SHUBHANGI SUDHAKAR TELAWANE, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, MUMBAI

ITA 382/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7453 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 17-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of cross examination; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 382/MUM/2018 ASSESSMENT Y EAR: 2011 - 12 SHUBHANGI SUDHAKAR TELAWANE, PROP. TELAWANE CROMTEK, A - 1002, GREESHMA RESIDENCY - 2, OPP . DYANSADHANA VIDYA MANDIR, THANE - 400604 PAN: ABIPT2788D VS. THE ACIT, CIRCLE - 3, ROOM NO. 2, B WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO. 16Z, MIDC, THANE (WEST) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEVENDRA JAIN (AR ) REVENUE BY : MS. N . HEMALATHA (SR. DR) DATE OF HEARING: 12 /04 /201 8 DATE OF PRONOUNCEMENT: 25 / 04 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 15.09.2 017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , PUNE , FOR THE A S S ESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING , SELLING REPAIR , MAINTENANCE AND LETTING OUT OF TRANSFORMERS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION D ECLARING THE TOTAL INCOME OF RS. 36,26,830/ - . SUBSEQUENTLY, INFORMATION WAS RECEIVED FROM SALES TAX DEPARTMENT, MAHARASHTRA TO THE EFFECT THAT THE ASSESSEE HAD OBTAINED ACCOM M ODATION BILLS FROM BOGUS PARTIES WHICH USED TO ISSUE BOGUS BILLS WITHOUT SUPPLYIN G ANY GOODS. ACCORDINGLY, THE ASSESSMENT WAS REOPENED AFTER 2 ITA NO. 382 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 ISSUING NOTICE U/S 148 OF THE ACT. SINCE, NO REPLY WAS RECEIVED TO THE NOTICE, U/S 148 OF THE ACT, THE AO TREATED THE ORIGINAL RETURN FILED BY THE ASSESSEE AS THE RETURN FILED IN RESPONSE TO THE S AID NOTICE. THE AO ALSO ISSUED NOTICE 143 (2) AND 142 (1) OF THE ACT AND THE ASSESSEE WAS ASKED TO FURNISH DETAILS REGARDING THE PURCHASES SHOWN FROM THE BOGUS ENTITIES M/S SHIV INDUSTRIES AND M/S DHARM TRADERS PVT. LTD. AMOUNTING TO R S. 10,03,995/ - DURIN G THE PREVIOUS YEAR. HOWEVER, NO RESPONSE WAS RECEIVED BY THE AO. ACCORDINGLY, T HE AO ISSUED SHOW CAUSE NOTICE AS TO WHY THE PURCHASES SHOWN FROM T HE BOGUS PARTIES SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE AND THE ASSESSMENT SHOULD NOT BE FINALIZE D U./S 144 OF THE ACT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. IN RESPONSE THEREOF, THE ASSESSEE SUBMITTED THE WRITTEN REPLY AND CONTENDED THAT ALL THE PURCHASES IN QUESTION ARE GENUINE. THE ASSESSEE ALSO SUBMITTED THE COPIES OF MONTHLY PURCHASE, SALE S AND STOCK, CHART SHOWING MONTHLY BILLING ON ACCOUNT OF JOB WORK DONE AND SALES EFFECTED, INCREASE/DECREASE IN STOCK AT THE END OF THE MONTH . THE ASSESSEE FURTHER CONTENDED THAT INVOICE/DELIVERY CHALLAN AND STATEMENT OF BANK ACCOUNT FURTHER ESTABLISH THE GENUINENESS OF PURCHASE. HOWEVER, THE AO REJECTING THE CLAIM OF THE ASSESSEE ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 3. IN THE FIRST APPEAL, THE LD. CIT (A) AFTER HEARING THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE ASSESSEE AND DISMISSE D THE APPEAL FILED BY THE ASSESSEE. 4 . AGGRIEVED BY THE ORDER OF LD. CIT (APPEAL S ), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUND S : - 1. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNE D CIT (A) HAS ERRED IN UPHOLDING THE ISSUE OF NOTICE U/S 143 (2) AND COMPLETING THE ASSESSMENT U/S 143 (3) R.W.S. 147 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FILED ANY RETURN IN RESPONSE TO NOTICE U/S 148 SERVED UPON HIM BY THE ASSESSING OF FICER. 3 ITA NO. 382 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 BY ISSUE OF NOTICE U/S 148 DATED 01.07.2013 WITHOUT RECORDING THE REASONS BEFORE ISSUE OF SUCH NOTICE. 3. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 BY ISSUE OF NOTICE U/S 148 DATED 01.07.2013 BY THE LEARNED ASSESSING OFFICER WITHOUT INDEPENDEN T APPLICATION OF MIND ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. 4. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF COMPLETING THE ASSESSMENT U/ S 143 (3) R.W.S. 147, ON THE BASIS OF STATEMENT OF THIRD PARTY WITHOUT PROVIDING ANY OPPORTUNITY OF CROSS EXAMINATION OF THE WITNESSES OR PROVIDING THE COPY OF DOCUMENTS RELIED UPON BY THE ASSESSING OFFICER AND THUS VIOLATING THE LAW LAID DOWN BY HONORABLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V. CIT (1980) 125 ITR 713 AND ANDAMAN TIMBER INDUSTRIES V. COMMISSIONER OF CENTRAL EXCISE (CIVIL APPEAL NO. 4228 OF 2006). 5. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT ( A) HAS ERRED IN SUSTAINING ADDITION OF RS. 10,03,995/ - BEING ENTIRE ALLEGED BOGUS PURCHASES, MERELY ON SURMISES AND CONJECTURES RELYING UPON NON JURISDICTIONAL HIGH COURT DECISIONS AND DISREGARDING THE HONORABLE JURISDICTIONAL HIGH COURT DECISIONS IN THE C ASE OF BABULAL C. BORANA V. THIRD ITO (2006) 282 ITR 251 (BOM) AND CIT V. NIKUNJ EXIMP ENTERPRISES (P) LTD. (2013) 216 TAXMAN 171 (BOM) AND VARIOUS OTHER TRIBUNAL DECISIONS. ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 4 ITA NO. 382 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HE DOES NOT PRESS GROUND NO 1 TO 4 OF THE APPEAL VIDE WHICH THE ASSESSEE HAS CHALLENGED THE JURISDICTION OF AO IN REOPENING OF ASSESSMENT. HENCE, WE DISMISS THE SAID GROUND OF APPEAL BEING NOT PRESSED. VIDE GRO UND NO 4 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. THE LD. COUNSEL SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO. THE LD. COUNSEL FUR THER SUBMITTED THAT THE ASSESSEE IS A BONA FIDE BUYER OF MATERIAL AND ENTERED INTO THE TRANSACTIONS IN ORDINARY COURSE OF BUSINESS WITH THE VENDORS. THE ASSESSEE HAS SUBMITTED THE INVOICE, DELIVERY CHALLAN, STOCK REGISTER, WHICH ESTABLISH THE GENUINENESS O F THE PURCHASES. THE LD. COUNSEL FURTHER SUBMITTED THAT OPPORTUNITY TO CROSS EXAMINE THE WITNESSES, WHO HAD DEPOSED AGAINST THE ASSESSEE WAS NOT GIVEN BY THE AUTHORITIES BELOW. THE LD. CIT (A) HAS IGNORED THE CHART SUBMITTED REGARDING CONSUMPTION, GROSS PR OFIT TREND ETC. BY THE ASSESSEE. THE LD. COUNSEL FURTHER CONTENDED THAT SINCE VAT REGISTRATION WAS GIVEN TO THE PARTIES CONCERNED AFTER VERIFICATION, NO QUESTION OF BOGUS SALE BY THE SAID ENTITIES DOES ARISE. THE LD. COUNSEL ACCORDINGLY SUBMITTED THAT THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW, SUBMITTED THAT IN THIS CASE THE ISSUE UNDER CONSIDERATION IS BASED ON FACTS. SINCE, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE PURCHASES , THE LD CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO . THEREFORE, THERE IS NO INFIRMITY IN THE IMPUGNED ORDER TO INTERFERE WITH. 7. WE HAVE HEARD THE RIVAL SUB MISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE APPELLANT/ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS 5 ITA NO. 382 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 PURCHASES MADE BY THE AO. IN OUR CONSIDERED VIEW, THE EVIDENCE ON RECORD IS NOT SUFFICIENT TO HOLD THAT THE PURCHASES IN QUESTION ARE GENUINE. HENCE, WE AGREE WITH THE LD. CIT(A) ON THIS POINT. HOWEVER, SINCE THE AO HAS NOT DISPUTED/ REJECTED THE SALE, THE ENTIRE AMOUNT OF THE BOGUS PURCHASES CANNOT BE ADDED TO THE INCOM E OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 (GUJ). IN THE SAID CASE, T HE HONBLE GUJARAT HIGH COURT HAS HELD THAT IN THE CASE OF BOGUS PURCHASES IT IS NECESSARY TO AS CERTAIN THE FACT AS TO WHETHER PURCHASES WERE NOT MADE AT ALL OR PURCHASES WERE MADE BUT FROM GREY MARKET. ONCE IT IS ESTABLISHED THAT THE PURCHASES WERE ACTUALLY MADE THEN ONLY PROFIT EMBEDDED IN THE SAME COULD BE ADDED IN THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT ACCORDINGLY UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES. IN THE PRESENT CASE SINCE, THE AO HAS NOT REJECTED THE SALES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR, THERE IS NO JUSTIF ICATION IN MAK ING ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES. HENCE, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH (SUPRA) WE PARTLY ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND ACCORDINGLY MODIFY THE ORDE R OF THE LD. CIT (A) RESTRICTING THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. AO IS DIRECTED TO MAKE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR. IN THE RESULT, APPEAL FILED BY TH E ASSESSEE FOR A SSESSMENT YEAR 20 11 - 2012 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL , 2018 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 25 / 04 / 201 8 ALINDRA, PS 6 ITA NO. 382 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY OR DER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI