CLEAN ENGINEERING PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER, WARD 1(1), MUMBAI

ITA 384/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7452 (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: Bogus purchase
• 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. 384 /MUM/2018 ASSESSMENT Y EAR: 2011 - 12 M/S CLEAN ENGINEERING PVT. LTD., PLOT NO. 31, SHED NO. 20, MIDC, BADLAPUR - 421503 P AN: AADCC1247R VS. THE INCOME TAX OFFICER, WARD - (1)(1), MOHAN PLAZA, 1 ST FLOOR, WAYALE NAGAR, KHADAK PADA, KALYAN - 421301 (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 14 .09.2017 PASSED BY THE LD. COMMISSIONER OF IN COME 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. BRI EF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 6,86,805/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO RECEIV ED INFORMATION FROM THE SALES TAX DEPARTMENT, MAHARASHTRA THAT CERTAIN BOGUS ENTITIES, DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , ISSUED BOGUS BILLS TO A LARGE NUMBER OF TAX PAYERS INCLUDING THE PRESENT ASSESSEE. AS PER THE INFORM ATION 2 ITA NO. 384 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 THE ASSESSEE OBTAINED BOGUS BILLS FROM GROWELL ENTERPRISES, TURBO SALES EXIM PVT. LTD. AND HARIOM TRADERS AMOUNTING TO RS. 16,15,950/ - . ACCORDING LY, THE AO ISSUED NOTICE U/S 148 OF THE ACT. IN RESPONSE THEREOF THE ASSESSEE SUBMITTED THAT THE RETURN A LREADY FILED MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE AO FURTHER ISSUED NOTICE U/S 143 (2) AND 142 (1) ALONG WITH THE QUESTIONNAIRE. THE ASSESSEE WAS FURTHER ASKED TO SUBMIT THE INFORMATION OF J - I AND J - II, STATEMENT, ST OCK REGISTER, MODE OF PAYMENT, TRANSPORTATION BILLS AND OCTROI CHALLAN AND DELIVERY CHALLAN PERTAINING TO THE PURCHASES CLAIMED. THE AUTHORIZED REPRESENTATIVE SUBMITTED SOME OF THE DETAILS, HOWEVER, FAILED TO PRODUCE TRANSPORTATION BILLS, DELIVERY CHALLAN AND OCTROI CHALLAN. NOTICES U/S 133 (6) ISSUED TO THE PARTIES CONCERNED RECEIVED BACK UN - SERVED. INDEPENDENT INVESTIGATION CARRIED OUT BY THE INSPECTOR INCOME TAX ALSO ESTABLISHED THAT THE PURCHASE IN QUESTION WERE NOT GENUINE. ONE MORE OPPORTUNITY WAS GIV EN TO THE ASSESSEE TO PRODUCE THE PARTIES AND TO FURNISH THE REQUISITE DETAILS. SINCE, THE ASSESSEE FAILED TO DO THE SAME THE AO HELD THE PURCHASES IN QUESTION AS BOGUS AND ADDED THE ENTIRE AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. 3. IN T HE FIRST APPEAL THE LD. CIT(A) AFTER HEARING THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE AO AND DISMISSED THE APPEAL OF THE APPELLANT/ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT (APPEAL S ) , THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY FILING THE PR ESENT APPEAL. 4 . T HE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING EFFECTIVE GROUND : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND ALSO IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 16,15,950/ - MADE BY THE LD. AO ON ACCOUNT OF DISALLOWANCE OF THE PURCHASES, HOLDING THE SAME TO BE NON - GENUINE. YOUR 3 ITA NO. 384 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 APPELLANT, THEREFORE, PRAYS THAT THE DISALLOWANCE BE DELETED. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE HAS SUBMITTED THE LEDGER ACCOUNT OF THE PARTIES, CONFIRMATION OF AMOUNT RECEIVED COPIES OF INVOICE ALONG WITH DELIVERY CHALLAN, RELEVANT ABSTRACT OF BANK STATEMENT AND STATEMENT SHOWING COMPARATIVE ANALYSIS OF GROSS PROFIT AND NET PROFIT RATIO, THE ASSESSEE HAS DISCHARG ED THE ONUS OF PROVING THE GENUINENESS OF THE TRANSACTION. THE LD. COUNSEL FURTHER SUBMITTED THAT THERE CANNOT BE A SALE WITHOUT ANY PURCHASE AND SINCE THE AO HAS NOT REJECTED THE SALE, THE PURCHASES CANNOT BE BOGUS. 6. ON THE OTHER HAND, THE LD. DEPARTME NTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE, THE ASSESSEE HAS FAILED TO SUBMIT THE DETAILS OF VEHICLE EXPENSE, VEHICLE NUMBER, TYPE OF VEHICLE AND TRANSPORT RECEIPT FOR VERIFICATION, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE PURCHASES. MOREOVER, THE INDEPENDENT VERIFICATION MADE BY THE INSPECTOR HAS ESTABLISHED THAT THE PURCHASES IN QUESTION ARE NOT GENUINE. HENCE, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO AND THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE EVIDENCE ON RECORD IS NOT SUFFICIENT TO HOLD THAT THE PURPOSES IN QUESTION ARE GENUINE. ON THE OTHER HAND THE EVIDENCE COLLECTED BY THE AO DURING THE COURSE OF ASSESSMENT SUGGESTS THAT THE ASSESSEE HAS NOT MADE THE PURCHASED IN QUESTION FROM THE PARTIES ALLEGED BY IT. HOWEVER, SINCE THE AO HAS NOT DISPUTED/REJECTED THE SALE, THE ENTIRE AMOUNT OF THE BOGUS PURCHASES CANNOT BE ADDED TO THE INCOME 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, THE HONBLE GUJARAT HIGH COURT HAS HELD THAT IN THE CASE OF BOGUS PURCHASES IT IS NEC ESSARY TO 4 ITA NO. 384 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 ASCERTAIN 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 AS SESSEE. 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 REASON TO MAKE 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 O RDER OF THE LD. CIT (A) AND RESTRICT 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 IS MADE BY THE ASSESSEE DURING THE PREVIOUS IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 20 11 - 20 1 2 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL , 2018 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTA NT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 25 / 04 / 201 8 ALINDRA, PS / 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 . 5 ITA NO. 384 / MUM/2018 ASSESSMENT YEAR: 2011 - 12 / BY O RDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI