TECHNO PROCESS EQUIPMENTS (I) LTD, MUMBAI V. ASST CIT 10(3), MUMBAI

ITA 4040/MUM/2011

• Counselvise Citation: 404019914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Initiation of penalty proceedings; Accommodation entries
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , BEFORE SHRI R.C . SHARMA , A M AND DR S.T.M.PAVALAN , JM ITA NO. 4040 /MUM/20 1 1 ( ASSESSMENT YEAR : 200 6 - 0 7 ) TECHNO PROCESS EQUIPMENTS(I) LTD 2 ND FLOOR, ASHOK INDL PREMISE, L.B.S. MARG, BHANDUP (W) MUMBAI 400 078 VS. ASST CIT 10(3) MUMBAI PAN : AA BC T2398C 333 ( APPLICANT) .. RESPONDENT ) ASSESSEE B Y : SHRI ANANT PAI DEPARTMENT B Y : SHRI R.K. SAHU (DR) DATE OF HEARING : 15 - 0 1 - 201 4 / DATE OF PRONOUNCEMENT : 22 - 01 - 2014 O R D E R PER R . C.SHARMA , A.M . : T H I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 09 . 03 .201 1 FOR THE ASSESSMENT YEAR 2006 - 07, IN THE MATTER OF ORDER PASSED BY THE AO U/S. 14 3(3) OF T HE INCOME TAX AC T 1961. THE ASSESSEE HA S TAKEN FOLLOWING GROUNDS OF APPEAL. 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN CONFIRMING THE ADDITION OF THE SUM OF RS.28,73,940/ - ( REPEES TWENTY EIGHT LACS SEVENTY THREE THOUSAND NINE HUNDRED FORTY ONLY) OUT OF PURCHASES MADE BY THE APPELLANT AS UNDISCLOSED INCOME . 2. THE APPELLANT HAVE NOT BEEN GIVEN PROPER AND REASONABLE OPPORTUNITY TO SUBMIT THE NECESSARY DETAILS. SUBMISSIONS AND DOCUMENTS IN RESPECT OF THE AFORESAID PURCHASES. IT A NO. 4040 /MUM/201 1 . 2 2. RIVAL CONTEN TIONS HAVE B EEN HEARD AND PERUSED THE RECORD . THE FACTS OF THE CASE IN BRIEF ARE THAT THE APPELLANT COMPANY HAD FILED ITS RETURN OF INCOME ON 22.08.2006 DECLARING TOTAL INCOME AT RS.46,43,950/ - . THE RETURN WAS PROCESSED U/S.143(1) AND THEREAFTER THE ASSESSMENT HAS BEE N COMPLETED U/S.143(3) ON 08.12.2008 DETERMINING TAXABLE INCOME AT RS.75,17,890/ - . DURING THE YEAR THE APPELLANT COMPANY IS STATED TO BE ENGAGED IN THE BUSINESS OF FABRICATORS, ENGINEERS & CONTRACTORS. IN THIS CASE THE JT. DIRECTOR OF INCOME - TAX (INV.) BA RODA VIDE LETTER DATED 5.09.2006 AND 9.12.2006 INTIMATED THE ADI, THANE REGARDING THE BOGUS PURCHASES MADE BY THE ASSESSEE COMPANY FROM M/ S. MINAXI ENTERPRISES. A.O. FURTHER NOTED THAT INQUIRIES WERE CONDUCTED BY ADI (INV.) TO ASCERTAIN THE FACT OF BOGUS P URCHASES MADE BY THE .ASSESSEE. A.O. FURTHER NOTED THAT A SUMMONS WAS ISSUED IN RESPONSE TO WHICH SHRI AJAY PAL SINGH, DIRECTOR OF THE ASSESSEE COMPANY ATTENDED AND HIS STATEMENT WAS RECORDED ON 3.1.2008 AND 11.3.2008. A.O. FURTHER NOTED THAT THE DIRECTOR OF THE COMPANY STATED THAT THE COMPANY HAD MADE BOGUS PURCHASES FROM ARUN INDUSTRIAL CORPN. BARODA BASED FIRM OF RS.28,73,940/ - . ACCORDINGLY, ADDITION WAS MADE BY THE AO IN RESPECT OF BOGUS PURCHASES. 3 . BY THE IMPUGNED ORDER LD.CIT(A) CONFIRMED THE ADD ITION AFTER HAVING THE FOLLOWING OBSERVATIONS : 2.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER, PERUSED THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED TH AT AS PER INFORMATION RECEIVED BY JDIT (INV.) BARODA, ASSESSEE HAS MADE BOGUS PURCHASES DURING THE YEAR. SHRI AJAY PAL SINGH, DIRECTOR OF THE COMPANY APPEARED BEFORE ADIT IN RESPONSE TO SUMMONS ISSUED. IN HIS STATEMENT ON OATH DATED 03.01.2008 AND 11.03.2 008 HE ADMITTED THAT THE COMPANY HAD MADE PURCHASES FROM ARUN INDUSTRIAL CORPORATION, BARODA AND THAT THE PURCHASES FROM THESE PARTIES ARE NOT GENUINE AND OFFERED THE SAME AS UNDISCLOSED INCOME IN ADDITION TO THE RE GULAR INCOME FOR THE A.Y. 2006 - 07. ACCORD INGLY, A.O. MADE ADDITION. DURING THE COURSE OF A PPELLATE PROCEEDINGS IT WAS SUBMITTED THAT THE APPELLANT DOESN'T ACCEPT THE STATEMENT MADE BASED ON WRONG NOTION AND UNDERSTANDING THAT THE APPELLANT SHALL ONLY PAY THE AMOUNT OF INCOME TAX ON THE SAID PURCH ASE TO BUY PEACE OF MIND AND ALSO TO AVOID LITIGATION. THE APPELLANT SUBMITTED COPY OF LEDGER A/ C. CONFIRMED BY M/ S. ARUN INDUS. CORPN. WITH THEIR PAN. IT A NO. 4040 /MUM/201 1 . 3 THE SUBMISSIONS OF APPELLANT WAS FORWARDED TO THE A.O. FOR VERIFICATION OF ITS AUTHENTICITY AND GENUINEN ESS. THE A.O. VIDE LETTER DATED 15.02.2011 HAS SUBMITTED HIS REPORT THROUGH ADDL. CIT'S LETTER DATED 15.02.2011 WHICH IS AS UNDER: '2. AS DIRECTED, AN OPPORTUNITY WAS PROVIDED TO THE ASSESSEE AND THE SUBMISSIONS MADE BY THE ASSESSEE ARE CONSIDERED CAREFU LLY. THE REPORT CALLED FOR IS AS UNDER: 2.1 THE ASSESSEE HAS SUBMITTED A COPY OF LEDGER ACCOUNT, COPIES OF INVOICES AND DELIVERY CHALLANS ALONGWITH THE EXTRACT OF BANK STATEMENT IN SUPPORT OF ITS CONTENTION THAT THE PURCHASES MADE FROM M/S. ARUN INDUSTRIA L CORPORATION WERE GENUINE. HOWEVER, THE ASSESSEE HAS LOST SIGHT OF THE STATEMENTS GIVEN ON OATH BY ITS DIRECTOR, SHRI AJAY PAL SINGH ON 13.01.2008 AND 11.032008, WHEREIN HE HAD UNCONDITIONALLY ADMITTED THAT THE ASSESSEE HAD SHOWN BOGUS PURCHASES FROM VARI OUS PARTIES INCLUDING THE PURCHASES OF RS.28, 73,940 FROM M/S. ARUN INDUSTRIAL CORPORATION AND HAD OFFERED THE SAID AMOUNT AS ITS UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 2006 - 07. A SURVEY ACTION WAS CARRIED OUT BY DDIT (INV.) - I, BARODA ON VARIOUS PARTIE S IN SEPTEMBER 2006 WHEREIN IT WAS ASCERTAINED THAT THE SAID PARTIES INCLUDING MIS. ARUN INDUSTRIAL CORPORATION HAD PROVIDED ACCOMMODATION ENTRIES BY WAY OF PURCHASE BILLS TO VARIOUS ASSESSEES WITHOUT MAKING ANY ACTUAL SALES. SHRI AJAY PAL SINGH WAS SHOWN THE STATEMENTS OF THE SAID PARTIES AND AFTER SATISFYING HIMSELF, HE HAD SURRENDERED THE BOGUS PURCHASES SHOWN IN THE BOOKS OF THE ASSESSEE COMPANY. 2.2 FURTHER, WHILE THE ASSESSEE HAS TRIED TO SHOW S AID PURCHASES AS GENUINE WITH HELP OF THE INVOICES, LEDG ER ACCOUNT AND BANK STATEMENT, NO DOCUMENTARY EVIDENCES HAVE BEEN FURNISHED SHOWING ANY ACTUAL MOVEMENT OF THE GOODS FROM M/S. ARUN INDUSTRIAL CORPORATION TO THE ASSESSEE COMPANY. THE LORRY RECEIPTS, TRANSPORT DOCUMENTS, OCTROI/R'TO PAPERS, ETC. ARE NOT FU RNISHED OR PRODUCED. THE DELIVERY CHALLANS ALSO DO' NOT BEAR ANY INWARD REGISTERS ENTRY NUMBERS. RECEIPT STAMPS WITH DATES, ETC. THE STOCK REGISTERS, INWARD - OUTWARD REGISTERS SHOWING THE MOVEMENT OF GOODS HAVE NOT BEEN FURNISHED OR PRODUCED FOR VERIFICATIO N. IT IS WELL SETTLED POSITION THAT IN THE CASE OF ACCOMMODATION ENTRIES, THE PARTIES INVOLVED DO INDULGE INTO PREPARATION OF INVOICES, CHALLANS AND TRANSFER OF FUNDS THROUGH CHEQUES. BUT THE FUNDS ARE THEREAFTER RETURNED/EXCHANGED AS THERE ARE NO ACTUAL D UES. 2.3 THE LEDGER ACCOUNT FURNISHED BY THE ASSESSEE IS ALSO NOT SIGNED BY THE PROPRIETOR OF M/ S. ARUN INDUSTRIAL CORPORATION SHRI JAYANTILAL MANGILAL SHARMA, WHEREAS HIS PAN IS MEN TIONED 011 THE SAID LEDGER ACCOUNT. THE STATEMENT OF THE DIRECTOR, SH RI AJAY PAL SINGH WERE RECORDED ON 13.01.2008 AND 11.03.2008 WHEREAS THE ASSE SSMENT WAS COMPLETED ON 08.12.2008. THE COPIES OF THE SAID DURING TILE INTERVENING PERIOD NOR RETRACTED THE STATEMENTS GIVEN. IN FACT, VIDE LETTER DATED 08.12.2008, THE ASSESSEE'S REPRESENTATIVE HAD REQUESTED TO GRANT IMMUNITY FROM PENAL AND PROSECUTION PROCEEDINGS. IT IS JUST BECAUSE PENALTY PROCEEDINGS HAVE BEEN INITIATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD STARTED TO CONTEND THAT THE PURCHASES WERE GENUINE AND FURNISHE D THE FABRICATED EVIDENCES TO AVOID THE PENALTY PROCEEDINGS. ' IT A NO. 4040 /MUM/201 1 . 4 COMMENTING ON THE REMAND REPORT OF THE A.O. IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSEE HAD PURCHASED GOODS AT. BARODA AND ALL THE DOCUMENTS REGARDING GENUINENESS WERE PRODUCED BEFORE A.O. IT WAS ALSO SUBMITTED THAT A.O. HAS MERELY RELIED ON STATEMENT OF DIRECTOR AND NOT ON THE FACTS OF THE CASE. HOWEVER, THESE DID NOT FIND FAVOUR WITH THE CIT(A) . IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) HELD THAT THE A.O. HAS RIGHTLY MADE ADDITIO N ON ACCOUNT OF BOGUS PURCHASES. 4. IT WAS ARGUED BY LD.AR THAT FINDING OF BOGUS PURCHASES WERE IN RESPECT OF SUPPLIER OF M/S. MINAXI ENTERPRISES FOR PRIOR YEAR AND NOT FOR YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT NO SUBMISSIONS OF ARUN INDUSTRIA L CORPN. WAS RECORDED NOR ANY INQUIRY WAS MADE BY AO. WITH RESPECT TO ADMITTANCE OF ASSESSEES DIRECTOR IN HIS STATEMENT ON 3.01.2008 AND 11.03.2008 TO THE EFFECT THAT ASSESSEE COMPANY HAD MADE NOT GENUINE PURCHASE S FROM ARUN INDUSTRIAL CORP ORATIO N. BAROD A, IT WAS SUBMITTED NO SUCH ADMISSION WAS MADE IN THE STATEMENT DATED 3.1.2008. ACCORDINGLY, IT WAS PLEADED THAT INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) WAS CONTRARY TO THE ASSESSEE UNDERSTANDING THAT IF PURCHASES OR SURRENDER NO CONCEALMENT PENALT Y WOULD BE LEVIED. 5. ON THE OTHER HAND, LD. SENIOR DR CONTENDED THAT ASSESSEE HAD ACCEPTED FACT OF BOGUS PURCHASES HAVING BEEN MADE DURING THE YEAR AND DIRECTOR OF ASSESSEES COMPANY SHRI AJAY PAL SINGH APPEAR ED BEFORE ADIT ADMITTED THAT THE COMPANY HA D MADE PURCHASES FROM ARUN INDUSTRIAL CORPN. WHICH IS NOT GENUINE AND OFFERED THE SAME AS UNDISCLOSED INCOME IN ADDITION TO THE REGULAR INCOME FOR A.Y.2006 - 07. LD. DR ALSO PLACED ON RECORD, ORDER OF THE CO - ORDINATE BENCHES WHEREIN SIMILAR ADDITION WAS CON FIRMED BY THE TRIBUNAL. IT A NO. 4040 /MUM/201 1 . 5 6. WE HAVE CONSIDERED RIVAL CONTENTIONS CAREFULLY AND ALSO GO NE THROUGH ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO DELIBERATED ON THE CASE L AWS CITED BY LD.AR AND DR IN THE CONTEXT FACTUAL MATRIX OF THE CASE. FROM THE RECORD WE FOUN D THAT A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF FABRICATORS, ENGINEERS & CONTRACTORS. IN THIS CASE, THE JT. DIRECTOR OF INCOME - TAX (INV.) BARODA, VIDE HIS LETTER DATED 15.9.2006 AND 19.12.2006 INTIMATED THE ADI, THANE REGARDING THE BOGUS PURCHASES MA DE BY THE ASSESSEE COMPANY . ACCORDINGLY INQUIRIES WERE CONDUCTED BY ADI (INV) TO ASCERTAIN THE FACT ABOUT BOGUS PURCHASES MADE BY M / S. TECNO PROCESS EQUIPMENTS (INDIA) LTD. FROM THE BARODA BASED COS,. A SUMMONS WAS ISSUED. IN RESPONSE TO THE SUMMONS SHRI AJAY PAL SINGH, DIRECTOR OF THE ASSESSEE COMPANY ATTENDED AND FILED THE NECESSARY DETAILS. AS PER THE DETAILS FIELD BY SHRI AJAY PAL SINGH FOLLOWING PURCHASES' MADE BY ASSESSEE COMPANY M/S. TECNO PROCESS EQUIPMENTC (INDIA) LTD FROM THE FOLLOWING PARTIES W AS BOGUS . NAME OF THE CONCERN F.Y. TOTAL PURCHASES(RS.) DESCRIPTION OF GOODS PURCHASED M/S. ARUN INDUSTRIAL STEEL PIPES 2005 - 06 28,73,940 STEEL PIPES STATEMENTS U/S. 131 OF THE I.T. ACT 1961 OF SHRI AJAY PAL SINGH, DIRECTOR OF M/ S TECHNO PROCESS EQUIPMENTS (INDIA) LTD. WAS RECORDED ON 3.1.2008 AND 11.3.2008. DURING THE COURSE OF HIS STATEMENT SHRI AJAY PAL SINGH ADMITTED THAT THE PURCHASES MADE BY THE ASSESSEE COMPANY WAS NOT GENUINE. FURTHERMORE, V IDE ORDER DATED 15.02.2011, THE AO HAS SUBMITTED HIS REPORT THROUGH ADDITIONAL CIT, WHEREIN AO HAS STATED REGARDING OPPORTUNITY SO PROVIDED TO THE ASSESSEE. THE AO STATED THAT ASSESSEE HAD SUBMITTED A COPY OF LEDGER ACCOUNT, COPY OF INVOICES AND DELIVERY CHALLANS ALONGWITH THE EXTRACT O F IT A NO. 4040 /MUM/201 1 . 6 BANK STATEMENT IN SUPPORT OF ITS CONTENTION THAT THE PURCHASES MADE FROM M/S. ARUN INDUSTRIAL CORPORATION WERE GENUINE. THE AO OBSERVED THAT ASSESSEE H AS LOST SIGHT OF THE STATEMENTS GIVEN ON OATH BY ITS DIRECTOR, SHRI AJAY PAL SINGH ON 13.01.2008 AND 11 .03.2008, WHEREIN HE HAD ADMITTED THAT THE ASSESSEE HAD SHOWN BOGUS PURCHASES OF RS.28,73,940/ - FROM M/S. ARUN INDUSTRIAL CORPORATION. 6.1 AFTER CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD, WE FOUND THAT THE AO HAS MADE ADDITION IN RESPECT OF ENTIRE AMOUNT OF PURCHASES ALLEGED TO BE MADE FROM M/S ARUN INDUSTRIAL CORPORATION. HOWEVER, THE AO HAS NOT DENIED THE CORRESPONDING SALES MADE BY THE ASSESSEE. THERE IS ALSO NO ADVERSE OBSERVATION OF THE AO WITH REGARD TO TOTAL SALES AND PURCHASES MADE BY THE A SSESSEE AND PROFIT EARNED THEREON , E VEN IN RESPECT OF PROFIT EARNED ON THE SALE OF GOODS PURCHASED FROM M/S ARUN INDUSTRIAL CORPORATION. IT MEANS THE AO HAS DOUBTED THE SPECIFIC PURCHASES MADE FROM M/S ARUN INDUSTRIAL CORPORATION AND AFTER MAKING DETAILED INQUIRIES FOUND SUCH PURCHASES BOGUS . IT IS NOT THE CASE OF THE AO THAT NO PURCHASES HAVE BEEN MADE BY THE ASSESSEE, INSOFAR AS, CORRESPONDING SALES MADE BY THE ASSESSEE HAS NOT BEEN DOUBTED NOR ANY ADDITION HAS BEEN MADE WITH RESPECT TO SUCH SALES, NOR TH E PROFIT EARNED THEREON HAS BEEN EXCLUDED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. SO FAR AS ENQUIRY CONDUCTED BY THE DEPARTMENT VIS - - VIS THE FINDING RECORDED BY THE LOWER AUTHORITIES WITH REGARD TO THE CONFESSION OF THE ASSESSEE REGARDING BOGUS PURCHASES FROM M/S ARUN INDUSTRIAL CORPORATION IS CONCERNED, THERE IS NO DISPUTE. WE ALSO AGREE WITH THE FINDING OF THE LOWER AUTHORITIES WITH REGARD TO PURCHASES PRECISELY MADE FROM M/S ARUN INDUSTRIAL CORPORATION WHICH WAS FOUND TO BE BOGUS. AT THE VERY SAME TIME, WE CANNOT IGNORE THE POSSIBILITY THAT SUCH PURCHASES WERE MADE FROM OTHER SUPPLIER, INSOFAR AS CORRESPONDING SALES OF SUCH GOODS WAS NOT DECLINED BY THE AO NOR THE BOOKS OF ACCOUNT OF THE IT A NO. 4040 /MUM/201 1 . 7 ASSESSEE W ERE REJECTED. UNDER THESE CIRCUMSTANCES, IT IS REQUIRED TO BE CONSIDERED AS TO HOW MUCH ADDITION IS WARRANTED, WHETHER ENTIRE PURCHASES OR THE EXCESS AMOUNT PAID AS FOUND BY THE AO ON SUCH PURCHASES. THE ENTIRE AMOUNT OF PURCHASES, WHICH IS FOUND TO BE BOGUS IS REQUIRED TO BE ADDED WHEN THE SOURCES OF PAYMENT IS NOT FOUND OUT FROM ASSESSEES DISCLOSED SOURCE OF MONEY. WHEN THE ASSESSEE HAS MADE PAYMENT OUT OF ITS REGULAR BANK ACCOUNT WHICH IS PROPERLY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND ALSO DISCLOSED TO THE DEPARTMENT, THERE IS NO REASON TO D OUBT THE PAYMENT MADE FOR SUCH PURCHASES . O NLY INFERENCE WHICH CAN BE DRAWN UNDER THESE CIRCUMSTANCES IS THAT THE ASSESSEE HAS NOT MADE PURCHASES FROM THE PARTICULAR SUPPLIER WHICH WAS FOUND TO BE BOGUS . THERE MAY BE POSSIBILITY THAT TO AVOID PAYMENT OF AN Y TAXES ETC. , T HE ASSESSEE MIGHT HAVE ARRANGED THE PURCHASES FROM A DIFFERENT SUPPLIER, WHEREAS BILL S HA VE BEEN ARRANGED FROM OTHER SUPPLIER WHICH IS FOUND TO BE BOGUS. UNDER THESE CIRCUMSTANCES, THE ADDITION IS NOT REQUIRED TO BE MADE WITH RESPECT TO THE ENTIRE AMOUNT OF PURCHASES MORE PARTICULARLY WHEN PAYMENT FOR SUCH PURCHASES HAD BEEN MADE OUT OF REGULAR DISCLOSED BANK ACCOUNT OF THE ASSESSEE . KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE RESTORE THE MATTER BACK T O THE FILE OF THE AO FOR MAKING DETAILED INQUIRY AND FOR DECIDING THE ISSUE AFRESH IN TERMS OF OUR ABOVE OBSERVATIONS. WE DIRECT ACCORDINGLY. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/2014. ( S.T.M.PAVALAN ) ( R.C. SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M UMBAI ; DATED 22/01/2014 A.K.PATEL /PKM , PS IT A NO. 4040 /MUM/201 1 . 8 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - MUMBAI CONCERNED 4. / CIT MUMBAI CONCERNED 5. / DR, ITAT, MUMBAI D BENCH 6. GUARD FILE . / BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI