METRO SHOES LTD, MUMBAI V. DCIT CIR 2(2)2, MUMBAI

ITA 4419/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9535 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: DILIP LAKHANI
• Keywords: Reopening of assessment; Bogus purchase; Peak credit; Validity of assessment; Assessment record

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 4419/MUM/2016 (ASSESSMENT YEAR 2009 - 10) I.T.A. NO. 4420 /MUM/ 201 6 (ASSESSMENT YEAR 20 1 0 - 1 1 ) I.T.A. NO. 4421/MUM/2016 (ASSESSM ENT YEAR 2011 - 12) METRO SHOES LIMITED 401, ZILLION, 4 TH FLOOR LBS MARG & CST ROAD JUNCTION, KURLA WEST MUMBAI - 400 070. PAN : AAACM4754E VS. DCIT CIRCLE3(2)(2) ERSTWHILE DCIT 2(2) ROOM NO. 545 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPON DENT ) ASSESSEE BY SHRI DILIP LAKHANI DEPARTMENT BY SHRI RAJAT MITTAL DATE OF HEARING 3 1.8 . 201 7 DATE OF PRONOUNCEMENT 15 . 9 . 201 7 O R D E R PER B.R. BASKARAN (AM) : THE ASSESSEE HAS FILED THESE THREE APPEALS CHALLENGING THE ORDERS PASS ED BY LD CIT(A) - 5, MUMBAI PARTIALLY CONFIRMING THE ADDITION RELATING TO ALLEGED BOGUS PURCHASES MADE BY THE AO. 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEALING IN FOOT WEARS, SHOES ETC. CONSEQUENT TO THE INFORMATION REC EIVED FROM THE SALES TAX DEPARTMENT THAT CERTAIN DEALERS (CALLED HAWALA DEALERS) HAVE PROVIDED ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS, THE REVENUE ANALYSED THE DETAILS THEREOF. IT WAS NOTICED THAT THE ASSESSEE HEREIN HAS PURCHAS ED GOODS FROM SOME OF SUCH DEALERS IN THE THREE YEARS UNDER CONSIDERATION. ACCORDINGLY THE ASSESSING OFFICER REOPENED THE ASSESSMENTS OF ALL THE THREE YEARS UNDER CONSIDERATION. 3. IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11, THE ASSESSEE HAS PURCHASED FO OT WEARS/SHOES WORTH RS.44.77 LAKHS AND RS.94.70 LAKHS RESPECTIVELY FROM THE HAWALA DEALERS. THE AO COMPUTED PEAK CREDIT OF THOSE PURCHASES AND METRO SHOES LIMITED 2 DISALLOWED A SUM OF RS.9.34 LAKHS AND RS.72.22 LAKHS RESPECTIVELY IN AY 2009 - 10 AND 2010 - 11. IN THE ASSESSMENT YEAR 2011 - 12, THE ASSESSEE HAS PURCHASED SHOES HAVING VALUE OF RS.13,57,822/ - AND STATIONERY ITEMS HAVING VALUE OF RS.5,07,016/ - , BOTH AGGREGATING TO RS.18,64,838/ - FROM SUCH HAWALA DEALERS. THE ASSESSING OFFICER ASSESSED ENTIRE AMOUNT OF RS.18.64 LAKHS A S INCOME OF THE ASSESSEE. 4. BEFORE LD CIT(A), THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENTS, BUT THE SAME WAS REJECTED BY THE FIRST APPELLATE AUTHORITY. HOWEVER, THE LD CIT(A) RESTRICTED THE ADDITIONS TO 12.50% OF THE VALUE OF ALLEGED BOGUS PURCHASES IN ALL THE THREE YEARS . AGGRIEVED, THE ASSESSEE HAS FILED THESE APPEALS. 5. THE ASSESSEE HAS RAISED A LEGAL ISSUE IN AY 2009 - 10 AND 2010 - 11 WITH REGARD TO NON - ISSUING OF STATUTORY NOTICE PRESCRIBED U/S 143(2) OF THE ACT. THE LD A.R SUBMI TTED THAT THE ASSESSEE HAD RAISED IT BEFORE LD CIT(A) ALSO , BUT THE FIRST APPELLATE AUTHORITY HAS FAILED TO ADJUDICATE THE SAME. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY NOTICE PRESCRIBED IN SEC. 143(2) OF THE ACT FOR THESE TWO YEARS AN D NON - SERVICE OF NOTICE WOULD BE FATAL TO THE ASSESSMENT PROCEEDING. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. SHRI JAI SHIV SHANKAR TRADERS PVT . LTD (2016)(383 ITR 448). ACCO RDINGLY HE CONTENDED THAT THE ASSESSMENT ORDERS PASSED FOR AY 2009 - 10 AND 2010 - 11 IS LIABLE TO BE QUASHED. 6. THE LD D.R SUBMITTED THAT THE COPY OF NOTICE PRESCRIBED U/S 143(2) OF THE ACT IS AVAILABLE IN THE ASSESSMENT RECORD. HOWEVER HE FAIRLY ADMITT ED THAT THERE IS NO EVIDENCE FOR SERVICE OF THE SAID NOTICE. 7. WE HEARD THE PARTIES ON THIS ISSUE LEGAL ISSUE. THE ISSUE RELATING TO VALIDITY OF ASSESSMENT ORDER PASSED WITHOUT ISSUING NOTICE U/S 143(2) OF THE ACT WAS CONSIDERED BY HONBLE DELHI HI GH COURT. THE CASE BEFORE THE HONBLE DELHI HIGH COURT WAS ALSO A CASE OF REOPENING OF ASSESSMENT. THE HONBLE METRO SHOES LIMITED 3 COURT HELD THAT THE FAILURE OF THE AO TO ISSUE NOTICE U/S 143(2) OF THE ACT IS FATAL TO THE ORDER OF REASSESSMENT. IN THE INSTANT CASE, THERE IS NO PROOF TO SHOW THAT THE AO HAS SERVE D NOTICE U/S 143(2) OF THE ACT IN AY 2009 - 10 AND 2010 - 11. HENCE, FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT (REFERRED SUPRA), WE HOLD THAT THE REASSESSMENT ORDERS PASSED FOR THESE TWO YEARS ARE NO T V ALID AND LIABLE TO BE QUASHED. WE ORDER ACCORDINGLY. 8. IN ASSESSMENT YEAR 2011 - 12, THE ASSESSEE IS CONTESTING THE ADDITION SUSTAINED BY THE LD CIT(A). THE LD A.R SUBMITTED THAT THE ASSESSEE IS HAVING A TURNOVER OF MORE THAN RS.400 CRORES AND IT HA S PROCURED THE SHOES TH ROUGH ITS PURCHASE DEPARTMENT. HE SUBMITTED THAT THE PROCUREMENT, DISTRIBUTION AND SALE OF SHOES ARE CONTROLLED THROUGH COMPUTER SYSTEMS. HE SUBMITTED THAT THE ASSESSEE HAS ALSO PAID EXCISE DUTY ON SAID PURCHASES UPON BRANDING THEM BY ITS BRAND NAME. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION AND HE WAS NOT JUSTIFIED IN SUSTAINING ADDITION TO THE EXTENT OF 12.50%. HE SUBMITTED THAT THE STATIONERY ITEMS OF RS. 5.07 LAKHS HAS ACTUALLY BEEN PUR CHASED AND USED IN THE BUSINESS. ACCORDINGLY HE SUBMITTED THAT NO ADDITION IS CALLED FOR ON THESE PURCHASES ALSO . 9. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO OBTAIN CONFIRMATION LETTERS FROM THE SUPPLIERS AND ALSO FAILED T O PRODUCE THE SUPPLIERS. 10. WE HEARD THE PARTIES AND PERUSED THE RECORD. A PERUSAL OF PARAGRAPH 6.4 OF THE ASSESSMENT ORDER WOULD SHOW THAT THE ASSESSEE HAS ACCEPTED THE INFERENCE DRAWN BY THE AO THAT THE ASSESSEE HAS PURCHASED GOODS FROM SOME OTHE R PLACE AND NOT FROM THE PARTIES FROM WHOM BILLS WERE OBTAINED. THE ASSESSEE HAD INITIALLY CLAIMED THAT IT HAD PURCHASED GOODS THROUGH BROKERS, BUT IT COULD NOT GIV E THE DETAILS OF BROKERS ALSO AND IT APPEARS TO HAVE WITHDRAWN SAID SUBMISSIONS BY ACCEPTING THE FACT THAT THE PURCHASES WERE MADE FROM SOME OTHER PARTIES. FOLLOWING OBSERVATIONS MADE BY THE AO MAKES THIS POINT CLEAR: - METRO SHOES LIMITED 4 .THE SALES TAX DEPARTMENT HAD, THEREFORE, DECLARED THESE PARTIES AS HAWALA DEALERS, WHO ONLY PROVIDE BILLS WITHOUT DELIVERY O F GOODS. THE ASSESSEE HAS ALSO NOT PROVIDED DETAILS OF THE BROKER, SUCH AS NAME, PAN, ADDRESS ETC., NOT THE ASSESSEE COULD PRODUCE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE IS NO COMMISSION PAYMENT MADE TO THE SAID BROKER FOR ARRANGING THE P URCHASE, AS SEEN FROM P & L ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS AGREED THAT IT HAS PURCHASED MATERIAL FROM SOME OTHER PARTIES, BUT IT HAS FAILED TO IDENTIFY, PRODUCE OR GIVE THE DETAILS OF SUCH PARTIES FROM WHOM MATERIAL HAS ACTUALLY BEEN PROCURED S O THAT THE GENUINENESS OF THE PURCHASES COULD BE ESTABLISHED. ON THE OTHER HAND, THE ASSESSEE HAS ISSUED CHEQUES IN THE NAME OF BOGUS BILLERS AND NOT THE ORIGINAL SUPPLIER. THE ASSESSEE HAS TRIED TO ESTABLISH THE GENUINENESS OF THE PURCHASES BY PROVIDING VARIOUS DETAILS SUCH AS BILLS, PROOF OF DELIVERY, RECONCILIATION OF THE STOCK ETC. HOWEVER, SINCE THESE PARTIES ARE NOT TRACEABLE AND THE FACT THAT THESE PARTIES ON OATH ADMITTED BEFORE THE SALES TAX AUTHORITIES THAT THEY HAD ONLY PROVIDED BOGUS BILLS AN D NO MATERIAL WAS ACTUALLY DELIVERED, THE ASSESSEES CONTENTIONS CANNOT BE ACCEPTED. 11. THE LD A.R PLACED HEAVY RELIANCE ON THE DETAILS OF STOCK REGISTER, EXCISE DUTY PAYMENT ETC., IN ORDER TO CONTEND THAT THE PURCHASES WERE GENUINE. ALL THE RECORDS MAINTAINED BY THE ASSESSEE, NO DOUBT, WOULD PROVE THE PURCHASE OF SHOES, BUT THE QUESTION HERE IS THE SOURCE OF PURCHASE. FROM THE OBSERVATIONS MADE BY THE AO, WE NOTICE THAT THE ASSESSEE HAS AGREED THAT IT HAS PURCHASED MATERIAL FROM SOME OTHER PARTIES AND NOT FROM THE PARTIES WHO HAD GIVEN BILLS . IN THAT SITUATION, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN INFERRING THAT THE ASSESSEE WOULD HAVE MADE PROFIT ON SUCH PURCHASES, SINCE IT WAS NOT SHOWN THAT THE MATERIALS WERE PURCHASED ONLY AT THE RATES SHOWN IN THE ACCOMMODATION BILLS. WE NOTICE THAT THE LD CIT(A) HAS ESTIMATED THE PROFIT SO MADE ON SUCH PURCHASES AT 12.50% AND WE ARE NOT INCLINED TO DISTURB THE SAME. 12. THE ASSESSEE, IN THE ALTERNATIVE, HAS STATED THAT THE PROFIT @ 12. 50% SHOULD HAVE BEEN ESTIMATED ON THE NET PURCHASE VALUE OF RS.12,06,950/ - AND NOT ON THE GROSS VALUE OF RS.13,57,822/ - IN RESPECT OF SHOES. SIMILARLY IT HAS BEEN STATED THAT THE PROFIT SHOULD HAVE BEEN ESTIMATED ON THE NET PURCHASE VALUE OF RS.4,82,875/ - AND NOT ON THE GROSS VALUE OF RS.5,07,016/ - IN RESPECT METRO SHOES LIMITED 5 OF STATIONERIES. WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR MAKING NECESSARY CORRECTIONS AFTER DUE VERIFICATION. 13. IN THE RESULT, THE APPEALS FILED FOR AY 2009 - 10 AND 2010 - 11 ARE ALLOWED AND THE APPEAL FILED FOR AY 2011 - 12 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 15 . 9 . 201 7. SD/ - SD/ - (PAWAN SINGH) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 15 / 9 / 20 1 7 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 ORDER, //TRUE COPY// ( DY./ASSTT. REGIS TRAR) PS ITAT, MUMBAI