OSIAN S CONNOISSEURS OF ART P. LTD, MUMBAI V. DCIT (CEN CIR )-11, MUMBAI

ITA 4588/MUM/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55025 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-08-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D EVI SINGH
• Keywords: Bogus purchase; Search and seizure; Loose papers; Principle of natural justice; Rule of consistency; Accommodation entries
• Section: 133A; 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI R.K. PANDA, A.M. AND SHRI V. DURGA RAO , J.M. ITA NO. 4588/MUM/2011 ASSESSMENT YEAR: 2008-09 OSIANS CONNOISSEURS OF ART PVT. LTD., APPE LLANT G-2B NARIMAN BHAVAN, GROUND FLOOR, NARIMAN POINT, MUMBAI 400 021. (PAN AAACO3687L) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CENTRAL CIRCLE -11, MUMBAI APPELLANT BY : MR. DEEPAK TRALSHAWALA RESPONDENT BY : MR. DEVI SINGH ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)-37, MUMBAI, PASSED ON 27/04/2011 FOR THE ASS ESSMENT YEAR 2008-09 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITS APPEAL:- 1) CONFIRMING ADDITION OF RS. 4,79,11,132/- ON ACCO UNT OF BOGUS PURCHASES BY THE CIT(A). 2. CONFIRMING THE ADDITION OF RS. 5,65,99,293/- AND RS. 11,49,71,108/- ON ACCOUNT OF UNREPORTED/UNDER REPOR TED PURCHASES AND SALES RESPECTIVELY. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PVT. LTD. COMPANY ENGAGED IN THE BUSINESS OF AUCTION HOUSE IN ART & ART OBJECTS AND CONSULTANT OF DEALING IN ART, CINEMA AN D RELATED AREA INCLUDING PUBLICATION OF FILM MAGAZINES. SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT AND SURVEY ACTION U/S 133A OF THE ACT WERE CARRIED OUT IN THE PREMISES OF THE ASSESSEE AND GRO UP CONCERNS ON ITA NO. 4588/M/11 OSIANS CONNOISSEURS OF ART PVT. LTD. 2 17/04/2007, WHEREIN, CERTAIN INCRIMINATING MATERIAL S AND LOOSE PAPERS, DOCUMENTS ETC. WERE FOUND AND SEIZED. DURIN G THE FY 2007-08 RELEVANT TO AY 2008-09, THE ASSESSEE HAD OFFERED RS , 10 CRORE INCOME AND MADE A FURTHER OFFER OF RS. 50 LAKHS TO COVER U P ANY DISCREPANCY DETECTED AS A RESULT OF SEARCH VIDE QUESTION NO. 7 OF STATEMENT RECORDED U/S 131 OF THE ACT ON 06/06/07 FROM SHRI N EVILLE TULI, RESPONSIBLE DIRECTOR OF THE ASSESSEE COMPANY. DURIN G THE PREVIOUS YEAR RELEVANT TO AY 2008-09, THE ASSESSEE HAD SHOWN CERTAIN PURCHASES FROM CERTAIN PERSONS, WHO WERE NOT AVAILA BLE ON THE GIVEN ADDRESSES AT THE TIME OF SERVICE OF NOTICES ISSUED AND THE ASSESSEE COULD NOT PRODUCE THEM FOR VERIFICATION BEFORE THE AO. THE AO, THEREFORE, FOLLOWING THE DECISION IN AY 2006-07 IN ASSESSEES OWN CASE HELD THAT THE ASSESSEE HAD INFLATED PURCHASES TO TH E EXTENT OF AT LEAST RS. 19,16,44,527/- AND ALSO HAD NOT REPORTED OR UND ER REPORTED PURCHASES TO THE EXTENT OF RS. 5,65,99,293/- AND FU RTHER HAD UNREPORTED SALES OF RS. 11,49,71,108/-. THE TOTAL A DDITION TO THE INCOME, THUS, IS RS. 36,32,14,928/-. AGGRIEVED BY T HE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL TO THE CI T(A). 4. BEFORE THE CIT(A), THE LEARNED AR OF THE ASSESSE E STRONGLY CONTENDED THAT SUFFICIENT OPPORTUNITY WAS NOT PROVI DED TO THE ASSESSEE. IT WAS NOT KNOWN AS TO WHY THE AO DISALLO WED THE PURCHASES AS BOGUS PURCHASES BECAUSE THE ASSESSEE H AD SUBMITTED FULL DETAILS OF THE PARTIES FROM WHOM THE ABOVE PUR CHASES WERE MADE AND THE ABOVE PARTIES WERE AVAILABLE. IT WAS SUBMIT TED THAT THE AO HAD NOT STATED THE EFFORTS MADE BY HIM TO SERVE THE NOTICES. IT WAS POINTED OUT THAT ALL THE PAYMENTS WERE MADE BY CHEQ UE. ACCORDING TO LEARNED AR THE AO HAD NOT POINTED OUT ANY DISCREPAN CY IN STOCK. THE LEARNED AR ARGUED THAT THE AUDITOR HAD NOT POINTED OUT ANY DISCREPANCY IN THE PURCHASES OR OPENING OR CLOSING STOCK OF THE RELEVANT FINAL ACCOUNTS OF THE ASSESSEE AND NO FAU LTS WERE POINTED OUT IN THE COMPANY AUDIT, STATUTORY AUDIT OR INCOME TAX AUDIT CONDUCTED BY THE AUDITORS. BEFORE THE CIT(A) THE LEARNED AR O F THE ASSESSEE HAS ITA NO. 4588/M/11 OSIANS CONNOISSEURS OF ART PVT. LTD. 3 RELIED UPON VARIOUS CASE LAWS IN SUPPORT OF ASSESSE ES CASE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) HELD THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE OF BOGUS PURCHASES MADE BY THE AO AT R S. 19,16,44,527/- IS REDUCED TO RS. 4,79,11,132/- ONLY WHICH IS 25% OF THE BOGUS PURCHASES DEBITED BY THE ASSESSEE. THIS I S IN CONFORMITY WITH THE DECISION GIVEN BY THE AO AND CONFIRMED BY ME IN AY 2006-07 IN THE CASE OF THE SAME APPELLANT AND ALSO KEEPING THE PRINCIPLE OF CONSISTENCY IN MIND. AS FAR AS THE ADDITION ON ACCOUNT OF NON- REPORTED/UNDER REPORTED SALES AND PURCHASES ARE CON CERNED, THE CIT(A) CONFIRMED THE ADDITIONS OF RS. 5,65,99,293/- AND RS. 11,49,71,108/- MADE ON ACCOUNT OF UNREPORTED AND UN DER-REPORTED PURCHASES AND SALES, ON THE GROUND THAT THE ASSESSE E COULD NOT RECONCILE THE DIFFERENCES IN SPECIFIC CASES AND WAS NOT ABLE TO PRODUCE A SINGLE PARTY, THEREFORE, NO REASON TO INTERFERE W ITH THE FINDINGS GIVEN BY THE AO. STILL AGGRIEVED, THE ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO MADE THE ADDITION ON THE BASIS OF AY 2006-07 , BUT THE TRIBUNAL REMITTED THE ISSUE BACK TO THE FILE OF THE AO FOR CROSS EXAMINATION OF THE THIRD PARTIES. IT IS SUBMITTED T HAT IN AY 2007-08 THE AO HAS NOT MADE ANY ADDITION ON THE SIMILAR ISS UES. IN THE YEAR UNDER CONSIDERATION, THE AO MADE 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES WHEREAS THE CIT(A) RESTRICTED THE S AME TO 25%. THE MAIN ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESS EE BEFORE US IS THAT THE AO ISSUED NOTICE U/S 133(6) WITH REGARD TO VERIFY THE PURCHASES AND SALES EFFECTED. THE RESULT OF THE ENQ UIRY WAS COMMUNICATED TO THE ASSESSEE VIDE LETTER DATED 23/1 1/2010 FOR ITS COMMENTS/REPLY. HOWEVER, THERE WAS SOME ERRORS IN T HIS LIST, WHICH WAS RECTIFIED AND THE SAME WAS FURTHER COMMUNICATED TO THE ASSESSEE ON 09/12/10 REQUIRING COMPLIANCE BY 16/12/10 AND HE ARING WAS FIXED ON THE SAME DAY AT 4.00 PM, AND FINALIZED THE ASSESSMENT. THE ITA NO. 4588/M/11 OSIANS CONNOISSEURS OF ART PVT. LTD. 4 LEARNED COUNSEL CONTENDED THAT THE TIME WAS GIVEN T O THE ASSESSEE TO RESPOND ITS CASE ONLY 4 WORKING DAYS BETWEEN 09/12/ 10 TO 16/12/10. ACCORDING TO THE LEARNED COUNSEL, THERE WAS NO PROP ER OPPORTUNITY GIVEN TO THE ASSESSEE TO SUBSTANTIATE ITS CASE BEFO RE THE AO AND EVEN BEFORE THE CIT(A) ALL THE DETAILS IN RESPECT OF PUR CHASE AND SALES WERE FILED, HOWEVER, THE CIT(A) NOT ACCEPTED/ADMITTED TH E SAME. THEREFORE, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FINALLY PL EADED THAT THE ISSUES UNDER CONSIDERATION MAY BE REMITTED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 6. ON THE OTHER HAND, THE LEARNED DR HAS STRONGLY O BJECTED TO REMIT THE ISSUES BACK TO THE FILE OF THE AO. THE LE ARNED DR SUBMITTED THAT THE SEARCH WAS CONDUCTED FOR THE REASON THAT T HE DEPARTMENT WAS IN POSSESSION OF INFORMATION THAT THE ASSESSEE COMP ANY HAD PROCURED BOGUS PURCHASE BILLS FROM VARIOUS PERSONS, WHO HAVE FLOATED VARIOUS PROPRIETORSHIP CONCERNS AND PROVIDED ACCOMMODATION ENTRIES TO THE ASSESSEE AS THESE PARTIES ARE NOT ENGAGED IN ANY BU SINESS AND HAS NOT DELIVERED ANY GOODS TO THE ASSESSEE. THE LEARNED DR CONTENDED THAT THE ASSESSEE HAS DECLARED RS. 10 CRORES IN SEARCH A S UNDISCLOSED INCOME IN RESPECT OF THE IRREGULARITIES IN PURCHASE S. IT IS FURTHER CONTENDED THAT AGAINST THE NOTICE U/S 133(6) ISSUED BY THE AO, THE ASSESSEE HAS NOT PRODUCED EVEN A SINGLE PARTY NOR S UBMITTED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE GENUINENES S OF THE TRANSACTION. AS REGARDS THE CONTENTION OF THE ASSES SEE THAT SUFFICIENT OPPORTUNITY WAS NOT GIVEN BY THE AO TO SUBSTANTIATE ITS CLAIM, THE LEARNED DR SUBMITTED THAT THE OPPORTUNITIES GIVEN B Y THE AO WERE NOT UTILIZED BY THE ASSESSEE, THEREFORE, THE ALLEGATION OF THE ASSESSEE THAT CONTRAVENTION OF PRINCIPLES OF NATURAL JUSTICE, IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. FOR THIS CONTENTION, THE LEAR NED DR RELIED UPON THE DECISION IN THE CASE OF P.N. BALASUBRAMANIAN VS . ITO & OTHERS [AP], 112 ITR 512. ITA NO. 4588/M/11 OSIANS CONNOISSEURS OF ART PVT. LTD. 5 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W AS WELL AS DECISIONS CITED. THE PRIMARY CONTENTION OF THE ASSE SSEE BEFORE US IS THAT THE AO HAS NOT GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRESENT AND SUBSTANTIATE ITS CLAIM BEFORE THE AO. T HE FURTHER CONTENTION OF THE ASSESSEE IS THAT THE REVENUE AUTH ORITIES NOT CONSIDERED THE FULL CONFIRMATIONS AND RECONCILIATIO N PRODUCED BY THE ASSESSEE ON THE GROUND THAT NO APPLICATION WAS MADE UNDER RULE 46A, IGNORING THAT THIS WAS ONLY SUPPORTIVE EVIDENCE AS THE ASSESSEE HAD GIVEN ALL DETAILS OF NAMES AND ADDRESSES OF THE SEL LERS AND PURCHASERS TO THE AO UPON WHOM THE PRIMA FACIE ONUS LAY OF ASC ERTAINING THE CORRECTNESS OR OTHERWISE OF THE DETAILS SUBMITTED. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF TH E VIEW THAT IN THE INTEREST OF JUSTICE, WE REMIT THE ISSUES IN DISPUTE BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUES AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARI NG TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE ALL THE MATERIAL/E VIDENCES, IF ANY, IN SUPPORT OF ITS CASE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH OF AUGUST, 2011. SD/- SD/- (R.K. PANDA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 30 TH AUGUST, 2011 KV ITA NO. 4588/M/11 OSIANS CONNOISSEURS OF ART PVT. LTD. 6 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.