ASST CIT 15(2)(1), MUMBAI V. ISPAT INFRASTRUCTURE (INDIA) P.LTD, NAVI MUMBAI

ITA 4622/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0236 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 19-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase
• Section: 142(1); 147; 148; 6; 2; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 4622 / MUM/ 201 5 ( / ASSESSMENT YEAR: 2009 - 10 ) THE ASST. CIT 15(2) (1), ROOM NO. 403, 4 TH FLOOR, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 VS. M/S ISPAT INFRASTRUCTURE (INDIA) PVT. LTD., 149/151, CENTRAL FACILITY BUILDING, PH ASE - II, APMC MARKET, VASHI, NAVI MUMBAI - 400705 ./ ./ PAN/GIR NO. : AABCI 0639 P ( / APPELLANT ) .. ( / RESPONDENT ) & ./ ITA NO. 4623 / MUM/ 201 5 ( / ASSESSMENT YEAR: 20 10 - 11 ) THE ASST. CIT 15(2)(1), ROOM NO. 403, 4 TH FLOOR, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 VS. M/S ISPAT INFRASTRUCTURE (INDIA) PVT. LTD., 149/151, CENTRAL FACILITY BUIL DING, PHASE - II, APMC MARKET, VASHI, NAVI MUMBAI - 400705 ./ ./ PAN/GIR NO. : AABCI 0639 P ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : NONE /REVENUE BY : SHRI SAURABH KUMAR RAI (DR) / DATE OF HEARING : 02/08 /2017 / DATE OF PRONOUNCEMENT : 18 /08 /2017 / O R D E R PER RAM L AL NEGI, JM THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE COMMON ORDER DATED 20/05/2015 PASSED BY THE LD. CIT (A) - 24 , MUMBAI PERTAI NING TO THE ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY 2 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 ALLOWED THE APPEAL FIL ED BY THE APPELLANT/ ASSESSEE AGAINST ASSESSMENT ORDER PASSED U /S 143 (3) R/W SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . SINCE, THESE APPEALS PERTAIN TO SAME ASSESSEE AND THE ISSUES INVOLVED ARE COMMON IN BOTH THE APPEALS, BOTH THE APPEA LS WERE CLUBBED IN ORDER HEAR THE SAME TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THESE CASE S W ERE FIXED FOR HEARING ON 26/04/2017, HOWEVER, ADJOURNED TO 19/06/2017 AS NONE APPEARED ON BEHALF OF THE ASSESSEE. NOTICE WAS SENT THROUGH RPAD. ON 19/06/2017 AGA IN NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED. FRESH NOTICE WAS ISSUED AND SERVED THROUGH DR FOR 02/08/2017. TODAY, I.E., ON 02/08/2017 WHEN THE CASE WAS CALLED FOR HEARING, NEITHER THE ASSESSEE NOR HIS REPRESENTATIVE APPEARED NOR WE R ECEIVED ANY APPLICATION FOR ADJOURNMENT. WE ARE, THEREFORE, SATISFIED THAT THE RESPONDENT/ASSESSEE HAS NOTHING TO SAY IN THIS CASE. ACCORDINGLY, WE DECIDED TO DISPOSE OF THESE APPEALS ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AFTER HEARING THE DEPARTMEN TAL REPRESENTATIVE (DR). ITA NO. 4622 / MUM/2015 ( ASSESSMENT YEAR: 2009 - 10 ) SINCE, THE FACTS OF BOTH THE SE CASES ARE IDENTICAL EXCEPT THE AMOUNT INVOLVED, WE TAKE THE FACTS OF THIS CASE AS A LEAD CASE. THE ASSESSEE ENGAGED IN THE BUSINESS OF IMPORT , TRADI NG AND HIRING CONSTRUCTION EQUIPMENTS, FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 DECLARING THE TOTAL INCOME OF RS. 75,89,011/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT. 3. ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX D EPARTMENT, MUMBAI THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 1,94,78,882/ - FROM 15 PARTIES (HAWALA OPERATORS) MENTIONED IN THE ASSESSMENT ORDER, THE ASSESSMENT WAS REOPENED BY ISSU ING NOTICE U/S 142(1) INCORPORATING THEREIN THE RE ASONS FOR REOPENING OF ASSESSMENT . IN RESPONSE THEREOF THE ASSESSEE FILED A WRITTEN REPLY STATING 3 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 THEREIN THAT RETURN FILED U/S 139(1) MAY BE TREATED AS RETURN OF INCOME FILED U/S 148 OF THE ACT. THE AO ALSO DIRECTED THE ASSESSEE TO SHOW CAUSE AS TO WHY T HE ALLEGED PURCHASES MADE FROM THE SAID HAWALA DEALERS SHOULD NOT BE TREATED AS BOGUS PURCHASES AND THE AMOUNT SHOULD NOT BE ADDED TO THE TOTAL INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE MADE A WRITTEN SUBMISSION AND CONTENDED THAT THE PU RCHASES IN QUESTION WERE TO SELL THE SAME TO THE PURCHASERS . THE EXECUTION OF SUCH ORDERS IS NOT POSSIBLE WITHOUT MAKING PURCHASES. THE ASSESSEE FURTHER SUBMITTED THAT ITS GROSS PROFIT FOR THE FINANCIAL YEAR 2008 - 09 WAS 26.05 % AS AGAINST 20.31 % FOR THE FIN ANCIAL YEAR 2007 - 08 , THEREFORE QUESTION OF BOGUS PURCHASE DOES NOT ARISE . 4. THE AO REJECTING THE CONTENTION OF THE ASSESSEE, HELD THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE TO PROVE THE ACTUAL DELIVERY OF THE MATERIAL PURCHASED. THE AO ALSO RELIED ON THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT TO REACH AT THE CONCLUSION THAT THE PURCHASES SHOWN BY THE ASSESSEE OF RS. 1,94,78,882/ - DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ARE BOGUS. ACCORDINGLY, THE AO MADE ADDITION OF THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL , THE LD.CIT (A) RESTRICTED THE ADDITION TO 15% OF THE TOTAL ALLEGED BOGUS PURCHASES WHICH COMES TO RS. 29,21,832 / - 5. THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER ON T HE FOLLOWING EFFECTIVE GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE DISALLOWANCE OF BOGUS PURCHASE FROM RS. 19478882/ - TO 2921832/ - BEING 15% PROFIT ON BOGUS PURCHASE DESPITE THE FACT THAT THE PARTIES WERE FOUND TO BE HAWALA OPERATOR/BOGUS BILLERS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (356 ITR 451), EVEN THOUGH THE FACTS OF THIS CASE ARE 4 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 DIFFERENT FROM THAT RELIED UPON AND HENCE THE DECISION IS NOT APPLICABLE IN THIS CASE. 6. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSMENT WAS RE - OPENED ON THE BASIS OF INFORMATION RECEI VED FROM INVESTIGATION WING OF INCOME TAX DEPARTMENT THAT THE APPELLANT/ASSESSEE HAD OBTAINED BOGUS BILLS IN ORDER TO SHOW PURCHASES AMOUNTING TO RS. 19478882/ - FROM 15 PARTIES DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. T HE REASONS FOR REOPENING WERE ALSO INCORPORATED IN THE NOTICE U/S 142 (1). THE ASSESSEE ASKED TO TREAT THE ORIGINAL RETURN FILE U/S 139 (1) AS RETURN OF INCOME FILED U/S 148. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PURCHASES MADE FROM THE BOGUS HAWALA DEALERS SHOULD NOT BE TREATED AS BOGUS PURCHASE AND THE AMOUNT SHOULD NOT BE ADDED TO ITS TOTAL INCOME. THE SUBMISSIONS MADE IN BY THE ASSESSE ARE NOT ACCEPTABLE AS THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO PROVE THE ACTUAL DELIVERY OF THE MATE RIAL PURCHASED. MOREOVER, THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT HAS ESTABLISHED THAT THE SAID PARTIES USED TO ISSUE BOGUS BILLS TO THE DIFFERENT COMPANIES INCLUDING THE ASSESSEE IN THE PRESENT APPEAL. THE LD. DR RELYING ON THE VARIOUS D ECISIONS INCLUDING THE DECISION OF HONBLE HIGH COURT OF GUJARAT RENDERED IN N.K. PROTEIN LTD. VS. DCIT IN TAX APPEAL NO. 240, 241 261, 242 AND 260 OF 2003, UPHELD BY THE HONLE SUPREME COURT , KACHWALA GEMS 288 ITR 10 (SC) SREELEKHA BANERJEE 49 ITR 112 (SC ), SUMATI DAYAL 214 ITR 801 (SUPREME COURT), LA MEDICA 250 ITR 575 (DELHI) AND THE DECISIONS RENDERED BY THE VARIOUS BENCHES OF THE TRIBUNALS HAS SUBMITTED THAT IF PURCHASES ARE NOT PROVED TO THE GENUINE THEN THE ENTIRE PURCHASE NEEDS TO BE TAKEN AS INCOME OF THE ASSESSEE. THEREFORE, THE LD. CIT(A) HAS WRONGLY RESTRICTED THE ADDITION TO 15% OF THE TOTAL AMOUNT AS AGAINST 100% ADDITION MADE BY THE AO. 5 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 7. WE HAVE HEARD THE LD. DR AND ALSO GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES. THE ONLY GRIEVANCE OF THE REVENUE IN THIS CASE IS THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO THE EXTENT OF 15% OF THE TOTAL ALLEGED BOGUS PURCHASES. THE LD. CIT(A) HAS RESTRICTED THE ADDITION HOLDING AS UNDER: - 2.11 THE F ACTS IN THE PRESENT CASE INDICATE THAT THE APPELLANT WAS NOT IN A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. THE SUPPLIER WAS ENGAGED IN PROVIDING BOGUS BILLS WITHOUT ACTUAL DELIVERY OF GOODS. MOREOVER THIS SUPPLIER IS NOT A REGULAR PARTY AND IT WAS FOUND TO HAVE SUPPLIED MATERIAL ONLY DURING THE YEAR AND THERE WERE NO SUPPLY EITHER IN THE EARLIER YEAR OR IN THE SUBSEQUENT YEAR. AS DISCUSSED ABOVE THIS CIRCUMSTANTIAL EVIDENCE PROVE THE BOGUS NATURE OF THE TRANSACTION. ON CAREFUL ANALYSIS OF THE FINDI NG OF HONBLE HIGH COURT OF GUJARAT IN THE ABOVE MENTIONED CASES. I AM OF THE FIRM VIEW THAT WITHOUT PURCHASE OF THE MACHINES IT WAS NOT POSSIBLE FOR THE APPELLANT TO EITHER SELL THE ITEMS. AS MENTIONED ABOVE THE AO HAD NEVER DISPUTED OR EXAMINED THE ASPEC T OF SALES. HENCE I AM OF THE FIRM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS. THE APPELLANT TOOK ONLY BILLS FROM THESE 15 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASES. THEREFORE THE ENTIR E PURCHASES FROM THESE 15 PARTIES CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. PROFIT ESTIMATES RANGING FROM 12.5% TO 25% HAS BEEN UPHELD BY THE HONBLE GUJARAT HIGH COURT DEPENDING UPON THE NATURE OF THE BUSINESS. AS HELD IN THE CASE OF SIMIT P. SHETH (SUPRA) NO UNIFORM YARDSTICKS COULD BE APPLIED TO ESTIMATE THE RATE OF PROFIT AND IT VARY WITH THE NATURE OF BUSINESS. TAKING ALL THE FACTS INTO CONSIDERATION AND THE FINDINGS OF THE HONBLE COURTS ON THIS ISSUE, I AM OF THE VIEW THAT ESTIMATION OF 15% OF PROFIT WOULD MEET THE ENDS OF THE JUSTICE. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 15% ON THE TOTAL ALLEGED BOGUS PURCHASE RS. 1,94,78,882/ - WHICH WORKS OUT TO RS. 29,21,832/ - . THE APPELLANT GETS RELIEF OF THE BALANCE RS. 1,65,57,050/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 8. WE NOTICE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES SHOWN BY THE ASSESSEE. WE FURTHER NOTICE THAT THE ASSESSEE HAS CONTENDED BEFORE T HE AO AS WELL AS BEFORE THE LD. CIT (A) THAT THE PARTIES HAVE GIVEN SOME SORT OF AFFIDAVIT AND THEIR NAMES ARE APPEARING ON THE WEBSITE, THEREFORE WE CANNOT BE CONCLUDED THAT THE PARTIES WERE NON - EXISTENT. SINCE, THE MAHARASHTRA VAT AUTHORITIES HAVE GIVEN THEM THE REGISTRATION AFTER OBTAINING THEIR PAN NOS, COPY OF PASSPORTS, TELEPHONE OR ELECTRICITY BILLS AND THEIR PHOTOGRAPHS AND OTHER REQUIRED DOCUMENTS; THEY CANNOT BE TERMED AS HAWALA DEALERS. THE ENTRIES REGARDING THE PURCHASES IN QUESTION ARE MADE IN THE BOOKS OF ACCOUNT AND IF THE SAID PARTIES HAD NOT PAID THE SALES TAX, THE ASSESSEES PURCHASES CANNOT BE TREATED AS BOGUS. PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN CIT VS. ORISSA CORPORATION PVT. LTD. 159 ITR 78 (SC) HONB LE BO MBAI HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) AND CIT VS. U M SHAH 90 ITR 396 (BOMB.) AND JODHPUR BENCH OF THE TRIBUNAL IN JAGDAMBA TRADING COMPANY VS. ITO (2007) 16 SOT 66 JODHPUR, THE ASSESSEE HAS CONTENDED BEFORE T HE AUTHORITIES BELOW THAT FOR EVERY SALE THERE HAS TO BE CORRESPONDING PURCHASES. IF SALES BILLS ARE BEING ACCEPTED THEN THE TOTAL PURCHASES AMOUNT SHOULD BE ACCEPTED. 9. WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL THE HONBLE BOMBAY HIGH COURT IN CI T VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) HAS HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE , IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS BASED ON THE 7 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 PRINCIPLES OF LAW DOWN BY THE HONBLE SUPREME COURT AND VARIOUS HIGH COURTS. IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS BASED ON THE LAW LAID DOWN BY THE HON BL E SUPREME COURT, HONBLE BOMBAY HIGH COURT AND THE DECISIONS OF THE TRIBUNAL DISCUSSED ABOVE. ON THE OTHER HAND THE LAW RELIED UPON BY THE LD. DR ARE DISTINGUISHABLE ON FACTS. T HEREFORE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTER FERE WITH. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE SOLE GROUND OF THE APPEAL FILED BY THE REVENUE. ITA NO. 4623 / MUM/2015 (ASSESSMENT YEAR: 2010 - 11 ) THE FACTS AND THE ISSUES INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND ISSUES INVOLVE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10, EXCEPT THE AMOUNT OF BOGUS PURCHASE. 2. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 3. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE DISALLOWANCE OF BOGUS PURCHASE FROM RS. 2827375 0/ - TO 4241063/ - BEING 15% PROFIT ON BOGUS PURCHASE DESPITE THE FACT THAT THE PARTIES WERE FOUND TO BE HAWALA OPERATOR/BOGUS BILLERS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (356 ITR 451), EVEN THOUGH THE FACTS OF THIS CASE ARE DIFFERENT FROM THAT RELIED UPON AND HENCE THE DECISION IS NOT APPLICABLE IN THIS CASE. 8 ITA NO S . 4622 & 4623/MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 4 . SINCE, WE HAVE DISMISSED THE DEPARTMENT APPEAL FOR THE A.Y. 2009 - 10 A ND SINCE THERE IS NO CHANGE IN THE FACTS OR ISSUES INVOLVED IN THIS CASE, WE UPHOLD THE ORDER PASSED BY THE LD. CIT (A) AND DISMISS THE APPEAL OF THE DEPARTMENT FOR THE SAME REASONS. IN THE RESULT, APPEAL S FILED BY THE REVENUE FOR ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 18 / 8 / 2017 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI