ASST CIT 15(2)(1), MUMBAI V. ICARO MACHINES (INDIA) P. LTD, NAVI MUMBAI

ITA 4624/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0249 (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: 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. 46 24 / 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 ICARO MACHINES (INDIA) PVT. LTD., ISPAT HOUSE, PLOT NO. EL - 28, TTC INDUSTRIAL AREA, MIDC, MHAPE, NAVI MUMBAI - 400710 ./ ./ PAN/GIR NO. : AABCI 6485 R ( / APPELLANT ) .. ( / RESPONDENT ) & . / ITA NO. 4625 / 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 ICARO MACHINES (INDIA) PVT. LTD., ISPAT HOUSE, PLOT NO. EL - 28, TTC INDUSTRIAL AR EA, MIDC, MHAPE, NAVI MUMBAI - 400710 ./ ./ PAN/GIR NO. : AABCI 6485 R ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : NONE /REVENUE BY : SH. SAURABH KUMAR RAI (DR) / DATE OF HEARING : 02/08 /2017 / DATE OF PRONOUNCEMENT : 18 /08 /2017 / O R D E R PER RAM LAL NEGI, JM THES E APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE COMMON ORDER DATED 20/05/2015 PASSED BY THE CIT (A) - 24 , MUMBAI PERTAI NING TO THE ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 RESPECTIVELY , WHEREBY THE LD. CIT (A) HAS 2 ITA NO S . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 PARTLY ALLOWED THE APPEAL PREFERRED BY THE AS SESSEE AGAINST ASSESSMENT ORDER PASSED U /S 143 (3) R / W SECTION 147 OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEARS 2009 - 10 AND 201 0 - 1 1 . SINCE, THESE APPEALS PERTAIN TO THE ASSESSEE FOR THE DIFFERENT AYS AND THE ISSUES IN VOLVED ARE COMMON IN BOTH THE APPEALS, THE SAME WERE CLUBBED IN ORDER HEAR BOTH THE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THIS CASE WAS FIXED FOR HEARIN G ON 26/04/2017, HOWEVER, IT WAS ADJOURNED TO 19/06/2017 AS NONE APPEARED ON BEHALF OF THE ASSESSEE. NOTICE WAS SENT THROUGH RPAD. O N 19/06/2017 NEITHER THE ASSESSEE N OR HIS AUTHORIZED REPRESENTATIVE APPEAR ED . FRESH N OTICE WAS ORDERED TO BE ISSUED AND SERVED THROUGH DR FOR 02/08/2017. TODAY, I.E., ON 02/08/2017 WHEN THE CASE WAS CALLED FOR HEARI NG, NEITHER THE ASSESSEE NOR HIS REPRESENTATIVE APPEAR ED , NOR WE RECEIVED 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 DEPARTMENTAL REPRESENTATIVE (DR). ITA NO. 4624 / MUM/2015 ( ASSESSMENT YEAR: 2009 - 10 ) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF DEALING IN CONSTRUCTION EQUIPMENTS FI LED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 DECLARING THE TOTAL INCOME OF RS. 33,35,754/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT . 3. ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI THAT THE ASSESSEE HAD O BTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 82,61,592/ - FROM 14 PARTIES (HAWALA OPERATORS) MENTIONED IN THE ASSESSMENT ORDER , THE ASSESSMENT WAS REOPENED. ACCORDINGLY, THE AO ISSUED NOTICE U/S 142(1) AND CALLED FOR DETAILS AND REASONS WERE ALSO INCORPORA TED THEREIN. IN RESPONSE THEREOF THE ASSESSEE SUBMITTED 3 ITA NO S . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 WRITTEN REPLY STATING 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 THE 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 PURCHASES IN QUESTION WERE FOR FINISHED CONSTRUCTION EQUIPMENT S WHICH WERE SOLD TO THE CLIENTS. THE EXECUTION OF SUCH ORDER S WAS NOT P OSSIBLE WITHOUT MAKING PURCHASES. THE ASSESSEE FURTHER SUBMITTED THAT ITS GROSS PROFIT FOR THE FINANCIAL YEAR 2008 - 09 WAS 12.39% AS AGAINST 10.1 8% FOR THE FINANCIAL YEAR 2007 - 08 , HENCE NO QUESTION OF OBTAINING BOGUS BILLS DOES 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 PURCHASE D. TH E 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. 82,61,592/ - DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ARE BOGUS . AC CORDINGLY, 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. 12,39,239 / - 5. THE REVENUE HAS CHALLENGED THE IMPUGNE D ORDER ON THE 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. 8261592 / - TO 1229239 / - 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 4 ITA NO S . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 SIMIT P SHETH (356 ITR 45 1), EVEN THOUGH THE FACTS OF THIS CASE ARE DIFFERENT FROM THAT RELIED UPON AND HENCE THE DECISION IS NOT APPLICABLE IN THIS CASE. 6. BEFORE US, THE LD. D EPARTMENTAL R EPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSMENT WAS RE - OPENED ON THE BASIS OF INFORMATI ON RECEIVED FROM INVESTIGATION WING OF I NCOME T AX DEPARTMENT TO THE EFFECT THAT THE APPELLANT/ASSESSEE HAD OBTAINED BOGUS BILLS IN ORDER TO SHOW PURCHASES AMOUNTI NG TO RS. 82,61,592/ - FROM 1 4 PARTIES DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEA R UNDER CONSIDERATION. THE 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 PURCHA SES MADE FROM THE BOGUS HAWALA DEALERS SHOULD NOT BE TREATED AS BOGUS PURCHASE AND THE AMOUNT SHOULD NOT BE ADD ED TO ITS TOTAL INCOME. THE SUBMISSIONS MADE IN BY THE ASSESSE WERE NOT FOUND ACCEPTABLE AS THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO PROVE THE ACTUAL DELIVERY OF THE MATERIAL 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 DECISIONS 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 (S C ) SR EELEKHA BANERJEE 49 ITR 112 (SC), SUMATI DAYAL 214 ITR 801 (SUPREME COURT), LA MEDICA 250 ITR 575 (DELHI) AND THE DECISION S RENDERED BY THE VARIOUS BENCHES OF THE TRIBUNALS HAS SUBMITTED THAT IF PURCHASES ARE NOT PROVED TO BE G ENUINE THEN THE ENTIRE PURCHA SE 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 . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 7. WE HAVE HEARD THE LD. DR AND ALSO GONE THROUGH THE MATERIAL ON RECORD INCL UDING THE CASES RELIED UPON BY THE REVENUE . THE ONLY GRIEVANCE OF THE REVENUE 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 : - 2.10 THE FACTS 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 REGULA R 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 ANA LYSIS OF THE FINDING OF HONBLE HGIH 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 SELL THE ITEMS. AS MENTIONED ABOVE THE AO HAD NEVER DISPUTED OR EXAMINE D THE ASPECT 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 13 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASES. THEREFOR E THE ENTIRE PURCHASE FROM THESE 13 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 VARIES WITH THE NATURE OF BUSINESS. TAKING ALL THE FACTS INTO CONSIDERATION AND THE FINDINGS OF THE HONB LE COURTS ON THIS ISSUE , I AM OF THE VIEW THAT ESTIMATION OF 15% OF PROFIT WOULD MEET THE ENDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 15% ON THE TOTAL ALLEGED BOGUS PURCHASE RS. 82,61,592/ - WHICH WORKS OUT TO RS. 12,39,239/ - . THE APPE LLANT GETS RELIEF OF THE BALANCE RS. 70,22,353/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. W E 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 BE FORE THE AO AS WELL AS BEFORE THE LD. CIT (A) THAT THE PARTIES 6 ITA NO S . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 HAVE GIVEN SOME SORT OF AFFIDAVIT S AND THEIR NAMES ARE APPEARING ON THE WEBSITE, THEREFORE , IT CANNOT BE CONCLUDED THAT THE PARTIES WERE NONEXISTENT. SINCE, THE MAHARASHTRA VAT AUTHORITIES HAV E GIVEN THE M THE REGISTRATION AFTER OBTAINING THEIR PAN NOS , COPY OF PASSPORT S , TELEPHONE OR ELECTRICITY BILLS AND THEIR PHOTOGRAPHS AND OTHER REQUIRED DOCUMENTS, THEY CANNOT BE TERMED AS HAWALA DEALERS. THE ENTRIES REGARDING THE PURCHASE S 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 ) , DECISION S OF THE HONBLE BOM BAI HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) AND CIT VS. U M SHAH 90 ITR 396 (BOMB.) DECISION OF JODHPUR BENCH OF THE TRIBUNAL IN JAGDAMBA TRADING COMPANY VS. ITO (2007) 16 SOT 66 JODHPUR, AN D OTHER BENCHES INCLUDING THE MUMBAI BENCHES , THE ASSESSEE HAS CONTENDED BEFORE THE AUTHORITIES BELOW, THAT FOR EVERY SALE THERE HAS TO BE CORRESPONDING PURCHASES. IF SALES BILLS ARE ACCEPTED THEN THE THERE IS NO JUSTIFICATION OF TREATING THE TOTAL PURCHAS ES AS BOGUS . 9. WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL , THE HONBLE BOMBAY HIGH COURT IN CIT 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) O NE 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 HOL DING 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 PRINCIPLES OF LAW DOWN BY THE HON BLE SUPREME COURT AND VARIOUS HIGH COURT S. 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 7 ITA NO S . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 INTERFERE WITH. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE SOLE GROUND OF THE AP PEAL FILED BY THE REVENUE. ITA NO. 4625/ MUM/2015 (ASSESSMENT YEAR: 2010 - 11 ) THE FACTS AND THE ISSUES INVOLVE D 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 . 3. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE DISALLOWANCE O F BOGUS PURCHASE FROM RS. 4836669 / - TO 725500 / - 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 DE CISION 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. 3. SINCE, WE HAVE DISMISSED THE DEPARTMEN T APPEAL FOR THE A.Y. 2009 - 10 AND SINCE THERE IS NO CHANGE IN THE FACTS OR ISSUE S 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 REV ENUE 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 8 ITA NO S . 4624 & 4625 /MUM/2015 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 / 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