ACIT 14(1), MUMBAI V. BHAIRAV METALS, MUMBAI

ITA 4680/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9121 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMARDR
• Assessee Lawyers: S C PATNIAR
• Keywords: Bogus purchase; Principle of natural justice; Opportunity of cross examination
• Section: 69C; 143(3)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./4680/MUM/2014, / ASSESSMENT YEAR: 2010-11 ACIT-14(1) 2 ND FLOOR,EARNEST HOUSE NARIMAN POINT MUMBAI-400 021. VS. M/S. BHAIRAV METALS 57, BINANI BUILDING, GR. FLOOR 2 ND BHOIWADA LANE, BHULESHWAR MUMBAI-400 002. PAN:AAAFB 4213 E ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI SUMAN KUMAR-DR /ASSESSEE BY: SHRI S.C. PATNI-AR / DATE OF HEARING: 05/12/2016 / DATE OF PRONOUNCEMENT: 01/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 30.4.14,OF CIT(A)-MUMBA I, THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL. ASSESSEE-FIRM,ENGAGED IN THE BU SINESS OF IMPORTING AND SUPPLY OF FERROUS AND NON FERROUS METALS,FILED ITS RETURN OF INCOME O N 13.10.2010,DECLARING INCOME OF RS.57.90 LAKHS.THE AO COMPLETED THE ASSESSMENT ON 28.02.2013 ,U/S. 143(3) OF THE ACT,DETERMINING THE INCOME AT RS.1.90 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE AD DITION MADE BY THE AO ON ACCOUNT OF UNSUBSTANTIATED PURCHASE FROM UMIYA SALES AGENCY PV T. LTD. (USAPL),CHIRAG STEEL CENTRE (CSC)AND ATLAS JINKUSHAL METAL CORPORATION(AJMC).DU RING THE ASSESSMENT PROCEEDINGS,THE AO RECEIVED INFORMATION FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE SALES TAX AUTHORITIES HAVE IDENTIFIED BOGUS BILL PROVIDERS, T HAT THE NAME OF THE SUPPLIERS OF GOODS TO THE ASSESSEE I.E.USAPL, CSC AND AJMC WERE APPEARING IN THE LIST OF THE SALES TAX DEPARTMENT. ACCORDINGLY,HE ISSUED A SHOW CAUSE NOTICE TO THE AS SESSEE ASKING IT TO EXPLAIN AS TO WHY THE AFORESAID TRANSACTIONS SHOULD NOT BE TREATED AS BOG US.AFTER CONSIDERING SUBMISSION OF THE ASSESSEE DT.23.1.2013, 20.2.2013 AND 26.2.2013,THE AO HELD THAT PURCHASES WERE NOT SUPPORT -ED BY CHALLANS, THAT THERE WAS NO DIRECT EVIDENCE OF RECEIPT OF GOODS, THAT THE SUPPLIERS WERE BOGUS HAWALA DEALERS,THAT THE ONUS WAS ON THE ASSES SEE TO PROVE THE GENUINENESS OF THE TRANSACTION,THAT THE ACCOMMODATION BILLS WERE PROCU RED BY ASSESSEE TO INFLATE PURCHASE AND TO REDUCE GROSS PROFIT. INVOKING THE PROVISIONS OF SEC TION 69C OF THE ACT. HE MADE AN ADDITION 4680/M/14-BHAIRAV.M 2 OF RS.1.31(RS.1.12 CRORES +13.10 LAKHS+6.53 LAKHS) CRORES UNDER THE HEAD BOGUS PURCHASES FOR THE PURCHASES MADE FROM THE ABOVE REFERRED THRE E PARTIES. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,IT MADE ELABOR ATE SUBMISSIONS. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HELD THAT ADDITION WAS M ADE ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, THAT THE SALES TAX AUTHORI TIES HAD PASSED ON INFORMATION ABOUT BOGUS BILL PROVIDERS TO THE DEPARTMENT, THAT IN CASE OF U SAPL NO ENQUIRY WAS MADE IN THE CORPORATE SALES OFFICE AT BORIVALI,THAT THE AO HAD MADE NO AT TEMPT TO FIND OUT ABOUT THE PURCHASE OF GOODS FROM THE SAID PARTY,THAT THE AO HAD NOT PROVI DED OPPORTUNITY OF CROSS EXAMINATION OF SUPPLIERS TO THE ASSESSEE.HE REFERRED TO THE CASE O F PARMIT TEXTILES (ITA.S./4012-4015& 4020- 21/MUM/2012.,DT.1.10.2013 ),KASHIRAM TEXTILES MILLS (P) LTD. (284 ITR 61) AND HELD THAT AO HAD MADE ADDITION JUST ON PRESUMPTION AND SUSPIC ION,THAT THERE WAS NO JUSTIFICATION FOR ADDITION OF ENTIRE TRANSACTION, THAT THE CAUSE OF J USTICE WOULD BE MET BY MAKING ADDITION OF A REASONABLE PERCENTAGE OF SUCH PURCHASES IN ORDER TO FULFILL THE GAP OF ANY REVENUE LEAKAGE. FINALLY,HE HELD THAT ADDITION SHOULD BE RESTRICTED TO 10% OF PURCHASES MADE FROM CSC AND AJMC.WITH REGARD TO USAPL,HE HELD THAT THE ASSESSE E HAD EXPORTED THE GOODS PURCHASED FROM USAPL,THAT WITHOUT PURCHASES THERE COULD NOT B E ANY SALE, THAT THE AO HAD NOT FOUND ANY FAULT WITH THE QUANTITATIVE INFORMATION OF PURC HASES AND SALES, THAT THE AO COULD NOT ACCEPT ONE LIMB OF THE TRANSACTION AND REJECT THE O THER.HE REFERRED TO THE CASE OF NIKUNJ EXIMP ENTERPRISES (216 TAXMAN 171). 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPOR TED THE ORDER OF THE AO AND STATED THAT RELIABLE EVIDENCE WAS NOT PRODUCED BEFORE AO A BOUT PURCHASE OF GOODS, THAT SALES TAX AUTHORITIES HAD RECORDED STATEMENTS OF SUPPLIERS, T HAT SUPPLIER OF GOODS TO THE ASSESSEE WAS ISSUING BOGUS BILLS WITHOUT DELIVERING THE GOODS.TH E AUTHORISED REPRESENTATIVE (AR)RELIED UPON THE ORDER OF THE FAA AND CONTENDED THAT THE AO HAD ACCEPTED THE SALES OF GOODS,THAT IT SHOULD HAVE ACCEPTED THE PURCHASES ALSO,THAT ALL TH E DOCUMENTS WERE PRODUCED BEFORE HIM, THAT PAYMENTS WERE MADE THROUGH BANKING CHANNELS, T HAT THE ASSESSEE WAS NOT PROVIDED A CHANCE OF CROSS EXAMINATION OF THE ALLEGED BOGUS HA WALA DEALERS. 5. WE HAVE PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE AO HAD MADE THE ADDITION OF RS. 1.31 CRORES TO THE INCOME OF THE ASSESSEE U/S. 69C OF THE ACT,THAT HE HAD RECEIVED INFORMATION FROM SALES TAX AUTHORITIES VIA THE OFFICE OF DGIT(I NV.) MUMBAI, THAT THREE OF THE SUPPLIERS OF 4680/M/14-BHAIRAV.M 3 GOODS TO THE ASSESSEE WERE IN THE LIST OF HAWALA DE ALERS, THAT THE FAA HAD PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, THAT HE HAD DELETED THE ENT IRE ADDITION MADE WITH REGARD TO THE PURCHASES MADE FROM USAPL,THAT THE ASSESSEE HAD EXP ORTED GOODS PURCHASED FROM USAPL, THAT THE AO DID NOT DOUBT THE GENUINENESS OF EXPORT S MADE BY THE ASSESSEE, THAT THE COPIES OF THE STATEMENTS OF THE SUPPLIERS OF GOODS TO THE ASS ESSEE WERE NOT GIVEN TO IT,THAT THE ASSESSEE WAS NOT ALLOWED TO CROSS EXAMINE THE SUPPLIERS, THA T THE ASSESSEE HAD FILED LEDGER ACCOUNT, COPIES OF CONFIRMATIONS,BANK STATEMENTS, INWARD-OUT WARD REGISTERS ETC. BEFORE THE REVENUE AUTHORITIES. IN OUR OPINION, THE APPEAL COULD BE DI SMISSED ONLY ON ACCOUNT OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY AO. HE SHOULD HAVE SUPPLIED COPY OF STATEMENT OF THE ALLEGED HAWALA DEALERS TO THE ASSESSEE AND SHOULD HAVE ALLO WED THE CROSS EXAMINATION. BUT,WE WOULD ALSO LIKE TO MENTION THAT HE HAD MADE THE ADDITION U/S. 69C OF THE ACT.IN OUR OPINION,PROVISIONS OF THE SAID SECTION ARE NOT APPL ICABLE TO THE FACTS OF THE CASE. THE ASSESSEE HAD SHOWN ALL THE EXPENDITURE IN HIS BOOKS OF ACCOU NTS. SO,THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. IT IS ALSO A FACT THAT AO HAD NOT DOUBTED THE SALES,INCLUDING THE EXPORT, SHOWN BY THE ASSESSEE.THEREFORE,HOW COULD HE REJECT THE TOTAL PURCHASES.WE FURTHER FIND THAT FAA PARTLY UPHELD THE ADDITION MADE BY THE AO.THERE FORE, IN OUR OPINION, THERE IS NO NEED TO INTERFERE WITH HIS ORDER.CONFIRMING THE SAME,WE DEC IDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY AO STANDS DISMI SSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY, 2017. , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06 .01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.