ITO WD 28(1)(2), NAVI MUMBAI V. BALAJI ENGINEERING CO, NAVI MUMBAI

ITA 471/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9534 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N KAILASH NATHAN
• Keywords: Unexplained expenditure; Opportunity of being heard
• Section: 271(1)(c); 69C; 147; 148; 144

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO.471/MUM/2016 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER-28(1)(2), ROOM NO.328, 3 RD FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI-400703 / VS. M/S BALAJI ENGINEERING CO SHREE NIWAS HOUSE, PLOT NO.30, SECTOR-5, KOPARKHAIRANE, NAVI MUMBAI-400709 ( $ / REVENUE) ( %&'() * /ASSESSEE) P.A. NO.AAIFB0234D $ / REVENUE BY SHRI S. K. MISHRA-DR %&'() * / ASSESSEE BY SHRI N. KAILASH NATHAN + &$, - * . / DATE OF HEARING : 19/12/2018 - * . / DATE OF PRONOUNCEMENT 19/12//2018 / O R D E R PERJOGINDER SINGH (VICE PRESIDENT) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 02/11/2015 OF THE FIRST APPELLATE AUTHORITY, MUMBAI, DELETING THE PENALTY OF RS.43,41,137/-, LEVIED UNDE R SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), ITA NO.471/MUM/2016 M/S BALAJI ENGINEERING COMPANY ASSESSMENT YEAR-2009-10 2 DESPITE THE FACT THAT THE ASSESSEE KNOWINGLY AND DE LIBERATELY MISLEAD THE DEPARTMENT AND ATTEMPTED TO FURNISH INA CCURATE PARTICULARS OF INCOME. 2. DURING HEARING, SHRI S. K. MISHRA, LD. DR, ADVAN CED ARGUMENTS, WHICH IS IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, SHRI N. KAILASHNATHAN, LD. COUNSEL FOR THE ASSESSEE, FURNISHED COPY OF THE ORDER DATED 15/09/2 017 (ITA NO.472/MUM/2016), WHEREIN, THE LD. ASSESSING O FFICER WAS DIRECTED TO VERIFY THE GENUINENESS OF THE DOCUM ENTS, FILED BY THE ASSESSEE, AND TO CARRY OUT NECESSARY VERIFICATION/INVESTIGATION AND THEREAFTER PASSED AN ORDER. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REV ENUE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 15/0 9/2017 FOR READY REFERENCE AND ANALYSIS:- THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-26, MUMBAI DAT ED 02.11.2015 FOR AY 2009-10. ITA NO.471/MUM/2016 M/S BALAJI ENGINEERING COMPANY ASSESSMENT YEAR-2009-10 3 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE APPE ARED ON BEHALF OF ASSESSEE AND ON PERUSAL OF THE ORDER SHEET, WE NOTI CED THAT NOBODY WAS APPEARING ON BEHALF OF ASSESSEE ON THE LAST SEV ERAL OCCASIONS. ALTHOUGH NOTICE WAS ISSUED TO THE ASSESSEE, BUT EVE N THEN NOBODY APPEARED NOR ANY APPLICATION FOR ADJOURNMENT HAS BE EN MOVED ON BEHALF OF THE ASSESSEE. ON THE OTHER HAND LD. DR PR ESENT IN THE COURT IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX-PARTE WITH THE ASSISTANCE OF THE LD. DR AND THE MATERIAL ON RECORD. 3. THE GROUNDS RAISED BY THE REVENUE ARE INTER-CONN ECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN RESTRICTING THE ADDITIONS MADE BY AO ON THE TOTAL BOGUS HAWALA PURCHASES. 4. AS PER THE FACTS OF THE PRESENT CASE, THE ASSESS EE FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 29.09.09 DECLARING TOTA L INCOME AT RS. 36,804-. SUBSEQUENTLY, THE CASE WAS REOPENED BY SER VING NOTICE U/S 148 OF THE ACT DATED31.01.13 AFTER RECORDING REASON S FOR REOPENING BEING ON ACCOUNT OF HAWALA PURCHASES FROM SUSPICIOU S PARTIES. SINCE NOBODY APPEARED ON BEHALF OF ASSESSEE, THEREFORE AS SESSMENT ORDER U/S 144 R.W.S 147 OF THE I.T. ACT WAS PASSED BY THE AO THEREBY MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED EXPENDITURE IN TERMS OF SECTION 69C OF THE I.T. ACT. 1961. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED AP PEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CAS E OF BOTH THE PARTIES PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY RESTRI CTING THE ADDITIONS MADE BY AO. NOW BEFORE US, THE REVENUE HAS PREFERRED THE APPEA L BY CHALLENGING THE ORDER OF LD. CIT(A). 5. WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED TH E MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY RE VENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECE SSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. C IT(A) HAS DEALT WITH THE GROUNDS RAISED BY THE REVENUE IN PARA NO. 2(2.1 TO 2.4) OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 2.4 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW:- 2.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE APPELLANT. THE REASONS FOR THE DISALLOWANCE HAS BEE N THE INABILITY OF THE APPELLANT TO EXPLAIN THE SUSPICIOUS NATURE O F THE TRANSACTION RELATING TO THE PURCHASE OF GOODS FROM HAWALA OPERA TORS APPEARING IN THE WEBSITE OF THE VAT DEPARTMENT. IT IS ALSO EXPLAINED BY THE APPELLANT THAT THERE HAS BEEN A FA ILURE ON THE PART OF THE AO TO ISSUE NOTICES AND PROVIDING THE D ETAILS OF THE ITA NO.471/MUM/2016 M/S BALAJI ENGINEERING COMPANY ASSESSMENT YEAR-2009-10 4 TRANSACTIONS WITH THE SUSPICIOUS DEALERS. THE AO HA S NOT GONE BEYOND ISSUING NOTICE TO THE PPELLANT TO ASCERTAIN THE REAL NATURE OF THE TRANSACTION. THE HON'BLE ITAT 'D' BENCH BOMB AY IN DCIT VS RAJEEV G. KALATHIL IN ITA NO.6727/MUM/2012 HAS STAT ED THAT THE INFORMATION RECEIVED FROM THE VAT DEPARTMENT WAS A GOOD STARTING POINT FOR FURTHER INVESTIGATION. IT WAS AL SO OBSERVED THAT THE AO COULD HAVE CALLED FOR THE DETAILS OF THE BAN K ACCOUNTS TO FIND OUT WHETHER THERE WAS ANY IMMEDIATE WITHDRAWAL OF CASH BY THE SUSPICIOUS DEALERS ON RECEIPT OF MONEY FROM THE ASSESSEE. IT IS SEEN THAT THE AO HAS NOT DONE ANYTHING IN THIS DIRE CTION MAY BE BECAUSE THERE WAS NO RESPONSE FROM THE APPELLANT. H OWEVER, IT IS A FACT THAT THE INFORMATION ABOUT THE TRANSACTIONS WI TH THE SUSPICIOUS DEALERS REMAINED ONLY AS AN INFORMATION AND NOTHING MORE WAS DONE TO INVESTIGATE THEM. THE HON'BLE BOMB AY HIGH COURT IN CIT VS NIKUNJ EXIM ENTERPRISES PT. LTD. (3 72 ITR 619)HAS HELD THAT MERELY BECAUSE SUPPLIERS HAVE NOT APPEARE D BEFORE THE AO OR CIT(A), ONE CANNOT CONCLUDE THAT THE PURCHASE S WERE NOT MADE BY THE ASSESSEE. IN VIEW OF THE ABOVE, IT IS D IFFICULT TO SUSTAIN THE DISALLOWANCE MADE BY THE AO. HOWEVER, THE FACT THAT SOME OF SUPPLIERS APPEARED IN THE WEBSITE OF VAT DEPARTMENT CANNOT BE CONSIDERED LIGHTLY. IT IS POSSIBLE THAT THE APPELLA NT HAD MADE PURCHASES FROM GREY MARKET AND IN ORDER TO SUPPORT ITS CLAIM THE PURCHASES HAD BEEN MADE, THE APPELLANT WOULD HAVE R ESORTED TO ARRANGING THE PURCHASES FROM THE SUSPICIOUS DEALERS . THE APPELLANT WOULD HAVE BENEFITED FROM THE PURCHASES MADE FROM T HE GREY MARKET AS THE PRICES WOULD NORMALLY BE LESS THAN TH E PURCHASES IN THE NORMAL COURSE. THEREFORE, THERE IS AN ELEMENT O F PROFIT EMBEDDED IN THE TRANSACTIONS WITH THE HAWALA OPERAT ORS. THE GUJARAT HIGH COURT IN CIT VS BHOLANATH POLYFAB PVT. LTD. (355 ITR 290) AND CIT VS SIMIT P. SHETH (356 ITR 451) HAS HE LD THAT WHETHER PURCHASES ARE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE AS SESSEE'S INCOME. THE GROSS PROFIT OF THE APPELLANT FOR THE Y EAR IS 5.08%. THEREFORE, THE PROFIT ELEMENT OF THE TRANSACTIONS R ELATING TO THE PURCHASES FROM THESE BOGUS DEALERS BEING THE GROSS PROFIT AT THE RATE INDICATED ABOVE, COMES TO RS.6,48,800/-. THIS IS BROUGHT TO TAX. THEREFORE, THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF RS.6,48,800/- IS SUSTAINED AND THE BALANCE AMOUNT O F RS. 1,21,23,007/-IS DELETED. 5. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESE NT CASE AS WELL AS CONSIDERING ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY LD. DR, WE FIND THAT LD. CIT(A) WHILE ADJUD ICATING THE APPEAL OF THE ASSESSEE HAD NOTED THAT THE REASONS FOR THE DISALLOWANCE MADE BY AO, HAS BEEN THE INABILITY OF THE ASSESSEE TO EX PLAIN THE SUSPICIOUS ITA NO.471/MUM/2016 M/S BALAJI ENGINEERING COMPANY ASSESSMENT YEAR-2009-10 5 NATURE OF THE TRANSACTIONS RELATING TO THE PURCHASE S OF THE GOODS FROM HAWALA OPERATORS APPEARING IN THE WEBSITE OF THE VA T DEPARTMENT. THE LD. CIT(A) DURING THE APPELLATE PROCEEDING ACC EPTED THE DOCUMENTS PLACED BY THE ASSESSEE IN THE SHAPE OF LE DGER ACCOUNTS, PURCHASE INVOICES, BANK STATEMENT, ETC. BY WAY OF A DDITIONAL EVIDENCE AND RESTRICTED THE ADDITIONS BY RELYING UPON THOSE DOCUMENTS. IT IS AN ADMITTED FACTUAL POSITION THAT LD. CIT(A) HAD NOT C ALLED FOR ANY REMAND REPORT IN RESPECT OF THE DOCUMENTS SO FILED/PLACED ON RECORD BY THE ASSESSEE FOR THE FIRST TIME BEFORE LD. CIT(A). TO O UR MIND, IN THE ABSENCE OF REMAND REPORT OR WITHOUT VERIFYING THE G ENUINESS OF THE DOCUMENTS PRODUCED BY THE ASSESSEE AND WITHOUT PROV IDING OPPORTUNITY TO THE AO FOR CARRYING OUT INDEPENDENT INVESTIGATION, MORE PARTICULARLY WHEN THE ASSESSMENT ORDER WAS PAS SED U/S 144 R.W.S 147 OF THE I.T. ACT IS BAD IN LAW. BE THAT AS IT MAY, CONSIDERING THE INTEREST OF JUS TICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK T O THE FILE OF AO WITH A DIRECTION TO VERIFY THE GENUINENESS OF THE DOCUME NTS FILED BY THE ASSESSEE AND TO CARRY OUT NECESSARY VERIFICATION/IN VESTIGATION AND THEREAFTER PASS AFRESH ORDER ASSESSMENT. IT IS NEED LESS HERE TO MENTION THAT BEFORE PASSING THE ORDER OF ASSESSMENT, THE AO SHALL PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING A NY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHAL L BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. 6. IN THE NET RESULT, THE APPEAL FILED BY THE REVEN UE STANDS ALLOWED FOR STATISTICAL PURPOSES. 2.2. WE FIND THAT WHILE DELIBERATING UPON THE QUAN TUM APPEAL OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR, THE TRIBUNAL DIRECTED THE LD. ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THE DOCUMENT, FILED BY THE ASSESSEE AND TO CARRY OUT NECESSARY VERIFICATION/INVESTIGATION AND THEREAFTER PASSED A FRESH ASSESSMENT ORDER. SINCE, THE PENALTY WAS IMPOSED UPON THE ASSESSEE ON THE BASIS OF QUANTUM ITA NO.471/MUM/2016 M/S BALAJI ENGINEERING COMPANY ASSESSMENT YEAR-2009-10 6 ADDITION, THEREFORE, WE DEEM IT APPROPRIATE TO REMA ND THE PENALTY APPEAL ALSO TO THE FILE OF THE LD. ASSESSIN G OFFICER FOR FRESH ADJUDICATION AS THE PENALTY WILL BE DEPENDENT UPON THE OUTCOME OF THE QUANTUM ADDITION AND OTHER ATTENDANT CIRCUMSTANCES. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH NECESSARY EVI DENCE, IF ANY, IN SUPPORT OF ITS CLAIM. THUS, THE APPEAL OF T HE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 19/12/2018. SD/- (M. BALAGANESH) SD/- (JOGINDER SINGH) / ACCOUNTANT MEMBER / VICE PRESIDENT MUMBAI; 1&! DATED : 19/12//2018 F{X~{T? P.S/. %&. . !'#$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. 234 / THE APPELLANT 2. 5634 / THE RESPONDENT. 3. 7! 7 8* , ( 2 ) / THE CIT, MUMBAI. 4. 7! 7 8* / CIT(A)- , MUMBAI ITA NO.471/MUM/2016 M/S BALAJI ENGINEERING COMPANY ASSESSMENT YEAR-2009-10 7 5. :$;5%*%&' , 7! 2.2'! , / DR, ITAT, MUMBAI 6. <(= / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI