SPECTRA SOLUTIONS, MUMBAI V. INCOME TAX OFFICER, WARD 22(3)(4), MUMBAI

ITA 473/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3278 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 22-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M A Y; V VINOD KUMAR ITA NO S
• Keywords: Bogus purchase; Unexplained expenditure; Revised return; Reassessment proceedings
• Section: 69C; 143(1); 201; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO . 473 /MUM/2018 ( / ASSESSMENT YEAR: 20 09 - 1 0 ) M/S. SPECTRA SOLUTIONS NEW SATGURU NANIK INDUSTRIAL ESTATE GALA NO.1, JA Y COACH NAKA, NEW WESTERN EXPRESS HIGHWAY, GOREGAON (E), MUMBAI - 400053 . / VS. ITO WARD - 22(3)(4) ROOM NO.304, 4 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI - 400012 . / I.T.A. NO . 35 /MUM/2018 ( / ASS ESSMENT YEAR: 20 09 - 10 ) ITO WARD - 22(3)(4) ROOM NO.304, 4 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI - 400012 . / VS. M/S. SPECTRA SOLUTIONS NEW SATGURU NANIK INDUSTRIAL ESTATE GALA NO.1, JA Y COACH NAKA, NEW WESTERN EXPRESS HIGHWAY, GO REGAON (E), MUMBAI - 400053. ./ ./ PAN/GIR NO. : AANFM8588J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 08 / 11 / 201 9 /DATE OF PRONOUNCEMENT: 26 / 11 / 201 9 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE AS WELL AS REVENUE HAS FILED THE ABOVE MENTIONED APPEAL S AGAINST THE ORDER DATED 13.10.2017 PASSED B Y THE COMMISSIONER OF ASSESSEE BY : SHRI DINKLE HARIYA REVENUE BY: SHRI V. VINOD KUMAR ITA NO S . 35 & 473 / M/20 1 8 A.Y. 2009 - 10 2 INCOME TAX (APPEALS) - 34 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y . 2009 - 10. ITA. NO.473/M/2018 2. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 13.10.2017 PASSED BY THE COMMISSIONER OF I NCOME TAX (APPEALS) - 34 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y .2009 - 10. 3 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. REASSESSMENT 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 34, MUMBAI LD. CIT (A)'J, ERRED IN CONFIRMING THE ACTION OF THE A.O. IN INITIATING REASSESSMENT PROCEEDINGS AND FRAMING THE ASSESSMENT OF THE APPELLANT BY INVOKING THE PROVISIONS OF SECTION 147 R.W.S. 148 OF THE INCOME TAX ACT, 1961 ['THE ACT'). 1.2 WHILE DOING SO, THE LD. CIT (A) FAILE D TO APPRECIATE THAT: (I) THE CASE OF THE APPELLANT DID NOT FALL WITHIN THE PARAMETERS LAID DOWN BY SECTION 147 R.W.S. 148 OF THE ACT; (II) THE NECESSARY PRECONDITIONS FOR INITIATING AND COMPLETION THEREOF WERE NOT SATISFIED. 1.3 IT IS SUBMITTED THAT IN TH E FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE REASSESSMENT FRAMED IS BAD, ILLEGAL AND VOID. WITHOUT PREJUDICE TO THE ABOVE 2. UNEXPLAINED PURCHASE / BOGUS PURHCASE [RS. 27,14,322/ - 2.1 THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF THE ALLEGED UNEXPLAINED EXPENDITURE / BOGUS PURCHASE U/S. 69C, TO THE EXTENT OF RS.27,14,322/ - , BEING APPROXIMATELY 25% OF THE ALLEGED BOGUS PURCHASES. 2.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND I N LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. ITA NO S . 35 & 473 / M/20 1 8 A.Y. 2009 - 10 3 2.3 WITHOUT PREJUDICE TO THE ABOVE, ASSUMING BUT NOT ADMITTING THAT SOME DISALLOWANCE WAS CALLED FOR, IT IS SUBMITTED THAT THE COMPUTATION OF THE DISALLOWANCE MADE BY THE AO IS ARBITRARY, EXCESSIVE AND NOT IN ACC ORDANCE WITH LAW. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28 . 09 .20 0 9 DECLARING TO TAL INCOME TO THE TUNE OF RS . 4,56,770 / - FOR THE A.Y.2009 - 10 . T HE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THE CASE OF THE ASSESSEE WAS REOPENED U/S 147/148 OF THE ACT. IN REPLY TO THE NOTICE, THE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME ON 17.04.2014 DECLARING TOTAL INCOME TO THE TUNE OF RS.3,88,977/ - . THE CASE OF THE ASSESSEE WAS REOPENED ON THE BASIS OF INFORMAT ION RECEIVED FROM THE DGIT (INV.), MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE BOGUS PURCHASE ENTRIES IN SUM OF RS. 1,09,11,784/ - FROM THE FOLLOWING 5 PARTIES. NAME OF HAWALA PARTY NAME BENEFICIARY AMOUNT SAGAR ENTERPRISES SPECTRA SOLUT IONS 10,86,800 OM CORPORATION SPECTRA SOLUTIONS 31,09,496 TARA ENTERPRISES SPECTRA SOLUTIONS 10,96,368 REAL TRADERS SPECTRA SOLUTIONS 11,57,520 SIDDHIVINAYAK CORPORATION SPECTRA SOLUTIONS 44,61,600 TOTAL 1,09,11,784 5 . AFTER THE REPLY OF THE ASSESSE E, THE AO RESTRICTED THE ADDITION OF THE BOGUS PURCHASE TO THE TUNE OF RS. 1,08,57,289/ - U/S 69C OF THE ACT . FEELING AGGRIEVED, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF THE TOTAL BOGUS PURCHASE . FEEL ING AGGRIEVED , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 6. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE FAILED TO PRODUCE THE ITA NO S . 35 & 473 / M/20 1 8 A.Y. 2009 - 10 4 SUFFICIENT EVIDENCE BEFORE THE AO TO PROVE THE PU RCHASE AS GENUI NE . THE ASSESSEE ALSO FAILED TO PRODUCE THE SUPPLIERS BEFORE THE AO. IN THE INSTANT CASE, SALE IS NOT DOUBTED. IT IS SETTLED LAW THAT WHEN THE SALES ARE NOT DOUBTED THEN THE 100% ADDITION CANNOT BE MADE AND IN THIS REGARD WE ALSO FIND SUPPOR T OF LAW SETTLED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO.2860 DATED 18.06.2014). IN THE PRESENT CASE THE FACTS OF THE CASE SEEMS THAT THE ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX OF AND OTHERS AT THE EXPENSES OF THE STATE - EXCHEQUER. IN VIEW OF THE SAID CIRCUMSTANCES, NO HARMS SEEM IF THE ADDITION BE RESTRICT ED TO THE EXTENT OF 12.5% OF TH E BOGUS PURCHASE. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT WHEN ONLY THE PROFIT EARNED BY ASSESSEE ON THESE BOGUS TRANSACTIONS IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDAR D 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 7 . UP ON CAREFUL CONSIDERATION, WE FIND STRENGTH IN THE SUBMISSION OF THE LD. REPRESENTATIVE OF THE ASSESSEE AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY, WE MODI FY THE ORDER OF THE LD. CIT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. ACCORDINGLY, THE APPEAL FILED BY ASSESSEE IS HEREBY PARTLY ALLOWED. ITA. NO.35/M/2018 8. THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACT OF THE CASE AS NARRATED ABOVE WHILE DECIDING THE APPEAL OF THE ASSESSEE ITA NO S . 35 & 473 / M/20 1 8 A.Y. 2009 - 10 5 BEARING ITA. NO.473/M/2018 FOR THE A.Y.2009 - 10. THERE IS NO NEED TO REPEAT T HE FACT AGAIN. THE MATTER OF CONTROVERSY IN THIS APPEAL IS ALSO THE SAME. THE REVENUE FILED THE APPEAL TO RAISE THE ADDITION MORE THAN 12.5% OF ADDITION AND THE ASSESSEE FILED THE APPEAL CHALLENGING THE ADDITION WHICH HAS BEEN RESTRICTED TO THE EXTENT OF 1 2.5% MINUS GROSS PROFIT DECLARED BY THE ASSESSEE . THE MATTER OF CONTROVERSY HAS BEEN DECIDED WHILE DEC IDING THE APPEAL BEARING ITA. NO.473 /M/201 8 . ACCORDINGLY, THE FINDING GIVEN IN THE SAID APPE AL IS QUITE APPLICABLE TO THIS APPEAL ALSO AS MUTATIS MUTANDI S. ACCORDINGLY, WE DISMISSED THE APPEAL OF REVENUE BEARING ITA. NO.35 /M/201 8 . IN RESULT, APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED AND APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERE D TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 /11 /2019 . SD/ - SD/ - ( RAJESH KUMAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 26 /11 /2019 V IJAY PAL SINGH/ SR. P.S. ITA NO S . 35 & 473 / M/20 1 8 A.Y. 2009 - 10 6 / 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// (SR. PRIVATE SECRETARY) , / ITAT, MUMBAI