RAVI STEEL INDUSTRIES, MUMBAI V. INCOME TAX OFFICER-17(3)(1), MUMBAI

ITA 4745/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7960 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Principle of natural justice; Opportunity of cross examination; Third party statement; Accommodation entries; Reassessment proceedings
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 4745 / MUM/20 17 & 4746/MUM/2017 ( ASSESSMENT YEAR : 2010 - 11 & 2011 - 12 ) M/S. RAVI STEEL INDUSTRIES 223, SANT TUKARAM ROAD IRON MARKET, MUMBAI 400 009 VS. ITO 17 (3)(1) MUMBAI PAN/GIR NO. AAAFR 1646P APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI TARUN G HIA REVENUE BY MS. N. HEMALATHA DATE OF HEARING 25 / 10 /201 7 DATE OF PRONOUNCEME NT 08 / 12 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 28, MUMBAI DATED 24/05/2017 FOR A.Y. 2010 - 11 AND 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. COMMON GRIEVANCE O F ASSESSEE IN BOTH THE YEARS PERTAINS TO ESTIMATION OF 5% PROFIT ON THE ALLEGED UNVERIFIABLE PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT AO GOT INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING SUSPIC IOUS PARTIES WHO ARE ALLEGEDLY PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ANY ACTUAL BUSINESS. ON GOING THROUGH THE SOME CLAIMED LIST, IT WAS FOUND THAT SOME OF THE SE PARTIES ARE SUPPLYING THE GOODS TO THE ASSESSEE. THE AO ASKED THE ASSESSEE TO ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 2 FURNISH ALL RELEVANT EVIDENCE TO HAVE ACTUALLY BEEN DELIVERED/SUPPLIED ALONG WITH DETAILS OF PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE INCLUDING NAME, A DDRESS, C ONTACT N UMBER ETC. TO PROVE THE GENUINENESS OF THE TRANSACTION. FURTHER, THE ASSESSEE WAS A SKED TO SHOW CAUSE AS TO WHY THE EXPENDITURE CLAIMED IN RESPECT OF PURCHASES SHOWN TO HAVE MADE FROM THE AFORESAID DEALER SHOULD NOT BE DISALLOWED. 5. THE ASSESSEE VIDE LETTER SUBMITTED ON 01.02.16 FURNISHED COPIES OF: A) LEDGER A/CS OF THE PURCHASE PA RTY B) PURCHASE BILLS C) PAYMENT DETAILS TO PURCHASE PARTIES THROUGH ACCOUNT PAYEE CHEQUES; D) COPY OF STO CK REGISTER E) TRANSPORTATION BILLS AND F) COPIES OF DELIVERY CHALLANS. 6. THE AS SESSEE ALSO FURNISHED QUANTITATIVE DETAILS OF CORRESPONDING SALE OF M ATERIALS ALLEGED TO HAVE BEEN PU RCHASED FROM HAWALA PARTIES INCOME THEREON WAS OFFERED FOR TAXATION. THE ASSESSEE HAS CONTENDED THAT THERE CAN BE NO SALE WITHOUT PURCHASE, THE REFORE ASSESSEE REQUESTED LD. AO TO TREAT THE PURCHASES AS GENUINE. ASSESSEE ALSO OBJECTED TO THE RE - OPENING OF THE CASE AND RAISED OBJECTIONS VIDE DATED 24.07.2015. 7. ASSESSEE HAS ALSO MADE A REQUEST TO THE AO TO GIVE THE DETAILS ON THE BASIS OF WHICH AO HAS TREATED PURCHASES FROM THESE PARTIES AS BOGUS. IT WAS ALSO CONTENTION OF AS SESSEE THAT MERELY THE FACT THAT SOME OF THE SUPPLIERS HAVE NOT PAID VAT FOR THE REASONS BEST KNOWN TO THEM OR THERE IS MISMATCH IN VAT SHOWN BY PURCHASER AND NECESSARY ACTION HAVE BEEN ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 3 TAKEN AGAINST THEM BY THE SALES TAX DEPARTMENT OR DISPLAY OF INFORMATI ON BY VAT AUTHORITIES DOES NOT MEAN THAT SALES MADE BY THESE PARTIES ARE BOGUS. HOWEVER, AO DID NOT ACCEPT THE ASSESSEES CONTENTION. HE ACCEPTED THE PURCHASES BUT ESTIMATE D FURTHER PROFIT OF 5% AND MADE ADDITION THEREOF IN THE ASSESSEES INCOME AMOUNTING TO RS.21,21,366/ - IN THE A.Y.2010 - 11. SIMILAR ADDITION WAS ALSO MADE IN THE A.Y.2011 - 12 BY ESTIMATING PROFIT AT 5% OF SUCH ALLEGED PURCHASES. 8. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFO RE US. 9. IT WAS ARGUED BY LEARNED AR , MR. TARUN GHIA THAT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S.44AB OF THE INCOME TAX ACT, 1961. NO ADVERSE FINDINGS, OBSERVATIONS HAVE BEEN REPORTED BY THE AUDITOR IN CONNECTION WITH THE PURCHASES DEBITED TO PROFI T AND LOSS ACCOUNT. IN FACT THE ENTIRE OF THE AUDIT REPORT IS WITHOUT ANY QUALIFICATION OR ADVERSE COMMENTS IMPLYING THAT THE GENUINENESS OF THE ENT RIES IN THE BOOKS OF ACCOUNT IS FULLY ESTABLISHED. THE ASSESSEE HAS ALSO FURNISHED STOCK LEDGE/ FOR THE ENT IRE RELEVANT PREVIOUS YEAR FURNISHING FULL DETAILS OF THE INFLOW OF GOODS AND OUTFLOW OF GOODS WITH SPECIFIC REFERENCES LIKE DATE, DESCRIPTION, QUANTITY RECEIVED, QUANTITY ISSUED, APPLICABLE VAT, BILL NUMBER AND BALANCE AT THE END OF EACH TRANSACTION. THE UNDERLYING PURPOSE OF MAKING AVAILABLE THE CONSOLIDATED STOCK LEDGERS IS TO PRESENT THE COMPLETE QUANTITATIVE DETAILS OF ALL ITEMS TRADED. ALSO, ALL THE PURCHASES INCLUDING PURCHASES FROM THE ALLEGED HAWA L A DEALERS ARE DULY ACCOUNTED IN BOOKS OF ACCOUNTS A ND ENTERED IN THE STOCK REGISTER. THERE IS NO DISCREPANCY IN THE QUANTITATIVE ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 4 DETAILS OF THE CONCERN. IT IS ESTABLISHED THAT EACH AND EVERY PURCHASE IS MATCHED WITH CORRESPONDING SALES AND EACH AND EVERY SALE IS BACKED BY CORRESPONDING PURCHASES. 10. MY AT TENTION WAS ALSO INVITED BY LEARNED AR TO THE LETTER WRITTEN BY THE ASSESSEE ASKING THE AO TO PROVIDE INFORMATION AND EVIDENCE INCLUDING THIRD PARTY STATEMENT BY WHICH THE SAID SUPPLIERS HAVE BEEN TREATED AS SUSPICIOUS. AS PER LEARNED AR, SUCH INFORMATION IS REQUIRED TO BE PROVIDED TO THE ASSESSEE FOR HIS EXAMINATION AND REBUTTAL BEFORE USE THEREOF AGAINST THE ASSESSEE. AS PER LEARNED AR , SUCH INFORMATION WAS SPECIFICALLY SOUGHT BY T HE ASSESSEE FROM THE AO, HOWEVER SAME WAS NOT SUPPLIED TO ASSESSEE. HE FUR THER EMPHASIZED THAT NO CROSS EXAMINATION WAS PROVIDED BY THE AO TO REBUT THE ALLEGATION OF THESE PARTIES . UNDER THESE CIRCUMSTANCES, IT WAS CONTENDED THAT NO ADDITION ON ACCOUNT OF SUCH SUPPLIES NOR ANY ESTIMATION OF PROFIT ON SUCH PURCHASES ARE REQUIR ED TO BE MADE. RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE PROPOSITION THAT NO ADDITION WAS WARRANTED. (1) ITO VS. SHRI DEEPAK POPATLAL GALA INITANO.5920/MUM/2013 (A.Y 2010 - 11) DATED 27/03/2015; (2)RAMESH KUMAR AND CO. V/ S. ACIT IN ITA NO.2959/MUM/2014 (A.Y. 2010 - 11) DATED 28/11/2014; (3)DCIT V/S. SHRI RAJEEV G. KALATHIL IN ITA NO.6727/MUM/2012 (A.Y.2009 - 10) DATED 20/08/2014; (4)SHRI GANP ATRAJ A. SANGHAVI V/S. ACIT IN I TA NO.2826/MUM/2013 (A.Y.2009 - 10) DATED 5/11/2014; AND ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 5 (5) SHRI HIRALAL CHUNILAL JAIN VS. INCOME TA X OFFICER IN NO.4547/MUM/2014 DATED 01/01/2016. 11. RELIANCE WAS ALSO PLACED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF ASHISH INTERNATIONAL IN ITA NO.4299 OF 2009 DATED 22/02/2011 IN SUPPORT OF THE PROPOSITION THAT WHERE ASSESSEE HAS DISPUTED THE CORRECTNESS OF THE STATEMENT AND ASSESSEE IS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE PERSON WHO HAS MADE THE STATEMENT , NO ADDITION IS WARRANTED . 12. LEARNED AR VEHEMENTLY ARGUED THAT DEPARTMENTAL AUTHORITIES HAD NOT DOUBTED SALES MADE BY THE ASSESSEE AND HAD P R ODUC ED ALL THE NECESSARY DOCUMENTS DESIRED BY THE AO / CIT(A), THE SUPPLIERS HAD FILED THE SALES TAX AND INCOME TAX RETURNS, CONFIRMATION OF THE SUPPLIES SO MADE. AS PER LEARNED AR, THERE WAS A CLEAR VIOLATION OF PRINCIPLE OF NATURAL JUSTICE IN SO FAR AS MATERIAL RECEIVED BY THE AO FROM THE SALES TAX DEPARTMENT WAS NEVER REVEALED TO THE ASSESSEE INSPITE OF THE FACT THAT REQUEST WAS MADE IN THAT REGARD. AS PER LEARNED AR ALL THE PAYMENTS WERE MADE THROUGH BANK CH EQUES . PROVISION OF SECTION 69C WAS NOT ATTRACTED TO THE FACTS OF THE CASE THAT INVESTMENT WERE NEVER IN DOUBT. FURTHER, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF ANDAMAN TIMBER INDUSTRIES DATED 02/09/2015, NIKUNJ EXIMP ENTERPRISES (P) LTD., (BOMBAY HIGH COURT). 13 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT AO HAS VERY REASONABLY ESTIMATED THE ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 6 PROFIT AT 5% ON THE SUSPICION PURCHASE, ACCORDINGLY THE SAME SHOULD BE UPHELD. 14. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I HAVE ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURIN G THE COURSE OF HEARING BEFORE ME IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE . I N THE INSTANT CASE, I FOUND THAT ON THE BASIS OF INFORMATION FROM SALES TAX DEPARTMENT , AO HAS INITIATED REASSESSMENT PROCEEDINGS AND CALLED FOR VARIOUS DETAILS ABOUT THE PURCHASES MADE BY THE ASSESSEE. IN RESPONSE TO THE SAME, ASSESSEE HAS FURNISHED PURCHASE BILLS, DELIVERY CHALLANS, BANK STATEMENT SHOWING PAYMENT MADE TO THE PARTIES, CONFIRMATION OF THE RESPECTIVE PARTIES, LEDGER ACCOUNT OF THE PURCHASE PARTY , COPY OF STOCK REGISTER, COPY OF TRANSPORTATION BILLS A ND COPY OF DELIVERY CHALLANS. ASSESSEE HAS ALSO FURNISHED DETAILS OF CORRESPONDING SALES AFFECTED BY IT DURING BOTH THE YEARS UNDER CONSIDERATION. IT IS NOT IN DISPUTE THAT ASSESSEE HAS ASKED FOR THE COPY OF STATEMENT ON THE BASIS OF WHICH PURCHASES FROM T HESE PARTIES WERE ALLEGED AS BOGUS BY THE AO HOWEVER, THE SAME WAS NOT SUPPLIED TO THE ASSESSEE NOR AN OPPORTUNITY O F CROSS EXAMINATION WAS PROVIDED TO THE ASSESS EE. UNDER THESE CIRCUMSTANCES, I FOUND THAT PRINCIPLE OF NATURAL JUSTICE WAS GROSSLY VITIATED . THERE IS NO DOUBT THAT REOPENING WAS BASED ON THE VALID REASON, WHERE AO WAS HAVING NECESSARY PRIMAFACIE MATERIAL JUSTIFYING THE ISSUE OF NOTICE U/S.148. I FOUND THAT MATERIAL WITH REGARD TO ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 7 SUPPLY OF GOODS BY THE SUSPICIOUS DEALER WAS AVAILABLE TO THE AO ONLY AND IT WAS NOT SHARED WITH THE ASSESSEE. AO WAS RELYING ON THE FINDINGS MADE BY THE SALES TAX DEPARTMENT. IF AO WAS RELYING UPON THE STATEMENTS OF THESE PARTIES, IT WAS HIS DUTY TO PROVIDE THE COPIES OF THEIR STATEMENT TO THE ASSESSEE AND TO AFFORD CROSS EXAMINATION OF THE SUPPLIERS. THERE IS NO BAR OF UTILISING THE MATERIAL COLLECTED BY OTHER GOVERNMENT AGENCIES AND MAKING ADDITION ON THE BASIS OF SUCH MATERIAL, BUT WHEN THE AO WAS IDENTIFYING TO MAKE SUCH ADDITION HOW CAN HE DEPRIVE THE ASSESSEE TO ACCESS TO THE MATERIA L THAT WAS BEING USED AGAINST ASSESSEE . THERE IS NO PROVERBIAL WHISPER IN THE ASSESSMENT ORDERS REGARDING REQUEST MADE BY THE ASSESSEE FOR SUPPLY OF MATERIALS AND CROSS - EXAMINATION OF THE SUPPLIERS, THE BASIC PRINCIPLE OF NATURAL J USTICE MANDATE THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY TO DEFEND ITSELF I.E., THEY SHOULD BE SUPPLIED THE MATERIAL THAT IS PROPOSED TO BE USED AGAINST THEM . IN RESPECT OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, THE HONBLE SUPREME COURT IN THE CA SE OF ANDAMAN TIMBER (SUPRA) OBSERVED AS UNDER: - '...ACCORDING TO US,NOT ALLOWING THE ASSESSEE TO CROSS EXAMINE THE WITNESS BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY IN AS MUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORE SAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE 1596 - 97/M/16 - FANCYWEAR STATEMENTS AND WANTED TO CROSS - EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE I MPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER NO SUCH OPTION WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT BY THE ADJUDICATING AUTHORITY.....' ITA NO. 4745/MUM/2017 & 4746/MUM/2017 M/S. RAVI STEEL INDUSTRIES 8 15. WE AL SO FOUND THAT BOTH THE YEARS UNDER CONSIDERATION, AO & CIT(A) HAS ACCEPTED THE CORRESPONDING SALES AND EVEN PURCHASES WERE ACCEPTED. AO ONLY MADE THE ADDITION BY ESTIMATING FURTHER PROFIT OF 5% ON SUCH PURCHASES. H OWEVER, WITH REGARD TO THE PAYMENT SO MADE BY THE CHEQUES NO EVIDENCE HAS BEEN BROUGHT ON RECORD PROVING THAT SUPPLIERS HAVE WITHDRAWN CASH IMMEDIATELY AFTER DEPOSITING THE CHEQUES OF THE ASSESSEE. UNDER THESE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN TREATING THE PURCHASES AS BOGUS AND ESTIMATING FURTHER PROFIT OF 5% ON THE ALLEGED SUSPICION PURCHASES. ACCORDINGLY, AO IS DIRECTED TO DELETE THE SAME. 1 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 12 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 08 / 12 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//