SATELLITE DEVELOPERS P. LTD, MUMBAI V. ACIT CEN CIR 37, MUMBAI

ITA 4873/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9824 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 22-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: V C SHAH
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3)

Judgement Text

ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI G.S. PANNU , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO. 4 873 /MUM/201 6 ( / ASSESSMENT YEAR: 20 11 - 12 ) M/S SATELLITE DEVELOPERS PVT. LTD, BUILDING NO. 12, 7 TH FLOOR, SOLITAIRE CORPORATE PARK, ANDHERI - GHATKOPAR LINK, ROAD, ANDHERI (E), MUMBAI - 400 093. / VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 37, MUMBAI . ./ ./ PAN/GIR NO. AADCS0420Q ( / APPELLANT ) : ( / RESPONDENT ) / ASSESSEE BY : SH. V.C. SHAH / REVENUE BY : SH. SAURABH KUMAR , D.R. / DATE OF HEARING : 06/06/2017 / DATE OF PRONOUNCEMENT : 23 /08 /2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 53 , MUMBAI, DATED 23.03.2016 , FOR A.Y. 2011 - 12 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O U/S 271(1)(C) OF THE INCOME - TAX ACT 1961 (FOR SHORT ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 2 ACT), DATED 2 5 . 0 9 .20 14 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE US: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE PENALTY OF RS. 2,50,132/ - LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT ON ALLEGED CONCEALMENT IN RESPECT OF COMMISSION ESTIMATED AT RS. 24,404/ - AND A SUM OF RS. 7,28,613/ - BEING PEAK AMOUNT OF PURCHASES FRO M THE SUPPLIER PARTIES BEING AMOUNTS DISALLOWED/ADDED IN COMPUTING TOTAL INCOME WHILE PASSING ASSESSMENT ORDER U/S 143(3) EVENTHOUGH IT WAS SUBMITTED THAT THERE WAS NO CONCEALMENT AS PER PROVISIONS OF I.T. ACT. 2. YOUR APPELLANT C RAVES, LEAVE TO ADD , ALTER , AMEND OR DELETE ANY OF THE GROUNDS AS MAY BE ADVISED . 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, POWER GENERATION (WIND MILL), FINANCE AND TRADING HAD E - FILED ITS RETURN OF INCOME DECLARIN G TOTAL INCOME OF RS. 15,68,32,429/ - ,WHICH WAS PROCESSED AS SUCH U/S 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER TAKEN UP FOR SCRUTINY ASSESSMENT U/S 143(2). THAT THE A.O ON THE BASIS OF AN INFORMATION RECEIVED FROM THE INVESTIGATION WING THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM THE FOLLOWING CONCERNS WHICH HAD BEEN DECLARED AS HAWALA PARTIES BY THE SALES TAX DEPARTMENT : - S. NO. PARTICULARS 1. DRASHAT TRADING PVT. LTD. 2. RAHUL TRADERS 3. MAIRU ENTERPRISES 4. AJAY STONE , THEREIN CALLED UPON THE ASSESSEE TO PUT FORTH AN EXPLANATION AS REGARDS THE TRANSACTIONS ENTERED INTO WITH THE AFORESAID PARTIES . THE ASSESSEE THOUGH IN ITS REPLY TR IED TO ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 3 SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS MADE FROM THE AFOREMENTIONED FOUR PARTIES, BUT HOWEVER THE A.O NOT FINDING FAVOR WITH THE SAME , THEREIN REJECTED IT AND WORKED OUT THE PEAK INVESTMENT IN CASH MADE BY THE ASSESSEE FOR THE BOGUS PURCHASES (I.E. PURCHASES MADE IN CASH BY THE ASSESSEE FROM THE OPEN MARK ET) AT RS. 7,28,613/ - AND MADE AN ADDITION OF THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. THE A.O FURTHER MADE AN ADDITION OF RS. 24,404/ - TOWARDS COMMISSION THAT MUST HAVE BEEN PAID BY THE ASSESSEE TO THE AFORESAID HAWALA PARTIES FOR FACILITATI NG THE ACCOMMODATION ENTRIES. THE APPEAL OF THE ASSESSEE BEFORE THE CIT(A) ASSAILING THE ADDITION MADE BY THE A.O WAS DISMISSED. [ 3 . THAT PURSUANT TO THE FRAMING OF THE ASSESSMENT , THE A.O ISSUED A PENALTY NOTICE U/S 271(1)(C) THEREIN CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY MAY NOT BE IMPOSED ON IT WITH REGARD TO THE ADDITIONS MADE IN RESPECT OF BOGUS PURCHASES. THE ASSESSEE VIDE ITS REPLY REQUESTED THE A.O THAT THE PENALTY PROCEEDING MAY BE KEPT IN ABEYANCE TILL THE DISPOSAL OF THE APPEAL BY THE CIT(A). THE A.O HOWEVER PROCEEDED WITH THE PENALTY PROCEEDINGS AND BEING OF THE VIEW THAT AS THE ASSESSEE HAD INDULGED IN OBTAINING BOGUS PURCHASE BILLS FROM THE HAWALA P ARTIES , THEREFORE , IT COULD SAFELY BE HELD THAT THE ASSESSEE HAD NOT DISCLOSED CORRECT AND TRUE PARTICULARS OF ITS INCOME AND HAD MANIPULATED ITS TRUE PICTURE OF PROFITS. THE A.O THUS ON THE BASIS OF HIS AFORESAID CONVICTION IMPOSED A PENALTY OF RS. 2,50,1 32/ - U/S 271(1)(C) IN THE HANDS OF THE ASSESSEE. 4. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE A.O IMPOSING PENALTY U/S 271(1)(C) , THEREIN FILED AN APPEAL WITH ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 4 THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE IN THE BACKDROP OF THE FACTS OF THE CASE , THE REIN CONCLUDED THAT NO ERROR OR INFIRMITY DID EMERGE FROM THE ORDER OF THE A.O LEVYING PENALTY OF RS. 2,50,132/ - ON THE ASSESSEE. THE CIT(A) THUS UPHELD THE ORDER OF THE A.O AND DISMISSED THE APPEAL OF THE ASSESSEE. 5 . THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED A UTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT NOW WHEN IT REMAINS AS A MATTER OF FACT THAT THE MATERIAL PURCHA SED BY THE ASSESSEE FROM THE AFORESAID FOUR PARTIES , VIZ (I) DARSHAT TRADING PVT. LTD. (II) MAIRU ENTERPRISES (III) RAHUL TRADERS, AND (IV) AJAY STONE HAD BEEN ACCEPTED BY THE A.O TO HAVE BEEN PURCHASED AND CONSUMED BY THE ASSESSEE IN ITS BUSINESS, THEREFO RE , IN THE BACKDROP OF THE SAID FACTUAL POSITION NO PENALTY U/S 271(1)(C) WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER S OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE PENALTY HAD RIGHTLY BEEN IMPOSED BY THE A.O AND UPHELD BY THE CIT(A). 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL AVAIL ABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT THOUGH IT REMAINS AS A MATTER OF FACT THAT THE ASSESSEE HAD PURCHASE D THE MATERIAL UNDER CONSIDERATION AND CONSUMED THE SAME IN THE COURSE OF ITS BUSINESS, HOWEVER, ITS CLAIM OF HAVING MADE THE PURCHASES FROM THE ABOVEMENTIONED FOUR PARTIES, VIZ . (I) DARSHAT ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 5 TRADING PVT. LTD. (II) MAIRU ENTERPRISES (III) RAHUL TRADERS, AND (IV) AJAY STONE , DESPITE SUFFICIENT OPPORTUNITY AFFORDED BY THE LOWE R AUTHORITIES, COULD NOT BE PROVED TO THE SATISFACTION OF THE LATTER . WE HAD WHILE DISPOSING THE QUANTUM APPEAL OF THE ASSESSEE, KEEPING IN VIEW THE INFORMATION RECEIVED BY THE REVENUE FROM THE SALES TAX DEPARTMENT THAT THE AFORESAID SUPPLIER PARTIES WERE BLACKLISTED FOR HAVING BEEN INVOLVED IN BOGUS BILLING, AS WELL AS THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE TO THE HILT ITS CLAIM OF HAVING MADE THE PURCHASES FROM THE ABOVEMENTIONED PARTIES, THUS CONCLUDED THAT THE PURCHASE PRICE OF THE GOODS RECORDED BY THE ASSESSEE ON THE BASIS OF THE BILLS OF THE AFORESAID SUPPLIER PARTIES COULD NOT BE ACCEPTED. WE HAD ON THE BASIS OF OUR AFORESAID CONVICTION FURTHER OBSERVED THAT IT COULD SAFELY BE HELD THAT THE ASSESSEE AFTER MAKING THE PURCHASES OF THE GOODS UNDER CONSIDERATION FROM THE OPEN/GREY MARKET, HAD THEREAFTER ONLY FOR THE PURPOSE OF FACILITATING ROUTING OF THE SAID PURCHASE S THROUGH ITS BOOKS OF A CCOUNTS, THEREIN OBTAINED THE BILLS FROM THE ABOVEMENTIONED PARTIES. WE THUS NOT BEING INSPIRED BY THE CLAIM OF THE ASSESSEE THAT IT HAD MADE PURCHASES FROM THE AFORESAID SUPPLIER PARTIES, HAD THUS, ON THE BASIS OF OUR CONVICTION HELD THAT THE ASSESSEE HAD MADE PURCHASES OF THE GOODS UNDER CONSIDER ATION FROM THE OPEN/GREY MARKET. WE THUS IN THE BACKDROP OF THE AFORESAID FACTS, BEING OF THE CONSIDERED V I E W THAT THE ACTUAL PURCHASES PRICE OF THE GOODS PROCURED FROM THE OPEN/GREY MARKET MUST BE LESS THAN THAT CLAIMED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS ON THE BASIS OF THE BILLS OF THE AFORESAID SUPPLIER PARTIES, THEREFORE, IN ALL FAIRNESS , HAD ON AN ESTIMATE BASIS ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 6 UPHELD AN ADDITION OF 12.5% OF TH E AGGREGATE VALUE OF THE SAID PURCHASES , IN ORDER TO REASONABLY SCALE DOWN THE INFLATED PURCHASE PRICE BOOKED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AND BRING THE SAME AT PAR WITH THE PURCHASE CONSIDERATION FOR WHICH THE SAME MUST HAVE BEEN PROCURED FR OM THE OPEN/GREY MARKET. WE ARE OF THE CONSIDERED VIEW THAT THE ENTIRE EXERCISE LEADING TO UPHOLDING OF AN ADDITION OF 12.5% IN THE HANDS OF THE ASSESSEE IS NOT BASED ON ANY CONCRETE EVIDENCE, BUT IS ONLY BACKED BY AN ESTIMATE ON OUR PART. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT THE ADDITION OF 12.5% OF THE VALUE OF THE GOODS PURCHASED HAD BEEN SUSTAINED BY US IN THE HANDS OF THE ASSESSEE, ONLY FOR THE REASON THAT THE LATTER S CLAIM AS REGARDS THE SOURCE OF PURCHASE HAD REMAINED UNPROVED. WE ARE OF THE CONSIDERED VIEW THAT THE ADDITIONS MADE IN THE HANDS OF THE PRESENT ASSESSEE CAN TO THE BEST BE CHARACTERIZED AS BEING BASED ON UNVERIFIED SOURCE OF PURCHASES AND NOT DISPROVED SOURCE OF PURCHASES . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE, AND ARE OF THE VIEW THAT THE CIRCUMSTANCES ATTENDING THERETO DO NOT LEAD TO ANY REASONABLE AND POSITIVE INFERENCE THAT THE EXPLANATION TENDERED BY THE ASSESSEE AS REGARDS THE GENUINENESS OF THE SOURCE FROM WHERE THE PURCHASES AS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE, I S FOUND TO BE FALSE. WE ARE THUS OF THE CONSIDERED VIEW THAT THOUGH THE AFORESAID STATE OF AFFAIRS THOUGH JUSTIFIED MAKING OF AN ADDITION IN THE HANDS OF THE ASSESSEE, HOWEVER, ON THE BASIS OF THE SAME NO PENALTY CAN BE VALIDLY SUSTAINED IN THE HANDS OF THE ASSESSEE. WE FIND THAT OUR AFORESAID OBSERVATIONS STANDS FORTIFIED BY THE VIEW TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. UPENDRA V. ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 7 MITHANI (ITA (L) NO. 1860 OF 2009), DATED 05.08.2009 , WHEREIN THE HONBLE HIGH COURT HAD OBSERVED AS UNDER: - THE ISSUE INVOLVED IN THE APPEAL REVOLVES AROUND DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE I. T. ACT. THE TRIBUNAL HAS CONCURRED WITH THE VIEW TAKEN BY THE COMMISSIONER OF INCOME TAX (A). THE COMMISSIONER OF INCOME TAX (A) HAS RIGHTLY TAKEN A VIEW THAT NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHES IS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFER ENCE THAT THE ASSESSEES CASE IS FALSE. THE VIEW TAKEN BY THE TRIBUNAL IS A REASONABLE AND POSSIBLE VIEW. THE APPEAL IS WITHOUT ANY SUBSTANCE. THE SAME IS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS. WE T HUS IN THE BACKDROP OF THE AFORESAID FACTS R.W TH E SETTLED POSITION OF LAW , ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF ANY CONCRETE MATERIAL WHICH COULD GO TO IRREBUTABLY PROVE THE FALSITY OF THE CLAIM OF THE ASSESSEE, THE LATTER CANNOT MERELY ON THE BASIS OF AN UNPROVED EXPLANATION OF HIS AS REGARDS THE SOURCE FROM WHERE THE PURCHASES OF THE GOODS WERE MADE BY IT, BE THEREIN SUBJECTED TO PENALTY UNDER SEC. 271(1)(C). WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS SET ASIDE THE ORDER OF THE CIT(A) AND QUAS H THE PENALTY IMPOSED BY THE A.O. UNDER SEC. 271(1)(C). 7. T HE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 23 .08. 2017 SD/ - SD/ - ( G.S.PANNU ) (RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23. 08 . 2017 PS : ROHIT ITA NO. 4873/MUM/2016 M/S SATELLITE DEVELOPERS PVT. LTD. 8 CO PY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI