SUKHESHAN EQUIPMENTS P. LTD, MUMBAI V. ITO WD 1(4), KALYAN

ITA 4924/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8352 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C LALKA
• Assessee Lawyers: H M WANARE
• Keywords: Bogus purchase; Principle of natural justice; Question of law
• Section: 143(3); 147; 131; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR , AM ITA NO . 4924 / MUM/ 20 1 6 ( / ASSESSMENT YEA R : 20 09 - 10 ) SUKESHAN EQUIPMENTS PVT LTD, C/O T M GOSHER AND CO, CAS, 12, SHIVAJI FORT CO - OPERATIVE HSG.SOCIETY LTD, N S MANKIKAR MARG, SION, (E), MUMBAI - 400022 / VS. INCOME TAX OFFICER WARD 1(4), KALYAN, DIST THANE ./ PAN : AAACS5594E ( / APPELLANT) : ( / RESPONDENT ) / REVENUE BY : SHRI G C LALKA / ASSESSEE BY : SHRI H M WANARE / DATE OF HEARING : 10 .1201 7 / DATE OF PRONOUNCEMENT : 27. 2. 201 7 / O R D E R PER RAJESH KUMAR, A. M: TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.6.2016 PASSED BY THE LD.CIT(A) - 2, THANE FOR THE ASSESSMENT YEAR 2009 - 10. 2 ITA NO. 4924/ M/201 6 2. THE SOLE I SSUE RAISED IN THE GROUNDS OF APPEAL BY THE ASSESSEE IS AGAINST THE UPHOLDING THE ADDITION OF RS.6,12,261/ - BY THE LD.CIT(A) AS MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASE. 3. FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 2 4.9.2009 DECLARING TOTAL INCOME OF RS. 9,33,990/ - . THE RETURN OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 3.3.2011 . THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT DURING THE YEAR THAT THE ASSE SSEE OBTAINED BOGUS BILLS FROM THE ENTRY PROVIDERS/HAWALA TRADERS. THEREFORE, ON THE BASIS OF THIS INFORMATION, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE RECEIVED ACCOMMODATION PURCHASES BILLS FROM THE FOLLOWING FOUR PARTIES: S.NO. NAME OF THE ENTRY PROVIDER MAHARASHTRA VAT NO. AY AMOUNT OF BILLS TAKEN BY THE ASSESSEE 1 M/S SWASTIK ENTERPRISES 27610669252V 2009 - 10 RS.2,15,373 2 M/S DEEP ENTERPRISES 277505955164V 2009 - 10 RS.85,936/ - 3 M/S AMAR ENTERPRISES 27770524440V 2009 - 10 RS.1,16,448 4 M/S LEO IMPEX 27230614753V 2009 - 10 RS.1,94,504 THEREAFTER, THE AO ISSUED NOTICE UNDER SECTION 148 ON 20.3.2013 WHICH WAS SERVED UPON THE ASSESSEE AND WAS COMPILED WITH BY THE ASSESSEE BY FILING REPLY DATED 29.3.2013, REQUESTING THE AO THAT THE RETURN OF INCOME FILED ON 24.9.2009 BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THEREAFTER, THE CASE WAS TRANSFERRED FROM ACIT CIRCLE - 1, KALYAN VIDE TRANSFER ORDER DA T ED 9.1.2014 TO THE ITO WARD 1(4), KALYAN. 3 ITA NO. 4924/ M/201 6 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PHARMACEUTICAL MACHINERIES AT BADLAPUR . DURING THE YEAR, THE ASSESSEE SHOWED GROSS PROFIT OF RS.58,66,010/ - AND NET PROFIT OF RS.641,307/ - WHICH IS RS.34.66% AND 3.84 % RESPECTIVELY ON THE TURNO VER OF RS.1,69,22,696/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO ISSUED SUMMON U/S 131 OF THE ACT TO ONE OF THE DIRECTOR SHRI SHANTANU SOMESH SATHE AND HIS STATEMENT WAS RECORDED ON OATH RAISING VARIOUS QUERIES. THE AO CAME TO THE CONCLUSIO N THAT THE ASSESSEE MADE BOGUS PURCHASES TO THE TUNE OF RS.6,12,261/ - FROM THE FOUR PARTIES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BY FRAMING THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT VIDE ORDER DATED 21.1.2014 BY ASSESSING THE TOT AL INCOME AT RS.15,46,250/ - . 4. THE FIRST APPELLATE AUTHORITY AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AS HAS BEEN INCORPORATED IN PARA 5 OF THE APPELLATE ORDERS DISMISSED THE APPEAL OF THE ASSESSEE. DURING THE COURSE OF APP ELLATE PROCEEDINGS , THE LD. CIT(A) CALLED UPON THE ASSESSEE TO PRODUCE COMPARATIVE DETAILS OF GP/NP FOR PRECEDING TWO AND SUBSEQUENT TWO YEARS WHICH HAS BEEN INCORPORATED BY THE LD.CIT(A) AT PARA 6.11 OF THE APPELLATE ORDERS WHICH IS AS UNDER : 4 ITA NO. 4924/ M/201 6 AYR GR OSS SALE GROSS PROFIT IN AMOUNT GP IN % NET PROFIT NP RATIO 200 708 7205105 3342510 46.39 NA NA 200 8 - 09 18175117 7735031 42.56 2401364 13.21 20 09 - 10 16922696 5866010 34.66 647357 3.83 201 0 - 11 20025407 9534451 47.61 1816148 9.07 201 1 - 12 28289308 10116545 35.76 1468834 5.19 THE LD. CIT(A) OBSERVED THAT SUPPRESSED NP/GP OF RS.15,87,349/ - /13,36,893/ - IS MORE THAN HAWALA PURCHASES BOOKED I.E. RS.6,12,261/ - AND ACCORDINGLY SUSTAINED THE SAME BY UPHOLDING THE ORDER OF T HE AO. 5 . THE LD. AR VEHEME NTLY SUBMITTED BEFORE US THAT THE FAA HAS GROSSLY ERRED BY ACTING ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA IN WHICH THE ABOVE FOUR PARTIES WERE DECLARED TO BE HAWALA DEALERS. THE LD. AR ARGUED THAT THE ASSESSEE IN FACT RECEIVED MATERIAL S FROM THE ABOVE MENTIONED FOUR PARTIES WHICH W ERE CONSUMED IN THE PRODUCTION OF PHARMACEUTICAL INSTRUMENTS AND MACHINERY. THE LD. AR CORROBORATED HIS AVERMENTS BY DRAWING OUR ATTENTION TO COPIES OF PURCHASE BILLS AS FILED IN THE PAPER BOOK FROM PAGES 2 TO 7 , 9 TO 16, 18 TO 31 AND 33 TO 44 OF THE PAPER BOOK. THE LD. AR ALSO SUBMITTED THAT THE PAYMENTS TO ALL THESE PARTIES WERE MADE THROUGH BANKING CHANNELS AND THAT THE STOCK S W ERE ACTUALLY CONSUMED IN THE MANUFACTURING OF PH ARMACEUTICAL INSTRUMENTS AND MACHINERY BY FILING STOCK TALLY OF THE STORES AND TOOLS AT PAGES 50 TO 54 OF THE PAPER BOOK. THE ASSESSEE ALSO TRIED TO EXPLAIN THE GENUINENESS OF THE PURCHASES BY FILING THE COMPARATIVE CHART OF NP /GP FROM THE ASSESSMENT YEAR S 2008 - 09 TO 2012 - 13 I.E. FOR FI VE ASSESSMENT YEARS WHICH RANGED FROM 5 ITA NO. 4924/ M/201 6 29.65 % TO 42.56 %. THE LD. AR SUBMITTED THAT THE AO HAS NOT CARRIED OUT AN INDEPENDENT AND EXTENSIVE INQUIRY TO FIND OUT THE TRUTH AND WENT AHEAD BY DISBELIEVING THE PURCHASES BY IGN ORING THE RELEVANT FACTS AS THE PAYMENTS OF PURCHASES WERE MADE THROUGH BANKING CHANNEL AND PURCHASED MATERIAL WERE CONSUMED FOR MANUFACTURING OF PHARMACEUTICAL INSTRUMENTS AND WHICH WERE EVENTUALLY SOLD. THE ACT OF THE FAA IN UPHOLDING THE ORDER OF THE AO WAS NOTHING BUT BASED ON CONJECTURE, SURMISES AND PRESUMPTIONS WHICH WAS NOT PERMISSIBLE IN LAW . THE LD. AR ARGUED THAT THE PURCHASES MADE BY THE ASSESSEE WHICH WENT INTO MANUFACTURING PROCESS COULD NOT BE TREATED AS BOGUS ONLY ON THE BASIS OF FACT THA T THE PURCHASES MADE FROM THE PARTIES WERE LISTED ON THE WEBSITE OF SALES TAX DEPARTMENT, GOM AS HAWALA DEALERS. MOREOVER, THE ASSESSEE WAS CONFRONT ED WITH THE STATEMENTS WHICH WERE USED BY THE REVENUE TO MAKE THE ADDITION S . THE LD. AR IN SUPPORT OF HIS CONTENTION RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S M/S ASHISH INTERNATIONAL IN INCOME TAX APPEAL NO.4299 OF 2009 DATED 22 ND FEBRUARY, 2011 AND THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. IMPERIAL IMP & EXP V/S ITO IN ITA NO. ITA NO. 5427/MUM/2015(AY - 2009 - 10) DATED 18.3.2016. 6 . ON THE OTHER HAND, THE LD. DR, RELIED HEAVILY ON THE ORDERS OF AUTHORITIES BELOW BY SUBMITTING THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY OF THE ENTRIES PROVIDED BY THE HAWALA DEALERS WHO ALSO AFFIRMED ON OATH IN 6 ITA NO. 4924/ M/201 6 THE AFFIDAVIT MADE BEFORE THE SALES TAX AUTHORITIES, GOM THAT WERE ENGAGED IN THE SUPPLY OF BILLS WITHOUT ACTUALLY DOING ANY BUSINESS AND THEREFORE THE AO HAS RIGHTLY MADE THE ADDITION AND UPHE LD BY THE FAA WHICH DESERVED TO BE SUSTAINED . 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS , PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CA S E LAW RELIED UPON BY THE ASSESSEE. WE FIND THAT THE AO ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOM REOPENED THE ASSESSMENT OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS BENEFICIARY OF HAWALA ENTRIES PROVIDED BY THE HAWALA DEALERS AMOUNTING TO RS.6,12,162/ - . ON PERUSAL OF THE RECORD AVA ILABLE BEFORE US WE OBSERVE THAT THE SOLE BASIS OF ISSUE OF NOTICE UNDER SECTION 148 WAS THAT THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY OF THESE ENTRIES. WE FIND THAT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE FILED A COPY OF LEDGER ACCOUNT, PURCHASE BILLS, DELIVERY CHALLANS, PROOF OF PAYMENTS THROUGH BANKING CHANNELS AND STOCK TALLY WHICH PROVE D BEYOND DOUBT THAT THE ASSESSEE HAS RECEIVED MATERIAL S WHICH WERE CONSUMED IN MANUFACTURIN G PROCESS OF PHARMACEUTICALS AND THE AO DID NOT POINT OUT ANY DEFECT S OR DEFICIENCY IN THE BOOKS OF ACCOUNT EXCEPT BASING HIS CONCLUSION QUA BOGUS PURCHASE ON THE BASIS OF INFORMATION RE CEIVED FROM THE SALES TAX DEPARTMENT, GOM. IN OUR OPINION THE A SSESSEE 7 ITA NO. 4924/ M/201 6 HAS DISCHARGED THE ONUS CAST UPON IT AND NOW THE BURDEN SHIFT S TO THE REVENUE TO DISPROVE THE CONTENTIONS OF THE ASSESSEE BY CARRY ING OU T FURTHER INQUIRIES WHICH WAS NOT DONE IN THE PRESENT CASE. MOREOVER, THE ASSESSEE WAS NOT CONFRONTED WITH T HE STATEMENT S RECORDED BY THE VAT DEPARTMENT OF GOM FROM THE HAWALA DEALERS WHICH ITSELF IS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. IN THE CASE OF M/S ASHISH INTERNATIONAL (SUPRA), THE HONBLE HIGH COURT HAS HELD THAT WHE RE CROSS - EXAMINATION OF T HIRD PARTY WHOSE STATEMENT WAS RELIED BY THE REVENUE IS NOT ALLOWED TO CONFRONT WITH THE ASSESSEE, THEN THE TRIBUNAL WAS RIGHT IN DELETING THE ADDITION MADE ON THE BASIS OF THIRD PARTY INFORMATION AND NO SUBSTANTIAL QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL AND ACCORDINGLY DISM ISSED THE APPEAL OF THE REVENUE . WE ALSO FIND FROM THE COMPARATIVE CHART PLACED AT PAGE 55 OF THE PAPER BOOK THAT GP RATE DURING THE YEAR 2009 - 10 WAS 34.66% VIS - - VIS THE GP RATE IN THE ASSESSMENT YEAR 2011 - 12 OF 3 5.76% ASSESSMENT YEAR 2012 - 13 OF 29.65% WHICH IS SATISFACTORY . IN THE CASE OF M /S IMPERIAL IMP AND EXP, THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS HELD AS UNDER : 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE ENTIRE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT PURCHASES FROM FOUR PARTIES NAMELY DHRUV SALES CORPORATION - RS.13,67,640/ - ; SUBHLAXMI SALES CORP. - RS.20,20,800/ - ; DHARSHAN SALES CORPORATION - RS.9,64,656/ - ; AND PARAS (INDIA) - RS.33,98,400, TOTALING TO RS.77,51,496/ - HAVE B EEN TREATED TO BE BOGUS BASED ON THE PURPORTED ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA. OSTENSIBLY, THE ASSESSING OFFICER OUGHT TO HAVE BROUGHT ON RECORD MATERIAL WHICH IS RELEVANT TO THE TRANSACTIONS OF THE ASSESSE E WITH THE AFORESAID FOUR PARTIES INSTEAD OF MAKING A GENERAL OBSERVATION ABOUT THE INFORMATION RECEIVED FROM THE SALES TAX 8 ITA NO. 4924/ M/201 6 DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA. QUITE CLEARLY, THE ASSESSING OFFICER AS WELL AS CIT(APPEALS) HAVE TAKEN NOTE OF THE FAC T THAT NO SALES COULD HAVE BEEN EFFECTED BY THE ASSESSEE WITHOUT PURCHASES. IN THE PRESENT CASE, ASSESSEE HAS EXPLAINED THAT ALL ITS SALES ARE BY WAY OF EXPORTS. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE SHOW PAYMENT FOR EFFECTING SUCH PURCHASES BY A CCOUNT PAYEE CHEQUES AND ALSO THE VOUCHERS FOR SALE AND PURCHASE OF GOODS, ETC. NOTABLY, NO INDEPENDENT ENQUIRIES HAVE BEEN CONDUCTED BY THE ASSESSING OFFICER. UNDER IDENTICAL CIRCUMSTANCES, OUR CO - ORDINATE BENCHES IN THE CASES OF DEEPAK POPATWALA GAL (SUP RA), SHRI RAJEEV G. KALATHIL(SUPRA)AND RAMESH KUMAR AND CO.(SUPRA) HAVE HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS MERELY ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRIES. BEFORE THE CIT(APPEALS), ONE OF THE POINTS RAISED BY THE ASSESSEE WAS WITH RESPECT TO AN OPPORTUNITY TO CROSS EXAMINE THE FOURPARTIES, BUT WE FIND THAT NO SUCH OPPORTUNITY HAVE BEEN ALLOWED. CONSIDERING THE ENTIRETY O F FACTS AND CIRCUMSTANCES OF THE CASE AND THE AFORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED UNDER IDENTICAL CIRCUMSTANCES, IN OUR VIEW, THE CIT(APPEALS) ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS.4,19,356/ - INSTEAD OF DELETING THE ENTIRE ADDITIO N OF RS.9,68,937/ - MADE BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY. 8 . ON PERUSAL OF THE FACTS OF THE PRESENT CASE AS COMPARED WITH THE CASE LAW RELIED UPON BY THE ASSESSEE, WE ARE OF THE OPINION THAT THE AO HAS WRONGLY MADE ADDITION ON ACCOUNT OF BOGUS PURCHASE FROM THE HAWALA PARTIES. WE ARE THEREFORE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE FAA THAT THE SUPPRESSED GP/NP BEING MORE THAN THE HAWALA PURCHASES FOR SUSTAINING THE ADDITIONS. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS OF RS. 6,12,162/ - . 9 ITA NO. 4924/ M/201 6 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH FEBRUARY , 2017. SD SD ( C.N. PRASAD ) ( RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 27TH 2 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE A PPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI