M/s. Rashmi Bearing Co, Mumbai V. The ACIT Circle17(3), Mumbai

ITA 5035/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3500 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 01-08-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY SETHI
• Keywords: Bogus purchase
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 5035/MUM/2019 (A.Y: 2011-12) M/S RASHMI BEARING CO., ROOM NO. 7, 2 ND FLOOR, 115, NAGDEVI STREET, MUMBAI - 400003 / VS. THE ACIT, CIRCLE 17 (3), 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAEFR2683Q ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI NISHIT GANDHI , A R RESPONDENT BY : SHRI SANJAY SETHI , DR / DATE OF HEARING 15 /02 /20 2 1 / DATE OF PRONOUNCEMENT 10 /03 /202 1 / O R D E R PER PAVAN KUMAR GADALE: THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 28, MUMBAI, PASSED U/S. 143 (3) R.W.S 147 AND U/SEC250 OF THE INCOME TAX ACT, 1961. ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 2 - 2. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESS EE SUBMITTED THAT THE GROUNDS OF APPEAL ON JURISDICTIO N OF REASSESSMENT ARE NOT PRESSED. ACCORDINGLY, THE GROU NDS OF APPEAL NO 2.1 & 2.2 ARE TREATED AS WITHDRAWN AND DISMISSED. THE EFFECTIVE GROUNDS OF APPEAL ARE AS U NDER: 1.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) - 28. MUMBAI ['THE CIT (A)' FOR SHORT] ERRED IN CONFI RMING THE ORDER OF THE LEARNED ASSISTANT COMMISSIONER OF INCO ME TAX - 17 (3), MUMBAI, ['THE AO' FOR SHORT I WHICH IN IT SELF WAS PASSED IN GROSS VIOLATION OF THE PRINCIPLES OF NATU RAL JUSTICE AND COULD THEREFORE NOT BE UPHELD. ON MERITS: 3.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE AO AND AS AFFIRMED BY THE CIT(A) IS ALSO BAD IN LAW SINCE THE SAME IS BASED ON MATERIAL GATHERED AT THE BACK OF THE APPELLANT WHICH WAS NEV ER FURNISHED TO THE APPELLANT DESPITE BEING SPECIFICAL LY ASKED FOR AND MORE PARTICULARLY EVEN CROSS EXAMINATION OF THOSE PARTIES ON WHOSE STATEMENTS RELIANCE WAS PLACED WAS NEVER PROVIDED TO THE APPELLANT THOUGH SPECIFICALLY ASKED FOR AT THE TIME OF ASSESSMENT. 3.2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT (A) ERRED IN PARTLY CONFIRMING THE ACTION OF THE AO AND SUSTAINING AN ADDITION OF RS.2,12,210/- AS ALLEGED GROSS PROFIT AT 12.5% OUT OF AN ADDITION OF RS.2,89,285/- AT A GROSS PROFIT OF 17.04% ON ACCOUN T OF THE ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 3 - ALLEGED TAINTED PURCHASES MADE BY THE APPELLANT DUR ING THE YEAR. 3.3 WHILE DOING SO THE CIT(A) FAILED TO APPRECIATE THAT: (I) THE ADDITION AT 12.5% OF THE ALLEGED TAINTED PURCHASES OF RS.16,97,681/- AMOUNTED TO DOUBLE TAXA TION OF THE SAME AMOUNT SINCE THE APPELLANT HAS ALREADY OFFERED PROFIT ON SALE OF THESE PURCHASES TO TAX IN ITS RETURN OF INCOME: (II) IN ANY CASE, THE ENTIRE PURCHASES OF THE APPEL LANT STOOD EXPLAINED BOTH QUANTITY-WISE AND VALUE-WISE, BASED ON VARIOUS DETAILS I EVIDENCES SUBMITTED AT THE TIM E OF ASSESSMENT AS WELL AS THE APPEAL PROCEEDINGS BEFORE THE CIT(A); AND; (III) THE AO HAS ACCEPTED THE SALES OF THE APPELLAN T AND THEREFORE THERE IS NO QUESTION OF DOUBTING THE PURC HASES PARTICULARLY WHEN ACCORDING TO THE AO HIMSELF AND A S ADMITTED BY HIM IN HIS ORDER, THE APPELLANT HAD ACT UALLY MADE PURCHASES WHICH WERE SOLD DURING THE YEAR. 3.4 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE A PPELLANT HAD IN ITS RETURN ALREADY DECLARED A PROFIT OF 13.1 2% ON THE AMOUNT OF ITS. 16,97,681/- ALLEGED AS TAINTED PURCH ASES BY. THE AO AND AS SUCH AFTER GRANTING CREDIT I SET OFF OF SUCH PROFIT ALREADY DECLARED BY THE APPELLANT NO FU RTHER ADDITION COULD HAVE BEEN MADE AND SUCH AN ORDER PAS SED BY HIM WITHOUT GRANTING CREDIT FOR THE G.P. ALREADY DECLARED IS, CONTRARY TO THE JUDGEMENT OF THE HON'B LE TRIBUNAL IN THE APPELLANT'S OWN CASE FORAY 2009-10 IN ITA NO.2435 / M / 18. 3.5 WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTER NATIVE, THE ESTIMATION OF GROSS PROFIT RATE OF 12.5% ON THE ALLEGED ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 4 - TAINTED PURCHASES BY THE LD. CIT(A) IS EXCESSIVE AN D UNFAIR AND DESERVES TO BE SUBSTANTIALLY REDUCED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, DE LETE OR MODIFY ALL OR ANY THE ABOVE GROUNDS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE FIRM IS ENGAGED IN THE BUSINESS AS DEALER AND SUPPLIER OF B ALL BEARINGS. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE AY 2011-12 ON 23.02.2016 WITH THE TOTAL INCOME OF R S. 34,29,300/-.THE RETURN OF INCOME WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS RE OPENED, AS THE ASSESSEE HAS OBTAINED THE BOGUS PURCHASES BI LLS FROM HAWALA DEALERS AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND DGIT (INV.).THEREFORE THE AO HAS REASON TO BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT AND ISSUED NOTICE U/S 148 OF THE ACT. FU RTHER THE NOTICE U/S 143 (2) AND 142 (1) OF THE ACT WERE ISSUED. IN COMPLIANCE, THE LD. AR OF THE ASSESSEE APPEARED FRO M TIME TO TIME AND THE CASE WAS DISCUSSED. THE AO FOUND TH AT THE ASSESSEE HAS OBTAINED BOGUS PURCHASES BILLS FROM 14 PARTIES AND CALLED FOR THE DETAILED EXPLANATIONS TO PROVE THE GENUINENESS OF THE PURCHASES. THE ASSESSEE HAS FILE D THE EXPLANATIONS, BUT THE A.O. WAS NOT SATISFIED WITH T HE INFORMATION AND HAS ISSUED NOTICE U/SEC 133 (6) OF THE ACT ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 5 - AND THERE WAS NO RESPONSE TO NOTICE FROM PARTIES. T HEREFORE, THE A.O. CONSIDERING THE FACT OF FAILURE ON THE PAR T OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES AND HAS RELIED ON THE JUDICIAL DECISIONS AND MADE AN ADDITI ON @17.04% OF THE GROSS PURCHASES AS INCOME AND ASSESS ED THE TOTAL INCOME AT RS. 37,80,590/- AND PASSED THE ORDER U/S 143 (3) R.W.S. 147 OF THE ACT DATED 20.12.2016 . 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED THE APPEAL WITH THE LD. CIT (A). THE LD. CIT (A) CONSIDERED TH E GROUNDS OF APPEAL, SUBMISSIONS OF THE ASSESSEE, FINDINGS OF THE AO AND RELIED ON THE JUDICIAL DECISIONS AND FINALLY RESTRICTED THE ADDITION @12.5% OF THE BOGUS PURCHASES AND PART LY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY TH E CIT(A) ORDER, THE ASSESSEE HAS FILED THE APPEAL WITH THE H ONBLE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESS EE HAS ARGUED ONLY ON THE FACTS THAT THE LD. CIT (A) HAS E RRED IN RESTRICTING THE ADDITION @ 12.5%.THE CIT(A) HAS NOT CONSIDERED THE VITAL CALCULATIONS AND FURTHER THE LD.AR HAS MENTIONED THAT THE ASSESSEE HAS DECLARED THE P ROFIT @13.12% ON THE ALLEGED BOGUS PURCHASES IN THE FINANCIAL ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 6 - STATEMENTS, WHICH IS HIGHER THAN 12.5% AND PRAYED F OR THE DELETION .CONTRA, THE LD.DR SUPPORTED THE ORDER OF THE CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE LD. AR EMPHASIZED THAT SINCE THE ASS ESSEE HAS DISCLOSED PROFIT @13.12% ON THE ALLEGED BOGUS PURCHASES AND THE LD. CIT (A) HAS RESTRICTED THE ADDITION PERCENTAGE FROM 17.04% TO 12.5%. THEREFORE, THE ASS ESSEE SHOULD BE GRANTED SETOFF OF PROFIT WHICH IS DISCLOS ED AND THE REMAINING ONLY SHOULD BE CONSIDERED AS INCOME, OTHE RWISE THE ASSESSEE IS SUBJECT TO THE DOUBLE TAXATION ON THE SAME INCOME. WE FIND THE SUBMISSIONS OF THE LD.AR ARE R EALISTIC BUT THE ASSESSEE HAS TO PROVE WITH MATERIAL EVIDEN CES AND CALCULATIONS WITH RESPECT TO THE PROFIT DECLARED @ 13.12% THEREFORE, TO MEET THE ENDS OF THE JUSTICE, WE PRO VIDE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE I TS CLAIM. ACCORDINGLY, FOR THE LIMITED PURPOSE, THE DISPUTED ISSUE IS REMITTED TO THE FILE OF AO FOR VERIFICATION OF FACT S AND THE ASSESSEE SHOULD BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING AND WE ALLOW THE GROUNDS OF APPEAL OF THE A SSESSEE FOR STATISTICAL PURPOSES. ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 7 - 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10.03.2021. SD/- S D/- (M. BALAGANESH) (PAVAN KUMAR GA DALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10.03.2021 AK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! '# $ / THE CIT(A) 4. $ ( ) / CONCERNED CIT 5. '() **'# , '# , / DR, ITAT, MUMBAI 6. ),- . / GUARD FILE. / BY ORDER, ' * //TRUE COPY// 1. / ( ASST. REGISTRAR) , / ITAT, MUMBAI ITA NO . 5035/MUM/2019 M/S. RASHMI BEARINGS, MUMBAI. - 8 - DATE INITIAL 1. DRAFT DICTATED ON 17.02.2021 PS 2. DRAFT PLACED BEFORE AUTHOR 18.02.2021 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER PS 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. PS 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DICTATION PAD IS ENCLOSED YES 2. OTHER MEMBER ON WHICH THE