ITO WARD-1, PALGHAR V. M/S. ARYA PROCESS EQUIPMENT, PALGHAR

ITA 5044/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3530 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SETHI
• Keywords: Bogus purchase; Reason to believe; Reassessment proceedings
• Section: 250; 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. 5044/MUM/2019 (A.Y: 2010-11) ITO WARD 1, PALGHAR RANGE, PALGHAR, AAYAKAR BHAWAN, BIDCO ROAD, PALGHAR - 401404 / VS. M/S ARYA PROCESS EQUIPMENT, SHREE SHANTA DURGA COMPLEX, RAM KRISHNA NAGAR, MAHIM ROAD, DIST. PALGHAR - 401404 ./ ./ PAN/GIR NO. : AALFA3887G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY SETHI, DR / RESPONDENT BY : NONE / DATE OF HEARING 16/02/2021 / DATE OF PRONOUNCEMENT 18/02/2021 / O R D E R PER PAVAN KUMAR GADALE: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THECOMMISSIONER OF INCOME TAX (APPEALS) - 3, ITA NO. 5044/MUM/2019 M/S ARYA PROCESS EQUIPMENT - 2 - THANE, PASSED U/S. 143 (3) R.W.S. 147 AND 250 OF THE INCOME TAX ACT, 1961. 2.THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1.1 WHETHER OIL FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASE FROM THE NON-EXISTENT VENDORS AS PER THE INFORMATION RECEIVED FROM SALE TAX LAW DEPARTMENT AGENCIES AND ESTABLISHED BY THE ASSESSING OFFICER? 1.2 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSE IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASE FROM NON-EXISTENT VENDORS? 1.3 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASE FROM NONEXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT OF GOODS, STOCK REGISTER ETC. TO ARRIVE AT DISALLOWANCE AT 12.5% OF THE PURCHASE FROM NONEXISTENT VENDORS? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASE ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW OF THE RATION OF THE DECISION OF ITA NO. 5044/MUM/2019 M/S ARYA PROCESS EQUIPMENT - 3 - THE HON'BLE GUJRAT HIGH COURT IN TAX APPEAL NO. 242 DATED 20.06.2016 IN THE CASE OF N.K. PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE APEX COURT? 3. IT IS HUMBLY REQUESTED THAT THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND THAT OF THE AO MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CENTFRIGUE, DRYERS AND ENGINEERING GOODS AND FILED THE RETURN OF INCOME ON 09.09.2010 DECLARING TOTAL INCOME OF RS. 91,430/- AND THE RETURN OF INCOME WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, THE A.O. FOUND THAT THE ASSESSEE HAS MADE PURCHASE OF GOODS FROM M/S ASIAN STEEL OF RS. 1,29,375/-.BUT AS PER THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THAT, THE ASSESSEE HAS OBTAINED THE BOGUS PURCHASE BILLS FROM THE HAWALA TRADERS. THEREFORE, THE AO HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AND ISSUED NOTICE U/S 148 OF THE ACT. IN COMPLIANCE THE LD. AR OF THE ASSESSEE AND FILED LETTER ON 26-08-2013 TO TREAT THE RETURN OF INCOME FILED ON 09-09-2010 AS COMPLIANCE TO NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, NOTICE U/S 143 (2) AND 142 ITA NO. 5044/MUM/2019 M/S ARYA PROCESS EQUIPMENT - 4 - (1) OF THE ACT WAS ISSUED. THE LD.AR OF THE ASSESSEE HAS APPEARED FROM TIME TO TIME AND FILED THE DETAILS IN THE REASSESSMENT PROCEEDINGS. THE AO HAS CALLED FOR THE EXPLANATIONS OF THE TRANSACTION TO TEST CHECK THE GENUINITY OF THE PURCHASES. THE A.O. HAS ISSUED NOTICE U/S 133 (6) OF THE ACT ON THE DEALER, AND THE SAID NOTICE WAS RETURNED UN-SERVED WITH REMARKS LEFT ADDRESS. THE AO REQUIRED THE ASSESSEE TO SUBMIT THE DETAILS AND FINANCIAL STATEMENTS. THE AO FOUND THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASE TRANSACTION. HENCE, MADE AN ADDITION OF RS. 1,29,375/- AND ASSESSED THE TOTAL INCOME OF RS.2,20,800/- AND PASSED ORDER U/S 143 (3) R.W.S. 147 OF THE ACT DATED 27-10-2014. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE HAS FILED THE APPEAL WITH THE LD. CIT (A). THE LD. CIT (A) CONSIDERED THE GROUNDS OF APPEAL AND SUBMISSIONS OF THE ASSESSEE, FINDINGS OF THE AO AND RELIED ON THE JUDICIAL DECISIONS AND OBSERVED THAT THE AO IS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION, BUT THE AO HAS NOT DOUBTED THE SALES, AND THE ASSESSEE HAS MADE PURCHASES TO SAVE TAXES. THEREFORE, ONLY PROFIT ELEMENT HAS TO BE ESTIMATED. ACCORDINGLY, THE LD. CIT (A) ITA NO. 5044/MUM/2019 M/S ARYA PROCESS EQUIPMENT - 5 - CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES VALUE AND PARTLY ALLOWED THE APPEAL. 5. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ADJOURNMENT PETITION WAS FILED. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE LD.CIT (A) HAS CONSIDERED THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL DECISIONS OF THE HONBLE HIGH COURT AND COORDINATE BENCH DECISIONS OF HONBLE TRIBUNAL AND HAS RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES. THE LD. DR HAS SUPPORTED THE ORDER OF THE AO AND COULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT (A) WITH ANY NEW COGENT EVIDENCE OR INFORMATION. WE FIND THAT THE LD.CIT (A) HAS PASSED A REASONED ORDER BY ESTIMATING THE INCOME AT 12.5% OF VALUE OF THE BOGUS PURCHASES TRANSACTION WHICH WAS ACCEPTED. ACCORDINGLY, WE DO NOT FIND INFIRMITY IN THE ORDER OF THE LD. CIT (A) AND UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. ITA NO. 5044/MUM/2019 M/S ARYA PROCESS EQUIPMENT - 6 - 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2021. SD/- SD/- (M. BALAGANESH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 18.02.2021 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 2. OTHER MEMBER