ORIENTAL FABRITECH PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 13(1)(1), MUMBAI

ITA 5113/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 4706 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 133(6); 143(1); 147; 148; 139

Judgement Text

1 ITA NO.5113/NAG /2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI C.N. PRASAD(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO 5113/MUM/2017 (ASSESSMENT YEAR 2009-10) ORIENTAL FABRITECH PVT LTD C/O D.C. BOTHRA & CO LLP (CA) (FORMERLY KNOWN AS D.C. BOTHRA & CO) 297, TARDEO ROAD, WILLE MANSION, 1 ST FLOOR, OPP BANK OF INDIA, NANA CHOWK, MUMBAI-400 007 PAN : AAACO8702A VS DY.CIT.13(1)(1), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI RAJKUMAR SINGH RESPONDENT BY SHRI ABI RAMA KARTIKEYAN DATE OF HEARING 15-11-2018 DATE OF PRONOUNCEMENT 30-11-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-21, MUMBAI DATED 05-06-2011 AND IT PERTAINS TO ASSESSMENT YEAR 2009- 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. C. IT. (APPEALS) HAS ERRED IN UPHOLDING THE REASSES SMENT PROCEEDING INITIATED U/S. 147 BY THE ID. A.O. ON WRONG FACTS A ND IN UNLAWFUL MANNER. 2 ITA NO.5113/NAG /2017 2. THAT THE ID. C. I. T. (APPEALS) HAS ERRED IN CON FIRMING THE DISALLOWANCE MADE BY THE ID. A.O. OF THE ENTIRE PUR CHASES AMOUNTING TO RS. 15,89, 604/- FROM THE SUSPICIOUS HAWALA DEALERS DISREGARDING THE DOCUMENTARY EVIDENCES AND QUANTITY AND QUALITY WISE STOCK TALLY AND EVEN NOT APPRECIATING THAT PART OF SUCH UNCONSUMED PURCHASES IN THE BUSINESS ACTIVITY AT THE YEAR END TO THE EXTENT OF RS. 1, 49/490/- WERE HELD IN CLOSING STOCK AND DULY CREDITED IN MANUFACT URING AND PROFIT/LOSS ACCOUNT. BEING ALLEGED DISALLOWANCE MADE AND UPHELD BY THE LOWER INCOME TAX AUTHORITIES WRONG ON FACTS AND BAD IN LA W THEREFORE SAME MAY KINDLY BE DELETED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF EQUIPMENT AND RELATED PA RTS, FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 22-09-2009 DECLARING TOTAL INCOME OF RS.35,49,681 AND THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147 ON THE GROUND THAT I NCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT ON ACCOUNT OF ACCOMMODA TION ENTRIES IN THE FORM OF BOGUS PURCHASES OBTAINED FROM HAWALA OPERAT ORS / SUSPICIOUS DEALERS, AS PER THE LIST OF SALES-TAX DEPARTMENT. IN RESPON SE TO NOTICE, THE ASSESSEE, VIDE LETTER DATED 22-09-2009 STATED THAT RETURN FIL ED U/S 139 SHALL BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE A CT. THEREAFTER, THE ASSESSMENT HAS BEEN TAKEN UP FOR SCRUTINY AND AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE, THE AO HAS MADE ADDITION OF RS.15, 89,604 BEING PURCHASES PURPORTED TO HAVE BEEN MADE FROM ANKIT ENTERPRISES, RAJHANS STEELS & MUKTA STEEL ON THE GROUND THAT THE ASSESSEE FAILED TO FIL E NECESSARY EVIDENCES TO PROVE PURCHASES FROM THE ABOVE PARTIES. 3 ITA NO.5113/NAG /2017 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT IT HAS PURCHASED RAW MATERIALS FROM ANKIT ENTERPRISES, RAJ HANS STEELS & MUKTA STEEL AND THE SAID PURCHASES WERE SUPPORTED BY VALID PURC HASE BILLS. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS MADE PAYMENTS THROUGH BANKING CHANNEL. THE AO, WITHOUT RECORDING ANY ADVERSE COMMENTS ON EVIDE NCES FURNISHED BEFORE HIM, SIMPLY MADE ADDITIONS ON THE BASIS OF INFORMAT ION RECEIVED FROM SALES-TAX DEPARTMENT. THE LD.CIT(A), AFTER CONSIDERING RELEV ANT SUBMISSIONS OF THE ASSESSEE OBSERVED THAT WHEN THERE IS A DOUBT CAST O N PURCHASES FROM THE SAID PARTIES, IT IS THE DUTY OF THE ASSESSEE TO FILE COM PLETE DETAILS OF PURCHASES TO PROVE BEYOND DOUBT THAT THE SAID PURCHASES ARE GENU INE PURCHASES. FURTHER, THE AO HAS CARRIED OUT NECESSARY ENQUIRIES BY ISSUI NG NOTICES U/S 133(6), HOWEVER, SUCH NOTICES WERE RETURNED UNSERVED. IT I S ALSO AN ADMITTED FACT THAT THE PARTIES HAVE ADMITTED BEFORE THE SALES-TAX DEPA RTMENT THAT THEY HAVE ISSUED ACCOMMODATION BILLS ONLY AND NO GENUINE GOOD S HAVE BEEN SUPPLIED TO ANY PURCHASERS. SINCE THE ASSESSEE HAS NOT FILED A NY EVIDENCE, EXCEPT PURCHASE BILLS AND PAYMENT PROOF TO PROVE THE PURCH ASES, THE AO WAS RIGHT IN TREATING PURCHASES FROM THE ABOVE PARTIES AS NON GE NUINE AND ACCORDINGLY, THERE IS NO REASON TO INTERFERE WITH THE FINDINGS O F THE AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US . 4 ITA NO.5113/NAG /2017 4. THE LD.AR FOR THE ASSESSEE, AT THE TIME OF HEARI NG, SUBMITTED THAT ALTHOUGH THE ASSESSEE HAS TAKEN A GROUND CHALLENGIN G REOPENING OF ASSESSMENT, THE ASSESSEE DOES NOT WANT TO PRESS THA T GROUND AND ACCORDINGLY, GROUND 1 RAISED BY THE ASSESSEE IS DISMISSED, AS NO T PRESSED. 5. INSOFAR AS THE ISSUES INVOLVED ON MERITS, THE LD .AR SUBMITTED THT THE ASSESSEE HAS FILED COMPLETE DETAILS FOR PURCHASES I NCLUDING PURCHASE BILLS, PAYMENT PROOF AND ALSO COMPLETE DETAILS OF QUANTITA TIVE STOCK DETAILS TO PROVE THE PURCHASES. THE AO DISREGARDING EVIDENCES, MADE ADDITION ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES-TAX DE PARTMENT. 6. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT IT I S EVIDENT FROM THE FACTS GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDING S THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES PROVIDE D BY HAWALA OPERATORS AND THIS FACT WAS PROVED BEYOND DOUBT, AS THE ASSES SEE HAS FAILED TO FILE COMPLETE DETAILS OF PURCHASES FROM THE ABOVE PARTIE S, THEREFORE, THE AO WAS RIGHT IN MAKING ADDITION TOWARDS PURCHASES FROM THE SAID PARTIES AND HIS ORDER SHOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE FACT THAT THREE PARTIES FROM WHOM THE ASSESSEE STATED TO HAVE PURCHASED GOODS WERE APPEARING IN THE LIST OF SUSPI CIOUS / HAWALA DEALERS PREPARED BY SALES-TAX DEPARTMENT. IT IS ALSO AN AD MITTED FACT THAT NOTICES 5 ITA NO.5113/NAG /2017 ISSUED U/S 133(6) WERE RETURNED UNSERVED BY THE POS TAL AUTHORITIES. UNDER THESE FACTS, THE AO CAME TO THE CONCLUSION THAT PUR CHASES FROM THE SO-CALLED PARTIES ARE NON GENUINE IN NATURE. AT THE SAME TIM E, IT IS NOT THE CASE OF THE AO THAT THE SAID PURCHASES WERE NOT SUPPORTED BY PU RCHASE BILLS OR ANY OTHER EVIDENCE. THE ASSESSEE HAS PRODUCED COPIES OF PURC HASE BILLS AND ALSO FILED PAYMENT PROOF TO PROVE THAT PAYMENT FOR THE SAID PU RCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. UNDER THESE CIRCU MSTANCES, THE ONLY INFERENCE THAT COULD BE DRAWN TOWARDS PURCHASES FRO M THE SAID PARTIES ARE ARE NOT TOTALLY BOGUS, BUT THE ASSESSEE COULD NOT SUBST ANTIATE WITH NECESSARY EVIDENCE. UNDER THESE CIRCUMSTANCES, VARIOUS COURT S AND TRIBUNALS HAVE TAKEN A CONSISTENT VIEW THAT WHEN THE PURCHASES ARE CONSI DERED AS BOGUS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES COULD BE ADDED AS INCOME OF THE ASSESSEE, BUT NOT TOTAL PURCHASES FROM THE SAID PAR TIES. THE CO-ORDINATE BENCH OF ITAT, MUMBAI IN A NUMBER OF DECISIONS, BY FOLLOW ING THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P S HETH VS CIT 38 TAXMANN.COM 385 (GUJ) HAS DIRECTED THE AO TO SUSTAIN ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES. IN THIS CASE, FACTS ARE IDENTICAL TO THE FACTS WHICH HAVE ALREADY BEEN CONSIDERED BY THE CO-ORDINATE BENCH IN A NUMBER OF CASES. THEREFORE, CONSISTENT WITH THE VIEW TAKEN BY THE CO -ORDINATE BENCH, WE DIRECT THE AO TO SUSTAIN ADDITION TO THE EXTENT OF 12.5% O F ALLEGED BOGUS PURCHASES. 6 ITA NO.5113/NAG /2017 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 -11-2018 . SD/- SD/- (C.N. PRASAD) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 30 TH NOVEMBER, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI