ACIT, C-20(3), MUMBAI V. M/S SMITA ELECTRICAL INDUSTRIES, MUMBAI

ITA 5177/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9564 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Assessee Lawyers: DINESH DIWALE
• Keywords: Bogus purchase; Tax effect; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5177/MUM/2019 ASSESSMENT YEAR: 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-20(3), ROOM NO. 615, 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012. VS. M/S SMITA ELECTRICAL INDUSTRIES, C-14 SHRI RAM INDL. ESTATE, 13, G.D. AMBEDKAR ROAD, WADALA, MUMBAI-400031. PAN NO. AACFS 2921 C APPELLANT RESPONDENT REVENUE BY : MR. SANJAY J. SETHI, DR ASSESSEE BY : MR. DINESH DIWALE, AR DATE OF HEARING : 03/03/2021 DATE OF PRONOUNCEMENT : 19/03/2021 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-32, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE I NCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN BY DELETING THE ADDITION OF RS.2,36,717/- MADE A GAINST ALLEGED BOGUS PURCHASES FROM M/S HITEN ENTERPRISES. M/S SMITA ELECTRICALS ITA NO. 5177/M/2019 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ONUS IS ON THE ASSE SSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATURE OF THE PURCHASE TRANSAC TION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE HAWALA DEALERS ADMITTED ON OATH BEFORE SALES TAX AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY AND ASSESSEE FAILED TO PRODUCE SUCH PARTIES AT THE ASSESSMENT STAGE THOUGH SPECIFICALLY ASKED BY THE AO. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT PURCHASES WERE MA DE FROM SOME OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AN D ONLY ACCOMMODATION BILLS WERE OBTAINED FROM HAWALA PARTIES AND THEREBY ATTRA CTING PROVISIONS OF SECTION 40A(3). 5. THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT P RESCRIBED IN THE CBDT INSTRUCTION NO 3/2018 DATED 11.07.2018 AS AMENDMENT ON 20.06.20 18 AS THE CASE FALLS IN THE EXCEPTION PROVIDED IN PARA 10(E) OF THE SAID INSTRU CTION IN AS MUCH AS THE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES, NAMELY SALES TAX AUTHORITIES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009- 10 ON 25.09.2009 DECLARING TOTAL INCOME OF RS.27,55,591/-. ON RECEIP T OF INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INV), MUMBAI THAT T HE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS OF RS.19,20,456/- FROM TWO PAR TIES I.E. RAJ TRADERS OF RS.26,719/- AND HITEN ENTERPRISES OF RS.18,93,737/- , THE ASSESSING OFFICER (AO) ISSUED NOTICE U/S 148 FOR REOPENING THE ASSESSMENT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE APPEARED BEF ORE THE AO ON 05.03.2015 ALONG WITH SHRI HITEN PAREKH, PROPRIETOR OF M/S HIT EN ENTERPRISES FROM WHOM HE CLAIMED TO HAVE MADE THE PURCHASES. THE AO RECOR DED THE STATEMENT OF SHRI M/S SMITA ELECTRICALS ITA NO. 5177/M/2019 3 PAREKH AND HAS PRODUCED THE RELEVANT PORTION IN HIS ASSESSMENT ORDER, WHICH READS AS UNDER : Q. NO. 5 AS PER THE INFORMATION GIVEN BY THE SALES TAX DEPAR TMENT, YOUR NAME IS APPEARING AS ONE OF TH E BOGUS SUPPLIERS. PLEASE STATE WHETHER YOUR STATEMENT WAS RECORDED BY TH E SALES TAX OFFICERS AND YOU HAVE GIVEN STATEMENT TO THAT EFFECT? ANS. YES, THE SALES TAX DEPARTMENT HAS RECORDED MY STATE MENT IN APPROXIMATELY JUNE, 2010 AND I HAD GIVEN A STATEMEN T THAT I WAS INDULGING IN BOGUS PURCHASES. Q. NO. 6 I AM SHOWING YOU YOUR COPY OF AFFIDAVIT DATED 17.04.2012 WHEREIN YOU HAVE STATED THAT YOU HAVE MADE SALES FOR RS.19,14,7 37/- TO M/S. SMITA ELECTRICAL INDUSTRIES. PLEASE STATE WHY THIS AFFIDA VIT HAS BEEN GIVEN BY YOU IN THE BACKDROP OF THE STATEMENT TO SALES TAX A UTHORITIES. ANS. I SAY THAT I HAD GIVEN THE BUSINESS TO RUN TO SHRI HITESH SHAH AND SHRI JATIN SHAH WHO WERE RUNNING THE BUSINESS IN MY NAME . THEY HAD OPENED THE BANK ACCOUNT IN AXIS BANK, KANDIVALI (WE ST) BRANCH - MAHAVIR NAGAR AND MIGHT HAVE DONE SOME WRONG TRANSA CTIO NS. HOWEVER, I HAVE DONE GENUINE BUSINESS WITH M/S. SMI TA ELECTRICAL INDUSTRIES AND THE ENTRIES WERE THROUGH JAIN SAHAKA R BANK LTD, MANDVI BRANCH, MUMBAI-400 003. HAVING CONSIDERED THE ABOVE STATEMENT ALONG WITH T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO ESTIMATED THE PRO FIT @ 12.5% OF THE DISPUTED PURCHASES OF RS.19,20,456/- AND ACCORDINGLY, MADE A N ADDITION OF RS.2,40,057/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD .CIT(A). WE FIND THAT VIDE ORDER DATED 10.05.201 9, THE LD. CIT(A) HELD THAT : 5.2 I FIND THAT THE AO HAS NOT BEEN ABLE TO BRI NG ANY EVIDENCE TO THE CONTRARY TO SHOW THAT, THE ABOVE SAID DETAILS AND EVIDENCE FURN ISHED WERE NOT CORRECT EXCEPT THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THROUGH DGIT(INV.), MUMBAI THAT M/S. HITEN ENTERPRISE WAS INDULGING IN ISSUE O F BOGUS HAWALA ENTRIES, I FIND THAT IN THE SAID STATEMENT THE SHRI HITEN PAREKH HAS ACC EPTED THAT SOME WRONG M/S SMITA ELECTRICALS ITA NO. 5177/M/2019 4 TRANSACTIONS MAY HAVE BEEN DONE THROUGH HIS ACCOUNT IN AXIS BANK BY SHRI HITESH AND SHRI JATIN SHAH BUT THIS DOES NOT SHOW THAT, T HE TRANSACTIONS WITH THE APPELLANT COMPANY WERE ALSO BOGUS CONSIDERING THE DETAILS FIL ED AND CONFIRMATION MADE BY THE SELLER. THE A.O HAS ALSO NOTED IN THE ASSESSMENT OR DER THAT THE APPELLANT WAS ABLE TO CORRELATE THE PURCHASES OF MATERIAL WITH THE ALLOCA TION OF RAW MATERIAL AND SALES OF FINISHED GOODS. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS LED SUFFICIENT EVIDENCE TO ESTABL ISH THE GENUINENESS OF THE PURCHASE TRANSACTIONS MADE WITH HITEN ENTERPRISE. FURTHER, T HE APPELLANT HAS NOT CONTESTED THE ADDITION MADE IN RESPECT OF PURCHASES FROM RAJ TRAD ERS AMOUNTING TO RS.26,719/-. THEREFORE, THE ADDITION OF RS.236,717/- MADE @ 12% OF THE PURCHASES FROM HITEN ENTERPRISES, ON THE BASIS OF PRESUMPTIONS, IS FOUND TO BE WITHOUT MERIT AND THE SAME IS DELETED. ACCORDINGLY, THE ADDITION MADE BY THE A .O OF RS.2,40,057/- IS RESTRICTED TO RS.3340/-. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) SUPPORTS THE ORDER PASSED BY THE AO. ON THE OTHER HAND, THE LD. COUNSE L FOR THE ASSESSEE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE AFFIRMED . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, THE AO HAS RECORDED THE STATEMENT OF SHRI HITEN PAREKH, PROPRIETOR OF M/S HITEN ENTERPRISES, FROM W HOM THE ASSESSEE CLAIMED TO HAVE MADE THE PURCHASES. IN THAT STATEMENT, SHRI PAREKH HAS STATED BEFORE THE AO CATEGORICALLY THAT HE HAD DONE GENUINE BUSIN ESS WITH M/S SMITA ELECTRICAL INDUSTRIES (THE ASSESSEE) AND THE ENTRIE S WERE THROUGH JAIN SAHAKAR BANK LTD., MANDVI BRANCH, MUMBAI-400003. THE AO COU LD HAVE MADE FURTHER INQUIRIES/INVESTIGATIONS TO DISLODGE THE ABOVE STAT EMENT OF SHRI PAREKH. HOWEVER, THE AO HAS NOT DONE EVEN PRELIMINARY INQUI RY TO VERIFY THE CONTENTIONS OF SHRI PAREKH. M/S SMITA ELECTRICALS ITA NO. 5177/M/2019 5 THE AO HAS ALSO NOTED IN THE ASSESSMENT ORDER AT PA GE 6 THAT THE ASSESSEE WAS ABLE TO CORRELATE THE PURCHASES OF MATERIALS WITH T HE ALLOCATION OF RAW MATERIALS AND SALE OF FINISHED GOODS. IN VIEW OF THE ABOVE FACTUAL SCENARIO, THE LD. CIT (A) HAS RIGHTLY DELETED THE ESTIMATED PROFIT @ 12.5% ON PURCHASES OF RS.18, 93,737/- FROM HITEN ENTERPRISES. HE HAS RIGHTLY RESTRICTED THE DISALLOW ANCE TO 12.5% OF PURCHASES OF RS.26,719/- FROM RAJ TRADERS WHICH COMES TO RS.3 ,340/-. AS THE ABOVE ORDER PASSED BY THE LD. CIT(A) IS BAS ED ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE AFFIRM IT. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/03/2021. SD/- SD/- (VIKAS AWASTHY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 19/03/2021 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI