ACIT 24(1), MUMBAI V. BIMAL KUMAR AGARWAL, MUMBAI

ITA 5220/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0364 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 15-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: DR K SHIVARAM; RAHUL HAKANI A DVOC
• Keywords: Bogus purchase; Additional evidence
• Section: 143(3); 142(1); 133A; 133(6); 194C; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO.5220 /MUM/201 4 ASSESSMENT YEAR: 2010 - 11 ACIT - 24(1) R.NO. 503, C - 13 5 TH FLOOR, BKC BANDRA (E) MUMBAI - 400051 VS. BIMAL KUMAR AGARWAL 19/40/C - 2 SEKSARIA INDL. ESTATE S.V. ROAD MALAD (W) MUMBAI - 400064 PAN NO. ADWPA0759M APPELLANT RESPONDENT REVENUE BY : MS. VIDISHA KALRA , CIT ( DR ) ASSESSEE BY : DR. K. SHIVARAM , SR. ADVOCATE & SHRI RAHUL HAKANI, A DVOCATE DATE OF HEARING : 15/05 /2017 DATE OF PRONOUNCEMENT: 10/08/2017 ORDER PER N.K. PRADHAN, A.M . THIS IS AN APPEAL FILED BY THE REVENUE. THE REL EVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 39 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). ITA NO. 5220/MUM/2014 2 2. THE GROUN DS OF APPEAL FILED BY THE REVENUE READ AS UNDER: - 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE IN RESPECT OF BOGUS PURCHASES TO THE EXTENT OF RS.12,90,55,849/ - WITHOUT THIRD PARTY CO NFIRMATION OR PRODUCTION OF ANY OTHER CLINCHING EVIDENCE REGARDING MATERIAL CONSUMPTION DURING THE COURSE OF SURVEY OR ASSESSMENT PROCEEDINGS. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN NEGATING WITHOUT SUFFICIENT REASON THE FINDING THAT NO DELIVERY CHALLAN COULD BE PRODUCED DURING SURVEY, LEADING TO THE ASSESSEE'S STATEMENT OF CONFIRMATION REGARDING ABSENCE OF RECORDS, DULY RECONFIRMED BY VARIOUS PARTY'S DEPOSITION BEFORE SALES TAX INVESTIGATION WING TO THE EFFECT THAT SALE BILLS WERE ISSUED WITHOUT GENUINE PURCHASES. 3. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES BY ACCEPTING ADDITIONAL EVIDENCE DURING THE COURSE OF APPELLATE PROCEEDINGS WITHOUT GRANTING ANY OPPORTUNITY TO THE AO FOR VERIFYING THE DETAILS SUBMITTED BY WAY OF REMAND REPORT WHICH IS CLEARLY IN VIOLATION OF RULE 46A(3) OF THE I.T. RULES, 1962. 4. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO IN RESPECT OF PENALTY OF RS.11,45,254/ - WITHOUT APPRECIATING THE FACT THAT THE SAID PENALTY WAS PAID TO MCGM FOR BREACH OF CONTRACT WHICH IS INFRINGEMENT OF LAW AND THEREFORE, NEEDS TO BE DISALLOWED. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO. 5220/MUM/2014 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) FOUND D URING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD MADE SUBSTANTIAL AMOUNT OF PURCHASES FROM THE PARTIES WHICH WERE IDENTIFIED AS SUSPICIOUS DEALERS BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE AO, IN ORDER TO VERIFY THE TRANSA CTIONS, ISSUED NOTICE S U/S 133(6) TO 23 SUCH PARTIES. HOWEVER, NOTICE S ISSUED TO 1 9 PARTIES WERE RETU R NED BACK BY THE POSTAL AUTHORITY. IN THE CASE OF 4 PARTIES, NO REPLY WAS RECEIVED BY THE AO. 3.1 DURING THE SURVEY ACTION U/S 133A CONDUCTED IN THE BUSIN ESS PREMISES OF THE ASSESSEE 07.01.2013, IT WAS NOTICED THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM THE PARTIES IDENTIFIED BY THE SALES TAX DEPARTMENT AS NON - GENUINE TO THE TUNE OF RS.6,34,5 6 ,488/ - IN THE IMPUGNED ASSESSMENT YEAR. THE AO NOTED THAT NO REPLY WAS RECEIVED IN RESPECT OF THE QUERY PUT BY HIM TO THE ASSESSEE. THEREAFTER, THE AO ASKED THE AR OF THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 23.01.2013 TO (I) SUBMIT THE DETAILS OF 23 PARTIES FROM WHOM INFORMATION AS SOUGHT U/S 133(6) COULD NOT BE A SCERTAINED, (II) PRODUCE THE PARTIES, (III) SUBMIT THEIR INCOME TAX PARTICULARS AND (IV) FILE COPIES OF THEIR BANK ACCOUNTS. THE AO HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE ONLY DETAILS THE ASSESSEE PROVIDED WERE THE LEDGER ACCOUNT OF THE PARTIES IN HIS BOOKS AND THE BILLS OF THE PARTIES. THE ASSESSEE CLAIMED BEFORE THE AO THAT THE PAYMENTS WERE MADE BY CHEQUES . THE AO WA S NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND MADE AN ADDITION OF RS.6,34,56,488/ - . ITA NO. 5220/MUM/2014 4 3.2 FURTHER THE AO FOUND THAT THE ASSESSEE HAD PURCHASED GARDEN MATERIAL S LIKE SOIL, MANURE FROM NON - GENUINE PARTIES I.E. PEARL INTERNATIONAL, AJAY STONE, NISHA ENTERPRISES, AAYUSHI ENTERPRISES WHO HAD SUPPLIED MATERIALS TO VARIOUS SITES IN BHANDUP . THE AO ASKED THE ASSESSEE TO GIVE THE SPECIFIC DETAILS OF SITES. BUT THE ASSESSEE FAILED TO PROVIDE THE SAME. THE AO THEN ISSUED NOTICE S U/S 133(6) TO 10 PARTIES WHO H AD DONE LABOUR JOBS . HOWEVER, THE SAID NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES. THE AMOUNT INVOLVED WAS RS.6,75,51,417/ - . THE AO ASKED THE AR OF THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 23.01.2013 (I) TO PRODUCE THE PARTIES AND (II) FILE COPY OF LEDGER ACCOUNT IN THEIR BOOKS, THEIR I NCOME T AX PARTICULARS, BALANCE SHEET, PROFIT & LOSS ACCOUNTS AND BANK ACCOUNTS REFLECTING THE PAYMENTS MADE BY THE ASSESSEE. THE AO NOTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE A SINGLE PARTY. HOWEVER, THE ASSESSEE FILED CONFIRMATION IN REGULAR FOR MAT ON 26.03.2013 BEFORE THE AO . THE AO WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND MADE AN ADDITION OF LABOUR CHARGES OF RS.6,75,51,417/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS MENTIONED AT PARA 5.6 OF THE APPELLATE ORDER DATED 30.05.2014 THAT THE ASSESSEE HAD SUB MITTED THE FOLLOWING DOCUMENTS: - A. LEDGER ACCOUNT CONFIRMATION OF ALL THE PARTIES ALONG WITH SAMPLE COPIES OF INVOICES IS SUED ; B. COPIES OF PURCHASE ORDER; ITA NO. 5220/MUM/2014 5 C. PROOF OF PAYMENT MADE BY ACCOUNT PAYEE CHEQUE; D. COPIES OF TDS CERTIFICATES IN RESPECT OF ALL THE PAYMENTS MADE TO SUB - CONTRACTOR; E. SAMPLE COPIES OF WORK ORDER ISSUED BY MCGM WHEREBY THE VERY SAME MATERIAL PURCHASED FROM THE SE PARTIES ARE CERTIFIED TO BE USED FOR GARD EN MAINTENANCE AND DEVELOPMENT.; F. THE SALES EFFECTED WERE CROSS LINKED WITH THE PURCHASES MADE. 4.1 THE LD. CIT(A) OBSERVED THAT THE AO HAD NOT DOUBTED THE SALES AND STOCK RECORDS MAINTAINED BY THE ASSESSEE. DURI NG THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAD FURNISHED COMPLETE QUANTITATIVE DETAILS OF THE ITEMS OF GOODS PURCHASE D DURING THE YEAR UNDER CONSIDERATION AND THERE CORRESPONDING CONSUMPTION FOR GARDEN MAINTENANCE AND DEVELOPMENT WORK. WHEN THE A SSESSEE WAS MAINTAINING THE QUANTITATIVE DETAILS ITEM - WISE, THE FACT THAT HE MUST HAVE PURCHASED THE SAID GOODS FROM THE PARTIES AND USED THEM FOR THE PURPOSE OF CONTRACT WORK CANNOT BE DENIED. HOWEVER, LOOKING TO THE FACTS THAT THE VARIOUS PARTIES WERE A LISTED BY THE SALES TAX DEPARTMENT AS SUSPICIOUS HAWALA DEALERS, THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE MIGHT HAVE EARNED A GROSS PROFIT OF 10% ON SALES OF TRADING ITEMS AND 12% ON GARDEN MAINTENANCE CONTRACT. ACCORDINGLY, SHE COMPUTED THE PROF IT ON THE TRANSACTION VIS - A - VIS PROFIT DECLARED BY THE ASSESSEE AND WORKED OUT THE DISALLOWANCE AS UNDER: ITA NO. 5220/MUM/2014 6 PARTICULAR S SALES/CONTRA CT AMOUNT (RS.) ESTIMATED G/P RATE (IN %) ESTIMATED G/P (RS.) G/P DECLARED (RS.) ADDITION TO BE CONFIRMED (RS.) GARDEN ITEMS TRADING 70,00,000/ - 10% 7,00,000/ - 3,33,342/ - 3,66,658/ - GARDEN MAINTENAN CE CONTRACT 19,17,67,357/ - 12% 2,30,12,083/ - 2,14,26,685/ - 15,85,398/ - TOTAL RS. 2,37,12,083/ - 2,17,60,027/ - 19,52,056/ - IN VIEW OF THE ABOVE, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE MADE BY THE AO OF BOGUS PURCHASE TO RS.19,52,056/ - AS AGAINST RS.13,10,07,905/ - MADE BY THE AO. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER DATED 16.01.2017 OF THE HONBLE SUPREME COURT IN THE CASE OF N.K. PROTEINS LTD. VS. DCIT [2017 - TIOL - 23 - SC - IT ]. THE LD. DR FURTHER SUBMITS THAT IN THE INSTANT CASE THE ASSESSEE HAS MADE BOGUS PURCHASES AND THE ORDER OF THE CIT(A) IS ERRONEOUS ON FACTS AS WELL AS IN LAW AND THE PRINCIPLE LAID DOWN IN N.K. PROTEINS LTD. (SUPRA) SQUARELY COVERS THE CASE OF THE R EVENUE. 6. ON THE OTHER HAND, THE LD. COUNSEL S OF THE ASSESSEE SUBMIT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS OF PURCHASES SUCH AS LEDGER ACCOUNT , COPY OF THE CONCERNED PARTIES IN BOOKS OF THE ASSESSEE ALONG WITH SAMPLE COPIES OF INVOICES ISSUED BY THE PARTIES AND BANK STATEMENTS IN WHICH PAYMENTS MADE TO THE PARTIES ARE DULY REFLECTED. THERE WAS NO FINDING OF THE AO THAT THE ASSESSEE HAD RECEIVED B ACK THE MONEY OR MONEYS WORTH BACK AGAINST THE PAYMENT MADE. THE SALES EFFECTED AND REVENUE SHOWN ITA NO. 5220/MUM/2014 7 WAS NOT DOUBTED. EVEN THE PARTIES ENLISTED ON SALES TAX WEBSITE HAVE NOT NAMED THE ASSESSEE. THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. THE LD. COUNSE L S FURTHER SUBMIT THAT SIMILARLY THE ASSESSEE HAD PAID SUB - CONTRACTOR CHARGES TO VARIOUS PARTIES IN RESPECT OF WHOM THE AO HAS MADE AN ADDITION OF RS.6,75,51,417/ - . IT IS SUBMITTED BY THEM THAT (I) THE ASSESSEE HAD DEDUCTED APPLICABLE TDS U/S 194C OUT OF T HE PAYMEN TS MADE TO THE SUB - CONTRACTORS, (II) THE ASSESSEE HAD CARRIED OUT THE WORK RELATING TO GARDEN DEVELOPMENT AND MAINTENANCE FOR BRIHA N MUMBAI MUNICIPAL CORPORATION (BMC) WH ICH IS A GOVERNMENT DEPARTMENT AND HENCE, THE SALES EFFECTED CANNOT BE QUESTIONED. 6.1 THE LD. COUNSEL OF THE ASSESSEE THUS SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). RELIANCE IS ALSO PLACED BY HIM ON THE ORDER OF THE ITAT A BENCH, MUMBAI IN THE CASE OF DCIT VRS. SHRI KISHORE KUMAR AGARWAL (ITA NO. 870 & 871/MUM/2015). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE BEGIN WITH THE 3 RD GROUND OF APPEAL. WE FIND THAT THE AO HAS MENTIONED AT THE BEGINNING OF HIS ASSESSMENT ORDER DATED 28.03.2013 THAT THE CASE WAS SE LECTED FOR SCRUTINY IN CASS AND NOTICES U/S 143(2) AND 142(1) WERE DULY ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES , SHRI RAJESH AGARWAL , CHARTERED ACCOUNTANT & SHRI KAMAL SHARMA , CHARTERED ACCOUNTANT FROM M/S SARA & ASSOCIATES, CHAR TERED ACCOUNTANTS ATTENDED AND FILED THE DETAILS CALLED FOR. THE AO HAS ALSO MENTIONED AT PAGE 12 OF THE ASSESSMENT ITA NO. 5220/MUM/2014 8 ORDER THAT THE ASSESSEE FILED CONFIRMATIONS IN REGULAR FORMAT ON 26.03.2013. THUS WE FIND THAT THE DOCUMENTS FILED BEFORE THE LD. CIT(A) WE RE AVAILABLE TO THE AO. WE FIND THAT THE LD. CIT(A) HAS ANALYSED THOSE DOCUMENTS AND ARRIVED AT A FINDING. THEREFORE, THERE IS NO VIOLATION OF RULE 46A (3) OF THE I.T. RULES 1962 BY THE LD. CIT(A). SO WE DISMISS THE 3 RD GROUND OF APPEAL. 7.1 NOW WE TURN TO THE 1 ST , 2 ND , & 5 TH GROUND OF APPEAL AS THE ADDRESS A COMMON ISSUE. WE NOW DISCUSS THE DECISION IN THE CASE OF N.K. PROTEINS LTD. (SUPRA) RELIED ON BY THE LD. DR. DURING THE COURSE OF SEARCH PROCEEDINGS AT THE OFFICER PREMISES OF N.K. PROTEINS LTD., BLA NKED SIGNED CHEQUE BOOKS AND VOUCHERS OF NUMBER OF CONCERNS WERE FOUND. ENDORSED BLANK CHEQUES OF N.K. PROTEINS LTD. BY THESE CONCERNS WERE ALSO FOUND FROM THE OFFICE PREMISES OF N.K. PROTEINS LTD. WHEREIN THE ENDORSEMENT WAS ON THE BACK OF THE CHEQUES. BL ANK BILL BOOKS, LETTER HEADS AND VOUCHERS OF THESE CONCERNS WERE FOUND AND SEIZED FROM THE FACTORY PREMISES OF N.K. PROTEINS LTD. PURCHASES MADE BY THESE CONCERNS HAVE BEEN TREATED BY THE AO AS BOGUS PURCHASES. HOWEVER, THE FACTS IN THE INSTANT CASE ARE DIFFERENT FROM THE CASE OF N.K. PROTEINS LTD. (SUPRA) . WE HAVE NARRATED THE FACTS OF THE PRESENT CASE EARLIER AT LENGTH. IN THE INSTANT APPEAL, DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO, THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS OF PURCHA SES SUCH AS LEDGER ACCOUNT, COPY OF THE CONCERNED PARTIES IN BOOKS OF THE ASSESSEE ALONG WITH SAMPLE COPIES OF INVOICES ISSUED BY THE PARTIES AND BANK STATEMENTS IN WHICH PAYMENTS ITA NO. 5220/MUM/2014 9 MADE TO THE PARTIES ARE DULY REFLECTED. THUS THE DECISION CITED BY THE LD. D R IS DISTINGUISHABLE. 7.2 IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTI RE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). WE FIND THAT THE LD. CIT(A) HAS RIGHTLY ESTIMATED AND RESTRICTED THE DISALLOWANCE TO RS.19,52,056/ - AS AGAINST RS.13,10,07,905/ - MADE BY THE AO. WE UPHOLD THE ORDER OF THE LD. CIT(A). THUS THE 1 ST , 2 ND , & 5 TH GROUND OF APPEAL ARE DISMISSED. 8. NOW WE TURN TO THE 4 TH GROUND OF APPEAL. THE ISSUE IS PENALTY IN RESPECT OF BREACH OF CONTRACT. THE HONBLE DELHI HIGH COURT IN CIT VS. LOKE NATH & CO (CONSTRUCTION) (1984) 147 ITR 624 HELD THAT THE AMOUNT PAI D TO MUNICIPALITY AS COMPENSATION FOR CONDONING DEVIATIONS OF ORIGINAL SANCTION AND ACCEPTING REVISED PLAN OF CONSTRUCTION IS DEDUCTIBLE AND IT IS NOT A PENALTY FOR INFRACTION OF LAW. IN CIT VS. INDO ASIAN SWITCH - GEARS (P.) LTD . (1996) 222 ITR 772, THE HO NBLE PUNJAB & HARYANA HIGH COURT HELD THAT PENALTY FOR LATE DELIVERY OF GOODS IS NOT ON ACCOUNT OF INFRACTION OF LAW AND THUS DEDUCTIBLE. WE FOLLOW THE ABOVE ITA NO. 5220/MUM/2014 10 DECISIONS AND UPHOLD THE ORDER OF THE LD. CIT(A). THE 4 TH GROUND OF APPEAL IS THUS DISMISSED. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 10/08/2017. SD/ - SD/ - (MAHAVIR SI NGH) (N.K. PRADHAN) J UDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/08/2017 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./ASSTT. REGISTRAR) ITAT, MUMBAI