DCIT 12(1)(2), MUMBAI V. BALAJEE INFRATECH & CONSTRUCTIONS PVT. LTD., MUMBAI

ITA 5226/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0411 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Bogus purchase; Opportunity of cross examination

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 5226/MUM./201 6 (ASSESSMENT YEAR: 2009 - 10 ) DCIT 12(1)(2) ROOM NO.223, 2 ND FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 . APPELLANT V/S M/S. BALAJEE INFRATECH & CONSTRUCTIONS PVT. LTD., 401 - 406, SAMRUDDHI COMP. OPP. MAGNUS TOWERS, CHINCHOLI BUNDER ROAD, MALAD (W) MUMBAI 400 064 PAN NO. AABCB3624M . RESPONDENT CO. NO.156/MUM./2017 (ASSESSMENT YEAR: 2009 - 10) ASSESSEE BY : NONE REVENUE BY : MS. POOJA SWAROOP DATE OF HEARING 08.08.2017 DATE OF ORDER - 11 .08 .2017 M/S. BALAJEE INFRATECH & CONSTRUCTIONS PVT. LTD., 401 - 406, SAMRUDDHI COMP. OPP. MAGNUS TOWERS, CHINCHOLI BUNDER ROAD, MALAD (W) MUMBAI 400 064 PAN NO. AABCB3624M . APPELLANT V/S DCIT 12(1)(2) ROOM NO.223, 2 ND FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 . RESPONDENT ITA NO. 5226/MUM/2016 & CO. NO.156/MUM/2017 M/S. BALAJEE INFRATECH & CONSTRUCTION PVT. LTD., 2 O R D E R PER: SHAMIM YAHYA THIS APPEAL BY THE REVENUE AND CO BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A) DATED 27/05/2016 AND PERTAIN TO A.Y.2009 - 10. 2. THE ISSUE RAISED IN REVENUES APPEAL IS THAT CIT(A) ERRED IN RESTRICTING DISALLOWANCE OF BOGUS PURCHASE OF RS.1,33,24,535/ - TO 8% WITHOUT ANY BA SIS. 3. THE ISSUE RAISED IN THE CROSS OBJECTION IS THAT CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF AN ADHOC AMOUNT OF RS.10,65,963/ - APPLYING AN ESTIMATED PERCENTAGE OF 8%. 4. BRIEF FACTS OF THE CASE ARE AS UNDER: - T HE ASSESSING OFFICER RECEIVED INFORMATION FROM INVESTIGATION WING THAT THE APPELLANT HAD INDULGED IN THE PRACTICE OF TAKING BOGUS PURCHASE BILLS AND ROUTING IT THROUGH THE BOOKS OF ACCOUNT FROM THE DETAILS SO RECEIVED IT WAS PERUSED BY THE ASSESSING OFFICER THAT THE APPELLANT HAD MADE BOGUS PURCHASE FROM FIVE PARTIES NAMELY M/S. S.S, ENTERPRISES, M/S. S.J . INTERNATIONAL, M/S. ADI JIN ENTERPRISES, M/S. SAI INTERNATIONAL IMPEX, AND M/S. CNS TRADE LINKS PVT. LTD. THE AMOUNT INVOL VED IN SUCH BOGUS PURCHASE WAS RS. 1,33,24,535/ - WHICH WAS ADD ED TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS THOUGH THE ASSESSEE HAS PRODUCED RELEVANT DOCUMENTS AND COPY OF LEDGER ACCOUNT CORRESPONDING TO SUCH PURCHASES BUT IT HAD FAILED TO PRODUCE THE PARTIES FOR ITA NO. 5226/MUM/2016 & CO. NO.156/MUM/2017 M/S. BALAJEE INFRATECH & CONSTRUCTION PVT. LTD., 3 CONFRONTATION. AN INDEPENDENT E NQUIRY CONDUCTED AND EFFORTS MADE BY THE A.O. ALSO REVEALED THAT THE PARTY WAS NON - EXISTENT. THE ASSESSING OFFICER THUS MADE AN AD DITION OF RS. 1,33,24,535/ - TREATING THE SAME AS BOGUS PURCHASES . 5. UPON ASSESSEES APPEAL, LEARNED CIT(A) RESTRICTED THE ADDITION TO 8% BY HOLDING AS UNDER: - 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS MADE IN THIS REGARD. IT IS NOTED THAT THE A.O. HAD MADE ADDITION OUT OF PURCHASE MADE BY THE ASSESSEE TO THE TUNE OF RS. 1,33,24,535/ - ON THE BASIS OF THE IN FORMATION RECEIVED FROM THE INVESTIGATION WING. THE A/R OF THE ASSESSEE HAS VEHEMENTLY OPPOSED THE ADDITIONS AND SUBMITTED THAT THE PURCHASES WERE GENUINE AND CONFIRMED THESE TRANSACTIONS. IT IS ALSO SUBMITTED THAT PAYMENT WAS ALL MADE THROUGH BANKING CHAN NEL AND THE DELIVERY OF MATERIALS WAS SUPPORT ED BY DELIVERY CHALLANS. IT IS S TATED THAT THE A.O. HAD MADE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING WITHOUT AFFORDING OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. IT IS NOTED THAT THE ENTIRE MATTER PERTAINS TO HAWALA PURCHASES FROM SO CALLED SUSPICIOUS DEALERS AS PER THE IN FORMATIO N RECEIVED FROM INVESTIGATION WING. THE A.O. HAS DISALLOWED THESE PURCHASES AS THE ASSESSEE COULD NOT PRODUCE THESE PARTIES FOR VERIFICATION. IT IS N OTED THAT PRIMARY ONUS TO ESTABLISH THAT THE PURCHASES WERE GENUINE WAS O N THE ASSESSEE. THE ASSESSEE IS ONLY PARTLY ABLE TO DISCHARGE THE COMPLETE ONUS. IT IS ALSO NOTED THAT A.O. HAS SIMPLY MADE ADDITION ORT THE BASIS OF STATEMENT WITHOUT MUCH ENQUIRY IN TO THE FACTS OF THE CASE. ON THE OTHER HAND ASSESSEE HAS FILED COPIES OF BILLS, BANK STATEMENT ETC: TO ESTABLISH THAT PURCHASES WERE GENUINE. ON THE FACE OF THESE EVIDENCES THE ENTIRE PURCHASES CANNOT BE HELD T O BE BOGUS MERELY ON THE BASIS OF A STATEMENT OF SELLER WHO WAS NEVER CROSS EXAMINED BY THE ASSESSEE. IT IS ALSO NOTED THAT THE ITEMS PURCHASED WERE USED AS INPUT INTO ASSESSEE'S PRODUCT FOR SALES WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. 4.4 IT IS NOTED THAT ONLY PROFIT ELEMENT IS LIABLE TO TAX IN SUCH CASES AS WAS HELD IN T HE CASE OF: 1 CIT VS. BHOLANATH POLY FAB LTD. (2013) 355 ITR 290 (GUJ). (HC) 2. CITVSIMITP. SHETH(2013) 356 (TR 451 (GUJ) (HC ) 3. CIT VS. SANJAY OIL CAKE INDUSTRIES (2009) 316 I TR 274 (GUJ) (HC) 4. ITO VS. PERMANAND (2007) 107 TTJ 395 (JD)(TRIB;); 5. SHRI MADHUKANT B. GANDHI VS. ITO ITA NO. 1950/IVL/2009 BENCH 'B' DT. 23 - 02 - 2010 (AY 2005 - 06) (MUM.)(TRIB.) ITA NO. 5226/MUM/2016 & CO. NO.156/MUM/2017 M/S. BALAJEE INFRATECH & CONSTRUCTION PVT. LTD., 4 6. SANJEEV WOOLEN MILLLS VS. CIT (2005) 279 ILK 434 (SC) 4. 5 IN VIEW OF THE ABOVE DISCUSSION IT IS SEEN THAT THE ADDITION MADE BY THE A.O. ON ACCOUNT OF ALLEGED BOGUS PURCHASE CANNOT BE SUSTAINED FULLY IN APPEAL. HAVING REGARDS TO FACTS OF THE CASE IT WOULD BE FAIR AND REASONABLE IF THE ADDITION MADE BY A.O. IS RE STRICTED TO G.P. ADDITION OF 8% ON THE ALLEGED BOGUS PURCHASE OF RS. 1,33,24,53 5/ - WHICH COMES TO RS. 10,65,963 / - . THE AO IS DIRECTED TO RESTRICT THE ADDITION TO RS. 10,65,963/ - ON THIS ISSUE . 6. AGAINST THE ABOVE ORDER REVENUE HAS FILED APPEAL AND ASSESSEE HAS FILED CROSS OBJECTION. 7. WE HAVE HEARD LEARNED DR AND PERUSED THE RECORDS . A N ADJOURNMENT PETITION HAS BEEN MOVED BY THE ASSESSEE SUBMITTING THAT THE AR IS TRAVELLING OUT OF MUMBAI, HENCE , ADJOURNMENT MAY BE GRANTED. WE FIND THAT THE ISSUE IN THIS APPEAL PERTAINS TO BOGUS PURCHASES AND THE CASES HAVE BEEN FIXED OUT OF TURN AS SEVERAL SUCH CASES HAVE ALREADY BEEN DISPOSED OF BY THE TRIBUNAL. MOREOVER, WE DO NOT FIND THE REASONING COGENT FO R SEEKING ADJOURNMENT, HENCE THE SAME HAS BEEN REJECTED. 8. UPON CAREFUL CONSIDERATION WE FIND THAT IN THIS CASE OVERWHELMING EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THE CONCERNED PURCHASE S ARE BOGUS. COGENT INFORMATION HAS BEEN RECEIVED FROM THE MAHARASH TRA SALES TAX DEPARTMENT THAT THE SUPPLIERS HAVE ADMITTED THAT THEY WERE SUPPLYING BOGUS BILLS. THE ASSESSING OFFICER ALSO HAS ALSO MADE ENQUIRIES. NO RESPONSE TO HIS NOTICES CAME FROM THE SUPPLIERS. 9. UPON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, WE FIND THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THERE IS NO EVIDENCE OF THE ACTUAL MOVEMENT ITA NO. 5226/MUM/2016 & CO. NO.156/MUM/2017 M/S. BALAJEE INFRATECH & CONSTRUCTION PVT. LTD., 5 OF THE GOODS UNDER DISPUTE. IN THESE CIRC UMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT , ORDER DT 20/06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WA S HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE H ONOURABLE APEX COURT VIDE ORDER DT 16 . 1 . 2017 . 10. HOWEVER , WE NOTE THAT DISMISSAL OF A SPECIAL LEAVE PETITION SIMPLY WITHOUT ANY SPEAKING ORDER, D OES NOT MERGE THE ORDER OF THE H ONOURAB LE HIGH COURT WITH THAT OF THE H ONOURABLE APEX COURT. FURTHERMORE , WHEN SALES ARE NOT DOUBTED HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE IS NOT POSS IBLE. THIS HAS BEEN SO HELD BY H ONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER WE ALSO NOTE THAT FACTS OF THE CASE BEFORE THE JURISDICTIONAL HIGH COURT WERE DIFFERENT FROM THAT IN THE PRESENT CASE. FACTS OF THE PRESENT CASE CLEARLY INDICATE THAT ASSESSEE HAS ENGAGED IN TRANSACTION IN THE GREY MARKET. MAKING TRANSACTIONS IN THE GREY MARKET GIVES THE ASSESSEE SAVINGS OF TAXES ETC AT THE EXPENSE OF EXCHEQUER. IN SIMILAR SI TUATION FOLLOWING THE HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF SIRNIT P SETH DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASE HAS BEEN FOUND TO BE MEETING THE END OF JUSTICE IN A NUMBER OF CASES AT THE MUMBAI TRIBUNAL. THE LEARNED CIT - A HAS ALSO RE FERRED TO THIS DECISION IN HIS ORDER. ITA NO. 5226/MUM/2016 & CO. NO.156/MUM/2017 M/S. BALAJEE INFRATECH & CONSTRUCTION PVT. LTD., 6 11. ACCORDINGLY , WE MODIFY THE ORDER OF LEARNED CIT - A AND HOLD THAT THE DISALLOWANCE IN THIS CASE SHOULD BE MADE AT THE RATE OF 12.5% OF THE BOGUS PURCHASE. 12. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 1 .0 8 .2017 S D / - S D / - SANDEEP GOSAIN SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 1 .08 .2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI