M/S.VALSON FABRICATORS, MUMBAI V. ITO 28(3)(4), MUMBAI

ITA 5292/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3654 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R BOOPATHI
• Assessee Lawyers: NEHA PARANJAPE
• Keywords: Bogus purchase; Principle of natural justice; Set aside
• Section: 143(3); 133(6); 201; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI G. MANJUNATHA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5292 /MUM/2018 ASSESSMENT Y EAR: 2010 - 11 M/S VALSONS FABRICATORS, PLOT NO. 85, MIDC THANE BELAPUR ROAD, TTC INDUSTRIAL AREA , NAVI MUMBAI - 400701 PAN: AACFV5519P VS. THE ITO - 28(3)(4), TOWER NO. 6, VASHI STATION COMPLEX, VASHI, NAVI MUMBAI - 400703 (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. NEHA PARANJAPE ( A R ) REVENUE BY : SHRI R. BOOPATHI (D R ) DATE OF HEARING: 30/09 /201 9 DATE OF PRONOUNCEMENT: 30 / 09 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 25.06.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 26 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR S HORT THE ACT). BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALING IN ROLL FORMING MACHINERY AND DIES ETC., FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 2,17,660/ - . THE RETURN WAS PROCESSED U/S 143(3) OF THE ACT. SUBSEQUENTLY, IN THE YEAR 2015 THE AO RECEIVED INFORMATION FROM SALES TAX DEPARTMENT MAHARASHTRA THROUGH DGIT (INVESTIGATION) TO THE EFFECT THAT THE ASSESSEE DURING THE YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER CONSIDERATION OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 8,41,933/ - FROM FIVE PARTIES, WHOSE WERE LISTED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT, WITHOUT 2 ITA NO. 5292 / MUM/2018 ASSESSMENT YEAR: 2010 - 11 PURCHASING GOODS FROM THEM. ON THE BASIS OF THE SAID INFORMATION, THE AO REOPENED THE ASSESSMENT U/S 147 OF THE ACT AFTER ISSUING NOTICE U/S 148 OF THE ACT. THEREAFTER , THE AO ISSUED NOTICES U/S 143 ( 2) AND 142(1 ) OF THE ACT. IN RESPONSE THERE OF THE ASSESSEE SUBMITTED THE DETAILS AND CONTENDED THAT IT HAD MADE GENUINE PURCHASE S FROM THE SAID PARTIES. IN ORDER TO VERIFY THE GENUINENESS OF TRANSACTIONS, AO ISSUED NOTICE TO THE PARTIES CONCERNED U/S 133(6) OF THE ACT. HOWEVER, THE NOTICES WERE RECEIVED BACK UN - SERVED. THE AO REJECTED THE CLAIM OF THE ASSESSEE TREATED THE PURCHASES AS BOGUS AND ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.10,59,590/ - . IN THE FIRST APPEAL THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL AND CONFIRMED THE ADDITION MADE BY THE AO. AGAINST THE S AID FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2. AGGRIEVED BY THE ORDER OF LD. CIT (APPEAL S ), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITIONS OF RS. 8,41,933/ - . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING RE - ASSESSMENT. 3. ADDITION ON ACCOUNT OF BOGUS PURCHASES RS. 8,41,933/ - 3.1 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THAT THE ASSESSEE HAS MADE BOGUS PURCHASES BY COMPLETELY IGNORING VARIOUS DOCUMENTARY EVIDENCES SUBMITTED IN SUPPORT OF THE PURCHASES. 3.2 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS BY NOT APPRECIATING THE DOCUMENTARY EVIDENCES IN SUPPORT OF THE PURCHASES MADE AND CONSUMPTION. 3.3 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS NOT APPREC IATED THE FACT THAT LEARNED ASSESSING OFFICER 3 ITA NO. 5292 / MUM/2018 ASSESSMENT YEAR: 2010 - 11 HAS VIOLATED PRINCIPLES OF NATURAL JUSTICE FOR NON - SHARING OF THE INFORMATION ON WHICH HE HAS RELIED. 3.4 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS BY CONFIRMING ADDITIONS @ 100 % OF THE ALLEGED PURCHASES WITHOUT DOUBTING SALES ARISING OUT OF THE SAID PURPOSES. 4 WITHOUT PREJUDICE TO ABOVE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS FAILED TO APPRECIATE THAT ASSESSING OFFICER HAS RESTRICTED THE ADDITION AT 25% IN THE SUBSEQUENT ASSESSMENT YEAR AND HENCE ADDITION BE RESTRICTED TO 25% OF THE ALLEGED PURCHASES IN THE YEAR UNDER APPEAL. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT SINCE THE AO HAD MADE ADDITION OF THE TOTAL AMOUNT OF ALLEGED BOGUS PURCH ASES WITHOUT TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE IN THE LIGHT OF THE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES IN QUESTION, THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION. THE LD. COUNSEL FURTHER POINTED OUT THAT AO HAS NOT REJECTED THE SALES MADE BY THE ASSESSEE BUT, REJECTED THE PURCHASES IGNORING THAT THERE CANNOT BE ANY SALE WITHOUT PURCHASES. THE ASSESSEE APART FROM THE DETAILS OF THE WHEREABOUTS OF THE PARTIES, HAS FURNISHED T HE COPIES OF INVOICES, PAYMENT DETAILS AND STATEMENT OF BANK ACCOUNT BEFORE THE AUTHORITIES BELOW IN ORDER TO ESTABLISH THE GENUINENESS OF TRANSACTION OF PURCHASES. THE LD. COUNSEL FURTHER POINTED OUT THE ASSESSEE IN ORDER TO BUY PEACE AND AVOID LITIGATION MADE AN ALTERNATIVE SUBMISSION BEFORE THE LD. CIT(A) TO MAKE ADDITION OF 25% BASED ON GROSS PROFIT RATIO, WHICH WAS ALSO NOT TAKEN INTO CONSIDERATION. THE LD. COUNSEL FURTHER SUBMITTED THAT IN VIEW OF THE AFORESAID FACTS, THE ADDITION MAY BE DELETED OR IN ALTERNATIVE A REASONABLE PERCENTAGE OF THE TOTAL AMOUNT OF BOGUS PURCHASED MAY BE ADDED TO THE TOTAL INCOME. 4. ON THE OTHER HAND, THE LD DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE TRANSACTION, THE LD. CIT(A) HAS RIGHTLY DISMISSED THE APPEAL OF THE ASSESSEE AND 4 ITA NO. 5292 / MUM/2018 ASSESSMENT YEAR: 2010 - 11 CONFIRMED THE ADDITION MADE BY THE AO. THE LD DR FURTHER SUBMITTED THAT THE FINDINGS OF THE LD. DR ARE BASED ON THE EVIDENCE ON RECORD AND IN ACCORDANCE WITH THE PROVISIONS OF LAW, THEREFORE THE APPEAL OF THE ASSESSEE DESERVES DISMISSAL BEING DEVOID OF ANY MERIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND CAREFULLY GONE THROUGH THE RELEVANT MATERIAL ON RECORD IN THE LIGHT OF THE CONTENTIONS OF THE PARTIES. WE ARE CONVINCED FROM THE MATERIAL ON RECORD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES IN QUESTION BY ADDUCING COGENT AND CONVINCING EVIDENCE. THE NOTICES I SSUED BY THE AO WERE RECEIVED BACK UN - SERVED. THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES BEFORE THE AO FOR VERIFICATION. HENCE, IN OUR CONSIDERED VIEW, THE AO HAS RIGHTLY CONCLUDED THAT THE ASSESSEE HAS NOT MADE THE QUESTIONED PURCHASES FROM THE PARTI ES MENTIONED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER, THE AO HAS NOT REJECTED THE SALE OF THE GOODS SO PURCHASED. THE ABOVE - MENTIONED FACTS GIVE RISE TO THE CONCLUSION THAT THE ASSESSEE HAD PURCHASED THE GOODS IN QUESTION FROM GREY MARKET AND EVAD ED THE TAX APPLICABLE DURING THE RELEVANT PERIOD. UNDER THESE CIRCUMSTANCES, THE AO HAD NO OPTION BUT TO MAKE AN ADDITION ON ESTIMATION BASIS CONSIDERING THE APPLICABLE RATE OF VAT OR OTHER TAXES AND THE PROFIT EMBEDDED IN THE SAID TRANSACTION. BUT, HE INS TEAD OF DOING SO, MADE ADDITION OF THE ENTIRE AMOUNT IN QUESTION TO THE INCOME OF THE ASSESSEE. IN THE FIRST APPEAL THE LD. CIT(A) AFFIRMED THE FINDINGS OF THE AO. 6. THE LD CIT(A) HAS CONFIRMED THE ADDITION MAINLY ON THE GROUND THAT THE ASSESSEE HAS FAILE D TO DISCHARGE HIS ONUS OF PROVING THE GENUINENESS OF THE PURCHASES MADE FROM THE FIVE HAWALA PARTIES . THE HONBLE GUJARAT HIGH COURT IN THE CASE CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) , WHILE DEALING WITH THE SIMILAR ISSUE, HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE TRIBUNAL, HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE ORDER PASSE D BY THE LD. CIT(A) IS NOT BASED ON THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE SAID CASE. HENCE, WE ARE OF THE CONSIDERED VIEW THAT 5 ITA NO. 5292 / MUM/2018 ASSESSMENT YEAR: 2010 - 11 THE FINDINGS OF THE LD. CIT(A) ARE NOT SUSTAINABLE IN LAW AS 100% ADDITION IS NOT JUSTIFIED IN THE LIGHT OF THE RATIO OF LAW LAID DOWN BY THE HONBLE GUJ A RAT HIGH COURT DISCUSSED ABOVE. WE, THEREFORE, FIND MERIT IN THE ASSESSEES APPEAL. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT (A) AND PARTLY ALLOW THE APPEAL AND DIRECT THE AO TO MAKE A DDITION OF 12.5% OF THE TOTAL AMOUNT OF QUESTIONED PURCHASES. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 20 11 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEP T , 2019 . SD/ - SD/ - ( G. MANJUNATHA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 30 / 0 9 / 201 9 ALINDRA, PS / 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./A SSTT. REGISTRAR) , / ITAT, MUMBAI