ASHTAVINAYAK CONSTRUCTION, NAVI MUMBAI V. JCIT CIR. 22(3), MUMBAI

ITA 5367/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9254 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 31-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDHYADHAR
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Assessment record
• Section: 143(3)

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5367 / MUM/201 6 ( / ASSESSMENT YEAR : 20 10 - 11 ) M/S ASHTAVINAYAKA CONSTRUCTION, PLOT NO. R - 478, TTC INDUSTRIAL AREA, MIDC, RABALE, NAVI MUMBAI 400 701. / V. JCIT RANGE 22(3), MUMBAI . ./ PAN : AADFA 1724 G ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI VIDHYADHAR, D.R. / DATE OF HEARING : 31.08./2017 / DATE OF PRONOUNCEMENT : 25.09.2017 / O R D E R PER RAMIT KOCHAR, A CCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 5367 /MUM/201 6 , IS DIRECTED AGAINST THE APPELLATE ORDER DATED 03.06.2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 26 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 20 10 - 11 , APPELLATE PROCEEDINGS BEFORE LEARNED CIT(A) HAS ARISEN FROM THE PENALTY ORDER DATED 30.09 .2013 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 271(1)(C) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER C ALLED THE ACT) . ITA 5367/ MUM/201 6 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. THE LD. CIT(A) HAS ER RED IN CONFIRMING THE ACTION OF A.O OF LEVYING PENALTY OF RS. 8,56,765/ - IN RESPECT OF DISALLOWANCE OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS. 27,72,702/ - . THE SAID PENALTY MAY PLE ASE BE DELETED. 3. THE B RIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE IS BUILDER AND DEVELOPER AND IS ENGAGED IN THE BUSINESS OF SETTING UP POWER T RANSMISSION LINES, SUB - STATIONS, ET C . . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S 143(3) OF THE ACT FOR IMPUGNED ASSESSMENT YEAR . T HE ASSESSEE HA D SHOWN TURNOVER OF RS. 25.95 CRORES WITH GROSS PROFIT DECLARED OF RS . 7.94 CRORES AND NET PROFIT OF RS. 3.14 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) , THE A.O. HAD ENQUIRED FROM THE ASSESS E E WITH RESPECT TO CERTAIN GOODS PURCHASED FROM THE FOUR P ARTIES WHOSE NAME AND VAT/TIN NUMBERS WERE MATCHING WITH THE LIST OF SUSPICIOUS DEALERS AS PUBLISHED ON VAT WEBSITE BY MAHARASHTRA SALES TAX DEPARTMENT . THE NAME OF THE SAID FOUR PARTIES WHOSE NAMES APPEARED IN WEBSITE OF MAHARASHTRA SALES TAX WEBSITE AS SUSPICIOUS DEALERS, ARE AS UNDER: - NAME OF THE SUPPLIER PURCHASES DURING THE YEAR 1. DHRUV SALES CORPORATION RS. 7,65,847/ - 2. NIDHISH IMPEX PVT. LTD. RS. 10,24,145/ - 3. TORAL ENTERPRISES RS. 4,67,460/ - 4. TULSIANI TRADING PVT. LTD. RS. 5,15,250/ - RS. 27,72,702/ - ============== THE ASSESSEE SUBMITTED THAT THE AFORESAID PURCHASES WERE GENUINE PURCHASES AND THE MATERIAL SO PURCHASED WAS RECEIVED AND UTILIZED BY THE ASSESSEE . ITA 5367/ MUM/201 6 3 HOWEVER, THE A.O. CONCLUDED THAT S INCE THE ABOVE PURCHASES WERE FROM PERSONS WHO HAVE DEPOSED BEFORE THE MAHARASHTRA SALES T AX AUTHORITIES THAT THEY INDULGED IN ISSUING BOGUS ACCOMMODATION BILLS AND HAVE NOT DELIVERED ANY MATERIAL PHYSICALLY , THE ABOVE AMOUNT I.E. RS.27,72,702/ - WAS DISALLOWED BY THE AO AS BOGUS PURCHASES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO , VIDE ASSESSMENT ORDER DATED 20 - 3 - 2013 PASSED BY THE AO U/S 143(3) . PENALTY PROCEEDINGS WERE ALSO INITIATED BY THE AO U/S. 271(1)(C) OF THE ACT . 4. DURING THE COURSE OF PENALTY PROCEEDINGS U/S 271(1)(C) , T HE ASSESSEE SUBMITTED THAT THE PURCHASES WERE GENUINE AND THE MATERIAL WAS RECEIVED AND UTILIZED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE . IT WAS SUBMITTED THAT THE LIST PUBLISHED BY THE MAHARASHTRA SALES TAX AUTHORI TIES WAS SUBJECT TO OBJECTIONS RAISED BY THE PARTIES . THUS, I T WAS NOT CONFIRMED THAT THE SUPPLIERS WERE NOT GENUINE , HENCE, THE DISALLOWANCE WAS STATED BY THE ASSESSEE AS MADE BY THE AO TO BE ITSELF INCORRECT AND THE ASSESSEE PRAYED THAT PENALTY BE NOT LEVIED ON THE ASSESSEE U/S 271(1)(C). THE A.O. REJECTED THE CONTENTION S OF THE ASSESSE E AND OBSERVED THAT THE ASSESSEE HAS NOT PROVED THE ACTUAL DELIVERY OF GOODS FROM THE PURCHASER S AND ALSO THE ASSESSEE COULD NOT PROVE UTILIZATION OF MATERIAL REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AO OBSERVED THAT N O SUPPORTING D OCUMENTS PERTAINING TO THE DELI VERY OF GOODS SUCH AS DELIVERY CHALLAN, PLACE OF DELIVERY, LORRY RECEIPT WERE SUBMITTED BY THE ASSESSEE AND MERELY BILLS ISSUED BY THE SAID PARTY W AS SUBMITTED . THUS, THE A.O. CONCLUDED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME ON ACCOUNT OF ADDITION MADE IN THE ASSESSMENT ORDER TO THE TUNE OF RS. 27,72,702/ - ON ACCOUNT OF BOGUS PURCHASES AND THE AO LEVIED PENALTY OF RS. 8,56, 765/ - U/S 271(1)(C) OF THE ACT VIDE PENALTY ORDERS DATED 30 - 09 - 2013 . ITA 5367/ MUM/201 6 4 5. AGGRIEVED BY THE PENALTY ORDER DATED 30 - 09 - 2013 PASSED BY THE AO U/S 271(1)(C) , THE ASSESSEE FILED FIRST APPEAL WITH LEARNED CIT(A) WHICH STOOD DISMISSED BY LD. CIT(A) AND PENALTY ORDER PASSED BY THE AO STOOD UPHELD . BEFORE THE LD. CIT(A) THE ASSESSEE RAISED CONTENTION THAT THE A.O. HAS NOT CATEGORICALLY MENTIONED AS TO WHICH LIMB THE NOTICE WAS ISSUED I.E WHETHER IT IS ISSUED FOR CONCEALMENT OF INCOME OR FOR FURNISHI NG OF THE INACCURATE PARTICULARS OF INCOME, HENCE, IT WAS CLAIMED THAT ASSESSMENT ORDER OF THE A.O. IS BAD IN LAW AS THE ASSESSEE WAS NOT NOTIFIED BY THE AO AS TO SPECIFIC OFFENCE FOR WHICH THE ASSESSEE WAS CHARGED BY AO U/S 271(1)(C) . IT WAS ALSO SUBMIT TED THAT THE A .O. HAS NOT BROUGHT ON RECORD ANY EVIDENCE THAT THE ASSESSEE HAS RECEIVED BACK THE SAID AMOUNT. IT WAS SUBMITTED THAT ACCEPTED REALITY WAS ALWAYS THAT THE PURCHASES HAS BEEN CERTAINLY MADE, BUT THAT BILLS WERE RECEIVED FROM ONE VENDOR ALTHOUG H THE SUPPLIES WERE RECEIVED FROM ANOTHER PARTY, THROUGH SOME INTERMEDIARY AND IN MOST OF THE CASES EITHER THE ADDITIONS WERE DELETED OR CERTAIN PROFIT WAS ASSESSED @12.5% WHICH WAS BROUGHT TO TAX BY APPELLATE AUTHORITIES . IT WAS SUBMITTED THAT NO OPPORTU NITY FOR CROSS EXAMINATION WAS GIVEN TO THE ASSESSEE AND RULES OF NATURAL JUSTICE WERE FLOUTED . THE ASSESSEE RELIED UPON LARGE NUMBER OF CASES WHICH ARE MENTIONED IN THE APPELLATE ORDER PASSED BY LEARNED CIT(A) ON PAGE 3 AND 4. THE LD. CIT(A) REJECTED T HE SUBMISSION OF THE ASSESSEE BY RELYING UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SMT. KAUSHALYA AND OTHERS, (1995) 216 ITR 660 (BOM) AND UPHELD THE ACTION OF THE A.O. CONFIRMING THE LEVYING OF PENALTY U/S 271(1)(C). THE LEARNED CIT(A) RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (306 ITR 277) AND ATUL MOHAN BINDAL (317 ITR 1) TO HOLD THAT PENALTY IS CIVIL LIABILITY AND MENS REA AND WILLFUL CONCEALMENT IS NOT ESSENTIAL INGREDIENTS TO BE ESTABLISHED BEFORE LEVYING PENALTY U/S 271(1)(C). THE LEARNED CIT(A) DISTINGUISHED THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013) 92 DTR 111(KAR. HC) ITA 5367/ MUM/201 6 5 AND RELIED UPON DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF SMT KAUSHALYA DEVI(SUPRA) . THE LD. CIT(A) OBSERVED THAT IT IS AN ADMITTED FACT BY THE ASSESSEE THAT THE PURCHASES HAVE BEEN CERTAINLY MADE , BUT THAT THE BILLS WERE RECEIVED FROM ONE VENDOR ALTHOUGH THE SUPPLIES WERE RECEIV ED FROM ANOTHER PARTY , THROUGH SOME INTERMEDIARY . IT WAS ALSO OBSERVED BY LEARNED CIT(A) FROM PERUSAL OF ASSESSMENT RECORDS THAT THE ASSESSEE NEVER ASKED FOR ANY CROSS EXAMINATION DURING ASSESSMENT PROCEEDINGS OR PENALTY PROCEEDINGS . IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE THE DELIVERY OF GOODS. NO DOCUMENTS HAVE BEEN FURNISHED WITH RESPECT TO DELIVERY OF GOODS SUCH AS DELIVERY CHALLANS, LORRY RECEIPTS ETC NOR UTILIZATION /CONSUMPTION OF MATERIAL STOOD PROVED BY THE ASSESSEE . THE LEARN ED CIT(A) RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA PRIVATE LIMITED REPORTED IN 1 SCC 674. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS ONLY GIVEN NAME OF THE SUPPLIERS AND AMOUNT OF PURCHASES BUT HAS NOT GIVEN THE ADDRESSE S OF THESE FOUR SUPPLIERS FROM WHOM PURCHASES TO THE TUNE OF RS. 27,72,702/ - WERE ALLEGEDLY MADE BY THE ASSESSEE. IT WAS OBSERVED BY LEARNED CIT(A) THAT T HE OTHER DETAILS SOUGHT BY THE AO W.R.T. THESE PURCHASES WERE ALSO NOT FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS NOT FURNISHED COPIES OF DELIVER Y CHALLANS, PAYMENT SLIPS NOR IT WAS SHOWN THAT PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE TO THESE ALLEGED SUPPLIERS. THUS, THE LD. CIT(A) CONFIRMED THE PENALTY ORDER PASSED BY THE AO WHEREIN PENALTY OF RS. 8,56 ,765/ - LEVIED BY THE AO U/S 271(1)(C) OF THE 1961 ACT WAS CONFIRMED BY LEARNED CIT(A), VIDE APPELLATE ORDERS DATED 03 - 06 - 2016 PASSED BY LEARNED CIT(A) . 6. AGGRIEVED BY THE APPELLATE ORDER DATED 03 - 06 - 2016 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED SEC OND APPEAL BEFORE THE T RIBUNAL. ITA 5367/ MUM/201 6 6 7 . AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE, HENCE, WE PROCEED TO DISPOSE OF THE APPEAL BASED UPON THE MATERIAL AVAILABLE ON RECORD AFTER HEARING LD. D.R. 8 . THE LD. D.R. RELIED ON THE APPELLATE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE PURCHASES AMOUNTING TO RS. 27,72,702/ - MADE BY THE ASSESSEE WERE FROM PERSONS WHO HAVE DEPOSED BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE INDULGED ONLY IN ISSUING BOGUS ACCOMMODATION BILLS AND HAVE NOT DE LIVERED ANY MATERIAL . 9 . WE HAVE HEARD LD. D.R. AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD . WE HAVE OBSERVED THAT THE ASSESSE IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER AND IS SETTING UP POWER TRANSMISSION LINES, SUB STATIONS ETC. . TH E ASSESSEE HAD A TURNOVER OF RS. RS. 25.95 CRORES AGAINST WHICH THE GROSS PROFIT DECLARED WAS RS. 7.94 CRORES AND NET PROFIT WAS RS. 3.14 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) , THE A.O. OBSERVED THAT AS PER THE LIST UPLOADED ON THE VAT WEBSITE , THE ASSESSEE HAD PURCHASED MATERIAL TO THE TUNE OF RS. 27,72,702/ - FROM FOUR PARTIES DETAILED BELOW WHO HAVE DEPOSED BEFORE THE MAHARASHTRA SALES T AX AUTHORITIES THAT THEY ARE HAWALA DEALERS WHO HAVE INDULGED ONLY IN ISSUING BOGUS ACCOMMODA TION BILLS WITHOUT PHYSICALLY DELIVERING ANY MATERIAL . THE DETAILS OF SAID FOUR PARTIES AND AMOUNT OF ALLEGED BOGUS PURCHASES ARE AS UNDER: NAME OF THE SUPPLIER PURCHASES DURING THE YEAR 1. DHRUV SALES CORPORATION RS. 7,65,847/ - 2. NIDHISH IMPEX PVT. LTD. RS. 10,24,145/ - 3. TORAL ENTERPRISES RS. 4,67,460/ - 4. TULSIANI TRADING PVT. LTD. RS. 5,15,250/ - RS. 27,72,702/ - ITA 5367/ MUM/201 6 7 ============== THE AS SESSEE CONTENDED THAT THE PURCHASES WERE GENUINE PURCHASES AND THE MATERIAL SO PURCHASED HAD BEEN UTILIZED/CONSUMED FOR ASSESSEES BUSINESS. THE ASSESSEE COULD NOT FURNISH DETAILS OF MOVEMENT OF GOODS SUCH AS DELIVERY CHALLANS, LORRY RECEIPT WHICH COULD E VIDENCE MATERIAL FROM THE PLACE OF SELLERS TO THE ASSESSEES PREMISES. THE ASSESSEE ALSO COULD NOT PRODUCE ANY EVIDENCES FOR CONSUMPTION/ UTILIZATION OF THE SAID MATERIAL . THE ASSESSEE COULD NOT PRODUCE EVIDENCES OF MAKING PAYMENT FOR THESE ALLEGED BOGUS PURCHASES THROUGH ACCOUNT PAYEE CHEQUES. THE SAID FOUR PARTIES HAVE DEPOSED BEFORE MAHARASHTRA SALES TAX A UTHORITIES THAT THE SAID PARTIES WERE MERELY ISSUING BOGUS ACCOMMODATION BILLS WITHOUT SUPPLYING ANY MATERIAL AND WERE ALLEGED HAWALA OPERATORS. THE S AID INFORMATION WAS OBTAINED BY THE AO FROM WEB SITE OF MAHARASHTRA SALES TAX DEPARTMENT. IT IS PERTINENT TO MENTION HERE THAT NO INDEPENDENT ENQUIRY HAS BEEN MADE BY THE A.O. WITH THESE PARTIES AS IS EMERGING FROM RECORDS . IN - FACT THE ASSESSEE ALSO DID NO T DISCHARGE ITS PRIMARY ONUS AS IT DID NOT SUPPLY ADDRESSES OF THESE FOUR PARTIES TO THE AO AND COULD NOT REBUT THE INCRIMINATING INFORMATION WITH THE AO AS DETAILED ABOVE BY US . THE A.O., HAD RELIED UPON THE STATEMENT WHICH HAS BEEN GIVEN BY THESE PARTIE S BEFORE MAHARASHTRA SALES TAX AUTHORITIES ABOUT THEIR INVOLVEMENT IN ACCOMMODATION HAWALA ENTRIES . WE HAVE OBSERVED THAT NO CROSS EXAMINATION WAS ALLOWED OF THE SAID FOUR PARTIES TO THE ASSESSEE DESPITE THE ASSESSEE BRINGING ON RECORD HIS GRIEVANCES BEF ORE LEARNED CIT(A) THAT THE ASSESSEE WAS NOT ALLOWED CROSS EXAMINATION AS IS EMANATING FROM THE APPELLATE ORDER OF LEARNED CIT(A) BUT AT THE SAME TIME THE ASSESSEE HAS ALSO NOT FURNISHED ADDRESSES OF THESE FOUR PARTIES NOR PROOF OF MOVEMENT OF GOODS FROM S ELLING PARTIES TO THE ASSESSEE IS BROUGHT ON RECORD . AT THE SAME TIME THE ASSESSEE HAS ALSO ADMITTED THAT IN THESE CASES SUPPLIES ARE OBTAINED FROM ONE VENDOR AND INVOICES ARE OBTAINED FROM OTHER VENDOR BUT THE MATERIAL WAS PURCHASED WHICH WAS UTILIZED/CON SUMED FOR BUSINESS WHEREIN ADDITIONS HAVE EITHER BEEN DELETED OR PROFIT@12.5% WAS BROUGHT TO TAX ON THESE ALLEGED ITA 5367/ MUM/201 6 8 BOGUS PURCHASES BY APPELLATE AUTHORITIES . UNDER THE SE PECULIAR FACTUAL CIRCUMSTANCES AND MATRIX OF THE CASE AS NARRATED ABOVE , WE ARE OF THE VIEW THAT THE ASSESSEE DESERVES ONE MORE OPPORTUNITY AND THE MATTER /ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE AO FOR DE - NOVO DETERMINATION OF THE ISSUE OF LEVIABILITY OF PENALTY U/S 271(1)(C). TH E ASSESSEE BE ALLOWED TO RAISE ALL CONTENTIONS BOTH ON MERITS AND ON LAW BEFORE THE AO WHICH ARE KEPT OPEN, WHICH SHALL BE ADJUDICATED DE - NOVO BY THE AO ON MERITS IN ACCORDANCE WITH LAW. THE AO SHALL ALSO BE FREE TO MAKE ANY ENQUIRY/VERIFICATION AS HE MAY DEEM W.R.T. PURCHASES FROM THESE FOUR PARTIES. THE AO SHALL ALLOW THE ASSESSEE TO FILE ALL NECESSARY AND RELEVANT EVIDENCES AND EXPLANATIONS IN REMAND PROCEEDING WHICH SHALL BE ADMITTED BY TH E AO IN THE INTEREST OF JUSTICE . THE AO SHALL PROVIDE TO THE ASSE SSEE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. 10 . IN THE RESULT, APPEAL OF THE A SSESSEE I N ITA NO. 5367 /MUM/201 6 FOR ASSESSMENT YEAR 20 10 - 11 IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPTEMBER, 2017 . 25.09.2017 SD/ - SD/ - ( SAKTIJIT DEY ) ( RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 25.09.2017 [ ITA 5367/ MUM/201 6 9 . . ./ R.K. , EX. SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED , MUMBAI 4. / CIT - CONCERNED , MUMBAI 5. , , / DR, ITAT, MUMBAI G BENCH 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI