IMPERIAL IMP & EXP, MUMBAI V. ITO 20(1)(5), MUMBAI

ITA 5427/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3461 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 24-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Bogus purchase
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 5427/MUM/2015 (ASSESSMENT YEAR : 2009-10) M/S. IMPERIAL IMP & EXP. BUILDING NO.3, 10 TH FLOOR, BLOCK NO.30, NAVJEEVAN SOCIETY, LAMINGTON ROAD, MUMBAI 400 008 ... APPELLANT PAN:AABFI 7409L VS. THE ITO 20(1)(5), PIRAMAL CHAMBERS, MUMBAI. .... RESPONDENT APPELLANT BY : SHRI BHUPENDRA SHAH RESPONDENT BY : SHRI O.P.MEENA DATE OF HEARING : 22/02/2016 DATE OF PRONOUNCEMENT : 18/03/2016 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRE CTED AGAINST THE ORDER OF THE CIT(A)-32, MUMBAI DATED 23/10/2015 PE RTAINING TO THE ASSESSMENT YEAR 2009-10, WHICH IN TURN HAS ARISEN F ROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 16/03/2015 UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2 ITA NO. 5427/MUM/2012 (ASSESSMENT YEAR : 2009-10) 2. IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SUBSTANTIVE GRIEVANCE IS AGAINST THE ACTION OF THE CIT(APPEALS) IN CONFIRMING AN ADDITION OF RS.4,19,3 56/- BEING ESTIMATED PROFIT ON UNEXPLAINED PURCHASES. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELL ANT IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF CONSUMER CLOTHING. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 WA S FILED BY THE ASSESSEE DECLARING A TOTAL INCOME OF RS.3,49,320/-, WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT, WHEREBY THE TOTAL INCOME WAS ASSESSED AT RS.3,66,344/-. SUBSEQ UENTLY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 O F THE ACT ON 06/03/2014 REOPENING THE ASSESSMENT ON THE GROUND T HAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IN AS MUCH AS, ASSESSEE HAD TAKEN ACCOMMODATION PURCHASE BILLS FRO M FOUR PARTIES, TOTALLING TO RS.77,51,496/-. IN THE ENSURING ASSES SMENT, THE ASSESSING OFFICER HAS HELD THAT PURCHASES DECLARED BY THE ASS ESSEE OF RS.77,51,496/- FROM FOUR PARTIES, DETAILED IN PARA -1 OF THE ASSESSMENT ORDER ARE BOGUS PURCHASES. ACCORDING TO THE ASSE SSING OFFICER, ASSESSEE DID NOT MAKE ACTUAL PURCHASES FROM SUCH FO UR PARTIES BECAUSE AS PER THE INFORMATION RECEIVED FROM THE INVESTMENT WING, THE FOUR PARTIES IN QUESTION WERE FOUND TO HAVE BEEN VAT DOD GERS BY THE MAHRASHTRA VAT DEPARTMENT. THE ASSESSING OFFICER N OTED THAT SINCE SALES HAVE BEEN EFFECTED BY THE ASSESSEE, WHICH SH OWED THAT ASSESSEE WAS ACTUALLY IN POSSESSION OF GOODS, THE MATERIAL WOULD HAVE BEEN PROCURED FROM GREY MARKET WITHOUT BILLS IN ORDER TO COVER UP THE PURCHASES, AND THUS ASSESSEE WOULD HAVE TAKEN ACCOM MODATION BILLS 3 ITA NO. 5427/MUM/2012 (ASSESSMENT YEAR : 2009-10) FOR PURCHASES FROM THE SAID FOUR PARTIES AMOUNTING TO RS.77,51,496/-. ACCORDINGLY, THE ASSESSING OFFICER BROUGHT TO TAX T HE PROFIT MARGIN IN RELATION TO SUCH NON-GENUINE PURCHASES, WHICH HE CO MPUTED BY APPLYING THE RATE OF 12.5% ON THE TOTAL AMOUNT OF R S.77,51,496/-, WHICH CAME TO RS.9,68,937/-. 3.1 THE PLEA OF THE ASSESSEE BEFORE THE ASSESSIN G OFFICER AS WELL AS BEFORE THE CIT(APPEALS) WAS THAT THE PURCHA SES IN QUESTION WERE DULY SUPPORTED BY THE BILLS OF PURCHASE. MOREOVER, THE ASSESSEE POINTED OUT THAT ALL ITS SALES WERE BY WAY OF EXPOR TS AND THAT THERE WAS NO EVIDENCE TO SAY THAT THE PURCHASES IN QUESTION WERE BOGUS. THE ASSESSEE ALSO REFERRED TO HIS BANK STATEMENT TO PRO VE PAYMENTS TO SUCH PARTIES. THE DETAILS OF GOODS SOLD BY THE ASSESSEE WAS ALSO FURNISHED, WHICH CORRESPONDED TO THE PURCHASES EFFECTED FROM S UCH FOUR PARTIES. THE CIT(APPEALS) HAS PRIMARILY AFFIRMED THE STAND OF THE ASSESSING OFFICER BASED ON THE INFORMATION STATED TO HAVE BEE N RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT RELATING TO T HE FINDING OF THE MAHARASHTRA VAT DEPARTMENT. ADDITIONALLY, THE CIT( APPEALS) ALSO NOTICED THAT ASSESSEE COULD NOT PROVE THE EXISTENC E OF THE SUPPLIERS AND, THEREFORE, THE CIRCUMSTANTIAL EVIDENCE ALSO S UGGESTED THAT THE ENTIRE PURCHASES FROM THE FOUR PARTIES WAS UNVERIFI ABLE. HOWEVER, HE RESTRICTED THE ADDITION TO 5.41% OF THE AMOUNT OF S UCH UNEXPLAINED PURCHASES, INSTEAD OF 12.5% ADOPTED BY THE ASSESSIN G OFFICER. THE CIT(APPEALS) HAS APPLIED THE RATE OF 5.41% BEING TH E GROSS PROFIT RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ACC ORDINGLY, OUT OF AN ADDITION OF RS.9,68,937/- MADE BY THE ASSESSING OFF ICER, THE 4 ITA NO. 5427/MUM/2012 (ASSESSMENT YEAR : 2009-10) CIT(APPEALS) RETAINED AN ADDITION OF RS.4,19,356/- AND DELETED THE BALANCE. 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS VEHEMENTLY POINTED OUT THAT THE ENTIRE SALES OF THE ASSESSEE ARE BY WAY OF EXPORTS AND, THEREFORE, THERE WAS NO LIABILITY T OWARDS SALES TAX ON THE PURCHASES EFFECTED BY IT. IT WAS ALSO CONTENDED TH AT THOUGH THE ASSESSING OFFICER HAS REFERRED TO THE FOUR PARTIES HAVING BEEN LISTED AS HAWALA OPERATORS BY THE SALES TAX DEPARTMENT OF T HE GOVERNMENT OF MAHARASHTRA, BUT THERE IS NO CLEAR EVIDENCE TO SUGG EST THAT THE TRANSACTION WITH THE ASSESSEE WERE BOGUS. IT IS PO INTED OUT THAT IN THE CASES OF SOME OTHER ASSESSEES, UNDER IDENTICAL CIRC UMSTANCES, THE CO- ORDINATE BENCHES OF THE TRIBUNAL HAVE DELETED THE A DDITIONS. IN THIS CONNECTION, RELIANCE HAVE BEEN PLACED ON THE FOLLOW ING DECISIONS:- (1) ITO VS. SHRI DEEPAK POPATLAL GALA INITANO.5920/ MUM/2013 (A.Y 2010-11) DATED 27/03/2015; (2)RAMESH KUMAR AND CO. V/S. ACIT IN ITA NO.2959/MU M/2014 (A.Y. 2010-11) DATED 28/11/2014; (3)DCIT V/S. SHRI RAJEEV G. KALATHIL IN ITA NO.6727 /MUM/2012 (A.Y.2009-10) DATED 20/08/2014; (4)SHRI GANPATRAJ A. SANGHAVI V/S. ACIT IN ITA NO.2 826/MUM/2013 (A.Y.2009-10) DATED 5/11/2014; AND (5) SHRI HIRALAL CHUNILAL JAIN VS. INCOME TA X OFFI CER IN NO.4547/MUM/2014 DATED 01/01/2016. ON THIS BASIS, THE PLEA OF THE ASSESSEE IS THAT TH E ENTIRE ADDITION IS LIABLE TO BE DELETED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BY PO INTING OUT THAT THE ADDITION HAS BEEN MADE ON ACCOUNT OF THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHT RA AND NO EFFORT HAS BEEN MADE BY THE ASSESSEE TO CONTROVERT SUCH IN FORMATION. 5 ITA NO. 5427/MUM/2012 (ASSESSMENT YEAR : 2009-10) 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ENTIRE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT PUR CHASES FROM FOUR PARTIES NAMELY DHRUV SALES CORPORATION - RS.13,67,6 40/-; SUBHLAXMI SALES CORP. - RS.20,20,800/-; DHARSHAN SALES CORPOR ATION -RS.9,64,656/-; AND PARAS (INDIA)- RS.33,98,400, TOTALLING TO RS. 77,51,496/- HAVE BEEN TREATED TO BE BOGUS BASED ON THE PURPORTED ENQUIRIE S CONDUCTED BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHT RA. OSTENSIBLY, THE ASSESSING OFFICER OUGHT TO HAVE BROUGHT ON RECO RD MATERIAL WHICH IS RELEVANT TO THE TRANSACTIONS OF THE ASSESSEE WITH T HE AFORESAID FOUR PARTIES INSTEAD OF MAKING A GENERAL OBSERVATION ABO UT THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF THE GOVE RNMENT OF MAHARASHTRA. QUITE CLEARLY, THE ASSESSING OFFICER AS WELL AS CIT(APPEALS) HAVE TAKEN NOTE OF THE FACT THAT NO S ALES COULD HAVE BEEN EFFECTED BY THE ASSESSEE WITHOUT PURCHASES. IN TH E PRESENT CASE, ASSESSEE HAS EXPLAINED THAT ALL ITS SALES ARE BY WA Y OF EXPORTS. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE SHOW P AYMENT FOR EFFECTING SUCH PURCHASES BY ACCOUNT PAYEE CHEQUES AND ALSO THE VOUCHERS FOR SALE AND PURCHASE OF GOODS, ETC. NOTA BLY, NO INDEPENDENT ENQUIRIES HAVE BEEN CONDUCTED BY THE ASSESSING OFF ICER. UNDER IDENTICAL CIRCUMSTANCES, OUR CO-ORDINATE BENCHES IN THE CASES OF DEEPAK POPATWALA GAL (SUPRA), SHRI RAJEEV G. KALATH IL(SUPRA)AND RAMESH KUMAR AND CO.(SUPRA) HAVE HELD THAT THE A SSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS MERELY ON TH E BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA WITHOUT CONDUCTING ANY IN DEPENDENT ENQUIRIES. BEFORE THE CIT(APPEALS), ONE OF THE POI NTS RAISED BY THE ASSESSEE WAS WITH RESPECT TO AN OPPORTUNITY TO CRO SS EXAMINE THE FOUR 6 ITA NO. 5427/MUM/2012 (ASSESSMENT YEAR : 2009-10) PARTIES, BUT WE FIND THAT NO SUCH OPPORTUNITY HAVE BEEN ALLOWED. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE AFORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED UNDE R IDENTICAL CIRCUMSTANCES, IN OUR VIEW, THE CIT(APPEALS) ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS.4,19,356/- INSTEAD OF DELETING THE ENTIRE ADDITION OF RS.9,68,937/- MADE BY THE ASSESSING OF FICER. WE DIRECT ACCORDINGLY. 7. SINCE THE ASSESSEE FIRM HAS SUCCEEDED ON MERITS OF THE ADDITION, THE OTHER GROUND RAISED BY THE ASSESSEE CHALLENGING THE INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IS REN DERED ACADEMIC AND IS NOT BEING ADJUDICATED FOR THE PRESENT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 18/03/20 16. SD/- SD/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 18/03/2016 VM , SR. 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./ASSTT. REGISTRAR) ITAT, MUMBAI