KAUSHIK N. TANNA, MUMBAI V. ACIT 18(2),

ITA 5439/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8608 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 5439 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2010 - 11 ) SHRI KAUSHIK N. TANNA, 15 - C/25, 3 RD FLOOR, SHANKAR BARI LANE, CHIRA BAZAR, MUMBAI - 400002 VS. THE ASST. COMMISSIONER OF INCOME TAX - 18 (2), MUMBAI ./ ./ PAN/GIR NO . : AAAPT 7941 B ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SH. BHARAT KUMAR (AR) / RE VENUE BY : SH. SAURABH KUMAR RAI (DR) / DATE OF HEARING : 10 /08 /2017 / DATE OF PRONOUNCEMENT : 09 / 11 / 2017 / O R D E R PER RAM LAL NEGI, JM THIS APPEA L HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 25/07/2016 PASSED BY THE LD. CIT (A) - 29 , MUMBAI PERTAI NING TO THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PROPRIETORSHIP CONCERN ENGAGED IN THE BUSINESS OF EXPORT AND TRADING OF FABRICS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON DECLARING THE TOTAL INCOME OF RS. 25,50,958/ - . THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. LATER ON, THE ASSESSMENT WAS RE - OPENED U/S 147 OF THE ACT ON THE BASIS OF INFORMATION 2 ITA NO. 5439 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 RECEIVED FROM THE DIT ( INV.), DELHI TO THE EFFECT THAT DURING THE FINAN CIAL YEAR RELEVANT TO THE ASSESSME N T YEAR UNDER CONSIDERATION , T HE ASSES SEE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 4,49,12,169/ - FROM M/S CITYBASE MULTI - TRADE PVT. LTD. AND M/S SIDDHPAD TRADING PVT. LTD. ACCORDINGLY, NOTICE U/S 148 WAS SERVED U PON THE ASSESSEE , T HEREAFTER, NOTICE U/S 143(2) AND 142 (1) WERE ISSUED. IN RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND FURNISHED THE COPIES OF INVOICES/BILLS, DETAILS OF PAYMENTS MADE AND BANK STATEMENTS SHOWI NG PAYMENTS. THE ASSESSEE FURTHER SUBMITTED THAT THE PURCHASES WERE GENUINELY MADE. IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTION AO ISSUED NOTICES U/S 133 (6) OF THE ACT TO THE SAID PARTIES, HOWEVER, NO RESPONSE WAS RECEIVED FROM THE PARTIES. THE ASSESSEE ALSO FAILED TO PRODUCE THE SUPPLIERS BEFORE THE AO. THE ASSESSEE ALSO FAILED TO SUBMIT DELIVERY CHALLAN OR ANY SUBSTANTIAL PROOF OF PURCHASES IN QUESTION. 3. SINCE, THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS THE TRANSACTION, THE AO MADE AD DITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A) IN THE FIRST APPEAL. THE LD. CIT (A) AFTER HEARING THE ASSESSEE, RELYING ON THE VARIOUS JUDICIAL PRONO UNCEMENTS AND DECISION OF THE VARIOUS BENCHES OF THE ITAT CONFIRMED THE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER. 4. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROU ND OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE RE - ASSESSMENT PROCEEDING U/S 147 INITIATED BY THE LD. ASSESSING OFFICER. 3 ITA NO. 5439 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 2. ON THE FACTS AND C IRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) FAILED TO CONSIDER THAT REASSESSMENT PROCEEDING CANNOT BE INITIATED: - A) NO REASSESSMENT CAN BE MADE JUST TO MAKE AN ENQUIRY OR VERIFICATION. B) REASSESSMENT PROCEEDING CANNOT BE INITIATE MERELY ON T HE INFORMATION RECEIVED FROM INVESTIGATION WING. C) REASSESSMENT PROCEEDING CANNOT BE INITIATED WHEN THE LD. AO HAVE REASON TO SUSPECT AND NOT REASON TO BELIEVE. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ASSESSMENT ORDER PASSED BY LD. AO U/S 143(3) OF INCOME TAX ACT, WHICH IS PASSED AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A) ERRED IN CONFIRMING AND TREATING THE GENUINE PURCHASES OF RS. 4, 49,12,169/ - FROM SIDDHPAD TRADING PVT. LTD. AND CITYBASE MULTITRADE PVT. LTD. AS BOGUS PURCHASES AND ADDED RS. 56,14,021/ - TO TOTAL INCOME BEING THE G.P. @ 12.5% ON THE PURCHASES OF RS. 4,49,12,169/ - FROM THESE PARTIES, WITHOUT ANY BASIS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF ESTIMATED AD - HOC GROSS PROFIT @ 12.5% ON TURNOVER MERELY ON ASSUMPTION BASIS WITHOUT CONSIDERING THE FACTS THAT DEFECT WERE POINTED OUT IN BOOKS OF ACCO UNT. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE RE - ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT INITIATED BY THE ASSESSING OFFICER. THE LD. CIT (A) HAS FAILED TO CONSIDER THAT REASSESSMENT PROC EEDINGS CANNOT BE INITIATED MERELY ON THE INFORMATION RECEIVED FROM INVESTIGATION WING . REASSESSMENT PROCEEDINGS CAN BE INITIATED 4 ITA NO. 5439 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 ONLY IF THE AO HAS REASON TO BELIEVE THAT CERTAIN INCOME HAS ESCAPED ASSESSMENT. SO FAR AS CONFIRMATION OF ADDITION TO THE EXT ENT OF 12.5% IS CONCERNED, LD. COUNSEL SUBMITTED THAT SINCE THE ASSESSEE HAS FURNISHED THE COPIES OF INVOICES/BILLS, DETAILS OF PAYMENTS MADE AND BANK STATEMENTS SHOWING PAYMENTS , THE LD. CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION MADE BY THE AO. THE L D. COUNSEL RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) SUBMITTED THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. RELYING ON THE VARIOUS JUDGMENTS/ DECISION S THE ASSESSEE SUBMITTED THAT THE FACT THAT THE PAYMENTS WERE MADE BY ACCOUNT PAYEES CHEQUE, WOULD OVER SHADOW ALL OTHER SHORTCOMINGS ; S INCE, THE AO H AS NOT FOUND ANY DEFECT IN BOOKS OF ACCOUNT THE ADDITION CANNOT BE MADE ON THE BASIS OF SURMISES; P URCHASE FROM GRAY MARKET IS AN ASSUMPTION AND ADDITION CANNOT BE MADE ON THE BASIS OF ASSUMPTION ; A DDITION CANNOT BE MADE ON THE BASIS OF THIRD PARTY STATEME NTS. THEREFORE, THE CIT (A) HAS WRONGLY SUSTAINED THE ADDITION OF 12.5%. THE LD. COUNSEL FURTHER SUBMITTED THAT ASSESSEE HAS ALSO FILED CROSS OBJECTION . 6. 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 PURCHASES, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION OF 12.5% OF THE AMOUNT OF BOGUS PURCHASE TO THE INCOME OF THE ASSESSEE. TH E FINDINGS OF THE LD. CIT(A) IS IN ACCORDANCE WITH THE DECISIONS OF VARIOUS COURTS AND THE ITAT. HENCE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH THE SAME. 5 ITA NO. 5439 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ENTIRE RECORD AND ALSO GONE THROUGH THE CASES RELIED UPON BY THE AUTHORITIES BELOW AS WELL AS REFERRED BEFORE US BY THE PARTIES . THE ASSESSEE HAS BASICALLY CHALLENGED THE ASSESSMENT ORDER ON TWO GROUNDS I.E. 1 ) THE LD. CIT (A) HAS WRONGLY UPHELD THE REOPENING OF THE AS SESSMENT BY THE AO AND 2 ) THAT THE LD. CIT (A) HAS WRONGLY SUSTAINED THE ADDITION OF 12.5% OF THE AMOUNT OF BOGUS PURCHASES . 8. SO FAR AS THE FIRST ISSUE IS CONCERNED THE REQUIREMENT OF SECTION 147 OF THE ACT IS THAT IF THE ASSESSING OFFICER HAS REASON T O BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT HE MAY ASSESS OR REASSESS SUCH INCOME. HENCE, REASON TO BELIEVE IS MORE IMPORTANT THAT THE SOURCE OF INFORMATION. IF THE AO HAS REASON TO BELIEVE FROM ANY INFORMATION RECEIVED OR OTHERWISE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, AO CAN EXERCISE POWERS UNDER SECTION 147 OF THE ACT. IN INCOME TAX OFFICER V S. PURUSHOTTAM DAS BANGUR AND ANOTHER 224 ITR 362, THE HONBLE SUPREME COURT HAS HELD THAT ITO WAS JUSTIFIED IN REOPENING THE ASSESSMENT U/S 147(B) ON THE BASIS OF LETTER WRITTEN BY DY. DIRECTOR OF INSPECTION (INVESTIGATION) TO JURISDICTIONAL IAC CONTAINING RELEVANT FACTS AND INFORMATION. IN THE SAID CASE, NOTICE WAS ISSUED BY THE ITO ON THE BASIS OF LETTER/INFORMATION RECEIVED FROM DDI (INV.) WITHOUT CONDUCTING ANY FURTHER INVESTIGATION. THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF T HE CASE REFERRED ABOVE. SINCE, THE FINDINGS OF THE LD. CIT(A) IS IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE AFORESAID JUDGMENT , WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DISMISS GROUND NO 1 TO 3 OF THE APPEAL. 9. SO FAR AS THE SECOND ISSUES IS CONCERNED, WE AGREE WITH THE AUTHORITIES BELOW THAT THE ASSESSEE HAS PURCHASED THE GOODS IN QUESTION FROM GRAY MARKET WITHOUT PAYING THE VAT WHICH WAS OTHERWISE REQUIRED TO BE PAID. HENCE, IN OUR 6 ITA NO. 5439 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 CONSIDERED OPINION, FINDINGS OF THE LD CIT(A) IS WELL REASONED AND IN ACCORDANCE WITH THE PRINCIPLES OF LAW LAID DO WN BY THE COURTS AND THE ITAT . THE LD. CIT(A) HAS SUSTAINED THE ADDITION TAKING INTO CONSIDERATION THE ESTIMATED PROFIT EARNED BY THE ASSESSEE BY PURCHASING THE GOODS FROM THE PARTIES OTHER THAN THE PARTIES MENTIONED IN THE BOOKS OF ACCOUNT OR FROM GREY MA RKET. T HE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) , WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL, HAS OBSERVED THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COU LD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. SO, WE HOLD THAT THE ASSESSEE HAS EVADE VAT BY PURCHASING THE GOODS IN QUESTION FROM GREY MARKET AND OBTAINING ACCOMMODATION ENTRIES. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SI MIT P. SETH 356 ITR 451(GUJ) HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, FOLLOWING THE PRIN CIPLES OF LAW LAID DOWN BY THE HONBLE HIGH COURTS OF BOMBAY AND GUJARAT AFORESAID , WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS GROUND NO 4 AND 5 OF APPEAL OF THE ASSESSEE . WE ACCORDINGLY, DIRECT THE AO TO MAKE ADDITION @ 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 11 IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 09 / 11 / 2017 ALINDRA, PS 7 ITA NO. 5439 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 / 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, MU MBAI