JAGDISH P. JAIN, MUMBAI V. INCOME TAX OFFICER-19(2)(1), MUMBAI

ITA 5467/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2802 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN ADD
• Assessee Lawyers: K TULSIAN
• Keywords: Bogus purchase; Tangible material
• Section: 143(3); 133(6); 143(2); 13; 145(3); 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 5467/MUM/2019 (ASSESSMENT YEAR 2011-12 ) JAGDISH P. JAIN ROOM NO. 9, 1 ST FLOOR, 68, TODKART HOUSE, 1 ST KUMBHARWADA, MUMBAI- 400004. PAN: AFIPJ6569C VS. ITO 19(2)(1) ROOM NO. 218, 2 ND FLOOR, MATRU MANDIR ROAD, MUMBAI-400007. APPELLANT RESPONDE NT APPELLANT BY : SHRI K. TULSIAN (AR) RESPONDENT BY : MOHAMMED RIZWAN (ADD. CIT) DATE OF HEARING : 05.03.2020 DATE OF PRONOUNCEMEN T : 05.03.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-30, MUMBAI DATED 18.07.2019 FOR ASSESSMENT YEAR 2011-12 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINI NG THE ASSUMPTION OF JURISDICTION UNDER SECTION 147/148 BY HOLDING THAT IT IS BASED ON DEFINITE INFORMATION/ MATERIAL AS WELL AS NOTICE ISSUED U/S 148. 2. WHETHER THE LD. CIT(A) WAS JUSTIFIED BY NOT AFFO RDING A PROPER OPPORTUNITY OF HEARING EVEN SHOT BY APPLICATION FOR ADJOURNMENT ON 11.07.2019 WHEREAS THE ORDER HAS BEEN PASSED ON 18.07.2019. 3. WHETHER THE LD. CIT(A) WAS JUSTIFIED BY NOT AFFO RDING A PROPER OPPORTUNITY OF HEARING FOR THE ENHANCEMENT AND EXERCISED HER JURIS DICTION CONTRARY TO THE MANDATE OF THE LAW AND IN THE INTEREST OF NATURAL J USTICE. ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 2 4. WHETHER THE LD. CIT (A) WAS JUSTIFIED IN SUSTAIN ING THE ASSUMPTION OF JURISDICTION UNDER SECTION 147/148 AS NO COPY OF TH E REASONS RECORDED BY THE LD. A.O WAS PROVIDED TO THE ASSESSEE. MOREOVER, NOTHING ABOUT THE SERVICE OF COPY OF REASONS RECORDED APPEARS IN THE BODY OF ASSESSME NT ORDER. 5. WHETHER THE LD. CIT (A) WAS JUSTIFIED BY UPHOLDI NG AN IMPUGNED ASSESSMENT ORDER IS JUSTIFIED AND VALID AS THE ASSUMPTION OF J URISDICTION U/S 147/148 IS NOT BASED UPON THE PIECE OF INFORMATION AND NO ANY TANG IBLE MATERIAL WAS BROUGHT ON RECORD. 6. WHETHER THE LD. CIT (A) WAS JUSTIFIED BY UPHOLDI NG THE ORDER OF LD. A.O. IN ARBITRARY MANNER WITHOUT APPRECIATING THE JUSTIFICA TION FILED BY THE APPELLANT, TOWARDS NOTICE U/S 133(6) IF NOT SERVED BY ANY REAS ONS, NO OCCASION TO DRAW ADVERSE OPINION DESPITE THE FACTS NO DISPUTE ON THE EVIDENCES FILED. 7. WHETHER THE LD. CIT (A) WAS JUSTIFIED BY UPHOLDI NG THE ADDITIONS MADE BY THE LD. AO AMOUNTING TO RS. 24,01,718/- I.E. @12.5% OF PURCHASES AS THE SAME ARE UNLAWFUL, ON SURMISES AND UNJUSTIFIED AND NOT BASED ON ANY TANGIBLE MATERIAL/EVIDENCE. 8. WHETHER THE LD. CIT (A) WAS JUSTIFIED BY ENHANCI NG THE ADDITIONS FROM 12.5% OF PURCHASES AS MADE BY THE LD. AO TO 100% OF PURCH ASES WITHOUT BRINGING ANY TANGIBLE MATERIAL/EVIDENCE ON RECORD AND SOLELY BAS ED ON SURMISES AND HIS OWN ASSUMPTIONS AND PRESUMPTIONS. 9. WHETHER THE LD. CIT (A) WAS JUSTIFIED BY UPHOLDI NG THE ACTION OF THE LD. A.O. WHO EXERCISED POWER U/S 145(3) AND REJECTED THE BOO KS OF ACCOUNTS WITHOUT PINPOINTING ANY SPECIFIC DEFECT/IRREGULARITIES. 10. THAT THE LD. CIT (A) HAS ERRED IN UPHOLDING THE ASSESSMENT ORDER IN TERMS OF LEVYING OF INTEREST U/S 2346 AND 234C OF THE ACT WH ICH IS CONTRARY TO THE LAW. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS/ TRADING OF FERROUS AND NON-FERROUS METALS, FILED H IS RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON 23.09.2011 DECLARING INC OME OF RS. 3,95,057/-. THE RETURN OF INCOME WAS PROCESSED UNDE R SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE B ASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MA HARASHTRA THAT ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 3 CERTAIN HAWALA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPA RTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALER S AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSES SEE APPEARED IN THE LIST OF BENEFICIARY. ON THE BASIS OF INFORMATION, T HE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED AS SESSMENT, THEREFORE, RE- OPENED THE ASSESSMENT UNDER SECTION 147. THE NOTICE UNDER SECTION 148 DATED 04.11.2014 WAS SERVED UPON THE ASSESSEE. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN THE PURCHASES FROM FOLLOWING 14 PARTIES OF RS . 1,92,13,747/-, WHICH WERE DECLARED AS HAWALA DEALERS BY THE SALE TAX DEP ARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTY BILL AMOUNT (RS.) 1 SHAKTI TRADING 680,860 2 ANMOL INDUSTRIES 896,583 3 LIBERTY TRADING CORPORATION 122,097 4 GLOBAL TRADE IMPEX 454,384 5 ATLAS INTERNATIONAL (I) 3,128,262 6 SEEMANT TRADING CO. 9,316 7 UNICORN ENTERPRISE 1,459,875 8 PREMIER ENTERPRISE 1,852,820 9 NIRMA METAL INDUSTRIES 369,058 10 AARCO ENTERPRISES 171,131 11 NIMESH STEELS PVT. LTD. 1,608,625 12 RED ROSE STEELS PVT. LTD. 2,011,671 ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 4 13 MICO STEELS 2,524,165 14 JAY IMPEX 3,924,900 TOTAL 1,92,13,747 3. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSA CTION OF PURCHASES, ISSUED NOTICE UNDER SECTION 133(6) TO ALL THE TRADERS FROM WHOM THE ASSESSEE HAS SHOWN PURCHASE. THE NOTICE SENT THROUGH REGISTERED POST WAS RETURNED BACK WITH THE REMARK LEFT. THE ASSESSEE WAS ASKED TO S HOW-CAUSE AS TO WHY THE PURCHASES SHOWN FROM ALL THE PARTIES SHOULD NOT BE TREATED AS NON- GENUINE. THE ASSESSEE IN ORDER TO SUBSTANTIATE THE PURCHASES STATED THAT THE GOODS WERE DELIVERED BY THE SAID PARTIES AND ARE RE FLECTED IN THE BOOKS OF ACCOUNT. THE PAYMENTS WERE MADE THROUGH CHEQUES ONL Y. THE ASSESSEE FURNISHED THE BOOKS OF ACCOUNT, PURCHASES BILLS. T HE ASSESSING OFFICER AFTER CONSIDERING THE REPLY OF ASSESSEE, COPIES OF BILLS AND ON THE BASIS OF REPORT OF INVESTIGATION WING OF SALE TAX DEPARTMENT DISALLOWED 12.5% OF AGGREGATE OF PURCHASES SHOWN FROM THE SAID HAWALA P ARTIES IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 DATED 15.03.2016. THE ASSESSING OFFICER WHILE MAKING THE DISALLOWANCE S OBSERVED THAT HONBLE GUJARAT HIGH COURT IN CASE OF SIMITH P. SET H (356 ITR 451HELD THAT ONLY PROFIT ELEMENT IN THE IMPUGNED PURCHASES IS LIABLE TO BE DISALLOWED. 4. ON APPEAL BEFORE THE LD. CIT(A), THE RE-OPENING UND ER SECTION 147 WAS UPHELD AND THE ADDITION/DISALLOWANCE OF BOGUS PU RCHASES WAS ENHANCE TO ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 5 100%. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A) , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. A R OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) PASSED THE ORDER EX-PAR TE WITHOUT GIVING FAIR AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THE NOTICES OF HEARING WERE SENT VIA EMAIL. IN RESPONSE TO THE NOTICE DATE D 26.09.2019 SENT VIA E- MAIL FOR FIXING HEARING ON 11.07.2019, THE ASSESSEE REQUESTED FOR ADJOURNMENT. THE LD. CIT(A) NEITHER ADJOURNED THE H EARING NOR ISSUED FURTHER NOTICE TO THE ASSESSEE. THE ORDER WAS PASSE D EX-PARTE. NO NOTICE OF ENHANCEMENT UNDER SECTION 251(1)(A) OF INCOME-TAX A CT, WAS ISSUED TO THE ASSESSEE. LAST NOTICE WHICH WAS RESPONDED BY ASSESS EE WAS ONLY FOR 11.07.2019 AND NO FURTHER NOTICE WAS RECEIVED BY TH E ASSESSEE. THE LD. CIT(A) ENHANCE THE ADDITION TO 100% OF THE ALLEGED BOGUS PURCHASES. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE LD CIT(A) P ASSED THE IMPUGNED ORDER WITHOUT PROVIDING FAIR AND OPPORTUNITY. 6. THE ASSESSEE IS DEALING IN FERROUS AND NON-FERROUS METALS WHEREIN PROFIT MARGIN IS VERY LOW. THE LD. AR OF THE ASSESSEE FURT HER SUBMITS THAT THE ASSESSEE HAS GOOD CASE ON MERIT AND LIABLE TO BE SU CCEEDED IN CASE THE ASSESSEE IS GIVEN OPPORTUNITY OF HEARING ON MERIT A T THE STAGE OF FIRST APPELLATE AUTHORITY (FAA). THE LD. AR OF THE ASSESS EE PRAYED FOR RESTORING ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 6 THE MATTER TO THE FILE OF LD. CIT (A) FOR DECISION ON ALL GROUNDS OF APPEAL AFRESH ON MERIT AFTER AFFORDING THE OPPORTUNITY OF HEARING. 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. DR SUBMITS THAT ASSESSEE WAS GIVEN NOTICE THROUGH EMAIL. THE ASSESSEE HAS INTENTIONALLY AND DELIBERATELY NOT ATTENDED THE PROCEEDING BEFORE THE LD. CIT(A) KNOWING FULLY WELL THAT THE A SSESSEE HAS NO GOOD CASE ON MERIT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE REPRESENTATIVES OF THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES. IN THE RE-ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IDENTIFIED THE P URCHASES SHOWN FROM 14 PARTIES, WHICH WERE DECLARED AS HAWALA DEALERS BY S TATE GOVERNMENT. THE ASSESSING OFFICER MADE THE ADDITION @ 12.5% OF THE ALLEGED BOGUS PURCHASES BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT IN SIMITH P. SETH (SUPRA). ON APPEAL BEFORE THE LD. CI T(A), RE-OPENING UNDER SECTION 147 WAS UPHELD AND THE ADDITION OF BOGUS PU RCHASES WAS ENHANCED TO 100%. 9. WE HAVE NOTED THAT IN PARA-4.1 OF THE IMPUGNED ORDE R, THE LD. CIT(A) HAS RECORDED THAT FIRST NOTICE OF HEARING DATED 22.01.2 019 WAS ISSUED THROUGH EMAIL FOR HEARING ON 05.02.2019. THE ASSESSEE SOUGH T ADJOURNMENT ON THAT DAY. IT IS FURTHER RECORDED THAT ANOTHER NOTICE DA TED 26.06.2019 FOR FIXING THE DATE OF HEARING ON 11.07.2019 WAS ALSO SENT VIA EMAIL. THE ASSESSEE RESPONDED IN RESPONSE TO THE HEARING FIXED ON 11.07 .2019. THE LD. CIT(A) ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 7 RECORDED THAT ASSESSEE AGAIN SOUGHT ADJOURNMENT VIA EMAIL ON 11.07.2019. THE ADJOURNMENT WAS DENIED. NO REASON F OR DENIAL OF ADJOURNMENT WAS RECORDED BY LD. CIT(A). THE LD CIT( A) HAS NOT RECORDED IF THE DENIAL OF ADJOURNMENT WAS COMMUNICATED TO THE A SSESSEE. THE NOTICE OF ENHANCEMENT UNDER SECTION 251(1)(A) WAS ALLEGEDLY I SSUED ON 22.01.2019 FOR 05.02.2019. THE DATE OF ENHANCEMENT NOTICE IS CONFLICTING ONE (ANTEDATED). THERE IS NO REFERENCE IN PARA 4.1 OF T HE ORDER THAT IN A FIRST NOTICE OF HEARING DATED 22.01.2019, THE LD CIT(A) D ECIDED TO MADE THE ENHANCEMENT. 10. THE ASSESSEE FILED ITS APPEAL ON 30.06.2016. THE H EARING OF APPEAL WAS TAKEN UP AFTER TWO AND HALF YEAR FROM THE DATE OF F ILING THE APPEAL. EVEN IF THE FACTS RECORDED BY LD CIT(A) ARE APPRECIATED, TH E NOTICE OF ENHANCEMENT WAS ALLEGEDLY ISSUED ON THE FIRST DATE ITSELF 22.0 1.2019 FOR FIXING HEARING ON 05.02.2019. IN OUR VIEW, NO FAIR AND PROPER OPPO RTUNITY OF HEARING WAS PROVIDED TO THE ASSESSEE. IT IS SETTLED POSITION UN DER THE LAW THAT OPPORTUNITY OF HEARING NOT ONLY BE GIVEN BUT IT SHOULD BE REFLE CTED ON THE FACE OF IT. SINCE NO FAIR AND PROPER OPPORTUNITY WAS GIVEN BY L D. CIT(A), THEREFORE, THE ORDER PASSED BY LD. CIT(A) DATED 18.07.2019 IS SET-ASIDE AND THE MATTER IS RESTORED BACK TO THE FILE OF LD. CIT(A) FOR ADJU DICATING ALL THE ISSUE AFRESH. NEEDLESS TO DIRECT THAT BEFORE PASSING THE ORDER, THE LD. CIT(A) SHALL GRANT FAIR AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO APPEAR BEFORE THE LD. CIT(A) WITHI N TWO MONTHS FROM THE ITA NO. 5467 MUM 2019-JAGDISH P. JAIN 8 DATE OF RECEIPT OF THIS ORDER AND TO BE MORE VIGILA NT IN ATTENDING THE HEARING BEFORE FIRST APPELLATE AUTHORITY AND TO PROVIDE ALL MATERIAL AND EVIDENCE IN HIS POSSESSION TO SUBSTANTIATE THE GENUINITY OF PUR CHASES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 05/03/2020. SD/- SD/- R.C. SHARMA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 05.03.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI