BIRLA COTSYN (INDIA) LTD, MUMBAI V. DCIT 2(1), MUMBAI

ITA 5633/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3736 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Reopening of assessment; Bogus purchase; Depreciation; Tangible material; Accommodation entries; Reassessment proceedings
• Section: 40A(3); 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5633/M/2015 ASSESSMENT YEAR: 2010-11 M/S. BIRLA COTSYN (INDIA) LTD., 101, 1 ST FLOOR DALAMAL HOUSE, 206, J.B. MARG, NARIMAN POINT, MUMBAI 400 021 PAN: AAACJ 1362K VS. DY COMMISSIONER OF INCOME TAX-2(1), 5 TH FLOOR, R.NO.561, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : MS. ARATI VISSANJI, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 25.07.2018 DATE OF PRONOUNCEMENT : 10.08.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 04.09.2015 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1) THE LEARNED AUTHORITIES BELOW ERRED IN LAW AND ON FACTS IN RE-OPENING THE ASSESSMENT WITHOUT ANY BASIS AND GROUND AND WIT HOUT CONSIDERING ALL THE MATERIAL FACTS AND CIRCUMSTANCES OF THE CASE. 2) THE LEARNED AUTHORITIES BELOW ERRED IN LAW AND O N FACTS IN MAKING AN ADDITION OF RS. 99,94,191/- IN RESPECT OF CERTAIN P URCHASES IN COMPUTING THE TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT WITHOUT A NY BASIS AND GROUND AND WITHOUT CONSIDERING ALL THE MATERIAL FACTS AND CIRC UMSTANCES OF THE CASE. 3) THE LEARNED AUTHORITIES BELOW ERRED IN LAW AND O N FACTS IN NOT ALLOWING SET ITA NO.5633/M/2015 M/S. BIRLA COTSYN (INDIA) LTD. 2 OFF OF BROUGHT FORWARD DEPRECIATION LOSS OF EARLIER YEARS WITHOUT APPRECIATING AND CONSIDERING ALL THE MATERIAL FACTS AND CIRCUMSTANCE S OF THE CASE. 4) THE LEARNED AUTHORITIES BELOW ERRED IN LAW AND O N FACTS IN NOT ALLOWING CARRY FORWARD OF MAT CREDIT OF EARLIER YEARS AND FOR THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING AND CONSIDERING ALL THE MATERI AL FACTS AND CIRCUMSTANCES OF THE CASE. 5) THE LEARNED AUTHORITIES BELOW ERRED IN INITIATIN G PENALTY PROCEEDINGS U/S 271(1)(C) WITHOUT APPRECIATING AND CONSIDERING ALL THE MATERIAL FACTS AND CIRCUMSTANCES OF THE CASE. 6) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3. THE ISSUE RAISED IN FIRST GROUND OF APPEAL IS AG AINST THE REOPENING OF ASSESSMENT OF THE ASSESSEE WITHOUT ANY BASIS AND WITHOUT ANY TANGIBLE MATERIAL. THE FACTS IN BRI EF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29.09.2009 DEC LARING A LOSS OF RS.68,84,343/- UNDER THE NORMAL PROVISION OF THE ACT AND RS.11,57,13,984/- UNDER SECTION 115JB OF THE ACT . THEREAFTER, THE RETURN WAS REVISED ON 08.03.2011 DEC LARING THE SAME LOSS UNDER THE NORMAL PROVISION AND INCOME UNDER SECTION 115JB OF THE ACT. THEREAFTER, THE CASE OF TH E ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT ON 29.01.2013 ACCEPTING THE LOSS UNDER THE NORMAL PROVISION AND INCOME UNDER SECTION 115JB OF THE ACT. THE ASSESSEE WAS INTO THE BUSINESS OF MANU FACTURING OF COTTON AND SYNTHETIC YARN, WOOL YARN, JUTE YARN, G INNING & PRESSING OF COTTON, MANUFACTURING AND TRADING OF OIL SEED COTTON CAKE. THE CASE OF THE ASSESSEE WAS REOPENED AFTER AO RECEIVED INFORMATION FROM DGIT (INVESTIGATION) WHO IN TURN WAS SUPPLIED INFORMATION AS TO HAWALA RACKET BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT ASSESSEE HAS ITA NO.5633/M/2015 M/S. BIRLA COTSYN (INDIA) LTD. 3 TAKEN ACCOMMODATION ENTRIES FROM M/S. SIDDHAPAD TRA DING PVT. LTD. AMOUNTING TO RS.99,94,191/- . THUS THE ASSE SSEE INFLATED THE EXPENSES BY BOOKING BOGUS PURCHASES. T HE AO ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 22.02.2 013 AFTER RECORDING REASONS WHICH WERE DULY SERVED UPON THE A SSESSEE AND FINALLY THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT MAKING ADDITION O F FULL AMOUNT OF BOGUS PURCHASE OF RS.99,94,191/-. 4. THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSM ENT BEFORE LD. CIT(A) WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE AO AFTER RECEIVING IN FORMATION FROM THE DGIT (INVESTIGATION) TO THE EFFECT THAT AS SESSEE HAS AVAILED THE ENTRIES OF BOGUS PURCHASE FROM M/S. SID DHAPAD TRADING PVT. LTD. TO THE TUNE OF RS.99,94,191/- JUS TIFYING THAT THE REOPENING WAS VALIDLY DONE. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL, WE FIND THAT THE AO HAS TANGIBLE INFORMATION IN HIS POSSESSION ON THE BASIS OF WHICH THE REASONS WERE RECORDED FOR MING BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSM ENT. IN OUR VIEW THE RE-OPENING THE ASSESSMENT ON THE BASIS OF INFORMATION FROM DGIT(INVEST.) IS QUITE VALID AS TH AT IS A TANGIBLE MATERIALS WHICH THE AO HAS WHILE RECORDING THE REASONS. WE ARE ,THEREFORE, INCLINED TO UPHOLD THE OR DER OF LD. CIT(A) ON THE ISSUE OF REOPENING AND ACCORDINGLY, WE DISMISS THE GROUND RAISED BY THE ASSESSEE. 6. THE ISSUE RAISED BY THE ASSESSEE IN THE SECOND GR OUND OF ITA NO.5633/M/2015 M/S. BIRLA COTSYN (INDIA) LTD. 4 APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.99,94,191/- BY LD. CIT(A) AS MADE BY THE AO TOWA RDS THE BOGUS PURCHASES. 7. THE FACTS IN BRIEF ARE THAT THE ASSESSEE MADE PUR CHASES FROM M/S. SIDDHAPAD TRADING PVT. LTD. AMOUNTING TO RS.99,94,191/-. THE AO RECEIVED INFORMATION FROM TH E DGIT (INVESTIGATION) THAT THE SAID PARTY WAS ONLY ISSUI NG BILLS AND INVOICES WITHOUT SUPPLYING ACTUAL MATERIALS AND THE CASE OF THE ASSESSEE WAS RE-OPENED. A SHOW CAUSE NOTICE WAS ISSU ED TO THE ASSESSEE IN THE REASSESSMENT PROCEEDINGS AS TO WHY THE SAME SHOULD NOT BE ADDED TO THE INCOME OF THE ASSES SEE WHICH WAS REPLIED BY THE ASSESSEE BY SUBMITTING THA T THE ASSESSEE HAS MADE PURCHASES FROM THE SAID PARTY WIT H ACTUALLY DELIVERY OF THE GOODS. HOWEVER, TRANSPORT CHALLAN, DELIVERY CHALLAN ETC. COULD NOT BE FURNISHED BEFORE THE AO. BESIDES, THE ASSESSEE COULD NOT PRODUCE THE SUPPLIER BEFORE THE AO. THEREFORE, THE AO TREATED THE ENTIRE PURCHA SES FROM THE SAID PARTY AS NON GENUINE PURCHASES AND THUS AD DED THE ENTIRE AMOUNT TO THE INCOME OF THE ASSESSEE. THE AO ALSO NOTED IN THE ASSESSMENT ORDER THAT ASSESSEE HAS MAD E CORRESPONDING SALES AGAINST THE SAID PURCHASES THUS CONCLUDING THAT THE ASSESSEE MIGHT HAVE PURCHASED THE ACTUAL MATERIALS FROM SOME OTHER SOURCES. THE AO ALSO OBS ERVED THAT ASSESSEE HAS MADE PURCHASES OF RS.99,94,191/- I N CASH AND SAME WAS DISALLOWED UNDER SECTION 40A(3) OF THE ACT WITHOUT PREJUDICE. 8. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CONFI RMED ITA NO.5633/M/2015 M/S. BIRLA COTSYN (INDIA) LTD. 5 THE ADDITION BY HOLDING THAT THE ASSESSEE HAS FAILE D TO ESTABLISH THE GENUINENESS OF PURCHASES FROM M/S. SID DHAPAD TRADING PVT. LTD. AND THUS JUSTIFIED THE ADDITION MA DE BY THE AO. 9. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT T HE ORDER OF THE AO IS FULL OF CONTRADICTIONS AS HE HAS OBSERVED IN THE ASSESSMENT ORDER THAT ASSESSEE HAS MADE THE CORRESPONDING SALES VIS--VIS THE SAID BOGUS PURCHA SES MEANING THEREBY PURCHASES WERE MADE FROM SOME OTHER SOURCES WHILE THE BILLS WERE PROCURED FROM M/S. SI DDHAPAD TRADING PVT. LTD. ONCE THE SALES ARE NOT DISPUTED B Y THE AO THEN THE ACTION OF THE AUTHORITIES BELOW DISALLOWIN G THE ENTIRE PURCHASES ON THE GROUND OF GENUINENESS SHOULD NOT B E SUSTAINED AS IT IS ONLY THE INCOME ON THE SAID PURC HASES WHICH COULD BE BROUGHT TO TAX AND NOT THE ENTIRE PURCHAS ES. THE AR WHILE REFERRING TO BANK STATEMENT OF THE ASSESSEE W HICH ARE FILED IN THE PAPER BOOK CONTROVERTED THE FINDING O F THE AO THAT THE ASSESSEE MADE CASH PURCHASES WHICH ARE DISALLOW ED U/S 40A(3) OF THE ACT AND SUBMIITED THAT THE PURCHASE W ERE MADE BY ACCOUNT PAYEE CHEQUES. PER CONTRA THE LD DR REL IED ON THE ORDERS OF AUTHORITIES BELOW. 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT RECORDS AS PLACED BEFORE US WE OBSERVE THAT UNDISPU TABLE THE PURCHASE ARE MADE FROM BOGUS SUPPLIER WHICH WAS RIG HTLY TREATED AS NON GENUINE FOR THE WANT OF VERIFICATION AND CONFIRMATION. BUT WHERE THE SALES ARE NOT DISPUTED, IT IS THE INCOME ON THE SAID BOGUS PURCHASES WHICH SHOULD BE BROUGHT ITA NO.5633/M/2015 M/S. BIRLA COTSYN (INDIA) LTD. 6 TO TAX AND NOT THE ENTIRE PURCHASES. EVEN THE AO REC ORDED A FINDINGS IN THE ASSESSMENT ORDER THAT ASSESSEE PURC HASED THE GOODS FROM OTHER SOURCES AND MADE CORRESPONDING SAL ES. THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS BEEN TAKI NG A VIEW IN SUCH ABOVE CASES AND DIRECTING THE INCOME ESTIM ATION RANGING FROM 2% TO 30% DEPENDING ON THE FACTS OF EACH CASE. IN THE PRESENT CASE, WE NOTE THAT ASSESSEE HAS ALRE ADY DECLARED A GP OF 11.18% ON THE TOTAL PURCHASES INCL UDING THE BOGUS PURCHASE OF RS.99,94,191/-. BESIDES THE OBSERVAT ION OF THE AO THAT PURCHASES WERE MADE IN CASH WAS ALSO DE MOLISHED BY THE AR WITH THE PROOFS OF PAYMENT BY CHEQUES. U NDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT A REAS ONABLE PERCENTAGE SHOULD BE ADDED TO THE INCOME OF THE ASS ESSEE WHICH WOULD BE OVER AND ABOVE THE PROFIT DECLARED B Y THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO ASSESS T HE INCOME OF THE SAID PURCHASES @ 4% WHICH WOULD BE OVER AND ABOVE THE REGULAR GP DECLARED BY THE ASSESSEE. ACCORDINGL Y, THE GROUND NO.2 OF THE ASSESSEE IS PARTLY ALLOWED. 11. GROUND NOS.3 & 4 ARE NOT PRESSED AND ACCORDINGLY DISMISSED. IN RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.08.2018. SD/- SD/- (JOGINDER SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 10.08.2018. * KISHORE, SR. P.S. ITA NO.5633/M/2015 M/S. BIRLA COTSYN (INDIA) LTD. 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.