INCOME TAX OFFICER 32 (3) (1), Mumbai V. RAMREKHA SHUKLA, Mumbai

ITA 5805/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7919 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Reopening of assessment; Bogus purchase; Corroborative evidences; Tax effect; Reason to believe; Reassessment proceedings; Set aside
• Section: 133(6); 143(1); 274; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO . 5805 /M UM /201 9 ( / ASSESSMENT YEAR : 2011 - 12 ) ITO - 32(3)(1) ROOM NO.733, 7 TH FLOOR, KAUTILYA BHAVAN, BKC, BANDRA (E), MUMBAI - 400051 . / VS. RAMREKHA SHUKLA A/204, RIDDHI CO. OPERATIVE HSG. LTD, SAI BABA NAGAR, BORIVALI (W), MUMBAI - 400092. ./ ./ PAN/GIR NO. : AGGPD6265J ( / APPELLANT ) .. ( / RESPONDE NT ) / DATE OF HEARING: 08 / 0 4 / 20 2 1 /DATE OF PRONOUNCEMENT: 01/07 / 2021 / O R D E R PE R AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 03 . 05 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 46 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 11 - 1 2 . 2 . THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS: - (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION TO 5% ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE SALES TAX DEPARTMENT HAS PROV ED BEYOND DOUBT THAT THE PARTIES DECLARED AS HAWALA TRADERS WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRY OF PURCHASES REVENUE BY: MS. SMITA VERMA (SR. A R) ASSESSEE BY : SHRI MAHESH SABOO ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 2 AND THE ASSESSEE WAS ONE OF THE BENEFICIARY OF ACCEPTING ACCOMMODATION FOR THE PURCHASES.' (II) 'ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE NOTICES U/S 133(6) SENT TO THE PARTIES WERE RETURNED BACK UNSERVED AND THE ASSESSEE FAILED TO PRODUCE THEM FOR VERIFICATION, IN SPITE OF OPPORTUNITY PROVIDED BY THE A O. (III) 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE RATIO OF THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF N.K. PROTEINS LTD. WHEREIN IT WAS CONFIRMED THAT IN THE EVENT OF BOGUS PURCHASES, T HE ADDITION ON THE WHOLE OF SUCH PURCHASES WAS REQUIRED TO BE MADE AND THIS PARTICULAR RATIO WAS CONFIRMED BY THE HON'BLE SUPREME COURT IN SLP NO.CC NO.769 OF 2017 DATED 16.01.2017, BY DISMISSING THE SLP OF THAT ASSESSEE.' (IV) 'ON THE FACTS AND CIRCUM STANCES OF THE CASE, THE HON'BLE ITAT IS REQUESTED TO ENTERTAIN THIS APPEAL THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT PRESCRIBED IN THE CBDT CIRCULAR NO.17/2019 DATED 08.08.2019 R.W. CIRCULAR NO.3/2018 DTD. 11.07.2018 AS AMENDED ON 20.08.2018 A S THE CASE FALLS IN THE EXCEPTION PROVIDED IN PARA 10(E) OF THE SAID CIRCULAR IN AS MUCH AS THE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES, NAMELY, SALES TAX AUTHORITIES'. (V) 'THE APPELLAN T PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. (VI) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND.' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS R ETURN OF INCOME ON 29 . 09 .20 11 DECLARING TOTAL INCOME TO TH E TUNE OF RS. 3,17,380 FOR THE A.Y. 2011 - 12 . THE RETURN WAS PROCESSED U/S 143(1) OF THE I. T. ACT, 1961 . THEREAFTER, THE ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE INFORMATION R ECEIVED FROM THE DGIT(INV.), MUMBAI IN WHICH IT WAS ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 3 CONVEYED THAT THE ASSESSEE HAS TAKEN THE BOGUS PURCHASE ENTRIES IN SUM OF RS.89,70,817/ - FROM THE FOLLOWING PARTIES.: - TIN NAME OF THE PARTY AMOUNT 27690680848V HARSHIL FERROMET PVT. LTD. 7,16,721/ - 279 10623885V DONEAR TRADING PVT. LTD. 4,03,588/ - 27030610110V ROMEX METAL & TUBES PVT. LTD. 1,55,770/ - 27230561209V SRISHTI MERCANTILE PVT. LTD. 2,70,695/ - 27050634058V LINUX SALES AGENCY PVT. LTD. 4,46,269/ - 27940626827V UJWAL ENTERPRISES 3,28,500/ - 274 40561142V ALOK TRADING CO. 16,62,481/ - 27550784036V AXON INDUSTRIES 15,72,630/ - 27950675467V JINALAY TRADING PVT. LTD. 13,22,455/ - 27360675452V AVION SALES PVT. LTD. 17,73,816/ - 27970650430V SUBHAM STEEL IMPEX 3,17,892/ - TOTAL 89,70,817/ - THEREAFTER , THE NOTICE U/S 148 OF THE ACT WA S GIVEN AND AFTER THE REPLY OF THE ASSESSEE, THE AO RAISED THE ADDITION TO THE EXTENT OF 12.50% OF BOGUS PURCHASE AMOUNT IN SUM OF RS.89,70,817/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.14,38,730/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO RESTRICTED T HE ADDITION TO THE EXTENT OF 5% OF THE BOGUS PURCHASE BUT THE REVENUE WAS NOT SATISFIED, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 4 . WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 4 5.1 GROUND NO. 1 I HAVE PERUSED THE ASSESSMENT ORDER. THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND THE INVESTIGATION WING WAS AUTHENTIC AND RELIABLE, THEREFORE THE REOPENING CANNOT BE SAID TO HAVE BEEN MADE ON SUSPICION AS ALLEGED BUT THE ASSESSEE. THERE WAS A 'REASON TO BELIEVE' BY THE ASSESSING OFFICER AND IT WAS HIS INDEPENDENT OPINION AFTER PERUSAL OF INFORMATION IN HIS HAND. THE AO IS NOT REQUIRED TO CARRY OUT ANY INVESTIGATION BEFORE REOPENING AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD VS ITO 236 ITR 3 (SC). HON'BLE APEX COURT HELD T HAT IN DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS WAS VALID, IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THE STAGE OF REOPENING. THEREFORE, REOPENING OF ASSESSMENT IS FOUND TO BE IN ORDER AND IS UPHELD. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 5.2 GROUND NO. 2 ON IDENTICAL GROUND PROCEEDINGS FOR A.Y. 2010 - 11 WERE CONCLU DED. THE CIT(A) - 45/IT032(3) ITA 74/2017 - 18 DATED 19.07.2018. 5.2.1. THE OPERATIVE PART OF THE ORDER IS IN PARA 5 GROUND NO.2 RELATES TO ADDITION OF RS.9,27,975 BEING 12.5% OF THE PURCHASES OF RS.74,23,796/ - REJECTING BOOKS OF ACCOUNT U/S 145(3). FOLLOWING ARE THE DETAILS OF PARTIES FROM WHOM THE ASSESSEE OBTAINED BOGUS PURCHASES: S. NO NAME OF THE DEALERS AMOUNT 1 VEER INDUSTRIES 7,03 ,368 2 RATANDEEP TRADERS 9,23,646 3 SIVAMANI TRADERS PVT. LTD. 5,99,522 4 KANAK STEEL (INDIA) 14,43,665 ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 5 5 ANHANT TRADELI NK 17,95,227 6 AMAN IMPEX 88,959 7 S. K. ENGINEERING CO. 4,65,196 8 DEV DEEP STEEL 14,04,213 TOTAL 74,23,796 DURING THE ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE FURNISHED COPY OF PURCHASE BILLS, LEDGER ACCOUNTS OF SUPPLYING PARTIES, PROOF OF D ELIVERY OF GOODS, TRANSPORT PROOF, AND BANK ACCOUNT STATEMENT AND COPY OF STOCK REGISTER. FURTHER, TO ASCERTAIN THE GENUINENESS OF TRANSPORTATION THE AO ISSUED NOTICES U/S 133(6) OF THE ACT ON THE PARTIES WHO SOLD MATERIAL TO THE APPELLANT. HOWEVER, SUCH N OTICES WERE RETURNED UNSERVED BY POSTAL DEPARTMENT WITH NOTING 'LEFT/UNSERVED'. AO GAVE A FINDING AS UNDER IN PARA 8.4 OF HIS ORDER. 'SINCE THE SALES ARE CLAIMED AS GENUINE, BY THE ASSESSEE IT PROCURED THAT THE ASSESSEE WAS OWN ACTUALLY IN POSSESSION OF GO ODS THIS IS BASED ON THE FLOORINGS THAT THERE RAN NOT BE ANY SALES WITHOUT PURCHASES. AT THE SAME TIME, IT DID NOT PURCHASE GOODS FROM OTHER SUPPLIERS. MAY BE WITHOUT BILLS, WHICH IS COMMONLY KNOWN AS GREY MARKET. SUCH PURCHASES IN THIS LINE OF BUSINESS CA NNOT BE DENIED AS PER THE NO - EVADING PRACTICE O MARKET. THEREFORE, THE PURCHASE RATE MENTIONED IN THE ALLEGED SALES BILLS CANNOT BE ACCEPTED THE OBVIOUS R EASON IS THAT THE ASSESSEE DID MAKE PURCHASES BUT AT A LOWER PRICE SO AS TO INCREASE IT'S OVERALL PROF ITS. BY RECORDING THE BOGUS PURCHASES AT A HIGHER LEVEL, THE ASSESSEE MANAGED TO SIPHON OFF PROFIT TO THE EXTENT TO THE DIFFERENT LIKE ACTUAL PURCHASES AND BOGUS PURCHASES. ANY PERSON INDULGING IN PRACTICE OF PURCHASING THE GOODS FROM THE GREY MARKET AND O BTAINING BOGUS BILLS OF SOME OF THE PARTIES WOULD DO SO FOR GETTING SINCE BENEFITS. BAT TUBA? WOULD BE THE MAGNITUDE OF THE BENEFIT WOULD DEPEND UPON ON THE PETS OF THE CASE' ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 6 THE AO RELIED UPON CERTAIN DECISIONS MENTIONED IN PAR 8.5 OF ASSESSMENT ORDER. AN D ON CERTAIN FINDINGS MENTIONED IN PARA 8.6 OF ASSESSMENT ORDER AND HELD THAT 12.5% OF THE TOTAL AMOUNT OF 74,23,796/ - BE TAKEN AS UNPROVED/NON GENUINE PURCHASES AND ADDED TO THE TOTAL INCOME RETURNED. 5.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUB MISSIONS OF THE APPELLANT INCLUDING THE CASE LAWS CITED. DURING THE APPELLATE PROCEEDINGS THE APPELLANT FILED SOME COPIES OF PURCHASE BILLS CORRESPONDING SALES BILLS, LEDGERS OF PARTIES AND COPY OF BANK STATEMENTS HIGHLIGHTING THE PAYMENTS MADE FOR PURCHAS ES FROM THE SETTER PARTIES, COPIES OF TRANSPORTATION AND DELIVERY CHALLANS. IT IS NOTICED THAT WITHOUT CONSIDERING THESE EVIDENCES INCLUDING THE DELIVERY CHALLANS, THE AO ESTIMATED THE PROFIT ON ALLEGED BOGUS PURCHASES. IN THIS REGARD. IT IS THAT MANY BENC HES OF ITAT AND HONBLE HIGH COURTS AND IN RECENT JUDGMENT THE HONBLE SUPREME COURT HAVE HELD THAT WHEN PURCHASE ARE SUPPORTED BY SUFFICIENT DOCUMENTARY EVIDENCES THEN ONE CANNOT CONCLUDE THAT THE PURCHASES WE' A NOT MADE BY THE APPELLANT. 5.2 HOWEVER RE MAINS THAT THE APPELLANT PRODUCED BANK ACCOUNT LENIENT, PUN HOSE BILLS, LEDGERS OF SUPPLYING PARTIES ETC., TO PROVE THE GENUINENESS PURCHASES. I HE APPELLANT HAS BROUGHT DOCUMENTARY EVIDENCES ON RECORD TO PROVE GENUINENESS OF SUCH TRANSACTIONS, THE ACTION OF THE ASSESSING OFFICER IN IGNORING THEM CANNOT BE ACCEPTED. CONSIDERING THE REASONING GIVEN BY THE AO IN 8.4 WHICH IS EXTRACTED ABOVE IN PARA 5, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE 12.5% OF SAID PURCHASES AS INFLATION IN COST OF PURCHASES WI TH BOGUS BILLS, WHICH IS ON HIGHER SIDE. THEREFORE, THE SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES MADE BY THE APPELLANT ON THE SAID BOGUS PURCHASES AS ARGUED BY THE AC) ARE LIABLE TO BE REDUCED CONSIDERING THE FACTS OF THE CASE AND THE ACTUAL C I' DECLARED BY THE ASSESSEE IN THE BOOKS WHICH IS 2.87%. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 5% OF SUCH PURCHASES OF RS.74,23,796/ - WHICH COMES TO RS.3,71,290/ - . THE AO IS DI RECTED TO MODIFY THE ADDITION ACCORDINGLY AND THE APPELLANT GETS PART RELIEF. THIS GROUND IS PARTLY ALLOWED. ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 7 5.2.2 THE AR DURING THE PROCEEDINGS HAS FILED TAX INVOICES INDICATING THAT THAT VAT WAS ONLY 4% AND 5% DURING THE YEAR. OTHER SUPPORTING EVIDENCE I N FORM OF INVOICES TRANSPORT BILL ETC WERE ALSO FILED. 5.2.3 HAVING CONSIDERED THE DETAILS/FINDINGS OF THE AO, I AM INCLINED TO FOLLOW THE FINDINGS OF LEARNED CIT(A) FOR A.Y. 2010 - 11 AS THE ISSUE UNDER CONSIDERATION IS IDENTICAL. 5.2.4 HENCE FOLLOWING THE SAME THE DISALLOWANCE IS DIRECTED TO BE RESTRICTED TO 5% IN LIGHT OF THE PRESENT FACTS I.E 5% OF 89,70,817/ - , HENCE GROUND NO. 2 IS PARTLY ALLOWED. 5 . ON APPRAISAL OF THE OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE DECISION OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 IN WHICH THE ISSUE WAS IDENTICAL. THE CIT(A) FOLLOWED THE SAME AND RESTRICTED THE ADDITION TO THE EXTENT OF 5% OF THE BOGUS PURCHASE OF RS. 89,70,817/ - . THE FACTS ARE NOT DISTINGUISHABLE AT THIS STAGE. MOREOVER, WE NOTICED THAT THE HONBLE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN CASE BEARING ITA. NO.6257/M/2018 DATED 02.12.2019. NOW THE ISSUE HAS DULY BEEN COVERED IN FAVOUR OF THE ASSESSEE. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, WE UPHELD THE FINDING OF THE CIT(A) ON TH IS ISSUE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA. NO. 5805 / M UM /201 9 A.Y . 20 11 - 12 8 6 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED . ORDER PRONOUNCE D IN THE OPEN COURT ON 01 / 07 / 20 2 1 SD/ - SD/ - ( RAJESH KUMAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBA I DATED : 01 / 07 /20 21 VIJAY PAL SINGH ( SR. PS ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE C IT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR ) , / ITAT, MUMBAI