ITO 4(3)(1), MUMBAI V. PAREKH PIPES P. LTD, MUMBAI

ITA 5847/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3453 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Keywords: Bogus purchase; Difference of opinion; Change of opinion; Set aside
• Section: 69C; 143(3); 142(1); 115JB; 133(6); 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 5847 / MUM/ 201 6 ( / ASSESSMENT YEAR: 20 09 - 10 ) ITO - 4(3)(1) ROOM NO.648, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. / VS. M/S. PAREKH PIPES PVT. LTD. 158/160, LAXMI BHUVAN, 1 ST FLOOR, OPP. COTON EXCHANGE, KALBADEVI, MUMBAI - 400002. CO . NO. 207 / MUM/ 20 1 7 ( ARISING OUT OF ITA . NO. 5847 /MUM/2016 ) ( / ASSESSMENT YEAR: 20 09 - 10 ) M/S. PAREKH PIPES PVT. LTD. 158/160, LAXMI BHUVAN, 1 ST FLOOR, OPP. COTON EXCHANGE, KALBADEVI, MUMBAI - 400002 / VS. ITO - 4(3)(1) ROOM NO.648, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MU MBAI - 400020 ./ ./ PAN/GIR NO. : AABCP 9904 A ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 26/ 0 2/ 201 9 / DATE OF PRONOUNCEMENT : 30 / 0 4/2019 REVENUE BY: SHRI ABI RAMA KARTIKIYEN (DR) ASSESSEE BY : SHRI PRADIP KAPASI ( AR ) ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 2 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE AS WELL AS ASSESSEE HAVE FILED THE ABOVE MENTIONED APPEAL S AGAINST THE ORDER DATED 29 . 07 .201 6 PASSE D BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 9 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2009 - 10 . ITA. NO.5847/M/2016 2 . THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 29.07.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 9 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2009 - 10 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,18,50,610/ - MADE U/S 69C OF THE 1.1. ACT, ON THE BASIS OF ESTIMATED G.P. PERCENTAGE AT 12.5% WHERE THERE WAS ESTABLISHED NON - GENUINE PURCHASE WITHOUT APPRECIATING THE - FACT - THAT IF INFORMATION OF SUCH PURCHASE IS NOT RECEIVED BY THE DEPARTME NT IN THOSE YEARS DOES NOT IPSO FACTO ESTABLISH THAT THERE WERE NO PURCHASES IN THOSE YEARS.' ' 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ERRONEOUSLY TAKING GP OF EARLIER YEARS. WHERE NO INFORMATION WAS RECEIVED RELATED TO BOGUS PURCHASES, AS A TOUCHSTONE FOR EVERY SUBSEQUENT YEAR DESPITE THE FACT OF CONCLUSIVE EVIDENCE OF NON - DELIVERY OF GOODS FROM THE SUPPLIERS WHO HAVE GIVEN ONLY BILL FOR YEAR UNDER CONSIDERATION. ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 3 ' 3. THE APPELLANT CRAVES LEAVE TO AMEND OR AL TER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 12 . 09 .20 0 9 DECLARING TOTAL LOSS TO THE TUNE OF RS. 1,92,994/ - . THEREAFTER, THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 30.11.2011 ASSESSING LOSS IN SUM OF RS.1,93,000/ - AND BOOK PROFIT U/S 115JB OF THE ACT OF RS.38,455/ - . THEREAFTER, THE CASE WAS REOPENED U/S 147/1 48 OF THE I. T. ACT, 1961 ON THE GROUND OF THAT THE AO RECEIVED THE INFORMATION FROM INVESTIGATION WING IN WHICH IT WAS INFORMED THAT THE INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT AND ACCORDING TO INFORMATION THE ASSESSEE HAD MADE BOGUS PURCHA SE OF RS.94,804 ,881/ - FROM THE VARIOUS PARTIES WHOSE NAMES ARE HEREBY MENTIONED BELOW.: - TIN OF PURCHASE PARTIES PURCHASE PARTIES HAWALA PAN F.Y. AMOUNT IN RS./ - 27760622173V DHRUV SALES CORPORATION AHYPD6115E 2008 - 09 1023019 27310540795V OM CORPORATION AYZPS5296B 2008 - 09 2274965 27660591188V SAILEELA TRADING PVT. LTD. AAKCS4578C 2008 - 09 828929 27490339033V N.B. ENTERPRISES AAYPL7154J 2008 - 09 4442071 27640591781V TRIMURTI ENTERPRISES AODPP0486L 2008 - 09 1020673 27940256772V NISHA ENTERPRISE AWGPS3492N 2008 - 09 2333227 27430642161V R. K. ISPAT BIAPS2799R 2008 - 09 3348210 27360563999V KUNAL STAINLESS STEEL INDUSTRIES & ALEPB4997Q 2008 - 09 854885 ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 4 KUNAL ENTERPRISE 27190653866V UNIVERSAL TRADING COMPANY AJIPJ7859H 2008 - 09 1684425 27730562486V REVIKA TRADE I MPEX P. LTD. AADCR3729H 2008 - 09 2054916 27800298365V J.B. INTERLINK ADVPT2496H 2008 - 09 6110995 27650564276V JINDAL STEEL CORPORATION ALEPB6133C 2008 - 09 7559421 27050389521V SIDDHIVINAYAK STEEL AGVPS7889Q 2008 - 09 3361386 27580647977V SNEHAL ENTERPRISES ALOPR3012J 2008 - 09 480920 27560605599V SHREE NAKODAJI IMPEX ABFPY2160B 2008 - 09 717524 27870658730V PAYAL ENTERPRISE AAGHB7856M 2008 - 09 1390083 27690556203V K.K. ENTERPRISES ADYPA7682D 2008 - 09 942388 27020229342V UNIVERSAL ENTERPRISES ABPPV9606H 2008 - 09 1,640,229 27 460355491V CHANCHAL TUBE CORPORATION AVFPS0644A 2008 - 09 2367850 27 510603638V G.M. INTERNATIONAL ANRPP2729F 2008 - 09 2409166 27 370252187V LAXMI TRADING CO AEIPJ0766N 2008 - 09 7313602 27 520503189V SHRITI ENTERPRISES AGGPB9487Q 2008 - 09 1739144 27 860346638V ASIAN STEEL AWZPS2908L 2008 - 09 10877944 27 550304371V SURAT TUBE CORPORATION APMPS5397D 2008 - 09 12073188 27 810355056V GRIFTON INDIA RIDDHI ENTERPRISE ABQPV4099K 2008 - 09 1057418 27 490615192V SHUBHLAXMI SALES CORP. AAVPS1333B 2008 - 09 1065733 27 860587392V BHUMI ENTERPRISE AVCPS0096H 2008 - 09 137816 27 540616280V NAVDEEP TRADING CORPN AAAPV4487A 2008 - 09 1288365 27 280553858V D.K. ENTERPRISE AAAPQ3161C 2008 - 09 3693606 ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 5 27 830258239V PK TRADING CO. AAIPF6144J 2008 - 09 1386036 27 600574149V ADIGIN EN TERPRISES AAGPS5286C 2008 - 09 2117852 27 120674808V SHREE TRADING CORPORATION BZPPS2869L 2008 - 09 444112 27 600611203V VICTOR TRADERS AECPN3302A 2008 - 09 623464 27 960673085V K.K. TRADING COMPANY ARIPS0295C 2008 - 09 864063 27 710403514V GAUTAM TRADERS AABHG72 76FF 2277256 TOTAL 94,804,881 THEREAFTER, THE NECESSARY NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND A FTER THE REPLY OF THE ASSESSEE, T HE AO RAISED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE OF RS.9,48,04,881/ - TOTAL TO THE TUNE OF RS.1,18,50,610/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DELETED THE ADDITION IN CONNECTION WITH THE BOGUS PURCHASE , THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 5 . WE HAVE HEARD THE ARGUMENTS ADVANCED B Y THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. WE NOTICED THAT THE CASE OF THE ASSESSEE WAS REOPENED BY ISSUANCE OF NOTICE U/S 1 48 OF THE ACT ON THE BASIS OF THE RECEIPT OF INFORMATION RECEIVED FROM THE INVESTIGATION WING MUMBAI IN WHICH I T WAS CONVEYED THAT THE SALES TAX DEPARTMENT OF MAHARASHTRA INFORMED ABOUT THE VARIOUS PARTIES WHOSE DEALS WITH THE BOGUS PURCHASE BUSINESS. THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF RS.94,804,881/ - FROM VARIOUS PARTIES. THE NOTIC E WAS GIVEN TO THE ASSE SSEE AND THE ASSESSEE FAILED TO PROVE THE ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 6 GENUINENESS OF THE CLAIM , THEREFORE, BY APPLYING THE RATIO OF THE JUDGMENT IN THE CASE OF SIMIT P SHETH (2013) 356 ITR 451 (GUJ) . THE AO RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE IN SUM O F RS.94,804,881/ - . IN APPEAL, THE CIT(A) HAS DELETED THE SAID ADDITION ON THE BASIS OF THIS FACT THAT THE G.P. RATIO WAS NOT PROPERLY C ONSIDERED AND THE G.P. RATIO OF THE LAST OF THE A.Y. 2006 - 07 & 2007 - 08 COMES TO THE 6.05% AND FOR THE CURRENT YEAR THE G. P. RATIO COMES TO THE EXTENT OF 7.25%. NO DOUBT, THE G.P. RATIO IS DIFFERENT IN EVERY PRECEDING YEAR BUT HOW THE ADDITION HAS BEEN ORDERED TO BE DELETED IS NOT UNDERSTANDABLE. THE AO ISSUED THE NOTICE U/S 133 (6) OF THE ACT WHICH WERE NOT SERVED TO THE PART IES AND ASSESSEE FAILED TO SUBSTANTIATE THE GENUINENESS OF THE CLAIM OF THE PURCHASE IN QUESTION . O N THE BASIS OF SIMILAR FACTS AND CIRCUMSTANCES, T HE HONBLE GUJARAT HIGH COURT HAS PASSED THE ORDER IN THE CASE OF SIMIT P SHETH (2013) 356 ITR 451 (GUJ) IN WHICH THE PROFIT EMBEDDED TO THE BOGUS PURCHASE HAS BEEN CONSIDERED FOR RAISING THE ADDITION IN THE INCOME OF THE ASSESSEE. IT IS CORRECT METHOD TO RAISE THE ADDITION SUBSEQUENTLY IN THE CASE WHERE THE ASSESSEE HAS FAILED TO PROVE HIS PURCHASE BEYOND THE R EASONABLE DOUBT. TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES AND CONSIDERING THE JUDGMENT DELIVERED BY THE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (2013) 356 ITR 451 (GUJ) , WE ARE OF THE VIEW THAT THE INTEREST OF JUSTICE WOULD MET WHEN THE BOGUS PURCHASE WE RESTRICTED TO THE EXTENT OF 12.5% ( - ) G.P. OF THE CURRENT YEAR, THEREFORE, IN THE SAID CIRCUMSTANCES, WE SET ASIDE THE ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 7 FINDING OF THE CIT(A) AND RESTRICT THE ADDITION OF BOGUS PURCHASE TO THE EXTENT OF 12.5% ( - ) G.P. OF THE CURRENT YEAR. ACCORDINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE. CROSS - OBJECTION 207/M/2017 : - 6 . THE ASSESSEE HAS FILED THE PRESENT CROSS OBJECTION AGAINST THE ORDER DATED 29.07.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 9 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2009 - 10. 7 . THE ASSESSEE HAS RAISED THE CROSS - OBJECTION: - ' 1. THE ID. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE W. A.0. IN RE - OPENING THE COMPLETED ASSESSMENT IN GROSS VIOLATION OF THE PROVISIONS OF S.147 AND IN PASSING AN ORDER OF RE - ASSESSMENT U/S. 143(3) R.W.S. 147 IN VIOLATION OF THE PROVISIONS OF LAW. 2. YOUR APPELLANT SUBMITS THAT: A. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) UNDER AN ORDER DT.28.11.2 011 ON DUE CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORDS AND PRODUCED DURING THE COURSE OF ASSESSMENT AND ON PROPER APPLICATION OF MIND BY AO. AND THAT THE ACTION OF THE AO. WHO WAS NOT IN POSSESSION OF ANY INFORMATION TO ENABLE HIM TO REOPEN A COMPLE TED ASSESSMENT NOR ANY MIND WAS APPLIED BY HIM TO SUCH ALLEGED INFORMATION, IF ANY, NOR WAS ANY COPY THEREOF FURNISHED TO YOUR APPELLANT BY HIM. THE LD. CIT(A) CONFIRMED THE ACTION OF AO. WHO JUST RELIED UPON THE INFORMATION AVAILABLE ON THE MAHARASHTRA SA LES TAX DEPARTMENT SITE (MAHAVAT.GOV.IN). 3. YOUR RESPONDENT PLEADS THAT THE SAID RE - OPENING BY THE A.O. BE HELD TO BE BAD IN LAW AND THE SAID ORDER OF RE - ASSESSMENT PASSED BY HIM BE QUASHED.' 8 . THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACTS OF THE CASE WHICH HAS BEEN NARRATED ABOVE WHILE DECIDING THE APPEAL OF THE ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 8 REVENUE BEA RING ITA. NO.5847/M/2016 ABOVE, T HEREFORE , THERE IS NOT NEED TO REPEAT THE SAME. CROSS OBJECTION 1 & 2 9. UNDER THESE CROSS OBJECTION THE ASSESSEE HAS CHALLENGED THE REO PENING U/S 147/148 OF THE ACT SPECIFICALLY IN THE CIRCUMSTANCES WHEN THE AO RECEIVED THE INFORMATION FROM THE INVESTIGATION WING THEN NO ENQUIRY WAS CONDUCTED BY AO, THEREFORE, THE ORDER IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW. IN SUPPORT OF TH ESE CONTENTION, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN P. S. VEERAPPA VS. CIT, 127 ITR 247 (MAD) A ND CIT VS. ADANI EXPORT , 2 40 ITR 224 (GUJ). IT IS ALSO ARGUED THAT ON ACCOUNT OF CHANGE OF OPINION THE PROVISION U /S 147/148 OF THE ACT IS NOT LIABLE TO BE INVOKED AND IN SUPPORT OF THIS CONTENTION, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE LAW SETTLED IN THE CASE OF BHARAT JAYANTILAL PATEL, 378 ITR 596 (BOM) AND KELVINATOR OF INDIA LTD., 320 ITR 561 (SC). ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. IT IS A CASE IN WHICH THE ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI OF INCOME TAX DEPARTMENT IN WHICH IT WAS CONVEYED THAT THE SALES TAX AUTHORITIES OF MAHARASHTRA CONDUCTED THE ENQUIRY AND FOUND THAT THE PARTIES WHICH HAS BEEN MENTIONED IN THE ASSESSMENT ORDER ARE INDULGING BY GIVING THE BOGUS ENTRIE S OF PURCHASES. NO ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 9 DOUBT, AFTER THE RECEIPT OF THE INFORMATION , THE AO ISSUED THE NOTICES TO THE PARTIES U/S 133(6) OF THE ACT BUT NO NOTICE WAS SERVED. IT IS INCUMBENT UPON THE ASSESSEE TO P ROVE THE PURCHASE AS GENUINE . THE NOTICE WAS GIVEN TO THE ASSESSEE AND THE ASSESSEE HAS ALSO SUBMITT ED THE REPLY, IT IS NOT A CASE OF CHANGE OF OPINION AND THE AO TOOK INTO THE NOTICE ON RECEIPT OF THE INFORMATION FROM DGIT INVESTIGATION , THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE IS DISTINGUISHABLE WITH THE FACTS OF THE PRESENT CASE. TAKIN G INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE NOTICE ISSUED U/S 147/148 OF THE ACT IS QUITE REASONABLE WHICH IS NOT RELIABLE TO BE SET ASIDE IN ACCORDANCE WITH LAW. ACCORDINGLY , WE DECIDE THESE CROSS - OBJECTION AGAINST THE ASS ESSEE. 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE PARTLY ALLOWED AND THE CROSS - OBJECTION OF THE ASSESSEE IS HEREBY ORDERED TO BE DISMISSED . ORDER PRONOUNCE D IN THE OPEN COURT ON 30 /04/2019 . SD/ - SD/ - ( RAJESH KUMAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBA I DATED : 30 / 04/2019 VIJAY ITA. NO.5847 /M /1 6 CO. NO. 207 /M/201 7 A.Y. 20 09 - 10 10 / 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// (SR. PRIVATE SECRETARY) , / ITAT, MUMBAI