ACIT - 13(2)(1), MUMBAI V. SEJAL GLASS LTD., MUMBAI

ITA 5858/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9916 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: SUNIL M MAKH IJA
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries; Reason to believe
• Section: 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH G, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5473/MUM/2016 (ASSESSMENT YEAR- 2007-08) M/S SEJAL GLASS LTD. 3 RD FLOOR, 173/174, SEJAL ENCASA, OPP. BATA SHOWROOM, S.V. ROAD, KANDIVALI (W), MUMBAI-400067 PAN: AADCS8659M VS. DCIT CIRCLE-13(2)(1) MUMBAI. (APPELLANT) (RESPONDENT) ITA NO.5858/MUM/2016 (ASSESSMENT YEAR- 2007-08) DCIT CIRCLE- 13(2)(1) MUMBAI. VS. M/S SEJAL GLASS LTD. 3 RD FLOOR, 173/174, SEJAL ENCASA, OPP. BATA SHOWROOM, S.V. ROAD, KANDIVALI (W), MUMBAI-400067 PAN: AADCS8659M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL M. MAKHIJA (AR) REVENUE BY : SHRI V.VIDHYADHAR (DR) DATE OF HEARING : 06.09.2017 DATE OF PRONOUNCEMENT : 06.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE CROSS APPEAL U/S 253 OF THE INCOME-TAX ACT (T HE ACT) ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-21, MUMBAI DATED 25 .07.2016 FOR THE ASSESSMENT YEAR (AY) 2007-08. THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL . ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 2 I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION TO THE EXTENT OF 8.76% ONLY OF THE BOGUS PURCHASES WHEREIN THERE WAS SUBSEQUENT SA LES INSTEAD OF UPHOLDING THE SAME TO THE EXTENT OF 100% OF SUCH PURCHASES WI THOUT APPRECIATING THE FACT THAT ASSESSEE HAS FAILED TO PROVE THE GENUINEN ESS OF THE TRANSACTION OF THE PURCHASES MADE WITH THE PARTIES MENTIONED IN THE AS SESSMENT ORDER. II. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. THE REVENUE IN ITS CROSS APPEAL HAS RAISED THE FOLL OWING GROUNDS OF APPEAL ; 1. (I) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN REJECTI NG E APPELLANT'S CONTENTION THAT REOPENING OF ASSESSMENT AFTER EXPIR Y OF OUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT SHOWING THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND, THEREF ORE, THE REASSESSMENT WAS BAD IN LAW LIABLE TO BE SET ASIDE. 2. (II) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN REJECT ING THE APPELLANT'S CONTENTION THAT THE LEARNED AO HAD ERRED IN REOPENI NG THE ASSESSMENT WITHOUT APPLICATION OF MIND TO MATERIAL PRIOR TO FO RMING REASON TO BELIEVE AND WITHOUT INDEPENDENT APPLICATION OF MIND TO INFO RMATION RECEIVED FROM THE INVESTIGATION WING RENDERING THE ASSESSMENT MAD E WITHOUT JURISDICTION. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN NOT APPRECI ATING THAT THE LEARNED AO HAD RELIED ON EVIDENCES RECEIVED FROM THE INVEST IGATION WING OF THE INCOME TAX DEPARTMENT WITHOUT PROVIDING COPIES THER EOF TO THE ASSESSEE AND THUS HAD VIOLATED THE PRINCIPLES OF NATURE JUST ICE RENDERING THE ASSESSMENT ORDER LIABLE TO BE SET ASIDE. 4. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ESTIMATING GROSS PROFIT AT THE RATE OF 8.76% OF PURCHASES OF RS.L,46,76,661/- AND CONFI RMING ADDITION TO THE EXTENT OF RS.12,85,675/- WITHOUT APPRECIATING THAT THE ASSESSEE HAD SOLD THE GOODS ON PROFIT WHICH WAS CREDITED TO THE PROFIT LO SS ACCOUNT AND THERE WAS NO MATERIAL TO HOLD THAT THE ASSESSEE HAD EARNE D ANY EXTRA PROFIT. 5. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS.43,98,018/- OUT OF PURCHASES WITHOUT APPRECIATIN G THE EVIDENCES FURNISHED. 6. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE T O ONE ANOTHER. ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 3 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF MANUFACTURING OF GLASS AND ALSO EARNED INCOME FROM OTHER SOURCES, FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 30.10.2007 DECL ARING TOTAL INCOME OF RS. 77,82,240/-. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) OF THE ACT ON 30.12.2009 ASSESSING THE TOTAL INCOME AT NORMAL PRO VISION AT RS. 1,11,17,490/- U/S 115JB OF THE ACT AT RS. 4,00,27,8 55/-. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 OF THE A CT ON 25.03.2014. THE ASSESSMENT WAS RE-OPENED ON THE BASIS OF INFORMATIO N RECEIVED FROM INVESTIGATION WING OF INCOME-TAX DEPARTMENT. INFORM ATION WAS RECEIVED THAT THE ASSESSEE IS ONE OF THE BENEFICIARY WHO HAS RECEIVED ACCOMMODATION ENTRIES PROVIDED BY SHRI PRAVIN JAIN. SH. PRAVEEN J AIN THROUGH HIS COMPANY, FIRMS CONTROLLED AND MANAGED BY HIM AND HIS ASSOCIA TE WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRY WITHOUT DELIVERY OF G OODS. THE NOTICE UNDER SECTION 148 OF THE ACT WAS RECEIVED. THE ASSESSMEN T WAS COMPLETED ON 10.03.2015 U/S 143(3) R.W.S. 147 OF THE ACT. THE AO MADE THE ADDITION OF RS.4,82,987/- ON ACCOUNT OF PURCHASES FROM M/S NEW PLANET TRADING CO. PVT. LTD AND RS. 1,90,74,680/- PURCHASED FROM M/S. FASTSTONE TRADING COMPANY. THUS, AO MADE THE ADDITIONS OF TOTAL PUR CHASES FROM BOTH THE CONCERN OF RS. 1,95,57,667/- ON ACCOUNT OF IMPUGNE D/BOGUS PURCHASE. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION WAS O F RS. 4,82,987/- ON ACCOUNT OF PURCHASES FROM M/S NEW PLANET TRADING CO . PVT. LTD. WAS ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 4 DELETED. HOWEVER, OUT OF PURCHASES OF RS.1,90,74,68 0/- PURCHASED FROM M/S. FASTSTONE TRADING COMPANY THE ADDITION OF RS. 43,98 ,018/- WAS SUSTAINED HOLDING THAT NO PROOF SALE WAS PROVIDED BY ASSESS EE. THE LD CIT(A) FURTHER SUSTAINED THE 8.76 % OF REMAINING PURCHASE OF RS. 146,76,661/- FROM M/S. FASTSTONE TRADING COMPANY. HENCE, FURTHER AGGRIEVE D BY THE ORDER OF LD. CIT(A) BOTH THE PARTIES HAVE FILED THEIR CROSS APPE AL RAISING THE GROUNDS OF APPEAL REFERRED ABOVE. 5. NONE, APPEARED ON BEHALF OF ASSESSEE DESPITE REPEAT ED CALLS AND WAITING FOR SUFFICIENT TIME. PERUSAL OF THE RECORDS REVEALS THA T THE REPRESENTATIVE OF ASSESSEE WAS PRESENT ON 17.08.2017 WHEN ONE OF THE APPEALS (ITA NO. 5858/MUM/2016) WAS LISTED. THE ASSESSEE MOVED AN AP PLICATION FOR CONSOLIDATION OF BOTH THE APPEAL AND THE SAID APPEA L WAS ADJOURNED FOR 06.09.2017. AS NONE APPEARED ON BEHALF OF ASSESSEE, WE LEFT NO OPTION EXCEPT TO HEAR THE LD. DR FOR THE REVENUE AND TO PR OCEED WITH ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. WE HAVE HEARD THE LD. DR FOR THE REVENUE AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT INVESTIGATION WING OF INCOME-TAX DEPARTMENT MADE FULL-FLEDGED ENQ UIRY. THE PARTIES WAS SHOWN ARE HAWALA DEALERS, THE HAWALA DEALERS WERE E NGAGED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS, TH E ASSESSEE OBTAINED ACCOMMODATION BILLS ONLY IN ORDER TO INFLATE THE EX PENSES AND TO BRING DOWN ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 5 THE PROFITABILITY IN ORDER TO AVOID THE TAX. THE LD . DR FOR THE REVENUE PRAYED THAT THE ENTIRE ADDITION SHOULD HAVE BEEN SUSTAINED BY LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF AUTH ORITIES BELOW. DURING THE ASSESSMENT PROCEEDING, THE AO OBSERVED THAT THE ASS ESSEE HAS MADE THE FOLLOWING TRANSACTION OF PURCHASES FROM THE FIRMS/ CONCERN MANAGED BY PRAVEEN KUMAR JAIN; SR. NO. NAME OF THE PARTIES TRANSACTION AMOUNT (RS.) 1 M/S FASTSTONE TRADING CO. PVT. LTD. 1,90,74,080 2 M/S NEW PLANET TRADING CO. PVT. LTD. 4,82,987 TOTAL 1,95,57,667 THE DIRECTOR OF THESE COMPANIES HAVE ADMITTED ON OATH DURING THE SEARCH THAT THEY INDULGED IN PROVIDING ACCOMMODATION ENTRI ES. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES AND TO PRODUCE THE EVI DENCES OF PURCHASES FROM M/S FASTSTONE TRADING CO. PVT. LTD. AND M/S NEW PLA NET TRADING CO. PVT. LTD. THE ASSESSEE FILED ITS REPLY DATED 05.09.2014 ON 19.04.2014 BEFORE THE AO. IN THE REPLY, THE ASSESSEE HAS SPECIFICALLY CON TENDED THAT THEY HAVE NOT MADE ANY TRANSACTION WITH M/S NEW PLANET TRADING CO . PVT. LTD. AND ALL THE TRANSACTION WERE FROM M/S FASTSTONE TRADING CO. PVT . LTD. THE ASSESSEE FURTHER CONTENDED THAT ALL THE GOODS WERE RECEIVED BY THE ASSESSEE IS ENTERED IN THE BOOKS OF COMPANY. THE GOODS ARE THEN SOLD TO THE CUSTOMERS. THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. T HE CONTENTION OF ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 6 THE ASSESSEE WAS NOT ACCEPTED BY AO. THE AO DISALLO WED THE ENTIRE ALLEGED PURCHASES OF RS. 1,95,57,667/- FROM M/S FASTSTONE T RADING CO. PVT. LTD. AND M/S NEW PLANET TRADING CO. PVT. LTD. AS UNEXPLAINED PURCHASES. 8. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SIMILAR CONTENTION AS URGED BEFORE THE AO. THE LD. CIT(A) DELETED THE ADD ITION OF RS. 4,82,987/- HOLDING THAT THE ASSESSEE CATEGORICALLY CONTENDED T HAT ASSESSEE DID NOT HAVE ANY TRANSACTION WITH M/S NEW PLANET TRADING CO. PVT . LTD. WITH REGARD TO THE REMAINING DISALLOWANCE OF RS. 19,074,080/-. THE LD. CIT(A) OBSERVED THAT ASSESSEE HAS SHOWN THE PURCHASES OF RS. 1,90,7 4,679/- (15.6%) OF PURCHASES. SINCE THE ASSESSEE HAS NOT SUBSTANTIATED THE SALES IN RESPECT OF PURCHASE VALUE OF RS. 43,98,018/-. THUS, THE DISALL OWANCES ON SIMILAR PURCHASES WERE SUSTAINED. HOWEVER, FOR THE REMAININ G PURCHASE OF RS.1,46,76,661/- FOR WHICH THE SALE WAS SHOWN THE A DDITION WAS RESTRICTED @ 8.76% BY GIVING THE BENEFIT OF VAT. WE HAVE OBSERVE D THAT THE ASSESSEE HAS NEITHER COME FORWARD TO SUBSTANTIATE THEIR CONT ENTION. 9. WE HAVE SEEN THAT THE LD. CIT(A) RESTRICTED THE ADD ITION ON THE BASIS OF DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. S IMITH P. SHETH [(2013) 219 TAXMANN 85 (GUJ.)]. WE HAVE NOTED THAT THE AO H AS NOT REJECTED THE SALE OF THE ASSESSEE. THE BOOKS OF ACCOUNT OF ASSES SEE WERE ALSO NOT REJECTED. THE AO HAS NOT DISPUTED THE CORRESPONDING SALES. HO WEVER, THE LD. CIT(A) CONSIDERED THE REPLY OF ASSESSEE DATED 05.09.2014 T HAT ASSESSEE HAS NOT ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 7 TRANSACTED WITH M/S NEW PLANET TRADING CO. PVT. LTD . AND DELETED THE DISALLOWANCE OF PURCHASES THEREOF. THE LD. CIT(A) W HILE EXAMINING THE CORRESPONDING SALE OF REMAINING PURCHASES AND FURTH ER OBSERVED THAT NO CORRESPONDING SALE WITH REGARD TO PURCHASES VALUE O F RS. 43,98,018/- WAS SHOWN OR FILED BEFORE HIM. THE LD. CIT(A) SUSTAINED THE TOTAL DISALLOWANCE OF RS. 56,83,693/- WHICH IS ABOUT 29% OF THE IMPUGN ED/ALLEGED BOGUS PURCHASES OF RS. 1,90,74,679/-. IN OUR CONSIDERED V IEW, THE DISALLOWANCE SUSTAINED BY LD. CIT(A) IS ON THE HIGHER SIDE. IN O UR VIEW, UNDER THE INCOME- TAX, THE ONLY REAL INCOME CAN BE TAXED BY THE REVEN UE. WE ARE OF THE FURTHER VIEW THAT IN CASE WHERE THE WHOLE TRANSACTION OR PA RT TRANSACTION IS NOT VERIFIABLE DUE TO VARIOUS REASONS, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT ONLY. 10. THE HONBLE BOMBAY HIGH COURT IN CASE OF HARIRAM BH AMBANI IN ITA NO. 313/13 DECIDED ON 04.02.2015 HELD THAT THE REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALE CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTABLE ON THE TOTAL UNRECORDED SALE CONSIDERATION ALONE CAN BE SU BJECT TO INCOME-TAX. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE , THE DISALLOWANCE OF REASONABLE PERCENTAGE OF IMPUGNED/BOGUS PURCHASES W OULD MEET THE END OF JUSTICE. THUS, WE ARE OF THE OPINION THAT THE DISAL LOWANCE MADE ON ACCOUNT OF BOGUS PURCHASES BE RESTRICTED TO 12.5% OF IMPUGN ED/ALLEGED BOGUS ITA NO.5473 & 5858/M/2 016- M/S SEJAL GLASS LTD. 8 PURCHASES OF RS. 1,90,74,679/-. THE AO IS DIRECTED ACCORDINGLY. HENCE, GROUNDS OF APPEAL RAISED BY ASSESSEE ARE PARTLY ALL OWED. RESULTANTLY, THE GROUNDS OF APPEAL RAISED BY REVENUE ARE DISMISSED. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 D AY OF SEPTEMBE R 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 06/09/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/