D.C.I.T. RG. 9(1), MUMBAI V. ACUBE ENGINEERING & CONSULTANCY LTD., MUMBAI

ITA 6050/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3588 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B PRUSETH
• Assessee Lawyers: SUBHASH SHETTY
• Keywords: Bogus purchase; Gross profit estimation; Accommodation entries
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI BEFORE SHRI R.C. SHARMA, AM AND SHRI SANDEEP GOSAIN , JM ./ I.T.A. NO. 6050/MUM/2013 ( / ASSESSMENT YEAR: 2010-11) D.C.I.T. 9(1), R. NO. 223, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. / VS. M/S. ACUBE ENGINEERING & CONSULTANCY LTD 208, ACME INDUSTRIAL PARK, I.B. PATEL ROAD, GOREGAON EAST, MUMBAI-400 063. ./ ./PAN/GIR NO. AAFCA 8128D ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI B. PRUSETH / RESPONDENT BY : SHRI SUBHASH SHETTY / DATE OF HEARING : 30/12/2015 !'# / DATE OF PRONOUNCEMENT : 02/03/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-19 DATED 07.08.2013 THEREBY ALLOWING THE APPEAL OF TH E ASSESSEE FILED AGAINST THE ORDER OF THE AO DATED 13.02.2013 ON THE FOLLOWING G ROUNDS. 2 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS .1,08,97,610/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACCOUN T OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE PARTIES FROM WHOM THE PURCHASES WERE SHOWN TO HAVE BEEN MADE HAD ADMITTED BEFORE THE SAL ES TAX AUTHORITIES THAT THEY HAVE ONLY PROVIDED ACCOMMODATION BILLS WITHOUT SALE OF GOODS? 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF CONTRACTS FOR AIR-CONDITIONING AND ITS MAINTENAN CE, APART FROM CONSULTANCY IN THE SAME FIELD. THE RETURN OF INCOME OF THE ASSESSEE FO R A.Y. 2010-11 WAS E-FILED ON 27.09.2010 DECLARING TOTAL INCOME OF RS.77,44,570/- . THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT. THE STA TUTORY NOTICES U/S 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE. AND THE ASSESSING OFFICER AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE HAD PAS SED ORDER OF ASSESSMENT U/S 143(3) DATED 13.02.2013 THEREBY MAKING THE ADDITION S OF RS.1,08,97,610/- ON ACCOUNT OF BOGUS PURCHASES. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITIONS MADE BY THE AO VIDE ORDER DATED 13.02.201 3. 3 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREINABOVE. GROUND NO. 1&2 4. SINCE BOTH THE GROUNDS ARE INTER-CONNECTED AND I NTER-RELATED THEREFORE WE THOUGHT IT FIT TO DISPOSE OFF THE SAME THROUGH PRES ENT ORDER. 4.1 LD. DR REPRESENTING THE REVENUE SUBMITTED THAT THE AO AFTER GETTING INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE PURCHASES MADE BY THE ASSESSEE FROM SIX PARTIES NAMELY:- (A) NIDDHISH IMPEX PVT. LTD. (B) MAHAVIR SALES CORPORATION (C) DEEP ENTERPRISES (D) TULSIANI PVT. LTD. (E) ROHIT ENTERPRISES (F) SAMARTH ENTERPRISES ARE BOGUS AND IN THIS RESPECT THE AO ISSUED NOTICES TO THE ASSESSEE AND ASKED TO SHOW CAUSE AS TO WHY THE PURCHASE AMOUNTING TO RS.1 ,08,97,610/- FROM ABOVE PARTIES SHOULD NOT BE DISALLOWED ON THE BASIS OF IN FORMATION RECEIVED FROM SALES TAX DEPARTMENT. IT WAS ALSO SUBMITTED BY THE LD. DR THAT THE ASSESSEE HAD COLLECTED TAX OF RS.4,19,138/- AND HAS NOT DEPOSITE D THE SAME IN THE P& L A/C. THE 4 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D ASSESSEE FURTHER FAILED TO PRODUCE ALL THESE PARTIE S BEFORE THE AO FOR VERIFICATION REGARDING THE GENUINENESS OF THE PURCHASES SHOWN BY THE ASSESSEE. AND AS A RESULT OF THIS, THE GENUINENESS OF THE PURCHASES SHOWN BY THE ASSESSEE FROM THE SAID PARTIES COULD NOT BE VERIFIED WITH SUPPORTING DOCUM ENTARY EVIDENCES. MOREOVER THE ASSESSEE FAILED TO DEBIT THE TAX DEDUCTED ON THE NE T PURCHASES MADE FROM THE ABOVE SIX PARTIES. THEREFORE, THE LD. AO HAD RIGHTLY MADE THE ADDITION OF RS.1,08,97,610/- 5. THE LD. DR ALSO SUBMITTED THAT THE CIT(A) HAS WI THOUT CONSIDERING THE FACTS OF THE PRESENT CASE IN THE RIGHT PERSPECTIVE HAS WR ONGLY DELETED THE ADDITION MADE BY THE AO. ON THE OTHER HAND THE LD. AR REPRESENTI NG THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE CIT(A) AND SUBMITTED THAT THE A O HAS MADE THE ADDITION PURELY ON THE BASIS OF GENERAL INFORMATION BROUGHT FROM THE SALES TAX DEPARTMENT. LD. AO FAILED TO APPRECIATE THAT ENTIRE PAYMENTS WE RE MADE THROUGH CHEQUES AND DOCUMENTARY EVIDENCES WERE ALSO PLACED ON RECORD AN D RELIED UPON BY THE ASSESSEE IN THE SHAPE OF COPIES OF THE LEDGER ACCOUNTS OF TH E PARTIES, PURCHASE ORDERS, DELIVERY CHALLANS AS ALSO THE BANK STATEMENT EVIDEN CING PAYMENTS. IT WAS ALSO SUBMITTED BY THE LD. AR THAT THE CIT(A) HAS APPRECI ATED THE DOCUMENTS PLACED ON RECORD BY THE AR AND HAS RIGHTLY DELETED THE ADDITI ONS MADE BY THE AO. 5 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D 6. WE HAVE HEARD THE COUNSELS FROM THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PAS SED BY THE REVENUE AUTHORITIES, BEFORE WE DECIDE THE MERIT OF THE CASE IT IS NECESS ARY TO ANALYZE THE ORDERS PASSED BY THE CIT(A) WHILE DEALING WITH THIS GROUND RAISED BY THE REVENUE. THE RELEVANT PARA IS REPRODUCED AS UNDER. 5.1 IT IS CLEAR THAT THE AO HAD INSISTED ON PRODUC TION OF THE PARTIES. HE HAD HOWEVER CLEARLY LOST SIGHT OF THE FACT THAT THE ONUS WAS PARTLY ON HIM, IN THAT HE WAS SEEKING TO RELY ON THE STATEMEN TS OF THESE SIX PARTIES. AS SUCH, HE WAS BOUND TO PROVIDE AN OPPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE THESE PARTIES. HE WAS-ALSO BOUND TO ALLOW-THE APPELLANT ACCESS TO THE STATEMENTS OF THESE SIX PARTIES. WHIL E THE ASSESSMENT ORDER IS SILENT ON THIS MATTER, THE APPELLANT HAS FORCEFU LLY BROUGHT THIS POINT' OUT DURING ITS SUBMISSION. IN OTHER WORDS, THE NON- PRODUCTION OF THESE PARTIES WOULD NOT JUST BE AN ISSUE AGAINST THE APPE LLANT. IT WOULD ACTUALLY STRENGTHEN THE CLAIM OF THE APPELLANT AS W ELL. 5.2 IN THIS CONTEXT, THE DECISION OF THE HON'BLE HI GH COURT OF DELHI IN THE CASE OF CIT VIS NIKUNJ EXIMP ENTERPRISES PVT. LTD. (2013 1 TMI 88) IS NOTEWORTHY. THE HON'BLE HIGH COURT HAD HELD THAT, 'IN OUR VIEW, MERELY BECAUSE SUPPLIERS HAVE NOT APP EARED BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME TAX (APPEALS) ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT- ASSESSEE. THE ASSESSING OFFICER AS WELL THE COMMISS IONER OF INCOME TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE, BASIS OF SUSPICION BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THE M. 5.2 FURTHER, IT IS ALSO A FACT THAT THE AO HAS SOUG HT NOT TO DISTURB EITHER THE GROSS PROFIT OR THE NET PROFIT RATIOS, NOR HAS HE REJECTED THE BOOKS OF 6 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D ACCOUNT OF THE APPELLANT. HE HAS ONLY SOUGHT TO MAK E AN ADDITION ON THE BASIS OF CERTAIN INFORMATION RECEIVED FROM THE SALE S TAX DEPARTMENT. 5.3 FURTHER, THE DOCUMENTATION PRODUCED BY THEE AP PELLANT IN THIS CASE IS SEEN TO BE SPECIFIC. ALL THE DOCUMENTS PERTAININ G: TO ALL THE PURCHASES MADE BY THE APPELLANT FROM ALL THE PARTIES HAVE BEE N PRODUCED BY WAY OF COPIES OF THE SAME. THESE ARE LEDGER ACCOUNTS OF TH E PARTIES, PURCHASE ORDERS, DELIVERY CHALLANS AS ALSO THE BANK STATEMEN T EVIDENCING PAYMENTS. THIS DOCUMENTATION WAS ONCE MORE FILED BE FORE ME. THE AO HOWEVER FAILED TO TAKE INTO ACCOUNT ANY OF THIS. 5.4 FURTHER, IT IS CLEAR THAT THE AO HAD SOUGHT TO CONFRONT THE APPELLANT ONLY BY WAY OF SEEKING THE PRESENCE OF THE SIX SPEC IFIC PARTIES. IN OTHER WORDS, EVEN THE STATEMENTS OF ' THE SIX PARTIES HAV E NOT BEEN PROVIDED TO THE APPELLANT. THIS WOULD BE IMPORTANT IN THE LIGHT OF THE FOLLOWING OBSERVATION MADE BY THE HONBLE TRIBUNAL IN THE CAS E OF JAGDAMBA TRADING COMPANY V/S ITO [2006-(ID2)-GJX-0689-TJOD] 'THE AO TOOK THE PURCHASES MADE BY THE ASSESSEE FRO M THESE PARTIES AS FICTITIOUS AND BOGUS MAINLY ON THE STRENGTH OF THE AFFIDAVITS' OF THESE PARTIES TENDERED BEFORE SALES-TAX AUTHORITIES . THE SE AFFIDAVITS AND EVEN STATEMENT, OF THE ASSTT. MANAGER OF THE BANK WERE N EVER THE SUBJECT- MATTER OF CROSS-EXAMINATION BY THE ASSESSEE. IN THE SE CIRCUMSTANCES, THE DECISIONS OF. HON'BLE SUPREME COURT IN THE CASE OF KISHINCHAND. CHELLARAM VS. CIT (1980) 19 CTR (SC) 360: (1980) 12 5 ITR 713 (SC) AND IN THE CASE OF TIN BOX CO. VS. CIT(2001) 166 CT R (SC) 509: (2001) 249 ITR 216 (SC) T66 COME TO THE RESCUE OF THE ASSE SSEE. THE HON'BLE APEX COURT IN THESE DECISIONS HAVE CATEGORICALLY HE LD THAT UNLESS THE CONTENTS OF THE AFFIDAVITS, ETC. ARE CONFRONTED GIV ING OPPORTUNITY OF CROSS- EXAMINATION, THE SAME CANNOT BE READ IN EVIDENCE AG AINST THE ASSESSEE. 5.5 FOR ENSURING CONFRONTATION, AVAILABILITY OF THE STATEMENTS SHOULD HAVE BEEN ENSURED. THIS WOULD ALSO BE IMPORTANT IN THE CONTEXT OF THE AVERMENT OF THE APPELLANT THAT THE STATEMENTS OF AC COMMODATION ENTRIES WERE COMPLETELY GENERAL IN NATURE AND HAD NO CONNEC TION WITH THE SPECIFIC GOODS SOLD TO THE APPELLANT. UNFORTUNATELY , THERE IS NO CLARITY ON 7 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D THIS ISSUE AS THE BASIC-MATTER OF PROVISION OF THE STATEMENT AND THE SUBSEQUENT EXAMINATION HAVE NOT BEEN ATTENDED TO BY THE AO. FURTHER, IT IS SEEN THAT ALL THE PAYMENTS MADE BY THE APPELLANT TO THE SIX PARTIES HAVE, FLOWN ONLY THROUGH BANKING CHANNELS, BY WAY O F CROSSED CHEQUES. IT IS THUS CLEAR DOCUMENTARY PROOF AVAILABLE FOR SH OWING THE FLOW OF MONIES FROM THE BANK ACCOUNT OF THE APPELLANT TO TH E BANK ACCOUNTS OF THE SIX PARTIES. IN OTHER WORDS, THESE ARE NOT SIMP LE CASH PURCHASES. THERE IS NO COUNTER AVAILABLE AGAINST THIS IN THE A SSESSMENT ORDER. 5.6 IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OP INION THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF THE ALLEGED BOGUS PURC HASES IS NOT SUSTAINABLE. 6. AS STATED EARLIER ALL THE GROUNDS ARE INTERCONNE CTED. THE APPELLANT HENCE SUCCEEDS ON ALL THE SIX GROUNDS. 7. IN THE RESULT, THE APPEAL IS ALLOWED. 7. WE HAVE ANALYZED THE ORDER PASSED BY THE CIT(A) AND WHILE DEALING WITH THE SAID GROUND ,WE FOUND THAT THE CIT(A) HAS RIGHT LY TAKEN INTO CONSIDERATION THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V/S NIKUNJ EXIMP ENTERPRISES PVT. LTD (2013 1 TMI 88) WHEREIN IT HA S BEEN CATEGORICALLY MENTIONED THAT MERELY BECAUSE SUPPLIERS HAVE NOT APPEARED BEF ORE THE AO OR THE CIT(A), ONE CANNOT CONCULDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. WE HAVE ALSO NOTICED THAT IN THE PRESENT CASE THE ASSE SSEE SUBMITTED DETAILS OF PURCHASES COMPRISING OF NET PURCHASES AND SALES TAX ALONG WITH SUPPORTING DOCUMENTS SUCH AS COPIES OF LEDGER ACCOUNTS, COPIES OF PURCHASE INVOICES, COPIES OF PURCHASE ORDERS, DELIVERY CHALLANS IN RESPECT OF PURCHASES, COPIES OF BANK 8 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D STATEMENT OF THE ASSESSEE HIGHLIGHTING THE PAYMENTS MADE BY CROSSED CHEQUES. THE AO HAS TREATED THE SAID PURCHASES AS BOGUS ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. WE HAVE ALS O NOTICED THAT THE AO HAD DISALLOWED THE PURCHASES WITHOUT CONSIDERING THE CO RRESPONDING SALES MADE BY THE ASSESSEE IN RESPECT OF SAID GOODS. THE LD. CIT(A) W HILE CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE HAS RIGHTLY NOTED THA T THE AO HAS SOUGHT NOT TO DISTURB EITHER THE GROSS PROFIT OR THE NET PROFIT R ATIO, NOR HE HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. AO HAS MADE THE ADDITION O N THE BASIS OF CERTAIN INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. IN THE PRESENT CASE, THE COPIES OF STATEMENTS RECEIVED FROM THE SALES TAX DE PARTMENT WERE ALSO NOT GIVEN TO THE ASSESSEE IN THIS RESPECT LD. CIT(A) HAS RIGH TLY FOLLOWED THE OBSERVATIONS MADE BY THE HONBLE TRIBUNAL IN THE CASE OF JAGDAM BA TRADING COMPANY VS. ITO [2006-(ID2)-GJX-0689-TJOD] . SINCE IN THE PRES ENT CASE THE LD. CIT(A) HAS CONSIDERED THE CASE FROM ALL ANGLES AND HAS RIGHTLY COME TO THE CONCLUSION THAT THE STATEMENTS WITH REGARD TO ACCOMMODATION ENTRIES WER E COMPLETELY GENERAL IN NATURE AND HAD NO CONNECTION WITH THE SPECIFIC GOOD S SOLD TO THE ASSESSEE. THE CIT(A) HAS RIGHTLY HELD THAT THERE WAS NO CLARITY O N THIS ISSUE AS THE BASIC MATTER OF PROVISION OF THE STATEMENT AND THE SUBSEQUENT MATTE R OF CROSS-EXAMINATION HAS NOT BEEN CONSIDERED BY THE AO. THE DEFENCE RAISED BY TH E ASSESSEE THAT ENTIRE TRANSACTION WAS BASED ON DOCUMENTARY EVIDENCES AND IT IS ALSO AN UN-DISPUTED FACT 9 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D THAT ALL THE PAYMENTS MADE BY THE ASSESSEE TO ALL T HESE SIX PARTIES HAVE FLOWN ONLY THROUGH BANKING CHANNELS I.E. BY WAY OF CROSSED CHE QUES AND THESE WERE NOT SIMPLE CASH PURCHASES. THUS, IT IS CLEAR THAT THERE IS DOC UMENTARY PROOF AVAILABLE FROM THE BANK ACCOUNT OF THE ASSESSEE TO THE BANK ACCOUNTS O F THE SIX PARTIES AND MOREOVER THE ASSESSEE HAS ALSO PLACED BEFORE US THE COMPARAT IVE CHART SHOWING TURNOVER, GROSS PROFIT RATE AND NET PROFIT RATE IN THE FOLLOW ING FORMAT: SR.NO. A.Y. G.P. RATIO N.P. RATIO TURNOVER 1 2010-11 24.81 3.14 19,05,77,494 2 2009-10 27.23 5.30 23,70,24,521 3 2008-09 25.72 5.14 21,88,98,682 FROM THE COMPARATIVE SHEET IT IS CLEAR THAT THE AVE RAGE GROSS PROFIT RATE IS 25.92% WHEREAS GROSS PROFIT RATIO OF ASSESSEE IN TH E YEAR UNDER CONSIDERATION IS 24.81%. TO COVER UP THE LEAKAGE OF REVENUE, CAUSED BY LOWER GROSS PROFIT RATE WE RESTRICT THE ADDITION TO THE EXTENT OF LOWER G.P. R ATE APPLIED BY ASSESSEE AS COMPARED TO AVERAGE GROSS PROFIT RATE I.E. 1.11 (25 .92-24.81) ON THE ALLEGED PURCHASES. ACCORDINGLY ADDITION OF RS.1,19,800/- (1 .11% OF 1.08 CRORES) IS UPHELD. 9. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED I N PART. 10 ITA NO. 6050/MUM/2013 (A.Y. 2010-11) D.C.I.T VS. M/S. ACUBE ENGINEERING & CONSULTANCY LT D ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY, 2016 SD/- SD/- (R.C. SHARMA) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :29.02.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI