DCIT 9(2)(1), MUMBAI V. CAYLX CHEMICALS & PHARMACEUTICALS LTD, MUMBAI

ITA 6071/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4990 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 29-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ABI RAMA KARTHIKEYAN
• Keywords: Bogus purchase; Onus to prove; Revised return
• Section: 143(3); 147

Judgement Text

P A G E | 1 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6071/MUM/2017 (ASSESSMENT YEAR: 2009 - 10 ) DEPU TY COMMISSIONER OF INCOME TAX - 9(2)(1 ) ROOM NO. 665A , 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S CALYX CHEMICALS & PHARMACEUTICALS LTD, 110, MARWAH COMPLEX MARWAH ESTATE, SAKI VIHAR ROAD, SAKINAKA, ANDHERI (EAST), MUMBAI - 400072 PAN AABCC1457B ( APPELLANT ) ( RESPONDENT ) APPELLANT BY: SHRI S. ABI RAMA KARTHIKEYAN, D.R RESPONDENT BY: NONE DATE OF HEARING: 26 .12.2018 DATE OF PRONOUNCEMENT: 25.01.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 16, MUMBAI DATED 20.07.2017, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 09.11.2011 FOR A.Y. 2009 - 10. THE REVENUE ASSAILING THE ORD ER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING EFFECTIVE GROUND OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN LAW RESTRICTING THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES MADE FROM T HE BOGUS ENTITIES IGNORING THE FACT THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF TRANSACTION FROM HAWALA OPERATORS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO IGNORING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF NK PROTEINS LT D.V S . DEPUTY COMMISSIONER OF INCOME TAX [ SPECIAL LEAVE TO APPEAL (C). CC NO.(S) ] 769 OF 2017 WHEREIN ADDITION OF ENTIRE INCOME ON ACCOUNT OF BOGUS PURCHASES WAS CONFIRMED. P A G E | 2 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS 2. BRIEFLY STATED, THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29.09.2009, DECLARING TOTAL INCOME AT RS.2,71,70,080/ - . SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 01.10.2010 , DECLARING LOSS AT ( - ) RS.2,22,98,960/ - . ASSESSMENT UNDER SEC.143(3) OF THE I. T. ACT WAS COMPLETED ON 09.11.2011, DETERMINING THE TOTAL LOSS AT ( - ) RS.2,20,92,026/ - . THEREAFTER , ON THE BASIS OF INFORMATION GATHERED BY THE SALES TAX (VAT) DEPARTMENT MAHARASHTRA RECEIVED BY THE A.O THROUGH THE OFFICE OF THE DGIT (INV.), MUMBAI, THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION CARRIED OUT BOGUS PURCHASES/HAWALA TRANSACTIONS WITH THREE PARTIES VIZ. (I) SHRI GANESH ENTERPIRSES/STAR ENTERPRISES ( G RACIOUS P HARMA); (II) M/S VINAY TRADING COMP ANY; AND (III) M/S SHYAM ENTERPRISES, WHICH ALL CONCERNS WERE ADMITTEDLY INVOLVED IN ISSUING HAWALA SALES BILLS WITHOUT SUPPLYING GOODS , THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC. 147 OF THE I.T. ACT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O CALLED UPON THE ASSESSEE TO JUSTIFY THE GENUINENESS OF THE PURCHASES OF RS.7,06,52,624/ - MADE DURING THE YEAR UNDER CONSIDERATION FROM THE AFOREMENTIONED PARTIES, FAILING WHICH THE SAME WERE TO BE TREATED AS BOGUS PURCHASE S AND ADDED TO ITS TOTAL I NCOME . APART THEREFROM, THE A.O DIRECTED THE ASSESSEE TO PLACE ON RECORD DOCUMENTS EVIDENCING THE TRANSPORT AND DELIVERY OF THE GOODS PURCHASED FROM THE AFOREMENTIONED PARTIES. IN ORDER TO FORTIFY THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRA NSACTIONS THE A. O ISSUED NOTICE S UNDER SEC.133(6) TO THE AFORESAID PARTIES VIZ. (I) SHRI GANESH ENTERPIRSES/STAR ENTERPRISES ( G RACIOUS P HARMA); (II) M/S VINAY TRADING COMPANY; AND (III) M/S SHYAM ENTERPRISES, , HOWEVER NEITHER OF THEM RESPONDED TO THE SAME. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O DIRECTED THE ASSESSEE TO PRODUCE THE REPRESENTATIVE S /DIRECTORS/PROPRIETORS OF ONE OF THE AFOREMENTIONED PARTIES VIZ. M/S S HRI GANESH ENTERPRISES. THE ASSESSEE WAS ALSO CALLED UPON BY THE A.O. TO PLACE ON REC ORD THE COPIES OF THE INVOICES, TRANSPORT BILLS , QUANTITATIVE DETAILS OF THE GOODS PURCHASED AND SOLD ALONG WITH THE PAYMENT DETAILS. THE ASSESSEE IN COMPLIANCE TO THE AFORESAID DIRECTIONS OF THE A.O THOUGH PLACE D ON RECORD THE COPIES OF THE TAX INVOICES O F THE PURCHASES MADE FROM M/S SHRI GANESH ENTERPRISES ALONGWITH THE COPY OF ITS LEDGER ACCOUNT AS APPEARING IN ITS BOOKS OF P A G E | 3 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS ACCOUNT AND THE BANK DETAILS, HOWEVER, FAILED TO GIVE ANY QUANTITY WISE DETAILS OF PURCHASE S AND SALE S WHICH WOULD HAVE PROVED THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS OF THE ASSESSEE WITH THE AFOREMENTIONED PARTIES. THE A.O AFTER DELIBERATING ON THE FACTS OF THE CASE WAS NOT PERSUADED TO SUBSCRIBE TO THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT IT HAD MADE GENUINE PURCHASES F ROM THE AFOREMENTIONED PARTIES . IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE BURDEN TO PROVE THE GENUINENESS OF THE TRANSACTIONS MADE WITH THE AFOREMENTIONED PARTIES. HOWEVER, THE ASSESSEE SUBMITTED BEFORE THE A.O THAT IN THE CO URSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS THE TOTAL PURCHASES OF RS.2,11,16,271/ - MADE FROM ONE OF THE AFOREMENTIONED CONCERN S VIZ. M/S SHYAM ENTERPRISES HAD ALREADY BEEN BROUGHT TO TAX BY THE A.O WHILE PASSING THE ORDER UNDER SEC.143(3). T HE A.O FINDING THE AFORE SAID CLAIM OF THE ASSESSEE IN ORDER , THUS DID NOT PROCEED WITH AND DREW ANY ADVERSE INFERENCES AS REGARDS THE PURCHASES WHICH WERE MADE BY THE ASSESSEE FROM THE AFOREMENTIONED CONCERN VIZ. M/S SHYAM ENTERPRISES. HOWEVER, THE A.O BEI NG OF THE VIEW THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE REMAINING TWO CONCERN S VIZ. (I) SHRI GANESH ENTERPRISES ; AND (II) M/S VINAY TRADING COMPANY, THUS MADE AN ADDITION OF THE ENTIRE VALUE OF PURCHASES OF RS.4,95,36,353/ - THAT WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE M . 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTIONS ADVANC ED BY THE ASSESSEE AGREED WITH THE VIEW TAKEN BY THE A.O THAT THE ASSESSEE HAD FAILED TO PROVE THE EXISTENCE OF THE AFOREMENTIONED PARTIES. HOWEVER, IT WAS OBSERVED BY THE CIT(A) THAT THE A.O AFTER EXAMINING THE DOCUMENTARY EVIDENCE WHICH WAS PLACE D ON HIS RECORD BY THE ASSESSEE HAD NOT DRAWN ANY ADVERSE INFERENCES AS REGARDS THE CONSUMPTION/SALES OF THE GOODS UNDER CONSIDERATION. IN SUM AND SUBSTANCE, IT WAS OBSERVED BY THE CIT(A) THAT THE A.O NOT HAVING DOUBTED THE GENUINENESS OF THE SALE S COULD NOT HAVE GONE AHEAD AND MADE AN ADDITION IN RESPECT OF THE ENTIRE PURCHASES , AS IT WOULD LEAD TO ABSURD PROFITS. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE CIT(A) P A G E | 4 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS WAS OF THE VIEW THAT AS THE ASSESSEE HAD MADE THE PURCHASES OF THE GOODS, THOUGH NOT FROM THE AF OREMENTIONED PARTIES BUT FROM THE OPEN/GREY MARKET, THEREFORE, IT WOULD HAVE BENEFITED BY PROCURING THE SAID GOODS AT A DISCOUNTED VALUE. INSOFAR, THE ESTIMATION OF THE SUPPRESSED PROFIT INVOLVED IN MAKING OF THE PURCHASE S UNDER CONSIDERATION BY THE ASSESS EE FROM THE OPEN/GREY MARKET, THE CIT(A) ESTIMATED THE SAME AT 12.5% OF THE VALUE OF PURCHASES THAT WERE CLAIMED TO HAVE BEEN MADE FROM THE SAID BOGUS ENTITIES. IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS THE CIT(A) SUSTAINED THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF 12.5% OF THE PURCHASES OF RS.4,95,36,353/ - THAT WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED TWO PARTIES, VIZ. (I) M/S SHRI GANESH ENTERPRISES/STAR ENTERPRISES; AND (II) M/S VINAY TRADING COMPANY. 4. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE RESPONDENT ASSESSEE DESPITE HAVING BEEN INTIMATED AS REGARDS THE DATE OF HEARING OF THE APPEAL , HOWEVER HAD NEITHER PUT UP AN APPEARANCE BEFORE US NOR ANY APPLICATION SEEKING AN ADJOURNMENT HAS BEEN FILED BEFORE US. WE THUS IN THE BACKDROP OF THE AFORESAID FACTS ARE CONSTRAINED TO PROCEED WITH THE APPEAL AS PER RULE 25 OF THE A PPELLATE TRIBUNAL RULES, 1963 AND DISPOSE OFF THE SAME AFTER HEARING THE REVENUE APPELLANT. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER OF THE A.O. IT WAS SUBMITTED BY THE LD. D.R THAT THE CIT(A) WHILE RESTRICTING THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE VALUE OF THE PURCHASES MAD E BY THE ASSESSEE FROM THE BOGUS ENTITIES HAD LOST SIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF N.K. PROTIENS LTD. VS. DCIT [SPECIAL LEAVE TO APPEAL (C....CC NO. (S)769 OF 2017] WHEREIN THE ADDITION OF THE ENTIRE INCOME ON ACCOUNT OF B OGUS PURCHASE S WAS CONFIRMED. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE DELIBERATED AT LENGTH ON THE FACTS OF THE CASE AND ARE PERSUADED TO BE IN AGREEMEN T WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES P A G E | 5 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. IN OUR CONSIDERED VIEW , NOW WHEN THE REVENUE WAS IN RECEIPT OF INFORMATION THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FROM THE AFOREMENTIONED PARTIES, THEREFORE, A VERY HEAVY ONUS WAS CAST UPON THE ASSESSEE TO SUBSTANTIATE THE AUTHENTICITY OF THE SAID PURCHASE TRANSACTIONS ON THE BASIS OF IRREFUTABLE DOCUM ENTARY EVIDENCE AND PROVE THE SAME TO THE HILT, WHICH WE FIND THE ASSESSEE HAD FAILED TO DO. HOWEVER, AT THE SAME TIME WE FIND OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT THE GENUINENESS OF THE SALES HAD NOT BEEN DISLODGED BY THE A. O. RATHER, NO ADVERSE FINDING AS REGARDS THE CONSUMPTION/SALES OF THE GOODS HAD BEEN A R RIVED AT BY THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. WE ARE PERSUADED TO SUBSCRIBE TO THE OBSERVATIONS OF THE CIT(A) THAT NOW WHEN THE A.O HAD NOT DOUBTED TH E GENUINENESS OF THE SALES, THUS HE COULD NOT HAVE THEREAFTER GONE AHEAD AND MADE AN ADDITION IN RESPECT OF THE ENTIRE PURCHASES , AS THE SAME WOULD CLEARLY LEAD TO ABSURD PROFITS IN TE HANDS OF THE ASSESSEE . IN SUM AND SUBSTANCE, IT WOULD BE HIGHLY IMPROBA BLE TO PRESUME THAT THE ASSESSEE WOULD HAVE CARRIED OUT THE SALES WITHOUT MAKING THE CORRESPONDING PURCHASES. IN OUR CONSIDERED VIEW , IT IS CLEARLY A CASE WHERE THE ASSESSEE HAD MADE PURCHASES FROM THE OPEN/GREY MARKET AND HAD AVAILED THE SERVICE S OF THE A FOREMENTIONED PARTIES FOR PROCURING THE ACCOMMODATION BILLS IN ORDER TO FACILITATE ROUTING OF THE PURCHASE THROUGH ITS BOOKS OF ACCOUNTS . WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAD RIGHTLY CONCLUDED THAT IN THE TOTALITY OF THE FACTS OF THE CASE TH E ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. 6. INSOFAR, THE CONTENTION OF THE REVENUE THA T THE CIT(A) WHILE RESTRICTING THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE VALUE OF THE PURCHASES MADE FROM THE BOGUS ENTITIES HAD LOST SIGHT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF N.K. PROTIENS LTD. VS. DCIT [SPECIAL LEAVE TO APPEA L (C..CC NO. (S)769 OF 2017], WHEREIN THE ADDITION OF THE ENTIRE INCOME ON ACCOUNT OF BOGUS PURCHASES WAS CONFIRMED, THE SAME IN OUR CONSIDERED P A G E | 6 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS VIEW BEING DISTINGUISHABLE ON FACTS WOULD NOT ASSIST THE CASE OF THE REVENUE BEFORE US. WE FIND THAT IN THE CASE OF N.K. PROTIENS LTD. (SUPRA) SEARCH PROCEEDINGS WERE CONDUCTED ON THE ASSESSEE, IN THE COURSE OF WHICH CERTAIN SIGNED BLA N K CHEQUES AND VOUCHERS OF THE PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HA VE MADE PURCHASES WERE FOUND. IT WAS THUS IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX THAT IT WAS CONCLUDED THAT THE CASH DEPOSITED IN THE BANK ACCOUNT S OF THE SAID RESPECTIVE SUPPLIER PARTIES WAS THE UNDISCLOSED INCOME OF THE ASSESSEE, AND THE PURCHASES MADE THEREFROM WERE BOGUS. WE ARE OF THE CONSIDERED VIEW THAT THE FACTS INVOLVED IN THE CASE OF THE PRESENT ASSESSEE ARE ABSOLUTELY DISTINGUISHABLE AS AGAINST THOSE AS WERE INVOLVED IN THE CASE OF N.K. PROTIENS LTD. (SUPRA) . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A), WHO IN OUR CONSIDERED VIEW HAD RIGHTLY RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES CLAIMED BY THE ASSESSE E TO HAVE BEEN MADE FROM THE AFOREMENTIONED BOGUS ENTITIES VIZ. (I) M/S SHRI GANESH ENTERPRISES/STAR ENTERPRISES; AND (II) M/S VINAY TRADING COMPANY, UPHOLD HIS ORDER. 7. THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONO UNCED IN THE OPEN COURT ON 2 5.01 .2019 SD/ - SD/ - ( SHAMIM YAHYA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 25.01 . 2019 PS. ROHIT P A G E | 7 ITA NO. 6071/MUM/2017 A.Y. 2009 - 10 DY. COMMISSIONER OF INCOME TAX VS. M/S CALYX CHEMICALS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT . REGISTRAR) , / ITAT, MUMBAI