M/s. Raizan Steel Engineering Private Limited, Pune V. Deputy Commissioner of Income tax, Pune

ITA 615/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2956 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MALVIYA
• Keywords: Bogus purchase; Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 615 /PUN/20 17 / ASSESSMENT YEAR : 2011 - 12 M/S. RAIZAN STEEL ENGINEERING PRIVATE LIMITED. T - 159, MIDC, BHOSARI, PUNE - 411 026. PAN : AABCR3337B ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 10, PUNE. / RESPONDENT A SSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI ALOK MALVIYA / DATE OF HEARING : 11 .0 3 .2020 / DATE OF PRONOUNCEMENT : 12 .03 .2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 9, PUNE DATED 28.11.2016 FOR THE ASSESSMENT YEAR 2011 - 12 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD: 2 ITA NO. 615 /PUN/20 17 A.Y. 2011 - 12 1. THE LEARNED CIT(A) - 9, PUNE ERRED IN LAW AND ON FACTS IN CONFIRMING THE ORDER PASSED BY THE LEARNED AO WITHOUT APPRECIATING FACT THAT THE JURISDICTION ASSUMED BY LEARNED AO U/S.147 OF THE IT ACT, 1961 IN INCORRECT . THE LEARNED CIT(A) - 3 OUGHT TO HAVE APPRECIATED THAT THE LEARNED AO HAS REOPENED THE CASE ONLY BECAUSE TAN OF SOME OF THE SUPPLIERS OF THE APPELLANT APPEARING IN LIST OF SALES TAX DEPARTMENT AS BOGUS PARTIES. 2. THE LEARNED CIT(A) - 9, PUNE ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION MADE BY THE LEARNED AO IN MAKING ADDITIONS RELATING TO PURCHASES FROM M/S. VARDHMAN TRADERS, AMOUNTING TO RS.20,27,741/ - U/S.68 OF IT ACT, 1961 ALLEGING THAT THE SAID PURCHASES ARE BOGUS/ HAWALA TRANSACTIONS. 3. THE LEARNED CIT(A) - 9, PUNE ERRED IN LAW AND ON FACTS IN REJECTING ADDITIONAL EVIDENCES SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDINGS MERELY STATING THAT CONDITIONS OF 46A ARE NOT SATISFIED. 4. THE LEARNED CIT(A) - 9, PUNE ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ADDITION MADE BY THE LEARNED AO AMOUNTING TO RS.20,27,741/ - BY MERELY RELYING ON THE INFORMATION RECEIVED FROM THE MAHARASHTRA SALES TAX DEPARTMENT DESPITE THE FACT THAT APPELLANT HAS DISCHARGED HIS ONUS FOR JUSTIFYING THE GENUINENESS OF THE T RANSACTION. 5. WITHOUT PREJUDICE TO GROUND NO 1 & 2, THE LEARNED AO ERRED IN LAW AND ON FACTS IN NOT RESTRICTING THE ADDITION TO THE EXTENT OF AVERAGE GROSS PROFITS REGARDING THE ALLEGED BOGUS/HAWALA PURCHASES, AS THE APPELLANT HAD SUBMITTED ALL THE PRIMA RY DOCUMENTS AND SUBSTANTIATED THE ONUS GENUINENESS OF THE TRANSACTIONS. 6. THE APPELLANT CRAVES LEAVE TO ADD/MODIFY/ALTER/ DELETE ALL /ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF INDUSTRIAL FABRICATION AND STEEL PROFILE CUTTING. IT HAS FILED RETURN FOR THE ASSESSMENT YEAR 2011 - 12 ON 25.09.2011 DECLARING TOTAL INCOME OF RS.88,95,579/ - . THE SAID RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 07.01.2012. THE CASE WAS REOPENED BY THE THEN ASSESSING OFFICER WITH REASON TO BELIEF AND RECORDING THE REASONS DATED 26.08.2013 AS PER THE STATUTE LAID DOWN IN THE ACT. FINALLY, THE ASSESSMENT WAS COMPLETED AT RS.1,09,23,320/ - BY MAKING ADDITION OF RS.20,27,741/ - ON ACCOUNT OF BOGUS PURCHASES U/S.68 OF THE ACT. 3. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT AS PER THE ASSESSMENT ORDER, THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF 3 ITA NO. 615 /PUN/20 17 A.Y. 2011 - 12 THE PURCHASES MADE FROM SELLER EXCEPT FOR PROVIDING COPIES OF BILLS AND INVOICES OF THE PARTIES, MONTHLY STATEMENT OF DETAIL S OF PAYMENTS MADE THROUGH BANKING CHANNELS. HOWEVER, IT IS THE CONTENTION OF THE LD. AR OF THE ASSESSEE THAT THEY HAVE PRODUCED SUF FICIENT EVIDENCES BEFORE THE ASSESSING OFFICER, H OWEVER, THE ASSESSING OFFICER DID NOT CONDUCT ANY SPECIFIC ENQUIRY WITH RESPECT TO THE FACTS VIS - - VIS THE EVIDENCES PRODUCED BEFORE HIM. THE ASSESSING OFFICER MADE THE DISALLOWANCE S ON THE BASIS OF SUSPICION AND CONJECTURE WITHOUT CARRYING OUT ANY ENQUIRY. 3.1. THE LD. AR OF THE ASSESSEE HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. MOHAMMAD HAJI ADAM & CO. VIDE ITS JUDGMENT DATED 11.02.2019 IN ITA NO.1004 OF 2016 . THE LD. AR OF THE ASSESSEE HAS FURTHER SUBMITTED THAT IN SUCH SITUATION OF BOGUS PURCHASES, THE GP RATE OF GENUINE PURCHASES HAS TO BE IDENTIFIED AND ALONG WITH THAT BOGUS PURCHASE GP ALSO HAVE TO BE IDENTIFIED. THE DIFFERENCE OF THESE TWO CAN BE ADDED TO THE INCOME OF THE ASSESSEE. FOR EXAMPLE, IF THE GP PERCENTAGE OF GENUINE PURCHASES COMES TO 8% WHEREAS GP PERCENTAGE OF BOGUS PURCHASES COMES TO 10%, THEN 2% OF BOGUS PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSE SSEE. 4. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE JUDICIAL PRONOUNCEMENT PLACED BEFORE US. WE HAVE ALSO GIVEN CONSIDERABLE THOUGHT TO THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT VS. MOHOM MAD HAJI ADAM (SUPRA.) WHEREIN IT HAS BEEN HELD THAT NO AD - HOC ADDITION AT THE RATE OF 10% OF BOGUS PURCHASES IS WARRANTED. RATHER, THE ADDITION SHOULD BE MADE TO THE EXTENT OF DIFFERENCE BETWEEN GROSS PROFIT RATE ON GENUINE PURCHASES AND GROSS PROFIT RATE OF BOGUS PURCHASES. 4 ITA NO. 615 /PUN/20 17 A.Y. 2011 - 12 REVERTING TO THE FACTS OF THE PRESENT CASE AND TAKING GUIDANCE FROM THE SAID JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. MOHOMMAD HAJI ADAM (SUPRA.), WE SET ASIDE THE ORDER OF THE LD. CIT(APPEAL) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR UNDERTAKING THIS EXERCISE AND FINDING OUT THE EXCESS GROSS PROFIT RATE EARNED FROM BOGUS PURCHASES AND THEN MAKING THE ADDITION ACCORDINGLY AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 5 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 12 TH D AY OF MARCH , 20 20 . SD/ - SD/ - D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 12 TH MARCH , 2020. SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 9, PUNE. 4. THE PR. CIT - 5, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 5 ITA NO. 615 /PUN/20 17 A.Y. 2011 - 12 DATE 1 DRAFT DICTATED ON 11 .03.2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11 .03.2020 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER