MICROWARE COMMUNICATIONS, MUMBAI V. ITO WD 21(1)(3), MUMBAI

ITA 6196/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9931 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: SANJAY PARIKHLD
• Keywords: Bogus purchase
• Section: 143(3); 133(6)

Judgement Text

ITA NO.6196/MUM/2014 MICROWARE COMMUNICATIONS ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 6196/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) MICROWARE COMMUNICATIONS 101, CHINTAMANI KUTIR PLOT NO.504, AZAD ROAD VILE PARLE (E) MUMBAI 400 020 / VS. INCOME TAX OFFICER WARD 21(1)(3) C-10, ROOM NO. 605, BANDRA KURLA COMPLEX MUMBAI 400 051 ! ./ ./PAN/GIR NO. AAAFM-1504-B ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : SANJAY PARIKH,LD. AR REVENUE BY : SUMAN KUMAR, LD. DR / DATE OF HEARING : 29/06/2017 / DATE OF PRONOUNCEMENT : 07/07/2017 ITA NO.6196/MUM/2014 MICROWARE COMMUNICATIONS ASSESSMENT YEAR 2010-11 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-32 [CIT(A)], MUMBAI DATED 11/08/2014 QUA CONFIRMATION OF ADDITIONS ON ACCOUNT OF BOGUS PURCHASES AND ADHOC DISALLOWANCE OF CERTAIN EXPENSES. 2. BRIEFLY STATED THE ASSESSEE, BEING RESIDENT FIRM ENGAGED IN THE BUSINESS OF TRADING OF TELECOMMUNICATION & ELECTRIC GOODS , WAS ASSESSED U/S 143(3) FOR IMPUGNED AY AT RS.31,49,020 /- AFTER CERTAIN ADDITIONS / DISALLOWANCES AS AGAINST RETURNED INCOM E OF RS.12,45,320/- FILED BY THE ASSESSEE ON 15/10/2010. 2.1 THE ADDITIONS WHICH ARE SUBJECT MATTER OF THIS APPEAL ARE ADDITION OF RS.18,23,624/- ON ACCOUNT OF CERTAIN BOGUS PURCHASES AND AN ADHOC DISALLOWANCE OF RS.74,418/- BEING 10% OF CERTAIN EX PENSES VIZ. STAFF WELFARE, SUNDRY EXPENSES, CONVEYANCE EXPENSES AGGREGATING TO RS.7,44,187/-. 2.2 DURING ASSESSMENT PROCEEDINGS, NOTICES U/S 133( 6) WERE SENT TO SEVEN PARTIES TO VERIFY THE PURCHASES OF RS.18,23,6 24/- MADE BY THE ASSESSEE BUT THE SAME REMAINED UN-SERVED BY POSTAL AUTHORITIES. THESE PARTIES WERE LISTED AS BOGUS BILL SUPPLIERS BY THE SALES TAX DEPARTMENT, MAHARASHTRA . THE ASSESSEE CONTENDED THAT THE GOODS WERE PURCHA SED THROUGH BANKING CHANNELS AND PURCHASED GOODS HAVE B EEN SOLD BY THE ASSESSEE. HOWEVER, NOT CONVINCED, LD. AO TREATED TH E SAME AS BOGUS ITA NO.6196/MUM/2014 MICROWARE COMMUNICATIONS ASSESSMENT YEAR 2010-11 3 PURCHASES AND ADDED THE SAME TO THE INCOME OF THE A SSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE T HE SAME. 2.3 FURTHER, LD. AO NOTICED MANY DISCREPANCIES IN T HE EXPENSE VOUCHERS MAINTAINED BY THE ASSESSEE WHICH LED TO AN ADHOC DISALLOWANCE OF 10% AGAINST THE SAME WHICH CAME TO RS.74,418/-. 3. AGGRIEVED, THE ASSESSEE CONTESTED BOTH THE ADDIT IONS WITHOUT ANY SUCCESS BEFORE LD. CIT(A) AND RAISED SIMILAR CONTEN TIONS. HOWEVER, LD. CIT(A) CONFIRMED THE STAND OF LD. AO BY NOTING THAT THE ASSESSEE FAILED TO DISCHARGE PRIMARY ONUS OF SUBSTANTIATING THE PUR CHASES. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR ASSESSEE [AR], WHILE DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER BOOK, CONTENDED THAT THE ACCOUNTS OF THE ASSESSEE WERE SUBJECTED TO TAX AUDIT WHEREIN QU ANTITATIVE DETAILS OF GOODS TRADED HAVE BEEN PROVIDED AND THE SAME HAS NO T BEEN DISPUTED BY THE REVENUE. FURTHER, THE ASSESSEE WAS IN POSSES SION OF PURCHASE INVOICES, ALL PAYMENTS WERE THROUGH BANKING CHANNEL S AND CORRESPONDING SALES HAVE BEEN ACCEPTED BY THE REVEN UE AND THEREFORE, IMPUGNED ADDITIONS WERE NOT JUSTIFIED. THE ADHOC DISALLOWANCE OF EXPENSES WAS ASSAILED ON THE GROUND THAT THE SAME W AS ON THE HIGHER SIDE. 4.1 PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR] CONTENDED THAT NO CONFIRMATION IN RESPECT OF ANY OF THE SUPPLIERS COULD BE FILED BY THE ASSESSEE AND NOTICES U/S 133(6) ISSUED BY THE LD. A O WERE RETURNED BACK UN-SERVED AND THEREFORE, THE ONUS TO SUBSTANTIATE THE PURCHAS ES SQUARELY FELL ON THE ASSESSEE WHICH HE FAILED TO DI SCHARGE AND HENCE THE ADDITIONS WERE JUSTIFIED. ITA NO.6196/MUM/2014 MICROWARE COMMUNICATIONS ASSESSMENT YEAR 2010-11 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SO FAR AS THE ADHOC DISALLOWANCE OF EXPENSES IS CONCERNED, WE SEE NO REASON TO INTERFERE WITH THE S AME SINCE THE 10% ADDITION WAS FAIR AND REASONABLE TO ACCOUNT FOR DIS CREPANCIES IN THE VOUCHERS MAINTAINED BY THE ASSESSEE. 5.1 REGARDING ADDITION AGAINST BOGUS PURCHASES, WE ARE CONVINCED WITH THE ARGUMENTS OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE PRIMARY ONUS OF PROVING THE PURCHASES AND IT COULD NOT PRODUCE EVIDENCES TO SHOW ACTUAL DELIVERY OF MATERI AL AND ALSO COULD NOT PRODUCE CONFIRMATORY LETTERS FROM THE ALLEGED BOGUS SUPPLIERS. HOWEVER, WE ALSO FIND THAT THE ASSESSEE IS IN POSSESSION OF PURCHASE INVOICES AND THE PAYMENTS ARE THROUGH BANKING CHANNELS AND COMPL ETE QUANTITATIVE DETAILS IS AVAILABLE ON RECORD WHICH HAS BEEN ACCEP TED. THEREFORE, EVEN IF ALL THE PURCHASES ARE FOUND TO BE BOGUS, IT IS N OTED THAT SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR P ROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E PROFIT EARNED BY ASSESSEE AGAINST PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES. THEREFORE, WE RESTRICT THE SAID DISALLOWANCE TO 10% OF TOTAL ALLEGED BOGUS PURCHASE S OF RS.18,23,624/- WHICH COMES TO RS.1,82,362/-. WE DIRECT SO. 6. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. ITA NO.6196/MUM/2014 MICROWARE COMMUNICATIONS ASSESSMENT YEAR 2010-11 5 ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JULY, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07.07.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. $'- , - , / DR, ITAT, MUMBAI 6. . / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI