ITO WD 2(2), KALYAN V. K MANYAR, ULHASNAGAR

ITA 6229/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8874 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: VIRAG M SHAH
• Keywords: Bogus purchase
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 6229 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2011 - 12 ) THE INCOME TAX OFFICER, WARD 2(2), 2 ND FLOOR, MOHAN PLAZA, WAYLE NAGAR, KHADAKPADA, KALYAN (W) - 421301 VS. M/S K. MANYAR, PROP. MADHU H. MANIYAR (HUF), BK NO. 831, ROOM NO. 1, SEC. 17, ULHASNAGAR - 421503 ./ ./ PAN/GIR NO. : AAHHM 3368 J ( / APPELLANT ) .. ( / RESPONDENT ) / REVENUE BY : SHRI V. JENARDHANAN ( D R) / ASSESSEE BY : SHRI VIRAG M SHAH (AR) / DATE OF HEARING : 14 /08 /2017 / DATE OF PRONOUNCEMENT : 23 / 10 / 2017 / O R D E R PER RAM LAL NEGI, JM THIS APPEA L HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 07/07/2016 PASSED BY THE LD. COMMISS IONER OF INCOME TAX (APPEALS) - 3 , THANE , PERTAI NING TO THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE KARTA, HUF A TRADER IN PLY - WOOD, FILED ITS RETURN OF INCO ME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 2,89,090 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. 2 ITA NO. 6229 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 3. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT REGARDING BOGUS PURCHASES MADE BY VA RIOUS COMPANIES INCLUDING THE PRESENT ASSESSEE FROM HAWALA ENTITIES WHICH USED TO ISSUE BOGUS BILLS WITHOUT SELLING ANY GOODS , THE ASSESSMENT WAS RE - OPENED U/S 147 OF THE ACT. THE ASSESSEE WAS ONE OF THE COMPANIES, WHICH HAD MADE BOGUS PURCHASES FROM ONE O F THE SAID ENTITIES. AS PER THE INFORMATION, THE ASSESSEE COMPANY DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION MADE BOGUS PURCHASES TO THE TUNE OF RS. 7 2 ,1 5 , 46 5 / - FROM SUCH ENTITIES, VICTOR INTERTRADE PRIVATE LTD. 4. IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT THE AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE AO AND SUBMITTED THAT THE ORIGINAL RETURN FILED U/S 139(1) OF THE ACT MAY BE TREATED AS RETURN OF INCOME IN RESPONSE TO THE SAID NOTICE. THE ASSESSEE OBJECTED THE RE - OPENING, H OWEVER, THE ASSESSEES OBJECTION WAS REJECTED. DURING THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE TRANSACTION. ACCORDINGLY, SHOW CAUSE NOTICE WAS ISSUED AS TO WHY THE AMOUNT OF BOGUS PURCHASES SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE PURCHASES WERE GENUINELY MADE THROUGH BROKER AND THE GOODS WERE DIRECTLY DELIVERED AT THE DOORSTEP IN OWN VEHICLES . THE ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS WERE MADE TO THE PARTIES THR OUGH BANKING CHANNELS. TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE SUBMITTED COPY OF AUDIT REPORT, COPIES OF PURCHASE INVOICES AND DETAILS OF ASSETS PURCHASED COPY OF BANK STATEMENTS ETC. THE ASSESSEE HOWEVER, FAILED TO PRODU CE CONFIRMATION FROM THE PARTY CONC ERNED AND EVIDENCE TO ESTABLISH CONSUMPTION OF GOODS , DELIVERY CHALLANS STOCK REGISTER TO PROVE THE GENUINENESS OF THE TRANSACTION . THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTY BEFORE AO. SINCE, THE ASSESSEE COULD NOT SATISFY THE AO BY PRODUCING SUFFICIEN T EVIDENCE THAT THE TRANSACTIONS WERE GENUINENESS , THE AO 3 ITA NO. 6229 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 MADE ADDITION OF RS. 72,15,465 / - TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS 75,04,550 / - . 5 . FEELING AGGRIEVED, THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL AND RESTRICTED THE ADDITION TO 1 5% OF THE BOGUS PURCHASES MADE BY THE AO. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND S OF APPEAL AGAINST THE IMPUGNED ORD ER PASSED BY THE LD. CIT (A): - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - 3 THANE, ERRED IN DELETING OF RS. 72,15,465/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE AND THE ASS ES S EE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - 3, THANE ERRED IN DELETING THE ABOVE ADDITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVI NG THE PURCHASES. 6. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD.CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO 1 5% OF THE BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE RELEVANT YEAR. SINCE, THE ASSESSEE HAS FAILED TO PROV E GENUINENESS OF THE TRANSACTION, THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE FINDINGS OF THE LD. CIT(A) SUBMITTED THAT SINCE THE ASSESSEE HAS FURNISHED THE COP IES OF PURCHASE INVOICES, DETAILS OF ASSETS PURCHASED, BANK STATEMENTS ETC. AND FURTHER PROVED THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS, THE LD. CIT (A) HAS RIGHTLY RESTRICTED THE ADDITION MADE BY THE AO. THE LD. 4 ITA NO. 6229 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 COUNSEL FURTHER SUBMITTED THAT SINCE, THE FINDINGS OF THE LD. CIT(A) IS BASED ON THE LAW LAID DOWN BY THE VARIOUS HIGH COURTS AND THE DECISIONS OF THE VARIOUS BENCH OF THE INCOME TAX APPELLATE TRIBUNAL, THERE IS NO MERIT IN THE REVENUES APPEAL THEREFORE THE SAME IS LIABLE TO BE DISMISS ED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ENTIRE RECORD AND ALSO GONE THROUGH THE CASES RELIED UPON BY THE AUTHORITIES BELOW AS WELL AS REFERRED BEFORE US. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED T HE ADDITION MADE BY THE ASSESSEE TO 1 5%. WE NOTICE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES SHOWN BY THE ASSESSEE. SINCE, THE AO HAS NOT REJECTED THE SALES SHOWN DURING THE RELEVANT YEAR, THE ENTIRE AMOUNT OF PURCHASES CANNO T BE ADDED TO THE INCOME OF THE ASSESSEE AS THERE CANNOT BE SALE WITHOUT ANY PURCHASE. IF THE ASSESSEE HAD NOT PURCHASED THE GOODS IN QUESTION FROM THE PARTIES CONCERNED, IT IMPLIES THAT PURCHASES WERE MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN T HE BOOKS OF ACCOUNT . HENCE, THERE IS NO JUSTIFICATION IN MAKING ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO. UNDER THESE CIRCUMSTANCES, THE AO OUGHT TO HAVE MADE ADDITION KEEPING IN VIEW THE PROFIT ELEMENT EMBEDDED IN THE PURCHASE S IN QUESTION. 9. THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) , WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL, HAS OBSERVED THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICE R OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL B OGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, FOLLOWING THE PRINCIPLES LAW LAID DOWN BY THE HONBLE HIGH 5 ITA NO. 6229 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 COURTS OF BOMBAY AND GUJARAT, DISCUSSED ABOVE, WE DISMISS ALL THE GROUNDS O F APPEAL OF THE REVENUE AND UPHOLD THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO MAKE ADDITION @ 15% OF THE TOTAL AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 20 11 - 12 IS DISMIS SED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; D ATED: 23 / 10 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / C IT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI