DCIT 15(3)(1), MUMBAI V. TOPNOTCH CHEMICALS P.LTD, NAVI MUMBAI

ITA 6231/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8484 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• 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: DR P DANIEL
• Keywords: Bogus purchase
• Section: 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. 6231 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2011 - 12 ) THE DCIT 15(3)(1) , ROOM NO. 451, 4 TH FLOOR, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 VS. M/S TOPNOTCH CHEMICALS PRIVATE LIMITED, PLOT NO. C - 116, TTC INDUSTRIAL AREA, THANE BEL APUR ROAD, PAWANE VILLAGE, NAVI MUMBAI - 400705 ./ ./ PAN/GIR NO. : AAACT 3865 F ( / APPELLANT ) .. ( / RESPONDENT ) & ./ CO NO. 155 / MUM/ 201 7 ( / ASSESSMENT YEAR: 2011 - 12 ) M/S TOPNOTCH CHEMIC ALS PRIVATE LIMITED, PLOT NO. C - 116, TTC INDUSTRIAL AREA, THANE BELAPUR ROAD, PAWANE VILLAGE, NAVI MUMBAI - 400705 VS. THE DY. C.I.T. 15(3)(1), ROOM NO. 451, 4 TH FLOOR, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 ./ ./ PAN/GI R NO. : AAACT 3865 F ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI V. JENARDHANAN ( DR) / ASSESSEE BY : DR. P. DANIE L (AR) / DATE OF HEARING : 1 4/08 /2017 / DATE OF PRONOUNCEMENT : 08 / 11 /2017 / O R D E R PER RAM LAL NEGI, JM T HE PRESENT APPEAL AND CROSS OBJECTION HAVE BEEN FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST ORDER DATED 18/08/2016 PASSED BY THE 2 ITA NO. 6231 /MUM/2016 & CO NO. 155/MUM/2017 ASSESSMENT YEAR: 2011 - 12 LD. CIT (A) - 24 , MUMBAI 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 U / S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO. 6231 / MUM/2016 ( ASSESSMENT YEAR: 2011 - 12 ) BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 32,25,530/ - . THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. LATER ON, THE ASSESSMENT WAS RE - OPENED U/S 147 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM THE IN VESTIGATION WING OF THE INCOME TAX DEPARTMENT TO THE EFFECT THAT DURING THE YEAR 2010 - 11 RELEVANT TO ASSESSMENT YEAR 2011 - 12, THE ASSESSEE HAD OBTAINED BOGUS BILLS FROM HAWALA DEALERS AMOUNTING TO RS. 64,08,602/ - WITHOUT PURCHASING ANY GOODS . ACCORDINGLY, NOTICE U/S 148 WAS ISSUED TO WHICH THE ASSESSEE DID NOT RESPOND. HOWEVER, IN RESPONSE TO NOTICES U/S 143 (2) AND 142 (1), THE AUTHORIZED REPRESENTATIVE FILED A LETTER SUBMITTING THAT THE ORIGINAL RETURN FILED MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. 2. ACCORDINGLY, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS TO VERIFY THE TRANSACTION IN QUESTION. THE ASSESSEE SUBMITTED THAT THE GOODS WERE GENUINELY PURCHASED AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. THE AS SESSEE FURTHER SUBMITTED THAT PURCHASES WERE MADE THROUGH BROKERS WHO USED TO DELIVER THE GOODS AT THE COMPANY GODOWN . SINCE, THE ASSESSEE COULD NOT FURNISH DELIVERY CHALLAN, GATE PASS, LOWRY RECEIPT/TRANSPORTATION RECEIPT, WEIGHT MEASUREMENT RECEIPT AND T RANSPORTERS BILLS FOR VERIFICATION, SHOW CAUSE NOTICE WAS ISSUED AS TO WHY THE AMOUNT OF BOGUS PURCHASES SHOULD NOT BE 3 ITA NO. 6231 /MUM/2016 & CO NO. 155/MUM/2017 ASSESSMENT YEAR: 2011 - 12 ADDED BACK TO THE INCOME. THE ASSESSEE CONTENDED THAT THE PURCHASES ARE GENUINE AND SUBMITTED TAX INVOICE AND LEDGER ACCOUNT OF THE PARTY IN SUPPORT OF ITS CONTENTION . THE AO FURTHER ISSUED NOTICE U/S 1 3 3 (6) TO THE 9 BOGUS PARTIES FROM WHOM BOGUS BILLS WERE OBTAINED BY THE ASSESSEE , HOWEVER, T HE SAME WERE RECEIVED BACK UN - SERVED. T HE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES BEFORE THE A O. 3. SINCE, THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS THE TRANSACTION , THE AO MADE ADDITION OF THE TOTAL AMOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 64,08,602/ - TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE L D. CIT (A) IN THE FIRST APPEAL . T HE LD. CIT (A) AFTER HEARING THE ASSESSEE , RELYING ON THE VARIOUS JUDICIAL PRONOUNCEMENTS AND DECISION OF THE VARIOUS BENCHES OF THE ITAT RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER. 4. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A0 ERRED IN DIRECTING THE ASSESSING OFFICER TO ESTIMATE PROFIT OF 12.5% ON THE TOTAL ALLEGED BOGUS PURCHASES. THE LD. CIT (A) HAS FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE SAID SELLER PARTIES WERE FOUND TO BE HAWALA OPERATORS/BOGUS BILLERS. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (A) OUGHT TO HAVE MADE FURTHER ENQUIRIES HIMSELF OR DIRECTED THE A.O. TO MAKE FURTHER ENQUIRIES AND FURNISH TO REPORT IN VIEW OF THE PROVISIONS OF SECTION 250 OF THE I.T. ACT, IF HE WAS NOT SATISFIED REGARDING THE ENQUIRY MADE BY THE A.O. 4 ITA NO. 6231 /MUM/2016 & CO NO. 155/MUM/2017 ASSESSMENT YEAR: 2011 - 12 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE PURCHASES, THE LD. CIT (A) OUGHT TO HAVE CONFIRMED THE ENTIRE AMOUNT OF BOGUS PURCHASE TO THE INCOME OF THE ASSESSEE. HENCE, THE ORDER OF THE LD. CIT (A) IS LIABLE TO BE SET ASIDE. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE HAS SUBMITTED THE PARTIES BILL , TAX INVOICES AND LEDGER ACCOUNTS TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTION OF PURCHASES , T HE LD. CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION MADE BY THE AO. THE LD. COUNSEL RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. NIKUNJ EXIMP ENTE RPRISES PVT. LTD. 372 ITR 619 (BOM) SUBMITTED THAT SINCE THE AO HAS NOT REJECTED THE SALE SHOWN BY THE ASSESSEE THE PURCHASES CANNOT BE CANNOT BE TREATED AS BOGUS. THEREFORE, THE CIT (A) HAS WRONGLY SUSTAINED THE ADDITION OF 12.5%. THE LD. COUNSEL FURTHER SUBMITTED THAT ASSESSEE HAS ALSO FILED CROSS OBJECTION. 7. 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 REV ENUE IS THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION MADE BY THE ASSESSEE TO 12.5%. 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 BY THE ASSESSEE DURING THE RELEVANT YEAR, THE ENTIRE AMOUNT OF PURCHASES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE FOR THE REASON THAT THERE CANNOT BE SALE WITHOUT ANY PURCHASE. IF THE ASSESSEE HAD NOT PURCHASED THE GOODS IN QUESTION FROM THE PARTIES CONCERNE D, IT IMPLIES THAT PURCHASES WERE MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT . HENCE, THERE IS NO JUSTIFICATION IN MAKING ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES DETERMINED BY THE 5 ITA NO. 6231 /MUM/2016 & CO NO. 155/MUM/2017 ASSESSMENT YEAR: 2011 - 12 AO. UNDER THESE CIRCUMSTANCES, THE AO OUGHT TO HAVE MADE ADDITION KEEPING IN VIEW THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES IN QUESTION. 8 . THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPR A ) , WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL, HAS OBSERVED THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER 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) UPHEL D THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS 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 HI GH COURTS OF BOMBAY AND GUJARAT, DISCUSSED ABOVE, WE DISMISS ALL THE GROUNDS OF APPEAL OF THE REVENUE AND UPHOLD THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO MAKE ADDITION @ 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. C O NO. 155 / MUM/2017 (ASSESSMENT YEAR: 2011 - 12 ) THE ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE IMPUGNED ORDER ON THE FOLLOWING EFFECTIVE GROUNDS: 1. THE LEARNED A.O. ERRED IN REOPENING THE ASSESSMENT COMPLETED WITHOUT ANY VALID REASONS WHATSOEVER. 2. THE LEARNED CIT (A) ERRED IN RETAINING AN AMOUNT OF RS. 8,01,075/ - BEING 12.5% OF THE PURCHASES EVEN THOUGH THE ASSESSEE HAD MADE GENUINE PURCHASES. SINCE, WE HAVE UPHELD THE FINDINGS OF THE LD. CIT(A) BY CONFIRMING THE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES IN QUESTION AND 6 ITA NO. 6231 /MUM/2016 & CO NO. 155/MUM/2017 ASSESSMENT YEAR: 2011 - 12 DISMISSED THE REVENUES APPEAL, THE PRESENT CROSS OBJECTION HAS BECOME INFRUCTUOUS. HENCE, WE DISMISS THE PRESENT CROSS OBJECTION AS INFRUCTUOUS. IN THE RESULT, APPEAL FILED BY T HE REVENUE FOR ASSESSMENT YEAR 2011 - 12 AND CROSS OBJECTION FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH NOVEMBER , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 08 / 11 / 2017 ALINDRA, PS / 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI