DCIT 11(2)(2), MUMBAI V. SUPREME OFFSHORE CONSTRUCTION AND TECHNICAL SERVICE LTD, MUMBAI

ITA 626/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0318 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.626 /MUM/2015 (ASSESSMENT YEAR: 2011-12) D C I T - 11(2)(2) VS. M/ S . SUPREME OFFSHORE CONSTRUC TION ROOM NO. 477A, 4TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 AND TECHNICAL SERVICE LTD. 410-411, MIDAS SAHAR PLAZA M.V. ROAD, JPB. NAGAR ANDHERI (E), MUMBAI 400059 PAN AAECS0155R APPELLANT RESPONDENT APPELLANT BY: DR. A.K. NAYAK RESPONDENT BY: NONE DATE OF HEARING: 14.06.2017 DATE OF PRONOUNCEMENT: 14.06.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF THE CIT(A)- 18, MUMBAI DATED 11.11.2014 FOR A.Y. 2011-12. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO T HE DISALLOWANCE OF PURCHASES AMOUNTING TO RS.1,03,55,993/- REDUCED BY THE CIT(A) TO 10% I.E. RS.10,35,599/- THEREBY GRANTING RELIEF OF RS.9 3,20,394/-. 3. FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTED THAT THE ASSESSEE HAD MADE PURCHASES OF RS.1,03,55,993/- FROM M/S. CE E PORT IRON & STEEL PVT. LTD. AS THE NAME OF THE PARTY APPEARED IN THE HAVALA DEALERS IDENTIFIED BY THE SALES TAX DEPARTMENT AND DISPLAYED IN ITS WE BSITE AT SERIAL NO. 1475, THE AO THEREFORE DISALLOWED THE TOTAL PURCHAS ES AMOUNTING TO RS.1,03,55,993/-. 4. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) REDUCED THE SAID PURCHASES TO 10% OF RS.1,03,55,933/-. ITA NO. 626/MUM/2015 SUPREME OFFSHORE CONSTRUCTION & TECHNICAL SERVICES LTD. 2 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE, THEREF ORE, DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LEARNED D. R. AFTER HEARING THE LEARNED D.R. AND GOING THROUGH THE ORDERS OF THE TA X AUTHORITIES BELOW WE NOTED THAT THE CIT(A) HAS REDUCED THE ADDITION TO 1 0% OF THE BOGUS PURCHASES BY OBSERVING AS UNDER: - FROM THE PERUSAL OF THE SUBMISSIONS AND FACTS OF T HE CASE IT IS NOTICED THAT THE AO HAS MADE DISALLOWANCE OF PURCHASES MADE FROM CEEPORT IRON AND STEEL PVT. LTD AMOUNTING TO RS.1,03,55,993 /- BECAUSE THE ASSESSEE COULD NOT PRODUCE THE PARTY FOR EXAMINATIO N. THE AO HAS NO DOCUMENTARY EVIDENCE IN HIS POSSESSION EXCEPT THAT THE NAME OF M/S. CEEPORT IRON AND CEEPORT IRON AND STEEL PVT. LTD WA S APPEARING IN THE LIST OF HAWALA OPERATORS IN THE WEBSITE OF SALES TA X DEPARTMENT. NO OTHER INCRIMINATING DOCUMENT WAS AVAILABLE WITH THE AO FOR MAKING THIS DISALLOWANCE. ON THE OTHER HAND THE AR HAS SUB MITTED COMPLETE DETAILS AND DOCUMENTARY EVIDENCE IN THE SHAPE OF IN VOICES, TRANSPORTATION RECEIPTS, OCTROI BILLS AND STOCK INV ENTORY ALSO THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. B UT ONLY THE ASSESSEE COULD NOT PRODUCE THE PARTY FOR EXAMINATIO N. IT IS OBSERVED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT V. NIKUNJ EXIMP ENTERPRISES PVT. LTD IN APPEAL NO.5604 ORDER DATED 17.12.2012 HAS DECIDED THE, ISSUE OF BOGUS PURCHASES WHERE THE QUE STION BEFORE THE HON'BLE HIGH COURT WAS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN DE LETING THE ADDITION MADE BY THE AO OF RS.1.33 CRORES TOWARDS BOGUS PURC HASES EVEN THOUGH THE SUPPLIERS WERE NON-EXISTENT AND ONE OF T HE PARTIES HAD CATEGORICALLY DENIED HAVING ANY BUSINESS DEALING WI TH THE ASSESSEE COMPANY. EVEN THE HON'BLE MUMBAI TRIBUNAL IN THE CA SE OF DCIT V. SHRI RAJEEV G. KALATHIL ORDER DATED 20.8.2014 HAS DECIDE D THIS ISSUE BY HOLDING AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DE PARTMENT. WE AGREE THAT LOT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE L EFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TA KE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF T HE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE. TH E FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASESSEE WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE O F WESTERN EXTRUSION INDUSTRIES (SUPRA) IS CONCERNED, WE FIND THAT IN THAT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLI ER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE C ASE BEFORE US, ITA NO. 626/MUM/2015 SUPREME OFFSHORE CONSTRUCTION & TECHNICAL SERVICES LTD. 3 THERE IS NOTHING IN THE ORDER OF THE AO ABOUT THE C ASH TRAIAL. SECONDLY, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUB T THEREFORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND THERE ARE NOT S UFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAKEN BY THE AO. SO CON FIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO. FURTHER, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH POLY FAB (P). LTD 40 TAXMANN.COM 494 HAS HELD THAT WHERE THE ASSESSEE WHO PURCHASED CLOTH AND SELL GOODS BUT PURCHASED WERE NOT TRACEABLE. THE PROFIT ELEMENT EMBEDDED IN THE P URCHASES WOULD BE SUBJECT TO TAX AND NOT ENTIRE AMOUNT. KEEPING IN VI EW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THAT THE FACTS AR E SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT AND GU JARAT HIGH COURT THAT THE ASSESSEE HAS SUBMITTED COMPLETE EVIDENCES AND MOREOVER THE SALES WERE NOT DOUBTED BY THE AO. SINCE SALES ARE A CCEPTED, THEREFORE, PURCHASES CANNOT BE TREATED AS BOGUS. WITHOUT PURCH ASES, THERE CANNOT BE ANY SALES. HOWEVER, IT IS A CASE WHERE PU RCHASES INVOICES WERE RECEIVED FROM M/S. CEE PORT IRON AND STEEL PVT . LTD BUT ACTUALLY MATERIAL WAS RECEIVED FROM OTHER COMPANY. THUS THE FACTS ARE SQUARELY COVERED BY THE DECISION OF HONORABLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH POLY FAB (P) LTD (SUP RA). THEREFORE, I AM OF THE VIEW THAT ONLY THE PROFIT ELEMENT EMBEDDED B Y THESE PURCHASES OF RS.1,03,55,993/- @ 10% HAS TO BE CONFIRMED. THER EFORE, THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES IS RES TRICTED TO RS.10,35,599/- AND BALANCE ADDITION IS DELETED. THE GROUND OF APPEAL IS PARTLY ALLOWED. 6. THE LEARNED D.R. EVEN THOUGH VEHEMENTLY RELIED ON T HE ORDER OF THE AO BUT COULD NOT PRODUCE ANY COGENT MATERIAL IN EVI DENCE OR ANY CASE LAW CONTRARY TO ONE ON WHICH THE CIT(A) PLACED RELIANCE WHILE REDUCING THE ADDITION TO 10% OF RS.1,03,55,993/- . WE ARE, THERE FORE, OF THE VIEW THAT THIS IS NOT A FIT CASE WHICH WARRANTS OUR INTERFERE NCE. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 14 TH JUNE, 2017 ITA NO. 626/MUM/2015 SUPREME OFFSHORE CONSTRUCTION & TECHNICAL SERVICES LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -18, MUMBAI 4. THE CIT - 8, MUMBAI 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.