TITAN LABORATORIES P LTD., MUMBAI V. DCIT CIRCLE-14(1)(2), MUMBAI

ITA 628/MUM/2023

AI Insights

The case involves M/s Titan Laboratories Pvt. Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, Delhi, for the assessment year 2011-12. The primary issues were the reopening of the assessment and the addition of purchases amounting to Rs. 19,82,500 from two parties, M/s Palak Enterprises and M/s Waksons Enterprises, which were alleged to be bogus. The Tribunal noted that the reopening was based on information from the Sales Tax Department regarding bogus purchases. The Tribunal referenced a similar case where it had restricted the disallowance of bogus purchases to 6% and applied the same reasoning, thus partly allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123449 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 21-06-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of cross examination; Third party statement
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI NARENDER KUMAR CHOUDHRY (JUDICIAL MEMBER) ITA No. 628/MUM/2023 Assessment Year: 2011-12 M/s Titan Laboratories Pvt. Ltd., A/01-GF & A/101 Plot No. 120, Anand Bhavan Road, Spectrum Building, R B Mehta Marg, Tilak Road, Ghatkopare (E), Mumbai-400077. Vs. DCIT Circle-14(3)(1), Aayakar Bhavan, M.K. Road, Mumbai-400020. PAN No. AACCT 0509 Q Appellant Respondent Assessee by : Mr. Ravindra Poojary Revenue by : Mr. B.K. Bagchi, DR Date of Hearing : 22/06/2023 Date of pronouncement : 22/06/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 29.01.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds: I. Reopening of Assessment : 1. The ld CIT(A) erred in confirming the order of Assessing officer in reopening the assessment vide notice w/s 148 of the act which is merely on information received from sales tax department, Mumbai without considering the fact that there was no tangible material on basis of which an assessment can be reopened, furthe his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. II. Addition of purchases Rs. 19,82,500/ 2. The Id CIT(A) erred in confirming the order of Assessing officer in disallow namely M/s Palak Enterprises and Ms Waksons Enterprises aggregating to Rs. 19,82,500/ withoutconsidering the genuine of purchase duly supported by documents details. like bank statement showing payments made to supplier, challans, ledger accounts etc, therefore merely on the information received from the sales tax department and third party statement,purchases cannot be treated as non genuine. 2. Briefly stated, facts of the case are that the return of income on 24.08.2011 declaring total loss of Rs.5,40,77,862/-. The return of income filed by the assessee was selected for scrutiny assessment of the Income-tax Act Rs.4,76,65,760/-. Subsequently, on receipt of information from the Sales Tax Department that assessee had obtained accommodation entry of bogus purchase reassessment was completed on 17.12.2016 u/s 143(3) of the Act, wherein addition in respect of 14 bogus purchase parties amounting to Rs.4,92,14,439/ assessment order, the assessee preferred appeal before the Ld. CIT(A), who dismissed M tax department, Mumbai without considering the fact that there was no tangible material on basis of which an assessment can be reopened, further the A failed to apply his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. II. Addition of purchases Rs. 19,82,500/-: 2. The Id CIT(A) erred in confirming the order of Assessing officer in disallowing the purchases from two parties namely M/s Palak Enterprises and Ms Waksons Enterprises aggregating to Rs. 19,82,500/ withoutconsidering the genuine of purchase duly supported by documents details. like bank statement showing payments made to supplier, purchase bills, delivery challans, ledger accounts etc, therefore merely on the information received from the sales tax department and third party statement,purchases cannot be treated as non Briefly stated, facts of the case are that the assessee filed its return of income on 24.08.2011 declaring total loss of . The return of income filed by the assessee was selected for scrutiny assessment, which was completed u/s 143(3) Act, 1961( in short the Act) at t . Subsequently, on receipt of information from the Sales Tax Department that assessee had obtained accommodation entry of bogus purchase, the assessment was reopened and reassessment was completed on 17.12.2016 u/s 143(3) wherein addition in respect of 14 bogus purchase parties amounting to Rs.4,92,14,439/- was made. Against the assessee preferred appeal before the Ld. ed the appeal of assessee. However, o M/s Titan Laboratories Pvt. Ltd. 2 ITA No. 628/Mum/2023 tax department, Mumbai without considering the fact that there was no tangible material on basis of which an r the A failed to apply his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. 2. The Id CIT(A) erred in confirming the order of Assessing ing the purchases from two parties namely M/s Palak Enterprises and Ms Waksons Enterprises aggregating to Rs. 19,82,500/- withoutconsidering the genuine of purchase duly supported by documents details. like bank statement showing purchase bills, delivery challans, ledger accounts etc, therefore merely on the information received from the sales tax department and third party statement,purchases cannot be treated as non- assessee filed its return of income on 24.08.2011 declaring total loss of . The return of income filed by the assessee was which was completed u/s 143(3) at total income of . Subsequently, on receipt of information from the Sales Tax Department that assessee had obtained accommodation he assessment was reopened and reassessment was completed on 17.12.2016 u/s 143(3) r.w.s. 147 wherein addition in respect of 14 bogus purchase parties . Against the said the assessee preferred appeal before the Ld. the appeal of assessee. However, on further appeal, the Tribunal vide order dated 01.10.2021 restricted the disallowance to 6% of the 2.1 Subsequently, the 148 of the Act on the ground that information from sales tax Department in relation two parties namely , and Waksons Enterprises as bogus purchases Assessing Officer completed the reassessment proceedings on 17.12.2016 and disallowed the purchases from amounting to Rs.19,82,500/ challenged reopening could not get any relief before the Ld. CIT(A). 3. Before us, the Ld. Counsel of the assessee did not press the ground challenging the validity of the reassessment. No. 1 of the appeal is accordingly dismissed as not pressed. 3.1 Regarding the second ground challenging the addition on merit, the Ld. Counsel of the assessee submitted that the assessee not object if disallowance for bogus purchase is restricted @ 6% which was sustained by the Tribunal in case of another 14 parties having identical issue 4. We have heard rival submission of the parties on the issue in dispute and perused the relevan the Co-ordinate Bench of the Tribunal in ITA No. 3344 and M appeal, the Tribunal vide order dated 01.10.2021 restricted the disallowance to 6% of the quantum of bogus purchases. Subsequently, the Assessing Officer issued another notice u/s 148 of the Act on the ground that information from sales tax in relation two parties namely , M/s Palak Enterprises and Waksons Enterprises as bogus purchases was received Assessing Officer completed the reassessment proceedings on 17.12.2016 and disallowed the purchases from those two Rs.19,82,500/-. Before the Ld. CIT(A), the assessee challenged reopening and addition on merit. However, the assessee could not get any relief before the Ld. CIT(A). Before us, the Ld. Counsel of the assessee did not press the the validity of the reassessment. No. 1 of the appeal is accordingly dismissed as not pressed. he second ground challenging the addition on merit, the Ld. Counsel of the assessee submitted that the assessee isallowance for bogus purchase is restricted @ 6% which was sustained by the Tribunal in case of another 14 parties issue of bogus purchases. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that ordinate Bench of the Tribunal in ITA No. 3344 and M/s Titan Laboratories Pvt. Ltd. 3 ITA No. 628/Mum/2023 appeal, the Tribunal vide order dated 01.10.2021 restricted the of bogus purchases. issued another notice u/s 148 of the Act on the ground that information from sales tax s Palak Enterprises was received. The Assessing Officer completed the reassessment proceedings on those two parties . Before the Ld. CIT(A), the assessee addition on merit. However, the assessee Before us, the Ld. Counsel of the assessee did not press the the validity of the reassessment. Thus, ground No. 1 of the appeal is accordingly dismissed as not pressed. he second ground challenging the addition on merit, the Ld. Counsel of the assessee submitted that the assessee would isallowance for bogus purchase is restricted @ 6% which was sustained by the Tribunal in case of another 14 parties We have heard rival submission of the parties on the issue in t material on record. We find that ordinate Bench of the Tribunal in ITA No. 3344 and 3545/M/2019 for assessment years 2009 restricted the disallowance of bogus purchases to 6% of the alleged bogus purchase amount. The relevant fi is reproduced as under: “8. We have heard the rival submissions, perused the orders of the authorities below and the documents on record. We have perused the remand report of the Assessing Officer furnished before the Ld.CIT(A) from the remand report that the Assessing Officer has not doubted records, details and evidences i.e. purchases made by the assessee, consumption, sales and stock reconciliations furnished by the assessee during the remand proceedings. No adverse the Assessing Officer in the remand report against the claim of the assessee. We observe that even though the Tribunal in assessee’s own case for A.Y. 2010 disallowance to 10%, however, the facts in the current assessment year are slightly different as there is a remand report called for by the Ld.CIT(A) in the year under consideration but whereas such remand report was not available for adjudication before the Ld.CIT(A) and also before the Tribunal for A.Y.2010 the facts and circumstances into consideration we are of the view that ends of justice would be met if the disallowance is sustained at 6% of the alleged bogus purchases considering the fact that even the Assessing Officer in his remand report did not dispute the records in respect of purchases, consumption, sales as well as the stock reconciliation etc., furnished by the assessee. Thus, we direct the Assessing Officer to restrict the disallowance to 6% of the alleged bogus purchases assessee on this issue is partly allowed. 4.1 Since, the issue in dispute before us being identical to the issue in dispute of bogus purchases raised before the Tribunal (supra) therefore, respectfully following the finding of the T M 3545/M/2019 for assessment years 2009-10 and 2011 restricted the disallowance of bogus purchases to 6% of the alleged bogus purchase amount. The relevant finding of the Tribunal is reproduced as under: 8. We have heard the rival submissions, perused the orders of the authorities below and the documents on record. We have perused the remand report of the Assessing Officer furnished before the Ld.CIT(A) from the remand report that the Assessing Officer has not doubted records, details and evidences i.e. purchases made by the assessee, consumption, sales and stock reconciliations furnished by the assessee during the remand proceedings. No adverse inference was drawn by the Assessing Officer in the remand report against the claim of the assessee. We observe that even though the Tribunal in assessee’s own case for A.Y. 2010-11 restricted the disallowance to 10%, however, the facts in the current essment year are slightly different as there is a remand report called for by the Ld.CIT(A) in the year under consideration but whereas such remand report was not available for adjudication before the Ld.CIT(A) and also before the Tribunal for A.Y.2010-11. Taking the totality of the facts and circumstances into consideration we are of the view that ends of justice would be met if the disallowance is sustained at 6% of the alleged bogus purchases considering the fact that even the Assessing Officer in his mand report did not dispute the records in respect of purchases, consumption, sales as well as the stock reconciliation etc., furnished by the assessee. Thus, we direct the Assessing Officer to restrict the disallowance to 6% of the alleged bogus purchases. Ground raised by the assessee on this issue is partly allowed.” Since, the issue in dispute before us being identical to the issue in dispute of bogus purchases raised before the Tribunal (supra) therefore, respectfully following the finding of the T M/s Titan Laboratories Pvt. Ltd. 4 ITA No. 628/Mum/2023 10 and 2011-12 has restricted the disallowance of bogus purchases to 6% of the alleged nding of the Tribunal(supra) 8. We have heard the rival submissions, perused the orders of the authorities below and the documents on record. We have perused the remand report of the Assessing Officer furnished before the Ld.CIT(A). We find from the remand report that the Assessing Officer has not doubted records, details and evidences i.e. purchases made by the assessee, consumption, sales and stock reconciliations furnished by the assessee during the inference was drawn by the Assessing Officer in the remand report against the claim of the assessee. We observe that even though the Tribunal 11 restricted the disallowance to 10%, however, the facts in the current essment year are slightly different as there is a remand report called for by the Ld.CIT(A) in the year under consideration but whereas such remand report was not available for adjudication before the Ld.CIT(A) and also Taking the totality of the facts and circumstances into consideration we are of the view that ends of justice would be met if the disallowance is sustained at 6% of the alleged bogus purchases considering the fact that even the Assessing Officer in his mand report did not dispute the records in respect of purchases, consumption, sales as well as the stock reconciliation etc., furnished by the assessee. Thus, we direct the Assessing Officer to restrict the disallowance to . Ground raised by the Since, the issue in dispute before us being identical to the issue in dispute of bogus purchases raised before the Tribunal (supra) therefore, respectfully following the finding of the Tribunal, we restrict the disallowance of the bogus purchases in respect of these two parties to 6% of the bogus purchases amount of Rs.19,82,500/-. The accordingly allowed partly. 5. In the result, the appeal o Order pronounced in the open Court on Sd/- (NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER Mumbai; Dated: 22/06/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// M we restrict the disallowance of the bogus purchases in respect of these two parties to 6% of the bogus purchases amount of . The ground No. 2 of the appeal of the assessee is accordingly allowed partly. In the result, the appeal of the assessee is allowed partly. nounced in the open Court on 22/06/2023. Sd/ NARENDER KUMAR CHOUDHRY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai M/s Titan Laboratories Pvt. Ltd. 5 ITA No. 628/Mum/2023 we restrict the disallowance of the bogus purchases in respect of these two parties to 6% of the bogus purchases amount of No. 2 of the appeal of the assessee is f the assessee is allowed partly. /06/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai