ITO 6(3)(2), MUMBAI V. INDO TUBES TECH P.LTD, MUMBAI

ITA 6364/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9100 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 27-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Bogus purchase
• Section: 133(6); 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH J, MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 6364/MUM/2016 (ASSESSMENT YEAR-2009-10) ITO 6 (3)(2), ROOM NO. 503, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S INDO TUBE TECH PVT. LTD. C/O. MR. J.D. SANGHAVI & CO. (C.A), 409, JOLLY BHAVAN NO.2, 7, NEW MARINE LINES, MUMBAI- 400020. PAN: AABCI6396K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V. JUSTIN (SR. DR) ASSESSEE BY : SHRI SANJIV M. SHAH (ADVOCATE) DATE OF HEAR ING : 17.10.2017 DATE OF PRONOUNCEMENT : 17.10.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE U/S 253 OF THE INCOME-TAX AC T (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-12, MUMBAI DATED 02.08.2016 FOR ASSESSMENT YEAR (AY) 2009-10. THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN THE LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 83 ,78,783/- ON ACCOUNT OF BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE COULD NOT BRING ANY EVIDENCE ON RECORD TO THE SATISFACTION OF THE ASSES SING OFFICER TO SHOW THAT THE PURCHASES ARE GENUINE'. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(AP PEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF BUILDING MATERIALS INCLUDING STEELS BRE AKS, HR SHEETS, MS BEAMS, COILS AND PIPES ETC., FILED ITS RETURN OF IN COME FOR RELEVANT AY ON 29.09.2009 DECLARING TOTAL INCOME OF RS. 7,45,270/- . THE RETURN WAS PROCESSED U/S 143(1) VIDE ORDER DATED 22.02.2011 AC CEPTING THE RETURN INCOME. THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE ACT. THE NOTICE U/S 148 DATED 14.03.2014 WAS SERVED UPON THE ASSESSEE. REASONS OF RE-OPENING WERE ALSO SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS RE-OPENED ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WI NG OF THE INCOME-TAX DEPARTMENT THAT THE ASSESSEE HAS OBTAINED ACCOMMODA TION BILL OF PURCHASES FROM HAWALA DEALERS DURING THE RELEVANT FY. THE AO RECEIVED INFORMATION THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION BILL F ROM THE FOLLOWING PARTIES: NAME OF PURCHASE PARTY A.Y. AMOUNT SIDDHIVINAYAK STEEL 2009-10 688,500 CHANCHAL TUBE CORPORATION 2009-10 459,000 SURAT TUBE CORPORATION 2009-10 441,000 ASIAN STEEL 2009-10 450,000 SAGAR STEEL TRADERS 2009-10 485,576 RUPANI & CO. 2009-10 5854,707 TOTAL 83,78,783 3. DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE WAS ASKED TO SUBMIT PURCHASE BILL, LEDGER COPY OF THE SAID PARTIES AND SALE-TAX RETURN BY THE SAID PARTIES AND ALL DOCUMENTARY EVIDENCE FOR THE TRANSA CTION. THE ASSESSEE VIDE ITS REPLY DATED 09.02.2015 AND SUBMITTED THE PURCHA SE DETAILS, LEDGER ACCOUNT AND THE BILLS. THE ASSESSEE ALSO FURNISHED THE BANK ACCOUNT SHOWING ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 3 THE PROOF OF PAYMENT. THE CONFIRMATIONS OF THE SAID PARTIES WERE ALSO FILED. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO HOLDING THAT THE ASSESSEE FAILED TO PRODUCE THE CORROBORATIVE EVIDEN CE RELATING TO THE TRANSACTION OF GOODS AND GENUINENESS OF THE PURCHAS ES. THE ASSESSEE COULD NOT SUBMIT ANY CONFIRMATION OR TO PROVIDE THE ADDRE SS OF THE PARTIES. THE AO TREATED THE ENTIRE PURCHASES FROM SIX PARTIES AS BOGUS TRANSACTION AND THEREBY DISALLOWED THE AGGREGATE OF PURCHASES FROM SIX PARTIES FOR L RS.83,78,783/-. ON APPEAL BEFORE THE LD. CIT(A), TH E ASSESSEE HAS CHALLENGED HE RE-OPENING OF THE ASSESSMENT AS WELL AS ADDITION ON ACCOUNT OF BOGUS PURCHASES. THE LD. CIT(A) UPHELD THE RE-OP ENING, HOWEVER, THE ADDITION OF RS. 83,78,783/- WAS DELETED. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BE FORE US. 4. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSE SSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE RE VENUE ARGUED THAT THE AO MADE THE DISALLOWANCE OF PURCHASES IN ABSENCE OF SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF PURCHASES. THE ASSESSEE FA ILED TO PRODUCE ANY DOCUMENTARY EVIDENCE ABOUT THE DELIVERY OF GOODS AN D MODE OF TRANSPORTATION. THE LD. CIT(A) DELETED THE ENTIRE A DDITION DESPITE INSUFFICIENT EVIDENCE AVAILABLE ON RECORD. THE LD. CIT(A) PASSED A VERY CRYPTIC ORDER. THE ORDER PASSED BY LD. CIT(A) IS NO T SUSTAINABLE AS THE SAME DOES NOT CONTAIN THE PROPER REASONING. THE LD. DR F OR THE REVENUE PRAYED ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 4 THAT THOUGH THE ENTIRE ADDITION WAS LIABLE TO BE SU STAINED WHICH HAS BEEN DELETED BY LD. CIT(A). THE LD. DR FOR THE REVENUE F URTHER PRAYED THAT THERE IS SUFFICIENT MATERIAL ON RECORD EVEN TO SUSTAIN TH E REASONABLE DISALLOWANCE. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE AR OF THE ASSESSEE ARGUED THAT THE LD. CIT(A) AFTER CONSIDERING THE EVIDENCES RELATED TO STOCK-REGISTER AND EVIDENC E AND THE REASONS AS TO WHY THE EVIDENCE ON TRANSPORTATION WAS NOT AVAILABL E, GRANTED THE RELIEF TO THE ASSESSEE. THE AO DURING THE RE-ASSESSMENT PROCE EDING HAS NOT MAKE ANY INVESTIGATION NOR BROUGHT ANY MATERIAL ON RECORD AG AINST THE ASSESSEE. THE AO HAS NEITHER ISSUED ANY NOTICE UNDER SECTION 133( 6) OR ANY SUMMONS TO THE SAID HAWALA PARTIES. THE PURCHASES MADE BY ASSE SSEE ARE GENUINE ONE. THE ASSESSEE MADE THE PAYMENT THROUGH BANKING CHANN EL. THE ASSESSEE HAD DULY PROVED ABOUT THE CONSUMPTION OF THE MATERIAL W AS NOT DISPUTED BY THE AO. THE AO MADE THE DISALLOWANCE OF 100% OF PURCHAS ES FROM SIX PARTIES WITHOUT ANY INCRIMINATING MATERIAL. THE AO RELIED U PON THE INFORMATION OF THIRD PARTY WITHOUT GIVING ANY OPPORTUNITY TO THE A SSESSEE FOR CROSS- EXAMINATION OF SUCH PARTIES. THE ASSESSEE HAS DECLA RED THE GROSS PROFIT OF 3% DURING THE RELEVANT AY. IN SUPPORT OF HIS SUBMIS SION, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: 1. SHRI HARILAL CHUNILAL JAIN VS. ITO (ITA NO. 4570/M/ 2014). 2. SHRI GANAPATRAI SANGHAVI VS. ACIT (ITA NO. 2826/M/2 013). 3. CIT VS. NIKUNJ EXIMP ENTERPRISES (P) LTD. 35 TAXMAN N.COM 384, BOMBAY. 4. CIT VS. HARILAL BHAMBHANI, (MUM HC). 5. CIT VS. MUL HEALTHCARE PRODUCTS LTD. (MUM HC). 6. ACIT VS. SAY INDIA JEWELLERS PVT. LTD. (ITA NO. 673 5/M/2010). ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 5 7. RAMESHKUMAR & CO. VS. ACIT (ITA NO. 2959/M/2014). 8. NEETA TEXTILES VS. ITO (ITA NO. 6138/MUM/13. 9. DCIT VS. RAJIV J. KALATHIL (ITA NO. 6727/M/12). 10. ACIT VS. RAMILA PRAVIN SHAH (ITA NO. 5246/M/13. 11. ACIT VS. M/S. G.V. SONS (ITA NO. 2239/M/12. 12. ACIT VS. SHRI MAHESH K. SHAH (ITA NO. 5194/M/14. 13. ACIT VS. STEEL LINE INDIA. 14. M/S GEOLFE ORGAINICES VS. ACIT (ITA NO. 3699/M/16). 15. DCIT VS. SHRI SHIVSHANKAR R. SHARMA (ITA NO. 4260/M /15. 16. RESHMA ENTERPRISES VS. ITO (ITA NO. 6246/M/13). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO RE-OPENED T HE ASSESSMENT UNDER SECTION 147 VIDE NOTICE DATED 14.03.2014. THE ASSES SMENT WAS RE-OPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIG ATION WING AND SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. DURING THE A SSESSMENT PROCEEDING, THE AO ASKED THE ASSESSEE TO SUBSTANTIA TE THE PURCHASES FROM ALL SIX PARTIES ALONG WITH THE DOCUMENTARY EVIDENCE. TH E ASSESSEE FIELD ITS REPLY DATED 09.02.2015 ALONG WITH THE REPLY THE ASSESSEE FURNISHED THE COPY OF PURCHASES DETAILS, LEDGER ACCOUNT AND BILLS ALONG W ITH STATEMENT OF PAYMENT MADE THROUGH BANKING CHANNEL. NO CONFIRMATIONS FROM THE SAID PARTIES WERE FILED. THE ASSESSEE CONTENDED THAT THE PARTIES ARE NOT AVAILABLE AT THE GIVEN ADDRESS. THE ASSESSEE ALSO CONTENDED THAT THIRD PAR TY INFORMATION CANNOT BE USED AGAINST THE ASSESSEE. THE CONTENTION OF THE AS SESSEE WAS NOT ACCEPTED BY AO HOLDING THAT THE ASSESSEE FAILED TO PRODUCE A NY CORROBORATIVE EVIDENCE AS THE ASSESSEE NEITHER FILED CONFIRMATION NOR FURNISHED THE ADDRESS OF THE PARTIES. THE AO TREATED THE ENTIRE PURCHASES AS BOGUS AND MADE THE ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 6 ADDITION OF AGGREGATE AMOUNT OF RS. 83,78,783/-. TH E LD. CIT(A) DELETED THE ENTIRE ADDITION HOLDING AS UNDER: 8.3 THE APPELLANT'S AR HAS MADE THE SUBMISSION DUR ING APPELLATE PROCEEDINGS. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT. THE REAL ISSUE WHICH IS NOTICED IS THAT THE APPELLANT, DURING ASSESSMENT PROCEEDINGS, HAS, VIDE LETTER DATED 9.2.2015, FURNI SHED THE COPY OF STOCK REGISTER AND EXPLAINED THE REASON AS TO WHY THE EVIDENCE OF TRANSPORTATION WAS NOT AVAILABLE WITH HIM. THE A.O. HAS NOT DISPUTED THIS FACT IN THE ASSESSMENT ORDER. THERE WAS ONE TO ONE PURCHASE AND SALE. THE A.O. HA S ACCEPTED THE SALES AND IT IS HELD THAT WITHOUT PURCHASE THERE CANNOT BE SALES. A CCORDINGLY, I FIND MERIT IN THE SUBMISSION OF THE APPELLANT AND ITS RELIANCE ON VAR IOUS CASE LAWS. THEREFORE, GROUND OF APPEAL NO 2 IS ALLOWED. 6. WE HAVE NOTED THAT THE AO HAS NOT MADE ANY INDEPEND ENT ENQUIRY. THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESS EE. THE AO DISALLOWED THE ENTIRE PURCHASES THAT ASSESSEE COULD NOT FILED CONFIRMATION AND THE ADDRESSES OF THE SAID PARTIES. THE AO HAS NOT ISSUE D ANY NOTICE TO THE ALLEGED BOGUS PARTIES EITHER UNDER SECTION 133(6) O R UNDER SECTION 131 OF THE ACT. THE AO HAS NOT CONSIDERED THE GROSS PROFIT AND NET PROFIT FOR EARLIER AND SUBSEQUENT YEAR VIS--VIS THE ALLEGED BOGUS PUR CHASES. THE LD. CIT(A) PASSED A NON-SPEAKING ORDER. THE LD. CIT(A) DELETED THE ENTIRE ADDITION WITHOUT GIVING ANY REASONING. THE LD. CIT(A) SIMPLY CONCLUDED THAT THE ASSESSEE FURNISHED COPY OF STOCK-REGISTER AND EXPLA INED THE REASON AS TO WHY THE EVIDENCE OF TRANSPORTATION WAS NOT AVAILABLE. I N OUR VIEW, THE ORDER OF LD. CIT(A) IS NOT SUSTAINABLE. HOWEVER, WE ARE OF THE C ONSIDERED VIEW THAT UNDER THE INCOME-TAX ACT, THE ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER CONCLUDE THAT EVEN IF THE T RANSACTION IS NOT VERIFIABLE BECAUSE OF THE CERTAIN REASONS OR THE RE ASONS EXPLAINED BY ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 7 ASSESSEE IS NOT ACCEPTABLE TO THE REVENUE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION IN ORDER TO FULFILL THE REVENUE LEAKAGE, THE REVENUE AUTHORITY ON THE BASIS OF FACT OF THE PARTICULAR CASE MAY BROUGHT TO TAX ONLY THE PROFIT ATTRIBUTABL E ON SUCH PURCHASES. WE ARE ALSO OF THE OPINION THAT IN SUCH CASES IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE, THE DISALLOWANCE OF REASONABLE PER CENTAGE OF THE IMPUGNED PURCHASES WOULD MEET THE END OF JUSTICE. CONSIDERIN G THE FACT OF THE PRESENT CASE, WHEN THE ASSESSEE HAS DECLARED GROSS PROFIT O F 3%, WE ARE OF THE VIEW THAT DISALLOWANCE OF 8% OF THE IMPUGNED/BOGUS PURCH ASES OF (RS.83,78,783/-) WOULD MEET THE END OF JUSTICE. SIM ILAR VIEW WAS TAKEN BY HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. HARIRA M BHAMBHANI (92 CCH 006) RELIED BY LD. AR OF THE ASSESSEE. WITH UTM OST REGARD TO THE VARIOUS DECISION RELIED BY LD. AR OF THE ASSESSEE, WE FIND THAT THE RATIO OF THE DECISION ARE BASED ON THE FACTUAL MATRIX OF EAC H AND EVERY CASE AND NO STRAIGHT JACKET FORMULA CAN BE ADOPTED IN THE CASES OF BOGUS PURCHASES. HENCE, WE DIRECT THE AO TO DISALLOW 8% OF IMPUGNED / BOGUS PURCHASES. IN VIEW OF THE ABOVE OBSERVATION, THE APPEAL OF THE RE VENUE IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DAY OF OCTOBER 2017. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 17/10/2017 S.K.PS ITA NO. 6364/M/201 6- M/S INDO TUBE TECH PVT. LTD. 8 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/