ROMILA M. NAGPAL, MUMBAI V. ITO 24(3)(4), MUMBAI

ITA 6388/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7788 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHENDR
• Assessee Lawyers: GAUTAM SALECHAAR
• Keywords: Bogus purchase
• Section: 147; 148

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./6388/MUM/2016, /ASSESSMENT YEAR: 2009-10 SMT. ROMILA M. NAGPAL 24/103, PARK-VIEW, MHADA COMPLEX BEHIND SHANTIVAN, OFF LINK ROAD ANDHERI WEST,MUMBAI-400 053. PAN:AADPN 7268 C VS. INCOME TAX OFFICER-24(3)(4) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.C. OMI NINGSHEN-DR ASSESSEE BY: SHRI GAUTAM SALECHA-AR / DATE OF HEARING: 13.02.2017 / DATE OF PRONOUNCEMENT: 17.03.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 24.8.2016 OF CIT(A)-36, MUMBAI THE ASSESSEE HAD FILED THE PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL,ENGAGED IN DE ALING IN CHEMICALS FILED HER RETURN OF INCOME ON 24/09/2009,DECLARING TOTAL INCOME OF RS. 4.32 LAKHS.INITIALLY RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. LATER ON, THE ASSESSMENT WA S REOPENED AS PER THE PROVISIONS OF SECTION 147 OF THE ACT AND THE AO COMPLETED THE ASSESSMENT ON 30.01.2015,DETERMINING HER INCOME AT RS.22.46 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION MADE TO HER INCOME WITH REGARD TO PURCHASES. THE AO RECEIVED AN INFORMATION FROM THE INVESTIGATI ON WING THAT THE SALES TAX DEPARTMENT, GOVT.OF MAHARASHTRA HAD MADE ENQUIRIES ABOUT BOGUS PURCHASES/HAWALA TRANSACTIONS.THE SALES TAX AUTHORITIES HAD FORWARDED THE LIST OF BEN EFICIARIES WHO HAD TAKEN BILLS FROM THE HAWALA DEALERS.THE AO OBSERVED THAT ASSESSEE HAD PU RCHASED GOODS WORTH RS.1.35CRORES FROM THREE PARTIES NAMELY SHRI GARNESH TRADING (RS. 27.73 LAKHS); KISHNA CHEMICAL WORKS (RS.27.85 LAKHS) AND SHREYAS MARKETING AGENCY (RS.8 0.40 LAKHS). THE AO ISSUED A NOTICE U/S.148 OF THE ACT .IN RESPONSE TO THE NOTICE THE A SSESSEE STATED THAT RETURN FILED ON 24/9/2009 SHOULD BE TREATED AS RETURN FILED IN RESPONSE TO RE -ASSESSMENT NOTICE.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE VARIOUS DETAILS FILED BY HER THE AO ISSUED NOTICES U/S. 133 (6) OF THE ACT TO ABOVE MENTIONED THREE PARTIES.AS PER THE AO,NOTICES WERE RETURNED BACK BY POSTAL AUTHORITIES AS SAME COULD NOT BE SERVED.HE H ELD THAT IN ABSENCE OF AUTHENTIC CONFIRMA - TION FROM THE PARTIES THE GENUINENESS OF THE TRANSA CTION WAS NOT VERIFIABLE. HE DIRECTED THE 6388/M/16(09-10) SMT.ROMILA M.NAGPAL 2 ASSESSEE TO PRODUCE THE PARTIES.THE ASSESSEE ,VIDE HER LETTER DT.12.11.2014,STATED THAT PARTIES WERE NOT AVAILABLE AS ON DATE.THE AO HELD THAT PURC HASES MADE BY HER WERE NOT VERIFIABLE IN ABSENCE OF PROPER AND LEGITIMATE CONFIRMATIONS,THAT THE ASSESSEE HAD NOT PRODUCED THE SUPPLIERS ,THAT THE ONUS WAS ON THE ASSESSEE TO PR OVE THE GENUINENESS OF THE PURCHASES, THAT THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES HAD TO BE BROUGHT TO TAX.ESTIMATING THE GROSS PROFIT @ 12.5% OF THE UNPROVED PURCHASES OF RS.1.35 CRORES, HE MADE AN ADDITION OF RS.16.99 LAKHS TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF AO,THE ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,THE ASSESSEE MADE ELABORA TE SUBMISSIONS AND RELIED UPON SEVERAL CASE LAWS.BEFORE HIM,IT WAS ARGUED THAT THE ASSESSE E HAD FILED LEDGER COPIES OF THE PARTIES, SALES DETAILS, THAT THE PURCHASES WERE FULLY BACKED BY AUTHENTICATED INVOICES, THAT SHE HAD MADE PAYMENT THROUGH BANKING CHANNELS,THAT THE STOC K REGISTER AND THE CONSUMPTION CHART SHOWED THE NEXUS BETWEEN THE PURCHASES AND THE SALE S MADE BY THE ASSESSEE,THAT DETAILS OF CLOSING STOCK WERE AVAILABLE ON RECORD,THAT THERE W AS NO EVIDENCE TO PROVE THAT ASSESSEE HAD RECEIVED BACK THE MONEY IN CASH,THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE,THAT THE ASSESSEE WAS MAINTAINING QUANTIT ATIVE DETAILS OF PURCHASE AND SALES, THAT THE AO HAD NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS MAINTAINED BY HER. AFTER CONSIDERING AVAILABLE MATERIAL,THE FAA HELD T HAT THE AO HAD MADE EFFORTS BEYOND GETTING INFORMATION FROM THE INVESTIGATION WING,THA T HE HAD DIRECTED THE AO TO PRODUCE THE PARTIES,THAT THE SUPPLIER WERE NOT FOUND AT THE GIV EN ADDRESSES, THAT IT WAS A CASE OF PURCHASES MADE FORM BOGUS PARTIES RATHER THAN A CASE OF BOGUS PURCHASES,THAT WITHOUT MAKING PURCHASES IT WAS NOT POSSIBLE FOR ASSESSEE TO COMPLETE THE S ALES, THAT THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 147, THAT HE WAS JUSTIFIED I N MAKING THE DISALLOWANCE OF RS.16.99 LAKHS. FINALLY, HE DISMISSED THE APPEAL FILED BY THE ASSES SEE. 4. DURING THE COURSE OF HEARING BEFORE US THE AUTHORI SED REPRESENTATIVE (AR) SUBMITTED THAT THE ASSESSEE HAD FILED ALL NECESSARY DETAILS BEFOR E THE AO, THAT STOCK REGISTER AND QUANTITATIVE DETAILS WERE MADE AVAILABLE TO THE AO, THAT PAYMENT S WERE MADE THROUGH BANKING CHANNELS. HE REFERRED TO THE CASES OF SHRI MAHESH SHAH (ITA NO.5194/MUM/2014 A.Y.2010-11); M/S. IMPERIAL IMP & EXP. (ITA NO.5427/MUM/2015 A.Y.2009- 10); SHRI RAMILA PRAVIN SHAH (ITA NO.5246/M/2013 A.Y.10-11); SHRI DEEPAK POPATLA L GALA (ITA NO.5920/MUM/2013 A.Y.2010-11,DATED 27/3/2015); RAMESH KUMAR AND CO.( ITA NO.2959/MUM/2014 A.Y.2010- 11 DATED 28/11/2014); SHRI RAJEEV G. KALATHIL (ITA NO.6727/MUM/2012 A.Y.2009-10 DATED 6388/M/16(09-10) SMT.ROMILA M.NAGPAL 3 20/08/2014);SHRI GANPATRAJ A. SANGHAVI (ITA NO.2826 /MUM/2013 A.Y. 2009-10 DT.5/11/2 014 AND SHRI HIRALAL CHUNILAL JAIN (ITA NO.4547/MUM /2014 DATED 01/01/2016. THE DR SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF IMPERIAL IMP. & EXP. (SUPRA) IDENTICAL ISSU E HAS BEEN DELIBERATED UPON AND HAS BEEN DECIDED BY THE TRIBUNAL .WE ARE REPRODUCING THE REL EVANT PORTION CONSISTING THE FACTS OF THE CASE, ORDER OF THE FAA, ARGUMENTS ADVANCED BY AR AN D DR BEFORE THE TRIBUNAL AND THE OPERATIVE PART OF THE ORDER OF THE TRIBUNAL WHICH READS AS UNDER :- 2.IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SUBSTANTIVE GRIEVANCE IS AGAINST THE ACTION OF THE CIT(APPEALS) IN CONFIRMING AN ADDITION OF RS.4,19,356/- BEING ESTIMATED PROFIT ON UNEXPLAINED PURCHASES. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELL ANT IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF CONSUMER CLOTHING. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 WAS FILED BY THE ASSESSEE DECLARING A TOTAL INCOME OF RS.3,49,320/-, WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT UNDER SECTION 143( 3) OF THE ACT, WHEREBY THE TOTAL INCOME WAS ASSESSED AT RS.3,66,344/-. SUBSEQUENTLY, THE AS SESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 06/03/2014 REOPENING THE ASSESSMENT ON THE GROUND THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IN AS MUCH AS, ASSESSEE HAD TAKEN ACCOMMODATION PURCHASE BILLS FROM FOUR PARTIES, TOT ALLING TO RS.77,51,496/-. IN THE ENSURING ASSESSMENT, THE ASSESSING OFFICER HAS HELD THAT PUR CHASES DECLARED BY THE ASSESSEE OF RS.77,51,496/- FROM FOUR PARTIES, DETAILED IN PARA- 1 OF THE ASSESSMENT ORDER ARE BOGUS PURCHASES. ACCORDING TO THE ASSESSING OFFICER, ASSE SSEE DID NOT MAKE ACTUAL PURCHASES FROM SUCH FOUR PARTIES BECAUSE AS PER THE INFORMATION RE CEIVED FROM THE INVESTMENT WING, THE FOUR PARTIES IN QUESTION WERE FOUND TO HAVE BEEN VA T DODGERS BY THE MAHRASHTRA VAT DEPARTMENT. THE ASSESSING OFFICER NOTED THAT SINCE SALES HAVE BEEN EFFECTED BY THE ASSESSEE, WHICH SHOWED THAT ASSESSEE WAS ACTUALLY IN POSSESSI ON OF GOODS, THE MATERIAL WOULD HAVE BEEN PROCURED FROM GREY MARKET WITHOUT BILLS IN ORD ER TO COVER UP THE PURCHASES, AND THUS ASSESSEE WOULD HAVE TAKEN ACCOMMODATION BILLS FOR P URCHASES FROM THE SAID FOUR PARTIES AMOUNTING TO RS.77,51,496/-. ACCORDINGLY, THE ASSES SING OFFICER BROUGHT TO TAX THE PROFIT MARGIN IN RELATION TO SUCH NON-GENUINE PURCHASES, W HICH HE COMPUTED BY APPLYING THE RATE OF 12.5% ON THE TOTAL AMOUNT OF RS.77,51,496/-, WHI CH CAME TO RS.9,68,937/-. 3.1 THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING O FFICER AS WELL AS BEFORE THE CIT(APPEALS) WAS THAT THE PURCHASES IN QUESTION WERE DULY SUPPOR TED BY THE BILLS OF PURCHASE. MOREOVER, THE ASSESSEE POINTED OUT THAT ALL ITS SALES WERE BY WAY OF EXPORTS AND THAT THERE WAS NO EVIDENCE TO SAY THAT THE PURCHASES IN QUESTION WERE BOGUS. THE ASSESSEE ALSO REFERRED TO HIS BANK STATEMENT TO PROVE PAYMENTS TO SUCH PARTIES. T HE DETAILS OF GOODS SOLD BY THE ASSESSEE WAS ALSO FURNISHED, WHICH CORRESPONDED TO THE PURCH ASES EFFECTED FROM SUCH FOUR PARTIES. THE CIT(APPEALS) HAS PRIMARILY AFFIRMED THE STAND O F THE ASSESSING OFFICER BASED ON THE INFORMATION STATED TO HAVE BEEN RECEIVED FROM THE I NVESTIGATION WING OF THE DEPARTMENT RELATING TO THE FINDING OF THE MAHARASHTRA VAT DEPA RTMENT. ADDITIONALLY, THE CIT(APPEALS) ALSO NOTICED THAT ASSESSEE COULD NOT PROVE THE EXIS TENCE OF THE SUPPLIERS AND, THEREFORE, THE CIRCUMSTANTIAL EVIDENCE ALSO SUGGESTED THAT THE ENT IRE PURCHASES FROM THE FOUR PARTIES WAS UNVERIFIABLE. HOWEVER, HE RESTRICTED THE ADDITION T O 5.41% OF THE AMOUNT OF SUCH UNEXPLAINED PURCHASES, INSTEAD OF 12.5% ADOPTED BY THE ASSESSING OFFICER. THE CIT(APPEALS) HAS APPLIED THE RATE OF 5.41% BEING TH E GROSS PROFIT RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, OUT OF A N ADDITION OF RS.9,68,937/- MADE BY THE ASSESSING OFFICER, THE CIT(APPEALS) RETAINED AN AD DITION OF RS.4,19,356/- AND DELETED THE BALANCE. 6388/M/16(09-10) SMT.ROMILA M.NAGPAL 4 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS VEHEMENTLY POINTED OUT THAT THE ENTIRE SALES OF THE ASSESSEE ARE BY WAY OF EXPORTS AND, THEREFORE, THERE WAS NO LIABILITY TOWARDS SALES TAX ON THE PURCHASES EFFECTED BY IT. IT WAS ALSO CONTENDED THAT THOUGH THE ASSESSING OFFICER HAS REFERRED TO THE FOUR PARTIES HAVING BEEN LISTED AS HAWALA OPERATORS BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MA HARASHTRA, BUT THERE IS NO CLEAR EVIDENCE TO SUGGEST THAT THE TRANSACTION WITH THE A SSESSEE WERE BOGUS. IT IS POINTED OUT THAT IN THE CASES OF SOME OTHER ASSESSEES, UNDER IDENTIC AL CIRCUMSTANCES, THE COORDINATE BENCHES OF THE TRIBUNAL HAVE DELETED THE ADDITIONS. IN THIS CONNECTION, RELIANCE HAVE BEEN PLACED ON THE FOLLOWING DECISIONS:- (1) ITO VS. SHRI DEEPAK POPATLAL GALA INITANO.5920/ MUM/2013 (A.Y 2010-11) DATED 27/03/2015; (2)RAMESH KUMAR AND CO. V/S. ACIT IN ITA NO.2959/MU M/2014 (A.Y. 2010-11) DATED 28/11/2014; (3)DCIT V/S. SHRI RAJEEV G. KALATHIL IN ITA NO.6727 /MUM/2012 (A.Y.2009-10) DATED 20/08/2014; (4)SHRI GANPATRAJ A. SANGHAVI V/S. ACIT IN ITA NO.2 826/MUM/2013 (A.Y.2009-10) DATED 5/11/2014; AND (5) SHRI HIRALAL CHUNILAL JAIN VS. INCOME TA X OFFI CER IN NO.4547/MUM/2014 DATED 01/01/2016. ON THIS BASIS, THE PLEA OF THE ASSESSEE IS THAT THE ENTIRE ADDITION IS LIABLE TO BE DELETED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BY POINTING OUT THAT THE ADDITION HAS BEEN MA DE ON ACCOUNT OF THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT OF THE GOVERN MENT OF MAHARASHTRA AND NO EFFORT HAS BEEN MADE BY THE ASSESSEE TO CONTROVERT SUCH IN FORMATION. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ENTIRE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT PURCHASES FROM FOUR P ARTIES NAMELY DHRUV SALES CORPORATION - RS.13,67,640/-; SUBHLAXMI SALES CORP. - RS.20,20, 800/-; DHARSHAN SALES CORPORATION - RS.9,64,656/-; AND PARAS (INDIA)- RS.33,98,400, TOT ALLING TO RS.77,51,496/- HAVE BEEN TREATED TO BE BOGUS BASED ON THE PURPORTED ENQUIRIE S CONDUCTED BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA. OSTENS IBLY, THE ASSESSING OFFICER OUGHT TO HAVE BROUGHT ON RECORD MATERIAL WHICH IS RELEVANT T O THE TRANSACTIONS OF THE ASSESSEE WITH THE AFORESAID FOUR PARTIES INSTEAD OF MAKING A GENE RAL OBSERVATION ABOUT THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF THE GOVER NMENT OF MAHARASHTRA. QUITE CLEARLY, THE ASSESSING OFFICER AS WELL AS CIT(APPEALS) HAVE TAKEN NOTE OF THE FACT THAT NO SALES COULD HAVE BEEN EFFECTED BY THE ASSESSEE WITHOUT PURCHASE S. IN THE PRESENT CASE, ASSESSEE HAS EXPLAINED THAT ALL ITS SALES ARE BY WAY OF EXPORTS. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE SHOW PAYMENT FOR EFFECTING SUCH PURCHASES BY ACCOUNT PAYEE CHEQUES AND ALSO THE VOUCHERS FOR SALE AND PURCHASE OF GOODS, ETC. NOTAB LY, NO INDEPENDENT ENQUIRIES HAVE BEEN CONDUCTED BY THE ASSESSING OFFICER. UNDER IDENTICAL CIRCUMSTANCES, OUR CO-ORDINATE BENCHES IN THE CASES OF DEEPAK POPATWALA GAL (SUPRA ), SHRI RAJEEV G. KALATHIL(SUPRA)AND RAMESH KUMAR AND CO.(SUPRA) HAVE HELD THAT THE ASSE SSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS MERELY ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRIES. BEFORE THE CIT(APPEALS), ONE OF THE POIN TS RAISED BY THE ASSESSEE WAS WITH RESPECT TO AN OPPORTUNITY TO CROSS EXAMINE THE FOUR 6 ITA NO. 5427/MUM/2012 (ASSESSMENT YEAR : 2009-10) PARTIES, BUT WE FIND THAT NO SUCH O PPORTUNITY HAVE BEEN ALLOWED. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE AFORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED UNDER IDENTICA L CIRCUMSTANCES, IN OUR VIEW, THE CIT(APPEALS) ERRED IN SUSTAINING THE ADDITION TO TH E EXTENT OF RS.4,19,356/- INSTEAD OF DELETING THE ENTIRE ADDITION OF RS.9,68,937/- MADE BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY. 7. SINCE THE ASSESSEE FIRM HAS SUCCEED ED ON MERITS OF THE ADDITION, THE OTHER GROUND RAISED BY THE ASSESSEE CHALLENGING THE INITI ATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IS RENDERED ACADEMIC AND IS NOT BEING ADJUDICATED FOR THE PRESENT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED, AS A BOVE. 6388/M/16(09-10) SMT.ROMILA M.NAGPAL 5 RESPECTFULLY,FOLLOWING THE ABOVE ORDER AND THE OTHE R ORDERS RELIED UPON BY THE AR DURING THE COURSE OF HEARING BEFORE US,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 17 TH MARCH, 2017. , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 17.03 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.