SRIKEM LABORATORIES P.LTD, MUMBAI V. ACIT 7(2), MUMBAI

ITA 6399/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8931 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: J RAVINDRA
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6399/MUM/2016 ASSESSMENT YEAR: 2009 - 10 M/S SRIKEM L ABORATORIES PVT. LTD. 311 JOGANI INDUSTRIAL ESTATE CHUNABHATTI MUMBAI - 400022 VS. ACIT - 8(2) MUMBAI. PAN NO. AADCS5022Q APPELLANT RESPONDENT ASSESSEE BY : MR. J. RAVINDRA , AR REVENUE BY : MS. ARJU GARODIA , DR DATE OF HEARING : 07/09 /2017 DATE OF PRONOUNCEMENT : 30/10/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE R ELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 14 , MUMBAI AND ARISES OUT OF THE ORDER U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - 1. THE LEARNED COMMISSIONER OF APPEALS ERRED IN UPHOLDING AOS ORDER FOR DISALLOWING BOGUS PURCHAS ES AGGREGATING TO RS.6,82,308 ON ACCOUNT OF M/S SRIKEM LABORATORIES PVT. LTD. ITA NO. 6399/MUM/2016 2 SUPPLIERS ADMITTING BEFORE SALES TAX AUTHORITIES HAVING ISSUED FALSE BILLS TO THE APPELLANT COMPANY. 2. THE LEARNED COMMISSIONER OF APPEALS ERRED IN STATING NO MENTION OF STOCK REGISTER OR END USE OF MATERIAL AND P RODUCING TRANSPORT BILLS, IN FACT ALL RELEVANT DOCUMENTS INCLUDING EXTRACT OF STOCK REGISTER WERE PRODUCED BEFORE AO IN COURSE ASSESSMENT PROCEEDINGS. 3. THE LEARNED COMMISSIONER OF APPEALS ERRED IN DISMISSING THE APPELLANT APPEAL WITHOUT APPRECIATING THE FACT THAT AO HAS NOT MADE ANY INVESTIGATION ABOUT THE ALLEGED BOGUS PURCHASES BUT DISALLOWED PURCHASES MERELY ON SUSPICION. 4. WITHOUT PREJUDICE TO ABOVE ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN REOPENI NG THE CASE U/S 148 OF THE IT ACT ON THE BASIS OF THE STATEMENT OF THIRD PARTY, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2009 - 10 ON 28.09.2009 DECLARING TOTAL INCOME OF RS.2,35,55,290/ - . THE RETURN WAS PROCESSED U/S 143(1). THEN THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INV.) MUMBAI THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THE FOLLOWING PARTIES WHO HAD BEEN DECLARED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA: SR. NO. NAME OF THE PUR. PARTIES AMT. (IN RS.) 1. SUBHIKSHA ENTERPRISES 2,27,489 2. PURAB ENTE RPRISES 60,975 3. CHEMI - AGE ENTERPRISES 94,116 4. BHAKTI ENTERPRISE 2,99,728 TOTAL 6,82,308 M/S SRIKEM LABORATORIES PVT. LTD. ITA NO. 6399/MUM/2016 3 IN VIEW OF THE ABOVE, THE AO ISSUED NOTICE U/S 148 TO REOPEN THE ASSESSMENT MADE U/S 143(1) OF THE ACT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS , THE AO REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES FOR VERIFICATION. HOWEVER, THE ASSESSEE FAI LED TO PRODUCE THE SAID PARTIES. THE AO NOTED THAT THE ASSESSEE ALSO FAILED TO FILE THE RELEVANT EVIDENCE TO SUBSTANTIATE THE GENUINENESS OF TRANSACTIONS . T HEREFORE, THE AO MADE AN ADDITION OF RS.6,82,308/ - TREATING THE SAME AS BOGUS PURCHASES. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE DISALLOWANCE OF RS.6,82,308/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING THE DETAILS OF ALLEGED BOGUS PURCHASES AND THE RELATED PURCHASE INVOICES. HE ALSO FILES A COPY OF THE ORDER IN (I) ASSISTANT COMMISSIONER OF INCOME TAX VS. MAHESH K. SHAH (2017) 49 CCH 0028 MUM TRIB, (II) GEOLIFE ORGANICS VS. ASSISTANT COMMISSIONER OF INCOME TAX (2017) 50 CCH 0100 MUM TRIB, (III) JAYESH A. SHAH VS. ITO WARD 4(2) MUMBAI SMC BENCH ITA NO. 6289/M/2016, (IV) ACIT VS. TARLA R. SHAH MUMBAI E BENCH ITA NO. 5295/M/2013 . 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORD ER PASSED BY THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.6,82,308/ - MADE BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE BEGIN WITH THE 4 TH GROUND OF APPEAL. W E FIND M/S SRIKEM LABORATORIES PVT. LTD. ITA NO. 6399/MUM/2016 4 THAT THE AO HAS REOPENED THE ASSE SSMENT MADE EARLIER U/S 143(1). IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 (SC), THE HONBLE SUPREME COURT HAS HELD THAT INTIMATION U/S 143(1) (A) IS NOT AN ASSESSMENT. THEREFORE, THE NOTICE U/S 148 ISSUED BY THE AO WAS HELD T O BE VALID. THE ISSUE BEING SIMILAR, WE HOLD THE NOTICE U/S 148 ISSUED BY THE AO IN THE INSTANT CASE AS VALID AND DISMISS THE 4 TH GROUND OF APPEAL FILED BY THE ASSESSEE. 7.1 THEN WE COME TO THE 1 ST , 2 ND AND 3 RD GROUND OF APPEAL. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD ASKED THE ASSESSEE TO PRODUCE THE SAID PARTIES FOR VERIFICATION. THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES BEFORE THE AO FOR VERIFICATION. AS THE ISSUE INVOLVED THE GENUINENESS OF P URCHASES, VERIFICATION OF THE PARTIES BY THE AO WAS A BASIC REQUIREMENT. IN VIEW OF THE ABOVE, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE CASE LAWS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TA XMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE O F CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). M/S SRIKEM LABORATORIES PVT. LTD. ITA NO. 6399/MUM/2016 5 WE ARE OF THE CONSIDERED VIEW THAT IN THE INSTANT CASE PROFIT BE ESTIMATED IN THE LIGHT OF THE ABOVE DECISIONS. FACTS B EING SIMILAR , WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ESTIMATE THE PROFIT @ 12.5% ON THE SAID PURCHASES OF RS.6,82,308/ - . 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2017. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 30/10/2017 RAHUL SHARMA, SR. P.S. 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, MUMBAI