ASHOK INDUSTRIAL CORPORATION, MUMBAI V. ITO 19(2)(1), MUMBAI

ITA 647/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0674 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2017
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Keywords: Bogus purchase; Principle of natural justice; Onus to prove
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 647 / MUM/20 1 7 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. ASHOK INDUSTRIAL CORPORATION, 18, SHOP NO.4 C.P.TANK NANUBHAI DESAI ROAD, MUMBAI 400 004 VS. ITO 19(2)(1), MUM BAI PAN/GIR NO. AAEFA5524H APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI S ASHANK DUNDU / SHRI RAHUL R.SARD A REVENUE BY SHRI A.K.KARDAM DATE OF HEARING 09 / 05 /201 7 DATE OF PRONOUNCEME NT 1 2 / 05 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS I S AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 30, MUMBAI DATED 25/11/2016 FOR THE A.Y.2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BE EN TAKEN BY THE ASSESSEE: - 1. THE CIT (A) FAILED TO APPRECIATE THAT ALL PURCHASES OF THE APPELLANT WERE GENUINE AND DULY SUPPORTED BY EVIDENCE. THEREFORE, THE ADDITION SUSTAINED AT THE RATE OF6.5% OF PURCHASES IS BAD IN LAW. 2. THE CIT (A) FAILED TO APPR ECIATE THAT THE AO DID NOT CARRY OUT ANY INDEPENDENT ENQUIRY HIMSELF AND DID NOT POINT OUT ANY DEFECT IN THE EVIDENCE FURNISHED BY THE APPELLANT. THEREFORE, THE ADDITION IS LIABLE TO BE DELETED. 3. THE CIT (A) FAILED TO APPRECIATE THAT THE AO HAD NOT PR OVIDED THE APPELLANT ANY MATERIAL ON WHICH HE PLACED RELIANCE IN MAKING THE IMPUGNED ADDITION THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. THE ITA NO. 647/MUM/2017 M/S. ASHOK INDUSTRIAL CORPORATION 2 CIT (A) OUGHT TO HAVE PROVIDED SUCH MATERIAL TO THE APPELLANT BEFORE ADJUDICATING ON THE IMPUGNED ADDITI ON. THEREFORE, THE ADDITION IS NOT JUSTIFIED. 3. IT WAS ARGUED BY LEARNED AR MR. SHASHANK DUNDU THAT MERELY ON THE INFORMATION RECEIVED FROM DGIT(INV.), REGARDING T HE SALES TAX DEPARTMENT FINDING HAWALA DEALERS INVOLVED IN BOGUS TRANSACTIONS, AO MADE AN ADDITION OF RS.23,64,585.6/ - @12.5% OF THE TOTAL ALLEGED BOGUS PURCHASES AMOUNTING TO RS.1,89,16,685/ - , TO THE TOTAL INCOME OF THE ASSESSEE . HE INVITED OUR ATTENTION TO THE COPIES OF THE PURCHASE BILLS FILED BEFORE THE AO. AS PER LEARNED AR, THE STOCK REG ISTER ALSO SHOWS RECORDING OF ALL THE PURCHASES IN THE REGULAR BOOKS OF ACCOUNTS. COPIES OF SALES BILLS HAVE ALSO NOT BEEN DOUBTED BY THE AO AND CIT(A). 4. MY ATTENTION WAS ALSO INVITED BY LEARNED AR TO THE BANK STATEMENT EVIDENCING THE PAYMENTS THROUGH A CCOUNT PAYEE CHEQUES. ATTENTION WAS ALSO INVITED TO THE LEDGER COPIES OF PURCHASE PARTIES IN ASSESSEES BOOKS. CHALLENGING THE REOPENING, IT WAS CONTENDED BY LEARNED AR THAT AO HAD NOT PROVIDED ANY REASON OR FURTHER INFORMATION W.R.T. MAKING THE ADDITION. THE INFORMATION FROM THE SALES TAX DEPARTMENT IS THE SOLE BASIS FOR THE ADDITION. AO HAD NOT CALLED THE PARTIES FOR ENQUIRY, HENCE THE BURDEN OF PROOF LIES ON THE AO. 5. LEARNED AR FURTHER CONTENDED THAT CIT(A) ERRED IN MAKING THE FOLLOWING STATEMENTS AS PROVIDED IN THE CIT(A)'S ORDER: - RELIANCE WAS PLACED ON THE DECISION OF CIT V. SIMIT P. SHETH(SUPRA) BY THE CIT(A)(PG.17, PARA 6.11, CIT(A)) , SINCE THE ADDITION IN THE SAID CASE IS BASED ON 2 FACTORS I.E. THE GP AVERAGE % AND THE VAT % PAID. ITA NO. 647/MUM/2017 M/S. ASHOK INDUSTRIAL CORPORATION 3 IN THE CURR ENT CASE THE VAT HAS BEEN PAID BY THE ASSESSEE, AND HE CANNOT BE PUNISHED FOR THE MISDEEDS OF THE VENDORS. - THAT THE APPELLANT HAD NOT FULLY RECONCILED THE PURCHASES WITH THE ITEMS SOLD AND FAILED TO RECONCILE 1:1 OF THE ITEMS PURCHASED AND SOLD (PG.14, PARA6.4, CIT(A)). IN THE CURRENT CASE, THE ASSESSEE HAS PRODUCED AND MATCHED ALL THE DETAILS AS MENTIONED IN THE WRITTEN SUBMISSIONS BEFORE THE CIT(A)(PG.6, PARA4, POINT 11, SR. NO. 2, CIT(A). 6. INVITING MY ATTENTION TO THE AOS ORDER, LEARNED AR ARGUED THAT IN THE INSTANT CASE THE AO HAD NOT CALLED FOR ANY ATTENDANCE OF ANY OF THE SUPPLIERS. HE HAD THE RIGHT TO SUMMON ANY PERSON U/ S 13 1 IN CASE OF SUSPICION, WHICH WAS NOT CHOSEN BY AO TO BE EXERCISED. 7.IT WAS ARGUED BY MR. S ASHANK DUNDU THAT THE ONUS O F PROOF IS ALWAYS ON THE PERSON WHO MAK E S T HE CLA IM . IN THE INSTANT CASE, THE BURDEN OF PROOF HAS SHIFTED ON THE DEPARTMENT SINCE, THE ONUS HAS BEEN DISCHARGED BY ASSESSEE AFTER PROVIDING ALL THE DETAILS OF THE CYCLE OF THE ALLEGED B OGUS TRANSACTIONS I.E. FROM PURCHASE TO SALE. 8. RELYING ON THE DECISION OF BOMBAY TRIBUNAL IN CASE OF SHRI RAJEEV G. KALATHIL IN ITA NO.6727/MUM/2012, LEARNED AR CONTENDED THAT ADDITION ON THE GROUND THAT ONE OF THE SUPPLIERS WAS DECLARED A HAWALA DEALERS BY THE VAT DEPARTMENT WAS NOT JUSTIFIED. IT IS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO A LOGIC AL END, BUT THE AO LEFT THE JOB AT THE INITIAL POINT ITSELF. SUSPICION OF THE HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. 9. MY ATTENTION WAS ALSO INVITED TO THE VARIOUS JUDICIAL PRONOUNCEMENTS BY THE BOMBAY TRIBUNAL, WHEREIN ADDITION SO MADE WAS DELETED BY THE TRIBUNAL. ITA NO. 647/MUM/2017 M/S. ASHOK INDUSTRIAL CORPORATION 4 10 . IN VIEW OF THE ABOVE DISCUSSION, LEARNED AR CONTENDED THAT NO ADDITION IS WARRANTED WITH RESPECT TO THE PU RCHASES WHICH HAVE BEEN SOLD AND ON WHICH DUE PROFIT HAS BEEN DECLARED BY THE ASSESSEE. 11 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE AO AND CIT(A) AND CONTENDED THAT CIT(A) HAVE VERY REASONABLY ESTIMATED THE PROFIT AT 6.5% OF SUCH PURCHASES AND NO FURTHER RELIEF IS WARRANTED. 12 . I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT IN RESPECT OF ALLEGED BOGUS PURCHASES AO ESTIMATED PROFIT AT 12.5%. BY THE IMPUGNED ORDER , CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 6.5%. I FOUND THAT SINCE SALES ARE ACCEPTED, THE PURCHASES CANNOT BE REJECTED SOLELY BASED ON THE INFORMATION FROM SALES TAX DEPARTMENT. PURCHASES CANNOT BE ADDED ONCE SALES ARE ACCEPTED AND THE BOOKS OF AC COUNTS ARE NOT REJECTED. (ITO V. SHRI DEEPAK POPATLAL GALA ITA NO. 5920/M/2013 ITAT - MUMBAI ). IN VIEW OF THE DECISION OF BOMBAY HIGH COURT IN CASE OF NIKUNJ EXIMP ENTERPRISES PVT. LTD., 216 TAXMAN 171 WHERE SALES ARE SUPPORTED BY PURCHASES AND PAYMENT WAS M ADE THROUGH BANKS, MERELY BECAUSE SUPPLIERS HAD NOT APPEARED BEFORE THE AO , PURCHASES COULD NOT BE REJECTED AS BOGUS. 13. KEEPING IN VIEW THE ABOVE DISCUSSION AND THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE JUDICIAL PRONOUNCEMENTS CI TED BY LEARNED AR DURING THE COURSE OF HEARING BEFORE US, I DIRECT THE AO TO ITA NO. 647/MUM/2017 M/S. ASHOK INDUSTRIAL CORPORATION 5 RESTRICT THE ADDITION TO THE EXTENT OF 2% OF SUCH ALLEGED PURCHASES. I DIRECT ACCORDINGLY. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 12 / 05 /2017 SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 12 / 05 /201 7 KARUNA SR. PS 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//