DSG CORPORATION PVT. LTD., MUMBAI V. DCIT CENT. CIR. - 7(2), MUMBAI

ITA 6534/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8818 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 07-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: OTHER SEVEN; MANI JAIN I T A NO MUM
• Keywords: Bogus purchase; Opportunity of being heard; Corroborative evidences; Accommodation entries
• Section: 133A; 133(6); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO . 6530 TO 6532 /MUM/201 6 ( / ASSESSMENT YEA R S : 20 06 - 07 TO 2008 - 09 ) AND ./ I.T.A. NO .6533 & 6534/MUM/2016 ( / ASSESSMENT YEA RS : 2009 - 10 AND 2011 - 12 ) M/S DSG CORPORATION PVT. LTD, 103/A, SWISS CORNER, SHASTRI NAGAR, LOKHANDWALA, ANDHERI(W), MUMBAI - 400053 / VS. DY.COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE 7(2), R . NO.655, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT ) ( / RESPONDENT ) ./ I.T.A. NO .6449 , 6450 AND 6451 /MUM /2016 ( / ASSESSMENT YEA RS : 2011 - 12 & 2006 - 07 AND 2008 - 09 ) DY.COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE 7(2), R.NO.655, AAYAKAR BHAVAN, M .K.ROAD, MUMBAI - 400020 / VS. M/S DSG CORPORATION PVT.LTD, (FORMERLY KNOWN AS M/S D.S.GUPTA CONSTRUC TION PVT.LTD. ) 103/A, SWISS CORNER SHASTRI NAGAR, LOKHANDWALA, ANDHERI(W), MUMBAI - 400053 ( / APPELLANT ) ( / RESPONDENT ) PAN: AAACD5064G / REVENUE BY : S HRI V VIDHYADHAR / ASSESSEE BY : SHRI MANI JAIN 2 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS / DATE OF HEARING : 14 . 9 .2017 / DATE OF PRONOUNCEMENT : 31. 10. 2017 / O R D E R PER BENCH TH E ASSESSEE HAS FILED FIVE APPEALS AGAINST THE COMMON ORDER DATED 18.8.2016 PASSED BY T HE LD. CIT(A) - 49 , MUM BAI RELEVANT TO THE ASSESSMENT YEARS 2006 - 07 TO 2008 - 09 AND 2009 - 10 & 2011 - 12 . THE REVENUE ALSO FILED CROSS APPEALS FOR THE ASSESSMENT YEARS 2006 - 07, 2008 - 09 AND 2011 - 12 . SINCE THE ISSUES AGITATED IN ALL THESE APPEALS ARE ALMOST IDENTICAL IN NATURE, TH EREFORE, THESE APPEALS WERE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DECIDED BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. WE SHALL TAKE UP THE CROSS - APPEAL S RELATING TO THE ASSESSMENT YEAR 20 06 - 07 FILED BY THE ASSESSEE AND REVENEUE FIRST AS THI S BEING THE LEAD CASE. THE FACTS RELATING TO THE ISSUES UNDER CONSIDERATION ARE DISCUSSED HEREUNDER WITH REFERENCE THERETO. I.T.A. NO.6530/MUM/2016 (BY THE ASSESSEE) AND ITA NO.6450/MUM/2016 (BY REVENUE) 2. ONLY ISSUE RAISED IN THE VARIOUS GROUNDS OF AP PEAL OF THE ASSESSEE IS AGAINST THE ESTIMATION OF GROSS PROFIT AT THE RATE OF 12.5% OF THE ALLEGED BOGUS PURCHASES, WHEREAS THE DEPARTMENT I S IN APPEAL AGAINST THE DELETION OF 3 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS BOGUS PURCHASE S TO THE TUNE OF 87.5% BY THE LD. CIT(A) AGAINST THE 100% MADE B Y THE AO. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29.11.2006 DECLARING TOTAL INCOME OF RS. 1,44,99,999/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT ON 31.3.2008 ACCEPTING THE RE TURNED INCOME . THEREAFTER, THE AO REOPENED THE ASSESSMENT BY ISSUING THE U/S 1 48 OF THE ACT AFTER RECEIVING THE INFORMATION FROM THE DGIT(INV) MUMBAI WHO IN TURN WAS PASSED ON THE INFORMATION BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE OBTAINED BOGUS PURCHASE BILLS FROM THE VARIOUS PARTIES WHOSE NAMES WERE APPEARING IN THE WEBSITE OF GOVERNMENT OF MAHARASHTRA AS A HAWALA OPERATORS . A SURVEY ACTION U/S 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED ON THE ASSESSEE AS A CCORDING TO THE AO, THE ASSESSEE OBTAINED BOGUS BI LLS TO SUPPRESS ITS PROFITS. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE WAS NOT FOLLOWING THE STANDARD OF OPERATING PROCEDURE BY MAKING PURCHASES FROM DOSHI TRADING COMPANY AND MOST OF THESE PARTIES WERE NOT GENUINE AND VER IFIABLE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE VIDE LETTER DATED 28.11.2013 TO PRODUCE THE PARTIES ALONG WITH THE SUPPORTING DETAILS OF PARTIES AND PURCHASES MADE FROM THEM AND ALSO THE DETAILS OF GOODS USED IN THE MANUFACT URE AND FINISHED PRODUCTS . THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY RS.7,81,370/ - ADMITTED BY SHRI SUNIL GUPTA, 4 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS MANAGING DIRECTOR OF THE ASSESSEE COMPANY TO BE NON - GENUINE PURCHASES SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS RE PLIED BY THE ASSESSEE VIDE LETTER DATED 21 .3.2014 AS INCORPORATED IN PARA 5 OF THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE PRODUCED A COPY OF BANK STATEMENT, LEDGER ACCOUNT AND CONSUMPTION STOCK REGISTER AND STATEMENT E TC. IT WAS ALSO SUBMITTED BEFORE THE AO THAT WHEN THE SALES TAX AUTHORITY FAILED TO LOCATE THE SUPPLIERS OF GOODS , THE ASSESSEE WAS DENIED SET OFF OF VAT ON PURCHASES AND WAS FORCED TO PAY THE ADDITIONAL DEMAND ON BEHALF OF THE SUPPLIERS . THE AO WAS NO T CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND THEREFORE ADDED THE ENTIRE SUM OF RS.7 , 81 , 370/ - TO THE TOTAL INCOME OF THE ASSESSEE. THE MATTER WAS CARRIED TO THE FIRST APPELLATE AUTHORITY, WHO AFTER CONSIDERING THE VARIOUS ASPECTS OF THE CASE PART LY SUSTAINED THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES THEREBY DELET ING 87.5% OF THE BOGUS PURCHASES FOR WHICH BOTH THE PARTIES ARE IN APPEAL BEFORE US. 4. THE LD.AR VEHEMENTLY SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE LD.CIT(A) PART LY CONFIRMING THE ORDER OF THE AO TO THE EXTENT OF 12.5% OF BOGUS PURCHASES WAS TOTALLY WRONG AND AGAINST THE FACTS OF THE CASE AS THE AO HAS NOT MADE ANY INDEPENDENT INQUIRY AT ALL . THE AO HAS NOT ISSUED NOTICES TO THE PARTIES U/S 133(6). FURTHER, LD. AR SUBMI TT ED THAT NOTWITHSTANDING THE PURCHASES WERE ADMITTED BY THE MANAGING DIRECTOR OF 5 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDING , BUT GOODS WERE INFACT PROCURED AND USED IN THE MANUFACTURING PROCESS AS APPARENT FROM THE STOCIK TALLY . THE LD. AR FURTHER CONTENDED THAT THE APPLICABLE RATE FOR VAT IS 4% AND AT THE MOST IF THE GP ON ALLEGED BOGUS PURCHASES WAS SO IS TO BE APPLIED THEN THE ASSESSEE COULD BE SAID TO HAVE MADE THE SAVINGS ON ACCOUNT OF NON PAYMENT OF VAT ONLY TO THE EXTENT OF 4% + REASONABLE GP. THE LD. AR SUBMITTED THAT IN THE SIMILAR CASES THE CO - ORDINATE BENCHES OF T HE TRIBUNAL HAVE TAKEN A CONSISTENT VIEW BY APPLYING VAT +2 FOR THE NET PROFIT OF THE ASSESSEE. ACCORDINGLY, THE GP AT THE MOST 6% MAY BE APPLIED. 5 . THE LD. DR ON THE OTHER HAND, RELIED ON T H E ORDE R S OF AO AND SUBMI TT ED THAT THE ASSESSEE UNDOUBTEDLY WAS AVAILING BOGUS PURCHASE BILLS FROM THE PARTIES WHICH WERE DECLAR ED SUSPICIOUS HAWALA OPERATORS BY THE SALES TAX DEPARTMENT , GOVERNMENT OF MAHARASHTRA . THE LD. DR SUBMITTED THAT THE MERE FACT IS THAT THE ASSESSEE HAS PURCHASE D THE MATERIALS AND PAYMENTS WERE MADE BY CHEQUES, DELIVERY TAKEN , STOCK CONSUMED IN THE MANUFACTURING PROCESS DID NOT PROVE THE GENUINENESS OF THE PURCHASES. AS REGARDS NON - INVESTIGA TION BY THE AO, THE LD.DR SUBMITTED THAT THE ONUS IS ON THE ASSESSEE TO PRODUCE THE PARTIES AND PROVE THE GENUINENESS OF THE PURCHASES AND NOT AO. THE LD. DR PRAYED BEFORE US THAT THE ORDER OF THE AO BE RESTORED AND THAT OF LD.CIT(A) BE SET ASIDE. 6 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS 6 . WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE AVAILED ACCOMMODATION ENTRIES OF BOGUS PURCHASE S F ROM THE HAWALA DEALERS AMOUNTING TO RS.7,81,370/ - FROM DOSHI TRADING COMPANY WHICH IS THE HAWALA OPERATOR LISTED IN THE WEBSITE OF SALES TAX DEPARTMENT, GOM. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PLUMBING . T HE ASSESSEE HAS PRODUCED BEFORE THE AO CO P IES OF BILLS AND VOUCHERS , LEDGER ACCOUNT AND CONSUMPTION REGISTER MAINTAINED BY THE ASSESSEE. FURTHER , DESPITE THE ASSESSEE HAVING SUPPLIED THE NAMES AND ADDRESSE S OF THE PARTIES, THE AO DID NOT ISSUE NOTICE U/S 133(6) OF THE ACT AND THUS HAS NOT TAK EN ANY STEPS FOR VERIFI CATION OF THE GENUINENESS OF PURCHASE AND THEREBY NOT CONDUCT ED ANY INQUIRY OR INVESTIGATION IN THE MATTER AND SOLELY HARPED ON THE BELIEF THAT THE PARTY WAS DECLARED AS HAWALA DEALER. THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING THE ADDITION TO THE EXTENT OF 12.5% OF THE TOTAL BOGUS PURCHASE. IN THE PRESENT CASE BEFORE US IN SUCH TYPE OF CASES OF HAWALA PURCHASES THE ASSESSEE PURCHASE GOODS FROM THE GREY MARKET AND THEREBY SAVES BY NON - PAYMENT OF VAT A ND OTHER INCIDENTAL TAXES. IN THE PRESENT CASE BEFORE US, THE APPLICABLE VAT RATE IS 4% AND THEREFORE A REASONABLE CONCLUSION IS THAT THE ASSESSEE MIGHT HAVE SAVED 4% BY MAKING PURCHASES FROM THE GRAY MARKET. IN SIMILAR TYPE OF CASES, THE CO - ORDINATE BEN CHES OF 7 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS THE TRIBUNAL HAVE BEEN TAKING A VIEW A REASONABLE RA T E OF PROFIT DEPENDING ON THE VAT SAVED BY THE ASSESSEE SHOULD BE MADE. IN THE PRESENT CASE, SINCE THE VAT IS 4%, WE ARE OF THE CONSIDERED VIEW, IT WOULD BE FAIR AND REASONABLE IF THE A DDITI ON IS SUSTAINED EQUAL TO 6 % OF THE TOTAL BOGUS PURCHASE S . ACCORDINGLY , THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF REVENUE IS DISMISSED. I.T.A. NO.6531,6532, 6533/MUM/2016 (BY ASSESSEE), ITA NO . 6451/MUM/2016 (BY REVENUE). 7. IN THESE APPEAL S THE ISSUE RAISED BY THE RESPECTIVE PARTIES ARE SIMILAR TO THAT AS DECIDED BY US IN THE EARLIER PARAGRAPHS IN ITA NO I.T.A. NO.6530/MUM/2016 (BY THE ASSESSEE)AND ITA NO.6450/MUM/2016 (BY REVENUE) AND HENCE THE DECISION TAKEN THEREIN WOULD MUTATIS MUTANDI APPLY TO THESE APPEALS AS WELL. ACCORDINGLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THAT OF REVENUE STAND DISMISSED. I.T.A. NO.6534/MUM/2016 (BY ASSESSEE), ITA NO.6449/MUM/2016 (BY REVENUE). 8 . IN THE APPEAL OF THE ASSESSEE, THE GROUNDS OF A PPEAL TAKEN BY THE ASSESSEE FROM ONE TO THREE HAVE ALREADY BEEN DECIDED BY US WHILE DEALING THE APPEAL NO.653 0 /M/2016 & 6450/M/2016 AND HENCE, THE DECISION TAKEN THEREIN WOULD BE APPLICABLE TO TH ESE APPEAL AS WELL WITH REGARD TO GROUND OF APPEAL NO.1 TO 3 AND HENCE, THESE GROUNDS ARE PARTLY ALLOWED. 8 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS 9 . WITH REGARD TO GROUND NO 4 OF APPEAL TAKEN BY THE ASSESSEE IN GROUND NO.4 IS AS AGAINST HE CONFIRMATION OF ORDER OF AO BY THE LD. CIT(A) REJECTING THE CLAIM OF TDS CREDIT AMOUNTING TO RS.20,41,218/ - . 1 0 . THE BRIEF FACTS OF THE CASE ARE THAT THE AO ON THE BASIS OF AIR INFORMATION OBSERVED THAT ASSESSEE HAS NOT SHOWN GROSS INCOME MEANING THEREBY THAT NET INCOME AFTER DEDUCTION OF TDS WAS SHOWN. ACCORDINGLY AO ADDED A SUM OF RS.20,41,218/ - TO THE TOTAL I NCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NOT FILE ANY SUPPORTING EVIDENCE S . THE LD.CIT(A) RESTORED THE ISSUE TO THE FILE OF AO AND DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE AFTER VERIFYING THE DOCUMENTARY EVIDENCES AND BRINGING ON RECORD THE DETAILS. 1 1 . WE FIND THAT THE LD. CIT(A) HAS CORRECTLY DIRECTED THE AO T O CARRY OUT NECESSARY VERIFICATION AND DECIDE THE ISSUE OF TDS CREDIT ACCORDINGLY. WE ARE IN COMPLETE AGREEMENT WITH THE FINDINGS OF THE LD.CIT(A) AND DIRECT THE AO TO LOOK INTO THE MATTER AFTER PROVIDING FAIR AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . WE ALSO DIRECT THE ASSESSEE TO CO - OPERATE WITH T HE AO FOR SPEEDY DISPOSAL OF THE ISSUE. 1 2 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. 1 3 . IN SUM AND SUBSTANCES, I . I.T.A. NO.6530/MUM/2016 (BY THE ASSESSEE) IS PARTLY ALLOWED; II . ITA NO.6450/MUM/2016 (BY REVENUE) IS DISMISSED; 9 I.T.A. NO. 6530/MUM/2016 AND OTHER SEVEN APPEALS III . I.T.A. NO.6531,6532,6533/MUM/2016 (BY - ASSESSEE) ARE PARTLY ALLOWED; IV . ITA NO. 6451/MUM/2016 (BY REVENUE) IS DISMISSED; V . I.T.A. NO.6534/MUM/2016 (BY ASSESSEE) PARTLY ALLOWED FOR STATISTICAL PURPOSES AND; VI ITA NO.6449/MUM/2016 (BY REVENUE) IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST OCT, 2010 , 2017 SD SD ( SAKTIJIT DEY ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31. 10. 2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI