ACIT 8(1)(1), MUMBAI V. ROHINI INDUSTRIAL ELECTRICALS LTD, MUMBAI

ITA 6585/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8561 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 20-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMAL MANGAL
• Keywords: Bogus purchase
• Section: 13; 28

Judgement Text

IN THE IN COME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY , JM & SHRI M.BALAGANESH, AM ITA NO. 6585 /MUM/201 8 ( ASSESSMENT YEAR : 2011 - 12 ) ACIT - 8(1)(1) ROOM NO.624, 6 TH FLOOR AAYAKAR BHAWAN MAHARSHI KARVE MARG MUMBAI 400 020 VS. M/S. ROHINI INDUSTRIAL ELECTRICALS LTD. VOLTAS HOUSE, A BLOCK 4 TH FLOOR, DR. B.A.ROAD CHINCHPOKLI (E) MUMBAI MAHARASHTRA PAN/GIR NO. AAACR5512K (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI KAMAL MANGAL ASSESSEE BY SHRI NITESH JOSHI DATE OF HEAR ING 13 / 01 /2020 DATE OF PRONOUNCEMENT 15 / 01 /2020 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 6585/MUM/2018 FOR A.Y. 2011 - 12 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 14, MUMBAI IN APPE AL NO. CIT(A) - 14/IT - 211/14 - 15 DATED 27/07/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 19/03/2014 BY THE LD. ADDL. COMMISSIONER OF INCOME TAX - 8(3) (HEREINAFTE R REFERRED TO AS LD. AO). ITA NO .6585/MUM/2018 M/S. ROHINI INDUSTRIAL ELECTRICALS 2 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASES TO 12.5% AS AGAINST 100% MADE BY THE LD. AO IN THE FACTS AND CIRCUMS TANCES OF THE CASE. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF UNDERTAKING ELECTRICAL CONTRACTS, INSTRUMENTATION CONTRACTS FOR POWER, PROCESS, INDUSTRIAL AND COMME RCIAL PROJECTS AND RENDERING ENGINEERING SERVICES. THE ASSESSEE IS A SUBSIDIARY OF M/S. VOLTAS LTD. THE LD. AO OBSERVED THAT ASSESSEE HAD MADE PURCHASES FROM M/S. OM TRADERS FOR RS.10,40,156/ - AND THE NAME OF SUCH SUPPLIER HAS BEEN LISTED AS A HAWALA ACCOM MODATION ENTRY PROVIDER AS PER THE INFORMATION GIVEN BY MAHARASHTRA SALES TAX DEPARTMENT. THE LD. AO DISREGARDED THE ENTIRE DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE TO SUPPORT THE GENUINENESS OF THE PURCHASES AND PROCEEDED TO MAKE 100% DISALLOWANCE OF THE SAME TREATING THE SAME AS BOGUS PURCHASES IN THE ASSESSMENT. THE LD. CIT(A) APPRECIATED THE FACT THAT ASSESSEE HAD PROVIDED COPIES OF PURCHASE ORDERS, INVOICES OF M/S. OM TRADERS GIVING DETAILS OF MATERIALS SUPPLIED AND RECEIPT OF MATERIALS AT THE J OB SITES. THE LD. CIT(A) OBSERVED THAT MERE PROVISION OF PURCHASE BILLS, DELIVERY CHALLANS AND THE EVIDENCE OF PAYMENT MADE BY CHEQUE WILL NOT BE SUFFICIENT TO PROVE THE GENUINENESS OF THE TRANSACTIONS WITH THE SAID PARTY. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE GOODS WERE DIRECTLY DELIVERED BY THE SELLER TO THE CONTRACT SITE AND INVOICES HAVE A STAMP OF S ITE R EGISTER S HEET N UMBER WHICH SHOWS THAT THE INVOICE WAS ENTERED INTO THE REGISTER MAINTAINED AT THE WORK SITE. THE LD. CIT(A) GAVE A CA TEGORICAL FINDING THAT THERE IS EVIDENCE OF CONSUMPTION OF GOODS MENTIONED IN THE PURCHASE BILLS OF M/S. OM TRADERS AND THE CONSUMPTION OF THE ITA NO .6585/MUM/2018 M/S. ROHINI INDUSTRIAL ELECTRICALS 3 CORRESPONDING MATERIAL HAD ALSO BEEN ACCEPTED BY THE LD. AO. ACCORDINGLY, THE LD. CIT(A) CONCLUDED THAT THE GOODS WERE PURCHASED BY THE ASSESSEE FROM THE GREY MARKET AND FOR WHICH BILLS WERE OBTAINED FROM M/S. OM TRADERS, THEREBY LEADING TO ASSESSEE DERIVING BENEFIT IN THE FORM OF NON - PAYMENT OF VAT ETC., HENCE, HE HELD THAT ONLY THE PROFIT ELEMENT EMBEDDED IN THE VA LUE OF SUCH PURCHASES SHOULD BE BROUGHT TO TAX AND ACCORDINGLY , DIRECTED THE LD. AO TO ADD ONLY 12.5% OF THE VAL UE OF SUCH PURCHASES BEI N G THE PROFIT ELEMENT THEREON. AGAINST THIS ACTION OF THE LD. CIT(A), THE ASSESSEE HAD NOT PREFERRED ANY APPEAL BEFORE T HIS TRIBUNAL. 3.1. WE FIND THAT IN THE INSTANT CASE, THERE IS NO DISPUTE WITH REGARD TO CONSUMPTION OF GOODS BY THE ASSESSEE OUT OF PURCHASES MADE FROM M/S. OM TRADERS. SINCE THE MATERIAL PURCHASED FROM ALLEGED SUPPLIER HAS BEEN ACTUALLY CONSUMED BY THE ASSESSEE IN THE BUSINESS OF THE ASSESSEE WHICH FACT IS NOT DISPUTED BY THE REVENUE, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN ADDING 12.5% BEING THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES, WHICH IN OUR CONSIDERED OPINION , DOES NOT WARRANT ANY INTERFE RENCE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IN THIS REGARD IS DISMISSED. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF ADVANCE S GIVEN T O EMPLOYEES WRITTEN OFF IN THE SUM OF RS.9.67 LAKHS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE DURING THE COURSE OF ITS BUSINESS HAD GIVEN CERTAIN ADVANCES TO ITS EMPLOYEES FOR MEETING THE EXPENSES AT PROJECT JOB SITES. SOME OF THE EMPLOYEES LEFT THE SERVICES OF ITA NO .6585/MUM/2018 M/S. ROHINI INDUSTRIAL ELECTRICALS 4 THE COMPANY WITHOUT SUBMITTING THE BILLS AND DOCUMENTS AND WITHOUT REFUNDING THE ADVANCES RECEIVED BY THEM FROM THE COMPANY. THERE IS NO DIS PUTE WITH REGARD TO THE FACT THAT THESE ADVANCES WERE GIVEN TO THE EMPLOYEES IN THE NORMAL COURSE OF ITS BUSINESS AND FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HAD THE EMPLOYEES SUBMITTED THE RELEVANT BILLS TOGETHER WITH SUPPORTING DOCUMENTS, THE SAID A DVANCES WOULD HAVE BEEN ADJUSTED BY CORRESPONDING DEBIT TO RELEVANT EXPENDITURE ACCOUNT , WHICH IN TURN WOULD BE ELIGIBLE FOR DEDUCTION FOR THE ASSESSEE. SINCE THE EMPLOYEES HAD LEFT THE COMPANY WITHOUT SUBMITTING THE BILLS AND DOCUMENTS AND THE RECOVERABIL ITY OF THE ADVANCES GIVEN TO THOSE EMPLOYEES WERE TOTALLY DOUBTFUL, ACCORDINGLY, THE ASSESSEE PRUDENTLY DECIDED TO WRITE OFF THE SAME IN ITS BOOKS OF ACCOUNTS AND CLAIMED THE SAME AS BUSINESS LOSS IN TERMS OF SECTION 28 OF THE ACT AND CLAIMED DEDUCTION ACC ORDINGLY. WE DO NOT FIND ANY DISCREPANCY IN THE SAID ACTION OF THE ASSESSEE CLAIMING DEDUCTION IN RESPECT OF BUSINESS ADVANCES WRITTEN OFF WHICH WAS GIVEN TO EMPLOYEES. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IN THIS REGARD IS DISMISSED. 5. IN THE RE SULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 / 01 /2020 SD/ - ( SAKTIJIT DEY ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15 / 01 / 2020 KARUNA , SR.PS ITA NO .6585/MUM/2018 M/S. ROHINI INDUSTRIAL ELECTRICALS 5 COPY OF THE ORDER FORWARDED TO : BY ORDE R, ( 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//