DCIT 8(3), MUMBAI V. SPARKLE FACILITY SERVICES P.LTD, MUMBAI

ITA 6633/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0395 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 31-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: DR K SHIVARAM; ADITYA AJGAONKAR A
• Keywords: Bogus purchase; Opportunity of being heard; Additional evidence
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6633 / MUM/20 14 ASSESSMENT YEAR: 2011 - 12 DCIT 8(3) VS. M/S. SPARKLE FACILITY SERVICE S P LTD. R. NO. 217 , AAYAKAR BHVEN 83, G.L.I. DEWAN CENTRE M.K. MARG SHOPPING MALL, S.V. ROAD MUMBAI 400020 JOGESHWARI. MUMBAI 400102 PAN NO. AAHCS4617 F (APPELLANT) (RESPONDENT) REVENUE BY : MR. K. RAVI KIRAN, D R ASSESSEE BY: DR. K. SHIV A RAM , SR. ADVOCATE & MR. ADITYA AJGAONKAR , ADVOCATE DATE OF HEARING : 18/05 /2017 DATE OF PRONOUNCEMENT: 10/08/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 18 , MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER : - I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT ONLY THE PROFIT ELEMENT OF BOGUS PURCHASES EARNED FROM M/S. GALAXY ENTERPRISES CAN BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE IGNORING THE DECISION BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF J.R. SOLVENT INDUSTRIES (PVT.) LTD. (2012) (22 TAXMANN.COM 115) WHEREIN IT WAS ITA NO. 6633 /MUM/201 4 2 HELD THAT WHERE PURCHASES WE RE MADE FROM A NON - EXISTING SELLER, SAME WOULD BE HELD TO BE BOGUS EVEN IF COMPLETE QUANTITATIVE DETAILS OF PURCHASE WAS AVAILABLE IN THE ASSESSEES BOOKS OF ACCOUNT. II. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE PURCHASES MADE FROM THE FOLLOWING PARTIES ARE NOT BOGUS PURCHASES M/S. OSHO CORPORATION OF RS. 83,01,241/ - , M/S. APEKSHA ENTERPRISSES OF RS. 9, 19,499/ - IGNORING THE FOLLOWING FACTS: A) IN THE CASE OF M/S. OSHO CORPORATION ONLY SHRI HITESH MULJI SHAH, PROPRIETOR APPEARED BEFORE THE ASSESSING OFFICER BUT NOT FURNISHED ANY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASE. B) IN THE CASE OF M/S. AP EKSHA ENTERPRISES, NO ORIGINAL INVOICE, DELIVERY CHALLANS, OCTROI /SALES TAX RECEIPTS, BALANCE SHEETS, INCOME TAX RETURNS WERE FURNISHED TO PROVE THE GENUINENESS OF THE PURCHASES. III. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 84,37,206/ - MADE ON ACCOUNT OF NON - RECONCILIATION OF ENTRIES IN 26AS WITHOUT APPRECIATING THE SUBMISSIONS OF THE ASSESSEE THAT THE DIFFERENCE ON ACCOUNT OF SALES TAX PAYMENT HAD NOT BEEN BACKED BY REQUISITE C ORROBORATIVE EVIDENCES AND ASSESSING OFFICER NEVER AGREED TO THE SAME AS HELD BY CIT(A) IN PARAGRAPH 2.3 OF THE ASSESSMENT ORDER. A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT IF AMOUNT O F RS. 84,37,206/ - IS HELD TO BE ON SALES TAX, THEN SALES SHOWN BY THE ASSESSEE IS MORE THAN THE SALE AMOUNT IN 26AS INFORMATION WHEN FACTS ARE THAT EVEN AFTER TAKING INTO ACCOUNT SALES TAX FIGURES, SALE SHOWN ARE LESS BY AMOUNT OF RS. 8,13,625/ - . ITA NO. 6633 /MUM/201 4 3 IV. THE APPE LLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD MADE PURCHASES AMOUNTING TO RS.85,353/ - FROM M/S GALAXY ENTERPRISES. THE NAME OF THE SAID PARTY WAS APPEARING IN THE LIST OF HAWALA DEALERS IDENTIFIED BY THE SALES TAX DEPARTMENT , MAHARASHTRA AND PUT UP ON THEIR WEBSITE. T HE AO TREATED THE PURCHASES OF RS.85,353/ - AS BOGUS AND MADE AN ADDITION OF IT. 3.1 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APP EAL BEFORE THE LD. CIT(A). AS THE ASSESSEE FAILED TO SUBMIT COMPLETE DOCUMENTARY EVIDENCE AND PRODUCE THE PARTY FOR EXAMINATION, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 25% OF RS.85,353/ - WHICH COMES TO RS.21,338/ - . 3.2 BEFORE US, THE LD. DR RELIES O N THE DECISION IN THE CASE OF JR SOLVENT INDUSTRIES (P) LTD. VS. CIT (2012) 22 TAXMANN.COM 115 (P & H). 3.3 ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF JR SOLVENT INDUSTRIES (P) LTD. (SUPRA) IT HAS BEEN HELD THAT PURCHASES MADE FROM NON - EXISTING SELLER CANNOT BE SUBJECT MATTER OF BEST ASSESSMENT. HOWEVER, I N THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAX MANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES ITA NO. 6633 /MUM/201 4 4 OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE A DDED TO INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF 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). WE FIND THAT THE LD. CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT FOR THE IMPUGNED ASSESSMENT YEAR. WE UPHOLD THE SAME AND DISMISS THE 1 ST GROUND OF APPEAL. 4. WE NOW COME TO 2 ND GROUND OF APPEAL. THE AO ISSUED NOTICE S U/S 133(6) TO M/S OSHO CORPORATION, M/S RP ENTERPRISE AND M/S APEKSHA ENTERPRISE FROM WHOM PURCHASES OF RS.83,01,241/ - , RS.56,906/ - AND RS.9,19,499/ - RESPECTIVELY HAVE BEEN ALLEGEDLY MADE BY THE ASSESSEE. THE AO FOUND THAT THE NOTICE ISSUED TO M/S OSHO CORPORATION WAS RETURNED BACK BY THE POSTAL AUTHORITIES. IN THE CASE OF M/S RP ENTERPRISE AND M/S APEKSHA ENTERPRISE, NO REPLY WAS RECEIVED BY THE AO TILL DATE OF ASSESSMENT ORDER. THEN THE AO ISSUED A NOTICE TO THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES. IN RESPONSE TO IT , THE ASSESSEE FILED ON 05.11.2013 (I) A COPY OF LEDGER ACCOUNT IN THE CASE OF RP ENTERPRISE (II) A COPY OF ACCOUNT AND PURCHASE BILLS IN THE CASE OF OSHO CORPORATION. THE AO FOUND THAT IN THE CASE OF M/S APEKSHA ENTERPRISE, THE ASSESSEE FAILED TO FILE THE CONFIRMATION TILL THE DATE OF ASSESSMENT. THE AO THUS NOTED THAT THE ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE ALLEGED PURCHASES. THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES ALONG WITH RELEVANT ITA NO. 6633 /MUM/201 4 5 BOOKS OF ACCOUNT AND DOCUMENTS. THEREFORE, THE AO MADE AN ADDITION OF RS .92,77,646/ - TREATING THE PURCHASES AS NON - GENUINE. 4. 1 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). DURING THE APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE FILED SOME ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) SENT A COPY OF IT TO THE AO TO MAKE INQUIRY AND SUBMIT A R EMAND R EPORT . AFTER RECEIVING THE SAID REPORT, THE LD. CIT(A) SENT A COPY OF IT TO THE ASSESSEE TO FILE A REPLY. HAVING GONE THROUGH THE REMAND REPORT AND THE REPLY OF T HE ASSESSEE , THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO IN RESPECT OF M/S OSHO CORPORATION, M/S RP ENTERPRISE AND M/S APEKSHA ENTERPRISE. 4 . 2 BEFORE US, THE DR SUBMITS THAT IN THE CASE OF M/S OSHO CORPORATION, SHRI HITESH MULJI SHAH, PROPRIETOR AP PEARED BEFORE THE AO BUT FAILED TO FURNISH ANY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES. IT IS SUBMITTED BY HIM THAT IN THE CASE OF M/S APEKSHA ENTERPRISE, NO ORIGINAL INVOICE, DELIVERY CHALLANS, OCTROI/SALES TAX RECEIPTS, BALANCE SHEETS, INCOME TAX RETURNS WERE FURNISHED TO PROVE GENUINENESS OF THE PURCHASES. 4 . 3 PER CONTRA THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT (I) CONSIDERING THE NATURE OF THE GOODS PURCHASED LIKE CHEMICALS, DETERGENTS AND CLEANING SUPPLIES, THE ASSESSEE HAD PLACED ON RE CORD ALL EVIDENCES THAT COULD HAVE BEEN OBTAINED, (I I ) THE ASSESSEE HAD PRODUCED THE PARTIES BEFORE THE AO FOR EXAMINATION AND THEREBY DISCHARGED ITS ONUS (III) T HERE IS NO ALLEGATION IN THE ASSESSMENT ORDER THAT THESE PARTIES WERE IN THE LIST OF HAWALA DE ALERS AS IDENTIFIED BY THE SALES TAX DEPARTMENT. ITA NO. 6633 /MUM/201 4 6 4 . 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT IN THE REMAND REPORT , THE AO HAS MENTIONED THAT (I) IN RESPECT OF M/S OSHO CORPORATION, SHRI HITESH MULJI SHAH , THE PROPRIETOR APPEARED BEFORE HIM ON 04.07.2014 , (II) THE ASSESSEE PRODUCED ON 08.07.2014 TWO PARTIES BEFORE HIM FOR EXAMINATION - SHRI CHANDULAL C. MEHTA , THE PROPRIETOR OF M/S APEKSHA ENTERPRISE AND SHRI HITEN R. UPADHYAY, THE PR OPRIETOR OF M/S RP ENTERPRISES AND (III)S UBSEQUENTLY, VIDE LETTER DATED 15.07.2014, THE ASSESSEE - COMPANY FURNISHED THE FOLLOWING EVIDENCE : A: M/S R.P. ENTERPRISE I. COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN FOR AY 2011 - 12 II. COPIES OF INVOICES AND DELIVERY CHALLANS. III. COPY O F BANK STATEMENT OF THE PARTY SHOWING PAYMENTS RECEIVED BY IT. IV. COPY OF PAN CARD. B: M/S APEKSHA ENTERPRISE I. COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN FOR AY 2011 - 12 II. COPY OF TAX AUDIT REPORT III. COPY OF PAN CARD. 4.5 WE FIND THAT THERE IS NO ALLEGATION IN THE ASSESSMENT ORDER THAT M/S OSHO CORPORATION AND M/S APEKSHA ENTERPRISE WERE IN THE LIST OF HAWALA DEALERS AS IDENTIFIED BY THE SALES TAX DEPARTMENT. THE ASSESSEE PRODUCED THE PARTIES BEFORE THE AO FOR EXAMINATION. THE ASSESSEE HA S DISCHARGED IT S ONUS BY PRODUCING THE PARTIES BEFORE THE AO AND FILING THE DETAILS AS EVIDENT FROM THE CONTENTS OF THE REMAND REPORT MENTIONED AT PARA 4.4 HERE - IN - ITA NO. 6633 /MUM/201 4 7 ABOVE. THERE FORE , THE CONCLUSION ARRIVED AT BY THE AO IS NOT BASED ON PROPER APPRECIATIO N OF FACTS. SO WE UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.83,01,241/ - IN THE CASE OF M/S OSHO CORPORATION AND RS.9,19,499/ - IN THE CASE OF M/S APEKSHA ENTERPRISE. THUS 2 ND GROUND OF APPEAL IS DISMISSED. 5. WE NOW DEAL WITH THE 3 RD GROUND OF APPEAL. IT RELATES TO THE MIS MATCH OF 26AS ON ACCOUNT OF SERVICE CHARGES. THE AO OBSERVED THAT AS PER THE INFORMATION RECEIVED FROM THE AIR DATA BASE, THE ASSESSEE HAD RECEIVED CONTRACTUAL RECEIPTS OF RS.8,24,89,870/ - BUT AS PER THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD CREDITED AN AMOUNT OF RS.7,40,52,661/ - . HENCE, THE ASSESSEE WAS ASKED BY THE AO TO EXPLAIN THE DIFFERENCE OF RS.84,37,206/ - . THE ASSESSEE EXPLAINED THAT THE DIFFERENCE WAS DUE TO THE SERVICE TAX PAID OF RS.76,23,581/ - WHICH W AS REDUCED FROM THE TOTAL SERVICE CHARGES RECEIVED. THE DIFFERENCE ACCORDING TO THE ASSESSEE WAS ONLY RS.8,13,625/ - WHICH WAS DUE TO CERTAIN SALES MADE LAST YEAR FOR WHICH THE PAYMENT CAME THIS YEAR AND SOME SALES NOT PERTAINING TO THE ASSESSEE. THE AO HEL D THAT THE ASSESSEE HAD FAILED TO RECONCILE THE DIFFERENCE IN 26AS AND ADDED THE ABOVE SUM OF RS.84,37,206/ - TO THE INCOME OF THE ASSESSEE. 5.1 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE RECONCILIATION FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) IS AS UNDER: RECONCILATION OF SALES AS PER PROFIT AND LOSS ACCOUNT & 26AS. SALES AS PER SALES REGISTRAR RS.81,676,241.00 LESS: SERVICE TAX RS.7,623,581.00 NET SERVICE CHARGES DECLARED IN PROFIT & LOSS A/C RS.74,052,660.00 ITA NO. 6633 /MUM/201 4 8 SALES AS PER 26AS RS.82,489,866.00 LESS: SALES AS PER SALES REGISTER RS.81,676,241.00 DIFFERENCE RS.813,625.00 THIS SAID DIFFERENCE IS DULY EXPLAINED BY A SEPARATE SHEET GIVING DETAILS OF EACH PARTY TURNOVER ATTACHED HEREWITH. 5.2 WE FIND THAT NEITHER THE AO NOR THE LD. CIT(A) HAS VERIFIED THE FACTS REFLECTED IN ABOVE RECONCILIATION FILED BY THE ASSESSEE. WE THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER VERIFYING THE DOCUMENTS AND GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AS SESSEE IS ALSO DIRECTED TO FILE THE RELEVANT DOCUMENTS/ DETAILS BEFORE THE AO. THUS THE 3 RD GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 10/08/2017 . SD/ - SD/ - ( MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 10/08/2017 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