MEHTA INFOCOM P.LTD, MUMBAI V. ITO WD 9(2)(3), MUMBAI

ITA 6917/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9865 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Bogus purchase; Income from undisclosed sources; Opportunity of being heard; Accommodation entries
• Section: 142(1); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI RAJENDRA , AM AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 6917 / M/ 20 1 4 ( / ASSESSMENT YEAR: 20 10 - 11 ) MEHTA INFOCOM P. LTD. MEHTA HOUSE, PLOT NO. AF/3 CAMA INDL ESTATE, NEAR HUB MALL, OFF W.E. HIGHWAY GOREGAON (E) MUMBAI - 4000 63 / VS. ITO WD 9(2) (3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 40002 0 ./ ./ PAN/GIR NO. : AAFCM 2000 E ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 28 .0 4 .2017 / DATE OF PRONOUNCEMENT : . 17 . 0 7 .2017 / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21.08.2014 PASSED BY THE COMMIS SIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2010 - 11 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1 . 1 ON THE FACTS AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF PUR CHASES OF RS.4,07,408 FROM THE PARTIES AS BOGUS ASSESSEE BY: SHRI SANJIV M. SHAH (AR) DEPARTMENT BY: SHRI ABANI KANTA NAYAK (D R) MEHTA INFOCOM P. LTD. 2 PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT WITHOUT APPRECIATING THE FACT THAT APPELLANT IS A TRADER, STOCK RECORDS ARE MAINTAINED, CHART SHOWING CORRESPONDING SALES AGAINST THE ALLEGED PURCHASES WAS PRODUCED AND THE PAYMENTS FOR PURCHASES WERE MADE TO THE ALLEGED PARTIES BY ACCOUNT PAYEE CHEQUES. 1.2 ON THE FACTS AND IN LAW AND WITHOUT PREJUDICE TO GROUND NOS. 1.2 THE LD. CIT(A) ERRED IN NOT ACCEPTING THE GROUND OF DISALLOWING GROSS PROFIT WITHOUT APPRECIATING THE FACTS THAT APPELLANT IS A TRADER FOR EVERY SALE THERE HAS TO BE A CORRESPONDING PURCH ASE AND STOCK REGISTER IS MAINTAINED BY APPELLANT. 2. APPELLANT PRAYS FOR LEAVE TO ADD, AMEND OR DELETE ANY GROUNDS. FO R APPEAL ON OR B EFORE THE FINAL DATE OF HEARING. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED E - RETURN OF INCOME FOR THE A.Y. 2010 - 11 ON 04.10.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS.27,74,144/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT DATED 02.09.2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, THE NOTICE U/S 142(1) OF THE ACT DATED 07.06.2012 WAS ALSO ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND DEALING IN CABLES A ND INTERNET RELATED PRODUCTS. TH E DDIT (INV.) UNIT - 2(4) INFORMED BY VIRTUE OF LETTER DATED 13.03.2013 THAT THE ASSESSEE COMPANY WAS AVAILING ACCOMMODATION ENTRIES FROM M/S MEHTA INFOCOM P. LTD. THE FOLLOWING ENTRIES WERE IDENTIFIED. - F.Y DETAILS M/S MEHTA INFOCOM P. LTD 4658583 MEHTA INFOCOM P. LTD. 3 2008 - 09 BOGUS PURCHASE 407408 185850 2009 - 10 2010 - 11 12500000 2009 - 10 UNACCOUNTED INCOME INTRODUCED AS SHARE CAPITAL PREMIUM TOTAL 1,77,51,841 4 . THEREAFTER, THE NOTICE WAS GIVEN AND AFTER GETTING REPLY AN AMOUNT OF RS.4,07,4 08 WAS ADDED TO THE INCOME OF THE ASSESSEE AND THE INCOME TO THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 1,68,64,580/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE SAID ADDITION THEREFORE, THE PRESENT APPEAL HAS BEEN FIELD BEFORE US. ISSUE NO.1 .1 TO 1.2 : - 5 . AT THE VERY OUTSET THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE DISALLOWANCE OF PURCHASE EXPENSES TO THE TUNE OF RS.4,07,408/ - IS WRONG AGAINST THE LAW AND FACT S AND IS LIABLE TO BE SET ASIDE . IT IS ALSO ARGUED THAT THE PAYMENT WAS MADE THROUGH ACCOUN T PAYEE CHEQUES WHICH IS SUPPORTED BY RECEIPT AND T HE AP PELLANT HAS ALSO GIVEN THE VAT THEREFORE, THE APPELLANT HAS DISCHARGED HIS ONUS WITH REGARD TO THE GENUINENESS OF THE PURCHASE BUT THE ASSESSING MEHTA INFOCOM P. LTD. 4 OFF ICER HAS WRONGLY DISALLOWED THE PURCHASE THEREFORE, THE FINDING OF THE CIT(A) IN THIS REGARD IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW . IT IS ALSO ARGUED THAT THE SALE IS NOT DISPUTED AND THE BOOKS O F ACCOUNT HAS NOT BEEN REJECTED , T HEREFORE, IN THE SAID CIRCUMSTANCES T HE ADDITION OF AN AMOUNT OF RS. 4,07,408/ - REGARDING BOGUS PURCHASE IS WRONG AND AGAINST THE LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. IT IS ALSO ALTERNATIVE LY ARGUED THAT THE GROSS PROFIT OF THE BOGUS PURCHASE MAY KINDLY BE TAKEN INTO CONSIDERATION FOR THE ASSESSMENT OF TAX IN VIEW OF THE LAW SETTLED IN CIT VS. SIMIT P SHETH HONBLE GUJARAT HIGH COURT DATED 16.01.2013 IN ITA. NO. 553 OF 2013. ON THE OTHER HAND, THE LD. REPRESENTATIVE OF TH E DEPARTMENT HAS REFUTED SAID CONTENTIONS. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE CASE OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE LETTER DATED 13.03.2013 RECEIVED FROM DDIT(INV.) UNIT - 2(4), MUMBAI ALONG WITH ENQUIRY PROCEEDING U/S 131 OF THE ACT IN THE CASE OF MEHTA GROUP IN WHICH M/S. MEHTA INFOCOM P. L TD. IS ONE OF THE GROUP CONCERN. IN THE ENQUIRY , THE TRANSACTION OF THE ASSESSEE COMPANY WAS EXAMINED AND IT WAS FOUND THAT THE ASSES SEE AVAIL ED THE ACCOMMODATION ENTRIES IN THE FORM OF PURCHASE AND ALSO SHARE CAPITAL TO THE TUNE OF RS.4,07,408/ - RELATING TO THREE PARTIES WHICH WERE FOUND AS BOGUS. HOWEVER, THE ENQUIRY WAS CONDUCTED BY SALES TAX DEPARTMENT OF MAHARASHTRA I N WHICH THESE PARTIES ADMITTED T HESE FACTS THAT THEY WERE ISSUING THE BOGUS BILLS. SUBSEQUENTLY, THE ASSESSING OFFICER WENT TO THE ADDRESS MEHTA INFOCOM P. LTD. 5 OF THESE PARTIES AND THE SAID PARTIES WERE NOT FOUND TH EREFORE, THE ASSESSEE WAS ASKED TO PROVE THE TRANSACTIONS. THE ASSESSEE FAILED TO PRODUCE THESE PARTIES BUT RELIED UPON THE DOCUMENTS AVAILABLE WITH HIM SUCH AS LEDGER ACCOUNT AND PURCHASE PAYMENT MADE THROUGH THE BANKING CHANNELS ETC. T HE SAID EVIDENCE WAS NOT CONSIDERED BY AO BECAUSE OF THE MANIPULATION ANYHOW WE FOUND THAT NO OPPORTUNITY OF BEING HEARD WAS GRANTED TO THE ASSESSEE TO CROSS - EXAMINE THE PERSON WHOSE STATEMENT WAS RECORDED BY THE SALES TAX DEPARTMENT OF MAHARASHTRA AND NO BOOKS OF ACCOUNT HAS NOT BEEN REJECTED SO IN SUCH TYPE OF CASES GUJARAT HIGH COURT HAS PASSED THE ORDER WHEREIN IT HAS BEEN HELD THAT THE GROSS PROF IT RATIO IS LIABLE TO BE TAKEN ON THE BOGUS PURCHASE . IF ANY, IN THE CASE OF CIT VS. SIMIT P SHETH (SUPRA). I N VIEW OF THE SAID LAW, WE ARE OF THE VIEW THAT TH E ADDITION OF THE TOTAL BOGUS PURCHASE INTO THE INCOME OF THE ASSESSEE IS NO T JUSTIFIABLE AND THE ONLY ELEMENT WHICH IS LIABLE TO BE ADDED IS THE RATIO OF GROSS PROFIT . ACCORDINGLY, W E FOUND IT JUSTIFIABLE TO ADD THE INCOME @ O F 12.5% OF THE BOGUS PURCHASE. IN THIS REGARD WE ALSO FIND OF SUPPORT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HARIRAM BHAMBHANI, ITA NO.313 OF 2013, FEB 4, 2015 (2015) 92 CCH 0046 MUM BAI HIGH COURT) . IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) ON THIS ISSUE IS NOT JUSTIFIABLE THEREFORE, WE SET ASIDE THE SAME AND HOLD THAT THE PROFIT RATIO @ OF 12.5% OF THE PURCHASE TO THE TUNE OF RS.4,07,408/ - IS LIABLE TO BE TAKEN INTO CONSIDERATION IN THE INCOME OF THE A SSESSEE. MEHTA INFOCOM P. LTD. 6 ACCORDINGLY, W E DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE . 6 . IN THE RESULT , APPEAL OF THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 17 .07 . 2017 SD/ - SD/ - ( RAJENDRA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 17 . 0 7 . 2 01 7 V.P.SINGH / 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