NOBLE CORPORATION, MUMBAI V. INCOME TAX OFFICER WARD 33(1), MUMBAI

ITA 6962/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7557 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: ASHWIN S CHHAG
• Keywords: Bogus purchase; Opportunity of cross examination; Onus to prove
• Section: 133(6); 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 6962 /MUM/20 1 7 (ASSESSMENT YEAR 20 0 9 - 1 0 ) I.T.A. NO. 6963/MUM/2017 (ASSESSMENT YEAR 2010 - 11) M/S. NOBLE CORPORATION D - 41, SUPANT H CHS PLOT NO. 602, SECTOR 6 CHARKOP, KANDIVALI (W) MUMBAI - 400 067. PAN : AAHHA2159K VS. ITO WARD 33(1)(1) C - 13, BKC BANDRA WEST MUMBAI ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI ASHWIN S. CHHAG DEPARTMENT BY SMT. ARJU GARODIA DATE OF HEARING 4 . 4 . 201 8 DATE OF PRONOUNCEMENT 4 . 4 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED CIT(A) - 45, MUMBAI AND THEY RELATE TO A.YS. 2009 - 10 & 2010 - 11. THE AS SESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN SUSTAINING THE ADDITION RELATING TO THE ALLEGED BOGUS PURCHASES MADE BY THE AO IN BOTH THE YEARS . SINCE IDENTICAL ISSUES WERE URGED IN THESE TWO APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE A SSESSEE HEREIN IS A TRADER IN HYGIENIC PRODUCTS AND CHEMICALS. CONSEQUENT TO THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT CERTAIN DEALERS ARE PROVIDING ONLY ACCOMMODATIO N BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS AND UPON NOTICING THAT THE ASSESSEE HAS PURCHASED GOODS FROM SOME OF SUCH SUSPICIOUS DEALERS IN BOTH THE YEARS UNDER CONSIDERATION , THE ASSESSING OFFICER REOPENED THE ASSESSMENT S OF BOTH THE YEARS UNDER CONS IDERATION BY ISSUING NOTICES U/S. 148 OF THE ACT. IN THE REOPENED ASSESSMENT, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE M/S. NOBLE CORPORATION 2 GENUINENESS OF PURCHASES MADE FROM THE SUSPICIOUS DEALERS. IN RESPONSE THERETO, THE ASSESSEE FURNISHED COPIES OF PURCHASE BI LLS, LEDGER ACCOUNT OF SUPPLIERS, DELIVERY CHALLANS, CORRESPONDING SALE BILLS AND BANK STATEMENT S HIGHLIGHTING PAYMENT MADE TO THE SUPPLIERS. 3. IN ORDER TO ASCERTAIN GENUINENESS OF THE TRANSACTION OF PURCHASES, THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) OF THE ACT TO THE SUPPLIERS. HOWEVER, ALL THE NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORIT Y . THE AO ASKED THE ASSESSEE TO PRODUCE THE SUPPLIERS, BUT THE ASSESSEE DID NOT DO THE SAME. HENCE, THE ASSESSING OFFICER PROPOSED TO DISALLOW PURCHA SE S MADE FROM SUCH SUSPICIOUS DEALERS. IN RESPONSE THERETO, THE ASSESSEE PLACED HEAVY RELIANCE ON THE DOCUMENTS FURNISHED BY IT . THE ASSESSEE ALSO SUBMITTED THAT THE STATEMENT GIVEN BY THE DEALERS BEFORE THE SALES TAX AUTHORITY SHOULD NOT BE RELIED UPON AS NO OPPORTUNITY OF CROSS EXAMINATION WAS GIVEN TO THE ASSESSEE. THE ASSESSING OFFICER , HOWEVER, HELD THAT THE ONUS TO PROVE THE GENUINE NE SS OF PURCHASE S IS PLACED UPON THE ASSESSEE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE DID NOT PROVE THAT T HE GOOD S WERE ACTUALLY DELIVERED TO IT BY THE SUPPLIERS BY PRODUCING EVIDENCE S FOR TRANSPORTATION OF GOODS. SINCE THE ASSESSEE HAS RECONCILED THE PURCHASES WITH THE CORRESPONDING SALES, THE ASSESSING OFFICER TOOK THE VIEW THAT THE PROFIT ELEMENT EMBEDDED I N SUCH PURCHASES SHOULD ALONE BE BROUGHT TO TAX. IN THIS REGARD, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (356 ITR 451 ) . ACCORDINGLY, THE ASSESSING OFFICER ESTIMATED THE PRO FIT ON SUCH PURCHASES AT 12.5% AND ACCORDINGLY MADE ADDITION OF ` 6,94,490/ - IN A.Y. 2009 - 10 AND ` 7,95,828/ - IN A.Y. 2010 - 11. 4. THE ASSESSEE CARRIED THE MATTER BY FILING APPEALS BEFORE THE LEARNED CIT(A) BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE HA S FILED THESE APPEALS BEFORE THE TRIBUNAL. 5 . WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICED THAT THE ASSESSEE HAS PLACED RELIANCE ON THE PURCHASE BILLS, DELIVERY CHALLANS AND BANK STATEMENT S ONLY IN ORDER TO PROVE THE GENUINENESS OF PURCHAS E S . IT IS AN M/S. NOBLE CORPORATION 3 ADMITTED FACT THAT THE ASSESSING OFFICER ISSUED NOTICE S U/S. 133(6) OF THE ACT BUT ALL OF THEM WERE RETURNED UNSERVED AND HENCE THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE SUPPLIERS FOR VERIFICATION BUT THE ASSESSEE HAS FAILED TO C OMPLY WITH THE SAME. THE ASSESSEE HAS ALSO FAILED TO PROVE THAT THE GOODS WERE ACTUALLY TRANSPORTED TO ITS PREMISES BY PRODUCING TRANSPORTATION BILLS. UNDER THESE SET OF FACTS, THE TAX AUTHORITIES HAVE DOUBTED THE GENUINENESS OF PURCHASES. THE AO HAS RIG HTLY HELD THAT THAT THE BURDEN TO PROVE THE GENUINENESS OF EXPENDITURE IS PLACED UPON THE ASSESSEE AND ALSO OBSERVED THAT THE SAID BURDEN WAS NOT DISCHARGED BY THE ASSESSEE. SINCE THE ASSESSEE HAS PROVED THAT IT HAS SOLD GOODS BY RECONCILING PURCHASES WITH THE SALES , THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM SOME OTHER SOURCES AND OBTAINED BILLS FROM SUSPICIOUS DEALERS. ACCORDINGLY, THE ASSESSING OFFICER HAS COME TO THE CONCLUSION THAT THE PROFIT ELEMENT EMBEDDED I N SUCH PURCHASES ALONE SHOULD BE ASSESSED TO TAX. 6 . WE NOTICE THAT THE AO HAS NOT SIMPLY RELIED UPON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT WITH REGARD TO THE IMPUGNED PURCHASES. THE AO HAS MADE INDEPENDENT ENQUIRY BY ISSUING NOTICES U/ S 133(6) OF THE ACT, BUT ALL OF THEM WERE RETURNED UNSERVED. THE AO ALSO ASKED THE ASSESSEE TO PRODUCE THE SUPPLIERS, BUT THE ASSESSEE COULD NOT PRODUCE THEM. THE ASSESSEE HAS SIMPLY PLACED RELIANCE ON THE DOCUMENTS AVAILABLE WITH IT TO PROVE THE GENUIN ENESS OF PURCHASES. THE ASSESSEE HAS FAILED TO PROVE THAT THE GOODS WERE, IN FACT, TRANSPORTED FROM THE PLACE OF THE SUPPLIERS. HENCE, IN OUR VIEW, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCLUSIVELY PROVED THE GENUINENESS OF PURCHASES. BEFORE US ALSO, THE ASSESSEE HAS FAILED TO FURNISH ANY MATERIAL TO CONTRADICT THE FINDINGS GIVEN BY THE TAX AUTHORITIES . HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION REACHED BY THE TAX AUTHORITIES THAT THE ASSESSEE MIGHT HAVE SOURCED THE MATERIALS FROM SOME OTHER SOURCE. 7. HOWEVER, WE NOTICED THAT THE PROFIT RATE OF 12.5% ESTIMATED BY THE ASSESSING OFFICER IS ON HIGHER SIDE. THE ASSESSING OFFICER HIMSELF HAS OBSERVED THAT ASSESSEE MIGHT HAVE SAVED MONEY ON ACCOUNT OF SALES TAX ETC., EMBEDDED M/S. NOBLE CORPORATION 4 IN SUCH PURCHASES . THE LEARNED AR SUBMITTED THAT THE VAT RATE APPLICABLE TO THE IMPUGNED PURCHASES IS 4%. WE NOTICE THAT THE ASSESSEE HAS DECLARED GP RATE AT AROUND 7% IN AY 2009 - 10 AND AT AROUND 4% IN AY 2010 - 11. CONSIDERING THE S E FACT S, THE PROFIT RATE OF 12.5% ESTIMATE D BY THE ASSESSING OFFICER, IN OUR VIEW, IS ON HIGHER SIDE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE PROFIT RATE EMBEDDED ON THE IMPUGNED PURCHASES MAY BE ESTIMATED AT 7% , WHICH , IN OUR VIEW, WOULD TAKE CARE OF SAVING S MADE ON ACCOUNT OF TAX AND DISCOUNT, IF ANY, AVAILABLE TO THE ASSESSEE. ACCORDINGLY, WE MODIFY THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO SUSTAIN THE ADDITION TO THE EXTENT OF 7% OF THE VALUE OF BOGUS PURCHASES IN BOTH THE YEARS UNDER CONSIDERATION. 8 . THE AS SESSEE HAS ALSO RAISED CERTAIN LEGAL GROUNDS WITH REGARD TO VALIDITY OF REOPENING, NON REJECTION OF BOOKS OF ACCOUNT. THE LEARNED AR ALSO RAISED LEGAL CONTENTION THAT THE ASSESSEE WAS NOT AFFORDED OPPORTUNITY OF CROSS EXAMINATION. HOWEVER, AT THE TIME OF H EARING , THE LEARNED AR SUBMITTED THAT HE WILL NOT PRESS LEGAL ISSUE S IF PARTIAL RELIEF IS GI VEN TO THE ASSESSEE. SINCE WE HAVE GIVEN PARTIAL RELIEF TO THE ASSESSEE , WE DO NOT FIND IT NECESSARY TO DISPOSE OF THE LEGAL GROUNDS URGED BY THE ASSESSEE. 9 . IN T HE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 4 . 4 .201 8 . SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 4 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI M/S. NOBLE CORPORATION 5 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI