RAJENDRA TUBES & FITTINGS, MUMBAI V. ITO WD 19(3)(1), MUMBAI

ITA 7003/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1110 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2016
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Assessee Lawyers: ISHWER P RATHI
• Keywords: Reopening of assessment; Bogus purchase
• Section: 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 7003 /MUM/ 201 6 (ASSESSMENT YEAR 20 09 - 1 0 ) RAJENDRA TUBES & FITTINGS 160/162 3 RD KUMBHARWADA MUMBAI - 400 004. VS. ITO WARD 19(3)(1) MATRU MANDIR BUILDING, TARD EO MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAFFR3990K ASSESSEE BY SHRI ISHWER P. RATHI DEPARTMENT BY MISS BHARTI SINGH DATE OF HEARING 4 . 5. 201 7 DATE OF PRONOUNCEMENT 4 .5 . 201 7 O R D E R THE ASSESSEE HAS FILED THIS APPEAL CHA LLENGING THE ORDER DATED 23 - 09 - 2016 PASSED BY LD CIT(A) - 30, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.28,58,433/ - RELATING TO PROFIT ESTIMATED ON ALLEGED B OGUS PURCHASES. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN TUBES AND FITTINGS. THE REVENUE RECEIVED THE INFORMATION FROM SALES TAX DEPARTMENT THAT CERTAIN DEALERS HAVE PROVIDED ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING GOOD S. ON FURTHER EXAMINATION, THE REVENUE NOTICED THAT THE ASSESSEE HEREIN HAS PURCHASED GOODS FROM SEVEN PERSONS, WHO WERE LISTED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT, FOR AN AMOUNT AGGREGATING TO RS.2,28,67,463/ - . THE ASSESSEE FURNISHED THE COPIES OF BILLS AND PAYMENT DETAILS TO THE AO. HOWEVER, THE AO NOTICED THAT THE ASSESSEE DID NOT PRODUCE DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPT FOR PAYMENT OF OCTROI DUTY, WEIGH BRIDGE SLIPS, EXCISE RAJENDRA TUBES & FITTINGS 2 GATE PASS, GOODS INWARD REGISTER ETC. THE ASS ESSEE ALSO COULD NOT PRODUCE THE PARTIES. ACCORDINGLY THE AO TOOK THE VIEW THAT THE ASSESSEE HAS PROCURED THESE ACCOMMODATION BILLS ONLY FOR MAKE GOOD THE GOODS PURCHASED FROM GREY MARKET, I.E., THE ASSESSEE PURCHASED GOODS FROM GREY MARKETS WITHOUT BILLS AND MADE GOOD THE SAME BY PROCURING ACCOMMODATION BILLS FROM ALLEGED HAWALA TRADERS. WHEN THIS INFORMATION WAS CONFRONTED, THE ASSESSEE AGREED FOR AN ADDITION OF 12.5% OF THE PURCHASES REFERRED ABOVE. ACCORDINGLY THE AO COMPLETED THE ASSESSMENT BY ADDIN G 12.5% OF THE PURCHASE VALUE OF RS.2.28 CRORES, REFERRED ABOVE. DESPITE AGREEING TO THE ADDITION, THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) CHALLENGING THE ADDITION MADE BY THE AO. THE LD CIT(A) NOTICED THAT THE HONBLE GUJARAT HIGH HAS UPHELD THE ESTI MATION OF PROFIT FROM PURCHASES MADE FROM GREY MARKET IN THE CASE OF CIT VS. SIMIT SHETH (356 ITR 451). FURTHER HE NOTICED THAT THE ASSESSEE HAS ALSO GIVEN CONSENT TO THE ADDITION. ACCORDINGLY THE LD CIT(A) CONFIRMED THE ADDITION MADE BY THE AO AND HENCE THE ASSESSEE HAS FILED THIS APPEAL. 3. I HEARD THE PARTIES AND PERUSED THE RECORD. I NOTICE THAT THE ASSESSEE HAS AGREED FOR THE ADDITION OF 12.5% OF THE ALLEGED BOGUS PURCHASES. AT THE TIME OF HEARING, THE LD A.R PLACED RELIANCE ON VARIOUS CASE LAWS TO CONTEND THAT THE ADDITION COULD NOT HAVE BEEN MADE BY THE AO MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. HE FURTHER SUBMITTED THAT THE CONSENT GIVEN BY THE ASSESSEE BEFORE THE AO IS NOT BINDING AND THE ASSESSEE COULD ALWA YS CONTEST THE ADDITION. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S EVEREST KENTO CYINDERS LTD (378 ITR 57)(BOM). 4. I HAVE GONE THROUGH THE ORDER PASSED BY HONBLE BOMBAY HIGH COURT AND IN MY VIEW, THE ASSESSEE CANNOT DERIVE SUPPORT THERE FROM. IN THE CASE BEFORE HONBLE HIGH COURT, THE ISSUE WAS RELATING TO THE ADDITION MADE U/S 14A OF THE RAJENDRA TUBES & FITTINGS 3 ACT. THE ASSESSEE BEFORE THE HONBLE HIGH COURT DID NOT MAKE ANY DISALLOWANCE UNDER SEC TION 14A OF THE ACT IN THE RETURN OF INCOME, BUT AGREED FOR DISALLOWANCE OF RS.4.47 LAKHS U/S 14A BEFORE THE AO ON ADHOC BASIS. HOWEVER, THE AO DISALLOWANCE A SUM OF ABOUT RS.20 LAKHS U/S 14A. WHEN THE MATTER REACHED THE ITAT, THE TRIBUNAL RESTRICTED THE ADDITION TO RS.1.00 LAKH. THE REVENUE CONTENDED BEFORE THE HIGH COURT THAT THE DISALLOWANCE U/S 14A SHOULD BE AT LEAST TO THE EXTENT OF RS.4.47 LAKHS ACCEPTED BY THE ASSESSEE. FOLLOWING CONTENTIONS MADE BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT ARE REL EVANT: - 8. MR. PARDIWALLA APPEARING ON BEHALF OF THE ASSESSEE POINTED OUT THAT THE FIRST ISSUE OF DISALLOWING INTEREST UNDER SECTION 14A OF THE I T ACT, THE ORDER OF THE TRIBUNAL WAS PERFECTLY JUSTIFIED AND THE DISALLOWANCE OF RS.1 LAKH IS ALSO JUSTIFIED IN VIEW OF THE FACT THAT THE ADJUSTMENT TO THE EXTENT OF RS.4,47,649/ - THAT WAS OFFERED BEFORE THE ASSESING OFFICER WAS NOT BASED ON THE ORIGINAL RETURN AT ALL. HE POINTED OUT THAT THE ORIGINAL RETURN DID NOT CONTAIN ANY SUCH CONCESSION AND ADHOC FIGURE WAS SOMETHING THAT THE ASSESSEE SUBMITTED DURING THE COURSE OF ASSESSMENT. THE ADMISSION WAS THUS NOT A PART OF RETURN FILED AND WHICH WAS BEFORE THE ASSESSING OFFICER AND THE ASSESSEE COULD NOT BE BOUND BY IT.. 10. HAVING CONSIDERED SUBMISSIONS OF MR. MALHOTRA FOR THE REVENUE AND MR. PARDIWALLA FOR THE ASSESSEE, WE ARE OF THE VIEW THAT THE ORDER OF THE TRIBUNAL AS REGARDS DISALLOWANCE UNDER SECTION 14A AND RESTRICTING THE SAME TO RS.1 LAC WAS JUSTIFIED IN VIEW OF THE MATERIAL BEFORE THE TRIBUNAL. FURT HER, HAVING CONSIDERED THE FACT THAT A SUM OF RS.4,47,649/ - WAS NOT CONCEDED IN THE RETURN BUT WAS ADHOC ACCEPTANCE DURING THE COURSE OF ASSESSMENT, THE ASSESSEE COULD NOT BE BOUND BY IT.. IN THE INSTANT CASE, THE ASSESSMENT HAS BEEN REOPENED ON THE BAS IS OF INFORMATION RECEIVED BY THE AO FROM SALES TAX DEPARTMENT. BEFORE THE AO, THE ASSESSEE COULD NOT FURNISH SUFFICIENT MATERIALS TO PROVE THE GENUINENESS OF THE PURCHASES. UNDER THESE SET OF FACTS, THE ASSESSEE HAS AGREED FOR ADDITION OF 12.5% OF THE A LLEGED BOGUS PURCHASES TO MAKE GOOD THE REVENUE LEAKAGE. WHETHER THERE WAS REVENUE LEAKAGE OR NOT IS A MATTER RELATING TO FACTS AND THE SAME IS WITHIN THE PERSONAL KNOWLEDGE OF THE ASSESSEE. WHEN THE EVIDENCES RAJENDRA TUBES & FITTINGS 4 THAT WERE CALLED FOR BY THE AO TO PROVE THE GENUINENESS OF PURCHASES COULD NOT BE PRODUCED, THE ASSESSEE HAS COME FORWARD FOR AN ADDITION AND IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE AGREED FOR THE ADDITION ON THE BASIS OF HIS PERSONAL KNOWLEDGE. IN THE CASE BEFORE THE HONBLE HIGH COURT, THE Q UESTION WAS ABOUT COMPUTATION OF DISALLOWANCE U/S 14A OF THE ACT FOR AY 2007 - 08 ON THE BASIS OF FACTS AND MATERIALS ALREADY AVAILABLE ON RECORD. FURTHER THE HONBLE BOMBAY HIGH COURT HAS ALREADY HELD IN THE CASE OF GODREJ & BOYCE MFG CO. LTD (328 ITR 81) THAT THE DISALLOWANCE US 14A SHOULD BE MADE FOR AY 2007 - 08 AND EARLIER YEARS ON A REASONABLE BASIS AND HENCE THE ISSUE WAS WHAT IS REASONABLE AMOUNT THAT COULD BE DISALLOWED?. IN THAT SITUATION, THE ADHOC ACCEPTANCE WOULD NOT BAR THE ASSESSEE IN CONTESTIN G THE SAME, SINCE THERE IS NO ESTOPPEL AGAINST LAW. IN THE INSTANT CASE, THE FACTS ARE ENTIRELY DIFFERENT AS DISCUSSED ABOVE AND FURTHER THE ASSESSEE HAS ALSO CONCEDED FOR THE DISALLOWANCE, WHICH IS BASED ON FACTS SURROUNDING THE ISSUE. HENCE THE MAXIM T HAT THERE IS NO ESTOPPEL AGAINST LAW IS NOT APPLICABLE HERE. ACCORDINGLY I AM OF THE VIEW THAT THE ASSESSEE SHOULD FAIL ON THIS GROUND. 5. THE ASSESSEE HAS ALSO CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT. SINCE THE AO HAS REOPENED THE AS SESSMENT ON THE BASIS OF CREDIBLE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, I AM OF THE VIEW THAT THE REOPENING IS VALID IN LAW. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN TH E COURT ON 4 . 5 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 5 / 20 1 7 RAJENDRA TUBES & FITTINGS 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELL ANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI