ITO-14(2)(4), MUMBAI, MUMBAI V. ORIOLE ELECTRONICS PVT.LTD., MUMBAI

ITA 7185/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4257 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 13-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries; Tax effect; Reason to believe
• Section: 143(3); 14A; 133(6); 143(1); 250; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI M BALAGANESH, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NOS. 7185/MUM/2018 ( ASSESSMENT YEARS: 2010-11 ) & C.O. NO. 277/MUM/2019 (ARISING OUT OF ITA NO. 7185/MUM/2018) ITO 14(2)(4) RM NO. 470, 4 TH FLOOR, AAYAKAR BHAVAN, MK ROAD MARINE LINES, MUMBAI / VS. ORIOLE ELECTRONICS PVT LTD., 4, KURLA INDUSTRIAL ESTATE, NARAYAN NAGAR, N.S.S ROAD, GHATKOPAR (W), MUMBAI 400086 ./ ./ PAN/GIR NO. : AAACO0819Q APPELLANT/RESPONDENT .. RESPONDENT/APPELLANT / APPELLANT BY : SHRI AMIT PRATAP SINGH, DR / RESPONDENT BY : NONE / DATE OF HEARING 10/09/2020 !'# / DATE OF PRONOUNCEMENT 18/09/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT(A)-22, MUMBAI PASSED U/S 143(3) R.W.S 147 AND 250 OF THE INCOME TAX ACT. THE ASSESSEE HAS FILED CO NO. 277/MUM/2019 IN REVENUE APPEAL. AT ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 2 - THE TIME OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE NOR WAS ANY ADJOURNMENT PETITION FILED. WE HEARD SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL ON RECORD. WE FIND THERE IS A DELAY OF 10 DAYS IN FILING THE C.O BY THE ASSESSEE AND THE ASSESSEE HAS FILED AFFIDAVIT AND APPLICATION FOR CONDONATION OF DELAY. CONSIDERING THE FACTS AND THE REASONS EXPLAINED, WE CONDONE THE DELAY IN FILING A ND ADMIT THE CROSS OBJECTIONS OF THE ASSESSEE. FIRST, WE SHALL TAKE UP THE CROSS OBJECTIONS C.O.NO277/MUM/2019.THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF OBJECTIONS. 1. A.O HAD MADE ADDITION TO THE EXTENT OF 100% OF THE VALUE OF BOGUS PURCHASES OF RS. 1,49,203/- AND THE CIT(A) HAS REDUCED ADDITION TO 28% OF THE VALUE OF ALLEGED BOGUS PURCHASE. HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY T HE ASSESSEE RETURNED INCOME BE ACCEPTED. 2. TAX DEMAND INVOLVED IN THIS APPEAL IS RS. 85,47 6/-. IN VIEW OF THE CIRCULAR NO. 3/2018 DATED 11.07.2018 MODIFIED BY PRESS RELEASE DATED 08.08.2019, WE ARE OF THE HUMBLE OPINION THAT THIS APPEAL BE DISMISSED BE CAUSE THE TAX EFFECT IN THE SAID APPEAL IS LESS THAN RS. 50 LAKHS. OTHERWISE ALSO THE INCOME TAX DEPARTMENT OUGHT TO H AVE ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 3 - CONSIDERED THE MERITS OF THE CASE AND NOT OUGHT TO HAVE FILED AN APPEAL BEFORE HONBLE ITAT. 3. THERE IS A SLIGHT DELAY IN FILLING CROSS OBJECT IONS AND AN AFFIDAVIT HAS BEEN FILED FOR THE SAME. IT IS RE QUESTED TO CONDONE THE DELAY IN FILLING CROSS OBJECTIONS AN D A FAIR CHANCE BE GIVEN TO PRESENT THE CASE. 4. THE ASSESSEE CRAVES LEAVE TO ADD, DELETE OR MOD IFY GROUNDS FOR CROSS OBJECTIONS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ELECTRONIC COMPONENTS AND DEVELOPMENT OF EMBEDDED SOFTWARE SOLUTIONS. THE ASSESSEE HAS FILED THE RETURN OF INCOME ELECTRONICALLY ON 29.09.2009 WITH TOTAL INCOME OF R S. 2,12,162/-AND THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. IN THE ASSESSMENT PROCEEDINGS, THE A.O FOUND THAT ASSESSEE HAS MADE PURCHASETRANSACTIONS WITH M/S.TRISHALA TRADEWINGS, WHICH IS ENGAGED IN BUSINESS OF PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUALLY SUPPLYING THE GOODS. THE LD. AO HAS REASON TO BELIEVE THAT THERE IS INCOME ESCAPING ASSESSMENT DUE TO BOGUS BILLS TRANSACTIONS AND ISSUED NOTICE U/S 148 OF THE ACT. IN RESPONSE TO THE NOTICE THE ASSESSEE HAS FI LED ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 4 - THE RETURN OF INCOME ON 31.02.2017 WITH THE TOTAL INCOME OF RS 2,12,162/.-FURTHER THE A.O HAS PROVIDED THE REASONS RECORDED FOR REOPENING OF ASSESSMENT TO THE ASSESSEE VIDE OFFICE LETTER DATED 13.02.2017 AND ALSO THE NOTICE U/S 142 OF THE ACT WAS ISSUED. IN COMPLIANCE THE LDA.R OF THE ASSESSE E APPEARED FROM TIME TO TIME AND THE CASE WAS DISCUSSED. THE A.O FOUND THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 1.49.203/-.THE A.O TO VERITY AND EXAMINE THE GENUINENESS OF THE PURCHASE TRANSACTIONS HAS ISSUED NOTICE U/S 133(6) OF THE ACT TO M/S. TRISHALA TRADEWINGS REFERRED AT PAGE 2 OF THE ASSESSMENT ORDER. WHEREAS THE NOTICE U/S 133(6) OF THE ACT WA S RETURNED WITH REMARK AS NOT KNOWN. THE A.O IS OF THE OPINION THAT THE ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS AS THE NOTICE ISSUED UNDER 133(6) OF THE ACT WAS RETURNED UNDELIVERED AND FURTHER SHOWCASE NOTICE WAS ISSUED FOR PRODUCTION OF BOOKS OF ACCOUNT AND CONFIRMATION OF ALLEGED TRANSACTIONS. THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED T HE WRITTEN SUBMISSIONS. THE A.O CONSIDERED THE FACTS ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 5 - AND THE BOGUS PURCHASES AND IS OF THE VIEW THAT THE TAINTED PARTY IS REFERRED IN THE WEBSITE OF THE MAHARASHTRA SALES TAX DEPARTMENT AND MADE AN ADDITION OF RS. 1,49,203/- AND WITH OTHER ADDITIONS U/SEC 14A OF THE ACT, AND ASSESSED THE TOTAL INCOME OF RS3,63,590/AND PASSED THE ORDER U/S 143(3) R.W.S 147 DATED 31.10.2017.AGGRIEVED BY THE ORDER,THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A).THE LD . CIT(A) IN APPELLATE PROCEEDINGS CONSIDERED THE GROUNDS OF APPEAL, SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE A.O AND HAS OBSERVED THAT THE A.O IS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO PRO VE THE GENUINENESS OF THE PURCHASES. BUT THE A.O HAS NOT DOUBTED OR DISPUTED THE SALES.HENCE, CONSIDERIN G THE GP RATIO OF THE ASSESSEE IN THE FINANCIAL YEAR, CIT(A) HAS ESTIMATED THE INCOME @ 28% OF THE BOGUS PURCHASES AND PARTLY ALLOWED THE APPEAL AND OBSERVED AT PAGE 4 PARA -6 OF THE ORDER WHICH IS READ AS UNDER: 6. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT. AS PER THE INVESTIGATION CARRIED OUT BY THE SALES TAX AUTHORIT IES, THE AFOREMENTIONED PARTY WAS FOUND TO BE INVOLVED IN GI VING ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 6 - ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYI NG THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCH ASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE O F ACCOMMODATION ENTRIES ONLY. TO VERIFY THE SAME, TH E AO HAD ISSUED NOTICE U/S 133(6) TO THIS PARTY WHICH WA S RETURNED UN-SERVED BY THE POSTAL AUTHORITIES WITH T HE REMARK NOT KNOWN. THIS WAS COMMUNICATED TO THE APPELLANT AND THE AO HAD REQUIRED THE APPELLANT TO PRODUCE THESE PARTIES WHICH THE APPELLANT COULD NOT DO. I FIND THAT THE APPELLANT ALSO DID NOT PRODUCE TRANSPORTATION DETAILS NOR CONFIRMATION FROM THE PA RTY. UNDER THE CIRCUMSTANCES, THE DOCUMENTARY EVIDENCES SUCH AS PURCHASES BILLS PAYMENTS BY CHEQUES, ETC. W OULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THIS PARTY ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF IS NOT SACROS ANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, TH E APPELLANT HAS SHOWN ONWARD SALES WHICH HAS NOT BEEN DOUBTED OR DISPUTED BY THE A.O. THE A.O, HOWEVER, HELD THE PURCHASES WERE MADE FROM SOME OTHER UNDISCLOSED PARTIES AND NOT FROM THE SAID PARTY. IN SUCH A SIT UATION, THE VARIOUS COURTS INCLUDING THE HONBLE GUJARAT HI GH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH, 356 IT R 541 HAVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY TH E PROFIT ELEMENT EMBEDDED IN THESE PURCHASES WAS TO BE DISALLOWED. THE ESTIMATION WOULD VARY WITH THE NAT URE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. THE APPELLANTS GP RATIO DURING THE YEAR IS STATED TO B E 28%. FOLLOWING THE DECISION OF THE HONBLE GUJART HIGH C OURT IN THE CASE OF CIT VS. SIMIT P. SHETH, THE ADDITION OF THE ENTIRE PURCHASE OF RS. 1,49,203/- IS RESTRICTED TO 28% OF THE SAME WHICH SHOULD SUFFICIENTLY OVER THE PROFIT ELEMENT ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 7 - EMBEDDED IN THE IMPUGNED PURCHASES. THE APPELLANT S GROUNDS IS PARTY ALLOWED. 3. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS FILED AN APPEAL AND THE ASSESSEE HAS FILED C.O.IN REVENUE APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE. 5. WE HEARD THE LDDR AND PERUSED THE MATERIAL ON RECORD. IN THE CO OF THE ASSESSEE, THE GROUND NO. 1 IS WITH RESPECT TO ACCEPTING OF RETURNED INCOME WHI CH CANNOT BE CONSIDERED AS THE ASSESSEE HAS ENTERED INTO ACCOMMODATION BILLS FOR BOGUS PURCHASES. THE LDCIT(A) HAS ESTIMATED THE INCOME @ 28%OF BOGUS PURCHASES. WE CONSIDERED THE FACTS AND SERIES OF DECISIONS OF THE HONBLE ITAT IN SIMILAR CASES AND PRECEDENTS,WHERE THE INCOME ESTIMATED @12.50% OF VALUE OF BOGUS TRANSACTIONS WAS ACCEPTED. ACCORDINGLY, WE RESTRICT THE ADDITION TO THE EXTENT OF 12.50% OF BOGUS PURCHASES AND MODIFY THE CIT(A) ORDER SUSTAINING THE ADDITION TO THE EXTENT OF 12.50% AND PARTLY ALLOW THE GROUND OF OBJECTION OF THE ASSESSEE. ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 8 - THE GROUND NO. 2 IS WITH RESPECT TO LOW TAX EFFECT MAINTAINABILITY, WE FIND, THE REVENUE APPEAL IS FIL ED BASED ON THE BOGUS PURCHASES WHICH IS CONSIDERED AS EXCEPTION TO THE APPLICABILITY OF LOW TAX EFFECT CIRCULAR, THEREFORE, WE DO NOT FIND MERITS IN THE GROUND RAISED BY THE ASSESSEE AND IS DISMISSED. THE CROSS OBJECTIONS OF THE ASSESSEE IS PARTLY ALLOWED. WE SHALL TAKE UP THE REVENUE APPEAL IN ITA NO. 7185/MUM/2018.THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDIT ION TO 28% OF THE AMOUNT OF BOGUS PURCHASES, I.E. THE GROS S PROFIT RATIO DECLARED BY THE ASSESSEE IN THE REGULA R BOOKS OF ACCOUNT, WHEREAS THE CIT(A) OUGHT TO HAVE APPREC IATED THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON IT TO PROVE THE GENUINENESS OF THE CLAIM OF PURCHAS ES MADE, WHEN LAWFULLY CALLED UPON BY THE AO TO DO SO. IN THE RESULT, THE ENTIRE AMOUNT WAS LIABLE TO BE ADDE D BACK TO THE TOTAL INCOME. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APP EAL. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET-ASIDE AND THAT OF THE A.O BE RE STORED ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 9 - 7. WE HAVE DEALT ON THE CO OF THE ASSESSEE, IN PARTICULAR GROUND NO. 1 OF THE CO WITH RESPECT TO ACCEPTING OF RETURNED INCOME FILED BY THE ASSESSEE WHICH WAS NOT CONSIDERED, AS THE ASSESSEE HAS OBTAINED ACCOMMODATION BILLS FOR BOGUS PURCHASES. HENCE WE RESTRICTED THE INCOME@12.5%OF BOGUS PURCHASES. ACCORDINGLY MODIFIED THE CIT(A) ORDER SUSTAINING THE ADDITION TO THE EXTENT OF 12.50%. THEREFORE REVENUE APPEAL IS NOT MAINTAINABLE AND IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D AND THE C.O. OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 18.09.2020 SD/- SD/- ( M.BALAGANESH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 18/09/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : ITA NO . 7185/MUM/2018 & CO. NO. 277/MUM/2019 ORIOLE ELECTRON ICS PVT LTD,. - 10 - 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI