P.S.ENGINEERS AND FABRICATORS, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3, Thane

ITA 7201/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7465 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: S L RATNAPANCHI
• Keywords: Bogus purchase
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 7201/MUM/2017 ASSESSMENT Y EAR: 2009 - 10 M/S P.S. ENGINEERS AND - FABRICATORS, SHOP NO. 9, KAMNA CHS NO. 1, SK BOLE ROAD, PRABH ADEVI, MUMBAI - 400028 PAN: AABFP4086A VS. THE ACIT - CIRCLE - 3, 6 TH FLOOR, ASHAR I.T. PARK, ROAD NO. 16Z, WAGALE IND. ESTATE, THANE (W) - 400604 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L RATNAPANCHI (AR) REVENUE BY : MS. N. HEMALATHA ( D R) DATE OF HEARING: 09/04 /201 8 DATE OF PRONOUNCEMENT: 25 / 04 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 31.08.2017 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 2 , PUNE , FOR THE A S S ESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT (A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PARTNERSHIP FIRM , ENGAGED IN THE BUSINESS OF MANUFACTURING OF PIPES ETC., FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 23,66,670/ - . THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. LATER ON, ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, MUMBAI THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FROM THE BOGUS ENTITIES, THE 2 ITA NO. 7201 / MUM/2017 ASSESSMENT YEAR: 2009 - 10 ASSESSMENT WAS RE OPENED AFTER ISSUING NOTICE U /S 148 OF THE ACT. SINCE, NO RESPONSE TO THE NOTICE WAS RECEIVED , THE AO TREATED THE RETURN FILED BY THE ASSESSEE AS THE RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, NOTICE U/S 143 (2) AND 142 (1) WERE ISSUED AND IN RESPONSE THEREOF THE ASSESSEE SUBMITTED THE DETAILS AS CALLED FOR. AS PER THE INFORMATION, THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS TO THE TUNE OF RS. 8,16,192/ - FROM TWO BOGUS PARTIES NAMELY M/S CHANCHAL TUBE CORPORATION AND M/S SURAT TUBE CORPORATION. ACCORDINGLY, THE ASSESSEE WAS ASKED AS TO WHY THE AMOUNT OF BOGUS PURCHASES SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT ALL THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. THERE IS NO EVIDENCE ON RECORD TO HOLD THAT THE APPELLANT RECEIVE D BACK THE CASH FROM THESE PARTIES. THE ASSESSEE CONTENDED THAT A LL THE PURCHASES WERE GENUINE, THE AO HAS NOT SHARED THE INFORMATION ON BASIS OF WHICH HE HAS CONCLUDED THAT THE PURCHASES ARE NOT GENUINE. N O OPPORTUNITY TO CROSS EXAMINE ANY PERSON GIVING A DVERSE EVIDENCE WAS GRANTED. THE AO REJECTED THE CONTENTION OF THE ASSESSEE ADDED THE TOTAL AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. 3. IN THE FIRST APPEAL, THE LD. CIT (A) AFTER HEARING THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE A O AND DISMISSED THE APPEAL. THE ASSESSEE IS IN APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). 4 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD.CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. THE HON. CIT (A) ERRED IN NOT APPRECIATING THAT THE RE - OPENING OF ASSESSMENT U/S 147, BY ISSUE OF NOTICE U/S 148 ON 19.07.2013, WAS WITHOUT ANY INDEPENDENT AND VALID BELIEF ON THE PART OF THE LD. AO THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THEREFORE THE RE - OPENING O F 3 ITA NO. 7201 / MUM/2017 ASSESSMENT YEAR: 2009 - 10 ASSESSMENT WAS BAD IN LAW AND THE ASST. ORDER FLOWING THEREFROM WAS REQUIRED TO BE QUASHED. 2. THE HON. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 8,16,192/ - MADE ON ACCOUNT OF ALLEGED HAWALA PURCHASES DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE APP ELLANT, NOT APPRECIATING THAT THE PURCHASES WERE GENUINE PURCHASES DULY SUPPORTED BY SUBSTANTIAL EVIDENCES AND THAT THE MATERIAL PURCHASED WAS CONSUMED BY THE APPELLANT IN FABRICATION WORK AND MANUFACTURING OF PIPES. 3. THE HON. CIT (A) ERRED IN UPHOLDING TH E ADDITION OF RS. 8,16,192/ - MADE ON ACCOUNT OF ALLEGED HAWALA PURCHASES, WITHOUT AFFORDING YOUR APPELLANT WITH ANY OPPORTUNITY TO CROSS EXAMINE THE SOURCE OF SUCH ADVERSE EVIDENCE, THEREBY BREACHING THE SILENT PRINCIPLES OF EQUITY, FAIRPLAY AND NATURAL JU STICE. 5 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E DOES NOT WANT TO PRESS GROUND NO . 1 OF THE APPEAL. ACCORDING LY, WE DISMISS GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE AS NOT PRESSED. SO FAR AS GROUND NO . 2 AND 3 ARE CONC ERNED, THE SAID GROUNDS PERTAIN TO THE CONFIRMATION OF ADDITION OF RS. 8,16,192/ - MADE BY THE LD. CIT (A) ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT (A) HAS WRONG LY CONFIRMED THE ADDITION MADE BY THE AO. SINCE, THE ASSESSEE HAS FURNISHED THE COPIES OF INVOICES, TRANSPORT OPERATORS BILL AND DETAILS OF BANK STATEMENTS, THE LD. CIT(A) HAS WRONGLY MADE THE ADDITION. THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE JUDGM ENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES AND OTHER CASES SUBMITTED THAT MERELY BECAUSE THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPLIERS BEFORE THE AO, IT CANNOT BE CONCLUDED THAT PUR CHASES WERE NOT MADE. SINCE, THE AO HAS NO T REJECTED THE SALE, THE PURCHASES CANNOT BE DOUBTED. HENCE, THE LD. CIT(A) HAS WRONGLY AFFIRMED THE FINDINGS OF THE AO . 4 ITA NO. 7201 / MUM/2017 ASSESSMENT YEAR: 2009 - 10 6 . ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN O F PROVING THE GENUINE NE SS OF THE PURCHASES, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW , THE EVIDENCE ON RECORD IS NOT SUFFICI ENT TO HOLD THAT THE PURCHASES IN QUESTION WERE GENUINE. HENCE, IT CAN BE INFERRED THAT THE ASSESSEE HAS OBTAINED BOGUS BILLS AMOUNTING TO RS. 8,16,192/ - DURING THE PREVIOUS YEAR. SINCE, THE AO HAS NOT REJECTED THE SALE, THE ENTIRE AMOUNT OF PURCHASES CANN OT BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) , HAS BEEN HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. UNDER THESE CIRCUMSTANCES IT CAN BE CONCLUDED THAT THE ASSESSEE HAS MADE PURCHASES IN QUESTION FROM GREY MARKET EVADING VAT AND OTHER TAXIS APPLICABLE DURING THE RELEVANT PERIOD. SO FAR AS THE ADDITION IS CONCERNED, THE HONBLE GUJARAT HIGH COURT HAS UPHELD THE DECISION OF THE ITAT AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES IN THE CASE OF SIMIT P. SHETH 356 ITR 451(GUJ) HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. 8 . SO , FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT AND THE HONBLE GUJARAT H IGH COURT IN THE AFORESAID CASES , WE MODIFY THE ORDER OF THE LD . CIT(A) AND RESTRICT THE ADDITION TO 12. 5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES IN QUESTION. ACCORDINGLY , WE DIRECT THE AO TO COMPUTE THE ADDITION TO BE MADE @ 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED DURING THE ASSESSMENT PROCEEDINGS . 5 ITA NO. 7201 / MUM/2017 ASSESSMENT YEAR: 2009 - 10 IN THE RESULT, APPEAL FILED BY THE ASSESSE E FOR A SSESSMENT YEAR 2009 - 20 10 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL , 2018 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBE R JUDICIAL MEMBER MUMBAI ; DATED: 25 / 04 / 201 8 ALINDRA, PS / 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