WINDSCASTLE EXPORTS P. LTD, MUMBAI V. DCIT 13(3)(1), MUMBAI

ITA 7351/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 6914 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts; Additional evidence
• Section: 271(1)(c); 143(3); 142(1); 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT M EMBER AND SHRI AMA R JIT SINGH, JUDICIAL MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 7350/MUM/16 2012 - 13 M/S. WINDCASTLE EXPORTS PVT. LTD., 7 - A, GROUND FLOOR, 73, SANT TUKARAM ROAD, IRON MARKET, MUMBAI [PAN: AAACW 1205 A] DCIT - 13(3)(1), MUMBAI 7351/MUM/16 2013 - 14 APPELLANT BY : SHRI BHUPENDRA SHAH , AR RESPONDENT BY : SHRI SUHAS KULKARNI , DR DATE OF HEARING : 26 - 1 2 - 2018 DATE OF PRONOUNCEMENT : 31 - 12 - 2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE S E TWO APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER S OF THE COMMISSIONER OF INCOME TAX(APPEALS) - 2 1 , MUMBAI , DATED 01 - 0 9 - 201 6 FOR THE AYS. 2012 - 13 & 2013 - 14 . SINCE THE ISSUE IS COMMON IN BOTH THE ASSESSMENT YEARS EXCEPT CHANGE IN AMOUNTS , WE HAVE HEARD BOTH THE FILES TOGETHER AND DECIDED BY THIS COMMON ORDER. FOR ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 2 : THE SAKE OF CONVENIENCE, THE FACTS IN ITA NO. 7350/MUM/2016 (AY. 2012 - 13) ARE TAKEN HERE UNDER: 2. FOR THE AY. 2012 - 13, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION OF THE NET PROFIT OF RS. 93,04,009/ - BEING 0.5% OF TOTAL TURNOVER AMOUNTING TO RS. 187,88,01,713/ - BY REJECTING THE BOOKS OF ACCOUNTS. 2. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITIONS OF RS. 53,40,684/ - U/S. 68 OF THE INCOME TAX ACT, 1961 EVEN AFTER REJECTING THE BOOKS AND STILL RELYING UPON THE SAME FOR MAKING ADDITIONS UNDER THIS GROUND. 3. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(A) ERRED IN CONFIRMING THE A BOVE ADDITIONS BY DISREGARDING SEVERAL SUBMISSIONS MADE TO HIM. 4. THE ASSESSING OFFICER WRONGLY INITIATED PENALTY U/S. 271(1)(C) AND ALSO WRONGLY CHARGED INTEREST U/S. 234B & C. 3. THE ISSUE RAISED IN GROUND NO. 1 IN BOTH THE APPEALS IS OF SIMILAR IN NATURE, CHALLENGING THE ORDER OF CIT(A), CONFIRMING THE ADDITION OF RS. 93,04,009/ - AND RS. 2,20,18,695/ - BEING 0.5% OF TOTAL TURNOVER IN AY. 2012 - 13 AND 2013 - 14 RESPECTIVELY , BY REJECTING BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT . 4. FOR THE AY. 2012 - 13, THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 30 - 09 - 2012 DECLARING TOTAL ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 3 : INCOME OF RS. NIL. SUBSEQUENTLY, THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE U/S. 143(2) OF THE INCOME TAX ACT ( ACT) DT. 06 - 08 - 2013 WAS ISSUED WHICH WAS DULY SERVED ON ASSESSEE. FURTHER, NOTICE U/S. 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED DURING THE ASSESSMENT PROCEEDINGS CALLING UPON TO FURNISH VARIOUS INFORMATION/DET AILS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT LOSS FROM BUSINESS FOR WHICH THE ASSESSEE HAS NOT FILED ANY CONVINCING REPLY NOR CORROBORAT IVE EVIDENCES TO PROVE THE LOSSES DESPITE HUGE TURNOVER . THE AO FOUND THAT ASS ESSEE HAS SHOWN TURNOVER OF RS. 1,87,88,01,713/ - AND CL A IMED PURCHASES AMOUNTING TO RS. 1,92,80,28,606/ - DURING THE AY 2012 - 13 IN CO MPARISON TO THE TURNOVER OF RS. 91,47,38,323/ - AND PURCHASE OF RS. 91,45,56,246/ - IN THE PRECEDING YEAR. ACCORDING TO THE ASSESSEE, NECESSARY DETAILS OF PURCHASES AND SALES EXPENSES WERE FILED BEFORE THE AO, INCLUDING NAME AND ADDRESSES OF THE PARTIES , SUPPLIER AND CUSTOMERS ETC . HOWEVER, NO VERIFICATION HAS BEEN CARRIED OUT BY THE AO, DESPITE FURNISHING FULL DETAILS AND ADDRESSES OF THE PARTIES BY THE ASSESSEE. THE AO REJECT ED THE BOOKS OF ACCOUNTS OF ASSESSEE ON THE GROUND OF CIRCULAR ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 4 : TRANSACTIONS BETWEEN INDIAN STEEL CORPORATION LTD. AND RUCHI GLOBAL LIMITED AND VARIOUS OTHER PARTIES AND CAME TO THE CONCLUSION THAT ALL THESE TRANSACTIONS ARE SAME TRANSACTIONS AND FINALLY ESTIMATED THE INCOME @ 0.5% OF THE TOTAL TURNOVER AFTER REJECTING THE BOOKS OF ACCOUNTS BY FRAMING ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DT. 05 - 03 - 2015. 5. LD. CIT(A) UPH ELD THE ORDER OF AO IN A VERY CRYPTIC MANNER , WITHOUT CONSIDERING THE DETAIL ED SUBMISSIONS AND REPLY AS FILED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS AND THUS DISMISSED THE GROUND BY UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS AND ALSO ON THE GROUND THAT ASSESSEE HAS BEEN INVOLVED IN THE BOGUS PURCHASE AND SALES IN ORDER TO INFLATE TURNOVER AND PURCHASES. 6. LD. AR VEHEMENTLY ARGUED BEFORE US THAT THE DECISION OF THE AO IS PURELY BASED ON THE SUSPICION, PRESUMPTION AND SURMISES. THE LD AR SUBMITTED THAT THE AO HAS NOT CARR IED OUT ANY VERIFI CATION IN THE MATTER, DESPITE ASSESSEE HAVING FILED ALL THE PROOF S AND EVIDENCES, ADDRESS ES OF THE PARTIES. THE AO DID NOT EVEN ISSUE NOTICE S U/S. 133(6) OF THE ACT IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS . UNDER ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 5 : THESE CIRCUMSTANCES, LD. AR PRAYED THAT THE AO HAS COMPLETELY FAILED IN DISCHARGING THE ONUS CAST UPON HIM DESPITE HAVING BEEN FURNISHED ALL THE INFORMATION AND DETAILS, INCLUDING ADDRESSES AND PAN DETAILS WITH WHOM THE ASSESSEE DEALT IN DURING THE YEAR. THEREFORE, THE ADDITION AS MADE BY THE CIT(A) SHOULD BE DELETED AS THERE IS NO BASIS FOR THE SAME AND THE ORDER WAS PASSED WITHOUT TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE . 7. LD. DR ON THE OTHER HAND, RELYING ON THE ORDER OF CIT(A) SUBMITTING THAT THE BOOKS OF ACCOUNTS WERE RIGHTLY REJECTED AS THE ASSESSEE WAS ENGAGED IN CIRCULAR TRANSACTIONS OF BUYING AND SELLING TO AND FRO FROM THE SAME PARTIES. THEREFORE, THE APPEAL OF THE ASSESSEE SHOUL D BE DISMISSED ON THIS GROUND. THE LD DR SUBMITTED THAT THE ASSESSEE HAS UNDISPUTEDLY RESORTED TO INFLATION OF PURCHASES AND SALES AND THUS JUSTIFIED THE ORDER OF LD CIT(A). 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, INCLUDING THE IMPUGNED ORDER , WE FIND THAT IN THIS CASE, THE ASSESSEE UNDISPUTEDLY FILED ALL THE DETAILS BEFORE THE AO AND ALSO FILED DETAIL S BEFORE THE FIRST APPELLATE AUTHORITY ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 6 : WHICH REMAINED UNVERIFIED . WE OBSERVE THAT THE ASSESSMENT BY THE AO IS BASED ON THE S USPICION THAT THE TRANSACTIONS WERE CIRCULAR TRANSACTIONS, WHEREAS THE VERIFICATION OF THE INFORMATION AND PARTIES WITH WHOM THE ASSESSEE DEALT WITH DURING THE YEAR WERE NOT VERIFIED AND EVEN NOTICE S U/S. 133(6) OF THE ACT WERE NOT ISSUED. IN OUR OPINION , THE REVENUE HAS FAILED TO CARRY OUT THE INVESTIGATION AND VERIFICATION OF FACTS IN THIS CASE. WE FIND MERIT IN THE CONTENTIONS OF LD. AR THAT THE CASE WAS BUILT UP ON SUSPICION, NO NOTICES U/S. 133(6) OF THE ACT WERE ISSUED AND NO VERIFICATION WAS CARRIE D OUT, DESPITE FULL DETAILS AND ADDRESSES OF THE PARTIES WERE BEING FILED. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE CIT(A) CANNOT BE SUSTAINED MERELY ON PRESUMPTION BASIS. HOWEVER UNDER THE PRESENT FACTS AND CIRCUMSTANCES , WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE AO TO DECIDE THE SAME AS FACTS AND LAW AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE AS THE AO SHOULD BE GIVEN ONE MORE OCCASION TO VERIFY THE TRANSACTIONS . ACCORDINGLY THE ISSUE IS RESTORED TO AO. ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 7 : 9. THE ISSUE RAISED IN GROUND NO. 2 IS AGAINST THE ORDER OF CIT(A) , UPHOLDING THE ADDITION OF RS. 53,40,684/ - U/S. 68 OF THE ACT. 10. AT THE OUTSET, LD. COUNSEL FOR THE ASSESS EE SUBMITTED BEFORE THE BENCH THAT ASSESSEE HAS MOVED APPLICATION U/S. 46A OF THE ACT BEFORE THE CIT(A), REQUESTING THE CIT(A)S PERMISSION TO PRODUCE FRESH EVIDENCES, WHICH COULD NOT BE FILED BEFORE THE AO AS THE SAME COULD NOT BE COLLECTED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. HOWEVER, LD. CIT(A) BRUSHED ASIDE THE REQUEST OF ASSESSEE AND REJECTED THE APPLICATION MOVED AND DID NOT CONSIDER THE EVIDENCES FILED BY ASSESSEE. THEREFORE, THE LD. AR PRAYED FOR THE BENCH THAT SINCE THE ISSUE REQUIRES EXA MINATION OF EVIDENCES AT THE LEVEL OF AO , THE SAME MAY BE RESTORED TO THE FILE AO FOR FRESH EXAMINATION OF FACTS AND EVIDENCES . 11. HAVING HEARD THE RIVAL CONTENTIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND FROM PG. 38 OF THE PAPER BOOK THAT THE APPLICATION OF ASSESSEE UNDER RULE 46A , FILED ADDITIONAL EVIDENCES IN THE FORM OF NEW EVIDENCES , WHICH COULD NOT BE FILED BEFORE THE AO HOWEVER THE ASSESSEE FILED THE SAME BEFORE ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 8 : LD CIT(A) AND ALSO DURING THE PRESENT PROCEEDINGS. SINCE THE ISSUE REQUIRES APPRECIATION AND EXAMINATION OF THESE EVIDENCES, IT WOULD BE PROPER TO RESTORE THE SAME TO THE FILE OF CIT(A) IN THE INTEREST OF JUSTICE AND FAIR - PLAY . WE, ACCORDINGLY RESTORE THE ISSUE TO THE FILE OF AO. 12. IN THE RESULT, THE APPEAL S OF ASSESSEE FOR THE AY. 2012 - 13 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 7351/MUM/2016 (AY. 2013 - 14) : 13. SINCE THE ISSUE INVOLVED IN THE PRESENT AP PEAL IS SAME AS DECIDED BY US IN GROUND NO. 1 OF ITA 7350/MUM/2016 ( SUPRA ) EXCEPT THE CHANGE IN AMOUNTS , THEREFORE , OUR FINDING IN ITA NO. 7350/MUM/2016 WOULD APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. ACCORDINGLY MATTER IS RESTORE D TO THE FILE OF THE AO. 1 4 . IN THE RESULT BOTH THE APPEAL S OF ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF DECEMBER , 201 8 SD/ - SD/ - (A MARJIT SINGH) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI; / DATED : 31/12 / 201 8 TNMM ITA NO S . 7350 & 73 5 1 /MUM/ 20 16 : 9 : / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) , MUMBAI 4. / CIT , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI