NARESH FIBRES LIMITED , MUMBAI V. INCOME TAX OFFICER 10(3)(1), MUMBAI

ITA 7431/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Reassessment proceedings
• Section: 133(6); 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 7431/MUM/2017 ASSESSMENT Y EAR: 2009 - 10 M/S NARESH FIBRES LTD., DHAM INDUSTRIAL PREMISES, MAROL MAROSHI ROAD, ANDHERI (EAST ), MUMBAI - 400059 PAN: AAACN1892L VS. THE INCOME TAX OFFICER - 10(3)(1), AAYKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI SATISH CHANDRA RAJORE (D R ) DATE OF H EARING: 18/03 /201 9 DATE OF PRONOUNCEMENT: 07 / 06 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29.09.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 17 (F OR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING NIL INCOME. THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, PROCEEDINGS U/S 147 WERE INITIATED AFTER IS SUING NOTICE U/S 148 ON THE GROUND THAT THE ASSESSEE OBTAINED BOGUS BILLS DURING THE PREVIOUS YEAR FROM HAWALA DEALERS AMOUNTING TO RS. 54,89,271/ - AND HENCE INCOME TO THE TUNE OF RS. 54,89,271/ - HAS ESCAPED ASSESSMENT. INFORMATION REGARDING BOGUS TRANSACT ION WAS RECEIVED 2 ITA NO. 139 8 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 FROM THE INVESTIGATION WING OF THE DEPARTMENT AND THE SAID INFORMATION WAS BASED ON THE SEARCH AND SEIZURE CONDUCTED U/S 64 OF MAHARASHTRA VALUE ADDED TAX ACT, 2002 CONDUCTED BY THE SALES TAX DEPARTMENT. DURING THE RE - ASSESSMENT PROCEEDING S, THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE FURNISHED CERTAIN DETAILS, HOWEVER FAILED TO ESTABLISH THAT THE GOODS WERE ACTUALLY PURCHASED FROM THE PARTY SPECTACLE INFOTEK. SINCE, THE ASSESSEE COMPANY PROVIDED STOCK S TATEMENT AND DIRECT NEXUS OF ENTRIES OF THE SAID PURCHASES WITH THE SALES, THE AO M A DE DISALLOWANCE OF RS. 3,40,335/ - I.E. @ 6.2% OF THE PURCHASE VALUE OF THE AMOUNT IN QUESTION TAKING THE AVERAGE OF THE PROFIT MARGIN PROVIDED BY THE ASSESSEE FOR THE LAST THREE YEARS. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) DISMISSED THE APPEAL FILED BY THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY AO. THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL AGAINST THE SAID ORDER PASSED BY THE LD.CIT (A). 3 . T HE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE F OLLOWING EFFECTIVE GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDI NG AN ADDITION OF RS.3,40,335/ - BEING 6.2% OF THE PURCHASES OF RS.54,89,2711 - AS BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THE LEARNED AO DID NOT ISSUE ANY SHOW CAUSE NOTICE PRIOR TO MAKING ANY DISALLOWANCE WHICH IS AGAINST THE PRINCIPLES OF NATURAL JU STICE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING AN ADDITION OF RS.3,40,335/ - BEING 6.2% OF THE PURCHASES OF RS.54,89,271/ - AS BOGUS PURCHASES WITHOUT APPRECIATING FOLLOWING FACTS; 2.1 THAT THE PURCHASES WERE MA DE FROM A PUBLIC LIMITED COMPANY AND ENTIRE PAYMENTS WERE MADE BY AN ACCOUNT PAYEE CHEQUE, OTHER DOCUMENTS SUCH AS DELIVERY CHALLAN, LORRY RECEIPT ETC. WERE ALSO SUBMITTED BY THE APPELLANT 3 ITA NO. 139 8 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 AND VERIFIED BY THE LEARNED AO AND WERE FOUND TO BE IN ORDER. 2.2 T HAT IN RESPONSE TO NOTICE U/S 133(6) OF THE I T ACT, 1961 THE SUPPLIER OF THE MATERIAL HAD SUBMITTED ALL THE PARTICULARS REQUIRED BY THE LEARNED AO AND THE LEANED AO HAS NOT DOUBTED THE GENUINENESS OF THOSE DOCUMENTS. 2.3 THAT THE DIRECTOR OF THE SUPPLIER COMPANY MR. SHAIKH FAZAL MEHMOOD PERSONALLY APPEARED BEFORE THE LEARNED AO IN RESPONSE TO THE SUMMONS SENT U/S 131 OF THE I T ACT, 1961 AND CONFIRMED THE TRANSACTION WITH THE APPELLANT. THE SAID FACT IS ALSO NOT DISPUTED BY THE LEARNED AO. 2.4 THAT THE LEA RNED AO HIMSELF HAS ACCEPTED THE THEORY THAT THERE CANNOT BE A SALE OF MATERIAL WITHOUT PURCHASING THE SAME. 2.5 THAT NO ADVERSE MATERIAL WAS IN POSSESSION OF THE LEARNED AO TO INFER THAT PURCHASES WERE BOGUS. 2.6 THAT THE LEANED AO DID NOT JUSTIFY ON W HAT BASIS A RATE OF 6.20% HAS BEEN ARRIVED UPON BY HIM. 2.7 THAT THE ASSESSMENT OF THE APPELLANT BY THE MAHARASHTRA VAT AUTHORITIES, ON WHOSE INFORMATION THE PURCHASES ARE TREATED AS BOGUS, WAS ALSO COMPLETED TREATING THE PURCHASES AS GENUINE PURCHASE. THE APPELLANT PRAYS THAT THE SAID ADDITION BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT - A ERRED IN NOT CONSIDERING AND DISTINGUISHING THE CASE LAWS RELIED UPON BY THE APPELLANT DURING THE COURSE OF HEARING. 4. THIS CASE WAS FIXED FOR FINAL HEARING ON 18.03.2019. HOWEVER, WHEN THE CASE WAS CALLED OUT FOR HEARING, NONE APPEARED ON BEHALF OF THE APPELLANT/ASSESSEE. WE NOTICE THAT THE ASSESSEE DID NOT APPEAR ON THE LAST DATE OF HEARING DESPITE SERVICE OF NOTICE. THEREFORE, TH E CASE WAS ADJOURNED TO 18.03.2019. FROM THE CONDUCT OF THE ASSESSEE, IT APPEARS THAT THE ASSESSEE IS NO T INTERESTED IN PURSUING ITS CASE. ACCORDINGLY, WE DECIDED TO DISPOSE OF THIS 4 ITA NO. 139 8 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 APPEAL ON THE BASIS OF THE MATERIAL ON RECORD AFTER HEARING THE DEPARTMENT AL REPRESENTATIVE (DR). 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASE IN QUESTION, THE LD. CIT (A) HAS RIGHTL Y UPHELD THE DISALLOWANCE MADE BY THE AO ON THE BASIS OF PROFIT MARGIN OF THE ASSESSEE FOR THE LAST THREE YEARS. SINCE, THE DISALLOWANCE IS REASONABLE, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. WE HAVE PERUSED THE MATERIAL ON RECORD IN THE LIGH T OF THE GROUNDS OF APPEAL AND THE SUBMISSIONS MADE BY THE LD. DR. THE LD. CIT (A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER HOLDING AS UNDER: - 5.5.1 THE NET CONCLUSION THAT CAN BE ARRIVED AT FROM THE ABOVE DISCUSSION IS THAT WHERE THE SALES AND PURCHASES ARE VERIFIABLE AND PROVEN E.G. TO OR FROM GOVERNMENT BODIES OR AGENCIES ETC NO ADDITION MAY BE MADE. IF HOWEVER, THE PURCHASES ARE BOGUS BUT THE DIRECT SALES ARE PROVED, THE ASSUMPTIONS ARE THAT THE PURCHASES WERE MAD E FROM UNKNOWN PARTIES AND THE AO CAN APPLY A PROFIT RATE TO DETERMINE THE LIABILITY OF THE ASSESSEE. IT IS ALSO SEEN THAT PUTTING AN ONUS ON THE AO TO TRACE THE MONEY TRAIL OR VERIFY THE WITHDRAWALS FROM THE BANKS ETC MAY GIVE MORE POINTERS BUT IT IS NOT SUFFICIENT BY ITSELF AND THE ITAT HAS NOT ACCEPTED SUCH AN ARGUMENT IN THE CASE OF SHRI GANPATRAJ A.SANGHAVI (SUPRA). IF THE BOGUS PURCHASES ARE UNPROVED AND ARE DECLARED CONSUMED BY ASSESSEE ITSELF IN ITS TRADING, MANUFACTURING OR NON - TRADING ACTIVITIES, THE ENTIRE ADDITION CAN BE MADE AS IT ONLY GOES TO INFLATE THE EXP ENSES OF THE ASSESSEE. (REFER M/ S. SHORELINE HOTEL PVT. LTD VS. C IT CENTRAL - I IN ITA NO.964/ M/2015 DATED 19.06.2015). 5.5.2 IT IS SEEN THAT THE ASSESSEE IS UNABLE TO SUBSTANTIATE ITS PUR CHASES FROM THE CLAIM SUPPLIERS WHO HAD ALREADY ESTABLISHED HAWALA DEALERS BY THE SALES TAX DEPARTMENT (GOVERNMENT OF MAHARASHTRA) AND INVESTIGATION WING OF THE 5 ITA NO. 139 8 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 INCOME TAX DEPARTMENT. THE SUPPLIERS WERE NEITHER PRODUCED DURING THE ASSESSMENT PROCEEDINGS NO R DURING APPELLATE PROCEEDINGS WHEN OPPORTUNITY WAS SO PROVIDED. WHAT IS IMPORTANT TO FIND OUT IS THE ENTIRE BENEFIT DERIVED BY THE ASSESSEE COMPANY BY USING SUCH ACCOMMODATION ENTRIES AND ACTUALLY USING THE GOODS FROM THE GREY MARKET. 5.5.3 IT IS OBSER VED THAT DURING THE REASSESSMENT PROCEEDINGS, THE PRIMARY ONUS WHICH IS CAST UNDER THE LAW ON THE APPELLANT COMPANY HAS NOT BEEN DULY DISCHARGED. ONCE CERTAIN PARTIES HAVE BEEN ESTABLISHED AS HAWALA OPERATORS PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUALL Y SUPPLYING ANY GOODS, THEN IT WAS INCUMBENT UPON THE APPELLANT TO PROVIDE THE BASIC DETAILS AND SUBSTANTIATE THE PURCHASES. 5.5.4 THE A.O. IN HIS CONCLUSION HAS ACCEPTED THAT SALES ARE GENUINE AND ONCE THERE IS A SALE THERE HAS TO BE A PURCHASE. THE A.O . HAS ALSO CONCLUDED THAT THE GOODS HAVE BEEN PURCHASED BUT NOT FROM THE PARTIES WHICH HAS BEEN CLAIMED BUT FROM RECOGNIZED SECTOR COMMONLY KNOWN AS GREY MARKET. CERTAINLY, THERE ARE BENEFITS FROM TRADE WITH UNORGANIZED SECTOR WHICH HAS BEEN ELABORATED I N VARIOUS JUDICIAL REVIEWS POINTED IN EARLIER PARA. IN FACT, THE A.O. IS MORE THAN FAIR TO DISALLOW ONLY 6.2% OVER AND ABOVE THE GROSS PROFIT WHICH HAS ALREADY BEEN SHOWN BY THE APPELLANT. IN MY OPINION, THERE IS NO REASON TO INTERFERE WITH THE FINDING OF THE A.O. AND, THEREFORE, DISALLOWANCE MADE BY THE A.O. IS CONFIRMED AND APPEAL FILED BY THE APPELLANT COMPANY IS DISMISSED . 6. WE NOTICE THAT THE AO HAS MADE DISALLOWANCE OF 6.2% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED DURING THE ASSESSMEN T PROCEEDINGS BY TAKING AVERAGE GP OF THE LAST THREE FINANCIAL YEARS. THE LD. CIT (A) HAS CONFIRMED THE ADDITION MADE BY THE AO HOLDING THAT THE DISALLOWANCE MADE BY THE AO IS FAIR AND REASONABLE IN THE LIGHT OF THE FACTS OF THE CASE. SINCE, THE AUTHORITI ES BELOW HAVE DETERMINED THE PERCENTAGE OF DISALLOWANCE KEEPING IN VIEW THE PROFIT 6 ITA NO. 139 8 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 ELEMENT EMBEDDED IN THE PURCHASES IN QUESTION, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW. HENCE, WE ENDORSE THE FINDINGS O F THE LD. CIT (A) THAT THE DISALLOWANCE MADE BY AO IS FAIR AND REASONABLE. WE THEREFORE UPHOLD THE FINDINGS OF THE LD.CIT (A) AND DISMISS ALL THE GROUNDS OF APPEAL OF THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2013 - 201 4 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE , 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 07 / 0 6 / 201 9 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