DCIT CIR 4, THANE V. URVASHI INDUSTRIES, THANE

ITA 748/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8755 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 12-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Corroborative evidences; Condonation of delay
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 748/MUM/2016 ASSESSMENT YEAR: 2010 - 11 DCIT - 4 THANE VS. M/S URVASHI INDUSTRIES, FAFADIA INDUSTRIAL ESTATE, VILLAGE - WALIV, BESSEIN, VASAI (E) TALUKA - VASAI THANE. PAN NO. AAAFU7651H APPELLANT RESPONDENT ITA NO. 3546/MUM/2016 ASSESSMENT YEAR: 2010 - 11 M/S URVASHI INDUSTRIES, 3, NITYANAND CONSUMER SOCIETY, NITYANAND NAGAR NO. 4 ANDHERI (E) MUMBAI - 400069 VS. ACIT - 4 THANE PAN NO. AAAFU7651H APPELLANT RESPONDENT REVENUE BY : SHRI PURUSHOTTAM KUMAR, DR ASSESSEE BY : SHRI DEVENDRA JAIN, AR DATE OF HEARING : 11 /09/2017 DATE OF PRONOUNCEMENT : 31/10/2017 M/S URVASHI INDUSTRIES ITA NO. 3546 & 748/MUM/2016 2 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED CROSS APPEALS - ONE BY THE REVENUE AN D THE ONE BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 3 , THANE AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSO LIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THERE HAS BEEN A DELAY OF 76 DAYS ON THE PART OF THE ASSESSEE IN FILING THIS APPEAL. HAVING GONE THROUGH THE AFFIDAVIT FILED BY THE ASSESSEE FOR CONDONATION OF DELAY IN FILING THIS APPEAL, WE FIND THAT THERE W AS GENUINE DIFFICULTY ON THE PART OF THE ASSESSEE TO FILE THE APPEAL IN TIME BECAUSE OF ILLNESS. THUS W E CONDONE THE DELAY OF 76 DAYS ON THE PART OF THE ASSESSEE TO FILE THIS APPEAL. 3 . THE G ROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - 3, THANE ERRED IN DELETING THE ADDITION OF RS.71,37,242/ - OUT OF THE TOTAL ADDITION OF RS.83,96,755/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE A ND THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) - 3, THANE ERRED IN DELETING THE ABOVE ADDITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVI NG THE PURCHASES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) - 3, THANE, MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. M/S URVASHI INDUSTRIES ITA NO. 3546 & 748/MUM/2016 3 4 . THE G ROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. THE LD. CIT (A) HAS COMPLETED THE ASSESSMENT WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WHICH IS CONTRARY TO LAW AND IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2. A. THE LD. CIT (A) HAS ERRED IN FACTS AND IN LAW BY DISALLOWING A SUM OF RS.12,59,513/ - , BEING 15% OF THE ALLEGED BOGUS PURCHASES (OF RS. 8 3,96,755/), AS INFLATED PURCHASES MADE FROM UNVERIFIABLE PARTIES, WHICH IS WITHOUT ANY BASIS AS SUCH. B. THE LD. CIT (A) HAS ERRED IN IGNORING VARIOUS DOCUMENTARY EVIDENCES SUBMITTED IN SUPPORT OF THE GENUINE PURCHASES MADE BY THE APPELLANT FIRM. C. THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THAT THE LD. AO HAS NEITHER AFFORDED ANY OPPORTUNITY OF CROSS EXAMINATION NOR HAS MADE ANY EFFORTS TO CONDUCT INDEPENDENT ENQUIRIES. 5 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2010 - 11 ON 23.09.2010 DECLARING TOTAL INCOME AT RS.38,71,980/ - . THEREAFTER, THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOV ERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM DHANERA METAL CORPORATION WITHOUT ACTUALLY PURCHASING GOODS/MATERIALS FROM THEM. THE DETAILS ARE AS UNDER: S. NO. NAME OF THE ENTRY PROVIDER MAHARASHTRA VAT NO. F.Y. AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE 1. DHANERA METAL CORPORATION 2719925791 3 V 2009 - 10 RS.83,96,755/ - ON THE BASIS OF SUCH INFORMATION THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148. DURING THE COURSE OF REASSESSMENT M/S URVASHI INDUSTRIES ITA NO. 3546 & 748/MUM/2016 4 PROCEEDINGS , THE ASSESSEE FILED BEFORE THE AO LEDGER ACCOUNT, BANK ACCOUNT OF THE ABOVE PART Y . THE ASSESSEE DID NOT FILE CONFIRMATION OF THE ABOVE PART Y NOR THE DELIVERY CHALLANS, SITE GATE PASS/SITE STOCK REGISTER SHOWING THE RECEIPT OF GOODS FROM THE ABOVE PARTY IN THE ASSESSEES FACTORY. IN ORDER TO VERIFY THE GENUINENESS OF TRANSACTIONS , THE AO ISSUED NOTICE U/S 133(6) TO THE ABOVE PARTY. THE SAID NOTICE WAS RETURNED UNSERVED BY THE POSTAL AUTHORITY. THEN THE AO ASKED THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 17.1 1.2014 TO PRODUCE THE ABOVE PARTY FOR EXAMINATION. HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE ABOVE PART Y BEFORE THE AO FOR EXAMINATION. THE AO HAS NOTED THAT HOWEVER, EXCEPT FOR FILLING OF LEDGER OF M/S DHANERA METAL CORPORATION AND CLAIMING THAT AS THE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUE AND HAS BEEN RECEIVED AND UTILIZED FOR MANUFACTURE OF FINISHED PRODUCTS SOLD TO THIRD PARTIES, THE ASSESSEE HAS NOT FILED ANY OTHER SUPPORTING EVIDENCES IN THE FORM OF CONFIRMATION OF THE PARTY, OCTROI RECEIPT S, STOCK REGISTER ETC. ON THE BASIS OF ABOVE FACTS, THE AO MADE AN ADDITION OF RS.83,96,755/ - U/S 69C OF THE ACT. 6 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 15% OF THE ALLEGED BOGUS PURCHASES OF RS.83,96,755/ - WHICH WORKS OUT TO RS.12,59,513/ - . 7 . BEFORE US, THE LD. DR SUBMITS THAT THE ASSESSEE FAILED TO PRODUCE THE SAID PARTY BEFORE THE AO FOR EX AMINATION. ALSO THE ASSESSEE FAILED TO M/S URVASHI INDUSTRIES ITA NO. 3546 & 748/MUM/2016 5 FILE CONFIRMATION OF THE ABOVE PARTY, OCTROI RECEIPTS, STOCK REGISTER BEFORE THE AO. THEREFORE, IT IS SUBMITTED BY HIM THAT THE LD. CIT(A) SHOULD HAVE CONFIRMED THE DISALLOWANCE OF RS.83,96,755/ - IN FULL INSTEAD OF RE STRICTING IT TO 15% OF IT WHICH COMES TO RS.12,59,513/ - . 8. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAD SUBMITTED DOCUMENTARY EVIDENCES BEFORE THE AO WHICH PROVE THE GENUINENESS OF SUCH PURCHASES. THEREFORE, THERE WAS NO BASIS ON THE PART OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE TO 15% OF THE ALLEGED BOGUS PURCHASES. THE LD. COUNSEL FURTHER SUBMITS THAT THE AO HAS NEITHER AFFORDED ANY OPPORTUNITY OF CROSS - EXAMINATION TO THE ASSESSEE NOR HAS MADE ANY EFFORT TO C ONDUCT INDEPENDENT ENQUIRY. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. THE FACT REMAINS THAT AFTER THE NOTICE U/S 133(6) ISSUED BY THE AO CAME BACK UNSERVED BY THE P OSTAL AUTHORITIES, HE HAD REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTY FOR EXAMINATION. THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTY BEFORE THE AO. WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTIOUS ISSUES IN THE INSTANT CASE COULD BE RESOLVED BY E XAMINING THE ABOVE PART Y . IT IS THE DUTY OF THE AO TO ENFORCE ATTENDANCE OF A WITNESS IF HIS EVIDENCE IS MATERIAL. AT THE SAME TIME THE ASSESSEE MUST FURNISH THE COMPLETE ADDRESS OF SUCH PERSON. A PROPER HEARING MUST ALWAYS INCLUDE A FAIR OPPORTUNITY TO THOSE WHO ARE PARTIES IN THE CONTROVERSY FOR CORRECTING OR CONTRADICTING M/S URVASHI INDUSTRIES ITA NO. 3546 & 748/MUM/2016 6 ANYTHING PREJUDICIAL TO THEIR VIEW. CROSS - EXAMINATION IS ALLOWED BY PROCEDURAL RULES AND EVIDENTLY ALSO BY THE RULES OF NATU RAL JUSTICE. ANY WITNESS WHO HAS BEEN SWORN ON BEHALF OF ANY PARTY IS LIABLE TO BE CROSS - EXAMINED ON BEHALF OF THE OTHER PARTY TO THE PROCEEDINGS. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS - EXAMINE WITNESSES. IN ITO VS. M. PIRAI CHOODI (2012) 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT ORDER OF ASSESSMENT PASSED WITHOUT GRANTING AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE BY HIGH COURT; AT MOST, HIGH COURT SHOULD HAVE DIRECTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE CONCERNED WITNESS. THE IMPORTANCE OF CROSS - EXAMINATION HAS BEEN EMPHASIZED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF OM VINYLS P. LTD. VS. ITO [WP(L) NO. 3114 OF 2014]. THERE IS NO BASIS IN THE ORDER OF THE LD. CIT(A) IN ESTIMATING THE PROFIT @ 15% ON THE ALLEGED BOGUS PURCHASES OF RS.83,96,755/ - . IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT IN THE LIGHT OF OUR OBSERVATION HEREINBEFORE AFTER GIVING OPPORTUNITY TO THE M/S URVASHI INDUSTRIES ITA NO. 3546 & 748/MUM/2016 7 ASSESSEE TO CROSS - EXAMINE THE CONCERNED PART IES. WE ALSO DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE ASSESSMENT ORDER. 10. IN THE RESULT, THE APPEALS ARE ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/ - SD/ - ( D.T. GARASIA ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/10/2017 RAHUL SHARMA, SR. P.S. 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