AADIT METAL TRADE PVT.LTD., MUMBAI V. PCIT(CENTRAL)-3, MUMBAI

ITA 983/MUM/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 9299 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 30-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV HARIT
• Keywords: Bogus purchase; Revision of order; Tangible material; Accommodation entries; Assessment record; Set aside
• Section: 147; 148; 263; 139; 143(3); 37(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM (Hearing through Video Conferencing Mode) आयकर अपील सं/ I.T.A. No.983/Mum/2021 (ननधधारण वर्ा / Assessment Years: 2011-12) Aadit Metal Trade Pvt. Ltd. Building No.118/120, Ground Floor, V. P. Road, Ardisher Dadi Street, C.P. Tank, Mumbai-400004. बनधम/ Vs. PCIT(Central)-3 Room No.1901, 19 th Floor, Air India Building, Nariman Point, Mumbai- 400021. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAECA7245C (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) सुनवाई की तारीख / Date of Hearing: 10/08/2021 घोषणा की तारीख /Date of Pronouncement: 27/10/2021 आदेश / O R D E R PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 28.12.2018 passed by the Principal Commissioner of Income Tax-03, Mumbai [hereinafter referred to as the “PCIT”] relevant to the A.Y.2011-12 in which the Principal Commissioner of Income Tax-03 has invoked the provisions u/s 263 of the I.T. Act, 1961. 2. The assessee has raised the following grounds of appeal: - 1. Whether the Ld. POT (Central)-3 Mumbai was justified in Assuming Jurisdiction under section 263 by holding that the order u/s 143(3)/147 of A.O. dt. 28.12.2018 is erroneous and prejudicial to the interest of Revenue on the issue of 2 parties which was in facts relates to First A.O. order u/s143(3)/ 147 dt.29.12.2016 instead of order dt.28.12.2018 2. Whether the Ld. POT (Central)-3 Mumbai was justified in Assuming Jurisdiction under section 263 which is invalid and bad in law, because the subject matter sought to be exercised with reference to an Assessee by: Shri V. K. Tulsian (AR) Revenue by: Shri Rajeev Harit (DR) ITA No.983/Mum/2021 A.Y. 2011-12 2 issue which does not form the subject matter of purported order dt.28.12.2018, therefore it is barred by limitation because the issue in the order relates to and against A.O.order u/s 147/143(3) dt. 29.12 2016. 3. Whether the Ld. POT (Central)-3 Mumbai was justified by not allowing a reasonable opportunity of being heard as mandate by section itself and treat first notice dt.25.03.2021 issued as sufficient, which was partly complied with on 26.03.2021 by requesting a short Adjournment but all in vain. 4. Whether the Ld. POT (Central)-3 was justified under the garb of section 263 by invoking his power to interfered in a plausible view taken by A.O. vide order dt.29.12.2016 on facts and in law in making the Additions by way of disallowance of purchases from the alleged 2 parties by treating them as bogus and simply ignoring the corresponding sales made as the same was admitted and the matter is still pending Before CIT(A)on law and facts 5. Whether the Ld. PUT (Central)-3 was justified by upholding an impugned assessment order is valid one as the assumption of jurisdiction has been exercised not only piece of information despite the fact that there is no any tangible material brought on record and is still pending before CIT-A. 6. Whether the ld. PCIT(Central)-3 was justified in not considering/examined the evidences on voluminous record and submissions made as well as adj asked for and passed the order in highly arbitrary , mechanical hurried manner even if so then there are no occasion to invoke 263 on the issue already barred by limitation. 7. Whether the Ld. PCIT -3 was justified by giving direction for making additions on entire purchase i.e 100% of purchases based on order dt. 29.12.2016, which is barred by limitation, to be added without bringing any tangible material/evidence on record and solely based on surmises and his own assumptions and presumptions.” ITA No.983/Mum/2021 A.Y. 2011-12 3 3. The brief facts of the case are that the assessee filed its return of income on 24.09.2011 declaring total income to the tune of Rs.29,18,033/-. The return of income was processed u/s 143(1) of the I. T. Act. Thereafter, the assessment u/s 143(3) r.w.s 147 of the Act was passed on 29.12.2016 assessing total income to the tune of Rs.1,52,23,920/-. The case of the assessee was reopened in view of the notice u/s 148 and thereafter, the income of the assessee was assessed to the tune of Rs.1,88,85,920/- u/s 143(3) r.w.s. 147 of the Act vide order dated 28.12.2018. The assessment record was called and the PCIT issued notice u/s 263 on following grounds: - “Further. on perusal of the assessment order passed u/s 143(3) r.w.s. 147 of the IT Act dated 29.12.2016 it was noticed that the assessee company had made purchases through Hawala entities, namely, Rajkamal Steel and Ballard Steel P. Ltd. amounting to Rs.111,74,21,567/- and Rs.8,47,80,618/- respectively during the AY 2011-12 for which the assessee had not proved the genuineness of the transaction and also failed to furnish any cogent evidence in respect of the claim. The assessment was completed after making addition of Rs. 1.20,22,022/- on account of bogus purchases being 1% of the total bogus purchases of Rs. 120,22,02,185/-. Since all the purchases made by the assessee was bogus and not actually purchases by the assessee then as per section 37(1) of the IT Act 1961, all the expenditure pertaining to the bogus purchases should have been disallowed. During the course of search in the case of Indiabulls group on 13.04.2016, it was found that the entities belonging to Indiabulls group has been indulging into practice of inflation of purchases by debiting bogus purchases in their books of account by taking accommodation entries from known accommodation entry providers. It was found that group companies namely /IC Ltd. IINFC Ltd, Indiabulls Properties Private Ltd., Sentia Real Estate Ltd., Lucina Land Development Ltd. had allegedly booked bogus expenses in their books, ostensibly in order to suppress the profits and thereby reduce the tax incidence. ITA No.983/Mum/2021 A.Y. 2011-12 4 List of all the purchases debited by group companies developing real estate projects was obtained during post-search proceedings. As a result of this extensive exercise carried out, following purchases made by Group companies have identified to be bogus. M/s. Indiabulls Group has also admitted in its application filed before ITSC that the purchases made from the below mentioned entities are non-genuine. Further, from the data seized during the course of search in the case of M/s. lndiabulls Group. it can be seen that M/s. Indiabulls group made commission payments to the tune of 3- 4% in cash to the parties from whom the accommodation entries of bogus purchase were booked. The details of such bogus purchases have been torn antpri in a table with name of the company, name of the purchases party from which bogus purchase made FY in which payments given for purchase with dates of positing of such payment entries in SAP, financial year in which bills are posted in SAP with dated of posting of bills. S No. Name of Assessee company who has made payments for bogus purchase Name of the party from whom bogus purchase made FY in which payments made Dates of payments made entries posted in SAP FY in which purchase bills psoted in SAP system Dates of bills posted in SAP Amount of payment made (in Rs. Cr.) 1 IIC Ltd Aadit Metal Trade 2010-11 17.02.2011 to 11.03.2011 2010-11 15.03.2011 7.81 2 IINFC Ltd. Aadit Metal Trade 2010-11 21.02.2011 to 25.02.2011 2010-11 15.03.2011 10.5 Total 18.31 4. Thereafter, the notice was given and after the reply of the assessee, the PCIT passed an order u/s 263 of the Act on the following grounds: - “(i) The failure on part of the AO to disallow the total purchases made from Rajkamal Steel and Ballard Steel in accordance with the judicial pronouncement by the Hon’ble Supreme Court in the case of NK Proteins Ltd. Vs. DCIT (2017) (292 CTR 354 (SC) and the Hon’ble ITAT, Mumbai in the case of Pratibha Pipes & Structurals Ltd. DCIT (ITA. No.387/Mum/2015).” ITA No.983/Mum/2021 A.Y. 2011-12 5 5. The assessee was aggrieved by this order, therefore, the assessee has filed the present appeal before us. 6. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The reason for reopening the assessment is hereby reproduced below: - “(i) The failure on part of the AO to disallow the total purchases made from Rajkamal Steel and Ballard Steel in accordance with the judicial pronouncement by the Hon’ble Supreme Court in the case of NK Proteins Ltd. Vs. DCIT (2017) (292 CTR 354 (SC) and the Hon’ble ITAT, Mumbai in the case of Pratibha Pipes & Structurals Ltd. DCIT (ITA. No.387/Mum/2015).” 7. In brief, the PCIT is of the view that the AO has failed to disallow the total purchase made from Rajkamal Steel and Ballard Steel in accordance with judicial pronouncement of the Hon’ble Supreme Court in the case of NK Proteins Vs. DCIT (2017) (292 CTR 354 (SC) and the decision of the Hon’ble ITAT, Mumbai in the case of Pratibha Pipes & Structurals Ltd. Vs. DCIT (ITA. No.387/Mum/2015. The copy of assessment order u/s 143(3) r.w.s. 147 of the Act dated 29.12.2016 is on the record which lies at page no. 25 to 32 of the paper book. The case of the assessee was reopened on the basis of the bogus purchase entry from Rajkamal Steel for the assessment year 2011-12 in sum of Rs.111,74,21,567/- and purchase from Ballard Steel for the A.Y. 2011-12 of Rs.8,47,80,618/-. The total to the tune of Rs.120,22,02,185/-. Thereafter, the notice was given by AO and 1% of bogus purchases i.e. Rs.1,20,22,022/- was added to the income of the assessee. It is pertinent to mention here that during the assessment, the AO raised the query in his notice dated 19.12.2016 in para no.10 lies at page nos. 37 of the paper book. The assessee also replied to the notice dated 27.12.2016 which lies at page no. 39 of the paper book. In brief, the matter was inquired by the AO while completing the assessment order u/s 143(3) r.w.s 147 of the Act dated 29.12.2016. The said issue has also been discussed in the order dated 29.12.2016. Further, on the same ground, the assessment of the ITA No.983/Mum/2021 A.Y. 2011-12 6 assessee was again reopened u/s 147 of the Act by virtue of letter dated 04.12.2018 lies at page no. 44 of the paper book. The reason for reopening is hereby reproduced as under: - “The assessee had filed return of income under section 139 of the IT Act, on 24.09.2011, declaring income at Rs. 29,18,033/-. The return was passed u/s 143(1) on 09.01.2012. 2. The assessment was reopened on the basis of information from Investigation wing. Assessment u/s 143(3) r.w.s 197 of the IT Act was completed on 29.12.2016 wherein assessed income for A.Y. 2011-12 was determined at Rs. 1,52,23,920/-. 3. Further, on perusal of the assessment order passed u/s 143(3) r.w.s 147 of the IT Act it was noticed that the assessee company had made purchases through Hawala entities, namely, Rajkamal Steel and Ballard Steel P. Ltd. amounting to Rs.111,74,21,567/- and Rs.8,47,80,618/ respectively during the A? 2011 12 for which the assessee had not proved the genuineness of the transactions and also failed to furnish any cogent evidence in respect of the claim. The assessment was completed after making addition of Rsl,20,22,022/- on account of bogus purchases being 1% of the total bogus purchases of Rs.120,22.02,185/-. Since all the purchases made by the assessee was bogus and not actually purchased by the assessee, then as per Section 37(1) of the IT Act, 1961, all the expenditure pertaining to the bogus purchases should have been disallowed. 4. During the course of search in the case of Indiabulls group on 13.07.2016, it was found that the entities belonging to Indiabulls group has been indulging into practice of inflation of purchases by debiting bogus purchases in their books of account by taking accommodation entries from known accommodation entry providers. It was found that group companies namely IIC ltd. IINPC Ltd. Indiabulls Properties Private Ltd., Sentia Real Estate Ltd. Lucina Land Development Ltd. had allegedly booked bogus expenses in their books, ITA No.983/Mum/2021 A.Y. 2011-12 7 ostensibly in order to suppress the profits and thereby reduce the tax incidence. 5. List of all the purchases debited by group companies developing real estate projects was obtained during post-search proceedings. As a result of this- extensive exercise carried out, following purchases made by Group companies have been identified to the bogus. M/s Indiabulls Group has also admitted in its application filed before ITSC that the purchases made from the below mentioned entities are non-genuine. Further, from the date seized during the course of search in the case of M/S Indiabulls Group, it can be seen that M/s Indiabulls Group made commission payment to the tune of 3-4% in the parties from whom the accommodation entries of bogus purchase were booked. The details of such bogus purchases have been tabulated in a table with name of the Company, Name of the purchase party from which bogus purchase made. F.Y. in which payments given for purchase with dates of posting of such payment entries in SAP, financial year in which bills are posted in SAP with dates of posting of bills: S No. Name of Assessee company who has made payments for bogus purchase Name of the party from whom bogus purchase made FY in which payments made Dates of payments made entries posted in SAP FY in which purchase bills psoted in SAP system Dates of bills posted in SAP Amount of payment made (in Rs. Cr.) 1 IIC Ltd Aadit Metal Trade 2010-11 17.02.2011 to 11.03.2011 2010-11 15.03.2011 7.81 2 IINFC Ltd. Aadit Metal Trade 2010-11 21.02.2011 to 25.02.2011 2010-11 15.03.2011 10.5 Total 18.31 6. In view of the above, I have reason to believe that income chargeable to tax amounting to Rs. 1119.02 + 0.7324 (18.31x0.04) Cr. totaling of Rs. 119.75Cr. has escaped assessment for Assessment Year 2011-12 in terms of provisions of section 147 of the I T Act, Further, with reference to the first proviso to section 147 of the I T Act, there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Accordingly, notice u/s 148 of ITA No.983/Mum/2021 A.Y. 2011-12 8 the I T Act, 1961 for A.Y. 2011-12 is issued for the purpose of reassessment.” 8. The same issue has been raised again in para no.3 of the reasons record by AO. Thereafter, considering the reply of the assessee, the assessment was completed on 28.12.2018 assessing the income to the tune of Rs.1,88,85,920/-. The issue for reopening the case u/s 263 of the Act has already been examined and dealt with by the AO while completing the assessment u/s 143(3) r.w.s. 147 of the Act dated 29.12.2016 and while completing the assessment u/s 148 of the Act dated 28.12.2018. It is not justifiable to invoke the provisions u/s 263 of the Act by quoting the decision of Hon’ble Supreme Court in the case of NK Proteins Vs. DCIT (2017) (292 CTR 354 (SC) which was passed by Hon’ble Gujarat High Court not by Hon’ble Supreme Court and by quoting the decision of Hon’ble ITAT, Mumbai in the case of Pratibha Pipes & Structurals Ltd. Vs. DCIT (ITA. No.387/Mum/2015. Since the issue has already been discussed above in the assessment completed on 29.12.2016 & 28.12.2018, therefore, revision u/s 263 of the Act is not justifiable in accordance with law, therefore, we set aside the same. 9. In the result, the appeal of the assessee is hereby allowed. Order pronounced in the open court on this 27/10/2021 Sd/- Sd/- (SHAMIM YAHYA) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 27/10/2021 Vijay Pal Singh/Sr. PS ITA No.983/Mum/2021 A.Y. 2011-12 9 आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. ववभागीय प्रवतवनवि, आयकर अपीलीय अविकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधनुसधर/ BY ORDER, सत्यावपत प्रवत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनधकरण, मुंबई / ITAT, Mumbai