DCIT - 9(1)(1), MUMBAI v. AIRPAC FILTERS & SYSTEMS PVT. LTD., MUMBAI

ITA 6049/MUM/2016 | 2009-2010
Pronouncement Date: 29-11-2017 | Result: Dismissed

Appeal Details

RSA Number 604919914 RSA 2016
Assessee PAN AAACA5728J
Bench Mumbai
Appeal Number ITA 6049/MUM/2016
Duration Of Justice 1 year(s) 1 month(s) 19 day(s)
Appellant DCIT - 9(1)(1), MUMBAI
Respondent AIRPAC FILTERS & SYSTEMS PVT. LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 29-11-2017
Assessment Year 2009-2010
Appeal Filed On 10-10-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R.C. SHARMA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 6049/MUM/2016 ASSESSMENT YEAR: 2009 - 10 THE DCIT 9(1)(1) ROOM NO. 260A 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 4000 20 VS. M/S AIRPAC FILTERS & SYSTEMS - PVT. LTD. 21 PAPA INDUSTRIAL ESTATE 40 SUREN ROAD ANDHERI (EAST) MUMBAI - 400093 PAN: AAACA5728J (APPELLANT) (RESPONDENT) ITA NO. 6112/MUM/2016 ASSESSMENT YEAR: 2009 - 10 M/S AIRPAC FILTERS & SYSTEMS - PVT. LTD. 21 PAPA INDUSTRIAL ESTATE 40 SUREN ROAD ANDHERI (EAST) MUMBAI - 400093 PAN: AAACA5728J VS. THE DCIT 9(1)(1) ROOM NO. 260A 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020 (APPELLANT) (RESPONDENT) & ITA NO. 6113/MUM/2016 A SSESSMENT YEAR: 2010 - 11 M/S AIRPAC FILTERS & SYSTEMS - PVT. LTD. 21 PAPA INDUSTRIAL ESTATE 40 SUREN ROAD ANDHERI (EAST) MUMBAI - 400093 PAN: AAACA5728J VS. THE DCIT 9(1)(1) ROOM NO. 260A 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 40002 0 (APPELLANT) (RESPONDENT) 2 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 REVENUE BY : SHRI V. JUSTIN (DR) ASSESSEE BY : SHRI JITENDRA SINGH (AR) DATE OF HEARING: 07 /11 /201 7 DATE OF PRONOUNCEMENT: 29 / 11 /2017 O R D E R PER RAM L AL NEGI JM T HE REVENUE AND THE ASSESSEE HAVE CHALLENGED THE ORDER DATED 20/07/2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16 MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2009 - 10 WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FI LED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT). THE ASSESSEE HAS FURTHER CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16 MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2010 - 11 WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT. SINCE ALL THE THREE APPEALS PERTAIN TO THE SAME ASSESSEE FO R THE ASSESSMENT YEAR 2009 - 19 AND 2010 - 11 ALL THE THREE APPEALS WERE CLUBBED HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 6049 / MUM/2016 & ITA NO. 6112/MUM/2016 (ASSESSMENT YEAR: 2009 - 10 ) BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF EXECUTING WORK CONTRACTS F ILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 70 12 253/ - . SUBSEQUENTLY ON TH E BASIS OF INFORMATION RECEIVED FROM THE SALES 3 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 TAX DEPARTMENT MAHARASHTRA TO THE EFFECT THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THREE HAWALA DEALERS NAMELY ANUPAM METAL ANMOL FERROMET PVT.LTD. AND SANDEEP ENTERPRISES AMOUNTING TO RS. 38 6 7 926/ - THE ASSESSEES CASE WAS REOPENED AND NOTICE U/S 148 OF THE ACT WAS ISSUED ASKING THE ASSESSEE TO FURNISH THE INCOME WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF THE NOTICE . I N RESPONSE THEREOF THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN FILE D MA Y BE TREATED AS THE RET URN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THEREAFTER THE AO ISSUED NOTICE U/S 143(2) & 142(1) OF THE ACT . T HE ASSESSEE OPPOSED REOPENING OF THE ASSESSMENT H OWEVER THE CONTENTION OF THE ASSESSEE WAS REJECTED. SINCE THE ASSESS EE DID NOT SUBMIT THE DOCUMENTS CALLED FOR BY THE AO INCLUDING TRANSPORTATION RECEIPT LORRY RECEIPT STOCK REGISTER WEIGHBRIDGE SLIP ETC. TO PROVE THE GENUINENESS OF THE TRANSACTION OF PURCHASES IN QUESTION DESPITE SEVERAL REMINDERS ISSUED TO THE ASSESS EE THE AO MADE ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. 2. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLANT AUTHORITY. THE LEARNED CIT(A) AFTER HEARING THE ASSESSE E RESTRI CTED THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO. THE ASSESSEE AND THE DEPARTMENT HAVE FILED THE PRESENT CROSS APPEAL S AGAINST THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). 3. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. THE HONBLE CIT (A) ERRED IN ADDING 12.5% (WHICH WORKS OUT TO RS. 483 491/ - ) OF THE PURCHASES WORTH RS. 38 67 926/ - MADE FROM THE ALLEGED BOGUS ENTITIES BEING DECLARED AS SUCH BY THE SALES TAX AUTHORITIES. 2. THE HONBLE CIT (A) ERRED IN NOT GRANTING SUITABLE RELIEF ARISING OUT OF THE FACT THAT THE ASSESSING OFFICER HAD ERRONEOUSLY CONSIDERED THE 4 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 PURCHASES WORTH RS. 367 994/ - FROM ONE BOGUS ENTITY M/S ANUPAM METAL TWICE AT RS. 735 988/ - 3. THE LEARNED ASSESSING OFFICER ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) OF THE ACT. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 4. ON THE OTHER HAND THE DEPARTMENT HAS RAISED THE FOLL OWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN HOLDING THE SUPPRESSED PROFIT ON ACCOUNT OF BOGUS TRANSACTION WAS TO B E ESTIMATED AT 12.5% OF THE NET PURCHASES IGNORING THE FACT THAT THE ASSESSEE WAS A CONTRACTOR WHO CONSUMERS THE PURCHASES MADE BY IT IN THE COURSE OF ITS BUSINESS THAT ONE TO ONE CO - RELATION BETWEEN ITEM OF PURCHASE AND SALE CANNOT BE ESTABLISHED IN SUCH CASE AND THEREFORE THE TOTAL INCOME ARRIVED ON THE BASIS OF ESTIMATION OF PROFIT ATTRIBUTABLE TO SUCH BOGUS PURCHASE IS NOT VALID IN SUCH CASES? 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED ORDER PASSED BY THE LEARNED CI T(A) VIDE WHICH THE LEARNED CIT(A) HAS RESTRICTED THE ADDITION TO 12.5% IS BAD IN LAW AS THE AO HAS REOPENED THE AS SESSMENT SOLELY ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX AUTHORITIES MAHARASHTRA. THE ASSESSEE HAD ACTUALLY PURCHASED THE MATERIA L FROM THE PARTIES AND THE SAME HAVE BEEN PROPERLY RECORDED IN THE BOOKS OF ACCOUNT. ALL PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. THE MATERIALS PURCHASED WERE DIRECTLY DELIVERED TO THE CLIENT S AND THAT THE R EVENUE EARNED FROM EACH SUCH PROJECT WAS PROPERLY ACCOUNTED AND THE PROFITS DERIVED WERE OFFERED TO TAX. THE LEARNED COUNSEL FURTHER RELYING ON THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BABULAL C. BORANA VS. ITO 282 ITR 251 (BOM) SUBMITTED THAT NON - PAYMENT OF SALES TAX DOES NOT AFFECT THE 5 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 GENUINENESS OF THE TRANSACTION . THE LEARNED COUNSEL FURTHER RELYING ON THE DECISION OF MUMBAI TRIBUNAL RENDERED IN ITO VS. PERMANAND 107 ITJ 395 (TRIB) SUBMITTED THAT ADDITION CANNOT BE MADE ON THE BASIS OF OBSERVATIONS MADE BY THE SALE S TAX DEPARTMENT . THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE AO HAS NOT REJECTED THE SALES THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION. 6. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE (DR) POINTED OUT THAT THERE IS A DELAY OF 27 DAYS IN FILING THE PRESENT APPEAL . THE LD. DR FURTHER SUBMITTED THAT THE DELAY HAS BEEN CAUSED IN THE PROCESS OF OBTAINING REQUISITE PERMISSION FROM THE COMPETENT AUTHORITY AND SINCE THERE WAS A SUFFICIENT CAUSE WHICH PREVENTED THE DEPARTMENT FROM FILING THE APPEAL WITHIN LIMITATION PERIOD THE DELAY OF 27 DAYS MAY BE CONDONED . THE LD. COUNSEL FOR THE ASSESSEE DID NOT RAISE ANY OBJECTION. AFTER GOING THROUGH THE REASONS FOR DELAY WE FIND THAT THERE WAS A REASONABLE CAUSE FOR DELAY . HENCE IN THE SU BSTANTIAL INTEREST OF JUSTICE WE CONDONED THE DELAY AND ALLOW THE LD. DR TO ADVANCE ARGUMENTS ON MERIT. 7. ON MERIT T HE LD. DR SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO PRODUCE TRANSPORTATION RECEIPT LORRY RECEIPT STOCK REGISTER WEIGHBRIDGE SLIP E TC. BEFORE T HE AUTHORITIES BELOW THE AO HAS RIGHTLY MADE ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE. SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF TRANSACTION TO THE SATISFACTION OF THE AO THE LEARNED CIT(A) OUGH T TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. HENCE THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSE THE MATERIAL ON THE RECORD IN THE LIGHT OF THE SUBMISSION S MADE BY THE PARTIES. THE ONLY CONTENT ION OF THE ASSESSEE IS THAT THE LEARNED CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF 12.5% OF THE TOTAL BOGUS PURCHASES DETERMINED BY THE AO. ON THE 6 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 OTHER HAND THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LEARNED CIT(A) HAS WRONGLY RESTRICTED THE ADDITIO N TO 12.5% OF THE TOTAL BOGUS PURCHASES MADE BY THE AO. 9. WE NOTICE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES SHOWN BY THE ASSESSEE. WE FURTHER NOTICE THAT THE ASSESSEE HAS CONTENDED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT (A) THAT THE PURCHASES IN QUESTION WERE GENUINELY MADE. THE LD. COUNSEL FURTHER CONTENDED THAT SINCE THE MAHARASHTRA VAT AUTHORITIES HAVE REGISTERED THE SAID PARTIES AFTER OBTAINING THEIR PAN NOS COPY OF T ELEPHONE OR E LECTRICITY B ILLS AND THEIR PHOTOGRAP HS AND OTHER REQUIRED DOCUMENTS; THEY CANNOT BE TERMED AS HAWALA DEALERS. THE ENTRIES REGARDING THE PURCHASES IN QUESTION ARE MADE IN THE BOOKS OF ACCOUNT AND IF THE SAID PARTIES HAD NOT PAID THE SALES TAX THE ASSESSEES PURCHASES CANNOT BE TREATED AS BOG US. PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN CIT VS. ORISSA CORPORATION PVT. LTD. 159 ITR 78 (SC) HONBLE BOMBAI HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) AND CIT VS. U M SHAH 90 ITR 396 (BOMB. ) AND JODHPUR BENCH OF THE TRIBUNAL IN JAGDAMBA TRADING COMPANY VS. ITO (2007) 16 SOT 66 JODHPUR THE ASSESSEE HAS CONTENDED BEFORE THE AUTHORITIES BELOW THAT FOR EVERY SALE THERE HAS TO BE CORRESPONDING PURCHASES. IF SALES BILLS ARE BEING ACCEPTED THEN TH E TOTAL PURCHASES AMOUNT SHOULD BE ACCEPTED. 10 . THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL H AS HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED B EFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADD ITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. IN VIEW 7 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 OF THE CASES DISCUSSED ABOVE AO HAS WRONGLY MADE 100% DISALLOWANCE . ON THE OTHER HAND SINCE THE ASSESSEE H AS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS THE LD. CIT(A) HAS MADE ADDITION OF 12 .5 % OF THE TOTAL PURCHASES IN QUESTION KEEPING IN VIEW THE PROFIT ELEMENT INVOLVED IN THE PURCHASES . HENCE IN OUR CONSIDERED VIEW THE ORDER PASSED BY THE LD. CIT (A) IS BASED ON THE PRINCIPLES OF LAW DOWN BY THE HONBLE BOMBAY HIGH COURT AND GUJRAT HIGH COURT . THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH. HENCE WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE GROU ND S OF THE APPEAL FILED BY THE ASSESSEE AND THE REVENUE ON THIS ISSUE . SO FAR AS THE GROUND RELATING TO INITIATION OF PENALTY U/S 271(1) (C) OF THE ACT RAISED BY THE ASSESSEE IS CONCERNED THE SAME IS NOT REQUIRED TO BE ADJUDICATED AT THIS STAGE. HENCE AL L THE GROUNDS OF CROSS APPEAL S FILED BY THE DEPARTMENT AND THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 10 ARE DISMISSED. ITA NO. 6113/MUM/2016 (ASSESSMENT YEAR: 2010 - 11 ) THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNE D ORDER PASSED BY THE LD. CIT (A): - 1. THE HONBLE CIT (A) ERRED IN ADDING 12.5% (WHICH WORKS OUT TO RS. 140 671/ - ) OF THE PURCHASES WORTH RS. 11 25 369/ - MADE FROM THE ALLEGED BOGUS ENTITIES BEING DECLARED AS SUCH BY THE SALES TAX AUTHORITIES. 2. THE LEARNE D ASSESSING OFFICER ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) OF THE ACT. 3. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 2. THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE ASSESSEES OWN CASE FOR THE AY 2009 - 10 DISCUSSED ABOVE EXCEPT THE AMOUNT OF BOGUS 8 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 PURCHASES MADE BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT UNDER CONSIDERATION THE ASSESSEE MADE BOGUS PURCHASES F ROM THE HAWALA PARTIES AMOUNTING TO RS. 11 25 369/ - AND THE AO MADE ADDITION OF THE ENTIRE AMOUNT TO THE INCOME OF THE ASSESSEE. IN FIRST APPEAL THE LEARNED CIT(A) RESTRICTED THE ADDITION TO 12.5%. SINCE WE HAVE UPHELD THE FINDINGS OF THE LEARNED CIT(A) IN ASSESSEES OWN CASE FOR THE AY 2009 - 10 FOR THE SAME REASONS WE ALSO UPHOLD THE FINDINGS OF THE LEARNED CIT(A) IN THIS APPEAL ALSO. ACCORDINGLY WE CONFIRM THE ADDITION OF 12.5% OF THE TOTAL BOGUS PURCHASE MADE BY THE ASSESSEE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE RESULT CROSS APPEAL S FILED BY THE REVENUE AND THE ASSESSEE FOR ASSESSMENT YEAR S 2009 - 10 AND APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 ARE DISMISSED. ORDER PRONOUNCED IN T HE OPEN COURT ON 29 TH . NOVEMBER 2017 . SD/ - SD/ - ( R.C. SHARMA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 29 / 11 / 2017 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 . 9 ITA NO S . 6049 6112 & 6113/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 / BY ORDER //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT MU MBAI