I.T.A. No. 4463/Mum/2016. Case: Ratnagiri Stainless Pvt. Ltd Vs Income Tax Officer 5(3)(1). ITAT (Income Tax Appellate Tribunal)

Case NumberI.T.A. No. 4463/Mum/2016
CounselFor Appellant: N.M. Porwal, Adv. and For Respondents: Pooja Swaroop, DR
JudgesC.N. Prasad, Member (J) and Ramit Kochar, Member (A)
IssueIncome Tax Act, 1961 - Sections 133(6), 139, 139(1), 142(1), 143, 143(1), 143(1)(a), 143(2), 143(3), 143(a)(1), 144, 145(3), 147, 147(a), 148, 148, 149, 150, 151, 152, 148, 149, 150, 151, 152, 153, 156, 234A, 234B, 234C, 234D, 246, 264, 69C; Indian Evidence Act, 1872 - Section 106
Judgement DateApril 04, 2017
CourtITAT (Income Tax Appellate Tribunal)

Order:

Ramit Kochar, Member (A), (ITAT Mumbai 'H' Bench)

  1. This appeal, filed by the assessee, being ITA No. 4463/Mum/2016, is directed against the appellate order dated 30th March, 2016 passed by the learned Commissioner of Income Tax (Appeals)- 10, Mumbai (hereinafter called "the CIT(A)"), for the assessment year 2009-10, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 20th January, 2015 passed by learned Assessing Officer (Hereinafter called "the AO") u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (Hereinafter called "the Act").

  2. The grounds of appeal raised by the assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:-

    1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in confirming addition of Rs. 2997908/- on account of gross profit @ 12.50% on alleged bogus purchases of Rs. 23983261/- to the total income of the Appellant. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such addition should have been made.

    2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming conclusion of the Assessing Officer that purchases made by the appellant to the tune of Rs. 23983261/- is bogus and non genuine. Reasons assigned by him are wrong and insufficient to support such conclusion.

    3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in estimating rate of gross profit of 12.50% on alleged bogus purchases over and above gross profit declared by the appellant on such purchases. Reasons assigned by him are wrong and insufficient to justify such rate of gross profit of 12.50%

    4. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming validity of initiating proceeding under section 147 of the Act by issuing notice under section 148 of the Act. The initiation of proceeding under section 147 of the Act and issuance of notice under section 148 is bad in law and contrary to the provisions of the Act and liable to be cancelled/annulled.

    5. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming order made under section 143(3) rws 147 of the Act by the learned Assessing Officer which is illegal, bad-in-law, ultra vires and without allowing reasonable opportunity of the hearing, without appreciating the facts, submission and evidences in their proper perspective, without providing copies of material used against the appellant and therefore same is liable to be annulled.

    6. The learned assessing officer erred in charging interest under section 234A, 234B, 234C and 234D of the Act.

    7. The appellant crave leave to add, amend, alter and/or vary any of the grounds of appeal before or at the time of hearing.

  3. At the outset learned counsel for the assessee submitted that the assessee did not wish to press ground No. 1, 2, 5 and 6 raised by the assessee in memo of appeal filed with the tribunal and prayed that the same may be dismissed as not being pressed. The learned counsel for the assessee submitted that he wish to restrict his arguments to ground No. 3 and 4 raised by the assessee in memo of appeal filed with tribunal. The ld. DR did not raised any objection to dismissal of ground No. 1, 2, 5 and 6. We have considered rival contentions and perused the material on record and we hereby order dismissal of ground No. 1, 2, 5 and 6 raised by the assessee in memo of appeal filed with the tribunal as not being pressed. The ground No. 7 raised by the assessee is also general and does not require separate adjudication by us and is hereby ordered to be dismissed as there are no specific arguments in this context raised by the assessee during course of hearing before us as well in written submissions before us. We order accordingly.

  4. Brief facts of the case are that the return of income declaring income of Rs. 6,28,330/- was filed by the assessee on 25th September, 2009 which was originally processed by Revenue u/s. 143(1) of 1961 Act. The assessment was re-opened by the AO u/s. 147 of 1961 Act by the issue of notice u/s. 148 of the Act on 25th March, 2014 which was duly served on the assessee. In response to notice u/s. 148 of 1961 Act, the assessee submitted that original return of income filed by the assessee on 25th September, 2009 u/s. 139(1) of 1961 Act may be treated as return filed in response to notice u/s. 148 of 1961 Act. Reasons recorded by the AO prior to issue of notice u/s. 148 of the Act were also provided by the AO to the assessee. The assessee filed objections for the reopening of the assessment vide letter dated 02.06.2014 which were disposed off by the A.O. vide letter dated 06.05.2014. The A.O. while disposing off objections to re-opening observed that as per records of the Sales tax department there were 28 parties from whom the assessee had made hawala transactions who were involved in bogus billing. It was observed by AO that these parties just issue bills for commission without actual supply of goods. In an sworn Affidavit Cum Declaration filed before Sales Tax Investigation Branch, Mumbai and in deposition before the Assistant Commissioner of Sales tax, Investigation Branch, Mumbai, the directors of the said 28 entities have admitted of issuing only invoices for sake of entry without delivery of goods, were the observation of the AO. The Directors of the said 28 entities stated in their sworn affidavit that they had only supplied bills on receipt of cheques and later on cash was withdrawn from banks and after deduction of agreed commission, balance money was returned in cash to the assessee. The A.O. observed that the statements of the hawala dealers were recorded under oath by the sales tax authority during survey action conducted in their premises and they have confessed to have issued bogus bills in lieu of fixed commission and the assessee company is one of the beneficiaries who has obtained bogus purchase bills amounting to Rs. 2,39,83,261/- during the previous year relevant to assessment year 2009-10 from these twenty eight bogus parties as detailed below:-

    The assessee was asked by the AO to furnish details of sale and purchases giving name, address and the amount etc.. The assessee filed the details and from the details, the A.O. observed that the details were exactly matching with the information available with the A.O. Notices u/s. 133(6) of the Act were issued by the AO to all the above 28 parties. All these notices except one notice were either returned un-served or were not replied to. Only one party namely M/s. Ranakpur Sales Corporation, categorically stated that they have not supplied any material to the assessee concern. The assessee was confronted with the same whereby the assessee was asked to produce the parties and also file the documents to substantiate the claim of purchase and stock register, particulars of the transporter, medium of transport, date of transport, transport voucher, octroi post records and payment particulars etc..

    The assessee submitted that an affidavit signed before the sales tax authorities cannot be relied upon. It was submitted that the Revenue has treated these parties as hawala operators because these dealers have not paid taxes collected to VAT department. These dealers were raided by VAT authorities and their dealership was cancelled. The assessee asked for cross examination of all these parties. It was submitted that the sales were not disputed by the Revenue and it was submitted that there cannot be sales without purchases. The assessee submitted that it had purchased material from all these parties and these parties are registered VAT certificate holders and registration certificate is issued after thorough verification of all the documents and proper visit by VAT officers. It was submitted that assessee is doing business genuinely and all its purchases were genuine and from the registered TIN holders which is supported with Tax invoice and challans. It was submitted that all the payments were made through cheque and deposited into their bank account. All the sale and purchase transactions were supported with tax invoices, delivery challans, lorry receipts and hence the assessee has discharged its burden. Statement of purchase and sales showing name of the supplier and customers, date of purchase and sales, quantity purchased and sold to show one to one co-relation between purchases and sales were submitted by the assessee before the AO. The assessee also submitted VAT audit report. It was submitted that sales are fully vouched and without purchases, there cannot be sales and hence all purchases are genuine. The stock register for full year and ledger copy of the suppliers were also submitted. It was submitted that no addition can be made on the basis of mere affidavit given by suppliers and it was submitted that it will be highly unfair to treat the entire purchases as bogus and add back the same as income u/s. 69C of 1961 Act. The assessee relied upon several case laws which are enumerated in page 10 & 11 of the assessment order. The assessee has also sought cross examination of the parties who have given statement against the assessee. The assessee was also issued a fresh show cause letter dated 19.09.2014, whereby the assessee was specifically asked to produce original bills and vouchers, all original documentary evidence of movement of goods for verification, details and documentary evidence of delivery challans, vehicle numbers, weighment slips, details of godowns, details of octroi payment etc.. However, the assessee did not produce the original documents before the A.O.. The assessee also did not file...

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