Itxa/1418/2017 Of Pr. Commissioner Of Income-Tax-5 v. Allied Blenders And Distillers Pvt. Ltd

GAURIAMITGAEKWAD Date:2021.11.2712:03:37+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1404 OF 2017 WITH INCOME TAX APPEAL NO.1418 OF 2017 Pr. Commissioner of Income Tax – 5 ….Appellant V/s. Allied Blenders and Distillers Pvt. Ltd. ….Respondent ---- Mr. N.C. Mohanty for appellant. Ms. Nikita Abhyankar i/b. Roy’s Law Firm for respondent. ---- CORAM : K.R. SHRIRAM & AMIT B. BORKAR, JJ. DATED : 22[nd] NOVEMBER 2021 P.C. : INCOME TAX APPEAL NO.1418 OF 2017 1 This is an appeal in which appellant proposes the following three substantial questions of law : 6.1 Whether on the facts and circumstances of the case andin law, the Hon’ble ITAT was justified in deleting the additionof Rs.4,92,43,370/- made on account of bogus purchases onthe basis of self serving documents produced by the assesseewithout appreciating the fact that these alleged supplierswere non-existent at the addresses, not engaged in genuinebusiness activities suppliers were declared as hawala dealersby the Maharashtra Sales-tax Department on the basis of onthe spot enquiries conducted and statements recorded onvarious parties? 6.2 Whether on the facts and circumstances of the case andin law, the Hon’ble ITAT was justified in deleting the additionof Rs.4,92,43,370/- made on account of bogus purchasesmerely stating that payments were made through bankingchannel and without appreciating the fact that payment byaccount payee cheque itself is not sufficient to establish thegenuineness of the alleged purchases? 6.3 Whether on the facts and circumstances of the case andin law, the Hon’ble ITAT was justified in deleting the additionof Rs.4,92,43,370/- made on account of disallowance of non-genuine purchases without appreciating the fact that the assessee failed to establish the physical delivery of goodsfrom the alleged purchase parties? 2Respondent was engaged in the business of manufacturing andselling Indian made Foreign liquor. The return of income was filed on27[th] September 2010 declaring a total income of Rs.8,39,89,526/-.Subsequently, the case was selected for scrutiny under Section 143 (3) ofthe Income Tax Act, 1961 (the said Act) and on 28[th] March 2013, an ordercame to be passed determining the total income of respondent atRs.14,20,47,620/- by making various additions/disallowances to the totalincome. Among the various additions/disallowances made to the totalincome, an addition on account of bogus purchase was made to the tune ofRs.4,92,43,370/-. Aggrieved by this order, respondent preferred an appealbefore the Commissioner of Income Tax (Appeals) [CIT(A)]. The appeal wasonly partly allowed because the addition by the Assessing Officer on accountof alleged bogus purchases was confirmed by the CIT(A). Respondentimpugned this order of CIT(A) before the Income Tax Appellate Tribunal(ITAT). To the extent CIT(A) had allowed the appeal, Revenue preferred anappeal before ITAT. ITAT dismissed Revenue’s appeal and allowedrespondent’s appeal. The ITAT relied on a judgment of the co-ordinate benchof the ITAT in the case of M/s. MPIL Steel Structure Limited V/s. DCIT (ITANo.6602/Mum/2014) for Assessment Year 2011-2012, wherein similar issuewas involved and deleted the addition towards bogus purchases. Unhappy with the conclusions of the ITAT, this appeal has been preferred. with the conclusions of the ITAT, this appeal has been preferred. 3We are inclined to agree with the opinion of the ITAT. In makingthe addition, the Assessing Officer has primarily relied upon someinformation received from the office of the Director General of Income Tax(Investigation), Mumbai regarding bogus purchases. The Assessing Officerhas also relied upon a notification issued by the Sales Tax Departmentdeclaring certain persons as hawala dealers. It is alleged that from thepurchase details submitted by respondent, it is found that during the yearunder consideration, respondent made purchases amounting toRs.4,92,43,370/- from the bogus dealers who had issued false bills withoutdelivery of goods. The bogus purchases made by respondent are mentionedto be from RCL Trading Pvt. Ltd. in the sum of Rs.29,83,250/-, KotsonsImpex Pvt. Ltd. in the sum of Rs.2,79,74,170/-, Hermitage Trading Co. Pvt.Ltd. in the sum of Rs.1,82,85,950/-. According to the Assessing Officer, fromthe records of the Sales Tax Department, these three parties were involvedin bogus billing. They just issued bills for commission without actual supplyof goods and the Director of the said parties (not even his name ismentioned in the Assessing Officer’s order or the date of the affidavit ismentioned) in a sworn notarised affidavit cum declaration filed before theSales Tax Investigation Branch, Mumbai and in deposition before theAssistant Commissioner of Sales Tax (I-27), Investigation Branch, Mumbai,the Director has admitted issuing only invoices/bills without delivery of goods. In the assessment order, it is also stated that the said hawala billprovider has categorically admitted during deposition before the sales taxauthorities that these bills are provided just for the sake of entry and as suchno materials were supplied by them and that they had only supplied bills onreceipt of cheques and later on cash withdrawn from the banks and afterdeduction of agreed commission balance money was returned in cash. TheAssessing Officer says his statement is available on website and same istreated as an evidence to justify the issue involved in the case. It is alsostated by the Assessing Officer that the notice issued to these three partiesunder Section 133 (6) of the Act remained unserved because they are notavailable/traceable. It is also stated that by an office order sheet notingdated 19[th] March 2013, respondent was requested to produce the saidparties before officer for verification but respondent did not produce them. 4 It is respondent’s case that they purchased various gift articlefor promoting sales and respondent also filed copies of photographs takenduring promotional activity, stock register stating the various gift itempurchased from various parties, delivery challans and also confirmationfrom few wine shops about description of goods and quantity of goodsdistributed. The ITAT has on facts came to a conclusion that respondent hasfiled before the Assessing Officer complete books of accounts, items wisestock register evidencing the receipts of gift materials and issue thereof. ITAT has also accepted the photographs of the functions and promotionalactivities and confirmations from the shop keepers. What really tilted theopinion of ITAT in favour of respondent is that respondent had producedcopies of bank statements of Punjab National Bank and Axis Bankevidencing the payments through banking channels by account payeecheques to the suppliers. There is nothing in the order of the AssessingOfficer that the Assessing Officer has looked into or considered this factdispassionately. The ITAT, therefore, came to a conclusion that respondenthas discharged its onus by producing the books of accounts, stock register,stock tally and also filed various documentary evidences such as statementsof banks. According to ITAT, once respondent has discharged this burden,the onus shifts to the Revenue and the Assessing Officer has not conductedany independent inquiry or further verification of the records producedbefore him. We have to note that this view of ITAT has not even beenchallenged and no substantial question of law has been proposed.5On the Assessing Officer’s conclusions, we also observed thatadmittedly the three parties are private limited companies. The AssessingOfficer does not mention anywhere to which address the notice underSection 133 (6) of the Act was sent because being a company, certainly therecords in the office of the Ministry of Corporate Affairs or the Registrar ofCompanies will indicate the address of the registered office of these threeentities. The Assessing Officer only says the notices remained unserved because companies are not available/traceable. That is neither here northere because the Assessing Officer should have stated why the notices werenot served - Was it because of any endorsement by the postal authoritiesthat there was no such company in existence at the address mentioned orintimation posted but not collected or refused. Another point we have tonote is that the Director of these three companies, on whose notarisedaffidavit cum declaration the Assessing Officer was relying upon, was noteven made available for cross examination. 6In our view, the Tribunal has not committed any perversity orapplied incorrect principles to the given facts and when the facts andcircumstances are properly analysed and correct test is applied to decide theissue at hand, then, we do not think that question as pressed raises anysubstantial question of law. 7The appeal is devoid of merits and it is dismissed with no orderas to costs. INCOME TAX APPEAL NO.1404 OF 2017 8 8The facts in this case are almost identical to the facts asmentioned in Income Tax Appeal No.1418 of 2017 except to the extent thatthe Assessing Officer has recorded that the concerned Inspector wasdeputed to serve the notice under Section 133 (6) of the Act on two partiesinstead of three at their given address but in the said report of the Inspector dated 26[th] February 2014, it is noted that the address of one party wasfound locked and the other party was not traceable, the address was notcorrect and the said party was not operating from the said premises. Itwould still not help the case of the Revenue because it it not clear from theAssessing Officer whether the two addresses were the registered officeaddress and on what day of the week the Inspector went to serve andwhether it was a holiday or a working day and just because the officepremises was locked or a party was not available at the time the Inspectorvisited the particular address does not mean those parties were not carryingon business or non existent or bogus parties. We say this because even inthis case, payments have been made by cheques to these parties and theAssessing Officer could have called upon the banks to provide details of thepayees to whose account the amounts have been credited. 9This appeal also accordingly stands dismissed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)