Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Rajesh Kumar & Shri Ram Lal Negi
O R D E R Per Rajesh Kumar, Accountant Member : The captioned appeals are by the Revenue against separate but identical orders of the CIT(A), which in turn arise out
Mangalam Drugs & Organics Ltd. of the assessment orders passed u/s. 143(3) r.w.s. 147 of the Income tax Act, 1961, for assessment years 2007-08, 2008-09, 2009-10 and 2010-11. The assessee has also raised cross-objections in all these years. Since identical issue is involved in the appeals and the cross-objections, we shall pass a consolidated order for the sake of convenience and brevity.
ITA 5273/Mum/2016 For A.Y. 2007-08
2. The Revenue has raised the following Grounds of appeal :-
“1. On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the statement recorded and relied has no independent evidential value, even when in fact there were recorded on oath under section 131(1) of the I.T.Act confronting various materials available."
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs.3,31,38,210/- on account of bogus purchase u/s.69C of the Act made by the Assessing Officer, stating that the addition based only on the statement recorded without finding any other tangible evidence during survey is not justifiable, without appreciating the facts brought on record during assessment proceedings by the Assessing Officer."
3. "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs.3,31,38,210/- on account of bogus purchase u/s.69C of the Act made by the Assessing Officer, stating that the addition based only on the statement recorded is not justifiable, and relying on Supreme Court decision in CIT Salem v/s. S. Khader Khan when the facts of the instant case are distinguishable since statement in assessee's case is recorded u/s.131 and not recorded u/s.!33(A) as in the case relied upon."
"On the facts and in the circumstances of the case and in law, the Ld.ClT(A) erred in ignoring the various admissions made u/s.131(1) during the course of survey specifically accepting specific transactions.""
The only issue raised by the Revenue in all the grounds of appeal is against the deletion of the addition of ` 3,31,38,210/- by the CIT(A) as made by the AO on account of bogus purchase u/s. 69C of the Act.
Mangalam Drugs & Organics Ltd.
3. The facts in brief are that the assessee filed its return of income for A.Y. 2007-08 on 29.10.2007 declaring income of ` 13,89,826/- under regular provisions of the Act and ` 66,32,682/- under the special provisions u/s. 115JB of the Act.
Thereafter, the case of the assessee was reopened by issuing notice u/s 148 of the Act on 31.03.2014 after recording reasons that income of the assessee has escaped assessment due to the fact that assessee has made bogus purchases from three parties viz. Chirag Trips Pvt Ltd., Sai Kripa Metalic Tradecom Ltd. and Shraddha Saburi Merchants Ltd. to the tune of ` 3,31,38,210/- The said information was received by the AO from Sales Tax Department, Government of Maharashtra and also from DGIT -Investigation Wing of Mumbai. A survey u/s. 133A of the Act was conducted on Mangalam Drugs & Organics Ltd. (assessee) on 27.08.2013 at three different places as mentioned in page 2 of the assessment order. Pertinent to mention that the assessee company is engaged in the business of manufacturing of chemicals such as Active Pharma Ingredients, intermediates and speciality chemicals. A survey action was carried out on the assessee in order to verify whether the assessee is engaged in procuring bogus purchase bills. The investigation wing of the Mumbai unit observed that assessee has obtained bogus bills from hawala parties to inflate its turnover with primary motive of enhancing its bank credit limits. It was also found that assessee has taken accommodating entries of bogus capital expenditure from hawala dealers in order to claim higher depreciation. During the course of survey, a statement was recorded of Shri Govardhan M Dhoot, Managing Director of the assessee company and Shri Ajay Samant, VP Finance, admitted that assessee has obtained bogus bills to the tune of ` 3,31,38,210/- in the current financial year. During the course of assessment
Mangalam Drugs & Organics Ltd. proceedings, assessee was called upon to prove the genuineness of its purchase by filing bills, vouchers and various other evidences, which were filed by the assessee.
However, the AO treated the purchase as non-genuine on the basis of evidence gathered during the course of survey proceedings and statement recorded during survey and added the entire purchase of ` 3,31,38,210/- as unexplained expenditure u/s. 69C of the Act.
4. In the appellate proceedings, the learned CIT(A) after considering the submissions and contentions as made by the assessee, partly allowed the appeal of the assessee. The learned CIT(A) dismissed the appeal on technical ground by upholding the reopening, however, the addition was deleted on merit by observing as under:
“7. DECISION
Ground No. 4 & 5 I have gone through the assessment order dated 30.03.2015, as well as various submissions and the entire paper book filed during the appellate proceedings, wherein the AO has added a sum of Rs. 3,31,38,2100/- u/s. 69C as unexplained expenditure alongwith return of income of Rs. 13,89,826/- and finally arrived at the total income of Rs. 3,45,28,040/- stating the reasons that the appellant company has obtained accommodation entries from three hawala parties M/. Shraddha Saburi Merchants Ltd., M/s. Sai Kripa Metalic Tradecom Ltd. and M/s. Chirag Srips Pvt. Ltd. to the extent of Rs. 3,31,38,210/-.
Sr. Name F.Y. 2006-07 No. 1. M/s. Chirag Trips Pvt. Ltd. 1,50,70,973/-
M/s. Sai Kripa Metalic 1,00,11,2807- Tradecom Ltd.
M/s. Shraddha Saburi 80,55,957/- Merchants Ltd. Total Amount 3,31,38,210/-
Mangalam Drugs & Organics Ltd.
Further the Assessing Officer highly relied on the statement recorded during the course of survey on .27.08.2013 and 28.08.2013 of Shri Govardhan M. Dhoot, Director, Mangalam Drugs & Organics Ltd.
Further the Assessing Officer has relied on the following judicial decisions:- i. Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala (197) 911 ITR 18(SC) ii. Dr. S C Gupta v. Commissioner of Income-tax (2001) 248 ITR 782 iii. HonTale Madras High Court in the case of T S Kumarswamy vs. ACIT
On the other hand, the AR of the appellant company has argued that there was a survey carried out u/s. 133A of the Income tax Act, 1961 in the Company's premises as under :
Sr. Address of the premises No. 292, Princess Street, 2nd floor, Near Flyover, 1 Marine Lines, Mumbai 400 002
2 Unit I, Plot No. 187, GIDC, Vapi, Gujarat 396195
3 Unit II Plot No. 1203, GIDC, Vapi, Gujarat 396195
On completion of the survey, statements were recorded from Shri Govardhan Dhoot and other employees regarding the modus operand! purchase of machinery etc. After the end of the survey, the Department has not brought out tangible evidence for, such alleged bogus purchase except the statements recorded at the time of survey from Govardhan Dhoot arid other employees and further the AR of the appellant relied on the following judicial decisions : a.CIT, Salem vs. S.Khader Khan Son, Appeal (Civil) Nos. 13224 of 2008 & 6747 of 2012 b. Mumbai ITAT in the case of Maruti Impex 2016(5) TMI 104) c. Global Stock 4DTR 172, Mumbai d. Mumbai Bench K G Sharma 133 ITD 112 e. Apex curt in the case of K R Verghis 131 ITR 597 f. Lalchand Bhagat 37 ITR 288 (SC)
Mangalam Drugs & Organics Ltd. g. Shiva Kami Co. 159 ITR 71 where their lordship disapproved the system of making additions in the assessment on mere suspicision and surmises.
I have gone through the CIT Selam vs. S Khader Khan Son judicial decision wherein the Hon'ble Supreme Court has given the following findings :
"Section 133A of the Income tax Act, 1961 - Survey - Whether section 133A does not empower any JTO to examine any person on oath; so statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition - Held, yes (in favour of assessee)”
The main allegation of the Assessing Officer is that the appellant company obtained bogus entries with regard to the purchase on account of Repair and Maintenance through hawala parties. Survey was carried out at the office premises at Marine Lines, Mumbai and also factory premises at Vapi in Gujarat Unit I & II. I have also gone through survey report dtd. 26.03.2014 wherein also the main focus is on the sworn statement recorded from Shri Govardhan Dhoot for making the addition of Rs. 3,31,38,210/- whereas no other adverse remark given by DDIT(Inv.) Unit 1(3), Mumbai and also no other incriminating materials/tangible evidence found at the time of survey proceedings.
Considering all the facts of the record, survey report dtd. 26.03.2016 of DDIT(Inv) and also respectfully following the Hon'ble Supreme Court in the case of CIT, Salem vs. S Khader Khans Sons, I am of the considered opinion that the addition of Rs. 3,31,38,210/- based on the statement recorded from Shri Govardhan Dhoot alone is not justifiable one and accordingly I direct the Assessing Officer to delete the addition of Rs. 3,31,38,210/-. Hence this ground of appeal is allowed.
5. The learned DR submitted before the Bench that the order passed by learned CIT(A) deleting the addition on merit is wrong as the learned CIT(A) has ignored all the evidences on record. He further submitted that the case of the assessee was reopened after specific information received qua the fact that the assessee is engaged in obtaining entries of bogus bills from hawala parties to suppress its profits. The fact was corroborated during the course of survey conducted on the assessee at three places and also reinforced by the statement of Shri Govardhan M
Mangalam Drugs & Organics Ltd.
Dhoot , MD, recorded during the course of survey, who clearly admitted to have made bogus entries to the effect of ` 3,31,38,210/-. Moreover, during the re- assessment proceedings u/s. 147, the assessee could not prove the genuineness of these purchases and, therefore, the bogus purchases were added to the income of the assessee by the AO. However, the CIT(A) by relying on the decision of CIT vs. S Khader Khan & Sons (supra), held that addition cannot be sustained merely on the basis of statement recorded during the course of survey when the AO has failed to bring on record any tangible material to support the admission in the statement that assessee is engaged in procuring bogus bills from hawala parties. The learned DR, therefore contended that the order of the CIT(A) may be reversed and that of the AO be restored.
The learned AR, on the other hand, relied on the order of the CIT(A) and submitted that the addition was made only on the basis of statement recorded during the course of survey and such statement was not corroborated or backed with any evidence or materials whatsoever by the AO during the course of assessment proceedings. The learned AR submitted that addition purely on the basis of the statement recorded during survey u/s. 133A of the Act cannot be a basis for making addition unless there is incriminating material found during the course of survey or brought by the AO during the assessment proceedings. He therefore prayed that the order of the CIT(A) is very reasoned order and passed on the basis of CIT v. S Khader Khan Son (supra) and, therefore, the order of CIT(A) may be upheld by dismissing the appeal of the Revenue.
Mangalam Drugs & Organics Ltd.
We have heard the rival submissions and perused the record including the decisions cited by the parties. We observed that in this case survey was conducted on the three business premises of the assessee in order to verify whether the assessee was engaged in procuring bogus hawala purchases from certain parties, as mentioned at page 2 of the assessment order. The case of the assessee was re- opened after receiving information from Sales Tax Authorities, Government of Maharashtra and DDIT - Investigation Wing, Mumbai, the assessee is a beneficiary of hawala transactions to the tune of ` 3,31,38,210/-. We find from the perusal of the assessment order that AO has not brought any material on record to corroborate the fact that assessee has procured bogus purchase bills from hawala parties and AO has merely relied on the statement of Shri Govardhan M Dhoot, Director of the assessee company that it has procured bogus purchases bills to the above extent. In our opinion, the case of the assessee is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT v. S Khader Khan Son (supra), wherein it has been held that no addition can be made on the basis of mere statement recorded during the course of survey unless there is corroborative material brought on record by the AO. Under these circumstances, we are fully in agreement with the conclusion drawn by the CIT(A) that addition cannot be sustained on the basis of statement of Directors recorded during the course of survey. Accordingly, the order of the CIT(A) is upheld and appeal is dismissed.
The Cross objection in CO No.41/Mum/2018 for A.Y. 2007-08, the assessee has challenged the re-opening of assessment on the ground that the case of the assessee has been invalidly re-opened.
Mangalam Drugs & Organics Ltd.
We have heard the rival parties and perused the material on record. We find that in this case the information received by the AO from Sales Tax Department, Government of Maharashtra and also from DDIT- Investigation Wing, Mumbai, was specific that assessee has been beneficiary of bogus purchase entries from three different parties and only thereafter the case of the assessee was re-opened u/s. 147 r.w.s. 148 of the Act, after following due procedure of law. In our opinion, we do not find any infirmity in the re-opening of assessment and, accordingly, we are inclined to dismiss the Cross-objection of the assessee.
Facts and circumstances of the cases are identical for all the assessment years under appeal. Therefore, our finding in the appeal and cross-objection for A.Y 2007-08 in the earlier paras shall apply, mutatis mutandis, in the A.Ys. 2008-09, 2009-10 and 2010-11 also.
In the result, the appeals as well as the cross-objections are dismissed. Order pronounced in the open court on this day of 16th May, 2019.