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Income Tax Appellate Tribunal, “D”, BENCH
Before: SHRI SANDEEP GOSAIN, JM & SHRI M.BALAGANESH, AM
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y. 2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Mumbai in appeal No.90-THN/2015-16 dated 14/09/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 24/03/2015 by the ld. Income Tax Officer, Ward – 3, Palghar (hereinafter referred to as ld. AO). 2. The assessee has raised the following grounds of appeal:-
M/s. Ramdev Chemicals P. Ltd., 1] The Hon'ble C.I.T (A) erred in confirming the action of the Lr. A.O. in estimating 22.83% as profit embedded in impugned purchases of Rs. 14,86,922.00 from three parties. 2] Your Appellant prays before your Honours that the purchases made from those three parties are genuine purchases as substantiated by the documentary evidence filed before the Hon'ble C.I.T (A) who appears to have overlooked and hence the additions be deleted. 3] Your appellant craves leave to add, alter, modify, or delete the above grounds of Appeal
. 2.1. The assessee has also raised and the following additional grounds on the validity of reopening of assessment for the A.Y. 2009-10:- “1. In respect with the captioned appeal, we state and submit as under:
2. It is submitted that the above appeal has been filed by the appellant against the order of the Ld. CIT(A) dated 14.09.2017 dismissing the appeal of the appellant and confirming the order of Ld. Assessing Officer with respect to disallowance of alleged bogus purchases.
3. As against the aforesaid order, the appellant has taken various grounds of appeal challenging the action of the Ld. CIT(A) in dismissing the appeal. However, the appellant has not taken the ground challenging the jurisdiction of the Assessing Officer in reopening of the assessment and passing the order u/s. 143 (3) r.w.s. 147 of the Act before Your Honour.
4. The above aspect has been left to be raised before Your Honour at the time of filing the appeal due to an inadvertent error. The appellant is therefore filing herewith the additional ground of appeal with respect to the aforesaid issue.
5. It is submitted that vide the enclosed additional ground, the appellant has raised issue, which goes to the root of the matter. It is further submitted that for adjudication of the said additional ground, all the facts are available on the record.
6. Accordingly, it is humbly prayed that the enclosed additional ground may kindly be admitted and adjudicated upon by Your Honours. It is a settled position in law that the Hon'ble Tribunal has powers to consider a claim of the appellant emanating from the assessment proceedings, although not raised earlier. In this regard, the appellant relies upon the following landmark decisions of the Hon'ble Courts. i. National Thermal Power Corporation v. CIT [229 ITR 383 (SC)] ii.Jute Corporation of India Ltd. V. CIT [187 ITR 688 (SC)] iii. Ahmedabad Electricity Co. Ltd. V. CIT [199 ITR 351 (Bom) (FB)] iv. CIT v. Pruthvi Brokers & Shareholders [349 ITR 336 (Bom)] M/s. Ramdev Chemicals P. Ltd.,
7. In view of the above, it is most humbly submitted that the enclosed additional ground may kindly be admitted and adjudicated upon by Your Honour.”
2.2. This additional ground was raised together with a petition framed for admission of additional grounds of appeal explaining the reasons thereon that it goes to the root of the matter and does not require fresh investigation of facts. 2.3. We have heard rival submissions. We find that the additional ground raised by the assessee deserves to be admitted as it goes to the root of the matter and involves substantial question of law. We find that this legal ground of validity of reopening was not raised by the assessee before the ld. CIT(A) and therefore, the ld. CIT(A) did not have an occasion to adjudicate the same in his appellate order. When this was pointed out to the ld. AR by the Bench by stating that this issue requires to be sent back to the ld. CIT(A) for his adjudication, the ld. AR stated that he has got a very good case on merits and accordingly, if the issue is adjudicated on merits by treating the purchases made from M/s. Chemi Age Enterprises as genuine purchase and by reasonable estimation of profits in respect of purchases made from other two parties, he would be happy and would not be pressing additional ground on the validity of reopening of the assessment. In this scenario, it would be relevant for us to address the original grounds of appeal first on merits. 2.4. The only issue on merits to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the action of the ld. AO in estimating 22.83% as profit embedded in total purchases of Rs.14,86,922/- made from three parties in the facts and circumstances of the case.
3. Brief facts of this issue are that the ld. AO received information from Sales Tax department wherein it was mentioned that the assessee had obtained bogus purchase bills from the following three parties:-
M/s. Ramdev Chemicals P. Ltd., Sr. No. Name Amount(Rs.) 1. M/s. Chemi Age 61,30,150/- Enterprises 2. M/s. Sumukh Corporation 32,723/- 3. M/s. International Trade 3,50,147/- Agency Total 65,13,020/- 3.1. The assessee is a private limited company engaged in the business of manufacture of bulk drugs, fine chemicals, Intermediates etc. The return of income for the A.Y.2009-10 was filed by the assessee company on 29/09/2009 declaring total income of Rs.8,32,10,070/-. The assessment was originally completed u/s.143(1) of the Act. Later, the assessment was sought to be reopened by issuance of notice u/s.148 of the Act based on the information obtained from Sales Tax Department that certain charges were involved in supplying bogus bills to various persons through the assistance of various entry operators and that assessee was found to be one such person to whom the said bills were supplied. Notice u/s.148 of the Act dated 23/05/2013 was issued to the assessee and assessee in response to that submitted on 04/06/2013 that the original return filed u/s.139(1) of the Act may be treated as return in response to notice u/s.148 of the Act. 3.2. The ld. AO sought to verify the veracity of the purchases made from aforesaid three parties by the assessee by issuing notice u/s.133(6)
M/s. Ramdev Chemicals P. Ltd., of the Act. The status of such notices u/s.133(6) that were sent are tabulated as under:- Sr. Name Amount 133(6) Gist of reply Remarks No whether served or not 1 Sumukh 32723" Not applicable No acknowledge Corporation of service nor return unserved. 3,50,147 2. International Not Not applicable Return unserved Trade Agency served "Not known" 3. Chemi-Age 61,30,150 Not applicable No acknowledge Enterprises of service nor return unserved.
3.3. The ld. AO confronted the assessee regarding non-compliance / non-service of notice u/s.133(6) as stated above and requested assessee to produce the concerned authorities before him for further examination with supporting evidences to establish the genuineness of the purchase. The assessee was also requested to produce copy of invoices, delivery challans, payment details alongwith supporting evidences in respect of above charges. The assessee furnished the following details before the ld. AO.
List of all partywise purchases 2. Copy of Sales Tax returns 3. Ledger print out of all the above three parties with their respective copies of invoices and delivery challans M/s. Ramdev Chemicals P. Ltd., 4. Bank statements highlighting payments made to them by account payee cheque. 3.4. With regard to purchases made by the assessee from M/s. Chemi Age Enterprises, the assessee also produced details of purchases made by M/s. Chemi Age Enterprises from M/s. Speciality chemicals and M/s. Chemoxcil Corporation and subsequent supply to the assessee herein to the tune of Rs.61,30,150/- before the ld. AO. In other words, the source of source of purchases made by M/s. Chemi Age Enterprises was also furnished by the assessee before the ld. AO. The assessee also filed a letter from M/s. Chemi Age Enterprises dated 07/12/2013 confirming the genuineness of the entire transactions made by them with the assessee. Later as per direction of the ld. AO, an affidavit executed on 21/01/2014 was also furnished from M/s. Chemi Age Enterprises confirming the genuineness of transactions with the assessee to the tune of Rs.61,30,150/-. 3.5. The assessee stated that the other two parties are not traceable and hence, no additional documents in the form of affidavit could be filed from them before the ld. AO and accordingly, requested ld. AO to tax the profit element embedded thereon by adopting the rate at 12.5% of the value of the transactions. 3.6. Ld. AO observed that assessee was able to obtain confirmation and affidavit from M/s. Chemi Age Enterprises and could not produce the said party before him. The ld. AO also observed that assessee had shown the M/s. Ramdev Chemicals P. Ltd., gross profit of Rs.9,80,11,806/- against sales of Rs.42,93,97,670/- which comes to 22.83% of gross profit from its business activities. Accordingly, the ld. AO applied the very same GP rate at 22.83% on the total value of purchases made from the aforesaid three parties in the sum of Rs.65,13,020/- and made an addition of Rs.14,86,922/- in the assessment which was upheld by the ld. CIT(A).
Aggrieved, the assessee is in appeal before us.
We have heard rival submissions. At the outset, from the facts narrated hereinabove and in the light of various factual evidences, supporting documents, confirmation and affidavit confirming the transactions filed by M/s. Chemi Age Enterprises, which remain uncontroverted by the revenue and on which no adverse findings were recorded by the ld. AO or by the ld. CIT(A), the claim of the assessee deserves to be accepted as assessee had given complete evidences for movement of goods from M/s. Chemi Age Enterprises to the assessee. The assessee has also gone a step ahead in providing evidences in respect of source of source of purchases made by M/s. Chemi Age Enterprises from two other outside parties. Without disputing these facts, drawing adverse inference on the assessee merely on the ground that the said party was not produced by the assessee before the ld. AO for examination, in our considered opinion, could not be sustained in the eyes of law. Nothing prevented the ld. AO, being a Quasi Judicial Authority, and being vested for unfettered powers provided in the Act for M/s. Ramdev Chemicals P. Ltd., the purpose of independent examination of the said party either by issuing summon u/s.131 of the Act or by making examination through the Assessing Officer of the said party to understand the transactions carried out by the assessee. In these peculiar facts and circumstances, we hold that the purchases made by the assessee from M/s. Chemi Age Enterprises deserves to be accepted as genuine purchases and accordingly, we direct the ld. AO to delete 22.83% of Rs.61,30,150/- straightaway. 5.1. With regard to purchases made from other two parties, we hold that this Tribunal in a series of decisions have been constantly holding that adoption of profit at 12.5% on the value of such purchase would meet the ends of justice. Respectfully following the various decisions of this Tribunal, we direct the ld. AO to adopt 12.5% of value and purchases of Rs.32,723/- and Rs.3,50,147/- from M/s. Sumukh Corporation and M/s. International Trade Agency respectively. Accordingly, the original grounds raised by the assessee are partly allowed. In view of our aforesaid adjudication of the original grounds of appeal raised by the assessee and in view of the concession given by the ld. AR before us as stated in the early part of this order hereinabove, we are inclined to dismiss the additional ground raised by the assessee on the validity of reopening of assessment. Accordingly, the additional ground raised by the assessee is dismissed and the original grounds raised by the assessee are partly allowed.
M/s. Ramdev Chemicals P. Ltd.,