The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that genuineness of purchase cannot be suspected merely because the seller is not traceable.
The aforesaid observation was made by the Tribunal when an appeal was preferred before it by the Revenue as against the order of the Commissioner of Income Tax (Appeals)-3, Mumbai, dated 15/11/2018, passed under section 250 of the Income Tax Act, 1961, pertaining to assessment year 2009-10.
The brief facts being that the assessee M/s CMI FPE Ltd. , was engaged in manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants and pickling lines for ferrous and non-ferrous industries worldwide, it had filed its return of income on 30/09/2009 declaring total income at Rs.45,37,83,890/- under the normal provisions of the Act and had computed profit of Rs.17,68,56,100/- under the provisions of section 115JB of the Act.
The case of the assesse being selected for scrutiny and the assessment order dated 16/12/2012 determining total income at Rs.46,64,49,540, being passed, the assessee’s case was subsequently reopened under section 147 of the Income Tax Act vide notice under section 148 issued on 28/03/2014.
Further an Assessment order under section 143(3) read with section 147 of the Income Tax Act dated 30/03/2015 was also passed determining total income at Rs.46,96,13,080/- wherein a disallowance of Rs.35,50,000/- was made pertaining to payments made to V3 Enterprises for purchase of M.S. plates.
And being aggrieved by the same, the assessee was in appeal before the CIT(A) on the ground of reopening the assessment and on the additions made by the Assessing Officer, wherein the CIT(A) had dismissed the ground of appeal pertaining to reopening of the assessment, on the basis that the reopening was made on the basis of information received from Investigation Wing and that the Assessing Officer had reopened the said assessment by duly following the process of law.
However, on the ground of addition made by the Assessing Officer, the CIT(A) deleted the said addition on the pretext that the assessee is not at fault when the seller is not traceable or is involved in dubious acts by relying upon the decision of Hon’ble jurisdictional High Court in the case of CIT vs Nikunj Eximp Enterprises (P) Ltd., and it is being aggrieved by the same that the Revenue has preferred the instant appeal before the Tribunal.
The solitary ground involved in the Revenue’s appeal being that the CIT(A) has erred in deleting the disallowance made by the Assessing Officer, of purchases the assessee from V3 Enterprises, the Tribunal consisting of Prashant Maharshi, the Accountant Member and Kavitha Rajagopal, the JudiciaL Member, observed:
“We are of the considered opinion that the assessee had purchased M.S. plates from various dealers out of which M/s V3 Enterprises was alleged to be an accommodation entry provider. It is evident from the record that the assessee has furnished the details of the suppliers along with their addresses and the price quoted for the materials purchased.” “The only contention of the department is that the alleged dealer’s name appeared in the website of sales tax department, Government of Maharashtra to be a non- genuine dealer. And apart from this, the Assessing Officer has not shown any corroborative evidences to prove that the said transaction is only a bogus transaction for the purpose of providing accommodation entry”, the Tribunal added.
“The assessee, on the other hand, has proved the genuineness by furnishing the details of cheque, the bank account number, the invoices, delivery challans and other details evidencing the purchase of M.S. plates to the tune of Rs.35,78,377/, and has also relied on the decision of DCIT vs Adinath Industries , wherein it was held that the assessee cannot be penalised for the action of supplier and that the assessee cannot be expected to know the commercial rationale on how this supplier operates its bank account which was considered by the Ld.CIT(A). Further, the Ld.CIT(A) has also relied on the decision of the jurisdictional High Court in the case of CIT vs Nikunj Eximp Enterprises (P) Ltd., on the ground that the assessee cannot be faulted if the seller is not traceable and also that it is not the burden of the assessee to investigate the genuineness of the seller or their business transaction”, the Bench further noted.
Thus dismissing the Revenue’s appeal, the Tribunal held:
“Respectfully following the above judicial precedent, we hold that there is no infirmity in the order of Ld.CIT(A). And hence the grounds of appeal filed by the Revenue are dismissed”.
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