RAJKUMAR AGARWAL, MUMBAI V. ITO 25(3)3, MUMBAI

CO 225/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0590 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 04-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: R S SHARMA
• Keywords: Unexplained expenditure; Accommodation entries
• Section: 69C; 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , . / I.T.A. NO . 5233 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 10 - 11 ) INCOME TAX OFFICER, WARD 25(3)(3), ROOM NO.304, 3 RD FLOOR, BLD. NO.C - 11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E ) , MUMBAI - 400051 / VS. SHRI RAJKUMAR AGARWAL, 70 7/708, SHIV A LIK TOWER CHS LTD., 90 FEET ROAD, KANDIVALI (E), MUMBAI - 400101 ( / APPELLANT ) .. ( / RESPONDENT ) CROSS - OBJECTION NO.225/MUM/2014 IN ./ I.T.A. NO .5233 /MUM/20 13 ( / ASSESSMENT YEAR : 20 10 - 11 ) SHR I RAJKUMAR AGARWAL, 707/708, SHIVALIK TOWER CHS LTD., 90 FEET ROAD, KANDIVALI (E), MUMBAI - 400101 / VS. INCOME TAX OFFICER, WARD 25(3)(3), ROOM NO.304, 3 RD FLOOR, BLD. NO.C - 11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 40 0051 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAAPA5702F / REVENUE BY SHRI LOVE KUMAR / ASSESSEE BY SHRI R S SHARMA / DATE OF HEARING : 12 .3. 2015 / DATE OF PRONOUNCEMENT : 10. 4 . 2015 ITA. NO . 5233 / M UM/ 20 1 3 & CO 225/M/14 2 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE AND CROSS - OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATE D 7.5.2013 PASSED BY THE LD. CIT(A) - 35, M UMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2010 - 11. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD.CIT(A) IN DELETING THE FOLLOWING ADDITIONS: A) UNEXPLAINED EXPENDITURE RELATING TO PURCHASES OF RS.63,87,826/ - AND B) ADHOC ADDITION FROM OUT OF PURCHASES - RS.4,72,034/ - . 3. THE ASSESSEE FILED THE CROSS - OBJECTION ONLY TO SUPPORT THE ORDER PASSED BY THE LD.CIT(A). 4. THE FACTS RELAT ING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY OF SAND TO VARIOUS BUILDERS. THE FIRST ISSUE RELATES TO THE ADDITION MADE OUT OF PURCHASE EXPENDITURE U/S 69C OF THE ACT TREATING PART OF PURCHASE EXPENDITURE AS UNEXPLAINED EXPENDITURE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH THE LIST OF PERSONS FROM WHOM THE SAND WAS PURCHASE D . THE AO NOTICED THAT THE ASSESSEE HAS PURCHASED SAND FROM CERTAIN PERSONS WHO WERE LISTED BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAH ARASHTRA AS SUSPICIOUS DEALERS , WHO INDULGED IN ISSUING BOGUS BILLS WITHOUT SUPPLYING GOODS. THE AGGREGAT E AMOUNT OF PURCHASES MADE BY THE ASSESSEE FROM THE PARTIES LISTED OUT BY TH E SALES TAX DEPARTMENT OF G OVERNMENT OF M AHARASHTRA WAS RS.63,87,826/ - . ACC ORDINGLY, THE AO PROPOSED TO ASSESS THE ABOVE SAID AMOUNT AS UNEXPLAINED EXPENDITURE U/S 69C OF THE INCOME TAX ACT, 1961 (THE ACT). THE ASSESSEE SUBMITTED THAT HE HAS MADE PAYMENT TO THE ABOVE SAID PARTIES BY WAY OF ACCOUNT PAYEE CHEQUES AND HAS ALSO REC EIVED THE GOODS ITA. NO . 5233 / M UM/ 20 1 3 & CO 225/M/14 3 FROM THEM. ACCORDINGLY, THE ASSESS E E PLEADED THAT THE DISALLOWANCE SHOULD NOT BE MADE. HOWEVER , THE AO BY PLACING STRONG RELIANCE ON THE REPORT OF THE SALES TAX DEPARTMENT TREATED THE SAID AMOUNT AS UNEXPLAINED EXPENDITURE WITH THE FOLLOW ING OBSERVATIONS: THE PURCHASES OF THE ASSESSEE ARE NOT THE ISSUE HERE AND THESE ALLEGED PURCHASES ARE NOT BEING TREATED AS BOGUS. THE SALES TAX DEPARTMENT HAS COME DOWN HARD ON THE PERNICIOUS PRACTICES INDULGED IN BY THESE UNSCRUPULOUS TRADERS FIGURI NG IN THE LIST OF SUSPICIOUS DEALERS AND IT IS EVIDENT THAT THE ASSESSEE HAS NOT PURCHASED THE GOODS FROM THESE ALLEGED SUPPLIERS . IT IS EQUALLY TRUE THAT THE GOODS HAVE SOMEHOW ENTERED IN THE ASSESSEE REGULAR BUSINESS. THE ASSESSEE HAS BEEN UNABLE TO GIV E ANY CONVINCING OR COGENT EXPLANATION AS TO HOW THESE GOODS HAPPENED TO COME IN HIS POSSESSION. THE ASSESSEE HAS THUS, INCURRED EXPENDITURE ON SUCH PURCHASE S WHICH IS NOT EXPLAINED. THE PURCHASE S A R E NOT BEING TREATED AS BOGUS OR SHAM RATHER THE EXPENDIT URE INCURRED ON SUCH PURCHASES IS TREATED AS UNEXPLAINED. 4.5 IN VIE W OF THE ABOVE FACTS AND FINDINGS IN THE PARA GR APHS MENTIONED ABOVE, THE AGGREGATE OF THE PURCHASE S DETAILED IN PARA NO.4.4 ABOVE, TOTALING RS.63,87,826/ - IS TREATED AS UNEXPLAINED EXPEND ITURE U/S 69C AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 274 R.W. 271 (1)(C) ARE SEPARATELY INITIATED FOR CONCEALING PARTICULARS OF INCOME 5. THE LD . CIT(A) NOTICED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT OF PUR CHASE OF GOODS AND FURTHER THEY HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT. HE FURTHER NOTICED THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ONLY FOR THE REASON THAT THE NAME OF THE SUPPLIERS FINDS PLACE IN THE LIST OF SUSPICIOUS DEALERS RELEASED BY THE SALES TAX DEPARTMENT, I.E., THE AO HAS FAILED TO CONDUCT ANY FURTHER INVESTIGATION OR EXAMINATION IN ORDER TO DISPROVE THE CLAIM OF PURCHASE OF SAND FROM THE SAID DEALERS. THE LD CIT(A) FURTHER NOTICED THE ASSESSEE HAS MADE THE PAYMENTS AG AINST THE PURCHASES BY WAY OF ACCOUNT PAYEE CHEQUES. ACCORDINGLY, THE LD CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS NOT DISCHARGED THE ONUS OF DISPROVING THE EVIDENCES FURNISHED ITA. NO . 5233 / M UM/ 20 1 3 & CO 225/M/14 4 BY THE ASSESSEE IN SUPPORT OF THE PURCHASES. ACCORDINGLY H E DELETED THE ADDITION OF RS.63,87,826/ - MADE BY THE ASSESSING OFFICER. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THIS BENCH OF TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF DEEPAK POPATLAL GALA , IN ITA NO . 5920/M/13 AND TRIBUNAL, VIDE ITS ORDER DATED 27.3.2015 , HAS HELD AS UNDER: - 10. THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OUT OF PURCHASES AND ASSESSED U/S 69C OF THE ACT. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE TOTAL PURCHASE EXPENDITURE CL AIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS.7,36,27,555 / - . THE AO NOTICED THAT THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA HAS LISTED OUT NAMES OF CERTAIN DEALERS , WHO WERE ALLEGED TO HAVE BEEN PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ACTUAL BUSINESS. THE AO NOTICED THAT THE ASSESSEE MADE PURCHASE S TO THE TUNE OF RS.38.69 LAKHS FROM TWO PARTIES NAMED M/S UMIYA SALES AGENCY PVT LTD AND M/S MERCURY ENTERPRISES , WHOSE NAMES FOUND PLACE IN THE LIST PROVIDED BY THE SALES TAX D EPARTMENT . T HE AO PLACED FULL RELIANCE ON THE ENQUIRIES CONDUCTED BY SALES TAX DEPARTMENT IN RESPECT OF THE PARTIES, REFERRED ABOVE. ACCORDINGLY, THE AO TOOK THE VIEW THAT T HE PURCHASES TO THE TUNE OF RS.38.69 LAKHS HAVE TO BE TREATED AS UNEXPLAINED EXPEN DITURE. ACCORDINGLY, HE ASSESSED THE SAME U/S 69C OF THE ACT. 11. THE LD. CIT(A) DELETED THE ADDITION AND HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 12. THE LD. DR STRONGLY PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 13. ON THE O THER HAND, THE LD. AR SUBMITTED THAT THE ADDITIONS MADE IN THE CASE OF SOME OTHER ASSESSES ON IDENTICAL REASONS HAVE BEEN DELETED BY THE CO - ORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES : A) RAMESH KUMAR AND CO V/S ACIT IN ITA NO.2959/MUM/2014 (AY - 2010 - 11) DATED 28.11.2014; B) DCIT V/S SHRI RAJEEV G KALATHIL IN ITA NO.6727/MUM/2012 (AY - 2009 - 10) DATED 20.8.2014; AND ITA. NO . 5233 / M UM/ 20 1 3 & CO 225/M/14 5 C) SHRI GANPATRAJ A SANGHAVI V/S ACIT IN ITA NO. 2826/MUM/2013 (AY - 2009 - 10) DATED 5.11.2014 IN ALL THE ABOVE SAID CASES, THE CO - ORDINATE BENCHES OF THE TRIBUNAL HAS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF STATEMENT S GIVEN BY THE THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT , WITHOUT CONDUCTING ANY OTHER INVESTIGATION. IN THE INSTANT CASE ALSO, TH E ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE PARTIES BEFORE THE SALES TAX DEPARTMENT. WE NOTICE THAT THE LD.CIT(A) HAS TAKEN NOTE OF THE FACT THAT NO SALES COULD BE EFFECTED WITHOUT PURCHASES. HE HAS FURTHER PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS (163 ITR 249). HE HAS FURTHER RELIED UPON THE DECISION RENDERED BY THE TRIBUNAL IN THE CAE OF ITO VS. PREMANAND (2008)(25 SOT 11)(JODH), WHEREIN IT HAS BEEN HELD THAT WHERE THE AO HAS MADE ADDITION MERELY ON THE BASIS OF OBSERVATIONS MADE BY THE SALES TAX DEPT AND HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRIES FOR MAKING THE ADDITION ESPECIALLY IN A CASE WHERE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONU S OF SHOWING BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING VOUCHERS FOR SALE OF GOODS, SUCH AN ADDITION COULD NOT BE SUSTAINED. THE LD CIT(A) HAS ALSO APPRECIATED THE CONTENTIONS OF THE ASSESSEE THAT HE WAS NOT PROVIDED WITH AN OP PORTUNITY TO CROSS EXAMINE THE SELLERS, WHICH IS REQUIRED TO BE GIVEN AS PER THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF PONKUNNAM TRADERS (83 ITR 508 & 102 ITR 366). ACCORDINGLY, THE LD CIT(A) HAS DELETED THE IMPUGNED ADDITION. ON A CAREFU L PERUSAL OF THE DECISION RENDERED BY LD CIT(A) WOULD SHOW THAT THE FIRST APPELLATE AUTHORITY HAS ANALYSED THE ISSUE IN ALL ANGLES AND APPLIED THE RATIO LAID DOWN BY THE HIGH COURTS AND TRIBUNALS IN DECIDING THIS ISSUE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER ON THIS ISSUE. 7 . IN THE INSTANT CASE ALSO, THE FACTS ARE IDENTICAL, I.E., THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ONLY ON THE BASIS OF INFORMATION GIVEN BY THE SALES TAX DEPARTMENT, HE DID NOT MAKE INDEPENDENT ENQ UIRY WITH THE SALES TAX DEPARTMENT, THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CROSS EXAMINE THE OFFICIALS OF SALES TAX DEPARTMENT, THE EVIDENCES FURNISHED BY THE ASSESSEE TO PROVE PURCHASES OF SANDS AND ITS MOVEMENT WERE NOT DISPROVED, THE EVIDENCES FURNIS HED BY THE ASSESSEE TO PROVE THE PAYMENTS MADE AGAINST PURCHASES BY WAY OF ACCOUNT PAYEE CHEQUES WERE ALSO NOT DISPROVED. UNDER THESE SET OF FACTS, BY FOLLOWING THE DECISION ITA. NO . 5233 / M UM/ 20 1 3 & CO 225/M/14 6 RENDERED BY THIS BENCH OF TRIBUNAL IN THE CASE OF DEEPAK POPATLAL GALA (SUPRA), W E UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 8. THE NEXT ISSUE RELATES TO THE ADHOC DISALLOWANCE MADE OUT OF THE PURCHASE S . THE ASSESSING OFFICER ISSUED NOTICES U/S 133(6) OF THE ACT TO CERTAIN PARTIES FROM WHOM THE ASSESSEE HAD PURCHASED SAND. HOWEV ER, NOTICES ISSUED TO FIVE PARTIES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. HENCE, THE AO ASKED THE ASSESSEE TO PRODUCE VOUCHERS IN SUPPORT OF PURCHASES MADE FROM THE FIVE PARTIES. SINCE THE ASSESSEE FAILED TO FURNISH THE DETAILS, THE AO DISALLO WED 4% OF THE AGGREGATE AMOUNT OF PURCHASES MADE FROM THE ABOVE SAID FIVE PARTIES, WHICH WORKED OUT TO RS.4,72,034/ - . BEFORE LD . CIT(A), THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THIS ADDITION WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE. FU RTHER, IT WAS SUBMITTED THAT HE HAD ALREADY REQUESTED THE PURCHASE PARTIES TO SEND CONFIRMATION LETTER DIRECTLY TO THE AO. THE LD CIT(A) HELD THAT THE ASSESSING OFFICER HAS MADE THIS ADDITION WITHOUT REJECTING THE BOOKS OF ACCOUNT AND ACCORDINGLY DELETED THIS ADDITION. 9. WE NOTICE FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS MADE ADHOC ADDITION ONLY ON THE REASONING THAT THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS. THE CASE OF THE ASSESSEE BEFORE THE LD . CIT(A) WAS THAT HE WAS HAVING A LL THE RELEVANT DETAILS. WE NOTICE THAT THE FIRST APPELLATE AUTHORITY HAS DELETED THIS DISALLOWANCE WITHOUT VERIFYING THOSE DETAILS. SINCE THIS ADDITION WAS MADE FOR WANT OF EVIDENCES AND DETAILS AND SINCE THE DETAILS, IF ANY, AVAILABLE WITH THE ASSESSEE WERE NOT EXAMINED BY THE TAX AUTHORITIES, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES TO BE RESTORED TO THE FILE OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH T HE DIRECTION TO EXAMINE THE SAME AFRESH. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE DETAILS THAT MAY BE CALLED FOR BY THE AO ON THIS ISSUE. ITA. NO . 5233 / M UM/ 20 1 3 & CO 225/M/14 7 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED AND THE CROSS - OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 19TH APRIL , 2015. 10TH APRIL, 2015 SD SD ( / SANJAY GARG ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 10TH APRIL , 201 5 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT . 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI