AAREN CHEMICALS, MUMBAI V. ITO 13(2)(3), MUMBAI

CO 60/MUM/2014

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2990 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 06-01-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 18-03-2014
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH KUMAR YADAV
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.6381&6382/MUM/2012 (ASSESSMENT YEARS 2003-04 & 2004-05) THE ITO 13(2)(3), ROOM NO.425/427, 4 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S. AREN CHEMICALS, 281, SAMUEL STREET, MUMBAI 400 020 .... RESPONDENT C.O.NO.60 &61/MUM/2014 (ARISING OUT OF ITA NO.6381&6382/MUM/2012 ASSESSMENT YEARS 2003-04 & 2004-05) M/S. AREN CHEMICALS, 281, SAMUEL STREET, MUMBAI 400 020 .... CROSS OBJECTOR VS. THE ITO 13(2)(3), ROOM NO.425/427, 4 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ..... APPELLANT IN APPEAL APPELLANT BY : SHRI RAJESH KUMAR YADAV RESPONDENT BY : SHRI SNEHAL SHAH DATE OF HEARING : 13/02/2017 DATE OF PRONOUNCEMENT : 12 /04/2017 2 M/S. AREN CHEMICALS, ORDER PER G.S.PANNU,A.M: THE CAPTIONED ARE FOUR APPEALS RELATING TO THE SAME ASSESSEE PERTAINING TO ASSESSMENT YEARS 2003-04 AND 2004-05 AND SINCE THEY INVOLVE CERTAIN COMMON ISSUES, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE REVENUES APPEAL AND CROSS OBJECTION OF THE ASSESSEE FOR 2003-04 ARE BEING TAKEN AS THE LEAD CASE AND THEY ARE DIREC TED AGAINST ORDER PASSED BY CIT(A)-24, MUMBAI DATED 23/08/2012, WHICH IN TUR N, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/12/20 10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- (1) (I)'ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 27,21,609 /- MADE BY AO HOLDING THE SUNDRY CREDITORS AS NON-GENUINE. (II) WHILE DOING SO, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT DESPITE VARIOUS OPPORTUNITIES GIVEN TO THE ASSESSEE FOR PRODUCTION OF THE CREDITORS AS THEY WERE NOT AVAILABLE ON THE GIVEN ADDRESS AND HENCE NOTICE S U/S. 133(6) COULD NOT BE SERVED, THE ASSESSEE FAILED TO DISCHARGE THE PRIMAR Y ONUS CAST ON IT TO PROVE THE GENUINENESS OF THE TRANSACTION. (III) THE ID. CIT(A) HAS ERRED IN HOLDING THE TRAN SACTION AS GENUINE ON THE GROUND THAT THESE WERE MADE THROUGH BANKING CHANNELS.' (2) 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT( A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED .' (3) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY NEW G ROUND, IF NECESSARY.' 2.1 GROUNDS OF CROSS OBJECTION RAISED BY THE ASSESS EE FOR ASSESSMENT YEAR 2003-04 READ AS UNDER:- THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACT ION OF THE LD. ASSESSING OFFICER OF ISSUING NOTICE UNDER SECTION. 148 OF THE INCOME TAX ACT, 1961. WITHOUT APPRECIATING THE FACTS OF THE CASE THE SAID NOTICE IS BAD IN LAW AND ULTRA VIRES THE PROVISIONS OF THE INCOME TAX ACT, 1961. 3 M/S. AREN CHEMICALS, 3. BEFORE WE PROCEED TO ADJUDICATE THE DISPUTE IN T HE APPEAL OF THE REVENUE, THE FOLLOWING BACKGROUND OF THE CASE IS RE LEVANT. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS, INTER-ALIA, ENGAGED IN T HE BUSINESS OF TRADING IN CHEMICALS. FOR THE ASSESSMENT YEAR 2003-04, IT FIL ED A RETURN OF INCOME ON 27/11/2003 DECLARING TOTAL INCOME OF RS.1,75,157/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 16/03/2004. MEA NWHILE, THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 WAS COMPLETED BY THE AS SESSING OFFICER UNDER SECTION 143(3) OF THE ACT ON 31/12/2007 WHEREBY, THE TOTAL INCOME WAS DETERMINED AT RS.80,84,380/- AS AGAINST THE RETURNE D INCOME OF RS.7,730/-. WHILE COMPLETING THIS ASSESSMENT, THE ASSESSING OFF ICER MADE ADDITIONS ON ACCOUNT OF SUNDRY CREDITORS AMOUNTING TO RS.80,76,6 49/-, TREATING THE SAME AS UNEXPLAINED. SUBSEQUENTLY, THE CIT(A), CENTRAL -2, MUMBAI VIDE ORDER DATED 28/08/2009 DELETED THE ADDITIONS AND IN DOING SO OBSERVED THAT THE SUNDRY CREDITORS IN QUESTION WERE OLD AND THE RELEV ANT PURCHASES WERE MADE IN EARLIER ASSESSMENT YEARS OF 2000-01, 2001-02, 20 02-03, 2003-04 AND 2004-05. ON THE SAID BASIS THE CIT(A) PROCEEDED TO HOLD THAT THE ASSESSING OFFICER WAS WRONG IN MAKING THE ADDITION, WHICH WAS IN FACT OLD AND BROUGHT FORWARD BALANCES, WHICH DID NOT PERTAIN TO THE ASSE SSMENT YEAR 2005-06. BASED ON THE SAID ORDER OF THE CIT(A) FOR ASSESSME NT YEAR 2005-06, THE ASSESSING OFFICER RECORDED REASONS AND REOPENED THE ASSESSMENT FOR ASSESSMENT YEAR 2003-04 AND ISSUED NOTICE UNDER SEC TION 148 OF THE ACT ON 26/10/2009. AS A CONSEQUENCE OF THE ISSUANCE OF NO TICE UNDER SECTION 148 OF THE ACT DATED 26/10/2009, THE IMPUGNED ASSESSME NT HAS BEEN FINALIZED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S . 147 OF THE ACT DATED 30/12/2010. IN THE IMPUGNED ASSESSMENT ORDER THE A SSESSING OFFICER STATES 4 M/S. AREN CHEMICALS, THAT NOTICES UNDER SECTION 133(6) OF THE ACT WERE I SSUED TO SIX PARTIES FOR THE VERIFICATION OF THE TRANSACTIONS DONE WITH THE ASSE SSEE AND ALL THE PARTIES EXCEPT M/S. S.K.TRADING CO. AND M/S. SWAGAT TRADING CO., CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE FIRM. IN THE CONTEX T OF M/S. S.K.TRADING AND M/S. SWAGAT TRADING CO., THE ASSESSING OFFICER HAS REFERRED TO THE REPORT OF THE INSPECTOR POINTING OUT THAT THE NOTICES UNDER S ECTION 133(6) OF THE ACT COULD NOT BE SERVED AS THE PROPRIETOR OF THE TWO CO NCERNS, SHRI SUNILKUMAR D. CHOUDHARY WAS NOT TRACEABLE ON THE ADDRESS GIVEN BY THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO STATED IN THE ASSESSMENT ORDER THAT LOCAL ENQUIRIES MADE BY THE INSPECTOR REVEAL THAT THE SAID SHRI SUN ILKUMAR D. CHOUDHARY HAS SOLD THE PREMISES AND SHIFTED SOMEWHERE ELSE. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT THE INSPECTOR VISITED ANOTHER AD DRESS OF M/S. SWAGAT TRADING CO. BUT COULD NOT LOCATE THE CONCERN. ON B EING CONFRONTED WITH THE AFORESAID, ASSESSEE SUBMITTED THAT THE PURCHASES WE RE EFFECTED FROM THE TWO CONCERNS THROUGH BROKERS AND THAT THE TWO CON CERNS HAD LEFT THE PREMISES, AS APPEARING IN THE CONFIRMATION LETTERS. THE ASSESSEE ALSO FILED AN AFFIDAVIT BEFORE THE ASSESSING OFFICER POINTING OUT THAT THE CHEQUES ISSUED TO M/S. S.K. TRADING CO. AND M/S. SWAGAT TRADING CO . WERE REFLECTED IN THE BANK ACCOUNT AS WELL AS BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE, WHICH PROVED THE GENUINENESS OF THE PURCHASES EFFEC TED FROM THE SAID TWO CONCERNS. THE ASSESSING OFFICER HOWEVER, DID NOT A CCEPT THE STAND OF THE ASSESSEE AND HE PROCEEDED TO TREAT THE CREDITORS ST ANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN RESPECT OF M/S. S.K.TRA DING CO. RS.3,64,061/- AND M/S. SWAGAT TRADING CO. RS.23,67,548/- AS NOT GENUINE ON THE GROUND THAT THE ASSESSEE HAD NEITHER FURNISHED CONFIRMATIO NS FROM THE TWO CONCERNS AND NOR COULD PRODUCE THE TWO CONCERNS FOR VERIFICATION DESPITE 5 M/S. AREN CHEMICALS, AFFORDING OPPORTUNITY. ACCORDINGLY, AN ADDITION OF RS.27,31,609/- WAS MADE TO THE RETURNED INCOME. THE SAID ADDITION WAS CARR IED IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE CHALLENGED THE ASSESSMENT ON LAW AND ALSO ON FACTS. ON THE ISSUE OF THE VALIDITY OF THE PROCEEDINGS INITIATED UNDER SECTION. 147/148 OF THE ACT, THE PLEA OF THE ASSESS EE WAS THAT THE SAME WAS BAD IN LAW AND THAT THE REOPENING WAS NOT BASED ON ANY EVIDENCE. THE CIT(A) DISAGREED WITH THE ASSESSEE ON THE VALIDITY OF THE PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT . HOWEV ER, ON FACTS, THE CIT(A) HAS DELETED THE ADDITION OF RS.27,21,609/- MADE TO THE RETURNED INCOME. THE REVENUE IS IN APPEAL ASSAILING THE DECISION OF THE CIT(A) IN DELETING THE ADDITION, WHEREAS ASSESSEE HAS PREFERRED A CROSS OB JECTION CHALLENGING THE VALIDITY OF THE NOTICE ISSUED UNDER SECTION. 148 OF THE ACT DATED 26/10/2009 REOPENING THE ASSESSMENT. 4. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REP RESENTATIVE PRIMARILY REITERATED THE STAND OF THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN THE EARLIER PARAS AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5. ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE AS SESSEE HAS RELIED UPON THE ORDER OF THE CIT(A) IN SUPPORT OF THE CASE OF THE ASSESSEE. IT IS FURTHER CANVASSED THAT THE ORDER OF THE CIT(A) DATE D 28/08/2009 FOR ASSESSMENT YEAR 2005-06 HAS BECOME FINAL AS NO APPE AL AGAINST IT HAS BEEN PREFERRED BY THE DEPARTMENT. IT HAS FURTHER BEEN P OINTED OUT THAT IN THE COURSE OF APPELLATE PROCEEDINGS IN ASSESSMENT YEAR 2005-06, THE CIT(A) HAD CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFIC ER AND IN THE COURSE OF SUCH REMAND PROCEEDINGS ASSESSEE HAD DULY FURNISHED THE CONFIRMATION OF SHRI SUNIL KUMAR CHOUDHARY. IN THIS CONTEXT, OUR A TTENTION HAS ALSO BEEN INVITED TO PAGES 40 TO 47 OF THE PAPER BOOK, WHEREI N THE CONFIRMATION FROM 6 M/S. AREN CHEMICALS, THE TWO CONCERNS HAVE BEEN PLACED ALONGWITH THE SUB MISSIONS OF THE ASSESSEE ADDRESSED TO THE CIT(A) AND TO THE ASSESSI NG OFFICER DURING THE REMAND PROCEEDINGS. THE LD. REPRESENTATIVE FOR THE ASSESSEE EMPHASIZED THAT THE AFORESAID EVIDENCE HAD FORMED THE BASIS FO R THE CIT(A) IN ASSESSMENT YEAR 2005-06 TO ACCEPT THE GENUINENESS O F THE SUNDRY CREDITORS AND SUCH A DECISION HAS ATTAINED FINALITY AS NO APP EAL AGAINST IT HAD BEEN FILED BY THE DEPARTMENT. IT WAS, THEREFORE, CONTEN DED THAT EVEN IN THE INSTANT ASSESSMENT YEAR THE FINDINGS OF THE CIT(A), WHICH ARE CONSISTENT WITH THE FINDINGS OF THE ASSESSMENT YEAR 2005-06 AND CAN NOT BE ASSAILED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. AS THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER REVEALS THE ONLY REASON PREVAILING WITH THE ASSESSING OFFICER TO TREAT THE PURCHASES STATED TO HAVE BEEN EFFECTED BY THE ASSESSEE FROM TWO CONCERNS, NAMELY M/S. S.K.TRA DING CO. AND M/S. SWAGAT TRADING CO. AS NON-GENUINE WAS THE NON-FURNI SHING OF CONFIRMATIONS AND THE NON-PRODUCTION OF THE SAID PARTIES FOR VERI FICATION DESPITE AFFORDING OPPORTUNITY TO THE ASSESSEE. IT IS QUITE CLEAR THA T THE PAYMENTS FOR THE PURCHASES HAVE BEEN EFFECTED THROUGH BANKING CHANNE LS BUT AS PER THE ASSESSING OFFICER THE SAME IS NOT ENOUGH TO PROVE T HE GENUINENESS OF THE TRANSACTIONS. IT IS NOTICEABLE FROM THE DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW THAT ASSESSEE HAD EXPLAINED THAT THE PROPRIETOR OF THE TWO CONCERNS IN QUESTION HAD LEFT THE PREMISES, THE AD DRESS OF WHICH WAS APPEARING IN THE CONFIRMATION LETTER AND, THEREFORE , THE NOTICES ISSUED BY THE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT C OULD NOT BE SERVED; IT IS ALSO SEEN THAT ASSESSEE HAD EXPLAINED DURING THE IM PUGNED ASSESSMENT PROCEEDINGS THAT CHEMICALS WERE PURCHASED FROM BOTH THE CONCERNS, WHICH 7 M/S. AREN CHEMICALS, WERE RESOLD TO VARIOUS RETAIL CUSTOMERS. IN SUPPOR T, ASSESSEE HAD FURNISHED THE SUMMARY OF PURCHASES AND SALES EFFECTED IN QU ANTITATIVE TERMS IN ORDER TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASES E FFECTED FROM THE TWO CONCERNS. THE RELEVANT DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW CLEARLY SUGGEST THAT THE ASSESSING OFFICER HAS NOT FOUND ANY INFIRMITY IN THE AFORESAID ASSERTIONS OF THE ASSESSEE BUT MERELY REL IED UPON HIS ENQUIRIES, WHEREIN THE TWO CONCERNS WERE NOT FOUND AT THE ST ATED ADDRESSES IN ORDER TO TREAT THE CONCERNS AS BOGUS. IN THIS BACKGROUN D, THE CIT(A) NOTICED THAT THE REPORT OF THE INSPECTOR WAS A PROOF ITSELF TO SUGGEST THAT THE TWO CONCERNS DID EXIST AT THE GIVEN ADDRESSES AT T HE RELEVANT POINT OF TIME, BUT WERE NOT OPERATING FROM THE SAME ADDRESS WHEN ENQ UIRIES WERE CONDUCTED BY THE ASSESSING OFFICER. THE CIT(A) TOOK NOTE OF THE FACT THAT THE TRANSACTIONS IN QUESTION RELATE TO THE FINANCIAL YE AR 2002-03, WHEREAS THE ENQUIRIES REGARDING THE EXISTENCE OF SUNDRY CREDITO RS WAS CONDUCTED BY THE ASSESSING OFFICER IN 2010 I.E. AFTER A PERIOD OF 6 TO 7 YEARS. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, IT WOULD BE IMPROPER TO INSIST UPON THE ASSESSEE TO PRODUCE THE CREDITORS FOR VERIFICATION AS THEY A RE NOT IN THE CONTROL OF THE ASSESSEE. THE ASSESSEE HAD POINTED OUT AT THE TIME OF THE VERIFICATION EXERCISE THAT THE WHEREABOUTS OF THE CREDITORS WER E NOT KNOWN TO HIM, AND THAT THERE WERE NO DEALINGS WITH THE CREDITORS DUR ING THE PERIOD OF THE VERIFICATION EXERCISE. BE THAT AS IT MAY, IT IS QU ITE CLEAR THAT THE EVIDENCE AND THE MATERIAL SOUGHT TO BE FURNISHED BY THE ASSESSEE HAS BEEN BRUSHED ASIDE, AND IT HAS NOT FOUND TO BE FALSE; THEREFORE, UND ER THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE CONCERNS AS BOGUS, MERELY NOTICING THEIR ABSENCE FROM THE STATED ADDRESSES, O STENSIBLY AT THE TIME OF AN EXERCISE, WHICH CARRIED ON A MUCH LATER DATE TH AN THE TRANSACTION DATES. 8 M/S. AREN CHEMICALS, 6.1 IN PARA 3.3.4 OF HIS ORDER THE CIT(A) HAS MADE THE FOLLOWING OBSERVATIONS:- 3.3.4 I ALSO FIND THAT THE ASSESSING OFFICER MADE ADDITION OF RS.23,67,548/- ON ACCOUNT OF SUNDRY CREDITORS IN THE NAME OF SWAGAT T RADING CO. AND ADDITION OF RS.3,64,061/- ON ACCOUNT SUNDRY CREDITORS IN THE NA ME OF S.K.TRADING CO. PERUSAL OF THE DOCUMENT ON RECORD HOWEVER SHOW THAT THE ABO VE AMOUNTS AGAINST THESE CONCERNS WERE THE CREDIT BALANCES AS ON 31/03/2005 AND NOT AS ON 31/03/2003. THE BALANCE SHEET OF THE ASSESSEE AS ON 31/03/2003 SHOWS CREDIT BALANCE OF RS.94,00,678.50 AGAINST S.K.TRADING CO. AND CREDIT BALANCE OF RS.81,76,293/- AGAINST SWAGAT TRADING CO. HENCE, THE ADDITION OF R S.23,67,548/- AND RS.3,64,061/- ON ACCOUNT OF SUNDRY CREDITORS CANNOT BE SUSTAINED SINCE THE ASSESSING OFFICER CANNOT HOLD PART OF THE SUNDRY CR EDITORS AS GENUINE AND OTHER PART AS BOGUS. 6.2 THE AFORESAID OBSERVATIONS, WHICH HAVE NOT BE EN CONTROVERTED BY REVENUE BEFORE US, ALSO CLEARLY SUGGEST AN INCONS ISTENCY IN THE APPROACH OF THE ASSESSING OFFICER, WHICH HAS BEEN RIGHTLY NEGAT ED BY THE CIT(A). APART THEREFROM, WE ALSO NOTICE THAT THE CIT(A) HAS REFER RED TO THE JUDGMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF DIA GNOSTICS VS. CIT (2011) 56 DTR 317 (CAL) IN COMING TO DELETE THE ADDITION. TH E RELEVANT DISCUSSION IS REPRODUCED HEREAFTER AS UNDER:- 3.3.5 ONCE SALE IS CREDITED IN THE P&L ACCOUNT, PU RCHASES CANNOT BE DOUBTED FOR THE MERE FACT THAT THE CREDITORS FOR PURCHASES DID NOT RESPOND TO THE SUMMONS UNDER SECTION 131FOR THAT THE CREDITORS COULD NOT B E LOCATED AT THE LAST KNOWN ADDRESS AFTER EFFLUX OF TIME. IF THE CREDITORS CHA NGED THEIR ADDRESS OR DISCONTINUED THE BUSINESS, THE ASSESSEE COULD NOT BE EXPECTED T O PROVIDE THE CURRENT ADDRESS, AS IT MAY NOT BE HAVING ANY DEALING WITH SAID PARTY NOW. THE FACTUM OF GENUINENESS OF ANY EXPENDITURE IS NOT CONFINED TO T HE PRODUCTION OF THE PARTIES IN PERSON ONLY. IF THE PAYMENTS IS SUPPORTED BY BILLS AND MADE THROUGH BANKING CHANNELS AND THE SALE OF GOODS SO PURCHASED IS NOT IN DISPUTE, THE ONUS OF APPELLANT IS DISCHARGED AND IT IS FOR THE AO TO PR OVE THAT THE EXPENDITURE WAS NOT GENUINE OR THAT THE SUNDRY CREDITOR WAS BOGUS. IN THE CASE OF DIAGNOSTICS VS. CIT (2011) 56 DTR 317(CAL), WHERE THE ASSESSEE PURCHASE D MATERIALS FOR ITS BUSINESS BY WAY OF ACCOUNT PAYEE CHEQUE FROM THIRD PARTY AND, S UBSEQUENTLY, THE PARTIES DID NOT APPEAR BEFORE THE ASSESSING AUTHORITIES AS THEY HAD DISCONTINUED THEIR BUSINESS, THE HON'BLE HIGH COURT HELD THAT ASSESSE ES CLAIM OF GENUINE BUSINESS 9 M/S. AREN CHEMICALS, EXPENDITURE COULD NOT BE DISALLOWED ON ACCOUNT OF T HEIR NON EXISTENCE AFTER THREE OF TRANSACTIONS. THE HONBLE HIGH COURT, IN THE FA CTS OF THE SAID CASE, HELD AS FOLLOWS:- ''HOWEVER, THE TRANSACTIONS HAVING TAKEN PLACE THRO UGH ACCOUNT PAYEE CHEQUES, THE CONTENTION OF THE ADVOCATE APPEARING F OR THE REVENUE THAT THE TRANSACTION WAS A NON-EXISTENT ONE CANNOT BE AC CEPTED. IF AN ASSESSEE TOOK CARE TO PURCHASE MATERIALS FOR HIS BUSINESS BY WAY OF ACCOUNT PAYEE CHEQUES FROM A THIRD PARTY AND SUBSEQUENTLY, THREE YEARS AFTER THE PURCHASE, THE SAID THIRD PARTY DOES NOT APPEAR BEFO RE THE AO PURSUANT TO THE NOTICE OR EVEN HAS STOPPED BUSINESS, THE CLAIM OF THE ASSESSEE ON THAT ACCOUNT CANNOT BE DISCARDED AS NON-EXISTENT. THE RE VENUE HAS NOT PUT FORWARD ANY OTHER GROUND, SUCH AS, IT WAS NOT A GEN UINE TRANSACTION FOR OTHER REASONS BUT HAS SIMPLY REJECTED THE CLAIM ON THE GROUND AS IF THERE WAS NO SUCH TRANSACTION. THE TRANSACTION HAVING TAK EN PLACE THROUGH PAYMENT BY ACCOUNT PAYEE CHEQUES, SUCH PLEA IS NOT TENABLE AND IN SUCH CIRCUMSTANCES, THE TRIBUNAL ERRED IN LAW IN REVERSI NG THE FINDING ARRIVED AT BY THE CIT(A) ACCEPTING THE SAID TRANSACTION AS A G ENUINE TRANSACTION. 6.3 CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTA NCES AND THE ORDER OF THE CIT(A), WHICH IS ELOQUENT AND BASED ON APPROPRI ATE LEGAL PROPOSITION, WE FIND THAT THERE WAS INADEQUACY OF MATERIAL WITH THE ASSESSING OFFICER TO TREAT THE IMPUGNED SUNDRY CREDITORS AS UNEXPLAINED. THEREFORE, WE HEREBY AFFIRM THE ORDER OF THE CIT(A) AND ACCORDINGLY REVE NUE FAILS IN ITS APPEAL. 7. SINCE WE HAVE ALREADY DISMISSED THE APPEAL OF TH E REVENUE, THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION AGAIN ST VALIDITY OF THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT IS RENDERED ACA DEMIC AND IS NOT BEING ADJUDICATED FOR THE PRESENT. RESULTANTLY, FOR ASSE SSMENT YEAR 2003-04, WHEREAS THE APPEAL OF THE REVENUE DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS INFRUCTUOUS. 8. INSOFAR AS REVENUES APPEAL IN ITA NO. 6382/MUM /2012 AND THE CROSS OBJECTION OF THE ASSESSEE IN C.O NO.61/MUM/2014 FO R ASSESSMENT YEAR 10 M/S. AREN CHEMICALS, 2004-05 ARE CONCERNED, IT WAS A COMMON GROUND BET WEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN THE SAID APPEALS ARE PARI MATERIA TO THOSE CONSIDERED BY US IN ITA NO. 6381/MUM/2012 & C.O NO. 60/MUM/2014, FOR ASSESSMENT YEAR 2003-04; THEREFORE, OUR DECISION TH EREIN SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AND CROSS OBJECTION FOR ASSESSM ENT YEAR 2004-05 ALSO. 9. IN THE RESULT, APPEALS OF THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 12/04/2017 SD/- SD/- ( RAVISH SOOD) (G.S.PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 12/04/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI