JIGAR VINACHANDRA SHAH, MUMBAI V. ITO WD 25(2)(1), MUMBAI

ITA 1223/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3458 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 14-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained investment; Unexplained expenditure; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1223/M/2014 ASSESSMENT YEAR: 2010-11 SHRI JIGAR VINAYCHANDRA SHAH, B-301, THIRD FLOOR, PREM APARTMENT, KAYBEE GEEJAY CO-OP. HSG. SOC., NEAR GURUDWARA, SAIBABA NAGAR, BORIVALI (WEST), MUMBAI 400 092 PAN: AOYPS4771C VS. ITO, WARD 25(2)(1), C-11, ROOM NO.107, FIRST FLOOR, PRATYAKSHA KAR BHAVAN, B.K.C., MUMBAI - 400051 (APPELLANT) (RESPONDENT) ITA NO.1719/M/2014 ASSESSMENT YEAR: 2010-11 O/O ITO 25(2)(1), C-11 BLDG., ROOM NO.107, P.K. BHAVAN, B.K.C., BANDRA (E), MUMBAI - 400051 VS. SHRI JIGAR VINAYCHANDRA SHAH, B-3/11, JAI PUNIT NAGAR CHSL, PLOT NO.1, S.V. ROAD, NEAR POISAR BUS DEPOT, BORIVALI (WEST), MUMBAI 400 092 PAN: AOYPS4771C (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NISHIT GANDHI, A.R. REVENUE BY : SHRI JEEVANLAL LAVIDIYA, D.R. DATE OF HEARING : 17.12.2015 DATE OF PRONOUNCEMENT : 22.01.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS, ONE BY THE ASSESSE E AND THE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 30.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. ITA NO.1223/M/2014 & ITA NO.1719/M/2014 SHRI JIGAR VINAYCHANDRA SHAH 2 2. THE ASSESSEE IN THIS APPEAL HAS AGITATED THE ACT ION OF THE LD. CIT(A) IN SUSTAINING THE ADDITION AT THE RATE OF 15% OF THE P URCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM SUSPICIOUS DEALERS WHOSE NAMES WE RE LISTED IN THE WEBSITE OF THE SALES TAX DEPARTMENT. 3. THE REVENUE, ON THE OTHER HAND, HAS AGITATED THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE ADDITION TO THE 15% OF TH E PURCHASES AS AGAINST THE TOTAL ADDITION OF RS.1,07,71,713/- MADE BY THE ASSE SSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) HOLDING THE PURCHASES MADE B Y THE ASSESSEE FROM THE SUSPICIOUS DEALERS AS BOGUS AND ADDING THE SAME INT O THE INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE AO DURI NG THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD DEBITED PUR CHASES OF RS.14,36,61,735/- IN THE P& L ACCOUNT OF HIS PROPRIETARY CONCERN M/S HINENDRA IMPEX. THE AO NOTED THAT THE ASSESSEE HAD MADE PURCHASES FROM CER TAIN PARTIES WHOSE NAMES WERE LISTED IN THE LIST OF SUSPICIOUS DEALERS AS PROVIDED IN THE OFFICIAL WEBSITE OF SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, WH O WERE ALLEGEDLY PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ACTUA L BUSINESS. THE AO RELIED UPON THE STATEMENT TAKEN BY THE SALES TAX DE PARTMENT FROM SOME OF THE ABOVE LISTED PARTIES AND CONCLUDED THAT THE PURCHAS ES MADE BY THE ASSESSEE IN RESPECT OF THE ABOVE STATED AMOUNT WERE BOGUS. HE THEREFORE ADDED THE AMOUNT OF RS.1,07,71,713/- AS UNEXPLAINED EXPENDITU RE INTO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED BY THE ABOVE ADDITION, T HE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). 5. THE LD. CIT(A), CONSIDERING THE OVERALL FACTS AN D CIRCUMSTANCES OF THE CASE AND THE EVIDENCES FURNISHED BY THE ASSESSEE OB SERVED THAT AO HAD NOT DOUBTED THE FACTUM OF SALES BEING MADE WITH RESPECT TO THE PURCHASES MADE BY THE ASSESSEE AND ALSO THAT THE PAYMENTS WERE MADE B Y CHEQUE INTO THE ACCOUNTS OF THE RESPECTIVE PARTIES. THERE WAS NO EVIDENCE BE FORE THE AO TO SUGGEST THAT ITA NO.1223/M/2014 & ITA NO.1719/M/2014 SHRI JIGAR VINAYCHANDRA SHAH 3 THOSE CHEQUES HAVE COME BACK TO THE ASSESSEE. HE HO WEVER FURTHER OBSERVED THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS O F THE PURCHASES MADE FROM THE 12 PARTIES WHOSE NAMES WERE LISTED IN THE LIST OF SALES TAX DEPARTMENT. HE THEREFORE HELD THAT THE COMPONENT OF THE PURCHASES SHOULD BE TREATED AS UNEXPLAINED INVESTMENT AND SINCE IT WAS A PART OF T HE BOOKS OF ACCOUNT AND A PART OF THE BUSINESS OF THE ASSESSEE, PROFIT THEREU PON SHOULD BE BROUGHT TO TAX. HE THEREFORE HELD THAT 15% OF SUCH PURCHASES BE ADD ED TO THE INCOME OF THE ASSESSEE AND THEREBY PROFIT DECLARED BE INCREASED. THE ASSESSEE THUS HAS COME IN APPEAL BEFORE US AGITATING THE SUSTAINING OF ADD ITION @ 15% OF THE PURCHASES WHEREAS THE REVENUE HAS COME IN APPEAL AGAINST THE RELIEF GRANTED BY THE CIT(A) TO THE ASSESSEE. 6. THE LD. A.R. OF THE ASSESSEE, BEFORE US, HAS SUB MITTED THAT THE STATEMENT IF ANY, OF THE SUSPICIOUS DEALERS WERE ALLEGEDLY MA DE BEFORE THE SALES TAX AUTHORITIES, HOWEVER, NO SUCH STATEMENT HAD BEEN RE CORDED IN THIS RESPECT BY THE INCOME TAX AUTHORITIES. THE ASSESSEE WAS NOT G IVEN OPPORTUNITY TO CONFRONT THE SAID PERSONS BY WAY OF CROSS EXAMINATI ON. ALL THE PAYMENTS WERE MADE THROUGH CHEQUES WHICH WERE REFLECTED IN THE BA NK STATEMENTS OF THE RESPECTIVE PARTIES. THE ASSESSEE HAD PRODUCED ALL THE DETAILS SUCH AS LEDGER ACCOUNTS, COPIES OF PURCHASE BILLS, COPIES OF BANK STATEMENTS, MONTHLY QUANTITATIVE STATEMENTS AND INVENTORY OF CLOSING ST OCK. HE HAS FURTHER CONTENDED THAT EVEN THE SALES MADE FROM THESE PURCH ASES AND THE PROFIT THEREUPON WAS ACCEPTED BY THE AO. HE HAS ALSO RELI ED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. M/ S. NIKUNJ EXIMP ENTERPRISES PVT. LTD. ITA NO.5604 OF 2010 DECIDED ON 17.12.2012 AND FURTHER OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF DIAGNOSTICS V. CIT (2012) 20 TAXMANN.COM 692 (CAL.). THE LD. D.R. ON THE OTHER HAND, HAS RELIED UPON TH E FINDINGS OF THE ASSESSING OFFICER. ITA NO.1223/M/2014 & ITA NO.1719/M/2014 SHRI JIGAR VINAYCHANDRA SHAH 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE ADDITIONS IN THIS CASE HAVE BEEN MADE ON THE GROUND THAT NAME OF CERTAIN SUPPLIERS FIGURED IN THE LIST OF SUSPICIOUS DEALERS IN THE WEBSITE OF SALES TAX DEPARTMENT. EXCEPT THAT, NO EVIDENCE HAS BEEN POINTED OUT BY THE AO WH ICH MAY PROVE THAT THE ASSESSEE HAS INDULGED IN THE BOGUS PURCHASES. THE A O HAS NOT DOUBTED THE SALES MADE BY THE ASSESSEE. THE EXPENDITURE IS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE. IT IS NOT THE CASE OF THE AO THAT THE GOODS WERE PURCHASED BY THE ASSESSEE AT A LESSER RATE OR THAT SOMEONE HAS SUPPLIED THE GOODS TO THE ASSESSEE FOR FREE. WHEN IT IS NOT SO, SOLELY ON THE BASIS OF UNCONFRONTED AND GENERAL STATEMENTS OF ALLEGED SUPP LIERS MADE BEFORE SALES TAX AUTHORITIES, ADDITION U/S 69C UNDER THE CIRCUMSTANC ES ON ACCOUNT OF PURCHASES IS NOT WARRANTED AT ALL. THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT VS. M.K. BROTHERS (1987) 163 ITR 249 HAS HELD THAT WH ERE THERE WAS NOTHING TO INDICATE THAT THE AMOUNT GIVEN BY THE ASSESSEE FOR THE PURCHASES MADE HAD COME BACK TO THE ASSESSEE IN ANY OTHER FORM AND WHE RE THERE WAS NO EVIDENCE THAT THE SAID CONCERNS GAVE BOGUS VOUCHERS TO THE A SSESSEE AND EVEN THE STATEMENTS MADE BY THE ALLEGED SUPPLIERS IN NO WAY IMPLICATE THE TRANSACTION WITH THE ASSESSEE THEN UNDER SUCH CIRCUMSTANCES IT CANNOT BE SAID THAT ENTRIES FOR THE PURCHASE OF GOODS MADE IN THE BOOKS OF ACCO UNT OF THE ASSESSEE WERE BOGUS AND NO ADDITION IN THIS RESPECT CAN BE MADE. THE LD. A.R. OF THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIKUNJ ENTERPRISES (P.) LTD. (201 3) 35 TAXMAN.COM 384 (BOMBAY) WHEREIN THE HONBLE BOMBAY HIGH COURT HAS UPHELD THE FINDINGS OF THE TRIBUNAL THAT WHERE THE ASSESSEE FILED LETTERS OF CONFIRMATION OF SUPPLIERS, COPIES OF BANK STATEMENT SHOWING ENTRIES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TO SUPPLIERS AND STOCK RECONCILIATION STATE MENTS, SALE OF PURCHASED GOODS WAS NOT DOUBTED, THE TRANSACTIONS WERE SUPPOR TED WITH EVIDENCES AND CONFIRMATIONS, IN SUCH AN EVENT MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE AO OR THE LD. CIT(A), ONE CANNO T CONCLUDE THAT THE PURCHASES WERE NOT GENUINE. ITA NO.1223/M/2014 & ITA NO.1719/M/2014 SHRI JIGAR VINAYCHANDRA SHAH 5 EVEN WHEN IT IS NOT THE CASE OF THE REVENUE THAT SA LES TURNOVER OF THE ASSESSEE HAS DECREASED OR THE NET PROFIT RATIO IS L ESS THAN THE EARLIER ASSESSMENT YEARS OR THE SUBSEQUENT ASSESSMENT YEARS, THEN, IN OUR VIEW, MAKING ADDITION ON ASSUMPTION THAT THE ASSESSEE WOULD HAVE BOOKED A LESSER PROFIT HAS NO JUSTIFICATION. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES IN MAKING/SUSTAINING THE IMPUGNED ADDITIONS AND THE SAME ARE ACCORDINGLY ORDERED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED, WHEREAS, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 22.01.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.