ACG ARTS & PROPERTIES P.LTD, MUMBAI V. DCIT CEN CIR 42, MUMBAI

ITA 1238/MUM/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9812 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Assessee Lawyers: J D MISTRY M ADHUR AGARWAL
• Keywords: Bogus purchase; Source of fund
• Section: 143(3); 153A; 131

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.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) ACG ARTS & PROPERTIES PVT.LTD. 1001, DALAMAL HOUSE, 10 TH FLOOR, NARIMAN POINT, MUMBAI 400 021 PAN: AAACU 0615L ...... APPELLANT VS. THE DY. CIT, CEN. CIR.42, AAYKAR BHAVAN,M.K.ROAD, MUMBAI-400020 ..... RESPONDENT APPELLANTS BY : S/ SHRI J.D.MISTRY &M ADHUR AGARWAL RESPONDENT BY : SHRI R.P.MEENA DATE OF HEARING : 21/03/2018 DATE OF PRONOUNCEMENT : 23/03/2018 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEALS ARE FILED BY THE ASSESSEE S PERTAINING TO ASSESSMENT YEARS 2006-07 AND 2007-08. SINCE COMMON ISSUES ARE INVOLVED, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CON SOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. SINCE THE ISSUES RAISED IN THESE APPEALS ARE IDE NTICAL, ITA NO. 1238/MUM/2012 FOR ASSESSMENT YEAR 2066-07 IS TAKEN AS THE LEAD CASE, WHICH IS DIRECTED AGAINST AN ORDER PASSED BY THE CIT(A) -38, MUMBAI DATED 2 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) 19/12/2011, WHICH IN TURN, ARISES OUT OF ORDER P ASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/12/2009. THE GROUNDS OF APPEAL RAIS ED BY THE ASSESSEE IN THIS APPEAL READ AS UNDER:- GROUND I ADDITION ON ACCOUNT OF UNPROVED PURCHASES OF PAINTI NGS: RS. 1,74,37,500/- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 38, MUMBAI ('CIT(A') ERRED I N UPHOLDING THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 42, MUMB AI ('AO') IN MAKING AN ADDITION TO TOTAL INCOME ON ACCOUNT OF PURCHASES OF PAINTINGS F ROM DIFFERENT PARTIES ON THE ALLEGED GROUND THAT THE SAME WERE BOGUS IN NATURE. 2. IN DOING SO, HE ERRED IN RELYING UPON THE STAT EMENTS OF THE PARTIES FROM WHOM PAINTINGS WERE PURCHASED WHICH SUPPORTS ONLY ONE PART OF THE TRANSACTION. 3. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: I. THE PURCHASES WERE GENUINE AND DEPARTMENT D ID NOT HAVE ANY MATERIAL ON RECORD TO PROVE THAT PURCHASES WERE BOGUS. II. THE PAINTINGS WHICH WERE PURCHASED DURING THE YEAR WERE EITHER SOLD DURING THE YEAR OR ARE LYING IN THE CLOSING STOCK OF THE APPEL LANT AND WOULD THEREFORE NOT AFFECT THE PROFITS OF THE YEAR. III. THE APPELLANT HAD PRODUCED LEDGER, PURCHASE B ILL, PAYMENT PROOF & BANK CONFIRMATION, AND SALES TAX REGISTRATION IN SUPPORT THAT THE AFORESAID PURCHASES WERE GENUINE. 3. A PERUSAL OF THE GROUNDS OF APPEAL REVEALS THAT THE SOLITARY DISPUTE ARISES WITH RESPECT TO AN ADDITION OF RS.1,74,37,50 0/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNPROVED PURCHASES. THE FACT S RELEVANT IN ORDER TO APPRECIATE THE CONTROVERSY CAN BE SUMMARIZED AS FOL LOWS. THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956 AND IS A PART OF A GROUP OF CONCERNS, WHERE A SEARCH ACTIO N UNDER SECTION 132(1) OF THE ACT WAS CARRIED OUT ON 17/04/2007. THE SEARCH AND THE RELATED INVESTIGATIONS CARRIED OUT, INTER-ALIA, REVEALED TH AT THE ASSESSEE COMPANY AND M/S. REFLECTIONS(PROP.SMT. KAVITA SINGH)ONE OF THE ENTITIES OF THE GROUP, WERE 3 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) INDULGING IN ACCEPTING BOGUS PURCHASE BILLS IN RESP ECT OF PAINTINGS AND SCULPTURES POSSESSED BY THEM AND THAT SUCH BILLS WERE OBTAINED FROM PERSONS WHO WERE OTHERWISE ENGAGED IN PROVIDING ACCOMMODATI ON ENTRIES. THE DISCUSSION IN THE ASSESSMENT ORDER ALSO BRINGS OUT THAT IN THE COURSE OF SEARCH AT THE VARIOUS PREMISES OF THE GROUP, CERTAIN DOCUM ENTS/BILLS SHOWING PURCHASE OF PAINTINGS, SCULPTURES AND ART WORKS WE RE FOUND. THE DISCUSSION ALSO REVEALS THAT IN THE COURSE OF SEARCH, INVENTO RY OF THE PAINTINGS/ART WORKS WAS DONE, WHICH NUMBERED 288 NO. OF PAINTINGS, WHOS E VALUATION WAS MADE AT RS.9,99,20,000/- AND SOME WERE ALSO PUT UNDER CONS TRUCTIVE SEIZURE AS PER SECTION 132(1)(III) OF THE ACT . BE THAT AS IT MAY , SO FAR AS WE ARE CONCERNED, THE DISPUTE RELATES TO A TOTAL OF FIVE PAINTINGS, W HICH HAS BEEN DETAILED IN PAGE- 1 OF THE PAPER BOOK. ON THIS SUMMARY PAGE, THE ASS ESSEE HAS BROUGHT OUT, IN A TABULATED MANNER, THE DISPUTE INVOLVING THE FIVE PA INTINGS AND THE DETAIL OF THE ADDITION OF RS.1,74,37,500/- MADE TO THE RETURNED I NCOME. WE DEEM IT FIT AND PROPER TO REPRODUCE THE RELEVANT PORTION OF THIS TA BULATION, WHICH IS AS UNDER:- SR.NO. OF ASSESSING OFFICERS ORDER NAME OF THE SELLER DESCRIPTION OF THE PAINTING PURCHASE PRICE WHETHER SOLD OR IN STOCK SOLD TO SALE PRICE PROFIT ADDITION IN ASSESSMENT ORDER. 1 GALLERY 7 CHITABANU MAZUMDAR 1,125,000 SOLD M/S. OSWAL TRADERS 1,687,500 562,500 1,687,500 2 ROYAL TRUST CORPORATION ** GANESH HALOI 1,462,500 STOCK - - - 1,462,500 3 RASHESH SHAH ** M.F.HUSSAIN 1,237,500 STOCK - - - 1, 237,500 4 OSWAL TRADERS M.F.HUSSAIN 6,187,500 STOCK - - - 6,187,500 5 MUKTA SALES CORP. RAM KUMAR 6,862,500 STOCK - - - 6,862,500 TOTAL 16,875,000 1,687,500 562,500 17,437,500 4 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) 3.1 THE ASSESSING OFFICER NOTED THAT THE ASPECT OF EFFECTING BOGUS PURCHASE OF PAINTINGS CAME TO LIGHT IN THE COURSE OF SEARCH AND THE SUBSEQUENT INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING . IN PARTICULAR, THE ASSESSING OFFICER HAS REFERRED TO THE STATEMENTS RECORDED OF THE STATED SUPPLIERS OF THE PAINTINGS BY THE INVESTIGATION WING AS REFERRED IN PARA-8 OF THE ASSESSMENT ORDER. IN THE COURSE OF HEARING ALSO, THE LD. REPR ESENTATIVE FOR THE ASSESSEE AS WELL AS THE LD. DEPARTMENTAL REPRESENTATIVE HAVE TA KEN US THROUGH A PORTION OF SUCH STATEMENTS, COPIES OF WHICH HAVE BEEN PLACE D IN THE PAPER BOOK. THE GIST OF THE STATEMENTS NOTED BY THE ASSESSING OFFI CER IN PARA-8, AND WHICH IS IN CONSONANCE WITH THE READING OF THE STATEMENTS MADE AT THE TIME OF HEARING, IS THAT THE SAID PERSONS DENIED HAVING SUPPLIED ANY PA INTINGS TO THE ASSESSEE COMPANY. HOWEVER, THE PERSONS ADMITTED HAVING RECE IVED PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES DRAWN BY THE ASSESSEE AND DEP OSITED IN THEIR BANK ACCOUNT. THE PERSONS UNIFORMLY DEPOSED THAT MONEY WAS WITHDRAWN AFTER CLEARING OF CHEQUES AND AFTER RETAINING THEIR COMMI SSION, THE BALANCE OF THE CASH WAS GIVEN BACK TO THE PERSON, WHO GIVE THEM TH E CHEQUE. AT THIS STAGE, WE MAY REPRODUCE HEREINAFTER, THE ANSWER GIVEN BY O NE OF SUCH PERSON I.E. SHRI ASHOK PALAN, WHOSE STATEMENT WAS RECORDED UNDE R SECTION 131(1) OF THE ACT ON 22/01/2007. THE SAID PERSON WAS HAVING, INT ER-ALIA, A PROPRIETARY CONCERN M/S. MUKTA SALES CORPORATION AND QUA THE IN STANT ASSESSMENT YEAR, THE ASSESSEE STATED TO HAVE PURCHASED A PAINTING FOR RS.68,62,500/- FROM THE SAID CONCERN, I.E. ITEM-5 OF THE TABULATION ABOVE. THE RELEVANT PORTION OF THE STATEMENT IS REPRODUCED AS UNDER:- Q11.HAVE YOU MADE ANY BUSINESS TRANSACTIONS WITH(1 ) M/S.OSIANS CONNOISSEURS OF ART PVT. LTD., MUMBAI, AND (2) M/S.ACG ARTS AND PRO PERTIES PVT. LTD., MUMBAI (FORMERLY UNIVERSAL CAPSULES PVT. LTD.) AND (3) M/S .REFLECTION, MUMBAI? 5 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) ANS.YES, I MADE BUSINESS TRANSACTION WITH (1)M/S. O SIANS CONNOISSEURS OF ART PVT. LTD., MUMBAI, AND (2) M/S.ACG ARTS AND PROPERTIES P VT. LTD., MUMBAI (FORMERLY UNIVERSAL CAPSULES PVT. LTD.) AND (3) M/S.REFLECTIO N, MUMBAI. HERE I WISH TO STATE THAT ONE PERSON I.E. SHRI PRA SHANT JHAVERI(BROKER) HAS GIVEN ME THE CHEQUES ISSUED BY M/S. OSIANS CONNOISSEURS OF ART PVT. LTD., MUMBAI, AND M/S.ACG ARTS AND PROPERTIES PVT. LTD., IN THE NAME OF MY PROPRIETARY-SHIP CONCERNS. THEREAFTER I HAVE DEPOSITED THESE CHEQUES IN MY BAN K ACCOUNTS, AFTER CLEARING THE CHEQUES I HAVE WITHDRAWN THE CASH AND HANDED OVER T HE CASH/BEARER CHEQUE/CROSS CHEQUE TO THE SAME PERSONS I.E. SHRI PRASHANT JHAVE RI AFTER DEDUCTING MY COMMISSION RANGING FROM 0.05% TO 0.10%. SINCE I AM IN THE BUSINESS OF BILL DISCOUNTING, I H AVE ISSUED CHEQUES TO M/S. REFLECTION, MUMBAI IN CONNECTION WITH THE ADJUSTMENT OF THE TR ANSACTIONS WITH THE ABOVE CONCERNS. 3.2 BEFORE THE ASSESSING OFFICER, ASSESSEE CONTENDE D THAT THE PURCHASE OF PAINTINGS IS DULY REFLECTED IN THE ACCOUNT BOOKS AN D CONSIDERATION HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES INCLUDING THE VAT PAY MENT. THE ASSESSEE ALSO FURNISHED A CERTIFICATE ISSUED BY ITS BANK TO ESTA BLISH THAT THE ACCOUNT PAYEE CHEQUES ISSUED TO THE SUPPLIERS WERE INDEED CLEARED . IN THIS MANNER, ASSESSEE SOUGHT TO JUSTIFY THE GENUINENESS OF THE ENTRIES OF PURCHASE OF PAINTINGS REFLECTED IN THE ACCOUNT BOOKS, QUA THE FIVE PAINTI NGS IN QUESTION AMOUNTING TO RS.1,68,75,000/-. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE SUBMISSIONS PUT-FORTH BY THE ASSESSEE. THE ASSESS ING OFFICER HAS BASED HIS STAND PRIMARILY ON THE STATEMENT RECORDED FROM THE ISSUERS OF PURCHASE BILLS. THE ASSESSMENT ORDER REVEALS THAT THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FROM WHOM THE PAINTINGS WERE CLAIMED TO B E PURCHASED; AND THAT THE SUMMONS UNDER SECTION 131 OF THE ACT WERE ALSO ISSUED TO SUCH PARTIES. THE ASSESSING OFFICER RECORDS THAT IN RESPONSE TO S UMMONS, ONLY ONE MR.RASHESH SHAH APPEARED AND CONFIRMED THAT HE HAD INDEED SOLD THE PAINTINGS MENTIONED AT ITEM-2&3 OF THE EARLIER TABU LATION. THE SAID STATEMENT OF MR. RASHESH SHAH WAS NOT GIVEN ANY CREDENCE B Y THE ASSESSING OFFICER ON THE GROUND THAT HE DID NOT FURNISH HIS BANK STATEME NT WHEN ASKED FOR; AND, 6 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) SECONDLY, FOR THE REASON THAT IN AN EARLIER DEPOSIT ION BEFORE THE INVESTIGATION WING ON 30/05/2007, THE SAID PERSON HAD DENIED HAV ING SOLD ANY PAINTINGS TO THE ASSESSEE AND REFUSED TO ACCEPT THAT THE RELEVAN T BILLS WERE ISSUED BY HIM. FOR ALL THE SAID REASONS, THE ASSESSING OFFICER TRE ATED THE ENTIRE AMOUNT OF PURCHASE AS UNEXPLAINED. AT THIS STAGE, WE MAY CLA RIFY WITH REFERENCE TO THE TABULATION THAT OUT OF FIVE PAINTINGS, FOUR ARE CL AIMED TO BE IN STOCK AT THE END OF THE YEAR, AND ONE OF THEM I.E. THE PAINING AT IT EM NO.1 WAS SOLD DURING THE YEAR FOR A CONSIDERATION OF RS.16,87,500/-, WHOSE PURCHASE PRICE WAS STATED AT RS.11,25,000/- AND ACCORDINGLY, THE DIFFERENTIAL OF RS.5,62,500/- WAS DECLARED BY THE ASSESSEE AND OFFERED TO TAX THROUGH ITS PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WHILE DETERMINING THE ADDITI ON ON ACCOUNT OF UNPROVED PURCHASES HAS ARRIVED AT RS.1,74,37,500/-, WHICH CO MPRISES OF THE PURCHASE PRICE OF FOUR PAINTINGS IN STOCK OF RS.1,57,50,000/ - PLUS THE SALE VALUE OF PAINTING SOLD OF RS.16,87,500/-. 4. THE ASSESSEE COMPANY CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A) ASSAILING THE ADDITION ON VARIOUS GROUNDS ON FACTS AND IN LAW. THE ASSESSEE COMPANY ASSERTED THAT THE PURCHASES EFFECTED BY THE ASSESSEE AND PAYMENTS MADE THERETO THROUGH ACCOUNT PAYEE CHEQUES WERE GEN UINE AND COULD NOT BE REJECTED AS UNPROVED. REFERRING TO THE STATEMENTS OF THE STATED SUPPLIERS OF PAINTINGS, ASSESSEE CONTENDED THAT THEIR DEPOSITION S CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE, INASMUCH AS, THE SU PPLIERS HAVE OWNED UP THE PAYMENTS MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES. ON THE DEPOSITION OF THE SUPPLIERS OF THE PAINTINGS THAT AFTER CLEARING OF CHEQUES, CASH WAS WITHDRAWN AND HANDED OVER TO THE SAME BROK ER WHO GAVE THEM THE CHEQUE AFTER DEDUCTING THEIR COMMISSION, ASSESSEE C ONTENDED THAT THE SAME DID NOT IMPLY THAT ANY MONEY HAS COME BACK TO THE ASSESSEE. IT WAS ALSO 7 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) SOUGHT TO BE EMPHASIZED THAT WHICHEVER PAINTINGS W ERE FOUND IN THE COURSE OF SEARCH, THE SAME HAVE BEEN ACCOUNTED FOR IN THE BO OKS OF ACCOUNT AND PAYMENTS HAVE BEEN DULY RECORDED FOR THEIR ACQUISIT ION. THE ASSESSEE ALSO POINTED OUT THAT OUT OF FIVE PAINTINGS, ONE WAS SO LD AGAINST A CONSIDERATION OF RS.16,87,500/- RECEIVED FROM M/S. OSWAL TRADERS, AN D THE PROFIT THEREOF HAS BEEN OFFERED FOR TAX AND, THEREFORE, THE CORRESPOND ING PURCHASE COULD NOT BE CONSIDERED AS UNPROVED IN THIS PARTICULAR INSTANCE. FOR ALL THE SAID REASONS, THE ADDITION WAS SOUGHT TO BE ASSAILED BEFORE THE CIT(A ). 4.1 THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANATI ONS PUT-FORTH BY THE ASSESSEE, AND HE UPHELD THE APPROACH OF THE ASSESSI NG OFFICER IN PLACING RELIANCE ON THE DEPOSITION MADE BY THE STATED SELLE RS OF THE PAINTINGS WHO HAD DENIED HAVING ISSUED THE SALE BILLS. THE CIT(A) FU RTHER NOTES THAT THE RESULT OF INVESTIGATIONS REVEALED THAT THE PERSONS SHOWN AS SELLERS OF THE PAINTINGS WERE NOT IN THE BUSINESS OF PAINTINGS AND THEY HAVE NO IDEA OR KNOWLEDGE ABOUT THE BUSINESS OF PAINTINGS AND THAT SUCH PARTIES ADMITTE D THAT THEY HAVE BEEN CARRYING ON CHEQUE DISCOUNTING BUSINESS IN THE NAME OF THEIR SEVERAL BUSINESS ENTITIES. THE CIT(A) ALSO CONCLUDED THAT THE STAT EMENTS OF THE SELLERS WERE RELIABLE TO CONCLUDE THAT CASH CORRESPONDING TO THE VALUE OF THE CHEQUES ISSUED MINUS THE COMMISSION, HAS COME BACK TO THE ASSESSEE THROUGH THE BROKER. THUS, IN SUM AND SUBSTANCE, THE CIT(A) AFF IRMED THE CONCLUSION OF THE ASSESSING OFFICER. IN THIS BACKGROUND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. BEFORE US, THE LD.REPRESENTATIVE FOR THE ASSESSE E VEHEMENTLY POINTED OUT THAT THE LOWER AUTHORITIES HAVE TOTALLY MISDIRE CTED THEMSELVES IN TREATING THE PURCHASES AS UNPROVED. IT IS SOUGHT TO BE CANV ASSED THAT THE FACTUM OF PAINTINGS BEING IN THE POSSESSION OF THE ASSESSEE I S NOT DOUBTED, INASMUCH AS, 8 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) THE PAINTINGS WERE PHYSICALLY FOUND AT THE TIME OF SEARCH, EXCEPT OF-COURSE, IN RELATION TO ONE OF THE PAINTING, WHICH HAD BEEN SOL D. THE LD.REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SO FAR AS THE INSTANT YEAR IS CONCERNED, QUA THE FOUR PAINTINGS WHICH ARE IN STOCK, THERE IS NO NET DEBIT IN PROFIT AND LOSS ACCOUNT WHICH REDUCES THE TAXABLE INCOME, INASMUC H AS , WHATEVER PURCHASE PRICE IS DEBITED, THE SAME HAS BEEN CARRIED FORWARD AS CLOSING STOCK. IN RELATION TO ONE PAINTING, WHOSE STATED COST IS RS. 11,25,000/-, THE SAME HAS BEEN SOLD FOR RS.16,87,500/- AND THE ASSESSEE HAS A NET CREDIT IN ITS PROFIT & LOSS ACCOUNT OF RS.5,62,500/-. SO FAR AS THE ST ATEMENT GIVEN BY THE SELLERS TO THE DEPARTMENT IS CONCERNED, THE LD.REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID DEPOSITION CLEARLY BRING OUT THAT THE TRANSACTIONS WERE UNDERTAKEN, AND THEY CANNOT BE INTERPRETED TO SAY THAT ANY CONSIDERATION HAS FLOWN BACK TO THE ASSESSEE AND ASSESSEE ALONE. REF ERRING TO THE NATURE AND DESCRIPTION OF THE PAINTINGS, IT IS POINTED OUT THA T THE SAME ARE ART WORKS DONE BY RENOWNED PERSONS VIZ. M.F.HUSSAIN, CHITABANU MAZUMDAR,GANESH HALOI, ETC. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINT ED OUT THAT IF THE MODUS OPERANDI SOUGHT TO BE ESTABLISHED BY THE ASSESSIN G OFFICER IS ACCEPTED, I.E. THE CONSIDERATION PAID THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN RETURNED TO THE ASSESSEE IN THE FORM OF CASH, IT WOULD MEAN THA T ASSESSEE HAS BOTH MONEY AS WELL AS PAINTINGS IN ITS POSSESSION, WHICH IS QU ITE ABSURD BECAUSE OBVIOUSLY, SUCH LIKE ART WORK HAS SIGNIFICANT VALUE, AND COULD NOT HAVE BEEN ACQUIRED BY THE ASSESSEE FOR FREE. AT THE TIME OF HEARING, REL IANCE HAS ALSO BEEN PLACED ON THE FOLLOWING DECISIONS OF OUR CO-ORDINATE BENCHES, WHEREIN SOMEWHAT SIMILAR ADDITIONS MADE IN THE CASES OF OTHER GROUP CONCERNS, BASED ON A SIMILAR STAND OF THE ASSESSING AUTHORITY, HAS BEEN DELETED: - (I) MRS. KAVITA SINGH(PRO.OF REFLECTIONS) VS.DCIT, 9 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) ITA NOS.1240& 1241/MUM/2012,A.YS. 2006-07&2007-08 ORDER DATED 28/10/2015. (II) ACG ASSOCIATED CAPSULES PVT. LTD. VS. ACIT, IT A NOS.2829&2830/MUM/2014 A.YS 2006-07 & 2007-08 ORDER DATED 25/02/2015 . (III) NEPEAN SEA HOLDINGS PVT. LTD. VS. DCIT, ITA N O.1237/MUM/2012, ORDER DATED 23/09/2016. 5.1 WITH REGARD TO THE ELEMENT OF ADDITION REGARDIN G ITEM 1 OF THE TABULATION I.E. PAINTING OF CHITABANU MAZUMDAR WHI CH HAS BEEN SOLD DURING THE YEAR, THE LD.REPRESENTATIVE FOR THE ASSESSEE RE LIED UPON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. NIKUNJ EXIMP ENTERPRISES (P) LTD.,(2013) 35 TAXMANN.COM 384 (BOM). IT IS SO UGHT TO BE CANVASSED THAT WHERE THE SALE OF THE PURCHASED GOODS IS NOT DOUBTE D, THE PURCHASES COULD NOT BE TREATED AS UNEXPLAINED. IT HAS BEEN POINTED OUT THAT SO FAR AS THE SALE OF PAINTING MADE TO M/S. OSWAL TRADERS OF RS.16,87,500 /- IS CONCERNED, THE SAME HAS NOT BEEN DOUBTED AND, THEREFORE, QUA THE CORRES PONDING PURCHASE OF RS.11,25,000/-, NO ADVERSE VIEW CAN BE TAKEN. IN T HIS MANNER, THE ADDITION HAS BEEN SOUGHT TO BE ASSAILED. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE HAS PRIMARILY RELIED UPON THE STAND OF THE AUTHORITIES BELOW, WHI CH WE HAVE ALREADY NOTED IN SOME DETAIL IN EARLIER PARAS AND IS NOT BEING REPEA TED FOR THE SAKE OF BREVITY. IN NUTSHELL, THE LD. DEPARTMENTAL REPRESENTATIVE P OINTED OUT THAT THE SEARCH PROCEEDINGS REVEALED THAT ASSESSEE AND ITS GROUP CO NCERNS WERE IN POSSESSION OF VALUABLE ART WORKS, WHOSE SOURCE OF ACQUISITION COULD NOT BE FULLY EXPLAINED. IT IS POINTED OUT THAT THE STATEMENT O F THE SELLERS BRING OUT THAT THE TRANSACTION OF PURCHASE OF PAINTINGS AS CLAIMED B Y THE ASSESSEE WERE NOT PROVED. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE PVT. LTD., 10 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) 208 ITR 465 (CAL), FOR THE PROPOSITION THAT A TRANS ACTION COULD NOT BE SAID TO BE GENUINE MERELY BECAUSE THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THE INSTANT, THE CASE MADE OUT BY THE ASSESSING OFFICER IS THAT THE PURCHASE OF PAINTINGS BY THE ASSESSEE IS UNPROVED. FACTUALLY SPEAKING, THE EXIS TENCE OF THE PAINTINGS AND THE SAME BEING IN THE POSSESSION OF THE ASSESSEE, I S NOT IN DISPUTE, INASMUCH AS, ALL THE PAINTINGS IN QUESTION, EXCEPT ONE (WHIC H HAS BEEN SOLD DURING THE YEAR) ARE AVAILABLE AS A PART OF THE CLOSING STOCK. IN FACT, THE CRUX OF THE DISPUTE IS WITH REGARD TO THE POINT OF PURCHASE OF THE PAIN TINGS. THE DEPOSITIONS OF THE STATED SUPPLIERS/SELLERS HAVE BEEN RELIED UPON BY T HE REVENUE TO CONTEND THAT NO SUCH PAINTINGS WERE INDEED SOLD/SUPPLIED BY THEM TO THE ASSESSEE. NOTABLY, ASSESSEE DEMONSTRATED BEFORE THE LOWER AUTHORITIES THAT THE CONSIDERATION PAID TO SUCH SELLERS/SUPPLIERS WAS THROUGH ACCOUNT PAYEE CHEQUES, WHICH STOOD ULTIMATELY CREDITED IN THE ACCOUNTS OF SUCH S UPPLIERS/SELLERS. OUR CO- ORDINATE BENCH IN THE CASE OF ACG CAPSULES PVT. LTD .(SUPRA) IN SIMILAR CIRCUMSTANCES HELD THAT WE DO NOT FIND ANY MERIT FOR ADDING THE AMOUNT OF PAINTINGS IN THE ASSESSEES INCOME WHEN THE SOURCE OF FUNDS FOR MAKING SUCH PURCHASE WAS NOT IN DISPUTE, NOR THE PHYSICAL FORM OF PAINTINGS. IN THE CASE OF M/S. KAVITA SINGH( PROPRIETOR OF REFLECTIONS) (SUPR A) ALSO SIMILAR SITUATION PREVAILED AND THE ADDITION MADE ON ACCOUNT OF UNPRO VED PURCHASES WAS DELETED. IN COMING TO SUCH DECISION, THE BENCH NOT ED THAT THE RIGHT OF CROSS EXAMINATION WHICH WAS PRAYED FOR BY THE ASSESSEE WA S ALSO NOT ALLOWED TO HER. IF THIS OPPORTUNITY WOULD HAVE BEEN GIVEN, THE PICT URE WOULD PROBABLY MUCH MORE CLEAR. 11 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) 7.1 NOW, WE MAY BRIEFLY TOUCH UPON THE STATEMENT OF THE SUPPLIERS/SELLERS RELIED UPON BY THE REVENUE. THE CASE MADE OUT IS T HAT THE STATED SUPPLIERS/SELLERS OF PAINTINGS OF THE ASSESSEE RECE IVED CHEQUES AND AFTER CLEARANCE WITHDREW THE CASH AND AFTER DEDUCTING TH EIR COMMISSION, BALANCE OF CASH WAS HANDED OVER TO THE PERSON WHO CAME WIT H THE CHEQUES. THE SUPPLIERS ALSO STATED THAT THEY WERE IN THE BUSINES S OF BILL DISCOUNTING AND ADJUSTMENT TRANSACTIONS. IT HAS ALSO BEEN POINTED OUT THAT THE STATED SUPPLIERS/SELLERS ARE NOT IN THE BUSINESS OF PAINTI NGS AND THEREFORE, THE TRANSACTION OF PURCHASE AS CANVASSED BY THE ASSESSE E IS NOT PROVED. IN THIS CONTEXT, WE FIND THAT THERE NOT ENOUGH MATERIAL WIT H THE REVENUE TO ESTABLISH THAT THE PURCHASE OF PAINTINGS IS PER-SE BOGUS, AS OUR SUBSEQUENT DISCUSSION WOULD SHOW. PERTINENTLY, EXISTENCE OF THE TRANSAC TION BETWEEN ASSESSEE AND THE STATED SUPPLIERS/SELLERS CANNOT BE DOUBTED, INA SMUCH AS, THE CONSIDERATION HAS FLOWN FROM THE ASSESSEE TO SUCH PARTIES BY AC COUNT PAYEE CHEQUES, WHICH STAND CLEARED TO THE CREDIT OF THE BANK ACCOUNT O F SUCH SUPPLIERS. WHILE WE AGREE WITH THE REASONING OF THE LD. DEPARTMENTAL RE PRESENTATIVE THAT PAYMENT BY ACCOUNT PAYEE CHEQUES BY ITSELF DOES NOT PROVE G ENUINENESS OF THE TRANSACTION BUT IN THE INSTANT CASE MORE IS REQUIRE D TO PROVE THAT THE TRANSACTION WAS BOGUS. WE SAY SO FOR THE REASON THA T IN THE PRESENT CASE, THE EXISTENCE OF PAINTINGS IN THE POSSESSION OF THE ASS ESSEE, OF-COURSE, EXCEPT ONE WHICH HAS BEEN SOLD, IS NOT IN DISPUTE. THE STATEME NT OF THE STATED SUPPLIERS/SELLERS DOES NOT PROVE THAT THE CONSIDERA TION GOING OUT OF THE ASSESSEES BANK ACCOUNT HAS COME BACK TO THE ASSES SEE IN THE FORM OF CASH. QUITE CLEARLY, EVEN THE STATEMENT GIVEN BY THE STAT ED SUPPLIERS/SELLERS ONLY SAY THAT CASH WAS RETURNED BY THEM TO THE PERSON WHO GA VE THEM THE CHEQUES; THERE IS UNIFORMITY IN THE STATEMENTS ON THE A FORESAID ASPECT. AT THIS POINT, 12 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) WE MAY LIKE TO EMPHASIZE THAT IT WAS FOR THE REVENU E TO ESTABLISH THE LINK, IF ANY, BETWEEN THE PERSON WHO IS STATED TO HAVE RECEI VED BACK THE CASH FROM THE STATED SUPPLIERS/SELLERS AND THE ASSESSEE. IT IS IN THIS BACKGROUND, ONE HAS TO APPRECIATE THE REASONING GIVEN BY OUR CO-ORDINAT E BENCH IN THE CASE OF M/S. KAVITA SINGH (PROPRIETOR OF REFLECTIONS)(SUPRA) THA T RIGHT OF CROSS EXAMINATION OF THE SUPPLIERS OUGHT TO HAVE BEEN ALLOWED. IF TH E AFORESAID EXERCISE WOULD HAVE BEEN DONE, THE COMPLETE PICTURE WOULD HAVE EME RGED. OTHERWISE, THE ONLY PRUDENT INFERENCE THAT CAN BE DRAWN IS THAT T HE PAINTINGS IN QUESTION HAVE INDEED BEEN PURCHASED, BECAUSE THEY EXIST IN T HE POSSESSION OF THE ASSESSEE; AND, AT BEST THE PURCHASES HAD BEEN EFFEC TED FROM SOME OTHER PARTIES AND NOT THE STATED SUPPLIERS/SELLERS. IN F ACT, AS PER THE GIVEN STATE OF VERIFICATION, IT CAN ALSO BE A PROBABILITY THAT ST ATED SUPPLIERS/SELLERS HAVE ACTED FOR AND ON BEHALF OF THE ACTUAL SELLERS OF PAINTING S TO THE ASSESSEE AND IF THAT BE SO THEN NO FAULT CAN BE FOUND WITH THE TRANSACTI ON CARRIED OUT BY THE ASSESSEE. THEREFORE, FOR ALL THESE REASONS, WE SAY THAT THERE IS NOT ENOUGH MATERIAL WITH THE REVENUE TO TREAT THE PURCHASE TRA NSACTION AS BOGUS OR NOT PROVED. BE THAT AS IT MAY, IN OUR CONSIDERED OPINIO N, WE FIND NO JUSTIFIABLE REASON TO DEPART FROM THE CONCLUSION DRAWN BY OUR C O-ORDINATE BENCHES IN THE CASES OF MRS. KAVITA SINGH(PROPRIETOR OF REFLELCTIO NS) (SUPRA) AND ACG CAPSULES PVT. LTD.(SUPRA), WHEREIN ALSO SIMILAR STA ND OF THE REVENUE, QUA PURCHASE OF PAINTINGS FOUND IN THE SEARCH, HAS BEEN FOUND TO BE UNSUSTAINABLE. IN THE CASE OF NEPEAN HOLDINGS PVT. LTD. HOLDINGS (SUPRA) THE TRIBUNAL ALSO FOUND IT FIT TO FOLLOW THE EARLIER D ECISION IN THE CASE OF MRS. KAVITA SINGH (PROPRIETOR OF REFLECTIONS) (SUPRA) IN DELETING SIMILAR ADDITIONS. 7.2 IN FACT, WITH REGARD TO ONE OF THE TRANSACTION, WHEREIN ONE PAINTING HAS BEEN SOLD AND PROFIT THEREOF HAS BEEN CREDITED IN T HE P&L ACCOUNT, THERE IS NO 13 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) DOUBT ABOUT THE SALE MADE. THE LD.REPRESENTATIVE FOR THE ASSESSEE IS QUITE JUSTIFIED IN INVOKING THE RATIO LAID DOWN BY THE HO N'BLE BOMBAY HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (P) LTD.(SUPR A), IN SUCH A SITUATION, TO CANVASS THAT WHERE SALE OF PURCHASED GOODS IS NOT DOUBTED, THE CORRESPONDING PURCHASES COULD NOT BE CONSTRUED AS B OGUS. 7.4 FOR ALL THE ABOVE REASONS, WE DEEM IT FIT AND PROPER TO SET-ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. ITA NO.3778/MUM/2012: 8. AT THE TIME OF HEARING, IT WAS A COMMON POINT B ETWEEN THE PARTIES THAT SO FAR AS APPEAL IN ITA NO.3778/MUM/2012 FOR ASSE SSMENT YEAR 2007-08 IS CONCERNED, THE ISSUE RAISED IS SIMILAR TO THE GROU NDS OF APPEAL DEALT WITH BY US IN ITA NO.1238/MUM/2012 FOR ASSESSMENT YEAR 200 6-07. AS A CONSEQUENCE, OUR DECISION IN ITA NO.1238/MUM/2012 FOR ASSESSME NT YEAR 2006-07 SHALL APPLY MUTATIS MUTANDIS IN THE APPEAL FOR ASSESSMENT YEAR 2007-08 ALSO. 9. RESULTANTLY, CAPTIONED APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/03/2018 . SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 23/03/2018 VM , SR. PS 14 ITA NO.1238/MUM/2012, (A.Y. 2006-07) ITA NO.3778/MUM/2012, (A.Y. 2007-08) 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