SHREEKISHAN JOSHI, MUMBAI V. JCIT 24(2), MUMBAI

ITA 1259/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5723 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 22-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Keywords: Unexplained expenditure; Accommodation entries
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1259 /MUM/2017 ASSESSMENT YEAR: 2011 - 1 2 SHRI SHREEKISHAN JOSHI 922/923, 9 TH FLOOR CORPORATE AVENUE SONAWALA ROAD, GOREGAON (E) MUMBAI - 400063. VS. DCIT 30(2) C - 13/5 TH F LOOR BANDRA KURLA COMPLEX MUMBAI - 400051. PAN NO. AABPJ7710M APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MS. AARJU GARODIA, DR DATE OF HEARING : 03/07/2018 DATE OF PRONOUNCEMENT : 11/07/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 201 1 - 1 2 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 41 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). THOUGH THE CASE WAS FIXED FOR HEARING ON 03.07.2018 , NEITHER THE ASSESSEE NOR HIS AUTHORI ZED REPRESENTATIVE APPEARED. WE DECIDE THE CASE BELOW ON THE BASIS OF THE ARGUMENT OF THE LD. DR AND THE MATERIALS AVAILABLE ON RECORD. SHRI SHREEKRISHAN JOSHI ITA NO. 1259/MUM/2017 2 2. THE 1 ST GROUND OF APPEAL ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE ERRED IN CONFIRMING/RETAINING THE ADDITION TO THE EXTENT OF 30% AMOUNTING TO RS.6,07,933/ - OF THE PURCHASE VALUE OF SO CALLED PURCHASES FROM GENUINE PARTIES AMOUNTING TO RS.20,26,444/ - U/S 69C OF THE I.T. ACT AND THE REASONS ASSIGNED BY THEM WERE WHOLLY WRONG AND NOT IN ACCORDANCE WITH THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF INCOME TAX ACT AND RULES MADE THERE UNDER. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (I NV), MUMBAI THAT THE ASSESSEE HAD MADE PURCHASES OF RS.20,26,444/ - FROM FOLLOWING FOUR HAWALA PARTIES, WHO WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY . A. ASIAN STEEL RS.7,76,017/ - B. MEHUL TRADERS RS. 2,00,070/ - C. KRISHAN TRADING ASSOCIATES RS. 4,50,052/ - D. RIDHI SIDDHI CORPORATION RS.6,00,305/ - TOTAL RS.20,26,444/ - IN ORDER TO VERIFY THE TRANSACTIONS, THE AO ISSUED NOTICE U/S 133(6) TO THE ABOVE PARTIES. IN THE CASE OF TWO PARTIES, THE NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES AS UNSERVED. NO REPLY WAS RECEIVED FROM THE OTHER TWO PARTIES, WHERE THE NOTIC ES WERE SERVED. THE AO NOTED THAT THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES FOR VERIFICATION. HOWEVER, THE ASSESSEE FILED COPIES OF THE BILLS AND LEDGER SHRI SHREEKRISHAN JOSHI ITA NO. 1259/MUM/2017 3 ACCOUNTS OF THE ABOVE PARTIES BEFORE THE AO. THE AO RELIED ON THE DEPOSITION MADE BY THE PROPRIE TORS OF THE ABOVE PARTIES THAT THEY HAD ONLY ISSUED TAX INVOICES TO THE ASSESSEE AND HAD NOT CONDUCTED ANY ACTUAL BUSINESS. THUS THE AO MADE AN ADDITION OF RS.20,26,444/ - AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE HELD THAT THE DISALLOWANCE TO THE EXTENT OF 100% IS NOT JUSTIFIED FOR THE REASON THAT IT WAS NOT PROVED THAT THE ASSESSEE HAD NOT P URCHASED ANY MATERIAL FROM ANY SOURCE AND THE ENTIRE CASH RECEIVED ON AFORESAID ACCOMMODATION ENTRIES WERE REALIZED BY THE ASSESSEE. THEREFORE, THE LD. CIT(A) SUSTAINED 30% OF THE DISALLOWANCE MADE BY THE AO WHICH COMES TO RS.6,07,933/ - . 5. BEFORE US, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES W ERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR V IEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). SHRI SHREEKRISHAN JOSHI ITA NO. 1259/MUM/2017 4 SO CONSIDERING THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 12.5% OF THE DISPUTED PURCHASE OF RS.20,26,444/ - . THUS THE 1 ST GROUND OF APPEAL IS PARTLY ALLOWED. 7. THE 2 ND GROUND OF APPEAL ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE ERRED IN DISALLOWING A SUM OF RS.3,12,702/ - U/S 40(A)(IA) OF THE IT ACT FROM OUT OF INTEREST PAID TO BANK/FINANCIAL INSTRUCTIONS AND THE REASONS ASSIGNED BY THEM WERE WHOLLY WRONG, AND NOT IN ACCORDANCE WITH THE PROVISIONS OF IT ACT AND RULES MADE THERE UNDER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD NOT MADE TDS ON INTEREST PAID TO THE FOLLOWING PARTIES: 1. CHOLAMANDALAM DBS RS.31,1 47 2. M&M FINANCIALS LTD. RS.1,01,963/ - 3. RELIANCE CAPITAL LTD. RS.85,115/ - 4. RELIGARE FINVEST LTD. RS.94,477/ - RS.3,12,702/ - AS THE ASSESSEE FAILED TO MAKE THE TDS, THE AO MADE A DISALLOWANCE OF RS.3,12,702/ - U/S 40(A)(IA) OF THE ACT. 9. IN APPEAL, THE LD. CIT(A) OBSERVED THAT THE ABOVE CONCERNS ARE NOT EXEMPT U/S 194A AND INTEREST PAID TO THEM SHOULD HAVE BEEN SUBJECTED TO TDS. THE LD. CIT(A) FOLLOWED THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THOMAS GEORGE MUTHOOT V. CIT (2015) 63 TAXMANN.COM 99 SHRI SHREEKRISHAN JOSHI ITA NO. 1259/MUM/2017 5 (KER . ) AND HELD THAT WHETHER THE PAYEE HAS CONSIDERED THE RECEIPT AS INCOME AND PAID TAX THEREON DOES NOT AFFECT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THUS THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 10. BEFORE US, THE LD . DR RELIES ON THE ORDER OF THE LD. CIT(A). 11. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE ABOVE ISSUE IS SQUARELY COVERED BY THE DECISION IN THOMAS GEORGE MUTHOOT (SUPRA) AND FOLLOWING THE SAME WE UPHOLD THE O RDER OF THE LD. CIT(A) AND DISMISS THE 2 ND GROUND OF APPEAL. 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/07/2018 . SD/ - SD/ - ( JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 11/07/2018 RAHUL SHARMA, SR. P.S. 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