The ITO, Ward-4, Navsari V. Shri Tejpal Kirtilal Shah, Navsari

ITA 1440/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6132 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 11-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI LAXMI
• Assessee Lawyers: S B VAIDYA
• Keywords: Unexplained investment; Income from undisclosed sources; Corroborative evidences; Commercial expediency
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : A HMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 1440/AHD./2007 ASSESSMENT YEAR : 2001-2002 INCOME TAX OFFICER, WARD-4, NAVSARI VS.- SHRI TEJPAL KIRTILAL SHAH, NAVSARI (PAN : AEQPS 6756 M) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI LAXMI, SR . D.R. RESPONDENT BY : SHRI S.B. VAIDYA O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 01.12.2006 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), VALSAD DELETIN G THE ADDITION OF RS.7,98,037/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INV ESTMENT IN PURCHASE UNDER SECTION 69C OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2001-0 2. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL ENGAGED IN THE BUSINESS OF DEALING IN DIAMONDS. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.51,590/-. THE ASSESSIN G OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3), WHEREIN HE MADE THE ADDITION OF RS. 7,98,037/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES. THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER STATED THAT THE ASSESSEE MADE PURCHASES FROM M/S. MAYURI DIAMONDS (PROPRIETO R HASMUKH B. SHAH) OF SURAT AND THAT HE WAS NOT HAVING ANY BUSINESS ESTABLISHMENT, ANY OTHE R OFFICE FACILITIES AND HAD NOT PRODUCED ANY SUPPORTING EVIDENCES FOR HIS BUSINESS DURING THE AS SESSMENT PROCEEDINGS. THE ASSESSING OFFICER ALSO STATED THAT THE ASSESSEE HAD CARRIED OUT VERY LIMITED BUSINESS ACTIVITIES AS UNDER :- DATE OF PURCHASE FROM WHOM PURCHASE AMOUNT (RS.) DATE OF SALE TO WHOM SOLD SALE AMOUNT (RS.) 24.03.2001 MAYURI DIAMONDS 4,81,687/- 26.03.2001 MEGAN MEHTA & SONS 5,06,460/- 27.03.2001 BINAL GEMS 3,16,350/- 29.03.2001 MEHTA DIAMONDS 3,33,925/- 7,98,037/- 8,40,385/- 2 ITA NO. 1440/AHD/2007 2.1. THE ASSESSING OFFICER HAS ALSO STATED THAT THE ASSESSEE HAD MADE PAYMENT FOR HIS PURCHASES ON THE SAME DATE WHEN HE RECEIVED THE PAY MENTS FROM M/S. M.M. & SONS AND MEHTA DIAMONDS TO WHOM GOODS WERE SOLD. THEREFORE, THE AS SESSING OFFICER CONCLUDED THAT THE ASSESSEE WAS INVOLVED IN THE GAME OF HAWALA ENTRIES AND ACCORDING TO HIM, THE ASSESSEE HAD INTRODUCED HIS UNACCOUNTED INCOME FOR THE TIME BEIN G TO GIVE COLOUR OF PURCHASES AND SALES. ON THIS GROUND ALONE, THE ASSESSING OFFICER ADDED RS.7 ,98,037/- AS UNACCOUNTED INVESTMENT IN PURCHASES. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), THE LD. COUNSEL OF THE ASSESSEE ARGUED THAT THE ASSESSEE HAD CARRIED O UT GENUINE BUSINESS ON VERY LIMITED BASIS FOR TRADING OF DIAMOND JEWELLERY. IT WAS CONTENDED THAT THE ASSESSEE PURCHASED DIAMOND JEWELLERY THROUGH TWO BILLS AND IMMEDIATELY SOLD OUT THE SAME BY ADDING HIS PROFIT MARGIN AND AS AND WHEN HE RECEIVED PAYMENTS FROM HIS DEBTORS, HE PAID THE AMOUNT DUE TO HIS CREDITORS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD MADE ALL TH E TRANSACTIONS THROUGH CHEQUES AND HE WAS LEAST CONCERNED WITH THE AFFAIRS OF THE PARTIES FRO M WHOM HE HAD PURCHASED THE GOODS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD DISCHARGED HIS LIA BILITY OF PAYMENTS FOR PURCHASES AND THERE WAS NO REASON FOR HIM TO LOOK IN TO THE FINANCIAL AFFAI RS OF SHRI HASMUKHBHAI B. SHAH TO ASCERTAIN AS TO WHAT HE DID FROM THE AMOUNT RECEIVED BY HIM. WIT H REGARD TO RELIANCE PLACED BY THE ASSESSING OFFICER ON THE ASSESSMENT OF HASMUKHLAL B. SHAH (PR OPRIETOR OF MAYURI DIAMONDS), IT WAS CONTENDED THAT THERE WAS NOTHING WRONG IN MAKING PA YMENTS TO SUPPLIERS IMMEDIATELY AS A NORMAL BUSINESS PRACTICE AND COMMERCIAL EXPEDIENCY. 3.1. AFTER CONSIDERING THE VARIOUS SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADD ITION FOR THE REASONS GIVEN IN PARA 6.4 ON PAGES 8-9, WHICH READS AS UNDER :- 6.4. I HAVE CONSIDERED THE OBSERVATION OF THE A.O. IN THE ASSESSMENT ORDER AS WELL AS HIS COMMENTS IN THE REMAND REPORT. I HAV E ALSO CAREFULLY CONSIDERED THE SUBMISSION OF THE AR. I FIND THAT THE A.O. HAS NO EVIDENCE IN HIS POSSESSION TO ESTABLISH THAT THE PURCHASE AND SALES TRANSACTIO NS WERE BOGUS. THE APPELLANT HAD SUBMITTED THE PURCHASE AND SALES BILL AND IT IS SEEN THAT ALL THE TRANSACTIONS HAVE BEEN MADE BY CHEQUES. MOREOVER, ALL THE TRANSA CTIONS WERE RECORDED IN THE BOOKS OF ACCOUNTS AND NO PURCHASE WAS FOUND TO BE OUTSIDE THE BOOKS OF ACCOUNTS. THE A.O. DOUBTED PURCHASES FROM ONE PARTY AD TREATED THE ENTIRE 3 ITA NO. 1440/AHD/2007 PURCHASES AS BOGUS, WHICH IS ALSO NOT CORRECT. ALSO THE A.O. FAILED TO PROVE THAT THE SALES MADE BY THE APPELLANT WAS BOGUS. THEREFOR E, IF SALES ARE GENUINE, THERE IS NO REASON TO DOUBT THE PURCHASES. I AGREE WITH THE CONTENTION OF THE AR THAT BY RECORDING THE TRANSACTIONS OF PURCHASES AND SALES, NO ADDITIONAL FUND HAS BEEN INTRODUCED IN THE BOOKS OF ACCOUNTS EXCEPT THE PROFIT MARGIN EARNED OUT OF THESE TRANSACTION WHICH WAS ALREADY OFFERED BY THE APPELLANT FOR TAXATION. I DO NOT FIND ANY REASON TO SUPPORT THE VIEW OF THE ASSESSING OFFICER THAT THE APPELLANT HAD MADE UNACCOUNTED INVESTMENT IN PURCHA SES TO THE TUNE OF RS.7,98,037/-. IT IS CLEAR FROM THE RECORDS THAT AL L THE PURCHASES AND SALES ARE RECORDED IN THE BOOKS OF ACCOUNTS AND THEREFORE, IT IS NOT A CASE OF A.O. THAT ANY UNACCOUNTED INCOME HAS BEEN INTRODUCED IN THE BOOKS OF ACCOUNTS OR THE APPELLANT MADE ANY SALES OUT OF BOOKS OF ACCOUNTS. THIS IS NEITHER A CASE OF ANY UNEXPLAINED INVESTMENT, WHICH IS NOT RECORDED IN TH E BOOKS OF ACCOUNTS. CONSIDERING THIS, THERE IS NO CASE FOR A.O. TO TREA T RS.7,98,037/- AS UNACCOUNTED INVESTMENT IN PURCHASES. THE A.O. IS HEREBY DIRECTE D TO DELETE THE ADDITION OF RS.7,98,037/-. AS A RESULT, THIS GROUND OF APPEAL S TANDS ALLOWED. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF R EVENUE SMT. JYOTI LAXMI, SR. D.R. APPEARED AND CONTENDED THAT SHRI HASMUKH B. SHAH, P ROPRIETOR OF M/S. MAYURI DIAMONDS, FROM WHOM THE ASSESSEE HAD PURCHASED DIAMONDS, INVOLVED IN THE GAME OF HAWALA TRANSACTIONS AND HAD INTRODUCED HIS UNACCOUNTED INCOME TO GIVE COLOU R OF PURCHASE AND SALES. THE LD. D.R. CONTENDED THAT THE ASSESSEE WAS NOT HAVING ANY BUSI NESS ESTABLISHMENT, ANY OTHER OFFICE FACILITIES AND HAD NOT PRODUCED ANY SUPPORTING EVIDENCES FOR H IS BUSINESS DURING ASSESSMENT PROCEEDINGS. SHE CONTENDED THAT THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) DELETED THE ADDITION CONSIDERING THIS VITAL FACT MENTIONED BY THE ASSESS ING OFFICER IN THE ASSESSMENT ORDER. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD MADE ONLY BUSINESS OF HAWALA AND MADE BUSINESS IN THE FAG END OF THE MARCH, 2001. SHE CONTENDED THAT THE ASSESSEE HAS NOT MADE ANY BUSINESS OF TRADING OF DIAMOND THROUGHOUT THE YEAR WITH ANY OTHER PARTIES. THIS ALONE CLEARLY INDICATES THAT PURCHASE AND SALES MADE BY THE ASSESSEE IS NOTHING BUT FROM HAWALA ENTIRES AND THAT THE ASSESSEE COULD NOT PRODUCE DETAILS AND EVIDENCES IN RESPECT OF MOD E OF TRANSPORTATION OF DIAMONDS. THE LD. D.R. SUBMITTED THAT BEFORE THE ASSESSING OFFICER THE ASS ESSEE ADMITTED THAT THE ASSESSEE DOES NOT HAVE ANYTHING ABOUT THE MODE OF TRANSPORTATION OF DIAMON DS. TO SUM UP, THE LD. D.R. SUBMITTED THAT SINCE THE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM OF PURCHASE OR SALE BY SUPPORTING EVIDENCES, THE ASSESSING OFFICER RIGHTLY HELD THAT PURCHASE AND SA LES TRANSACTIONS WERE BOGUS. THEREFORE, SHE 4 ITA NO. 1440/AHD/2007 SUGGESTED THAT THE ADDITION OF RS.7,98,037/- MADE B Y THE ASSESSING OFFICER UNDER SECTION 69C OF THE ACT BE RESTORED. 5. ON THE OTHER HAND, SHRI S.B. VAIDYA, LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE PRODUCED A COPY OF THE DECISION DATED 07.11.2008 OF ITAT, B BENCH, AHMEDABAD IN ITA NO. 1622/AHD/2005 FOR THE ASSESSMENT YEAR 2001-02 IN TH E CASE OF ITO VS.- SHRI HASMUKHLAL BABULAL SHAH, WHEREIN TRIBUNAL IN PARA 13 HELD THAT SHRI HASMUKH B. SHAH, PROPRIETOR OF M/S. MAYURI DIAMONDS, FROM WHOM THE ASSESSEE HAD PURCHAS ED DIAMONDS, IS DOING GENUINE BUSINESS. THEREFORE, THE LD. COUNSEL CONTENDED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSING O FFICER MADE THE ADDITION OF RS.7,98,037/- UNDER SECTION 68C OF THE ACT ON DOUBTS AND SUSPICION, WHI CH IS EVIDENT FROM THE FACT THAT THE ITAT, B BENCH, AHMEDABAD VIDE ORDER DATED 07.11.2008 IN ITA NO. 1622/AHD/2005 FOR THE ASSESSMENT YEAR 2001-02 IN THE CASE OF ITO VS.- SHRI HASMUKHL AL BABULAL SHAH HELD THAT HE IS ENGAGED IN GENUINE BUSINESS OF PURCHASES AND SALES OF DIAMONDS . BY CONSIDERING THE TOTALITY OF THE FACTS, WE ARE CONVINCED THAT THERE IS NO JUSTIFICATION WHATSO EVER FOR HOLDING THAT PURCHASES AND SALES MADE BY THE ASSESSEE ARE NOT GENUINE. WE, THEREFORE, INC LINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 04.06.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 04 / 06 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.