SIMPLEX CASTING LTD., MUMBAI V. DCIT(OSD)-3(1), MUMBAI

ITA 1562/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2056 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR CHAND
• Assessee Lawyers: S C TIWARI
• Keywords: Wrong claim
• Section: 143(3); 142(1); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 1562/MUM/2015 : (A.Y : 2010-11) M/S. SIMPLEX CASTING LTD., 601-602A, FAIRLINK CENTRE, OFF ANDHERI LINK ROAD, ANDHERI (W), MUMBAI 400 053. PAN : AABCS4650E (APPELLANT) VS. DCIT (OSD)-3(1), MUMBAI (RESPONDENT) ITA NO. 2472/MUM/2015 : (A.Y : 2010-11) DCIT-11(2)(1), MUMBAI (APPELLANT) VS. M/S. SIMPLEX CASTING LTD., 601-602A, FAIRLINK CENTRE, OFF ANDHERI LINK ROAD, ANDHERI (W), MUMBAI 400 053. PAN : AABCS4650E (RESPONDENT) ASSESSEE BY : SHRI S.C. TIWARI REVENUE BY : SHRI NARENDRA KUMAR CHAND DATE OF HEARING : 09/09/2016 DATE OF PRONOUNCEMENT : 04/11/2016 O R D E R THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A)-8, MUMBAI DATED 30.01.2 015, PERTAINING TO THE ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARIS EN FROM THE ORDER 2 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) PASSED BY THE ASSESSING OFFICER DATED 31.03.2013 UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. WE MAY FIRST TAKE UP APPEAL OF ASSESSEE WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE OF THE APPELLANT AND IN LAW, LD. CIT(APPEAL) HAS ERRED IN CONFIRMING DISALLOWANCE OF 25% OF ALLEGED UNVERIFIED PURCHASES/EXPENDITURE. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT AND IN LAW, LD. CIT(A) HAS ERRED I N UPHOLDING DISALLOWANCE OF RS.4,38,96,447/- WHEREAS THE AGGREGATE AMOUNT OF SP ECIFIED INSTANCES ENUMERATED IN PARAGRAPH 6.2 OF THE IMPUGNED ORDER I S RS.1,38,45,354/-. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT AND IN LAW, LD. CIT(A) HAS ERRED I N NOT DIRECTING DEDUCTION FOR ASSESSMENT YEAR 2011-12 OF THE SUM OF RS.1,13,58,80 9/- AS ENUMERATED IN PARAGRAPH 6.2 OF THE IMPUGNED ORDER, MORE SO WHEN H E HIMSELF HAS DECIDED THE APPELLANTS APPEAL BEARING NO. CIT(A)-8/IT-598/ 13-14 FOR ASSESSMENT YEAR 2011-12 ON EVEN DATE AND IN NOT DIRECTING AMOU NT OF RS.24,77,708/- FOR DEDUCTION FOR ASSESSMENT YEAR 2009-10 AS HELD BY HI M IN THE IMPUGNED ORDER. 4. THAT THE IMPUGNED ORDER BEING CONTRARY TO LAW, M ATERIAL ON RECORD AND FACTS OF THE CASE MAY KINDLY BE SET ASIDE, AMEN DED AND MODIFIED IN THE LIGHT OF THE GROUNDS OF APPEAL ENUMERATED ABOVE AND THE APPELLANT BE GRANTED SUCH RELIEFS AS IS CALLED FOR ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE OF THE APPELLANT AND IN LAW. 3. IN THE CROSS-APPEAL, REVENUE HAS RAISED THE FOLL OWING GROUNDS :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANC E OF RS.17,55,85,788/- OUT OF THE TOTAL EXPENDITURE CLAIMED ON ACCOUNT OF PURCHAS E, LABOUR CHARGES AND OFF-LOADING CHARGES TO 25% WITHOUT APPRECIATING THA T THE ASSESSEE WAS INDULGING IN INFLATING ITS PURCHASES, DEBITING FICT ITIOUS EXPENSES UNDER THE HEAD LABOUR CHARGES AND OFF-LOADING CHARGES ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .96,96,318/- ON ACCOUNT OF 3 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) COMMISSION PAID TO SEFW PROJECTS PRIVATE LIMITED AN D RS.1,06,16,357/- ON ACCOUNT OF COMMISSION PAID TO BANK WITHOUT APPRECIA TING THAT HE HAD ADMITTED AND RELIED UPON FRESH EVIDENCES WHICH WERE SUBMITTED ONLY DURING THE COURSE OF APPELLATE PROCEEDINGS, WITHOUT PROVID ING AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THEM AND TO OFFER COMM ENTS THEREON AND HENCE SHOULD NOT HAVE BEEN ADMITTED AS PER RULE 46A OF TH E I T RULES 1962 ? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 4. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER-ALIA , ENGAGED IN THE BUSINESS OF MANUFACTURE AND SUPPLY OF IRON AND STEEL CASTINGS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT FILED A RETURN OF INCO ME DECLARING A TOTAL INCOME OF RS.14,39,17,524/- WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT WHEREBY THE TOTAL INCOME HAS BEEN ASSESSED AT RS.35 ,11,28,290/- AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES WHICH WERE C ARRIED IN APPEAL BEFORE THE CIT(A). THE CIT(A) HAS ALLOWED PARTIAL RELIEF. AGAINST THE ADDITIONS SUSTAINED BY THE CIT(A), ASSESSEE IS IN A PPEAL BEFORE US ON THE ABOVE STATED GROUNDS OF APPEAL WHEREAS REVENUE HAS CHALLENGED THE RELIEFS ALLOWED BY CIT(A) IN ITS APPEAL. 5. IN ASSESSEES APPEAL, THE SUSTENTATIVE DISPUTE A RISES FROM AN ADDITION OF RS.17,55,85,788/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED/INFLATED PURCHASES AND EXPENDITURE. THE CIT(A) HAS SINCE RESTRICTED THE ADDITION TO RS.4,38,96,447/- A ND, NOT BEING SATISFIED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. IN THE CROSS-APPEAL, REVENUE HAS CONTESTED THE ACTION OF CIT(A) IN RESTR ICTING THE DISALLOWANCE TO RS. 4,38,96,447/- AS AGAINST RS.17, 55,85,788/- MADE BY 4 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) THE ASSESSING OFFICER. SINCE THE TWO CROSS-GROUNDS ARISE FROM THE SAME ISSUE, BOTH ARE BEING TAKEN UP TOGETHER. 6. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER CARRIED O UT AN EXERCISE TO VERIFY THE GENUINENESS OF THE PURCHASES AND/OR EXPE NSES RECORDED IN THE ACCOUNT BOOKS. THE DISCUSSION IN THE ASSESSMEN T ORDER REVEALS THAT NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO VARIOU S PARTIES. IN MANY CASES, THE NOTICES RETURNED UN-SERVED WITH THE REMA RK PARTY NOT KNOWN/LEFT. IT IS ALSO NOTED THAT IN MANY CASES N OTICES WERE SERVED BUT EITHER NO REPLY WAS RECEIVED OR IF THE REPLY WAS RE CEIVED, THE FIGURES REPORTED BY THE PARTIES DID NOT TALLY WITH THE FIGU RES PRESENTED BY THE ASSESSEE-COMPANY. IN THIS BACKGROUND, THE ASSESSIN G OFFICER ISSUED A NOTICE U/S 142(1) OF THE ACT DATED 11.3.2013 SHOW-C AUSING ASSESSEE THE VARIOUS DISCREPANCIES NOTICED IN THE COURSE OF NOTI CE U/S 133(6) OF THE ACT. 7. THE ASSESSING OFFICER NOTES THAT IN RESPONSE, AS SESSEE INSISTED THAT ALL THE PURCHASES AND EXPENSES WERE GENUINE AN D THAT THE PARTIES WERE REGULAR SUPPLIERS. ONE PERTINENT POINT WHICH WAS MADE BY THE ASSESSEE WAS THAT THERE WAS INADEQUACY OF TIME INAS MUCH AS THE NOTICE U/S 142(1) OF THE ACT WAS ISSUED ON 11.3.2013 AND T HAT IT WAS NOT POSSIBLE TO RESPOND WITH ALL THE REQUIREMENTS BY 19 .3.2013. IN ANY CASE, ASSESSEE OFFERED TO PRODUCE TWO PARTIES (CONT RACTORS) AND THE ASSESSING OFFICER RECORDED THE STATEMENTS OF TWO CO NTRACTORS WHICH IS DETAILED IN PARA 5.3 OF THE ASSESSMENT ORDER. APAR T THEREFROM, ASSESSEE ALSO FURNISHED RECONCILIATIONS BASED ON THE ENTRIES IN THE BOOKS OF 5 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) ACCOUNT VIS--VIS THE INFORMATION COLLECTED BY ASSE SSING OFFICER. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND THE RES ULT OF HIS EXERCISE CARRIED OUT, THE ASSESSING OFFICER INFERRED THE FOL LOWING MODUS OPERANDI ON THE PART OF ASSESSEE:- 5.9 MODUS OPERANDI : FROM THE VARIOUS FACTS ENUMERATED ABOVE, THE MODUS OPERANDI OF THE ASSESSEE TO THE EXTENT INDICA TED BY MATERIAL AVAILABLE ON RECORD IS AS UNDER : A) PURCHASE/EXPENSES ARE BEING SHOWN IN NAME OF CER TAIN PARTIES AGAINST WHICH CASH IS BEING RECEIVED EITHER IN PART OF IN ENTIRETY. B) ADDITIONAL PURCHASE/EXPENSE BILLS ARE BEING BOOK ED IN NAME OF ACTUAL VENDORS TO INFLATE THE EXPENSES. A COROLLAR Y TO THE SAME, PAYMENTS WOULD BE SHOWN IN NAME OF THOSE PARTIES BU T ACTUAL WITHDRAWALS WILL BE IN DIFFERENT ACCOUNT/IN CASH. IN THIS BACKGROUND, THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE- COMPANY HAD FAILED TO PROVE THE GENUINENESS OF PURC HASES MADE/EXPENSES CLAIMED AND, THEREFORE, HE MADE DISAL LOWANCE OF RS.17,55,85,788/-. THE PARTY-WISE DETAILS IN THIS REGARD ARE CONTAINED IN PARAS 5.11 & 5.12 OF THE ASSESSMENT ORDER AND THE B ROAD CATEGORIZATION IS AS FOLLOWS :- A) PARTIES WHERE NOTICES ISSUED U/S 133(6) WERE RETURNED UN-SERVED - RS. 4,85,27,686 B) PARTIES WHERE NOTICES ISSUED U/S 133(6) WERE SERVED, BUT NO REPLY RECEIVED - RS. 6,52,15,644 C) PARTIES WHERE PURCHASES AS PER ACCOUNTS OF ASSESSEE DID NOT RECONCILE WITH DETAILS RECEIVED FROM THE PARTIES :- I) INFLATED PURCHASES - RS. 54,19,143 II) UNEXPLAINED PURCHASES - RS. 3,61,44,082 6 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) D) PARTIES RELATING TO PAYMENT OF LABOUR CHARGES WHERE NOTICES U/S 133(6) WERE EITHER UN- SERVED OR WERE NOT REPLIED - RS. 1,47,91,709 E) PARTIES RELATING TO PAYMENT OF OFF-LOADING EXPENSES WHERE NOTICES ISSUED U/S 133(6) WERE RETURNED UN-SERVED/REPLY NOT RECEIVED/AMOUNTS NOT RECONCILED - RS. 54,87,524 TOTAL - RS.17,55,85,788 AGAINST SUCH A DISALLOWANCE, ASSESSEE MADE DETAILED SUBMISSIONS ON FACTS AND IN LAW BEFORE THE CIT(A), A COPY OF WHICH HAS ALSO BEEN PLACED IN THE PAPER BOOK BEFORE US AT PAGES 11 TO 30 AND 2 4 TO 62 RESPECTIVELY. 8. BEFORE THE CIT(A), ASSESSEE POINTED OUT THAT ASS ESSEE WAS REQUIRED TO PRODUCE 59 PARTIES IN A SHORT SPAN OF T IME DURING THE FAG END OF ASSESSMENT PROCEEDINGS. INSPITE OF THE SHOR T PERIOD, ASSESSEE HAD FURNISHED CONSIDERABLE INFORMATION WHICH HAS NO T BEEN PROPERLY APPRECIATED BY THE ASSESSING OFFICER. ASSESSEE ALS O POINTED OUT THAT IT WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF HEAVY AND LIGHT ENGINEERING IRON & STEEL CASTINGS (JOBBING INDUSTRY ) AS PER REQUIREMENTS OF ITS CUSTOMERS AND ALSO TAKES PART IN TENDERS ISS UED BY PUBLIC SECTOR UNDERTAKINGS AND THAT THE BOOKS OF ACCOUNT OF ASSES SEE DEPICT CORRECT POSITION. IT WAS ALSO POINTED OUT THAT THE ACTION OF ASSESSING OFFICER WAS NOT JUSTIFIED IN VIEW OF JUDGMENT OF HON'BLE BO MBAY HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES PVT. LTD. IN I TA NO. 5604 OF 2010 DATED 17.12.2012, WHICH PRESCRIBES THAT NO DISALLOW ANCE OF EXPENDITURE CAN BE MADE MERELY BECAUSE THE NOTICES U/S 133(6) R EMAINED UN- SERVED OR REMAINED UN-COMPLIED WITH. BEFORE THE CI T(A), ASSESSEE ALSO POINTED OUT THAT IT HAD FURTHER OBTAINED CONFIRMATI ONS FROM FEW OTHER 7 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) PARTIES ALSO, WHICH WERE PRODUCED BEFORE HIM, AS TH E SAME COULD NOT BE PRODUCED DUE TO INADEQUACY OF TIME DURING ASSESSMEN T PROCEEDINGS. IT WAS ALSO POINTED OUT THAT SOME OF THE NON-RECONCILE D BALANCES WERE ON ACCOUNT OF MISMATCH OF THE ACCOUNTING YEAR IN WHICH AMOUNTS WERE RECORDED BY THE SUPPLIER AND THE ASSESSEE-COMPANY. 9. IN PARTICULAR, ASSESSEE ASSAILED THE ADDITION OF RS.3,61,44,082/- REGARDING PURCHASES ALLEGED NOT TO HAVE BEEN DISCLO SED BY THE ASSESSEE, BUT APPEARING IN THE LEDGER OF THIRD PARTIES. IN T HIS CONTEXT, IT WAS ASSERTED THAT THERE WAS NO JUSTIFICATION TO MAKE SU CH A DISALLOWANCE BECAUSE NO DEDUCTION IN THIS RESPECT WAS CLAIMED AN D THAT THE SAME COULD NOT BE TREATED AS UNDISCLOSED PURCHASES MEREL Y BECAUSE THE AMOUNTS WERE APPEARING IN THE LEDGER ACCOUNT OF SUP PLIERS. 10. AS REGARDS THE LABOUR CONTRACTOR EXPENSES DISAL LOWED, ASSESSEE POINTED OUT THAT IN THE PROCESS OF MANUFACTURING, S UBSTANTIAL LABOUR WAS INVOLVED AND MOST OF THE LABOUR BEING CASUAL AN D THE RATE OF TURNOVER OF SUCH LABOUR BEING HIGH, ASSESSEE HAD OU TSOURCED THE REQUIREMENT OF LABOUR TO SMALL-TIME CONTRACTORS HAV ING 8-15 WORKERS EACH WITH THEM. THE ASSESSEE USED TO DEPOSIT THE E NTIRE LABOUR CHARGES IN THE ACCOUNT OF CONTRACTOR WHO WOULD MAKE TIMELY PAYMENTS TO WORKERS IN THE PRESENCE OF ASSESSEES STAFF. ASSES SEE REFERRED TO THE FACT THAT IT HAD FURNISHED THE NAME OF CONTRACTORS, ADDRESS, PAN, ETC. ALONGWITH COPIES OF CONTRACTORS BILLS WHICH COMPLE TELY PROVE THE EXPENDITURE. REGARDING NON-PRODUCTION OF SUCH CONT RACTORS, IT WAS POINTED OUT THAT OUT OF 14 CONTRACTORS, 3 CONTRACTO RS DISCONTINUED DEALING WITH ASSESSEE, FEW OF THE CONTRACTORS WERE EITHER NOT AVAILABLE 8 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) ON ACCOUNT OF HOSPITALIZATION, ETC., WHEREAS TWO PE RSONS APPEARED BEFORE THE ASSESSING OFFICER. EVEN WITH REGARD TO THE ADDITION OF RS.54,87,524/- OUT OF OFF-LOADING EXPENSES, ASSESSE E POINTED OUT THAT COMPLETE DETAILS ALONGWITH PAN AND COPIES OF BILLS WERE PRODUCED AND THAT NON-PRODUCTION OF PARTIES WAS NOT FATAL SO AS TO RESULT IN DISALLOWANCE. 11. THE CIT(A) CONSIDERED THE VARIED SUBMISSIONS PU T FORTH BY THE ASSESSEE AND EVEN DIRECTED THE ASSESSING OFFICER TO MAKE FURTHER INQUIRIES AND SEND A REPORT U/S 250(4) OF THE ACT. THE REMAND REPORT FURNISHED BY ASSESSING OFFICER WAS CONFRONTED TO TH E ASSESSEE AND THE REJOINDER BY ASSESSEE HAS ALSO BEEN CONSIDERED BY T HE CIT(A). 12. IN THIS CONTEXT, CIT(A) HAS, IN-PRINCIPLE, UPHE LD THE STAND OF ASSESSING OFFICER THAT ASSESSEE HAD FAILED TO DISCH ARGE ITS BURDEN WITH REGARD TO THE AMOUNTS IN QUESTION. CIT(A) HAS ALSO NOTED IN PARA 6.2 OF THE ORDER SOME OF THE DISCREPANCIES IN DATE OF RECO RDING OF THE PURCHASES BY ASSESSEE ON ONE HAND AND BY THE SUPPLI ER ON THE OTHER HAND. ON THAT BASIS, CIT(A) RECORDS THAT CERTAIN P AYMENTS HAVE NOT BEEN RECORDED IN THE RELEVANT YEAR BY THE ASSESSEE. THE CIT(A) THEREAFTER GOES ON TO SAY THAT THE AFORESAID SHOWS NON-COMPLIANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING, WHICH IS OTHER WISE ADOPTED BY THE ASSESSEE. BE THAT AS IT MAY, CIT(A) RESTRICTED THE DISALLOWANCE TO 25% OF RS.17,55,85,788/- WHICH CAME TO RS.4,38,96,447/-. 13. IN THIS BACKGROUND, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT THERE WAS NO JUSTIFICAT ION FOR MAKING THE 9 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) IMPUGNED ADDITION BECAUSE THERE IS NO SPECIFIC FAIL URE ON THE PART OF ASSESSEE TO FURNISH THE RELEVANT DETAILS. THE LEAR NED REPRESENTATIVE POINTED OUT THAT THE ASSESSING OFFICER HAD ISSUED N OTICES TO A LARGE NUMBER OF PARTIES AND THAT IN A FAIR NUMBER OF CASE S, REPLIES WERE RECEIVED AND RECONCILIATIONS WERE PREPARED BY THE A SSESSEE. IT WAS POINTED OUT THAT THE RECONCILIATIONS SHOWED THAT TH E SUPPLIERS HAD RECORDED THE PURCHASES AS PER THE DATE OF BILLS ISS UED, WHEREAS THE ASSESSEE HAD RECORDED THE PURCHASES AS AND WHEN THE MATERIAL WAS RECEIVED. IT WAS ALSO POINTED OUT THAT CERTAIN DIF FERENCES AROSE ON ACCOUNT OF SHORT-RECEIPT OF MATERIAL OR REJECTIONS, WHICH THE SUPPLIERS HAD ACCOUNTED FOR FULLY WHEREAS ASSESSEE HAD RECORD ED THE PURCHASES OF A LESSER AMOUNT. THE LEARNED REPRESENTATIVE POI NTED OUT THAT INSOFAR AS THE BURDEN ON ASSESSEE IS CONCERNED, IT WAS FULL Y DISCHARGED INASMUCH AS ASSESSEE HAD FURNISHED COMPLETE DETAILS OF PURCHASES AS WELL AS EXPENSES ALONGWITH THE LEDGER ACCOUNTS OF P ARTIES AND NO FALSITY IN THE SAME HAS BEEN ESTABLISHED. THE LEARNED REPR ESENTATIVE POINTED OUT THAT THE CIT(A) ERRED IN CONCLUDING THAT THE BU RDEN OF PROOF SHIFTED TO THE ASSESSEE BECAUSE OF ISSUANCE OF NOTICE U/S 1 33(6) OF THE ACT. IN THIS CONTEXT, ASSESSEE POINTED OUT THAT IN CASES WH ERE REPLIES WERE RECEIVED, ASSESSEE HAD FURNISHED THE RECONCILIATION AND IN OTHER CASES WHERE NO NOTICE U/S 133(6) WAS SERVED, BURDEN DOES NOT SHIFT TO THE ASSESSEE BECAUSE IT WAS FOR THE ASSESSING OFFICER T O ENSURE THE ATTENDANCE OF PARTIES. IN THIS CONTEXT, THE LEARNE D REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE JUDGMENT OF THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. U.M. SHAH, 90 ITR 396 (BOM) WHERE IT HAS BEEN OBSERVED THAT IF THE ITO ISSUES SUMMONS AND TH E WITNESS DOES NOT APPEAR, ASSESSEE COULD NOT BE BLAMED FOR IT. THE L EARNED 10 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) REPRESENTATIVE ASSERTED THAT SO FAR AS THE PURCHASE S BY THE ASSESSEE IS CONCERNED, THERE WAS NO FALSITY PROVED AND, THEREFO RE, THE VERSION OF ASSESSEE HAS BEEN MERELY DISBELIEVED WITHOUT ANY AD VERSE EVIDENCE. IN THE COURSE OF HEARING, RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDGMENTS :- (1) CIT VS. DAULAT RAM RAWATMULL , 87 ITR 349 (SC) (2) ANIS AHMAD & SONS V. CIT & ANR.,297 ITR 441(SC) (3) JETHABHAI HIRJI & JETHABHAI RAMDAS V. CIT, 120 ITR 792 (BOM) (4) CIT V. M/S. NIKUNJ EXIMP ENTERPRISES PVT. LTD., ITXA NO.5604 OF 2010 14. ON THE OTHER HAND, THE LD. DR APPEARING FOR THE REVENUE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER AND IN PAR TICULAR, HAS REFERRED TO THE REMAND REPORT FURNISHED BY THE ASSESSING OFF ICER TO CIT(A), COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK OF ASSES SEE AT PAGE 31-44. IT WAS POINTED OUT THAT EVEN DURING THE REMAND PROC EEDINGS, THOUGH ASSESSEE HAD FURNISHED ITS LEDGER ACCOUNT, BUT WITH REGARD TO THE DISCREPANCIES IN THE REPLIES NOTED BY THE ASSESSING OFFICER, THE RECONCILIATIONS WERE NOT COMPLETE. IT WAS, THEREFO RE, POINTED OUT THAT THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT O F NON-RECONCILIATION OF BALANCES OF THE PARTIES IS QUITE JUSTIFIED. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE CRUX OF THE CONTROVERSY BEFORE US ARISES FROM THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT AMOUNT OF CERTAIN PURCHASES AND EXP ENSES DEBITED IN THE BOOKS OF ACCOUNTS COULD NOT BE PROPERLY VERIFI ED AND, THEREFORE, HE ADDED A SUM OF RS.17,55,85,788/- TO THE RETURNED IN COME. THE CIT(A), 11 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) ON THE OTHER HAND, HAS RESTRICTED THE DISALLOWANCE TO 25% OF RS.17,55,85,788/- , WHICH CAME TO RS.4,38,96,447/-. THIS ACTION OF THE CIT(A) IMPLIES THAT HE WAS NOT FULLY CONVINCED WITH THE STAND OF THE ASSESSING OFFICER THAT THE AMOUNT OF PURCHASES/EXPE NSES AMOUNTING TO RS.17,55,85,788/- COULD BE CONSTRUED AS UNVERIFIABL E IN TOTO. THE REASONING OF THE CIT(A) IS REVEALED FROM THE DISCUS SION IN PARA 6.1 OF HIS ORDER WHEREBY, IT IS RECORDED BY HIM THAT EVEN IN T HE REMAND REPORT SUBMITTED BY THE AO AND THE REPLY TO THE SAID REPOR T FILED BY THE LEARNED AR DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE COULD NOT FILE COMPLETE DETAILS WITH REGARD TO THE AFORESAID AMOUNT. THEREAFTER, IN PARA 6.2 THE CIT(A) HAS ENUMERATED 20 CASES WHER E BILLS ISSUED BY THE SUPPLIERS WERE NOT FOUND IN THE RELEVANT FINANC IAL YEAR. ON THE AFORESAID TWIN BASIS, THE CIT(A) HAS PROCEEDED TO R ESTRICT THE DISALLOWANCE AT 25% OF RS.17,55,85,788/-, I.E., RS. 4,38,96,447/-. 15.1 IN OUR CONSIDERED OPINION, THE CIT(A) HAS MADE BALD ASSERTION OF THE ASSESSEE NOT HAVING FILED THE COMPLETE DETAILS WITHOUT SPECIFICALLY ENUMERATING SUCH DETAILS. IN ANY CASE, EVEN THE INS TANCES WHERE BILLS WERE NOT FOUND RECORDED IN THE RELEVANT FINANCIAL Y EAR IS CONCERNED, THE SAME DOES NOT IPSO-FACTO SHOW ANY UNEXPLAINED PURCH ASES/EXPENSES. THE VARIATION IN THE YEAR OF RECORDING OF PURCHASE/ EXPENSE WAS EXPLAINED BY THE ASSESSEE CONSISTENTLY BEFORE THE A SSESSING OFFICER AS WELL AS BEFORE THE CIT(A), WHICH IS EVIDENT FROM TH E COPY OF WRITTEN SUBMISSIONS MADE TO THE LOWER AUTHORITIES DATED 1 5/1/2014 AND 24/02/2014, WHICH HAVE BEEN PLACED IN THE PAPER BOO K AT PAGES 11 TO 24 AND 25 TO 30 RESPECTIVELY. THE ASSESSEE HAD EXP LAINED THAT IN 12 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) RESPECT OF PURCHASE BILLS ISSUED THE SUPPLIERS IN T HE MONTH OF MARCH, 2009, THE SAME WERE BOOKED AS SALES IN FINANCIAL Y EAR 2008-09 BY THE SUPPLIERS, WHEREAS THE SAID MATERIAL WAS RECEIVED B Y THE ASSESSEE IN APRIL, 2009 I.E. IN THE YEAR UNDER CONSIDERATION AN D SUCH ENTRY OF PURCHASE WAS PASSED IN THE YEAR UNDER CONSIDERATION . APART THERE FROM, ASSESSEE HAD EXPLAINED THAT THE DIFFERENCES M AY BE DUE TO CERTAIN DEDUCTIONS MADE BY THE ASSESSEE ON ACCOUNT OF SHORT RECEIPT OF MATERIAL OR REJECTIONS, WHICH THE SUPPLIERS MAY NOT HAVE ACCOUNTED FOR. ANOTHER ASPECT OF WHICH ADDITION WAS MADE OF RS.3,6 1,44,082/- WAS IN THE CASE WERE PURCHASES ARE SAID NOT TO HAVE BEEN D ISCLOSED BY THE ASSESSEE, BUT IT WAS APPEARING IN THE LEDGER OF OTH ER PARTIES AS FOUND BY THE ASSESSING OFFICER. IN THIS CONTEXT, THE PLEA O F THE ASSESSEE HAS BEEN THAT IT HAD NOT CLAIMED ANY DEDUCTION WITH RESPECT TO THE ABOVE AMOUNT AGAINST INCOME OF THE YEAR UNDER CONSIDERATION AND, THEREFORE, ANY DISALLOWANCE THEREOF IS UNTENABLE. WE FIND THAT TH E AFORESAID PLEA HAS BEEN SIMPLY GLOSSED OVER BY THE CIT(A). IN FACT, T HE ENTIRE EDIFICE OF THE ADDITION OF RS.17,55,85,788/- IS BASED ON THE VERIF ICATION EXERCISE CARRIED OUT WITH CERTAIN PARTIES WITH WHOM ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF PURCHASES OR OTHER EXPENSES. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS ENUMERATED IN PARA 5.11(B) A LIST OF CASES WHERE PURCHASES AS PER AUDITED ANNUAL ACCOUNT S OF THE ASSESSEE DID NOT RECONCILE WITH THE DETAILS RECEIVED FROM T HE PARTIES. IN THE SAID TABULATION AN AMOUNT OF RS.3,61,41,082/- HAS BEEN TABULATED OF CASES WHERE THE PARTIES HAVE CLAIMED SALES MADE TO THE AS SESSEE MORE THAN THE AMOUNT OF PURCHASES RECORDED BY THE ASSESSEE. IN THIS CONTEXT, WE FIND THAT THE ASSESSEE HAS BEEN CONSISTENTLY EXPLAI NING THAT THE PURCHASES RECORDED BY IT ARE BASED ON THE PURCHASE INVOICES, WHICH 13 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) WERE AVAILABLE ON RECORD. IT HAS ALSO BEEN EXPLAI NED THAT THE INSTANCES NOTED BY THE ASSESSING OFFICER COULD NOT IPSO-FACTO SHOW THAT ASSESSEE HAD INDEED EFFECTED ANY UNRECORDED PURCHASES. AT P AGES 45 TO 62 OF THE PAPER BOOK IS PLACED A COPY OF THE REPLY FILED BY THE ASSESSEE WITH REGARD TO THE REMAND REPORT SUBMITTED BY THE ASSES SING OFFICER DURING THE APPELLATE PROCEEDINGS. AT PAGES 50 TO 62 OF TH E PAPER BOOK IS PLACED THE EXPLANATION OF THE ASSESSEE WITH REGARD TO 24 SUCH PARTIES REGARDING THE VARIATION FOUND BY THE ASSESSING OFFI CER IN CASES WHERE PURCHASES RECORDED BY ASSESSEE WERE OF DIFFERENT AM OUNTS. IN THIS REGARD, WE MAY REFER TO ONE ITEM OF SIMPLEX ENGINEE RING & FDR WORKS PVT. LTD. IN WHOSE CASE A SUM OF RS.7,83,247/- HAS BEEN CONSIDERED AS UNEXPLAINED PURCHASES BECAUSE THE REPLY RECEIVED FR OM THE SUPPLIERS SHOWED THAT SALES EFFECTED TO THE ASSESSEE HAS BEEN SHOWN AS RS.37,99,042/-, WHEREAS AS THE AMOUNT OF PURCHASE AS PER ASSESSEE WAS RS.30,15,795/-. IN THIS CONTEXT ASSESSEE HAD EXPLAINED THAT THE BILL OF THE SAID SUPPLIER WAS OF LAST YEAR BUT ASSESSEE HAD ACCOUNTED FOR THE SAME IN THE INSTANT YEAR AND RELEVANT INVOICES OF T HE PARTY WAS ALSO PLACED ON RECORD. THE ASSESSEE HAD ALSO FURNISHED CONFIRMED LEDGER ACCOUNT OF THE PARTY OF THE EARLIER ASSESSMENT YEAR S HIGHLIGHTING THE BILLS WHICH RECONCILED THE DIFFERENCE. WE FIND THAT THERE IS NO REBUTTAL TO ANY OF SUCH EXPLANATION FURNISHED AND THE ENTIRE AMOUNT HAS BEEN ADDED AS UNEXPLAINED PURCHASES BY THE ASS ESSING OFFICER, WHILE THE CIT(A) EFFECTED AN OVERALL SCALING DOWN OF THE DISALLOWANCE. CONSIDERING THE MANNER IN WHIC H THE REPLIES/RECONCILIATION FILED BY THE ASSESSEE HAVE BEEN CONSIDERED, IN OUR VIEW, THE ADDITION OF RS.3,61,44,082/- IS NOT AT ALL JUSTIFIED. EVEN 14 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) ADDITION OF RS.54,19,143/- ON ACCOUNT OF VARIATION IN THE YEAR OF RECORDING IS ALSO NOT JUSTIFIED AT ALL. 15.2 NOW WE MAY SEE THE INSTANCES OF ADDITIONS, WH ETHER NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT WERE EITHER RETURNED UNSERVED OR NO REPLIES WERE RECEIVED. IN THIS CONTEXT, THERE I S NO DENYING THE FACT THAT THE ASSESSEE HAD FURNISHED THE PRIMARY MATERIA L IN THE SHAPE OF ITS PARTY-WISE LEDGER ACCOUNTS, WHICH BROUGHT OUT THE P URCHASES EFFECTED AND THE PAYMENTS MADE. THE ASSESSEE HAD BROUGHT OU T BEFORE THE CIT(A) AND ALSO BEFORE US THAT IT WAS ONLY IN THE M ONTH OF MARCH, 2013 THAT ASSESSEE WAS CONFRONTED WITH THE RESULT OF VER IFICATION EXERCISE RELATING TO 59 PARTIES AND WAS ASKED TO PRODUCE THE PARTIES OR FURNISH RECONCILIATION STATEMENTS. THE ASSESSEE ALSO POINT ED OUT THAT THERE WAS A PERTINENT UNREASONABLENESS OF REQUIRING THE ASSES SEE TO PRODUCE 59 SUCH PARTIES IN SHORT SPAN OF TIME AS ASSESSMENT WA S GETTING TIME BARRED ON 31/3/2013. APART THERE-FROM, THE APPELLA NT COMPANY POINTED OUT TO THE CIT(A) THAT CONSIDERABLE INFORMA TION WAS FURNISHED TO THE ASSESSING OFFICER ON VARIOUS DATES. IT IS A LSO POINTED OUT BEFORE THE CIT(A) THAT ASSESSEE WAS REGISTERED WITH EXCISE , SALES TAX AND SERVICE TAX DEPARTMENT, ETC. AND THAT THE PRODUCTS ARE MANUFACTURED BY THE ASSESSEE AS PER THE REQUIREMENTS OF ITS CUST OMERS AND THERE WAS NO OPEN MARKET FOR SALE OF PRODUCTS MANUFACTURED BY IT. IT WAS POINTED OUT THAT THE ASSESSEE MANUFACTURED AND SUPPLIED PRO DUCTS AS PER THE DRAWINGS OF THE CUSTOMERS, WHICH ARE USERS SPECIFIC IN NATURE. IT WAS, THEREFORE, POINTED OUT THAT THERE WAS NO REASON TO DOUBT THE PURCHASES EFFECTED BY THE ASSESSEE IN A WHOLESALE MANNER. IN OUR CONSIDERED OPINION, THE VERIFICATION EXERCISE CARRIED OUT BY T HE ASSESSING OFFICER 15 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) DOES NOT RESULT IN UNEARTHING OF ANY FALSITY IN THE CLAIMS MADE BY THE ASSESSEE AND THUS, NO ADDITION IS MERITED. ABSENCE OF RECEIPT OF ANY REPLY FROM THE SUPPLIERS CANNOT BY ITSELF DEMONSTRA TE ANY BOGUS CLAIM BY THE ASSESSEE UNLESS ANY OF THE ATTENDANT FACTS B EAR OUT ANY BOGUS NATURE OF THE CLAIM OF EXPENDITURE BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, ADDITIONS AMOUNTING TO RS.4,85,27,686/- AND RS. 6,52,15,644/- ENUMERATED IN PARA -7 OF THE INSTANT ORDER ARE ALSO NOT JUSTIFIED. 15.3 NOW, WE MAY COME TO THE ADDITIONS MADE OF RS. 1,47,91,709/- AND RS.54,87,524/- WITH RESPECT TO THE PAYMENT OF LABOUR CHARGES AND OFF-LOADING EXPENSES RESPECTIVELY. IN SO FAR AS, T HE PAYMENT OF LABOUR CHARGES IS CONCERNED, THE PLEA OF THE ASSESSEE IS T HAT MOST OF THE LABOUR BEING CASUAL IN NATURE, THERE IS A HIGH RATE OF TUR NOVER AND THEREFORE, ASSESSEE OUTSOURCES THE REQUIREMENT OF LABOUR FROM SMALL CONTRACTORS HAVING 8-15 WORKERS WITH THEM. IT HAS BEEN EXPLAI NED BEFORE THE LOWER AUTHORITIES THAT ASSESSEE HAD 14 SUCH CONTRACTORS A ND BEING ASKED TO PRODUCE THEM ONLY TWO PERSONS APPEARED. IN THIS CO NTEXT, THE ASSESSING OFFICER HAD RECORDED STATEMENT OF SHRI HR IDAY RAM SAHU, A COPY OF WHICH HAS BEEN PLACED AS ANNEXURE TO THE AS SESSMENT ORDER. A PERUSAL OF THE STATEMENT REVEALS THAT THOUGH THE CO NTRACTOR ADMITTED OF HAVING ARRANGEMENT WITH THE ASSESSEE FOR PROVIDING LABOUR BUT HE HAS ALSO TENDERED THAT A PORTION OF THE AMOUNT WAS REFU NDED BACK TO THE ASSESSEE COMPANY. BECAUSE OF SUCH STATEMENT AND FO R THE FACT THAT OTHER CONTRACTORS COULD NOT BE PRODUCED, THE AMOUNT OF RS.1,47,91,709/- HAS BEEN DISALLOWED. EVEN DISALLO WANCE OUT OF OFF- LOADING EXPENSES HAVE ALSO BEEN MADE IN THE CASES O F FIVE PARTIES, 16 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) BECAUSE THE AMOUNT COULD NOT BE VERIFIED AT ALL. O N THIS TWO ELEMENTS OF EXPENDITURE, IN OUR VIEW, THE APPROACH OF THE AS SESSING OFFICER IN PRINCIPLE IS JUSTIFIED IN PRINCIPLE. THE CONTRACTOR EXAMINED BY THE ASSESSING OFFICER REVEALS INHERENT DISCREPANCY IN T HE CLAIM OF EXPENSES BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, CERTAIN ADDITION DESERVES TO BE MADE EVEN THOUGH SPECIFIC D ISCREPANCY IS AVAILABLE ONLY WITH RESPECT TO THE ONE OF THE PARTI ES. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, SOME AMOUNT OF UNVERIFIABILITY IN THE CLAIM OF THE EXPENSES CANNOT BE RULED OUT AND, THEREFORE, ON THIS ASPECT OF THE MATTER WE FIND NO REASON TO INTERFERE WITH THE CONCLUSION OF THE CIT(A) THAT 25% OF SUCH EXPENSES OF LABOUR C HARGES RS.1,47,91,709/- AND OUT OF OFF-LOADING EXPENSES O F RS.54,87,524/-, DESERVE TO BE DISALLOWED. 15.4 IN THE RESULT, OUT OF TOTAL ADDITION OF RS.17, 55,85,788/- SUSTAINED BY THE CIT(A), 25% OF EXPENSE OF RS. 1,47,91,709/- OUT OF LABOUR CHARGES AND 25% OF RS.54,87,524/- TOWARDS OFF-LOADI NG EXPENSES ARE SUSTAINED AND THE BALANCE OF THE ADDITIONS MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. RESULTANTLY, WH EREAS THE STAND OF THE REVENUE ON THIS ASPECT IS DISMISSED, THAT OF THE AS SESSEE IS PARTLY ALLOWED. 16. THE ONLY OTHER ISSUE REMAINING IN THE APPEAL OF THE REVENUE IS RELATING TO THE DISALLOWANCE OF RS.96,96,318/- AND RS.1,06,16,357/- REPRESENTING MARKETING COMMISSION PAYMENT TO M/S.S EFW PROJECTS PVT. LIMITED AND TO THE BANK RESPECTIVELY. 17 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) 16.1 IN THIS REGARD, THE BRIEF FACTS ARE THAT THE C OMMISSION PAID TO M/S.SEFW PROJECTS PVT. LIMITED WAS DISALLOWED BY TH E ASSESSING OFFICER ON THE GROUND THAT ASSESSEE COULD NOT PROVE THE PUR POSE OF SUCH COMMISSION PAYMENT. SIMILARLY, COMMISSION PAID TO B ANK WAS DISALLOWED, AS ACCORDING TO THE ASSESSING OFFICER, THE IDENTITY OF THE BANK AND THE PURPOSE OF THE PAYMENT COULD NOT BE PR OVED BY THE ASSESSEE. ACCORDINGLY, A DISALLOWANCE OF RS.2,03,1 2,675 WAS MADE. THE CIT(A) HAS SINCE DELETED THE DISALLOWANCE, AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 16.2 IN THIS CONTEXT, IT IS NOTICEABLE THAT CIT(A) HAS DELETED THE DISALLOWANCE HOLDING THAT SIMILAR DISALLOWANCE IN A SSESSMENT YEAR 2009- 10 WAS DELETED BY THE CIT(A) AND REVENUES APPEAL A GAINST WHICH WAS PENDING BEFORE THE TRIBUNAL. 16.3 BEFORE US, THE PARTIES COULD NOT STATE THE OUT COME OF THE APPEAL OF THE REVENUE ON SIMILAR ISSUE BEFORE THE TRIBUNAL FOR ASSESSMENT YEAR 2009-10. LD. REPRESENTATIVE FOR THE ASSESSEE SUBMI TTED THAT ASSESSEE HAS NO OBJECTION IF THE MATTER IS REMANDED BACK TO THE FILE OF CIT(A) TO BE DECIDED, IN THE LIGHT OF THE DECISION OF THE TRI BUNAL FOR ASSESSMENT YEAR 2009-10. 16.4 IN VIEW OF THE SAID SUBMISSION OF THE LD. REPR ESENTATIVE FOR THE ASSESSEE, WE SET-ASIDE THE ORDER OF THE CIT(A) ON T HIS ASPECT AND RESTORE THE MATTER BACK TO HIS FILE FOR A DECISION AFRESH I N CONSONANCE WITH THE DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2009- 10. THUS, ON THIS ASPECT REVENUE SUCCEEDS FOR STATISTICAL PURPOSES. 18 ITA NO. 1562& 2472/MUM/2015(A.Y.2010-11) 17. RESULTANTLY, APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 0 4/11/2016 SD/- SD/- (SANDEEP GOSAIN) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 0 4 /11/2016 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 VM , SR. PS