ITO 27(2)(2), NAVI MUMBAI V. MANISHA HEMANT MEHTA, MUMBAI

ITA 1570/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8822 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: HEMANT MEHTA
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained expenditure; Opportunity of being heard; Principle of natural justice; Reassessment proceedings
• Section: 143(3); 133A; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1570/MUM/2017 ASSESSMENT YEAR: 2010 - 11 ITO - 27(2)(2) R.N. 414, 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION COMPLEX VASHI NAVI MUMBAI - 400703 VS. SMT. MANISHA HEMANT MEHTA C/O MANISHA ENTERPRISES A - 13, YASHWANT BUILDING, 90 FT. ROAD, GATKOPAR (E) MUMBAI - 400077 PAN NO. AGTPM8940N APPELLANT RESPONDENT REVENUE BY : SHRI RAJAT MITTAL, DR ASSESSEE BY : SHRI HEMANT MEHTA , AR DATE OF HEARING : 24 /08/2017 DATE OF PRONOUNCEMENT : 31/10/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 25 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 148 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.90,56,115/ - ON ACCOUNT OF BOGUS PURCHASES, WITHOUT SMT. MANISHA HEMANT MEHTA ITA NO. 1570/MUM/2017 2 APPRECIATING THE FACT THAT T HE ASSESSEE HAS FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISALLOWING ONLY 25% OF THE BOGUS P URCHASES, AS EVEN THE BASIC ONUS OF PRODUCING BILL OF PURCHASES LEDGER ACCOUNT, TRANSPORT BILLS DELIVERY CHALLANS WAS NOT FULFILLED BY THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.2,58,637/ - ON ACCOUNT OF CASH CREDIT U/S 68 OF THE I.T. ACT, 1961. 4. THE APPELLANT PRAY THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE RESERVED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D HER RETURN OF INCOME FOR THE AY 2010 - 11 ON 12.10.2010 DECLARING TOTAL INCOME OF RS.3,23,230/ - . THE RETURN OF INCOME WAS PROCESSED U/S 143(1). THEN THE DEPARTMENT CONDUCTED A SURVEY U/S 133A IN THE BUSINESS PREMISES OF THE ASSESSEE ON 22.01.2013. DURING T HE COURSE OF SURVEY , IT WAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM THE PARTIES WHO WERE HELD AS BOGUS BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THEN THE ASSESSING OFFICER (AO) ISSUED NOTICE U/S 148 TO REOPEN THE ASSESSMENT DONE U/S 1 43(1). DURING THE COURSE OF REASSESSMENT PROCEEDINGS , THE AO ISSUED NOTICE U/S 133(6) TO 24 PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES IN ORDER TO VERIFY THE GENUINENESS OF TRANSACTIONS. THESE NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES AS UNSERVED. THE AO THEN REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES ALONG WITH COPY OF LEDGER ACCOUNT, BILLS, BANK STATEMENT FOR VERIFICATION. IT IS FOUND THAT THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES BEFORE THE AO FOR EXAMINATION. THE SMT. MANISHA HEMANT MEHTA ITA NO. 1570/MUM/2017 3 ASSESS EE ALSO FAILED TO FILE BEFORE THE AO EVIDENCE OF THE PURCHASES LIKE DELIVERY CHALLANS, TRANSPORT BILLS ETC. IN VIEW OF THE ABOVE, THE AO MADE AN ADDITION OF RS.2,08,70,690/ - AS UNEXPLAINED EXPENDITURE U/S 69C. 3.1 THE AO ON PERUSAL OF THE CAPITAL ACCOUNT FOUND THAT THE ASSESSEE HAD INTRODUCED FRESH CAPITAL OF RS.2,58,639/ - . IT CONSISTED OF INTRODUCTION OF NEW CAPITAL OF RS.1,75,000/ - AND FD MATURITY OF RS.83,637/ - . THE AO WAS NOT CONVINCED WITH THE SOURCE OF THE ABO VE AMOUNT AND THEREFORE, MADE AN ADDITION OF RS.2,58,637/ - AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE DECISION IN THE CASE OF VIJAY PROTEINS PVT. LTD. VS. CIT 58 ITD 428 AND RESTRICTED THE DISALLOWANCE TO 25% ON SUCH ALLEGED BOGUS PURCHASES. HOWEVER, IN THE CASE OF THE ADDITION OF RS.2,58,637/ - MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68, THE LD. CIT(A) DELETED THE SAME ON THE REASON THAT NO SPECIFIC GROUND HAS BEEN MADE BY THE AO IN THE ASSESSMENT ORDER. 5. BEFORE US, THE LD. DR SUBMITS THAT AS THE ASSESSEE FAILED TO PRODUCE BEFORE THE AO THE 24 PARTIES AND ALSO FAILED TO FILE DELIVERY CHALLANS, TRANSPORT BILLS ETC., THE LD. CIT(A) SHOULD HAVE CONFIRMED THE TOTAL DISALLOWANCE OF RS.2,08,70,690/ - . THE DR ALSO SUBMITS THAT THE LD. CIT(A) SHOULD HAVE CONFIRMED THE ADDITION OF RS.2,58,637/ - MADE BY THE AO AS UNEXPLAINED CASH CREDIT SMT. MANISHA HEMANT MEHTA ITA NO. 1570/MUM/2017 4 U/S 68 AS THE ASSESSEE FAILED TO FILE THE CORROBORATIVE EVIDENCE BEFORE THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAD SUBMITTED THE CORRESPONDING DETAILS BEFORE THE AO. HE SUBMITS THAT THE GOODS WERE RECEIVED AND ENTERED INTO STOCK REGISTER AN D THE CORRESPONDING SALES WERE ACCOUNTED. SINCE THE SALES WERE NOT SUSPECT, NO ONE COULD DOUBT ABOUT THE PURCHASES. IN RESPECT OF THE ADDITION MADE BY THE AO OF RS.2,58,637/ - U/S 68 AS UNEXPLAINED CASH CREDIT, THE LD. COUNSEL RELIED ON THE ORDER OF THE L D. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE DEAL WITH THE 1 ST AND 2 ND GROUND OF APPEAL TOGETHER AS THEY ADDRESS A COMMON ISSUE . THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE FIND THAT THE NOTICES ISSUED U/S 133(6) BY THE AO TO 24 PARTIES CALLING FOR COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE, NATURE OF GOODS SOLD, SAMPLE COPY OF BILLS ISSUED, COPY OF DELIVERY CHALLANS OF GOODS DISPATCHED ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEMENT WERE RETU RNED BACK BY THE POSTAL AUTHORITIES AS UNSERVED. THEREAFTER, THE AO REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES ALONG WITH THEIR BOOKS OF ACCOUNTS FOR EXAMINATION. THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES BEFORE THE AO. WE ARE OF THE CONSI DERED VIEW THAT THE CONTENTIOUS ISSUES IN THE INSTANT CASE COULD BE RESOLVED BY EXAMINING THE ABOVE PARTIES. IT IS THE SMT. MANISHA HEMANT MEHTA ITA NO. 1570/MUM/2017 5 DUTY OF THE AO TO ENFORCE ATTENDANCE OF A WITNESS IF HIS EVIDENCE IS MATERIAL. AT THE SAME TIME THE ASSESSEE MUST FURNISH THE COMPLETE AD DRESS OF SUCH PERSON. A PROPER HEARING MUST ALWAYS INCLUDE A FAIR OPPORTUNITY TO THOSE WHO ARE PARTIES IN THE CONTROVERSY FOR CORRECTING OR CONTRADICTING ANYTHING PREJUDICIAL TO THEIR VIEW. CROSS - EXAMINATION IS ALLOWED BY PROCEDURAL RULES AND EVIDENTLY AL SO BY THE RULES OF NATURAL JUSTICE. ANY WITNESS WHO HAS BEEN SWORN ON BEHALF OF ANY PARTY IS LIABLE TO BE CROSS - EXAMINED ON BEHALF OF THE OTHER PARTY TO THE PROCEEDINGS. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS - EXAMINE WITNESS ES. IN ITO VS. M. PIRAI CHOODI (2012) 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT ORDER OF ASSESSMENT PASSED WITHOUT GRANTING AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE BY HIGH COURT; AT MOST, HIGH COU RT SHOULD HAVE DIRECTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE CONCERNED WITNESS. THE IMPORTANCE OF CROSS - EXAMINATION HAS BEEN EMPHASIZED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF OM VINYLS P. LTD. VS. ITO [WP(L) NO. 3114 OF 2014]. SMT. MANISHA HEMANT MEHTA ITA NO. 1570/MUM/2017 6 THERE IS NO BASIS IN THE ORDER OF THE LD. CIT(A) IN ESTIMATING THE PROFIT @ 2 5% IN THE CASE OF A TRANSACTION IN WHICH THE GENUINENESS IS NOT PROVED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT IN THE LIGHT OF OUR OBSERVATION HEREINBEFORE AFTER GIVING OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE THE CONCERNED PART IES. WE ALSO DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE ASSESSMENT ORDER. THUS THE 1 ST AND 2 ND GROUND OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN RESPECT OF THE 3 RD GROUND OF APPEAL, WE AGREE WITH THE LD. CIT(A) THAT THE AO HAS FAILED TO MENTION ANY SPECIFIC GROUND WHILE MAKING AN ADDITION OF RS.2,58,637/ - U/S 68 OF THE ACT. THUS WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE 3 RD GROUND OF APPEAL. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/ - SD/ - ( JOGINDER SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/10/2017 RAHUL SHARMA, SR. P.S. SMT. MANISHA HEMANT MEHTA ITA NO. 1570/MUM/2017 7 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