ITO 25(2)(4), MUMBAI V. RITESH R. JAIN, MUMBAI

ITA 1734/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2318 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2014
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: SAROJ MANIAR; NAMRATA BHANDARKAR
• Keywords: Depreciation; Accommodation entries
• Section: 69C; 133(6); 69

Judgement Text

, , D, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1734/MUM/2014 ASSESSMENT YEAR: 2010-11 ITO 25(2)(4) C-11 PRATYAKSHAKAR BHAVAN, B. K.C. BANDRA (E) MUMBAI--400051 / VS. RITESH R. JAIN B-607/608 SHUBHAM DHARMJI THAKURCHS, BORIVALI(W) MUMBAI-400062 ( REVENUE ) ( RESPON DENT) P.A. NO . AAIPJ8820H REVENUE BY SHRI B.S. BIST (SR. DR) RESPONDENT BY SHRI SAROJ MANIAR & SHRI NAMRATA BHANDARKAR, (AR) ! ' # $% / DATE OF HEARING : 05/10/2016 # $% / DATE OF ORDER: 26/10/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 35,{(IN SHORT CIT(A)}, DATED 02.12.2013 PASSED AG AINST RITESH R. JAIN 2 ASSESSMENT ORDER OF THE AO DATED 26.03.2013 U/S 143 (3) FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUND S: I.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS 2,64,31231/- U/S 69C OF THE I.T. ACT BY TREATING TH E PURCHASES AS GENUINE.' II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN RELYING UPON JUDGMENTS IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. WITHOUT APPRECIATING THAT THE FACTS INVOLVED IN THE APPELLA NT'S CASE ARE DIFFERENT FROM THE FACTS OF THE ABOVE CASE LAW. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS GROSSLY ERRED IN ACCEPTIN G THE ASSESSEE'S CLAIM THOUGH THE PARTIES HAVE ALREADY AC CEPTED IN THEIR STATEMENT ON OATH THAT THEY HAVE NOT ENTER ED INTO ANY BUSINESS WITH THE ASSESSEE BEFORE THE SALES TAX AUTHORITIES,' IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) GROSSLY ERRED IN NOT APPRECIA TING THE FACT THAT ALLEGED BILLS WERE NOT SUPPORTED BY SUPPL Y OF GOODS AND THE NOTICES UNDER 133(6) ISSUED TO PARTIE S FROM WHOM ALLEGED BILLS WERE RECEIVED WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES AND THE ASSES SEE HAS ALSO FILED TO PRODUCE THE PARTIES BEFORE THE AO .' V. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLO WANCE MADE BY THE AO OVERLOOKING THE EXPLICIT FINDING OF THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTME NT AND CORROBORATED BY THE ENQUIRIES OF THE AO..' VI. ON THE FACTS AND CIRCUMSTANCES AND IN LAW THE L D CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOU NT OF DEPRECIATION ON MOTOR CAR OF RS.1,84,092/- WITHOUT APPRECIATING THE FACT THAT THE CAR WAS NOT USED FOR BUSINESS PURPOSE VII. ON THE FACTS AND CIRCUMSTANCES AND IN LAW THE LD CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE A SSESSEE INTRODUCED THIS ASSET JUST TO CLAIM DEPRECIATION AS THE ADDITION ON THE SAME ISSUE MADE FOR A.Y.2009-10 WAS ACCEPTED BY THE ASSESSEE. RITESH R. JAIN 3 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI SAROJ MANIAR & SHRI NAMRATA BHANDARKAR, AUTHOR ISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND B Y SHRI B.S. BIST, DEPARTMENTAL REPRESENTATIVE (SR. DR) ON BEHAL F OF THE REVENUE. 3. GROUND NOS. 1 TO 5: THESE GROUNDS DEAL WITH THE ACTION OF LD CIT(A) IN DELETING THE ADDITION OF RS.2,64,31,23 1/- MADE BY THE AO U/S 69 OF THE ACT. IN THIS CASE LD. DR SUBMI TTED THAT IN THIS CASE ENTIRE ADDITION MADE BY THE AO ON ACCOUNT OF PURCHASES WAS DELETED BY THE LD. CIT(A) DESPITE THE FACT THAT THOUGH ASSESSEE HAD HIMSELF OFFERED BEFORE THE AO T O MAKE THE ADDITION @ 6% OF THE IMPUGNED PURCHASES, BUT LD. CI T(A) WHILE PASSING THE ORDER OMITTED TO CONSIDER THIS AS PECT AND DELETED ENTIRE ADDITION INADVERTENTLY. 3.1. PER CONTRA LD. COUNSEL RELIED UPON THE ORDER OF TH E LD. CIT(A) AND REQUESTING FOR UPHOLDING THE SAME. 3.2. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AS WELL AS ORDER PASSED BY LOWER AUTHORITIES. THE BRIEF FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL AND IS THE PROPRIETOR OF M/S. ALLWAYS DEVELOPERS ENGAGED IN THE BUSINESS OF TRADING IN BUILDING MATERIALS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT SOME INFOR MATION WAS RECEIVED IN AOS OFFICE FROM THE SALES TAX DEPA RTMENT REGARDING SUSPICIOUS PARTIES WHO WERE PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ANY ACTUAL BUSI NESS. THOUGH, THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS AND EVIDENCES WITH REGARD TO ELEVEN PARTIES ABOUT WHOM INQUIRY WAS MADE BY THE AO WITH REGARD TO PURCHASE MADE FRO M THEM RITESH R. JAIN 4 BY THE ASSESSEE AGGREGATING TO RS.2,64,31,231/-, BU T, THE AO RELYING UPON THE INFORMATION SENT BY THE SALES TAX DEPARTMENT HAD ISSUED NOTICE TO THESE PARTIES FOR F URTHER VERIFICATION. IN ABSENCE OF ANY PROPER RESPONSE, IT WAS HELD BY HIM THAT IMPUGNED PURCHASES WERE NOT GENUINE. IT IS NOTEWORTHY THAT DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSEE HAD PLEADED BEFORE THE AO THAT THOUGH COMPLETE EVIDENCES ARE AVAILABLE, BUT, IN ABSENCE OF PROPER RESPONSE FROM THESE PARTIES, 6% OF THE PURCHASES MAY BE ADDE D TO INCOME BY TREATING THE SAME AS INFLATED PURCHASES. BUT, ENTIRE AMOUNT OF THESE PURCHASES WAS ADDED TO THE INCOME O F THE ASSESSEE BY THE AO. 3.3 . BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEF ORE LD. CIT(A) WHEREIN DETAILED SUBMISSIONS WERE MADE ALONG WITH REQUISITE EVIDENCES IN SUPPORT OF THESE PURCHASES. THE ARGUMENTS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A ) WERE SUMMARIZED IN THE APPEAL ORDER BY LD. CIT(A) AS UND ER: A) PAYMENTS WERE THROUGH BANKING CHANNEL AND BY CH EQUE. B) PURCHASE INVOICE RAISED BY THE SUPPLIER AND SUBM ITTED TO THE AO. C) NOTICE ISSUED BUT NOT SERVED, DOES NOT MEAN THAT THESE PARTIES ARE BOGUS, THEY ARE JUST DENYING THEIR BUSI NESS TRANSACTION TO AVOID SALES TAX/VAT ETC. D) STATEMENT BY THIRD PARTIES CANNOT BE CONCLUDED A DVERSELY IN ISOLATION AND WITHOUT CORROBORATING EVIDENCES AGAIN ST THE ASSESSEE. E) FAILURE TO PRODUCE PARTIES CANNOT BE TREATED ADV ERSELY AGAINST ASSESSEE. RITESH R. JAIN 5 3.4. LD. CIT(A) CONSIDERED ALL THE SUBMISSIONS OF THE A SSESSEE AND DELETED THE ENTIRE PURCHASES BY OBSERVING AS UN DER: I HAVE GONE THROUGH THE CONTENTIONS OF THE APPELLANT, FINDINGS OF THE AO AND VARIOUS SUBMISSIONS MADE. THE MAIN CONTENTION OF THE AO IS THAT THE NAMES OF THESE 11 SELLERS APPEAR IN THE LI ST OF THE SUSPICIOUS DEALERS IN THE LIST PUBLISHED BY SAL ES TAX DEPARTMENT, MUMBAI. ON THE BASIS OF THIS THE AO SENT NOTICES U/S.133(6) OF THE I.T, ACT, 1961 WHICH WERE RETURNED UNSERVED WITH VARIOUS REMARKS LIKE NO T KNOWN, UNCLAIMED, LEFT, REFUSED. ON THE BASIS OF TH E STATEMENT MADE BY THESE PARTIES BEFORE THE SALES TA X DEPARTMENT AND THE NON SERVICE OF NOTICES U/S 133(6 ) LED THE AG TO CONCLUDE THAT THE PURCHASES WERE BOGUS AN D WERE ONLY ACCOMMODATION ENTRIES. AS PART OF THE STATEMENT THE APPELLANT HAS BROUGHT FORWARD THE FAC TS THAT HE HAS FURNISHED ALL THE DETAILS OF PURCHASES AND SALES THE INVOICE COPIES OF THESE TRANSACTIONS, THE BANK STATEMENTS AND ALSO THAT THE ACCOUNTS WERE DULY AUDITED BOTH UNDER THE INCOME TAX ACT AND UNDER THE VAT ACT 2005 FOR THE PURPOSE OF VAT AUDIT. THE APPELLAN T HAS ALSO REFERRED 'TO HON'BLE JURISDICTIONAL HIGH C OURT IN THE CASE OF M/S.NIKUNJ EXIMP ENTERPRISES PVT. LTD. AND BABULAL C. BORANA BOTH REFERRED TO SUPRA TO MAKE HI S ARGUMENT THAT THE BOOKS OF THE APPELLANT ARE NOT BE ING REJECTED AND THE SALES HAVE NOT BEEN DOUBTED. THE PAYMENTS HAVE BEEN MADE BY CHEQUES AND THE AO HAS NOT FOUND. ANY .REASON TO QUESTION THE GENUINENESS OF THOSE PAPERS. ALL THESE EVIDENCES WERE AVAILABLE BE FORE THE AO DURING THE COURSE OF ASSESSMENT BUT THE AO HAS NOT FOUND ANYTHING INCRIMINATING WITH ANY OF TH ESE DOCUMENTS. THE APPELLANT HAS ALSO SUBMITTED THAT IF THESE PURCHASES WERE TO BE ADDED THEN GROSS PROFIT ON THESE TRANSACTIONS IS 99.92% WHICH IS IMPOSSIBILITY. AFTER GOING , THROUGH THE ABOVE SUBMISSIONS AND FACTS I FIND MERIT IN THE ARGUMENTS OF THE APPELLANT THAT ONCE THE SALES ARE BEING TREA TED AS GENUINE AND THE APPELLANT HAS VOUCHED FOR THE PURCHASE BOTH THROUGH INVOICE AND CHEQUE PAYMENTS THEN MERELY TO HOLD THE PURCHASES AS BOGUS ON THE BASIS OF SUSPICIOUS LIST DOES NOT LEAD TO THE RITESH R. JAIN 6 CONCLUSION THAT THESE PURCHASES ARE BOGUS. THE ADDITION MADE IN THIS REGARD IS THEREFORE DELETED. 3.5. WE HAVE GONE THROUGH THE ORDERS OF THE LD. CIT(A). CRUX OF THE REASONING GIVEN BY THE LD. CIT(A) IS THAT TH OUGH THE ASSESSEE HAD PLACED COMPLETE DOCUMENTARY EVIDENCES TO SUBSTANTIATE THESE PURCHASE, BUT WITHOUT BRINGING A NY CONTRARY MATERIAL ON RECORD, THE AO REJECTED THE CL AIM OF THE ASSESSEE AND MADE ADDITION OF ENTIRE PURCHASE DESPI TE THE FACT THAT ENTIRE PAYMENT WAS MADE BY CHEQUE. THE AO MADE THE DISALLOWANCE MERELY ON THE GROUND THAT NO RESPONSE WAS GIVEN BY THESE PARTIES IN RESPONSE TO NOTICE ISSUED BY TH E AO. LD. COUNSEL OF THE ASSESSEE VEHEMENTLY RELIED UPON JUD GMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NI KUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) AND SUBMITTED T HAT IN VIEW OF THE SAME THE ADDITION HAS BEEN RIGHTLY DELETED B Y THE LD. CIT(A). HOWEVER, DURING THE COURSE OF HEARING BEFOR E US BOTH THE PARTIES FAIRLY STATED THAT THE ADDITION OFFERED BY THE ASSESSEE HIMSELF @ 6% OF THE PURCHASE SHOULD BE SUS TAINED. 3.6. WE HAVE CONSIDERED ENTIRE MATERIAL HELD ON RECORD AS WELL AS SUBMISSIONS MADE BY BOTH THE SIDES BEFORE US. WE FIND THAT WHEN THE ASSESSEE HAD HIMSELF OFFERED TO MAKE DISAL LOWANCE @ 6% OF PURCHASE OF RS.2,64,54,407/- THEN, THE ADDITI ONS AT LEAST TO THIS EXTENT OUGHT TO HAVE BEEN SUSTAINED B Y THE LD. CIT(A). THEREFORE, IN THESE PECULIAR FACTS AND CIRC UMSTANCES OF THIS CASE, WE DIRECT THE AO TO SUSTAIN THE DISALLOW ANCE TO THE EXTENT OF 6% OF THE PURCHASES OF RS.2,64,54,407/- A ND BALANCE AMOUNT IS HELD TO BE RIGHTLY DELETED BY THE LD. CIT (A). THEREFORE, ORDER OF LD. CIT(A) IS MODIFIED ACCORDIN GLY. RITESH R. JAIN 7 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2016 SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER ! ' MUMBAI; ' DATED : 26 /10/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. ) *+ / THE APPELLANT 2. ,-*+ / THE RESPONDENT. 3. .$ . ! / ( ) ) / THE CIT, MUMBAI. 4. .$ . ! / / CIT(A)- , MUMBAI 5. 23 , 45 , .$ )% 45$6 , ! ' / DR, ITAT, MUMBAI 6. 7 8 ' / GUARD FILE. / BY ORDER, - 2) , //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! ' / ITAT, MUMBAI