SHARMISTHA MAFATIA MEHTA, MUMBAI V. ITO 22(2)(3), MUMBAI

ITA 1780/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5291 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGHDR
• Assessee Lawyers: AMIT C JHAVERI
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained expenditure; Opportunity of being heard; Reassessment proceedings; Set aside
• Section: 69C; 133A; 133(6); 68

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER, ITA NO.1780/MUM/2017 ASSESSMENT YEAR: 2010-11 SHARMISTA MAFATLAL MEHTA, 404, REKHA APARTMENT, AMRUT NAGAR, GHATKOPAR(W) MUMBAI-400086 / VS. INCOME TAX OFFICER-22(2)(3), MUMBAI !' / ASSESSEE # / REVENUE P.A. NO . AFAPM1923P !' / ASSESSEE BY SHRI AMIT C. JHAVERI # / REVENUE BY CHAUDHARY ARUN KUMAR SINGH - DR $ #%&'' / DATE OF HEARING 17/10/2018 &'' / DATE OF ORDER: 23/10/2018 / O R D E R PER JOGINDER SINGH, VICE PRESIDENT THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 12/12/2016 OF THE FIRST APPELLATE AUTHORITY, MUMBAI, CONFIRMING THE ADDITION OF RS.1,29,61,913/- (G.P. AT THE RATE OF 25%) ON THE HAWALA PURCHASES ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 2 AMOUNTING TO RS.5,18,47,653/- UNDER SECTION 69C OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. DURING HEARING OF THIS APPEAL, SHRI AMIT C. JHAVERI, LD. COUNSEL FOR THE ASSESSEE, CLAIMED THAT IN THE CASE OF RELATIVE IN INCOME TAX OFFICER VS MANISHA H EMANT MEHTA (ITA NO.1570/MUM/2017), ORDER DATED 31/10/2017, THE TRIBUNAL SENT THE MATTER TO THE FIL E OF THE LD. ASSESSING OFFICER WITH CERTAIN DIRECTIONS. HOWE VER, THE LD. DR, CHAUDHARY ARUN KUMAR SINGH, DEFENDED THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE AD VERTING FURTHER, WE DEEM IT APPROPRIATE TO REPRODUCE HEREUN DER THE RELEVANT PORTION FROM THE AFORESAID ORDER OF TH E TRIBUNAL DATED 31/10/2017 FOR READY REFERENCE AND CONSIDERATION. THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-25, MUMBAI AND ARISES OUT OF THE ASSESSME NT COMPLETED U/S 143(3)R.W.S. 148 OF THE INCOME TAX AC T 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 3 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 APPRECIATING THE FACT THAT THE A SSESSEE HAS FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EV IDENCE 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 DISA LLOWING ONLY 25% OF THE BOGUS PURCHASES, AS EVEN THE BASIC ONUS OF PRODUCING BILL OF PURCHASES LEDGER ACCOUNT, TRANSPORT BILLS D ELIVERY 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 O F 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 OFFIC ER BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED 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 BUSIN ESS PREMISES OF THE ASSESSEE ON 22.01.2013. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE HA D MADE PURCHASES FROM THE PARTIES WHO WERE HELD AS BOGUS B Y THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. TH EN THE ASSESSING OFFICER (AO) ISSUED NOTICE U/S 148 TO REOPEN THE ASSESSMENT DONE U/S 143(1). DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO ISSUED N OTICE U/S 133(6) TO 24 PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES IN ORDER TO VERIFY THE GENUINENESS O F TRANSACTIONS. THESE NOTICES WERE RETURNED BACK BY T HE POSTAL AUTHORITIES AS UNSERVED. THE AO THEN REQUEST ED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES ALONG WITH CO PY OF LEDGER ACCOUNT, BILLS, BANK STATEMENT FOR VERIFICAT ION. IT IS FOUND THAT THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES BEFORE THE AO FOR EXAMINATION. THE ASSESSEE ALSO FAILED TO FILE BEFORE THE AO EVIDENCE OF THE PURCHA SES 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 ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 4 OF RS.1,75,000/- AND FD MATURITY OF RS.83,637/-. TH E AO WAS NOT CONVINCED WITH THE SOURCE OF THE ABOVE AMOU NT 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 F ILED 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.2,58,63 7/- MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68, T HE LD. CIT(A) DELETED THE SAME ON THE REASON THAT NO SPECI FIC GROUND HAS BEEN MADE BY THE AO IN THE ASSESSMENT OR DER. 5. BEFORE US, THE LD. DR SUBMITS THAT AS THE ASSESS EE FAILED TO PRODUCE BEFORE THE AO THE 24 PARTIES AND ALSO FA ILED TO FILE DELIVERY CHALLANS, TRANSPORT BILLS ETC., THE L D. CIT(A) SHOULD HAVE CONFIRMED THE TOTAL DISALLOWANCE OF RS.2,08,70,690/-. THE DR ALSO SUBMITS THAT THE LD. CIT(A) SHOULD HAV E CONFIRMED THE ADDITION OF RS.2,58,637/- MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 AS THE ASSESSEE F AILED TO FILE THE CORROBORATIVE EVIDENCE BEFORE THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITS THAT THE ASSESSEE HAD SUBMITTED THE CORRESPONDING DETAILS BEFORE THE AO. HE SUBMITS THA T THE GOODS WERE RECEIVED AND ENTERED INTO STOCK REGISTER AND THE CORRESPONDING SALES WERE ACCOUNTED. SINCE THE S ALES 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, TH E LD. COUNSEL RELIED ON THE ORDER OF THE LD. 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 BELO W. ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 5 WE FIND THAT THE NOTICES ISSUED U/S 133(6) BY THE AO TO 24 PARTIES CALLING FOR COPY OF THE LEDGER ACC OUNT OF THE ASSESSEE, NATURE OF GOODS SOLD, SAMPLE COPY OF BILLS ISSUED, COPY OF DELIVERY CHALLANS OF GOODS DISPATCH ED ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEMENT WERE RETURNED BACK BY THE POSTAL AUTHORITIES AS UNSERVED . THEREAFTER, THE AO REQUESTED THE ASSESSEE TO PRODUC E THE ABOVE PARTIES ALONG WITH THEIR BOOKS OF ACCOUNTS FO R EXAMINATION. THE ASSESSEE FAILED TO PRODUCE THE ABO VE PARTIES BEFORE THE AO. WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTIOUS ISSUES IN THE INSTANT CASE COULD BE RESOLVED BY EXA MINING THE ABOVE PARTIES. IT IS THE DUTY OF THE AO TO ENFO RCE ATTENDANCE OF A WITNESS IF HIS EVIDENCE IS MATERIAL . AT THE SAME TIME THE ASSESSEE MUST FURNISH THE COMPLETE ADDRESS OF SUCH PERSON. A PROPER HEARING MUST ALWAYS INCLUDE A FAIR OPPORTUNITY TO THOSE WHO ARE PARTIES IN THE CONTROV ERSY FOR CORRECTING OR CONTRADICTING ANYTHING PREJUDICIA L TO THEIR VIEW. CROSS-EXAMINATION IS ALLOWED BY PROCEDU RAL RULES AND EVIDENTLY ALSO BY THE RULES OF NATURAL JU STICE. ANY WITNESS WHO HAS BEEN SWORN ON BEHALF OF ANY PAR TY 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 COMPLETENES S OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO E XAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CR OSS- EXAMINE WITNESSES. 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 OPPORTUNIT Y TO ASSESSEE TO CROSS-EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE BY HIGH COURT; AT MOST, HIGH COURT SHOULD HAVE DIRE CTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESS EE TO CROSS-EXAMINE CONCERNED WITNESS. ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 6 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]. THERE IS NO BASIS IN THE ORDER OF THE LD. CIT(A) I N ESTIMATING THE PROFIT @ 25% IN THE CASE OF A TRANSA CTION IN WHICH THE GENUINENESS IS NOT PROVED BY THE ASSESSEE . IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF TH E 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 ASSESS EE TO CROSS-EXAMINE THE CONCERNED PARTIES. WE ALSO DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BE FORE THE AO. NEEDLESS TO SAY THE AO WOULD GIVE REASONABL E 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 AN Y 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. 2.2. WE FIND THAT IN THE AFORESAID ORDER, THE ADDI TION ON ACCOUNT OF BOGUS PURCHASES WAS UPHELD TO THE TUN E OF 25% OF THE BOGUS PURCHASES BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AND FINALLY, ON APPEAL BY THE REVENUE, THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEAL) WAS SET-ASIDE AND THE MATTER WAS RESTORED TO THE FILE OF THE LD. ASSESSING OFFICER WITH CERTAIN DIRE CTIONS. IN THE PRESENT APPEAL, BEFORE US, THE ASSESSEE DECLARE D ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 7 INCOME OF RS.3,89,450/-. THE LD. ASSESSING OFFICER RECEIVED INFORMATION FROM DGIT THAT THE ASSESSEE OB TAINED ACCOMMODATION ENTRY TO THE EXTENT OF RS.5.18CRORES FROM HAWALA ENTRY OPERATORS, ON THE BASIS OF WHICH, SURV EY ACTION 133A WAS CARRIED OUT ON 22/01/2013 AND DURIN G SURVEY, THE STATEMENT OF THE PROPRIETOR I.E. THE AS SESSEE WAS RECORDED AND INCRIMINATING DOCUMENTS WERE IMPOUNDED. ON THE BASIS OF RECORD, THE ASSESSMENT W AS REOPENED UNDER SECTION 147/148 OF THE ACT. IT WAS F OUND THAT THE ASSESSEE MADE PURCHASES FROM CERTAIN PARTI ES TO WHOM NOTICES WERE ISSUED UNDER SECTION 133(6) OF TH E ACT. AS PER THE REVENUE, THE ASSESSEE DID NOT DISCHARGED THE ONUS CAST UPON THE ASSESSEE AND ULTIMATELY ADDITION WAS MADE AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C O F THE ACT. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), VARIOUS CASE LAWS WERE CONSIDE RED AND FINALLY, THE DISALLOWANCE WAS MADE @25% OF THE ALLEGED BOGUS PURCHASES OF RS.5,18,47,653/- AND THU S ADDITION OF RS.1,29,61, 913/- WAS CONFIRMED, WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. CONSIDERING T HE AFORESAID DECISION OF THE TRIBUNAL, WE REMAND THIS ISSUE TO ITA NO.1780/MUM/2017 SHARMISTA MAFATLAL MEHTA 8 THE FILE OF THE LD. ASSESSING OFFICER WITH SIMILAR DIRECTIONS AS CONTAINED IN AFORESAID ORDER DATED 31/10/2017, T HUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17/10/2018. SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $%& /VICE PRESIDENT MUMBAI; ) DATED : 23/10/2018 F{X~{T? P.S / *# !'()*+,+-) / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 00 1' ( + ) / THE CIT, MUMBAI. 4. 00 1' / CIT(A)- , MUMBAI 5. 4#5.' , 0+'+6 , / DR, ITAT, MUMBAI 6. 7 8 / GUARD FILE. ! / BY ORDER, $/ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI