Shri Jignesh R.Bodekar, Surat V. The Income tax Officer,Ward-5(2), Surat

ITA 2071/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2297 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY RAI
• Assessee Lawyers: KK SHAH
• Keywords: Bogus purchase; Unexplained investment; Income from undisclosed sources; Third party statement
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI N.S. SAINI, A.M. ) I.T.A. NO. 2071/AHD./2010 ASSESSMENT YEAR : 2007-2008 SHRI JIGNESH R. BODEKAR, SURAT -VS.- INCOME TAX OFF ICER, WARD-5(2), SURAT (PAN : AIBPB 8898 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. SHAH, A.R. RESPONDENT BY : SHRI SANJAY RAI, SR. D. R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 26.05.2010 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT CONF IRMING THE ADDITION OF RS.57,28,853/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS CONTAINED IN SECTION 41(1) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2007-0 8. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL CARRYING ON THE BUSINESS OF DIAMOND TRADING AT 1/1085 DHOBI SHERI, NANPURA, SUR AT. HE IS BUYING AND SELLING ROUGH AND FINISHED DIAMONDS. BESIDES DIAMOND TRADING, THE ASS ESSEE IS ALSO DOING OF DIAMOND POLISHING. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 31.03.2007 DECLARING TOTAL INCOME AT RS.2,01,685/-. THE ASSESSING OFFICER FRAM ED THE ASSESSMENT UNDER SECTION 143(3) ON 29.12.2009 WHEREIN HE MADE THE ADDITION OF RS.57,28 ,853/- UNDER SECTION 41(1) OF THE INCOME TAX ACT, 1961. 3. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER H AS STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FU RNISH THE CONFIRMATION/ CONTRA CONFIRMATIONS IN RESPECT OF THE FOLLOWING THREE CREDITORS FOR GOO DS AND EXPENSES :- SR. NO. NAME OF THE OUTSTANDING CREDITORS/ SUPPLIERS AS ON 31.03.2007 OUTSTANDING AMOUNT AS ON 31.03.2007 1. KAVAD HIMMAT BHUPENDRA RS.4,54,087/- 2. SHAILESH K. DEVALIYA RS.6,80,207/- 3. VITHAL D. VYAS RS.45,94,739/- 2 ITA NO. 2071-AHD-2010 TOTAL RS.57,28,853/- 4. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SIMPL Y FURNISHED LEDGER ACCOUNT OF THE CREDITORS FROM HIS BOOKS OF ACCOUNTS, WHICH BEARS P AN AND SIGNATURE OF THE CREDITORS. TO CHECK THE GENUINENESS OF THE CONFIRMATIONS, THE ASSESSING OFFICER ISSUED STATUTORY NOTICES UNDER SECTION 133(6) OF THE ACT DATED 10.12.2009 TO ALL T HE CREDITORS. HOWEVER, NO CONFIRMATION FROM THE AFORESAID THREE CREDITORS WAS RECEIVED. THEREAF TER THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 131 OF THE ACT DATED 07.12.2009 TO THE ASSE SSEE AND HIS STATEMENT ON OATH WAS RECORDED ON 16.12.2009. THEREAFTER THE ASSESSING OFFICER ISS UED A SHOW CAUSE NOTICE TO THE ASSESSEE TO SHOW-CAUSE WHO THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED BY INVOKING THE PROVISIONS CONTAINED IN SECTION 145(3) OF THE INCOME TAX ACT, 1961. IT APPEARS THAT ON ACCOUNT OF NO COMPLIANCE BY THE ASSESSEE, THE ASSESSING OFFICER M ADE THE ADDITION OF RS.57,28,853/- FOR THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER, WHI CH ARE AS UNDER :- (1) THE ASSESSEE HAD MADE THE PURCHASES FROM THE OP EN MARKET IN CASH BY MAKING SPOT PAYMENT AND PROCURED/ CREATED BOGUS PURCHASE B ILLS IN THE NAME OF NON- EXISTENT PARTIES WITH AN INTENTION TO COVER UP/ INT RODUCE HIS UNEXPLAINED INVESTMENT IN PURCHASE/ STOCK IN THE FORM OF SUNDRY CREDITORS. (2) THE ASSESSEE FAILED TO FILE THE PROOF REGARDING PAYMENT MADE SUBSEQUENTLY TO THE SO-CALLED CREDITORS. THEREFORE, IT IS PRESUMED THAT ALL THE PAYMENTS WERE MADE IN CASH. THUS THE ASSESSEE INTRODUCED HIS UNACCOUNT ED INCOME IN THE PURCHASES OF DIAMOND. (3) LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE UNDERSIGNED IS OF THE OPINION THAT BOOKS OF ACCOUNTS OF THE ASSESS EE ARE NOT CORRECT AND COMPLETE IN THE SENSE THAT THE SAME DOES NOT REFLECT THAT AC TUAL STATUS OF AFFAIRS OF THE ASSESSEE. THEREFORE, THE BOOKS OF ACCOUNTS ARE HERE BY REJECTED U/S. 145(3) OF THE I.T. ACT. (4) THUS IT IS CONCLUSIVELY PROVED THAT CREDITORS F OR GOODS AND EXPENSES HAVE ALREADY BEEN PAID OFF OUT OF UNDISCLOSED INCOME OF THE ASSESSEE, WHICH IS LIABLE TO BE TAXED. CONSEQUENTLY, THE LIABILITY TO THAT EXTEN T HAS CEASED AND EVENTUALLY THE SO CLAIMED CREDITORS ARE BOGUS. (5) AT LAST, AFTER DISCUSSING ALL THE ASPECT OF THI S MATTER AND LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AN AMOUNT OF RS.57,2 8,853/- IS ADDED BACK TO THE INCOME OF THE ASSESSEE ON THE BASIS THE SAID CREDIT ORS WHICH ARE MERELY BOOK ENTRIES AND HAVE ALREADY BEEN PAID OFF IN CASH. THE REFORE, IT IS ABUNDANTLY CLEAR THAT TRADE CREDIT SHOWN BY THE ASSESSEE IN BALANCE SHEET IS NOT GENUINE AND THE SAME HAS NOT NEED BEEN ESTABLISHED. THEREFORE, THE WHOLE AMOUNT IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE BECAUSE COR RESPONDING ASSETS HAVE BEEN CREATED IN THE BALANCE SHEET. IT MAY BE REITERATED THAT ASSESSEE MIGHT HAVE 3 ITA NO. 2071-AHD-2010 PURCHASED THE GOODS IN CASH USING HIS UNACCOUNTED M ONEY AND ONLY WITH A VIEW TO COME UP THE PURCHASES CORRESPONDING TO THE SALE, SU CH BOGUS LIABILITIES HAVE ALREADY BEEN PAID OFF OR PROCURED AND THEREBY HE HA S CREATED THE UNPROVEN CREDITS IN BALANCE SHEET. THIS IS PROVED BEYOND THE DOUBT THAT SUCH TRADE CREDITS ARE NOT GENUINE AND PURCHASE ARE NOT ESTABLISHED, T HAT IS WHY IT IS MOST REASONABLE AND JUSTIFIABLE TO ADD AN AMOUNT OF RS.5 7,28,853/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL, IN THE IMPUGNED ORDER THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) TOOK THE VIEW THAT INVOCATION OF PROVISIONS CONTAIN ED IN SECTION 145(1) IS HYPOTHETICALLY WRONG AND EXPENSES IN QUESTION CAN BE DISALLOWED AS NON-G ENUINE EXPENDITURE. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SHRI K.K. SHAH, LD. A.R. APPEARED AND CONTENDED THAT BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE HAS FURNISHED CONFIRMATION OF ACCOUNTS FOR THE ASSESSME NT YEAR 2007-08. FROM THE BALANCE-SHEET, IT WAS QUITE CLEAR THAT ALL THE CREDITORS WERE PAID DU RING SUBSEQUENT YEAR. THE ASSESSING OFFICER MADE THE ADDITION ON DOUBTS AND PRESUMPTION THAT PA YMENTS WERE MADE IN CASH IN WHICH THE ASSESSEE INTRODUCED UNACCOUNTED INCOME. HE SUBMITTE D THAT NO PAYMENT WAS MADE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AND PAYMENT WAS MADE AFTER THE END OF THE FINANCIAL YEAR 2006-07, WHICH IS EVIDENT FRO M THE BALANCE-SHEET OF SUBSEQUENT YEAR FURNISHED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT WAS FURTHER CONTENDED THAT THE ASSESSEE FURNISHED LEDGER ACCOUNT OF THE C REDITORS, WHICH BEAR SIGNATURE AND PAN OF CREDITORS TO THE ASSESSING OFFICER. HE COULD HAVE M ADE CROSS VERIFICATION FROM THE ASSESSING OFFICER WITH WHOM THE CREDITORS WERE ASSESSED TO TA X. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE BILLS OF PU RCHASES AND SALES, CONFIRMATION OF DEBTORS AND CREDITORS. WITH REGARD TO THE INVOCATION OF PROVISI ONS CONTAINED IN SECTION 145(3), THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT BOOKS OF ACCOUNTS CA NNOT BE REJECTED ON THE GROUND THAT CONTRA- CONFIRMATIONS WERE NOT PRODUCED FROM SUNDRY CREDITO RS FROM GOODS AND EXPENSES. WITH REGARD TO PARA 4.3 OF THE ASSESSMENT ORDER, THE LD. COUNSEL O F THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER DREW INFERENCE ON HYPOTHETICAL BASIS STATED THAT THE ASSESSEE HAD MADE PURCHASES FROM OPEN MARKET IN CASH BY MAKING SPOT PAYMENT AND PROC URED/CREATED BOGUS PURCHASE BILLS IN THE 4 ITA NO. 2071-AHD-2010 NAME OF NON-EXISTING PARTIES WITH AN INTENTION TO C OVER UP / INTRODUCE HIS UNEXPLAINED INVESTMENT IN PURCHASE/ STOCK IN THE FORM OF SUNDRY CREDITORS. 7. ON THE OTHER HAND, SHRI SANJAY RAI, LD. SR. D.R. APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). THE LD. D.R. POINTED OUT THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF THE CLAIM BEFORE THE TRIBUNAL THAT ALL THE AFORESAID THREE SUNDRY CR EDITORS WERE PAID IN THE SUBSEQUENT ASSESSMENT YEAR, THEREFORE, THE VIEW TAKEN BY THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) BE UPHELD. 8. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION ON THE GROUND THAT IT IS A NON-GENUINE EXPENDITURE. IT APPEARS THAT THE ASSESSEE HAS PURCHASED GOODS FROM THE AFORESAID THREE PARTIES. SALE OF GOODS, AND PURCHASES ARE NOT DOUBTED BY THE ASSESSING OFFI CER. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), IT WAS CONTENDED THAT THE PAY MENT WAS MADE TO ALL THE AFORESAID THREE CREDITORS IN THE NEXT FINANCIAL YEAR. THIS PLEA HAS BEEN COMPLETELY IGNORED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNE D ORDER. WE ARE, THEREFORE, OF THE VIEW THAT IT WILL MEET THE END OF JUSTICE IF THE IMPUGNE D ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS SET ASIDE AND HE BE DIRECTED TO VE RIFY WHETHER THE ASSESSEE HAS MADE THE PAYMENT TO ALL THE THREE CREDITORS IN SUBSEQUENT YE AR/ YEARS. IF THE PAYMENT HAS BEEN MADE IN THE NEXT FINANCIAL YEARS, THIS PLEA IS FOUND TO BE CORR ECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OF RS.57,28,853/- BE CAUSE THE ASSESSING OFFICER HAS NOT DOUBTED THE SALE OF GOODS WHICH WAS ALLEGEDLY TO BE PURCHAS ED FROM THE AFORESAID THREE PARTIES. WE DIRECT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AC CORDINGLY. 9. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 21.01.20 11 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 / 01 / 2011 5 ITA NO. 2071-AHD-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 REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.