Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 5981 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-09-2020
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
16-01-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI RAJESH KUMAR (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 214/MUM/2019 ASSESSMENT Y EAR: 2009 - 2010 SHRI ANIL K. SHAH (HUF), 703, SUPERSHAV, NAHUR ROAD, SARVODAYA NAGAR, MULUND (WEST), MUMBAI - 400080 PAN: AADHA5072M VS. THE ITO WARD 23(2)(1), 111, MATRU MANDIR, TARDEO, GRANT ROAD, MUMBAI (APPELLANT) (RESPONDENT) & ITA NO. 215/MUM/2019 ASSESSMENT Y EAR: 2009 - 2010 SHRI ANIL K. SHAH , 703, SUPERSHAV, NAHUR ROAD, SARVODAYA NAGAR , MULUND (WEST), MUMBAI - 400080 PAN: AAPPS6042M VS. THE ITO WARD 23(2)(1), 111, MATRU MANDIR, TARDEO, GRANT ROAD, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEVENDRA JAIN (AR) REVENUE BY : SHRI JERNOLD MICHEL (D R ) DATE OF HEARING: 21/08 /2020 DATE OF PRONOUNCEMENT: 10 / 09 /2020 O R D E R PER RAM LAL NEGI, JM THESE APPEAL S HAVE BEEN FILED AGAINST THE TWO ORDER S DATED 31.08.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APP EALS) - 39 (FOR SHORT THE CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR S 2009 - 10 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL S FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER S PASSED U/S 143 (3) R.W.S. 14 7 AND U/S 144 R.W.S. 147 OF THE INCOME TAX ACT , 1961 (FOR SHORT THE ACT). SINCE, THESE APPEALS PERTAIN TO THE SAME PERSON IN THE INDIVIDUAL CAPACITY AND IN THE CAPACITY OF HUF AND THE ISSUES INVOLVED ARE 2 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 IDENTICAL , THESE WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED OF FOR THE SAKE OF CONVENIE NCE. IT A NO. 214/MUM/2019 (ASSESSMENT YEAR: 2009 - 2010 ) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CARRYING ON THE BUSINESS AS DEALER IN IRON AND STEEL, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 15.09.2009 DECLAR ING THE TOTAL INCOME OF RS. 7,92,587/ - THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FROM BOGUS DEALERS IN ORDER TO INFLATE PURCHASES. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT. IN RESPONSE TO THE NOTICE U/S 142 (1) OF THE ACT, THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE APPEARED BEFORE THE AO AND FURNISHED SOME OF THE DETAILS CALLED FOR BY THE AO . THEREAFTER, NEITHER THE ASSESSEE NOR THE REPRESENTA TIVE APPEARED BEFORE THE AO ANY DETAILS/DOCUMENTS WERE FURNISHED BEFORE THE AO. ACCORDINGLY, THE AO PASSED THE ASSESSMENT ORDER ON THE BASIS MATERIAL AVAILABLE ON RECORD AND DETERMINED THE TOTAL I NCOME OF THE ASSESSEE AT RS. 5,38,54,780/ - AFTER MAKING VARIOUS ADDITIONS. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 3 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) MUMBAI HAS ERRED IN SUSTAINING TH E ADDITIONS MADE BY THE ASSESSING OFFICER ON FOLLOWING MATTERS NOT RELATED TO THE REASONS RECORDED FOR ISSUING NOTICE U/S 148 AND THUS TRAVELING BEYOND THE SCOPE OF REASSESSMENT AND MAKING ADDITIONS TO THE TOTAL INCOME ON MATTERS NOT RELATED TO REASONS REC ORDED FOR REASSESSMENT, THOUGH IN PRINCIPLE THE CIT (A) AGREED WITH THE CONTENTION OF THE APPELLANT THAT ASSESSING OFFICER CANNOT MAKE FISHING ENQUIRY IN THE COURSE OF REASSESSMENT. 3 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 NATURE F ADDITION/ DISALLOWANCE RELEVANT GROUND NO. BEFORE CIT(A) A MT. OF ADDITION/ DISALLOWANCE SUSTAINED VARIOUS EXPENSES DEBITED TO PROFIT & LOSS A/C GROUND NO. 4 RS. 2,85,180/ - BORROWED FUNDS GROUND NO. 8 RS. 6,50,000 / - 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING GENUINE PURCHASE MADE FROM FOLLOWING PARTIES AS NON - GENUINE PURCHASE AND ADDING THE WHOLE AMOUNT U/S 69C. SR. NO. NAME OF PARTY AMOUNT 1 M/S PRAYAN TRADING CO. RS. 8,98,040 / - 2 M/S SAMPA RK STEELS RS. 8,21,174 / - TOTAL RS. 17,19,214 / - 3. IN T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A), MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING, VARIOUS EXPENSES AGGREGATE TO RS. 2,85,180 / - DEBITED TO P & L A/C., AS UNEXPLAINED EXPENDITURE U/S 69C AND DISALLOWING 100% OF SUCH EXPENDITURE AND IN SUSTAINING SUCH DISALLOWANCE CIT (A) IGNORED HIS OWN FINDINGS IN GROUND OF APPEAL NO. 1 BEFORE HIM. SR. NO. EXPENSE AMOUNT 1 STAFF WELFARE 21 ,250/ - 2 SALARY 1,00,000/ - 3 CRANE 12,150 / - 4 CONVEYANCE 25,970/ - 5 TRAVELING 22,875 / - 6 HAMALI 19,015 7 LOADING & UNLOADING 39,500/ - 8 OIL & PAINTING 26,195/ - 9 PRINTING & STATIONERY 18,225/ - TOTAL 2,85,180/ - 4 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 4. IN THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW, THE LEARNED CIT (A), MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING THE BORROWED FUNDS OF RS. 6,50,000/ - FROM THE FOLLOWING LENDERS AS UNEXPLAINED CASH CREDITS U/S 68: SR. NO. LENDER AMOUNT 1 GAMHIRDAS D. SHAH RS. 3 ,00,000/ - 2 KAJAL JETHWA RS. 3,50,000 / - TOTAL RS. 6,50,000 / - IN SUSTAINING SUCH ADDITION CIT (A) IGNORED HIS OWN FINDINGS IN GROUND OF APPEAL NO. 1 BEFORE HIM. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE LD. CIT (A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER ON THE ISSUES NOT RELATED TO THE REASONS RECORDED FOR ISSUING NOTICE U/S 148 AND TRAVELLING BEYOND THE SCOPE OF REASSESSMENT AND MAKING ADDITION TO THE TOTAL INCOME ON MAT TERS NOT RELATED TO REASONS RECORDED FOR THE ASSESSMENT. THE LD. COUNSEL FURTHER POINTED OUT THAT THE LD. CIT (A) EVEN AFTER HOLDING THAT THE ASSESSING OFFICER CANNOT MAKE FISHING ENQUIRY IN THE COURSE OF REASSESSMENT , THE LD. CIT (A) HAS CONFIRMED THE ADD ITION MADE BY THE AO IN THE ISSUE S NOT RELATING TO THE REASONS RECORDED FOR REOPENING. THE LD. COUNSEL FOR THE ASSESSEE PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. VS. CIT 336 ITR 136 (DELHI) S U BMITTED THAT EXPLANATION 3 TO SECTION 147 DOES NOT EMPOWER THE AO TO MAKE ROVING ENQUIRIES IN RESPECT OF OTHER MATTERS. MAKING ROVING ENQUIRIES IN RESPECT OF OTHER MATTERS IS DIFFERENT FROM SOMETHING COMING TO HIS NOTICE OF AO DURING THE COURSE OF ASSESSME NT. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE LD. CIT (A) HAS ALLOWED THE LEGAL GROUND RAISED BY THE ASSESSEE AND HELD THAT THE AO CANNOT MAKE FISHING ENQUIRY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. CIT (A) OUGHT TO HAVE DELETED THE ADD ITION MADE BY THE AO ON THE ISSUES OTHER THAN 5 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 THE ISSUE MENTIONED IN THE REASONS RECORDED FOR ISSUING NOTICE U/S 148 OF THE ACT. 5. SO FAR AS THE ADDITION ON ACCOUNT OF BOGUS PURCHASES IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE L D. CIT (A) HAS WRONGLY CONFIRMED THE ACTION OF AO AND UPHELD THE ADDITION AMOUNTING TO RS. 17,19,214/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASES MADE FROM M/S PRAYAN TRADING COMPANY AND M/S SAMPARK STEELS. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE AO H AD MADE ADDITION OF THE SAID AMOUNT ON THE GROUND THAT THE ASSESSEE HAD NOT SUBMITTED RECEIPT OF VAT PAID, SALE S TAX PAID, TRANSPORT RECEIPT, OCTROI RECEIPT, GODOWN RECEIPT, TOLL RECEIPT, INSURANCE RECEIPT, DISPATCH VOUCHERS AND OTHER RELATED DOCUMENTS TO ESTABLISH THE GENUINENESS OF TRANSACTION OF PURCHASES, THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THE OTHER EVIDENCES PLACED ON RECORD BY THE ASSESSEE. PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BABULAL C BORANA VS. THIR D ITO 282 ITR 251 (BOM) , THE LD. COUNSEL SUBMITTED THAT MERELY BECAUSE THE SUPPLIERS ARE LISTED AS DEFAULTERS UNDER THE SALES TAX LAWS, IT CANNOT BE A GROUND FOR DISALLOWANCE OF THOSE PURCHASES. THE LD. COUNSEL FURTHER CONTENDED THAT THERE IS NO EVIDENCE T O SUPPORT THAT PAYMENT MADE THROUGH BANK WAS RECEIVED BACK IN CASH. THE LD. COUNSEL FURTHER PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIKUNJ EXIM ENTERPRISES P. LTD. 216 TAXMAN 171 (BOM) FURTHER CONTENDED THAT MERE NON PRODUCTION OF PARTIES CANNOT LEAD TO A PRESUMPTION THAT TRANSACTION IS NOT GENUINE. THE LD. COUNSEL FURTHER SUBMITTED THAT IN ANY CASE 100% ADDITION IS CONTRARY TO THE SETTLED PRINCIPLES OF LAW. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE (DR) RELYING ON THE ORDER PASSED BY THE LD.CIT (A) SUBMITTED THAT AS PER THE LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. VS. COMMISSIONER OF INCOME TAX 12 TAXMAN.COM 74 (DELHI), IF DURING THE COURSE OF REA SSESSMENT PROCEEDING , THE AO COMES TO CONCLUSION THAT SOME ITEMS HAVE ESCAPED ASSESSMENT THEN NOTWITHSTANDING THAT THOSE ITEMS WERE NOT INCLUDED IN REASONS TO BELIEVE AS RECORDED FOR INITIATION OF PROCEEDINGS AND NOTICE THE AO 6 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 CAN MAKE ASSESSMENT OF THOSE ITEMS. THE LD. DR FURTHER CONTENDED THAT SINCE THE AO HAD MADE ADDITIONS IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT , T HE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION OF RS. 2,85,180/ - ON ACCOUNT OF VARIOUS EXPENSES IN P & L A CCOUNT, RS. 6,50,000/ - ON ACCOUNT OF BORROWED FUNDS, RS. 2,85,180/ - ON ACCOUNT OF EXPENSES RELATED TO S TAFF WELFARE , SALARY, C RANE, C ONVEYANCE, T RAVELLING, H AMALI, L OADING AND U N LOADING , O IL AND PAINTING, AND P RINTING & S TATIONERY AMOUNTING TO RS. 2,85,18 0/ - AND ADDITION OF RS. 6,50,000/ - ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT APART FROM THE ADDITION OF RS. 17,19,214/ - ON ACCOUNT OF BOGUS PURCHASES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF PARTIES AND ALSO PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A) INTER ALIA ON THE GROUND THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN MAKING FISHING ENQUIRIES ABOUT MATTERS NOT RELATED TO THE REASONS RECORDED FOR ISSUING NOTICE U/S 148 AND THUS TRAVELING BEYOND THE SCOPE OF THE ASSESSMENT AND MAKING ADDITION TO THE TOTAL INCOME ON MATTERS NOT RELATED TO REASONS RECOR DED FOR REASSESSMENT. THE ASSESSEE CONTENDED BEFORE THE LD. CIT (A) THAT ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), THE AO FORMED THE BELIEF THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT TO THE TUNE OF RS. 17,19,214/ - BEING PURCHASES SHOW N FROM HAWALA PARTIES. H OWEVER , THE AO MADE FISHING ENQUIRY ABOUT MANY OTHER MATTERS NOT RELATED TO THE REASONS RECORDED FOR ISSUING NOTICE U/S 148 AND MADE VARIOUS ADDITIONS. THE AR RELIED ON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VIPON KHANNA VS. CIT 255 ITR 220 (PUNJAB & HARYANA), AMRINDER SINGH DHIMAN VS. ITO 269 ITR 378 (P & H) AND RANBAXY LABORATORY LTD. VS. CIT 366 ITR 136 (DELHI) TO SUBSTANTIATE THE PLEA THAT THE ACTION OF THE AO IS NOT SUSTAINABLE IN LAW . THE LD. CIT (A) ALLOWED THE SAID GROUND FOR STATISTICAL PURPOSE HOLDING AS UNDER: - I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT. THE APPELLANT HAS CONTENDED THAT THE AO CANNOT MAKE ROVING AND 7 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 FISHING ENQUIRY IN THE COURSE OF THE REASSESSMENT PROCEEDINGS. THE APPELLANT RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. VERSUS CIT (2011) 336 ITR (DELHI). THE APPELLANT ALSO RELIED UPON THE JURISDICTIONAL, MUMBAI BENCH OF THE ITAT IN THE CASE OF JAI GLASS WORKS VS. DCIT (ITA NO. 2557/MUM/2013). I FIND THAT THE CASES CITED BY THE APPELLANT SUPPORTS THE CONTENTIONS OF THE APPELLANT. THEREFORE, I AGREE WITH THE CONTENTIONS OF THE APPELLANT THAT THE AO CANNOT MAKE FISHING ENQUIRY THE COURSE OF THE REASSESSMENT PROCEEDING S. THIS ASPECT WILL BE BORNE IN MIND WHILE DECIDING THE OTHER GROUNDS OF APPEAL. FOR STATISTICAL PURPOSE THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 8. AS POINTED OUT BY THE LD. COUNSEL, THE LD. CIT (A) HAS DECIDED THE LEGAL ISSUE HOLDIN G THA T THE AO HAS NO JURISDICTION TO MAKE FISHING ENQUIRY IN THE COURSE OF REASSESSMENT PROCEEDINGS. ADMITTEDLY, THE DEPARTMENT IS NOT IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). UNDER THESE CIRCUMSTANCES, WE FIND FORCE IN THE ARGUMENT OF THE L D. COUNSEL THAT THE FINDING OF THE LD. CIT (A) HAS ATTAINED FINALITY AND THE DEPARTMENT CANNOT RAISED THIS PLEA BEFORE THE TRIBUNAL THAT THE LD. CIT (A) HAS WRONGLY DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE . IN THE CASE OF RANBAXY LABORATORY LTD. V S. CIT (SUPRA), THE HONBLE HIGH COURT HAS EXPLAINED THE EFFECT OF EXPLANATION 3 TO SECTION 147 INSERTED BY FINANCE ACT, 2009 WHICH EMPOWERS THE AO TO ASSESS THE ANY INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY EVEN THOUGH NO REASONS HAVE BEEN RECORDED IN RESPECT THEREOF HOLDING THAT EXPLANATION 3 DOES NOT EMPOWER THE AO TO MAKE ROVING ENQUIRIES IN RESPECT OF OTHER MATTERS . SINCE, THE LD. CIT (A) HAS HELD IN PRINCIPLE THAT THE AO HAS MADE FISHING ENQUIRY IN THE COURSE OF REASSESSMENT PROCEEDINGS AND ALLOWE D THE LEGAL GROUND RAISED BY THE ASSESSEE FOR STATISTICAL PURPOSES AND SINCE THE DEPARTMENT HAS NOT CHALLENGED THE FINDINGS OF THE LD. CIT (A), IN OUR CONSIDERED VIEW, THE ADDITION MADE BY THE AO EXCEPT THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES WHICH WAS THE SUBJECT MATTER OF REASSESSMENT, ARE NOT SUSTAINABLE . ONCE, IT IS ESTABLISHED THAT THE A O HAS MADE FISHING AND ROVING ENQUIRY , THE ADDITIONS MADE AS A RESULT OF SUCH ENQUIRY CANNOT BE CONFIRM ED. HENCE, WE ALLOW THE LEGAL GROUND RAISED BY THE ASSESS EE 8 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 AND DELETE ALL THE ADDITION S SUSTAINRD BY THE LD. CIT (A) EXCEPT THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. 9. SO FAR AS THE ADDITION ON ACCOUNT OF BOGUS PURCHASES IS CONCERNED , WE NOTICE THAT THE ASSESSEE DID NOT PRODUCE DELIVERY CHALLAN, TRANS PORT BILL, STOCK REGISTER, QUANTITATIVE RECONCILIATION OF PURCHASES AND SALES. AS PER THE AUDIT REPORT, THE ASSESSEE HAD NOT MAINTAINED THE STOCK REGISTER. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES MADE F ROM TWO BOGUS TRADERS AMOUNTING TO RS. 17,19,214/ - , THEREFORE, THE AUTHORITIES BELOW HAVE RIGHTLY HELD THE SAID TRANSACTION AS BOGUS. WE FURTHER NOTICE THAT THE AUTHORITIES BELOW HAVE NOT REJECTED THE SALES OF THE ASSESSEE. AS CONTENDED BY THE LD. COUNSEL, THERE CAN BE NO SALE S WITHOUT ANY PURCHASES . THE FACTS AND THE CIRCUMSTANCES OF THE CASE SUGGEST THAT THE ASSESSEE HA D PURCHASED THE MATERIAL FROM GREY MARKET AND EVADED THE APPLICABLE TAXES. THEREFORE, ADDITION TO THE EXTENT OF PROFIT EARNED FROM SUCH TR ANSACTION AND THE APPLICABLE TAXES EVADED BY THE ASSESSEE IS REQUIRED TO BE MADE. THE HONBLE GUJ A RAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASE S SHOWN BY THE ASSESSEE HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. 10. HENCE, IN VIEW OF THE FAC TS AND CIRCUMSTANCE OF THE CASE AND IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA) , WE PARTLY ALLOW GROUND NO 2 RAISED BY THE ASSESSEE AND DIRECT THE AO TO MAKE ADDITION @ 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES UPHELD BY THE LD. CIT (A) AND TO DELETE THE REMAINING ADDITIONS SUSTAINE D BY THE LD. CIT (A) . ITA NO. 215/MUM/2019 (ASSESSMENT Y EAR: 2009 - 2010 ) 2 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - 9 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEA RNED CIT (A) MUMBAI HAS ERRED IN SUSTAINING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON FOLLOWING MATTERS NOT RELATED TO THE REASONS RECORDED FOR ISSUING NOTICE U/S 148 AND THUS TRAVELING BEYOND THE SCOPE OF REASSESSMENT AND MAKING ADDITIONS TO THE TOT AL INCOME ON MATTERS NOT RELATED TO REASONS RECORDED FOR REASSESSMENT, THOUGH IN PRINCIPLE THE CIT (A) AGREED WITH THE CONTENTION OF THE APPELLANT THAT ASSESSING OFFICER CANNOT MAKE FISHING ENQUIRY IN THE COURSE OF REASSESSMENT. NATURE F ADDITION/ DISAL LOWANCE RELEVANT GROUND NO. BEFORE CIT(A) A MT. OF/ADDITION/ DISALLOWANCE SUSTAINED VARIOUS EXPENSES DEBITED TO PROFIT & LOSS A/C GROUND NO. 4 RS. 6, 20,512/ - INTEREST EXPENSE GROUND NO. 5 RS. 5,36,251/ - BORROWED FUNDS GROUND NO. 8 RS. 9,50,000 / - 2 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING GENUINE PURCHASE MADE FROM FOLLOWING PARTIES AS NON - GENUINE PURCHASE AND ADDING THE WHOLE AMOUNT U/S 69C. SR. NO. NAME OF PARTY AMOUNT 1 M/S PRAYAN TRADING CO. RS. 6,52,090/ - 2 M/S SAMPARK STEELS RS. 6,25,185/ - TOTAL RS. 12,77,275/ - 3. IN T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A), MUMBAI HAS ERRED IN CONFIRMING T HE ACTION OF THE ASSESSING OFFICER IN CONSIDERING, VARIOUS EXPENSES AGGREGATE TO RS. 6,20,512/ - DEBITED TO P & L A/C., AS UNEXPLAINED EXPENDITURE U/S 69C AND DISALLOWING 100% OF SUCH EXPENDITURE AND IN SUSTAINING SUCH DISALLOWANCE CIT (A) IGNORED HIS OWN F INDINGS IN GROUND OF APPEAL NO. 1 BEFORE HIM. SR. EXPENSE AMOUNT 10 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 NO. 1 BONUS 20,000 / - 2 STAFF WELFARE 22,870/ - 3 CAR EXPENSE 36,512/ - 4 CRANE 32,610/ - 5 HAIL CHARGES 19,675/ - 6 LABOR CHARGES 1,80,000/ - 7 LOADING CHARGES 69,850/ - 8 OIL & PAINTI NG 36,975/ - 9 PRINTING & STATIONERY 15,250/ - 10 STRAIGHTENING CHARGES 34,345/ - 11 WEIGHTMENT CHARGES 32,425/ - 12 SALARY 1,20,000/ - TOTAL 6,20,512/ - 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A), MUMBAI HAS ERRED I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING INTEREST EXPENSE OF RS. 5,36,251/ - DEBITED TO P & L A/C U/S 40(A)(IA) AND IN SUSTAINING SUCH DISALLOWANCE CIT (A) IGNORED HIS OWN FINDINGINGS IN GROUND OF APPEAL NO. 1 BEFORE HIM. 5. IN THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING THE BORROWED FUNDS OF RS. 9,50,000/ - FROM THE FOLLOWING LENDERS AS UNEXPLAINED CASH CREDITS U/S 68: SR. NO. LEND ER AMOUNT 1 CAMBHIRDAS D SHAH RS. 2,00,000/ - 2 TUSHAR DOSHI RS. 5,00,000/ - 3 R.B. SHAH RS. 2,50,000/ - TOTAL RS. 9,50,000/ - IN SUSTAINING SUCH ADDITION CIT (A) IGNORED HIS OWN FINDINGS IN GROUND OF APPEAL NO. 1 BEFORE HIM. 3. THE FACTS AND THE ISS UES INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND THE ISSUES INVOLVED IN ASSESSEES CASE ITA NO. 214/MUM/2019 11 ITA NO S . 214 AND 215/MUM/2019 ASSESSMENT YEAR: 2009 - 10 DISCUSSED ABOVE EXCEPT THE AMOUNTS OF ADDITIONS SUSTAINED BY THE LD. CIT (A) . SINCE, WE HAVE PARTLY ALLOWED THE APPEAL OF THE ASSESS EE AND SUSTAINED ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES SUSTAINED BY THE LD. CIT (A) AND DELETED THE REMAINING ADDITIONS IN ITA NO. 214/MUM/2019 AFORESAID AND SINCE THERE IS NO MATERIAL CHANGE IN THE FACTS OF THE PRESENT CASE, CONSISTENT WITH OUR FINDINGS IN THE ASSESSEES CASE IN ITA NO. 214/MUM/2019 AFORESAID, WE DIRECT THE AO TO MAKE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES SHOWN BY THE ASSESSEE IN THE PRESENT CASE AND DELETE THE REMAINING ADDITIONS SUSTAINED BY THE LD. CIT (A). IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 10 TH SEPT . , 2020 UNDER RULE 34 (4) OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 10 / 0 9 / 2020 ALINDRA, PS / 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
