DY.C.I.T. 1, V. SHRI BHOJRAJ LALCHAND NAWANI, Mumbai

ITA 220/BIL/2014

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9680 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 29-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RITUPARAN NAMDEO
• Assessee Lawyers: S R RAO
• Keywords: Bogus purchase; Gross profit estimation; Unexplained expenditure; Search and seizure
• Section: 69C; 142(1); 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.220/RPR/2014 ASSESSMENT YEAR : 2011-12 DCIT- 1 BHILAI (CG). VS. BHOJRAJ LAL CHAND NAWANI, 10-11, KAMLA BHAWAN, INDUSTRIAL ESTATE, GOREGAON (E), MUMBAI. PAN : ACYPN0357P (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI RITUPARAN NAMDEO, DR ASSESSEE BY : SHRI S. R. RAO, ADV. DATE OF HEARING : 13-08-2018 DATE OF PRONOUNCEMENT : 25-09-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 25.07.2014 OF THE LD. CIT(A), RAIPUR (CG) RELATING TO ASSESSMENT YEAR 2011-12. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER :- 1. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.73,28,854/ - MADE BY THE A.O. ON ACCOUNT OF BOGUS PURCHASE MADE BY A.O. ON THE BASIS OF INFORMA TION RECEIVED FROM THE SALES TAX DEPARTMENT? 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF READYMA DE GARMENTS. THE ASSESSEE 2 ITA NO.220/RPR/2014 FILED HIS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCOME OF RS.50,64,523/-. SUBSEQUENTLY, INFORMATION WAS RECE IVED THAT SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT VARIOUS PLACES BY THE SA LES TAX AUTHORITY (INV.), GOVERNMENT OF MAHARASHTRA ON VARIOUS BUSINESSMEN DU RING WHICH IT WAS FOUND THAT THOSE BUSINESSMEN WERE ENGAGED IN HAWALA TRANS ACTION BY PROVIDING BOGUS SALE BILLS TO VARIOUS PARTIES. SUCH INFORMATION WA S THEN HANDED OVER TO THE OFFICER OF THE DIRECTOR GENERAL OF INCOME TAX (INV. ), MUMBAI FOR TAKING NECESSARY ACTION AS PER PROVISIONS OF THE INCOME TA X ACT, 1961. ON VERIFICATION OF THE INFORMATION SO RECEIVED, THE ASSESSING OFFIC ER FOUND THAT THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, ENTERED INTO B OGUS TRADING WITH THE FOLLOWING CONCERNS :- I. M/S SPICE TRADING CO., 18-A, SHANTI NAGAR, DAHAN UKARWADI, M.G. ROAD, MUMBAI-67. II. M/S NIRMAL TRADING CO., 91, 6 TH FLOOR, 616, DURGADORI ROAD, MUMBAI- 4. III M/S REMI TRADING CO. PVT. LTD., 29, CHANDRA MAH AL BLDG., 3 RD FLOOR, 56, 1 ST KUMBHARWADA, MUMBAI-04. 4. HE, THEREFORE, REOPENED THE CASE BY RECORDING RE ASONS AND ISSUED NOTICE U/S 148 ON 01.03.2013 WHICH WAS DULY SERVED ON THE ASSESSEE THROUGH REGISTERED POST. HOWEVER, THE ASSESSEE DID NOT FILE ANY RETUR N OF INCOME WITHIN THE STIPULATED TIME. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) ON 10.09.2013 TO WHICH ALSO THE ASSESSEE DID NOT COMPL Y. THE ASSESSING OFFICER FURTHER ISSUED NOTICE U/S 142(1) ON 04.11.2013 WHIC H WAS DULY SERVED ON THE ASSESSEE THROUGH REGISTERED POST AND AGAIN THERE WA S NO COMPLIANCE ON THE PART 3 ITA NO.220/RPR/2014 OF THE ASSESSEE. THEREFORE, NOTICE U/S 144 WAS ISS UED ON 24.12.2013 WHICH WAS RETURNED UNSERVED WITH THE COMMENT LEFT. THEREAF TER, THE ASSESSING OFFICER COLLECTED THE NEW ADDRESS AND MOBILE NUMBER OF THE ASSESSEE AND AGAIN NOTICE U/S 144 WAS ISSUED ON 26.02.2014 IN RESPONSE TO WHI CH, THE AR OF THE ASSESSEE APPEARED ON 10.03.2014 BEFORE THE ASSESSING OFFICER . 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE ALL THE BILLS/VOUCHERS AND SUPPORTING DOCUMENTS IN RESPECT OF THE PURCHASES. HOWEVER, THE ASSESSEE DI D NOT PRODUCE THE SUPPORTING DOCUMENTS FOR WHICH THE ENTRIES MADE IN THE BOOKS O F ACCOUNT AND THE RESULT THEREON COULD NOT BE VERIFIED BY THE ASSESSING OFFI CER. SINCE THE ASSESSEE DID NOT SATISFY THE ASSESSING OFFICER BY PRODUCING THE RELEVANT DETAILS AND SINCE THE ASSESSEE HAS RECEIVED SALE BILLS OF RS.45,71,421/- FROM M/S SPICE TRADING COMPANY, RS.12,75,469/- FROM M/S NIRMAL TRADING COM PANY AND RS.14,81,964/- FROM M/S REMI TRADING COMPANY PVT. L TD., THE ASSESSING OFFICER HELD THAT SUCH PURCHASES ARE BOGUS. WHILE HOLDING SO, HE FURTHER OBSERVED THAT DURING THE COURSE OF SEARCH AND SEIZU RE OPERATION CONDUCTED BY THE SALES TAX AUTHORITY (INV.), GOVERNMENT OF MAHAR ASHTRA, STATEMENT OF SHRI SAITAN SINGH J. KHEECHAR WAS RECORDED WHEREIN HE HA D STATED THAT HE INTER-ALIA OPERATED M/S REMI TRADING COMPANY PVT. LTD. AND THE RE WAS NO PHYSICAL SALE/PURCHASE OF GOODS. HE ISSUED ONLY SALE BILLS TO DIFFERENT PARTIES AND DISCOUNT PAID RS.0.50/- PAISE PER RS100/-. SHRI KH EECHAR CONFIRMED THE FACT 4 ITA NO.220/RPR/2014 VIDE AFFIDAVIT DATED 17.08.2011. AFTER CONSIDERING THE VARIOUS FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER CAME TO THE CO NCLUSION THAT THE ASSESSEE DID NOT PURCHASE ANY GOODS BUT ACCOUNTED FOR PURCHA SE BILLS IN BOOKS OF ACCOUNT. SIMILARLY, THE STATEMENT OF SHRI NITIN ME HTA OF SPICE TRADING COMPANY AND SHRI MANGILAL PESAYAK OF NIRMAL TRADING COMPANY WERE RECORDED AND FROM THEIR STATEMENTS AND AFFIDAVITS F ILED SUBSEQUENTLY HE OBSERVED THAT THEY WERE ENGAGED IN ISSUING SALE BIL LS TO DIFFERENT PARTIES FOR COMMISSION OF RS.0.50/- PAISE FOR RS.100/- AND USED THE TIN NUMBER OF SPICE TRADING COMPANY BY PAYING OF RS.4,000/- PER MONTH T O MR. MEHTA. THE ABOVE FIRM WAS OPERATED BY MR. JAGDISH MISTRI. THEREFORE , THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE DID NOT PURCHASE ANY GO ODS BUT ACCOUNTED FOR THE PURCHASE BILLS IN ITS BOOKS OF ACCOUNT. HE FURTHER HELD THAT SINCE THE GOODS WERE NOT PHYSICALLY MOVED THEREFORE PURCHASES HAVE TO BE TREATED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE I.T. ACT. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.73,28,854/- TO THE TOTAL INCOME OF T HE ASSESSEE ON ACCOUNT OF SUCH BOGUS PURCHASES. 6. BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENGED T HE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ENTIRE PAY MENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, REGULAR BOOKS OF ACCOUNT ARE MAINTAINED AND THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES WERE DULY RECORDED IN THE BOOKS OF ACCOUNT. THE ACCOUNTS WERE AUDITED AND TH ERE IS NO DOUBT ABOUT THE 5 ITA NO.220/RPR/2014 IDENTITY AND POSTAL ADDRESS OF THE SELLERS INCLUDIN G THE CONFIRMATIONS, COPY OF ACCOUNTS AND SALE BILLS/INVOICES WHICH WERE FILED D URING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER ARGUED THAT THE COPIES OF STATEMENT RECORDED BY THE SALES TAX DEPARTMENT AND THE AFFIDA VITS PURPORTEDLY FILED BY THE PARTIES BEFORE THE SALES TAX DEPARTMENT WERE NEVER SUPPLIED TO THE ASSESSEE BEFORE MAKING THEIR SUBMISSIONS AS THE BASIS OF ADD ITION. IT IS ALSO NOT UNDERSTOOD AS TO UNDER WHAT CIRCUMSTANCES THE PERSO NS HAVE MADE SUCH STATEMENTS BEFORE THE SALES TAX DEPARTMENT OF MAHAR ASHTRA. THEREFORE, CONCLUSION DRAWN BY THE ASSESSING OFFICER ON THE BA SIS OF ANY UN-SUBSTANTIATED MATERIAL WITHOUT ALLOWING ANY OPPORTUNITIES OF GIVI NG CROSS-EXAMINATION TO THE ASSESSEE CONSTITUTES VIOLATION OF PRINCIPLES OF NAT URAL JUSTICE. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) O N THIS ISSUE. 7. SO FAR AS THE OBSERVATION OF THE ASSESSING OFFIC ER THAT THE DELIVERY CHALLANS WERE NOT PRODUCED AND EXPENSES WERE NOT CL AIMED TOWARDS TRANSPORTATION OF GOODS IS CONCERNED, IT WAS SUBMIT TED THAT THE GOODS WERE PURCHASED ON FOR BASIS AND, THEREFORE, NO SUCH EXPE NDITURE WAS INCURRED AND THE SALE BILLS WERE ENDORSED WITH DELIVERY REPORT. THE INVOKING OF PROVISIONS OF SECTION 69C WAS ALSO CHALLENGED BEFORE THE LD. CIT( A). 8. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- 3.2 I HAVE GONE THROUGH THE OBSERVATIONS OF THE A. O. AND SUBMISSIONS OF THE APPELLANT. THE UNDISPUTED FACTS OF THE CASE ARE THA T THE APPELLANT IS ENGAGED IN THE 6 ITA NO.220/RPR/2014 BUSINESS OF MANUFACTURING AND SALES OF READYMADE GA RMENTS. IN THE COURSE OF HIS BUSINESS OPERATIONS, HE PURCHASED RAW-MATERIAL FROM THE AFOREMENTIONED SELLERS AND CONSUMED THE SAME OR INCLUDED THE BALANCE IN HIS BO OKS OF ACCOUNT AS CLOSING STOCK. THE APPELLANT HAS PRODUCED RELEVANT PURCHASES BILLS , POSTAL ADDRESSES, CONFIRMED ACCOUNT COPIES OF THE SELLERS BEFORE THE A.O. HE HA S ALSO FILED COPY OF BANK STATEMENTS TO SUBSTANTIATE THAT THE PAYMENT WAS MADE THROUGH A CCOUNT PAYEE CHEQUES. UNDER THESE CIRCUMSTANCES THE APPELLANT HAS SATISFACTORY DISCHARGED THE BURDEN LAID ON HIM. THUS, THE DISPUTE IN THIS CASE OSCILLATES AROUND TH E OUTCOME OF SEARCH CONDUCTED BY SALES TAX DEPARTMENT OF MAHARASHTRA WHEREIN STATEME NTS OF SOME PERSON OF THE SELLERS WERE RECORDED. THEY HAVE DEPOSED THAT THEY WERE INDULGED IN ISSUING BOGUS SALES BILL TO SOME PARTIES ON COMMISSION BASIS. THE Y HAVE ALSO CONFIRMED THIS STATEMENT THROUGH AFFIDAVIT. HOWEVER, NEITHER COPY OF STATEMENT NOR THE AFFIDAVITS WERE SUPPLIED TO THE APPELLANT TO MAKE THEIR SUBMIS SION. THOUGH THESE STATEMENTS AND AFFIDAVITS WERE HEAVILY RELIED UPON TO MAKE THE ADD ITION, THE APPELLANT WAS NOT ALLOWED CROSS-EXAMINATION OF THE DEPONENTS. IT IS T RITE LAW THAT NO ADDITION COULD BE MADE ON THE BASIS OF EVIDENCE PRIVATELY COLLECTED W ITHOUT AFFORDING THE ASSESSEE AN OPPORTUNITY TO SUBMIT HIS CASE AND TO CROSS-EXAMINE DEPONENT OF THE STATEMENT. IN THIS CASE NOTHING OF THAT SORT WAS DONE. THE A.O. WAS CA RRIED AWAY BY THE AVERMENTS MADE IN THE STATEMENTS RELIED UPON. IT IS FOUND FROM THE ASSESSMENT ORDER THAT THE SAID PERSONS STATED THAT THE CONCERNED PERSON WERE INDUL GED IN ISSUING BOGUS BILL TO SOME PARTIES. IT IS ALSO NOT CLEAR WHETHER THE NAME OF P RESENT APPELLANT WAS INCLUDED IN THE PARTIES FOR WHOM THEY HAVE ALLEGEDLY WORKED. THE AP PELLANTS CONTENTION THE CIRCUMSTANCES UNDER WHICH THE STATEMENTS AND AFFIDA VITS RELIED UPON WERE RECORDED WERE ALSO NOT MADE KNOWN, CARRIES STRONG FORCE. TH ERE IS NO AVERMENT THAT THE MONEY PAID THROUGH BANK HAS EVER RETURNED BACK TO THE APP ELLANT. FURTHER THERE IS NO DISPUTE REGARDING SOURCE OF PURCHASE OF THE RAW-MATERIAL, H ENCE PROVISIONS OF SECTION 69C ARE ALSO NOT APPLICABLE. UNDER THESE CIRCUMSTANCES AND LOOKING TO THE CASE LAWS RELIED UPON THE APPELLANT, I AM OF THE CONSIDERED O PINION THAT THE ABOVE ADDITIONS MADE BY THE A.O. ARE NOT SUSTAINABLE AND ACCORDINGL Y THE SAME IS DELETED. THIS GROUND OF APPEAL IS, THEREFORE, ALLOWED. 9. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSESSING OFFICER, ON THE BASIS OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT OF MAHARASHTRA ON SOME OF THE SUPPLIERS, CAME TO THE CONCLUSION TH AT THE ASSESSEE HAS MADE BOGUS PURCHASES FROM THREE PARTIES, THE DETAILS OF WHICH ARE GIVEN AT PARAGRAPHS 7 ITA NO.220/RPR/2014 NO. 3 OF THIS ORDER, TOTALING TO RS.73,28,854/-. I NVOKING THE PROVISIONS OF SECTION 69C, THE ASSESSING OFFICER MADE THE ADDITIO N OF RS.73,28,854/-. WE FIND THE LD. CIT(A) DELETED THE ADDITION, THE REASO NS OF WHICH ARE REPRODUCED IN THE PRECEDING PARAGRAPH. IT IS THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND ALL THE PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNT AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, THEREFORE, WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO GO THROUGH THE AFFIDAVITS PURPORTEDLY FILED BY THOSE SUPPLIERS BEFORE THE SALES TAX DEPARTMENT OF MAHARASHTRA AND IN ABSENCE OF OPPORTU NITY TO CROSS-EXAMINE THESE PARTIES, NO ADDITION COULD HAVE BEEN MADE. I T IS ALSO HIS ALTERNATE SUBMISSION THAT AT BEST ONLY GP ADDITION CAN BE MAD E ON SUCH PURCHASES AND ENTIRE AMOUNT CANNOT BE ADDED TO THE TOTAL INCOME O F THE ASSESSEE U/S 69C OF THE I.T. ACT ESPECIALLY WHEN THE SALES HAS NOT BEEN DIS TURBED. 11. WE FIND SOME FORCE IN THE ALTERNATE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT AT BEST ONLY GP ADDITION COULD BE MAD E IN THE INSTANT CASE ON ACCOUNT OF PURCHASES AND THE ENTIRE PURCHASE CANNOT BE ADDED. ALTHOUGH THE ASSESSEE HAD MADE THE PAYMENTS THROUGH ACCOUNT PAYE E CHEQUES, SUCH PURCHASES WERE RECORDED IN THE BOOKS OF ACCOUNT AND THE AUDITORS HAVE NOT GIVEN ANY QUALIFICATION IN THE AUDIT REPORT, HOWEVER, AT THE SAME TIME THE PARTIES FROM WHOM THE PURCHASES ARE MADE ARE TAINTED PARTIE S AND THE ASSESSEE IS UNABLE TO GIVE FULL DETAILS REGARDING THE TRANSPORTATION O F SUCH GOODS. THE CONDUCT OF 8 ITA NO.220/RPR/2014 THE ASSESSEE IS ALSO SPEAKING VOLUMES. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION OF 5% OF SUCH ALLEGED BOGUS PURCHASE TO TH E TOTAL INCOME OF THE ASSESSEE WILL MEET THE ENDS OF JUSTICE. WE HOLD AN D DIRECT ACCORDINGLY. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY PARTLY ALLOWED. 12. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS U NDER :- 2. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES O F THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE LUMPSUM ADDITION OF RS.5, 00,000/- ON ACCOUNT OF LOW GROSS PROFIT RATE? 13. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE GP SHOWN BY THE ASSESSEE DURING THE YEAR AT 5.80% HAS GONE DOWN FROM 8.97% S HOWN IN THE PRECEDING YEAR. ON BEING QUESTIONED BY THE ASSESSING OFFICER IT WAS EXPLAINED THAT IN ORDER TO ACHIEVE THE INCOME, THE ASSESSEE HAS EMPLO YED MECHANISM OF ACHIEVING HIGHER TURNOVER BY COMPROMISING ON GP RATE. THE SU BSTANTIAL INCREASE IN NET PROFIT WAS SHOWN AS POSITIVE PROOF OF THE FACT. HO WEVER, THE ASSESSING OFFICER DISAGREEING WITH THE SUBMISSIONS MADE BY THE ASSESS EE MADE LUMPSUM ADDITION OF RS.5,00,000/- TO THE TOTAL INCOME OF THE ASSESSE E. WHILE DOING SO, HE HELD THAT THE ASSESSEE WAS ENGAGED IN HAWALA TRANSACTION S BY ACCOUNTING BOGUS PURCHASE BILLS IN HIS BOOKS OF ACCOUNT. HE, THEREF ORE, MADE LUMPSUM ADDITION OF RS.5,00,000/- ON ACCOUNT OF LOWER GROSS PROFIT W HICH WAS DELETED BY THE LD. CIT(A). 9 ITA NO.220/RPR/2014 14. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 15. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A). WE FIND THE LD. CIT(A) WHILE DELET ING THE ADDITION HAS NOTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT BOGUS PURCHASES HAVE BEEN DELETED BY HIM. WHILE DECIDING THE GROUN D NO.1 OF THE ASSESSEE, WE HAVE ALSO HELD THAT ONLY 5% OF SUCH PURCHASES HAS T O BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. EVEN OTHERWISE ALSO WHEN T HE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND NO SUCH DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT, THEREFORE, FALL IN GP RATE CA NNOT BE A GROUND TO MAKE ESTIMATE LUMPSUM ADDITION ESPECIALLY WHEN THE ASSES SEE HAS ACHIEVED HIGHER TURNOVER DURING THE YEAR. THE GROUND RAISED BY THE REVENUE IS THEREFORE DISMISSED. 16. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS U NDER :- 3. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES O F THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING ADDITION OF RS.10,00,000/- ON ACCOUNT OF SUPERVISION CHARGES PAID TO RELATED PERSONS COVERED U/S 40A(2)(B) OF TH E INCOME TAX ACT, 1961? 17. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE AS SESSEE DEBITED AN AMOUNT OF RS.21,85,400/- ON ACCOUNT OF CONSULTANCY CHARGES. ON BEING ASKED BY THE ASSESSING OFFICER TO FURNISH THE DETAILS OF SUCH CO NSULTANCY CHARGES INCLUDING THE NATURE OF SERVICES RENDERED AND THE RELATIONSHI P WITH THE ASSESSEE OF THE SO- 10 ITA NO.220/RPR/2014 CALLED CONSULTANT THE ASSESSEE FURNISHED THE REQUIS ITE DETAILS. FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NO TED THAT THE AMOUNT OF RS.5,65,700/- WAS PAID TO ROSHANI KALWANI, RS.8,36, 400/- WAS PAID TO VANDANA NAWANI AND RS.7,83,300/- WAS PAID TO SUNITA NAWANI. IN THE CASE OF ROSHANI KALWANI, THE PURPOSE OF PAYMENT WAS EXPLAINED TO BE FOR LOOKING AFTER MAKING/STITCHING DEPARTMENT TOWARDS PRODUCTION OF G OODS. SIMILARLY, IT WAS SUBMITTED THAT VANDANA NAWANI WAS LOOKING AFTER WAS HING DEPARTMENT/NATURE OF WASH TO BE CARRIED AND LIASIONING WITH LAUNDARY AND EMBROIDERY WORKERS. IT WAS EXPLAINED THAT SUNITA NAWANI WAS LOOKING AFTER FINI SHING DEPARTMENT TOWARDS IRONING/BUTTING/BARCODING/PACKING/SORTING FOR DEFEC TS AND MAKING THE GOODS AVAILABLE FOR READY TO DISPATCH. THEREFORE, THE AS SESSING OFFICER HELD THAT THE ABOVE WORK CANNOT BE CONSIDERED AS CONSULTANCY. HE NOTED THAT VANDANA NAWANI IS WIFE OF THE ASSESSEE AND OTHER TWO LADIES ARE IN-LAWS TO THE ASSESSEE. THEREFORE, THE PROVISIONS OF SECTION 40A(2)(B) ARE APPLICABLE. THE ASSESSING OFFICER NOTED THAT THERE MAY BE SOME EFFORTS BY THE LADIES FOR INCREASE IN THE TURNOVER OF THE ASSESSEE AND IT IS ALSO AN ACCEPTED FACT THAT THE RELATED PERSONS HELP EACH OTHER IN FAMILY MATTER AS WELL AS IN THE BUSINESS ON NEED. FURTHER, IT IS NOT NECESSARY THAT THE HELP EXTENDED TO OTHER RELAT ED PERSON IS ALWAYS FOR MONEY ONLY. THE ASSESSING OFFICER, UNDER THESE CIRCUMSTA NCES, MADE LUMPSUM ADDITION OF RS.10,00,000/- TO THE TOTAL INCOME OF T HE ASSESSEE OUT OF THE CONSULTANCY CHARGES. 11 ITA NO.220/RPR/2014 18. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HAT THE ASSESSING OFFICER HIMSELF HAS ADMITTED THAT SOME SERVICES ARE RENDERE D BY THESE PERSONS FOR INCREASE IN THE TURNOVER. THERE IS ALSO NO ALLEGAT ION THAT SUCH EXPENSE WAS EXCESSIVE OR UNREASONABLE. IT WAS EXPLAINED THAT A LL THE RECIPIENTS ARE REGULARLY ASSESSED TO TAX AND TDS WAS DEDUCTED FROM THE PAYME NTS SO MADE. RELYING ON VARIOUS DECISIONS, IT WAS ARGUED THAT THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER IS UNCALLED FOR. 19. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE , LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSER VING AS UNDER :- 5.2 I HAVE GONE THROUGH THE OBSERVATIONS OF A.O. A ND SUBMISSIONS OF THE APPELLANT. ADMITTEDLY THERE IS NO DISPUTE REGARDING OFFERING OF SERVICES BY THE CONCERNED PERSONS. THERE IS ALSO NO DISPUTE REGARDI NG INCREASE IN SALES VOLUME WITH ASSISTANCE OF THE LADIES. THE ONLY REASON FOR SUCH DISALLOWANCE WAS THAT THE A.O. HAS CONSTRUED THE SERVICES RENDERED BY THE FAMILY MEMBE RS AS PERSONAL HELP FOR BUSINESS NEEDS AND ACCORDING TO THE A.O., THE ENTIRE EXPENDI TURE CANNOT BE HELD TO BE GENUINE BECAUSE FAMILY MEMBERS MAY ASSIST IN MANIPULATING F ACTS AND FIGURES AS PER THEIR SWEET WILL. THE A.O. DID NOT BRING ON RECORD ANY MA TERIAL TO DERIVE THESE INFERENCES. THUS, THE CONCLUSIONS DRAWN BY THE A.O. ARE BASED O NLY ON UNSUBSTANTIATED INFERENCES. THERE IS NO AVERMENT THAT THE EXPENDITU RE WAS NOT INCURRED. THE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. DUE TDS WAS MADE AND REMITTED TO GOVT. A/C. ALL THE RECIPIENTS ARE ALSO ASSESSED TO TAX AN D THIS INCOME WAS INCLUDED IN THEIR INDIVIDUAL RETURNS OF INCOME. UNDER THESE CIRCUMSTA NCES, IT IS HELD THAT THE ABOVE DISALLOWANCES MADE BY THE A.O. ARE NOT CORRECT, HEN CE, THE SAME ARE DELETED. THE APPEAL IS ALLOWED ON THIS GROUND OF APPEAL. 20. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 21. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE ASSESSING OFFICER HIMSELF IN T HE ASSESSMENT ORDER HAS ADMITTED THAT THERE MAY BE SOME EFFORTS BY THESE PE RSONS FOR WHICH THE TURNOVER 12 ITA NO.220/RPR/2014 HAS GONE UP. THERE IS ALSO NO ALLEGATION BY THE AS SESSING OFFICER THAT SUCH PAYMENTS MADE BY THE ASSESSEE TO THESE PERSONS ARE UNREASONABLE. THERE IS NO ALLEGATION BY THE ASSESSING OFFICER THAT THEY HAVE NOT DONE ANY SERVICES TO THE ASSESSEE. THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND DUE TDS HAS BEEN DEDUCTED AND THOSE RECIPIENTS HAVE DECLARED SU CH INCOME IN THEIR RESPECTIVE RETURNS OF INCOME WHICH WERE ACCEPTED BY THE DEPARTMENT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION. ACCORDINGLY, THE GROUND RAI SED BY THE REVENUE IS DISMISSED. 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH SEPTEMBER, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25-09-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., RAIPUR. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY ITAT, RAIPUR