Jignesh Desai, Kolkata V. ITO, Ward-35(2), Kolkata, Kolkata

ITA 2205/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1628 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJYENDRA KUMAR A DDL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Bogus purchase; Search and seizure; Wrong claim
• Section: 69C; 143(3); 142(1); 133(6); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI A.T.VARKEY, JM & SHRI M.BALAG ANESH, AM ] I.T.A NO. 2205/KOL/20 16 ASSESSMENT YEAR : 2010-1 1 JIGNESH DESAI , -VS.- I.T.O., WARD-35(2) KOLKATA KOLKATA [PAN : AFEPD 5066 Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI MIRAJ D.SHAH, ADVOCATE FOR THE RESPONDENT : SHRI VIJYENDRA KUMAR, A DDL. CIT DATE OF HEARING : 06.06.2017. DATE OF PRONOUNCEMENT : 14.06.2017. ORDER PER M.BALAGANESH, AM 1. THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -10 , KOLKATA [ IN SHORT THE L D CITA] IN APPEAL NO. 60/CIT(A)- 10/W-35(2)/2014-15/KOL. DATED 20.10.2016 AGAINST TH E ORDER PASSED BY THE INCOME TAX OFFICER, WARD 35(2), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE ACT DATED 19.02.2015 FOR THE ASST YEAR 2010-11. 2. THE GROUND NO. 1 & 7 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 3. DURING THE COURSE OF HEARING, THE LD AR STATED T HAT GROUNDS 2 & 3 RAISED BY THE ASSESSEE ARE NOT PRESSED. THE SAME IS RECKONED AS A STATEMENT FROM THE BAR AND ACCORDINGLY THE GROUNDS 2 & 3 RAISED BY THE ASSESSE E ARE DISMISSED AS NOT PRESSED. 2 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 2 4. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE TOWARDS PURCHASES MA DE FROM M/S MEHUL TRADERS IN THE SUM OF RS 3,36,451/- AS BOGUS , IN THE FACTS AND CI RCUMSTANCES OF THE CASE . 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE , AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF TRADING IN IMITATION JEWELLERY. ASSESSE E IS A PROPRIETOR OF M/S SHREEJI COLLECTION HAVING ITS OFFICE AT MUMBAI AND KOLKATA. THE RETURN OF INCOME FOR THE ASST YEAR 2010-11 WAS FILED ELECTRONICALLY BY THE ASSESS EE ON 27.9.2010 DECLARING TAXABLE INCOME OF RS 5,66,376/-. THE LD AO OBSERVED THAT A N INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING, MUMBAI THAT THE ASSESSEE HA D MADE TRANSACTIONS DURING THE FINANCIAL YEAR 2009-10 WITH THE HAWALA DEALER M/S M EHUL TRADERS (TIN : 27260365107V) FOR AN AMOUNT OF RS 3,36,451/-. THE A BOVE INFORMATION WAS PROVIDED BY THE INVESTIGATION WING, MUMBAI, FOLLOWING THE IN VESTIGATION CONDUCTED BY THE SALES TAX DEPARTMENT, MUMBAI, GOVT. OF MAHARASHTRA. AS P ER THE FINDINGS OF THE ABOVE INVESTIGATION (WHICH IS BASED ON THE DOCUMENTS FOUN D IN THE SEARCH AND SEIZURE OPERATION OF THE SAID HAWALA DEALER, STATEMENT UNDE R OATH OF THE SAID HAWALA DEALER AND FURTHER ENQUIRY OF SUCH HAWALA DEALER) THE SAID HAWALA DEALER, NAMELY, M/S MEHUL TRADERS, HAD DONE TRANSACTIONS WITH DIFFERENT PARTI ES INCLUDING THE ASSESSEE BY WAY OF ISSUING BOGUS BILLS WITHOUT ACTUAL DELIVERY OF GOOD S IN LIEU OF COMMISSION. IN VIEW OF THIS INFORMATION, THE CASE WAS REOPENED U/S 147 AND NOTICE U/S 148 OF THE ACT WAS ISSUED ON 11.3.2014. THE ASSESSEE FILED HIS RETURN OF INC OME ON 22.4.2014 IN COMPLIANCE TO NOTICE U/S 148 OF THE ACT. FURTHER, THE ASSESSEE S OUGHT FOR REASONS RECORDED FOR REOPENING THE ASSESSMENT WHICH WAS PROVIDED TO THE ASSESSEE VIDE LETTER DATED 9.5.2014. THE ASSESSEE REPLIED THAT HE HAD NO HAWALA TRANSACT IONS OR BOGUS BILL TRANSACTIONS WITH M/S MEHUL TRADERS DURING THE FINANCIAL YEAR 2009-10 RELEVANT TO ASST YEAR 2010-11. LATER THE LD AO PROCEEDED WITH THE REASSESSMENT PRO CEEDINGS BY ISSUING NOTICES U/S 143(2) AND 142(1) OF THE ACT. THE ASSESSEE WAS AS KED TO FURNISH TAX AUDIT REPORT, PROFIT & LOSS ACCOUNT AND BALANCE SHEET, BANK STATE MENTS, BOOKS OF ACCOUNTS INCLUDING 3 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 3 PURCHASE INVOICES, PURCHASE REGISTER, TRANSPORT BIL LS, ROAD CHALLANS, STOCK REGISTER AND SALES MEMO / BILLS IN SUPPORT OF CLAIM OF TRANSACTI ONS MADE DURING THE FINANCIAL YEAR 2009-10. ALL THE DOCUMENTS CALLED FOR BY THE LD A O WERE EITHER PRODUCED OR EXPLAINED WITH REASONS FOR NON-PRODUCTION. ON PERUSAL OF THE SAID DOCUMENTS , THE LD AO SHOWCAUSED THE ASSESSEE AS TO WHY HIS CLAIM OF PURC HASE FOR THE SUM OF RS 3,36,451/- SHOWN TO HAVE BEEN MADE FROM M.S MEHUL TRADERS SHOU LD NOT BE TREATED AS PURCHASE MADE FROM UNACCOUNTED SOURCE. THE ASSESSEE REPLIED TO THE ASSESSEE BY SUBMITTING THE STOCK POSITION WHICH WAS WORKED OUT AND SUBMITTED D URING THE ASSESSMENT PROCEEDINGS EVEN THOUGH THE SAME WAS NOT MAINTAINED AS PART OF HIS BOOKS OF ACCOUNTS. THE ASSESSEE ALSO VIDE REPLY LETTER DATED 5.1.2015 STAT ED BEFORE THE LD AO AS FOLLOWS:- THIS IS TO INFORM YOU THAT THE DETAILS OF ALL PURCH ASE MADE BY ME ARE VERIFIABLE. I DO NOT UNDERSTAND HOW M/S MEHUL TRADERS HAS DENIED THE TRANSACTIONS REGARDING YOUR QUERIES FOR M/S KANTRODIWALA MANUFACTURERS & M /S KARRI ENTERPRISES. AFTER RECEIPT OF YOUR LETTER MY ACCOUNTANT HAS CONT ACTED THE KANTRODIWALA MANUFACTURERS AND HE HAS CONFIRMED THAT HE HAS NOT RECEIVED NOTICE U/S 133(6) ALTHOUGH THERE IS NO CHANGE OF ADDRESS. AFTER CONV ERSATION WITH MY ACCOUNTANT THEY HAVE SENT YOU REPLY DIRECTLY TO YOU AS PER XER OX COPY ENCLOSED. KINDLY CONSIDER THE SAME BEFORE FINALIZING THE ASSESSMENT. M/S KARRI ENTERPRISES HAS MADE MISTAKE IN REPLY THEY WERE IN BELIEF THAT IT I S RELATED TO SHREEJI ENTERPRISE AND THERE IS NO TRANSATION WITH SHREEJI ENTERPRISE AFTER RECEIPT OF YOUR LETTER MY ACCOUNTANT CONTACTED THEM AND HE APOLOGIZED FOR MIS TAKE THAT HE HAS GIVEN REPLY CONNECTED WITH M/S SHREEJI ENTERPRISE INSTEAD OF SH REEJI COLLECTION AND THEY HAVE ADDRESSED LETTER DIRECTLY TO YOUR OFFICE AND T HE COPY GIVEN TO US AS PER XEROX COPY ENCLOSED. I SHALL BE PLEASED IF YOU CON SIDER THE SAME WHILE FINALIZING THE ASSESSMENT. AFTER RECEIPT OF YOUR LETTER DATED 24.12.2014, I AM TRYING TO TRACE PROPRIETOR OF M/S MEHUL TRADERS BUT COULD NOT FIND THEM. THE LD AO CONCLUDED THAT THE ASSESSEE WAS UNABLE TO PROVE HIS CLAM OF PURCHASE FOR THE SUM OF RS 3,36,451/- FROM M/S MEHUL TRADERS BY RECO RDING THE FOLLOWING REASONS :- (I)THERE WAS NO EVIDENCE IN SUPPORT OF ACTUAL RECEI PT OF GOODS CLAIMED TO HAVE BEEN PURCHASED FROM M/S. MEHUL TRADERS. THERE WERE CHALL ANS IN SUPPORT OF GOODS RECEIVED 4 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 4 FROM OTHER PARTIES BUT IT WAS NOT IN THE CASE OF M/ S. MEHUL TRADERS. THEREFORE, IT IS AMPLY CLEAR THAT THE ASSESSEE'S CLAIM OF PURCHASE F ROM M/S. MEHUL TRADERS IS ONLY A BOGUS CLAIM . .(II) AS PER THE TAX AUDIT REPORT FILED IN THE COUR SE OF ASSESSMENT PROCEEDINGS, NO STOCK REGISTER WAS MAINTAINED FOR THE RELEVANT FINANCIAL YEAR, I.E. 2009-10, AND THE SAME WAS NOT AUDITED. MOREOVER, IT WAS MENTIONED AT PARA 28( A) OF FORM 3CD THAT THE ASSESSEE HAD NOT MAINTAINED QUANTITATIVE DETAILS OF STOCK DU RING THE RELEVANT PREVIOUS YEAR, 2009-10, UNDER AUDIT. THE CLAIM OF THE ASSESSEE ABO UT PREPARATION OF STOCK EXTRACT IN THE COURSE OF ASSESSMENT PROCEEDINGS IS NOT ACCEPTA BLE AS THE ASSESSEE HAS NOT ACCOUNTED FOR EACH OF THE STOCK WITH SUPPORTING BILLS AND VOU CHERS AND THE ASSESSEE HAS ALSO NOT VALUED THE SAME AS PER ACTUAL PURCHASE INSTEAD THE ASSESSEE HAS TAKEN AVERAGE VALUE OF THE STOCK. THE STOCK EXTRACT PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS IS NOTHING BUT A CONCOCTED DOCUMENT ABOUT THE STOCK P REPARED AFTER LAPSE OF A CONSIDERABLE TIME OF ALMOST FIVE YEARS JUST TO LEND CREDENCE TO ITS CLAIM THAT THE PURCHASES' MADE FROM M/S. MEHUL TRADERS IS GENUINE. (III)THE ASSESSEE WAS UNABLE TO EXPLAIN HOW ITS BUS INESS RELATIONSHIP HAD BEEN ESTABLISHED WITH M/S. MEHUL TRADERS. FURTHER, IN TH E COURSE OF . ASSESSMENT PROCEEDINGS HE HIMSELF HAS ACCEPTED VIDE HIS LETTER DATED 05/01 /2015 THAT HE HAD BEEN UNABLE TO TRACE THE PROPRIETOR OF M/S. MEHUL TRADERS. (IV)THE PAYMENT THROUGH BANKING CHANNEL IS NOT SACR OSANCT. IT ONLY PROVES THAT MONEY HAD BEEN TRANSFERRED FROM ONE ACCOUNT TO ANOTHER AC COUNT. IT CANNOT BE THE ONLY PROOF OF PURCHASE FROM M/S. MEHUL TRADERS. THE CLAIM OF PURC HASE HAD TO BE SUPPORTED BY DOCUMENTARY EVIDENCE OF ACTUAL RECEIPT OF THE GOODS AS IS EVIDENT IN CASE OF PURCHASES MADE FROM OTHER PARTIES DURING THE-YEAR BY THE ASSE SSEE. (V)THE FINDING OF THE SALES TAX DEPARTMENT, GOVT. O F MAHARASHTRA, THAT M/S. MEHUL TRADERS HAD ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS WAS NOT DENIED BY M/S. MEHUL TRADERS AND M/S. MEHUL TRADERS DID NOT APPROACH THE SAID DEPARTMENT TO GET ITS NAME DELETED FROM THE LIST OF BOGUS DEALERS. 5 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 5 (VI) THERE WAS NO TRANSACTION WITH M/S. MEHUL TRAD ERS EITHER IN THE PAST OR IN FUTURE BY THE ASSESSEE. ON BEING ASKED FOR THE REASONS FOR SU CH SOLITARY TRANSACTION WITH M/S. MEHUL TRADERS, THE ASSESSEE HAD CLAIMED THAT THE QU ALITY OF GOODS SUPPLIED BY M/S. MEHUL TRADERS WERE NOT SATISFACTORY, HOWEVER, SUCH GOODS WERE CLAIMED TO HAVE BEEN SOLD TO M/S. J.D. JEWELLERS. ON VERIFICATION FROM M /S. J.D. JEWELLERS IT WAS FOUND THAT THEY HAVE MADE TRANSACTIONS WITH THE ASSESSEE DURIN G THE F. YR. 2009-10 AND THE QUALITY OF GOODS RECEIVED BY THEM FROM M/S. SHREEJI COLLECT ION WAS SATISFACTORY. THUS, THE EXPLANATION OF THE ASSESSEE ABOUT SOLITARY TRANSACT ION WITH M/S. MEHUL TRADERS WAS JUST AN AFTERTHOUGHT. MOREOVER, THE FACTS DISCUSSED ABOV E CLEARLY SHOW THAT GOODS WERE ACTUALLY SOLD TO M/S. J.D. JEWELLERS BUT THEY WERE NOT PURCHASED FROM M/S. MEHUL TRADERS BUT FROM SOME OTHER SOURCE THAT REMAINS UNE XPLAINED. 4.2. THE LD CITA UPHELD THE DISALLOWANCE MADE BY TH E LD AO BY MAKING THE FOLLOWING OBSERVATIONS :- A.THERE IS THE CLEAR INFORMATION AND FACTUAL FINDI NG THAT M/S MEHUL TRADERS, MUMBAI WAS FOUND TO BE A HAWALA DEALER, PROVIDING P URCHASE BILLS (WITHOUT PAYMENT OF VAT) TO PARTIES, AND ONE SUCH PARTY WAS THE ASSESSEE-APPELLANT. B. THE STATUS OF THE M/S MEHUL TRADERS, MUMBAL, THE ALLEGED SELLER, AS ON DATE CONTINUES TO BE A BLACKLISTED ONE, AS PER THE MAHAR ASHTRA SALES TAX WEBSITE. THE APPELLANT-ASSESSEE HAS ALSO' NOT BEEN ABLE TO PROVI DE CONFIRMATION FROM M/S MEHUL TRADERS THAT IT HAS APPROACHED DC (VIGILANCE), VIKR IKAR BHAWAN, MAZGAON, MUMBAL [ THE APPROPRIATE AUTHORITY] AND GOT ITS NAM E DELETED FROM THE LIST OF BOGUS DEALERS UPLOADED ON THE OFFICIAL WEBSITE OF T HE DEPARTMENT OF SALES TAX, GOVERNMENT OF MAHARASHTRA. IN FACT THE NAME CONTINU ES TO BE IN THE LIST. I DO NOT AGREE WITH THE ARGUMENTS OF THE APPELLANT / LD A.R THAT IT HAS NO RESPONSIBILITY IN THE MATTER, AND THAT SUCH AN EXPECTATION IS BEYOND ITS CONTROL. ON THE OTHER HAND, I FIND THAT THIS LACK OF EFFORT BY THE APPELLANT IS A CONTRIBUTORY FACTOR IN THE MATTER OF A SUSPICIOUS AND NON-GENUINE TRANSACTION. C. THE APPELLANT-ASSESSEE. WAS UNABLE TO PROVIDE AN Y EVIDENCE OF THE TRANSPORTATION OF THE GOODS FROM M/S MEHUL TRADERS TO ITS PLACE OF BUSINESS. IN ANY BUSINESS, IT IS QUITE EXPECTED THAT EVEN IF THE GOO DS ARE HANDED OVER BY HAND, THERE HAS TO BE CONFIRMATION OF HANDING OVER / TAKING OVE R OF GOODS' AS A PART OF THE RECORD OF TRANSACTIONS. THESE ARE VITAL DOCUMENTS, AND ARE A SINE QUANON, EVEN IF 6 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 6 THERE MAY NOT BE ANY EVIDENCE OF FREIGHT OR TRANSPO RT. IN THE INSTANT CASE, SUCH VITAL EVIDENCE IS CONSPICUOUS BY ITS ABSENCE. D. THERE IS NOT MUCH MERIT IN THE ARGUMENT OF THE L D A.R THAT PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, AS THESE INDICATE DOCUMEN TS FOR TRANSFER OF MONEY, AND REMAIN MERE DOCUMENTS WITHOUT THE CORRESPONDING DOC UMENTS / EVIDENCE RELATING TO TRANSFER 'OF GOODS. IN MY CONSIDERED VIEW OF THE MATTER, THE EVIDENTIARY VALUE OF PAYMENTS BY BANK THEREFORE IS ENORMOUSLY DIMINISHED FOR THE CASE AT HAND, AND AS SUCH THESE ARE TO BE TREATED AS DOCUMENTS AND NOT A S EVIDENCE IN THE EMERGENT CIRCUMSTANCES. E. I ALSO FIND THAT THERE IS NO MERIT IN THE CLAIM OF THE APPELLANT THAT THE LD. AO DID NOT CONDUCT ANY INDEPENDENT ENQUIRY FROM HIS SIDE. I FIND THAT THE ASSESSEE- APPELLANT HIMSELF HAD STATED THAT HE WAS NOT HAVING BUSINESS RELATIONSHIP WITH THE PARTY AS THE GOODS SUPPLIED WERE NOT SATISFACTORY A ND THERE WERE COMPLAINTS FROM THE CUSTOMERS. AT ANY RATE THE ONUS WAS CAST UPON T HE APPELLANT TO CLEARLY BRING ON RECORD THAT THE PURCHASES WERE MADE FROM M/S MEHUL TRADERS, AND THAT THERE WAS ACTUAL DELIVERY OF GOODS IN THE CASE. FOR THE CASE AT HAND, THE APPELLANT HAS FAILED TO DISCHARGE SUCH BASIC ONUS OF PROOF OF DELIVERY. F. THE EMERGENT CIRCUMSTANCES, THE FACTS OF THE CAS E WHEN COUPLED WITH THE FINDINGS OF THE SALES TAX DEPARTMENT, IN MY CONSIDERED VIEW MAKE IT CLEAR THAT M/S MEHUL TRADERS IS / WAS A DUMMY BUSINESS OFFERING ONLY BIL LS WITH NO MOVEMENT OF GOODS. ALSO, IN MY CONSIDERED VIEW THERE IS ABSOLUTELY NO NEED FOR THE LD. AO TO ESTABLISH THAT THE MONEY CAME BACK TO THE ASSESSEE, BY WAY OF CASH, ON ACCOUNT OF SUCH 'BOGUS PURCHASES'. THIS IS SO AS THE ASSESSEE HAS N OT BEEN ABLE TO ESTABLISH THE IDENTITY OF THE PARTY FROM WHOM THE ALLEGED PURCHAS ES WERE MADE IN THE FIRST INSTANCE ITSELF. G. OVERALL, I FIND THAT THE LD AO HAS NOT ONLY DEPE NDED ON THE FINDINGS AND INFORMATION MADE AVAILABLE FROM THE MAHARASHTRA VAT AUTHORITIES, HE HAS REACHED CONCLUSIONS ON THE BASIS ON NON-AVAILABILIT Y OF PROOF OF TRANSPORT AND DELIVERY OF GOODS AND THE OTHER CORROBORATIVE AND S USPICIOUS FINDINGS DISCUSSED SUPRA. IN THE CASE OF ACIT VS SHRI SHANTI SWARUP JA IN [2015] 55 TAXMANN.COM 378 (ALLAHABAD) , THE HON'BLE HIGH COURT OF ALLAHABAD I N ORDER DATED 01.09.2014 HAVE OBSERVED IN IT APPEAL NOS. 133 OF 2013 & 19 OF 2014 ( AS HEAD NOTED) AS FOLLOWS: IT: WHERE ASSESSEE-FIRM, ENGAGED IN BUSINESS OF ZIP S FOR SHOES ETC, SHOWED CERTAIN PURCHASES MADE FROM 'G' ENTERPRISES, IN VIEW OF FAC T THAT PROPRIETOR OF 'G' ENTERPRISES ADMITTED THAT HE WAS RUNNING A DUMMY BU SINESS, ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITION UNDER SECTION 69C IN R ESPECT OF BOGUS PURCHASES 7 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 7 SECTION 69C OF THE INCOME-TAX ACT, 1961 - UNEXPLAIN ED EXPENDITURE (BOGUS PURCHASES) - ASSESSMENT YEARS 2008-09 AND 2009-10 - ASSESSEE-FIRM WAS ENGAGED IN BUSINESS OF ZIPS FOR SHOES ETC. - DURING ASSESSM ENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT ASSESSEE HAD MADE PURCHASES FROM 'G' ENTERPRISES - PROPRIETOR OF 'G' ENTERPRISES ADMITTED THAT HE WAS RUNNING A D UMMY BUSINESS AND FIRM HAD NOT BEEN FUNCTIONING FOR LAST ONE YEAR - ASSESSING OFFI CER RELYING UPON SAID STATEMENT, MADE ADDITION TO ASSESSEE'S INCOME UNDER SECTION 69 C IN RESPECT OF BOGUS PURCHASES - WHETHER ON FACTS, IMPUGNED ADDITION MAD E BY ASSESSING OFFICER WAS TO BE CONFIRMED - HELD, YES [PARA 8] [IN FAVOUR OF REV ENUE OVERALL FROM THE FACTS AND -CIRCUMSTANCES EMANATING IN THE CASE, I FIND MYSELF AGREEABLE WITH THE FINDINGS OF THE LD AO, AND THER EFORE SUSTAIN THE ACTION OF ADDITION OF RS.3,36,251/- UNDER THE HEAD OF 'BOGUS PURCHASES', AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE-APPELLANT STANDS D ISMISSED. 4.3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER ERRED IN HOLDING THAT THE PURCHASE FROM MEHUL TRADERS FOR RS.3,36,451/- WAS BOGUS. THE SAID ADDITION WAS UNCALLED FOR AND THE SAME WAS BAD IN LAW AND THUS THE ADDITION BE DELETED. 5. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ASSESSING OFFICER FAILED TO APPRECIATE THAT WITHOUT PURCHASE OF DIAMONDS IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SELL THE DIAMONDS OR HOLD THE SAME IN ITS CLOSIN G STOCK. THUS THE SAID ADDITION OF RS.3,36,451/- WAS UNCALLED FOR AND THE SAME WAS BAD IN LAW AND THUS THE ADDITION BE DELETED. 4.4. THE LD AR ARGUED THAT THE ASSESSEES TURNOVER FROM HIS IMITATION JEWELLERY BUSINESS WAS RS 56.34 LACS AND HAD REPORTED GROSS PROFIT OF RS 10.59 LACS WHICH WORKS OUT TO 18.8% OF TURNOVER. HE BUYS THE GOODS FROM VARIOUS P ARTS OF THE COUNTRY AND SELLS IN KOLKATA. THE ENTIRE PURCHASES HAVE BEEN ACCEPTED A S GENUINE EXCEPT THE PURCHASES MADE FROM M/S MEHUL TRADERS IN THE SUM OF RS 3,36,4 51/- . THE LD AO DOES NOT DISPUTE THE PURCHASES MADE FROM M/S MEHUL TRADERS B UT INSTEAD ONLY SAYS THAT IT IS MADE BY THE ASSESSEE FROM UNACCOUNTED SOURCE. THE F INDINGS GIVEN BY THE SALES TAX DEPARTMENT, IF ANY, WHICH IS THE TRIGGERING FACTOR FOR REOPENING OF THE ASSESSMENT, IS EITHER FURNISHED TO THE ASSESSEE OR NO WHERE REPROD UCED IN THE ASSESSMENT ORDER. EVEN 8 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 8 THE REASONS RECORDED FOR REOPENING THE ASSESSMENT D OES NOT CONTAIN THE SAID FINDINGS OF SALES TAX DEPARTMENT. THE ASSESSEE HAD PREPARED TH E STOCK STATEMENT AND HAD FURNISHED THE SAME BEFORE THE LD AO AS THE ASSESSEE CANNOT AF FORD A FULL TIME ACCOUNTANT TO MAINTAIN THE STOCK REGISTERS ON A DAY TO DAY BASIS , EVENTHOUGH THE ENTIRE DETAILS OF THE STOCKS COMING IN AND GOING OUT ARE AVAILABLE IN THE FORM OF PURCHASE AND SALE INVOICES. THE SAID STOCK STATEMENT WAS FURNISHED TO THE LD AO BY COLLATING THE INFORMATION AVAILABLE IN VARIOUS PURCHASE AND SALE INVOICES AND JUST PRESENTED THE SAME IN THE FORM OF A STATEMENT. THE ASSESSEE HAD LINKED THE DETAI LS OF EACH SALES MADE WITH THE RESPECTIVE PURCHASES PARTY WISE AND FURNISHED A ST ATEMENT TO THE LD AO. THE PURCHASES MADE FROM M/S MEHUL TRADERS WERE SOLD TO M/S J.D.JEWELLERS. THE LD AO EVEN MADE ENQUIRIES WITH M/S J.D.JEWELLERS IN THIS REGARD BEHIND THE BACK OF THE ASSESSEE AND CONCLUDED THAT THE SALES MADE TO M/S J .D.JEWELLERS ARE GENUINE. THEN HOW CAN THE PURCHASES MADE FROM MEHUL TRADERS BE DOUBTE D. BOTH THE LD AO AS WELL AS THE LD CITA DID NOT BOTHER TO MAKE ANY ENQUIRIES WITH M /S MEHUL TRADERS AND PROCEEDED TO FRAME THE ASSESSMENT AND CONFIRM THE SAME RESPECTIV ELY MERELY BY THE INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBAI WHICH WAS ORIGINALLY TRIGGERED FROM THE FINDINGS OF THE SALES TAX DEPARTMENT AT MUMBAI. H E ALSO ARGUED THAT THE ENTIRE QUANTITATIVE DETAILS OF PURCHASES, SALES AND CLOSIN G STOCK WITH THEIR RESPECTIVE VALUES WERE ALSO FURNISHED BEFORE THE LD AO. INFACT THE P URCHASES MADE FROM M/S MEHUL TRADERS WERE LYING IN CLOSING STOCK IN PART, WHICH WAS ACCEPTED BY THE LD AO. WITHOUT MAKING THE PURCHASES, HOW COULD THERE BE ANY SALES AND CLOSING STOCK. 4.5 .IN RESPONSE TO THIS, THE LD AO STATED THAT THE TAX AUDITOR HAD STATED THAT THE ASSESSEE HAD NOT MAINTAINED THE STOCK REGISTER IN TAX AUDIT REPORT. THE ASSESSEE HAD PRODUCED THE TRANSPORT CHALLANS TO PROVE THE GENUINENESS OF ITS PURCHASES EXCEPT PURCHASES MADE FROM M/S MEHUL TRADERS. 9 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 9 4.6. IN DEFENCE, THE LD AR ALSO EXPLAINED THAT M/S MEHUL TRADERS HAD DELIVERED THE ARTICLES PERSONALLY TO THE ASSESSEE AND HENCE THERE IS NO QUESTION OF TRANSPORT BILLS AND ROAD CHALLANS FOR THE SAME. SINCE THE TRANSACTION WAS MADE FOR THE FIRST TIME WITH MEHUL TRADERS, AND MOREOVER THE ASSESSEE IS AN ESTA BLISHED PLAYER IN THIS FIELD OF BUSINESS, THE SAID PARTY M/S MEHUL TRADERS HAD COME TO THE OFFICE PREMISES OF THE ASSESSEE AND DISPLAYED HIS ARTICLES FOR PLACING THE ORDER AND ACCORDINGLY DELIVERED THE GOODS PERSONALLY TO THE ASSESSEE. THIS BUSINESS MO DEL CARRIED OUT BY THE ASSESSEE CANNOT BE DOUBTED OR DISPUTED BY THE LD AO. 4.7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE LD AR COMPRIS ING OF BILL FOR PURCHASE MADE FROM M/S MEHUL TRADERS (ENCLOSED IN PAGES 33 TO 35 OF PA PER BOOK) ; BANK STATEMENTS SHOWING PAYMENTS AGAINST THE PURCHASES (ENCLOSED IN PAGES 36 TO 41 OF PAPER BOOK) ; PURCHASE REGISTER RECONCILED WITH ACCOUNTS FOR PURC HASE FIGURE (ENCLOSED IN PAGES 42 TO 44 OF PAPER BOOK) ; LEDGER ACCOUNT OF MEHUL TRADERS AS ON 31.3.2010 (ENCLOSED IN PAGE 45 OF PAPER BOOK) ; AUDITED ACCOUNTS FOR THE Y EAR ENDED 31.3.2010 (ENCLOSED IN PAGES 46 TO 50 OF PAPER BOOK) ; STATEMENT SHOWING S ALES MADE FROM THE RESPECTIVE PURCHASES (ENCLOSED IN PAGES 51 TO 56 OF PAPER BOOK ) AND SALES BILLS RELATED TO SALES MADE OUT OF RESPECTIVE PURCHASES (ENCLOSED IN PAGES 57 TO 68 OF PAPER BOOK) . WE FIND AT THE OUTSET, THE ENTIRE DETAILS RELEVANT TO TOTAL PURCHASES AND SALES TOGETHER WITH THE RESPECTIVE BILLS AND EVIDENCES WERE DULY SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. THE PURCHASES MADE FROM M/S MEHUL TRA DERS IN THE SUM OF RS 3,36,451/- IS ALSO INCLUDED IN THE TOTAL PURCHASES GIVEN ABOVE. W E FIND THAT OUT OF THE PURCHASES MADE FROM M/S MEHUL TRADERS, THE FOLLOWING CLOSING STOCK WAS LYING AS ON 31.3.2010 :- PARTICULARS QTY IN PIECES VALUE PENDANT SETS 154 7,840 MANG TIKA 900 20,700 PENDANT 1878 25,580 10 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 10 ----------- 54,120 ----------- THIS CLOSING STOCK OF RS 54,120/- WAS ACCEPTED BY T HE LD AO AS GENUINE TOGETHER WITH THE OTHER CLOSING STOCK OF ARTICLES. WE ARE ALSO IN AGREEMENT WITH THE ARGUMENTS OF THE LD AR THAT WITHOUT MAKING THE PURCHASES, HOW COULD THERE BE SALES AND CLOSING STOCK. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD PRODUCED TH E DETAILS OF EACH AND EVERY SALE BY LINKING IT WITH THE RESPECTIVE PURCHASES MADE. ACC ORDINGLY THE PURCHASES MADE FROM M/S MEHUL TRADERS HAD BEEN SOLD TO M/S J.D.JEWELLER S. INFACT THE LD AO HAD EVEN VERIFIED THE FACTUM OF SALES MADE TO M/S J.D.JEWELL ERS WITH THE SAID PARTY BEHIND THE BACK OF THE ASSESSEE WHEREIN IT WAS ACCEPTED BY THE M AND THE LD AO GIVES A FINDING TO THIS EFFECT IN HIS ASSESSMENT ORDER. MOREOVER, WE FIND THAT THE LD AO HAD NOT DISPUTED THE PURCHASES MADE BY THE ASSESSEE FROM M/S MEHUL T RADERS. HE ONLY DISPUTES THE FACT THAT THE SAME IS MADE FROM UNACCOUNTED SOURCE. IN THIS REGARD, THE RELEVANT OPERATIVE PORTION OF THE LD AOS ORDER IS REPRODUCED BELOW:- 6.4. IN VIEW OF THE ABOVE DISCUSSIONS, THE IMPUGNED PURCHASES FROM M/S MEHUL TRADERS FOR THE SUM OF RS 3,36,451/- IS TREATED AS PURCHASE MADE FROM UNACCOUNTED SOURCE OF THE ASSESSEE AND THE SAME IS ADDED TO THE TOTAL INCOME FOR THE ASSESSMENT YEAR 2010-11. WE FIND FROM THE PERUSAL OF THE BANK STATEMENTS OF THE ASSESSEE, THAT THE PAYMENTS FOR PURCHASES HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE ON 22.8.2009 VIDE CHEQUE NO. 83428 DRAWN ON AXIS BANK FROM A/C NO. 2010102000045 89 FOR RS 3,36,451/-. THE SAID BANK ACCOUNT IS THE DISCLOSED BANK ACCOUNT OF THE ASSESSEE WHICH IS DULY REFLECTED IN HIS BALANCE SHEET AND THE RETURN OF INCOME. HENC E THERE IS NO QUESTION OF TREATING THE SAME AS PURCHASE MADE FROM UNACCOUNTED SOURCE. WE A RE ALSO IN AGREEMENT WITH THE EXPLANATION OFFERED BY THE ASSESSEE FOR NOT PRODUCI NG THE TRANSPORT BILLS WITH ROAD CHALLANS IN RESPECT OF PURCHASES MADE FROM MEHUL TR ADERS. IT IS NORMAL BUSINESS PRACTICE THAT THE NEW CUSTOMER WOULD DISPLAY HIS GO ODS TO AN ESTABLISHED PLAYER AND HAND OVER THE GOODS IN PERSON TO THE ESTABLISHED PL AYER LIKE ASSESSEE. THIS WOULD BE 11 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 11 EVEN MORE LOGICAL IN THE LINE OF BUSINESS IN WHICH ASSESSEE IS ENGAGED IN (I.E IMITATION JEWELLERY). WE FIND THAT THE ENTIRE REASSESSMENT HAS BEEN TRIG GERED ONLY BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBAI , WHICH IN TURN HAD OBTAINED INFORMATION BASED ON THE FINDINGS OF THE SALES TAX DEPARTMENT A T MUMBAI. THE RELEVANT FINDINGS OF THE SALES TAX DEPARTMENT WERE NOT FURNISHED TO THE ASSESSEE. THE LD AO ALSO HAD NOT BOTHERED TO MAKE INDEPENDENT ENQUIRIES WITH M/S MEH UL TRADERS TO ASCERTAIN THESE FACTS. WE FIND THAT THE RELIANCE PLACED BY THE LD CITA ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ACIT VS SHANTI SWARUP JAIN REPORTED IN (2015) 55 TAXMANN.COM 378 (ALLAHABAD) DATED 2.9.2014 IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. THE FACTS IN THE SAID CASE ARE AS BE LOW:- THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ZOPS FO R SHOES ETC. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE THE PURCHASES FROM G. THE ASSESSING OFFICER TRE ATED THE SAID PURCHASES AS BOGUS AFTER EXAMINING R I.E PROPRIETOR OF G, WH OSE STATEMENTS WERE RECORDED, WHEREIN HE ADMITTED THAT HE WAS RUNNING A DUMMY BUS INESS AND FIRM HAD NOT BEEN FUNCTIONING FOR LAST ONE YEAR. ACCORDINGLY, C ERTAIN ADDITION WAS MADE TO ASSESSEES INCOME BY REJECTING THE BOOKS OF ACCOUNT S OF THE ASSESSEE AND INCOME DETERMINED ON ESTIMATE BASIS. IN THE INSTANT CASE, NO ENQUIRIES WERE MADE BY THE LD AO FROM M/S MEHUL TRADERS AND NO STATEMENTS WERE RECORDED FROM HIM TO PROVE ANY B USINESS RELATIONSHIP WITH THE ASSESSEE AS BOGUS. MOREOVER, THE BOOKS OF ACCOUNT S HAVE NOT BEEN REJECTED BY THE LD AO IN THE INSTANT CASE. AS STATED EARLIER, THE PUR CHASES FROM MEHUL TRADERS WERE INFACT NOT AT ALL DOUBTED BY THE LD AO AS IS EVIDENT FROM THE LANGUAGE USED BY THE LD AO IN HIS CONCLUDING PARAGRAPHS AS REPRODUCED SUPRA. HE ONL Y DOUBTS THE FACT THAT THE SAID PURCHASES WERE MADE FROM UNACCOUNTED SOURCE OF THE ASSESSEE WHICH HAS BEEN ASSAILED 12 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 12 AND PROVED THE CONTRARY. HENCE THE DECISION OF HON BLE ALLAHABAD HIGH COURT IS FACTUALLY DISTINGUISHABLE AND HENCE DOES NOT ADVANC E THE CASE OF THE REVENUE. WE DEEM IT FIT NOT TO DISCUSS THE VARIOUS CASE LAWS RELIED UPON BY THE LD AR IN THE INSTANT CASE FOR THE SAKE OF BREVITY. IN THESE FACTS AND CIRCUMSTANC ES AND IN VIEW OF OUR AFORESAID FINDINGS, WE DO NOT HAVE ANY HESITATION IN DIRECTI NG THE LD AO TO DELETE THE ADDITION MADE IN THE SUM OF RS 3,36,451/- TOWARDS PURCHASES FROM MEHUL TRADERS. ACCORDINGLY, THE GROUNDS 4 & 5 RAISED BY THE ASSESSEE ARE ALLOWE D. 5. THE GROUND NO. 6 RAISED BY THE ASSESSEE IS WITH REGARD TO CHARGEABILITY OF INTEREST U/S 234A /B/C/D OF THE ACT WHICH IS ONLY CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14.06.2017. SD/- SD/- [A.T.VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14.06.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.JIGNESH DESAI, C/O D.J.SHAH & CO., KALYAN BHAWAN, 2, ELGIN ROAD, KOLKATA-700020. 2. I.T.O., WARD-35(2), KOLKATA. . 3..C.I.T.(A)-10, KOLKATA 4. C.I.T.-12, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 13 ITA NO.2205/KOL/2016 JIGNESH DESAI A.YR.2010-11 13