ITO 14(1)(1), MUMBAI V. NIKHIL A JHAVERI, MUMBAI

ITA 2457/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2952 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAURYA PRATAPDR
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 69C

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , ,, , !'# , ,, , $ BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.2457/MUM/2014, % & /ASSESSMENT YEAR-2009-10 INCOME TAX OFFICER-14(1)(1) ROOM NO.204, 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT MUMBAI-400 021. VS SHRI NIKHIL A. JHAVERI 191, 3 RD FLOOR KAPADIA BUILDING NO.1,JHAVERI BAZAR, S.M. STREET MUMBAI-400 002. PAN: ACXPJ 8947 L ( / APPELLANT) ( / RESPONDENT) %'# /ASSESSEE BY : NONE / REVENUE BY : SHRI MAURYA PRATAPDR / DATE OF HEARING : 06-10- 2015 / DATE OF PRONOUNCEMENT : 14 -10-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) )*# ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 27.10.2014,OF CIT(A)-25 ,MUMBAI,THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL. ASSESSEE,AN INDIVIDUAL,PROPRIETOR OF RUCHI EXPORTS AND ENGAGED IN THE BUSINESS OF TRADING OF GOLD AND SILVER JEWELLEWRY,FILED HIS RETURN OF INCO ME ON 08.09.2009,DECLARING TOTAL INCOME OF RS. 5.30 LAKHS.THE AO COMPLETED THE ASSESSMENT U/S. 143(3)R.W.S.147 OF THE ACT ON 22.03.2013, DETERMINING THE INCOME OF THE ASSESSEE AT RS.2,23,99,680/-. 2. EFFECTIVE GROUND OF APPEAL DEALS WITH NOT SUSTAININ G THE ADDITION MADE U/S.69 OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE SALES TAX DEPARTMENT HAD INFORMED THAT THE ASSESSEE HAD MADE BOGUS PURCHASE OF RS.1.63 CRORES FROM SHREE ENTERPRISES(SE).HE DIRECTED THE ASSESSEE TO FILED C ERTAIN DETAILS AND TO PROVE THE GENUINENESS OF THE TRANSACTION.AFTER CONSIDERING THE REPLIES FI LED BY THE ASSESSEE,THE AO HELD THAT CHALLAN COPY WAS WITHOUT MARKINGS AND SIGNATURES,THAT GOODS WERE NOT ACTUALLY RECEIVED BY THE ASSESSEE,THAT THE ASSESSEE HAD SHOWN SALES AGAINST THE ALLEGED PURCHASES,THAT ENTIRE PURCHASES WERE MADE ON TWO DAYS I.E.ON 09. 06. 2008 AND 10.06 .2008,THAT HE RECEIVED THE PAYMENTS AFTER FOUR MONTHS OF THE SALE,THAT THE PARTY FROM W HOM THE ASSESSEE PURCHASED GOODS WAS NOT AVAILABLE ON THE GIVEN ADDRESS,THAT HE DID NOT PROD UCE THE SUPPLIER OF GOODS,THAT THE ASSESSEE MUST HAVE PURCHASED GOODS FROM THE GREY MARKET BY I NVESTING UNACCOUNTED CASH.INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT,THE AO MADE AN ADDITION OF RS.1,63,15,869/-. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS CONTENTE D THAT THE AO HAD INFORMED HIM THAT SE WAS DECLARED HAVALA DEALER BY THE SALES TAX DEPA RTMENT FOR ITS FAILURE TO CLEAR VAT LIABILITIES UNDER THE MVAT ACT,2002,THAT HE RECEIVE D A NOTICE FROM THE SALES TAX DEPARTMENT SE HAD NOT DEPOSITED MVAT OF RS.1,61,543/-,THAT FOR THAT REASON SE WAS DECLARED DEFAULTER ON THE WEB SITE OF THE DEPARTMENT,THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM SET OFF OF RS.1.61 LAKHS ON THE PURCHASES MADE FROM SE,THAT HE WAS DIRECTED TO CLEAR THE DEFICIT IN SET OFF,THAT HE PAID DEFICIT IN SET OFF ARISING ON REJE CTION OF HIS SET OFF DUE TO DEFAULT ON THE PART OF SE IN DEPOSITING THE AMOUNT IN GOVERNMENT TREASU RY,THAT HE WAS NOT LEFT WITH NO 2457/14 NIKHIL AJ/A.Y.09-10 2 ALTERNATIVE EXCEPT PAYING THE DEFICIT,THAT ST DEPAR TMENT MADE THE ASSESSMENT AFTER HE DEPOSITED THE MONEY,THAT HE TRIED TO RECOVER THE MO NEY FROM SE,THAT THE SUPPLIER HAD TURNED INSOLVENT,THAT HE TRIED TO CONTACT THE BROKER THROU GH WHOM TRANSACTION WAS FINALISED,THAT HE COULD NOT REALIZE THE ADDITIONAL MVAT LIABILITY,THA T HE WROTE OFF THE SAID CLAIM,THAT THE AO ASKED THE PRODUCE THE SUPPLIER GIVING ONLY ONE DAY S TIME, THAT HE HAD SOLD THE GOODS TO PRANSUKHLAL & SONS JEWELLERS(PSJ),THAT SALE PROCEE DS WERE RECEIVED BY CHEQUES,THAT THE TRANSACTION WAS SUBJECT TO MVAT REGULATIONS,THAT PA YMENT WAS MADE TO SE BY CHEUQES,THAT THERE COULD NOT BE ANY SALES WITHOUT PURCHASES,THAT IF SALES WERE ACCEPTED GENUINE THEN PURCHASES COULD NOT BE DOUBTED,THAT QUANTITY DETAIL S OF PURCHASE AND SALE OF GOODS WAS MADE AVAILABLE TO THE AO.THE ASSESSEE MADE ELABORATE SUB MISSIONS AND THE FAA DIRECTED THE AO TO FILE A REMAND REPORT WITH REGARD TO THE SUBMISSI ONS MADE BY THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,T HE ASSESSMENT ORDER THE REMAND REPORT AND THE REJOINDER TO THE REMAND REPORT,HE HELD THAT THE ASSESSEE FILED THE COPY OF TAX INVOICE PREPARED UNDER MVAT ACT WITH FULL DETAILS AND SIGNA TURE,THAT WHEN SALE WAS MADE BY THE PERSON REGISTERED UNDER MVAT ACT HE WAS DUTY BOUND TO ISSUE HIS TAX INVOICE WITH DATE, NAME AND ADDRESS OF PURCHASE PARTY,PARTICULARS OF G OODS,CALCULATION OF MAVT WITH RATE AS APPLICABLE,THAT THE THREE INVOICES OF SE REFLECTED NECESSARY DETAILS,THAT THEY WERE DULY SIGNED,THAT THE ASSESSEE HAD FILED QUANTITY DETAILS ,THAT THE INVOICES DID NOT SUFFER FROM ANY DEFECT, THAT PURCHASES WERE MADE THROUGH ACCOUNT PA YEE CHEQUES,THAT SAME WERE DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE,THA T HE HAD SOLD THE GOODS AND THE SALE PROCEEDS WERE PAID TO THE SUPPLIER OF THE JEWELLERY ,THAT THE AO HAD NOT COUNTERED THE EVIDENCE PRODUCED BY THE ASSESSEE, THAT NO MISTAKE WAS POINTED OUT BY HIM IN THE QUANTITY DETAILS FILED BY THE ASSESSEE,THAT THE PURCHASES WE RE PROPERLY CORRELATED WITH THE SALES,THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS,THAT HE H AD NOT MADE ANY INDEPENDENT INQUIRY TO ESTABLISH THAT PURCHASES WERE NOT GENUINE,THAT THE ASSESSEE HAD OFFERED TO TAX THE SALES MADE TO PSJ,THAT HE WAS ENTITLED TO CLAIM DEDUCTION OF C ONSEQUENT PURCHASES MADE FROM SE,THAT WITHOUT PURCHASES THERE COULD NOT BE ANY SALE,THAT THERE WAS NO EVIDENCE THAT THE ASSESSEE HAD RECEIVED BACK THE MONEY FROM SE, THAT THE AO MADE A DDITION ON THE BASIS OF OBSERVATION MADE BY SALES TAX DEPARTMENT.FINALLY,HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.NONE APPEARED ON BEHALF OF THE ASSESSEE,AS STATED EARLIER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT UNDISPUTED FACTS OF THE CASE ARE THAT THE SALES TAX DEPARTMENT HAD DECLARED SE A DEFAULTER UNDER MVAT ACT,THAT THE ASSESSEE HAD CLAIMED THAT H E HAD SOLD GOLD JEWELLERY TO PSJ THAT WAS PURCHASED FROM SE,THAT THE AO HAD MADE ADDITION U/S.69C OF THE ACT,THAT THE FAA HAD ALLOWED THE APPEAL OF THE ASSESSEE.IN OUR OPINION,T HE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT JUST BECAUSE S E WAS DECLARED DEFAULTER BY THE SALES TAX DEPARTMENT. WE HOLD THAT DEFAULT BY A PERSON UNDER MVAT ACT CANNOT BE A BASE FOR MAKING ADDITION UNDER INCOME TAX ACT IN CASE OF ANOTHER PE RSON UNTIL AND UNLESS DOCUMENTARY EVIDENCE IS NOT BROUGHT ON RECORD IN THE INCOME TAX PROCEEDINGS PROVING THE TRANSACTION WAS NON-GENINUE.SE DID NOT DEPOSIT TAX IN THE TREASURY OF STATE GOVERNMENT AND LATER ON THE ASSESSEE HAD PAID THE REQUIRED SUM,AS HE HAD TAKEN CREDIT UNDER MVAT ACT.SECTION 69C OF THE ACT IS AN INDEPENDENT SECTION AND CAN BE INVOKE D IF CERTAIN CONDITIONS ARE FULFILLED.THE AO HAD IGNORED THE DOCUMENTARY AND CORROBORATIVE EV IDENCES PRODUCED BY THE ASSESSEE IN FORM OF BANK STATEMENTS, DECLARATION MADE UNDER MVA T ACT,TIN NO.,STOCK REGISTERING CONTAINING QUANTATIVE DETAILS. EXCEPT REFERRING TO THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THE AO HAD NOT CARRIED OUT ANY INDEPENDE NT INQUIRY.IF THE EVIDENCES PRODUCED BY THE ASSESSEE ARE WEIGHED AGAINST THE INFORMATION OF THE SALES TAX DEPARTMENT,IT BECOMES CLEAR 2457/14 NIKHIL AJ/A.Y.09-10 3 THAT PIECE OF THE INFORMATION WAS TOO LIGHT.MAXIUM IT WAS A STARTING POINT FOR FURTHER INVESTIGATION.BUT,THE AO STOPPED AT THE BEGINNING A ND MADE AN ADDITION THOUGH THE ASSESSEE HAD PRODUCED RELIABLE EVIDENCE IN HIS FAVOUR.SECOND LY,IN OUR OPINION THE FAA HAD RIGHTLY OPINED THAT WITHOUT PURCHASES THERE CANNOT BE ANY S ALE.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE,WE ARE OF THE OPINION THA T THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO,CONFIRMING H IS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER,2015. 14 ,2015 SD/- SD/- ( !'# / SAKTIJIT DEY) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 14.10. 2015 . . . .. . JV.SR.PS. +# ,&# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ $ & , 4. THE CONCERNED CIT / $ & 5. DR A BENCH, ITAT, MUMBAI / ') , , . . . 6. GUARD FILE/ (, //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.