DCIT, CIR-22(1), MUMBAI V. ASHISH S. JOBANPUTRA, MUMBAI

ITA 2566/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2935 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVEER MADNAPPA
• Keywords: Bogus purchase
• Section: 68

Judgement Text

1 , ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANJAY GARG,JUDICIAL MEMBER /.ITA NO.2566/MUM/2013, /ASSESSMENT YEAR-2009-10 THE DY. CIT, CIRCLE-22(1) ROOM NO.411, 4 TH FLOOR TOWER NO.6, VASHI STATION COMPLEX MUMBAI-400 703. VS SHRI ASHISH S. JOBANPUTRA 8, PARMESHWAR KRUPA, TILAK ROAD GHATKOPAR (E),MUMBAI-400 077. PAN:ADIPJ 8012 E ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : SHRI DEVENDRA JAIN / REVENUE BY : SHRI RAGHUVEER MADNAPPA / DATE OF HEARING :16 - 09-2015 / 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 ORDERS DT.24.01.2013 OF CIT(A)-33,M UMBAI, THE ASSESSING OFFICER(AO) , HAS FILED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN RESTRICTING THE DISALL OWANCE OF EACH PURCHASES TO RS.1,05,43,677/- AS AGAINST RS.3,95,75,587/- DISALL OWED BY THE ASSESSING OFFICER. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.THE APPELLANT CRAVES TO LEAVE AMEND OR ALTER ANY GROUND OR ADD ANY NEW GROUND, IF NECESSARY. ASSESSEE,AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF C OTTON TRADING,FILED HIS RETURN OF INCOME ON 30.09.2009,DECLARING TOTAL INCOME OF RS.50.52 LA KHS.THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT,ON 21.12.2011,DETERMINING THE INCOME OF THE ASSESSEE AT RS.4,68, 38, 180/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT RESTRICTING THE DISALLOWANCE TO RS.1,05,43,677/-,AS AGAINST RS.3,95,75,587/- DISALLOWED DURING THE ASSE SSMENT PROCEEDINGS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD MADE UNREGISTERED DEALERS (URD) PURCHASES OF RS.3.95 CRORES,THAT HE HAD MADE CASH PAYMENT OF RS.2.89 CRORES,THAT BALANCE AMOUNT OF RS.1.05 CRORES WAS REFLECTED AS B ALANCE OUTSTANDING AND IN SUNDRY CREDITORS IN THE BALANCE SHEET.HE GAVE THE ASSESSEE VARIOUS OPPORTUNITIES TO PRODUCE THE PARTIES AND TO FILE DETAILS OF TRANSPORTATION OF TH E GOODS.AS PER THE AO,THE ASSESSEE MERELY SUBMITTED THE ACCOUNTS OF THE PARTIES,THAT IN SOME CASES IT DID NOT FILE FULL ADDRESSES OF THE PARTIES FROM WHOM HE HAD PURCHASED GOODS.HE DIRECTE D THE ASSESSEE TO SUBSTANTIATE HIS CLAIM BY FURNISHING DETAILS OF THE PARTIES ALONG WITH DOC UMENTARY EVIDENCES AND TO SHOW THAT ALL THE PURCHASES WERE COVERED UNDER THE PROVISIONS OF RULE 6DD(E)(I).AFTER CONSIDERING THE REPLY OF THE ASSESSEE,THE AO HELD THAT HE HAD NOT PRODUCED T HE CORROBORATIVE DOCUMENTS TO PROVE THE PURCHASE OF RS.3.95 CRORES,THAT HE DID NOT FURNISH THE ADDRESSES OF THE PARTIES FROM WHOM GOODS WERE PURCHASED,THAT NO STOCK REGISTER WAS PRO DUCED,THAT NO EVIDENCE WAS FURNISHED THAT THE PAYMENTS WERE MADE TO THE CULTIVATOR/ GROW ER/PRODUCER,THAT CASH PAYMENTS WERE MADE AFTER 2-3 MONTHS,THAT PAYMENTS FOR THE PURCHAS ES MADE IN THE OCTOBER-NOVEMBER WERE CLAIMED TO HAVE BEEN MADE IN SUBSEQUENT YEAR,THAT N O EVIDENCE ABOUT SUCH PAYMENTS WERE PRODUCED.FINALLY,THE AO HELD THAT AN AMOUNT OF RS.3 .95 CRORES REPRESENTED UNEXPLAINED ASHISH S.JOHANPUTRA-2566/13.AY.09-10 2 CREDIT THAT WAS NOT VERIFIABLE.HE ADDED THE SAID AM OUNT TO THE TOTAL INCOME OF THE ASSESSEE U/S.68 OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS CONTENT ED THAT DURING THE YEAR UNDER APPEAL THE ASSESSEE STARTED TRADING IN KAPAS,THAT THE FARMERS WOULD ACCEPT PAYMENT IN CASH ONLY,THAT HE HAD PRODUCED THE ACCOUNTS,THAT ALL THE CORRESPONDIN G SALES WERE MADE TO A BIG PROCESSING HOUSE, THAT HE HAD RECEIVED PAYMENT FOR THE SOLD GO OD BY CHEQUE, THAT ASSESSEE WITHDRAWN HUGE CASH FOR MAKING PAYMENTS AGAINST URD PURCHASES ,THAT NECESSARY DETAILS OF LAND HOLDINGS OF THE FARMERS WERE MADE AVAILABLE TO THE AO. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE T HE FAA OBSERVED THAT THERE WAS DIFFERENCE IN THE QUANTITY DETAILS FILED BY HIM.SO,HE ASKED TH E ASSESSEE TO RECONCILE THE SAME. THE ASSESSEE FILED A DETAILED REPLY IN THAT REGARD. DEL IBERATING UPON IT THE FAA HELD THAT THE ASSESSEE HAD NOT SHOWN TRADING IN ALMONDS AND COTTO N SEEDS IN THE RETURN OF INCOME,THAT THE AUDITOR HAD MENTIONED THE FACT ABOUT IT IN HIS REPO RT,THAT THE ASSESSEE HAD CLAIMED THAT HE HAD GONE INTO GINNING AND PROCESSING BUSINESS,THAT THE CLAIM MADE BY HIM DID NOT MUCH SUBSTANCE,THAT THERE WAS NO DOCUMENTARY EVIDENCE TO SUPPORT THE CLAIM.HE DIRECTED THE ASSESSEE TO FILE DETAILS OF LOCATION OF THE FACTORY .BUT,NO DETAILS WERE MADE AVAILABLE BY THE HIM TO THE FAA.HE HELD THAT THE CLAIM MADE BY THE A SSESSEE ABOUT PURCHASE OF RAW COTTON FROM URD REMAINED UNRECONCILED,THAT THE ASSESSEE HA D NOT RECONCILED MISMATCH OF QUANTITY OF RAW COTTON,THAT THE ASSESSEE HAD PRODUCED ANY S UPPORTING EVIDENCE THAT THE FARMERS FROM WHOM HE HAD PURCHASED THE GOODS HAS ACTUALLY GROWN COTTON IN THEIR FIELDS.HE ISSUED A FRESH SHOW CAUSE NOTICE TO THE ASSESSEE ON 13.12.2012 TO FURNISH PARTY WISE DETAILS OF PURCHASE OF RAW COTTON QUANTITY,AMOUNT,PAYMENT MADE AGAINST THE SAME DURING THE YEAR AND MODE THEIR OF AND BALANCE OUTSTANDING ON 31.03.2009. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT IN CASE OF 44 PARTIES THE AMOUNT CLAIMED AS PURCHAS ES REMAINED OUTSTANDING, THAT THE ASSESSEE WAS SPECIFICALLY DIRECTED TO SUPPORT HIS CLAIM ABOU T THOSE PURCHASES,THAT THE ASSESSEE HAD CLAIMED THAT THE SELLERS WERE FARMERS,THAT HE DID N OT PRODUCE CERTIFIED EXTRACTS OF 7/12,THAT HE HAD PRODUCED SUCH EXTRACTS IN 16 CASES ONLY,THAT TH E EXTRACTS SHOWED THAT THE FARMERS WERE THE OWNERS OF THE LAND,THAT IN MANY A CASES THOSE FARME RS HAD TAKEN LOANS FROM THE BANKS,THE REVENUE RECORDS DID NOT PROVE THAT COTTON WAS GROWN IN THEIR FIELDS,THAT IDENTITY OF SELLER OF GOODS WAS NOT SUPPORTED BY ANY IDENTIFICATION CARD, THAT THE ASSESSEES CLAIM IN ABSENCE OF ANY PROOF OF CROP GROWN AND THE VERY FACT THAT THE 7/12 EXTRACT AND FORM 8A COULD NOT BE ACCEPTED, THAT THESE DOCUMENTS WERE DOWNLOADED FROM THE INTERNET AND WERE NOT CERTIFIED, SAME WERE LIABLE TO BE REJECTED, THAT THE ASSESSEE HAD FAILED TO SUPPORT HIS PLEA THAT GOODS HAD BEEN PURCHASED FROM PERSONS WHO WERE FARMERS AND GR EW RAW COTTON IN THEIR FIELDS, THAT HE HAD GIVEN LOGIC FOR NOT MAINTAINING PROPER DOCUMENT S AND DETAILS FOR RAW COTTON PURCHASED FROM THOSE PERSONS, THAT HE HAD NOT EXPLAINED THE R EASONS FOR MAINTAINING THE DOCUMENTS, THAT WITHOUT THE DOCUMENTS THE AMOUNTS OUTSTANDING IN TH E BOOKS OF ACCOUNT COULD NOT BE VERIFIED, THAT THE ASSESSEE HIMSELF HAD PLEADED THAT DISALLOW ANCE U/S. 68 IF AT ALL WAS TO BE MADE SAME HAD TO BE RESTRICTED TO RS.1.05 CRORES. THE FAA HEL D THAT THE CASES CITED BY THE ASSESSEE E- LAND INTERNATIONAL (P) LTD. (26 DTR 113) SARAF GRAM UDYOG SANSTHAN (108 ITD 115) WERE NO HELD, THAT THE FACTS OF THE CASE UNDER APPEAL WERE TOTALLY DIFFERENT. ACCORDINGLY,HE HELD THAT THE DISALLOWANCE HAD TO BE MADE FOR THE SUNDRY CRED ITORS OUTSTANDING.FINALLY,HE UPHELD THE ADDITION OF RS.1.05 CRORES OUT OF DISALLOWANCE MADE OF RS. 3.95 CRORES. 4. DURING THE COURSE OF HEARING BEFORE US THE ,AUTHORI SED REPRESENTATIVE (AR) STATED THAT THE ASSESSEE HAS PRODUCED QUANTITATIVE RECONCILIATION O F GOODS PURCHASED PROCESSED AND SOLD BEFORE THE FAA ALONGWITH THE ALONWITH STOCK MOVEMEN T OF URD PURCHASES, THAT PROOF OF SALE ASHISH S.JOHANPUTRA-2566/13.AY.09-10 3 OF RAW COTTON AND PROCESSED ARE ALSO FURNISHED BESI DES THE 7/12 EXTRACTS OF THE FARMERS, THAT FAA HAD ACCEPTED THE PURCHASES WITH REGARD TO RS.2. 90 CRORES,THAT SHE HAD RESTRICTED THE DISALLOWANCE TO RS.1.05 CRORES ONLY, HE REFERRED TO THE PAGES NOS.24 TO 50 AND 186-203 OF THE PAPER BOOK AND RELIED UPON THE CASE OF NIKUNJ EXIM ENTERPRISES PVT. LTD. (372 ITR 619), LIAKAT ALI M.SADDIQ (81 TTJ 769) AND E-LAND INTERNA TIONAL P.LTD.(SUPRA).HE FURTHER ARGUED THAT THE GROSS PROFIT FOR THE YEAR WAS 2.04% AS COM PARED TO 0.39% AND 0.47% FOR THE EARLIER TWO A.YS., THAT THE AO HAD NOT REJECTED THE BOOKS O F ACCOUNT, THAT IF THE CONTENTION OF THE AO WERE TO BE ACCEPTED THE GROSS PROFIT WOULD BE 7.42% .DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD,DURING THE APPELLATE PROCEEDINGS DIRECTED T HE ASSESSEE TO FILE VARIOUS DETAILS WITH REGARD TO THE DISCREPANCIES HIGHLIGHTED BY THE AO I N HIS ASSESSMENT ORDER, THAT AFTER OBTAINING THE RECONCILIATION STATEMENT SHE HAD GIVEN A CATEGO RICAL FINDING OF FACT THAT IN CASE OF 44 PARTIES THE AMOUNT CLAIMED AS PURCHASES MADE OF RAW COTTON REMAINED OUTSTANDING AS ON 31.3.2009,THAT IN CASE OF REMAINING PURCHASES THE A SSESSEE HAD PRODUCED NECESSARY DOCUMENTS, THAT THERE WAS NO JUSTIFICATION FOR UPHO LDING THE ENTIRE ADDITION, THAT THE AO HAD ACCEPTED THE SALES WITH REGARD TO PURCHASES MADE, T HAT ENTIRE PURCHASES COULD NOT BE DOUBTED.WE FIND THAT AFTER SEGREGATING THE PURCHASE S IN TWO CATEGORIES THE FAA HAD JUDICIOUSLY UPHELD A PORTION OF IT AND DELETED THE OTHER PORTION.IT WAS FOUND BY HER THAT THE ASSESSEE HAD NOT PROVED THE PURCHASES TO THE TUNE O F RS.1.05 CRORES AND SHE HAD CONFIRMED THE ADDITION.AS FAR AS THE REMAINING ADDITION IS CONCER NED,WE ARE OF THE OPINION THAT HER ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY ESPECIALLY AFTER THE RECONCILIATION STATEMENT WAS FILED BY THE ASSESSEE BEFORE HER.HERE WE WOULD LIKE TO R EFER TO THE CASE OF NIKUNJ EXIM ENTER - PRISES(P)LTD.(SUPRA) OF THE HONBLE BOMBAY HIGH COU RT WHEREIN THE COURT HAS HELD AS UNDER :- WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DATED APRIL 30, 2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITIONS ON ACCOUNT OF BOGUS PURCHASE S NOT ONLY ON THE BASIS OF STOCK STATEMENT, I.E., REC ONCILIATION STATEMENT BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOUNT OF T HE RESPONDENT-ASSESSEE HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE NOT BEEN DOUBTED AND IT I S AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT , I.E., DEFENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE WERE CONFIRMA TION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK ST ATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURCHA SES WERE IN FACT MADE. IN OUR VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS) , ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFI CER AS WELL AS THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED O RDER TAKING INTO ACCOUNT ALL THE FACTS BEFORE CONCL UDING THAT THE PURCHASES OF RS. 1.33 CRORES WAS NOT BOGUS . NO FAULT CAN BE FOUND WITH THE ORDER DATED APRIL 30, 2010, OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ABOVE AND UPHOLDING THE ORDER OF THE FAA, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER,2015. 14 ,2015 SD/- SD/- ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 14.10.2015 . . . JV.SR.PS. ASHISH S.JOHANPUTRA-2566/13.AY.09-10 4 / 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.