RAWASSA CONSTRUCTION, MUMBAI V. DCIT CEN CIR -9, MUMBAI

ITA 26/MUM/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5431 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: R C JAIN
• Keywords: Bogus purchase; Business income; Principle of natural justice; Accommodation entries; Reason to believe; Set aside
• Section: 143(3); 201; 274; 191; 27

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN , JM & HONBLE SH. N. K. PRADHAN , A M ./ I.T.A. NO . 26 /MUM/201 6 ( / ASSESSMENT YEAR: 2010 - 11 ) RAWASSA CONSTRUCTION 638 GOURI HOUSE, TPS III, 8 TH ROAD, KHAR (W) M UMBAI - 400052 / VS. DCIT CEN CIR - 9 8 TH FLOOR, OLD CGO ANNEX BUILDING, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAAFR 6170N ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI R. C. JAIN, AR / RESPONDENTBY : SHRI CHAITANYA ANJARIA , DR / DATE OF HEARING : 24 /0 8 /201 8 / DATE OF PRONOUNCEMENT : 30/10/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 48 , MUMBAI, DATED 08.10.15 FOR AY 20 10 - 11 O N THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION ADDITION OF RS. 8933527/ - AS ALLEGED BOGUS PURCHASES: 1. THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 89,33,527/ - IN RESPECT OF BOGUS PURCHASESAS ALLEGED. 1.1 IN SO DOING HE DID NOT CONSIDER THE MATERIAL ON RECORD. 1.2 THE LD. CIT (APPEALS) DID NOT APPRECIATE THAT NO ADDITION COULD HAVE BEEN MAD E WITHOUT CONFRONTING THE MATERIAL AND ALSO IN NOT GIVING AN OPPORTUNITY TO CROSS EXAMINE THE THIRD PARTIES ON THE STATEMENTS MADE BY THEM. 1.3 THE LD. CIT (APPEALS) IN ANY EVENT DID NOT APPRECIATE THAT THE MATERIAL PURCHASED BY APPELLANT WAS CONSUMED IN E XECUTION OF THE APPELLANT'S CONTRACTING BUSINESS AND HE DID NOT APPRECIATE THE EVIDENCE CONCERNING THE SAID UTILISATION. 1.4 FURTHER THE LD. CIT (APPEALS) DID NOT APPRECIATE THAT THE PURCHASES IN THEIR ENTIRETY COULD NOT HAVE BEEN ADDED TO THE INCOME AS HA S BEEN DONE BY A.O. 1.5 THE LD. CIT (APPEALS) ERRED IN RELYING UPON DECISIONS WHICH ON FACTS ARE DISTINGUISHABLE AND REJECTED THE CASE LAW RELIED UPON BY THE APPELLANT. II. DISALLOWANCE OF RS. 60,48,016/ - OUT OF INTEREST PAID: THE LD. CIT (APPEALS) ERRED I N REST RICTING THE DISALLOWANCE OF RS. 6048416 / - OUT OF INTEREST PAID OFRS.87,39,822/ - 3 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION 1.1 THE LD. CIT (APPEALS) IN RESTRICTING THE DISALLOWANCE DID NOT APPRECIATE THAT (A) THERE WAS NO NEXUS BETWEEN THE INTEREST BEARING FUNDS AND UTILISATION OF THE SAME INGIVING INTEREST FREE ADVANCES, (B) NO INTEREST BEARING FUNDS WERE ADVANCED DURING THE YEAR UNDER APPEAL, AND (C) THE ISSUE STOOD CLINCHED IN FAVOUR OF THE APPELLANT ON THE SAME FACTS IN THE PRECEEDING YEAR BY THE HON. CIT (APPEALS) YOUR APPELLANT, THEREF ORE, SUBMITS THAT DUE RELIEF BE ALLOWED 2 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF UNDERTAKING OF CIVIL WORKS CONTRACT FROM THE GOVT. AND SEMI GOVT. BODIES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 15.10.10 DECLARING TOTAL INCOME AT RS. 1,20,63,480/ - . SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED BY AO , T HEREBY MAKING ADDITION ON ACCOUNT OF BOGUS PURCHASES AND DISALLOWANCE U/S 36(1)(III) OF THE I.T ACT. 4 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. I ( 1 & 1.1. TO 1.5) 3 . SINCE ALL THE GROUND S RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE AD DITION OF RS. 89,33,527/ - IN RESPECT OF BOGUS PURCHASES , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY AO AS WELL AS LD. CIT(A). THE AO HAS DEALT WITH THE ABO VE GROUNDS RAISED BY THE ASSESSEE IN PARA 5 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION NO. 4.1 TO 4.9 AND T HE OPERATIV E PORTION IS CONTAINED IN PARA NO. 4.9 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4.9 I HAVE CAREFULLY AND DISPASSIONATELY CONSIDERED THE FACTS & CIRCUMSTANCES OF THE ISSUE INVOLVED AND THE S UBMISSIONS MADE BY THE ASSESSEE FIRM IN THIS REGARD. FROM TH E ABOVE CHRONOLOGY OF EVENTS, IT CAN BE SEEN THAT THE ASSESSEE FIRM WAS EXTENDED A LONG ROPE IN ESTABLISHING THE GENUINENESS OF THE CLAIM OFPURCHASES MADE FROM THE ABOVE THREE PARTIES. INSPITE OF PROVIDING VARIOUS OPPORTUNITIES TO THE ASSESSEE FIRM, EXCEPT FOR STATING THAT THE ABOVE PURCHASES WERE MADE THROUGH SALES AGENTS/BROKERS, WHO APPROACHED IT, THE ASSESSEE FIRM FAILED TO FURNISH ANY CLINCHING, CREDIBLE DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF THE PURCHASE CLAIMS MADE BY IT. THE ONUS IS ON AS SESSEE TO PROVE THE GENUINENESS OF ANY CLAIM BY ASSESSEE [CIT V. CALCUTTA SALES AGENCY 19 ITR 191 (SC)]. FROM THE SUBMISSIONS MADE BY THE ASSESSEE FIRM, IT CAN BE SEEN THAT THE ASSESSEE FIRM EVEN FAILED TO FURNISH THE NAMES, ADDRESS AND/OR CONTACT NUMBERS OF THE SO - CLAIMED SALES AGENTS/BROKERS OF THE SUPPLIERS OF RAW MATERIAL. DESPITE REPEATED OPPORTUNITIES DURING A LONG SPAN OF TIME OF ALMOST ONE YEAR, THE ASSESSEE COULD NOT SUBMIT EVEN AN IOTA OF EVIDENCE IN THE FORM OF PURCHASE ORDERS, BILLS/INVOICES RAI SED BY SO - CALLED SUPPLIERS, DELIVERY CHALLANS, 6 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION WEIGHING SLIP, LORRY RECEIPT, MATERIAL RECEIPT REGISTER IN SUPPORT OF THE CLAIM OF PURCHASES, WHICH GOES BEYOND DOUBT THAT THE PURCHASES WERE IN FACT MADE ONLY ON PAPER AND ACTUAL MATERIAL WAS NEVER RECEIVED B Y THE ASSESSEE FIRM AGAINST THE ACCOMMODATION BILLS TAKEN FROM THE ABOVE REFERRED HAWALA DEALERS. INTERESTINGLY, IT IS NOTED THAT IN RESPONSE TO SUMMON PROCEEDINGS, THOUGH THE ASSESSEE FIRM WAS ASKED TO FURNISH THE ABOVE REFERRED DOCUMENTS WITH RESPECT TO EACH OF THE SUPPLIER FOR AT LEAST ONE TRANSACTION; NO SUCH DOCUMENTARY EVIDENCE HAVE BEEN FURNISHED FOR ANY OF THE ABOVE REFERRED THREE ACCOMMODATION ENTRY PROVIDERS. ON THE FACE OF GLARING FACT THAT THE ASSESSEE FIRM THROUGH ITS RESPONSIBLE PARTNER, MR.YU NUS E. KHATRI HAD ALREADY ADMITTED DURING SURVEY ACTION IN HIS SWORN STATEMENT HAVING INDULGED IN TAKING ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS PURCHASES, WHICH WERE NOT VERIFIABLE BY HIS OWN ADMISSION; THE UNDERSIGNED HAS REASON TO BELIEVE THAT THE PURCHASES SHOWN BY THE ASSESSEE FIRM FROM THE ABOVE REFERRED PARTIES AS WELL ARE NOTHING BUT ACCOMMODATION ENTRIES AIMING AT INFLATING THE PURCHASES THEREBY REDUCING T HE TAXABLE INCOME . AND THAT ON BEING CAUGHT ON WRONG FOOT, TH E ASSESSEE FIRM FOUND NO OTHER ALTERNATIVE BUT TO TAKE PLEA, WHICH IS INHERENTLY WITHOUT ANY SUBSTANCE. THEREFORE, THE 7 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION UNDERSIGNED OF THE CONSIDERED VIEW THAT THE SO - CLAIMED PURCHASES FROM THE ABOVE REFERRED PARTIES AMOUNTING TO RS. 8,93,3,527/ - AS DISCUSS ED ABOVE IS I N THE NATURE OF BOGUS PURCHASES AND ACCORDINGLY, THE SAME IS HEREBY DISALLOWED TO BE DEBITED TO P&L A/C AND ACCORDINGLY, THE SAME IS HEREBY ADDED TO THE BUSINESS INCOME IN THE HANDS OF THE ASSESSEE FIRM FOR THE A.Y. UNDER CONSIDERATI ON. PENALTY PROCEEDINGS U/S 27 1 ( 1)(C) OF THE ACT ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME RESULTING INTO CONCEALMENT OF INCOME. ON APPEAL BEFORE LD. CIT(A), ASSESSEE FILED WRITTEN SUBMISSIONS IN ORDER TO SUPPORT ITS CONTENTIONS , THE SAME ARE CONTAINED IN PARA NO. 3.4 OF THE ORDER PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE ASSESSEE IN PARA NO. 3.1 TO 3.21 OF ITS ORDER. THE OPERATIVE PORTION IS CONTAINED IN PARA NO. 3.13 TO 3.21 OF ITS ORDE R AND THE SAME IS REPRODUCED BELOW: - 3.13 I AM OF THE CONSIDERED VIEW THAT SINCE THE PURCHASES SO MADE WERE NOT USED BY THE APPELLANT, THE AO WAS JUSTIFIED IN DISALLOWING THE ENTIRE BOGUS PURCHASES AS SUCH BOGUS PURCHASES/EXPENSES WERE 8 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION GOING TO REDUCE THE APPELLANT'S PROFIT BY THE EQUAL AMOUNT OF SUCH EXPENSES. IT IS NOT A CASE WHERE PURCHASES SO MADE WERE ACTUALLY SOLD BY THE APPELLANT. WHERE THE APPELLANT IS FOUND TO HAVE SOLD THE GOODS OUT OF BOGUS PURCHASE, UNDER THOSE CIRCUMSTANCES, IT IS REASONABLE TO ESTIMATE PROFIT OUT OF SUCH SALES SO AS TO MAKE APPROPRIATE ADDITION. HOWEVER, IN THE INSTANT CASE, BEFORE ME, THE ASSESSEE IS ENGAGED IN THE BUSINESS AS A CONTRACTOR WHERE THE EXPENDITURE ALLEGED TO HAVE BEEN INCURRED ON MAKING GATES OF DAMS AS PER THE F IRST VERSION AND ON MACHINERIES, ETC. BY THE SECOND VERSION AMOUNTING TO RS.89,33,5271 - , EACH, APPEARS TO HAVE REDUCED DIRECTLY THE PROFIT EARNED BY THE ASSESSEE. ONCE IT IS FOUND THAT PURCHASES WERE BOGUS, ADDITION HAS TO BE MADE TO THE EXTENT OF THE PURC HASES FOUND TO BE FICTITIOUS. THE CONSIDERATION THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE COMPARES FAVOURABLY AS COMPARED TO THE EARLIER YEARS IS WHOLLY IRRELEVANT. TO NEUTRALIZE THE EFFECT OF INFLATION IN PURCHASES, THE ONLY COURSE OPEN TO THE AO IS TO ADD BACK THAT AMOUNT TO THE INCOME IRRESPECTIVE OF THE FACT WHETHER THE RATE OF GROSS PROFIT GOES UP AND WHETHER THE RESULTANT GROSS PROFIT IS HIGHER THAN THE GROSS PROFIT NORMALLY SHOWN IN THE EARLIER YEARS. 9 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION 3.14 IT MAY BE RELEVANT TO CITE THE OBSERVA TIONS MADE BY THE HON'BLE ITAT MUMBAI IN THECASE OF M/S. SHORELINE HOTEL PVT LTD VS. CIT ITA NO.964/M/2015 'AS PER OUR CONSIDERED VIEW, SINCE THE PURCHASES SO MADE WERE NOT SOLD BY THE ASSESSEE, THE AO WAS NOT JUSTIFIED IN ESTIMATING 15% PROFIT ON SUCH BOG US PURCHASES, HOWEVER, SUCH BOGUS PURCHASES/EXPENSES WERE GOING TO REDUCE THE ASSESSEE'S PROFITS BY THE EQUAL AMOUNT OF SUCH EXPENSES AND NOT ONLY BY 15% AS TAKEN BY THE AO. IT WAS NOT A CASE WHERE PURCHASES SO MADE WERE ACTUALLY SOLD BY THE ASSESSEE. WHER E ASSESSEE IS FOUND TO HAVE SOLD THE GOODS OUT OF THE BOGUS PURCHASES, UNDER THOSE CIRCUMSTANCES IT IS REASONABLE TO ESTIMATE PROFIT OUT OF SUCH SALES SO AS TO MAKE APPROPRIATE ADDITION. HOWEVER, IN THE INSTANT CASE, BEFORE US, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF HOTEL WHEREIN THE EXPENDITURE ALLEGED TO BE INCURRED ON PLUMBING, ELECTRICAL ITEMS, FURNITURE, PRINTING AND STATIONARY ETC. AMOUNTING TO RS.2,98, 13,059/ - , APPEARS TO HAVE REDUCED DIRECTLY THE PROFIT EARNED BY ASSESSEE. EVEN IN RESPECT OF A LLEGED BOGUS PAYMENT MADE FOR PURCHASE OF FURNITURE ITEMS NO INQUIRY WAS MADE BY THE A 0 TO FIND OUT WHETHER FURNITURE WAS ACTUALLY ACQUIRED AND INSTALLED. GENUINENESS OF THE VARIOUS EXPENDITURE SO INCURRED OR PURCHASES SO MADE WHOSE SUPPLIERS WERE NOT TRA CEABLE, WERE ALSO NOT INQUIRED BY THE AO. 10 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION THUS, WE FIND THAT A0 HAS NOT MADE ANY INQUIRY WITH REGARD TO THE EXPENSES CLAIMED IN RESPECT OF ACCOMMODATION BILL OBTAINED BY ASSESSEE WHICH REDUCED PROFIT OF ASSESSEE BY 100% INSTEAD OF 15% CONSIDERED BY A0. IN THE ABSENCE OF MAKING ANY INQUIRY AS WELL AS APPLYING WRONG PROPOSITION OF TREATING THE ASSESSEE AS DEALER AND APPLYING THE GP RATE ON SUCH ACCOMMODATION BILL WHICH IS ACTUALLY IN THE NATURE OF EXPENSES, THE LD. CIT WAS JUSTIFIED IN SETTING ASIDE THE ORDER PERUSED BY AO AND RESTORING THE MATTER BACK TO THE FILE OF THE A0 FOR DECIDING AFRESH AFTER MAKING NECESSARY INQUIRY WITH REGARD TO SUCH PURCHASES/EXPENSES AND AFFORDING ASSESSEE ADEQUATE OPPORTUNITY OF HEARING.' 3.15 THE APPELLANT HAS RELIED ON CERTAIN D ECISIONS INFRA, HOWEVER THE SAME AREDISTINGUISHABLE ON THE FACT S OF THE INSTANT CASE. IN THESE CASES RELIED UPON, SALES/ UTILIZATION WERE NOT DOUBTED. IN CASE OF M/S BHOLANATH POLY FAB PVT. LTD. 355 ITR 290 (GUJ) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN FINISHED FABRICS. PURCHASES RS. 40.69 LAKH WERE HELD UNEXPLAINED. THE NOTICES ISSUED TO THE SUPPLIERS WERE RETURNED UNSERVED WITH REMARKS 'INCOMPLETE ADDRESS'. ITI COULD NOT FIND THE PARTIES AT THE ADDRESS GIVEN. ASSESSEE FAILED TO FURNISH ANY 11 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION CONFIRMATION FROM ANY OF THE PARTIES. ALSO THE PAYMENT BY CHEQUES WERE ENCASHED BY SOME OTHER PARTIES AND NOT BY THE ALLEGED SUPPLIERS. 3.16 ITAT HELD THAT PURCHASES WERE MADE FROM BOGUS PARTIES BUT PURCHASES THEMSELVES WERE NOT BOGUS. ENTIRE QUANTITY OF O PENING STOCK, PURCHASED AND MANUFACTURED GOODS WERE SOLD DURING THE YEAR, THUS, ENTIRE PURCHASE OF 102514 METERS CLOTH WERE SOLD DURING THE YEAR AND THERE WAS NO CLOSING STOCK. 3.17 TRIBUNAL HELD THAT ENTIRE PURCHASE AMOUNT CANNOT BE TAXED BUT ONLY THE PRO FIT EMBEDDED IN SUCH PURCHASE WOULD BE TAXABLE. ITAT DECISIONS IN VIJAY PROTEINS PVT. LTD. AND ALSO M/S SANKET STEEL TRADERS WERE ALSO CONSIDERED. HIGH COURT UPHELD THE ITAT ORDER AND ALSO REFERRED TO THE DECISIONS IN SANJAY OILCAKE INDUSTRY 316 ITR 274 (G UJ) AND KISHORE AMRUTLAL PATEL DATED 16.08.2011 IN ITA NO. 679 OF 2010. 3.18 THE MAIN CONTENTION OF THE APPELLANT IS THAT THE PAYMENTS HAVE BEEN MADE BY CHEQUE AND THEREFORE, THE TRANSACTION IS GENUINE. PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASE. THE OVERALL CIRCUMSTANCES INCLUDING HUMAN PROBABILITIES HAVE TO BE LOOKED INTO. IN THIS REGARD, I PLACE RELIANCE ON THE FOLLOWING JUDGEMENTS: 12 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION (I) THE HON'BLE ITAT, DELHI BENCH IN THE CASE OF DCIT VS. SMT. PHOOLWATI DEVI (2009) 314 ITR AT 1 (DELHI) HAS HELD AS UNDER: 'DESPITE THE DOCUMENTATION SUPPORTING THE CLAIM OF THE ASSESSEE SUPERFICIALLY, THE EVIDENCE COULD NOT BE ACCEPTED IN VIEW OF THE SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITIES. THERE WERE CERTAIN FEATURES OF THE CASE WHICH BELIE THE DOCUMENTARY EVIDENCE.' (II) IN THE CASE OF M/S.KACHWALA GEMS VS. JCIT, ITA NO.134/JP/2002 DATED 10.12.2003, WHICH HAS BEEN AFFIRMED BY THE SUPREME COURT IN THE CASE OF M/S.KACHWALA GEMS VS. JCIT (2006 ) 206 CTR (SC) 585, 288 ITR 10 (SC), IT WAS HELD THAT PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF PURCHASES. (III) IN THE CASE OF CIT VS. PRASHANT (F) (1994) 121 CTR (CAL.) 20, THE CALCUTTA HIGH COURT HAS HELD THAT EVE N PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT AND IT WOULD NOT MAKE AN OTHERWISE NON - GENUINE TRANSACTION GENUINE. (IV) IN THE CASE OF SUMATIDAYAL VS. CIT (1995) 214 ITR 801, THE SUPREME COURT, INTER ALIA, HELD AS UNDER: 'IN SUCH CASES, A SUPERFICIAL APPROACH TO THE PROBLEM SHOULD BE ESCHEWED AND THE MATTER HAS TO BE 13 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION CONSIDERED IN THE LIGHT OF HUMAN PROBABILITIES AND FURTHER THAT ANY TRANSACTION ABOUT WHICH DIRECT EVIDENCE IS RARELY AVAILABLE SHOULD BE INFERRED ON THE BASIS OF CIRCUMSTANCES AVAILABLE O N THE RECORD. IN THAT CASE, THE MAJORITY OPINION OF THE SETTLEMENT COMMISSION WAS APPROVED AS IT WAS TAKEN AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES.' (V) IT WAS SETTLED IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 ITR 540 (SC) THAT WHERE A PARTY RELIES ON SELF - SERVING RECITALS IN A DOCUMENT, IT IS FOR THAT PARTY TO ESTABLISH THE TRUTH OF THESE RECITALS. IT WAS FURTHER HELD BY THE APEX COURT IN THIS CASE THAT THE TAX AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. THE HON'BLE APEX COURT HAS SPECIFICALLY OBSERVED AS UNDER: 'SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OF TRIBUNAL. THEREFOR E, THE COURTS AND TRIBUNALS ARE APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A PIECE OF EVIDENCE.' THESE PRINCIPLES APPLY TO THE PRESENT CASE WHERE THE DOCUMENTARY EVIDENCE PRIMA FACIE SUPPORTS THE APPELLANT'S C ASE BUT A CLOSER LOOK AT THE SAME IN THE 14 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION LIGHT OF SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES REVEAL THAT THE DOCUMENTARY FAADE CANNOT BE ACCEPTED. 3.19 THUS, IT IS CLEAR THAT THE SETTLED POSITION IS THAT THE ONUS LIES UPON THE APPELLANT TO PROVETHE GENUINENESS OF THE PURCHASE TRANSACTION CLAIMED BY THE ASSESSEE AS GENUINE. HOWEVER, THIS ONUS HAS NOT BEEN DISCHARGED BY THE APPELLANT. IN THIS REGARD, RELIANCE IS ALSO PLACED ON THE JUDGMENT OF THE HON'BLE RAJASTHAN HIGH COURT IN TH E CASE OF INDIAN WOOLEN CARPET FACTORY (2002) 178 CTR (RAJ.) 420 AND MADHYA PRADESH HIGH COURT IN THE CASE OF VISP(P) VS. CIT, INDORE (2004) 186 CTR (MP) 218. HERE IT IS PERTINENT TO NOTE THAT THE COURTS HAVE HELD THAT IF THE INVESTIGATION DONE BY THE DEPA RTMENT LEADS TO DOUBT IN RESPECT OF THE GENUINENESS OF THE TRANSACTION, IT IS INCUMBENT ON THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH NECESSARY DOCUMENTS IN ORDER TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. 3.20 THE APPELLANT'S SUBMISSION THAT NO CROSS EXAMINATION OPPORTUNITY WAS GRANTED IS NOT VALID IN VIEW OF THE DECISIONS IN THE FOLLOWING CASES: (I ) IN THE CASE OF DEVASAHAYANADAR (T.) VS. CIT (51 ITR 20), THE HON'BLE MADRAS HIGHCOURT HELD AS UNDER: 15 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION 'IT CANNOT BE LAID DOWN AS A GENERAL PROPOSIT ION OF LAW THAT THE INCOME - TAX DEPARTMENT CANNOT RELY UPON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS EXAMINATION. AN INCOME TAX OFFICER OCCUPIES THE POSITION OF A QUASI - JUDICIAL TRIBUNAL AND IS NOT BOUND BY THE RULES OF THE EVIDENCE ACT, BUT HE MU ST ACT IN CONSONANCE WITH NATURAL JUSTICE, AND ONE SUCH RULE IS THAT HE SHOULD NOT USE ANY MATERIAL AGAINST AN ASSESSEE WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO MEET IT. HE IS NOT BOUND TO DIVULGE THE SOURCE OF HIS INFORMATION. THERE IS NO DENIAL OF N ATURAL JUSTICE IF THE INCOME TAX OFFICER REFUSES TO PRODUCE AN INFORMANT FOR CROSS EXAMINATION THOUGH IF A WITNESS IS EXAMINED IN THE PRESENCE OF THE ASSESSSEE, THE ASSESSEE MUST BE ALLOWED TO CROSS EXAMINE HIM. THE RANGE OF NATURAL JUSTICE IS WIDE AND WHE THER OR NOT THERE HAS BEEN VIOLATION OF NATURAL JUSTICE WOULD DEPEND ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS FOR THE DEPARTMENT TO DECIDE WHETHER A STATEMENT MADE BY AN INFORMANT IS TRUE AND CAN BE ACTED UPON. THE VALUE OR WEIGHT TO BE ATTACHED T O IT FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE DEPARTMENT AND THE TRIBUNAL. THE HIGH COURT CANNOT REWEIGH OR REAPPRAISE THE EVIDENCE LEADING TO THE ASSESSMENT AND REACH A CONTRARY CONCLUSION.' 16 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION (II) IN THE CASE OF MOTI LAL PADAMPATUDYOG VS. CIT (293 ITR 565), THE HON'BLE ALLAHABAD HIGH COURT HELD AS UNDER: 'THE COPIES OF THE ROUGH CASH BOOKS AND THE STATEMENTS OF THE PARTNERS OF V WHICH WERE RECORDED HAD BEEN PROVIDED TO THE ASSESSEE AND, IN FACT, THE ASSESSEE HAD ALSO SUBMITTED ITS REPL Y. IN THE LETTER DATED JUNE 13, 1977, AN OPPORTUNITY TO CROSS EXAMINE WAS ASKED FOR ONLY IN CASE THE STATEMENTS HAD NOT BEEN RECORDED. SINCE THE ASSESSEE HAD PROPER OPPORTUNITY TO CONTROVERT THE MATERIAL GATHERED BY THE ASSESSING AUTHORITY AND USED AGAINST IT, THERE HAD BEEN COMPLIANCE WITH THE PRINCIPLES OF NATURAL JUSTICE.' 3.21 CONSIDERING THE FACTS OF THE CASE, I UPHOLD THE ORDER OF THE AO. THE ADDITION MADE BYTHE A.O. OF RS.89,33,5271 - IS CONFIRMED. THIS GROUND IS ACCORDINGLY DISMISSED. AFTER HAVING G ONE THROUGH THE ORDERS PASSED REVENUE AUTHORITIES , HEARING THE COUNSELS AT LENGTH AS WELL AS AFTER CONSIDERING THE JUDGMENT CITED BY BOTH THE PARTIES, WE FIND AS PER THE FACTS OF THE PRESENT CASE THAT ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF UNDERTAKING OF CIVIL WORKS CONTRACT FROM THE 17 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION GOVERNMENT AND SEMI GOVERNMENT BODIES. THE AO IN THE ORDER OF ASSESSMENT HAD HELD THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF ITS CLAIM PURCHASES FROM THR EE PARTIES I.E. M/S MEETI TRADE IMPEX, M/S NIKHIL ENTER PRISES AND M/S JI GNA ENTERPRISES TOTALING RS. 89,33,527/ - . AS PER RECORDS, THE AO HAD PROVIDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE FOR SUBSTANTIATE ITS CLAIM FOR ESTABLISHING GENUINENESS OF PURCHASES MADE FROM ABOVE THREE PARTIES, BUT EVEN IN SPITE OF AVAILING OPPORTUNITY, THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF PURCHASES. SINCE IT WAS THE ONUS OF THE ASSESSEE TO PROVE THE GENUINENESS OF ANY CLAIM, THEREFORE THE REVENUE AUTHORITIES WHILE RELYING UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VRS. CALCUTTA SALES AGENCY 19 ITR 191 (SC), HAD CORRECTLY HELD THAT ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS. SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN THE FORM OF BILLS /INVOICES, DELIVERY CHALLANS, WEIGHING SLIP, LORRY REC E IPT, MATERIAL RECEIPT REGISTER IN SUPPORT OF CLAIM OF PURCHASES , WHICH CONCLUSIVELY PROVE THAT THE PURCHASES WERE MADE BY THE ASSESSEE ON PAPER AND ACTUAL MATERIAL WAS NEVER RECEIVED BY THE ASSESSEE FIRM. ON THE BASIS OF MATERIAL ON RECORD, THE AO HAD RIGHTLY C ONCLUDED THAT ASSESSEE 18 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION INDULGED IN INFLATING OF PURCHASES FOR REDUCING ITS TAXABLE INCOME. ALTHOUGH, LD. AR RAISED ARGUMENTS BEFORE US THAT THE MATERIAL PLACED BY THE ASSESSEE WAS UTILIZED, BUT AT THE SAME TIME, HE HAS FAILED TO SUBSTANTIATE ITS ARGUMENTS TO THIS EFFECT. WE OBSERVED THAT THE SIMILAR ARGUMENTS WERE RAISED BY THE ASSESSEE BEFORE LD. CIT(A) AND LD . CIT(A) HAS CATEGORICALLY DEALT WITH THE FACTS OF THE PRESENT CASE IN PARA N O. 3.7 TO 3.10 OF ITS ORDER, WHEREIN IT HAS BEEN CLEARLY MENTIONED THAT ASSESSEE IS NOT A TRADER, BUT RATHER A CONTRACTOR UNDERTAKING GOVERNMENT AND SEMI GOVERNMENT WORKS CONTRACT. THE ASSESSEE WAS PROVIDED SUFFICIENT OPPORTUNITIES TO FURNISH THE DETAILS OF QUANTITATIVE PURCHASES FROM HAWALA DEALERS AND THEIR UTILIZATION WITH SUPPORTING DOCUMENTARY EVIDENCES, BUT THE ASSESSEE SUBMITTED TWO DIFFERENT LETTER DATE D 08.09.15 AND 26.08.15 STAKING ITS CLAIM THAT THE IMPUGNED MATERIAL PURCHASED FROM THE SUSPICIOUS DEALERS WAS UTILIZED. IN BOTH THE LETTERS, A CONTRARY STAND WAS TAKEN BY THE ASSESSEE , THEREFORE BOTH THE LETTERS WERE NOT RELIABLE. ON ONE HAND, ASSESSEE HAD CLAIMED TO HAVE USED THE MATERIAL TOWARDS WORK OF BUILDING DAM GATES AND SIMILARLY, ON THE OTHER HAND, IT CLAIMED THE SAME 19 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION FOR ALTOGETHER A DIFFERENT PURPOSE. IN THESE CIRCUMSTANCES, IN THE ABSENCE OF ANY CREDIBLE DETAILS OF UTILIZATION OF MATERIAL, SHOW S THAT ASSESSEE HAD MADE NO ACTUAL PURCHASE AND THE CLAIM OF ITS UTILIZATION IS AN AFTERTHOUGHT. APART FROM ABOVE, ASSESSE HAD NOT FILED ANY COPY OF CONTRACTS AWARDED W HICH WOULD SHOW THE QUANTITY OF VARIOUS MATERIALS THAT INCLUDES HAVING USED IN ITS PROJECTS. EVEN, THE ASSESSEE HAD NOT FILED A CONFIRMATION FROM THE SUPERVISORY AUTHORITY CERTIFYING THE UTILIZATION OF SUCH MATERIALS. SINCE THE ASSESSEE COULD NOT PRODUCE A BARE MINIMUM DETAILS OF PURCHASES EXCEPT INVOICES AND BANK STATEMENT, WHICH CANNOT BE SAID TO BE CONCLUSIVE EVIDENCE TO PROVE GENUINENESS OF PURCHASES. THEREFORE, IN SUCH CIRCUMSTANCES, LD. CIT(A) HAS RIGHTLY DISCARDED TH IS STAND TAKEN BY THE ASSESSEE. L D. CIT(A) HAS ELABORATELY DISCUSSED THE ENTIRE FACTUAL POSITION AS WELL AS LEGAL POSITION AND RIGHTLY CONCLUDED THAT SINCE THE ASSESSEE COULD NOT PROVE THAT HE HAD ACTUALLY PURCHASED THE MATERIAL AND WAS UTILIZED. THEREFORE, THE ARGUMENTS OF THE ASSESSEE T HAT ENTIRE PURCHASED AMOUNT CANNOT BE TAXED, BUT ONLY THE PROFIT EMBEDDED ANY SUCH PURCHASE WOULD BE TAXABLE , WAS RIGHTLY REJECTED BY LD. 20 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION CIT(A). IN THIS RESPECT, LD. CIT(A) HAD RECORDED ITS DETAILED FINDINGS IN PARA NO. 3.13. TO 3.17, WHICH IS REPRODUCED BELOW: - 3.13 I AM OF THE CONSIDERED VIEW THAT SINCE THE PURCHASES SO MADE WERE NOT USED BY THE APPELLANT, THE AO WAS JUSTIFIED IN DISALLOWING THE ENTIRE BOGUS PURCHASES AS SUCH BOGUS PURCHASES/EXPENSES WERE GOING TO REDUCE THE APPELLANT'S PROFIT BY THE EQ UAL AMOUNT OF SUCH EXPENSES. IT IS NOT A CASE WHERE PURCHASES SO MADE WERE ACTUALLY SOLD BY THE APPELLANT. WHERE THE APPELLANT IS FOUND TO HAVE SOLD THE GOODS OUT OF BOGUS PURCHASE, UNDER THOSE CIRCUMSTANCES, IT IS REASONABLE TO ESTIMATE PROFIT OUT OF SUCH SALES SO AS TO MAKE APPROPRIATE ADDITION. HOWEVER, IN THE INSTANT CASE, BEFORE ME, THE ASSESSEE IS ENGAGED IN THE BUSINESS AS A CONTRACTOR WHERE THE EXPENDITURE ALLEGED TO HAVE BEEN INCURRED ON MAKING GATES OF DAMS AS PER THE FIRST VERSION AND ON MACHINER IES, ETC. BY THE SECOND VERSION AMOUNTING TO RS.89,33,5271 - , EACH, APPEARS TO HAVE REDUCED DIRECTLY THE PROFIT EARNED BY THE ASSESSEE. ONCE IT IS FOUND THAT PURCHASES WERE BOGUS, ADDITION HAS TO BE MADE TO THE EXTENT OF THE PURCHASES FOUND TO BE FICTITIOUS . THE CONSIDERATION THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE COMPARES FAVOURABLY AS COMPARED TO THE EARLIER YEARS IS WHOLLY IRRELEVANT. TO NEUTRALIZE THE EFFECT OF INFLATION IN PURCHASES, THE ONLY COURSE OPEN TO THE AO IS TO ADD BACK THAT AMOUNT TO 21 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION THE INCOME IRRESPECTIVE OF THE FACT WHETHER THE RATE OF GROSS PROFIT GOES UP AND WHETHER THE RESULTANT GROSS PROFIT IS HIGHER THAN THE GROSS PROFIT NORMALLY SHOWN IN THE EARLIER YEARS. 3.14 IT MAY BE RELEVANT TO CITE THE OBSERVATIONS MADE BY THE HON'BLE IT AT MUMBAI IN THECASE OF M/S. SHORELINE HOTEL PVT LTD VS. CIT ITA NO.964/M/2015 'AS PER OUR CONSIDERED VIEW, SINCE THE PURCHASES SO MADE WERE NOT SOLD BY THE ASSESSEE, THE AO WAS NOT JUSTIFIED IN ESTIMATING 15% PROFIT ON SUCH BOGUS PURCHASES, HOWEVER, SUCH BOGUS PURCHASES/EXPENSES WERE GOING TO REDUCE THE ASSESSEE'S PROFITS BY THE EQUAL AMOUNT OF SUCH EXPENSES AND NOT ONLY BY 15% AS TAKEN BY THE AO. IT WAS NOT A CASE WHERE PURCHASES SO MADE WERE ACTUALLY SOLD BY THE ASSESSEE. WHERE ASSESSEE IS FOUND TO HAVE SOLD THE GOODS OUT OF THE BOGUS PURCHASES, UNDER THOSE CIRCUMSTANCES IT IS REASONABLE TO ESTIMATE PROFIT OUT OF SUCH SALES SO AS TO MAKE APPROPRIATE ADDITION. HOWEVER, IN THE INSTANT CASE, BEFORE US, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF HOTEL WHEREI N THE EXPENDITURE ALLEGED TO BE INCURRED ON PLUMBING, ELECTRICAL ITEMS, FURNITURE, PRINTING AND STATIONARY ETC. AMOUNTING TO RS.2,98, 13,059/ - , APPEARS TO HAVE REDUCED DIRECTLY THE PROFIT EARNED BY ASSESSEE. EVEN IN RESPECT OF ALLEGED BOGUS PAYMENT MADE FO R 22 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION PURCHASE OF FURNITURE ITEMS NO INQUIRY WAS MADE BY THE A 0 TO FIND OUT WHETHER FURNITURE WAS ACTUALLY ACQUIRED AND INSTALLED. GENUINENESS OF THE VARIOUS EXPENDITURE SO INCURRED OR PURCHASES SO MADE WHOSE SUPPLIERS WERE NOT TRACEABLE, WERE ALSO NOT INQUIR ED BY THE AO. THUS, WE FIND THAT A0 HAS NOT MADE ANY INQUIRY WITH REGARD TO THE EXPENSES CLAIMED IN RESPECT OF ACCOMMODATION BILL OBTAINED BY ASSESSEE WHICH REDUCED PROFIT OF ASSESSEE BY 100% INSTEAD OF 15% CONSIDERED BY A0. IN THE ABSENCE OF MAKING ANY IN QUIRY AS WELL AS APPLYING WRONG PROPOSITION OF TREATING THE ASSESSEE AS DEALER AND APPLYING THE GP RATE ON SUCH ACCOMMODATION BILL WHICH IS ACTUALLY IN THE NATURE OF EXPENSES, THE LD. CIT WAS JUSTIFIED IN SETTING ASIDE THE ORDER PERUSED BY AO AND RESTORING THE MATTER BACK TO THE FILE OF THE A0 FOR DECIDING AFRESH AFTER MAKING NECESSARY INQUIRY WITH REGARD TO SUCH PURCHASES/EXPENSES AND AFFORDING ASSESSEE ADEQUATE OPPORTUNITY OF HEARING.' 3.15 THE APPELLANT HAS RELIED ON CERTAIN DECISIONS INFRA, HOWEVER THE SAME AREDISTINGUISHABLE ON THE FACTS OF THE INSTANT CASE. IN THESE CASES RELIED UPON, SALES/ UTILIZATION WERE NOT DOUBTED. IN CASE OF M/S BHOLANATH POLY FAB PVT. LTD. 355 ITR 290 (GUJ) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF 23 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION TRADING IN FINISHED FABRICS . PURCHASES RS. 40.69 LAKH WERE HELD UNEXPLAINED. THE NOTICES ISSUED TO THE SUPPLIERS WERE RETURNED UNSERVED WITH REMARKS 'INCOMPLETE ADDRESS'. ITI COULD NOT FIND THE PARTIES AT THE ADDRESS GIVEN. ASSESSEE FAILED TO FURNISH ANY CONFIRMATION FROM ANY OF THE PARTIES. ALSO THE PAYMENT BY CHEQUES WERE ENCASHED BY SOME OTHER PARTIES AND NOT BY THE ALLEGED SUPPLIERS. 3.16 ITAT HELD THAT PURCHASES WERE MADE FROM BOGUS PARTIES BUT PURCHASES THEMSELVES WERE NOT BOGUS. ENTIRE QUANTITY OF OPENING STOCK, PURCHASED AND MANUFACTURED GOODS WERE SOLD DURING THE YEAR, THUS, ENTIRE PURCHASE OF 102514 METERS CLOTH WERE SOLD DURING THE YEAR AND THERE WAS NO CLOSING STOCK. 3.17 TRIBUNAL HELD THAT ENTIRE PURCHASE AMOUNT CANNOT BE TAXED BUT ONLY THE PROFIT EMBEDDED IN SUCH PURCHAS E WOULD BE TAXABLE. ITAT DECISIONS IN VIJAY PROTEINS PVT. LTD. AND ALSO M/S SANKET STEEL TRADERS WERE ALSO CONSIDERED. HIGH COURT UPHELD THE ITAT ORDER AND ALSO REFERRED TO THE DECISIONS IN SANJAY OILCAKE INDUSTRY 316 ITR 274 (GUJ) AND KISHORE AMRUTLAL PAT EL DATED 16.08.2011 IN ITA NO. 679 OF 2010. 24 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION LD. AR SUBMITTED BEFORE US THAT THE REVENUE AUTHORITIES HAD NOT ACCORDED ANY OPPORTUNITY TO CROSS EXAMINE THE MATERIAL ON THE BASIS OF WHICH ADDITIONS WERE MADE. IN THIS RESPECT, WE RELIED UPON THE JUDGMENT OF HONBLE MADRAS HIGH COURT I N THE CASE OF DEVAS AHAYANADAR (T.) VS. CIT (51 ITR 20) & ALLAHABAD HIGH COURT IN THE CASE OF MOTI LAL PADAMPATUDYOG VS. CIT (293 ITR 565) , WHICH IS CONTAINED IN PARA NO. 20 OF THE ORDER OF LD. CIT(A) AND THE SAME IS REPRODUCED BELOW: - 3.20 THE APPELLANT'S SUBMISSION THAT NO CROSS EXAMINATION OPPORTUNITY WAS GRANTED IS NOT VALID IN VIEW OF THE DECISIONS IN THE FOLLOWING CASES: (I) IN THE CASE OF DEVASAHAYANADAR (T.) VS. CIT (51 ITR 20), THE HON'BLE MADRAS HIGHCOURT HELD AS UNDER: 'IT CANNOT BE LAID DOWN AS A GENERAL PROPOSITI ON OF LAW THAT THE INCOME - TAX DEPARTMENT CANNOT RELY UPON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS EXAMINATION. AN INCOME TAX OFFICER OCCUPIES THE POSITION OF A QUASI - JUDICIAL TRIBUNAL AND IS NOT BOUND BY THE RULES OF THE EVIDENCE ACT, BUT HE MUS T ACT IN CONSONANCE WITH NATURAL JUSTICE, AND ONE SUCH RULE IS 25 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION THAT HE SHOULD NOT USE ANY MATERIAL AGAINST AN ASSESSEE WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO MEET IT. HE IS NOT BOUND TO DIVULGE THE SOURCE OF HIS INFORMATION. THERE IS NO DENIAL OF NA TURAL JUSTICE IF THE INCOME TAX OFFICER REFUSES TO PRODUCE AN INFORMANT FOR CROSS EXAMINATION THOUGH IF A WITNESS IS EXAMINED IN THE PRESENCE OF THE ASSESSSEE, THE ASSESSEE MUST BE ALLOWED TO CROSS EXAMINE HIM. THE RANGE OF NATURAL JUSTICE IS WIDE AND WHET HER OR NOT THERE HAS BEEN VIOLATION OF NATURAL JUSTICE WOULD DEPEND ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS FOR THE DEPARTMENT TO DECIDE WHETHER A STATEMENT MADE BY AN INFORMANT IS TRUE AND CAN BE ACTED UPON. THE VALUE OR WEIGHT TO BE ATTACHED TO IT FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE DEPARTMENT AND THE TRIBUNAL. THE HIGH COURT CANNOT REWEIGH OR REAPPRAISE THE EVIDENCE LEADING TO THE ASSESSMENT AND REACH A CONTRARY CONCLUSION.' (II) IN THE CASE OF MOTI LAL PADAMPATUDYOG VS. CIT (293 ITR 565), THE HON'BLE ALLAHABAD HIGH COURT HELD AS UNDER: 'THE COPIES OF THE ROUGH CASH BOOKS AND THE STATEMENTS OF THE PARTNERS OF V WHICH WERE RECORDED HAD BEEN PROVIDED TO THE ASSESSEE AND, IN FACT, THE ASSESSEE HAD ALSO SUBMITTED ITS REPLY. IN THE LETTER DATED JUNE 13, 1977, AN OPPORTUNITY TO CROSS EXAMINE WAS ASKED FOR 26 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION ONLY IN CASE THE STATEMENTS HAD NOT BEEN RECORDED. SINCE THE ASSESSEE HAD PROPER OPPORTUNITY TO CONTROVERT THE MATERIAL GATHERED BY THE ASSESSING AUTHORITY AND USED AGAINST IT, THERE HAD BE EN COMPLIANCE WITH THE PRINCIPLES OF NATURAL JUSTICE.' AFTER HAVING G ONE THROUGH THE ABOVE FINDINGS , WE FIND THAT NO CONTRARY JUDGMENTS APPLICABLE TO THE PRESENT FACTS HAVE BEEN CITED OR PLACED ON RECORD BY THE ASSESSEE. LD. AR ALSO SUBMITTED THAT THE PAY MENTS HAVE BEEN MADE BY CHEQUE AND THEREFORE, THE TRANSACTIONS IN QUESTION CARRIED OUT BY THE ASSESSEE ALONGWITH AFOREMENTIONED PARTIES WERE GENUINE. IN THIS RESPECT, WE HAVE GONE THROUGH THE DETAILED ORDER PASSED BY LD. CIT(A), WHICH IS CONTAINED IN PARA NO. 3.18 TO 3.19 OF THE ORDER OF LD. CIT(A) AND THE SAME IS REPRODUCED BELOW: - 3.18 THE MAIN CONTENTION OF THE APPELLANT IS THAT THE PAYMENTS HAVE BEEN MADE BY CHEQUE AND THEREFORE, THE TRANSACTION IS GENUINE. PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SUFFICI ENT TO ESTABLISH THE GENUINENESS OF THE PURCHASE. THE OVERALL CIRCUMSTANCES INCLUDING HUMAN PROBABILITIES HAVE TO BE LOOKED INTO. IN THIS REGARD, I PLACE RELIANCE ON THE FOLLOWING JUDGEMENTS: 27 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION (I) THE HON'BLE ITAT, DELHI BENCH IN THE CASE OF DCIT VS. SMT. PHOOLWATI DEVI (2009) 314 ITR AT 1 (DELHI) HAS HELD AS UNDER: 'DESPITE THE DOCUMENTATION SUPPORTING THE CLAIM OF THE ASSESSEE SUPERFICIALLY, THE EVIDENCE COULD NOT BE ACCEPTED IN VIEW OF THE SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITIES. THERE WERE CER TAIN FEATURES OF THE CASE WHICH BELIE THE DOCUMENTARY EVIDENCE.' (II) IN THE CASE OF M/S.KACHWALA GEMS VS. JCIT, ITA NO.134/JP/2002 DATED 10.12.2003, WHICH HAS BEEN AFFIRMED BY THE SUPREME COURT IN THE CASE OF M/S.KACHWALA GEMS VS. JCIT (2006) 206 CTR (SC) 585, 288 ITR 10 (SC), IT WAS HELD THAT PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF PURCHASES. (III) IN THE CASE OF CIT VS. PRASHANT (F) (1994) 121 CTR (CAL.) 20, THE CALCUTTA HIGH COURT HAS HELD THAT EVEN PAYMENT BY A CCOUNT PAYEE CHEQUE IS NOT SACROSANCT AND IT WOULD NOT MAKE AN OTHERWISE NON - GENUINE TRANSACTION GENUINE. (IV) IN THE CASE OF SUMATIDAYAL VS. CIT (1995) 214 ITR 801, THE SUPREME COURT, INTER ALIA, HELD AS UNDER: 'IN SUCH CASES, A SUPERFICIAL APPROACH TO TH E PROBLEM SHOULD BE ESCHEWED AND THE MATTER HAS TO BE 28 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION CONSIDERED IN THE LIGHT OF HUMAN PROBABILITIES AND FURTHER THAT ANY TRANSACTION ABOUT WHICH DIRECT EVIDENCE IS RARELY AVAILABLE SHOULD BE INFERRED ON THE BASIS OF CIRCUMSTANCES AVAILABLE ON THE RECORD. IN THAT CASE, THE MAJORITY OPINION OF THE SETTLEMENT COMMISSION WAS APPROVED AS IT WAS TAKEN AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES.' (V) IT WAS SETTLED IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 ITR 5 40 (SC) THAT WHERE A PARTY RELIES ON SELF - SERVING RECITALS IN A DOCUMENT, IT IS FOR THAT PARTY TO ESTABLISH THE TRUTH OF THESE RECITALS. IT WAS FURTHER HELD BY THE APEX COURT IN THIS CASE THAT THE TAX AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING C IRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. THE HON'BLE APEX COURT HAS SPECIFICALLY OBSERVED AS UNDER: 'SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OF TRIBUNAL. THEREFORE, THE COURTS AND TRIBUNALS ARE APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A PIECE OF EVIDENCE.' THESE PRINCIPLES APPLY TO THE PRESENT CASE WHERE THE DOCUMENTARY EVIDENCE PRIMA FACIE SUPPORTS THE APPELLANT'S CASE BUT A CLOS ER LOOK AT THE SAME IN THE 29 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION LIGHT OF SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES REVEAL THAT THE DOCUMENTARY FAADE CANNOT BE ACCEPTED. 3.19 THUS, IT IS CLEAR THAT THE SETTLED POSITION IS THAT THE ONUS LIES UPON THE APPELLANT TO P ROVETHE GENUINENESS OF THE PURCHASE TRANSACTION CLAIMED BY THE ASSESSEE AS GENUINE. HOWEVER, THIS ONUS HAS NOT BEEN DISCHARGED BY THE APPELLANT. IN THIS REGARD, RELIANCE IS ALSO PLACED ON THE JUDGMENT OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF INDI AN WOOLEN CARPET FACTORY (2002) 178 CTR (RAJ.) 420 AND MADHYA PRADESH HIGH COURT IN THE CASE OF VISP(P) VS. CIT, INDORE (2004) 186 CTR (MP) 218. HERE IT IS PERTINENT TO NOTE THAT THE COURTS HAVE HELD THAT IF THE INVESTIGATION DONE BY THE DEPARTMENT LEADS T O DOUBT IN RESPECT OF THE GENUINENESS OF THE TRANSACTION, IT IS INCUMBENT ON THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH NECESSARY DOCUMENTS IN ORDER TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. AFTER HAVING GONE THROUGH AFOREMENTIONED ORDER, WE FI ND THAT ONLY P AYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASE. THE OVERALL CIRCUMSTANCES INCLUDING HUMAN PROBABILITIES HAVE TO BE LOOKED INTO AND LD. CIT(A) HAS RIGHTLY RELIED UPON ALL THE ABOVE 30 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION MENTIONED JUDGM ENTS AND RIGHTLY CONCLUDED THAT IT IS A SETTLED LAW THAT ONUS LIES UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASED TRANSACTION AND IF THE INVESTIGATION DONE BY THE DEPARTMENT LEADS TO DOUBT IN RESPECT OF THE GENUINENESS OF THE TRANSACTION, THEN IT IS INCUMBENT UPON THE ASSESSEE TO PRODUCE THE PARTIES ALONGWITH NECESSARY DOCUMENTS IN ORDER TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. ON THIS PROPOSITION, WE FIND SUPPORT FROM THE JUDGMENT S OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF INDIA N WOOLEN CARPET FACTORY (2002) 178 CTR (RAJ.) 420 AND MADHYA PRADESH HIGH COURT IN THE CASE OF VISP(P) VS. CIT, INDORE (2004) 186 CTR (MP) 218 . THEREFORE, AFTER CONSIDERING THE FACTS OF THE PRESENT CASE, WE FIND THAT LD. CIT(A) HAD RIGHTLY APPRECIATED TH E FACTS OF THE PRESENT CASE BY UPHOLDING THE DECISION OF AO IN RESPECT OF ADDITIONS MADE. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED 31 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. THUS, WE FIND NO INFIRMITY I N THE ORDER UNDER CHALLENGE. THE SAME IS HEREBY UPHELD. RESULTANTLY, THESE GROUND S RAISED BY THE ASSESSEE STANDS DISMISSED . GROUND NO. II (1 & 1.1 ) 5 . SINCE ALL THE GROUNDS RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN RESTRICTING THE DISALLOWANCE OF RS. 6048416/ - OUT OF INTEREST PAID OFRS.87,39,822/ - , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMM ON ORDER. 6 . LD. AR APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SAME ARGUMENTS BEFORE US AS WERE RAISED BEFORE LD. CIT(A) AND SUBMITTED THAT THE PRESENT CASE IS COVERED BY THE ORDER OF HON BLE ITAT IN ITA NO. 1065/MUM/14 FOR AY 2009 - 10, DECIDED ON 22.07.16 IN ASSESSEES OWN CASE, WHEREIN THE IDENTICAL GROUNDS RAISED IN THE PRESENT APPEAL HAVE ALREADY BEEN DECIDED ON MERITS. 7. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES. 32 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION 8. WE HAVE HEARD COUNSELS FOR BOTH THE PA RTIES AT LENGHT AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, ORDERS PASSED BY REVENUE AUTHORITIES AS WELL AS ORDER PASSED BY THE COORDINATE BENCH OF HONBLE ITAT . WE FIND THAT THE ORDER OF COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 1065/MUM/14 FOR AY 2009 - 10 IN ASSESSEE S OWN CASE, WAS NOT AVAILABLE BEFORE THE LD. CIT(A) AT THE TIME OF DECIDING THE PRESENT CASE AS ORDER OF LD. CIT(A) WAS PASSED ON 08.10.15 AND ORDER OF HONBLE TRIBUNAL WAS PASSED ON 22.07.16 . APART FROM THIS, THE A SSESSEE HAS NO T PLACED ON RECORD THE FUND FLOW STATEMENT FOR THE YEAR UNDER CONSIDERATION BEFORE THE LD. CIT(A) . BE THAT AS IT MAY, KEEPING IN VIEW THE INTEREST OF JUSTICE AS WELL AS CONSIDERING THE DECISION TITLED IN THE CASE OF CIT VRS. RELIANCE UTILITIES AND POWER L TD 313 ITR 340, ORDERS PASSED BY COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 1065/MUM/14 IN ASSESSEES OWN CASE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO DECIDE THIS GROUND AFRESH WHILE TAKING INTO CONSIDERATION THE ORDER PASSED BY ITAT IN ASSESSEES OWN CASE . 33 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. RESULTANTLY THESE GROUND RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED F OR STATISTICAL PURPOSES WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCT , 2018. SD/ - SD/ - (N. K. PRADHAN ) ( SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 30 . 10 . 201 8 SR. P S. DHANANJAY 34 I.T.A. NO. 26 /MUM/201 6 RAWASSA CONSTRUCTION / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI