ASSOCIATED CAPSULES P.LTD, MUMBAI V. ASST CIT CEN CIR 42, MUMBAI

ITA 2829/MUM/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9377 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: K
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2014
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Assessee Lawyers: J D MISTRY
• Keywords: Bogus purchase; Depreciation; Source of fund
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI AMIT SHUKLA , JM ITA NO. 2829 &2830 / MUM/20 1 4 ( ASSESSMENT YEAR : 20 0 6 - 0 7 & 2007 - 08 ) ACG ASSOCIATED CAPSULES PVT. LTD. (FORMERLY ASSOCIATED CAPSULES PVT. LTD.), 1001, DALAMAL HOUSE, 10 TH FLOOR, NARIMAN POINT, MUMBAI - 400021 VS. ACIT, CC - 42, MUMBAI PAN/GIR NO. : A A A CA 4769 K ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI J.D.MISTRY /REVENUE BY : SHRI S. D .SRIVASTAVA DATE OF HEARING : 07 / 0 1 /201 5 DATE OF PRONOUNCEMENT : 25 /0 2 /2015 O R D E R PER R.C.SHARMA ( A .M.) : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 28 - 2 - 2014 FOR THE ASSESSMENT YEAR S 20 0 8 - 0 9 , IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S.153A OF THE I.T.ACT . 2. THE COMMON GRIEVANCE IN BOTH THE YEARS RELATE TO ADDITION MADE ON ACCOUNT OF PURCHASES OF PAINTINGS FROM DIFFERENT PARTIES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE GR IEVANCE OF THE ASSESSEE PERTAIN TO THE ADDITION TO THE TOTAL INCOME ON ACCOUNT OF 'UNPROVED PURCHASES' OF R S .29,53,125/ - AND R S .15,18,750 / - FOR THE AYRS.2006 - 07 & 2007 - 08 RESPECTIVELY. IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ISSUE OF BOGUS PURCHAS ES OF PAINTINGS CAME TO, ITA NO S . 2829 & 2830 /20 1 4 2 LIGHT DURING THE SEARCH & SEIZURE ACTION U/S.132 OF THE ACT. IT IS STATED IN THE ASSESSMENT ORDER THAT THE INVESTIGATION WING HAD INVESTIGATED' INTO CERTAIN PURCHASES OF PAINTINGS SHOWN BY THE ASSESSEE GROUP AND ESTABLISHED THEM AS BOGUS ON THE BASIS OF INVESTIGATION CARRIED OUT ON VARIOUS SUPPLIERS. IT IS FURTHER STATED BY THE AO THAT THE STATEMENTS OF MR. KRISHNA KUMAR GUPTA, PROPRIETOR OF M/S.MUKTA SALES CORPORATION AND DIRECTOR OF M/SVENKATESH MERCANTILE PVT. LTD. & M/S.MUNI TRA DE PVT. LTD., MR.RASHESH A SHAH, PROPRIETOR OF M/S.ROYAL TRUST CORPORATION, SH RI ASHOK PALAN, PROPRIETOR OF M/ S. ELEGANT TRADING COMPANY & M/S.MANGALA CORPORATION, MR. JESARAN PRAJAPATHI, PROPRIETOR OF M/S.RAJ ENTERPRISES, M/S.OSHWAL TRADERS, M/S.BALAJI SA LES CORPORATION, M/ S. JYOTI ENTERPRISES, M/S.MARCO ENTERPRISES AND MR. CHETAN M. SHAH, PROPRIETOR OF M/ S. NEELAM SALES CORPORATION WERE ENCLOSED AS ANNEXURES WITH THE ASSESSMENT ORDER. IT IS STATED THAT ALL THE PERSONS DENIED HAVING SUPPLIED ANY PAINTINGS T O THE ASSESSEE BUT ADMITTED HAVING RECEIVED CHEQUES ON BEHALF OF ASSESSEE WHICH WERE DEPOSITED IN THEIR BANK ACCOUNTS AND SUBSEQUENTLY MONEY WAS WITHDRAWN AND GIVEN TO THE PERSON WHO HAS GIVEN THE CHEQUES, AFTER COLLECTING THEIR COMMISSION. DURING THE ASSE SSMENT PROCEEDINGS, ASSESSEE CONTENDED THAT THEY HAVE PURCHASED PAINTINGS AND THE CONSIDERATIONS WERE PAID BY CHEQUES WHICH INCLUDED VAT PAYMENT AND THEIR CHEQUES WERE ENCASHED. THE AO DISAGREED WITH THE STAND OF THE ASSESSEE ON THE BASIS OF STATEMENTS REC ORDED FROM THE BILL PROVIDERS. IT IS FURTHER STATED IN THE ASSESSMENT ORDER THAT ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FROM WHOM THE ABOVE PAINTINGS WERE PURCHASED TO PROVE THE GENUINENESS OF PURCHASES, BUT THE ASSESSEE DID ITA NO S . 2829 & 2830 /20 1 4 3 NOT COMPLY WITH THE SAME. IT IS FURTHER STATED IN THEIR STATEMENTS BEFORE THE INVESTIGATION WING ON 30.05.2007 THAT THE PARTIES DENIED HAVING SOLD PAINTINGS TO THE ASSESSEE AND REFUSED TO ACCEPT THAT THE SAID BILLS WERE ISSUED BY THEM. ON THE BASIS OF THESE FINDINGS, THE AO HELD THAT THE FOLLOWING PURCHASES AS UNPROVED PURCHASES : A.Y.2006 - 07 1. M/S RAJ ENTERPRISES RS.29,53,125/ - A.Y.2007 - 08 M/S TRISHALA TRADEWINGS RS.15,18,750/ - 4. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ADDITION AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL S FOR BOTH THE ASSESSMENT YEARS BEFORE US. 5. IT WAS ARGUED BY LD. AR THAT PAINTINGS WERE PURCHASED BY ISSUING ACCOUNT PAYEE CHEQUE WHICH WAS DULY CREDITED IN THE ACCOUNT OF SELLER. THE PAINTINGS WERE PHYSICALLY FOUND DURING THE COURSE OF SEARCH, TH EREFORE, MERE DECLINE BY SELLER WILL NOT BE SUFFICIENT FOR TREATING THE PURCHASES AS BOGUS. HE FURTHER CONTENDED THAT NO DEDUCTION IN THE FORM OF ANY EXPENSES PERTAINING TO THE PAINTINGS WERE CLAIMED IN THE RETURN OF INCOME, THEREFORE, NO DISALLOWANCE SHOU LD BE MADE. 6. ON THE OTHER HAND, THE CONTENTION OF LD. DR WAS THAT THE PARTIES FROM WHOM ALLEGED PAINTINGS WERE PURCHASED HAVE CLEARLY DECLINED SUCH TRANSACTION. FURTHERMORE, ONE OF THE SUPPLIER WAS NOT FOUND AT THE ADDRESS GIVEN BY THE ASSESSEE. ACCORDI NGLY, DEPARTMENT WAS JUSTIFIED IN TREATING SUCH PURCHASES AS BOGUS. 7. WE HAV E CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE STATEMENT RECORDED BY THE AO FROM THE SUPPLIER OF PAIN TINGS. IT IS EVIDENT ITA NO S . 2829 & 2830 /20 1 4 4 FROM THE RECORD THAT ASSESSEE HAS CLAIMED PURCHASE OF PAINTINGS BY ISSUE OF ACCOUNT PAYEE CHEQUES. THE PAINTINGS WERE ALSO FOUND DURING THE COURSE OF SEARCH AT ASSESSEES PREMISES. THE AO HAS MADE THE ADDITION BY TREATING THE PAINTINGS AS BOGUS PURCHASE MERELY ON THE BASIS OF THE STATEMENT OF THE SELLER/SUPPLIER OF PAINTINGS. IT IS ALSO A MATTER OF RECORD THAT ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT WITH RESPECT TO COST OF PAINTINGS . THE SOURCE OF FUND FR OM WHERE PAYMENT WAS MADE IS ALSO NOT IN DISPUTE, INSOFAR AS PAYMENT WAS MADE OUT OF CREDIT BALANCE IN THE BANK ACCOUNT . THE FACT THAT PAINTINGS WERE FOUND DURING THE COURSE OF SEARCH INDICATED THAT PAINTINGS WERE ACTUALLY PURCHASED. ACCORDINGLY, WE DO NOT FIND ANY MERIT FOR ADDING THE AMOUNT OF PAINTINGS IN THE ASSESSEES INCOME WHEN THE SOURCE OF FUNDS FOR MAKING SUCH PURCHASE WAS NOT IN DISPUTE, NOR THE PHYSICAL FORM OF PAINTINGS. UNDER THESE CIRCUMSTANCES, THE ONLY INFERENCE WHICH CAN BE DRAWN IS THAT T HE ASSESSEE MIGHT HAVE PURCHASED PAINTINGS FROM SOME OTHER PARTIES. THE VALUE PAID TO THE OTHER PARTIES ARE NOT KNOWN. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE AO TO ASCERTAIN THE ACTUAL VALUE OF PAINTINGS IN CASE ASSESSEE CLAIMS ANY DEPRECIATION ON SUCH ASSETS IN FUTURE. WE DIRECT ACCORDINGLY. 8 . IN THE RESULT, BOTH APPEAL S OF THE ASSESSEE ARE ALLOWED , IN TERMS INDICATED HEREINABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH FEB. 201 5 . SD/ - SD / - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25 / 0 2 /201 5 /PKM , PS ITA NO S . 2829 & 2830 /20 1 4 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / I TAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//