ITO WD 1(4)), THANE V. GOPIKISHAN C. MUNDHARA, THANE

ITA 2994/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4005 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 19-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 18-04-2013
• Court: TRIBUNAL
• Section: 133(6)

Judgement Text

, , G, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.2993/MUM/2013 ASSESSMENT YEAR: 2005-06 & ITA NO.2994/MUM/2013 ASSESSMENT YEAR: 2006-07 & ITA NO.3629/MUM/2012 ASSESSMENT YEAR: 2007-08 ITO WD 1(4), THANE / VS. SHRI GOPIKISHAN C. MUNDHARA, PROP. OF M/S. D.P. MUNDHARA & CO. 211, DEWAN TOWER, BLDG. NO.4, ABOVE KUBERA HOTEL, VASAI-MANIKPUR ROAD, VASAI THANE (REVENUE) (RESPONDENT) P.A. NO. ABLPM6182B REVENUE BY SHRI NITIN WAGHMODE (DR) RESPONDENT BY NONE / DATE OF HEARING : 19/01/2016 / DATE OF ORDER: 12/02/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINS T THE SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME TAX ( APPEALS), GOPIKISHAN C. MUNDRA 2 MUMBAI {(IN SHORT CIT(A)}, FOR THE ASSESSMENT YE ARS 2005-06, 2006-07 & 2007-08 INVOLVING COMMON ISSUES. 2. DURING THE COURSE OF HEARING, NONE APPEARED ON BEHA LF OF THE RESPONDENT AND ARGUMENTS WERE MADE BY SHRI NITI N WAGHMODE, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHAL F OF THE REVENUE. FIRST, WE TAKE UP ITA NO.3629/MUM/2012 FOR A.Y. 200 7- 08 3. THE BRIEF BACKGROUND OF THE ISSUE INVOLVED IN THIS APPEAL IS THAT DURING THE YEAR UNDER CONCERN, THE ASSESSEE WA S ENGAGED IN THE TRADING IN IRON AND STEEL SCRAP AND IN A SMA LL QUANTITY OF TRADING IN CLOTHES. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FILE THE DETAILS OF SUNDRY CREDITORS, IN RESPONSE TO WHICH REQUISITE DE TAILS WERE FILED BY THE ASSESSEE. THEREAFTER, THE AO CALLED FO R INFORMATION U/S 133(6) FROM THE PARTIES FROM WHOM THE PURCHASES WERE DONE BY THE ASSESSEE. THE AO DID NOT RECEIVE SATISF ACTORY RESPONSE WITH RESPECT TO SOME OF THE PARTIES AND TH EREFORE, THE PURCHASES MADE BY THE ASSESSEE FROM THESE FORMS WER E TREATED AS IN-GENUINE AND WERE DISALLOWED AS UNEXPL AINED PURCHASES AND WERE ADDED TO THE INCOME OF THE ASSES SEE IN THE ASSESSMENT ORDER. 3.1. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A). IN THE APPELLATE PROCEEDINGS, THE ASSES SEE MADE GOPIKISHAN C. MUNDRA 3 DETAILED SUBMISSION WITH RESPECT TO EACH OF THE SUP PLIERS AND SUBMITTED DETAILS AND EVIDENCES TO SUPPORT THAT PUR CHASES MADE BY THE ASSESSEE WERE GENUINE. IT WAS ALTERNATI VELY SUBMITTED BY THE ASSESSEE THAT IN ANY CASE, SALES D ONE BY THE ASSESSEE HAVE BEEN ACCEPTED, AND IN ABSENCE OF PURC HASES, SALES WERE NOT POSSIBLE, AND THEREFORE, THE AO COUL D NOT HAVE DISALLOWED THE ENTIRE PURCHASES. 3.2. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE A SSESSEE IN DETAIL, BUT HE WAS NOT SATISFIED WITH THE FIRST CONTENTION OF THE ASSESSEE THAT WHOLE OF THE AMOUNTS CLAIMED TO H AVE BEEN PAID BY THE ASSESSEE FOR MAKING PURCHASES WERE GENU INE. 3.3. HOWEVER, LD. CIT(A) FOUND MERIT IN THE ALTERNATIVE SUBMISSION OF THE ASSESSEE AND HELD THAT IN ABSENCE OF PURCHASES, SALES WERE NOT POSSIBLE. THE RELEVANT F INDINGS OF THE ORDER OF THE LD. CIT(A) ARE REPRODUCED BELOW: 4.4. FROM THE FACTS AND CIRCUMSTANCES EXPLAINED ABOVE, IT APPEARS THAT THE GOODS PURCHASED FROM THE ABOVE PARTIES INVOLVED ARE NOT CONCLUSIVELY PROVED TO BE GENUINE. ON THE OTHER HAND, THERE IS A MERIT IN THE CONTENTION OF THE APPELLANT THAT IF THE PURCHAS ES ARE BOGUS, THE SALES SHOULD ALSO BE BOGUS. IF THE SALES OF THE APPELLANT ARE GENUINE THEN THE PURCHAS ES OF MATERIALS ALSO HAVE TO BE GENUINE AS WITHOUT PURCHASES THERE CANNOT BE ANY SALES. 4.4.1. ACCEPTING THE SALES WITHOUT THERE BEING ANY CORRESPONDING PURCHASES WOULD LEAD TO AN ABSURD SITUATION OF SALE OF MATERIALS WITHOUT ANY PURCHASE S. IN THE INSTANT CASE ALSO, THE A.O. IS NOT DISPUTING TH E SALES BUT TREATING THE PURCHASES AS BOGUS WOULD LEA D TO THE SAME ABSURD SITUATION. IF THE SALES ARE GENU INE THEN THE FACT HAS TO BE ADMITTED THAT THE APPELLANT HAS GOPIKISHAN C. MUNDRA 4 MADE THE PURCHASES. 4.4.2. IN THE BUSINESS OF TRADING IN STEEL AND SCRA P, IT IS A GENERAL PRACTICE THAT PURCHASES ARE MADE FR OM AN OPEN MARKET AND THEREAFTER THE BILLS ARE ARRANGE D. THE FACT OF EXISTENCE OF BOGUS BILLS DOES NOT IN AN Y WAY PROVE THAT THERE ARE NO CORRESPONDING PURCHASES. SINCE THE PURCHASE BILLS PRODUCED ARE FR OM NON-EXISTENT PARTIES, IT IS DIFFICULT TO VERIFY THE RATES APPLIED FOR THE PURCHASES MENTIONED IN THESE BILLS, WHICH MAY BE INFLATED TO REDUCE THE PROFITS. IN SUC H A SITUATION IT WOULD BE FAIR AND REASONABLE, IF, PART OF SUCH PURCHASES ARE DISALLOWED. 3.4. THEREAFTER, LD. CIT(A) HAS DISCUSSED THE JUDGMENT OF COORDINATE BENCH IN THE CASE OF SHRI SANKET STEEL T RADERS VS ITO, (ITAT, AHMADABAD) AND AFTER ANALYZING THE JUDG MENT HE CONCLUDED AS UNDER: IN VIEW OF THE FACTS AND CIRCUMSTANCES EXPLAINED A BOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT , AHMADABAD ON AN IDENTICAL ISSUE, IT WOULD BE FAIR A ND REASONABLE IF THE DISALLOWANCES OF PURCHASES MADE B Y THE APPELLANT IS RESTRICTED TO 12.5% ON THE TOTAL PURCH ASES DISALLOWED BY THE AO AS THE QUANTUM OF PURCHASES DISALLOWED IS QUITE HIGH IN THE INSTANT CASE. ACCOR DINGLY, THE AO IS DIRECTED TO DISALLOW 12.5% OF THE TOTAL P URCHASES OUT OF THE TOTAL PURCHASES MADE FROM M/S. BHAGWATI STEELS, M/S. BHAVANA STEEL TRADERS AND M/S. SAMRUDD HI EXIM PVT. LTD. FOR THE YEAR UNDER CONSIDERATION. 3.5. SIMILARLY, WITH REGARD TO PURCHASES MADE FROM THE O THER PARTY NAMELY M/S. SHREE KARNI TEXTILES AMOUNTING TO RS.3,81,136/-, IT WAS FOUND BY THE LD. CIT(A) THAT COMPLETE GOPIKISHAN C. MUNDRA 5 BILLS AND OTHER DOCUMENTARY EVIDENCES HAVE BEEN FUR NISHED BY THE ASSESSEE AND THEREFORE, DISALLOWANCE MADE BY TH E AO WAS FULLY DELETED WITH REGARD TO THE SAID PARTY, BY OBS ERVING AS UNDER: 6.1. THE ABOVE ARGUMENTS OF THE AR OF THE APPELLAN T HAVE BEEN CONSIDERED AND I INTEND TO AGREE WITH THESE ARGUMENTS. THE APPELLANT HAS PRODUCED THE LEDGER ACCOUNT OF M/S. SHREE KARNI TEXTILES ALONG W ITH THE COPIES OF THE PURCHASE BILLS WITH CORRESPONDING DEL IVERY CHALLANS. THE BALANCE CONFIRMATION STATEMENT OF M/S . SHREE KARNI TEXTILES HAS BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE INDEPENDENT VERIFICATION OF THE PARTY HAS BEEN CARRIED OUT BY T HE AO THROUGH HIS INSPECTOR AND THE PARTY WAS FOUND TO BE IN EXISTENCE AT THE GIVEN ADDRESS AND A FINDING TO THIS EFFECT HAS BEEN RECORDED IN THE ASSESSMENT ORD ER AT PAGE 9. ALL THESE FACTS HAVE NOT BEEN CONTROVERT ED BY THE AO AND STILL PROCEEDED TO DISALLOW THE PURCHASES ONLY ON THE GROUND THAT THE BILLS ISSUED BY THE PARTY ARE ALMOST SERIALLY NUMBERED WHICH INDICA TE THAT THE BILLS ARE NOT PROPER AND ALSO DOES NOT CONTAIN TELEPHONE NUMBER. THIS CANNOT BE TAKEN AS B ASIS FOR DISALLOWING THE PURCHASES. 6.2. IN VIEW OF THE FACT THAT THE DETAILS OF THE PURCHASES HAVE BEEN PROPERLY RECORDED IN THE BOOKS OF ACCOUNTS AND DULY SUPPORTED BY THE DOCUMENTARY EVIDENCES AND THE EXISTENCE AND CONFIRMATION OF THE PARTY IS PLACED ON RECORD, THE PURCHASES CANNOT BE DISALLOWED ONLY ON THE GROUND THAT THE BILLS ARE SERIALLY NUMBERED AND DOES NOT CONTAIN THE TELEPHON E NUMBER. THEREFORE, THE ACTION OF THE AO DISALLOWING THE PURCHASES MADE FROM M/S. SHREE KARNI TEXTILES IS NO T JUSTIFIED AND CANNOT BE SUSTAINED. THE ADDITION MAD E AMOUNTING TO RS.3,81,136/- DISALLOWING THE PURCHASE S MADE FROM M/S. SHREE KARNI TEXTILES, IS HEREBY DELE TED. 3.6. DURING THE COURSE OF HEARING IT WAS MENTIONED BY T HE LD. DR THAT HE DID NOT HAVE ANY GRIEVANCE WITH REGARD T O RELIEF GOPIKISHAN C. MUNDRA 6 GIVEN WITH RESPECT TO PURCHASE MADE FROM M/S. SHREE KARNI TEXTILES. THUS WE CONFIRM ACTION OF LD CIT(A) IN DE LETING THIS ADDITION. WITH RESPECT TO PART RELIEF GIVEN BY HIM FOR OTHER PARTIES, THE BENCH ASKED LD. DR TO POINT OUT IF THE RE WAS ANYTHING WRONG IN THE FINDINGS OF LD. CIT(A) WITH R EGARD TO DISALLOWANCE SUSTAINED BY LD CIT(A) @ OF 12.5% OF T HE TOTAL PURCHASES. IN RESPONSE, NOTHING WRONG WAS POINTED O UT BY LD. DR IN THE REASONING GIVEN BY LD. CIT(A). IT IS NOTE D THAT NO ADVERSE OR INCRIMINATING MATERIAL, WHATSOEVER, HAS BEEN BROUGHT ON RECORD BY LD AO IN ASSESSMENT PROCEEDING S OR BY LD DR BEFORE US, TO SHOW THAT THESE PURCHASES WERE BOGUS. THE FACTUAL FINDINGS RECORDED BY THE LD. CIT(A) THA T ALL THE PURCHASES AND SALES WERE PROPERLY BACKED UP WITH QUANTITATIVE RE-CONCILIATION, WERE NOT CONTROVERTED BY THE LD. DR. IN VIEW OF THE DETAILED FINDINGS RECORDED BY TH E LD. CIT(A) WHICH REMAIN UNCONTROVERTED, UNCHALLENGED AND UN-RE BUTTED BEFORE US, AND IN VIEW OF PECULIAR FACTS OF THIS CA SE, WE HAVE NO OTHER OPTION BUT TO UPHOLD THE ORDER OF LD CIT(A). THUS, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. NOW, WE TAKE UP ITA NOS.2993 & 2994/MUM/2013 FOR A.YS. 2005-06 & 2006-07: 3.8. IT HAS BEEN SUBMITTED BY LD. DR THAT FACTS AND ISS UES INVOLVED IN THESE TWO YEARS ARE IDENTICAL TO A.Y. 2 007-08. THE LD. CIT(A) HAS FOLLOWED HIS ORDER FOR A.Y.2007-08 W HILE DECIDING APPEALS FOR THESE TWO YEARS. SINCE, APPEAL FOR A.Y. 2007-08 HAS BEEN DISMISSED, THUS, FOLLOWING OUR ORD ER APPEALS FOR THESE TWO YEARS ARE ALSO DISMISSED. GOPIKISHAN C. MUNDRA 7 4. IN THE RESULT, ALL THREE APPEALS FILED BY THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12. 02. 2016. SD/- (SAKTIJIT DEY ) SD/- (ASHWANI TANEJA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12/02 /2016 CTX? P.S/. .. !'#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A)- , MUMBAI 5. #$% &' , &' ) , / DR, ITAT, MUMBAI 6. %*+ , / GUARD FILE. / BY ORDER, # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI