MILIND KISHENCHAND AGARWAL, MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 3201/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7084 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Bogus purchase
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3201/MUM/2016 ASSESSMENT YEAR: 2010 - 11 MILIND KISHENCHAND AGRAWAL, SUN ENTERPRISES, 605/A, DHAWALGIRI BLDG. PLOT, NO. 13, SHER - E - PUNJAB SOCIETY, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI - 400093. VS. ITO - 20(2)(2) PIRAMAL CHAMBERS, PAREL, MUMBAI. PAN NO. AACPA1340F APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MR. SAURABH DESHPANDE, DR DATE OF HEARING : 09/05/2018 DATE OF PRONOUNCEMENT: 31/05/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 39, MUMBAI [IN SHORT CIT(A) ]AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) O F THE INCOME TAX ACT 1961, (THE ACT). 2. THOUGH THE CASE WAS FIXED FOR HEARING BEFORE THE TRIBUNAL ON 11.12.2017, 31.01.2018, 21.03.2018 AND 09.05.2018, NEITHER THE MILIND KISHENCHAND ITA NO. 3201/MUM/2016 2 ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED ON THE ABOVE DATES. THEREFORE, THE APPEAL IS DISPOSED OFF AFTER HEARING THE LD. DR AND PERUSING THE MATERIALS AVAILABLE ON RECORD. 3. THE 1 ST GROUND OF APPEAL THE 1 ST GROUND RAISED BY THE ASSESSEE IS AG AINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.1,23,90,660/ - BEING 25% OF THE ALLEGED BOGUS PURCHASES OF RS.4,95,62,642/ - . 3.1 THE ASSESSEE IS THE PROPRIETOR OF M/S SUN ENTERPRISES ENGAGED IN THE BUSINESS THAT OF MERCHANT IMPORTER AND TRADING IN DEPB/DFRC IMPORT LICENCES AND ELECTRICAL GOODS. HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2010 - 11 ON 28.09.2010 DECLARING TOTAL INCOME OF RS.14,48,100/ - . THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION), MUMBAI THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO HAWALA TRANSACTIONS FOR PURCHASES AMOUNTING TO RS.4,95,62,642/ - WITH THE FOLLOWING PARTIES : NO. NAME OF THE PARTY AMOUNT 1. M/S NAVRATAN METAL IMPEX RS.1,20,27,397/ - 2. M/S RONAK INDUSTRIES RS. 1,54,20,797/ - 3. M/S TAMAS STEEL & ALLOYS PVT. LTD. RS.1,08,60,374/ - 4. M/S POLARIS SALES AGENCY PVT. LTD. RS.1,12,54,074/ - TOTAL RS.4,95,62,642/ - MILIND KISHENCHAND ITA NO. 3201/MUM/2016 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES BEFORE HIM IN PERSON (PROPRIETOR IN CASE OF PROPRIETARY CONCERN, PARTNER IN CASE OF FIRM, DIRECTOR IN CASE OF COMPANY, ETC.) WITH CERTIFIED COPIES OF LEDGER ACCOUNT, COPIES OF BILLS ISSUED, QUANTITATIVE DETAILS OF GOODS PURCHASED, DETAILS OF DELIVERY OF GOODS WITH DELIVERY CHALLANS AND BANK STATEMENTS EVIDENCING PAYMENT TO THE SAID PART IES . IN RESPONSE TO IT, THE ASSESSEE FILED COPIES OF LEDGER ACCOUNT, PURCH ASE INVOICES, DELIVERY CHALLANS AND BANK STATEMENTS HIGHLIGHTING PAYMENTS MADE TO THESE PARTIES AND A STATEMENT OF QUANTITATIVE DESCRIPTION OF GOODS PURCHASED FROM THEM. THE AO NOTED THAT THE DELIVERY CHALLANS HAVE BEEN PREPARED BY THE AFORESAID PARTIES (HAWALA OPERATORS) AND THEY HAVE MERELY STATED THAT GOODS WERE DELIVERED EX - GODOWN TO THE ASSESSEE. NO DETAILS REGARDING TRANSPORTATION OF SUCH GOODS COULD BE FURNISHED BEFORE THE AO. IN VIEW OF THE ABOVE FACTS, THE AO MADE AN ADDITION OF RS.4,95,62,642/ - U/S 69C. 3.2 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) FOLLOWING THE DECISION IN CIT V. SANJAY OIL CAKE INDUSTRIES (2009) 31 6 ITR 274 (GUJ - HC) AND VIJAY PROTEINS LTD. V. ACIT (1996) 58 ITD 428 (AHD) DIRECTED THE AO TO DISALLOW 25% OF THE ABOVE PURCHASES OF RS.4,95,62,642/ - WHICH COMES TO RS.1,23,90,660/ - . 3.3 BEFORE US, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). MILIND KISHENCHAND ITA NO. 3201/MUM/2016 4 3.4 WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE FACT REMAINS THAT THE ASSESSEE COULD NOT FILE SATISFACTORY EXPLANATION BEFORE THE AO REGARDING ITS PURCHASES OF RS.4,95,62,642/ - FROM FOUR PARTIES DELINEATED AT PARA 3.1 HEREINB EFORE. INSTEAD OF CONFIRMING THE FULL DISALLOWANCE MADE BY THE AO, THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION IN SANJAY OIL CAKE INDUSTRIES (SUPRA) AND VIJAY PROTEINS LTD . (SUPRA) AND RESTRICTED THE DISALLOWANCE TO 25% OF THE ABOVE PURCHASES OF RS.4, 95,62,642/ - WHICH COMES TO RS.1,23,90,660/ - . THE ORDER OF THE LD. CIT(A), BEING REASONABLE ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE SAME. THUS THE 1 ST GROUND OF APPEAL IS DISMISSED. 4. THE 2 ND GROUND OF APPEAL THE 2 ND GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.3,88,250/ - MADE BY THE AO FOR NON - DEDUCTION OF TAX. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNIS H COPY OF TDS RETURNS FOR THE YEAR UNDER CONSIDERATION WITH ANNEXURE THEREOF. THE AO OBSERVED THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON PAYMENTS AMOUNTING TO RS.3,88,250/ - . SINCE THE ABOVE PAYMENTS FALL WITHIN THE AMBIT OF SECTION 194A AND 194J, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. AS THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON THE SAID PAYMENTS, THE AO MADE A DISALLOWANCE OF THE ABOVE SUM OF RS.3,88,250/ - U/S 40(A)(IA) OF THE ACT. MILIND KISHENCHAND ITA NO. 3201/MUM/2016 5 4.2 IN APPEAL, THE LD. CIT(A) HEL D THAT THE AO HAS RIGHTLY COME TO FINDING THAT FORM 15G WERE SIGNED ON 01.04.2010, A DATE SUBSEQUENT TO THE FINANCIAL YEAR IN WHICH THE ASSESSEE HAD RESPONSIBILITY TO DEDUCT TAX AT SOURCE. IN VIEW OF THE ABOVE FACTS, THE LD. CIT(A) UPHELD THE DISALLOWANCE OF RS.3,88,250/ - MADE BY THE AO. 4.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 4.4. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS FOUND THAT FORM 15G FILED BY THE ASSESSEE FROM THE SAID PARTIES WERE SIGNED ON 01.04.2010, WHICH IS A DATE SUBSEQUENT TO THE FINANCIAL YEAR 2009 - 10 IN WHICH THE ASSESSEE HAD RESPONSIBILITY TO DEDUCT TAX AT SOURCE. THUS THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF RS.3,88,250/ - MADE BY THE AO. WE UPHOLD THE ORDE R OF THE LD. CIT(A) AND DISMISS THE 2 ND GROUND OF APPEAL. 5. THE 3 RD GROUND OF APPEAL THE 3 RD GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE DISALLOWANCE OF RS.10,89,016/ - MADE BY THE AO U/S 43B OF THE ACT. 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE TAX AUDIT REPORT THE OUTSTANDING LIABILITY OF THE ASSESSEE OF RS.10,89,016/ - ON ACCOUNT OF VAT WAS NOT PAID TILL THE DUE DATE OF FILING OF THE RETURN OF INCOME. IN RESPONSE TO IT, THE AS SESSEE VIDE LETTER DATED 21.12.2012 STATED THAT DUE TO HEAVY FINANCIAL CRISIS, THE SAME COULD NOT BE PAID TILL THE DATE OF FILING THE RETURN OF INCOME. THE AO FOLLOWED THE MILIND KISHENCHAND ITA NO. 3201/MUM/2016 6 PROVISIONS OF SECTION 43B AND MADE A DISALLOWANCE OF THE ABOVE SUM OF RS.10,89,016/ - . 5.2 IN APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO IN ABSENCE OF ANY EVIDENCE OF PAYMENT OF THE SAID AMOUNT, WHICH IS ALLOWABLE ONLY ON ACTUAL PAYMENT BASIS. 5.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 5.4 WE HAVE HEARD TH E LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE ASSESSEE FAILED TO FILE ANY EVIDENCE EITHER BEFORE THE AO OR THE LD. CIT(A) REGARDING THE PAYMENT OF THE SAID AMOUNT BEFORE THE FILING OF RETURN OF INCOME. IN VIEW THEREOF, WE UPHOLD T HE ORDER OF LD. CIT(A) AND DISMISS THE 3 RD GROUND OF APPEAL. 6. THE 4 TH , 5 TH , 6 TH AND 7 TH GROUND OF APPEAL THE ABOVE GROUNDS OF APPEALS ARE AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCES. AS WE HAVE SUSTAINED THE DISALLOWANCE OF RS.1,23 ,90,660/ - (25% OF PURCHASES OF RS.4,95,62,642/ - ) MADE BY THE LD. CIT(A), FURTHER DISALLOWANCE OF EXPENSES ARE NOT CALLED FOR. THEREFORE, WE ALLOW THE 4 TH , 5 TH , 6 TH AND 7 TH GROUND OF APPEAL. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 31/05/2018. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MILIND KISHENCHAND ITA NO. 3201/MUM/2016 7 MUMBAI ; DATED: 31/05/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI