MUKESH S. JAIN , MUMBAI V. DY. COMMISSIONER OF INCOME TAX 24(3), MUMBAI

ITA 3254/MUM/2022

AI Insights

The case involves Mukesh S. Jain, who appealed against the order of the CIT(A), which confirmed the additions made by the Assessing Officer regarding unverifiable purchases and estimated disallowances from various expenses claimed. The Tribunal examined the documents and evidence provided by the assessee, including purchase bills, ledger accounts, and bank statements. The Tribunal found that the Assessing Officer's conclusions were based on surmises and conjectures rather than concrete evidence, leading to the decision to remove the disallowance on purchases. However, the Tribunal upheld the disallowance on expenses, agreeing that a 5% disallowance was reasonable under the circumstances.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123970 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 12-03-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2022
• Other Referred Cases: M/s Vijay Proteins
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘D’ BENCH, MUMBAI. Before Shri B.R. Baskaran (AM) & Smt. Kavitha Rajagopal (JM) I.T.A. No. 3254/Mum/2022 (A.Y. 2008-09) Mukesh S. Jain 58, 1 st Floor, Jagat Staguru Indl. Estate Vishveshwar Road Near Udipi Hotel Goregaon West Mumbai-400 063. PAN : AABPJ9222G Vs. DCIT-24(3) Mumbai (Appellant) (Respondent) Assessee by Shri S.C. Tiwari & Ms. Komal Majethia Department by Ms. Mahita Nair Date of Hearing 13.03.2023 Date of Pronouncement 19.05.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the order dated 2.12.2022 passed by learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2008-09. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the additions made by the Assessing Officer towards unverifiable purchases and also in partially confirming the estimated disallowance made by the Assessing Officer from various expenses claimed by the assessee. 2. This is second round of proceedings. In the earlier round, the ITAT has restored all the issues to the file of Ld CIT(A) for examining them afresh. The facts of the case are that the assessee is engaged in the business of manufacturing of garments under the name and style M/s. Mukesh Enterprises. It filed its return of income for the year under consideration Mukesh S. Jain 2 declaring a total income of Rs.11,94,480/-. During the course of assessment proceedings, the Assessing Officer issued notice under section 133(6) of the Act to some of the suppliers in order to verify the genuineness of the purchases. The Assessing Officer did not receive any response from the following parties :- M/s. Bombay Rayon Fashions Ltd. Rs. 21,03,869/- M/s. Dhanesh chandra Kothari & Co. Rs. 25,52,295/- M/s. Fashion Fab Rs. 15,33,193/- M/s. Laminators (India) Rs. 11,89,034/- ------------------- Total Rs. 73,78,391/- ============= Hence, the Assessing Officer asked the assessee to produce the above said four parties. The assessee furnished ledger account copies of M/s. Dhanesh Chandra Kothari & Co. and confirmations from M/s. Bombay Rayon Fashions Ltd. and M/s. Fashion Fab. However, the assessee could not produce the parties. Accordingly, the Assessing Officer took the view that the assessee has not proved the genuineness of the purchases. Taking cue from the decision rendered by ITAT in case named M/s Vijay Proteins, the AO took the view that part of above said purchases should be disallowed. Accordingly, the AO disallowed 35% of the above said purchases, which worked out to Rs.25,82,437/-. 3. The Assessing Officer also noticed that the assessee has claimed expenses under various heads. Since the said expenses are supported by self made vouchers in some cases, the AO disallowed 20% of the expenses claimed under the head conveyance, travelling and transport charges. The Assessing Officer also disallowed 10% expenses claimed under the head Sales promotion and sundry expenses on similar reasoning. The learned CIT(A) confirmed the additions and hence the assessee filed appeal before the ITAT alongwith certain additional evidences. Hence, as stated earlier, the Mukesh S. Jain 3 ITAT restored the matters back to the file of the learned CIT(A) for examining the issues afresh. 4. In the set aside proceedings, the learned CIT(A) called for a remand report from the Assessing Officer on the additional evidences filed by the assessee, but the Assessing Officer expressed his inability to verify the additional evidences since the case records have been handed over to a service provider. The learned CIT(A) noticed from the bank statements that the assessee has made payments towards above said purchases to the extent of Rs. 15,47,093/- only during the year under consideration. Since the said payments are lower than the purchases amount of Rs.73.78 lakhs, referred above, the learned CIT(A) took the view that the assessee has failed to prove the payments made towards said purchases. Accordingly, the learned CIT(A) confirmed the addition made out of purchases. 5. In respect of disallowances made out of various expenses, the learned CIT(A) restricted the addition uniformly to 5% of all the expenses. Aggrieved by the order passed by Ld CIT(A) in the second round, the assessee has filed this appeal before the Tribunal. 6. We heard the parties and perused the record. We notice that the assessee has furnished copies of purchase bills, ledger accounts of parties, bank statement copies and a statement showing payments made to the above said suppliers during the year under consideration. The Ld A.R submitted that all these documents prove the genuineness of purchases. He further submitted that the tax authorities have not found fault with any of the evidences furnished by the assessee to prove genuineness of purchases. He submitted that the fact that the assessee has not made full payment during the year under consideration, cannot be a ground to disbelieve the genuineness of purchases. He also submitted that non-production of Mukesh S. Jain 4 suppliers also cannot also be a ground for disbelieving purchases, when no fault with the documentary evidences was found. 7. Learned DR, on the contrary, supported the orders passed by the Assessing Officer/the learned CIT(A). 8. We heard the parties and perused the record. In our considered view, there is merit in the submissions made by learned AR that non-production of suppliers or non-payment of outstanding balance of creditors during the year under consideration itself, cannot be grounds for disbelieving the purchases made by the assessee. We noticed earlier that the assessee has furnished copies of purchase bills and also details of payments made to them. We noticed that the tax authorities have not found any fault with those documents. It is also not the case of the assessing officer that the assessee, by booking these purchases, has suppressed his profits. Under these set of facts, we are of the view that there is no reason to disbelieve the purchases made by the assessee, i.e., the AO has drawn conclusion only on surmises and conjectures. Accordingly, we are of the view that this addition cannot be sustained. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete the entire disallowance made out of purchases. 9. With regard to the disallowance made out of expenses, we noticed that the Assessing Officer has made estimated disallowance on the reasoning that some expenses are supported by self made vouchers. There should not be any dispute that the self made vouchers are not susceptible for verification. We also further noticed that the Assessing Officer has made disallowance @ 20%/10%. However, the learned CIT(A) has reduced the same and sustained disallowance at an uniform rate of 5% of expenses. In our view, the disallowance made @ 5% out of expenses is reasonable as the same would take care of the revenue leakage, if any, made by claiming such kind of Mukesh S. Jain 5 expenses, which are supported by self made vouchers. Accordingly, we confirm the order passed by the learned CIT(A) on this issue. 10. In the result, appeal filed by the assessee is partly allowed. Pronounced in the open court on 19.5.2023. Sd/- Sd/- (KAVITHA RAJAGOPAL) (B.R. BASKARAN) Judicial Member Accountant Member Mumbai; Dated : 19/05/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(Judicial) 4. PCIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai