ASST CIT 32(3), MUMBAI V. RAJ REALTORS, MUMBAI

ITA 3257/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9826 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GORADIA
• Assessee Lawyers: DARSHANI GOHIL
• Keywords: Unexplained expenditure
• Section: 69C

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT M EMBER AND SHRI PAWAN SINGH ./ITA NO. 3257/MUM/2015, /ASSESSMENT YEAR: 2011-12. ASSTT. CIT 32(3) ROOM NO. 108, 1 ST FLOOR BLDG. NO. C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI-400051 VS. M/S. RAJ REALTORS 1101, RAJSHRRE-1, ROYAL COMPLEX BABHAI NAKA, ESKAR ROAD BORIVALI (W), MUMBAI 400092 PAN AAKFR2535B ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: MS. ARJU GORADIA ASSESSEE BY: MS. DARSHANI GOHIL / DATE OF HEARING: 26.07.2017 / DATE OF PRONOUNCEMENT: 26.07.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 20.02.2015 OF THE CIT ( A)-44,MUMBAI, THE ASSESSING OFFICER (AO) HAS FILED PRESENT APPEAL. ASSESSEE-FIRM, ENGAGED IN THE BUSINESS OF BUILDING AND CONSTRUCTION, FILED ITS RETURN OF INCOME OF 28.09.2011, DECLARING TOTAL INCOME OF RS.1.78 CRORES. THE AO COMPLETED THE ASSESSMENT U/S.143(3) R.W.S 147 OF TH E ACT ON 06.03.2014,DETERMINING ITS INCOME AT RS.3.43 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS RESTRICTING OF ADDITI ON OF UNEXPLAINED EXPENDITURE TO RS.13.18 LAKHS AS AGAINST RS.1.64 CRORES, ON ACCOUNT OF BOGU S PURCHASES. DURING THE ASSESSMENT PROCEED - INGS,THE AO HAS RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MAHARASHTRA THAT FOUR OF THE SUPPLIERS, NAMELY MAHAVIR SALES CORPORATION(MSC ), ROHIT ENTERPRISES (RE),SM TRADING CO. (SMTC)AND AMAR TRADING CORPORATION(ATC),FROM WHOM T HE ASSESSEE HAVE SHOWN PURCHASES, WERE NON GENUINE. THE SALES TAX DEPARTMENT HAD RECO RDED THE STATEMENTS AND HAD OBTAINED AFFIDAVITS OF DEPOSITION OF PERSONS WHO ARE BEHIND RUNNING THE RACKET OF ISSUING BOGUS BILLS FOR A COMMISSION. THE AO SUPPLIED COPY OF THE STATEMENTS/ AFFIDAVITS TO THE ASSESSEE TO FILE EXPLANATION IN THAT REGARD. HE ALSO ISSUED NOTICES TO THE SUPPLIERS I.E. MSC, RE, SMTC AND ATC U/S.133(6)OF THE ACT. AS PER THE AO THE NOTICES WER E RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT/ NOT KNOWN. THE AO ISSUED A SHOW CAUS E NOTICE TO THE ASSESSEE.AFTER CONSIDERING 2 THE SUBMISSION OF THE ASSESSEE THE AO HELD JUST BEC AUSE ACCOUNT PAYEE CHEQUES HAD BEEN ISSUED TO MAKE THE PAYMENT WOULD NOT PROVE THE GENUINENESS OF THE TRANSACTION, THAT THE ASSESSEE HAD NOT ADDUCED DELIVERY CHALLANS, LORRY RECEIPTS, MODE OF TRANSPORT OF GOODS, STOCK REGISTER, ETC.FOR ALL THE PURCHASES MADE FROM THE ALLEGED SUPPLIERS, THAT ASSESSEE WAS NOT ABLE TO REBUT BY EVIDENCES AND THE STATEMENTS OF HAVALA OPERATORS, T HAT THE PURCHASES OF THE ASSESSEE PER SE WAS NOT THE ISSUE. HE DID NOT TREAT THE PURCHASES BOGUS . HOWEVER, THE PAYMENTS MADE AND THE EXPENDITURE INCURRED FOR SUCH PURCHASES WAS QUESTIO NED AND WAS TREATED AS UNEXPLAINED EXPENDITURE, AS PER THE PROVISIONS OF SECTION 69C O F THE ACT.FINALLY PURCHASES MADE FROM MSC (80.69 LAKHS),RE(74.35 LAKHS),SMTC (8.17 LAKHS) AND ATC (1.65 LAKHS), TOTALLING TO RS.1,69,97,434/- WERE ADDED TO THE INCOME OF THE AS SESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AND APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSIONS BEFORE HIM. IT ALSO RELIED UPON CERTAIN CASE LAWS IN ITS FAVOUR. AFTER CONSIDERING AVAILABLE MATERIAL HE HELD THAT THE AO HAD ISSUED NOTICES UNDER SECTION 133 (6) AND HAD MADE ENQUIRES ABOUT THE SUP PLIERS, THAT HE HAD NOT FOUND ANY CONCRETE EVIDENCE TO DOUBT THE GENUINENESS OF THE PAYMENT MA DE THROUGH BANKING CHANNELS, THAT HE WAS NOT ABLE TO QUESTION THE AVAILABILITY OF THE INVENT ORY, THAT THE ASSESSEE HAD FILED HIS BOOKS OF ACCOUNT AND BANK STATEMENTS IN ITS SUPPORT, THAT TH E ONUS OF PROVING THE GENUINENESS OF THE PURCHASES WAS ON THE ASSESSEE, THAT MERELY FILING C OPIES OF LEDGER ACCOUNTS AND BANK STATEMENTS WOULD NOT ESTABLISH THE GENUINENESS OF THE TRANSACT ION, THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED BY THE AO, THAT SALES MADE BY THE ASSESSEE WERE NEVER DISPUTED, THAT THERE WAS NO PROOF THAT ASSESSEE HAD RECEIVED BACK THE CASH IN LIEU OF THE CHEQUES ISSUED. CONSIDERING THE GROSS PROFIT MARGINS AND FOLLOWING THE DECISION OF SUMMIT P. SHETH OF THE HONBLE GUJARAT HIGH COURT (TAX APPEAL NO.5531 OF 2012, DATED 16.01.2013)SHE H ELD THAT WHEN THE SALE WAS ACCEPTED BY THE AO HE COULD NOT ADD ENTIRE PURCHASES TO THE INCOME OF THE ASSESSEE, THAT FAIR PROFIT RATIO SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE FAA RES TRICTED THE ADDITION TO 8% OF THE TOTAL PURCHASES WHICH WORKED OUT TO RS.13.18 LAKHS. 4.DURING THE COURSE OF HEARING BEFORE US, THE DEPAR TMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO AND STATED THAT ENTIRE BOGUS PURCHA SES WERE RIGHTLY ADDED TO THE INCOME OF THE ASSESSEE. THE AUTHORISED REPRESENTATIVE(AR)RELIED U PON THE ORDER OF THE FAA. 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD HELD THAT PURCHASES MADE BY THE ASSESSEE FRO M THE ABOVE REFERRED FOUR SUPPLIERS WERE NOT GENUINE, THAT THE ASSESSEE HAD PRODUCED HIS BOOKS O F ACCOUNTS AND BANK STATEMENTS ALONG WITH THE STOCK REGISTER TO PROVE THE GENUINENESS OF THE TRANSACTIONS, THAT THE AO HAD NOT DOUBTED THE SALES MADE BY THE ASSESSEE. THERE IS NO NEED TO QUO TE ANY AUTHORITY TO HOLD THAT WITHOUT PURCHASES SALES CANNOT TAKE PLACE. IN THESE CIRCUMS TANCES THERE WAS NO JUSTIFICATION IN ADDING THE ENTIRE PURCHASES. THE FAA HAS AFTER CONSIDERING THE RELEVANT FACT AND THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT HAD HELD THAT 8% OF THE PURCHASES SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE. SHE HAD ARRIVED AT THE CONCLUSION AFT ER CONSIDERING THE GROSS PROFIT RATE. THUS, IN OUR OPINION METHOD ADOPTED BY HER IS MORE SCIENTIFI C AND REASONABLE-ESPECIALLY WHEN SALE ARE NOT IN DOUBT. IN OUR OPINION, ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY, SO, CONFIRMING THE SAME, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. . ORDER PRONOUNCED IN THE OPEN C OURT ON 26 TH JULY, 2017. 26 2017 . SD/- SD/- ( / PAWAN SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 26.07.2017 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.