DILIP KUMAR SARAWGI, MUMBAI V. ITO WD 14(1)(2), MUMBAI

ITA 3304/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3113 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Peak credit; Onus to prove; Revised return
• Section: 69C; 133(6); 139(5); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3304/M/2014 ASSESSMENT YEAR: 2007-08 M/S. OM SHREE INTERNATIONAL, 115, NEW INDIA INDUSTRIAL ESTATE, OFF MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI 400 057 PAN: AAAFO 3000A VS. ASSTT. COMM. OF INCOME TAX, RANGE 20(2), AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ITA NO.4575/M/2012 ASSESSMENT YEAR: 2007-08 OFFICE OF THE ACIT-20(2), 612, PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400012 VS. M/S. OM SHREE INTERNATIONAL, OFF MAHAKALI CAVES ROAD, 115, NEW INDIA INDUSTRIAL ESTATE, ANDHERI (E), MUMBAI 59 PAN: AAAFO 3000A (APPELLAN T) (RESPON DENT) PRESENT FOR: ASSESSEE BY : SHRI K. GOPAL, A.R. & MS. NEHA PARA NJPE, A.R. REVENUE BY : DR. S. PANDIAN, D.R. DATE OF HEARING : 23.03.2016 DATE OF PRONOUNCEMENT : 17.06.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE HAVE BEEN DIRECTED AGAINST THE ORDER DATED 31.12.2009 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007-08. SINCE THE FAC TS AND ISSUES INVOLVED THEREIN ARE INTERRELATED, HENCE THE SAME ARE TAKEN TOGETHER FOR DISPOSAL BY THIS COMMON ORDER. FIRST WE TAKE UP ASSESSEES APPEAL I .E. ITA NO.3304/M/2014. ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 2 ITA NO.3304/M/2014 (ASSESSEES APPEAL) 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN - 1. A. MAKING ADDITION ON ACCOUNT OF NON PAYMENT OF TDS UNDER SECTION 40(A)(IA) RS. 23,91,398/-. B. NOT CONSIDERING THE SUBMISSIONS MADE BY APPELLAN T THAT HE IS NOT LIABLE FOR DEDUCTING TDS FROM THE BILLS THE AGENTS HAVE ALREAD Y DEDUCTED TAX AT SOURCE FROM TRANSPORT CHARGES AND ONE OF THE PARTIES HAS BEEN I SSUED CERTIFICATE FOR NON- DEDUCTION OF TAXES AT SOURCE. 2. A. MAKING ADDITION UNDER SECTION 69C OF THE INCO ME TAX ACT ON ACCOUNT OF UNCONFIRMED UNPROVED PURCHASES FROM CERTAIN PARTIES RS.25,68,750/-. B. IGNORING THE SUBMISSIONS OF APPELLANT THAT THE GOOD S PURCHASED FROM THE PARTIES ARE FARMERS AND SAID GOODS HAVE BEEN EXPORT ED WHICH IS VERIFIABLE BY DOCUMENTARY EVIDENCE. C. GIVING TECHNICAL REASONS FOR REJECTING THE PURCHASE S MADE GENUINELY, BECAUSE ALL THE NOTICES ISSUED BY AO HAVE BEEN DULY SERVED. D. APPLYING THE RATIO OF DELHI HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. LA MEDICA (2001) 250 ITR 575 (DELHI) ALTHOUGH THE FACTS ARE D IFFERENT AND NOT APPLICABLE IN THE APPELLANT'S CASE. E. BY TREATING THE PURCHASES OF RS.25,68,750/-, UNSUBS TANTIATING, UNVERIFIED, UNPROVED ON ACCOUNT OF FAILURE OF THE APPELLANT TO DISCHARGE THE NECESSARY BURDEN OF PROOF AND IGNORING THE SUBMISSIONS MADE BY APPEL LANT FROM TIME TO TIME. 3. BY DISALLOWING OUT OF LEGAL AND PROFESSIONAL CH ARGES RS. 18,300/- PAID TO REGISTER OF FIRM FOR FILLING CERTAIN DOCUMENTS, WHICH WAS IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 4. THE APPELLANT CRAVES, LEAVE TO ADD, TO ALTER, TO AMEND THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. THE LD. A.R. OF THE ASSESSEE, AT THE OUTSET, HAS STATED THAT HE DOES NOT PRESS GROUND NO.3 OF THE APPEAL. GROUND NO.3 OF TH E APPEAL IS THEREFORE DISMISSED AS NOT PRESSED. 4. WE FIND THAT GROUND NO.4 IS GENERAL IN NATURE AN D DOES NOT REQUIRE ANY ADJUDICATION. 5. NOW WE ARE LEFT WITH GROUND NOS.1 & 2 OF THE APP EAL WHICH REQUIRE ADJUDICATION. GROUND NO.1: 6. THE ASSESSEE, VIDE GROUND NO.1, HAS AGITATED THE CONFIRMATION OF DISALLOWANCE OF RS.23,91,398/- UNDER SECTION 40(A)( IA) OF THE INCOME TAX ACT ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 3 ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE. AT T HE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS STATED THAT IN FACT THE ACTUAL FIGURE OF THE DISALLOWANCE IS OF RS.22,15,365/- INSTEAD OF RS.23,91,398/-. 7. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE IS AN EXPORTER AND OBTAINS SERVICES FROM CLEARING AND FORWARDING A GENTS FOR EXPORT OF THE GOODS. THE ASSESSEE AVAILED THE SERVICES OF VARIOU S AGENTS, MADE PAYMENTS IN RESPECT OF AGENCY COMMISSION AND ALSO DEDUCTED TDS ON SUCH PAYMENTS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER (HEREINAFTER REFERRED TO AS THE AO) CALLED FOR THE REQUIRED DETAILS. AFT ER GOING THROUGH THE DETAILS OF THE AGENCY COMMISSION PAYMENTS MADE, THE AO OBSERVE D THAT THE ASSESSEE HAS DEDUCTED LESS TDS IN CASE OF BELOW NAMED FOUR PARTI ES. 1) M/S. J.N. FREIGHT FORWARDERS PVT. LTD. 2) M/S. VELJI DOSSABHAI & SONS PVT. LTD. 3) M/S. M. LILADHAR 4) M/S. LINCS CARGO PVT. LTD. 8. THE AO CALCULATED THE TOTAL AMOUNT AT RS.43,14,5 31/- IN RESPECT OF WHICH TDS WAS NOT DEDUCTED BY THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE HAD DEDUCTED TDS ONLY ON AGENCY CHARGES/TE RMINAL HANDLING CHARGES/DOC CHARGES ETC. INSTEAD OF ON ENTIRE CHARG ES AS STIPULATED IN THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT. HE ACCORDINGLY DISALLOWED THE TOTAL SUM OF RS.43,14,531/- FOR NON DEDUCTION O F TDS IN RELATION TO ABOVE 4 PARTIES. 9. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE S UBMITTED THAT THE PAYMENTS IN RESPECT OF WHICH TDS WAS NOT DEDUCTED W ERE IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF AS SESSEE BY THE CONCERNED CLEARING AND FORWARDING AGENTS. THEREFORE, THE TDS WAS NOT REQUIRED TO BE DEDUCTED AND EVEN IN SOME CASES THE TDS WAS DEDUCTE D BY THE AGENTS FROM TRANSPORTS ON BEHALF OF THE ASSESSEE. THE LD. CIT( A) HOWEVER REJECTED THE ABOVE CONTENTIONS OF THE ASSESSEE. HE, HOWEVER, O BSERVED THAT THE ASSESSEE HAD SUBMITTED A CERTIFICATE UNDER SECTION 197(1) OF THE ACT DATED 07.04.06 ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 4 ISSUED BY ITO TDS-3(5), MUMBAI UPON WHICH A REMAND REPORT WAS ALSO CALLED BY HIM FROM THE AO, WHEREIN, THE AO HAD REPORTED TH AT SO FAR AS ADDITION OF RS.19,23,133/- ON ACCOUNT OF NON DEDUCTION OF TDS W ITH RESPECT TO M/S. VELJI DOSSABHAI & SONS PVT. LTD., MUMBAI, THE CERTIFICATE SUBMITTED BY THE ASSESSEE BE CONSIDERED AND RELIEF MAY BE ALLOWED. THE LD. C IT(A), THEREFORE, DIRECTED THE AO NOT TO MAKE ANY DISALLOWANCE UNDER SECTION 4 0(A)(IA) OF THE ACT IN RESPECT OF THE PAYMENTS MADE TO M/S. VELJI DOSSABHA I & SONS PVT. LTD. REGARDING THE REMAINING THREE PARTIES HE CONFIRMED THE DISALLOWANCE. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE HAS COME IN APPEAL BEFORE US. 10. THE LD. A.R. OF THE ASSESSEE HAS STATED AT BAR THAT HE DOES NOT PRESS DISALLOWANCE MADE BY THE LOWER AUTHORITIES IN RESP ECT OF TWO PARTIES NAMELY M/S. M. LILADHAR AMOUNTING TO RS.2,57,827/- AND M/S . LINCS CARGO PVT. LTD. AMOUNTING TO RS.2,39,340/-. HE, HOWEVER, HAS STRON GLY CONTESTED THE DISALLOWANCE MADE BY THE AO IN RESPECT OF PAYMENTS MADE TO M/S. J.N. FREIGHT FORWARDERS PVT. LTD. AMOUNTING TO RS.17,18, 198/-. HE HAS INVITED OUR ATTENTION TO PAGE 95 OF THE PAPER BOOK WHICH IS A C ONFIRMATION BY M/S. J.N. FREIGHT FORWARDERS PVT. LTD. STATING THAT THEY HAD DEDUCTED TDS ON BEHALF OF ASSESSEE IN RESPECT OF TRANSPORTATION CHARGES, FUMI GATION CHARGES AND STUFFING CHARGES. FURTHER THAT THE EXPENSES LIKE PORT DUES, TELE WAGES WERE EXEMPTED AND THAT PAPER LINING, PAYMENT CHARGES WERE NOT REC URRING EXPENSES. THE ABOVE CONFIRMATION WAS ALSO SUBMITTED BEFORE THE AO DURING THE REMAND PROCEEDINGS. HOWEVER, THE AO REJECTED THE ABOVE CO NFIRMATION FOR WANT OF PROPER EVIDENCE. THE LD. A.R. OF THE ASSESSEE, BEF ORE US, HAS SUBMITTED THAT SINCE THE TDS WAS DEDUCTED BY THE CONCERNED PARTY/A GENT AND SOME OF THE EXPENSES WERE IN THE NATURE OF REIMBURSEMENT OF ACT UAL EXPENDITURE; THEREFORE, THE DISALLOWANCE WAS NOT WARRANTED. HE HAS SUBMITT ED THAT HE MAY BE GIVEN AN OPPORTUNITY TO DEMONSTRATE BEFORE THE AO IN THIS RE SPECT. CONSIDERING THE ABOVE SUBMISSIONS OF THE LD. A.R., WE ARE OF THE VI EW THAT INTEREST OF JUSTICE WILL BE WELL SERVED, IF, THE ASSESSEE IS ALLOWED AN OPPORTUNITY TO DEMONSTRATE BEFORE THE AO REGARDING THE ABOVE SUBMISSIONS. WE ACCORDINGLY RESTORE THIS ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 5 ISSUE TO THE FILE OF THE AO FOR CONSIDERATION OF TH E CONTENTIONS OF THE ASSESSEE ONLY IN RELATION TO PAYMENT MADE TO M/S. J.N. FREIG HT FORWARDERS PVT. LTD. HOWEVER, THE DISALLOWANCES MADE IN RESPECT OF THE O THER TWO PARTIES M/S. M. LILADHAR AND M/S. LINCS CARGO PVT. LTD. ARE HEREBY CONFIRMED. GROUND NO.2 11. VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE CONFIRMATION OF ADDITION OF RS.25,68,750/- UNDER SECTION 69C OF THE ACT ON A CCOUNT OF UNCONFIRMED/UNPROVED PURCHASES. THE ASSESSEE IS EX PORTING AGRICULTURAL COMMODITIES. THE AO DURING THE ASSESSMENT PROCEEDI NGS ASKED THE ASSESSEE TO FURNISH THE DETAILS OF PARTIES FROM WHOM THE PUR CHASES EXCEEDING RS.1 LAKH WERE MADE DURING THE RELEVANT ASSESSMENT YEAR. THE REQUIRED DETAILS WERE FURNISHED BY THE ASSESSEE. THEREAFTER, TO ASCERTAI N THE VERACITY AND CORRECTNESS OF THE PURCHASES, ENQUIRY LETTERS UNDER SECTION 133 (6) WERE ISSUED BY THE AO TO THESE PARTIES ASKING THEM TO FURNISH THEIR CONFIRMA TIONS OF THE SALES MADE TO THE ASSESSEE. THE AO OBSERVED THAT OUT OF SEVERAL NOTI CES SENT TO THE VARIOUS PARTIES UNDER SECTION 133(6), THE CONFIRMATIONS WER E RECEIVED FROM MOST OF THE PARTIES EXCEPT IN RESPECT OF 5 PARTIES. THEREAFTER , THE ASSESSEE WAS ASKED TO PRODUCE THESE 5 PARTIES IN PERSON. HOWEVER, THE AS SESSEE COULD NOT PRODUCE THESE PARTIES BEFORE THE AO FOR VERIFICATION. THE ASSESSEE, HOWEVER, PRODUCED CONFIRMATIONS FROM THE SAID PARTIES. HOWEVER, THE AO DISBELIEVED THE SAID CONFIRMATION STATING THAT THESE WERE MERE COPIES OF ACCOUNTS EXTRACTED FROM THE ASSESSEES BOOKS ITSELF CONTAINING THE PARTIES NAME ON WHICH SIGNATURES WERE SCRIBBLED. IN VIEW OF THIS, THE AO HELD THE PURCHA SES IN RESPECT OF 5 PARTIES AS BOGUS PURCHASES AMOUNTING TO RS.10,27,21,404/- AND ADDED THE SAID AMOUNT INTO THE INCOME OF THE ASSESSEE UNDER SECTION 69C O F THE ACT. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). 12. THE LD. CIT(A), AFTER GOING THROUGH THE EVIDENC ES ON THE FILE, OBSERVED THAT FROM THE QUANTITATIVE DETAILS OF PURCHASE AND SALES SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT, WHICH EVEN WERE NOT DISPUT ED BY THE AO, IT COULD NOT ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 6 BE SAID THAT THE ASSESSEE HAD NOT PURCHASED THE PRO DUCTS TO THE EXTENT OF QUANTITY SHOWN. HOWEVER, THE ASSESSEE COULD NOT PRO DUCE THE RESPECTIVE FARMERS AND NOR ANY CONFIRMATIONS FOR THE SAME. TH E PAYMENTS WERE NOT MADE BY THE ASSESSEE DIRECTLY TO THE FARMERS BUT TO CERT AIN AGENTS AND ALL THESE CIRCUMSTANCES SHOWED THAT THE ASSESSEE HAD MADE PUR CHASES FROM GREY MARKET BY PAYING CASH. HE OBSERVED THAT THE ASSESSEE HAD WRONGLY SHOWN THOSE IN THE ACCOUNTS AS CREDIT PURCHASES. HE, THEREAFTER, OBSE RVED THAT SOURCE OF THE CASH PURCHASES WAS NOT EXPLAINED. HE OBSERVED FROM THE A CCOUNTS PRODUCED BY THE ASSESSEE THAT THE MAXIMUM CREDIT BALANCE AS ON 10.1 0.06 OUT OF THE VARIOUS TRANSACTION OF PURCHASES MADE DURING THE RELEVANT Y EAR WAS AT RS.25,68,750/- OBSERVING THAT THE ASSESSEE MIGHT HAVE MADE THE PUR CHASES BY PAYING CASH FROM THE GREY MARKET AND THAT THE SOURCE OF CASH WA S NOT EXPLAINED. HE, THEREFORE, CONFIRMED THE ADDITION RESTRICTING THE S AME TO THE MAXIMUM/PEAK AMOUNT OF CASH PURCHASES AMOUNTING TO RS.25,68,750/ - MADE ON 10.10.06. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE LD. CIT (A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE AL SO GONE THROUGH THE RECORDS. IT IS AN ADMITTED FACT ON THE FILE THAT T HE ASSESSEE HAD MADE PURCHASES OF AGRICULTURE COMMODITIES WHICH WERE EXPORTED. TH E PURCHASES WERE ALLEGEDLY MADE FROM VARIOUS FARMERS. THE AO ISSUED NOTICE UNDER SECTION 133(6) TO VARIOUS PARTIES AND MOST OF THEM VERIFIED THE PURCHASES MADE BY THE ASSESSEE FROM THEM EXCEPT 5 PARTIES. AS OBSERVED B Y THE LD. CIT(A), SINCE THERE WAS CORRESPONDING EXPORT/SALE AND THE COMMODI TIES WERE PROVED TO BE IN THE STOCK OF THE ASSESSEE OR EXPORTED BY THE ASSESS EE, HENCE IT WAS ESTABLISHED THAT THE SAID COMMODITIES WERE ACTUALLY PURCHASED B Y THE ASSESSEE. THE ADDITIONS HAVE BEEN MADE BY THE AO ON THE GROUND TH AT THE SAID 5 PARTIES DID NOT TURN UP TO CONFIRM THE PURCHASES. HOWEVER, THER E IS A FACT ON THE FILE THAT THE NOTICES SENT TO THESE 5 PARTIES WERE DULY SERVE D UPON THEM. THE LD. A.R. OF THE ASSESSEE HAS INVITED OUR ATTENTION TO PARA 4 .2 OF THE IMPUGNED ORDER OF THE LD. CIT(A) WHEREIN IT HAS BEEN EXPLAINED THAT T HE ASSESSEE HIMSELF HAD ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 7 TRIED TO OBTAIN CONFIRMATION FROM THE SAID PARTIES. THE ASSESSEE HAD SENT REMINDER BY SPEED POST TO THESE PARTIES AND REQUEST ED THEM TO SEND THE CONFIRMATIONS. THE ASSESSEE FILED EVIDENCES E.G. X EROX COPIES OF REGISTERED ACKNOWLEDGEMENT, LEDGER CONFIRMATIONS LETTERS, COPY OF ACCOUNTS, EXPORT SALES INVOICES, EXTRACTED OF BANK STATEMENT, COPY OF PURC HASE INVOICES AND SALES TAX ASSESSMENT ORDER OF KARNATAKA STATE GOVERNMENT WHER EIN THE PURCHASES HAVE BEEN ASSESSED. THE FACTS ON THE FILE ESTABLISHED T HAT THE PURCHASES WERE MADE BY THE ASSESSEE AND THE SAME WERE DULY REFLECTED IN HIS ACCOUNTS. THE AO MADE THE ADDITIONS HOLDING THAT THE ENTIRE PURCHASE S WERE BOGUS, WHICH FACT HAS BEEN DULY REBUTTED BY THE ASSESSEE BEFORE THE L D. CIT(A). HOWEVER, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE MIGHT HAVE MA DE THE PURCHASES IN CASH. HOWEVER, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE MIGHT HAVE MADE THE PURCHASES IN CASH. HE ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT THE PAYMENTS WERE MADE BY THE ASSESSEE THROUGH BANKING CHANNELS TO THE AGENTS AND THEY FURTHER PASSED ON THE SAME TO THE FARMERS. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE FA CT THAT THE QUANTITATIVE PURCHASE AND SALES WERE SHOWN BY THE ASSESSEE IN TH E BOOKS OF ACCOUNT, THE COMMODITIES WERE ACTUALLY EXPORTED AND THE SALES WE RE ACCEPTED BY THE LOWER AUTHORITIES AND PAYMENTS WERE MADE THROUGH BANKING CHANNEL TO THE AGENTS WHO FURTHER MADE THE PAYMENTS TO THE FARMERS AND MO ST OF THE FARMERS HAVE CONFIRMED THE SALES MADE TO THE ASSESSEE; IN OUR VI EW, THE PURCHASES IN RESPECT OF 5 PARTIES WHO HAVE NOT RESPONDED TO THE NOTICES SENT BY THE AO CANNOT BE HELD TO BE BOGUS. MOREOVER, THE CASH THEORY PROPOU NDED BY THE LD. CIT(A) HAS NO LEGS TO STAND AS THERE IS NO CORRESPONDING O R CORROBORATING EVIDENCE IN THIS RESPECT. THE ADDITIONS IN RESPECT OF 5 PARTIE S HAVE BEEN MADE ONLY ON ASSUMPTION BASIS. EVEN WHEN THE PURCHASES ARE NOT DOUBTED WHICH ACTUALLY HAD BEEN SHOWN TO BE MADE BY THE ASSESSEE AND CORRE SPONDING SALES HAVE ALSO BEEN ADMITTED, THEN UNDER SUCH CIRCUMSTANCES, ASSUM PTION THAT THESE PURCHASES WERE MADE BY THE ASSESSEE FROM GREY MARKET ONLY BEC AUSE THAT OUT OF VARIOUS PARTIES, ONLY 5 PARTIES DID NOT RESPOND, IN OUR VIE W, WOULD NOT BE JUSTIFIED FOR ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 8 MAKING ADDITIONS IN THIS RESPECT. THE LD. A.R. HAS BROUGHT OUR ATTENTION TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. M.K. BROTHERS (1987) 163 ITR 249 WHEREIN IT HAS BEEN HE LD THAT WHERE THERE WAS NOTHING TO INDICATE THAT THE AMOUNT GIVEN BY THE AS SESSEE FOR THE PURCHASES MADE HAD COME BACK TO THE ASSESSEE IN ANY OTHER FOR M AND WHERE THERE WAS NO EVIDENCE THAT THE SAID CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE AND EVEN THE STATEMENTS MADE BY THE ALLEGED SUPPLIERS IN NO WAY IMPLICATE THE TRANSACTION WITH THE ASSESSEE THEN UNDER SUCH CIRCU MSTANCES IT CANNOT BE SAID THAT ENTRIES FOR THE PURCHASE OF GOODS MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE BOGUS AND NO ADDITION IN THIS RESPECT CAN BE MADE. THE LD. A.R. OF THE ASSESSEE HAS FURTHER RELIED UPON THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIKUNJ ENTERPRIS ES (P.) LTD. (2013) 35 TAXMAN.COM 384 (BOMBAY) WHEREIN THE HONBLE BOMBAY HIGH COURT HAS UPHELD THE FINDINGS OF THE TRIBUNAL THAT WHERE THE ASSESSEE FILED LETTERS OF CONFIRMATION OF SUPPLIERS, COPIES OF BANK STATEMENT SHOWING ENTRIES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TO SUPPLIERS AND STOCK RECONCILIATION STATEMENTS, SALE OF PURCHASED GOODS WAS NOT DOUBTED , THE TRANSACTIONS WERE SUPPORTED WITH EVIDENCES AND CONFIRMATIONS, IN SUCH AN EVENT MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE AO OR TH E LD. CIT(A), ONE CAN NOT CONCLUDE THAT THE PURCHASES WERE NOT GENUINE. 14. IN THE LIGHT OF ABOVE STATED LEGAL POSITION, WE DO NOT FIND JUSTIFICATION FOR THE ADDITION MADE BY THE LOWER AUTHORITIES IN THIS RESPECT. HENCE, THE ADDITIONS MADE BY THE LOWER AUTHORITIES ON ACCOUNT OF BOGUS P URCHASES UNDER SECTION 69C OF THE ACT ARE THEREFORE ORDERED TO BE DELETED. 15. IN VIEW OF OUR ABOVE OBSERVATION, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 16. NOW COMING TO THE REVENUES APPEAL I.E. ITA NO. 4575/M/2012. ITA NO.4575/M/2012 17. THE REVENUE IN ITS APPEAL HAS TAKEN THE FOLLOWI NG GROUNDS OF APPEAL: ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 9 I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN TH E CIRCUMSTANCES OF THE CASE IN DIRECTING THE AO TO ACCEPT THE REVIS ED RETURN AND DELETING THE ADDITION MADE ON ACCOUNT OF EXCESS STO CK, IGNORING THE FACT THAT THE REVISED RETURN WAS REJECTED DUE TO FA ILURE OF THE ASSESSEE TO SUBSTANTIATE DOWNWARD REVISION OF THE CLOSING ST OCK IN THE REVISED RETURN AND NOT THE VALIDITY OF RETURN. II) THE LEARNED CIT(A) ON FACTS AND CIRCUMSTANCES OF TH E CASE HAS FAILED TO APPRECIATE THAT THE AO IN HIS ASSESSM ENT ORDER HAS CLEARLY BROUGHT OUT FACTUAL ERRORS AND INCONSISTENC IES AND SELF- CONTRADICTORY STATEMENTS IN RESPECT OF THE SO CALLE D MISTAKES AND REVISION IN THE STOCKS. THEREFORE, THE SAME CAN NOT BE RELIED UPON. III) THE LEARNED CLT(A) HAS ERRED ON FACTS AND IN T HE CIRCUMSTANCES OF THE CASE IN DIRECTING THE AO TO RESTRICTING ADDI TION U/S 69C TO . RS.25,68,750/- ONLY BEING PEAK CREDIT BALANCE INSTEAD OF A0 TREATING THE ENTIRE PURCHASE AS BOGUS. IV) THE EARNED CIT(A) HAS ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN IGNORING THE FACT THAT THE AO HAS MADE ADDITION RELYING ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS LA MEDICA 250 ITR 575 WHICH BASED ON SIMILAR FACTS. V) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT ( APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RE STORED. VI) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY. GROUND NOS.1 & 2 18. VIDE GROUND NOS.1 & 2, THE REVENUE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN DIRECTING THE AO TO ACCEPT THE REVISED RE TURN AND DELETE THE ADDITIONS MADE ON ACCOUNT OF EXCESS STOCK. 19. THE BRIEF FACTS ARE THAT THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 29.10.07 BASED ON AUDIT ACCOUNTS, THE A UDIT REPORT WAS SHOWN TO BE SIGNED ON 28.10.07. THE AO, HOWEVER, FOUND THAT TH ERE WAS ANOTHER AUDIT REPORT FINALIZED AND SIGNED ON THE SAME DATE WHEREI N THE REVISED CLOSING STOCK FIGURE APPEARED WHICH HAD THE RESULT OF REDUCING TH E VALUE OF CLOSING STOCK. THE AO FURTHER NOTED THAT THOUGH THE REVISED AUDIT REPORT WAS SIGNED ON 28.10.07 BUT THE REVISED RETURN OF INCOME WAS UPLOA DED BY THE ASSESSEE ONLY IN THE END OF JANUARY I.E. AFTER A GAP OF NEARLY FOUR MONTHS. THE ASSESSEE ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 10 EXPLAINED BEFORE THE AO THAT THE QUANTITY OF TWO EX PORT BILLS WAS LEFT UNACCOUNTED BY ITS ACCOUNTANT IN THE ACCOUNTING SOF TWARE SYSTEM, RESULTING INTO EXCESS STOCK OF TWO ITEMS VALUING AT RS.80,98,900/- IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HOWEVER, THE SAID MISTAKE WAS DULY P OINTED OUT BY THE AUDITOR BEFORE SIGNING THE FINAL ACCOUNTS BUT DUE TO OVERSI GHT, THE ORIGINAL RETURN WAS FILED BASED ON THE HIGHER FIGURE OF CLOSING STOCK. IT WAS ALSO SUBMITTED THAT THE PURCHASE AND SALES OF THESE ITEMS HAD TAKEN PLACE I N MARCH 2007 AND THE ENTIRE QUANTITY PURCHASED WAS EXPORTED DURING THE RELEVANT ACCOUNTING YEAR ITSELF. IT WAS SUBMITTED THAT DUE TO THE MISTAKE, THE QUANTITY OF THESE TWO ITEMS WAS WRONGLY SHOWN IN THE CLOSING STOCK AS ON 31.03.07 A ND ACCORDINGLY THE RETURN WAS FILED. HOWEVER, TO RECTIFY THE MISTAKE, A REVI SED RETURN WAS FILED BY THE ASSESSEE ON 17.01.08, WHICH WAS FILED WITHIN THE LI MITATION PERIOD PRESCRIBED UNDER SECTION 139(5) OF THE ACT. THE AO, HOWEVER, REJECTED THE ABOVE CONTENTION OF THE ASSESSEE AND FINALIZED THE ASSESS MENT ON THE BASIS OF ORIGINAL RETURN FILED. 20. IN APPEAL, THE LD. CIT(A) OBSERVED FROM THE QUA NTITATIVE DETAILS OF SALES AND PURCHASES OF THE TWO ITEMS, AS STATED ABOVE, TH AT THE ENTIRE QUANTITY OF THE SAID TWO ITEMS WAS SOLD/EXPORTED DURING THE RELEVAN T YEAR UNDER CONSIDERATION AND NO CLOSING STOCK OF THESE ITEMS WAS LEFT WITH T HE ASSESSEE AT THE END OF THE RELEVANT ACCOUNTING YEAR. THAT THE ASSESSEE HAD DUL Y EXPLAINED THE MISTAKE RESULTING IN SHOWING THE EXCESS STOCK AND THE SAID MISTAKE WAS DULY RECTIFIED BY FILING A REVISED RETURN WITHIN THE LIMITATION PE RIOD PRESCRIBED. ON ACCOUNT OF THESE FACTS AND EVIDENCES, THE LD. CIT(A) HELD T HAT THE AO WAS NOT JUSTIFIED IN REJECTING THE REVISED RETURN FILED BY THE ASSESS EE. HE HELD THAT THE MISTAKE OF WRONGLY SHOWING THE CLOSING STOCK AT THE ENHANCED V ALUE OF RS.80,98,900/- WAS FULLY VERIFIED AND THE SAME BEING INADVERTENT M ISTAKE APPARENT FROM RECORD AND THE REVISED RETURN BEING FILED IN TIME, THE REJ ECTION OF THE SAID REVISED RETURN BY THE AO WAS WRONG. HE DIRECTED THE AO TO ACCEPT THE REVISED RETURN AND TO DELETE THE ADDITION ON ACCOUNT OF EXCESS STO CK OF TWO ITEMS AS STATED ABOVE. ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 11 21. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH P ARTIES, WE DO NOT FIND ANY INFIRMITY IN THE ABOVE ORDER OF THE LD. CIT(A) RELA TING TO THE ISSUE UNDER CONSIDERATION AND THE SAME IS ACCORDINGLY UPHELD. GROUND NOS.3 & 4 22. VIDE GROUND NOS.3 & 4, THE REVENUE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE ADDITION ONLY TO THE BOOK CREDIT BALANCE INSTEAD OF TRADING THE ENTIRE PURCHASES AS BOGUS. 23. THIS ISSUE HAS ALREADY BEEN DEALT WITH AND DECI DED BY US WHILE ADJUDICATING GROUND NO.2 OF THE ASSESSEES APPEAL. IN VIEW OF OUR OBSERVATIONS MADE ABOVE WHILE DECIDING THE APPEAL OF THE ASSESSE E, GROUND NOS.3 & 4 OF THE REVENUES APPEAL ARE HEREBY DISMISSED. 24. GROUND NOS.5 & 6 OF THE REVENUES APPEAL ARE GE NERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 25. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE APPEAL OF THE REVENUE IS THEREBY DISMISSED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. WHEREAS THE APPEAL OF THE RE VENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.06.2016. SD/- SD/- (RAJESH KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.06.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO.3304/M/2014 & ITA NO.4575/M/2012 M/S. OM SHREE INTERNATIONAL 12 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.