RAJASHRI PRODUCTIONS P.LTD, MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 3477/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6804 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: AJAY SEKHARI; DILKHUSH MALESH A R S
• Keywords: Bogus purchase; Earning of tax free income; Accommodation entries; Rule 8D; Set aside
• Section: 14A; 143(2)

Judgement Text

P A G E | 1 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI G.MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NOS.3477 & 3478/MUM/2017 (ASSESSMENT YEAR: 2011 - 12 ) RAJSHRI PRODUCTIONS PVT. LTD. BHAVANA 1 ST FLOOR, 422, VEER SAVARKAR MARG, PRABHADEVI, MUMBAI 400 025 VS. THE ASST. COMMISSIONER OF INCOME TAX 16(1) ROOM NO. 439, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 PAN AAACR4139G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY SEKHARI & SHRI DILKHUSH MALESH , A.R S RESPONDENT BY: SHRI D.G. PANSARI , D.R DATE OF HEARING: 27 .02.2019 DATE OF PRONOUNCEMENT: 28 .02.2019 O R D E R PER RAVISH SOOD, JM THE ASSESSEE HAS PREFERRED THE CAPTIONED APPEALS AGAINST THE RESPECTIVE ORDERS PASSED BY THE CIT(A) - 4, MUMBAI, FOR A.Y: 2011 - 12, WHICH IN TURN ARISES FROM THE RESPECTIVE ORDER S PASSED BY THE A.O UNDER SEC.143(3) , DATED 26.11.2013 AND UNDER SEC.143(3) R.W.S. 147, DATED 31.10.2014. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A) IN RESPECT OF THE ASSESSMENT FRAMED BY THE A.O UNDER SEC. 143(3), DATED 26.11.2013. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD COMMISSIONER OF INCOME TAX (APPEALS) - 4 [HEREINAFTER REFERRED TO AS P A G E | 2 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) LD. CIT (A)] ERRED IN CONFIRMING THE ACTION OF LD ASSESSING OFFICER (HEREINAFTER REFERRED TO AS LD . AO) OF DISALLOWANCE OF RS. 2,13,382/ - UNDER SECTION 14A R.W.S. AS PER RULE 8D(2)(III) BEING 0.5% OF THE VALUE OF AVERAGE INVESTMENTS EARNING EXEMPT INCOME. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, LD CIT (A) ERRED IN CONFIRMING THE ACTION OF LD AO OF NOT CONSIDERING THE CLAIM OF THE APPELLANT & STRAIGHTWAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RULE 8 D. 3. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, LD CIT (A) ERRED IN CONFIRMING THE ACTION OF LD AO OF NOT CONSIDERING THE DISALLOWANCE MADE BY THE APPELLANT AMOUN TING TO RS. 43,131/ - TOWARDS PORTFOLIO MANAGEMENT FEES AND THAT THE LD. A.O. HAS FAILED TO RECORD A FINDING AS CONTEMPLATED BY SECTION 14 - A(2) HAVING REGARD TO THE ACCOUNTS AND OTHER FACTS AND FAILED TO ESTABLISH ANY NEXUS WHATSOEVER WITH ANY OF THE ITEMS OF EXPENDITURE AND EXEMPT INCOME. 4. THAT THE ORDER OF LD CIT (A) IS BAD IN LAW AND ON FACTS. 5. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE FOREGOING GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF PRODUCT ION OF FEATURE FILMS AND TV SERIALS HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 29.0 9.2011, DECLARING TOTAL INCOME AT RS.1,82,28,320/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE INC OME TAX ACT, 1961 (FOR SHORT IT ACT). 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT WAS OBSERVED BY THE A.O THAT THOUGH THE ASSESSEE DURING THE YEAR HAD EARNED DIVIDEND INCOME WHICH WAS CLAIMED AS EXEMPT, HOWEVER , NO EXPENSES INCURRED FOR EARNIN G THE SAME WERE SUO MOTTO DISALLOWED BY IT . THE A.O HOLDING A CONVICTION THAT SOME EXPENDITURE DEFINITELY WOULD HAVE BEEN INCURRED BY THE ASSESSEE FOR EARNING OF THE EXEMPT INCOME, THUS WORKED OUT THE DISALLOWANCE UNDER SEC.14A R.W. RULE 8D(2)(III) AT RS.2,13,382/ - . 4. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER PASSED BY THE A.O IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE P A G E | 3 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) CONTENTIONS ADVANCED BY THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME AND DISMISSED THE APPEA L. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A ) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THE A.O HAD MEC HANICALLY WORKED OUT THE DISALLOWANCE UNDER SEC.14A AT RS.2,13,382/ - . IT WAS SUBMITTED BY THE LD. A.R THAT THE A.O HAD FAILED TO RECORD HIS SATISFACTION WHILE DISLODGING THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR EARNING OF THE EXEMPT D IVIDEND INCOME. THE LD. A.R DRAWING SUPPORT FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT & ANR. (CIVIL APPEAL NO. 7020 OF 2011; DATED 08.05.2017) , SUBMITTED THAT WHERE AN AO MAKES A DISALLO WANCE UNDER SEC.14A R.W. RULE 8D WITHOUT ARRIVING AT A SATISFACTION AS REGARDS THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE , ON THE BASIS OF ITS ACCOUNTS AS WERE PLACED BEFORE HIM, T HE SAME COULD NOT BE SUSTAINED IN THE EYES OF LAW. IT WAS SUBMITTED BY THE LD. A.R THAT THE DISALLOWANCE MADE BY THE A.O UNDER SEC.14A WITHOUT SATISFYING THE MANDATE OF LAW COULD NOT BE SUSTAINED AND WAS LIABLE TO BE VACATED. 6. PER CONTRA, THE LD. D.R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW THE VERY PROCESS OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME W OULD BE TRIGGERED ONLY IF THE A.O. RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. IN FACT, THE A.O BEFORE P A G E | 4 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) DISCARDING THE CLAIM OF THE ASSESSEE AS REGARDS THE AMOUNT OF EXPENDITUR E INCURRED IN RELATION TO THE EXEMPT INCOME REMAINS UNDER A STATUTORY OBLIGATION TO RECORD COGENT REASONS AS REGARDS HIS DISSATISFACTION IN RESPECT OF THE SAID CLAIM, BEFORE EMBARKING UPON THE DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE WITH T HE METHOD PRESCRIBED IN SECTION 14A R.W. RULE 8D. WE FIND THAT OUR AFORESAID VI EW STANDS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LIMITED (SUPRA), WHEREIN THE HONBLE APEX COURT HAD HELD AS UNDER: - WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WIT H RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. IN OUR CONSIDERED VIEW THE A.O IN THE PRESENT CASE HAD FAILED TO SATISFY THE FUNDAMENTAL REQUIREMENT OF ARRIVING AT A SATISFACTION THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IT WAS NOT POSSIBLE FOR HIM GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAD BEEN INCURRED IN RESPECT OF THE EXEMPT INCOME. WE THEREFORE NOT BEING ABLE TO PERSUADE OURSELVES TO UPHOLD THE DISALLOWANCE OF 2,13,382/ - MADE BY THE A.O UNDER SECTION 14A R.W. RULE 8D , WHICH THEREAFTER HAD BEEN S USTAINED BY THE CIT(A) , VACATE THE SAID DISALLOWANCE AND SET ASIDE THE ORDER OF THE CIT(A) TO THE SAID EXTENT. 8 . IN TERMS OF OUR AFORESAID OBSERVATIONS THE APPEAL OF THE ASSESSEE IS ALLOWED. P A G E | 5 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) ITA NO .3477/MUM/2017 A.Y. 2011 - 12 9 . WE SHALL NOW ADVERT TO THE APPEAL FILED BY THE ASSESSEE , WHEREIN THE LAT TER HAS ASSAILED BEFORE US THE ORDER OF THE CIT(A) UPHOLDING THE ASSESSMENT MADE BY THE A.O UNDER SEC.143(3) R.W.S 147 OF THE IT ACT, DATED 31.10.2014. THE ASSESSEE HAS ASSAILED THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD COMMI SSIONER OF INCOME TAX (APPEALS) - 4 (HEREINAFTER REFERRED TO AS LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF LD. ASSESSING OFFICER ( HEREINAFTER REFERRED TO AS LD . AO) OF RE - O PENING THE ASSESSMENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD . CIT (A) ERR ED IN CONFIRMING THE ACTION OF LD . AO IN HOLDING THAT THE APPELLANT HAS RECEIVED ACCOMMODATION ENTRIES OF RS. 1.85 LACS AND ACCORDINGLY ERRED IN CONFIRMING THE ACTION OF LD . AO IN MAKING ADDITION TO TOTAL INCOME. 3. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, LD. CIT (A) ERRED IN NOT APPRECIATING THAT LD. AO FAILED IN PROVIDING REASONABLE OPPORTUNITY TO THE APPELLANT I.E. TO CROSS EXAMINE THE PARTIES WHICH WERE ALLEGED AS BOGUS AND TO PROVIDE AND ALS O ACCESS TO MATERIAL EVIDENCE/ DOC UMENTS / STATEMENT ON OATH FOR CROSS EXAMINATION DURING THE COURSE OF ASSESSMENT PROCEEDING. 4. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, LD. CIT (A) WAS NOT JUSTIFIED AND ERRED IN TREATING THE CASE ADVERSELY AGAINST THE APPELLANT JUST FOR THE REASONS OF ABSENCE OF THE PARTIES AT THE STATED ADDRESS WHICH WAS BEYOND THE CONTROL OF THE APPELLANT. 5. A. THE LD. CIT (A) FAILED TO GIVE DUE WEIGHT TO THE POSITIVE EVIDENCE SUCH AS PAYMENT BY A/ C PAYEE CHEQUES AND FURNISHING OF PAN NO. AAJHM 4684 H AND MOBILE NO. 9821220199 OF THE PARTY AND ERRED IN SUSTAINING THE ADDITION PURELY ON THE BASIS OF SUSPICION SURMISES AND CONJECTURES. B. THE LD . CIT (A) FURTHER ERRED IN NOT PROVIDING THE APPELLANTS AN OPPORTUNITY TO CLARIFY AND MAKE THEIR SUBMISSIONS IN RESPECT OF THE OBSERVATIONS AND DOUBTS RAISED BY THE LD . CIT (A) IN RESPECT OF THE PURCHASE BILLS AS PER HIS ORDER. THE APPELLANTS HAD PROPER EXPLANATION TO JUSTIFY THE GENUINENESS OF THE SAID PURCHASES AND EXPENSES. 6. THAT THE ORDER OF LD. CIT (A) IS BAD IN LAW AND ON FACTS. 7. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE FOREGOING GROUNDS OF APPEAL. 10 . BRIEFLY STATED, ON THE BASIS OF INFORMATION RECEIVED BY THE A.O FROM THE OFFICE OF THE DGIT(INV.), MUMBAI , THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM TWO PARTIES VIZ. (I) M/S NIRMAL TRADING COMPANY: RS.13,46,533/ - ; AND (II) M/S PRADEEP ENTERPRISES: P A G E | 6 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) RS.11,16,885/ - , THE CASE OF T HE ASSESSEE WAS REOPENED AND A N OTICE UNDER SEC.1 48, DATED 20.03.2014 WAS ISSUE D AND SERVED UPON IT. IN REPLY , THE ASSESSEE R EQUESTED THAT ITS ORIGINAL RETURN FILED ON 29.09.2011 BE CONSIDERED AS THE RETURN FILED IN COMPLIANCE TO THE NOTICE ISSUED UNDER SEC.148 OF THE IT ACT , WHICH WAS ACCEPTED BY THE A.O . 1 1 . DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES VIZ. (I) M/S NIRMAL TRADING COMPANY: RS.13,46,533/ - ; AND (II) M/S PRADEEP ENTERPRISES: RS. 11,16,885/ - , DIRECTED THE ASSESSEE TO PRODUCE THEM FOR NECESSARY EXAMINATION. HOWEVER, THE ASSESSEE EXPRESS ED ITS INABILITY TO PRODUCE THE AFOREMENTIONED PARTIES. THE A.O IN ORDER TO VERIFY THE AUTHENTICITY OF THE PURCHASE TRAN SACTIONS ISSUED NOTICE S UNDER SEC.133(6) TO THE ABOVE MENTIONED PARTIES, WHICH HOWEVER COULD NOT BE SERVED AS IT WAS REPORTED THAT THE SAID PARTIES HAD NEVER EXISTED AT THE GIVEN ADDRESSES. IN THE BACKDROP OF THE AFORESAID FACTS IT WAS CONCLUDED BY THE A.O THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES. IT WAS NOTICE D BY THE A.O THAT OUT OF THE PURCHASES AGGREGATING TO RS.22,78,097/ - STATED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES , THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.1,85,321/ - AS AN EXPENSE DURIN G THE YEAR UNDER CONSIDERATION. INSOFAR THE BALANCE AMOUNT OF RS.22,78,097/ - WAS CONCERNED, THE SAME WAS CARRIED FORWARD BY THE ASSESSE E TO THE SUBSEQUENT YEAR I.E A.Y. 2012 - 13 AS WORK IN PROGRESS AND WAS CAPITALIZED IN THE SAID YEAR . ON THE BASIS OF THE AFORESAID FACTS THE A.O DISALLOWED THE PURCH ASES OF RS.1,85,321/ - THAT WERE CLAIMED BY THE ASSESSEE AS AN EXPENSE DURING THE YEAR UNDER CONSIDERATION AND RE - ASSESSED ITS INCOME AT RS.1,86,27,020/ - . P A G E | 7 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) 1 2 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE IN THE BACKDROP OF T HE FACTS OF THE CASE WAS HOWEVER NOT PERSUADED TO ACCEPT THE SAME. OBSERVING, THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES CLAIMED TO HAVE BEEN M ADE FROM THE AFOREMENTIONED PARTIES, THE CIT(A) UPHELD THE DISALLOWANCE OF RS.1,85,321/ - MADE BY THE A.O AND DISMISSED THE APPEAL. 1 3 . THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT THOUGH THE ASSESSEE HAD FURNISHED WITH THE A.O SUFFICIENT EVIDENCE TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES, HOWEVER, THE LAT T ER HAD WHIMSICALLY DECLINED TO ACCEPT THE SAME AND HAD CHARACTERISED THE PURCHASES AS BOGUS. 1 4 . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE COULD NOT SUBSTANTIATE THE VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM TH E AFOREMENTIONED PARTIES, THEREFORE , THE A.O HAD RIGHTLY DISALLOWED THE SAME TO THE EXTENT THE SAME WAS CLAIMED AS AN EXPENSE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 1 5 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY , THE ASSESSEE DESPITE HAVING BEEN AFFORDED SUFFICIENT OPPORTUNITY HAD FAILED TO SUBSTANTIAT E THE GENUINENESS AND VERACITY OF THE PURCHASES WHICH WERE CLAIMED TO HAVE P A G E | 8 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) BEEN MADE FR OM THE AFOREMENTIONED PARTIES V IZ. (I) M/S NIRMAL TRADING COMPANY: RS.13,46,533/ - ; AND (II) M/S PRADEEP ENTERPRISES: RS.11,16,885/ - . APART THEREFROM, THE NOTICES ISSUED BY THE A.O UNDER SEC.133(6) ALSO COULD NOT BE SERVED ON THE SAID PARTIES FOR THE REASON THAT THEY HAD NEVER EXISTED AT THE SAID ADDRESS ES . IN OUR CONSIDERED VIEW THE LOWER AUTHORITIES HAD RIGHTLY CONCLUDED THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHAS ES FROM THE AFOREMENTIONED PARTIES. WE FIND THAT THE CASE OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE MATERIAL PURCHASED FROM THE AFOREMENTIONED PARTIES WAS USED TOWARDS PREPARING OF SETS DURING THE MUSIC RELEASE AT J.W. MARRIOTT. HOWEVER, THE CIT(A) OBSERVING THAT IN THE BILL IT WAS MENTIONED THAT THE MATERIAL HAD BEEN USED FOR REPAIR WORK , DECLINED TO ACCEPT THE AFORESAID CONTENTION OF THE ASSESSEE . FURTHER, IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD FAILED TO PLACE ON RECORD ANY EVIDE NCE O F PREPARATION OF ANY SET AT J.W. MARRIOTT . 1 6 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND FIND THAT THE ASSESSEE HAD FURNISHED WITH THE A.O THE COMPLETE DETAILS OF THE CONSUMPTION OF M ATERIAL WHICH WAS STATED TO HAVE BEEN PURCHASE D FROM THE AFOREMENTIONED PARTIES FOR SETTING UP OF SETS TO FACILITATE THE MUSIC LAUNCH AND PROMOTION OF ITS MOVIE ISI LIFE MEIN AT J.W. MARRIOTT, MUMBAI AND FILM STUDIO NIGHT CLUB, MUMBAI. IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE CONSUMPTION OF THE MATERIAL STANDS PROVED, THEREFORE, ON THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE THE SOURCE OF PURCHASE, IT CAN SAFELY BE CONCLUDED THAT THE SAME W ERE MADE FROM THE OPEN/GREY MARKET. IN SUM AND SUBSTANCE, IT CAN SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASE D THE GOODS UNDER CONSIDERATION FROM UNIDENTIFIED SUPPLIER PARTIES AND HAD UTI LISED THE SAME FOR SETTING UP SETS AT THE TIME OF PROMOTION OF ITS MOVIE ISI LIFE MEIN. HOWEVER, AS P A G E | 9 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, THEREFORE, IT CAN SAFELY BE CONCLUDED THAT THE MATERIAL WAS PURCHASED BY HIM AT A DISCOUNTED PRICE FROM THE OPEN/G REY MARKET, AS AGAINST THAT SHOWN IN ITS ACCOUNTS. INSOFAR THE ESTIMATION OF THE PROFIT ELEMENT IS CONCERNED, THE SAME IN OUR CONSIDERED VIEW CAN SAFELY BE TAKEN AT 12.5% OF THE AGGREGATE VALUE OF PURCHASES OF RS.1,85,321/ - IN THE BACKDROP OF THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS RESTRICT THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF THE PROFIT ELEMENT OF RS.23,125 / - (I.E 12.5% OF RS.1,85,321/ - ) THAT WOULD HAVE BEEN INVOLVED FOR MAKING THE AFOREMENTIONED PURCHASES FROM THE OPEN/GREY MARKET. 1 7 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 18. IN TERMS OF OUR AFORESAID OBSERVATIONS THE APPEAL OF ASSESSEE VIZ. ITA NO. 3478/MUM/2017 IS ALLOWED , AND THAT MARKED AS ITA NO. 3477/MUM/2017 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28. 02.2019 SD/ - SD/ - ( G. MANJUNATHA) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 28 .02.2019 PS. ROHIT P A G E | 10 ITA NOS. 3477 & 3478/MUM/2017 A.Y. 2011 - 12 RAJSHRI PRODUCTIONS PVT. LTD. VS. THE ACIT - 16(1) / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI