ITO 31(2)(3), MUMBAI V. MUKESH M. PARMAR, MUMBAI

ITA 3725/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9797 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 17-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANIS H KUMAR SINGH DR S
• Assessee Lawyers: DARSHAN DEEPAK MEHTA
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE S HRI G.S. PANNU (VP ) AND SHRI RAM LAL NEGI (JM) ITA NO. 3725 /MUM/20 1 5 ASSESSMENT YEAR: 2010 - 11 THE INCOME TAX OFFICER - 31(2)(3), ROOM NO. 704, C - 11, PRATAYAKSHA KAR BHAVAN, BANDRA KUR LA COMPLEX, BANDRA (EAST), MUMBAI - 400051 VS. SHRI MUKESH MAVJI PARMAR, B - 16, SHREYAS INDUSTRIAL ESTATE, NR. JAY COACH, GOREGAON (E), MUMBAI - 400063 PAN: AAEPP2846H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH KUMAR SINGH & SHRI MANIS H KUMAR SINGH (DR S ) RESPONDENT BY : SHRI DARSHAN DEEPAK MEHTA (AR) DATE OF HEARING: 18/01 /201 9 DATE OF PRONOUNCEMENT: 15 / 0 4 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILE D BY THE REVENUE AGAINST THE ORDER DATED 18/03/2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) - 4 2 , MUMBAI , FOR THE A S S ESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/ S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE PROPRIETOR OF M/S SHREE SWASTIK ROLLING SHUTTER , ENGAGED IN MANUFACTUR ING OF ROLLING SHUTTER AND GRILL ETC. , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 13,83,915/ - . THE AO COMPLETED THE 2 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 ASSESSMENT U/S 143 (3) OF THE ACT AFTER MAKING ADDITION OF RS. 10,00,000/ - CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE, ADDITION OF RS. 3 8,45,758/ - AS UNEXPLAINED EXPENDITURE RS. 88,150/ - AS DIFFERENCE IN PURCHASES AND RS. 18,65,085/ - TOWARDS UNEXPLAINED PURCHASES AND DETERMINED THE TOTAL INCOME OF RS. 81,82,910/ - . IN THE FIRST APPEAL, THE LD. CIT (A) DELETED THE ADDITION OF RS. 10,00,000/ - MADE TOWARDS THE CAPITAL INTRODUCTION , RESTRICTED THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED PURCHASES AND UNEXPLAINED EXPENDITURE TO 13.71% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. THE REVENUE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). 3 . T HE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 10,00,000/ - MADE ON ACCOUN T OF UNEXPLAINED INTRODUCTION OF CAPITAL IGNORING THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE LIKE SALE/PURCHASE BILLS OF JEWELLERY, WEIGHT OF JEWELLERY, CAPITAL GAIN DETAILS ON SALE OF JEWELLERY ETC. FURTHER, THE LOAN CONFIRMATIONS GIVEN DO NOT CONTAIN PAN AND PROPER ADDRESS DUE TO WHICH GENUINENESS OF LOAN IS NOT CONFIRMED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE TOTAL ADDITION OF RS. 57,10,843/ - MADE ON ACCOUNT OF UNEXPL AINED PURCHASES AND UNEXPLAINED EXPENDITURE AND DIRECTING THE AO TO TAX 13.71% OF BOGUS PURCHASES IGNORING THE FACT THAT THE NOTICES ISSUED U/S 133(6) TO THE PURCHASE PARTIES WERE RECEIVED BACK UNSERVED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE TOTAL ADDITION OF RS. 57,10,843/ - MADE ON ACCOUNT OF UNEXPLAINED PURCHASE AND UNEXPLAINED EXPENDITURE AND DIRECTING THE AO TO TAX 13.71% OF BOGUS PURCHASES IGNORING THE FACT THAT THE NAMES OF THE 3 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 PURCHASE PA RTIES ARE IN THE LIST OF THE HAWALA PARTIES ISSUED BY THE SALES TAX DEPARTMENT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE TOTAL ADDITION OF RS. 57,10,843/ - MADE O N ACCOUNT OF UNEXPLAINED PURCHASES AND DIRECTING THE AO TO TAX 13.71% OF BOGUS PURCHASES IGNORING THE FACT THAT THE ONUS LIES ON ASSESSEE TO PRODUCE THE CONCERNED PARTIES WHICH ASSESSEE FAILED TO DO. 4. THE F IRST ISSUE PERTAINS TO ADDITION OF RS. 10,00,000/ - MADE ON ACCOUNT OF UNEXP LAINED INTRODUCTION OF CAPITAL MADE BY THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED BEFORE US THAT THE LD. CIT (A) HAS WRONGLY DELETED THE ADDITION IGNORING THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE TO SUBSTANT IATE ITS CLAIM THAT THE ASSESSEE HAD GIVEN ADVANCES DURING THE FY 2008 - 09 TO SH. DHARMESH CHHEDA, WHO IS A FARMER BY PROFESSION. DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION SH. DHARMESH RETURN ED THE SAID LOAN IN CASH AND THE SAME WA S INTRODUCED IN THE CAPITAL. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM. FURTHER, THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE ASSESSEE HAD SOLD GOLD BRACELET STUDDED WITH DIAMOND TO THE DINE SH SHAH DURING FY 1998 - 99 WHICH WAS GIVEN AS LOAN TO SH. RAMJI S SATRA, KESARBEN S SATRA AND DHARMESH P CHHEDA, THE SAID PERSONS RETURNED THE LOAN AMOUNT IN THE AY 2008 - 09 WHICH WAS FURTHER TRANSFERRED TO MR. DHARMESH. SINCE, THE ASSESSEE HAS FAILED TO PR OVE THE ALLEGED TRANSACTIONS, THE LD. CIT (A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT THE ASSESSEE HAS PRODUCED THE CONFIRMA TIONS OF LOAN BY THE PARTIES. MOREOVER, THE ASSESSEE HAD PRODUCED THE COPY OF INCO M E TAX RETURN AND EXPLAINED THE SOURCE OF THE AMOUNT WHICH ESTABLISH THAT THE JEWELLERY WAS SOLD AND THE GAINS ARISING ON THE SAME WERE 4 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 OFFERED TO TAX AND THE TAX WERE PAID. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE AO HAD MADE THE ADDITION WRONGLY REJECTING THE CONTENTION OF THE ASSESSEE AND IGNORING THE EVIDENCE ON RECORD, THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. WE HAVE GONE THROUGH THE ENTIR E MATERIAL ON RECORD INCLUDING THE ORDERS PASSED BY THE AUTHORITIES BELOW. THE LD. CIT (A) HAS DELETED THE ADDITION HOLDING AS UNDER: - 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND THE SUBMISSION. IT IS SEEN THAT THE APPELLANT HAS SUBMITTED THAT HE HAD SOLD HIS OLD JEWELLERY AND THE MONIES RECEIVED ON THE SALE WERE ADVANCED AS LOANS . THE PARTIES TO WHOM THE LOANS WERE ADVANCED BELONG TO A VERY SMALL VILLAGE AND ACCORDINGLY, THE CASH WAS BEING HANDED OVER TO THEM FOR DEVELOPMENT OF THEIR AGRICULTURAL LAN D. THESE ADVANCES WERE THEN RECOVERED AND AGAIN ADVANCED TO MR. DHARMESH CHHEDA. THE APPELLANT HAS FILED ALL THE LOAN CONFIRMATION OF THE RESPECTIVE PARTIES. IT MAY BE NOTED THAT SMT. KESARBEN SATRA IS AN OLD LADY AND THAT SHE CANNOT SIGN AND ACCORDINGLY, HER THUMB PRINT WAS IMPRESSED ON THE LOAN CONFIRMATION. THE APPELLANT PROVIDED A COPY OF THE INCOME TAX RETURN AS THE SOURCE DOCUMENT WHICH CLEARLY EVIDENCES THAT THE JEWELLERY WAS SOLD AND THE GAINS ARISING ON THE SAME WERE OFFERED TO TAX AND NECESSARY TAXES WERE PAID ON THE SAME. ALSO, THE APPELLANT SUBMITTED THAT THE SALE PROCEEDS WERE ADVANCED AS LOANS AND WHICH THEN SUBSEQUENTLY RECEIVED WERE CREDITED TO THE CAPITAL ACCOUNT. FURTHER, CONSIDERING THE OLD AGE OF SMT. KESARBEN SATRA, IT CAN BE CONSIDERE D THAT SHE WOULD NOT BE ABLE TO SIGN AND WOULD AFFIX THE THUMB IMPRESSION ONLY. IT IS A WELL SETTLED POSITION IN LAW THAT ONCE THE TAXES ARE PAID ON THE INCOME, NO FURTHER TAXES CAN BE LEVIED UNLESS THE SAID INCOME GIVES RISE TO ANOTHER INCOME. IN THE IN STANT CASE, THE APPELLANT HAS DULY DISCLOSED THE GAINS/LOS ARISING ON THE SALE OF JEWELLERY AND THE PROCEEDS THEREOF WERE UTILIZED TO ADVANCE THE LOANS. AS THESE LOANS WERE RECEIVED BACK, THE SAME WERE CREDITED TO THE CAPITAL 5 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 ACCOUNT. THE APPELLANT HAS PRO VED THE SOURCE OF MONEY AND GENUINENESS OF THE TRANSACTION. ACCORDINGLY, I HEREBY DIRECT THE AO TO DELETE THE ADDITION MADE OF RS. 10,00,000/ - TOWARDS THE CAPITAL INTRODUCTION. TH IS GROUND OF APPEAL IS ALLOWED. 6. WE NOTICE THAT THE LD. CIT (A) HAS D ELETED THE ADDITION HOLDING THAT THE ASSESSEE HAS PROVE D THE SOURCE OF MONEY AND GENUINENESS OF THE ADDITION. AS POINTED OUT BY THE LD.CIT (A), THE ASSESSEE HAS SUBMITTE D THE CONFIRMATION OF THE PARTIES TO WHOM THE LOANS WERE ADVANCED BY THE ASSESSEE. MORE OVER, THE ASSESSEE HAS PRODUCED THE RETURN OF INCOME TAX PERTAINING TO THE RELEVANT ASSESSMENT YEAR TO PROVE THAT THE ORNAMENTS WERE SOLD AND THE GAINS ARISING FROM THE SALE WERE OFFERED TO TAX. SINCE, THE ASSESSEE HAS ESTABLISHED THE SOURCE OF AMOUNT CRED ITED TO THE CAPITAL ACCOUNT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A). IN OUR CONSIDERED VIEW, THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE EVIDENCE ON RECORD. WE THEREFORE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THIS GRO UND OF APPEAL OF THE REVENUE. VIDE GROUND NO. 2 TO 4, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN DELETING THE TOTAL ADDITION OF RS. 57,10,843/ - MADE ON ACCOUNT OF UNEXPLAINED PURCHASES AND UNEXPLAINED EXPENDITURE AND FURTHER DIRECTING THE AO TO TAX 13.71% OF BOGUS PURCHASES. THE LD. DR SUBMITTED THAT THE LD.CIT (A) HAS RESTRICTED THE ADDITION TO 13.71% OF THE BOGUS PURCHASES IGNORING THE FACT THAT THE NOTICES ISSUED U/S 133(6) OF THE ACT TO PARTIES WERE RECEIVED BACK UN - SERVED. FURTHER, TH E LD. CIT (A) HAS IGNORED THE FACT THAT THE NAME OF THE PURCHASED PARTIES ARE IN THE LIST OF HAWALA DEALERS, ISSUED BY THE SALES TAX DEPARTMENT. THE LD. DR FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACT ION OF PURCHASE, THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO 13.71% AS AGAINST THE 100% ADDITION MADE BY THE AO. 6 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT EVEN IF THE ASSE SSEE HAS FAILED TO PROVE THE TRANSACTION OF PURCHASE, THE AO HAS ADMITTED THE SALES OF THE ASSESSEE. ONCE THE SALES IS ADMITTED THE ENTIRE AMOUNT OF PURCHASED CANNOT BE DISALLOWED. MOREOVER, THE ASSESSEE HAS SUBMITTED THE NECESSARY DOCUMENTS RELATING TO PU RCHASES MADE INCLUDING THE COPIES OF BILLS PAYMENT DETAILS ETC. THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 13.71% KEEPING IN VIEW THE GROSS PROFIT RATIO OF THE APPELLANT. HENCE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH. 8. WE HAVE GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE ORDERS PASSED BY THE AUTHORITIES BELOW. THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 13.71% OF THE TOTAL AMOUNT OF THE PURCHASES IN QUESTION AS AGAINST THE 100% ADDITION MADE BY THE AO. TH E OPERATIVE PART OF THE ORDER READS AS UNDER: - 4.3 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT, MATERIAL AVAILABLE ON RECORD AND THE IMPUGNED ASSESSMENT ORDER ON THIS ISSUE. THE LIST OF THE SUSPICIOUS DEALERS AND HAWALA PARTIES IS AS AVAI LABLE WITH THE SALES TAX DEPARTMENT. THE APPELLANT HAS UNABLE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BY PRODUCING THE PARTIES OR GETTING THE CONFIRMATIONS FROM THESE PARTIES. NO REPLY OR CONFIRMATION HAS BEEN OBTAINED TO THE NOTICES ISSUED U/S 133(6) OF THE INCOME TAX ACT, 1961. A. FURTHER, CONSIDERING THAT THE SALES OF THE APPELLANT ARE GENUINE AND HAS NOT BEEN UNDER DOUBT, THE ENTIRE AMOUNT OF PURCHASES CANNOT BE DISALLOWED. THE APPELLANT HAS ALSO SUBMITTED THE NECESSARY DOCUMENTS RELATING TP THE PURCH ASES MADE INCLUDING THE BILL COPIES, PAYMENT DETAILS, ETC. THE GROSS PROFIT MARGIN OF THE APPELLANT IS AS UNDER - PARTICULARS AY 2008 - 09 AY 2009 - 10 AY 2010 - 11 GROSS PROFIT RATIO 12.87% 15.45% 12.8% 7 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 THE GROSS PROFIT MARGIN FOR THE CURRENT YEAR IS 12.8% A ND THE AVERAGE GROSS PROFIT OF THE LAST THREE YEARS IS 13.71%. ACCORDINGLY, I DO HEREBY DIRECT TO DISALLOW ONLY THE SUM OF RS. 7,82,957/ - BEING THE GROSS PROFIT MARGIN ON THE TOTAL PURCHASES OF RS. 57,10,853/ - BEING FROM THE PARTIES COVERED UNDER HAWALA OF RS. 38,45,758/ - AND FROM M/S NATIONAL TRADING CO OF RS. 18,65,085/ - . IN VIEW OF THESE FACTS, THE ENTIRE ADDITIONS MADE BY THE AO OF RS. 51,10,853/ - (RS. 38,45,758 + 18,65,085) IS NOT JUSTIFIED AND ACCORDINGLY I DIRECT THE AO TO RESTRICT THE ADDITION TO TH E EXTENT OF GROSS PROFIT MARGINS AT RS. 7,82,957 MADE AS UNEXPLAINED EXPENDITURE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 9. THE LD. CIT (A) HAS RESTRICTED THE ADDITION ON THE GROUND THAT EVEN IF THE ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM T HE QUESTIONED PURCHASES WERE MADE, THE ENTIRE AMOUNT OF PURCHASES CANNOT BE DISALLOWED. WE NOTICE THAT IN THE PRESENT CASE, THE ASSESSEE FAILED TO PRODUCE THE PARTIES FROM WHOM THE PURCHASES WERE SHOWN BUT AS PER THE LAW LAID DOWN BY THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) HAS HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPO NDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADD ED TO INCOME OF THE ASSESSEE. 10. IN OUR CONSIDERED VIEW, THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY AND HONBLE HIGH COURT OF GUJARAT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD. CIT (A), THE LD. CIT (A) HAS RIGHTLY ESTIMATED THE ADDITION KEEPING OF VIEW THE GROSS PROFIT RATIO PERTAINING TO THE EARLIER YEARS. WE THEREFORE, UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS GROUND NO. 2 TO 4 OF THE REVENUE AND 8 ITA NO. 3 725/MUM/2015 ASSESSMENT YEAR: 2010 - 11 FURTHER D IRECT THE AO TO COMPUTE THE ADDITION TO BE MADE IN TERMS OF ORDER OF THE LD. CIT (A). IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2010 - 2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH APRIL, 2019 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; DATED: 15 / 04/2019 ALINDRA, PS / 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