THE ACIT RG-10(1), V. M/S. GARDEN CELLOR P. LTD.,

ITA 3786/MUM/2004

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6207 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 26-10-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 12-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRIK GOPAL
• Keywords: Bogus purchase; Gift; Additional evidence; Assessment record
• Section: 131; 68

Judgement Text

1 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP, A.M. AND SMT. ASHA VIJAYAR AGHAVAN, JM ITA NO. 4644/MUM/04 ASSESSMENT YEAR 1999-2000 M/S GOLDEN CELLAR PVT. LTD., 323, JARIWALA STABLE, KALE MARG, BAIL BAZAR, KURLA (W), MUMBAI 400 070. PAN AAACG 2430 R VS. DCIT CENTRAL CIRCLE 36, MUMBAI. APPELLANT RESPONDENT ITA NO. 3786/MUM/04 ASSESSMENT YEAR 1999-2000 ACIT 10(1), ROOM NO. 476, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI. 20. VS. M/S GOLDEN CELLAR PVT. LTD., 158, DANI MILL COMPOUND, VIDYANAGARI MARG, KALINA, SANTACRUZ (EAST), MUMBAI 400 098. PAN AAACG 2430 R APPELLANT RESPONDENT ASSESSEE BY SHRIK. GOPAL DEPARTMENT BY SHRI MANOJ MISHRA ORDER PER P.M. JAGTAP, A.M. THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO.4644/M/04 AND OTHER FILED BY THE REVENUE BEING ITA NO. 3786/M/04 ARE CR OSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) - X MUMBAI DTD. 26 .3.04. 2 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. 2. GROUND NO. 1 OF THE ASSESSEES APPEAL AND T HE SOLITARY GROUND RAISED IN THE REVENUES APPEAL RELATE TO THE COMMON ISSUE OF ADDI TION OF ` 30,95,724/- MADE BY THE A.O. ON ACCOUNT OF ALLEGED BOGUS PURCHASES OF CLOTH AND T-SHIRTS WHICH STANDS SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF ` 15,95,724/-. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF TRADING IN WHISKY AND BEER AS DISTRIBUTOR OF M/S SH AH WALLACE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 22.12.99 DECLARING TOTAL INCOME OF ` 10,02,240/-. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, IT WAS NOTICED BY THE A.O. FROM THE DETAILS OF OTHER PURCHASES FURNISHED BY TH E ASSESSEE THAT PURCHASES OF CLOTH AMOUNTING TO ` 15,95,724/- AND PURCHASES OF T-SHIRTS AMOUNTING TO ` 15 LACS WERE CLAIMED TO BE MADE BY THE ASSESSEE FROM M/S RELIABL E ENTERPRISES AND M/S LAK ENTERPRISES RESPECTIVELY. IN ORDER TO VERIFY THE GE NUINENESS OF THE SAID PURCHASES, INSPECTOR WAS DEPUTED BY THE A.O. TO MAKE SPOT ENQU IRIES AT THE ADDRESSES OF THE SAID PARTIES APPEARING IN THEIR PURCHASE BILLS AND TO SE RVE SUMMONS TO THEM. AS REPORTED BY THE INSPECTOR, M/S RELIABLE ENTERPRISES WAS NOT FOU ND TO BE IN EXISTENCE AT THE ADDRESS GIVEN AND THE PERSON AVAILABLE THERE STATED THAT NO SUCH FIRM WAS EVER OPERATING FROM THE SAID ADDRESS. THE SUMMONS ISSUED TO M/S RELIABLE EN TERPRISES THEREFORE COULD NOT BE SERVED. THE PREMISES AT THE ADDRESS GIVEN IN THE CA SE OF M/S LAK ENTERPRISES WAS ALSO FOUND TO BE CLOSED AND THE SECURITY GUARD AVAILABLE THERE STATED THAT THE OWNER OF THE PREMISES VISITS THE SAID PLACE ONLY TWICE IN A MONT H. THIS ADVERSE DETAILS REPORTED BY THE INSPECTOR WERE CONFRONTED BY THE A.O. TO THE ASSESS EE AND THE ASSESSEE WAS CALLED UPON BY HIM TO PRODUCE THE CONCERNED PARTIES IN ORDER TO PROVE THE GENUINENESS OF THE PURCHASES CLAIMED TO BE MADE FROM THEM. ON 4.3.02, ONE SHRI P. RAMALINGAN CLAIMED TO BE PROPRIETOR OF M/S LAK ENTERPRISES WAS PRODUCED B Y THE ASSESSEE BEFORE THE A.O. AND HIS STATEMENT WAS RECORDED BY THE A.O. U/S 131. ON ANALYSIS OF THE SAID STATEMENT, THE A.O. RECORDED THE FOLLOWING OBSERVATIONS: 1. IN HIS STATEMENT HE STATED THAT HIS OFFICE ADDRE SS IS OF TIRPUR WHEREAS ADDRESS GIVEN ON THE BILLS B-1/203 PARIJAT, VASANT VIHAR, THANE. 3 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. 2. HE FURTHER STATED THAT HE HAS STATED THAT HE IS A MANUFACTURER ONLY TO CREATING IMPRESSION. 3. HE HAS STATED HE HAS SOLD THE GOODS AT TIRPUR W HEREAS THE BILLS IN THE NAME OF ASSESSEE ARE FROM THANE ADDRESS AND THERE IS NO ADDRESS OF TIRPUR ON THESE BILLS. 4. IN MAHARASHTRA THERE IS SALE TAX ON HOSIERY ITE MS. THE BILLS OF LAK INTERNATIONAL DO NOT SHOW ANY SALES TAX CHARGED. 5. MR RAMALINGAM STATED IN HIS STATEMENT THAT HE W ILL PRODUCE THE DETAILS OF INCOME TAX, PROFESSIONAL TAX PAID WHICH HE NEVER PR ODUCED. 6. HE IS NOT A MANUFACTURER AND HE IS NOT AWARE AB OUT THE ADDRESS M/S KAVI IMPEX SO CALLED SUPPLIER OF THE T-SHIRTS. 7. THERE IS NO INVESTMENT IN THE BUSINESS BY MR. R AMALINGAM. 8. THERE IS NO PROOF FOR THE TRANSPORTATION CHARGE S AND OCTROI PAID. 9. MR. RAMALINGAM HAS MADE A CONTRARY STATEMENT. VIDE ANSWER TO QUESTION NO. 1 HE HAS STATED THAT THE DELIVERY WAS GIVEN BY HIM WHEREAS IN ANSWER TO Q NO. 2 HE STATED DELIVERY WAS GIVEN BY KAVI IMPEX. 4. IN VIEW OF THE ABOVE OBSERVATION RECORDED BY HIM AND FOR THE OTHER REASONS GIVEN IN THE ASSESSMENT ORDER, THE A.O. HELD THAT THE PUR CHASES OF CLOTH AND T-SHIRTS CLAIMED TO BE MADE BY THE ASSESSEE FROM M/S RELIABLE ENTERPRIS ES AND M/S LAK ENTERPRISES FOR FURTHER DISTRIBUTION OF THE SAME AS GIFTS WERE NOT GENUINE AND ACCORDINGLY THE AMOUNT THEREOF TO THE TUNE OF ` 30,95,725/- WAS ADDED BY HIM TO THE TOTAL INCOME O F THE ASSESSEE. 5. THE ADDITION MADE BY THE A.O. AMOUNTING TO ` 30,95,724/- TREATING THE OTHER PURCHASES AS NOT GENUINE WAS CHALLENGED BY THE ASSE SSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A). IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT WITH A VIEW TO MAXIMIZE THE TURNOVER, THE ASSESSEE COMPANY AS A SUPER DISTRIBUTOR HAD TO ADHERE TO THE MARKETING STRATEGY OF DISTRIBUTING GIFTS AND OF FERING ATTRACTIVE SCHEMES TO THE NEXT LINKS IN THE CHAIN OF MARKETING AND DISTRIBUTION OF LIQUOR. IT WAS SUBMITTED THAT SUCH A PRACTICE IS PREVALENT IN THE MARKET AND THE PURCHAS ES OF CLOTH AND T-SHIRTS WERE MADE FOR DISTRIBUTING THE SAME AS GIFTS AS PER THE SAID PRAC TICE. IT WAS SUBMITTED THAT M/S RELIABLE ENTERPRISES AND M/S LAK ENTERPRISES WERE INTRODUCED TO THE ASSESSEE COMPANY BY THE 4 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. PRINCIPAL COMPANY FOR SUPPLY OF THE SAID ITEMS AND ACCORDINGLY PURCHASES WERE MADE FROM THE SAID PARTIES UNDER BILLS WHICH WERE DULY S ETTLED BY MAKING THE PAYMENTS. IT WAS SUBMITTED THAT THIS FACT WAS CONFIRMED BY SHRI P. R AMALINGAM, PROPRIETOR OF M/S LAK ENTERPRISES IN HIS STATEMENT RECORDED BY THE A.O. IT WAS ALSO POINTED OUT THAT IN THE SAID STATEMENT SHRI P. RAMALINGAM HAD ADMITTED IN ABSOLU TELY CLEAR AND UNAMBIGUOUS TERMS THAT HIS PROPRIETARY CONCERN M/S LAK ENTERPRISES WA S ENGAGED IN SUPPLYING SIMILAR MATERIAL AND SUCH SUPPLIES WERE MADE TO THE PRINCIP AL COMPANY AS WELL AS TO THE ASSESSEE COMPANY. IT WAS CONTENDED THAT KEEPING IN VIEW THE SAID ADMISSION OF THE SUPPLIER M/S LAK ENTERPRISES AS WELL AS THE NORMAL PRACTICE PREV AILING IN THE LIQUOR MARKETING BUSINESS TO DISTRIBUTE GIFTS IN THE FORM OF T-SHIRTS ETC., T HE EXPENDITURE INCURRED BY WAY OF PURCHASES AMOUNTING TO ` 30,95,724/- WHICH WAS ONLY TO THE EXTENT OF 0.63% OF THE TOTAL TURNOVER OF ` 48.5 9 CRORES SHOULD BE ALLOWED. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DECIDED THIS ISSUE RELATING TO THE ASSESSEE S CLAIM FOR OTHER PURCHASES IN PARA 2.5 TO 2.7 WHICH READ AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT COMPANY. THE UNCONTROVERTED FACTS OF THE CASE ARE THAT IN ITS AC COUNT, THE APPELLANT COMPANY DEBITED AN AMOUNT OF ` 30,95,724/- AS OTHER PURCHASES. ON ENQUIRY, THE APPELLANT EXPLAINED THAT IT HAS PURCHASED T-SHIRTS AND OTHER SUITINGS-SHIRTINGS FROM TWO PARTIES. IT WAS CLAIMED THAT IT HAS PURCHASED SUITINGAS-SHIR TINGS FROM M/S RELIABLE ENTERPRISES FOR TOTAL AMOUNT OF ` 15,19,724/- AND T-SHIRTS WERE PURCHASED FROM M/S LAK ENTERPRISES FOR A TOTAL CONSIDERATION OF ` 15 LACS. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER CARRIED OUT THE N ECESSARY ENQUIRIES AT THE ADDRESSES FURNISHED BY THE APPELLANT COMPANY. HOWE VER, THE ASSESSING OFFICER COULD NOT LOCATE THE PERSONS CONCERNED FROM WHOM TH E APPELLANT CLAIMED TO HAVE PURCHASED THE GIFT ITEMS. ON PERSUASION, THE APPEL LANT PRODUCED ONE MR. RAMALINGAM BEFORE THE ASSESSING OFFICER WHO HAD PAR TLY DEPOSED BEFORE THE ASSESSING OFFICER BUT, HE DID NOT FURNISH THE NECES SARY DETAILS WHICH WERE CALLED FOR. IN THE STATEMENT RECORDED BEFORE THE ASSESSING OFFI CER, SHRI RAMALINGAM HAS ADMITTED THAT HE HAS SUPPLIED THE T-SHIRTS OF ` 15 LACS TO THE APPELLANT COMPANY. BESIDES, THE ABOVE GIFTS OF ` 30,95,724/- THE APPELLANT HAS ALSO DEBITED AN AMOU NT OF ` 3,89,372/- IN ITS ACCOUNTS AS SALES PROMOTION EXPE NSES. IN OTHER WORDS, THE APPELLANT CLAIMED THAT DURING THE YEAR UNDER CONSID ERATION, IT HAS EXPENDED ` 34,85,096/- ON PRESENTATION ARTICLES. I FIND THAT IN THE STATEMENT RECORDED OF SHRI RAMA LINGAM, HE HAS ADMITTED THAT HE HAD SUPPLIED GOODS TO THE APPELLANT COMPANY BEING T-SHIRTS OF TOTAL VALUE OF ` 15 LACS. TO MY MIND, WHEN THE SUPPLIER OF THE T-S HIRTS HAS ATTENDED BEFORE THE 5 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. ASSESSING OFFICER AND CONFIRMED THE TRANSACTIONS, T HEN THE DISALLOWANCE COULD NOT BE MADE MERELY ON THE BASIS OF CERTAIN PRESUMPTIONS OR SURMISES OR DUE TO THE FACT THAT THE THIRD PART I.E. THE SUPPLIER HAS NOT PRODU CED CERTAIN DETAILS LIKE PAYMENT OF OCTROI DUTY, SALES TAX ETC. THE DETAILS OF PAYMENT OF OCTROI DUTY, SALES TAX ETC. ARE RELEVANT TO BE EXAMINED IN THE ASSESSMENT OF SHRI R AMALINGAM. HOWEVER, AS FAR AS THE AFFAIRS OF THE APPELLANT COMPANY IS CONCERNED, ONCE THE SUPPLIER OF THE GOODS HAD CONFIRMED THE TRANSACTIONS, IT HAS TO BE ACCEPTED. IT IS NOT APPELLANTS CONCERN AS TO WHETHER THE SUPPLIER OF THE PRODUCT IS ASSESSED TO TAX OR NOT, WHETHER HE HAS PAID THE OCTROI DUTY OR SALES-TAX ETC. ACCORDINGLY, THE PUR CHASES OF ` 15 LACS MADE FROM M/S LAK ENTERPRISES ARE CONSIDERED GENUINE AND THE ADDI TIONS OF THE SAME ARE DELETED. FROM THE SECOND PARTY, PURCHASES OF POLYSTERS SUIT INGS AND SHIRTINGS AMOUNTING TO ` 15,95,724/- HAD BEEN CLAIMED. IT IS RELEVANT TO M ENTION THAT DURING THE COURSE OF ASSESSMENT, AN INSPECTOR WAS DEPUTED TO MAKE THE SPOT ENQUIRY AND SERVE THE NOTICE TO M/S RELIABLE ENTERPRISES. HOWE VER, NO SUCH FIRM WAS FOUND TO BE OPERATING FROM THAT PREMISES. THE APPELLANT HAS AL SO FAILED TO PRODUCE ANY RESPONSIBLE PERSON OF M/S RELIABLE ENTERPRISE AT TH E TIME OF ASSESSMENT PROCEEDINGS. BESIDES, DURING THE YEAR UNDER CONSIDERATION, THE A PPELLANT COMPANY HAS DECLARED THE TOTAL TURNOVER OF ` 48.58 CRORES. AS PER THE APPELLANTS OWN ADMISSIO N, THE COMMISSION TO SUPER DISTRIBUTOR ON SUCH TRANSACTION S AMOUNTS TO APPROXIMATELY 3- 4%. TAKING A MODERATE COMMISSION OF 3.5% OF THE TO TAL TURNOVER OF ` 44.58 CRORES, THE TOTAL COMMISSION EARNED TO THE APPELLANT DURING THE YEAR AMOUNTED TO ` 170.03 LACS. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS CLAIMED TO HAVE DISTRIBUTED TOTAL GIFTS OF ` 34,85,096/-. THUS THE APPELLANT HAS CLAIMED THAT OUT OF THE TOTAL COMMISSION RECEIPT, IT HAS INCURRED 21 % OF SUCH COMMISSION FOR DISTRIBUTION OF GIFTS AND PRESENTATION ARTICLES. S UCH BUSINESS RESULTS ARE ABSURD AS NO BUSINESSMAN WOULD EXPEND 21% OF TOTAL EARNINGS MERE LY FOR THE PURCHASE OF GIFT ITEMS AND PRESENTATION ARTICLES. CONSIDERING SUCH FACTS IN TOTALITY, IT IS HELD THAT THE GENUINENESS OF THE OTHER PURCHASES OF ` 15,95,724/- IS NOT PROVED AND THE ADDITION OF THE SAME IS CONFIRMED. IN OTHER WORDS, OUT OF TOTA L ADDITION OF ` 30,95,724/- MADE ON THIS POINT, AN ADDITION OF ` 15,000/- IS DELETED AND BALANCE ADDITION OF ` 15,95,724/- IS CONFIRMED. THE LD. CIT(A) THUS SUSTAINED THE ADDITION OF ` 30,95,724/- MADE BY THE A.O. ON ACCOUNT OF PURCHASES OF CLOTH AND T-SHIRTS TO THE EXTENT OF ` 15,95,724/-. AGGRIEVED BY THE SAME, THE ASSESSEE AND REVENUE BOTH HAVE RAISED THIS ISSU E IN THEIR RESPECTIVE APPEALS FILED BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDE S AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE AS SESSEE HAS MAINLY REITERATED THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE T HE LD. CIT(A) ON THIS ISSUE WHERE AS THE LEARNED D.R. HAS STRONGLY RELIED ON THE ADVERSE OBSERVATIONS/FINDINGS RECORDED BY THE 6 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. A.O. IN THE ASSESSMENT ORDER WHILE DISALLOWING THE PURCHASES CLAIMED TO BE MADE BY THE ASSESSEE OF CLOTH AND T-SHIRTS TREATING THE SAME AS NOT GENUINE. IN THIS REGARD, IT IS OBSERVED THAT THE PURCHASES AMOUNTING TO ` 15,95,724/- CLAIMED TO BE MADE BY THE ASSESSEE FROM M/S RELIABLE ENTERPRISES WERE SOUGHT TO BE VERIFIED BY THE A.O. BY MAKING A DIRECT ENQUIRY FROM THE SAID PARTY. HE THEREFORE DEPUTED HIS INSPECTOR TO CONDUCT SPOT ENQUIRY AT THE ADDRESS OF THE SAID PARTY GIVEN IN T HE PURCHASE BILLS AND TO SERVE SUMMONS ON THE SAID PARTY. AS REPORTED BY THE INSPECTOR, T HE SAID PARTY, HOWEVER, WAS NOT FOUND TO BE IN EXISTENCE AT THE ADDRESS GIVEN AND THE PERSON AVAILABLE THERE REFUSED TO ACCEPT THE SUMMONS ISSUED TO M/S RELIABLE ENTERPRISES STATING THAT THERE WAS NO SUCH FIRM IN EXISTENCE AT THE SAID ADDRESS FOR THE LAST 20 YEARS . WHEN THIS ADVERSE FINDINGS REPORTED BY THE INSPECTOR WERE CONFRONTED BY THE A.O. TO THE AS SESSEE AND AN OPPORTUNITY WAS GIVEN BY HIM TO IT TO PRODUCE M/S RELIABLE ENTERPRISES FO R EXAMINATION, THE ASSESSEE COULD NOT PRODUCE THE SAID PARTY IN ORDER TO SUPPORT AND SUBS TANTIATE ITS CLAIM OF GENUINENESS OF THE PURCHASES MADE FROM THE SAID PARTY. KEEPING IN VIE W OF THIS FAILURE OF THE ASSESSEE AS WELL AS FOR THE OTHER REASONS BY THE A.O. IN THE AS SESSMENT ORDER AS WELL AS BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, WE ARE OF THE VIEW TH AT THE ONUS THAT LAY ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF PURCHASES CLAIMED TO B E MADE FROM M/S RELIABLE ENTERPRISES WAS NOT SATISFACTORILY DISCHARGED BY IT AND THE DIS ALLOWANCE OF THE SAID PURCHASES MADE BY THE A.O. WAS RIGHTLY CONFIRMED BY THE LD. CIT(A) . 7. AS REGARDS THE PURCHASES OF T-SHIRTS AMOUN TING TO ` 15 LACS CLAIMED TO BE MADE BY THE ASSESSEE FROM M/S LAK ENTERPRISES, IT IS OBSERV ED THAT ALTHOUGH THE PREMISES AT THE ADDRESS GIVEN BY THE SAID PARTY WAS FOUND TO BE CLO SED, THERE WAS NOTHING TO SHOW THAT THE SAID PARTY DID NOT EXIST AT THE ADDRESS GIVEN. ON THE OTHER HAND, THE SECURITY GUARD AVAILABLE THERE INFORMED THE INSPECTOR THAT THE OWN ER OF THE PREMISES REGULARLY VISITS THERE TWICE IN A MONTH. WHEN THIS POSITION WAS CON FRONTED BY THE A.O. TO THE ASSESSEE COMPANY AND IT WAS CALLED UPON TO PRODUCE THE SAID PARTY, SHRI P. RAMALINGAM, PROPRIETOR OF M/S LAK ENTERPRISES WAS DULY PRODUCED BY THE ASSESSEE COMPANY BEFORE THE A.O. FOR EXAMINATION. THE A.O. ALSO RECORDED THE S TATEMENT OF SHRI P. RAMALINGAM ON 7 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. 4.3.02 WHEREIN HE ADMITTED THAT HIS PROPRIETARY CON CERN WAS ENGAGED IN THE BUSINESS OF SUPPLY OF T-SHIRTS AND SUCH SUPPLIES WERE MADE NOT ONLY TO THE ASSESSEE COMPANY BUT ALSO TO ITS PRINCIPAL COMPANY. HE ALSO EXPLAINED THE MO DUS OPERANDI OF PROCURING THE SAID MATERIAL AND ITS FURTHER SUPPLY TO ASSESSEE COMPANY . ALTHOUGH THE SAID DEPONENT COULD NOT PRODUCE HIS BOOKS OF ACCOUNT AND OTHER RECORD F OR VERIFICATION OF THE A.O., WE ARE OF THE VIEW THAT KEEPING IN VIEW THE DEPOSITION MADE B Y SHRI P. RAMALINGAM IN THE STATEMENT RECORDED BY THE A.O. U/S 131 AND HAVING R EGARD TO THE DOCUMENTARY EVIDENCE PLACED BY THE ASSESSEE IN THE FORM OF BILLS ETC., T HE ONUS THAT LAY ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF PURCHASES CLAIMED TO B E MADE FROM M/S LAK ENTERPRISES WAS DULY DISCHARGED AND THE LD. CIT(A) WAS FULLY JUSTIF IED IN DELETING THE DISALLOWANCE OF THE SAID PURCHASES MADE BY THE A.O. WE, THEREFORE, UPH OLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE APPEAL OF THE REVENUE AS WELL AS GROUND NO. 1 OF ASSESSEES APPEAL. 8. THE ISSUE RAISED IN GROUND NO. 2 OF THE ASS ESSEES APPEAL RELATES TO THE ADDITION OF ` 56,56,290/- MADE BY THE A.O. AND CONFIRMED BY THE L D. CIT(A) ON ACCOUNT OF SUNDRY LIABILITY. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE SUNDRY CREDITORS SHOWN BY THE ASSESSEE COMPANY IN I TS BALANCE SHEET INCLUDED SUNDRY LIABILITY OF ` 20,06,290/-. WHEN THE ASSESSEE WAS CALLED UPON BY THE A.O. TO EXPLAIN THE SAID LIABILITY, IT WAS SUBMITTED ON BEHALF OF THE F ORMER THAT A TOTAL LIABILITY OF ` 56,56,290/- WAS TRANSFERRED BY PASSING A JOURNAL ENTRY ON 1.4.9 8 FROM M/S AVADH LIQUOR, A PROPRIETARY CONCERN OF ONE OF ITS DIRECTORS. IT WA S SUBMITTED THAT M/S AVADH LIQUOR SUBSEQUENTLY SUPPLIED GIFT ITEMS OF ` 36.50 LACS TO THE ASSESSEE FOR DISTRIBUTION ON TH EIR BEHALF AND THE SAID AMOUNT WAS ADJUSTED AGAINST THE LIABILITY OF ` 56,56,290/- LEAVING BALANCE OF ` 20,06,290/-. IT WAS SUBMITTED THAT THE SAID AMOUNT WAS FINALLY WRITTEN BACK IN THE SUBSEQUENT YEAR AND THE INCOME TO THAT EXTEN T WAS OFFERED TO TAX IN THAT YEAR. THIS 8 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. EXPLANATION OF THE ASSESSEE, HOWEVER, WAS NOT FOUND ACCEPTABLE BY THE A.O. AND HE ADDED THE ENTIRE AMOUNT OF LIABILITY TO THE TOTAL INCOME OF THE ASSESSEE FOR THE FOLLOWING REASONS: A) THE LIABILITY SHOWN BY APPELLANT IS NOT A GENUIN E LIABILITY. B) THE LIABILITY HAS BEEN MET BY TAKING A DEBIT NO TE FROM M/S AVADH LIQUORS (THIS, THOUGH NOT CLEARLY SPELT OUT, APPEARS TO BE HAVING REFERENCE TO THE AMOUNT OF ` 36,50,000.00, RECEIVED IN THE FORM OF GIFT ITEMS T RANSFERRED BY THE SUBJECT CONCERN). C) FULL DETAILS SUCH AS THE PARTIES TO WHOM THE GI FT ARTICLES WERE DISTRIBUTED AND THE QUANTITY DISTRIBUTED TO SUCH PARTIES ETC. WAS N OT AVAILABLE ON RECORD (THIS, ONCE AGAIN APPEARS TO BE A REFERENCE TO THE AMOUNT OF ` 36,50,000.00, RECEIVED IN THE FORM OF GIFT ITEMS TRANSFERRED BY T HE SUBJECT CONCERN. D) THE SUNDRY LIABILITY OF ` . 56,56,290.00 WAS NOT SATISFACTORILY EXPLAINE. 10. WHILE CHALLENGING THE ADDITION OF ` 56,56,290/- MADE BY THE A.O. ON ACCOUNT OF SUNDRY LIABILITY, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE PRINCIPAL COMPANY HAD ASSIGNED THE BUSINESS OF SUPE R DISTRIBUTORSHIP TO IT WHICH WAS EARLIER BEING CARRIED ON BY M/S AVADH LIQUOR. IT W AS SUBMITTED THAT AT THE INSTANCE OF PRINCIPAL COMPANY, THE LIABILITY OF ` 56,56,290/- ON ACCOUNT OF VARIOUS SCHEMES OFFERED TO THE SUCCEEDING LINKS IN THE MARKETING OF LIQUOR PRODUCTS BELONGING TO M/S AVADH LIQUOR WAS TAKEN OVER BY THE ASSESSEE COMPANY BY DE BITING THE ACCOUNT OF THE SAID CONCERN AND CREDITING THE ACCOUNT OF SUNDRY LIABILI TIES. IT WAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, M/S AVADH LIQUOR SUPPLIED PRESENTATION ARTICLES WORTH ` 30.50 LACS TO THE ASSESSEE COMPANY FOR DISTRIBUTION UNDER THE VARIOUS SCHEMES AND THE SUNDRY LIABILITY OF ` 56,54,290/- THUS WAS REDUCED BY THE ASSESSEE COMPA NY BY CREDITING THE ACCOUNT OF M/S AVADH LIQUOR AND DEBITING THE ACCOUN T OF THE SUNDRY LIABILITY LEAVING THE BALANCE LIABILITY TO THE EXTENT OF ` 20,06,290/-. IT WAS CONTENDED THAT ALL THESE TRANS ACTIONS WERE ENTERED INTO THE BOOKS OF ACCOUNT BY PASSING J OURNAL ENTRIES AND SINCE THE SAID TRANSACTIONS HAD NO EFFECT ON THE INCOME OF THE ASS ESSEE, ANY ADDITION TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE AS MADE BY THE A.O. W AS NOT WARRANTED. 9 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. 11. THE LD. CIT(A) FOUND NO MERIT IN THE SUBMISSION S MADE ON BEHALF OF THE ASSESSEE COMPANY BEFORE HIM ON THIS ISSUE AND PROCEEDED TO C ONFIRM THE ADDITION OF ` 56,56,290/- MADE BY THE A.O. FOR THE FOLLOWING REASONS GIVEN IN PARA 4.5 AND 4.6 OF HIS IMPUGNED ORDER. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT COMPANY. DURING THE COURSE OF APPEAL PROCEEDINGS, VIDE THE ORDER SHEET ENTRY RECORDED ON 09.12.2003, THE APPELLANT COMPANY WAS REQUESTED TO FURNISH THE COPY OF THE AGREEMENT ENTERED IN BETWEEN THE PRINCIPAL COMPANY AND THE APPELLANT COM PANY FOR TAKING OVER THE LIABILITY OF ` 56,56,290/-. THE APPELLANT WAS ALSO REQUESTED TO SUPPLY THE COPY OF THE TERMINATION AGREEMENT, ENTERED INTO BY THE PRINCIPA L I.E. M/S SHAW WALLACE AND M/S AVADH LIQUORS. HOWEVER, THE APPELLANT EXPRESSED IT S INABILITY TO PRODUCE ANY OF THE AGREEMENT. IN OUR WORDS, THERE IS NO AGREEMENT TO EXPLAIN THE TRANSACTION OF TAKING OVER THE LIABILITY OF ` 56,56,290/- BY THE APPELLANT COMPANY. THERE IS NEI THER ANY TERMINATION AGREEMENT IN BETWEEN THE PRINCIPAL COMP ANY AND M/S AVADH LIQUOR NOR THERE IS ANY AGREEMENT IN BETWEEN M/S AVADH LIQUOR AND APPELLANT FOR TAKING OVER THE LIABILITY OF ` 56,56,920/-. IT IS ONLY APPELLANTS CONTENTION TH AT LIABILITY OF ` 56,56,290/- WAS TRANSFERRED BY JOURNAL ENTRY FROM M /S AVADH LIQUORS ON 01.04.1998. I ALSO FIND THAT THERE IS NO DETAILS OF THE GIFT D ISTRIBUTED OF ` 36.5 LACS, AS CLAIMED BY THE APPELLANT. IT IS ALSO NOT CLEAR AS UNDER WHAT CIRCUMSTANCES, THE APPELLANT COMPANY UNDERTOOK TO DISTRIBUTE GIFTS OF ` 35.5 LACS ON BEHALF OF M/S AVADH LIQUORS, IN WHAT FORM THESE GIFTS WERE PROCUR ED AND DISTRIBUTED AND TO WHOM THE GIFTS WERE DISTRIBUTED. IT IS ALSO NOT CLEAR A S TO UNDER WHAT CIRCUMSTANCES, IN THE VERY SUBSEQUENT YEAR, THESE APPELLANT DECLARED THE BALANCE AMOUNT OF ` 20,06,920/- AS ITS INCOME AND OFFERED THE SAME TO TAX. FROM THE AFORESAID DISCUSSIONS AND IN THE ABSENCE OF ANY RELIABLE EVIDENCE, THE FACTS PRESENTED BY THE APPELLANT COMPANY COULD NOT BE RELIED UPON. THE UNCONTROVERTED FACTS REMAIN THAT DURING THE YEAR UN DER CONSIDERATION, THE APPELLANT HAD CREDITED ITS ACCOUNT BY SUNDRY LIABILITIES OF ` 56,56,290/- AND EXACT NATURE OF THIS LIABILITY HAS NOT BEEN EXPLAINED THROUGH ANY DOCUME NTARY EVIDENCE. IN VIEW OF THE ABOVE, THE ADDITION OF ` 56,56,290/- IS CONFIRMED. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SI DES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT APPEARS FROM THE ORDERS OF T HE AUTHORITIES BELOW THAT THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPECT OF S UNDRY LIABILITY HAS NOT BEEN APPRECIATED IN THE PROPER PERSPECTIVE EITHER BY THE A.O. OR BY THE LD. CIT(A). AS EXPLAINED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND REITERATE D BY THE LEARNED COUNSEL AT THE TIME OF HEARING BEFORE US, THE LIABILITY OF ` 56,56,290/- ON ACCOUNT OF VARIOUS BUSINESS PROMOTI ON 10 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. SCHEME BELONGING TO M/S AVADH LIQUOR WAS TAKEN OVER BY IT AT THE INSTANCE OF PRINCIPAL COMPANY BY DEBITING THE ACCOUNT OF M/S AVADH LIQUOR AND CREDITING THE ACCOUNT OF SUNDRY LIABILITY BY PASSING JOURNAL ENTRY ON 1.4.98 . THEREAFTER, DURING THE YEAR UNDER CONSIDERATION, M/S AVADH LIQUOR SUPPLIED GIFT ITEMS OF ` 36.50 LACS TO THE ASSESSEE COMPANY FOR FURTHER DISTRIBUTION UNDER THE VARIOUS PROMOTION SCHEMES IN DISCHARGE OF THE SAID LIABILITY WHICH WAS ACTUALLY BELONG TO THEM. THE ASSESSEE THUS REDUCED THE SUNDRY LIABILITY BY AN AMOUNT OF ` 36.5 LACS BY DEBITING THE ACCOUNT OF SUNDRY LIABIL ITY AND CREDITING THE ACCOUNT OF M/S AVADH LIQUOR. SINCE T HE SAID LIABILITY WAS ACTUALLY BELONGING TO M/S AVADH LIQUOR AND THE SAME WAS DISC HARGED BY THEM TO THE EXTENT OF ` 36.50 LACS BY SUPPLYING GIFT ITEMS TO THE ASSESSEE FOR FURTHER DISTRIBUTION UNDER THE VARIOUS PROMOTION SCHEMES, IT WAS NOT MATERIAL AS T O WHAT WAS THE QUANTITY OF GIFT ARTICLES AND TO WHOM THEY WERE DISTRIBUTED IN SO FAR AS THE CASE OF THE ASSESSEE IS CONCERNED. MOREOVER, AS RIGHTLY SUBMITTED ON BEHALF OF THE ASS ESSEE BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE US, ALL THESE TRANSACTIONS WERE ENTE RED INTO IN ITS BOOKS OF ACCOUNT BY PASSING JOURNAL ENTRIES AND THE SAME HAD NO BEARING WHATSOEVER ON THE INCOME OF THE ASSESSEE. IN ANY CASE, THE LIABILITY OF ` 56,56,290/- TRANSFERRED FROM THE BOOKS OF M/S AVADH LIQUOR TO THE BOOKS OF THE ASSESSEE COMPANY W AS SUBSEQUENTLY DISCHARGED BY M/S AVADH LIQUOR TO THE EXTENT OF ` 36.50 LACS AND THE BALANCE AMOUNT OF ` 20,06,290/- APPEARING IN THE BALANCE SHEET OF THE ASSESSEE AS O N 31.3.99 BEING AN EXISTING LIABILITY ON THAT DATE AS DULY EXPLAINED BY THE ASSESSEE, WE ARE OF THE VIEW THAT NO ADDITION ON ACCOUNT OF THE SAID LIABILITY CAN JUSTIFIABLY BE MADE. IN OUR OPINION, THE ADDITION MADE BY THE A.O. ON THIS ISSUE WAS NOT SUSTAINABLE AND THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE SAME. IN THAT VIEW OF THE MATTER, WE DELETE TH E ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE AND ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL. 13. THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 OF ITS APPEAL RELATES TO THE ADDITION OF ` 5,60,000/- MADE BY THE A.O. AND CONFIRMED BY THE L D. CIT(A) ON ACCOUNT OF LOAN TAKEN FROM MRS. GHOSH AND INTEREST CLAIMED TO BE PAID THEREON. 11 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. 14. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE COULD NOT FURNISH CONFIRMATION FROM MRS. S. GHOSH FOR THE LOAN OF ` 5 LACS SHOWN TO HAVE BEEN TAKEN FROM HER. IN THE ABSENCE OF SUCH LOAN CONFIRMATION, THE A.O. HELD THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH THE IDENTITY OF T HE CREDITOR AS WELL AS HER CAPACITY TO GIVE LOAN OF ` 5 LACS TO THE ASSESSEE. ACCORDINGLY, THE LOAN AMO UNT OF ` 5 LACS CLAIMED TO BE RECEIVED BY THE ASSESSEE FROM MRS. S. GHOSH WAS ADD ED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 TREATING THE SAME AS UNEXPLAINED CA SH CREDIT. THE INTEREST PAID ON THE SAID LOAN AMOUNTING TO ` 60,000/- WAS ALSO DISALLOWED BY HIM. DURING THE CO URSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE, INTER ALIA, THAT LOAN CONFIRMATION OF MRS. S. GHOSH WAS DULY FI LED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE A.O. ON EXAMINATION OF THE RELEVANT ASSESSMENT RECORD, THE LD. CIT(A), HOWEVER, FOUND THAT THERE WAS NO SUCH LOAN CONFIRMATION FILED BY THE ASSESSEE BEFORE THE A.O. AT THE TIME OF ASSESSMENT. HE ALSO FOUND THAT THERE WAS NO APPLICATION FILED BY THE ASSESSEE BEFORE HIM SEEKING ADMISSION OF THE LOAN CONFIRMATION OF MRS. S. GHOSH AS ADDITIONAL EVIDENCE U/R 46A OF THE INCOME TAX RULES, 1962. HE, THEREFORE, CONFIRMED THE ADDITION OF ` 5,60,000/- MADE BY THE A.O. ON THIS ISSUE. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH, THE LD. COUNSEL FOR T HE ASSESSEE HAS MADE AN ATTEMPT TO POINT OUT THAT THE LOAN AMOUNT OF ` 5 LACS WAS BORROWED BY THE ASSESSEE FROM MRS. S. GHOSH BY A/C PAYEE CHEQUE AND EVEN INTEREST THEREON WAS PAID TO HER BY A/C PAYEE CHEQUE AFTER DEDUCTING THE TAX AT SOURCE, THE FACT REMAINS TO BE SEEN IS THAT THE LOAN CONFIRMATION OF MRS. S. GHOSH GIVING ALL THE RELEVA NT DETAILS WAS NOT FURNISHED BY THE ASSESSEE BEFORE THE A.O. IN ORDER TO ESTABLISH THE IDENTITY OF THE SAID CREDITOR AND MORE SO HER CAPACITY TO ADVANCE THE AMOUNT OF ` 5 LACS. BEFORE THE LD. CIT(A), THE ASSESSEE CLAIMED TO HAVE FILED THE LOAN CONFIRMATION OF MRS. S. GHOSH AND MADE A SUBMISSION THAT THE SAME WAS FILED BEFORE THE A.O. DURING THE COURS E OF ASSESSMENT PROCEEDINGS. AS FOUND BY THE LD. CIT(A) ON VERIFICATION OF THE ASSE SSMENT RECORD, THERE WAS, HOWEVER, NO 12 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. SUCH CONFIRMATION FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO DID NOT FILE ANY APPLICATION FOR ADMI SSION OF THE SAID CONFIRMATION AS ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A) U/R 46A O F THE INCOME TAX RULES, 1962. EVEN BEFORE US, NO APPLICATION HAS BEEN FILED BY THE ASS ESSEE FOR ADMISSION OF THE SAID CONFIRMATION AS ADDITIONAL EVIDENCE. WE, THEREFORE , FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMIN G THE ADDITION MADE BY THE A.O. IN RESPECT OF LOAN CLAIMED TO HAVE BEEN TAKEN BY THE A SSESSEE FROM MRS. S. GHOSH SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS THAT LAY ON IT IN TERMS OF SECTION 68 TO ESTABLISH THE IDENTITY OF THE CONCERNED CREDITOR AS WELL AS H ER CAPACITY TO ADVANCE THE AMOUNT IN QUESTION TO THE ASSESSEE. GROUND NO. 3 OF THE ASSE SSEES APPEAL IS ACCORDINGLY DISMISSED. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DIS MISSED WHEREAS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2010. SD/- SD/- (ASHA VIJAYARAGHAVAN) ( P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 30 TH NOVEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) X - MUMBAI 4. THE CIT- M.C. X, MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 13 ITA 4644/M/04, 3786/M/04, M/S GOLDEN CELLAR P. LT D. ` DATE INITIALS 1. DRAFT DICTATED 26.11.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 29.11.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.