PRATARAM G. CHAUDHARY, MUMBAI V. ITO WD 16(3)(4), MUMBAI

ITA 3867/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100861 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Corroborative evidences; Cancellation of registration
• Section: 40A(3); 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./ I.T. A.NO. 3867 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) PRATAPRAM G CHAUDHARY, 208, 55/60, SHREE SWAMI SAMARTH, 2 ND KUMBHARWADA, MUMB A I - 400 00 4 / VS. THE INCOME TAX - 16(3)(4), 1ST FLOOR, MATRU MANDIR, MUMBAI ( / APPELLA NT ) .. ( / RESPONDENT ) ./ ./PAN. : A GSPC8984F / APPELLANT BY SHRI SANJIV M SHAH / RSPONDENT BY S HRI PREMAND J / DATE OF HEARING : 2 3 .6. 201 5 / DATE OF PRONOUNCEMENT : 26 . 8. 201 5 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 12 - 02 - 2013 PASSED BY LD CIT(A) - 27, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN HOLDING THAT THE PURCHASES MADE FROM M/S CHIRAG CORPORATION IS BOGUS IN NATURE AND CONSEQUENTLY THE CORRESPONDING PURCHASES IS ASSESSABLE AS UNEXPLAINED INVESTMENT. 2. THE FACTS R ELATING TO THE ABOVE SAID ISSUE ARE THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDING, ISSUED NOTICE U/S 133(6) OF THE ACT TO ONE OF THE SUPPLIERS NAMED M/S CHIRAG CORPORATION, IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES MADE FROM IT. HOWEVER, A PERSON NAMED GEETA JAYKANT MEHTA CLAIMED TO BE THE PROPRIETOR OF M/S CHIRAG CORPORATION ITA NO.3867/ M/ 13 2 REPLIED THAT THE BUSINESS OF M/S CHIRAG CORPORATION WAS CLOSED IN MARCH, 2006 ITSELF AND FURTHER CONFIRMED THAT SHE DID NOT CARRY ON ANY BUSINESS WITH THE ASSESSEE. IN SUPPORT OF THE LETTER, A COPY OF SALES TAX REGISTRATION CANCELLATION ORDER WAS ALSO FILED BY GEETA JAYKANT MEHTA. THE ASSESSEE CLAIMED THAT THE PAYMENTS AGAINST PURCHASES WERE MADE BY WAY OF ACCOUNT PAYEE CHEQUES AND ACCORDINGLY CONTENDED THAT THE REPL Y GIVEN BY M/S CHIRAG CORPORATION WAS NOT CORRECT. THE AO MADE ENQUIRIES WITH VARIOUS BANKS AND FOUND THAT THE CHEQUES ISSUED BY THE ASSESSEE HAVE BEEN ENCASHED BY VARIOUS OTHER CONCERNS, WHO ARE NOT CONNECTED WITH THE ASSESSEE. THE ASSESSEE FURTHER SUBM ITTED THAT THE MATERIALS PURCHASED MADE FROM M/S CHIRAG CORPORATION WAS SOLD TO M/S MURLI INDUSTRIES LTD, I.E., WITHOUT EFFECTING PURCHASES, THE ASSESSEE COULD NOT HAVE SOLD THE GOODS. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID EXPLANATIONS. ACCORDI NGLY HE DISALLOWED THE PURCHASES AMOUNT OF RS.68,03,659/ - BY HOLDING THE SAME AS NOT GENUINE. 3. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS PURCHASED MATERIALS WORTH RS.95,19,775/ - FROM M/S CHIRAG CORPORATION. THE LD CI T(A) TOOK COGNIZANCE OF THE FACT THAT THE PROPRIETOR OF THE ABOVE SAID CONCERN HAS DENIED THE TRANSACTIONS AND FURTHER THE PAYMENTS MADE BY THE ASSESSEE WERE FOUND TO HAVE BEEN ENCASHED BY SOME OTHER CONCERNS. HE ALSO NOTICED THAT THE ASSESSEE DID NOT MAK E THE PAYMENTS DURING THE YEAR UNDER CONSIDERATION AND HENCE THE ENTIRE PURCHASES WERE SHOWN AS OUTSTANDING, I.E., THE PAYMENTS WERE CLAIMED TO HAVE BEEN MADE IN THE SUCCEEDING YEAR. UNDER THESE SET OF FACTS, THE LD CIT(A) HELD AS UNDER: - (A) THE ASSESSE E HAS VIOLATED THE PROVISIONS OF SEC. 40A(3) OF THE ACT, OTHERWISE THE PAYMENTS MADE BY THE ASSESSEE COULD NOT HAVE BEEN ENCASHED BY OTHER CONCERNS. (B) SINCE THE AMOUNT DUE TO M/S CHIRAG CORPORATION WAS SHOWN AS OUTSTANDING AS AT THE YEAR END, THE ASSES SEE WOULD HAVE PURCHASED ITA NO.3867/ M/ 13 3 GOODS FROM THIRD PARTIES BY MAKING PAYMENTS. HENCE THE PAYMENTS SO MADE WOULD AMOUNT TO UNEXPLAINED INVESTMENT. (C) THE ASSESSEE HAD PRODUCED STOCK REGISTER BEFORE THE LD CIT(A). HOWEVER, THE LD CIT(A) HELD THAT, SINCE THE PURC HASES MADE FROM M/S CHIRAG CORPORATION WAS FOUND TO BE BOGUS, IT IS THE RESPONSIBILITY OF THE ASSESSEE TO SHOW AS TO FROM WHOM THE GOODS WERE PURCHASED. (D) SINCE THE ASSESSEE HAD CLAIMED TO HAVE PURCHASED GOODS WORTH RS.95,19,775/ - FROM M/S CHIRAG CORP ORATION, THE LD CIT(A) ENHANCED THE ADDITION TO THE ABOVE SAID AMOUNT AND HELD THAT THE SAME IS ASSESSABLE AS UNEXPLAINED INVESTMENT. 4. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE HAD PURCHASED FROM A PERSON NAMED SHRI CHIRAG VORA, WHO CLAIMED TO BE REP RESENTING THE CONCERN M/S CHIRAG CORPORATION. HE SUBMITTED THAT THE ASSESSEE DID NOT CHECK THE ANTECEDENTS OF THE ABOVE SAID PERSON AND BELIEVED HIM AT HIS FACE VALUE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS EARNED GROSS PROFIT @ 5.21% FROM THE IMPUGN ED TRANSACTIONS AS AGAINST THE AVERAGE G.P. RATE OF 2.16%. HE FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT HAVE SOLD GOODS TO M/S MURALI INDUSTRIES LTD WITHOUT PURCHASING THEM. ACCORDINGLY HE SUBMITTED THAT THE ENTIRE PURCHASES MADE BY THE ASSESSEE ARE GENUINE AND HENCE NO ADDITION IS CALLED FOR. IN THE ALTERNATIVE, HE SUBMITTED THAT THE ADDITION MAY BE RESTRICTED TO A REASONABLE RATE OF GROSS PROFIT. THE LD A.R PLACED RELIANCE ON THE FOLLOWING CASE LAW IN SUPPORT OF HIS CONTENTIONS: - (A) CIT VS. HAR IRAM BHAMBHANI (2015)(92 CCH 0046)(MUM) (B) CIT VS. NIKUNJ EXIMP ENTERPRISES PVT LTD (ITA NO.5604 OF 2010)(MUM) (C) SRI GANPATRAJ A SANGHAVI VS. ACIT (ITA NO.2826/MUM/2013 DATED 5.11.2014 OF MUMBAI TRIBUNAL). 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEES CLAIM OF PURCHASES MADE FROM M/S CHIRAG CORPORATION WAS FOUND TO BE BOGUS AND THE PAYMENTS MADE HAVE ALSO BEEN ENCASHED BY DIFFERENT PERSONS. THE ENTIRE PURCHASE AMOUNT WAS SHOWN AS OUTSTANDING AS AT THE YEAR END. ITA NO.3867/ M/ 13 4 HENCE THE ASSESSEE WOULD HAVE PURCHASED GOODS FROM SOME OTHER PARTY BY MAKING CASH PAYMENTS AND HENCE THE LD CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO AS UNEXPLAINED INVESTMENT. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE REC ORD. THE CONTENTION OF THE ASSESSEE IS THAT HE HAS PURCHASED GOODS THROUGH A PERSON NAMED SHRI CHIRAG VORA, WHO CLAIMED TO BE REPRESENTATIVE OF M/S CHIRAG CORPORATION. THE AO HAS ALSO NOTICED THAT THE PURCHASE BILLS HAVE BEEN SIGNED BY MR. CHIRAG VORA ON LY. HOWEVER, THE UNDISPUTED FACT REMAINS THAT THE CONCERN M/S CHIRAG CORPORATION HAS CLOSED ITS BUSINESS IN 2006 ITSELF AND THE SAME HAS ALSO BEEN CONFIRMED BY ITS PROPRIETOR WITH SUPPORTING EVIDENCES. BEFORE THE AO, THE ASSESSEE HAS CONTENDED THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. HOWEVER, THE SAID CLAIM HAS BEEN ESTABLISHED TO BE WRONG BY THE ASSESSING OFFICER. HENCE BOTH THE CLAIMS PUT FORTH BY THE ASSESSEE HAVE BEEN PROVED TO BE FALSE BY THE ASSESSING OFFICER. HENCE THE LD CIT(A ) HAS EXPRESSED THE VIEW THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 40A(3) OF THE ACT AND FURTHER EXPRESSED THE VIEW THAT THE ASSESSEE WOULD HAVE PURCHASED GOODS FROM SOME OTHER PARTY. SINCE THE PAYMENT DUE TO M/S CHIRAG CORPORATION WAS SHOWN A S OUTSTANDING AS AT THE YEAR END, THE LD CIT(A) HAS HELD THAT THE ASSESSEE WOULD HAVE PURCHASED THE GOODS BY PAYING CASH FROM THIRD PARTIES AND HENCE THE ENTIRE AMOUNT OF PURCHASES WAS HELD TO BE UNEXPLAINED INVESTMENT BY LD CIT(A). 7. WE HAVE NOTIC ED THAT THE CLAIM OF PURCHASES MADE FROM M/S CHIRAG CORPORATION COULD NOT BE PROVED TO BE GENUINE BY THE ASSESSEE. ON THE CONTRARY, THE AO HAS ESTABLISHED THE SAME TO BE BOGUS BY COLLECTING THE RELEVANT DETAILS. SIMILARLY THE CLAIM OF PAYMENTS MADE TO M/ S CHIRAG CORPORATION WERE ALSO PROVED TO BE WRONG BY THE ASSESSING OFFICER BY ESTABLISHING THAT THE PAYMENTS HAVE BEEN ENCASHED BY SOME OTHER PERSONS. THE ONLY CONTENTION OF THE ASSESSEE IS THAT THE GOODS COULD NOT ITA NO.3867/ M/ 13 5 HAVE BEEN SOLD WITHOUT PURCHASING THE SA ME AND ACCORDINGLY CONTENDED THAT THE PURCHASES WERE GENUINE. WE ARE UNABLE TO AGREE WITH THE SAID CONTENTIONS. THE SALES ONLY SHOW THAT THERE WAS CORRESPONDING PURCHASE, BUT THE SAME DOES NOT PROVE THAT THE SAID PURCHASES WERE FROM M/S CHIRAG CORPORATIO N. AS OBSERVED BY LD CIT(A), THE ONUS IS PLACED UPON THE ASSESSEE TO PROVE THE PURCHASES. IN THE INSTANT CASE, THE INITIAL EXPLANATIONS FURNISHED BY THE ASSESSEE HAVE BEEN PROVED TO BE WRONG. SUBSEQUENTLY, THE ASSESSEE COULD HAVE PRODUCED SHRI CHIRAG VO RA, WHO HAD SUPPLIED GOODS TO THE ASSESSEE, TO PROVE THE CLAIM OF PURCHASES. SIMILARLY, THE ASSESSEE COULD NOT OFFER PROPER EXPLANATIONS WITH REGARD TO THE PAYMENTS MADE AGAINST THE PURCHASES. THE ASSESSEE ALSO COULD NOT OFFER PROPER EXPLANATIONS AS TO W HY THE AMOUNT DUE AGAINST PURCHASES WAS SHOWN AS OUTSTANDING AS AT THE YEAR END. WE NOTICE THAT THE ASSESSEE HAD PURCHASED THE GOODS IN THE MONTHS OF MAY AND JUNE, 2008. HOWEVER, THE PAYMENTS HAVE BEEN MADE FROM SEPTEMBER, 2009 ONWARDS, I.E., AFTER EXPIR Y OF ABOUT ONE AND HALF YEARS. IT IS ALSO NOT SHOWN THAT THE ASSESSEE COULD AVAIL CREDIT PERIOD OF ONE AND HALF YEARS UNDER NORMAL TRADE PRACTICE. 8. HENCE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF PURCHASES C LAIMED TO HAVE BEEN MADE FROM M/S CHIRAG CORPORATION. SINCE THE ASSESSEE HAS CLAIMED TO HAVE SOLD THE GOODS AND SINCE THE AMOUNT DUE TO M/S CHIRAG CORPORATION WAS SHOWN AS OUTSTANDING AS AT THE YEAR END, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DRAWING INFERENCE THAT THE ASSESSEE COULD HAVE PURCHASED GOODS FROM THIRD PARTIES BY MAKING PAYMENT. IN THAT KIND OF SITUATION, THE PAYMENTS THAT COULD HAVE BEEN SO MADE SHOULD BE CONSIDERED AS UNEXPLAINED INVESTMENT. THE FACTS AND CIRCUMSTANCES OF T HE CASE, IN OUR VIEW, SUPPORTS THE INFERENCE SO DRAWN BY THE LD CIT(A). ITA NO.3867/ M/ 13 6 9. WE HAVE GONE THROUGH THE CASE LAW RELIED UPON BY THE LD A.R. WE HAVE NOTICED THAT THE DECISION IN THOSE CASES HAVE BEEN RENDERED ON THE BASIS OF FACTS PREVAILING IN EACH CASE. IN THE CASE OF HARIRAM BHAMBHANI (SUPRA), THE ISSUE WAS RELATED TO UNACCOUNTED SALES. HENCE IT WAS HELD THAT THE ADDITION OF GROSS PROFIT ON THE UNACCOUNTED SALES COULD BE MADE. IN THE CASE OF M/S NIKUNJ EXIMP ENTERPRISES PVT LTD (SUPRA), THE HONBLE BO MBAY HIGH COURT DECIDED IN FAVOUR OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: - FURTHER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN THE CASE OF SHRI GANPATRAJ A SANGHAVI (SUPRA), THE ASSESSEE PROVED THAT THE PAYMENTS WERE MADE TO THE CONCERNED SUPPLIERS. IN THE INSTANT CASE, THE ALLEGED SUPPLIER HAS DENIED THE TRANSACTIONS AND THE PAYMENTS WERE ALSO FO UND TO HAVE BEEN MADE TO SOME OTHER PERSONS. THUS, WE ARE OF THE VIEW THAT THE ASSESSEE COULD NOT PLACE RELIANCE ON THE ABOVE SAID CASE LAWS. 10. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION RENDERED B Y THE LD CIT(A). ACCORDINGLY, WE CONFIRM HIS ORDER ON THIS ISSUE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 26TH AUG , 2015. 26TH AUG , 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 2 6TH AUG ,2015 . ITA NO.3867/ M/ 13 7 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASST T. REGISTRAR) , /ITAT, MUMBAI