ACIT 32(2), MUMBAI V. MANGALSINGH M RATHOD, MUMBAI

ITA 4022/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 12-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN LD
• Assessee Lawyers: RATAN KUMAR SAMAL LD
• Keywords: Bogus purchase; Unexplained cash credit
• Section: 69C; 133(6); 68

Judgement Text

ITA NO. 4022/MUM/2015 MANGALSINGH M. RATHOD ASSESSMENT YEAR 2007-08 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI SANJAY GARG, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.4022/MUM/2015 ( / ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX 32(2) PRATYAKSHKAR BHAVAN ROOM NO. 202, 2 ND FLOOR BKC BANDRA(E) MUMBAI-400 051 / VS. MANGALSINGH M.RATHOD B-406, MAYUR CHS, SODAWALA X LANE BORIVALI MUMBAI 400 092 ! ./ ./ PAN/GIR NO. AAIPR-6967-L ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# / APPELLANT BY : M.C.OMI NINGSHEN,LD.DR $%!# / RESPONDENT BY : RATAN KUMAR SAMAL, LD.AR / DATE OF HEARING : 12/06/2017 / DATE OF PRONOUNCEMENT : 14 /06/2017 2 ITA NO. 4022/MUM/2015 MANGALSINGH M. RATHOD ASSESSMENT YEAR 2007-08 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2007-08 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-44 [CIT(A)], MUMBAI DATED 10/03/2015 PRIMARILY ON THREE GROUNDS VIZ. ADDITION U/S 68, ADDITION U/S 69C FOR BOGUS PURCHASES AND ADMISSIBILITY OF EXPENDITURE U/S 37(1). THIS IS SECOND ROUND OF APPEAL. IN THE FIRST ROUND OF APPEAL, THE ASSESSEE AS WELL AS REVENUE AGGRIEVED BY THE APPELL ATE ORDER, CONTESTED THE QUANTUM ADDITIONS BEFORE TRIBUNAL VIDE ITA NOS. 3718/M/2010, 5109/M/2010 & CO.104/M/2011 ORDER DATED 16/12/2011 WHERE THE ASSESSMENT WAS SET ASIDE AND RESTORED TO FILE OF AO FOR FRESH ADJUDICATION. WITH THIS BACKGROUND, WE PROCEED FURTHER ON THE MER ITS OF THE APPEAL BY CULLING OUT RELEVANT FACTS DURING SECOND ROUND OF A PPEAL. 2. BRIEFLY STATED, THE ASSESSEE, BEING RESIDENT INDIVIDUAL ASSESSEE ENGAGED AS CIVIL CONTRACTOR UNDER PROPRIETORSHIP CONCERN NAMELY MUNDARA ENTERPRISES , WAS ASSESSEE U/S 143 READ WITH SECTION 254 ON 26/03/2013 AT RS.1,59,63,261/- AFTER CERTAIN ADDITIONS/DISALLOWAN CES AS AGAINST RETURNED INCOME OF RS.72,18,510/- FILED BY THE ASSESSEE ON 3 1/10/2007. 3. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE RECEIVED LOANS FROM SEVEN AGRICULTURISTS TOTALING R S.11.55 LACS. SINCE NO REPLY WAS RECEIVED IN RESPONSE TO NOTICE U/S 133(6) FROM THE SAID PARTY, THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FOR CONFI RMATION OF THE LOAN 3 ITA NO. 4022/MUM/2015 MANGALSINGH M. RATHOD ASSESSMENT YEAR 2007-08 TRANSACTIONS. THE ASSESSEE FAILED TO DO SO BUT SUBM ITTED COPIES OF AFFIDAVITS AND LAND RECORDS OF THE SAID PARTIES TO PROVE THE G ENUINENESS OF THE TRANSACTION. NOT CONVINCED, LD. AO TREATED THE SAME AS UNEXPLAINED CASH CREDIT U/S 68. THE SECOND ADDITION IS AGAINST BOGUS PURCHASES OF RS.50,74,962/- PURPORTED TO BE MADE BY THE ASSESSEE FROM AN ENTITY NAMELY ALOK IMPEX TO WHOM NOTICES SENT U/S 133(6) WERE RETURNED BACK UN-SERVED. THE ASSESSEE COULD NOT PRODUCE THE SAID PARTY AND ALSO THE REQUISITE STOCK INFORMATION, COPY OF INVOICES, DELI VERY CHALLANS, BANK STATEMENTS ETC. WHICH LED THE AO TO TREAT THE SAID PURCHASES AS BOGUS AND THEREFORE ADDED U/S 69C. THE THIRD ADDITION WAS REL ATED WITH PAYMENT OF RS.25,14,789/- MADE TO A SUB-CONTRACTOR NAMELY SUNIL GUPTA SINCE LD. AO FOUND DISCREPANCIES IN THE DOCUMENTS SUBMITTED BY T HE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS VIDE IMPUGNED ORDER DATED 10/03/2015 WHERE LD. CIT(A) AF TER APPRECIATING THE LOAN CONFIRMATIONS, LEDGER EXTRACTS, AND LAND RECOR DS CONFIRMED ADDITION OF RS.2.30 LACS WITH RESPECT TO TWO PARTIES AND DELETE D THE BALANCE ADDITION OF RS.9.25 LACS WITH RESPECT TO FIVE PARTIES. THE A DDITION WITH RESPECT TO BOGUS PURCHASES WAS DELETED IN TOTAL BY RELYING UPON THE JUDGMENT RENDERED BY JURISDICTIONAL HIGH COURT IN NIKUNJ EXIMP PVT. LTD. [2013 216 TAXMAN 171]. THE ADDITION ON ACCOUNT OF SUB-CONTRACT PAYMENT WAS ALSO DELETED BY NOTICING THAT WORK DONE BY THE SUB-CONTRACTOR WAS NOT IN DISPUTE AND THE SAID PAYMENT WAS DULY REFLECTED BY THE SUB-CONTRACTOR IN HIS RETURN OF INCOME. 4 ITA NO. 4022/MUM/2015 MANGALSINGH M. RATHOD ASSESSMENT YEAR 2007-08 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. T HE LD. DEPARTMENTAL REPRESENTATIVE DREW OUR ATTENTION TO THE FACT THAT THE ASSESSEE COULD NOT PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LENDER AND THEREFORE, RIGHTLY BEEN SADDLED WITH DISALLOWANCE U /S 68. SIMILARLY, THE ASSESSEE COULD NOT SUBSTANTIATE THE DELIVERY OF MAT ERIAL IN ANY MANNER AND THEREFORE, RELIEF PROVIDED TO ASSESSEE BY LD. CIT(A ) ON ACCOUNT OF PURCHASES WAS NOT JUSTIFIED. FURTHER, DISCREPANCIES WERE NOTICED IN THE AGREEMENT MADE BY THE ASSESSEE WITH THE SUB-CONTRACTOR WHICH REVEALS THAT THE BOOKING OF IMPUGNED EXPENDITURE WAS SIMPLY AN AFTERTHOUGHT TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE. 6. PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] DREW OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER BOOK AND PLACED RELIANCE ON THE FINDINGS OF LD. CIT(A). 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED RELE VANT MATERIAL ON RECORD. SO FAR ADDITION U/S 68 IS CONCERNED, WE FIN D THAT THE ASSESSEE PRODUCED CONFIRMATION OF LOANS BY ADDUCING EVIDENCE S IN THE FORM OF AFFIDAVITS, LAND RECORDS, BILL OF EXCHANGE ETC. WHI CH WERE DULY EXAMINED IN DETAIL BY THE LD. CIT(A) WHO AFTER DUE APPLICATION OF MIND CONFIRMED ADDITION OF RS.2.30 LACS WITH RESPECT TO TWO PARTIE S AND DELETED THE BALANCE ADDITION. UPON PERUSAL OF THE DOCUMENTS, WE AGREE WITH THE STAND OF LD. CIT(A) AND DO NOT FIND ANY REASON TO INTERFE RE WITH THE SAME. SIMILARLY, REGARDING SUB-CONTRACTUAL PAYMENT OF RS.25,14,789/- MADE TO SUNIL GUPTA, WE FIND THAT THE ADDITION HAS BEEN SUSTAINED ONLY ON THE BASIS 5 ITA NO. 4022/MUM/2015 MANGALSINGH M. RATHOD ASSESSMENT YEAR 2007-08 OF DISCREPANCIES NOTICED BY LD. AO IN THE AGREEMENT . HOWEVER, THE ASSESSEE HAS MADE THE SAID PAYMENT AFTER DEDUCTION OF APPLICABLE TDS AND THIS INCOME HAS DULY BEEN REFLECTED BY THE PAYE E IN HIS RETURN OF INCOME. THE COPY OF THE WORK ORDER AND INVOICE COPY HAS BEEN PLACED ON RECORD AND THE REVENUE COULD NOT CONTROVERT THE FACTUM OF RENDERING OF ACTUAL SERVICES. THEREFORE, FINDING THE REASON OF L D. CIT(A) FAIR AND REASONABLE, WE CONFIRM THE SAME. ACCORDINGLY, REVEN UES GROUNDS OF APPEAL WITH RESPECT TO THESE TWO ADDITIONS ARE DISM ISSED. 8. HOWEVER, WITH RESPECT TO ADDITION ON ACCOUNT OF BOGUS PURCHASES, WE FIND STRENGTH IN THE ARGUMENT OF THE REVENUE THAT T HE ASSESSEE COULD NOT PROVE DELIVERY OF MATERIAL AND COULD NOT PRODUCE AN Y CONFIRMATION, STOCK REGISTER ETC. TO SUBSTANTIATE THE PURCHASES MADE FR OM ALOK IMPEX. THE COMPLETE ONUS TO SUBSTANTIATE THE PURCHASES SQUAREL Y LIED ON THE ASSESSEE, WHICH IT FAILED TO DISCHARGE. CONVERSELY, IT IS ALSO A FACT THAT THE ASSESSEE WAS A CIVIL CONTRACTOR WHICH WAS MATERIAL INTENSIVE WORK AS NOTED BY THE LD. CIT(A) AND THEREFORE, COULD NOT UNDERTAK E THE SAID WORK WITHOUT PURCHASE OF MATERIAL. THEREFORE, FINDING SUBSTANCE IN REVENUES GROUND OF APPEAL, WE CONFIRM DISALLOWANCE TO THE EXTENT OF 10 % OF IMPUGNED PURCHASES TO ACCOUNT FOR THE UNDUE PROFITS / VAT EL EMENT EMBEDDED IN THOSE TRANSACTIONS. ACCORDINGLY, ADDITION AMOUNTING TO RS.5,07,496/- IS CONFIRMED WHICH RESULTS INTO REVENUES GROUND OF AP PEAL BEING PARTLY ALLOWED. 9. IN NUTSHELL, THE REVENUES APPEAL STANDS PARTLY ALLOWED. 6 ITA NO. 4022/MUM/2015 MANGALSINGH M. RATHOD ASSESSMENT YEAR 2007-08 ORDER PRONOUNCED IN THE OPEN COURT ON 14TH JUNE, 2017. SD/- SD/- (SANJAY GARG) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14 .06.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. $(/ , / , / DR, ITAT, MUMBAI 6. 0 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI