GOVIND BHILU RATHOD, VASAI V. ITO WD 4(1), THANE

ITA 439/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2453 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 29-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Borrowed satisfaction
• Section: 44AD; 69C; 40A(3); 143(3); 133(6); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI BEFORE SHRI RAJENDRA , AM AND SHRI PAWAN SINGH, JM ./ I.T.A. NO 439/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) SHRI GOVIND BHILU RATHOD , C-301, EVEREST TOWER, VASANT NAGRI, SECTOR- 8 VASAI ROAD(E), 401208 / VS. ITO WARD (4) (1) THANE. ./ ./PAN/GIR NO. AEIPR7254M ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI BHUPENDRA SHAH / RESPONDENT BY : SHRI ARVIND KUMAR / DATE OF HEARING : 10/10/2016 / DATE OF PRONOUNCEMENT : 14/10/2016 / O R D E R PER PAWAN SINGH, J. M.: 1. THE PRESENT APPEAL UNDER SECTION 253 OF INCOME TAX ACT (ACT) IS DIRECTED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS) 3, THANE, DATED 05/11/2015. THE ASSESSEE HAS RAISED AS MANY AS 8 GROUNDS OF APP EAL. HOWEVER, AS PER OUR CONSIDERED OPINION THERE IS ONLY THREE EFFECTIVE GROUNDS OF AP PEAL, THE REST OF THE GROUNDS ARE ARGUMENTATIVE IN NATURE. THE GROUNDS OF APPEAL ARE SUMMARIZED AS UNDER; (I) THE LD AO ERRED IN REOPENING THE ASSESSMENT UNDER S ECTION 148 MERELY ON THE BORROWED SATISFACTION WHICH IS BAD IN LAW. (II) THE LD AO ERRED IN DISALLOWING RS. 37,59,256/- BY W AY OF ALLEGED BOGUS PURCHASES. (III) THE AO WRONGLY CHARGED INTEREST UNDER SECTION 234 A ND INITIATED PENALTY UNDER SECTION 271(1)( C) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A MANUFACTURER OF ENGINEERING GOODS IN THE NAME OF MICROTECH ENGINEERING WORKS FILED RETURN OF INCOME ON 29/09/2011 DECLARING INCOME AT RS 6,68,700/-. THE ASSESSMENT WAS REOPENE D BY AO ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT OF STATE OF MAHAR ASHTRA THAT CERTAIN PARTIES FROM WHOM ASSESSEE MADE PURCHASES ARE INVOLVED IN PROVIDING H AWALA ENTRIES NAMELY. THE SALES TAX DEPARTMENT CONDUCTED INVESTIGATION AND RECORDED STA TEMENTS OF VENDORS ON OATH, WHO HAVE ADMITTED THAT THEY HAVE PROVIDED ACCOMMODATION ENTR Y WITHOUT ACTUAL DELIVERY OF GOODS. THE DETAILS OF THE BOGUS DEALERS ARE AVAILABLE ON T HE WEBSITE OF SALES TAX DEPARTMENT. THE ITA NO.439/M/2016 AY 2011-12 GOVIND B RATHOD 2 ASSESSEE HAS ALSO MADE PURCHASES FROM SUCH BOGUS DE ALERS, THE DETAILS OF WHICH ARE AS UNDER; TOTAL RS. 37,59,256/- TO VERIFY THE PURCHASES CLAIMED BY THE ASSESSEE, T HE AO ISSUED NOTICE UNDER SECTION 133(6). NONE OF THE PARTIES FILED THEIR REPLY IN COMPLIANCE OF THE SAID NOTICE. IN ABSENCE OF REPLY FROM THOSE SUPPLIERS THE AO PRESUMED THAT ASS ESSEE HAS NOT PURCHASED ANYTHING FROM THE ABOVE SAID SUPPLIER DURING THE YEAR UNDER CONSI DERATION. THE AO MADE THE ADDITION OF THE ENTIRE AMOUNT OF SUCH PURCHASES IN THE INCOME O F ASSESSEE IN THE ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. AG GRIEVED BY THE ORDER OF AO THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), BUT THE SAME WAS DI SMISSED VIDE ORDER DATED 15 NOVEMBER 2015 IMPUGNED IN THE PRESENT APPEAL. 3. WE HAVE HEARD LD AR OF THE ASSESSEE AND THE LD DR F OR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED AR OF THE ASSESSEE ARGUED THAT AO HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE NOTICE UNDER SECTION 133(6) SENT TO THE PARTIES WERE DULY SERVED. SECTION 69C OF THE ACT HAS NO APPLICAT ION ON THE FACTS OF THE PRESENT CASE. THE AO DISALLOWED THE ENTIRE PURCHASES. THE AO FAILED T O APPRECIATE THAT THE PURCHASES WERE MADE BY ACCOUNT PAYEE CHEQUES WHICH CANNOT BE TERME D AS A BOGUS. THE AO RELIED ON THE INFORMATION OF THIRD-PARTY WHICH IS NOT ADMISSIBLE AGAINST THE ASSESSEE. THE AO HAS NOT MADE ANY INDEPENDENT ENQUIRY OR DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIER TO FIND OUT WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FRO M THEIR ACCOUNTS. THE LD AR OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF HONBL E JURISDICTIONAL HIGH COURT IN NIKUNJ EXIMP ENTERPRISES PRIVATE LIMITED REPORTED VIDE 372 ITR 619(BOM) AND VARIOUS DECISIONS OF THIS TRIBUNAL, COPIES OF WHICH ARE FILED IN THE PAPER BOOK. ON THE OTHER HAND, THE LEARNED DR FOR THE REVENUE ARGUED THAT NOTICES SENT TO ALL THOSE DEALERS/ PARTIES BUT NOBODY APPEARED NOR FILED THEIR REPLY IN RESPONSE TO THE NOTICE SER VED UPON THEM. THE ASSESSEE HAS NOT CALLED ANY OF THE PARTIES DURING THE REASSESSMENT PROCEEDI NG TO PROVE THE GENUINENESS OF PURCHASES. THE GP RATE OF THE ASSESSEE IS FLUCTUATI NG. THE GP RATE FOR THE YEAR UNDER CONSIDERATION WAS 21%. THE LEARNED DR FOR REVENUE S TRONGLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. IN THE REJOINDER ARGUMENT THE L D AR OF THE ASSESSEE ARGUED THAT GP ADDITION CANNOT BE MADE WITHOUT REJECTING BOOKS OF ACCOUNT OF THE ASSESSEE, WHICH HAS NOT BEEN DONE IN THE PRESENT CASE. SR. NO. NAME AMOUNT IN RS. 1 SHEETAL TRADING CO 10,96,875/- 2 EMCO INDUSTRIES 6,99,919/- 3 DARSHAN SALES CORPORATION 2,80,001/- 4 SUBHALAXMI SALES CORPORATION 3,53,506/- 5 AMBIKA SALES CORPORATION 9,89,291/- 6 SHANTINATH CORPORATION 3,39,664/- ITA NO.439/M/2016 AY 2011-12 GOVIND B RATHOD 3 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD REPRESENTATIVE OF THE PARTIES AND FURTHER PERUSED THE ORDERS OF AUTHORITIES BELOW. THE PERUSA L OF ASSESSMENT ORDER REVEALS THAT AO HAS NOT MADE ANY INDEPENDENT ENQUIRY EXCEPT ISSUING NOTICE TO THE DEALER/ SUPPLIER UNDER SECTION 133(6) OF THE ACT. IN ABSENCE OF REPLY FROM THE ALLEGED SUPPLIER THE AO PRESUMED THAT ASSESSEE HAS NOT PURCHASED ANYTHING FROM THE S AID SUPPLIER. THE ENTIRE ADDITION MADE BY ASSESSING OFFICER IS BASED ON THE ASSUMPTION AND PRESUMPTION. THE ORDER OF AO DOES NOT REVEAL THAT COPIES OF STATEMENT RECORDED BY SALE TA X DEPARTMENT OF STATE GOVERNMENT WAS CALLED BY AO FOR HIS PERUSAL OR THE SAME WAS PROVID ED TO THE ASSESSEE. THE ACTION OF AO IS BASED ON THE INFORMATION OF THIRD-PARTY. DURING THE APPELLATE PROCEEDING, THE LEARNED CIT(A) OBSERVED THAT ASSESSEE DID NOT PRODUCED THE HAWALA DEALERS BEFORE ASSESSING OFFICER FOR CROSS VERIFICATION. THE OBSERVATION OF LEARNED CIT(A) IS CONTRARY TO THE FINDING OF ASSESSING OFFICER. THE AO HAD NOT ASKED THE ASSE SSEE TO PRODUCE THE SAID HAWALA DEALER DURING THE REASSESSMENT PROCEEDING. THE LD CIT (A) FURTHER OBSERVED THAT STATEMENT AND AFFIDAVIT FILED BY HAWALA DEALER BEFORE SALES TAX D EPARTMENT HAVE EVIDENTIARY VALUE. IN FACT SUCH EVIDENCE WAS NOT AVAILABLE BEFORE ASSESSI NG OFFICER OR BEFORE LD CIT (A). THE COPIES OF SUCH STATEMENTS OR AFFIDAVITS WERE NEVER CONFRONTED WITH THE ASSESSEE EITHER BY ASSESSING OFFICER OR BY LD CIT(A). EVEN OTHERWISE, IF IT IS CONSIDERED FOR THE SAKE OF CONSIDERATION FOR A MOMENT THAT THE STATEMENT OR TH E AFFIDAVIT FILED BEFORE THE SALE TAX DEPARTMENT HAS ANY RELEVANCE, THE ASSESSING OFFICER SHOULD HAVE CARRIED OUT INDEPENDENT ENQUIRY AND TO PROVIDE OPPORTUNITY TO THE ASSESSEE TO COUNTER THE SAME. THE COORDINATE BENCH OF THIS TRIBUNAL IN DCIT VS R AJEEV M. KALATHIL IN ITA NO.6727/MUM/2012 (AY-2009-10) DATED 20.08.2014 IN W HICH THE SIMILAR ADDITION WAS MADE ON THE BASIS OF INFORMATION AVAILABLE ON WEBSI TE OF SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, WAS DELETED BY THE TRIB UNAL, HOLDING AS UNDER:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIE R WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TA KE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FRO M THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTATION OF G OOD TO THE SITE IS ONE OF THE DECIDING FACTORS TO BE CONSIDERED FOR RESOLVING THE ISSUE. THE FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE OF WESTERN EXTRUS ION INDUSTRIES WWW.TAXGURU IN ITA/6727/MUM/2012/RGK 4 (SUPRA)IS CONCERNED, WE FIN D THAT IN THAT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEFORE US, THER E IS NOTHING, IN THE ORDER OF THE AO, ABOUT THE CASH TRAIAL. SECONDLY, PROOF OF MOVEM ENT OF GOODS IS NOT IN 9 ITA NO.5295/MUM/2013 ACIT VS. TARLA R SHAH DOUBT. THERE FORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAK EN BY THE AO. SO, CONFIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO. ITA NO.439/M/2016 AY 2011-12 GOVIND B RATHOD 4 IN GANPATRA A SANGHAVI VS ACIT IN ITA NO. 2826/M UM/2013 (AY-2009-10) DATED 05.11.2014, SIMILAR ADDITION OF RS.1,74,01,436/- W AS DELETED BY THE TRIBUNAL HOLDING AS UNDER:- 8.BE THAT AS IT MAY, ANOTHER IMPORTANT FACTOR THE BANK ACCOUNT COPIES COLLECTED BY THE ASSESSING OFFICER SHOWS THAT THE ASSESSEE HA D MADE THE A PAYMENTS TO THE ABOVE SAID PARTIES BY WAY OF ACCOUNT PAYEE CHEQUES. THUS, IT IS SEEN THAT THE TRANSACTIONS HAVE BEEN ROUTED THROUGH THE BANK ACCO UNTS. FURTHER, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS INDULGED IN ACCOUNTING OF BOGUS PURCHASES. WHEN THE ASSESSEE SUBMITTED THAT H E COULD NOT HAVE AFFECTED THE SALES WITHOUT MAKING CORRESPONDING PURCHASES, T HE AO HAS TAKEN THE VIEW THAT THE ASSESSEE COULD HAVE EFFECTED PURCHASES IN THE GREY MARKET, WHICH CONCLUSION IS, IN FACT, NOT SUPPORTED BY ANY MATERI AL. UNDER THIS IMPRESSION ONLY, THE AO HAS FURTHER EXPRESSED THE VIEW THAT TH E ASSESSEE WOULD HAVE PURCHASED THE MATERIALS BY PAYING CASH THUS VIOLATI NG THE PROVISIONS OF SEC 40A(3) OF THE ACT, WHICH IS AGAIN BASED ON ONLY SUR MISES. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT THE SAID VIEW, WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN BY THE TAX AUTHORITIES THAT THE PURCHASES AMOUNT IS LI ABLE TO BE DISALLOWED U/S40A(3) OF THE ACT ON THE SAME IMPRESSION ONLY, T HE AO HAS EXPRESSED THE VIEW IN THE REMAND REPORT THAT THE PURCHASES AMOUNT IS ALSO LIABLE TO ASSESSED U/S69C OF THE ACT AS THE SOURCE OF PURCHASES WERE N OT PROVED. AGAIN THE SAID CONCLUSION IS BASED UPON ONLY SURMISES, WHICH COULD NOT BE SUSTAINED. THUS, IT IS SEEN THAT THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE QUANTITY DETAILS OF PURCHASES AND SALES HAVE BEEN RECONCILED BY THE ASSESEE. FURTHER, VARIOUS CASE LAW RELIED UPON BY THE ASSESSEE ALSO SUPPORTS HIS CASE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS N OT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF PURCHASES. ACCORDINGLY, WE SET ASID E THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISAL LOWANCE OF PURCHASES. FURTHER IN ACIT VS. TALRA R SHAH IN ITA NO.5295/MUM /2013DATED 28.11.2014, SIMILAR ADDITION TO THE TUNE OF RS.4,98,80,892/- WAS DELETE D BY THE TRIBUNAL HOLDING AS UNDER:- 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT BEFORE US. W E FIND THAT THE AO HAS MADE THE ADDITION AS SOME OF THE SUPPLIERS OF THE ASSESS EE WERE DECLARED HAWALA DEALER BY THE SALES TAX DEPARTMENT. THIS MAY BE A GOOD REA SON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER I NVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASS ESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE. THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION MADE BY THE AO BY GOING ON T HE SUSPICION AND THE BELIEF THAT THE SUPPLIERS OF THE ASSESSEE ARE HAWALA TRADE RS. WE ALSO FIND THAT NO EFFORT HAS BEEN MADE TO VERIFY THE WORK DONE BY THE ASSESS EE FROM THE MUNICIPAL CORPORATION OF GREATER MUMBAI. WE AGREE WITH THE SU BMISSIONS OF THE LD. COUNSEL THAT IF THERE WERE NO PURCHASES, THE ASSESS EE WOULD NOT HAVE BEEN IN A POSITION TO COMPLETE THE CIVIL WORK. 8.1. ON CIVIL CONTRACT RECEIPTS OF RS. 32.05 CRORES, THE ASSESSEE HAS SHOWN GROSS PROFIT AT 14.2 % AND NET PROFIT AT 9.72%. 8.2. EVEN IF FOR THE SAKE OF ARGUMENT, THE BOOKS OF ACCO UNTS ARE REJECTED, THE PROFIT HAS TO BE COMPUTED ON THE SALES MADE BY THE ASSESSEE WW W.TAXGURU.IN 6 ITA NO. ITA NO.439/M/2016 AY 2011-12 GOVIND B RATHOD 5 2959/M/2014 U/S. 44AD OF THE ACT, THE PRESUMPTIVE P ROFIT IN CASE OF CIVIL CONTRACTORS IS 8% AND IN CASE OF A PARTNERSHIP FIRM , A FURTHER DEDUCTION IS ALLOWED IN RESPECT OF SALARY AND INTEREST PAID TO T HE PARTNERS. THE RATIO ANALYSIS OF THE PROFITABILITY IS ALSO IN FAVOUR OF THE ASSES SEE. IN OUR CONSIDERED OPINION, THE PURCHASES ARE SUPPORTED BY PROPER INVOICES DULY REF LECTED IN THE BOOKS OF ACCOUNT. THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAY EE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. TH ERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BOOK FROM THE SUPPLI ERS. THE ADDITIONS HAVE BEEN MADE MERELY ON THE REPORT OF THE SALES TAX DEPARTME NT BUT AT THE SAME TIME IT CANNOT BE 11 ITA NO.5295/MUM/2013 ACIT VS. TARLA R SHAH SAID THAT PURCHASES ARE BOGUS. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 4,98,80,892/-. SIMILARLY IN ACIT VS DEEPAK POPAT LAL GALA IN ITA NO. 5920/MUM/2013 (AY: 2010-11) DATED 27.03.2015, SIMILAR DELETION OF ADDITION TO THE TUNE OF RS.7,36,27,555/- WAS SUSTAIN BY THE TRIBUNAL OBSERVING AS UNDER:- 13. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ADDITIONS MADE IN THE CASE OF SOME OTHER ASSESSES ON IDENTICAL REASONS HAVE BE EN DELETED BY THE CO- ORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING C ASES : A) RAMESH KUMAR AND CO V/S ACIT IN ITA NO.2959/MUM/2014 (AY- 2010-11) D ATED 28.11.2014; B) DCIT V/S SHRI RAJEEV G KALATHIL IN ITA NO.6727/MUM/ 2012 (AY-2009- 10) DATED 20.8.2014; AND C) SHRI GANPATRAJ A SANGHAVI V /S ACIT IN ITA NO. 2826/MUM/2013 (AY- 2009-10) DATED 5.11.2014 IN ALL THE ABOVE SAID CASES, THE CO-ORDINATE BENCHES OF THE TRIBUNAL HAS HELD THAT T HE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF STATEMENTS GIVE N BY THE THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT, WITHOUT CONDUCTING ANY OT HER INVESTIGATION. IN THE INSTANT CASE ALSO, THE ASSESSING OFFICER HAS MADE T HE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE PARTIES BEFORE THE SALES TAX DEPARTMENT. WE NOTICE THAT THE LD.CIT(A) HAS TAKEN NOTE OF THE FAC T THAT NO SALES COULD BE EFFECTED WITHOUT PURCHASES. HE HAS FURTHER PLACED R ELIANCE ON THE DECISION RENDERED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS (163 ITR 249). HE HAS FURTHER RELIED UPON THE DECIS ION RENDERED BY THE TRIBUNAL IN THE CAE OF ITO VS. PREMANAND (2008)(25 SOT 11)(J ODH), WHEREIN IT HAS BEEN HELD THAT WHERE THE AO HAS MADE ADDITION MERELY ON THE BASIS OF OBSERVATIONS MADE BY THE SALES TAX DEPT AND HAS NOT CONDUCTED AN Y INDEPENDENT ENQUIRIES FOR MAKING THE ADDITION ESPECIALLY IN A CASE WHERE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF ITA. NO.5920/MUM/2013 AND 6203/MUM/ 2013 7 SHOWING BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING VOUCHERS FOR SALE OF GOODS, SUCH AN ADDITION COULD NOT BE SU STAINED. THE LD CIT(A) HAS ALSO APPRECIATED THE CONTENTIONS OF THE ASSESSEE TH AT HE WAS NOT PROVIDED WITH AN OPPORTUNITY TO CROSS EXAMINE THE SELLERS, WHICH IS REQUIRED TO BE GIVEN AS PER THE DECISION OF HONBLE KERALA HIGH COURT IN THE CA SE OF PONKUNNAM TRADERS (83 ITR 508 & 102 ITR 366). ACCORDINGLY, THE LD CIT (A) HAS DELETED THE IMPUGNED ADDITION. ON A CAREFUL PERUSAL OF THE DECI SION RENDERED BY LD CIT(A) WOULD SHOW THAT THE FIRST APPELLATE AUTHORITY HAS A NALYSED THE ISSUE IN ALL ANGLES AND APPLIED THE RATIO LAID DOWN BY THE HIGH COURTS AND TRIBUNALS IN DECIDING THIS ISSUE. HENCE, WE DO NOT FIND ANY REASON TO INT ERFERE WITH HIS ORDER ON THIS ISSUE. ITA NO.439/M/2016 AY 2011-12 GOVIND B RATHOD 6 FURTHER IN RAMILA R SHAH IN ITA NO. 5246/MUM/2013 (AY: 2010-11) DATED 05.03.2015, THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A) DELE TING THE ADDITION OF RS.28.08 LAKHS. IN THE CASE OF ITA NO. 5706/MUM/2013 IN PARESH GANDHI (AY: 2010-11) DATED 13.05.2015, THE ORDER OF THE CIT(A) WAS CONFIRMED BY THE TRIBUN AL DELETING THE ADDITION OF RS.1,37,65,667/- HOLDING AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD NOT DOUBTED THE GENUINENESS OF THE PURCHASE BUT HAD MADE THE DISALLOWANCE OF RS.1.37 CRORES INVOKING THE PRO VISIONS OF 69C OF THE ACT. WE FIND THAT IN SIMILAR CIRCUMSTANCES THE TRIBUNAL HAD DELETED THE ADDITION MADE BY THE AO IN THE CASES RELIED UPON BY THE AR OF THE AS SESSEE. IN THE CASE OF RAJIV G KALATHIL (SUPRA), TO WHICH ONE OF US WAS PARTY IDEN TICAL ISSUE HAS BEEN DECIDED AS UNDER :- 2.3.BEFORE US, DEPARTMENTAL REPRESENTAT IVE ARGUED THAT BOTH THE SUPPLIERS WERE NOT PRODUCED BEFORE THE AO BY THE AS SESSEE, THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE. HE RELIED UPON THE ORDER OF THE G BENCH OF MUMBAI TRIBUNAL DE LIVERED IN THE CASE OF WESTERN EXTRUSION INDUSTRIES. (ITA/6579/ MUM/2010- DATED 13.11.2013). AUTHORIZED REPRESENTATIVE (AR) CONTENDED THAT PAYME NTS MADE BY THE ASSESSEE WERE SUPPORTED BY THE BANKERS STATEMENT, THAT GOOD S RECEIVED BY THE ASSESSEE FROM THE SUPPLY WAS PART OF CLOSING STOCK, THAT THE TRANSPORTER HAD ITA/5706/MUM/2013,AY-2010-11-PG 4 ADMITTED THE TRAN SPORTATION OF GOODS TO THE SITE. HE RELIED UPON THE CASE OF BABULA BORANA (282 ITR251), WOULD NIKUNJ EXIMP ENTERPRISES (P) LTD. (216TAXMAN171) DELIVERED BY THE HONBLE BOMBAY HIGH COURT. 2.4. WE 13 ITA NO.5295/MUM/2013 ACIT VS . TARLA R SHAH HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIA L BEFORE US. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DE CLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STA RTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. B UT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLA CE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTATION OF GOOD TO T HE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE. TH E FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSE E WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE OF WESTERN EXTRUSION INDU STRIES (SUPRA)IS CONCERNED, WE FIND THAT IN THAT MATTER CASH WAS IMMEDIATELY WI THDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEFORE US, THERE IS NOTHING, IN THE ORDER OF THE AO, ABOUT THE CASH TRA IL. SECONDLY, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUBT. THEREFORE, CONSI DERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INF IRMITY AND THERE IS NOT SUFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAK EN BY THE AO. SO, CONFIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO. 5. CONSIDERING, THE VARIOUS DECISIONS OF COORDINATE BE NCH, WE ARE OF THE VIEW THAT THE FACTS OF CASE OF THE ASSESSEE ARE SIMILAR AND THE RATIO DEC IDED IN ALL THE CASES IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. THUS, WE HOLD THA T THE ADDITION MADE BY AO AND SUSTAINED BY LD CIT(A) IS LIABLE TO BE DELETED. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ACCEPTED. ITA NO.439/M/2016 AY 2011-12 GOVIND B RATHOD 7 6. AS THE ASSESSEE HAS SUCCEEDED ON THE MERITS OF THE ADDITION, THE OTHER GROUND RAISED BY THE ASSESSEE CHALLENGING THE REOPENING U/S 147/148 HAS BECOME ACADEMIC. EVEN, OTHERWISE THE AR FOR ASSESSEE HAS NOT ARGUED ANYTHING IN RESPECT OF SUCH GROUND OF APPEAL. THE GROUND RELATED WITH CHARGING OF INTEREST U/S 234 IS CONSEQ UENTIAL IN NATURE AND NEEDS NO ADJUDICATION, WHEN THE ASSESSEE SUCCEEDED ON MERIT. THE GROUNDS ARE RELATED WITH INITIATION OF PENALTY IS PREMATURE AND THE SAME IS DISMISSED. 7. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. NO ORDER AS TO COST. ORDER ANNOUNCED IN OPEN COURT ON 14 TH DAY OF OCTOBER 2 016. SD/- SD/- (RAJENDRA) (PAWAN SINGH) ' / ACCOUNTANT MEMBER # $ ' / JUDICIAL MEMBER MUMBAI; $ DATED : 14.10.2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' ( ) / THE CIT(A) 4. ' / CIT - CONCERNED 5. * , * , / DR, ITAT, MUMBAI 6. +, / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.