GHAnSHAM T. GURSAHANI, MUMBAI V. DCIT 23(2), MUMBAI

ITA 4427/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4068 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 01-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2011
• Court: TRIBUNAL
• Department Lawyers: S SENT H IL KUMARAN
• Assessee Lawyers: B N RAO
• Keywords: Bogus purchase; Unexplained expenditure; Opportunity of being heard
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO. 4427/M/2011 (ASSESSMENT YEAR: 2008 - 2009 ) SHRI GHANSHAM T. GURSAHANI, C - 602, SAGAR, SWAPNA NAGRI, MULUND (W), MUMBAI 400 026. / VS. DCIT - 23(2), C - 10, 2 ND FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI 51. ./ PAN : AABPG6912E ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI B.N. RAO / RESPONDENT BY : SHRI S. SENTHIL KUMARAN, DR / DATE OF HEARING : 01.03 .2016 / DATE OF PRONOUNCEMENT : 22 .04.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS IS THE APPEAL BY THE ASSESSEE AGAINST THE ORDER OF CIT (A) - 33 MUMBAI DATED 28. 3. 2011 FOR THE ASSESSMENT YEAR 2007 - 08. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO THE ADDITION OF RS. 36,03,196/ - U/S 69C OF THE ACT. THE GROU ND RAISED IN THIS APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) MUMBAI ERRED IN LAW IN CONFIRMING ADDITION MADE OF RS. 36 ,0 3 ,196/ - OF THE A CT IN ORDER OF ASSESSMENT PASSED WITHOUT AFFORDING REAL UNDER REASONABLE OPPO RTUNITY TO THE APPELLANT TO PROVE THE PURCHASES DEBITED TO THE PROFIT AND LOSS ACCOUNT. 2. BRIEFLY STATED RELEVANT FACTS OF THIS CASE INCLUDE THAT THE ASS ESSEE IS A PROPRIETOR OF M/S KR E ISEL P UMPS , WHICH IS ENGAGED IN THE BUS INESS OF MANUFACTURING OF PUMPS AND SPARES. DURING THE PROCEEDINGS , AO NOTICE D SHARP FALL IN THE GP FROM 20.2% ( AY 20 06 - 2 07) TO 18.7%. AO INVOKED THE PROVISIONS OF SECTION 133 (6) OF THE A CT AND EXA MINED THE PURCHASES IN THE P&L A CCOUNT. EVENTUALLY, AO MA DE ADDITION OF RS. 36 , 30 , 196/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE A CT IN THE ASSESSMENT ORDER DATED 30 TH DECEMBER 2009. AGGRIEVED WITH THE ABOVE ADDITION , ASSESSEE FILED THE APPEAL BEFORE THE CIT (A). 3. DURING THE PROCEEDINGS BEFORE THE CIT (A), ASSESSEE FILED CO NFIRMATION LETTERS SUPPORTING THE CLAIMS OF PURCHASES. WITH REGARD TO AFOREMENTIONED ADDITION MADE BY THE AO, IT IS SUBMITTED THE SAID PURCHASES WERE MADE FROM M/S. NAVKAR ENTERPRISE (RS. 10,76,541/ - ) AND M/S. MANAV IM PEX (RS 26,78,409/ - ). THE CIT (A) REMANDED THESE CONFORMATIONS TO THE AO FOR HIS REPORT. AO FURNISHED HIS REPLY DATED 28 TH FEBRUARY 2011 TO THE CIT (A). IN HIS REPORT, AO NARRATED THE NON - COOPERATIVE A TTITUDE OF THE ASSESSEE AND HIGHLIGHTED THE REPEATED A DJOURNMENTS DURING THE REMAND PROCEEDINGS. EVENTUALLY, CONSIDERING THE ABOVE RE PORT OF THE AO (SUPRA), THE CIT (A) CONCLUDED HIS PROCEEDINGS BY CONFORMING THE ADDITIONS MADE BY THE AO ON ACCO UNT OF BOGUS PURCHASES. PARA 5.4 OF THE CIT (A)S ORDER IS RELEVA NT AND THE SAME READS AS UNDER: 5.4. IN VIEW OF THIS, I UNDERSTAND THAT APPELLANT HAS BEEN PURPOSELY AVOIDING VERIFICATION FROM THE AO AND HAS CHOSEN NOT TO COOPERATE. IN VIEW OF THE FACT THAT MORE THAN SUFFICIENT TIME HAS BEEN GIVEN FROM THE DATE O F DEMANDING THE MATTER IE 29 SEPTEMBER 2010 TILL THE DATE OF REMAND IE 28 TH FEBRUARY 2011. IN VIEW OF THIS IM CONVINCED THAT APPELLANT HAS NOTHING TO CONTRADICT THE FINDINGS MADE BY THE AO DURING THE ASSESSMENT ORDER PASSED AFTER NECESSARY VERIFICATION AN D DUE ENQUIRY CONDUCTED THROUGH WARD IN SPECTOR WHICH REVEALED THAT THESE PARTIES COULD NOT BE TRACED ON THE ADDRESSES GIVEN. CONSEQUENTLY, THEN ASSESSEE WAS APPR A ISED OF THIS AND ASKED BY THE AO TO PRODUCE TH E PARTIES WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING O FFICER AND IT WAS FOUND THAT THEY ARE ONLY DUMMIES . THE ASSESSING O FFICER HAS DISCUSSED THIS ISSUE AT LE NGTH BEFORE CONCLUDING THAT THESE PARTIES HAVE BEEN UTILISED ONLY FOR CREATING BOGUS PURCHASES AS BROUGHT OUT IN PARA THREE OF THE ASSESSMENT OR DER REPRODUCED ABOVE ALREADY. HE NCE IM CONVINCED THAT APPELLANT IS PURE PURPOSELY TRYING TO AVOID THE VERIFICATION. ACCORDINGLY ADDITION MADE FO R T HE AMOUNT OF RS. 30, 63 , 196/ - UNDER THE HEAD BOGUS PURCHASE IS SUSTAINED AS SUCH. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A) , THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUND ALREADY EXTRACTED ABOVE . 5. BEFORE US , LD C OUNSEL FOR TH E ASSESSEE NARRATED THE ABOVE FACTS OF THE CASE A ND SUBMITTED THAT THE CIT (A) COMPLETED THE FIRST APPELLATE PROCEEDINGS WITHOUT RELYING ON THE PROPER REMAND REPORT OF THE AO. HE HAS NOT UTILISED THE CONFIRMATION LETTERS WHICH ARE GENUINELY GIVEN BY THE SE LLERS OF THE RAW MATERIAL. AS R AISED IN THE GROUND , PROPER 3 OPPORTUNITY WAS NOT GRANTED BY THIS CIT (A). CIT (A) DID NOT PASS A PROPER ORDER GOING INTO THE GENUINENESS OF THE PURCHASES, PHENOMENAL INCREASE IN THE GP RATES FOR THE YEAR UNDER CONSIDERATION WI TH HUG E ADDITIONS MADE BY THE AO ETC . ORDER OF THE CIT (A) CANNOT BE C ONSIDERED AS A SPEAKING ORDER AS IT IS COMPLETELY DEPENDENT ON THE ORDER OF THE AO WHICH IS CHALLENGED BY THE ASSESSEE. BRING ING OUR ATTENTION TO PAGE 194, 195 AND 196 OF THE PAPER BOOK, LD COUNSEL SUBMITTED THESE PAPERS REFLECT ON THE GP RATES AMONG THE THREE ASS ESSMENT YEARS WITH AND WITHOUT AD DITIONS MADE BY THE AO IN ASSESSMENT YEAR 2007 - 08. THE G P RATES OF 35.40% AND 40.04% WERE NEVER REPORTED BY THE ASSESSEE IN THE PAST. THE GP RATE S REVOLVE AROUND 20.29% AND 20. 25% IN THE ASSESSMENT YEAR S 2005 - 06 AND 2006 - 07. FROM THE PAPER BOOK, LD COUNSEL FOR ASSESSEE BROUGHT OUR ATTENTION TO THE COPIES OF RELEVANT INVOICES AND THE BANK EXTRACTS AND THE PAYMENTS TO SELLERS. 6. PER CONTRA , LD DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO AND THE CIT (A) AS WELL AS THE DOCUMENTS FURNISHED FOR THE FIRST TIME BEFORE THE FIRST APPELLATE AUTHORITY CIT (A) . HE ALSO RELIED ON THE OUTCOME OF THE PROCEEDINGS INVOKED BY THE AO U/S 133 ( 6) OF THE A CT. HE ALSO HIGHLIGHTED THE NON - COOPERATIVE ATTITUDE OF THE ASSESSEE DURING THE REMAND PROCEEDINGS BEFORE THE AO. 7. WE HEARD BOTH THE PARTIES ON THE ISSUE OF ADDITION U/S 69C OF THE A CT. THE CASE OF THE ASSESSEE INCL UDES , WITH THE ABOVE SAID AD DITION OF RS. 36 , 03 , 196/ - , THE GP RATE HAS GONE UP PHENOMENALLY HIGH , WHICH WAS NEVER REPORTED BY THE ASSESSEE IN THE PAST. THE CIT (A) IGNORED THIS FACT WHILE CONFIRMING THE ADDITION OF THE AO WITHOUT GIVING APPROPRIATE EXPLANATION FOR THIS HIGH GP RATES. THE SAID APPEAL DID NOT GIVE ANY FINDING OF FACT ON THE GENUINENESS OF THE CONFIRMATION LETTERS FURNISHED BY THE ASSESSEE BEFORE HIM. SHE HAS NOT COMMENTED ON THE BANKING TRANSACTIONS , UNDERPAYMENTS OF MONEY PAID BY THE ASSESSEE TO BANKS TO THE SELLERS. F URTHER , IT IS THE CASE OF THE ASSESSEE THAT THE CIT (A) DID NOT GRANT ANY FAIR AND REASONABLE OPPORTUNITY TO THE ASSESSEE BEFORE THE FIRST APPELLATE PROCEEDINGS WERE CONCLUDED. CONSIDERING THESE ASPECTS , WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) CANNOT BE CONSIDERED AS A SPEAKING ORDER AS IT DOES NOT PRODUCE SUFFICIENT LIGHT ON THE ISSUES NARRATED IN THIS PARAGRAPH ABOVE. 4 ASSESSEE HAS SOME EXPLANATION FOR H IS NON - ATTENDANCE BEFORE THE AO , DURING REMAND PROCEEDINGS , WHICH WERE COMPLETELY IGNORED BY THE AO AND THE CIT (A) . THE CONTENTS OF PARA 5.2 OF THE IMPUGNED ORDER THROW SOME LIGHT ON THE NUMBER OF SUCH ADJOURNMENTS IN THE REASONS MENTIONED BY THE ASSESSEE BEFORE THE AO DURING REMAND PROCEEDINGS. IN ALL FAIRNESS , WE ARE OF THE OPINION THAT THIS I SSUE SHOULD BE REMANDED TO THE FILE OF TH E AO WITH THE DIRECTION TO THE ASSESSING O FFICER TO COMPLETE THE PROCEEDINGS DE NOVO RESTRICTING TO THE ADDITION MADE U/S 69C OF THE A CT. IN THE SET ASIDE PROCEEDINGS, THE ASSESSING O FFICER SHALL CONSIDER A LL THE EV IDENCE FURNISHED BY THE ASSESSEE BEFORE THE CONCLUSION OF PROCEEDINGS. IT IS OUR DIRECTION TO THE ASSE SSEE ALSO TO COMPLY WITH THE NOTICES OF THE ASSESSING O FFICER AND AVOID FRIVOLOUS ADJOURNMENTS , IF ANY. AO SHOULD ALSO ENTERTAIN ANY OTHER EVIDENCE THAT M AY BE NECESSARY , IN HIS OPINION , FOR PROPER ADJUDICATION OF THIS ISSUE UNDER CONSIDERATION. HE SHALL NOT REJECT T HEM FOR ONE REASON OR OTHER. WITH THESE DIRECTIONS , WE SET ASIDE THE ISSUE RAISED IN THE GROUND TO THE FILE OF THE AO FOR FRESH EXAMINATION AND DECISION. AO SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL J USTICE. ACCORDINGLY , THE GROUND RA ISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER IS PRO NO UNCED IN THE OPEN COURT ON 22 ND APRIL, 2016. SD/ - SD/ - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 22.4 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 5 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI