ITO 19(3)(5), MUMBAI V. VINODKUMAR S. BHOJANIA, MUMBAI

ITA 4447/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0499 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 27-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL LD
• Assessee Lawyers: SATISH MODY LD
• Keywords: Bogus purchase; Notional interest
• Section: 143(3); 133(6); 37

Judgement Text

ITA NO. 4043 & 4447/MUM/2016 VINODKUMAR SANTLAL BHOJANIA ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 4043/MUM/2016 ( / ASSESSMENT YEAR: 2010-11) VINOD KUMAR SANTLAL BHOJANIA 302,KAMLA HUB, PLOT NO.53 NEAR COSTA COFFEE RESTAURANT, JVPD SCHEME,JUHU VILE PARLE(W), MUMBAI 49 / VS. INCOME TAX OFFICER 5(1)(1) IT MAIN OFFICE MUMBAI 400 020 ./ ./PAN/GIR NO. AAHPB-9402-A ( /APPELLANT ) : ( !' / RESPONDENT ) & ./I.T.A. NO. 4447/MUM/2016 ( / ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER 19(3)(5) 2 ND FLOOR, MATRU MANDIR TARDEO ROAD MUMBAI 400 007 / VS. VINOD KUMAR SANTLAL BHOJANIA COMPAIR EQUIPMENTS CO. 2,AMAN CHAMBERS 1 ST FLOOR,113 MAMA PARMANAND MARG MUMBAI 400 004 ./ ./PAN/GIR NO. AAHPB-9402-A ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : SATISH MODY, LD. AR REVENUE BY : RAJAT MITTAL, LD. DR / DATE OF HEARING : 25/01/2018 / DATE OF PRONOUNCEMENT : 31/01/2018 ITA NO. 4043 & 4447/MUM/2016 VINODKUMAR SANTLAL BHOJANIA ASSESSMENT YEAR 2010-11 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR [AY] 2010-11 WHICH CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-10/ITO-5(1)(1)/98/2013-14 DATED 29/03/2016. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER 5(1)(1), MUMBAI [AO] U/S 143(3) OF THE INCOME TAX ACT,1961 ON 20/03/2013. FIRST, WE TAKE UP REVENUES APPEAL ITA NO.4447/MUM/2016 WHEREIN FOLLOWING EFFECTIVE GROUND S HAVE BEEN RAISED:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE COMMISSION PAI D TO ASSESSEE RELATIVE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION TO THE EXT ENT OF ONLY 12.5% OF THE TOTAL PURCHASES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARN ED CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED 2.1 FACTS, IN BRIEF, ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING OF ENGINEERING PARTS UNDER PROPRIETORSHIP CONCERN NAMELY COMP AIR EQUIPMENT CO. WAS ASSESSED AT RS.91.49 LACS AFTER CERTAIN ADJUSTMENTS / DISALL OWANCES AS AGAINST RETURNED INCOME OF RS.20.69 LACS FILED BY THE ASSES SEE ON 30/09/2010. THE ISSUE UNDER REVENUES APPEAL IS ALLOWANCE OF CE RTAIN COMMISSION PAYMENTS AND CERTAIN ADDITION AGAINST ALLEGED BOGUS PURCHASES. 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE PAID COMMISSION OF RS.1,38,900/- TO HIS SON NAMELY RISHABH BHOJANIA WHICH WAS DISALLOWED FOR WANT OF GENUINENESS. 2.3 THE SECOND ADDITION PERTAINED TO ADDITION ON AC COUNT OF ALLEGED BOGUS PURCHASES. PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM DGIT ITA NO. 4043 & 4447/MUM/2016 VINODKUMAR SANTLAL BHOJANIA ASSESSMENT YEAR 2010-11 3 (INVESTIGATION), IT WAS NOTED THAT THE ASSESSEE STOOD BENEFICIARY OF BOGUS PURCHASE BILLS OF RS.66,57,258/- FROM AN ENTITY NAM ELY AKSHAT ENTERPRISES. NOTICE ISSUED U/S 133(6) TO THE SAID PARTY TO CONFI RM THE TRANSACTIONS RETURNED BACK UNDELIVERED BY THE POSTA L AUTHORITIES WITH THE REMARKS LEFT. THE ASSESSEE EXPRESSED INABILITY TO PRODUCE THE SAI D PARTY WHICH LED THE LD. AO TO TREAT THE ENTIRE PURCHASES AS NON-GENUINE AND CONSEQUENTLY, THE SAME WAS ADDED TO THE INCOME OF T HE ASSESSEE. 3. THE ASSESSEE CONTESTED BOTH THE ADDITIONS WITH P ARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 29/03/2 016 WHERE THE DISALLOWANCE OF COMMISSION WAS DELETED BY SINCE THE ASSESSEE PRODUCED LEDGER EXTRACTS, CONFIRMATION AND TDS DETAILS ETC. THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES WAS RESTRICTED TO 12.5% BY LD. CIT(A) BY FOLLOWING THE STAND OF ITS PREDECESSOR IN ASSESSEES OWN CASE FOR AY 2009-10. AGGRIEVED, THE REVENUE IS IN FURTHE R APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] PLACE R ELIANCE ON THE STAND OF LD. AO WHEREAS LD. AUTHORISED REPRESENTATI VE [AR] FOR ASSESSEE CONTENDED THAT THE STAND OF LD. CIT(A) WAS QUITE FAIR AND REASONABLE UPON FACTUAL MATRIX. 5. UPON PERUSAL, WE CONCUR WITH THE STAND OF LD. AR THAT THE ORDER OF LD. FIRST APPELLATE AUTHORITY REQUIRE NO INTERFEREN CE ON OUR PART SINCE THE COMMISSION PAID TO THE SON WAS DULY BACKED BY CONFIRMATION, TDS DETAILS ETC. FURTHER, THE ESTIMATION OF 12.5% AGAINST ALLEGED BOGUS PURCHASES WAS QUITE FAIR & REASONABLE SINCE ADDITIONS COULD N OT BE MADE MERELY ON CONJECTURES OR SURMISES PARTICULARLY WHEN THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS. FU RTHER, THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY T HE REVENUE AND THE ITA NO. 4043 & 4447/MUM/2016 VINODKUMAR SANTLAL BHOJANIA ASSESSMENT YEAR 2010-11 4 ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES WHICH CO ULD NOT BE CARRIED OUT WITHOUT PURCHASE OF MATERIAL. THEREFORE, THE AD DITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VALUE ADDED TAX [VAT] AGAINST SUCH BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE. HENCE, ON FACTUAL MATRIX, WE SEE NO REASON TO INTERFERE WITH THE STAND OF LD. CIT(A) AND THEREFOR E, DISMISS REVENUES APPEAL. ASSESSEES APPEAL ITA NO. 4043/MUM/2016 6. THE SOLE ISSUE INVOLVED IN ASSESSEES APPEAL IS ADDITION OF RS.2 LACS ON ACCOUNT OF PERSONAL EXPENSES AND AN ADDITION OF RS.0.80 LACS ON ACCOUNT OF NOTIONAL INTEREST. 7. THE ADDITION OF RS.2 LACS COMPRISED OF RS.1.80 L ACS, BEING MAINTENANCE OF RESIDENTIAL FLAT SITUATED AT RAHEJA ORCHID AND RS.0.20 LACS ON ACCOUNT OF CERTAIN ADVANCE TO AN ENTITY NAM ELY ORBITZ LEISURE TRAVELS AND THE SAME HAS BEEN DISALLOWED U/S 37. THE ADDIT ION ON ACCOUNT OF NOTIONAL INTEREST WAS MADE @10% SINCE AS SESSEE UTILIZED INTEREST BEARING LOANS TOWARDS GRANT OF INTEREST FR EE LOANS TO ENTITIES NAMELY AIR DRIVE EQUIPMENT CO. PVT. LTD. & MOHAN BHOJANIA AGGREGATING TO RS.8 LACS. THE SAME, UPON CONFIRMATION BY LD. CI T(A), HAVE BEEN CONTESTED BEFORE US. 8. THE LD. AR CONTENDED THAT THE SAID EXPENDITURE O F RS.2 LACS WAS NEVER CLAIMED AS EXPENDITURE AND THEREFORE, THE QUE STION OF DISALLOWANCE U/S 37 DO NOT ARISE. SIMILARLY, LD. AR CONTENDED THAT OWN CAPITAL WAS SUFFICIENT TO GRANT THE INTEREST FREE L OANS AND THEREFORE, ITA NO. 4043 & 4447/MUM/2016 VINODKUMAR SANTLAL BHOJANIA ASSESSMENT YEAR 2010-11 5 ADDITION ON ACCOUNT OF NOTIONAL INTEREST WAS NOT JU STIFIED. THE LD. DR PLACED RELIANCE ON THE STAND OF LOWER AUTHORITIES. 9. UPON PERUSAL OF PROPRIETORS CAPITAL ACCOUNT AS PLACED ON RECORD, WE FIND THAT THE ASSESSEE HAS DEBITED THE SAME, BY WAY OF TRANSFER, AN AMOUNT OF RS.1,84,425/- ON 31/03/2010 AND THE SAME REPRESENTS PAYMENTS MADE TO RAHEJA ORCHID RESIDENTS. THE CLOSING BALANCE OF THIS ACCOUNT TALLIES WITH THE SUMMARIZED CAPITAL ACCOUNT OF THE ASSESSEE AS PER BOOKS OF ACCOUNTS. THIS GIVES STRENGTH TO THE A RGUMENTS OF LD. AR THAT THE SAID EXPENSES HAVE DIRECTLY BEEN DEBITED T O THE PERSONAL ACCOUNT AND NOT CLAIMED AS EXPENDITURE AND THEREFOR E, THE QUESTION OF DISALLOWANCE OF THE SAME U/S 37 DO NOT ARISE. HENCE , WE DELETE THE SAME. FURTHER, IT IS OBSERVED THAT THE ASSESSEES O PENING AS WELL AS CLOSING CAPITAL WAS SUFFICIENT TO COVER THE INTERES T FREE LOANS OF RS.8 LACS GRANTED BY THE ASSESSEE. THE REVENUE HAS NOT ESTABL ISHED THE NEXUS OF INTEREST BEARING LOANS OBTAINED BY THE ASSESSEE VIS --VIS INTEREST FREE LOANS GRANTED BY THE ASSESSEE AND THEREFORE, DRAWIN G PRESUMPTION IN ASSESSEES FAVOUR, WE DELETE THE SAME. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOWED. CONCLUSION 10. IN NUTSHELL, REVENUES APPEAL STANDS DISMISSED WHEREAS ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018 ITA NO. 4043 & 4447/MUM/2016 VINODKUMAR SANTLAL BHOJANIA ASSESSMENT YEAR 2010-11 6 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 31.01.2018 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. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI