KHIMJI MADEVA PATEL, MUMBAI V. ITO 24(3)(1), MUMBAI

ITA 4553/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9779 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: MADAN DEDHIA
• Keywords: Bogus purchase; Unexplained cash credit; Source of fund; Additional evidence; Permanent establishment
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.T.A. NO. 4553/MUM/2013 (ASSESSMENT YEAR: 2008 - 09 ) KHIMJI MADEVA PATEL PLOT NO. 1511, C - WING, SEJAL PARK, PRABHA APARTMNET, LINK ROAD, GOREGAON (W), MUMBAI - 400 062 VS. ITO, WARD 24(3)( 1 ), ROOM NO. 703, 7 TH FLOOR, C - 11, PRATYAKSH KAR BHAVAN, BKC, BANDRA (E), MUMBAI - 400 051 PAN/GIR NO. AADPP 8923 G ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI MAD AN DEDHIA RESPONDENT BY : SHRI T. A. KHAN DATE OF HEARING : 10.07.2017 DATE OF PRONOUNCEMENT : 23 .0 8 .2017 O R D E R PER R. C. SHARMA, A. M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER BY THE LD. CIT(A) - 34 , MUMBAI FOR THE ASSESSMEN T YEAR (A.Y.) 2008 - 09 IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE ACT. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED FOR THE FOLLO WING ADDITIONS MADE BY THE A.O AND CONFIRMED BY CIT(A). 1) ADDITION MADE TOWARDS INTEREST INCOME OF RS.2,21,436/ - 2) AD DITION MADE AS UNEXPLAINED CASH DEPOSIT U/S. 68 OF I.T. ACT OF RS.2,00,000/ - 3) ADDITION MADE TOWARDS BOGUS PURCHASES OF RS.26,80,592/ - 4) ADDITION MADE FOR DIFFERENCE OF PURCHASE RS.27,513/ - 5) TOTAL ADDITION MADE TO INCOME BY A.O. AND UPHELD BY CIT(A ) RS.31,29,541/ - 2 ITA NO. 4553/MUM/2013 (A.Y. 2008 - 09) KHIMJI MADEVA PATEL VS. ITO 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL, CARRYING BUSINESS UNDER THE NAME AND STYLE OF M/S. JYOTI WIRE AS A PROPRIETORSHIP CONCERN ENGAGED IN BUSINESS OF PROCESSIN G OF M. S. WIRE CONVERTED TO G. I. WIRE USED FOR MANUFACTURE OF STAPLE PINS ETC HAVING SALES TURNOVER OF RS.71,19,070/ - FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION I.E., A.Y.2008 - 09 . 4. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME RS.2,59,910/ - FOR A.Y. 2008 - 09 WHICH WAS PROCESSED U/S. 143(1). SUBSEQUENTLY RETURN WAS TAKEN IN SCRUTINY BY ASSESSING OFFICER. A.O. FRAMED ASSESSMENT U/S. 143(3) OF ACT DETERMINING TOTAL INCOME AT RS.33,89,450/ - MAKING ADDITION OF RS.31,29,541/ - TO INCOME OF ASSESSEE. 5. THE ADDITION ON ACCOUNT OF INTEREST INCOME OF RS.2,21,436/ - WAS MADE BY ASSESSING OFFICER ON ACCOUNT OF INTEREST INCOME FROM MANJARI HOME MAKERS PVT. LTD. AS PER ITS DETAILS . AS PER LEARNED AR, THE ASSESSEE DID NOT ACTUALLY RECEIVE THE I NTEREST AND WHICH THE ASSESSEE GENUINELY BELIEVED THAT IT WOULD NOT AT ALL RECEIVE AND THEREFORE DID NOT ACCOUNT FOR IN THE COMPUTATION OF INCOME OF THE YEAR. 6. WE HAVE HEARD RIVAL CONTENTIONS AND FOUND FROM RECORD THAT ADDITION WAS MADE BY AO ALLEGING T HE ASSESSEE HAD RECEIVED INTEREST OF RS.2,21,436/ - FROM M/S. MANJARI HOME MAKERS PVT. LTD. AS PER THE ITS DETAILS. THE ASSESSEE WAS ASKED TO FILE THE COPY OF THE TDS CERTIFICATE ISSUED BY THE ABOVE CONCERN DURING 3 ITA NO. 4553/MUM/2013 (A.Y. 2008 - 09) KHIMJI MADEVA PATEL VS. ITO THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF . HOWEVER, THE ASSESSEE FAILED TO FURNISH THE TDS CERTIFICATES BUT INSTEAD FILED THE LEDGER EXTRACT OF M/S. MANJARI DEVELOPERS. THE ASSESSING OFFICER FURTHER FOUND THAT THE ABOVE INTEREST INCOME HAD NOT BEEN OFFERED FOR TAXATION IN THE COMPUTATION OF INCOM E FILED ALONG WITH THE RETURN OF INCOME. HENCE ADDED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. NO SPECIFIC SUBMISSION WAS MADE BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN THIS REGARD BEFORE US. 7. THE CIT(A) CONFIRMED THE ADDITION BY OBSER VING THAT EVEN BEFORE HIM THE AUTHORISED REPRESENTATIVE HAD FAILED TO FURNISH THE TDS CERTIFICATE ISSUED BY M/S. MANJARI HOME MAKERS PVT. LTD., ALONG WITH COMPUTATION OF INCOME. IN THE ABSENCE OF ANY EVIDENCES TO SUBSTANTIATE THIS CLAIM, THE ACTION OF THE ASSESSING OFFICER WA S UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. 8 . AS PER LD. AR , ON WRONG INFORMATION THE A.O. HAD MADE THE ADDITION. HOWEVER, NO WHERE THE AO HAS POINTED OUT THE AMOUNT OF ADVANCE GIVEN BY ASSESSEE GIVING RISE TO INTEREST INCOME. FU RTHERMORE NO POSITIVE MATERIAL WAS BROUGHT ON RECORD BY THE AO INDICATING ACTUAL RECEIPT OF INTEREST AMOUNT. I N THE INTEREST OF JUSTICE , WE RESTORE THIS MATTER BACK TO THE FILE OF THE A.O. FOR DECIDING THE MATTER AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 9 . AN ADDITION OF RS. 2 LACS WAS MADE U/S. 68 BEING UNEXPLAINED CASH CREDIT. 1 0 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ASSESSING OFFICER NOTED IN PARA 4 OF PAGE 3 OF ASSESSMENT ORDER . 4 ITA NO. 4553/MUM/2013 (A.Y. 2008 - 09) KHIMJI MADEVA PATEL VS. ITO THE ITS DETAILS OBTAINED FROM THE SYSTEM REVEALED THAT THE ASSESSEE HAD DEPOSITED AN AMOUNT OF RS.2,00,000/ - IN ABHYUDAYA CO - OPERATIVE BANK IN CASH ON 21.09.2010. FURTHER NOTED IN PARA 4.3 SINCE THE ASSESSEE DID NOT OPT TO PUT UP ANY EXPLANATION OR DETAILS REGARDING CASH DEPOSIT IT IS PRESUMED THAT ASSESSEE HAS NOTHING TO SAY IN THIS MATTER. THEREFORE I BELIEVE THAT CASH DEPOSIT OF RS.2,00,000/ - FAL L S UNDER THE PROVISION OF SECTION 68 OF I. TAX ACT AND CALLS FOR ADDITION OF SAME U/S. 68. HENCE ENTIRE AMOUNT OF CASH DEPOSIT OF RS.2,00,000/ - IS AD DED BACK TO THE TOTAL INCOME OF ASSESSEE. 1 1 . THUS IN THE OPINION OF AO HE HAD NO OPTION BUT TO ADD BACK THE AMOUNT AS UNEXPLAINED CASH CREDIT U/S. 68 OF INCOME TAX ACT. THE CIT(A) SUSTAINED THE ADDITION FOR WANT OF CASH FLOW STATEMENT STATING ASSESSEE HAD FAILED TO DISCHARGE THE ONUS CASTED UPON HIM. 12 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AMOUNT WAS FOUND TO BE DEPOSITED IN THE BANK ACCOUNT OF 21/09/2010 WHICH FALLS IN THE F.Y.2010 - 11 RELEVANT TO THE A.Y.2011 - 12, THEREFORE, THERE IS N O REASON FOR MAKING ANY ADDITION OF THIS AMOUNT IN THE A.Y.2008 - 09 UNDER CONSIDERATION. WE DIRECT THE AO TO EXAMINE IF ANY ADDITION IS WARRANTED IN THE A.Y.2011 - 12 AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SOURCE OF FUNDS AND THE CASH FLO W STATEMENT. WE DIRECT ACCORDINGLY. 13 . AO HAS ALSO MADE ADDITION OF RS.26,80,892/ - ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSING OFFICER HAD DISCUSSED THIS ISSUE IN PARA 5 TO 5.2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAD ISSUED NOTICES U/S.133(6) TO THE FOLLOWING 4 PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES. THE LETTERS ISSUED WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. 5 ITA NO. 4553/MUM/2013 (A.Y. 2008 - 09) KHIMJI MADEVA PATEL VS. ITO S.NO. NAME OF THE PARTY PURCHASE AMOUNT (RS.) 1 M/S. MEGHNA ENTERPRISES 8,52,003/ - 2 M/S. OM SHREE ENTERPRISES 7,3 6,414/ - 3 M/S. NETRA ENTERPRISES 10,92,175/ - 4 M/S. AGGARWAL ALLIED INDUSTRIES 7,61,928/ - 14 . DURING THE COURSE OF APPELLATE PROCEEDINGS THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAD FURNISHED ADDITIONAL EVIDENCES IN THE FORM OF: I). COPIES OF INV OICES ALONGWITH LEDGER EXTRACTS OF ALL THE 4 SUPPLIERS II).COPIES OF BANK STATEMENT WITH M/S. BOMBAY MERCANTILE BANK LTD., 1 5 . THE ABOVE EVIDENCES WERE SENT TO THE ASSESSING OFFICER AND THE ISSUE WAS REMANDED TO THE AO. AFTER CONSIDERING THE REMAND REPORT , CIT(A) CONFIRMED THE ACTION OF THE AO. 16 . IT WAS ARGUED BY LEARNED AR THAT ASSESSEE HAS PURCHASED RAW MATERIAL AT REASONABLE PRICE FROM THE ABOVE PARTIES. THESE PARTIES WERE SUPPLIERS OF STEEL AND WIRE AND NOT STOCKISTS ALWAYS HAVE SAME ADDRESS YEAR AFT ER YEAR. THE ABOVE THREE SUPPLIERS WERE NOT HAVING PERMANENT PLACE OF BUSINESS. THEY KEEP CHANGING PLACE AFTER ELEVEN MONTHS LOOKING F OR CHEAP PREMISES. ALL THE PARTIES ARE REGISTERED UNDER MAHARASHTRA VAT ACT, 2002. THE ASSESSEE HAS NOT PURCHASED ANY MATE RIAL FROM THEM THEREAFTER . A GENT THROUGH WHOM THE ASSESSEE PURCHASED NEW MATERIAL HAS LEFT MUMBAI TO SETTLE IN SURAT. 6 ITA NO. 4553/MUM/2013 (A.Y. 2008 - 09) KHIMJI MADEVA PATEL VS. ITO 17 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES B ELOW. WE FOUND THAT THE AO HAS DISPUTED THE GENUINENESS OF THE SUPPLIERS AND NOT OF THE GENUINENESS OF THE PURCHASE S HAVING ACTUALLY BEEN MADE AND AO HAS ALSO ACCEPTED THE SALES OF THE GOODS SO PURCHASED. K EEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT THE ADDI TION TO THE EXTENT OF 12. 5% OF SUCH PURCHASES. WE DIRECT ACCORDINGLY. 18 . WE HAVE ALREADY DECIDED THE ISSUE OF BOGUS PURCHASES IN THE GROUND NO.3 . THEREFORE, GROUND NO.4 BECOME INFRUCTUOUS WITH RESPECT TO ADDITION OF DIFFERENCE OF PURCHASE OF RS.27,513/ - . 19 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 23 / 08 /2017 . SD/ - SD/ - ( AMARJIT SINGH ) ( R. C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI ; DATED : 23 / 08 /2017 . R OSHANI / KARUNA SR. PS 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 F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI