SAMIR H. KOTHARI, MUMBAI V. ITO 25(2)(3), MUMBAI

ITA 4568/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9856 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: M S MATHURIA
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Opportunity of being heard; Accommodation entries
• Section: 69C; 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO.4568/MUM/2016 ASSESSMENT YEAR: 2010 - 11 SHRI SAMIR H. KOTHARI, [PROP. OF SUNCHEMS], 8, MADHUSUDAN TERRACE, SIMPOLI ROAD, BORIVLI (W) MUMBAI - 400092 VS. THE INCOME TAX OFFICER, 25 (2)(3), 105/C - 11, PRATYAKSHAKARBHAVANBANDRAKURLA COMPLEX, BANDRA (E), MUMBAI - 400051. PAN NO. A ABPK6071A (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. M.S. MATHURIA , AR REVENUE BY: MR. M.C. OMI NINGSHEN , DR DATE OF HEARING: 20 /04 /2017 DATE OF PRONOUNCEMENT: 12/07/2017 ORDER PER N.K. PRADHAN, A.M THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 4 4, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - ITA NO. 4568/MUM/2016 2 1. ON THE FACTS AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.48,589/ - MADE BY THE AO U/S 69C OF THE I.T. ACT, 1961. 2. ON THE FACTS AND IN LAW, LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF TRANSPORT CHARGES AMOUNTING TO RS.24,854/ - U/S 40(A)(IA). 3. ON THE FACTS AND IN LAW, LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF SERVICE CHARGES AMOUNTING TO RS.3,82,790/ - U/S 40(A)(IA). 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) OBSERVED THAT AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MUMBAI THERE WERE SOME SUSPICIOUS PARTIES PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ANY ACTUAL BUSINESS. HE FURTHER FOUND THAT THE ASSESSEE HAD MADE PU RCHASES OF RS.48,589/ - FROM ONE SUCH BOGUS PARTY NAMELY M/S V.M. UDYOG (TIN: 27820645517V). THE AO NOTED THAT THE SALES TAX DEPARTMENT HAD CONDUCTED INDEPENDENT INQUIRIES IN EACH OF THE HAWALA PARTIES AND PROVE D THAT THE PARTIES WERE ENGAGED IN THE BUSINES S OF PROVIDING ACCOMMODATION ENTRIES ONLY. THE AO RELIED UPON THE DOCUMENTS PROVIDED BY THE SALES TAX DEPARTMENT PARTICULARLY THE DEPOSITION DATED 25.05.2010 OF SHRI HASMUKH N. SHAH (WORKING WITH MR. PARAS GANDHI), PROPRIETOR OF M/S V.M. UDYOG RECORDED IN OATH BEFORE THE ASSISTANT COMMISSIONER OF SALES TAX - 17, INVESTIGATION BRANCH MUMBAI. THE AO PROVIDED COPIES OF THE ABOVE DOCUMENTS TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ASKED THE ASSESSEE TO FILE A REPLY AS TO WHY THE BOGUS PURCHA SE SHOULD NOT BE TREATED AS HIS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. THERE WAS NO REPLY BY THE ASSESSEE BEFORE THE AO. THEREFORE, THE AO MADE AN ADDITION OF THE ABOVE SUM OF RS.48,589/ - U/S 69C OF THE ACT. ITA NO. 4568/MUM/2016 3 3.1 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE FILED BEFORE THE LD. CIT(A) A WRITTEN SUBMISSION ALONG WITH BILLS RELATING TO TRANSACTIONS WITH M/S V.M. UDYOG. AS THE SAID BILLS WERE NOT FILED BEFORE THE AO, THE LD. CIT(A) DECLINED TO CONSIDER IT FOLLOWING RULE 46A OF THE I.T. RULES 1962. THE LD. CIT(A) AGREED WITH THE FINDING OF THE AO AND DISMISS ED THE APPEAL FILED BY THE ASSESSEE. 3.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE TOTAL PURCHASES WERE OF RS.14,85,94,092/ - . THE PURCHASES FROM THE ALLEGED SUSPICIOUS SUPPLIER ARE AT RS.45,569/ - WHICH IS 0.03% OF SUCH PURCHASES. IT IS SUBMITTED BY HIM THAT THE TOTAL SALES OF RS.15,29,68,624/ - ARE FULLY ACCEPTED BY THE AO. THE AO HAS ALSO ACCEPTED THE RATE OF GROSS PROFIT AND NET PRO FIT. THEREFORE, IT IS SUBMITTED THAT THE ADDITION OF RS.48,589/ - MADE BY THE AO WITHOUT INVESTIGATION BE DELETED. 3.3 ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE ADDITION OF RS.48,589/ - MADE BY THE AO. IT IS STA TED BY HIM THAT THE ASSESSEE FAILED TO FILE A REPLY BEFORE THE AO TO EXPLAIN WHY THE BOGUS PURCHASES SHOULD NOT BE TREATED AS HIS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECO RD. IT IS A FACT THAT THE ASSE SSEE HAS PURCHASED MATERIAL WORTH RS.48,589/ - FROM M/S V.M. UDYOG WHO WAS PROVIDING ACCOMMODATION ENTRIES AS PER INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MUMBAI . HOWEVER, THE AO HAS ACCEPTED THE TOTAL SALES AND THE RATE OF GROSS PROFIT AND NET PROFIT. THEREFORE, THE AO IS DIRECTED TO ESTIMATE PROFIT @ 10% EMBEDDED ITA NO. 4568/MUM/2016 4 IN THE BOGUS PURCHASE OF RS.48,589/ - AND MAKE AN ADDITION OF RS.4,858/ - ONLY. THUS THE 1 ST GROUND OF APPEAL IS PARTLY ALLOWED. 4. WE NOW TURN TO THE 2 ND G ROUND OF APPEAL. THE AO ON A VERIFICATION OF DETAILS FOUND THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE U/S 194C ON TRANSPORTATION CHARGES PAID TO M/S JANSEWA BULK CARRIER. THEREFORE, HE DISALLOWED THE ABOVE SUM OF RS.24,854/ - U/S 40(A)(IA) . I N APPEAL THE LD. CIT(A) AGREED WITH THE AO AND DISMISS ED THE APPEAL FILED BY THE ASSESSEE. 4.1 THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT NONE OF THE GR EXCEED S TO RS.20,000/ - AND THEREFORE, THE DISALLOWANCE SHOULD NOT HAVE BEEN MADE. 4.2 THE LD. DR SUPPORTS TH E ORDER OF THE LD. CIT(A) OBSERVING THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE AMENDED PROVISION OF SECTION 194C IS APPLICABLE IN THIS CASE. 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE AO HAS S UMMARILY DISALLOWED RS.24,854/ - U/S 40(A)(IA) WITHOUT EXAMINING THE ACCOUNTS/DETAILS FILED BY THE ASSESSEE. WE FIND THAT NONE OF THE GR EXCEEDS RS.20,000/ - . AGGREGATE PAYM ENT DOES NOT EXCEED RS.50,000/ - . T HEREFORE, THE WE DELETE THE DISALLOWANCE OF RS.24,8 54/ - MADE BY THE AO U/S 40(A)(IA). 5. WE NOW COME TO THE LAST GROUND OF APP EAL. THE AO ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE OBSERVED THAT NO TDS HA D BEEN MADE U/S 194C ON THE FOLLOWING PAYMENTS MADE TOWARDS SERVICE CHARGES: ITA NO. 4568/MUM/2016 5 SR. NO. NAME OF THE PARTY AMOUNT OF SERVICE CHARGES PAID WITHOUT TDS (RS.) 1. PETROCHEM MIDDLE EAST (I) PVT. LTD. 74,227 2. ULTIMATE CHEM (I) PVT. LTD. 38,824 3. SANJAY CHEMICALS (I) PVT. LTD. 72,320 4. NOBLE RES. & TRADING INDIA PVT. LTD. 72,320 5. C.J. SHAH & CO. 26,932 6. CRESENT ORGANICS PVT. LTD. 70,592 7. B.K. SALES 27,575 TOTAL 3,82,790 AS THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON THE ABOVE SERVICE CHARGES, THE AO DISALLOWED THE ABOVE SUM OF RS.3,82,790/ - U/S 40(A)(IA). 5.1 IN APPEAL, THE LD. CIT(A) AGREED WITH THE FINDINGS OF THE AO AND DISMISS ED THE APPEAL FILED BY THE ASSESSEE. 5.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING INTER ALIA THE CONFIRMATION AND COPY OF BILLS IN RESPECT OF THE 7 PARTIES MENTIONED HERE - IN - ABOVE . 5.3 ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.3,82,790/ - MADE BY THE AO U/S 40(A)(IA) OF THE ACT. 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. WE FIND THAT THE CONFIRMATION AND COPY OF BILLS FILED BY THE ASSESSEE NEED VERIFICATION. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE MATTER OF DISALLOWANCE OF RS.3,82,7 90/ - MADE U/S 40(A)(IA) AND RESTORE THE SA ME TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER EXAMINING THE ITA NO. 4568/MUM/2016 6 CONFIRMATION AND COPY OF BILLS FILED BY THE ASSESSEE. NEEDLESS TO SAY , THE AO WOULD GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE MATTER. THE ASSESSEE IS DIRECTED TO FILE THE REQUIRE D DETAILS BEFORE THE AO. AS WE HAVE RESTORED THE ABOVE MATTER TO THE FILE OF THE AO, WE ARE NOT ADVERTING TO THE CASE LAWS RELIED ON BY BOTH THE SIDES. THUS, THE 3 RD GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 12/07/2017. SD/ - SD/ - ( D.T. GARASIA ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 12/07/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI