ITO 25(1)(2), MUMBAI V. AJIT RAMDAS CHAUDHARY, MUMBAI

ITA 4643/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2455 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N RAVI RAMACHANDRAN
• Assessee Lawyers: SRI K SHIVARAM
• Keywords: Accommodation entries
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI N. K. PRADHAN , AM ITA NO . 46 4 3/MUM/2012 (A.Y: 2009 - 10 ) THE INCOME TAX OFFICER 25(1)(2), ROOM NO.204, 2 ND FLOOR, BUILDING NO.C - 11, PRATYAKSHAKAR BHAVAN, BANDRA KURL A COMPLEX, BANDRA (EAST), MUMBAI 400 51 VS. SRI AJIT RAMDAS CHAUDHARY, B - 10, NEEL KAMAL, S. V. ROAD, DAHISAR (EAST), MUMBAI 400 068 PAN:AAGPC 4173N APPELLANT .. RESPONDENT APPELLANT BY .. SRI N. RAVI RAMACHANDRAN, SR. DR RESPONDENT BY .. SRI SRI K. SHIVARAM, A R DATE OF HEARING .. 13 - 10 - 2016 DATE OF PRONOUNCEMENT .. 13 - 10 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE ORDER OF THE CIT (A) - 35, MUMBAI IN APPEAL NO.CIT (A)35/ITO 25(1)(2)/IT.428/11 - 12 DATE D 26 - 04 - 2012. ASSESSMENT WAS FRAMED BY THE IT O , WARD - 25(1)(2), MUMBAI FOR ASSESSMENT YEAR 2009 - 10 VIDE HIS ORDER DATED 29 - 12 - 2011 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) . 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINS T THE ORDER OF THE CIT (A) DELETING THE ADDITION OF UN - PROVED CREDITORS APPEARING IN HIS BOOKS OF ACCOUNTS. FOR THIS, THE REVENUE HAS RAISED THE FOLLOWING GROUND: - (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.2,67,45,632/ - UNDER SECTION 68 OF I.T. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE THE CREDITORS APPEARING HIS BOOKS OF ACCOUNTS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS PROPRIETOR O F M/S. AJIT ENTERPRISES. DURING THE FINANCIAL YEAR 2008 - 09 RELEVANT TO THIS ASSESSMENT YEAR 2009 - 10, THE NET SALES OF THE YEAR WAS RS.4,21,87,209/ - AND THE CORRESPONDING PURCHASES WAS RS.3,80,50,737/ - . AS ON 31 - 03 - 2009, THE SUNDRY DEBTORS ITA NO. 46 4 3 /MUM/20 1 2 2 OUTSTANDING WAS A T RS.2,95,11,183/ - AS AGAINST OUTSTANDING SUNDRY CREDITORS AT RS.3,04,27,454/ - . THE AO DURING THE ASSESSMENT PROCEEDINGS NOTICED THAT THERE IS A DISCREPANCY IN THE ACCOUNT OF SUNDRY CREDITORS AND ACCORDING TO HIM THESE ARE NOT VERIFIABLE IN VIEW OF THE FAC T THAT THE NOTICES ISSUED U/S 133(6) OF THE ACT WERE EITHER NOT SERVED OR REPLY NOT RECEIVED BACK FROM THE FOLLOWING PARTIES: - SR. NO. NAME OF PARTY AS PER ASSESSEE AS PER REPLY TO TO NOTICE U/S 133(6) DIFFERENCE 1. ROHAN ENTERPRISES 27,52,153 REP LY NOT RECEIVED 27,52,153 2. A TO Z DIGITAL PRINTS 2,22,390 REPLY NOT RECEIVED 2,22,390 3. CROWN SALES CORPORATION 1,53,25,040 REPLY NOT RECEIVED 1,53,25,040 4. VIN INTERNATIONAL 6,53,435 6,44,999 8,436 5. V3 ENTERPRISES 84,37,613 LEFT 84,37,613 TOTAL 2,67,45,632 ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE COULD NOT PROVE THESE SUNDRY CREDITORS WITH DOCUMENTARY EVIDENCES AND MOREOVER, IN REGARD TO THE S UPPLIER NAMELY V3 ENTERPRISES IS A HAWALA PARTY PROVI DING ACCOMMODATION ENTRIES IN VIEW OF INFORMATION AVAILABLE ON W EB S ITE OF SALES TAX DEPARTMENT. ACCORDINGLY, HE ADDED THE SUNDRY CREDITORS AS BOGUS/UN - PROVED AMOUNTING TO RS.2,67,45,632/ - . AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). 4. T HE CIT (A) DELETED THE ADDITION BY OBSERVING IN PARA 3 OF HIS APPELLATE ORDER AS UNDER: - 3. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. IT IS APPARENT THAT THE ASSESSING OFFICER HAS CONSIDERED THE NE T PROFIT FROM THE TRADING ACTIVITY OF THE APPELLANT IN ARRIVING AT THE TOTAL INCOME, THEREBY ACCEPTING THE PURCHASE, SALES AND THE RESULTANT PROFIT. FURTHER, THE APPELLANT HAS PRODUCED DOCUMENTARY EVIDENCE IN THE FORM OF LEDGER ACCOUNTS AND CONFIRMATIONS IN RESPECT OF ALL BUT ONE CREDITOR. THESE WERE FILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER PRIOR TO HIS PASSING THE ORDER, BUT THE SAME WERE NOT CONSIDERED AND NO REASONS GIVEN FOR NOT TAKING COGNIZANCE THEREOF. THE ASSESSING OFFICER HAS POINTED OUT THAT AS THE APPELLANT HAS DEALINGS WITH PARTIES LISTED BY THE SALES TAX DEPARTMENT AS A SUSPICIOUS DEALER AND SHOWN HUGE AMOUNTS OF CREDIT AGAINST SUCH PARTY, THE ENTIRE DIFFERENCE AS POINTED OUT TOTALING TO RS.2,67,45,632/ - WAS ADDED TO THE TOTAL INCO ME OF THE APPELLANT AS UNPROVED CREDITORS. THE APPELLANT HAS PRODUCED LEDGER ACCOUNTS, CONFIRMATIONS AND ALSO BANK STATEMENTS TO SUBSTANTIATE SUBSEQUENT PAYMENTS TO CREDITORS AND HAS THUS DISCHARGED THE ONUS CAST ON HIM TO PROVE THE CREDITORS. THE CORRESPO NDING SALES ARE TO REPUTED PARTIES ITA NO. 46 4 3 /MUM/20 1 2 3 AND THIS FACT HAS ALSO NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. FURTHER, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF SUSPICIONS OF A THIRD PARTY. EVEN SO, THERE IS NO RATIONALE TO CONSIDER TH AT ALL CREDITORS IN RESPECT OF PUR CHASES MADE, TO BE UNPROVED CREDITORS, MERELY BECAUSE ONE OF THEM IS LISTED IN THE WEBSITE OF THE SALES TAX DEPARTMENT AS A SUSPICIOUS DEALER. THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASES, SALES AND RESULTANT PROFIT FROM THE APPELLANTS TRADING ACTIVITIES. THE APPELLANT HAS FURNISHED LEDGER ACCOUNTS, CONFIRMATIONS AND BANK STATEMENT TO SUBSTANTIATE SUBSEQUENT PAYMENTS AND HAS THUS DISCHARGED THE ONUS CAST ON HIM. A MERE SUSPICION OF A THIRD PART WITH RESPECT TO ONE O F THE PARTIES IS NOT A GROUND FOR ADDITION TO THE TOTAL INCOME. IN THE CIRCUMSTANCES, THE APPLICATION OF THE PROVISION OF SECTION 68 IS UNCALLED FOR. THE CASE LAWS RELIED UPON BY THE APPELLANT ALSO SUPPORTS HIS CLAIM. THE ASSESSING OFFICER IS DIRECTED TO D ELETE THE ADDITION MADE TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF UNPROVED CREDITORS. THE GROUND OF APPEAL IS ALLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED SR. DR ARGUED THAT THE ASSESSEE FAILED TO PRODUCE A NY EVIDENCE TO PROVE THESE CREDITORS AND MOREOVER, THE ASSESSEE IS UNABLE TO RECONCILE THE STOCK POSITION TO PROVE THAT THE GOODS WERE MOVED IN AND MOVED OUT. HE ARGUED THAT THE CIT (A) ERRED IN DELETING THE ADDITION ONLY ON ONE PREMISE THAT SALES ARE NOT DOUBTED BY THE AO OR THE PARTY HAS PROVED THAT SUBSEQUENTLY THE PAYMENT HAS BEEN MADE TO THE CREDITORS. IN VIEW OF THESE ARGUMENTS, THE LEARNED SR. DR URGED THE BENCH TO RESTORE THE MATTER BACK TO THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE RELIED ON THE ORDER OF THE CIT (A) AND HE CARRIED US THROUGH THE DOCUMENTS AND EVIDENCES FILED IN THE ASSESSEES PAPER BOOK CONSISTING OF PAGES 1 TO 147. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPY OF THE CONFIRMATION OF V3 ENTERPRISES , ROHAN ENTERPRISES, VIN INTERNATIONAL AND CROWN SALES CORPORATION. BUT, THE ASSESSEE COULD NOT FILE CONFIRMATION OF A TO Z DIGITAL PRINTS. THE ASSESSEE ALSO FILED COPY OF LEDGER ACCOUNT SHOWING PAYMENTS MADE TO THESE PARTIES SUBSEQUENTLY ALONG WITH BANK STATEMENT. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2011 - 12 FILED COMP LETE BALANCE CONF IRMATION OF CREDITORS AND THE A O HAS ACCEPTED THE CONFIRMATION AS WELL AS THE ITA NO. 46 4 3 /MUM/20 1 2 4 OUTSTANDING CREDIT BALANCES IN THE SAME PARTY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE AUDITED ACCOUNTS WHEREIN COMPLETE RECONCILIATI ON OF STOCK STATEMENT IS FILED IN RESPECT TO PURCHASES AS WELL SALES. WE FIND THAT THE ASSESSEE IS ABLE TO PROVE THAT THESE CREDITORS HAVE BEEN PAID SUBSEQUENTLY DURING THE FINANCIAL YEAR 2010 - 11 RELEVANT TO ASSESSMENT YEAR 2011 - 12 AND THE A O DURING THE CO URSE OF SCRUTINY ASSESSMENT U/S 143 (3) OF THE ACT HAS ACCEPTED THIS POSITION. WE ALSO FIND THAT THE ASSESSEE HAS MADE PAYMENTS TO THESE CREDITORS AND TO PROVE THE SAME, THE ASSESSEE ALSO FILED COPY OF BANK STATEMENT OF THESE PARTIES ALONG WITH CONFIRMATIO N IN HIS PAPER BOOK. WE ALSO FIND THAT THE A O COULD NOT DISPROVE THE SALES MADE BY THE ASSESSEE AND IN THE ABSENCE OF PURCHASE; SALES COULD NOT HAVE BEEN EFFECTED. BUT HERE, WE WANT TO CR A VE OUT ONE EXCEPTION THAT THE ASSESSEE IS UNABLE TO FILE ANY CONFIRM ATION IN RESPECT OF ONE PARTY VIZ. A TO Z DIGITAL PRINTS FROM WHOM THE ASSESSEE HAD MADE PURCHASES TO THE EXTENT OF RS.2,22,390/ - AND TO THIS EXTENT, THE ADDITION IS CONFIRMED IN ABSENCE OF ANY EVIDENCE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE PAR TLY CONFIRM THE ORDER OF THE CIT (A) CONFIRMING THE DELETION OF SUNDRY CREDITORS EXCEPT IN THE CASE OF A TO Z DIGITAL PRINTS FOR AN AMOUNT OF RS.2,22,390/ - . 7 . IN THE RESULT, THE APPEAL OF THE R EVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN T HE OPEN COURT ON 13 - 10 - 2016 . SD/ - (N. K. PRADHAN ) ACCONTANT MEMBER MUMBAI, DATED: 13 - 10 - 2016 LAKSHMIKANTA DEKA/SR.PS SD/ - ( MAHAVIR S INGH ) JUDICIAL MEMBER ITA NO. 46 4 3 /MUM/20 1 2 5 BY ORDER, ASSISTANT REGISTRAR ITA T, MUMBAI SR. NO. PARTICULARS DATE INITIALS MEMBER CONCERNED 1 DICTATION GIVEN ON 13/ 1 0/16 LK DEKA JM 2 DRAFT PLACED BEFORE AUTHOR 14/10/16 3 DRAFT PROPOSED/PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROV ED DRAFT COMES TO THE SR.PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//