ITO 17(2)(2), MUMBAI V. HANSRAJ DHANJI PRASAD HUF, MUMBAI

ITA 4678/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3890 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 18-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D NAIK
• Assessee Lawyers: D C SABOO; SHYAM SABOOAR
• Keywords: Bogus purchase; Additional evidence
• Section: 143(3); 133(6); 37(1)

Judgement Text

4678/M/14-HANSRAJ 1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI H BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAM LAL NEGI,JUDICIAL MEMBER /.ITA NO.4493 /MUM/2014, /ASSESSMENT YEAR-2002-03 INCOME TAX OFFICER-17(2)(2) ROOM NO.212, PIRAMAL CHAMBER LALBAUG, MUMBAI-400 012. VS. M/S. HANSRAJ DHANJI PRASAD & SONS HUF GROUND FLOOR, 66-68, DONTAD STREET, MASJID BUNDER, MUMBAI -400 009. PAN: AAAHP 2674 R ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : S/ SHRI D.C. SABOO & SHYAM SABOO-AR / REVENUE BY : SHRI B.D. NAIK / DATE OF HEARING : 1 11 1 8.02.2016 / DATE OF PRONOUNCEMENT : 18.02.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 22,4.14 CIT(A)29, MUMBA I THE ASSESSING OFFICER ( AO) HAS FILED THE PRESENT APPEAL. ASSESSEE-HUF IS ENGAGED I N TRADING ACTIVITIES IN COTTON CANVAS PLASTIC AND TARPAULINS AND ERECTION OF TEMPORARY MO NSOON SHED ON HIRE BASIS, FILED ITS RETURN OF INCOME ON 30.9.2009, DECLARING TOTAL INCOME AT R S.12.97 LACS.THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 23.12.2011, DE TERMINING THE INCOME OF THE ASSESSEE AT RS.23.84 LACS. 2. FIRST GROUND OF APPEAL IS ABOUT REDUCING THE ADDITI ON MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES. DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE AO MADE ENQUIRIES BY ISSUING LETTERS U/S. 133(6) OF THE ACT , TO FOUR PARTIES NAMELY M/S. SHRINATH TRADING COMPANY, M/S. UV DISTRIBUTORS PVT. LTD., M /S. SANGURA TRADING PVT. LTD. AND M/S.SAILEELA TRADING PVT. LTD., THAT THE ASSESSEE H AD MADE PURCHASES FROM THESE PARTIES OF RS.16.15 LACS, RS.21.65 LACS, RS.15.62 LACS AND RS. 7.72LACS RESPECTIVELY DURING THE YEAR .THE LETTERS SENT BY THE AO RETURNED UNSERVED.AS PER THE AO THE ASSESSEE DID NOT PROVIDE PROPER DETAILS REGARDING PURCHASES MADE FROM THE ABOVE PAR TIES DESPITE THE NUMBER OF OPPORTUNITIES PROVIDED TO IT.HE TREATED THE PURCHASE MADE FROM TH E ABOVE FOUR PARTIES AS BOGUS PURCHASE AMOUNTING TO RS.61.15 LACS, AND ADDED BACK THIS AMO UNT TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, IT WAS ARGUED THAT IT HAD DISCHARGED ITS INITIAL ONUS BY PROVIDING THE PURCHASE BILL CONTAINING ADDRESSES,SA LES TAX NUMBER OF THE PURCHASERS,THAT IT HAD FURNISHED THE BANK STATEMENT SHOWING PAYMENTS MADE TO THE ABOVE PARTIES BY CHEQUES ALONG WITH THE LEDGER COPY OF THE ABOVE PARTIES, THAT ST OCK STATEMENT WAS SUPPLIED TO THE AO TO PROVE THE CONSUMPTION OF THE MATERIAL FOR ERECTION OF MONSOON SHADES,THAT THE AO HAD NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT, TH AT IF THE SALES WERE ACCEPTED THERE WAS NO JUSTIFICATION FOR DISAPPROVING THE PURCHASES, THAT IT HAD FILED THE CONFIRMATION ALONG WITH THE PURCHASE BILLS FROM THE ABOVE PARTIES DURING THE AS SESSMENT PROCEEDINGS.THE ASSESSEE FILED CERTAIN DETAILS WITH REGARD TO PURCHASES BEFORE THE FAA AND MADE A REQUEST TO ADMIT THE ABOVE EVIDENCES AS PER THE PROVISIONS OF RULE 46A O F THE INCOME TAX RULES 1962.THE FAA 4678/M/14-HANSRAJ 2 DIRECTED THE AO TO FILE A REMAND REPORT. AFTER CONS IDERING THE REMAND REPORT AND THE COMMENTS OF THE ASSESSEE ON THE REMAND REPORT, THE FAA HELD THAT EVEN DURING THE REMAND PROCEEDINGS THE ASSESSEE COULD NOT PROVIDE THE CURR ENT ADDRESSES OF THE PARTIES FROM WHOM THE PURCHASES WERE MADE DURING THE YEAR UNDER APPEA L, THAT THE AO HAD NOT GIVEN ANY CONCLUSIVE FINDING TO PROVE THAT PURCHASES WERE BOG US, THAT HE HAD DOUBTED THE GENUINENESS OF THE PURCHASES ONLY ON THE GROUND THAT PURCHASERS HAD NOT RESPONDED TO THE LETTERS ISSUED BY HIM U/S.133(6) OF THE ACT, AO HAD ACCEPTED THE TOTA L SALES MADE BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THAT HE HAD NOT TREATED ANY PA RT OF THE SALES AS BOGUS, THAT PAYMENTS TO THE SELLERS OF THE GOODS WERE MADE THROUGH BANKING CHANNELS, ASSESSEE HAD SHOWN THE QUANTITATIVE TALLY OF THE STOCK PURCHASED/SOLD.FINA LLY, HE HELD THAT THERE WAS NO QUESTION OF DISALLOWING THE ENTIRE PURCHASES , THAT THE ASSESSE E HAD NOT PRODUCED THE PARTIES FROM WHOM GOODS WERE PURCHASED, THAT THE POSSIBILITY OF OBTAI NING BILL FROM NON-EXISTENT PARTIES COULD NOT BE RULED OUT, THAT THERE WERE CHANCES OF INFLAT ING THE PURCHASE TO REDUCE THE PROFIT. HE REFERRED TO THE CASES OF SIMIT P. SHETH (IT APPEAL NO.553 OF 2012 DT.16.1.2013) OF THE HONBLE HIGH COURT OF GUJARAT AND HELD THAT ONLY TH E PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES WAS TO BE TAXED AND NOT THE ENTIRE AMOUNT OF THE ALLEGED BOGUS PURCHASES. HE DIRECTED THE AO TO DISALLOW 11% OF THE ALLEGED BOGU S PURCHASES FOR THE YEAR UNDER APPEAL. 4. DURING THE COURSE OF HEARING BEFORE US, THE DR CONT ENDED THAT ASSESSEE HAD FAILED TO PRODUCE THE ALLEGED SELLERS OF THE GOODS, THAT THE LETTERS ISSUED U/S. 133(6) COULD NOT BE SERVED ON THE ADDRESSES GIVEN BY THE ASSESSEE. THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT ALL THE NECESSARY DETAILS WERE MADE AVAILABLE TO THE AO DURING THE ASSESSMENT PROCEEDINGS, THAT THE AO HAD ACCEPTED THE SALES, THAT IN THE REMAND R EPORT THE AO HAD NOT DOUBTED THE GENUINENESS OF THE TRANSACTIONS. HE REFERRED TO CAS ES OF BALAJI TEXTILE INDUSTRIES (49ITD177), RAJIV G. KALATHIL(ITA/6727/MUM/2012-AY09-10 DT.20.8 .2014); NIKUNJ EXIM ENTERPRISES OF HONBLE BOMBAY HIGH COURT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE SUBMITTING HIS REMAND REPORT ON 7.3.2014 THE AO HAD MADE THE FOLLOWING OBSERVATION AT PARA NO.4:- ON PERUSAL OF THE ADDITIONAL EVIDENCES FILED BY TH E ASSESSEE DURING THE APPELLATE PROCEEDINGS SUCH AS CONFIRMATIONS, COPY OF ACCOUNT IN THE BOOKS OF THE APPELLANT, BANK STATEMENT AND SALES TAX PAID CHALLAN, IT APPEARS TH AT PAYMENT FOR ALLEGED PURCHASES HAD BEEN MADE THROUGH THE BANK ACCOUNT OF THE ASSESSEE, THER EFORE, TO THAT EXTENT THE CLAIM OF THE ASSESSEE THAT PURCHASES ARE GENUINE SEEMS TO BE IN ORDER, BUT IN THE ABSENCE OF ANY CROSS VERIFICATION BY WAY OF SECTION 133(60) OF THE IT AC T, 1961 THE SAME IS NOT ESTABLISHED. WE FIND THAT THE AO HAD MADE THE ADDITION ONLY BECA USE LETTERS ISSUED BY HIM COULD NOT BE SERVED ON THE PURCHASERS.IN OUR OPINION HE SHOULD H AVE ISSUED SUMMONS TO THE PARTIES AND MADE FURTHER ENQUIRIES IN THAT REGARD SPECIALLY WHE N THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS.IN OUR OPINION AFTER ACCEPTING THE GENUINENESS OF THE SALES HE WAS NOT JUSTIFIED IN REJECTING THE CORRESPONDING PURCHASES. IT IS ALSO A FACT THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY EVIDENCE DURING THE ASS ESSMENT/REMAND PROCEEDINGS LIKE PURCHASE BILLS, LEDGER ACCOUNTS OF THE SUPPLIER OF GOODS, CO NFIRMATION OF THE PARTIES, DETAILS OF PAYMENTS MADE THROUGH BANKING CHANNELS.IN THE CASE OF NIKUNJ EXIM ENTERPRISES (SUPRA), THE HON'BLE BONBAY HIGH COURT HELD THAT IF THE SALES AR E ACCEPTED BY THE AO THEN PURCHASES SHOULD NOT BE REJECTED.CONSIDERING THE PECULIAR FAC TS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFF ER FROM ANY LEGAL OR FACTUAL INFIRMITY.WE FIND THAT HE HAD CONFIRMED THE ADDITION TO THE TUNE OF RS.61.15 LACS I.E. @ 11% OF THE PURCHASES.IN OUR OPINION, THERE IS NO JUSTIFICATION IN DISTURBING HIS ORDER.FIRST GROUND OF APPEAL IS DECIDED AGAINST THE AO. 4678/M/14-HANSRAJ 3 6. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF CASH EXPENSES @20%. AS PER THE AO VERIFICATION OF BOOKS OF ACCOUNT REVEALED THAT THE ASSESSEE HAD INCURRED EXPENSES AMOUNTING TO RS.38.54 LACS, IN CASH, THAT THOSE EXPENSES WERE NOT SUPPORTED BY PROPER BILLS/EVIDENCES, THAT THE GENUINENESS OF THE EXPENSES HAD NOT BEEN S ATISFACTORILY EXPLAINED.HE MADE A DISALLOWANCE OF RS.7.70 LACS (20%) AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 7. IN THE APPELLATE PROCEEDINGS BEFORE THE FAA THE ASS ESSEE STATED THAT THE DISALLOWANCE WAS MADE BY THE AO PURELY ON ADHOC BASIS, THAT IT HAD F ILED ALL THE DETAILS DURING THE ASSESSMENT PROCEEDINGS, THAT EXPENSES HAD BEEN INCURRED FOR TH E PURPOSE OF BUSINESS OF THE ASSESSEE, THAT PAYMENTS WERE SUPPORTED BY BILLS/VOUCHERS, THAT IN CERTAIN CASES TAX WAS ALSO DEDUCTED,THAT THE BOOKS OF ACCOUNT WERE AUDITED U/S.44AB OF THE A CT, THAT THE AO HAD FAILED TO POINT OUT ANY SPECIFIC DEFECTS IN ANY BILLS/VOUCHERS. 8. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE A ND THE ASSESSMENT ORDER THE FAA HELD THAT THE EXPENSES HAD BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND WERE ALLOWABLE AS PER THE PROVISION OF SECTION 36 AND 37(1) OF THE ACT, THAT THE ASSESSEE HAD MAINTAINED PROPER BOOKS OF ACCOUNT THAT WERE DULY AUDITED BY A PROFESSIONAL, T HAT THE AUDITORS HAD NOT MADE ANY ADVERSE COMMENT ON THE INCURRING OF THE EXPENSES, THAT THE AO HAD NOT PROVED THAT PART OF THE EXPENSES WERE BOGUS OR THAT SAME HAD BEEN ACTUALLY USED FOR OTHER THAN BUSINESS PURPOSES, THAT IN ABSENCE OF ANY SPECIFIC DISCREPANCY IN MAIN TAINING THE BOOKS OF ACCOUNTS THE ADHOC ADDITION MADE BY THE AO COULD NOT BE SUSTAINED.FINA LLY, HE DELETED THE ADDITION MADE BY THE AO. 9. BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO AN D THE AR RELIED UPON THE ORDER OF THE FAA. WE FIND THAT THE AO HAD DISALLOWED 20% OF THE CASH EXPENSES ON ADHOC BASIS, THAT HE HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESS EE, THAT HE HAD NOT POINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE A SSESSEE,THAT THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT ASSESSEE HAD PRODU CED ALL THE NECESSARY DOCUMENTS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS IN SUPPORT OF ITS CLAIM,THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND THAT THE AUDITORS HAD NOT POINTED OUT ANY DISCREPANCY IN THEIR REPORT.CONSIDERING THESE FACTS, WE ARE OF THE OPINI ON THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THEREFORE, CONF IRMING HIS ORDER WE DECIDE GROUND NO.2 AGAINST THE AO. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH ,FEBRUARY, 2016. 1 8 .02.2016 . SD/- SD/- ( /RAM LAL NEGI) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE:18.02. 2016 JV,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR H BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.