MANOHAR G. KANDA, BHAYANDER V. ITO WARD - 2(1), THANE

ITA 4695/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8306 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 11-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Bogus purchase; Rejection of books of accounts

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./4696 /MUM/2016, /ASSESSMENT YEAR: 2009-10 ./I.T.A./4697 /MUM/2016, /ASSESSMENT YEAR: 2010-11 SMT. ANITA M. KANDA A-102, CHANDRAKANT RESIDENCY NEAR MAXIS MALL, 150 FEET ROAD BHAYANDER (W) 401 101. PAN:AFTPK 3500 P VS. INCOME TAX OFFICER WARD, -2(1) THANE. ( /APPELLANT ) ( / RESPONDENT ) ./I.T.A./4693 /MUM/2016, /ASSESSMENT YEAR: 2009-10 ./I.T.A./4694 /MUM/2016, /ASSESSMENT YEAR: 2010-11 ./I.T.A./4695 /MUM/2016, /ASSESSMENT YEAR: 2011-12 SHRI MANOHAR G. KANDA A-102, CHANDRAKANT RESIDENCY NEAR MAXIS MALL, 150 FEET ROAD BHAYANDER (W) 401 101. PAN:AFTPK 3500 P VS. INCOME TAX OFFICER WARD, -2(1) THANE. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M. C.OMI NINGSHEN -DR ASSESSEE BY: SHRI BHUPENDRA SHAH -AR / DATE OF HEARING: 15.02.2017 / DATE OF PRONOUNCEMENT: 22.02.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH - CHALLENGING THE ORDER,DATED 27/05/2016,OF THE CIT ( A)-1,THANE,THE ASSESSEE HAS FILED THE APPEALS FOR TWO (AY.S),WHEREAS MANOHAR G. KANDA HAS FILED APPEALS FOR THE THREE AY.S., AS STATED ABOVE.ASSESSEES ARE ENGAGED IN THE BUSINESS OF TRADING OF PIPES AND HARDWARE ITEMS ON COMMISSION BASIS.THE DETAILS OF FILING OF RETURNS, RETURNED INCOMES, ASSESSED INCOMES ETC. IN THE CASE OF ANITA M. KANDA CAN BE SUMMARISED AS UND ER: AY. ROI FILED ON RETURNED INCOME DT. OF ASSESSMENT ORDER ASSESSED INCOME 2009-10 19.09.2009 RS.6,61,407/- 30/05/2014 RS.12,9 7,297/- 2010-11 21.09.2010 RS.10,68,533/- 21/03/2013 RS.14, 33,640/- 4696+4/M/16-ANITA &MANOHAR KANDA 2 AS THE ISSUE INVOLVED IN ALL THE APPEALS IS COMMON, SO,A SINGLE ORDER IS BEING PASSED TO ADJUDICATE THE APPEALS. ITA/4696/MUM/2016,AY.2009-10: 2. EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMATION OF ADDITION OF RS. 6.35 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD MADE PURCHASES FROM MAHAVIR ENTERPRISES (ME) AND MR CORPORATION (MRC), THAT BOT H THE PARTIES WERE APPEARING IN THE LIST OF SUSPICIOUS DEALERS PUBLISHED BY SALES TAX DEPART MENT (STD),THAT AS PER THE INFORMATION OF STD ME AND MRC WERE ISSUING BOGUS BILLS WITHOUT DEL IVERY OF GOODS. AS PER THE AO HE WAS IN POSSESSION OF THE AFFIDAVITS/STATEMENTS/DEPOSITI ONS,GIVEN BY THE SUPPLIERS,BEFORE THE SALES TAX AUTHORITIES,WHEREIN IT WAS STATED THAT THEY WER E ISSUING ONLY BOGUS BILLS AND HAD NOT PURCHASED OR SOLD ANY GOODS. AS PER THE AO, IT WAS ALSO ADMITTED THAT THEY DID NOT HAVE ANY GODOWNS/ BUSINESS PLACES AND THAT PAYMENTS RECEIVED BY THEM FROM THE CLIENTS THROUGH CHECKS WERE HANDED OVER BACK TO THE PURCHASERS IN C ASH AFTER DEDUCTING SPECIFIED AMOUNT OF COMMISSION. THE AO OBSERVED THAT THE STATEMENTS WER E GIVEN ON OATH BEFORE THE SALES TAX AUTHORITIES, THAT THE SAME WAS TO BE TREATED AS EVI DENCE AGAINST THE ASSESSEE. HE EXPLAINED THE FACTS DURING THE COURSE OF HEARING TO THE ASSESSEE AND ASKED HER AS TO WHY THE PURCHASES MADE FROM ME AND MRC,AMOUNTING TO RS.6.35 LAKHS,SHOULD N OT BE TREATED AS NON-GENUINE AND SHOULD NOT BE ADDED TO HER INCOME IS UNEXPLAINED EX PENDITURE. THE ASSESSEE STATED THAT ALL PAYMENTS IN RESPECT OF THE PURCHASES WERE MADE THRO UGH BANK ACCOUNTS, THAT EXPENSES COULD NOT BE DISALLOWED.AS PER THE AO,HE HAD ISSUED NOTIC ES U/S. 133 (6) OF THE ACT TO THE SUPPLIERS. BUT, NO REPLIES WERE RECEIVED FROM THEM.REFERRING T O THE AFFIDAVITS/DECLARATION MADE BY THE SUPPLIERS BEFORE THE SALES TAX DEPARTMENT,HE HELD T HAT PURCHASES MADE FROM ME AND MRC WAS TO BE TREATED AS UNEXPLAINED EXPENSES.FINALLY,H E MADE AN ADDITION OF RS.6,35,872/-TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, THE ASSESSEE ARGUED THAT SHE HAD MADE THE PURCHASES THROUGH VALID TAX INVOICES,THAT PAYMENTS WERE MADE THROUGH BANKING CHANNELS BY ISSUING ACCOUNT PAYEE CHEQUES,THAT THE MATERIAL PURCHASED F ROM THE SUPPLIERS WAS USED FOR SALES MADE SUBSEQUENTLY.THE ASSESSEE PRODUCED THE COPIES OF PURCHASE BILLS ALONG WITH THE COPY OF BANK ACCOUNT BEFORE HIM. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSION OF THE ASSESSEE, THE FAA HELD THAT THE AO HAD RECEIVED INFORMATION FROM THE SALES TAX AUTHORITIES ABOUT CERTAIN SUPPLIERS WHO WERE ISSUING BOGUS BILLS WITHOUT SUPPLYING GOODS, T HAT THE NAME OF BOTH THE SUPPLIERS WERE 4696+4/M/16-ANITA &MANOHAR KANDA 3 APPEARING IN THE LIST OF HAWALA DEALERS PUBLISHED B Y THE STD, THAT THE AO HAD CONFRONTED THE ASSESSEE WITH THE FACTS GATHERED FROM THE SALES TAX AUTHORITIES,THAT THE ASSESSEE DID NOT FILE ANY SATISFACTORY EXPLANATION,THAT IN RESPONSE TO THE NO TICES ISSUED U/S.133(6) NO REPLIES WAS RECEIVED, THAT THE ASSESSEE HAD NOT DISCUSSED THE P RIMARY ONUS OF ESTABLISHING THE GENUINENESS OF THE PURCHASES SHOWN FROM THE ABOVE-MENTIONED TWO SUPPLIERS. INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT,HE HELD THAT THE BOOKS OF ACCOUNTS WERE LIABLE TO BE REJECTED AS SAME WERE INCOMPLETE AND UNRELIABLE.THE FAA CONSIDERED T HE GROSS PROFIT RATE AND NET PROFIT RATE FOR THE EARLIER YEARS AND HELD THAT THE ASSESSEE HA D SHOWN NET PROFIT RATE OF 2.70%, THAT AFTER DISALLOWANCE OF UN-PROVED PURCHASES THE NET PROFIT WOULD BE APPROXIMATELY 5%, THAT THE SAME WAS COMPARABLE TO THE NET PROFIT SHOWN BY HER IN TH E AY. 2007-08(5.66%). FINALLY, HE UPHELD THE DISALLOWANCE OF RS.6.35 LAKHS MADE BY THE AO AN D REJECTED THE BOOKS OF ACCOUNTS. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) ARGUED THAT THE ASSESSEE WAS A SEMI-WHOLESALER OF PLUMBING MATERIAL ,THAT NO DEFECT WAS FOUND IN THE STOCK REGISTERED CAPPED BY THE ASSESSEE, THAT PAYMENTS WE RE MADE BY ACCOUNT PAYEE CHEQUES, THAT THE AO HAD NOT DOUBTED THE GENUINENESS OF THE SALES . HE RELIED UPON THE CASES OF RAJEEV M. KALATHIL(ITA/6727/MUM/2012),GANPATRAJ A SANGHAVI (I TA/2826/MUM/2013), RAMILA P SHAH (ITA/ 5246/MUM/2013),SHIV SHANKAR R SHARMA (IT A/ 5149/MUM/2014) AND (ITA 4260/MUM/2015), GOVIND RATHOD (ITA/439/MUM/2016). T HE DEPARTMENTAL REPRESENTATIVE (DR) CONTENDED THAT THE SUPPLIERS HAD ADMITTED OF N OT HAVING ANY GODOWNS SUPPLYING GOODS TO THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AO HAD FOUND THE NAME OF THE SUPPLIERS IN THE LIST OF HAWALA DEALERS PUBLISHED BY THE SALES TAX AUTHORITIES,THAT HE WAS IN POSSESSION OF THE ST ATEMENTS MADE BY THEM ADMITTING ISSUING BOGUS BILLS, THAT HE HAD ISSUED NOTICE U/S. 133 (6) OF THE ACT, THAT HE DID NOT RECEIVE ANY REPLY FROM THE SUPPLIERS, THAT HE MADE AN ADDITION OF RS. 6.35 LAKHS ON ACCOUNT OF BOGUS PURCHASES (RS. 3.11 LAKHS IN THE CASE OF ME+ RS. 3.2 LAKHS TH E CASE OF MRC) TO THE TOTAL INCOME OF THE ASSESSEE,THAT THE FAA INVOKED THE PROVISIONS OF SEC TION 145(3)OF THE ACT. FROM THE CHRONO - LOGY OF THE EVENTS IT IS CLEAR THAT THE AO WAS IN P OSSESSION OF THE INFORMATION SUPPLIED BY THE SALES TAX AUTHORITIES.HE HAS NOT MENTIONED AS TO WH ETHER THE NAME OF THE ASSESSEE WAS APPEARING IN THE STATEMENTS/AFFIDAVITS OF THE HAWAL A DEALERS OR THAT THE STATEMENT WERE GENERAL IN NATURE.IT WAS HIS DUTY TO SUPPLY A COPY OF THE S TATEMENT OF THE ALLEGED HAWALA DEALERS TO THE ASSESSEE, AS HE WAS RELYING UPON THEIR STATEMENTS. THE INFORMATION RECEIVED FROM THE SALES TAX 4696+4/M/16-ANITA &MANOHAR KANDA 4 AUTHORITIES WAS A GOOD STARTING POINT FOR MAKING FU RTHER INVESTIGATION AND TO TAKE IT TO LOGICAL END. BUT, HE STOPPED AT THAT JUNCTURE AND DID NOT C OLLECT FURTHER EVIDENCES. WHILE MAKING THE DISALLOWANCE OF ENTIRE PURCHASES,HE DID NOT DOUBT T HE SALES MADE BY THE ASSESSEE.AS PER THE ESTABLISHED PRINCIPLES OF TAX JURISPRUDENCE NO SALE S CAN BE AFFECTED WITHOUT PURCHASES. THEREFORE,IN OUR OPINION THERE WAS NO JUSTIFICATION IN DISALLOWING THE ENTIRE PURCHASES.BY PRODUCING THE BANK STATEMENT AND STOCK STATEMENT, T HE ASSESSEE HAS DISCHARGED THE BURDEN CAST UPON HER.WE FIND THAT IN ALL THE CASES, RELIED UPON BY THE ASSESSEE,THE TRIBUNAL HAS HELD THAT WHERE THE AO ACCEPTS THE SALE MADE BY THE ASSE SSEE,HE CANNOT REJECT THE ENTIRE PURCHASES. IT IS TRUE THAT THE FAA HAS REJECTED THE BOOKS,BUT, HE HAS NOT GIVEN ANY REASON FOR THE REJECTION OF THE SAME. WE WOULD ALSO LIKE TO MENTIO N THAT THE FAA HAD WITHOUT ASSIGNING ANY REASON HAD DISTURBED THE PROFIT RATES SHOWN BY THE ASSESSEE. HE SHOULD HAVE CALLED FOR AN EXPLANATION OF THE ASSESSEE ABOUT FALL IN THE GP FO R THE YEAR UNDER CONSIDERATION.THERE CAN BE SEVERAL REASONS FOR VARIATION IN PROFIT RATES,SO,ON LY ON THAT BASIS RESULTS OF AUDITED BOOK SHOULD NOT BE DISTURBED.HERE,WE WOULD ALSO LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN THE CASE OF RAJEEV M. KALATHIL(S UPRA) AND IT READS AS UNDER: 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DE CLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING PO INT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END.BUT,HE LEFT THE JOB AT INITI AL POINT ITSELF.SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE.HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMME DIATE CASH WITHDRAWAL FROM THEIR ACCOUNT.WE FIND THAT NO SUCH EXERCISE WAS DONE.TRAN SPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE.THE FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSE E WAS FORMING PART OF CLOSING STOCK.AS FAR AS THE CASE OF WESTERN EXTRUSION INDUSTRIES. (SUPRA)IS CONCERNED,WE FIND THAT IN THAT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS.BUT,IN THE CASE BEFORE US,THERE IS NOTHING,IN THE ORDER OF THE AO,ABOUT THE CASH TRAIAL.SECONDLY,PROOF OF MOVEMENT OF GOODS IS NOT I N DOUBT. THERERFORE,CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INF IRMITY AND THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAKEN BY THE AO. SO,CON FIRMING THE ORDER OF THE FAA,WE DECIDE GROUND NO.1 AGAINST THE AO. RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL R ELIED UPON BY THE ASSESSEE AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE REVERSE THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E. ITA/4697/MUM/2016-AY.2010-11: 6. EXCEPT FOR THE AMOUNT INVOLVED(RS.3.16 LAKHS),THAT WAS DISALLOWED BY THE AO AND CONFIRMED BY THE FAA,THERE IS NO DIFFERENCE IN THE CASE FOR THE YEAR UNDER CONSIDERATION AND THE EARLIER AY.FOLLOWING OUR ORDER,FOR THE AY.2009- 10,WE ALLOW THE APPEAL FILED BY THE ASSESSEE. 4696+4/M/16-ANITA &MANOHAR KANDA 5 ITA/4693, 4694 & 4695/MUM/2016,AY.S.: 2009-10;2010- 11 & 2011-12(MANOHAR G. KANDA): 7. THE APPELLANT IS HUSBAND OF ANITA M KANDA,WHO HAD F ILED THE EARLIER TWO APPEALS.IN HIS CASE,THE AO HAD MADE DISALLOWANCES OF RS.4.85 LAKHS , RS.6.30 LAKHS AND RS.14.48 LAKHS FOR THE AY.S 2009-10,2010-11 AND 2011-12 RESPECTIVELY AS THE FACTS AND CIRCUMSTANCES OF THE CASE IDENTICA L TO THE FACTS OF HIS WIFE,SO, REVERSING THE ORDER OF THE FAA,WE DECIDE OF THE APPEALS IN FAVOUR OF THE ASSESSEE. AS A RESULT, ALL THE APPEALS ,FILED BY THE ASSESSEES,STAND ALLOWED. ! . ORDER PRONOUNCED IN TH E OPEN COURT ON 22 ND FEBRUARY , 2017. ' # 22 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( $'% / RAJENDRA ) ' &' / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 22.02 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.