ITO 17(2)(3), MUMBAI V. RANJHOMAL ASSOMAL DODEJA, MUMBAI

ITA 4758/MUM/2012

• Counselvise Citation: 475819914 RSA 2012
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DR P DANIAL
• Keywords: Rejection of books of accounts; Business income; Opportunity of being heard

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO.4758/MUM/2012 ( ! ' # / ASSESSMENT YEARS : 2009-10) INCOME TAX OFFICER 17(2)(3), 210, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012. / VS. SHRI RANJHOMAL ASSOMAL DODEJA 4, NEELKANTH APARTMENT, CHS, GOKALDAS PASTA LANE, DADAR (E), MUMBAI-400014 ( $% / APPELLANT) .. ( &'$% / RESPONDENT) $ ./ ( ./PAN/GIR NO. : ADZPD0931B $% ) / APPELLANT BY : SHRI DURGA DUTT &'$% * ) /RESPONDENT BY : DR .P.DANIAL + , * - . / DATE OF HEARING : 14.7.2014 /0#' * - . /DATE OF PRONOUNCEMENT : 25.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 16.04.2012 PASSED BY LD CIT(A)-29, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF L D CIT(A) IN GRANTING RELIEF IN RESPECT OF THE FOLLOWING ADDITIONS:- (A) UNACCOUNTED CONTRACT RECEIPTS RS.87,24,320/- (B) UNIDENTIFIED SUNDRY CREDITORS RS.73,54,879/- (C) DISALLOWANCE OUT OF TELEPHONE, CONVEYANCE, CA RTAGE ETC. I.T.A. NO.4758/MUM/2012 2 3. THE FACTS RELATING TO THE CASE ARE SET OUT IN BRIEF. THE ASSESSEE IS CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF EM PTY BOTTLES AND BROKEN GLASSES UNDER THE NAME AND STYLE ENAR BOTTLES SUPP LYING CO. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y THE ASSESSEE DECLARING A TOTAL INCOME OF RS.19.18 LAKHS. IN THE SCRUTINY PR OCEEDINGS, THE ASSESSING OFFICER NOTICED FROM THE ITS DETAILS THAT THE ASSESSEE HAS RECEIVED CONTRACT RECEIPTS OF RS.79,77,554/- FROM M/S HALDYN GLASS GUJRAT LTD. T HE AO WAS OF THE VIEW THAT THE ASSESSEE DID NOT DECLARE THE SAME IN HIS RETURN OF INCOME AND HENCE SOUGHT CLARIFICATION FROM THE ASSESSEE. IN RESPONSE THERE TO, THE ASSESSEE SUBMITTED THAT HE HAS RECEIVED A SUM OF RS.87,24,320/- FROM M/S HA LDYN GLASS GUJRAT LTD DURING THE YEAR UNDER CONSIDERATION. HE FURTHER SU BMITTED THAT THE ABOVE SAID RECEIPT REPRESENTS TRANSPORTATION CHARGES REIMBURSE D TO HIM BY THE ABOVE SAID COMPANY. HE ALSO SUBMITTED THAT THE ABOVE SAID COM PANY HAD ALSO DEDUCTED TDS FROM THE ABOVE SAID PAYMENT AND HE HAS ALSO CLA IMED THE SAME IN HIS RETURN OF INCOME. HE FURTHER SUBMITTED THAT THE TR ANSPORTATION CHARGES WERE INCURRED ON BEHALF OF THE ABOVE SAID COMPANY AND HE NCE HE GOT REIMBURSEMENT FROM IT. HE ALSO SUBMITTED THAT THE AMOUNT SO REIM BURSED WAS CREDITED TO CARTAGES A/C. THE AO CALLED FOR ACCOUNT COPY OF T HE ASSESSEE FROM M/S HALDYN GLASS GUJRAT LTD AND NOTICED THAT THE IMPUGNED PAYM ENT MADE TO THE ASSESSEE WAS NOT DESCRIBED AS REIMBURSEMENT OF TRANSPORT CHA RGES. HE ALSO NOTICED THAT THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVID ENCE TO SHOW THAT THE TRANSPORTATION CHARGES WERE INCURRED ON BEHALF OF T HE ABOVE SAID COMPANY. HENCE, THE EXPLANATIONS FURNISHED BY THE ASSESSEE W AS NOT ACCEPTABLE TO THE AO AND ACCORDINGLY TREATED THE AMOUNT OF RS.87,24,320/ - AS THE UNDISCLOSED INCOME OF THE ASSESSEE AND ASSESSED THE SAME. I.T.A. NO.4758/MUM/2012 3 3.1 THE AO ALSO NOTICED THAT THE ASSESSEE HAS DIS CLOSED SUNDRY CREDITORS BALANCE OF RS.73,54,879/- IN ITS BALANCE SHEET AS O N 31.3.2009 AS AMOUNTS DUE TO VARIOUS PARTIES. THE AO ASKED THE ASSESSEE TO F URNISH THE NAMES AND ADDRESSES OF ALL SUNDRY CREDITORS SHOWING CLOSING B ALANCE OF RS.25,000/- AND ABOVE, ALONG WITH THEIR ACCOUNT COPIES. THE AO ALS O ASKED FOR THE REASON, IF IT IS OUTSTANDING FOR MORE THAN 6 MONTHS. HOWEVER, THE A SSESSEE DID NOT FURNISH ANY DETAIL. THE AO NOTICED THAT THE ASSESSEE HAS SHOWN 170 PEOPLE AS SUNDRY CREDITORS AND OUTSTANDING AMOUNT IN RESPECT OF EACH OF THEM RANGED FROM RS.17,000/- TO RS.74,000/-. THE AO NOTICED THAT TH E ASSESSEE HAS CLAIMED THAT HE HAS MADE PURCHASES EXCEEDING RS.20,000/- FROM TW O PERSONS VIZ., M/S G.M. BREWERIES LTD AND M/S VISHAL GLASS. HENCE, THE AO PRESUMED THAT MOST OF THE CREDITORS ARE OUTSTANDING FOR MORE THAN ONE YEAR. THE AO WAS OF THE VIEW THAT THE LOWER INCOME GROUPS ONLY COLLECT EMPTY BOTTLES AND BROKEN GLASSES FROM STREETS AND SELL THEM TO THE ASSESSEE. HENCE, THEY COULD NOT AFFORD TO GIVE CREDIT TO THE ASSESSEE. HENCE, THE AO CONCLUDED THAT THE OUTSTANDING AMOUNT OF RS.73,54,879/- REPRESENTS BOGUS CREDITORS AND ACCOR DINGLY ASSESSED THE SAME AS BUSINESS INCOME OF THE ASSESSEE. 3.2 THE AO ALSO DISALLOWED 20% OF THE AMOUNT CL AIMED UNDER THE HEAD TELEPHONE EXPENSES TOWARDS PERSONAL ELEMENT INVOLVE D IN IT. HE ALSO DISALLOWED 20% OF THE CONVEYANCE EXPENSES, CARTAGE EXPENSES, C OOLIAGE EXPENSES, LABOUR CHARGES ON THE REASONING THAT THEY ARE NOT SUPPORTE D BY PROPER BILLS/EVIDENCES AND HENCE THE GENUINENESS OF THESE EXPENSES COULD N OT BE SATISFACTORILY EXPLAINED. I.T.A. NO.4758/MUM/2012 4 3.3 THE AO ALSO DISALLOWED 1/3 RD OF EXPENSES CLAIMED AS STAFF WELFARE EXPENSES, SINCE IT IS NOT SUPPORTED BY PROPER BILLS /EVIDENCES AND FURTHER IT UNREASONABLE AND EXCESSIVE. 4. AGGRIEVED, BY THE ORDER OF THE AO, THE ASSES SEE CARRIED THE MATTER IN APPEAL FILED BEFORE LD CIT(A). THE FIRST APPELLATE AUTHORITY WAS CONVINCED THAT THE AMOUNT REIMBURSED BY M/S HALDYN GLASS GUJRAT LT D HAVE ALREADY BEEN ROUTED THROUGH THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND A CCORDINGLY DELETED THE ADDITION OF RS.87,24,320/-. WITH REGARD TO THE SU NDRY CREDITORS, THE LD CIT(A) ACCEPTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE NEEDS TO BE REJECTED, WHEN IT IS NOT S UPPORTED BY PROPER EVIDENCES. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNTS OF T HE ASSESSEE AND ESTIMATED THE NET PROFIT @ 6% OF THE TOTAL SALES REPORTED BY THE ASSESSEE IN THE PLACE OF 3.82% DISCLOSED BY THE ASSESSEE. THE SAME RESULTED IN ENHANCEMENT OF INCOME BY RS.10,16,271/-, MEANING THEREBY THE LD CIT(A) SU STAINED ADDITION TO THE ABOVE SAID EXTENT IN THE PLACE OF RS.73,54,879/- AS SESSED BY THE AO. SINCE THE BUSINESS INCOME WAS ESTIMATED, THE LD CIT(A) HELD T HAT THERE IS NO REQUIREMENT OF MAKING SEPARATE DISALLOWANCES DEBITED IN THE PRO FIT AND LOSS ACCOUNT AND ACCORDINGLY DELETED THE DISALLOWANCE MADE OUT OF TE LEPHONE, STAFF WELFARE, CONVEYANCE EXPENSES ETC. AGGRIEVED BY THE DECISION OF LD CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LD D.R STRONGLY DEFENDED THE ORDER PASSED BY THE AO ON THE IMPUGNED ISSUES. ON THE CONTRARY, THE LD A.R PLACED STRONG RELIANCE ON THE ORDER OF LD CIT(A). I.T.A. NO.4758/MUM/2012 5 6. THE FIRST ISSUE RELATES TO THE ADDITION OF R S.87,24,320/-, BEING THE AMOUNT RECEIVED FROM M/S HALDYN GLASS GUJARAT LTD. WE NOT ICE THAT THE ASSESSING OFFICER HAS ASSESSED THE ABOVE SAID AMOUNT ON THE REASONING THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE SAME REPRESENTS REIMBURSEM ENT OF TRANSPORTATION CHARGES AND FURTHER THE LEDGER ACCOUNT COPY SENT BY M/S HALDYN GLASS GUJARAT LTD DID NOT SHOW THAT IT WAS REIMBURSEMENT OF TRANS PORT CHARGES. HOWEVER, FROM THE EXPLANATIONS FURNISHED BY THE ASSESSEE BEF ORE AO SHOW THAT THE ASSESSEE HAS SUBMITTED THAT HE HAS CREDITED THE ABO VE SAID RECEIPTS TO THE CARTAGE ACCOUNT. THE LD CIT(A) HAS ALSO GIVEN A FI NDING THAT THE AMOUNT OF RS.87,24,320/- HAS BEEN CREDITED TO THE CARTAGE ACC OUNT AND ACCORDINGLY HELD THAT THE ASSESSING OFFICERS PRESUMPTION THAT THE A BOVE SAID AMOUNT WAS NOT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT IS NOT COR RECT. THOUGH THE REVENUE CONTENDS THAT THE LD CIT(A) HAS VIOLATED THE PROVIS IONS OF RULE 46A IN MAKING THIS OBSERVATION BY CONSIDERING FRESH EVIDENCE, YET WE NOTICE THAT THE LD CIT(A) DID NOT CONSIDER ANY FRESH MATERIAL, I.E., HE HAS ONLY CONSIDERED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. WE ALSO NOTICE THAT THE ASSESSEE HAS CLAIMED CREDIT OF THE TDS AMOUNT DEDUCTED FROM THE ABOVE SAID PAYMENT OF RS.87,24,320/-. THUS, IT IS SEEN THAT SUBMISSIONS MADE BY THE ASSES SEE BEFORE AO AND ALSO THE DECISION RENDERED BY LD CIT(A) SHOWS THAT THE ASSES SEE HAS DISCLOSED THE ABOVE SAID AMOUNT IN THE PROFIT AND LOSS ACCOUNT BY CREDI TING THE CARTAGE EXPENSES ACCOUNT WITH THE ABOVE SAID AMOUNT. WHEN THE ASSES SEE HAS DULY ACCOUNTED FOR THE AMOUNT OF RS.87,24,320/- IN ITS ACCOUNT AND HAS ALSO BROUGHT THE SAME TO THE PROFIT AND LOSS ACCOUNT THROUGH THE CARTAGE AC COUNT, WE DO NOT FIND ANY REASON TO ASSESS IT AGAIN. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DECISION TAKEN BY LD CIT(A) ON THIS ISSUE. I.T.A. NO.4758/MUM/2012 6 7. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF S UNDRY CREDITORS BALANCE OF RS.73,54,879/-. THE AO ASSESSED THE SAME ON THE RE ASONING THAT (A) THE SUPPLIERS OF EMPTY BOTTLES AND BROKEN GLASS ES ARE POOR PEOPLE, WHO COULD NOT AFFORD GIVING CREDIT TO THE ASSESSEE. (B) THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DE TAILS CONCERNING THE SUNDRY CREDITORS. (C) THE ASSESSEE HAS EFFECTED PURCHASES EXCEEDING RS.20,000/- ONLY FROM TWO PERSONS AND HENCE THE REMAINING PARTIES ARE POO R PEOPLE AND THEIR BALANCE IS OUTSTANDING FOR MORE THAN 6 MONTHS. (D) HENCE, THE ASSESSEE HAS FAILED TO PROVE THE GE NUINENESS OF OUTSTANDING BALANCES, WHICH LEADS TO THE CONCLUSION THAT THEY ARE BOGUS CREDITORS. THUS, IT IS SEEN THAT THE ASSESSING OFFICER DID NOT DOUBT THE PURCHASES AND SALES EFFECTED BY THE ASSESSEE AND HE HAS ASSESSED THE SU NDRY CREDITORS BALANCE ONLY FOR THE REASON THAT THE ASSESSEE COULD NOT ESTABLIS H ITS GENUINENESS. 8. WE NOTICE THAT THE LD CIT(A) HAS TAKEN AN ALT OGETHER DIFFERENT STAND AND HAS COME TO THE CONCLUSION THAT THE BOOKS OF ACCOUN T OF THE ASSESSEE ARE NOT RELIABLE. ACCORDINGLY HE HAS REJECTED THE BOOK RES ULTS AND HAS ESTIMATED THE NET PROFIT BY ADOPTING A HIGHER RATE. HOWEVER, AS STAT ED EARLIER, THE AO DID NOT DOUBT ABOUT THE PURCHASES AND SALES, MEANING THEREB Y, THE ASSESSING OFFICER WAS SATISFIED WITH THE TRADING RESULTS. HE WAS ONLY OF THE VIEW THAT THE CLAIM OF THE ASSESSEE THAT HE HAD OBTAINED GOODS ON CREDIT FROM POOR PEOPLE WAS NOT BELIEVABLE. ACCORDINGLY, HE HAS ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF I.T.A. NO.4758/MUM/2012 7 THE SUNDRY CREDITORS. FOR THE REASONS DISCUSSED IN THE PRECEDING PARAGRAPH, THE AO CAME TO THE CONCLUSION THAT THE SUNDRY CREDITOR BALANCE CONTAIN ONLY BOGUS CREDITORS. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE DID NOT EXIST ANY REASON TO REJECT THE BOOKS OF ACCOUNT. 9. THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE L D CIT(A) WOULD SHOW THAT THE ASSESSEE HAS CHALLENGED THE PRESUMPTION ENTERTA INED BY THE AO. HE HAS SUBMITTED THAT THE VIEW ENTERTAINED BY THE AO THAT THEY ARE OUTSTANDING FOR MORE THAN ONE YEAR IS WRONG. HE HAS ALSO POINTED O UT THAT THE PURCHASES EXCEEDING RS.20,000/- WAS EFFECTED FROM MORE THAN T WO PERSONS AND ACCORDINGLY SUBMITTED THAT THE OBSERVATIONS MADE BY THE AO IN T HIS REGARD IS ALSO WRONG. HE HAS ALSO SUBMITTED THAT NO CREDITORS BALANCE WAS O UTSTANDING FOR MORE THAN SIX MONTHS. THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD CIT(A) SHOWS THAT THE ASSESSING OFFICER HAS ALSO APPEARS T O HAVE ACTED IN A HASTY MANNER ON THIS ISSUE. 10. IN ANY CASE, THERE SHOULD NOT BE ANY DOUBT THAT THE RESPONSIBILITY TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS LIES UPON T HE ASSESSEE. IN THIS REGARD, THE ASSESSEE HAS SUBMITTED BEFORE THE LD CIT(A) AND THE LD A.R ALSO SUBMITTED BEFORE US THAT THE SUPPLIERS OF EMPTY BOTTLES ARE R AG PICKERS WHO ARE STAYING IN SLUMS AND DO NOT HAVE A PERMANENT ADDRESS. HENCE, THE ASSESSEE HAS EXPRESSED ITS DIFFICULTY IN PROCURING AND FURNISHIN G THE DETAILS THAT WERE CALLED FOR BY THE AO. THESE EXPLANATIONS OF THE ASSESSEE, IN OUR VIEW, REQUIRES EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE FRESH EXAMINATION AT THE END OF THE ASSESSING OFFIC ER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH E SAME TO THE FILE OF THE I.T.A. NO.4758/MUM/2012 8 ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THI S ISSUE AFRESH IN THE LIGHT OF EXPLANATIONS FURNISHED BY THE ASSESSEE AND TAKE APP ROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 11. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF CERTAIN EXPENSES. THE LD CIT(A) HAS HELD THAT THESE DISALLOWANCES NEED TO BE SET ASIDE, SINCE HE HAD ESTIMATED THE NET PROFIT BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. SINCE, WE HAVE SET ASIDE THE ORDER OF LD CIT(A) WIT H REGARD TO THE REJECTION OF BOOKS OF ACCOUNT, THIS ISSUE NOW REQUIRES ADJUDICAT ION. HOWEVER, SINCE WE HAVE SET ASIDE THE ISSUE RELATING TO THE SUNDRY CREDITOR S, WE ARE OF THE VIEW THESE DISALLOWANCES MAY ALSO BE EXAMINED AFRESH AT THE EN D OF THE ASSESSING OFFICER. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THESE ISSUES AFRESH. 12. NEEDLESS TO STATE, THE ASSESSING OFFICER SHOUL D PROVIDE NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25TH JULY , 2014. /0#' + 1 2 3 25TH JULY, 2014 0 * , 4 SD SD ( /SANJAY GARG) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + , MUMBAI: 25TH JULY,2014. I.T.A. NO.4758/MUM/2012 9 . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT. 3. + 6- ( ) / THE CIT(A)- CONCERNED 4. + 6- / CIT CONCERNED 5. 78 &-9! , . 9! ' , + , / DR, ITAT, MUMBAI CONCERNED 6. : , / GUARD FILE. ; + / BY ORDER, TRUE COPY < (ASSTT. REGISTRAR) . 9! ' , + , /ITAT, MUMBAI