ACIT 13(2), MUMBAI V. JANAK BHUPATRAI DOSHI, MUMBAI

ITA 4760/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3714 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 14-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER / I .TA NO. 4760/MUM/2013 ( / ASSESSMENT YEAR: 2009-10 THE ACIT - 13(2), AAYKAR BHAVAN, MUMBAI-400 020 / VS. SHRI JANAK BHUPATRAI DOSHI, C/O M/S. SHAH BHUPATRAI HIRACHAND, 212/16, SAMUEL STREET, RANG MAHAL, 3 RD FLOOR, MASJID BUNDER, MUMBAI-400 09 ./ ./ PAN/GIR NO.AAAPD 7409A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI AJAY / RESPONDENT BY: SHRI BHUPENDRA SHAH / DATE OF HEARING :22.02.2016 ! / DATE OF PRONOUNCEMENT :29.04.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE LD. CIT(A)-24, MUMBAI DATED 22.03.2013 PERTAINING TO A SSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL : 1.(I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT (A) HAS ERRED IN RESTRICTIN G THE ADDITION MADE BY THE AO IN RESPECT OF PURCHASES OF ALMOND-IN-SHELL' MADE FROM JAYLONS IMPEX INDIA PVT . TD., OF ITA NO. 4760/M/2013 2 RS.2,31,03,785/- TO RS.51,78,963/- AND IN RESPECT O F PURCHASES OF 'PISTACHIO KEMAL' MADE FROM SAI ENTERP RISES OF RS.8,94,696/- TO RS.3,70,765/-.' (II) 'WHILE DOING SO, THE ID. CIT(A) HAS ERRED IN N OT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT MAD E ANY PAYMENT TO SUPPLIERS FOR SUPPLY OF INFERIOR QUALITY OF GOODS. (2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE DI SALLOWANCE OF INTEREST EXPENSES IN RESPECT OF THE ABOVE LOANS / CREDITS.' 3. BRIEF FACTS ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALER IN GUM, PULSES CHEMICALS & DRYFRUITS. THE ASSESSEE FILED HIS RETURN OF INCOME ON 27.9.2009 DECLARING NIL INCOME. THE ASSE SSMENT WAS COMPLETED U/S. 143(3) ON 21.12.2001 DETERMINING THE INCOME AT RS. 50,65,860/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION OF RS. 2,31,03,785/- AND RS. 8,94,696 /- IN RESPECT OF INFERIOR QUALITY OF ALMOND IN-SHELL AND PISTACHIO K ERNAL. THE ASSESSING OFFICER HELD THAT THE PURCHASES MADE BY THE ASSESSEE FOR ALMOND IN-SHELL AND PISTACHIO KERNAL DURING THE YEA R ARE NOT ALLOWABLE AS NOT GENUINE EXPENSES. 4. ON APPEAL, THE LD. CIT(A) PARTLY DELETED THE ADDITION/DISALLOWANCES MADE BY THE ASSESSING OFFICE R. 5. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY S UPPORTS THE ORDER OF THE ASSESSING OFFICER IN MAKING ADDITION/D ISALLOWANCE TOWARDS INFERIOR QUALITY OF PURCHASES OF ALMOND IN -SHELL AND PISTACHIO KERNAL TREATING THEM AS NOT GENUINE PURCH ASES BY THE ASSESSING OFFICER. 6. THE LD. COUNSEL FOR THE ASSESSEE SUPPORTS THE OR DER OF THE LD. CIT(A) IN PARTLY DELETING THE ADDITION /DISALLOWANC E. ITA NO. 4760/M/2013 3 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT REDUCED THE COST OF ALMOND IN-SHELL AND PISTACHIO KERNAL FROM THE PURCHASES HOLDING THAT THE ASSESSEE HAD PU RCHASED INFERIOR QUALITY OF GOODS AND THEREFORE INCURRED LOSS. HE C ONCLUDED THAT THE PURCHASES ARE NOT GENUINE OBSERVING THAT LOSS ON PO OR QUALITY OF SUPPLY OF ITEM SHOULD BE BORNE BY THE SUPPLIER AND NOT BY THE ASSESSEE. THE LD. CIT(A) HAS ANALYZED THE SUBMISS IONS AND THE CONTENTIONS OF THE ASSESSING OFFICER IN DETAIL AND PARTLY SUSTAINED THE ADDITIONS OBSERVING AS UNDER: ASSESSEE HAS SUBMITTED THAT ASSESSING OFFICER ERRE D IN MAKING ADDITION IN RESPECT OF PURCHASE OF ALMOND IN SHELL OF RS: 2,31,03,785/-. IT IS OBSERVED FROM THE RECORDS THAT ASSESSEE HAD SHOWN A NET LOSS OF RS. IN THE P&L A/C RS. 2,06,71, 168/- AND CALLED FOR DETAILS OF TRADING ACTIVITY IN VARIOUS I TEMS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD INCURRED GROSS LOSS OF RS. 48,12,324/- IN TRADING ACTIVITY AND GRO SS LOSS OF RS. 51,78,963/- IN TRADING IN ALMONDS IN SHELL WHICH RE SULTED IN NET LOSS OF RS. 2,06,71,168/- ALSO AFTER DEDUCTING THE EXPENSES OF BUSINESS . TOTALLING RS. 3,13,51,813/-. IT WAS FUR THER NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD INCURRED TH ESE TRADING LOSSES TOTALLING RS. 51,78,963/- MAINLY IN RESPECT OF TRADING IN ALMOND IN SHELL. ASSESSING OFFICER CALLED FOR DETAI LS AND FOUND OUT THAT THESE TRADING LOSSES IN RESPECT OF ALMOND IN S HELL CONSISTED OF TRADING WITH M/S JAYLON IMPEX INDIA PVT. LTD., MUMB AI AND ASSESSEE HAD EFFECTED TOTAL PURCHASES OF RS. 3,89,8 7,641/- FROM JAYLON IMPEX INDIA PVT. LTD. OF ALMOND IN SHELL AND OTHER COMMODITIES BUT LOSSES HAD OCCURRED IN RESPECT OF T RADING IN ALMOND IN SHELL OF RS. 51,78,963/- WITH THIS PARTY. ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE HAD NOT MADE PAY MENT OF RS. 2,31,03,785/- TO M/S. JAYLON IMPEX INDIA PVT. LTD. IN RESPECT OF PURCHASES OF RS. 2,31,03,785/- OUT OF TOTAL PURCHAS E OF RS. 3,13,51,813/- TO THE SELLER OF GOODS, THAT IS JAYLO N IMPEX INDIA PVT. LTD. TILL THE END OF 31/3/2009, THAT IS THE EN D OF FINANCIAL YEAR. ITA NO. 4760/M/2013 4 4.2.3 IT IS OBSERVED FROM THE RECORDS THAT (1) ASSE SSEE EFFECTED PURCHASES OF RS. 3,13,51,813/- FROM 14/5/2 008 TO 29/11/2008 DURING F.Y. 2008-09 RELEVANT TO A.Y.2009 -10 REGULARLY DESPITE DEFECTIVE GOODS BEING SUPPLIED BY M/S. JAYLON IMPEX INDIA PVT. LTD. IN MAY AND AUGUST 2008 AND AL SO MADE PAYMENTS TO M/S. JAYLON IMPEX INDIA PVT. LTD. IN SE PTEMBER, OCTOBER, NOVEMBER AND DECEMBER 2008 AND IN FEBRUARY 2009 DESPITE THE FACT THAT ASSESSEE HAD ALREADY GIVEN IN TEREST FREE LOAN OF RS. 1,68,78,835/- AND INTEREST FREE ADVANCE OF R S. 3,49,02,030/- TO M/S. JAYLON IMPEX INDIA PVT LTD. IN THE BEGINNIN G OF THE YEAR AND WHICH WAS OUTSTANDING AS 31/3/2009, (2) ASSESSE E KEPT ON PURCHASING AND SELLING GOODS FROM/TO JAYLON IMPEX I NDIA PVT. LTD. EVEN AFTER MAY AND AUGUST 2008, (3) ASSESSEE H AS EFFECTED FURTHER LOAN TRANSACTIONS AND PURCHASE TRANSACTIONS WITH JAYLON IMPEX INDIA PVT. LTD. DURING FY 2009-10 RELEVANT TO A.Y 2010-11 RESULTING IN ULTIMATE SQUARING UP OF ALL THE ACCOUN TS WITH JAYLON IMPEX INDIA PVT. LTD. TO A BALANCE RECOVERABLE OF R S. 8,40,517/- ONLY ON 31/3/2010. ALL THESE FACTS CLEARLY INDICATE THAT ASSESSEE COULD HAVE EXTRACTED A REDUCTION IN PURCHASE PRICE FROM JAYLON IMPEX INDIA PVT. LTD. IN RESPECT OF PURCHASE OF ALM OND IN SHELL EVEN THOUGH ASSESSEE'S CONDITION VIS-A-VIS JAYLON I MPEX INDIA PVT. LTD., WAS LITTLE PRECARIOUS IN VIEW OF LOAN AND ADV ANCES ALREADY GIVEN BY HIM. HOWEVER, KEEPING IN VIEW THE ENTIRE F ACTS OF THE CASE IT WOULD APPEAR THAT INCURRING OF LOSSES IN PU RCHASE OF DEFECTIVE GOODS FROM M/S. JAYLON IS NOT FULLY JUSTI FIABLE. AFTER ALL THE ASSESSEE HAS BEEN IN THE BUSINESS FOR LAST SEVE RAL YEARS AND NO PRUDENT BUSINESSMAN TRANSACTS IN THIS FASHION. THIS IS BUYING GOODS, FINDING IT DEFECTIVE LATER ON, AND RECONCILI NG WITH THE SAME. THE ASSESSEE'S EXPLANATIONS AND SUBMISSIONS A RE NOT CONVINCING TO FAVOUR HIS STAND. IT ALSO APPEARS FRO M THE RECORDS THAT AO'S ACTION IN ADDING ENTIRE PURCHASES TOTALLI NG RS. 2,31,03,785/- WITHOUT CONSIDERING THE_ENTIRETY OF A LL THE TRANSACTIONS OF PURCHASE, SALES AND LOAN/ADVANCES T RANSACTIONS IS ALSO WITHOUT MERIT. KEEPING IN VIEW, ENTIRE FACT S OF ASSESSEE'S CASE IT IS HELD THAT ADDITIONS TO THE EXTENT OF LOS S OF RS. 51,78,963/- INCURRED BY THE ASSESSEE OUT OF TOTAL A DDITIONS OF RS. 2,31,03,785/- ARE CONFIRMED AND BALANCE ADDITIONS O F RS. 1,79,24,822/- ARE DELETED. 4.2.4. FACTS OF THE CASE ARE SIMILAR WITH THE DIFF ERENCE THAT TOTAL PURCHASES MADE FROM M/S SHRI ENTERPRISES, MUMBAI TO TALLED RS. ITA NO. 4760/M/2013 5 38,94,696/- DURING THE FY 2008-09RELEVANT TO AY 200 9-10 AND AMOUNT PAYABLE AND RECEIVABLE BY ASSESSEE FROM M/S SHRI ENTERPRISES AS ON 31/3/2009 WERE RS. 8,94,696/- AND RS. 10,89,762/- RESPECTIVELY AND NET BALANCE RECEIVABLE AS ON 31/3/2009 FROM SHRI ENTERPRISES WAS RS. 1,95,066/-. ASSESSEE EFFECTED TOTAL PURCHASES OF 8000 KG OF PISTACHIO KE RNELS FROM SHRI ENTERPRISES AT RS. 38,94,696/- FROM 5/12/2008 TO 7/2/2009 AND SOLD THESE TO FIVE TRADERS IN NAVI MUMBAI MARKE T FOR RS. 35,23,931/- AND INCURRED A GROSS LOSS OF RS. 3,70,7 65/- IN THESE TRANSACTIONS. AMOUNT PAYABLE AS ON 31/3/2009 WAS RS . 8,94,696/- AND RECEIVABLE WAS RS. 10,89,762/- THUS LEAVING A NET RECEIVABLE BALANCE OF RS. 1,95,066/-. REASONS GIVEN BY THE ASSESSEE IN RESPECT OF THESE TRANSACTIONS ARE ALSO SIMILAR. AO MADE A SIMILAR ADDITION OF RS. 8,94,696/- ON ACCOUN T OF OUTSTANDING AMOUNT PAYABLE TO SHRI ENTERPRISES, MUM BAI AND ASSESSEE IS IN APPEAL ON THE ISSUE. IN VIEW OF SIMI LARITY OF CIRCUMSTANCES AND FACTS OF THE CASE, ADDITION OF RS . 8,94,696/- IS NOT JUSTIFIED, HOWEVER INCURRENCE OF LOSS OF RS. 3, 70,765/- BY THE ASSESSEE IN RESPECT OF SIMILAR TRANSACTIONS IS ALSO NOT JUSTIFIED. KEEPING IN VIEW, THE FACTS OF THE CASE THE LOSS OF RS. 3,70,765/- INCURRED BY THE ASSESSEE IS DIRECTED TO BE ADDED B ACK. THUS THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. THE REVENUE COULD NOT REBUT ANY OF THE ABOVE FIN DINGS OF THE LD. CIT(A). ON READING OF THE ORDER OF THE LD. CIT (A), WE DO NOT FIND ANY INFIRMITY IN RESTRICTING THE ADDITIONS TO THE E XTENT OF LOSS SUFFERED BY THE ASSESSEE AND NOT THE ENTIRE PURCHASES OF THE ITEMS. THUS, WE SUSTAIN THE ORDER OF THE LD. CIT(A) AND DISMISS REV ENUES GROUNDS. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016. SD/- SD/- (ASHWANI TANEJA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 29 TH APRIL, 2016 . % . ./ RJ , SR. PS ITA NO. 4760/M/2013 6 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI