DCIT 22(1), NAVI MUMBAI V. HEMENDRA C. DAFTARY, MUMBAI

ITA 4910/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101209 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K MOHANDA S

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND PAWAN SINGH , JM ./ I.T.A. NO . 4910 / MUM/20 1 3 ( / ASSESSMENT YEA R : 200 6 - 07 ) DY. COMMISSIONER OF INCOME TAX - 22 (1), ROOM NO. 411 , 4TH FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMVAI - 400705 / VS. SHRI HEMENDRA C DAFTARY, NEELKANTH ANAND, OPP BANK OF INDIA, M G ROAD, GHATKOPAR (W), MUMBAI - 400086. ( / APPEL LANT ) .. ( / RESPONDENT ) ./ ./PAN. : AFFPDI910E / APPELLANT BY SHRI K. MOHANDAS / R EVENUE BY SHRI NISHIT GANDHI / DATE OF HEARING : 6 .10. 201 5 / DATE OF PRONOUNCEMENT: 6 .10. 201 5 / O R D E R P ER B R BASKARAN, AM : THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 21.04.2013 PASSED BY LD CIT(A) - 19, MUMBAI AND IT RELATES TO THE ASSESSMENT Y EAR 2006 - 07. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE FOLLOWING ADDITIONS MADE BY THE AO. (A) DISALLOWANCE OF 10% OF PURCHASES (B) DISALLOWANCE OF 10% OF LABOUR CHARGES (C) ADDITION OF SUNDRY CREDITORS BALANCE . I TA NO. 4910 / MUM/20 1 3 2 3. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF SAREES AND READYMADE GARMENTS TO LATIN AMERICAN COUNTRIES. ACCORDING TO THE AO, THE ASSESSEE DID NOT CO - OPERATE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED LETTERS TO SOME OF THE SUPPLIERS SEEKING CONFIRMATIONS FROM THEM, BUT HE DID NOT RECEIVE REPLY FROM SEVEN OF THEM AND THE NOTICE WAS NOT SERVED ON ONE PERSON. HENCE THE AO CAME TO THE C ONCLUSION THAT THE PURCHASES CLAIMED BY THE ASSESSEE STANDS UNPROVED TO THE EXTENT OF 10%. ACCORDINGLY HE DISALLOWED 10% OF THE PURCHASES VALUE. THE AO ALSO CALLED FOR DETAILS OF LABOUR CHARGES CLAIMED BY THE ASSESSEE. ACCORDING TO THE AO, THE ASSESSEE FURNISHED THE DETAILS AT THE FAG END OF THE ASSESSMENT PROCEEDINGS AND HENCE HE DISALLOWED 10% OF THE LABOUR CHARGES ALSO. THE AO FURTHER ASKED THE ASSESSEE TO GET CONFIRMATION LETTERS FROM THREE OF ITS CREDITORS. SINCE THE ASSESSEE DID NOT FURNISH THE DETAILS, THE AO ADDED THE OUTSTANDING BALANCES PERTAINING TO THE THREE CREDITORS AGGREGATING TO RS.6,64,235/ - TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELETED ALL THE THREE ADDITIONS AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF 10% OF THE VALUE OF PURCHASES MADE BY THE AO FOR THE REASON THAT THE SUPPLIERS DID NOT RESPOND TO THE NOTICES ISSUED BY THE AO. WE NOTICE THAT THE LD CIT(A) HAS FOLLOWED THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES PVT LTD (ITA NO.5604 OF 2010 DATED 17.12.2012) TO GRANT RELIEF IN RESPECT OF THIS ADDITION. IN THE CASE OF NIKUNJ EXIMPT ENTERPRISES P LTD (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE I TA NO. 4910 / MUM/20 1 3 3 AO OR THE CIT(A), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT ASSESSEE. IN THE INSTANT CASE ALSO, THE AO HAS MADE THE IMPUGNED ADDITION ON LY FOR THE REASON THAT THE SUPPLIERS DID NOT RESPOND TO THE NOTICES ISSUED BY HIM. NO OTHER MATERIAL WAS BROUGHT ON RECORD BY HIM. HENCE, THE REASONING GIVEN BY THE AO DOES NOT JUSTIFY THE ADDITION MADE BY HIM. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 6. THE NEXT ISSUE RELATES TO THE DISALLOWANCE MADE OUT OF LABOUR CHARGES. WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF LABOUR CHARGES BEFORE THE AO, BUT THE ASSESSING OFFICER DID NOT EXAMINE THE SAME WITH THE REASONING THAT THE SAME WAS FILED AT THE FAG END OF THE ASSESSMENT. BEFORE LD CIT(A) HAS SUBMITTED THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE AGAINST THOSE PAYMENTS. DURING THE COURSE OF HEARING, THE LD A.R CARRIED US THROUGH THE VARI OUS DETAILS FURNISHED BEFORE THE AO. THUS, WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE RELEVANT DETAILS, BUT THE ASSESSING OFFICER HAS MADE THE IMPUGNED DISALLOWANCE WITHOUT FINDING FAULT WITH THOSE DETAILS. HENCE, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION ALSO. 7. THE LAST ISSUE RELATES TO THE ADDITION OF SUNDRY CREDITORS BALANCES. THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITIONS ONLY FOR THE REASONING THAT THE ASSESSEE DID NOT FURNISH CONFIRMATION LETTERS OB TAINED FROM THEM. THE ASSESSEE SUBMITTED BEFORE THE LD CIT(A) THAT THE ASSESSING OFFICER HAS CALLED FOR THE DETAILS ON 12.12.2008 AND COMPLETED THE ASSESSMENT ON 26.12.2008, I.E., WITHOUT PROVIDING ADEQUATE TIME TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT TWO OF THE THREE CREDITORS ARE HAVING RUNNING ACCOUNT WITH THE ASSESSEE AND THE REMAINING PARTY M/S AVANI GARMENTS WAS PAID IN FULL IN THE SUCCEEDING YEAR. HENCE, THE LD CIT(A) HAS TAKEN THE VIEW THAT THE ASSESSING OFFICER HAS MADE THIS ADDITION I TA NO. 4910 / MUM/20 1 3 4 ON S URMISES AND CONJECTURES. THE LD A.R SUBMITTED BEFORE US THAT THE ASSESSEE HAD PROVIDED THE ADDRESSES OF ALL THE SUNDRY CREDITORS AND THE ASSESSEE COULD NOT FURNISH THE CONFIRMATION LETTERS ONLY FOR WANT OF TIME. ACCORDINGLY HE CONTENDED THAT THE ASSESSI NG OFFICER WAS NOT JUSTIFIED IN DRAWING ADVERSE INFERENCES WITHOUT FINDING FAULT WITH THE ACCOUNT BOOKS OF THE ASSESSEE. WE FIND MERIT IN THE SAID CONTENTIONS. ADMITTEDLY, THE ASSESSEE WAS NOT GIVEN SUFFICIENT TIME TO FURNISH THE CONFIRMATION LETTERS. E VEN OTHERWISE, IT IS STATED THAT TWO OF THE THREE PARTIES ARE HAVING RUNNING ACCOUNTS WITH THE ASSESSEE. THE THIRD PARTY HAS BEEN FULLY PAID IN THE SUCCEEDING YEAR BY WAY OF CHEQUES. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DRAWING ADVERSE INFERENCES AGAINST THE ASSESSEE WITHOUT BRINGING ANY OTHER MATERIAL ON RECORD. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION ALSO. 8. IN THE RESULT, THE APPEAL FILED BY TH E REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 6TH OCTOBER, 2 015. 6TH OCTOBER, 2 015 SD SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 6TH OCTOBER, 2 015. . . ./ SRL , SR. PS I TA NO. 4910 / MUM/20 1 3 5 / COPY OF THE ORDER FORWARD ED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD F ILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI