J. KUMAR SOFTWARE SYSTEMS (I) PVT. LTD., MUMBAI V. J.C.I.T.(OSD) CENTRAL CIRCLE 39, MUMBAI

ITA 5100/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8026 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 24-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Bogus purchase; Unexplained cash credit; Opportunity of being heard; Corroborative evidences
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI ! , ' #$ % % % % , , #$ & BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUICIAL MEMBER ./ I.T.A. NO.5100/MUM/2012 ( ' ' ' ' / ASSESSMENT YEAR :2008-09 M/S. J. KUMAR SOFTWARE SYSTEMS (I) PVT. LTD., 16-A, ANDHERI INDUSTRIAL ESTATE, VEERA DESAI ROAD, ANDHERI (W), MUMBAI-400 058 / VS. THE JCIT (OSD), CENTRAL CIRCLE-39, AAYAKAR BHAWAN, NEW MARINE LINES, MUMBAI-400 020 $( ' ./ ) ./ PAN/GIR NO. : AABCJ 8239J ( (* / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / APPELLANT BY: SHRI VIJAY KOTHARI +,(* . - / RESPONDENT BY: SHRI S.D. SRIVASTAVA . /0' / DATE OF HEARING :30.07.2014 12' . /0' / DATE OF PRONOUNCEMENT :08.08.2014 #3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-41, MUMBAI DT.24.5.2012 PERTAINING TO A .Y. 2008-09/ ITA NO. 5100/M/2012 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE READS AS UNDE R: ON FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE SUBJECT THE LD. AO ERRED IN ADDING RS. 3,48,23,985/ - AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT, 19 61. ON FACTS & CIRCUMSTANCES OF THE CASE & LAW ON THE SUBJ ECT CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 3,48, 23,985/-. ON FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON T HE SUBJECT THE ADDITION BE DELETED. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS. 8,00,00,000/- FROM V ARIOUS PARTIES. THE AO OBSERVED THAT DURING THE COURSE OF THE SEARCH U/ S. 132, ONE OF THE GROUP CONCERN M/S. JKIL HAD ADMITTED THAT THE SHAR E APPLICATION MONEY WAS ITS OWN UNDISCLOSED INCOME WHICH WAS GEN ERATED THROUGH BOOKING OF BOGUS PURCHASE BILLS. THE AO WENT ON TO CONSIDER THE AMOUNT OF FUND AVAILABLE ON A PARTICULAR DATE AFTER DEDUCT ING THE COMMISSION @ 1.25% ON ACCOUNT OF SUCH BOGUS BILLS AND ITS INTROD UCTION IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AO WAS OF THE OPINION THAT ON FEW DATES THERE WAS NEGATIVE FUND BALANCE WHEREAS ENTRIES OF FUNDS INTRODUCTION AS SHARE APPLICATION MONEY IN THE ASSESSEES BOOKS OF ACCOUNT WAS STILL TAKEN. THE AO HAS EXHIBITED SUCH DATES WITH AMOUN T AT PARA 7.3 OF HIS ORDER. THE TOTAL SHORTFALL WAS COMPUTED AT RS. 3,4 8,23,985/-. 3.1. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE O F THE CREDIT ENTRIES OF RS. 3,48,23,985/-. THE ASSESSEE CLAIMED THAT IF ANY SHORTFALL IS THERE, THE DEFICIT SHOULD BE CONSIDERED AGAINST FUNDS AVAI LABLE IN THE HANDS OF SHRI JAGDISHKUMAR GUPTA ON ACCOUNT OF HIS ADMISSION OF CERTAIN BOGUS PURCHASES. THE ASSESSEE FURTHER CONTENDED THAT IF THOSE FUNDS ARE CONSIDERED THEN THERE REMAINS NO DEFICIT. THE EXPLA NATION OF THE ASSESSEE ITA NO. 5100/M/2012 3 DID NOT FIND ANY FAVOUR FROM THE AO. THE AO WAS OF THE OPINION THAT NEITHER ANY EVIDENCE SHOWING ANY CO-RELATION BETWEE N THE ASSESSEES UNEXPLAINED FUND/CASH DEFICIT AND FUNDS AVAILABLE I N THE HANDS OF SHRI JAGDISHKUMAR GUPTA ON ACCOUNT OF SUCH BOGUS PURCHA SES WAS FOUND DURING THE COURSE OF SEARCH OPERATIONS NOR ANY EVID ENCE WAS POINTED OUT OR PRODUCED BY THE ASSESSEE OR SHRI JAGDISHKUMAR GU PTA TO PUT FORTH SUCH CLAIM. THE AO FINALLY CONCLUDED THAT THERE WAS NO R ELATION BETWEEN THE ASSESSEES UNEXPLAINED FUND DEFICIT AND THE FUNDS AVAILABLE ON ACCOUNT OF BOGUS PURCHASES AS NO SUPPORTING EVIDENCE SHOWING A NY SUCH RELATION WAS PRODUCED BY THE ASSESSEE. THE AO TREATED THE D EFICIT OF RS. 3,48,23,985/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) AT PARA 2.3 OF HIS ORD ER OBSERVED THAT THE ASSESSEE HAS DECLARED RS. 52.02 CRORES AS UNEXPLAIN ED INCOME ON ACCOUNT OF BOGUS PURCHASES AND THIS UNDISCLOSED INCOME WAS INTRODUCED AS SHARE APPLICATION MONEY IN ITS GROUP COMPANIES. THE LD. CIT(A) WAS CONVINCED WITH THE CASH FLOW CHART PREPARED BY THE AO AND CONFIRMED THE ADDITION. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THAT THE AMOUNT INTRODUCED AS SHARE APPLICATION MONEY IS OUT OF THE BOGUS PURCHASES BOOKED BY THE ASSESSEE AND OFFERED FOR TAXATION DUR ING THE COURSE OF SEARCH. THE LD. COUNSEL FILED A DETAILED CHART EXH IBITING THE BOGUS PURCHASES AND THE AMOUNT RECEIVED AFTER REDUCING TH E COMMISSION. IT IS THE SAY OF THE LD. COUNSEL THAT THESE DATEWISE ENTR IES HAVE NOT BEEN ITA NO. 5100/M/2012 4 PROPERLY EXAMINED BY THE AO. THE LD. COUNSEL BY RE FERRING TO THE CHART FILED BEFORE US, SUBMITTED THAT IF THESE ENTRIES AR E CONSIDERED IN THE RIGHT PERSPECTIVE THERE WOULD REMAIN NO DEFICIT AND THE E NTIRE SHARE APPLICATION MONEY WOULD STAND EXPLAINED. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT MATERIAL EVIDENCE BROUGHT ON RECORD BE FORE US. IT IS NOT IN DISPUTE THAT THE ASSESSEE ALONGWITH ITS ASSOCIATES WAS ENGAGED IN BOOKING BOGUS PURCHASES. IT IS ALSO AN ADMITTED FACT THAT THE AMOUNT RECEIVED OUT OF SUCH BOGUS PURCHASE BILLS HAVE BEEN INTRODUCED I N THE BOOKS OF THE ASSESSEE AND ITS ASSOCIATES IN THE FORM OF SHARE AP PLICATION MONEY. THESE UNDISPUTED FACTS LEAD TO ONE CONCLUSION THAT THE AV AILABILITY OF FUNDS WITH THE ASSESSEE IS DIRECTLY RELATED TO THE BOGUS PURCH ASE BILLS BOOKED ON VARIOUS DATES. 8.1. WE HAVE CAREFULLY PERUSED THE CASH FLOW CHART SUBMITTED BY THE ASSESSEE. WE FIND MERIT IN THE CONTENTION OF THE L D. COUNSEL THAT IF THE ENTRIES ARE CONSIDERED IN THEIR RIGHT PERSPECTIVE, THERE WOULD REMAIN NO DEFICIT. IN OUR CONSIDERED VIEW, THESE ENTRIES NEE D TO BE RE-VERIFIED BY THE AO. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY THESE ENTRIES DATE-WISE ALONGWIT H BOGUS PURCHASE BILLS BOOKED BY THE ASSESSEE AND RE-DECIDE THIS ISSUE IN THE LIGHT OF HIS FINDINGS FROM THE VERIFICATION OF CASH FLOW CHART AFTER GIVI NG A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AS SESSEE IS DIRECTED TO EXPLAIN THE ENTRIES TO THE SATISFACTION OF THE AO. ITA NO. 5100/M/2012 5 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2014 #3 . 2' ' 4 5#6 08.08.2014 2 . 7 SD/- SD/- (VIVEK VARMA ) (N.K. BILLAIYA) #$ / JUDICIAL MEMBER ' #$ / ACCOUNTANT MEMBER MUMBAI; 5# DATED : 8 TH AUGUST, 2014 . . ./ RJ , SR. PS #3 #3 #3 #3 . .. . +/ +/ +/ +/ 8'/ 8'/ 8'/ 8'/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. #3 #3 #3 #3 / BY ORDER, ,/ +/ //TRUE COPY// = == = / > > > > (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI