ASHOK R. MAKWANA, MUMBAI V. ITO 24(3)(1), MUMBAI

ITA 5332/MUM/2009

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3648 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-08-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 17-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A DHYANI
• Keywords: Bogus purchase; Unexplained investment; Tax effect
• Section: 143(3); 133(6)

Judgement Text

, IN THE INCOME - TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SH RI RAJENDRA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER / ITA NO. 5332 /M/20 09 / ASSESSMENT YEAR 200 4 - 0 5 ASHOK R. MAKWANA C/O. P. SHAH & CO., C.AS 308, REWA CHAMBERS, NEW MARINE LINES, MUMBAI 400 018. (APPELLANT) PAN : AFNPM 2402 E VS ITO 24(3)(1) PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMP LEX, BANDRA (E), MUMBAI 400 051. (RESPONDENT) APPELLANT BY : SHRI DHARMESH SHAH RESPONDENT BY : SHRI R.A. DHYANI DATE OF HEARING : 21/10/2015 DATE OF PRONOUNCEMENT : 15 /01/2016 O R D E R PER AMIT SHUKLA, JM : THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DT. 10.7.2009 PASSED BY THE CIT(A) - 24, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y 2004 - 05. 2. OUT OF THE VARIOUS GROUNDS OF APPEAL, THE ASSESSEE HAS O NLY P RESSED FOR TWO GROUNDS, THAT IS (I) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 5,33,049/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASES AND (II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION AMOUNT ING TO RS. 57,245/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK. THE OTHER GROUNDS RAISED BY REVISED GROUNDS OF APPEAL HAVE NOT BEEN PRESSED. 2 ASHOK R. MAKWANA ITA NO. 5332/MUM/2009 ACCORDINGLY, GROUND NOS. 1, 4, 5 AND 6 ARE NOT PRESSED BY THE LD. COUNSEL ON THE GROUND THAT THE AMOUNT INVOLV ED IS VERY SMALL HAVING VERY LESS TAX EFFECT. 3. THE BRIEF FACTS OF THE ISSUE RAISED QUA THE ADDITION S OF RS. 5,33,049/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASES AND RS. 57,245/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK ARE THAT , THE LD. AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS HAD ISSUED NOTICE S U/S 133(6) TO THREE PARTIES VIZ. (I) M/S. H.M. ELECTRODES, (II) M/S. SHUBHAM ENTERPRISES AND (III) M/S. METRO STEEL TRADERS FROM WHOM THE ASSESSEE HAD SHOWN PURCHASES. FROM THE CONFIRMA TION RECEIVED, THE AO NOTED THAT IN THE CASE OF M/S. H.M. ELECTRODES THE ASSESS EE HAD SHOWN MATERIAL PURCHASE OF RS. 1,63,236/ - , WHEREAS THE SAID PARTY HAD SHOWN SALE OF MATERIALS WORTH RS. 2,20,481/ - . SINCE THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE , AMOUNT OF RS. 57,245/ - WAS ADDED AS UNEXPLAINED STOCK . SIMILARLY, IN THE CASE OF THE OTHER TWO PARTIES IT WAS FOUND THAT THESE PARTIES WERE NOT AVAILABLE ON THE ADDRESSES GIVEN BY THE ASSESSEE , THEREFORE , THE NOTICES COULD NOT BE SERVED. ACCORDINGLY, THE PURCHASES OF RS. 2,01,920/ - IN RESPECT OF M/S. SHUBHAM ENTERPRISES AND RS. 3,31,129/ - IN RESPECT OF M/S. METRO STEEL TRADERS AGGREGATING TO RS. 5,33,049/ - IS BOGUS PURCHASES . 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT THE AO HAD ONLY ASKED TO RECONCILE THE DIFFERENCE OF THE PURCHASES SHOWN BY THE ASSESSEE FROM M/S. H.M. ELECTRODES AND SECONDLY, THE AO NEVER ASKED THE ASSESSEE TO PRODUCE THE TWO PARTIES E SPECIALLY WHEN CONFIRMATIONS FROM THESE TWO PARTIES WERE FILED BEFORE THE AO. THE L D. CIT(A ) SENT ALL THESE DETAILS TO THE AO TO SUBMIT HIS REMAND REPORT WHICH WAS SUBMITTED BY THE AO VIDE HIS REMAND REPORT DT. 6.5.2009. THE L D. CIT(A) WITHOUT CONSIDERING THE ASSESSEES EVIDENCES AS WELL AS THE MATERIAL DISCUSSED IN THE REMAND REPORT HAS SOLELY GONE BY THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT RESPOND BEFORE THE AO AND THE SUMMONS ISSUED IN CASE OF THE TWO 3 ASHOK R. MAKWANA ITA NO. 5332/MUM/2009 PARTIES REMAINED UN - SERVED. THUS, HE REJECTED THE ASSESSEES CONTENTION AND UPHELD THE ADDITIONS. 5 . BEFORE US, THE L D. COUNSEL SUBMITTED THAT DURING THE COURSE OF THE REMAND PROCEEDINGS, THE ASSESSEE HAD FILED NOT ONLY THE CONFIRMATIONS FROM THESE PARTIES BUT ALSO THE INVOICES RAISED BY THESE PARTIES. IN THE CONFIRMATION OF THE LEDGER ACCOUNT ALONGWIT H THEIR LETTER, THEY HAVE DULY CONFIRMED THE PURCHASES MADE BY THE ASSESSEE. IN THE REMAND REPORT THE AO HAS ALSO TAKEN NOTE OF THE RECONCILIATION FILED BY THE ASSESSEE WITH REGARD TO M/S. H.M. ELECTRODES STATING THAT THE JOURNAL ENTRY ON 31.3.2004 HAS BE EN STATED TO BE WRONGLY PASSED BY THE S AID PARTY AS THE SAME PERTAINS TO A.Y 2003 - 04. SIMILARLY, IN THE CASE OF THE OTHER TWO PARTIES, THE ASSESSEE HAD MADE THE PAYMENT FOR THE PURCHASES THROUGH ACCOUNT PAYEE CHEQUES, DETAILS OF WHICH HAVE BEEN NOTED IN THE REMAND REPORT. ALL THESE ASPECTS HAVE NOT BEEN EXAMINED B Y THE L D. CIT(A) AT ALL. 6. ON THE OTHER HAND, THE L D. DR STRONGLY RELIED UPON THE ORDER OF THE L D. CIT(A) AND SUBMITTED THAT IN THE REMAND REPORT THE AO HAS ULTIMATELY DOUBTED THE TRANSACTION AS PER THE REASONING GIVEN THEREUNDER. THEREFORE, THE ADDIT ION SUSTAINED BY THE L D. CIT(A) SHOULD BE CONFIRMED. 7. AFTER CONSIDERING THE RIVAL CONTENTIONS AND ON PERUSAL OF THE RELEVANT MATERIAL ON RECORD AND THE FINDING GIVEN IN THE IMPUGNED ORDER, WE FIND THAT IN THE CASE OF M/S. H.M. ELECTRODES THE ADDITION HAS BEEN MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES TO THE ASSESSEE BY THE SAID PARTY. THE ASSESSEE DURING THE COURSE OF THE REMAND PROCEEDINGS FIL ED A COPY OF LEDGER ACCOUNT FROM 1.4.2003 TO 31.3.2004 IN THE B OOKS OF M/S. H.M. ELECTRODES AND POINTED OUT THAT THE JOURNAL ENTRY OF 31.3.2004 OF RS. 57,245/ - HAS WRONGLY BEEN PASSED BY THE SAID PARTY AS THE SAME PERTAINS TO A.Y 2003 - 04 . THE AO AND THE L D. CIT(A) WITHOUT THERE BEING ANY 4 ASHOK R. MAKWANA ITA NO. 5332/MUM/2009 FURTHER ENQUIRY OR ANY MATERI AL ON RECORD TO REBUT THE CONTENTION OF THE ASSESSEE HAS CONFIRMED THE ADDITION SOLELY REL YING UPON UNCONFIRMED INFORMATION RECEIVED FROM M/S. H.M. ELECTRODES. THE ENTRY IN THE BOOKS OF ACCOUNTS OF THE THIRD PARTY CANNOT BE PRESUMED TO BE SACROSANCT ONCE THE ASSESSEE HAS DENIED THE TRANSACTION AND HAS DULY EXPLAINED THE REASONS FOR SUCH DIFFERENCE. ACCORDINGLY, THE ADDITION OF RS. 57,245/ - CANNOT BE UPHELD AS UNEXPLAINED INVESTMENT . 8. AS REGARDS THE PURCHASES MADE FROM M/S. SHUBHAM ENTERPRISES AND M/S . METRO STEEL TRADERS, IT IS SEEN THAT THE ASSESSEE HAD FILED THE COPY OF THE INVOICES RAISED BY THESE PARTIES AND THE AMOUNT FOR PURCHASES HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. IN THE CASE OF M/S. SHUBHAM ENTERPRISES, THE AO IN THE REMAND REPORT HAS NOT ACCEPTED THE ASSESSEES CONTENTION ON THE GROUND THAT THE PAYMENT FOR PURCHASES MADE BY THE ASSESSEE IS AFTER A GAP OF 10 - 13 MONTHS . THIS CANNOT BE THE REASON FOR DISBELIEVING THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTY, ESPECIALLY WHEN CONFIRMED COPY OF LEDGER ACCOUNT AND BANK DETAILS HAVE BEEN GIVEN FOR THE PURCHASES MADE. ACCORDINGLY, THE PURCHASES AMOUNTING TO RS. 2,10,920/ - MADE FROM M/S. SHUBHAM ENTERPRISES IS HELD TO BE GENUINE AND CONSEQUENTLY, THE ADDITION CONFIRMED BY THE LD. CIT(A) STANDS DELETED. 9. IN THE CASE OF M/S. METRO STEEL TRADERS, THE ASSESSEE HAD PRODUCED THE LEDGER ACCOUNT AND ALSO THE BANK STATEMENT WHICH SHOWS THE PURCHASES MADE FROM THE SAID PARTY ON 11.6.2003 AMOUNTING TO RS. 1,39,929/ - AND RS. 1,91,200/ - ON 14.2.2004 AND REPAYMENT HAS BEEN MADE ON 7.7.2003 AMOUNTING TO RS.1,33,170/ - . THE AO IN THE REMAND REPORT THOUGH HAS NOTED DOWN THE VARIOUS TRANSACTIONS, BUT NOTED THAT AT THE END OF THE YEAR CERTAIN AMOUNT IS OUTSTANDING AND CERTAIN BALANCE PAYMENT DOES NOT APPEAR TO BE GENUINE. HERE, THE AO IS NOT DOUBTING THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTY BUT PART OF 5 ASHOK R. MAKWANA ITA NO. 5332/MUM/2009 TRANSACTION . ONCE THE ASSESSEE HAS FILED COPY OF INVOICES AND THE DETAILS OF PAYMENT THROUGH CHEQUES, THE N WHOLE OF THE PURCHASES CA NNOT BE HELD TO BE NOT GENUINE UNLESS SOME FURTHER ENQUIRY HAS BEEN DONE TO SHOW THAT THE ENTRIES IN THE THIRD PARTY ACCOUNT ARE GENUINE AND THAT OF ASSESSEE IS FALSE . THE L D. CIT(A) HAS NOT EVEN FOUND IT PROPER TO VERIFY THE CONTENTS NOTED DOWN IN THE RE MAND REPORT AND HAS SIMPLY UPHELD THE ORDER OF THE AO WHICH, IN OUR OPINION, CANNOT BE SUSTAINED AT ALL . ACCORDINGLY, THE ADDITION AS SUSTAINED BY THE LD. CIT(A) ON THESE ACCOUNTS STANDS DELETED. 10. THUS, IN VIEW OF THE FINDING GIVEN ABOVE, THE ADDITION OF RS. 57,245/ - AND RS. 5,33,049/ - STANDS DELETED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2016. ____ , 201 6 SD/ - SD/ - ( / RAJENDRA ) / ACCOUNTANT MEMBER ( / AMIT SHUKLA ) / JUDICIAL MEMBER MUMBAI, DATE: 15 .01.2016 . . . SSL. SR.PS / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 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. 6 ASHOK R. MAKWANA ITA NO. 5332/MUM/2009