M/s Mahad Joo & Sons, Kashmir V. The Income Tax Officer, Srinagar

ITA 540/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7746 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: SUNIL K BHAT LD
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO.540(ASR)/2016 ASSESSMENT YEAR:2011-12 M/S MAHAD JOO & SONS, GUNJ KHUD, SRINAGAR, KASHMIR. PAN:AAFFM-2034F VS. INCOME TAX OFFICER, WARD-3 (2), SRINAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SUNIL K. BHAT (LD. CA.) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING: 16.08.2017 DATE OF PRONOU NCEMENT:25.10.2017 ORDER PER N. K. CHOUDHRY: THE INSTANT APPEAL HAS BEEN FILED BY THE ASSESSEE, ON FEE LING AGGRIEVED AGAINST THE ORDER DATED 25.05.2016 PASSED BY THE LD. CIT(A)-, JAMMU, IN APPEAL NO.63/14-15 FOR ASST. YEAR: 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED:- 1. IN DENYING GENUINE RELIEF TO APPELLANT BY CONFIRMIN G THE DISALLOWANCE OF RS.6,32,915/- AS BOGUS PURCHASES CONTRARY TO DOC UMENTARY EVIDENCE PLACED ON RECORD WHICH HAS NOT BEEN PROVED INCORRECT. 2. IN DISPOSING OFF THE APPEAL WITHOUT CONSIDERING AND PASSING ANY SPEAKING ORDER ON THE BASIS OF SUBMISSIONS FILED BY THE APPELLANT WITH REGARD TO ADHOC DISALLOWANCES UNDER VARIOUS HEADS O F EXPENSES AT RS.1,19,481/-. 3. IN TOTALLY IGNORING THE DOCUMENTARY EVIDENCE PRODUC ED IN SUPPORT OF PURCHASES ACTUALLY MADE BY THE FIRM SUPPORTED BY CO NCLUSIVE EVIDENCED AND WITHOUT DISCUSSING OR REPUDIATING THE SUBMISSIONS OF THE APPELLANT WITH REGARD TO ADHOC DISALLOWANCE OF EXPENSES. I TA NO.540(ASR)/2016 ASST. YEAR: 2011-12 2 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN HANDICRAFTS IN DOMESTIC AS WELL AS OVERSEAS MARKETS. DURIN G THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCO UNT ALONG WITH SUPPORTING DOCUMENTARY EVIDENCE. WHEN THE D ETAILS WERE SUBMITTED BY THE ASSESSEE, THE AO PICKED UP FEW CASES O N TEST CHECK BASIS AND SOUGHT INFORMATION U/S. 133(6) OF THE INCOME TAX ACT. IN THE CASE OF M/S. SHARMA ENTERPRISES, L AJPAT NAGAR, NEW DELHI AND M/S. CHIRAG ENTERPRISES, BAKSHI HEM RAJ KI GALI, KHAWAS JI KA RASTA, HAWA MOHAL ROAD, JAIPUR THE NOTICES ISSUED BY THE AO WERE RECEIVED BACK WITH THE POSTAL REM ARKS 'NO SUCH ADDRESS' AND 'INCOMPLETE ADDRESS' RESPECTIVELY. WHE N THE ASSESSEE WAS CONFRONTED WITH THIS, THE ASSESSEE PROVIDED THE NEW ADDRESS OF M/S. SHARMA ENTERPRISES BUT WHEN THE NOTI CE WAS RE-SENT, IT WAS RECEIVED BACK AGAIN WITH POSTAL REMAR K 'INCOMPLETE ADDRESS.' ACCORDINGLY, THE AO DISALLOWED THE PURCHASES, CLAIMED TO HAVE MADE FROM THE ABOVE PARTY AS BOGUS PURCHASE AND ADDED A SUM OF RS.6,32,915/- TO THE INCOME OF THE ASSESSEE. SECONDLY, WHILE PERUSING THE INFORMATION FILED BY THE ASSESSEE IT WAS FOUND THAT THE ASSESSEE HAD CLAIMED HUGE EXPENSES UNDER THE HEADS 'COMMISSION ON SALES' AT RS.10,54,390/-, 'TRAVELLING AND CONVEYANCE' AT RS.6,77, 112/- MESS EXPENSES AT RS.4,36,617/- AND BUSINESS PROMOTION A T RS.2,21,510/- AND BOOKED INTO ITS PROFIT AND LOSS ACCOUNT . WHEN THE ASSESSEE WAS ASKED TO PRODUCE THE SUPPORTING BILLS AND VOUCHERS TO SUBSTANTIATE THESE EXPENSES, THE ASSESSEE COULD NOT PRODUCE THE SAME AND THEREFORE, THE AO DISALLOWED THE EXPENSES TO THE EXTENT OF 5% OF THE TOTAL EXPENSES CLAIMED AND MADE AN ADDITION OF RS.1,19,481/-. I TA NO.540(ASR)/2016 ASST. YEAR: 2011-12 3 4. ON FEELING AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT(A), WH O AFTER CONSIDERING OF THE CASE DISMISSED THE APPEAL OF THE ASSESSEE WHILE CONFI RMING THE ADDITION AMOUNTING TO RS.6,32,915/- BY THE A.O BY HO LDING AS UNDER: DETERMINATION: GROUNDS OF APPEAL NO.1, 2, 4 & 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. GROUND OF APPEAL NO. 3: AT THE OUTSET, IT IS IMPORTANT TO MENTION THAT THE APPELLANT DID NOT APPEAR BEFORE THE UNDERSIGNED IN RESPONSE TO THE NOTICES ISSUED BY THIS OFFICE FROM TIME TO TIME AND, INSTEA D, REQUESTED TO DECIDE THE CASE ON THE BASIS OF THE WRITTEN SUBMISSION FILED B Y THE APPELLANT. I, THEREFORE, TAKE UP THIS APPEAL TO DECIDE ON MERIT A FTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRI TTEN SUBMISSION MADE BY THE ASSESSEE STATED AS ABOVE. IN ITS SUBMIS SION THE APPELLANT HAS SUBMITTED THAT THE PURCHASES MADE FROM M/S. SHARMA ENTERPRISES, LAJPAT NAGAR, NEW DELHI IS A GENUINE PARTY AND DULY REGIST ERED WITH SALES TAX DEPARTMENT, NEW DELHI AND THE PAYMENT HAS BEEN MADE BY ISSUING ACCOUNT PAYEE CHEQUE DRAWN ON J & K BANK AND DULY REFLECTED IN THE BOOKS OF ACCOUNTS. 1 HAVE CONSIDERED THE ABOVE SUBMISSION BU T NOT INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT ON THE GROUND THAT THE APPELLANT HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE SUCH AS BILLS/VOUC HERS, LEDGER COPY, BANK ACCOUNT ETC. EITHER BEFORE THE AO OR BEFORE TH E UNDERSIGNED TO PROVE THE GENUINENESS OF THE PARTY I.E., M/S. SHARMA ENTE RPRISES , NEW DELHI. WHEN THE ASSESSEE HAS CLAIMED CERTAIN PURCHASES OR EXPENSES, IT IS INCUMBENT ON HIS PART TO PROVE BEYOND DOUBT ABOUT T HE GENUINENESS OF THAT PURCHASE OR EXPENSES. SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THIS DUTY, THE A.O HAS RIGHTLY DISALLOWED THE CLAIM OF PURCHAS E MADE FROM M/S. SHARMA ENTERPRISES. THUS, THE ADDITION MADE BY THE AO AMOUNTING TO RS.6,32,915/- IS CONFIRMED AND THE APPEAL IS DISMIS SED. 5. THE ASSESSEE FURTHER CARRIED THE MATTER BEFORE THIS BENCH, AND IN SUPPORT OF ITS CASE SUBMITTED THAT THE OBSERVATION OF THE LD. CIT(A) THAT THE APPELLANT HAS FAILED TO PRODUCE ANY DOCUMENTA RY EVIDENCE SUCH AS BILLS/ VOUCHERS, LEDGER COPY, BANK ACCOUNT ETC., EI THER BEFORE THE A.O OR BEFORE THE UNDERSIGNED TO PROVE THE GENUI NENESS OF THE PARTIES I.E., M/S. SHARMA ENTERPRISES, NEW DELHI. FURTH ER, IT WAS WRONGLY HELD BY THE LD. CIT(A) THAT WHEN THE ASSESSEE H AS CLAIMED CERTAIN PURCHASES OR EXPENSES, IT IS INCUMBENT ON HIS PART T O PROVE I TA NO.540(ASR)/2016 ASST. YEAR: 2011-12 4 BEYOND DOUBT ABOUT GENUINENESS OF THAT PURCHASE OR EXPE NSES. SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE DUTY, THE AO RI GHTLY DISALLOWED THE CLAIM OF PURCHASES MADE FROM MS. SHARMA EN TERPRISES. IT WAS ALSO SUBMITTED BY THE LD. AR THAT THE DEPARTMEN T HAS NOT DISALLOWED ANY AMOUNT IN THIS PARTICULAR HEAD EITHER IN THE PREVIOUS OR PAST ASSESSMENT YEARS. THUS, THE ADDITION MADE BY THE A.O AMOUNTING TO RS.6,32,915/- IS CONFIRMED AND THE APPEAL IS DISMISSE D. 6. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) AND SUBMITTED THAT THE SAME IS BASED ON LEGAL REASONING AND DOES NOT REQUIRES TO BE INTERFERED WITH. 7. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE ORDER PASSED BY THE LD. CIT(A) AT PAGE NO. 4, IT IS CLEARLY WRITTEN THAT THE DETAILED LEDGER ACCOUNT DULY DEPICTIN G ALL THE TRANSACTIONS OF PURCHASES & PAYMENTS MADE ALONG WITH THE B ILLS ISSUED BY THE VENDOR VERIFYING THE PURCHASES IS ENCLOSED FOR YOU R KIND PERUSAL AS (ANNEXURE-1) TO THIS REPLY AND FROM THE PAGE NO.17 OF THE PAPER BOOK SUBMITTED BY THE AR WHICH CLEARLY REFLECTS THE CREDI T ENTRIES OF RS.40,800/-, RS.1,87,250/-, RS.1,03,665/-, RS.3,01,200/ - TOTALING TO RS.6,32,915/- AND FROM THE LEDGER ACCOUNT OF M/S SHARMA ENTERPRISES, DELHI (CR) THERE IS A DEPICT ENTRY OF RS.2,28,050/- A ND 1,03,665/- AND TOTALING TO RS.6,32,915/-. FURTHER THE PURCHASE OF THE ITEMS ARE ALSO CORROBORATED BY DETAILED INVOICES OF RS.40,800/- VIDE BOOK NO.6, SERIAL NO.256 DATED 01.11.2010, RS.1,87,200/- VIDE BOOK NO. 6, SERIAL NO.257 DATED 01.11.2010, RS.1,03,665/- VIDE BOOK NO. 6, SERIAL NO.259 DATED 03.01.2011 AND RS.3,01,200/- VIDE BOOK NO.6, SERIAL NO.260 DATED 02.02.2011 AND VAT FORM SUBMITTED BY TH E ASSESSEE VIDE PAGE NO.22 TO 24 WHICH CLEARLY REFLECTS THE SAID TR ANSACTIONS, THEREFORE, CONSIDERING THE SAME AS THE ASSESSEE HAS FILED D ETAILED I TA NO.540(ASR)/2016 ASST. YEAR: 2011-12 5 LEDGER ACCOUNT DULY DEPICTING THE TRANSACTIONS OF PURCHASE S AND PAYMENTS MADE ALONG WITH BILLS ISSUED BY THE VENDOR VE RIFYING THE PURCHASES FOR KIND PERUSAL OF THE LD. CIT(A), HOWEVER, IT SEEMS THAT INADVERTENTLY HE FAILED TO LOOKED INTO THE SAID DOCUM ENTS. HENCE, WE ARE OF THE CONSIDERED OPINION THAT ONCE THE ASSESSEE HAS DISCHARGED HIS ONUS TO SUBSTANTIATE THE PURCHASE OF THE DISALLOWED AMOUNT BY PRODUCING LEDGER ACCOUNT, DETAIL INVOICES AND VAT FORM ETC. THEN WE DO NOT FIND ANY REASON TO SUSTAIN THE ADDITION, HENCE, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER PASSED BY THE LD. CIT (A) SUFFERS FROM PERVERSITY, IMPROPRIETY AND BASED ON THE ILLOGICA L REASON. HENCE, THE SAME IS SET ASIDE AND THE ADDITION OF RS.RS.6,32,915/ - IS DELETED. 7.1 THAT THE ASSESSEE HAS NOT PREFERRED THE GROUND NO.2 WH ICH RELATES TO ADHOC DISALLOWANCES UNDER VARIOUS HEADS OF EXPE NSES AT RS.1,19,481/- HENCE, DOES NOT REQUIRES SPECIFIC ADJUDICATI ON. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.10.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY ) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 25.10.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER