ITO 25(3)(3), MUMBAI V. REKHA DEVELOPERS, MUMBAI

ITA 5495/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92274 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: HITESH M SHAH
• Keywords: Unexplained expenditure; Accommodation entries
• Section: 69C; 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , . / I.T.A. NO . 5 495 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 09 - 10 ) INCOME TAX OFFICER, WARD 25(3)(3), ROOM NO.304, 3 RD FLOOR, BLD. NO.C - 11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E ) , MUMBAI - 400051 / VS. M/S REKHA DEVELOPERS, 1305, GAURAV HEIGHT, MAHAVIR NAGAR, K KANDIVALI ( W ), MUMBAI - 400 067 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : A A HFR4590H / APPELLANT BY SHRI LOVE KUMAR / RE SPONDEN T BY SHRI HITESH M SHAH / DATE OF HEARING : 12 .3. 2015 / DATE OF PRONOUNCEMENT : 10 .4 . 2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATE D 5 .6 .201 2 PASSED BY THE LD.CIT(A) - 35, M UMBAI AND IT R ELATE S TO THE ASSESSMENT YEAR 20 09 - 10 . 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD.CIT(A) ON THE FOLLOWING ISSUES: - (A) DISALLOWANCE OF PURCHASE S - RS.26,03,060/ - . (B) ADDITION MADE U/S 41(1) OF THE ACT. ITA. NO . 5 495 / M UM/ 20 1 2 2 3. THE FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF RS.26,03,060/ - OU T OF PURCHASES TREATING THE SAME AS NON - GENUINE. THE AO NOTICED THAT THE ASSESSEE HAS PURCHASED MATERIALS FROM CERTAIN PERSONS, WHO HAVE BEEN IDENTIFIED BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA AS SUSPICIOUS DEALERS INDULGING IN PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS. THE ASSESSEE HAD EFFECTED PURCHASES TO THE TUNE OF RS.26,03,060/ - FROM THREE PARTIES, WHOSE NAMES FOUND PLACE IN THE LIST PREPARED BY THE SALES TAX DEPARTMENT. HENCE, THE AO DISALLOWED TH E ABOVE SAID AMOUNT TREATING THE SAME AS NON - GENUINE PURCHASES. THE LD CIT(A) DELETED THE SAME ON THE REASONING THAT THE ASSESSING OFFICER HAS FAILED TO DISPROVE THE EVIDENCES FURNISHED BY THE ASSESSEE IN SUPPORT OF THE PURCHASES. 4 . WE HEARD THE PAR TIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THIS BENCH OF TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF DEEPAK POPATLAL GALA , IN ITA NO. 5920/M/13 AND TRIBUNAL, VIDE ITS ORDER DATED 27.3.2015 , HAS HELD AS UNDER: - 10. THE NEXT IS SUE RELATES TO DISALLOWANCE MADE OUT OF PURCHASES AND ASSESSED U/S 69C OF THE ACT. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE TOTAL PURCHASE EXPENDITURE CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS.7,36,27,555 / - . THE AO NOTICED THAT THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA HAS LISTED OUT NAMES OF CERTAIN DEALERS , WHO WERE ALLEGED TO HAVE BEEN PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ACTUAL BUSINESS. THE AO NOTICED THAT THE ASSESSEE MADE PURCHASE S TO THE TUNE OF RS.38.69 LAKHS FROM TWO PARTIES NAMED M/S UMIYA SALES AGENCY PVT LTD AND M/S MERCURY ENTERPRISES , WHOSE NAMES FOUND PLACE IN THE LIST PROVIDED BY THE SALES TAX DEPARTMENT . T HE AO PLACED FULL RELIANCE ON THE ENQUIRIES CONDUCTED BY SALES TAX DEPARTMENT IN R ESPECT OF THE PARTIES, REFERRED ABOVE. ACCORDINGLY, THE AO TOOK THE VIEW THAT T HE PURCHASES TO THE TUNE OF RS.38.69 LAKHS HAVE TO BE TREATED AS UNEXPLAINED EXPENDITURE. ACCORDINGLY, HE ASSESSED THE SAME U/S 69C OF THE ACT. ITA. NO . 5 495 / M UM/ 20 1 2 3 11. THE LD. CIT(A) DELETED T HE ADDITION AND HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 12. THE LD. DR STRONGLY PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 13. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ADDITIONS MADE IN THE CASE OF SOME OTHER ASSESSES ON IDENTICAL REASONS HAVE BEEN DELETED BY THE CO - ORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES : A) RAMESH KUMAR AND CO V/S ACIT IN ITA NO.2959/MUM/2014 (AY - 2010 - 11) DATED 28.11.2014; B) DCIT V/S SHRI RAJEEV G KALATHIL IN ITA NO.6727/MUM/2012 (A Y - 2009 - 10) DATED 20.8.2014; AND C) SHRI GANPATRAJ A SANGHAVI V/S ACIT IN ITA NO. 2826/MUM/2013 (AY - 2009 - 10) DATED 5.11.2014 IN ALL THE ABOVE SAID CASES, THE CO - ORDINATE BENCHES OF THE TRIBUNAL HAS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIO N ON THE BASIS OF STATEMENT S GIVEN BY THE THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT , WITHOUT CONDUCTING ANY OTHER INVESTIGATION. IN THE INSTANT CASE ALSO, THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE PAR TIES BEFORE THE SALES TAX DEPARTMENT. WE NOTICE THAT THE LD.CIT(A) HAS TAKEN NOTE OF THE FACT THAT NO SALES COULD BE EFFECTED WITHOUT PURCHASES. HE HAS FURTHER PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS (163 ITR 249). HE HAS FURTHER RELIED UPON THE DECISION RENDERED BY THE TRIBUNAL IN THE CAE OF ITO VS. PREMANAND (2008)(25 SOT 11)(JODH), WHEREIN IT HAS BEEN HELD THAT WHERE THE AO HAS MADE ADDITION MERELY ON THE BASIS OF OBSERVATIONS MADE BY THE SALES TAX DEPT AND HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRIES FOR MAKING THE ADDITION ESPECIALLY IN A CASE WHERE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF SHOWING BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING VOUCHERS F OR SALE OF GOODS, SUCH AN ADDITION COULD NOT BE SUSTAINED. THE LD CIT(A) HAS ALSO APPRECIATED THE CONTENTIONS OF THE ASSESSEE THAT HE WAS NOT PROVIDED WITH AN OPPORTUNITY TO CROSS EXAMINE THE SELLERS, WHICH IS REQUIRED TO BE GIVEN AS PER THE DECISION OF H ONBLE KERALA HIGH COURT IN THE CASE OF PONKUNNAM TRADERS (83 ITR 508 & 102 ITR 366). ACCORDINGLY, THE LD CIT(A) HAS DELETED THE IMPUGNED ADDITION. ON A CAREFUL PERUSAL OF THE DECISION RENDERED BY LD CIT(A) WOULD SHOW THAT THE FIRST APPELLATE AUTHORITY HAS ANALYSED THE ISSUE IN ALL ANGLES ITA. NO . 5 495 / M UM/ 20 1 2 4 AND APPLIED THE RATIO LAID DOWN BY THE HIGH COURTS AND TRIBUNALS IN DECIDING THIS ISSUE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER ON THIS ISSUE. 5 . IN THE INSTANT CASE ALSO, THE FACTS ARE IDENTIC AL, I.E., THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ONLY ON THE BASIS OF INFORMATION GIVEN BY THE SALES TAX DEPARTMENT, HE DID NOT MAKE INDEPENDENT ENQUIRY WITH THE SALES TAX DEPARTMENT, THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CROSS EXAMINE TH E OFFICIALS OF SALES TAX DEPARTMENT, THE EVIDENCES FURNISHED BY THE ASSESSEE TO PROVE PURCHASES OF MATERIAL S WERE NOT DISPROVED. UNDER THESE SET OF FACTS, BY FOLLOWING THE DECISION RENDERED BY THIS BENCH OF TRIBUNAL IN THE CASE OF DEEPAK POPATLAL GALA (SU PRA), WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 6. THE NEXT ISSUE RELATES TO THE ADDITION MADE U/S 41(1) OF THE ACT. THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE ACT TO A PARTY NAMED M/S SHREE KRISHNA INTERBUILD TO VERIFY THE CORRECTNES S OF THE OUTSTANDING AMOUNT OF RS.13,42,483/ - . HOWEVER, THE ABOVE SAID PARTY, INSTEAD OF CONFIRMING THE OUTSTANDING BALANCE, CONFIRMED ONLY CURRENT YEARS TRANSACTION OF RS.1,21,000/ - . SINCE THE ASSESSEE DID NOT FURNISH ANY REPLY THEREAFTER, THE AO ASSE SSED THE OUTSTANDING AMOUNT OF RS.13,42,483/ - AS INCOME OF THE ASSESSEE U/S 41(1) OF THE ACT. THE LD CIT(A), HOWEVER, DELETED THE ADDITION ON THE REASONING THAT (A) THE ASSESSING OFFICER WAS NOT RIGHT IN ASSESSING THE AMOUNT U/S 41(1) OF THE ACT WITHOUT EXAMINING THE TRADE CREDITOR. (B) THERE IS SUBSTANCE IN THE EXPLANATION OF THE ASSESSEE THAT THE CREDITOR IS FOLLOWING CASH SYSTEM OF ACCOUNTING. 7. BEFORE US, THE LD D.R CONTENDED THAT THE LD CIT(A) WAS NOT RIGHT IN PRESUMING THAT THE CREDITOR WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH NECESSARY DETAILS BEFORE THE AO. ON THE CONTRARY, THE LD A.R INVITED OUR ATTENTION TO THE ACCOUNT COPY OF THE CREDITOR, FORM NO.16A, LETTER WRITTEN BY THE C REDITOR ITA. NO . 5 495 / M UM/ 20 1 2 5 ETC AND SUBMITTED THAT THERE IS NO REASON TO DOUBT THE GENUINENESS OF THE OUTSTANDING AMOUNT. HOWEVER, IT IS AN UNDISPUTED FACT THAT THE ABOVE SAID DETAILS WERE NOT PRODUCED BEFORE THE AO OR CONSIDERED BY HIM. HENCE, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH BY DULY CONSIDERIN G THE INFORMATION AND EXPLANATIONS THAT MAY BE FURNISHED BY THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OP EN COURT ON 10TH APRIL , 2015. 10TH APRIL, 2015 SD SD ( / SANJAY GARG ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 10TH APRIL , 201 5 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APP ELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRU E COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI