ASST CIT 16(1), MUMBAI V. RISHI K RAJANI, MUMBAI

ITA 5572/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1840 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 03-09-2014
• Court: TRIBUNAL
• Department Lawyers: MATHRUDEV VASUDEVAN
• Assessee Lawyers: B S BIST
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI SANJAY GARG (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.5572/MUM/2014 (ASSESSMENT YEAR : 2010-11) ACIT 16(1) VS RISHI K RAJANI 5-A, BHAGWAT NIWAS, 2 ND FLOOR PEDDAR ROAD,MUMBAI-26 PAN : AABPR06002C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MATHRUDEV VASUDEVAN RESPONDENT BY SHRI B.S. BIST (CIT DR) DATE OF HEARING : 17-10-2016 DATE OF PRONOUNCEMENT : 18 -11-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-27, MUMBAI [HE REINAFTER CALLED CIT(A)] DATED 25-06-2014 PASSED AGAINST THE ASSESSM ENT ORDER U/S 143(3) DATED 24-03-2013 FOR A.Y. 2010-11 ON THE FOLLOWING GROUNDS: 1. 'ON THE FACT AND THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF RS.33,47,382/- TOWARDS FOREIGN TRAVEL EXPENSES TO R S.28,575/- WITHOUT APPRECIATING THE FACT THAT THE AO HAS CLEAR LY BROUGHT IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD VISITED TO PLACES WHICH WERE NOT RELATED TO HIS BUSINESS.' 2. 'ON THE FACT AND THE CIRCUMSTANCES OF THE CASE AND IN THE 2 I.T.A. NO.5572/MUM/2014 LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE DIS ALLOWANCE OF RS.33473821- TOWARDS FOREIGN TRAVEL EXPENSES TO RS. 28,575/- AFTER RELYING ON THE DECISION OF LD, CIT(A) IN THE ASSESSEE'S OWN CASE FOR 2009-10 VIDE ORDER NO.CIT(A)/ACITI6(1)/322/201 1-12 DTD.30.11.2012 WITHOUT APPRECIATING THE FACT THE SA ID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FILED APPEA L BEFORE HON'BLE ITAT ON 0702.2013 VIDE APPEAL NO. ITA 1071 /MUM/201 3.' 3. 'WHETHER ON THE FACT AND THE CIRCUMSTANCES OF THE C ASE AND IN THE LAW, THE LD.CIT(A) IS RIGHT IN RESTRICTING THE ADDI TION MADE U/S 69C OF RS.1,16,244/- TO 12.5% OF RS.1,16,244/- I.E.RS.14,5 30/ON ACCOUNT OF BOGUS PURCHASE?' 4. 'WHETHER ON THE FACT AND THE CIRCUMSTANCES OF THE C ASE AND IN THE LAW, THE LD.CIT(A) IS RIGHT IN ESTIMATING THE EARNI NG AT A VERY LOW RATE PARTICULARLY WHEN ALLEGED SELLERS OF GOODS TO THE ASSESSEE BEING PROVIDER OF ACCOMMODATION ENTRIES HA S ADMITTED BEFORE THE SALES TAX DEPARTMENT THAT ACCOMMODATION ENTRIES WERE PROVIDED TO THE ASSESSEE AND ALSO THE FIELD EN QUIRES RESULTED IN CONFIRMATION OF BOGUS PURCHASES.' 5. WHETHER ON THE FACT AND THE CIRCUMSTANCES OF THE CA SE AND IN THE LAW, THE LD.CIT(A) IS RIGHT IN NOT APPRECIATING THE FINDINGS OF THE AO IN ASSESSMENT ORDER THAT THE SELLERS WERE AVAILABLE AT THE ADDRESS SHOWN IN THE PURCHASES BILLS.' 2. GROUNDS 1 & 2 : THESE GROUNDS ARE COMMON AND DEAL WITH ISSUE OF DISALLOWANCE OF TRAVEL EXPENSES MADE BY THE ASSESSI NG OFFICER AT THE RATE OF 1/3 RD BUT DELETED BY LD.CIT(A). 3. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER MADE ADHOC DISALLOWANCE OF 1/3 RD FOREIGN TRAVEL EXPENSES ON THE GROUND THAT THE SA ME WAS NOT RELATABLE TO THE BUSINESS, ON THE BASIS OF DISALLOWANCE MADE IN EARLIER YEARS. THE LD.CIT(A) DELETED THE DISALLOWA NCE RELYING UPON HIS ORDER OF EARLIER YEARS. 4. DURING THE COURSE OF HEARING, BOTH THE PARTIES AGRE ED THAT THE ISSUE INVOLVED IS COVERED WITH THE ORDERS OF EARLIER YEAR S. THE LD.COUNSEL PLACED 3 I.T.A. NO.5572/MUM/2014 BEFORE US THE ORDER PASSED BY THE TRIBUNAL DATED 28 -10-2015 FOR ASSESSMENT YEARS 2006-07, 2007-08, 2008-09 AND 2009 -10 AND REQUESTED FOR APPLYING THE SAME IN THE YEAR BEFORE US. 5. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIE S AS WELL AS THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS. IT IS NO TED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DESIGNING, MANUFACTURING , TRADING AND EXPORTING OF WESTERN LADIES DRESSES. IT HAS BEEN O BSERVED BY THIS TRIBUNAL IN ITS ORDER FOR THESE YEARS THAT THE ASSESSEE WAS REQUIRED TO MAKE TRAVEL TO VARIOUS COUNTRIES FOR NOT ONLY MARKETING ITS DES IGNS AND DRESSES BUT ALSO TO FIND OUT LATEST TRENDS AND DESIGNS PREVAILING IN VARIOUS COUNTRIES. IT IS NOTED THAT IN A.YS 2007-08, 2008-09 AND 2009-10 THE DISALLOWANCE WAS RESTRICTED TO 10% BY THE TRIBUNAL ON THE GROUND THA T NECESSARY DETAILS AND OTHER EVIDENCES WERE NOT MADE AVAILABLE BY THE ASSE SSEE. 6. IT IS NOTED THAT IN THE YEAR BEFORE US, THE FINDING HAS BEEN GIVEN BY THE LD.CIT(A) THAT RELEVANT DETAILS AND DOCUMENTARY EVIDENCES HAVE BEEN FURNISHED BY THE ASSESSEE. IT WAS SUBMITTED THAT U NDER THESE CIRCUMSTANCES, THE DECISION OF A.YS 2007-08, 2008-0 9 AND 2009-10 SHOULD BE MADE APPLICABLE IN PREFERENCE TO DECISION FOR A. Y. 2006-07 AND ACCORDINGLY, DISALLOWANCE CANNOT BE SUSTAINED FOR M ORE THAN 10%. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE BROUGHT BEFORE US, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A.YS 2007- 08, 2008-09 & 2009-10 AND SUSTAIN THE DISALLOWANCE TO THE EXTENT OF 10%. ORDER OF THE LD.CIT(A) IS MODIFIED ACCORDINGLY. 7. GROUNDS 3,4 & 5: THESE GROUNDS PERTAIN TO DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF PURCHAS ES AMOUNTING TO RS.1,16,244/-. 4 I.T.A. NO.5572/MUM/2014 8. THE BRIEF FACTS ARE THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE PURCHASES OF R.1,16,244 OF SAMPLE ITEMS FROM V IJAYALAXMI TRADING COMPANY AND PAYMENT FOR THE SAME WAS MADE BY ACCOUN T PAYEE CHEQUE. BUT THE ASSESSING OFFICER WAS OF THE VIEW THAT AS P ER THE INFORMATION RECEIVED FROM THE SALES-TAX DEPARTMENT, AFORESAID P ARTY WAS NOT GENUINE AND CONSEQUENTLY ASSESSING OFFICER TREATED THESE PU RCHASES AS BOGUS AND DISALLOWED THE SAME U/S 69C OF THE ACT. BEFORE LD. CIT(A) ASSESSEE MADE DETAILED SUBMISSIONS AND THEREFORE, LD. CIT(A) REST RICTED THE DISALLOWANCE TO 12.5% OF THE AFORESAID PURCHASES AND DELETED THE BALANCE AMOUNT OF DISALLOWANCE. REVENUE IS BEFORE US FOR THE DISALLO WANCE DELETED BY THE LD.CIT(A). 9. DURING THE COURSE OF HEARING BEFORE US, THE LD.DR S UPPORTED THE ORDER OF THE ASSESSING OFFICER AND ALSO ALTERNATIVE LY SUBMITTED THAT DISALLOWANCE SUSTAINED BY THE LD. CIT(A) WAS TOO LO W AND SHOULD BE FURTHER INCREASED. 10. PER CONTRA, THE LD. COUNSEL SUPPORTED THE ORDER OF THE LD.CIT(A). 11. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHOR ITIES. DURING THE COURSE OF HEARING, BOTH THE PARTIES FAIRLY AGRE ED THAT KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, DISALLOWAN CE @25% WOULD BE REASONABLE IN THIS CASE. UNDER THESE CIRCUMSTANCES , WE DIRECT THE ASSESSING OFFICER TO MAKE DISALLOWANCE @25%. THE O RDER OF THE LD.CIT(A) IS MODIFIED ACCORDINGLY. 5 I.T.A. NO.5572/MUM/2014 12. AS A RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWE D. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (SANJAY GARG) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 18 TH NOVEMBER, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , D-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES