SHRI JAYANTILAL DINESH PUROHIT, MUMBAI V. INCOME TAX OFFICER 19(2)(1), MUMBAI

ITA 5608/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5879 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 28-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Unexplained cash credit
• Section: 133(6); 68; 37

Judgement Text

1 ITA 5608/MUM/2019 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) I.T.A. NO.5608/MUM/2019 (ASSESSMENT YEAR 2014-15) SHRI JAYANTILAL DINESH PUROHIT ROOM NO.114, 5 TH FLOOR GITANJALI BUILDING-B, DR. D.B. MARG LAMINGTON ROAD, MUMBAI-400 008 PAN : AJSPP3006A VS ITO-19(2)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI VIMAL PUNMIYA (AR) RESPONDENT BY SMT. SMITA VERMA (DR) DATE OF HEARING 08-06-2021 DATE OF PRONOUNCEMENT 03-09-2021 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DA TED 24-07-2019 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI FOR THE ASSESSMENT YEAR 2014-15. 2. THE PRIMARY DISPUTE ARISING IN THE PRESENT APPEA L IS CONFINED TO ADDITION OF AN AMOUNT OF RS.42,75,000/- UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVI DUAL AND STATED TO BE ENGAGED IN THE BUSINESS OF TRADING IN HEALTHCARE PRODUCTS T HROUGH HIS PROPRIETARY CONCERN, M/S SHIVAM ENTERPRISES. FOR THE ASSESSMENT YEAR UND ER DISPUTE, ASSESSEE FILED HIS RETURN OF INCOME ON 26-11-2014 DECLARING TOTAL INCO ME OF RS.6,42,750. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT AS AGAINST PURCHASES 2 ITA 5608/MUM/2019 SHOWN OF RS.1,50,73,562/- ASSESSEE HAS SHOWN CREDIT ORS OF RS.2,41,16,702/- IN THE CURRENT YEARS BALANCE-SHEET. WHEREAS, IN THE PRECE DING ASSESSMENT YEAR THE ASSESSEE HAD SHOWN PURCHASES OF RS.2,82,01,376/- AN D SUNDRY CREDITORS OF RS.2,07,60,801/-. NOTICING THE ABOVE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF SUNDRY CREDITORS . AFTER PERUSING THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER OB SERVED THAT SOME OF THE CREDITORS REMAINED OUTSTANDING EVEN AFTER LAPSE OF TWO YEARS. FURTHER, HE ALLEGED, THE VERACITY OF ALL THE CREDITORS IN THE CURRENT YE AR COULD NOT BE PROVED IN ABSENCE OF CONFIRMATIONS. THEREFORE, HE HELD THAT THE CREDI TORS ARE NON GENUINE. HOWEVER, HE ULTIMATELY DISALLOWED 30% ON ESTIMATE B ASIS OUT OF THE TOTAL INCREASE IN CREDITORS SHOWN BETWEEN THE PRECEDING ASSESSMENT YEAR AND THE IMPUGNED ASSESSMENT YEAR, WHICH WORKED OUT TO RS.10,06,770/- . ASSESSEE CONTESTED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE A UTHORITY. THOUGH, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER; HOWEVER, SHE WANTED TO VERIF Y THE GENUINENESS OF THE CREDITORS AND ACCORDINGLY, CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS. AFTER VERIFYING THE DETAILS OF CREDITORS, LEARNED COMMISS IONER OF INCOME TAX (APPEALS) FOUND THAT MOST OF THE CREDITORS WERE RELATING TO P URCHASES MADE BY THE ASSESSEE BELOW RS.10 LAKHS. HOWEVER, TWO PURCHASE INVOICES I N THE NAME OF M/S KHUSHAL TRADING CORPORATION WERE MORE THAN RS.10 LAKHS, I.E . RS.22.50 LAKHS AND RS.20.25 LAKHS. TO VERIFY THE GENUINENESS OF THE CREDIT AMOU NT SHOWN IN THE NAME OF M/S KHUSHAL TRADING CORPORATION, LEARNED COMMISSIONER ( APPEALS) ISSUED NOTICES UNDER SECTION 133(6) AT THE GIVEN ADDRESSES. AS OBS ERVED BY LEARNED COMMISSIONER (APPEALS), THE NOTICE ISSUED AT MUMBAI CENTRAL ADDRESS WAS SERVED, WHEREAS, THE NOTICE ISSUED AT THE MIRA ROAD ADDRESS REMAINED UNSERVED. 3 ITA 5608/MUM/2019 FURTHER, THE INSPECTOR DEPUTED TO ASCERTAIN THE GEN UINENESS OF M/S KHUSHAL TRADING CORPORATION REPORTED THAT THERE WAS NO BUSI NESS UNDERTAKING IN THE SAID NAME AT THE GIVEN ADDRESS. HOWEVER, IN RESPONSE TO NOTICE ISSUED UNDER SECTION 133(6), M/S KHUSHAL TRADING CORPORATION FURNISHED C ERTAIN DOCUMENTARY EVIDENCES SUCH AS PROFIT AND LOSS ACCOUNT, BALANCE- SHEET; INCOME-TAX RETURN FILING ACKNOWLEDGEMENTS FOR VARIOUS YEARS AND LEDGER ACCOU NT OF M/S SHIVAM ENTERPRISES FOR SOME YEARS. FURTHER, M/S KHUSHAL TR ADING CORPORATION ALSO FURNISHED SALES INVOICES FOR RS.22,50,000/- AND RS. 20,25,000/-. HOWEVER, SINCE COMPLETE LEDGER ACCOUNT WAS NOT FURNISHED, LEARNED COMMISSIONER (APPEALS) ISSUED A NOTICE UNDER SECTION 251(1)(A) OF THE ACT FOR ENHANCING ASSESSEES INCOME AND ULTIMATELY HELD THE PURCHASES OF RS.22,5 0,000/- AND RS.20,25,000/- AGGREGATING TO RS.42,75,000/- FROM M/S KHUSHAL TRAD ING CORPORATION AS UNSUBSTANTIATED PURCHASES AND DISALLOWED UNDER SECT ION 37 OF THE ACT. SIMULTANEOUSLY, SHE TREATED THE AMOUNT OFRS.42,75,0 00/- AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 OF THE ACT. 4. LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSE E SUBMITTED, IN COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAD FURNISHED A LL THE DETAILS RELATING TO THE PURCHASES MADE FROM M/S KHUSHAL TRADING CORPORATION . IN THIS CONTEXT, HE DREW MY ATTENTION TO THE ACCOUNT CONFIRMATION FROM M/S K HUSHAL TRADING CORPORATION, TAX AUDIT REPORTS, BOTH, IN CASE OF THE ASSESSEE AS WELL AS M/S KHUSHAL TRADING CORPORATION, SALES-TAX / VAT RETURNS FILED BY M/S K HUSHAL TRADING CORPORATION, BANK STATEMENTS REFLECTING PAYMENT MADE AGAINST PUR CHASES, PURCHASE INVOICES, VAT PAID CHALLANS, ETC. SPECIFICALLY DRAWING MY AT TENTION TO THE VAT AUDIT REPORT AND SALES-TAX RETURN OF M/S KHUSHAL TRADING CORPORA TION, HE SUBMITTED, THE SALES MADE TO THE ASSESSEE HAVE BEEN SPECIFICALLY REFLECT ED IN THEM. HE SUBMITTED, THE 4 ITA 5608/MUM/2019 ASSESSEE HAS REGULAR TRANSACTION WITH M/S KHUSHAL T RADING CORPORATION; HENCE, CANNOT BE TREATED AS NON GENUINE. HE SUBMITTED, IN RESPONSE TO NOTICE ISSUED UNDER SECTION 133(6), M/S KHUSHAL TRADING CORPORATI ON HAS FURNISHED INFORMATION AS REQUIRED. FURTHER, HE SUBMITTED, THERE IS NO ALL EGATION EVEN BY THE SALES-TAX DEPARTMENT AGAINST M/S KHUSHAL TRADING CORPORATION. THUS, HE SUBMITTED, THE DISALLOWANCE MADE IS UNJUSTIFIED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, RELYING UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) SUBMITTED THAT ON EN QUIRY MADE, THE CONCERNED PARTY WAS NOT FOUND AT THE GIVEN ADDRESS. FURTHER, SHE SUBMITTED, ASSESSEES LEDGER ACCOUNT COPY WAS NOT FURNISHED BY THE CONCER NED PARTY DESPITE REPEATED REQUESTS BY LEARNED COMMISSIONER (APPEALS). SHE SUB MITTED, EVEN THE INSPECTOR DEPUTED TO CONDUCT A PHYSICAL ENQUIRY HAS REPORTED THAT NO SUCH PARTY WAS AVAILABLE AT THE GIVEN ADDRESS. THUS, SHE SUBMITTED , SINCE THE GENUINENESS OF PURCHASES COULD NOT BE ESTABLISHED, DISALLOWANCE MA DE WAS JUSTIFIED. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. ADMITTEDLY, THE ASSESSING OFFICER HAS NOT RAISED AN Y DOUBT REGARDING THE PURCHASES EFFECTED FROM M/S KHUSHAL TRADING CORPORA TION. HE HAS ONLY MADE ADHOC DISALLOWANCE OUT OF THE SUNDRY CREDITORS CONS IDERING THE FACT THAT CERTAIN CREDITORS WERE CONTINUING FOR ABOUT TWO YEARS. HOWE VER, AT THE APPELLATE STAGE LEARNED COMMISSIONER (APPEALS) HAD ENQUIRED INTO TH E DETAILS OF SUNDRY CREDITORS AND HAS PICKED UP TWO PURCHASES FROM M/S KHUSHAL TR ADING CORPORATION FOR FURTHER ENQUIRY AND MADE THE DISALLOWANCE. AS COULD BE SEEN FROM THE FACTS ON RECORD, IN RESPONSE TO THE NOTICE ISSUED UNDER SECT ION 133(6) OF THE ACT, M/S KHUSHAL TRADING CORPORATION DID FURNISH ITS REPLY W ITH CERTAIN DOCUMENTARY EVIDENCES, SUCH AS, PROFIT AND LOSS ACCOUNT, BALANC E-SHEET, INCOME-TAX RETURN 5 ITA 5608/MUM/2019 ACKNOWLEDGEMENTS, ACCOUNT CONFIRMATION COPIES, ETC. EVEN, ASSESSEES LEDGER ACCOUNT APPEARING IN THEIR BOOKS FOR TWO ASSESSMENT YEARS WAS FURNISHED. IN FACT, LEARNED COMMISSIONER (APPEALS) HAS REFERRED TO THE REPLY RECEIVED FROM M/S KHUSHAL TRADING CORPORATION IN RESPONSE TO NOTICE U NDER SECTION 133(6) OF THE ACT. THUS, IT IS NOT A CASE WHERE THE SELLING DEALE R HAS COMPLETELY VANISHED. THEREFORE, THE IDENTITY OF M/S KHUSHAL TRADING CORP ORATION HAS BEEN ESTABLISHED. THE FACT THAT M/S KHUSHAL TRADING CORPORATION IS A N INCOME-TAX ASSESSEE AND HAS ALSO BEEN FILING VAT/ SALES-TAX RETURN IS ESTABLISH ED FROM COPIES OF SUCH RETURNS SUBMITTED IN THE PAPER BOOK. IN FACT, THE ASSESSEE HAS ALSO FURNISHED THE VAT AUDIT REPORT AND SALES-TAX RETURN OF M/S KHUSHAL TR ADING CORPORATION, WHEREIN, THE TRANSACTION WITH THE ASSESSEE HAS BEEN REFLECTE D. IT IS ALSO EVIDENT, THE ASSESSEE HAS MADE PAYMENT FOR PURCHASE TO M/S KHUSH AL TRADING CORPORATION THROUGH BANKING CHANNEL. THUS, FROM THE AFORESAID F ACTS AND EVIDENCES AVAILABLE ON RECORD, IT CAN BE SAID THAT NOT ONLY THE IDENTIT Y OF M/S KHUSHAL TRADING CORPORATION IS ESTABLISHED BUT THE ASSESSEE HAD PUR CHASED GOODS FROM THE SAID PARTY IS ALSO PROVED, AS THE CONCERNED SELLING DEAL ER HAS ALSO FURNISHED CONFIRMATION OF ACCOUNT. THUS, IN SUCH CIRCUMSTANCE S, THE AMOUNT OF RS.42,75,000/- CANNOT BE TREATED AS UNEXPLAINED CAS H CREDIT AS THE IDENTITY, GENUINENESS AND CREDITWORTHINESS HAVE BEEN ESTABLIS HED. 7. HAVING HELD SO, THE NEXT ISSUE WHICH ARISES IS W HETHER THE PURCHASES MADE FROM M/S KHUSHAL TRADING CORPORATION CAN BE HELD TO BE NON GENUINE. PERTINENTLY, NO ALLEGATION HAS BEEN MADE BY SALES-T AX DEPARTMENT REGARDING THE GENUINENESS OF M/S KHUSHAL TRADING CORPORATION. RAT HER, M/S KHUSHAL TRADING CORPORATION APPEARS TO BE A REGISTERED DEALER UNDER THE SALES-TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AS IT IS FILING ITS VAT R ETURNS. FURTHER, THE EXISTENCE OF 6 ITA 5608/MUM/2019 M/S KHUSHAL TRADING CORPORATION IS ALSO ESTABLISHED FROM THE FACT THAT IN RESPONSE TO NOTICE ISSUED UNDER SECTION 133(6), IT HAS FURNI SHED VARIOUS INFORMATION/EVIDENCES ACKNOWLEDGING THE SALES MADE TO THE ASSESSEE. THAT BEING THE CASE, THE PURCHASES MADE FROM M/S KHUSHAL TRADI NG CORPORATION CANNOT BE HELD AS NON GENUINE MERELY BECAUSE LEDGER ACCOUNT C OPY OF ASSESSEE FOR COUPLE OF YEARS COULD NOT BE FURNISHED DUE TO CERTAIN EXIG ENCIES. IN ANY CASE OF THE MATTER, ONCE THE SELLING DEALER CONFIRMS THE SALES MADE TO THE ASSESSEE AND WHEN SUCH SALES HAVE BEEN REFLECTED IN ITS ACCOUNTS AND RETURNS FILED, BOTH, BEFORE THE INCOME-TAX DEPARTMENT AS WELL AS SALES-TAX DEPARTME NT AND THERE IS NO ADVERSE INFORMATION FROM THE SALES-TAX DEPARTMENT, THE PURC HASES MADE FROM M/S KHUSHAL TRADING CORPORATION CANNOT BE DOUBTED, MERE LY ON THE BASIS OF PRESUMPTION AND SURMISES, UNLESS, THE REVENUE BRING S EVIDENCE ON RECORD TO FACTUALLY ESTABLISH THAT THE PURCHASES ARE NON GENU INE OR M/S KHUSHAL TRADING CORPORATION IS A NON GENUINE ENTITY. IN VIEW OF TH E AFORESAID, I DELETE THE ADDITION OF RS. 42,75,000/-. 8. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED ON 03/09/2021. SD/- SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DT : 03/09/2021 PAVANAN 7 ITA 5608/MUM/2019 COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI