ITO 25(2)(2), MUMBAI V. PARESH ARVIND GANDHI, MUMBAI

ITA 5706/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92633 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 13-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J PREMANAND
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 133(6)

Judgement Text

, C INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 5706 /MUM/20 13 , / ASSESSMENT YEAR - 2010 - 11 INCOME TAX OFFICER - 25 (2)(2) C - 11 BLDG. ROOM NO.106, PRATYAKSHAKAR BHAVAN \ BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI - 51. VS SHRI PARESH ARVIND GAN DHI 305, NEELDHARA CHS, BEHIND VASHUDEVTA TEMPLE, BORIVALI (W) MUMBAI - 400 092. PAN :AEBPG 2903 H ( / A PPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI BHUPENDRA SHAH / REVENUE BY :SHRI J. PREMANAND - DR / DATE OF HEARING : 05 - 0 5 - 2015 / DATE OF PRONOUNCEMENT : 13 - 0 5 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 18/7/2013 OF THE CIT(A) - 35 ,MUMBAI, THE ASSESSING OF FICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID.CIT(A) ERRED IN DELETI NG THE ADDITION OF RS. 1,37,65,667/ - MADE U/S 69C OF THE I.T. ACT, BY TREATING THE PURCHASE AS GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RELYING UPON JUDGEMENT IN THE CASE OF CIT V/S NIKUNJ EXIMP ENTERPRISES PVT. LTD. WITHOUT APPRECIATING THAT THE FACTS INVOLVED IN THE APPELLANT'S CASE ARE DIFFERENT FROM THE FACT S OF THE ABOVE CASE LAW. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C I T(A) GROSSLY ERRED IN NOT APPRECIATING THE FACT THAT NOTICES UNDER 133(6) ISSUED TO PARTIES FROM WHOM ALLEGED BILLS WERE RECEIVED, WERE RETURNED UNDELIVERED B Y THE POSTAL AUTHORITIES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) GROSSLY ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE THE PARTIES FROM WHOM THE ALLEGED BILLS WERE RECEIVED DESPITE MANY OPPOR TUNITIES ACCORDED HIM. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN .AW, THE ID. CI T(A) FAILED TO APPRECIATE THAT THE ASSESSEE FAILED TO REBUT THE FINDINGS OF SALES TAX DEPARTMENT VIS - - VIS BOGUS PURCHASES, DESPITE REASONABLE OPPORTUNITIES A FFORDED TO HIM. ASSESSEE , AN INDIVIDUAL, PROPR IETOR OF M/S. HYDRO PURE SYSTEM, IS ENGAGED IN THE BUSINESS OF INSTALLATION, ERECTION AND SERVICING OF WATER PURIFYING SYSTEMS .H E IS DERIVING INCOME FROM BUSINESS AND OTHER SOURSES. HE FILED HIS RETURN OF INCOME ON 28.9.10 , DECLARING TOTAL INCOME OF RS . 18.40 LACS .THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 1/3/ 2013 ,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1 , 56 , 05 , 880/ - . ITA/5706/MUM/20 13 ,AY - 20 10 - 11 - PG 2 THE EFFECTIVE GOA IS ABOUT DEL E TING THE ADDITION OF 1.37 CRORES MADE BY THE AO , U/S. 69C OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS THE AO DIRECTED ASS ESSEE TO F URNISH A LIST OF PERSONS FROM WHOM HE HAD MADE PURCHASES. HE FOUND THAT FOLLOWING PARTIES FROM WHOM THE ASSESSEE HAD SHOWN PURCHASES WERE APPEARING IN THE L IST OF SUSPICIOU S DEALERS WHO WERE INDULGED IN ISSUING ONLY BILLS WITHOUT DELIVERY OF ANY GOODS/MATERIAL FOR A COMMISSION AS PER THE OFFICIAL WEBSITE OF SALES TAX DEPARTMENT - SL.NO. NAME OF ALLEGED SUPPLIER AMOUNT OF ALLEGED PURCHASES RS. 1. BHAGWATI TRADING COMPANY 23, 78,818/ - 2. MANAV IMPEX 39,910/ - 3. PRAYAN TRADING COMPANY 23,72,916/ - 4. SAMPARK STEELS 10,78,220/ - 5. SAVITA INTERNATIONAL 19,597/ - 6. VARDHMAN TRADING COMPANY 46,73,578/ - 7. VITARAG TRADING COMPANY 32,02,628/ - TOTAL 1,37,65,667/ - I N VIEW OF TH E ABOVE INFORMATION, VIDE HIS SHOW CAUSE NOTICE DT.6.2.13, THE ASSESSEE WAS ASKED AS TO WHY THE ALLEGED PURCHASE FROM THE ABOVE MENTIONED SEVER PARTIES AGGREGATING TO 1.37 CR ORES S HOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE. THE AO PROVIDED THE ASSESSEE THE COPIES OF STATEMENT RECORD ED BY THE SALES TAX DEPARTMENT.IN RESPONSE TO THE ABOVE, THE ASSESSEE FILED A LETTER DT.12.2.2013 AND ARGUED THAT THE PURC HASES MADE BY HIM WERE GENUINE, THAT PURCHASE OF MATER IAL WAS DULY RECORDED IN THE BOOKS OF ACCOUNT, THAT THE PARTIES CONCERNED HAD SUBMITTED RELEVANT SUPPORTING DOCUMENTS, I.E. SALES TAX CONFIRMATION AND COPIES SALES TAX RETURN, THAT THOSE DO C U MENTS WERE SUBMITTED DURING ASSESSMENT PROCEEDINGS , THAT THERE W AS NO CHANGE IN THE GP RATIO, THAT MATERIAL PURCHASED DURING THE YEAR WAS USED IN PRODUCTION OF EQUIPMENTS. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO THAT HELD THAT SAME WAS NOT ACCEPTA BLE, THAT THE SALES TAX DEPARTMENT H AD CARRIED OUT INVESTIGATION ABOUT THE ABOVE MENTIONED SEVEN PARTIES, THAT THE SALES TAX AUTHORITIES HAD CONCLUDED THAT THOS E PARTIES HAD NOT INDULGED IN GENUINE SALES/ PURCHASE OF GOODS, THAT THE ASSESSEE HAD NOT PRODUCED THE PARTIES , THAT THE PURCHAS ES MADE BY THE ASSESSEE, PER SE, WAS NOT THE ISSUE , THAT THE ALLEGED PURCHASES WH ERE NOT TO BE TREATED AS BOGUS, THAT THE ASSESSEE HAD NOT PURCHASED THE GOODS FROM THE ALLEGED SUPPLIERS, THAT THE GOODS HAD SOMEHOW ENTERED INTO ASSESSEES REGULAR BUSINESS, THAT THE ASSESSEE WAS UNABLE TO GIVE ANY CONVINCING OR COGENT EXPLANATION AS TO HO W THOSE GOODS HAPPENED TO COME IN HIS POSSESSION, THAT THE PURCHASE WAS NOT BEING TREATED AS BOGUS, THAT THE EXPENDITURE I NCURRED ON SUCH PURCHASES WAS TO BE TREATED AS UNEXPLAINED , THAT THE ABOVE REFERRED SEVEN PARTIES WERE ENGAGED IN ISSUING BILLS ONLY. F INALLY, HE MADE AN ADDITION OF R S. 1.37 CRORES TO THE TOTAL INCOME OF THE ASSESSEE UNDER T HE HEAD UNEXPLAINED EXPENDITURE, AS PER THE PROVISIONS OF SEC. 69C OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE FIRST AP PELLATE AUTHORITY(FAA).BEFORE HIM, IT WAS CONTENTED THAT ALL MATERIAL PURCHASE AND ISSUANCE MADE WERE DULY RECORDED AND AC COUNTED FOR IN INWARD AND OUTWARD MO VE MENT REGISTER, THAT THE ASSESSEE SUBMITTED MATERIAL REGISTER BE F ORE THE AO SHOWING THE RECEIPT OF MATERIAL FROM THE PARTIES MENTIONED IN THE SHOW CAUSE NOTICE. HE ALSO FURNISHED COPIES OF INVOICE AND L/R OF RECEIP T OF INWARD MATERIAL PURCHASED, BANK STATEMENT SHOWING PAYMENT MADE BY CROSS ACCOUNT PAYEE ITA/5706/MUM/20 13 ,AY - 20 10 - 11 - PG 3 CHEQUES TO THE ABOVE MENTIONED PARTIES,COPIES OF V AT RETURNS, IT RETURNS AND CONFIRMATION OF THE IMPUGNED PARTIES ALONG WITH THEIR MVAT REPORTS AND ACKNOWLEDGEMENTS. IT WAS ARGUED THAT THE AO HAD N OT TREATED THE PURCHASES BOGUS, THAT HE WAS MERELY RELYING ON THE LIST OF THE SUSPICIOUS DEALERS P UBLIS H ED BY THE VAT DEPARTMENT, T HE AO DID NOT DISPUTE THE DELIVERY OF GOODS . THE ASSESSEE RELIED UPON THE CASES OF BAJRANG OIL ( 12ITD631 ) , MILK FOOD(65 TTJ 848), M/S.BALAJI TEXTILE IND.(49 ITD 117) AND N AHAR SPINNING MILLS LTD. ( 8SOT6 ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, T HE FAA HELD THAT THE PURCHASES HAD BEEN MADE THROUGH A/C.PAYEE CHEQUES THAT WERE DULY REFLECTED IN THE BANK STATE - MENT OF THE ASSESSEE, THAT THE ASSESSEE HAD PRODUCED REGISTER OF MATERIAL PURCHASED, COPIES OF VAT RETURNS, IT RETURNS AND CONFIRMATION OF PARTIES FROM WHOM THE ALLEGED PURCHASES WERE SUPPOSED TO HAVE BEEN MADE ALONGWITH THEIR MVAT REPEROTS, THAT THE ASSESSEE WAS ENGAGED IN THE PROCESS OF M ANU F ACTURING EQUIPMENT THAT REQUIRED STEEL, THAT THE AO HAD AT NO STAGE COUNTER E D THE EVIDENCES P RODUCED BY THE A SSESSEE , THAT HE HAD NOT CONDUCTED ANY INDEPE NDENT ENQUIRY TO ESTABLISH THAT THE PURCHASES WERE NOT GENUINE, THAT A B SENCE OF DELIVERY CHALLAN WAS NOT SUFFICIEN T TO PROVE NON - GENUINESS OF TRANSACTION.THE FA A R EFERRED TO CASES OF MILK FOOD(65 TTJ 848 ),M/S.BALAJI TEXTILE IND.(49ITD 117 );M.K.BROTHERS( 163 ITR 249 ); PREMANAND (25 SOT 11 ). HE FURTHER HELD THAT THE ASSESSEE HAD PRODUCED THE EVIDENCE OF MAKING PAYMENTS FROM HIS BANK ACCOUNT, THAT THE SOURCE OF THE SAID MON EY WAS NOT DOUBTED BY THE AO, THAT THE EXPENDITURE ON PURCHASES COULD NOT BE TREATED AS UNEXPLAINED, THAT THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE ABOVE REFERRED SEVEN PARTIES DESPITE THE FACT THAT ASSESSEE HAD SPECIF I CAL LY ASKED THE SAM E. THE FAA RELIED UPON THE CASE OF PONKUNNAM TRADERS (102 ITR 366) OF THE H ONBLE KER LA HC AND FINALLY DELETED THE ADDITION MADE BY THE AO. 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE(DR)RELIED UPON THE ORDER OF THE AO . AUTHORISED REPRESENTATIVE (AR) SUPPORTED T HE ORDER OF FAA AND RELIED ON THE FOLLOWING CASES RAJIV G KALATHIL(ITA/6727/MUM/2012,DATED 20.08.2014),RAMILA PRAVIN SHAH(ITA/5246/MUM/2013, DATED 05.03.2015),RAMESHKUMAR& CO. (ITA/2959/MUM/2014,DATED 28.11.2014)DEEPAK POPATLAL GALA(ITA/5920 - 6203/MUM/2013,D ATED 27.03.2015) .HE FURTHER ARGUED THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL S, THAT CROSS EXAMINATION OF THE ABOVE REFERRED SEVEN PARTIES WAS NOT ALLOWED EVEN THOUGH THE ASSESSEE HAD REQUESTED FOR THE SAME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD NOT DOUBTED THE GENUINENESS OF THE PURCHASE BUT HAD MADE THE DISALLOWANCE OF RS.1 . 37 CR ORES I NVOKING THE PROV ISIONS O F 69C OF THE ACT. WE FIND THAT IN SIMILAR CIRCUMSTANCES THE TRIBUNAL HAD DELETED T HE ADDITION MADE BY THE AO IN THE CASES RELIED UPON BY THE AR OF THE ASSESSEE. IN T HE CASE OF RAJIV G KALATHIL (SUPRA) , TO WHICH ONE OF US WAS PARTY IDENTICAL ISSUE HAS BEEN DE C IDED AS UNDER : - 2.3. BEFORE US,DEPARTMENTAL REPRESENTATIVE ARGUED THAT BOTH THE S UPPLIERS WERE NOT PRODUCED BEFORE THE AO BY THE ASSESSEE,THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE.HE RELIED UPON THE ORDER OF THE G BENCH OF MU MBAI TRIBUNAL DELIVERED IN THE CASE OF WESTERN EXTRUSION INDUSTRIES.(ITA/6579/MUM/2010 - DATED 13.11.2013).AUTHRORISED REPRESENTATIVE (AR) CONTENDED THAT PAYMENTS MADE BY THE ASSESSEE WERE SUPPORTED BY THE BANKERS STATEMENT, THAT GOODS RECEIVED BY THE ASSES SEE FROM THE SUPPLIE WAS PART OF CLOSING STOCK,THAT THE TRANSPORTER HAD ITA/5706/MUM/20 13 ,AY - 20 10 - 11 - PG 4 ADMITTED THE TRANSPORTATION OF GOODS TO THE SITE.HE RELIED UPON THE CASE OF BABULA BORANA (282 ITR251),NIKUNJ EXIMP ENTERPRISES (P) LTD. (216TAXMAN171)DELIVERED BY THE HONBLE BOMBAY H IGH COURT. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FUR THER INVESTIGATION AND TAKE IT TO LOGICAL END.BUT,HE LEFT THE JOB AT INITIAL POINT ITSELF.SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE.HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT.WE FIND THAT NO SUCH EXERCISE WAS DONE.TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE.THE FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS REC EIVED BY THE ASSESSEE WAS FORMING PART OF CLOSING STOCK.AS FAR AS THE CASE OF WESTERN EXTRUSION INDUSTRIES. (SUPRA)IS CONCERNED,WE FIND THAT IN THAT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS.BUT,IN THE CASE BEFORE US,THERE IS NOTHING,IN THE ORDER OF THE AO,ABOUT THE CASH TRAIAL.SECONDLY,PROOF OF MOVEMENT OF GOODS IS NOT IN DOUBT. THERERFORE,CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAKEN BY THE AO.SO,CONFIRMING THE ORDER OF THE FAA,WE DECIDE GROUND NO.1 AGAINST THE AO. RESPECTFULLY FOLLOWING THE ABOVE AND CONSIDERING THE FACTS AND CIRCUMSTANCES EFFECTIVE G OA IS DECIDED AGAINST THE AO . AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH , MAY ,2015. 13 TH MAY , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 13 .0 5 .2015 JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ ITA/5706/MUM/20 13 ,AY - 20 10 - 11 - PG 5 //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.