DCIT 24(3), MUMBAI V. HARSH J PATEL, MUMBAI

ITA 5857/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8920 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 30-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 19-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHATURBHUJ DAS
• Keywords: Bogus purchase; Depreciation; Corroborative evidences
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI , . . BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 5857/MUM/2011 / ASSESSMENT YEAR 2008-09 DCIT-24(3), R.NO. 701, C-11, 7 TH FLOOR, B.K.C, BANDRA (E), MUMBAI 51 VS. SHRI HARESH J. PATEL, 503/236, GOPAL KRISHNA CHS, ROAD NO. 15, JAWAHAR NAGAR, GOREGAON (WEST), MUMBAI-400 062. PAN: AABPP 5683 M ( / APPELLANT ) ( ! / RESPONDENT ) REVENUE BY : SHRI CHATURBHUJ DAS ASSESSEE BY : SHRI RAJESH KOTHARI ' #$% / DATE OF HEARING : 30 -08-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 05 -09-2012 () / O R D E R PER RAJENDRA, A.M. THE FOLLOWING ARE THE GROUNDS OF APPEAL FILED BY TH E APPELLANT AGAINST THE ORDER DATED 23-06-2011 OF THE CIT(A)-34, MUMBAI : ON FACTS & IN THE CIRCUM STANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCOUNT OF UN-VERIFIED PURCHASES AMOUNTING TO RS. 14,64,454/- STATING THAT THE ASSES SING OFFICER HAD NOT CONDUCTED ANY ENQUIRIES TO VERIFY THE PURCHASES EXC EPT SENDING NOTICE U/S. 133(6), WITHOUT CONSIDERING THE FACT THAT THE ASSES SEE FAILED TO DISCHARGE ITA NO. 5857/MUM/2011 SHRI HARESH J. PATEL 2 PRIMARY ONUS OF PROVIDING BASIC DETAILS SUCH AS NEW ADDRESS OF THE PARTIES, PURCHASE BILLS OR BANK STATEMENTS REFLECTING THE PA YMENTS TO PROVE THAT THE PURCHASES WERE GENUINE. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISALLOWING VARIOUS EXPENSES UPTO 1 5% AS AGAINST 20% DISALLOWED BY THE ASSESSING OFFICER, WITHOUT APPREC IATING THAT THE SAID DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AFTE R RECORDING DUE REASONS. 2. THE ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINE SS OF MANUFACTURING OF ENGINEERING GOODS, FILED HIS RETURN OF INCOME ON 30 .9.2008 DECLARING TOTAL INCOME OF RS. 14.4 LAKHS. ASSESSMENT WAS FINALISED BY THE AS SESSING OFFICER (AO) UNDER SECTION 143(3) OF THE INCOME-TAX ACT,1961 (ACT) ON 18.11.2010, DETERMINING TOTAL INCOME AT RS.30.48LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS AO ISSUED NOTIC ES U/S.133(6) OF THE ACT TO FOUR PARTIES, NAMELY, ARIZONA MOULDOMAC, AAYSUH STE EL, ELEGANT TRADING AND PAWAN ENTERPRISES , TO VERIFY GENUINENESS OF PURCHASES MADE FROM THEM B Y THE ASSESSEE. AS PER THE AO NOTICES ISSUED TO THE ABOVE REFERRED PAR TIES WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN. HE ASKED THE ASSESSEE TO PRODUCE BOOKS OF ACCOUNTS AND SUPPORTING EVIDENCES OF THE P URCHASES MADE DURING THE AY UNDER CONSIDERATION. ASSESSEE SUBMITTED PHOTO-COPI ES OF THE LEDGER ACCOUNTS OF THE FOUR PARTIES TO WHOM NOTICES WERE ISSUED, BUT HAD N OT BEEN SERVED. AO OBSERVED THAT THE ASSESSEE DID NOT PRODUCE ORIGINAL BILLS OF PURC HASE FROM THE SAID PARTIES. FINALLY, HE HELD THAT BECAUSE OF THE MATERIAL DEFICIENCIES A ND NON PRODUCTION OF BOOKS OF ACCOUNTS AS WELL AS THE SUPPORTING EVIDENCES NO REL IANCE COULD BE PLACED ON THE AUDITED ACCOUNTS, THAT THE SAME REMAINED UNVERIFIAB LE. AS A RESULT A LUMP SUM ADDITION AMOUNTING TO RS. 14.64 LAKHS ON ACCOUNT OF PURCHASES MADE FROM THE FOUR PARTIES WAS MADE TO THE INCOME OF THE ASSESSEE.AO A LSO CONSIDERED THE ISSUE OF GP WHILE MAKING THE ADDITIONS. HE WAS OF THE OPINION THAT ASSESSEE WAS TRYING TO INFLATE PURCHASES TO SUPPRESS THE PROFITS OF THE AY UNDER C ONSIDERATION. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRS APPELL ATE AUTHORITY (FAA). AFTER GOING THROUGH THE SUBMISSION MADE BY THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT NO ADDITION COULD BE MADE FOR THE WHOLE A MOUNT OF PURCHASE I.E. OF RS. 14.64 LAKHS, SIMPLY BECAUSE A FEW PARTIES COULD NOT BE SERVED WITH NOTICES ISSUED U/S.133(6)OF THE ACT, THAT COMMENTS BY POSTAL AUTHO RITIES CANNOT FORM BASIS FOR REACHING AT THE CONCLUSION THAT THE SAID PARTIES WE RE NOT IN EXISTENCE, THAT THE AO HAD NOT CONDUCTED FURTHER ENQUIRIES TO VERIFY THE PURCH ASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE, THAT IN THE MATTER CONSIDERATION ISSU E WAS ABOUT TRADE CREDIT- NOT ABOUT LOAN OR CASH CREDIT, THAT THE BURDEN WAS ON THE AO TO PROVE THAT THE PURCHASES WERE NOT GENUINE, AS IT WAS DONE IN THE CASE OF LA MEDI CA (250 ITR 575). HE HELD THAT THERE WAS NO MATERIAL AVAILABLE ON THE RECORD TO SU GGEST THAT PURCHASES WERE BOGUS, THAT'S SUSPICION ABOUT THE AUDITED ACCOUNTS WAS NOT JUSTIFIED, THAT THE AO WANTED TO MAKE A LUMP SUM ADDITION ON ACCOUNT OF GROSS PROFIT ON THE IMPUGNED PURCHASES BUT MADE THE ADDITION OF TOTAL AMOUNT OF PURCHASES, THA T THERE WAS NO CONCEPT OF MAKING A LUMP SUM ADDITION OF GROSS PROFIT WITH RESPECT TO T HE PURCHASES, THAT PURCHASES WERE NOT FOUND OUTSIDE THE BOOKS OF ACCOUNTS. HE DELETED THE ADDITION MADE BY THE AO. ITA NO. 5857/MUM/2011 SHRI HARESH J. PATEL 3 5. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) REL IED UPON THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT O UT OF THE FOUR PARTIES, POSTAL AUTHORITIES COULD NOT SERVE THE NOTICES ONLY ON TWO PARTIES, THAT ASSESSEE HAD PRODUCED NECESSARY DOCUMENTS BEFORE THE AO, THAT LEDGER ACCO UNTS PROVED THE GENUINENESS OF THE TRANSACTIONS, THAT PAYMENTS WERE MADE BY ACCOUN T PAYEE CHEQUES, THAT CONFIRMATION LETTER OF THE SUPPLIERS WERE FILED BEF ORE THE AO ALONG WITH THE DETAILS OF PERMANENT ACCOUNT NUMBERS, THE DETAILS OF TDS DEDUC TED AND DEPOSITED WITH REGARD TO JOB WORK DONE, WERE SUBMITTED DURING THE ASSESSM ENT PROCEEDINGS, THAT THERE WAS MARGINAL REDUCTION IN THE GP FOR THE YEAR UNDER CON SIDERATION, THE DETAIL OF CHEQUES CLEARED BY THE BANK ISSUED BY THE ASSESSEE IN FAVOU R OF SUPPLIERS /PURCHASERS WAS ALSO MADE AVAILABLE TO THE AO. HE RELIED UPON THE CASES OF LAKHI GAMES IMPEX P LTD. (TOIL-2010-272ITAT), YFC PROJECTS (134TTJ167), KACH WALA GEMS(122TTJ854), M K BROTHERS(52CTR228), SAGAR BOSE(56ITD561). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PRODUCE THE MATERIAL SUBMITTED BY THE AR. IT IS A FACT THAT TWO OF THE NOTICES ISSUE D UNDER SECTION 133 (6) OF THE ACT WERE NOT SERVED ON THE PARTIES THAT HAD SUPPLIED TH E GOODS TO THE ASSESSEE. BUT NON- SERVICE OF NOTICE; WHICH COULD BE FOR MANY A REASON S; CANNOT BE THE BASIS FOR MAKING AN ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. F AA HAS RIGHTLY OBSERVED THAT AO WAS SUPPOSED TO MAKE FURTHER ENQUIRY IS IN THIS REG ARD. FROM THE PAPER BOOK IT IS CLEAR THAT DETAILS OF PURCHASES AND PAYMENT MADE BY CHEQUES WERE MADE AVAILABLE TO THE AO. NOT ONLY THE DETAILS OF PANS WERE FILED, BU T ASSESSEE HAD ALSO SUBMITTED THE DETAILS OF TDS DEDUCTED AND PAID TO THE GOVERNMENT ACCOUNT. AFTER OBTAINING ALL THESE PIECES OF INFORMATION, IF HE WANTED TO MAKE A DDITIONS ON ACCOUNT OF BOGUS PURCHASES HE WAS SUPPOSED TO BRING FURTHER MATERIAL ON RECORD. WE FIND THAT AO HAS CARRIED OUT ANY SUCH EXERCISE. IN OUR OPINION, FA A WAS RIGHT IN HOLDING THAT THERE WAS DIFFERENCE BETWEEN CASH CREDIT AND TRADE CREDIT . WE FIND THAT AO HAS MADE ADDITION OF RS.14.64 LAKHS, BUT THE BASIS OF THE IM PUGNED ADDITION IS NOT CLEAR. HERE, WE WOULD LIKE TO REPRODUCE A FEW LINE FROM THE ASSE SSMENT ORDER- CONSEQUENTLY, A LUMPSUM ADDITION ON ACCOUNT OF G.P . AMOUNTING TO THE PURCHASES MADE FROM THESE PARTIES, IN RESPECT OF A BOVE MENTIONED FOUR PARTIES AND HAS TRIED TO BOOK PURCHASES IN THE NAME S OF THESES FOUR PARTIES...... IN OUR OPINION ADDITION ON ACCOUNT OF GP AMOUNTIN G TO PURCHASES MADE IS AN ALIEN CONCEPT UNDER THE ACT. OBSERVATION OF THE FAA, MADE IN THIS REGARD, DO NOT SUFFER FROM ANY INFIRMITY. CASES RELIED UPON BY THE AR ALSO SUPPORT THE VIEWS OF THE FAA. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION. THE AFFORD ORDER OF THE FAA . GROUND NO. 1 IS DECIDED A GAINST THE AO. 7. NEXT GROUND OF APPEAL IS ABOUT ADHOC DIS-ALLOWANCE MADE BY THE AO AND REDUCED BY THE FAA. AO HAD DISALLOWED 10% OF TELEPHONE EXPENSES (RS. 7,325/-), 20% OF CAR AND PETROL EXPENSES (RS. 23,458/-), 20% OF DEPRECIATION ON MOTOR CAR EXPENSES (RS. 20,808/-), 15% OF VARIOUS OTHER EXPEN SES (RS. 91,338/-). HE WAS OF THE OPINION THAT PERSONAL USE IN THE SAID EXPENSES COUL D NOT BE RULED OUT/OR ALL THE EXPENSES WERE NOT CROSS VERIFIABLE. 8. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA. HE HE LD THAT DIS-ALLOWANCES MADE BY THE AO WERE OF ROUTINE NATURE AND HENCE COU LD NOT BE UPHELD IN TOTALITY. HE ITA NO. 5857/MUM/2011 SHRI HARESH J. PATEL 4 RESTRICTED THE DISALLOWANCE TO 10%. BEFORE US, DR RELIED UPON THE ORDERS OF THE AO. AR SUBMITTED THAT ASSESSEE HIMSELF HAD MADE CERTAIN DIS-ALLOWANCES ON ACCOUNT OF PERSONAL USE OF TELEPHONE, MOTOR CAR ETC., WHILE F ILING THE RETURN OF INCOME. HE RELIED UPON THE CASES OF ARTHUR ANDERSON & CO., (94 TTJ 73 6) , HOTEL VIKRANT (28 TTJ 528), SPEED CARRIERS (27 TTJ 387). 9. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING T HE CASE LAWS CITED BY THE AR, WE ARE OF THE OPINION THAT ORDER OF THE FAA IS AS PER THE PROVISIONS OF LAW. GROUND NO.2 DESERVES TO BE REJECTED. APPEAL FILED BY THE AO STANDS REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH SEPTEMBER, 2012. SD/- SD/- ( /VIJAY PAL RAO ) ( , / RAJENDRA ) (* / JUDICIAL MEMBER % (* / ACCOUNTANT MEMBER MUMBAI, +( DATE: 05 TH SEPTEMBER, 2012 TNMM () () () () ' '' ' # # # # ,# ,# ,# ,# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE !# # //TRUE COPY// () () () () / BY ORDER, - -- - / . . . . DY./ASSTT. REGISTRAR , / ITAT, MUMBAI