CHANDRAKANT MANILAL THAKKAR, MUMBAI V. ITO 23(2)(2), MUMBAI

ITA 600/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2539 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MAHAPATRA
• Assessee Lawyers: DR K SHIVRAM MS NEELAM JADHAV
• Keywords: Additional evidence
• Section: 143(3); 133(6)

Judgement Text

CHANDRAKANT MANILAL THAKKAR ITA NO. 600 /M UM /201 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 600 /MUM/20 1 1 (ASSESSMENT YEAR :200 7 - 08 ) CHANDRAKANT MANILAL THAKKAR , C - 1/206, LOK EVEREST, J D ROAD, MULUND (WEST), MUMBAI - 400 080 .: PAN: A BXPT 9478 M VS IT O 2 3 ( 2 ) (2) , PIRAMAL CHAMBERS, LALBAUG, LOWER PAREL, MUMBAI - 400 01 (APPELLANT (RESPONDENT) APPELLANT BY : DR. K SHIVRAM MS. NEELAM JADHAV RESPONDENT BY : SHRI S K MAHAPATRA /DATE OF HEARING : 21 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : __ - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 2 0 .1 0 .201 0 , PASSED BY CIT(A) - 3 3 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 200 7 - 0 8 , MAINLY ON THE FOLLOWING GROUNDS : - 1. TH AT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED I N CON F ORMING THE ADDITION OF RS. 35,99,465/ - MADE BY THE A SSESSING OFFICER ON ACCOUNT OF UNPROVED PURCHASES WITHOUT CONSIDERING THE DETAILS FILED BEFORE HIM. CHANDRAKANT MANILAL THAKKAR ITA NO. 600 /M UM /201 1 2 2. THAT WHILE CONFIRMING THE ADDITION OF RS. 35,99,465/ - TO THE RETURNED INCOME ON ACCOUNT OF UNPROVED PURCHASES THE LEARNED CIT(A) HAS TAKEN IRRELEVANT IN TO CONSIDERATION AND THEREBY ARRIVED AT AN ERRONEOUS CONCLUSION. 3. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT M/S NARAQYAN POLYPLAST HAD FILED THE DETAILS AND THE PAYMENT TO THE SAID PARTY WAS MADE BY PAYEES A/C CHEQUE. 4. THAT THE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THAT THE ADDITION SUSTAINED U/S 41(1) OF THE I.T. ACT, 1961 THE LIABILITY HAS NOT CEASED AND IN FACT THE APPELLANT HAD MADE THE PAYMENT IN THE SUBSEQUENT YEARS BY PAYEES A/C CHEQUE. 5. THAT THE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THE FACT THAT THE G.P. SHOWN IN THE YEAR UNDER CONSIDERATION IS HIGHER THAN THE G.P. OF PREVIOUS YEAR AND HENCE THERE IS NO QUESTION OF INFLATING THE PURCHASES. 2. BRIEF FACTS ARE THAT, THE ASSESSEE IN HI S PROPRIETARY CONCERN IS CARRYING OUT THE BUSINESS OF MANUFACTURING PLASTIC GOODS. IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAD SHOWN GROSS PROFIT @ 23.77% ON TURNOVER OF RS. 89,27,756/ - AS AGAINST GROSS PROFIT @ 29.69% ON TURNOVER OF RS. 80,89,061/ - IN THE PRECEDING YEAR. THE A O NOTED THAT THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 64,70,932/ - AND SUNDRY CREDITORS AS ON 31.03.2007 AT RS. 40,22,864/ - . I N ORDER TO VERIFY THE GENUINENESS OF THE PURCHASE AND SUNDRY CREDITORS HE ISSUED LETTERS TO SOME OF THE PARTIES U/S 133( 6) , H OWEVER SOME OF THESE LETTERS RETURNED UNSERVED AS THE SAID PART IES W ERE NOT AVAILABLE AT THE ADDRESS GIVEN BY THE ASSESSEE. THE AO ALSO DEPUTED INSPECTOR, IN CASE OF CERTAIN PARTIES, HOWEVER, SOME OF THEM COULD NOT G E T CONFIRM ED. A CCORDINGLY, AO AFT ER DETAILED REMARK O N EACH AND EVERY PARTIES SHOWN UNDER THE CHANDRAKANT MANILAL THAKKAR ITA NO. 600 /M UM /201 1 3 HEAD PURCHASES AND SUNDRY CREDITORS , MADE THE ADDITION ON ACCOUNT OF UN - PROVED / INFLATED PURCHASES F O R SUMS AGGREGATING TO RS. 35,99,465/ - . THE PARTIES NAME UNDER WHOM THE SAID ADDITION ON ACCOUNT OF UNPROVED/INFLATED PURCHASES WERE MADE ARE AS UNDER : - A ) M/S AMRUT TRADERS RS. 2,38,810 B ) M/S MAHAJAN IMPEX RS. 3,60,256 C ) M/S VARDHAMAN INTERNATIONAL RS. 8,81,140 D ) M/S ABHIJIT ENTERPRISES RS.10,52,883 E ) M/S SHAH TRADING CORPN. RS. 3,47,400 F ) M/S NARAYAN POLY PRINT RS. 4,45,428 RS.35,99,465 =========== BESIDES THIS , AO A L S O MADE SEPARATE ADDITION ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) IN THE CASE OF ONE PARTY , M/S RAJESH TRADING FOR RS. 1,46,548/ - . 3. LD. CIT(A), TOO CONFIRMED THE SAID ADDITION AFTER FOLLOWING THE DECISION OF ITAT BANGALORE IN THE CASE OF SHRI SURESH K JAIN VS ITO IN ITA NO. 667/BANG/2009. 4. BEFORE US, LD. COUNSEL SUBMITTED THAT, ASSESSEE HAD SUBMITTED THE LEDGER ACCOUNT OF THE PARTIES AND THE BANK STATEMENT SHOWING T HE PAYMENT BY CHEQUE AND ALSO ONE OF THE PARTIES M/S NARAYAN POLY PRINT THROUGH I TS C.A. HAD CONFIRMED THE TRANSACTION . HE FURTHER SUBMITTED THAT ALL THE PAYMENTS OF THE PURCHASES WERE MADE THROUGH BANKING CHANNELS AND THE GP RATE AS WELL AS NP RATE WAS HI GHER AS COMPARED TO EARLIER YEARS AND SUBSEQUENT YEARS. IF THE ADDITION MADE BY THE AO IS ADDED IN THE TRADING ACCOUNT THEN THE GROSS PROFIT WILL WORK OUT TO 64.25% WHICH IS TOO ABNORMAL. THE UN - PROVED PURCHASES AS ADDED BY THE AO CONSTITUTE S APPROXIMATELY 54% OF THE TOTAL PURCHASES AND I F SALES ARE NOT DOUBTED , THEN ENTIRE PURCHASES CANNOT BE DISALLOWED. OUT OF THE 12 PARTIES , ONLY 4 PARTIES DID NOT RESPONDED U/S 133(6) AND, THEREFORE, ADVERSE INFERENCE SHOULD NOT BE DRAWN. B ESIDES CHANDRAKANT MANILAL THAKKAR ITA NO. 600 /M UM /201 1 4 TH I S, LD. COUNSEL SUBMIT TED THAT SO FAR AS ADDITION ON ACCOUNT OF 41 (1) OF RS. 1,46,558/ - WITH RESPECT TO ONE PARTY , M/S RAJESH TRADING IS CONCERNED , LD. COUNSEL SUBMITTED THAT ASSESSEE I S NOW FILING ADDITIONAL EVIDENCES SHOWING PAYMENT AS WELL AS THE INCOME ON THIS SCORE OFFERED BY THE ASSESSEE IN THE SUBSEQUENT YEAR. THEREFORE, THIS MATTER CAN BE VERIFIED BY THE AO AND APPROPRIATE RELIEF CAN BE GIVEN. 5 . ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO AS WELL AS CIT(A). 6 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT FIRST OF ALL, THE MAIN ADDITION HA S BEEN MADE FOR SUMS AGGREGATING TO RS. 35,99,465/ - ON ACCOUNT OF UNPROVED PURCHASES. THE ADDITION HAS BEEN MADE ON THE GROUND THAT SOME OF THE PARTIES HAVE N OT CONFIRMED THE PURCHASES I N RESPONSE TO THE NOTICE ISSUED U/S 133(6) A S THEY WERE NOT TRACEABLE ON THEIR RESPECTIVE ADDRESSES. WE FIND THAT THE ASSESSEE HAD SHOWN TURNOVER OF RS. 89.28 LAKHS IN THIS YEAR AS COMPARED TO RS. 80.9 LAKHS IN THE EARLIER YEAR . T HE GROSS PROFIT SHOWN BY THE A SSESSEE IS ALSO HIGH THAT IS 23.77% IN THE EARLIER YEARS AS AGAINST 21.69% IN THIS YEAR . IF THE ENTIRE PURCHASES ARE TO BE DISALLOWED , THEN ASSESSEES GP WILL BE ENHANCED TO 62.5% , WHICH LOOKING TO THE PAST AND SUBSEQUENT HI STORY OF THE ASSESSEE IS MUCH TOO HIGH AND EXCESSIVE. THE PURCHASES EVEN IF ARE NOT ACCEPTED , THEN ALSO IT IS SEEN THAT THESE PURCHASES HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES AND THERE IS NO INFORMATION ON RECORD THAT THESE PURCHASES HAVE BEEN ROUTED THROUGH ACCOMMODATION BILL S FROM SUCH PARTIES. THEREFORE, THE SOURCE OF MAKING THE PURCHASES IS FROM THE BOOKS OF ACCOUNT ONLY . IN ANY CASE, IF THE ENTIRE PURCHASES ARE NOT VERIFIABLE , THEN IT CAN ONLY LEAD TO REJECTION OF BOOKS OF ACCOUNT . IF ANY ADDITIO N AT ALL IS CALLED FOR IN SUCH SITUATION THEN SAME SHOULD BE MADE ON ACCOUNT OF GROSS PROFIT AFTER BRINGING ON RECORD CERTAIN COMPARABLE CASES AS GP SHOWN BY THE ASSESSEE IS NOT CORRECT. THUS, IN THE INTEREST OF JUSTICE, WE FEEL THAT THIS MATTER CHANDRAKANT MANILAL THAKKAR ITA NO. 600 /M UM /201 1 5 SHOULD BE REMANDED BACK TO THE FILE OF THE AO TO MAKE PROPER ASSESSMENT OF INCOME AND AFTER EXAMINING THE BOOKS OF ACCOUNT IN PRINCIPLE LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS NIKUNJ EXIMP ENTERPRISES (P) LTD., REPORTED IN [2013] 216 TAXMAN 171 , AS RELIED UPON BY THE LD. COUNSEL , WHEREIN IT HAS BEEN HELD BY HONBLE HIGH COURT THAT, IF THE SALES ARE SUPPORTED BY PURCHASES AND PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS THEN MAINLY BECAUSE SUPPLIERS ARE NOT TRACEABLE OR HAD NOT APPEARED BE FORE THE AO, PURCHASES COULD NOT TO BE REJECTED AS BOGUS . ACCORDINGLY, W E DIRECT THE AO TO EXAMINE THE ISSUE IN THE LIGHT OF THE DECISION OF THE HONBLE HIGH COURT. IF THE BOOKS OF ACCOUNT ARE FOUND RELIABLE THEN NO ADDITION SHOULD BE MADE. REGARDING ADD ITION U/S 41(1), THE ASSESSEE HAD FILED ADDITIONAL EVIDENCES BEFORE US WHICH WE TAKE INTO ACCOUNT AND ADMIT THE SAME AND REMAND THE MATTER TO THE FILE OF THE AO WHO WILL SCRUTINIZE AND EXAMINE THE CONTENTION OF THE ASSESSEE THAT THE INCOME HAS BEEN OFFERED IN THE SUBSEQUENT YEAR. ACCORDINGLY, O N BOTH THE SCORES THE MATTER IS RESTORED TO THE FILE OF THE AO . 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER , 2015. SD/ - SD/ - ( . ) ( ) ( D. KARUNAKARA RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 30 TH OCTOBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 3 3 , MUMBAI. 4 ) THE CIT - 23 , MUMBAI. 5 ) , , / THE D.R. C BENCH, MUMBAI. CHANDRAKANT MANILAL THAKKAR ITA NO. 600 /M UM /201 1 6 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS