INCOME TAX OFFICER 33(1)(3), MUMBAI V. M/S.CHANDAN ENTERPRISES, MUMBAI

ITA 6524/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2075 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 15-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 6524/MUM/2018 ( ASSESSMENT YEAR: 2011-12) I.T.O.-33(1)(3), MUMBAI. VS. M/S CHANDAN ENTERPRISES, SHOP NO. 17, LALJI COMPLEX, DAHANUKAR WADI, KANDIVALI (WEST), MUMBAI-400067. PAN/GIR NO.AACFC 0879 M (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI KUMAR PADMAPANI BORA (SR.DR) ASSESSEE BY NONE DATE OF HEARING 05/12/2019 DATE OF PRONOUNCEMENT 06/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-45, MUMBAI DATED 09/07/2018 FOR THE A.Y. 2011-12 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. NO BODY APPEARED ON BEHALF OF THE ASSESSEE IN SP ITE OF SERVICE OF NOTICE, THEREFORE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR AND CONSIDERING THE MATERIAL PLA CED ON RECORD. 3. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD. CIT(A) FOR RESTRICTING THE ADDITION ON ACCOUNT OF B OGUS PURCHASES TO THE EXTENT OF 12.5% WHICH WAS MADE BY THE A.O. AT 100%. ITA NO. 6524/MUM/2018 ITO VS M/S CHANDAN ENTERPRISES 2 4. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE ADDITION WAS MADE BY THE A.O. ON THE FINDING THAT THE ASSESSEE IS TAKING ACCOMMODATION BILL IN RESPECT OF PURCHASES. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS RESTRICTED THE A DDITION TO THE EXTENT OF 12.5% AFTER HAVING THE FOLLOWING OBSERVATION: 5. GROUND NO.1 RELATES TO THE ADDITION MADE BY AO OF RS.4,37,774 A S UNEXPLAINED EXPENDITURE U/S 69C. FOLLOWING ARE THE DETAILS OF PARTIES FROM WHOM THE ASSESSEE OBTAINED BOGUS PURCHASES: S. NO. NAME OF THE DEALERS AMOUNT 1 DHAVAL ENTERPRISES 1,22,456 2 MARUTI TRADERS 2,888 3 DARSHAN ENTERPRISES 3,12,430 TOTAL 4,37,774 DURING THE ASSESSMENT PROCEEDINGS, THE FURNISHED AU DIT REPORT, COPIES OF P&L A/C & BALANCE SHEET, DETAILS OF PURCH ASES & SALES, DETAILS OF EXPENSE ETC. THE AO ISSUED NOTICES U/S 133(6) TO THE PARTIES AND MOST OF THE NOTICES WERE RETURNED WITH A REMARK LEFT/ NO T KNOWN. THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN THE AB OVE TRANSACTIONS AND DISCHARGE HIS ONUS BY WAY PRODUCING PARTIES. IN RESPONSE, THE AR OF THE ASSESSEE MADE SUBMISSION DATED 21.03.2014. A FTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO DID NOT ACCE PT THE SUBMISSION OF THE ASSESSEE HOLDING THAT THE GOODS HAVE COME INTO THE BUSINESS THOUGH THE ALLEGED SUPPLIERS STATED THAT THEY ONLY ISSUED BILLS. THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS O F THE CLAIM. ASSESSEE WAS NOT ABLE TO EXPLAIN THE EXPENDITURE IN CURRED, THEREFORE IT IS AN ISSUE OF EXPENDITURE. AO STATED THAT THERE WERE NO REPLIES FROM THE SUPPLIERS WHEN NOTICES U/S 133(6) WERE ISSUED A T THE ADDRESS GIVEN BY THE ASSESSEE ONLY. THEREFORE, THE AO ADDED THE E NTIRE PURCHASES ITA NO. 6524/MUM/2018 ITO VS M/S CHANDAN ENTERPRISES 3 OF RS.4,37,774 AS UNEXPLAINED EXPENDITURE U/S 69C T O THE TOTAL INCOME OF THE ASSESSEE. 5.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AND TH E SUBMISSIONS OF THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. IT IS NOTICED THAT ON ACCOUNT OF NON-AVAILABILITY OF THE SUPPLIERS AT THE GIVEN ADDRESS AND NON-PRODUCTION OF DELIVERY CHALLANS, BANK ACCOUNT S TATEMENT, LORRY RECEIPTS, TRANSPORTATION DETAILS, THE AO ADDED THE ENTIRE PURCHASES AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. SECTION 69C READS. WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURR ED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANAT ION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE A O, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. AS CAN BE SEEN FROM THE PROVISION, FOR APPLYING THE SECTION 69C, WHAT IS IMPORTANT IS THAT THERE SHOULD BE NO EXPLANATION AB OUT THE SOURCE OF EXPENDITURE OR THAT THE EXPLANATION OFFERED IS NOT FOUND SATISFACTORY. IN OTHER WORDS, THE SOURCE OF EXPENDITURE INCURRED FOR THE EXPENDITURE IN QUESTION IS THE HEART OF SECTION 69C. HERE IN THIS CASE, THE APPELLANT FILED PURCHASE BILLS, LEDGER COPIES AND SOURCE OF E XPENDITURE FOR THE PURCHASES FROM THE BANK ACCOUNT. THEREFORE, IN THIS CASE, THE SOURCE OF EXPENDITURE FOR PURCHASES STANDS EXPLAINE D. THEREFORE INVOKING OF SECTION 69C IN THE PRESENT CASE IS NOT PROPER. 5.2 THOUGH, THE APPELLANT WAS NOT ABLE TO PRODUCE THE CONCERNED PARTIES BEFORE THE ASSESSING OFFICER, FACT REMAINS THAT THE APPELLANT PRODUCED BANK ACCOUNT STATEMENT, PURCHASE BILLS, ETC., TO PR OVE THE GENUINENESS OF THE PURCHASES. IT IS ALSO A FACT ON RECORD THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES AFFECTED BY THE APPELLANT. TH US, IT IS LOGICAL TO CONCLUDE THAT WITHOUT CORRESPONDING PURCHASES BEING AFFECTED, THE APPELLANT COULD NOT HAVE MADE THE SALES. MERELY REL YING UPON THE ITA NO. 6524/MUM/2018 ITO VS M/S CHANDAN ENTERPRISES 4 INFORMATION FROM THE SALES TAX DEPARTMENT THE ASSES SING OFFICER COULD NOT HAVE TREATED THE ENTIRE PURCHASES AS BOGUS. THE APPELLANT HAS BROUGHT DOCUMENTARY EVIDENCES ON RECORD TO PROVE GE NUINENESS OF SUCH TRANSACTIONS, THE ACTION OF THE ASSESSING OFFI CER IN IGNORING THEM CANNOT BE ACCEPTED. WHEN THE PAYMENT TO THE CO NCERNED PARTIES ARE THROUGH PROPER BANKING CHANNEL AND THER E IS NO EVIDENCE BEFORE THE AO THAT THE PAYMENTS MADE WERE AGAIN ROUTED BACK TO THE APPELLANT, THE ADDITION OF BOGUS PURCHA SES IS NOT SUSTAINABLE IN LAW AND FACTS. ONLY COROLLARY THAT F OLLOWS IN SUCH SITUATION IS THAT THE APPELLANT COULD HAVE OBTAINED THE ACCOMMODATION BILLS FOR THE MATERIAL PURCHASED LOCALLY. IN OTHER WORDS THE ENTITIES MAY NOT BE THE ACTUAL SUPPLIER BUT MAY HAVE PROVIDED TH E BILLS FOR THE MATERIAL PURCHASED LOCALLY. THEREFORE THE SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES MADE BY THE APPELLANT ON T HE SAID BOGUS PURCHASES CAN BE BROUGHT TO TAX AS ADDITIONAL PROFI T. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE , THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 12.5% OF SUCH PURCHASES OF RS.4,37,774 WHICH COMES TO RS.54,722.THE AO IS DIRE CTED TO MODIFY THE ADDITION ACCORDINGLY AND THE APPELLANT GETS PART RE LIEF. THIS GROUND IS PARTLY ALLOWED. 5. IT IS CLEAR FROM THE ORDERS OF THE LOWER AUTHORI TIES THAT LD. CIT(A) HAS OBSERVED THAT THE CORRESPONDING SALES MADE BY T HE ASSESSEE HAS NOT BEEN DOUBTED AND THE ENTIRE PAYMENT WAS MADE TH ROUGH ACCOUNT PAYEE CHEQUE, THEREFORE, CONSIDERING THE SAVINGS ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES, THE LD. CIT(A) RESTRI CTED THE ADDITION TO THE EXTENT OF 12.5% OF SUCH PURCHASES. NOTHING WAS BROUGHT ON RECORD BY THE LD DR SO AS TO PERSUADE ME TO DEVIATE FROM T HE FINDINGS OF THE LD. CIT(A) FOR RESTRICTING THE ADDITION TO THE EXTE NT OF 12.5%. ITA NO. 6524/MUM/2018 ITO VS M/S CHANDAN ENTERPRISES 5 ACCORDINGLY, I DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LD. CIT(A) IN RESTRICTING THE ADDITION TO THE EXTENT OF 12.5%. I UPHOLD THE SAME. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH DECEMBER, 2019. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 06/12/2019 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//