DCIT-15(3)(1), MUMBAI V. M/S.RAJLAXMI HOME PRODUCTS PRIVATE LIMITED, MUMBAI

ITA 6599/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4269 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 14-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Bogus purchase; Unexplained cash credit
• Section: 143(3); 133(6); 201; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 6599 /MUM/201 7 ( / ASSESSMENT YEAR: 20 14 - 1 5 ) DCIT 15(3)(1) ROOM NO. 451, 4 TH FLOOR, AA YAKAR BHAVAN, MAHARISHI KARVE ROAD, MUMBAI - 400078 . / VS. M/S. RAJLAXMI HOME PRODUCTS PVT. LTD. 5, ANJANI KUMAR INDUSTRIAL ESTATE, DUTT MANDIR ROAD, BHANDUP (W), MUMBAI - 400078. ./ ./ PAN/GIR NO. : AAACR7088L ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 06 . 0 2 .201 9 / DATE OF PRONOUNCEMENT : 13. 03 . 201 9 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 02 . 0 8 .201 7 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 24 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 14 - 1 5 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF UNEXPLAINED CASH CREDITS AMOUNTING TO RS.1,68,44,162/ - , MADE UNDER SECTION 68 OF THE INCOME TAX ACT, HOLDING THAT THE APPELLANT HAS PROVED THE GENUINENESS OF THE REVENUE BY : SHRI D. G. PANSARI (SR AR) ASSESSEE BY: SHRI AMIT JHAVERI ITA NO.6599 /M/201 7 A.Y.20 14 - 15 2 TRANSACTIONS IN THE FORM OF CONFIRMATIONS, PAN, RETURN OF INCOME, BANK STATEMENT ETC, THEREBY IGNORING THE RECENT DECISION OF THE HON'BLE SUPREME COURT OF INDIA IN THE CAS E OF NAVODAYA CASTLE (P) LTD. [2015] 56 TAXMANN.COM18 (SC), WHEREIN THE APEX COURT HAS UPHELD THE DELHI HIGH COURT DECISION HOLDING THAT CERTIFICATE OF INCORPORATION, PAN ETC., WERE NOT SUFFICIENT FOR PURPOSE OF IDENTIFICATION OF SUBSCRIBER COMPANY.' 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION UNDER SECTION 68 OF THE I NCOME TAX ACT OF RS.1,12,82,614/ - ON ACCOUNT OF BOGUS PURCHASES TO ONLY 12.5% OF THE SUCH BOGUS PURCHASES, WITHOUT GIVING A NY FINDINGS AS TO HOW 12.5% HAS BEEN WORKED OUT AND IGNORING THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N. K. PROTEINS LTD., WHEREIN IT HAS BEEN HELD THAT IN THE EVENT OF BOGUS PURCHASES, THE ADDITION OF WHOLE OF SUCH PURCHA SES IS REQUIRED TO BE MADE AND THIS DECISION HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT IN SLP NO. CC NO.769 OF 2017, BY DISMISSING THE SLP OF THAT ASSESSEE.' 3 THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A), MUMBAI ON THE ABOVE DIRECTIONS BE SET - AS IDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 4 THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY OF THE AFORESAID GROUNDS OR ADD A NEW GROUND OF APPEAL, WHICH MAY BE NECESSARY, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL.' 3 . THE BRIEF FA CTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 . 11 .20 1 4 DECLARING TOTAL IN C OME TO THE TUNE OF RS32,26,345/ - . THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 02.12.2016 DETERMINING THE TOTAL INCOME TO THE TUNE OF RS. 3,13,53,120/ - . THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING & TRADING OF READYMADE GARMENTS. THE ASSESSEE PURCHASED MATERIAL FROM SOME PARTIES AND SHOWN SUNDRY CREDITORS AGAINST SUCH PURCHASES. THE AO ISSUED THE NOTICE U/S 133(6) OF THE ACT AND SO ME OF THE PARTIES FAILED TO RESPONSE THE NOTICE. THEREAFTER, THE AO ISSUED THE SHOW - CAUSE NOTICE TO THE ASSESSEE. THE ASSESSEE PRODUCED THE EVIDENCE IN SUPPORT OF HIS CLAIM. THE AO OBSERVED OF THE CONFIRMATION LETTER WAS HAVING THE COMMON FEATURE SUCH AS S IZE OF THE ENVELOPS, HANDWRITING ETC, HENCE, DOUBTED GENUINENESS OF ITA NO.6599 /M/201 7 A.Y.20 14 - 15 3 TRANSACTION WITH M/S. BHARATHI TEXTILES IN SUM OF RS.41,77,935/ - AND M/S. DHANALAXMI TEXTILES IN SUM OF RS.1,26,66,227/ - AGGREGATING TO RS.1,68,44,162/ - , THEREFORE, THE AO RAISED THE ADDIT ION IN SUM OF RS.1,68,44,162/ - U/S 68 OF THE ACT AS UNEXPLAINED CASH CREDIT AND THE SAID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. THE AO ALSO FOUND THAT THE TWO PARTIES NAMELY M/S. SHAGUM IMPEX IN SUM OF RS.16,59,031/ - AND M/S. K.V. IMPEX IN SUM OF RS.96,23,583/ - FAILED TO RESPONSE TO THE NOTICE, THEREFORE, THE AMOUNT IN SUM OF RS.1,12,82,614/ - WAS ALSO ADDED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND ADDED THE TOTAL INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE T UNE OF RS.3,13,53,120/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE , THEREFORE , THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO S . 1 & 2 4. UNDER THESE ISSUE S THE REVENUE HAS CHALLENG ED THE DELETION OF THE ADDITION RAISED BY THE AO AS UNEXPLAINED CASH CREDIT IN SUM OF RS.1,68,44,162/ - AND BOGUS PURCHASE IN SUM OF RS.1,12,82,614/ - WHICH HAS BEEN RESTRICTED TO THE EXTENT OF 12.5%. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT TH E FINDING OF THE CIT(A) ON RECORD.: - 2.4 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. I HAVE ALSO GONE THROUGH TH E ASSESSMENT ORDER PASSED BY THE A.O., WRITTEN SUBMISSIONS FILED BY THE APPELLANT AND RELEVANT CASE LAWS CITED BY THE APPELLANT DURING THE APPELLANT PROCEEDINGS. THE SUBMISSION AND CONTENTION OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED AS UNDER: - ITA NO.6599 /M/201 7 A.Y.20 14 - 15 4 2.4 .2 IN THE INSTANT CASE IT IS SEEN THAT THE GROUNDS OF APPEAL PERTAIN TO THE DISALLOWANCE OF RS. 2,81,26,7761 - . FOR THE SAKE OF CONVENIENCE, BOTH THE ADDITIONS ARE DISPOSED TOGETHER. THE AO RECEIVED THE CONFIRMATIONS FROM THE SUNDRY CREDITORS TOTAL AMOUNTIN G TO RS.1,68,44,162/ - SHOWN BY THE ASSESSE FROM MIS. BHARTI TEXTILES (RS.41,77,935/ - & M/S. R DHANLAXMI TEXTILES (RS.126,66,227/ - ) ARE TREATED AS CASH CREDITS WITHIN THE MEANING OF PROVISIONS OF SECTION 68 OF THE I.T. ACT, 1961 AND THE SAME WAS THEREFORE, TREATED AS INCOME IN THE HANDS OF THE ASSESSEE BY THE AO AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WITH RESPECT TO THE ALLEGED PURCHASES MADE FROM M/S. SHAGUN IMPEX OF RS.16,59,031/ - AND M/S. K.V. IMPEX OF RS.96,23,583/ - TOTALING TO RS.1,12,82,614/ - , BOTH THE PARTIES HAVE NOT COMPLIED THROUGH THE NOTICE ISSUED ON 16.8.2016 ARE TREATED AS NON - GENUINE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO U/S 68 OF THE I.T. ACT, 1961. THUS THE AO HAS NOT ACCEPTED THE TRANSACTION AS GENUINE AND CONS IDERED INCOME OF RS.2,81,26,776/ - U/S 68 OF THE I.T. ACT, 1961. FROM THE ASSESSMENT ORDER, IT TRANSPIRES THAT THE A.O. HAS DISALLOWED THE TRANSACTION OF RS. 1,68,44,162/ - U/S. 68 AS UNEXPLAINED CASH CREDIT BY SOLELY RELYING ON THE ASSUMPTION THAT AS THE CO NFIRMATIONS RECEIVED THROUGH SAME COURIER SERVICE, SAME SIZE OF ENVELOPE AND HANDWRITING ON BOTH ENVELOPES ARE IDENTICAL THE TRANSACTIONS STANDS TO BE NON - GENUINE. THE A.O. HAS DISALLOWED THE TRANSACTIONS OF RS.1,12,82,614/ - U/S. 68 AS UNEXPLAINED CASH CRE DIT AS THE CREDITORS HAS NOT REPLIED TO THE NOTICE ISSUED U/S. 133(6). 2.4.3 THE A.R. HAS SUBMITTED THE CONFIRMATIONS, COPY OF ITR AND PAYMENT PROOFS OF ALL FOUR PARTIES FOR THE A.Y. 2014 - 15, 2015 - 16 & 2016 - 17. IT IS CONFIRMED THAT THE ASSESSEE IS AFFECTIN G PURCHASES FROM THE SAID PARTIES TILL DATE. ALL THE FOUR PARTIES ARE SAID TO BE PRESENTLY AVAILABLE IN THE PREMISES AS MENTIONED BY THE APPELLANT. 2.4.4 CONFIRMATION FROM 2 PARTIES WORTH OF RS.1,68,44,162/ - RECEIVED THROUGH COURIER. AS FAR AS THE QUESTIO N OF THE VALIDITY OF THE TRANSACTIONS, EVEN IF THE REPLY IS RECEIVED THROUGH SAME COURIER SERVICES, SAME SIZED ENVELOPE AND SAME HANDWRITING ON ENVELOPE, IT CANNOT BE SOLE REASON TO TREAT THE TRANSACTIONS AS BOGUS AND NON - GENUINE. THE A.O. HAS SOLELY RELI ED UPON THE ASSUMPTION AND DID NOT CONDUCT ANY INDEPENDENT INQUIRY IN THE MATTER. HE HAS IGNORED THE DOCUMENTARY EVIDENCES SUBMITTED BY THE APPELLANT. WITHOUT POINTING OUT ANY LACUNA IN THE EVIDENCES SUBMITTED BY THE APPELLANT, THE SOURCES AND THE GENIUSES CANNOT BE DOUBTED. THEREFORE, THE DECISION OF THE A.O. TREATING THE SAME AS BOGUS OR NON - GENUINE TRANSACTIONS IS NOT IN ORDER AND CANNOT BE JUSTIFIED. THE ITA NO.6599 /M/201 7 A.Y.20 14 - 15 5 A.O. IS ACCORDINGLY DIRECTED TO DELETE THE ADDITION AS A CASH CREDIT U/S. 68 OF RS. 1,68,44,162/ - 2. 4.5 CONFIRMATIONS HAS NOT BEEN RECEIVED FROM 2 PARTIES WORTH OF RS1,12,82,614/ - DURING THE ASSESSMENT PROCEEDINGS. THE LD AO HAS THEREFORE DOUBTED THE GENUINENESS OF THE PURCHASES. DURING THE APPEAL PROCEEDINGS, THE A.R. HAS MADE SIMILAR SUBMISSIONS AS WAS DONE BEFORE THE AO AT THE TIME OF SCRUTINY ASSESSMENT WHICH INCLUDE DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAID PURCHASE CLAIMS. THE LD AR HAS ALSO PLACED RELIANCE ON THE DECISION OF THE MUMBAI TAT OF DOT V/S. SHRI RAJEEV KALATHIL DT 20/8/2014, ITA NO: 67 27/MUM/2012 THEREFORE THE DECISION OF THE A.O. TREATING THE SAME AS BOGUS OR NON - GENUINE TRANSACTIONS IS NOT IN ORDER AND CANNOT BE JUSTIFIED. TH A.O. IS ACCORDINGLY DIRECTED TO RESTRICT THE ADDITION AS A CASH CREDIT U/S 68 @ 12.5% OF RS.1,12,82,614/ - . THI S GROUND IS PARTLY ALLOWED. GROUND NO. 6 & 7 ARE GENERAL IN NATURE. HENCE, THESE GROUNDS ARE FOUND TO BE DEVOID OF MERIT AND THEREFORE DISMISSED 2.5 IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 5. ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED TH AT THE ASSESSEE HAS ALREADY SUBMITTED THE CONFIRMATION , COPY OF ITR , PROOFS OF PAYMENT OF ALL FOUR PARTIES FOR THE A.Y. 2014 - 15 TO 2016 - 17. THE ASSESSEE WAS MAKING THE PURCHASE FROM THE SAID PARTIES TILL DATE. ALL FOUR PARTIES ARE AVAILABLE. T HE AO DECLINE D THE CLAI M OF THE ASSESSEE ON ACCOUNT OF TWO PARTIES NAMELY M/S. SHAGUM IMPEX IN SUM OF RS.16,59,031/ - AND M/S. K.V. IMPEX IN SUM OF RS.96,23,583/ - ON THE BASIS OF THIS FACT THAT THE REPLY WAS RECEIVED BY THE SAME COURIER SERVICE, SAME SIZE ENVELOPE AND S AME HANDWRITING ON ENVELOPE. THE AO NOWHERE CONDUCTED ANY ENQUIRY. THE ASSESSING OFFICER NOWHERE TOOK INTO THE NOTICED OF ANY MATERIAL WHICH LEADS TO THE ADDITION ON THE PART OF THE ABOVE SAID PARTIES . TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE WHICH DOES NOT SEEMS UNJUSTIFIABLE, THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. SO FAR AS THE CLAIM OF ITA NO.6599 /M/201 7 A.Y.20 14 - 15 6 THE BOGUS PURCHASE IN SUM OF RS.1,12,82,614/ - IS CONCERNED, THE SAME HAS BEEN REST RICTED TO THE EXTENT OF 12.5%. T HE ISSUE HAS BEEN DECIDED BY CIT(A) ON THE BASIS OF THE DECISION OF THE HONBLE ITAT IN THE CASE OF DCIT VS. RAJEEV KALATHIL DATED 20.08.2014 IN ITA. NO.6727/M/2012 FOR THE A.Y.2009 - 10. THE SALE IS NOT DISPUTED . T HE ADDITION WAS RESTRICTED TO THE EXTENT OF ELEMENT OF PROFIT OF THE ASSESSEE IN THE TRANSACTION CONCERNED. IT IS NOT UNJUSTIFIABLE. THE GUJARAT HIGH COURT IN CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM 385 (GUJ) HAS DEALT THE ISSUE IN WHICH T HE PROFIT EMBEDDED IN THE BOGUS TRANSACTION HAS BEEN CONSIDERED TO RAISE THE ADDITION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON BOTH THE ISSUES JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WI TH AT THIS APPELLATE STAGE. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 13. 03 .2019 . SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 13. 0 3 .2019 . V IJAY ITA NO.6599 /M/201 7 A.Y.20 14 - 15 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBA I