ITO 18(2)(5), MUMBAI V. PRVAIN D. JAIN, MUMBAI

ITA 7043/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0087 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 02-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.7043/M/2016 ASSESSMENT YEAR: 2008-09 ITA NO.7044/M/2016 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER-18(2)(5), R. NO.608, 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021 VS. SHRI PRAVIN D. JAIN, PROP. M/S. RAJENDRA METAL INDS., 225, PETIT HOUSE, SHOP NO.4, THAKURDWAR ROAD, MUMBAI 400 002 PAN: AABPJ6897R (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 17.08.2017 DATE OF PRONOUNCEMENT : 31.08.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E REVENUE AGAINST THE COMMON ORDER DATED 23.09.2016 OF THE COMMISSIONER O F INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2008-09 & 2009-10. 2. THE SHORT FACTS OF THE CASE ARE THAT A SURVEY AC TION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON 05.12.2012 AT THE OFFICE AND GODOWN PREMISES OF THE ASSESSEE. SUBSEQUENTLY, THE ASSESSMENT WAS REO PENED BY ISSUE OF NOTICE U/S 148 OF THE ACT. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) IN THE ASSESSMENT ORDER, CONSIDERING THE FACT THAT THE PAYMENT FOR GOODS ITA NO.7043/M/2016 & ITA NO.7044/M/2016 SHRI PRAVIN D. JAIN 2 PURCHASED FROM THE FOLLOWING UNKNOWN PARTIES HAS BE EN MADE IN CASH, MADE THE FOLLOWING ADDITIONS OF BOGUS PURCHASES TREATING THE SAME AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT: 1. M/S. HARI OM TRADERS RS.33,53,979/- 2. M/S. MAYUR ENTERPRISES RS.69,76,382/- TOTAL RS.1,03,30,361/- 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESS EE. WE HAVE HEARD THE LD. D.R. THE LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS V S. ITO AHMEDABAD AND GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WH OM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGA GED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEALING OF GOODS. IN THIS REGAR D, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WI TH RESPECT OF THE SALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PR OCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEV ER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED T HE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY TH AT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR I TS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON ITA NO.7043/M/2016 & ITA NO.7044/M/2016 SHRI PRAVIN D. JAIN 3 FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT O N SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYME NTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FRO M THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED, THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FO UND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAU SE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS W ERE NOT FURNISHED, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISION OF NIKUNJ EXIMP ENTERPRIS ES VS. CIT 216 TAXMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SU PPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED THAT SUPPLIE R WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. TH ERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUN TANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINE D WITHOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT RANGING F ROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CAS E OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DISMISS THE DEPARTMENTAL APPEAL. ITA NO.7043/M/2016 & ITA NO.7044/M/2016 SHRI PRAVIN D. JAIN 4 ITA NO.7044/M/2016 5. IN THIS APPEAL, DURING THE YEAR, THE AO FOUND TH AT ASSESSEE HAD MADE PURCHASES FROM FOLLOWING PARTIES: 1. M/S. TEJ CORPORATION 2. M/S. MAYUR ENTERPRISES 3. M/S. HARI OM TRADERS 6. WE FIND THAT THE REVENUE HAS TAKEN THE IDENTICAL GROUNDS IN ITA NO.7043/M/2016 AND THE SAME HAVE ALREADY BEEN DECID ED AS ABOVE. FOLLOWING THE SAME RATIO APPLIED IN ITA NO.7043/M/2016, WE DE CIDE THIS APPEAL ALSO. 7. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.08.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.