VIRCHAND KHIMJI & CO., MUMBAI V. ITO 15(2)(3), MUMBAI

ITA 7129/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2160 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-11-2014
• Court: TRIBUNAL
• Department Lawyers: R A DHYANI
• Keywords: Bogus purchase; Unexplained expenditure

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, A CCOUNTANT MEMBER ./ ITA NO . 7129 /MUM/201 4 ( / ASSESSMENT YEAR :20 11 - 201 2 ) M/S VIRCHAND KHIMJI & COMPANY 142/44, GRANT ROAD, OPP. TWO TANK, MUMBAI - 400008 VS. ITO 15(2)(3), MUMBAI ./ ./ PAN/GIR NO. : AADFV5555A ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI RAJIV KHAND ELWAL WITH SHRI NILKANT KHANDELWAL /REVENUE BY : SHRI R.A.DHYANI / DATE OF HEARING : 1 8 /08/2016 / DATE OF PRONOUNCEMENT 09 / 11 / 2016 / O R D E R THIS IS AN APPEAL FILED BY THE ASSE SSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2011 - 2012, IN THE MATTER OF ORDER PASSED U/S.143(3). 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED BY THE ACTION OF CIT(A) CONFIRMING THE ADHOC ADDITION OF 3% IN RESPECT OF TRANSPORT, FREIGHT, TELEPHONE A ND TRAVELLING CHARGES. ASSESSEE IS ALSO AGGRIEVED FOR CONFIRMING ADDITION U/S.69C OF RS.2,26,136/ - BEING AMOUNT PAID TO M/S. HITEN ENTERPRISES AND M/S. RONAK OVERSEAS FOR PURCHASE OF MISCELLANEOUS OFFICE ITEMS. 3. IN GROUND NO.3 ASSESSEE IS AGGRIEVED FOR C ONFIRMING THE ADDITION U/S.69C @2% OF THE TOTAL PURCHASES MADE FROM M/S. RONAK OVERSEAS. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF SUPPLY OF FOOD GRAINS ITEMS LIKE EDIBLE OIL, GHEE, PROVISION STORES ETC., RETURN OF ITA NO. 7129 - 2014 VIRCHAND KHIMJI & CO., 2 INCOME DECLARING TOTAL INCOME OF RS.12,61,162/ - WAS FILED BY THE ASSESSEE WHICH WAS ASSESSED AT RS.41,98,618/ - AFTER MAKING THE FOLLOWING ADDITIONS: (I)DISALLOWANCE OUT OF TRANSPORT AND FREIGHT RS.10,00,000/ - (II) DISALLOWANCE OUT OF TELEPHONE AND TRAVELLING RS. 65,957/ - (III) UNEXPLAINED EXPENDITURE U/S.69C RS.18,71,499/ - 6. BY THE IMPUGNED ORDER CIT(A) UPHELD THE ADDITION TO THE EXTENT OF 3% ON THESE EXPENSES AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE EXTRACT OF COMPARATIVE STATEMENT OF FREIGHT, TRANSPORT CHARGES AND SAMPLE SELF - MADE VOUCHER IN RESPECT OF TRANSPORT CHARGES PAID. WE FOUND THAT TRANSPORT CHARGES PAID BY ASSESSEE THROUGH R EGULAR TRANSPORTERS WERE DULY SUPPORTED BY THEIR BILLS / CASH MEMO AND IN OTHER CASES THEY ARE MOSTLY SUPPORTED BY THIRD PARTY SIGNED VOUCHERS BUT PREPARED BY THE ASSESSEES STAFF AND SOME TIME SELF - VOUCHERS. SINCE VOUCHERS ARE SIGNED BY THIRD PARTY, THEY CANNOT BE TERMED AS SELF - MADE VOUCHERS SIMPLY ON ACCOUNT OF FACT THAT THE SAME ARE PREPARED BY OFFICIALS OF THE ASSESSEE IN REGULAR VOUCHER FORMS IN THE REGULAR COURSE OF BUSINESS. 8. WE HAD VERIFIED THE SAMPLE COPIES OF VOUCHERS SIGNED BY THE THIRD PARTIE S AND SELF - MADE VOUCHERS AND FOUND THAT ASSESSEE HAS GENUINELY INCURRED THE EXPENDITURE IN REGULAR COURSE OF BUSINESS AND ADHOC DISALLOWANCE SO MADE BY AO AND PARTY UPHELD BY CIT(A) IN RESPECT OF TRANSPORT AND FREIGHT IS UNWARRANTED. ACCORDINGLY, WE DELETE THE DISALLOWANCE OF TRANSPORT / FREIGHT EXPENSES SO UPHELD BY CIT(A). ITA NO. 7129 - 2014 VIRCHAND KHIMJI & CO., 3 9. WITH REGARD TO 3% DISALLOWANCE UPHELD BY CIT(A) ON ACCOUNT OF TELEPHONE, TRAVELLING EXPENSES, LOOKING TO THE NATURE OF ASSESSEES BUSINESS, IT APPEARS TO BE ON HIGHER SIDE, ACCORDIN GLY, WE RESTRICT THE SAME TO THE EXTENT OF 1% OF THE EXPENDITURE SO INCURRED. 10. IN GROUND NO. 2 & 3, ASSESSEE IS AGGRIEVED FOR UPHOLDING ADDITION BY CIT(A) U/S.69C. 11. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ON THE BASIS OF INFORMATION BY SALES TAX DEPARTMENT, AO HAD ADDED THE PURCHASES MADE FROM HITEN ENTERPRISES AND RONAK OVERSEAS IN ASSESSEES INCOME . 12. BY THE IMPUGNED ORDER CIT(A) OBSERVED AS UNDER: - CONS IDERING THE FACTS OF THIS C ASE AND VARI OUS CASE LAW S AS ABOVE, IT IS NOT A CASE OF BOGUS PURCHASE. AS PER THE LEDGER ACCOUNT OF M/S. RONAK . OVERSEAS, THE TO TAL PURCHASE IS RS.3.02 CRORES AND OUTSTANDING BALANCE AS O N 31.03.2012. IS ONLY RS.963 . 00. FURTHER FROM THE NATURE AND PERIOD ICI TY OF TRANSACTIONS, IT IS SEEN TH AT PAYMENTS ARE MADE' SHORTL Y (W ITHI N - 3 - 5 DAYS) AFTER PURCHASE. PAYMENTS MADE ARE APPEARING IN THE BAN K .STATEMENT. QUANTITATIVE TALLY IS N OT DISPUTED. THE PAYMENTS ARE GENERALLY MADE BILL WISE. PU RCHASE AND PAYMENTS ARE REGULAR DURING THE PERIOD OF. TRA NSACTION. THE CREDIT OF 3 - 5 DAYS CANNOT BE SAID TO BE ABNORMAL I N TH IS LINE OF TRADE. MOREOVER, G.P SHOWN .IN THESE SUSPICIOUS PURCHASES IS ALSO SIMILAR TO TH E G.P SHOWN IN OTHER PURCHASES . 13. EVEN AFTER HAVING THE ABOVE OBSERVATION, THE CIT(A) UPHELD TH E ADDITION OF 2% ON SUCH PURCHASES. WE DO NOT FIND ANY MERIT IN THE ACTION OF CIT(A). IN SO FAR AS A CLEAR FINDING HAS BEEN GIVEN BY HIM TO THE EFFECT THAT OUT OF TOTAL PURCHASE OF RS.2.02 CRORES , D URING THE YEAR THE OUTSTANDING BALANCE AS ON 31/03/2012 WA S ONLY RS.963.00. THE CIT(A) ITA NO. 7129 - 2014 VIRCHAND KHIMJI & CO., 4 HAS ALSO OBSERVED THE NATURE AND PERIODICITY OF TRANSACTIONS, THE PAYMENTS WERE MADE SHORTLY WITHIN 2 - 3 DAYS AFTER THE PUR CHASES. THE PURCHASE SO MADE WAS DULY REFLECTED IN THE BANK STATEMENT. QUANTITATIVE TALLY IS NOT DISPUTED MEANS WHATEVER SALE HAS BEEN MADE OUT OF THE SE HAS BEEN ACCEPTED BY THE DEPARTMENT. THE CIT(A) ALSO OBSERVED THAT G.P. SHOWN IN THESE PURCHASES ARE SIMILAR TO THE G.P. SHOWN ON OTHER PURCHASES. 14. IN VIEW OF THESE FINDINGS, WE DO NOT FIND ANY MERIT F ROM THE ADDITION SO UPHELD BY THE CIT(A). ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION IN RESPECT OF PURCHASES MADE FROM M/S. HITEN ENTERPRISES AND M/S. RONAK OVERSEAS. WE DIRECT ACCORDINGLY. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09 / 11 /2016 S D/ - ( R.C.SHARMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 11 /2016 KARUNA SR.P.S / 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// ITA NO. 7129 - 2014 VIRCHAND KHIMJI & CO., 5