ITO 29(1)92), MUMBAI V. CHIRAG C PUJARA, MUMBAI

ITA 7661/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1706 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 69C; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE HONBLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR, ( AM ) ./ I .T.A. NO. 7661/ MUM/20 14 ( / ASSESSMENT YEAR : 2010 - 11 ) INCOME TAX OFFICER - 2 9 (1)(2), ROOM NO.103, 1 ST FLOOR, C - 1 0 , PRATYAKSHAKAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400051. VS. SHRI CHIRAG C PUJARA B - 704, KALPA NAGARI, BAL RAJESHWAR ROAD, VAISHALI NAGAR, M ULUND, MUMBAI - 400080 / APPELLANT .. / RESPONDENT ./ PAN :AASPP3622R / APPELLANT BY : SHRI RAJAT MITTAL /RESPONDENT BY : S HRI BHADRESH DOSHI / DATE OF HEARIN G : 5.12.2016 / DATE OF PRONOUNCEMENT : 09. 12.2016 / O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST THE ORDER DATED 14.10.2014 PASSED BY THE LD. CIT(A) - 33 , MUMBA I FOR THE ASSESSMENT YEAR 2010 - 12 . 2. THE ISSUE RAISED IN GROUNDS OF APPEAL NO.1 TO 4 ARE COMMON AND IS AGAINST THE DELETION OF ADDITION OF RS.11,47,180/ - BY THE LD. CIT(A) AS MADE BY THE ASSESSING OFFICER UNDER SECTION 69C OF THE INCOME TAX ACT, 1 961 IN RESPECT OF BOGUS PURCHASES MADE IN THE NAME OF DIFFERENT PARTIES. ITA NO . 7661 / M/ 201 4 2 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR THE EXPLANATION FROM THE ASSESSEE REGARDING PURCHASES MADE FROM THE DIFFERENT PARTIES, THEIR NAMES AND ADDRESSES WHICH WERE FILED BY THE ASSESSEE AS DESIRED BY THE AO. HOWEVER, THE AO, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MUMBAI, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAS MADE TRANSACTIONS WITH SUSPICIOUS PARTIES WHO WERE ENGAG ED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT SUPPLYING ANY MATERIALS. AFTER EXAMINATION OF DOCUMENTS AND DETAILS FILED BY THE ASSESSEE, THE AO FOUND THAT THREE PARTIES FROM THE ASSESSEE MADE PURCHASES OF RS.11,47,180/ - WERE APPEARING IN THE LIST OF BOGU S PARTIES AS PUBLISHED BY THE STATE SALES TAX DEPARTMENT , GOVT OF MAHARASHTRA. THE AO AFTER GIVING SHOW CAUSE NOTICE TO THE ASSESSEE AND CONSIDERING REPLY OF THE ASSESSEE CAME TO THE CONCLUSION THAT THE ASSESSEE HAD MADE PURCHASES FROM THE SAID THREE PARTIES AND ACCORDINGLY ADDED A SUM OF RS.11,47,180/ - TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURES UNDER SECTION 69C OF THE ACT. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BE F ORE THE LD. CIT(A), WHO ALSO DISMI SSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 4.19 KEEPING IN VIEW ALL THE ABOVE FACTS AND CIRCUMSTANCES AS WELL THE JUDICIAL PRONOUNCEMENT ON THE ISSUE, IT WOULD BE FAIR AND REASONABLE IF THE DISALLOWANCE OUT OF THE ALLEGED BOGUS PU RCHASE IN THE CASE OF T HE APPELLANT FOR THE YEAR UNDER CONSIDERATION IS RESTRICTED TO 10%. THE AO IS THEREFORE DIRECTED TO DISALLOW THE 10% OF THE ALLEGED BOGUS PURCHASE, WHICH COMES T O RS.1,14,718/ - BEING THE PROFIT ELEMENT FROM THE PURCHASE MADE FROM T HE TH R EE PARTIES NAMELY G R TRADELINK, V M UDYOG, AND SHEETAL TRADING COMPANY DURING T HE YEAR UNDER CONSI D E R ATION. THEREFORE, THE ADDITION TO THE EXTENT OF RS.1,14,718/ - ITA NO . 7661 / M/ 201 4 3 ON ACCOUNT OF BOGUS PURCHASE IS CONFIRMED AND THE BALANCE ADDITION MADE IS DELETE D. THE GROUND NO.2 IS PARTLY ALLOWED ACCORDINGLY . AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4 . THE LD. DR SUBMITTED BEFORE US THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION AS THERE WAS SUFFICIENT PROOF WITH T HE AO TO SUBSTANTIATE THE PURCHASE S TO BE BOGUS. THE LD . DR ARGUED THAT ALL THESE PARTIES FROM WHOM THE ASSESSEE ALLEGED DID PURCHASE TRANSACTIONS WERE DISPLAYED ON THE WEBSITE OF THE SALE TAX DEPARTMENT , GOVERNMENT OF MAHARASHTRA AND ACCORDING TO TH E SURVEY CONDUCTED BY THE SAID DEPTT. THESE PARTIES WERE PROVIDING BOGUS ACCOMMODATION ENTRIES WITHOUT SUPPLYING ACTUAL MATERIALS AND THEREFORE PRAYED THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND THAT OF AO BE RESTORED. 5 . ON THE OTHER HAND THE LD. AR SUPPORTED AND RELIED HEAVILY UPON THE ORDER OF LD.CIT(A) BY SUBMITT ING THAT GOODS WERE ACTUALLY PURCHASED , RECEIVED AND WERE RECORDED I N THE BOOKS OF ACCOUNTS . LD AR ALSO SUBMITTED THAT CORRESPONDING SALES WERE ALSO MADE AND DULY RECORDED IN THE BOOKS OF ACCOUNTS . THE LD.AR ALSO SUBM ITTED THAT THE GOODS SO PURCHASED FROM THESE PARTIES WERE EXPORTED WHICH WAS THE FINDING OF THE FACTS AS RECORDED BY THE LD. CIT(A) WHILE DECIDING THE APPEAL OF THE ASSESSEE BY EXAMINING AFTER EXAMINING THE CORRO BORATIVE EVIDENCES SUCH AS EXPORT INVOICES, AIRWAY BILLS AND SHIPPING BILL FOR THE EXPORT ISSUED BY CUSTOM AUTHORITIES. WHEREAS, ON THE OTHER HAND, THE AO SIMPLY RELIED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA . THE LD ARGUED THAT THE ITA NO . 7661 / M/ 201 4 4 ASSESSEE HAS FULLY DISCHARGED ITS ONUS BY FURNISHING VARIOUS PROOFS AND DOCUMENTARY EVIDENCES IN THE FORM OF PURCHASE BILLS, SALES BILLS , CASH BOOK, LEDGER , STOCK REGISTER AND BANK STATEMENT S EVIDENCING THE PAYMENTS THROUGH AC COUNT PAYEE CHEQUES/RTGS. THE LD COUNSEL OF THE ASSESSEE ARGUED THAT O NCE THE ASSESSEE HAS FURNISHED THE NECESSARY DOCUMENTARY EVIDENCES THEN THE ONUS WILL BE SHIFTED TO THE AO TO VERIFY THE SAID RECORD AND DOCUMENTS BY CARRYING OUT NECESSARY VERIFICATI ON AND INVESTIGATION . HOWEVER, IN HIS CASE, THE AO SIMPLY PROCEEDED TO FORM OPINION THAT THE PURCHASES WE R E BOGUS ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA WHICH WAS WRONG AND AGAINST THE FACTS OF TH E CASE. FINALLY, THE LD. AR PRAYED THAT THE ORDER OF THE LD.CIT(A) BE UPHELD AS THE SAME WAS PASSED AFTER CONSIDERING ALL THE FACT UAL AND LEGAL ASPECT OF THE CASE. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION, PURSUED THE MATERIAL PLACED ON RECOR D INCLUDING ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE AO MADE ADDITION ON THE BASIS OF INFORMATION FROM THE SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT THAT CERTAIN PARTIES WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. THEREAFTER THE AO FOUND DUR ING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HA S MADE PURCHASES FROM THREE HAWALA PARTIES AMOUNTING TO RS.11,47,180/ - AND THE ASSESSEE WAS ASKED TO PRODUCE THE NECESSARY RECORDS AND EVIDENCES TO PROVE HIS CASE. WE FIND THE ASSESSEE FURNISHED BEFORE T HE AO COPIES OF PURCHASE BILLS AND SALES BOOKS, BANK ITA NO . 7661 / M/ 201 4 5 STATEMENT S , AND OTHER RELEVANT EVIDENCES IN THE FORM OF STOCK REGISTER, LEDGER ACCOUNT TO PROVE THE GENUINENESS OF THE PURCHASES FROM THESE PARTIES. WE ALSO FIND THAT THE ASSESSEE ALSO EXPORTED THE GOO DS FOR WHICH THE NECESSARY EVIDENCES ISSUED BY THE CUSTOM DEPTT . WERE FURNISHED BEFORE THE AO. T HE AO SIMPLY PROCEEDED TO MAKE THE ADDITION BY DOUBTING THE PURCHASES FROM THOSE PARTIES WITHOUT CARRYING OUT ANY VERIFICATION OF THE EVIDENCES AS FILED BY THE ASSESSEE BEFORE THE AO OR INVESTIGATING THE MATTER FURTHER . THE LD. CIT(A) DURING THE COURSE OF APPELLANT PROCEEDINGS CONSIDERED ALL THESE EVIDENCES AND RECORDED FINDING OF THE FACTS THAT THE ASSESSEE HAS ACTUALLY RECEIVED GOODS FROM THOSE PARTIES AND W ERE DULY ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE STOCK REGISTER AS WELL AS THE PAYMENT WERE MADE THROUGH BANKING CHANNELS. FURTHER, WE FIND THAT ASSESSEE ALSO EXPORTED GOODS AND RELEVANT RECORDS HAVE BEEN PLACED BEFORE AO AS WELL AS DURING THE COURSE OF HEARING BEFORE US SUCH AS EXPORT INVOICES, AIRWAY BILLS AND SHIPPING BILL FOR THE EXPORT ISSUED BY CUSTOM AUTHORITIES. THESE DOCUMENTS WERE EXAMINED AND AFTER TAKING INTO ACCOUNT ALL THESE EVIDENCES, THE LD. CIT(A) DELETED THE ADDITION. IN VIEW OF THE FACTS HEREINABOVE, WE ARE OF THE VIEW THAT THE ORDER OF LD.CIT(A) IS A REASONED ORDER WHICH DO ES NOT REQUIRE ANY I NTERFERENCE FROM OUR SIDE WHEREAS THE AO HAS SIMPLY RELIED ON THE INFORMATION FROM THE SALES TAX DEPTT , GOVT OF MAHARASHTRA THERE BY NOT DISCHARGING THE ONUS WHICH SHIFTED ON HIM AFTER THE ASSESSEE FILED NECESSARY EVIDENCES BEFORE HIM TO FURTHER INQUIRE AND VERIFY THE EVIDENCES. ITA NO . 7661 / M/ 201 4 6 ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) BY DISMISSING THE APPEAL OF THE REVENU E ON THIS GROUND. 7 . THE SECOND ISSUE RAISED IN THE GROUNDS OF APPEAL NO.5 TO 8 IS AGAINST THE DELETION OF ADDITION MADE BY THE LD. CIT(A) OF RS.44,89,670/ - WITH R EGARD TO COMMISSION PAYMENT AS DISALLOWED BY THE AO ON THE GROUND THAT THESE PAYMENTS WERE MADE TO THE RELATED PARTIES AT THE EXORBITANT RATES IN ORDER TO REDUCE THE PROFIT OF THE ASSESSEE. 8 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS BOOKED COMMISSION AMOUNTING TO RS.44,89,670/ - WHICH WAS SHOWN AS PAYABLE ON 31.3.2010 AND THE SAID AMOUNT WAS PAID AFTER 31.3.2010. T HE ASSESSEE SUBMITTED BEFORE THE AO THAT COMMISSION WAS PAID TO SEVEN PARTIES BY FURNISHING PERMANENT ACCOUNT NUMBER , ADDRESS ES OF THE RECIPIENT S AND BANK STATEMENTS. T HE AO FINALLY D ISALLOWED AND ADD ED THE SAID AMOUNT OF COMMISSION OF RS. 44,89,670/ - TO THE TOTAL INCOME OF THE ASSESSEE ON THE GROUND THAT THE COMMISSION WAS PAID TO THE RELATED PARTIES IN VIOLATION OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AT EXORBITANT RATES . DU RING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AFTER CONSIDERING THE REPLY OF THE ASSESSEE ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE BY OBSERVING AND HOLDING AS UNDER : 5.14 LASTLY, THE AO HAS INVOKED THE PROVISIONS OF SECTION 40A(2)(B) FOR DISALL OWING THE COMMISSION. THE COMMISSION WAS PAID BY THE PROPRIETARY CONCERN, M/S CHIRAG CORPORATION, OF WHICH THE APPELLANT IS THE PROPRIETARY . AS EXPLAINED BY THE AR OF THE APPELLANT, OUT OF SEVEN PERSONS TO WHOM THE COMMISSION WAS PAID , ONLY ONE PERSON I .E. DARSHANA PUJARA WAS COVERED BY THE PROVIS IO NS OF SECTION 40A(2)(B) OF ITA NO . 7661 / M/ 201 4 7 T HE ACT AS SHE IS THE SISTER OF THE APPELLANT. THE OTHER SIX INDIVIDUALS W E RE NOT AT ALL RELATIVE OF THE APPELLANT. THEY WERE RELATIVES OF SOME OTHER PERSONS NAMELY, RAKESH JAIN, RAJESH JAIN AND KALPESH SHAH WHO BECAME THE PARTNERS OF T HE APPELLANT IN SUCCEEDING YEAR AS NOTED BY THE AO. IT HAS BEEN SUBMITTED BY THE AR OF THE APPELLANT THAT THEY WERE NOT THE PARTNERS OF THE APPELLANT IN THE YEAR UNDER CONSIDERATION . FOR DISALL OWING ANY EXPENSES U /S 40A(2)(B), THE RELATIONSHIP AS EXISTING IN THE YEAR UNDER CONSIDERATION HAS TO BE SEEN AND NOT THE RELATIONSHIP IN ANY OF THE PAST YEARS OR FUTURE YEAS. IN THE ABSENCE OF ANY RELATIONSHIP BETWEEN THE A PPELLANT AND THOSE SIX PERSONS (RAMILA JAIN, RAJNI JAIN, DARSHANA JAIN, SAPNA SHAH, RATAN JAIN AND KALPESH SHAH) FALLING UNDER THE PROVISIONS OF SECTION 40A(2)(B). I AM OF T HE VIEW THAT THE COMMISSION PAID TO THEM CANNOT BE DISALLOWED UNDER THOSE PROVI SI ONS. 9 . THE LD. DR ARGUED BEFORE US THAT THE COMMISSION WAS ACCOUNTED FOR AND SHOWN PAYABLE AT THE END OF THE YEAR TO 7 PARTIES TO WHO WERE COVERED IN THE DEFINITION OF RELATIVES UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT . THE DR ARGUED THAT WHOLE EXERCISE WAS UNDERTAKEN TO SUPPRESS THE PROFIT OF THE ASSESSEE. THIS HAS BEEN PROVED BY THE INQUIRY CONDUCTED BY THE INSPECT OR WHO DEPUTED BY THE AO WHO FOUND AND OBSERVED THAT ALL THESE RECIPIENTS WERE RELATED TO EACH OTHER AND THEREFORE THE PROVISIONS OF SECTION 40A(2)(B) W ERE CLEARLY ATTRACTED . M OREOVER THE COMMISSION WAS OUTSTANDING AT THE YEAR END AND WAS PAID SUBSEQUENTLY. THEREFORE, THE AO HAS RIGHTLY MADE THE ADDITION AND IN VIEW OF THE FACTS AS NARRATED ABOVE, THE LD. DR PRAYED THAT THE ORDER OF LD. CIT(A) BE SE T ASIDE AND THAT OF AO BE RESTORED. 10 . THE LD. AR STRONGLY OBJECTED TO THE ARGUMENT S ADVANCED BY THE LD.DR THAT ALL THE RECIPIENTS OF COMMISSION WERE RELATED PARTIES WHEREAS AS A MATTER OF FACT ONLY ONLY ONE PARTY VIZ M R S.DARSHNA CHAMPAKLAL THAKUR WAS RELATED AND COVERED BY PROVISIONS OF SECTION 40A(2)(B) AND OTHER PARTIES WERE NOT ITA NO . 7661 / M/ 201 4 8 AT ALL RELATED . THE AR SUBMITTED THAT THE AO WRONGLY PRESUMED AND ACTED ON THE BASIS OF PRESUMPTIONS AND CONJECTURES THAT ALL 7 PARTIES WERE RELATED TO THE ASSESSEE. IN FACT I N THE NEXT YEAR WHEN THE ASSESSEES PROPRIETARY CONCERN WAS CONVERTED INTO PARTNERSHIP FIRM , THEY BECOME COVERED UNDER THE DEFINITION OF RELATED PARTIES . THE LD. AR ALSO SUBMITTED THAT FOR INVOKING THE PROVISIONS OF SECTION 40A(2)(B), THE AO H AS TO BRING ON RECORD MATERIAL TO PROVE THAT THE PAYMENTS BY WAY OF COMMISSION WERE EXCESSIVE AND UNREASONABLE VIS A VIS MARKET RATES FOR THE SIMILAR SERVICES . HOWEVER, NO SUCH EXERCISE WAS DONE BY THE AO . FINALLY, THE LD. AR RELIED ON THE ORDER OF LD. C IT(A) AND PRAYED FOR UPHOLDING THE SAME. 1 1 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW ON THE SUBJECT. WE FIND THAT THE AO HAS DISALLOWED THE COMMISSION PAYMENT O N THE PRESUMPTION AND SURMISES THAT ALL THE SEVEN PARTIES TO WHOM THE COMMISSION WAS SHOWN TO BE PAYABLE IN THE ACCOUNTS AT THE YEAR END WERE RELATED AND THEREFORE COVER ED BY THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. WE FIND THAT THE LD. CIT(A) HAS RECORDED THE FINDINGS OF FACTS THAT ONLY ONE PERSON OUT OF 7 PERSONS NAMELY MS.DARSHNA CHAMPAKLAL THAKUR WAS COVERED UNDER THE PROVISION OF SECTION 40A(2)(B) AS SHE WAS SISTER OF THE APPELLANT ASSESSEE AND OTHER SIX PERSONS WERE NOT RELATED TO TH E ASSESSEE. HE LD. CIT(A) FURTHER OBSERVED THAT NO DEFECTS WERE FOUND IN THE BOOKS OF ACCOUNT AND COMMISSION PAID TO MS.DARSHNA CHAMPAKLAL THAKUR WAS AT ITA NO . 7661 / M/ 201 4 9 THE RA T E OF RS.321 PER UNIT VIS A VIS HIGHEST RATE BEING RS.343 PER UNIT AND ACCORDINGLY, THE LD. CIT(A) PARTLY DELETED THE ADDITION. WE FIND THAT THE LD. CIT(A) HAS CONSIDERED ALL THE FACT S AND MATERIAL ON RECORDS AND ALSO ANALYZED THE COMMISSION PAID TO MS.DARSHNA CHAMPAKLAL THAKUR AND OTHER PAYEE S AND THEREBY DELETED THE ADDITION TO THE EXTENT O F RS.44,47,827/ - WHICH IN OUR OPINION IS VERY MUCH REASONABLE AND JUSTIFIED AS DULY SUPPORTED WITH REASONING AS TO THE EXCESSIVE AND UNREASONABLENESS OF THE PAYMENT OF COMMISSION. WE, THEREFORE ARE IN AGREEMENT WITH THE FINDINGS AND CONCLUSION DRAWN BY TH E LD.CIT(A) THAT THE COMMISSION PAYMENT TO THE EXTENT OF RS.44,47,827/ - WERE GENUINE AND DESERVED TO BE ALLOWED. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE ON TH IS GROUND ALSO. 1 2 . IN THE RESULT , THE APPEAL OF THE REVENUE STANDS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9TH DEC,201 6 . S D SD ( JOGINDER SINGH ) ( RAJESH KUMAR ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 9. 12.2016 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPOND ENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI