ACIT 29(1), MUMBAI V. JAGDISH THAKKAR, MUMBAI

ITA 768/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9113 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 04-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGAR ZAIN
• Keywords: Bogus purchase; Unexplained investment; Onus to prove
• Section: 69C; 133(6)

Judgement Text

, J INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA, ACCOUNTANT MEMBER AND C.N. PRASAD, JUDICIAL MEMBER / ITA NO.768/MUM/2015 : /ASSESSMENT YEAR-2011-12 ASST. CIT-29(1), ROOM NO. 108, 1 ST FLOOR, C-10, PRATYANKSHAKAR BHAVAN, BKC BANDRA (E), MUMBAI-51 PAN: AADPT 9100 H VS. JAGDISH THAKKAR VIKASH PARADISE-1002B, TOWER-III, LBS MARG, MULUND (W), MUMBAI-400 080 (APPELLANT) (RESPON DENT) REV ENUE BY: SHRI ASGAR ZAIN ASS ESSEE BY: SHRI DHAVAL SHAH / DATE OF HEARING: 03.11.2016 / DATE OF PRONOUNCEMENT: 06.01.2017 , ,, ,1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 5.11.2014, OF THE CIT(A )-33, MUMBAI, THE ASSESSING OFFICER (AO)HAS FILED THE PRESENT APPEAL.THE ASSESSEE, AN I NDIVIDUAL, FILED HIS RETURN OF INCOME ON 26. 09.2011,DECLARING TOTAL INCOME AT RS.31.18 LACS. TH E AO COMPLETED THE ASSESSMENT, U/S. 143 (3), ON 04.03.2014,DETERMINING HIS INCOME AT RS.3.4 6 CRORES. 2.EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE ADDITION MADE U/S. 69C OF THE ACT IN RESPECT OF BOGUS PURCHASES OF RS.3.15 CRORES.DURING THE ASSESSMENT PROCEEDINGS, THE AO RECEIVED PIECES OF INFORMATION FROM THE DGIT (INV.) , MUMBAI THAT THE ASSESSEE HAD MADE PURCHASES FROM THE PERSONS WHO WERE APPEARING IN TH E LIST OF HAWALA DEALERS OF THE SALES TAX DEPARTMENT.HE ISSUED NOTICES U/S. 133(6) IN ORDER T O VERIFY THE PURCHASES MADE FROM THREE PARTIES NAMELY HARSHAD FERROMET (RS.1.22 CRORES),HA NS ENTERPRISES (RS.1.08 CRORES) AND KHUSHAL MERCHANTILE PVT. LTD.(RS.85.13 LACS).ACCORD ING TO THE AO NONE OF THE PARTIES COMPLIED WITH THE NOTICES EITHER ON ACCOUNT OF NON- AVAILABILITY AT GIVEN ADDRESS OR THEY DID NOT ATTEND BEFORE HIM. HE DIRECTED THE ASSESSEE TO PRODUCE THE PARTIES AND TO FURNISH COPIES OF PURCHASE BILLS, CORRESPONDING SALES.THE ASSESSEE FA ILED TO PRODUCE THE PARTIES. HOWEVER, HE SUBMITTED THE LEDGER ACCOUNTS, BANK STATEMENTS OF T HE PARTIES. HE ARGUED THAT ALL THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS.THE AO HELD THAT MERE PRODUCTION OF PURCHASE INVOICES AND BANK STATEMENT WOULD NOT BE A CONCLUSIVE PROOF TO ESTABLISH THE GENUINENESS OF THE PURCHASES,THAT THOUGH THE SALES AGAINST THE PURCHAS E AND PAYMENT FOR THE PURCHASE WERE MADE BY CROSS ACCOUNT PAYEE CHEQUES YET IT WOULD NOT MAK E THE PURCHASE GENUINE.HE FURTHER OBSERVED THAT THE ASSESSEE HAD PURCHASED THE GOODS IN CASH FROM THE MARKET AND THE SALES BILLS ITA/768/MUM/2015,A.Y. 2011-1- JAGDISH THAKKAR 2 WERE OBTAINED FROM HAWALA DEALERS.FINALLY, HE ADDED A SUM OF RS.3.15 CRORES TO THE TOTAL INCOME OF THE ASSESSEE HOLDING THAT HE HAD VIOLATED THE PROVISIONS OF SECTION 69C OF THE ACT. 3.AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE ELABORATE SUBMISSIONS.HE RE LIED UPON THE CASES OF THE JMD COMPUTER(321 ITR 6) AND PRAKASHCHAND (301 ITR 134), BABULAL BORANA (282 ITR 251) AND RAJEEV J KALATHA (ITA/1627/MUM/2012). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER, THE FAA HELD THAT ONUS TO PROVE THE GENUINENESS OF THE EXPENDITU RE WAS ON THE ASSESSEE, THAT BY FURNISHING THE BILLS AND DELIVERY CHALLANS RELATING TO THE PUR CHASES OF THE GOODS HE HAD DISCHARGED THE ONUS,THAT PAYMENTS FOR PURCHASES WERE MADE BY ACCOU NT PAYEE CHEQUES, THAT ALL THE PURCHASES WERE REFLECTED IN THE STOCK RECONCILIATION STATEMEN T, THAT THE AO HIMSELF HAD ACCEPTED THAT THE ASSESSEE HAD MADE PURCHASES,THAT HE HAD NOT DOUBTED THE SALES ARISING OUT OF THE EXPORT ACTIVITIES CARRIED OUT BY THE ASSESSEE,THAT HE HAD ACCEPTED THE GP RATIO SHOWN BY THE ASSESSEE, THAT THE ENTIRE PURCHASE COULD NOT BE TREATED AS BO GUS, THAT THE AO HAD MADE AVAILABLE THE COPIES OF THE DOCUMENTS RELIED UPON BY HIM FOR PURP OSE OF MAKING THE ADDITION, THAT IT PROVED THAT THERE WAS NO EVIDENCES TO THE EFFECT THAT MONE Y GIVEN BY CHEQUE HAD COME BACK TO THE ASSESSEE IN FORM OF CASH,THAT THE AO HAD MADE ADDIT ION U/S. 69C OF THE ACT WITH REGARD TO THE ENTIRE PURCHASES MADE BY THE ASSESSEE WHOSE NAMES A PPEARED IN THE WEBSITE OF MAHAVAT AS SUSPICIOUS DEALERS,THAT HIS CONCLUSION WAS BASED ON THE PRESUMPTION THAT THE ASSESSEE MIGHT HAVE PAID CASH TO THE THIRD PARTY OUT OF HIS UNEXPLAINED SOURCES FOR PURCHASING THE GOODS,THAT THE AO HAD NOT DISPUTED THE FACT THAT TH E ASSESSEE HAD MADE SALES OUT OF SUCH PURCHASES,THAT THE PAYMENT MADE BY ACCOUNT PAYEE CH EQUE WAS NOT ALSO DISPUTED BY THE AO. HE REFERRED TO THE CASE OF KIRTILAL KALIDAS JEWELLE RS PVT. LTD. (54 SOT 29) AND SAGAR BOSE (56 ITD 561) AND HELD THAT THERE WAS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAD PURCHASED MATERIAL FROM UNEXPLAINED CASH AVAILABLE WITH HIM, THAT NO ADDITION COULD BE MADE U/S. 69C OF THE ACT, THAT IT WAS NOT THE CASE OF TH E AO THAT THE PAYMENTS AGAINST THE PURCHASES WERE IN CASH,THAT ALL THE PAYMENTS HAD BEEN MADE TH ROUGH ACCOUNT PAYEE CHEQUES AND WERE DEBITED IN THE BANK ACCOUNT OF THE ASSESSEE. REFERR ING TO THE CASE OF RAJEEV J KALATHA (SUPRA), THE FAA HELD THAT THE OBSERVATIONS OF THE TRIBUNAL WERE APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION, THAT THE AO HAD MERELY RELIED UPON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT,THAT THE FACTS OF SALE OF GOOD S PURCHASED FROM THE PARTIES IN QUESTION AND PAYMENT TO THEM THROUGH PROPER BANKING CHANNELS HAD BEEN COMPLETELY IGNORED BY THE AO,THAT THE PROVISION OF SECTION 69C WOULD APPLY ON LY WHERE THE SOURCES OF EXPENDITURE WERE IN DOUBT AND NOT THE EXPENDITURE ITSELF, THAT IN THE INSTANT CASE THE AO HAD DOUBTED THE ITA/768/MUM/2015,A.Y. 2011-1- JAGDISH THAKKAR 3 EXPENDITURE IN THE FORM OF PURCHASES AND ON THE OTH ER HAND HE HAD ADDED THE INCOME IN THE HANDS OF THE ASSESSEE ON THE GROUND THAT SOURCE OF EXPENDITURE HAD REMAINED UNEXPLAINED, THAT IF THE EXPENDITURE ITSELF HAD BEEN REJECTED AS NON GENUINE THEN THERE WAS NO QUESTION OF ADDING ANY INCOME ON THE GROUND THAT SOURCES OF THE SAID EXPENDITURE HAD REMAINED UNEXPLAINED.HE FURTHER HELD THAT NO ADDITION COULD BE MADE U/S. 69C, THAT THE BASIC ISSUE WAS TO BE ADJUDICATED AS TO WHETHER ANY ADDITION/DISALL OWANCE WAS REQUIRED TO BE MADE ON ACCOUNT OF THE PURCHASES FROM THE PARTIES FROM WHOM THE ASSESSEE HAD PURCHASED THE GOODS, THAT THE ASSESSEE SHOULD NOT GET EXEMPTION FROM TAX ATION MERELY BECAUSE THE AO HAD INVOKED THE WRONG PROVISIONS OF THE ACT,THAT THE PARTIES FR OM WHOM GOODS HAD BEEN PURCHASED WERE NOT AVAILABLE FOR VERIFICATION QUA PURCHASES MADE F ROM THEM,THAT THERE WAS NO QUESTION OF DISALLOWING THE ENTIRE PURCHASES MADE FROM CERTAIN ALLEGED BOGUS PARTY,THAT WHAT COULD BE TAXED IN SUCH TRANSACTION WAS PROFIT ELEMENT EMBEDD ED AND NOT THE ENTIRE PURCHASES. REFERRING TO THE CASES OF SIMIT P SHETH AND BHOLENA TH KOLI FEB PVT. LTD., HE HELD THAT ONLY PROFIT ELEMENT EMBEDDED IN THE PURCHASES SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE. FINALLY,HE DIRECTED THE AO TO DISALLOW 10% OF THE A LLEGED BOGUS PURCHASES BY RS.31.57 LACS. 5.DURING THE COURSE OF HEARING BEFORE US, THE DEPAR TMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE ( AR) STATED THAT THE PROVISION OF SECTION 69C WERE NOT APPLICABLE. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AFTER RECEIVING THE INFORMATION ABOUT HAWALA DEALERS, THE AO DIRECTED THE ASSESSEE TO FURNISH CERTAIN DETAILS,THAT HE HELD THAT THERE WERE NO EVI DENCE TO HOLD THAT THE PURCHASES MADE BY THE ASSESSEE WERE GENUINE, THAT HE INVOKED THE PROVISIO NS OF SECTION 69C OF THE ACT AND MADE AN ADDITION OF RS.3.51 CRORES TO THE INCOME OF THE ASS ESSEE,THAT THE FAA RESTRICTED THE DISALLOW - ANCE TO THE 10% OF THE PURCHASES.IT IS ALSO FOUND T HAT THE AO HAD NOT DOUBTED SALES (EXPORTS) MADE BY THE ASSESSEE,THAT HE HAD ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSEE, THAT THE PAYMENT MADE BY THE ASSESSEE THROUGH BANKING CHANNE LS IS NOT IN DOUBT, THAT THERE IS NO EVIDENCE OF MAKING UNEXPLAINED INVESTMENT.EXCEPT IS SUING NOTIE U/S. 133(6) TO THE SUPPLIERS OF THE GOODS, THE AO HAS NOT MADE ANY FURTHER INVES TIGATION.THE ASSESSEE HAD PRODUCED BEFORE HIM THE DELIVERY CHALLANS, PURCHASE BILLS AN D EVIDENCE OF PAYMENT MADE THROUGH BANKING CHANNELS.THUS,THE ASSESSEE HAD DISCHARGED T HE INITIAL BURDEN.IT WAS DUTY OF THE AO TO REBUT THE EVIDENCES PRODUCED BY THE ASSESSEE.BUT,HE DID NOT BRING ANYTHING ON RECORD. IN OUR OPINION,THE FAA HAD RIGHTLY HELD THAT THE PROVISION S OF SECTION 69C CANNOT BE INVOKED FOR BOGUS PURCHASES.IN THESE CIRCUMSTANCES, WE ARE OF T HE OPINION THAT HIS ORDER DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THE CASES RELIE D UPON BY HIM SUPPORT THE VIEW TAKEN BY ITA/768/MUM/2015,A.Y. 2011-1- JAGDISH THAKKAR 4 US.CONFIRMING THE ORDER OF THE FAA, WE DECIDE THE E FFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, THE APPEAL FILED BY THE A.O. STAND S DISMISSED. AS A RESULT, APPEAL FIL ED BY THE AO STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY, 2017. 06 , 2017 SD/- SD/- ( . . / C. N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06. 01 .2017. ROSHANI, SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.