ASST CIT 32(1), MUMBAI V. HI ROCK CONSTRUCTION CO, MUMBAI

ITA 960/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1195 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 16-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHENDR
• Keywords: Unexplained expenditure; Accommodation entries
• Section: 69C; 43B; 69

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./960/MUM/2015, /ASSESSMENT YEAR: 2011-12 ACIT-32(1) PRATYAKSHAKAR BHAVAN, ROOM NO.202, 2 ND FLOOR, BANDRA KURLA COMPLEX BANDRA EAST, MUMBAI-400 051. VS. M/S. HI ROCK CONSTRUCTION CO. 903/A, GURUKUL TOWER, J.S. ROAD DAHISAR WEST,MUMBAI-400 068. PAN:AAFFH 6403 B ( /APPELLANT ) ( / RESPONDENT ) REV ENUE BY: SHRI M.C. OMI NINGSHEN-DR ASS ESSEE BY: SHRI BHUPENDRA SHAH / DATE OF HEARING: 16.02.2017 / DATE OF PRONOUNCEMENT: 12.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 28/11/2014,OF THE CIT(A )-44,MUMBAI THE ASSESSING OFFICER (AO)HAS FILED THE PRESENT APPEAL.ASSESSEE, AN INDIV IDUAL, IS A CIVIL CONTRACT. HE FILED HIS RETURN OF INCOME ON 29/09/2011,DECLARING TOTAL INCO ME OF RS. 62.73 LAKHS.THE AO COMPLETED THE ASSESSMENT U/S.143 (3) OF THE ACT,ON 27/03/2014 , DETERMINING HIS INCOME AT RS.2.48 CRORE. 2. FIRST EFFECTIVE GROUND OF APPEAL (GOA 1-5) IS ABOUT DELETING THE ADDITION OF UNEXPLAINED EXPENDITURE TO THE TUNE OF RS. 1.24 CRORE. DURING T HE ASSESSMENT PROCEEDINGS,THE AO DIRECTED THE ASSESSEE TO FURNISH A LIST OF PERSONS FROM WHOM PURCHASES WERE MADE.OUT OF THE LIST 5 PARTIES, NAMELY DHARAM TRADERS PRIVATE LTD.,KOTSONS IMPEX PVT. LTD.,MR CORPORATION,PRINCE TRADING CO.,SHRADDHA TRADING CO.,FROM WHOM THE ASSE SSEE HAD MADE PURCHASES WERE APPEARING IN THE LIST OF SUSPICIOUS DEALERS WHO WER E ISSUING BOGUS BILLS WITHOUT ANY GOODS AND MATERIALS AS PER THE OFFICIAL WEBSITE OF SALES TAX DEPARTMENT. HE ISSUED NOTICES U/S.133 (6) TO THE AFORESAID PARTIES. HOWEVER, IN ALL THE C ASES OF NOTICES WERE RETURNED BACK UNSERVED BY THE POSTAL AUTHORITIES. HE DIRECTED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE PURCHASES FROM THE ABOVE-MENTIONED 5 PARTIES,AGGREGATING RS. 1.24 CRORE SHOULD NOT BE TREATED AS UNEXPLAIN - ED EXPENDITURE. ALTERNATIVELY,HE DIRECTED THE ASSES SEE TO PRODUCE THE PARTIES FOR VERIFICATION BEFORE HIM.THE ASSESSEE FILED HIS REPLY ON 15/03/20 14 BUT DID NOT PRODUCE ANY OF THE PARTIES.CONSIDERING THE ABOVE FACTS, THE AO HELD TH AT ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENDITURE WHICH HE HAD CLAIMED AS DEDUCTION IN COMPUTING THE TAXABLE INCOME,THAT ASSESSEE WAS AWARE THAT HE WAS ENTERING INTO COLOURABLE TRANSACTION WITH THE ALLEGED SUPPLIERS, THAT THE SALES TAX DEPARTMENT HA D RECORDED A STATEMENT OF THE PROPRIETORS OF THESE FORMS, THAT THE COPY OF THE STATEMENTS WERE S UPPLIED TO THE ASSESSEE AS PER THE LETTER 960/M/15(11-12) M/S. HI ROCK CONSTRUCTION CO. 2 DATED 22/01/2014, THAT THE ASSESSEES ARGUMENT OF GE NUINE PURCHASES WAS NOT TENABLE, THAT THE PURCHASES MADE BY HIM WERE BOGUS, THE SUPPLIER SAID AGREED TO HAVE ISSUED ONLY BOGUS BILLS. HE HELD THAT THE EXPENDITURE INCURRED BY THE ASSESS EE ON ACCOUNT OF PURCHASE OF GOODS HAD TO BE TREATED AS UNEXPLAINED EXPENDITURE WITHIN THE ME ANING OF SECTION 69 OF THE ACT. 2.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM, IT WAS ARGUED THAT IN THE EARLIER AY, THE THEN FAA HAD DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASS ESSEE, THAT THE BOOKS OF ACCOUNTS WERE AUDITED, THAT PAYMENTS WERE MADE THROUGH BANKING CH ANNELS.IT RELIED UPON THE CASE OF NIKUNJ EXIMP ENTERPRISES PVT.LTD. (35TAXMANN.COM384) OF TH E HON'BLE BOMBAY HIGH COURT AND THE CASE OF RAJEEV M. KALATHIL (6727/MUM/2012 ). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT IN THE EARLIER YEAR IDENTICAL ISSUE WAS DECIDED BY HIS PREDECESSOR IN FAVOUR OF THE ASSESSEE. FOLLOWING THAT ORDER,HE ALLOWED THE APPEAL OF THE A SSESSEE. 2.2. DURING THE COURSE OF HEARING BEFORE US THE DEPARTME NTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE(A R) REFERRED TO THE ORDER OF THE GANPATRAJ A.SANGHVI (2826/MUM/2013-AY. 2009-10, DT.15.11.2014 ;); DEEPAK POPPATLAL GALA(ITA/ 5920/MUM/2013 & ORS (DT.27.3.2015);HIRALAL CHUNNILA L JAIN & ORS (4547/MUM/2014 DT.1.1. 2016)& KARSAN NANDU (2651/MUM/2016 DT.30/11/2016;AY 10-11)(77TAXMANN .COM 275). 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT. IN THE CASE OF KARSAN NANDU (SUPRA),THE TRIBUNAL HA S DEALT WITH THE IDENTICAL ISSUE .IN THAT MATER THE AO HAD HELD THAT PURCHASES MADE BY THE AS SESSEE FROM SEVEN (7) PARTIES WERE MERE ACCOMMODATION ENTRIES AND THAT NO REAL PURCHASES WE RE MADE.HE TREATED THE EXPENDITURE ON PURCHASES AS UNEXPLAINED EXPENDITURE U/S. 69C OF TH E ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE.DECIDING THE APPEAL, THE TRIBUNAL H AS HELD AS UNDER:- 9. BE THAT AS IT MAY, INVOKING OF SEC. 69C OF THE ACT IN THE PRESENT CASE IS ALSO SUSPECT. SEC. 69C OF THE ACT PRESCRIBES THAT WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPE NDITURE OR PART THEREOF, OR 9 SHRI KARSAN NANDU ITA NO. 2651/MUM/2016 & CO 197/MUM/2016 THE EXPLANA TION OFFERED BY HIM IS NOT FOUND TO BE SATISFACTORY BY THE ASSESSING OFFICER, THEN THE AMO UNT COVERED BY SUCH EXPENDITURE OR PART THEREOF MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. IN THE CONTEXT OF THE APPLICATION OF SEC. 69C OF THE ACT WHAT IS OF IMPORTANCE IS THAT E ITHER THERE IS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR THAT THE EXPLANATION OFFERED I S NOT FOUND SATISFACTORY. THE UNDERLYING EMPHASIS I S ON THE EXPLANATION IN RELATION TO THE SOURCE OF SU CH EXPENDITURE. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS INVOKED SEC. 69C OF THE ACT TO TREAT TH E EXPENDITURE ON PURCHASES OF RS. 37,45,965/- AS UNEXPLAINED. SO HOWEVER, THE ASSESSEE HAS DEMONSTRA TED THAT THE PAYMENTS FOR SUCH PURCHASES HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES FOR WHICH T HERE IS NO REPUDIATION BY THE ASSESSING OFFICER THEREBY IMPLYING THAT THE SOURCE OF EXPENDITURE STA NDS EXPLAINED. IN FACT, THE CASE OF ASSESSING OFFIC ER IS THAT THE PURCHASE TRANSACTIONS ARE ONLY ACCOMMO DATION ENTRIES AND NOT REALLY PURCHASES, THEREBY IMPLYING THAT AS PER THE ASSESSING OFFICER ASSESSEE HAS NOT INCURRED SUCH EXPENDITURE. TO HOLD THE TRANSACTIONS AS MERE ACCOMMODATION ENTRIES AND NOT REAL PURCHASES IS QUITE DIFFERENT FROM SAYING THAT THE SOURCES OF EXPENDITURE FOR THE PURCHASES FROM T HE 7 PARTIES IN QUESTION HAVE NOT BEEN EXPLAINED IN 960/M/15(11-12) M/S. HI ROCK CONSTRUCTION CO. 3 THE CONTEXT OF SEC. 69C OF THE ACT. THEREFORE, IN M Y VIEW, INVOKING OF SEC. 69C OF THE ACT IN THE PRES ENT CASE TO TREAT THE PURCHASES OF RS.37,45,965/- STATE D TO HAVE BEEN MADE FROM THE 7 PARTIES IN QUESTION IS ON A WRONG FOOTING. THUS, ON THIS ASPECT ALSO, ASSE SSEE DESERVES TO SUCCEED. RESPECTFULLY FOLLOWING THE ABOVE, AND OTHER ORDERS REFERRED TO BY THE ASSESSEE WE DECIDE THE FIRST EFFECTIVE GROUND RAISED BY THE AO AGAINST HIM . 3. NEXT GROUND OF APPEAL IS ABOUT ALLOWING THE VAT EXP ENSES,AMOUNTING RS.61.41 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.89.47 LAKHS UNDER THE HEAD VAT EXPENSES. HE DIRECTED THE ASSESSEE TO FURNISH THE DETAILS IN THA T REGARD .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT PAYMENT MADE DURING THE YEAR,AMOUNTING TO RS.61.41 LAKHS, PERTAINED TO EARLIER YEAR, THAT SAME COULD NOT BE A LLOWED AS AN ALLOWABLE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION, THAT THE ASSESSEE HAD NOT SUBMITTED THE CHALLAN OF THE PAYMENT.HE FURTHER HELD THAT EVEN IF THE CONTENTION OF THE ASS ESSEE WAS CORRECT SAME WOULD BE ALLOWABLE ON PAYMENT BASIS ONLY, IF IT WAS EARLIER DISALLOWE D U/S.43AB OF THE ACT. 3.1. DURING THE APPELLATE PROCEEDINGS BEFORE THE FAA THE ASSESSEE ARGUED THAT PAYMENTS WERE MADE DURING THE YEAR UNDER APPEAL THAT EVIDENCE IN THAT REGARD WERE FURNISHED BEFORE THE AO.IT REFERRED TO CASE BHARATI TELETECH LTD. (ITA/2 174/DEL/2008). AFTER CONSIDERING THE AVAILABLE MATERIAL THE FAA HELD THAT THE ASSESSEE HAD MADE THE PAYMENT DURING THE YEAR , THAT THERE WAS NO REASON TO DISALLOW THE SAME REFER RING TO THE PROVISIONS OF SECTION 43B OF THE ACT. HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. 3.2. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO.THE AR STATED THAT DEDUCTION WAS NOT CLAIMED TWICE,THAT THE CLAIM MADE BY THE ASSESSEE WAS ALLOWABLE ON PAYMENT BASIS. HE REFERRED TO PG-71 TO 79 OF THE PB. 3.3. AFTER CONSIDERING THE RIVAL SUBMISSIONS,WE FIND THA T THE AO HAD MADE THE DISALLOWANCE WITHOUT ANY VALID REASON, THAT THE ASSESSEE HAD MA DE THE VAT PAYMENT FOR THE YEAR UNDER CONSIDERATION(PG-71 TO 79 OF PB ) ARE THE CHALLANS EVIDENCING THE PAYMENT OF VAT ON VARIOUS DATES.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY INFIMITY.SO, CONFIRMING THE SAME WE DECIDE SECOND EFFECTIVE GROUND AGAINST THE AO. AS A RESULT, APPEAL FILED BY AO STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. SD/ - SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 12.04 .2017. JV.SR.PS. 960/M/15(11-12) M/S. HI ROCK CONSTRUCTION CO. 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.