Income Tax Appellate Tribunal - Mumbai
Vishal P. Mehta, Mumbai vs Department Of Income Tax on 5 October, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" Bench, Mumbai
Before Shri Jason P. Boaz, Accountant Member
and Shri Sandeep Gosain , Judicial Member
ITA No. 5313/Mum/2013
(Assessment Year: 2010-11)
A C I T - 25(3) Shri Vishal P. Mehta
308, C--11, Bandra Kurla A/305, Sairaj Garden
Vs.
Complex, Bandra (E) Iraniwadi Road No. 3
Mumbai 400051 Kandivali (W), Mumbai -067
PAN - AFGPM0875G
Appellant Respondent
Appellant by: Shri V.K. Bora
Respondent by: Shri Neelkanth Khandelwal
& Ms. Bhumika Vora
Date of Hearing: 28.09.2016
Date of Pronouncement: 05.10.2016
ORDER
Per Jason P. Boaz, A.M.
This appeal by Revenue is directed against the order of the CIT(A)-35, Mumbai dated 09.05.2013 for A.Y. 2010-11.
2. The facts of the case, briefly, are as under: -
2.1 The assessee, Prop. Ispat Steel Supplies engaged in the business of trading in iron and steel sheets, filed its return of income for A.Y. 2010-11 on 24.09.2010 declaring total income of `52,93,,655/-. On the basis of information from the Sales Tax Department, Government of Maharashtra, it was found by the Assessing Officer (AO) that certain dealers are providing accommodation entries/bills without doing any actual business for a commission. On going through the list of bogus dealers listed in the website of the Sales Tax Department, it was found that the assessee had made purchases from the following dealers; the details of which are as under: -2 ITA No. 5313/Mum/2013
Shri Vishal P. Mehta Amount of alleged S.No. Name of alleged Supplier purchase (`) 1 M/s. Hiten Enterprises `1,46,17,686/-
2 M/s. Rushabh Enterprises ` 58,23,655/-
3 M/s. Shree Traders ` 44,69,575/-
4 M/s. Simandhar Trading Corporation `1,09,53,073/- 5 M/s. Swastik Enterprises ` 17,23,304/-
Total `3,75,87,293/- 2.2 To ascertain the genuineness of such purchases (supra) the AO
issued notice to the assessee to show cause as to why the aforesaid purchases amounting to `3,75,87,293/- should not be treated as unexplained expenditure. In reply thereto, the assessee furnished copies of purchase bills from three parties, copies of bank statements to show payments were made by crossed cheque, copies of confirmation from the above parties, etc. The AO then issued notices under section 133(6) of the Act to these parties which were returned unserved. The AO did not accept the explanations put forth by the assessee and brushed aside the evidence placed before him as he was of the view that the assessee's documentary evidence was not supported by lorry receipts or delivery challans; that the assessee was not able to produce the three parties from whom alleged purchases were made before him for verification and placed reliance on the statement on oath and affidavit of one Rajendra Dodhiwala (proprietor of M/s. Rushabh Enterprises) given before Sales Tax authorities. In this view of the matter, the AO treated the purchases made from these three parties (supra) amounting to `3,75,87,293/- as unexplained expenditure under section 69C of the Act and the assessment was accordingly concluded under section 143(3) of the Act vide order dated 28.12.2012 wherein the assessee's income was determined at `4,29,80,520/-.
3.1 Aggrieved by the order of assessment for A.Y. 2010-11 dated 28.12.2012, the assessee preferred an appeal before the CIT(A)-35, Mumbai. Before the learned CIT(A), the assessee reiterating the stand taken before the AO, and in order to prove the purchases placed before the learned CIT(A) the evidence earlier filed before the AO; such as copies of purchase bills, copies of bank statements to show that payments to these 3 ITA No. 5313/Mum/2013 Shri Vishal P. Mehta parties for the said purchases have been made by account payee cheques, copies of stock register to show that the goods were received from these parties. It was submitted that the sales effected in respect of these purchases have not been doubted or questioned by the AO and therefore the purchases made by the assessee could not be held to be bogus, as without purchases the assessee could not have effected sales. Merely because these parties were not found at their given addresses, no adverse inference could be drawn against the assessee.
3.2 The learned CIT(A), after considering the submissions of the assessee vis-a-vis the material on record and the AO's views, found that the AO while treating the purchases as bogus has merely relied upon the information obtained from the Sales Tax Department and the statement and affidavit of a third party who neither had any relation to the assessee nor named it therein and in respect of which no opportunity for cross examination of that party were afforded to the assessee. The learned CIT(A) observed that the assessee had submitted the above referred documentary evidences before the AO and also in appellate proceedings before him to prove that purchases made from the above referred three parties were genuine. No material was brought on record by the AO to establish that the payments made for purchases to the above three parties were received back in cash by the assessee. According to the learned CIT(A), the assessee has submitted documentary evidence before the AO and also before him to establish that the said purchases were genuine and the AO, without recording any finding that the evidences produced are not genuine or doubtful; could not have made the additions ignoring the evidences placed before him. The learned CIT(A), inter alia, relying on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 619 (Bom) deleted the addition of `3,75,87,293/- made by the AO under section 69C of the Act vide the impugned order dated 09.05.2013.
4 ITA No. 5313/Mum/2013Shri Vishal P. Mehta 4.1 Aggrieved by the order of the CIT(A)-35, Mumbai dated 09.05.2013 for A.Y. 2010-11, Revenue has preferred this appeal raising the following grounds: -
"(i) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs 3,75,87,293/- on account of unexplained expenditure u/s 69C of the I.T. Act, by treating the purchases as genuine.
(ii) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the findings of another government agency without controverting the content in the documents which have evidentiary value in the eyes of law .
(iii) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in relying upon judgments in the case of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. without appreciating that the facts involved in the appellant's case are different from the facts of the above case law.
(iv) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has grossly erred in not appreciating the fact that the notices under 133(6) 'Issued to the parties from whom alleged bills were received were returned undelivered by the postal authorities.
(v) The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside that of the AO be restored.
(vi) The appellant craves leave to amend or alter any ground or add a new ground."
4.2 The learned D.R. for Revenue was heard in support of the grounds raised (supra) submitting that since the parties could not be traced at the given address for confirmation and lorry receipts in respect of the said purchases were not produced, the genuineness of the said purchases from the three parties could not be verified. Therefore, the AO was justified in treating the said purchases as bogus.
4.3 Per contra, the learned counsel for the assessee strongly supported the impugned order of the learned CIT(A), deleting the additions on account of bogus purchases of `3,75,87,293/- made by the AO under section 69C of the Act. It was submitted that, the assessee to prove the genuineness of purchase transactions had produced material evidence in the form of purchase bills issued by these parties, copies of bank statements to establish that the said purchases were made through banking channels, copies of stock register to show receipt of the said 5 ITA No. 5313/Mum/2013 Shri Vishal P. Mehta material purchased from these parties, confirmations from two of the three parties in respect of the said purchases. It is contended that, on the contrary, the AO has not brought on record even a shred of evidence to prove the said purchases were bogus and in coming to an adverse finding in the matter merely relied on the information of purchase parties listed by the Sales Tax Department and statement of a third party, unrelated to the assessee, wherein the assessee's name was not mentioned. The learned counsel for the assessee submitted that on identical facts and circumstances, the Hon'ble Bombay High Court and the Coordinate Benches of this Tribunal had deleted such additions made under section 69C of the Act in, inter alia, the following cases: -
(i) CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. (372 ITR 619) (Bom);
(ii) Hiralal Chunilal Jain vs. ITO (ITA NO. 4547/Mum.2014 dated 01.01.2016;
(iii) Imperial Imp & Exp (ITA No. 5427/Mum/2015 dated 18.03.2016);
(iv) Sanjay V. Dhruv (ITA No. 5089/Mum/2014 dated 29.02.2016.
4.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. On an appreciation of the material on record, it is evident from the order of assessment that it is on the basis of information obtained from the Sales Tax Department that the AO issued show cause notice to the assessee to explain the said purchases, as well as notices under section 133(6) of the Act to the said three parties from whom purchases were made, which were returned unserved. As the assessee failed to produce the said parties, the AO primarily relying on the information obtained from the Sales Tax Department and the statement of an unconnected third party, Shri Rajendra Dodhiwala (Prof. Rushabh Enterprises ) held the said purchases to be bogus. While it may be true that the said three parties did not appear before the AO, for whatever reason, the fact remains that the assessee itself had filed conformations for purchases from two of the three parties, copies of purchase bills, copies of bank account statements to show payment for the same were through banking channels, copies of stock register to show that the material from these parties had been 6 ITA No. 5313/Mum/2013 Shri Vishal P. Mehta received, etc. to establish the genuineness of these purchases. It is a fact on record that the AO has not doubted the sales effected by the assessee and therefore, it is in order to conclude that without corresponding purchases being effected, the assessee would not have made sales.
4.4.2 In our view, the AO has not brought on record any material evidence to conclusively prove that the purchases are bogus. Mere reliance by the AO on information obtained from the Sales Tax Department or the statement of a third party before the Sales Tax Department, without affording the assessee adequate opportunity to cross examine that person or the fact that these parties did not respond to notice under section 133(6) of the Act would not suffice to treat the purchases as bogus and make the addition. If the AO doubted the genuineness of this said purchases, it was incumbent upon him to cause further inquiries in the matter to ascertain the genuineness or otherwise of the transactions. Without causing any further enquires in respect of the said purchases, the AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statement/affidavit of a third party, Shri Rajendra Dodhiwala wherein the assessee was not named or afforded opportunity of cross examination of that person and issue of notices under section 133(6) of the Act.
4.4.3 In the factual matrix of the case, where the AO failed to cause any enquiry to be made to establish his suspicion that the said purchases are bogus, the assessee has brought on record documentary evidences to establish the genuineness of the purchase transactions, the action of the AO in ignoring these evidences cannot be accepted. Moreover, as correctly observed by the learned CIT(A), when the payment for the said purchases to the concerned three parties is through proper banking channels and there is no evidence brought on record by the AO to establish that the said payments were routed back to the assessee, the addition made by the AO under section 69C of the Act is unsustainable. We are fortified in this view of ours by the decisions of, inter alia, the Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (supra) and the decision of 7 ITA No. 5313/Mum/2013 Shri Vishal P. Mehta the Coordinate Benches of this Tribunal in the case of Hiralal Chunilal Jain (supra). Shri Sanjay V. Dhruv (supra) and Imperial Imp & Exp (supra). In this factual matrix of the case, as discussed above, we find no requirement for interference in the order of the learned CIT(A) and consequently uphold the same. Therefore, Revenue's grounds (i) to (vi) are dismissed.
5. In the result, Revenue's appeal for A.Y. 2010-11 is dismissed.
Order pronounced in the open court on 5th October, 2016.
Sd/- Sd/-
(Sandeep Gosain) (Jason P. Boaz)
Judicial Member Accountant Member
Mumbai, Dated: 5th October, 2016
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) -35, Mumbai
4. The CIT - 25, Mumbai
5. The DR, "F" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.