Income Tax Appellate Tribunal - Mumbai
Aastha Telecom, Mumbai vs Assessee on 9 July, 2014
आयकर अपील य अ धकरण "जे" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "J" BENCH, MUMBAI ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा सद य के सम ।
BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM
आयकर अपील सं./I.T.A. No. 1912/Mum/2011
( नधारण वष / Assessment Year: 2007-08)
Aastha Telecom ITO-15(2)(3),
Shop No.11, Rajendra Ratan Society, Mumbai
Mahesh Nagar, S. V. Road, बनाम/
Goregaon (W), Mumbai-400 062 Vs.
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AALFA 7380 G
(अपीलाथ /Appellant) : ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Ravindra Bairolia
यथ क ओर से/Respondent by : Shri Sanjeev Jain
सनु वाई क तार ख / : 01.05.2014
Date of Hearing
घोषणा क तार ख /
: 09.07.2014
Date of Pronouncement
आदे श / O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-26, Mumbai ('CIT(A)' for short) dated 12.01.2011, dismissing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2007-08 vide order dated 18.05.2009.
2 ITA No. 1912/Mum/2011 (A.Y.2007-08)Aastha Telecom vs. ITO
2. The brief facts of the case are that the assessee is a firm trading in telecom products, being an authorized Distributor of Mahanagar Telephone Nigam Ltd. ('MTNL' for short) for sale of coupons/recharge vouchers of mobile/cell phones. In verification of its purchases, made and claimed at Rs.5692.81 lacs per its accounts, during the course of the assessment proceedings for the relevant year, it submitted the following details:
i) Mahanagar Telephone Nigam Ltd., Rs.56,89,70,187/-
Currey Road, Mumbai
ii) Maniar Associates, 44, Nagdevi Cross Rs.2,76,812/-
Lane, 3rd Floor, Mumbai-400 003
Total Rs.56,92,46,999/-
Notice u/s. 133(6) was issued to M/s. Maniar Associates, Mumbai ('MA' for short), the only other supplier apart from MTNL, who denied having had any transaction with the assessee during the relevant year. The assessee, on being confronted with the said information, clarified that the goods (recharge vouchers) are, in case of shortage, loaned from other distributors, and returned back subsequently. These transactions, being in the nature of accommodation by one distributor to another, with no financial implication whatsoever, are therefore recorded only in the stock register and not in the financial accounts (of the concerned parties). In the present case, however, these were entered as purchases from and sales to MA in its accounts, only to enable being entered/recorded in its' stock records, i.e., in terms of its accounting software. Copy of the ledger account of MA for the year, as appearing in its books, containing both the purchase and sale entries for the same amount/s (at a total of Rs.2,76,812 / PB pg. 8), was submitted in support. The main person, Shri Pravinchandra B. Maniar, looking after the affairs of MA, had since expired (on 16.09.2006), and it was this that was responsible for the disclaimer by the person now in-charge of the said firm, his son, being not aware of the transaction/s. Copy of the death certificate of Late Shri P. B. Maniar was furnished in support (PB pg.1). The same did not, however, find favour with the Assessing Officer (A.O.), who, rejecting the assessee's books of account u/s.145(3) of the Act, made disallowance to the extent of the said purchases, inferring them as bogus. The assessee reiterated its case in appeal, also relying on the reply to its letter dated 21.09.2007 to AGM (Sales), MTNL 3 ITA No. 1912/Mum/2011 (A.Y.2007-08) Aastha Telecom vs. ITO with regard to the lost Trump recharge and VCC coupons. As informed by MTNL, the lost cards had been issued to another distributor, MA, and which would thus prove the assessee's case in-as-much as the cards issued to MA could only be sold by it (assessee) if its' claim of loan of goods there-from was true. The same, as well as the ledger account of MA as appearing in the assessee's books, were dismissed as only self-serving, and a result of an afterthought. There was no contemporary voucher/material to exhibit the loan transaction/s, in the absence of which the assessee's claim in its respect could not be accepted. The disallowance having been confirmed, the assessee is in second appeal.
3. We have heard the parties and perused the material on record, giving our careful consideration to the matter.
3.1 Without doubt, books of account, where maintained in the regular course of business, have evidentiary value (refer sec. 34 of the Indian Evidence Act, 1872). The presumption in law would be that the same are true, so that the assessee did indeed make purchases from and sales to MA during the relevant year. So, however, it is open to the Revenue (or even to the assessee) to rebut those entries as not reflecting the true state of affairs [91 ITR 18 (SC)]. In fact, to the extent the assessee admits of goods having been received from and delivered to MA on the relevant dates, the accounting entries of purchase and sale are in agreement with their purport and consistent with the assessee's explanation of those entries. Further, to the extent the assessee, again, admits of the said transactions as having no financial implication - the goods received carrying only an obligation to return back the same in kind, its version corroborates that of the corresponding party (MA), claiming no (financial) transactions with the assessee during the relevant year. The only question, therefore, is whether the relevant goods were indeed received from and subsequently delivered back to MA by the assessee during the relevant year, i.e., prove the truth of its stock records inasmuch MA has denied the same, casting a doubt on the assessee's version.
4 ITA No. 1912/Mum/2011 (A.Y.2007-08)Aastha Telecom vs. ITO 3.2 The first thing that strikes us is that the assessee's explanation has to be taken and considered as a whole. Considering the 'purchase' part as untrue, while accepting the 'sale' part, as has been done by the Revenue, would be myopic. The Revenue has, in our view, rather than subjecting the assessee's explanation to appropriate verification in-as- much as the corresponding party - MA, had responded to the notice u/s.133(6) denying the transactions, proceeded without due discrimination and application of mind. Was the stock of the relevant goods (recharge coupons) with the assessee indeed nil or low on the relevant dates, so that it could not have made the sales of the said goods in its absence? Correspondingly, was the 'loaner', i.e., MA, sufficiently stocked qua the said goods on the relevant dates? That is to say, would its stock (of the relevant cards/coupons) fall to nil or even negative if the goods stated to be loaned to the assessee were indeed recorded by it in its stock records on those dates. This is as, firstly, the assessee could not possibly have access to the loaner's records and, further, nobody would possibly loan to another if it is not adequately stocked in respect of the said goods, or even at the risk of loss of its' own sales, by allowing the stock level to fall to nil or to precariously low levels. In fact, it is quite possible that the stock records of MA reflected the entries of delivery and receipt, yet denied the transactions, being unofficial. Then, did the assessee's purchase and sale returns for the relevant period (July to September, 2006), as furnished to the concerned authorities, were at an amount/s in agreement with its books of account and, further, bore the name of MA as the supplier or buyer, as the case may be, of the relevant goods. All these facts, it may be appreciated, would be borne out of records of the concerned parties, which stand crystallized at the relevant points in time, much before the enquiry, so that the assessee's explanation would stand to be validated, or not so, with reference thereto.
Further still, the loan transaction being unofficial, in-as-much as the relevant goods could be validly sourced only from MTNL, what document/s was generated between the parties to evidence the same. This would be necessary to safeguard one from a denial of the transaction by another (debtor), or, as indeed as happed in the instant case, demise or otherwise absentia of one of the persons to the transaction. Could, for example, the said recharge vouchers, if only on a test check basis, be got verified from MTNL as to 5 ITA No. 1912/Mum/2011 (A.Y.2007-08) Aastha Telecom vs. ITO their supply, i.e., originally. If ratified by it (MTNL), as indeed the assessee's claims with reference to the reply to its letter to MTNL, written to report lost cards, the assessee's claim would stand validated. However, the Revenue, as observed earlier, does nothing on the sort, and has merely dismissed the assessee's case as an afterthought.
3.3 Considering the facts as borne out of the record, we firstly find nothing unusual about the loan transactions; parties in the same trade - both the distributors in the instant case being located at Mumbai, may occasionally accommodate each other to facilitate each other's business. The volume of such transactions, at Rs.2.77 lacs (i.e., at less than 0.05% of the total purchases), itself reveals the infrequency of such transactions.
Further, there is nothing to suggest or indicate of the assessee's claim as being an afterthought. How could, one may ask, the purchase, being of a licensed product, from other than an authorized source, be possible? There is no grey market, i.e., on the supply side, while, in fact, the sales are also subject to a variety of regulatory controls, and can only be registered users. This also explains the entire purchases, other than for which it claims loan of goods (from another authorized distributor), as from MTNL. Then, again, there is sale of the same quantity (at the same rate) to MA, which itself shows the peculiar nature of the transaction - between two distributors, who would thus ordinarily have no occasion to be each other's suppliers or buyers. Why would a distributor purchase goods from another? Then, again, why would he sell it without normal profit?
The assessee's account books are as kept and maintained in the regular course of its business, while the enquiry by the Revenue was only much later, in, as it appears, February, 2009, followed by notice u/s.133(6) on 05.03.2009. The transaction/s with MA, as per the assessee's books of account, occurred during the period 15.07.2006 to 04.09.2006, prior to the demise of its main person, i.e., Shri P. B. Maniar, on 16.09.2006. The plea of the successor being not, therefore, aware of the transactions, which are generally not recorded in accounts is not without merit. Did the assessee deliberately record the purchases and sales on those dates, which are ostensibly guided by its stock levels on those dates? Then, again, how could the letter dated 21.09.2007 to MTNL, 6 ITA No. 1912/Mum/2011 (A.Y.2007-08) Aastha Telecom vs. ITO receipted by the addressee on the same date, be an afterthought? Even so, what prevents the Revenue to seek confirmation of the stated reply thereto from MTNL itself, i.e., as claimed by the assessee, as being actually so and, further, as being in conformity with the MTNL's records. This would provide a valid basis to accept or reject the assessee's plea, while an absence of any such verification would only lead to the inference of validity of the asseessee's claim in its respect. The assessee, in our view, in reporting its purchases from MA, has acted in good faith, and the entries in accounts reflect its bona fides.
The assessee may have, as stated in the assessment order (para 4.1), not reflected the name of MA in the details of sales made in excess of Rs.1 lac each during the year, as furnished in the assessment proceedings. However, that could not hold against the assessee or lead to the inference of the purchases being bogus. If so, the sales thereto, also appearing in the same account (of MA), must equally be regarded as bogus. In fact, the objection is to no moment, as the assessee's books, including stock records, are matched, showing the purchase from and sale of goods to MA, so that notwithstanding the said non-reflection, the said transactions stood duly recorded in its accounts. The assessee does not gain in any manner from the said non-reflection; its accounts clearly showing the goods 'purchased' from as having been subsequently 'sold' to, MA, i.e., in the same quantity and at the same rate. In other words, the recording of the said transactions exhibits the authenticity of the said account, as it could have otherwise kept the same off its books, as did MA. The aspect of 'sales' to MA, an integral part of the assessee's explanation in support of its accounts, has been completely ignored by the Revenue. It, in our view, in acting in the manner it has, acted parochially and with a prejudiced state of mind.
4. Considering the entirety of the facts and circumstances of the case, in our clear view there is nothing to doubt the genuineness of the impugned entries of purchase. Accordingly, we set aside the invocation of s. 145(3) qua the assessee's accounts as also direct the deletion of the disallowance effected. We decide accordingly.
7 ITA No. 1912/Mum/2011 (A.Y.2007-08)Aastha Telecom vs. ITO
5. In the result, the assessee's appeal is allowed.
प रणामतः नधा रती क अपील वीकृत क जाती है ।
Order pronounced in the open court on July 09, 2014
Sd/- Sd/-
(D. Manmohan) (Sanjay Arora)
उपा य / Vice President लेखा सद य / Accountant Member
मुंबई Mumbai; दनांक Dated : 09.07.2014
व. न.स./Roshani, Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु त(अपील) / The CIT(A)
4. आयकर आयु त / CIT - concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard File
आदे शानस
ु ार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मंब
ु ई / ITAT, Mumbai