HAJI ABDUL QAYUM SOOMAR ENTERPRISES, MUMBAI v. ITO 13(1), MUMBAI

ITA 1641/MUM/2012 | 2008-2009
Pronouncement Date: 10-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 164119914 RSA 2012
Bench Mumbai
Appeal Number ITA 1641/MUM/2012
Duration Of Justice 2 year(s) 8 month(s) 3 day(s)
Appellant HAJI ABDUL QAYUM SOOMAR ENTERPRISES, MUMBAI
Respondent ITO 13(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 10-11-2014
Date Of Final Hearing 15-09-2014
Next Hearing Date 15-09-2014
Assessment Year 2008-2009
Appeal Filed On 07-03-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNALH BENCH MUMBAI BEFORE SHRI JOGINDER SINGH JM AND SHRI D. KARUNAKARA RAO AM ITA NO. 1639/MUM/2012 ASSESSMENT YEAR-2005-06 M/S HAJI ABDUL QAYUM SOOMAR ENTERPRISES SHERIFF DEVJI STREET (CHAKLA STREET) MUMBAI-400003 / VS. ACIT - 13(1) MUMBAI ! ./ PAN :AAFH2701H ( '#!$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ITA NO. 1640/MUM/2012 ASSESSMENT YEAR-2007-08 M/S HAJI ABDUL QAYUM SOOMAR ENTERPRISES SHERIFF DEVJI STREET (CHAKLA STREET) MUMBAI-400003 / VS. ACIT - 13(1) MUMBAI ! ./ PAN :AAFH2701H ( '#!$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ITA NO. 1641/MUM/2012 ASSESSMENT YEAR-2008-09 M/S HAJI ABDUL QAYUM SOOMAR ENTERPRISES SHERIFF DEVJI STREET (CHAKLA STREET) MUMBAI-400003 / VS. ACIT - 13(1) MUMBAI ! ./ PAN :AAFH2701H ( '#!$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) 2 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES '#!$' ( / ASSESSEE BY: SHRI PRAKASH PANDIT %&!$ ' ( / RESPONDENT BY : SHRI JEETENDRA KUMAR DR ) *+ ' - / DATE OF HEARING 10/11/2014 ./ ' - / DATE OF PRONOUNCEMENT 10/11/2014 1 / O R D E R PER JOGINDER SINGH JM: THIS BUNCH OF THREE APPEALS IS BY THE ASSESSEE FOR DIFFERENT ASSESSMENT YEARS HAVING IDENTICAL GROUNDS CHALLENGING THE IMPUGNED ORDERS OF THE FIRST APPELL ATE AUTHORITY ALL DATED 07/12/2011. 2. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SHRI PRAKASH PANDIT DID NOT PRESS GROUND NO. 1 TO 4 THEREFORE THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 3. THE ONLY GROUND ARGUED BY THE LD. COUNSEL ARE GR OUNDS NO. 5 AND 6 WHICH PERTAINS TO ADHOC ADDITION OF RS. 6 28 000/- OUT OF THE TOTAL ADDITION OF RS. 50 23 547/-. THE CRUX OF ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE IS THA T THE NECESSARY DETAILS WERE DULY FURNISHED BEFORE THE AS SESSING OFFICER AS WELL AS BEFORE THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) THEREFORE THERE IS NO REASON TO MAKE TH E ADHOC ADDITION. IT WAS PLEADED THAT ALL THE SALE/PURCHAS ES WERE MADE THROUGH ACCOUNT PAYEE CHEQUE AND THE CONCERNED PART IES DULY 3 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES AFFIRMED THE SAME. ON THE OTHER HAND SHRI JEETENDR A KUMAR LD.DR DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION F ROM THE IMPUGNED ORDER FOR READY REFERENCE:- 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUM STANCES OF THE CASE THE REASONS GIVEN BY THE ASSESSING OFFICE R FOR MAKING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AS WELL AS THE SUBMISSIONS MADE BY THE ASSESSEE IN SUPPORT OF THE GROUNDS OF APPEAL TAKEN BY IT. IN MY OPINION ON MERITS WHAT IS TO BE DECIDED IS WHETHER IN VIEW OF THE FACTS OF THE CASE A ND EVIDENCES ON RECORD THE ADDITION ON ACCOUNT OF THE P URCHASES HELD TO BE BOGUS BY THE AO IS JUSTIFIED. IT IS SETTLED PRINCIPLE OF LAW THAT THE ONUS TO PROV E THE GENUINENESS OF AN EXPENDITURE LIES ON THE ASSESSEE. THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF CERTA IN PURCHASES MADE BY IT FROM THREE PERSONS NAMELY SHRI RAKESH KUMAR GUPTA PROP. MIS MANOJ MILLS SHRI MOHIT R. GUPTA PROP. MIS ASTHA SILK MILLS AND SMT. HEMA R. GUPTA PROP. OF MIS SHREE RAM SALES & SYNTHETICS. THE ASSESSING OFFICER REQUIR ED THE ASSESSEE TO FURNISH THE DETAILS OF THE SAID PURCHAS ES. THE ASSESSEE FURNISHED THE BILLS AND DELIVERY CHALLANS RE LATING TO THE PURCHASES DETAILS AND EVIDENCES TO SHOW THAT TH E PAYMENTS FOR THE PURCHASES WERE MADE TO THE THREE PA RTIES BY 4 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES CROSSED CHEQUES WHICH WERE DULY ACCOUNTED FOR IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE. AS IS EVIDENT FROM THE DOC UMENTS IN THE ASSESSMENT RECORD XEROX COPIES OF THE BANK STA TEMENTS WERE ALSO SUBMITTED EVIDENCING THE PAYMENTS BY THE AS SESSEE FOR THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM TH E THREE PERSONS. THE ASSESSEE ALSO SHOWED THAT THE PURCHASES WERE REFLECTED IN THE MONTHLY QUANTITATIVE STOCK RECONCI LIATION. IT PRODUCED METER TO METER TALLY OF THE OPENING AND CLO SING STOCK WITH NEGLIGIBLE SHORTAGE. IT SHOWED THAT SALES WERE MADE OUT OF THE STOCK AND THE INCOME ON ACCOUNT OF THE SALES WE RE DISCLOSED IN THE BOOKS. THE ASSESSING OFFICER CALLED FOR INFOR MATION U/S 133(6) OF THE LT. ACT 1961 FROM THE THREE PARTIES IN CONNECTION WITH THE SALES MADE BY THEM TO THE ASSESSEE. THE TH REE PARTIES CONFIRMED THE SALES MADE BY THEM TO THE ASSESSEE AN D ALSO CONFIRMED THE RECEIPT OF PAYMENTS BY ACCOUNT PAYEE C HEQUES. THE THREE PARTIES HAD ALSO SUBMITTED AFFIDAVITS CON FIRMING THAT THE PURCHASES MADE BY THE ASSESSEE FROM THEM WERE G ENUINE. SINCE THE ASSESSING CLFFICER HAD BASED HIS ENTIRE S HOW CAUSE NOTICE ON THE STATEMENT OF THE THREE PARTIES RECORDED U/S 133A AND 131 OF THE LT. ACT 1961 BY THEIR ASSESSIN G OFFICER THE ASSESSEE SOUGHT CROSS EXAMINATION OF THE SAID T HREE PARTIES. HOWEVER THE THREE PERSONS COULD NOT BE PRODUCED BY TH E ASSESSING OFFICER FOR CROSS- EXAMINATION BY THE ASS ESSEE. ON THE OTHER HAND THE SAID THREE PARTIES IN RESPONSE T O NOTICE ULS 133(6) AS WELL AS SUMMONS ULS 131 ISSUED TO THEM HA VE CONFIRMED THEIR TRANSACTIONS WITH THE ASSESSEE. AFFI DAVITS TO THIS EFFECT HAD ALSO BEEN FILED BY THE THREE PARTIES BEFORE THEIR ASSESSING OFFICERS. THE ASSESSING OFFICER HAS HOWE VER REJECTED THE AFFIDAVITS FILED BY THE THREE PARTIES AND HAS BASED HIS FINDINGS ON THE STATEMENT OF THE THREE PARTIES AS WELL AS THE 5 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES FACT THAT THE SURVEY IN THEIR PREMISES CLEARLY REVE ALED THAT THEY WERE MERELY PROVIDING ACCOMMODATION BILLS AND WERE NOT DOING ANY TRADING IN CLOTH. HENCE THE ASSESSEE WOULD APP EAR TO HAVE DISCHARGED ITS ONUS IN RESPECT OF THE PURCHASES IN QUESTION. HOWEVER THE ENTIRE GAMUT OF CIRCUMSTANCES AS WELL AS EVIDENCES GATHERED DURING THE COURSE OF THE SURVEY PR OCEEDINGS IN THE PREMISES OF SHRI GUPTA AND OTHERS ALSO CANNOT BE DISREGARDED. IN MY OPINION THE EVIDENCES CLEARLY SHO W THAT SHRI GUPTA & OTHERS WERE IN THE BUSINESS OF PROVIDING ACCOMMODATION BILLS. THE FACT THAT THE SAID PERSONS DID NOT HAVE EVEN A SINGLE PIECE OF EVIDENCE IN SUPPORT OF THEIR ACTIVITIES OF TRADING IN CLOTH BUTTRESSES THE STAND OF THE ASSE SSING OFFICER IN THIS REGARD. SHRI GUPTA AND OTHERS HAVE CONFIRM ED THEIR TRANSACTIONS WITH THE ASSESSEE. CONSIDERING THE TOTALITY OF CIRCUMSTANCES I AM OF T HE OPINION THAT THE ASSESSEE MAY NOT HAVE MADE PURCHAS ES FROM SHRI GUPTA & OTHERS. IT MAY HAVE MADE THE PURCHASES FROM UNIDENTIFIABLE PARTIES. GUPTA & OTHERS WERE USED ONLY TO OBTAIN BILLS FOR THE PURCHASES MADE IN ORDER TO PROVIDE AU THENTICITY TO THE SAME . IN THE ASSESSMENT YEAR IN QUESTION THE TOTAL AMOUN T OF PURCHASES IN QUESTION IS RS. 50 23 547/-. IN THE C ASE OF M/S VIJAY PROTEINS LTD. REPORTED IN 58 ITD 428 HON'BLE ITAT AHMEDABAD 'C' BENCH UNDER SIMILAR CIRCUMSTANCES W HERE THE AO HAD DISALLOWED THE ENTIRE EXPENDITURE ON ACCOUNT O F PURCHASES MADE FROM CERTAIN PARTIES TREATING THE SA ME AS BOGUS HAS HELD THAT 'IT IS AN ELEMENTARY RULE OF AC COUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM S ALES OTHERWISE IT COULD AMOUNT TO LEVY OF INCOME TAX ON GROSS RECEIPT 6 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES OR ON SALES. SUCH A RECOURSE IS NOT PERMISSIBLE UNLE SS IT IS SPECIFICALLY AUTHORIZED TO DO SO UNDER ANY PARTICULA R PROVISIONS CONTAINED IN THE ACT.' IT HAS BEEN HELD BY THE HON'B LE TRIBUNAL THAT IN SUCH CIRCUMSTANCES A CERTAIN PERCENTAGE OF EXPENDITURE HAS TO BE DISALLOWED ON ACCOUNT OF INFLATION OF PURC HASE PRICE. HONBLE TRIBUNAL HAS HELD THAT IF PURCHASES ARE MADE FROM OPEN MARKET WITHOUT INSISTING FOR THE GENUINE BILLS THE SUPPLIERS MAY BE WILLING TO SELL THOSE PRODUCTS AT A MUCH LOWER RA TE COMPARED TO THE RATE AT WHICH THEY MAY CHARGE IN CASE THE DEA LER HAS TO GIVE A GENUINE SALE INVOICE IN RESPECT OF THAT SALE AND SUPPLY OF GOODS. THERE MAY BE VARIOUS FACTORS DUE TO WHICH THE RE IS BOUND TO BE A SUBSTANTIAL DIFFERENCE BETWEEN THE PA RTY PURCHASE PRICE OF UNACCOUNTED MATERIAL AND RATE OF PURCHASE OF UNACCOUNTED FOR GOODS. THERE MAY BE A SAVING ON ACCO UNT OF SALES-TAX AND OTHER TAXES AND DUTIES WHICH MAY BE LE VIABLE IN RESPECT OF MANUFACTURE OF SALE OF GOODS IN QUESTION . THE SUPPLIERS OR MANUFACTURERS MAKE A SUBSTANTIAL SAVING IN THE INCOME-TAX IN RESPECT OF INCOME FROM SALE OF UNACCO UNTED GOODS PRODUCED AND SOLD BY THEM. THIS MAY ALSO BE ONE OF T HE FACTORS DUE TO WHICH THE SELLER MAY BE WILLING TO CHARGE LOW ER RATES FOR UNACCOUNTED GOODS AS COMPARED TO ACCOUNTED FOR GOODS. I FIND FROM THE DETAILS FURNISHED BY THE ASSESSEE THAT WHI LE IT HAS REFLECTED GP RATE OF 8.81% ON ACCOUNT OF THE PURCHA SE AND SALES IN RESPIRES OF THE PURCHASE MADE FROM GUPTA & OTHER S THE OVERALL GP FOR THE YEAR HAS BEEN REFLECTED AT 10.30% . HENCE THE ASSESSEE HAS REFLECTED LOWER GP IN RESPIRES OF T RANSACTIONS RELATING TO GUPTA & OTHERS BY 1.49% AS COMPARED. 7 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES CONSIDERING THE NATURE OF THE TRANSACTIONS AND THE TO TALITY OF CIRCUMSTANCES AS ALSO THE FACT THAT THE ASSESSEE HAS SHOWN LESSER GP IN RESPECT OF THE TRANSACTIONS RELATING T O THE GUPTA GROUP AS COMPARED TO THE OVERALL GP IT WOULD BE FAIR AND REASONABLE TO MAKE AN ADHOC ADDITION OF RS. 6 28 00 0/- (REPRESENTING SLIGHTLY MORE THAN 12.5% OF THE PURCH ASES IN QUESTION) TO COVER UP THE POSSIBLE LEAKAGES IN THE PURCHASES INCLUDING ELEMENT OF INFLATION. THEREFORE ADDITION OF RS. 6 28 000/- IS REQUIRED TO BE MADE. HENCE ADDITION TO THE EXTENT OF RS. 6 28 000/- IS SUSTAINED. THE BALANCE ADDITION IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS PARTLY ALLO WED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 4.2. IF THE OBSERVATION FOR MAKING THE ADDITION MAD E IN THE ASSESSMENT ORDER CONCLUSION DRAWN IN THE IMPUGNED ORDER MATERIAL AVAILABLE ON RECORD AND THE ASSERTIONS MAD E BY THE LD. RESPECTIVE COUNSEL IF KEPT IN JUXTAPOSITION AND A NALYSED WE FIND THAT COMPLETE DETAILS OF PURCHASES MADE FROM T HE CONCERNED PARTIES INCLUDING DOCUMENTS IN SUPPORT OF PURCHASES PAYMENT THROUGH ACCOUNT PAYEE CHEQUE CO PIES OF SALE BILLS TO WHOM THE SAID GOODS WERE SOLD ALONG W ITH QUANTITATIVE DETAILS AGAINST EACH PURCHASES WERE DU LY FURNISHED BY THE ASSESSEE. IT IS NOTEWORTHY THAT Q UANTITY WISE DETAILS OF THE MONTHLY PURCHASES AND SALES ALONGWIT H OPENING/CLOSING STOCK WERE ALSO FURNISHED BY THE AS SESSEE BEFORE THE AUTHORITIES BELOW. IT IS UNCONTROVERTED FACT THAT SUMMONS WERE ISSUED TO CONCERNED PARTIES WHO CONFIR MED THAT THEY SOLD THE GOODS TO THE ASSESSEE AND RECEIVED TH E PAYMENTS 8 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES THROUGH ACCOUNTS PAYEE CHEQUE. UNDER THESE FACTS M AKING THE ADHOC ADDITION WITHOUT PINPOINTING ANY DEFECT IN TH E BOOKS OF ACCOUNTS IS NOT JUSTIFIED. THE RATIO LAID DOWN FRO M HONBLE APEX COURT IN THE CASE OF J.M.D COMPUTER (320 ITR 6 ) TO THE EFFECT THAT ADDITION CANNOT BE MADE MERELY ON THE S TATEMENT OF THIRD PARTY IS NOT JUSTIFIED. IDENTICAL WAS THE SI TUATION IN THE CASE OF PRAKASH CHANDRA NAHATA VS CIT 301 ITR 134 ( MP). IT IS AN ELEMENTARY RULE OF ACCOUNTANCY AS WELL AS TAXATI ON LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES OTHERWISE IT COULD AMOU NT TO LEVY OF TAX ON GROSS RECEIPTS/GROSS SALES. SUCH A RECOURSE IS NOT PERMISSIBLE UNLESS AND UNTIL ANY COGENT MATERIAL IS BROUGHT ON RECORD. THE ASSESSING OFFICER HAS NOT CITED ANY MA TERIAL ON THE BASIS OF WHICH THE ADDITION CAN BE SAID TO BE JUSTI FIED. CONSIDERING THE TOTALITY OF CIRCUMSTANCE AND THE MA TERIAL ON RECORD WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER AND PART ADHOC ADDITION SUSTAI NED BY THE CIT(A) TO COVER UP THE POSSIBLE LEAKAGES. IT HAS N EITHER BEEN MENTIONED IN THE ASSESSMENT ORDER NOR IN THE IMPUGN ED ORDER WHAT ARE THE POSSIBLE LEAKAGES. MERELY MENTIONING O F POSSIBLE LEAKAGES IS NOT ENOUGH MORE SPECIFICALLY WHEN THE N ECESSARY DETAILS WERE DULY FURNISHED RIGHT FROM ASSESSMENT S TAGE ITSELF AND ALL THE PURCHASES/SALES ARE MADE THROUGH ACCOUN T PAYEE CHEQUE DULY CONFIRMED BY THE CONCERNED PARTIES. IN VIEW OF THESE FACT THE APPEAL OF THE ASSESSEE IS ALLOWED. 4.3. IDENTICAL IS THE SITUATION FOR MAKING THE ADHO C ADDITION OF 9 M/S HAJI ABDUL QAYUM SOOMAR ENTERP RISES RS. 4 16 000/- (A.Y. 2007-08) AND RS.1 62 000/- (A. Y. 2008- 09). ON THE SAME REASONING WE FIND NO JUSTIFICATI ON TO SUSTAIN THE ADHOC ADDITION. THEREFORE THESE APPEALS ARE A LSO PARTLY ALLOWED AS REOPENING OF ASSESSMENT U/S147/148 OF TH E ACT AND GROUND NO. 3 & 4 WERE NOT PRESSED BY THE ASSESSEE. 5. FINALLY ALL THESE APPEALS ARE PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF HEARING ON 10/11/2014. SD/- SD/- D.KARUNAKARA RAO JOGINDER SINGH ACCOUNTANT MEMBER JU DICIAL MEMBER MUMBAI DATED -10/11/2014 SHEKHAR. PS. !' #'$ / COPY OF THE ORDER FORWARDED TO : 1. '#!$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. ) 2 ( '# ) / THE CIT(A)- 4. ) 2 / CIT 5. 34 % *5 '#- '5 ) 6+ / DR ITAT MUMBAI 6. 7 8+ / GUARD FILE. % / BY ORDER &3# % //TRUE COPY// & / %' ( (DY./ASSTT. REGISTRAR) ) 6+ / ITAT MUMBAI