GANPATRAJ A SANGHAVI, MUMBAI v. ASST CIT 15(3), MUMBAI

ITA 2826/MUM/2013 | 2009-2010
Pronouncement Date: 05-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 282619914 RSA 2013
Assessee PAN AMXPS1466M
Bench Mumbai
Appeal Number ITA 2826/MUM/2013
Duration Of Justice 1 year(s) 6 month(s) 25 day(s)
Appellant GANPATRAJ A SANGHAVI, MUMBAI
Respondent ASST CIT 15(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 05-11-2014
Date Of Final Hearing 29-09-2014
Next Hearing Date 29-09-2014
Assessment Year 2009-2010
Appeal Filed On 10-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA (JM) . . ./I.T.A. NO.2826/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) SHRI GANPATRAJ A SANGHAVI 135/141 1 ST FLOOR ROOM NO.23 GURURAJENDRA HOUSE 5 TH KUMBHARWADA MUMBAI-400004 / VS. ASSISTANT COMMISSIONER OF INCOME TAX 15(3) MUMBAI. ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ % ./PAN/GIR NO. :AMXPS1466M !' & / APPELLANT BY SHRI V K TULSIAN #$!' ' & /RESPONDENT BY SHRI PAVAN KUMAR BEERLA ( ' ) / DATE OF HEARING : 16.10.2014 *+ ' ) /DATE OF PRONOUNCEMENT : 5.11.2014 / O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 4.2.2013 PASSED BY LD CIT(A)-26 MUMBAI AND IT RELA TES TO THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCES OF FOLLOWING AMOUNTS MADE BY THE AO : A) DISALLOWANCES OF PURCHASES RS.1 74 01 436/-; B) DISALLOWANCE OF DONATION; C) DISALLOWANCE OF TELEPHONE EXPENSES; AND D) DISALLOWANCE OF HAMALI AND CARTAGES EXPENSES. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS A PROPRIETOR OF M/S GURURAJ METALS AND THE SAID CON CERN IS IN THE BUSINESS OF SUPPLY OF FERROUS AND NON-FERROUS METALS TO SMALL S ALE INDUSTRIES. HE FILED HIS I.T.A. NO.2826/MUM/2013 2 RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION D ECLARING TOTAL INCOME OF RS.33 88 804/-. HOWEVER THE AO COMPLETED THE ASSES SMENT BY DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.2 08 58 870/- BY MAKI NG VARIOUS ADDITIONS. THE ASSESSEE CHALLENGED THE ADDITIONS BY PREFERRING AN APPEAL BEFORE THE LD. CIT(A) BUT THE SAME WAS PARTLY ALLOWED. STILL AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF PURCHASES MADE. THE FACTS RELATING TO THE SAME ARE STATED AS UNDER BY THE LD. CIT(A) : 3. GROUND NO.1 IS AGAINST THE ADDITION OF RS.1 74 01 436/- ON ACCOUNT OF BOGUS PURCHASES. BRIEF FACTS IN THIS RE GARD ARE THAT DURING THE ASSESSMENT PROCEEDINGS INQUIRIES WERE M ADE U/S 133(6) FROM VARIOUS PARTIES FROM WHERE THE ASSESSEE HAS SH OWN PURCHASE OF METALS. THE NOTICE ISSUED TO THE FIVE PARTIES I E. M/S MONTEX INDUSTRIES M/S ROSHAN STEEL IMPEX M/S MOKESH META L AND TUBES M/S VIRAJ STEEL AND ALLOYS AND M/S SHIVAM METALS INDUSTRIES RETURNED BACK BY THE POSTAL AUTHORITIES WITH A REM ARK NOT KNOWN. ACCORDINGLY THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE PURCHASES FROM THESE PARTIES SHOULD NOT BE TREATED AS NON GENUINE AND THE SAME SHOULD NOT BE ADDED BACK. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE FURNISHED LEDGER COPY OF PURCHASES SIGNED BY THE RESPECTIVE PARTIES AND COPIES OF SAMP LE PURCHASE BILLS ALONG WITH A FEW DELIVERY CHALLANS AND CLAIMED THAT THE PURCHASES ARE GENUINE. HOWEVER THE AO FURTHER INQUIRED THIS MATTER THROUGH ON THE SPOT FIELD INQUIRES BY THE INSPECTOR WHO SU BMITTED THAT NONE OF THE PARTIES EXISTS AT THE GIVEN ADDRESS AND THE INQUIRIES WITH THE NEARBY SHOPS REVEALED THAT NOBODY IS AWARE ABOUT TH ESE PARTIES. THE REPORT OF THE INSPECTOR FORMS PART OF THE ASSES SMENT ORDER. ON THE BASIS OF DETAILED ENQUIRIES THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS MANAGED TO OBTAIN THE SIGNATURES O F THESE PARTIES BUT ACTUALLY THESE PARTIES DOES NOT EXISTS AT THE GIVEN ADDRESS. THE AO HAS FURTHER OBSERVED THAT (I) THE RECEIVERS SIG NATURE ARE NOT AFFIXED ON THE DELIVERY CHALLANS OF THE PURCHASE FR OM THESE PARTIES. (II) THE MODE OF TRANSPORT FOR DELIVERY OF THESE GO ODS IS NOT MENTIONED ON THE PURCHASE BILLS OF THESE PARTIES WH EREAS THE I.T.A. NO.2826/MUM/2013 3 PURCHASES INVOICE OF OTHER PARTIES CONTAINS THE LOR RY NUMBER ETC.(III) MAJOR PORTION OF PURCHASES ARE STILL SHOWN OUTSTAND ING IN THE LIST OF SUNDRY CREDITORS. ON THE BASIS OF ALL THESE FACTS THE AO HAS HELD THAT THE ASSESSEE HAS MERELY OBTAINED ACCOMMODATION ENTRIES FOR THESE PURCHASES. IF AT ALL SUCH PURCHASES HAVE BEEN MADE FROM SOME OTHER PARTY TO MAKE CORRESPONDING SALES THE SAME WOULD OBVIOUSLY BE IN CASH WHICH WOULD ATTRACT THE PROVISIONS OF S ECTION 40(A)(3) OF THE IT ACT ACCORDINGLY THE AO HAS DISALLOWED RS .1 74 01 436/- ON ACCOUNT OF SUCH BOGUS PURCHASES. 5. IN THE APPELLATE PROCEEDINGS THE ASSESSEE SUBMI TTED ADDITIONAL EVIDENCES UNDER RULE 46A OF THE INCOME TAX RULES 1962 IN TH E FORM OF TIN ALLOTMENT LETTER SALES TAX ACKNOWLEDGEMENT OF E-RETURN CHA LLANS CERTIFICATES UNDER VAT ETC IN RESPECT OF PURCHASES IN QUESTION. HENCE THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. IN THE REMAND REPORT THE AO SUBMITTED THAT OUT OF FIVE PARTIES REFERRED ABOVE THREE PARTIES VIZ. (A) M /S ROSHAN STEEL IMPEX (B) M/S VIRAJ STEEL AND ALLOYS AND C ) M/S SHIVAM METALS INDUSTRIES APPEAR IN THE LIST OF HAWALA OPERATORS PREPARED BY THE SALES TAX DEPA RTMENT. THE AO FURTHER SUBMITTED THAT HE HAS OBTAINED BANK STATEMENTS OF ALL THE FIVE PARTIES AND THE PERUSAL OF THE SAME SHOWS THAT THEY HAVE WITHDRAWN THE AMOUNTS IN CASH AS SOON AS THE CHEQUES ISSUED BY THE ASSESSEE WERE REA LISED. THE AO ALSO PLACED RELIANCE ON THE DECISION OF THE DELHI BENCH OF T HE TRIBUNAL IN THE CASE OF DCIT V/S PHOOLWATI DEVI (2009) 314 ITR AT I (DELHI) AND ALSO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUMAN DAYAL V/S CIT (1995) 214 ITR 801 (SC). ACCORDINGLY THE AO STOOD BY THE ASSESSMENT ORDER . THE AO FURTHER OBSERVED THAT IF AT ALL THE PURCHASES WERE CONSIDERED TO HAV E BEEN MADE FROM ANY OTHER PARTY THE SAME WOULD HAVE BEEN SOURCED OUT OF UNDI SCLOSED INCOME OF THE ASSESSEE IN WHICH CASE THE PROVISIONS OF SEC. 69C OF THE ACT WOULD BE ATTRACTED. EVEN THOUGH THE ASSESSEE FURNISHED A DETAILED REPLY IN RESPONSE TO THE REMAND REPORT AND ALSO PLACED RELIANCE ON VARIOUS CASE LAW YET THE LD. CIT(A) CONCURRED WITH THE VIEW TAKEN BY THE AO. THE LD. CIT(A) ALS O CONCURRED WITH THE VIEW OF AO THAT THE ASSESSEE WOULD HAVE MADE PURCHASES FRO M THE GREY MARKET AND SUCH PURCHASES WOULD HAVE MADE IN CASH RESULTING I N VIOLATION OF THE PROVISIONS OF SECTION 40(A)(3) OF THE ACT. HE ALSO AGREED WIT H THE VIEW TAKEN BY AO THAT ASSESSEE HAS NOT EXPLAINED THE SOURCES FOR MAKING SUCH PURCHASES AND HENCE I.T.A. NO.2826/MUM/2013 4 THE AGGREGATE AMOUNT OF PURCHASES IS LIABLE TO BE ASSESSED AS UNEXPLAINED EXPENDITURE UNDER THE PROVISIONS OF SECTION 69C OF THE ACT. ACCORDINGLY THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY AO ON TH IS ISSUE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. THE AO PLACED RELIANCE ON THE WRITTEN SUBMISSIONS F URNISHED BEFORE THE LD. CIT(A) WHEREAS THE LD. DR PLACED STRONG RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. WE NOTICE THAT THE ASSESSEE HAS FURNISHED FOLLOWING REPLY IN RESPONSE TO THE REMAND REPORT FURNISHED BY AO: 3.2 IN THIS RESPECT THE APPELLANTS SUBMISSIONS M ADE DURING THE APPEAL PROCEEDINGS ARE AS UNDER : WE ARE IN RECEIPT OF THE REMAND REPORT DATED 21.12 .2012 ON 31.12.2012 1. THE ASSESSEE HAD FILED WRITTEN SUBMISSIONS PAPE R BOOK AND APPLICATION FOR ADDITIONAL EVIDENCE U/R 46A BEFORE YOUR HONOUR THE MATTER WAS REMANDED TO THE AO FOR A REPORT VIDE LETTER DATED 12.9.2012. THE ASSESSEE HAD FILED FURTHER DETAILS BEING LEDGER ACCOUNT OF SUNDRY CREDITORS SUBSEQUENTLY PAID DULY HIGHLIGHTED IN THE BANK STATEMENT IN THE REMAND PROCEEDINGS. 2 . ON PERUSAL OF THE REMAND REPORT IT IS SEEN THA T THE AO IN PARA 6 STATES THAT OUT OF THE 5 PARTIES THREE PARTIES ARE HAWALA OPERATORS. THE AO HOWEVER ACCEPTS THE EXISTENCE OF PARTIES ON ENQU IRY WITH THE BANKS (REFER 9 ON PAGE 4 OF THE REMAND REPORT) 3. THE ASSESSEE RESPECTFULLY SUBMITS THAT : A. THE ASSESSEE IS PROPRIETOR OF M/S GURURAJ METAL S WHICH IS ENGAGED IN THE BUSINESS OF SUPPLY OF FERROUS AND NON-FERROU S METALS TO SMALL SCALE INDUSTRIES. FOR THE RELEVANT PREVIOUS YEAR THE ASS ESSEE HAS DECLARED GP OF 4.48% AND NP OF 1.01% ON TURNOVER OF RS.4 36 53 266/- (PG.1-33 OF THE WRITTEN SUBMISSIONS ) AS COMPARED TO THE SAME THE ASSESSEE HAD IN THE IMMEDIATELY PRECEDING YEAR DECLARED GP OF 4. 36% AND NP OF 1.02% ON THE TURNOVER FOR THAT YEAR. IN THE P/L ACCOUNT THE ASSESSEE HAS CREDITED SALES OF RS.4.36 53 266. THE ASSESSEE HA S DECLARED NET PROFIT OF RS.4.42 515/- FROM HIS PROPRIETARY CONCERN M/S GURURAJ METALS. THE ASSESSEE IS REGISTERED UNDER MVAT AND FILING THE V AT RETURNS REGULARLY. VARIOUS JUDICIAL PRONOUNCEMENTS HAVE BEEN SUBMITTED TO YOUR HONOUR VIDE PAPER BOOK 1 B.. DURING THE COURSES OF ASSESSMENT PROCEEDINGS T HE AO HAD ISSUED NOTICE U/S 133(6) TO 23 PARTIES. OUT OF THE SAME IN CASE OF 5 PARTIES THE NOTICE CAME BACK AS NOT KNOWN. I.T.A. NO.2826/MUM/2013 5 C. THE AO HELD THAT THE AGGREGATE PURCHASE OF RS.1 74 01 436/- ARE BOGUS PURCHASE. THE AO HAS RELIED ON THE COPY OF I NSPECTOR REPORT WHEREIN IT WAS SUBMITTED THAT PARTIES WERE NOT IN E XISTENCE AT THE ADDRESS. D. THE ASSESSEE SUBMITS THAT THE PARTIES CONFIRMAT ION BEAR THEIR PAN NOS. AND INVOICE COPY BEARS THEIR VAT NO. AND ADD RESS. THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. THUS THE ASSESS EE HAD DISCHARGED THE PRIMARY ONUS OF PROOF BY PROVING THE IDENTITY OF PARTY AND GENUINENESS OF THE TRANSACTIONS . E. THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES IN P APER BOOK-II AS UNDER : 1 TIN ALLOTMENT LETTER IN CASE OF MONTEX INDS. 265- 266 2 ACKNOWLEDGMENT OF FILING E RETURNS WITH SALES TAX DEPARTMENT ALONG WITH REGISTRATION UNDER CST IN CASE OF ROHAN STEEL IMPEX. 267-268 3 ACKNOWLEDGMENT OF FILING E RETURNS WITH SALES TAX CHALLANS IN CASE OF MOKSH METAL TUBES 269-270 4 ACKNOWLEDGMENT OF FILING E RETURNS WITH SALES TAX AND CERTIFICATE OF REGISTRATION UNDER CST AND VAT IN CASE OF VIR AJ STEEL ALLOYS 271-272 5 ACKNOWLEDGMENT OF FILING E RETURNS WITH SALES TAX AND CERTIFICATE OF REGISTRATION UNDER CST IN CASE OF SHIVAM METALS 273-275 6 LETTERS FROM RBS BANK FOR CLEARING OF CHEQUES IN NAMES OF 5 PARTIES DATED 6.8.2012 14.8.12 25.6.12 18.7.12 17.7.12 276-303 7 BANK STATEMENT DULY CERTIFYING THE PAYMENTS BEEN MADE TO PARTIES 304 8 CERTIFICATE FROM DEPART OF SALES TAX SHOWING CAN CELLATION OF REGISTRATION BY THE PARTIES 305-309 9 LEDGER ACCOUNT OF HAMALI AND CARTAGE EXP. ALONG WITH VOUCHERS 310-318 F. THE DETAILS OF PURCHASE AND SALES WERE SUBMITTED THUS ONCE THE SALES ARE ACCEPTED THE PURCHASES CANNOT BE DOUBTED. WITHOUT PREJUDICE TO ABOVE ONCE PAYMENT ARE MADE BY ACCOUNT PAYEE CHEQUE S NO DISALLOWANCE COULD BE MADE MERELY BECAUSE PARTIES A RE NOT FOUND. THE ADDITIONAL EVIDENCE PRODUCE IN FORM OF BANK CERTIFI CATE AND E RETURN OF SALES TAX PROVE THE EXISTENCE OF THE PARTIES G. FURTHER PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQ UES. THIS FACT WOULD OVER SHADOW ALL OTHER SHORT COMING A. MATHER & PLATT (INDIA) LTD. VS CIT 168 ITR 493 CAL ASSESSEE MADE PAYMENTS TO ITS TWO COMMISSION AGENT S THROUGH AGENTS THROUGH BANK DRAFT AND ACCOUNT PAYEE CHEQUE RESPECT IVELY. DURING ASSESSMENT PROCEEDINGS SUMMONS U/S 131 WERE ISSUED AFTER FOUR YEARS OF AFOREMENTIONED TRANSACTION TO EACH OF SAID COMM ISSION AGENTS CALLING UPON THEM TO CONFIRM THOSE PAYMENTS- SUMMONS CAME B ACK WITH REMARK NOT KNOWN FROM POSTAL AUTHORITIES-WHETHER TRIBUNA L WAS RIGHT IN HOLDING THAT ASSESSEE HAD FAILED TO DISCHARGES ONUS OF ES TABLISHING IDENTIFICATION OF THESE TWO COMMISSIONS AGENT- HELD NO.. I.T.A. NO.2826/MUM/2013 6 B. ITO V/S KASHMIR IND. PALACE 99 TAXMANN (CHD) (MAG) AO MADE ADDITION OF RS.52 250 TREATING CERTAIN PURC HASE AS BOGUS AS PARTY WAS NOT PRODUCED FOR VERIFICATION-WHETHER SIN CE PAYMENTS WERE MADE THROUGH ACCOUNT-PAYEE CHEQUES AND AMOUNTS HAD GONE INTO ACCOUNT OF PARTY CONCERNED AS DULY CERTIFIED BY BAN K AND ASSESSEE ALSO HAD SURRENDERED RS.50 000/- DURING SURVEY AS EXCES S STOCK. AO COULD NOT TREAT SUCH PURCHASE AS BOGUS HELD YES. C. RAMANAND SAGAR V/S DCIT 256 ITR 134 (BOM) ASSESSEE FILED HIS RETURN AND CLAIMED DEDUCTION OF EXPENSES ON ACCOUNT OF EQUIPMENT HIRE CHARGES PAID TO FIVE DIFFERENT PA RTIES-AO NOT BEING SATISFIED WITH PROOF PRESENTED IN RESPECT OF TWO PA RTIES ND AND VF MADE DISALLOWANCE OF PAYMENTS MADE TO SAID TWO PART IESWHETHER XEROX COPIES OF BILLS AND VOUCHER PRODUCED TO ESTABLISH G ENUINENESS AND REASONABLENESS OF TOTAL PAYMENTS MADE IN FAVOUR O F ND BEING NOT SATISFACTORY DISALLOWANCE OF PAYMENT MADE TO ND WAS JUSTIFIED- HELD YES-WHETHER SINCE CERTIFICATE PRODUCED BY ASSESSEE FROM HIS BANKER ESTABLISHED THAT PAYMENTS WERE MADE TO SAID PARTY VF BY ACCOUNT PAYEE CHEQUES IT OVERSHADOWED ALL OTHER SHORTCOMINGS SOU GHT TO BE POINTED OUT BY AUTHORITIES WHILE DISALLOWING EXPENDITURE INCURR ED BY ASSESSEE AND HENCE DISALLOWANCE OF PAYMENT BY WAY OF HIRE CHAR GES MADE TO VF WAS NOT JUSTIFIED-HELD YES. H. THE ASSESSEE FURTHER SUBMITS THAT THE DETAILS OF TOTAL PURCHASE AND TOTAL SALES QUANTITY WISE AND DATE WISE WAS FURNISH ED BEFORE THE AO. I. IT MAY ALSO NOT BE OUT OF PLACE TO MENTION THAT THE PARTIES ARE FILING E-RETURN OF SALES-TAX AND THE ACKNOWLEDGEMENT ARE P RODUCE. IN VIEW OF THE ABOVE FACTS THE ASSESSEE HAS DISCHA RGED THE ONUS OF PROOF THEREFORE NO ADDITION SHOULD BE MADE . WITHOUT PREJ UDICE TO ABOVE IF AT ALL THE ADDITION CAN BE SUSTAINED THEN IT SHOULD BE AT NET PROFIT RATIO IN RESPECT OF PURCHASE. J. FURTHER ONCE QUANTITATIVE TALLY OF SALES IS FURN ISHED THE SAME SHOULD BE ACCEPTED (PG.78-107 OF THE WRITTEN SUBMISSIONS). IT IS NOT OPEN FOR AO TO DISREGARD THE SAME. A. BABULAL C BORANA V/S ITO 282 ITR 251 (BOM) WHERE THE IDENTITY OF THE PERSONS FROM WHOM GOODS A RE PURCHASES HAS BEEN EXPLAINED PAYMENT ARE MADE BY ACCOUNT PAY EE CHEQUES TRANSACTIONS ARE RECORDED IN BOOKS NO ADD ITION CAN BE MADE. I.T.A. NO.2826/MUM/2013 7 B. ITO V/S SURANA TRADING 92 ITD 212 (MUM)(PARA 98) WHERE A QUANTITATIVE TALLY OF SALES IS FURNISHED E VEN IF PURCHASERS ARE NOT AVAILABLE NO ADDITION COULD BE MADE MERELY ON ASSUMPTIONS OR PRESUMPTIONS OR SURMISES OR CONJECTU RES. C. CIT V/S LEADERS VALVES (P) LTD 206 CTR 463 (P&H) COMMISSIONER (A) DELETED ADDITIONS MADE BY AO ON AC COUNT OF BOGUS PURCHASE FROM SEVEN PARTIES AS ALSO ADDITION IN TRADING ACCOUNT BESIDES ALLOWING TRIPLE SHIFT ALLOWANCE ON MACHINERY ETC- TRIBUNAL CONCURRED WITH ANALYSIS AND CONCLUSION DR AWN BY COMMISSIONER (A) ON APPRECIATION OF MATERIAL ON REC ORD AFTER TAKING NOTICE OF FACT THAT TRADING RESULTS OF ASSES SEE HAD ALL ALONG BEEN ACCEPTED AND PURCHASES OF SCRAP FROM SEVEN PAR TIES COULD ALSO BE NOT TERMED AS BOGUS FOR REASON THAT IN SUB SEQUENT ASSESSMENT YEAR PURCHASE FROM THOSE VERY PARTIES ST OOD ACCEPTED BY DEPARTMENT TO A VERY SUBSTANTIAL EXTENT- TRIBUNA L ALSO TOOK NOTICE OF REVENUES CONTRADICTORY STAND IN AS MUCH AS FIRSTLY SPECIFIC ADDITIONS WERE MADE IN ASSESSMENT ON ACCOU NT OF ALLEGED BOGUS PURCHASE AND THEN ASSESSEES BOOKS WERE REJE CTED ON GROUND THAT THOSE WERE NOT VERIFIABLE BUT ADJUSTM ENT OF BOGUS PURCHASES WAS MADE WHILE WORKING OUT GROSS PROFITS AND THAT TOO ON BASIS OF SALES VERSION IN THOSE VERY BOOKS T HOUGH WITH A SLIGHT MODIFICATION-WHETHER BRIEF CAPITULATION OF FINDING S OF FACTS RETURNED BY TRIBUNAL LED TO AN IRRESISTIBLE CONCLUSION THAT THESE WERE PURE FINDINGS OF FACT GIVING RISE TO NO QUESTION OF LAW- HELD YES. D. RAJESH P SONI V/S ACIT 100 TTJ 892 (AHD) WHERE PURCHASES ARE PROPERLY RECORDED IN BOOKS OF A CCOUNT AND SUPPORTED BY AUTHENTICATED PURCHASES BILLS/ VOUCHES PAYMENTS WERE MADE THROUGH BANKING CHANNEL THE SALES AGAINS T THESE PURCHASES NOT DOUBTED. NO ADDITION CAN BE MADE MERE LY BECAUSE HE SUPPLIERS CANNOT BE LOCATED. E. CIT V/S M K BROTHERS (1987) 163 ITR 249 (GUJ) IN RELEVANT ASSESSMENT YEAR ASSESSEE MADE CERTAIN P URCHASES FROM SOME PARTIES AND MADE PAYMENT THROUGH CHEQUES- ITO FOUND THAT PARTIES WERE NOT AVAILABLE TO CROSS-EXAMINE A ND THAT THROUGH PURCHASES RE CLAIMED TO HAVE BEEN MADE ON CREDIT BA SIS PAYMENTS WERE SHOWN TO HAVE BEEN MADE AFTER SUBSTANTIAL LAPS E OF TIME AFTER DATE OF PURCHASE-ITO HELD THOSE TRANSACTIONS TO BE BOGUS AND ADDED BACK AMOUNT SPENT ON PURCHASE AS INCOME OF A SSESSEE- WHETHER TRIBUNAL WAS JUSTIFIED IN DELETING AFORESA ID ADDITION TO INCOME OF ASSESSEE ON GROUND THAT THERE WAS NOT EV IDENCE TO SHOW THAT VOUCHERS GIVEN BY THOSE PARTIES TO ASSESS EE WERE BOGUS OR THAT ANY PART OF THOSE PAYMENTS CAME BACK TO AS SESSEE-HELD YES. I.T.A. NO.2826/MUM/2013 8 K. IN THE REMAND REPORT THE LD.AO HAS MENTIONED TH AT NOTICES U/S 133(6) WERE ISSUED TO BANK OF BARODA V P ROAD BR ANCH AND ABN AMRO FORT BRANCH. IN RESPONSE TO THE SAID NOTICES BANK OF BARODA HA D PROVIDED THE DETAILS OF FOUR PARTIES I.E. M/S MONTEX INDUSTRIES M/S VI RAJ STEEL AND ALLOYS M/S SHIVAM METAL INDUSTRIES AND M/S ROHAN STEEL IMPEX SINCE THESE PARTIERS WERE HAVING ACCOUNT WITH THE SAID BANK. THE LD. AO HAS ALSO MENTIONED THAT THE BANK STATE MENTS OF THE ABOVE PARTIES PROVIDED BY THE BANK OF BARODA SHOULD THAT THERE WAS AN IMMEDIATE CASH WITHDRAWAL AGAINST THE CHEQUE DEPOSI TS. YOUR HONOURS ATTENTION IS DRAWN TO THE FACT THAT BANK OF BAROD A HAD PROVIDED THE NECESSARY DETAILS OF THE FOUR PARTIES WITH RESPECT TO THE DATE OF OPENING ACCOUNT NUMBERS BANK STATEMENTS ETC. THE EXISTENC E OF THESE PARTIES IS THUS JUSTIFIED BY AN EXTERNAL INDIRECT CONFIRMATION OBTAINED BY THE LD. AO. SINCE THE BANKS HAVE MANDATED THE KYC DOCUMENTS T HE EXISTENCE OF THESE PARTIES CANNOT BE RULES OUT MERELY ON THE RE PORT OF THE INSPECTOR . THE ASSESSEE CANNOT BE PENALIZED IF THE OTHER PARTY ENTERS IN ANY DUBIOUS TRANSITIONS. THE ASSESSEE AS A PURCHASE IS CONCERN ED WITH THE GOODS AND THE ONLY OBLIGATION REMAINS IS TO MAKE THE PAYM ENT. SINCE THE ASSESSEE DOES NOT HAVE TO RECOVER MONEY FROM THESE PARTIES HENCE HE IS NOT REQUIRED TO CONFIRM ON THEIR CREDITWORTHINESS. MOREOVER THE ASSESSEE CANNOT SIT OVER AND INVESTIGATE THE GENUINENESS OF THE PARTY OR THEIR BUSINESS TRISACTION. THE ASSESSEE AS A BUSINESS MAN TAKEN DUE CARE IN GETTING NECESSARY DETAILS WHICH WERE PRODUCED BEFOR E YOUR HOUR AS WELL AS THE AO DURING ASSESSMENT AS WELL AS REMAND PR OCEEDINGS. L. AS REGARD ATTRACTION OF PROVISION OF SECTION 40 !(3) IS CONCERNED IT IS APPLICABLE TO CASH PAYMENTS. THE SAID SECTION STAT ES AS UNDER : WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH PAYMENT OR AGGREGATE OF PAYMENT MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR AN ACCOUNT PAYEE BANK DRAFTS EXCEEDS TWENTY THOUSAND RUPEES NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE IN THE FACTS OF THE PRESENT CASE THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAS SUBMITTED THE LETT ERS FROM RBS BANK FOR CLEARING OF CHEQUES IN NAMES OF 5 PARTIES. THU S MERELY ON PRESUMPTIONS AND ASSUMPTIONS THE PROVISIONS OF SEC TION 40A(3) CANNOT BE INVOKED. MERELY BECAUSE THE PARTIES ARE NOT TRA CEABLE THE ASSESSEE CANNOT BE PENALIZED FOR THE SAME. M. AS REGARD INVOKING THE PROVISIONS OF SECTION 69C IS CONCERNED THE SAID SECTION REDS AS UNDER : WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURR ED ANY EXPENDITURE AND OFFERS NO EXPLANATION IF ANY OFFERED BY HIM I S NOT IN THE OPINION OF THE I.T.A. NO.2826/MUM/2013 9 AO SATISFACTORY THE AMOUNT COVERED BY SUCH EXPEND ITURE OR PART THEREOF AS THE CASE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR] [PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOWED AS A D EDUCTION UNDER ANY HEAD OF INCOME] THE ASSESSEE HAS GIVEN EXPLANATION AND ALSO PROVIDE D SUFFUIIENT EVIDENCE IN SUPPORT OF ITS CLAIM. THE ASSESSEE HAS NOT ONLY PROVED THE PURCHASE BUT THE CORRESPONDING SALES ALSO. THE PRIMARY ONUS OF PROOF HAS BEEN DISCHARGED BY THE ASSESSEE. MERELY ON PROHIBITING THE PROVISION OF SECTION 69 CANNOT BE INVOKED. N. IT IS SUBMITTED THAT UNDER IT ACT THERE IS NO SC OPE FOR ASSUMPTION AND PRESUMPTIONS NOR ANYTHING CAN BE IMPLIED. ADDI TION CANNOT BE SUSTAINED ON THE BASIS OF PREPONDERANCE OF PROBABIL ITIES. SUSPICION HOWEVER STRONG IT MAY BE CANNOT FORM BASIS OF ADDIT ION. ADDITION CANNOT BE MADE MERELY ON SUSPICION SURMISES AND CONJECTURE S IN THE HANDS OF THE ASSESSEE. 7. A PERUSAL OF THE ORDERS PASSED BY THE TAX AU THORITIES WOULD SHOW THAT THEY HAVE SUSPECTED THE GENUINENESS OF THE PURCHASES ONL Y FOR THE REASON THAT THE ABOVE SAID FIVE PARTIES WERE NOT AVAILABLE IN THE G IVEN ADDRESSES. IT IS PERTINENT TO NOTE THAT THE AO HIMSELF DURING THE COURSE OF R EMAND PROCEEDINGS HAVE OBTAINED THE BANK STATEMENTS OF THE ABOVE SAID FIVE PARTIES. IT IS IN THE COMMON KNOWLEDGE OF EVERYBODY THAT THE BANK ACCOUNT NOW A DAYS COULD BE OPENED ONLY ON SUBMISSION OF PROPER DOCUMENTS. FURTHER TH E ASSESSEE HAS FURNISHED THE SALES TAX DOCUMENTS OF THE ABOVE SAID FIVE PART IES AND ALSO THEIR INCOME TAX DETAILS TO PROVE THEIR EXISTENCE. THUS IT IS SEE N THAT THE ASSESSEE HAS FURNISHED MANY DOCUMENTS TO PROVE THE EXISTENCE OF THE PARTIE S AND THEY HAVE NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER. 8. BE THAT AS IT MAY ANOTHER IMPORTANT FACTOR THE BANK ACCOUNT COPIES COLLECTED BY THE ASSESSING OFFICER SHOWS THAT THE A SSESSEE HAD MADE THE PAYMENTS TO THE ABOVE SAID PARTIES BY WAY OF ACCOUN T PAYEE CHEQUES. THUS IT IS SEEN THAT THE TRANSACTIONS HAVE BEEN ROUTED THROUGH THE BANK ACCOUNTS. FURTHER IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT TH E ASSESSEE HAS INDULGED IN ACCOUNTING OF BOGUS PURCHASES. WHEN THE ASSESSEE S UBMITTED THAT HE COULD NOT HAVE EFFECTED THE SALES WITHOUT MAKING CORRESPONDIN G PURCHASES THE AO HAS TAKEN THE VIEW THAT THE ASSESSEE COULD HAVE EFFECTE D PURCHASES IN THE GREY I.T.A. NO.2826/MUM/2013 10 MARKET WHICH CONCLUSION IS IN FACT NOT SUPPORTED BY ANY MATERIAL. UNDER THIS IMPRESSION ONLY THE AO HAS FURTHER EXPRESSED THE V IEW THAT THE ASSESSEE WOULD HAVE PURCHASED THE MATERIALS BY PAYING CASH THUS VI OLATING THE PROVISIONS OF SEC. 40A(3) OF THE ACT WHICH IS AGAIN BASED ON ONLY SUR MISES. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT THE SAID VIEW WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN BY THE TAX AUTHORITIES THAT THE PURCHASES AMOUNT IS LI ABLE TO BE DISALLOWED U/S 40A(3) OF THE ACT. ON THE SAME IMPRESSION ONLY THE AO HA S EXPRESSED THE VIEW IN THE REMAND REPORT THAT THE PURCHASES AMOUNT IS ALSO LIA BLE TO ASSESSED U/S 69C OF THE ACT AS THE SOURCE OF PURCHASES WERE NOT PROVED. AGAIN THE SAID CONCLUSION IS BASED UPON ONLY SURMISES WHICH COULD NOT BE SUS TAINED. THUS IT IS SEEN THAT THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT TH E QUANTITY DETAILS OF PURCHASES AND SALES HAVE BEEN RECONCILED BY THE ASSESSEE. FU RTHER VARIOUS CASE LAW RELIED UPON BY THE ASSESSEE ALSO SUPPORTS HIS CASE. UNDER THESE SET OF FACTS WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIE D IN CONFIRMING THE DISALLOWANCE OF PURCHASES. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF PURCHAS ES. 9. THE NEXT GROUND RELATES TO THE DISALLOWANCE OF DONATION EXPENSES OF RS.3 351/- WHICH WAS CLAIMED TO HAVE BEEN PAID FOR GANPATI MANDAL POOJA. THE LD CIT(A) HAS CONFIRMED THE DISALLOWANCE ON THE REA SONING THAT THE SAID PAYMENT IS NOT RELATED TO THE CARRYING ON OF THE BU SINESS. WE AGREE WITH THE SAID REASONING AND ACCORDINGLY UPHOLD THE ORDER OF LD CI T(A) ON THIS ISSUE. 10. THE NEXT GROUND RELATES TO THE DISALLOWANCE OF RS.16 472/- OUT OF TELEPHONE EXPENSES. ON NOTICING THAT THE TELEPHONE DID NOT BELONG TO THE ASSESSEE AND IT BELONGED TO A RELATIVE NAMED SHRI M AHENDRA SANGHVI THE AO DISALLOWED THE ABOVE SAID AMOUNT ON THE REASONING T HAT THE ASSESSEE COULD NOT PROVE THE USAGE OF TELEPHONE BELONGING TO AN OUTSID ER. THE LD CIT(A) CONFIRMED THE SAID DISALLOWANCE SINCE THE ASSESSEE COULD NOT FURNISH PROPER EXPLANATIONS. BEFORE US ALSO THE ASSESSEE DID NOT FURNISH ANY CO NVINCING EXPLANATION OR THE LETTER OBTAINED FROM SHRI MAHENDRA SANGHVI REGARDIN G THE USAGE OF TELEPHONE. HENCE WE HAVE NO OTHER OPTION BUT TO CONFIRM THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. I.T.A. NO.2826/MUM/2013 11 11. THE LAST ISSUE RELATES TO THE DISALLOWANCE OF 20% OF THE AMOUNT CLAIMED UNDER THE HEAD HAMALI AND CARTAGE CHARGES ON THE REASONING THAT THE SAID EXPENSES INCURRED ENTIRELY ON CASH PAYMENT AND FURT HER THEY WERE NOT SUPPORTED BY ANY EVIDENCE. EVEN THOUGH THE ASSESSEE FURNISH ED CERTAIN VOUCHERS BEFORE LD CIT(A) IN THE FORM OF ADDITIONAL EVIDENCE THE F IRST APPELLATE AUTHORITY NOTICED THAT THEY WERE DEFICIENT ON MANY RESPECTS. HENCE HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. BEFORE US NO FRESH E VIDENCE OR ARGUMENTS WERE ADVANCES IN ORDER TO COMPEL US TO INTERFERE WITH TH E DECISION TAKEN BY LD CIT(A) ON THIS ISSUE. ACCORDINGLY WE CONFIRM THE ORDER O F LD CIT(A) ON THIS ISSUE ALSO. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 TH NOV 2014. *+ -. 5 TH NOV 2014 + ' /( 0 SD SD ( / AMIT SHUKLA) ( . . / B.R. BASKARAN) 1 / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( MUMBAI: 5 TH NOV 2014. . . ./ SRL SR. PS !'# $#%! / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 23/ #4 ) 4 ( / DR ITAT MUMBAI CONCERNED 6. /5 6( / GUARD FILE. / BY ORDER TRUE COPY 7 (ASSTT. REGISTRAR) ) 4 ( /ITAT MUMBAI