ITO Wd. - 23(3) (2), MUMBAI v. Sri. RAM H. PUNJWANI, MUMBAI

I.T.A NO.3973/ MUM/2005 SHRI RAM H PUNJWANI 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI [BEFORE SHRI D MANMOHAN VP AND SHRI PRAMOD KUMAR A M] ITA NO.: 3973/MUM/05 ASSESSMENT YEAR: 2001-02 INCOME TAX OFFICER WARD 3(3)(2) MUMBAI .. APPELLANT VS. RAM H PUNJWANI .. RESPONDENT FLAT NO. 401 4 TH FLOOR MOONLIGHT APARTMENT GODAVARI NAGAR ULHASNAGAR 421 003 PAN : AAAHR5370N APPEARANCES: H G SINGH FOR THE APPELLANT AJEET MANWANI FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. IT IS A RECALLED MATTER AND BY WAY OF THIS APPEA L THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S OR DER DATED 14 TH FEBRUARY 2005 FOR THE ASSESSMENT YEAR 2000-01. 2. IN GROUND NO. 1 THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED COMMISSIONER (APPEALS) ERRED IN DELETING TH E ADDITION OF RS 3 60 000 MADE ON ACCOUNT OF CAPITAL INTRODUCED BY THE ASSESSEE. I.T.A NO.3973/ MUM/2005 SHRI RAM H PUNJWANI 3 RESPOND TO THE SUMMONS ISSUED BY THE ASSESSING OFFI CER. IN APPEAL CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT ONCE IT IS HELD THAT SALES BY WAY OF EXPORTS HAD TAKEN PLACE IT CANNOT BE DENIED THAT C ERTAIN EXPENSES WAY OF JOB CHARGES AND PURCHASE OF RAW MATERIAL ETC WERE BOU ND TO HAVE BEEN INCURRED AND THAT DISALLOWANCE OF THE ENTIRE AMO UNT OF PURCHASES AND JOB CHARGES PAID DURING THE YEAR AS BOGUS EXPENSES IS N OT ACCEPTABLE. HE THUS DELETED THE DISALLOWANCE FOR THE ENTIRE EXPENSES DI SALLOWED THOUGH MADE AN ADDITION OF RS 11 76 867 THUS EFFECTIVELY RESTRIC TING THE DISALLOWANCE TO THIS FIGURE AS EXPENDITURE INCURRED TO ARRANGE THE BOGU S BILLS BY OBSERVING AS FOLLOWS: 27. IT IS HOWEVER A FACT THAT THE APPELLANT HAS N OT BEEN ABLE TO SUPPORT ITS CLAIM OF PURCHASE AND JOB CHARGES BY PR ODUCING PARTIES BEFORE THE AO FOR VERIFICATION. THE ONLY PLAUSIBLE EXPLANATION COULD BE THAT THE EXPENDITURE WAS EITHER INFLATED OR PURC HASES AND JOB WORK PAYMENTS WERE MADE TO/FROM PARTIES OTHER THAN THE PERSONS WHOSE NAMES FIGURED IN THE BOOKS OF ACCOUNT. IT IS A COMMON PRACTICE FOR THE PERSONS IN THE GARMENT BUSINESS TO MAKE PURCHASES IN CASH FROM THE MARKET AND PROCURE ACCOM MODATION BILLS FROM OTHER PARTIES FOR THE PURPOSE OF MAKING ENTRIES IN THE BOOKS OF ACCOUNT. IT HAS BEEN SEEN IN OTHER CASES THAT MOST OF THE SMALL TRADERS AND LOOM OWNERS AND TAILORS ARE AVERS E TO ISSUING BILLS PREFERRING TO TRANSACT BUSINESS IN CASH. THE EXPORTERS HAVE NO OPTION BUT GET BOGUS BILLS ISSUED FROM OTHER PERSON S BY PAYING SOME COMMISSION. THE COMMISSION PAID RANGES FROM 6 % TO 10%. THE APPELLANT COULD NOT OBTAIN BILLS WITHOUT PAYING COMMISSION. THERE IS HOWEVER NO DEBIT TOWARDS COMMISSION PAYME NT WHICH HAS CERTAINLY BEE MADE OUT OF UNACCOUNTED CASH. THE CO MMISSION HAS BEEN PAID BY THE APPELLANT OUT OF UNACCOUNTED MONEY WHICH IS NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. THE UNACCOUNTE D INCOME CANNOT BE TREATED AS BUSINESS INCOME IN THE ABSENCE OF ANY EXPLANATION FROM THE APPELLANT THAT THE INCOME WAS DERIVED FROM THE BUSINESS ACTIVITY. 28. IT IS HELD THAT COMMISSION AMOUNTING TO 8% OF T HE TOTAL PURPOSES AND LABOUR CHARGES DURING THE YEAR AMOUNTI NG TO ` `` ` .1 47 10 842 HAS BEEN PAID OUT OF UNACCOUNTED INCOM E. THE UNEXPLAINED INCOME WOULD BE ASSESSABLE UNDER THE RE SIDUARY HEAD OF INCOME FROM OTHER SOURCES. THE AMOUNT OF SUCH I NCOME IS WORKED OUT AS ` `` ` .11 76 867. THE AO IS DIRECTED TO ASSESS THE ABOVE INCOME UNDER THE HEAD OTHER SOURCES I.T.A NO.3973/ MUM/2005 SHRI RAM H PUNJWANI 5 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONR CONCERNED MUMBAI 4. COMMISSIONER (APPEALS)-XXIII MUMBAI 5. DEPARTMENTAL REPRESENTATIVE B BENCH MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI