ITO 25(2)(4), MUMBAI v. RATILAL V. SANGANI, MUMBAI

ITA 5983/MUM/2009 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 598319914 RSA 2009
Assessee PAN AABPS7779P
Bench Mumbai
Appeal Number ITA 5983/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 18 day(s)
Appellant ITO 25(2)(4), MUMBAI
Respondent RATILAL V. SANGANI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 29-07-2011
Date Of Final Hearing 03-05-2011
Next Hearing Date 03-05-2011
Assessment Year 2006-2007
Appeal Filed On 11-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D : MUMBAI BEFORE SHRI R.V. EASWAR (PRESIDENT) AND SHRI RAJENDRA SINGH (ACCOUNTANT MEMBER) ITA NO.5983/MUM/2009 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER WARD 25(2)(4) C-11 BUILDING ROOM NO.103 P.K. BHAVAN BKC BANDRA (E) MUMBAI-400 051. ..( APPELLANT ) VS. SHRI RATILAL V. SANGANI 303 VISHAL APARTMENT KAPADIA COMPLEX TPS-III 56 TH ROAD BORIVALI(W) MUMBAI-400 092. ..( RESPONDENT ) P.A. NO. (AABPS 7779 P) APPELLANT BY : SHRI C.G.K. NAIR RESPONDENT BY : SHRI R AJESH B. GUPTE O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORD ER DATED 19/8/2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. T HE REVENUE IN THIS APPEAL HAS RAISED DISPUTES ON TWO GROUNDS. 2. THE FIST DISPUTE IS REGARDING ADDITION OF RS.22.00 LACS ON ACCOUNT OF BOGUS PURCHASES UNDER SECTION 41(1) OF THE INCOME TAX A CT. THE ASSESSING OFFICER ON EXAMINATION OF SUNDRY CREDITORS NOTED THAT THE SUNDRY CREDITORS INCLUDED OUTSTANDING OF RS.22.00 LACS IN THE NAME OF ITA NO.5983/M/09 A.Y:06-07 2 SHRI SANJAY. ON BEING ASKED TO FILE THE CONFIRMATION ASSESSEE SUBMITTED THAT THE NAME OF SHRI SANJAY WAS WRONGLY WR ITTEN AND LIABILITY OF RS.22 LACS WAS ON ACCOUNT OF 3 PARTIES I.E. I ) NEELAM ENTERPRISES RS. 7 96 172 II) FORAM TRADERS RS.8 50 928 & III) V.S.K ENTERPRISES RS.5 52 900/-. ON VERIFICATION OF BILLS FUR NISHED THE ASSESSING OFFICER OBSERVED THAT ADDRESSES OF THREE CONCERNS WER E THE SAME AND SIGNATURE ON THE BILLS WAS OF THE SAME PERSON I.E. N.T. RUPARAL . FURTHER IN THE BILLS QUANTITY RATE AND D ESCRIPTION OF ITEMS AS WELL AS DATES WERE NOT MENTIONED. THE ASSESSING OFFICER T HEREFORE DID NOT ACCEPT THE EXPLANATION GIVEN AND HELD THAT TH E LIABILITY OF RS. 22 LACS SHOWN IN THE NAME OF MR.SANJAY WAS NOT EXISTIN G AND THEREFORE HE ADDED THE SAME AS CEASED LIABILITY UNDE R SECTION 41(1) OF THE ACT. 2.1 THE ASSESSEE DISPUTED THE DECISION OF THE ASSESSING OFFICE R AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE HAD PURCHASED CHE MICALS FROM ABOVE THREE PARTIES THROUGH BROKER MR. SANJAY A ND THE ASSESSEE HAD SUBMITTED THE PURCHASE BILLS AND THE CONFIRMATION OF THE PARTIES GIVING ADDRESSES AND PAN. THE ASSESSING OFFICER WITHOUT MA KING ANY VERIFICATION CONCLUDED THAT THE PURCHASES WERE NOT GENUIN E. IT WAS FURTHER SUBMITTED THAT THE THREE CONCERNS WERE PROPRIET ARY CONCERNS OF DIFFERENT MEMBERS OF THE SAME FAMILY WHICH WAS THE REASO N FOR ITA NO.5983/M/09 A.Y:06-07 3 ADDRESSES BEING SAME AND THE DATES WERE CLEARLY MENTIONE D IN THE BILLS. ASSESSEE ALSO ARGUED THAT IN CASE ASSESSING OFFICER HAD ANY DOUBT THE ASSESSING OFFICER COULD HAVE CALLED FOR STOCK REG ISTER AND VERIFIED THE VAT RETURN OF THE PERSONS WHICH WAS NOT D ONE. THE CIT(A) ON EXAMINATION OF RECORDS FOUND THAT COPY OF PURCHASE B ILLS HAD BEEN FILED BY THE ASSESSEE ALONG WITH CONFIRMATIONS CONTAI NING PAN. THE PURCHASE BILLS WITH NAME ADDRESSES INVOICE NUMBERS A ND QUANTITY AND DESCRIPTION OF MATERIAL WERE FILED BEFOR E ASSESSING OFFICER WHICH WAS AVAILABLE ON RECORD. FURTHER THE ASSESSING OFFI CER WAS NOT CORRECT IN STATING THAT ALL BILLS WERE SIGNED BY THE SAME PERSON. THE BILLS IN CASE OF NEELAM ENTERPRISES AND VSK ENTERPRISES WE RE SIGNED BY T.A. RUPAREL IN THE CAPACITY OF KARTA OF HUF AND INDIV IDUAL RESPECTIVELY AND THEREFORE BOTH WERE SIGNED BY THE SAME PERSON BU T IN CASE OF FORAM TRADERS BILLS HAD BEEN SIGNED BY N.T.RUPARAL. A S THE ASSESSEE HAD GIVEN DETAILS AND ALSO FILED CONFIRMATIONS ADDITION COULD NOT BE MADE ONLY ON THE GROUND THAT NAME OF THE BROKER WA S SHOWN IN THE LIST OF SUNDRY CREDITORS. THE ACCOUNTANT MAY BE UNDER TH E IMPRESSION THAT MR.SANJAY WAS RESPONSIBLE FOR PURCHASE OF GOODS AND THEREFORE HE MAY HAVE ENTERED HIS NAME AGAINST THE OUTSTANDING BALANCE. MOREOVER ASSESSING OFFICER ALSO BROUGHT NO MATERIAL ON RE CORD TO SHOW THAT THE LIABILITY HAD CEASED AND THEREFORE NO ADDI TION CAN BE MADE. ITA NO.5983/M/09 A.Y:06-07 4 THE CIT(A) ACCORDINGLY DELETED THE ADDITION MADE BY ASSESSING OFFICER AGGRIEVED BY WHICH REVENUE IS IN APPEAL. 2.2 BEFORE US THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND ARGUED THAT TH E ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION WITHOUT CARRYING OUT ANY VERIFICATION OF THE DETAILS GIVEN BY THE ASSESSEE. IT W AS ALSO SUBMITTED THAT THE AMOUNTS OUTSTANDING HAD BEEN PAID IN THE SUBSEQUENT YEAR. THE LD. D.R ON THE OTHER HAND SUPPOR TED THE ORDER OF ASSESSING OFFICER AND PLACED RELIANCE ON THE FINDINGS G IVEN IN THE ASSESSMENT ORDER. 2.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITI ON MADE UNDER SECTION 41(1) ON ACCOUNT OF OUTSTANDING CREDITS OF RS.22 LA CS SHOWN IN THE NAME OF MR. SANJAY. THE ASSESSEE EXPLAINED THAT MR . SANJAY WAS NAME OF THE BROKER THROUGH WHOM PURCHASES WERE MADE A ND ASSESSEE GAVE DETAILS OF THREE CREDITORS FROM WHICH THE PURCHASES A CTUALLY HAD BEEN MADE ALONG WITH NAMES AND ADDRESSES. THE CIT(A) ON VERIFICATION OF RECORDS HAS GIVEN A CLEAR FINDING THA T THE ASSESSEE HAD ALSO FILED CONFIRMATIONS FROM THE CREDITORS WITH PA NUMB ERS AND THAT THE PURCHASE BILLS GAVE WITH COMPLETE DETAILS OF ADDRESSE S INVOICE NUMBERS QUANTITY PURCHASED AND DESCRIPTION OF MATERIAL . THESE ITA NO.5983/M/09 A.Y:06-07 5 FINDINGS HAD NOT BEEN CONTROVERTED BEFORE US BY THE L D. D.R. EVEN THE ASSESSING OFFICER HAD NOT GIVEN ANY FINDING THAT CONFIRMA TIONS ETC. WERE NOT FILED. HE HAS DISPUTED THE GENUINENESS OF PURCH ASES FROM THREE PARTIES ONLY ON THE GROUND THAT THE ADDRESSES WER E THE SAME AND BILLS HAVE BEEN SIGNED BY THE SAME PERSONS AND DETAI LS OF QUANTITY ETC. WERE NOT GIVEN WHICH IS FOUND TO BE NOT CORRECT AS P ER UNCONTROVERTED FINDING GIVEN BY THE CIT(A). SINCE PU RCHASES HAD BEEN MADE THROUGH A BROKER MR. SANJAY IT IS POSSIBLE THAT THE NAME OF MR. SANJAY WAS MENTIONED BY THE ACCOUNTANT UNDER THE IMPRE SSION THAT HE WAS ACCOUNTABLE FOR THE PURCHASES. HOWEVER FULL DETAI LS OF THE PARTIES AND PURCHASES WERE GIVEN BEFORE ASSESSING OFFICER W HO WITHOUT MAKING ANY ENQUIRY OR VERIFICATION HELD THEM TO BE NON-GENUINE WHICH ON THE FACTS OF THE CASE AS MENTIONED ABOVE IS NOT JUSTIFIED. MOREOVER NO MATERIAL HAS BEEN PLACED ON RECORD BY ASSE SSING OFFICER THAT THE LIABILITY HAD CEASED TO EXIST DURING THE YEAR . UNDER THESE CIRCUMSTANCES DELETION OF ADDITION BY CIT(A) IS FOUND TO BE IN ORDER. WE ACCORDINGLY UPHOLD THE ORDER OF CIT(A). 3. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.11 88 780/- ON ACCOUNT OF COMMISSION PAID TO M/S. EZIMPEX PVT. LTD. TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE GAVE NO DETAILS OF SERV ICES RENDERED AND THE GENUINENESS OF TRANSACTION WAS ALSO NOT PROVED. THE ITA NO.5983/M/09 A.Y:06-07 6 ASSESSING OFFICER ALSO OBSERVED THAT NO TAX HAD BEEN DEDUCT ED AT SOURCE IN RESPECT OF COMMISSION AND THEREFORE CLAIM WAS NO T ALLOWABLE AS DEDUCTION UNDER SECTION 40(A)(IA) OF THE ACT ON THIS G ROUND ALSO. THE ASSESSING OFFICER THEREFORE DISALLOWED THE SUM OF R S.11 88 780/- AND ADDED TO THE TOTAL INCOME. THE ASSESSEE DISPUTED TH E DECISION OF ASSESSING OFFICER AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE WAS SELLING LABORATORY CHEMICALS AND GOODS WERE PURCHASED AN D SOLD THROUGH BROKERS. IT WAS ALSO SUBMITTED THAT TAX HAD BEEN DEDUCTED AT SOURCE AND TDS RECEIPT WAS ALSO FILED ON 26/12/2008. AS REGARDS NATURE OF SERVICE RENDERED IT WAS SUBMITTED THAT THE ASSESSING OFFICER NEVER REQUIRED THE ASSESSEE TO EXPLAIN THE SAME. THE CIT(A) ON EXAMINATION OF RECORDS OBSERVED THAT THE ASSESSEE IN RE SPONSE TO QUERY BY THE ASSESSING OFFICER HAD GIVEN DETAILS OF PAY MENT TO THE BROKERS GIVEN CHEQUE NUMBER AND DATE AND IT WAS ALSO MENTIONED THAT SUM OF RS.51 000/- HAD BEEN PAID AS TDS ON 29/3 /2006. FULL DETAILS OF PAYMENTS ON ACCOUNT OF COMMISSION WERE ALSO GIV EN. IT WAS THUS NOT CORRECT THAT THE ASSESSEE HAD NOT DEDUCTED TAX. T HE CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER HAD NOT ASKED FOR NATURE OF SERVICES RENDERED AND THEREFORE ASSESSEE COULD NOT GIVE T HE SAME. IT WAS ALSO OBSERVED BY HIM THAT SINCE ASSESSEE WAS SELLING LABO RATORY CHEMICALS THE TRANSACTIONS HAVE TO BE DONE THROUGH SO ME KNOWN ITA NO.5983/M/09 A.Y:06-07 7 PEOPLE. HE THEREFORE HELD THAT THE ADDITION WAS NO T JUSTIFIED. AGGRIEVED BY THE SAID DECISION REVENUE IS IN APPEAL. 3.1 BEFORE US THE LD. A.R FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUPPORTED THE O RDER OF CIT(A) WHEREAS THE LD. D.R PLACED RELIANCE ON THE ORDER OF ASSE SSING OFFICER. 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.11 88 780/- ON ACCOUNT OF DISALLOWANCE OF COMMISSION PA ID TO M/S. EZIMPEX PVT. LTD. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS O F TRANSACTION AND ALSO GAVE NO DETAILS OF SERVICES RENDERE D. AS PER ASSESSING OFFICER TAX HAD ALSO NOT BEEN DEDUCTED AT SOURCE. THE CIT(A) HAS MENTIONED THAT THE ASSESSEE VIDE LETTER DAT ED 26/12/2008 HAD GIVEN THE FULL DETAILS OF COMMISSION WHICH HAD BE EN PAID BY CHEQUE AND ALSO GAVE DETAILS OF TAX DEDUCTED AT SOURCE OF RS.51 000/-. THE CIT(A) ALSO OBSERVED THAT THE ASSESSEE WAS IN THE BUSI NESS OF SELLING LABORATORY CHEMICALS WHICH CAN BE DONE ONLY THROU GH KNOWN PEOPLE. HE THEREFORE ACCEPTED THE GENUINENESS OF TRANSA CTION THOUGH THERE WAS NO EVIDENCE OF SERVICES RENDERED NOR ANY CONFIR MATION HAD BEEN FILED FOR THE COMMISSION CHARGED. THE CIT(A) HIM SELF MENTIONED ITA NO.5983/M/09 A.Y:06-07 8 THAT ASSESSING OFFICER HAD CALLED FOR CONFIRMATION WITH PA NUMBER BUT THE ORDER OF CIT(A) NOWHERE MENTIONS THAT THE ASSESSEE F ILED CONFIRMATION. FURTHER EVEN IF THE ASSESSING OFFICER DID NOT CALL FOR THE DETAILS OF SERVICES RENDERED CIT(A) WAS REQUIRED TO LOOK INTO THIS ASPECT AS AO HAD GIVEN A CLEAR FINDING THAT DETAILS OF SE RVICES RENDERED WERE NOT AVAILABLE. FURTHER CIT(A) WAS NOT JUSTIFIE D IN ASSUMING THAT SALES HAVE TO BE THOUGH SOME BROKER ONLY. IT IS A SETTLE D LEGAL POSITION THAT THE BURDEN IS ON THE ASSESSEE TO PROVE THAT THE SERV ICES HAVE BEEN RENDERED AND THAT MERE PAYMENT BY CHEQUE IS NOT ENOUGH. IN OUR VIEW THE MATTER REQUIRES FURTHER VERIFICATION BEF ORE REACHING ANY CONCLUSION. WE THEREFORE SET ASIDE THE ORDER OF CIT(A ) AND RESTORE THE MATTER TO ASSESSING OFFICER FOR PASSING A FRESH ORDER A ND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011. SD/- SD/- (R.V. EASWAR) (RAJENDRA SINGH ) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 29.7.2011. JV. ITA NO.5983/M/09 A.Y:06-07 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.