M/s MGM Tradelink Pvt. Ltd.,, GANDHIDHAM v. The Assistant Commissioner of Income Tax, Gandhidham Circle,, GANDHIDHAM

ITA 622/RJT/2010 | 2004-2005
Pronouncement Date: 31-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 62224914 RSA 2010
Assessee PAN AADCM6466A
Bench Rajkot
Appeal Number ITA 622/RJT/2010
Duration Of Justice 3 year(s) 6 month(s) 10 day(s)
Appellant M/s MGM Tradelink Pvt. Ltd.,, GANDHIDHAM
Respondent The Assistant Commissioner of Income Tax, Gandhidham Circle,, GANDHIDHAM
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 31-07-2013
Date Of Final Hearing 08-07-2013
Next Hearing Date 08-07-2013
Assessment Year 2004-2005
Appeal Filed On 20-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA JM AND SHRI D K SRIVASTAVA AM ITA NO. 622 /RJ T/201 0 ASSESSMENT YEAR : 200 4 - 200 5 M/S MGM TRADELINK PVT LTD PLOT NO. 46 SECTOR - 1A GANDHIDHAM PAN: AADCM 6466 A V. ACIT GA NDHIDHAM CIRCLE GANDHIDHAM DATE OF HEARING : 08 .0 7 .2013 DATE OF PRONOUNCEMENT : 31 .0 7 .2013 ASSESSEE BY : SHRI VIMAL DESAI CA REVENUE BY : SHRI AVINASH KUMAR DR ORDER D. K. SRIVASTAVA : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST T HE ORDER PASSED BY THE CIT(A) - II RAJKOT ON 30 . 11 .2 0 0 9 . THE ASSESSEE IS A CLOSELY HELD COMPANY. IT IS ENGAGED IN THE BUSINESS OF EXPORT AND IMPORT OF VARIOUS ITEMS OF FOOD GRAINS. IT FILED ITS RETURN OF INCOME FOR THE A SSESSMENT Y EAR UNDER APPEAL ON 09.06.2005 RETURNING TOTAL INCOME AT RS.21 06 990/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT ON 23.01.2006. ORDER OF ASSESSMENT U/S 143(3) WAS PASSED BY THE ASSESSING OFFICER ON 29.03.2007 WHICH ON APPEAL WAS ANNULLED BY THE LD . CIT(A) ON THE TECHNICA L GROUND THAT THE ASSESSMENT WAS BARRED BY LIMITATION AS IT WAS MADE AFTER THE EXPIRY OF PERIOD OF LIMITATION. THE ASSESSING OFFICER THEREAFTER PROCEEDED TO INITIATE THE PROCEEDINGS U/S 147/148 OF THE INCOME - TAX ACT AND ACCORDINGLY ISSUED A NOTICE ON 13.03 .2 0 08 AFTER RECORDING THE FOLLOWING REASONS: - 2. IN THIS CASE SCRUTINY ASSESSMENT U/S 143(3) WAS PASSED ON 29.03.2007. FURTHER THERE IS A DIFFERENCE OF OPINION REGARDING THE TIME LIMI TATION TO COMPLETE THE ASSESSMENT PROCEEDINGS. AS PER THE A.O.S OPINI ON THE DATE TO FINALISE THE ASSESSMENT PROCEEDINGS WAS 31.03.2007. HOWEVER ACCORDING TO THE ASSESSEES STAND THE TIME LIMITATION TO COMPLETE THE ASSESSMENT ORDER FOR THE YEAR UNDER REFERENCE IS 31.12.2006 ON WHICH THE LD. CIT(A) ALSO RELIED UPON AND CANC ELLED THE ASSESSMENT ORDER. ON ACCOUNT OF THIS CANCELLATION OF ASSESSMENT ORDER THE GENUINE ADDITION OF RS.43 66 821/ - MADE ON ACCOUNT OF SCRUTINY ASSESSMENT PROCEEDINGS IN WHICH THE ASSESSEE CLAIMED BOGUS EXPENSES OF RS.1 00 000/ - FOR PACKING 2 622 - RJT - 2010 MGM TRADELINK PVT LTD MATERIAL EX PENSES BOGUS EXPENSES OF RS.415152/ - FOR LAUNCH FREIGHT EXPENSES AND CLAIMED BOGUS/FICTITIOUS CREDITORS OF RS.3381669/ - AS DISCUSSED IN DETAILS IN ASSESSMENT ORDER PASSED ON 29.03.2007 STANDS CANCELLED THE SAME HAS ESCAPED TO INCLUDE IN THE INCOME OF THE ASSESSEE FOR A.Y. 2004 - 05. 3. THEREFORE I AM SATISFIED THAT THIS IS A FIT CASE TO REOPEN AND ISSUANCE OF NOTICE U/S 148 OF THE I.T. ACT. 2. PURSUANT TO THE PROCEEDINGS INITIATED BY THE AO U/S 147/148 O RDER OF ASSESSMENT U/S 143(3) READ WITH SECTION 1 47/148 OF THE INCOME - TAX ACT HAS BEEN PASSED BY THE ASSESSING OFFICER ON 15.12.2008 ASSESSING THE TOTAL INCOME AT RS.64 73 810/ - AFTER ADDING/DISALLOWING A SUM OF (1) RS.1 00 000/ - OUT OF PACKING MATERIAL EXPENSES; (2) RS.4 70 000/ - { REDUCED TO RS.1 00 000 / - BY CIT(A) } OUT OF LAUNCH FREIGHT EXPENSES; (3) RS.4 15 152/ - OUT OF TRANSPORTATION EXPENSES AND (4) RS.33 81 669/ - BEING BOGUS PURCHASE S/UNEXPLAINED LIABILITY . ON APPEAL THE LD CIT(A) HAS CONFIRMED THE AFORE SAID ADDITIONS/DISALLOWANCES MADE BY THE ASSE SSING OFFICER EXCEPT THE DISALLOWANCE OF RS.4 70 000/ - MADE BY THE AO OUT OF LAUNCH FREIGHT EXPENSES WHICH HAS BEEN REDUCED BY THE CIT(A) TO RS.1 00 000/ - . AGGRIEVED BY THE ORDER PASSED BY THE LD CIT(A) THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 3. GROUND NOS. 1 AND 2 TAKEN BY THE ASSESSEE READ AS UNDER: - 1. THE ASSESSMENT AND ASSESSMENT ORDER U/S.143(3) R.W.S.147 IS BAD IN LAW. 2. THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. 4. IN SUPPORT OF APPEAL THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME WAS FILED U/S 139 ON 09.06.2005 RETURNING TOTAL INCOME AT RS.21 06 990/ - ON THE BASIS OF WHICH ASSESSMENT U/S 143(3) WAS COMPLETED BY THE ASSESSING OFFICER ON 29.03.2007 MAKING THOSE V ERY DISALLOWANCES/ADDIT IONS WHICH HAVE NOW BEEN MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED U/S 143(3)/147 OF THE INCOME - TAX ACT. HE FURTHER SUBMITTED THAT THE SAID ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 143(3) ON 29.03.2007 WAS SUBSEQUENTLY ANNULLED BY TH E LD CIT(A) ON THE GROUND THAT THE SAID 3 622 - RJT - 2010 MGM TRADELINK PVT LTD ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER WAS BARRED BY LIMITATION. ACCORDING TO THE LD . AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IT WAS NOT OPEN TO THE ASSESSING OFFICER TO INITIATE THE PROCEEDINGS U/S 147/148 TO MAKE THOSE V ERY ADDITIONS/DISALLOWANCES WHICH WERE INITIALLY MADE IN THE ORIGINAL ORDER OF ASSESSMENT AS THE ORIGINAL ORDER OF ASSESSMENT ITSELF STOOD ANNULLED. IN SUPPORT OF HIS SUBMISSIONS HE RELIED UPON THE JUDGMENT DATED 28.03.2008 OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN SMT . ANCHI DEVI V. CIT ITA NO.208 OF 2007. 5. IN REPLY THE LD . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE LD CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMIS SIONS. IT IS TRUE THAT THE ORDER OF ASSESSMENT ORIGINALLY PASSED BY THE ASSESSING OFFICER U/S 143(3) WAS ANNULLED BY THE LD CIT(A) ON THE GROUND THAT IT WAS BARRED BY LIMITATION. IT IS ALSO TRUE THAT THE ASSESSING OFFICER HAS NOW MADE THOSE V ERY ADDITIONS/ DISALLOWANCES IN HIS ORDER OF ASSESSMENT PASSED U/S 14 3(3) /148 WHICH HE HAD ORIGINALLY MADE IN THE ORIGINAL ORDER OF ASSESSMENT PASSED U/S 143(3). 7. ONCE THE ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 143(3) IS ANNULLED BY THE CIT(A) AS IT HAS BEEN AN NULLED IN THE PRESENT CASE THE SAID ORDER OF ASSESSMENT BECOMES COMPLETELY NON - EST IN THE EYES OF LAW . WHAT THEN SURVIVES IS THE RETURN OF INCOME WHICH WAS PROCESSED U/S 143(1) AND NOT THE ASSESSMENT WHICH STANDS ANNULLED. O NCE THE RETURN IS PROCESSED U/ S 143(1) THE ASSESSING OFFICER HAS AM P LE JURISDICTION TO INITIATE THE PROCEEDINGS U NDER THE MAIN PROVISIONS OF SECTION 147 IF ALL OTHER CONDITIONS FOR SUCH INITIATION ARE SATISFIED. 8. IN THE PRESENT CASE THE VALIDITY OF INITIATION HAS TO BE SEEN WITH REFERENCE TO THE REQUIREMENTS OF THE MAIN PROVISIONS OF SECTION 147 AND NOT THE PROVISO (NOW FIRST PROVISO) TO SECTION 147. THE ASSESSING OFFICER IS AUTHORISED BY THE MAIN PROVISIONS OF SECTION 147 TO INITIATE THE PROCEEDINGS IF HE HAS REASON TO BELIEVE TH AT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS THUS NOT A CASE OF REOPENING AN ASSESSMENT WHICH WAS ANNULLED BY THE CIT(A) BUT A CASE OF INITIATING THE PROCEEDINGS U NDER THE MAIN PROVISIONS OF SECTION 147 ON THE BASIS THAT THE 4 622 - RJT - 2010 MGM TRADELINK PVT LTD ASSESSING OFFI CER HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 512 (SC) THE HONBLE SUPREME COURT HAS HELD THAT THE MAIN PROVISIONS OF SECTION 147 CONFER JURISDICTION ON THE ASSESSING OFFICER TO INITIATE PROCEEDINGS IF T HE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT . WE HAVE ALREADY REPRODUCED THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATING THE PROCEEDINGS U/S 147/148. IN OUR CONSIDERED VIEW THE AFORESAID REASONS ARE SPECIFIC AND RELEVANT FOR THE FORMATION OF PRIMA - FACIE BELIE F BY THE ASSESSING OFFICER THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. BESIDES I T IS ALSO EVIDENT ON PERUSAL OF THE MATERI ALS ON RECORD ( E.G. FINDINGS IN THE ORIGINAL ORDER OF ASSESSMENT PASSED U/S 143(3) AS ALSO IN THE ORDER OF ASSESSMENT PASSED U/S 143(3)/147) THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT OWING TO THE RECORDING OF BOGUS PURCHASES AND OTHER EXPEN SES OF DISALLOWABLE NATURE IN THE BOOKS OF ACCOUNT . IN THIS VIEW OF THE MATTER IT IS HELD THAT THERE IS NO INFIRMITY IN THE INITIATION OF PROCEEDINGS U/S 147/148 BY THE AO. 9 . THE SUBMISSIONS OF THE ASSESSEE THAT THE ORIGINAL ORDER OF ASSESSMENT IN WHIC H ADDITIONS/DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER HAS BEEN ANNULLED BY THE LD . CIT(A) AND THEREFORE THE ITO WAS NOT COMPETENT TO INITIATE PROCEEDINGS U/S 147/148 TO MAKE SIMILAR ADDITIONS/DISALLOWANCES DO NOT CARRY ANY FORCE PRIMARILY FOR THE RE ASONS GIVEN EARLIER IN THIS ORDER AND ALSO FOR THE REASON THAT SIMILAR SUBMISSION HAS BEEN REJECTED BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITS JUDGMENT IN A G GROUP CORPORATION V . HARSH PRAKASH [2013] 35 TAXMANN.COM 48 (GUJARAT) IN WHICH IT HAS BEEN HELD THAT THERE IS NO BAR IN INITIATING THE PROCEEDINGS U/S 147/148 ON SAME GROUNDS AFTER FOLLOWING DUE PROCEDURE IN ACCORDANCE WITH LAW IN A CASE WHERE EARLIER ORDER OF ASSESSMENT STOOD ANNULLED. IN THE CASE BEFORE US ALSO EARLIER ORDER OF ASSESSMENT WA S ANNULLED BY THE CIT(A) ON THE GROUND THAT IT WAS BARRED BY LIMITATION. THAT EARLIER ORDER WILL THEREFORE NOT OPERATE AS A BAR IN INITIATING THE PROCEEDINGS U/S 147/148 PROVIDED ALL REQUISITE CONDITIONS IN THIS BEHALF ARE SATISFIED WHICH AS ALREADY HELD EARLIER IN THIS ORDER ARE SATISFIED. THE CASE BEFORE US IS SQUARELY COVERED BY THE AFORESAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT. RESPECTFULLY FOLLOWING THE SAID JUDGMENT IT IS HELD THAT THE INITIATION OF 5 622 - RJT - 2010 MGM TRADELINK PVT LTD PROCEEDINGS BY THE AO AFTER MEETIN G ALL THE REQUIREMENTS OF THE MAIN PROVISIONS OF SECTION 147 IS VALID. RELIANCE PLACED BY THE LD . AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN SMT . ANCHI DEVI V. CIT (SUPRA) IS MISPLACED PRIMARILY FOR THE REASON THAT WE ARE OBLIGED TO FOLLOW THE JUDGMENT OF THE HONBLE J URISDICTIONAL HIGH COURT IN A G GROUP CORPORATION V. HARSH PRAKASH (SUPRA) ACCORDING TO WHICH THE ASSESSING OFFICER HAS AM P LE JURISDICTION TO INITIATE PROCEEDINGS U/S 147/148 TO MAKE AD DITIONS/DISALLOWANCES SIMILAR TO THOSE MADE IN THE EARLIER ORDER OF ASSESSMENT WHICH WAS SUBSEQUENTLY ANNULLED PROVIDED THE REQUISITE CONDITIONS FOR SUCH INITIATION ARE SATISFIED . IN THE CASE BEFORE US THE INITIATION OF PROCEEDINGS U/S 147/148 BY THE AO N OT ONLY SATISFIES ALL THE REQUIREMENTS OF MAIN PROVISIONS OF SECTION 147 BUT ALSO IS IN CONFORMITY WITH THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN RAJESH JHAVERI (SUPRA). IN THIS VIEW OF THE MATTER G ROUND NOS. 1 AND 2 ARE DISMISSED. 10 . GR OUND NO.3 TAKEN BY THE ASSESSEE READS AS UNDER: - 3. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS.1 00 000/ - OUT OF PACKING MATERIAL EXPENSES. THE LD.CIT (A) HAS ERRED IN CONFIRMING THE SAME. 11 . THE IMPUGN ED DISALLOWANCE HAS BEEN CONFIRMED BY THE LD . CIT(A) WITH THE FOLLOWING OBSERVATIONS: - 3(C). THIS SIMPLE ISSUE WAS CONSIDERED. THE A.O. FOUND THAT SOME MATERIAL PACKING EXPENSES WERE PAID IN CASH AND NO VOUCHERS WERE AVAILABLE ON THE RECORD. IT WAS APPEL LANTS CONTENTION THAT IT MISPLACED THE FILE CONTAINING VOUCHERS. BUT THE SAID AMOUNTS WERE PAID TO ONE M/S. RUSHABH POLYMERS. BASICALLY THE ADDITION WAS MADE BY THE A.O. IN THE ABSENCE OF ANY SUPPORTING EVIDENCE. IT WAS A.RS GRUDGE THAT THE A.O. DID NO T GRANT ANY OTHER OPPORTUNITY FOR PRODUCTION OF THESE VOUCHERS DURING THE ASSESSMENT PROCEEDINGS. I AM NOT CONVINCED WITH THIS ARGUMENT. THE EVIDENCES WHICH WERE NOT FILED BEFORE THE A.O. SHOULD HAVE BEEN AT LEAST FURNISHED BEFORE ME DURING THE APPELLATE PROCEEDINGS. ONE CANNOT FIND FAULT WITH A.O. AS THE 6 622 - RJT - 2010 MGM TRADELINK PVT LTD APPELLANT DID NOT MEET THE INITIAL ONUS OF PROVING A CLAIM WITH SOME SUPPORTING EVIDENCE THAT TOO WHEN THE EXPENSE WAS MET BY WAY OF CASH DISBURSEMENTS. ON THIS COUNT THE ADDITION MADE BY A.O. IS CONFI RMED. 1 2 . IN SUPPORT OF APPEAL THE LD . AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED COPY OF THE ACCOUNT OF M/S RISHABH POLYMERS AS APPEARING IN THE BOOKS OF THE ASSESSEE. HE SUBMITTED THAT A SUM OF RS.15 40 033/ - WAS PAID/PAYABLE BY THE ASSESSEE TO M/S. RISHABH POLYMERS FOR THE SERVICES RENDERED BY THE PAYEE DURING THE YEAR UNDER APPEAL OUT OF WHICH A SUM OF RS.17 000/ - RS.19 000/ - RS.18 000/ - RS.19 000/ - RS.18 000/ - AND RS.9 000/ - W AS PAID IN CASH ON 01.02.2004 09.02.2004 12.02.2004 13.12 .2004 04.03.2004 AND 05.03.2004 RESPECTIVELY. HE SUBMITTED THAT MERE PAYMENT IN CASH WAS NOT SUFFICIENT FOR MAKING THE IMPUGNED DISALLOWANCE. 1 3 . IN REPLY THE LD . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER / CIT(A) IN THIS BEHALF. 1 4 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS . THE ASSESSING OFFICER HAS MADE THE IMPUGNED DISALLOWANCE WITH THE FOLLOWING OBS ERVATIONS: - 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDING SUPPORTING DOCUMENT AL ONG WITH BOOKS OF ACCOUNTS WERE VERIFIED. FROM THE VERIFICATION IT WAS FOUND THAT SOME MATERIAL PACKING EXPENSES WERE PAID IN CASH AND THERE WERE NO VOUCHERS WERE AVAILABLE ON THE RECORD. THE DETAILS OF THESE EXPENSES ARE AS UNDER. S. NO. DATE AMOUNT . A. 01 - 02 - 04 RS.17 000 B. 09 - 02 - 04 RS.19 000 C. 12 - 02 - 04 RS.18 000 D. 13 - 02 - 04 RS.19 000 E. 04 - 03 - 04 RS.18 000 F. 05 - 03 - 04 RS. 9 000 3.2 THEREFORE A SHOW CAUSE NOTICE WAS ISSUED DATED 24/11/2008 TO THE ASSESSEE TO EXPLAIN THE SAME. IN RESPONSE TO THIS SHOW CAUSE NOTICE THE ASSESSEE REPLIED VIDE DATED 02/12/2008 WHICH IS AS UNDER 7 622 - RJT - 2010 MGM TRADELINK PVT LTD VOUCHERS FOR EXPENSES TOWARDS PACKING MATERIAL EXPENSES THE FILE OF THE SAME IS MISPLACE D BY OUR ASSESSEE SO WE ARE UNABLE TO SUBMIT THE SAME WE WILL SUBMI T AS SOON POSSIBLE. EXPENSES FOR PACKING MATERIAL WERE PAID TO M/S RISHABH POLYMERS. 3.3 THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. AS THE ASSESSEE HAS HIMSELF ADMITTED THAT VOUCHERS ARE NOT WITH HIM SO THERE IS NO EVIDENCE WITH THE ASSESSEE TO PR OVE THAT THESE EXPENSES ARE GENUINE. THEREFORE AN AMOUNT OF RS.1 00 000/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS INFLATED EXPENSES/ CLAIMED BOGUS EXPENSES PENALTY PROCEEDINGS U/S.271(1)(C) ARE INITIATED SE PARATELY. 1 5 . ON APPEAL THE LD . CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE WITH THE OBSERVATIONS WHICH HAVE ALREADY BEEN PRODUCED EARLIER IN THIS ORDER. BOTH THE AUTHORITIES HAVE CONCURRENTLY RECORDED A FINDING OF FACT THAT THE IMPUGNED EXPENSE S/PAY MENTS A RE NOT SUPPORTED BY ANY VOUCHERS. THE ASSESSEE HAS NEITHER FILED COPIES OF VOUCHERS SUPPORTING THE IMPUGNED PAYMENTS NOR ANY CONFIRMATION FROM M/S. RISHABH POLYMERS N OR ANY OTHER EVIDENCE IN SUPPORT OF THE AFORESAID PAYMENTS EITHER BEFORE THE ASSESS ING OFFICER OR BEFORE THE LD CIT(A) OR BEFORE THIS TRIBUNAL. WE DO APPRECIATE THAT ONE CAN GENUINELY MISPLACE VOUCHERS BUT THAT IS NOT THE END OF THE MATTER. THE ASSESSEE COULD HAVE FILED OTHER EVIDENCES E.G. CONFIRMATION FROM THE PARTY TO WHO PAYMENT WA S MADE IN SUPPORT OF ITS CLAIM. HOWEVER THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE BEFORE THE AO THE CIT(A) AND THIS TRIBUNAL TO SUBSTANTIATE ITS CLAIM. I N THE ABSENCE OF ANY EVIDENCE TO SUPPORT THAT THE IMPUGNED EXPENSES WERE AT ALL INCURRED THERE IS NO OPTION EXCEPT TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER A ND SUSTAINED BY THE LD . CIT(A). WE ORDER ACCORDINGLY. GROUND NO.3 IS DISMISSED. 1 6 . GROUND NO.4 TAKEN BY THE ASSESSEE READS AS UNDER: - 4. THE LD. AO HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS.4 70 000/ - ON ACCOUNT OF LAUNCH FREIGHT EXPENSES. THE LD.CIT (A) HAS ERRED IN CONFIRMING THE SAME TO THE EXTENT OF RS.1 00 000/ - . 8 622 - RJT - 2010 MGM TRADELINK PVT LTD 1 7 . PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT A SUM OF RS.4.70 LAKHS WAS PAID BY THE ASSESSEE TO INDIVIDUAL LABORERS FOR LOADING/UNLOADING/PACKING OF CARGO FOR EXPORT ETC. IT IS FURTHER STATED THAT SUCH PAYMENTS WERE MADE TO INDIVIDUAL LABO U RERS IN CASH. THE ASSESSING OFFICER DOUBTED THE CORRECTNESS OF THE VOUCHERS ON WHICH THE SIGNATURES OF THE LABORERS WERE OBTAINED AND ACCORDINGLY MADE THE IMPUGNED DISALLOWANCE. ON APPEAL THE LD . CIT(A) HAS REDUCED THE IMPUGNED DISALLOWANCE TO RS.1 00 000/ - FROM RS.4 70 000/ - MADE BY THE ASSESSING OFFICER. 1 8 . IN SUPPORT OF APPEAL THE LD . AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT ALL THE VOUCHERS IN SUPPORT OF IMPUGNED EXPENSES WERE PLACED BEFORE THE ASSESSING OFFICER AND THE LD . CIT(A). ACCORDING TO HIM THE LD . CIT(A) ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND ACCORDINGLY REDUCED T HE DISALLOWANCE TO RS.1 00 000/ - . HE CONTENDED THAT THE IMPUGNED DISALLOWANCE SHOULD HAVE BEEN COMPLETELY DELETED BY THE LD . CIT(A). 1 9 . IN REPLY THE LD . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE LD . CIT(A) . 20 . WE HAVE HEARD BOTH T HE PARTIES. THE ASSESSING OFFICER HAS HIGHLIGHTED SEVERAL DEFICIENCIES IN THE VOUCHERS PRODUCED BY THE ASSESSEE BEFORE HIM IN SUPPORT OF THE IMPUGNED EXPENSES IN PARAGRAPH 4.3 OF THE ASSESSMENT ORDER. THE LD . CIT(A) HAS ALSO AGREED WITH THE ASSESSING OFFIC ER THAT THE IMPUGNED EXPENSES WERE NOT SUPPORTED BY VERIFIABLE VOUCHERS. IN THE ABSENCE OF FULLY VERIFIABLE INDEPENDENT VOUCHERS IT IS NOT POSSIBLE TO FULLY DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD CIT(A). HOWEVER THE DISALLOWANCE OF RS.1 00 000/ - OUT OF TOTAL EXPENSES OF RS.4 70 000/ - APPEARS TO BE ON HIGHER SIDE ; IT IS THEREFORE REDUCED TO RS.50 000/ - . GROUND NO.4 IS PARTLY ALLOWED. 21 . GROUND NO.5 TAKEN BY THE ASSESSEE READS AS UNDER: - 5. THE LD. AO HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS.4 15 152/ - ON ACCOUNT OF TRANSPORTATION EXPENSES. THE LD.CIT (A) HAS ERRED IN CONFIRMING THE SAME. 2 2 . THE IMPUGNED DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER FOR THE REASONS GIVEN IN PARAGRAPH 5 OF THE ASSESSMENT ORDER. IT WAS SUBMITTED BY THE 9 622 - RJT - 2010 MGM TRADELINK PVT LTD ASSESSEE BEFORE THE ASSESSING OFFICER THAT M/S. TRINITY SHIPP ING & ALLIED SERVICES PVT. LTD. A SISTER CONCERN OF THE ASSESSEE WAS A CLEARING AGENT FOR THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT TRANSPORTA TION WORK OF RS.4 15 152/ - WAS DONE BY M/S. RADHE KRISHNA TRANSPORT. IT WAS CLAIMED THAT THE SAID SUM OF RS.4 15 152/ - WAS PAID BY M/S. TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. TO M/S.RADHE KRISHNA TRANSPORT WHICH IT WAS CLAIMED BY THE ASSESSEE WAS R EIMBURSED BY THE ASSESSEE. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE AFORESAID SUBMISSIONS AND ACCORDINGLY DISALLOWED THE IMPUGNED SUM WITH THE FOLLOWING OBSERVATIONS: - 5.3 THE CONTENTION OF THE ASSESSEE IS DULY CONSIDERED BUT THE SAME IS NOT AC CEPTABLE. THE WHOLE TRANSPORTATION WAS DONE BY RADHE KRISHNA TRANSPORT AS IT IS A TRANSPORTER FOR MOVEMENT OF EXPORT CARGO AT LOCAL LEVEL AND ALL BILLS WERE RAISED BY M/S. RADHE KRISHNA TRANSPORT IN THE NAME OF M/S. TRINITY SHIPPING & ALLIED SERVICES P. LT D. BUT AFTER VERIFICATION OF THE RECORD IT IS FOUND THAT DURING THE WHOLE YEAR NO AMOUNT IS PAID OR REIMBURSEMENT BY OR TO M/S. TRINITY SHIPPING & ALLIED SERVICES P. LTD. AND NO SUCH CLOSING BALANCE IS MENTIONED AS SUNDRY CREDITORS IN THE BALANCE SHEET OF THE ASSESSEE SO IT IS CLEAR THAT IT IS JUST A JOURNAL ENTRY AND THIS EXPENSES WERE NOT BORNE BY THE ASSESSEE IN THE REALITY. THE CREDIT ENTRY WAS SET OFF BY SOME UNEXPLAINED DEBIT ENTRY. AS A RESULT NO AMOUNT IS PAID OR REIMBURSED BY THE ASSESSEE. FRO M THE ABOVE DISCUSSION IT IS CLEAR THAT IT IS THE BOGUS EXPENDITURE DEBITED IN THE ACCOUNTS FOR THE PURPOSE OF TAX EVASION. THEREFORE AN AMOUNT OF RS.4 15 152/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS INFL ATED EXPENSES/ CLAIMED BOGUS EXPENSES PENALTY PROCEEDINGS U/S.271(1)(C) ARE INITIATED SEPARATELY. 2 3 . ON APPEAL THE LD . CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE FOR THE REASONS GIVEN BY HIM AT PAGE 8 OF HIS APPELLATE ORDER. 2 4 . IN SUPPORT OF APP EAL THE LD . AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED SUM WAS PAID TO M/S. TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. BY WAY OF REIMBURSEMENT OF ACTUAL TRANSPORT EXPENSES PAID BY 10 622 - RJT - 2010 MGM TRADELINK PVT LTD M/S. TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. TO M/S. RADHE KRISHNA TRANSPORT AND THEREFORE THE IMPUGNED EXPENSES OUGHT TO HAVE BEEN ALLOWED. 2 5 . IN REPLY THE LD DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND LD CIT(A). 2 6 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. THE LD . CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE WITH TWO MAJOR OBSERVATIONS NAMELY (I) M ERE SUBMISSION OF COPY OF LEDGER ACCOUNT OR JOURNAL ENTRY DOES NOT PROVE THAT THE IMPUGNED EXPENSES WERE MERE REIMB URSEMENT OF EXPENSES ; AND (II) I F IT WAS A CASE OF MERE REIMBURSEMENT OF EXPENSES ACTUALLY INCURRED BY M/S. TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. A SISTER CONCERN OF THE ASSESSEE THE ASSESSEE IN THAT CASE SHOULD HAVE LED THE EVIDENCE TO ESTABLISH THAT THE IMPUGNED SUM WAS NOT CLAIMED BY M/S. TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. AS DEDUCTION. BOTH THE AFORESAID OBSERVATIONS MADE BY THE LD. CIT(A) ARE RELEVANT AND CANNOT BE IGNORED . 2 7 . ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS IT IS CO NSIDERED APPROPRIATE TO RESTORE THE MATTER TO THE FILE OF THE LD . CIT(A) WITH THE DIRECTION TO DECIDE THE MATTER AFRESH AFTER GIVING A SPECIFIC OPPORTUNITY OF HEARING TO THE ASSESSEE TO ESTABLISH ITS CLAIM THAT (I) THE IMPUGNED SUM WAS PAID BY THE ASSESSEE TO M/S. TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. BY WAY OF REIMBURSEMENT ; (II) THE IMPUGNED SUM WAS NOT PAID BY THE ASSESSEE DIRECTLY TO M/S. RADHE KRISHNA TRANSPORT ; AND (III) NO DEDUCTION IN RESPECT OF SUCH REIMBURSEMENT BY THE ASSESSEE WAS CLAIMED AS DEDUCTION BY M/S TRINITY SHIPPING & ALLIED SERVICES PVT. LTD. THE LD . CIT(A) SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER MAKING SUCH INQUIRIES AS HE MAY CONSIDER APPROPRIATE IN THE MATTER. GROUND NO.5 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 2 8 . GROUND NO.6 TAKEN BY THE ASSESSEE READS AS UNDER: - 6. THE LD . AO HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING THE ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN PURCHASE OF RS.33 81 669/ - . THE LD.CIT (A) HAS ERRED IN CONFIRM ING THE SAME. 11 622 - RJT - 2010 MGM TRADELINK PVT LTD 2 9 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT A SUM OF RS. 33 81 669/ - WAS RECORDED IN THE BOOKS OF THE ASSESSEE IN THE NAME OF A CREDITOR NAMELY M/S. RAMESH AGRO INDUSTRIES INDORE AND SHOWN AS OUTST ANDING LIABILITY IN THE BALANCE SHEET . HE FURTHER NOTICED THAT THE ASSESSEE HAD RECORDED TWO PURCHASE TRANSACTIONS FROM M/S. RAMESH AGRO INDUSTRIES AGGREGATING TO RS.33 81 669/ - IN ITS BOOKS FOR THE YEAR UNDER APPEAL . ON BEING CALLED UPON TO EXPLAIN THE GE NUINENESS OF THE AFORESAID PURCHASES AND CONSEQUENTIAL OUTSTANDING LIABILITY SHOWN IN THE BALANCE SHEET THE ASSESSEE COULD FILE ONLY A CONFIRMATION FROM THE SAID PARTY I.E. M/S. RAMESH AGRO INDUSTRIES. ON PERUSAL OF THE CONFIRMATION THE ASSESSING OFFIC ER NOTICED THAT THE SAID CONFIRMATION DID NOT CARRY PERMANENT ACCOUNT NUMBER OF M/S. RAMESH AGRO INDUSTRIES . FOR THE DETAILED REASONS GIVEN BY HIM IN PARAGRAPH 6 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER TREATED THE PURCHASES TO THE EXTENT OF RS.33 81 669/ - FROM M/S. RAMESH AGRO INDUSTRIES AND CONSEQUENTIAL LIABILITY SHOWN AS PAYABLE IN THE BALANCE AS BOGUS AND ACCORDINGLY DISALLOWED THE SAME. ON APPEAL THE LD CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE. 30 . IN SUPPORT OF APPEAL THE LD AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE HAS FILED A PAPER - BOOK BEFORE THIS TRIBUNAL WHICH INTER ALIA CONTAINS ( A) A C OPY OF LEDGER ACCOUNT OF M/S. RAMESH AGRO INDUSTRIES AS APPEARING IN THE BOOKS OF THE ASSESSEE; ( B) A COPY OF INVOICE DATED 17.11.2003 RAISED B Y M/S. RAMESH AGRO INDUSTRIES AND; ( C) A C OPY OF CONFIRMATION NOTE DATED 12.11.2003 ISSUED BY M/S. R K COMMODITIES AS BROKER FOR THE IMPUGNED TRANSACTIONS. RELYING UPON THE AFORESAID DOCUMENTS HE SUBMITTED THAT THE IMPUGNED PURCHASES WERE GENUINE AND THER EFORE NO DISALLOWANCE WAS CALLED FOR. HIS ALTERNATIVE SUBMISSION WAS THAT THE RATE OF DISALLOWANCE SHOULD BE RESTRICTED TO 25% IN VIEW OF THE DECISION OF THIS TRIBUNAL IN VIJAY PROTEINS LTD. V. JCIT 55 TTJ 76 (AHD.) . 31 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. THERE ARE TWO IMPORTANT ASPECTS OF THE CASE. ONE THE ASSESSEE HAS SHOWN A SUM OF RS.33 81 669/ - AS OUTSTANDING LIABILITY PAYABLE TO M/S RAMESH AGRO INDUSTRIES IN ITS BALANCE SHEET. IT IS THEREFORE FOR THE ASSESS EE TO ESTABLISH THE GENUINENESS OF 12 622 - RJT - 2010 MGM TRADELINK PVT LTD THE AFORESAID LIABILITY. TWO IT IS CLAIMED BY THE ASSESSEE THAT THE SAID LIABILITY HAS ARISEN ON ACCOUNT OF PURCHASES MADE FROM M/S RAMESH AGRO INDUSTRIES. THE ASSESSEE IS THEREFORE REQUIRED TO ESTABLISH THE GENUINENESS OF THE SAID PURCHASES. BOTH THE ISSUES ARE INEXTRICABLY INTERLINKED. 3 2 . FACTS OF THE CASE NEED TO BE HIGHLIGHTED FOR PROPER APPRECIATION. A SUM OF RS.33 81 669/ - WAS FOUND TO HAVE BEEN RECORDED BY THE ASSESSEE IN ITS BOOKS AS AMOUNT PAYABLE TO M/S. RAME SH AGRO INDUSTRIES. AS POINTED OUT BY THE ASSESSING OFFICER THE ASSESSEE CLAIMED TO HAVE MADE TWO PURCHASES FROM M/S. RAMESH AGRO INDUSTRIES DURING THE YEAR UNDER APPEAL OUT OF WHICH FIRST PURCHASE WAS OF RS.33 20 000/ - WHILE THE SECOND PURCHASE WAS OF RS .61 669/ - . THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HAD NOT PAID THE AFORESAID AMOUNT TO M/S RAMESH AGRO INDUSTRIES DURING THE WHOLE YEAR UNDER APPEAL. ON PERUSAL OF COPY OF LEDGER ACCOUNT OF M/S. RAMESH AGRO INDUSTRIES AS APPEARING IN THE BOOK S OF THE ASSESSEE FOR THE SUCCEEDING YEAR THE ASSESSING OFFICER NOTICED THAT THE PAYMENTS FOR THE IMPUGNED PURCHASES WERE MADE NEXT YEAR IN CASH IN SUCH A MANNER THAT EACH OF THE CASH PAYMENTS W AS KEPT BELOW RS.20 000/ - SO AS TO OBVIATE THE NECESSITY FOR PAYMENT B Y ACCOUNT PAYEE CHEQUE /DRAFT . HE ALSO PERUSED THE CONFIRMATION GIVEN BY M/S. RAMESH AGRO INDUSTRIES ON THE COPY OF THE LEDGER ACCOUNT OF M/S. RAMESH AGRO INDUSTRIES AS APPEARING IN THE BOOKS OF THE ASSESSEE AND NOTICED THAT THE SAID CONFIRMATION D ID NOT CARRY THE PERMANENT ACCOUNT NUMBER OF THE CREDITOR I.E. M/S. RAMESH AGRO INDUSTRIES. PERUSAL OF THE ORDER PASSED BY THE LD . CIT(A) SHOWS THAT EVEN QUANTITATIVE TALLY WAS NOT MAINTAINED BY THE ASSESSEE AND THAT THE INVOICE RAISED BY M/S. RAMESH AGR O INDUSTRIES DID NOT HAVE RELEVANT DETAILS LIKE TELEPHONE NUMBER SALES TAX NUMBER ETC. THE FACTUAL POSITION CAN BETTER BE APPRECIATED IN THE FOLLOWING OBSERVATIONS MADE BY THE LD CIT(A ) IN HIS APPELLATE ORDER: - (C) RIVAL CONTENTIONS WERE CAREFULLY CONSI DERED. IT WAS FOUND THAT DURING THE COURSE OF ORIGINAL PROCEEDINGS THE A.O. ISSUED NOTICE U/S 133(6) TO VARIOUS CREDITORS TO VERIFY THE GENUINENESS OF THE PURCHASES. OUT OF THEM ONE OF CREDITORS WAS THE SAID RAMESH AGRO WHO HAD THE CREDIT BALANCE OF RS. 33 81 669/ - . THERE WERE TWO PURCHASE TRANSACTIONS IN THIS YEAR FOR 13 622 - RJT - 2010 MGM TRADELINK PVT LTD RS.33 20 000/ - & RS.61 669/ - AND THE APPELLANT DID NOT PAY ANY AMOUNT IN THE WHOLE YEAR. THE AO CALLED FOR THE COPY OF LEDGER ACCOUNT OF THE SAID PARTY FOR THE NEXT ACCOUNTING YEAR AND FOUN D THAT THE REPAYMENTS WERE MADE IN CASH AND ALL CASH ENTRIES WERE KEPT BELOW RS.20000/ - . THE CONFIRMATION FILED BY THE APPELLANT ALSO DID NOT CONTAIN PAN. THE WHEREABOUTS OF THE SAID CONCERN WAS ALSO NOT KNOWN TO THE APPELLANT THE A.O. REMARKED. HE ALSO D REW SUPPORT FROM SEVERAL DECISIONS INCLUDING THAT OF DELHI HIGH COURT (SUPRA). (CA) I AM CONVINCED WITH WHAT A.O. DID. THE A.RS CONTENTION THAT NO INQUIRY WAS DONE BY A.O. WAS NOT CORRECT AS THE ASSESSMENT ORDER ITSELF CONTAINED A REMARK THAT NOTICE U/ S 133(6) WAS ISSUED TO SEVERAL CREDITORS INCLUDING RAMESH AGRO. IT SEEMS THAT THE APPELLANT ALSO DID NOT PROVIDE THE ADDRESS OF THE SAID PARTY TO THE A.O. FOR FURTHER VERIFICATION. NEITHER APPELLANT NOR ITS A.R. CLARIFIED WHY THE AMOUNTS WERE PAID SUBSEQ UENTLY IN CASH THAT TOO BELOW RS.20000/ - PER PAYMENT. STRANGELY BEFORE ME ON INVOICE LOOKING FRESH PURPORTEDLY ISSUED BY SAID RAMESH AGRO WAS FURNISHED IN PAPER - BOOK PAGE - 30. IT CONTAINS SOME ADDRESS BUT IT DID NOT CONTAIN ANY PIN CODE NUMBER PHONE NU MBER TELE FAX NUMBER ETC. IT ALSO ATTACHED A RECEIPT FROM ONE SMART COURIER SERVICE AS AN EVIDENCE FOR HAVING DISPATCHED A CONFIRMATION TO A.O. GANDHIDHAM BY RAMESH AGRO. THE COURIER SERVICE GOT ADDRESS IN AHMEDABAD NOT THE ADDRESS OF INDORE WHERE RAME SH AGRO WAS PURPORTED TO HAVE FUNCTIONED. IN PAGE - 31 OF PAPER - BOOK I FOUND A CONFIRMATION FROM ONE R.K. COMMODITIES WHICH WAS SUPPOSED TO HAVE ACTED AS A BROKER BETWEEN THE APPELLANT AND RAMESH AGRO. THIS CONFIRMATION WAS DATED 12 - 1 - 2003 SIGNED BY ALL TH E PARTIES CONCERNED. I AM NOT SURE WHETHER THESE DOCUMENTS WERE FILED BEFORE THE A.O. IF THEY PARTAKE THE CHARACTER OF NEW EVIDENCES I AM NOT INCLINED TO ACCEPT THESE EVIDENCES AS THE APPELLANT DID NOT PROVE ANY CIRCUMSTANCES BEYOND ITS CONTROL THAT IT W AS PREVENTED IN FILING THESE EVIDENCES BEFORE THE A.O. (CB) THE A.R. SAID THAT THERE WAS A COMPLETE TALLY OF ALL THE GOODS PURCHASED AND SOLD DURING THE YEAR. WHERE WAS THE TALLY STATEMENT? NOTHING 14 622 - RJT - 2010 MGM TRADELINK PVT LTD WAS PRODUCED FOR MY PERUSAL. ONLY WHEN THERE IS SOME CORR ESPONDING SALES AND PURCHASES THE A.RS ALTERNATE REQUEST OF DISALLOWING 25% AS BOGUS PURCHASES ON THE BASIS OF THE DECISION OF HON. ITAT RAJKOT IN THE CASE OF VIJAY PROTEINS LTD. MAY BE CONSIDERED. ULTIMATELY THE APPELLANT FAILED MISERABLY TO EXPLAIN TH E PURCHASES FROM RAMESH AGRO WERE GENUINE. THERE ARE STILL LOOSE ENDS OF SUBSTANTIAL NATURE WHICH WERE NOT TIED UP BY THE APPELLANT BEYOND DOUBT. THE ADDITION MADE BY AO IS CONFIRMED. 3 3 . IT IS THE ASSESSEE - COMPANY WHICH HAS RECORDED THE IMPUGNED PURCH ASES IN ITS BOOKS OF ACCOUNT. IT IS A WELL SETTLED PRINCIPLE OF LAW OF EVIDENCE THAT THE BURDEN TO ESTABLISH THE GENUINENESS OF TRANSACTIONS LIES ON THE PERSON WHO ASSERTS THEIR GENUINENESS. IT IS THE CASE OF THE ASSESSEE THAT THE IMPUGNED PURCHASES WERE G ENUINE AND THEREFORE IT WAS FOR ASSESSEE TO ESTABLISH THEIR GENUINENESS. FACTS BROUGHT ON RECORD BY THE AO/CIT(A) HAVE NOT BEEN REBUTTED BY THE ASSESSEE. 3 4 . A PURCHASE CAN BE CONSIDERED AS GENUINE IF FOUR FACTS ARE ESTABLISHED. ONE THE PARTY FROM WHOM THE GOODS ARE CLAIMED TO HAVE BEEN PURCHASED MUST BE SHOWN TO EXIST AS A SELLER OF THOSE GOODS WHICH ARE CLAIMED TO HAVE BEEN PURCHASED. TWO THE PARTY FROM WHOM THE GOODS ARE CLAIMED TO HAVE BEEN PURCHASED MUST BE SHOWN TO BE IN A POSITION TO MANUFACTURE OR IN A POSITION TO SUPPLY THE GOODS. IN OTHER WORDS THE CAPABILITY OF THE PARTY TO SUPPLY THE GOODS CLAIMED TO HAVE BEEN PURCHASED MUST BE ESTABLISHED. THREE THE GOODS PURCHASED MUST BE SHOWN TO HAVE PHYSICALLY MOVED FROM THE PREMISES OF THE PARTY FROM WHOM THEY ARE CLAIMED TO HAVE BEEN PURCHASED TO THE PREMISES OF THE PARTY BY WHOM THE GOODS ARE CLAIMED TO HAVE BEEN PURCHASED. FOUR THE PRICE FOR PURCHASING THE GOODS MUST BE SHOWN TO HAVE BEEN GENUINELY PAID TO THE PARTY FROM WHOM THE GOODS HAVE BEEN P URCHASED. 3 5 . WE SHALL NOW PROCEED TO EXAMINE THE GENUINENESS OF THE IMPUGNED PURCHASES ON THE AFORESAID PRINCIPLES. WE SHALL FIRST TAKE UP THE EVIDENCE PRODUCED BY THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE IMPUGNED PURCHASES. THE ASSESSEE HAS PL ACED A COPY OF INVOICE DATED 17.11.2003 REPORTEDLY ISSUED BY M/S 15 622 - RJT - 2010 MGM TRADELINK PVT LTD RAMESH AGRO INDUSTRIES INDORE SHOWING SALE OF 400 MT OF INDIAN SOYBEAN MEAL FOR A SUM OF RS.33 20 000/ - AT PAGE 30 OF THE PAPER - BOOK FILED BEFORE THIS TRIBUNAL. THE SAID INVOICE DOES NOT CAR RY ANY TELEPHONE/FAX NO. OR ST REGISTRATION NO. OF THE SAID FIRM. IT IS ILLEGIBLY SIGNED BY SOME AUTHORIZED SIGNATORY WHOSE AUTHORITY TO SIGN SUCH PAPER HAS NOT BEEN ESTABLISHED . THE ASSESSEE HAS ALSO PLACED (PAGE 29 OF THE PAPER - BOOK FILED BEFORE THIS TR IBUNAL ) A COPY OF LEDGER ACCOUNT OF M/S RAMESH AGRO INDUSTRIES AS APPEARING IN ITS BOOKS IN WHICH A SOLITARY PURCHASE OF RS.33 38 000/ - HAS BEEN RECORDED ON 26.3.2004 . BEING A PART OF THE ASSESSEES OWN BOOKS IT IS IN THE NATURE OF SELF - SERVING DOCUMENT. BESIDES T HE BOTTOM OF THE SAID PAGE CARRIES CONFIRMATION UNDER ILLEGIBLE SIGNATURE OF SOME AUTHORIZED SIGNATORY FOR THE SAID M/S RAMESH AGRO INDUSTRIES WHOSE AUTHORITY SO SIGN SUCH CONFIRMATION HAS NOT BEEN ESTABLISHED . THE SAID CONFIRMATION DOES NOT CAR RY ANY DATE OR NAME OF THE PERSON SIGNING THE CONFIRMATION. THE INVOICE REPORTEDLY ISSUED BY M/S RAMESH AGRO INDUSTRIES OF INDORE IS DATED 17.11.2003 WHILE THE LEDGER ACCOUNT RECORDS THE SAID TRANSACTION OF PURCHASE ALMOST AFTER FOUR MONTHS ON 26.3.2004 I .E. THE FAG END OF THE ACCOUNTING PERIOD. ANOTHER PIECE OF EVIDENCE FILED BY THE ASSESSEE IS A COPY OF CONFIRMATION NOTE DATED 12.11.2003 REPORTEDLY ISSUED BY M/S R K COMMODITIES INDORE IN WHICH THE TRANSACTION BETWEEN THE ASSESSEE AND M/S RAMESH AGRO IN DUSTRIES HAS BEEN CONFIRMED. BARRING THE AFORESAID THREE PIECES OF EVIDENCE THERE IS NO OTHER EVIDENCE ON RECORD TO ESTABLISH THE GENUINENESS OF PURCHASES. THE AFORESAID PIECES OF EVIDENCE NEITHER ESTABLISH THE EXISTENCE OF THE PARTY FROM WHOM THE IMPUGNE D PURCHASES HAVE BEEN MADE NOR HIS CAPABILITY TO SUPPLY THE GOODS COVERED BY THE IMPUGNED PURCHASES NOR THE PHYSICAL MOVEMENT OF GOODS NOR THE PAYMENT OF PURCHASE PRICE THROUGH BANKING CHANNELS. ON THE OTHER HAND THE MATERIALS BROUGHT ON RECORD BY THE AO/ CIT(A) WHICH HAVE NOT BEEN REBUTTED BY THE ASSESSEE ESTABLISH THE BOGUS NATURE OF TRANSACTION. SINCE THE IMPUGNED PURCHASES AS A WHOLE AND THE CORRESPONDING LIABILITY SHOWN AS PAYABLE IN THE BALANCE SHEET ARE NOT GENUINE THEY DESERVE TO BE DISALLOWED IN THEIR ENTIRETY. ON THE FACTS OF THE CASE THE LD. CIT(A) HAS RIGHTLY HELD THE IMPUGNED PURCHASE AS ALSO THE CORRESPONDING LIABILITY SHOWN AS PAYABLE IN THE BALANCE SHEET AS BOGUS. 16 622 - RJT - 2010 MGM TRADELINK PVT LTD 36. BOGUS PURCHASES CANNOT BE CLAIMED AS DEDUCTION. SIMILARLY BOGUS LIAB ILITIES SHOWN IN THE BALANCE SHEET ALSO CANNOT BE ALLOWED TO STAND. THEREFORE THE IMPUGNED DISALLOWANCE HAS RIGHTLY BEEN CONFIRMED BY THE CIT(A). HIS ORDER IN THIS BEHALF IS IN CONFORMITY WITH THE DECISIONS NOT ONLY OF THE HONBLE DELHI HIGH COURT IN CIT V. LA - M EDICA 250 ITR 575 (DEL) BUT ALSO OF SEVERAL HIGH COURTS SOME OF WHICH ARE (I) KAVERI RICE MILLS V. CIT 157 TAXMAN 376 (ALL.); (II) SREE RAJVEL & CO. V. CIT 268 ITR 267 (KER.); (III) DEORIA OXYGEN CO. V. CIT 160 TAXMAN 427 (ALL.); (IV) SRI GANESH RICE MILLS V. CIT 294 ITR 316 (ALL.); AND (V) CIT V. A R CHOCKALINGAM CHETTIAR & SONS 197 TAXMAN 222. 3 7 . IT IS NOT A CASE WHERE ADDITIONS ARE BASED ON ACCOUNT OF INFLATED PURCHASE PRICE OR WHERE MATERIAL IS AVAILABLE ON RECORD TO INDICATE THAT THE A SSESSEE HAS MADE PURCHASES FROM SOURCES OTHER THAN THOSE RECORDED IN THE BOOKS OF ACCOUNT. IN THE PRESENT CASE IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS INFLATED THE PURCHASE PRICE. IT IS A CASE WHERE THE ENTIRE PURCHASES REPORTEDLY MADE FRO M M/S RAMESH AGRO INDUSTRIES HAVE NOT ONLY BEEN FOUND TO BE BOGUS BUT THAT THE ASSESSEE HAS ALSO FAILED TO LEAD ANY EVIDENCE THAT IT HAS MADE CORRESPONDING PURCHASES FROM ANY OTHER SOURCE. A BOGUS PURCHASE AND CORRESPONDING LIABILITY SHOWN AS PAYABLE IN TH E BALANCE SHEET HAVE TO BE COMPLETELY IGNORED. 75% OF SUCH BOGUS PURCHASES/LIABILITY CANNOT BE ALLOWED AS GENUINE AND REMAINING 25% AS BOGUS. THEREFORE THE PLEA OF THE ASSESSEE THAT ONLY 25% OF BOGUS PURCHASES SHOULD BE DISALLOWED CANNOT BE ACCEPTED. ON T HESE FACTS IT IS THE JUDGMENT IN CIT V. LA - M EDICA (SUPRA) AND SEVERAL OTHER JUDGMENTS CITED SUPRA THAT SQUARELY COVER THE ISSUE AND NOT THE JUDGMENT S IN CASES IN WHICH A FINDING HAS BEEN RECORDED INDICATING PURCHASE OF GOODS FROM SOURCES OTHER THAN THOSE SHOWN IN THE BOOKS AS IN THE CASE OF VIJAY PROTEIN (SUPRA). 3 8 . THE CASE BEFORE US IS A CASE WHERE THE ASSESSEE HAS SHOWN UNPAID LIABILITY AS OUTSTANDING IN ITS BALANCE SHEET. THE ASSESSEE HA S HOWEVER FAILED TO SATISFACTOR ILY ESTABLISH THE NATURE AND SOUR CE AS ALSO THE GENUINENESS OF THE LIABILITY. FOR THIS REASON ALSO THE ENTIRE AMOUNT IS LIABLE TO BE ADDED AND NOT 25% THEREOF 17 622 - RJT - 2010 MGM TRADELINK PVT LTD BECAUSE A BOGUS LIABILITY CANNOT BE CONSIDERED AS GENUINE TO THE EXTENT OF 75% AND BOGUS TO THE EXTENT OF 25% ALONE. 3 9 . FOR TH E REASONS EXPLAINED ABOVE GROUND NO.6 IS DISMISSED. 40 . IN VIEW OF THE FOREGOING APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED ON 3 1 . 0 7 . 201 3 SD/ - SD/ - (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT ME MBER RAJKOT: 31 .07 .2013 B T COPY OF ORDER FORWARDED TO: - 1 . APPELLANT M/S MGM TRADELINK PVT LTD PLOT NO. 46 SECTOR - 1A GANDHIDHAM 2 . RESPONDENT - ACIT GANDHIDHAM CIRCLE GANDHIDHAM 3 . CONCERNED CIT - I RAJKOT 4 . CIT(A) - II RAJKOT 5 . DR ITA T RAJKOT 6 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY ITAT RAJKOT