VINOD S.DEORA, MUMBAI v. DCIT 24(2) NOW 30(3), MUMBAI

ITA 7723/MUM/2014 | 2010-2011
Pronouncement Date: 05-10-2016 | Result: Allowed

Appeal Details

RSA Number 772319914 RSA 2014
Assessee PAN AAAPD4566E
Bench Mumbai
Appeal Number ITA 7723/MUM/2014
Duration Of Justice 1 year(s) 9 month(s) 10 day(s)
Appellant VINOD S.DEORA, MUMBAI
Respondent DCIT 24(2) NOW 30(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 05-10-2016
Assessment Year 2010-2011
Appeal Filed On 26-12-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN JUDICIAL MEMBER ITA NO. 7723/MUM/2014 (ASSESSMENT YEAR: 2010-11) SHRI VINOD S. DEORA VS. DCIT 24(2) NOW 30(3) G - 507 SONMARG S.V. ROAD MALAD (W) MUMBAI 400064 C - 13 ROOM NO. 601 6 TH FLOOR PRATYAKSHAKAR BHAVAN BANDRA (E) MUMBAI 400051 PAN - AAAPD4566E APPELLANT RESPONDENT ITA NO. 7251/MUM/2014 (ASSESSMENT YEAR: 2010-11) DCIT 24(2) NOW 30(3) VS. SHRI VINOD S. DEORA C - 13 ROOM NO. 601 6 TH FLOOR PRATYAKSHAKAR BHAVAN BANDRA (E) MUMBAI 400051 G - 507 SONMARG S.V. ROAD MALAD (W) MUMBAI 400064 PAN - AAAPD4566E APPELLANT RESPONDENT APPELLANT BY: SHRI HARESH P. SHAH RESPONDENT BY: SHRI RAJNEESH K. ARVIND DATE OF HEARING: 19.09.2016 DATE OF PRONOUNCEMENT: 05.10.2016 O R D E R PER JASON P. BOAZ A.M. THESE ARE CROSS APPEALS ONE BY REVENUE AND THE OTH ER BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A)- 34 MUMBAI DATED 09.10.2014 FOR A.Y. 2010-11. 2. THE FACTS OF THE CASE BRIEFLY ARE AS UNDER: - 2.1 THE ASSESSEE PROP. OF M/S. S.R. INTERNATIONAL AND ENGAGED IN THE BUSINESS OF TRADING IN LICENCES AND EARNING SALARY FROM M/S. GURUASHISH EXIM PVT. LTD. FILED HIS RETURN OF INCOME FOR A.Y. 2010-11 ON 30.09.2010 DECLARING TOTAL INCOME OF ` 22 87 440/-. THE RETURN WAS PROCESSED UNDER ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 2 SECTION 143(1) OF THE INCOME TAX ACT 1961 (IN SHOR T 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. IN THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (AO) RECORDS THA T INFORMATION WAS RECEIVED FROM SALES TAX AUTHORITIES (GOVERNMENT OF MAHARASHTRA) THAT THE ASSESSEE IS A BENEFICIARY OF THE TRANSACTIONS MADE BY M/S. CRYSTAL ENTERPRISES AND M/S. INDUJA TRADERS PVT. LTD. FIRM S ENGAGED IN THE BUSINESS OF ISSUE OF BILLS WITHOUT DELIVERY OF MATE RIALS; TO THE EXTENT OF ` 44 67 716/- AND ` 25 93 040/- RESPECTIVELY. THE AO REQUIRED THE ASSES SEE TO PRODUCE THESE PARTIES ALONGWITH ALL RELEVANT DOC UMENTS TO ESTABLISH THE GENUINENESS OF THE AFORESAID TRANSACTIONS. THE ASSE SSEE EXPRESSED HIS INABILITY TO PRODUCE THESE TWO PARTIES BUT HOWEVER SUBMITTED XEROX COPIES OF PURCHASE BILLS SALE BILLS BANK STATEMEN TS INDICATING PAYMENTS MADE AND COPIES OF LEDGER ACCOUNTS OF THESE TWO PAR TIES AS APPEARING IN ITS BOOKS. THE ASSESSEE CONTENDED BEFORE THE AO THAT TH ERE IS NO CASE OF BOGUS PURCHASES AND THAT THE AFORESAID DOCUMENTARY EVIDENCE ESTABLISHED THAT THE SAID PURCHASES AMOUNTING TO ` 70 60 756/- FROM THESE TWO PARTIES WAS GENUINE. THE EXPLANATION PUT FORTH BY THE ASSES SEE DID NOT FIND FAVOUR WITH THE AO WHO WAS OF THE VIEW THAT THE INABILITY OF THE ASSESSEE TO PRODUCE THESE TWO PARTIES BEFORE HIM COUPLED WITH THE INFORMATION FROM SALES TAX AUTHORITIES MADE IT CLEAR THAT THE TRANSA CTIONS WITH THE AFORESAID TWO PARTIES VIZ. M/S. CRYSTAL ENTERPRISES AND M/S. INDUJA TRADERS PVT. LTD. WERE NOT GENUINE AND WERE ONLY ACCOMMODATION E NTRIES AND THEREFORE FURNISHING OF PURCHASE BILLS IN THIS REGARD WOULD N OT SUFFICE. RELYING ON THE STATEMENT OF SHRI RAMACHANDRA KORE OF M/S. CRYSTAL ENTERPRISES GIVEN BEFORE THE SALES TAX AUTHORITIES ON 01.03.2012 BY W AY OF AFFIDAVIT; WHICH THE AO FELT WAS AMPLE EVIDENCE TO DISPROVE THE CLAI M OF GENUINE PURCHASES MADE BY THE ASSESSEE THE AO DISALLOWED THE SAID PU RCHASES AMOUNTING TO ` 70 60 756/- UNDER SECTION 40A(3) OF THE ACT. APART FROM THIS THE AO ALSO MADE DISALLOWANCE OF PERSONAL EXPENSES - ` 56 638/- AND ` 6 908/- UNDER SECTION 14A OF THE ACT. THE ASSESSMENT WAS ACCORDIN GLY COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 14.03.20 13. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 14.0 3.2013 FOR A.Y. 2010-11 THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A)-34 MUMBAI. ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 3 THE LEARNED CIT(A) DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DATED 09.10.2014 ALLOWING THE ASSESSEE PARTIAL RELIEF OF ` 52 95 567/- AND CONFIRMED THE DISALLOWANCE ONLY TO THE EXTENT OF 25 % OF THE VALUE OF PURCHASES I.E. ` 17 65 189/- OUT OF ` 70 60 756/- AND HOLDING THAT THE CORRECT SECTION UNDER WHICH THE DISALLOWANCE OUGHT TO BE MADE WAS 69C OF THE ACT. 3. BOTH REVENUE AND THE ASSESSEE BEING AGGRIEVED BY T HE ORDER OF THE CIT(A)-34 MUMBAI DATED 27.09.2014 FOR A.Y. 2010-11 TO THE EXTENT THE SAME IS AGAINST THEM HAVE PREFERRED APPEALS RAISIN G THE FOLLOWING GROUNDS: - 3.1 GROUNDS RAISED BY REVENUE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.70 60 756/- MADE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF NON-G ENUINE PURCHASES FROM M/S. CRYSTAL ENTERPRISES AND M/S. IN DUJA TRADERS PVT. LTD. AND DIRECTING THE DISALLOWANCE AT 25% OF ALLEGED PURCHASES OF RS.70 60 756/- IGNORING THE FA CT THAT THESE TWO PARTIES ARE INCLUDED IN THE LIST OF SUSPICIOUS AND/OR HAWALA DEALERS PROVIDED BY THE SALES TAX DEPARTMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS OF RS.44 67 716/- AND RS.25 93 040/- MADE ON ACCOUNT OF PURCHASES MADE FR OM M/S. CRYSTAL ENTERPRISES AND M/S. INDUJA TRADERS PVT. LT D. AND DIRECTING THE DISALLOWANCE AT 25% OF ALLEGED PURCHA SES OF RS.70 60 756/- IGNORING THE FACT THAT THE SALES TAX COMMISSIONER HAS RECORDED THE STATEMENT OF SHRI SAN JAY RAMCHANDRA KORE BY WAY OF AFFIDAVIT THAT THESE DEAL ERS ARE ENGAGED IN THE BUSINESS OF ISSUE OF BILLS WITHOUT P HYSICAL DELIVERY OF MATERIALS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.70 60 756/- MADE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF NON-G ENUINE PURCHASES FROM M/S. CRYSTAL ENTERPRISES AND M/S. IN DUJA TRADERS PVT. LTD. AND DIRECTING THE DISALLOWANCE AT 25% OF ALLEGED PURCHASES OF RS.70 60 756/- WITHOUT GIVING ANY FINDINGS WITH REGARD TO THE GENUINENESS OF THE CLAIM OF THE ASSESSEE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. C.I.T. (A) ERRED IN DELETING THE ADDITIONS OF R S.44 67 716/ AND RS.25 93 040/- MADE ON ACCOUNT OF PURCHASES MAD E FROM M/S. CRYSTAL ENTERPRISES AND M/S. LNDUJA TRADERS PV T. LTD. AND DIRECTING THE DISALLOWANCE AT 25% OF ALLEGED PURCHA SES OF ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 4 RS.70 60 756/- IGNORING THE FACT THAT THE ONUS LIES ON ASSESSEE TO PRODUCE THE CONCERNED PARTIES WHICH ASSESSEE FAI LED TO DO. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. C.I.T.(A) ERRED IN DELETING THE ADDITIONS RELYING O N THE HON'BLE BOMBAY HIGH COURT'S DECISION IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISERS P. LTD.(2013) 216 TAXMAN 171 WIT HOUT APPRECIATING THE FACT THAT THE ASSESSEE'S CASE IS E NTIRELY DIFFERENT FROM THE FACTS OF NIKUNJ EXIMP CASE WHEREAS IN THE ASSESSEE'S CASE THE SALES TAX DEPARTMENT HAS CARRIED OUT INVES TIGATION AND ESTABLISHED THAT THE PURCHASES ARE NOT GENUINE AND THAT IS NOT IN THE NIKUNJ EXIMP CASE. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLA NT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHIC H MAY BE NECESSARY. 3.2 GROUNDS RAISED BY THE ASSESSEE 1. THE LD. CIT(A) ERRED IN CONFORMING DISALLOWANCE OF 25% OF ALLEGED PURCHASES OF RS.70 60 756/- I.E. RS.17 65 1 89/- [ORDER PAGE NO. 8 - PARA (IV)] INSTEAD OF ALLOWING/ DELETING ENTIRE ADDITION OF ` 70 60 756 AS EXPLAINED IN WRITTEN SUBMISSION & PAPER BOOK. 2. WITHOUT PREJUDICE TO THE ABOVE THE AO INFERRED IN HIS ORDER THAT PURCHASES OF RS.70 60 756 IS IN CASH (INSPITE OF COGENT EVIDENCE OF PAYMENT BY A/C. PAYEE CHEQUES) & DISALLOWED U/S. 40A(3) WHICH WAS CORRECTED BY LD. CIT(A) TO SE CTION 69C AS UNEXPLAINED EXPENDITURE IGNORING THE FACT IT WAS EXPLAINED & FURTHER THERE WAS CORRESPONDING SALES OF GOODS (I .E. LICENCES) IS ALSO WRONG. 3. WIHTOU PREJUDICE TO THE ABOVE THE LD. CIT(A) ST ATED ON PAGE 8 PARA (IV) AS UNDER: - HENCE THE ADDITION OF ENTIRE PURCHASES AMOUNT CA NNOT BE MADE IN THE PRESENT CASE. RATHER THE CAUSE OF JUSTICE WOULD BE MET BY MAKING ADDITION OF A REASONABLE PERCENTAGE OF SUCH PURCHAS ES IN ORDER TO FULFIL THE GAP OF ANY LEAKAGE IN AFORESAID CIRCUMSTANCES. I FURTHER FIND THAT IN MANY SUCH CASES THE ADDITIONS ARE MADE BASED ON THE G.P./N.P. RATIO. IN THE PRESENT CASE THE APPELLANT HAS SHOWN G.P. OF 0.68% & 1.19% ON SUBSEQUENT SALE OUT OF PURCHASES FROM TWO SUSPICIOUS DEALERS I.E. M/S. CRYSTAL LICENSE & M/S. INDUJA L ICENSE RESPECTIVELY. THE APPELLANT HAS NOT SHOWN ANY COMPARISON OF G.P. RATIO IN RESPECT OF PURCHASE/SALE FROM OTHER PARTIES AND ALSO HIS OVER ALL G.P. RATIO. IGNORING THE FACT THAT THE ABOVE DETAILS WAS GIVEN IN WRITTEN SUBMISSION DT. 20.05.2014 PARA 25 - WITHOUT PREJUDICE TO THE ABOVE THE ASSESSING OFFICER FAILE D TO APPRECIATE G.P. RATIO WORKING OF THE TRANSACTION WH ICH IS AS UNDER: - ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 5 PURCHASE SALES PROFIT G.P. RATE CRYSTAL LICENSE 44 67 716 44 98 528 30 812 0.68 INDUJA LICENSE 25 93 040 26 24 297 31 257 1.19 70.60 456 ======== 71 22 825 ======== 62 069 ====== 0.87 === THE OVERALL G.P RATIO FOR THE WHOLE YEAR IS ALSO A S UNDER: - A.Y. G.P. 2010-2011 0.76% 2009-2010 0.75% 2008-2009 1.11% 4. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AME ND THE ABOVE GROUNDS OF APPEAL. 4. GROUNDS 2 TO 4 OF ASSESSEES APPEAL AT THE OUTSET THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT ASSESSEE IS NOT PRESSING GROUNDS RAISED AT S.NOS. 2 TO 4 IN ITS APPEAL. SINCE THE GROUNDS AT S. NOS. 2 TO 4 OF THE ASSESSEE APPEA L (SUPRA) ARE NOT BEING PRESSED THE SAME ARE RENDERED INFRUCTUOUS AND ARE ACCORDINGLY DISMISSED. 5. GROUNDS 1 TO 5 OF REVENUES APPEAL GROUND NO. 1 OF ASSESSEES APPEAL 5.1 THE ONLY ISSUE FOR CONSIDERATION AND ADJUDICAT ION BEFORE US IS WITH RESPECT TO THE GENUINENESS OR OTHERWISE OF PURCHASE S AMOUNTING TO ` 70 60 756/- ALLEGEDLY MADE BY THE ASSESSEE FROM M/S . CRYSTAL ENTERPRISES (I.E. ` 44 67 716/-) AND M/S. INDUJA TRADERS PVT. LTD. (I.E . ` 25 93 040/-). REVENUE CHALLENGES THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION IN RESPECT OF 75% O F THE AFORESAID PURCHASES FROM THESE TWO PARTIES. ON THE OTHER HAND THE ASSE SSEES GRIEVANCE IS THAT THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION OF ` 70 60 756/- ON ACCOUNT OF PURCHASES AND ERRED IN CO NFIRMING THE SAME TO THE EXTENT OF ` 17 05 189/- I.E. 25% OF THE VALUE OF THE SAID PURC HASES. 5.2 THE LEARNED D.R. FOR REVENUE WAS HEARD AND HE P LACED STRONG RELIANCE ON THE FINDINGS RENDERED BY THE AO IN THE ORDER OF ASSESSMENT ON HIS ISSUE. 5.3.1 THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED T HAT IN THE IMPUGNED ORDER AT PARA 3.3 THEREOF THE LEARNED CIT(A) HAS O BSERVED THAT THE ADDITION ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 6 MADE BY THE AO WAS MADE ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX AUTHORITIES AND THAT THERE WAS NO MENTION OF TH E NAME OF THE ASSESSEE IN THE CASE ON HAND THEREIN OR IN THE STATEMENT/AFF IDAVIT OF PERSONS WHICH IS RELIED ON BY THE AO AND CONSEQUENTLY CONTENDED T HAT THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED AS IT IS BASED ONLY O N PRESUMPTIONS AND SURMISES. IT IS SUBMITTED THAT THE ASSESSEE HAD ADM ITTEDLY PLACED BEFORE THE AUTHORITIES BELOW COPIES OF THE PURCHASE BILLS FOR PURCHASES FROM THE AFORESAID TWO PARTIES (PLACED AT PAGES 26 TO 47 OF PAPER BOOK) BANK STATEMENTS EVIDENCING PAYMENTS MADE THROUGH BANKING CHANNELS LEDGER COPIES OF THESE TWO PARTIES IN ITS BOOKS OF ACCOUNT S WHICH EVIDENCED THE GENUINENESS OF THE PURCHASES. IT WAS FURTHER CONTEN DED THAT THERE IS NO EVIDENCE WITH THE AO TO PROVE THAT CASH HAS FLOWN B ACK TO THE ASSESSEE IN THESE TRANSACTIONS OR THAT THE BILLS GIVEN TO THE A SSESSEE BY THOSE TWO PARTIES WERE BOGUS. IT WAS SUBMITTED THAT ONCE THE PURCHASES AND SALES ARE NOT DISPUTED BY THE AUTHORITIES BELOW THERE WA S NO REASON TO MAKE ADDITION OF ENTIRE ALLEGED PURCHASES OR SUSTAIN A P ART OF IT. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (P) L TD. (2013) 216 TAXMAN 17 (BOM) WHEREIN IT WAS HELD THAT WHERE SALES SUPPO RTED THE PURCHASES AND PAYMENTS WERE THROUGH BANKS MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE AO THE PURCHASES COULD NOT BE REJECTED AS BOGUS. 5.3.2 THE LEARNED A.R. FOR THE ASSESSEE FURTHER SUB MITTED THAT THE ADDITIONS MADE BY THE AO IN THE CASES OF SOME OTHER ASSESSEES ON IDENTICAL REASONS; I.E. ON THE BASIS OF STATEMENTS GIVEN BY THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT WITHOUT CARRYING OU T ANY OTHER SEPARATE INQUIRY TO ESTABLISH THE ALLEGATION OF BOGUS PURCHA SES WERE HELD TO BE UNJUSTIFIED BY VARIOUS COORDINATE BENCHES OF THIS T RIBUNAL AND DELETED. IN THIS REGARD THE LEARNED A.R. PLACED RELIANCE ON I NTER ALIA THE FOLLOWING JUDICIAL PRONOUNCEMENTS OF THE COORDINATE BENCHES: - (I) RAMILA PRAVIN SHAH (ITA NO. 5246/MUM/2013 DATED 05.03.2015) (II) RAMESH KUMAR & CO. (ITA NO. 2959/MUM/2014 DATE D 28.11.2014) (III) RAJEEV G. KALATHIL (ITA NO. 6727/MUM/2012 DAT ED 02.08.2014) ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 7 IT IS SUBMITTED THAT IN THE INSTANT CASE ALSO THE AO HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT. 5.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; IN CLUDING THE JUDICIAL PRONOUNCEMENTS CITED. THE ASSESSEE PROP. S.R. INTE RNATIONAL IS ENGAGED IN THE BUSINESS OF TRADING IN LICENCES. THE AO OBSE RVED THAT THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA HAS LIS TED OUT NAMES OF CERTAIN DEALERS WHO WERE ALLEGEDLY PROVIDING ACCOM MODATION ENTRIES TO VARIOUS PARTIES WITHOUT DOING ACTUAL BUSINESS. THE AO NOTICED THAT THE ASSESSEE HAD MADE PURCHASES FROM TWO SUCH PARTIES WHOSE NAMES FOUND PLACE IN THE LIST GIVEN BY THE SALES TAX DEPARTMENT I.E. M/S. CRYSTAL ENTERPRISES (OF ` 44 67 716/-) AND M/S. INDUJA TRADERS PVT. LTD. (OF ` 25 93 040/-) TOTALLING TO ` 70 60 756/-. THE AO ALSO PLACED RELIANCE ON THE STATEMENT OF A THIRD PARTY SHRI SANJAY RAMACHANDRA KORE. BEFORE THE AO AND LATER BEFORE THE CIT(A) ADMITTEDLY THE ASSESSE E FILED COPIES OF PURCHASE BILLS BANK STATEMENTS EVIDENCING PAYMENTS MADE FOR PURCHASE THROUGH BANKING CHANNELS AND THE COPIES OF LEDGER A CCOUNTS OF THESE TWO PARTIES APPEARING IN THE ASSESSEES BOOKS OF ACCOUN T TO SHOW THAT THE SAID PURCHASES WERE GENUINE. THE AO WAS OF THE VIEW THAT THE INABILITY OF THE ASSESSEE TO PRODUCE THESE TWO PARTIES BEFORE HIM C OUPLED WITH THE RELIANCE ON THE STATEMENT OF A THIRD PARTY BEFORE THE SALES TAX DEPARTMENT EVEN THOUGH THE ASSESSEE WAS NOT NAMED THEREIN; RENDERED THE PURCHASES BOGUS AND THEREFORE RELYING ON THE SAID STATEMENT O F THE THIRD PARTY HELD THE SAID PURCHASES AMOUNTING TO ` 70 60 756/- AS BOGUS. 5.4.2 ON APPEAL WE FIND THAT THE LEARNED CIT(A) OBS ERVED THAT IN THE STATEMENT MADE BY THE THIRD PARTY BEFORE SALES TAX DEPARTMENT RELIED UPON BY THE AO TO MAKE THE ADDITION ON ACCOUNT OF B OGUS PURCHASES THE ASSESSEE HAS NOT BEEN NAMED AND THAT THERE BEING NO CORROBORATIVE EVIDENCE TO PROVE THAT THE SAID PURCHASES MADE FROM THE TWO PARTIES WERE BOGUS THE ADDITION OF BOGUS PURCHASES MADE BY THE AO IN THE CASE ON HAND WAS BASED ON PRESUMPTIONS AND IS NOT SUSTAINAB LE IN THE EYES OF LAW. ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 8 IT IS SEEN THAT THE LEARNED CIT(A) ALSO ACKNOWLEDGE D THAT THE ASSESSEE IN ITS ATTEMPT TO PROVE THE SAID PURCHASES AS GENUINE HAD FILED COPIES OF PURCHASE BILLS BANK STATEMENTS EVIDENCING PAYMENT THEREOF LEDGER ACCOUNTS OF THESE PARTIES IN THE ASSESSEES BOOKS O F ACCOUNT. WE ALSO FIND THAT NO FAULT HAD APPARENTLY BEEN FOUND BY THE LEAR NED CIT(A) WITH THESE PURCHASES AS THERE WAS NO EVIDENCE ON RECORD TO PRO VE THAT CASH IN RESPECT OF THE SAID TRANSACTION HAD FLOWN BACK TO THE ASSES SEE OR THAT THE VOUCHERS/PURCHASE BILLS GIVEN BY THESE TWO PARTIES WERE BOGUS. ONCE THE PURCHASES AND SALES ARE NOT DISPUTED AS IN THE CAS E ON HAND THERE IS NO REASON TO MAKE ADDITION OF THE ENTIRE ALLEGED PURCH ASES. 5.4.3 IN THE CASE OF SHRI RAMILA PRAVIN SHAH (ITA N O. 5246/MUM/2013 DATED 05.03.2015) A COORDINATE BENCH OF THIS TRIBU NAL FOLLOWING THE DECISIONS OF OTHER COORDINATE BENCHES IN THE CASE O F RAMESH KUMAR & CO. (SUPRA) HELD THAT THE AO WAS NOT JUSTIFIED IN MAKI NG SUCH ADDITIONS BASED ON STATEMENTS GIVEN BY THIRD PARTIES BEFORE THE SAL E TAX DEPARTMENT WITHOUT CONDUCTING ANY FURTHER INVESTIGATION TO EST ABLISH WITH CORROBORATIVE EVIDENCE THAT THE SAID PURCHASES WERE BOGUS. THE COORDINATE BENCH IN THE CASE OF RAMILA PRAVIN SHAH (SUPRA) IN THIS REGARD AT PARA 6 AND 7 THEREOF HAS HELD AS UNDER: - 6. ON THE OTHER HAND THE ID. AR SUBMITTED THAT TH E ADDITIONS MADE IN THE CASE OF SOME OTHER ASSESSES ON IDENTICA L REASONS HAVE BEEN DELETED BY THE CO-ORDINATE BENCHES OF THE TRIB UNAL IN THE FOLLOWING CASES A) RAMESH KUMAR AND CO V/S ACIT IN ITA NO.2959/MUM/201 4 (AY-2010-11) DATED 28.11.2014; B) DCIT V/S SHRI RAJEEV G KALATHIL IN ITA NO.6727/MUM/ 2012 (AY- 2009-10) DATED 20.8.2014; AND C) SHRI GANPATRAJ A SANGHAVI V/S ACIT IN ITA NO. 2826/MUM/2013 (AY-2009-10) DATED 5.11.2014 IN ALL THE ABOVE SAID CASES THE CO-ORDINATE BENCHE S OF THE TRIBUNAL HAS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE AD DITION ON THE BASIS OF STATEMENTS GIVEN BY THE THIRD PARTIES BEFORE THE SA LES TAX DEPARTMENT WITHOUT CONDUCTING ANY OTHER INVESTIGATION. IN THE INSTANT CASE ALSO THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE PARTIES BEFORE THE SALES TA X DEPARTMENT. WE NOTICE THAT THE LD.CIT(A) HAS PROPERLY ANALYSED THE FACTS PREVAILING IN THE INSTANT CASE AND FOR THE SAKE OF CONVENIENCE WE EX TRACT THE SAME BELOW:- ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 9 '5.3.11. I HAVE ALSO GONE THOUGH THE JUDICIAL PRONO UNCEMENTS RELIED UPON BY THE LD AR AND FIND THAT THE FACTS OF THE AB OVE REFERRED JUDICIAL PRONOUNCEMENTS ARE SIMILAR TO THE PRESENT FACTS OF THE CASE AND THEREFORE THE RATIO OF JUDGMENTS OF THE ABOVE REFERRED TWO CASES ARE FULLY APPLICABLE IN THE PRESENT CASE. FURTHER I HAVE ALSO TAKEN INTO CONSIDERATION THE DECISION OF JURISDICTIONAL HIGH C OURT AND ITAT I.E. THE COMMISSIONER OF INCOME TAX - 1 MUMBAI VS NIKUNJ EXIMP ENTERPRISES PVT LTD. APPEAL NO HA NO. 5604 OF 2010 (HON. MUMBAI HIGH COURT) AND BALAJI TEXTILE INDUSTRIES (P) LTD. VS INCOME TAX OFFICER (1994) 49 LTD (BOM) 177. WHILE IN THE CASE OF NIKUN J EXIMP ENTERPRISES THE HON'BLE BOMBAY HIGH COURT IN ITS L ATEST JUDGMENT HAS HELD THAT ONCE THE SALES ARE ACCEPTED THE PURC HASES CANNOT BE TREATED AS INGENUINE IN THOSE CASES WHERE THE APPEL LANT HAD SUBMITTED ALL DETAILS OF PURCHASES AND PAYMENTS WER E MADE BY CHEQUES MERELY BECAUSE THE SELLERS/SUPPLIERS COULD NOT BE PRODUCED BEFORE THE A.O. BY THE ASSESSEE. FURTHER I HAVE AL SO GONE THROUGH THE JUDGMENT IN CASE BALAJI TEXTILE INDUSTRIES (P) LTD. VS INCOME TAX OFFICER BY HON. ITAT MUMBAI (1994) 49 LTD (BOM) 17 7 WHICH WAS MADE AS LONG BACK AS 1994 AND WHICH STILL HOLDS GOO D IN WHICH WAS HELD THAT- 'ISSUING PRINTED BILLS FOR SELLING THE T EXTILE GOODS TO THE ASSESSEE-COMPANY AT BHIWANDI WAS NOT A CONCLUSIVE P ROOF BUT IT WAS A PRIMA FADE PROOF TO ARRIVE TO A CORRECT CONCLUSIO N THAT THE ASSESSEE PURCHASED CERTAIN GOODS FROM CERTAIN PARTIES AT BHI WANDI. THE ASSESSEE SOLD THOSE GOODS TO '5' AND ADJUSTED THE S ALE PROCEEDS AGAINST THE LOAN TAKEN BY IT FROM THAT PARTY. THE A SSESSEE'S BOOKS OF ACCOUNT AND THE BOOKS OF ACCOUNT OF '5' IN WHICH TH E ENTRIES OF SALE AND ADJUSTMENT WERE MADE COULD NOT BE DISCARDED ME RELY BY SAYING THAT THEY WERE NOT GENUINE ENTRIES THOUGH NEITHER T HE ASSESSING OFFICER NOR THE COMMISSIONER (APPEALS) OPINED ANYTH ING IN RESPECT OF THOSE ENTRIES. FURTHER THE PURCHASE OF THE GOODS I N THE MONTH OF MARCH 1985 DID NOT MAKE ANY DIFFERENCE. THE ASSESSE E MIGHT NOT HAVE CARRIED ON ANY BUSINESS ACTIVITIES PRIOR TO MA RCH 1985 BUT THAT DID NOT MEAN THAT THE ASSESSEE WAS NOT ENTITLED TO CARRY ON THE BUSINESS ACTIVITY IN MARCH 1985. THEY COULD NOT BE COMPELLED TO CARRY ON THE BUSINESS ACTIVITY THROUGHOUT THE YEAR. THERE WERE NO GOOD REASONS TO DISBELIEVE THE SALES MADE BY THE ASSESSE E TO 'S'. NO SALES WERE LIKELY TO BE EFFECTED IF THERE WERE NO PURCHAS ES. A SALE COULD BE MADE IF THE GOODS WERE AVAILABLE WITH THE SELLER. F ROM ALL THESE FACTS ON RECORD A REASONABLE AND CONVINCING INFERENCE WH ICH COULD BE DRAWN WAS THAT THE ASSESSEE PURCHASED THE TEXTILE GOODS SOLD THEM AND ADJUSTED THE SAME TOWARDS THE LOAN TAKEN BY IT. THEREFORE THE ASSESSEE WAS ENTITLED TO GET THE ENTIRE DEDUCTION. I HAVE ALSO TAKEN INTO CONSIDERATION THE G.P RATIO/G.P. MARGIN OF TH E APPELLANT IN THE PREVIOUS A.Y. AS WELL AS SUBSEQUENT ASSESSMENT YEAR . IF THE ADDITION MADE BY THE A.O. IS ACCEPTED THEN G.P. RATIO OF TH E APPELLANT DURING THE PRESENT A.Y.WILL BECOME ABNORMALLY HIGH AND THE REFORE THAT IS NOT ACCEPTABLE BECAUSE IT ONUS OF THE A.O. BY BRINGING ADEQUATE MATERIAL ON RECORD TO PROVE THAT SUCH A HIGH G.P. RATIO EXIS TS IN THE NATURE OF BUSINESS CARRIED OUT BY THE APPELLANT. ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 10 FURTHER IT HAS TO BE APPRECIATED THAT (I)PAYMENTS WERE THROUGH BANKING CHANNEL AND BY CHEQUE (II) NOTICES COMING B ACK DOES NOT MEAN THOSE PARTIES ARE BOGUS THEY ARE JUST DENYI NG THEIR BUSINESS TO AVOID SALES TAX/VAT ETC (III) STATEMENT BY THIR D PARTIES CANNOT BE CONCLUDED ADVERSELY IN ISOLATION AND WITHOUT CORROB ORATING EVIDENCES AGAINST APPELLANT (IV) NO CROSS EXAMINATION HAS BEE N OFFERED BY AO TO THE APPELLANT TO CROSS EXAMINE THE RELEVANT PARTIES (WHO ARE DEEMED TO BE WITNESS OR APPROVER BEING USED BY AO AGAINST THE APPELLANT) WHOSE NAME APPEAR IN THE WEBSITE WWW.MAHAVAT.GOV.IN AND (V) FAILURE TO PRODUCE PARTIES CANNOT BE TREATED ADVERS ELY AGAINST APPELLANT. IN VIEW OF THE FACTS DISCUSSED ABOVE AS WELL AS BIN DING JUDICIAL PRONOUNCEMENTS OF THE JURISDICTIONAL ITAT MUMBAI BE NCH AS WELL AS HON'BLE MUMBAI HIGH COURT AND OTHER LEGAL PRECEDENT S THE ADDITION MADE BY THE AO AMOUNTING TO RS.28 08 071/- CANNOT B E SUSTAINED. ACCORDINGLY THE ADDITION OF RS.28 08 071/- IS DELE TED.' 7. HENCE ON A CONSPECTUS OF THE MATTER WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE ID. CIT(A) ON THIS ISSUE. FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH IN THE CASE OF RAMLIA PARVIN SHAH (SUPRA) WE HOLD AND DIRECT THAT THE ADDITION OF ` 70 60 756/- MADE BY THE AO (DELETED TO THE EXTENT O F ` 52 95 567/- BY THE CIT(A)) IS TO BE DELETED IN TOTO. WE HOLD AND DIREC T ACCORDINGLY. CONSEQUENTLY REVENUES GROUND RAISED AT S.NOS. 1 T O 5 (SUPRA) ARE DISMISSED. 5.4.4 AFTER COMING TO THE ABOVE FINDING IT IS SEEN THAT THE LEARNED CIT(A) NOTICED THAT IN RESPECT OF THESE TRANSACTIONS I.E. PURCHASES OF ` 70 60 756/- THE ASSESSEE HAD SHOWN G.P. OF 0.68% ON SALE OF ITEMS PURCHASED FROM M/S. CRYSTAL ENTERPRISES AND G.P. OF 1.19% ON SALE OF ITEMS PURCHASED FROM M/S. INDUJA TRADERS PVT. LTD. STATING THAT INTER ALIA THE ASSESSEE HAD NOT GIVEN HIS OVERALL G.P. RATIO THE LEARNED CIT(A) PROCEEDED TO HOLD ON ESTIMATE THAT 25% OF THE PUR CHASES AMOUNTING TO ` 70 60 756/- I.E. R.17 65 189/- IS TO BE BROUGHT TO TAX IN ASSESSEES HANDS. WE FIND THAT THIS AVERMENT OF THE LEARNED CI T(A) TO BE FACTUALLY INCORRECT. FROM THE DETAILS PLACED BEFORE THE LEARN ED CIT(A) IT IS SEEN THAT THE ASSESSEE VIDE LETTER DATED 20.05.2014 HAD INFAC T AT PAGE 15 THEREOF GIVEN ITS OWN G.P. FOR THE LAST FEW YEARS AS UNDER: - ITA NOS. 7723&7251/MUM/2014 SHRI VINOD S. DEORA 11 SR.NO. A.Y. GROSS PROFIT (I) 2010-11 0.76% (II) 2009-10 0.75% (III) 2008-09 1.11% IN OUR VIEW WHEN THE G.P. OF THE ASSESSEE FROM A.Y . 2008-09 TO 2010- 11 HOVERED BETWEEN 1.11% TO 0.76% AND THE G.P. ON S ALE OF THE SAID PURCHASES IS 0.68% AND 1.19% NOTHING APPEARS ABNOR MALLY LOW IN THE G.P. RATES. THERE IS NO BASIS WHATSOEVER FOR THE LE ARNED CIT(A) TO HAVE ESTIMATED THE SAID PURCHASES AT ` 17 65 189/- (I.E. 25% OF ` 70 60 756/-) AND NEITHER HAS THE LEARNED CIT(A) RENDERED ANY COG ENT REASONS FOR COMING TO THE SAID FINDING. IN OUR VIEW THE LEARNED CIT(A )S ESTIMATION THAT 25% OF THE ALLEGED PURCHASES OF ` 70 60 756/- IS PROFIT THEREFROM BE TAXED AS INCOME OF THE ASSESSEE IS UNSUSTAINABLE AND THEREF ORE DELETE THE SAME. CONSEQUENTLY GROUND NO. 1 OF ASSESSEES APPEAL IS ALLOWED. 6. IN THE RESULT THE ASSESSEES APPEAL FOR A.Y. 2010- 11 IS ALLOWED AND REVENUES CROSS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER 2016. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 5 TH OCTOBER 2016 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -34 MUMBAI 4. THE CIT - 24 MUMBAI 5. THE DR F BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.