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DCIT vs M/S. Mota Trading Pvt. Ltd… | ITAT Mumbai 2023 | BharatTax

DCIT, CIRCLE-7(1)(1), MUMBAI vs. M/S. MOTA TRADING PVT. LTD., MUMBAI

ITA 2195/MUM/2023Status: DisposedITAT Mumbai30 October 2023AY 2011-1217 pages

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Kachwala Gems v. JCIT
288 ITR 10 · 2007 · SC
332 citing

Income Tax Appellate Tribunal, ‘D‘ BENCH

Before: SHRI AMIT SHUKLA & SHRI, GAGAN GOYAL

For Appellant: Shri Sanjay Parikh

For Respondent: Smt. Mahita Nair

Hearing: 30/10/2023Pronounced: 30/10/2023

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against the order dated 18/04/2023 passed by NFAC, Delhi for the quantum of assessment passed u/.143(3) r.w.s. 147 for the A.Y.2011-12. 2. In the grounds of appeal, Revenue has raised the following grounds:-

1.

1.On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred to delete the addition made on disallowance of RS.2,51,76,570/- being purchase made from the M/s SAR Engineering Ld which is a suspicious entity 2.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred to decide against the Ld AO for violation of principles of natural justice whereas the AO has followed the due process of law.

3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred to held that the transaction done through account payee cheque are genuine whereas assessee itself vide affidavit dated 22.09.2009 admitted that certain purchases of DFIA/DFRC licenses from three parties during AY 2008-09 to 2010-11 may not be considered genuine purchases even when it was done through account payee cheque and purchase were duly reflected in the books of account 4."On the facts and in the circumstances of the case and in law, the CIT (A) has erred to decide against the Ld AO without providing an opportunity of being heard when admitting additional ground."

5. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary at the time of hearing."

2.

Thus, in the grounds of appeal Revenue has challenged the deletion of addition made on disallowance of Rs.2,51,76,570/- being purchase made from M/s. SAR Engineering Ltd.; and secondly, ld. CIT(A) has erred in deciding against the AO without providing an opportunity of being heard when admitting the additional ground.

11.

Further on merits also he discussed the issue in detail holding as under:- It is a fact that all the payments to the suppliers have been made through banking channels. No evidences has been brought on record proving that the suppliers had withdrawn cash immediately after deposits of cheques of the assesses Otherwise a probable presumption could have been reached that the money trail proved returning of money to the assessed from the suppliers. We are aware that payment by cheques in itself is not conclusive. But, the surrounding circumstances are such that prove that the AO had made upheld the addition not on evidence but on surmises and suspicion. It is said that suspicion of highest degree cannot take place evidence and in the case under consideration the AO have not brought sufficient material that could justify huge addition made to the income of the assessee. In my opinion, the information received by the AO was a very good starting point for further investigation. But, he did not taken it to the logical end. It can be said that he left the starting point as and where it was. Without rebutting the evidences produced by the assessee, the AO made the addition. It appears that the only thing that has tied the scale against it is returning back of notices issued by the AO, u/e.133(6)of the Act But, this itself is not sufficient to hold that purchases made by it were bogus. In the case of Nikunj Exim Export, the Hon'ble Bombay High Court has held that non service of notice does not conclusively prove the non genuineness of a transaction. By producing various documents the assessee had proved that balance of convenience was in its favour. For violation of principles of natural justice alone, the order can be held to be invalid. Here, we would like to rely upon the cases referred to by the AR before us-especially the case of Andaman Timbers (supra) and it reads as under- • According to us, not allowing the assessee to cross examine the witness by the Adjudicating Authority though the statements M/s. Mota Trading Pvt. Ltd. of those witnesses were made the basis of impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine the Adjudicating Authority did not grant this opportunity to the assessee, it would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However no such option was granted and the aforesaid plea is not even dealt by the Adjudicating Authority But, I would like to decide the issue on merits also. The AO has not rejected the books of accounts of the assessee nor have doubted the purchases made by it. The recognized principles of accountancy and tax jurisprudence hold that no sales can take place without purchases. Thus, the case under appeal is not about non genuineness of purchases itself, but it is about non genuineness of suppliers. Whether provisions of section 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of accounts. Here, the payments to the suppliers, as stated earlier, have been made by cheques. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose. A bare reading of the section makes it clear that if the assessee incurred any expenditure, but offered no explanation about the source of such expenditure or part thereof, or the explanation so offered is not satisfactory, such expenditure may be deemed to be the income of the assessee. The assessee has offered satisfactory explanation about the source of the expenditure in the case before us. In the case of Parekh Corporation Ul Building (32 CCH 129) the Tribunal has discussed the applicability of provisions of section 69C of the Act and has held as under:

M/s. Mota Trading Pvt. Ltd. The assessee has brought his import licenses like DFRC/DFIA/DEPB licenses from various parties including SAR Engineering Ltd. During the year assessee has made purchases of these licenses for Rs.2,51,76,570/- from the said party. In support, assessee has filed confirmation of accounts and the copy of ledger accounts of M/s. SAR Engineering Ltd. wherein sales have been shown to the assessee company. All these transactions are through banking channels and in support of this, the copy of bank statements have also been filed. The copy of tax invoices placed in the paper book shows various particulars of sale of import licenses alongwith transfer letter duly authenticated by the manager of the bank. None of the tax invoices and transfer letters has been rebutted or any comment has been made by the ld. AO. If assessee had shown purchase bills for licenses alongwith copy of covering letter for transfer of licenses duly attested by the Bank Manager alongwith transactions reflected in the bank accounts then it cannot be held that assessee had not made any purchases. Apart from that, assessee has also produced stock register highlighting the purchases, corresponding sales made to various parties, the copy of which is appearing from pages 161 to 166. These document shows date wise, license number wise purchases made from M/s. SAR Engineering Ltd. and corresponding sales made to various parties alongwith inward and outward quantity of stock. None of these details of trading account have been doubted or the books of accounts has been rejected by the ld. AO. The assessee has also filed copy of ledger accounts of the parties to M/s. Mota Trading Pvt. Ltd. whom assessee has made sales of the same licenses purchased from M/s. SAR Engineering Ltd. which are also reflected in the bank statements, that the amount received from the parties to whom the same licenses were sold. Another important piece of evidence was that assessee had filed customer wise VAT sales return not only in the case of assessee itself but also of SAR Engineering Ltd., which goes to show that the purchase and sales have been accepted by the VAT department. Once the source of purchases are from the books duly corroborated by inward stock register, quantity details of licenses purchased and corresponding details of sales made to various parties, then it cannot be held that purchases are bogus.