THE PR. COMMISSIONER OF INCOME TAX, PANAJI. vs. NEELAM AJIT PHATARPEKAR.

The learned Counsel for the parties agree that both these Appeals can be disposed of by a common Judgment and Order since the issues involved in both these Appeals are identical.

The learned Counsel for the parties, however, submit that Tax Appeal No.22/2016 may be treated as a lead Appeal.

This Appeal was admitted on 5th March 2019 on the following substantial questions of law “1. Whether the Income Tax Appellate Tribunal erred in law upholding the disallowance to the extent of Rs.65,000/-

Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner of Income Tax(A), in disallowing cash purchases without considering that onus is upon the assessee to prove the genuineness thereof?

Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner of Income Tax(A), deleting additions made under 41(1) when assessee had not filed any confirmation of trade creditors and existence of liabilities?

Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner of Income Tax(A), in deleting additions of Rs.1,18,26,320/- on account of undervaluation of closing stock merely by passing journal entries ?

Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner in deleting additions towards staking and handling expenses and blending and screening charges, where assessee has failed to prove genuineness of rendering any service by sister concern?

Ms. Razaq, the learned Counsel for the Revenue submits that the findings recorded by the Income Tax Appellate Tribunal (ITAT) suffer from perversity. She submits that the relevant and vital material on record has been excluded from consideration. She, therefore, submits that the substantial questions of law, as framed, are required to be answered in favour of the Revenue and against the Assessees.

Ms. Razaq, the learned Counsel for the Revenue submits that the Assessing Officer (AO), based on the detailed reasoning and calculations, had concluded that a sum of Rs.4,71,566/- was required to be disallowed under Section 14A of the Income Tax Act, 1961 (IT Act). The Commissioner (Appeals) and the ITAT, by misconstruing the provisions of Section 14A, have reduced this disallowance to only Rs.65,000/-, which is not proper.

Mr. Jain defends the orders made by the Commissioner (Appeals) and the ITAT based on the reasoning reflected therein. He points out that the total dividend income was only Rs.45,321/-. He Assessment Year, was only Rs.45,371/-. Accordingly, the disallowance in this case could not have exceeded Rs.45,371/-. It is only because the Assessees voluntarily offered a disallowance to the extent of Rs.65,000/-, that the Commissioner (Appeals) made a disallowance to the extent of Rs.65,000/-. Thus, the first substantial question of law is required to be answered against the Revenue and in favour of the Assessees.

Ms. Razaq then submits that in this case, the cash purchases to the extent of Rs.60,28,080/- were made by the Assessees and despite the opportunity, there was no explanation forthcoming as to the details of the parties from whom such cash purchases were made. Mr. Razaq submits that onus to prove the genuineness of cash purchases, lies upon the Assessees and since the same was not discharged despite opportunities, this amount of Rs.60,28,080/- CA No.7865/2009 decided by SC on 29/7/2020

On consideration of the rival contentions, again we are unable to agree with the contentions of Ms. Razaq. The record indicates that the total purchases of the Assessees during the relevant assessment year were in the range of Rs.29.97 crores. As against this, cash purchases were of Rs.60,20,080/- which corresponds to around 2% of the total purchases. The purchases were in a series of transactions, involving an amount of less than Rs.20,000/-. This is not a case where the books of account of the Assessees were rejected by the AO. The record also establishes that the Assessees obtained 'H' Form concerning these purchases. 13. for the Assessment Year 2009-10 in respect of these very Assessees, has confirmed the deletion of a similar nature, relying upon a decision of this Court in Chase Bright Steel Ltd. (supra). 3 (1989) 171 ITR 128

In any case, even the reasonings of the Commissioner (Appeals) and the ITAT suffer from no perversity whatsoever. The view taken is consistent with the law laid down by this court in Chase Bright Steel Ltd (supra). There is material on record, which also suggests that the confirmations were indeed received and filed by the Assessees though, there are contradictory findings by the AO on this issue.

For all the aforesaid reasons, the third substantial question of law is required to be decided against the Revenue and in favour of the Assessee in this matter.

Ms. Razaq then submits that in this case, undervaluation of closing stock is done by merely passing journal entries in the name of the sister concern. She submits that dealings involving the transfer of funds to related parties are required to be scrutinized with care and caution. She submits that no such care and caution were applied by 9 the Commissioner (Appeals) and the ITAT in the present matter. Accordingly, an amount of Rs.1,18,26,320/- was required to be added to the income of the Assessees.

Mr. Jain again defended the impugned orders made by the Commissioner (Appeals) and the ITAT based on the reasoning reflected therein. He points out that in this case, the Revenue has accepted the rendering of service as genuine and on such basis, even collected the tax. Having done this, it is not open to the Revenue to allege any undervaluation of closing stock.

Again, on consideration of the rival contentions, we detect neither any perversity in the concurrent findings of fact recorded by the Commissioner (Appeals) and the ITAT, nor can we say that the two authorities misconstrued the legal position in this regard. The Revenue, on one hand, cannot accept rendering of service as genuine and tax the transactions based on the same and the other hand, urge that there has been undervaluation of the closing stock and on such basis make additions to the returned income. Accordingly, even the fourth substantial question of law is required to be answered against the Revenue and in favour of the Assessees.

Ms. Razaq finally contends that the Commissioner (Appeals) and the ITAT erred in deleting the additions towards

Mr. Jain points out that there is sufficient material on record which indicates that the sister- concern was indeed involved in such activities. He points out that in the preceding assessment year, this position had been accepted by the Revenue. He submits that the concurrent findings as to the genuineness recorded by the Commissioner (Appeals) and the ITAT suffer from no perversity and, therefore, warrant no interference.

Again, upon consideration of the rival contentions we agree with Mr. Jain that this is not a case of perversity in the matter of record of concurrent findings of fact.

The record very clearly indicates that the sister concern M/s. Karishma Goa Mineral Trading Pvt. Ltd. had rendered similar types

Secondly, we are satisfied that both Commissioner (Appeals) and the ITAT did scrutinize the transaction with required care and caution and only thereafter recorded the concurrent findings of fact. Therefore, even the fifth substantial question of law is required to be answered against the Revenue and in favour of the Assessees.

As a result, the substantial questions of law in these Appeals are required to be answered against the Revenue and in favour of the Assessee. Consequently, these appeals are liable to be dismissed and are hereby dismissed.

There shall be no order as to costs. Dama Seshadri Naidu, J. M.S. Sonak, J.