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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार /PER RAJENDRA, AM- अनुसार Challenging the order,dated 23/12/2016,of CIT(A)-37,Mumbai the assessee has filed the present appeal.Assessee,an individual,filed her return of income on 19/09/2008,declaring income of Rs.37.27 lakhs.Initially the return was processed u/s. 143(1) of the Act.Subsequently,the assessment was completed u/s.143(3) of the Act,on 16/11/2010,determining her income at Rs.31.80 lakhs. On receipt of information from sales department the AO re-opened the assessment,invoking the provisions of section 148 of the Act. He finalised the assessment u/s.143(3) r.w.s 147 of the Act on 4/3/16 determining the income of the assessee at Rs.70.16 lakhs.
2.Effective Ground of appeal is about addition of Rs.19.18 lakhs, being 12.5 % of the alleged suspicious purchases.During the assessment proceedings the AO found that as per the Sales Tax Department the assessee had purchased goods from 15 parties who were engaged in the business of providing bills without
1167/M/17- Smt. Pinaki Dineshkumar Panani actual delivery of goods. The AO disallowed 25% of the total alleged purchases (Rs.1.53 crores), amounting to Rs.38.36 lakhs .
3.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA) and made elaborate submissions. The FAA after considering the available material upheld the order of the AO.
4.We find that while deciding the appeal for the AY 2009-10 (ITA/119/Mum/2015 & C.O. No.117/Mum/2015 dated 19.12.2016) the Tribunal had considered facts of the case and after deliberating the issue in details had decided the matter. We would like to reproduce the relevant portion of the order of the Tribunal which reads as under:- “2.2.We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that the assessee is engaged in the business of civil construction, on sub-contract basis, from other contractors, who were awarded contracts by Municipal Corporation of Greater Mumbai (in short hereinafter MCGM). The assessee carried out various repairs and construction job in the nature of building repair, water drain repairs, reinstatements of drenches and road repairs, etc. For execution of the work the assessee used labour and machinery along with raw material such as bricks, sand, cement, steel, etc. The stand of the assessee is that the material was supplied at the site, where such work was undertaken and the same was inspected by the engineers, who approved the material and receipt thereof. The payment of such material was made by the assessee. It is noted that the factual matrix considered by the Hon'ble Settlement Commission and explained by the assessee with respect to whole process of works was considered by the Ld. Commissioner of Income Tax (Appeal) as is evident from para 2.6 onwards of the impugned order. It is noted that the assessee made purchases worth Rs.1,69,48,368/- from the parties, who were suspected to be non-genuine by the Sales Tax Department of the Maharashtra Government as the hawala dealers made certain statement before the Sales Tax Department that they did not supply any material to any party and merely issued the bills. On the basis of this statement, the Assessing Officer made addition of the entire purchases. It is noted that the payment was made through banking channel by MCGM after fully getting satisfied about the quantity and quality of the material, duly certified by the engineer of the MCGM, that too subject to tax deduction at source, retention amount, etc. The payments to the supplier parties was also made through banking channel. In view of this factual matrix, the case of the assessee is fully covered by the decision from Hon'ble jurisdictional High Court in the case of CIT vs M/s Nikunj Exim Enterprises Pvt. Ltd. 372 ITR 619 (Bom.), Dhakeshwari Cotton Mills Ltd. vs CIT 26 ITR 775 (SC), Hital Chunilal Jain & Ors. (2016) 46 CCH 0020(Mum.) and DCIT vs Rajeev G. Kalathil (2014) 41 CCH 552 (Mum.). The Hon'ble High Court in the case of M/s Nikunj Eximp Enterprises Pvt. Ltd. (supra) held that merely because the suppliers could not be produced before the authorities but other relevant details have been filed to show that the transaction was genuine the purchases cannot be disallowed. The relevant extract of the judgment is as under: "Whether on the facts and in the circumstances of the case and in law the Tribunal was right in deleting the addition made by the Assessing Officer of Rs. I,33,41,917/- towards bogus
1167/M/17- Smt. Pinaki Dineshkumar Panani purchases even though the suppliers were non-existent and one of the parties had categorically denied having any business dealings with the Appellant Company". ............. We have considered the submissions on behalf of the revenue. However, from the order of the Tribunal dated 30.04.2010, we, find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the assessee appellant have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were inflict made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the assessee- appellant. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 erores was not bogus. No fault can he .found with the order dated 30.04.2010 of the Tribunal".
2.3.So far as, the contention of the ld. DR, the Ld. Commissioner of Income Tax (Appeals) was not justified in accepting genuineness of purchases when the name of supplier parties appeared on the list of suspicious dealers on the website of the Sales tax Department, in concerned, we are of the view that the assessment under Income Tax Act by the Assessing Officer, should have been done on its own enquiry and should have confronted the assessee with the material thus gathered. If the Assessing Officer really wanted to apply the tentative inferences of the Sales Tax Department to the assessment proceedings of the assessee, he was duty bound to call the deponents and make them confirm the nature of dealings with the assessee. If they depose that the dealings with the assessee are not genuine the assessee would have right to cross examine them to bring the truth of the deposition on the surface. This has not been done by the Assessing Officer. Thus the conclusion reached by the Assessing Officer is devoid of merit.
2.4.Even otherwise, fact remains that the assessee made purchases, for which payments have been made by cross-cheque. It is nobody's case that payments made to purchase parties were received back in cash by the assessee or the cheques issued to them were not in cashed, meaning thereby, the purchases from the concerned parties cannot be disputed. Where payments are made by account payee cheques, nobody can deny the existence of the parties. Once the assessee establishes consumption of items purchased nothing more remains to be proved by the assessee. The fact that the assessee has made the purchases by payment through account payee cheques and its consumption has been broadly explained which clearly establishes the assessee's case that the purchases as recorded by the assessee in the books of accounts are genuine. The ratio laid down by Hon'ble Apex court in the case of Dhakeswari Cotton Mills Ltd. Vs Commissioner of Income Tax, West Bengal reported at 26 ITR 775 (SC) The relevant para of the order is reproduced hereunder:- we are in entire agreenei1 with the learned Solicitor-General when he says that the income- tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a coon of law, hut there the agreement ends , because it is equally clear that in making the assessment tinder sith-section ('3) of Sectioii 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must he something more than hare suspicion to support the assessment under Section 23(3).
Likewise, the Mumbai Bench of the Tribunal in the case of Hiralal Chunilal Jain & Others vs. ITO & Others (2016) 46 CCH 0020 (Mum) wherein the Tribunal held as under:
1167/M/17- Smt. Pinaki Dineshkumar Panani "2. Assessee,an individual is proprietor of M/s.Divya Alloys and is engaged in business of resellers of ferrous and non ferrous metals. Effective ground of appeal is about an addition of Rs. 1,44,348/- During the assessment proceedings, the A0 found that the assessee had purchased goods worth Rs. 7.21 laksh Shiv Sagar Steel(India),that the name of Shiv Sagar was appearing in the list of bogus parties forwarded by the sales tax authorities, that the name of the assessee was appearing as a beneficiaries in the list. The AO directed the assessee to produce the party from whom he had claimed to have purchased goods. However, the supplier was not produced by the assessee. Summons issued to Shiv Sagar could not he served on the given address. The AO held the purchase transaction bogus and treated the entire purchase (Rs. 7.21 lakhs)as unexplained expenditure u/s.69C of the Act.
We have heard the rival submissions and perused the material before us. We find that the AO had received information from the investigation wing of STD, Maharashtra that the assessee was one of the beneficiaries of accommodation entries, that Shiv Sagar the supplier of the goods was one of the entities who had admitted to have bogus bills, that the assessee had asked for cross examination of the supplier but same was not given, that the AO had not supplied the copy of the statements of Shiv Sagar to the assessee,that in the books of accounts of the assessee all the purchases and sales were recorded, that payments were made through banking channels, that the AO had made addition of entire purchases u/s.69 of the Act, that the FAA had reduced it to 20%. It is a fact that the AO had not rejected the sales of the assessee and the assessee was maintaining the quantative derails and stock register. In our opinion, once the sales are accepted as j'enuiize or not doubted the AO cannot reject the entire purchase. In the case of Nikunj Eximp(supra)the Hon'ble Bombay High Court has held if sales were not doubted by the AO and copies of bank statement showing entries of payment through account payee cheques to the suppliers, copies of invoices for purchases and a stock statement, i.e. stock reconciliation statement are filed purchased could not be rejected. In the case of Rajeev Kalathil('supra)the Tribunal has held as under:
"2.4. We find that AG had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done." In the present case also the AG had made the addition on the basis of information received from the Sales tax department, but, he did not make any independent inquiry. He did not follow the principles Of natural justice before making the addition. The FAA had reduced the addition to 20%, but he has not given any justification except stating that same was done to plug the probable leakage revenue. Considering the peculiar facts and circumstances of the case, we are reversing the order Of the FAA Effective ground of appeal is decided in favour of the assessee."
In another case, the Mumbai Bench of the Tribunal in the case of DGIT vs. Rajeev G. Kalathil reported at (2014) 41 CCH 0552 (Mum), wherein it was held as under:
"2.3 Before us, Departmental Representative argued that both the suppliers were not produced before the AO by the assessee, that one of them was declared hawala dealer by VAT department, that because of cheque payment made to the supplier transaction cannot be taken as genuine. He relied upon the order of the G Bench of Mumbai Tribunal delivered in the case of Western Extrusion Industries. (ITA/6579/Mum/2010- dated 13.11.2013). Authorised representative (AR) contended that payments made by the assessee were supported by the banker's statement, that goods received by the assessee from the supplier was part of closing stock, that the transporter had admitted
1167/M/17- Smt. Pinaki Dineshkumar Panani the transportation of goods to the site. He relied upon the case of Babula Borana (282 ITR251), Nikunj Eximp Enterprises (P) Ltd. (216Taxman 1 71) delivered by the Hon'ble Bombay High Court.
2.4 We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. (supra)is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash trial.
Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on .file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no.1 against the AO."
Considering the totality of facts and the foregoing discussion including various judicial pronouncements, we find that the assessee duly maintained books of account. The contract receipts are completely verifiable as they are paid/received through accounts payee cheque and subjected to TDS. This factual matrix was not even controverted by the Revenue. Thus, mere appearance of the purchase parties on the website of the Sales Tax Department does not falsify the purchases, claimed to be made by the assessee. There is a possibility that some other parties might have engaged with such parties in a suspicious manner but in the present case, no evidence has been brought on record to fortify the suspicion raised by the Assessing Officer, more specifically when the purchase was made through account payee cheque and the payment of receipt from the contractee party/MCGM is also through banking channel. There is no evidence that any payment was paid back in cash. In the light of the foregoing discussion, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), it is affirmed, resulting into dismissal of appeal of the Revenue. Finally, the appeal of the Revenue is dismissed.
3.So far as, the Cross objection (C.O. No.117/Mum/2015) is concerned, the assessee has challenged estimation of net profit at the rate of 5.76% and thus confirming the addition of Rs.50,44,947/- only on the reason that some of the suppliers names were appearing in the list of hawala dealers is not justified. During hearing, the ld. counsel for the assessee, fairly agreed that if the impugned order of the Ld. Commissioner of Income Tax (Appeal) is confirmed then there is no merit in the cross objection of the assessee. Since, by having an elaborate discussion, while disposing of the appeal of the Revenue, we have dismissed the appeal of the Revenue, confirming the stand of the Ld. Commissioner of Income Tax (Appeal), thus, considering the argument of the assessee, the cross objection of the assessee has become in-fructuous (as admitted by the ld. counsel for the assessee), consequently, dismissed. Finally, the appeal of the Revenue as well as cross objection of the assessee is dismissed.”
Respectfully following the above order we direct the AO to restrict the disallowance as per the order of the Tribunal for the AY 2009-10.Effective Ground of appeal raised by the assessee, is decided in its favour in part.