DCIT 25(1), MUMBAI vs. SANJAY HIRACHAND DHOKAD, MUMBAI

आयकर अपील सं/ (िनधा"रण वष" / Assessment Year: 2010-11) बनाम/ Dy. Commissioner of Shri Sanjay Hirachand Income Tax 25(1) Dhokad Vs. Pratyaksha Kar Bhavan, C/o. M/s. Hi Rock Room No.202, 2nd Floor, Construction Co., 903-A, Bandra Kurla Complex Gurukul Tower, J.S.Road, Bandra (East) Dahisar (West) Mumbai - 400051 Mumbai - 400068 "थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAAPA5702F (अपीलाथ" /Appellant) (""थ" / Respondent) .. Revenue by: Shri Vishwas Mundhe Assessee by: Shri Bhupendra Shah सुनवाई की तारीख / Date of Hearing: 20.03.2017 घोषणा की तारीख /Date of Pronouncement: 31.03.2017 आदेश / O R D E R PER AMARJIT SINGH, JM:

The assessee has filed the present appeal against the order dated 10.05.2013 passed by the Commissioner of Income Tax (Appeals)-35, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11. 2. The revenue has raised the following grounds:-

A.Y.2010-11 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deleting the addition of Rs.4,99,27,664/- which was made by invoking the provisions of section 69C of the Income Tax Act, 1961, by treating the purchase are non-genuine. 2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying upon judgments of the CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. without appreciating that the facts involved in the appellant’s case are different from the facts of the above case laws.

3. On the facts and in the circumstances of the case in law, the Ld. CIT(A) has grossly erred in not appreciating the fact that the notice under Sec.133(6) issued to the parties from whom alleged bills were received were returned undelivered by the postal authorities and spot verification by the inspector of this circle, revealed that no business is carried out from these premises.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in not appreciating the fact that the assessee was not able to produce the parties from whom alleges bills were received, before the Assessing Officer, despite specific opportunities being accorded to him, vide Show Cause Notice dated 11.02.2013.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in not appreciating the fact that the assessee failed to rebut the findings of Sales Tax Department vis-à- vis bogus purchase despite reasonable opportunity being accorded to him, vide Show Cause Notice dated 11.02.2013.

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in accepting the misleading submissions made by the assessee that the department did not make available the information, provided by sales tax department, when in fact the statements recorded by Sales Tax Department were provided to the assessee vide show cause letter dated 11.02.2013.

7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in concluding that the assessee was not given the opportunity to cross examine, when in fact the assessee did 2 A.Y.2010-11 not make any such request for cross examination to the Assessing Officer.

8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in concluding that the Assessing Officer has failed to comply with the assessee request for issuing summons under section 131 of the Income Tax Act, 1961, when in fact no such request was made by the assessee to the Assessing Officer.

9. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside that of the Assessing Officer be restored.”

3. The brief facts of the case are that the assessee filed his return of income declaring total income to the tune of Rs.37,60,430/- on 20.09.2010. The return of income was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). Thereafter, the case was selected for scrutiny under CASS. Notice u/s.143(2) of the Act was issued on 25.08.2011. Consequent to the change of incumbent in office, fresh notice u/s.142(1) of the Act along with detailed questionnaire was issued on 09.07.2012. The assessee was an individual and was a civil contractor. The assessee purchased the material from 21 parties amounting to Rs.4,99,27,664/-. These parties were suspicious dealers and were issuing the bills without delivery of any goods or material for commission. Therefore, show cause notice was given and notice u/s.133(6) of the Act were issued. The notices were served. However, the official of the Income Tax Department visited the spot and found that no business was running there. The assessee failed to produce the parties for verification. It was incumbent upon the assessee to establish genuineness of the purchases but the assessee failed to do so. Therefore, the said purchases to the tune of Rs.4,99,27,664/- was added to 3 A.Y.2010-11 the income of the assessee. Since the assessee was not satisfied, therefore, the assessee filed an appeal before the CIT(A) who deleted the said addition. Therefore, the Revenue has filed the present appeal before us.

ISSUE NO. 1 TO 8:-

S. Name and Address of the parties Amount No. (Rs.) 1 M/s. Aryen Sales Corpn. 14,14,438 132-A Aksar Bhawan, Bhagatwadi, Bhuleshwar, Mumbai - 400002 2 M/s. Balaji Traders 46,58,466 D/102 Dharma Nagar, Opp. Jayraj Nagar, Off Link Road, Borivali (W), Mumbai - 400091 3 M/s. Bharat Enterprise 7,15,787 A/104, Neha Kunj CHS Ltd., Pandeshwar Marg, Vasai (W), Thane 4 M/s.Foram Traders 9,45,667 1/9, Palm View CHS Ltd., Rajawadi, Vidyavihar, Mumbai- 400077 5 M/s. Hans Enterprises 10,65,194 22/24, R.J.Bldg., 2nd Floor, R. No.47, Anantwadi, Bhuleshwar, Mumbai – 400004 6 M/s. Hermitage Trading Co. Pvt. Ltd. 64,31,651 B/102 Soni Park Bldg. No.1, TPS-III, Chikuwadi, Borivali (W), Mumbai - 400092 7 M/s. Jai Matadi Trading Co. 30,64,552 4 A.Y.2010-11 13/31, Ram Market, Old Bardan Lane, Gr. Floor, Vadgadi, Mumbai - 400003 8 M/s. Jain Corpporation 32,03,409 173/6, Gharkul Soc., Sec. No.1, Charkop, Kandivali (W), Mumbai – 400067 9 M/s. Krsna Enterprise 31,28,546 A-10 Karishana Apt., Link Road, Opp. Yogi Nagar, Nr. Aura Hotel Borivali (W), Mumbai - 400091 10 M/s. Mahavir Enterprise 26,34,187 D-102, Dharma Nagar, Yogi Nagar, Off. Link Road, Borivali (W) Mumbai – 400 091 11 M/s. Navdeep Trading Corporation 5,97,467 120/124, C.P.Tank Naka, 1st Floor, V.P.Road, Mumbai – 400004 12 M/s. Niddish Impex Pvt. Ltd. 25,01,163 52/54 V.V.Chandan St., Babu Bhavan, 1st Floor, Masjid Budnder, Mumbai - 400003 13 M/s. Om Corporation 13,20,001 Nanakbhi Wadi, Ram Padarth Bhavan, M.L.P. Road, Mulund(E), Mumbai – 400 087 14 M/s. Riddhi Siddhi Enterprises 31,35,102 30 Dwardesh, 2nd Floor, Modi Patel Road, Bhayander (W) Thane- 401101 15 M/s. Rohit Enterprise 25,08,517 Om Sai Baba Nagar, Room No.1, Janta Nagar Road, Near Sargam Apt., Bhayander (W), Thane – 401101 16 M/s. Shree Sai Trading Co. 19,35,147 6/2 Madhav Niwas, Ram Mandir Road, Bhayander (W), Thane - 400067 17 M/s. Siddhi Enterprise 31,33,894 14 Kolsa “X” Lane, 23 Shirin Mansion, Pydhonie, Mumbai- 400003 18 M/s. Skand Industries 19,07,446 14 Kolsa “X” Lane, 23 Shirin Mansion, Pydhonie, Mumbai- 400003 19 M/s. Tulsiani Trading Pvt. Ltd. 25,04,063 Plot No.182, Room No.9, Sec-1, Sanjivini CHS Ltd., Charkop, Kandivali (W), Mumbai - 400067 20 M/s. Urvin General Trading P. Ltd. 30,60,692 218/220 Samuel St., Kapoorwala Bldg., Mezannine Floor, Mumbai - 400003 21 M/s. V. K. Enterprises 62,275 5 A.Y.2010-11 163/4540 Pant Nagar, Ghatkopar (E), Mumbai - 400075 Total 4,99,27,667

“5.3 I have carefully considered the assessment order vis-à-vis the written submissions filed by the Learned Authorised Representative of the appellant. The only issue under first six grounds of appeal is the disallowance of purchases amounting to Rs.4,99,27,664/-. The Assessing Officer has added the same by treating the purchases as unexplained expenditure u/s.69C. It is further seen that notices u/s.133(6) were duly issued and served to the said suppliers. Thereafter, the Assessing Officer did not issue

6. A.Y.2010-11 any summons to them. It is therefore, further seen that the appellant has discharged his burden of proving the existence and genuineness of the purchases claimed. It is further seen that once the appellant has discharged his burden, the subsequent burden shifts to the Assessing Officer to disprove the claim of the appellant. Therefore, there is a substantial force in the contention of the appellant that the Assessing Officer has erroneously treated the same as unexplained expenditure. I have also observed that the payments are made by account payee cheques as reflected in the bank statements of the appellant and has been credited to the bank accounts of the suppliers. Therefore, this contention of the Assessing Officer does not hold good that account payee cheque is not a good proof, particularly in absence of any further finding that the said account payee cheques have not reached the said supplier. I have also observed that the only basis of the disallowance by the Assessing Officer. There is a force in the argument of the Authorized Representative that suspicion however strong, cannot form the basis of assessment. Moreover, it is further seen that, the payments have been made from the disclosed bank account of the appellant and therefore the same cannot be treated as unexplained expenditure.

7 A.Y.2010-11 Accordingly, without any cross-examination of the said suppliers, the Assessing Officer could not have proceeded to treat the same as unexplained expenditure. Apart from this, even the copes of statements alleged to have been recorded by the MVAT department were not furnished to the appellant. Therefore, the rebuttal of the same by the appellant was not possible. Any assessment made in violation of this aspect is against the law of natural justice. Besides, without purchases, the appellant could not have executed huge contract work of 28.33 crores during the year under appeal. The appellant has already shown Gross Profit and Net Profit which are duly accepted by the Assessing Officer and therefore, in the absence of rejection of any book result, such huge addition of Rs.4,99,27,664/- is not tenable in law. In this regard, I have also noticed the orders of the jurisdictional tribunal in the case of Balaji Textile Industries Pvt. Ltd. (49 ITD 117 Mum). Moreover, the Authorised Representative has rightly adverted my attention to the orders of the Mumbai Tribunal in the case of FREE INDIA ASSURANCE SERVICES LTD. Vs. DEPUTY COMMISSIONER OF INCOME TAX (132 ITD 60) (Mumbai)(Trib) in which it was held that, “In the absence of any material to refute the claim of the 8 A.Y.2010-11 assessee that the cash received by it against the cheque payments of Rs.30,80,730 from two parties was utilized to purchase cloth from the grey market which was found recorded in the inventory of closing stock, it has to be accepted that the assessee did make cash purchases of Rs.30,80,730 and therefore, the same cannot be treated as bogus purchases.” Mere payment of VAT by the appellant for the default of the suppliers is not sufficient to treat the purchases as unexplained expenditure. The income tax is a self-contained code. Therefore, I am also strengthened by the judgment of the Hon’ble Bombay High Court in the case of M/s.Nikunj EXIMP Pvt. Ltd. (ITA appeal No.5604 of 2010) in which it is categorically held that, “the Assessing Officer as well as the Commissioner of Income Tax-(A) have disallowed the deduction on account of purchases merely on the basis of suspicion because the parties have not been produced before them. We find that the order of the tribunal is a well reasoned order, taking into account all the facts before concluding that the purchases were not bogus. No fault can be found with the order of the tribunal is a well as the genuineness of the purchases claimed. There is also a force in the contention of the appellant that contractile clients are subjected to several inspections in 9 A.Y.2010-11 their office by different engineers and authorities. The Assessing Officer has never disputed the completion of contract as per the stipulation of the clients of the appellant. Therefore, on one hand, the Assessing Officer has accepted the correctness of the contracts executed by the appellant. On the other hand, he has disallowed a huge sum of Rs.4,99,27,664/- only on the basis of information on the MVAT website and merely on suspicion. On the totality of the facts and the case laws relied upon by the appellant, I am of the considered view that the disallowance made by the Assessing Officer is not tenable in law because income tax is a tax on real income. Moreover, I am also of the opinion that the disallowance of the whole amount of Rs.4,99,27,664/- u/s.69C would result into abnormally high GP and NP of the appellant which is unrealistic in any line of contract as being executed by the appellant. I am therefore, inclined to agree with the appellant and the disallowance of Rs.4,99,27,664/-.

Accordingly, first six grounds of appeal are allowed”.

6. On appraisal of the above mentioned order, it is not in dispute that the Assessing Officer arrived at this conclusion that the purchases to the tune of Rs.4,99,27,664/- were from the 21 parties whose names 10 A.Y.2010-11 have been cited in the official website of the Sales Tax Department, Government of Maharashtra www.mahavat.gov.in. as bogus as these parties were issuing bills without any delivery of goods or material for commission. Assessee disclosed the addresses of all these parties and also furnish the details of payment through bank in the account of the said parties. Thereafter, the Assessing Officer issued the notices to the parties which were duly served upon the assessee but the matter was not further enquired into. The only reason which has been mentioned by the Assessing Officer is that the official of the Income Tax Department has visited in the premises of all the 21 parties, where no business was found but infact there is no further enquiry was done by the Assessing Officer. The Assessing Officer did not enquire about the payment of the assessee through cheque in the accounts of the said 21 parties. No doubt after giving the address and after giving the details of the payment through cheque in the account of the said parties it was incumbent upon the Assessing Officer to verify the transaction which he has not done. In brief the evidences given by the assessee nowhere discussed and discredited. Merely the name of the parties to whom the transaction was done by the assessee have been reflected in the official website of the Sales Tax Department, Government of Maharashtra www.mahavat.gov.in. is not itself to prove the sufficient case in connection with the bogus purchase against the assessee. Moreover, the appellant has shown the Gross Profit and Net Profit which were duly accepted by the Assessing 11 A.Y.2010-11 Officer, therefore in absence of the rejection of any book resulted into such huge addition of Rs.4,99,27,664/- was not tenable in the eyes of law. The CIT(A) while deciding the matter of controversy has also placed reliance upon the law settled by the Hon’ble Bombay High Court in the case of M/s.Nikunj EXIMP Pvt. Ltd. (ITA appeal No.5604 of 2010). The CIT(A) has decided the matter of controversy after considering the case of the assessee from every angle. Nothing came into the notice that the finding of the CIT(A) is required to be interfere with. In view of the discussion made above we are of the view that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage.