ACIT 30(1), MUMBAI vs. B.K. SHARMA, MUMBAI

PDF · subscribers
ITA 834/MUM/2015Status: DisposedITAT Mumbai11 January 2017AY 2010-1116 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee was not given sufficient opportunity to substantiate the genuineness of the purchases. The CIT(A)'s order was also not fully satisfactory. Therefore, the matter was restored to the AO for fresh adjudication.

What were the facts?

The Assessing Officer (AO) rejected the assessee's books of accounts and estimated income due to unconfirmed purchases from six parties. The AO noted that four parties were identified as issuing bogus bills, and confirmations from the remaining two were not adequately provided.

What were the issues?

Whether the assessee discharged the onus of proving the genuineness of purchases when suppliers failed to provide confirmations or appear before the AO. Whether sufficient opportunity was provided to the assessee to substantiate the purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144,Section 133(6),Section 145(3)

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "B" MUMBAI BEFORE SHRI D KARUNAKARA RAO (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA No. 834/MUM/2015 Assessment Year: 2010-11 A_ LCIT-30(1), Vs. Sh: B.K . Sharma, Mumbai: Mumbai: PAN No_ AACHBOI48Q (Appellant) (Respondent) Revenue By: Sh: Suman Kumar Assessee By: Sh. RC Jain Date of Hearing 06/01/2017 11/01/2017 Date of pronouncement ORDER PER RAVISH SOOD, JUDICIAL MEMBER The present appeal has been filed by the revenue against the order of the CIT(A)-41, Mumbai, dt:19/11/2014, which in itself has arisen from the assessment order passed by the A.O under section 143(3) r.w.s.144 of the Income Tax Act, 1961(in short 'Act), dated 25.03.2013. 2. The brief facts of the case are that the assessee HUF which is engaged in the business of trading of iron, steel, hardware and 2 chemicals etc had e-filed its return of income declaring as on total 09.09.2010, income of Rs. 1,59,27,857 / - assessee The case was taken up for of the scrutiny 'Act' . That proceeding u/s 143/2) of the during the course of the in the assessment proceedings the A.O course of verifying the genuineness and purchases had issued veracity of the Notices u/8 133(6) of the 'Act' to six from whom the assessee claimed parties to had carried however no compliance as out purchases, said regards the same was carried respective out by the parties, and as such the aforesaid transactions remained purchase unconfirmed, as under per details culled out as Name of the Nature of Amount Party service rendered Date issue notice of Mode of Remarks of service N.B. Purchase 7,12,6487- 10.01.2013 Enterprises Reg: Post No reply received Jindal Steel Purchase 6,28,118/ Corp. 10.01.2013 Reg: Post No reply received Jinesh Purchase 2,97,733/- Trading 05.03.2013 Hand Could not Corp. delivery be served as party not available Khyati Steel Purchase 6,59,2017- Corp. 05.03.2013 Hand Could not delivery be served 3 as party not available J.B. Interlink Purchase 6,52,538/- 05.03.2013 Hand delivery Could not be served as party not available Revika Purchase 6,67,685/ - 05.03.2013 Hand Trade delivery Impex Pvt. Ltd. Could not be served as party not available The A.O after failing to get compliance effected to the notices issued u/s 133(6) to the aforesaid six parties, therein directed the assessee to place on record the confirmations from the said respective parties along with their income tax credentials, as well as produce them for necessary verification: The A.O thereafter observing that as regards four parties, i.e. (i) N.B. Enterprises (ii) Jindal Steel Corpn: (iii) J.B. Interlink (iv) Revika Trade Impex Pvt. Ltd. no confirmation was received, despite being informed by the assessee that the confirmations from the said respective parties would shortly be placed on record, while for as regards the remaining two parties, ie. () Khyati Steel Corpn: and (ii) Jinesh Trading Corpn > the assessee only filed the ledger accounts of the respective parties as appearing in its books of accounts' alongwith the purchase bills, however neither the said parties for necessary were produced verifications, nor their confirmations respective income and tax the credentials were placed assessee. The on record by Ao further the observed that parties, four of the aforesaid namely () N.B Enterprises (ii) Jindal Steel Interlink and (iv) Revika Corpn: (iii) J.B. Trade Impex Pvt: Ltd. by the Sales tax had been identified department; Govt: of who Maharashtra, were into issuing as the parties bogus in the bills' without supplying goods. Thus totality of the aforesaid observations, observed that the the A.O therein assessee had failed to discharge establish the genuineness the onus and of the purchases as were claimed been carried out by it, and to have being of the view that merely payments by the assessee to the making of be sufficient for said respective parties would not proving the same, therefore accounts: of the rejected the books of assessee u/s 145(3) of the 'Act: The A.O estimated the income of the thereafter assessee by by 2%/, and increasing the gross profit therein applying the enhanced GP Rs. 17,80,59,242/- rate to the sales of disclosed by the assessee account' and after in its books making of an addition of Rs. the latters 33,86,936/- income at Rs. assessed 1,93,14,796/- ~_ 3. The assessee assailing appeal with the the assessment order; therein filed an CIT(A): That during the before the said first course of the proceedings appellate authority, the assessee nature of its business explaining the therein submitted that it was iron, a reseller steel, hardware and chemicals of and etc , as and such it was not would a stockist; on an order being placed by a customer, 5 would purchase the exact quantity of the material, either directly or through brokers That in the backdrop of the aforesaid facts, it was thus submitted by the assessee that to the extent the purchases would be carried out through the brokers, the entire work, ie. collection of the bills and payments; arranging the material etc. was done by the brokers, and in majority of such cases the supplier parties would not be known to the assessee. It was further submitted by the assessee that in order to substantiate the genuineness and veracity of the purchases carried out by the assessee from the aforesaid six parties, it had placed on record of the AO substantial material which therein did go to prove the said purchase transactions, as under Sr No. Particular 1 Statement of sales with corresponding purchases Copy of purchase bills 2 3 Copy of Lorry receipts 4 Copy of sales invoices 5_ Copy of Stock Register 6 Copy of Bank Statement 4_ The assessee assailing the observations of the A.O before the CITIA) that confirmations WI.t neither of the six parties had been 6 placed on record by the assessee during the course of the assessment proceedings, therein submitted that Sr_No4, i.e. the party placed at Khyati Steel Corpn: had directly A.O on 19.03.2013, sent the reply to the while for a copy of the acknowledgement with the documents along forwarded by the aforesaid confirmation of party , as well as the the party placed at SrNo 3, ie. Corpn: = Jinesh Trading which were received by the were also placed assessee through its broker, on record of the A.O by the letter on 21.03.2013. assessee along with its That as regards the was remaining submitted by the four parties, it assessee before the CIT(A) that party placed at Sr. as regards the No 5 8 Impex 6, ie JB. Interlink and Revika Pvt: Ltd , Trade as the notices sent by the A.O had not upon the respective been served parties, therefore no replies were them, while for in the case of received from N.B. parties placed at Sr_No 1 Enterprises and Jindal Steel & 2, ie. Corpn , served on though the notices were them, however no replies were received respective parties. from the The said assessee further in its substantiate the genuineness attempt to of the purchase took support of the transactions, therein following facts Sr. No. Particulars 1 The assessee had purchased the goods and same without sold the any change in quantity and quality. 2 The assessee had submitted the statement of from six purchases parties with corresponding sales, details as regards which were placed on record 3 The assessee had maintained the stock register for receipt and issue of the goods, copy of which was placed on record. 4 The assessee had paid to the supplier parties by account payee cheque, and the copy of the bank statement was placed on record. 5 The copies of lorry receipts through whom the assessee had sent the goods through transportation, were placed on record by the assessee. 6 That out Of total purchase from six parties, the goods of the value of Rs. 32,56,476/- were sold by the assessee out of Maharashtra: Thus in the backdrop of the aforesaid facts, the assessee relying on the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs M/s Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR 619 (Bom), along with certain other judicial pronouncements /orders, therein submitted that now when the assessee had placed on record the purchase bills, furnished details of the purchases with corresponding sales, bank statement for proof of payment; copy of the stock register etc , then merely for the reason that the supplier parties had failed to put up an appearance before the A.c 0, would not g0 to prove that the purchases were bogus. That as regards the observations of the A.0 that four parties (out of six 8 parties) were blacklisted by the Sales Tax submitted by the assessee Department; it was parties had that in light of the fact that carried out genuine the said sales sales, tax as but had failed regards the to said pay the exchequer, transactions would with not render Government the hands of the assessee purchase transactions as being in the bogus in the color and purchases. That character as that of during the the course of the CITIA), it was further proceedings before had not afforded submitted by the assessee sufficient time in that the A.O effect order to facilitate the compliance to assessee to the directions substantiate of the the A.O, and therein genuineness of the purchase thus submitted by the transactions. It was the assessee that on account of assessee could place on paucity of time, be obtained record only the confirmations by it from some of the as could after deliberating supplier parties only: The on the submissions CIT(A) perusing the material made by the assessee and that available on record, therein the assessee being had of the view duly substantiated explanation and evidence along with valid the factum towards of the the purchases expenditure incurred carried business, out by it in therein deleted the the course of its the A.O, and addition of Rs. 33,86,936/- as such allowed the made by appeal of the assessee.

5.

The revenue being aggrieved CIT(A) had with the order therein carried the passed by the during the matter in appeal before course of the hearing us. That Representative of the appeal the Ld. (for short D.R) Departmental AO. It heavily relied was submitted on the order by the of the Ld. D.R that the assessee had 9 absolutely failed to discharge the onus as stood cast upon it to substantiate the genuineness and veracity of purchase transactions It was averred by the Ld. DR that the A.O after failing to obtain the necessary confirmations u/s 133/6) from the aforesaid parties, therein directed the assessee to place on record the confrmations of the said respective parties alongwith their income tax credentials, as well as produce the said respective parties for necessary verifications, however as the assessee failed to do the needful, therein the A.O being left with no other alternative, coupled with the fact that four of the supplier parties had been blacklisted by the Sales Tax Department for being into the business of 'providing accommodation entries, thus proceeded with, and after rejecting the %books of accounts' u/s 145(3), had rightly held the purchase transactions relatable to the aforesaid parties, as bogus, and made an addition of Rs. 33,86,936/- It was submitted by the Ld: DR that a8 the CIT(A) had failed to appreciate the facts in the right perspective, therefore his order may therein be set aside and the assessment framed by the A.O be restored That 0n the other hand the Ld. Authorized Representative (for short 'AR) heavily supported the order of the CIT(A) and therein submitted that the latter had rightly set aside the assessment order and deleted the additions made by the A.O. The Ld. A.R referring to the substantial material which was placed on record of the lower authorities to substantiate the genuineness and veracity of the purchase transactions, therein reiterating the facts and submissions as were SO made by the assessee before the lower authorities, therein submitted that merely for the reason that the supplier parties had 10 not put up an appearance before the Ao during assessment the course of the proceedings, adverse inferences genuineness of the as regards the purchase transactions by ignoring the material supporting the same as was brought on could not be record by the assessee, drawn: The assessee to reliance on the support his contention placed order of a coordinate in the case bench of the Tribunal passed of DCIT, Mumbai Vs. Shri, No. 6727/Mum_ Rajeev G. Kalathil (ITA /2012, dt2o.08.2014) ITAT Mumbai "p" (Copy placed on record). Bench 6. We have heard the Ld. Representatives perused the of both the parties, orders of the lower placed authorities, as well as the material on record before uS_ We are though in the of the considered backdrop view that of the settled position of onus is law, cast a upon very heavy the assessee to and veracity substantiate the genuineness of an expenditure which been incurred is claimed by him in to have the course of his such business, while and considered computing its as income, however in before us, as stands the present gathered case from that the the Order of the A.O, it assessee had not been able emerges to cast discharge upon it, and the onus as stood had failed to prove purchase the genuineness of the transactions under consideration; the assessment order However, a perusal of also reveals substantial the A.0, and it can be lapses on the part of safely concluded that the latter had through the matter and hushed characterized claimed by the the purchase transactions assessee to have been carried six parties, as out from the aforesaid bogus purchases. We are unable to persuade 11 ourselves to subscribe to the observations of the A.O, who had drawn adverse inferences as regards the genuineness of the purchase transactions carried out by the assessee from the four parties (out of six parties), i.e: namely () NB Enterprises (i) Jindal Steel Corpn: (iii) J.B. Interlink and (iv) Revika Trade Impex Pvt: Ltd: for the reason that the said respective parties had been identified by the Sales Tax Department of the Govt: of Maharashtra as having been engaged in the activity of issuing bogus bills, without supplying goods. We find ourselves to be in agreement with the observations of the coordinate bench of the Tribunal SO recorded in the case of Shri: Rajeev G. Kalathil, ITA No. 6727 / Mum/2012 (supra); and are of the considered view that though the genuineness of the purchase transactions carried out by the assessee from the aforesaid 4 parties, in light of their alleged reputation as that of being into the business of providing bogus bills, would be under serious doubts, but then suspicions or doubts of the highest degree cannot be allowed to take place of evidence. We are of the considered view that the A.0 in the backdrop of the aforesaid facts should have carried out further investigations and brought the same to a logical end, by placing on record such material which could inescapably and irrebutably prove the ingenuineness of the said purchase transactions, as it was only then that he could have justifiably dislodged the said claim of expenditure s0 raised by the assessee. We though are not oblivious of the fact that the AO after failing to have gathered the confirmations from the aforesaid respective parties u/s 1336), had directed the assessee to produce the parties, along with the copies 12 of the respective ledger accounts maintained accounts' in their books of as well as their income cast a tax credentials, which therein did very heavy onus on the assessee, who statutory remained obligation under to a substantiate the genuineness purchase transactions, of the as per the terms the A.O of the said However directions of we_find that_the_assessee direction_by the was_issued AQ such a only_vide_his_office_letter_dated:l5.€ which as claimed by 032013, the assessee in CIT(A), his submissions before was received by him the after 2-3 days, wherein the was called upon to effect the assessee compliance AM: We on 21.03.2013 at 11:00 are unable to uphold such an arbitrary the A.O, who act on the part of we find had afforded hardly for 2-3 obtaining days the to the assessee confirmations and for verification producing the aforesaid parties before him: We find ourselves with the to be in agreement assessee, wbo had categorically the factum averred before the as regards CIT(A) affording of insufficient A.O for proving the opportunity by the genuineness of the purchase are of the considered transactions. We view that it could safely be concluded that proper opportunity was not afforded the to the assessee to substantiate genuineness of the purchase The A.O vide his transactions under consideration. letter dated:15.03.2013 (which assessee after 2-3 was received by the days) had called upon the confirmations assessee from to produce the supplier parties , for as well necessary as produce them verifications on 21.03.2013, and in light of thc on the part of the failure assessee to do the needful period, had within thereafter such short proceeded with and purchase transactions characterizing the from the aforesaid respective parties as 13 bogus purchases, rejected the books of accounts of the assessee u/s 145(3) and culminated the assessment vide his assessment order dated:25.03.2013. Thus in light of the insufficient time allowed by the A.O to the assessee for placing on record the documentary evidence and. production of the aforesaid parties for examination, we herein in light of the totality of the circumstances prevailing in the present case, can safely conclude that the assessee had remained divested of sufficient opportunity to effect compliance to the directions of the A.O, and for such reason had failed to substantiate the genuineness of the purchase transactions under consideration. We in light of the insufficient time allowed to the assessee by the A.O to substantiate the genuineness of the purchase transactions, are thus unable to persuade ourselves to subscribe to the adverse inferences drawn by the A.O for the reason that the assessee had failed to discharge onus as stood cast upon him. We however are also not much inspired by the order of the CIT(A), whom we find had acted upon the explanation and the documents which were furnished by the assessee, say bank statement, challan copies, stock register etc , and had summarily accepted the same: We are of the considered view that it remains as a matter of fact that neither the confirmations from the aforesaid respective supplier parties had been filed by the assessee, nor the respective parties had been produced for examination before the A.O, which furnishing of the confirmations and examination of the aforesaid respective parties before the A.O gains all the more importance; and rather would be indispensably required for proving the genuineness of the purchase transactions under consideration; 14 in light of the blacklisting of the aforesaid respective parties by the Sales Tax Department of the Govt: of Maharashtra; not be and thus could summarily brushed aside, as we find had been the CIT(A), who had so done by summarily accepted the bits and pieces of evidences as had been produced by the and assessee, as per its choice convenience. We are absolutely in that agreement with the assessee no sufficient opportunity to prove the veracity genuineness of the and purchase transactions was afforded during by the A.0 the course of the assessment a fair proceedings, and thus taking approach, in the very interest of justice and scope of doubt to remove any as regards the genuineness of transactions, the purchase as had been sO canvassed therein by the assessee till date, restore the matter to the file of the A.O. That course of during the the set aside assessment proceedings the directed to place assessee is on record of the A.0 the the income-tax confirmations alongwith credentials of the aforesaid four (out of six parties), as well supplier parties as produce the said parties for examination by the A0. necessary 7 . We further find that the CIT(A) assessee had submitted before the that the confirmations as regards two parties (out parties), ie. Khyati Steel of Six Corpn: and Jinesh Trading made available o the record Corpn: was of the AO during assessment the course of the proceedings, however a finding to the gathered from the order of the contrary is A.O, who we find had observed the assessee had only filed the that said copy of the ledger accounts of the parties as appearing in its 'books of accounts' along with the 15 copies of the purchase bills, while for no other details, say income tax credentials, confirmations of the respective parties and copies of the bank accounts were ever placed on record. We further find that the aforesaid claim of the assessee therein rebutting the observations recorded by the A.O in the body of the assessment order had been summarily accepted by the CIT(A), without making necessary verifications from the record. We are unable to find ourselves to be in agreement with the aforesaid findings of the CIT(A), and being of the view that the same are not based on any verifications o the part of the CIT(A), much the less any concrete evidence, we therefore are not persuaded to subscribe to the findings and the conclusion arrived at by the CIT(A) by summarily accepting the explanations of the assessee during the course of the appellate proceedings, and thus set aside the order of the CIT(A) and restore the matter pertaining to the purchases made by the assessee from the aforesaid two parties (i) Khyati Steel Corpn: and (ii) Jinesh Trading Corpn: also to the file of the A.O, who is herein directed to verify from the record that as to whether the claim of the assessee that the confirmations of the aforesaid two parties were furnished during the course of the assessment proceedings , is found to be in order, Or not We herein direct the A0 that in case the confirmations, as claimed by the assessee, are proved by the assessee to have been filed during the course of the assessment proceedings, then no adverse inference as regards the purchase transactions pertaining to the said respective parties would be drawn, however in case the claim of the assessee is found to be incorrect, then in terms of the directions given in respect to the 16 aforementioned four parties (supra), the assessee would be required to place on record the necessary confirmations and the income tax credentials of the aforesaid two parties, as well as produce them for necessary examination by the A.O. The order of the CIT(A) is thus set aside and the matter is restored to the file of the A.O for fresh adjudication in light of our observations recorded hereinabove. 8 That the appeal of the revenue is allowed for statistical purposes, in light of our aforesaid observations. Order pronounced in the open court on 11/01/2017. / - (D.KARUNAKARA RAO) - ACCOUNTANT (RAVISH SOOD) MEMBER JUDICIAL MEMBER 7j19 Mumbai; faiie Dated 11.01.2017 3arr #MMTaif4 3ufaiCopy of the Order = 1. 3datrff forwarded to The Appellant 2. 5qeff The Respondent 3_ 3TA 31ra(dird) 4 The CIT(A) 31R 3T _ CIT 5_ concerned @uniW.@ae, 31N4 3fai4 6 '3fuarror, %are Js 5sct DR, Guard File ITAT, Mumbai 3IaRITTHR / BY ORDER, 34RF6RIF oiaR (Dy-/Asstt Registrar) 3T4FF 3iai 3fe470, @a8 _ ITAT, Mumbai

More judgments on Section 133(6)

All 7,227 judgments and leading authorities on Section 133(6) →

Recent GST High Court judgments

Search GST case law →