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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAMIT KOCHAR
आदेश / O R D E R PER C.N. PRASAD, JM: These two appeals are filed by the Revenue against the order of the Ld. CIT(A)-35, Mumbai dated 3.10.2012 pertaining to assessment years 2008-09 & 2009-10.
2. The issue in the appeal of the Revenue for the assessment year 2008-09 is that the Ld. CIT(A) erred in deleting the addition on account of bogus purchases and labour charges.
3. Brief facts are that the assessee filed its return of income on 17.9.2008 declaring income of Rs. 19,43,169/-. The assessment was completed u/s. 143(3) of the Act. While completing the assessment, the Assessing Officer made addition/disallowance of Rs. 41,95,897/- on account of inflated and bogus purchases. The Assessing Officer also disallowed labour charges of Rs. 4,87,504/- treating them as bogus. In the course of assessment proceedings notices u/s. 133(6) were issued to six parties. The Ward Inspector submitted report stating that out of six, five parties are not available in the given address. Therefore, the assessee was required to submit details in respect of purchases made from those parties alongwith stock register, delivery challans etc. However, nobody attended nor produce any details as called for including the parties for verification. Thus, the Assessing Officer concluded that assessee failed to establish the genuineness of the purchased claimed. Thus, he disallowed the purchases as bogus.
3.1. Similarly, the Assessing Officer called for details of purchases from M/s. Shreenath Electricals and Shri Mohamed Kashim and asked to produce the confirmations from the parties. Though assessee produced details, parties were not produced for verification. The Inspector in his report submitted that notices issued u/s. 133(6) to the address given in respect of Ms. Anita Girish Akola, Prop. M/s. Shreenath Electricals and Shri Mohamed Kashim are not available at the given address. Therefore the Assessing Officer required the assessee to produce these parties for verification. Since the assessee could not produce these parties, the Assessing Officer disallowed the labour charges paid to these parties are treated as bogus.
On appeal, the Ld. CIT(A) deleted these additions considering the submissions of the assessee and the details furnished by the assessee before the Assessing Officer in respect of these parties and concluded that assessee has filed complete details regarding purchases and labour charges including name of the person in whose name the cheques were cleared as per the bank statement.
The Ld. Departmental Representative vehemently supporting the orders of the Assessing Officer submits that Ld. CIT(A) erred in deleting the bogus purchases and bogus labour charges inspite of the fact that the notices issued u/s. 133(6) were not received by the parties and the assessee did not produce the parties for verification. The Ld. Departmental Representative further submits that the Ld. CIT(A) erred in deleting the addition/disallowance of bogus purchases without appreciating the fact that the Sales tax Department carried out independent enquiries with respect to these parties and proved that these parties are indulged in providing accommodation entries only and not in real business. Therefore, he submits that disallowances are rightly made by the Assessing Officer.
The Ld. Counsel for the assessee submits that assessee furnished all the details in respect of these parties. In the course of assessment proceedings on 4.11.2010, assessee submitted various information such as details of sundry creditors, details of party-wise , item-wise purchases above Rs. 20,000/-, name, address and PAN of the concerned parties. The Ld. Counsel for the assessee submits that thereafter showcause notice dated 24.11.2010 was issued requiring the assessee to submit confirmations from the parties, copy of return of income and bank statement of all the parties in person. In response to the said notice dated 6.12.2010, requisite information has been filed alongwith copy of confirmation of accounts, copy of PAN card, copy of income tax returns etc. The Ld. Counsel for the assessee submits that the Assessing Officer has simply gone by the Inspector’s report which stated that the parties are not available at the addresses given. The Ld. Counsel for the assessee submits that not much diligent efforts have been put in by the Inspector to find and serve the notice as it could be seen from the Inspector’s report. The Ld. Counsel for the assessee submits that the assessee has furnished all the particulars specified by the Assessing Officer to discharge its obligation but the Assessing Officer never bothered to verify various aspects such as mode of payments, existence of PAN and VAT No., nature of items and its consumption etc. The Ld. Counsel for the assessee further submits that except jumping to the conclusion mainly based on the fact that the address of the creditors are not verifiable, the Assessing Officer has not established that such purchases are either bogus or inflated. The Ld. Counsel for the assessee submits that assessee firm has maintained regular books of accounts and the said accounts are subject matter of audit u/s. 44AB where independent, qualified Chartered Accountant and the auditors have not pointed out any defects therefore he submits that the purchases and the labour payments cannot be treated as bogus simply because the Inspector has given a report stating that parties are not available at the given address. The Ld. Counsel for the assessee submits that confirmations of the parties are available at page-40 of the Paper book and further he submits that at page 50 onwards the PAN, account payee cheque and demand drafts are available. In respect of the submissions of the Ld. Departmental Representative that the depositions recorded by the Sales tax authorities during independent enquiries with respect to these parties to prove that these parties are indulged in providing accommodation entries only and not in real business, the Ld. Counsel for the assessee submits that in the assessment order, nowhere the Assessing Officer mentioned about the independent enquiries caused by the sales tax department with these parties and the depositions taken stating that they are not into real business. In the absence of any such finding in the assessment order, it is totally unjustified making an allegation at this stage. The Ld. Counsel for the assessee submits that in an identical situation, the addition/disallowance made by the Assessing Officer on account of bogus purchases and labour charges for the immediate preceding assessment year 2007- 08 has been deleted by the Tribunal in of 2010 by order dated 8.5.2013. The Ld. Counsel for the assessee submits that except M/s. Bhagwati Enterprises and M/s. Sandeep Trading Co., all other parties are same in the current assessment year.
We have heard the rival contentions, perused the orders of the authorities below and the Tribunal’s order in assessment year 2007- 08. The Assessing Officer while completing the assessment disallowed Rs. 41,95,897/- & Rs. 4,87,504/- towards bogus purchases and labour charges for the reason that the notice u/s. 133(6) could not be served on the parties in the address given by them. The Assessing Officer solely relied on the Inspector’s report which stated that the parties are not available at the given address. It is the contention of the assessee that all the details in respect of these parties including confirmation, PAN, bank statements, ledger accounts, copies of returns have been furnished in the course of assessment proceedings and they were all completely ignored by the Assessing Officer. The Ld. CIT(A) has taken cognizance of the fact that all these details were furnished by the assessee before the Assessing Officer, deleted the disallowance made by the Assessing Officer as there is no basis for making these additions. While coming to such conclusion, the Ld. CIT(A) observed as under:
“1 have considered the submissions of the representative and the stands taken by the Assessing Officer. The AO has primarily formed his surmises on the basis of Ward Inspector's report who was unable to serve notice u/s. 133(6) to the aforesaid parties. However,the appellant firm had filed confirmation of accounts, PAN, lncome Tax Return s etc. instead of conducting verification based on the above information, the AO disallowed the purchases on the ground that the appellant did not submit bank account, income tax return and new addresses of the parties. In any case, it is seen from the copies of confirmation that all the payments by the appellant were made either by DD or by account payee cheques. If the AO doubted the genuineness of purchases, he ought to have conducted verification with the bank to find out as to who encashed the cheques. Without doing this exercise, he required the appellant to furnish the bank account and income tax returns of the purchase cases which the appellant could not obtain in certain cases. However, the appellant has filed bank account and income tax return copies of certain parties wherever the same could be obtained.
From the table given in para 4 above, it is seen that the confirmations were filed in respect of all the 7 parties and income tax returns were filed in respect of 2 parties and copy of PAN card was also furnished in respect of 3 parties. Details of TDS deducted have also been provided. The appellant has discharged the initial onus of proving the genuineness of purchases and labour but the Assessing Officer never attempted to conduct any verification and he wanted everything to be filled by the appellant including information which were not available with the appellant. When the above details were filled by the appellant, the burden was shifted to the AO when the confirmations were filled and no addition could be made without proving that there was bogus purchases and income tax returns of purchase parties.
Futher, the appellant made payments by DD or account payee cheques. There is not a single cash payment to any of the purchase or labour party. Complete details have been filed regarding purchases and labour charges including name of the person in whose name the cheques were cleared, as seen from the bank statement of the appellant. It is further seen that on the cheques were cleared in the name of the parties to whom the payments were claimed to have been made. The AO without verifying such details, footed his conclusion only on Ward Inspector's Report which in itself seems to be done negligently without putting much efforts and application of mind. The AO's very basis for making the said additions is flawed and unsustainable. In the circumstances, there is no case for any such ad hoc disallowance.
I have also taken notice of Appeal Order dt. 24.02.2010, wherein my predecessor has passed a detailed order and allowed the appeal in favour of Assessment Year 2007-08. In view of the above facts & circumstances of the case and discussion, entire addition of Rs. 41,95,897/- on account of purchases and Rs . 4,87,504/- of labour charges is deleted”.
We also find that an identical issue has been considered by the Co-ordinate Bench in assessee’s own case for assessment year 2007- 08 wherein similar additions/disallowances were deleted holding as under:
“After considering the rival submissions and perusing the relevant material on record, it is noticed that the Assessing Officer has restricted the addition in respect of purchases to the tune of Rs.1.16 crore, of which 90% has been added resulting into an addition of Rs.1.04 crore. The detail of purchases to the tune of Rs.1.16 crore is incorporated in the impugned order along with remarks given by the. assessee. A common feature as prevailing in respect of all these parties is that the copies of confirmations of these parties have invariably been made available. For example, the first party is M/s.Akshat Enterprises from whom purchases worth Rs.27.57 lakh were made. A copy of confirmation from this party is available on page 182 of the paper book. This confirmation is not only duly signed by M/s.Akshat Enterprises but also gives permanent account number of the said party along with mobile number of the concerned person. Similar position is obtaining in the other cases also. Apart from that, the assessee has also furnished income-tax returns with other attaching documents in respect of 3 parties. Under these circumstances we are unable to appreciate the contention of the learned Departmental Representative that the assessee failed to discharge the onus cast upon it to prove the genuineness of the purchases. Once confirmation from the party together with its permanent account number etc. is provided, the onus on the assessee stands discharged. If the Assessing Officer is not satisfied with the particulars so furnished, it is open to him to make further inquiry from the concerned party. Having not done so, it is not open to the A.O. to make addition. We, therefore, uphold the impugned order on this issue. This ground taken by the Revenue is, therefore, not allowed. The last ground is against the deletion of addition of Rs.11.51 lakh on account of labour charges. The assessee debited a sum of Rs.57.56 lakh towards labour charges. The assessee did not provide even addresses or bills in respect of 8 parties. Most of the parties in respect of whom the addresses were given, were returned unserved. The A.O. made disallowance at the rate of 20% of the total expense under this head. The learned CIT(A) deleted the entire addition. Facts of this ground as also the decision taken by the ld. CIT(A) is mutatis mutandis similar to ground no.2. Here again, the learned CIT(A) deleted the entire addition by losing sight of the fact that in respect of several persons to whom the alleged payment was made, the assessee failed to furnish even the basic details such as addresses or bills. It is on certain selective material that the total addition came to be deleted. The assessee has filed fresh details before the ld. CIT(A), which have neither been commented upon by the ld. CIT(A) nor the remand report called from the AO. In our considered opinion, the ends of justice would meet adequately if the impugned order on this issue is also set aside and the matter is remitted to the file of A.O. We order accordingly and require him to decide this issue afresh as per law after allowing a reasonable opportunity of being heard”.
Facts and circumstances being identical, we delete the disallowance/addition made towards alleged bogus purchases and bogus labour charges made by the Assessing Officer for the assessment year 2008-09.
Coming to the appeal in for Assessment Year 2009-10, the addition made in this appeal towards bogus purchases is Rs. 4,50,787/-, the Revenue effect is less than Rs. 10 lakhs.
Before going into the merits of the case, we consider CBDT’s latest instructions vide Circular No.21/2015 dated 10/12/2015, the relevant portion of which read as under:-
“ Circular No. 21/2015 F No 279/Misc. 142/2007-ITJ (Pt) Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes New Delhi the 10th December, 2015
Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court - measures for reducing litigation - Reg –
Reference is invited to Board's instruction No 5/2014 dated 10.07.2014 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Appellate Tribunal and High Courts and SLP before the Supreme Court were specified.
In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal and High Courts and SLP before the Supreme Court keeping in view the monetary limits and conditions specified below.
Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: -
S. Appeals in Income-tax Monetary Limit No matters (in Rs) 1. Before Appellate Tribunal 10,00,000/- 2. Before High Court 20,00,000/- 3. Before Supreme Court 25,00,000/-
It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.”
It is further clarified by the Board in its circular that these instructions will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts and Tribunals. It is also made clear that pending appeals below the monitory limits fixed in para-3 above may be withdrawn or not pressed.
In the case in hand, the total demand as per CIT(A)’s order is less than the amount of Rs. 10,00,000/-,which is below the monetary limits as mentioned in CBDT Circular dated 10.12.2015 (supra). Following the same, this appeal of the Revenue is dismissed.
In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 18th May, 2016.