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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Aforesaid appeal of the Department is directed against the order dated 8th April 2013, passed by the learned Commissioner (Appeals)– 35, Mumbai, for the assessment year 2010–11.
2 Shri Sanjay V. Dhruv 2. Department is basically aggrieved with the decision of the learned Commissioner (Appeals) in deleting the addition of ` 58,94,887, made by the Assessing Officer under section 69C of the Income Tax Act, 1961 (for short "the Act").
Briefly stated the facts are, assessee an individual is engaged in the business of trading in chemical through his proprietory concern M/s. Deal Well Enterprises. For the assessment year under consideration, assessee filed his return of income on 29th September 2010, declaring total income of ` 6,58,690. On the basis of information received from Sales Tax Department, Mumbai, it was found by the Assessing Officer that certain dealers are only providing accommodation entries without doing any actual business. On going through the list of such dealers, Assessing Officer found that three parties from whom assessee had effected purchases are also included in the list of bogus dealers maintained by the Sales Tax Department. The details of such dealers are as under:–
Name of Party TIN as per Amount of Sales Tax Purchase 27320697202V ` 2,92,074 M/s. Bhavna Enterprise 27950702239V ` 9,57,549 J.M.D. Organics 27400387728V ` 46,45,264 Chemi Age Enterprise ` 58,94,887 TOTAL
3 Shri Sanjay V. Dhruv To ascertain genuineness of such transactions, Assessing Officer issued notices under section 133(6) of the Act to the aforesaid three parties. As observed by the Assessing Officer, the postal authorities returned the notices in case of J.M.D. Organics and M/s.Bavna Enterprises with remark “unclaimed”. As far as M/s. Chem–Age Enterprises is concerned, though, notices were served upon him but it do not respond to such notice. The Assessing Officer, therefore, called upon the assessee to provide whereabouts of the parties and produce them for verification for proving the genuineness of the purchases. As alleged by the Assessing Officer, instead of providing new addresses of the parties or producing them, assessee submitted ledger copies of the concerned parties along with copies of bank statement, stock register and sample bills of purchases effected from these parties. The Assessing Officer, however, opining that the assessee was not able to produce concerned parties before him held that assessee did not purchase any goods from the said three parties and accordingly, treated the purchase made from these parties aggregating to ` 58,92,887, as unexplained expenditure under section 69C of the Act. Being aggrieved by such addition of the Assessing Officer, assessee preferred appeal before the learned Commissioner (Appeals).
4 Shri Sanjay V. Dhruv 4. In course of hearing before the learned Commissioner (Appeals), the assessee reiterating the stand taken before the Assessing Officer and also producing the documentary evidence such as ledger copies of the parties, copy of bank statement evidencing payment, stock register, bills and delivery challans evidencing purchase / sale of goods submitted, as the evidences brought on record clearly prove the genuineness of the purchases made, the addition is not proper. He also submitted, the sales effected by the assessee have not been doubted by the Assessing Officer. Therefore, the purchases made by the assessee could not have been held as bogus, as without such purchases, the assessee could not have effected sales. The learned Commissioner (Appeals), after considering the submissions of the assessee vis–a–vis facts and material on record, found that the Assessing Officer while treating the purchases effected by the assessee as bogus has mainly relied upon the information obtained from the Sales Tax Department. However, the assessee has submitted documentary evidences before the Assessing Officer and also in course of appeal proceedings which proved that purchases were genuine. He observed, Assessing Officer without recording any finding that the evidences produced are not genuine or doubtful could not have made the additions ignoring such evidences. He submitted, on the contrary, there was no evidence before the Assessing Officer that concerned
5 Shri Sanjay V. Dhruv parties have not effected sales to the assessee and the payments made by the assessee through banking channel to the concerned parties were again routed back to him. The learned Commissioner (Appeals), following the decision of the Hon'ble Jurisdictional High Court in Nikunj Exim Enterprises Pvt. Ltd., ultimately, deleted the addition made by the Assessing Officer.
Learned Departmental Representative submitted, in spite of specific request of the Assessing Officer since the assessee failed to produce the concerned parties, the genuineness of purchase transaction could not be verified. Therefore, the Assessing Officer was justified in treating the purchases made from the concerned parties as bogus.
Learned Counsel for the assessee, on the other hand, submitted, since the Department has made the allegation that the purchases are bogus, the onus is on the Department to prove such fact through cogent evidences. He submitted, assessee is not a manufacturer but trader of goods and he simply purchases the goods for re–sale. He submitted, while the assessee has produced not only the confirmed ledger copies of the concerned parties, but all other necessary evidences like purchase bills, delivery challans, etc., to prove the genuineness of the transactions, whereas, the Assessing Officer has 6 Shri Sanjay V. Dhruv not brought even a single piece of evidence, except the information obtained from the Sales Tax Department, to prove that purchases are not genuine. He submitted, on identical facts and circumstances, the Hon'ble Jurisdictional High Court as well as the Tribunal, Mumbai Bench, has deleted the addition made under section 69C, in the following cases:–
i) CIT v/s Nikunj Eximp Enterprise Pvt. Ltd. 372 ITR 619 (Bom.); ii) A”CIT v/s Tarla R. Shah, ITA no.5295/Mum./2013, dated 2nd February 2016; and iii) Shri Harilal Chunilal Jain v/s ITO, ITA no.4547/Mum./2014, dated 1st January 2016.
We have considered the submissions of the parties and perused the material available on record. It is evident from the assessment order that on the basis of information obtained from the Sales Tax Department, Assessing Officer issued notices under section 133(6) to three parties out of which two notices were returned un–served by the postal authorities and in case of one of the parties through notice was served, there was no response. Therefore, he called upon the assessee to produce the concerned parties. As the assessee failed to produce the concerned parties, the Assessing Officer, therefore, primarily relying upon the information obtained from the Sales Tax Department,
7 Shri Sanjay V. Dhruv held the purchases to be bogus and made addition under section 69C of the Act. Though, it may be a fact that assessee was not able to produce the concerned parties before the Assessing Officer, for whatever may be the reason, fact remains during assessment proceedings itself the assessee had produced confirmed ledger copies of concerned parties, bank account statement, purchase bills, delivery challans, etc., to prove the genuineness of the purchases. It is also a fact on record that the Assessing Officer has not doubted the sales effected by the assessee. Thus, it is logical to conclude that without corresponding purchases being effected the assessee could not have made the sales. Moreover, the Assessing Officer has not brought any material on record to conclusively establish the fact that purchases are bogus. Merely relying upon the information from the Sales Tax Department or the fact that parties were not produced the Assessing Officer could not have treated the purchases as bogus and made addition. If the Assessing Officer had any doubt with regard to purchases made, it was incumbent upon him to make further investigation to ascertain the genuineness of the transactions. Without making any enquiry or investigation the Assessing Officer cannot sit back and make the addition by simply relying upon the information obtained from the Sales Tax Department and issuing notices under section 133(6) of the Act. As the Assessing Officer has failed to make
8 Shri Sanjay V. Dhruv any enquiry or investigation to prove the fact that the purchase transactions are not genuine whereas the assessee has brought documentary evidences on record to prove genuineness of such transactions which are not found to be fabricated or non–genuine, the action of the Assessing Officer in ignoring them cannot be accepted. Moreover, as rightly observed by the learned Commissioner (Appeals), when the payment to the concerned parties are through proper banking channel and there is no evidence before the Assessing Officer that the payments made were again routed back to the assessee, the addition made under section 69C cannot be sustained. Moreover, the decisions relied upon by the learned A.R. on careful analysis were found to be squarely applicable to the facts of the present appeal. Therefore, finding no infirmity in the order of the first appellate authority, we uphold the same by dismissing the grounds raised by the Department.
In the result, appeal stands dismissed. Order pronounced in the open Court on 29.02.2016