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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: S/SHRI B.R.BASKARAN & SHRI SANDEEP GOSAIN
CO No.249/M/14 O R D E R
PER SANDEEP GOSAIN, JM:
This is an appeal filed the revenue challenging the order dated 29.5.2013 passed by the ld.CIT(A)-35, Mumbai for the assessment year 2010-11 in which the revenue has raised the issue of deletion of addition of Rs.20,74,957/- on account of unexplained expenditure u/s 69C of the Income Tax Act, 1961. The assessee has also filed cross-objection thereto.
Facts relating to the issue are that the assessee filed return of income on 15.10.2010 declaring a total income of Rs.61,96,310/-. The assessee is an individual and engaged in the business of Civil Contractor under the name and style of M/s Hydrotech Projects and People. The assessee, in the return of income stated sources of income as income from house property, business income and income from other sources. During the course of assessment proceedings, the AO noticed that the assessee has shown purchases to the tune of Rs.20,74,957/-. Doubting the genuineness of the transactions, the AO called the assessee to furnish details of these purchase. The assessee furnished all the relevant details of suppliers and the amount of purchases against their names viz., M/s Sunder Corporation- Rs.7,64,791/-, M/s Inspire Traders- Rs.6,93,854/-, M/s Worth Traders, -Rs.2,58,604/- and M/s Kantillal Brothers-Rs.3,57,708/- . The AO noticed that the names of the these suppliers are mentioned in the list of Sales Tax Department, Government of Maharashtra who are involved in the business of issuing only bills without supplying any goods or material and charging commission to the needy persons. Therefore, the AO, relying on the office letter dated DCIT-25(3)/show cause/2012-13 dated 19.11.2012, issued show cause notice to the assessee as to why these purchases should not be treated as unexplained expenditure and CO No.249/M/14 should not be added to the total income of the assessee. In reply, the assessee submitted details vide his letter dated 29.11.2012 in which he has given specific details about purchases made, VAT account, sales tax payment and banks details. The AO did not find favour of the submissions and explanation of the assessee and added the sum of Rs.20,74,957/- u/s 69C of the Act to the total income of the assessee. Being aggrieved by this, assessee preferred an appeal before the ld. CIT(A).
Before the ld.CIT(A), the assessee contended that only because of names of the suppliers are mentioned in the list of suspicious dealers declared by the Sales Tax Department, Government of Maharashtra which were displayed on official website of the Government of Maharashtra, the AO disallowed the purchases and added it to the income of the assessee is without basis. Since all the details relating to purchases made during the year have been furnished to the AO, assessee is entitled for deduction of these purchases. The assessee has also filed written submissions before the ld. CIT(A). The assessee submitted that only on the basis of statement given by Mr.Makwana, of M/s Worth Traders, from whom the assessee purchased material worth Rs.2,58,604/- and because of his statement before the Sales tax authorities that purchases are not genuine. The AO solely relied on the statement so made by third party behind the back of the assessee and without enquiring the details in respect of other parties added full amount to the income of the assessee. In support of his contention, the assessee placed reliance on the decision of Patna High Court in the case of Addl.CIT V/s Hanuman Agarwal (1985) 151 ITR 150 and stated that the Hon’ble High Court has held that the confession made by the third party behind the back of the assessee cannot be used against the assessee and the addition made on this basis cannot be held to be proper.
CO No.249/M/14 4. The ld. CIT(A) has deleted the addition made by the AO for the following reasonings: a) That the AO made the addition only on account of unexplained expenditure incurred for purchase of raw material u/s 69C solely on the basis of the information received by him from the Central Excise Department, impugned addition could not be sustained and no inquiry was made by the AO and relied only on the statement given by them to Sales Tax Department, Government of Maharashtra. b) That the transactions were supported by the proper documentary evidences. The payments made to the parties by the assessee were in conformity with certificate issued by the bank authorities with regard to payment made by the assessee to the various parties; c) The AO did not doubted the identity of the suppliers; d) No opportunity was granted to the assessee to cross-examine the creditors. e) Confession made by third party; f) Non-production of parties by the assessee cannot be held against the assessee; g) The findings of the Sales tax department are not conclusive and in no way establishes that the purchases are not genuine;. h) The AO did not brought any material on record to show that the assessee has received cash out of the bill receipts; i) While coming to conclusion, the ld.CIT(A) relied on the following decisions: i) CIT V/s M K Brothers -163 ITR 249(Guj); ii) ITO V/s Permanand 107 TTJ 395, ITAT Jodhpur Bench; iii) Diagnostics V/s CIT (334 ITR 111) Calcutta High Court; iv) YFC Project Pvt Ltd V/s DCIT 46 DTR 496/134 TTJ 167 (Del); CO No.249/M/14 v) Free India Assurance Services Ltd V/s DCIT 62 DTR 349 /(2011)12 Taxman.com 424 (Mum); vi) Rajmal Lakhichand V/s ACIT 79 ITD 84 vii) Kishinchand Chellaram V/s CIT 125 ITR713 (Supreme Court) viii) Kanchanwala Gems -122 TTJ 854, Jaipur Bench ITAT; ix) Babulal C Borana V/s ITO (282 ITR 251) (Bombay High Court); x) CIT V/s M/s Nikunj Eximp Enterprises Pvt Ltd 2013 TIOL-04-HC-MUM-IT, 17.12.2012 While elaborating the applicability of provisions of section 69C of the Act, the ld.CIT(A) in para 6.3.8.1 has observed and held as under :
6.3.8.1. The Assessing Officer has applied Section 69C in making addition as unexplained expenditure. The Section 69C of the Income Tax Act, 1961 reads as under:- “Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any,' offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may !be,' may be deemed to be the income of the Assessee for such Financial Year From' the reading of . Section 69C it is very clear that the section applies in the following two circumstances: I. Firstly, an expenditure have been incurred and;' II. Secondly, the assessee fails to indicate satisfactorily the source of such expenditure or any part thereof. This is a deeming provision whereby such unexplained expenditure or part thereof is to be treated as the Income of the assessee for such year .
CO No.249/M/14 Thus the provision will apply only where the two conditions are jointly found in a case i.e. (i)an expenditure have been claimed as revenue expenses in computing the income of the year and(ii) the source of such expenditure could not be proved satisfactorily unless both the situations are found in a case, Section 69C will not be applicable.” 5. Aggrieved by the decision of the ld.CIT(A), the revenue is in appeal before us.
Before us the ld.AR reiterated the facts as submitted before the ld.CIT(A) and relied on the decision of the ld. CIT(A). The ld. AR also submitted that the issue raised in this appeal had come up before the Mumbai Bench of the Tribunal, in assessee’s own case in DCIT V/s Rajeev G Kalathil in (AY-2009-10) dated 20.8.2014 and the Tribunal has decided this issue favour of the assessee. The ld. AR also relied on the decision of Mumbai Benches of Tribunal in ITO V/s Shree Deepak Popatlal Gala in ITA No.5920/Mum/2013 (AY-2010-11) order dated 27.3.2015 and in the case of Ramesh Kumar and Co V/s ACIT in ITA No.2959/Mum/2014(AY-2010-11) dated 28.11.2014 and submitted that similar issue has been decided by the Tribunal in favour of the assessee.
On the contrary, the ld.DR relied on the decision of the AO.
We have heard both the parties and perused the record. We find from the record and decisions rendered by the Co-ordinate Benches of the Tribunal that the Tribunal has held that the AO was not justified in making the addition on the basis of statements given by the third parties before the Sales Tax Department, without CO No.249/M/14 conducting any other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statements given by the parties before the Sales tax department. He has further placed reliance on the decision rendered by Hon’ble Gujarat High Court in the case of CIT Vs. M.K. Brothers (163 ITR 249). He has further relied upon the decision rendered by the Tribunal in the cae of ITO Vs. Premanand (2008)(25 SOT 11)(Jodh), wherein it has been held that where the AO has made addition merely on the basis of observations made by the Sales tax dept and has not conducted any independent enquiries for making the addition especially in a case where the assessee has discharged its primary onus of showing books of account, payment by way of account payee cheque and producing vouchers for sale of goods, such an addition could not be sustained. The Ld CIT(A) has also appreciated the contentions of the assessee that he was not provided with an opportunity to cross examine the parties, which is required to be given as per the decision of Hon’ble Kerala High Court in the case of Ponkunnam Traders (83 ITR 508 & 102 ITR 366). Accordingly, the Ld CIT(A) has deleted the impugned addition. On a careful perusal of the decision rendered by Ld CIT(A) would show that the first appellate authority has analysed the issue in all angles and applied the ratio laid down by the High Courts and Tribunals in deciding this issue. Hence, we do not find any reason to interfere with his order on this issue.
The assessee has filed cross-objection to support the order of the ld.CIT(A). Since, we have decided the issue in favour of the assessee while dismissing the appeal of the revenue, the cross-objection filed by the assessee has no independent legs to stand over, therefore, dismissed as infructuous.