ITO 14(1)(1), MUMBAI vs. NIKHIL A JHAVERI, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order,dated 27.10.2014,of CIT(A)-25,Mumbai,the Assessing Officer(AO)has filed the present appeal. Assessee,an individual,proprietor of Ruchi Exports and engaged in the business of trading of gold and silver jewellewry,filed his return of income on 08.09.2009,declaring total income of Rs. 5.30 lakhs.The AO completed the assessment u/s.143(3)r.w.s.147 of the Act on 22.03.2013, determining the income of the assessee at Rs.2,23,99,680/-. 2.Effective ground of appeal deals with not sustaining the addition made u/s.69 of the Act.During the assessment proceedings,the AO found that the sales tax department had informed that the assessee had made bogus purchase of Rs.1.63 Crores from Shree Enterprises(SE).He directed the assessee to filed certain details and to prove the genuineness of the transaction.After considering the replies filed by the assessee,the AO held that challan copy was without markings and signatures,that goods were not actually received by the assessee,that the assessee had shown sales against the alleged purchases,that entire purchases were made on two days i.e.on 09. 06. 2008 and 10.06.2008,that he received the payments after four months of the sale,that the party from whom the assessee purchased goods was not available on the given address,that he did not produce the supplier of goods,that the assessee must have purchased goods from the grey market by investing unaccounted cash.Invoking the provisions of section 69C of the Act,the AO made an addition of Rs.1,63,15,869/-. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was contented that the AO had informed him that SE was declared Havala Dealer by the Sales tax department for its failure to clear VAT liabilities under the MVAT Act,2002,that he received a notice from the Sales tax department SE had not deposited MVAT of Rs.1,61,543/-,that for that reason SE was declared defaulter on the web site of the department,that the assessee was not entitled to claim set off of Rs.1.61 lakhs on the purchases made from SE,that he was directed to clear the deficit in set off,that he paid deficit in set off arising on rejection of his set off due to default on the part of SE in depositing the amount in Government treasury,that he was not left with no 2457/14 Nikhil AJ/A.Y.09-10 alternative except paying the deficit,that ST department made the assessment after he deposited the money,that he tried to recover the money from SE,that the supplier had turned insolvent,that he tried to contact the broker through whom transaction was finalised,that he could not realize the additional MVAT liability,that he wrote off the said claim,that the AO asked the produce the supplier giving only one day’s time, that he had sold the goods to Pransukhlal & Sons Jewellers(PSJ),that sale proceeds were received by cheques,that the transaction was subject to MVAT regulations,that payment was made to SE by cheuqes,that there could not be any sales without purchases,that if sales were accepted genuine then purchases could not be doubted,that quantity details of purchase and sale of goods was made available to the AO.The assessee made elaborate submissions and the FAA directed the AO to file a remand report with regard to the submissions made by the assessee. After considering the submissions of the assessee,the assessment order the remand report and the rejoinder to the remand report,he held that the assessee filed the copy of tax invoice prepared under MVAT Act with full details and signature,that when sale was made by the person registered under MVAT Act he was duty bound to issue his tax invoice with date, name and address of purchase party,particulars of goods,calculation of MAVT with rate as applicable,that the three invoices of SE reflected necessary details,that they were duly signed,that the assessee had filed quantity details,that the invoices did not suffer from any defect, that purchases were made through account payee cheques,that same were duly reflected in the bank statement of the assessee,that he had sold the goods and the sale proceeds were paid to the supplier of the jewellery,that the AO had not countered the evidence produced by the assessee, that no mistake was pointed out by him in the quantity details filed by the assessee,that the purchases were properly correlated with the sales,that the AO had not rejected the books of accounts,that he had not made any independent inquiry to establish that purchases were not genuine,that the assessee had offered to tax the sales made to PSJ,that he was entitled to claim deduction of consequent purchases made from SE,that without purchases there could not be any sale,that there was no evidence that the assessee had received back the money from SE, that the AO made addition on the basis of observation made by Sales tax department.Finally,he allowed the appeal filed by the assessee. 4.Before us,Departmental Representative(DR)supported the order of the AO.None appeared on behalf of the assessee,as stated earlier.