Rajkumar Agarwal, Mumbai vs Department Of Income Tax

Income Tax Officer, बनाम/ Shri Rajkumar Agarwal, Ward 25(3)(3), Vs. 707/708, Shivalik Tower CHS Ltd., Room No.304, 3rd floor, 90 feet road, Bld. No.C-11, Kandivali (E), Pratyakshkar Bhavan, Mumbai-400101 Bandra Kurla Complex, Bandra (E), Mumbai-400051 (अपीलाथ /Appellant) .. ( यथ / Respondent)

Cross-Objection No.225/Mum/2014 In आयकर अपील सं./I.T.A. No.5233/Mum/2013 ( नधारण वष / Assessment Year : 2010-11)

Shri Rajkumar Agarwal, बनाम/ Income Tax Officer, 707/708, Vs. Ward 25(3)(3), Shivalik Tower CHS Ltd., Room No.304, 3rd floor, 90 feet road, Bld. No.C-11, Kandivali (E), Pratyakshkar Bhavan, Mumbai-400101 Bandra Kurla Complex, Bandra (E), Mumbai-400051 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAAPA5702F

अपीलाथ ओर से / Revenue by Shri Love Kumar यथ क ओर से/ Assessee by Shri R S Sharma

सन ु वाई क तार ख / Date of Hearing : 12.3.2015 घोषणा क तार ख /Date of Pronouncement : 10.4.2015 2 ITA. No.5233/Mum/2013 & CO 225/M/14

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The appeal filed by the Revenue and cross-objection by the assessee are directed against the order dated 7.5.2013 passed by the ld. CIT(A)-35, Mumbai and they relate to the assessment year 2010-11.

2. The revenue is aggrieved by the decision of ld.CIT(A) in deleting the following additions:

a) Unexplained expenditure relating to purchases of Rs.63,87,826/- and

b) Adhoc addition from out of purchases - Rs.4,72,034/-.

3. The assessee filed the cross-objection only to support the order passed by the ld.CIT(A).

4. The facts relating to the above said issues are stated in brief. The assessee is engaged in the business of supply of sand to various builders. The first issue relates to the addition made out of purchase expenditure u/s 69C of the Act treating part of purchase expenditure as unexplained expenditure. During the course of assessment proceedings, the AO asked the assessee to furnish the list of persons from whom the sand was purchased. The AO noticed that the assessee has purchased sand from certain persons who were listed by the Sales Tax Department of Government of Maharashtra as suspicious dealers, who indulged in issuing bogus bills without supplying goods. The aggregate amount of purchases made by the assessee from the parties listed out by the Sales Tax Department of Government of Maharashtra was Rs.63,87,826/-. Accordingly, the AO proposed to assess the above said amount as unexplained expenditure u/s 69C of the Income Tax Act, 1961 (the Act). The assessee submitted that he has made payment to the above said parties by way of account payee cheques and has also received the goods 3 ITA. No.5233/Mum/2013 & CO 225/M/14

from them. Accordingly, the assessee pleaded that the disallowance should not be made. However, the AO by placing strong reliance on the report of the Sales Tax Department treated the said amount as unexplained expenditure with the following observations:

"The purchases of the assessee are not the issue here and these alleged purchases are not being treated as bogus. The Sales Tax Department has come down hard on the pernicious practices indulged in by these unscrupulous traders figuring in the list of suspicious dealers and it is evident that the assessee has not purchased the goods from these alleged suppliers. It is equally true that the goods have somehow entered in the assessee regular business. The assessee has been unable to give any convincing or cogent explanation as to how these goods happened to come in his possession. The assessee has thus, incurred expenditure on such purchases which is not explained. The purchases are not being treated as bogus or sham rather the expenditure incurred on such purchases is treated as unexplained.

4.5 In view of the above facts and findings in the paragraphs mentioned above, the aggregate of the purchases detailed in para no.4.4 above, totaling Rs.63,87,826/- is treated as unexplained expenditure u/s 69C and added to the total income of the assessee. Penalty proceedings u/s 274 r.w. 271 (1)(c) are separately initiated for concealing particulars of income"

5. The Ld.CIT(A) noticed that the assessing officer has not disputed the fact of purchase of goods and further they have been duly recorded in the books of account. He further noticed that the assessing officer has made the impugned addition only for the reason that the name of the suppliers finds place in the list of suspicious dealers released by the Sales tax department, i.e., the AO has failed to conduct any further investigation or examination in order to disprove the claim of purchase of sand from the said dealers. The Ld CIT(A) further noticed the assessee has made the payments against the purchases by way of account payee cheques. Accordingly, the Ld CIT(A) came to the conclusion that the assessing officer has not discharged the onus of disproving the evidences furnished 4 ITA. No.5233/Mum/2013 & CO 225/M/14

by the assessee in support of the purchases. Accordingly he deleted the addition of Rs.63,87,826/- made by the assessing officer.

6. We heard the parties on this issue and perused the record. We notice that this bench of Tribunal has considered an identical issue in the case of Deepak Popatlal Gala, in ITA No. 5920/M/13 and Tribunal, vide its order dated 27.3.2015, has held as under:-

"10. The next issue relates to disallowance made out of purchases and assessed u/s 69C of the Act. We heard the parties and perused the record. The total purchase expenditure claimed by the assessee during the year under consideration was Rs.7,36,27,555/-. The AO noticed that the Sales Tax Department of Government of Maharashtra has listed out names of certain dealers, who were alleged to have been providing accommodation entries without doing actual business. The AO noticed that the assessee made purchases to the tune of Rs.38.69 lakhs from two parties named M/s Umiya Sales Agency Pvt Ltd and M/s Mercury Enterprises, whose names found place in the list provided by the Sales Tax Department. The AO placed full reliance on the enquiries conducted by Sales Tax Department in respect of the parties, referred above. Accordingly, the AO took the view that the purchases to the tune of Rs.38.69 lakhs have to be treated as unexplained expenditure. Accordingly, he assessed the same u/s 69C of the Act.

11. The ld. CIT(A) deleted the addition and hence the Revenue is in appeal before the Tribunal.

12. The ld. DR strongly placed reliance on the order of Assessing Officer.

13. On the other hand, the ld. AR submitted that the additions made in the case of some other assesses on identical reasons have been deleted by the Co-ordinate Benches of the Tribunal in the following cases :

a) Ramesh Kumar and Co V/s ACIT in ITA No.2959/Mum/2014 (AY-2010-11) dated 28.11.2014;

b) DCIT V/s Shri Rajeev G Kalathil in ITA No.6727/Mum/2012 (AY-2009-10) dated 20.8.2014; and 5 ITA. No.5233/Mum/2013 & CO 225/M/14

c) Shri Ganpatraj A Sanghavi V/s ACIT in ITA No. 2826/Mum/2013 (AY-2009-10) dated 5.11.2014

In all the above said cases, the Co-ordinate Benches of 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 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. We notice that the ld.CIT(A) has taken note of the fact that no sales could be effected without purchases. 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 sellers, 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."

7. In the instant case also, the facts are identical, i.e., the assessing officer has made the impugned addition only on the basis of information given by the Sales tax department, he did not make independent enquiry with the sales tax department, the assessee was not given opportunity to cross examine the officials of sales tax department, the evidences furnished by the assessee to prove purchases of sands and its movement were not disproved, the evidences furnished by the assessee to prove the payments made against purchases by way of account payee cheques were also not disproved. Under these set of facts, by following the decision 6 ITA. No.5233/Mum/2013 & CO 225/M/14

rendered by this bench of Tribunal in the case of Deepak Popatlal Gala (supra), we uphold the order of Ld CIT(A) on this issue.

8. The next issue relates to the adhoc disallowance made out of the purchases. The assessing officer issued notices u/s 133(6) of the Act to certain parties from whom the assessee had purchased sand. However, notices issued to five parties were returned unserved by the postal authorities. Hence, the AO asked the assessee to produce vouchers in support of purchases made from the five parties. Since the assessee failed to furnish the details, the AO disallowed 4% of the aggregate amount of purchases made from the above said five parties, which worked out to Rs.4,72,034/-. Before Ld.CIT(A), the assessee submitted that the assessing officer has made this addition without giving opportunity to the assessee. Further, it was submitted that he had already requested the purchase parties to send confirmation letter directly to the AO. The Ld CIT(A) held that the assessing officer has made this addition without rejecting the books of account and accordingly deleted this addition.

9. We notice from the assessment order that the assessing officer has made adhoc addition only on the reasoning that the assessee has failed to furnish the details. The case of the assessee before the Ld.CIT(A) was that he was having all the relevant details. We notice that the first appellate authority has deleted this disallowance without verifying those details. Since this addition was made for want of evidences and details and since the details, if any, available with the assessee were not examined by the tax authorities, we are of the view that this issue requires to be restored to the file of the AO. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the same afresh. The assessee is also directed to furnish all the details that may be called for by the AO on this issue.

7 ITA. No.5233/Mum/2013 & CO 225/M/14

10. In the result, the appeal filed by the revenue is treated as partly allowed and the cross-objection of the assessee is partly allowed.

Pronounced accordingly in the open court on 19th April, 2015.

घोषणा खुले यायालय म दनांकः10thApril, 2015 को क गई ।

Sd sd (संजय गग/SANJAY GARG) ( बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER

मुंबई Mumbai: 10th April,2015.

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. आयकर आयु त(अपील) / The CIT(A)- concerned 4. आयकर आयु त / CIT concerned 5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai concerned 6. गाड फाईल / Guard file. आदे शानुसार/ BY ORDER, True copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai