ITO Wd. - 4(1)(4), MUMBAI v. Sri. JITENDRA R. DOSHI, MUMBAI

ITA 2034/MUM/2006 | 1999-2000
Pronouncement Date: 29-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 203419914 RSA 2006
Bench Mumbai
Appeal Number ITA 2034/MUM/2006
Duration Of Justice 4 year(s) 6 month(s) 30 day(s)
Appellant ITO Wd. - 4(1)(4), MUMBAI
Respondent Sri. JITENDRA R. DOSHI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 29-10-2010
Date Of Final Hearing 30-09-2010
Next Hearing Date 30-09-2010
Assessment Year 1999-2000
Appeal Filed On 30-03-2006
Judgment Text
1 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP A.M. AND SHRI N.V. VASUDEV AN JM ITA NO. 2034/MUM/06 ASSESSMENT YEAR 1999-2000 INCOME TAX OFFICER WARD 4(1)(4) ROOM NO. 637A 6 TH FLOOR AAYAKAR BHAWAN M.K. ROAD MUMBAI. 20 VS. SHRI JITENDRA R. DOSHI A-101 KRISHNA NAGARI S.V. ROAD BORIVALI (WEST) MUMBAI. PAN ITO 4(1)(3) APPELLANT RESPONDENT APPELLANT BY SHRI R.S. SRIVASTAV A RESPONDENT BY SHRI R.G. TRALSHAWALA ORDER PER P.M. JAGTAP A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. CIT(A) IV MUMBAI DATED 9.1.06. 2. IN GROUND NO. 1 THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF ` 24 48 000/- MADE BY THE A.O. ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIV IDUAL WHO IS ENGAGED IN THE BUSINESS OF PHARMACEUTICAL PRODUCTS UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S DIPALI ENTERPRISES. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 3.1.2000 DECLARING TOTAL INCOME OF ` 8 60 090/-. THE SAID RETURN WAS ORIGINALLY PROCES SED BY THE A.O. U/S 143(1). SUBSEQUENTLY THE A.O. RECEIVED I NFORMATION THAT ONE M/S SUBHEKSHA EXPORTS PVT. LTD. HAD ISSUED ACCOMMODATION BILLS TO THE ASSESSEES PROPRIETARY CONCERN 2 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. FOR BOGUS PURCHASES IN THE YEAR UNDER CONSIDERATION . HE THEREFORE REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 AFTER DULY REC ORDING THE REASONS. IN RESPONSE TO THE SAID NOTICE A LETTER WAS FILED BY THE ASSESSEE ON 5.4.04 STATING THEREIN THAT THE RETURN FILED ORIGINALLY MAY BE TREATED AS HAVING BEEN FILED IN R ESPONSE TO NOTICE U/S 148. IN THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 BY AN OR DER DTD. 21.3.05 ADDITION OF ` 24 48 000/- WAS MADE BY THE A.O. TO THE TOTAL INCOM E OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF PURCHASES CLAIMED TO BE MADE FROM M /S SUBHEKSHA EXPORT PVT. LTD. TREATING THE SAME AS BOGUS RELYING ON THE STATEMENT OF DIRECTOR OF THE SAID COMPANY WHEREIN HE HAD STATED OF HAVING ISSUED FOUR ACCOMMO DATION BILLS AGGREGATING TO ` 24 48 000/- IN THE NAME OF M/S DIPALI ENTERPRISES A PROPRIETARY CONCERN OF THE ASSESSEE. THE SAID ADDITION WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFO RE THE LD. CIT(A) INTER ALIA THAT THE ALLEGED BOGUS PURCHASES OF ` 24 48 000/- WERE NOT CLAIMED BY HIM AS EXPENDITURE IN HIS BOOKS OF ACCOUNT AND THERE WAS THUS NO QUESTION OF MAKING ADDITION ON ACCOUNT OF DISALLOWANCE OF THE SAID PURCHASES WHICH WERE NOT C LAIMED AS EXPENDITURE. THE LD. CIT(A) FOUND MERIT IN THIS CONTENTION RAISED ON BEH ALF OF THE ASSESSEE AND DELETED THE ADDITION OF ` 24 48 000/- MADE BY THE A.O. OBSERVING THAT NO UND ISCLOSED INCOME COULD BE GENERATED IN THE HANDS OF THE ASSESSEE WITHOUT S UCH ACCOMMODATION ENTRIES HAVING BEEN DEBITED IN THE BOOKS OF ACCOUNT. HE ALSO NOTE D IN THIS CONTEXT THAT THERE WAS NO DISPUTE THAT THE ACCOMMODATION BILLS DID NOT FIND A NY PLACE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDE S AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. D.R. HAS NOT DISPUTED THE FACT THAT THE ALLEGED BOGUS PURCHASE BILLS WERE NOT ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OF ACCOUNT OF HIS PROPRIETARY CONCERN M/S DIPALI ENTERPRISES. HE HOWEVER HAS C ONTENDED THAT THE AMOUNT OF PURCHASE OF ` 24 48 000/- HAVING NOT BEEN ACCOUNTED FOR BY THE A SSESSEE IN HIS BOOKS OF ACCOUNT THE SAME HAS TO BE TREATED AS UNEXPLAINED EXPENDITU RE INCURRED BY HIM WHICH IS LIABLE TO BE ADDED TO THE TOTAL INCOME U/S 69-C. WE FIND IT DIFFICULT TO ACCEPT THIS CONTENTION OF THE 3 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. LD. D.R. FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAI NED EXPENDITURE U/S 69-C IT HAS TO BE FIRST ESTABLISHED THAT THE CORRESPONDING EXPENDITUR E HAS BEEN ACTUALLY INCURRED BY THE ASSESSEE. IN THE PRESENT CASE THE ALLEGATION OF T HE DEPARTMENT IS THAT NO SUCH EXPENDITURE ON PURCHASES WAS ACTUALLY INCURRED MADE BY THE ASSE SSEE AND ONLY ACCOMMODATION BILLS WERE OBTAINED TO CLAIM BOGUS PURCHASES. MOREOVER IT IS NOT EVEN THE CASE OF THE A.O. THAT THE SOURCE OF FUNDS FOR MAKING PAYMENT AGAINST THE SAID PURCHASES WAS NOT EXPLAINED BY THE ASSESSEE SO AS TO TREAT THE SAID PURCHASES A S UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE. WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDITION OF ` 24 48 000/- MADE BY THE A.O. ON ACCOUNT OF DISALLO WANCE OF ALLEGED BOGUS PURCHASES WHICH WERE ACTUALLY NOT CLA IMED AS EXPENDITURE BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT AND UPHOLDING THE SAME WE DISMISS GROUND NO. 1 OF REVENUES APPEAL. 5. IN GROUND NO. 2 THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF ` 14 47 328/- MADE BY THE A.O. ON ACCOUNT OF BROKERA GE AND COMMISSION. 6. THE DEDUCTION CLAIMED BY THE ASSESSEE ON AC COUNT OF EXPENDITURE INCURRED ON BROKERAGE AND COMMISSION AMOUNTING TO ` . 14 47 328/- WAS DISALLOWED BY THE A.O. AS A RESULT OF FAILURE OF THE ASSESSEE TO FURNISH THE DO CUMENTARY EVIDENCE TO SUPPORT AND SUBSTANTIATE THE SAME. THE LD. CIT(A) HOWEVER DE LETED THE SAID DISALLOWANCE MADE BY THE A.O. FOR THE FOLLOWING REASONS GIVEN IN HIS IMP UGNED ORDER: I HAVE CAREFULLY EXAMINED THE ISSUE AND FIND THAT T HERE WAS NO BASIS FOR A.O. TO MAKE THE DISALLOWANCE. PB 101 TO 152 GIVES THE DET AILS OF THE BROKERAGE AND COMMISSION. THESE DETAILS WERE PROVIDED TO THE A.O. ALONG WITH LETTER DT. 17.03.2005 AND THE DETAILS INCLUDES THE LEDGER ACCO UNTS THE RATE OF BROKERAGE THE DETAILS OF TAX STATUS OF THE PERSONS WHO RECEIVED T HE BROKERAGE THE NAMES OF THE PARTIES INVOLVED IN THE TRANSACTION THROUGH THE BRO KER AND THE DETAILS OF ITEMS QUANTITY AND RATE OF THE GOODS TRANSACTED. I DO NO T SEE WHAT OTHER DETAILS COULD BE EXPECTED FROM THE APPELLANT WHICH COULD SATISFY THE A.O. REGARDING THE GENUINENESS OF THE BROKERAGE AND COMMISSION PAID BY THE APPELLA NT. IN FACT THE ASSESSMENT ORDER DOES NOT TALK OF ANY OTHER REASONS FOR DISALLOWANCE EXCEPT THAT THE DETAILS CALLED FOR 4 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. HAD NOT BEEN PROVIDED. AS FAR AS DETAILS WHICH WER E MADE AVAILABLE TO THE A.O. NO DISCREPANCY OF ANY SORT HAS BEEN INDICATED IN THE A SSESSMENT ORDER. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE IT IS HEL D THAT A.O. ERRED IN MAKING A DISALLOWANCE OF BROKERAGE AND COMMISSION WITHOUT AN Y COGENT REASONS AND WITHOUT BRINGING ANY EVIDENCE ON RECORD WHICH COULD INDICAT E THAT THE BROKERAGE AND COMMISSION SHOWN TO HAVE BEEN PAID WERE EITHER BOGU S OR NOT RELATED TO THE BUSINESS OF THE APPELLANT. IN FACT THE EVIDENCE P LACED ON RECORD BY THE APPELLANT CLEARLY SHOWS THAT THE BROKERAGE AND COMMISSION WER E INDEED PAID AND WAS FOR BUSINESS CONSIDERATION. UNDER THE CIRCUMSTANCES TH E DISALLOWANCE OF ` 14 47 328/- IS DELETED. 7. AS IS CLEARLY EVIDENT FROM THE RELEVANT PORT ION OF THE IMPUGNED ORDER OF THE LD. CIT(A) REPRODUCED ABOVE THE DISALLOWANCE MADE BY T HE A.O. ON ACCOUNT OF BROKERAGE AND COMMISSION WAS DELETED BY HIM RELYING ON THE DO CUMENTARY EVIDENCE PLACED AT PAGE NO. 101 TO 152 OF THE PAPER BOOK FILED BEFORE HIM. WHILE DOING SO HE ACCEPTED THE SUBMISSION OF THE ASSESSEE THAT THE SAID DOCUMENTAR Y EVIDENCE WAS DULY FURNISHED BEFORE THE A.O. UNDER LETTER DTD. 17.3.05. IN THIS REGARD THE LD. D.R. HAS BROUGHT TO OUR NOTICE THAT THERE IS NO REFERENCE WHATSOEVER IN THE ASSESS MENT ORDER TO THE SAID LETTER DTD. 17.3.05 FILED BY THE ASSESSEE. A COPY OF THE SAID LETTER I S PLACED AT PAGE NO. 64 OF THE ASSESSES PAPER BOOK AND A PERUSAL OF THE SAME SHOWS THAT THE RE IS NO ACKNOWLEDGEMENT OF THE OFFICE OF THE A.O. INDICATING THE DATE OF RECEIPT O F THE SAID LETTER. IN THE ASSESSMENT ORDER THE A.O. WHILE DEALING WITH THIS ISSUE HAS REFERRED TO A LETTER FILED BY THE ASSESSEE ON 14.3.05 BUT NOT TO THE LETTER DTD. 17.3.05 CLAIMED TO BE FILED BY THE ASSESSEE ALONG WITH VOLUMINOUS DOCUMENTARY EVIDENCE AT THE FAG END OF T HE ASSESSMENT PROCEEDINGS WHEREIN THE ORDER OF ASSESSMENT WAS PASSED BY THE A.O. ON 2 1.3.05. THE ONLY INFERENCE WHICH CAN BE DRAWN IN ALL THESE FACTS AND CIRCUMSTANCES O F THE CASE IS THAT THE A.O. HAD NO OPPORTUNITY TO EXAMINE THE SAID DOCUMENTARY EVIDENC E FILED BY THE ASSESSEE AND AS RIGHTLY CONTENDED BY THE LD. D.R. THE LD. CIT(A) SHOULD HAVE GIVEN THE A.O. AN OPPORTUNITY TO VERIFY THE SAME BEFORE RELYING ON IT TO GIVE RELIEF TO THE ASSESSEE ON THIS ISSUE AS REQUIRED BY RULE 46A OF INCOME TAX RULES 1 962. WE THEREFORE DEEM IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF A. O. WITH A DIRECTION TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE EVIDENCE FILED BY THE AS SESSEE UNDER LETTER DTD. 17.3.05. NEEDLESS 5 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. TO OBSERVE THAT THE A.O. SHALL OFFER PROPER AND SUF FICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE ON THIS ISSUE. GROUND NO. 2 OF THE REVENU ES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 8. IN GROUND NO. 3 THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF ` 3 56 445/- MADE BY THE A.O. OUT OF INTEREST TO THE EXTENT ATTRIBUTABLE TO INTEREST FREE LOAN GIVEN TO THE SISTER CONCERN. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE A.O. THAT A SUM OF ` 19 80 251/- HAS BEEN ADVANCED BY THE ASSESSEE TO SI STER CONCERN M/S DIPALI ENTERPRISES PVT. LTD. FREE OF INTEREST. THE INTER EST EXPENDITURE CLAIMED BY THE ASSESSEE THEREFORE WAS DISALLOWED BY HIM ON PROPORTIONATE BA SIS AFTER QUANTIFYING THE SAME AT ` 3 56 445/-. ON APPEAL THE LD. CIT(A) RESTRICTED T HE SAID DISALLOWANCE TO ` 43 313/-FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- I HAVE CAREFULLY EXAMINED THE ISSUE AND HOLD THAT T HOUGH THE A.O. DID HAVE A GROUND TO MAKE THE DISALLOWANCE THE A.O. ERRED IN CALCULATING THE DISALLOWANCE ON THE LOAN BALANCE OF ` 19 80 251/-. THE LEDGER ACCOUNT OF THE PARTY SHOW S THE DETAILS OF THE LOANS ON VARIOUS DATES AND THE INTEREST RECE IVABLE OR PAYABLE ON THE DEBIT/CREDIT ENTRIES FROM 19.9.1998 TO 31.03.1999. AFTER APPLYING A RATE OF 21%; THE NET INTEREST RECEIVABLE FROM SISTER CONCERN M/S DIP ALI ENTERPRISES WOULD COME TO ` 43 313/-. UNDER THE CIRCUMSTANCES THE DISALLOWANCE OF INTEREST IS UPHELD TO THE EXTENT OF ` . 43 313/- AS AGAINST THE DISALLOWANCE AMOUNTING TO ` 3 56 445/-. THE A.O. SHALL RECOMPUTE THE INCOME ACCORDINGLY. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. A PERUSAL OF THE RELEVANT PORTI ON OF THE IMPUGNED ORDER OF THE LD. CIT(A) EXTRACTED ABOVE CLEARLY SHOWS THAT HE HAS SU STAINED THE DISALLOWANCE MADE BY THE A.O. OUT OF INTEREST EXPENDITURE TO THE EXTENT OF ` 43 313/- AND IT IS NOT A CASE WHERE HE HAS DELETED THE ENTIRE DISALLOWANCE OF ` 3 56 445/- MADE BY THE A.O. AS WRONGLY PROJECTED IN GROUND NO. 3 RAISED BY THE REVENUE IN THIS APPEAL. IN ANY CASE THE DISALLOWANCE OF ` 3 56 445/- OUT OF INTEREST EXPENDITURE WAS WORKED OUT BY THE A.O. BY APPLYING THE RATE OF 21% TO THE CLOSING BALANCE OF LOAN AMOUNT WITHOUT TAKING INTO 6 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. CONSIDERATION THE EXACT DATES ON WHICH THE AMOUNTS WERE ADVANCED BY THE ASSESSEE TO ITS SISTER CONCER AND REPAYMENT OF THE SAID AMOUNTS BY THE SISTER CONCERN TO THE ASSESSEE PARTLY IN THE YEAR UNDER CONSIDERATION. THE LD. CI T(A) THEREFORE RECOMPUTED THE QUANTUM OF INTEREST WHICH WAS LIABLE TO BE DISALLOW ED AS ATTRIBUTABLE TO THE INTEREST FREE LOAN GIVEN BY THE ASSESSEE TO ITS SISTER CONCERN BY TAKING ACTUAL DATE OF PAYMENTS AND RECEIPTS AND RESTRICTED THE DISALLOWANCE OF ` 3 56 445/- TO THE EXTENT OF ` 43 313/-. AT THE TIME OF HEARING BEFORE US THE LD. D.R. HAS NOT BEE N ABLE TO POINT OUT ANY MISTAKE IN THE WORKING MADE BY THE LD. CIT(A) WHILE QUANTIFYING TH E DISALLOWANCE ON ACCOUNT OF INTEREST AND SINCE THE METHOD ADOPTED BY THE LD. CI T(A) IN OUR OPINION IS PROPER AND CORRECT WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH HIS IMPUGNED GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. THE SAME IS THEREFORE UPHE LD DISMISSING GROUND NO. 3 OF THE APPEAL OF REVENUE. 11. IN THE RESULT THE APPEAL OF THE REVENUE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 29 TH OCTOBER 2010. SD/- SD /- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI DATED 29 TH OCTOBER 2010. RK 7 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IV - MUMBAI 4. THE CIT- 4 MUMBAI 5. THE DR BENCH H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 8 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. DATE INITIALS 1. DRAFT DICTATED 27.9.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 28.10.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. 9 ITA 2034/M/06 SHRI JITENDRA R. DOSHI. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4- MUMBAI 4. THE CIT- 2 MUMBAI 5. THE DR BENCH H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 10 ITA 2034/M/06 SHRI JITENDRA R. DOSHI.