Itxa/480/2017 Of The Principal Commissioner Of Income Tax-18 v. Nikhil Arunkumar Jhaveri

SKN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 480 OF 2017 The Principal Commissioner of Income Tax-18.…Appellant.V/s.Shri Nikhil Arunkumar Jhaveri.…Respondent. Mr.P.C.Chhotaray for the appellant.Mr.Sameer Dalal for the respondent. CORAM :AKIL KURESHI AND S.J.KATHAWALLA, JJ.DATE :1st July 2019. P.C.: This appeal is filed by the Revenue to challenge the judgmentof the Income Tax Appellate Tribunal (“Tribunal” for short). Thefollowing questions are presented for our consideration: “A. Whether on the facts and in the circumstances of the caseand in law, the Tribunal was justified in not upholding theorder passed by the Assessing Officer making an additionof Rs.1,63,15,869/- in respect of the purported purchasesshown in the name of alleged bogus biller/accommodation entry provider M/s.Shree Enterprises?and in law, the Tribunal was justified in not upholding theorder passed by the Assessing Officer making an additionof Rs.1,63,15,869/- in respect of the purported purchasesshown in the name of alleged bogus biller/accommodation entry provider M/s.Shree Enterprises? B.Whether on the facts and in the circumstances of the caseand in law, the Tribunal was justified in not upholding theaddition made by the Assessing Officer under section 69Cof the Act and holding that the source of expenditure inpurchasing the goods was explained?and in law, the Tribunal was justified in not upholding theaddition made by the Assessing Officer under section 69Cof the Act and holding that the source of expenditure inpurchasing the goods was explained? C.Whether on the facts and in the circumstances of the caseand in law, the order of the Tribunal is perverse as noand in law, the order of the Tribunal is perverse as no reasonable person acting judicially and properly instructedin the relevant law, could arrive at such a finding on theevidence on record?” 2.The respondent- assessee is engaged in the business of tradeof gold and silver jewellery. In relation to the assessment of return ofincome for the assessment year 2009-10, the Assessing Officer madecertain additions of sum of Rs.1.63 crore (rounded off) under section 69Cof the Income Tax Act, 1961 (“Act” for short). The Commissioner ofIncome Tax (Appeals) and the Tribunal deleted the additions. Hence,this appeal. 3.The Tribunal in the impugned judgment while confirming thejudgment of the Commissioner (Appeals) made the followingobservations: “5.We have heard the rival submissions and perused thematerial before us. We find that undisputed facts of the caseare that the Sales tax department had declared SE a defaulterunder MVAT Act, that the assessee had claimed that he hadsold gold jewellery to PSJ that was purchased from SE, thatthe AO had made addition u/s. 69C of the Act, that the FAAhad allowed the appeal of the assessee. In our opinion, theAO was not justified in invoking the provisions of section 69Cof the Act just because SE was declared defaulter by the Salestax department. We hold that default by a person underMVAT Act cannot be a base for making addition under Incometax Act in case of another person until and unlessdocumentary evidence is not brought on record in the incometax proceedings proving the transaction was non-genuine. SEdid not deposit tax in the treasury of State Government andlater on the assessee had paid the required sum, as he had taken credit under MVAT Act. Section 69C of the Act is anindependent section and can be invoked if certain conditionsare fulfilled. The AO had ignored the documentary andcorroborative evidences produce by the assessee in form ofbank statements, declaration made under MVAT Act, TIN No.,stock registering containing quantitative details. Exceptreferring to the information received from the sales taxdepartment the AO had not carried out any independentinquiry. If the evidences produced by the assessee areweighed against the information of the Sales tax department,it becomes clear that piece of the information was too light.Maxium it was a starting point for further investigation. But,the AO stopped at the beginning and made an addition thoughthe assessee had produced reliable evidence in his favour.Secondly, in our opinion the FAA had rightly opined thatwithout purchases there cannot be any sale. Considering thefacts and circumstances of the case, we are of the opinion thatthe order of the FAA does not suffer from any legal or factualinfirmity. So, confirming his order, we decide the effectiveground of appeal against the AO.” 4.The Tribunal was, therefore, of the opinion that the additioncould not have been made with the aid of section 69C of the Act relyingmerely on the proceedings in connection with another party carried by theValue Added Tax Department of the State. The Commissioner (Appeals)in his detailed independent Judgment while deleting additions made bythe Assessing Officer, made following observations: “5.5I have carefully considered the observations of the A.O.in assessment order as well as in remand report; thesubmissions of the appellant along with cross-objection againstthe remand report and the case laws referred to and reliedupon by the appellant. The only issue in all the grounds ofappeal is the disallowance of purchase amounting toRs.1,63,15,869/- u/s. 69C of the Income Tax Act, 1961 as unexplained expenditure. That the appellant has furnished the copy of Tax Invoiceprepared under MVAT Act, 2002 with full details andsignature. When the sale is made by the person registeredunder MVAT Act, 2002 then he is duty bound to issue his taxinvoice with date, Name and Address of Purchase party,particulars of goods, calculation of MVAT with rate asapplicable declaration under MVAT Act, 2002 and accordinglythe three invoice produced by the appellant from the supplierM/s.Shree Enterprise reflects Date, Name of the Purchaser withAddress, TIN Number, PAN and declaration under MVAT Act,2002, the said Tax Invoices were duly signed. The appellanthas also filed photocopy of three invoices with quantitativeTally with A.O. and since the tax invoices contained signaturethe same do not suffer from any defect. It is a fact that the purchases have been made through AccountPayee cheque only and the same are duly reflected in the bankstatement of the appellant. The jewellery purchases have beensold and the considerations were received during the year.The appellant has made payment to the supplier out of the saidconsiderations and hence the source of acquisition isexplained. The appellant ;maintains books of accountsincluding Stock Register and the same are audited by theauditor. The A.O. has at no stage countered the evidenceproduced by the appellant ;and no mistakes have been noticed/found from the quantitative tally co-relating inward andoutward of the Jewellery. The purchase was co-relatedproperty with the sales. The A.O. has also not rejected thebooks of accounts u/s 145 of the Act to disapprove the Tradingand P & L Account or conducted any independent enquiry toestablish his contentions that the said purchases were bogus asif there were no purchases at all. The appellant establishedhis claims by furnishing relevant Tax Invoice, Bank statements.Since the appellant has offered to taxation sales toM/s.Pransukhlal & Sons Jewellers, he is entitled to deductionof consequent purchases from Shri Enterprise resulting in taxpayment on the profit margin only. Otherwise, the disallowance of purchases from Shree Enterprise ofRs.46,01,040/-, Rs.65,05,236/- and Rs.52,09,593/- will resultin double taxation. There cannot be sales withoutcorresponding purchases and both the things cannot be taxedsimultaneously resulting in taxing of Turnover instead ofincome. Since, there is no evidence of the appellant receivingany money back in respect of the purchases, in question, thepurchases could not be held to be bogus. The A.O. has madeadditions merely on the basis of observations made by the SalesTax Department, for which he has not conducted ;anyindependent enquiries where as the appellant has dischargedits primary onus by producing books of accounts with StockRegister, payment which was made by way of Account Payeescheque, Tax Invoices and bank statements during theassessment proceedings. Hence, such addition could not besustained. In the case of INCOME TAX OFFICER vs.PERMANAND (2007) 107 TTJ (Jd) 395 it was held that, “AOcould not make addition in the hands of the assessee merely onthe basis of observations made by the Sales-tax Departmentthat the purchases made by the assessee from certain partieswere bogus, without conducting independent enquiries ITO v.Vinod Chand, Prop. Vinod Brothers (ITA No.623/Jd/2005, dt.17[th] Dec. 2005) followed; Kishan Chand Chella Ram vs. CIT(1980) 19 CTR (SC) 360: (1980) 125 ITR 713 (SC) applied.”” 5.It can, thus, be seen that the Commissioner (Appeals) and theTribunal concurrently came to the factual finding that the Department hasno independent material to come to the conclusion that the purchasesmade by the assessee of gold and silver were either non-genuine or thatthe same were made out of assessee’s known source. As noted by theCommissioner (Appeals), the purchases were made through bankingchannel. The Assessing Officer had not rejected the books of accounts ofthe assessee. SKN 6.Being a pure question of fact, no question of law arises. Thelearned counsel for the Revenue, however, attempted strenuously tocontend that the findings are perverse relying on several decisions in thisrespect. We are, however, of the opinion that the Commissioner(Appeals) and the Tribunal have taken into consideration the entirematerial on record to come the factual finding. No question of law,therefore, arises. The income tax appeal is dismissed. (S.J.KATHAWALLA, J.) (AKIL KURESHI, J.)