Pr. Commissioner Of Income Tax-33,Appellantmumbai v. Vishal P. Mehta

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO. 456 OF 2018 Pr. Commissioner of Income Tax-33,AppellantMumbai Versus Vishal P. Mehta Respondent ------------------ Mr. Akhileshwar Sharma, for Appellant. Mr. Sameer G. Dalal with Ms. Rashmi Vyas, for Respondent. --------------------- CORAM:DHIRAJ SINGH THAKUR &VALMIKI SA MENEZES, JJ. Dated:30[th] SEPTEMBER 2022. PER:- (VALMIKI SA MENEZES, J). 1.This is an appeal under section 260 (A) of the Income Tax Act, 1961 at the behest of the revenue, impugning order dated5[th] October 2016 of the Income Tax Appellate Tribunal (hereinafterreferred to as ‘ITAT’), Mumbai Bench ‘F’ passed in ITA No.5313/M/2013, on the following substantial question of lawproposed by the revenue, which is reproduced as under: “4.a) Whether on the facts & in the circumstances ofthe case and in Law, the Hon’ble ITAT was justified inupholding the order of the CIT(A) deleting the additionof Rs.3,75,87,293/- made by the Assessing Officertreating the purchases amounting to Rs.3,75,87,293/-as unexplained expenditure under Section 69 C of theIT Act,1961.” 2. The ITAT, by the impugned order dated 5[th] October 2016 confirms the order dated 9[th] May 2013 passed by the Commissioner of Income Tax (Appeals), in Appeal No. CIT(A)-35/DCIT-25(3)/ITA.164/2012-2013, which order disallows additions made by the Assessment Officer in order passed underSection 143(3) of the Income Tax Act, 1961 dated 28[th] December2012. By the said order dated 28[th] December 2012, the AssessmentOfficer in a scrutiny case completed the assessment under theProvisions of Section 143 (3) of the Act making additions underSection 69 C of the Act, treating certain alleged purchases made bythe assessee-respondent herein, aggregating to Rs.3,75,87,293/- andtreated the same as unexplained expenditure for the assessment year2010-2011, and consequently assessing the same to tax.3.From the substantial question of law proposed by therevenue, the issue for our consideration is ‘whether the additions made by the Assessing Officer to the income of the assessee,invoking the Provision of section 69 C of the Act, as unexplainedexpenditures were sustainable at law’. From a perusal of the assessment order, it appears thatduring the assessment proceedings, the assessee was asked tofurnish a list of the persons from whom purchases had been made byhim; further, it appears that he furnished his stock book and variousother documents to the Assessing Officer. According to theassessment order, the official website of the Sales Tax Department,Government Of Maharashtra published names of five parties fromwhom the assessee is alleged to have made purchases the said fiveparties being termed as suspicious dealers, who indulge in issuingbills without any goods or materials being actual sold, for acommission charge by them. Based upon this information, theassessee was asked to show cause why the alleged purchases fromthe said five suspicious parties, aggregating to Rs. 3,75,87,293/-should not be treated as his unexplained expenditure and charge toTax. 4.From the order of the Assessing Officer, it furthertranspired that the respondent participated in the assessment proceedings and filed his reply to the show cause notice, wherein hehas specifically taken a defence, that all the payments to the fiveparties referred to in the show cause notice, from whom he hadmade purchases, were made by account payee Cheques/RTGS only,through genuine banking channels. The assessee, who deal in sale ofIron and Steel Sheets, as the proprietor of M/s Ispat Steel Supplies,further filed a chart before the Assessing Officer reflecting all thepayments made by him through banking channels, specifying thedetails of the dates of cheques or RTGS transactions, the amount ofeach transaction and the transaction number; he has also submittedStock Register maintained by him which reflected the purchases ofthe goods from the said parties and the subsequent sales made bythe assessee to third parties. 5.After considering the reply of the assessee and thematerial placed by him on record in answer to the show causenotice, the Assessing Officer passed assessment order dated 28[th]December 2012 rejecting the contention of the assessee andconcluded that the transactions are not supported in the form oflorry receipts or delivery challans. He further concluded that theaffidavit produced by the five suspicious dealers were not sufficiently rebutted by the assessee and consequently passed an assessmentorder under section 143 (3) of the Act making additions to theincome of the assessee in terms of section 69 C of the Act for theamount of Rs.3,75,87,293/- as additional income, levying taxthereon and consequent penalties.6.The respondent had challenged the Assessing Officer’sorder in appeal before the Commissioner of Income Tax, Mumbai,who, by its order dated 9[th] May 2013 has considered all the materialplaced by the assessee along with his reply, before the AssessingOfficer and has come to a specific finding of fact, to the effect thatthe transactions by which the assessee had produced the goods weregenuine, supported by proof of payment made through properbanking channels; Commissioner of Income Tax has also consideredthe fact that the reliance on the affidavits of the suspicious supplierswas misplaced and does not constitute evidence, more so in the lightof the fact that assessee was not given any opportunity to cross-examine the affiants / witnesses. In such, no reliance could beplaced on such material which does not constitute evidence underthe Indian Evidence Act. The Commissioner of Income Tax hasfurther concluded that assessee had also produced on record to prove the genuineness of his case, the stock register maintained byhim, clearly reflecting the purchases of goods from the parties andsubsequent sales made in the course of his business. TheCommissioner of Income Tax has held that merely because theassessee has not been able to produce the relevant parties, theamount spent on purchases from the said parties cannot bedisallowed. Consequently the Commissioner of Income Tax allowedthe appeal, after arrived at the specific finding that the assessee hasestablished the genuineness of these purchases. It is a fact on recordthat the Assessing Officer has not doubted the sales effected by theassessee and accordingly set aside the order passed by the AssessingOfficer to the extent of the additions made by him.7.In an appeal filed by the revenue before the ITAT, theTribunal, after reassessing all the material on record before theAssessing Officer has arrived at concurrent findings to those arrivedat by the Commissioner of Income Tax, and specifically held thatwithout causing any further enquires in respect of the saidpurchases, the Assessing Officer cannot make the addition undersection 69 C of the Act by merely relying on information obtainedfrom the Sales Tax Department. The ITAT has further concurrently held on fact that the statement/affidavit of a third party, wherein theassessee was not named or afforded opportunity of crossexamination of the affiant, was inadmissible as evidence against theassessee; it further held that mere reliance by the Assessing Officeron information obtained from the sales tax department or statementof a third party before the sales tax department, without affordingthe assessee adequate opportunity to cross-examine that personwould not suffice, to treat the purchases as bogus and make additionunder section 69 C of the Act. Thus, we find that there are concurrent findings of factin issues by the Commissioner of Income Tax and the ITAT. 8.We have heard learned counsel, Mr. Sharma for theappellant and Mr. Dalal for the respondent. We consider thesubmission made before us in the appeal. 9.For easy reference the provisions of Section 69 C of theAct are extracted hereunder: “69 C : Where in any financial year an assessee hasincurred any expenditure and he offers noexplanation about the source of such expenditure orpart thereof or the explanation, if any, offered byhim is not, in the opinion of the AO, satisfactory, theamount covered by expenditure or part thereof, asthe case may be, may be deemed to be the income Provided that, notwithstanding anything containedin any other provisions of this Act, such unexplainedexpenditure which is deemed to be the income ofthe assessee shall not be allowed as a deductionunder any head of income.” 10. The above provisions contain a deeming provisions whereby if the assessee increase any expenditure in the relevantprevious year, but does not offer any explanation about a source ofsuch expenditure, such expenditure is deemed to be his income andshall not be allowed as a deduction under that head. 11.Learned counsel for the appellant argues before us thatthe findings of fact arrived at by the Commissioner of Income Taxwhich are concurrently upheld by the ITAT as perverse and withoutconsidering the material placed by the assessee before the AssessingOfficer in the right perspective. He further argues that the burdenwas on the assessee to produce lorry receipts or delivery challans ofmaterial supplied and purchased by the assess fromthe suspiciousvendors and in the absence of the assessee placing before theAssessing Officer such material, the conclusions, on fact arrived at bythe Assessing Officer are well within the provisions of section 69C ofthe Act. 12.Per contra, the learned counsel for the respondentsupports the concurrent findings of fact arrived at by theCommissioner of Income Tax and ITAT, which he submits, werecorrectly arrived at on the basis of documentary evidence producedby the assessee. Learned counsel for the respondent cited before us ajudgment of Division Bench of this Court in the case of Principal 1Commissioner of Income Tax vs. Vaman International (P) Ltd tosupport his contention that in light of the concurrent findings of factarrived at by two authorities below, after considering the materialevidence to show that the purchases made by the assessee weregenuine, this Court ought not to exercise jurisdiction vested in itunder the Provisions of section 260 A of the Income Tax Act. 13.We have considered the rival submissions made by thecounsel for the parties and gone through the records before us. 14.This Court in the case of Principal Commissioner ofIncome Tax (Supra) considering the provisions of section 69 C of theAct, which reads as follows:- “16. The first appellate authority while deleting theaddition made by the AO under s. 69 C held that AOdid not doubt the sales and stock records 1Commissioner of Income Tax vs. Vaman International (P) Ltd tosupport his contention that in light of the concurrent findings of factarrived at by two authorities below, after considering the materialevidence to show that the purchases made by the assessee weregenuine, this Court ought not to exercise jurisdiction vested in itunder the Provisions of section 260 A of the Income Tax Act. 13.We have considered the rival submissions made by thecounsel for the parties and gone through the records before us. 14.This Court in the case of Principal Commissioner ofIncome Tax (Supra) considering the provisions of section 69 C of theAct, which reads as follows:- “16. The first appellate authority while deleting theaddition made by the AO under s. 69 C held that AOdid not doubt the sales and stock records maintained by the assessee. By submittingconfirmation letters, copies of invoices, bankstatement, payment order, payment by accountpayee cheques etc. assessee had proved that saleand purchases had taken place. By highlighting thefact that all the payments against the purchaseswere made through banking channel by way ofaccount payee cheques, the first appellate authorityheld that source of expenditure was fully establishedby the assessee beyond any doubt. He has furtherrecorded that during appellate proceedings theassessee had furnished complete quantitative detailsof the items of goods purchased during the yearunder consideration and their corresponding sales.” Thereafter, on considering the order passed by theTribunal and noting that the Tribunal has arrived at concurrentfindings with ones arrived at by the Commissioner of Income Tax, tothe effect that the purchases made by the assesse could not bedoubted on the basis of production of purchase bills as well asinvoices, challan-cum tax invoices in respect of purchases andextracts of stock ledgers showing entry/exit of materials hasconcluded in paras 18 and 19, as under : “18. We are in agreement with the view expressed by the Tribunal. In fact, Tribunal has only affirmed thefinding of the first appellate authority. Thus, there isconcurrent finding of fact by the two lower appellateauthorities. 19. This Court in the case of CIT Vs. Nijunj EximpEnterprises (P) Ltd. (2015) 372 ITR 619 (Bom);wherein an identical fact situation arose did notinterfere with the order passed by the Tribunal andheld that no substantial question of law arose fromsuch order. It was held that merely because thesuppliers had not appeared before the AO, noconclusion could be arrived at that the purchaseswere not made by the assessee.” 15.In our opinion, the CIT as well as ITAT have concurrentlyconcluded, on a matter of fact that the transactions entered into bythe assessee were genuine, supported by material such as stockentries and payments made through cheques through properbanking channels. Both these authorities have concurrentlyconcluded that the assessee had made purchases materials andreflected the same materials to various authorities in a StockRegister. We see no reason to conclude otherwise and accordinglyfind no infirmity with findings and conclusions arrived at by the CITor with the concurrent view taken by the Tribunal on this matter.The judgment rendered inPrincipal Commissioner of Income Tax(supra) applies in all vigor to the facts of the present case. NoVarsha11 of 12 VARSHADEEPAKGAIKWADDigitally signed byVARSHA DEEPAKGAIKWADDate: 2022.10.0610:44:49 +0530 substantial question of law as envisaged under section 260 (A) of theAct arises in the present matter. Accordingly, we dismiss the appeal.16.Appeal is dismissed with no order as to costs. (VALMIKI SA MENEZES, J) (DHIRAJ SINGH THAKUR, J)