Principal Commissioner Of Incometax-32, Mumbai, Room v. Respondent: 1. Mr. Sanjay Dhokad,Hi Rock Construction Co., 903-A,Gurukul Towers, J S Road, Dahisar(W) Mumbai 400 063Hi Rock Construction Co., 903-A,Gurukul Towe

SHRADDHAKAMLESHTALEKAR Digitally signed bySHRADDHAKAMLESH TALEKARDate: 2023.01.1015:57:15 +0530 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY. ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.795 OF 2018 APPELLANT :Principal Commissioner of IncomeTax-32, Mumbai, Room No.206, C-11,2[nd] Floor Pratyakshakar Bhawan, BKCMumbai-400 051Principal Commissioner of IncomeTax-32, Mumbai, Room No.206, C-11,2[nd] Floor Pratyakshakar Bhawan, BKCMumbai-400 051 ..VERSUS.. RESPONDENT: 1. Mr. Sanjay Dhokad,Hi Rock Construction Co., 903-A,Gurukul Towers, J S Road, Dahisar(W) Mumbai 400 063Hi Rock Construction Co., 903-A,Gurukul Towers, J S Road, Dahisar(W) Mumbai 400 063 ----------------------------------------------------------------------------------------- Mr. Suresh Kumar, Advocate for the Appellant. -------------------------------------------------------------------------------------------------------- CORAM :DHIRAJ SINGH THAKUR ANDVALMIKI SA MENEZES, JJ.:11thNOVEMBER, 2022. RESERVED ON thPRONOUNCED ON:9 JANUARY, 2023. JUDGMENT: (PER : VALMIKI SA MENEZES, J.) .This is an appeal under Section 260A of the IncomeTax Act 1961 (“the Act”), impugning order dated 31.03.2017,passed by the Income Tax Appellate Tribunal, Mumbai (“theTribunal”), which while dismissing the appeal of the revenue,has upheld the order dated 10.05.2013 of the Commissioner ofIncome Tax (Appeals), Mumbai, which directs deletion of the disallowance for the amount of Rs.4,99,27,664/- under Section 69C of the Act, as was directed by the Assessment Officerunder his order dated 25.02.2013. 2.The appeal is sought to be admitted on the followingsubstantial questions of law : “5.1Whether in law and on the facts andcircumstances of the case, was the Hon’ble Tribunaljustified in upholding the orders of the CIT(A)deleting the addition made on account of thenon-genuine purchases; without a consideration thatthese parties themselves had given a declaration thatthey did not supply any material, but onlyaccommodation bills ? 5.2Whether in law, and on the facts of theinstant case was the Tribunal was in error in nottaking into consideration that an independentauthority namely the Sales tax department hadprovided evidence of the fact that these parties didnot undertake the sale of any material but only 3.The present matter pertains to Assessment Year2010-11. The Respondent had filed his Return of income forthe relevant assessment year, declaring a total income ofRs.37,60,430/-. That Return was processed in terms of theprovisions of Section 143(1) of the Act, and his case wasselected for scrutiny and accordingly a notice under Section143(2) of the Act, was issued to Respondent on 25.08.2011.Thereafter, a fresh notice under Section 142(1) of the Act,alongwith a detailed questionnaire was issued to theRespondent on 09.07.2012. In response, the Respondent filedhis reply with various clarifications and details called for by thesaid notice. In his reply, the assessee stated he was CivilContractor engaged in civil construction contracts. He claimedthat in the course of his business, he made purchases fromvarious parties for which, payments were made through properbanking channels by cheque and such payments were realized. 4.During the assessment proceedings, the Respondentwas called upon to furnish a list of persons from whom he hadmade purchases, and on supplying such a list, the Assessment Officer identified 21 dealers from that list, who according tohim, were termed as “suspicious dealers” indulging in issuingfictitious bills without actual supply of goods or material, for acommission, as was put up on the official websites of the SalesTax Department, Government of Maharashtra. 4.During the assessment proceedings, the Respondentwas called upon to furnish a list of persons from whom he hadmade purchases, and on supplying such a list, the Assessment Officer identified 21 dealers from that list, who according tohim, were termed as “suspicious dealers” indulging in issuingfictitious bills without actual supply of goods or material, for acommission, as was put up on the official websites of the SalesTax Department, Government of Maharashtra. 5.Further, during the course of assessment, the assesseewas asked to show cause by Notice dated 11.02.2013, as to whythe alleged purchases from the said 21 parties, totallyamounting to Rs.4,99,27,664/- should not be treated as hisunexplained expenditure. The show cause notice claimed thatnotice under Section 133(6) of the Act, had been issued to thesaid 21 suppliers who, after having been served with the noticehad not replied thereto. That spot enquiries were made by theIncome Tax Department at the addresses of the said 21suppliers and during the enquiries, it was revealed that nobusiness was carried out from the premises, and in view of thatfact, the assessee was called upon to show cause why purchasesfrom the said 21 suppliers should not be treated as fictitiouspurchases. 6.Relying upon certain statements of the proprietors ofthe 21 Firms referred to in the notice, and since none attendedor made any submissions on behalf of the assessee afterreceiving a show cause notice, the Assessing Officer presumedthat the assessee had nothing to say and that the said purchasesshould be treated as his income. He passed the assessment orderdated 25.02.2003, treating the entire amount ofRs.4,99,27,664/- as unexplained expenditure under theprovisions of Section 69C of the Act, and added this amount tothe total income of the assessee, and in consequence of thisorder, initiated penalty proceedings under Section 274, readwith Section 271(c) of the Act, for furnishing inaccurateparticulars of income and conceal income. 7.On the Respondent challenging the order ofassessment dated 25.02.2013, the Commissioner of IncomeTax (Appeals), allowed the same holding that the Respondenthad proved the transactions by producing his books ofaccounts, banks statements and proved that the payments hadbeen realized. On an appeal filed against the order dated31.03.2017 has upheld the order of the Appellate Forum. 8.We have heard Mr. Suresh Kumar, learned Counsel for the Appellant and perused the records of appeal. 9. Mr. Suresh Kumar, learned Counsel submits that theTribunal and the Commissioner (Appeals), have concurrentlyerred in holding that the transactions of the Respondent whichwere in question have been sufficiently proved. It is hissubmission that the burden of proving the transactions in termsof Section 69C of the Act, would not get discharge by merelyproducing such documents or by the production of the bankstatements, invoices and books of accounts, and it wasincumbent upon the Respondent to produce from the supplierssome evidence or proof of actual delivery of the material and ofactual receipt of the amounts paid to them, notwithstandingthat they were made through proper banking channels byaccount payee cheques. He further submits that the statements recorded bythe Sales Tax Department of the Government of Maharashtrafrom suppliers, whose names were shown on the website of thedepartment as suspicious traders, had not been rebutted by theRespondent, who would be required to produce these traders 7 J-ITXA-795-2018.odt He further submits that the statements recorded bythe Sales Tax Department of the Government of Maharashtrafrom suppliers, whose names were shown on the website of thedepartment as suspicious traders, had not been rebutted by theRespondent, who would be required to produce these traders 7 J-ITXA-795-2018.odt before the Assessing Officer or at least get theirstatements or affidavits recorded. Mr Kumar, relies upon ajudgment of the Hon’ble Supreme Court in the case of--Principal Commissioner of IncomeTax (Central)1 ..V/s..NRA Iron and Steel (P.) Ltd., reported in [2019] 103taxmann.com 48 (SC), to buttress his submissions that theburden of proving the transactions was on the Respondent andthe onus shifts on to the revenue only after the Respondentproves the transactions by producing evidence through theconcerned suppliers. 10.The order of assessment dated 25.02.2013, passed bythe Assessment Officer was challenged before theCommissioner of Income Tax (Appeals) at Mumbai, primarilyon the ground that the Respondent had discharged the initialburden of proving the delivery of material from 21 suppliersreferred to in a show cause notice and had proved payments tothem through proper banking channels and such payments hadbeen realized. The assessee has also specifically taken a groundin the appeal that his statement alleged to have been taken bythe Sales Tax Department, but was never supplied or furnished to him to enable him to deal with their content, and further,that such statements would have no legal sanctity to prove thatthe purchases made by the assessee were fictitious. 11.The Commissioner of Income Tax (Appeals) atMumbai, considering this ground and the material on record,and has arrived at a specific finding, firstly that the Respondentherein had already shown gross profit and net profit in hisaccounts, which were duly accepted by the Assessing Officer,and therefore, in the absence of rejection of any book entries,such huge additions of Rs.4,99,27,664/- were not tenable atlaw. The Appellate Authority has further, on consideration ofthe material before the Assessing Officer, come to a conclusionthat in the absence of Assessing Officer issuing any summonsto the 21 suppliers alleged to have fictitious transactions withthe assessee, and in the absence of the copies of the statementsrecorded by the Sales Tax Department being furnished to theRespondent to enable him to cross-examine the suppliers, theAssessing Officer could not have proceeded to treat thepurchases as unexplained expenditure. The Appellate Authority has then, after goingthrough all the payments made by the assessee to thosesuppliers by perusing the bank statements of the assessee andascertaining that the payments were made by account payeecheques, which had been credited to the bank accounts of thesuppliers, concluded that the Respondent had in-fact provedthe payments actually were made by him, and were notfictitious sales. 12.The Appellate Authority has specifically arrived at afinding that the Assessment Officer had accepted thecorrectness of the contracts executed by the Appellant with thesuppliers, and having accepted the same, could not haveproceeded to disallow the expenditure under the provision ofSection 69C. of the Act. The Appellate Authority has thenopined that the disallowance of the whole amount ofRs.4,99,27,664/- under Section 69C would result inabnormally high gross profit and net profit of the Appellant,which is unrealistic in any line of contract as has been executedby the Respondent. For all these reasons, the Commissioner ofIncome Tax (Appeals) at Mumbai, set aside the order of assessment dated 25.02.2013 to the extent that it added theamount of Rs.4,99,27,664/- as unexplained expenditure underSection 69C of the Act, to the total income of the Respondent. assessment dated 25.02.2013 to the extent that it added theamount of Rs.4,99,27,664/- as unexplained expenditure underSection 69C of the Act, to the total income of the Respondent. 13.The revenue challenged the order of theCommissioner of Income Tax (Appeals) before the Tribunal,which on reconsideration of the material on record, hasconcluded that the Respondent had shown gross profit and netprofit, which were accepted by the Assessing Officer and in theabsence of rejection of the books and accounts, such additionswere not tenable at law. The Tribunal has further noted that theassessee has disclosed the addresses of all the parties, who weresuppliers and has furnished details of payments through bankaccounts into the bank accounts of such suppliers. It has furtherfound that after having received details of the payments madeby the Respondent through cheques to such suppliers, it wasincumbent upon the Assessing Officer to verify the transactionswhich had been done. The Tribunal has held that the evidence given by the assessee, which is in the documentary form, has nowhere beendiscussed and discredited by the Assessment Officer and in that light, merely because the names of such parties were found on the official website of the Sales Tax Department of theGovernment of Maharashtra would by itself not be sufficient toprove that the transactions were bogus. The Tribunal has heldthat the Respondent had sufficiently discharged the burden ofproving the transactions. 14.The Tribunal has also referred to the judgment of-this Court in the case of The Commissioner of Income Tax1,Mumbai ..V/s.. M/s. Nikunj Eximp Enterprises Pvt. Ltd., dated17.12.2012, in Income Tax Appeal No.5604 of 2010andapplying the ratio therein, dismissed the appeal. 15.Section 69C of the Income Tax Act, reads as under : “69C.Where in any financial year an assessee hasincurred any expenditure and he offers no explanationabout the source of such expenditure or part thereof, orthe explanation, if any, offered by him is not, in theopinion of the [Assessing] Officer, satisfactory, theamount covered by such expenditure or part thereof, asthe case may be, may be deemed to be the income of theassessee for such financial year.” The provisions would be attracted to a case where the assessee offers no explanation on the source of such expenditure or part of thereof, or by the explanation that isoffered is not, in the opinion of the Assessing Officersatisfactory. The Assessment Officer, is therefore, called uponby the provisions of Section 69C to record his satisfaction basedupon the material produced by the assessee and cannot advertto material such as unproved statements recorded by someother Authority such as the Sales Tax Department, which inany event were not put to assessee during the course of theassessment proceedings. --16.Principal Commissioner of IncomeTax (Central)1 ..V/s.. NRA Iron and Steel (P.) Ltd., (supra), was the case inwhich, the Hon’ble Supreme Court considered a situation,where Share Capital/Premium was credited in the books ofaccounts of the assessee company, and such ShareCapital/Premium was considered as transaction, which was notgenuine, and therefore, treated as income of the assessee underSection 69C. It is in that context, that the Assessing Officer inthat case, conducted an extensive investigation by holding anindependent field enquiry to ascertain the genuineness of theinvestors in the assessee company. On the assessee being given an opportunity for meeting of the evidence collected by theAssessing Officer to demonstrate the non-existence suchinvestors, that the Assessing Officer concluded that the assesseehad not discharged the initial onus of establishing by cogentevidence with the genuineness of the transactions andcreditworthiness of the investors under Section 68 of the Act. an opportunity for meeting of the evidence collected by theAssessing Officer to demonstrate the non-existence suchinvestors, that the Assessing Officer concluded that the assesseehad not discharged the initial onus of establishing by cogentevidence with the genuineness of the transactions andcreditworthiness of the investors under Section 68 of the Act. It is in this context that the Hon’ble Supreme Courtconcluded that the Lower Appellate Authorities had ignoredthe detailed findings of the Assessing Officer from the fieldenquiry and investigations carried out by him and the assesseehad not discharged his legal obligation to prove the receipt ofthe Share Capital/Premium to the satisfaction of the AssessingOfficer. The ratio laid down in Principal Commissioner of--IncomeTax (Central)1 ..V/s.. NRA Iron and Steel (P.) Ltd.,(supra), was in the facts of that case and would have noapplication to the present case. 17.The Bombay High Court in case of The-Commissioner of Income Tax1, Mumbai ..V/s.. M/s. NikunjEximp Enterprises Pvt. Ltd., (supra), has in a similar case,where the assessee produced his books of accounts, copies of invoices for purchases, and copies of bank statements indicating that purchases were made, has held as under : “We have considered the submission on behalf ofthe revenue. However, from the order of the Tribunaldated 30.04.2010, we find that the Tribunal has deletedthe additions on account of bogus purchases not only onthe basis of stock statement i.e. reconciliation statement,but also in view of the other facts. The Tribunal recordsthat the Books of Accounts of the respondent assesseehave not been rejected. Similarly, the sales have not beendoubted and it is an admitted position that substantialamount of sales have been made to the GovernmentDepartment i.e. Defence Research and DevelopmentLaboratory, Hyderabad. Further, there were confirmationletters filed by the suppliers, copies of invoices forpurchases as well as copies of bank statement all of whichwould indicate that the purchases were in fact made. Inour view, merely because the suppliers have not appearedbefore the Assessing Officer or the CIT(A), one cannotconclude that the purchases were not made by therespondent-assessee. The Assessing Officer as well asCIT(A) have disallowed the deduction of Rs.1.33 croreson account of purchases merely on the basis of suspicionbecause the sellers and the canvassing agents have notbeen produced before them. We find that the order of theTribunal is well a reasoned order taking into account allthe facts before concluding that the purchases of Rs.1.33crores was not bogus. No fault can be found with theorder dated 30.04.2010 of the Tribunal.” 18.The Appellate Tribunal was right in applying the-ratio of the judgment in The Commissioner of Income Tax1, Mumbai ..V/s.. M/s. Nikunj Eximp Enterprises Pvt. Ltd., (supra), to the facts of the present case. There are concurrent findings arrived at by the Commissioner of Income Tax(Appeals) and the Income Tax Appellate Tribunal, on the factthat the Respondent had satisfactorily discharged the initialburden of proving the genuineness of the transactions. 19.In that view, we are of the considered opinion thatthis is not a fit case for consideration in appeal as the substantialquestions of law proposed by the revenue would not arise.Therefore, the appeal is dismissed with no order as to costs. (VALMIKI SA MENEZES, J.) (DHIRAJ SINGH THAKUR, J.) TAMBE.