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TMI Blog2016 (5) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... s the documents furnished by the assessee. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the addition made by the AO. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the impugned addition. - Decided in favour of assessee. - I.T.A. No. 3823/MUM/2014 - - - Dated:- 9-3-2016 - Shri B. R. Baskaran (AM) And Shri Pawan Singh (JM) For the Petitioner : Shri Sashi Tulsiyan For the Respondent : Shri Sachchidanand Dube ORDER Per B. R. Baskaran, AM The appeal filed by the assessee is directed against the order dated 28.02.2014 passed by Ld CIT(A)-41, Mumbai and it relates to the assessment year 2009-10. 2. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the disallowance of purchase of ₹ 7.56 crores. At the time of hearing, the Ld Counsel appearing for the assessee did not press the ground relating to the disallowance made u/s 36(1)(iii) of the Act because of the smallness of the amount involved. Other grounds are consequential in nature. 3. The facts relating to the disallowance of purchases are set out in brief. The assessee is a partnership firm and is enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the payment against the subsequent supplies and on subsequent visit by the partner of appellant, the matter will be discussed in person. In the mean time, the appellant claims to have also informed the Broker Mr. Dungrani Shailshbhai Kanjibhai about this fact vide letter dated 12-05-2009. It is argued that since the matter was in dispute and export party was not ready to accept the material, the appellant has not paid to the supplier, i.e., TTPL. It is claimed that finally the entire goods exported against these purchases were returned by the export party and the appellant in turn returned the said goods to TTPL through broker, Mr. Dungrani Shaishbhai Kanjibhai. From the above events, according to the appellant, it is proved that the appellant has genuinely purchased material from TTPL which was subsequently exported as mentioned above and on non-approval, the material was received back in India and returned to the supplier. It is pointed out that the appellant had to suffer additional burden of Custom Duty of ₹ 17,86,611/- due to re-import of exported items. 6. The assessee also contended before the Ld CIT(A) that the assessing officer has made the impugned addition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have purchased the goods. He has stated that he is not having any office in Mumbai and he is carrying on his business activities from Surat. He further stated that he has purchased goods through another broker named Shri Raju Patel, who is doing business in Mumbai and the said Raju Patel was acting on behalf of TTPL. However, he could not provide telephone number of Raju patel. (c) When the remand proceedings were going on, the AO received information from DGIT (Inv), Mumbai that the Sales tax department of Mumbai has provided list of persons who are providing hawala bills and the said list contained the name of TTPL. It was also noticed that the PAN number given by the TTPL was found to be invalid and further the said company has failed to file accounts with Registrar of Companies. Accordingly, the AO has doubted about the claim of purchases made from TTPL and accordingly held that the purchases were bogus. In this regard, the AO also placed reliance on the decision of Hon ble Supreme Court rendered in the case of Sumati Dayal Vs.CIT (214 ITR 801). 9. The Ld CIT(A) was in agreement with the assessing officer and accordingly observed as under:- It is well established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om M/s TTPL b. Ledger account of M/s TTPL in the books of the appellant duly confirmed by M/s TTPL. c. Ledger account of the appellant in the books of M/s TTPL. d. Copy of affidavit of the Broker Mr. Shaileshbhai K Dungrani confirming the purchases. e. Documents of export to M/s AJT. f. Stock register from 01.04.08 to 31.03.2010 g. Copy of correspondence with M/s AJT h. Copy of correspondence with the broker, Mr. Shaileshbhai K Dungrani i. Copy of import documents of the items exported to M/s AJT. j. Copy of letter from the broker, Mr. Shaileshbhai K Dungrani, confirming receipt of material on behalf of M/s TTPL. The Ld A.R submitted that the assessing officer has doubted the genuineness of the correspondences exchanged between the assessee and the importer of diamonds and hence sent them for examination to CFSL, Hyderabad. He submitted that even though the report of CFSL was not received by the time the order of Ld CIT(A) was passed, yet the same has since been received by the AO thereafter and CFSL has not given any adverse view on the documents. Accordingly, the Ld A.R submitted that this fact vindicates the claim of the assessee that the tax author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings before the Income Tax Department. The position of law on the subject is fairly established. As far as Income Tax proceedings are concerned the A.O is not fettered by technical considerations. He is however obliged to make independent enquiry and if he wants to use any materials acquired or received from a sister department he has to confront it to the assessee. Any deposition made before any other departmental authority cannot be utilized against the appellant unless an opportunity to the appellant to cross examine has been given. Since such an opportunity was not given to the appellant no addition can be made relying on the said statement. In support of the above said contentions, the Ld A.R placed reliance on the following case law:- (a) Kishinchand Chellaram Vs. CIT (4 Taxman 0029)(SC) (b) R.W Promotions P Ltd Vs. ACIT (ITA No.1489 of 2013) (c) Heirs and Legal Representatives of Late Laxmanbhai S Patel Vs. CIT (327 ITR 290)(Guj) (d) ITO Vs. Permanand (107 TTJ 395) Accordingly the Ld A.R submitted that the various evidences furnished by the assessee should not have been disregarded. With regard to the observations of the tax authorities that the TTPL coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses made from TTPL were available in stock is supported by the stock register maintained by the assessee. He submitted that the Ld CIT(A) has rejected the stock register without examining the same. The description of goods is available in the export invoices and import documents. He submitted that, when the assessee is able to link the closing stock with the relevant purchase invoices and when the tax authorities could not contradict the same with any credible material, it was not justified on the part of tax authorities to disbelieve the stock register and consequently disbelieve the export invoices import documents. He submitted that the export and import of goods are monitored by the RBI and Customs authorities and their certification is not expected to be questioned by the Income tax authorities. He submitted that the suspicion, howsoever strong, cannot replace the fact and hence the assessing officer is not entitled to make a pure guess and make assessment without reference to any evidence or any material at all as held by the Hon ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd Vs.CIT (26 ITR 775). He further submitted that the Hon ble jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e brokers, referred above, got strained due to the returning of goods and hence Shri Dungrani discontinued the relationship with Raju Patel and hence could not furnish the phone number. (c) With regard to the third point relating to the statement given by the director of TTPL under Sales tax proceedings, the Ld A.R submit that the assessee has purchased goods through a broker and hence it was not aware of antecedents of the supplier company. He further submitted that the goods have been exported, which could not have been done without receiving goods in physical condition. He further submitted that the assessee has, thereafter, re-imported the same goods and returned back the same to the very same supplier. Accordingly, the Ld A.R submitted that the assessee should not be penalised for the default, if any, committed by the supplier under any other Act. We find merit in the said submissions of the assessee for the reasons discussed in the succeeding paragraphs. 15. We notice that the assessee has furnished various documents before the assessing officer during the course of remand proceedings to support the claim of purchases. The assessee has also proved that the said purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the order of the Tribunal dated 30-04-2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement, but also in view of the facts. The Tribunal records that the Books of accounts of the respondent appellant have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the assessing officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent appellant. The Assessing officer as well as CIT(A) have disallowed the deduction of ₹ 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the broker, through whom the purchases have been made. The very fact that the assessee had to re-import the goods shows the genuineness of the claim, since a prudent business man would not normally bear the cost of re-import, payment of import duty etc., unless there is substance in the claim of his client. Hence, we are of the view that there is no reason to suspect the claim the assessee in this regard. When the evidences available with the assessee support the claim of the assessee, the assessing officer was not right in suspecting the same on the basis of mere surmises and conjectures. This proposition gets support from the decision rendered by the Hon ble Supreme court in the case of Dhakeswari cotton Mills Ltd (26 ITR 775) and the decision of jurisdictional High Court in the case of Omprakash K Jain and others (322 ITR 362). 18. Further, the principles of natural justice demand that the assessee should be provided with an opportunity to examine and counter the documents relied upon by the AO to decide an issue against the assessee. In the instant case, the assessing officer has also supported his view by placing reliance on the report given by the DGIT. It is a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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