The Commissioner of Income-tax, Panaji v. Ajit Ramakant Phatarpekar through LRs Neelam Phaterpekar and Aniket Ajit Phaterpekar
[Citation -2020-LL-1029-53]

Citation 2020-LL-1029-53
Appellant Name The Commissioner of Income-tax, Panaji
Respondent Name Ajit Ramakant Phatarpekar through LRs Neelam Phaterpekar and Aniket Ajit Phaterpekar
Court HIGH COURT OF BOMBAY AT GOA
Relevant Act Income-tax
Date of Order 29/10/2020
Judgment View Judgment
Keyword Tags undervaluation of closing stock • transfer of funds • books of account • dividend income • trade creditors • total purchases • cash purchases • onus to prove • exempt income
Bot Summary: Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner of Income Tax(A), in disallowing cash purchases without considering that onus is upon the assessee to prove the genuineness thereof 3. Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner of Income Tax(A), deleting additions made under 41(1) when assessee had not filed any confirmation of trade creditors and existence of liabilities 4. Whether the Income Tax Appellate Tribunal erred in law upholding the order of Commissioner in deleting additions towards staking and handling expenses and blending and screening charges, where assessee has failed to prove genuineness of rendering any service by sister concern 5. Mr. Razaq submits that onus to prove the genuineness of cash purchases, lies upon the Assessees and since the same was not discharged despite opportunities, this amount of Rs.60,28,080/- should have been added to the returned income of the Assessees. Ms. Razaq then submits that the Commissioner and the ITAT were not justified in deleting the addition made under Section 41(1) of the IT Act, since despite opportunities no confirmations of trade creditors were produced on record by the Assessees. Ms. Razaq finally contends that the Commissioner and the ITAT erred in deleting the additions towards 10 staking and handling expenses and blending and screening charges since the Assessees failed to establish the genuineness of such activities by their sister concern. As a result, the substantial questions of law in these Appeals are required to be answered against the Revenue and in favour of the Assessee.


1 Santosh IN HIGH COURT OF BOMBAY AT GOA TAX APPEALS NO.22 & 45 OF 2016 TAX APPEAL NO.22 OF 2016 Pr. Commissioner of Income Tax Having office at Aayakar Bhavan, Panaji, Goa. .. Appellant. Versus Ajit Ramakant Phatarpekar, deceased (through LRs.) a) Mrs. Neelam Phaterpekar (wife of Respondent), major in age, married, business. b) Mr. Ankiet Ajit Phaterpekar (son of respondent) major in age, business, both resident of 601/602, 6th Floor, Gera Imperium, Patto Plaza, Goa 403 001. .. Respondents. TAX APPEAL NO.45OF 2016 Pr. Commissioner of Income Tax Having office at Aayakar Bhavan, Panaji, Goa. .. Appellant. Versus Neelam Ajit Phatarpekar, 601/602, 6th Floor, Gera Imperium, Patto Plaza, 2 Goa 403 001. .. Respondent. Ms. Amira Abdul Razaq, Standing Counsel for Appellant. Mr. Jitendra Jain, with Mr. H.D. Naik, Advocates for Respondents. Coram : M.S. Sonak & Dama Seshadri Naidu, JJ. Reserved on : 27th October, 2020 Pronounced on : 29th October, 2020. JUDGMENT : - (Per M.S. Sonak, J.) Heard Ms. Amira Razaq, learned Standing Counsel for Income Tax Department (Revenue) and Mr. Jitendra Jain, along with Mr. H.D. Naik for Respondents (Assessees). 2. learned Counsel for parties agree that both these Appeals can be disposed of by common Judgment and Order since issues involved in both these Appeals are identical. 3. learned Counsel for parties, however, submit that Tax Appeal No.22/2016 may be treated as lead Appeal. 4. This Appeal was admitted on 5th March 2019 on following substantial questions of law 1. Whether Income Tax Appellate Tribunal erred in law upholding disallowance to extent of Rs.65,000/- 3 only and deleting balance addition of Rs.24,06,566/- u/s 14A ? 2. Whether Income Tax Appellate Tribunal erred in law upholding order of Commissioner of Income Tax(A), in disallowing cash purchases without considering that onus is upon assessee to prove genuineness thereof? 3. Whether Income Tax Appellate Tribunal erred in law upholding order of Commissioner of Income Tax(A), deleting additions made under 41(1) when assessee had not filed any confirmation of trade creditors and existence of liabilities? 4. Whether Income Tax Appellate Tribunal erred in law upholding order of Commissioner of Income Tax(A), in deleting additions of Rs.1,18,26,320/- on account of undervaluation of closing stock merely by passing journal entries ? 5. Whether Income Tax Appellate Tribunal erred in law upholding order of Commissioner in deleting additions towards staking and handling expenses and blending and screening charges, where assessee has failed to prove genuineness of rendering any service by sister concern? 5. Ms. Razaq, learned Counsel for Revenue submits that findings recorded by Income Tax Appellate Tribunal (ITAT) suffer from perversity. She submits that relevant and vital material on record has been excluded from consideration. She, therefore, submits that substantial questions of law, as framed, are required to be answered in favour of Revenue and against Assessees. 4 6. Ms. Razaq, learned Counsel for Revenue submits that Assessing Officer (AO), based on detailed reasoning and calculations, had concluded that sum of Rs.4,71,566/- was required to be disallowed under Section 14A of Income Tax Act, 1961 (IT Act). Commissioner (Appeals) and ITAT, by misconstruing provisions of Section 14A, have reduced this disallowance to only Rs.65,000/-, which is not proper. 7. Mr. Jain defends orders made by Commissioner (Appeals) and ITAT based on reasoning reflected therein. He points out that total dividend income was only Rs.45,321/-. He relies on Nirved Traders Pvt. Ltd. vs. Dy. Commissioner of Income Tax 1, to submit that disallowance under Section14A cannot be more than exempt income earned by Assessee during relevant assessment year. 8. Rival contentions now fall for our determination. 9. There is no perversity in orders passed by Commissioner (Appeals) and ITAT on this issue. Besides in Nirved Traders Pvt. Ltd. (supra), this Court has held that disallowance under Section 14A of IT Act cannot be more than exempt income earned by Assessee during assessment year in question. In this case, there is no dispute that dividend i.e. 1 (2019) 3 NYPCTR 411 (Bom) 5 exempt income earned by Assessees during relevant Assessment Year, was only Rs.45,371/-. Accordingly, disallowance in this case could not have exceeded Rs.45,371/-. It is only because Assessees voluntarily offered disallowance to extent of Rs.65,000/-, that Commissioner (Appeals) made disallowance to extent of Rs.65,000/-. Thus, first substantial question of law is required to be answered against Revenue and in favour of Assessees. 10. Ms. Razaq then submits that in this case, cash purchases to extent of Rs.60,28,080/- were made by Assessees and despite opportunity, there was no explanation forthcoming as to details of parties from whom such cash purchases were made. Mr. Razaq submits that onus to prove genuineness of cash purchases, lies upon Assessees and since same was not discharged despite opportunities, this amount of Rs.60,28,080/- should have been added to returned income of Assessees. She relies on Shree Choudhary Transport Co. vs. Income Tax Office r2 in support of her contention. 11. Mr. Jain defends impugned orders made by Commissioner (Appeals) and ITAT based upon reasoning reflected therein. He points out that decision in Shree Choudhary Transport Co. (supra) is not at all relevant to issue 2 CA No.7865/2009 decided by SC on 29/7/2020 6 in this matter. 12. On consideration of rival contentions, again we are unable to agree with contentions of Ms. Razaq. record indicates that total purchases of Assessees during relevant assessment year were in range of Rs.29.97 crores. As against this, cash purchases were of Rs.60,20,080/- which corresponds to around 2% of total purchases. purchases were in series of transactions, involving amount of less than Rs.20,000/-. This is not case where books of account of Assessees were rejected by AO. record also establishes that Assessees obtained 'H' Form concerning these purchases. 13. Assessees have also offered plausible explanation that such purchases were from smaller traders or mining contractors who would collect residual iron ore spilled on land and then sold for cheaper price based on on spot cash payments. 14. Both, Commissioner (Appeals) and ITAT have recorded concurrent findings on issue of cash purchases and it cannot be said that such findings suffer from perversity to warrant interference in this Appeal. 15. decision in Shree Choudhary Transport Co. (supra) is distinguishable and concerns mainly interpretation of Section 40(i)(ia) of IT Act. Since fact position in said decision is 7 in no manner comparable, said decision can be of no assistance to Revenue in this matter. 16. Accordingly, second substantial question of law is also required to be answered against Revenue and in favour of Assessee. 17. Ms. Razaq then submits that Commissioner (Appeals) and ITAT were not justified in deleting addition made under Section 41(1) of IT Act, since despite opportunities no confirmations of trade creditors were produced on record by Assessees. She submits that in absence of such confirmations, additions were correctly made by AO and same required no interference. 18. Mr. Jain defends impugned orders based on reasoning reflected therein. He relies on CIT vs. Chase Bright Steel Ltd 3 in support of his contentions. 19. On considering rival contentions, again, we find no good ground to interfere with view taken by Commissioner (Appeals) as also ITAT on this issue. In first place, ITAT for Assessment Year 2009-10 in respect of these very Assessees, has confirmed deletion of similar nature, relying upon decision of this Court in Chase Bright Steel Ltd. (supra). 3 (1989) 171 ITR 128 8 Admittedly, this order of Tribunal was never challenged by Revenue, and view taken therein was accepted. Though indeed, principle of res judicata will not be attracted in such matters, it is clear that in similar circumstances and overlapping facts, view of Tribunal was never questioned by Revenue concerning these very Assessees. Accordingly, there is no case made out to answer this substantial question of law in favour of Revenue. 20. In any case, even reasonings of Commissioner (Appeals) and ITAT suffer from no perversity whatsoever. view taken is consistent with law laid down by this court in Chase Bright Steel Ltd (supra). There is material on record, which also suggests that confirmations were indeed received and filed by Assessees though, there are contradictory findings by AO on this issue. 21. For all aforesaid reasons, third substantial question of law is required to be decided against Revenue and in favour of Assessee in this matter. 22. Ms. Razaq then submits that in this case, undervaluation of closing stock is done by merely passing journal entries in name of sister concern. She submits that dealings involving transfer of funds to related parties are required to be scrutinized with care and caution. She submits that no such care and caution were applied by 9 Commissioner (Appeals) and ITAT in present matter. Accordingly, amount of Rs.1,18,26,320/- was required to be added to income of Assessees. 23. Mr. Jain again defended impugned orders made by Commissioner (Appeals) and ITAT based on reasoning reflected therein. He points out that in this case, Revenue has accepted rendering of service as genuine and on such basis, even collected tax. Having done this, it is not open to Revenue to allege any undervaluation of closing stock. 24. Again, on consideration of rival contentions, we detect neither any perversity in concurrent findings of fact recorded by Commissioner (Appeals) and ITAT, nor can we say that two authorities misconstrued legal position in this regard. Revenue, on one hand, cannot accept rendering of service as genuine and tax transactions based on same and other hand, urge that there has been undervaluation of closing stock and on such basis make additions to returned income. Accordingly, even fourth substantial question of law is required to be answered against Revenue and in favour of Assessees. 25. Ms. Razaq finally contends that Commissioner (Appeals) and ITAT erred in deleting additions towards 10 staking and handling expenses and blending and screening charges since Assessees failed to establish genuineness of such activities by their sister concern. She points out that in first place transactions with sister concerns are required to be scrutinized with care and caution. Secondly, there was no evidence that sister- concern was at all involved in such kind of activities. She submits that for these reasons, fifth substantial question of law was required to be answered in favour of Revenue and against Assessees. 26. Mr. Jain points out that there is sufficient material on record which indicates that sister- concern was indeed involved in such activities. He points out that in preceding assessment year, this position had been accepted by Revenue. He submits that concurrent findings as to genuineness recorded by Commissioner (Appeals) and ITAT suffer from no perversity and, therefore, warrant no interference. 27. Again, upon consideration of rival contentions we agree with Mr. Jain that this is not case of perversity in matter of record of concurrent findings of fact. 28. record very clearly indicates that sister concern M/s. Karishma Goa Mineral Trading Pvt. Ltd. had rendered similar types 11 of services to M/s. Karishma Global Mineral Exports Pvt. Ltd. during assessment year 2010-11 and said expenditure was never disallowed by Revenue during assessment of M/s. Karishma Global Mineral Exports Pvt. Ltd. even though such assessment was completed under Section 143(3) of IT Act. Therefore, there was factual error on part of AO in holding that sister- concern was never involved in this type of activity. 29. Secondly, we are satisfied that both Commissioner (Appeals) and ITAT did scrutinize transaction with required care and caution and only thereafter recorded concurrent findings of fact. Therefore, even fifth substantial question of law is required to be answered against Revenue and in favour of Assessees. 30. As result, substantial questions of law in these Appeals are required to be answered against Revenue and in favour of Assessee. Consequently, these appeals are liable to be dismissed and are hereby dismissed. 31. There shall be no order as to costs. Dama Seshadri Naidu, J. M.S. Sonak, J. Commissioner of Income-tax, Panaji v. Ajit Ramakant Phatarpekar through LRs Neelam Phaterpekar and Aniket Ajit Phaterpekar
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