ITO 15(2)(2), MUMBAI V. JAKHARIA FABRICS P.LTD, MUMBAI

ITA 1281/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9770 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMARSAURABH DESHP ANDE
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Bogus purchase
• Section: 40A(3); 115JB; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 1281 /MUM/20 1 6 ASSESSMENT YEAR: 2009 - 10 THE ITO 15(2)(2), ROOM NO. 15B, GROUND FLOOR, AAYKAR BHAVAN, MAHARHI KARVE ROAD, MUMB AI - 400020 VS. M/S JAKHARIA FABRICS PVT. LTD., B/2, 605, MANMANDIR, SURAKHA CHS, NAHUR VILLAGE ROAD, NEAR SARVODAYA NAGAR, MULUND (WEST), MUMBAI - 400069 PAN: AABCJ8510G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAYANT KUMAR/SAURABH DESHP ANDE RESPONDENT BY : SHRI M. SUBRAMANIAN DATE OF HEARING: 27/07 /201 7 DATE OF PRONOUNCEMENT: 28 / 0 7 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST O RDER DATED 23/12/2015 PASSED BY THE COMMISSIONER OF INCOME TAX ( APPEALS ) - 2 4 , MUMBAI , FOR THE A S S ESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3)/ 115JB OF THE INCOM E TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING AND FABRICS , FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS. 15,81,237/ - . THE ASSESSM ENT WAS RE - OPENED U/S 147 OF THE ACT. DURING THE PROCEEDINGS, THE AO OBSERVED THAT THE 2 ITA NO. 1281 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 APPELLANT/ASSESSEE HA D DEBITED PURCHASES OF RS. 44,00,969/ - FROM FOUR PARTIES WHOSE TIN MATCHED WITH THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT REGARDING BOG US PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES . T HE ASSESSEE WAS ACCORDINGLY ASKED TO FURNISH THE DETAILS OF PART IES FROM WHOM PURCHASES H AD BEEN MADE. ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE NOTICE U/S 142 (1) WAS ISSUED TO EXPLAIN AS TO W HY THE AFORESAID AMOUNT SHOULD TO BE ADDED TO ITS INCOME. IN RESPONSE THEREOF THE ASSESSEE CONTENDED THAT THE PARTIES HAD ACTUALLY SUPPLIED THE GOODS . THE ASSESSEE ALSO SUBMITTED THE COPIES OF LE DGER ACCOUNTS PURCHASE BILLS AND BANK ACCOUNTS SHOWING PAYMEN TS TO THE PARTIES. THE AO REJECTING THE CONTENTION OF THE ASSESSEE ADDED THE SAID AMOUNT TO ITS INCOME HOLDING THE PURCHASES AS BOGUS. 3. FEELING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE ASSAILED THE IMPUGNED ORDER IN FIRST APPEAL BEFORE THE LD. C IT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE SET ASIDE THE ASSESSMENT ORDER ISSUED DIRECTION TO THE AO TO ESTIMATE PROFIT @ 17.5% OF THE TOTAL BOGUS PURCHASES AND PARTLY ALLOWED THE APPEAL. 4. AGAINST THE ORDER OF T HE LD. CI T(A), THE REVENUE HAS PRE FERRED THE PRESENT APPEAL ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN ESTIMATING THE PROFIT TO THE EXTENT OF 17.5% OF THE PURCHASES OF RS. 44,00,969/ - AS THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES IN ADDITION TO THE REGULAR PROFIT WITHOUT GIVING ANY FINDINGS AS TO HOW 17.5% GP CAN BE TAKEN SINCE THE CORRESPONDING EXPENDITURE HAVE ALREADY BEEN CLAIMED IN P & L A/C. AND FURTHER ERRED IN IGNORING THE ASSESSEES OBJECT FAILURE TO PROVE THE PURCHASES WHEN T HE ONUS WAS CAST UPON HIM THE STATUTE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT (A) ERRED IN ESTIMATING THE GP AT 17.5% WITHOUT GIVING DUE CONSIDERATION TO THE FACT THAT SINCE THE SELLER DID NOT PAY VAT 3 ITA NO. 1281 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 EXCISE, OCTROI ETC. O N THESE UNDISCLOSED PURCHASES RESULTING IN CHEAPER COST. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT PROVISION OF SECTION 40A(3) WOULD APPLY SINCE PAYMENT TO SUCH PARTIES WERE IN CASH ONLY. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E PRESENT APPEAL IS COVERED BY THE DECISION OF ITAT, MUMBAI RENDERED IN ITA NO. 6851/MUM/ 2014, IN ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 AND THE TRIBUNAL HAS UPHELD THE FINDINGS O F THE LD.CIT (A ) AND CONFIRMED THE ADDITION @ 17.5% OF THE TOTAL PURCHASES IN QUESTION. THE LD. COUNSEL FURTHER SUBMITTED THAT ON THE SAME LINES THE ADDITION IN THE PRESENT CASE MAY BE RESTRICTED TO 17.5% AS PER THE DECISION OF THE ITAT AFORESAID. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT DATED 16.01.2016 DELIVERED IN SPECIAL LEAVE TO APPEAL (C)NO.(S) 769 OF 2017 , N.K. PROTEINS LTD. VS. DCIT AND THE DECISION OF HONBLE RAJASTHAN HIGH C OURT (JAIPUR BENCH) IN CIT VS. M /S CARPET MAHAL RENDERED IN T AX APPEAL NO . 170/2009 , SUBMITTED THAT THE IMPUGNED ORDER IS ERRONEOUS AND THE SAME IS LIABLE TO BE SET ASIDE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL ON RECOR D IN THE LIGHT OF THE RIVAL CONTENTIONS . WE NOTICE THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE IN ASSESSEES OWN CASE ITA NO. 6851/MUM/2014 FOR THE A.Y. 2010 - 11, WHEREBY THE TRIBUNAL HAS SUSTAINED THE ADDITION TO THE EXTENT OF 17.5% OF THE TOTAL PURCHASES IN QUESTION. THE OPERATIVE PART OF THE ORDER READS AS UNDER: 4 ITA NO. 1281 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 6. THUS FROM AFORESAID ANALYSIS, CONCLUSIONS AND FINDINGS RECORDED BY THE LD. CIT (A), IT IS EVIDENT THAT TOTAL PURCHASES WERE WRONGLY DISALLOWED BY THE ASSESSING OFFICER. THE LD. CIT (A) TOOK A REASONABLE VIEW WHEREBY THE DISALLOWANCE WAS SUSTAINED TO THE EXTENT OF ESTIMATED INFLATION IN THE AMOUNT OF PURCHASES MADE BY THE ASSESSEE. THE DISALLOWANCE SUSTAINED BY THE LD. CIT (A) @ 17.5% OF THE PURCHASES HAVE BEEN AC CEPTED BY THE ASSESSEE WITH A VIEW TO BURY THE LITIGATION. NOTHING HAS BEEN BROUGHT BEFORE US BY THE LD. DR TO CONTRADICT THE FINDINGS RECORDED BY THE LD. CIT (A). THE ASSESSEES COUNSEL HAS ALSO PLACED RELIANCE UPON THE JUDGMENT OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. NIKUNJ EIM P ENTERPRISES PVT. LTD. (SUPRA) WHEREIN SIMILAR ISSUE HAS BEEN DECIDED ON IDENTICAL LINES BY THE HONBLE BOMBAY HIGH COURT. IN OUR VIEW, NO INTERVENTION IS REQUIRED IN THE FINDINGS OF LD. CIT (A) AND, THEREFORE, THE SA ME IS CONFIRMED. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. SINCE, THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE AFORESAID, WE RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE CO - ORDINATE BENCH RESTRICT THE ADDITION TO 17.5% OF THE TOTAL PURCHASES IN QUESTION. IN OUR CONSIDERED VIEW, THE FACTS OF THE CASES RELIED UPON BY THE REVENUE ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. HENCE, WE DISMISS ALL THE GROUNDS OF THE APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2009 - 2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH JULY , 2017 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNT ANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 28 / 0 7 / 2017 ALINDRA, PS 5 ITA NO. 1281 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RES PONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER , //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI