JITENDRA HARSHADKUMAR TEXTILES P.LTD, MUMBAI V. ITO WD NO. 4(2)(3), MUMBAI

ITA 1369/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9289 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase; Unexplained investment; Accommodation entries; Assessment record
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AG G ARWAL, HON'BLE ACCOUNTANT MEMBER ITA NO . 1367 /MUM/2017 (A.Y: 2008 - 09 ) ITA.NO.1368/MUM/2017 (A.Y: 2009 - 10) ITA.NO.1369/MUM/2017 (A.Y:2006 - 07) M/S. JITENDRA HARSHADKUMAR TEXTILES P. LTD., SHOP NO.685, GOVIND CHOWK. M.J. MARKET, MUMBAI 400 002. PAN : AABCJ 9447 J V . INCOME TAX OFFICER WARD NO.4(2)(3) MUMBAI (APPELLANT) (RESPONDENT) ITA.NO.1610/MUM/2017 (A.Y:2008 - 09) INCOME TAX OFFICER WARD NO.4(2)(3) ROOM NO.647, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400 020 V. M/S. JITENDRA HARSHADKUMAR TEXTILES P. LTD., SHOP NO.685, GOVIND CHOWK. M.J. MARKET, MUMBAI 400 002. PAN : AABCJ 9447 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHUPENDRA SHAH DEPARTMENT BY : MS. ARJU GARODIA DATE OF HEARING : 12.09.2017 DATE OF PRONOUNCEMENT : 20 .09.2017 2 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. O R D E R PER C. N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006 - 07, 2008 - 09 AND 2009 - 10 AND BY REVENUE FOR THE ASSESSMENT YEAR 2008 - 09 AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9 MUMBAI DATED 08.12.2016. 2. THE ASSESSEE IN ITS APPEALS RAISED THE F OLLOWING COMMON GROUND EXCEPT FOR T HE CHANGE IN FIGURES: - (1) UNDER THE FACTS AND THE CIRCUMSTANCES OF THE CASE OF YOUR APPELLANT, THE LD.CIT(A) - 9 HAS ERRED IN CONFIRMING THE ADDITION OF .5,84,527/ - MADE BY LD.A.O. AS UNEXPLAINED/UNPROVED PURCHASE/INVESTMENTS IN PURCHASE U/S. 69 OF I.T.ACT, 1961. 3. THE REVENUE HAS FILED CROSS APPEAL ONLY FOR THE ASSESS MENT YEAR 2008 - 09 CONTENDING THAT LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO CONSIDER GROSS PROFIT A T 1.87% BEING GROSS P ROFIT RATE OF THE ASSESSEE FOR THE PURCHASE S FROM GUPTA PARTIES WITHOUT CONSIDERING THE FACT THAT ASSESSEE HAS NOT BEEN ABLE TO PROVE ACTUAL DELIVERY OF GOODS PURCHASED EVEN DURING THE RE - ASSESSMENT PROCEEDINGS A S DIRECTED BY THE HON'BLE ITAT. 4. THE LEARNED COUN SEL FOR THE ASSESSEE AT THE OUT SET SUBMITS THAT IN ALL THES E ASSESSMENT YEARS THE PURCHASES MADE BY THE ASSESSEE FROM SHRI RAKESH KUMAR GUPTA HAVE BEEN CONSIDE RE D AS NON - GENUINE BASED 3 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. ON THE STATEMENT GIVEN BY THE SHRI RAKESH KUMAR GUPTA IN THE SURVEY PROCEEDI NGS CONDUCTED IN HIS PREMISES. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT , RAKESH KUMAR GUPTA HAS RETRACTED THE STATEMENT SUBSEQUENTLY AND THEREFORE IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE EXCEPT FOR THE STATEMENT BY RAKESH KUMAR GUPTA THERE IS NO JUSTIFICATION IN TREATING THE PURCHASES AS NON - GENUINE WHEN THE ASSESSEE HAS SUBMITTED ALL THE EVIDENCES OF PURCHASES IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO PAGE NO.83 TO 88 OF THE PAPER BOOK SUBMITS THAT ON SIMILAR CIRCUMSTANCES THE TRIBUNAL IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2007 - 08 DELETED THE ADDITION MADE TOWARDS UNPROVED PURCHASES. LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITS THAT IN THE SISTER CONCERNS OF THE ASSESSEE THE TRIBUNAL DELETED SIMILAR ADDITION S MADE BY THE ASSESSING OFFICER . 5. THE LD. DR SUBMITS THAT THIS IS THE SECOND ROUND OF APPEAL AND IN THE FIRST ROUND THE TRIBUNAL IN ITS COMMON ORDER RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE IN THE LIGHT OF THE OBSERVATION MADE BY THE TRIBUNAL . THE LD. DR INVITED OUR ATTENTION TO PAGE NO.2 OF THE ASSESSMENT ORDER WHERE THE OBSERVATION S OF THE TRIBUNAL WAS EXTRACTED BY THE ASSESSING OFFICER . REFERR ING TO THE SAID OBSERVATIONS THE LD. DR SUBMITS THAT MATTER WAS RESTORED TO THE ASSESSING OFFICER TO PROVE THE GENUINENESS OF THE PURCHASES A N D SALE S , 4 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. SUPPORTING MATERIAL HAS TO BE PRODUCED TO SHOW THAT THE TRANSACTION IN QUESTION ARE BACKED BY ACTUAL DELIVERY. THE LD.DR REFERRING TO PARA 4.1 OF THE RE - ASSESSMENT SUBMITS THAT THE ASSESSEE COULD NOT PR OVE THE PHYSICAL DELIVERY OF GOODS AS DIRECTED BY THE TRIBUNAL . LD. DR SUBMITS THAT IT IS THE FINDING OF THE ASSESSING OFFICER THAT T HE PURCHASES AND SALE OF GOODS WAS SHOWN ON THE VERY SAME DAY AND THE VERY SAME PATTERN WAS OBSERVED BY THE ASSESSING OFFICER ON EXAMINATION OF OTHER BILLS SUBMITTED BY THE ASSESSEE AND THER E IS ABSOLUTELY NO MENTION ABOUT THE MODE OF DELIVERY OF MATERIAL PURCHASED AND SOLD. THEREFORE, THE LD. DR VEHEMENTLY SUBMITTED THAT SINCE THE ASSESSEE COULD NOT PROVE THE DELI VERY O F GOODS THE ENTIRE PURCHASES HAVE TO BE TREATED AS BOGUS PURCHASES AND ACCORDINGLY THE ASSESSING OFFICER IS JUSTIFIED IN TREATING ENTIRE PURCHASES AS BOGUS PURCHASES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORD ERS OF THE AUTHORITIES BELOW. THE T RIBUNAL BY COMMON ORDER DATED 17.10.2013 FOR THE ASSESSMENT YEAR S UNDER CONSIDERATION RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER TO PROVE THE GENUINENESS OF THE PURCHASES AND SALE TRANSACTIONS AND TO PRODUCE EVIDENCES TO SHOW THAT T HE TRANSACTION IN QUESTION ARE BACKED B Y ACTUAL DELIVERY. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE ANY DOCUMENTS REGARDING THE MODE OF DE LIVERY OF THE MATERIAL PURCHASED AND 5 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. SOLD. INABILITY TO PROVE THE PHYSICAL DELI VERY OF GOODS WAS EXPRESSED AS RE CORDED BY THE ASSESSING OFFICER . 7. THE LD.CIT(A) TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES INTO CONSIDERATION AND TAKING THE FACT THAT T HE ADDITION WAS MADE BASED ONLY ON THE STATEMENT RECORDED F ROM SHRI RAKESH KUMAR GU PTA WHO STATED THAT THEY HAVE ONLY PROVIDED ACCOMMODATION ENTRIES WHICH WAS LATER RETRACTED THE STATEMENT BY RAKESH KUMAR GUPTA, C ONCLUDED THAT THERE SHALL BE AN ADDITION TOWARDS GROSS PROFIT ON SUCH PURCHASES AND IN ADDITION THE LD.CIT(A) ESTIMATED THE INITIAL INVESTMENT CAPITAL ON SUCH PURCHASES AT 20% AND ACCORDINGLY ESTIMATED THE DISALLOWANCE IN ALL THESE ASSESSMENT YEARS OBSERVING AS UNDER: - 5.3.6.2. A.Y. - 2006 - 07 : I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AND FINDING OF THE AO. IT IS SEEN THAT THE SALES ARE IDENTIFIABLE AND QUANTITATIVE DETAILS ARE AVAILABLE ON RECORD. THE BOOKS OF ACCOUNTS ARE AUDITED AND THERE IS NO ADVERSE REFERENCE BY THE AUDITORS. THE ALLEGED BOGUS PURCHASE S ARE BASED ON THE STATEMENT AND THE ASSESSMENT RECORD OF THIRD PART, THE SAID PERSONS WERE NOT AVAILABLE FOR CROSS EXAMINATION NOR THE MATERIAL FOUND FROM THE THIRD PARTY WAS MADE AVAILABLE TO THE APPELLANT. IT IS SEEN THAT THE ADDITION IS MADE ON THE BASIS OF STATEMENT RECORDED DURING THE COURSE OF SURVEY FROM MR. R AKESHKUMAR GUPTA, MR. MOHNIT GUPTA AND MRS. HEMA GUPTA WHO HAVE ADMITTED THAT THEY ONLY GAVE ACCOMMODATION ENTRIES. THE PAYMENTS WERE RECEIVED FROM THE PARTIES BY CHEQUE WERE DEPOSITED IN BANK AND ENCASHMENT THE SAME WAS RETURNED TO THE PERSONS MINUS THE C OMMISSION. BASED ON ABOVE, THE ADDITION OF RS.28,72,536/ - HAS BEEN MADE TREATING THE ENTIRE PURCHASES AS UNEXPLAINED. IT IS OBSERVED FROM THE ASSESSMENT ORDER ITSELF THAT THE APPELLANT MUST HAVE PURCHASED GOODS FROM OPEN MARKET, OUTSIDE THE BOOKS OF 6 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. ACCOUN T AND TO COVER THE SAID PURCHASES OBTAINED HAWALA BILLS. THEREFORE, IT CAN BE CONCLUDED THAT THE APPELLANT HAS MADE PURCHASES ALTHOUGH THESE WERE NOW DISPUTED ONE. THEREFORE, THE PEAK INVESTMENT OUTSIDE BOOKS OF ACCOUNTS HAS TO BE CONSIDERED AND BENEFIT OF THE SAME REQUIRED TO BE GIVEN TO THE APPELLANT WHICH HAS NOT BEEN DONE BY THE A.O. IN SUCH TYPE OF CASES WHERE ORE PARTY DENIES MAKING THE SALES WHEREAS THE OTHER PARTIES AFFIRMS OF HAVING RECEIVED THE GOOD'S AND OF HAVING MADE THE PAYMENTS BY CHEQUES AND SUBSEQUENTLY HAVING SOLD THE SAME VERY ITEMS TO 3RD PARTIES AND BOOKING THESE SALES A INCOME THEN THE ENTIRE PURCHASES BE ADDED BACK AS UNEXPLAINED BECAUSE THE APPELLANT HAS ALREADY SHOWN THE SALE PROCEED SUCH ALLEGED PURCHASES. IN SUCH CASES, THERE ALWAY S BEEN THE LEGAL JURISPRUDENCE THAT IF ANY ADDITION IS TO BE MADE THEN IT IS ONLY ON ACCOUNT OF GP RATE OR SOME ADHOC ADDITIONS. THIS VIEW IS ALSO SUPPORTED BY THE CASE LAWS BALAJI TEXTILES VS ITO (49 LTD 177) RELIEF BY THE AR WHEREIN IT WAS HELD THAT PURC HASES WERE MADE FROM UNTRACEABLE PARTIES AND ASSESSEE MADE SALES TO A PARTY WHICH IS RECORDED IN THE BOOKS OF BOTH PARTIES, PURCHASES HAVE TO BE BELIEF AND DEDUCTION IS TO BE ALLOWED. IT IS SEEN THAT THE CF RATE IS IN CASE OF APPELLANT FOR THESE PURCHASES COMES TO AROUND 0.29% THEREFORE IT WOULD BE REASONS TO CONSIDER THE GP @ 0.29% ON UNRECORDED PURCHASES WHICH COMES TO RS.8,354/ (I.E. 28,72,536 + 8,330 = 28,80,866). FURTHER, TO INVEST SUCH UNEXPLAINED PURCHASES THE ASSESSEE MUST HAVE INVESTED INITIAL CAPI TAL WHICH IS NOT RECORDED IN THE BOOKS HENCE, IT WOULD BE REASONABLE TO ESTIMATE 20% OF RS.28,80,866/ - (28,72,536 + 8,330) TOTAL SALE PROCEEDS TO CONSIDER UNEXPLAINED INITIAL AS WELL AS P & L ACCOUNT INVESTMENT WHICH WORKS OUT AT RS.5,76,173/ (20% OF 28,80 ,866/ - ). THIS AMOUNT WILL SERVE THE PURPOSE BECAUSE ALL THE CHEQUES ISSUED BY THE - APPELLANT TO THE THREE PARTIES NAMELY SHRI. RAKESHKUMAR GUPTA, MRS. HEMA GUPTA AND SHRI. MOHIT GUPTA HAVE BEEN ENCHASED AFTER IN SHORT TIME. THIS IS ALSO BECAUSE, THE SAID IN ITIAL INVESTMENT MUST HAVE BEEN RE - CIRCULATED / ROTATED IN MAKING PURCHASE. ACCORDINGLY, THE TOTAL ADDITION BEING UNEXPLAINED INVESTMENT IS RS.5,76,173/ - AND GP ADDITION OF RS.8,354/ - AGGREGATING TO RS.5,84,527/ - IS CONFIRMED AND THE BALANCE OF RS.22,88,00 9/ - (28,72,536 - 8,354) IS DELETED. THIS GROUND IS THEREFORE PARTLY ALLOWED. 7 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. 8. THE LD.CIT(A) MADE SIMILAR CALCULATIONS FOR THE OTHER TWO ASSESSMENT YEARS AND ARRIVED AT THE DISALLOWANCE OF .16,09,2010/ - AND .9,42,434/ - FOR THE ASSESSME NT YEARS 2008 - 09 AND 2009 - 10 RESPECTIVELY . THE CASE LAW RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 WILL NOT HELP THE ASSESSEE FOR THE REASON THAT THE COORDINATE BENCH HAS RECORDED A FINDING THAT FOR ASSESSMENT YEAR 2007 - 08 ASSESSEE SUBMITTED VARIOUS EVIDENCES TO SHOW THAT ACTUAL DELIVERY OF GOODS WAS RECEIVED BY THE ASSESSEE FRO M THE SAID PURCHASES AND THIS WOULD NOT HAVE DISREGARDED BY THE ASSESSING OFFICER. IN THE ASSESSMENT YEARS BEFORE US I.E. 20 06 - 07, 2008 - 09 AND 2009 - 10 THE ASSESSEE COULD NOT PRODUCE THE NECESSARY EVIDENCES TO SHOW THAT THERE IS ACTUAL DELIVERY OF GOODS AND IN FACT IT IS THE FI NDING OF THE ASSESSING OFFICER THAT THE ASSESSEE EXPRESSED INABILITY TO PRODUCE ANY DOCUMENTS REGARDING THE MODE OF DELIVERY OF MATERIAL PURCHASED AND SOLD. THE FINDING OF THE ASSESSING OFFICER IS NOT REBUTTED WITH EVIDENCES. IN THE CIRCUMSTANCES WE CANNOT FOLLOW THE ORDER OF THE TRIBUNAL FOR T HE ASSESSMENT YEAR 2007 - 08 AND DELETE THE ENTIRE ADDITION OF BO GUS PURCHASES THOUGH VEHEMENTLY RELIED UPON BY THE LE ARNED COUNSEL FOR THE ASSESSEE. 9. ON A CAREFUL READING OF THE OBSERVATIONS OF THE DECISION OF THE LD.CIT(A) WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDINGS AND 8 ITA NO.1367 TO 1369 & 1610/MUM/2017 M/S. JITENDRA HARSHADKUMAR TEXTILES P.LTD. DECISION MADE BY THE LD.CIT(A) IN ESTIMATING THE GROSS PROFIT ON SUCH BOGUS PURCHASES . HOWEVER , IN RESPECT OF THE PERCENTAGE ADOPTED BY THE LD.CIT(A) TOWARDS INITIAL INVESTMENT OF CAPITAL ON THESE PURCHASES AT 20% IS ON HIGHER SIDE. THUS, WE DIRECT THE ASSESSING OFFICER TO M ODIFY THIS PERCENTAGE TO 10% INSTEAD O F 20% ADOPTED BY THE LD.CIT( A). EXCEPT FOR THIS PERCENTAGE THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). IN THE CIRCUMSTANCES THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AND GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON THE 20 TH SEPTEMBER , 2017. SD/ - SD/ - ( MANOJ KUMAR AG G ARWAL ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 20 / 09/2017 VSSGB , SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM