CYCLONE RETAILING & CLOTHING PVT, MUMBAI V. ITO 6(2)(2), MUMBAI

ITA 1480/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4424 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 133(6); 143(1); 250; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER ITA NO. 1480 /MUM/2020 ( A. Y : 2009 - 10 ) INCOME TAX OFFICER 6(2)(2) ROOM NO. 510, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400020 V. M/S. CYCLONE RETAILING & CLOTHING PVT. LTD., SHOP NO. 6 & 8, DEHNOO BUILDING DR. BABASAHE B AMBEDKAR ROAD PAREL, MUMBAI - 400012 PAN: AACCC9368E ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY SHRI SANJAY J. SETHI DATE OF HEARING : 16.09.2021 DATE OF PRONOUNCEMENT : 16.09.2021 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 12 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 18.12.2019 FOR THE A.Y. 2009 - 10 IN RESTRICTING THE DISALLOWANCE TO 12.5% OF PURCHASES AS AGAINST THE ENTIRE PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER. 2 ITA NO. 1480/MUM/2020 (A.Y: 2009 - 10) M/S. CYCLONE RETAILING & CLOTHING PVT. LTD., 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE ENGAGED IN THE BUSINESS OF RETAIL TRADING OF READYMADE CLOTHS AND ACCESSORIES FILED RETURN OF INCOME ON 26.09.2009 FOR THE A.Y.2009 - 10 DECLARING INCOME OF . 27,49,308 / - AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEAL ERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM M/S. SHAKTI TRADING CO. AND M/S. SANGURU TRADING PVT. LTD., WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE F ROM M/S. SHAKTI TRADING CO. AND M/S. SANGURU TRADING PVT. LTD., AS REFERRED IN ASSESSMENT ORDER. ASSESSEE VIDE LETTER DATED 18.02.2015 FURNISHED COPIES OF INVOICES OF THE RESPECTIVE PARTIES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE . 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE 3 ITA NO. 1480/MUM/2020 (A.Y: 2009 - 10) M/S. CYCLONE RETAILING & CLOTHING PVT. LTD., BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE FAILED TO ESTABLISH THAT IMPUGNED PURCHASES WERE MADE FROM THE PARTIES AND THE PARTIES HAVE THE CAPACITY TO MAKE CORRESPONDING PURCHASES. THEREFORE, ASSESSING OFFICER TREATED ENTIRE PURCHASES OF . 3,24,319 / - AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO AN EXTENT OF 12.5% OF THE NO N - GENUINE PURCHASES. 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, I PROCEED TO DISPOSE OFF THIS APPEAL ON HEARING LD. DR ON MERITS. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 6. HEARD LD. DR, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH [356 ITR 451] RESTRICTED THE DISALLOWANCE TO 12.5% OF THE 4 ITA NO. 1480/MUM/2020 (A.Y: 2009 - 10) M/S. CYCLONE RETAILING & CLOTHING PVT. LTD., NON - GENUINE PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 3. ONLY GROUND RAISED BY THE APPELLANT RELATE TO THE ADDITION OF RS.3,24,319 BEING 100% OF THE PURCHASES AS NON - GENUINE PURCHASES. THE AO HAS MENTIONED IN THE ORDER THAT AS PER THE INFORMATION FROM T HE SALES TAX DEPARTMENT PURCHASES WERE MADE BY THE ASSESSEE FROM A SUSPICIOUS DEALERS M/S. SHAKTI TRADING CO. AND SANGURU TRADING PVT. LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE CONTENDED THAT THE PURCHASES WERE GENUINE. IN ORDER TO ASCE RTAIN THE GENUINENESS, THE AO ASKED THE ASSESSEE TO FURNISH ALL THE RELEVANT EVIDENCE TO ESTABLISH THAT GOODS WERE ACTUALLY SUPPLIED, TO DISCHARGE THE ONUS. IN REPLY, THE ASSESSEE FILED SUBMISSION LIKE COPIES OF PURCHASE BILLS AND PAYMENT DETAILS TO PURCHA SE PARTIES, AS MENTIONED IN THE ORDER. BEING NOT SATISFIED WITH THE DETAILS FILED, THE AO HELD THAT MERE FACT THAT THE ASSESSEE MADE PAYMENT TO THIS PARTY DOES NOT MADE THE PURCHASES AS GENUINE UNLESS AND UNTIL THAT RECIPIENT OF THE PAYMENT CONFIRMED THAT THE PAYMENTS WAS TOWARDS THE PURPOSE FOR WHICH IT WAS MADE. THUS, THE PAYMENTS TO M/S. SHAKTI TRADING CO. AND SANGURU TRADING PVT. LTD. WERE BOGUS AND NOT GENUINE AND ADDED THE TOTAL PURCHASES AS SUPPRESSED PROFIT TO THE INCOME RETURNED. 3.1 I HAVE PERUSED THE ASSESSMENT ORDER AND THE GROUNDS OF APPEAL AS WELL AS SOF OF THE ASSESSEE. THE APPELLANT CONTENDED BEFORE A.O. THAT IT PURCHASED THE MATERIALS FROM M/S. SHAKTI TRADING CO. AND SANGURU TRADING PVT. LTD. THE AO HELD IN THE ASSESSMENT ORDER THAT THE APPE LLANT PRODUCED THE DETAILS WITH REGARD TO PURCHASES AND SALE MADE. ASSESSEE ALSO FILED COPIES OF PURCHASES INVOICES AND DETAILS OF PAYMENTS FOR PURCHASES. IT IS ALSO SEEN THAT A.O. HAS NEITHER DISPUTED THE PURCHASE OF GOODS NOR EVEN DISPUTED THE SALE, BUT ONLY DISPUTED THE PAYMENT FOR THE PURCHASE OF PARTICULAR GOODS AS SHOWN IN THE INVOICES AND THE SOURCES OF INVESTMENT IN SUCH PURCHASES AND ADDED 1 00% AS NON GENUINE PURCHASES. IT ALSO SEEN THAT A.O. HAS NOT MADE ANY INDEPENDENT INQUIRY TO CONFIRM THE PURC HASES LIKE ISSUING NOTICES U/S. 133(6) OF THE ACT TO THE PARTIES OR CALLING OTHER INFORMATION BUT SOLELY RELYING ON THE INFORMATION RECEIVED HE HAS ADDED 100% AS NON GENUINE PURCHASES. IT IS SEEN THAT MANY BENCHES OF ITAT AND HON'BLE HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPORTED BY SUFFICIENT DOCUMENTARY EVIDENCES, THEN MERELY BECAUSE OF NON - APPEARANCE BEFORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THERE ARE MANY DECISIONS WHEREIN THE ITAT, MUMBAI, HAVE UPHELD ADDITION OF A PERCENTAGE OF ALLEGED BOGUS PURCHASES UNDER SIMILAR FACTS. 5 ITA NO. 1480/MUM/2020 (A.Y: 2009 - 10) M/S. CYCLONE RETAILING & CLOTHING PVT. LTD., 3.2 FURTHER, IT IS NOT THE CASE OF THE AO THAT IN THIS CASE SIGNED BLANK CHEQUE BOOKS ARE FOUND WITH THE BUYER TO HOLD THAT THE PURCHASES OF MATERIAL WERE NOT AT ALL MADE BUT ENTERED IN THE STOCK TO INFLATE THE RAW MATERIAL. THEREFORE THE DECISION OF THE SUPREME COURT IN THE CASE OF N K PROTEINS LTD 250 TAXMAN 0022(SC) WOULD NOT APPLY TO THE CASE. THEREFORE, THE SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES MADE BY THE APPELLA NT ON THE SAID BOGUS PURCHASES CAN BE BROUGHT TO TAX AS ADDITIONAL PROFIT. IN THE CASE OF CIT VS. SIMIT P SHETH, 356 ITR 451, HON'BLE GUJARAT HIGH COURT HAS UPHELD ESTIMATION @ 12.5% OF ALLEGED BOGUS PURCHASES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIR CUMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 12.5% OF SUCH PURCHASES. THEREFORE THE AO IS DIRECTED ADD 12.5% OF RS.3,24,319 WORKING OUT TO RS.40,540 AND MODIFY THE ADDITION ACCORDINGLY. APPELLANT GETS PART RELIEF. THIS GROUND IS PARTLY ALLOWED. 7. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE VIRTUAL COURT ON 16.09.2021. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 16/09/2021 GIRIDHAR, SR.PS 6 ITA NO. 1480/MUM/2020 (A.Y: 2009 - 10) M/S. CYCLONE RETAILING & CLOTHING PVT. LTD., 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