Shree Shubham Exports, Kolkata V. ITO, Ward-36(2), Kolkata

ITA 1654/KOL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2674 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 09-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3); 40(b); 142(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA Before SRI RAJPAL YADAV, VICE PRESIDENT & SRI MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports...........................................Appellant [PAN: AAPFS 2792 G] Vs. ITO, Ward-36(2), Kolkata......................................Respondent Appearances by: None A/R, appeared on behalf of the Assessee. Sh. Biswanath Das, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : June 13 th , 2022 Date of pronouncing the order : June 27 th , 2022 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2015-16 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-10, Kolkata [in short ld. “CIT(A)”] dated 26.04.2019 which is arising out of the assessment order framed u/s 143(3) of the Act dated 28.12.2017. 2. When the case called up, none appeared on behalf of the assessee. On perusal of records, we find that multiple opportunities have been given to the assessee and notices have I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Page 2 of 7 also been issued by RPAD. But, there is no compliance on behalf of the assessee. We have no option left except to proceed to adjudicate the issues in the instant appeal with the assistance of ld. D/R and available records. 3. The assessee is in appeal before this Tribunal raising the following grounds: “1. That on the facts and in the circumstances of the case the order passed by the A.O. is arbitrary, imaginary and without any basis and illegal. 2. That on the facts and in the circumstances of the case the A.O. erred in making addition of Rs 78,55,136/- as undisclosed purchase4 when it had been duly substantiated before the A.O. that the alleged purchases were not acknowledged as purchase by the assessee and treated as orders cancelled between the assessee and the exporter as the exporter had to fulfil the commercial terms of the contract. 3. That on the facts and in the circumstances of the case having not controverted the assessee's claim that the purchases were to be tre3ated as infractions, A.O. has grossly erred in treating the same as undisclosed purchase based on mere conjectures and hearsay. 4. That on the facts and in the circumstances of the case A.O. has grossly erred in stating that no details were furnished when complete details of exporter from whom goods wore imported, details of parties to whom goods were supplied stc were duly furnished to prove the genuineness of the transaction. 5. That the Ld. A.O. erred in law in not allowing correct deduction u/s 10(b) as per statutory provisions. 6. That the Ld. A.O. erred in law in not allowing set off of unabsorbed depreciation and brought forward losses which are allowed as per income tax act. 7. That the appellant craves leave to add to amend, modify recind supplement or alter any of the grounds stated here in above either before or at the time of hearing of this appeal.” I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Page 3 of 7 4. Brief facts of the case as culled out from the records are that the assessee is a partnership firm. NIL income has been shown in the return of income filed on 10.04.2016 for AY 2015-16. Case selected for limited scrutiny through CASS on the basis of information received by the Income Tax Department from Central Board of Excise and Custom (CBEC) that there were 38 instances of import made by the assessee totalling to Rs. 5,23,67,576/-. Based on this information notices u/s 143(2) & 142(1) of the Act were issued and duly served upon the assessee. In the course of assessment proceedings, the assessee was confronted with the said information. The assessee firstly contended that the goods imported were of inferior quality and no payment was made and, therefore, there was no purchase in the year. In the income-tax return also no purchase and sale has been shown by the assessee. The assessee also stated that the goods were sent to customers but being of inferior quality they could not be sold. Since, the assessee was giving contradictory statements and no details were filed of any of the customer, ld. Assessing Officer (in short ld. “AO”) was not satisfied. However, during the course of hearing an alternative plea was taken by the assessee in its statement that if explanation is not found satisfactory a gross profit rate of 12.5% on alleged purchases may be calculated in the light of the decision of co- ordinate Bench of Mumbai in the case of M/s Ratnagiri Stainless Pvt. Ltd. vs. Income Tax Officer 5(3)(1), Mumbai in ITA No. 4463/Mum/2016 dated 04.04.2017. Based on this explanation, ld. AO concluded the assessment by computing the profit at the rate I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Page 4 of 7 of 15% on the alleged purchases and made addition of Rs. 78,55,136/- in the hands of the assessee. 5. Aggrieved, the assessee preferred appeal before ld. CIT(A) challenging the addition made by the ld. AO and also taking ground that ld. AO has not provided the benefit of Section 40(b) of the Act towards partners’ remuneration as per the partnership deed. Ld. CIT(A) was not convinced with the submission made by the assessee and dismissed the assessee’s appeal. 6. Aggrieved, the assessee is now in appeal before the Tribunal. The assessee has not appeared on any of the dates nor any written submissions have been filed even though at least on five occasions notices by RPAD have been issued to the assessee. 7. Ld. D/R vehemently argued supporting the orders of both the lower authorities. 8. We have heard rival contentions and perused the records placed before us. The grievance of the assessee raised in ground no. 1 to 4 centres around the addition of Rs. 78,55,136/- confirmed by ld. CIT(A) which was made by ld. AO applying the profit rate of 15% on the alleged undisclosed purchases in the form of import of Rs. 5,23,67,576/-. 9. We find that a specific information was received by the Department from CBEC. The assessee as imported goods worth Rs. 5,23,67,576/-. Complete list of such purchases are placed at page 4 & 5 of the assessment order wherein the list has been given by Indian Customs EDI System – Imports V1.5, 15/1, Strand I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Page 5 of 7 Road, Custom House, Kolkata-700 001. The assessee has been regularly pleading that, goods imported were of inferior quality, no payments were made to the exporter. Undisputedly no purchase has been recorded in the books of account. The assessee has also pleaded that the imported goods were sold to different parties who rejected them on the ground of inferior quality, therefore no sales were recorded in books and regarding the payment of customs duty, the assessee stated before ld. AO that it was paid by bank draft received from suppliers. On one hand, the assessee agrees that, purchases and sales happened in the year but on the other hand, in the income-tax return NIL income has been shown and no profit & loss and balance sheet have been filed showing the alleged transactions of purchase and sale in the books. The assessee has also not given the details of so-called customers to whom it sold goods and which were returned back for inferior quality. The assessee’s contention before the lower authorities are contradictory and also not supported by any evidence. Whatever submissions the assessee has made, they seem to be hollow and not supported by any documentary evidence since the beginning of the assessment proceedings and till the date of hearing of this appeal by us. 10. We also find that ld. AO has accepted the alternative plea of the assessee of applying profit rate on the alleged purchases and made the addition by applying 15% profit rate as against the assessee’s plea of applying 12.5% profit rate. 11. We, however, under the given facts and circumstances of the case, find no merit in the ground nos. 1 to 4 raised by the assessee I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Page 6 of 7 and, therefore, no interference is called for in the finding of the ld. CIT(A) confirming the action of ld. AO of applying 15% profit rate on the alleged purchases, thereby, confirming the addition of Rs. 78,55,136/-. Thus, ground nos. 1 to 4 raised by the assessee are dismissed. 12. As regards ground no. 5 for deduction u/s 40(b)(v) of the Act for the deduction of partners’ remuneration, we find that the assessee has not filed partnership deed before both the authorities and ld. CIT(A) has rightly restored the issue to ld. AO to examine the issue and directed the assessee to file necessary evidences i.e. a copy of partnership deed etc. then deduction u/s 40(b) of the Act may be allowed and the deduction so allowed will be taxed in the hands of the respective partners. Thus, ground no. 5 is allowed for statistical purposes. 13. As regards ground no. 6 for allowing of set off unabsorbed depreciation and brought forward losses, we find that ld. CIT(A) has rightly restored the issue to the ld. AO to examine the correctness of claim and we accordingly direct the assessee to go before ld. AO and furnish the details of returns filed for the preceding years claiming the depreciation and business losses (if any) and if the same is found to be correct then ld. AO may allow the deduction of the same as per law. Thus, this ground raised by the assessee is allowed for statistical purposes. 14. Ground no. 7 is general in nature which need no adjudication. I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Page 7 of 7 15. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Kolkata, the 27 th June, 2022. Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 27.06.2022 Bidhan (P.S.) Copy of the order forwarded to: 1. Shree Shubham Exports, Mangalam – A, 2 nd Floor, Room. 204, 24, Hemant Basu Sarani, Kolkata-700 001. 2. ITO, Ward-36(2), Kolkata. 3. CIT(A)- 10, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata