ITO 14(3)(2), MUMBAI V. P R SYNDICATE, MUMBAI

ITA 1895/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2897 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 20-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANUJ KISHNADWALAAR
• Keywords: Bogus purchase; Principle of natural justice; Opportunity of cross examination
• Section: 143(3); 133A; 69

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL CBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER ./I.T.A./1895/MUM/2014 , /ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER-14(3)(2) 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT MUMBAI-400 021. VS. M/S. P.R. SYNDICATE 492, CHANDRA CHOWK, M.J. MARKET MUMBAI-400 002. PAN:AAFFP 9056 L ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI NAVEEN GUPTA-DR ASSESSEE BY: SHRI ANUJ KISHNADWALA-AR / DATE OF HEARING: 21.06.2016 / DATE OF PRONOUNCEMENT: 24.06.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 12.12.2013 OF CIT(A)-25 MUMBAI THE ASSESSING OFFICER (A.O.) HAS FILED THE PRESENT APPEAL. ASSESSEE FIRM-ENGAGED IN THE BUSINESS OF SELLING OF CLOTH FILED RETURN OF INCOME ON 31.10.2006, DECLARING TOTAL INC OME OF RS.50,960/-. THE ASSESSMENT WAS MADE U/S. 143(3) R.W.S. 147 OF THE ACT ON 15.12.201 0 DETERMINING THE INCOME OF THE ASSESSEE AT RS.88.55 LAKHS. 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING TH E DISALLOWANCE MADE OF RS.88,04,103/- OUT OF THE PURCHASES.DURING THE ASSESSMENT PROCEEDI NGS IT WAS NOTED THAT AN ACTION U/S. 133A OF THE ACT WAS CARRIED OUT IN THE CASE OF RAKESH KU MAR M. GUPTA (RMG) AND HIS FAMILY MEMBERS ON 13/14.02.2009, THAT THE RMG GROUP CONCER NS WERE FOUND TO BE ENGAGED IN THE ACTIVITIES OF ISSUING ACCOMMODATION BILLS, THAT THE ASSESSEE HAD PURCHASED GOODS WORTH RS.88.04 LAKHS FROM RMG GROUP CONCERNS (MANOJ MILLS -RS.24.41 LAKHS, SHREERAM SALES AND SYNTHETICS-RS.33.97 LAKHS AND ASTHA SILK INDUSTRIES -RS.29.64 LAKHS). VIDE HIS LETTERS DT.29.10.2010 AND 8.11.2010 THE AO DIRECTED THE ASS ESSEE TO EXPLAIN AT WHY THE PURCHASES MADE FROM RMG GROUP SHOULD NOT BE CONSIDERED AS BO GUS AND INFLATED. THE ASSESSEE VIDE HIS LETTER DT.29.11.2010 STATED THAT THERE COULD NO T BE ANY SALE WITHOUT ANY PURCHASE, THAT IT HAD NOT PURCHASED THE GOODS FROM OTHER THAN THE THR EE PARTIES, THAT STATEMENT GIVEN BY THE ASSESSEES OF RMG WERE NOT BINDING ON IT, THAT THE PAYMENTS FOR PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, THAT IT HAD NOT INFL ATED ANY PURCHASES. THE ASSESSEE MENTIONED THAT THE PURCHASES MADE FROM M/S. MANOJ M ILLS, SHREE RAM SALES & SYNTHETICS 1895/M/14-PRSYNDICATE 2 AND M/S. ASTHA SILK INDUSTRIES WAS OF RS.23.68 LAKH S, RS.34.28 LAKHS AND RS.27.72 LAKHS RESPECTIVELY. AFTER CONSIDERING THE SUBMISSION OF T HE ASSESSEE, THE AO HELD THAT RMG WAS ISSUING HAWALA BILLS,THAT RAKESHKUMAR GUPTA (RMG) H AD ADMITTED OF ISSUING BOGUS BILLS DURING THE COURSE OF SURVEY, THAT THERE WAS NO REAL PURCHASE OF GOODS, THAT THE BILLS INTRODUCED IN THE BOOKS OF ACCOUNT WERE NOTHING BUT COLOURABLE DEVICE ADOPTED TO COVER UP INVESTMENT IN PURCHASES. INVOKING THE PROVISIONS OF SECTION 69 OF THE ACT, THE AO MADE AN ADDITION OF RS.88,04,103/-. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM IT WAS ARGUED THAT THE ASSESSEE HAD FURNISHED ALL THE DETAILS AND INFORMATION IN RESPECT OF THE PARTIES F ROM WHOM IT HAD MADE PURCHASES, THAT THE ADDITION WAS MADE ON THE BASIS OF STATEMENT OF THIR D PARTY, THAT THERE WAS NO SPECIFIC MENTION ABOUT ACCOMMODATION BILL ISSUED TO THE ASSESSEE BY THE GUPTA GROUP AND THE AMOUNTS THEREOF, THAT THE COPIES OF STATEMENT WERE RECORDED U/S. 133 A OF THE ACT, DT.13./14.2.2009 IN THE CASE OF RAKESH GUPTA AND STATEMENT OF MAHESH GUPTA DT.23 .2.2009 WERE NOT MADE AVAILABLE TO THE ASSESSEE, THAT NO OPPORTUNITY WAS GIVEN TO THE ASSE SSEE TO CROSS EXAMINE THE SAID PARTIES, THAT VIDE LETTER DATED 6.4.2009, RAKESHKUMAR GUPTA DENIE D THE FACTS UNEARTHED DURING THE COURSE OF SURVEY.THE ASSESSEE RELIED UPON THE CASE OF PRAK ASH CHAND NAHTA (301ITR134) AND SMC SHARE BROKERS LTD. (288ITR345). FURTHER, IT WAS CON TENDED THAT THE ASSESSEE HAD FILED CONFIRMATION LETTER OF THE PROPRIETORS OF ALL THE T HREE CONCERNS NAMELY M/S. MANOJ MILLS, SHREE RAM SALES & SYNTHETICS AND M/S. ASTHA SILK IN DUSTRIES, THAT THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES ONLY, THAT THE COPIES OF R ELEVANT BANK STATEMENT ABOUT SAID PAYMENTS WERE SUBMITTED DURING THE ASSESSMENT PROCE EDINGS, THAT THE ASSESSEE WAS MAINTAINING REGULAR BOOKS OF ACCOUNTS AND ALL THE TRANSACTIONS WERE PROPERLY RECORDED IN THE BOOKS, THAT IT WAS MAINTAINING THE PURCHASE AND SAL E REGISTERS, THAT IT HAD MAINTAINED THE QUANTITY OF THE CLOTHES PURCHASED AND SOLD DURING T HE YEAR UNDER CONSIDERATION, THAT IT HAD SHOWN REASONABLE GROSS PROFIT(GP) @ 9.61%, THAT IF THE ALLEGED UNPROVED PURCHASE OF RS.88,04,103/- LAKHS WAS EXCLUDED, THE GP FOR THE Y EAR UNDER APPEAL WOULD SHOOT UPTO 58.77%. 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER , THE FAA HELD THAT THE AO HAD RELIED UPON THE STATEMENTS OF RMG A ND OTHERS, THAT HE DID NOT PROVIDE ANY OPPORTUNITY OF CROSS EXAMINATION OF THAT PARTY TO T HE ASSESSEE INSPITE OF SPECIFIC REQUEST MADE BY IT REFERRING TO THE JUDGMENT OF KISHANCHAND CHEL ARAM (125ITR713) HE HELD THAT THE 1895/M/14-PRSYNDICATE 3 STATEMENT OF RMG GROUP COULD NOT BE USED AGAINST T HE ASSESSEE, THAT THE ASSESSEE HAD MAINTAINED THE PURCHASE AND SALE REGISTER WHEREIN T HE NAMES OF THE PARTIES , DATES, BILLS NO. QUANTITY OF METERS PURCHASED AND SOLD WERE ENTERED, THAT IT HAD PREPARED DATE WISE AND MONTH-WISE STOCK REGISTER SHOWING QUANTITY OF GOODS PURCHASED AND SOLD, THAT THERE COULD NOT BE ANY SALES WITHOUT CORRESPONDING PURCHASES, THAT WHEN THE SALE OF THE APPELLANT WAS NOT DISPUTED THE ADDITION OF ENTIRE PURCHASE WAS NOT JU STIFIED, RMG GROUP WAS ISSUING ACCOMMODATION BILLS TO SEVERAL PARTIES. CONSIDERING THE PECULIAR CIRCUMSTANCES OF THE CASE, THE FAA HELD THAT THE CAUSE OF JUSTICE WOULD BE MET BY MAKING ADDITION @10% OF PURCHASES IN ORDER TO FILL THE DIFFERENCE OF GP OF THE ALLEGE D PURCHASES AS WELL TO PLUG ANY LEAKAGE OF REVENUE. FINALLY, HE PARTLY ALLOWED THE APPEAL FILE D BY THE ASSESSEE. 5. DURING THE COURSE OF HEARING BEFORE US THE DEPARTME NTAL REPRESENTATIVE (DR) STRONGLY RELIED UPON THE CASE OF AO AND STATED THAT RMG HAD ADMITTED THAT THE GROUP CONCERNS WERE ISSUING ACCOMMODATION BILLS.THE AUTHORISED REPRESEN TATIVE (AR) STATED THAT IT HAD NOT CHALLENGED THE ORDER OF THE FAA, THAT WITHOUT PURC HASES THERE COULD NOT BE ANY SALES. HE RELIED UPON THE CASES OF M/S. JITENDRA HARSHADKUM AR TEXTILE(ITA NOS.771/M/2011 & ORS)(A.Y.2007-08)DATED 21.11.2012; M/S. C.CHOTALAL & CO.(ITA NOS.3690 TO 3967/ MUM/ 2012 A.Y.S 2002-03 TO 09-10 & ORS.) DATED 24.9.201 3; M/S. PRAMIT TEXTILES (ITA NOS.3648 TO 3953/M/2012 AND ORS. FOR (A.Y.S 2005-06 AND ORS. DATED 27.025.2015) AND M/S. KHAVERI HATHISING GOPALJI & SONS (ITA NOS.6141 & 6142/M/201 3 & ORS. A.Y.S 2008-09 DATED 23.06.2015. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD MADE THE ADDITION ON THE BASIS OF STATEMENT OF RAKESHKUMAR GUPTA AND THE MEMBERS OF HIS FAMILY,THAT THE COPY OF THE STATEMENTS OF RA KESH GUPTA WERE NOT PROVIDED TO THE ASSESSEE, THAT THE ASSESSEE HAD SPECIFICALLY REQUE STED FOR CROSS EXAMINATION OF RAKESH GUPTA, THAT THE AO DID NOT PROVIDE THE OPPORTUNITY OF CROS S EXAMINATION TO THE ASSESSEE, THAT THE STATEMENTS GIVEN DURING SURVEY PROCEEDINGS WERE LAT ER ON RETRACTED,THAT THE GUPTA GROUP HAD NOT NAMED THE ASSESSEE TO WHOM THEY HAD ISSUED ACCO MMODATION BILLS.IT IS A FACT THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES.IN OUR OPINION WHEN SALES ARE ACCEPTED THE AO CANNOT OUTRIGHTLY REJECT THE PURCHA SES-NO SALE CAN TAKE PLACE WITHOUT PURCHASES. AS THE AO HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTICE BY NOT SUPPLYING THE COPIES OF STATEMENT AND BY NOT PROVIDING OPPORTUNIT Y OF CROSS EXAMINATION THE ADDITION MADE BY HIM ON ACCOUNT OF BOGUS PURCHASES SHOULD HAVE BE EN DELETED ONLY ON THAT 1895/M/14-PRSYNDICATE 4 ACCOUNT.HOWEVER, THE FAA SUSTAINED THE ADDITION @10 % OF THE ALLEGED PURCHASES MADE DURING THE YEAR.THEREFORE, IN OUR OPINION HIS ORDER DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THE CASE LAWS RELIED UPON BY THE ASSESSEE SUPPORT THE VIEW EXPRESSED BY US. THEREFORE, CONFIRMING HIS ORDER WE DECIDE THE EFFEC TIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT APPEA L FILED BY THE AO STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. 24 , 2016 SD/- SD/- ( / // / PAWAN SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 24.06.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.