DEAL CLOTHING, MUMBAI V. ACIT CIR 19(2) NOW ACIT CIR 24(1), MUMBAI

ITA 1943/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8024 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KUMAR LD
• Assessee Lawyers: VIJAY MEHTALD
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

ITA NO.1943/MUM/2015 DEAL CLOTHING ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.1943/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) DEAL CLOTHING GHANSHYAM INDUSTRIAL ESTATE NEAR YASHRAJ STUDIO VEERA DESAI ROAD ANDHERI (WEST) MUMBAI-400 053 / VS. ASSISTANT COMMISSIONER OF INCOME TAX-CIRCLE 19(2) [NOW CIRCLE 24(1)] PIRAMAL CHAMBERS MUMBAI ! ./ ./PAN/GIR NO. AAHFD-1076-G ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : VIJAY MEHTA,LD.AR RE VENUE BY : PURUSHOTTAM KUMAR, LD. SR. DR / DATE OF HEARING : 06/12/2017 / DATE OF PRONOUNCEMENT : 20/12 /2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 ASSAILS THE ORDER OF THE LD. COMMISSIONER O F INCOME-TAX (APPEALS)-34 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-34/ACIT-19(2)(1)/IT- 377/13-14 DATED 13/03/2015 QUA CONFIRMATION OF CERTAIN ADDITIONS. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT ITA NO.1943/MUM/2015 DEAL CLOTHING ASSESSMENT YEAR-2011-12 2 COMMISSIONER OF INCOME TAX, CIRCLE-19(2), MUMBAI [A O] U/S 143(3) OF THE INCOME TAX ACT,1961 ON 13/03/2014. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT FIRM ENGAGED IN MANUFACTURING & TRADING OF GARMENTS WAS ASSESSED AT RS.61,45,720/- AFTER CERTAIN ADDITIONS / DISALLOWAN CES AS AGAINST RETURNED INCOME OF RS.28,84,970/- FILED BY THE ASSE SSEE ON 10/09/2011. 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX AUTHORITIES REGARDING DEALERS INDULGING IN PROVIDING ACCOMMODA TION BILLS, IT WAS NOTED THAT THE ASSESSEE STOOD BENEFICIARY OF SUCH BOGUS PURCHASE BILLS FROM FOUR SUCH PARTIES AGGREGATING TO RS.1,26 ,14,945/-. THE ASSESSEE, IN SUPPORT, PRODUCED PURCHASE BILLS AND C ORRESPONDING SALES DETAILS BUT EXPRESSED INABILITY TO PRODUCE ANY OF S UCH PARTY WHICH LED THE LD. AO TO TREAT SUCH PURCHASES AS BOGUS PURCHASES. FINALLY, RELYING UPON CERTAIN JUDICIAL PRONOUNCEMENTS, LD. AO ESTIMA TED THE ADDITIONS AGAINST THESE PURCHASES @25% WHICH CAME TO RS.31,53 ,736/-. THE ASSESSEE SUFFERED ANOTHER ADHOC ADDITION TO THE EXTENT OF 20% AGAINST VEHICLE EXPENSES, OFFICE EXPENSES & TELEPHONE EXPEN SES WHICH CAME TO RS.1,07,013/-. BOTH THESE ADDITIONS ARE THE SUBJ ECT MATTER OF THIS APPEAL. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH OUT ANY SUCCESS BEFORE LD.CIT(A) VIDE IMPUGNED ORDER DATED 13/03/20 15 WHERE LD. CIT(A) RELYING UPON THE ORDER OF PRECEDING YEAR IN THE CASE OF ERSTWHILE ASSESSEE FIRM ENHANCED THE ADDITION AGAINST BOGUS P URCHASES TO 100% AS AGAINST 25% ESTIMATED BY LD. AO. THE ADHOC DISALLOWANCE WAS ALSO CONFIRMED TO ACCOUNT FOR PERSONAL ELEMENT EMBEDDED IN THE EXPENSES ITA NO.1943/MUM/2015 DEAL CLOTHING ASSESSMENT YEAR-2011-12 3 CLAIMED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. REPRESENTATIVE FOR ASSESSEE [AR] DREW OU R ATTENTION TO THE FACT THAT THE ASSESSEE ALREADY REFLECTED HIGH GROSS PROFIT RATE OF 18.71% AND SIMILAR RATE HAS BEEN ACCEPTED BY THE RE VENUE IN IMMEDIATELY SUCCEEDING AY IN AN ASSESSMENT U/S 143( 3) AND THEREFORE, THE ADDITIONS WERE NOT JUSTIFIED. OUR ATTENTION WAS ALSO DRAWN TO THE FACT THAT THE ASSESSEE WAS MAINLY INTO TRADING ACTIVITIE S AND COMPLETE QUANTITATIVE DETAILS WERE AVAILABLE ON RECORD. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR] DREW ATTENTION TO THE FACT THAT THE ASSESSEE COULD NOT PRODUCE EVE N A SINGLE PARTY TO SUBSTANTIATE THE PURCHASES TRANSACTIONS AND THEREFO RE, ADDITIONS WERE JUSTIFIED. 6. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE ADHOC ADDITION OF 20% AGAINST VARIOUS EXPENSES IS CONCERNED, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME SINCE THE POSSIBILITY OF PERSONAL ELEMENT, KEE PING IN VIEW THE NATURE OF THESE EXPENSES, COULD NOT BE RULED OUT. H ENCE, THE ADDITION TO THAT EXTENT STANDS CONFIRMED. 7. SO FAR AS THE ADDITION AGAINST BOGUS PURCHASES I S CONCERNED, WE FIND THAT THE ASSESSEE IS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND ALREADY REFLECTED HIGH GROSS PROFIT RATE OF 18.71%. THE SIMILAR RATE HAS BEEN ACCEPTED BY THE REVENUE IN IMMEDIATELY SUC CEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE N O SALE WITHOUT PURCHASE /CONSUMPTION OF MATERIAL SINCE THE ASSESSE E WAS ENGAGED IN MANUFACTURING AND TRADING ACTIVITY. THE SALES TURNOVER ACHIEVED BY THE ITA NO.1943/MUM/2015 DEAL CLOTHING ASSESSMENT YEAR-2011-12 4 ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE. THE ASSESSEE HAS, TO SOME EXTENT, SHOWN CORRELATION BETWEEN SALES AND PU RCHASES. THE PURCHASES WERE BACKED BY INVOICES. AT THE SAME TIME , THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM ANY OF THE IMPUGNED SUPPLIER AND COULD NOT PRODUCE ANY PARTY FOR CONFIRMATION, W HICH CAST A SERIOUS DOUBT ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SIT UATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEM ENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN T HE GREY MARKET AND UNDUE BENEFIT OF VALUE ADDED TAX [VAT] AGAINST SUCH BOGUS PURCHASES. HENCE, LD. CIT(A), IN OUR OPINION, ERRED IN ENHANCI NG THE SAME TO 100%. THEREFORE, ON FACTUAL MATRIX AND KEEPING IN VIEW TH E APPLICABLE VAT RATE ON GOODS BEING TRADED BY THE ASSESSEE, WE ESTIMATE THE SAME @ 8% OF ALLEGED BOGUS PURCHASES OF RS.1,26,14,945/- WHICH COMES TO RS.10,09,196/-. 8. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2017. SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGAR WAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 20.12 .2017 SR.PS:- THIRUMALESH ITA NO.1943/MUM/2015 DEAL CLOTHING ASSESSMENT YEAR-2011-12 5 / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. $'. , . , / DR, ITAT, MUMBAI 6. / / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI