AI Insights
The case involves M/s Golden Seams Textiles Pvt. Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals)-47, Mumbai, confirming the additions made by the Assessing Officer under sections 153A and 143(3) of the Income-tax Act, 1961. The additions were based on alleged bogus purchases amounting to Rs. 2,36,93,640 from a trader identified as a hawala operator by the Sales Tax Department of Maharashtra. The Tribunal examined whether the conditions for making such additions were met, particularly in the absence of incriminating material during the search and the status of the assessment proceedings prior to the search.
Appeal Details
Counselvise Citation
[2022] 140 COUNSELVISE.COM (IT) 123644 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-12-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
G
Next Hearing Date
01-11-2022
Assessment Year
2010-2011
Appeal Filed On
20-02-2021
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 2019/MUM/2020 Assessment Year: 2010-11 M/s Golden Seams Textiles Pvt. Ltd., 14, Peninsula Centre, Dr. S.S. Rao Road, Parel, Mumbai-400012. Vs. DCIT, Central Circle-5, Old CGO Bldg., Room No. 901, Annexe, 9 th floor, M.K. Road, Mumbai-400020. PAN No. AACCG 1114 E Appellant Respondent Assessee by : Mr. Dharan Gandhi/Vipul J. Revenue by : Mr. Sanjay Vishwas Rao Deshmukh, CIT-DR Date of Hearing : 02/11/2022 Date of pronouncement : 27/12/2022 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against order dated 20.10.2020 passed by the Ld. Commissioner of Income-tax (Appeals)-47, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, arising from the order passed by the Assessing Officer u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’). 2. The grounds raised by the assessee are reproduced as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the AO's action of illegal, bad in law or otherwise void for want of jurisdiction as the conditions precedent for invoking the provisions of section 153C are not satisfied. 2. On the facts and in the circumstances of the case and in law, the addition to the extent of Rs. 29,61,705/ of total purchases of Rs. 2,36,93,640/ considering the fact that profit disclosed in the transaction is not considered by the Ld. CIT(A). 3. The appellant pr the addition made by the Ld. AO and to the extent confirmed by the Ld. CIT(A). 3. Briefly stated, facts of the case are that the assessee is a subsidiary of M/s Mandhana Industries Ltd., on which search u/s 132(1) of the Act was carried out of the assessee company. Subsequent to search proceedings, a survey action u/s 132(1) of the Act registered office of the the assessee company accepted entry of capital of M/s Golden Seams Textiles Pvt. Ltd. The grounds raised by the assessee are reproduced as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the AO's action of issuing notice ws. 153C, which is illegal, bad in law or otherwise void for want of jurisdiction as the conditions precedent for invoking the provisions of section 153C are not satisfied. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition to the extent of Rs. 29,61,705/- being 12.5% of total purchases of Rs. 2,36,93,640/- without considering the fact that profit disclosed in the transaction is not considered by the Ld. CIT(A). 3. The appellant prays this Hon'ble Tribunal to delete the addition made by the Ld. AO and to the extent confirmed by the Ld. CIT(A). Briefly stated, facts of the case are that the assessee is a subsidiary of M/s Mandhana Industries Ltd., on which search u/s Act was carried out on 11.01.2012 alongwith of the assessee company. Subsequent to search proceedings, a survey action u/s 132(1) of the Act was also carried out on the of the assessee company on 31.07.2013, wherein company accepted entry of capital of ₹81,93,142/ M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 2 The grounds raised by the assessee are reproduced as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the issuing notice ws. 153C, which is illegal, bad in law or otherwise void for want of jurisdiction as the conditions precedent for invoking 2. On the facts and in the circumstances of the case Ld. CIT(A) erred in confirming the being 12.5% without considering the fact that profit disclosed in the ays this Hon'ble Tribunal to delete the addition made by the Ld. AO and to the extent Briefly stated, facts of the case are that the assessee is a subsidiary of M/s Mandhana Industries Ltd., on which search u/s on 11.01.2012 alongwith premises of the assessee company. Subsequent to search proceedings, a also carried out on the assessee company on 31.07.2013, wherein 81,93,142/-. 4. Consequently, the Assessing Officer issued notice u/s 153A of the Act on 21.011.2012 income on 14.05.2013 declaring total income of the assessment completed u/s 153A r.w.s. 143(3) of the Act, the Assessing Officer referred to the finding of the Investigation Wing during survey proceedings dated 31.07.2013 and informed the assessee that made Siddhpad Trading Pvt. Ltd. by the Sales Tax Department of Maharashtra and therefore, purchases were in nature of bogus purchases. The Ld. Assessing Officer rejected the submission of the assessee in the order dated 27.03.2014 and made addition of bogus purchases. On further appeal, the Ld. CIT(A) observed that the assessee has not only made bogus purchases but has shown that products purchase another party and therefore, the purchases are bogus and sales are also in the nature of bogus and therefore, the Ld. CIT(A) held the profit rate of ₹12.5% on bogus purchases as the fair and reasonable which was worked out to the addition of ₹29,61,705/ Aggrieved with the addition sustained before the Tribunal raising the grounds as reproduced above. M/s Golden Seams Textiles Pvt. Ltd. Consequently, the Assessing Officer issued notice u/s 153A of the Act on 21.011.2012. In response, the assessee filed return of income on 14.05.2013 declaring total income of ₹ ssment completed u/s 153A r.w.s. 143(3) of the Act, the Assessing Officer referred to the finding of the Investigation Wing proceedings dated 31.07.2013 and informed the made purchases of ₹2,36,96,640/ Trading Pvt. Ltd., which is a black listed by the Sales Tax Department of Maharashtra and therefore, nature of bogus purchases. The Ld. Assessing Officer rejected the submission of the assessee in the order dated made addition of ₹2,36,93,640/- bogus purchases. On further appeal, the Ld. CIT(A) observed that the assessee has not only made bogus purchases but has shown that products purchased through those bills were further sold y and therefore, the purchases are bogus and sales are also in the nature of bogus and therefore, the Ld. CIT(A) held the 12.5% on bogus purchases as the fair and reasonable worked out to ₹29,61,705/-. Accordingly 29,61,705/- and balance addition the addition sustained, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 3 Consequently, the Assessing Officer issued notice u/s 153A of n response, the assessee filed return of ₹72,36,285/-. In ssment completed u/s 153A r.w.s. 143(3) of the Act, the Assessing Officer referred to the finding of the Investigation Wing proceedings dated 31.07.2013 and informed the 2,36,96,640/- from M/s hawala traders by the Sales Tax Department of Maharashtra and therefore, nature of bogus purchases. The Ld. Assessing Officer rejected the submission of the assessee in the order dated on the issue of bogus purchases. On further appeal, the Ld. CIT(A) observed that the assessee has not only made bogus purchases but has shown through those bills were further sold to y and therefore, the purchases are bogus and sales are also in the nature of bogus and therefore, the Ld. CIT(A) held the 12.5% on bogus purchases as the fair and reasonable . Accordingly he confirmed and balance addition was deleted. assessee is in appeal before the Tribunal raising the grounds as reproduced above. 5. Before us, the Ld. Counsel of the assessee referred to the additional grounds filed by the assessee under: “1.0 On the facts and in circumstances of the case, the amount of subsidy availed by the Appellant under Technology Upgradation Fund Scheme (TUF) from Government amounting to Rs. 53,96,680/ the nature of capital receipt should be excluded in computing total income under the normal provisions of the Act and also in computing book profits w/s 1151B of the Act. 2.0 On the facts and in circumstances of the case, no addition could have assessment year in absence of any incriminating material found during the course of search. 5.1 The additional ground No. 1 was not pressed before us and therefore, same is dismissed as infructuous. 5.2 As regards, additional same is purely legal in nature investigation of the fresh facts view of the decision of the NTPC Ltd. v. CIT 229 ITR 383 6. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. M/s Golden Seams Textiles Pvt. Ltd. Before us, the Ld. Counsel of the assessee referred to the filed by the assessee, which are 1.0 On the facts and in circumstances of the case, the amount of subsidy availed by the Appellant under Technology Upgradation Fund Scheme (TUF) from Government amounting to Rs. 53,96,680/-, being in the nature of capital receipt should be excluded in computing total income under the normal provisions of the Act and also in computing book profits w/s 1151B of the Act. On the facts and in circumstances of the case, no addition could have been made in the impugned assessment year in absence of any incriminating material found during the course of search.” The additional ground No. 1 was not pressed before us and therefore, same is dismissed as infructuous. As regards, additional ground No. 2 is concerned same is purely legal in nature and don’t require further investigation of the fresh facts, therefore, same was admitted, view of the decision of the Hon’ble Supreme Court in the case NTPC Ltd. v. CIT 229 ITR 383. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 4 Before us, the Ld. Counsel of the assessee referred to the are reproduced as 1.0 On the facts and in circumstances of the case, the amount of subsidy availed by the Appellant under Technology Upgradation Fund Scheme (TUF) from , being in the nature of capital receipt should be excluded in computing total income under the normal provisions of the Act and also in computing book profits w/s On the facts and in circumstances of the case, no been made in the impugned assessment year in absence of any incriminating The additional ground No. 1 was not pressed before us and . 2 is concerned, we find that require further therefore, same was admitted, in Hon’ble Supreme Court in the case We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. In the additional ground No. 2, the assessee has submitted addition could be made without incriminating material during the course of search. We find that as far as the additional ground raised by the assessee is concerned no addition could have been made in the assessment firstly, no incriminating material is found and not abated i.e. no assessment proceedings date of search. 6.1 We find that in the instant case, search was condu 11.01.2012. For the assessment year concerned was filed on 30.11.2010 and therefore, u/s 143(2) for selecting the case under scrutiny expired on 30.09.2011 and till issued thus no assessment proceedings was pending in the year under reference in the case of the assessee mentioned by the Assessing Officer in para 8 of the assessment order which is reproduced as under: “8. It was verified from the details submitted by the A.R. that assessee's case was not selected under scrutiny and hence, no regul been passed u/s 143(3) of the IT Act for the assessment year under consideration. pursuant to the search action conducted on M/s Mandhana Industries Limited, compulsory scrutiny M/s Golden Seams Textiles Pvt. Ltd. additional ground No. 2, the assessee has submitted ould be made without incriminating material course of search. We find that as far as the additional ground raised by the assessee is concerned no addition could have been made in the assessment, if follow two conditions are fulfilled minating material is found and secondly abated i.e. no assessment proceedings were pending as We find that in the instant case, search was condu the assessment year concerned, the regular return on 30.11.2010 and therefore, time limit for issuing u/s 143(2) for selecting the case under scrutiny expired on 30.09.2011 and till the date of search, no notice thus no assessment proceedings was pending in the year under reference in the case of the assessee. This fact has been duly mentioned by the Assessing Officer in para 8 of the assessment order which is reproduced as under: 8. It was verified from the details submitted by the A.R. that assessee's case was not selected under scrutiny and hence, no regular assessment order had been passed u/s 143(3) of the IT Act for the assessment year under consideration. However, pursuant to the search action conducted on M/s Mandhana Industries Limited, compulsory scrutiny M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 5 additional ground No. 2, the assessee has submitted that no ould be made without incriminating material found course of search. We find that as far as the additional ground raised by the assessee is concerned no addition could have two conditions are fulfilled secondly, assessment were pending as on the We find that in the instant case, search was conducted on the regular return limit for issuing notice u/s 143(2) for selecting the case under scrutiny expired on no notice u/s 143(2) was thus no assessment proceedings was pending in the year . This fact has been duly mentioned by the Assessing Officer in para 8 of the assessment 8. It was verified from the details submitted by the A.R. that assessee's case was not selected under ar assessment order had been passed u/s 143(3) of the IT Act for the However, pursuant to the search action conducted on M/s Mandhana Industries Limited, compulsory scrutiny proceedings have been initiated u/s 153A of against the assessee. 6.2 Therefore, the assessment year concerned is in the category of unabated assessment. 6.3 As far as second condition is concerned, we find that the Assessing Officer in para 6 of the assessment has mentioned that the information in relation to bogus trading purchases from M/s Siddhpad Trading Pvt. Ltd. was found during the course of survey proceedings dated 31.07.2013. The relevant para of the Assessing Officer is reproduced as under: “6. During the course of survey pro 31/7/2013, the assessee company was found to have taken bogus trading purchases of Rs.2,36,93,640/ during the FY 2009 Trading Prt Ltd. earmarked as hawala traders by the Sales Tax Department of Maharashtra. On Shri Purushottam Mandhana during the course of recording of his statement on oath accepted to have taken a bogus trading purchase of Rs. 2,36,93,640/ from M/s Siddhpad Trading Pvt Ltd. and claimed to have issued a corresponding bogus sale bill 2,62,57,392/ an exaggerated growth rate of the company to its investors and to maintain requisite turnover of the company to avail of cash credit facility from the bank M/s Golden Seams Textiles Pvt. Ltd. proceedings have been initiated u/s 153A of the IT Act against the assessee.” Therefore, the assessment year concerned is in the category of unabated assessment. As far as second condition is concerned, we find that the Assessing Officer in para 6 of the assessment has mentioned that formation in relation to bogus trading purchases from M/s Siddhpad Trading Pvt. Ltd. was found during the course of survey 31.07.2013. The relevant para of the Assessing Officer is reproduced as under: 6. During the course of survey proceedings on 31/7/2013, the assessee company was found to have taken bogus trading purchases of Rs.2,36,93,640/ during the FY 2009-10 from one trader viz. Siddhpad Trading Prt Ltd. earmarked as hawala traders by the Sales Tax Department of Maharashtra. On confronted, Shri Purushottam Mandhana during the course of recording of his statement on oath accepted to have taken a bogus trading purchase of Rs. 2,36,93,640/ from M/s Siddhpad Trading Pvt Ltd. and claimed to have issued a corresponding bogus sale bill of Rs. 2,62,57,392/- to The Loot India Pvt. Ltd. so as to show an exaggerated growth rate of the company to its investors and to maintain requisite turnover of the company to avail of cash credit facility from the bank M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 6 the IT Act Therefore, the assessment year concerned is in the category of As far as second condition is concerned, we find that the Assessing Officer in para 6 of the assessment has mentioned that formation in relation to bogus trading purchases from M/s Siddhpad Trading Pvt. Ltd. was found during the course of survey 31.07.2013. The relevant para of the Assessing ceedings on 31/7/2013, the assessee company was found to have taken bogus trading purchases of Rs.2,36,93,640/- 10 from one trader viz. Siddhpad Trading Prt Ltd. earmarked as hawala traders by the confronted, Shri Purushottam Mandhana during the course of recording of his statement on oath accepted to have taken a bogus trading purchase of Rs. 2,36,93,640/- from M/s Siddhpad Trading Pvt Ltd. and claimed to of Rs. to The Loot India Pvt. Ltd. so as to show an exaggerated growth rate of the company to its investors and to maintain requisite turnover of the company to avail of cash credit facility from the bank on the basis of jacked company.” 6.4 This fact has been further mentioned by the Ld. Assessing Officer in para 10 of the assessment order which is reproduced as under: “10. During the course of survey proceedings, the investigation team has found that the assessee company has taken the purchases amounting to Rs.23693640/ who is a blacklisted hawala trader by the Sales Tax Department of Maharashtra. During the course of scrutiny proceedings, the notice us 133(6) was issued to M/s Siddhpad Trading Pvt. Ltd. After physical verification by the Inspector of this office, it was found that the said concern does not exist at the specified address.” 6.5 In view of the above observation of the Assessing Officer, it is evident that the additio the basis of evidence proceedings and not based on any incriminating material found during the course of search dated following decision of the Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation Ltd 374 ITR 645 no addition could have been made in the year under reference without reference to M/s Golden Seams Textiles Pvt. Ltd. on the basis of jacked-up sales turnover of the This fact has been further mentioned by the Ld. Assessing Officer in para 10 of the assessment order which is reproduced as During the course of survey proceedings, the investigation team has found that the assessee ompany has taken the purchases amounting to Rs.23693640/- from M/s Siddhpad Trading Pvt Ltd. who is a blacklisted hawala trader by the Sales Tax Department of Maharashtra. During the course of scrutiny proceedings, the notice us 133(6) was issued to ddhpad Trading Pvt. Ltd. After physical verification by the Inspector of this office, it was found that the said concern does not exist at the specified In view of the above observation of the Assessing Officer, it is evident that the addition has been made by the Assessing Officer on the basis of evidence gathered during the course of the survey proceedings and not based on any incriminating material found during the course of search dated 11.01.2012. In view of the above of the Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation Ltd no addition could have been made in the year under reference to any incriminating material M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 7 over of the This fact has been further mentioned by the Ld. Assessing Officer in para 10 of the assessment order which is reproduced as During the course of survey proceedings, the investigation team has found that the assessee ompany has taken the purchases amounting to from M/s Siddhpad Trading Pvt Ltd. who is a blacklisted hawala trader by the Sales Tax Department of Maharashtra. During the course of scrutiny proceedings, the notice us 133(6) was issued to ddhpad Trading Pvt. Ltd. After physical verification by the Inspector of this office, it was found that the said concern does not exist at the specified In view of the above observation of the Assessing Officer, it is n has been made by the Assessing Officer on during the course of the survey proceedings and not based on any incriminating material found . In view of the above, of the Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation Ltd., reported in no addition could have been made in the year under ny incriminating material found during the course of search assessee is accordingly allowed. 6.6 Since, we have allowed the additional ground of appeal of the assessee, the ground raised by the assessee are not requ adjudicate as same are rendered only academic. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court/under Rule 34 the ITAT Rules, 1963 on Sd/- (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 27/12/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// M/s Golden Seams Textiles Pvt. Ltd. during the course of search. The additional ground of appeal of the assessee is accordingly allowed. Since, we have allowed the additional ground of appeal of the ground raised by the assessee are not requ same are rendered only academic. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court/under Rule 34 the ITAT Rules, 1963 on 27/12/2022. Sd/- RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai M/s Golden Seams Textiles Pvt. Ltd. ITA No. 2019/M/2020 8 . The additional ground of appeal of the Since, we have allowed the additional ground of appeal of the ground raised by the assessee are not required to In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court/under Rule 34(4) of - OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Sr. Private Secretary) ITAT, Mumbai
Other Referred Cases
NTPC Ltd. v. CIT, CIT vs. Continental Warehousing Corporation Ltd
Laws Referred To
Income-tax Act, 1961
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1:1 Consultation on Tax Litigation
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Non-Compete Agreement
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Shipping and Logistics Agreement
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