THE ITO WD 12(2)(1), MUMBAI V. SHRI RAKESH KUMAR GOYAL, MUMBAI

ITA 2462/MUM/2007

• Counselvise Citation: 246219914 RSA 2007
• Duration Of Justice: 7 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 08-09-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 29-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: V K TULSIAN
• Keywords: Opportunity of being heard
• Section: 68; 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.2462/MUM/2007 ( / ASSESSMENT YEAR :2003-04) INCOME TAX OFFICER 12(2)(1), ROOM NO.137, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. SHRI RAKESH KUMAR GOYAL, 109, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./I.T.A. NO.2772/MUM/2007 ( / ASSESSMENT YEAR :2003-04) SHRI RAKESH KUMAR GOYAL 109, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI-400020. / VS. INCOME TAX OFFICER 12(2)(1), ROOM NO.137, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./I.T.A. NO.6517/MUM/2007 ( / ASSESSMENT YEAR :2004-05) INCOME TAX OFFICER 12(2)(1), ROOM NO.137, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. SHRI RAKESH KUMAR GOYAL, 863, INDUSTRIAL AREA A, LUDHIANA ( / APPELLANT) .. ( !' / RESPONDENT) ./I.T.A. NO.6532/MUM/2007 ( / ASSESSMENT YEAR :2004-05) SHRI RAKESH KUMAR GOYAL 56/1, CUNNING STREET, KOLKATA / VS. INCOME TAX OFFICER 12(2)(1), ROOM NO.137/123, 1 ST FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) I.T.A. NOS. 2462, 2772, 6517 AND 6532 /MUM/2007 AND 4356/M/11 1438 /MUM/2013 2 ./I.T.A. NO.4356/MUM/2011 ( / ASSESSMENT YEAR :2004-05) SHRI RAKESH KUMAR GOYAL, 863, INDUSTRIAL AREA A, LUDHIANA. / VS. INCOME TAX OFFICER 12(2)(1), ROOM NO.137, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./ #$ ./PAN/GIR NO. : AABPG3433C % / REVENUE BY : SHRI LOVE KUMAR !' & % /ASSESSEE BY : SHRI V K TULSIAN ' ( & ) * / DATE OF HEARING : 8.9.2014 +, & ) * / DATE OF PRONOUNCEMENT : 12.9.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED EITHER BY ASSESSEE OR BY RE VENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) AND THEY REL ATE TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE APPEAL NUMBERED AS ITA 43 56/MUM/2011 RELATES TO PENALTY ORDER AND OTHER APPEALS RELATE TO THE ASSES SMENT ORDERS. ALL THESE APPEALS WERE HEARD TOGETHER AND HENCE THEY ARE BEIN G DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. WE SHALL FIRST TAKE UP THE APPEALS PERTAINING TO ASSESSMENT YEAR 2003-04. BOTH THE PARTIES ARE AGGRIEVED BY THE DECISION REND ERED BY LD CIT(A) IN PARTIALLY SUSTAINING THE FOLLOWING ADDITIONS:- (A) DISALLOWANCE OF FABRICATION EXPENSE S (B) DISALLOWANCE OF PURCHASES. 3. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF FABRICATION EXPENSES. THE ASSESSEE IS TRADING IN HOSIERY AND WOOLEN ITEMS IN THE PROPRIETARY CONCERN NAMED M/S SHIRDI OVERSEAS IMPORTS & EXPORTS. THOUG H THE TURNOVER WAS DECLARED AT RS.15.26 CRORES, THE NET PROFIT WAS SHO WN AT A MEAGER FIGURE OF I.T.A. NOS. 2462, 2772, 6517 AND 6532 /MUM/2007 AND 4356/M/11 1438 /MUM/2013 3 RS.26,714/-, WHICH WORKED OUT TO 0.018% ONLY. IN T HE EARLIER YEARS, THE NET PROFIT RATE WORKED OUT TO 0.46% (AY 2001-02) AND 0.37% (AY 2002-03). FURTHER, THE AO NOTICED THAT THE ASSESSEE HAD INCURRED SUBSTANTI AL EXPENSES TOWARDS FABRICATION, EMBROIDERY CHARGES AND PURCHASES BY MA KING CASH PAYMENTS. FURTHER THE FABRICATION EXPENSES WERE SUPPORTED BY SELF MADE VOUCHERS ONLY, WHICH ALSO DID NOT BEAR THE NAME AND SIGNATURE OF P ERSONS RECEIVING CASH. FURTHER, EACH CASH PAYMENT WAS SEEN MADE AT RS.20,0 00/- OR LESS IN ORDER TO AVOID THE PROVISIONS OF SEC. 40A(3) OF THE ACT. IN VIEW OF THE ABOVE, THE AO DISALLOWED 30% OF FABRICATION EXPENSES AND EMBROIDE RY CHARGES, AS THE SAID EXPENSES WERE NO FULLY SUSCEPTIBLE FOR VERIFICATION . THE LD CIT(A) REDUCED BOTH THE DISALLOWANCES TO 10%. HENCE BOTH THE PARTIES A RE AGGRIEVED. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RE CORD. WE NOTICE THAT THE LD CIT(A) CONSIDERED THE FACT THAT THE ASSESSEE WAS CO NSTRAINED TO GET THE FABRICATION AND EMBROIDERY WORKS DONE THROUGH PERSO NS BELONGING TO UNORGANIZED SECTORS AND HENCE CASH PAYMENT IS INEVI TABLE IN SUCH KIND OF BUSINESS. AT THE SAME TIME, THE LD CIT(A) ALSO NOT ICED THAT THE ASSESSEE SHOULD HAVE MAINTAINED PROPER RECORDS AND VOUCHERS AND ALS O SHOULD HAVE MAINTAINED DETAILS OF RECIPIENTS, QUANTITY REGISTERS ETC. HEN CE, ON A CONSPECTUS OF THE MATTER, THE LD CIT(A) REDUCED THE DISALLOWANCE TO 1 0% AS AGAINST 30% MADE BY THE AO. IN THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT THE LD CIT(A) HAS TAKEN A CONSCIOUS DECISION ON THESE I SSUES BY CONSIDERING THE PRACTICAL ASPECTS. HENCE, WE DO NOT FIND ANY INFIR MITY IN HIS DECISION ON THIS ISSUE. 5. THE NEXT ISSUE RELATES TO THE DISALLOWANCE O F PURCHASES. THE ASSESSEE HAD DECLARED PURCHASES AT RS.14.33 CRORES AND IT WAS SE EN THAT MOST OF PURCHASES WERE MADE BY MAKING CASH PAYMENT OF RS.20,000/- OR LESS. FURTHER THE ASSESSEE DID NOT MAINTAIN SALES AND PURCHASE REGIST ERS. THE ASSESSEE ALSO DID NOT PRODUCE PURCHASE BILLS, PURCHASE REGISTER ETC. HENCE THE AO DISALLOWED 5% OF THE PURCHASE AMOUNT TO COVER UP THE DEFICIENCIES . THE LD CIT(A) REDUCED THE SAME TO 1% OF THE PURCHASE AMOUNT. HENCE BOTH THE PARTIES ARE AGGRIEVED BY HIS DECISION. I.T.A. NOS. 2462, 2772, 6517 AND 6532 /MUM/2007 AND 4356/M/11 1438 /MUM/2013 4 6. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSU E AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAD EXPLAINED BEFORE THE L D CIT(A) THAT THE ASSESSEE WAS GETTING GOOD PROFIT MARGIN IN EXPORT BUSINESS A ND HENCE THE ASSESSEE SOLD THE SURPLUS GOODS IN DOMESTIC MARKET WITH LOW MARGI N. ACCORDINGLY THE ASSESSEE HAD SUBSTANTIATED THE LOW G.P DECLARED BY HIM. HOW EVER, SINCE THE ASSESSEE COULD NOT EXPLAIN THE CASH PURCHASES AND DEFICIENCY IN MAINTENANCE OF BOOKS, THE LD CIT(A) THOUGHT IT FIT TO SUSTAIN A PORTION O F DISALLOWANCE. ACCORDINGLY, HE REDUCED THE DISALLOWANCE FROM 5% TO 1% OF TOTAL PUR CHASES. WE NOTICE THAT THE LD CIT(A), IN THIS ISSUE ALSO, HAS TAKEN A CONSCIOU S DECISION BY CONSIDERING THE FACTS AND CIRCUMSTANCES PREVAILING IN THIS CASE. H ENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER ON THIS ISSUE. 7. WE SHALL NOW TAKE THE APPEALS FILED BY BOTH T HE PARTIES FOR ASSESSMENT YEAR 2004-05. IN THE APPEAL FILED BY THE ASSESSEE, FOLL OWING ISSUES ARE CONTESTED:- (A) CASH CREDIT ADDITION U/S 68 - RS.18,51,96 5/- (B) DISALLOWANCE OF PURCHASES. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT( A) IN REDUCING THE DISALLOWANCE OF PURCHASES FROM 5% TO 2%. 8. WITH REGARD TO THE CASH CREDIT ADDITION OF R S.18,51,965/- MADE U/S 68 OF THE ACT, THE LD A.R SUBMITTED THAT THE ASSESSEE DID NOT GET ADEQUATE OPPORTUNITY TO FURNISH ALL THE DETAILS. ACCORDINGLY, HE PRAYED TH AT THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY IN THIS MATTER. THE LD D.R AL SO DID NOT OBJECT TO THE PLEA PUT FORTH BY LD A.R. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION TO EXAMINE THIS MATTER AFRESH AFTER AFFORDING NECESSAR Y OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE W ITH THE LAW. 9. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF PURCHASES. AS IN THE EARLIER YEAR, THE AO DISALLOWED 5% OF PURCHASES TO COVER UP DEFICIENCY. THE LD CIT(A) REDUCED THE SAME TO 2%. HENCE BOTH THE PARTIES ARE AGGRIEVED BY THE SAID DECISION. IN THE PRECEDING YEAR, THE LD CIT(A) HAS SUSTAINED THE ADDITION TO 1% OF THE PURCHASES. HENCE, IN OUR VIEW, THIS ISSUE W OULD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS SUSTAINED TO THE SAME LEVEL OF 1%. ACCORDINGLY, WE MODIFY I.T.A. NOS. 2462, 2772, 6517 AND 6532 /MUM/2007 AND 4356/M/11 1438 /MUM/2013 5 THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO SUSTAIN THE DISALLOWANCE TO 1% OF THE PURCHASES AMOUNT. 10. WE SHALL NOW TAKE UP THE PENALTY APPEAL FILED FOR AY 2004-05. THE AO LEVIED PENALTY U/S 271(1)(C) ON PURCHASE DISALLOWAN CE SUSTAINED BY LD CIT(A) AT 2% AND ALSO ON CASH CREDIT ADDITION SUSTAINED BY LD CIT(A). IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT(A) CONFIRMED THE PENALT Y LEVIED BY THE AO. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFOR E US. 11. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WITH REGARD TO THE ADDITION PERTAINING TO CASH CREDIT, WE HAVE SET ASI DE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE M ATTER RELATING TO PENALTY LEVIABLE ON CASH CREDIT TO THE FILE OF THE AO WITH THE DIRECTION TO TAKE A FRESH LOOK AT IT AFTER DECIDING THE CASH CREDIT ADDITION ON ME RITS. WITH REGARD TO THE PENALTY SUSTAINED ON PURCHASE DISALLOWANCE, WE ARE INCLINED TO DELETE THE PENALTY SINCE THE SAID DISALLOWANCE HAS BEEN MADE ON ESTIMATED BA SIS. IN THE INSTANT CASE, THE BOGUS NATURE OF PURCHASES, IF ANY, HAS NOT BEEN ESTABLISHED, BUT THE DISALLOWANCE HAS BEEN MADE ON ESTIMATED BASIS TO CO VER UP THE DEFICIENCIES, IF ANY, IN MAINTENANCE OF BOOKS OF ACCOUNT WITH REGARD TO THE PURCHASES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THE PENALTY LEVIED ON DISALLOWANCE OF PURCHASES AND DIRECT THE AO TO DELE TE THE SAID PENALTY. 12. IN THE RESULT, THE APPEALS FILED BY BOTH T HE PARTIES FOR AY 2003-04 AND THE APPEAL FILED BY THE REVENUE FOR AY 2004-05 ARE DISM ISSED. THE QUANTUM APPEAL AS WELL AS THE PENALTY APPEAL FILED BY THE ASSESSEE FOR AY 2004-05 IS TREATED AS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12TH SEPT, 2014 . +, ' - ./ 0 1 12TH SEPT, 2014 , & 3( 4 SD SD ( . . / H.L. KARWA ) ( . . , / B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER . ' ( MUMBAI : 12TH SEPT,2014 . I.T.A. NOS. 2462, 2772, 6517 AND 6532 /MUM/2007 AND 4356/M/11 1438 /MUM/2013 6 . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ' 9) ( ) / THE CIT(A)- CONCERNED 4. ' 9) / CIT CONCERNED 5. 6. :; 3 !)< , * < , . ' ( / DR, ITAT, MUMBAI CONCERNED 3 = ( / GUARD FILE. > ' / BY ORDER, TRUE COPY ? # (ASSTT. REGISTRAR) * < , . ' ( /ITAT, MUMBAI