M/s. Craft Creations, CHENNAI V. DCIT, Tiruppur

ITA 2658/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4593 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 24-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 12-09-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: S SRIDHAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.2658/MDS./2016 / ASSESSMENT YEAR : 2012-13 M/S.CRAFT CREATIONS , 76/IB, MALAR GARDEN, GANAPATHY, PALAYAM VILLAGE, GANAPATHY PALAYAM, TIRUPPUR 641 605. VS. THE DCIT, CIRCLE 2, TIRUPPUR [PAN AAFFC 4199 M] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : MR.S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR.SUPRIYO PAL, JCIT, D.R / DATE OF HEARING : 04.04 .2017 !' / DATE OF PRONOUNCEMENT : 05 .05 .2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, COIMBATORE DATED 20.07.2016 AND PERTAINS TO ASSESSMENT YEAR 2012- 13. 2. THE FIRST GROUND RAISED IN THIS APPEAL IS WITH REGARD TO CONFIRMING THE ADDITION OF 1,00,03,725/- AS UNPROVE D PURCHASES IN THE ITA NO.2658 /MDS./2016 :- 2 -: COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNI NG PROPER REASONS AND JUSTIFICATION. 3. THE FACTS OF THE ISSUE ARE THAT THE AO MADE ADD ITIONS TOWARDS UNPROVED PURCHASES IN RESPECT OF FOUR PROPE RTIES AS BOGUS AS FOLLOWS:- I. M/S.SHIV DURGA FASHIONS 25,00,636 II. M/S.ELITE KNITS 25,00,906 III.M/S.LAKSHMI AGENCIES 25,01,409 IV.M/S.TEJA INTERNATIONAL COTTONS 25,00,774 1,00,03,725 AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) OBSERVED TH AT GP RATE OF ASSESSEE FOR THE PRESENT ASSESSMENT YEAR IS VERY LO W I.E. 3.77% AS COMPARED TO THE EARLIER ASSESSMENT YEARS I.E. 2009 -10: 11.31%, 2010-11: 7.39%, 2011-12:5.61%. FURTHER, ASSESSEE HAS NOT DISCHARGE THE PRIMARY BURDEN OF PROVIDING THE NAME AND ADDRESS OF THE AGENT THROUGH WHOM IT WAS PURCHASED. IT WAS STA TED BY THE ASSESSEE THAT AGENT WAS KNOWN THROUGH THE ASSESSEE S STAFF AND THE CONCERNED STAFF WAS DEAD AND THERE IS NO CONTACT WI TH THE AGENT, SHRI DURAIRAJ, AND HE CANNOT BE PRODUCED. THIS STATEMEN T OF THE ASSESSEE WAS CONTRARY TO THE LOGIC AND REASON AS A PRUDENT B USINESS MAN WOULD KEEP ALL DETAILS OF THE AGENT WHEN SUCH KIND OF TRA NSACTIONS MADE BY A PERSON. FURTHER, PURCHASE WAS MADE IN THE MONTH OF MAY AND JUNE, ITA NO.2658 /MDS./2016 :- 3 -: 2011 ONWARDS, BUT NO PAYMENT HAS BEEN MADE DURING T HE ENTIRE FINANCIAL YEAR 2010-11. THE PERSON DOING OF BUSINES S OF PURCHASE AND SALE OF CLOTH CANNOT AFFORD TO GIVE SUCH A LONG PER IOD OF CREDIT. SINCE THE ASSESSEE HAS NOT PROVIDED THE IDENTITY OF AGENT OR HIS ADDRESS, PURCHASERS WERE NOT VERIFIED. AS THE IDENTITY AND G ENUINENESS OF THE TRANSACTIONS ARE NOT PROVIDED, THE MERE FACT THAT T HE ASSESSEE HAS PRODUCED THE PHOTO COPIES OF VAT RETURNS IS OF NO H ELP IN PROVING THE IDENTITY OF TRADE CREDITORS. SINCE THE PURCHASES H AVE NOT BEEN PROVED THE PRIMARY BURDEN NOT DISCHARGED BY THE ASSESSEE, THE LD.CIT(A) CONFIRMED THE ABOVE ADDITION. AGAINST THIS, THE ASS ESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD.A.R SUBMITTED THAT THE PURCHA SES WERE GENUINE AND THERE CANNOT BE SALE WITHOUT PURCHASE A ND PAYMENTS WERE MADE TO THE PURCHASER. DUE TO SHORTAGE OF TIME AND IT WAS NOT ABLE TO PRODUCE THE SALES TAX RETURN OF THE PURCHAS ERS. ACCORDING TO LD.A.R, THE SUPPLIERS ARE EXISTING AND ARE GENUINE. ALTERNATIVELY, HE PLEADED THAT THE INCOME OF ASSESSEE MAY BE ESTIMATE D ON THE BASIS OF PAST HISTORY OF ASSESSEE. 4.1. ON THE OTHER HAND, LD.D.R RELIED ON THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE IS SAID TO BE P URCHASED CLOTH FROM ITA NO.2658 /MDS./2016 :- 4 -: THOSE PARTIES AT ` 1,00,03,725/-. THE ASSESSEE FAILED TO PURCHASE THE EVIDENCE REGARDING PURCHASE OF MATERIALS FROM THESE PARTIES. ON VERIFICATION, IT WAS FOUND THAT WHEREABOUT OF M/S.S RI DIVYA FASHIONS WAS KNOWN. THE SAME WAS CONFIRMED BY THE OWNER OF T HE PREMISES. SIMILARLY IN THE CASE OF M/S.EELITE KNITS BUILDING OWNER ALSO CONFIRMED THAT NO CONCERN IN THE NAME OF M/S.EELITE KNITS WAS THERE. IN THE CASE OF M/S.LAKSHMI AGENCIES, IT WAS CONFIRMED BY INSPEC TORS REPORT THAT NO CONCERN WAS EXISTED THERE. IN THE CASE OF M/S.TE JAS INTERNATIONAL COTTONS, THERE IS NO SUCH CONCERN IN THE GIVEN ADDR ESS. BEING SO, IT WAS CONCLUDED BY THE LOWER AUTHORITIES THAT THEY AR E THE BOGUS ENTITIES AND THERE CANNOT BE ANY PURCHASE FROM THESE PARTIES . COMING TO THE ALTERNATIVE ARGUMENT OF THE LD.A.R, LD.A.R SUBMITTE D THAT THE PAST HISTORY OF ASSESSEE TO BE CONSIDERED TO ESTIMATE TH E INCOME OF ASSESSEE. ADMITTEDLY, PAST HISTORY IS BETTER YARDST ICK TO DETERMINE THE INCOME OF ASSESSEE. IN THIS CASE, THE GP OF THE ASS ESSEE FOR THE LAST THREE YEARS IS AS FOLLOWS:- 2009-10: 11.31%, 2010-11: 7.39%, 2011-12:5.61% . SO, THE AVERAGE GP FOR THE ABOVE ASSESSMENT YEARS W ERE WORKED OUT AT 8.10%. THE ASSESSEE DECLARED ONLY 3.77%, DIFFERE NCE SHOULD BE 4.33%. THUS, THE TOTAL INCOME OF ASSESSEE TO BE EST IMATED AT 8.1% OF THE TOTAL TURNOVER FOR ASSESSMENT YEAR UNDER CONSID ERATION I.E. 23,30,28,207 X 8.1%; GROSS PROFIT: ` 1,88,75,285 INDIRECT EXPENSES ITA NO.2658 /MDS./2016 :- 5 -: 85,39,365, NET FIGURE ` 1,03,35,920; TOTAL INCOME OF ASSESSEE TO BE ESTIMATED AT ` 1,03,35,920/- INSTEAD OF TOTAL INCOME OF ASSESSEE ESTIMATED AT ` 1,21,70,841/-. THUS, THE ASSESSEE WOULD GET BENEFI T OF ` 18,34,921/-. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 05 TH MAY, 2017, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) ! / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 05 TH MAY, 2017. K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF