ACIT 21(3), Mumbai V. M/s Shradha Apparels Wordwide, Mumbai

ITA 2718/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3411 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 133(6); 143(1); 13; 22; 147; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER ITA NO. 27 16, 2717 & 2718 /MUM/201 9 ( A.Y S . 2009 - 10 , 2010 - 11 & 2011 - 12 ) ACIT - 2 1( 3 ) ROOM N O. 2 09, 2 ND FLOOR PIRAMAL CHAMBERS, LALBAUG MUMBAI 400 012 V. M/S. SHRADHA APPARELS WORLDWIDE 201, JOGANI INDUSTRIAL ESTATE 541, SENAPATI BAPAT MARG DADAR (W), MUMBAI 400028 PAN: ABFFS5542M ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY AMRITA SINGH DATE OF HEARING : 22 .10.2020 DATE OF PRONOUNCEMENT : 13 .11 .2020 O R D E R PER C.N. PRASAD (JM) 1. THESE APPEAL S ARE FILED BY THE REVENUE AGAINST COMMON ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) 33 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 28.02.2019 FOR THE A . YS., 2009 - 10 , 2010 - 11 & 2011 - 12 IN RESTRICTING THE DISALLOWANCE TO 25 % OF PURCHASES AS AGAINST THE ENTIRE PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER. 2 ITA NO. 2716, 2717 & 2718/MUM/2019 M/S. SHRADHA APPARELS WORLDWIDE 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURER AND EXPORTER OF READYMADE GARMENT , FILED RETURN OF INCOME ON 30.09.2009 , 15.10.2010 AND 29.09.2011 DECLARING INCOME OF . 9,71,464 / - , . 6,87,434 / - & . 6,32,536/ - FOR TH E A.Y: 2009 - 10, A.Y. 2010 - 11 AND A.Y.2011 - 12 RESPECTIVELY, AND THE RETURNS WERE PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT (INV.,), MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALER S AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENTS WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.) , MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO AR E SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS PARTIES REFERRED IN ASSESSMENT ORDER. ASS ESSEE VIDE LETTER S DATED 03.03.2014 AND 10.03.2014 FURNISHED DELIVERY CHALLANS, PURCHASE ORDERS AND BANK STATEMENTS AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT ALL THE PURCHASES ARE GENUINE. 3 ITA NO. 2716, 2717 & 2718/MUM/2019 M/S. SHRADHA APPARELS WORLDWIDE HOWEVER, PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND NO EXPLANATION WAS OFFERED. 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUIN E AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESS EE DID NOT FURNISH ANY CONFIRMATION FROM THE PARTIES AND FAILED TO PRODUCE CONC RETE DOCUMENTARY EVIDENCES TO PROVE THE CLAIM OF THE ASSESSEE. ASSESSING OFFICER OBSER VED THAT THE NOTICE ISSUED U/S. 133(6) OF THE ACT TO THE PARTIES WERE RETURNED UNSERVED WIT H A REMARK LEFT AND THE ASSESSING OFFICER DEPUTED WARD INSPECTOR TO DELIVER THE LETTERS TO THE PARTIES AND WARD INSPECTOR REPORTED THAT THE PARTIES ARE FOUND TO BE NON - EXISTING. THEREFORE, ASSESSING OFFICER TREATED ENTIRE PURCHASES OF . 7,01,000 / - , . 2, 90,400 / - & . 19,44,456 / - FOR THE A.Y:2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12 RESPECTIVELY AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED TH E DISALLOWANCE TO AN EXTENT OF 25 % OF THE NON - GENUINE PURCHASES. 4 ITA NO. 2716, 2717 & 2718/MUM/2019 M/S. SHRADHA APPARELS WORLDWIDE 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, I PROCEED TO DISPOSE OFF THESE APPEALS ON HEARING THE LD. DR ON MERITS. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 6. HEARD LD. DR , PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WIT H REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND RESTRICTED THE DISALLOWANCE TO 25 % OF THE NON - GENUINE PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) FOR THE A.Y. 2009 - 10 OBSERVED AS UNDER: - 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE IMPUGNED ASSESSMENT ORDER, AND THE REMAND REPORT OF THE AO, ON THIS ISSUE. MY OBSERVATIONS AND FINDINGS ARE AS UNDER - 6.1 THERE IS NO DISPUTE THAT THOSE PARTIES WERE DECLARED AS HAWALA/SUSPICIOUS TRADERS BY THE SALES TAX DEPARTMENT WHO HAD ONLY ISSUED ACCOM MODATION ENTRIES WITHOUT ACTUAL SUPPLY OF MATERIALS. THOSE PARTIES WERE NOT FOUND TRACEABLE ON SPOT ENQUIRY. THE ASSESSEE COULD NOT FILE ANY CONFIRMATION FROM THEM OR FURNISH CURRENT WHEREABOUT. 6.2 HOWEVER , IT ALSO ON RECORD THAT THE ASSESSEE HAS PRODUCED INVOICES AND STOCK SHEET IN SUPPORT OF ITS CLAIM OF PURCHASE AND CONSUMPTION AND HAS FURNISHED BANK STATEMENT TO SHOW PAYMENTS TO THEM BY ACCOUNT PAYEE CHEQUES. 6.3 IT IS ALSO FOUND THAT THE AO HAS MADE AD DITION OF 100% OF BOGUS PURCHASE U/S 40A (3) HOLDING THAT THE ASSESSEE MUST HAVE MADE CASH PURCHASE OF THE MATERIALS. THE CONCLUSION OF THE AO 5 ITA NO. 2716, 2717 & 2718/MUM/2019 M/S. SHRADHA APPARELS WORLDWIDE SEEMS LOGICAL THAT THE ASSESSEE MUST HAVE PURCHASED MATERIAL FROM GREY MARKET BUT VIOLATION OF CONDITIONS U/S 40A (3) HAS NOT BEEN PROVED AND THE SAID SECTION CANNOT BE INVOKED ON ASSUMPTION. THEREFORE, IT IS HELD THAT THE AO IS NOT JUSTIFIED IN INVOKING SECTION 40A(3). 6.4 THE AO HAS FAILED TO CONDUCT IN - DEPTH ENQUIRY TO SHOW THAT THE CASH WAS WITHDRAWN FROM THE BANK ACCOUNTS OF THE SUPPLIERS AND HANDED OVER TO THE APPELLANT. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE APPELLANT HAS NOT PURCHASED ANY SUCH MATERIALS FROM ANY OTHER SOURCE. THEREFORE, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF 100 % OF PURCHASE AMOUNTS. 6.5 CONSIDERING THE ENTIRETY OF FACTS, THE ONLY CONCLUSION WHICH CAN BE DRAWN IS THAT THE ASSESSEE HAS PURCHASED MATERIAL FROM GREY MARKET AND OBTAINED BILLS FROM THE PARTIES IN QUESTION. OBVIOUSLY, NO ONE WILL DO SO UNLESS HE IS HAV ING A BENEFIT MUCH BIGGER THAN THE NORMAL G.P. IN THE BUSINESS. HENCE, THE ADDITIONAL PROFIT IS TO BE ASSESSED IN THE HANDS OF THE APPELLANT BECAUSE THE ACTUAL SOURCE, RATE AND QUANTITY IS NOT KNOWN AND WHAT IS THE LEVEL OF INFLATION IN THE ACCOMMODATIONS BILLS COULD NOT BE VERIFIED DUE TO NON - EXISTENCE OF THE BILL PROVIDERS. CONSIDERING THE ENTIRETY OF FACTS, I AM OF THE VIEW THAT 30% OF PURCHASE AMOUNTS SHOWN FROM THE HAWALA PARTIES NEE DS TO BE DISALLOWED WHICH WILL TAKE CARE OF PROFIT EMBEDDED IN THE TRA NSACTIONS. THEREFORE, THE DISALLOWANCE TO THE EXTENT OF 25% OF RS.7,01,000/ - = RS. 1,75,250/ - IS HEREBY SUSTAINED AND BALA NCE DISALLOWANCE OF RS.5,25,750/ - IS HEREBY DELETED. THE GROUNDS ARE PARTLY ALLOWED. SIMILARLY , THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 25% FOR A.Y. 2010 - 11 AND A.Y. 2011 - 12 ALSO. 7. ON A CAREFUL PERUSAL OF THE ORDER S OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE 6 ITA NO. 2716, 2717 & 2718/MUM/2019 M/S. SHRADHA APPARELS WORLDWIDE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 25 % OF THE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 13 . 11.2020 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD. S D / - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 13 / 11 / 2020 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM