KUMAR WIRE CLOTH MANUFACTURING CO. LTD, MUMBAI V. DCIT PANVEL CIRCLE, PANVEL

ITA 2804/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0065 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: ASHOK SUTHAR
• Keywords: Bogus purchase; Reasonable cause

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 2804 /MUM/ 2 017 (ASSESSMENT YEAR 20 11 - 12 ) M/S. KUMAR WIRE CLOTH MANUFACTURING CO. LTD. 29A, 1 ST FLOOR ABOVE BRAJMANDAL HALL DR. ATMARAM RANGNEKAR MARG, GIRGA UM, CHOWPATTY MUMBAI - 400 007. VS. DCIT PANVEL CIRCLE PANVEL DISTRICT RAIGAD ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACK1716E ASSESSEE BY SHRI ASHOK SUTHAR DEPARTMENT BY MS. N. HEMALATHA DATE OF HEARING 2 2 . 8 . 201 7 DATE OF PRONOUNCEMENT 22 . 8 . 2 01 7 O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.1.2016 PASSED BY THE LEARNED CIT(A) - 2, THANE AND IT RELAT ES TO A.Y. 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN PARTIALLY CONFIRMING THE ADDITION RELATING TO BOGUS PURCHASES. 2. THE APPEAL IS BARRED BY LIMITATION BY 40 DAYS. LEARNED AR SUBMITTED THAT THE ASSESSEE I S A SICK COMPANY AND FILED APPLICATION BEFORE BIFR . I T DOES NOT HAVE ANY EFFECTIVE EMPLOYEE AND HENCE PROMOTER DIRECTOR CO ULD NOT TAKE EFFECTIVE STEPS TO PURSUE THE ORDER PASSED BY THE LEARNED CIT(A). ACCORDINGLY, IT WAS SUBMITTED THAT THE APPEAL FILED BELATEDLY BEFORE THE TRIBUNAL WAS DUE TO GREATER HARDSHIP FACED BY THE ASSESSEE. ACCORDINGLY, HE SUBMITTED THAT THE MARGINAL DELAY OF 40 DAYS IN FILING THE APPEAL BE CONDONED. 3. I HEARD LEARNED D R ON THIS PRELIMINARY ISSUE . HAVING REGARD TO THE SUBMISSIONS MADE IN THE PETITION FILED BY THE ASSESSEE, I AM OF THE VIEW THAT M/S. KUMAR WIRE CLOTH MANUFACTURING CO. LTD. 2 THERE WAS REASONABLE CAUSE IN FILING THE APPEAL BELATED LY BEFORE THE T RIBUNAL. ACCORDINGLY, I CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 4. LEARNED AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SS WIRE CLOTH. THE ASSESSEE HAS DECLARED NET LOSS OF ` 27.32 LAKHS ON GROSS TURNOVER OF ` 146.82 LAKHS. BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, THE ASSESSING OFFICER TOOK THE VIEW THAT PURCHASE OF ` 50.71 LAKHS MADE BY THE ASSESSEE FROM M/S. HPL MULTI TRADE PVT. LTD. IS BOGUS IN NATURE AND ACCORDINGLY DIS ALLOWED ENTIRE AMOUNT OF PURCHASE. 5. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS PROVED THAT THE GOODS PURCHASE D ( OF ` 50.71 LAKHS ) FROM M/S. HPL MULTI TRADE PVT. LTD. HAS BEEN SOLD FOR A SUM OF ` 52.24 LAKHS. A C CORDINGLY, HE SUBMITTED T HAT THE ASSESSEE HAS MADE ONE TO ONE RECONCILIATION OF PURCHASE S AND SALES. HE SUBMITTED THAT THE ASSESSEE - COMPANY HAS INCURRED HUGE LOSSES AND HENCE IT HAS FILED PETITION BEFORE THE BIFR . ACCORDINGLY HE SUBMITTED THERE WAS NO NECESSITY OR INCENTIVE FOR THE ASSESSEE TO B OOK BOGUS PURCHASES , AS NO TAX BENEFIT W OULD BE DERIVED BY THE ASSESSEE. LEARNED AR SUBMITTED THAT THE LEARNED CIT(A), WITHOUT CONSIDERING THE CONTENTION S OF THE ASSESSEE, DETERMINED GROSS PROFIT RATE @ 2.49% AND APPLIED THE SAME ON THE ENTIRE AMOUNT OF G ROSS RECEIPTS. IN THIS PROCESS, HE HAS SUSTAINED THE ADDITION TO THE EXTENT OF ` 30.98 LAKHS. HE SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN APPLYING THE ABOVE SAID GP RATE ON ENTIRE AMOUNT OF SAL ES , WHEN THE AMOUNT IN DISPUTE WAS WITH REGARD TO PURCHASE OF ` 50.71 LAKHS. ACCORDINGLY HE PRAYED THAT THE ENTIRE ADDITION SHOULD BE DELETED. 6. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE LEARNED CIT(A). 7. HAVING HEARD THE RIVAL SUBMISSIONS , I AM OF THE VIEW THAT THERE IS MERIT IN THE CONTENTION S OF THE ASSESSEE THAT THE LEARNED CIT(A) SHOULD HAVE M/S. KUMAR WIRE CLOTH MANUFACTURING CO. LTD. 3 ADDRESSED THE ISSUE RELATING TO BOGUS PURCHASES AND SHOULD NOT HAVE APPLIED UNIFORM GP ON ALL THE RECEIPTS INCLUDING SALES RELATED TO GENUINE PURC HASES. HOWEVER, I NOTICED FROM THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO PROVE THE GENUINENESS OF THE PURCHASES. AT THE SAME TIME, IT IS ALSO THE FACT THAT THE ASSESSEE IS ABLE TO RECONCILE PURCHASE S WITH SALES. IT IS IN THE CO MMON UNDERSTANDING THAT A PRODUCT CANNOT BE SOLD WITHOUT ACTUALLY PURCHASING THE SAME. UNDER THESE SET OF FACTS, THE POSSIBLE VIEW IS THAT THE ASSESSEE COULD HAVE SOURCE D THE MATERIAL FROM THE GREY MARKET AT A LOWER RATE. ACCORDINGLY, I AM OF THE VIEW THAT THE PROFIT THAT WOULD HAVE BEEN MADE BY THE ASSESSEE BY PURCHASING MATERIAL FROM THE GREY MARKET SHOULD HAVE BEEN SUSTAINED BY THE LEARNED CIT(A). HENCE, ON CONS PECT US OF THE MATTER, I AM OF THE VIEW THAT THE PROFIT THAT WOULD HAVE BEEN MADE BY THE ASSESS EE FROM THE ALLEGED BOGUS PURCHASE S MAY BE ESTIMAT ED AT 12 .5% OF THE VALUE OF IMPUGNED PURCHASES AND THE SAME MAY BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND THE SAME WOULD MEET THE ENDS OF JUSTICE . ACCORDINGLY, I SET ASIDE THE ORDER PASSED BY THE LEA RNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO SUSTAIN THE ADDITION TO THE EXTENT OF 12.5% O F THE VALUE OF ALLEGED BOGUS PURCHASES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 2 . 8 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 2 2 / 8 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. TH E RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI