Golden Time Watches (I) Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-2(1)(1), Ahmedabad

ITA 2832/AHD/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2380 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Bogus purchase; Business income; Principle of natural justice
• Section: 143(3); 133(6)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER &SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO. 2832/AHD/2016 ( / ASSESSMENT YEAR:2012-13) GOLDEN TIME WATCHES (I) PVT. LTD. AMAR COMPLEX, SWASTIK CHAR RASTA, NAVRANGPURA, AHMEDABAD-380009 / VS. ITO WARD-2(1)(1) AHMEDABAD ./ ./PAN/GIR NO. : AAD CG3 553 C ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI TUSHAR HEMANI, A.R. / RESPONDENT BY: SHRI LALIT P. JAIN, SR. DR !' /DATE OFHEARING 06/06/2019 #$!' / DATE OF PRONOUNCEMENT 24/06/2019 %& /O R D E R PER AMARJIT SINGH - AM: THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2012-13, ARISE FROM ORDER OF THE CIT(A)-2, AHMEDABAD DATED 19.05.2016, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. IN THIS CASE RETURN OF INCOME DECLARING INCOME O F RS. 15,75,868/- WAS FILED ON 28.09.2012. SUBSEQUENTLY THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING NOTICE U/S. 143(2) OF THE ACT ON 07.08.2012. THE AS SESSEE COMPANY IS RUNNING RETAIL BUSINESS IN WRIST WATCHES, CLOCKS, JEWELLERY AND ACCESSORIES. DURING THE YEAR ITA NO. 2832/AHD/2016 A.Y. 2012-13 2 UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS REPOR TED TURNOVER OF RS. 11,47,96,433/- AND NET PROFIT OF RS. 14,71,136/-. DURING THE COURSE OF ASSESSMENT THE AO NOTICED THA T ASSESSEE HAS DEBITED A SUM OF RS. 13,60,298/- AS BUSINESS PROMOTION EXPENS ES UNDER THE HEAD SELLING AND DISTRIBUTION EXPENSES. OUT OF THESE EXPENSES THE A O NOTICED THAT ASSESSEE HAS CLAIMED EXPENSES INCURRED TOWARDS PURCHASE OF EXECU TIVE DIARIES FROM M/S. KUSH TRADING COMPANY TO THE AMOUNT OF RS. 7,49,931/- AND FROM M/S. AMISHA ENTERPRISES TO THE AMOUNT OF RS. 4,20,167/- FOR DIST RIBUTING TO ITS CUSTOMERS. IN THIS REGARD, THE ASSESSEE COMPANY HAS SUBMITTED THREE PU RCHASE BILLS OF M/S. KUSH TRADING CO. WHEREAS NO PURCHASE BILL WAS SUBMITTED I N RESPECT OF PURCHASES MADE FROM M/S. AMISHA ENTERPRISES. TO PROVE THE GENUINENE SS OF SUCH EXPENSES THE AO HAS ISSUED NOTICES U/S. 133(6) OF THE ACT BOTH TO M /S. KUSH TRADING COMPANY AND M/S. AMISHA TRADING COMPANY. IN RESPONSE TO NOTICES U/S. 133(6) OF THE ACT M/S. KUSH TRADING COMPANY RESPONDED THAT THEY HAD SOLD C OTTON CLOTH TO THE ASSESSEE TO THE AMOUNT OF RS. 4,20,168/- ONLY. IN RESPECT O F M/S. AMISHA ENTERPRISES THE AO HAS NOT RECEIVED ANY REPLY IN RESPECT OF THE NOT ICE U/S. 133(6) OF THE ACT ISSUED TO SUCH PARTY. AFTER CONSIDERING THE FACT THAT M/S . KUSH TRADING COMPANY HAD NOT SOLD ANY DIARIES BUT SOLD COTTON CLOTHS TO THE ASSE SSEE FOR THE AMOUNT OF RS. 4,20,168/- AND NOT RECEIVING ANY REPLY FROM M/S. AM ISHA ENTERPRISES, THE AO HAS DISALLOWED THE CLAIM OF EXPENSES OF RS. 11,71,430/- CLAIMED UNDER THE HEAD BUSINESS PROMOTION EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED ASSESSEE HAS FILED BEFORE THE LD. CIT(A) WHO HAS DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE DISALLOWAN CE MADE BY THE AO. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE U S THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING INFORMATION AND COP IES OF SUBMISSION FURNISHED BEFORE THE AO AND LD. CIT(A) DURING THE COURSE OF ASS ESSMENT AND APPELLATE PROCEEDING. THE LD. COUNSEL HAS CONTENDED THAT ASSE SSEE PURCHASES DIARIES, ITA NO. 2832/AHD/2016 A.Y. 2012-13 3 CALENDARS, PENS ETC. AND DISTRIBUTE THE SAME TO THE CUSTOMER TO PROMOTE ITS BUSINESS. HE HAS FURTHER CONTENDED THAT AO HAS NOT PROVIDED A NY COPY OF REPLY FURNISHED BY M/S. KUSH TRADING COMPANY IN RESPONSE TO NOTICE U/S . 133(6) ISSUED BY THE AO AND HENCE NO COGNIZANT OF SUCH REPLY COULD HAVE BEE N TAKEN BY THE AO SINCE THAT TANTAMOUNT TO VIOLATIONS OF PRINCIPLES OF NATURAL J USTICE. HE HAS FURTHER CONTENDED THAT AS REGARD M/S. AMISHA ENTERPRISES AO, THE CIT(A ) HAS FAILED TO APPRECIATE THAT IT IS QUITE POSSIBLE THAT THE SAID PARTY MIGHT HAVE SHIFTED TO SOME OTHER PLACE SINCE TRANSACTION TOOK PLACE WITH THEM IN F.Y. 2011 -12 WHEREAS ENQUIRY WAS CARRIED OUT IN THE YEAR 2015 AND ASSESSEE DID NOT H AVE ANY CONTROL OVER SUCH SITUATION. 4. ON THE OTHER HAND THE LD. DR VEHEMENTLY CONTENDED THAT ASSESSEE HAS FAILED TO SUBSTANTIATE THE GENUINENESS OF THE EXPENDITURE AND IT IS CLEARLY ESTABLISHED FROM THE FINDING OF AO AND CIT(A) THAT CLAIM OF THE EXPEN DITURE IN RESPECT OF BUSINESS PROMOTION IN RESPECT OF AFORESAID TWO PARTIES WAS N OT GENUINE. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD CAREFULLY. THE LD. COUNSEL HAS ALSO REFERRED THE JUDICIAL PRONO UNCEMENT PERTAINING TO GANESH INDUSTRIES VS. ITO VIDE ITA NOS. 93 & 814/AHD/2011 AND NEHAL HASMUKHRAI GANDHI VS. DCIT VIDE ITA NO. 2578/AHD/2017. WE HAVE GONE THROUGH THE MATERIAL ON RECORD AND NO TICED THAT FACTS OF THE ABOVE CITED JUDICIAL PRONOUNCEMENT ARE PERTAINED TO BOGUS PURCHASES MADE IN HIGH QUANTUM IN THE GOODS TRADED WHEREAS, THE CASE OF T HE ASSESSEE IS DIFFERENT AS THE ISSUE IS PERTAINED TO THE CLAIM OF NON-TRADING ITEM OF BUSINESS AND PROMOTION EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. D URING THE YEAR UNDER CONSIDERATION THE TOTAL SALES OF THE ASSESSEE WAS S HOWN AT RS.11,47,96,433/- AND TOTAL PURCHASES WAS SHOWN AT RS. 10,04,37,745/-. T HERE WAS DISPUTE REGARDING GENUINENESS OF INDIRECT EXPENDITURE OF RS. 11,70,43 0/- AFFECTING THE NET PROFIT ITA NO. 2832/AHD/2016 A.Y. 2012-13 4 DURING THE YEAR UNDER CONSIDERATION. AFTER PERUSAL OF MATERIAL ON RECORD WE OBSERVE THAT THE AO HAS NEITHER CATEGORICALLY EXPLA INED THE CONTENTS OF THREE COPIES OF PURCHASE BILLS ISSUED BY M/S. KUSH TRADING COMPA NY NOR PROVIDED ANY COPY OF REPLY FURNISHED BY M/S. KUSH TRADING COMPANY TO THE ASSESSEE. THE AO HAS NOT SPECIFIED WHETHER OR NOT THE OTHER PARTY M/S. AMISH A ENTERPRISES WAS AVAILABLE AT THE GIVEN ADDRESS. IN RESPECT OF PURCHASES MADE FR OM M/S. AMISHA ENTERPRISES IT IS NOT CLEARLY MENTIONED IN THE ASSESSMENT ORDER WHETH ER THE SAID PARTY WAS AVAILABLE AT THE GIVEN ADDRESS OR NOT. IN THE LIGHT OF THE A FORESAID FACTS AND CIRCUMSTANCES WE RESTORE THIS MATTER TO THE FILE OF THE AO FOR DECID ING DENOVO AFTER PROVIDING ACCESS TO THE ASSESSEE OF THE INFORMATION COLLECTED FROM B OTH THE PARTIES AND AFTER CONSIDERING THE OPPOSITE MATERIALS TO BE PRODUCED B Y THE ASSESSEE. ACCORDINGLY, THIS MATTER IS RESTORED TO THE FILE OF THE AO FOR D ECIDING A FRESH AS DIRECTED ABOVE AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSE E. THEREAFTER, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. 6. SECOND GROUND OF APPEAL OF THE ASSESSEE IN CONFI RMING THE ADDITION OF RS. 27,94,869/- AGAINST THE ORDER OF CIT(A) ON ACCOUNT O F ESTIMATED GROSS PROFIT. IT IS NOTICED THAT ASSESSEE HAS INCORRECTLY FILED THIS GR OUND OF APPEAL AS THE LD. CIT(A) HAS VIDE PARA NO. 5.8 OF HIS ORDER HAS ALREADY DELE TED SUCH ADDITION. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS INFRUCTUOU S AND DISMISSED. 7. THIRD GROUND OF APPEAL OF THE ASSESSEE IS OF GENE RAL IN NATURE AGAINST THE ACTION OF THE LOWER AUTHORITY IN NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. THIS GROUND OF APPEAL IS NOT REQUIRED ANY ADJUDICATION A S WE HAVE RESTORED THE ISSUE IN APPEAL TO THE FILE OF THE AO FOR DECIDED AFRESH AFT ER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. ITA NO. 2832/AHD/2016 A.Y. 2012-13 5 8. GROUND NO. 4 REGARDING NOT LEVYING OF INTEREST U /S. 234A/B/C/D OF THE ACT HAS NO MERIT AS CHARGING OF INTEREST UNDER ABOVE SE CTIONS ARE MANDATORY AS PER THE PROVISION OF LAW. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD: DATED 24/06/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. % / ASSESSEE 3. '( ! )! / CONCERNED CIT 4. )! - / CIT (A) 5. *+, ! ( , ' ( , -.%'% / DR, ITAT, AHMEDABAD 6. ,/ 0 / GUARD FILE. BY ORDER / %& , 1 / - ' ( , -.%'% 2 1.DATE OF DICTATION ON 13.06.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 14.06.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 17.06.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 17.06.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 24.06.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24 .06.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 24/06/2019