ZINC CLOTHING PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX WRD-13(3)(2), MUMBAI

ITA 5074/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8053 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 27-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Opportunity of cross examination; Accommodation entries; Reason to believe
• Section: 143(1); 148

Judgement Text

IN THE I NCOME TAX APPELLATE TRIBUNALG BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH, JM I.T.A. NO .5074 /M/201 7 (ASSESSMENT YEAR : 2011 - 12 ) ZINC CLOTHING P. LTD. OFFICE NO. 5,6,7, GULAM MOHHAMMAD CHAWAL PLOT NO.08, KHOTWADI, SANTACRUZ, (W), MUMBAI - 400054 . VS. DY. COMMISSIONER OF INCOME TAX, WARD - 13(3)(2) ROOM NO. 229, AAYKAR BHAWAN, MK ROAD, MUMBAI. ./ ./ PAN/GIR NO. : AAACZ 4099 F (APPELLANT ) .. (RESPONDENT ) DATE OF HEARING : 04 . 12 .2018 DATE OF PRONOUNCEMENT : 20. 12. 2018 O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED PRESENT APPEAL AGAINST THE ORDER DATED 02 .0 5 .2017 PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS) - 21 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2011 - 12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE RE - OPENING OF THE ASSESSMENT MADE ON ISSUING THE NOTICE U/S 148 WITHOUT APPRECIATING THAT THERE IS NO REASON TO BELIEVE OF ESCAPEMENT OF INCOME, WITHOUT FRESH TANGIBL E MATERIAL AND WITHOUT INDEPENDENT APPLICATION OF JUDICIAL MIND; 2.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF PURCHASE MADE FROM THE PARTIES DECLARED AS NON - GENUINE BY THE SALES TAX DEPAR TMENT ON ESTIMATING THE INFLATION OF PURCHASE @ 12.50% OF RS.47,24,555/ - ; ASSESSEE BY: SHRI PRAKASH G. JHUNJHUNWALA DEPARTMENT BY: SHRI CHAUDHARY ARUN KUMAR SINGH ITA. NO. 5074/M/2017 A.Y. 2011 - 12 2 3.0 THE LD CIT(A), BEFORE SUSTAINING THE ADDITION OF PURCHASE @ 12,50% ON ALLEGED BOGUS PURCHASE, ERRED IN IGNORING ME UNDERSTATED VITAL FACTS, BEING; A) THE ENTIRE ADDITI ON HAD BEEN MADE SOLELY ON THE BASIS OF AN INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT; B) THE APPELLANT FILED ON RECORD VARIOUS DOCUMENTS SUCH AS PURCHASE BILLS, CORRESPONDING SALE BILLS, QUANTITY TALLY, STOCK REGISTER, BANK STATEMENTS, ETC AND NO DEFECTS WAS POINTED BY LD. AO; C) THE APPELLANT MADE THE ENTIRE PAYMENTS FOR DISPUTED PURCHASE THROUGH BANKING CHANNEL BY A/C PAYEE CHEQUES D) THE LD. AO INSPITE OF WRITTEN REQUEST, DID NOT PROVIDE A COPY OF A DVERSE PIECE OF EVIDENCE/STATEMENT TO THE APPELLANT FOR CONFRONTATION AND REBUTTAL; E) THE GENERAL STATEMENT OF 3 RD P ARTIES RECORDED AT BA CK OF THE APPELLANT WITHOUT ALLOWING AN OPPORTUNITY OF CROSS EXAMINATION USED AGAINST THE APPELLANT IS ERRONEOUS; 4.0 WITHOUT PREJUDICE, AN ALTERNATE PRAYER IS MADE TO RESTRICT THE DISALLOWANCE @ 5% OF ALLEGED NON - GENUINE PURCHASE SINCE NORMAL PROFITS CORRESPONDING TO DISPUTED PURCHASE HAVE ALREADY BEEN OFFERED TO TAX. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y.2011 - 12 ON 09 .09.20 11 DECLARING TOTAL I NCOME TO THE TUNE OF RS.40,56,020 / - .THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 20.01.2012 . THEREAFTER, THE CASE WAS REOPENED UPON THE INFORMATION RECEIVED BY DGI T (INV.), MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE TOOK THE ACCOMMODATION ENTRIES FROM 17 PARTIES WHOSE NAMES WERE LISTED AT THE WEBSITE OF THE SALES TAX DEPARTMENT OF MAHARASHTRA TOTAL IN SUM OF RS.3,77,96,442/ - . THEREAFTER, THE NOTICE WAS GIVEN AND THE AO RAISED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE OF RS.3,77,96,442/ - TOTAL TO THE TUNE OF RS.47,24,555/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ITA. NO. 5074/M/2017 A.Y. 2011 - 12 3 ISSUE NO.1 4. AT THE TIME OF ARGUMENT, THIS ISSUES HAS NOT BEEN PRESSED B Y THE ASSESSEE, THEREFORE, THIS ISSUES IS BEING DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED . ISSUE NO.2 , 3, & 4 5 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE CASE OF THE ASSESSEE WAS REOPENED UPON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENTR Y WITHOUT ACTUAL DELIVERY FROM 17PARTIES MENTIONED BELOW: - SR.NO. NAME OF THE PARTY AMOUNT OF TRANSACTION (IN RS.) 1 DONEAR TRADING PRIVATE LIMITED 9,785,920 2 SRISHTI MERCANTILE PRIVATE LIMITED 2,117813 3 LINUX SALES AGENCY PRIVATE LIMITED 3,918,671 4 KAMLESH TRADING CO 4,846,219 5 DEEP ENTERPRISES 817,670 6 PAYAL ENTERPRISE 829,216 7 VARDHMAN TRADERS 979,201 8 REANNEX IMPEX PRIVATE LIMITED 714,993 9 KHIMSAR IMPEX PRIVATE LTD 447,581 10 AADESHWAR ENTERPRISES 787,394 11 PRATIK ENTERPRISES 1,166,062 12 ADINATH ENTERPRISES 1,568,370 13 TIRUPATI ENTERPRISE 1,639,147 14 ASHTAVINAYAK TRADING CO. 1,652,906 15 MANA TRADERS 1,805,061 16 JAINEX TRADERS PRIVATE LIMITED 1,923,750 17 DIPALI ENTERPRISE 2,796,468 TOTAL 3,77,96,442/ - ITA. NO. 5074/M/2017 A.Y. 2011 - 12 4 THE ASSESSING OFFICER RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE AND IN APPEAL THE CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE GP RATIO IN THE YEAR IN QUESTION IN HIS BUSINESS IS @ 5.10%, THEREFORE, ASSESSING THE PROFIT RATIO @ 12.5% BY THE CIT(A) IS VERY HIGH, THEREFORE, THE SAME IS LIABLE TO BE REDUCED IN ACCORDANCE WITH THE BUSINESS OF THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, THE LD. REPRESENTATIV E OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) (HIGH COURT) AND THE CIT VS.NIKUNJ EXIMPT ENTERPRISES (P) LTD. (2013) 216 216 TAXMAN 171 (BOM) AND OTHER CASES& DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC). HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT (A) IN QUESTION. IN THE INSTANT CASE, NO DOUBT AFTER THE RECEIPT OF THE INTIMATION FROM SALES TAX AUTHORI TIES, THE AO ISSUED THE NOTICES TO THE RELEVANT PARTIES WHICH WERE NOT SERVED TO THEM. ASSESSEE FAILED TO PRODUCE THE PARTIES BEFORE THE AO. THE PURCHASES WERE NOT VERIFIABLE. THE SALE IS NO T DISPUTED. BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURER AND TRADER OF READYMADE SHIRTS. IN VIEW OF THE LAW SETTLED BY THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) (HIGH COURT), THE PROFIT RATIO EMBEDDED TO THE BOGUS PURCHASE IS LIAB LE TO BE ADDED TO THE INCOME OF THE ASSESSEE. THE GROSS PROFIT OF THE ASSESSEE IN THE A.Y. 2011 - 12 IS 5.10% AND IN THE A.Y. 2012 - 13 IS 9.57% AND IN THE A.Y. 2013 - 14 IS 11.13%. KEEPING IN VIEW OF THE GROSS PROFIT WHICH IS @ 5.10% IN THE YEAR UNDER CONSIDERATION AND IN VIEW OF THE NATURE OF THE BUSINESS AND FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, W E RESTRICT THE ADDITION TO THE EXTENT OF 7% OF THE BOGUS PURCHASE I.E. TO THE TUNE OF RS.3,77,96,442/ - . ACCORDINGLY, THESE ISSUES ARE DECIDED IN FAVOU R OF THE ASSESSEE AGAINST THE REVENUE. ITA. NO. 5074/M/2017 A.Y. 2011 - 12 5 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20. 12. 2018 . SD/ - SD/ - ( B. R. BASKARAN ) ( AMARJIT SINGH ) / ACCOUNTANT MEMBER / JUDICIALMEMBER MUMBAI; DATED : 20. 12. 2018 . VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PRIVATE SECRETARY , / ITAT, MUMBAI