MICHELE BOUTIQUE, MUMBAI V. ITO 12(2)(2), MUMBAI

ITA 5823/MUM/2014

• Counselvise Citation: 582319914 RSA 2014
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 16-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 148

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (ACCOUNTANT MEMBER . . , ./ I.T.A. NO S . 5822 AND 5823 / MUM/20 1 4 ( / ASSESSMENT YEAR : 2005 - 2006 AND 2006 - 07 ) MICHELE BOUTIQUE, SHOP NO.21, SHAH HOUSE, MANDLIK ROAD, COLABA, MUMBAI - 400039 . / VS. INCOME TAX OFFICER, 12(2)(2), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAGFM6861P / APPELLANT BY SHRI VIPUL J SHAH / RSPONDENT BY SHRI K P R R MURTY / DATE OF HEARING : 3.8 . 201 5 / DATE OF PRONOUNCEMENT : 3. 8. 201 5 / O R D E R PER B ENCH: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS PASSED BY THE LD.CIT(A) - 23, MUMBAI AND THEY RELATE TO THE ASSESSM ENT YEARS 2005 - 06 AND 2006 - 07. SINCE IDENTICAL ISSUES ARE URGED IN BOTH THE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE S OLITARY ISSUE URGED IN BOTH THESE APPEALS IS WHETHER THE L D.CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE TOWARDS BOGUS PURCHASE S . ITA NO. 5822 AND 5823 / MUM/20 14 2 3. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A DEALER IN READYMADE GARMENTS. THE ASSESSING OFFICER RECEIVED INFORMATION THAT THE ASSESSEE HAS MANAGED ACCOM MODATION BILLS FOR ACCO UNTING THE PURCHASES AND ACCORDINGLY, HE REOPENED THE ASSESSMENT OF BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION BY ISSUING NOTICE S UNDER SECTION 148 OF THE INCOME TAX ACT, 1961. THE AMOUNT OF ACCOMMODATION BILLS ALLEGED TO HAVE BE EN AVAIL ED BY THE ASSESSEE WAS RS.4,63,784/ - AND RS.10,09,934/ - RESPECTIVELY FOR THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07. 4. THESE BILLS HAVE BEEN PROVIDED BY A PERSON NAMED AS SHRI RAKESH KUMAR GUPTA. THE AO, BY PLACING RELIANCE ON THE STATEMENT RECORDED FROM SHRI RAKESH KUMAR GUPTA , DISALLOWED THE CLAIM OF PURCHASES TO THE EXTENT OF RS.4,63,784/ - AND RS.10,09,934/ - IN THE RELEVANT YEARS BY TREATING THE SAME AS BOGUS, SINCE THE ASSESSEE DID NOT APPEAR BEFORE HIM TO OFFER EXPLANAT ION. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT IT HAD PURCHASED THE MATERIALS FROM SMALL TIME MANUFACTURERS, JOB WORKERS AND LABOURERS LIVING IN SLUM AREAS . IT WAS SUBMITTED THAT THOSE PEOPLE DO NO T MAINTAIN BILLS AND HENCE THEY HAVE OBTAINED BILLS FROM SHRI RAKESH KUMAR GUPTA. IN SUPPORT OF THIS CONTENTION, T HE ASSESSEE ALSO FURNISHED AFFIDAVITS OBTAINED FROM CERTAIN PERSONS FROM WHOM THE GOODS WERE CLAIMED TO HAVE BEEN PURCHASED. HENCE, THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO BY DIRECT ING HIM TO ALLOW THE ASSESSEE TO CROSS - EXAMINE SHRI RAKESH KUMAR GUPTA. 6. IN THE REMAND PROCEEDINGS, SHRI RAKESH KUMAR GUPTA DID NOT APPEAR BEFORE THE AO BUT FILED A LETTER, WHEREIN HE STATED TH AT HE HAS ITA NO. 5822 AND 5823 / MUM/20 14 3 SUPPLIED GOODS TO THE ASSESSEE AND ALSO RECEIVED PAYMENT FROM IT. HOWEVER, THE AO DID NOT EXAMINE THE PERSONS WHO HAD F URNISH ED AFFIDAVITS CONFIRMING THE SUPPLY OF GOODS TO THE ASSESSEE BUT HELD THAT IT WAS AN AFTERTHOUGHT ON THE PART OF THE ASSES SEE TO FURNISH THESE AFFIDAVITS . ACCORDINGLY, THE AO STOOD BY THE ADDITION MADE BY HIM IN BOTH THE ASSESSMENT YEARS. THE LD. CIT(A) FURTHER NOTICED THAT THE ASSESSEE DID NOT FURNISH THE BOOKS OF ACCOUNT BEFORE THE AO, BUT CLAIMED THAT IT HAS LOST BOOKS OF ACCOUNT. THOUGH THE ASSESSEE FURNISHED A COPY OF FIR ISSUED BY THE COLABA POLICE STATION, THE SAID FIR DID NOT SPECIFY THE YEAR TO WHICH THE BOOKS PERTAINED TO. FURTHER THE LD CIT(A) ALSO NOTICED THAT THERE WAS CONTRADICTION WITH REGARD TO THE DATE O N WHICH THE BOOKS WERE CLAIMED TO HAVE BEEN LOST. HENCE THE LD CIT(A) TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASE CLAIM AND ACCORDINGLY CONFIRMED THE ADDITION MADE BY THE AO. AGGRIEVED BY THE ORDER OF LD.CIT(A) PASSED F OR BOTH THE ASSESSMENT YEARS, THE ASSESSEE HAS FILED THESE APPEALS. 7. I HAVE HEARD THE PARTIES AND PERUSED THE RECORD. IT IS NOW AN ADMITTED FACT THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. FURTHER, I NOTIC E THAT THERE IS CONTRADICTION BETWEEN THE ASSESSEES EXPLANATION AND THE LETTER WRITT EN BY RAKESH KUMAR GUPT A. THE ASSESSEE HAS CLAIMED THAT IT HAS PURCHASED GOODS, BEING READY MADE GARMENTS; FROM SMALL TIME MANUFACTURERS AND THOSE PEOPLE HAVE OBTAINED AC COMMODATION BILLS FROM RAKESH KUMAR GUPTA. HOWEVER, SHRI RAKESH KUMAR GUPTA, IN HIS LETTER WRITTEN TO THE ASSESSING OFFICER DURING THE COURSE OF REMAND PROCEEDINGS, HAS STATED THAT HE HAS SUPPLIED GOODS TO THE ASSESSEE AND RECEIVED THE PAYMENTS ALSO BY CR OSSED CHEQUES. SINCE THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT BY ITA NO. 5822 AND 5823 / MUM/20 14 4 CLAIMING THAT THEY HAVE BEEN LOST, THE PAYMENT DETAILS COULD NOT BE VERIFIED BY THE TAX AUTHORITIES. 8. THE LD A.R SUBMITTED THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WI THOUT PURCHASING IT AND HENCE THE LD CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE PURCHASES. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE TRADERS NORMALLY GET THESE KIND OF BOGUS BILLS WITHOUT RECEIVING GOODS IN ORDER TO REDUCE THE GROSS PROFIT. 9. AT THE TIME OF HEARING , THE LD A.R COULD NOT OFFER SATISFACTORY EXPLANATION WITH REGARD TO THE CONTRADICTION BETWEEN THE EXPLANATIONS FURNISHED BY THE ASSESSEE AND THE EXPLANATIONS GIVEN BY RAKESH KUMAR GUPTA IN HIS LETTER. HOWEVER I NOTICE THAT THE ASSE SSEE HAS FURNISHED AFFIDAVITS OBTAINED FROM SMALL TIME MANUFACTURERS TO SUBSTANTIATE THE CLAIM OF PURCHASES AND AS NOTICED EARLIER, THE ASSESSING OFFICER HAS REFUSED TO EXAMINE THE CONCERNED PERSONS BY HOLDING THAT IT WAS AN AFTERTHOUGHT ON THE PART OF THE ASSESSEE. 10. BE THAT AS IT MAY, AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE EFFECT OF THE ALLEGED BOGUS PURCHASES WOULD RESULT IN REDUCTION OF GROSS PROFIT ONLY. SINCE THE ASSESSEE HAS FURNISHED AFFIDAVITS TO SUPPORT THE CLAIM OF PUR CHASES AND SINCE THE AO HAS FAILED TO CONSIDER THE SAME IN THE REMAND PROCEEDINGS FOR THE REASONS FURNISHED BY HIM, I AM OF THE VIEW THAT THE ENTIRE AMOUNT OF PURCHASES CANNOT BE CONSIDERED TO BE BOGUS. AT THE SAME TIME, SINCE THE EXPLANATIONS FURNISHED B Y THE ASSESSEE IS IN CONTRADICTION WITH THE EXPLANATIONS GIVEN BY SHRI RAKESH KUMAR GUPTA AND FURTHER, SINCE THE ASSESSEE COULD NOT FURNISH THE BOOKS OF ACCOUNT, THE POSSIB ILITY OF INFLATING THE PURCHASE VALUES OR PART OF PURCHASE BILLS BEING BOGUS , COULD NOT BE RULED OUT. UNDER THESE SET OF ITA NO. 5822 AND 5823 / MUM/20 14 5 FACTS, I AM OF THE VIEW THAT THIS ISSUE CAN BE SET AT REST IN BOTH THE YEARS BY ESTIMATING THE ELEMENT OF INFLATION/ BOGUS PART. WHEN THE BENCH SUGGESTED THAT THE DISALLOWANCE MAY BE RESTRICTED TO 50% OF THE DISALLOWA NCE, THE LD A.R PRAYED THAT THE DISALLOWANCE MAY BE RESTRICTED TO 20%, WHILE THE LD D.R SUGGESTED FOR 50% DISALLOWANCE. CONSIDERING THE CONTENTIONS OF BOTH THE PARTIES, I AM OF THE VIEW THAT THIS MATTER WOULD MEET THE END S OF JUSTICE, IF THE DISALLOWANCE IS RESTRICTED TO 30% OF THE ALLEGED BOGUS PURCHASES IN BOTH THE YEARS. I ORDER ACCORDINGLY. THE ORDER OF LD CIT(A) ON THIS ISSUE STANDS MODIFIED IN BOTH THE YEARS AND THE AO IS DIRECTED TO SUSTAIN THE ADDITION TO THE EXTENT OF 30% OF ALLEGED BOGUS PURCHA SES. 11 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 3RD AUGUST 2015. 3 RD AUG , 2015 SD ( . . / B.R . BASKARAN) / ACCOUNTANT MEMBER MUMBAI: 3RD AUG , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPO NDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. ITA NO. 5822 AND 5823 / MUM/20 14 6 / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI