KETAN ENTERPRISES, MUMBAI V. ITO WD 14(3)(2), MUMBAI

ITA 655/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3855 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: KETAN SANGHVI
• Section: 143(3); 133A; 147; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 653 /MUM/20 1 4 (ASSESSMENT YEAR: 200 4 - 05 ) ITA NO. : 654 /MUM/20 14 (ASSESSMENT YEAR: 200 5 - 06 ) ITA NO. : 655 /MUM/20 14 (ASSESSMENT YEAR: 200 6 - 07 ) KETAN ENTERPRISES, 591, 1 ST FLOOR, NARAYAN CHOWK, M J MARKET, MUMBA I - 400 002 PAN: AAEFK 6412 E VS INCOME TAX OFFICER WARD - 14(3)(2), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400 021 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KETAN SANGHVI RESPONDENT BY : SHRI A RAMCHANDRAN /DATE OF HEARING : 0 2 - 0 8 - 201 6 / DATE OF PRONOUNCEMENT : 0 2 - 0 8 - 2016 ORDER , : PER AMIT SHUKLA , J M: THE AFORESAID APPEAL S HA VE BEEN FILE D BY THE ASSESSEE AGAINST SEPARATE IMPUGNED ORDER DATE D 0 8 . 1 1 .201 3 , PASSED BY LD. CIT(A PPEALS ) - 25 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 200 4 - 05, 2005 - 06 AND 2006 - 07. SINCE COMMON ISSUES 2 ITA N O. : 653/MUM/2014 ITA NO. : 654/MUM/2014 ITA NO. : 655/MUM/2014 KETAN ENTERPRISES ARE INVOLVED ARISI NG OUT OF IDENTICAL SET OF FACTS, THEREFORE, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. IN ALL THE APPEALS THE ASSESSEE IS MAINLY AGGRIEVED BY THE CONFIRMATION OF ADDITION OF PURCHASE BY APPLYING GROSS PR OFIT RATE OF 10% . IN AY 2004 - 05, THE ADDITIONS SUSTAINED BY THE CIT(A) ON THIS SCORE IS RS.10,000/ - ; IN AY 2005 - 06 IT IS RS.50,250/ - ; AND IN AY 2006 - 07 THE DISALLOWANCE STANDS AT RS.50,234/ - . 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS PARTNE RSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN TEXTILE CLOTH. A SURVEY ACTION UNDER SECTION 133A WAS CONDUCTED IN THE FOLLOWING CASES: - 1. SHRI RAKESHKUMAR M GUPTA, PROP OF M/S MANOJ MILLS; 2. SMT. HEMA R. GUPTA, PROP. OF M/S SHREE RAM SALES & SYNTHETICS; 3. SHRI MOHIT R GUPTA, PROP. OF M/S ASTHA SILK INDUSTRIES. DURING THE SURVEY, IT WAS FOUND THAT THESE GROUP CONCERNS WERE ENGAGED IN ACTIVITIES OF ISSUING /PROVIDING ACCOMMODATION BILLS AND NO ACTUAL TRADING ACTIVITIES HAVE BEEN COND UCTED BY THESE PAR TIES AND ALSO NO STOCK WAS FOUND. THE RELEVANT INFORMATION REGARDING SURVEY HAS BEEN INCORPORATED BY THE AO FROM PAGES 1 AND 2 OF THE ASSESSMENT ORDER. BASED ON THESE INFORMATIONS, THE ASSESSEES CASE WAS REOPENED UNDER SECTION 147 FOR AL L THE ABOVE IMPUGNED ASSESSMENT YEARS. IN THE REASONS RECORD ED, THE AO HAS POINTED OUT THAT ASSESSEE HAD MADE PURCHASES F R OM THESE ENTITIES IN DIFFERENT YEARS AND HENCE ASSESSEE WAS ALSO PARTY 3 ITA N O. : 653/MUM/2014 ITA NO. : 654/MUM/2014 ITA NO. : 655/MUM/2014 KETAN ENTERPRISES TO SUCH ACCOMMODATION ENTITIES . BEFORE THE AO, THE ASSESSEE IN SUPPORT OF PURCHASES MADE, VIDE ITS LETTER DATED 15.12.2010 FURNISHED ALL THE DETAILS , VIZ., COPIES OF PURCHASE INVOICE, DELIVERY CHALLAN, TRANSPORTATION RECEIPTS ISSUED BY THESE ENTITIES ETC ; BESIDES THIS, THE COPIES OF SALE INVOICE IN RESPECT OF GOODS SO LD OUT OF THE GOODS RECEIVED FROM THESE PERSONS WERE ALSO SUBMITTED TO PROVE THE LINKAGE AND GRIEVANCES OF THE ENTIRE TRANSACTIONS . THE AO, HOWEVER, AFTER TAKING NOTE OF VARIOUS INFORMATION RECEIVED DURING THE COURSE OF SURVEY AND ALSO VARIOUS STATEMENTS R ECORDED AT THAT TIME , HELD THAT, ACCOMMODATION BILL OF RS.1 LAKH IS TO ADDED BACK AS UNEXPLAINED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004 - 05 ; RS.5,02,501/ - FOR THE ASSESSMENT YEAR 2005 - 06 ; AND RS.5,02,342 FOR THE ASSESSMENT YEAR 2006 - 07. 5 . THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE GAMUT OF INFORMATION AS REPRODUCED BY THE AO AND ALSO THE MATERIAL PLACED AND SUBMISSIONS MADE BY THE ASSESSEE HELD THAT, THE ENTIRE PURCHASE CANNOT BE ADDED AND HELD THAT, 10% OF SUCH PURCHASES IN THE FORM O F GROSS PROFIT SHOULD BE ADDED. THE RELEVANT OBSERVATION AND FINDING OF THE CIT(A) READS AS UNDER: - 6. I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS OF THE APPELLANT AND THE FACTS AND CIRCUMSTANCES OF THE CASE. ON PLAIN READING OF THE ASSESSMEN T ORDER, I FIND THAT THE AO HAS BASICALLY RELIED ON THE STATEMENTS RECORDED OF SHRI RAKESHKUMAR M GUPTA & OTHERS DURING THE COURSE OF SURVEY ACTION U/S 133A AND SUBSEQUENTLY RE - AFFIRMED ON OATH U/S 131 OF THE ACT, TO MAKE ADDITIONS IN HANDS OF PURCHASER PA RTY 4 ITA N O. : 653/MUM/2014 ITA NO. : 654/MUM/2014 ITA NO. : 655/MUM/2014 KETAN ENTERPRISES I.E. THE APPELLANT IN THIS CASE. I FURTHER OBSERVE THAT THE APPELLANT HAS SUBMITTED DURING ASSESSMENT PROCEEDINGS, THE COPY OF INVOICE SENT TO PROCESSOR OUT OF MATERIAL RECEIVED FROM GUPTA PARTY AND COPIES OF SALES INVOICE IN RESPECT OF GOODS SOLD OUT OF GOODS RECEIVED FORM PROCESSOR, AS STATED IN PARA 11 OF THE ASSESSMENT ORDER. CONSIDERING THE SAME, IT HAS TO BE ACCEPTED THAT THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, AND WHEN THE SALE OF APPELLANT IS NOT DISPUTED, THE ADDITIONS OF ENTIRE ALLEGED PURCHASES IS ALSO NOT JUSTIFIED. 6.1 LOOKING AT THE FACTS AND CIRCUMSTANCES OF THE CASE AS A WHOLE, I AM OF THE CONSIDERED VIEW THAT THE CAUSE OF JUSTICE WOULD BE MET BY MAKING ADDITION AT 10% OF SUCH PURCHASES IN ORDER TO FILL THE GAP DIFFERENC E OF GP FOR THE ALLEGED PURCHASES AS WELL AS PLUG ANY LEAKAGE OF REVENUE. THE AO HAS MADE ADDITIONS OF ALLEGED PURCHASES FROM GUPTA PARTIES AT RS.1,00,000/ - . HENCE, THE ADDITIONS IS RESTRICTED TO 10% OF SAID PURCHASES I.E. TO RS.10,000/ - AND HENCE THE APPE LLANT GETS RELIEF OF BALANCE RS.90,000/ - . 6 . BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL IN CASE OF SHRI JAY SH C V ASA IN ITA NO.656/MUM/2014 VIDE ORDER DATED 18.12.2015 , HAS ALLOWED THE ASSESSEES APPEAL EXACTLY ON SIMILAR FACTS AND CIRCUMSTANCES. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF CIT(A). 5 ITA N O. : 653/MUM/2014 ITA NO. : 654/MUM/2014 ITA NO. : 655/MUM/2014 KETAN ENTERPRISES 7 . AFTER CONSIDERING THE RELEVANT FINDING GIV E N IN THE IMPUGNED ORDER AS WELL AS MATERIAL PLACED BEFORE US, WE FIND THAT THE ENTIRE ADDITION MADE BY THE AO IS ON THE BAS IS OF INFORMATION RECEIVED DURING THE SURVEY OPERATIONS IN THE CASE OF THREE PERSONS / ENTITIES AS STATED ABOVE, WHICH WERE FOUND TO BE PROVIDING ACCOMMODATION BILLS. BEFORE THE AO AS WELL AS CIT(A), THE ASSESSEE HAS NOT ONLY FILED COPIES OF THE PURCHASE B ILLS BUT ALSO HAS FURNISHED DELIVERY CHALLAN, TRANSPORTATION RECEIPTS TO SHOW THAT THE GOODS AS SHOWN IN THE INVOICE HAS ACTUALLY BEEN THE DELIVERED AND ALSO PRODUCE THE COPY OF SALE INVOICE IN RESPECT OF THE GOODS SOLD OUT OF THE GOODS PURCHASE FROM THESE ENTITIES. ONCE THESE FACTS HAVE BEEN ACCEPTED AND HAD NOT BEEN CONTROVERTED OR REBUTTED , THEN SIMPLY RELYING UPON THE INFORMATION IN THE SURVEY WOULD NOT BE SUFFICIENT. THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDING TO THIS EFFECT WHICH HAS BEEN NOTED BY US IN THE FOREGOING PARAGRAPH . ONCE, THE PURCHASE A M OUNT IS FLOWING FROM THE SOURCES SHOWN/ GIVEN IN THE BOOKS OF ACCOUNT AND IT HAS ALSO BEEN ADMITTED THAT SALE HAVE ALSO BEEN EFFECTED FROM SUCH PURCHASES WHICH ARE REFLECTED IN THE BOOKS OF ACCOUNTS, THEN WE DO NOT FIND ANY REASON TO MAKE FURTHER ADDITION OF GROSS PROFIT OF 10% , BECAUSE ALREADY A GROSS PROFIT ON SUCH PURCHASE AND SALE HAS BEEN SHOWN BY THE ASSESSEE WHICH HA S BEEN SUBJECTED TO TAX. ONCE THE PURCHASES DEBITED ARE REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS AND HAVE BEEN MADE FROM THE SOURCE S OF DISCLOSED AND THEREAFTER SALE HAS BEEN MADE WHICH HAS BEEN SHOWN ON THE CREDIT SIDE OF THE T RADING A CCOUNT, THEN THE BALANCING FIGURE OF GROSS PROFIT ALONE IS THE CONSIDERATION OF TAXABILITY WHICH HERE IN THIS CASE HAS ALREADY BEEN FACTORED INTO. THUS, ANY ADDITION, OVER AND 6 ITA N O. : 653/MUM/2014 ITA NO. : 654/MUM/2014 ITA NO. : 655/MUM/2014 KETAN ENTERPRISES ABOVE CAN NOT BE MADE , UNLESS IT IS PROVED THAT THE PURCHASE OF GOODS HAVE NOT BEEN ACTUALLY DELIVERED OR THE AMOUNT OF THE PURCHASE OR PURCHASE BILL HAS BEEN INF L A TED BY CIRCUITOUS OF A CCOMMODATION BILLS . I T IS ONLY IN CASE OF LATER, THAT IS, INFLATION OF AMOUNT OF PURCHASE BILL , THE GROSS PROFIT RATE CAN BE ADOPTED FOR THE MAKING THE ADDITION. HENCE, IT IS NOT THE CASE OF THE REVENUE FOR EITHER OF THE CIRCUMSTANCES, ACCORDINGLY, THE ADD ITION SUSTAINED ON ACCOUNT OF GP @ 10% IS DIRECTED TO BE DELETED IN ALL THE THREE YEARS . 8 . RESULTANTLY, ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST, 2016 . SD/ - SD/ - ( ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 2 ND AUGUST , 2016 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3 ) THE C IT 25 , MUMBAI . 4 ) THE C IT IX , MUMBAI 5 ) , , / THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS