KRISHNA APPLIANCES, THANE V. ITO WD 4(2), THANE

ITA 6821/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0962 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 21-11-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: STAM C AGRAWAL
• Keywords: Bogus purchase

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6821 /MUM/ 2016 (ASSESSMENT YEAR 20 1 1 - 1 2 ) M/S. KRISHNA APPLIANCES GALA NO. 7 & 8 KUMAVAT INDUSTRIAL ESTATE BILAL PADA, GOLHIVIRA VASAI EAST THANE, MAHARASHTR A. ITO 4(2) THANE AASHAR IT PARK, WAGLE ESTATE A WING, R.NO. 162 THANE - 400604. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAKFK1746P ASSESSEE BY SHRI STAM C. AGRAWAL DEPARTMENT BY MS. BEENA SANTOSH DATE OF HEARING 1 . 5. 201 7 DATE OF PRONOUNCEMENT 1 . 5 . 201 7 O R D E R THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18 - 08 - 2016 PASSED BY LD CIT(A) - 3, THANE AND IT RELATES TO THE ASSESSMENT YEAR 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.5,34,009/ - ON ACCOUNT OF BOGUS PURCHASES. 2. THE ASSESSEE IS MANUFACTURING HOME APPLIANCES LIKE NON - STICK COOK WEARS ETC. THE REVENUE GOT INFORMATION FROM THE SALES TAX DEPARTMENT THAT CERTAIN DEALERS ARE PROVIDING ONLY ACCOMMODATION BILLS WITH OUT ACTUALLY SUPPLYING THE MATERIALS. THE INFORMATION SUPPLIED BY THE SALES TAX DEPARTMENT ALSO PROVIDED THE DETAILS OF BENEFICIARIES. THE ASSESSEE WAS NAMED AS ONE OF THE BENEFICIARIES IN RESPECT OF BILLS GIVEN BY M/S HETA SALES P LTD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PURCHASED MATERIALS WORTH RS.5,34,009/ - FROM THE ABOVE SAID PARTY. THE AO ADDED THE ABOVE SAID AMOUNT TO THE TOTAL INCOME M/S. KRISHNA APPLIANCES 2 OF THE ASSESSEE BY DISALLOWING THE PURCHASES. THE LD CIT(A) ALSO CONFIRMED THE ADDITION AND HE NCE THE ASSESSEE HAS FILED THIS APPEAL. 3. AT THE TIME OF HEARING, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS PURCHASED SPARE PARTS FROM THE ABOVE SAID CONCERN AND CONSUMED THE SAME IN PRODUCING THE HOME APPLIANCES. HE SUBMITTED THAT THE MATERIALS WE RE SUPPLIED TO ITS DOORSTEPS AND THE PAYMENTS HAVE BEEN MADE BY WAY OF CHEQUE. HE SUBMITTED THAT THERE IS NO EVIDENCE TO SHOW THAT THE MONEY HAS FLOWN BACK TO THE ASSESSEE. HE SUBMITTED THAT THE GROSS PROFIT RATIO DECLARED BY THE ASSESSEE WAS 18.89% DURI NG THE YEAR UNDER CONSIDERATION AND THE SAME IS COMPARABLE TO 17.89% AND 19.74% DECLARED BY THE ASSESSEE IN THE SUCCEEDING TWO YEARS. HE FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT HAVE PRODUCED THE GOODS WITHOUT USING THE MATERIALS. HE SUBMITTED THAT THE CONCERNED DEALER HAS GIVEN SUCH TYPE OF STATEMENT TO SUIT ITS OWN CONVENIENCE AND HENCE THE SAME SHOULD NOT HAVE BEEN RELIED UPON BY THE TAX AUTHORITIES. ACCORDINGLY HE SUBMITTED THAT THERE IS NO JUSTIFICATION FOR TREATING THE ENTIRE AMOUNT OF PURCHAS ES AS BOGUS, MERELY BY PLACING RELIANCE ON THE GENERAL INFORMATION PROVIDED BY THE SALES TAX DEPARTMENT. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE INSPECTOR OF INCOME TAX HAS CONDUCTED INDEPENDENT ENQUIRIES AND HAVE GIVEN REPORT SUPPORTING THE VIEW TAKEN BY THE SALES TAX DEPARTMENT. SHE FURTHER SUBMITTED THAT THE ABOVE SAID SUPPLIER HAS CONFESSED BEFORE THE SALES TAX DEPARTMENT THAT IT HAS GIVEN ONLY ACCOMMODATION BILLS. ACCORDINGLY SHE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO. 5. I HEARD THE PARTIES AND PERUSED THE RECORD. I NOTICE THAT THE ASSESSING OFFICER HAS MAINLY PLACED RELIANCE ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT TO TAKE ADVERSE DECISION AGAINST THE ASSESSEE. THOUGH THE M/S. KRISHNA APPLIANCES 3 ASSESSING OFFICER STATES THAT AN INDEPENDENT ENQUIRY WAS CONDUCTED BY HIS INSPECTOR, HE HAS NOT DISCUSSED ABOUT THE NATURE AND RESULTS OF ENQUIRY NOR DID HE CONFRONT THE SAME WITH THE ASSESSEE. THE LD A.R SUBMITTED THAT THE YEAR UNDER CONSIDERA TION WAS THE FIRST YEAR OF OPERATION AND THE GROSS PROFIT RATIO DECLARED BY THE ASSESSEE WAS COMPARABLE WITH THE SUCCEEDING YEARS. THE ASSESSEE HAS GIVEN THE G.P RATIO WORKINGS IN PAGE NO.10 OF PAPER BOOK. ACCORDINGLY THE LD A.R SUBMITTED THAT THE ADDITI ON MADE BY THE AO WOULD INCREASE THE G.P RATIO ABNORMALLY. I FIND MERIT IN THE SAID CONTENTIONS. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER NOR DID IT HAVE PROOF FOR TRANSPORTATION OF MATERIALS. THE ASSESSEE ALSO COULD NOT GE T ANY CONFIRMATION LETTER FROM THE SUPPLIER NOT DID IT PRODUCE THE SUPPLIER BEFORE THE AO. HENCE, I AM OF THE VIEW THAT THE ASSESSEE HAS NOT CONCLUSIVELY PROVED THE GENUINENESS OF THE PURCHASES. AT THE SAME TIME, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSEE COULD NOT HAVE PRODUCED THE GOODS WITHOUT USING THE MATERIALS. ONE POSSIBILITY IS THAT THE ASSESSEE COULD HAVE PURCHASED THE GOODS FROM GREY MARKET AT A LOWER RATE, THOUGH THERE IS NO FOOL PROOF EVIDENCE TO SUPPORT SUCH A CONCLU SION. UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THIS ISSUE MAY BE SETTLED BY ESTIMATING THE PROFIT THE ASSESSEE COULD HAVE MADE FROM SUCH KIND OF PURCHASES. ACCORDINGLY I MODIFY THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITI ON TO 12.5% OF THE IMPUGNED PURCHASE AMOUNT IN ORDER TO TAKE CARE OF DEFICIENCIES, IF ANY. IN MY VIEW, THE SAME WOULD PUT THIS ISSUE AT REST. I ORDER ACCORDINGLY. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 1 . 5 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 1 / 5 / 20 1 7 M/S. KRISHNA APPLIANCES 4 COPY OF THE ORDER FORWARDED T O : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI