DCIT 10(3), MUMBAI V. JAKHARIA FABRICS P.LTD, MUMBAI

ITA 6851/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3062 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SONI
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Bogus purchase; Additional evidence; Accommodation entries
• Section: 143(3)

Judgement Text

1 I.T.A. NO.6851 /MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6851/MUM/2014 (ASSESSMENT YEAR : 2010-11) DY.CIT 10(3), MUMBAI VS M/S JAKARIA FABRICS PVT LTD B-2,605, MAN MANDIR SURAKSHA CHS NAHUR VILLAGE ROAD, NEAR SARVODAYA NAGAR, MULUND (W), MUMBAI 80. PAN : AABCJ8510G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI VIJAYKUMAR SONI RESPONDENT BY SHRI M SUBRAMANIAN DATE OF HEARING : 06-09-2016 DATE OF PRONOUNCEMENT : 21-09-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)[HEREINAFTER CA LLED CIT(A)] PASSED AGAINST THE ASSESSMENT ORDER U/S 143(3) DT 02-03-20 13 FOR A.Y. 2010-11 ON THE FOLLOWING GROUNDS: 1. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT OUT OF THE TOT AL BOGUS PURCHASES OF RS. 1,14,92,970/-, ONLY 17.5% BE TREATED AS BOGU S PURCHASES. 2 I.T.A. NO.6851 /MUM/2014 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT PROVIDING ANY OPPORTUNI TY TO THE AO AND ADDITIONAL EVIDENCE(S) WAS ADMITTED IN VIOLATION TO RULE 46A OF THE I.T. RULES. 3. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN APPLYING THE RATIO OF HON'B LE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS SIMIT P. SETH, 356 ITR 451(GUJ) AND THEREBY LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CASE WITH EVIDE NCE. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CASE WITH EVIDENCE THAT THE SAID PURCHASE ENTRIES WITH 8 PARTIES WERE NOT ACCOMMODATION ENTRIES. 2. DURING THE COURSE OF HEARING ASSESSEE FILED PETITIO N U/R 27 OF THE INCOME- TAX (APPELLATE TRIBUNAL) RULES, 1962 TO SUPPORT THE ORDER OF THE LD.CIT(A) ON THE FOLLOWING GROUNDS: I) THE ASSESSMENT ORDER IS INVALID AND BAD IN LAW, AS NO CROSS EXAMINATION HAS BEEN ALLOWED OF THE WITNESSES WHOSE STATEMENT HAS BEEN MADE THE BASIS OF THE IMPUGNED ORDER. II) THE ASSESSMENT ORDER IS INVALID AND BAD IN LAW, AS THE SAME HAS BEEN PASSED BY THE A.O. WITHOUT APPLICATION OF MIND, ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING WHI CH IN TURN RELIED ON THE SURVEYS CONDUCTED BY THE SALES TAX DEPARTMEN T. 3. DURING THE COURSE OF HEARING, THE LD. LD. DEPARTME NTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF LD.CIT(A) AND ALSO RELIED UPON THE JUDGEMENT OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT(A) VS NIKUNJ EXIMP ENTERPRISES PVT LTD 372 ITR 6129 (BOM). 4. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOWER AUT HORITIES AND JUDGEMENT PLACED BEFORE US. WITH RESPECT TO GROUND RELATING TO ADDITIONAL 3 I.T.A. NO.6851 /MUM/2014 EVIDENCES CONSIDERED BY THE LD.CIT(A), WE POINTED O UT TO THE LD.DR TO SHOW US THE ADDITIONAL EVIDENCES CONSIDERED BY THE LD.CIT(A ) WHILE PASSING HIS ORDER AND RECORDING HIS CONCLUSIONS AND FINDINGS. IN RES PONSE, THE LD.DR COULD NOT POINT OUT ANY ADDITIONAL EVIDENCES AND DID NOT PRES S THIS GROUND, AS A RESULT. WE HAVE ALSO GONE THROUGH THE FINDINGS RECORDED BY THE LD.CIT(A) AND FOUND THAT NO ADDITIONAL EVIDENCE HAS BEEN CONSIDERED BY THE LD.CIT(A) AND, THEREFORE, THIS GROUND IS DISMISSED. 5. AS FAR AS MERITS OF THE CASE ARE CONCERNED, THE BRI EF BACKGROUND OF THE ISSUE INVOLVED IS THAT DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DOING JOB WORK OF DYEING OF FABRICS AND HAS SHOWN INCOME FROM JOB WORK CHARGES AND SCRAP SALES IN ITS P&L ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER FOUND THAT IN VIEW OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WIN G OF INCOME-TAX DEPARTMENT, MUMBAI, THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS AGGREGATING TO RS.1,14,92,970 FROM 8 PARTIES, WHOSE DETAILS HAVE BEEN GIVEN AT PARAGRAPH 4 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THESE PURCHASES. IN RESPONSE, THE ASSESSEE SUBMITT ED COPIES OF BOGUS INVOICES, DELIVERY CHALLANS, DETAILS OF PAYMENT MADE TO THE S AID PARTIES, LEDGER ACCOUNTS OF THESE PARTIES AND OTHER DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE PURCHASES. BUT THE ASSESSING OFFICER WAS NOT SATIS FIED WITH THE DOCUMENTARY EVIDENCES AND, THEREFORE, HE DISALLOWED THE TOTAL A MOUNT OF PURCHASES MADE FROM THESE PARTIES AGGREGATING TO R RS.1,14,92,970 BY SOLELY RELYING UPON THE ALLEGED INFORMATION RECEIVED FROM THE INVESTIGATION CARRIED OUT BY THE SALES-TAX DEPARTMENT, MUMBAI. WHILE DOING SO, THE ASSESSING OFFICER DID NOT POINT OUT ANY DEFICIENCIES, SHORTCOMINGS OR CONTRADICTIONS IN THE DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE. BEING AGGRIEVED, ASSESS EE FILED APPEAL BEFORE THE 4 I.T.A. NO.6851 /MUM/2014 LD.CIT(A) AND SUBMITTED THAT COMPLETE DOCUMENTARY E VIDENCES HAVE BEEN SUBMITTED BEFORE THE ASSESSING OFFICER AND WITHOUT CONTROVERTING THESE EVIDENCES, THE ASSESSING OFFICER MADE TOTAL DISALLO WANCE OF PURCHASES. IT WAS ALTERNATIVELY SUBMITTED THAT IN ANY CASE, THE ASSES SING OFFICER HAS ACCEPTED THE INCOME RECEIVED BY THE ASSESSEE ON ACCOUNT OF JOB W ORK CHARGES. NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT ITEMS PURCHASED HAVE NOT BEEN USED FOR THE PURPOSE OF JOB WORK. TH E ASSESSEE WAS NOT IN A POSITION TO CARRY OUT THE JOB WORK IN ABSENCE OF IM PUGNED PURCHASES. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NO T PROVIDE ANY ADVERSE MATERIAL IN SUPPORT OF HIS ALLEGATIONS. THE LD.CIT (A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS THE LD.CIT(A) AND DECIDED THIS ISSUE BY RECORDING THE FOLLOWING FINDINGS: 2.15 THE FACTS IN THE PRESENT CASE SHOWS THAT THE A PPELLAN T WAS NOT IN A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. THE SUPPLIERS WERE FOUND TO BE EN G A G ED IN PROVIDING BOGUS 'BILLS WITHOUT ACTUAL DELIVERY OF GOODS MOREOVER FEW OF TH E SUPPLIERS ARE HOT REGULAR PARTIES AND THEY WERE FOUND TO HAVE BEEN SUPPLIED ONLY DURING THE EAR AND THERE WERE NO SUPP LY EITHER IN THE EARLIER YEAR OR IN THE SUBSEQUENT YEAR FROM SUC H PARTIES. THIS CIRCUMSTANTIAL EVIDENCE ALSO PROVE THE BOGUS N ATURE OF THE TRANSACTION. ON CAREFUL ANALYSIS OR THE FINDING OF HONBLE HIGH COURT OR COURT IN THE ABOVE MENTIONED CASES, I AM O F THE FIRM VIEW THAT WITHOUT PURCHASE OF MATERIALS IT WAS NOT POSSIBLE FOR THE APPELLANT TO COMPLETE THE JOB WORK OF DYING. AS MENTIONED ABOVE THE AO HAD NEVER DISPUTED OR EXAMINED THE ASP ECT OF JOB WORK RECEIPTS. HENCE I AM OF THE FIRM BELIEF TH AT THE APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WE RE NOT RECORDED IN THE BOOKS. THE APPELLANT TOOK ONLY BILL S FROM THESE 6 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASES . 5 I.T.A. NO.6851 /MUM/2014 THEREFORE THE ENTIRE PURCHASE FROM THESE 8 PARTIES CANNOT . BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PR OFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. THE APPELLANT CARRVOUT ONLY THE JOB WORK OF DYING THE CLOTHS ONE CONTRACT BASIS. ESTIMATION RANGING FROM TO 25% HAS BEEN UPHEID BY THE HON'BLE GUJARAT HIGH COURT DEPENDING UPON THE NATURE OF THE BUSINESS. AS HELD IN THE CASE OF SIMIT P. SHETH (SUPRA) NO, UNIFORM YARD STICKS COULD BE APPLIED TO ESTIMATE THE RATE OF PROFIT AND IT VARY WITH THE NATURE OF BUSINESS. TAKING ALL THE FACTS I NTO CONSIDERATION AND THE FINDINGS OF THE HONBLE COURT S ON THIS ISSUE, I AM OF THE VIEW THAT ESTIMATION OF 17.5% OF PROFIT WOULD MEET THE ENDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 17.5% ON THE TOTAL ALLEGED BOGUS PURCHASE WHICH, WORKS OUT TO RS. 2011270 (17.5% OF RS.114,92 ,970!-). THE APPELLANT GET THE RELIEF OF THE BALANCE RS,9481 7001-. THE GROUNDS RAISED ARE PARTLY ALLOWED. 6. THUS, FROM THE AFORESAID ANALYSIS, CONCLUSIONS AND FINDINGS RECORDED BY THE LD.CIT(A), IT IS EVIDENT THAT TOTAL PURCHASE S WERE WRONGLY DISALLOWED BY THE ASSESSING OFFICER. THE LD.CIT(A) TOOK A REA SONABLE VIEW WHEREBY THE DISALLOWANCE WAS SUSTAINED TO THE EXTENT OF ESTIMAT ED INFLATION IN THE AMOUNT OF PURCHASES MADE BY THE ASSESSEE. THE DISA LLOWANCE SUSTAINED BY THE LD.CIT(A) @17.5% OF THE PURCHASES HAVE BEEN ACC EPTED BY THE ASSESSEE WITH A VIEW TO BURY THE LITIGATION. NOTHING HAS BE EN BROUGHT BEFORE US BY THE LD.DR TO CONTRADICT THE FINDINGS RECORDED BY TH E LD.CIT(A). THE ASSESSEES COUNSEL HAS ALSO PLACED RELIANCE UPON TH E JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS NIKUNJ EXIM P ENTERPRISES PVT LTD (SUPRA) WHEREIN SIMILAR ISSUE HAS BEEN DECIDED ON I DENTICAL LINES BY THE HONBLE BOMBAY HIGH COURT. IN OUR VIEW, NO INTERVE NTION IS REQUIRED IN THE FINDINGS OF LD.CIT(A) AND, THEREFORE, THE SAME IS C ONFIRMED. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6 I.T.A. NO.6851 /MUM/2014 7. AS A RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS 21 ST DAY OF SEPTEMBER,2016. SD/- SD/- (C.N. PRASAD) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 21 ST SEPTEMBER, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , J-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES