KITTENS SHOES AND ALLIED PRODUCTS PVT. LTD., MUMBAI V. ITO 1(2)(2), MUMBAI

ITA 7092/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8335 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAVITHA P KAUSHIK
• Keywords: Bogus purchase; Depreciation; Accommodation entries; Unabsorbed depreciation; Set aside
• Section: 133(6); 143(1); 13; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.7092/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) KITTENS SHOES AND ALLIED PRODUCTS PVT.LTD. 9, DHANSHREE BUILDING P.G.SOLANKI PATH LAMINGTON ROAD MUMBAI-400 007 VS. ITO-1(2)(2) AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AABCK6248A ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. KAVITHA P.KAUSHIK, DR ASSESSEE BY NONE DATE OF HEARING 17/02 /2020 DATE OF PRONOUNCEME NT 13 /03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, MUM BAI DATED 31/07/2018 AND IT PERTAINS TO THE A.Y 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER THE PROVISIONS OF LAW. THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL-2) MUMBAI HAS ERRED IN RETAINING THE DISALLOWANCE ATL2.5% OF THE PURCHASES MADE FROM ALLEGED SUSPICIOUS DEALERS. ITA NO.7092/MUM/2018 KITTENS SHOES AND ALLIED PRODUCTS PVT.LTD. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER ME PROVISIONS OF LAW. THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL-2) MUMBAI HAS ERRED IN DISALLOWING GROSS PURCHASE FROM ALLEGE D SUSPICIOUS DEALERS WITHOUT CONSIDERING THE PURCHASE RETURN TO THOSE PARTIES DURING THE YEAR UNDER APPEAL. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER THE PROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL-2) MUMBAI HAS ERRED IN DISALLOWING GROSS PURCHASE FROM ALLEGE D SUSPICIOUS DEALERS WITHOUT CONSIDERING THE FACT THAT OUR APPEL LANT ACCOUNTS ONLY NET PURCHASES IN PROFIT AND LOSS ACCOUNT. THE VAT TAX C OMPONENT IS REFLECTED IN BALANCE SHEET IN DUTIES AND TAXES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND U NDER THE PROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL-2) MUMBAI HAS ERRED IN GIVING ANY IMPACT OF THE BROUGHT FORWA RD BUSINESS LOSSES AND UNABSORBED DEPRECIATION WITHOUT REJECTING THE S AME. THE LEARNED INCOME TAX OFFICE 2(1)(1) TOO HAD REMAINED SILENT O N THE IMPACT OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPREC IATION. YOUR APPELLANT REQUESTED THE HON' BENCH LO CONSIDER THE SAME IN PRESENT PROCEEDINGS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER THE PROVISIONS OF LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL-2) MUMBAI HAS ERRED IN RETAINING INTEREST U/S. 234A OF RS.50, 707/- WITHOUT APPRECIATING THE FACT THAT THE RETURN OF INCOME WAS FILED IN TIME. 6. FOR THESE AND OTHER REASONS WHICH MAY BE ADDUCE D AND PRESENTED AT THE TIME OF HEARING, THE APPELLANT PRAISE BEFORE YO UR HONOUR LO SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS - 2) AND LO DELETE THE ADDITION MADE BY THE ASSESSING OFFICE R WHICH IS BAD IN LAW . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADER IN KIDS SHOES AND ACCESSORI ES, FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 30/09/2011, DECL ARING THE TOTAL INCOME AT RS. 23,23,417/- AND SAID RETURN WAS PROCE SSED U/S 143(1) OF THE I.T.ACT, 1961/-. THE CASE HAS BEEN, S UBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORM ATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SAL ES TAX AUTHORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURC HASE BILLS TO ITA NO.7092/MUM/2018 KITTENS SHOES AND ALLIED PRODUCTS PVT.LTD. 3 VARIOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM M/S M N COMTRADE PVT LTD AMOUNTING TO RS. 1,29,938/-. THE CASE WAS S ELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 29/03/2016 AND DETERMIN ED TOTAL INCOME OF RS. 23,55,900/-, AFTER MAKING ADDITIONS OF 25% G ROSS PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 32,485/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS REITRATED ITS SUBMISSIONS MADE BEFORE THE AO. THE S UM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COU LD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESS EE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) HAS SCALED DO WN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 1 2.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 25% PROFI T ON ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE ITA NO.7092/MUM/2018 KITTENS SHOES AND ALLIED PRODUCTS PVT.LTD. 4 BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCH ASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUG H ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE F URTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTME NT, MAHARASHTRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMM ODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD AL SO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSES SEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PAR TY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIB LE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PRO VE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTH ER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX ITA NO.7092/MUM/2018 KITTENS SHOES AND ALLIED PRODUCTS PVT.LTD. 5 DEPARTMENT. THE AO NEITHER POINTED OUT ANY DESCREPA NICES IN BOOKS OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BO OKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGU MENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSI DERED TO BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS H IGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE OF PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 25% PROFIT ADDITIONS, WHEREAS THE LD. LD.CIT(A ) HAS SCALED DOWN ADDITION TO 12.50% GROSS PROFIT ON ALLEGED BOG US PURCHASES. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, B UT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY COMPARABLE CASES. HOWEVER, THE PROFIT RATE ADOPTED BY THE LD. CIT(A) IS SUPPORTED BY VARIOUS DECISIONS OF HIGH CO URTS AND TRIBUNALS. THEREFORE, CONSIDERING FACTS AND CIRCUMS TANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDIN ATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION T HAT THE LD. ITA NO.7092/MUM/2018 KITTENS SHOES AND ALLIED PRODUCTS PVT.LTD. 6 CIT(A) HAS TAKEN A FAIR VIEW AND HAS ESTIMATED 12.5 0% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEE N THE PARTIES AND HENCE, WE ARE INCLINED TO UPHOLD ORDER OF THE L D. CIT(A) AND DISMISS APPEAL FILED BY THE ASSESSEE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13/03/2 020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//