INCOME TAX OFFICER 10(3)(1), MUMBAI V. NAUTICA CLOTHING INDIA PRIVATE LIMITED, MUMBAI

ITA 7152/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9315 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Assessee Lawyers: SAMBHAV SHAH
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7152/MUM/2017(A.Y. 2009-10) INCOME TAX OFFICER 10(3)(1), ROOM NO.621, 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S. NAUTICA CLOTHING INDIA PVT. LTD. 1008, 10 TH FLOOR, IJMIMA COMPLEX, NEAR RAHEJA COMPLEX, NEW LINK ROAD, MALAD(WEST), MUMBAI 400 064. PAN: AACCN 0650Q ..... RESPONDENT ITA NO.1863/MUM/2018(A.Y. 2009-10) M/S. NAUTICA CLOTHING INDIA PVT. LTD. .... APPELLANT MUMBAI 400 064. PAN: AACCN 0650Q VS. INCOME TAX OFFICER 10(3)(1), MUMBAI 400 020 ...... RESPONDENT REVENUE BY : MS. KAVITA P. KAUSHIK ASSESSEE BY : SHRI SAMBHAV SHAH DATE OF HEARING : 17/09/2019 DATE OF PRONOUNCEMENT : 17/09/2019 ORDER PER VIKAS AWASTHY, JM: THESE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-17, MUMBAI DATED 29/09/ 2017 FOR THE ASSESSMENT YEAR 2009-10. 2 ITA NO.7152/MUM/2017(A.Y. 2009-10) ITA NO.1863/MUM/2018(A.Y. 2009-10) 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE; THE ASSESSEE COMPANY IS ENGAGED IN TRADING OF READYMADE GARMENTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGN ED ASSESSMENT YEAR ON27/09/2019 DECLARING TOTAL INCOME OF RS.4,11,520/ -. THE RETURN OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THEREAFTER, ASSESSMENT WAS R EOPENED ON THE GROUND THAT ASSESSEE HAS INDULGED IN BOGUS PURCHASES FROM SUSPICIOUS DEALERS. THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS MAD E ADDITION OF THE ENTIRE ALLEGED BOGUS PURCHASES I.E. RS.73,88,09,154 /-. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 31/03/2015 PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE FILED AN APPEA L BEFORE THE CIT(A). THE FIRST APPELLATE AUTHORITY AFTER EXAMINING THE FACTS AND APPLYING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHAH, 356 ITR 451(GUJ) RESTRICTED THE ADDITION TO 1 2.5% OF THE PURCHASES MADE FROM HAWALA DEALERS. AGAINST THE FINDINGS OF CIT(A), THE REVENUE, AS WELL AS, THE ASSESSEE IS IN APPEAL BEFORE THE TR IBUNAL. 3. MS. KAVITA P. KAUSHIK REPRESENTING THE DEPART MENT SUBMITTED THAT THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO 12.5% OF THE BOGUS PURCHASES. THE DOCUMENTS ON RECORD CLEARLY INDIC ATE THAT THE ASSESSEE HAS INDULGED IN TRANSACTIONS WITH HAWALA DEALERS NO TIFIED BY THE MAHARASHTRA SALES TAX DEPARTMENTS INVESTIGATION WI NG. THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF EXPENDITURE FOR MAKING THE PURCHASES. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF N.K.PROTEINS LTD VS. DCIT, (2017) TOIL 3 ITA NO.7152/MUM/2017(A.Y. 2009-10) ITA NO.1863/MUM/2018(A.Y. 2009-10) 23(SC) TO CONTEND THAT 100% ADDITION IS JUSTIFIED I N CASE OF SUCH BOGUS PURCHASES. 4. ON THE OTHER HAND, SHRI SAMBHAV SHAH APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLDING THAT ASSESSEE HAS INDULGED IN BOGUS PURCHASES. THE ASSE SSEE HAD SUBMITTED VARIOUS DOCUMENTS VIZ. COPIES OF INVOICES, DESCRIPT ION OF QUANTITY OF GOODS PURCHASED, COPY OF PURCHASE ORDER, PROOF OF DISPATC H OF GOOD AND PROOF OF PAYMENTS TO PROVE TRAIL OF GOODS. THE LD. AUTH ORIZED REPRESENTATIVE FURTHER CONTENDED THAT THE REVENUE HAS NOT RAISED A NY DOUBT OVER THE SALES DECLARED BY THE ASSESSEE. IN THE ABSENCE OF PURCHASES THERE CANNOT BE SALES, HENCE, 100% ADDITION AS MADE BY ASSESSING OFFICER CANNOT BE SUSTAINED. THE LD. AUTHORIZED REPRESENTATIVE FURTHE R CONTENDED THAT CIT(A) RESTRICTED THE ADDITION TO 12.5% OF THE BOGU S PURCHASES, HOWEVER, IN THE LIGHT OF DOCUMENTS FURNISHED BY ASSESSEE THE ENTIRE ADDITION OUGHT TO HAVE BEEN DELETED BY THE CIT(A). THE LD. AUTHORI ZED REPRESENTATIVE, THUS, PRAYED FOR MODIFYING THE ORDER OF CIT(A) AND DELETING THE ENTIRE ADDITION MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES . 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE RIVAL SIDES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ASSES SING OFFICER IN REASSESSMENT PROCEEDINGS MADE ADDITION OF RS.73,88, 09,154/- ON ACCOUNT OF BOGUS PURCHASES MADE BY ASSESSEE FROM ALLEGED HA WALA DEALERS NOTIFIED BY MAHARASHTRA SALES TAX DEPARTMENT. DURI NG ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED VARIOUS DOCUMEN TS TO PROVE GENUINENESS OF THE TRANSACTIONS. HOWEVER, THE ASSE SSING OFFICER BRUSHED ASIDE THE SAME AND MADE ADDITION OF THE ENTIRE ALLE GED BOGUS PURCHASES. 4 ITA NO.7152/MUM/2017(A.Y. 2009-10) ITA NO.1863/MUM/2018(A.Y. 2009-10) IN FIRST APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE GOT SUBSTANTIAL RELIEF AS THE CIT(A) AFTER EXAMINING VA RIOUS DOCUMENTS RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL ALLEG ED BOGUS PURCHASES. IT IS AN UNDISPUTED FACT THAT THE SALES DECLARED BY THE A SSESSEE HAVE NOT BEEN DOUBTED BY THE DEPARTMENT. IN THE ABSENCE OF PURCH ASES, THERE CANNOT BE SALES. THUS, THE ENTIRE PURCHASES MADE FROM ALL EGED HAWALA DEALERS CANNOT BE ADDED. IN THE GIVEN FACTS EVEN IF IT IS PRESUMED THAT BILLS ARE BOGUS, SINCE SALES HAVE NOT BEEN DOUBTED, TO MATCH SALES, THE ONLY PRESUMPTION WOULD BE THAT THE GOODS HAVE BEEN PROCU RED FROM GREY MARKET. IN SUCH SCENARIO, THE ADDITION, AT THE BE ST CAN BE MADE BY ESTIMATING GROSS PROFIT ON SUCH PURCHASES. THE CIT (A) HAS ESTIMATED GP AT 12.5% OF THE ALLEGED BOGUS PURCHASES. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. ACCORDINGLY, THE SAME IS UPHEL D. CONSEQUENTLY, THE APPEAL BY THE REVENUE AND THE ASSESSEE ARE DISMISS ED BEING DEVOID OF MERIT. 6. IN THE RESULT, THE APPEAL OF REVENUE, AS WELL AS ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER HEARING TH E APPEALS ON TUESDAY, THE 17 TH DAY OF SEPTEMBER 2019. SD/- SD/- (RAJESH KUMAR ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 17/09/2019 VM , SR. PS(O/S) 5 ITA NO.7152/MUM/2017(A.Y. 2009-10) ITA NO.1863/MUM/2018(A.Y. 2009-10) COPY OF THE ORDER FORWARDED TO : 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) ITAT, MUMBAI