ITO 14(3)(2), MUMBAI V. JEM TEXTILES, MUMBAI

ITA 7538/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2698 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Bench Allotted: J
• Assessment Year: 2003-2004
• Appeal Filed On: 24-12-2013
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Assessee Lawyers: S C TIWARI
• Keywords: Bogus purchase
• Section: 133A; 147; 131

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI SANDEEP GOSAIN , J M ./ ITA NO S . 7537&7538 /MUM/201 3 ( / ASSESSMENT YEAR S : 2002 - 03 & 2003 - 04 ) ITO - 14(3) - 2, MUMBAI VS. M/S JEM TEXTILES, 572, SUNDER CHOWK, M.J.MARKET, MUMBAI - 400002 ./ ./ PAN/GIR NO. : A A CFJ 9348 Q ( / APPELLANT ) .. ( / RESPONDENT ) AND CROSS OBJECTION NO S . 82&83 / MUM/20 1 5 (ARISING OUT OF ITA NOS.7537&7538/MUM/2013) ( / ASSESSMENT YEARS :200 2 - 03 & 2003 - 04 ) M/S JEM TEXTILES, 572, SUNDER CHOWK, M.J.MARKET, MUMBAI - 400002 VS. ITO - 14(3) - 2, MUMBAI ./ ./ PAN/GIR NO. : A ACFJ 9348 Q ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI SHRIKANT NAMDEO /ASSESSEE BY : SHRI S.C.TIWARI & MS.RUTUJA N. PAWAR / DATE OF HEARING : 26 / 10 / 2015 / DATE OF PRONOUNCEMEN T 04/11 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS BY THE ASSESSEE AGAINST THE ORDER OF CIT (A) , MUMBAI , FOR THE ASSESSMENT YEAR S 200 2 - 03 & 2003 - 04 , IN THE MATTER OF ORDER PASS ED U/S.143(3) R.W.S147 OF THE I.T ACT . ITA NOS. 7537&7538 / 1 3 AND CO NOS.82&83/15 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP F IRM CARRYING ON - BUSINESS OF TRADING OF SHIRTINGS( TEXTILE). THE ASSESSEE FILED RETURN OF INCOME FOR A. Y. 2002 - 03 ON 21.10.2002 DECLARING TOTAL INCOME OF RS.1 ,25,962/ - . BASED ON INFORMATION GATHERED DURING SURVEY OPERATIONS AT THE PREMISES OF SHRI RAKESHKUMAR M. G UPTA (PROP. MANOJ MILLS) & GROUP CONCERNS, THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE I.T. ACT AND NOTICE U/S 148, DATED 19.03.2009 WAS ISSUED AND SERVED ON THE ASSESSEE. THE ORDER U/S.143(3) R.W.S.147 WAS PASSED, WHEREIN PURCHASES MADE FROM THESE CONCERNS AMOUNTING TO RS.12,56,369/ - WAS ADDED BY THE AO IN ASSESSEES INCOME. 3. IN AN APPEAL FILED BEFORE THE CIT(A), THE ADDITION OF 10% OF GP ON SUCH PURCHASES WERE UPHELD AND BALANCE ADDITION WAS DELETED. THE PRECISE OBSERVATION OF THE CIT(A) WAS AS UNDER : - 6 I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS OF THE APPELLANT, AND THE FACT AND CIRCUMSTANCE OF THE CASE. ON PLAIN READING OF THE ASSESSMENT 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 O N OATH U/S 131 OF THE ACT, TO MAKE ADDITIONS IN HANDS OF THE PURCHASER PARTY I.E. THE APPELLANT IN THIS CASE. SHRI RAKESHKUMAR GUPTA AND FAMILY MEMBERS RETRACTED THEIR STATEMENTS LATER ON WITH AFFIDAVITS WHICH WERE FILED BEFORE THE ASSESSMENT AS WELL AS AP PELLATE PROCEEDINGS. THE SAID ADDITIONS ARE MADE TO ARRIVE AT TOTAL PURCHASES MADE BY THE APPELLANT DURING THE YEAR AT RS.12,56,369 / - WHICH IS ALSO CONFIRMED BY THE APPELLANT. 6.1 I FURTHER OBSERVE THAT THE APPELLANT HAS NOT MAINTAINED THE STOCK REGISTER. HOWEVER, SINCE THE APPELLANT HAS SUBMITTED MONTHLY QUANTITATIVE DETAILS OF PURCHASES AND SALES MADE, AND ALSO SUBMITTED DETAILS OF SALES MADE AGAINST THE SAID PURCHASES, 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. ITA NOS. 7537&7538 / 1 3 AND CO NOS.82&83/15 3 6.2 A LOGICAL CONCLUSION WHICH MAY BE DRAWN IN SUCH SITUATION MAY BE THAT THE APPELLANT HAS RECORDED SOME SALES IN ITS BOOKS OF ACCOUNTS WHICH MAT ERIALS MIGHT HAVE BEEN PURCHASED BY IT IN GREY MARKET WITHOUT BILLS; AND TO REGULARIZE SUCH PURCHASES IN GREY MARKET, THE APPELLANT MIGHT HAVE TAKEN ACCOMMODATION BILLS FROM THE SAID PARTIES FOR PURCHASE OF SPECIFIED MATERIAL. THE AO HAS NOT DENIED SUCH PO SSIBILITY BY QUOTING THE WORDS 'HAWALA PURCHASES/ OR TO ACCOMMODATE THE PURCHASES MADE OUT OF THE BOOKS' IN PARA 19 OF THE ASSESSMENT ORDER. IN THE REMAND REPORT FOR AY 2003 - 04, THE AO STATED THAT MERE SUBMITTING OF SALES BILLS CORRESPONDING TO PURCHASES M ADE BY THE ASSESSEE DOES NOT MEAN THAT THE PURCHASES BY THE ASSESSEE FROM GUPTA GROUPS ARE GENUINE. THE ASSESSEE COULD HAVE PURCHASED THESES ITEMS FROM SOMEONE ELSE AS WELL. IN THE ABSENCE OF STOCK REGISTER/STOCK TALLY IT CANNOT BE SAID THAT THE ASSESSEE M UST HAVE PURCHASED THESE GOODS FROM GUPTA GROUPS AS HE IS SELLING THESE ITEMS. THERE CANNOT BE ANY DISPUTE ABOUT A WELL SETTLED LEGAL PROPOSITION THAT TAX CAN BE LEVIED ONLY ON REAL INCOME. IT IS AN ELEMENTARY RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAW S THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES, OTHERWISE IT WOULD AMOUNT TO LEVY OF INCOME - TAX ON GROSS RECEIPTS OR ON SALES. SUCH RECOURSE IS NOT PERMISSIBLE UNLESS IT IS SPECIFICALLY AUTHORIZED TO DO SO U NDER ANY PARTICULAR PROVISIONS CONTAINED IN THE ACT. UNDER THESE CIRCUMSTANCES, THE ADDITIONS CAN ONLY BE MADE AT CERTAIN PERCENTAGE OF GP/ NP OR ON AD - HOC IU M PSUM AMOU NT , IN CONSONANCE WITH THE APPELLATE ORDERS OF VARIOUS CIT(A) IN CASES OF PURCHASES FROM MR. RAKESHKUMAR GUPTA, THE COPIES OF WHICH ARE SUBMITTED BY THE APPELLANT. 6.3. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE CAUSE OF JUSTICE WOULD BE MET BY MAKING ADDITION AT 10% OF SUCH PURCHASES I N ORDER TO FILL IN THE GAP OF DIFFERENCE OF GP AS WELL AS TO PLUG FOR POSSIBLE LEAKAGE OF REVENUE. HENCE, THE ADDITION IS RESTRICTED TO 10% OF THE ALLEGED PURCHASES I.E. RS.L,25,636/ - AND THE BALANCE AMOUNT OF ADDITION IS DELETED. HENCE, THE APPELLANT GETS PARTIAL RELIEF OF RS.11,30,733/ - . 4. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN APPEALS BEFORE US AND THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN RESPECT OF 10% ADDITION ON GP UPHELD BY THE CIT(A). 5. WE HAVE CONSIDERED RIVAL CONTENTIONS, CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT PURCHASES MADE FROM THREE PARTIES WERE ADDED BY THE AO ON THE PLEA THAT ASSESSEE HAS JUST TAKEN A ITA NOS. 7537&7538 / 1 3 AND CO NOS.82&83/15 4 PURCHASE BILL. THE CIT(A) AFTER VERIFYING THE RECORDS OBSERVED THAT AS PER THE MONTHLY Q UANTITATIVE DETAILS OF PURCHASE AND SALES, THE ASSESSEE HAD SOLD GOODS SO PURCHASED, WHEN THE SALE IS NOT DISPUTE D , THE ADDITION ON ENTIRE ALLEGED PURCHASE IS ALSO NOT JUSTIFIED. THE CIT(A) ALSO OBSERVED THAT AS PER ELEMENTARY RULE OF ACCOUNTANCY AS WELL A S TAXATION LOSS/PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM THE SALES. SINCE THE DEPARTMENT HAS ACCEPTED THE SALES, THE CIT(A) DELETED THE ADDITION AFTER SUSTAINING THE GP ADDITION OF 10% TO PLUG THE POSSIBLE LEAKAGE OF REVENUE. HENCE, THE ADDITION WAS RESTRICTED TO 10% OF THE ALLEGED BOGUS PURCHASES. DETAILED FINDING RECORDED BY CIT(A) HAD NOT BEEN CONTROVERTED BY DEPARTMENT AND ASSESSEE BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, W E DO NOT FIND ANY INFIR M ITY IN THE ORDER OF CIT(A) FOR SUSTAINING ADDITION OF 10% OF SUCH PURCHASES. 6. AS THE FACTS AND CIRCUMSTANCES DURING THE ASSESSMENT YEAR 2003 - 04 ARE SAME, FOLLOWING THE REASONING GIVEN HEREINABOVE, BOTH APPEALS OF THE REVENUE AS WELL AS CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 7 . IN THE RESULT, APPEAL S OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 04/11 / 201 5 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 04/11 /201 5 . . /PKM , . / PS ITA NOS. 7537&7538 / 1 3 AND CO NOS.82&83/15 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / T HE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//