JITENDRA HARSHADKUMAR TEXTILES P. LTD, MUMBAI V. ITO 4(2)(3), MUMBAI

ITA 771/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9427 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 14-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJNISH DEO BURMAN
• Keywords: Bogus purchase; Accommodation entries
• Section: 133A; 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.771/MUM/2011(A.Y. 2007-08) M/S. JITENDRA HARSHADKUMAR TEXTILES P. LTD., SHOP NO.685, GROUND FLOOR, GOVIND CHOWK, MJ MARKET, MUMBAI - 400 002. PAN:AAAFJ 0270F (APPELLANT) VS. THE ITO, WARD NO.4(2)(3), AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. (RESPONDENT) ITA NO.2211/MUM/2011(A.Y. 2007-08) THE ITO, WARD NO.4(2)(3), AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. (APPELLANT) VS. M/S. JITENDRA HARSHADKUMAR TEXTILES P. LTD., SHOP NO.685, GROUND FLOOR, GOVIND CHOWK, MJ MARKET, MUMBAI - 400 002. PAN:AAAFJ 0270F (RESPONDENT) REVENUE BY : SHRI RAJNISH DEO BURMAN ASSESSEE BY : SHRI BHUPENDRA SHAH DATE OF HEARING : 14/11/2012 DATE OF PRONOUNCEMENT : 2 1/11/2012 ORDER PER I.P.BANSAL, J.M, THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) 10, DATED 21/12/2010 FOR A.Y 2007-08. THE G ROUNDS OF APPEAL IN BOTH THE APPEALS READ AS UNDER: ITA NO.771 & 2211/MUM/2011(A.Y. 2007-08) 2 ASSESSEES GROUNDS OF APPEAL: 1. UNDER THE FACTS AND THE CIRCUMSTANCES OF THE C ASE OF YOUR APPELLANT, THE LD. AO HAS ERRED IN MAKING THE ADDIT ION OF RS. 16,16,613/- AS UNEXPLAINED/UPROVED PURCHASES / INV ESTMENT IN PURCHASES AS PER SECTION 69 OF THE I.T. ACT, 1961 WHICH THE LD. CIT(A) SCALED DOWN BY RS. 12,46,534/- THEREBY CONFIRMING T O THE EXTENT OF RS. 3,72,079/-. 2. THE APPELLANT, THEREFORE, PRAYS THAT THE ADDITI ON MADE BY THE AO SHOULD BE DELETED IN TOTAL. REVENUES GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF U NEXPLAINED INVESTMENT U/S. 69 TO THE TUNE OF RS.3,31,622/- AG AINST THE TOTAL ADDITION OF RS. 16,18,613/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW TO BE SE T ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. SINCE COMMON ISSUE IS INVOLVED IN BOTH THE APPEA LS AND THESE WERE ARGUED TOGETHER BY BOTH THE PARTIES, FOR SAKE OF CO NVENIENCE BOTH THE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY OF TRADING IN CLOTH AND FABRICS. ON THE BASIS OF STATEMENT OBTAINED BY THE DEPARTMENT DURING THE SURVEY ACTION ON THE GROUP CONCERNS OF SHRI RAKESH KUMAR GUPTA AND HIS FAMILY ON 13 TH /14 TH FEB.2009, THE AO CAME TO THE CONCLUSION THAT FOLLO WING PURCHASES MADE BY THE ASSESSEE FROM THE CONCERNS OF SHRI RAKESH KUMAR GUPTA ARE BOGUS AND ACCOMMODATION ENTRIES. A) M/S. MANOJ MILLS - RS. 2,95,162 B) M/S. SHREERAM SALES AND SYNTHETICS - R S. 12,43,629 ------------------- RS. 15,38,792 ============ ITA NO.771 & 2211/MUM/2011(A.Y. 2007-08) 3 3.1 IN THE STATEMENT SHRI RAKESH KUMAR GUPTA HAD AD MITTED THAT HE IS EXCLUSIVELY ENGAGED IN ISSUING ACCOMMODATION ENTRIE S( SALES BILLS) WITHOUT EFFECTING ANY REAL PURCHASES TO THE PARTIES WHO REQ UIRED THE BILLS IN ORDER TO INFLATE/ACCOMMODATE THEIR PURCHASES MADE OUTSIDE BO OKS OF ACCOUNT. THEREFORE, AO OBSERVED THAT THE CONCERNS OF SHRI R AKESH KUMAR GUPTA HAVE ADMITTED HAWALA SALES AND HIS STATEMENT ON OATH WAS RECORDED BY THE DEPARTMENT ACCORDING TO WHICH NO GENUINE BUSINESS A CTIVITY WAS BEING CARRIED OUT, THEREFORE, THE PURCHASES MADE BY THE ASSESSEE FROM THOSE CONCERNS WERE BOGUS PURCHASES. HE ASKED THE ASSESS EE TO EXPLAIN AS TO WHY PURCHASES MADE FROM AFOREMENTIONED CONCERNS SHOULD NOT BE TREATED AS BOGUS. IN RESPONSE THE ASSESSEE FILED A LETTER DAT ED 23/12/2009 IN WHICH IT WAS SUBMITTED THAT ALL THE PURCHASES MADE BY THE A SSESSEE FROM THE SAID PARTIES ARE REAL, GENUINE AND PHYSICALLY EFFECTED. IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED BACK ANY CASH AFTER REALI ZING PAYMENT CHEQUE TO THE SAID PARTIES AS ALLEGED BY THEM AND NO COMMISSI ON WHATSOEVER HAS BEEN PAID. THE PURCHASES MADE BY THE ASSESSEE ARE REAL AS THE SAME IS SUPPORTED BY DELIVERY NOTE, AND THE EVIDENCE REGARDING MATERI AL SENT THROUGH VARIOUS TRANSPORT AGENCIES WHICH ESTABLISH THE PHYSICAL DEL IVERY OF THE GOODS. THE AO ALSO RECEIVED LETTER DATED 20/12/2009 FROM THE SAID SHRI RAKESH KUMAR GUPTA IN RESPONSE TO SUMMON UNDER SECTION 131 WH EREIN HE HAS SUBMITTED THAT THE ALLEGED STATEMENT UNDER SECTION 133A AND 131 OF THE ACT I AM RECEIVING WITNESS SUMMONS FROM ALL FOUR CORNER S OF THE CITY ON THE GROUND THAT ACCOMMODATION BILLS HAVE BEEN GIVEN. H E DENIED THE CONTENTIONS OF THE STATEMENT VIDE LETTER SUBMITTED ON 27/4/2009 AND ALSO BY WAY OF AN AFFIDAVIT DATED 20/2/2009 SUBMITTED TO ITO, WARD 14(3)(2) AND IT IS PHYSICALLY IMPOSSIBLE FOR HIM TO ATTEND BEFO RE VARIOUS AUTHORITIES ON THE GROUND OF HIS ILL HEALTH. SO FAR AS IT RELATES TO SALES MADE TO THE ASSESSEE HE SUBMITTED THAT HE HAS ALREADY FILED AN AFFIDAVIT IN WHICH IT HAS BEEN SPECIFICALLY STATED THAT GOODS HAVE BEEN SOLD TO TH E ASSESSEE AND ITA NO.771 & 2211/MUM/2011(A.Y. 2007-08) 4 CONSIDERATION HAS ALSO BEEN RECEIVED BY CROSS ORDER CHEQUES. HE STATED THAT COPY OF LEDGER ACCOUNT HAS ALREADY BEEN SUBMITTED. HOWEVER, AO HAS DISCARDED THE SUBMISSION OF THE ASSESSEE AS WELL AS LETTER FILED BY SHRI RAKESH KUMAR GUPTA AND HAS ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 4. IN APPEAL FILED BEFORE LD. CIT(A) SIMILAR SUBMIS SIONS WERE MADE AND IT WAS SUBMITTED THAT ADDITION COULD NOT BE MADE SIMPL Y ON THE GENERAL STATEMENT WHICH DOES NOT SPECIFY THE NAME OF THE AS SESSEE. THE PURCHASES MADE BY THE ASSESSEE ARE REAL AND GENUINE FOR WHICH THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. THE SELLER OF THE GOODS HAVE ALSO CONFIRMED AND HAD RETRACTED THE STATEMENT GIVEN DUR ING THE SURVEY.. THUS IT WAS PLEADED THAT THE ADDITION SHOULD BE DELETED. L D. CIT(A) AFTER CONSIDERING ALL THESE SUBMISSIONS HELD THAT ENTIRE PURCHASES CA NNOT BE ADDED BACK AS UNEXPLAINED BECAUSE THE ASSESSEE HAS ALREADY SHOWN THE SALE PROCEEDS AGAINST ALLEGED PURCHASES AND IN SUCH CASES IF ANY ADDITION IS TO BE MADE THEN IT IS ONLY ON ACCOUNT OF G.P RATE OR SOME ADHO C ADDITION. HE REFERRED TO THE DECISION OF ITAT IN THE CASE OF BALAJI TEXTILES VS. ITO(49 ITD 177) IN WHICH IT HAS BEEN HELD THAT PURCHASES WERE MADE THR OUGH UNTRACEABLE PARTIES AND ASSESSEE MADE SALE TO A PARTY WHICH IS RECORDED IN BOOKS OF ACCOUNT OF BOTH THE PARTIES, THEN PURCHASES HAVE TO BE BELIEVED AND DEDUCTION IS TO BE ALLOWED. FINDING THAT GP RATE O F THE ASSESSEE IS AROUND 2.44%, LD. CIT(A) ESTIMATED THE PROFIT OF RS. 40,47 5/- ON THESE SALES. FURTHER ON ACCOUNT OF INITIAL CAPITAL INVESTMENT I N MAKING SUCH PURCHASES INCLUDING PROFITS, HE ESTIMATED 20% AND ADDED A FUR THER SUM OF RS.3,31,622/- AND IN THIS MANNER LD. CIT(A) HAS SUS TAINED THE ADDITION OF RS.3,72,079/- AND HAS DELETED THE BALANCE ADDITION OF RS.12,46,534/-. THE DEPARTMENT IN ITS APPEAL IS AGITATING THE DELETION OF RS. 12,46,534/- AND ASSESSEE IN ITS APPEAL IS AGITATING THE SUSTAINED A DDITION OF RS.3,72,079/-. ITA NO.771 & 2211/MUM/2011(A.Y. 2007-08) 5 5. LD. D.R AFTER NARRATING THE FACTS SUBMITTED THAT ACCORDING TO THE STATEMENT GIVEN BY SHRI RAKESH KUMAR GUPTA THE SALE S MADE BY HIS CONCERNS WERE BOGUS AND MERE ACCOMMODATION ENTRIES WERE MADE. THEREFORE, AO WAS RIGHT IN MAKING THE ADDITION OF E NTIRE PURCHASES. LD. CIT(A) HAS WRONGLY DELETED PART OF THE SAME AS THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES. 6. ON THE OTHER HAND, LD. A.R OF THE ASSESSEE SUBMI TTED THAT THERE IS NOTHING ON RECORD TO HOLD THAT THE PURCHASES MADE B Y THE ASSESSEE FROM THOSE CONCERNS WAS NOT GENUINE. HE SUBMITTED THAT ENTIRE EVIDENCE WAS PLACED ON RECORD WHICH CLEARLY EVIDENCES THE GENUIN ENESS OF THE PURCHASES MADE BY THE ASSESSEE. HE SUBMITTED THAT IN THE STA TEMENT RECORDED BY THE REVENUE, THE NAME OF THE ASSESSEE DID NOT SPECIFICA LLY EXIST. THE ADDITION WAS MADE BY THE AO ON PRESUMPTION THAT THE ENTIRE SALES MADE BY THOSE CONCERNS WERE NOT GENUINE. HE SUBMITTED THAT SHR I RAKESH KUMAR GUPTA HAS FURNISHED LETTER IN RESPONSE TO NOTICE OF THE A O IN WHICH IT HAS BEEN CLEARLY STATED THAT THE EARLIER STATEMENT HAS BEEN RETRACTED AND THE SALES MADE BY THOSE CONCERN TO THE ASSESSEE ARE GENUINE F OR WHICH GOODS HAVE BEEN DELIVERED AND PAYMENTS HAVE BEEN RECEIVED THRO UGH BANKING CHANNELS. THUS IT WAS SUBMITTED BY HIM THAT ADDITION SHOULD BE DELETED IN ITS ENTIRETY. 7. ON THE OTHER HAND, LD. D.R SUBMITTED THAT WITHO UT PREJUDICE, IN ANY CASE, IF CASE OF DEPARTMENT IS NOT ACCEPTED, THE AD DITION SUSTAINED BY LD. CIT(A) SHOULD BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT WILL BE RELEVANT TO REPRODUCE THE LETTER RECEIVED BY THE AO FROM SHRI RAKESH KUMAR GUPTA, WHICH IS A LSO REPRODUCED IN THE ASSESSMENT ORDER: ITA NO.771 & 2211/MUM/2011(A.Y. 2007-08) 6 1 AM IN RECEIPT OF YOUR SUMMONS U/S. 131 OF THE I. T.ACT. 1961 IN THE CASE OF M/S. JITENDRA HARSHAD KUMAR TEXTILE PVT. LT D. ASKING ME TO ATTEND BEFORE YOUR GOODSELF WITH THE DETAILS OF MY ACCOUNT WITH THE SAID M/S. JITENDRA HARSHAD KUMAR TEXTILE PVT. LTD. FOR A.Y.2002-03 & 2007-08. AS YOU ARE AWARE THAT MY ASSESSING OFFICER HAD RECO RDED ALLEGED STATEMENT U/S. 133A AND 131 OF THE I.T.ACT. 1961 1 HAVE BEEN RECEIVING WITNESS SUMMONS FROM ALL FOUR CORNERS OF THE CITY ON THE GROUND THAT I HAVE GIVEN ACCOMMODATION BILL, THOUGH I HAVE DENIED THE CONTENT OF THE STATEMENTS RECORDED BY A.O. U/S. 133 A & 131 VIDE MY LETTER DATED 27.4.2009 AND MY AFFIDAVIT DATED 20.2. 2009 SUBMITTED TO WARD 14(3)(2). IT IS PHYSICALLY IMPOSSIBLE FOR ME T O ATTEND BEFORE VARIOUS INCOME TAX AUTHORITIES, AS I AM NOT FEELING WELL, IT WILL NOT POSSIBLE FOR ME TO ATTEND BEFORE YOUR GOODSEIF IN R ESPONSE TO YOUR ABOVE MENTIONED SUMMONS. AS REGARDS M/S. JITENDRA HARSHAD KUMAR TEXTILES PVT . LTD. IS CONCERNED. I HAVE ALREADY GIVEN MY AFFIDAVIT WHEREI N I HAVE SPECIFICALLY STATED THAT I HAVE SOLD THE GOODS TO M/S. JITENDRA HARSHAD KUMAR TEXTILES P. LTD. AND THE CONSIDERATION IS RECEIVED TO ME BY CROSS ORDER CHEQUE. COPY OF THE SAID LEDGER ACCOUNT IS ALREADY SUBMITTED THE DEPARTMENT. 8.1 FROM THE ABOVE LETTER IT IS CLEAR THAT THE SAME WAS WRITTEN IN RESPONSE TO NOTICE ISSUED BY THE AO. NOT ONLY SHRI RAKESH K UMAR GUPTA HAS STATED THAT HE HAS RETRACTED FROM THE STATEMENT RECORDED D URING THE SURVEY BUT ALSO FILED AN AFFIDAVIT DATED 20/2/2009 AND LETTER DATED 27/4/2009 TO DENY THE STATEMENT MADE DURING THE SURVEY UNDER SECTION 133A . HE HAS FURTHER CONFIRMED THAT THE SALES MADE BY THE ASSESSEE WERE EFFECTED AND THE CONSIDERATION WAS RECEIVED BY CROSS ORDER CHEQUES. THUS IT IS CLEAR THAT THERE IS NO MATERIAL ON RECORD TO SAY THAT THE PURC HASES MADE BY THE ASSESSEE FROM THE SAID CONCERN WERE BOGUS EXCEPT TH E GENERAL STATEMENT RECORDED BY THE DEPARTMENT IN THE CASE OF SHRI RAKE SH KUMAR GUPTA, WHICH WAS LATER ON RETRACTED. IN ABSENCE OF ANY MATERIA L BROUGHT ON RECORD AGAINST THE SUBMISSIONS MADE BY SHRI RAKESH KUMAR G UPTA IN HIS LETTER DATED 20/12/2009 FILED BEFORE THE AO OF THE ASSES SEE THE ADDITION, IF ANY, MADE IN THE CASE OF THE ASSESSEE WILL BE BASED ON P RESUMPTION ONLY AND IT ITA NO.771 & 2211/MUM/2011(A.Y. 2007-08) 7 CANNOT BE SUSTAINED IN THE EYES OF LAW. AS AGAINST THAT ASSESSEE HAS SUBMITTED VARIOUS EVIDENCES TO SHOW THAT THE ACTUA L DELIVERY OF THE GOODS WAS RECEIVED BY THE ASSESSEE FROM THE SAID PARTY WH ICH HAS NOT BEEN DISCARDED BY THE AO. THE ADDITION SUSTAINED BY LD. CIT(A) IS ALSO ON PRESUMPTION BASIS. THEREFORE, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT ADDITIONS M ADE BY THE AO DESERVES TO BE DELETED IN ITS ENTIRETY. WE DECIDE ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 21 ST DAY OF NOV. 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 21ST NOV. 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R I BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.