RAINBOW CABLE CORPORATION, MUMBAI V. ITO, 18(3)(1), MUMBAI

ITA 838/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2157 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SETHI
• Keywords: Reasonable cause; Condonation of delay
• Section: 143(3); 22; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 838 /MUM. /201 9 ( ASSESSMENT YEAR : 20 10 11 ) RAINBOW CABLE CORPORATION ROOM NO.1, 51/53, POPATWADI KALBADEVI ROAD, MUMBAI 400 002 PAN AAGPR0145M . APPELLANT V/S INCOME TAX OFFICER WARD 18(3)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI AJAY SINGH REVENUE BY : S HRI SANJAY SETHI DATE OF HEARING 23.11.2020 DATE OF ORDER 27.11.2020 O R D E R CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 7 TH FEBRUARY 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 29, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2010 11. 2. THERE IS A DELAY OF 277 DAYS IN FILING THE PRESENT APPEAL. THE ASSESSEE HAS FILED APPLICATION SEEKING CONDONATION OF DELAY BEING SUPPORTED BY AN A FFIDAVIT. IT HAS BEEN STATED BY THE ASSESSEE THAT THE DELAY WAS CAUSED DUE TO THE FACT THAT THE PARTNERSHIP FI RM WAS DISSOLVED ON 12 TH JANUARY 2010, AND THE PARTNERS WERE NOT IN GOOD 2 RAINBOW CABLE CORPORATION TERMS. THUS, ALL THESE FACTORS LED TO DELAY IN FILING THE APPEAL. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTA TIVE AND AVERMENTS MADE IN THE A FFIDAVIT, I AM SATISFIED THAT THE DELAY IN FILING THE APPEAL IS DUE TO REASONABLE CAUSE. ACCORDINGLY, I CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION ON MERIT. 3. IN GROUND NO.(I), THE ASSESSEE HAS CHALLENGED THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). HOWEVER, AT THE TIME OF HEARING, THE LEANED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND. ACCO RDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSED. 4. IN GROUND NO.(II), THE ASSESSEE HAS CHALLENGED THE ADDITION MADE ON ACCOUNT OF NON GENUINE PURCHASES. 5. BRIEF FACTS ARE, THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TRADING OF INDUSTRIAL CABLE , WIRES, ETC . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 22 ND SEPTEMBER 2010, DECLARING INCOME OF ` 1,260. THE RETURN OF INCOME WAS INITIALLY PROCESSED UNDER SECTION 143(3) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, AND THE DGIT (INV.), MUMBAI, THAT PURCHASES WORTH ` 21, 94,017, CLAIMED TO HAVE BEEN MADE DURING THE YEAR FROM SIX PARTIES ARE NON GENUINE AS THE CONCERNED PARTIES ARE 3 RAINBOW CABLE CORPORATION MERELY PROVIDING ACCOMMODATION BILLS. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES. THOUGH, THE ASSESSEE FURNISHED SOME EVIDENCES, HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE M . THUS, HE WAS OF T HE VIEW THAT THE PURCHASES MADE BY THE ASSESSEE ARE NON GENUINE. HOWEVER, INSTEAD OF DISALLOWING THE ENTIRE PURCHASES, THE ASSESSING OFFICER RESTRICTED THE ADDITION TO THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES BY ESTIMATING IT @ 12.5%. THUS, HE MADE TH E ADDITION OF ` 2,74,252. THE AFORESAID ADDITION WAS ALSO SUSTAINED BY LEARNED COMMISSIONER (APPEALS) WHILE DECIDING ASSESSEES APPEAL. 6. THE LEANED COUNSEL FOR THE ASSESSEE SUBMITTED , IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED NECE SSARY EVIDENCES , SUCH AS , PURCHASE BILLS, BANK STATEMENT SHOWING PAYMENT MADE THROUGH CHEQUES, DETAILS OF CORRESPONDING SALES, LEDGER ACCOUNT, ETC. THUS, HE SUBMITTED , IN ABSENCE OF PURCHASES, THE ASSESSEE COULD NOT HAVE EFFECTED THE SALES. FURTHER, HE SUB MITTED THAT THE VAT RATE ON CABLES AND WIRES IS 4% , WHEREAS , THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 3.50%. THUS, HE SUBMITTED , AT THE MOST ADDITION , IF ANY , SHOULD BE RESTRICTED TO 4%. IN SUPPORT OF SUCH CONTENTION, THE LEANED COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: 4 RAINBOW CABLE CORPORATION I) PCIT V/S PINAKI D. PANANI, ITA NO.1543/2017, DATED 08.01.2020; II) MOHAMMAD HAJI ADAM & CO., ITA NO.1004/2016, DATED 11.02.2019; AND III) PARAM SHAKTI PVT. LTD., ITA NO.413/2017, DATED 15.07.2019. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER. 8. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT HAS TREATED CERTAIN PURCHASES MADE BY THE ASSESSEE TO BE NON GENUINE. HOWEVER, FACT REMAINS , BEFORE THE ASSESSING OFFICER THE ASSESSEE HAD FURNISHED PURCHASE INVOICES, BANK STATEMENT SHOWING PAYMENT TO THE SELLING DEALERS AND SALES INVOICE WITH QUANTITATIVE TALLY. UNDISPUTEDLY, THE ASSESSING OFFICER WAS CONVINCED THAT THE ASSESSEE HAS MADE CORRESPONDING SALES AGAINST THE PURCHASES SHOWN. SO, THE DOUBT , IF ANY , IS ONLY WITH REGARD TO THE SOURCE OF PURCHASES. FOR THIS REASON ONLY, THE ASSESSING OFFICER ADDED THE PROFIT ELEMENT BY ESTIMATING @ 12.5%. THUS, ULTIMATELY, IT BOILS DOWN TO THE REASONABLE PROFIT ELEMENT WHICH CAN BE CONSIDERED FOR ADDITION. IT CAN BE ASSUMED THA T BY PURCHASING FROM UNDECLARED/ UNIDENTIFIED SOURCES WHAT THE ASS ESSEE MIGHT HAVE SUPPRESSED IS THE PAYMENT OF VAT. IT IS THE CONTENTION OF THE ASSESSEE 5 RAINBOW CABLE CORPORATION BEFORE US THAT VAT RATE ON THE PRODUCT SOLD BY THE ASSESSEE IS @ 4%. THUS, AT BEST, WHAT THE ASSESSEE MIGHT HAVE GAIN ED IS THE VAT NOT PAID TO THE DEPARTMENT. IN MY CON SIDERED OPINION, IF THE ADDITION IS RESTRICTED TO THE VAT RATE SUPPRESSED BY THE ASSESSEE, IT WOULD BE FAIR AND REASONABLE. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO 4% OF THE ALLEGED NON GENUINE PURCHASES. THE GROUND RAISED B Y THE ASSESSEE IS PARTLY ALLOWED. 9. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2020 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 27.11.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI