NEETA PRAKASH AHUJA, MUMBAI V. ITO 21(2)(3), MUMBAI

ITA 8735/MUM/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0678 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-06-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 14-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 131; 69

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 8735 /MUM/ 2010 (ASSESSMENT YEAR 20 02 - 03 ) MS. NEETA PRAKASH AHUJA 1/4 S.S. S. NAGAR SION - KOLIWADA MUMBAI - 400 037. VS. ITO 21(2)(3 ) ROOM NO. 504 C - 10 PRATYAKSHKAR BHAVAN, BKC BANDRA, MUMBAI - 51. ( APPELLANT ) ( RESPONDENT ) PAN NO . AACPA2241J ASSESSEE BY SHRI M. SUBRAMANIAN DEPARTMENT BY S HRI M.C. OMI NINGSHEN DATE OF HEARING 22.5 . 201 7 DATE OF PRONOUNCEMENT 22. 5 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.9.2010 PASSED BY THE LEARNED CIT(A) - 32, MUMBAI AND IT RELATES TO A.Y. 2002 - 03. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION OF ` 9.49 LAKHS RELATING TO PURCHASE MADE U/S. 69 OF THE ACT. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT. 2 . WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSING OFFICER REOPENED THE ASSESSME NT OF THE ASSESSEE UPON RECEIVING INFORMATION THAT THE ASSESSEE HAS AVAILED ACCOMMODATION BILLS FROM THREE CONCERNS NAMELY M/S. MANOJ MILLS, M/S. SHREERAM SALES & SYNTHETICS & M/S. ASTHA SILK INDUSTRIES. THE ASSESSING OFFICER RELIED UPON THE STATEMENT GIVE N BY A PERSON NAMED SHRI RAKESHKUMAR GUPTA U/S. 131 OF THE ACT, WHEREIN HE HAD ADMITTED THAT THE ABOVE SAID CONCERNS HAV E BEEN ISSUING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS . DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD P URCHASED GOODS TO THE TUNE OF ` 9,49,758/ - FROM THE ABOVE SAID MS. NEETA PRAKASH AHUJA 2 CONCERNS . H ENCE THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHASES OF RS.9.49 LAKHS REFERRED ABOVE AND ASSESS ED THE SAME AS INCOME OF THE ASSESSEE. T HE LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. WITH REGARD TO THE VALIDITY OF REOPENING OF THE ASSESSMENT, WE NOTICED THAT THE ASSESSING OFFICER HAD SUFFICIENT REASON IN THE FORM OF INFORMATION RELATING TO ACCOMMODATION BILLS AND HENCE, W E ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE VALIDITY OF REOPENING OF THE ASSESSMENT. 4. WITH REGARD TO THE PURCHASES MADE FROM THE ABOVE SAID CONCERNS, LEARNED AR PLACED RELIANCE ON THE FOLLOWING CASE LAWS AND SUBMITTED THAT THE TRIBUNAL HAS DELETED AN IDENTICAL ADDITION RELATING TO THE PURCHASES MADE FROM THE ABOVE SAID THREE CONCERNS : - (A) SHRI JAYESH C. VASA (ITA NO. 656/MUM/2014 DATED 18.12.2015) (B) M/S. C. CHOTALAL & CO. (ITA NO. 3960 TO 3967/MUM/2012 DATED 24.9.2013 (C) M/S . NEW MEENA BAZAR INTERNATIONAL P. LTD. (ITA NO. 888/HYD/2012 DATED 11.1.2013) 4. LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED RELEVANT BILLS AND ALL THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS ONLY. THE ASSESSEE , PRODUCER O F READYMADE GARMENTS, HAS FULLY CONSUMED MATERIAL. HE FURTHER SUBMITTED THAT THE GROSS PROFIT RATE AND NET PROFIT RATE DISCLOSED BY THE ASSESSEE OVER THE YEARS ARE CONSISTENT AND COMPARABLE . HE SUBMITTED THAT THE A DDITION MADE BY THE ASSESSING OFFICER WOUL D RESULT IN ABNORMAL RATE OF GROSS PROFIT RATE AND NET PROFIT RATE , WHICH IS NOT PREVALENT IN THIS TRADE . ACCORDINGLY, HE SUBMITTED THAT THE ADDITIO N CONFIRMED BY THE LEARNED CIT(A) SHOULD BE DELETED. 5. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATI VE PLACED HIS STRONG RELIANCE ON THE ORDER PASSED BY THE LEARNED CIT(A). MS. NEETA PRAKASH AHUJA 3 6. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE CASE LAWS RELIED UPON BY THE ASSESSEE, WE NOTICED THAT THE ASSESSEES THEREIN WERE CARRYING ON THE BUSINESS OF TRADIN G IN TEXTILE GOODS, WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAS BEEN MANUFACTURING READYMADE GARMENTS BY USING TEXTILE GOODS. WE NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED STOCK RECORD S AND CONSUMPTION RECORD S. HOWEVER, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE COULD NOT HAVE PRODUCED READYMADE GARMENTS WITHOUT CONSUMING MATERIAL S . WE NOTICED THAT THE HYDERABAD BENCH OF THE TRIBUNAL HAS EXAMINED AN IDENTICAL ISSUE , VIZ., PURCHASES MADE FROM THREE CONCERNS REFERRED ABOVE . WE NOTI CED THAT THE HYDERABAD BENCH OF THE TRIBUNAL HAS EXTRACTED THE ORDER PASSED BY THE LEARNED CIT(A) IN THE ABOVE SAID CASE , WHEREIN THE ACTIVITIES OF SHRI RAKESHKUMAR GUPTA HAS ALSO BEEN CONSIDERED. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OB SERVATIONS MADE BY THE TRIBUNAL : - 4. THE CIT(A), AFTER CONSIDERING THE SUBMISSION AND ALSO OBTAINING REPORT FROM THE ASSESSING OFFICER, DELETED THE ADDITION BY HOLDING AS UNDER - '4.2 I HAVE CONSIDERED CAREFULLY THE FACTS AND EVIDENCE. FIRST AND FOREMOST THE ISSUE TO BE UNDERSTOOD IS THAT THERE ARE SOME PURCHASES WITH RESPECT TO THE THREE PARTIES OF MUMBAI WHOSE NAMES HAVE BEEN GIVEN ABOVE. THESE PURCHASES OF CLOTH ARE DEBITED BY THE APPELLANT IN ITS BOOKS OF ACCOUNT. IT IS IMPORTANT TO UNDERSTAND THAT TH E APPELLANT IS NOT A MANUFACTURER OF A COMMODITY WHICH INVOLVES ANY MANUFACTURING LOSS OR BURNING LOSS. IN THE CASE OF THE APPELLANT THERE HAS TO BE AN ACCURATE QUANTITATIVE TALLY VIS - - VIS ITS PURCHASE OF CLOTH/SAREES AND SALE THEREIN. IN CASE, PURCHASES WORTH RS.33 LAKHS ARE HELD TO BE BOGUS, THEN THERE IS NO POSSIBILITY OF SUCH SALES BEING AFFECTED. THE SALES CORRESPONDING TO THIS CLOTH HAVE TO BE BOGUS TOO. IN OTHER WORDS, IN SUCH A CASE THE MOST FUNDAMENTAL AND BASIC EVIDENCE IS WITH REGARD TO A QUANTI TATIVE TALLY VIS - A - VIS CLOTH/SAREES. IN CASE, THE QUANTITATIVE TALLY BETWEEN THE SALES AND PURCHASES (MINUS THE BOGUS PURCHASES) IS THERE THEN THE PURCHASES COULD BE HELD TO BE BOGUS. IN THE CURRENT CASE, NEITHER ANY QUANTITATIVE TALLY WAS CHECKED BY THE A SSESSING OFFICER NOR ANY ATTEMPT WAS MADE TO VALUE THE TALLY EVEN AFTER BEING ASKED FOR THE SAME DURING APPEAL PROCEEDINGS. WITHOUT THIS BASIC DOCUMENTATION, IT IS VERY DIFFICULT TO COME TO A CONCLUSION TO WHICH THE ASSESSING OFFICER HAS RECEIVED. 4.2.1 ON THE OTHER HAND, THE APPELLANT IS MAINTAINING PROPER BOOKS OF ACCOUNTS AND HAS CLAIMED THAT EACH AND EVERY SALE MATCHES THE MS. NEETA PRAKASH AHUJA 4 PURCHASE. THE ENTIRE CONCLUSION OF THE ASSESSING OFFICER IS BASED ON TWO THINGS I.E. INFORMATION SUPPLIED BY THE ITO, MUMBAI IN THE FORM OF STATEMENT OF ONE SRI RAKESH KUMAR GUPTA, PROPRIETOR OF MANOJ MILLS, SHOP NO.4, RAMGALI, PANKAJ MARKET, KALBA DEVI, MUMBAI - 400 002 AND THE FACT THAT THE 3 CONCERNS DID NOT RESPOND TO THE LETTERS OF THE ASSESSING OFFICER IN THIS REGARD. I HAVE NOTED THAT THE ASSESSING OFFICER WROTE LETTERS TO MANY SELLERS WITH REGARD TO THE PURCHASERS OF SAREES AND CLOTH DEBITED IN ITS BOOKS BY THE APPELLANT. ALL THE SELLERS CONFIRMED THEIR SALES MADE TO THE APPELLANT. MERELY BECAUSE THERE WAS NO RESPONSE FROM THE 3 V ENDORS IT DOES NOT IMPLY AT ALL THAT THE PURCHASES WERE BOGUS. IN FACT, AS IS EVIDENT FROM THE STATEMENT MR.RAKESH KUMAR GUPTA, THE 3 CONCERNS DEFINITELY EXIST AT THE ADDRESS MENTIONED. THE ASSESSING OFFICER DID NOT MAKE ANY EFFORT TO VERIFY THE ADDRESSES, THE EXISTENCE OF THE CONCERNS OR ANY OTHER INFORMATION IN SPITE OF FACT THAT ALL 3 CONCERNS ARE ASSESSEES WITH PAN GIVEN. THERE CAN BE MANY REASONS FOR NOT RESPONDING. THIS BY ITSELF CANNOT LEAD TO THE CONCLUSION THAT THE PURCHASES FROM THESE PARTIES ARE BOGUS. 4.2.2 LOOKING AT THE STATEMENT OF SRI RAKESH KUMAR GUTPA, I FIND THAT HE CLAIMS TO BE ONLY A PROVIDER OF M/S. NEW MEENA BAZAR INTERNATIONAL P. LTD., HYDERABAD ACCOMMODATION ENTRY BILLS TO VARIOUS PARTIES. HE CLAIMS THAT HE WAS ONLY CHARGING 1% COMMI SSION ON THE BILLS AND WAS NEVER DOING ANY BUSINESS OF TRADING IN CLOTH. HOWEVER, IT IS NOTICED THAT HE WAS GIVEN AN OVERDRAFT FACILITY BY THE BANK AGAINST HIS STOCK. IT IS AGAINST HUMAN PROBABILITY THAT A PERSON WHO IS ONLY PROVIDING ACCOMMODATION ENTRIES SHOULD REQUIRE AN OVERDRAFT FACILITY FOR HIS BUSINESS. WHY WOULD SUCH PERSON REQUIRE CASH WHEN THE ONLY MODUS OPERANDI IS TO ACCEPT THE CHEQUE, DEPOSIT IN THE BANK AND RETURN 99% OF THE MONEY IN CASH? AN OVERDRAFT FACILITY AND USE OF THAT FACILITY IMPLY T HAT THE PERSON IN QUESTION I.E. RAKESH KUMAR GUPTA WAS CONDUCTING BUSINESS WHERE HE REQUIRED CASH AS WORKING CAPITAL. THIS IS ALSO COLLABORATED WITH THE ACTUAL PRESENCE OF CLOTH IN HIS PREMISES. FURTHER, NO BANK PROVIDES OVERDRAFT FACILITIES AGAINST STOCK UNLESS THE STOCKS ARE PERIODICALLY CHECKED PHYSICALLY. A MERE BOGUS BALANCE SHEET IS NOT SUFFICIENT FOR ANY BANK TO GIVE OVERDRAFT FACILITY. FROM THESE FACTS THE OBVIOUS CONCLUSION IS THAT SRI RAKESH KUMAR GUPTA WAS DEFINITELY CONDUCTING THE BUSINESS OF TR ADING IN CLOTH ALTHOUGH HE MAY HAVE ALSO PROVIDED CERTAIN ACCOM M ODATION ENTRIES TO PEOPLE. 4.2.3. FURTHER, FROM THE STATEMENT OF SRI GUTPA IT IS CLEAR THAT HE HAD PROVIDED CASH LOAN OF RS.1.4 CRORES TO ONE SRI MADAN LAL BAGICHA. HE ALSO BORROWED F R O M VARIOU S BANKS FOR BUSINESS PURPOSES. THESE FACTS CLEARLY INDICATES THE PRESENCE WELL ENTRENCHED BUSINESS ACTIVITY AND NOT JUST HAWALA ACCOMMODATION ENTRY WORK. THESE FACTS ARE ALSO COLLABORATED BY RS.1.4 CRORE INVESTMENTS IN IMMOVABLE PROPERTIES, HUGE AMOUNT OF RENOVATION WORK CARRIED OUT IN RESIDENCE AND OTHER DISCREPANCIES. MS. NEETA PRAKASH AHUJA 5 4.2.4 FROM THE ABOVE FACTS, THE OBVIOUS CONCLUSION IS THAT SRI RAKESH KUMAR GUPTA WAS FAR MORE THAN JUST AN ACCOMMODATION ENTRIES PROVIDER. HE DEFINITELY TRADED IN CLOTH WITH A WELL - ESTABLIS HED BUSINESS. 4.2.6 I FURTHER FIND THAT THE APPELLANT HAS PROVIDED NOT JUST BOOKS OF ACCOUNT BUT ALSO COPIES OF INVOICES AND LORRY RECEIPTS AND OTHER EVIDENCE WHICH WOULD ESTABLISH THAT THE GOODS WERE ACTUALLY DELIVERED TO THE APPELLANT'S PREMISES. THE ASS ESSING OFFICER HAS NEITHER VERIFIED NOR COMMENTED ON THIS EVIDENCE. THIS IS FUNDAMENTAL EVIDENCE SHOWING THE DELIVERY OF GOODS IN THE HANDS OF THE APPELLANT. 4.2.7 FROM THE ABOVE FACTS AND CIRCUMSTANCES, IT IS VERY DIFFICULT TO CONCLUDE THAT HUGE AMOUNTS O F PURCHASES MADE BY THE APPELLANT ARE BOGUS ESPECIALLY IN VIEW OF THE FACT THAT THERE IS NO QUANTITATIVE TALLY SHOWING THE DIFFERENCE IN METERS OF CLOTH, THERE IS EVIDENCE SHOWING DELIVERY OF CLOTH AND ALL OTHER DETAILS AS DISCUSSED ABOVE. THEREFORE, I CAN NOT SUPPORT THE CONCLUSION OF THE ASSESSING OFFICER. .....' 5. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND LEARNED COUNSEL FOR THE ASSESSEE. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). FIRST OF ALL, THERE IS NO DENIAL OF THE EXISTENCE OF THE ABOVE THREE PARTIES, AS THE ASSESSING OFFICER CONDUCTED SURVEY AND RECORDED STATEMENTS. THEREFORE, THE PARTIES CANNOT BE CONSIDERED TO BE BOGUS. WITH REFERENCE TO NON - RESPONSE BY THEM, AS RIGHTLY POINTED OUT BY THE CIT(A), THERE COU LD BE MANY REASONS FOR NOT RESPONDING. HOWEVER, ASSESSEE, AS NOTED ABOVE, HAS PROVIDED ALL THE VOUCHERS, TRANSPORTATION BILLS, INVOICES ALONG WITH DETAILS OF PAYMENTS MADE BY WAY OF CHEQUES, WHICH ARE NOT DISPUTED. FURTHER, ASSESSEE IS ALSO ABLE TO ESTABLI SH THAT THE GOODS RECEIVED WERE IN FACT SOLD AND THE SALES WERE NOT DISTURBED. IN VIEW OF THIS, WE DO NOT SEE ANY REASON TO DISTURB THE FINDINGS OF THE CIT(A), AS THE REVENUE HAS NOT BEEN ABLE TO ESTABLISH THAT THE SALES ARE INDEED BOGUS AND THOSE PARTIES HAVE GIVEN ACCOMMODATION BILLS IN THE CASE OF THE ASSESSEE. IN THE ABSENCE OF ANY EVIDENCE ON RECORD TO DISTURB THE FINDINGS OF THE CIT(A), WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 7. IN THE INSTANT CASE, WE FIND THAT THE A SSESSEE HAS NOT PROVIDED ANY EVIDENCE IN RESPECT OF TRANSPORT OF MATERIAL BUT LEARNED AR SUBMITTED THAT THE MATERIALS WERE DELIVERED AT ITS DOOR , WHICH APPEARS TO BE REASONABLE EXPLANATION BY CONSIDERING THE TRADE PRACTICE . HOWEVER, S INCE THE ASSESSEE HAS NOT MAINTAINED STOCK RECORDS AND CONSUMPTION RECORDS, SHE COULD NOT MAKE ONE TO ONE RECONCILIATION OF PURCHASES WITH THE CONSUMPTION. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT AN ADDITION OF 10% OF THE ALLEGED BOGUS MS. NEETA PRAKASH AHUJA 6 PURCHASES WOULD MAKE GOOD THE R EVENUE LEAKAGE, IF ANY , INVOLVED IN THESE PURCHASES . WE ARE TAKING THIS VIEW SINCE THE ASSESSEE HAS BEEN CONSISTENTLY DECLARING COMPARABLE RATE OF GROSS PROFIT AND NET PROFIT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO 10% OF THE ALLEGED BOGUS PURCHASES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 22 . 5 . 201 7. SD/ - SD/ - (AMARJIT SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 22 / 5 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUM BAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI