DCIT, CIRCLE-2(1)(2), SURAT V. M/S. SHANTAI EXIM LIMITED, SURAT

ITA 92/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2512 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-01-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 25-05-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Set aside
• Section: 145; 263; 271(1)(c); 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.92/SRT/2020 (AY 2012-13) (Hearing in Virtual Court) The Deputy Commissioner of Income Tax, Circle-2(1)(2), Surat. Vs Shantai Exim Limited, Plot No.435, Sawlani Compound, GIDC, Pandesara, Surat. PAN: AAECM 1115 D Appellant/ Revenue Respondent/ Assessee Assessee by Ms. Chaitali Shah – CA Revenue by Shri H.P.Meena – CIT(DR) Date of hearing 18/01/2022 Date of pronouncement 18/01/2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the Revenue is directed against order of ld.Commissioner of Income Tax (Appeals)-2, Surat dated 28.01.2020 for the A.Y. 2012-13. The Revenue raised following grounds of appeal: “(i) On the facts and circumstances of the case and in Law, the Ld.CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the Act of Rs.13,19,15,190/- on account of bogus purchases despite of the fact that quantum addition was confirmed by the Ld. CIT(A). (ii) On the facts and circumstances of the case and in Law, the Ld.CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the Act on the basis of Hon’ble ITAT’s order without appreciating the detailed findings of the AO in the assessment order/penalty order establishing the non-genuinity of the purchases made from Damor family. (iii) On the facts and circumstances of the case and in Law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that of the Assessing Officer’s order may be restored. ITA No.92/SRT/2020 (AY 2012-13) Shantai Exim Limited, Surat 2 (iv) On the facts and circumstances of the case and in law, the appellant craves its right to add, alter, amend, deleted, any of the ground or grounds of appeal.” 2. Brief facts of the case are that the Assessing Officer (AO) while passing the assessment order under section 143(3) of the Act on 30.03.2015 besides other addition made addition on account of bogus purchases of Rs.38.81 crore. Aggrieved by the additions the assessee filed appeal before the ld. CIT(A) wherein the addition was upheld. On receipt of order of ld. CIT(A), the AO levied penalty under section 271(1)(c) of the Act on the addition on bogus purchase, vide order dated 28.02.2019. The AO levied penalty of Rs. 13,19,15190/- being @100% of tax sought to be evaded on the addition. Aggrieved by the penalty levied under section 271(1)(c) of the Act, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) deleted the entire penalty by holding that in quantum assessment, the assessee filed appeal before the Tribunal in vie ITA No.273/SRT/2018 wherein the entire addition on account of bogus purchase, on which penalty was levied has been deleted vide order dated 27.02.2019, therefore, entire penalty was deleted. Aggrieved by the order of ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 3. We have heard the submission of ld.CIT-DR for the Revenue and ld.Authorised Representative(ld.AR) of the assessee. At the ouset of hearing ITA No.92/SRT/2020 (AY 2012-13) Shantai Exim Limited, Surat 3 the ld AR for the assessee submits that the addition on the basis of which penalty was levied by the AO has been deleted by the Tribunal in ITA No.273 & 436/SRT/2018 dated 27.08.2019. The ld.CIT(A) while deleting the penalty followed the order of Tribunal. The ld.AR submits that once addition the entire addition on account of bogus purchase has been deleted, therefore, the penalty levied under section 271(c) of the Act on such addition would not survive. 4. On the other hand, the ld.CIT-DR for the Revenue supported the order of AO. 5. We have considered the submission of both the parties. We find that the AO while passing the assessment order made addition on account of bogus purchase of Rs.38.81 crore. Initially, the additions were upheld by the ld.CIT(A), however, on further appeal before the Tribunal, the entire addition on account of bogus purchase was deleted by our predecessor by passing the following order: “7. We have considered the rival submissions and perused the material available on record. The Hon’ble Gujarat High Court in the case of Pr. CIT vs., Tejua Rohitkumar Kapadia [2018] 91 taxmann.com 324 (Gujarat) held as under : “Where purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque, seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, Assessing Officer was not justified in treating said purchases as bogus under section 69C.” 7.1. The aforesaid Judgment has been confirmed by the Hon’ble Supreme Court reported [2018] in 94 taxmann.com 325 (SC). The ITAT, Delhi Bench, in the case ITA No.92/SRT/2020 (AY 2012-13) Shantai Exim Limited, Surat 4 of Bhatia Diamonds Pvt., Ltd., vs., ITO, Ward-4(4), New Delhi, vide Order Dated 24.06.2019 in para-8 following its earlier order in the case of same assessee, in which it was held in para-8 as under : “8. We have considered the submissions of both the parties and gone through the material on record. It is an admitted fact that an identical issue have been considered by ITAT, Delhi SMC-Bench in the case of the same assessee in preceding A.Y. 2011-2012 and similar addition have been deleted on merits and this fact is also stated by the Ld. D.R. that facts are identical in assessment year under appeal as have been considered in A.Y. 2011-2012. In the present case also, two of the parties have denied making any sales to the assessee. No entries of such sales have been recorded in the books of account. Two parties have admitted to have made sales to the assessee and filed reply under section 133(6) of the I.T. Act, 1961, supported by bill and Affidavit, on which, no adverse inference have been drawn by the A.O. All the payments of purchases have been made through banking channel which have not been doubted by the authorities below. The assessee also filed the quantitative details of opening stock, purchase goods, manufacture, sales made and closing stock at Page-25 of the PB which also supports the explanation of assessee that he has made genuine purchases which have been sold later on. These facts clearly show that there was no basis for the authorities below to consider it to be a case of bogus purchases. It is also an admitted fact that statement of Shri Rajendra Jain was not provided to assessee nor statement was subjected to cross-examination on behalf of the assessee. He has also retracted from his earlier statement. Therefore, there was no basis to make any addition against the assessee. The issue is, therefore, covered by the Order of ITAT, Delhi SMC-Bench in the case of same assessee for the A.Y. 2011-2012 Dated 05.04.2019 (supra). In view of the above, we set aside the Orders of the authorities below and delete the entire addition. Ground Nos. 3 to 7 of the appeal of the Assessee are accordingly allowed.” 7.2. In the case of M/s. Nangalia Fabrics Pvt. Ltd., (supra), the Hon’ble Gujarat High Court confirmed the findings of the Tribunal in which the Tribunal accepted the submissions of the assessee that purchases are supported by bills, entries in the books of account and payments are made by cheque and quantitative details provided. The Hon’ble Gujarat High Court in the case of M.K. Brothers (supra), held that “amounts representing purchases could not be added as income as there was no evidence to conclude that the transactions were bogus.” Considering the facts of the case in the light of above decisions, it is clear that assessee made purchases from Damor family concerns which are duly supported by bills and vouchers. All the payments are made to Damor family concerns through account ITA No.92/SRT/2020 (AY 2012-13) Shantai Exim Limited, Surat 5 payee cheques. The Damor family concerns have confirmed all the transactions with the assessee before the authorities below. The Damor family concerns have filed their income tax returns reflecting the transaction with the assessee, and also have got their books of account audited by an independent auditor. The assessee undisputedly made the exports of all the finished purchase goods which includes impugned purchases which have not been doubted by assessing officer. Without purchases, assessee could not have made the exports. The explanation of assessee as regards exports supported by all the documentary evidences which have not been disputed. The assessee filed confirmation statement of all the purchase parties. The assessing officer in the remand proceeding also examined the purchase parties and their auditor, who have confirmed the genuineness of the transaction. There is no evidence on record to prove that amount of purchases given to Damor family have come back to the assessee. In survey, no incrementing material was found to prove that assessee made bogus purchases. Whatever evidence was found during the course of survey i.e., bills and invoices of purchases have already been recorded in the books of account. The sellers are also assessed to tax and have declared the transaction in their returns which have been accepted by the Revenue Department. The seller party have also replied to the notice under section 133(6) of the Income Tax Act. The assessing officer did not reject books of account of assessee under section 145 of the Income-Tax Act. If the aforesaid addition is confirmed, according to explanation of assessee, it would give gross profit rate of 41.4 % which is impossible to earn in this line of trade. The assessing officer accepted in the remand report that assessee maintained stock quantitative details, in which, no deficiency have been pointed-out. The assessing officer analysed the KYC documents of bank statements of Damor family and their bank statements and nothing adverse was found against them or against the assessee. The assessee produced complete details before the authorities below in which no deficiency have been pointed-out. The assessee need not to prove source of the source i.e., purchase made by the purchaser parties i.e., Damor concerns. The assessee also established common practice in Textile Sector in Surat for supply of goods at door step of consumer. Thus, the initial burden upon assessee to prove the genuine purchases have been discharged by assessee. The assessee has fully discharged its onus of proving the purchases by giving names, addresses, confirmation, PAN, bills and invoices, details of payment by account payee cheques, ITRs and Audit reports of its suppliers. Merely because further suppliers to Damor family did not respond to the notice of the assessing officer is no ground to reject the explanation of assessee. Since in the case of assessee no incriminating material was found to prove bogus purchases, therefore, the decision in the case of M/s. M.K. Proteins Limited (supra), would not apply. It may also be noted here that in A.Y. 2010-11 the assessing officer accepted similar purchases in the scrutiny assessment order under section 143(3) of the Income Tax Act on the identical facts. Similarly, seized material was also considered in that year. The Ld. CIT, Surat, however, did not agree with the assessment order of the ITA No.92/SRT/2020 (AY 2012-13) Shantai Exim Limited, Surat 6 A.O. and initiated revision proceedings under section 263 of the I.T. Act. However, the Order of the Ld. CIT under section 263 of the I.T. Act for the A.Y. 2010-2011 have been set aside and quashed by the ITAT, Ahmedabad Bench in the case of same assessee vide Order Dated 19.02.2016. Therefore, issue is covered on identical facts in favour of assessee by the aforesaid decision of the Tribunal. Considering the totality of the facts and circumstances of the case and above discussion, we do not find it to be a fit case where even gross profit rate of 5% be applied against the assessee as per Judgment of Hon’ble Gujarat High Court in the case of Mayank Diamonds Pvt. Ltd., (supra). In view of the above discussion, we set aside the Orders of the authorities below and delete the entire addition. Ground No.1 of the appeal of Assessee is accordingly allowed.” 6. Considering the fact that once addition on the basis of which the penalty was levied has been deleted, therefore, penalty levied under section 271(1)(c) of the Act will not survive. The ld.CIT(A) while deleting the penalty followed the order of the Tribunal dated 27.08.2019, therefore, we affirm the order of ld.CIT(A). No contrary fact or law is brought to our notice to take other view. 7. In the result, appeal of the Revenue is dismissed. Order announced on 18 th January, 2022 in open court while hearing the appeal. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 18/01/2022 /SGR* Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order / / TRUE COPY / / Sr.Pvt. Secretary, ITAT, Surat