Kohinoor Sarees(P) Ltd, Hooghly V. ACIT, Kolkata

ITSSA 138/KOL/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4866 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-11-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 22-08-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 131; 132; 153A; 133(6)

Judgement Text

IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Rajesh Kumar, Accountant Member I.T.(SS)A. Nos. 138 & 139/KOL/2023 Assessment Years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited,..............Appellant Village Kalachara, P.O. Chanditala, Hooghly-712702 [PAN: AACCK7784J] -Vs.- Assistant Commissioner of Income Tax,..Respondent Central Circle-3(4), Kolkata, Aayakar Bhawan Poorva, 110, Shantipally, Kolkata-700107 Appearances by: Shri Sunil Surana, A.R., appeared on behalf of the assessee Shri Rakesh Kumar Das, CIT (DR), appeared on behalf of the Revenue Date of concluding the hearing : November 29, 2023 Date of pronouncing the order : November 30, 2023 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeals before the Tribunal against the separate orders of ld. Commissioner of Income Tax (Appeals)-21, IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 2 Kolkata dated 10.08.2023 passed on the respective appeals of the assessee for A.Ys. 2013-14 and 2015-16. 2. Though the assessee has taken three grounds of appeal in each year, but in brief, its grievances is that ld. CIT(Appeals) has erred in confirming the addition of Rs.1,26,170/- and Rs.6,63,425/- for A.Y. 2013-14 and 2015-16 respectively. The other two grounds in both the assessment years are peripheral submission to the main ground of appeals. 3. Ld. Counsel for the assessee has submitted that the issues involved in both the appeals are identical and, therefore, he argued on the basis of facts and circumstances available in A.Y. 2015-16. 4. Brief facts of the case are that the assessee at the relevant time was engaged in the job work of Saree Printing and Dealer in Cotton Printed Sarees. A search under section 132 of the Income Tax Act was carried out at the residential premises of the Directors as well as the business premises of the assessee. A notice under section 153A was issued on both the years and the assessee has filed its return of income in both the years. The ld. Assessing Officer has partly disallowed the purchase expenses debited in the accounts. The discussion made by the ld. Assessing Officer in A.Y. 2015-16 reads as under:- IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 3 “5. During the year under consideration, the assessee company has debited purchase of Rs. 14,11,23,536/- in its P&L A/c. To verify the genuineness, letters u/s 133(6) were issued to various parties. Further, summons u/s 131(1) was issued to M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading as transaction were suspicious as per reports of investigation wing. But, no compliance were made by those parties. Inspector of this Office was deputed to verify the existence of these parties. In enquiry report, the inspector has reported parties namely M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading are not found at the address 132/1, M.G. Road, 5 th Floor, Kol-7 & 132/1, M.G.Road, Kaveri House, 4 th Floor, 3, Baikunth Sen Lane, 132/1, M.G.Road, 4 th Floor respectively. In this regard, a show cause letter was issued to the assessee vide letter No.DCIT,CC-3(4)/Kol/Kohinoor Sarees/2017- 18/1234 dated 22.12.2017 regarding the transactions with M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading Trading are not genuine and why not transactions/purchase made with these party should be treated as ingenuine. The A/R of the assessee-company has submitted his reply vide reply dated 26.12.2017 and filed before the undersigned on 26.12.2017. The relevant portion is: - “...........it might be possible that the office/shop/warehouse of the particular party could not be located which may be due to various reasons. The entity might have been closed at that particular time or the Inspector could not get proper information from the caretaker of the Building...... the purchases of the goods were made by the purchase manager of the company directly. It was he only, who had contacts with the party and control over them. Unfortunately, the said personnel has left the company. Since, then the company did not have any transactions with those parties and there was no interaction with them that the transacting are fully disclosed in our Books of Account and the payment have been made through proper Banking Channel.... That the goods purchased from those parties are either sold to parties or lying in stock at the end of the year, which proves that every sale/stock must have been backed by some purchases, which can not be disputed. In support of our above statement we file herewith the following IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 4 Ledger copy of the above parties as appearing in our books for all the years, copy of Bank statement highlighting those transactions, quantity statement mentioning opening stock, purchase , sale and closing stock..........” After being carefully examined the submission of the assessee-company dated 26.12.2017, it is clear that the genuineness of the above party is not clear. As discussed above, after issuing summons u/s 131, the above mentioned creditor has not appeared and the assessee has also unable to produce the above mentioned parties. The Inspector of this Office was also reported vide her report dated 22.12.2017 that M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading are not found at the given address. The A/R of the assessee-company has submitted quantitative details of stock with purchase and sale month-wise. The assessee-company has produced purchase bills and sale bills in respect of purchase and sale made during the year. The same has been test checked. The assessee stressed upon the facts that all purchase and sale have been made through banking channel. Therefore, purchase creditors cannot be bogus even some purchase creditors are not in existence at present due to some reasons. But, the assessee failed in segregating exact items which were purchased from M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading and corresponding sale of that item. Due to voluminous items, it is not possible to quantify exactly that which stock were purchased from M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading and corresponding sale of these items. Under these circumstances, the purchase of Rs. 2, 55, 16,379/- could not be substantiated as the existence of creditor M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading are doubtful. The investigation wing of the department doubted regarding profitability shown by the assessee company. In its report, it was observed that purchase & sale were made by the concerns in kachcha and pakka books and the profit margin in kachcha books should be roughly about 20 to 25% on these transactions. IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 5 As the transaction with M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading are doubtful, hence gross profit on that transaction of Rs. 2, 55, 16,379/- is estimated at the rate^of 25% of the corresponding sale of that purchase. In the aforesaid assessment year, the assessee-company has taken overall gross profit of 9.56%. Hence, I am adding balance (25-9.56)% i.e 15.44% gross profit on these transactions of M/s Alokit Comotrade Pvt. Ltd., M/s Riddhi Siddhi Creation, M/s Sidheshwari Vinimay Pvt. Ltd. & M/s Shiv Shakti Trading. Hence, gross profit of Rs.39,39,729/-(15.44% of Rs.2,55,16,379/-) is estimated and added back to the total income of the assessee- company. Penalty u/s 271(1)(c ) is being initiated separately for furnishing inaccurate particular of income. Addition:- 39,39,729/-“. 5. Dissatisfied with the disallowance, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. 1 st Appellate Authority has substantially concurred with the ld. Assessing Officer but reduced the quantification of estimated profit. The ld. Assessing Officer has estimated the disallowance out of purchases at 15.44%, which has been restricted by the ld. CIT(Appeals) to 12.16%. In other words, an addition on account of disallowance of expenditure from four vendors has been confirmed at 2.6% of the expenditure debited by the assessee. The simple reason for estimating this disallowance was that the assessee itself has shown the profit at 9.56% in this year. However, in A.Y. 2016-17, the assessee has shown the profit at 12.16%. The ld. CIT(Appeals) has adopted this figure for estimating the profit element embedded in the purchases made by the assessee from four unknown parties. IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 6 6. While impugning the disallowances, ld. Counsel for the assessee has emphasized that summons issued under section 131 were served on all these four vendors, though they have not responded. He further contended that notices issued under section 133(6) were also served on the given addresses. The accounts of the assessee were audited. The ld. Assessing Officer did not find mismatch on quantitative details, i.e. purchase and sales were tallied and no discrepancy could be detected in the record inspite of search conducted at the premises of the assessee. On certain occasion it might be very difficult for a businessman to always locate the suppliers of the goods. Hence on the basis of non-availability of the suppliers, the purchases debited by the assessee ought not to have been doubted by the ld. Assessing Officer. The ld. Counsel for the assessee further contended that the books of account have not been rejected and if that be so then, was no occasion to estimate the profit over and above the one disclosed by the assesese qua four suppliers of the goods. The ld. Counsel for the assessee has relied upon the judgment of the Hon’ble Calcutta High Court in the case of Diagnostics –vs.- Commissioner of Income Tax & Another reported in 334 ITR 111 (Cal.). On the strength of this judgment, he contended that the payments were made through banking channel therefore purchases ought not to be doubted. Thereafter he relied upon the judgment of the Hon’ble High Court in the case of Crystal Networks (P) Limited –vs- Commissioner of Income Tax in ITA 158 of 2002 dated 29.07.2010. He also relied upon the order of ITAT dated 18.10.2023 in ITA No. 729/KOL/2023 in the IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 7 case of Bulu Ghosh –vs.- ITO, Ward-33(2), Kolkata. He placed on record copies of all these judgments. Apart from these decisions, the assessee has placed on record copy of written submission filed before the ld. Assessing Officer, wherein large numbers of judgments have been referred by the assessee. 7. On the other hand, ld. D.R. relied upon the orders of the revenue authorities. 8. We have duly considered the rival contentions and gone through the record carefully. We have reproduced the relevant part of the assessment order and a perusal of that would reveal that total purchases debited by the assessee are of Rs.14,06,58,076/-. The ld. Assessing Officer has not doubted the total purchases or the nature of business carried out by the assessee. He was of the view that he received information about the veracity of four vendors and, therefore, he directed the assessee to buttress its claim regarding genuineness of the expenditure debited by it towards purchases from these four vendors. The assessee could not have submitted anything specifically. It only relied upon on peripheral aspects that the accounts are audited, quantitative tally matched, namely sales and purchases. The ld. Assessing Officer has confronted the assessee that it has issued notice under section 133(6) and invited comments alongwith the evidences from these four entities but they have not supplied. Similarly he issued summons under section 131 of the Income Tax Act for their appearance IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 8 before him but they did not appear. The ld. Assessing Officer thereafter under the compelling circumstances deputed the Inspector to visit the premises of these four concerns, but they were not found at the given address. The ld. Assessing Officer thereafter confronted the assessee with the above material. The assessee could dispel the belief of ld. Assessing Officer by filing a confirmation from these parties, their address and information from their bank accounts. The assessee has also made purchases in A.Y. 2013-14. It would suggest that continuously it has been making purchases and if vendor is a regular supplier, then, there could not be any hitch at the end of the assessee to locate them. At the most, the assessee could locate anyone of them. It is also to be kept in mind that either the vendors would have contacted the assessee for supply of their goods or the assessee who would have contacted them for supply of the goods. Without any contact with each other, it is highly unreliable that goods must have been reached to the premises of the assessee. Therefore, there was no reason to reject the books of account because by and large genuineness of the goods was not in dispute. The dispute was very limited whether, the purchases were actually made from these four parties or bills were taken from these parties and actual purchases were sourced from such other concerns. It is to be appreciated that Revenue did not find discrepancy in the quantitative purchases, vis-à-vis sales. It means if purchases were not made from these four parties and made from some other entities on kachha bills, then, quantitative tally will match. It can be explained in some other words. An assessee made purchases IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 9 of 100 Kg. from ‘A’ & ‘B’ as reflected in the accounts, but actually purchases were made from ‘X’ & ‘Y’. In such situation, quantitative tally will match but genuineness of the purchases from ‘A’ & ‘B’ remained unproved. This could be an exercise for inflation of the purchases or this could be an exercise for avoiding local taxes, namely sales tax or GST etc. Faced with this situation, ld. Assessing Officer has estimated the profit on the purchases made from four concerns at a little high pedestal, then the regular profit shown by the assessee from its total purchases. The ld. 1 st Appellate Authority has again reduced the estimation of such purchases and restricted to a reasonable level i.e. 12.16%. This figure has been adopted by the ld. CIT(Appeals) on the basis of profit declared by the assessee in immediately subsequent year. The ld. 1 st Appellate Authority has reproduced the details of profits shown by the assessee in different assessment years in a tabulated form on the last but one page on the impugned order of ld. CIT(Appeals). 9. As far as the decisions relied upon by the ld. Counsel for the assessee is concerned, we find that in both these decisions, factual issue is being adjudicated by the Hon’ble High Court. Though Hon’ble High Court has accepted the genuineness of the purchases but no ratio of law is being laid down in both the judgments. We do not know what type of enquiry was made by the ld. Assessing Officer. In the present case, ld. Assessing Officer has not only issued notice under section 133(6) but also issued summons under section 131(1). The ld. Assessing Officer IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 10 thereafter deputed the Inspector to locate these suppliers and contrary to this evidence, assessee failed to submit anything except taking peripheral documents that accounts are audited, notices were served on the premises but were not returned back to the ld. Assessing Officer, that does not mean proving of the existence of those concerns. Both the Revenue Authorities have concurred on the factual finding. Thereafter they have exercised the discretion of estimating the profit. We do not see any reason to interfere in the finding of the ld. 1 st Appellate Authority. Hence, both the appeals are rejected. 10. In the result, both the appeals of the assessee are dismissed. Order pronounced in the open Court on 30/11/2023. Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 30 th day of November, 2023 Copies to :(1) Kohinoor Sarees Private Limited, Village Kalachara, P.O. Chanditala, Hooghly-712702 (2) Assistant Commissioner of Income Tax, Central Circle-3(4), Kolkata, Aayakar Bhawan Poorva, 110, Shantipally, Kolkata-700107 (3) Commissioner of Income Tax (Appeals)-21, Kolkata; (4) Commissioner of Income Tax- , Kolkata; (5) The Departmental Representative IT(SS)A Nos. 138 & 139/KOL/2023 Assessment years: 2013-2014 & 2015-2016 Kohinoor Sarees Private Limited 11 (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.