Income Tax Appellate Tribunal - Mumbai
Essel Marketing & Promotions Pvt. Ltd., ... vs Acit - 9(2)(2), Mumbai on 18 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "A", MUMBAI
BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND
SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER
ITA Nos.2760 & 2761/M/2016
Assessment Years: 2010-11 & 2011-12
M/s. Essel Marketing & The Assistant
Promotions Pvt. Ltd., Commissioner of Income
C-4109/10-C Wing, Tax 9(2)(2),
Oberoi Garden Estate, Vs. Aayakar Bhavan,
Chandivali Sakinaka, Mumbai - 400021
Andheri (E),
Mumbai- 400 072
PAN: AABCE 6463B
(Appellant) (Respondent)
Present for:
Assessee by : None
Revenue by : Shri Saurabh Deshpande, D.R.
Date of Hearing : 23.08.2017
Date of Pronouncement : 18.10.2017
ORDER
Per D.T. GARASIA, Judicial Member:
The above titled appeals have been preferred by the assessee against the orders dated 21.01.2016 and 27.01.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2010-11 & 2011-12.
ITA No.2760/M/2016 for A.Y. 2010-112. The brief facts of the case are that the assessee is engaged in business of trading and manufacturing sales promotional items and 2 ITA Nos.2760 & 2761/M/2016 M/s. Essel Marketing & Promotions Pvt. Ltd.
supplies material to FMCG companies. During the year the Assessing Officer (hereinafter referred to as the AO) found that assessee had made bogus purchases from following party:
Sr. Name of the party Amount of
No. Purchase (Rs)
1. K. Kundan Cargo Trading Pvt. Ltd. 4,54,105/-
Total 4,54,105/-
3. The assessee was asked to produce the above parties for verification. There was no compliance of notice under section 133(6). Therefore, the AO has made the addition on account of bogus purchases of Rs.4,54,105/-.
4. Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the claim by observing as under:
"6.3.31 As narrated earlier, the Ld. A.O. in this case has held that the parties from whom the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/ sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra) especially in the cases of CIT vs. Simit F. Sheth, Bholanath Poly Fab and Sanket Steel Traders (supra), I estimate the suppressed profit to the extent of 12.5% of the purchases made from the bogus entity, as the suppressed profit element embedded in such purchases. This estimation is in addition to the GP shown by the appellant. Accordingly, this ground of appeal is partly allowed."
5. We have heard the rival contentions of both the parties. Ld. D.R. relied upon the decision of the Tribunal, Ahmedabad Bench in the cases of Shwetambar Steels vs. ITO Ahmedabad and Ganesh Rice Mills vs. CIT (294 ITR 316). The facts in the present case show that assessee could not produce the parties from whom goods 3 ITA Nos.2760 & 2761/M/2016 M/s. Essel Marketing & Promotions Pvt. Ltd.
are stated to have been purchased. The suppliers were found to be engaged in providing bogus bill without actual dealing of goods. In this regard, the assessee has stated that they had submitted quantitative details of stock with respect of the sales with purchases from the parties during the assessment proceedings. The assessee has submitted the detail of corresponding sales in respect of the purchase from the said parties. As mentioned above the AO has never disputed or examined the aspect of sales receipts. Since the sales made by the assessee was not doubted or disputed by the AO and he has accepted the sales receipts of the assessee as it is, therefore, the AO cannot deny that purchases were not made by the assessee and the material was not used for its sales. What is under dispute is the purchases from the parties from whom bills have been taken and cheques have been issued to them. Purchases are not in dispute but the parties from whom purchase are shown to have been made are disputed and suspicious. The AO had made the addition as some of the suppliers were declared hawala dealers by the VAT Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion. Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done or findings recorded. There was no detailed investigation made by the AO himself. It is also found that the payments have 4 ITA Nos.2760 & 2761/M/2016 M/s. Essel Marketing & Promotions Pvt. Ltd.
been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. Merely because the suppliers did not appear before the AO or some confirmation letters were not furnished, one cannot conclude that the purchases were not made by the assessee. This view is supported by the decision of Nikunj Eximp Enterprises vs. CIT 216 Taxman 171 (Bom). To this extent, we are of the view that if the assessee has fulfilled its onus of making the payment by cheque and has supplied the addresses of the sellers then it cannot be presumed that supplier were bogus simply because the sellers were not found at the given address. There is a considerable time gap between the period of purchase transaction and period of scrutiny proceedings. The AO has not brought any material on record to show that there is suppression of sales. It is basic rule of accountancy as well as of taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales. Estimation of profit ranging from 12.5% to 15% has been upheld by the Hon'ble Gujarat High Court in the case of CIT vs Simit P Sheth 356 ITR 451 (Guj.). Respectfully following the decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth 38 taxman 385 (Guj), we do not find any infirmity in the order of the Ld. CIT(A). Hence, we confirm the order of the Ld. CIT(A).
6. In the result, assessee's appeal is dismissed.
5 ITA Nos.2760 & 2761/M/2016M/s. Essel Marketing & Promotions Pvt. Ltd.
ITA No.2761/M/2016 for A.Y. 2011-127. In this appeal, the AO found that assessee had made bogus purchases from following parties:
Sr. Name of the party Amount of
No. Purchase (Rs)
1. NB Enterprises 39,005/-
2. Liberty Trading Corporation 36,563/-
Total 75,568/-
8. The assessee was asked to produce the above parties for verification. There was no compliance of notice under section 133(6). Therefore, the AO has made the addition on account of bogus purchases of Rs.75,568/- from above parties.
9. Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the claim by observing as under:
"4.3.36 As narrated earlier, the Ld. A.O. in this case has held that the parties from whom the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/ sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra) especially in the cases of CIT vs. Simit F. Sheth, Bholanath Poly Fab and Sanket Steel Traders (supra), I estimate the suppressed profit to the extent of 12.5% of the purchases made from the bogus entity viz. B.B. Enterprises and Liberty Trading corporation totaling to Rs.75,568/-, as the suppressed profit element embedded in such parties.
5. In the result, the appeal of the assessee is partly allowed."
10. Since this appeal is identical to the facts of the assessee's own case for A.Y. 2010-11 and the same has already been dismissed as above, following the same ratio, we do not find any infirmity in the 6 ITA Nos.2760 & 2761/M/2016 M/s. Essel Marketing & Promotions Pvt. Ltd.
order of the Ld. CIT(A). Hence, we confirm the order of the Ld. CIT(A). Accordingly, this appeal of the assessee is dismissed.
11. In the result, both the appeals of the assessee are dismissed.
Order pronounced in the open court on 18.10.2017.
Sd/- Sd/-
(Manoj Kumar Aggarwal) (D.T. Garasia)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 18.10.2017.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.