Income Tax Appellate Tribunal - Mumbai
Acit 2(2)(2), Nashik vs Metro Shoes Ltd, Mumbai on 7 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "C", MUMBAI
Before Shri P K Bansal, Vice President &
Shri Pawan Singh, Judicial Member
ITA No. 4646/Mum/2016
Assessment Year : 2010 - 2011
ACIT 2(2)(2) Metro Shoes Ltd
Mumbai Metro House, 3rd Floor,
Vs. Colaba Causeway,
Mumbai 400 001
PAN : AAACM4754E
(Appellant) (Respondent)
Appellant By : Shri Saurabh Deshpande
Respondent By : Shri Dinesh Wagh
Date of Hearing : 07.08.2017 Date of Pronouncement : 07.08.2017
ORDER
Per Pawan Singh, Judicial Member:
This appeal by the Revenue u/s. 253 of the I T Act, is directed against the order of the CIT(A)-5, Mumbai, dated 05.04.2016 for A Y 2010-11. The Revenue has raised the following grounds of appeal:
"1. The order of the CIT(A) is opposed to law and facts of the case
2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in restricting the addition on account of bogus purchases to the element of profit embedded in the purchase, without appreciating htat these hawala dealers have declared on oath that they have not conducted any genuine business and have not given any delivery of goods and even after 2 ITA No.4646/Mum/2016 M/s Metro Shoes Ltd repeated opportunities being given the assessee could not prove that the purchases were genuine"
2. The brief facts of the case are that the assessee is engaged in the business of retailing of shoes. It filed its return of income on 27.09.2010, declaring total income at ` 40,99,01,206/-. The return was processed u/s. 143(1) on 05.05.2011. Subsequently, the assessment was re-opened u/s. 147 and notice u/s. 148 was issued on 15.12.2013 for the following reasons:
"Information received from DGIT (lnv) that the assessee is involved in booking of bogus purchase for FY 2010-11 from the following Hawala Operators.
The list of hawala operators (bogus bills issuers) was identified by Sales Tax Department, Statements of the Hawala Operators have also been recorded by the Sales Tax Department and the information has been shared with the office of the DGIT(lnv.) Mumbai. The Hawala Billers are mainly identified on the Registration of VAT No. received by them. The office of DGIT (lnv.) has intimated that the assessee Metro Shoes Ltd. has indeed booked bogus purchase (i.e. without delivery of goods) from following Hawala Operators.
Vat No Name of the Hawala Period (FY) Bill amount
Operator (Rs.)
27440688212V Tulsiani Trading Pvt. 2009-10 54,91,212/-
Ltd.
27870165388V Big Step International 2009-10 5,81,597/-
60,72,809/-
In view of the above, I have reasons to believe that the income of Rs. 60,72,809/-for the A.Y. 2010-11 has escaped assessment within the meaning of section 147 of the I.T. Act.
3. In response to the notice u/s. 148, the assessee attended the proceedings and filed various details as required by the Assessing Officer. 3 ITA No.4646/Mum/2016
M/s Metro Shoes Ltd The assessment was completed u/s. 143(3) r w s 147. The Assessing Officer while framing assessment made addition of ` 50,33,651/- on account of peak credit for the purchases from Tulsiani Trading Pvt. Ltd and Big Step International. The peak purchases amounting to ` 50,33,651/- was treated as unexplained expenditure u/s. 69C. On appeal, before the CIT(A), the CIT(A) restricted the addition to 12.5% of the total purchases from the impugned/bogus purchases. Aggrieved, the Revenue is in appeal before us.
4. We have heard the learned DR for the Revenue and the learned AR for the assessee. We have also perused the material available on record. The learned DR argued that the Assessing Officer made the addition after making full inquiry with regard to the genuineness of purchases. During the assessment proceedings, the assessee could not substantiate about the genuineness of the purchases made from the parties, whose names were listed in the list of hawala traders on the Website of Sales Tax Department of Government of Maharashtra. The assessee was asked to produce the parties for verification and to file documentary evidences with regard to the genuineness of purchases. The DR further contended that the assessee could not prove the delivery of goods. The assessee has merely obtained accommodation bills. In fact, no purchases were made by the assessee. The investigation wing of the department has also made full fledge inquiry about 4 ITA No.4646/Mum/2016 M/s Metro Shoes Ltd the genuineness of the parties, who were listed as hawala dealers by the Sales Tax Department of Government of Maharashtra.
5. On the other hand, the learned AR of the assessee argued that entire purchases made by the assessee during the relevant assessment year were genuine. The assessee had received delivery of goods along with bills and all purchases were recorded in the regular books of account. The assessee had paid excise duty on the purchases. All the goods were received at the central warehouse depot of the assessee. The assessee sold the goods through its retailer and all the details relating to quantity of purchase and sales were furnished to the Assessing Officer. However, the Assessing Officer without considering the evidences furnished by the assessee, made the addition on the basis of surmises and conjectures. The Assessing Officer relied on the opinion of the third party.
6. We find that the Assessing Officer reopened the assessment on the basis of information received from DGIT (Inv), Mumbai, that the assessee has taken accommodation bills from hawala dealers, who are declared so, by the Sales Tax Department, Government of Maharashtra. These dealers were issuing bogus bills without actually delivering any goods. The Assessing Officer asked the assessee to produce documents such as bills, vouchers/invoices, bank statement, stock register showing receipt of goods, lorry records etc., to establish the genuineness of the transactions. The 5 ITA No.4646/Mum/2016 M/s Metro Shoes Ltd Assessing Officer also directed the assessee to produce both the parties for verification. However, the assessee could not produce them. The assessee filed details of invoices, excise paid, copy of bank statement, details of purchase and dispatch to showrooms, sample challans etc. The assessee further contended that the purchases were made through brokers, who in turn supplied the material after sourcing them from various suppliers. Therefore, the bills and other supporting documents are of third parties and the payment was made to the party, whose bills were submitted by the brokers. Hence, the assessee was not aware of the genuineness of the bill issuing parties. These contentions of the assessee were not accepted by the Assessing Officer as the hawala dealers themselves had admitted before the Sales Tax Department that they have not supplied any material and provided only accommodation bills without delivery of goods. The Assessing Officer therefore, concluded that the assessee has neither provided the details of brokers, their names or address nor could he produce them during the course of assessment. Hence, the Assessing Officer on the basis of peak credit disallowed the amount of ` 50,33,651/-.
7. The CIT(A) while considering the case of the assessee observed that the assessee has paid excise paid and excise duty is paid only after receipt of goods. This shows that the suppliers had supplied goods because without goods there is no possibility of paying excise duty. It was also observed that 6 ITA No.4646/Mum/2016 M/s Metro Shoes Ltd because some of the suppliers have not paid sales tax they have been considered as hawala dealers, but for income tax purpose it cannot be treated as bogus purchases. The learned CIT(A) has further relying on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit P Sheth 256 ITR 451, wherein it has held that 12.5% of total purchases can be considered as bogus purchases, restricted the addition to 12.5% of the impugned purchases. Under the facts and circumstances of the case, we do not find any reason to interfere with the order of the CIT(A). It is accordingly, upheld.
8. In the result, the appeal is dismissed.
Order pronounced in the open court on 7th day of August, 2017.
Sd/- Sd/-
(P K Bansal) (Pawan Singh)
VICE-PRESIDENT JUDICIAL MEMBER
Mumbai; Dated: 7th August, 2017
SA
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(A),Mumbai
4. The CIT
5. DR, 'C' Bench, ITAT, Mumbai
BY ORDER,
#True Copy #
Assistant Registrar
Income Tax Appellate Tribunal, Mumbai