Income Tax Appellate Tribunal - Mumbai
Talco Marketing, Mumbai vs Assessee on 22 July, 2016
आयकर अपीलीय अधिकरण, मुंबई "ई" खंडपीठ Income-tax Appellate Tribunal -"E"Bench Mumbai सर्वश्री राजेन्द्र,लेखा सदस्य एवं सी. एन. प्रसाद,न्यायिक सदस्य Before S/Sh.Rajendra,Accountant Member and C.N. Prasad,Judicial Member आयकर अपील सं./I.T.A./3394/Mum/2014,निर्धारण वर्ष /Assessment Year: 2006-07 आयकर अपील सं./I.T.A./3395/Mum/2014,निर्धारण वर्ष /Assessment Year: 2007-08 M/s. Talco Marketing Kilachand Mansion, 282, Kalbadevi Road Mumbai-400 002.
PAN:AACFT 6514 G Vs. Income tax Officer-Ward-14(2)(3) Earnest House, Nariman Point Mumbai-400 021.
आयकर अपील सं./I.T.A./4626/Mum/2014,निर्धारण वर्ष /Assessment Year: 2006-07 आयकर अपील सं./I.T.A./4627/Mum/2014,निर्धारण वर्ष /Assessment Year: 2007-08 Income tax Officer-Ward-14(2)(3) Mumbai-400 021.
Vs. M/s. Talco Marketing Mumbai-400 002.
(अपीलार्थी /Appellant) (प्रत्यर्थी / Respondent)
Revenue by: Shri N. Sathya Moorthy-DR
Assessee by: Shri Deepak Tralshawala
सुनवाई की तारीख / Date of Hearing: 07.07.2016
घोषणा की तारीख / Date of Pronouncement: 22.07.2016
आयकर अधिनियम,1961 की धारा 254(1)के अन्तर्गत आदेश
Order u/s.254(1)of the Income-tax Act,1961(Act)
लेखा सदस्य राजेन्द्र के अनुसार PER RAJENDRA, AM-
Challenging the orders dt.30.04.2014 of CIT(A)-25,Mumbai the Assessing Officers (AO.s.) and the assessee have filed the cross-appeals for the above mentioned two Assement Years (AY.s.).As the issues involved in all these appeals are common,so for the sake of convenience we are passing a single order. The AO had re-opened the assessment for both the AY.s.,invoking the provisions of section 147 of the Act.The reasons recorded by the AO are also identical for both the years. The assessee firm is engaged in the business of trading and processing of interlining cloth. Details of dates of filing of returns, returned incomes,etc.can be summarised as under:
A.Y. ROI filed on Returned Income(Rs.) Assessment dt.
Assessed Income(Rs.) 2006-07 19.10.2006 Rs.1,91,305/-
28.01.2014 Rs.43,89,860/-
2007-08 17.09.2007 Rs.2,07,200/-
28.01.2014 Rs.20,10,170/-
ITA No.4626/Mum/2014 (06-07):2.Effective Ground of appeal is about not sustaining the addition made,u/s.69 of the Act,by the AO.In this case the original assessment was completed u/s.143(3)on 16.9.08, determining the income of the assessee at Rs.2.21 lakhs against the returned income of Rs.1.19 lakhs. Later on, based on the information gathered during survey operation at the business premises of Rakeshkumar M. Gupta (RMG),proprietor of Manoj Mills and Group concerns the AO reopened the case invoking the provisions of section 147. During the assessment proceedings the AO found that assessee had made purchases from M/s.Shreeram Sales & Synthetics (Rs. 14.75 lakhs) Manoj Mills(Rs.12.56 lakhs),and M/s.Astha Silk Industries (Rs.14.37 lakhs).All these entities were controlled by RKG.The AO directed the assessee to substantiate the genuineness of said purchases with documentary evidences and to explain as to why the said purchases made from above mentioned three parties should not be treated as bogus.After considering the submission of the assessee,dated 14.10.14,the AO held that RKG and his group concerns were engaged in issuing accommodation bills without effecting any real purchase,that the suppliers of goods to the assessee had admitted hawala sales to the assessee for the year under consideration.He referred to the statements of RKG where he had admitted issuing accommodation bills to various parties and had admitted to have running five entities in the names of his family members and himself, that the statements recorded during the survey proceedings of RKG lead to the conclusion that assessee had also obtained hawala sales to the extent of Rs.41.68 lakhs, hat the bills introduced in books were nothing but colourable devise adopted to cover investment in purchases outside the books of account, that it had issued cheques to the extent of bills obtained from RKG to inflate/ accomodate its purchases. Finally the AO held that purchases made by assessee to the extent of purchases made from RKG group were hawala purchase/were out of the books purchases, that the source of such purchase was not explained by the assessee,that the investment made for these purchases not reflected in the books of account.Hence,treating the bills amounting to Rs. 41,68,760/-as bogus bills,he addede the said sum to the total income of the assessee.
3.Aggrieved by the order the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions.After considering the submission of the assessee and the assessment order the FAA held that the AO had relied upon the statements of RKG to make additions in the hands of the purchaser, that he had not provided the opportunity of cross examination of RKG in spite of specific request made by it,that the assessee had submitted the day to day movement of material alongwith the corresponding sales/inventory of stock, that the books of account of the assessee were audited,there was no adverse comment by the auditors about completeness of the books of account or about the quantitative details, that if the sales were treated as genuine corresponding purchase cannot be considered bogus,that addition could be made only to the extent of some percentage. Finally,he held that the cause of justice would be served by making addition @10% of such purchase in order to fill in gap of difference of GP in recording the said purchase as well to plug any leakage of revenue.He upheld the addition of Rs.4.16 lakhs and deleted the addition of Rs.37.51 lakhs.
4.Before us,the Departmental Representative (DR) supported the order of the AO.Authorised Representative (AR) stated that assessee had produced all the necessary documents before the AO, that copies of purchase bills and bank statement, indicating the payment through channels were furnished, that AO had not doubted the sales shown by the assessee .He relied upon the cases of Nikunj Exim Enterprises Pvt. Ltd.( 372 ITR 619) and Goolamally Hasanjee (ITA/3740-41/Mum/2012 -AY06-07 and 08-09, dt.10.6.14).He also referred to the case of Ashok Talreja-HUF,(ITA/4629/Mum/2014 & Ors.AY.s 07-08 to 09-10, dtd.17.03.2016)and stated that facts of that case were similar to the case under consideration.
5.We have considered the rival submissions and perused the material before us.We find that in the case of Ashok Talreja-HUF(supra),the Tribunal has dealt with the bills issued by RKG Group concerns and has decided the issue as under :-
"5.We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue involving identical facts has already been considered and decided in favour of the assessee by the "G" Bench of the Mumbai Tribunal in the case of Goolamally Hassanji (supra).We would like to reproduce the relevant portion of the order of the Tribunal and same reads as under :
"2. The assessee is a trader in cotton and man-made fabrics on retail as well as wholesale. The assessee filed return of income on 27.10.2006 declaring total income at Rs. 4,68,089/-. The said return was processed u/s. 143(1) of the Act and thereafter it was reopened and notice u/s. 148 was issued and served upon the assessee. The notices u/s. 143(2) and 142(1) were also issued and served upon the assessee.
2. The Survey operation u/s. 133A was conducted on the premises of Shri Rakeshkumar M. Gupta, Proprietor of M/s. Manoj Mills, Shri Mohit R. Gupta Prop. of M/s. Astha Silk Industries and Smt. Hema R. Gupta, Prop. of M/s. Shree Ram Sales & Synthetics. In the course of the survey operation, it came to the notice of the survey party that the aforestated persons were engaged exclusively in the activity of issuing accommodation bills on which they received commission at the rate of 1%. It was also noticed that assessee is also one of the persons who had made purchases from the aforementioned parties. The assessee was asked to justify his purchases from the aforementioned parties. 2.1. The assessee submitted bills with delivery challan, the evidence of making payment through account payee cheque. The assessee also filed monthly quantitative stock reconciliation. The assessee was further asked to explain why the bogus purchases made from the aforementioned parties be not added to the income. It was explained by the assessee that the statements given by Shri Rakeshkumar M. Gupta and his family members are not correct. It was further explained that purchases and sales are duly reflected in the books of account of the assessee. It was also brought to the notice of the AO that the Affidavit of Shri Rakeshkumar M. Gupta and his family members who have denied in the said affidavit about the activity of issuance of bogus bills. The explanation of the assessee did not find any favour from the AO who was of the opinion that the assessee has availed bogus bills amounting to Rs. 10,59,265/-. The AO went on to treat the purchases amounting to Rs. 10,59,265 from the said Shri Rakeshkumar M. Gupta and his family members as bogus and accordingly added the same to the returned income of the assessee and completed the assessment.
3. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). Before the Ld. CIT(A), the assessee reiterated his submissions. After considering the facts and the submissions made by the assessee, the Ld. CIT(A) came to the conclusion that an adhoc addition of Rs. 1,35,000/- which is about 12.5% of the purchase in question would meet the ends of justice. The Ld. CIT(A) restricted the addition to Rs. 1,35,000/-.
4. Aggrieved by this, the assessee is before us.
5. The Ld. Counsel for the assessee reiterated that the AO has grossly erred in treating the purchases as bogus purchase. It is the say of the Ld. Counsel that the Ld. CIT(A) further erred in making an adhoc disallowance which has no basis.
6. Per contra, the Ld. Departmental Representative relied upon the findings of the AO.
7. We have carefully perused the orders of the lower authorities. We find that the entire addition has been made on the statement of one Shri Rakeshkumar M. Gupta and his family members. It is the allegation of the Revenue that the said family members were issuing accommodation bills to the assessee. The AO accordingly went on to treat the entire purchases as bogus purchases. However, we find that the sales made by the assessee have been accepted. It is an elementary rule of accountancy as well as taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales, otherwise it could amount to levy of income-tax on gross receipts or on sales. We further find that the AO has not commented upon the retraction made by Shri Rakeshkumar M. Gupta and his family members. We noticed that the said retraction was made by filing an affidavit. Nothing has been brought on record except for the statement of Shri Rakeshkumar M. Gupta which could suggest that the purchases made by the assessee are bogus.
7.1. Considering the entire facts in totality and keeping in mind that no adverse inference has been drawn so far as sales are concerned, we do not find any reason for making any disallowance on this account. The adhoc addition sustained by the Ld. CIT(A) is also without any basis and the same is deleted."
5.1.We further find that in the case of Jeetendra Harshadkumar Textiles (ITA/771 & 2211 / Mum/2011 dated 21-11-2012) ,similar issue was decided in favour of the assessee,that the decision of the Tribunal in the case of Jeetendra Harshadkumar Textiles was subsequently followed by the Tribunal to decide a similar issue in favour of the assessee in the case of M/s Pramit Textiles (ITA/3948 to 3953/Mum/2012 and ITA/4012 to 4015 and 4020 to 4021/ Mum/2012 dated 01.10.2013)and Neeta Textiles(ITA/6138-40/Mum/2013,dtd. 27.05.2015).
In the case of Nikunj Exim(supra)the Hon'ble Bombay High Court has dealt the issue of bogus purchases and corresponding sales as under :
"We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent- assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated April 30, 2010, of the Tribunal."
There is no doubt that the AO had accepted the genuineness of sales made by the assessee. He had not made any effort to make further investigation to substantiate his allegations with regard to non genuineness of the purchases.Considering the facts and circumstances of the case,we are of the opinion that the FAA was not justified in partly upholding the additions. Following the above mentioned decisions of the Tribunal and the judgment of the Hon'ble Bombay High Court,we decide the effective Ground of appeal against the AO."
Following the above order of the Tribunal in the case of Ashok Talreja-HUF for the AY.s 2007-08 to 2009-10,we decide the effective ground of appeal against, the AO and confirm the order of the FAA.
ITA No.3394/Mum/2014 (AY.2006-07):6.In its appeal,the assessee has objected to the addition sustained by AO i.e. of Rs.4.16 lakhs. We find that in the case of Ashok Talreja (supra),the identical issue was decided by the Tribunal as under (ITA/3393/Mum,AY-07-08):
"6.In the appeal filed by the assessee-HUF the effective Ground of appeal is about partially sustaining the additions made by the A.O. amounting to Rs.9.42 lakhs. While deciding the appeal filed by the A.O.,we had held that FAA had rightly deleted the additions made by the A.O., that the A.O. himself had accepted the sales, that after accepting the genuineness of the sales purchases could not be doubted.In our opinion, the logic applies to the remaining additions also.Considering the above facts, we hold that the FAA was not justified in sustaining the addition of Rs.9.42 lakhs-especially when the A.O. had not made further enquiries. Reversing the order of the FAA, we decide the effective ground of appeal in favour of the assessee. "
Respectfully following the above order,effective Ground of appeal is decided in favour of the assessee.
ITA/Nos.4627 & 3395/mum/2014,AY-2007-08:
7.Effective Grounds of appeal in both the matters are same as that of the earlier year.The only difference is of the amounts involved. Following our order for the earlier year we decide the effective Ground of appeal in favour of the assessee.Effective ground of appeal raised by the AO is decided against him.
As a result, appeals filed by the AO are dismissed and appeals of the assessee are allowed.
फलतःनिर्धारिती अधिकारी द्वारा दाखिल की गई अपीलें नामंजूर की जाती हैं और निर्धारिती की अपीलें मंजूर की जाती हैं.
Order pronounced in the open court on 22nd July,2016.
आदेश की घोषणा खुले न्यायालय में दिनांक 22 जुलाई, 2016 को की गई ।
Sd/- Sd/-
(सी. एन. प्रसाद / C.N. Prasad ) (राजेन्द्र / Rajendra)
न्यायिक सदस्य / JUDICIAL MEMBER लेखा सदस्य / ACCOUNTANT MEMBER
मुंबई Mumbai; दिनांकDated : 22 .07.2016.
Jv.Sr.PS.
आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to :
1.Appellant /अपीलार्थी 2. Respondent /प्रत्यर्थी
3.The concerned CIT(A)/संबद्ध अपीलीय आयकर आयुक्त, 4.The concerned CIT /संबद्ध आयकर आयुक्त
5.DR "E " Bench, ITAT, Mumbai /विभागीय प्रतिनिधि, ई खंडपीठ,आ.अ.अधिकरण.मुंबई
6.Guard File/गार्ड फाईल सत्यापित प्रति //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अधिकरण, मुंबई /ITAT, Mumbai.
Date Initials Initial
1. Draft dictated on-dictation sheets attached/direct on PC 12.7.16
2. Draft placed before author 12.7.16
3. Draft proposed & placed before the Second Member
4. Draft discussed/approved by Second Member
5. Approved draft comes to the Sr.PS
6. Kept for pronouncement
7. Date on which the file goes to the Bench Clerk
8. Date on which file goes to the A.R. for signature of the Order
9. Date of dispatch of the Order 394-95;4626-27-TALCO 8