Income Tax Appellate Tribunal - Kolkata
Chang Hing Tannery, Kolkata vs Department Of Income Tax on 15 May, 2013
आयकर अपीलीय अधीकरण, Ûयायपीठ - "B" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA
(सम¢)Before ौी के. के. गूƯा, लेखा सदःय एवं/and ौी महावीर िसंह, Ûयायीक सदःय)
[Before Shri K. K. Gupta, AM & Shri Mahavir Singh, JM]
आयकर अपील संÉया / I.T.A No. 1134/Kol/2010
िनधॉरण वषॅ/Assessment Year: 2007-08
Deputy Commissioner of Income-tax, Vs. M/s. Chang Hing Tannery
Circle-33, Kolkata. (PAN: AACFC4080C)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
Date of hearing: 15.05.2013
Date of pronouncement: 15.05.2013
For the Appellant: Shri K. N. Jana, Sr. DR
For the Respondent:S/Shri S. P. Chowdhury & Soumitra Chowdhury, Advocates
आदे श/ORDER
Per Shri Mahavir Singh, JM:
This appeal by revenue is arising out of order of CIT(A)-XX, Kolkata in Appeal No. 278/CIT(A)-XX/Cir-33/09-10/Kol dated 11.03.2010. Assessment was framed by DCIT, Cir-33, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2007-08 vide his order dated 15.12.2009.
2. The only issue in this appeal of revenue is against the order of CIT(A) in deleting the addition made by AO on account of bogus purchases. For this, revenue has raised following ground:
"In the instant case the assesee has failed for produce before the A.O. any of the 29 parties to prove the genuineness of the purchase made from them, despite providing ample opportunities to them. Hence, the Aq.O. has rightly added the purchase amount made from them."
2. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that the AO during the course of assessment proceedings noticed that the assesee is engaged in the business of purchase of raw hide and producing the same into finished leather product by processing the same. The assessee made purchases of raw hide amounting to Rs.7,62,33,468/- during the year. AO during the course of assessment proceedings identified 29 suppliers for verification of purchases and accordingly, notices u/s.
2 ITA No.1134/K/2010Chang Hing Tannery AY : 2007-08 133(6) of the Act was issued. According to AO these notices returned unserved by postal authority and assessee also produced these suppliers for verification of purchases. According to assesee, the suppliers were illeterate and they carried on the business of supply of raw hide on a very low scale and has no fixed place of business for them. AO was not convinced by the reply, he disallowed the entire purchase of Rs.46,77,880/- pertaining to these 29 suppliers. Aggrieved, assesee preferred appeal before CIT(A), who deleted the addition by observing as under:
"5.5 I have perused the assessment order and considered the submission of the appellant. I have also considered the decisions of the Hon'ble ITAT, which are relied upon by the appellant. I find substance in the arguments of the appellant. The purchases are supported by proper bills, and, are duly recorded in the books of account. The raw hide purchased by the appellant was entered in the stock register moreover, it was processed and utilized for producing finished leather. The sales of such finished leather are recorded ín the books of account, which has been accepted by the AO. The quantitative details of raw material and finished goods are maintained by the appellant, and, also form part of the Tax Audit Report. The facts are not disputed by the AO. The AO has not pointed out any specific defects in the books of account. The AO has also not found any defect or discrepancy in the stock register, or in the quantitative details of raw material or finished product. The ledger copies for the subsequent years show that payments were actually made to the suppliers against purchases. The gross profit rate and the net profit rate has also shown improvements. For, the gross profit rate for the current year is 11.08% as compared to 7.16% and 8.62% for the two preceding years. Similarly, the net profit ratio for the current year is 4.46% as compared to 2.68% and 2.75% for the preceding years. Simply because notice u/s 133(6) could not be served on the suppliers can be no basis or justification for holding that the purchases are bogus. In view of the above, and, the ratio laid down by the Hon'b1e ITAT, I arn of the opinion that the AO was not justified in treating the purchases as bogus. The addition of Rs.46,77,880/- is deleted. Ground no. 4 & 5 are allowed."
Aggrieved, revenue is now in appeal before us.
3. Before us, Ld. Sr. DR relied on the assessment order whereas Ld. counsel for the assessee relied on the order of CIT(A). We find that the CIT(A) has gone into the fact that the purchases are supported by proper bills and duly recorded in the books of account. According to assessee, it is maintaining complete stock details quantity wise and quality wise and these purchases have been verified by the CIT(A) to have been entered into the stock register and the same was processed and utilised for the purpose of producing finished leather. The CIT(A) also verified sales of such finished leather and has accepted by the AO. The quantity details of raw materials and finished goods are maintained by assesee is as evident from the audited accounts 3 ITA No.1134/K/2010 Chang Hing Tannery AY : 2007-08 of the assessee and audit report. We find that there is a categorical finding of the CIT(A) that the AO could not point out any defect in the stock register, quantitative details of raw material and sale of finished product. Even the gross profit rate of the relevant Financial Year relevant to this assessment year is much higher at 11.8% as compared to two preceding assessment years 2006-07 and 2005-06 respectively. In such circumstances, the only fact that the notice could not be served on the suppliers no basis can be made for making disallowance of entire purchases pertaining to these 29 parties. In such circumstances, we confirm the order of CIT(A) and this issue of revenue's appeal is dismissed.
4. In the result, the appeal of the revenue is dismissed.
5. Order pronounced in open court.
Sd/- Sd/-
के . के . गूƯा, लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(K. K. Gupta) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated : 15th May, 2013
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
4 ITA No.1134/K/2010
Chang Hing Tannery AY : 2007-08
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT- DCIT, Circle-33, Kolkata.
2 ू×यथȸ/ Respondent - M/s. Chang Hing Tannery, 77, Matheswartala Road, Kolkata-700 071.
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/ CIT Kolkata
5. ǒवभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar.