Income Tax Appellate Tribunal - Mumbai
Deal Clothing, Mumbai vs Acit Cir 19(2) Now Acit Cir 24(1), Mumbai on 20 December, 2017
ITA No.1943/Mum/2015 Deal Clothing Assessment Year-2011-12 आयकर अपीलीय अिधकरण "डी" ायपीठ मुं बई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI जोिग र िसंह , ाियक सद एवं ी मनोज कुमार अ वाल, लेखा सद के सम ।
BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./I.T.A. No.1943/Mum/2015 (िनधा रण वष / Assessment Year: 2011-12) Deal Clothing Assistant Commissioner Of Ghanshyam Industrial Estate Income Tax-Circle 19(2) Near Yashraj Studio बनाम/ [now Circle 24(1)] Veera Desai Road Vs. Piramal Chambers Andheri (West) Mumbai Mumbai-400 053 थायी ले खा सं . /जीआइआर सं ./PAN/GIR No. AAHFD-1076-G (अ पीलाथ# /Appellant) : ($%थ# / Respondent) Assessee by : Vijay Mehta,Ld.AR Revenue by : Purushottam Kumar, Ld. Sr. DR सुनवाई की तारीख / : 06/12/2017 Date of Hearing घोषणा की तारीख / : 20/12 /2017 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. The captioned appeal by assessee for Assessment Year [AY] 2011-12 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-34 [CIT(A)], Mumbai, Appeal No. CIT(A)-34/ACIT-19(2)(1)/IT- 377/13-14 dated 13/03/2015 qua confirmation of certain additions. The assessment for impugned AY was framed by Ld. Assistant 2 ITA No.1943/Mum/2015 Deal Clothing Assessment Year-2011-12 Commissioner of Income Tax, Circle-19(2), Mumbai [AO] u/s 143(3) of the Income Tax Act,1961 on 13/03/2014.
2.1 Facts leading to the same are that the assessee being resident firm engaged in manufacturing & trading of Garments was assessed at Rs.61,45,720/- after certain additions / disallowances as against returned income of Rs.28,84,970/- filed by the assessee on 10/09/2011. 2.2 Pursuant to receipt of certain information from Sales Tax Authorities regarding dealers indulging in providing accommodation bills, it was noted that the assessee stood beneficiary of such bogus purchase bills from four such parties aggregating to Rs.1,26,14,945/-. The assessee, in support, produced purchase bills and corresponding sales details but expressed inability to produce any of such party which led the Ld. AO to treat such purchases as bogus purchases. Finally, relying upon certain judicial pronouncements, Ld. AO estimated the additions against these purchases @25% which came to Rs.31,53,736/-. The assessee suffered another adhoc addition to the extent of 20% against Vehicle Expenses, Office Expenses & Telephone Expenses which came to Rs.1,07,013/-. Both these additions are the subject matter of this appeal.
3. Aggrieved, the assessee contested the same without any success before Ld.CIT(A) vide impugned order dated 13/03/2015 where Ld. CIT(A) relying upon the order of preceding year in the case of erstwhile assessee firm enhanced the addition against bogus purchases to 100% as against 25% estimated by Ld. AO. The adhoc disallowance was also confirmed to account for personal element embedded in the expenses 3 ITA No.1943/Mum/2015 Deal Clothing Assessment Year-2011-12 claimed by the assessee. Aggrieved, the assessee is in further appeal before us.
4. The Ld. Representative for Assessee [AR] drew our attention to the fact that the assessee already reflected high Gross Profit Rate of 18.71% and similar rate has been accepted by the revenue in immediately succeeding AY in an assessment u/s 143(3) and therefore, the additions were not justified. Our attention was also drawn to the fact that the assessee was mainly into trading activities and complete quantitative details were available on record.
5. Per Contra, Ld. Departmental Representative [DR] drew attention to the fact that the assessee could not produce even a single party to substantiate the purchases transactions and therefore, additions were justified.
6. We have carefully heard the rival contentions and perused relevant material on record. So far as the adhoc addition of 20% against various expenses is concerned, we do not find any reason to interfere with the same since the possibility of personal element, keeping in view the nature of these expenses, could not be ruled out. Hence, the addition to that extent stands confirmed.
7. So far as the addition against bogus purchases is concerned, we find that the assessee is in possession of primary purchase documents and already reflected high Gross Profit Rate of 18.71%. The similar rate has been accepted by the revenue in immediately succeeding year. We are of the considered opinion that there could be no sale without purchase /consumption of material since the assessee was engaged in manufacturing and trading activity. The sales turnover achieved by the 4 ITA No.1943/Mum/2015 Deal Clothing Assessment Year-2011-12 assessee has not been disputed by the revenue. The assessee has, to some extent, shown correlation between sales and purchases. The purchases were backed by invoices. At the same time, the assessee could not produce any confirmation from any of the impugned supplier and could not produce any party for confirmation, which cast a serious doubt on assessee's claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of Value Added Tax [VAT] against such bogus purchases. Hence, Ld. CIT(A), in our opinion, erred in enhancing the same to 100%. Therefore, on factual matrix and keeping in view the applicable VAT rate on goods being traded by the assessee, we estimate the same @8% of alleged bogus purchases of Rs.1,26,14,945/- which comes to Rs.10,09,196/-.
8. Resultantly, the assessee's appeal stands partly allowed.
Order pronounced in the open court on 20th December, 2017.
Sd/- Sd/-
(Joginder Singh) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनां क Dated : 20.12 .2017 Sr.PS:- Thirumalesh 5 ITA No.1943/Mum/2015 Deal Clothing Assessment Year-2011-12 आदे श की ितिलिप अ े िषत/Copy of the Order forwarded to :
1. अपीलाथ# / The Appellant
2. $%थ# / The Respondent
3. आयकर आयु,(अपील) / The CIT(A)
4. आयकर आयु, / CIT - concerned
5. िवभागीय $ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड/ फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पं जीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai