, ""
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM
./I.T.A. No.4910/Mum/2013
( / Assessment Year:2006-07)
Dy. Commissioner of Income / Shri Hemendra C Daftary,
Tax-22(1), Room No.411, Neelkanth Anand,
Vs.
4th floor, Tower No.6, Opp Bank of India, M G Road,
Vashi Railway Station Ghatkopar (W),
Complex, Vashi, Mumbai-400086.
Navi Mumvai-400705
( /Appellant) .. ( / Respondent)
./ ./PAN. :AFFPDI910E
/ Appellant by Shri K.Mohandas
/Revenue by Shri Nishit Gandhi
/ Date of Hearing
:6.10.2015
/Date of Pronouncement: 6.10.2015
/ O R D E R
Per B R Baskaran, AM:
The revenue has filed this appeal challenging the order dated
21.04.2013 passed by Ld CIT(A)-19, Mumbai and it relates to the
assessment year 2006-07.
2. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the
following additions made by the AO.
(a) Disallowance of 10% of purchases
(b) Disallowance of 10% of labour charges
(c) Addition of Sundry creditors balance.
2
I T A N o . 4 9 1 0 / Mu m / 2 0 1 3
3. We heard the parties and perused the record. The assessee is
engaged in the business of export of sarees and readymade garments to
Latin American countries. According to the AO, the assessee did not co-
operate during the course of assessment proceedings. During the course
of assessment proceedings, the AO issued letters to some of the suppliers
seeking confirmations from them, but he did not receive reply from seven
of them and the notice was not served on one person. Hence the AO
came to the conclusion that the purchases claimed by the assessee stands
unproved to the extent of 10%. Accordingly he disallowed 10% of the
purchases value. The AO also called for details of labour charges claimed
by the assessee. According to the AO, the assessee furnished the details
at the fag end of the assessment proceedings and hence he disallowed
10% of the labour charges also. The AO further asked the assessee to get
confirmation letters from three of its creditors. Since the assessee did not
furnish the details, the AO added the outstanding balances pertaining to
the three creditors aggregating to Rs.6,64,235/- to the total income of the
assessee.
4. In the appellate proceedings, the Ld CIT(A) deleted all the three
additions and hence the revenue has filed this appeal before us.
5. The first issue relates to the disallowance of 10% of the value of
purchases made by the AO for the reason that the suppliers did not
respond to the notices issued by the AO. We notice that the Ld CIT(A) has
followed the decision rendered by the Hon'ble Bombay High Court in the
case of Nikunj Eximp Enterprises Pvt Ltd (ITA No.5604 of 2010 dated
17.12.2012) to grant relief in respect of this addition. In the case of
Nikunj Eximpt Enterprises P Ltd (supra), the Hon'ble Bombay High Court
has held that merely because the suppliers have not appeared before the
3
I T A N o . 4 9 1 0 / Mu m / 2 0 1 3
AO or the CIT(A), one cannot conclude that the purchases were not made
by the respondent assessee. In the instant case also, the AO has made
the impugned addition only for the reason that the suppliers did not
respond to the notices issued by him. No other material was brought on
record by him. Hence, the reasoning given by the AO does not justify the
addition made by him. Accordingly, we are of the view that the Ld CIT(A)
was justified in deleting this addition.
6. The next issue relates to the disallowance made out of labour
charges. We notice that the assessee has furnished the details of labour
charges before the AO, but the assessing officer did not examine the same
with the reasoning that the same was filed at the fag end of the
assessment. Before Ld CIT(A) has submitted that the assessee had
deducted tax at source against those payments. During the course of
hearing, the Ld A.R carried us through the various details furnished before
the AO. Thus, we notice that the assessee has furnished the relevant
details, but the assessing officer has made the impugned disallowance
without finding fault with those details. Hence, we are of the view that the
Ld CIT(A) was justified in deleting this addition also.
7. The last issue relates to the addition of sundry creditors balances.
The assessing officer has made the impugned additions only for the
reasoning that the assessee did not furnish confirmation letters obtained
from them. The assessee submitted before the Ld CIT(A) that the
assessing officer has called for the details on 12.12.2008 and completed
the assessment on 26.12.2008, i.e., without providing adequate time to
the assessee. It was further submitted that two of the three creditors are
having running account with the assessee and the remaining party M/s
Avani Garments was paid in full in the succeeding year. Hence, the Ld
CIT(A) has taken the view that the assessing officer has made this addition
4
I T A N o . 4 9 1 0 / Mu m / 2 0 1 3
on surmises and conjectures. The Ld A.R submitted before us that the
assessee had provided the addresses of all the sundry creditors and the
assessee could not furnish the confirmation letters only for want of time.
Accordingly he contended that the assessing officer was not justified in
drawing adverse inferences without finding fault with the account books of
the assessee. We find merit in the said contentions. Admittedly, the
assessee was not given sufficient time to furnish the confirmation letters.
Even otherwise, it is stated that two of the three parties are having
running accounts with the assessee. The third party has been fully paid in
the succeeding year by way of cheques. Under these set of facts, we are
of the view that the assessing officer was not justified in drawing adverse
inferences against the assessee without bringing any other material on
record. Accordingly, we are of the view that the Ld CIT(A) was justified in
deleting this addition also.
8. In the result, the appeal filed by the revenue is dismissed.
Pronounced accordingly on 6th October, 2015.
6th October, 2015
Sd sd
(PAWAN SINGH) ( B.R. BASKARAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai: 6th October, 2015.
.../ SRL , Sr. PS
5
I T A N o . 4 9 1 0 / Mu m / 2 0 1 3
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
|
