"B"
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
./I.T.A. No.6138 /Mum/2013
( / Assessment Years 2005-06)
M/s Neeta Textiles, / The Income Tax Officer
685, Govind Chowk, WD- 14(3)(2),
Vs.
M.J. Market, Mumbai.
Mumbai 400 002.
. / PAN : AAAFN0729R
( /Appellant) .. ( / Respondent)
./I.T.A. No.7335 /Mum/2013
( / Assessment Years 2005-06)
The Income Tax Officer / M/s Neeta Textiles,
WD- 14(3)(2), 685, Govind Chowk,
Vs.
Mumbai. M.J. Market,
Mumbai 400 002.
. / PAN : AAAFN0729R
( /Appellant) .. ( / Respondent)
./I.T.A. No.6139 /Mum/2013
( / Assessment Years 2007-08)
M/s Neeta Textiles, / The Income Tax Officer
685, Govind Chowk, Vs. WD- 14(3)(2),
M.J. Market, Mumbai.
Mumbai 400 002.
. / PAN : AAAFN0729R
( /Appellant) .. ( / Respondent)
2 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
./I.T.A. No.7336 /Mum/2013
( / Assessment Years 2007-08)
The Income Tax Officer / M/s Neeta Textiles,
WD- 14(3)(2), Vs. 685, Govind Chowk,
Mumbai. M.J. Market,
Mumbai 400 002.
. / PAN : AAAFN0729R
( /Appellant) .. ( / Respondent)
./I.T.A. No.6140 /Mum/2013
( / Assessment Years 2008-09)
M/s Neeta Textiles, / The Income Tax Officer
685, Govind Chowk, WD- 14(3)(2),
Vs.
M.J. Market, Mumbai.
Mumbai 400 002.
. / PAN : AAAFN0729R
( /Appellant) .. ( / Respondent)
./I.T.A. No.7337 /Mum/2013
( / Assessment Years 2008-09)
The Income Tax Officer / M/s Neeta Textiles,
WD- 14(3)(2), Vs. 685, Govind Chowk,
Mumbai. M.J. Market,
Mumbai 400 002.
. / PAN : AAAFN0729R
( /Appellant) .. ( / Respondent)
Appellant by Shri Bhupendra Shah
Respondent by : Shri Yogesh Kamat
/ Date of Hearing : 14-05-2015
/Date of Pronouncement : 27-05-2015
[
3 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
/ O R D E R
PER BENCH :
The aforesaid appeals have been filed by the assessee as well as
Revenue against separate impugned order of even date 02-09-2013, passed
by the ld. CIT(A)- 25, Mumbai for quantum of assessment passed u/s 143(3)
r.w.s. 147 of the Income Tax Act, 1961 for the assessment years 2005-06,
2007-08 and 2008-09.
2. Since common issues are involved in all these appeals, therefore, they
were heard together and are being disposed off by way of this consolidated
order for the sake of convenience. For ready reference, the cross appeals for
A.Y. 2005-06 is being taken up as lead appeal.
3. Grounds raised by the assessee for A.Y. 2005-06 read as under:-
1. Under the facts and the circumstances of the case of your Appellant,
the Ld. CIT(A) has erred in confirming the addition to the extent of 10%
of disputed purchases i.e. Rs.1, 17,624/= ( Rounded off to Rs.
1,17,620/-) out of the total addition of Rs.11,76,242/= made by Ld.
A.O. as " Unexepted/unproved" purchase/investment in Purchase as
per section 69 of the Income Tax Act, 1961.
2. Your Appellant, therefore, prays that the addition of Rs.1,17,624/-
should be deleted."
Whereas grounds raised by the Revenue for A.Y. 2005-06 read as under:-
"The Ld.CIT(A) has erred in law as well as on fact by not sustaining
addition u/s 69 after having accepted the finding in principle that the
purchases were made from undisclosed/unverifiable/unidentifiable
parties in the grey market by investing in cash and the purchases from
the group concerns of Shri Rakesh Gupta & family were only
accommodation entries and not actual purchases.
2. On the facts and In the circumstances of the case, the Ld.CIT(A)
after having accepted the fact that the purchases made from 0 through
Shri Rakeshkumar Gupta and his family members are bogus, erred in
law in not confirming the addition at least to the extent of peak of the
purchases made from such from such parties on account of bogus
4 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
purchases made in cash from the open market out of unaccounted
cash, in view of the decision held by the Hon'ble ITAT's C-Bench,
Ahmedabad, in the case of VIJAY Proteins Ltd."
4. At the outset, the ld. Counsel for the assessee, Shri Bhupendra Shah
submitted that, similar issue had come up for consideration before the
Tribunal in several cases, some of them of being its sister concern/group
concerns, wherein the Tribunal have decided the issue of alleged bogus
purchases in favour of the assessee. In support, the ld. Counsel for the
assessee filed the following decisions:-
(i) ITA No. 3141/M/12, ITA No. 3142/M/12, ITA No. 4349/M/12,
ITA No. 3143/M/12, ITA No. 4350/M/12, ITA No. 3144/M/12 &
4351/M/12 order dated 13-11-2013 in the case of M/s Jitendra
Harshadkumar vs. ACIT & vice versa.
(ii) ITA No. 3948 to 3953/M/12, ITA No. 4012 to 4015 to 4021/M/12
order dated 01-10-2013 in the case of Pramit Textiles vs. ITO &
vice versa.
(iii) ITA No. 3960 to 3967/M/12, ITA No. 4022 to 4024/M/12, ITA
No. 4025/M/12 & ITA Nos. 3944,3955 and 5065/M/12 in the
case of C. Chotalal & Co. vs. ITO and vice versa.
5. The ld. D.R. has also admitted that the facts and issues involved in the
present cases are similar to the cases decided by the Tribunal.
6. Brief facts of the case are that, the assessee is a partnership firm
engaged in the business as dealers and merchant of cloth materials. The
return of income was filed on 25-7-2005. In the case of one of the suppliers
of the assessee firm Shri Rakesh Kumar M. Gupta (Proprietor of Manoj Mills)
and group concerns, a survey u/s 133 A of the Act was carried out on 13/14-
2-2009. During the course of survey, in the statement recorded, Shri Rakesh
Kumar M. Gupta stated that he was providing accommodation sale bill for the
purchases in the name of these proprietary concerns, Shri Rakeshkumar M.
Gupta, Prop. of M/s Manoj Mills, Smt. Hema R. Gupta, Prop. Of M/s Shree
5 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
Ram Sales and Synthetics and Shri Mohit R. Gupta, Prop. of M/s Astha Silk
Industries and other family members. Later on Shri Rakesh Kumar M. Gupta
retracted the statement in a written communication to the A.O. and also by
way of sworn affidavit filed by him and his family members who were
proprietors of such concern. The copy of his affidavit is appearing in the
paper book at page No. 68 & 69. Based on the information gathered during
the survey operation, the assessee's case was reopened u/s 147 of the Act by
issuing notice dated 26-2-2010 u/s 148 of the Act. The A.O., relying upon
the statement of Shri Rakesh Kr. M. Gupta held that the purchases to the
extent of Rs. 20,10,972/- are bogus and are merely accommodation entries,
the same was added u/s 69 of the Act. The ld. CIT(A) after considering the
various submissions of the assessee, as well as the details of purchases and
sales held that 10% of such purchases should be added. The relevant
observation and finding of ld. CIT(A) is as under:-
"I have perused the assessment order, remand report, written
submissions of appellant, and the facts and circumstance of the case.
On plain reading of the assessment order, I find that the AO has
basically relied on the statements recorded of Shri Rakeshkumar M.
Gupta & others during the course of survey action u/s 133A and
subsequently re-affirmed on oath u/s 131 of the Act, to make additions
in hands of purchaser party i.e. the appellant in this case. The said
additions are made based on documents impounded during survey
proceedings to arrive at total purchases made by appellant during the
year at Rs. 20,10,972/-. However, the appellant has submitted the
break-up of its purchases from Gupta party (Rs. 11,76,242/- & Non-
Gupta party (Rs. 11,71,970/-) aggregating to Rs. 23,48,212/-, which
figure also tallies with the purchase figure shown in its P&L account.
Further, the appellant has submitted ledger statement of Gupta party
(M/s Astha Silk Industries) in its books showing total purchases at Rs.
11,76,242/-. In these circumstances, even assuming the entire
purchases from Gupta party is to be treated as bogus, the additions on
that account cannot exceed Rs. 11,76,242/-.
6.1 Further observe that the appellant has not maintained the
stock register. However, since it has shown sales of Rs. 25.44
lakhs, as against purchases of Rs. 23.48 lakhs in its P&L
account, it has to be accepted that there can be no sales without
corresponding purchases, and when the sale of appellant is not
6 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
disputed, the additions of entire alleged purchases is also not
justified.
6.2 A logical conclusion which may be drawn in such
situation is that the appellant has recorded some sales in its
books of accounts which materials might have been purchased
by it in grey market without bills, and to regularize such
purchases in grey market, the appellant might have taken
accommodation bills from the said parties for purchase of
specified material. The AO has not denied such possibility by
quoting the words "hawala purchases/ or to accommodate the
purchases made out of the books" in para 17 of the assessment
order. In these circumstances, the additions can only be made at
certain percentage of GP/ NP or at an adhoc amount, in
consonance with the appellate orders of various CITs(A) in cases
of purchases from Mr. Rakeshkumar Gupta, the copies of which
are submitted by the appellant.
6.3 Looking at the facts and circumstances of the case as a
whole, I am of the considered view that the cause of justice
would be met by making addition at 10% of such purchases in
order to fill in the gap of difference of GP in recording the said
purchases as well to plug any leakage of revenue. The AO has
made additions of alleged purchases from Gupta party at Rs.
20,10,972/-, however as discussed above, the said purchases
are accepted at Rs. 11,76,242/-. Hence, the additions is
restricted to 10% of said purchases of Rs. 11,76,242/- i.e. Rs. of
Rs. 1,17,624/- and the balance addition of Rs. 18,93,348/- (i.e.
20,10,972/- - 1,17,624/- is deleted."
7. Against this, both assessee as well as Revenue have preferred these
appeals before us.
8. After considering the impugned order as well as the order of the
Tribunal in other cases and the material placed on record, we find that first of
all, Shri Rakesh Kumar M. Gupta has retracted his statement before the A.O.
and also filed affidavit admitting that sales made to the assessee are genuine.
The assessee has also produced evidences like copy of confirmed ledger
account, copy of bank statement showing the payment made for the
purchases and sale bills. All these documents have been placed in the paper
book before us. The assessee's case had been that no adverse inference
should be drawn on the basis of statement recorded without reference to the
7 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
assessee. No further enquiry was carried out in the case of the assessee or
Shri Rakesh Kumar M. Gupta despite the fact that statement was
subsequently retracted by him. We find that exactly similar issue on similar
set of facts had come up for consideration before the Tribunal in the aforesaid
cases as cited by the ld. Counsel for the assessee. In the case of M/s Jitendra
Harshadkumar & Company (supra), the Tribunal after recording the entire
facts of the case and evidences, deleted the entire additions made by the A.O.
For the sake of ready reference, the relevant portion of the decision of M/s
Harshadkumar & Company is reproduced hereunder:-
"7. 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 Mumbai
"I" Bench of this Tribunal in the case of Jeetendra Harshadkumar
Textiles (ITA No. 771 & 2211/Mum/2011 dated 21-11-2012) vide
para 8 & 8.1 which read as under:-
"8. We have carefully considered the rival submissions in the light of
material placed before us. It will be relevant to reproduce the letter
received by the AO from Shri Rakesh Kumar Gupta, which is also
reproduced in the assessment order:
"1 am in receipt of your summons u/s. 131 of the I.T.Act.
1961 in the case of M/s. Jitendra Harshad Kumar Textile Pvt. Ltd.
asking me to attend before your goodself with the details of my
account with the said M/s. Jitendra Harshad Kumar Textile Pvt.
Ltd. for A.Y.2002-03 & 2007-08.
As you are aware that my assessing officer had recorded alleged
statement u/s. 133A and 131 of the I.T.Act. 1961 1 have been receiving
witness summons from all four corners of the city on the ground that I
have given accommodation bill, though I have denied the content of the
statements recorded by A.O. u/s. 133A & 131 vide my letter dated
27.4.2009 and my affidavit dated 20.2.2009 submitted to ward 14(3)(2).
It is physically impossible for me to attend before various income tax
authorities, as I am not feeling well, it will not possible for me to attend
before your goodseif in response to your above mentioned summons.
As regards M/s. Jitendra Harshad Kumar Textiles Pvt. Ltd. is concerned.
I have already given my affidavit wherein I have specifically stated that I
have sold the goods to M/s. Jitendra Harshad Kumar Textiles P. Ltd. and
8 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
the consideration is received to me by cross order cheque. Copy of the
said ledger account is already submitted the department."
8.1 From the above letter it is clear that the same was written in
response to notice issued by the AO. Not only Shri Rakesh Kumar Gupta
has stated that he has retracted from the statement recorded during the
survey but also filed an affidavit dated 20/2/2009 and letter dated
27/4/2009 to deny the statement made during the survey under section
133A. He has further confirmed that the sales made by the assessee
were effected and the consideration was received by cross order
cheques. Thus it is clear that there is no material on record to say that
the purchases made by the assessee from the said concern were bogus
except the general statement recorded by the Department in the case of
Shri Rakesh Kumar Gupta, which was later on retracted. In absence of
any material brought on record against the submissions made by Shri
Rakesh Kumar Gupta in his letter dated 20/12/2009 filed before the
AO of the assessee the addition, if any, made in the case of the
assessee will be based on presumption only and it cannot be sustained
in the eyes of law. As against that assessee has submitted various
evidences to show that the actual delivery of the goods was received by
the assessee from the said party which has not been discarded by the
AO. The addition sustained by Ld. CIT(A) is also on presumption basis.
Therefore, keeping in view the facts and circumstances of the case, we
are of the opinion that additions made by the AO deserves to be deleted
in its entirety. We decide accordingly."
8. The above decision of the Tribunal in the case of Jeetendra
Harshadkumar Textiles has been subsequently followed by the
Tribunal to decide a similar issue in favour of the assessee in the
case of M/s Pramit Textiles vs. ITO (ITA No. 3948 to
3953/Mum/2012 and ITA No. 4012 to 4015 and 4020 to
4021/Mum/2012 dated Ist October, 2013). As the issue involved
in the present case as well as all the material facts relevant thereto
are similar to the case of Jeetendra Harshadkumar Textiles and
M/s Pramit Textiles (supra), we respectfully follow the orders of the
co-ordinate Benches of this Tribunal in the said cases and delete
the entire addition made by the A.O. on account of
unexplained/unproved purchases in all the four years under
consideration. Ground No. 1 of assessee's appeal for assessment
years 2005-06, 2006-07, 2007-08 & 2008-09 is accordingly
allowed whereas ground No. 1 of the Revenue's appeal for
assessment years 2006-07, 2007-08 and 2008-09 is dismissed.
9. Similar finding has been given by the Tribunal in the case of Pramit
Textiles and M/s C. Chotalal & Co. (supra). It has been informed bythe ld.
9 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
Counsel for the assessee that in other cases also wherein similar addition
were made on account of statement of Shri Rakesh Kr. M. Gupta have also
been deleted. Since, the finding of the Tribunal in all the cases are based on
similar set of facts, therefore, respectfully following the same, we direct the
A.O. to delete the entire addition of purchases and consequently the ground
raised by the assesasee is allowed whereas the grounds raised in Revenue's
appeal are dismissed.
10. In assessment years 2007-08 and 2008-09 also, similar grounds have
been raised and similar facts are permeated in these years, therefore, the
aforesaid finding given above will apply and accordingly, the addition made on
account of purchases in both the years are deleted.
11. In the result, appeals of the assessee are allowed whereas appeals of
the Revenue are dismissed.
Order pronounced in the open court on 27th May, 2015.
27-05-2015
Sd/- sd/-
(G.S. PANNU) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai;
Dated 27-05-2015
. ../ RK , Sr. PS
10 ITA 6138/M/13, ITA 7335/M/13,
ITA 6139/M/13, ITA 7336/M/13,
ITA 6140/M/13 & ITA 7337/M/13
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A) Concerned,, Mumbai
4. / CIT -Concerned, Mumbai
5. , , / DR, ITAT, Mumbai B Bench
6. / Guard file.
/ BY ORDER,
//True Copy//
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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