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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 20.02.2023 for the A.Y.2011-12 in sustaining the action of the Assessing Officer.
(A.Y: 2011-12) Aastha Creations 2. At the outset, we observe that the present appeal is filed by the assessee with a delay of 50 days and assessee also filed an affidavit in this regard and prayed for condonation of delay. Assessee filed an affidavit dated 25.05.2023 and submitted as under: -
“1) I am the partner of firm M/s. AASTHA CREATIONS having PAN: AAMFA1927A is engaged in business of Manufacturing and trading of printing flax boards, digital printing on outdoor flex, vinyl / backlit, videography and photography. The assessee firm for its business activity had maintained books of account in regular course of business which were subjected to statutory audit U/s.44AB of the Act. 2) The assessee firm has filed E-Return of income for A.Y 2011- 2012 on 30.09.2011 declaring total income of Rs.53,340/- which was taken in scrutiny assessment by Income Tax Officer, Ward 20(1)(1) Mumbai. 3) During the course of assessment proceeding the details called for were furnished from time to time and kept on record of assessing officer. While completing assessment the assessing officer passed assessment order dated 08.12.2018 u/s 143(3) r.ws 147 of Income tax Act, 1961 determining total income at Rs.2.94.480/- making addition of purchase amount Rs 2,41,135/- disallowed u/s 69C 4) On receipt of assessment order the assessee firm being aggrieved with addition made went in appeal and filed First Appeal before CIT(A)-32, Mumbai. This appeal filed was disposed of dismissing the appeal vide Appellate order dated 20.02.2023 passed by Commissioner of Income Tax Appeals-National Faceless Appeals Centre, which was received on 22.02.2023 5) Being dissatisfied with appellate order of CIT(A)-NFAC, the partners have intended to file Second Appeal before Hon'ble Income Tax Appellate Tribunal. The appeal ought to have been filed in the office of Tribunal within 60 days of receipt ie on or before 22.04 2023. But appeal could not be filed within time and this appeal was (A.Y: 2011-12) Aastha Creations presented with Tribunal Bench-on 05.06.2023. Hence delay of 43 days is caused in filing appeal on following reason. 6) The partners were grossly upset on receipt of appellate order of CIT(A)-NFAC dismissing appeal of assessee firm. They were advised to file appeal before Hon'ble ITAT for relief. As the appeal before Appellate Tribunal was preferred for first time partners were unaware of complexities of Tax Laws, appellate proceeding and further matter. Since the partners were ignorant of provision of law so in mental tension other partners were in search of other legal expert for filing second appeal with Appellate Tribunal. Unfortunately, it was time consumed to be complied with and in the absence of good legal advice from expert person which caused delay in presenting appeal before Tribunal But said delay was not due to willful default. 7) There is no presumption that delay is occasioned deliberately or on account of negligence or malafides and no intention to jeopardize the interest of the revenue by delaying the filing of appeal 8) Thus in the facts of present case the default, if any, was for good and sufficient reason without any willful, intentional laps, negligence but occurred under bonafide circumstances beyond our control. Kindly consider the same. 9) It is therefore most respectfully prayed that Your Honour may be pleased to condone the delay of 43 days in filing appeal u/s 253(5) of the Income Tax Act, 1961 and appeal may be admitted on merits in the interest of justice.”
Ld. DR objected for the condonation of delay and however, he has not filed any submissions against the affidavit as well as the facts described in the above affidavit.
Considered the submissions filed by way of affidavit, we found that 4. the reasons brought on record by the assessee are reasonable, for the (A.Y: 2011-12) Aastha Creations sake of overall justice, the Hon'ble Supreme Court in the case of Collector, Land Acquisition v. MST. Katiju and others, [1987]167 ITR 471, held as under: - “3. The legislature has conferred the power to condone delay by enacting s. 5 of the Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on "merits". The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice—that being the life-purpose of the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other Courts in the hierarchy.
And such a liberal approach is adopted on principle as it is realized that:
1. 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense and pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
(A.Y: 2011-12) Aastha Creations 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.”
Respectfully following the ratio laid down in the above judgment, we condone the delay in filing the appeal and decide the appeal on merits.
Briefly facts of the case are, assessee engaged in the business of Digital Printing on outdoor, videography and photography and filed its return of income on 30.09.2011 declaring income of ₹.53,340/- for the A.Y.2011-12, and the return was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). Subsequently, Assessing Officer received information from the DGIT(Inv.,), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened u/s. 147 of the Act based on the information received from DGIT (Inv.,), Mumbai, that the assessee has availed accommodation entries from M/s. Raj Traders who are said to be providing accommodation entries without there being transportation of any goods. In the reassessment
(A.Y: 2011-12) Aastha Creations proceedings, the assessee was asked to prove the genuineness of the purchases made from M/s. Raj Traders.
In response, assessee furnished the copy of bank statement and submitted that the transactions made with M/s. Raj Traders are genuine. The assessee produced copies of bank statements evidencing payments made through banking channels and submitted that the purchases made are genuine and they cannot be treated as bogus.
After considering the submissions of the assessee Assessing Officer rejected the same. During the assessment proceedings, Assessing Officer issued notice u/s. 133(6) of the Act to M/s. Raj Traders in order to verify the genuineness of the purchases made by the assessee and the notice was returned unserved by the Postal Authorities with remarks “left”. Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. It is the finding of the Assessing Officer that assessee not only failed to produce the party for verification but also failed to produce any documentary evidences to prove the genuineness of the purchases. Therefore, Assessing Officer treated
(A.Y: 2011-12) Aastha Creations ₹.2,41,135/- as non-genuine and added to the total income of the assessee.
Aggrieved with the above order, assessee preferred appeal before the Ld.CIT(A) and filed detailed submissions. After considering the submissions of the assessee Ld.CIT(A) sustained the addition made by the Assessing Officer.
Aggrieved with the above order, assessee is in appeal before us raising following grounds in its appeal: -
“1. On the facts and circumstances of case the learned Income Tax Officer, Ward 20(1)(1) erred in making addition of purchase amount Rs.2,41,135/- to the total income of assessee u/s.69C being unexplained expenditure while passing assessment order u/s.143(3) r.w.s.147 for A.Y. 2011-12. In appeal the learned Commissioner of Income Tax Appeals National Faceless Appeals Centre (NFAC) has confirmed the order passed by AO and dismissed appeal of assessee.”
Inspite of issue of notice none appeared on behalf of assessee nor any adjournment was sought, Accordingly, this appeal is disposed of by hearing Ld. DR on merits.
Ld. DR brought to our notice relevant facts of the case and the orders of the Authorities below. He supported the findings of lower authorities.
(A.Y: 2011-12) Aastha Creations 13. Considered the submissions of Ld. DR and material placed on record. We have perused the orders of the authorities below. It is not in dispute that sales have been accepted as genuine from out of these purchases. When the sales have been accepted as genuine the entire purchases cannot be treated as non-genuine. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been held by the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [38 taxman.com 385]. Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171]. In our considered view there should be an estimation of profit element from these purchases and should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from M/s. Raj Traders as claimed, especially in the absence of any confirmations from them. Taking the totality of facts and circumstances, keeping in view the nature of business of the assessee i.e. Digital printing on outdoor, videography and photography, it would be justified if the profit element embedded in those purchases are estimated at 12.5%.
(A.Y: 2011-12) Aastha Creations Accordingly, we direct the Assessing Officer to estimate the profit element from the non-genuine purchases at 12.5% for the Assessment Year under consideration and restrict the disallowance of purchases to 12.5% and compute the income accordingly. Accordingly, Ground No. 1 raised by the assessee is partly allowed.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 22nd September, 2023.