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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal has been preferred by the assessee against order dated 20.10.2020 passed by the Ld. Commissioner of Income-tax (Appeals)-47, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, arising from the order passed by the Assessing Officer u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 2 ITA No. 2019/M/2020
The grounds raised by the assessee are reproduced as under: The grounds raised by the assessee are reproduced as under: The grounds raised by the assessee are reproduced as under:
On the facts and in the circumstances of the case 1. On the facts and in the circumstances of the case 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the and in law, the Ld. CIT(A) erred in confirming the and in law, the Ld. CIT(A) erred in confirming the AO's action of AO's action of issuing notice ws. 153C, which is issuing notice ws. 153C, which is illegal, bad in law or otherwise void for want of illegal, bad in law or otherwise void for want of illegal, bad in law or otherwise void for want of jurisdiction as the conditions precedent for invoking jurisdiction as the conditions precedent for invoking jurisdiction as the conditions precedent for invoking the provisions of section 153C are not satisfied. the provisions of section 153C are not satisfied.
2. On the facts and in the circumstances of the case 2. On the facts and in the circumstances of the case 2. On the facts and in the circumstances of the case and in law, the and in law, the Ld. CIT(A) erred in confirming the Ld. CIT(A) erred in confirming the addition to the extent of Rs. 29,61,705/ addition to the extent of Rs. 29,61,705/- being 12.5% being 12.5% of total purchases of Rs. 2,36,93,640/ of total purchases of Rs. 2,36,93,640/- without without considering the fact that profit disclosed in the considering the fact that profit disclosed in the considering the fact that profit disclosed in the transaction is not considered by the Ld. CIT(A). transaction is not considered by the Ld. CIT(A).
3. The appellant pr 3. The appellant prays this Hon'ble Tribunal to delete ays this Hon'ble Tribunal to delete the addition made by the Ld. AO and to the extent the addition made by the Ld. AO and to the extent the addition made by the Ld. AO and to the extent confirmed by the Ld. CIT(A). confirmed by the Ld. CIT(A).
Briefly stated, facts of the case are that the assessee is a Briefly stated, facts of the case are that the assessee is a Briefly stated, facts of the case are that the assessee is a subsidiary of M/s Mandhana Industries Ltd., on which search u/s subsidiary of M/s Mandhana Industries Ltd., on which search u/s subsidiary of M/s Mandhana Industries Ltd., on which search u/s 132(1) of the Act was carried out Act was carried out on 11.01.2012 alongwith on 11.01.2012 alongwith premises of the assessee company. Subsequent to search proceedings, a of the assessee company. Subsequent to search proceedings, a of the assessee company. Subsequent to search proceedings, a survey action u/s 132(1) of the Act survey action u/s 132(1) of the Act was also carried out on the also carried out on the registered office of the of the assessee company on 31.07.2013, wherein assessee company on 31.07.2013, wherein company accepted entry of capital of ₹81,93,142/ the assessee company accepted entry of capital of 81,93,142/-.
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 3 ITA No. 2019/M/2020
Consequently, the Assessing Officer issued notice u/s 153A of Consequently, the Assessing Officer issued notice u/s 153A of Consequently, the Assessing Officer issued notice u/s 153A of the Act on 21.011.2012 the Act on 21.011.2012. In response, the assessee filed return of n response, the assessee filed return of income on 14.05.2013 declaring total income of income on 14.05.2013 declaring total income of ₹ ₹72,36,285/-. In the assessment completed u/s 153A r.w.s. 143(3) of the Act, the ssment completed u/s 153A r.w.s. 143(3) of the Act, the ssment completed u/s 153A r.w.s. 143(3) of the Act, the Assessing Officer referred to the finding of the Investigation Wing Assessing Officer referred to the finding of the Investigation Wing Assessing Officer referred to the finding of the Investigation Wing during survey proceedings dated 31.07.2013 and informed the proceedings dated 31.07.2013 and informed the proceedings dated 31.07.2013 and informed the assessee that made made purchases of ₹2,36,96,640/ 2,36,96,640/- from M/s Siddhpad Trading Pvt. Ltd. Trading Pvt. Ltd., which is a black listed hawala traders by the Sales Tax Department of Maharashtra and therefore, by the Sales Tax Department of Maharashtra and therefore, by the Sales Tax Department of Maharashtra and therefore, purchases were in nature of bogus purchases. The Ld. Assessing nature of bogus purchases. The Ld. Assessing nature of bogus purchases. The Ld. Assessing Officer rejected the submission of the assessee in the order dated Officer rejected the submission of the assessee in the order dated Officer rejected the submission of the assessee in the order dated made addition of ₹2,36,93,640/- 27.03.2014 and made addition of on the issue of bogus purchases. On further appeal, the Ld. CIT(A) observed that bogus purchases. On further appeal, the Ld. CIT(A) observed that bogus purchases. On further appeal, the Ld. CIT(A) observed that the assessee has not only made bogus purchases but has shown the assessee has not only made bogus purchases but has shown the assessee has not only made bogus purchases but has shown that products purchase that products purchased through those bills were further sold through those bills were further sold to another party and therefore, the purchases are bogus and sales are y and therefore, the purchases are bogus and sales are y and therefore, the purchases are bogus and sales are also in the nature of bogus and therefore, the Ld. CIT(A) held the also in the nature of bogus and therefore, the Ld. CIT(A) held the also in the nature of bogus and therefore, the Ld. CIT(A) held the profit rate of ₹12.5% on bogus purchases as the fair and reasonable 12.5% on bogus purchases as the fair and reasonable 12.5% on bogus purchases as the fair and reasonable worked out to ₹29,61,705/-. Accordingly which was worked out to . Accordingly he confirmed the addition of ₹29,61,705/ 29,61,705/- and balance addition and balance addition was deleted. Aggrieved with the addition sustained the addition sustained, the assessee is in appeal assessee is in appeal before the Tribunal raising the grounds as reproduced above. before the Tribunal raising the grounds as reproduced above. before the Tribunal raising the grounds as reproduced above.
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 4 ITA No. 2019/M/2020
Before us, the Ld. Counsel of the assessee referred to the Before us, the Ld. Counsel of the assessee referred to the Before us, the Ld. Counsel of the assessee referred to the additional grounds filed by the assessee filed by the assessee, which are are reproduced as under:
“1.0 On the facts and in circumstances of the case, 1.0 On the facts and in circumstances of the case, 1.0 On the facts and in circumstances of the case, the amount of subsidy availed by the Appellant under the amount of subsidy availed by the Appellant under the amount of subsidy availed by the Appellant under Technology Upgradation Fund Scheme (TUF) from Technology Upgradation Fund Scheme (TUF) from Technology Upgradation Fund Scheme (TUF) from Government amounting to Rs. 53,96,680/ Government amounting to Rs. 53,96,680/-, being in , being in the nature of capital receipt should be excluded in the nature of capital receipt should be excluded in the nature of capital receipt should be excluded in computing total income under the normal provisions computing total income under the normal provisions computing total income under the normal provisions of the Act and also in computing book profits w/s of the Act and also in computing book profits w/s of the Act and also in computing book profits w/s 1151B of the Act. 1151B of the Act.
2.0 On the facts and in circumstances of the case, no On the facts and in circumstances of the case, no On the facts and in circumstances of the case, no addition could have addition could have been made in the impugned been made in the impugned assessment year in absence of any incriminating assessment year in absence of any incriminating assessment year in absence of any incriminating material found during the course of search. material found during the course of search.”
5.1 The additional ground No. 1 was not pressed before us and The additional ground No. 1 was not pressed before us and The additional ground No. 1 was not pressed before us and therefore, same is dismissed as infructuous. therefore, same is dismissed as infructuous.
5.2 As regards, additional As regards, additional ground No. 2 is concerned . 2 is concerned, we find that same is purely legal in nature same is purely legal in nature and don’t require further require further investigation of the fresh facts investigation of the fresh facts, therefore, same was admitted, therefore, same was admitted, in view of the decision of the Hon’ble Supreme Court in the case Hon’ble Supreme Court in the case view of the decision of the NTPC Ltd. v. CIT 229 ITR 383 NTPC Ltd. v. CIT 229 ITR 383.
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. In the dispute and perused the relevant material on record. dispute and perused the relevant material on record.
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 5 ITA No. 2019/M/2020 additional ground No. 2, the assessee has submitted that no additional ground No. 2, the assessee has submitted additional ground No. 2, the assessee has submitted addition could be made without incriminating material ould be made without incriminating material found ould be made without incriminating material during the course of search. We find that as far as the additional course of search. We find that as far as the additional course of search. We find that as far as the additional ground raised by the assessee is concerned no addition could have ground raised by the assessee is concerned no addition could have ground raised by the assessee is concerned no addition could have been made in the assessment been made in the assessment, if follow two conditions are fulfilled two conditions are fulfilled firstly, no incriminating material is found and minating material is found and secondly secondly, assessment not abated i.e. no assessment proceedings abated i.e. no assessment proceedings were pending as were pending as on the date of search.
6.1 We find that in the instant case, search was condu We find that in the instant case, search was condu We find that in the instant case, search was conducted on 11.01.2012. For the assessment year concerned the assessment year concerned, the regular return the regular return was filed on 30.11.2010 and therefore, on 30.11.2010 and therefore, time limit for issuing limit for issuing notice u/s 143(2) for selecting the case under scrutiny expired on u/s 143(2) for selecting the case under scrutiny expired on u/s 143(2) for selecting the case under scrutiny expired on 30.09.2011 and till 30.09.2011 and till the date of search, no notice no notice u/s 143(2) was issued thus no assessment proceedings was pending in the year thus no assessment proceedings was pending in the year thus no assessment proceedings was pending in the year under reference in the case of the assessee under reference in the case of the assessee. This fact has been duly . This fact has been duly mentioned by the Assessing Officer in para 8 of the assessment mentioned by the Assessing Officer in para 8 of the assessment mentioned by the Assessing Officer in para 8 of the assessment order which is reproduced as under: order which is reproduced as under:
“8. It was verified from the details submitted by the 8. It was verified from the details submitted by the 8. It was verified from the details submitted by the A.R. that assessee's case was not selected under A.R. that assessee's case was not selected under A.R. that assessee's case was not selected under scrutiny and hence, no regul scrutiny and hence, no regular assessment order had ar assessment order had been passed u/s 143(3) of the IT Act for the been passed u/s 143(3) of the IT Act for the been passed u/s 143(3) of the IT Act for the assessment assessment year year under under consideration. consideration. However, However, pursuant to the search action conducted on M/s pursuant to the search action conducted on M/s pursuant to the search action conducted on M/s Mandhana Industries Limited, compulsory scrutiny Mandhana Industries Limited, compulsory scrutiny Mandhana Industries Limited, compulsory scrutiny
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 6 ITA No. 2019/M/2020 proceedings have been initiated u/s 153A of proceedings have been initiated u/s 153A of the IT Act the IT Act against the assessee. against the assessee.”
6.2 Therefore, the assessment year concerned is in the category of Therefore, the assessment year concerned is in the category of Therefore, the assessment year concerned is in the category of unabated assessment. unabated assessment.
6.3 As far as second condition is concerned, we find that the As far as second condition is concerned, we find that the As far as second condition is concerned, we find that the Assessing Officer in para 6 of the assessment has mentioned that Assessing Officer in para 6 of the assessment has mentioned that Assessing Officer in para 6 of the assessment has mentioned that the information in relation to bogus trading purchases from M/s formation in relation to bogus trading purchases from M/s formation in relation to bogus trading purchases from M/s Siddhpad Trading Pvt. Ltd. was found during the course of survey Siddhpad Trading Pvt. Ltd. was found during the course of survey Siddhpad Trading Pvt. Ltd. was found during the course of survey proceedings dated 31.07.2013. The relevant para of the Assessing 31.07.2013. The relevant para of the Assessing 31.07.2013. The relevant para of the Assessing Officer is reproduced as under: Officer is reproduced as under:
“6. During the course of survey pro 6. During the course of survey proceedings on ceedings on 31/7/2013, the assessee company was found to have 31/7/2013, the assessee company was found to have 31/7/2013, the assessee company was found to have taken bogus trading purchases of Rs.2,36,93,640/ taken bogus trading purchases of Rs.2,36,93,640/ taken bogus trading purchases of Rs.2,36,93,640/- during the FY 2009 during the FY 2009-10 from one trader viz. Siddhpad 10 from one trader viz. Siddhpad Trading Prt Ltd. earmarked as hawala traders by the Trading Prt Ltd. earmarked as hawala traders by the Trading Prt Ltd. earmarked as hawala traders by the Sales Tax Department of Maharashtra. On Sales Tax Department of Maharashtra. On confronted, confronted, Shri Purushottam Mandhana during the course of Shri Purushottam Mandhana during the course of Shri Purushottam Mandhana during the course of recording of his statement on oath accepted to have recording of his statement on oath accepted to have recording of his statement on oath accepted to have taken a bogus trading purchase of Rs. 2,36,93,640/ taken a bogus trading purchase of Rs. 2,36,93,640/ taken a bogus trading purchase of Rs. 2,36,93,640/- from M/s Siddhpad Trading Pvt Ltd. and claimed to from M/s Siddhpad Trading Pvt Ltd. and claimed to from M/s Siddhpad Trading Pvt Ltd. and claimed to have issued a corresponding bogus sale bill have issued a corresponding bogus sale bill of Rs. of Rs. 2,62,57,392/ 2,62,57,392/- to The Loot India Pvt. Ltd. so as to show to The Loot India Pvt. Ltd. so as to show an exaggerated growth rate of the company to its an exaggerated growth rate of the company to its an exaggerated growth rate of the company to its investors and to maintain requisite turnover of the investors and to maintain requisite turnover of the investors and to maintain requisite turnover of the company to avail of cash credit facility from the bank company to avail of cash credit facility from the bank company to avail of cash credit facility from the bank
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 7 ITA No. 2019/M/2020 on the basis of jacked on the basis of jacked-up sales turnover of the over of the company.”
6.4 This fact has been further mentioned by the Ld. Assessing This fact has been further mentioned by the Ld. Assessing This fact has been further mentioned by the Ld. Assessing Officer in para 10 of the assessment order which is reproduced as Officer in para 10 of the assessment order which is reproduced as Officer in para 10 of the assessment order which is reproduced as under:
“10. During the course of survey proceedings, the During the course of survey proceedings, the During the course of survey proceedings, the investigation team has found that the assessee investigation team has found that the assessee investigation team has found that the assessee company has taken the purchases amounting to ompany has taken the purchases amounting to ompany has taken the purchases amounting to Rs.23693640/ Rs.23693640/- from M/s Siddhpad Trading Pvt Ltd. from M/s Siddhpad Trading Pvt Ltd. who is a blacklisted hawala trader by the Sales Tax who is a blacklisted hawala trader by the Sales Tax who is a blacklisted hawala trader by the Sales Tax Department of Maharashtra. During the course of Department of Maharashtra. During the course of Department of Maharashtra. During the course of scrutiny proceedings, the notice us 133(6) was issued to scrutiny proceedings, the notice us 133(6) was issued to scrutiny proceedings, the notice us 133(6) was issued to M/s Siddhpad ddhpad ddhpad Trading Trading Trading Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. After After After physical physical physical verification by the Inspector of this office, it was found verification by the Inspector of this office, it was found verification by the Inspector of this office, it was found that the said concern does not exist at the specified that the said concern does not exist at the specified that the said concern does not exist at the specified address.”
6.5 In view of the above observation of the Assessing Officer, it is In view of the above observation of the Assessing Officer, it is In view of the above observation of the Assessing Officer, it is evident that the additio evident that the addition has been made by the Assessing Officer on n has been made by the Assessing Officer on the basis of evidence the basis of evidence gathered during the course of the survey during the course of the survey proceedings and not based on any incriminating material found proceedings and not based on any incriminating material found proceedings and not based on any incriminating material found during the course of search dated during the course of search dated 11.01.2012. In view of the above . In view of the above, following decision of the Hon’ble Bombay High Court in the case of of the Hon’ble Bombay High Court in the case of of the Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation Ltd., reported in CIT vs. Continental Warehousing Corporation Ltd CIT vs. Continental Warehousing Corporation Ltd 374 ITR 645 no addition could have been made in the year under no addition could have been made in the year under no addition could have been made in the year under reference without reference to reference to any incriminating material ny incriminating material found
M/s Golden Seams Textiles Pvt. Ltd. M/s Golden Seams Textiles Pvt. Ltd. 8 ITA No. 2019/M/2020 during the course of search during the course of search. The additional ground of appeal of the . The additional ground of appeal of the assessee is accordingly allowed. assessee is accordingly allowed.
6.6 Since, we have allowed the additional ground of appeal of the Since, we have allowed the additional ground of appeal of the Since, we have allowed the additional ground of appeal of the assessee, the ground raised by the assessee are not requ ground raised by the assessee are not requ ground raised by the assessee are not required to adjudicate as same are rendered only academic. same are rendered only academic.
In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed.