SHREE SHUBHAM EXPORTS,KOLKATA vs. ITO, WARD-36(2), KOLKATA

This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2015-16 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-10, Kolkata [in short ld. “CIT(A)”] dated 26.04.2019 which is arising out of the assessment order framed u/s 143(3) of the Act dated 28.12.2017.

When the case called up, none appeared on behalf of the assessee. On perusal of records, we find that multiple opportunities have been given to the assessee and notices have I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. also been issued by RPAD. But, there is no compliance on behalf of the assessee. We have no option left except to proceed to adjudicate the issues in the instant appeal with the assistance of ld. D/R and available records. 3. The assessee is in appeal before this Tribunal raising the following grounds: “

Brief facts of the case as culled out from the records are that the assessee is a partnership firm. NIL income has been shown in the return of income filed on 10.04.2016 for AY 2015-16. Case selected for limited scrutiny through CASS on the basis of information received by the Income Tax Department from Central Board of Excise and Custom (CBEC) that there were 38 instances of import made by the assessee totalling to Rs. 5,23,67,576/-. Based on this information notices u/s 143(2) & 142(1) of the Act were issued and duly served upon the assessee. In the course of assessment proceedings, the assessee was confronted with the said information. The assessee firstly contended that the goods imported were of inferior quality and no payment was made and, therefore, there was no purchase in the year. In the income-tax return also no purchase and sale has been shown by the assessee. The assessee also stated that the goods were sent to customers but being of inferior quality they could not be sold. Since, the assessee was giving contradictory statements and no details were filed of any of the customer, ld. Assessing Officer (in short ld. “AO”) was not satisfied. However, during the course of hearing an alternative plea was taken by the assessee in its statement that if explanation is not found satisfactory a gross profit rate of 12.5% on alleged purchases may be calculated in the light of the decision of co- ordinate Bench of Mumbai in the case of M/s Ratnagiri Stainless Pvt. Ltd. vs. Income Tax Officer 5(3)(1), Mumbai in dated 04.04.2017. Based on this explanation, ld. AO concluded the assessment by computing the profit at the rate I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. of 15% on the alleged purchases and made addition of Rs. 78,55,136/- in the hands of the assessee.

Aggrieved, the assessee preferred appeal before ld. CIT(A) challenging the addition made by the ld. AO and also taking ground that ld. AO has not provided the benefit of Section 40(b) of the Act towards partners’ remuneration as per the partnership deed. Ld. CIT(A) was not convinced with the submission made by the assessee and dismissed the assessee’s appeal.

Aggrieved, the assessee is now in appeal before the Tribunal. The assessee has not appeared on any of the dates nor any written submissions have been filed even though at least on five occasions notices by RPAD have been issued to the assessee.

Ld. D/R vehemently argued supporting the orders of both the lower authorities.

We have heard rival contentions and perused the records placed before us. The grievance of the assessee raised in ground no. 1 to 4 centres around the addition of Rs. 78,55,136/- confirmed by ld. CIT(A) which was made by ld. AO applying the profit rate of 15% on the alleged undisclosed purchases in the form of import of Rs. 5,23,67,576/-.

We find that a specific information was received by the Department from CBEC. The assessee as imported goods worth Rs. 5,23,67,576/-. Complete list of such purchases are placed at page 4 & 5 of the assessment order wherein the list has been given by Indian Customs EDI System – Imports V1.5, 15/1, Strand I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. Road, Custom House, Kolkata-700 001. The assessee has been regularly pleading that, goods imported were of inferior quality, no payments were made to the exporter. Undisputedly no purchase has been recorded in the books of account. The assessee has also pleaded that the imported goods were sold to different parties who rejected them on the ground of inferior quality, therefore no sales were recorded in books and regarding the payment of customs duty, the assessee stated before ld. AO that it was paid by bank draft received from suppliers. On one hand, the assessee agrees that, purchases and sales happened in the year but on the other hand, in the income-tax return NIL income has been shown and no profit & loss and balance sheet have been filed showing the alleged transactions of purchase and sale in the books. The assessee has also not given the details of so-called customers to whom it sold goods and which were returned back for inferior quality. The assessee’s contention before the lower authorities are contradictory and also not supported by any evidence. Whatever submissions the assessee has made, they seem to be hollow and not supported by any documentary evidence since the beginning of the assessment proceedings and till the date of hearing of this appeal by us.

We also find that ld. AO has accepted the alternative plea of the assessee of applying profit rate on the alleged purchases and made the addition by applying 15% profit rate as against the assessee’s plea of applying 12.5% profit rate.

We, however, under the given facts and circumstances of the case, find no merit in the ground nos. 1 to 4 raised by the assessee I.T.A. No.: 1654/Kol/2019 Assessment Year: 2015-16 Shree Shubham Exports. and, therefore, no interference is called for in the finding of the ld. CIT(A) confirming the action of ld. AO of applying 15% profit rate on the alleged purchases, thereby, confirming the addition of Rs. 78,55,136/-. Thus, ground nos. 1 to 4 raised by the assessee are dismissed.

As regards ground no. 5 for deduction u/s 40(b)(v) of the Act for the deduction of partners’ remuneration, we find that the assessee has not filed partnership deed before both the authorities and ld. CIT(A) has rightly restored the issue to ld. AO to examine the issue and directed the assessee to file necessary evidences i.e. a copy of partnership deed etc. then deduction u/s 40(b) of the Act may be allowed and the deduction so allowed will be taxed in the hands of the respective partners. Thus, ground no. 5 is allowed for statistical purposes.

As regards ground no. 6 for allowing of set off unabsorbed depreciation and brought forward losses, we find that ld. CIT(A) has rightly restored the issue to the ld. AO to examine the correctness of claim and we accordingly direct the assessee to go before ld. AO and furnish the details of returns filed for the preceding years claiming the depreciation and business losses (if any) and if the same is found to be correct then ld. AO may allow the deduction of the same as per law. Thus, this ground raised