M/S SHRADHA APPARELS WORDWIDE,MUMBAI vs. ACIT 21(3), MUMBAI

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ITA 3257/MUM/2019Status: DisposedITAT Mumbai17 September 2020AY 2011-124 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal rejected the assessee's primary plea to delete the entire addition, citing failure to prove the trail of goods and genuineness of dealers. However, it partly allowed the alternate plea regarding GP addition.

What were the facts?

The assessee, engaged in manufacturing and export of readymade garments, was found to have obtained bogus purchase bills from hawala dealers. The Assessing Officer added the entire alleged bogus purchases, which the CIT(A) restricted to 12.5% of such purchases.

What were the issues?

The main issue was the addition on account of bogus purchases. The secondary issue was whether the addition should be restricted to the Gross Profit (GP) rate declared by the assessee.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI VIKAS AWASTHY

For Respondent: Ms Kavita P. Kaushik

आदेश/ ORDER

1.

These three appeals by the assessee are directed against the order of Commissioner of Income Tax (Appeals) – 33, Mumbai [in short ‘the CIT(A)’] dated 28/02/2019, common for the assessment years 2009-10, 2010-11 and 2011-12. The common issue involved in all the three appeals is addition on account of bogus purchases.

2.

The assessee is engaged in manufacturing and export of readymade garments. During the impugned assessment years the Assessing Officer made addition holding that the assessee has obtained bogus purchase bills from Hawala Dealers declared by the Sales Tax Department, Government of Maharashtra. The Assessing Officer made addition of the entire alleged bogus purchases in the three assessment years as under:- Assessment year Bogus purchase addition made by the A.O. (in Rs.) 2009-10 7,01,000/- 2010-11 2,90,400/- 2011-12 19,44,456/- Aggrieved by the assessment orders for the respective impugned assessment years, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order common for all the three assessment years, restricted the addition on account of bogus purchases to 12.5% of such bogus purchases. Thus, the addition confirmed by CIT(A) in the three assessment years is:-

Assessment Year Addition confirmed by CIT(A) (in Rs.) 2009-10 1,75,250/- 2010-11 72,600/- 2011-12 4,86,114/- Still aggrieved, the assessee is in appeal before the Tribunal and has assailed the addition sustained by the CIT(A). The assessee’s primary plea is to delete the entire addition. Without prejudice to the primary plea, the assessee has made an alternate prayer that the addition to the extent of GP rate declared by the assessee in the impugned assessment years may be sustained. The GP rate declared by the assessee in the impugned assessment years is as under:-

Assessment Year G.P. rate declared by the assessee 2009-10 8.64% 2010-11 10.30% 2011-12 5.62%

3.

Ms. Kavita P. Kaushik, representing the department vehemently supported the impugned order and prayed for dismissing the appeals filed by assessee.

4.

I have heard the submissions made by ld. DR and have examined the documents available on record. The primary plea of the assessee is rejected for the reasons: (i) The assessee has failed to prove trail of goods with cogent evidence. (ii) The assessee could neither furnish correct address of the dealers nor the assessee could file confirmations from the dealers. Hence, the assessee has failed to prove genuineness of the dealers. Though, the assessee has furnished copy of invoices and the details of bank transactions vide which payments were made, but mere filing of invoices and details of bank transactions does not conclusively prove that the transactions are genuine. Hence, the primary plea of the assessee raised in ground No.1 of appeal is dismissed.

5.

Now, proceeding on alternate plea, the Department has not disputed sales. Without purchases there cannot be sales. We concur with the findings of the CIT(A) that the assessee must have made purchases from grey market and obtained bills from hawala operators. Taking into consideration entirety of facts, I am of considered view that the ends of justice would be served if G.P addition @11% in each of the impugned assessment years is sustained. The ground no.2 of the appeals is partly allowed, in the terms aforesaid.

6.

In the result, the appeals of the assessee are partly allowed.

Order pronounced on Thursday the 17th day of September, 2020.

Sd./- (VIKAS AWASTHY) �या�यक सद�य/JUDICIAL MEMBER मुंबई/ Mumbai, �दनांक/Dated: 17/09/2020 Vm, Sr. PS(O/S)

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