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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI G. MANJUNATHA, AM
Date of Hearing 26/06/2019 Date of Pronouncement 24/07/2019 आदेश / O R D E R आदेश आदेश आदेश PER G.MANJUNATHA (A.M):
This appeal filed by the assessee is directed against order of the Ld CIT(A)-16, Mumbai, dated 20/12/2016 and it pertains to Assessment Year-2012-13. 2. The assessee has raised following grounds of appeal:-
1. The Ld. CIT(Appeals) erred in sustaining addition of Rs. 1,57,00,000/- made by Assessing Officer in respect of unexplained cash credit and made addition u/s 68 of the Act.
2. The Ld. CIT (Appeals) erred in sustaining addition of Rs. 1,02,25,513/- made by Assessing Officer in respect of hawala purchases.
3. In so doing he did not appreciate the material & submissions made before him. 4.Your appellant submits that due relief be allowed.
Ahan Apparel Pvt.Ltd. 5. The appellant company craves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing. 3. The brief facts of the case are that the assessee company is engaged in the business of manufacturing and trading of textiles, filed its return of income for AY 2012-13 on 27/09/2012, declaring total income at Rs.3,37,27,955/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has issued shares at premium of Rs.195 per share and also forfeiture such shares for non-payment of balance consideration by the allottees, therefore, called upon the assessee to furnish necessary details to prove genuineness of transactions. In response, the assessee has filed details including copy of ITR filed for the relevant years, PAN Numbers, financial statement and ledger account of the subscribers to the share capital.
The Assessing Officer, in order to ascertain correctness of claim of the assessee, issued summons u/s 131 of the Act, to the Principle Officer of subscribers companies, but, no compliance by any of the subscribers company to summons issued u/s 131 of the Act. The Assessing Officer further observed that assessee has not filed any details in respect of forfeiture of money received from those two applicants for allotment of preferences that too, within short span of less than a year, therefore, he opined that the transactions between
Ahan Apparel Pvt.Ltd. the parties appears to be sham and accordingly made additions towards amount received from two subscribers for allotment of shares amounting to Rs.1,62,00,000/- as unexplained cash credit u/s 68 of the Act. Similarly, the Assessing Officer further noticed that the assessee has obtained bogus purchases bills from Sidhapad Trading Pvt. Ltd. and City Base Multi Trade Ltd. amounting to Rs.8,18,04,105/-. The Assessing Officer, further observed that both parties are appeared in the list of Hawala/suspicious dealers prepared by the Maharashtra Sales Tax Department, Govt. of Maharashtra, therefore, after considering the submissions of the assessee and also by relied upon various judicial precedence, including the decision of the Hon’ble Gujarat High Court in the case of P. Simith Sheth vs CIT (356 ITR 451) estimated 12.5% profit on alleged bogus purchases amounting to Rs.8,18,04,105/- and made additions of Rs.1,02,25,513/- to the total income of the assessee.
Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has reiterated its submissions made before the Assessing Officer to argue that share capital received from two subscribers companies are genuine which are supported by necessary evidences. The assessee has forfeited amount received from two companies for non-payment of balance consideration within the agreed period
Ahan Apparel Pvt.Ltd. between the parties, therefore, merely for the reason of forfeiture of shares, the transactions between the parties cannot be doubted when the assessee has filed complete set of documents including identity, genuineness of transactions and creditworthiness of the parties. Similarly, the assessee has reiterated its submissions made before the Assessing Officer to argue that purchase from above two parties are supported by necessary evidence and the Assessing Officer has made additions only on the basis of information received from Sales Tax Department, Govt. of Maharashtra, without ascertaining true nature of transactions between the parties,even, though, the assessee has filed complete set of documents to prove genuineness of transaction between the parties.
The Ld. CIT(A) after considering the submissions of the assessee and also by relied upon various judicial precedence, including the decision of the Hon’ble Supreme Court in the case of Sumati Dayal vs CIT (214 ITR 801)(SC) held that the assessee has failed to prove genuineness of transactions between the parties and also failed to offer any explanation for forfeiture of shares within a short span less than a year, therefore, the Assessing Officer was right in making addition towards amount received from two subscribers as unexplained cash credit u/s 68 of the Act. Similarly, as regards additions made towards alleged bogus purchases, the Ahan Apparel Pvt.Ltd. Ld. CIT(A) held that the facts brought out by the Ld. AO during the course of assessment proceedings, clearly established the nature of transactions between the parties, as per which the assessee has failed to prove purchases from above two parties with necessary evidences. This fact is further strengthened by the findings of the Sales Tax Department, Govt. of Maharashtra where the parties have admitted in their statement that they are involved in providing accommodation entries without there being any business activities.
The Assessing Officer after considering the relevant submissions and by following the decision of the Hon’ble Gujarat High Court in the case of P. Simit Sheth (supra), fairly estimated profit embedded in those bogus purchases @12.5%, therefore, he opined that no reason to interfere with the findings of the Ld. Assessing Officer and accordingly, dismissed the ground taken by the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
None appeared for the assessee.
We have heard the Ld. DR, perused the material available on record and gone through the orders of authorities below. In respect of additions made towards capital receipt from two subscriber companies u/s 68 of the Act, we find that the Assessing Officer as well as the Ld. CIT(A) have brought out clear facts to the effect that the assessee has failed to prove the identity, genuineness of Ahan Apparel Pvt.Ltd. transactions and creditworthiness of the parties with conclusive evidences. The Lower authorities further observed that although the assessee filed certain documents in order to prove the identity of the party but, mere furnishing certain documents including PAN number would not sufficient enough to discharge the onus cast upon the assessee u/s 68 of the Act. The lower authorities further observed that the conduct of the parties in so far as allotment of preferential shares by accepting part amount and subsequent forfeiture of amount received from parties for nonpayment of balance consideration for allotment of shares gives rise to suspicion.
Therefore, it is for the assessee to discharge the onus cast upon it by filing necessary evidences. Since, the assessee has not offered any explanation for forfeiture of shares and also failed to prove identity, genuineness of transactions and creditworthiness of the parties, came to the conclusion that transaction between the parties are sham, which are not supported by necessary details. Facts remains unchanged, the assessee neither appeared nor filed any details before us to controvert findings of the facts recorded by the lower authorities. Therefore, we are of the considered view that there is nothing to offer from the assessee side in order to prove the transactions of allotment of shares to two subscribers with any Ahan Apparel Pvt.Ltd. evidences and hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the assessee.
Coming back to the additions made towards profit element embedded in alleged bogus purchases. We find that the Assessing Officer has brought out clear facts in the light of information received from Sales Tax Department, Government of Maharashtra, coupled with further enquiries conducted during the course of assessment proceedings that purchases from above two parties are bogus in nature which are not supported by necessary evidence. Although, the assessee has filed primary evidences in from of purchase bills and payment proof to such purchases against banking channel, but failed to file further evidences in the back drop of clear findings from the Sales Tax Department that they are involved in providing accommodation entries without actual business activity. Even before us, the assessee neither appeared nor filed any details to controvert the findings of fact recorded by the Assessing Officer as well as the Ld. CIT(A). We further noted that the Assessing Officer has taken support from the ratio of Hon’ble Gujarat High Court in the case of CIT vs Simit P. Sheth (supra), where the Hon’ble High Court held that in case of alleged bogus purchases, only profit element embedded in those purchases needs to be taxed, but not entire alleged bogus purchases. The Court further observed that the profit
Ahan Apparel Pvt.Ltd. element required to be taxed needs to be ascertained depending upon facts of each case and accordingly considering the facts of case before the Court directed the Assessing Officer to estimate at 12.5% profit on alleged bogus purchases. The Co-ordinate Bench of the Tribunal in number of cases has taken consistent view and directed the Assessing Officers to estimate 12.5% profit on alleged bogus purchases. In this case, the Assessing Officer has estimated profit @12.5% on alleged bogus purchases. Therefore, we are of the considered view that the there is no reason to interfere with the findings of the Assessing Officer, hence, we are inclined to uphold the order of the Ld. CIT(A) and reject ground taken by the assessee.
In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on this 24 /07/2019