ASST CIT 32(3), MUMBAI vs. SHAYONA CORPORATION, MUMBAI

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ITA 5276/MUM/2015Status: DisposedITAT Mumbai11 April 2018AY 2011-127 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) reasonably estimated 10% of the bogus purchases as profit, following the Gujarat High Court's decision in CIT vs. Simit P Sheth. The Revenue's appeal was dismissed.

What were the facts?

During a survey, the assessee admitted to taking accommodation bills for purchases amounting to Rs. 1,53,90,687/- and offered Rs. 22 lacs for improper vouchers. The Assessing Officer (AO) made an addition of Rs. 1,75,90,687/-. The CIT(A) restricted the addition to 10% of the bogus purchases, amounting to Rs. 15.39 lakhs.

What were the issues?

Whether the CIT(A) erred in restricting the addition for bogus purchases to 10% of the total amount, and whether the AO had marshalled sufficient evidence to support the addition.

Which sections of the Income-tax Act were involved?

Section 133A,Section 144

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Heard together (2 matters)

CO No. 243/Mum/2017
ITA No. 5276/Mum/2011

Read from the judgment's own cause title. This page is filed under one of them.

These cross appeal by the assessee and Revenue are arising out of the order of Commissioner of Income Tax (Appeals)-44, Mumbai [in short CIT(A)], in appeal No. CIT(A)-44/JCIT-32(3)/ITA-305/2014-15 dated 02-09-2015. The Assessment was framed by the Jt. Commissioner of Income Tax, Range-8, Mumbai (in short ‘JCIT’) for the A.Y. 2011-12 vide order dated 19-03-2014 under section 144 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2.

The only issue in this appeal of Revenue is against the order of CIT(A) restricting the disallowance of bogus purchases at 10% of the bogus purchases to the extent of Rs. 15.39 lakhs as against the addition made by AO at Rs. 1,75,90,687/-. For this Revenue has raised the following grounds: - “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in restricting addition made on the basis of evidences found and admitted by the assessee during the survey under section 133A to ₹ 15,39,000/- as against addition of ₹ 1,75,90,687/- made by the AO without appreciating the fact that the assessee has not produced any cogent evidence to substantiate its claim of purchases and expenses claim and also the Ld. CIT(A) failed to appreciate the fact that the assessee did not cooperate in the assessee proceedings.

2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the AO overlooking the statements given by the parties and explicit finding of the investigation carried out by the sales tax department and corroborated by the enquiries of the AO.”

3. Briefly stated facts are that the assessee is a govt. contractor and Income Tax Department carried out survey under section 133A of the Act on 14.05.2013 based on information received from sales tax department that the assessee is one of the beneficiaries of bogus purchase bills issued by Rheem Tradelinks Pvt. Ltd. and Riddhi Siddhi Enterprises. During Survey a statement of Shri Ramesh Dabhi partner of the assessee was recorded, where he admitted having taken accommodation bills of purchases from the above parties amounting to Rs. 1,53,90,687/-. The assessee also offered a sum of Rs. 22 lacs towards improper vouchers and expenses claimed. The AO based on the same made addition of income at Rs. 1,75,90,687/-. Aggrieved, assessee preferred appeal before CIT(A).

4. The CIT(A) after considering the submissions of the assessee and going through the factual matrix of the case restricted the addition at Rs. 10% of the bogus purchases at Rs. 15.39 lacs by observing in Para 10.10 to 10.14 as under:

“10.10 In the present case, I find that the assessment order is quite brief and other than referring to the statement recorded during survey, which too is not reproduced, there is no marshalling of evidence in support of the addition. Perusal of case records too do not show any incriminating material supporting the declaration in the course of survey. There is no record of any verification or investigation carried out by the assessing officer in respect of information contained in the impounded material available with him for 9 months after the survey. It is a trite law that even in an assessment made u/s 144, the assessing officer has to marshal evidence in support of that additions made.

10.11 It is also seen that the appellant has been reflecting good profitability across the year as can be seen from the details tabulated below:-

10.12 From the copy of assessment orders of the preceding years and succeeding years, it is noted that no such disallowance regarding bogus purchases have been made. With the disallowances made by the assessing officer, the NP % for AY 2011-12 will go up to 18.21 % which is certainly quite high.

10.13 Records support the contention that there was issue of Jurisdiction and convenience in as much as the appellant was assessed at Mumbai, before his case was selected for scrutiny at Nagpur and a survey carried out by the AO from Nagpur office at appellant's premises at Mumbai and Thane. Even though the request for transfer of proceedings to Mumbai was not accepted by the AO at Nagpur, no effort was made to verily the purchases based on the copies of bills impounded and lying in custody of the assessing officer at Nagpur. There is not a whisper of the evidence found and verified to support the statement recorded in the course of the survey.

10.14 In this factual matrix, where there is no evidence to support the additions, based merely on the statement recorded in the survey proceedings. I the additions are clearly unsustainable. At the same time it is unacceptable that the appellant did not attend before the assessing officer even once in the assessment proceedings nor the impugned parties were produced. No confirmation was filed in respect of Riddhi Siddhi Enterprise - Rs. 3,17,487/-. These bills do not have the details of transport vehicle. The disallowance is therefore upheld to the extent of only Its 15,39,000/- @ 10% of the impugned purchases. Ground of appeal no 1 is partly allowed.”

Aggrieved, now Revenue is in second appeal before Tribunal.

5.

We have heard rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that that admittedly these are bogus purchases and Tribunal is consistently taking up bogus purchases by applying profit rate estimating the income. Hon’ble Gujarat High Court in the case of CIT vs. Simit P Sheth [2013] 356 ITR 451 (Gujarat) considered this issue and applied the profit rate at the rate of 12.5%. Taking a clue from Hon’ble Gujarat High Court, we are of the view that the CIT(A) has reasonably estimated 10% of the bogus purchases and hence, we find no infirmity in the order of CIT(A) and the same is confirmed. The issue of Revenues appeal is dismissed.

6.

Coming to the cross objection of the assessee, which is delayed by 133 days and assessee has filed condonation petition stating the reason that, the assessee firm did not prefer the appeal as the amount involved is very low and keeping in mind the low tax effect as compared to cost and time involved in filing appeal, the appeal was not preferred. Another reason given was that for frequent travel to Rajasthan and Gujarat on account of various social and family function in the month of June and July 2017. When this was confronted to the learned Counsel for the assessee that this is not reasonable cause for delay of 133 days and assessee knowing fully not filed appeal and taken a conscious decision not to file the appeal. It means that the cross objection filed by the assessee is delayed due to conscious decision not to file the appeal and hence, that cannot be attributed as a reasonable cause. Accordingly, the cross objection of the assessee is dismissed in limine.

7.

In the result, the Cross Objection of the assessee is dismissed and also the appeal of Revenue is dismissed.

Order pronounced in the open court on 13-04-2018.

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