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Income Tax Appellate Tribunal, BENCH “G”, MUMBAI
Before: SHRI B.R.BASKARAN & SHRI PAWAN SINGH
Assessee by : Shri Rajesh Shah (AR) Revenue by : Shri Maurya Pratap (DR) Date of hearing : 12.07.2016 Date of Pronouncement : 16.09.2016 O R D E R
PER PAWAN SINGH, JM:
The present appeal is filed by assessee against the order of CIT(A)-21, 1. Mumbai dated 14.08.2014 for Assessment Year (AY) 2010-11).
Brief facts of the case are that assessee filed return of income for the relevant AY on 27.09.2010 declaring total income of Rs. 7,23,18,711/-. The return of income was selected for scrutiny. The AO while framing the assessment besides the other addition/disallowance, disallowed a sum of Rs. 5,14,000/- on account of bogus purchases in the assessment order dated 30.03.2013. Aggrieved by the order of AO, the assessee filed appeal before the First Appellate Authority (FAA), wherein the FAA restricted the disallowance of bogus purchases to 25% of the impugned purchases order. Further aggrieved by the order of FAA, the assessee filed the present appeal on the following grounds of appeal:
1. On the facts and under the circumstances of the case and in law, the CIT(A) erred in confirming 25% of Rs 5,14,800/- as bogus purchase made by the appellant company. There is no justification to confirm addition at 25%.
2. On the facts and under the circumstances of the case and in law, the action of CIT(A) in confirming AO action is wrong on the following grounds:-
a. Total documents relating to Purchases along with Octroi Bills were produced before AO and CIT(A). Total Payments were by Account Payee Chq. b. Documentary Evidence were submitted to prove that company had purchased spoons for its promotion scheme. c. Non Payment of Sales Tax by Sellers should- not be construed as Bogus purchases by appellant company. d. Department had no documentary evidence to prove that purchases were Bogus other than the list of VAT Defaulter.
3. We have heard Ld. Authorised Representative (AR) of the assessee and Ld. Departmental Representative (DR) for Revenue and perused the material available on record. Ld. AR for assessee argued that during the year under consideration, the assessee purchased 60,000/- S.S. Spoons from M/s R.K. Mercantile Pvt. Ltd. for Rs. 5,14,800/-. These 60,000/- Spoons was given to consumer as “FREE” in the Sales Promotion Scheme during the Festive Season along with their product “GULAB JAMUM”. The assessee made genuine purchases from M/s R.K. Steel & Mercantile Pvt. Ltd. The assessee made the payment of bills through account payee cheque which is duly reflected in the books of accounts of the assessee for the relevant financial year. The assessee furnished the copy of bank statement along with the Octroi receipt, Lorry receipt, entry of goods in Municipal Corporation Limit which duly proves the entry of goods dispatched and supplied. Ld. AR of assessee further argued that Ld. CIT(A) erred in confirming the addition @ 25% of the alleged bogus purchases. Ld. AR of the assessee invited our attention to the various bills of different dates consisting of tax invoice, delivery challans, transport receipt which are available at page no. 5 to 23 of the Paper Book (PB). Ld. AR further relied upon the decision of Co-ordinate Bench of this Tribunal in following cases: a. ACIT vs. Tarla R. Shah in b. Hiralal Chunnilal Jain vs. ITO & Ors c. ITA No. 2547, 1275/Mum/14 reported vide (2016) 46 CCH 0020/Mum/Trib. dated 01.01.2005 d. ITO vs. Premanand (2008) 25 SOT 11 Jodhpur e. Imperial Imp & Exp. Vs. ITO in ITA No. 5427/Mum/15 dated 18.03.2016 f. DCIT vs. Etco Telcom Ltd. ITA No. 2533/Mum/2008 dated 04.05.2012.
On the other hand, Ld. DR for Revenue argued that the assessee was given substantial relief by FAA and the addition was confined to 25% of the bogus purchases made by the assessee. Ld. DR further argued that M/s R.K Steel Mercantile Pvt. Ltd. was one of the trader who was involved in providing accommodation entries without delivery of goods as per the VAT and Sales Tax Department of Government of Maharashtra. It was further argued by Ld. DR that the order of Ld. CIT(A) does not require any further interference at our end and the appeal of the assessee is liable to be dismissed.
We have considered the rival contentions of the parties and perused the material available on record. We have seen that the AO while framing assessment that as per the information received from the Investigation Wing, the party (supplier of material) involved in providing accommodation entries. As the parties involved is providing accommodation entry has entered into a bogus transaction with the assessee. The addition of entire purchase was made without discussing the contention of the assessee. Ld. CIT(A) while considering the appeal of the assessee concluded as :- “Once the sales disagree and until the bogus purchase will be disallowed, it is only the part profit of the supplies may be disallowed on issue as the assessee is a manufactures”. And the Ld. CIT(A) directed the AO to add only 25% of the purchase order as bogus purchases by referring the decision of Sanjay Oilcake Industry vs. CIT 316 ITR 274 (Guj.) and Vijay Protins Ltd. vs. ACIT 58 ITD 528 (Ahd.). In fact the assessee has not manufactured any product from the material purchased from M/s R.K. Steel Mercantile Pvt Ltd. The assessee purchased stainless steel Spoons to distribute the same with his product. From the bare reading of orders of authorities below, it is quite clear that neither the oral submission nor the written contention and the documentary evidences furnished by assessee was discussed by the authorities below. The assessee has placed on record the tax invoices, delivery challans, transport slip and the receipt of goods for the material purchased from the alleged impugned parties. The assessee also placed on record the copy of colour Xerox of Cartons of Gifts Pack of their product about the Fry Spoon in respect of festive sale.
The Revenue has not disputed he free distribution of stainless steel spoon. The Co-ordinate Bench in ACIT vs. Tarla R. Shah (supra) relying upon the decision of Hon’ble jurisdictional High Court in M/s Nikunj Eximp Enterprises Pvt. Ltd. (616 taxman 171)held that the AO made the addition merely on the basis of observation made by the Sale Tax Department, has not made any independent enquiry for making addition specially when assessee discharged his primary onus by showing books of accounts, payments by way of account payee cheques and produce this voucher for sales of goods, such addition could not be sustained. In Hiralal Chunnilal Jain (supra), the Co-ordinate Bench held that AO had not made any independent enquiry and simply made the addition on the basis of information received from Sales Tax Department, then addition not justified. Further in case of Imperial Imp & Exp.(supra), the Co-ordinate bench also taken the similar view in the present case, neither the AO nor the Ld. CIT(A) made any independent enquiry before making the impugned addition. Now coming to the facts of present case, Ld. CIT(A) restricted the addition to 25% of purchase order without discussing the documentary evidence furnished by assessee, which is not sustainable in the eyes of law. Considering the fact of the present case, we are of the opinion that there was no reason why 25% of the amount was sustained by the ld CIT(A). We are of the view that facts of the present case are somehow similar with the facts of the cases referred by Ld. AR of the assessee. Hence, the entire addition of alleged bogus purchased is deleted. With the above observations, the appeal of the assessee is allowed. Parties are left to bear their own cost.
In the result, appeal filed by assessee is allowed. Order pronounced in the open court on September 2016. Sd/- Sd/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 16/09/2016 S.K.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent.