KAVIS FASHIONS P.LTD,MUMBAI vs. DCIT 9(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) Per Rajendra, A.M.लेखा सद�य राजे�� के अनुसारः Challenging the order,dated 07.02.2014,of the CIT(A)-20,Mumbai, the Assessee has filed the present appeal. Assessee-company,engaged in the business of manufacturing and exporting of leather – footwear,filed its return of income on 30.9.2010 declaring income of Rs.2.85 crores.The Assessing Officer(AO),completed the assessment,u/s. 143 of the Act, on 11.2.2013 determi -ning the income of the assessee at Rs. 3,00,01,130/-. 2.Effective Ground of appeal is about Rs.13.48 lacs on account of purchase of raw material. During the assessment proceedings,the AO received information from sales tax department. Regarding bogus bills.He found that one of the bogus biller,namely Rohit Enterprises (RE), had shown sales to the assessee to the tune of Rs.13,48,763/-.He directed it to furnish details of the transaction entered into with RE.After considering the submission of the assessee, the AO held that the it had not produced the party nor had it filed the required details, that the onus of proving the genuineness of transaction was on the assessee,that it had failed to discharge the burden of proof cast upon it,.Treating the amount in dispute as bogus,the AO added it back to the total income of the assessee. 3.Aggrieved by the order of the AO,the assessee filed an appeal before the First Appellate Authoirty(FAA).Before him,it was stated that RE had registered itself with sales tax depart - ment,that it had a valid TIN Number issued by the sales tax department,that the AO had not given any evidence to prove that RE was issuing bogus bills,that the AO had accepted the books of accounts as well as the sales and closing stock,that the payment was made through account payee cheques,that the records maintained by the aa were destroyed by a major fire that took place at the premises of the aa on 6.3.12,that a copy of FIR made to the police and copy of report of the Mumbai Fire Brigade department was made available to the AO,that the AO had not established on record that purchase made from RE were bogus,that he had simply relied on the information recd from sales tax department.It furnished a copy of ledger account of RE and bank statement to show that corresponding payments were made against the purchases. After considering the submission of the assessee and the assessment order, the FAA held that it had failed to establish the genuineness of the purchase to the extent of Rs.13.48 lacs that were claimed to be purchased from RE,that it had not produced the party or the books of account,that the information from the sales tax department proved that RE was a bogus biller,that the assessee had obtained bogus bills either to inflate the expenditure and Kavis fashion 2 suppress the taxable income or had purchased goods at black markets,that from any angle the AO was justified in making the addition,that the bank statement was of no use to prove the genuineness of the transaction.Finally,he upheld the order of the AO. 4.Before us,the Authrorised Representative(AR)contended that, the AO had accepted the sales,that the assessee had purchased goods of Rs. 13.48 lacs only from RE,that it could not produce the records because of the fire that took place at the factory premises,that there was no evidence that cash was received back from RE.He relied upon the case of Rajeev G. Kalatil(ITA/6727.Mum/2012)AY.2009-10 dtd,20.08.2014.Departmental Representative (DR)supported the order of the FAA. 5.We have heard the rival submissions and perused the material before us. We find that RE was a registered entity with the sales tax department,that the AO had made the addition because the name of RE was appearing in the list prepared by the sales department, who were considered to be bogus bill providers,that the AO/FAA had not revealed the exact information which led them to the conclusion that RE had issued bogus bill to the assessee. Issuing bogus bills in general and issuing bogus bills to a particular assessee are two different situations.We do not find any evidence that RE was examined by AO/FAA.On the other hand the assessee had produced the bank account and details of payment made to RE. It is not denied by both the authorities that payments were made through account payee cheques.In these circumstances,they should have conducted further enquires.But they stopped at the threshold only and just relied upon the information appearing on the website of the sales tax department.The information in itself was a good starting point,but it required further investigation.We find that in similar circumstances in the case of Rajeev G Kalital (supra) the Tribunal has held as under :- “2.4.We have heard the rival submissions and perused the material before us.We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end.But,he left the job at initial point itself.Suspicion of highest degree cannot take place of evidence.He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account.We find that no such exercise was done.Transportation of good to the site is one of the deciding factor to be considered for resolving the issue.The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock.As far as the case of Western Extrusion Industries. (supra)is concerned,we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods.But,in the case before us,there is nothing,in the order of the AO,about the cash traial.Secondly,proof of movement of goods is not in doubt. Thererfore,considering the peculiar facts and circumstances of the case under appeal,we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO.So,confirming the order of the FAA,we decide ground no.1 against the AO.” Following the above decision of the Tribunal,we decide effective ground of appeal in favour of the assess and reverse the order of the FAA. As a result appeal filed by the Assessee stands allowed. फलतः िनधा�रती क� अपील मंजूर क� जाती है. Order pronounced in the open court on 29th,October, 2015. आदेश क� घोषणा खुले �यायालय म� �दनांक 29 अ�टूबर,2015 को क� गई । Sd/- Sd/- (बीना िप�लई / Beena Pillai ) (राजे�� / Rajendra) �याियक सद�य/Judicial Member लेखा सद�य/Accountant Member