Neena M Lekhi, Mumbai vs Department Of Income Tax

This appeal has been preferred by the Revenue against order

dated 26.12.2012, passed by the ld. CIT(A)-17, Mumbai, under

section 143(3) r.w.s.147 of the Income Tax Act, 1961 (the Act) for

the assessment year 2002-03.

2. The Revenue has taken following grounds :

" 1. On the facts and in the circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs.10,40,875/- made by AO on account of bogus purchases;

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2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting additional evidence in contravention of Rule 46A. Without granting an opportunity to the AO"

3. Brief facts of the case are that the information was received

from ITO 14(3)(2) that accommodation bills were issued by the

various parties to the assessee, who was proprietor of M/s Baggit.

The information stated that survey u/s 133A was conducted on

13.2.2009 in the cases of following person :

i) Shri Rakeshkumar M Gupta, Propo.of M/s Manoj Mills;

ii) Smt. Hema R Gupta of M/s Shree Ram Sales and Synthetics and

iii) Shri Mohit R Gupta Prop. of M/s Astha Silk Industries;

during which it was found that the above said persons were running

the activities of issuing accommodation bills to various partiers in

Mumbai and also tooutside parties. No trading or business activities

were conducted by the assessee or by the group concerns. As per

the statement given by Shri Rakeshkumar M Gupta, Prop.of M/s

Manoj Mills, it was admitted that he has been earning 1%

commission on the amount of bogus sales bills issued by him. The

modus operandi as explained was that, he use to issue sales bills as

per the requirements of the various parties and received cheques for

the amount as per the bills, which was deposited in the bank account

and the same amount of cash was returned to the party concerned

after deducting his commission charges. The AO noted that the 3 I . T . A . N o . 1 6 0 8 / Mu m / 2 0 1 3

assessee has also made purchases from following persons:

i) Shri Rakeshkumar M Gupta, Propo.of M/s Manoj Mills; Rs.6,00,750/-

ii) Smt. Hema R Gupta Prop. of M/s Shree Ram Sales and Synthetics and Rs.4,40,125/-

Based on these information, the case of the assessee was reopened

u/s 147 for assessing those purchases as income of the assessee.

During the course of the assessment proceedings, the assessee

furnished copies of purchase bills from these parties and also

submitted the copies of the bank account reflecting the payment to

the aforesaid parties. It was also stated that these purchases have

been duly recorded in the books of account as the assessee was

engaged in the business of making designer ladies hand bags for

which she had to purchase fabrics as main raw material. The entire

purchases of Rs.10,40,875/- was made from these two parties only,

which have been used for manufacturing of bags. The manufacuring

and sale has not been disputed. The AO recorded the statement of

Shri Rakeshkumar M Gupta and held that the purchases shown by

the assessee from these parties is bogus and accordingly he added

a sum of Rs.10,40,875/- to the total income of the assessee.

4. In the first appellate proceedings, the ld. CIT(A) required the

assessee to give evidence regarding the genuineness of purchases,

proof of delivery, transport receipt etc. The details of purchases, proof 4 I . T . A . N o . 1 6 0 8 / Mu m / 2 0 1 3

of delivery, transport receipt etc have been incorporated by the ld.

CIT(A) in the appellate order at para 7.6, which are reproduced

hereinbelow :

S.No. Name of the party Date of Bill no. and Mode of G R No. and purchase ands amount delivery date items deils of he goods 1 Manoj Muills 5/7/2001 Fancy 278, Rs.1,22,000/- Delivery 692; 5.7.2001 material at shop 2 Manoj Muills 20/9/2001 382, Rs.1,35,000/- Delivery 1110; 20.9.2001 Fancy Garment at shop fabrics 3 Manoj Muills 30/9/2001 399, Rs.50,500/- Delivery 1842; 30.9.2001 Polyster Blend at shop fabrics with Glitter 4 Manoj Muills 6/10/2001 410,Rs.53,750/- Delivery 2165; 6.10.2001 Peach Skin at shop 5 Manoj Muills 16/10/2001 432, Rs.20,700 Delivery 2534;16.10.2001 Glitter fabrics at shop with stitch 6 Manoj Muills 15/3/2002 777, Rs.1,26,000/- Delivery 3164;15.3.2002 synthetic Glitter at shop fabrics 7 Manoj Muills 26/03/2002, 802, Rs.92,800/- Delivery 3201; 26.3.2002 Glitter stitch at shop material 8 Shree Ram Sales 25/09/2001, 326, Rs.1,03,125/- Delivery 1521;25.9.2001 and Synthetics Glitter stitch at shop material 9 Shree Ram Sales 06/11/2001 376, Rs.2,82,000/- Delivery 2537;6.11.2001 and Synthetics fancy Glitter at shop fabric 10 Shree Ram Sales 25/09/2001, 447, Rs.1,03,125/- Delivery 2665;21.12.2001 and Synthetics Glitter stitch at shop fabrics

The ld. CIT(A) further required the assessee to produce the stock

register to prove the consumption of raw material for the purpose of

the manufacturing. In response the stock register was produced and

was examined by the ld. CIT(A) in detail and observed that the

CIT(A) has wide powers and can direct the assessee to produce any

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information or material for deciding the case and Rule 46A does not

place any bar on the right of the assessee to produce additional

evidence as directed by the First Appellate Authority. Accordingly, he

held that the documents as produced before him goes to show that

the assessee has actually consumed the material for the purpose of

the manufacturing and without any purchase no manufacturing could

have been done. Thus, he deleted the addition made by the AO.

5. Before us the ld. DR submitted that the ld. CIT(A) has violated

the provisions of Rule 46A of the Income Tax Rules, 1962( the Rules)

and could have given an opportunity to the AO to verify and

examine the record produced by the assessee, because there was

prima facie strong case against the assessee that all the purchases

were bogus in the wake of survey conducted in the case of the

parties from whom purchases were made by the assessee. Thus, the

entire matter should be restored back to the file of the AO for proper

examination and enquiry.

6. On the contrary, the ld.Counsel for the assessee submitted

that, first of all, the assessee had not produced any additional

evidence but has produced the bills and GR numbers required by

the ld. CIT(A) and also stock register. These documents were

furnished by the assessee as required by the ld.CIT(A) to be

produced before him and once any material or evidence has been 6 I . T . A . N o . 1 6 0 8 / Mu m / 2 0 1 3

produced at the behest and direction of ld.CIT(A), then the same

does not constitute any additional evidence for the purpose of Rule

46A. Otherwise also in similar case, where purchases were made

from the same parties, Co-ordinate Bench of the Tribunal has deleted

the addition. In support this contention, the ld. Counsel of the

assessee placed reliance on the decision of the Mumbai Bench in

the case of Jitendra Harshadkumar & Co. V/s DCIT in I.T.A. No.

3141/Mum/ 2012 (AY-2005-06) dated 31.10.2013. Thus this issue is

squarely covered by the aforesaid decision of the Tribunal.

7. We have heard the rival submissions, perused the relevant

record and also gone through the impugned order. The assessee is

engaged in the business of manufacturing of ladies bags/purses and

for this purpose, the assessee has purchased raw material from

various parties. The assessee had made aggregate purchases of

Rs.10,40,875/- from Shri Rakeshkumar M Gupta and Smt. Hema R

Gupta, who were the persons in whose case survey had taken place

and during the course of survey they have admitted that they were

engaged in providing accommodation entries by giving bogus sale

bills. Solely on this background the AO has treated the said

purchases as bogus and in the nature of accommodation entry of

sale bills. The ld. CIT(A) required the assessee to substantiate the

purchases by proving through mode of delivery and transport 7 I . T . A . N o . 1 6 0 8 / Mu m / 2 0 1 3

receipts. He also required the assessee to furnish the stock register

to examine, whether raw material purchased has been consumed or

not. He also asked the assessee to produce bank statement to see

whether any cash has been withdrawn after making the payment

through cheque for the purchases made from these parties. On

perusal and examination of these records, he found that, firstly no

cash has been withdrawn from the bank account for making the cash

payment to the alleged purchasers to show that it was for the

purposes of accommodation entries; secondly, the purchase bills

were duly supported by GR Nos. and mode of delivery and; lastly,

stock register reflected the consumption of material bought by the

assessee. On these three counts, he held that the purchases cannot

be said to be non-genuine. It is further seen that the Tribunal in the

case of Jitendra Harshadkumar & Co (supra) has categorically noted

that Shri Rakeshkumar Gupta when confronted with his statement

made earlier, has categorically rebutted his statement in the course of

cross-examination that he was also making genuine sales. The

Tribunal after considering this admission and referring to the series

of other decisions rendered on account of similar purchases made

from the said parties, deleted the said addition. Thus, on these facts,

we hold that the deletion of addition on account of bogus purchases

by the ld. CIT(A) is factually correct and no interference is called for.

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8. Regarding violation of Rule 46A as raised by the department,

we are of the opinion that, if the first appellate authority in exercise of

his powers has directed the assessee to produce any evidence,

information or material not produced or considered by the AO, then

there is no violation of Rule 46A. The Rule 46A provides that, when

the assessee on its own file any additional evidence, then the ld.

CIT(A) has to follow the provisions of the said Rule. There is no

fetter on the powers of the first appellate authority to call for any

fresh information or materials for adjudicating the lis before him.

Thus, in this case, there is no violation of Rule 46A, as the additional

evidences were filed on the direction of the ld. CIT(A). Accordingly,

the grounds raised by the revenue is dismissed.

9. In the result, the appeal of the revenue is dismissed.

The above order was pronounced in the open court on 14th Jan, 2015.

घोषणा खल ु े यायालय म दनांकः14th Jan, 2015 को क गई ।

sd sd (डी. क णाकर राव/D. KARUNAKAR RAO) (अ मत शु ला / AMIT SHUKLA) लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER मुंबई Mumbai: 14th Jan,2015.

व. न.स./ SRL , Sr. PS 9 I . T . A . N o . 1 6 0 8 / Mu m / 2 0 1 3

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER,

true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई /ITAT, Mumbai