Neeta Textiles, Mumbai vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No.6138 /Mum/2013 ( नधा रण वष / Assessment Years 2005-06)

M/s Neeta Textiles, बनाम/ The Income Tax Officer -

685, Govind Chowk, WD- 14(3)(2), Vs. M.J. Market, Mumbai. Mumbai - 400 002. थायी ले खा सं . /PAN : AAAFN0729R (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.7335 /Mum/2013 ( नधा रण वष / Assessment Years 2005-06)

The Income Tax Officer - बनाम/ M/s Neeta Textiles, WD- 14(3)(2), 685, Govind Chowk, Vs. Mumbai. M.J. Market, Mumbai - 400 002. थायी ले खा सं . /PAN : AAAFN0729R (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.6139 /Mum/2013 ( नधा रण वष / Assessment Years 2007-08)

M/s Neeta Textiles, बनाम/ The Income Tax Officer - 685, Govind Chowk, Vs. WD- 14(3)(2), M.J. Market, Mumbai. Mumbai - 400 002. थायी ले खा सं . /PAN : AAAFN0729R (अपीलाथ /Appellant) .. ( यथ / Respondent) 2 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

आयकर अपील सं./I.T.A. No.7336 /Mum/2013 ( नधा रण वष / Assessment Years 2007-08)

The Income Tax Officer - बनाम/ M/s Neeta Textiles, WD- 14(3)(2), Vs. 685, Govind Chowk, Mumbai. M.J. Market, Mumbai - 400 002. थायी ले खा सं . /PAN : AAAFN0729R (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.6140 /Mum/2013 ( नधा रण वष / Assessment Years 2008-09)

M/s Neeta Textiles, बनाम/ The Income Tax Officer - 685, Govind Chowk, WD- 14(3)(2), Vs. M.J. Market, Mumbai. Mumbai - 400 002. थायी ले खा सं . /PAN : AAAFN0729R (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.7337 /Mum/2013 ( नधा रण वष / Assessment Years 2008-09)

The Income Tax Officer - बनाम/ M/s Neeta Textiles, WD- 14(3)(2), Vs. 685, Govind Chowk, Mumbai. M.J. Market, Mumbai - 400 002. थायी ले खा सं . /PAN : AAAFN0729R (अपीलाथ /Appellant) .. ( यथ / Respondent)

Appellant by Shri Bhupendra Shah Respondent by : Shri Yogesh Kamat

ु वाई क तार ख / Date of Hearing सन : 14-05-2015

घोषणा क तार ख /Date of Pronouncement : 27-05-2015 [ 3 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

आदे श / O R D E R PER BENCH :

The aforesaid appeals have been filed by the assessee as well as Revenue against separate impugned order of even date 02-09-2013, passed by the ld. CIT(A)- 25, Mumbai for quantum of assessment passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 for the assessment years 2005-06, 2007-08 and 2008-09.

2. Since common issues are involved in all these appeals, therefore, they were heard together and are being disposed off by way of this consolidated order for the sake of convenience. For ready reference, the cross appeals for A.Y. 2005-06 is being taken up as lead appeal.

3. Grounds raised by the assessee for A.Y. 2005-06 read as under:-

1. Under the facts and the circumstances of the case of your Appellant, the Ld. CIT(A) has erred in confirming the addition to the extent of 10% of disputed purchases i.e. Rs.1, 17,624/= ( Rounded off to Rs.

1,17,620/-) out of the total addition of Rs.11,76,242/= made by Ld. A.O. as " Unexepted/unproved" purchase/investment in Purchase as per section 69 of the Income Tax Act, 1961.

2. Your Appellant, therefore, prays that the addition of Rs.1,17,624/- should be deleted."

Whereas grounds raised by the Revenue for A.Y. 2005-06 read as under:-

"The Ld.CIT(A) has erred in law as well as on fact by not sustaining addition u/s 69 after having accepted the finding in principle that the purchases were made from undisclosed/unverifiable/unidentifiable parties in the grey market by investing in cash and the purchases from the group concerns of Shri Rakesh Gupta & family were only accommodation entries and not actual purchases.

2. On the facts and In the circumstances of the case, the Ld.CIT(A) after having accepted the fact that the purchases made from 0 through Shri Rakeshkumar Gupta and his family members are bogus, erred in law in not confirming the addition at least to the extent of peak of the purchases made from such from such parties on account of bogus 4 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

purchases made in cash from the open market out of unaccounted cash, in view of the decision held by the Hon'ble ITAT's C-Bench, Ahmedabad, in the case of VIJAY Proteins Ltd."

4. At the outset, the ld. Counsel for the assessee, Shri Bhupendra Shah submitted that, similar issue had come up for consideration before the Tribunal in several cases, some of them of being its sister concern/group concerns, wherein the Tribunal have decided the issue of alleged bogus purchases in favour of the assessee. In support, the ld. Counsel for the assessee filed the following decisions:-

(i) ITA No. 3141/M/12, ITA No. 3142/M/12, ITA No. 4349/M/12, ITA No. 3143/M/12, ITA No. 4350/M/12, ITA No. 3144/M/12 & 4351/M/12 order dated 13-11-2013 in the case of M/s Jitendra Harshadkumar vs. ACIT & vice versa.

(ii) ITA No. 3948 to 3953/M/12, ITA No. 4012 to 4015 to 4021/M/12 order dated 01-10-2013 in the case of Pramit Textiles vs. ITO & vice versa.

(iii) ITA No. 3960 to 3967/M/12, ITA No. 4022 to 4024/M/12, ITA No. 4025/M/12 & ITA Nos. 3944,3955 and 5065/M/12 in the case of C. Chotalal & Co. vs. ITO and vice versa.

5. The ld. D.R. has also admitted that the facts and issues involved in the present cases are similar to the cases decided by the Tribunal.

6. Brief facts of the case are that, the assessee is a partnership firm engaged in the business as dealers and merchant of cloth materials. The return of income was filed on 25-7-2005. In the case of one of the suppliers of the assessee firm Shri Rakesh Kumar M. Gupta (Proprietor of Manoj Mills) and group concerns, a survey u/s 133 A of the Act was carried out on 13/14- 2-2009. During the course of survey, in the statement recorded, Shri Rakesh Kumar M. Gupta stated that he was providing accommodation sale bill for the purchases in the name of these proprietary concerns, Shri Rakeshkumar M. Gupta, Prop. of M/s Manoj Mills, Smt. Hema R. Gupta, Prop. Of M/s Shree 5 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

Ram Sales and Synthetics and Shri Mohit R. Gupta, Prop. of M/s Astha Silk Industries and other family members. Later on Shri Rakesh Kumar M. Gupta retracted the statement in a written communication to the A.O. and also by way of sworn affidavit filed by him and his family members who were proprietors of such concern. The copy of his affidavit is appearing in the paper book at page No. 68 & 69. Based on the information gathered during the survey operation, the assessee's case was reopened u/s 147 of the Act by issuing notice dated 26-2-2010 u/s 148 of the Act. The A.O., relying upon the statement of Shri Rakesh Kr. M. Gupta held that the purchases to the extent of Rs. 20,10,972/- are bogus and are merely accommodation entries, the same was added u/s 69 of the Act. The ld. CIT(A) after considering the various submissions of the assessee, as well as the details of purchases and sales held that 10% of such purchases should be added. The relevant observation and finding of ld. CIT(A) is as under:-

"I have perused the assessment order, remand report, written submissions of appellant, and the facts and circumstance of the case. On plain reading of the assessment order, I find that the AO has basically relied on the statements recorded of Shri Rakeshkumar M. Gupta & others during the course of survey action u/s 133A and subsequently re-affirmed on oath u/s 131 of the Act, to make additions in hands of purchaser party i.e. the appellant in this case. The said additions are made based on documents impounded during survey proceedings to arrive at total purchases made by appellant during the year at Rs. 20,10,972/-. However, the appellant has submitted the break-up of its purchases from Gupta party (Rs. 11,76,242/- & Non- Gupta party (Rs. 11,71,970/-) aggregating to Rs. 23,48,212/-, which figure also tallies with the purchase figure shown in its P&L account. Further, the appellant has submitted ledger statement of Gupta party (M/s Astha Silk Industries) in its books showing total purchases at Rs. 11,76,242/-. In these circumstances, even assuming the entire purchases from Gupta party is to be treated as bogus, the additions on that account cannot exceed Rs. 11,76,242/-.

6.1 Further observe that the appellant has not maintained the stock register. However, since it has shown sales of Rs. 25.44 lakhs, as against purchases of Rs. 23.48 lakhs in its P&L account, it has to be accepted that there can be no sales without corresponding purchases, and when the sale of appellant is not 6 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

disputed, the additions of entire alleged purchases is also not justified.

6.2 A logical conclusion which may be drawn in such situation is that the appellant has recorded some sales in its books of accounts which materials might have been purchased by it in grey market without bills, and to regularize such purchases in grey market, the appellant might have taken accommodation bills from the said parties for purchase of specified material. The AO has not denied such possibility by quoting the words "hawala purchases/ or to accommodate the purchases made out of the books" in para 17 of the assessment order. In these circumstances, the additions can only be made at certain percentage of GP/ NP or at an adhoc amount, in consonance with the appellate orders of various CITs(A) in cases of purchases from Mr. Rakeshkumar Gupta, the copies of which are submitted by the appellant.

6.3 Looking at the facts and circumstances of the case as a whole, I am of the considered view that the cause of justice would be met by making addition at 10% of such purchases in order to fill in the gap of difference of GP in recording the said purchases as well to plug any leakage of revenue. The AO has made additions of alleged purchases from Gupta party at Rs. 20,10,972/-, however as discussed above, the said purchases are accepted at Rs. 11,76,242/-. Hence, the additions is restricted to 10% of said purchases of Rs. 11,76,242/- i.e. Rs. of Rs. 1,17,624/- and the balance addition of Rs. 18,93,348/- (i.e. 20,10,972/- - 1,17,624/- is deleted."

7. Against this, both assessee as well as Revenue have preferred these appeals before us.

8. After considering the impugned order as well as the order of the Tribunal in other cases and the material placed on record, we find that first of all, Shri Rakesh Kumar M. Gupta has retracted his statement before the A.O. and also filed affidavit admitting that sales made to the assessee are genuine. The assessee has also produced evidences like copy of confirmed ledger account, copy of bank statement showing the payment made for the purchases and sale bills. All these documents have been placed in the paper book before us. The assessee's case had been that no adverse inference should be drawn on the basis of statement recorded without reference to the 7 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

assessee. No further enquiry was carried out in the case of the assessee or Shri Rakesh Kumar M. Gupta despite the fact that statement was subsequently retracted by him. We find that exactly similar issue on similar set of facts had come up for consideration before the Tribunal in the aforesaid cases as cited by the ld. Counsel for the assessee. In the case of M/s Jitendra Harshadkumar & Company (supra), the Tribunal after recording the entire facts of the case and evidences, deleted the entire additions made by the A.O. For the sake of ready reference, the relevant portion of the decision of M/s Harshadkumar & Company is reproduced hereunder:-

"7. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue involving identical facts has already been considered and decided in favour of the assessee by the Mumbai "I" Bench of this Tribunal in the case of Jeetendra Harshadkumar Textiles (ITA No. 771 & 2211/Mum/2011 dated 21-11-2012) vide para 8 & 8.1 which read as under:-

"8. We have carefully considered the rival submissions in the light of material placed before us. It will be relevant to reproduce the letter received by the AO from Shri Rakesh Kumar Gupta, which is also reproduced in the assessment order:

"1 am in receipt of your summons u/s. 131 of the I.T.Act. 1961 in the case of M/s. Jitendra Harshad Kumar Textile Pvt. Ltd. asking me to attend before your goodself with the details of my account with the said M/s. Jitendra Harshad Kumar Textile Pvt. Ltd. for A.Y.2002-03 & 2007-08.

As you are aware that my assessing officer had recorded alleged statement u/s. 133A and 131 of the I.T.Act. 1961 1 have been receiving witness summons from all four corners of the city on the ground that I have given accommodation bill, though I have denied the content of the statements recorded by A.O. u/s. 133A & 131 vide my letter dated 27.4.2009 and my affidavit dated 20.2.2009 submitted to ward 14(3)(2). It is physically impossible for me to attend before various income tax authorities, as I am not feeling well, it will not possible for me to attend before your goodseif in response to your above mentioned summons.

As regards M/s. Jitendra Harshad Kumar Textiles Pvt. Ltd. is concerned. I have already given my affidavit wherein I have specifically stated that I have sold the goods to M/s. Jitendra Harshad Kumar Textiles P. Ltd. and

8 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

the consideration is received to me by cross order cheque. Copy of the said ledger account is already submitted the department."

8.1 From the above letter it is clear that the same was written in response to notice issued by the AO. Not only Shri Rakesh Kumar Gupta has stated that he has retracted from the statement recorded during the survey but also filed an affidavit dated 20/2/2009 and letter dated 27/4/2009 to deny the statement made during the survey under section 133A. He has further confirmed that the sales made by the assessee were effected and the consideration was received by cross order cheques. Thus it is clear that there is no material on record to say that the purchases made by the assessee from the said concern were bogus except the general statement recorded by the Department in the case of Shri Rakesh Kumar Gupta, which was later on retracted. In absence of any material brought on record against the submissions made by Shri Rakesh Kumar Gupta in his letter dated 20/12/2009 filed before the AO of the assessee the addition, if any, made in the case of the assessee will be based on presumption only and it cannot be sustained in the eyes of law. As against that assessee has submitted various evidences to show that the actual delivery of the goods was received by the assessee from the said party which has not been discarded by the AO. The addition sustained by Ld. CIT(A) is also on presumption basis. Therefore, keeping in view the facts and circumstances of the case, we are of the opinion that additions made by the AO deserves to be deleted in its entirety. We decide accordingly."

8. The above decision of the Tribunal in the case of Jeetendra Harshadkumar Textiles has been subsequently followed by the Tribunal to decide a similar issue in favour of the assessee in the case of M/s Pramit Textiles vs. ITO (ITA No. 3948 to 3953/Mum/2012 and ITA No. 4012 to 4015 and 4020 to 4021/Mum/2012 dated Ist October, 2013). As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of Jeetendra Harshadkumar Textiles and M/s Pramit Textiles (supra), we respectfully follow the orders of the co-ordinate Benches of this Tribunal in the said cases and delete the entire addition made by the A.O. on account of unexplained/unproved purchases in all the four years under consideration. Ground No. 1 of assessee's appeal for assessment years 2005-06, 2006-07, 2007-08 & 2008-09 is accordingly allowed whereas ground No. 1 of the Revenue's appeal for assessment years 2006-07, 2007-08 and 2008-09 is dismissed.

9. Similar finding has been given by the Tribunal in the case of Pramit Textiles and M/s C. Chotalal & Co. (supra). It has been informed bythe ld.

9 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

Counsel for the assessee that in other cases also wherein similar addition were made on account of statement of Shri Rakesh Kr. M. Gupta have also been deleted. Since, the finding of the Tribunal in all the cases are based on similar set of facts, therefore, respectfully following the same, we direct the A.O. to delete the entire addition of purchases and consequently the ground raised by the assesasee is allowed whereas the grounds raised in Revenue's appeal are dismissed.

10. In assessment years 2007-08 and 2008-09 also, similar grounds have been raised and similar facts are permeated in these years, therefore, the aforesaid finding given above will apply and accordingly, the addition made on account of purchases in both the years are deleted.

11. In the result, appeals of the assessee are allowed whereas appeals of the Revenue are dismissed.

Order pronounced in the open court on 27th May, 2015.

आदे श क घोषणा खल ु े #यायालय म% &दनांकः 27-05-2015 को क गई ।

Sd/- sd/- (G.S. PANNU) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER मंब ु ई Mumbai; &दनांक Dated 27-05-2015

व.;न.स./ RK , Sr. PS 10 ITA 6138/M/13, ITA 7335/M/13, ITA 6139/M/13, ITA 7336/M/13, ITA 6140/M/13 & ITA 7337/M/13

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,, Mumbai

4. आयकर आयु<त / CIT --Concerned, Mumbai

5. ?वभागीय ;त;नAध, आयकर अपील य अAधकरण, मुंबई / DR, ITAT, Mumbai B Bench

6. गाडE फाईल / Guard file.

ु ार/ BY ORDER, आदे शानस

स या?पत ;त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai