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TMI Blog2016 (12) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... by : Shri Prakash Jhunjhunwala Revenue by : Shri Vikash Kumar Agarwal ORDER Per Ramit Kochar, Accountant Member These are cross appeals filed by the assessee and the Revenue before the Income-tax Appellate Tribunal, Mumbai (Hereinafter called the Tribunal ). These cross appeals are heard together and are disposed of by this common order for the sake of convenience and brevity. These appeals are directed against the appellate order dated 2nd May, 2014 passed by learned Commissioner of Income Tax (Appeals)- 27, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 28th March, 2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- l.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in estimating the undisclosed profit of ₹ 14,l8,097/- @ 12.50% on alleged bogus p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wallets and leather goods, boutique etc. having shops at Pune, Ahmedabad, Jalandhar and office at Mumbai. It was observed by the A.O. that the assessee had incurred expenditure in terms of purchases of ₹ 4,89,88,555.31 , out of which it was alleged by the AO that purchases of ₹ 1,13,44,77/- was made from the allegedly bogus parties as per information received from Sales Tax Department, Government of Maharashtra , who as per Government of Maharashtra web-site are suspicious parties providing accommodation entries and are thus bogus bill giving entities without doing any business , as detailed hereunder: S No. Name of parties TIN Financial year Amount 1 Rohit Enterprises 27020680974V 2009-10 ₹ 8,84,584 2 Deep Enterprises 27750595164V -do- ₹ 18,09,710 3 Kwality Enterprises 27790284742V -do- ₹ 60,33,496 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies named M/s Rohit Enterprises, M/s Deep Enterprises, M/s Kwality Enterprises and M/s V3 Enterprises of ₹ 1,13,44,776/- and of the Opening balance of such 4 parties of ₹ 18,43,451/- totaling to ₹ 1,31,88,227/- is erroneous and is unjustified on understated reasons :- . 1.1 The entire addition had been made purely on the basis of assumption and surmise. There is absolutely no evidence or material on record to justify that the appellant had incurred any unexplained expenditure to purchase the goods. The Ld. AO had not brought any evidence on record that the appellant had made the unexplained payments to any unidentified parties, in absence of which the provision of Sec 69C cannot be invoked. The appellant, during course of assessment, furnished various documentary evidences such as purchase and sale bills, confirmation of account, PAN of suppliers, details of purchase, payments made to the said 4 parties and bank statements to justify the genuineness of the recorded purchase and payments thereon. The appellant also furnished a detailed statement displaying the purchase made from such 4 parties and corresponding sales made against such purchases and profit earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases. In short, if there is a sale, then it is required to the presumed that there is a corresponding purchase against each such sale and moreover, in impugned case, there is a direct nexus of sales with the purchases. [38 Taxmann.com 385 (Guj), 355 ITR 290 (Guj), 263 ITR 610 (MP), 304 ITR 52 (MP), 258 ITR 654 (Gu}); As per comparative chart of sales vis-a-vis purchase (copy enclosed), it is evident that each purchase corresponds to the sales. For example : The purchase of 257 pairs of footwear made vide bill no 16 on 17th September, 2009 aggregating to ₹ 126,333 from Deep Enterprises were sold on 23rd September, 2009 at ₹ 1,44,273/-. 1.5 The appellant in audited P L account, disclosed a higher Gross- profit @ 45.49 % on sales (85% on purchase) which is most reasonable in trading activity of footwears. In respect of disputed purchase made from the 4 parties, the appellant disclosed the Gross profit @ 41.75 % on sales, stated as under :- Purchase from the 4 parties = ₹ 1,13,44,778/- Sales corresponding to above purchases = ₹ 1,93,83,886/- Closing stock from above purchase = ₹ 52,882/- Gross profit =Rs.80,91,990/-(41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in making the addition of the Opening balance of such 4 parties of ₹ 18,43,451/-. The appellant had not claimed the purchase expenses of ₹ 18.43,451/- in impugned year, thus addition of such purchases (related to earlier year) cannot be made in impugned year. Further, Ld. A.O. had already issued the notice u/s 148 of earlier year viz. A.Y. 2009-10 and had proposed to make the addition of the purchase of earlier year viz. A. Y- 2009-10, thus the addition of purchase made in earlier year whose closing balances are disclosed as opening balance in impugned year is unjustified. Further, there is absolutely no evidence on record that the opening balance of earlier year (purchase of last year) would have been paid in impugned year out of unaccounted source of funds, thus addition of opening balance of ₹ 18,43,451/- is unjustified, The appellant relies on understated direct judicial decisions :- Addition u/s. 69C cannot be invoked in absence of the full proof evidence . i) ITO vs. Sunsteel 92 TTJ 1126 (Ahd-ITAT) ii) Nisraj Real Estate Export(P) Ltd vs. ACIT 31 DTR 456 (JP-ITAT) (Trib) ii) ACIT vs. Kishan Lal Jewels (P) Ltd 147 TTJ 308(Del-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only recourse left is to estimate the profit element embedded in the purchases made during the year of ₹ 1,13,44,778/- , rather than on ₹ 1,31,88,227/- (which included opening balance added by the A.O.), which were estimated by learned CIT(A) @12.5% of the purchases made during the year of ₹ 1,13,88,227/-. The ld. CIT(A) accordingly partly allowed the appeal of the assessee vide appellate orders dated 02-05-2014. 7. Aggrieved by the appellate orders dated 02-05-2014 passed by the ld. CIT(A) , both the assessee and Revenue are in appeal before the Tribunal. 8. The assessee is challenging the addition made of the undisclosed profit of ₹ 14,18,097/- @12.5% on purchases of ₹ 1,13,44,778/- , while the Revenue in its appeal is challenging deletion of addition made by the AO u/s 69C of the Act to the tune of ₹ 1,31,88,227/- which was restricted to profit element embedded in the purchases to the tune of 12.5% of ₹ 1,13,44,778/. The ld. Counsel for the assessee submitted that the following parties were included in the list of bogus parties by Sales Tax Department of Government of Maharashtra with whom the assessee had made purchases:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Information was received by the AO from the Sales Tax Authorities, Government of Maharashtra that the assessee has made bogus purchases to the tune of ₹ 1.13 crores from following four parties who are in the list of hawala dealers giving accommodation entries without supplying any goods:- S No. Name of parties TIN Financial Amount year 1 Rohit Enterprises 27020680974V 2009-10 ₹ 8,84,584 2 Deep Enterprises 27750595164V -do- ₹ 18,09,710 3 Kwality Enterprises 27790284742V -do- ₹ 60,33,496 4 V3 Enterprises 27860613194V -do- ₹ 26,16,988 Total Rs.1,13,44,778/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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