IN INCOME TAX APPELLATE TRIBUNAL, BENCH G , MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 6983/Mum/2014 for AY - 2010-11 M/s Gits Food Products Pvt. Ltd. DCIT Circle 10(1), 404/405, Balarama, Bandra Kurla Mumbai. Complex, Bandra (East), V Mumbai-400051 s. PAN: AAACG1345D (Appellant) (Respondent) Assessee by : Shri Rajesh Shah (AR) Revenue by : Shri Maurya Pratap (DR) Date of hearing : 12.07.2016 Date of Pronouncement : 16.09.2016 ORDER PER PAWAN SINGH, JM: 1. 1. present appeal is filed by assessee against order of CIT(A)-21, Mumbai dated 14.08.2014 for Assessment Year (AY) 2010-11). 2. Brief facts of case are that assessee filed return of income for relevant AY on 27.09.2010 declaring total income of Rs. 7,23,18,711/-. return of income was selected for scrutiny. AO while framing assessment besides other addition/disallowance, disallowed sum of Rs. 5,14,000/- on account of bogus purchases in assessment order dated 30.03.2013. Aggrieved by order of AO, assessee filed appeal before First Appellate Authority (FAA), wherein FAA restricted disallowance of bogus purchases to 25% of impugned purchases order. Further aggrieved by order of FAA, assessee filed present appeal on following grounds of appeal: 1. On facts and under circumstances of case and in law, CIT(A) erred in confirming 25% of Rs 5,14,800/- as bogus purchase made by appellant company. There is no justification to confirm addition at 25%. 2 ITA No. 6983/M/2014 M/s Gits Food Products Pvt. Ltd. 2. On facts and under circumstances of case and in law, action of CIT(A) in confirming AO action is wrong on 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 list of VAT Defaulter. 3. We have heard Ld. Authorised Representative (AR) of assessee and Ld. Departmental Representative (DR) for Revenue and perused material available on record. Ld. AR for assessee argued that during year under consideration, 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 Sales Promotion Scheme during Festive Season along with their product GULAB JAMUM . assessee made genuine purchases from M/s R.K. Steel & Mercantile Pvt. Ltd. assessee made payment of bills through account payee cheque which is duly reflected in books of accounts of assessee for relevant financial year. assessee furnished copy of bank statement along with Octroi receipt, Lorry receipt, entry of goods in Municipal Corporation Limit which duly proves entry of goods dispatched and supplied. Ld. AR of assessee further argued that Ld. CIT(A) erred in confirming addition @ 25% of alleged bogus purchases. Ld. AR of assessee invited our attention to various bills of different dates consisting of tax invoice, delivery challans, transport receipt which are available at page no. 5 to 23 of Paper Book (PB). Ld. AR further relied upon decision of Co-ordinate Bench of this Tribunal in following cases: a. ACIT vs. Tarla R. Shah in ITA No. 5295/Mum/13 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. 3 ITA No. 6983/M/2014 M/s Gits Food Products Pvt. Ltd. On other hand, Ld. DR for Revenue argued that assessee was given substantial relief by FAA and addition was confined to 25% of bogus purchases made by assessee. Ld. DR further argued that M/s R.K Steel Mercantile Pvt. Ltd. was one of trader who was involved in providing accommodation entries without delivery of goods as per VAT and Sales Tax Department of Government of Maharashtra. It was further argued by Ld. DR that order of Ld. CIT(A) does not require any further interference at our end and appeal of assessee is liable to be dismissed. 4. We have considered rival contentions of parties and perused material available on record. We have seen that AO while framing assessment that as per information received from Investigation Wing, party (supplier of material) involved in providing accommodation entries. As parties involved is providing accommodation entry has entered into bogus transaction with assessee. addition of entire purchase was made without discussing contention of assessee. Ld. CIT(A) while considering appeal of assessee concluded as :- Once sales disagree and until bogus purchase will be disallowed, it is only part profit of supplies may be disallowed on issue as assessee is manufactures . And Ld. CIT(A) directed AO to add only 25% of purchase order as bogus purchases by referring decision of Sanjay Oilcake Industry vs. CIT 316 ITR 274 (Guj.) and Vijay Protins Ltd. vs. ACIT 58 ITD 528 (Ahd.). In fact assessee has not manufactured any product from material purchased from M/s R.K. Steel Mercantile Pvt Ltd. assessee purchased stainless steel Spoons to distribute same with his product. From bare reading of orders of authorities below, it is quite clear that neither oral submission nor written contention and documentary evidences furnished by assessee was discussed by authorities below. assessee has placed on record tax invoices, delivery challans, transport slip and receipt of goods for material purchased from alleged impugned parties. assessee also placed on record copy of colour Xerox of Cartons of Gifts Pack of their product about Fry Spoon in respect of festive sale. 4 ITA No. 6983/M/2014 M/s Gits Food Products Pvt. Ltd. Revenue has not disputed he free distribution of stainless steel spoon. Co-ordinate Bench in ACIT vs. Tarla R. Shah (supra) relying upon decision of Hon ble jurisdictional High Court in M/s Nikunj Eximp Enterprises Pvt. Ltd. (616 taxman 171)held that AO made addition merely on basis of observation made by 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), Co-ordinate Bench held that AO had not made any independent enquiry and simply made addition on basis of information received from Sales Tax Department, then addition not justified. Further in case of Imperial Imp & Exp.(supra), Co-ordinate bench also taken similar view in present case, neither AO nor Ld. CIT(A) made any independent enquiry before making impugned addition. Now coming to facts of present case, Ld. CIT(A) restricted addition to 25% of purchase order without discussing documentary evidence furnished by assessee, which is not sustainable in eyes of law. Considering fact of present case, we are of opinion that there was no reason why 25% of amount was sustained by ld CIT(A). We are of view that facts of present case are somehow similar with facts of cases referred by Ld. AR of assessee. Hence, entire addition of alleged bogus purchased is deleted. With above observations, appeal of assessee is allowed. Parties are left to bear their own cost. 5. In result, appeal filed by assessee is allowed. Order pronounced in 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 Order forwarded to : 1. Appellant 2. Respondent. 5 ITA No. 6983/M/2014 M/s Gits Food Products Pvt. Ltd. 3. CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy/ BY ORDER, (Asstt.Registrar) ITAT, Mumbai M/s Gits Food Products Pvt. Ltd. v. DCIT Circle 10(1), Mumbai