M/s. MONIKA INDIA, MUMBAI v. DCIT CEN. CIR. - 20, MUMBAI

ITA 3360/MUM/2003 | 1999-2000
Pronouncement Date: 24-03-2010 | Result: Allowed

Appeal Details

RSA Number 336019914 RSA 2003
Assessee PAN AABFM6640H
Bench Mumbai
Appeal Number ITA 3360/MUM/2003
Duration Of Justice 6 year(s) 10 month(s) 25 day(s)
Appellant M/s. MONIKA INDIA, MUMBAI
Respondent DCIT CEN. CIR. - 20, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 24-03-2010
Date Of Final Hearing 14-04-2010
Next Hearing Date 14-04-2010
Assessment Year 1999-2000
Appeal Filed On 29-04-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.K.GUPTA JM AND SHRI R.S.SYAL AM ITA NO.3360/MUM/2003 : ASST.YEAR 1999-2000 M/S.MONIKA INDIA 109 CHURCHGATE CHAMBERS 5 NEW MARINE LINES MUMBAI 400 020. PA NO.AABFM6640H. VS. THE DY.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 20 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.P.GOYAL RESPONDENT BY : S/SHRI S.S.RANE & VIRENDRA OJHA O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 28.2.2003 I N RELATION TO THE ASSESSMENT YEAR 1999-2000. 2. FIRST GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF LOSS OF RS.43 56 837. BRIEFLY STATED THE FACTS OF THIS GROU ND ARE THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS OF TRADING OF HOSIERY AND WOOLEN ITEMS AND TEXTILE IMPLEMENTS. DURING THE YEAR IT PURCHASED GOODS WORT H RS.1.55 CRORE AND SOLD THE SAME FOR RS.88.30 LAKHS RESULTING INTO GROSS LOSS O F RS.67.45 LAKHS. FROM THE DETAILS OF PURCHASE AND SALES FILED BY THE ASSESSEE THE A.O. OBSERVED THAT THE PURCHASES WERE MADE FROM PRINKA KNITWEAR AT THE RAT E OF RS.185 PER KG AND THE SALES WERE MADE TO SOORAJ HOSIERY FACTORY AND ANIL ENTERPRISES AT THE RATE OF 105 PER KG. THE REASON FOR THE LOSS WAS STATED TO BE T HE VOLATILE MARKET CONDITIONS. THE A.O. ISSUED NOTICE U/S.133(6) TO SOORAJ HOSIERY FAC TORY AND ANIL ENTERPRISES. BOTH THE PARTIES CONFIRMED THE TRANSACTIONS. ON THE PERU SAL OF THE PROFIT AND LOSS ACCOUNT OF SOORAJ HOSIERY FACTORY THE A.O. NOTED THAT THER E WAS GROSS PROFIT OF 2.59% AND ANIL ENTERPRISES HAD DECLARED GROSS PROFIT AT 1.33% . HE NOTED THAT IN EARLIER YEAR ANIL ENTERPRISES AND SOORAJ HOSIERY FACTORY WERE IN VOLVED AND INVESTIGATIONS WERE ITA NO.3360/MUM/2003 M/S.MONIKA INDIA. 2 MADE THROUGH DDIT (INV.) LUDHIANA AND IT WAS FINAL LY CONCLUDED THAT THE ASSESSEE RESORTED TO DUBIOUS METHODS OF EVADING TAX BY FABRI CATING NON-GENUINE AND UNREAL TRADE AND TRANSACTIONS RESULTING INTO HUGE LOSS WIT H THE HELP OF SHRI ANIL SINGHAL WHO WAS CONTROLLING THESE TWO CONCERNS VIZ. ANIL ENTERPRISES AND SOORAJ HOSIERY FACTORY. THE NOTICE SENT TO PRINKA KNITWEAR U/S.133 (6) WAS RETURNED UNSERVED. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FILE BAL ANCE SHEET PROFIT AND LOSS ACCOUNT AND OTHER DETAILS OF PRINKA KNITWEAR. IN RE SPONSE TO THAT THE ASSESSEE FILED LETTER FROM PRINKA KNITWEAR STATING THAT THEY HAD L OST THEIR BOOKS ALONG WITH PASSPORT DRIVING LICENSE ETC. WHICH FACT WAS ALS O PUBLISHED IN LOCAL NEWSPAPER. THE A.O. NOTED THAT THE ASSESSEE PURCHASED GOODS I N THE MONTHS OF SEPTEMBER OCTOBER AND NOVEMBER FROM PRINKA KNITWEAR AND SOLD THE SAME DURING THE MONTHS DECEMBER JANUARY AND FEBRUARY AT A LESSER PRICE. I N THIS BACKDROP OF FACTS THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD ENTERE D INTO COLLUSIVE TRANSACTIONS WITH THE PURCHASER AND SELLERS TO AVOID THE PAYMENT OF T AX. HE THEREFORE DID NOT ALLOW LOSS CLAIMED BY THE ASSESSEE. IN THE FIRST APPEAL T HE LEARNED CIT(A) UPHELD THE ASSESSMENT ORDER. 3. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE C ONTENDED THAT THE ASSESSEE HAS A SISTER CONCERN VIZ. M/S SANJEEV WOOLEN MI LLS AND IN ASSESSMENT YEAR 1999- 2000 ITSELF SIMILAR TRANSACTIONS WERE ENTERED INT O BY M/S SANJEEV WOOLEN MILLS WITH THE SAME PARTIES AS BY THE PRESENT ASSESSEE. I T WAS STATED THAT IN THAT CASE ALSO THE REVENUE AUTHORITIES DID NOT ACCEPT SUCH TRANSAC TIONS AS GENUINE AND RESULTANTLY THE LOSS SO CLAIMED WAS DISALLOWED. HE INVITED OUR ATTENTION TOWARDS THE COPY OF THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF SAN JEEV WOOLEN MILLS IN ITA NO.3324/MUM/2000 DATED 11.1.2000 ACCEPTING THE ASSE SSEES CASE AND DELETING THE SIMILAR DISALLOWANCE OF LOSS. IT WAS THEREFORE A RGUED THAT THE FACTS BEING IDENTICAL SIMILAR VIEW BE TAKEN. THE LEARNED DEPARTMENTAL REP RESENTATIVE FAIRLY CONCEDED THAT THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE WERE MUTATIS MUTANDIS SIMILAR TO THOSE OF SANJEEV WOOLEN MILLS INASMUCH A S THE PARTIES WITH WHOM ITA NO.3360/MUM/2003 M/S.MONIKA INDIA. 3 PURCHASES AND SALES TRANSACTIONS WERE ENTERED INTO BY THE ASSESSEE WERE THE SAME AS THOSE IN SANJEEV WOOLEN MILLS. 4. AFTER CONSIDERING THE SUBMISSIONS FROM BOTH THE SIDES AND PERUSING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE PARTIE S WITH WHOM PURCHASES AND SALES TRANSACTIONS WERE MADE BY THE ASSESSEE CONTINUED TO REMAIN THE SAME WITH WHOM TRADING TRANSACTIONS WERE ENTERED INTO BY ITS SISTE R CONCERN SANJEEV WOOLEN MILLS FOR THE SAME YEAR. IN THE ABSENCE OF ANY DISTINGUIS HING FEATURE HAVING BEEN POINTED OUT BY THE LD. DR RESPECTFULLY FOLLOWING THE PRECE DENT WE HOLD THAT THE LEARNED CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF LOSS MADE BY THE A.O. THIS GROUND IS THEREFORE ALLOWED. 5. GROUND NO.2 IS AGAINST THE ADDITION OF RS.2 11 4 5 710 AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. THE FACTS OF THIS GROUND A RE THAT THE ASSESSEE ACCEPTED LOANS FROM M/S CANNON STEEL PRIVATE LIMITED AND M/S MERTI NZ INTEX PRIVATE LIMITED AMOUNTING TO RS.2 02 45 710 AND RS.9 00 000 RESPECT IVELY. THE A.O. NOTED THAT SHAREHOLDERS OF THESE TWO COMPANIES AND THE PARTN ERS OF THE ASSESSEE FIRM WERE SAME. IN HIS OPINION THE PROVISIONS OF SECTION 2(22 )(E) WERE ATTRACTED. HE THEREFORE MADE ADDITION OF RS.2.11 CRORES U/S.2(22 )(E) OF THE ACT. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ISSUE RAISED IN THIS GROUND IS COVERED BY THE SPECIAL BENCH ORDER IN ACIT VS. BOWMIK COLOUR [(2009) 27 SOT 270 (MUM.) ( SB)] IN ASSESSEES FAVOUR. IN THIS CASE THE SPECIAL BENCH HAS BEEN H ELD THAT IF THE LOAN IS MADE TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS SUBSTANTIAL INTEREST THE DIVIDEND IS TAXABLE IN THE HANDS OF SUCH SHAREHOLDER AND NOT THE NON-SHAREHOLDER. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE AFORE-NOTED CASE OF SANJEEV WOOLEN MILLS A COPY OF WHICH HAS B EEN PROVIDED. THE LEARNED ITA NO.3360/MUM/2003 M/S.MONIKA INDIA. 4 DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE INSTANT CASE VIS--VIS THOSE AS CONSID ERED AND DECIDED BY THE SPECIAL BENCH AS WELL AS SANJEEV WOOLEN MILLS. RESPECTFULLY FOLLOWING THE PRECEDENTS WE OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND ORDER FOR THE DELETION OF ADDITION. 7. IN THE RESULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF MARCH 2010. SD/- SD/- ( R.K.GUPTA ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 24 TH MARCH 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) CENTRAL VII MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.