Goyal Synthetics Pvt. Ltd., Surat V. The Dy.CIT, Circle-1, Surat

CO 214/AHD/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7899 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 28-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS R ILAVANSI
• Assessee Lawyers: RAMESH MAL
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER I.T.A. NO.1580/AHD/2010 A.Y. 2004-05 WITH C.O. NO.214/AHD/2010 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1 SURAT (DEPARTMENT) VS. M/S GOYAL SYNTHETICS PVT. LTD. 701, TRIVIDH CHAMBERS, RING ROAD, SURAT (ASSESSEE) DEPARTMENT BY : MRS. R. ILAVANSI, SR. D.R. ASSESSEE BY : SHRI RAMESH MALPANI, A.R. DATE OF HEARING : 19.09.2012 DATE OF PRONOUNCEMENT : 26.10.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THE APPEAL BY THE REVENUE AND THE C.O. BY THE ASSES SEE HAVE BEEN FILED AGAINST THE ORDER OF ID. CIT(A)-1, SURAT DATED 10.0 3.2010. 2. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND :- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A)-1, SURAT HAS ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.14,90,802/- ON ACCOUNT OF 3% EXTRA PROFIT ON SAL ES MADE TO 'FICTITIOUS PARTIES'. 3. BRIEF FACTS OF THE CASE ARE THAT ORIGINAL ASSES SMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE ACT. THEREAFTER THE A.O . RECEIVED AN INFORMATION FROM CENTRAL EXCISE AUTHORITIES THAT ASSESSEE COMPA NY HAD CLEARED YEARN I.T.A. NO.1580/AHD/2010, A.Y. 2004-05 WITH C.O. NO.214/AHD/2010 2 KNOWN AS POLYESTER DRAW TWISTED YARD (PDTY) AND POL YESTER TEXTURISED YARD (PTY) WEIGHING 1,84,051.03 KGS. AND VALUED AT RS.1, 10,54,702/-. THE ASSESSEE HAD ALSO CLEARED IMPORTED POLYESTER KNITTED FABRICS WEIGHING 10,24,306.57 KGS. AND VALUED AT RS.4,21,98,625/- THROUGH BOGUS INVOIC ES IN THE FOLLOWING NAMES FROM APRIL 2003 TILL JULY, 2003:- (I) NILACHAL FABRICS PVT. LTD. (II) G.N. RUBBER TECH PVT. LTD. (III) ADARSH INDUSTRIES (IV) PARIKRAMA IMPEX PVT. LTD. 4. ON THE BASIS OF THIS INFORMATION ASSESSEE'S CAS E WAS REOPENED U/S 147 AND 148 OF THE INCOME TAX ACT. THE FACTS IN RESPECT OF ADDITION AS HAVE EMERGED FROM THE ORDER OF ID. CIT(A) ARE AS UNDER:- 'WITH RESPECT TO THE ADDITION, THE ASSESSEE STATED BEFORE THE A.O. THAT THE CASE OF EXCISE AUTHORITIES IS PURELY A TEC HNICAL CASE AND HAS NO BEARING WITH THE INCOME-TAX ASSESSMENT. THE ASSE SSEE IS 100% EOU AND PURCHASED/IMPORTED GOODS WITH DUTY BENEFITS . THE ASSESSEE IS ALLOWED TO RE-SALE THESE GOODS EITHER AS EXPORT SALES OR TO ANOTHER 100% EOU. IF THESE GOODS ARE SOLD IN THE DOMESTIC M ARKET AND THEY ARE LIABLE TO PAY DUTY ON THE SAME. ALL THE ABOVE P ARTIES WERE 100% EOU OR NOT TO WHOM THE GOODS WERE SOLD IS MATERIAL ONLY FOR EXCISE DEPARTMENT. IT HAS NOTHING TO DO WITH THE INCOME-TA X. HOWEVER, THE EXCISE AUTHORITIES HAS TAKEN THE VIEW THAT ALL THES E PARTIES WERE FICTITIOUS ENTITY AND ONLY DISPUTE IS SALES TO THES E PARTIES DO NOT AMOUNT TO SALE OF EOU. THE ASSESSEE ARGUED THAT THE SALES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AND THIS HAS NOT BEEN DISPUTED. ONLY THING IS DISPUTED WHETHER THE SALES HAVE BEEN MADE TO A PARTY WHICH IS EOU OR TO OTHER PARTIES WHICH A RE NOT EOU. THE A.O. STATED THAT ALL THESE SALES ARE RECORDED IN TH E BOOKS OF ACCOUNT BUT THE POINT IS WHETHER THE ASSESSEE HAS ACCOUNTED FOR SALES OF RS.1,20,30,042/- BEING THE SALES MADE FROM APRIL 20 03 TO JULY 2003 AND PURPORTED TO HAVE BEEN MADE TO THESE FOUR PARTI ES AND SINCE THESE FOUR PARTIES HAVE BEEN FOUND TO BE FICTITIOUS PARTY IT CANNOT BE SAID THAT THE ASSESSEE HAS ACCOUNTED FOR FULL AND T RUE SALES. THE A.O. STATED THAT BY SELLING THE GOODS IN THE OPEN MARKET , THE ASSESSEE MUST HAVE EARNED MORE PROFIT BY RECOVERING MORE SAL ES THAN THE INVOICES RAISED IN THE NAME OF THESE PARTIES. HE, T HEREFORE, REJECTED I.T.A. NO.1580/AHD/2010, A.Y. 2004-05 WITH C.O. NO.214/AHD/2010 3 THE EXPLANATION OF THE ASSESSEE AND REJECTED THE BO OKS OF ACCOUNT U/S 145(3) AS NOT RELIABLE BECAUSE THE PARTY TO WHO M SALES ARE SHOWN IS FICTITIOUS PARTY. HAVING REJECTED THE BOOK S OF ACCOUNT, THE A.O. STATED THAT THE ASSESSEE MUST HAVE EARNED AT L EAST 3% MORE PROFIT THAN WHAT WAS SHOWN IN THE BOOKS OF ACCOUNT, HE MADE AN ADDITION @ 3% OF SALES OF RS.4,96,93,415/- LEADING TO ADDITION OF RS.14,90,802/-.' 5. IN APPEAL LD. CIT(A) DELETED THIS ADDITION BY OB SERVING AS UNDER:- WITH RESPECT TO THE THIRD GROUND, THE APPELLANT HA S STATED THAT NO ADDITION SHOULD BE MADE BECAUSE THE ADDITION HAS BE EN MADE WITHOUT ANY BASIS OR VALID GROUND. THE A.O. HAS ST ATED THAT BECAUSE THE ABOVE FOUR PARTIES ARE FICTITIOUS FIRMS, THE AS SESSEE MUST HAVE SOLD THE GOODS IN THE OPEN MARKET AND MIGHT HAVE EA RNED EXTRA PROFIT WHICH WAS ESTIMATED BY THE A.O. AT 3%. THE APPELLANT HAS STATED THAT THE A.O. HAS NOT BROUGHT ANYTHING ON RE CORD THAT IT HAS EARNED EXTRA PROFIT BY SELLING TO SOME OTHER PARTIE S INSTEAD OF THE FOUR PARTIES MENTIONED ABOVE. ALL THE SALES HAVE B EEN FOUND TO BE RECORDED IN THE BOOKS OF ACCOUNT EVEN THOUGH IT IS IN THE NAME OF THE SAID FOUR PARTIES WHICH HAVE NOT BEEN ADMITTED BY T HE A.O. THE A.O ONLY DOUBTED THAT BY SELLING IT TO SOME OTHER PARTI ES THE ASSESSEE MIGHT HAVE EARNED MORE PROFIT THAN THAT RECORDED IN THE INVOICES. THE A.O. HAS SPECULATED THAT BY SELLING THE GOODS I N OPEN MARKET THE ASSESSEE MUST HAVE EARNED MORE PROFIT BY RECOVER MO RE SALES INVOICES REGISTER IN THE NAME OF THE SAID FOUR PART IES. THERE IS NO MERIT IN THE ARGUMENT THAT THE SALES MADE TO DIFFER ENT PARTIES WAS AT HIGHER SALES FIGURE. THEREFORE, THE ADDITION MADE BY THE A.O. IS DELETED. 6. AT THE TIME OF HEARING BEFORE US BOTH THE PARTIE S AGREED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE IN ASSESSEE'S OWN CASE BY THE DECISION OF THE TRIBUNAL FOR THE A. Y. 2002-03 AND 2003-04 WHEREIN THE ISSUE ON SIMILAR FACTS WAS DECIDED BY T HE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- ' WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH VARIOUS DECISIONS RELIED UPON THE ASSESSEE IN THE WRITTEN S UBMISSIONS. THE AO HAS ONLY SPECULATED THAT BY SELLING THE GOODS IN THE OPEN MARKET ROUTING THROUGH M/S RAJU FABRICS THE ASSESSEE MUST HAVE EARNED MORE PROFIT. IT IS A MERE GUESS OF THE LD. A.O. THE LD. AO HAD NOT MADE BY FURTHER ENQUIRY AND COME OUT WITH ANY MATER IALS TO POINT I.T.A. NO.1580/AHD/2010, A.Y. 2004-05 WITH C.O. NO.214/AHD/2010 4 OUT THE ALLEGED A/LEGATION TO BE TRUE. IT WILL ACCE PTED PRINCIPLE THAT ASSESSMENT CANNOT BE MADE ON SURMISES AND CONJECTUR ES. THEREFORE WE HEREBY CONFIRM THE ORDER OF LD. CIT(A).' 7. SINCE THE ORDER PASSED BY LD. CIT(A) IS ON SIMI LAR LINE, THE SAME IS HEREBY UPHELD. 8. IN THE RESULT, REVENUE'S APPEAL IS DISMISSE D. 9. NOW COMING TO THE C.O. FILED BY THE ASSESSEE . AT THE TIME OF HEARING THE C.O. FILED BY THE ASSESSEE WAS NOT SERIOUSLY PRESSE D AND THE SAME IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON 26.10.2012 SD/- SD/- (T.R. MEENA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD