The ITO, Ward-2, Mehsana V. M/s. Shree Bhagwati Steel Traders, Mehsana

ITA 1001/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8987 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 07-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: N O N E
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

1 ITA NO. 1001/AHD/2007 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 1001/AHD./2007 ASSESSMENT YEAR : 2003-2004 INCOME TAX OFFICER, WARD-2, MEHSANA -VS.- SHRE E BHAGWATI STEEL TRADERS, MEHSANA (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI M.C. PANDIT, SR . D.R. RESPONDENT BY : N O N E O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 11.12.2006 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XXI, AHMEDABAD FOR THE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN THE BUSINESS OF TRADING OF STEEL. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FIL ED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.35,380/- ALONGWITH THE AUDIT REPORT IN FORM N OS. 3CB AND 3CD. THE A.O. FRAMED THE ASSESSMENT ON 27.03.2006 UNDER SECTION 143(3) OF TH E ACT, WHEREIN HE MADE THE ADDITION OF RS.8,36,400/- ON ACCOUNT OF BOGUS PURCHASES. THE FA CT AND REASONING GIVEN BY THE A.O. AT PAGES 2 TO 5 IN C.I.T.(A)S ORDER FOR MAKING THIS ADDITIO N IS AS UNDER :- 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS ASKED TO FURNISH COMPLETE NAME AND PASTEL ADDRESS OF THE CREDITORS B ESIDES, NAME AND ADDRESS OF THE PARTIES FROM WHOM PURCHASES SHOWN TO HAVE BEEN MADE . IN COMPLIANCE THE ASSESSEE HAS SUBMITTED THE REQUISITE DETAILS. ON PERUSAL O F THE SAME IT HAS BEEN NOTICED THAT THE ASSESSES HAS SHOWN PURCHASE OF GOODS AMOUNTING TO R S.8,36,400/- FROM GANESH STEEL ENTERPRISES AND THE SAME HAS BEEN SHOWN AS LI ABILITIES. IN THIS REGARD. SHRI JAYANTIBHAI MANEKLAL SHAH, PROPRIETY OF GANESH STEE L ENTERPRISE WAS SUMMONED U/S. 131 OF THE I T, ACT ON 28.09.2005 AND HIS STAT EMENT WAS RECORDED ON OATH. INTERALIA SHN JAYANTIBHAI MANEKLAL SHAH T PROPRIETOR OF GANESH STEEL ENTERPRISE HAS STATED THAT HE WAS THE PROPRIETOR OF THE FIRM GANES H STEEL ENTERPRISE WHICH WAS CLOSED BEFORE TWO YEARS AND HAS STARTED NEW FIRM NA MELY SURYA STEEL. SHRI JAYANTIBHAI SHAH IN HIS ANSWER TO QUESTION NO.9 HAS CLEARLY STATED THAT HE HAS GIVEN THE BOGUS SALE BILLS IN THE NAME OF GANESH STEEL ENTERPRISE TO SHREE BHA GWATI STEEL TRADERS, GODOWN, MEHSANA AMOUNTING TO APPROXI MATELY RS.9 LAKHS IN F. Y. 2002-03. CONSEQUENTLY, SUMMON U/S.131 OF THE ACT WA S ISSUED TO THE ASSESSES ON 03.10.2005 IN RESPONSE TO WHICH SHRI STTARAMBHAI M PATEL, ONE OF THE PARTNERS OF THE ASSESSES FIRM ATTENDED AND A STATEMENT ON OATH U/S.131 OF THE ACT WAS ON 17,10.2005 IN WHICH HE HAS STATED THAT THE GOODS HA VE BEEN PURCHASED FROM GANESH 2 ITA NO. 1001/AHD/2007 STEEL ENTERPRISE. HOWEVER, SHRI SITARAMBHAI PATEL H AS NOT STATED THE RELEVANT FACTS I.E. ADDRESS OF GANESH STEEL ENTERPRISE, PHONE NUMB ER, ETC. FURTHER, THE ASSESSES HAS SHOWN THE SAID AMOUNT AGAINST SUNDRY CREDITORS. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE WAS ASKED TO FURNISH QUANTITY/QUA LITY WISE STOCK VIDE NOTING ON ORDER SHEET DATED 15.6.2005 WHICH HE FAILED TO SUBM IT TIFF DATE. IN VIEW OF THE ABOVE FACT, IT IS CLEAR THAT THE ASSESSES HAS OBTAINED THE BOGU S PURCHASE BILLS AMOUNTING TO RS.8,36,400/-.THE SAID BOGUS BILLS HAVE BEEN PURCHASED BY THE ASSESSEE TO REDUCE THE PROFIT FOR THE YEAR UNDER CONSIDERATION. HENCE, IN THIS REGARD, THE ASSESSES WAS REQUESTED TO SHOW CAUSE VIDE THIS OFFICE - LETTER DATED 12.01.2006 AS TO WHY THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM M/S.GANESH STEEL ENTERPRISE, MEHSANA AMOUNTING TO RS.8,36,000/- SHOULD NOT BE ADDED TO THE TOTAL INCORNE. IN RESPONSE TO THE SAID SHOW CAUSE LETTER, THE ASSE SSEE VIDE ITS REPLY DATED 23.1.2006 HAS SUBMITTED AS UNDER : - 'PROPOSED ADDITION OF RS.8,36,400/- AS AN ASSESSEE WE HAVE BEEN IN THE STEEL TRADE SINC E MORE THAN 10 YEARS ARE A REPUTED FIRM IN THE MARKET. WE KEEP UPTO DATE ACCOU NTS AND MAINTAIN A PERFECT QUANTITY TATTY OF THE PURCHASES AND CORRESPONDING S AFE MADE BY US. COPY OF THE AUDITED ACCOUNTS PROVING THE SAME IS ATTACHED HEREU NDER- (II) AS FAR AS PURCHASES OF RS.8,36,400/ - IS CONCERNED, IT IS A VERY SMALL AMOUNT OUT OF THE TOTAL PURCHASES OF RS.2,10,25,513/- MADE BY US. WE ARE ATTACHING HEREWITH COPY OF TOTAL PURCHASES MAD E DURING ME YEAR AND CORRESPONDING SALES MADE BY US TO PROVE OUR BONAFIDES THAT THESE ARE GENUINE PURCHASES MADE BY US AND THE PAYMENTS FAR THESE PURCHASES HAVE BEEN MADE BY ACCO UNT PAYEE CHEQUES. COPIES OF CORRESPONDING BILLS ALONGWITH TRUCK NUMBERS, WHICH HAVE SUPPLIED THE GOODS TO US ARE ANNEXED HEREWITH FOR YOUR PERUSAL. WE HAVE MADE PURCHASES FROM TOTAL 45 PARTIES OF AN AMOUNT OF RS.2,10,25,513/- AND ALL THESE PARTIES HAVE BEEN PAID BY CHEQUES AND ADDRESSES OF ALL THESE PARTIES ARE MENTIONED IN THE LIST ATTACHED HEREWITH AT PAGE 15 & 16. CORRESPONDINGLY, WE HAVE MADE SALES OF RS.2,24,83,8 91/- TO COMPANIES WHO ARE WEFT KNOWN AND PAYMENTS FOR THE SAME HAVE BEEN RECE IVED BY US BY CHEQUES- ADDRESSES OF THESE COMPANIES/PARTIES ARE MENTIONED IN THE COPY ATTACHED HEREWITH AT PAGE: 17. THE ABOVE MENTIONED EVIDENCE OF PURCHASE AN D SALE, PAYMENTS MADE/ RECEIVED BY CHEQUES, ADDRESSES OF THE PARTIES WITH WHOM WE HAVE DEALT CLEARLY SHOWS THE GENUINENESS OF TRANSACTIONS THAT WE HAVE ENTERED INTO. 3. IT WOULD BE WELT APPRECIATED BY YOU THAT TO MAKE SALES THERE HAVE TO BE PURCHASES. IF THESE PURCHASES ARE CONSIDERED TO BE BOGUS THEN SALES ALSO CANNOT BE TAXED. IT CANNOT BE THE CASE OF THE DEPARTMENT T HAT THE CREDIT SIDE OF THE P& L ACCOUNT IS AGREED UPON AND CORRESPONDING DEBIT SIDE IS NOT AGREED TO. GOODS PURCHASED BY AY AND CORRESPONDING SALES MADE BY US CAN BE PROVED BY US IF CALL UPON TO DO SO. WE MAINTAIN TOTAL EVIDENCES IN THE F ORM OF(I) DELIVERY CHALLANS ON 3 ITA NO. 1001/AHD/2007 WHICH TRUCK NUMBERS HAVE BEEN MENTIONED, (IT) COPIES OF VOUCHERS OF EXPENSES , PAID FOR LOADING AND UNLOADING CHARGES DEBITED BY US AND (III) WE ALSO MAINTAIN A DAY TO DAY STOCK REGISTER FROM WHICH PROPER STOCK AVAILABLE AND SOLD CAN BE ASCERTAINED., 5. OUR G.P IS CONSISTENT IN COMPARISON WITH THE PRE VIOUS YEARS I.E, FOR AY 2000-01 G.P WAS 7.98% FOR A. Y.2002-03 THE G.P. WA S 8.40 AND FOR AY 2003-04 THE G.P. IS 8.35%. , 6. THE ADDITION PROPOSED IS MERELY BACKED BY A STAT EMENT WITHOUT ANY PROOF OF MONEYS BEING RETURNED TO US BUT AGAINST THAT WE SUB MIT HEREWITH THE UNDERMENTIONED EVIDENCES TO SUPPORT THE GENUINENESS OF THE PURCHASES MADE :- I) PURCHASES PAID FOR BY ACCOUNT PAYEE CHEQU ES II COPIES OF BILLS ALONGWITH TRUCK NUMBERS WHI CH HAVE SUPPLIED THE GOODS ARE PRESENTED BEFORE YOUR GOODSE LF, III) COPIES OF VOUCHERS OF EXPENDITURE INCURRED FOR PAYMENT MADE TO LABOURERS FOR LOADING AND UNLOADING OF THE ALLEGED PURCHASES ARE MAINTAINED. IV) CORRESPONDING SALES ARE ALSO EVIDENCED WHICH CA N BE PROVED WITH THE HELP OF ACCOUNTS MAINTAINED BY US. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), IT WAS CONTENDED THAT THE ADDITION OF RS.8,36,400/- FOR ALLEGED BOGU S PURCHASES FROM GANESH STEEL ENTERPRISE CANNOT BE UPHELD MERELY ON THE BASIS OF A SELF-SERV ING STATEMENT WITHOUT ANY FURTHER EVIDENCE TO SUPPORT THE SAME. IT WAS ALSO CONTENDED THAT GANES H STEEL ENTERPRISE HAS NOT PROVED THAT THEY HAVE RETURNED THE MONEY TO THE ASSESSEE. IT WAS ALS O CONTENDED THAT THE ASSESSEE RECEIVED THE GOODS WHICH WERE PURCHASED FROM GANESH STEEL ENTERP RISE FOR WHICH THEY HAVE BEEN GIVEN PROPER BILLS ON WHICH SALES TAX NUMBERS ARE MENTION ED. IT IS FOR M/S. GANESH STEEL ENTERPRISE TO PROVE AS TO FROM WHERE IT PROCURED THIS GOODS WHICH WERE SUPPLIED TO THE ASSESSEE-FIRM. IT WAS ALSO SUBMITTED THAT WHATEVER ADDITION IS REQUIRED T O BE MADE IN THE CASE OF GANESH STEEL ENTERPRISES HAD NOT IN THE CASE OF ASSESSEE. 4. AFTER CONSIDERING THE VARIOUS SUBMISSIONS, IN TH E IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE A DDITION OF RS.1,25,460/- FOR THE DETAILED REASONS GIVEN IN PAGE 13 OF THE IMPUGNED ORDER, WHI CH IS REPRODUCED AS UNDER :- AT THE APPELLATE STAGE, THE LD. AUTHORIZED REPRESE NTATIVE OF THE APPELLANT HAS FILED A COPY O DECISION OF HON'BLE IT AT, C BENCH AHMEDABAD IN THE CASE OF ACIT VS.- COSMIC DIES & INTERMEDIATES PVT. LTD., AHMEDABAD, ITA NO. 4209 AN D 4 ITA NO. 1001/AHD/2007 4210/AHD/2003. THERE THE HON'BLE TRIBUNAL HAS OBSER VED THAT IN THE CASE OF BOGUS PURCHASES THE ASSESSEE MIGHT HAVE GOT GOOD FROM SOME OTHER SOURCES AND, THEREFORE, THE VALUE A DOPTED FOR PURCHASE OF SUCH GOODS DID NOT REPRESENT THE TRUE V ALUE OF THE PURCHASES AND SUSTAINED THE ADDITION AT 15% OF THE PURCHASES TREATED THIS TO BE THE VALUE AT WHICH PURCHASES MIG HT HAVE BEEN OVER STATED BY THE ASSESSEE. FOLLOWING THE ABOVE DE CISION OF HON'BLE TRIBUNAL, I HOLD THAT RS.1,25,460/-, 15% OF TOTAL PURCHASE VALUE OF RS.8,36,400/- IS REQUIRED TO BE SUSTAINED. HENCE, THE ADDITION OF RS.1,25,460/- IS CONFIRMED. 5. AGGRIEVED BY THIS ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- (I) THAT THE LD. C.I.T.(A) WAS NOT JUSTIFIED IN DEL ETING THE ADDITION OF RS.7,10,940/- OUT OF ADDITION OF RS.8,36,400/- ON A CCOUNT OF BOGUS PURCHASES MADE FROM GANESH STEEL ENTERPRISE. (II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. C.I.T.(A) WAS NOT JUSTIFIED IN RELYING UPON THE ITAT, AHMEDAB AD BENCHESS DECISION IN ITA NO. 4209 & 4210/AHD/2003 IN THE CAS E OF COSMIC DYES & INTERMEDIARIES PVT. LTD. AS THE FACTS IN THA T CASE ARE TOTALLY DIFFERENT FROM THAT OF THE FACTS IN THE CASE OF THE ASSESSEE. (III) THAT THE LD. LEARNED COMMISSIONER OF INCOME T AX(APPEALS) OUGHT TO HAVE UPHELD THE ADDITION OF RS.8,36,400/- APPLYI NG THE RATIO OF THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS.- LA MEDICA (250 ITR 575) AS THE FACTS OF THE ASSESSEES CASE A RE IDENTICAL. 6. IN THIS CASE, THE NOTICE FIXING THE DATE OF HEAR ING FOR TODAY, I.E. 09.02.2010 WAS SERVED ON THE ASSESSEE ON 18.01.2010. THE ACKNOWLEDGMENT DULY SIGNED IS PLACED ON RECORD. DESPITE THE SERVICE OF NOTICE OF HEARING, ON THE DATE OF HEARIN G, I.E. TODAY (09.02.2010), NEITHER ANYBODY APPEARED FROM THE SIDE OF THE ASSESSEE NOR AN APPLI CATION FOR ADJOURNMENT RECEIVED. WE, THEREFORE, PROCEED TO DECIDE THIS APPEAL ON THE BAS IS OF SUBMISSIONS MADE BY THE LD. D.R. AND MATERIAL AVAILABLE ON RECORD. 7. SHRI M.C. PANDIT, SR. D.R. APPEARING ON BEHALF O F THE REVENUE CONTENDED THAT IN THIS CASE NO GOODS WERE PURCHASED FROM GANESH STEEL ENTERPRIS E. THE VEHICLES ALLEGED TO BE MADE FOR TRANSPORTING THE GOODS WERE NEVER USED FOR TRANSPOR TING THE GOODS TO THE ASSESSEE. THE ASSESSEE PURCHASED THE BOGUS BILLS TO REDUCE THE PROFIT FOR THE YEAR UNDER CONSIDERATION, THEREFORE, THE ADDITION OF RS.8,36,400/- IS RIGHTLY MADE BY THE A. O. 5 ITA NO. 1001/AHD/2007 8. HAVING HEARD THE LD. DEPARTMENTAL REPRESENTATIVE , WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS RECORDED A FINDING OF FACT THAT WH ATEVER MATERIAL IS PURCHASED FROM SHRI JAYANTIBHAI M. SHAH, THE PROPRIETOR OF M/S. GANESH STEEL ENTERPRISES IS ACTUALLY SOLD. IN THESE CIRCUMSTANCES, IT CAN BE SAID THAT THE ASSESSEE MIG HT HAVE PURCHASED THE GOODS WHICH ARE CLAIMED TO BE PURCHASED FROM GANESH STEEL ENTERPRISES FROM GREY MARKET IN CASH. IN SUCH CIRCUMSTANCES, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHO ULD HAVE RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF TOTAL ALLEGED BOGUS PURCHASES OF R S.8,38,400/- APPLYING THE RATIO LAID DOWN IN THE CASE OF VIJAY PROTEINS VS.- CIT [58 TTJ 76 (AH D)]. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RESTRICTED THE ADDITION TO THE EXTENT OF 15% OF PURCHASES OF RS.8,38,400/-. FOLLOWING THE DECISION OF THE HO N'BLE ITAT, AHMEDABAD IN THE CASE OF VIJAY PROTEINS (SUPRA), WE RESTRICT THE ADDITION TO THE E XTENT OF RS.2,09,600/- I.E. 25% OF RS.8,38,400/-. THE A.O. IS ACCORDINGLY DIRECTED TO RE-WORKOUT THE INCOME OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 12.02.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 / 02 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER LAHA/SR.P.S. DEPUTY REGISTRAR, ITAT, AHMEDA BAD