Smt. Neelaben Kaniyalal Thakkar, V. The Income tax officer, Ward-2(3),

ITA 1084/AHD/2004

• Counselvise Citation: [2008] 114 COUNSELVISE.COM (IT) 4593 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2008
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-02-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 05-04-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN R DESAI
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.1084 AND 1985/AHD/2004 [ASSTT. YEAR : 1996-1997 AND 1997-98] NEELABEN KANAIYALAL THAKKAR 13, ARUN CHAMBERS, CHOKA BAZAR KALUPUR, AHMEDABAD. VS. ITO, WARD-2(3) AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL H. TALATI REVENUE BY : SHRI SUMAN R. DESAI O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE TWO APPEALS BY THE ASSESSEE ARE AGAINST THE ORDERS OF THE CIT(A)-VI, A HMEDABAD BOTH DATED 16.01.2004 FOR A.Y.1996-1997 AND 1997-98 ARISING OU T OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) R.W.S . 147 OF THE INCOME TAX ACT, 1961. SINCE ISSUES ARE COMMON IN BOTH THE APP EALS, WE DISPOSE OF BOTH THE APPEALS BY THIS CONSOLIDATED ORDER. 2. IN THESE TWO APPEALS VARIOUS GROUNDS ARE RAISED. HOWEVER, AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSE SSEE ARGUED ONLY ONE GROUND THAT WAS WITH REGARD TO APPLICATION OF NET PROFIT O N THE BOGUS PURCHASES. IT IS STATED BY THE LEARNED COUNSEL THAT THE ASSESSEE DER IVES INCOME FROM TRADING OF NON-EDIBLE OILS, OIL CAKES, SEEDS ETC. ON WHOLESALE BASIS. DURING THE YEAR UNDER CONSIDERATION, THE AO FOUND CERTAIN PURCHASES TO BE NOT VERIFIABLE AS THE SELLER PARTY WAS NOT AVAILABLE AT THE ADDRESS GIVEN IN THE SALE BILL. HOWEVER, THE ASSESSEE POINTED OUT THAT GOODS PURCHASED BY THOSE PARTIES HAVE BEEN SOLD BY THE ASSESSEE AND THE ASSESSEE PRODUCED BEFORE THE A O BILL TO BILL CO-RELATION OF THE PURCHASE AS WELL AS SALE OF THE GOODS. IN VIEW OF THE ABOVE FACTS, THE AO DREW INFERENCE THAT THE ASSESSEE MIGHT HAVE PURCHAS ED THE GOODS FROM SOME OTHER PARTIES WITHOUT ANY BILLS AND VOUCHERS AND IN THIS PROCESS, THE ASSESSEE MUST HAVE SAVED THE SALES-TAX WHICH WAS PAYABLE AT THE RATE OF 4% ON THE CASTOR ITA NO.1084 AND 1985/AHD/2004 -2- OIL. THE ASSESSEE HAS GIVEN COMPLETE DETAILS OF SA LE OF EACH ITEM OF PURCHASE OF CASTOR OIL AND THE AO NOTED THE HIGHEST GP IN SUCH SALE TRANSACTION WHICH WAS 2.43% IN A.Y.1996-97 AND 3.8% IN A.Y.1997-98. THE AO ADDED 4% I.E. THE ALLEGED GAIN OF SALES-TAX ON THIS PURCHASE AND OTHE R NET PROFIT AT THE RATE OF 2.43% AND 3.8% FOR A.Y.1996-97 AND 1997-98 RESPECTI VE ON THE BOGUS PURCHASE. IT IS CONTENDED BY THE LEARNED COUNSEL T HAT THE AO WAS NOT JUSTIFIED IN ADOPTING THE MAXIMUM OF THE GP FROM VARIOUS SALE INSTANCES. IN FACT IN A.Y.1996-97, THE AO HIMSELF HAS ADOPTED AVERAGE GP OF 0.41% FOR OTHER SALES AND 0.14% IN A.Y.1997-98. SIMILARLY, EVEN IF THERE WAS A GAIN OF SALES-TAX OF 4% IN PURCHASE OF GOODS OUTSIDE THE BOOKS, THE ENTI RE BENEFIT WOULD NOT BE PASSED ON BY THE SELLER OF THE GOODS TO THE ASSESSE E. HE THEREFORE STATED THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , THE NET PROFIT RATE APPLIED BY THE AO IN RESPECT OF UNVERIFIABLE PURCHASES IS E XCESSIVE. THE SAME SHOULD BE SUITABLE REDUCED. 3. THE LEARNED DR, ON THE OTHER HAND RELIED UPON TH E ORDER OF THE AUTHORITIES BELOW AND HE STATED THAT THE NP RATE AP PLIED BY THE AO IS MOST REASONABLE AND NO FURTHER RELIEF SHOULD BE GIVEN TO THE ASSESSEE. 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. FROM THE PERUSAL OF THE ASSESSMENT ORDER FOR A.Y.1996-97, THE AVERAGE GP RATE SHOWN BY THE ASSESSEE AND ACCEPTED BY THE REVENUE ON THE SALE OF GOODS WAS 0. 41%. SIMILARLY IN A.Y.1997-98, IT WAS ONLY 0.14%. THE CONTENTION OF THE LEARNED COUNSEL IS THAT EVEN THERE IS A SAVING OF SALES-TAX IN PURCHASES WI THOUT BILL, THE ENTIRE SAVING OF SALES-TAX WOULD NOT BE PASSED ON TO THE ASSESSEE BY THE SELLER OF THE GOODS APPEARS TO BE PLAUSIBLE. CONSIDERING THE ENTIRETY OF THE FACTS AND THE ARGUMENTS OF BOTH THE SIDES, IN OUR OPINION, IT WOULD MEET EN DS OF JUSTICE, IF THE AO IS DIRECTED TO APPLY THE NET PROFIT OF 3% ON THE BOGUS PURCHASES. THE AO WILL WORK OUT THE ADDITION ACCORDINGLY. ITA NO.1084 AND 1985/AHD/2004 -3- 5. ALL OTHER GROUNDS IN BOTH THE YEARS ARE TREATED AS NOT PRESSED AND AS SUCH REJECTED. 6. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 28 TH FEBRUARY, 2011. SD/- SD/- (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 28-02-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD