The ITO,Vapi Ward-2, Vapi V. Smt. Molly Mathew, Vapi

ITA 1089/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5759 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 133(6); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI MAHAVIR SINGH,JM & SHRI A N PAHUJA,AM] ITA NO.1089/AHD/2010 (ASSESSMENT YEAR:-2006-07) INCOME-TAX OFFICER, VAPI WARD-2, VAPI V/S SMT. MOLLY MATHEW, PROP. M/S MAHIMA PACKS, C-201, AMEE APARTMENT, NEAR N H NO.8, GIDC, VAPI [PAN: AFJPM 2161 C] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K MADHUSUDAN, DR ASSESSEE BY:- SHRI JAIMIN SHAH, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 22- 11-2009 OF THE LD. CIT(A), VALSAD, RAISES THE FOLLO WING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESPECT OF DISALLOWANCE THE CREDITORS OF RS.8,27,156/-. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER O R AMEND ANY GROUND OF APPEAL 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL INCOME FILED BY THE ASSESSEE, MANUFACTURING DEX TRIN/PASTING/ CORRUGATION POWDER, AFTER BEING PROCESSED ON 26-03- 2007 U/S 143(1)(A) OF THE INCOME-TAX ACT, 1961 [HEREIN AFTER REFERRED TO AS THE ACT],WAS SELECTED FOR SCRUTINY WITH THE SERVICE O F A NOTICE U/S 143(2) OF THE ACT ON 17-05-2007.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NO TICED THAT THE ASSESSEE HAD SHOWN CREDIT OF RS.8,27,156/- IN THE A CCOUNT OF M/S SAGOSERVE WHILE THE COPY OF ACCOUNT RECEIVED FROM S AGOSERVE U/S 133(6) OF THE ACT DID NOT DISCLOSE ANY SUCH AMOUNT OUTSTANDING. INTER ALIA, IT WAS MENTIONED BY M/S SAGOSERVE THAT SMT. MOLLY ITA NO.1089/AHD/2010 FOR AY 2006-07 SMT. MOLLY MATHEW 2 MATHEW PROP. OF M/S MAHIMA PACKS HAD NOT DEALT WITH SAGOSERVE DIRECTLY. M/S MAHIMA PACKS HAD AUTHORIZED M/S STARC O TRADING, PARATHOLLI, RAMAN CHIRA, THIRUVALLA, KERALA TO DEAL WITH SAGOSERVE ON BEHALF OF THEM. WITH THEIR LETTER, M/S SAGOSERVE ANNEXED A COPY OF LETTER ISSUED BY THE ASSESSEE TO M/S STARCO TRADING FOR AUTHORIZING THEM FOR BUSINESS DEALS. M/ S SAGOSERVE ALSO SUBMITTED THAT THEY ISSUED BILLS AMOUNTING TO RS.24,76,666/- IN THE NAME OF M/S MAHIMA PACKS ONLY. SINCE M/S SAGOSE RVE DENIED ANY OUTSTANDING AMOUNT AGAINST THE ASSESSEE, THE AO ASKED THE ASSESSEE TO CLARIFY. IN THEIR REPLY DATED 02-12-200 8, IT WAS SUBMITTED THAT M/S. STARCO TRADING (PROP. THOMAS P. MATHEW) W ARD NO. XXVI, BLDG NO. 98(4), RAMANCHIRA THIRUVALLA, KERALA STATE, USED T O MAKE THE PAYMENTS DIRECTLY TO THE SAGOSERVE, AGAINST SUPPLIES MADE TO THE ASSE SSEE, KEEPING HIS INTEREST IN PROFIT, FOR INVESTING THE MONEY. WHILE ENCLOSING A COPY OF THE LEDGER ACCOUNT OF THE SUPPLIERS M/S SAGOSERVE AS ALSO M/S STARCO TRAD ING AND THE COMBINED PURCHASE STATEMENT, THE ASSESSEE SUBMITTED THAT TH EY HAD PURCHASED THE MATERIAL ON ADVANCE PAYMENT AND HENCE PROVIDED SOME PROFIT FOR HIM AGAINST THEIR INVESTMENT. HOWEVER, THE AO DID NOT ACCEPT T HESE SUBMISSIONS ON THE GROUND THAT IN THE LEDGER COPY OF M/S STARCO TRADIN G, THE ASSESSEE HAD SHOWN O.G.S. PURCHASE OF RS. 6,60,445/-AND FOR SUCH PURCH ASE, PAYMENT HAD BEEN MADE ON DIFFERENT DATES THROUGH CHEQUES. SO THE ASS ESSEE COULD NOT SAY THAT M/S STARCO TRADING WAS ACTING ON BEHALF OF THE ASSE SSEE FOR ALL PURCHASES FROM M/S SOGOSERVE. BESIDES, THE ASSESSEE ALSO INFLATE D THE PURCHASES BY ADDING RS.1,78,871/- DURING THE YEAR WHILE PURCHASES OF ON LY RS.24,76,484/- WERE REFLECTED IN THE ACCOUNT COPY RECEIVED FROM M/S SAG OSERVE. SINCE THE ASSESSEE INCREASED THE COST OF RAW MATERIAL BY RS.1,78,871/- , TERMED AS PROFIT ELEMENT OF M/S STARCO TRADING WHILE THE SAID PROFIT ELEMENT WA S NOT ACCOUNTED FOR IN THE ACCOUNT OF M/S STARCO TRADING IN THE BOOKS OF ASSES SEE NOR THE ASSESSEE PRODUCED ANY EVIDENCE THAT THE PROFIT ELEMENT HAD R EALLY BEEN EARNED BY M/S STARCO TRADING, THE AO CONCLUDED THAT THE ASSESSE E INFLATED THE COST OF PURCHASE BY ADDING A CERTAIN AMOUNT NICKNAMED 'PROF IT PROVISION' IN THE NAME OF ITA NO.1089/AHD/2010 FOR AY 2006-07 SMT. MOLLY MATHEW 3 M/S STARCO TRADING. ACCORDINGLY, THE AO ADDED AN A MOUNT OF RS. 8,27,156/- BESIDES THE INFLATED THE COST OF PURCHASE BY RS.1, 78,871 . 3. ON APPEAL, THE LD. CIT(A) WHILE UPHOLDING THE AD DITION OF RS. 1,78,871/- CONCLUDED AS UNDER: THE ID. AR ALSO SUBMITTED BANK ACCOUNT OF MR. THOM AS P. MATHEW, WHO MADE THE PAYMENT TO M/S. SAGOSERVE AS WELL AS LEDGE R ACCOUNT OF SAGOSERVE. THE PAYMENT MADE BY MR. THOMAS P. MATHEW ARE DEBITED TO M/S. SAGOSERVE AND THE PAYMENT ENTRIES FROM THE BAN K A/C OF MR. THOMAS P. MATHEW TALLIES WITH LEDGER ACCOUNT OF M/S. SAGOS ERVE. THE APPELLANT ALSO SUBMITTED COPY OF AGREEMENT OF UNDERSTANDING W ITH MR. THOMAS P. MATHEW TO MAKE THE PAYMENT ON BEHALF OF ASSESSEE TO M/S. SAGOSERVE TO EARN THE INTEREST. THE DIFFERENCE IS WELL EXPLAINED AS THERE IS DIRECT PAYMENT BY THIRD PARTY TO M/S. SAGOSERVE. THERE IS AMOUNT OUTSTANDING IN THE NAME OF MR. THOMAS P. MATHEW OF RS.6,52,158/-, WHICH IS TRANSFERRED NEXT YEAR TO M/S. SAGOSERVE AND RS.1,75,000/- PAID FROM BANK ACCOUNT OF ASSESSEE, MAKING BALANCE NIL IN THE A/C OF M/S. SAG OSERVE. THIS EXPLAINS THE DIFFERENCE. IN VIEW OF THIS THE APPELLANT GETS RELIEF AND THIS GROUND OF APPEAL IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEF ORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A) ,DELETING THE ADDITION OF RS. 8,27,156/-.THE LD. DR SUPPORTED THE FINDINGS OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A).TO A QUERY BY THE BENCH, THE LD. AR SUBMITTE D THAT THE ASSESSEE IS NOT IN APPEAL AGAINST THE FINDINGS OF T HE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. UNDISPUTEDLY PAYMENTS FOR THE PURCHASES F ROM M/S SAGOSERVE TO THE EXTENT OF RS. 8,27,156/- WERE MADE BY MR. THOMAS P. MATHEW ON BEHALF OF THE ASSESSEE UNDER A MUTUAL ARRANGEME NT . THE LD. CIT(A) AFTER GOING THROUGH A COPY OF BANK ACCOU NT OF MR. THOMAS P. MATHEW, A COPY OF AGREEMENT OF UNDERSTANDING AND L EDGER ACCOUNT OF SAGOSERVE FOUND THAT THE PAYMENTS MADE BY MR. THOMA S P. MATHEW WERE DEBITED TO M/S. SAGOSERVE ON ACCOUNT OF PURCHASES M ADE BY THE ASSESSEE. SINCE THE ACCOUNT WAS RECONCILED , THE LD. CIT(A) DELETED THE ADDITION. THE REVENUE ITA NO.1089/AHD/2010 FOR AY 2006-07 SMT. MOLLY MATHEW 4 HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTIN G THESE FINDINGS OF THE LD. CIT(A).IN THE ABSENCE OF ANY MATERIAL SO AS TO ENA BLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. TH EREFORE, GROUNDS RAISED BY THE REVENUE IN RESPECT OF THE SAID ADDITION ARE DISMIS SED. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TE RMS OF THE RESIDUARY GROUND, ACCORDINGLY, THIS GROUND IS ALSO DISMISSED. 7. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 2-07-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 2 -07-2010 COPY OF THE ORDER FORWARDED TO: 1. SMT. MOLLY MATHEW, PROP. OF MAHIMA PACKS, C-201, AMEE APARTMENT, NR. N H NO.8, GIDC, VAPI 2. ITO, VAPI WARD-2, VAPI 3. CIT CONCERNED 4. CIT(A)-VALSAD 5. DR, BENCH-B, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR/ ASSISTANT REGISTRAR ITAT, AHMEDABAD