M/s. Ruchi Developers, Ahmedabad V. The Income tax Officer,Ward-9(1), Ahmedabad

ITA 1170/AHD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89560 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: M J SHAH
• Keywords: Bogus purchase; Corroborative evidences
• Section: 44AD; 143(3); 68; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1. ./ I.T.A. NO.3348/AHD/2010 A.Y. 2007-08 2. ./ I.T.A. NO.1170/AHD/2014 A.Y. 2007-08 M/S.RUCHI DEVELOPERS C/O.PIYUSH MAFATLAL SHAH A/40, LALITA SOCIETY OPP.ADARSH TENEMENT ISANPUR, AHMEDABAD / VS. THE INCOME TAX OFFICER WARD-9(1) AHMEDABAD ./ ./ PAN/GIR NO. : AADFR 6907 Q ( # / APPELLANT ) .. ( $% # / RESPONDENT) #& / APPELLANT BY : SHRI M.J. SHAH, AR $% #'& / RESPONDENT BY : SHRI ROOP CHAND, SR.DR ()'* / DATE OF HEARING 28/04/2015 +,-.'* / DATE OF PRONOUNCEMENT 05/06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE TWO APPEALS (QUANTUM AND PENALTY) BY THE ASS ESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMM ISSIONER OF INCOME TAX(APPEALS)-XV/XX, AHMEDABAD (CIT(A) IN SHORT) DATED 18/10/2010 AND 13/03/2014 PERTAINING TO ASSESSMENT YEAR (AY) 2007-08 RESPECTIVELY. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE. ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 2 - 2. FIRST, WE TAKE UP THE QUANTUM APPEAL, I.E. ITA N O.3348/AHD/2010 FOR AY 2007-08. THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. THE ID CIT(A) HAS ERRED IN CONFIRMING THAT THE O RDER U/S 143(3) DATED 24-12-2009 AND SERVED ON THE APPELLANT ON 1-01-2010 WAS NOT TI ME BARRED AS PER FIRST PROVISO TO SECTION 153(L)(A) ON THE GROUND THAT THE ASSESSMENT WAS COMPLETED WITHIN TWENTY ONE MONTHS I.E. BEFORE 31-12-2009. 2. THE ID CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS. 1,04,16,233/- AS BOGUS PURCHASES FROM THE FOLLOWING FIVE PARTIES AS PER PA RA 6 TO 11 OF THE APPEAL ORDER ON THE FINDING THAT THE APPELLANT HAS NOT DISCHARGED T HE ONUS OF PROVING THE PURCHASES BY FURNISHING HALF BAKED, UNRELIABLE, UNVERIFIABLE PAP ERS IN SUPPORT:- (1) JOLEX TRADERS RS. 24,94,120/- (2) UMIYA STEEL TRADERS RS. 19,69,268/- (3) RUSHI ENTERPRISE RS. 22,32,310/- (4) MARUTI TRADERS RS. 17,41,950/- (5) MAHAKALI STEEL CORPORATION RS. 19,78,585 /- ------------------------ TOTAL RS. 1,04,16,233/- 2.1 THE APPELLANT SUBMITS THAT THE ID C1T(A) HAS ERRED IN NOT APPRECIATING OBJECTIVELY THE GROUNDS OF APPEAL, AND WRITTEN SUBM ISSIONS, EVIDENCES AND CITATIONS FILED WITH ID CIT(A) WHEREIN THE APPELLANT HAD EXPL AINED THAT HE HAD DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF PURCHASES. 3. THE ID C1T(A) HAS ERRED IN IGNORING THE SPEC IFIC GROUNDS OF APPEAL NOS. (XI) TO (XIII) OF 2.3. AND GROUND NO.2.4 WHICH REFLECT THE TRADING RESULT AFTER ADDITION OF RS.1,04,16,233/-WHICH IS ABNORMAL AND UNJUSTIFIED A ND NOT REAL AND AS SUCH NOT PERMISSIBLE IN LAW. 4. THE ID CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION OF RS. 1,04,16,233/- AS BOGUS PURCHASES IN TRADING ACCOUNT WITHOUT REJECTING THE BOOKS U/S 145, AND WITHOUT THE AUTHORITY OF ANY SPECIFIC SECTION OF I.T.ACT, WHICH IS ILLEGAL AND NOT VALID IN LAW. ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 3 - 5. THE ID C1T(A) HAS ERRED IN DISMISSING THE ADD ITIONAL GROUND OF ALLOWING HIGHER REMUNERATION PAYABLE TO PARTNERS AS PER SECTION 40( B)(V)(2) ON THE BASIS OF THE INCOME ASSESSED, BY THE AO ON THE GROUND THAT PAYME NT OF REMUNERATION TO THE PARTNERS HAS TO BE AS PER THE PARTNERSHIP DEED WHIC H HAS NOT BEEN FURNISHED. 5.1 THE APPELLANT SUBMITS THAT THE REMUNERATION P AYABLE TO THE PARTNERS U/S 40(B)(V)(2) HAS TO BE CALCULATED AS PER THE DEFINIT ION OF ' BOOK PROFIT' GIVEN IN EXPLANATION 3 OF SECTION 40(B). ALSO, THE COPY OF T HE PARTNERSHIP DEED WAS ALREADY FILED ON RECORD. HENCE, THE ID CIT(A) WAS NOT JUSTI FIED IN DISMISSING THE ADDITIONAL GROUND OF APPEAL AS PER LAW. 6. THE ID CIT(A) HAS ERRED IN CONFIRMING THE IN TEREST OF RS.11,74,658/- CHARGED U/S 234-B AND RS. 10,674/- CHARGED U/S 234-C BY THE AO WHICH IS ILLEGAL. 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 24/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION IN RESPECT OF BOGUS PURCHASES AMOUNTING TO RS.1,04,16,233/-. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE T HE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS DISMISSED THE APPEAL. 3.1. DURING THE COURSE OF FIRST APPELLATE PROCEEDIN GS, THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND BEFORE THE LD.CIT(A) CL AIMING THE HIGHER REMUNERATION OF RS.45,77,944/- PAYABLE TO THE PARTN ERS OF FIRM. 3.2. FIRST GROUND OF ASSESSEES APPEAL HAS NOT BEEN PRESSED BY THE LD.COUNSEL FOR THE ASSESSEE AND, THEREFORE, THE SAM E ARE DISMISSED AS SUCH. ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 4 - 3.3. GROUND NOS.2 TO 4 OF ASSESSEES APPEAL ARE AG AINST CONFIRMATION OF ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES AMOU NTING TO RS.1,04,16,233/-. HE SUBMITTED THAT THE BOOKS OF A CCOUNTS ARE MAINTAINED IN THE REGULAR COURSE OF BUSINESS AND T HEY ARE AUDITED U/S.44AB OF THE ACT AND AUDIT REPORT IS FILED ON RE CORD. THE AO HAS ACCEPTED THE GP OF 10.34% ON THE RECEIPTS OF RS.1,8 6,50,000/- AS NOTED BY HIM IN PARA 3 OF HIS ORDER. HE SUBMITTED THAT G ROSS RECEIPTS FROM CONSTRUCTION BUSINESS OF RS.1,86,50,000/- DECLARING NET PROFIT OF RS.8,97,380/- WHICH WORKS OUT TO 8.49% AS AGAINST 8% NET PROFIT ON RECEIPTS AS PER SECTION 44AD APPLICABLE TO CONSTRUC TION BUSINESS. IN ADDITION THE ASSESSEE SUBMITS THAT THE ADDITION OF ALLEGED BOGUS PURCHASES OF RS.1,04,16,233/- WILL RESULT IN NET PROFIT AT 64 % WHICH IS NOT REAL. HE FURTHER SUBMITTED THAT THE GP WORKS OUT TO 10.34% I .E. OF RS.19,29,239/- ON THE RECEIPTS OF RS.1,86,50,000/- AS NOTED BY THE AO. IF THE ALLEGED BOGUS PURCHASES OF RS.1,04,16,233/- ARE ADDED TO GP , THE GP WILL WORK OUT TO 66% WHICH DOES NOT REFLECT THE REAL RATIO OF GP IN CONSTRUCTION BUSINESS. 3.4. ON THE CONTRARY, THE LD.SR.DR SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO MADE AD DITION ON THE BASIS THAT THE ASSESSEE FAILED TO ESTABLISH THE PURCHASES FROM THE CONCERNED PARTIES WITH CORROBORATIVE EVIDENCES IN SPITE OF VA RIOUS OPPORTUNITIES GIVEN TO THE ASSESSEE. HE SUBMITTED THAT THE AO HA S ALSO OBSERVED THAT ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 5 - THE ASSESSEE HAS NOT MAINTAINED ANY CORROBORATIVE D ETAILS REGARDING PURCHASES AND CONSUMPTION OF VARIOUS ITEMS USED FOR CONSTRUCTION. UNDER THESE FACTS, DISALLOWANCE OF EXPENDITURE IS J USTIFIED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO MADE DISALLOWANCE BY OBSERVING AS UNDER:- 4.11. THE FACTS EMERGING FROM THE ABOVE DISCUSSION CAN BE SUMMARIZED AS UNDER:- (I) THE ASSESSEE CLAIMED TO HAVE PURCHASED RS.1,04,16,2 33/- FROM FIVE DIFFERENT PARTIES AND SHOWN THE ENTIRE AMOUNT AS OUTSTANDING AS ON 31.03.2007. (II) THE ASSESSEE HAS NOT FURNISHED THE ITEM-WISE DETAIL S OF PURCHASES, THOUGH IT WAS SPECIFICALLY CALLED FOR. (III) THE LETTERS SENT U/S.133(6) OF THE ACT TO THREE OF THE PARTIES RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THE A SSESSEE COULD NOT FURNISH THE NEW ADDRESS OF THESE PARTIES. (IV) THOUGH THE LETTERS SENT U/S.133(6) SENT TO JOLEX TR ADERS AND UMIYA STEEL TRADERS, RETURNED UNSERVED, SOMEBODY HA S SUBMITTED A STATEMENT OF TRANSACTIONS ON THEIR BEHA LF IN THE TAPAL SECTION IN A DUBIOUS MANNER. (V) IN RESPECT OF RUSHI ENTERPRISE, AS ADMITTED BY THE ASSESSEE ITSELF, THE ASSESSEE COULD NOT FURNISH ANY DETAILS INCLUDIN G ADDRESS. (VI) VIDE LETTER/NOTICE DATED 18.11.2009 AND 17.12.2009 AND DURING THE COURSE OF HEARING, THE ASSESSEE WAS REPEATEDLY ASKED TO PRODUCE THE ALLEGED CREDITORS ALONG WITH VARIOUS DE TAILS. HOWEVER, THE ASSESSEE COULD NOT PRODUCE EVEN A SING LE PARTY. ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 6 - (VII) NONE OF THE ABOVE PARTIES HAVE CST/GST/VAT REGISTRA TION THOUGH THEY CLAIMED TO HAVE SUPPLIED BUILDING MATER IAL ON A LARGES SCALE THAT TOO ON CREDIT FOR YEARS. (VIII) HAD THE ASSESSEE ACTUALLY MADE PURCHASES FROM THESE PARTIES ON CREDIT, THEY WOULD HAVE REMAINED IN TOUCH WITH THE ASSESSEE, FOR THE PAYMENT DUE. HOWEVER, THE ASSESSEE IS NOT IN P OSSESSION OF CORRECT ADDRESSES OF FOUR OF THE PARTIES. (IX) THE ABOVE EVENTS SHOW THAT THE ASSESSEE HAD OBTAINE D SOME ACCOMMODATION BILLS IN THE NAME OF ABOVE PARTIES, S O AS TO REDUCE ITS PROFIT AND TAX LIABILITY. (X) THE ASSESSEE HAS NOT MADE ANY PAYMENT TO THESE ALLE GED CREDIT IN THE SUBSEQUENT YEARS TILL DATE. (XI) THE ASSESSEE HAS NOT FILED ITS RETURN OF INCOME FOR AY 2008-09 AND 2009-10 TILL DATE. (XII) ON VERIFICATION OF BANK STATEMENT IT IS NOTICED THA T THE ASSESSEE HAS NOT PAID OUTSTANDING AMOUNT TO THESE CREDITORS TILL DATE, HOWEVER, NOBODY CAN WAIT FOR SUCH HUGE AMOUNT FOR L ONG PERIOD. (XIII) DURING THE YEAR THE PARTNERS HAVE WITHDRAWN THEIR C APITAL WITHOUT SETTLE THE ACCOUNTS OF CREDITORS BECAUSE TH EY KNOW THAT THE CREDITORS ARE BOGUS. (XIV) THE ASSESSEE HAS COMPLETED THE PROJECT DURING THE Y EAR UNDER CONSIDERATION AND THE ASSESSEE HAS SUFFICIENT FUND TO PAY THE CREDITORS BUT DID NOT PAY THE SAME WHICH PROVE THAT THE CREDITORS ARE BOGUS. (XV) THE ASSESSEE ALSO FAILED TO FURNISH THE DETAILS OF SO CALLED GOODS PURCHASED FROM THESE PARTIES. 4.12. THE ONUS IS TOTALLY ON THE ASSESSEE TO PROVE THAT ANY EXPENDITURE INCURRED BY IT WAS WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. IN THE PRESENT CASE, THE ASSESSEE HAS FAILED TO PRO DUCE THE ALLEGED CREDITORS AND THE EXISTENCE OF THESE SUPPLIERS IS V ERY MUCH IN DOUBT. IN FACT NO EVIDENCE WHATSOEVER KIND HAS BEEN FURNISHED BY THE ASSESSEE TO DISCHARGE THE ONUS THAT LIES ON IT. HOWEVER, INSTE AD OF BRINGING ANY MATERIAL EVIDENCE ON RECORD, THE ASSESSEE MERELY MA DE THE CONTENTIONS AS QUOTED ABOVE. THE ASSESSEE HAS ALSO RELIED ON T HE DECISION IN THE ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 7 - CASE OF VIJAY PROTEINS. HOWEVER, THE FACTS OF THE PRESENT CASE ARE DIFFERENT. 4.13. IN THIS CONNECTION, RELIANCE IS ALSO PLACED O N THE DECISION OF ITAT BOMBAY BENCH B (ITA NO.614/BOM/87 A.Y. 1983- 84) IN THE CASE OF M/S.MONT BLANE PROPERTIES AND INDUSTRIES PVT.LTD ., WHEREIN THE HONBLE TRIBUNAL HELD THAT THE WORD EVIDENCE AS USED IN SEC. 143(3) COVERED CIRCUMSTANTIAL EVIDENCE ALSO. THE WORD EVIDENCE AS USED IN SEC.143(3) OBVIOUSLY COULD NOT BE CONFINED TO DIREC T EVIDENCE. THE WORD EVIDENCE WAS COMPREHENSIVE ENOUGH TO COVER T HE CIRCUMSTANTIAL EVIDENCE ALSO. UNDER THE TAX JURISPRUDENCE, THE WO RD EVIDENCE HAD MUCH WIDER CONNOTATIONS. WHILE THE WORD EVIDENCE MIGHT RECALL THE ORAL AND DOCUMENTARY EVIDENCE AS MAY BE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT, THE USE OF WORD MATERIAL IN SEC.143 (3) SHOWED THAT THE ASSESSING OFFICER, NOT BEING A COURT, COULD RELY UP ON MATERIAL, WHICH MIGHT NOT STRICTLY BE EVIDENCE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT, FOR THE PURPOSE OF MAKING AN ORDER OF ASSESSMENT. COURT OFTEN TOOK JUDICIAL NOTICE OF CERTAIN FACTS WHICH NEED NOT BE PROVED BEFORE THEM. THE PLAIN READING OF SECTION 142 AND 143 CLEARLY SU GGESTS THAT THE ASSESSING OFFICER MAY ALSO ACT ON THE MATERIAL GAT HERED BY HIM. THE WORD MATERIAL CLEARLY SHOWS THAT THE ASSESSING OF FICER IS NOT FETTERED BY THE TECHNICAL RULES OF EVIDENCE AND THE LIKE, AN D THAT HE MAY ACT ON MATERIAL WHICH MAY NOT STRICTLY SPEAKING BE ACCEPTE D EVIDENCE IN COURT OF LAW. 4.14 IN VIEW OF THE DETAILED DISCUSSION MADE IN FOR EGOING PARAS, IT IS VERY CLEAR THAT THE ASSESSEE HAS FAILED TO ESTABLIS H THE HUGE PURCHASES OF RS.1,04,16,233/- FROM ABOVE FIVE PARTIES WITH CORRO BORATIVE EVIDENCES INSPITE OF UMPTEEN OPPORTUNITIES GIVEN TO ITS. I T IS ALSO RELEVANT TO MENTION HERE THAT THE ASSESSEE HAS NOT MAINTAINED A NY QUANTITATIVE DETAILS REGARDING PURCHASE AND CONSUMPTION OF VARIO US ITEMS USED FOR CONSTRUCTION. IN VIEW OF THESE FACT, IT IS CLEAR T HAT THE ASSESSEE HAS MADE AN ATTEMPT TO INFLATE ITS PURCHASES BY OBTAINING AC COMMODATION BILLS TO REDUCE THE PROFIT AND ULTIMATELY TO REDUCE THE TAX LIABILITY. THEREFORE, I HAVE NO HESITATION TO HOLD THAT THE ENTIRE PURCHASE S CLAIMED TO HAVE MADE FROM THE ABOVE FIVE PARTIES ARE BOGUS. I HERE BY ADD ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 8 - RS.1,04,16,233/- TO THE TOTAL INCOME OF THE ASSESSE E. PENALTY PROCEEDINGS U/S.271(1)(C) ARE SEPARATELY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 4.1. THE CONTENTION OF THE ASSESSEE IS THAT IT HAS DISCHARGED PRIMARY ONUS BY FURNISHING THE DETAILS TO THE AO, THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. WE FIND THAT THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS CLAIMED PURCHASES FROM FOLLOWING F IVE PARTIES:- 1. JOTEX TRADERS RS.24,94,120/- 2. UMIYA STEEL TRADERS RS.19,69,268/- 3. RUSHI ENTERPRISE RS.22,32,310/- 4. MARUTI TRADERS RS.17,41,950/- 5. MAHAKALI STEEL CORPORATION RS.19,78,585/- THE TOTAL PURCHASES MADE FROM THESE PARTIES IS AMO UNTING TO RS.1,04,16,233/-. THE AO OBSERVED THAT THE ASSESSE E DID NOT MAINTAIN QUANTITATIVE DETAILS REGARDING PURCHASES AND CONSUM PTION OF VARIOUS ITEMS USED FOR CONSTRUCTION. THE AO HAS ALSO OBSER VED THAT IN RESPECT OF JOLEX TRADERS, THE SUMMON ISSUED U/S.133(6) OF THE ACT WAS RETURNED BY THE POSTAL AUTHORITIES WITH REMARKS LEFT. THE AS SESSEE COULD NOT FURNISH CORRECT/CHANGED ADDRESS OF THE PARTY OR COULD NOT P RODUCE THE PARTY BEFORE THE AO. SIMILARLY, IN THE CASE OF UMIYA STE EL TRADERS, SUMMON WAS ISSUED U/S.133(6) OF THE ACT ON 11/09/2009 WHIC H WAS RETURNED BY THE POSTAL AUTHORITIES WITH REMARKS LEFT. IN THE CASE OF RUSHI ENTERPRISE ALSO, THE POSTAL AUTHORITIES RETURNED THE SUMMON WI TH REMARKS LEFT. FURTHER, IN THE CASE OF MARUTI TRADERS AND MAHAKALI STEEL CORPORATION, ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 9 - REQUISITE DETAILS AS SOUGHT WERE NOT FURNISHED. T HE AO ALSO OBSERVED THAT THERE WERE CERTAIN DISCREPANCIES WITH REGARD T O THE INFORMATION SUBMITTED BY THE ASSESSEE. THE SETTLED POSITION OF LAW WITH REGARD TO ANY EXPENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE AS SESSEE, THE ONUS IS ON THE ASSESSEE TO PROVE THAT SUCH EXPENDITURE WAS FOR THE BUSINESS PURPOSE. IN THE CASE IN HAND, THE ASSESSEE HAS CLAIMED CERTA IN PURCHASES, HOWEVER, THE ASSESSEE HAS NOT PLACED ANY CORROBORATIVE DETAI LS OF THE RAW-MATERIAL SO PURCHASED. MOREOVER, THE PURCHASES SO MADE FROM THE PARTIES COULD NOT BE VERIFIED BY THE AO. THE AO HAS MADE EFFORTS BY SENDING LETTERS TO THE GIVEN ADDRESS, BUT THE LETTERS SO SENT AND THE INFORMATION AS SOUGHT BY THE AO WAS NOT FURNISHED BY THE ASSESSEE OR THE PAR TIES CONCERNED. UNDER THESE FACTS, WE DO NOT SEE ANY INFIRMITY IN T HE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NOS .2 TO 4 OF ASSESSEES APPEAL ARE DISMISSED. 5. GROUND NO.5 IS AGAINST DISMISSAL OF ADDITIONAL G ROUND WITH REGARD TO CLAIM OF HIGHER REMUNERATION PAYABLE TO PARTNERS AS PER SECTION 40(B)(V)(2) OF THE ACT. THE LD.COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN REJECTING THE GROUND . 5.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT PLACE D ANY MATERIAL ON RECORD SUGGESTING THAT THE HIGHER REMUNERATION IS P AYABLE TO THE PARTNERS. ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 10 - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS NOT MADE THE CLAIM IN THE ORIGINAL RETURN IN RESPECT OF THE HIGHER REMUNERATION PAYABLE TO THE P ARTNERS. THE ASSESSEE HAS NOT REVISED ITS RETURN AND NO CORRECTION HAS BE EN MADE IN THE ACCOUNT. WE FIND THAT THE LD.CIT(A) HAS REJECTED THE GROUND ON THE BASIS THAT THE GROUND HAS BEEN RAISED AS AN AFTERTHOUGHT TO NEGATE THE TAX MADE BY THE AO. THEREFORE, THE ASSESSEE CANNOT BLOW HOT AND CO LD, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) , SAME IS HEREBY UPHELD. THUS, GROUND NO.5 OF ASSESSEES APPEAL IS REJECTED. 7. GROUND NO.6 IS AGAINST CONFIRMING THE INTEREST OF RS.11,74,658/- CHARGED U/S.234B & RS.10,6574/- CHARGED U/S.234-C O F THE ACT. THIS GROUND BEING CONSEQUENTIAL IS HELD ACCORDINGLY. A S A RESULT, ASSESSEES QUANTUM APPEAL IN ITA NO.3348/AHD/2010 FOR AY 2007- 08 IS DISMISSED. 8. NOW, COMING TO THE PENALTY APPEAL, I.E. ITA NO.1170/AHD/2014 FOR AY 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE CIT(APPEALS) ERRED IN UPHOLDING THE LEVY OF PE NALTY U/S.271(1)(C) OF RS.35,96,103/-. 2. THE CIT(APPEALS) FAILED TO APPRECIATE THE SUBMISSIO NS MADE BEFORE HIM AND IN THE PROCESS ERRED IN UPHOLDING THE PENAL TY U/S.271(1)(C). ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 11 - THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. 8.1. BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE FRAMING THE ASSESSMENT VIDE ORDER DATED 24/12/2009 MADE DISALLO WANCE OF RS.1,04,16,233/- ON ACCOUNT OF BOGUS PURCHASES AND INITIATED PENALTY PROCEEDINGS. SUBSEQUENTLY, AO LEVIED A PENALTY OF RS.35,06,103/- U/S.271(1)(C) OF THE ACT. AGAINST THE SAID ASSESSM ENT ORDER, ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CON SIDERING THE SUBMISSIONS, DISMISSED THE APPEAL. NOW, THE ASSESS EE IS FURTHER IN APPEAL BEFORE THIS TRIBUNAL. 8.2. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY MADE BY THE AO. HE SUBMITTED THAT THE PENALTY HAS BEEN LEVIED ON THE GROUND THAT THE LD.CIT(A) HAS CONFIRMED THE BOGUS PURCHASES. HE FURTHER SUBMITTE D THAT BEFORE THE LD.CIT(A) ONE OF THE GROUNDS WAS THAT THE ASSESSEE WAS NOT PROVIDED SUFFICIENT OPPORTUNITY. THIS GROUND WAS NOT ADJUDI CATED AND SUMMARILY REJECTED CONSIDERING THE SAME AS GENERAL IN NATURE. THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS PROVID ED THE ADDRESSES, PANS, GST NOS, ETC. BEFORE THE AO. HE FURTHER SUBMITTED THAT THE LD.CIT(A) ALSO FAILED TO APPRECIATE THE FACT THAT IN CASE THE CONTENTION OF THE AO IS ACCEPTED, THEN THE GP WOULD BE AT AN UNREALISTIC PE RCENTAGE. THE LD.COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF COORDINATE ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 12 - BENCH (ITAT A BENCH AHMEDABAD) RENDERED IN THE CA SE OF ACIT VS. MANISH ORGANICS INDIA LTD. REPORTED AT (2012) 17 TA XMANN.COM 25 (AHD.). HE ALSO PLACED RELIANCE ON THE JUDGEMENT O F HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NATIONAL TEXTILE S VS. CIT REPORTED AT (2001) 249 ITR 125(GUJ.). 8.3. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS REJECTED THE GROUND FOR NOT PROVIDING ANY OPPORTUNITY AND TREATED THE SAME AS GENERAL IN NATU RE. THE LD.CIT(A) CONFIRMED THE PENALTY BY OBSERVING AS UNDER:- 5.14. RELIANCE IS ALSO PLACED ON THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF MAK DATA PVT.LTD. VS. CIT-II IN CIV IL APPEAL NO.9772 OF 2013, WHEREBY IT HAS BEEN HELD THAT EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT WHEN A DIFFEREN CE IS NOTICED BY THE AO BETWEEN REPORTED AND ASSESSED INCOME. THE BURDE N IS THEN ON THE ASSESSEE TO SHOW OTHERWISE BY COGENT AND RELIABLE E VIDENCES. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION HAS BEEN DIS CHARGED BY HIM THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. IN THE I NSTANT CASE THE APPELLANT HAS FAILED TO DISCHARGE THE ONUS CAST UPO N HIM BY ADDUCING COGENT AND RELIABLE EVIDENCES SHOWING THAT INFACT L OSSES WERE GENUINELY DEDUCTIBLE AGAINST THE CURRENT YEARS INCOME ONLY A ND NOT AGAINST PRECEDING YEARS INCOME ONLY AND NOT AGAINST PRECED ING YEARS INCOME. ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 13 - 5.15. IT IS NOTICED THAT THE AO HAS LEVIED THE PEN ALTY FOR CONCEALMENT OF INCOME BY WAY OF FURNISHING OF INACCURATE PARTIC ULARS OF INCOME WHICH IS VERY MUCH APPARENT FROM THE RECORDS. IT I S ALSO MENTIONED THAT AS PER SUB-SECTION (1B) OF 271(1) WHICH WAS INSERTE D BY FINANCE ACT, 2008 WITH RETROSPECT EFFECT FROM 1.4.1989, IF AN OR DER OF ASSESSMENT CONTAINS DIRECTION FOR INITIATING OF PENALTY PROCEE DINGS UNDER CLAUSE OF SUB-SECTION (1) THEN SUCH AN ORDER OF ASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF AO FOR INITIATION OF PEN ALTY. IN THE PRESENT CASE, SUCH DIRECTIONS HAVE BEEN GIVEN BY THE AO IN THE PENALTY ORDER AND THERE IS NO DEFAULT ON THIS COUNT. 9.1. WE FIND THAT THE ASSESSEE HAS PLACED ON RECORD LETTER(S) DATED 22/12/2009 ADDRESSED TO ITO WITH ACCOUNT OF RUSHI ENTERPRISES WITH ENCLOSURES, LETTER DATED 12/09/2009 ADDRESSED TO I TO FROM JOLEX TRADERS WITH ENCLOSURES, LETTER DATED 21/11/2009 ADDRESSED TO ITO FROM UMIYA STEEL TRADERS WITH ENCLOSURES, LETTER DATED 167/11/ 2009 ADDRESSED TO ITO FROM MARUTI TRADERS WITH ENCLOSURES AND LETTER DATE D 21/11/2009 ADDRESSED TO ITO FROM MAHAKALI STEEL CORPORATION WI TH ENCLOSURES. IN THE LETTER DATED 12/09/2009 PURPORTEDLY TO HAVE BEE N GIVEN THE DETAILS OF M/S.RUCHI DEVELOPERS BY JOLEX TRADERS. PAN IS ALS O WRITTEN IN THE CASE OF UMIYA TRADERS. SIMILARLY, IN THE CASE OF MARUTI TRADERS PAN WAS WRITTEN. THE ASSESSEE HAS ALSO PLACED ON RECORD THE CONFIRMATIONS BY THE CONCERNED PARTIES. THE AO MADE ADDITION ON TH E BASIS THAT THE ASSESSEE FAILED TO PRODUCE THE PARTIES. HOWEVER, O THER DETAILS IN THE NATURE OF PANS AND CONFIRMATIONS OF CONCERNED PARTI ES WERE FURNISHED. UNDER THESE FACTS, WE ARE UNABLE TO ACCEPT THE ARGU MENT OF REVENUE, SINCE THE AO HAS NOT MADE FURTHER ENQUIRY TO VERIFY THE CORRECTNESS OF ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 14 - CONFIRMATIONS. IT IS SETTLED LAW THAT THE QUANTUM PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. EVEN IF ADDITION IS SUSTAINED, IT IS NOT NECESSARY THAT PENALTY WOULD A UTOMATICALLY BE SUSTAINED. IF THE ASSESSEE IS ABLE TO DEMONSTRATE THAT UNDER THE GIVEN FACTS, PENALTY SHOULD NOT BE SUSTAINED IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS AND THE STATUTORY PROVISIONS. IN TH E INSTANT CASE, THE ADDITION HAS BEEN CONFIRMED IN THE QUANTUM PROCEEDI NGS ON THE BASIS THAT THE PARTIES FROM WHOM PURCHASES WERE MADE IS REPORT ED TO BE LEFT BY THE POSTAL AUTHORITIES. THIS REASON MAY BE SUFFICIENT TO SUSTAIN THE ADDITION, BUT IN OUR CONSIDERED VIEW, THIS BASIS IS NOT SUFFI CIENT IN THE LIGHT OF THE DECISION OF THE COORDINATE BENCH (ITAT A BENCH AH MEDABAD) OF THIS TRIBUNAL RENDERED IN THE CASE OF ACIT VS. MANISH OR GANICS INDIA LTD. IN ITA NO.2155 (AHD) OF 2010, DATED 30/11/2011, WHEREI N THE HONBLE COORDINATE BENCH HAS HELD AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY HAVING HUGE TURNOVER BUT SUFFERING LOSSES AND HAS U LTIMATELY BEEN CLOSED DOWN. THE NET LOSS RETURNED IS RS.59,54,460/- AND T HERE WAS NO INTENTION TO REDUCE ANY TAXABLE INCOME. EVEN AFTER ADDITIONS THE ASSESSED INCOME REMAINED A LOSS. THE ACCOUNTS ARE SUBJECT TO INTERN AL AUDIT, STATUTORY AUDIT AND TAX AUDIT. THE AO HAS LEVIED PENALTY ON THE ADD ITIONS RS. 13,67,594/- SUSTAINED BY THE APPELLATE AUTHORITIES ON THE TAX W ORKED OUT THEREON. THE AO LEVIED MINIMUM PENALTY OF RS. 6,29,093/-. THIS IS A CASE WHERE EXPLANATION OF THE ASSESSEE HA S NOT BEEN ACCEPTED BY THE DEPARTMENT. THE LEVY OF PENALTY IS MERELY ON DISALL OWANCE OF EXPENDITURE AND NOT FINDING OF CONCEALMENT OF ANY PARTICULARS OR MA LA FIDE INTENTION TO REDUCE THE TAXABLE INCOME. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES V. CIT [2001] 249 ITR 125/114 TAXMAN 203 HAS HELD THAT PROVISIONS ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 15 - OF SECTION 68 PERMITS THE AO TO TREAT UNEXPLAINED C ASH CREDITS AS INCOME FOR MAKING CERTAIN ADDITIONS IF THERE IS FAILURE BY THE ASSESSEE TO GIVE AN EXPLANATION. HOWEVER, THE ADDITION MADE ON THIS COU NT AUTOMATICALLY CANNOT JUSTIFY THE PENALTY LEVIED U/S 271(1)(C). HON'BLE H IGH COURT FURTHER HELD THAT FOR LEVY OF PENALTY U/S 271(1)(C) TWO FACTORS MUST CO-EXIST (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASO NABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INC OME AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS, I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON T HE PART OF THE ASSESSEE. EXPLANATION 1 TO SECTION 271(1)(C) HAS NO BEARING O N FACTOR NO.1 BUT HAS A BEARING ONLY ON FACTOR NO.2. THE EXPLANATION DOES N OT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACT S AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMO UNT DOES NOT REPRESENT CONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E . IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALSE, THE EXPLANATION CANNOT HE LP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT I N QUESTION WAS THE INCOME OF THE ASSESSEE. THIS CASE IS ALSO COVERED BY THE D ECISION OF THE TRIBUNAL, AHMEDABAD IN THE CASE OF ACIT V. EXCEL FORGING (P.) LTD. IN IT APPEAL NO.L709/AHD/2005 DATED 26.12.2008 WHEREIN IT HAS BE EN HELD THAT NON- AVAILABILITY OF CONFIRMATION AND OTHER DETAILS ARE VALID POINTS FOR MAKING ADDITION U/S 68. BUT BECAUSE THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE GENUINENESS OF DEPOSITS IS NOT ACCEPTED, IT CANNOT STRAIGHT AWAY RESULT INTO PENALTY. IN THE PRESENT CASE THE ASSESSEE IS A PUBL IC LIMITED COMPANY ACCEPTING DEPOSIT IN LARGE NUMBER FROM PUBLIC. THE ASSESSEE FAILED TO PRODUCE SOME OF THE DEPOSITORS TO PROVE THE GENUINENESS AND CREDITWORTHINESS INSPITE OF THE EFFORTS MADE, IT RESULTED INTO ADDITION U/S 68 BUT IT CANNOT LEAD TO PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME. THEREFORE, IN OUR CONSIDERED OPINION THE ID. CIT(A) HAS RIGHTLY DELET ED THE PENALTY. THERE IS NO INFIRMITY IN HIS ORDER. WE UPHOLD THE SAME. THE APP EAL FILED BY THE REVENUE IS DISMISSED. 9.2. IN THE LIGHT OF ABOVE, WE ARE OF THE CONSIDERE D VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED TO CONFIRM THE PENALTY. THEREFORE, WE HEREBY ITA NO.3348/AHD/2010(QUAN TUM) AND ITA NO.1170/AHD/2014(PENALTY) M/S.RUCHI DEVELOPERS VS. ITO ASST.YEAR 2007-08 - 16 - SET ASIDE THE ORDERS OF LD.CIT(A). ACCORDINGLY, T HE AO IS DIRECTED TO DELETE THE PENALTY. AS A RESULT, ASSESSEES APP EAL(PENALTY) IN ITA NO.1170/AHD/2014 FOR AY 2007-08 IS ALLOWED. 10. IN THE COMBINED RESULT, ASSESSEES APPEAL( QUANTUM) IN ITA NO.3348/AHD/2010 FOR AY 2007-08 IS DISMISSED, WHERE AS ASSESSEES APPEAL(PENALTY) IN ITA NO.1170/AHD/2014 FOR AY 2007 -08 IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 5 TH DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 05/ 06 /2015 2*..,(.../ T.C. NAIR, SR. PS !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-XV, AHMEDABAD/XX, AHMEDABAD 5. 7(8$45 , *45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<) / GUARD FILE. / BY ORDER, %7$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD