M/s. Pashupati Auto Industries, Gurgaon V. ITO, Gurgaon

ITA 1190/DEL/2010

• Counselvise Citation: 119020114 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 17-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEETA SINHA
• Assessee Lawyers: SOMIL AGARWAL ACA
• Keywords: Bogus purchase; Depreciation
• Section: 44AD; 40A(3); 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1190/DEL/2010 ASSESSMENT YEAR : 2003-04 M/S PASHUPATI AUTO INDUSTRIES, ITO, HOUSE NO.1010, SECTOR-15, WARD-4, PART-II, GURGAON. V. GURGAON. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AABFT AABFT AABFT AABFT- -- -1687 1687 1687 1687- -- -A AA A APPELLANT BY : SHRI ASHWANI TANEJA, FCA. SHRI TARUN KUMAR, ADVOCATE & SHRI SOMIL AGARWAL, ACA. RESPONDENT BY : MS. MEETA SINHA, SR. DR. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A) DATED 16.12.2009. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING DISALLOWANCE OF ` .26,65,810/- ON ACCOUNT OF BOGUS PURCHASE OF RAW MATERIAL MORE SO WHEN SALES TAX ORDER HAS BEEN PASSED ACCEPTING THE PURCHASE/SALES OF THE ASSESSEE. ITA NO1190/DEL/2010 2 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .30,025/- ON ACCOUNT ON EXPENSES ON CARTAGE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .37,800/- ON ACCOUNT OF DISCOUNT RECEIVED FROM M/S NARESH MOHAN LOVLESH MOHAN. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .60,600/- ON ACCOUNT OF PURCHASE OF JAR. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .9496/- (I.E. 20% OF ` .47,482/-) ON ACCOUNT OF CASH PAYMENT MADE TO M/S DHI NGRA MOTORS U/S 40A(3). ON ACCOUNT O 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .2,42,430/- ON ACCOUNT OF UNEXPLAINED CASH PAYMENTS MADE TO VARIOUS PARTIES. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .29091/- (I.E. 1/5TH OF ` .1,14,453/-) ON ACCOUNT OF PERSONAL USE OF VEHICLES. 8. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT QUASHING THE IMPUGNE D ASSESSMENT ORDER PASSED BY LD ASSESSING OFFICER AND IN NOT DELETING VARIOUS ADDITIONS/DISALLOWANCES MADE IN FULL B Y LD ASSESSING OFFICER AS THE ASSESSMENT ORDER IS NOT SUSTAINABLE ON ITA NO1190/DEL/2010 3 VARIOUS LEGAL AND FACTUAL GROUNDS AND MORE SO BY RECO RDING INCORRECT FACTS AND FINDING. 9. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSI NG THE ACTION OF LD ASSESSING OFFICER IN CHARGING INTEREST U/S 2 34A, 234B & 234C. 10.WITHOUT PREJUDICE TO ABOVE GROUNDS AND HAVING RE GARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ESTIMATING THE INCOME OF THE ASSESSEE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AT A REASON ABLE RATE AFTER CONSIDERING THE PAST HISTORY OF THE ASSESSEE AND KEE PING IN VIEW THE SOUND JUDICIOUS PRINCIPLES AND LD CIT(A) OUGH T TO HAVE ESTIMATED THE SAME IN VIEW OF PRINCIPLES OF NATURAL JU STICE. 11. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MOD IFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME O F HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF TWO LADIES. THE FIRM CAME INTO EXIST ENCE VIDE PARTNERSHIP DEED DATED 28.1.1998. THE FIRM IS ENGAGE D IN THE PURCHASE, SALE AND MANUFACTURE OF RUBBER PLASTIC COMPO NENTS AND AUTO PARTS. THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 20 03-04 WAS PICKED UP FOR SCRUTINY AND ACCORDINGLY NOTICE U/S 143 (2) WAS ISSUED ON 25.11.2004 AND PROCEEDINGS WERE ATTENDED BY SHRI ARU N KUMAR, HUSBAND OF ONE OF THE PARTNERS ALONG WITH SHRI VIMAL PURI, ACCOUNTANT OF THE FIRM. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE IN RESPECT OF TRANSACTIONS EXCEEDING ` . ONE LAKH OBSERVED THAT ASSESSEE HAD FURNISHED THREE BI LLS OF ` .85,500/-, ` .95,475/- AND ` .84,750/- FROM M/S RISHI ROOP CHEMICAL CO. PVT. LTD. TO WHICH SUPPLIER HAD DENIED OF HAVING ISSUED ANY SUCH ITA NO1190/DEL/2010 4 BILL. SIMILARLY, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD DEBITED ` .1 LAKH TO THE ACCOUNT OF M/S RISHI ROOP CHEMICALS CO. PVT. LTD. ON DATED 9.3.2003 WHICH THE ABOVE SAID COMPANY HAD DENI ED. SIMILARLY, THE ASSESSING OFFICER OBSERVED FROM THE ACCOUNT OF MR. L AVLESH MOHAN THAT THERE WAS A DIFFERENCE IN OPENING BALANCES IN TH E ACCOUNTS STATEMENT FURNISHED BY THE ASSESSEE AND THAT FURNISHED BY THE ABOVE SAID FIRM. FROM THE ACCOUNTS OF M/S RUBBER HOUSE & M/S A GGARWAL CHEMICALS ETC. SIMILAR DISCREPANCIES WERE FOUND BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER HELD THAT ASSESSE E HAD INFLATED ITS PURCHASES BY AN AMOUNT OF ` .26,65,810/- WITH BOGUS PURCHASES. THE CONTENTION OF THE ASSESSEE THAT IT HAD RE CEIVED THE MATERIAL THROUGH ITS AGENT DID NOT CONVINCE THE ASSESSI NG OFFICER AND HE THEREFORE MADE AN ADDITION OF ` .26,65,810/-. BESIDES THE ABOVE, THE ASSESSING OFFICER HAD MADE THE FOLLOWING ADDITIONS:- A) ` .30,025/- ON ACCOUNT OF CARTAGE BEING NOT SUPPORTED BY VEHICLE NUMBER ON THE VOUCHERS. B) ` .37,800/- ON ACCOUNT OF DISCOUNT RECEIVED FROM M/S NA RESH MOHAN LAVLESH MOHAN ON THE BASIS OF ENTRY IN THE ACCOU NT BOOKS OF THE ABOVE FIRM. C) ` .60,600/- ON ACCOUNT OF PURCHASE OF JARS AT THE FAG E ND OF THE YEAR IN THE ABSENCE OF NON FURNISHING OF ANY EVIDENCE OF HAVING USED THESE JARS. D) ` .84,198/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. E) ` .40,000/- ON ACCOUNT OF STOCK OF SEMI FINISHED MOULDED GOODS. F) ` .9496/- ON ACCOUNT OF DISALLOWANCE U/S 40A(3) ON ACCO UNT OF CASH PAYMENTS OF ` .45,482/-. G) ` .2,42,430/- ON ACCOUNT OF ALLEGED PAYMENTS MADE BY A SSESSEE TO VARIOUS PARTIES WHICH WERE NOT REFLECTED IN THE BO OKS OF ACCOUNTS OF THE ASSESSEE. ITA NO1190/DEL/2010 5 H) ` .53,400/- ON ACCOUNT OF CASH CREDITS. I) ` .7716/- ON ACCOUNT OF EXPENSES OF CAPITAL NATURE. J) ` .48,000/- ON ACCOUNT OF DISALLOWANCE OF SALARY TO PA RTNERS BEING NOT SUPPORTED BY PARTNERSHIP DEED. K) ` .29,091/- ON ACCOUNT OF DISALLOWANCE OF 1/5 TH OF EXPENSES IN RESPECT OF CAR RUNNING AND MAINTENANCE. L) ` .15,000/- ON ACCOUNT OF ALLEGED SALE OF SCRAP AND EMP TY BARRELS. 3. DISSATISFIED WITH THIS ORDER, THE ASSESSEE TOOK THE MAT TER TO LD CIT(A) WHO AFTER GOING THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE DELETED A FEW ADDITIONS AND UPHELD THE REMAINING. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THIS TRIB UNAL. 5. AT THE OUTSET, THE LD AR SUBMITTED THAT THE FIRM WAS OWNED BY LADY PARTNER AND WERE NOT AWARE OF VARIOUS TECHNICAL ITIES OF LAW. HE FURTHER STATED THAT IF ALL ADDITIONS AS UPHELD BY THE LD CIT(A) ARE ADDED TOGETHER THEN GP RATIO OF ASSESSEE COMES OUT TO BE MORE THAN 70% WHICH ACCORDING TO HIM WAS EXORBITANT AND CANNOT HAP PEN IN REALITY. THEREFORE, HE ARGUED THAT A REASONABLE BASIS MAY BE AD OPTED BY THE BENCH ON THE BASIS OF PAST TURNOVER AND ON PAST PERCEN TAGE OF PROFITS SO THAT INCOME OF THE ASSESSEE COULD BE ASSESSED IN A REASONA BLE WAY. HE TOOK US TO PAGES 68 TO 84 OF THE PAPER BOOK WHEREI N A CHART SHOWING SALES, GP RATE AND BALANCE SHEET OF THE ASSESSEE W ERE PLACED. HE FURTHER SUBMITTED THAT AVERAGE TURNOVER OF THE ASSE SSEE REMAINED BETWEEN ` 50 TO 55 LAKHS AND ARGUED THAT TURNOVER OF THE FIRM WAS NEVER QUESTIONED AND AS PER SALE TAX ASSESSMENTS ALSO THE SAM E WAS ACCEPTED. IN VIEW OF THE ABOVE HE REQUESTED THAT A R EASONABLE RATE OF NET PROFITS BE TAKEN TO ESTIMATE THE INCOME OF THE ASSE SSEE. ITA NO1190/DEL/2010 6 6. THE LD DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF ASSESSING OFFICER AND LD CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT ASSESSING OFFICER BY COMPARING THE STATEMENTS OF AC COUNTS OF VARIOUS SUPPLIERS AND DEBTORS WITH THE ACCOUNT BOOKS SUBM ITTED BY THE ASSESSEE FOUND DISCREPANCIES AND ALL DISCREPANCIES WERE ADD ED TO THE INCOME OF THE ASSESSEE. WE HAVE FURTHER NOTED THAT ON T HE BASIS OF BALANCE SHEET AND TURNOVER OF THE FIRM, THE ASSESSEE IS A SMALL TIME FIRM AND IT HAS BEEN SHOWING GP RATE FROM 13.61% TO 1 3.90% IN THE FINANCIAL YEAR 1999-2000 TO FINANCIAL YEAR 2002-03. SIMILARLY NET PROFIT RATE HAS BEEN SHOWN TO BE 0.99% TO 1.66% IN THESE FOUR YEARS. THE MAIN ADDITION MADE BY THE ASSESSING OFFICER IS ON ACCOUN T OF INFLATED PURCHASES ON THE BASIS THAT THERE WAS NO PROOF OF HAVING RECEIVED THESE MATERIALS AND FURTHER THE SUPPLIERS FROM WHOM TH ESE WERE ALLEGED TO HAVE BEEN PURCHASED HAD REFUSED TO HAVE SU PPLIED SUCH MATERIAL AGAINST BILLS PRODUCED BY ASSESSEE. HOWEVER, NO WHERE THE ASSESSING OFFICER HAD DISPUTED THE TURNOVER OF THE ASSESSE E WHICH FOR THE YEAR UNDER CONSIDERATION WAS ` .54,42.666/-. SINCE SALES HAVE NOT BEEN DISPUTED, THEREFORE, WE HELD THAT THE ASSESSEE MUST HAVE MADE PURCHASES OF MATERIAL SOLD BUT WAS NOT ABLE TO MAINTAIN PROPER BOOKS OF ACCOUNTS. THE LD AR DURING APPELLATE PROCEEDINGS H AS PLEADED TO ESTIMATE NET PROFITS ON THE BASIS OF TURNOVER AND NET P ROFIT RATIO IN EARLIER YEARS WHICH IN OUR OPINION CANNOT BE ACCEPTE D IN VIEW OF VARIOUS GLARING DISCREPANCIES POINTED OUT BY ASSESSING OFF ICER. MOREOVER, THE LD AR COULD NOT SUBMIT ANY PAST ASSESSMENTS OF ASSESSEE U/S 143(3) OF THE ACT NOR HE WAS ABLE TO PRODUCE ASSESSMENT ORDER OF ANY ASSESSEE ENGAGED IN SIMILAR TRADE. ITA NO1190/DEL/2010 7 8. ON THE OTHER HAND, IF ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER AND UPHELD BY LD CIT(A) ARE CONSIDERED THE N . P. RATIO OF THE FIRM WILL COME OUT TO 58.30% WHICH DO NOT SEEM TO BE ANYWHERE NEAR THE REALITY KEEPING IN VIEW THE NORMAL NP RATIO WHI CH PREVAILS IN THE INDUSTRY IN GENERAL. IN VIEW OF THE ABOVE FACTS, WE A RE OF THE CONSIDERED OPINION THAT NET PROFIT OF THE FIRM CAN B E ESTIMATED ON THE BASIS OF GUIDELINES OF SECTION 44AD OF THE INCOME TAX A CT, 1961 WHICH THOUGH ARE APPLICABLE TO TRADERS BUT STILL CAN BE OF HELP IN ESTIMATING NET PROFITS OF THE ASSESSEE. SECTION 44AD PROVIDES 8% OF TOTAL TURNOVER TO BE THE PROFITS AND GAINS OF A BUSINESS IN CASE OF NON MAINTENANCE OF ACCOUNTS. APPLYING THE SAME ON A TOTAL TURNOVER OF ` .54,42,666/-, THE NET PROFIT OF THE FIRM IS ESTIMATED AT ` .4,35,413/-/-. THE ABOVE NET PROFIT IS NET OF ALL EXPENSES INCLUDING DEPRECIATION. HOWEVER, PARTNER SALARY AS ALLOWABLE AS PER TERMS OF PARTNERSHIP DEED CAN BE REDUCED FROM THE ABOVE INCOME TO ARRIVE AT THE TAXABLE PROF ITS OF THE FIRM. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO CALCULATE THE TAXABLE PROFITS OF THE FIRM ACCORDINGLY. 9. CHARGING OF INTEREST U/S 234A, 234B & 234C ARE MAN DATORY PROVISIONS, THE INCIDENCE OF WHICH DEPENDS UPON TAX LI ABILITY ASSESSED. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD DAY OF NOVEMBER, 2012. SD/- SD/- (RAJPAL YADAV ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO1190/DEL/2010 8 DT.23.11.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 24.9.2012 DATE OF DICTATION 16.11.2012 DATE OF TYPING 16.11.2012 DATE OF ORDER SIGNED BY 23.11.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 23.11.2012 & SENT TO THE BENCH CONCERNED.