Shri Gobindram C. Agarwal, Surat V. The Income Tax Officer, Ward-2(3), Surat

ITA 1206/AHD/2014

• Counselvise Citation: 120620514 RSA 2014
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 22-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: RAM AVTAR DALMIA

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .# ## #. . . . % % % %, , , , &' ( & ' &' ( & ' &' ( & ' &' ( & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER) ITA NO.1206/AHD/2014 [ASSTT.YEAR : 2006-2007] SHRI GOBINDRAM C. AGARWAL A-1094 TO 1096, 1 ST FLOOR, LIFT NO.11 AND 12 KOHINOOR TEXTILE MARKET RING ROAD, SURAT 395 002. /VS. ITO, WARD-2(3) SURAT. ITA NO.1275/AHD/2014 WITH CO NO.270/AHD/2014 [ASSTT.YEAR : 2006-2007] ITO, WARD-2(3) SURAT. /VS. SHRI GOBINDRAM C. AGARWAL A-1094 TO 1096, 1 ST FLOOR, LIFT NO.11 AND 12 KOHINOOR TEXTILE MARKET RING ROAD, SURAT 395 002. PAN : AEPDA 3492 E ( (( ( *+ *+ *+ *+ / APPELLANT) ( (( ( ,- ,- ,- ,- *+ *+*+ *+ / RESPONDENT) ( . / & / REVENUE BY : SHRI V.K. SINGH, SR.DR 12 . / & / ASSESSEE BY : SHRI RAM AVTAR DALMIA 3 . 24' / DATE OF HEARING : 14 TH OCTOBER, 2014 567 . 24' / DATE OF PRONOUNCEMENT : 25-11-2014 &8 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE AND CO BY THE ASSESSEE FOR A.Y.2006-07 ARE ITA NO.1206, 1275/AHD/2011 WITH CO -2- DIRECTED AGAINST THE ORDERS OF THE CIT(A). THESE A RE BEING DISPOSED OF WITH CONSOLIDATED ORDER. ITA NO.1206/AHD/2014 (ASSESSEES APPEAL) 2. THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN MAKING A DISALLOWANCE OF 25% ON THE TO TAL PURCHASES AND MAKING AN ADDITION OF RS.26,27,344/- 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE BASIS ON WHICH THE DECISION WAS MADE I.E. VIJAY PROTEINS LTD. IS N OT APPLICABLE IN THE PRESENT CASE AND THE LD.CIT(A) HAS ERRED IN MAKING A REFERENCE OF THE SAME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE PREVIOUS LD.C IT(A) IN THE FIRST ROUND OF HEARING. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THIS IS THE SECOND ROUND OF LITIGATION BEFORE THE TRIBUNAL. HE SUBMIT TED THAT THE CIT(A) HAS ERRED IN MAKING DISALLOWANCE AT 25% OF THE TOTAL PURCHASE S AND MAKING AN ADDITION OF RS.26.27 LAKHS. HE SUBMITTED THAT THE ACCOUNTS OF THE ASSESSEE WERE AUDITED AND NO DISCREPANCY IN THE ACCOUNT COULD BE POINTED OUT BY THE REVENUE. HE SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSI NESS OF DEALING WITH SILK MAN-MADE FABRICS. THE ASSESSEE HAS DECLARED GP RAT E AT 4.02% ON TURNOVER OF RS.1.41 CRORES DURING THE YEAR AS AGAINST THE GP RA TE OF 3.99% ON TURNOVER OF RS.1.47 CRORES OF THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR. THUS, THE ASSESSEE HAS DECLARED BETTER TRADING RESULT DURING THE RELEV ANT PERIOD. THE AO HAS ACCEPTED TRADING RESULT OF THE ASSESSEE AND HAS ACC EPTED THE FIGURE OF PURCHASE AND SALES OF THE GOODS. THE ASSESSEE HAS FILED QUA NTITATIVE DETAILS, WHICH WERE ACCEPTED BY THE AO. HE SUBMITTED THAT THE ASSESSEE WAS SMALL INCOME-TAX ASSESSEE AND HAS DECLARED TOTAL INCOME OF RS.11,311 /- AND THE AO HAS MADE HEAVY ADDITION FOR NO VALID REASON. ITA NO.1206, 1275/AHD/2011 WITH CO -3- 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL OF THE ASSESSEE. HE REFERRED TO THE RELEVANT PORTIONS OF THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE FOR THE RELEVANT ASSTT.YEAR 20 06-07 WHEREIN THE ISSUE WAS RESTORED TO THE FILE OF THE CIT(A) FOR A DE NOVO ADJUDICATION ETC. HE SUBMITTED THAT THE PAYMENTS MADE TO THE CREDITORS WERE NOT VE RIFIABLE IN THIS CASE. HE RELIED ON THE ORDER OF THE AO. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A) AND ALSO ORDER OF THE TRIBUNAL IN THE APPEAL OF THE ASSESSEE IN THE FIRST ROUND OF LITIGATION FOR THE RELEVANT A SSTT.YEAR 2006-07 IN ITA NO.456/AHD/2010 ORDER DATED 21.9.2012. WE FIND TH AT THE CIT(A) IN THE IMPUGNED ORDER HAS NOT CORRECTLY APPRECIATED THE DI RECTIONS CONTAINED IN THE APPELLATE ORDER PASSED BY THE TRIBUNAL, IN THE FIRS T ROUND OF LITIGATION BEFORE THE TRIBUNAL VIDE ORDER DATED 21.9.2012. THE CIT(A) WA S DIRECTED BY THE TRIBUNAL BY THIS ORDER DATED 21.9.2012 TO VERIFY AS TO WHETH ER THE PAYMENTS MADE TO OTHER CREDITORS IN THE SUBSEQUENT YEARS WERE BY WAY OF ACCOUNT PAYEE CHEQUES IN THE NAME OF THE CREDITORS THEMSELVES AND THERE IS N O SUCH AMBIGUITY OR INCONSISTENCY IN THE CHEQUES REGARDING THE NAMES OF THE PAYEES. WE FIND THAT THE CIT(A) HAS MADE A ENTIRELY NEW CASE BY MAKING D ISALLOWANCE AT THE RATE OF 25% OF THE TOTAL PURCHASES OF THE ASSESSEE AMOUNTIN G TO RS.1,05,09,374/- AND THUS DIRECTED THE ADDITION OF RS.26,27,344/- . THE SALES FIGURES AS WELL AS PROFIT SHOWN HAS BEEN ACCEPTED BY THE DEPARTMENT AND TO DI SALLOW 25% OF THE TOTAL PURCHASES CLAIMED BY THE ASSESSEE, DOES NOT SEEM TO BE JUSTIFIED. IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD ON BEHALF OF THE REVENUE TO HOLD THAT THE PART OF THE PURCHASE WERE BOGUS OR INFLATED, WE HOLD THA T NO CASE OF DISALLOWANCE OUT OF PURCHASES DURING THE YEAR COULD BE MADE OUT BY T HE REVENUE, AND ACCORDINGLY, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, AND THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. ITA NO.1275/AHD/2014 (REVENUES APPEAL) ITA NO.1206, 1275/AHD/2011 WITH CO -4- 6. THE GROUNDS OF THE APPEAL OF THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN NOT FOLLOWING THE DIRECTIONS GIVEN BY THE HONBLE I TAT SETTING ASIDE THE CASE TO THE FILE OF THE LD.CIT(A) AND ACTED BEYOND THE MANDATE GIVEN BY THE ITAT. 2 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETH ER THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUN T OF CREDITORS BY APPLYING THE CASE LAW IN VIJAY PROTEINS EVEN THOUGH LD.CIT(A) HIMSELF FOUND THAT THE PURCHASES ARE NON VERIFIABLE AND PAY MENTS HAD BEEN MADE OTHER THAN BY ACCOUNT PAYEE CHEQUES. 3 . THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWAN CES TO 25% OF PURCHASES EVEN THOUGH CREDITORS OF RS.40,41,54/- WA S FOUND TO BE BOGUS AND HENCE THE DISALLOWANCE SHOULD HAVE BEEN RS.40,4 1,540/-. 7. THE LEARNED DR SUBMITTED THAT THE CIT(A) HAS WRO NGLY RESTRICTED THE DISALLOWANCE TO RS.26,27,344 AS AGAINST THE AMOUNT OF RS.40,41,540/- ADDED BY THE AO. HE RELIED ON THE ORDER OF THE AO AND SUBMI TTED THAT CREDITORS OF RS.40,41,540/- WERE FOUND TO BE BOGUS AND ADDITION SHOULD HAVE BEEN MADE TO THE ENTIRE AMOUNT OF THE CREDITORS BALANCE. THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO EVIDENCE TO SUGGEST THA T THE CREDITORS WERE BOGUS. 8. WE HAVE CONSIDERED RIVAL SUBMISSION. WE FIND TH AT DEPARTMENT COULD NOT BRING ANY MATERIAL ON RECORD TO SUGGEST THAT THE CR EDITORS OF RS.40,41,540/- WERE BOGUS, AND THEREFORE, NO CASE OF ADDITION OF BALANC E IN THE CREDITORS ACCOUNT COULD BE MADE OUT BY THE DEPARTMENT, AND THERE BEIN G NO MERITS IN THE GROUNDS OF THE APPEAL OF THE REVENUE, THE SAME ARE DISMISSE D. CO NO.270/AHD/2014 (ASSESSEES CO) 9. THE ONLY GROUND OF THE CO OF THE ASSESSEE IS GRO UND NO.1, WHICH IS REPRODUCED HEREUNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.AO HAS ERRED IN ADDITION OF RS.40,41,540/- ON ACCOUNT OF UNEXPLAINE D SUNDRY CREDITORS. ITA NO.1206, 1275/AHD/2011 WITH CO -5- 10. WE HAVE HEARD PARTIES. WE FIND THAT THE ADDITI ON OF RS.40,41,540/- MADE BY THE AO HAS NOT BEEN CONFIRMED BY THE CIT(A), AND THEREFORE, THIS ISSUE DOES ARISE OUT OF THE APPELLATE ORDER PASSED BY THE CIT( A), AND THEREFORE, THE GROUND OF THE CO OF THE ASSESSEE HAS NO MERIT, WHICH IS AC CORDINGLY DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( # ## # . .. . # ## # . . . . % % % % /N.S.SAINI) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD