The ACIT, Circle-5, Ahmedabad V. Pankaj Extrusions Limited, Ahmedabad

ITA 1329/AHD/2007

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5948 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-04-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 02-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K PATEL
• Assessee Lawyers: T P KRISHNA KUMAR
• Keywords: Bogus purchase; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NOS. 1125 & 1329 /AHD/2007 (ASSESSMENT YEAR: 2003-04) PANKAJ EXTRUSIONS LIMITED, S-14, VIKRAM CHAMBERS, ASHRAM ROAD, AHMEDABAD V/S THE ACIT, CIRCLE-5 AHMEDABAD (APPELLANT) (RESPONDENT) THE ACIT, CIRCLE-5 AHMEDABAD V/S PANKAJ EXTRUSIONS LIMITED, S-14, VIKRAM CHAMBERS, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO. 723/AHD/2010 (ASSESSMENT Y EAR: 2003-04) THE DCIT, CIRCLE-5, AHMEDABAD V/S PANKAJ EXTRUSIONS LIMITED, S-14, VIKRAM CHAMBERS, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO. 3041/AHD/2011 (ASSESSMENT YEAR: 2006-07) ITO, WARD-5(2), AHMEDABAD V/S PANKAJ EXTRUSIONS LIMITED, S-14, VIKRAM CHAMBERS, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAAJP0024H APPELLANT BY : SHRI M. K. PATEL RESPONDENT BY : SHRI T.P. KRISHNAKUMAR CIT, D .R. ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 2 ( )/ ORDER DATE OF HEARING : 21-04-201 4 DATE OF PRONOUNCEMENT : 29 -04-2014 PER SHRI G.C. GUPTA, VICE PRESIDENT. 1. THESE CROSS APPEALS OF THE ASSESSEE AND THE REVE NUE FOR THE ASSESSMENT YEAR 03-04 AND BY THE REVENUE FOR THE ASSESSMENT YE AR 06-07 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DI SPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO. 1125/AHD/2007 (A.Y. 03-04) (ASSESSEES APPE AL) 2. THE GROUNDS OF APPEAL NO. 1,2 & 3 OF THE ASSESSE E ARE AS UNDER:- 1. THE LD. CIT(A) GROSSLY ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING AND RETAINING AN AMOUNT OF RS. 1 CRORE OUT OF ADDITION OF RS. 6,50,97,268/- MADE BY THE A.O. ON ACCOUNT OF ALLEGED INFLATION OF PURCHAS ES. 2. HAVING HELD THAT THE A.O. HAS NOT ASCERTAINED ANY I RREGULARITIES IN THE APPELLANTS PURCHASES, IT CANNOT BE SAID THAT WHATEVER IS DISPU TED BY THE EXCISE DEPARTMENT WITH REGARD TO PURCHASES OF RAW MATERIAL IS ENTIREL Y PROVED AS BOGUS PURCHASES, AND THE ELEMENT OF SUSPICION ENTERTAINED BY THE A.O . TO DISALLOW 30% OF THE PURCHASES WHICH AMOUNTS TO THE VALUE OF RS. 6,50,97 ,268/- APPEARS TO NOT REASONABLE AND LOGICAL, THE LD.CIT(A) GROSSLY ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RETAINING AND CONFIRMI NG ADDITION OF RS. 1 CRORE, PARTICULARLY SO WHEN THE APPELLANT HAD PROVED THE E NTIRE PURCHASES, WHEN HEA.O. HAS NOT DISPUTED PRODUCTION AND SALE OF FINISHED GO ODS. 3. IT IS THEREFORE PRAYED THAT THE UNJUSTIFIED ADDITIO N OF RS. 1 CRORE CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF THE ALLEGED INFLATION OF P URCHASES MAY PLEASE BE DELETED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ONLY BASIS FOR THE IMPUGNED ADDITION ON ACCOUNT OF BOGUS PURCHASES WAS THE ADDITION MADE IN ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 3 THE CENTRAL EXCISE ASSESSMENT OF THE ASSESSEE. HE S UBMITTED THAT THE ASSESSEE PREFERRED APPEAL AGAINST THE ORDER OF THE EXCISE AUTHORITIES AND THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL V IDE ORDER DATED 06.08.2012 HAS SUBSTANTIALLY ALLOWED THE APPEAL OF THE ASSESSEE AND HAS SUSTAINED THE ADDITION OF RS. 9,88,236/- ONLY. THE OTHER AMOUNTS OF PURCHASES WERE RECONCILED BY THE ASSESSEE AND THE SAME HAS BE EN ACCEPTED BY THE EXCISE TRIBUNAL. HE REFERRED TO THE RELEVANT PORTIO N OF THE EXCISE TRIBUNALS ORDER DATED 06.08.2012 IN SUPPORT OF THE CASE OF TH E ASSESSEE . 4. THE LD. D.R. HAS OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE PURCHASE AMOUNT HAS BEEN RECEIVED BACK BY THE ASSESSEE AND THE PURCHASES WERE INFLATED OR BOGUS. HE REFERRED TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. HE SUBMITTED THAT THE ACCOUNTS BOOKS OF T HE ASSESSEE ARE NOT REFLECTING THE CORRECT STATE OF AFFAIRS OF THE ASSE SSEE. HE SUBMITTED THAT THE DEPARTMENT HAS ALSO PREFERRED APPEAL AGAINST THE OR DER OF THE CIT(A) IN REDUCING THE AMOUNT OF ADDITION FROM RS. 6.50 CRORE S TO RS. 1 CRORE AND THAT ISSUE SHALL ALSO BE COVERED WITH THE ARGUMENTS MADE IN THE ASSESSEES PRESENT APPEAL. HE RELIED ON THE ORDER OF A.O. 5. WE HAVE CONSIDERED THE RIVALS SUBMISSIONS AND HA VE PERUSED THE ORDER OF THE A.O AND THE CIT(A) AND ALSO THE ORDER OF THE CU STOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL DATED 06.08.2012 PASSED IN T HE CASE OF THE ASSESSEE. WE FIND THAT THE ASSESSEE WAS ABLE TO FILE RECONCIL IATION STATEMENT AND RECONCILE THE PURCHASE BILLS AND THE FINDING OF THE CESTA TRIBUNAL IS THAT THE ASSESSEE IN THE LAST COULD NOT RECONCILE THE QUANTI TY INVOLVED IN RESPECT OF INVOICES OF PURCHASES AMOUNTING TO RS. 9,88,236/-. ACCORDINGLY, THE CESTA TRIBUNAL HAS RESTRICTED THE ADDITION TO THE EXTENT OF RS. 9,88,236/- ONLY AND THE BALANCE ADDITION WAS DIRECTED TO BE DELETED. IN THESE FACTS OF THE CASE, WE ARE UNABLE TO SUSTAIN THE ADDITION MADE BY THE A.O. HOWEVER, CONSIDERING THE FACTUAL MATRIX OF THE CASE AND THE FINAL ORDER OF T HE CESTA TRIBUNAL DATED ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 4 06.08.2012 THAT THE ASSESSEE COULD NOT PROVE THE GE NUINENESS OF THE PURCHASES TO THE EXTENT OF RS. 9,88,236/-, WE HOLD THAT THE ACCOUNTS OF THE ASSESSEE COULD NOT SAID TO REPRESENT THE CORRECT ST ATE OF AFFAIRS AND THEREFORE SOME REASONABLE ESTIMATE OF ADDITION HAS TO BE MADE AND WHICH MAY NOT BE RESTRICTED TO THE ACTUAL AMOUNT OF UNPROVED PURCHAS ES IN THIS CASE. IN THESE FACTS OF THE CASE, WE HOLD THAT IT SHALL BE REASONA BLE TO RESTRICT THE ADDITION IN THIS CASE TO RS. 75 LACS AS AGAINST RS. 1 CRORE SUS TAINED BY THE CIT(A) AND THE GROUNDS OF APPEAL NO.1,2 & 3 OF THE ASSESSEE AR E PARTLY ALLOWED . 6. WE MAKE IT CLEAR THAT THIS ESTIMATE OF RS. 75 LA CS OF ADDITION SHALL ALSO COVER THE DISALLOWANCE OF JOB WORK CHARGES AND ADDITION M ADE BY THE A.O ON ACCOUNT OF INFLATED MATERIAL INWARD EXPENSES WHICH WAS CONFIRMED AT RS. 40,000/- BY THE CIT(A) AS AGAINST RS. 1,42,60,977/- BY THE A.O AND ACCORDINGLY THE GROUNDS OF APPEAL NO. 4,5 & 6 OF TH E ASSESSEE RELATING TO THE ISSUE OF DISALLOWANCE OF RS. 40,000/- OUT OF MATERI AL INWARD EXPENSES CONFIRMED BY THE CIT(A) ARE ALSO PARTLY ALLOWED. ITA NO. 1329/AHD/2007 (A.Y. 03-04) (REVENUES APPEA L) 7. THE GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDE R:- 1. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN REDUCING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INFLATI ON OF PURCHASES FROM RS. 6,50,97,268/- TO RS. 1,00,00,000/-. 2. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION MADE OF RS. 48,23,465/- ON ACCOUNT OF DIS ALLOWANCE OF JOB WORK CHARGES. 3. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION MADE OF RS. 48,23,465/- ON ACCOUNT OF DIS ALLOWANCE OF JOB WORK CHARGES BY CONSIDERING ADDITIONAL EVIDENCE IN THE FORM OF C ONFIRMATION ETC. OF M/S. APURVA ALUMINIUM CORPORATION AS MENTIONED IN PARAGRAPH 5.1 .2 OF THE ORDER IN CONTRAVENTION OF THE PROVISIONS OF RULE 46A(3) OF T HE INCOME TAX RULES, 1962. ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 5 4. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN REDUCING THE ADDITION MADE ON ACCOUNT OF MATERIAL INWARD EXPENSE S FROM RS. 1,42,60,977/- TO RS. 40,000/-. 5. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN REDUCING THE ADDITION MADE ON ACCOUNT OF MATERIAL INWARD EXPENSE S FROM RS. 1,42,60,977/- BY CONSIDERING ADDITIONAL EVIDENCE AS MENTIONED IN PAR AGRAPH 6.1.2 OF THE ORDER IN CONTRAVENTION OF THE PROVISIONS OF RULE 46A(3) OF T HE INCOME TAX RULES, 1962. 8. WE HAVE HEARD THE PARTIES. BOTH THE PARTIES HAVE SUBMITTED BEFORE US THAT THE ISSUES IN THESE GROUNDS OF APPEAL OF THE REVENUE AR E COVERED WITH THE ARGUMENTS AND THE ISSUES IN THE GROUNDS OF THE APPE AL IN THE ASSESSEES APPEAL FOR THE SAME ASSESSMENT YEAR 03-04. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN VIE W OF OUR DECISION IN THE FOREGOING PARAS OF THIS ORDER WHILE DISPOSING OF TH E ASSESSEES APPEAL FOR THE SAME ASSESSMENT YEAR 03-04, WE HOLD THAT THERE IS N O MERIT IN THE GROUNDS OF APPEAL OF THE REVENUE. THE ADDITION OF RS. 75 LA CS SUSTAINED BY US WHILE DISPOSING OF ASSESSEES APPEAL IN THE FOREGOING PAR AS OF THIS ORDER SHALL COVER THE ADDITION MADE ON ACCOUNT OF INFLATION OF PURCHASES, DISALLOWANCE OF JOB WORK CHARGES AND ADDITION ON ACCOUNT OF MATERIA L INWARD EXPENSES OF THE ASSESSEE AND ACCORDINGLY THE GROUNDS OF THE APP EAL OF THE REVENUE ARE DISMISSED. ITA NO. 723/AHD/2010 (A.Y. 03-04 (AGAINST PENALTY U /S. 271(1)(C)) (REVENUES APPEAL) 10. THE ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDER:- 1. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETION OF PENALTY LEVIED U/S 271(1)(C) AMOUNTING TO RS. 36,89 ,700/- BASED ON ADDITIONS MADE ON ACCOUNT OF INFLATION IN PURCHASES DISALLOWA NCE ON ACCOUNT OF JOB WORK CHARGES AND MATERIAL INWARD EXPENSES. ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 6 11. THE LD. D.R. HAS RELIED ON THE ORDER OF THE A.O . HE REFERRED TO PARA 4 OF THE PENALTY ORDER IN SUPPORT OF THE CASE OF THE REVENUE . THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND HAVE PERUSED THE ORDER OF THE A.O AND THE CIT(A). WE FIND THAT THE C IT(A) HAS PASSED A SPEAKING ORDER ON THE ISSUES AND HAS CONSIDERED ALL THE FACTS AND LAW APPLICABLE THERETO. WE FIND THAT THE ADDITION MADE BY THE A.O ON ACCOUNT OF INFLATED PURCHASES, JOB WORK CHARGES AND MATERIAL I NWARD EXPENSES HAVE BEEN RESTRICTED TO RS. 75 LACS BY US IN THE FOREGOI NG PARAS OF THIS ORDER WHILE DISPOSING OF THE ASSESSEES APPEAL FOR THE RELEVANT ASSESSMENT YEAR 03-04, BY WAY OF ESTIMATE ONLY AS THE ASSESSEE COULD NOT P ROVE THE PURCHASE BILLS AMOUNTING TO RS. 9,88,236/- OUT OF TOTAL PURCHASES OF RS. 29,69,90,893/-. WE FIND THAT THERE MAY BE MORE THAN ONE REASON DUE TO WHICH THE ASSESSEE MAY NOT BE IN A POSITION TO RECONCILE THE PURCHASE BIL LS AMOUNTING TO RS. 9,88,236/-. IT IS WELL SETTLED THAT PENALTY U/S 271 (1)(C) IS NOT IMPOSABLE WHERE SOME PART OF THE ADDITION IS SUSTAINED BY WAY OF ES TIMATE ONLY. ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AN D THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 3041/AHD/2011(A.Y. 06-07) ( REVENUES APPEA L) 13. THE GROUNDS OF APPEAL NO. 1 OF THE REVENUE IS A S UNDER:- 1. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE DISALLOWANCE OF INTEREST OF RS. 9,93,691/- MADE BY THE ASSESSING OFFICER U/S. 36(1)(III) OF THE I.T. ACT. 14. THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS AD VANCED LOAN WITHOUT INTEREST AND THEREFORE THE DISALLOWANCE OUT OF INTEREST PAID BY THE ASSESSEE WAS ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 7 RIGHTLY MADE BY THE A.O. HE REFERRED TO THE RELEVA NT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVE NUE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS ADVANC ED RS. 92.31 LAC AS INTEREST FREE ADVANCES TO TWO PARTIES AND THE RESER VES AND SURPLUS ARE OF RS. 11 CRORE WITH THE ASSESSEES, APART FROM NON INTERES T BEARING FUNDS LIKE SHARE CAPITAL OF RS. 8 CRORE. HE RELIED ON THE ORDER OF T HE CIT(A). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE ORDER OF THE A.O. AND CIT(A). WE FIND THAT THE ASSESSEES HAS AD VANCED RS. 92.31 LACS TO TWO PARTIES AS INTEREST FREE LOANS WHEREAS THE ASSE SSEE HAS HUGE NON INTEREST BEARING FUNDS LIKE SHARE CAPITAL OF RS. 8 CRORE AND RESERVES AND SURPLUS AMOUNTING TO RS. 11 CRORE. THUS FUNDS ADVAN CED AS INTEREST FREE LOANS TO TWO PARTIES ARE OUT OF ASSESSEES OWN FUND S WHICH ARE NOT INTEREST BEARING AND THEREFORE NO CASE OF DISALLOWANCE OUT O F INTEREST PAYMENT COULD BE MADE OUT BY THE DEPARTMENT. ACCORDINGLY THE ORD ER OF THE CIT(A) IS CONFIRMED ON THIS ISSUE AND THE GROUND OF THE APPEA L OF THE REVENUE IS DISMISSED. 16. THE GROUND OF APPEAL NO. 2 OF THE REVENUE IS AS UNDER:- THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE DISALLOWANCE OF RS. 11,278/- MADE ON ACCOUNT OF LAT E PAYMENT OF EMPLOYEES CONTRIBUTION TO P.F. 17. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE WITH THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT. THE LD. D.R. HAS SUPPORTED THE CONTENT ION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN VI EW OF THE SUBMISSIONS OF THE PARTIES, WE HOLD THAT THE ISSUE BEING COVERED IN FA VOUR OF THE REVENUE WITH ITA NOS 1125 & 1 329/AHD/2007, ITA NO. 723/A/10 & 3041/A/2011 . A.Y. 2003-04 & 2006- 07 8 THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT, THE GROUND OF APPEAL NO 2 OF THE REVENUE IS ALLOWED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 1125/AHD/2007 IS PARTLY ALLOWED AND THE REVENUES APPEAL IN ITA NO. 1329/AH D/2007 AND 723/AHD/2010 ARE DISMISSED AND THE REVENUES APPEAL IN ITA NO. 3041/AHD/2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29 -04 - 2014. SD/- SD/- (ANIL CHATURVEDI) (G.C. GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT ,AHMEDABAD