Shree Kishan Madhogaria, Kolkata V. Addl. CIT, Range - 29, Kolkata, Kolkata

ITA 161/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75023 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 10-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2010
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN SATPATI
• Keywords: Bogus purchase; Unexplained cash credit; Depreciation; Sham transactions
• Section: 143(3); 133(6); 194C; 131; 68; 69

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 161/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 SHRI KISHAN MADHOGARIA VS. ADDITIONAL COMMISSIO NER OF INCOME-TAX, (PAN: ADXPM4061H) RANGE-29, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NO. 988/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. SHRI KIS HAN MADHOGARIA CIRCLE-29, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 06.01.2014 DATE OF PRONOUNCEMENT: 27.01.2014 FOR THE ASSESSEE: S/SHRI TAPAN KR. CHAKRABORTY/SOUM ITRA CHOWDHURY FOR THE RESPONDENT: SHRI NIRANJAN SATPATI, JCIT, SR. DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF ORDER OF CIT(A)-XVI, KOLKATA IN APPEAL NO. 246/CIT(A)-XVI/R-29/08-09 DAT ED 30.11.2009. ASSESSMENT WAS FRAMED BY ADDL. CIT, RANGE-29, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE H IS ORDER DATED 31.12.2008. 2. FIRST WE TAKE UP REVENUES APPEAL I.E. ITA NO. 9 88/KOL/200. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DE LETING THE ADDITION OF UNSECURED LOAN/CASH CREDIT AMOUNTING TO RS.63,599/-. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING RS.63,599/- ON ACCOUNT OF CASH CREDIT U/S. 68 OF TH E I. T. ACT, 1961. 3. BRIEFLY STATED FACTS ARE THAT DURING THE COURSE OF SURVEY A CASH OF RS.2,50,800/- WAS FOUND AND INVENTORIES BY THE SURVEY TEAM. HOWEVER, THERE WAS CASH BALANCE AS PER CASH BOOK 2 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 AT RS.1,87,201/-. ACCORDING TO AO, AS THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE HE MADE ADDITION OF RS.63,519/- AS UNEXPLAINED CASH CREDIT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED ADDITION AFTER TAKING EX PLANATION OF THE ASSESSEE AND RECONCILIATION. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT EXPLANATION OF THE ASSESSEE IS THAT CA SH OF RS.2,50,800/- FOUND FROM ASSESSEES PREMISES BELONGS TO M/S. VIKASH IRON & STEEL CO. AS WELL AS M/S. VIKASH IRON WORLD AND THE SAME WAS KEPT IN THE SAME ALMIRAH ON THE PREMISES. ACCORDING TO ASSESSEE, THE SURVEY PARTY HAS MIXED ALL THE CASH FOUND FROM ALMIRAH OF THE AS SESSEE COMPANY I.E. VIKASH IRON & STEEL CO. AS WELL AS M/S. VIKASH STEEL WORLD. THIS CASH OF R S.60,900/- BELONGED TO M/S. VIKASH STEEL WORLD WHOSE PROPRIETOR IS MR. VIKAS MADHOGARIA AND RS.1,87,200/- BELONGED TO ASSESSEE AND THE BALANCE RS.7700/- BELONGED TO THE STAFF. WE FI ND THAT CIT(A) ON THESE FACTS ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING IN PARA 6 AS UNDER : 6. I HAVE CONSIDERED THE SUBMISSION OF THE APPELIA NT AND PERUSED THE ASSESSMENT ORDER. DURING THE COURSE OF SURVEY EXCESS CASH OF RS.63,59 9/- WAS FOUND. ON THE DATE OF SURVEY AS WELL AS DURING THE ASSESSMENT PROCEEDINGS IT WAS EXPLAINED TO THE A.O. THAT CERTAIN AMOUNT OF CASH BELONGED TO THE PROPRIETORY CONCERN OF APPELLANTS SON, SHRI VIKAS MADHOGARIA. HOWEVER, THE CONTENTION OF THE APPELLAN T WAS NOT ACCEPTED BY THE A.O. ON FACTS AND GOING THROUGH THE STATEMENT RECORDED AT T HE TIME OF SURVEY AND ASSESSMENT PROCEEDINGS AND GOING THROUGH THE ASSESSMENT ORDER IN THE CASE OF SHRI VIKAS MADHOGARIA, I AM OF THE OPINION THAT THERE IS NO RE ASON TO DISBELIEVE THE SUBMISSION OF THE APPELLANT. SHRI VIKAS MADHOGARIA IS NOT ONLY TH E PROPRIETOR OF M/S. VIKAS STEEL WORLD BUT ALSO THE CEO OF APPELLANTS CONCERN M/S. VIKAS I RON AND STEEL COMPANY. IT IS ALSO A MATTER OF RECORD THAT THE OFFICES OF BOTH THE PROPR IETORY CONCERNS ARE LOCATED IN THE SAME PREMISES. DURING THE COURSE OF SURVEY IT WAS SPECIF CALLY STATED BY SHR VIKAS MADHOGARIA THAT CERTAIN AMOUNT OF CASH BELONGED TO HIS PROPRIETORY CONCERN WHICH WAS KEPT IN THE OFFICE OF M/S. VIKAS IRON & STEEL COMPA NY. IT IS ALSO NOTEWORTHY THAT IN THE GODOWN PREMISE OF M/S. VIKAS STEEL WORLD, NO CASH W AS FOUND AND THE EXPLANATON OF THE APPELLANTS SON WAS ACCEPTED BY HIS A.O. IN HIS ASS ESSMENT ORDER FOR A.Y. 2006-07. UNDER THE CIRCUMSTANCES, IT IS HELD THAT THE A.O. W AS NOTJUSTIFIED IN MAKING ADDITION OF RS.63,599/- U/S. 68 OF THE ACT ON ACCOUNT OF CASH. THE A.O. S DIRECTED TO DELETE THE ADDITION OF RS.63,599/-. THE GROUND NO. 2 IS ALLOWE D. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY ACCEPTED THE EXPLANATION OF THE ASSESSEE BECAUSE IS ABLE TO RECONCILE THE DI FFERENCE AND DELETED THE ADDITION. WE CONFIRM THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMI SSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO OF RS.9,78,977/- I.E. PAYMENTS TO VARIOUS CONTRACTORS WITHOUT DEDUCTING TDS U/S. 194C OF THE ACT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NOS. 2 TO 7: 3 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING RS.9,78,977/- ON ACCOUNT OF TAX DEDUCTION AT SOURCE U/S 194C OF I T ACT 1961. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING RS. 29,024/- ON ACCOUNT OF TAX DEDUCTION AT SOURCE U/S 194C OF I T ACT 1961. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING RS. 15,539/- ON ACCOUNT OF TAX DEDUCTION AT SOURCE U/S 194C OF I T ACT 1961. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING RS. 47,300/- ON ACCOUNT OF TAX DEDUCTION AT SOURCE U/S 194C OF I T ACT 1961. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING RS. 64,688/- ON ACCOUNT OF SALES TAX PAYMENT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING RS. 38,277/- ON ACCOUNT OF PAYMENT OF PRODUCTION IN CENTIVES TO THE CONTRACTORS. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS AN INDIVIDUAL NAMELY S HRI KISHAN MADHOGARIA AND ASSESSMENT YEAR INVOLVED IS 2006-07. AT THE OUTSET, LD. COUNSEL FO R THE ASSESSEE FILED COPY OF THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SHRI RINKU MALLICK, ITAT NO. 96 OF 2012 IN G.A. NO. 1368 OF 2012 DATED 15.06.2012 AND STATE D THAT THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW WERE PLACED BEFORE THE HONBLE COURT: 1. WHETHER ON THE FACTS AND IN THE CIRLCUMSTANCES OF THE CASE THE TRIBUNAL WAS JUSTIFIED IN LAW IN DELETING THE DISALLOWANCE UNDER SECTION 4 0(A)(IA) READ WITH SECTION 194C(2) ON THE GROUND THAT THE ASSESSEE IS AN INDIVIDUAL. II) WHETHER ON THE FACTS AND IN THE CIRCUSTANCES OF THE CASE THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THE ASSESSEE IS AN INDIVIDUAL DESPIT E THE FACT THAT THE PROVISION OF SECTION 194C(1) IS APPLICABLE TO AN INDIVIDUAL WITH EFFECT FROM 1.6.2007 WHICH IS CONTRARY TO THE ASSESSMENT YEAR INVOLVED IN THE INSTANT CASE. AND THE HONBLE HIGH COURT DISMISSED THE REVENUES APPEAL BY OBSERVING AS UNDER: WE HAVE HEARD THE LD. COUNSEL SMT. SINHA (DAS DE), APPEARING FOR THE APPELLANT, AND WE HAVE GONE THROUGH THE IMPUGNED JU DGMENT AND ORDER. WE ARE OF THE VIEW THAT THIS APPEA; DOES NOT REQUIRE ADMIS SION FOR HEARING AS THE APPLICABILITY OF LAW INVOLVED HEREIN IS ADMITTEDLY SETTLED. IT IS ADMITTED POSITION THAT THE MATTER RELATES TO THE ASSESSMENT YEAR 2006 -07, WHEREAS SECTION 194C(1) HAS BEEN MADE APPLICABLE TO THE INDIVIDUAL ASSESSEE WITH EFFECT FROM 1.6.2007. THERE IS NO DISPUTE THAT THE RESPONDENT IS AN INDIV IDUAL ASSESSEE. CONSIDERING THE POSITION OF THE LAW, THE LEARNED TR IBUNAL HAS CONSISTENTLY HELD THAT SECTION 194C(1) CANNOT BE MADE APPLICABLE FOR THE ASSESSMENT YEAR 2006- 07. IN VIEW OF THE ABOVE PRINCIPLE LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT THAT THE PROVISIONS OF SECTION 194C(1) OF THE ACT HAS BEEN M ADE APPLICABLE TO THE INDIVIDUALS W.E.F. 4 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 01.06.2007, THIS PROVISIONS WILL NOT APPLY TO THE F ACTS OF THE PRESENT CASE. RESPECTFULLY FOLLOWING THE DECISION CITED SUPRA, WE DISMISS THIS GROUND OF APPEAL OF REVENUE. 7. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF UNEXPLAINED OR BO GUS PURCHASE. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.9: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN DELETING RS.20,05,000/-, RS.22,00,000/- AND RS.15,00,000/- O N ACCOUNT OF PURCHASE FROM M/S. SHARDA PATTERN WORKS AND M/S. NEHA ENTERPRISES. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE MADE PUR CHASE FROM M/S. SHARDA PATTERN WORKS FOR AN AMOUNT OF RS.20,05,000/-, FROM M/S. NEHA ENTERPRISE S AT RS.22 LACS AND RS.15 LACS RESPECTIVELY. ACCORDING TO AO, THE PURCHASES WERE DEBITED TO P&L ACCOUNT UNDER THE HEAD CONSUMPTION OF STORES AND SPARES AND THESE PURCHASE S WERE OF WOODEN PATTERNS OF RS.20.5 LACS FROM M/S. SHARDA PATTERN WORKS AND PURCHASES OF FER RO SILICON AND FIRE BRICKS OF RS.22,90,800/- AND RS.15 LACS. BUT ASSESSEE HAS NOT MADE ENTRIES IN MANUAL REGISTER. THESE PURCHASES WERE INFLATED THROUGH JOURNAL BOOK AS ON 31.03.2006 AND ALSO MADE ENTRIES IN COMPUTERISED LEDGER. THE AO TREATED THESE PURCHASES AS SHAM TRANSACTION BECAUSE, ACCORDING TO HIM, THE ASSESSEE HAS TRIED TO INFLATE EXPENSES ON ACCOUNT OF THESE PURCH ASES. FOR THIS, THE AO OBSERVED THAT THE ASSESSEE HAS NOT PAID TRANSPORTATION CHARGES AND TH E BILLS RAISED BY THE AFORESAID PARTIES WERE IN SERIAL AS IF THE ASSESSEE WAS THE ONLY CUSTOMER OF THIS PARTY AND EVEN LORRY NO. MENTIONED ON CHALLANS WERE INCORRECT. ACCORDING TO AO, THE SUPP LIERS WERE NOT REGISTERED WITH VAT AUTHORITIES. AGGRIEVED, AGAINST TREATING THE SAME AS BOGUS AND MAKING ADDITION, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADD ITION BY OBSERVING IN PARA 33 AS UNDER: 33. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER. DURING THE RELEVANT PREVIOUS YEAR THE APPEL LANT HAS DEBITED TOTAL AMOUNT OF RS.1,37,17,917/- UNDER THE HEAD CONSUMPTION OF STO RES & SPARES. THIS INCLUDE PURCHASE OF WOODEN PATTERNS AMOUNTING TO RS.20,05,0 00/- FROM M/S. SHARDA PATTERN WORKS AND PURCHASES RS.22,90,800/- OF FERRO SILICON POWDER AND PURCHASE OF FIRE BRICKS AMOUNTING TO RS.15,00,000/- FROM M/S. NEHA E NTERPRISES. THE SAID PURCHASES WERE DEBITED IN THE BOOKS OF ACCOUNTS AND P & L ACC OUNT BY RECORDING ENTRIES THROUGH JOURNAL BOOK AS ON 31.03.2006. THE AMOUNTS AGAINST THESE PURCHASES WERE OUTSTANDING AS ON 31.03.2006 AND IN THE BALANCE SHEET, THESE WE RE APPEARING IN THE LIST OF SUNDRY CREDITORS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE A.O. HAS ASKED THE APPELLANT TO SUBMIT A NOTE ON MANUFACTURING PROCESS OF CAST IRON GOODS AND THE APPELLANT HAS SUBMITTED AS UNDER: (A) WOOD & COAL PUT BELOW CUPOLA AND IS FIRED BY J UTE SOAKED IN KEROSENE OIL, AND THE FIRE IS IGNITED IN GREAT SPEED BY RUNN ING BLOWER THROUGH ENGINE. 5 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 (B) HARD COKE, LIMESTORIE, PIG IRON, C.I. SCRAP, M. S. SCRAP ARE POURED INTO CUPOLA FOR MELTING. (C) MELTED MATERIAL FROM CUPOLA ARE TAKEN INTO LADL E WHERE CHEMICALS ARE MIXED AND THEN THE SAME IS POURED INTO MOULDS. (D) MOULDS OF DIFFERENT TYPES ARE MADE THROUGH PATT ERN BY MIXING SAND, COW DUNG AND DIFFERENT TYPES OF CHEMICALS. THESE ARE HE ATED BY COAL TO MAKE THEM HOT FROM COLD. (E) MOULD IS OPENED WHEN IT BECOMES COLD TO GET FIN ISHED PRODUCTS KNOWN AS C.I. CASTINGS. (F) THERE IS A WASTAGE OF 10.54% IN MANUFACTURING F NISHED GOODS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. HAS ALSO CALLED FOR THE DETAILS OF SUNDRY CREDITORS AND ON EXAMINATION OF DETAILS HE A SKED THE APPELLANT TO SUBMIT THE DETAILS OF PURCHASE OF WOODEN PATTERNS PURCHASED FROM M/S. SHARDA PATTERN WORKS AND PURCHASES OF FERRO-SILICON AND FRE BRICKS PURCHASED FROM M/S . NEHA ENTERPRISES. IN RESPONSE, THE APPELLANT PRODUCED THE LEDGER ACCOUNTS, JOURNAL BOO K, BANK STATEMENTS AND THE COPIES OF BILLS RAISED BY BOTH THE PARTIES. THE COPIES OF CHA LLANS WERE ALSO PRODUCED. HOWEVER, THE A.O. HAS TREATED THE PURCHASE OF WOODEN PATTERNS, F ERRO-SILICON AND FIRE BRICKS AS SHAM TRANSACTIONS FOR THE REASON THAT PURCHASES OF THESE MATERIALS WERE NOT ENTERED IN THE MANUAL PURCHASE REGISTER AND THE APPELLANT DID NOT FURNISH THE NOTE ON REQUIREMENT OF THESE ITEMS IN MANUFACTURING ACTIVITIES. THE PURCHA SE AND CONSUMPTION WAS NOT VERIFABLE IN THE ABSENCE OF STOCK REGISTER. THE SUPPLIERS WER E NOT REGISTERED SUPPLIERS AND THE LETTERS ISSUED TO THEM COULD NOT BE SERVED. ON GOING THROUG H THE REASONS GIVEN BY THE A.O. FOR DISALLOWANCE OF PURCHASES, SUBMISSION OF APPELLANT AND ON PERUSAL OF RELEVANT DOCUMENTS AS WELL AS BANK STATEMENTS ETC., I AM OF THE OPINIO N THAT THE DISALLOWANCES MADE BY THE A.O., ON ACCOUNT OF PURCHASES MADE BY THE APPELLANT FROM SHARDA PATTERN WORKS AND NEHA ENTERPRISES, WERE NOT JUSTIFIED. IT IS SEEN THAT AT SEVERAL PLACES THE A.O. HAS GIVEN CONTRADICTORY STATEMENTS. AT ONE PLACE HE HAS MENTI ONED THAT PURCHASE AND CONSUMPTION OF THESE MATERIALS IN MANUFACTURING PROCESS WAS UNVERI FIABLE AND AT OTHER PLACE HE HAS STATED THAT ALL THE MATERIALS PURCHASED BY THE APPELLANT W ERE CONSUMED IN THE MANUFACTURING PROCESS. SIMILARLY, HE HAS MENTIONED THAT THE APPEL LANT HAS NOT PRODUCED THE COPIES OF TRANSPORT CHALLANS AND THEN STATED THAT COPIES OF C HALLANS ISSUED BY M/S. NEHA ENTERPRISES WERE PRODUCED BY THE ASSESSEE AS EVIDENCE OF TRANSP ORTATION. THE A.O. HAS MENTIONED THAT THE INFORMATION ABOUT THE LORRY NUMBERS CLAIMED TO BE USED FOR TRANSPORTATION WAS NOT CORRECT. HOWEVER, EXCEPT THIS STATEMENT NOTHING IS CLEAR FROM THE ASSESSMENT ORDER. IT IS NOT KNOWN AS TO WHAT INFORMATION WAS GATHERED BY THE A. O. FROM THE RTO. WHATEVER WAS THE INFORMATION GATHERED BY THE A.O. BUT IT WAS NOT CON FRONTED TO THE APPELLANT, WHILE THE APPELLANT HAS CLAIMED THAT IT WAS LEARNT BY HIM THA T THE LORRIES USED FOR THE PURPOSE OF TRANSPORTATION OF SILICON AND FIRE BRICKS WERE VERY MUCH IN EXISTENCE AND ROADWORTHY. I AM OF THE OPINION THAT ADDITIONS ON ACCOUNT OF PURCHAS ES COULD NOT MADE WITHOUT BRINGING ANYTHING POSITIVE ON RECORD TO PROVE THAT IN ACTUAL THE PURCHASES WERE NOT GENUINE. HOWEVER, THE A.O. HAS NOT BROUGHT ANYTHING POSITIVE ON RECORD. THE ADDITIONS COULD NOT BE MADE BY MAKING CERTAIN OBSERVATIONS. THE A.O. HAS N OT BROUGHT ANY EVIDENCE ON RECORD TO PROVE THAT THE MATERIALS PURCHASED BY THE APPELLANT FROM TWO PARTIES I.E. WOODEN PATTERNS, WHICH ARE NOTHING BUT THE WOODEN MOULDS, FERRO-SILI CON AND FRE BRICKS ARE NOT THE CONSUMABLES REQUIRED FOR APPELLANTS MANUFACTURING PROCESS. IT IS UNBELIEVABLE THAT THE APPELLANT WOULD PURCHASE AND MAKE SUBSTANTIAL PAYME NTS FOR THE MATERIALS NOT REQUIRED IN THE MANUFACTURING PROCESS. IN FACT, THE A.O. HIMSEL F HAS MENTIONED THAT THESE MATERIALS WERE CONSUMED BY THE APPELLANT. IF IT IS SO, THERE WOULD BE NO LOGIC TO STATE THAT THE APPELLANT HAS NOT GIVEN ANY NOTE OF REQUIREMENT OF THESE MATERIALS IN MANUFACTURING PROCESS AND THE PURCHASE AND CONSUMPTION WAS UNVERI FIABLE. I AM ALSO OF THE OPINION THAT THE SUPPLIERS WERE REGISTERED FOR VAT OR NOT, WOULD HAVE NO IMPACT ON THE PURCHASE 6 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 TRANSACTIONS OF THE APPELLANT. FURTHER, I FND FORC E IN THE SUBMISSION OF THE APPELLANT THAT THE A.O. WAS NOT CORRECT IN HIS STATEMENT THAT LETT ERS ISSUED BY THE A.O. TO M/S. SHARDA PATTERN WORKS AND M/S. NEHA ENTERPRISES COULD NOT B E SERVED BECAUSE IT IS SEEN THAT THE A.O. HAS ISSUED LETTERS NO.ADDL.CIT/R-29/KOL./133(6 )/08-09/234-237 DATED 20.10.2008 TO M/S. SHARDA PATTERN WORKS AND M/S. NEHA ENTERPRISES . THESE LETTERS WERE RECEIVED BY THE RESPECTIVE PARTY AND SUBMITTED THE DETAILS/INFORMAT IONS TO THE A.O. M/S. SHARDA PATTERN WORKS HAS SUBMITTED THE INFORMATION TO THE A.O. ON 31.10.2008 AND M/S. NEHA ENTERPRISES ON 06.11.2008. HOWEVER, THE A.O. HAS IGNORED THESE REPLIES IN THE ASSESSMENT ORDER. IT IS NOT KNOWN WHEN LETTERS U/S. 133(6) WERE SERVED TO T HE PARTIES, HOW THE NOTICE U/S. 131 OF THE ACT COULD NOT BE SERVED. DURING THE COURSE OF ASSES SMENT PROCEEDINGS AS WELL AS THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED DETA ILS OF PAYMENTS MADE TO THE SAID TWO PARTIES IN THE NEXT FINANCIAL YEAR. THE SAID PAYMEN TS WERE ALSO CONFIRMED BY THE RESPECTIVE PARTIES. IT IS SEEN THAT THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND DEBITED IN THE APPELLANTS BANK STATEMENT. FROM THE BOOKS OF A PPELLANT IT WAS OBSERVED THAT HE HAD MADE PURCHASES FROM THESE TWO PARTIES IN THE PRECED ING YEAR ALSO AND THERE WAS OPENING BALANCES IN THE NAME OF BOTH THE PARTIES AS ON 01.0 4.2005. THE A.O. HAS NOT DOUBTED THE PAYMENT MADE BY THE APPELLANT AGAINST THE PURCHASES . THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE APPELLANT HAS FILED FAK E AND FABRICATED DOCUMENTS TO INFLATE THE PURCHASES AS OPINED BY HIM IN THE ASSESSMENT ORDER. IN THE CASE OF SAGAR BOSE, REPORTED IN 56 ITD 561, (ITAT, CALCUTTA), THERE WAS ALLEGATION OF BOGUS PURCHASES. SUMMONS ISSUED U/S. 131 TO THE SUPPLIERS COULD NOT BE SERVED IN SO ME CASES AND THE A.O. HAD HELD THAT SOME OF THE OTHER SUPPLIERS WERE ALSO NON-EXISTENT. IT W AS HELD BY THE KOLKATA I.T.A.T. THAT SINCE THE ASSESSEE HAD TO USE THE MATERIALS FOR CONDUCTIN G THE BUSINESS, AND HAD FURNISHED FULL DETAILS OF CONSUMPTION AND SALES, WHICH COULD NOT B E DOUBTED AND THE DEPARTMENT HAD NOT CONDUCTED ENQUIRIES FROM THE BANK AND SALES TAX AUT HORITIES ABOUT THE SUPPLIERS, THE PURCHASES MUST BE CONSIDERED TO BE GENUINE AND HENC E, ARE TO BE ACCEPTED. SIMILARLY, IN THE CASE OF SUTLAJ COTTON MILLS LTD. REPORTED IN 96 TAX MAN 29, (DEL.)(AT), SUBSTANTIAL AMOUNTS OF PURCHASES WERE DISALLOWED BY THE A.O. AS BOGUS O N THE GROUND THAT THE SELLERS COULD NOT BE PRODUCED OR WERE NOT TRACEABLE. THE HONBLE I.T. A.T. HELD THAT SINCE THE PURCHASES WERE BACKED BY EVIDENCES SUCH AS INVOICES OF THE SUPPLIE RS ETC., THE PURCHASES COULD NOT BE DISALLOWED. IN THE CASE OF M. K. BROTHERS, 163 ITR 249 (GUJ.), ALTHOUGH THE SELLERS HAD GIVEN STATEMENTS BEFORE THE SALES TAX AUTHORTIES T HAT THEY HAD ISSUED BOGUS VOUCHERS, YET THE TRIBUNAL HELD THAT THERE WAS NO EVIDENCE THAT T HE VOUCHERS ISSUED BY THE SELLERS TO THE ASSESSEE WERE BOGUS. THIS FACT COUPLED WITH THE FAC T THE PAYMENTS HAD BEEN MADE THROUGH CHEQUES ULTIMATELY LED TO THE CONCLUSION OF THE I. T.A.T. THAT THE ADDITIONS WERE NOT JUSTIFIED, WHICH WAS UPHELD BY THE HONBLE GUJARAT HIGH COURT. IN VIEW OF ABOVE, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLAN T HAS FLED FAKE AND FABRICATED DOCUMENTS TO INFLATE PURCHASES AND CONSEQUENTLY HE WAS NOT CO RRECT IN MAKING ADDITIONS OF RS.20,05,000/-, RS.22,00,000/- AND RS.15,00,000/- O N ACCOUNT OF PURCHASES MADE BY THE APPELLANT FROM M/S. SHARDA PATTERN WORKS AND M/S. N EHA ENTERPRISES. THE A.O. IS DIRECTED TO DELETE THESE ADDITIONS. THE GROUND NOS. 12, 13 & 14 ARE ALLOWED . AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FINDS THAT THE ASSESSEE DURING THE COURSE OF ASS ESSMENT PROCEEDINGS AS WELL AS BEFORE CIT(A) FILED COMPLETE DETAILS OF SUNDRY CREDITORS A ND ON EXAMINATION OF DETAILS, IT WAS FOUND THAT THE DETAILS OF PURCHASE OF WOODEN PATTERNS PUR CHASED FROM M/S. SHARDA PATTERN WORKS AND PURCHASES OF FERRO-SILICON AND FRE BRICKS PURCHASE D FROM M/S. NEHA ENTERPRISES ARE GENUINE AND ACCOUNTED FOR. IN RESPONSE, THE ASSESSEE PRODUC ED THE LEDGER ACCOUNTS, JOURNAL BOOK, BANK STATEMENTS AND COPIES OF BILLS RAISED BY BOTH THE P ARTIES. THE COPIES OF CHALLANS WERE ALSO 7 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 PRODUCED. HOWEVER, THE A.O. HAS TREATED THE PURCHAS E OF WOODEN PATTERNS, FERRO-SILICON AND FIRE BRICKS AS SHAM TRANSACTONS FOR THE REASON THAT PUR CHASES OF THESE MATERIALS WERE NOT ENTERED IN THE MANUAL PURCHASE REGISTER AND THE ASSESSEE DID N OT FURNISH THE NOTE ON REQUIREMENT OF THESE ITEMS IN MANUFACTURING ACTIVITIES. THE PURCHASE AND CONSUMPTION WAS NOT VERIFABLE IN THE ABSENCE OF STOCK REGISTER. THE SUPPLIERS WERE NOT R EGISTERED SUPPLIERS AND THE LETTERS ISSUED TO THEM COULD NOT BE SERVED. ON GOING THROUGH THE REAS ONS GIVEN BY THE A.O. FOR DISALLOWANCE OF PURCHASES, SUBMISSION OF APPELLANT AND ON PERUSAL O F RELEVANT DOCUMENTS AS WELL AS BANK STATEMENTS ETC., WE ARE OF THE VIEW THAT MERELY NON -MAINTENANCE OF STOCK REGISTER AND NON- SERVICE OF LETTERS ISSUED BY AO CANNOT BE THE BASIS FOR TREATING THE PURCHASES AS BOGUS. THE AO HAS NOT CARRIED OUT PROPER ENQUIRIES DESPITE EVERY DETAIL WAS WITH HIM. THE AO COULD HAVE CALLED THE PARTYS RECORDS FROM THE CONCERNED AO OR COULD HAVE DEPUTED HIS INSPECTOR FOR VERIFICATION. IN SUCH CIRCUMSTANCES, AND THE EVIDE NCES PRODUCED BY ASSESSEE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY TREATED THE PURCHA SES AS GENUINE AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS ALSO DISMISSED. 10. NOW, WE ARE COMING TO ASSESSEES APPEAL I.E. IT A NO.161/KOL/2010. THE FIRST ISSUED IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT (A) CONFIRMING THE ADDITION OF UNACCOUNTED STOCK FOUND IN COURSE OF SURVEY AT RS.3,98,100/-. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING ADDITIO N OF RS.398,100 MADE U/S. 69 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF STOCK FOUND DURI NG THE SURVEY BY THE LD. ADDL. CIT. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. DURING THE COURSE OF SURVEY PROCEEDINGS INVENTORY O F PHYSICAL STOCK WAS PREPARED AND STOCK WAS VALUED. ACCORDING TO AO, AS PER SURVEY DOCUMEN T, ON COMPARISON OF PHYSICAL STOCK WITH THAT OF THE BOOKS OF ACCOUNT THERE IS EXCESS STOCK VALUED AT RS.3,98,100/-. BEFORE THE AO ASSESSEE STATED THAT THE STOCK WAS NOT TAKEN ON ACT UAL WEIGHMENT BASIS BUT WAS TAKEN ON ESTIMATE BASIS. BUT THE AO WAS NOT SATISFIED WITH THE REPLY AND HE MADE ADDITION OF EXCESS STOCK OF RS.3,98,100/-. AGGRIEVED, ASSESSEE PREFER RED APPEAL BEFORE CIT(A), WHO CONFIRMED THE ACTION OF AO VIDE PARA 9 OF HIS APPELLATE ORDER AS UNDER: 9. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. ON FACTS, I AM INCLINED TO AGREE WITH THE A.O. THAT THE SURVEY PARTY HAS MADE THE INVENTORY OF THE PHYSICAL STOCK ON ACTUAL WEIGHMENT BASIS AND THERE WAS EXCESS STOCK OF RS.3,98,100/-. THE AO HAS RIGHTLY MADE THE ADDITIO N OF RS.3,8,100/- U/S. 69 OF THE ACT. THE ADDITION SO MADE IS CONFIRMED. THE GROUND NO. 3 IS DISMISSED. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE US. 8 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 12. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. IT WAS SUBMITTED BY THE ASSESSEE THAT SURVEY WAS C OMPLETED WITHIN A FEW HOURS AND AT THE TIME OF SURVEY ALSO THE ASSESSEES REPRESENTATIVE OPPOSE D THE MAKING OF INVENTORY BY ESTIMATE METHOD BUT HIS OBJECTION WAS IGNORED. THE ASSESSEE SUBMITTED COMPLETE DAY TO DAY STOCK BOOKS ALONG WITH EXCISE STOCK REGISTERS FOR VERIFIC ATION BUT AO COULD NOT FIND OUT ANY MISTAKE OR DISCREPANCY AND ACCORDING TO HIM, NO ADDITION IS REQUIRED. LD. COUNSEL FOR THE ASSESSEE TOOK US TO COMPARATIVE ANALYSIS OF GROSS PROFIT AND NET PROFIT FOR THE YEAR ENDING 31 ST MARCH, 2006 AS ENCLOSED IN ASSESSEES PAPER BOOK WHICH IS AS UNDER : PARTICULAR 31.03.2005 31.03.2006 TURNOVER 121,411,533.00 131,907,500.00 GROSS PROFIT 6,83,725.00 12,598,144. 00 NET PROFIT 416,901.00 5,289,000.00 GROSS PROFIT PERCENTAGE 5.63% 9.55% NET PROFIT PERCENTAGE 0.34% 4.01% LD. COUNSEL FOR THE ASSESSEE STATED THAT EVEN THE G P RATE AND NP RATE PERCENTAGE IS MUCH BETTER THAN EARLIER YEARS AND THERE IS NO SCOPE OF FURTHER ADDITION. WE FIND FROM THE PHYSICAL VERIFICATION DONE BY THE SURVEY TEAM AND AS NOTED B Y AO IN HIS ASSESSMENT ORDER AT PAGE 4 AND AS PER STOCK REGISTER, THERE IS ACTUAL ESTIMATION M ADE BY SURVEY TEAM IT IS APPARENT FROM THE PHYSICAL VERIFICATION TAKEN. THE RELEVANT CHART IS AS UNDER: AS PER STOCK REGISTER AS PER PHYSICAL VERIFICATION DIFFERENCE EXCESS PIG IRON C.I. SCRAP BARS & RODS M. S. SCRAP HARD CODE STEAM COAL FERROUS WASTES C. I. CASTINGS 139.625 MT 40.440 MT 2.575 MT 5.200 MT 45,699 MT 21.127 MT 3.227 MT 126.886 MT 150.00 MT 51.00 MT 5.000 MT 6.00 MT 50.00 MT 125.00 MT 3.50 MT 135.50 MT 10.375 MT 10.560 MT 2.425 MT 0.800 MT 4.301 MT 3.873 MT 0.273 MT 8.614 MT EVEN THE COMPUTATION MADE BY AO AS IS SEEN FROM PAG E 5 SUB-PARA (B) OF PARA 2 THAT HE HAS TAKEN THE DIFFERENCE ON ESTIMATION BASIS. HOW THE WEIGHMENT ON ACTUAL ROUND FIGURES IN ALL THE ITEMS IS POSSIBLE? IT IS NOT POSSIBLE. IT CAN VER Y EASILY AND SAFELY BE STATED THAT THE VALUATION MADE IS ON ESTIMATE BASIS. ONCE THE PHYSICAL VERIF ICATION MADE ON ESTIMATE BASIS THE ADDITION CANNOT BE SUSTAINED. WE DELETE THE ADDITION. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 9 ITA NOS. 180 /K/2010 & ITA NO.2156/K/2009 GOPAL & SONS (HUF) , AY:2006-07 13. THE NEXT TWO ISSUES IN THE APPEAL OF ASSESSEE I S AS REGARDS TO THE DISALLOWANCE ON MOTOR CAR EXPENSES AT 15% AND DEPRECIATION AT 15%. FOR TH IS, ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS: 2. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLO WING OF RS.59,244 BEING 15% OUT OF MOTOR CAR EXPENSES AMOUNTING TO RS.380.562 INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF YOUR APPELLANT. 3. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLOW ING OF RS.48,360 BEING 15% OF DEPRECIATION ON MOTOR CAR AMOUNTING TO RS.322,411 I NCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF YOUR APPELLANT. 14. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS NOT SERIOUSLY PRESSED THESE TWO ISSUES AND HENCE, THE SAME ARE DISMISSED. 15. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED A ND THAT OF ASSESSEE IS PARTLY ALLOWED. 16. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.01. 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27TH JANUARY, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT SHRI KISHAN MADHOGRIA, 5, HASTINGS PARK ROAD, KOLKATA-27. 2 ./,- / RESPONDENT ADDL.CIT, RANGE-29/ACIT,CIRCLE-29, K OLKATA 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .