The ACIT, Mehsana Circle, Mehsana V. Maruti Panchal Cylinders Pvt. Ltd, Mehsana

ITA 1697/AHD/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8791 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-03-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 01-07-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: BHAVESH SHAH
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A, AHMEDABAD BEFORE SHRI BHAVNESH SAINI,JM & SHRI A.N. PAHUJA, A M ITA NO.1697/AHD/2005 (ASSESSMENT YEAR 2000-01) ACIT, MEHSANA CIRCLE VS MARUTI PANCHAL CYLINDERS PVT LTD 2 ND FLOOR, APOLLO ENCLAVE 7, SHASTRINAGAR SOCIETY HIGHWAY, MEHSANA KALOL [PAN : NOT AVAILABLE] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI GOVIND SINGHAL, DR ASSESSEE BY : SHRI BHAVESH SHAH, CA O R D E R A.N. PAHUJA : THIS APPEAL BY THE REVENUE AGAINST A N ORDER DATED 31 ST MARCH, 2005 OF THE LD.CIT(A)-XX, AHMEDABAD, RAISES THE FOL LOWING GROUNDS: 1. THE CIT(A) ERRED IN LAW AND ON FACT IN DIRECTING TO DELETE THE ADDITION OF RS.8,41,599/- MADE ON ACCOUNT OF INFLAT ION OF THE PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED TO THE ABOVE EXTENT. 2. ADVERTING FIRST TO THE GROUND NO.1 RELATING TO ADDITION OF RS.8,41,599/- ON ACCOUNT OF INFLATION IN PURCHASES, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING LOSS OF RS.16,79,686/- FILED O N 27-11-2000 BY THE ASSESSEE, MANUFACTURING CYLINDERS FOR THE TWO WHEELERS AND TH REE WHEELERS VEHICLES, AFTER BEING PROCESSED ON 11.6.2001 U/S 143(1) OF THE INCO ME-TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 25-11-2001. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOT ICED ON VERIFICATION OF PURCHASES OF RAW MATERIAL AS RECORDED IN THE BOOKS VIS--VIS MENTIONED IN THE ITA NO.1697/AHD/2005 2 STATEMENT OF STOCK AS ON 30.11.1999 FILED WITH THE BANK THAT THERE WAS VARIATION IN THE TWO FIGURES AS REVEALED HEREUNDER: NAME OF THE STOCK AS SHOWN STOCK AS PER DIFFERENCE ITEM TO THE BANK PURCHAS E DEBITED IN VALUE TO P&L A/C QTY VALUE QTY VALUE VALUE UPTO NOVEMBER 99 INCLUDNG OP.STOCK 1) PIG IRON 2970 25245 18460 133274 108029 2) IRON SCRAP 5100 40800 6620 47131 6331 3) SAND 7150 46833 35500 203754 119395 4) CARBON CHEMICALS 1250 37200 - 645044 607844 ------- --------- -------------------- -------- ----- TOTAL DIFFERENCE RS.841599 TO A QUERY BY THE AO, THE ASSESSEE EXPLAINED THAT STATEMENT SUBMITTED TO THE BANK WAS ON ESTIMATE BASIS. HOWEVER, THE AO WAS OF THE VIEW THAT STATEMENT SUBMITTED TO THE BANK WAS CORRECT AND THE ASSESSEE HAD INFLATED THE EXPENSES FOR PURCHASE OF RAW MATERIAL TO THE EXTENT OF RS. 8 ,41,599/- IN ORDER TO REDUCE PROFITS. ACCORDINGLY, HE ADDED THE SAID AMOUNT TO THE TOTAL INCOME 3. ON APPEAL, THE ASSESSEE CONTENDED THAT THE AO HA D WRONGLY INCLUDED PURCHASES OF 3400 KGS OF IRON SCRAP IN THE STOCK AS ON 30-11-1999, THE PURCHASES HAVING BEEN EFFECTED IN DECEMBER, 1999. BESIDES, THE VALUE OF STORES, CHEMICALS, ETC. AT RS.6,45,044/- COMPRISED OPENING STOCK OF RS.1,33,465/- AND PURCHASES FOR THE ENTIRE YEAR AMO UNTING TO RS.5,06,893/- WHILE THE PURCHASES UPTO 30 TH NOVEMBER, 1999 WERE ONLY RS.2,28,870/-. ACCORDING LY, THE ASSESSEE ARGUED THAT DIFFERENCE OF RS.8,41,599/ - WORKED OUT BY THE AO WOULD BE REDUCED TO RS.5,49,246/-. SINCE THE DETAIL S OF STOCK SUBMITTED TO BANK WAS ON ESTIMATE, THIS COULD NOT BE CO-RELATED WITH THE STOCK AS PER BOOKS. ACCORDINGLY, THERE WAS NO REASON TO ADD THE AMOUNT OF DIFFERENCE ALREADY DEBITED IN THE PURCHASES. IN THE LIGHT OF THESE SUB MISSIONS, THE LD. CIT(A) CONCLUDED AS UNDER: ITA NO.1697/AHD/2005 3 4.5 I HAVE CONSIDERED THE CONTENTIONS OF THE ASSES SING OFFICER AND THE VARIOUS ARGUMENTS AND EXPLANATIONS OF THE A PPELLANT. AS REGARDS THE DIFFERENCE IN VALUE WORKED OUT BY THE A SSESSING OFFICER AT RS.8,41,599/-, I FIND MERIT IN THE CONTENTION OF THE APPELLANT THAT THE DIFFERENCE IS ACTUALLY RS.5,49,246/-, SINCE THE PURCHASES OF IRON SCRAP OF DECEMBER, 1999 AND STORES AND CHEMICALS FO R THE PERIOD DECEMBER, 1999 TO MARCH, 2000 APPEAR TO HAVE BEEN I NADVERTENTLY INCLUDED IN THE STOCKS AS ON 30-11-1999. FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT STOCKS OF RAW MATERIALS O F THE APPELLANT AS PER BOOKS OF ACCOUNT EXCEED STOCKS OF RAW MATERI AL FURNISHED TO THE BANK. THE DIFFERENCE WORKED OUT BY HIM AT RS.8 ,41,599/- IS TREATED AS INFLATED PURCHASES DEBITED TO THE P&L AC COUNT AS ON 3011-1999 AND THEREFORE, DISALLOWED AND ADDED TO TH E INCOME OF THE APPELLANT. THIS FINDING OF THE ASSESSING OFFIC ER IS NOT TENABLE SINCE THERE IS NO EVIDENCE OR MATERIAL ON RECORD TO SHOW THAT THERE ARE BOGUS PURCHASES. THE ASSESSING OFFICER HAS ALS O NOT IDENTIFIED INSTANCES OF INFLATED PURCHASES. THEREFORE, I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE VALUE OF STOCKS AS ON 30-11-1999 AS INFLATED PURCHASES IN COMPARISON W ITH THE STOCKS AS PER STATEMENT FURNISHED TO THE BANK. ACCORDINGL Y, THE ADDITION OF RS.8,41,599/- IS DELETED. 4. THE REVENUE IS IN NOW APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED THE FINDINGS OF THE A O WHILE THE LD.AR ON BEHALF OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A ). TO A QUERY BY THE BENCH THAT STOCK IN THE PURCHASES ACCOUNT DEBITED TO PROF IT & LOSS ACCOUNT WAS MUCH MORE THAN THAT SHOWN TO THE BANK, THE LD. DR STATED THAT THE ASSESSEE HAD INFLATED THE PURCHASES. ON THE OTHER HAND, THE LD. AR POINTED OUT THAT NOT AN IOTA OF EVIDENCE WAS ON RECORD TO SHOW THAT THESE PURCHA SES WERE BOGUS NOR THE AO CONDUCTED ANY INDEPENDENT ENQUIRIES. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT STOCK AS PER BOOKS AS ON 30-11-1999 IS MUCH MORE THAN THE STOCK SHOWN TO THE BANK UPTO THAT DATE. THE AO WHILE RE LYING ON THE STATEMENT OF STOCK AS ON 30.11.1999 SUBMITTED TO THE BANK DISCAR DED THE BOOK VERSION ON THE GROUND THAT THE ASSESSEE INFLATED PURCHASES. HOWEV ER, THE REVENUE HAVE NOT PLACED BEFORE THE LD. CIT(A) AND EVEN BEFORE US AN Y MATERIAL SUGGESTING THAT THE PURCHASES AS RECORDED BY THE ASSESSEE IN THE ASSESS EES BOOKS UPTO 30-11- ITA NO.1697/AHD/2005 4 1999 WERE BOGUS. EVEN THE LD. CIT(A) NOTED THAT T HERE IS NO EVIDENCE OR MATERIAL ON RECORD TO SHOW THAT THERE WERE BOGUS PU RCHASES. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THERE IS NO MATERIAL BEFORE US FOR TAKING A DIFFERENT VIEW IN THE MATTER, WE DECLINE TO INTERFE RE . THUS, GROUND NO.1 IN THE APPEAL IS DISMISSED. 5. GROUND NOS. 2 & 3 IN THE APPEAL, BEING GENERAL I N NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISS ED. 6. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS 19TH D AY OF MARCH, 2010. SD/- SD/- (BHAVNESH SAINI) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED: 19TH MARCH, 2010 PK/- COPY TO: 1. THE ASSESSEE 2. ACIT, MEHSANA CIRCLE 3. CIT(A)-XX, AHMEDABAD 4. CIT CONCERNED BY ORDER 5. DR, A BENCH DEPUTY REGISTRAR, ITAT, AHMEDABAD