Sh. Keshav Dev Sharma, Agra V. Dy. C.I.T., Circle-2, Agra

ITA 178/AGR/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67417 (ITAT-AGRA)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: RAJENDER SHARMA; MANUJ SHARMA S
• Keywords: Bogus purchase; Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.178/AGRA/2013 ASSESSMENT YEAR: 2007-08 SHRI KESHAV DEV SHARMA, VS. DY. COMMISSIONER OF IN COME TAX, 24, PANCHVATI, CIRCLE-2, AGRA. VINAY NAGAR, BODLA, SHAHGANJ ROAD, AGRA. (PAN: APVPS 9591 Q). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDER SHARMA & SHRI MANUJ SHARMA, ADVOCATES RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 07.08.2013 DATE OF PRONOUNCEMENT : 14.08.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 15.01.2013 PASSED BY THE CIT(A)-I, AGRA FOR THE A.Y. 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LEARNED CIT (APPEALS) HAS ERRED ON FAC TS AND IN LAW WHILE SUSTAINING THE ADDITION FOR RS.1187400/- (RS. 2.00 LAKH TOWARDS 2 ITA NO.178/AGRA/2013 A.Y. 2007-08 THE GP AND 987400/- TREATING THE PURCHASES AS BOGUS ). NO ADDITION IS LIABLE TO BE SUSTAINED. ADDITION MADE BY THE AO AN D SUSTAINED BY CIT(APPEALS) IS LIABLE TO BE DELETED. 2. THAT WHILE MAKING THE ADDITION, TREATING THE PUR CHASES AT RS.987400/- AS BOGUS AND FURTHER RS.2.00 LAKH FOR U NVERIFIABLE PURCHASES, THE AUTHORITIES BELOW HAVE NOT APPRECIAT ED THAT THE TRADING RESULTS SHOWN BY THE APPELLANT ARE ALMOST SAME, IF COMPARED WITH THE PAST HISTORY, NO EXTRA ORDINARY ADDICTIONS ARE CALL ED FOR, ADDITIONS MADE ARE LIABLE TO BE DELETED. 3. THAT THE ESTIMATION MADE AND INCOME ASSESSED BY THE AUTHORITIES BELOW ARE HIGHLY EXCESSIVE AND UNJUSTIF IED, ADDITION MADE ON THIS SCORE IS LIABLE TO BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR. THE RETURN OF INCOME HAS BEEN FILED DECLARING INCOME OF RS.6,29,470/-. THE A.O. MADE ADDITION OF RS.2,00,000/- AS ON EXAMINATION OF BILL S AND VOUCHERS THE A.O. FOUND THAT THE PURCHASES OF MATERIAL SUPPORTED BY ONLY SE LF-MADE VOUCHERS. BEFORE THE A.O. THE ASSESSEE AGREED FOR ADDITION OF RS.2,00,00 0/- ON THIS ACCOUNT. THE ADDITION MADE BY THE A.O. HAS BEEN CONFIRMED BY THE CIT(A) OBSERVING THAT THE ASSESSEE AGREED FOR ADDITION OF RS.2,00,000/- OUT O F PURCHASES SHOWN BY THE ASSESSEE. THEREFORE, THE AGREED ADDITION CANNOT BE DISPUTED. 4. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. WE FIND THAT MATERIAL PURCHASES WERE NOT SUPPORTED BY PROPER BILLS. THE ASSESSEE 3 ITA NO.178/AGRA/2013 A.Y. 2007-08 ACCOUNTED FOR THE PURCHASES ON THE BASIS OF SELF-MA DE VOUCHERS. THE PURCHASES RECORDED IN THE BOOKS OF ACCOUNT COULD NOT BE VERIF IED AND AT THE TIME OF ASSESSMENT AFTER DISCUSSION THE ASSESSEE HIMSELF AG REED FOR THE ADDITION OF RS.2,00,000/-. ONCE THE ASSESSEE AGREED FOR THE AD DITION AND DO NOT POINT OUT ANY CONTRARY MATERIAL TO THAT AGREED ADDITION, THE ASSE SSEE SHOULD NOT CHALLENGE SUCH AGREED ADDITION. IN THE LIGHT OF THE FACT, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ORDER OF CIT(A) ON THE ISSUE IS CONFIRMED. 5. THE SECOND ADDITION MADE BY THE A.O. IS OF RS.9, 87,400/-. THE A.O. NOTED THAT AIR INFORMATION WAS RECEIVED DURING THE YEAR U NDER CONSIDERATION THAT THE ASSESSEE HAS MADE INVESTMENT IN SBI MUTUAL FUND OF RS.3,00,000/- ON 07.12.2006, RS.8,00,000/- ON 03.12.2006 AND RS.4,00,000/- ON 26 .11.2006. THESE INVESTMENTS HAVE NOT BEEN FOUND DISCLOSED BY THE ASSESSEE IN TH E BALANCE SHEET ENCLOSED ALONG WITH RETURN OF INCOME. BEFORE THE A.O. IT WAS EXPL AINED BY THE ASSESSEE THAT THESE THREE CHEQUES WERE ISSUED BY THE ASSESSEE TO SHRI A MIT SHARMA FOR PURCHASE OF MATERIAL AND SUBSEQUENTLY SHRI AMIT SHARMA MADE THE SE INVESTMENTS IN SBI MUTUAL FUND. SHRI AMIT SHARMA IS THE SON OF THE A SSESSEE. ON ENQUIRY FROM SBI IT WAS FOUND THAT ALL THE ABOVE MENTIONED THREE AMO UNTS WERE INVESTED IN SBI MAGNUM INSTA CASH FUND LIQUID FLOATER PLAN AND THIS INVESTMENT REMAINED IN THE 4 ITA NO.178/AGRA/2013 A.Y. 2007-08 SINGLE FOLIO NAME OF THE ASSESSEE HIMSELF. THE A.O . FURTHER NOTICED THAT OUT OF INVESTMENT OF RS.15,00,000/- (RS.3 LACS + RS.8 LACS + RS.4 LACS), THE ASSESSEE RECEIVED REPAYMENT OF RS.10,00,000/- ON 11.03.2007 AND THE SAME HAS BEEN FOUND TO BE DEPOSITED IN BANK ACCOUNT OF THE ASSESSEE. T HE ASSESSEE ALSO RECEIVED DIVIDEND ON SUCH INVESTMENT REGULARLY WHICH WAS DEP OSITED IN BANK ACCOUNT. THE DIVIDEND ON MUTUAL FUND INVESTMENT WAS TAX-FREE INC OME, THEREFORE, THE SAME WAS NOT SHOWN IN THE RETURN OF INCOME. THE ASSESSEE FU RNISHED A COPY OF ACCOUNT OF SHRI AMIT SHARMA WHICH HAS BEEN REPRODUCED BY THE A .O. AT PAGE NO.4 OF HIS ORDER. THE A.O. DID NOT ACCEPT THE ASSESSEES CONT ENTION THAT THE CHEQUES WERE GIVEN TO SHRI AMIT SHARMA FOR PURCHASE OF MATERIAL AS IN THE RELEVANT COPY OF RETURN OF INCOME OF SHRI AMIT SHARMA, NO PURCHASE V OUCHER, MODE OF TRANSPORT ETC. WERE PRODUCED BY SHRI AMIT SHARMA. THE A.O. AFTER CONSIDERING THE ASSESSEES SUBMISSION FOUND THAT THE PURCHASES SHOWN IN THE LE DGER ACCOUNT OF SHRI AMIT SHARMA OF RS.9,87,400/- WAS A BOGUS PURCHASES. THE A.O. ACCORDINGLY MADE ADDITION OF RS.9,87,400/-. 6. THE ADDITION MADE BY THE A.O. HAS BEEN CONFIRMED BY THE CIT(A) OBSERVING THAT THE ASSESSEE COULD NOT ESTABLISH THE PURCHASE CLAIMED TO HAVE BEEN MADE BY HIM THROUGH HIS SON SHRI AMIT SHARMA. IT IS UNDIS PUTED FACT THAT THE PERSON SHRI 5 ITA NO.178/AGRA/2013 A.Y. 2007-08 AMIT SHARMA WAS NOT IN THE BUSINESS OF SUPPLYING MA TERIAL IN EARLIER YEARS. AS PER THE CLAIM OF THE ASSESSEE, THIS WORK HAS BEEN START ED BY HIM DURING THE YEAR UNDER CONSIDERATION. IN THE STATEMENT RECORDED ON 26.11. 2012 BY THE A.O. SHRI AMIT SHARMA HAS REPLIED THAT HE DOES NOT BUY MATERIAL FR OM ANY REGULAR PARTY AND HE USED TO GO TO MARKET AND AFTER TAKING TO TRUCK DRIV ERS SETTLE THE DEAL AND PURCHASE THE MATERIAL BY MAKING CASH PAYMENT. THIS FACT HAS ALSO BEEN STATED BY HIM IN REPLYING TO QUESTION NO.6 IN THE STATEMENT. IN THE STATEMENT IT HAS ALSO BEEN STATED THAT SHRI AMIT SHARMA SELLS THE MATERIAL ON CASH TO DIFFERENT PARTIES AND THE CREDIT SALE IS MADE ONLY TO HIS FATHER AND THE PAYMENT IS MADE BY HIS FATHER WITHIN FEW DAYS. IN QUESTION NO.13 IT WAS ASKED BY THE A.O. T O EXPLAIN THE SOURCE OF HIS FUND FROM WHERE HE MADE PURCHASES FOR SELLING THE MATERI AL OF RS.10,00,000/- TO HIS FATHER IN A.Y. 2007-08. IN RESPONSE TO THAT QUERY SHRI AMTI SHARMA REPLIED THAT FOR PURCHASE OF THESE MATERIALS HE HAS TAKEN SOME M ONEY FROM HIS FATHER AND SOME MONEY WAS COLLECTED BY HIM BY MAKING CASH SALE. SH RI AMIT SHARMA STARTED FILING RETURN OF INCOME FROM A.Y. 2008-09. THE CIT(A) CAM E TO THE CONCLUSION THAT THE ENTIRE PURCHASES MADE BY THE ASSESSEE IN THE NAME O F SHRI AMIT SHARMA WAS FOUND TO BE BOGUS. THEREFORE, THE A.O. HAS RIGHTLY DISAL LOWED THE PURCHASES OF RS.9,87,400/- SHOWN IN THE NAME OF SHRI AMIT SHARMA . 6 ITA NO.178/AGRA/2013 A.Y. 2007-08 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HA S ALREADY SURRENDERED RS.2,00,000/- TO COVER UP THE PETTY LAPSES IN THE A CCOUNT OF THE ASSESSEE. THE ADDITION OF RS.9,87,400/- CANNOT BE MADE BY DISALLO WING PURCHASES AS IN FACT THE MATERIAL PURCHASED WAS USED FOR THE PURPOSE OF BUSI NESS. THE CONTENTION OF THE ASSESSEE THAT AFTER ADDING BOTH THE PURCHASES RS.2, 00,000/- AND RS.9,87,400/- THE CALCULATION OF G.P. INCREASED TO 22.19% AND N.P. RA TE TO 15.51% AS COMPARED TO G.P. AND N.P. RATES SHOWN BY THE ASSESSEE IN THIS Y EAR AND IN THE PAST YEAR. THEREFORE, IT IS ADMITTED FACT THAT MATERIAL WAS US ED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. A COMPARATIVE POSITION OF G.P. AND N. P. NOTED FROM THE ORDER OF CIT(A) IS REPRODUCED FROM PAGE NO.6 AS UNDER :- A.Y. CONTRACT RECD. GROSS PROFIT G.P. RATE % N.P. RATE % 2006-07 4633457.00 673107.00 14.59% 6.31% 2007-08 11920311.00 1458321.00 12.23% 5.56% 8. THE ADMITTED FACTS OF THE CASE ARE THAT THE MATE RIAL IN FACT HAS BEEN USED FOR THE PURPOSE OF BUSINESS BUT THE ASSESSEE HAS FAILED TO SUBSTANTIATE BY EVIDENCE THAT THE SAID MATERIALS WERE PURCHASED THROUGH SHRI AMIT SHARMA. THE VOUCHERS ARE SELF-MADE WITHOUT SUPPORTING BILLS AND VOUCHERS. S HRI AMIT SHARMA IN HIS STATEMENT SUBMITTED THAT THE BILLS AND VOUCHERS WER E NOT AVAILABLE AS HE DOES NOT 7 ITA NO.178/AGRA/2013 A.Y. 2007-08 BUY MATERIAL FROM ANY REGULAR PARTY AND HE USED TO GO TO MARKET AND AFTER TAKING TO TRUCK DRIVERS SETTLE THE DEAL AND PURCHASE THE MATE RIAL BY MAKING CASH PAYMENT. HE SOLD THE GOODS IN CASH TO DIFFERENT PARTIES AND THE CREDIT SALE IS MADE ONLY TO HIS FATHER. THIS STATEMENT GIVEN BY SHRI AMIT SHARMA H AS NOT BEEN CONTROVERTED BY THE REVENUE. THEREFORE, WE FIND THAT THE MATERIAL TO THE EXTENT OF RS.9,87,400/- HAS BEEN PURCHASED AND UTILISED FOR THE PURPOSE OF BUSINESS. IT MAY NOT HAVE BEEN PURCHASED FROM REGULAR PARTY BUT FROM THE MARKET AS STATED BY SHRI AMIT SHARMA. SUCH PURCHASES IN THIS LINE OF BUSINESS CANNOT BE D ENIED AS PER THE PREVAILING PRACTICE OF THIS TRADE. WHEN THE MATERIAL IS IN FA CT UTILISED FOR THE PURPOSE OF BUSINESS BUT FROM THE GREY MARKET THEN CERTAINLY TH E ASSESSEE HAS BEEN BENEFITED BY PROVIDING MARGIN OF GREY MARKET. WE ARE, THEREFORE , OF THE CONSIDERED VIEW THAT INSTEAD OF DISALLOWING THE ENTIRE PURCHASES OF RS.9 ,87,400/- THE BENEFIT OF GREY MARKET IS REQUIRED TO BE ADDED IN THE HANDS OF THE ASSESSEE. ON CONSIDERING THE TOTALITY OF THE FACTS AND COMPARATIVE POSITION OF T RADING RESULT, WE NOTICE THAT IN A.Y. 2006-07 THE G.P. RATE WAS 14.59%. IF THE SAID RATE IS APPLIED TO THE YEAR UNDER CONSIDERATION I.E. A.Y. 2007-08, THE G.P. SHO ULD BE RS.17,39,173/- AS AGAINST G.P. SHOWN BY THE ASSESSEE OF RS.14,58,321/-. THUS , THE ADDITION TO THE EXTENT OF RS.2,80,852/- IS WARRANTED. THE ASSESSEE HAS ALREA DY SURRENDERED RS.2,00,000/- AND, THEREFORE, THE ADDITION TO THE EXTENT OF RS.80 ,852/- IS FURTHER WARRANTED. WE 8 ITA NO.178/AGRA/2013 A.Y. 2007-08 ACCORDINGLY SUSTAIN THE ADDITION OF RS.80,852/- INS TEAD OF RS.9,87,400/-. THUS, THE ASSESSEE GETS RELIEF OF RS.9,06,548/-. THE ADDITIO N TO THE EXTENT OF RS.80,852/- IS SUSTAINED AND A RELIEF OF RS.9,06,548/- IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT/RESPONDENT/CIT (APPEALS) CONCERNED/CIT CO NCERNED/ D.R., ITAT, AGRA BENCH, AGRA/ GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY