Sh. Shanti Swaroop Jain, Agra V. A.C.I.T.-1, Agra

ITA 179/AGR/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0591 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Bogus purchase; Set aside
• Section: 271(1)(c); 133(6)

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.179/AGR/2012 ASSESSMENT YEAR: 2008-09 SHRI SHANTI SWAROOP JAIN, VS. ASSTT. COMMISSIONER OF INCOME PROP. M/S. JAIN INTERNATIONAL, TAX-1, AGRA. 6/23, HING KI MANDI, AGRA. (PAN: AAXPJ 6082 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE, RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 11.01.2013 DATE OF PRONOUNCEMENT OF ORDER : 29.01.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.11.2011 PASSED BY THE LD. CIT(A)-I, AGRA FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED AS MANY AS 8 GROUNDS OF APPEAL, HOWEVER, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT GROUND NOS .1 TO 7 PERTAIN TO ADDITION OF RS.37,65,836/- ON ACCOUNT OF PURCHASES FROM M/S. GO PAL ENTERPRISES AND SECOND EFFECTIVE GROUND IS IN RESPECT OF DISALLOWANCE OF I NTEREST OF RS.2,55,536/-. ITA NO.179/AGR/2012 A.Y. 2008-09 2 3. THE BRIEF FACTS OF FIRST GROUND OF APPEAL ARE TH AT THE ASSESSEE DERIVES INCOME FROM TRADING BUSINESS OF ZIPS FOR SHOES ETC. DURIN G THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE PURCHASED GOODS WORTH RS.38,68,137/- FROM M/S. GOPAL ENTERPRISES. OUT OF THAT PURCHASES, PAYMENTS WERE MADE ONLY FOR RS.7,50,000/- AND REST OF THE BALANCE AMOUNT HAS BE EN SHOWN AS OUTSTANDING. THE A.O. CALLED INFORMATION UNDER SECTION 133(6) FROM T HE ASSISTANT COMMISSIONER OF COMMERCIAL TAX, AGRA REGARDING SALES TAX RETURN OF M/S. GOPAL ENTERPRISES. STATEMENT OF SHRI RAM GOPAL SHARMA WAS ALSO RECORDE D ON 25.10.2010. AFTER CONSIDERING THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THE A.O. RECORDED SECOND STATEMENT OF SHRI RAM GOPAL SHARMA ON 11.11.2010 WHEREIN HE REPLIED TO QUESTION NO.2 THAT NECESSARY PAYMENT OF RS.7,50,000/- HAS BEEN RECEIVED AND HE IS NOT CONCERNED WITH BALANCE AMOUNT OF RS.3 1,18,137/- ON THE BASIS OF STATEMENT RECORDED ON 11.11.2010 AND 25.10.2010. T HE A.O. NOTED THAT RAM GOPAL SHARMA HAS PURCHASED ALL THE GOODS FROM SMALL VENDERS OF AGRA WHO WERE NON-TRACEABLE AND NON-VERIFIABLE. HE COULD NOT ALS O IDENTIFY THE PARTIES MENTIONED IN THE SALES TAX RETURN. ON THE BASIS OF INFORMATI ON COLLECTED, THE A.O. ISSUED SHOW CAUSE NOTICE WHY BOOKS OF ACCOUNT OF THE ASSES SEE SHOULD NOT BE REJECTED UNDER SECTION 145(3) OF THE ACT. THE A.O. HAS AL SO RECORDED STATEMENT OF SHRI MOHAN SWAROOP JAIN, PROPRIETOR M/S. JAIN PAPER MART . THE STATEMENT WAS RECORDED ON 04.12.2010. THE A.O. AFTER CONSIDERING STATEMENT OF SHRI RAM GOPAL SHARMA AND MOHAN SWAROOP JAIN NOTICED THAT SHRI RAM GOPAL SHARMA IS AN ITA NO.179/AGR/2012 A.Y. 2008-09 3 EMPLOYEE OF THE BROTHER OF THE ASSESSEE AND NOT AN INDEPENDENT TRADER. THE A.O. FOUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS AND CORRECTNESS OF THE PURCHASES AMOUNTING TO RS.38,68,137/- FROM M/S. GOPAL ENTERPRISES, THEREFORE, BOOKS OF ACCOUNT OF THE ASSESSEE WAS REJECTED INVOK ING SECTION 145(3) OF THE ACT. THE A.O. TREATED THE ENTIRE PURCHASE OF RS.38,68,13 7/- AS BOGUS PURCHASE AND MADE ADDITION OF THE SAID AMOUNT. 4. THE ASSESSEE MADE SUBMISSION ON MERIT AS WELL AS ON ALTERNATE SUBMISSION RELYING ON THE DECISION OF I.T.A.T., AHMEDABAD BENC H IN THE CASE OF VIJAY PROTEIN VS. ACIT, 55 TTJ (AHD.) 76. THE CIT(A) DID NOT ACC EPT THE ASSESSEES CONTENTION ON MERIT AS WELL AS ON ALTERNATE CONTENTION INCLUDI NG THE DECISION OF I.T.A.T., AHMEDABAD BENCH IN THE CASE OF VIJAY PROTEIN (SUPRA ) DISTINGUISHING THE SAID ORDER THAT IN THAT CASE MATERIAL IN QUESTION WAS FO UND TO HAVE BEEN RECEIVED AND WITHOUT RECEIVING SUCH MATERIAL IT WOULD NOT HAVE B EEN POSSIBLE TO CARRY OUT PRODUCTION AND SUCH IS NOT THE CASE OF THE ASSESSEE . THE CIT(A) WAS OF THE VIEW THAT THE ADDITION OF WHOLE GROSS AMOUNT IS WARRANTE D AS THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS. HOWEVER, THE CIT(A) ALLOWED RE LIEF OF RS.1,44,075/- ON ACCOUNT OF OPENING BALANCE OF THE PURCHASES. 5. IT IS ALSO RELEVANT TO NOTE THAT IN ADDITION TO THE ADDITION OF RS.38,68,137/-, THE A.O. ADDED RS.5,00,000/- ON ACCOUNT OF COMMISSI ON EXPENSES FOR WHICH THE ITA NO.179/AGR/2012 A.Y. 2008-09 4 ASSESSEE AGREED FOR THE ADDITION. THE CIT(A) DELET ED THE SAID ADDITION ON THE GROUND THAT HE HAS CONFIRMED THE ADDITION OF RS.37, 65,836/- ON ACCOUNT OF BOGUS PURCHASES AND ADDITION OF RS.5,00,000/- WILL BE COV ERED BY THE SAID AMOUNT SURRENDERED BY THE ASSESSEE. 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE ISSUE TO BE EXAMINED IN THE CASE UNDER CONSIDER ATION WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE A.O. IS CORRECT I N MAKING ADDITION OF GROSS AMOUNT OF PURCHASES MADE FROM M/S. GOPAL ENTERPRISE S. THE A.O. HELD THAT THE PURCHASE WAS BOGUS AS PAYMENT WAS MADE ONLY FOR RS. 7,50,000/- AND THE ENTIRE BALANCE AMOUNT WAS SHOWN AS OUTSTANDING. SHRI RAM GOPAL SHARMA IN HIS FIRST STATEMENT DATED 25.10.2010 ADMITTED THAT HE HAS SOL D THE GOODS TO THE ASSESSEE AND THE SAME HAS BEEN DECLARED IN THE SALES TAX RETURN BUT IN THE SECOND STATEMENT DATED 11.11.2010 HE DENIED ABOUT THE OUTSTANDING AM OUNT OF RS.31,18,137/- AND ALSO SHOWN IGNORANCE ABOUT THE SALES TAX RETURN FIL ED BY HIM. IT IS ADMITTED FACT THAT M/S. GOPAL ENTERPRISES HAS PAID THE SALES TAX ON THE SAID GOODS AND THE SAME HAS BEEN DECLARED BEFORE THE SALES TAX AUTHORITY BY FILING SALES TAX RETURNS. THE A.O. MADE ADDITION ON SURMISES THAT SHRI RAM GOPAL SHARMA IS EMPLOYEE OF THE BROTHER OF ASSESSEE AND NOT AN INDEPENDENT TRADER W HEREAS THE ASSESSEE HAS FURNISHED SUFFICIENT EVIDENCE IN THE FORM OF BANK A CCOUNT, COPY OF SALES TAX RETURN ETC. IN THE ALIGHT OF THE FACT, THE ADDITIO N OF PURCHASES IS NOT WARRANTED ITA NO.179/AGR/2012 A.Y. 2008-09 5 UNLESS IT IS FOUND THAT THE ASSESSEE HAS MADE THE B OGUS ENTRY OF PURCHASES FOR REDUCING THE PROFIT. IF WE CONSIDER THE COMPARATIV E POSITION OF G.P., WE FIND AS UNDER :- A.Y. 2004-05 9.11% A.Y. 2005-06 9.17% A.Y. 2006-07 9.4% A.Y. 2007-08 9.00% A.Y. 2008-09 9.00% 7. ON CONSIDERATION OF ABOVE COMPARATIVE G.P. POSIT ION, WE DO NOT FIND SUBSTANCE IN ADDITION MADE BY THE A.O. EVEN IF FOR THE SAKE OF ARGUMENT, IF WE ACCEPT THE VIEW OF REVENUE AUTHORITIES, THEN CALCUL ATION OF G.P. COMES TO 13% AFTER CONSIDERING THE GROSS AMOUNT OF ADDITION OF R S.38,68,137/- OF PURCHASES. 13% G.P. RATE WAS NEVER SHOWN BY THE ASSESSEE IN EA RLIER YEARS. THERE IS NO FINDING OF THE A.O. THAT SUCH G.P. RATE PREVAILS IN THIS LINE OF BUSINESS. UNDER THE CIRCUMSTANCES, IT CANNOT BE HELD THAT THE ASSESSEE HAS PASSED A BOGUS PURCHASE ENTRY IN THE BOOKS OF ACCOUNT. ON COMPARISON OF TH E G.P. RATE ONE CAN COME TO THE CONCLUSION THAT THE PURCHASES WERE GENUINE AS THE S AME WAS PURCHASED AND USED FOR THE PURPOSE OF BUSINESS. OTHERWISE FROM ACCOUNT ING POINT OF VIEW, IT WAS NOT POSSIBLE TO MAINTAIN 9% G.P. RATE. UNDER THE CIRCU MSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION ON ACCOUNT OF BOG US PURCHASES IS NOT WARRANTED. EVEN IF WE CONSIDER THE CASE FROM A DIFFERENT ANGLE ACCEPTING THE REVENUES CONTENTION THAT THE ASSESSEE DID NOT MAKE PURCHASES FROM M/S. GOPAL ENTERPRISES ITA NO.179/AGR/2012 A.Y. 2008-09 6 AND AS HELD AS ABOVE THAT THERE IS A POSITIVE EVIDE NCE THAT PURCHASES WAS IN FACT MADE, MAY BE FROM OTHER PARTIES THAN M/S. GOPAL ENT ERPRISES, IN SUCH CIRCUMSTANCES, THE FORMULA LAID DOWN BY THE I.T.A.T . AHMEDABAD BENCH IN THE CASE OF VIJAY PROTEIN (SUPRA) IS APPLICABLE. IF WE CONSIDER THE FORMULA THAT THE ASSESSEE MAY GET BENEFIT OF GREY MARKET, THE ASSESS EE HAS ALREADY SURRENDERED RS.5,00,000/-, MAY BE ON ACCOUNT OF COMMISSION AND OTHER EXPENSE WHICH CAN ALSO BE TREATED AS PROFIT OF GREY MARKET. THEREFORE, AD DITION TO THE EXTENT OF RS.5,00,000/- IS WARRANTED. IN THE LIGHT OF THE AB OVE DISCUSSION, WE CONFIRM THE ADDITION OF RS.5,00,000/- OUT OF THE ADDITION OF RS .37,65,836/- SUSTAINED BY THE CIT(A). IN OTHER WORDS, WE DELETE THE ADDITION OF RS.38,68,137/- MADE BY THE A.O. AND CONFIRM THE ADDITION OF RS.5,00,000/- MADE BY THE A.O. 8. THE SECOND EFFECTIVE GROUND IS IN RESPECT OF INT EREST OF RS.2,55,536/-. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS PAID INTEREST OF RS.2,55,536/- TO SMT. RENU JAIN. THE A.O. MADE HE ADDITION AS UNDER :- (PAGE NO.9) THE REPLY OF THE ASSESSEE IS NOT ACCEPTABLE. ASSE SSEE HAS SUBMITTED THAT HE HAD TAKEN LOAN OF RS.20,75,000/- FROM SMT. RENU JAIN IN HIS INDIVIDUAL CAPACITY AND NOT FOR THE BUS INESS OF M/S JAIN INTERNATIONAL, AGRA. THEREFORE, AS PER THE REPLY O F THE ASSESSEE, IT IS APPARENT THAT THE INTEREST GIVEN TO SMT. RENU JAIN OF RS.2,55,536/- FORM THE FIRMS ACCOUNT IS NOT FOR BUSINESS PURPOSE AND HENCE NOT ALLOWABLE. SECONDLY, AS PER THE LEDGER ACCOUNT OF SMT. RENU JAIN IN THE BOOKS OF M/S JAIN INTERNATIONAL, AGRA, IT IS OB SERVED THAT THERE IS A CREDIT BALANCE RS.3,72,216/- OF SMT. RENU JAIN ON 0 1.04.2007. THE ITA NO.179/AGR/2012 A.Y. 2008-09 7 CREDIT BALANCE OF SMT. RENU JIAN CONVERTED INTO DEB IT BALANCE FROM 15.10.2007 AND IT CONTINUED TO BE DEBIT BALANCE THR OUGHOUT THE YEAR. HENCE RS.2,55,536/- IS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. ASSESSEE HAS FURNISHED INACCURATE PA RTICULARS OF INCOME, THE PENALTY PROCEEDINGS IS BEING INITIATED U/S 271(1)(C) OF THE I.T. ACT. 9. THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY TH E A.O. 10. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. SUBMISSIONS OF THE ASSESSEE ARE THAT THE ASSESSEE H AS RAISED LOAN OF RS.8,00,000/- FROM SMT. RENU JAIN ON 31.03.2005. A LOAN OF RS.13 ,00,000/- WAS FURTHER RECEIVED. THE LOAN WAS TRANSFERRED TO THE PARTNERS HIP FIRM M/S. JAIN INTERNATIONAL. THUS, THE LOAN WAS USED FOR THE PURPOSE OF BUSINESS . THE ASSESSEE IS PROPRIETOR OF M/S. JAIN INTERNATIONAL, AGRA AND PARTNER IN M/S. J AIN INTERNATIONAL, NOIDA. THE ASSESSEE HAS MAINTAINED SEPARATE SETS OF BOOKS OF A CCOUNT IN INDIVIDUAL AND PROPRIETARY CONCERNS. RS.8,00,000/- WAS TRANSFERRE D ON 31.03.2005 TO THE ACCOUNT OF SHRI SHANTI SWAROOP JAIN, PROPRIETOR-SHIP CAPITA L ACCOUNT BY MEANS OF BOOK TRANSFERRED ENTRY. THUS THE CAPITAL IN THE HANDS O F M/S. JAIN INTERNATIONAL OF WHOM SHRI SHANTI SWAROOP JAIN IS PROPRIETOR HAD INCREASE D AS IT WAS REQUIRE TO BE INCREASED FOR THE PURPOSE OF BUSINESS. HOWEVER, IN PERSONAL SET OF BALANCE SHEET OF SHRI SHANTI SWAROOP JAIN THE AMOUNT OF RS.8,00,0 00/- WAS SHOWN AS CREDIT BALANCE IN THE NAME OF SMT. RENU JAIN. THE ENTRIES IN THE PROPRIETY BUSINESS AND PARTNERSHIP FIRM WERE ONLY FOR THE PURPOSE OF BUSIN ESS. THE LD. AUTHORISED ITA NO.179/AGR/2012 A.Y. 2008-09 8 REPRESENTATIVE DEMONSTRATED THIS FACT THAT THE ASSE SSEE HAS IN FACT TAKEN LOAN FROM SMT. RENU JAIN AND THE SAME WAS UTILISED FOR THE PU RPOSE OF BUSINESS. HE DREW OUR ATTENTION TO PAGE NO.82 WHERE COPY OF INDIVIDUAL BA LANCE SHEET AS ON 31.03.2008 OF SHRI SHANTI SWAROOP JAIN HAS BEEN PLACED. THE S AME IS REPRODUCED AS UNDER :- BALANCE SHEET AS ON 31 ST MARCH 2008 CAPITAL BALANCE B/D 5,997,959.61 M/S JAIN INTERNATI ONAL NOIDA 3,920,385.05 M/S JAIN INTERNATIONAL AGRA 2,304,731.69 SMT. RENU JAIN 2,075,000.00 CANARA BANK SB A/C 256,580.87 F.D.R. 65,737.00 MR. ATUL SHARMA 18,500.00 SAHARA AVAS YOJNA 10,000.00 BUILDING SANJAY PLACE 75,250.00 SMT. ANURADHA 15,000.00 BUILDING JATNI KA BAGH 115,300.00 BUILDING KANPUR 154,975.00 FLAT ADVANCES 800,000.00 PLOT SIKENDRA 400,000.00 CASH IN HAND 3,500.00 ---------------- ---------------- 8,106,459.61 8,106,459.61 ---------------- ---------------- 11. WE NOTICE THAT REVENUE AUTHORITIES HAS FAILED T O APPRECIATE THE FACTS OF THE ISSUE UNDER CONSIDERATION. THE ASSESSEE HAS MAINTA INED HIS PERSONAL SETS OF BOOKS OF ACCOUNT FOR PROPRIETARY CONCERN AND PARTNERSHIP CONCERN SEPARATELY. ON CONSIDERATION OF PERSONAL SETS OF BOOKS OF ACCOUNT, IT IS ADMITTED POSITION OF THE FACT THAT THE ASSESSEE HAS TAKEN LOAN FROM SMT. REN U JAIN AND THE BALANCE AS ON 31.03.2008 WAS RS.20,75,000/-. THE SAID AMOUNT HAS BEEN NEITHER DEPOSITED IN PROPRIETARY CONCERN M/S. JAIN INTERNATIONAL, AGRA N OR IN M/S. JAIN INTERNATIONAL, NOIDA. BOTH THESE CONCERNS ARE BUSINESS CONCERNS O F THE ASSESSEE, THEREFORE IT IS ESTABLISHED AND APPARENT FACT THAT THE BORROWED FUN D WAS UTILISED FOR THE PURPOSE OF ITA NO.179/AGR/2012 A.Y. 2008-09 9 BUSINESS. AS REGARDS OTHER ITEMS IN THE BALANCE SH EET, IN THE LIGHT OF THE ORDER OF I.T.A.T. AGRA BENCH IN VARIOUS CASES INCLUDING ITA NOS.439 & 440/AGR/2011 IN THE CASE OF M/S. ELDECO HOUSING & INDUSTRIES LIMITE D, ORDER DATED 14.09.2012, WHEREIN IT HAS BEEN HELD THAT SUCH INVESTMENT MADE OUT OF OWN CAPITAL THE INTEREST UNDER SECTION 36(1)(III) OF THE ACT IS ALLOWABLE. AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE NOTICE THAT IT IS ESTABLISHED FROM TH E ABOVE BALANCE SHEET THAT THE LOAN TAKEN BY THE ASSESSEE FROM SMT. RENU JAIN OF RS.20, 75,000/- HAS BEEN UTILISED FOR THE PURPOSE OF BUSINESS AND INTEREST PAID THEREON I S ALLOWABLE UNDER SECTION 36(1)(III) OF THE ACT. WE, THEREFORE, SET ASIDE TH E ORDERS OF THE REVENUE AUTHORITIES AND DELETE THE ADDITION OF RS.2,55,536/-. 12. 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: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY