The Dy,CIT, Circle-6, Surat V. Shri Rameshchandra I. Gandhi, HUF, Surat

ITA 1805/AHD/2014

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1894 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 13-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Assessee Lawyers: SHRIP M JAGASHETH
• Keywords: Bogus purchase; Unexplained cash credit; Deemed to accrue or arise in india
• Section: 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL,SURAT BENCH,SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NOS.1805 & 1806/AHD/2014/SRT [ [ / ASSESSMENT YEAR: 2004-05 DY. COMMISSIONER OF INCOME TAX, CIRCLE-6, SURAT. VS. SHRIRAMESHCHANDRA I GANDHI (HUF), PROP: JAY AMBE TEXTILE, 6/2507, LIMBU SHERI, MAHIDHARPURA, SURAT 395 003. [PAN: AACHR 4622R] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. R.P. RASTOGI, SR. D.R /RESPONDENT BY : SHRIP.M.JAGASHETH, C.A /DATE OF HEARING : 19-03-2018 /DATE OF PRONOUNCEMENT : 20-03-2018 / ORDER PERC.M.GARG, JUDICIAL MEMBER : THESETWO APPEALS HAVE BEEN FILED BY THE REVENUE CHALLENGING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I,SURAT (CIT(A) FOR SHORT) DATED 28.03.2014 PASSED IN FIRST APPEAL NO.CAS/I/TFR-6.77/216-A/2012-13 AND THE ORDER OF CIT(A)-I PASSED IN THE FIRST APPEAL NO.CAS-I/TFR- 6.77/216/2012-13 DATED 31.03.2014 FOR THE ASSESSMENT YEAR (AY) 2004-05. 2 ITA NOS.1805 & 1806/AHD/2014/SRT (A.Y: 2004-05) SHRIRAMESHCHANDRA I GANDHI(HUF) 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS: IN ITA NO.1805/AHD/2014/SRT : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,75,06,500/- MADE ON ACCOUNT OF BOGUS SUNDRY CREDITORS TOWARDS PURCHASES U/S.41(L) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS NOT APPRECIATED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PARTIES FROM WHOM PURCHASES WERE MADE IN A.YR.2003-04 DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS AND HAS IGNORED THE FACT THAT SOME OF THE PARTIES HAVE DENIED HAVING MADE ANY TRANSACTION WITH THE ASSESSEE WHICH IN THE BALANCE SHEET OF SOME OF THE PARTIES THE NAME OF THE ASSESSEE WAS NOT REFLECTED AS DEBTORS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS NOT APPRECIATED THAT BARRING THREE PARTIES PURCHASES WITH WHOM WERE DISALLOWED IN THE A.YR.2003-04 REST OF THE PARTIES IN RESPECT OF WHICH ADDITION WAS MADE IN A.YR.2004-05 U/S.41(L) OF THE ACT WERE DIFFERENT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING - OFFICER. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A)-I SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. IN ITA NO.1806/AHD/2014/SRT : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN CANCELLING PENALTY U/S.271(L)(C) OF THE ACT TO THE TUNE OF RS.57,77,145/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A)-I SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES IN THE QUANTUM OF THE REVENUE AND CAREFULLY PERUSED THE MATERIALS OF THE RELEVANT RECORD OF THE 3 ITA NOS.1805 & 1806/AHD/2014/SRT (A.Y: 2004-05) SHRIRAMESHCHANDRA I GANDHI(HUF) TRIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSING OFFICER (AO) WAS CORRECT AND JUSTIFIED IN MAKING ADDITION AND HOLDING THAT THE ASSESSEE HAS NO LIABILITY TO MAKE THE ALLEGED PAYMENT AS ON DATE. THE STORY THAT GOODS HAVE BEEN PURCHASED THROUGH BROKERS (AND THE LIABILITY LIES AGAINST THE BROKERS) IS UNACCEPTABLE AND UNBELIEVABLE. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS NO EVIDENCE OR WHATSOEVER TO BACK UP ITS CLAIM AND IT FAILED TO PRODUCE THE ALLEGED BROKERS FOR VERIFICATION. THUS, IT IS CLEAR THAT THE LIABILITY OF ASSESSEE TO MAKE PAYMENTS TO THE CREDITORS HAS SEIZED AND IN THIS SITUATION THE AO WAS RIGHT IN INVOKING PROVISION OF S. 41(1)(A) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT(A) WAS NOT CORRECT IN GRANTING RELIEF TO THE ASSESSEE BY OBSERVING THAT THE AO HAS DISCUSSED IN THE ASSESSMENT ORDER, CORRESPONDING PURCHASES TO THE CREDITORS OF RS. 1,75,06,500/- HAVE ALREADY BEEN DISALLOWED IN A.Y. 2003-04 WHICH WERE CONSIDERED BY LD. CIT(A) AND GP WAS ESTIMATED AT A SPECIFIC PERCENTAGE. 4. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRESENTATIVE (AR) PLACING COPY OF ORDER OF ITAT, AHMEDABAD CAMP AT SURAT ORDER DATED 05.04.2017 FOR A.Y 2003-04 IN ASSESSEES OWN CASE SUBMITTED THAT AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES THE TRIBUNAL HAS UPHELD ESTIMATION PROFIT @ 12.5% ON THE SAME ALLEGED PURCHASES OF RS. 1,92,28,170/- WHICH ALSO INCLUDES SOME CREDITORS BROUGHT FORWARD FROM THE EARLIER FINANCIAL TIME PERIOD AS ON 31.03.2003 THEREFORE, CONCLUSION DRAWN BY THE LD. CIT(A) MAY KINDLY BE UPHELD. 4 ITA NOS.1805 & 1806/AHD/2014/SRT (A.Y: 2004-05) SHRIRAMESHCHANDRA I GANDHI(HUF) 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, AT THE VERY OUTSET WE OBSERVE THAT THE LD. DR HAS NOT CONTROVERTED THE FACT THAT ON ACCOUNT OF BOGUS PURCHASES THE LD. CIT(A) FOR A.Y 2003-04 HAS RESTRICTED THE ADDITION TO 12.5% OF TOTAL ALLEGED PURCHASES AND THIS CONCLUSION HAS BEEN CONFIRMED BY THE TRIBUNAL ORDER DATED 05.04.2017 (SUPRA) AND THERE IS NO APPEAL FROM THE DEPARTMENT AGAINST THE SAID ORDER. IN THE BACK DROP OF ABOVE NOTED FACT WE ARE IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) IN PARA 3.1 OF THE IMPUGNED ORDER WHICH READS AS FOLLOWS: 3.1 IN THE CASE OF APPELLANT ALSO, AS DISCUSSED BY AO IN THE ASSESSMENT ORDER, LETTERS ISSUED U/S. 133(6) OF THE ACT TO THE CREDITORS REMAINED UNSERVED. THE ASSESSEE ALSO FAILED TO PRODUCE THE RELEVANT DETAILS RELATED TO PURCHASES AS WELL AS CREDITORS. AO, CONSEQUENTLY, REACHED TO THE CONCLUSION THAT NO LIABILITY OF ANY SORT EXISTS AGAINST ANY CREDITOR DURING THE YEAR UNDER CONSIDERATION AND HE MADE THE ADDITION OF RS. 1,75,06,500/- U/S. 41(1) OF THE ACT AS CESSATION OF LIABILITY. THUS, THE FACTS ARE SIMILAR TO THE FACTS OF AFORESAID SISTER CONCERN NAMELY UTSAV SILK MILLS PVT. LTD. THOUGH THE ASSESSMENT YEAR INVOLVED IN THAT CASE IS 2004-05, BUT, IT DOES NOT MAKE ANY DIFFERENCE AS THE FACTS; TO THAT CASE ARE SIMILAR AS .IN THE CASE OF APPELLANT. HOWEVER, IN THAT CASE:, HON'BIE ITAT HAS DELETED THE ADDITION HOLDING THAT MERELY BECAUSE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS OR COULD NOT BE VERIFIED, IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. THE SAME RATIO APPLIES TO THE FACTS IN CASE OF APPELLANT ALSO. FURTHER, IN A RECENT DECISION DATED 04.02.2014 IN THE CASE CIT VS. BHOGILALRAMJIBHAIATARA, HON'BLE GUJARAT HIGH COURT ON THE SAME ISSUE HAS HELD THAT EVEN IF CREDITORS ARE NOT FOUND AT THE GIVEN ADDRESSES OR THEY HAVE NO DEALING WITH THE ASSESSEE, THE AMOUNT IN QUESTION CANNOT BE ADDED, BACK AS DEEMED INCOME U/S. 41(1) OF THE ACT UNLESS THERE IS CESSATION OR REMISSION OF LIABILITY IN THAT YEAR. THE CASE OF APPELLANT IS SQUARELY COVERED BY THE DECISION OF HON'BLE COURT AS THERE IS NO CESSATION OR REMISSION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION IN HIS CASE. THEREFORE, IT CANNOT BE TREATED AS DEEMED INCOME U/S. 41(1) OF THE ACT. MOREOVER, APPELLANT HAS MENTIONED IN SUBMISSIONS AND AO HAS DISCUSSED IN THE ASSESSMENT ORDER, CORRESPONDING PURCHASES TO THE CREDITORS OF RS. 1,75,06,500/- HAVE ALREADY BEEN DISALLOWED IN A.Y. 2003-04 WHICH WERE CONSIDERED BY CIT(A) AND GP WAS ESTIMATED AT A SPECIFIC PERCENTAGE. SINCE THE PURCHASES HAVE ALREADY BEEN HELD UNEXPLAINED AND A CERTAIN PERCENTAGE HAS BEEN ESTIMATED FOR MAKING ADDITION, FURTHER DISALLOWANCE OF SAME AMOUNT AS UNEXPLAINED CREDITORS 5 ITA NOS.1805 & 1806/AHD/2014/SRT (A.Y: 2004-05) SHRIRAMESHCHANDRA I GANDHI(HUF) IN SUBSEQUENT YEAR WOULD LEAD TO DOUBLE TAXATION, WHICH IS NOT PERMISSIBLE IN THE LAW. IN VIEW OF ABOVE DISCUSSION, I HOLD THAT THE ADDITION MADE BY AO IS NOT SUSTAINABLE AND DESERVES TO BE DELETED. I, THEREFORE, DELETE THE ADDITION AND ALLOW THE GROUNDS TAKEN BY APPELLANT. 6. IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT SINCE IN EARLIER A.Y 2003- 04 THE PURCHASES HAVE ALREADY BEEN HELD UNEXPLAINED AND A CERTAIN PERCENTAGE HAS BEEN ESTIMATED FOR MAKING ADDITION, FURTHER DISALLOWANCE OF SAME AMOUNT AS UNEXPLAINED CREDITORS IN SUBSEQUENT YEAR WOULD LEAD TO DOUBLE TAXATION, WHICH IS NOT PERMISSIBLE IN THE LAW. THUS, WE ARE INCLINED TO HOLD THAT THE ADDITION MADE BY THE AO WAS NOT CORRECT AND JUSTIFIED AND THE LD. CIT(A) WAS RIGHT IN DELETING THE SAME BEING PERTAINING TO THE OUTSTANDING AMOUNT BROUGHT FORWARD BY THE ASSESSEE TO THE PRESENT FINANCIAL PERIOD AND WE ARE SATISFIED WITH THE CORRECTNESS OF THIS FACT FROM THE COPY OF THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE. IT IS ALSORELEVANT MENTION THAT WHEN THE LIABILITY, HOWEVER PERTAINING TO THE BOGUS PURCHASES OF EARLIER YEAR ON WHICH DEPARTMENT HAS ESTIMATED PROFIT @ 12.5%, IS STILL SHOWN AS UNPAID TO THE RESPECTIVE CREDITORS AND THE ASSESSEE HAS NOT MADE ANY UNILATERAL OR BILATERAL ACT IN THIS REGARD THEN, IT CANNOT BE PRESUMED THAT THE LIABILITY SEIZED TO EXIST AND IN THIS FACTUAL MATRIX PROVISION OF S. 41(1)(A) CANNOT BE INVOKED FOR MAKING ADDITION ON ACCOUNT OF CESSATION OF LIABILITY. THEREFORE, WE ARE UNABLE TO SEE ANY REASON TO INTERFERE WITH THE FIRST APPEAL ORDER AND THUS WE UPHOLD THE SAME. FINALLY, GROUNDS OF REVENUE BEING BREFT OF MERITS ARE DISMISSED. 6 ITA NOS.1805 & 1806/AHD/2014/SRT (A.Y: 2004-05) SHRIRAMESHCHANDRA I GANDHI(HUF) ITA NO.1806/AHD/2014/SRT: 7. IN THIS APPEAL THE REVENUE HAS CHALLENGED FIRST APPELLATE ORDER WHEREIN THE LD. CIT(A) HAS CANCELLED THE PENALTY IMPOSED BY THE AO ON THE ASSESSEE U/S. 271(1)(C)OF THE ACT. SINCE, BY THE EARLIER PART OF THIS ORDER WE HAVE UPHOLD CONCLUSION OF THE LD. CIT(A) WHEREIN QUANTUM ADDITION WAS DELETED. THUS, WHEN THE ADDITION ON WHICH PENALTY WAS IMPOSED IS NOT FOUND TOBE SUSTAINABLE THEN IMPOSITION OF PENALTY CANNOT BE HELD AS VALID AND SUSTAINABLE. THEREFORE, CONCLUSION DRAWN BY THE LD. CIT(A) CANCELLING THE PENALTY IS ALSO UPHOLD. ACCORDINGLY, GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT,BOTH THE APPEALS OF REVENUE ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 20 TH MARCH, 2018. / SURAT ; DATED :20 TH MARCH, 2018 EDN / COPY OF THE ORDER IS FORWARDED TO : / BY ORDER, // TRUE COPY // / ASSISTANT REGISTRAR SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) / JUDICIAL MEMBER 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)0I, SURAT; 4. THE PRL. CIT, SURAT; 5. , , / DR, ITAT,SURAT; 6. [ / GUARD FILE. 7 ITA NOS.1805 & 1806/AHD/2014/SRT (A.Y: 2004-05) SHRIRAMESHCHANDRA I GANDHI(HUF) , / ITAT, SURAT