M/s. Banu Hashim, Surat V. The ACIT., Circle-6, Surat

ITA 1867/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0336 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-08-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 22-08-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Bogus purchase; Deemed to accrue or arise in india; Assessment record
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.1867 & 1881/AHD/2006 ASSESSMENT YEAR:2003-04 DATE OF HEARING:20.8.09 DRAFTED:21.8.09 M/S. BANU HASHIM, C/O BHARAT P JHAVERI, ADVOCATE, 406 LALBHAT CONTRACTOR COMPLEX, OPP. PARSI LIBRARY NANPURA, SURAT PAN NO.AACFB4911B ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-6, ROOM NO.218, AAYAKAR BHAVAN, MAJURA GATE, SURAT V/S . V/S . ACIT, CIRCLE-6, SURAT M/S. BANU HASHIM, 85, GIDC PANDESARA, SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI KAMLESH BHATT, AR REVENUE BY:- SHRI C.K. MISHRA, DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE CROSS APPEALS ONE BY THE ASSESSEE AND OTHE R BY THE REVENUE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-IV, SURAT IN APPEAL NO.CAS-IV/19/06-07 DATED 12-06-2006. THE ASSESSMEN T WAS FRAMED BY THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-6, SURAT U/S.143 (3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 29-03-2006 FOR THE ASSESSMENT YEAR 2003-04. ITA NO.1867 & 1881/AHD/2006 A.Y. 2003-04 M/S. BANU HASHIM V. ACIT CIR-6, SURAT PAGE 2 2. THE FIRST COMMON ISSUE IN THE CROSS APPEALS IS A S REGARDS TO THE ORDER OF CIT(A) IN RESTRICTING THE DISALLOWANCE AT 20% OF TH E ALLEGED BOGUS PURCHASES THEREBY RESTRICTING THE ADDITION AT RS.5,26,160/- AS AGAINS T THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS.26,30,821/-. FOR THIS, ASSE SSEE HAS RAISED THE FOLLOWING GROUND NO.1 AND THE REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 AND 2 RESPECTIVELY:- ITA NO.1867/AHD/2006 (ASSESSEES APPEAL) (1) ON THE FACTS AND THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LEARNED C.I.T (APPEALS)-IV SURAT WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.5,26,160/- BEING 20% OF THE ALLE GED BOGUS PURCHASE AND HENCE YOUR PETITIONER PRAYS THAT THE SAME BE DELETE D. ITA NO.1881/AHD/2006 (REVENUES APPEAL) 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.26,30,821/- MADE BY THE ASSESSING OFFICER U/S.69 C OF THE I.T. ACT. 2. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ADDITION OF RS.26,30,821/- WAS MADE AFTER MAKING DETAILED INQUI RIES IN CONNECTION WITH PURCHASE OF GREY CLOTH FROM THE SUPPLIERS AND PAYME NT MADE, IN THIS REGARD. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED TH E CASE RECORDS INCLUDING THE ASSESSMENT ORDER, ORDER OF CIT(A) AND ASSESSEES PA PER BOOK CONTAINING PAGES 1 TO 78. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE PURCHASES MADE IN RESP ECT OF FIVE PARTIES, NAMELY, SHRI BALAJI FASHIONS, RACHNA SYNTHETICS, SHRI SAI BABA S ILK MILLS, ANUPAM SILK EMPORIUM AND LIBERTY ENTERPRISES, THAT THE PURCHASES DO NOT SEEM TO BE GENUINE. THE ASSESSING OFFICER ACCORDINGLY ISSUED NOTICE U/S.133 (6) OF THE ACT TO THE SAID FIVE SUPPLIERS, WHICH WERE ULTIMATELY RETURNED UN-SERVED . IN RESPONSE TO THE ASSESSING OFFICERS INQUIRY, THE ASSESSEE FILED COPIES OF ACC OUNT, COPIES OF BANK STATEMENT REFLECTING PAYMENT MADE TO THE SAID PARTIES AND STA TED THAT THE PURCHASES WERE GENUINE. THE AO FURTHER MADE INQUIRIES FROM THE BA NK AND ALSO REQUISITION THE CANCELLED ACCOUNT PAYEE CHEQUE FROM THE BANK IN ORD ER TO VERIFY THE GENUINENESS OF THE PURCHASE AND PAYMENT MADE THEREOF. THE AO FOUN D THAT THE CHEQUES ALTHOUGH ITA NO.1867 & 1881/AHD/2006 A.Y. 2003-04 M/S. BANU HASHIM V. ACIT CIR-6, SURAT PAGE 3 WERE INITIALLY ACCOUNT PAYEE CHEQUES WERE CONVERTED INTO CROSSED CHEQUES BY CANCELING NOTATION ACCOUNT PAYEE BY THE PERSON WH O HAD SIGNED THE CHEQUES, THE AO IN THE ASSESSMENT ORDER NOTED THAT ALL THE CHEQU ES WERE ENCASHED ON A SINGLE DAY I.E. ON 21-11-2002 BY THE PROPRIETORS OF M/S. N OVEL TEX PRINTS AND QUALITY PRINTS. ACCORDINGLY AO IN VIEW OF THE INQUIRIES, CONCLUDED THAT THESE TWO PARTIES WHO HAD ENCASHED THE CHEQUES, THE ACCOUNTS WERE OPENED ON T HE VERY SAME DATE IN CONJUNCTIVE NUMBERS. IN VIEW OF THESE FACTS, AO CO NCLUDED THAT PURCHASES MADE FROM THESE FIVE PARTIES TOTALING TO RS.26,30,821/- WERE NON-GENUINE AND THE ASSESSEE COULD NOT PRODUCE ANYTHING TO SUPPORT HIS CLAIM BEFORE THE AO, AND HE MADE ADDITION AS DEEMED INCOME OF THE ASSESSEE U/S. 69C OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A ) RESTRICTED THE ADDITION BY FOLLOWING THE TRIBUNALS DECISION IN THE CASE OF VIJAY PROTINS LTD. V. ACIT (1996) 55 TTJ 75 (AHD) IN PAGE-3 OF HIS APPELLATE ORDER AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUGH THE ASSESSMENT RECORDS AS ALSO THE FINDINGS OF THE AO. THE AO'S C ONCLUSION THAT THE PURCHASES WERE NOT MADE FROM THE PARTIES WHO ISSUED THE BILLS IS APPARENTLY CORRECT SINCE THE PAYMENTS HAVE BEEN MADE TO PERSON S OTHER THAN THE SAID PARTIES WHICH IS PROVED BY THE FAT THAT THE CHEQUES WERE ENCASHED BY A THIRD PARTY AND THE ULTIMATE DESTINATION OF THE SAID PAYM ENTS IS NOT KNOWN. HOWEVER, I AM NOT INCLINED TO AGREE WITH THE AO THA T THE ENTIRE PURCHASES WERE BOGUS SINCE WITHOUT PURCHASES, THERE COULD BE NO SALE OF THE FINISHED MATERIAL. SINCE THE PURCHASES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT, ITS GENUINENESS CAN NOT BE DOUBTED. HOWEVER, THE SAME H AVE BEEN MADE FROM PARTIES OTHER THAN THE ONES WHO ISSUED THE BILLS FO R THE SAID PURCHASES. SINCE THE PURCHASES MIGHT HAVE BEEN MADE FROM UNREGISTERE D DEALERS OR CASUAL VENDORS, IT IS LIKELY THAT THERE WOULD BE COSIDERAB LE SAVING OF SALES TAX, EXCISE, OCTROI AND FREIGHT CHARGES WHICH WOULD LOWER THE CO ST OF PURCHASE. THIS WOULD MEAN THAT THE PURCHASES HAVE NOT BEEN MADE AT THE P RICE REFLECTED IN THE BILLS AND DEBITED BY THE APPELLANT. I AM, THEREFORE, OF T HE CONSIDERED VIEW THAT THIS IS ONE CASE WHERE THE RATIO OF DECISION OF HONBLE ITAT AHMEDABAD IN THE CASE OF M/S. VIJAY PROTEINS LTD. IS CLEARLY APPLICA BLE. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT IN THIS CASE, I HOLD THAT THE PURCHASES WOULD BE INFLATED BY A CONSIDERABLE AMOUNT AND IT WOULD BE F AIR AND JUST IF 20% OF SUCH PURCHASES IS DISALLOWED. THEREFORE, ADDITION ON THI S ACCOUNT IS DIRECTED TO BE RESTRICTED TO 20% OF SUCH PURCHASES IS DISALLOWED. THEREFORE, ADDITION ON THIS ACCOUNT IS DIRECTED TO BE RESTRICTED TO 20% OF RS.2 6,30,821/- WHICH WORKS OUT TO RS.5,26,160/-. THE AO SHALL GIVE EFFECT TO THIS ORDER ACCORDINGLY. 4. AFTER HEARING BOTH THE SIDES AND GOING THROUGH T HE FACTS OF THE CASE, IT IS NOTICED THAT THE LD. COUNSEL FOR THE ASSESSEE FAIRL Y CONCEDED BEFORE US THAT THE ASSESSEE IS UNABLE TO PRODUCE COGENT EVIDENCE TO PR OVE THE PURCHASES AS GENUINE ITA NO.1867 & 1881/AHD/2006 A.Y. 2003-04 M/S. BANU HASHIM V. ACIT CIR-6, SURAT PAGE 4 AND ACCORDINGLY HE CONCEDED THE POSITION THAT THE C IT(A) HAS RIGHTLY FOLLOWED THE CASE LAW IN THE CASE OF VIJAY PROTEINS LTD. (SUPRA) AND DISALLOWED @ 20% WHICH IS FAIR AND REASONABLE. ON THE OTHER HAND, LD. DEPART MENTAL REPRESENTATIVE ALSO CONCEDED THE POSITION THAT THE CITED CASE LAW IS FU LLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. RESPECTFULLY, FOLLOWING THE DECISION IN THE CASE OF VIJAY PROTEINS LTD. (SUPRA) WE UPHOLD THE FINDING OF THE CIT(A) AS THE REVENUE COULD NOT POINT OUT ANY DISCREPANCY IN THE ORDER OF CIT(A). ACCORDINGLY, W E DO NOT WANT TO INTERFERE IN THE ORDER OF CIT(A) AND WE UPHELD THE SAME. THIS COMMON ISSUE IN THE APPEAL OF REVENUE AS WELL AS THAT OF ASSESSEES APPEAL IS DIS MISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLA IM OF DEDUCTION U/S.80HHC OF THE ACT ON ACCOUNT OF EXCHANGE RATE DIFFERENCE. FOR TH IS, THE REVENUE HAS RAISED THE FOLLOWING GROUND NO.3 :- 3. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSES SEE U/S.80HHC INCLUDING THE EXCHANGE RATE DIFFERENCE. 6. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESS ING OFFICER HAS EXCLUDED THE EXCHANGE RATE DIFFERENCE FOUND TO HAVE BEEN RECEIVE D BY THE ASSESSEE ON ACCOUNT OF EXCHANGE DIFFERENCE OF DEBTORS. IN VIEW OF THE PROVISIONS OF RULE 115 OF THE I.T. RULE, 1962 THE ASSESSEE EARNED EXCHANGE RATE DIFFER ENCE DURING THE ACCOUNTING YEAR AND INCLUDED THE SAME IN THE EXPORT TURNOVER F OR CLAIMING DEDUCTION U/S.80HHC OF THE ACT. THE ASSESSING OFFICER EXCLUDED THE SAM E FROM EXPORT TURNOVER. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A) AND CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING FOLLOWING FINDING I N PAGE-4 IN HIS APPELLATE ORDER. THE NEXT GROUND OF APPEAL IS REGARDING ASSESSING O FFICER'S ACTION IN NOT ALLOWING DEDUCTION U/S.80HHC ON EXCHANGE RATE DIFFE RENCE OF EARLIER YEAR WHICH WAS INCLUDED BY THE APPELLANT FOR WORKING OUT DEDUCTION UNDER THE SAID SECTION. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF T HE APPELLANT BY HONBLE ITAT, AHMEDABAD IN THE CASE OF M/S. PRIYANKA GEMS V S. ACIT IN THEIR ORDER NO.2472/HB/2004 DTD. 22.12.2004., WHEREIN IT HAS BE EN HELD THAT EXCHANGE RATE DIFFERENCE CONSTITUTES PART OF THE EXPORT TURN OVER FOR DEDUCTION U/S.80HHC. IN VIEW OF THE DECISION OF THE JURISDICT IONAL BENCH OF THE TRIBUNAL, THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. TH E AO SHALL ALLOW APPELLANTS ITA NO.1867 & 1881/AHD/2006 A.Y. 2003-04 M/S. BANU HASHIM V. ACIT CIR-6, SURAT PAGE 5 CLAIM OF DEDUCTION U/S/80HHC AFTER INCLUDING THE EX CHANGE RATES DIFFERENCE ALSO. 7. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE TRIBUNALS DECISION IN THE CASE OF M/S. PRIYANKA GEMS V. ACIT IN ITA NO.2472/HB/2004 DATED 22-12-2004, WHEREIN THE TRIBUNAL HAS HELD TH AT EXCHANGE RATE DIFFERENCE CONSTITUTES PART OF THE EXPORT TURN OVER FOR DEDUCTION U/S.80HHC. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDE R OF CIT(A) AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, APPEAL OF REVENUE AS WELL AS THAT OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09/10/2009 SD/- SD/- (D.C.AGRAWAL) (MAHAVI R SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED :09/10/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- IV, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD