The ACIT, Circle-6, Ahmedabad V. M/s. S.P.M. Engineers, Ahmedabad

ITA 1910/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6244 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 09-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSHI
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND D.C.AGRAWAL, AM ASSTT. CIT, CIR.6, AHMEDABAD. VS. M/S S.P. M. ENGINEERS, 54/3, GIDC, INDUSTRIAL ESTATE, PHASE-1, VATVA, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI G. S. SOURYAVANSHI, SR.DR RESPONDENT BY:- SHRI CHIRAG SHAH, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS :- (1) THE LD. COMMISSIONER OF INCOME TAX (A) XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETION OF ADDITION O N ACCOUNT OF BOGUS PURCHASES OF RS. 25,04,560/-. (2) THE LD, COMMISSIONER OF INCOME TAX (A) - XI, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETION OF ADDITION O N ACCOUNT OF G.P. OF RS. 20,04,550/-. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (A) -XI, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A FIR M ENGAGED IN THE BUSINESS OF MANUFACTURING OF CEMENT, PAPER AND PLAN T MACHINERIES. ITA NO.1910/AHD/2009 ASST. YEAR 2002-03 ITA NO.1910/AHD/2009 ASST. YEAR 2002-03 2 RETURN OF INCOME WAS FILED FOR ASST. YEAR 2002-03 O N 11.10.2002 DECLARING TOTAL INCOME OF RS.2,62,166/-. THE RETURN WAS PROCESSED U/S 143(1)(A) OF THE IT ACT, 1961. THE CASE WAS SELECTE D FOR SCRUTINY FOR WHICH A NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 24.11.2003 AND SERVED UPON THE ASSESSEE ON 29.10.2003. THE ASSESSMENT WAS FINALIZED AT AN INCOME OF RS.47,71,276/- AGAINST RETURNED INCOME OF RS.2,62,166/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FILE MONTH-WISE DETAILS OF THE SALES. HE ALSO AN ALYSED COPY OF ACCOUNTS OF FEW PARTIES TO WHOM SALES WERE MADE. HE WORKED O UT SALES ON THE BASIS OF INDIVIDUAL ACCOUNT OF THE PARTIES IN DIFFE RENT MONTHS AND ALSO ANALYSED BILL-WISE SALES WHOSE DETAILS WERE FILED B Y THE ASSESSEE. ON THE BASIS OF THESE ENQUIRIES THE AO FOUND VARIATIONS IN THE SALES TO THE EXTENT OF RS.50,14,776/-. THE DETAILS ARE GIVEN BY HIM ON PAGES 2 TO 4 OF HIS ASSESSMENT ORDER. THIS WAS TREATED AS SUPPRESSED SA LES. ACCORDING TO THE AO SALES AS PER INDIVIDUAL LEDGER IS DIFFERENT AND MONTHLY SALES AS RECORDED IN THE TRADING ACCOUNT ARE DIFFERENT. ON B EING ASKED THE ASSESSEE FAILED TO RESOLVE THE DISCREPANCIES. IN ADDITION TO THIS, THE AO FOUND THAT VALUE OF OPENING AND CLOSING STOCK VARIED SUBSTANTI ALLY. THERE WAS NO EVIDENCE TO SUBSTANTIATE THE VALUE OF CLOSING STOCK AT RS.67,59,483/-. THE PERCENTAGE OF CONSUMPTION OF RAW MATERIAL ALSO VARI ED SUBSTANTIALLY BETWEEN ASST. YEAR 2001-02 AND ASST. YEAR 2002-03 A S UNDER :- ITA NO.1910/AHD/2009 ASST. YEAR 2002-03 3 2001-02 2002-03 TURNOVER 14720000 19064688 RAW MAT.CONS. 9826381 14442059 % 65.8% 75.75% THE AO ALSO WORKED OUT CLOSING STOCK ON THE BASIS O F GP OF 9.49% SHOWN BY THE ASSESSEE AND FOUND ITS VALUE AT RS.77, 56,353/- WHEREAS THE ASSESSEE HAD SHOWN VALUE OF CLOSING STOCK AT RS.67, 59,483/-. ON THE BASIS OF ABOVE DEFECTS THE AO REJECTED THE BOOKS OF ACCOU NT OF ASSESSEE AND APPLIED A GP RATE OF 20% WHICH RESULTED IN AN ADDIT ION OF RS.20,04,550/-. THE ASSESSEE HAD DECLARED A GP RATE OF 9.49% IN THE CURRENT YEAR AS AGAINST GP RATE OF 13.25% IN THE IMMEDIATELY PRECED ING YEAR. THE AO DID NOT ACCEPT THE BOOK RESULT AND ACCORDINGLY ESTI MATED THE PROFIT AS ABOVE. 3. THE AO ISSUED NOTICE U/S 133(6) TO 4 PARTIES NAM ELY- R. K. ENTERPRISE, BALAJI COMMERCIAL, LAXMI STEEL SYNDICAT E, KHANNA GEARS CORPN. THE NOTICES WERE RETURNED UNSERVED. THE TOTA L PURCHASES FROM THESE PARTIES WERE AS UNDER :- R. K. ENTERPRISE 125000 BALAJI COMMERCIAL 825425 LAXMI STEEL SYNDICATE 1007364 KHANNA GEARS CORPN. 546771 TOTAL PURCHASES 2504560 SINCE MOST OF THESE PARTIES WERE NOT FOUND TRACEABL E AND COPY OF ACCOUNT SENT BY KHANNA GEARS CORPN., DID NOT INSPIRE CONFID ENCE INASMUCH AS NO ITA NO.1910/AHD/2009 ASST. YEAR 2002-03 4 PAN WAS MENTIONED THEREON, THE AO TREATED THESE PUR CHASES BOGUS AND MADE THE ADDITION OF RS.25,04,560/-. 4. THE MATTER CAME UP BEFORE LD. CIT(A) WHO DELETED THE ADDITION IN RESPECT OF BOGUS PURCHASES OF RS.25,04,560/- ON THE GROUND THAT ONCE THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GP THERE IS NO REASON TO MAKE SPECIFIC ADDITION ON ACCOUNT OF BOGU S PURCHASES. 5. IN RESPECT OF GP ADDITION LD. CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT BUT HELD THAT GP APPLIED BY THE AO IS TO O HIGH AS COMPARED TO GP RATE OF 13.25% SHOWN BY THE ASSESSEE IN THE IMME DIATELY PRECEDING YEAR. THEREFORE, HE ADOPTED A GP RATE OF 14% ON TOT AL SALES AND DIRECTED THE AO TO RECOMPUTE THE INCOME. THE REVENUE IS IN A PPEAL AGAINST DELETION OF ADDITION ON ACCOUNT OF BOGUS PURCHASES AND REDUCTION IN GP ADDITION. 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE REASONS ARE THAT ONCE BOOK S ARE REJECTED ON THE GROUND THAT, ON THE BASIS OF BOOKS INCOME CANNOT BE COMPUTED CORRECTLY, THEN ANY ADDITION BASED ON SPECIFIC ITEM OF PURCHAS E/SALE CANNOT BE SUSTAINED. THE ALLEGED BOGUS PURCHASE IS VALID GROU ND FOR REJECTING THE BOOKS. IN VIEW OF THIS, NO SEPARATE ADDITION ON ACC OUNT OF BOGUS ITA NO.1910/AHD/2009 ASST. YEAR 2002-03 5 PURCHASES IS CALLED FOR. SO FAR AS APPLICATION OF G P RATE OF 14% IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT THE S AME IS REASONABLE WHEN COMPARED WITH THE GP RATE DECLARED BY THE ASSE SSEE IN THE IMMEDIATELY PRECEDING YEAR. THE AO HAS NOT SHOWN AN Y BASIS FOR ADOPTING GP RATE OF 20%. ACCORDINGLY, WE DO NOT FIN D ANY MERIT IN THE APPEAL FILED BY THE REVENUE AND THE SAME IS DISMISS ED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30/6/11. SD/- SD/- (D. K. TYAGI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 30/6/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.1910/AHD/2009 ASST. YEAR 2002-03 6 1.DATE OF DICTATION 15/6/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 20/6/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..