Shri Devang H.Shah, Ahmedabad V. The Income tax Officer,Ward-5(3), Baroda

ITA 196/AHD/2013

• Counselvise Citation: 19620514 RSA 2013
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P THANGID
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI A. MOHAN ALANKAMONY, AM AND SHRI KUL B HARAT, JM) ITA NO.196/AHD/2013 ( A. Y.2007-08) DEVANG H SHAH, C/O. MUKESH M. PATEL & CO., 3-4, VITHALBHAI BHAVAN, NR. S. P. COLONY RLY. CROSSING, AHMEDABAD 13 P. A. NO. AFOPS 9307 R VS THE INCOME TAX OFFICER, WARD 5(3), BARODA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MUKESH M. PATEL, AR RESPONDENT BY SHRI J. P. THANGID, SR. DR DATE OF HEARING: 15-07- 2013 DATE OF PRONOUNCEMENT: 14-08-2013 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A)-V, BARODA DATED 29-10-2012, FOR THE ASSESSMENT YEARS 2007-08, IN AP PEAL NO. CAB/(A)V-226/09-10, PASSED U/S 250 READ WITH SECTIO N 143(3) OF THE INCOME TAX ACT, 1961. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCE D HEREIN UNDER FOR REFERENCE:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION TO THE EXTENT OF RS.7,17,500/- U/S. 69C OF THE I. T. ACT, OUT OF THE TOTAL ADDITION OF RS.12,73,423/- MADE BY THE A. O. IN THE I. T. ASSESSMENT FOR A. Y. 2007-08 TOWARDS ALLE GED BOGUS PURCHASED. ITA NO.196/AHD/2013(AY-2007-08) DEVNG H. SHAH, VS ITO W-5(3), BARODA 2 2. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACT S IN NOT APPRECIATING THE MERITS OF THE APPELLANTS SUBMISSI ONS THAT KEEPING IN VIEW THE RATIO OF THE ITAT DECISION IN I TA NO.390/AHD/2006 DATED 19-12-2008, WHICH WAS SQUAREL Y APPLICABLE IN THE FACTS OF THE APPELLANTS CASE, TH E MAXIMUM ADDITION THAT COULD BE SUSTAINED WAS ONLY 25% OF TH E ALLEGED BOGUS PURCHASES. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN STEEL, FILED HIS RETURN OF INCOME ON 25-10-2007 FOR THE ASSESSMENT YEAR 2007-08 DECLARI NG TOTAL INCOME OF RS.2,25,352/-. THE CASE WAS TAKEN UP FOR SCRUTINY A ND THE LEARNED AO PASSED ASSESSMENT ORDER U/S 143(3) OF THE ACT ON 30 -12-2009 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 15,05,860/- WHEREIN ONE OF THE DISALLOWANCES WAS MADE FOR RS.12,73,423/ - TOWARDS BOGUS PURCHASES MADE FROM M/S. BHAGYODAY ENTERPRISE. 3.1 THE LEARNED AO HAD MADE THE DISALLOWANCE BECAUS E ON VERIFICATION IT WAS FOUND THAT M/S. BHAGYODAY ENTER PRISE HAD NEVER SUPPLIED ANY MATERIAL TO THE ASSESSEE. THE EXPLANAT ION OFFERED BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE LEARNED AO FOR T HE FOLLOWING REASONS:- (I) TE ASSESSEE HAS NOT MAINTAINED ANY DAY TO DAY S TOCK PURCHASE AND SALES. THEREFORE, PURCHASES AND CORRESPONDING S ALES ARE NOT IDENTIFIABLE. (II) IN THE STATEMENT OF THE ABOVE PARTY RECORDED U /S 131 OF T HE AC BY DDIT(INV) ON 31.08.2006 AND IN A STATEMENT RECORDED U/S 131 OF THE ACT ON 10.11.2009, THE ASSESSEE HAS CATEGORICAL LY STATED AS FOLLOWS. (III) THE EVIDENCES PRODUCED DO NOT SHOW THE PLACE OF THE ACTUAL DELIVERY OF THE GOODS, MODE OF TRANSPORTATION LIKE LR NO., REGISTRATION A/C OF THE VEHICLE ETC. (IV) THERE IS NO ENDORSEMENT ON THE DELIVERY TO EST ABLISH THE FACTS THAT THE GOODS HAVE BEEN PHYSICALLY RECEIVED. ITA NO.196/AHD/2013(AY-2007-08) DEVNG H. SHAH, VS ITO W-5(3), BARODA 3 (V) THE ASSESSEE COULD NOT PRODUCE THE ABOVE PARTIE S TO PROVE THE GENUINENESS OF THE PURCHASES. (VI) THERE WAS NO COMPLIANCE FROM THE PARTIES IN RE SPONSE TO SUMMONS ISSUED BY THIS OFFICE. 3.2 FURTHER, IT WAS OBSERVED BY THE LEARNED AO THAT THE ALLEGED SUPPLIERS FROM WHOM THE ASSESSEE HAD PURCHASED GOOD S HAVE DENIED THE SALE MADE TO THE ASSESSEE. FOR THE AFORESAID RE ASONS, THE LEARNED AO REJECTED THE CLAIM OF EXPENDITURE OF PURCHASES O F RS.12,73,423/- AND ADDED TO THE INCOME OF THE ASSESSEE. 4. WHEN THE MATTER CREPT UP BEFORE THE LEARNED CIT( A), THE LEARNED CIT(A) KEEPING IN VIEW OF THE DECISIONS OF ITAT, AH MEDABAD BENCH IN (I) ITA NO. 1785 TO 1787/AHD/2008 AND ITA NO.1994 TO 19 96/AHD/2008 DATED 20-10-2008 IN THE CASE OF MANOHAR METAL CORPO RATION AND (II) ITA NO.390/AHD/2006 DATED 19-12-2008 IN CASE OF PAWANRA J B. BOKADIA AS RELIED UPON BY THE ASSESSEE BEFORE HIM, CONFIRMED T HE ADDITION TO THE EXTENT OF RS.7,14,500/- BEING UNEXPLAINED ASSETS AN D UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT AND FURTHER RESTRIC TED THE BALANCE ADDITION TO, 25% OF RS.5,58,923/- BEING NOTIONAL PR OFITS OF BOGUS PURCHASES MADE BY THE ASSESSEE FROM THE GREY MARKET . THE RELEVANT PORTION OF THE OBSERVATION OF THE LEARNED CIT(A) IS REPRODUCED HEREIN UNDER FOR REFERENCE: 4.2 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE F ACTS OF THE CASE AS WELL AS THE OBSERVATION OF THE AO AND ARGUMENTS ADV ANCED BY THE AR OF THE APPELLANT IN SUPPORT OF HIS CLAIM. IN THE AS SESSMENT ORDER THE AO HAS NOT GIVEN ANY FINDING ABOUT THE QUANTITIES PURC HASED AND SOLD. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPE LLANT WAS DIRECTED TO FILE QUANTITATIVE DETAILS OF PURCHASE AND SALES MADE DURING THE YEAR IN RESPECT OF THE ITEMS PURCHASED FROM BHAGYODAY EN TERPRISES. THE APPELLANT HAS BEEN ABLE TO RECONCILE THE QUANTITY P URCHASED AND SOLD. IN VIEW OF THIS, IT HAS TO B PRESUMED THAT THE APP ELLANT PURCHASED MATERIAL FROM MARKET IN CASH AND BILLS WERE OBTAINE D FROM BHAGYODAYA ITA NO.196/AHD/2013(AY-2007-08) DEVNG H. SHAH, VS ITO W-5(3), BARODA 4 ENTERPRISES. THE APPELLANT HAS MADE TOTAL PURCHASES OF RS.12,73,423/- FROM THIS PARTY DURING THE YEAR WHEREAS PAYMENT MAD E IS RS.5,58,923/- ONLY. THUS CREDIT BALANCE OF RS.7,14, 500/- APPEARING AGAINST THIS PARTY IS UNEXPLAINED. THIS SHOWS THAT THE APPELLANT HAS UNEXPLAINED ASSETS IN ITS BALANCE SHEET TO THIS EXT ENT. THEREFORE, ADDITION TO THE EXTENT OF RS.7,14,500/- HAS TO BE C ONFIRMED UNDER SECTION 69C OF THE IT ACT. SO FAR AS THE BALANCE PU RCHASES OF RS.5,58,923/- ARE CONCERNED, IN RESPECT OF WHICH PA YMENT HAS BEEN MADE, THE ADDITION IS RESTRICTED TO 25% OF SUCH PUR CHASES IN VIEW OF THE DECISION QUOTED BY THE APPELLANT. THUS, THIS GROUND OF APPEAL IS PARTLY8 ALLOWED. . 4.1 AGAINST THIS ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND RELIED UPON THE ORDER OF THE ITAT AHMEDABAD D BENCH DATED 19-12-2 008 PASSED IN ITA NO.390/AHD/2006 FOR ASSESSMENT YEAR 2002-03 IN THE CASE OF PAWANRAJ B. BOKADIA VS ACIT (COPY PLACED ON RECORD) AND PRAYED THAT ADDITION CONFIRMED BY THE LEARNED CIT(A) MAY BE DEL ETED. WHILE AS THE LEARNED DR RELIED ON THE ORDER OF THE LEARNED CIT(A ). 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO CONSIDERED THE MATERIALS PRODUCED BEFORE US. ON OUR PERUSAL OF RECORDS, WE FIND FORCE IN THE SUB MISSIONS OF THE LEARNED AR. IN THE CASE CITED BY THE LEARNED AR, SU PRA VIZ. PAWANRAJ B. BOKADIA VS ACIT IT WAS HELD THAT, WHEN IT IS FOUND THAT THE ASSESSEE HAS DEBITED IN HIS BOOKS OF ACCOUNTS WITH BOGUS PURCHAS E BILLS, BUT, THE QUANTITATIVE STOCK RECORDS MAINTAINED BY THE ASSESS EE TALLIES WITH RESPECT TO THE OPENING STOCK, PURCHASES, SALES AND PHYSICAL CLOSING STOCK, THEN THE PURCHASES CANNOT BE REJECTED, HOWEV ER, ADDITIONS CAN BE MADE FOR THE NOTIONAL PROFIT DERIVED DUE TO PURCHAS ES MADE FROM GREY MARKET. FURTHER, FOLLOWING THE DECISION OF THE CASE VIJAY PROTEINS PVT. ITA NO.196/AHD/2013(AY-2007-08) DEVNG H. SHAH, VS ITO W-5(3), BARODA 5 LTD. VS CIT REPORTED IN 58 ITD 428 (AHD) THE TRIBUN AL HELD IN THE CASE CITED BY THE LEARNED AR IN PAWANRAJ B. BOKADIA VS A CIT AS UNDER:- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND, THAT IN THE INSTANCE CASE, THE ADDITION OF RS.17,46,130/ - WAS MADE ON ACCOUNT OF BOGUS PURCHASES BY THE A. O. WHICH WAS C ONFIRMED IN APPEAL BY THE LD. CIT(A). LD. AR OF THE ASSESSEE SU BMITTED THAT THE DISALLOWANCE WAS EXCESSIVE AND IN ABSENCE OF PURCHA SES IT WAS NOT POSSIBLE TO SECURE THE TURNOVER WHICH THE ASSESSEE ACHIEVED. BOTH THE PARTIES BEFORE US AGREED THAT 25% OF THE BOGUS PURC HASES WILL BE FAIR AND REASONABLE AMOUNT FOR DISALLOWANCE AS INFLATION IN PURCHASES. WE THEREFORE MODIFY THE ORDERS OF THE LOWER AUTHORITIE S AND RESTRICT THE DISALLOWANCE TO 25% OF THE BOGUS PURCHASES. THUS, T HIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6.1 IN THE PRESENT CASE BEFORE US, THE FACT IS THAT , THE LEARNED AO HAD DISALLOWED RS.12,73,423/- BEING BOGUS PURCHASES MAD E FROM M/S. BHAGYODAYA ENTERPRISE. THE LEARNED CIT(A) HAS SUSTA INED THE ADDITION TO 25% OF RS.5,58,923/- IE FOR THE ACTUAL PAYMENT M ADE AND RS.7,14,500/- BEING THE CREDIT BALANCE FOR WHICH PAYMENT IS NOT M ADE, FOLLOWING THE DECISION OF THE TRIBUNAL. HOWEVER, FROM THE FACTS A ND CIRCUMSTANCES OF THE CASE AND FROM THE DECISION OF THE CASE CITED BY THE LEARNED AR AS WELL AS THE DECISION HELD IN THE CASE VIJAY PROTEIN S PVT. LTD., CITED SUPRA, IT WOULD BE APPROPRIATE TO DISALLOW 25% OF RS.12,7 3,423/- AND NOT RS.12,73,423/- AS HELD BY THE LEARNED AO AND (RS.7 ,14,500/- + 25% OF RS.5,58,923/-) SUSTAINED BY THE LEARNED CIT(A). WE HAVE ARRIVED AT THIS CONCLUSION BECAUSE FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE QUANTITATIVE FIGURES INCLUSIVE OF THE BOGUS BILL FO R RS.12,73,423/- HAVE TALLIED. THUS, ADDITION TO THE EXTENT OF 25% ON THE BOGUS BILL CLAIMED AS EXPENDITURE IE., RS.12,73,423/- WHICH WORKS OUT TO RS.3,18,355/- IS SUSTAINED AND THE BALANCE ADDITION MADE BY THE REVE NUE IS DELETED. THUS, BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE A CCORDINGLY DISPOSED OF IN HIS FAVOUR. ITA NO.196/AHD/2013(AY-2007-08) DEVNG H. SHAH, VS ITO W-5(3), BARODA 6 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14 -8-2013 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT ON COMPUTER 17-07-20 13/13-08-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17-07-2013/13-08-13 OTHER MEMBER : 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. 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 ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: