M/s. Mehsana Steel Syndicate, Navsari V. The Income tax Officer,Ward-3, Navsari

ITA 2031/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89313 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 16-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D C MISHRA
• Keywords: Bogus purchase; Principle of natural justice
• Section: 133A

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO.2031/AHD/2011 / ASSESSMENT YEAR: 2006-2007 M/S.MEHSANA STEEL SYNDICATE NR. BAGAYAT GRID ROAD KABILPORE, NAVSARI. PAN: AAEFM 774 A VS ITO, WARD-3 NAVSARI. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE(S) BY : SHRI D.C. MISHRA, SR.DR REVENUE BY : SHRI ANIL KSHATRIYA / DATE OF HEARING : 07/05/2015 / DATE OF PRONOUNCEMENT: 08/05/2015 $%/ O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A), VALSAD DATED 31.1.2011 2. THE ASSESSEE HAD FILED AN APPLICATION ON 6.5.201 5 FOR ADMISSION OF FOLLOWING GROUNDS AS ADDITIONAL GROUND OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE ADDIT ION OF RS.11,46,000/- ON ACCOUNT OF ALLEGED BOGUS PURCHASE S, WHEN ITA NO.2031/AHD/2011 2 HE OUGHT TO HAVE DELETED THE SAME, AS NO SUCH ADDIT ION IS WARRANTED/JUSTIFIED. 2. WITHOUT PREJUDICE TO THE ABOVE, HAVING REGARD T O THE RATIO OF JURISDICTIONAL TRIBUNAL IN THE CASE OF SMT . MEGHA S. SHAH VS. DCIT I ITA NO.159 & 1668/AHD/2010, THE LD. CIT(A) OUGHT TO HAVE DIRECTED THE AO TO TAX ONLY THE NET P ROFIT, AS AGAINST ENTIRE PURCHASES. 3. DR DID NOT HAVE ANY OBJECTION TO THE ADMISSION O F THE ABOVE CITED ADDITIONAL GROUNDS OF APPEAL, THEREFORE, THE SAME WERE ADMITTED AND THE PARTIES WERE ALLOWED TO MAKE THEIR SUBMISSIONS THEREOF. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADE IN STEEL AND CEMENT. THE AO OBSERVED THAT THE ASSESSEE HAS ENTERED SALES/PURCHASE TRANSA CTIONS WITH SHRI VIJAYKUMAR MANUBHAI PATEL, PROPRIETOR OF P. BAB ULAL & CO., MEHSANA. A SURVEY OPERATION UNDER SECTION 133A OF THE ACT WAS CONDUCTED IN THE CASE OF P. BABULAL & CO., DURING WH ICH SHRI VIJAYKUMAR M. PATEL ADMITTED IN HIS SWORN STATEMENT THAT HE HAS INVOLVED IN ISSUING OF BOGUS SALES BILLS WITHOUT DE LIVERY OF GOODS. THEREFORE, THE AO HELD THAT PURCHASES MADE BY THE A SSESSEE FROM PARTY ARE BOGUS. FURTHER, THE AO ALSO OBSERVED TH AT THE ASSESSEE FAILED TO PRODUCE QUANTITATIVE DETAILS FOR OPENING STOCK, PURCHASES AND SALES. THE ASSESSEE WAS UNABLE TO CO-RELATE TH E PURCHASES VIS--VIS SALES. THE AO ALSO OBSERVED THAT SHRI VI JAYKUMAR M. PATEL FURTHER ADMITTED IN HIS STATEMENT THAT HE WAS ISSUING THE BOGUS SALE BILLS TO VARIOUS PERSONS IN GUJARAT INCL UDING THE ASSESSEE, M/S.MEHSANA STEEL SYNDICATE. THE AO ALSO OBSERVED THAT ON PERUSAL OF FREIGHT PAID VOUCHERS FOR TRANSP ORTATION OF STEEL, HE OBSERVED THAT THE VOUCHERS ARE SELF-FABRICATED B Y THE ASSESSEE ITA NO.2031/AHD/2011 3 HIMSELF AND THEY ARE NOT SIGNED BY EITHER GIVER OR RECEIVER OF SUCH FREIGHT. THUS, THE PURCHASE TRANSACTION MADE BY T HE ASSESSEE I.E. SHRI VIJAYKUMAR M. PATEL ARE NON-GENUINE, AND MADE ADDITION ON ACCOUNT OF PURCHASES MADE FROM P. BABUBHAI & CO. OF RS.11,46,000/- BY TREATING THE SAME AS BOGUS PURCHA SES. 5. ON APPEAL, THE CIT(A) HELD THAT THE CASE WAS POS TED FOR SEVERAL TIMES, BUT NOBODY RESPONDED TO THE NOTICE. HE, THEREFORE, HELD THAT THERE IS NOTHING ON RECORD TO CONTROVERT THE FINDINGS OF THE AO, AND THEREFORE, IN THE CIRCUMSTANCES, HE HAD NO ALTERNATIVE, BUT AGREE WITH THE FINDINGS OF THE AO, HENCE HE CONFIRMED THE ADDITION MADE BY THE AO. 6. BEFORE US, THE AR OF THE ASSESSEE SUBMITTED THAT THE ENTIRE SALES OF THE ASSESSEE ARE ACCEPTED BY THE AO, AS GE NUINE. BOOK RESULTS OF THE ASSESSEE ARE ALSO ACCEPTED BY THE AO , AND NO MISTAKE THEREIN HAS BEEN POINTED OUT. THE ACCOUNT S OF THE ASSESSEE ARE AUDITED AND THE SAME ARE PLACED AT PAP ER BOOK, PAGE NOS.12 TO 32. THEREFORE, IT WAS HIS SUBMISSIO N THAT MAKING ADDITION ON ACCOUNT OF BOGUS PURCHASES AFTER ACCEPT ING THE SALES OF THE ASSESSEE WAS NO JUSTIFIED BY THE AO. 7. IN THE ALTERNATE, IT WAS THE SUBMISSION OF THE A R OF THE ASSESSEE THAT THE ENTIRE PURCHASE OF RS.11,46,000/- CANNOT BE MADE IN THE HANDS OF THE ASSESSEE, AND ONLY THE NET PROFIT EMBEDDED IN THE SAME CAN BE ADDED TO THE INCOME OF THE ASSESSEE HE SUBMITTED THAT THE ASSESSEE HAS SHOWN NET PROFIT AT 0.66% , AND THEREFORE, AT BEST, THE ADDITION OF 0.66% OF RS.11,46,000/- CAN BE MADE IN THE HANDS OF THE ASSE SSEE. ITA NO.2031/AHD/2011 4 8. ON OTHER HAND, THE DR SUPPORTED THE ORDERS OF TH E LOWER AUTHORITIES. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE ASSESSEE IS A TRADER IN STEEL AND CEMENT. THE ASSESSEE CLAIMED TO HAVE PURCHASED GOODS WORTH RS.1 1,46,000/- FROM M/S.P.BABULAL & CO., MEHSANA. ACCORDING TO THE AO, A SURVEY WAS CONDUCTED IN THE CASE OF SAID M/S.P. BABU LAL & CO. ON 30.8.2005, IN WHICH SHRI VIJAYKUMAR M PATEL HAD ADM ITTED THAT HE WAS IN THE BUSINESS OF ISSUING OF BOGUS BILLS. IN VIEW OF THE SAID STATEMENT, THE AO TREATED THE PURCHASES OF RS.11,46 ,000/- CLAIMED BY THE ASSESSEE FROM M/S.P. BABULAL & CO. AS BOGUS. THEREAFTER, THE AO ADDED THE ENTIRE AMOUNT OF RS.11 ,46,000/- TO THE INCOME OF THE ASSESSEE. 10. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF T HE AO. 11. BEFORE US, THE AR OF THE ASSESSEE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ADDING THE ENTIRE AMOUNT OF PURCHA SES TO THE INCOME OF THE ASSESSEE. HE POINTED OUT THAT THE SA LE DISCLOSED BY THE ASSESSEE WAS ACCEPTED BY THE AO AS GENUINE AND CORRECT. WITHOUT PURCHASES, THE ASSESSEE COULD NOT HAVE ACHI EVED SALES. HE ALSO POINTED OUT THAT THE GP OF THE YEAR UNDER C ONSIDERATIONS COMES TO 5.44%, WHICH IS THE SAME AS WAS ACCEPTED B Y THE DEPARTMENT IN THE CASE OF THE ASSESSEE IN THE IMMED IATELY PRECEDING YEAR. HE CONTENDED THAT IF THE AOS CONT ENTION IS ACCEPTED THAT THE ENTIRE AMOUNT OF RS.11,46,000/- I S TO BE ADDED TO THE GP OF THE ASSESSEE, THEN THE GP WORKS OUT TO 15.08%, ITA NO.2031/AHD/2011 5 WHICH IS NOT POSSIBLE, AS EVIDENCED FROM THE PAST A CCEPTED POSITION OF GP, IN THE CASE OF THE ASSESSEE. 12. ON THE OTHER HAND, THE DR RELIED UPON THE ORDER OF THE AO. 13. WE FIND THAT THE SALE OF THE ASSESSEE WAS ACCEP TED BY THE DEPARTMENT. IT IS OBVIOUS THAT WITHOUT PURCHASES, THERE CANNOT BE SALES. EVEN OTHERWISE, WHEN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE FOUND TO BE UNRELIABLE, THE INCOME OF THE ASSESSEE IS TO BE ESTIMATED TO THE BEST OF THE JUDGMENT OF THE AO. IN SUCH ASSESSMENT ALSO, THE JUDGMENT HAS TO BE BASED ON SO ME MATERIAL, AND IT CANNOT BE AT THE WHIMS OF THE AO. IN SUCH A SSESSMENT ALSO, THE ADDITION CANNOT BE MADE TO THE INCOME OF THE ASSESSEE BY THE AO WITHOUT ANY MATERIAL. 14. IN THE INSTANT CASE, THE GP OF THE YEAR DISCLOS ED BY THE ASSESSEE COMES TO 5.44%, AND THE SAME COMPARES FAVO URABLY WITH THE PAST ACCEPTED POSITION IN THE CASE OF THE ASSESSEE ITSELF. WE, THEREFORE, DO NOT FIND ANY GOOD REASON FOR ENHA NCEMENT IN THE INCOME OF THE ASSESSEE WITHOUT BRINGING ANY MAT ERIAL ON RECORD TO SHOW THAT THE ASSESSEE ACTUALLY EARNED AN Y INCOME MORE THAN THE INCOME DISCLOSED IN THE RETURN. WE F IND THAT NO MATERIAL HAS BEEN BROUGHT TO SHOW THAT THE MARKET V ALUE OF THE GOODS CLAIMED TO HAVE BEEN PURCHASED BY THE ASSESSE E FROM M/S.P. BABULAL & COMPANY WAS LESS THAN THE VALUE AT WHICH, THE ASSESSEE CLAIMED TO HAVE PURCHASED THESE GOODS ON T HOSE DATES. IN THE ABSENCE OF ANY SUCH MATERIAL, AND KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED VIEW, THE ADDITION OF RS.11,46,000/- MADE BY THE AO IS NO T SUSTAINABLE. ITA NO.2031/AHD/2011 6 WE, THEREFORE, DELETE THE ADDITION OF RS.11,46,000/ - AND ALLOW GROUND OF APPEAL OF THE ASSESSEE. 15. THE ASSESSEE HAS ALSO RAISED FOLLOWING GROUNDS OF APPEAL IN THE MEMO OF APPEAL: 1. THE LD.CIT(A) HAS GROSSLY ERRED IN DECIDING THE APPEAL EX PARTY PARTICULARLY IN VIEW OF THE FACT THAT THER E WAS NO EFFECTIVE SERVICE OF THE ALLEGED NOTICE OF HEARING TO THE APPELLANT WHICH TANTAMOUNT TO RENDER THE APPEAL ORD ER AS PASSED AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND EQUITY AND THEREFORE PERVERSE. 2. IN VIEW OF THE GROUND NO.1 ABOVE THAT THERE WAS NO EFFECTIVE SERVICE OF THE NOTICE OF HEARING BY THE L D.CIT(A), THE LD.CIT(A) ERRED IN CONFIRMING ADDITION OF RS.11 ,46,000/- ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 3. IN VIEW OF THE GROUND NO.1 ABOVE THAT THERE WAS NO EFFECTIVE SERVICE OF HEARING BY THE LD.CIT(A), THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,945/- @ 20% OFFICE EXPENSES. 16. AT THE TIME OF HEARING, THE AR SUBMITTED THAT H E WILL BE ARGUING ONLY ON THE ADDITIONAL GROUNDS RAISED BEFOR E THE TRIBUNAL, AND WAS NOT PRESSING THE ABOVE STATED GROUNDS OF AP PEAL-MEMO, THEREFORE, THEY ARE DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 8 TH MAY, 2015 AT AHMEDABAD. SD/- SD/- (S.S. GODARA) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 08/05/2015