Shri Simit P.Sheth L/h of Late Pankaj J.Sheth, Baroda V. The Income tax Officer,Ward-2(2), Baroda

ITA 2060/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63270 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI T.R. MEEN A, ACCOUNTANT MEMBER SIMIT PANKAJ SHETH L/H OF LATE PANKAJ J. SHETH 755/G, GORE COMPLEX GIDC ESTATE MAKARPURA, BARODA PAN NO. ADBPS9145C (APPELLANT) VS. INCOME TAX OFFICER WARD 2(2) BARODA (RESPONDENT) REVENUE BY : SRI Y.P. VERMA, SR. D.R. ASSESSEE BY : MS. URVASHI SHODHAN, A.R. DATE OF HEARING : 12-12-2012 DATE OF PRONOUNCEMENT : 28-12-2012 / ORDER PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:- THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LD. CIT(A)III BARODA DATED 15-04-2010 AND THE GROUNDS RAISED ARE HEREBY REPRODUCED AS FOLLOWS:- ITA NO. 2060/AHD/2010 A.Y.:-2005-06 ITA NO.2060 /AHD/2010 A.Y. 2005-06 PAGE NO SIMIT PANKAJ SHETH L/H OF LATE PANKJ J.SHETH VS. ITO 2 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS OF THE APPELLANTS CASE IN UPHOLDING THE O RDER PASSED BY THE LD. A.O. U/S 143(3) R.W.S. 147 OF THE ACT AS LEGAL AND VALID. THE APPELLANTS MOST HUMBLY SUBMITS THAT THE ORDER PASSED BY THE LD. A.O. U/S 143(3) R.W.S 147 OF THE ACT IS BAD IN LAW AND PRAYS THAT HONBLE TRIBUNAL BE PLEASED TO HOLD SO N OW. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON THE FACTS OF THE APPELLANTS CASE IN CONFIRMING THE ADDITION OF RS. 11,16,383/- MADE BY THE LD. A.O. AS BOGUS PURCH ASES. THE APPELLANT MOST HUMBLY SUBMITS THAT ON THE FACT S AD CIRCUMSTANCES OF HIS CASE AND IN LAW NO PART OF PUR CHASES MADE IN BOGUS AND PRAYS THAT HONBLE TRIBUNAL BE PLEASED TO HOLD SO NOW. 3. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON THE FACTS OF THE APPELLANTS CASE IN UPHOLDING T HE DISALLOWANCE MADE BY THE LD. A.O. OF RS. 78, 713/- BEING LOSS DUE TO FIRE ON THE ERRONEOUS PLEA THAT IT IS NOT RE VENUE EXPENDITURE. THE APPELLANT MOST HUMBLY SUBMITS THAT ON THE FACT S AND CIRCUMSTANCES OF HIS CASE AND IN LAW SUFFERED BY TH E APPELLANT IS ALLOWABLE AS DEDUCTION AND PRAYS THAT HONBLE TR IBUNAL BE PLEASED TO HOLD SO NOW. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER AND / OR AMEND THE GROUNDS HEREINABOVE TAKEN. 2. AT THE OUTSET LD. A.R. MS. URVASHI SHODHAN HAS E XPRESSED NOT TO PRESS GROUND 1, 3 AND 4. IN THE LIGHT OF THE STATE MENT OF LD. A.R. THESE GROUNDS ARE HEREBY DISMISSED BEING NOT PRESSED. NO W, WE ARE LEFT WITH ONLY GROUND NO. 2. ITA NO.2060 /AHD/2010 A.Y. 2005-06 PAGE NO SIMIT PANKAJ SHETH L/H OF LATE PANKJ J.SHETH VS. ITO 3 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 ORDER DATED 31-12-2008 THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS A PROPRIETOR OF PARSWANATH S TEEL CORPORATION AND ENGAGED IN THE BUSINESS OF TRADING IN STEEL ON WHOL ESALE BASIS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN GROSS P ROFIT OF RS. 4,40,197/- @ 3.56% ON SALES OF RS.1,23,28,671/- AS COMPARED TO G ROSS PROFIT OF RS.3,74,714/- @ 3.25 % ON SALES OF RS.1,15,28,279/- FOR THE IMMEDIATE LAST YEAR. ON INVESTIGATION BEING MADE BY THE REVENUE DEPARTMENT AND AFTER RECORDING CERTAIN STATEMENTS OF FEW PARTIES; IT WAS FOUND THAT THOSE PARTIES HAVE NOT ACTUALLY MADE ANY SALES TO THE ASSESSEE. IT WAS INTIMATED THAT THOSE PARTIES HAVE MERELY ISSUED SALES BILLS AND RECEIVED , DALALI. ON THE BASIS OF THOSE STATEMENTS IT WAS FOUND THAT ONE OF SUCH PART Y HAD ISSUED BOGUS SALE BILLS TO THE ASSESSEE AMOUNTING TO RS.6,37,025/- AN D LIKEWISE ANOTHER SUCH PARTY HAD CONFESSED TO HAVE ISSUED BOGUS BILL TO TH E ASSESSEE AMOUNTING TO RS.4,79,358/-. SINE TOTAL AMOUNT OF SUCH BOGUS BIL LS OF RS.11,16, 383/- WAS DETECTED ON INVESTIGATION, THEREFORE, THE REVENUE H AS HELD THAT THE ASSESSEE HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTIO N 147 OF THE I.T. ACT. HENCE, SHOW CAUSE WAS ISSUED AS TO WHY PURCHASES FR OM THE SAID TWO PARTIES TOTALING RS.11,16,383/- BE NOT TREATED AS BOGUS PUR CHASES AND TO BE ADDED IN THE TAXABLE INCOME OF THE ASSESSEE. THE ASSESSEES MAIN CONTENTION WAS THAT THE QUANTITATIVE DETAILS OF OPENING STOCK, PURCHAS ES MADE THROUGH-OUT THE YEAR, SALES MADE THROUGH THE YEAR AND THE QUANTITAT IVE DETAILS OF THE CLOSING STOCK WERE MAINTAINED BY THE ASSESSEE ON DAY TO DAY BASIS AS PER THE REGULAR BOOKS OF ACCOUNTS. AFTER DETAILED DISCUSSION AND CONSIDERING THE STATEMENTS OF THOSE PARTIES AND THE TRANSACTION IN THE BANK, T HE AO HAS HELD THAT THE ITA NO.2060 /AHD/2010 A.Y. 2005-06 PAGE NO SIMIT PANKAJ SHETH L/H OF LATE PANKJ J.SHETH VS. ITO 4 AMOUNT OF BOGUS PURCHASES WAS THE ESCAPED INCOME O F THE ASSESSEE, HENCE TAXED ACCORDINGLY. 3.1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY WHO HAS CONFIRMED THE ACTION OF THE AO FOLLOWING HIS OWN VI EW TAKEN IN ASSESSEES OWN CASE FOR A.Y. 06-07. WITH THIS BRIEF FACTUAL B ACKGROUND, WE HAVE BEEN INFORMED THAT IN ASSESSEES OWN CASE A.Y. 06-07 ITA T B BENCH AHMEDABAD ITA NO. 3238 AND 3293/AHD/2009 VIDE AN OR DER DATED 24-02- 2012 HAS HELD AS UNDER: 4. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143 R.W.S. 147 OF THE I.T. ACT DAT ED 31-12-2008 WERE THAT ASSESSEE INDIVIDUAL IS IN THE BUSINESS OF TRADING IN STEEL ON WHOLESALE BASIS. IT MAY NOT BE OUT OF PLACE TO MENT ION THAT GROSS PROFIT OF RS.7,42,524/- ON SALE OF RS.3,04,52,701/- WAS DECLARED HAVING GP RATE AT 2.43% AS AGAINST THE GP OF THE IM MEDIATE PAST YEAR AT 3.56%. AN INTIMATION WAS RECEIVED BY THE AS SESSING OFFICER FROM DDIT (INV.)-I, BARODA. ACCORDING TO THE SAID I NTIMATION, DURING THE COURSE OF VERIFICATION OF BANKING TRANSACTIONS IN THE CASE OF SHRI AMRATBHAI POONAMBHAI PRAJAPATI, PROP OF BHAVNA TRAD ING CO. & BHAGYODAYA ENTERPRISES, SHRI KANTILAL MANGILAL SHAA RMA, PROP OF MIAKSHI ENTERPRISES AND SHRI JAYANTILAL MANGILAL SH ARMA, PROP OF ARUN INDUSTRIAL CORPORATION AND AS PER THE ADMISSIO N IN THEIR STATEMENTS RECORDED ON OATH, IT WAS FOUND THAT NO S ALES WERE MADE BY THEM TO ANY PARTY. IT WAS INTIMATED THAT THOSE P ARTIES WERE SIMPLY ISSUING SALE BILLS AGAINST THOSE SALES BILLS THEY W ERE RECEIVING DALALI. THE MODUS OPERANDI WAS THAT ON ISSUANCE O F SALES BILLS THE AMOUNT OF CHEQUE WAS RECEIVED AND ON ENCASHMENT OF THE SAID CHEQUE AFTER DEDUCTING DALALI THE BALANCE AMOUNT WAS WITHDRAWN IN CASH AND RETURNED TO THE RESPECTIVE PARTIES. THEREF ORE, THE ISSUANCE OF BOGUS SALE BILLS WAS CONFIRMED BY THOSE PARTIES. ON THE BASIS OF THESE FACTS, THE ASSESSING OFFICER HAS HELD THAT BA RRING INVOICES AND DELIVERY CHALLANS, THERE WAS NO OTHER DOCUMENT TO P ROVE THAT THE PURCHASES HAVE ACTUALLY BEEN MADE BY THE ASSESSEE. THERE WAS NO LORRY RECEIPT, TRANSPORTATION DETAILS, NUMBER OF WE IGHMENT, EXCISE GATE PASS ETC., NO DOCUMENT WAS PRODUCED DURING THE ASSESSMENT PROCEEDINGS. AFTER EXAMINING THE BANK ACCOUNTS AND OTHER ITA NO.2060 /AHD/2010 A.Y. 2005-06 PAGE NO SIMIT PANKAJ SHETH L/H OF LATE PANKJ J.SHETH VS. ITO 5 EVIDENCES AO HAS HELD THAT ALLEGED PURCHASES FROM B HAVNA TRADING CO., MINAXI ENTERPRISE AND ARUN IND. CORPORATION WA S NOT GENUINE PURCHASE AND THEREFORE THE SAID AMOUNT OF BOGUS PUR CHASES OF RS41,04,903/- WAS TAXED IN THE HANDS OF THE ASSESSE E. IT MAY NOT BE OUT OF PLACE TO MENTION THAT BOOKS OF ACCOUNT U/S.1 45(3) OF THE ACT WAS REJECTED AND PROFIT OF THE ASSESSEE WAS ESTIMAT ED AT RS.5 LAKH. BOTH THE ADDITIONS WERE CONTESTED BEFORE THE LD. CI T(A). 6. LD. AR MR. SOPARKAR HAS CONTESTED THAT THE ASSES SEE HAS MAINTAINED THE QUANTITATIVE DETAILS OF PURCHASES AN D SALE OF STEEL. HE HAS PLEADED THAT THE AUDITOR HAS GIVEN THE QUANT ITATIVE DETAILS AS PER THE SPECIAL AUDITOR WHICH CONFIRMS THE MAINTENA NCE OF QUANTITATIVE RECORD. IT WAS ENQUIRED FROM THE BENCH THAT WHETHER THE STOCK REGISTER AND QUANTITY-WISE PURCHASES AND SALE S ARE AVAILABLE ON RECORD, HOWEVER, THE ANSWER IS NEGATIVE. FURTHER , IT HAS ALSO BEEN ENQUIRED THAT WHETHER THE WEIGHMENT DETAILS, EXCISE GATE PAS, TRANSPORTATION DETAILS ETC., ARE ON RECORD AND AGAI N THE ANSWER WAS A NEGATIVE. THE LD. AR HAS INFORMED THAT ALMOST IN ID ENTICAL SITUATION IN THE CASE OF ACIT V. M/S KULUBI STEEL . 7. HAVING HEARD THE SUBMISSIONS OF BOTH SIDES, WE HAVE BEEN INFORMED THAT THE MALPRACTICE OF BOGUS PURCHASE IS MAINLY TO SAVE 10% SALES TAX ETC. IT HAS ALSO BEEN INFORMED THAT I N THIS INDUSTRY ABOUT 2.5% IS THE PROFIT MARGIN. THEREFORE, RESPECT FULLY FOLLOWING THE DECISIONS OF THE CO-ORDINATE BENCH PRONOUNCED ON ID ENTICAL CIRCUMSTANCES, WE HEREBY DIRECT THAT THE DISALLOWAN CE IS REQUIRED TO BE SUSTAINED AT 12.5% OF THE PURCHASES FROM THOSE P ARTIES. WITH THESE DIRECTIONS, WE HEREBY DECIDE. THE GROUNDS OF THE RIVAL PARTIES WHICH ARE PARTLY ALLOWED. 4. SINCE ON IDENTICAL FACTS, A VIEW HAS ALREADY BEE N TAKEN IN ASSESSEES OWN CASE BY THE RESPECTED CO-ORDINATE BENCH, THEREF ORE, AFTER HEARING SUBMISSIONS OF BOTH SIDES, WE HEREBY HOLD THAT IN I DENTICAL MANNER FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE SHALL BE LIAB LE TO TAX ON THE PERCENTAGE AS SETTLED HEREINABOVE. WE DIRECT ACCORDINGLY. H ENCE, IN THE RESULT, GROUND OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.2060 /AHD/2010 A.Y. 2005-06 PAGE NO SIMIT PANKAJ SHETH L/H OF LATE PANKJ J.SHETH VS. ITO 6 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 28/ 12 /2012 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A)-III, BARODA 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#