Shri Nilesh Rameshchandra Shah, Ahmedabad V. The DCIT, Circle-6(1), Ahmedabad

ITA 2248/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8182 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts; Gift
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NOS. 2248 & 2249/AHD/2017 ( / ASSESSMENT YEARS : 2010-11 & 2011-12) SHRI NILESH RAMESHCHANDRA SHAH PROP. SHAGUN ART 8, RAM SHYAM APARTMENT NR.L.G. HOSPITAL MANINAGAR, AHMEDABAD / VS. THE DCIT CIRCLE 6 (1) AHMEDABAD ./ ./ PAN/GIR NO. : AFQPS 3070 R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NUPUR SHAH, AR / RESPONDENT BY : SHRI MUDIT NAGPAL, SR.DR / DATE OF HEARING 10/07/2019 !'# / DATE OF PRONOUNCEMENT 15/07/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE COMMISS IONER OF INCOME TAX (APPEALS)6, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEA L NO.CIT(A)-6/20 AND 19/16-17 DATED 17/08/2017 ARISING IN THE ASSE SSMENT ORDER PASSED UNDER S.147 R.W.S. 143(3) OF THE INCOME TAX ACT, 1 961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 14/03/2016 RELEVANT TO ASSESSMENT YEARS (AYS) 2010-11 & 2011-12 RESPECTIVELY. ITA NOS.2248 & 2249/AHD/2017 NILESH RAMESHCHANDRA SHAH VS. DCIT ASST.YEARS - 2010-11 & 2011-12 - 2 - BEFORE US, BOTH THE PARTIES SUBMITTED THAT THOUGH T HE APPEALS RELATE TO DIFFERENT ASSESSMENT YEARS, THE FACTS IN BOTH THE A PPEALS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR AND THE AMOUNTS INVO LVED AND THE SUBMISSIONS MADE BY THEM WHILE ARGUING ONE CASE WOU LD APPLY TO THE OTHER APPEAL ALSO. IN VIEW OF THE AFORESAID SUBMISS IONS, WE, THEREFORE, FOR THE SAKE OF CONVENIENCE, PROCEED TO DISPOSE OF BOTH THE APPEALS BY WAY OF A CONSOLIDATED ORDER. 2. THE ASSESSEE IN ITA NO. 2248/AHD/2017 FOR AY 201 0-11 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FAC TS IN DISMISSING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE APPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HI M. 1. REJECTION OF BOOKS OF ACCOUTNS 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE ACTION OF THE LD. A.O. IN REJECTING THE BOOKS OF ACCOUNTS EVEN THOUGH THE APPELLANT IS MAINTAINING THE BOOKS OF ACCOUNTS WHIC H WERE DULY AUDITED BY THE AUDITOR AS PER THE PROVISIONS OF THE INCOME TAX ACT AND U/S.44AB OF THE ACT AND THE AUDITOR HAS NOT MADE ANY QUALIFICA TION IN THE AUDITORS REPORT AND THEY HAVE NOT POINTED OUT ANY DEFECTS,. II. DISALLWOANCE ON ACOUNT OF ALLEGED BOGUS PURCH ASES RS. 63,44,326/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER. ON ALLEGED BOGUS PURCHASES OF RS.63,44,326/- BY TREATING THE PURCHAS ES MADE BY THE APPELLANT AS BOGUS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAI LING TO PROPERLY CONSIDER APPELLANTS SUBMISSIONS AND VARIOUS JUDICI AL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. ITA NOS.2248 & 2249/AHD/2017 NILESH RAMESHCHANDRA SHAH VS. DCIT ASST.YEARS - 2010-11 & 2011-12 - 3 - 3. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. PRAYER THE APPELLANT THEREFORE RESPECTFULLY PRAYS THAT:- 1. THE REJECTION OF APPELLANTS BOOKS OF ACCOUNTS CON FIRMED BY THE LD.CIT(A) MAY KINDLY BE QUASHED. 2. ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES OF R S.63,44,326/- AS CONFIRMED BY THE LD.CIT(A) MAY KINDLY BE DELETED . 3. SUCH AND FURTHER RELIEF AS THE NATURE AND CIRCUMSTA NCES OF THE CASE MAY JUSTIFY. AT THE OUTSET, WE NOTE THAT THE LEARNED AR FOR THE ASSESSEE HAS NOT ADVANCED ANY ARGUMENT ON THE ISSUE OF REJECTION OF THE BOOKS OF ACCOUNTS AS RAISED IN THE 1 ST GROUND OF APPEAL. THUS IN THE ABSENCE OF ANY ARGUM ENT BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE DEEM IT APPROPRIATE TO REJECT THE SAME AS NOT PRESSED. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED C IT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR 63,44,326.00 ON ACCOUNT OF BOGUS PURCHASES. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND PROPRIETOR OF M/S SHAGUN ART. THE ASSESSEE IS DEALI NG IN THE BUSINESS OF GIFT ARTICLES. THE AO BASED ON THE INFORMATION RECE IVED FROM THE VAT/ SALES TAX DEPARTMENT OF MUMBAI FOUND THAT THE ASSES SEE HAS MADE BOGUS PURCHASES FROM THE SEVERAL PARTIES AMOUNTING TO 63,44,324.00 ONLY. THEREFORE, THE AO DISALLOWED THE SAME AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS.2248 & 2249/AHD/2017 NILESH RAMESHCHANDRA SHAH VS. DCIT ASST.YEARS - 2010-11 & 2011-12 - 4 - THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO ALSO CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED AR FOR THE ASSESSEE BEFORE US SU BMITTED THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE INVOLVING IDENTICAL ISSUE HAS ALLOWED THE APPEAL IN FAVOR OF THE ASSESSEE IN PART IN ITA NO. 3131/AHD/2015 FOR THE ASSESSMENT YEAR 2009-10 VIDE DATED 31-10-2018. ACCORDINGLY, THE LEARNED AR PRAYED THAT THE SAME FI NDING COULD BE APPLIED IN THE CASE ON HAND. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY SUPPOR TED THE ORDER OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, W E NOTE THAT THE IMPUGNED ISSUE IS COVERED IN THE OWN CASE OF THE AS SESSEE AS DISCUSSED ABOVE. THE RELEVANT EXTRACT OF THE ORDER IS REPRODU CED AS UNDER: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND THE ORDERS OF THE AUTHORITIES BELOW. THE MAINTAINA BILITY OF ESTIMATED DISALLOWANCE OUT OF ALLEGED BOGUS PURCHAS ES IS IN CONTROVERSY. IN THIS REGARD, WE NOTICE THAT THE AS SESSEE IS ENGAGED IN TRADING OF GOODS AND THEREFORE EVERY PUR CHASE GETS MATCHED BY CORRESPONDING SALES/CLOSING STOCK. THUS , THE SCOPE OF MANIPULATION IN BILLS TOWARDS PURCHASE QUANTITY IS NEARLY NON-EXISTENT. WHAT AT BEST THUS CAN BE MANIPULATED IS THE ITA NOS.2248 & 2249/AHD/2017 NILESH RAMESHCHANDRA SHAH VS. DCIT ASST.YEARS - 2010-11 & 2011-12 - 5 - PRICE/VALUE OF THE GOODS PURCHASED. IN OTHER WORDS , WHILE IT MAY BE POSSIBLE THAT PURCHASES MIGHT HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, THE PURCHASES THEMSELV ES CANNOT BE TREATED AS BOGUS. THE SALE RECORDED IN BOOKS IS NO T IN QUESTION. CONTEXTUALLY, THE ASSESSEE HAD DECLARED 7.31% TOWAR DS PROFIT ON SUCH ALLEGED BOGUS PURCHASES. AS STATED, THE RELEV ANT DOCUMENTS INCLUDING INVOICE, PAYMENT THROUGH BANKIN G CHANNEL, QUANTITY TALLY WERE MADE AVAILABLE TO THE REVENUE A UTHORITIES. THE CROSS EXAMINATION OF THE SUPPLIERS WAS NOT PROV IDED DESPITE REQUESTS. IN THESE CIRCUMSTANCES, WE FIND CONSIDER ABLE MERIT IN THE CASE OF THE ASSESSEE IN THE LIGHT OF THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN GUJARAT AMBUJA EXPORT S (SUPRA); CIT VS. BHOLANATH POLY FAB PVT. LTD. 355 ITR 290 (G UJ) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PCIT VS. TEJUA ROHITKUMAR KAPADIA ARISING OUT OF THE DECISIO N OF THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.691 OF 2017, JUDGMENT DATED 18.09.2017. IN VIEW OF THE FACTS RE CORDED, IT IS DIFFICULT TO DISPUTE THE QUANTITATIVE ASPECTS OF TH E PURCHASES MADE. THIS LEAVES US TO THE LIMITED ASPECT OF PRIC ING OF ALLEGED BOGUS PURCHASE. HAVING REGARD TO THE FACTS AND CIR CUMSTANCES OF THE CASE AND MORE PARTICULARLY IN VIEW OF PROFIT S ALREADY DECLARED ON ALLEGED BOGUS PURCHASES IN THE VICINITY OF 7%, WE ARE OF THE VIEW THAT AN ESTIMATED DISALLOWANCE OF 5 % ALLEGED BOGUS PURCHASES OVER AND ABOVE THE PROFITS ALREADY DECLARED WOULD COVER POSSIBLE SUPPRESSION IN PROFITS AND WIL L BALANCE THE EQUITY. SUCH ESTIMATION WOULD ALSO BE IN TUNE WIT H THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN GUJARAT AMBUJA EXP ORTS (SUPRA). ACCORDINGLY, WE DIRECT THE AO TO RESTRICT THE ESTIMATED DISALLOWANCE TO RS.6,42,657/- ON ACCOUNT OF ALLEGED BOGUS PURCHASE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. AS THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDEN TICAL TO THE FACTS AS DISCUSSED ABOVE, THEREFORE WE ARE NOT INCLINED TO T AKE ANY CONTRARY VIEW. MOREOVER, THE LEARNED DR HAS NOT BROUGHT ANYTHING C ONTRARY TO THE ARGUMENT OF THE LEARNED AR FOR THE ASSESSEE. THEREF ORE, RESPECTFULLY FOLLOWING THE SAME THE GROUND OF APPEAL OF THE ASSE SSEE IS PARTLY ALLOWED. ITA NOS.2248 & 2249/AHD/2017 NILESH RAMESHCHANDRA SHAH VS. DCIT ASST.YEARS - 2010-11 & 2011-12 - 6 - 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE I N ITA NO.2248/AHD/2017 FOR AY 2010-11 IS PARTLY ALLOWED. COMING TO ASSESSEES APPEAL IN ITA 2249/AHD/2017 FO R AY 2011-12 6. THE ASSESSEE RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THE LD.CIT(A) HAS GROSSLY ERRED IN LAW AND ON F ACTS IN DISMISSING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE APPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HI M. 1. REJECTION OF BOOKS OF ACCOUNTS 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE ACTION OF THE LD. A.O. IN REJECTING THE BOOKS OF ACCOUNTS EVEN THOUGH THE APPELLANT IS MAINTAINING THE BOOKS OF ACCOUNTS WHIC H WERE DULY AUDITED BY THE AUDITOR AS PER THE PROVISIONS OF THE INCOME TAX ACT AND U/S.44AB OF THE ACT AND THE AUDITOR HAS NOT MADE ANY QUALIFICAT ION IN THE AUDITORS REPORT AND THEY HAVE NOT POINTED OUT ANY DEFECTS. II. DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHA SES RS. 8,28,788/-. 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE DISALLOWANCE MADE BY THE LD. A.O. ON ALLEGED BOGUS PURCHASES OF RS.8,28,788/- BY TREATING THE PURCHASES MADE BY THE APPELLANT AS BOGUS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FA ILING TO PROPERLY CONSIDER APPELLANTS SUBMISSIONS AND VARIOUS JUDICI AL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. PRAYER THE APPELLANT THEREFORE RESPECTFULLY PRAYS THAT:- 1. THE REJECTION OF APPELLANTS BOOKS OF ACCOUNTS CON FIRMED BY THE LD.CIT(A) MAY KINDLY BE QUASHED. ITA NOS.2248 & 2249/AHD/2017 NILESH RAMESHCHANDRA SHAH VS. DCIT ASST.YEARS - 2010-11 & 2011-12 - 7 - 2. ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES OF R S.8,28,788/- AS CONFIRMED BY THE LD.CIT(A) MAY KINDLY BE DELETED. 3. SUCH AND FURTHER RELIEF AS THE NATURE AND CIRCUMSTA NCES OF THE CASE MAY JUSTIFY. 7. BOTH THE SIDES CONSENTED THAT IDENTICAL ISSU E IS INVOLVED IN THIS APPEAL TOO. THUS, FOR PARITY OF REASONS NOTED ABOVE , OUR VIEW IN ITA NO.2248/AHD/2017 FOR AY 2010-11 ABOVE SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL CAPTIONED ABOVE. AS A RESULT, THE A PPEAL OF THE ASSESSEE IN ITA NO.2249/AHD/2017 FOR AY 2011-12 IS PARTLY ALLOW ED. 8. IN THE COMBINED RESULT, BOTH THE APPEALS OF TH E ASSESSEE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 15/07/2019 SD/- SD/- (MS. MADHUMITA ROY) (WASEEM A HMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 15/07/2019 &.., .(.. / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-6, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD