Shri Ghewarchand A.Shah, Ahmedabad V. The ACIT.,Circle-5, Baroda

ITA 2295/AHD/2010

• Counselvise Citation: 229520514 RSA 2010
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 09-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2010
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: MUKESH M PATEL
• Section: 68

Judgement Text

, , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.2295/AHD/2010 A.Y. 2007-08 GHEWARCHAND A. SHAH, BARODA. PAN: AGIPS3304H VS ACT, CIRCLE-5, BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SH. O.P. BATHEJA, SR.D.R., ASSESSEE(S) BY : SH. MUKESH M. PATEL, AR / // / DATE OF HEARING : 09/12/2013 !' / DATE OF PRONOUNCEMENT : 13/12/2013 #$/ O R D E R PER SHRI A. K. GARODIA, ACCOUNTANT MEMBER: 1. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)- V, BARODA DATED 02.04.2010 FOR AY 2007-08. 2. THE GROUNDS SUBMITTED BY THE ASSESSEE ARE AS UND ER: 2.1 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION OF RS 59, 85,416/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE I.T. ACT. 2.2 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FAC TS IN CONFIRMING THE DISALLOWANCE OF RS 1,85,416/- IN RES PECT OF SALES COMMISSION PAID BY THE APPELLANT. ITA NO.2295/AHD/2010 GHEWARCHAND A. SHAH VS. ACIT, CIR. 5, BARODA FOR A.Y. 2007-08 - 2 - 3. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE T HAT ALTHOUGH VARIOUS GROUNDS ARE RAISED BY THE ASSESSEE BUT THE ISSUES INVOLVED ARE ONLY TWO. THE FIRST ISSUE IS REGARDING ADDITIO N OF RS 59, 85,416/- U/S 68 OF THE I.T. ACT AND THE SECOND ISSU E IS REGARDING DISALLOWANCE OF RS 1,85,416/- IN RESPECT OF SALES C OMMISSION PAID BY THE ASSESSEE. REGARDING SECOND ISSUE, HE REITER ATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). THE LD. DR SUPPORTED THE ORDER OF CIT(A) ON THIS ISSUE. 3. CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE LD. CIT(A) HAS GIVEN FINDING ON THIS ISSUE IN PARA NO. 5.3 OF HIS ORDER THAT NO DETAILS COULD BE FURNISHED CONFIRMING THE ROLE PLAY ED BY SH. SANJAYJI SHAH (SON OF PROPRIETOR) IN SECURING THE O RDERS. HE HAS ALSO GIVEN A FINDING THAT THERE IS NO SUCH EXPENSE IN THE PRECEDING YEARS. THIS FINDING IS ALSO GIVEN BY HIM THAT GUJA RAT TECHNICAL CELL (P) LTD. HAS ALSO NOT CERTIFIED THAT THEY WERE DEALING WITH THE COMMISSION AGENT. THESE FINDINGS OF THE LD. CIT(A) COULD NOT BE CONTROVERTED BY LD. AR OF THE ASSESSEE AND HENCE ON THIS ASPECT, WE DONT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE ASSE SSEE. 3. REGARDING FIRST ISSUE I.E. ADDITION OF RS 59,85,416 /- MADE BY THE AO U/S 68, IT WAS SUBMITTED BY THE LD. AR OF THE AS SESSEE THAT THERE IS NO CASH CREDIT FROM THIS PARTY AND IN FACT, THE ASSESSEE HAS EFFECTED PURCHASE OF RS 61,71,796/- FROM THIS PARTY DURING PRESENT YEAR AND OUT OF THIS, THE ASSESSEE MADE PAYMENT OF RS 1,86,380/- IN THE PRESENT YEAR AND THE CLOSING CREDIT BALANCE OF THIS PARTY WAS RS 59,85,416/-. HE FURTHER SUBMITTED THAT THIS IS NOT THE ALLEGATION OF ITA NO.2295/AHD/2010 GHEWARCHAND A. SHAH VS. ACIT, CIR. 5, BARODA FOR A.Y. 2007-08 - 3 - THE AO THAT THESE PURCHASES ARE BOGUS BECAUSE HE HA S NOT DISALLOWED OR MADE ADDITION OF THE ENTIRE PURCHASES BUT MADE ADDITION OF THE UNPAID AMOUNT ONLY OF RS 5985416/- OUT OF TOTAL PURCHASE OF RS 6171796/-. HE SUBMITTED THAT THE CO NFIRMATION OF THE PARTY IS AVAILABLE ON PAGE NO. 1 OF THE PAPER B OOK AND COPY OF LEDGER ACCOUNT OF THAT PARTY IS AVAILABLE ON PAGE N O. 2 OF PAPER BOOK. HE ALSO SUBMITTED THAT THE COPY OF LEDGER AC COUNT OF THE PARTY IN THE NEXT YEAR IN THE BOOKS OF THE ASSESSEE IS AVAILABLE AT PAGE NO. 3 OF PAPER BOOK. 6. IN THE NEXT YEAR ALSO, VARIOUS PURCHASES WERE MA DE AND VARIOUS PAYMENTS WERE ALSO MADE LEAVING CLOSING CREDIT BALA NCE OF RS 5774285/-. HE FURTHER POINTED OUT THAT THE COPY OF LEDGER ACCOUNT OF THAT PARTY IN THE BOOKS OF THE ASSESSEE FOR THIR D YEAR IS AVAILABLE ON PAGE NO. 4 OF PAPER BOOK. AS PER THE SAME, THE ENTIRE OPENING BALANCE WAS PAID BY CHEQUE IN THAT YEAR AND THERE W AS NO PURCHASE IN THAT YEAR. HE ALSO SUBMITTED THAT THE COPY OF P AN CARD OF THE SUPPLIER IS AVAILABLE AT PAGE NO. 5 OF PAPER BOOK A ND HIS AFFIDAVIT IS AVAILABLE AT PAGE NO. 6 TO 10 OF THE PAPER BOOK. H E ALSO SUBMITTED THAT AS PER THIS AFFIDAVIT HE HAS EXPLAINED THAT HI S BUSINESS WAS CLOSED SINCE LAST TWO YEARS AND THEREFORE HIS OFFIC E PREMISES REMAINED CLOSED AND FOR THIS REASON, THE POST INCLU DING POST OF INCOME TAX DEPARTMENT WOULD HAVE RETURNED UNDELIVER ED. HE ALSO SUBMITTED THAT PAGES 11-12 OF THE PAPER BOOK A RE THE BALANCE SHEET AND P&L ACCOUNT OF THE ASSESSEE FOR PRESENT Y EAR, AS PER WHICH, THE ASSESSEE HAS MADE PURCHASES OF RS 508.72 LAKHS IN THE PRESENT YEAR AND THERE WERE CREDITORS OF RS 185.23 LAKHS AT THE END OF THE PRESENT YEAR. HE ALSO SUBMITTED THAT PARTY- WISE LIST OF THE ITA NO.2295/AHD/2010 GHEWARCHAND A. SHAH VS. ACIT, CIR. 5, BARODA FOR A.Y. 2007-08 - 4 - CREDITORS IS AVAILABLE AT PAGE NO. 13 OF THE PAPER BOOK INCLUDES THIS AMOUNT PAYABLE TO SUBBALAKSHMI ENTERPRISES RS 54854 16/-. HE ALSO SUBMITTED THAT ONLY BECAUSE THE PARTY HAS CLOS ED DOWN ITS BUSINESS AND WAS NOT AVAILABLE AT THE GIVEN ADDRESS , IT CANNOT BE CONCLUDED THAT THE PURCHASES ARE BOGUS OR THAT THE CREDIT IS NOT GENUINE. 7. THE LD. DR SUPPORTED THE ORDER OF THE CIT(A). H E ALSO SUBMITTED THAT AT THE ADDRESS GIVEN BY THE ASSESSEE, THE PART Y WAS NOT AVAILABLE AND WHEN THE AO DEPUTED AN INSPECTOR, IT WAS REPORTED BY HIM THAT THE ALLEGED PROPRIETOR OF SUBBULAKSHMI ENTERPRISES SH. CHAMAN LAL PRAJAPATI WAS DULY CROSS-EXAMINED AND IT WAS FOUND THAT HE WORKS IN A COURIER AGENCY HAVING NO KNOWLED GE ABOUT THE BUSINESS OF THE ASSESSEE OR ABOUT THE PROPRIETOR OF THE ASSESSEE FIRM. HE ALSO SUBMITTED THAT WHEN THE PROPRIETOR OF THE SUPPLIER FIRM IS WORKING IN COURIER AGENCY ON PALTRY SALARY HAVING NO KNOWLEDGE OF ASSESSEES BUSINESS, IT CANNOT BE EXPE CTED THAT HE COULD SUPPLY THE GOODS ON CREDIT TO THE EXTENT OF R S 59.85 LAKHS AND THEREFORE, THE ADDITION MADE BY THE A.O. AND CO NFIRMED BY THE CIT(A) IS JUSTIFIED. 8. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT ALTHOUGH THESE ABNORMALITIES ARE NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT THE SUPPLIER FIRM IS NOT AVAI LABLE AT THE ADDRESS AS PER INSPECTORS INQUIRY AND THE PERSON I N QUESTION SH. CHAMAN LAL PRAJAPATI WAS FOUND TO BE PERSON OF NO M EANS BUT STILL THE A.O. HAD CHOSEN TO MAKE ADDITION OF ONLY THE OU TSTANDING ITA NO.2295/AHD/2010 GHEWARCHAND A. SHAH VS. ACIT, CIR. 5, BARODA FOR A.Y. 2007-08 - 5 - AMOUNT AND NOT OF ENTIRE PURCHASES CLAIMED BY THE A SSESSEE FROM THAT PARTY. THIS GOES TO SHOW THAT THE A.O. IS NOT DOUBTING THE GENUINENESS OF THE PURCHASES FROM THIS PARTY. HAVIN G ACCEPTED THE PART PURCHASE FROM THIS PARTY, THE ADDITION MADE BY THE A.O. OF THE OUTSTANDING AMOUNT ALONE CANNOT BE UPHELD ON THE BA SIS OF DOUBTS. EVEN NO STATEMENT OF THAT PERSON WAS RECORDED BY TH E A.O. AS CAN BE SEEN IN THE ASSESSMENT YEAR. IT MAY BE THAT THI S PERSON WAS ALSO HAVING CREDIT PURCHASES AND THEREFORE, NO CREDIT WO RTHINESS IS REQUIRED TO SUPPLY ON CREDIT IF THE PERSON MAKING S UCH SUPPLY IS ALSO GETTING CREDIT ON HIS PURCHASES. WHEN THE A.O . COULD LOCATE THE CONCERNED PERSON, HE SHOULD HAVE RECORDED HIS S TATEMENT AND THE SAME SHOULD HAVE BEEN CONFRONTED TO THE ASSESSE E BUT THIS WAS NOT DONE BY THE A.O. THIS IS ALSO VERY IMPORTANT T O NOTE THAT IN THE PRESENT CASE, THE CREDIT IN DISPUTE IS NOT CASH CRE DIT BUT THE SAME IS SUPPLIERS CREDIT AND IT IS NOT THE CASE OF THE A.O . THAT THE PURCHASES FROM THIS PARTY ARE NOT GENUINE. IN SPIT E OF LOCATING THE CONCERNED PERSON, THE A.O. DID NOT RECORD HIS STATE MENT. MERELY BECAUSE AT THE TIME WHEN THE INSPECTOR LOCATED THE SUPPLIER IN THE YEAR 2009, HE WAS FOUND TO BE WORKING IN A COURIER FIRM, IT CANNOT BE CONCLUDED THAT AT THE RELEVANT POINT OF TIME, WH EN IT IS CLAIMED THAT HE MADE SUPPLIES ON CREDIT I.E. IN FY 2006-07 ALSO, HE WAS NOT HAVING SOURCE TO SUPPLY GOODS ON CREDIT. IT WAS NE CESSARY TO RECORD HIS STATEMENT THAT SINCE WHEN, HE WAS WORKIN G IN THE COURIER FIRM. SUCH COURIER FIRM ALSO COULD HAVE BEEN CONTA CTED AND ENQUIRED TO UNEARTH THE TRUTH. BUT THE A.O. HAS CH OSEN NOT TO DO SO. IT MAY BE THAT AFTER THE RELEVANT YEAR, THE PA RTY MIGHT HAVE INCURRED LOSSES AND THEREFORE, HE WAS WORKING IN A COURIER FIRM AND THIS DOES NOT PROVE THAT THE CREDIT IN FY 2006-07 I S NOT GENUINE. ITA NO.2295/AHD/2010 GHEWARCHAND A. SHAH VS. ACIT, CIR. 5, BARODA FOR A.Y. 2007-08 - 6 - 9. THE LD. DR ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF BLESSING CONSTRUCTION VS. ITO 32 TAXMANN.COM 366(GUJ.) AND HE HAS SUBMITT ED A COPY OF THIS JUDGMENT ALSO. IN OUR CONSIDERED OPINION, THIS JUDGMENT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. I N THAT CASE, LOAN WAS ADVANCED BY A LOAN CREDITOR TO THE ASSESSEE BY WAY OF CHEQUES AFTER DEPOSITING CASH IN HIS BANK ACCOUNT AND THE C ONCERNED CREDITOR COULD NOT EXPLAIN THE SOURCE OF HIS CASH. IT IS HELD BY HONBLE GUJARAT HIGH COURT THAT LEGAL CONTENTION OF THE ASSESSEE THAT THE REVENUE CANNOT INSIST ON ASSESSEE SUPPLYIN G SOURCE OF SOURCE IS IMPECCABLE BUT STILL THE ADDITION WAS UPH ELD BY HONBLE COURT FOR THIS REASON THAT THERE WAS SUFFICIENT EVI DENCE ON RECORD TO SUGGEST THAT IN BANK ACCOUNTS, CASH AMOUNTS WERE CREDITED AND IMMEDIATELY AFTER ENTIRE AMOUNTS WERE WITHDRAWN THR OUGH ISSUANCE OF CHEQUES IN FAVOUR OF THE ASSESSEE AND T HEIR CAPACITY OF SUCH CASH DEPOSITS WAS NOT ESTABLISHED. IN THE PRE SENT CASE, THE SUPPLIER IN QUESTION COULD BE LOCATED BY THE A.O. A ND HE WAS PRODUCED BY THE ASSESSEE BEFORE THE LD. CIT(A) ALON GWITH HIS PAN CARD AND HE HAS GIVEN AN AFFIDAVIT ALSO IN WHICH IT WAS EXPLAINED THAT HIS BUSINESS WAS CLOSED TWO YEARS BACK. IN SP ITE OF THIS, THE DEPARTMENT DID NOT RECORD HIS STATEMENT AND MAKE IN QUIRIES FROM HIM OR FROM HIS A.O. IN VIEW OF THESE FACTS, IT IS OUR CONSIDERED OPINION THAT THE ASSESSEE HAS FULFILLED HIS ONUS BY PRODUCING THE SUPPLIER AND THE DEPARTMENT HAS NOT BROUGHT ON RECO RD ANYTHING ADVERSE TO SUGGEST THAT THE CONCERNED SUPPLIER WAS NOT HAVING CREDITWORTHINESS AT THE RELEVANT POINT OF TIME. IN FACT, NO ATTEMPT WAS MADE BY THE A.O. EVEN TO RECORD HIS STATEMENT A ND CONFRONT THE SAME TO THE ASSESSEE. NO SUCH STEP WAS TAKEN B Y CIT(A) ALSO ITA NO.2295/AHD/2010 GHEWARCHAND A. SHAH VS. ACIT, CIR. 5, BARODA FOR A.Y. 2007-08 - 7 - ALTHOUGH THE LD. CIT(A) IS ALSO HAVING SIMILAR POWE RS INCLUDING POWER OF ENHANCEMENT. THIS IS ALSO NOTEWORTHY THAT THE CREDIT IN QUESTION IS NOT CASH CREDIT BUT SUPPLIERS CREDIT A ND THE GENUINENESS OF PURCHASES IS NOT DOUBTED BECAUSE ENTIRE PURCHASE S ARE NOT ADDED BUT ONLY UNPAID PURCHASES ARE ADDED. HENCE, IN OUR CONSIDERED OPINION, THIS JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE. IN THE FACTS OF TH E PRESENT CASE AS DISCUSSED ABOVE, THE A.O. AND CIT(A) WERE ABLE TO C REATE DOUBTS BUT COULD NOT DO ANYTHING FURTHER AND HENCE, ADDITI ON ON MERE DOUBT IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE SAME. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON THE DATE MENTIONED ON CAPTION PAGE. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( A.K. GARODIA) ACCOUNTANT MEMBER AHMEDABAD; DATED 13/12/2013 GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA, SR. P , SR. P , SR. P , SR. P. .. .S SS S. .. . TRUE COPY #$ %& '#&' #$ %& '#&' #$ %& '#&' #$ %& '#&'/ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. %*() / THE RESPONDENT. 3. ++ , / CONCERNED CIT 4. ,() / THE CIT(A)-III, AHMEDABAD 5. &/0 % , , / DR, ITAT, AHMEDABAD 6. 012 3 / GUARD FILE. #$ #$ #$ #$ / BY ORDER, 4 44 4/ // / +5 +5 +5 +5 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD