M/s. American Steel Pvt.Ltd., Baroda V. The Dy.CIT, Circle-1(1), Baroda

ITA 2324/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8460 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2324/AHD/2014 ( / ASSESSMENT YEAR : 2006-07) M/S.AMERICAN STEEL PVT.LTD. NARSINH ESTATGE YAMUNA MILL ROAD PRATAPNAGAR, BARODA / VS. DCIT CIRCLE-1(1) BARODA # ./ ./ PAN/GIR NO. : AAECA 6674 P ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : MS.URVASHI SHODHAN, AR &#%(' / RESPONDENT BY : SHRI MUDIT NAGPAL, SR.DR )*(+ / DATE OF HEARING 24/07/2017 ,-./(+ / DATE OF PRONOUNCEMENT 12/09/2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, BAROD A [CIT(A) IN SHORT] DATED 20/06/2014 IN THE PENALTY ORDER UNDER S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') DATED 20/08/2013 PASSED BY THE ASSESSING OFFICER (AO) REL EVANT TO ASSESSMENT YEAR (AY) 2006-07. ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 2 - 2. IN THE IMPUGNED APPEAL, THE ASSESSEE HAS ASSAI LED THE ACTION OF THE AO IN IMPOSING THE PENALTY OF RS.8,70,000/- AND CON FIRMATION THEREOF BY THE CIT(A) ON THE GROUND THAT THE ASSESSEE HAS N EITHER FURNISHED INACCURATE PARTICULARS OF ITS INCOME NOR CONCEALED ITS PARTICULARS TO EVADE TAXES. 3. BRIEFLY STATED, THE ASSESSEE FILED A RETURN OF I NCOME FOR THE AY 2006-07 WHICH WAS REOPENED ON THE BASIS OF A REFERE NCE OF INVESTIGATION WING INDICATING BOGUS PURCHASES FROM M/S.R.R.PATEL TRADING CORPORATION TO THE TUNE OF RS.1,28,80,366/- DURING THE FINANCIAL YEAR RELEVANT TO AY 2006-07. THE ASSESSMENT WAS COMPLET ED UNDER S.143(3) OF THE ACT R.W.S.147 OF THE ACT DATED 28/11/2008 WH EREIN THE PURCHASE MADE BY THE ASSESSEE FROM THE AFORESAID PARTY NAMEL Y R.R.PATEL TRADING CORPORATION WAS FOUND BOGUS AND CONSEQUENTLY ADDITI ON TOWARDS BOGUS PURCHASE TO THE EXTENT OF AFORESAID AMOUNT OF RS.1. 28 CRORES WAS MADE TO THE RETURNED INCOME. 3.1. FOR COMING TO SUCH CONCLUSION, THE AO NOTED C ERTAIN PECULIAR FACTS AS FOLLOWS. THE AO NOTED THAT FROM AN ENQUIRY REPOR T OF THE DDIT (INVESTIGATION), IT WAS REVEALED THAT RAVISH R.PATE L PROP OF M/S.R.R.PATEL TRADING CORPORATION HAD ISSUED BOGUS BILLS TO THE A SSESSEE-COMPANY. THE PROPRIETOR RR PATEL WAS EXAMINED ON OATH WHEREI N HE CONFESSED TO HAVE ISSUED BOGUS BILLS TO AMERICAN STEEL PVT.LTD. AS WELL AS SISTER- ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 3 - CONCERN OF THE ASSESSEE I.E. AMERICAN STEEL CORPORA TION. IN THE CROSS- EXAMINATION BY THE ASSESSEE ALSO, HE REITERATED THE FACT OFISSUE OF BOGUS BILLS TO THE ASSESSEE AND OTHERS. ON THE STRENGTH OF THE STATEMENT OF PROPRIETOR AND CROSS-EXAMINATION THEREOF BY THE ASS ESSEE, IT WAS FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES OF RS.1.28 C RORES AS NOTED ABOVE. IT WAS FURTHER NOTED THAT THE ALLEGED SUPPL IER M/S.RR PATEL TRADING CORPORATION DID NOT HAVE ANY ESTABLISHMENT TO CARRY OUT SUCH QUANTUM OF BUSINESS. THE TRANSPORTATION TOWARDS P URPORTEDLY SUPPLY FROM THE AFORESAID SUPPLIER ALSO COULD NOT BE ESTAB LISHED. IT WAS ALSO FOUND THAT THE AMOUNT DEPOSITED IN THE BANK ACCOUNT OF THE SUPPLIER WAS IMMEDIATELY WITHDRAWN. IT WAS FURTHER NOTED THAT T HE ASSESSEE CONTROLLED THE BANK ACCOUNT OF THE SUPPLIER. IT ALSO TRANSPIR ED THAT BILLS RAISED FOR PURPORTED PURCHASES WERE PREPARED BY THE ASSESSEE O N THE BLANK BILLS TAKEN FROM THE SUPPLIER. 3.2. BESIDES, IT WAS FURTHER NOTICED BY THE AO THA T THERE WERE NO OTHER TRANSACTIONS IN THE BANK ACCOUNT OF THE SUPPLIER OT HER THAN THE TRANSACTIONS WITH THE ASSESSEE. THE ACTUAL EVIDENC ES OF PURCHASE OF MATERIAL WERE ALSO NOT PRODUCED. ON THESE GROSS FA CTS, THE ADDITIONS TOWARDS BOGUS PURCHASES WERE CARRIED OUT BY THE AO. IN THE QUANTUM PROCEEDINGS, THE CIT(A) CONFIRMED THE ADDITION TO T HE EXTENT OF 25% OF THE PURCHASES BOOKED IN THE NAME OF THE AFORESAID S UPPLIER ON THE PREMISE THAT THE AFORESAID BOGUS PURCHASES FROM RR PATEL TRADING ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 4 - CORPORATION WAS POSSIBLY RECORDED TO COMPENSATE PRO BABLE CASH PURCHASES FROM OTHER PARTIES IN VIEW OF THE QUANTIT ATIVE TALLY OF PURCHASE AND SALES. THE AFORESAID ACTION OF THE CIT(A) IN T HE QUANTUM PROCEEDINGS WAS MODIFIED BY THE TRIBUNAL AND CONFIR MED TO THE EXTENT OF 20% I.E. RS.25,76,072/- IN THE SECOND APPEAL. THE AO CONSEQUENTLY IMPOSED PENALTY U/S.271(1)(C) OF THE ACT ON THE AF ORESAID AMOUNT OF RS.25,76,072/- BEING 20% OF THE BOGUS PURCHASE RECO RDED AS FINALLY CONFIRMED ON AN ESTIMATE BASIS. 4. THE CIT(A) CONFIRMED THE AFORESAID PENALTY ACTIO N OF THE AO. 5. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AG AINST THE AFORESAID ORDER OF THE CIT(A) WHEREBY THE PENALTY ON THE AMOU NT OF RS.25,76,072/- QUANTIFIED AS CONCEALED INCOME ON ESTIMATED BASIS W AS CONFIRMED. THE PENALTY THEREON DETERMINED AT RS.8,70,000/- IS SUBJ ECT MATTER OF CONTROVERSY. 6. THE LD.AR FOR THE ASSESSEE MS.URVASHI SHODHAN VE HEMENTLY CONTENDED THAT THE PENALTY HAS BEEN ERRONEOUSLY IMP OSED AND CONFIRMED BY THE LOWER AUTHORITIES ON ESTIMATED ADDITIONS TOW ARDS ALLEGED BOGUS PURCHASES. THE LD.AR SUBMITTED THAT IT HAS BEEN FO UND AS A MATTER OF FACT THAT PURCHASE OF THE EQUIVALENT QUANTITY (AS C LAIMED TO BE MADE FROM THE SUPPLIER) HAS BEEN EVENTUALLY MADE NOTWITHSTAND ING DIFFERENT PARTY ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 5 - AND STANDS TALLIED FROM THE CORRESPONDING SALE. TH E ADDITION/PENALTY THEREFORE ON SUCH HYPOTHETICAL DETERMINATION OF ESC APED INCOME IS NOT CALLED FOR IN VIEW OF SEVERAL DECISIONS OF THIS TRI BUNAL. THE LD.AR RELIED UPON FOLLOWING CASE LAWS (I) DECISION OF ITAT AHMED ABAD IN THE CASE OF SHRI POKHRAJ DOSHI VS. ITO IN ITA NO.426/AHD/2013 F OR AY 2005-06, ORDER DATED 26/07/2013 AND (II) DECISION OF ITAT A HMEDABAD IN THE CASE OF SHRI POKHRAJ P.DOSHI VS. ITO IN ITA NO.1522/AHD/ 2013 FOR AY 2006- 07, ORDER DATED 07/07/2016. TO BUTTRESS ITS CLAIM FOR NON-IMPOSITION OF PENALTY, AFTER THE CLOSURE OF THE HEARING, TWO MORE ORDERS WERE PLACED ON BEHALF OF THE ASSESSEE. (1) DECISION OF ITAT AHMEDA BAD IN THE CASE OF KIRTI D VADALIA VS. ITO IN ITA NO.2827 FOR AY 2002- 03 & ORS., ORDER DATED 04-05/2016 AND (2) DECISION OF ITAT AHMEDABAD IN THE CASE OF BHOLAATH POLY FAB PVT.LTD. VS. ITO IN ITA NO.807/AH D/2010, ORDER DATED 12/10/2012. IN ESSENCE, LD.AR CONTENDED THAT WHERE THE CIRCUMS TANCES EXISTING FOR ADDITION/DISALLOWANCE OF PURCHASE ITS ELF ARE NOT DEFINITE AND ADDITION/DISALLOWANCE HAS VARIED A DIFFERENT STAGES OF THE APPELLATE PROCEEDINGS, THERE IS NO JUSTIFICATION TO IMPOSE ON EROUS PENALTY BY INVOKING SECTION 271(1)(C) OF THE ACT. ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 6 - 7. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT BOGUS PURCHASE S HAVE BEEN FOUND AS A MATTER OF FACT. IT WAS SUBMITTED THAT THE RECORD S MAKE IT APPARENT THAT ASSESSEE HAD SUBVERTED FACTS AND RECORDED BOGUS PUR CHASES IN ITS BOOKS OF ACCOUNTS WHICH FACT WAS ENDORSED BY THE ITAT IN THE APPELLATE PROCEEDINGS. THE ADDITIONS ON THIS ACCOUNT WAS ULT IMATELY CONFIRMED BY THE TRIBUNAL ALBEIT PARTLY ON THE GROUND THAT PURPO SE DID TAKE PLACE IN VIEW OF CORRESPONDING SALES. THE LD.DR SUBMITTED T HAT IN THE WAKE OF SPEAKING FACTS NARRATING THE DECEPTION AND DESIGN O F THE ASSESSEE AFTER ELABORATE ENQUIRY, THERE CAN BE NO REASON TO TAKE A DIFFERENT VIEW IN THE MATTER OF IMPOSITION OF PENALTY. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CASE LAWS C ITED. THE QUESTION FOR ADJUDICATION BEFORE US IS ON MAINTAINABILITY OF IMP OSITION OF PENALTY BY REVENUE UNDER S.271(1)(C) OF THE ACT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. AS NOTED IN PRECEDIN G PARAS, WE OBSERVE THAT THE FACTS OF THE PRESENT CASE ARE EXTREMELY PE CULIAR. IN THE INSTANT CASE, THE REVENUE HAS ESTABLISHED BEYOND ANY REASON ABLE DOUBT THAT THE ASSESSEE WAS INDULGED IN BOOKING BOGUS BILL OF AN U NWORTHY SUPPLIER TO INFLATE THE EXPENSES. THE TELL-TALE EVIDENCE IN TH E FORM OF STATEMENT OF THE SUPPLIER AND CONFIRMATION THEREOF IN THE CROSS- EXAMINATION BY ASSESSEE COUPLED WITH LACK OF PROOF TOWARDS DELIVE RY OF PURCHASE AND ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 7 - CLOUDED OR SUSPICIOUS BANKING TRANSACTIONS RECORDED TO THIS EFFECT LEAVES US IN NO MANNER OF DOUBT THAT ASSESSEE HAD DELIBERA TELY AND WILLFULLY SUBVERTED THE REAL SOURCE AND CHARACTER OF THE TRAN SACTIONS. WHILE DOING SO, THE ASSESSEE ALSO PREVENTED THE REVENUE FROM KN OWING THE REAL SOURCE OF SUPPLY AND WHEREABOUTS OF SUPPLIER OF THE ALLEGE D GOODS PURCHASED, IF ANY. IN THE CIRCUMSTANCES, THE APPELLATE AUTHORITI ES WERE LEFT WITH NO OPTION BUT TO ESTIMATE THE PLAUSIBLE OVERSTATEMENT OF EXPENDITURE ON PURCHASES AND THEREBY UNDERSTATEMENT OF PROFITS. T HUS, IN THESE FACTS, IT IS NOT A MATTER FOR CONSIDERATION AS TO WHETHER THE RE WAS ANY CONCEALMENT RESULTED BY THE ASSESSEE OR NOT. THE FACT OF UNDE RSTATEMENT IS DISCERNIBLE. THE ONLY MATTER FOR CONSIDERATION IS EXTENT OF QUANTIFICATION OF UNDERSTATEMENT OF INCOME. THE ITAT AS FINAL FA CT FINDING AUTHORITY HAS LENT OBJECTIVITY TO SUCH ESTIMATIONS. THUS, QU ARREL ABOUT QUANTUM OF ESTIMATED UNDISCLOSED INCOME ALSO DOES NOT SURVIVE ANY MORE. IN THESE CIRCUMSTANCES, WE DO NOT SEE ANY RATIONAL GROUND FO R GRANTING LATITUDE TO THE ASSESSEE IN THE MATTER OF RELIEF PLEADED. THE ASSESSEE HAS REFERRED TO CERTAIN CASE-LAWS AS NOTED ABOVE, WHERE A VIEW HAS BEEN TAKEN THAT ESTIMATED ADDITION DOES NOT CALL FOR IMPOSITION OF PENALTY. HOWEVER, AS NOTED IN ELABORATION, THE ASSESSEE IN THE INSTANT C ASE STANDS ON A VERY DIFFERENT FOOTING ON FACTS. THE UNDENIABLE FACT OF BOGUS PURCHASE ENTERED IN THE BOOKS OF ACCOUNTS AND THEREBY VITIA TING THE TAXABLE INCOME BY THE ASSESSEE WAS FOUND AS A MATTER OF FACT AFTER THREADBARE ENQUIRY. IN THESE CIRCUMSTANCES, THE RATIO OF THE AFORESAID DEC ISIONS ARE NOT ITA NO.2324/AHD /2014 AMERICAN STEEL P LTD VS. DCIT ASST.YEAR 2006-07 - 8 - APPLICABLE AT ALL. AS A CONSEQUENCE, WE FIND NO ME RIT WHATSOEVER IN THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 12/ 09 /2017 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 12/ 09 /2017 3..),.)../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-I, BARODA 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6.9.17 (DICTATION-PAD 20- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.9.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.12.9.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 12.9.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER