Umiya Industries Pvt.Ltd., Himatnagar V. The DY.CIT.,S.K.Circle, Himatnagar

ITA 2360/AHD/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6120 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-10-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P B PARMAR
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2360/AHD/2012 (ASSESSMENT YEAR: 2006-07) UMIYA INDUSTRIES PVT. LTD. AT DOLGADH, P.O. VAKTAPUR, IDAR HIGHWAY ROAD, HIMATNAGAR, SABARKANTHA V/S THE DCIT, S.K. CIRCLE, HIMATNAGAR (APPELLANT) (RESPONDENT) PAN: AAACU6788Q APPELLANT BY :SHRI TUSHAR HEMANI & P.B. PARMAR, A R RESPONDENT BY : SHRI KEYUR PATEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 07 -02-201 8 DATE OF PRONOUNCEMENT : 12 -02-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)- VIII, AHMEDABAD DATED 30.08.2012 PERTAINING TO A.Y. 2006-07. ITA NO. 2360 /AHD/2012 . A.Y. 2006-07 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 76,43,453/- U/S. 69C OF THE ACT. THE ASSESSEE STRONGLY CONTENDS THAT PROVISIONS OF SECTION 69C ARE NOT AT ALL APPLICABLE ON THE FACTS OF THE CASE IN HAND. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THE ORIGIN AL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 15.12.2008 AND THE TOTAL INCOME WAS DETERMINED AT RS. 13,92,228/-. 4. THE ASSESSMENT WAS SET ASIDE BY THE LD. COMMISSIONE R U/S. 263 OF THE ACT WITH A DIRECTION TO THE A.O. TO RE-FRAME THE ASSESSMENT AFTER CONSIDERING ALL THE RELEVANT MATERIAL/PROVISIONS OF THE ACT. 5. THE DISPUTE REVOLVES AROUND THE PURCHASE OF COTTON WORTH RS. 99.76 LACS FROM M/S. DHARTI ENTERPRISES, BABRA. TO VERIFY THE GENUI NENESS OF THE PURCHASES ITO, AMRELI WAS REQUESTED TO SEND ITS REPORT REGARD ING GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE WITH DHARTI ENTERPRI SES, BABRA. THE SAID FIRM STATED BEFORE THE ITO, AMRELI THAT THEY DID NOT HAV E ANY TRANSACTIONS WITH THE ASSESSEE EXCEPT TWO TRANSACTIONS OF CASH SALES TOTA LING RS. 4,41,425/-. 6. TAKING A LEAF OUT OF THE REPORT SENT BY THE ITO, AM RELI, THE ASSESSEE WAS ASKED TO EXPLAIN WHY PURCHASES WORTH RS. 95.35 LACS SHOUL D NOT BE TREATED AS BOGUS AND WHY PAYMENTS MADE TOTALING TO RS. 76,43,453/- S HOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE IN VIEW OF THE STATEMENT OF SHRI DHIRUBHAI B. VARSADIA PROPRIETOR OF DHARTI ENTERPRISES, BABRA. ITA NO. 2360 /AHD/2012 . A.Y. 2006-07 3 7. THE ASSESSEE STRONGLY CLAIMED THAT IT IS HAVING BIL LS FROM DHARTI ENTERPRISES REGARDING PURCHASES MADE FROM THEM AND ASKED FOR TH E CROSS-EXAMINATION OF DHIRUBHAI B. VARSADIA. IN HIS CROSS-EXAMINATION, D HIRUBHAI B. VARSADIA SUBMITTED A LETTER IN WHICH HE REITERATED THAT TRAN SACTION WITH THE ASSESSEE WERE MADE ONLY TO THE TUNE OF RS. 4,41,425/-. INSOFAR AS TRANSACTION WORTH RS. 95 LACS IS CONCERNED, IT WAS STATED THAT THESE PURCHAS ES WERE MADE BY THE ASSESSEE DIRECTLY FROM FARMERS AND PAYMENTS WERE ALSO MADE T O FARMERS. 8. THE A.O. CONCLUDED BY OBSERVING THAT THE PROPRIETOR OF DHARTI ENTERPRISES HAS ONCE AGAIN ACCEPTED THE TRANSACTION ONLY TO THE TUN E OF RS. 4,41,425/- AND REGARDING REMAINING TRANSACTIONS, THE A.O. WAS OF T HE OPINION THAT THE PROPRIETOR OF DHARTI ENTERPRISES HAS CHANGED HIS ST ATEMENTS TO ACCOMMODATE THE ASSESSEE AND THEREFORE NOT MUCH WEIGHTAGE WAS G IVEN TO THE SAME AND THE A.O. COMPLETED THE ASSESSMENT BY MAKING ADDITION OF RS. 76,43,453/- TREATING THE SAME AS UNEXPLAINED CASH U/S. 69C OF THE ACT. 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES AND THE LD. D.R. STRON GLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND THAT THE APPELLANT HAS GIVEN COMPLE TE DETAILS OF CONSUMPTION OF RAW COTTON, PRODUCTION OF COTTON BALES AND COTTO N SEEDS AS WELL AS PRODUCTION LOSS FOR THE YEAR UNDER CONSIDERATION, T HE COMPARATIVE CHART IS AS UNDER:- ITA NO. 2360 /AHD/2012 . A.Y. 2006-07 4 F.Y. RAW COTTON CONSUMPTION (KG.) MFG. PRODUCTION (IN KG.) PRODUCTION LOSS COTTON BALES % COTTON SEEDS % % 2004 - 05 1254500 447769 35.69 787190 62.75 1.56 2005 - 06 9608809 3386175 35.24 5953462 61.96 2.80 2006 - 07 9977517 3475931 34.84 6003383 60.17 4.99 2007 - 0$ 7237330 2504430 34.60 45 20520 62.46 2.93 2008 - 09 , 5031471 1715390 34.09 3087406 61.36 4.54 2009 - 10 9753038 3365415 34.51 6144414 63.00 2.49 2010 - 11 5418785 1756158 32.41 3413835 63.00 4.59 12. AND THE GROSS PROFIT RATIO IS AS UNDER:- ASST. YEAR TURNOV ER GROSS PROFIT RATION% 2005 - 06 21,33,33,623/ - 77,78,370/ - 3.65% 2006 - 07 20,19,44,014/ - 9754848/ - 4.83% 2007 - 08 20, 10,23,868/ - 5268212/ - 2.62% 2008 - 09 19,02,01,716/ - 10795962/ - 5.68% 13. IF, WE ACCEPT THE CONTENTIONS OF THE REVENUE AUTHOR ITIES THEN THE RESULTS WOULD BE SOMEWHAT AS UNDER: THE TOTAL RAW COTTON CONSUMPTION IS 96,08,809. RAW COTTON FROM DHARTI ENTERPRISES IS 4,46,973 KGS. THE ASSESSEE HAS MANUF ACTURED 33,86,175 KGS OF COTTON BALES AND 59,53,462 KGS OF COTTON SEEDS AGGR EGATING TO 93,39,637 KGS. THIS WILL RESULT IN SURPLUS OF 1,77,801 KGS. ITA NO. 2360 /AHD/2012 . A.Y. 2006-07 5 14. IN OUR UNDERSTANDING OF BUSINESS OF THE ASSESSEE, T HIS RESULT IS PRACTICALLY UNACCEPTABLE BECAUSE INSTEAD OF THERE BEING PRODUCT ION LOSS, THE END RESULT SHOWN HEREINABOVE IS A PRODUCTION SURPLUS. THEREFOR E, THE CONTENTION OF THE REVENUE AUTHORITIES IS NOT ACCEPTABLE. IN ANY CASE, SALES HAVE NOT BEEN DOUBTED AT ALL THERE IS NO WHISPER OF ANY BOGUS SALES. THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS AND THE SAME HAS ALSO NOT BEEN FOUND TO BE BOGUS. 15. IN SUCH A SCENARIO, ADDITIONS NEED TO BE CONFIRMED BASED ON A REASONABLE ESTIMATE OF PROFIT AND CONSIDERING THE NATURE OF BU SINESS OF THE ASSESSEE, IN OUR CONSIDERED OPINION, A PROFIT RATE OF 7.5% SHOULD ME ET THE ENDS OF JUSTICE. WE ACCORDINGLY DIRECT THE A.O. TO COMPUTE THE PROFIT O N THE ALLEGED BOGUS PURCHASES @ 7.5%. 16. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 - 02- 20 18 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 12 /02/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD