Shri Ashfaq Haji Yusuf Noorani, Surat V. The Addl.CIT., Range-5, Surat

ITA 2373/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9191 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Keywords: Bogus purchase; Depreciation
• Section: 69C; 234B; 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM ASHFAQ HAJI YUNUS NOORANI, PROP. OF MAY CORPORATION, 105, SHALIMAR TEXTILE MARKET, SALABATPURA, DORIAWAD, SURAT. VS. THE ADDL.CIT, RANGE-5, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R. N. VEPARI, AR RESPONDENT BY:- SHRI K. MADHUSUDAN, SR.D.R. O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) UNPAID CREDITORS RS.47,64,326/- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE DELETED ADDITION OF RS.47,64,326/- (II) BOGUS PURCHASE FROM ALPHA CHEMICALS: (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.59,800/- BEING SO CALL ED BOGUS PURCHASES FROM ALPHA CHEMICALS WHEN THE DIFFERENCE WAS EXPLAINED. (III) UNEXPLAINED PURCHASES U/S 69C RS.2,20,066/- ITA NO.2373/AHD/2008 ASST. YEAR :2005-06 ITA NO.2373/AHD/2008 ASST. YEAR 2005-06 2 (I) THE LD. CIT(A) ERRED IN CONFIRMING DIFFERENCE TO TH E BALANCE OF SPECTRUM CHEMICAL INDUSTRIES OF RS.2,20,066/- (IV) CREDIT NOTE OF RS.1,10,000/- (I) THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.1 ,10,000/- IN RESPECT OF DIFFERENCE OF BALANCE OF M/S VISEN INDUS TRIES WHEN THIS POINT WAS RECONCILED. (V) UNEXPLAINED DIFFERENCE IN SADHNA DYE CHEM: (1) THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.1 ,37,320/- WHEN THE DIFFERENCE WAS RECONCILED. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADD ITION IS REQUIRED TO BE DELETED. (VI) HOUSEHOLD EXPENSES RS.1,03,230/- (1) THE LD. CIT(A) ERRED IN RETAINING ADDITION OF HOUSE HOLD EXPENSES AT RS.60,000/- IN PLACE OF RS.1,03,230/- W HEN THERE WAS NO EVIDENCE OF EXCESSIVE HOUSEHOLD EXPENSES. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADD ITION IS REQUIRED TO BE DELETED. (VII) DISALLOWANCE OUT OF VEHICLE EXPENSES RS.15,03 2/- (1) THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.15,032/- BEING 25% OF VEHICLE EXPENSES WHEN THE ENTIRE EXPEN SES WERE INCURRED FOR THE PURPOSE OF THE BUSINESS AND IN THE BACKGROUND OF TURNOVER OF RS.3,42,28,135/- THE EXPENDITURE BEI NG EMINENTLY REASONABLE NO DISALLOWANCE SHOULD HAVE BEEN SUSTAIN ED. (VIII) MISCELLANEOUS (1) THE LD. CIT(A) ERRED IN NOT CONSIDERING GROUND NO.( VIII) & (IX) IN RESPECT OF CARRY FORWARD OF UNABSORBED BUSI NESS LOSS/DEPRECIATION OF THE EARLIER YEAR AND CHARGE OF INTEREST U/S 234B OF THE ACT. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF DYEING OF CLOTH ON JOB WORK BASIS. ITA NO.2373/AHD/2008 ASST. YEAR 2005-06 3 3. THE FIRST GROUND RELATES TO ADDITION OF RS.47,64 ,326/-. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND T HAT FOLLOWING CREDIT BALANCES ARE APPEARING AS ON 31.03.2005:- SL.NO. NAME OF THE PARTY AMOUNT OF CREDIT BALANCE REMAINED UNPAID & OFFERED FOR TAXATION 1 M/S BHATIA INTERNATIONAL RS.812243 2 M/S FEMINA SILK MILLS RS.184510 3 GAJANAN SILK MILLS RS.161106 4 M/S NAZARANA FABRICS RS.167308 5 M/S NAVKAR SILK TRADERS RS.173485 6 M/S RANGOOLI SILK CREATIONS RS.294345 7 M/S SYNERGY SOLUTION RS.242030 8 MUKESH CHANDALAL JHAVERI RS.199978 9 M/S POOJA SYNTHETICS RS.293688 10 M/S KHEMANI ENTERPRISES RS.294304 11 M/S VAIBHAV LAXMI RS.328229 12 M/S BHARTI SYNTHETICS RS.281900 13. M/S R.K. SYNTHETICS RS.289466 14 M/S PIRA SILK MILLS RS.312187 15 M/S DHAVAL TEXTILE RS.187328 16 M/S BANSAL SYNTHETICS RS.211690 17 M/S PRASHANT SILK MILLS RS.135342 18 M/S KISHORE & SONS RS.200187 TOTAL RS.47,64,326 ON ENQUIRY IT WAS REPORTED TO THE AO THAT THESE ARE OPENING BALANCES CONTINUED DURING THE ACCOUNTING YEAR AND WERE PENDI NG AS BALANCES AT THE END OF THE YEAR. THE AO REQUIRED THE ASSESSEE TO FU RNISH CONFIRMATIONS. AS SUCH CONFIRMATIONS WERE NOT FURNISHED, HE TREATE D THESE CREDITS AS NON- EXISTENT AND BOGUS AND ADDED THE SAME IN THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A) NOTED THAT ASSESSEE HAD H IMSELF OFFERED THIS AMOUNT AS INCOME ON THE CONDITION THAT PENALTY PROC EEDINGS WILL NOT BE INITIATED BUT SINCE THE AO DID NOT FULFILL HIS PART OF THE PROMISE AND INITIATED PENALTY PROCEEDINGS, ASSESSEE CONTESTED T HE ADDITION. SINCE ASSESSEE HAD AGREED FOR THE ADDITION NO APPEAL WOUL D LIE AGAINST SUCH ADDITION AND, THEREFORE, HE CONFIRMED THE SAME. ITA NO.2373/AHD/2008 ASST. YEAR 2005-06 4 4. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT FIRSTLY THESE AMOUNTS PERTAINED TO EARLIER YEARS, THEREFORE, THEY COULD NOT BE TAXED UNDER SECTION 68 IN THE CURRENT YEAR. EVEN OTHERWIS E THESE COULD NOT BE TREATED AS PROFITS UNDER SECTION 41(1) AS LIABILITI ES ARE STILL STANDING IN THE BOOKS OF THE ASSESSEE. 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT ONC E ASSESSEE AGREED FOR THE ADDITION HE CANNOT GO BACK ON THIS ISSUE. 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ISSUE REQUIRES R ECONSIDERATION. THE AO IN PARA 2.1 OF HIS ORDER REFERS TO A SUM OF RS.2,12 ,49,556/- BEING BALANCES APPEARING ON 1.4.2004. WHETHER SUM OF RS.47,64,326/ - BEING THE IMPUGNED ADDITION IN RESPECT OF 18 PARTIES ARE INCL UDED IN THE SUM OF RS.2,12,49,556/- IS NOT CLEAR. IF THE SUM OF RS.47, 64,326/- WAS BALANCE OUTSTANDING AS ON 1.4.2004 NO ADDITION IN ASST. YEA R 2005-06 IS CALLED FOR AS THEY WERE THE BALANCES APPEARING IN THE EARLIER YEARS NOT IN THE CURRENT YEAR. IN CASE THIS AMOUNT IN RESPECT OF 18 PARTIES FIRST TIME APPEARED DURING ASST. YEAR 2005-06 AND SINCE ASSESSEE HAD AG REED FOR THE ADDITION, THE ADDITION IS REQUIRED TO BE SUSTAINED. IF THE BA LANCE PERTAINED TO EARLIER YEARS THEN ASSESSEES AGREEING TO ADDITION IS NOT M ATERIAL BECAUSE AO LEGALLY CANNOT MAKE THE ADDITION. THUS FOR THE LIMI TED PURPOSE OF VERIFICATION WE RESTORE THIS ISSUE TO THE FILE OF L D. CIT(A). THIS GROUND OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 7. GROUND NOS.2 4 & 5 ARE NOT PRESSED BY THE ASSESS EE AND HENCE THEY ARE TREATED AS REJECTED. ITA NO.2373/AHD/2008 ASST. YEAR 2005-06 5 8. GROUND NO.3 PERTAINS TO UNEXPLAINED PURCHASES OF RS.2,20,066/- BEING THE DIFFERENCE IN THE ACCOUNTS WITH SPECTRUM CHEMICAL INDUSTRIES WHO SOLD CERTAIN GOODS TO THE ASSESSEE. ON VERIFICA TION OF THE ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF THAT PARTY, THE AO FOU ND PURCHASES TO THE EXTENT OF RS.13,23,711/- WHEREAS PURCHASES AS PER A SSESSEES BOOKS AMOUNTED TO RS.11,03,615/-. THE DIFFERENCE BEING RS .2,20,066/- WAS ADDED BY THE AO AS ASSESSEES INCOME. THE LD. CIT(A ) CONFIRMED THE SAME WITHOUT REALLY LOOKING INTO THE ACCOUNTS. 9. IT WAS EXPLAINED TO US BY THE LD. AR THAT THE CO PY OF ACCOUNTS FROM M/S SPECTRUM CHEMICAL INDUSTRIES SHOWED THAT THERE IS A CONTRA ENTRY OF RS.1,11,199/- AND THERE IS OPENING BALANCE OF RS.1, 08,893/-. THESE TWO ITEMS CONSTITUTE THE SUM OF RS.2,20,066/-. IF THE O PENING BALANCE AND CONTRA ENTRY ARE EXCLUDED THEN NO DIFFERENCE WOULD SURVIVE. 10. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORD ER OF LD. CIT(A). 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE RES TORE THE MATTER TO THE LD. CIT(A) FOR VERIFICATION. IF AS IS APPARENT THERE IS AN OPENING BALANCE AND A CONTRA ENTRY, THEN NO DIFFERENCE WOUL D SURVIVE AND NO ADDITION WOULD BE CALLED FOR. LET THE LD. CIT(A) VE RIFY THE SAME AND DECIDE THE ISSUE. THIS GROUND OF ASSESSEE IS ALLOWE D BUT FOR STATISTICAL PURPOSES. 12. GROUND NO.6 RELATES TO HOUSEHOLD EXPENSES OF RS .1,03,230/-. IN THIS REGARD THE AO OBSERVED THAT IF EXPENDITURE FOR EDUCATION OF CHILDREN IS EXCLUDED THEN PERSONAL EXPENDITURE FOR THE FAMIL Y WOULD OF RS.1,06,770/-. THE TOTAL WITHDRAWAL SHOWN BY THE AS SESSEE IS RS.1,66,420/- AND A SUM OF RS.95,650/- WAS INCURRED FOR EDUCATION OF ITA NO.2373/AHD/2008 ASST. YEAR 2005-06 6 CHILDREN. THE AO ESTIMATED EXPENDITURE AT RS.2,10,0 00/- AND REDUCED THEREFROM A SUM OF RS.1,06,770/- AND PROPOSED AN AD DITION OF RS.1,03,230/- UNDER SECTION 69C. THE LD. CIT(A) CON FIRMED THE SAME UPHOLDING THE REASONS GIVEN BY THE AO. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ESTIMATE MADE BY THE AO IS REASONABLE LOOKING TO THE OVER ALL CIRCUMSTANCES OF THE CASE. ACCORDINGLY, WE DECLINE TO INTERFERE. THIS GROUND OF ASSESSEE IS REJECTED. 14. THE NEXT GROUND IS ABOUT DISALLOWANCE OF VEHICL E EXPENSES OF RS.15,032/-. THE AO HAD DISALLOWED 25% ON ACCOUNT O F NON-BUSINESS PURPOSES AND WAS CONFIRMED BY THE LD. CIT(A). CONSI DERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE REST RICT THE ADDITION TO 10%. AS A RESULT, THIS GROUND IS PARTLY ALLOWED. 15. GROUND NO.7 IS REGARDING INTEREST UNDER SECTION 234B. THIS, IN OUR VIEW IS CONSEQUENTIAL IN NATURE AND DOES NOT REQUIR E ANY SPECIFIC ADJUDICATION. ACCORDINGLY, THIS GROUND IS REJECTED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 10.12.10. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 10.12.10. MAHATA/- ITA NO.2373/AHD/2008 ASST. YEAR 2005-06 7 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 3/12/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 7/12/2010 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..