The DCIT, Circle-2(1)., Vijayawada V. M/s Arunodaya Note Book Manufacturers Pvt Ltd, Vijayawada

ITA 251/VIZ/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7043 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 30-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Bogus purchase
• Section: 142(1); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.251/VIZAG/2008 ASSESSMENT YEAR : 2005-06 DCIT, CIRCLE-2(1) VIJAYAWADA M/S. ARUNODAYA NOTE BOOK MANUFACTURERS PVT. LTD., VIJAYAWADA (APPELLANT) VS. (RESPONDENT) PAN NO.AAECA 3317R APPELLANT BY: SHRI G.S.S. GOPINATH, DR RESPONDENT BY: SHRI C. SUBRAHMANYAM, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) INTER-ALIA ON VARIOUS GROUNDS WHICH ARE AS U NDER:- 1. THERE IS NO BASIS FOR FIXING THE REASONABLE INCOME AT RS.25 LAKHS BY THE HON'BLE CIT(A). 2. THE CIT(A) HAS ERRONEOUSLY HELD THAT THE A.O. HAS T O PROVE BEYOND REASONABLE DOUBT THAT THERE WERE NO PURCHASES MADE FROM THE ALLEGED SUPPLIERS. IT IS TO BE MENTIONED HERE THAT IT HAS BEEN PROVED BEYOND DOUBT THAT THE ASSESSEE HAS NOT MADE ANY PURCHASES FROM THOSE ALLEGED SUPPLIERS WHERE THE EX ISTENCE OF THE ALLEGED SUPPLIERS ITSELF WAS NOT CONFIRMED BY THE A SSESSEE COMPANY. 3. THE LD. CIT(A) OUGHT NOT HAVE ALLOWED THE ASSESSEE S CONTENTION THAT IN THE SUBSEQUENT YEAR, I.E., IN THE ASST. YEA R 2006-07, IT HAS CLEARED THE OUTSTANDING AMOUNT BY MAKING CASH PAYME NT OF EACH OF RS.19,500/-. 4. THE LD. CIT(A) ERRED IN HOLDING THAT A.O. HAS NOT D ISCUSSED TO WHAT EXTENT THE QUANTITY OF RAW MATERIAL IS REQUIRED FOR ACHIEVING THE TOTAL TURNOVER. 5. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE ADDITION WAS MADE BY THE A.O. AFTER CONDUCTING DETAILED INVE STIGATION, PROVIDED SUFFICIENT OPPORTUNITIES, CONDUCTED INDEPE NDENT ENQUIRY AND PASSED A SPEAKING ASSESSMENT ORDER ACCORDINGLY. 6. THE CALCULATION OF CONSUMPTION OF INK, VIS--VIS WI TH THE PRODUCTION/JOB WORK IS NOT AT ALL REQUIRED FOR THE PRESENT CASE. THE DECISION OF THE HON'BLE ITAT, CHANDIGARH BENCH REPO RTED AT (68ITD 65) TM RELIED UPON BY THE LD. CIT(A) IS NOT APPLICA BLE TO THE FACTS 2 AND CIRCUMSTANCES OF THE PRESENT CASE. IT IS A CLE AR CASE WHERE THE BOGUS PURCHASES WERE PROVED BEYOND DOUBT. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 2. THOUGH THE CIT(A) HAS RAISED VARIOUS GROUNDS BUT THEY ALL RELATE TO THE ESTIMATION OF INCOME AFTER REJECTING THE BOOKS OF A CCOUNTS OF THE ASSESSEES. 3. THE FACTS WHICH LEAD TO THE IMPUGNED ADDITIONS A RE THAT THE ASSESSEE COMPANY IS ENGAGED IN JOB WORK OF PRINTING OF NOTE BOOKS AND BINDING WORKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. I SSUED NOTICE U/S 142(1) CALLING CERTAIN DETAILS. HOWEVER, THE ASSESSEE HAS FAILED TO FILE CONFIRMATIONS IN RESPECT OF SUNDRY CREDITORS EXCEEDING RS.4 LAKHS IN ORDER TO VERIFY THE GENUINENESS OF THESE PURCHASES. THE ASSESSEE WAS A SKED TO PRODUCE CONFIRMATIONS AND WAY BILLS. THE ASSESSEE HAS FAIL ED TO FURNISH THE CONFIRMATORY LETTERS FROM THESE SUNDRY CREDITORS. BESIDES, THE ASSESSEE SUBMITTED THAT IT HAD NEVER RECEIVED ANY WAY BILLS ALONG WITH THE PURCHASE BILLS. THE A.O. DOUBTED THE TRANSACTIONS AND ISSUE D LETTERS U/S 133(6) OF THE ACT TO THESE 4 SUPPLIERS BUT THE SAME WERE RETURNED BACK UNSERVED. THE A.O. ASKED THE ADDITIONAL CIT NAGPUR TO CONDUCT AN ENQUIRY ON GENUINENESS OF PURCHASES FROM ONE OF THE PARTIES M/S. GIRIJA P RINTING INKS, NAGPUR AND IN ENQUIRY, IT WAS FOUND THAT GIRIJA PRINTING WORKS HA VE SOLD INK FOR RS.12,900/- AGAINST THE DECLARED PURCHASE OF RS.8,19,500/- AND RS.4,09,750/- ON 29.7.2004 AND 15.12.2004 RESPECTIVELY. THE A.O. HA S ALSO OBSERVED FROM THE ADDRESSES OF OTHER SUPPLIERS OF DELHI I.E. S.S. TRA DERS, AMRIT TRADING COMPANY THAT THEIR PIN CODE WERE IN 7 DIGIT, WHEREA S ALL OVER THE COUNTRY IT IS IN 6 DIGIT. SINCE THE ASSESSEE COULD NOT PLACE ANY EVIDENCE TO PROVE THE GENUINENESS OF PURCHASES, THE A.O. TREATED THE ENTI RE PURCHASE AS BOGUS AND MADE THE ADDITION OF RS.41,43,150/- ON ACCOUNT OF B OGUS PURCHASES. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) A ND PLACED HIS SUBMISSIONS IN WRITING THAT ASSESSEE HAS MADE ITS S INCERE EFFORTS TO OBTAIN THE CONFIRMATIONS FROM THE SUPPLIERS BUT COULD NOT SUCC EED. THE ASSESSEE IS HAVING ORDERS FOR PRINTING WORKS IN HAND AND THEY M ADE BULK ORDERS TO AVAIL THE DISCOUNTS REGARDING PRICE AND DELIVERY CHARGES. THE PURCHASE OF CHEMICALS, INK AND WEB PLATES ARE BOUGHT FROM THE P ARTIES OF OTHER STATES AS 3 THEY AGREE TO SUPPLY AT A LESSER PRICE AND THE DELI VERY IS EXECUTED BY THE SUPPLIERS TO THE DOOR STEP OF THE ASSESSEES BY HAND ING OVER RESPECTIVE BILLS. PAYMENTS ARE ALSO USED TO BE PAID TO THE PERSONS WH O CAME FOR DELIVERY OF THE GOODS. THE ASSESSEE IS MORE PARTICULAR ABOUT T HE QUALITY, QUANTITY AND PRICE OF THE GOODS. 5. THE CIT(A) HAS RE-EXAMINED THE ISSUE IN THE LIGH T OF ASSESSEES CONTENTIONS AND HE WAS ALSO OF THE VIEW THAT THE AS SESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES MADE BY IT. WHILE DEALING WITH THE ISSUE, HE HAS ALSO TAKEN INTO ACCOUNT THE VARIOUS FACTUAL ASPECTS AND THE FOLLOWING QUESTIONS EMERGED IN THE INSTANT CASE: 1. WHETHER WITHOUT CONSUMING RAW MATERIALS TO THE EXTE NT OF RS.41,43,150/-, THE JOB WORK OF RS.1,32,54,371/- CA N BE CARRIED OUT? 2. WHETHER NON-SERVICE OF LETTERS ISSUED U/S 133(6) PR OVES THE PURCHASES FROM THESE PARTIES NOT GENUINE? 3. WHEN THE JOB WORK RECEIPTS HAVE BEEN ACCEPTED, IN T HAT CIRCUMSTANCES, WHETHER THE CLAIM OF CONSUMPTION OF THE RAW MATERIAL IS TO BE ACCEPTED? 4. WHETHER THE BOOKS OF ACCOUNT GIVES TRUE PICTURE ABO UT INCOME? 6. THE CIT(A) HAS ALSO ACCEPTED THAT ONUS IS UPON T HE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES BUT WITHOUT THE PU RCHASES THE JOB RECEIPTS ARE NOT POSSIBLE. THE ASSESSING OFFICER HAS ACCEPT ED THE JOB RECEIPT OF RS.1,32,54,371/-. HE HAS ALSO TAKEN A NOTE THAT PE RCENTAGE OF CONSUMPTION OF RAW MATERIAL IS LESS BY 10% IN THE IMMEDIATELY P RECEDING YEAR IN COMPARISON TO ASSESSMENT YEAR 2005-06. THE CIT(A) FURTHER OBSERVED THAT IN SUCH TYPE OF SITUATION THE ONLY OPTION LEFT TO THE ASSESSING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEES SINCE THE BOOKS OF ACCO UNT DO NOT GIVE CORRECT PICTURE ABOUT THE TRUE INCOME OF THE ASSESSEES. RE LYING UPON THE ORDER OF THE CHANDIGARH BENCH CIT(A) HAS ESTIMATED AN INCOME OF RS.25 LAKHS AGAINST THE ADDITION OF RS.41,43,150/- MADE ON ACCOUNT OF B OGUS PURCHASES. 4 7. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE T HE TRIBUNAL WITH THE SUBMISSIONS THAT WHEN THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES, THE ENTIRE PURCHASE WERE CONSIDERED TO B E BOGUS AS DONE BY THE ASSESSING OFFICER AND THE SAME WERE ADDED TO THE TO TAL INCOME OF THE ASSESSEES. THE LD. COUNSEL FOR THE ASSESSEES ON TH E OTHER HAND HAS REITERATED ITS CONTENTIONS AS RAISED BEFORE THE CIT (A). 8. WE HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE AND THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS AND THE ORDERS AND VARIOUS JUDGEMENTS REFERRED TO BY THE PARTIES. UNDISPUTEDL Y, THE ASSESSEE HAS MADE THE PURCHASES FROM DIFFERENT PARTIES OF DIFFERENT S TATES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VARIOUS OPPORTUNITIES WERE AFFORDED TO THE ASSESSEES TO PLACE EVIDENCE IN ORDER TO PROVE THE G ENUINENESS OF PURCHASES BUT HE FAILED TO DO SO. AN OPPORTUNITY WAS ALSO AF FORDED TO THE ASSESSEE DURING THE COURSE OF HEARING OF THE APPEAL BEFORE U S TO PROVE THE GENUINENESS OF PURCHASES BUT EXCEPT THE PURCHASE BI LLS, NO EVIDENCE WAS FILED. MEANING THEREBY, THE PURCHASES MADE BY THE ASSESSEES WERE NOT PROVED BY HIM THOUGH THE ONUS STRICTLY LAY UPON IT. WE HAVE ALSO EXAMINED THE OTHER FACTS OF THE CASE THAT ASSESSEE WAS RUNNI NG A PRINTING PRESS ON JOB WORK BASIS IN WHICH HE HAS CONSUMED THE RAW MATERIA LS. FOR RUNNING A PRESS RAW MATERIALS MUST HAVE BEEN CONSUMED THOUGH IT WAS NOT PURCHASED FROM THE DISPUTED SUPPLIERS. BUT THE PURCHASE OF RAW MA TERIALS TO THE EXTENT OF PARTICULAR QUANTITY IN ORDER TO GENERATE THE JOB RE CEIPT OF RS.1,32,54,371/- CANNOT BE DOUBTED. IF WE MAKE AN ADDITION OF TOTAL PURCHASES MADE BY THE ASSESSEES AS A BOGUS PURCHASE, IT WOULD NOT BE FAIR BECAUSE IT IS OVER AND ABOVE THE INCOME DECLARED BY THE ASSESSEES. ACCORD ING TO US IN THIS TYPE OF SITUATION, TRUE INCOME CANNOT BE WORKED OUT FROM TH E BOOKS OF ACCOUNTS OF THE ASSESSEES. THE BOOKS OF ACCOUNT SHOULD BE REJE CTED AND INCOME CAN BE ESTIMATED. WHILE ESTIMATING THE INCOME, THE COMPARA BLE CASES SHOULD BE TAKEN INTO ACCOUNT. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS OR BEFORE US, NO COMPARABLE CASE WAS SUGGESTED BY EITHER BY T HE REVENUE OR THE ASSESSEES. IN THIS SITUATION, WE HAVE TO ESTIMATE THE PROPER INCOME OF THE ASSESSEES IN ORDER TO MEET THE ENDS OF JUSTICE. TH E CIT(A) HAS ESTIMATED THE INCOME AT RS.25 LAKHS WHICH ACCORDING TO US APPEARS TO BE ON LOWER SIDE. 5 WE THEREFORE ESTIMATE THE INCOME OF THE ASSESSEES A T RS.30 LAKHS BEFORE ALLOWING SET OFF OF UNABSORBED LOSSES. THE SET OFF OF UNABSORBED LOSSES IS THE LEGAL CLAIM OF THE ASSESSEES WHICH SHOULD BE AL LOWED AGAINST THE ESTIMATED INCOME. WE THEREFORE MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO ADOPT THE INCOME FROM HIS BUSINESS AT R S.30 LAKHS AND THERE AFTER ALLOW THE SET OFF OF UNABSORBED LOSSES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 05-03-2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 5 TH MARCH, 2010 COPY TO 1 THE DCIT, VIJAYAWADA 2 M/S. ARUNODAYA NOTE BOOK MANUFACTURERS PVT. LTD., 33-5-9, 2 ND FLOOR, PAPAIAH STREET, SITARAMAPURAM, VIJAYAWADA-520 002. 3 THE CIT, VIJAYAWADA 4 THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM