Assistant Commissioner of Income-tax, V. M/s. Anant Chemicals, Kolhapur

ITA 262/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7712 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 13-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 262/PUN/2015 / ASSESSMENT YEAR : 2011-12 ACIT, ICHALKARANJI CIRCLE, ICHALKARANJI . / APPELLANT V/S M/S. ANANT CHEMICALS, 18/484, NEAR SHAHU PUTALA, NEW INDUSTRIAL ESTATE, ICHALKARANJI, DIST. KOLHAPUR PAN : AAEFA7703J . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI AJAY MODI / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A), KOLHAPUR, DATED 26-12-2014 FOR THE ASSESSMENT YEAR 2011-12. 2. GROUNDS RAISED BY THE REVENUE ARE ARGUMENTATIVE IN NATURE. THE CORE ISSUES MENTIONED IN THE GROUNDS RELATE TO (1) THE C APITAL NATURE OF THE REPAIR WORKS DONE TO A TRUCK, WHERE ITS BODY WAS SPOILED DUE TO TRANSPORT OF CHEMICALS AND (2) THE ADDITION ON ACCOUNT OF BOGUS PURCHASES. 3. IN CONNECTION WITH THE ISSUE RELATING TO THE BOG US PURCHASES, THE FACTS ARE THAT THE ASSESSEE EFFECTED PURCHASES OUT OF WHICH T HE PURCHASES AMOUNTING TO RS.95,77,680/- ARE FROM SOME SUSPECTED SUPPLIERS. IN VIEW OF CERTAIN EVIDENCES GATHERED BY THE AO, THE SAME WERE ADDED AS INCOME O F THE ASSESSEE IN THE / DATE OF HEARING : 21.08.2017 / DATE OF PRONOUNCEMENT: 23.08.2017 2 ITA NO.262/PUN/2015 M/S. ANANT CHEMICALS ASSESSMENT. HOWEVER, IN THE FIRST APPELLATE PROCEE DINGS BEFORE CIT(A) SAME WAS DELETED BY THE CIT(A) WITHOUT EVEN RESTRICTING THE ADDITION NOT EVEN TO THE GROSS PROFIT RATES OF THE ASSESSEE ON THE SAID BOGUS PURC HASES. 4. IN THIS REGARD, BEFORE US, LD. COUNSEL FOR THE A SSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.1288 AND 1289/PUN/2015 AND OTHERS ORDER DATED 28-04-2017 FOR THE A.YRS. 2009-10 AND 2010-11 WHICH ARE PRIOR TO THE CURRENT ASSESSMENT Y EAR UNDER CONSIDERATION. BRINGING OUR ATTENTION TO RELEVANT PARAS (NO.40 AND 46 WHERE THE ASSESSEES CASE WAS DISCUSSED) OF THE SAID ORDER OF THE TRIBUNAL, L D. COUNSEL MENTIONED THAT THE MATTER WAS DECIDED PARTLY IN FAVOUR OF THE ASSESSEE WHERE ADDITION WAS RESTRICTED TO 10% OF THE ALLEGED BOGUS PURCHASES. 5. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER OF THE TRIBUNAL AS WELL AS THE FINDINGS OF THE AO AND THE CIT(A). ON CONSIDER ING OF THE PRESENT FACTS, WE ARE OF THE OPINION THAT OPERATIONAL LINES FROM PARA NO. 40 AND PARA NO.46 OF THE ORDER OF THE TRIBUNAL SHOULD BE EXTRACTED AS UNDER : 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HOWEVER, THE BENEFIT OF PURCHASES BEING MADE FROM GREY MARKET, NEEDS ESTIMATION IN THE HANDS OF ASSESSEE. THE TRIBUNAL HAS ALREADY HELD THAT THE ADDITION MADE BY ESTIMATING T HE SAME @10% OF THE ALLEGED HAWALA PURCHASES. ACCORDINGLY, IT IS SO HELD. IN VIEW THEREOF, THE ISSUES WHICH EMERGE ARE AS UNDER : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46. IN THE CASE OF M/S. ANANT CHEMICALS, COPY OF ST ATEMENT WAS SUPPLIED TO THE ASSESSEE AND THE PERSON FROM WHOM PURCHASES WERE MA DE WAS ALSO SUMMONED. HOWEVER, THERE WAS NON-COMPLIANCE AND ADDITION WAS MADE IN THE HANDS OF ASSESSEE. THE CIT(A) ON THE OTHER HAND, APPLIED HIG HER GP RATE TO ESTIMATE THE INCOME IN THE HANDS OF ASSESSEE ON ACCOUNT OF BOGUS PURCHASES. THE REVENUE IS IN APPEAL AGAINST THE SAME. THE ASSESSEE HAS NOT FILE D ANY APPEAL AGAINST THE ORDER OF CIT(A) AND ACCORDINGLY, UPHOLDING THE ORDER OF C IT(A) BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 6. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSU E RIGHT IN ASSESSEES OWN CASE FOR OTHER ASSESSMENT YEARS, AND WITH THE CONSE NT OF BOTH THE PARTIES, WE ARE 3 ITA NO.262/PUN/2015 M/S. ANANT CHEMICALS OF THE VIEW THAT DELETION OF ENTIRE ADDITION BY THE CIT(A) IS NOT APPROPRIATE. THEREFORE, AO IS DIRECTED TO FOLLOW THE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS. AO IS DIREC TED TO RESTRICT THE ADDITION TO 10% OF THE GROSS PROFIT. ACCORDINGLY, THE ISSUE RELATE D TO BOGUS PURCHASES IS PARTLY ALLOWED IN FAVOUR OF THE REVENUE. 7. IN CONNECTION WITH THE SECOND ISSUE RELATING TO THE CAPITAL/REVENUE NATURE OF THE REPAIRS UNDERTAKEN BY THE ASSESSEE BY WAY OF THE BODY BUILDING OF THE TRUCK USED FOR TRANSPORT OF CHEMICALS, ASSESSEE CL AIMED THE ENTIRE EXPENSES AS REVENUE IN NATURE. HOWEVER, AO REJECTED THE ASSESS EES EXPLANATION AND ALSO THE DECISIONS RELIED UPON BY HIM. AO INFERRED THAT TH E REPAIRS DONE TO THE BODY OF THE TRUCK, CONSTITUTES AN IMPORTANT SEGMENT OF THE ASSET-TRUCK AND THEREFORE, THE REPAIRS HAS AN ENDURING BENEFIT. IN THE PROCESS, A O IGNORED THE ASSESSEES EXPLANATION, I.E. THE TRUCKS BODY GETS SPOILED OR CORRODED BY VIRTUE OF CHEMICALS BEING TRANSPORTED FOR THE PURPOSE OF THE BUSINESS. CIT(A) GRANTED RELIEF TO THE ASSESSEE RELYING ON THE JUDGMENT OF HONBLE KARNATA KA HIGH COURT IN THE CASE OF HANUMAN WATER SERVICES VS. CIT 66 ITR 88. 8. AGGRIEVED WITH THE SAME, THE REVENUE IS IN APPEA L BEFORE US WITH THE ARGUMENTATIVE GROUNDS GIVEN IN THE GROUNDS OF APPEA L. 9. BEFORE US, IN CONNECTION WITH THE APPEAL OF THE REVENUE, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE BODY OF THE TRU CK HAS AN ENDURING BENEFIT AND THEREFORE IT IS CAPITAL IN NATURE. HE PLEADED FOR CONFIRMING THE ORDER OF THE AO. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. KOROTH OIL MILL C O. LTD., (1982) 9 TAXMAN 104 (KERALA). 10. ON HEARING BOTH THE SIDES AND PERUSING THE SAI D JUDGMENT OF HONBLE KERALA HIGH COURT RELIED ON BY THE LD. DEPARTMENTAL REPRES ENTATIVE, WE FIND THE SAID 4 ITA NO.262/PUN/2015 M/S. ANANT CHEMICALS JUDGMENT IS NOT APPLICABLE TO THE FACTS OF THE PRES ENT CASE. AS ALREADY POINTED OUT IN THE OPEN COURT, WE FIND THE REPLACEMENT OF AN EN GINE OF A MOTOR BOAT IS THE ISSUE IN THE SAID CASE AND THE HONBLE KERALA HIGH COURT HELD THAT THE ENGINE CONSTITUTES AN IMPORTANT PART OF THE MOTORIZED BOAT. THEREFORE , THE SAME FALLS IN THE CAPITAL NATURE. IN OUR VIEW, THE SAID CASE DOES NOT HELP T HE REVENUE ON THE PRESENT FACTS WHERE REPLACEMENT OF ENGINE IS NOT THE ISSUE WHER EAS THE REPLACEMENT OF THE BODY OF TRUCK IS THE ISSUE UNDER CONSIDERATION. CONSIDERING THE NATURE OF BUSINESS AND THE USE OF THE TRUCK FOR TRANSPORTATIO N OF CHEMICALS, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS FAIR AND REASO NABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE FROM OUR SIDE. ACCORDINGLY, THE SECON D ISSUE RAISED BY THE REVENUE IS DISMISSED AND IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF AUGUST, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 23 RD AUGUST, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. THE CIT(A), KOLHAPUR THE CIT, KOLHAPUR 5. % , , B BENCH PUNE; 6. / GUARD FILE.