American Steel Pvt.Ltd., Baroda V. The Income tax Officer,Ward-1(1), Baroda

ITA 2720/AHD/2009

• Counselvise Citation: 272020514 RSA 2009
• Duration Of Justice: 3 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A TINKEY
• Keywords: Bogus purchase; Depreciation
• Section: 40A(3)

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% %% % . .. .&'( &'( &'( &'(, , , , %) * %) * %) * %) * % ' % ' % ' % ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. K. GARODIA, ACCOUNTANT MEMBER) ITA NO.2848/AHD/2008 AND 2720/AHD/2009 [ASSTT.YEAR : 2005-2006 AND 2006-2007] AMERICAN STEEL PVT. LTD. SHREE NARSHINJI INDUSL. ESTATE YAMUNA MILL ROAD PRATAPNAGAR, BARODA. /VS. ITO, WARD-1(1) BARODA. ITA NO.3098/AHD/2008 AND 2973/AHD/2009 [ASSTT.YEAR : 2005-2006 AND 2006-2007] ITO, WARD-1(1) BARODA. /VS. AMERICAN STEEL PVT. LTD. SHREE NARSHINJI INDUSL. ESTATE YAMUNA MILL ROAD PRATAPNAGAR, BARODA. ( (( (,- ,- ,- ,- / APPELLANT) ( (( (./,- ./,- ./,- ./,- / RESPONDENT) 01 2 3 %/ ASSESSEE BY : MS. URVASHI SHODHAN * 2 3 %/ REVENUE BY : SHRI A. TINKEY 5 2 16)/ DATE OF HEARING : 11 TH OCTOBER, 2012 7&8 2 16)/ DATE OF PRONOUNCEMENT : 02-11-2012 %9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENUE FOR A.Y.2005-2006 AND 2006 -2007 ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TA X (APPEALS)-I, BARODA. THESE ARE BEING DISPOSED OF WITH THIS CONS OLIDATED ORDER. ITA NO.2848/AHD/2008 A.Y.2005-2006 (ASSESSEES AP PEAL) 2. THE GROUNDS RAISED IN THE ASSESSEES APPEAL ARE AS UNDER: AMERICAN STEEL PVT. LTD . VS. ITO, BARODA -2- 1. THE LD.ITO HAS ERRED IN LAW AND ON THE FACTS OF THE APPELLANTS CASE IN ASSESSING THE TOTAL INCOME OF T HE APPELLANT AT RS.17,50,328/- INSTEAD OF RS.8,48,960/- RETURNED BY THE APPELLANT. 2. THE LD.ITO HAS ERRED IN LAW AND ON THE FACTS OF THE APPELLANTS CASE IN MAKING ADDITION OF RS.9,01,368/ - ON THE ERRONEOUS PLEA THAT PURCHASES MADE BY THE APPELLANT FROM M/S.R.R.PATEL TRADING CORPORATION IS BOGUS. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AO HAS MADE ADDITION BY HOLDING THE GOODS PURCHASED FROM M /S.R.R.PATEL TRADING CORPORATION (RRP FOR SHORT) AS BOGUS AND THE ENTIRE PURCHASE AMOUNT OF GOODS WAS ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. SHE SUBMITTED THAT THE CIT(A) HAS REDUCED THE ADDITION BY SUSTAINING THE ADDITION AT 25% OF THE PURCHASE AMOUNT BOOKED IN TH E NAME OF RRP. SHE SUBMITTED THAT THE ASSESSEE IS APPEAL AGAINST T HE HIGH RATE OF 25% APPLIED BY THE CIT(A) AND THE REVENUE IS IN APPEAL AGAINST THE REDUCTION OF THE PURCHASE AMOUNT FROM RRP TO THE EXTENT OF 75%. SHE SUBMITTED THAT THERE WAS COMPLETE QUANTITATIVE TALLY AND THE GOODS PURCHASED FROM RRP WERE DELIVERED TO THE REPUTED PARTIES LIKE VI DEOCON NARMADA GLASS, SAURASHTRA CEMENT LTD., GNFC ETC. SHE SUBMIT TED THAT THE AO HAS NOT DENIED THAT THESE SALES WERE INDEED MADE AND BO OKED. SHE SUBMITTED THAT THE ASSESSEE HAS GIVEN NUMBER OF REASONS FOR D ELETION OF ENTIRE ADDITION BEFORE THE CIT(A), AS HAS BEEN RECORDED BY THE CIT(A) IN HIS APPELLATE ORDER. SHE SUBMITTED THAT THE ITAT, AHME DABAD IN SERIES OF DECISIONS HAS APPLIED A RATE OF 12.5% IN CASE WHERE THE PURCHASES COULD NOT BE PROVED BY THE ASSESSEE. SHE RELIED ON THE F OLLOWING ORDERS OF THE ITAT, AHMEDABAD: I) ITA NO.3407/AHD/2007 & ITA NO.46 & 47/AHD/2010 IN T HE CASE OF ITO VS. SHRI SATHYNARAYAN P. RATHOD; II) ITA NO.3293/AHD/2009 IN THE CASE OF SHRI SMIT P. SH ETH, L/H. PANKAJ J. SHETH AMERICAN STEEL PVT. LTD . VS. ITO, BARODA -3- III) ITA NOS.652 & 635/AHD/2009 IN THE CASE OF M/S.ROLEX TIN WORKS VS. ITO; IV) ITA NO.1101 TO 1103/AHD/2009 IN THE CASE OF ALAP SHIRISHBHAI DERASARY. 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL OF THE ASSESSEE. HE REFERRED TO RELEVANT P ORTIONS OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVE NUE. HE SUBMITTED THAT THE ASSESSEE COULD NOT PROVE GENUINENESS OF THE PUR CHASES MADE FROM RRP, AND THEREFORE THE ENTIRE PURCHASE AMOUNT FRO M RRP WAS RIGHTLY ADDED BY THE AO. HE RELIED ON THE ORDER OF THE AO. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE CIT(A) HAS PASSED A WELL REASONED SPEAKING ORDER ON THE ISSUE. THE ASS ESSEE HAS SHOWN THAT THE GOODS PURCHASED FROM RRP WERE ACTUALLY DELIVE RED TO REPUTED CONCERN LIKE VIDEOCON NARMADA GLASS, SAURASHTRA CEM ENT LTD., GNFC ETC. AND THERE WAS A COMPLETE QUANTITATIVE TALLY BE TWEEN THE GOODS SHOWN TO BE PURCHASED FROM RRP AND CORRESPONDINGLY IN T URN SOLD BY THE ASSESSEE. THE AO HAS NOT DENIED THAT THESE SALES W ERE INDEED MADE AND BOOKED. WE FIND THAT THE CIT(A) IN THESE FACTS HAS GIVEN A FINDING THAT THE GOODS SHOWN AS PURCHASED FROM RRP WERE ACTUAL LY PURCHASED BY THE ASSESSEE FROM THE OPEN MARKET/UNREGISTERED DEAL ERS BY INCURRING CASH PAYMENTS AND AT LOWER RATES AND THE BILLS WERE TAKE N FROM PAPER CONCERN, M/S.RRP TO SHOW PURCHASES FROM REGISTERED DEALERS . THE CIT(A) HAS SUSTAINED THE FINDING OF THE AO THAT THE RRP HAS ISSUED SALES BILLS TO THE ASSESSEE AND THESE WERE MERELY A PAPER WORK. I N THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE NO HESITATION IN CONFIRMING THE FINDING OF THE CIT(A) THAT SINCE THERE WAS A COMPLE TE QUANTITATIVE TALLY BETWEEN THE GOODS SHOWN TO BE PURCHASED FROM RRP AND THE AMERICAN STEEL PVT. LTD . VS. ITO, BARODA -4- CORRESPONDINGLY IN TURN SOLD BY THE ASSESSEE, THE G OODS WERE ACTUALLY PURCHASED BY THE ASSESSEE FROM THE OPEN MARKET/UNRE GISTERED DEALER BY MAKING CASH PAYMENTS AND AT LOWER RATES. WE FIND T HAT THE CIT(A) HAS RECORDED THAT THE RATE OF PURCHASE IN BOGUS BILLS T AKEN FROM RRP WAS HIGHER THAN AVERAGE PURCHASE RATE FOR TRANSACTIONS EXCLUDING THE TRANSACTIONS OF RRP. THE GP EARNED IN TRANSACTIO NS THROUGH RRP WAS ALSO SUBSTANTIALLY LOWER THAN THE GP IN TRANSAC TIONS EXCLUDING THE TRANSACTIONS OF RRP. IN THESE FACTS OF THE CASE, WE HOLD THAT SOME PERCENTAGE OF PURCHASE AMOUNT FROM RRP HAS TO BE DISALLOWED TAKING INTO ACCOUNT THE FACTS OF THE CASE AND DIFFERENCE I N PURCHASE RATE AND THE DIFFERENCE IN GP RATE OF TRANSACTIONS OF RRP WHEN COMPARED TO OTHER TRANSACTIONS OF THE ASSESSEE EXCLUDING THE TRANSACT ION WITH RRP. WE FIND THAT VARIOUS DECISIONS OF THE ITAT, AHMEDABAD BENCH CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE WERE GIVEN IN THE LIGHT OF FACTS OF EACH CASE AND COULD NOT TAKEN AS A BINDING PRECEDENT FOR ALL CASES OF BOGUS PURCHASES. CONSIDERING THE ENTIRETY OF THE FACTUAL MATRIX OF THE CASE AND THE AMOUNT OF DIFFERENCE IN PURCHASE RATE AND ALSO DIFFERENCE IN GP RATE, WHICH WAS LOWER IN TRANSACTION RELATING TO RRP, W E ARE OF THE VIEW THAT ENDS OF THE JUSTICE SHALL BE MET IF 20% OF THE PURC HASE AMOUNT BOOKED IN THE NAME OF RRP IS ADDED AS ASSESSEES INCOME TO COVER THE DISCREPANCIES IN CASE OF THE ASSESSEE, AS AGAINST A DDITION OF 25% OF THE PURCHASE AMOUNT CONFIRMED BY THE CIT(A), AND ACCORD INGLY WE DIRECT THE AO TO RESTRICT THE ADDITION ON ACCOUNT OF PURCHASE FROM RRP TO THE EXTENT OF 20% OF THE TOTAL PURCHASE MADE FROM RRP AS INCOME IN THE HANDS OF THE ASSESSEE AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.3098/AHD/2008 A.Y.2005-2006 (REVENUES APP EAL) AMERICAN STEEL PVT. LTD . VS. ITO, BARODA -5- 6. THE GROUND NO.1 OF THE REVENUES APPEAL IS AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING RS.27,04,104/- FROM THE ADDITION MADE OF RS.36,05,472/- ON ACCOUNT OF BOGUS PURCHASE FROM R.R.PATEL TRADING CORPORATION, STATING THAT THE ISS UE IS COVERED UNDER THE PROVISO OF SEC.40A(3) IGNORING THE PROVIS IONS OF SEC.69C AS AMENDED W.E.F.1.4.99. 7. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE IS SUE IS COVERED WITH THE ISSUE IN THE GROUNDS OF THE APPEAL OF THE ASSES SEE FOR THE SAME ASSESSMENT YEAR 2005-2006. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW O F OUR DECISION WHILE DISPOSING OF THE ASSESSEES APPEAL FOR THE R ELEVANT ASSESSMENT YEAR 2005-2006 IN THE FOREGOING PARAS OF THIS ORDER, WE HOLD THAT THERE IS NO MERIT IN THE GROUND NO.1 OF THE APPEAL OF THE REVEN UE, WHICH IS ACCORDINGLY DISMISSED. 9. THE GROUND NO.2 OF THE REVENUES APPEAL IS AS UN DER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 41,121/- MADE ON ACCOUNT OF DISALLOWANCE OF 1/5 TH OF PETROL EXPENSES, REPAIRS AND DEPRECIATION, INSURANCE ON VEHICLES TELEPHONE EXPEN SES ETC., STATING THAT THE AO HAS MADE THE DISALLOWANCE ON PRESUMPTIV E BASIS IGNORING THE RATIO LAID DOWN IN THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN HE CASE OF SAYAJI IRON & ENGINEERING CO. LTD., VS. CIT,213 ITR 749 (GUJ). 10. WE HAVE HEARD PARTIES. THE CIT(A) HAS PASSED A WELL REASONED ORDER ON THE ISSUE OF DISALLOWANCE OUT OF PETROL EX PENSES ETC. AND NO REASON HAS BEEN CITED BEFORE US TO TAKE A DIFFERENT VIEW. ACCORDINGLY, THE GROUND NO.2 OF THE REVENUE IS DISMISSED. ITA NO.2720/AHD/2009 ASSTT.YEAR 2006-2007 (ASSESS EES APPEAL) AMERICAN STEEL PVT. LTD . VS. ITO, BARODA -6- 11. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDER: 1. THE LD.ITO HAS ERRED IN LAW AND ON FACTS OF THE APPELLANTS CASE IN PASSING AN ORDER U/S.143(3) R.W.S. 147 OF THE ACT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DI SMISSED. 13. THE GROUND NO.2 & 3 OF THE ASSESSEES APPEAL AR E AS UNDER: 2. THE LD.ITO HAS ERRED IN LAW AND ON THE FACTS OF THE APPELLANTS CASE IN ASSESSING TOTAL INCOME OF THE A PPELLANT AT RS.47,19,060/- INSTEAD OF RS.14,98,968/- RETURNED B Y IT. 3 . THE LD.ITO HAS ERRED IN LAW AND ON THE FACTS OF T HE APPELLANTS CASE IN MAKING ADDITION OF RS.32,20,092 /- ON THE ERRONEOUS PLEA THAT PURCHASES MADE BY THE APPELLANT S FROM RRP IS BOGUS.. 14. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THESE GROUNDS OF THE APPEAL IS IDENTICAL WITH THE ISSUE IN THE GR OUNDS OF THE APPEAL OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR 2005-2006. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FOR THE REASONS RECORDED WHILE DISPOSING OF THE APPEAL OF THE ASSES SEE FOR THE EARLIER ASSESSMENT YEAR 2005-2006 IN THE FOREGOING PARAS OF THIS ORDER, WE DIRECT THE AO TO RESTRICT THE ADDITION TO 20% OF THE PURCH ASE AMOUNT MADE BY THE ASSESSEE FROM RRP AS AGAINST ADDITION OF 25% MADE BY THE CIT(A), AND ACCORDINGLY, THE GROUND NOS.2 AND 3 OF THE ASSESSEES APPEAL ARE PARTLY ALLOWED. ITA NO.2973/AHD/2009 ASSTT.YEAR 2006-2007 (REVENU ES APPEAL) 16. THE ONLY GROUND IN THIS APPEAL OF THE REVENUE R EADS AS UNDER: AMERICAN STEEL PVT. LTD . VS. ITO, BARODA -7- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE IN LAW, THE LD.CIT(A) IN DELETING RS.96,60,274/- FROM THE ADDIT ION MADE OF RS.1,28,80,366/- ON ACCOUNT OF BOGUS PURCHASE FROM R.R.PATEL TRADING CORPORATION, STATING THAT THE ISSUE IS COVE RED UNDER THE PROVISO OF SECTION 40A(3) IGNORING THE PROVISOS OF SEC.69 C AS AMENDED W.E.F. 1.4.1999. 17. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS GROUND OF THE APPEAL OF THE REVENUE IS COVERED WITH THE ISSUE IN THE GROUNDS OF THE APPEAL OF THE ASSESSEE FOR A.Y.2005-2006. 18. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION, WHILE DISPOSING OF THE ASSESSEES APPEAL FOR THE EA RLIER ASSESSMENT YEAR 2005-2006 IN THE FOREGOING PARAS OF THIS ORDER, WE HOLD THAT THERE IS NO MERIT IN THE GROUND NO.1 OF THE REVENUES APPEAL, W HICH IS ACCORDINGLY DISMISSED. 19. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE FOR A.Y.2005-2006 AND 2006-2007 ARE PARTLY ALLOWED AND BOTH THE APPEA LS OF THE REVENUE FOR A.Y.2005-2006 AND 2006-2007 ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( # ## #. .. .% %% % . .. .&'( &'( &'( &'( /A.K. GARODIA) %) * /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT VK* C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD