The ITO, Ward-2(3), Surat V. Shri Gulambhai Alibhai Patel, Surat

ITA 2856/AHD/2014

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9355 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 27-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ANUPAMA SINGLA
• Keywords: Bogus purchase; Business income
• Section: 40A(3); 143(3); 142(1); 133A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ ITA NO.2856/AHD/2014 ( [ [ / ASSESSMENT YEAR: (2011-12) (VIRTUAL COURT HEARING) THE INCOME TAX OFFICER, WARD-2(3), SURAT. VS SHRI GULAMBHAI ALIBHAI PATEL, PROP OF M/S.GULAMBHAI ALIBHAI PATEL, 16-17, NEW SARDAR MARKET, DUMBHAL PATIA, SURAT 394 210. ./ ./PAN/GIR NO.: AEZPP 9802 N (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI RUSHI PAREKH - CA RESPONDENT BY : MS.ANUPAMA SINGLA SR.DR / DATE OF HEARING : 02/07/2021 / DATE OF PRONOUNCEMENT : 28/07/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY REVENUE PERTAINING TO ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT [LD.CIT(A)] DATED 04.08.2014 WHICH IN TURN ARISES OUT OF ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DATED 25.03.2014. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN TELESCOPING THE ADDITION OF RS.2,30,59,243/- ON ACCOUNT OF BOGUS PURCHASES, ADDITION OF RS.15,00,000/- ON ACCOUNT OF ADDITIONAL INCOME DISCLOSED DURING THE COURSE OF SURVEY ACTION U/S 133A OF THE ACT WITH THE ADDITION OF RS.18,18,274/- ON ACCOUNT OF ESTIMATION OF NET PROFIT ON ESTIMATED TRADING TURNOVER. PAGE | 2 ITA NO.2856/AHD/2014 FOR A.Y. 2011-12 SHRI GULAMBHAI ALIBHAI PATEL [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN TELESCOPING THE ADDITION U/S 40A(3) OF RS.5,01,000/- ON ACCOUNT OF PURCHASES MADE IN CASH OF RS. 2,00,000/- FROM M/S VIJETA TRADING CO. AND RS.3,01,000/- FROM SHANKARLAL RAMLAL PATIDAR EVEN IF THE PURCHASES ARE TREATED AS GENUINE. [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION TO RS.18,18,274/- BY ADOPTING NET PROFIT AT 8% ON ESTIMATED TRADING SALES OF RS.2,27,34,050/- EVEN THOUGH THE ASSESSEE HIMSELF OFFERED NET PROFIT @ 13.60% ON TOTAL SALES MADE BY HIM. [4] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 10% OUT OF SALARY, LABOUR AND VATAV KASAR EXPENSES EVEN THOUGH THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE TRANSACTIONS BY PRODUCING SPECIFIC DOCUMENTARY EVIDENCE IN SUPPORT OF CLAIM OF SUCH EXPENSES. [5] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 10% FROM DISALLOWANCE OF ENTIRE EXPENSES OF VAPSI EXPENSES EVEN THOUGH IT WAS CLEARLY ESTABLISHED THAT THE VOUCHERS PRODUCED IN SUPPORT OF SUCH EXPENSES WAS SELF- MADE AND THERE WAS NO MENTION OF THE IDENTITY OF THE PERSON VIZ. NAME, ADDRESS, CONTACT NUMBERS ETC. [6] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [7] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) MAY BE SET-SIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM THE MATERIAL ON RECORD, ARE AS FOLLOWS. ON VERIFICATION OF THE COPIES OF THE LEDGER ACCOUNTS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE PAGE | 3 ITA NO.2856/AHD/2014 FOR A.Y. 2011-12 SHRI GULAMBHAI ALIBHAI PATEL ASSESSEE HAS CLAIMED PURCHASES TO THE TUNE OF RS.2,30,59,243/- FROM THE FOLLOWING PARTIES:- SR. NO. NAME OF THE PARTY PURCHASE DURING THE YEAR 1 C C ENTERPRISE, GONDAL 201939 2 GAJANAND PANCHAL SAINI, KOTA 653789 3 JAGDISHBHAI VITHALBHAI VAGASYA, BHALGAM MOTA 210304 4 K P PATEL, JETPUR 129785 5 KAILASH CORPORATION, GONDAL 65834 6 KAMLESHKUMAR RUPCHAND, PIPALIAMANDI 1824446 7 KISHOR GARLIC MANDSAUR 856226 8 M P PATEL, GONDAL 8601019 9 PARMESHWAR TRADING CO., GONDAL 4760976 10 SHANKARLAL RAMLAL PATIDAR, GAROTH 1752605 11 SUMEET TRADING CO, MANDSAUR 339376 12 VIJETA TRADING CO., GONDAL 3075743 13 VIRTA TRADING CO., GONDAL 587201 TOTAL PURCHASES 23059243 IT WAS FURTHER OBSERVED BY ASSESSING OFFICER THAT ASSESSEE WAS SHOWING A SUM OF RS.41,20,074/- UNDER THE HEAD CURRENT LIABILITIES AND UNDER THE SUB-HEAD SUNDRY CREDITORS IN THE NAMES OF THE SAME PARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS SPECIFICALLY ASKED, TO SUBMIT DETAILS, DOCUMENTS AND EVIDENCES, VIDE POINT NO.2 OF ANNEXURE TO NOTICE U/S 142(1) ISSUED BY THE ASSESSING OFFICER, DATED 09.12.2013. THE ASSESSING OFFICER, ON VERIFICATION OF THE FACTS AND MATERIALS GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT CLAIM OF THE ASSESSEE IN RESPECT OF THE PURCHASES OF RS.2,30,59,243/- WAS MERE BOOK ENTRIES, AS THE ASSESSEE HAS TOTALLY FAILED TO PROVE THE GENUINENESS OF THE ALLEGED PURCHASE TRANSACTIONS AGGREGATING TO RS.2,30,59,243/-. THUS, MERE ENTRIES AND CONTRA-ENTRIES IN THE BOOKS OF THE ASSESSEE CANNOT BE BASE AS MATERIAL PROOF FOR ESTABLISHING THE GENUINENESS OF THE PURCHASE TRANSACTIONS OR THE IDENTITY OF THE SO-CALLED CREDITORS. THESE LACK THE CREDENTIALS OF ADMISSIBLE EVIDENCE. THE VERIFIABILITY OF THESE PURCHASES COULD NOT BE MADE SINCE PAGE | 4 ITA NO.2856/AHD/2014 FOR A.Y. 2011-12 SHRI GULAMBHAI ALIBHAI PATEL NO COMPLIANCE FROM MOSTLY ALL OF THE PURCHASES PARTIES UNDER REFERENCE. THEREFORE, ASSESSING OFFICER OBSERVED THAT GENUINENESS OF TRANSACTIONS COULD NOT BE ESTABLISHED BY THE ASSESSEE. HENCE, ASSESSING OFFICER WAS OF THE VIEW THAT THE SO-CALLED PURCHASES AGGREGATING TO RS.2,30,59,243/- WERE MERE BOOK ENTRIES AS THE ASSESSEE HAD TOTALLY FAILED TO PRODUCE ANY MATERIAL EVIDENCE IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS AND COULD NOT PRODUCE ANY CONTRA-CONFIRMATIONS FROM THE PARTIES UNDER REFERENCE OR THE PARTIES CONCERNED FOR VERIFICATION OF THE GENUINENESS OF THE TRANSACTIONS. THEREFORE, ASSESSING OFFICER TREATED RS. 2,30,59,243/-, AS BOGUS PURCHASES AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO MADE ADDITION ON ACCOUNT OF DISCLOSED INCOME ADMITTED DURING SURVEY NOT OFFERED IN RETURN OF INCOME OF RS.15,00,000/-. THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OF EXPENSES RS.4,62,370/-, DISALLOWANCE OF SALARY/LABOUR AND VATAV KATAR EXPENSES,RS.6,88,900/- AND DISALLOWNCE OF VAPSI EXPENSES RS.95,443/-. 4.AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) WHO HAS SUSTAINED ADDITION BY ADOPTING NET PROFIT AT 8% ON ESTIMATED TRADING SALES. THAT IS, ID.CIT(A) SUSTAINED THE ADDITION OF RS. 15,00,000/- AS THE ASSESSEE SURRENDERED THE SAID AMOUNT FOR TAX DURING APPELLATE PROCEEDINGS. HOWEVER, ID.CIT(A) TELESCOPED THE ADDITION OF RS.15,00,000/-. ABOUT ADDITION OF RS.5,01,000/- U/S - 40A(3) OF THE ACT, THE LD CIT(A) TREATED IT TO BE INCLUDED IN THE BOGUS PURCHASES. AFTER THIS, LD CIT(A) RESTRICTED THE ADDITION TO RS.18,18,274/-, ( AT THE RATE OF 8% OF RS.2,27,34,050/- ON ESTIMATED TRADING SALES, WHICH WAS 25% OF TOTAL SALES OF RS.9,09,36,200/-).HENCE, THE LD.CIT(A) HELD THAT THE ABOVE MENTIONED ADDITIONS GET COVERED BY THE ESTIMATION OF TRADING TURNOVER AND NET PROFIT. IN RESPECT OF 30% DISALLOWANCE AMOUNTING TO RS.11,51,270/- (4,62,370 + 6,88,900) OUT OF VARIOUS EXPENSES AND OUT OF SALARY, LABOUR AND VATAV KASAR, RESPECTIVELY AND DISALLOWANCE OF VAPSI EXPENSES OF RS.95,443/-, THE ID.CIT(A) RESTRICTED THE DISALLOWANCE TO 10% AMOUNTING TO RS.3,93,301/- OUT OF THE ABOVE EXPENSES BY HOLDING THAT THE NET PROFIT SHOWN BY THE ASSESSEE WAS SLIGHTLY LOWER THAN OTHER PAGE | 5 ITA NO.2856/AHD/2014 FOR A.Y. 2011-12 SHRI GULAMBHAI ALIBHAI PATEL COMMISSION AGENTS. THUS TOTAL ADDITIONS SUSTAINED BY THE LD CIT(A) WAS TO THE TUNE OF RS.22,11,575/- ( RS.18,18,274 + RS.3,93,301). 5. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY LD CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. WE NOTE THAT LD CIT(A) HAS RESTRICTED THE ADDITION TO RS.18,18,274/- BY ADOPTING NET PROFIT AT 8% ON ESTIMATED TRADING SALES OF RS.2,27,34,050/- WHICH WAS 25% OF TOTAL SALES OF RS.9,09,36,200/-. HENCE, THE LD.CIT(A) HELD THAT THE ABOVE MENTIONED ADDITIONS GET COVERED BY THE ESTIMATION OF TRADING TURNOVER AND NET PROFIT. WE NOTE THAT LD CIT(A) HAS FAILED TO BRING ON RECORD THE COMPARABLE CASES TO DEMONSTRATE THE NET PROFIT RATE OF 8%, WHICH WAS USED BY HIM TO ESTIMATE THE ASSESSEE`S PROFIT. WE NOTE THAT CONSIDERING THE NATURE AND CIRCUMSTANCES OF THE ASSESSEE`S CASE, NET PROFIT @ 8% ON ESTIMATED TRADING SALES IS LOWER SIDE, HENCE WE ARE OF THE VIEW THAT IT SHOULD BE 15% ON ESTIMATED TRADING SALES AT RS.2,27,34,050/-, WHICH COMES TO RS.34,10,108/-. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO MAKE THE ADDITION OF RS. 34,10,108/- ON THIS ACCOUNT. 10. BEFORE PARTING, WE WOULD LIKE TO MAKE IT CLEAR THAT SINCE ADDITION HAS BEEN MADE BASED ON ESTIMATION THEREFORE, OTHER DISALLOWANCE OF VARIOUS EXPENSES, SUCH AS SALARY, LABOUR AND VATAV KASAR, AND DISALLOWANCE OF VAPSI EXPENSES AMOUNTING TO RS.3,93,301/- SUSTAINED BY CIT(A) SHOULD NOT BE MADE. BESIDES, TELESCOPING OF DISCLOSURE AMOUNT OF RS.15,00,000/- ( RECEIVABLES) AND BOGUS PURCHASES OF PAGE | 6 ITA NO.2856/AHD/2014 FOR A.Y. 2011-12 SHRI GULAMBHAI ALIBHAI PATEL RS.2,30,59,243/- WITH THE ADDITION OF ESTIMATED NET PROFIT HAS BEEN ADJUSTED, SO NO SEPARATE DISALLOWANCE IS WARRANTED. IN RESPECT OF CASH PURCHASES MADE FROM M/S VIJETA TRADING CO. AND SHANKARLAL RAMLAL PATIDAR, AMOUNTING TO RS.5,01,000/-, THE SAME IS NOT REQUIRED TO BE SUSTAINED U/S 40A(3) OF THE ACT, AS ESTIMATED ADDITION HAS BEEN MADE, WHICH COVERS THESE DISALLOWANCES. 13. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER IS PRONOUNCED ON 28/07/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 28/07/2021 / SGR COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT