The ITO, Ward-5(1), Baroda V. M/s. Sanket Steel Traders, Baroda

ITA 2937/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6588 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2801/AHD/2008 [ASSTT. YEAR : 2004-2005] M/S. SANKET STEEL TRADERS OPP: ZENITH SCHOOL VADODARA 390 004. PAN : AANFS 4621 A VS. ITO, WARD-5(1) VADODARA. ITA NO.2937/AHD/2008 [ASSTT. YEAR : 2004-2005] ITO, WARD-5(1) VADODARA. VS. M/S. SANKET STEEL TRADERS OPP: ZENITH SCHOOL VADODARA 390 004. PAN : AANFS 4621 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TUSHAR HEMANI REVENUE BY : SHRI H.P. MEENA O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THE ABOVE APPEALS OF THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA DATED 29.05.2008 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER P ASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. FOR THE SAKE O F CONVENIENCE, WE DISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER. 2. THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINS T THE ADDITION OF RS.12,77,686/- SUSTAINED BY THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE WHILE IN ITA NO.2801 AND 2937/AHD/2008 -2- THE REVENUES APPEAL, THE ONLY GROUND RAISED IS AGA INST THE RELIEF OF RS.29,81,266/- ALLOWED BY THE LEARNED CIT(A). 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME FROM TRADING IN IRON, ANGLES, PLATES ETC. DURING THE CO URSE OF INVESTIGATION, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE PURCHAS ES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE FROM M/S.GIRNAR SALES COR PORATION AND SHIV METAL CORPORATION WERE BOGUS. THE TOTAL PURCHASES MADE FROM THE TWO PARTIES DURING THE YEAR WERE AS UNDER: I) M/S.GIRNAR SALES CORPORATION RS.5,31,496/- II) M/S.SHIV METAL CORPORATION RS.10,48,897/- RS.15,82,393/- THE PAYMENT MADE TO THESE PARTIES DURING THE YEAR U NDER CONSIDERATION WAS AS UNDER: I) M/S.GIRNAR SALES CORPORATION RS.21,18,369/- II) M/S.SHIV METAL CORPORATION RS.5,58,190/- RS.26,76,559/- THE AO DISALLOWED THE PURCHASE AS BOGUS PURCHASES A ND ALSO MADE THE ADDITION FOR PAYMENT MADE TO THESE PARTIES AS UNEXP LAINED PAYMENT. ACCORDINGLY, THE TOTAL ADDITION MADE BY HIM WAS RS. 42,58,952/- (RS.15,82,393 PLUS RS.26,76,559/-). 4. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF VIJAY PROTEINS AND OTHERS, DISALLOWED 30% O F THE TOTAL ADDITION I.E. RS.42,58,952/-. BOTH THE PARTIES AGGRIEVED WI TH THE ORDER OF THE CIT(A) IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FAIRLY ADMITTED THAT THE ASSESSEE WAS UNABLE TO ESTABLISH THE GENUINENESS OF THE ITA NO.2801 AND 2937/AHD/2008 -3- PURCHASE MADE FROM M/S.GIRNAR SALES CORPORATION AND M/S.SHIV METAL CORPORATION. HE FURTHER STATED THAT THE ASSESSEE H AS MAINTAINED COMPLETE QUANTITATIVE DETAILS OF THE GOODS CLAIMED TO HAVE B EEN PURCHASED FROM THE ABOVE PARTIES. QUANTITY OF GOOD PURCHASED FROM ABO VE TWO PARTIES WAS DULY RECORDED IN THE BOOKS OF ACCOUNTS AND HAVE BEE N REFLECTED IN THE SALES/CLOSING STOCK. HE FURTHER STATED THAT THE AS SESSEE IS ONLY TRADER IN THE IRON AND STEEL. HE THEREFORE STATED THAT THE F ACTS OF THE ASSESSEES CASE ARE SIMILAR TO VIJAY PROTEINS AND SEVERAL OTHER DEC ISIONS OF THE ITAT WHEREIN SOME PERCENTAGE OF THE BOGUS PURCHASES IS D ISALLOWED. HE ALSO REFERRED TO THE DECISION OF THE ITAT IN THE CASE OF ITO VS. SUN STEEL, 92 TTJ (AHD) 1126 WHEREIN THE ONLY DISALLOWANCE OF RS. 50,000/- OUT OF BOGUS PURCHASE WAS MADE. HE ALSO REFERRED TO THE DECISION OF ACIT VS. KULUBI STEEL, ITA NO.1568/AHD/2008 WHEREIN 12.5% BO GUS PURCHASE WAS DISALLOWED. ACCORDINGLY, HE SUBMITTED THAT A REASONABLE DISALLOWANCE OUT OF TOTAL PURCHASE DURING THE YEAR UNDER CONSIDERATION SHOULD BE MADE. 6. WITH REGARD TO THE ADDITION FOR UNEXPLAINED PAYM ENT, IT IS SUBMITTED BY THE LEARNED COUNSEL THAT ENTIRE PAYMEN T IS RECORDED IN THE ASSESSEES BOOKS OF ACCOUNTS AND THE AMOUNT HAS BEE N PAID BY THE CHEQUE. WHEN THE AMOUNT IS DULY RECORDED IN THE BO OKS OF ACCOUNTS THE SAME COULD NOT BE TERMED AS UNEXPLAINED PAYMENT. H E THEREFORE SUBMITTED THAT THE DISALLOWANCE CAN BE MADE ONLY OU T OF THE PURCHASES MADE FROM THE ABOVE TWO PARTIES, AND NOT IN RESPECT OF PAYMENTS. 7. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE ASSESSING OFFICER AND HE STATED THAT WITH THE THORO UGH INVESTIGATION, THE ASSESSING OFFICER WAS ABLE TO PROVE THAT THE PURCHA SES FROM GINAR SALES CORPORATION AND SHIV METAL CORPORATION WERE BOGUS. ONCE THE PURCHASES ITA NO.2801 AND 2937/AHD/2008 -4- FROM THE ABOVE PARTIES WERE BOGUS, THE ENTIRE BOGUS PURCHASES SHOULD BE DISALLOWED. HE ALSO STATED THAT THE PAYMENT MADE T O THESE PARTIES WAS ALSO RIGHTLY ADDED BECAUSE BOTH THE ABOVE PARTIES H AD NO ACTUAL BUSINESS TRANSACTIONS WITH THE ASSESSEE. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. FIRST WE SHALL CONSIDER THE ADDI TION OF RS.26,76,559/- MADE BY THE ASSESSING OFFICER AS UNEXPLAINED PAYMEN T. WE FIND THAT THE ASSESSING OFFICER IN THIS CASE HAS MADE A THOROUGH INVESTIGATION. HE HAD TAKEN PAIN TO TRACE THE PAYMENT FOR PURCHASES MADE BY THE ASSESSEE FROM THE BANK ACCOUNT AND AT PAGE NO.5 OF THE ASSESSMENT ORDER HAS RECORDED THE FINDING WITH REGARD TO EACH PAYMENT. PERUSAL O F WHICH CLEARLY SHOWS THAT THE ENTIRE PAYMENT MADE BY THE ASSESSEE WAS BY CHEQUE AND WAS DEBITED IN THE ASSESSEES BANK ACCOUNT. SINCE THE ASSESSEE HAS MADE THE PAYMENT BY CHEQUE, WHICH IS DULY DEBITED IN THE ASS ESSEES BANK ACCOUNT, THE SAME CANNOT BE SAID TO BE UNEXPLAINED PAYMENT. THEREFORE, IN OUR OPINION, THERE WAS NO JUSTIFICATION FOR MAKING THE ADDITION OF RS.26,76,559/- AS UNEXPLAINED PAYMENT. 9. SO FAR AS THE BOGUS PURCHASE IS CONCERNED, WE FI ND THAT THE ASSESSING OFFICER RECORDED THE DETAILED FINDING SO AS TO ESTABLISH THAT THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM GIRNAR SAL ES CORPORATION AND SHIV METAL CORPORATION WAS BOGUS. THE LEARNED COUN SEL FOR THE ASSESSEE WAS UNABLE TO CONTROVERT THE FACTUAL FINDING RECORD ED BY THE AO IN THIS REGARD. HOWEVER, THERE IS NO DISPUTE THAT THE ASSE SSEE IS ONLY A TRADER IN THE IRON AND STEEL AND IT HAS MAINTAINED QUANTITATI VE DETAILS. THE STATEMENT MADE BY THE LEARNED COUNSEL THAT THE PURC HASES CLAIMED TO HAVE BEE MADE BY THE ASSESSEE FROM GIRNAR SALES CORPORAT ION AND SHIV METAL CORPORATION IS DULY RECORDED IN THE BOOKS OF THE AS SESSEE AND HAS BEEN ITA NO.2801 AND 2937/AHD/2008 -5- REFLECTED EITHER IN THE SALES OR IN THE CLOSING STO CK, IS NOT CONTROVERTED. ON THESE FACTS, THE DECISION IN THE CASE OF KULUBI STEEL (SUPRA) WOULD BE SQUARELY WHEREIN THE ITAT HELD AS UNDER: 8. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE DID NOT MAKE ANY EFFORT TO CONTROVERT THE FINDING RECORDED BY THE DD IT (INVESTIGATION) AND IT MADE NO EFFORTS TO PRODUCE THE SELLER PARTIES ON THE OTHER HAND IT CLAIMED THAT IT IS NOT HIS RESPONSIBILITY TO PRODUC E THE SELLER. IT IS A SETTLED LAW THAT ONUS IS ON THE ASSESSEE TO ESTABLI SH THE GENUINENESS OF THE PURCHASE. THE ASSESSEE HAS PRODUCED VARIOUS EV IDENCE WITH REGARD TO THE RECEIPT OF THE GOODS BY IT, I.E. STOCK REGIS TER, RECEIPT OF WEIGH- BRIDGE FOR WEIGHMENT OF GOODS PURCHASED BY THE ASSE SSEE, OCTROI RECEIPT FOR THE PAYMENT OF OCTROI DUTY ETC. AFTER CONSIDER ING THE ENTIRE MATERIAL, WE ARE OF THE OPINION THAT THE ASSESSEE DID NOT PUR CHASE THE GOODS FROM THE PARTIES MENTIONED IN THE SALES BILL. AT THE SA ME TIME, IT DID PURCHASE THE GOODS FROM SOME OTHER SUPPLIERS, MAY BE WITHOUT BILL. THEREFORE, PURCHASE RATE AS MENTIONED IN THE ALLEGED SALES BIL L CANNOT BE ACCEPTED. ANY PERSON INDULGING IN THE PRACTICE OF PURCHASING GOODS FROM THE GREY MARKET AND OBTAINING BOGUS BILLS OF SOME OTHER PART IES, WOULD DO SO FOR GETTING SOME BENEFIT. BUT WHAT WOULD BE THE MAGNIT UDE OF THE BENEFIT WOULD DEPEND UPON FACTS OF EACH CASE. IN THE CASE OF VIJAY PROTEINS, ITAT HELD THAT SUCH BENEFIT TO BE 25% AND THEREFORE SUSTAINED THE DISALLOWANCE FOR BOGUS PURCHASE AT 25%. IN THE CAS E OF SUNSTEEL (SUPRA), THE ITAT DEEMED IT FIT TO SUSTAIN THE DISA LLOWANCE FOR A LUMPSUM AMOUNT OF RS.50,000/-. HOWEVER, WE FIND TH AT IN THE CASE OF SHRI ANUBHAI SHIVLAL (SUPRA) THE ITAT HAS CONSIDERE D BOTH THE DECISIONS IN THE CASE OF VIJAY PROTEINS AND SUNSTEEL (SUPRA) AND THEREAFTER SUSTAINED THE DISALLOWANCE AT 12.5%. RELEVANT FIND INGS OF THE ITAT IN THE CASE OF ANUBHAI SHIVALAL READS ARE UNDER: 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ADDITION SUSTAINED IS EXCE SSIVE. IN SUPPORT OF THIS CONTENTION HE REFERRED TO THE DECIS ION OF THE TRIBUNAL IN THE CASE OF ITO VS. SUN STEEL 92 TTJ (A HD) 1126 WHEREIN THE TRIBUNAL HAS SUSTAINED THE ADDITION OF RS.50,000/- ON ACCOUNT OF BOGUS PURCHASES. HOWEVER, WE FIND THAT THE FACTS IN THE ABOVE CASE WERE DIFFERENT. IN THE ABOVE CASE, THE ASSESSEE HAS SHOWN PURCHASES OF RS.27,39,410/-, SALE OF RS.2 8,17,207/- AND GP AT RS.94,740/-. THE ASSESSING OFFICER MADE THE ADDITION OF RS.27,39,407/- FOR BOGUS PURCHASES. IF THE ABOV E SUM IS ADDED TO THE GP, THE GP WORKS OUT RS.28,34,1247/- WHICH W AS MORE THAN THE SALE ITSELF. THE TRIBUNAL HELD THAT IT IS IMPOSSIBLE THAT THE GP IS MORE THAN THE SALE ITSELF. THE TRIBUNAL ALSO FOUND THAT THE ASSESSEE HAS MAINTAINED THE QUANTITATIVE DETAIL S IN RESPECT OF ITA NO.2801 AND 2937/AHD/2008 -6- MATERIALS PURCHASED AND SOLD. CONSIDERING PECULIAR FACTS OF THAT CASE, THE TRIBUNAL ARRIVED AT THE CONCLUSION THAT I T WOULD BE FAIR AND REASONABLE TO ESTIMATE THE ADDITION AT RS.50,00 0/- AS AGAINST THE ADDITION OF RS.27,39,407/- MADE BY THE ASSESSIN G OFFICER. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) CONSIDERING THE FACTS OF THE ASSESSEES CASE, HAS S USTAINED THE ADDITION AT 12.5%. WHILE DOING SO, HE HAS ALSO REL IED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S.VIJAY P ROTEINS LTD., 55 TTJ (AHD) 76. IN THE CASE OF M/S. VIJAY PROTEINS L TD., THE TRIBUNAL HAS SUSTAINED THE ADDITION OF 25% OF THE B OGUS PURCHASES. HOWEVER, CONSIDERING THE FACTS OF THE A SSESSEES CASE THE CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% AS AGAINST 25% MADE IN THE CASE OF M/S.VIJAY PROTEINS LTD. FROM T HESE FACTS IT IS EVIDENT THAT THE CIT(A) HAS SUSTAINED THE ADDITION AT 12.5% OF THE NON-GENUINE PURCHASES CONSIDERING THE FACTS OF THE ASSESSEES CASE. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. THE SAME I S SUSTAINED. AFTER CONSIDERING THE FACTS AND THE ARGUMENTS OF BO TH THE SIDES, WE ARE OF THE OPINION THAT IT WOULD MEET ENDS OF JUSTICE, IF THE DISALLOWANCE IS SUSTAINED AT 12.5% OF THE PURCHASE FROM THESE TWO P ARTIES. THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE DISAL LOWANCE ACCORDINGLY. SINCE THE FACTS OF THE ASSESSEES CASE ARE IDENTICA L, WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE ITAT, DIRECT TH E ASSESSING OFFICER TO DISALLOW 12.5% OF THE PURCHASES MADE DURING THE YEA R UNDER CONSIDERATION. 10. IN RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED WHILE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20 TH MAY, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 20-05-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT ITA NO.2801 AND 2937/AHD/2008 -7- 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD