Shri Nilesh Rameshchandra Shah, Ahmedabad V. The ACIT, Circle-12, Now Dy. CIT, Circle-6(1), Ahmedabad

ITA 3131/AHD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4303 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Gift
• Section: 143(3); 147

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 3131/AHD/2015 ( ASSESSMENT YEAR : 2009-10) SHRI NILESH RAMESHCHANDRA SHAH PROP: SHAGUN ART, 8, RAM SHYAM APARTMENT, NR. L.G. HOSPITAL, MANINAGAR, AHMEDABAD - 380008 / VS. THE ACIT, CIRCLE -12 [NOW DCIT, CIR. 6(1)], 1 ST FLOOR, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD - 380009 ./ ./ PAN/GIR NO. : AFQPS3070R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI DHIREN SHAH, A.R. / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. DATE OF HEARING 17/10/2018 !'# / DATE OF PRONOUNCEMENT 31/10/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-6, AHMEDABAD (CIT(A) IN SHORT), DATED 3 1.08.2015 ARISING IN THE ASSESSMENT ORDER DATED 28.03.2014 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 147 R.W.S. 143(3) O F THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2009-10. ITA NO. 3131/AHD/15 [SHRI NILESH R. SHAH] A.Y. 2009-10 - 2 - 2. BY WAY OF ITS GROUNDS OF APPEAL, THE ASSESSEE HA S RAISED SOLITARY GRIEVANCE TOWARDS ADDITION ON ACCOUNT OF A LLEGED BOGUS PURCHASE AMOUNTING TO RS.1,28,53,148/-. 3. THE ASSESSEE, A PROPRIETOR OF M/S. SHAGUN ART, F ILED ITS RETURN OF INCOME FOR AY 2009-10 WHICH WAS SUBSEQUENTLY REO PENED UNDER S.148 OF THE ACT. IN THE COURSE OF RE-ASSESSMENT P ROCEEDINGS, THE AO NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF SALE OF GIFT ARTICLES. THE AO OBSERVED THAT AS PER INFORMATION RECEIVED FROM VAT/SALES TAX DEPARTMENT, MUMBAI, THE ASSESSEE HAS RECEIVED BOGUS BILLS OF PURCHASE FROM VARIOUS PARTIES AGGREG ATING TO RS.1,28,53,148/-. WHEN CONFRONTED, THE ASSESSEE RE SPONDED BY SUBMITTING THAT IT IS ENGAGED IN TRADING OF GIFT AR TICLES AND SUBMITTED PURCHASE DELIVERY CHALLAN AS WELL AS PAN OF THE CRE DITORS TO SUPPORT THE PURCHASES RECORDED. THE CHALLANS OF SALES TAX PAID BY THE CREDITORS WERE ALSO PRODUCED. THE ASSESSEE ALSO PO INTED OUT THAT THE SALE OF THE PRODUCTS SO PURCHASED HAD BEEN MADE TO ASIAN PAINTS LTD., AND THE SALES HAVE NOT BEEN DOUBTED NOR COULD HAVE BEEN. THE PAYMENTS TO THE PURCHASERS HAVE BEEN MADE THROUGH B ANKING CHANNEL. THE ASSESSEE ALSO POINTED OUT TO THE AO T HAT THE SUPPLIERS MUST HAVE GIVEN WRONGFUL STATEMENT TO THE DETRIMENT OF OTHERS POSSIBLY TO SAVE THEIR OWN SKIN TOWARDS UNACCOUNTED SALES AND PUT OTHERS INTO TROUBLE AND THEREFORE SUCH STATEMENTS C ANNOT BE SUMMARILY RELIED WITHOUT CROSS EXAMINATION. THE AO HOWEVER DISCARDED ALL THE EVIDENCES AND QUANTITATIVE DETAIL S AND ADDED THE AFORESAID AMOUNT OF RS.1,28,53,148/- TO THE TOTAL I NCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) WITHOUT ANY SUCCESS. ITA NO. 3131/AHD/15 [SHRI NILESH R. SHAH] A.Y. 2009-10 - 3 - 5. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED AR FOR THE ASSESSEE VEHEMENTLY SUBMI TTED THAT ASSESSEE IS MERELY A TRADER WHERE EVERY PURCHASES M ATCHES WITH THE CORRESPONDING SALE. THE LEARNED AR ADVERTED TO THE P&L ACCOUNT AND SUBMITTED THAT OUT OF TOTAL PURCHASE OF RS.221. 20 LAKHS RECORDED, THE AO HAS ALLEGED ACCOMMODATION PURCHASE TO THE TUNE OF RS.128.53 LAKHS WHICH IS MORE THAN 50% OF THE PURCH ASES. THE CORRESPONDING SALES STAND AT RS.256.98 LAKHS. THER EFORE, WHEN THE PURCHASES ARE DEEMED TO BE BOGUS AS ALLEGED BY THE AO, THE CORRESPONDING SALE AND BOOK RESULT WOULD BE TOTALLY ABSURD AND INEXPLICABLE. WITHOUT THE PURCHASE OF THE TRADING ITEM AS RECORDED, IT IS IMPOSSIBLE TO CLOCK THE CORRESPONDING SALE OF SUCH AMOUNT. THE SALE CONSIDERATION MADE TO THE REPUTED PARTIES, LIKE, ASIAN PAINTS LTD. AND THE SALES IN ANY CASE HAVE NOT BEEN DOUBTED. THE LEARNED AR THEREAFTER REFERRED TO THE TRADING AND P &L ACCOUNT AND SUBMITTED THAT IT HAS DECLARED PROFITS AT 7.31% OF THE TURNOVER INCLUDING SIMILAR PROFITS ON SALE CORRESPONDING TO ALLEGED BOGUS PURCHASES. THE LEARNED AR SUBMITTED THAT IN SUCH A FACT-SITUATION, WHERE THE ASSESSEE HAS ALREADY DECLARED HANDSOME PR OFITS ON SALES CORRESPONDING TO PURCHASE OF THE TRADING ITEM, THER E WAS NO WARRANT FOR THE REVENUE AUTHORITIES TO DISBELIEVE THE BOOK RESULTS BASED ON SOME UNVERIFIED STATEMENT OF SUPPLIERS RECORDED IN SALE TAX PROCEEDINGS AND WITHOUT THEIR CROSS EXAMINATION SPE CIFICALLY DEMANDED. THE LEARNED AR FURTHER SUPPORTED ITS CAS E BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. GUJARAT AMBUJA EXPORTS LTD. (2014) 43 TAXMANN.COM 2 44 (GUJ) AND SUBMITTED THAT NO DISALLOWANCE IS CALLED FOR. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHO RITIES BELOW. ITA NO. 3131/AHD/15 [SHRI NILESH R. SHAH] A.Y. 2009-10 - 4 - 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND THE ORDERS OF THE AUTHORITIES BELOW. THE MAINTAINABILI TY OF ESTIMATED DISALLOWANCE OUT OF ALLEGED BOGUS PURCHASES IS IN C ONTROVERSY. IN THIS REGARD, WE NOTICE THAT THE ASSESSEE IS ENGAGED IN TRADING OF GOODS AND THEREFORE EVERY PURCHASE GETS MATCHED BY CORRESPONDING SALES/CLOSING STOCK. THUS, THE SCOPE OF MANIPULATI ON IN BILLS TOWARDS PURCHASE QUANTITY IS NEARLY NON-EXISTENT. WHAT AT BEST THUS CAN BE MANIPULATED IS THE PRICE/VALUE OF THE GOODS PURCHASED. IN OTHER WORDS, WHILE IT MAY BE POSSIBLE THAT PURCHASE S MIGHT HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, THE PUR CHASES THEMSELVES CANNOT BE TREATED AS BOGUS. THE SALE RE CORDED IN BOOKS IS NOT IN QUESTION. CONTEXTUALLY, THE ASSESSEE HAD DECLARED 7.31% TOWARDS PROFIT ON SUCH ALLEGED BOGUS PURCHASES. AS STATED, THE RELEVANT DOCUMENTS INCLUDING INVOICE, PAYMENT THROU GH BANKING CHANNEL, QUANTITY TALLY WERE MADE AVAILABLE TO THE REVENUE AUTHORITIES. THE CROSS EXAMINATION OF THE SUPPLIER S WAS NOT PROVIDED DESPITE REQUESTS. IN THESE CIRCUMSTANCES, WE FIND CONSIDERABLE MERIT IN THE CASE OF THE ASSESSEE IN T HE LIGHT OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN GUJAR AT AMBUJA EXPORTS (SUPRA); CIT VS. BHOLANATH POLY FAB PVT. LT D. 355 ITR 290 (GUJ) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TEJUA ROHITKUMAR KAPADIA ARISING OUT OF TH E DECISION OF THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.691 OF 2017, JUDGMENT DATED 18.09.2017. IN VIEW OF THE FACTS RE CORDED, IT IS DIFFICULT TO DISPUTE THE QUANTITATIVE ASPECTS OF TH E PURCHASES MADE. THIS LEAVES US TO THE LIMITED ASPECT OF PRICING OF ALLEGED BOGUS PURCHASE. HAVING REGARD TO THE FACTS AND CIRCUMSTA NCES OF THE CASE AND MORE PARTICULARLY IN VIEW OF PROFITS ALREADY DE CLARED ON ALLEGED BOGUS PURCHASES IN THE VICINITY OF 7%, WE ARE OF TH E VIEW THAT AN ESTIMATED DISALLOWANCE OF 5% ALLEGED BOGUS PURCHASE S OVER AND ITA NO. 3131/AHD/15 [SHRI NILESH R. SHAH] A.Y. 2009-10 - 5 - ABOVE THE PROFITS ALREADY DECLARED WOULD COVER POSS IBLE SUPPRESSION IN PROFITS AND WILL BALANCE THE EQUITY. SUCH ESTIM ATION WOULD ALSO BE IN TUNE WITH THE JUDGMENT OF HONBLE GUJARAT HI GH COURT IN GUJARAT AMBUJA EXPORTS (SUPRA). ACCORDINGLY, WE DI RECT THE AO TO RESTRICT THE ESTIMATED DISALLOWANCE TO RS.6,42,657/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 31/10/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 31/10/2 018