Shri Simit P.Sheth L/h of late Pankaj J.Sheth, Baroda V. The Income tax Officer,Ward-2(2), Baroda

ITA 3238/AHD/2009

• Counselvise Citation: 323820514 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWAL SRDR
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Bogus purchase

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD , . , !' BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A MOHON ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO. 3238 AND 3293/AHD/2009 $ %$ $ %$ $ %$ $ %$ / / / / ASSESSMENT YEAR:-2006-07 SHRI SIMIT P SHETH L/R OF SHRI PANKAJ J SHETH C/O MANISH G SHAH, 38/101 GAUTAMNAGAR SOC, RACE COURSE CIRCLE, VADODARA PAN NO.ADBPS9145C INCOME TAX OFFICER, WARD-2(2), 1 ST FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA / V/S . / V/S . INCOME TAX OFFICER, WARD-2(2), BARODA SHRI SIMIT P SHETH, L/R OF LT. PANKAJ J SHETH, PROP M/S. PARASWANATH STEEL, 755/G GORE COMPLEX, GIDC MAKARPURA, BARODA &'/ APPELLANT .. ()&'/ RESPONDENT ! * + ! /BY ASSESSEE SHRI S.N.SOPARKAR, SR-AR & MS. URVASHI SHODHAN, AR , * + ! /BY RESPONDENT SHRI SAMIR TEKRIWAL, SR-DR - * .' /DATE OF HEARING 21-02-2012 /% * .' /DATE OF PRONOUNCEMENT 24 -02-2012 !0 !0 !0 !0 / // / O R D E R , /PER MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER :- ITA NO.3238 & 3293/AHD/2009 A.Y. 2006-07 SH. SIMIT P SHETH V. ITO WD-2(2), BRD PAGE 2 THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AS W ELL AS REVENUE ARISING FROM THE ORDER OF LD. COMMISSIONER OF INCOM E-TAX (APPEALS)-II, BARODA DATED 18-09-2009 FOR THE ASSESSMENT YEAR 2006-07. 2. AS FAR AS ASSESSEES APPEAL IS CONCERNED GROUNDS NO. 1 TO 3 AND 5 ARE GENERAL IN NATURE AND AS PER THE STATEMENT OF LD. AR, MR. S.N.SOPARKAR NOT RELEVANT TO DECIDE THE MAIN ISSUE. IN VIEW OF HIS S TATEMENT THESE GROUNDS ARE HEREBY DISMISSED BEING GENERAL IN NATURE. 3. THE MAIN ISSUE OF THE APPELLANT IS ABOUT THE CO NFIRMATION OF ADDITION OF RS.12,71,471/- ON ACCOUNT OF ALLEGED BOGUS PURCHASE S OF THE ASSESSEE. LIKEWISE, DUE TO THE PART RELIEF REVENUE HAS ALSO C HALLENGED THAT LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 41,04,903/- TO RS.12,31,471/-. THESE TWO APPEALS ARE CONNECTED TO EACH OTHER, HENCE CONSOLIDATE AND HEREBY DECIDED BY THIS COMMON ORDER . 4. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143 R.W.S. 147 OF THE I.T. ACT DATED 31- 12-2008 WERE THAT ASSESSEE INDIVIDUAL IS IN THE BUSINESS OF TRADING IN STEEL O N WHOLESALE BASIS. IT MAY NOT BE OUT OF PLACE TO MENTION THAT GROSS PROFIT OF RS. 7,42,524/- ON SALE OF RS.3,04,52,701/- WAS DECLARED HAVING GP RATE AT 2.4 3% AS AGAINST THE GP OF THE IMMEDIATE PAST YEAR AT 3.56%. AN INTIMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM DDIT (INV.)-I, BARODA. ACCOR DING TO THE SAID INTIMATION, DURING THE COURSE OF VERIFICATION OF BANKING TRANSA CTIONS IN THE CASE OF SHRI AMRATBHAI POONAMBHAI PRAJAPATI, PROP OF BHAVNA TRAD ING CO. & BHAGYODAYA ENTERPRISES, SHRI KANTILAL MANGILAL SHAARMA, PROP O F MIAKSHI ENTERPRISES AND SHRI JAYANTILAL MANGILAL SHARMA, PROP OF ARUN INDUS TRIAL CORPORATION AND AS PER THE ADMISSION IN THEIR STATEMENTS RECORDED ON O ATH, IT WAS FOUND THAT NO SALES WERE MADE BY THEM TO ANY PARTY. IT WAS INTIMA TED THAT THOSE PARTIES WERE SIMPLY ISSUING SALE BILLS AGAINST THOSE SALES BILLS THEY WERE RECEIVING DALALI. THE MODUS OPERANDI WAS THAT ON ISSUANCE O F SALES BILLS THE AMOUNT OF ITA NO.3238 & 3293/AHD/2009 A.Y. 2006-07 SH. SIMIT P SHETH V. ITO WD-2(2), BRD PAGE 3 CHEQUE WAS RECEIVED AND ON ENCASHMENT OF THE SAID C HEQUE AFTER DEDUCTING DALALI THE BALANCE AMOUNT WAS WITHDRAWN IN CASH A ND RETURNED TO THE RESPECTIVE PARTIES. THEREFORE, THE ISSUANCE OF BOGU S SALE BILLS WAS CONFIRMED BY THOSE PARTIES. ON THE BASIS OF THESE FACTS, THE ASSESSING OFFICER HAS HELD THAT BARRING INVOICES AND DELIVERY CHLLANS, THERE W AS NO OTHER DOCUMENT TO PROVE THAT THE PURCHASES HAVE ACTUALLY BEEN MADE BY THE ASSESSEE. THERE WAS NO LORRY RECEIPT, TRANSPORTATION DETAILS, NUMBE R OF WEIGHMENT, EXCISE GATE PASS ETC., NO DOCUMENT WAS PRODUCED DURING THE ASSE SSMENT PROCEEDINGS. AFTER EXAMINING THE BANK ACCOUNTS AND OTHER EVIDENC ES AO HAS HELD THAT ALLEGED PURCHASES FROM BHAVNA TRADING CO., MINAXI E NTERPRISE AND ARUN IND. CORPORATION WAS NOT GENUINE PURCHASE AND THEREFORE THE SAID AMOUNT OF BOGUS PURCHASES OF RS41,04,903/- WAS TAXED IN THE H ANDS OF THE ASSESSEE. IT MAY NOT BE OUT OF PLACE TO MENTION THAT BOOKS OF AC COUNT U/S.145(3) OF THE ACT WAS REJECTED AND PROFIT OF THE ASSESSEE WAS ESTIMAT ED AT RS.5 LAKH. BOTH THE ADDITIONS WERE CONTESTED BEFORE THE LD. CIT(A). 5. AFTER EXAMINING THE BOOK RESULTS OF THE PAST YEA R, LD. CIT(A) HAS HELD THAT THERE WAS A REGULAR ARRANGEMENT OF PROVIDING A CCUMULATION SALES BILLS. HOWEVER, HE WAS OF THE VIEW THAT TAKING INTO ACCOUN T THE BUSINESS RESULTS 30% OF THE PURCHASES COST WOULD BE REASONABLE AMOUNT TO BE CONFIRMED TO COVER THE PROFITS OF THE ASSESSEE. RESULTANTLY, TO THE EX TENT TO RS.12,31,471/- WAS DELETED. THIS IS THE REASON THAT BOTH THE SIDES ARE NOW IN APPEAL. AS FAR AS ADDITION OF ESTIMATED INCOME OF RS.5 LAKH IS CONCER NED SAME WAS DELETED, HOWEVER, REVENUE IS NOT IN APPEAL. 6. LD. AR MR. SOPARKAR HAS CONTESTED THAT THE ASSES SEE HAS MAINTAINED THE QUANTITATIVE DETAILS OF PURCHASES AND SALE OF S TEEL. HE HAS PLEADED THAT THE AUDITOR HAS GIVEN THE QUANTITATIVE DETAILS AS PER T HE SPECIAL AUDITOR WHICH CONFIRMS THE MAINTENANCE OF QUANTITATIVE RECORD. IT WAS ENQUIRED FROM THE BENCH THAT WHETHER THE STOCK REGISTER AND QUANTITY- WISE PURCHASES AND SALES ARE AVAILABLE ON RECORD, HOWEVER, THE ANSWER IS NEG ATIVE. FURTHER, IT HAS ALSO BEEN ENQUIRED THAT WHETHER THE WEIGHMENT DETAILS, E XCISE GATE PAS, ITA NO.3238 & 3293/AHD/2009 A.Y. 2006-07 SH. SIMIT P SHETH V. ITO WD-2(2), BRD PAGE 4 TRANSPORTATION DETAILS ETC., ARE ON RECORD AND AGAI N THE ANSWER WAS A NEGATIVE. THE LD. AR HAS INFORMED THAT ALMOST IN ID ENTICAL SITUATION IN THE CASE OF ACIT V. M/S KULUBI STEEL IN ITA NO1568/AHD/2008 ORDER DATED 16-12- 2010 VIDE PARA-8 HAS 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 EVI DENCE WITH REGARD TO THE RECEIPT OF THE GOODS BY IT, IT. STOCK REGIST ER, RECEIPT OF WEIGH-BRIDE FOR WEIGHMENT OF GOODS PURCHASED BY THE ASSESSEE, O CTROI RECEIPT OF THE PAYMENT OF OCTROI DUTY ETC. AFTER CONSIDERING THE E NTIRE MATERIAL, WE ARE OF THE OPINION THAT THE ASSESSEE DID NOT PURCHASE T HE GOODS FROM THE PARTIES MENTIONED IN THE SALES BILL. AT THE SAME TI ME, IT DID PURCHASE THE GOODS FROM SOME OTHER SUPPLIERS, MAY BE WITHOUT BIL L. THEREFORE, PURCHASE RATE AS MENTIONED IN THE ALLEGED SALES BIL L CANNOT BE ACCEPTED. ANY PERSON INDULGING IN THE PRACTICE OF P URCHASING GOODS FROM THE GREY MARKET AND OBTAINING BOGUS BILLS OF S OME OTHER PARTIES, WOULD DO SO FOR GETTING SOME BENEFIT. BUT WHAT WOUL D BE THE MAGNITUDE OF THE BENEFIT WOULD DEPEND UPON FACTS OF EACH CASE . IN THE CASE OF VIJAY PROTEINS, ITAT HELD THAT SUCH BENEFIT TO BE 2 5% AND THEREFORE SUSTAINED THE DISALLOWANCE FOR BOGUS PURCHASE AT 25 %. IN THE CASE OF SUNSTEEL (SUPRA), THE ITAT DEEMED IT FIT TO SUSTAIN THE DISALLOWANCE FOR A LUMPSUM AMOUNT OF RS.50,000/-. HOWEVER, WE FIND T HAT 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 FINDI NGS 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 EXCESSIVE. I N SUPPORT OF THIS CONTENTION HE REFERRED TO THE DECISION OF THE TRIBU NAL IN THE CASE OF ITO VS. SUN STEEL 92 TTJ (AHD) 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 A BOVE CASE WERE DIFFERENT. IN THE ABOVE CASE, THE ASSESSEE HAS SHOWN PURCHASES OF RS.27,39,410/-, SALE OF RS.28,17,207/- AND GP AT RS.94,740/-. THE ASSESSING OFFICER MADE THE ADDITIO N OF RS.27,39,407/- FOR BOGUS PURCHASES. IF THE ABOVE SU M IS ADDED TO THE GP, THE GP WORKS OUT RS.28,34,1247/- WHICH WAS MORE THAN THE SALE ITSELF. THE TRIBUNAL HELD THAT6 IT IS IMPO SSIBLE THAT THE GP IS MORE THAN THE SALE ITSELF. THE TRIBUNAL ALSO FOU ND THAT THE ASSESSEE HAS MAINTAINED THE QUANTITATIVE DETAILS IN RESPECT OF ITA NO.3238 & 3293/AHD/2009 A.Y. 2006-07 SH. SIMIT P SHETH V. ITO WD-2(2), BRD PAGE 5 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 RELI ED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. VIJAY PROTEINS LTD. 55 TTJ (AHD) 76 . IN THE CASE OF M/S. VIJAY PROTEINS LTD., THE TRIB UNAL HAS SUSTAINED THE ADDITION OF 25% OF THE BOGUS PURC HASES. HOWEVER, CONSIDERING THE FACTS OF THE ASSESSEES CA SE THE CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% AS AGAINST 25% MADE IN THE CASE OF M/S. VIJAY PROTEINS LTD. FROM THESE FACTS IT IS EVIDENT THAT THE CIT(A) HAS SUSTAINED THE ADDITION AT 12.5% OF T HE NON- GENUINE PURCHASES CONSIDERING THE FACTS OF THE ASSE SSEES CASE. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INT ERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. THE SAME IS SUS TAINED. LIKEWISE, IN ANOTHER APPEAL DECIDED BY ITAT AHMEDAB AD BENCH D IN THE CASE OF SMT. SAJJANDEVI B JAIN VS. ITO IN ITA NO.609/AHD/2009 A.Y. 2005-06 ORDER DATED 13-01-2012. AGAIN IT WAS HELD T HAT IN RESPECT OF BOGUS PURCHASES THE ADDITION IS TO BE RESTRICTED TO 12.5%, RELEVANT PARA- 7.1 REPRODUCED BELOW:- 7.1 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE FINDINGS OF THE LD. AO AND FOLLOWING THE RATIO OF T HE DECISION IN THE CASE OF VIJAY PROTEINS (SUPRA) AND IN THE CASE OF M /S. BHOLANATH PLY FAB P. LTD. VS- ITO IN ITA NO.137/AHD/2009 AND M/S. RAJ EXPORTS VS- ITO IN ITA NO.2801/AHD/2008 , RELIED ON BY THE LD. A.R., WE RESTRICT THE ADDITION TO 12.5% OF THE BOGU S PURCHASE MADE BY THE ASSESSEE. THUS, 12.5% OF RS.12,86,373/- I.E. RS.1,60,797/- IS ADDED TO THE INCOME OF THE AS INST EAD OF THE ADDITION OF RS.12,86,373/- ADDED BY THE LD. AO AND CONFIRMED BY THE LD. CIT(A). THE LD. AO IS HEREBY DIRECTED TO MA KE ADDITION, AS INDICATED ABOVE. THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 7. HAVING HEARD THE SUBMISSIONS OF BOTH SIDES, WE HAVE BEEN INFORMED THAT THE MALPRACTICE OF BOGUS PURCHASE IS MAINLY TO SAVE 10% SALES TAX ETC. IT HAS ALSO BEEN INFORMED THAT IN THIS INDUSTRY ABOUT 2.5% IS THE PROFIT MARGIN. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDINATE BENCH PRONOUNCED ON IDENTICAL CIRCUMSTANCES, WE HEREBY DI RECT THAT THE ITA NO.3238 & 3293/AHD/2009 A.Y. 2006-07 SH. SIMIT P SHETH V. ITO WD-2(2), BRD PAGE 6 DISALLOWANCE IS REQUIRED TO BE SUSTAINED AT 12.5% O F THE PURCHASES FROM THOSE PARTIES. WITH THESE DIRECTIONS, WE HEREBY DECIDE. T HE GROUNDS OF THE RIVAL PARTIES WHICH ARE PARTLY ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL AS WELL AS REVENUE S APPEAL ARE PARTLY ALLOWED. 1 !0 * /% 2 3 24 /02/2012 '! 7 * 8- THIS ORDER PRONOUNCED IN OPEN COURT ON / 0 / 2012 . SD/- SD/- ( . ) ( ) ( !' ) ( ) ( A. MOHAN ALANKAMONY) (MUKUL KUMAR SHAWART) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) 2 3- 24/02/2012 DKP* !0 !0 !0 !0 * ** * (: (: (: (: ;!:% ;!:% ;!:% ;!:% / COPY OF ORDER FORWARDED TO:- 1. &' / APPELLANT 2. ()&' / RESPONDENT 3. = / CONCERNED CIT 4. =- / CIT (A) 5. :@8 ( , , / DR, ITAT, AHMEDABAD 6. 8B$ C1 / GUARD FILE. BY ORDER/ !0 !, //TRUE COPY// D/ , ,