MAA CHINTPURNI IRON & STEEL ( INDIA ) P. LTD, MUMBAI V. ITO WD 6(3)(4), MUMBAI

ITA 3270/MUM/2009

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9430 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 20-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Unexplained expenditure
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 MAA CHINTAPURNI IRON & STEEL (INDIA) PVT. LTD. 207, QUAY STREET, DARUKHANA MUMBAI 400 010 PAN:-AABCM 9597 N VS. IT O W ARD 6(3)(4) MUMBAI (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI SUBODH RATNAPAR KHI REVENUE BY : SHRI SACCHIDANAND DUBEY DATE OF HEARING : 20.01.2015 DATE OF PRONOUNCEMENT : 20.01.2015 PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 06.03.2009, PASSED BY LD. CIT(A)-VI, MU MBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y . 2005-06, ON FOLLOWING GROUNDS, WHICH READS AS UNDER:- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITIO N OF RS.26,36,212/- AS UNEXPLAINED EXPENDITURE U/S 69C O F THE I.T. ACT BY HOLDING ON THE BASIS OF INFORMATION PROVIDED BY CENTRAL EXCISE DEPARTMENT THAT THE APPELLANT HAD MADE UNEXPLAINED PURCHASES OF INGOTS OF RS.13,18,106/- FOR THE PERIOD 01.04.04 AND THAT EXTRAPOLATION OF THE SAID INFORMATION FOR THE BALAN CE FINANCIAL YEAR UP TO 31.03.05 RESULTING IN FURTHER ADDITION O F RS.13,18,106/- FOR PRESUMED UNACCOUNTED PURCHASES FOR SUCH PERIOD WAS ALSO VALIDLY MADE BY THE LD. AO. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS.29,97,778/- AS UNEXPLAINED MONEY U/S 69A OF THE I.T. ACT BY ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 2 HOLDING THAT THE SAID AMOUNT WAS THE UNACCOUNTED SA LES OF THE APPELLANT NOT APPRECIATING THE FACT THAT ENTIRE SAL ES AMOUNT CANNOT BE THE INCOME OF THE APPELLANT LIABLE TO TAX . 3. THE LEARNED CIT(A) ERRED IN SEPARATELY CONFIRMIN G THE ADDITION OF RS.1,19,912/- BEING 4% OF PRESUMED UNAC COUNTED SALES AS THE INCOME OF THE APPELLANT LIABLE TO TAX. 2. THE BRIEF FACTS ARE THAT, ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING MILD STEEL, ROLLED PRODUCT SUCH AS AN GLES, CHANNELS BEAMS, CTD BARS, ETC. A SURVEY WAS CONDUCTED IN AUG UST 2004, BY CENTRAL EXCISE DEPARTMENT AT THE FACTORY PREMISES AND OFFICE OF THE ASSESSEE AT THANE. SHOW CAUSE CUM DEMAND ORDER WAS PASSED BY EXCISE DEPARTMENT WHICH WAS PROCURED BY THE ASSESSI NG OFFICER. FROM THE SAID ORDER, THE ASSESSING OFFICER NOTED THAT AS SESSEE HAS MADE PURCHASES FROM TWO PARTIES, NAMELY, M/S. AMAR ISPAT PVT. LTD. AND FROM M/S. SDL STEEM PVT. LTD. IN CASH UP TO THE PERIOD O F 4 TH SEPTEMBER 2004. THE TOTAL PURCHASES MADE FROM THESE PARTIES A GGREGATED TO RS.13,18,106/-. BASED ON THIS INFORMATION, THE ASSE SSING OFFICER HELD THAT FOR THE PERIOD 04.09.2004 TO 31.03.2005, THE P URCHASES SHOULD BE ESTIMATED AND ACCORDINGLY, HE ESTIMATED THE SAME FI GURE OF RS.13,18,106/- AGAIN AS UNDISCLOSED PURCHASES. HENC E AMOUNT OF RS.26,36,212/- WAS TREATED AS UNEXPLAINED PURCHASES AND SAME WERE DISALLOWED U/S 69C. FURTHER BASED ON THESE UNACCOUN TED PURCHASES, THE ASSESSING OFFICER HELD THAT ASSESSEE MUST HAVE PROD UCED THE STEELS FROM SUCH UNACCOUNTED PURCHASES AND ALSO SOLD OUTSIDE TH E BOOKS IN CASH. ACCORDINGLY, HE ADDED FURTHER AMOUNT OF RS.29,97,77 8/- AS UNACCOUNTED SALES U/S 69A. BESIDES THESE ADDITIONS, HE FURTHER ESTIMATED GP OF 4% OF SALES AT RS.1,99,912/-. ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 3 3. THE LD. CIT(A) CONFIRMED THE ENTIRE ACTION OF TH E AO IN THE FOLLOWING MANNER:- I DO NOT AGREE WITH THE SUBMISSION OF THE AR. I FI ND THAT THE AO HAS MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED PUR CHASE U/S 69C ON RECEIPT OF INFORMATION RECEIVED FROM CENTRAL EXCISE DEPARTMENT THAT THE ASSESSEE HAS MADE PURCHASE OF I NGOTS OUT OF BOOKS OF ACCOUNT. THE AUTHORIZED REPRESENTATIVE HAS NOT FURNISHED ANY EVIDENCE TO SHOW THAT THE PURCHASES A RE NOT OUT OF BOOKS OF ACCOUNTS. THE AO IS JUSTIFIED IN EXTRAPOLA TING THE FINDING OF CENTRAL EXCISE DEPARTMENT FOR SIX MONTHS TO THE WHOLE OF THE YEAR. HENCE APPEAL ON THIS DISMISSED. SIMILARLY, THE AO IS JUSTIFIED IN ESTIMATING THE UN ACCOUNTED SALES FOR THE WHO YEAR ON THE BASIS OF UNACCOUNTED SALES FOR SIX MONTHS FOUND DURING THE SURVEY CONDUCTED BY CENTRAL EXCISE DEPARTMENT. DURING THE APPELLANT PROCEEDING ALSO TH E ASSESSEE DID NOT FURNISH ANY EVIDENCE TO SHOW THAT THESE SAL E ARE NO UNACCOUNTED. THERE IS NO EVIDENCE TO SHOW THAT THES E SALES ARE OUT OF THE UNACCOUNTED PURCHASES OR THESE UNACCOUNT ED SALES HAVE PROVIDED FINANCE FOR UNACCOUNTED PURCHASES. IN THE ABSENCE OF EVIDENCE TO THE CONTRARY THE AO IS JUSTIFIED IN BRINGING TO TAX SEPARATELY THE UNACCOUNTED PURCHASES AS WELL AS UNA CCOUNTED SALES. HENCE, THE ADDITION MADE BY THE AO IS UPHELD AND APPEAL ON THIS GROUND IS DISMISSED. AS REGARDS ADDITION ON ACCOUNT OF GP @ 4% OF SALE, I AGREE WITH THE VIEW OF THE AO THAT THE APPELLANT IS LIABLE FO R GP ADDITION ON ACCOUNT OF UNACCOUNTED PURCHASE AS WELL AS SALES AT 4% OF THE SALES FIGURE. I ALSO AGREE WITH THE AO THAT WHATEVE R HAS BEEN PURCHASED MUST HAVE BEEN DISPOSED OFF BY THE APPELL ANT OUT OF BOOKS OF ACCOUNT. HENCE, THE AO IS JUSTIFIED IN MAK ING THE ADDITION OF GP ON ACCOUNT OF UNEXPLAINED SALES. HEN CE, THE ENTIRE ADDITION IS UP HELD AND APPEAL IS DISMISSED. 4. BEFORE US, LEARNED COUNSEL SUBMITTED THAT FIRST OF ALL, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN EXTRAPOLATIN G THE PURCHASES FOR THE PERIOD FROM 04.09.2004 TO 31.03.2005, WITHOUT ANY M ATERIAL OR INFORMATION ON RECORD. THE INFORMATION AS PER THE E XCISE ORDER WAS WITH REGARD TO PURCHASES MADE IN CASH FROM TWO PARTIES F OR 24.145 MT TONS ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 4 OF INGOTS OF RS.5,20,325/- + 37.20 MT TONS OF INGOT S OF RS.7,97,781/-. BESIDES THIS, THERE WAS NO SUCH MATERIAL TO SHOW TH AT ASSESSEE HAD MADE ANY CASH PURCHASES, HENCE NO ESTIMATION OF PUR CHASES FOR THE BROKEN PERIOD SHOULD BE MADE. HE FURTHER SUBMITTED THAT ONCE THE AO HAS APPLIED GROSS PROFIT RATE OF 4%, THEN THERE WAS NO NEED TO FURTHER MAKE ADDITION OF RS.29,97,778/- ON ACCOUNT OF UNACC OUNTED SALES ON PRESUMED PRODUCTION AND SALE THEREOF. THUS, THE ENT IRE ADDITION SUBSTANTIAL BY THE LD. CIT(A) IS NOT JUSTIFIED. 5. ON THE OTHER HAND LD. DR STRONGLY RELIED UPON TH E ORDER OF THE AO AS WELL AS LD.CIT(A) AND SUBMITTED THAT, IF THE ASS ESSEE IS FOUND TO UNDERTAKING PURCHASES OUTSIDE THE BOOKS, THEN AO IS JUSTIFIED IN ESTIMATING THE PURCHASES FOR THE WHOLE OF THE YEAR AND ALSO JUSTIFIED IN APPLYING GROSS PROFIT RATE ON SUCH PURCHASES. THUS, THE ADDITION MADE HAS RIGHTLY BEEN CONFIRMED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT FINDING GIVEN IN IMPUGNED ORDER. THE ASSESSING OFFI CER HAS RECEIVED THE INFORMATION FROM CENTRAL EXCISE DEPARTMENT ON ACCOU NT OF UNACCOUNTED PURCHASES OF INGOTS IN RESPECT OF TWO PARTIES FOR S UMS AGGREGATING RS.13,18,106/-. BASED ON THIS INFORMATION, THE AO H AS MADE THE ADDITIONS IN THE FOLLOWING MANNER.:- A UNACCOUNTED PURCHASES U/S 69C (I) 24.145 + 37.20 MT OF INGOTS ALLEGEDLY PURCHASED BY THE APPELLANT IN CASH FROM M/S. AMAR ISPAT PVT. LTD./MS.SDL STEEL PVT. LT D. UPTO 4 TH SEP. 2004. TOTAL PURCHASE RS.5,20,325/- + RS.7,97,781/- = RS.13,18,106/- (II) ESTIMATED PURCHASES FOR THE PERIOD FROM ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 5 04.09.2004 TO 31.03.2005 BY EXTRAPOLATING THE PURCHASE FIGURE BY SAME AMOUNT = 13,18,106/- RS. 26,36,212/- B UNACCOUNTED SALES U/S 69A:- THE AO HAS FURTHER PRESUMED PRODUCTION FROM SUCH UN ACCOUNTED PURCHASES OF RS.26,36,212/- TO BE SOLD OUTSIDE BOOKS IN CASH FOR THE CONSIDERATION OF RS. 29,97,778/- C ESTIMATED UNACCOUNTED GROSS PROFIT @ 4% OF SALE S AFTER ESTIMATING UNACCOUNTED PURCHASES AND SALES AS PER ABOVE, THE AO HAS MADE ADDITION OF 4% OF SALES TO BE ESTIMATED UNACCO UNT ED GROSS PROFIT RS. 1,19,912/- 7. SO FAR AS FURTHER ADDITION OF RS.13,18,106/- (U NDER THE HEAD A) AND RS.29,97,778/-, (UNDER THE HEAD B) WE ARE OF THE OPINION OF THE AO WAS NOT JUSTIFIED IN MAKING THESE ADDITIONS, BECAUS E:- FIRSTLY, THE CASH PURCHASES WHICH WAS UNACCOUNTED WAS INFOR MED TO BE FOR RS.13,18,106/- MADE FROM TWO PARTIES, WHICH HAS ALREADY BEEN ADDED BY THE AO. IF SUCH A PURCHASE WAS FROM UNDISC LOSED SOURCES, THEN NO FURTHER EXTRAPOLATION OF THE SAME AMOUNT CA N BE MADE, AS THE SALES MADE FROM SUCH PURCHASES, BECOMES THE SOURCE OF FURTHER PURCHASES, THAT IS, IT COMES IN ROTATION AND IN SUC H A CASE ONLY THE GROSS PROFIT FROM SUCH SALES CAN BE TREATED AS THE ACTUAL INCOME OF THE ASSESSEE. SECONDLY, ONCE THE GP HAD BEEN ESTIMATED ON UNACCOUNTED PURC HASES. THEN FURTHER SALES CANNOT BE ADDED, AS ADDITION ON ACCOUNT OF ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 6 PURCHASES AND GROSS PROFIT SET OFF THE SALES. OTHER WISE IT WOULD LEAD TO DOUBLE ADDITION, ONE ON DEBIT SIDE AND OTHER ON CRE DIT SIDE FOR SOME TRANSACTION. GROSS PROFIT IS THE BALANCING FIGURE O F THE PURCHASE AND SALES, WHICH IS ACTUAL INCOME OF THE ASSESSEE. HERE-IN-THIS CASE, THE UNACCOUNTED PURCHASE OF RS.1 3,18,106/- MADE ON THE BASIS OF INFORMATION SHOULD BE ADDED AS PURCHAS ES FROM UNDISCLOSED SOURCES (TO BE ADDED U/S 69C). THIS ITSELF WILL BEC OME THE ROTATING CAPITAL AND SOURCE FOR FURTHER PURCHASE, BECAUSE TH E SALES MADE OUT OF INITIAL PURCHASE ITSELF JUSTIFIES THE FURTHER PURCH ASES UNLESS SOMETHING IS FOUND CONTRARY. THUS, ESTIMATE OF PURCHASE FOR THE PERIOD FROM 04.09.2004 TO 31.03.2005 BY EXTRAPOLATING THE SOME PURCHASE FIGURE IS NOT JUSTIFIED, HENCE THE SAME IS DELETED. THE ONLY ADDITION WHICH WOULD SURVIVE IS ACTUAL UNACCOUNTED PURCHASES OF RS.13,18 ,106/- FOUND UP TO 04.09.2004. 8. BESIDES THIS THE ESTIMATION OF GROSS PROFIT @ 4% OF SALES IS ALSO JUSTIFIED BECAUSE SUCH UNACCOUNTED PURCHASES HAS RE SULTED INTO UNACCOUNTED SALES FOR WHICH ONLY GROSS PROFIT SHOUL D BE TAKEN AS INCOME EARNED FROM SUCH SALES. ACCORDINGLY, GP ADDITION OF RS.1,19,912/- IS ALSO CONFIRMED. IN THE RESULT ADDITION OF RS.13,18,106/- AND RS.1,19,912/- IS CONFIRMED AND ADDITION RS. 13,18,106/- AND RS.29,97 ,778/- IS DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY JANUARY, 2015. SD/- SD/- (D. KARUNAKA RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 20.01.2015 *SRIVASTAVA ITA NO. 3270/MUM/2009 ASSESSMENT YEAR: 2005-06 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.