Star Agency, Kolkata V. ITO, WD-27(2), HALDIA, Haldia

ITA 337/KOL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4907 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2016
• Court: TRIBUNAL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3)

Judgement Text

I.T.A. NO. 337/KOL./2016 ASSESSMENT YEAR: 2006-2007 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 337 /KOL/ 2016 ASSESSMENT YEAR: 2006-2007 STAR AGENCY,....................................... ................................APPELLANT C/O. D.J. SHAH & CO., KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020 [PAN : AAOFS 5724 M] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-27(2), HALDIA-721 602, (FORMERLY ITO, WARD-2, HALDIA) APPEARANCES BY: SHRI MIRAJ D. SHAH, A.R., FOR THE ASSESSEE SHRI SRIDHAR BHATTACHARYYA, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : MAY 03, 2016 DATE OF PRONOUNCING THE ORDER : MAY 06, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX-(APPEALS)-7, KOLKATA DATED 09.12.2015 FOR THE ASSESSMENT YEAR 2006-07 AND THE GROUNDS RAI SED BY THE ASSESSEE THEREIN READ AS UNDER:- 1. FOR THAT THE LD COMMISSIONER OF INCOME TAX APPE ALS ERRED IN NOT ADJUDICATING THE GROUNDS OF APPEALS ON MERITS AND THUS THE APPELLATE ORDER WAS BAD IN LAW AND THE SAID ORDER BE SET ASIDE FOR DISPOSAL ON MERITS. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPA LS OF NATURAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE ADDITION OF BOGUS PURCHASES FROM THE FOLLOWING PART IES:- (A) SEN ENTERPRISES .......................RS. 13 ,245/ - I.T.A. NO. 337/KOL./2016 ASSESSMENT YEAR: 2006-2007 PAGE 2 OF 6 (B) LOKNATH DISTRIBUTORS.............. RS.1, 15,21 5/- (C) ORGAN PHARMACEUTICALS............ RS. 2,47 2/- (D) GOPAL MEDICAL AGENCY ....... RS.1,50,565/- (E) CENTRAL MEDICAL HALL .......... RS. 2,942/- _________________________ TOTAL : RS.2,84,439 /- _________________________ THE ADDITION IS NOT CALLED FOR HENCE THE SAME BE DE LETED. 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED CIT (APPEALS) ERRED IN UPHOLDING THE ADDITI ON OF OUT OF BOOK PURCHASE OF RS.6,47,601/- FROM LIFE DRUG HO USE PVT. LTD. THE ADDITION IS UNCALLED FOR AND HENCE THE SAM E BE DELETED. 5. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED CIT APPEAL ERRED IN UPHOLDING THE ADDITION OF RS.12,879/- ON ACCOUNT OF PROFIT EARNED ON UNDISCLO SED PURCHASE FROM LIFE DRUG HOUSE PVT. LTD. THE ADDITIO N IS UNCALLED FOR AND HENCE THE SAME BE DELETED. 6. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. ASSESSING OFFICER COULDN'T HAVE RELIED ON THE BOOKS OF ACCOUNTS AFTER REJECTING THE BOOKS OF ACCOUNTS. HEN CE ALL ADDITIONS MADE ON THIS BASIS ARE ILLEGAL AND UNCALL ED FOR AND THUS THE SAME BE DELETED. 7. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE IT BE DIRECTED THAT THE COMPUTATION OF INTEREST U/S 234A/ B/C/D OF THE I.T. ACT, 1961 BE RECOMPUTED T4HE INTEREST A S PER LAW. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF TRADING OF MEDICINES ON WHOLESALE BASIS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 31.10.2006 DECLARING TOTAL INCOME OF RS.3,406/-. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE INQUIRIES FROM THE I.T.A. NO. 337/KOL./2016 ASSESSMENT YEAR: 2006-2007 PAGE 3 OF 6 SUPPLIERS OF THE ASSESSEE IN ORDER TO VERIFY THE PU RCHASES SHOWN BY THE ASSESSEE. THESE INQUIRIES REVEALED THE FOLLOWING DI SCREPANCIES:- THE ABOVE DISCREPANCIES WERE CONFRONTED BY THE ASSE SSING OFFICER TO THE ASSESSEE SEEKING THE LATERS EXPLANATION IN THE MAT TER. THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPECT OF THE SAID DISC REPANCIES WAS FOUND BY THE ASSESSING OFFICER TO BE UNSUBSTANTIATED BY FURN ISHING PROPER DOCUMENTARY EVIDENCE. HE, THEREFORE, HELD THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AS UNRELIABLE AND REJECT ING THE SAME UNDER SECTION 145(3), THE ASSESSING OFFICER PROCEEDED TO DETERMINE THE INCOME OF THE ASSESSEE BY ESTIMATION. IN THIS REGARD, THE ASSESSING OFFICER FELT THAT THE BEST METHOD OF ESTIMATION WOULD BE TO MAKE ADDITIONS ON ACCOUNT OF VARIOUS DEFECTS INSTEAD OF MAKING AN ESTIMATE OF GROSS PROFIT. ACCORDINGLY THE DIFFERENCE OF RS.13,245/-, RS.1,15, 215/-, RS.2,472/-, RS.1,50,565/- AND RS.2,942/- REPRESENTING EXCESS PU RCHASES SHOWN BY THE ASSESSEE WERE TREATED BY THE ASSESSING OFFICER AS B OGUS PURCHASES AND ADDITIONS TO THAT EXTENT WERE MADE BY HIM TO THE TO TAL INCOME OF THE ASSESSEE. AS REGARDS THE DIFFERENCE OF RS.6,47,601/ - IN RESPECT OF ONE PARTY M/S. LIFE DRUG HOUSE PVT. LIMITED REPRESENTIN G SHORT PURCHASES I.T.A. NO. 337/KOL./2016 ASSESSMENT YEAR: 2006-2007 PAGE 4 OF 6 SHOWN BY THE ASSESSEE, THE ASSESSING OFFICER HELD T HAT THE SAME WAS NOTHING BUT UNDISCLOSED PURCHASES MADE BY THE ASSES SEE AND THE SAME WAS ENTIRELY ADDED BY HIM TO THE TOTAL INCOME OF TH E ASSESSEE ALONG WITH GROSS PROFIT THEREON WORKED OUT AT RS.12,879/- BY A PPLYING THE GROSS PROFIT RATE OF 1.90%. ACCORDINGLY THE TOTAL INCOME OF THE ASSESSEE WAS ESTIMATED BY THE ASSESSING OFFICER AT RS.9,48,325/- IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 14 5(3) OF THE ACT VIDE ORDER DATED 23.12.2008. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 145(3), AN APPEAL WAS PREF ERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING T HE SUBMISSIONS MADE BY THE ASSESSEE AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) CONFIRMED ALL THE ADDITIONS MA DE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- I HAVE GONE THROUGH THE SUBMISSION MADE BY THE APPELLANT, ASSESSMENT ORDER AND THE REMAND REPORT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE FROM THE SUPPLIERS TO RECONC ILE THE DIFFERENCES. THOUGH THE TIME LIMIT FOR COMPLETION O F ASSESSMENT WAS UP TO 31.12.2008 NEARLY ONE AND HALF YEAR FROM THE EARLIER ASSESSMENT YEAR THE APPELLANT HAS NOT FURNISHED REQUIRED EVIDENCES BEFORE THE ASSESSING O FFICER TO PROVE HIS CASE. DURING THE APPEAL THOUGH THE REMAND REPORT WAS CALLED FOR FROM THE A.O., THE AO HAS GIVEN NUMB ER OF OPPORTUNITIES TO THE APPELLANT BUT THE APPELLANT DI D NOT SUBMIT THE NECESSARY INFORMATION AND COOPERATE WITH THE DEPARTMENT TO PROVE HIS CASE INSTEAD HE HAS REFUSED THE NOTICES ISSUED BY THE AO. IN THE CIRCUMSTANCES, L H AVE NO OPTION EXCEPT TO HOLD THAT THE PURCHASES MADE FROM SEN ENTERPRISE, RS.13,245/-,LOKHNATH DISTDBUTORS,RS.L,1 5,215/-, ORGAN PHARMACEUTICALS RS.2,472/-, GOPAL MEDICAL AGE NCY RS.1,50,565/- AND CENTRAL MEDICAL HALL RS.2,942/- A S BOGUS PURCHASES AND IN THE CASE OF LIFE DRUG HOUSE PVT. L IMITED AS UNDISCLOSED PURCHASES FOR RS.6,47,601/-. ACCORDINGL Y THE ADDITION MADE BY THE AO AMOUNTING TO RS.9,44,919/- I.T.A. NO. 337/KOL./2016 ASSESSMENT YEAR: 2006-2007 PAGE 5 OF 6 (INCLUDING THE GROSS PROFIT OF RS.12,879/- ESTIMATE D BY THE AO SEPARATELY) IS CONFIRMED AND THE APPEAL IS DISMISSE D. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY S UBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, WHEN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER UND ER SECTION 145(3), THERE WAS NO JUSTIFICATION ON HIS PART TO RELY ON T HE PURCHASES SHOWN BY THE ASSESSEE IN THE SAID BOOKS TO WORK OUT THE DIFF ERENCE AND MAKE ADDITION ON ACCOUNT OF SUCH DIFFERENCE. HAVING REJE CTED THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER, IN MY OPINION, SHOU LD HAVE RESORTED TO THE ESTIMATION OF INCOME INDEPENDENT OF BOOKS OF ACCOUN T BY FOLLOWING THE GENERALLY ACCEPTED METHOD BY APPLYING GROSS PROFIT OR NET PROFIT RATE ON THE ESTIMATED TURNOVER AND THIS IS NOT DISPUTED EVE N BY THE LD. D.R. AT THE TIME OF HEARING BEFORE ME. IN THIS REGARD, IT IS OB SERVED THAT THE CASE OF INFLATION OF PURCHASES WAS INDEED MADE OUT BY THE A SSESSING OFFICER BY ESTABLISHING THAT THE PURCHASES SHOWN BY THE ASSESS EE WERE ACTUALLY MORE THAN THAT SHOWN BY THE CONCERNED SUPPLIERS THEREBY MAKING IT CLEAR THAT THE GROSS PROFIT RATE OF 1.90% DECLARED BY THE ASSE SSEE WAS ON THE LOWER SIDE. SIMILARLY THE CASE OF UNDISCLOSED PURCHASES W AS ALSO ESTABLISHED BY THE ASSESSING OFFICER ON THE BASIS OF INQUIRY DIREC TLY MADE BY HIM WITH ONE OF THE SUPPLIERS OF THE ASSESSEE, NAMELY LIFE D RUG HOUSE PVT. LIMITED, WHICH IS SUFFICIENT TO SHOW THAT THE ASSESSEE WAS I NDULGING IN SOME BUSINESS OUTSIDE THE BOOKS OF ACCOUNT. HAVING REGAR D TO ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THA T IT WOULD BE FAIR AND REASONABLE TO ESTIMATE THE TURNOVER OF THE ASSESSEE S BUSINESS AT RS.2.50 CRORES AS AGAINST RS.2.28 CRORES AND APPLY HIGHER G ROSS PROFIT RATE OF 3% INSTEAD OF 1.9% DECLARED BY THE ASSESSEE. THIS WOUL D RESULT IN TRADING I.T.A. NO. 337/KOL./2016 ASSESSMENT YEAR: 2006-2007 PAGE 6 OF 6 ADDITION OF ABOUT RS.3.20 LAKHS AS AGAINST THE ADDI TIONS OF RS.9.45 LAKHS MADE BY THE ASSESSING OFFICER. THE ASSESSING OFFICE R IS ACCORDINGLY DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 06, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 6 TH DAY OF MAY, 2016 COPIES TO : (1) M/S. STAR AGENCY, C/O. D.J. SHAH & CO., KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020 (2) INCOME TAX OFFICER, WARD-27(2), HALDIA-721 602, (FORMERLY ITO, WARD-2, HALDIA) (3) COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKAT A (4) COMMISSIONER OF INCOME TAX- , KOLKATA ; (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.