Shri Bhanwarlal S. Kothari, Ahmedabad V. The Income tax Officer,Ward-2(1), Ahmedabad

ITA 3380/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7715 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-07-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 25-11-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDANDR
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Bogus purchase; Proportionate interest

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, D - BENCH,AHMEDABAD . BEFORE : SHRI T.K.SHARMA, JUDICIAL MEMBER , AND SHRI P.K.BANSAL, ACCOUNTANT MEMBER. ITA NO. 3380/AHD/2004 (ASSESSMENT YEAR 2001 - 02) SHRI BHANWARLAL S.KOTHARI, PROP. KOTHARI TRADERS, 704/3 SIR CHINUBHAI BUILDING CROSS LANE, AHMEDABAD 380 001. VERSUS INCOME - TAX OFFICER, WARD 2(1), AHMEDABAD. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI MUKESH M.PATEL, AR FOR THE RESPONDENT SHRI K.MADHUSUDAN,DR ORDER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.4.10.2004 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) VI, AHMEDABAD FOR THE ASSESSMENT YEAR 2001 - 02. 2. GROUND NO.1 IS AGAINST CONFIRMING THE DISALLOWANCE OF DIFFERENTIAL INTEREST AM OUNTING TO RS.42,310 ON THE FUNDS ADVANCED TO SONMAL RAMESHCHANDRA KOTHARI. 3. THE FACTS RELATING TO THE CONTROVERSY INVOLVE IN THIS GROUND OF APPAL THAT THE ASSESSEE HAS CHARGED INTEREST @15% FROM SHRI SONMAL RAMESHCHNDRA KOTHARI ON THE DEBIT BALANCE IN HIS ACCOUNT. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, OBSERVED THAT INTEREST CHARGED FROM THIS PARTY @15% WAS LOW BECAUSE THE ASSESSEE HAD PAID INTEREST TO DI FFERENT CREDITORS @18%. HE , THEREFORE, DISALLOWED THE PROPORTIONATE INTEREST OF RS.42,310. IN APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. AGAINST THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL. 4. AT THE TIME OF HEARING, SHRI MUKSH M.PATEL, LEARNED AR OF THE ASSESSEE APPEARED AND DREW OUR ATTENTION TO PAGE 35 OF THE PB WHICH CONTAINS ACCOUNT OF INTEREST PAID AND RECEIVED ON THE FUNDS BORROWED/ FUNDS ADVANCED. HE POINTED OUT THAT THE TOTAL AMOUNT OF INTEREST PAID @12@ IS RS.21,509, @15% IS RS.1,77,536 AND @18% IS RS.6,01.541. THE TOTAL INTEREST PAID @15% OR LESS IS ONLY RS. 1,99,045 AS AGAINST WHICH INTEREST RECEIVED FROM SHRI SONMAL RAMESHCHNDRA KOTHARI @15% IS RS.2,11,545. IN THIS MANNER, AT THE MOST, THE ITA NO. 3380/AHD/2004 2 ASSESSEE INCURRED LOSS OF INTEREST OF RS.12,500. HE ACCORDINGLY SUGGESTED THAT AT THE MOST DISALLOWANCE OF INTEREST SHOULD HAVE BEEN RESTRICTED TO RS.12,500. THE LEARNED DR COULD NOT CONTROVERT THESE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. 5. HAVING HARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE MATERIAL ON RECORD. IT IS PERTINENT TO NO TE THAT INTEREST PAID @15% OR LESS IS ONLY RS.1,99,045 WHEREAS INTEREST RECEIVED @15% IS RS.2,11,545. IN VIEW OF THIS, IN OUR OPINION, IT WILL MEET THE ENDS OF JUSTICE IF DISALLOWANCE IS RESTRICTED TO RS.12,500 AS AGAINST RS.42,310 SUSTAINED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. 6. GROUND NO.2 IS AGAINST CONFIRMING THE DISALLOWANCE OF PROPORTIONATE INTEREST ON DEBIT BALANCE OF PARTIES VIZ., RANJIT AUTOMOBILES RS.51,000 AND SUNSTAR FUTURE WOOD RS.2,00,000 WHICH ARE OUTSTANDING SINCE PRIOR TO 1996 - 97 A ND HAS NO NEXUS WITH THE BORROWED FUNDS. 7. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT WHEN THESE TWO ADVANCES WERE GIVEN SUFFICIENT FUNDS WERE AVAILABLE AND THERE IS NO NEXUS WITH THE BORROWED FUNDS. HE, THEREFORE, POINTED OUT THAT NO DISALLOWANC E IS CALLED FOR. 8. IT IS PERTINENT TO NOTE THAT THIS ASPECT WAS NOT EXAMINED BY ANY OF THE AUTHORITIES BELOW. IN VIEW OF THIS, MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT HE MAY VERIFY THE YEAR N WHICH FUNDS WERE ADVAN CED TO THE AFORESAID TWO PARTIES, ALSO EXAMINE THE AVAILABILITY OF FUNDS AND RE - ADJUDICATE THIS ISSUE AFRESH KEEPING IN VIEW THAT IF ADVANCE TO THESE TWO PARTIES WERE NOT GIVEN OUT OF BORROWED FUNDS IN THAT EVENT NO DISALLOWANCE SHOULD BE MADE. 9. GROUND N O.3 IS AGAINST CONFIRMING THE DISALLOWANCE OF COMMISSION PAYMENT OF RS.20,000. 10. THE LEARNED COUNSEL OF THE ASSESSEE DID NOT PRESS THIS GROUND AT THE TIME OF HEARING. THEREFORE, GROUND NO.3 IS DISMISSED AS NOT PRESSED. 11. GROUND NO.4 IS AGAINST THE CON FIRMATION OF THE ADDITION OF RS.1,46,172 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES. ITA NO. 3380/AHD/2004 3 12. HEARD THE LEARNED DR AND PERUSED THE RECORD. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN PURCHASES GREY CLOT H OF RS.66,620 AND RS.79,552 FROM M/S.KUSOM TEXTILES AND M/S.K.K.TEXTILES RESPECTIVELY. THESE PURCHASES FROM THESE TWO CONCERNS HAVE BEEN DEBITED IN THE BOOKS OF ASSESSEE. ON BEING ASKED THE ASSESSEE PRODUCED THE RELEVANT COPIES OF PURCHASE BILLS. THE ASSE SSEE ALSO PRODUCED DELIVERY CHALLAN WHEREIN THERE IS CLEAR MENTION OF PARTICULARS OF THE GOODS, QUANTITY IN BALES AND IN METERS, L.R.NO., AND NAME OF THE ROAD CARRIER, IN WHICH THE ASSESSEE SEND THE GREY CLOTH DIRECTLY TO THE PROCESS HOUSE OF M/S.AAKASH FA SHION PRINTS PVT. LTD. THE ASSESSEE ALSO FURNISHED THE COPIES OF PURCHASE BILLS, DELIVERY CHALLAN, BILL FOR JOB CHARGES PAID AND EXCISE GATE PASS AND ALSO THE DETAILS OF PAYMENT MADE TO THESE TWO PARTIES. HOWEVER, THE ASSESSING OFFICER DID NOT SATISFY ABOU T THE GENUINENESS OF ABOVE PURCHASES AND HE ISSUED LETTERS TO THE ABOVE TWO PARTIES WHICH WAS RETURNED BACK WITH THE POSTAL REMARK IN THE CASE OF K.K.TEXTILES NOT FOUND AND IN THE CASE OF KUSUM TEXTILES NOT KNOWN. THEREFORE, THE ASSESSING OFFICER HELD THE PURCHASES AS BOGUS PURCHASES AND MADE THE IMPUGNED ADDITION AND THE LEARNED CIT(A) HAS CONFIRMED THE SAME. BUT, IN OUR CONSIDERED VIEW, THE IMPUGNED ADDITION ON THE ALLEGATION OF BOGUS PURCHASES IS NOT JUSTIFIED SIMPLY BECAUSE RETURN OF LETTERS ISSUED TO THE PURCHASERS WITH THE POSTAL REMARK NOT FOUND/NOT KNOWN. IT IS NOT DISPUTED BY THE REVENUE, THE ASSESSEE HAS PRODUCED THE PURCHASE BILLS, BANK STATEMENT WHEREIN THE BANK HAS DEBITED THE PAYMENTS IN SUPPORT OF THE PURCHASES. FURTHER THE ASSESSEE HAS STATED THAT THE GOODS WERE DIRECTLY SENT TO THE PROCESS HOUSE OF M/S.AAKASH FASHION PRINTS PVT. LTD. NECESSARY EVIDENCE (COPIES PLACED ON PAGES 46 TO 49 AND 50 TO 53 OF THE PB) LIKE DELIVERY CHALLANS WHEREIN ADMITTEDLY THERE IS CLEAR MENTION OF PARTICU LARS OF THE GOODS, QUANTITY IN BALES AND IN METERS, L.R.NUMBER AND NAME OF THE ROAD CARRIER HAVE BEEN MENTIONED. CONSIDERING ALL THESE EVIDENCES WHICH THE REVENUE IS NOT DISPUTED, THE PURCHASES IN QUESTION CANNOT BE HELD TO BE BOGUS SINCE ALL THE EVIDENCE LEAD US TO CONCLUDE THAT PURCHASES HAVE ACTUALLY BEEN MADE, DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, PAYMENTS WERE MADE FOR SUCH PURCHASES, AND THE GOODS PURCHASED WAS PROCESSED AND SOLD . THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE ITA NO. 3380/AHD/2004 4 CASE, W E HOLD THAT THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN HOLDING THE ABOVE PURCHASES AS BOGUS PURCHASES AND IN MAKING THE IMPUGNED ADDITION. WE DELETE THE SAME AND ALLOW THE GROUND NO.4 IS ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 24.07.09 SD/ - SD/ - (P.K.BANSAL) ACCOUNTANT MEMBER. (T.K.SHARMA) JUDICIAL MEMBER DATE: 24.07.09 (H.K.PADHEE) SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED T O : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.