The ITO, Ward-5(1), Baroda V. Shri Satyanarayan P.RAthi, Baroda

ITA 3407/AHD/2009

• Counselvise Citation: 340720514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 24-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Cost of acquisition
• Section: 40A(3); 147

Judgement Text

, , . .. . . .. . , , , , . .. .!' !' !' !' !' !' !' !' , #$ #$ #$ #$ # % # % # % # % IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE SHRI G.C.GUPTA, HONBLE V.P. & SHRI A.MOHAN ALANKAMONY, HONBLE A.M.) . ITA NO. 3407/AHD./2009 : ' &' - 2003-2004 ITO, WARD-5(1), BARODA -VS- SHRI SATHYNARAYAN P . RATHI, BARODA (PAN : ACNPR 8080N) ( () /APPELLANT) ( *+() /RESPONDENT ) . ITA NOS. 46&47/AHD./2010 : ' &' - 2003-04 & 2004-05 SHRI SATHYNARAYAN P. RATHI, BARODA VS- ITO, WAR D-5(1), BARODA ( () /APPELLANT) ( *+() /RESPONDENT ) , - # / APPELLANT BY : SHRI SAMIR TEKRIWAL, SR.D.R. ' ./ , - # / RESPONDENT BY : SHRI TUSHAR P. HEMANI, A.R. '0 , /1$ / DATE OF HEARING : 15/11/2011 2!& , /1$ / DATE OF PRONOUNCEMENT : 10/02/2012 #3 #3 #3 #3 / ORDER PER SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THESE ARE THREE APPEALS (I) ONE BY THE REVENUE A ND (II) ANOTHER TWO BY THE ASSESSEE ARE DIRECTED AGAINST THE IMPU GNED ORDER OF THE LD. CIT(A)-V, BARODA IN APPEAL NO. CAB/(A)-V/309/2006-0 7 & APPEAL NO.CAB/(A)-V/203/2007-08 ALL DATED 30.10.2009 FOR THE ASSESSMENT YEAR 2003-2004 AND 2004-05 RESPECTIVELY PASSED UNDE R SECTION 250 R.W.S.143(3)/147 OF THE I.T. ACT . I) ITA NO.3407/AHD/09 : A.Y. 2003-04 BY THE DEPARTME NT: 2. A SOLITARY GROUND OF THE REVENUE IS THAT THE L D.CIT (A) ERRED IN DELETING THE ADDITION OF RS.42,98,107/- ON ACCOUNT OF BOGUS PURCHASES AND PAYMENTS. ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 2 II) ITA NO. 46 & 47/AHD/10 : A.Y. 2003-04 & 04-05 BY THE ASSESSEE: 2.1. THOUGH THE ASSESSEE HAD RAISED FIVE IDENT ICAL GROUNDS FOR BOTH THE AYS UNDER DISPUTE, GROUND NO.5 BEING GENERAL AND NO SPECIFIC ISSUE INVOLVED, IT DOES NOT SURVIVE FOR ADJUDICATION. WI TH REGARD TO GROUND NO.1, THE ASSESSEE HAD CHALLENGED THE LD.CIT (A)S STAND IN CONFIRMING THE RE-OPENING OF THE ASSESSMENTS U/S 147 OF THE AC T. HOWEVER, DURING THE COURSE OF HEARING BEFORE US, THE LD. A R CONCED ED THAT THIS GROUND WAS NOT PRESSED FOR BOTH THE A.YS UNDER CHALLENGE A ND, ACCORDINGLY, GROUND NO.1 IS DISMISSED AS NOT PRESSED. THUS, THE LONE ISSUE (GROUND NOS.2,3 & 4) SURVIVES FOR ADJUDICATION IS THAT THE LD.CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALL OWING THE PURCHASES TO THE EXTENT OF RS.18,42,045/- AND RS.2,07,140/- FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY. 3. AS THE ISSUES RAISED BY THE RIVAL PARTIES I N THESE APPEALS PERTAINING TO THE SAME ASSESSEE AND THE ISSUES BEING INTER-LIN KED, FOR THE PURPOSE OF CONVENIENCE AND CLARITY, THEY WERE HEARD, CONSID ERED AND DISPOSED OFF IN THIS COMMON ORDER. 4. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL , WAS IN RECEIPT OF INCOME FROM BUSINESS. THE RETURN OF INCOME FOR THE ASSESS MENT YEAR UNDER CONSIDERATION FILED ON 25.11.2003, ADMITTING A TOTA L INCOME OF RS.1,08,558/- WAS, INITIALLY, PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE AO CONCLUDED THE ASSESSMENT U/S 1 43(3) R.W.S 147 OF THE ACT, DETERMINING THE TOTAL INCOME OF THE ASSESS EE AT RS.62,48,710/- FOR THE REASON RECORDED IN HIS IMPUGNED ORDER. ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 3 5. ON AN APPEAL BY THE ASSESSEE, THE LD.CIT (A) H AS, AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTIONS AS WELL AS THE PERUSAL OF THE REMAND REPORT OF THE AO ON THE ISSUE AND FOR THE DE TAILED REASONS RECORDED THEREIN, OBSERVED THUS: 5.5.2. HOWEVER, AS PER VARIOUS DECISIONS OF ITAT SUCH AS VIJAY PROTEINS LTD. 58 ITD 528, ENTIRE COST OF PURCHASES CANNOT BE ADDED IN SUCH CASES. THIS VIEW IS ALSO SUPPORTED BY THE JUDGMENTS OF ITAT IN THE CASES OF OMKAR PHARMA, SHREE RAJ INDUST RIES, AMIT PROCESSORS, PREM KUMAR RATHI ETC., 5.5.3. TAKING INTO ACCOUNT ALL THE RELEVANT FACTS OF THE CASE, I FIND THAT 30% OF THE PURCHASE COST WILL BE A REASONABLE AMOUNT WHICH CAN BE ADDED IN THIS CASE TO COVER THE GAIN OF THE APPELLANT. THIS WILL TAKE CARE OF VIOLATION OF SECTION 40A(3) BY MA KING CASH PURCHASES FROM THE OPEN MARKET AND ALSO THE SAVINGS IN TERMS OF NON-PAYMENT OF SALES TAX, OCTROI AND OTHER STATUTOR Y DUTIES. THEREFORE, OUT OF TOTAL ADDITION OF RS.61,40,152/- MADE BY THE AO ON ACCOUNT OF PURCHASES, AN AMOUNT OF RS.18,42,045/- B EING 30% OF THE SAID PURCHASES IS CONFIRMED. 6. AGGRIEVED, THE REVENUE HAS COME UP WITH THE PRESENT APPEAL. IT WAS THE CONTENTION OF THE REVENUE THAT THE CIT (A) HAD ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM M/S.GIRNAR S ALES CORPORATION AND M/S. SHIV METALS CORPORATION AND ALSO FAILED TO PROVE THE NEXUS OF PAYMENT DURING THE YEAR UNDER CONSIDERATION. TO DR IVE HOME ITS POINT, THE REVENUE HAD PLACED ITS UNSTINTED FAITH ON THE F INDINGS OF THE EARLIER BENCH IN THE CASE OF ACIT, CENTRAL CIRCLE 1(4) V. M ARDIA COPPER EXTRUSION PVT. LTD IN ITA NOS.4097 & 4290/AHD/1995 FOR THE ASSESSMENT YEAR 1992-93. 6.1. ON THE OTHER HAND, THE LD. A R HAD CON TESTED THE REVENUES ARGUMENT VEHEMENTLY AND HIS FURTHER SUBMISSION WAS MORE OR LESS ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 4 REVOLVED WHAT WAS REPRESENTED BEFORE THE FIRST APPE LLATE AUTHORITY. HE HAD ALSO FURNISHED A PAPER BOOK CONTAINING 1 74 PAGES WHICH CONSIST OF, INTER ALIA, COPIES OF (I) ANNUAL FINANCIAL STAT EMENTS FOR THE AY 2002-03; (II) AUDIT REPORT; (III) INVOICES OF PURCHASES AND SALES AND ALSO DELIVERY CHALLANS (IV) LEDGER ACCOUNT OF SUPPLIES ETC., TO S TRENGTHEN HIS POINT OF ARGUMENT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, THOROUGHLY PERUSED THE RELEVANT CASE RECORDS AND THE VOLUMINOU S PAPER BOOK FURNISHED BY THE LD. A R DURING THE COURSE OF HEARI NG. AT THE OUTSET, WE WOULD LIKE TO RECALL THE FINDINGS OF THE EARLIER BE NCHES ON A SIMILAR ISSUE. (I) ACIT, CENTRAL CIRCLE 1(4) V. MARDIA COPPER EX TRUSION PVT. LTD IN ITA NO.4290/AHD/1995 AY 1992-93: AFTER TAKING INTO ACCOUNT THE RIVAL SUBMISSIO NS AND ALSO THE REASONING OF THE CIT (A), THE BENCH HAD OBSERVED THUS: 32. IT ONLY REMAINS FOR US TO CONSIDER, THE RATHER UNUSUAL OBSERVATION, IF WE MAY SAY SO WITH RESPECT, OF THE CIT (A) THAT IF IT IS FOUND THAT MAHAKALI ROADLINES HAVE NOT TRANSPORTED THE GOODS, THEN THEY MIGHT HAVE BEEN TRANSPORTED BY SOME OTHER TRAN SPORTER AND THE ONLY THING WHICH THE AO CAN DO IS TO DISALLOW THE T RANSPORT CHARGES BUT NOT THE PURCHASES. WE ARE TOTALLY UNABLE TO UN DERSTAND OR APPRECIATE THE LOGIC OF THE OBSERVATION. IF THE CL AIM OF TRANSPORTATION OF THE GOODS IS FOUND TO BE BOGUS OR NOT GENUINE, T HE LOGICAL RESULT WOULD NOT ONLY BE THAT THE TRANSPORTATION CHARGES S HOULD BE DISALLOWED BUT SINCE THE FACT THAT THE GOODS WERE T RANSPORTED ITSELF STANDS DISPROVED OR UNPROVED, THE PURCHASES ALSO ST AND UNPROVED. IT IS NOT PROPER FOR THE CIT (A) TO GIVE THE BENEFI T OF DOUBT TO THE ASSESSEE, BY OBSERVING THAT THE GOODS MIGHT HAVE BE EN TRANSPORTED BY SOME OTHER TRANSPORTER. EVEN THE ASSESSEE HAS N O CASE THAT THE GOODS WERE TRANSPORTED BY SOME OTHER TRANSPORTER. THE CIT (A) IN OUR OPINION WAS NOT JUSTIFIED AT ALL IN MAKING THE AFORESAID OBSERVATION AND ALSO IN MAKING IT PART OF HIS REASO NING FOR DELETING THE DISALLOWANCE. ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 5 33. FOR THE ABOVE REASONS, WE REVERSE THE ORDER OF THE CIT (A) AND RESTORE THE DISALLOWANCE OF RS.51,08,219/- (II) YET ANOTHER SIMILAR ISSUE, THE EARLIER BENC H IN ITS RECENT FINDING IN THE CASE OF M/S. SHANKET STEEL TRADERS, VADODARA V. ITO, WARD 5(1), VADODARA IN ITA NOS.2801 & 2937/AHD/2008 DATED: 20.5.2011 HAS OBSERVED THUS: 9. SO FAR AS THE BOGUS PURCHASE IS CONCERNED, WE FIND THAT THE ASSESSING OFFICER RECORDED THE DETAILED FINDING SO AS TO ESTABLISH THAT THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM GIRNAR SALES CORPORATION AND SHIV METAL CORPORATION WAS BOGUS. THE LEARNED COUNSEL FOR THE ASSESSEE WAS UNABLE TO CONTROVERT T HE FACTUAL FINDING RECORDED BY THE AO IN THIS REGARD. HOWEVER, THERE IS NO DISPUTE THAT THE ASSESSEE IS ONLY A TRADER IN IRON AND STEEL AND IT HAS MAINTAINED QUANTITATIVE DETAILS. THE STATEMENT MAD E BY THE LEARNED COUNSEL THAT THE PURCHASES CLAIMED TO HAVE BEEN MAD E BY THE ASSESSEE FROM GIRNAR SALES CORPORATION AND SHIV MET AL CORPORATION IS DULY RECORDED IN THE BOOKS OF THE ASSESSEE AND H AS BEEN REFLECTED EITHER IN THE SALES OR IN THE CLOSING STO CK, IS NOT CONTROVERTED. ON THESE FACTS, THE DECISION IN THE CASE OF KULUBI STEEL [(SUPRA) ACIT V. KULUBI STEEL ITA NO.1568 /AHD/2008] WOULD BE SQUARELY (APPLICABLE) WHEREIN THE ITAT HEL D 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 PARTIE S ON THE OTHER HAND IT CLAIMED THAT IT IS NOT HIS RESPONSIBILITY T O PRODUCE THE SELLER. IT IS A SETTLED LAW THAT ONUS IS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE PURCHASE. THE ASSESSEE HAS PROD UCED VARIOUS EVIDENCES WITH REGARD TO THE RECEIPT OF THE GOODS B Y IT, I.E., STOCK REGISTER, RECEIPT OF WEIGH-BRIDGE FOR WEIGHMENT OF GOODS PURCHASED BY THE ASSESSEE, OCTROI RECEIPT FOR THE PAYMENT OF OCTROI DUTY ETC. AFTER CONSIDERING THE ENTIRE MATERIAL, WE ARE OF TH E OPINION THAT THE ASSESSEE DID NOT PURCHASE THE GOODS FROM THE PARTIE S MENTIONED IN THE SALES BILL. AT THE SAME TIME, IT DID PURCHASE THE GOODS FROM SOME OTHER SUPPLIERS, MAY BE WITHOUT BILL. THEREFO RE, PURCHASE RATE AS MENTIONED IN THE ALLEGED SALES BILL CANNOT BE AC CEPTED. ANY PERSON INDULGING IN THE PRACTICE OF PURCHASING GOOD S FROM THE GREY MARKET AND OBTAINING BOGUS BILLS OF SOME OTHER PART IES, WOULD DO SO FOR GETTING SOME BENEFIT. BUT WHAT WOULD BE THE MA GNITUDE OF THE ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 6 BENEFIT WOULD DEPEND UPON FACTS OF EACH CASE. IN T HE CASE OF VIJAY PROTEINS, ITAT HELD THAT SUCH BENEFIT TO BE 25% AND THEREFORE SUSTAINED THE DISALLOWANCE FOR BOGUS PURCHASE AT 25 %. IN THE CASE OF SUN STEEL (SUPRA), THE ITAT DEEMED IT FIT TO SUS TAIN THE DISALLOWANCE FOR A LUMP-SUM AMOUNT OF RS.50000/-. HOWEVER, WE FIND THAT IN THE CASE OF SHRI ANUBHAI SHIVLAL (SUPR A), THE ITAT HAS CONSIDERED BOTH THE DECISIONS IN THE CASE OF VIJAY PROTEINS AND SUN STEEL (SUPRA) AND THEREAFTER SUSTAINED THE DISALLOW ANCE AT 12.5%. RELEVANT FINDINGS OF THE ITAT IN THE CASE OF ANUBHA I SHIVLAL READ AS UNDER: 3.AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ADDITION SUSTAINED IS EXCESSIVE. IN SUPPORT OF THIS CONTENTION HE REFERRED TO THE DECISION OF THE TRIBU NAL IN THE CASE OF ITO V. SUN STEEL 92 TTJ (AHD) 1126 WHEREIN THE T RIBUNAL HAS SUSTAINED THE ADDITION OF RS. 50,000/- ON ACCOUNT O F BOGUS PURCHASES. HOWEVER, WE FIND THAT THE FACTS IN THE ABOVE CASE WERE DIFFERENT. IN THE ABOVE CASE, THE ASSESSEE HA S SHOWN PURCHASES OF RS.27,39,410/-, SALE OF RS.28,17,207/- AND GP AT RS.94,740/- THE ASSESSING OFFICER MADE THE ADDITION OF RS.27,39,407/- FOR BOGUS PURCHASES. IF THE ABOVE S UM IS ADDED TO THE GP, THE GP WORKS OUT TO RS.28,34,1247/- (SIC) 2 8,34,147/- WHICH WAS MORE THAN THE SALE ITSELF. THE TRIBUNAL HELD THAT IT IS IMPOSSIBLE THAT THE GP IS MORE THAN THE SALE ITSELF . THE TRIBUNAL ALSO FOUND THAT THE ASSESSEE HAS MAINTAINED THE QUA NTITATIVE DETAILS IN RESPECT OF MATERIALS PURCHASED AND SOLD. CONSIDERING PECULIAR FACTS OF THAT CASE, THE TRIBUNAL ARRIVED A T THE CONCLUSION THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMATE TH E ADDITION AT RS.50000/- AS AGAINST THE ADDITION OF RS.27,39,407/ - MADE BY THE ASSESSING OFFICER. HOWEVER, THE LEARNED COMMISSION ER OF INCOME-TAX (APPEALS) CONSIDERING THE FACTS OF THE A SSESSEES CASE, HAS SUSTAINED THE ADDITION AT 12.5%. WHILE D OING SO, HE HAS ALSO RELIED UPON THE DECISION OF THE TRIBUNAL I N THE CASE OF M/S.VIJAY PROTEINS LTD., 55 TTJ (AHD) 76. IN THE CASE OF M/S. VIJAY PROTEINS LTD., THE TRIBUNAL HAS SUSTAINED THE ADDITION OF 25% OF THE BOGUS PURCHASES. HOWEVER, CONSIDERING THE F ACTS OF THE ASSESSEES CASE, THE CIT (A) RESTRICTED THE DISALLO WANCE TO 12.5% AS AGAINST 25% MADE IN THE CASE OF M/S. VIJAY PROTE INS LTD. FROM THESE FACTS IT IS EVIDENT THAT THE CIT (A) HAS SUST AINED THE ADDITION AT 12.5% OF THE NON-GENUINE PURCHASES CONSIDERING T HE FACTS OF THE ASSESSEES CASE. WE, THEREFORE, DO NOT FIND AN Y JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT (A) IN THIS REGARD. THE SAME IS SUSTAINED. ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 7 AFTER CONSIDERING THE FACTS AND THE ARGUMENTS OF BO TH THE SIDES, WE ARE OF THE OPINION THAT IT WOULD MEET THE ENDS O F JUSTICE, IF THE DISALLOWANCE IS SUSTAINED AT 12.5% OF THE PURCHASE FROM THESE TWO PARTIES. THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE DISALLOWANCE ACCORDINGLY. SINCE THE FACTS OF THE ASSESSEES CASE ARE IDENTICA L, WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE ITAT, DIRECT TH E ASSESSING OFFICER TO DISALLOW 12.5% OF THE PURCHASE MADE DURI NG THE YEAR UNDER CONSIDERATION. 7.1. TAKING INTO ACCOUNT THE FACTS THAT THE PR ESENT ASSESSEE WHO HAS BEEN MAINTAINING CASH BOOK, PURCHASE REGISTER, SALE S REGISTER, STOCK REGISTER, LEDGER ACCOUNT ETC., AND ALSO HIS CASE CO MES UNDER THE PURVIEW OF THE PROVISIONS OF SECTION 44AB ACT, WE ARE OF CO NSIDERED OPINION THAT HIS CASE IS SQUARELY COVERED BY THE RECENT DECISION S OF THE EARLIER BENCHES (SUPRA) ON SIMILAR ISSUES. 7.2. IN AN OVER ALL CONSIDERATION OF THE FACT S OF THE ASSESSEES CASE NARRATED ABOVE AND ALSO IN CONFORMITY WITH THE LATE ST FINDINGS OF THE EARLIER BENCH (SUPRA), WE ARE OF THE FIRM VIEW THAT IF THE DISALLOWANCE IS RESTRICTED/SUSTAINED TO THE EXTENT OF 12.5% ON ACCO UNT OF THE BOGUS PURCHASES, IT WOULD MEET THE ENDS OF JUSTICE. IT I S, THEREFORE, ORDERED ACCORDINGLY. IN ESSENCE, THE REVENUES APPEAL IS DI SMISSED. II. ITA NO. 46 & 47/10 AY 2003-04 & 04-05 BY THE ASSE SSEE: 8. AT THE OUTSET, WE WOULD LIKE TO REITERATE THA T THE IDENTICAL ISSUE RAISED BY THE ASSESSEE FOR THE BOTH THE ASSESSMENT YEARS, HAS SINCE BEEN DEALT WITH IN THE REVENUES APPEAL FOR THE ASSESSMENT YEA R 2003-04 IN ASSESSEES OWN CASE ( SUPRA ) AND THE FINDINGS RECORDED THEREIN HOLD GOOD FOR THE ISSUES RAISED BY THE ASSESSEE. IT IS ORDERED ACCORDINGLY. IN SUBSTANCE, THE ASSESSEES APPEALS FOR THE BOTH THE ASSESSMENT YEARS ARE PARTLY ALLOWED. ITA NOS.3407-AHD-09, 46-AHD-10 & 47-AHD-10 8 9 . IN THE RESULT, THE REVENUES APPEAL FOR THE ASSESSM ENT YEAR 2003- 04 IS DISMISSED AND THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 ARE PARTLY ALLOWED. 4 #3 , 2!& 5' ' 10 / 02 /201 2 ! 6 , 0 SD/- SD/- (G.C.GUPTA) (A.MOHAN ALANKAMONY) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10/02/2012 #3 #3 #3 #3 , ,, , */7 */7 */7 */7 8#7&/' 8#7&/' 8#7&/' 8#7&/'- -- - 1. () 2. *+() 3. / = 4. =- - 5. 7@ */' , , A 6. C D4 #3 #, E/ , A TALUKDAR/ SR. P.S.