M/s Reliable Engg Industries, Nagpur V. D.C.I.T, Circle -8, Nagpur

ITA 342/NAG/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7655 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-06-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 08-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: C J THAKAR
• Keywords: Bogus purchase; Reasonable cause
• Section: 40A(3)

Judgement Text

1 ITA NOS. 342,343&344/NAG/2012. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) S.NO. I.T.A. NO. ASSTT. YEAR. 1. 342/NAG/2012 2003 - 04 2. 343/NAG/2012 2004 - 05 3. 344/NAG/2012 2005 - 06. M/S RELIABLE ENGG. INDUSTRIES, DY. COMMISS IONER OF INCOME - TAX, NAGPUR. VS. CIRCLE - 8, NAGPU. PAN AADFR 4034Q. APPELLANT. RESPONDENT. APPELLANT BY : SHRI C.J. THA KAR & SHRI SANJAY THAKAR. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 16 - 01 - 2017 DATE OF PRONOUNCEMENT : 17 TH JANUARY, 2017. O R D E R. THESE ARE APPEALS BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR FOR THE ABOVE ASSESSMENT YEARS DATED 26 - 03 - 2012. T HE COMMON GROUNDS OF APPEAL RAISED IS THAT THE LEARNED CI T(APPEAL) ERRED I N CONFIRMING THE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES AS UNDER : ASSTT. YEAR 2003 - 04 RS. 3,30,922/ - ASSTT. YEAR 2004 - 05 RS.19,67,675/ - ASSTT. YEAR 2005 - 06 RS.34,15,828/ - 2. AT THE OUTSET IT IS NOTED THAT THERE IS DELAY OF 15 DAYS IN FILING THE APPEALS. THE REASONABLE CAUSE IN THIS REGARD HAS BEEN ATTRIBUTED TO BE THE HEALTH PROBLEM 2 ITA NOS. 342,343&344/NAG/2012. OF THE CONCERNED ADVOCATE. IN THIS REGARD THE SUBMISSION OF THE CONCERNED ADVOCATE IS ALSO ON RECORD. 3. AFTER HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED. 4. THE ONLY ISSUE IN THESE APPEALS IS THE TREATMENT OF CERTAIN PURCHASES BY THE ASSESSEE TO BE BOGUS. THESE PURCHASES WERE MADE FROM NARENDRA TRADING CO. AND K.B. TRADING CO. THE AO WANTED TO ENQUIRE THE GENUI NENESS OF THE TRANSACTION. SO HE ISSUED NOTICE TO THE PARTIES. THERE WAS NO RESPONSE THOUGH THE PAYMENTS WERE MADE THROUGH CHEQUES. THE AO OBTAINED THE BANK STATEMENT OF THE PARTIES AND FOUND THAT WHENEVER THE CHEQUES WERE DEPOSITED THE VERY NEXT DAY THE ENTIRE AMOUNT WAS WITHDRAWN BY CASH. THE AO WENT ON TO CONCLUDE THAT THE PURCHASES WERE BOGUS AND THE PAYMENTS RECEIVED BY THE ALLEGED PAYEE WERE WITHDRAWN AND RETURNED TO THE ASSESSEE. 5. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LEARNED CI T(APPEALS) WHO AFFIRMED THE ADDITIONS. 6. AGAINST THE ABOVE ORDER OF LEARNED CIT(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE I T AT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DISC HARGED ITS ONUS AND PROVIDED ALL THE DETAILS. THE PAYMENTS WERE MADE BY CHEQUE. HENCE IF THE CONCERNED PARTY DOES NOT RESPOND, IT CANNOT LEAD TO INFERENCE THAT THE PURCHASES ARE BOGUS. LEARNED COUNSEL FURTHER SUBMITTED THAT EVEN IF IT IS ASSUMED THAT THE P URCHASES ARE BOGUS, THE AO HAS ASSESSED THE CONCERNED SALE. IN SUCH CIRCUMSTANCES LEARNED COUNSEL PLEADED THAT THERE CANNOT BE ANY SALE UNLESS THERE IS PURCHASE. HENCE LEARNED COUNSEL SUBMITTED THAT THE ENTIRE PURCHASES CANNOT BE DISALLOWED. FOR THIS PROPOSITION LEARNED COUNSEL PLACED RELIANCE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451. IN THE ALTERNATIVE LEARNED COUNSEL OF THE ASSESSEE 3 ITA NOS. 342,343&344/NAG/2012. SUBMITTED THAT SOME TIMES IT I S THE PRACTICE THAT THE SUPPLIERS ARE NOT READY TO ACCEPT PAYMENT BY CHEQUE. SO THE ASSESSEE ENGAGES AGENTS WHO MAKE THE PURCHASES ON ASSESSEES BEHALF TO WHOM THE ASSESSEE PAYS BY CHEQUE. IN SUCH CIRCUMSTANCES LEARNED COUNSEL SUBMITTED THAT THE PROVISION S OF SECTION 40A(3) MAY BE INVOKED AND 2 0% OF THE PURCHASES BE DISALLOWED. 7. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. I FIND THAT THE AO HAS DRAWN ADVE RSE INFERENCE IN THIS REGARD DUE TO LACK OF RESPONSE FROM THE CONCERNED SUPPLIER. THE AO HAS NOT DOUBTED THE CO RRESPONDING SALES AND HAS ASSESSED THE SAME WHILE COMPUTING THE INCOME OF THE ASSESSEE. IN SUCH CIRCUMSTANCES IT IS TRUE THAT THE PURCHASES FOR MAKING THE SALES CANNOT BE TREATED TO BE BOGUS BUT ADVERSE INFERENCE CAN BE DRAWN FOR LACK OF SUPPLY OF PROPER VOUCHERS. IN THESE CIRCUMSTANCES IN MY CONSIDERED OPINION, A DISALLOWANCE OF 40% OF THE CONCERNED PURCHASES WILL SERVE THE INTEREST OF JUSTICE. LEARNED COUNSEL OF THE ASSESSEE DULY AGREED TO THIS PROPOSITION. ACCORDINGLY I DIRECT THE AO TO MAKE A DISALLOWANCE OF 40% OF THE PURCHASES AND ALLOW THE BALANCE THEREOF. 9. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JANUARY., 2017. SD/ - ( SHAMIM YAHYA) ACC OUNTANT MEMBER. NAGPUR, DATED: 17 TH JANUARY, 2017. 4 ITA NOS. 342,343&344/NAG/2012. COPY FORWARDED TO : 1. M/S RELIABLE ENGG. INDUSTRIES , C.A. ROAD, NAGPUR - 18. , 2. D.C.I.T., CIRCLE - 8, NAGPUR. 3. C.I.T. - IV , NAGPUR. 4. CIT(APPEALS), - I I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.