The ITO, Ward-3(2), JAMNAGAR V. Shri Rajesh Gulabrai Shayani, Jam-Khambhalia

ITA 351/RJT/2014

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7772 (ITAT-RAJKOT)
• Duration Of Justice: 7 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 144; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “RAJKOT” BENCH, RAJKOT [Conducted through E-Court at Ahmedabad] BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR आयकर अपील सं./I.T.A. No. 351/Rjt/2014 ( Assess ment Ye ar : 2008-09) In co me T ax Of fi ce r W ar d- 3( 2) , Ja mna g ar ब म/ V s . Sh ri R aje sh G ul a b rai Sh ay an i Sh rad dh a Ud yo g n a gar , Har sh ad pu r Ro ad , J a m Kh a mbh ali a, J a mna gar यी ल सं./ ीआ आर सं./P A N / G IR N o . : A F H P S 5 2 5 4 C (अपील Appellant) . . ( य / Respondent) अपील र स /Appellant by : Sh ri Sa nj ee v Jai n, CI T. D. R. य क र स / Respondent by : Shri Chetan Agarwal, A.R. स क र D a t e o f H e a r i n g 22/02/2022 !"# क र /D a t e o f P r o n o u n c e m e n t 28/02/2022 ORDER PER MAHAVIR PRASAD, JM: The captioned appeal has been filed at the instance of the Revenue against the order of the Co mmissioner of Inco me Tax (Appeals), Ja mna gar (‘CI T( A) ’ in short) vide Appeal No. CIT( A)/Ja m/295/10-11/197, dated 20.07.2011 arising in the assessment order dated 24.12.2010 passed by the Assessing ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 2 - Officer ( AO) under s. 144 of the Inco me Tax Act, 1961 (the Act) concerning AY. 2008-09. 2. The grounds of appeal raised by the Revenue read as under: “ 1 . T h e L d . C I T ( A ) h a s e r r e d o n f a c t s a n d l a w b y de l e t i n g t h e a d d i t i o n o f R s . 1 0 , 0 8 , 7 6 , 7 5 7 / - m a d e b y t h e A O o n a c co u n t o f u n e x p l a i n e d p u r c h a s e . 2 . T h e L d . C I T ( A ) h a s e r r e d o n t h e f a c t s a n d l a w b y d e l e t i n g t h e a d d i t i o n o f R s . 1 , 9 1 , 4 5 9 / - m a d e b y t h e A O o n a c co u n t o f d i s c o u n t . 3 . T h a t o n t h e f a c t s a n d i n t h e c i r c u m s t a n c e s o f t he c a s e , t h e l d . C I T ( A ) o u g h t t o h a v e u p h e l d t h e o r d e r o f a s s e s si n g o f f i c e r . 4 . I t i s t h e r e f o r e p r a y e d t h a t t h e o r d e r o f t h e l d . C I T ( A ) b e s e t a s i d e a n d t h a t o f t h e A s s e s s i n g o f f i c e r b e r e s t o r e d. ” 3. The facts of the case as emanates fro m the impugned order are that the assessee has shown total turnover of Rs. 27,61,19,626/- and GP of Rs. 20,62,542/- i.e. 0.75% of total turnover. As discussed the assessee has not produced the books of accounts therefore the learned AO has made effort s to verify the trading [transactions of the assessee fro m S ales Tax Depart ment. The Deputy Sa les Tax Commissioner (Investigation), Dep. - 7, Ra jkot vide his letter No. STO(l)/INV/Dep. 7/RAJ/2010-11 dated Nil, has informed that they car ried out a search action on 18/07/2008 and seized certain books of accounts of the assessee. He provided a copy of his order dated 31/03/2010 passed after verification of the seized books of accounts and giving opportunity to the assessee. ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 3 - On perusal of the order passed for FY 2007-08 it is found that the assessee has purchased goods fro m following four parties during the year .u nder consideration as under: - Na me Amount M/s. Shri Dev Ent erprises Rs. 3,60,73,468/- M/s. Poona m Corporation Rs. 2,12,68,219/- M/s. Jain Enterprise Rs. 4,29,04,603/- M/s. Shiv Oil Ind ustries Rs. 6 ,30,467/- Total Rs. 10,08,76,757/- 3.1 It is further found by the Sales Tax Depart ment that all the above four parties were involved in billing activity. The billing activities are a transaction of purchase or sale made by a part y without any ph ys ical delivery of the goods. The Sales Tax Depart ment has canceled the registration of these four concerns even prior to the dates of purchases shown by the assessee. The assessee could not explain the above purchases before the Sales Tax Depart ment and they asked the assessee to pay Rs.1,04,83,777/- accordingly on account of Sales Tax interest and penalty. The\ assessee was provided a copy of this order by this office along with show cause notice dated 20/12/2010 asking hi m to explain the above purchases by producing cogent documentar y evid ences. However, t he assessee did not give any explanation in this regard. Under t he circu mstances, it is clear that the assessee has nothing to say i n this matter and has, thus, accepted the purchases of Rs. 10,08,76,757/- entered in the books of accounts without taking physical deliver y of the goods. It is pertinent to mention here that ma jority o f payment to the aforesaid four parties were shown as made in cash, ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 4 - ma jorit y of ever yday of the year i n the range of Rs.17,000 to 19,500/-. This practice also makes it clear that this is a book entry on account of purchases without taking physical delivery of the goods with only motive to reduce his legiti mate tax liability. 3.2 Further, on going through the quantity details given in tax audit report found that the assessee shown production of ground nut oil, oil-cake and husk of 32,56,306 kgs fro m consu mption of 34,73,198 kgs ground nut. Thus, it shows that there was loss in process of 2,16,892 kgs. Besides, the assessee has again shown shortage in ground nut husk of 1,62,113 kgs. Once the assessee has shown shortage in the process, the further claim of shortage, though made in husk, is not acceptable. The assessee has deliberately shown shortage in husk, which is of minimu m value a mongst the oil, cake, and husk. Without any evidence it cannot be believed that the shortage can be in husk. The assessee has mer el y provided statistics of "production, whereas the suppression in production of oil of the quantum clai med in further shortage of husk, cannot be ruled out. As discussed in pre-paras, the ass essee has shown purchases fro m t he parties involved in billing activities, it is clear that this further shortage was aimed to acco mmodate lower production in quantum on account of the raw material shown as purchased without taking physical deliver y of the goods. The assessee has though entered the value of raw ma terial in financial accounts^ he tried to adjust quantity b y wa y of making such shortage in addition to loss in quantity during the manufacturing process. This circu mstantial evidence clearly establishes that the value ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 5 - of raw material was enhanced by making book entries for bogus purchases. 3.3 Moreover, it is seen fro m copies of sundry creditors and debtors provided in the only submission that number of accounts of debtors and creditors wer e ad justed by making journal entries in the na me of o ther debtors and creditors. There are nu mbe r of such accounts but a glimpse of such accounts is given by following na me s. Arvind Export Solvent Oil Industries Aadesh Enterprises Bharat Food Co-operative Ltd. Mangal Oils Pvt. Ltd. Tanna Brokers. Pvt. Ltd. Cargil India Pvt. Ltd. Swastik Oil Industries K. M . Shroff Shri Rajmoti Industries R. K. Agencies Ne minath Traders Shiva m Trading Co mpan y Saraswati Industries Soha m Agencies Mitesh Enterprises Asha Traders Pravin & Co. Nar a yan Oil M ill Kiran Oil Mill Hareshku mar U. Patel 3.4 The adjust ment of accounts of sundry creditors with sundry debtors shows that the assessee has manipulated his books of accounts by making fake entries without any substance. The motive is also clear for this act to hide, adjust ment and acco mmodation of such this enhance ment in purchase. ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 6 - 3.5 It is pertinent to mention here that after search action of the Sales Tax Depart ment, on 18/07/2008, the assessee has reduced the business volume substantially. This shows that after revelation of such suppression of profit, he stopped the business. In the action of Sales Tax Depart ment, that the concern was involved in the same activity of clai ming bogus purchases in the preceding year also. Under the circu mstances, it is clear that the assessee is suppressing its profit by clai ming bogus purchases fro m-the aforesaid parties which are engaged in billing activities. The purchases of Rs. l0,08,76,757/-is therefore unexplained. In view of the above facts, no deduction on account of unexplained purchases of Rs.10,08,76,757/- was allowed b y the lea rned AO. 4. Thereafter , the assessee preferred first statutory a ppeal before the learned CIT( A) who partly allowed the appeal of the assessee. 5. We have gone through the relevant records and heard both sides. In this case, an ex parte order was passed under s.144 of the Act b y the AO. The whole case depends upon the infor mation was being given to the learned AO b y the Sales Tax Depart ment where in his purchases were doubted. It is pertinent to mention her that sales have not been doubted by the depart ment. In such case, we fail to understand the analogy of the depart ment for unexplained purchases. Moreover, assessee has paid taxes on the profit earned b y hi m. There a re several judg ments of the higher forum which says that if sales have not been doubted in that case purchases cannot be doubted. ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 7 - Therefore, we do not find any infirmit y in the order passed by the learned CIT(A) granting relief for addition of Rs.10,08,76,757/-. 6. Now, we co me to next ground relating to addition of Rs.1,91,459/-. On going through the P&L acco unt it was noticed that the assessee has incurred boiler license fee of Rs.1100/-, insurance expenses of Rs.65,301/-, weighing machine repairing expenses Rs.1,300/- and kapachi purchase expenses of Rs.1,10,800/- totaling to Rs.1,91,459/- but above assets particulars are not owned by the assessee but neither before lower authorities nor before us assessee furnished only details in this regard. Hence, we c onfir m the action of learned CIT( A) for disallowing the expenses under s.37 of the Act. Moreover, assessee could not give an y plausible explanation either before the lower authorities nor before us for making cash payment of Rs.8000/- and lower authority h as rightly disallowed Rs.80,000/-. Same does not require any sort of interference at our end. Thus, we confir m the action of the learned CIT( A). It has been mentioned by the learned CIT( A) in his order that assessee has been non-cooperative and defiant. Moreover, no submissions were filed either before AO or before the CIT( A). It appears fro m the co nduct of the assessee that he does not want to sa y an ything in his favour as he has failed to discharge his onus. Therefore , we c onfir m the action of learned CIT( A) on disallowance of Rs.1,19,459/- under s.37 of the Act as well as c ash payments made by the assessee totaling to Rs.80,000/- are hit b y provision of Section 40A(3) of the Act as no explanation has been given by the assessee with regard to ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 8 - Rs.80,000/-. In this ground also, we confir m the action of the CIT( A). 7. Resultantly, we do not find any infir mit y in the order passed by the lear ned CIT(A). So, f inally we confir m the action of the CIT( A) deleting the addition of Rs.10,08,76,757/-, however, confir m the addition of Rs.1,91,459/- & an a mount of Rs.80,000/- cash payment made by the assessee for the purchases. 8. In the result, the a ppeal of the Revenue is dismissed. Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACC OUNTANT MEMB ER JUDICIAL MEMBER Ahmedabad: Dated 28/02/2022 True Copy S.K.SINHA आदेश े / Copy of Order Forwarded to:- $. र / Revenue 2. आ दक / Assessee '. सं(ं)* आयकर आय + / Concerned CIT 4. आयकर आय + - अपील / CIT (A) .. / 0 1ीय 2 2 )*3 आयकर अपील य अ)*कर#3 अ45द ( द / DR, ITAT, Ahmedabad 6. 1 78 9 ल / Guard file. By order/आद श स 3 D e p u t y / A s s t t . R e g i s t r a r I T A T , R a j k o t This Order pronounced in Open Court on 28/02/2022