Avishkar Processing Mills Pvt.Ltd., Surat V. The ACIT.,Cent.Circle-4, Surat

ITA 3589/AHD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57178 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-02-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 29-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV SRDR
• Assessee Lawyers: M G PATEL
• Keywords: Bogus purchase; Unexplained investment; Unexplained expenditure; Deemed to accrue or arise in india
• Section: 250; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH BEFORE SHRI G.C.GUPTA, VICE-PRESIDENT (AZ) AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.3589, 3590 & 3291/AHD/2008 ASSESSMENT YEARS:2001-02 TO 2003-04 AVISHKAR PROCESSING MILLS PVT. LTD. 145, PANDESARA GIDC ESTATE, PANDESARA, SURAT PAN NO.AACCA0038P / V/S . ACIT, CENTRAL CIRCLE-4, SURAT / APPELLANT .. / RESPONDENT ITA NO.145, 146 &147/AHD/2009 ASSESSMENT YEARS:2001-02 TO 2003-04 DCIT, CIRCLE-1, ROOM NO. 108, AAYAKAR BHAVAN, MAJUA GATE, SURAT / V/S . AVISHKAR PROCESSING MILLS PVT. LTD. 1. 1, JASH MARKET, RING ROAD, SURAT PAN NO.AACCA0038P / APPELLANT .. / RESPONDENT / /ASSESSEE BY SHRI M.G. PATEL, AR /REVENUE BY SHRI B.L. YADAV, SR-DR / DATE OF HEARING 01-02-2012 !'# / DATE OF PRONOUNCEMENT 10-02-2012 $ $ $ $ / // / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 2 THESE CROSS-APPEALS OF THE ASSESSEE AND THE REVE NUE ARISE FROM THE CONSOLIDATED ORDER OF LD. COMMISSIONER OF INC-TAX ( APPEALS)-II, AHMEDABAD DATED 08-09-2008 FOR THE ASSESSMENT YEARS 2001-02 T O 2003-04 RESPECTIVELY. THE GROUNDS IN ASSESSEES APPEALS AND THE REVENUES APPEALS ARE IDENTICAL AND THEREFORE ALL THE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORDER. THE ASSESSEE IN THE ASSESSMENT YEAR 2001-02 HAS RAI SED THE FOLLOWING GROUND OF APPEAL:- ITA NO.3589/AHD/2008 (BY ASSESSEE). 1) THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING 25% OF THE ALLEGED NON-GENUINE PURCHASES FOR RS.84,50,070/- FROM VARIO US CONCERNS OF ROHIT PANWALA GROUP. 2) THE LEARNED CIT(A) OUGHT TO HAVE DELETED ENTIRE ADDITIONS ON ACCOUNT OF PURCHASES FROM ROHIT PANWALA GROUP THOUGH CROSS- EXAMINATION WAS GIVEN ONLY OF ROHIT PANWALA AND NO OTHER ASSOCIATE CONCERNS. THE ASSESSEE IN THE ASSESSMENT YEAR 2002-03 HAS RAI SED THE FOLLOWING GROUND OF APPEAL:- ITA NO.3590/AHD/2008 (BY ASSESSEE) 1) THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING 25% OF THE ALLEGED NON-GENUINE PURCHASES FOR RS.43,300/- FROM VARIOUS CONCERNS OF ROHIT PANWALA GROUP. 2) THE LEARNED CIT(A) OUGHT TO HAVE DELETED ENTIRE ADDITIONS ON ACCOUNT OF PURCHASES FROM ROHIT PANWALA GROUP THOUGH CROSS- EXAMINATION WAS GIVEN ONLY OF ROHIT PANWALA AND NO OTHER ASSOCIATE CONCERNS. THE ASSESSEE IN THE ASSESSMENT YEAR 2003-04 HAS RAI SED THE FOLLOWING GROUND OF APPEAL:- 1) THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING 2 5% OF THE ALLEGED NON-GENUINE PURCHASES FOR RS.9,38,650/- FROM VARIOU S CONCERNS OF ROHIT PANWALA GROUP. 2) THE LEARNED CIT(A) OUGHT TO HAVE DELETED ENTIRE ADDITIONS ON ACCOUNT OF PURCHASES FROM ROHIT PANWALA GROUP THOUGH CROSS- EXAMINATION WAS GIVEN ONLY OF ROHIT PANWALA AND NO OTHER ASSOCIATE CONCERNS. THE REVENUE IN ASSESSMENT YEAR 2001-02 HAS RAISED T HE FOLLOWING GROUND OF APPEAL:- ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 3 ITA NO.145/AHD/2009 (BY THE REVENUE) [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A), SURAT HAS ERRED IN RESTRICTING THE ADDITION MADE BY THE A.O OF RS.84,50,070/-, RS.40,300/- AND RS.9,38,650/ - TO RS.21,12,517/-, RS.10,075/- AND RS.2,34,662/- FOR ASST. YEAR 2001-0 2, 2002-03 AND 2003-04 RESPECTIVELY, IGNORING THE FACT THAT IN THE CASE OF M/S. VIJAY PROTEINS LTD., THE HONBLE ITAT HAS HELD THAT THE ENTIRE PURCHASE CAN BE DISALLOWED ONLY IF THE PURCHASES ARE PROVED TO BE BOGUS AND IN THE CASE WHERE THE SO CALLED SELLERS ARE NOT VERIFI ABLE FOR WHICH PAYMENTS WERE MADE THOUGH THROUGH CHEQUES AND NOT P ROVED THAT THE AMOUNT OF PURCHASES WERE RETURNED BACK TO THE ASSES SEE IN CASH, ONLY 25% BEING GROSS PROFIT THEREON CAN BE ADDED. [2] THE LD. CIT(A) HAS NOT APPRECIATED THAT IN THE CASE OF THE ASSESSEE, IT IS BEYOND ANY DOUBT PROVED THAT THE PU RCHASES MADE BY THE ASSESSEE FROM PANWALA GROUP WERE BOGUS WHICH IS CONFIRMED BY THE LD. CIT(A) HIMSELF IN HIS APPELLATE ORDER AND T HEREBY THE DECISION OF THE HONBLE ITAT IN THE CASE OF M/S VIJAY PROTEINS LTD., REFERRED TO BY HIM, IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE REVENUE IN ASSESSMENT YEAR 2002-03 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- ITA NO.146/AHD/2009 (BY REVENUE) [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A), SURAT HAS ERRED IN RESTRICTING THE ADDITION MADE BY THE A.O OF RS.84,50,070/-, RS.40,300/- AND RS.9,38,650/ - TO RS.21,12,517/-, RS.10,075/- AND RS.2,34,662/- FOR ASST. YEAR 2001-0 2, 2002-03 AND 2003-04 RESPECTIVELY, IGNORING THE FACT THAT IN THE CASE OF M/S. VIJAY PROTEINS LTD., THE HONBLE ITAT HAS HELD THAT THE ENTIRE PURCHASE CAN BE DISALLOWED ONLY IF THE PURCHASES ARE PROVED TO BE BOGUS AND IN THE CASE WHERE THE SO CALLED SELLERS ARE NOT VERIFI ABLE FOR WHICH PAYMENTS WERE MADE THOUGH THROUGH CHEQUES AND NOT P ROVED THAT THE AMOUNT OF PURCHASES WERE RETURNED BACK TO THE ASSES SEE IN CASH, ONLY 25% BEING GROSS PROFIT THEREON CAN BE ADDED. [2] THE LD. CIT(A) HAS NOT APPRECIATED THAT IN THE CASE OF THE ASSESSEE, IT IS BEYOND ANY DOUBT PROVED THAT THE PU RCHASES MADE BY THE ASSESSEE FROM PANWALA GROUP WERE BOGUS WHICH IS CONFIRMED BY THE LD. CIT(A) HIMSELF IN HIS APPELLATE ORDER AND T HEREBY THE DECISION OF THE HONBLE ITAT IN THE CASE OF M/S VIJAY PROTEINS LTD., REFERRED TO BY HIM, IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE REVENUE IN ASSESSMENT YEAR 2003-04 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 4 ITA NO.147/AHD/2009(BY THE REVENUE) [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A), SURAT HAS ERRED IN RESTRICTING THE ADDITION MADE BY THE A.O OF RS.84,50,070/-, RS.40,300/- AND RS.9,38,650/ - TO RS.21,12,517/-, RS.10,075/- AND RS.2,34,662/- FOR ASST. YEAR 2001-0 2, 2002-03 AND 2003-04 RESPECTIVELY, IGNORING THE FACT THAT IN THE CASE OF M/S. VIJAY PROTEINS LTD., THE HONBLE ITAT HAS HELD THAT THE ENTIRE PURCHASE CAN BE DISALLOWED ONLY IF THE PURCHASES ARE PROVED TO BE BOGUS AND IN THE CASE WHERE THE SO CALLED SELLERS ARE NOT VERIFI ABLE FOR WHICH PAYMENTS WERE MADE THOUGH THROUGH CHEQUES AND NOT P ROVED THAT THE AMOUNT OF PURCHASES WERE RETURNED BACK TO THE ASSES SEE IN CASH, ONLY 25% BEING GROSS PROFIT THEREON CAN BE ADDED. [2] THE LD. CIT(A) HAS NOT APPRECIATED THAT IN THE CASE OF THE ASSESSEE, IT IS BEYOND ANY DOUBT PROVED THAT THE PU RCHASES MADE BY THE ASSESSEE FROM PANWALA GROUP WERE BOGUS WHICH IS CONFIRMED BY THE LD. CIT(A) HIMSELF IN HIS APPELLATE ORDER AND T HEREBY THE DECISION OF THE HONBLE ITAT IN THE CASE OF M/S VIJAY PROTEINS LTD., REFERRED TO BY HIM, IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 2. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER F OUND THAT THE ASSESSEE HAS MADE PURCHASES OF COLOUR CHEMICALS FROM THE BOG US CONCERNS OF SHRI ROHIT PANWALA VIZ. POOJA DYECHEM, ABHI DYES, PUNITH A CORPORATION, SANDYA TRADING CO. AND SHRREE TAPI TRADING CO. NEHA SYNTHE TDICS, NALANDA CORPORATION, SHREEJI TEXTILES, SHREE MAHPRABHUJI TE XTILES ETC. AGGREGATING TO A TOTAL OF RS.84,50,070/-, RS.40,300/-& RS.9,38,650 / FOR THE ASSESSMENT YEARS 2001-02 TO 2003-04 RESPECTIVELY AS UNDER FOR A.Y. 2001-02 NAME AMOUNT RS. POOJA DYECHEM 2,28,550 SHREE SAI TEXTILES 2,69,090 SANDHYA TRADING CO. 9,04,670 SHREE MAHAPRABHUJI TEXTILES 5,34,495 SHREEJI TEXTILES 9,02,010 NEHA SYNTHETDICS 8,85,360 PUNITA CORPORATION 6,90,860 ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 5 NALANDA CORPORATION 18,00,595 SHREE TAPI TRADING CO. 13,06,895 GIRVRAJ TEXTXILES 8,70,545 TOTAL 84,50,070 FOR A.Y. 2002-03 NAME AMOUNT RS. POOJA DYECHEM 16,900 ABHI DYES 23,400 TOTAL 40,300 FOR A.Y. 2003-04 NAME AMOUNT RS. POOJA DYECHEM 2,56,825 ABHI DYES 4,26,425 PUNITA CORPORATION 72,525 SANDHYA TRADING CO 88,575 SHREE TAPI TRADING CO. 94,300 TOTAL 9,38,650 SHRI ROHIT PANWALA (SRP IN SHORT) HAS ADMITTED THAT HE HAS NEVER SOLD ANY RAW MATERIAL OR COLOUR CHEMICALS, BUT HAS ONLY ISSU ED BOGUS BILLS AT A MEAGER COMMISSION PRICE. THE BOGUS BILLS HAVE BEEN RAISED BY THE CONCERNS OF SRP AS LISTED ABOVE AND UPON RECEIPT OF CHEQUE AGAINST THE BOGUS BILLS; THE AMOUNTS HAVE BEEN WITHDRAWN BY SRP IN CASH AND ADMI TTEDLY RETURNED TO THE ASSESSEE IN CASH AFTER DEDUCTION OF THE COMMISSION. OPPORTUNITY OF CROSS- EXAMINATION OF SRP WAS AFFORDED TO SHRI KALURAM B R ASTOGI, PRINCIPAL OFFICER, SRP WHO HAS ONCE AGAIN REITERATED THE FACT OF NON-S ELLING OF ANY COLOUR CHEMICALS TO THE ASSESSEE. THUS, IT WAS TAKEN THAT THE CLAIM OF PURCHASE FROM THE BOGUS CONCERNS OF SRP ARE NOT GENUINE. THESE BO GUS PURCHASES HAVE INFLATED THE PURCHASES DEBITED TO THE PROFIT AND LO SS ACCOUNT. THEREFORE THE ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 6 ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FAILED TO MAINTAIN COMPLETE DETAILS OF PURCHASES. THESE CONSTITUTE A SERIOUS DE FECT IN THE REGULAR ACCOUNTS MAINTAINED BY IT AS CERTAIN PORTION OF THE PURCHASE S WAS NOT GENUINE. IN THE INSTANT CASE, THE PURCHASE REGISTERS IS INCOMPLETE AND INCORRECT ON ACCOUNT OF THE REASON THAT BOGUS PURCHASES HAVE BEEN UNDERTAKE N AS EVIDENCED FROM THE CONFESSION OF ENTRY GIVER SRP. HENCE THE PURCHA SE REGISTERS SUBMITTED BY THE ASSESSEE HAVE BEEN FOUND TO BE INCOMPLETE AND I NCORRECT AND ACCORDINGLY WAS REJECTED U/S.145 OF THE ACT. THEREAFTER THE AO OBSERVED THAT THE EXPENSES ON FICTITIOUS PURCHASES ARE LIABLE TO BE D ISALLOWED AS FICTITIOUS EXPENDITURES AND LACKING ANY BUSINESS NEXUS. BUT TH E ASSESSEE HAS UNDERTAKEN DYEING AND PRINTING AND SHOWN INCOME EMA NATING FROM THIS BUSINESS. WITHOUT THE CONSUMPTION AND USE OF COLOUR S AND CHEMICALS SUCH JOB WORK OF DYEING AND PRINTING CAN NOT BE UNDERTAKEN. SINCE THE INCOME ARISING FROM JOB WORK OF DYEING AND PRINTING HAS BEEN SHOWN AND OFFERED BY THE ASSESSEE. THERE MUST BE PURCHASES MADE IN THAT REGA RD. HOWEVER, IT HAS BEEN ESTABLISHED THAT THE PURCHASES MADE FROM CONCE RNS OF SRP ARE BOGUS AND NO PHYSICAL DELIVERY HAS BEEN UNDERTAKEN. SRP H AS ADMITTED THIS FACT AND THE ASSESSEE IN THE CROSS-EXAMINATION PROCEEDINGS H AS FAILED TO ESTABLISH THAT IT HAS PURCHASED ANY COLOURS AND CHEMICALS FROM SRP . HENCE, SINCE INCOME FROM DYEING AND PRINTING JOB WORK HAS BEEN OFFERED TO TAX. THERE HAVE BEEN PURCHASES MADE BY THE ASSESSEE AS CLAIMED. BUT THES E PURCHASES HAVE NOT BEEN MADE FROM SRP BUT FROM OTHER PARTIES. THIS CON CLUSION IS BASED ON TWO PREMISES:- A) THE PURCHASES OF COLOURS AND CHEMICALS CLAIMED T O HAVE BEEN MADE FROM SH. ROHIT PANWALA ARE FICTITIOUS; B) THE ASSESSEE MUST HAVE MADE PURCHASES OF COLOURS AND CHEMICALS TO RUN DYEING AND PRINTING ACTIVITY; THUS, THE ASSESSEE MUST HAVE PURCHASED THE COLOURS AND CHEMICALS FROM OPEN MARKET FOR BENEFITS LIKE LOWER DUTIES, BETTER CREDIT FACILITY, GREATER BARGAINING POWER ETC. CAUSES BEST KNOWN TO THE ASSE SSEE AND NOT DISCLOSED ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 7 BEFORE THE AUTHORITIES. THIS REASONING IS ALSO IN C ONSONANCE TO THE LOGIC APPLIED BY THE ITAT IN THE CASE OF VIJAY PROTEINS LTD. CO. V. ACIT (1996) 58 ITD 528 (AHD). HOWEVER, PERTAINING TO THESE PURCHAS ES MADE OUTSIDE THE BOOKS FROM MARKET, THE ASSESSEE HAS FAILED TO FURNI SH THE DETAILS REGARDING SOURCES OF SUCH EXPENDITURES ON COLOURS AND CHEMICA LS. IN THE INSTANT CASE, THERE HAVE BEEN EXPENDITURES FOR WHICH THE SOURCES HAVE NOT BEEN SATISFACTORILY EXPLAINED. THUS, AS PER SECTION 69C, THE EXPENDITURE IS DEEMED TO BE THE INCOME OF THE ASSESSEE FOR RELEVANT FINAN CIAL YEAR. THE QUESTION OF ADDITION HAS BEEN HINGED UPON THE SATISFACTORY EXPL ANATION OF THE SOURCE. THE ASSESSEE HAS UNDERTAKEN OUT OF BOOKS PURCHASES FOR WHICH IT HAS NOT MAINTAINED ANY ACCOUNTS OR JOURNALS. ALSO NO SATISF ACTORY EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE HAVE BEEN PROVIDED. ON THE FAILURE TO EXPLAIN THE SOURCE OF THE EXPENDITURE, IT IS DEEMED TO BE I NCOME OF THE ASSESSEE AND LIABLE TO BE ADDED U/S. 69C. FURTHER, AS PER THE PR OVISION TO THE SECTION NO DEDUCTION CAN BE ALLOWED IN RESPECT OF SUCH EXPENDI TURES. THEREFORE, THE UNEXPLAINED EXPENDITURE OF RS.84,50,070/- WAS CONSI DERED AS DEEMED INCOME OF THE ASSESSEE FOR THE A.Y. 2001-02 AND WAS ADDED TO THE TAXABLE INCOME. SIMILARLY, AN AMOUNT OF RS.40,300 FOR A.Y 2 002-03 AND RS.9,68,650/- FOR A.Y. 2003-04 WAS CONSIDERED AS DEEMED INCOME OF THE ASSESSEE. 3. THE LD. CIT(A) VIDE PARA-6.1 TO 6.6 HAS OBSERVED AS UNDER:- 6.1 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT AND THE CASE LAWS RELIED UPON. AS FAR AS ISSUE OF BOGUS PURCHASES AND REJECTING THE BOOKS OF ACCOUNT IS CON CERNED, I DO NOT AGREE WITH THE APPELLANTS VIEW. AS PER THE EVIDENC ES BROUGHT ON RECORD BY THE ADIT AND THE ASSESSING OFFICER, SHRI ROHIT P ANWALA ADMITTED THAT HE FLOATED VARIOUS BOGUS CONCERNS AND ISSUED B OGUS BILLS TO THE ASSESSEE AND AFTER RECEIVING AMOUNT BY CHEQUE, HE R ETURNED BACK THE AMOUNT IN CASH. THE ASSESSEE WAS ALSO ALLOWED OPPOR TUNITY TO CROSS EXAMINATION AND THERE WAS NO CHANGE IN INTENTIONS O F SHRI ROHIT PANWALA DURING THE EXAMINATION PROCEEDINGS, THUS, I T WAS ESTABLISHED THAT THE CLAIM OF THE PURCHASES FROM THE BOGUS CONC ERNS OF SHRI PANWALS, ARE NOT GENUINE AND REJECTION OF BOOKS OF ACCOUNT U/S 145 IS JUSTIFIED. ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 8 6.2 NOW THE QUESTION REMAINS WHETHER THE ADDITION H AS TO BE MADE FOR DISALLOWING ENTIRE PURCHASES AND WHETHER THE ADDITI ON HAS TO BE MADE U/S.69 FOR THE ENTIRE UNEXPLAINED EXPENDITURE, OR W HETHER ADDITION FOR SOME PERCENTAGE OF BOGUS PURCHASES HAS TO BE MADE. AS OBSERVED BY THE A.O HIMSELF, THE ASSESSEE HAS UNDERTAKEN DYEING AND PRINTING AND SHOWN INCOME THEREFROM. WITHOUT CONSUMPTION AND USE OF COLOURS AND CHEMICALS SUCH DYEING AND PRINTING CANNOT BE UNDERT AKEN. THUS, THE AS MUST HAVE PURCHASED COLOURS AND CHEMICALS FROM OPEN MARKET FOR BENEFITS LIKE LOWER DUTIES, BETTER CREDIT FACILITY, GREATER BARGAINING POWER ETC. CAUSES BEST KNOWN TO THE ASSESSEE AND NOT DISC LOSED BEFORE THE AUTHORITIES. WHEN IT IS ADMITTED BY THE AO AND IT I S ALSO LOGICAL THAT SOME PURCHASES MUST HAVE BEEN MADE, THE RATIO OF DE CISION OF HONBLE AHMEDABAD ITAT IN THE CASE OF VIJAY PROTEINS LTD. VS ACIT 58 ITD 428 IS APPLICABLE IN THESE CASES AND ACCORDINGLY, IT IS REASONABLE TO RESTRICT THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURC HASES. THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS LOWER AUTHORITIES MEDICA 250 ITR 575, IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASES AS IN THESE CASES, IT IS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE MUST HAVE PURCHASE COLOURS AND CHEMICALS FOR OTHER PARTIES AN D WITHOUT THE CONSUMPTION AND USE OF THESE, THE ASSESSEE CANNOT D O THE DYEING AND PRINTING. HENCE, THE ASSESSEE MUST HAVE PURCHASED T HE COLOURS AND CHEMICALS FROM OPEN MARKET. HENCE, THE ADDITION IS CONFIRMED TO THE EXTENT OF RS.21,12,5217/-, RS.10,075/- & RS.2,34,66 2/- FOR A.YS 2001- 02, 2002-03 & 2003-04 RESPECTIVELY. 6.3 IT IS ALSO HELD THAT THE DISALLOWANCE HAS TO BE MADE FOR BOGUS PURCHASES AND NOT FOR UNEXPLAINED INVESTMENT U/S.69 C AS DONE BY THE A.O BECAUSE THE ASSESSEE HAD MADE PAYMENTS TO CONCE RNS OF SHRI ROHIT PANWALA BY CHEQUE AND AS PER THE STATEMENT OF SHRI PANWALA, THE AMOUNTS WERE RETURNED BACK TO THE ASSESSEE IN CASH HENCE, THIS AMOUNT WAS AVAILABLE WITH THE ASSESSEE TO MAKE THE PAYMENT TO THE PURCHASES FROM OPEN MARKET FROM THIRD PARTY. HENCE, THE MONEY WAS AVAILABLE WITH THE ASSESSEE AND SOURCE OF EXPENDITU RE IS EXPLAINED, HENCE, THE ADDITION CANNOT BE SUSTAINED U/S.69C BUT THE ADDITION IS HERE SUSTAINED AS BOGUS PURCHASES. 6.4 THE APPELLANTS SUBMISSION THAT THE ADDITION CA NNOT BE MADE WHEN THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES AS P ER DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS 163 ITR 249, IS NOT APPLICABLE TO THE FACTS OF THE CASE BECAUSE HERE, IT IS EVIDENT FROM THE STATEMENT OF SHRI ROHIT PANWALA THAT ALL THE PA YMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES BUT THE AMOUNTS WERE REFUN D IN CASH TO THE ASSESSEE. HENCE, THE RATIO OF THIS CASE IS NOT APPL ICABLE TO THE ASSESSEES CASE. ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 9 FURTHER THE RATIO OF THE CASE CITED BY THE ASSESSEE OF HONBLE ITAT AHMEDABAD BENCH IN THE CASE OF AKRUIT DYEING & PRINTING MILLS (P) LTD. IN ITA NO.2551/A/2006 & 2752/A/2006 , IS NOT APPLICABLE TO THE ASSESSEES CASE BECAUSE IN THAT CASE, THE HOBLE IT AT OBSERVED IN PARA-20 THAT WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE PURCHASES SHOWN BY THE ASSE SSEE FROM THE AFORESAID 3 PARTIES, WERE NOT GENUINE AND WHERE ACCOMMODATION/FAKE BILLS SHOWN BY THE ASSESSEE. NO STATEMENT RECORDED FROM THE AFORESAID 3 PARTIES WERE BROUGHT ON RECORD. THEREFORE, THE DISALLOWANCE MADE IS UNSUSTAINABLE A ND ACCORDINGLY, WE DELETE THE ADDITION MADE. IN THESE CASES, THE A.O HAS BROUGHT ON RECORD THE S TATEMENT OF SHRI ROHIT PANWALA AND EVEN THE ASSESSEE HAS BEEN GIVEN AN OPPORTUNITY9 OF CROSS EXAMINATION. 6.5 THE APPELLANTS SUBMISSIONS THAT NO ADDITION IS TO BE MADE WHEN THERE IS BETTER G.P RATE SHOWN IS ALSO NOT ACCEPTAB LE BECAUSE HERE CERTAIN PURCHASE HAVE BEEN FOUND AS BOGUS HENCE, SP ECIFIC ADDITION HAS TO BE MADE FOR BOGUS PURCHASES IRRESPECTIVE OF G.P RATE SHOWN. 6.6 IN THE RESULT, THE ADDITION IS RESTRICTED TO RS .21,12,517/-, RS.10,075/- & RS.2,34,662/- FOR A.YS 2001-02, 2002-03 & 2003-04 RESPECTIVELY, AND THE BALANCE AMOUNT IS DELETED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF CASE. IT IS PERTINENT TO MENTION THAT THIS APPEAL WAS ORIGINALL Y DECIDED BY THE ITAT AHMEDABAD D BENCH VIDE ITS ORDER DATED 03-07-2009 , WHERE ASSESSEES APPEAL WAS ALLOWED AND THE REVENUES APPEAL WAS DIS MISSED. AGAINST THE SAID ORDER OF THE ITAT, THE REVENUE PREFERRED AN AP PEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AT AHMEDABAD. THE HONBLE JURISDICTIONAL HIGH COURT AT AHMEDABAD HELD VIDE PARA-9-11 AS UNDER:- 9. HAVING THUS HEARD LEARNED COUNSEL FOR THE PARTI ES AND HAVING PERUSED THE DOCUMENTS ON RECORD, WE FIND THAT THE T RIBUNAL HAS DECIDED THE ISSUE ONLY ON THE BASIS OF ITS EARLIER DECISION IN THE CASE OF AKRUTI DYEING & PRINTING MILLS PRIVATE LIMITED (SUPRA). PRIMA FACIE WE FIND SOME DIFFERENCES IN THE TWO SITUATIONS. IN THE JUDG MENT OF THE TRIBUNAL IN THE CASE OF AKRUTI DYEING & PRINTING MILLS PRIVATE LIMITED (SUPRA), APPARENTLY IT WAS A CASE WHERE ON THE BASIS OF STAT EMENT MADE BY ROHIT PANWALA, PURCHASES MADE BY THE ASSESSEE THEIR FROM OTHER PARTIES WAS SOUGHT TO BE ADDED. IN THE PRESENT CASE, REVENUES STAND IS THAT ROHIT PANWALA WAS THE SOLE PERSON OPERATING SUCH AGENCIES . WE ARE NOT ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 10 INCLINED TO CONCLUDE THIS ISSUE. THESE OBSERVATION ARE MADE SOLELY FOR THE PURPOSE OF RECORDING THAT IN OUR VIEW TRIBUNAL OUGHT TO HAVE ASSESSED THE ENTIRE EVIDENCE ON RECORD AND OUGHT NO T TO HAVE PROCEEDED TO REJECT THE REVENUES APPEAL ON THE SHO RT GROUND OF JUDGMENT IN SIMILAR MATTER IN THE CASE OF AKRUTI DYEING & PRINTING MILLS PRIVATE LIMITED (SUPRA). 10. HAD THE TRIBUNAL EXAMINED THE ENTIRE EVIDENCE A ND COME TO A CERTAIN FACTUAL FINDING, PERHAPS OUR ROLE WOULD HAV E ENDED THEE. IN THE PRESENT CASE, HOWEVER, SUCH EXERCISE HAS NOT BEEN U NDERTAKEN. WE HAD NOTICED THAT AGAINST THE REVENUES COLLECTION O F EVIDENCE IN THE FORM O STATEMENT AND AFFIDAVIT OF ROHIT PANWALA, WH O WAS ALSO OFFERED FOR CROSS EXAMINATION ON HANDS OF ASSESSEE, ASSESSE E HAD ALSO LED CONSIDERABLE EVIDENCE TO COUNTER SUCH STATEMENTS. I N PARTICULAR, AS ALREADY NOTED, SAND OF ASSESSEE WAS THAT PAYMENTS W ERE MADE THROUGH ACCOUNT PAYEE CHEQUE. THERE WAS NO EVIDENCE OF MONE Y HAVING BEEN REVERTED BACK TO THE ASSESSEE IN CASH. THERE WAS AL SO EVIDENCE OF GOODS ACTUALLY HAVING BEEN RECEIVED. SUCH EVIDENCES PRODUCED FROM BOTH SIDES OUGHT TO HAVE BEEN ASSESSED BY THE TRIBU NAL TO DECIDE THE FACTUAL ISSUES PRESENTED BEFORE IT. BY MAKING IT AB UNDANTLY CLEARLY THAT WE ARE INCLINED TO REMIT THE MATTER BACK TO THE TRI BUNAL FOR FULL AND FRESH CONSIDERATION IN ACCORDANCE WITH LAW. 5. THE ASSESSEE HAD DECLARED PURCHASES OF COLOURS A ND CHEMICALS FROM THE CONCERN OF SRP MENTIONED HEREINABOVE. SRP HAD A DMITTED THROUGH THE AFFIDAVIT AND THE STATEMENT THAT HE HAS NEVER SOLD ANY RAW MATERIAL OR COLOURS AND CHEMICALS BUT HAS ONLY ISSUED BOGUS BILLS AT A MEAGER COMMISSION PRICE. THE AMOUNT ON RECEIPT OF CHEQUE HAD BEEN WITHDRAWN IN CASH WHICH HAS RETURNED TO THE ASSESSEE IN CASH AFTER DEDUCTION OF COMMISSION. THESE FACTS ARE ON RECORD EXCEPT AS ARGUED BY THE LEARNED COUNS EL FOR THE ASSESSEE THAT THERE IS NO EVIDENCE OF MONEY HAVING BEEN RECEIVED BACK BY THE ASSESSEE IN CASH. THE ASSESSEE HAD RECEIVED THE GOODS ACTUALLY FROM THE SUPPLIERS I.E. THE CONCERN OF SRP, HAD BEEN ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE ASSESSEE HAS PLACED ON RECORD THE PAP ER BOOK WHICH CONTAINS THE COPY OF THE CROSS-EXAMINATION AND COPY OF THE B ILLS. ON PERUSAL OF THE SAME, IT HAS BEEN FOUND THAT ON CROSS-EXAMINATION O F SRP, HE HAS ONCE AGAIN REITERATED THE FACT OF NON-SELLING OF ANY COLOURS A ND CHEMICALS TO THE ASSESSEE. ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 11 6. IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND O N PERUSAL OF THE PAPER BOOK OF THE ASSESSEE AND DOCUMENTS ON RECORD AND AR GUMENTS OF BOTH THE PARTIES, WE ARE OF THE VIEW THAT AS PER EVIDENCES B ROUGHT ON RECORD BY THE ASSESSING AUTHORITIES, THE STATEMENT AND AFFIDAVIT OF SRP AND STATEMENT IN THE CROSS-EXAMINATION, CLAIM OF THE PURCHASES FROM THE CONCERNS OF SRP ARE NOT GENUINE AND THE ASSESSING OFFICER WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 7. THE ASSESSING OFFICER HIMSELF HAS OBSERVED ORDER THAT THE ASSESSEE HAS UNDERTAKEN THE DYEING AND PRINTING AND HAS DECL ARED THE INCOME THEREFROM. BY THIS OBSERVATION OF THE AO, IT IS EVI DENT THAT WITHOUT CONSUMPTION AND USE OF COLOURS AND CHEMICALS SUCH DYEING AND PR INTING CANNOT BE UNDERTAKEN. THE ASSESSEE MUST HAVE PURCHASED COLOUR S AND CHEMICALS FROM THE OPEN MARKET, MAY BE ASSESSEE HAD TAKEN THE BENE FITS OF GREATER BARGAINING POWER, BETTER CREDIT FACILITIES AND LOWE R INDIRECT TAXES ETC. WHICH WAS NOT DECLARED BEFORE THE VARIOUS AUTHORITIES. TH E FACT REMAINS THAT ASSESSEE HAD PURCHASED THE COLOURS AND CHEMICALS FR OM OTHER PARTIES WITHOUT THE CONSUMPTION OF WHICH DYEING AND PRINTING WAS NO T POSSIBLE. THEREFORE THE ASSESSEE HAD INFLATED THE PURCHASES IN ITS BOOKS OF ACCOUNT WHICH REQUIRES THE CORRECTION AT THIS JUNCTURE. THE LD. CIT(A) HAD CONFIRMED 25% OF ALLEGED PURCHASES MADE FROM THE CONCERNS OF SRP GROUP WHICH APPEARS TO BE EXCESSIVE. IN THE CIRCUMSTANCES AND FACTS OF THE PR ESENT CASE, THOUGH CERTAIN ESTIMATION HAS TO BE MADE TO DISALLOW THE PURCHASES DECLARED BY THE ASSESSEE, THE LEARNED COUNSEL FOR THE ASSESSEE HAD REFERRED TO THE DECISION OF ITAT AHMEDABAD D BENCH IN ITA NO.137/AHD/2009 DATED 26-07-2011, WHERE ON SIMILAR FACTS ITAT HAD DISALLOWED 12.5% OF THE PURCHASES. NO OTHER CITATION OR COMPARABLE CASE HAS BEEN BROUGHT ON REC ORD BY THE LD.SR-DR. THEREFORE, IN THE CIRCUMSTANCE AND FACTS OF THE CAS E WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE AT 12.5% PURCH ASED DECLARED FROM SRP GROUP BY THE ASSESSEE. WE ORDER ACCORDINGLY. THU S, ASSESSEES APPEAL IN ITA NO.3589-91/AHD/2008 & 145-47/AHD/2009 A.YS. 01-02 TO 03-04 AVISHKAR PROCESSING MILLS P.LTD. V. ACIT/DCIT CIR-1 SRT PAGE 12 ITA NO.3589, 3590 & 3591/AHD/2008 ARE PARTLY ALLOWED AND THAT OF REVENUES APPEAL IN ITA NO.145, 146 & 147/AHD/2009 ARE DISMISSED. 8. IN THE RESULT, APPEALS OF ASSESSEE IN ITA NO.3589, 3590 & 3591/AHD/2008 ARE PARTLY ALLOWED AND APPEALS OF REVENUE IN ITA NO.145, 146 & 147/AHD/2009 ARE DISMISSED. % $ !'# &'( 10 / 02 /201 2 ! , - . / THIS ORDER PRONOUNCED IN OPEN COURT ON 10/02/ 201 2. SD/- SD/- ( G.C.GUPTA ) ( B.P. JAIN ) (VICE PRESIDENT) (ACCOUNTANT MEMBER) &'(- 10/02/2012 1 / DKP* $ $ $ $ 223 223 223 223 43' 43' 43' 43' / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ''27 8 / CONCERNED CIT 4. 8- / CIT (A) 5. 3;. 2227, 27#, 1 / DR, ITAT, AHMEDABAD 6. .>? @% / GUARD FILE. BY ORDER/ $ , /TRUE COPY/ A/1 ' 27#, 1 /