M/s Bhushan Power & Steel Ltd., Chandigarh V. DCIT, Chandigarh

ITA 38/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1572 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 06-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR AMAR VEER SINGH DR SINGH
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained expenditure; Search and seizure; Question of law
• Section: 143(3); 147; 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 38/CHD/2014 (ASSESSMENT YEAR : 2003-04) M/S BHUSHAN POWER & STEEL LTD., VS. THE D.C.I.T., 3, INDUSTRIAL AREA, PHASE-1, CENTRAL CIRCLE-1, CHANDIGARH. CHANDIGARH. PAN: AAACB9760D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : DR.AMAR VEER SINGH, DR SINGH DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 03.08.2015 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)(CENTRAL), GURGAON DATED 14.11.2013 FOR ASSESSMENT YEAR 2003-04, CHALLENGING ADDITION OF RS.92,25,641/- ON PURCHASES ON GROUND NOS.1 AND 2. GROUND NO.3 IS CHALLENGED TO REOPENING OF ASSESSMEN T UNDER SECTION 147 OF THE ACT. 2. IN THIS CASE, THE ORIGINAL RETURN OF INCOME WAS FILED ON 28.11.2003 SHOWING TOTAL INCOME OF RS.11,42,98,9 30/- 2 WHICH WAS ASSESSED UNDER SECTION 143(3) OF THE ACT ON 31.1.2005 AT AN INCOME OF RS.21,54,65,790/-. ON IN FORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE OFFICE O F DIRECTOR GENERAL OF CENTRAL EXCISE, INTELLIGENCE THAT THE AS SESSEE HAD WRONGLY AVAILED CENVAT CREDIT FOR THE PERIOD 21.10. 2003 TO 24.8.2005, THE CASE WAS REOPENED UNDER SECTION 14 8 OF THE ACT BY ISSUING NOTICE TO THE ASSESSEE ON 30.3.2010. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED RET URN OF INCOME ON 29.7.2010 DECLARING THE SAME INCOME OF RS.11,42,98,930/- AS WAS DECLARED IN THE ORIGINAL R ETURN. 3. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ALLEGING THAT IT HAD AVAILED FRAUDULENT CE NVAT CREDIT FOR THE PERIOD 21.3.2003 ON 24.8.2005 ON INVOICES I SSUED BY M/S HARYANA STEEL & ALLOYS LTD. WITHOUT RECEIVING T HE CONSIGNMENTS. AS PER THE INFORMATION,, IT WAS SEE N THAT THE ASSESSEE HAD FILED AN APPLICATION BEFORE THE SETTLE MENT COMMISSION, CUSTOMS & CENTRAL EXCISE (PRINCIPAL BEN CH), NEW DELHI AGAINST THE SAID SHOW CAUSE NOTICE BY THE ADD L. DIRECTOR GENERAL OF CENTRAL EXCISE INTELLIGENCE. THE FINAL ORDER OF THE SETTLEMENT COMMISSION WAS PASSED IMPOSING PENALTY O F RS.4,11,84,835/-. AS PER THE LIST OF INVOICES PER TAINING TO BOGUS PURCHASES MADE BY THE ASSESSEE FROM M/S HARYA N STEEL & ALLOYS LTD., ATTACHED WITH THE SHOW CAUSE NOTICE, THE TOTAL PURCHASES MADE DURING THE RELEVANT ASSESSMENT YEAR WORKED OUT TO RS.92,25,641/-. 3 4. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, THE ASSESSEE MADE DETAILED REPLY STATING THAT THE ASSES SEE HAD PURCHASED NON ALLOY STEEL BILLET FOR ITS UNIT SHANT I STEEL NEW ROLLING MILL-II FROM VARIOUS NON-DUTY PAID SOURCES LIKE OPEN MARKET TRADES, ETC. IT WAS THE CONTENTION OF THE A SSESSEE THAT THOUGH IT DID NOT PHYSICALLY RECEIVE THE MATERIAL F ROM M/S HARYANA STEEL & ALLOYS LTD. BUT AN IDENTICAL QUANTI TY OF INPUTS WERE PURCHASED FROM VARIOUS NON-DUTY PAID SO URCES. IT WAS ALSO SUBMITTED THAT IN THE APPLICATION FILED BEFORE THE CUSTOMS & CENTRAL EXCISE SETTLEMENT COMMISSION, THE SAID FACT HAS ALREADY BEEN STATED. THE SETTLEMENT COMM ISSION SETTLED THE CASE AT RS.4,11,84,834/- AND NO PENALTY WAS IMPOSED. THE TOTAL AMOUNT OF CENVAT CREDIT PERTAI NING TO BILLS OF M/S HARYANA STEEL & ALLOYS LTD. WAS RS.12, 23,560/-. THE ASSESSEE PRODUCED QUANTITATIVE RECORDS OF DAY-T O-DAY RAW MATERIAL PURCHASES, CONSUMPTION AND ALSO PRODUCTION AND SALES RECORDS OF FINISHED GOODS WHICH WERE VERIFIED . THE COPIES OF INWARD GATE PASS FOR RAW MATERIAL PURCHAS ED WAS ALSO PRODUCED. THE CHART SHOWING THE MONTHLY YIEL D WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER AND IT WAS C ONTENDED THAT FOR YIELD FOR JANUARY, 2003, IF THE PURCHASES FROM OPEN MARKET ARE NOT CARRIED COMES TO 101.87%, WHICH WAS NOT POSSIBLE IN ASSESSEES LINE OF MANUFACTURE. IT WAS FURTHER CONTENDED THAT THE CLOSING STOCK WOULD HAVE BEEN NE GATIVE WITHOUT CONSIDERING THE OPEN MARKET PURCHASES, WHIC H IS NEVER POSSIBLE. THUS, THE ASSESSEE STATED THAT TH E MATERIAL HAD BEEN ACTUALLY RECEIVED AND WENT TO THE PRODUCTI ON OF THE FINISHED GOODS. THEREFORE, THE CONTENTION OF THE ASSESSEE WAS 4 THAT NO DISALLOWANCE ON ACCOUNT OF SUCH PURCHASES W AS WARRANTED. THE ASSESSEE RELIED UPON THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LEADER VALVES PVT. LTD., 285 ITR 435. 5. FROM THE REPLY SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE A SSESSEE HAD MADE PURCHASES FOR THE SAID MATERIAL FROM OTHER SOURCES INCLUDING OPEN MARKET PURCHASES. HE CAME TO THE C ONCLUSION THAT THE ASSESSEE HAS CLAIMED BOGUS CENVAT ON THE PURCHASES SHOWN TO BE MADE FROM M/S HARYANA STEEL & ALLOYS LTD. AMOUNTING TO RS.92,25,641/-. THE CENVAT CRED IT ON SAID PURCHASES FROM M/S HARYANA STEEL & ALLOYS LTD. WAS AMOUNTING TO RS.12,23,560/-. ON THESE BASIS, THE A SSESSING OFFICER MADE ADDITION OF RS.12,23,560/-. 6. FURTHER THE ASSESSING OFFICER HELD THAT THE SUC H BOGUS TRANSACTIONS BEING EMBEDDED IN THE TRADING/MANUFACTURING ACCOUNT OF M/S SHANTI STEEL N EW ROLLING MILL-II UNIT OF THE ASSESSEE, THE CORRECTNE SS OF THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS DISTORTED ON T HESE BASIS. HE REJECTED THE BOOKS OF ACCOUNT OF THE SAID UNIT. FURTHER, SINCE THE GP RATE OF THE ASSESSEE HAD COME DOWN TO 7.6% DURING THE RELEVANT ASSESSMENT YEAR AS AGAINST 8.4% IN THE PRECEDING ASSESSMENT YEAR, HE APPLIED THE RATE OF G.P. SHOWN IN THE PRECEDING ASSESSMENT YEAR ON THE TOTAL TURNOVER OF RS.71,53,41,741/- AND MADE AN ADDITION OF RS.57, 22,734/-. HOWEVER, HE DID NOT MADE SEPARATE ADDITION OF RS.12 ,23,560/- 5 ON ACCOUNT OF WRONG AVAILMENT OF CENVAT CREDIT AS T HE SAME WAS CONSIDERED TO BE IN OVERALL ADDITION OF RS.57,2 2,734/- 7. THE ASSESSEE WENT INTO APPEAL BEFORE THE LEARNE D CIT (APPEALS) CHALLENGING THE REJECTION OF BOOKS OF ACCOUNTS, ESTIMATION OF GP RATE OF 8.4% AS WELL AS THE ADDITI ON ON ACCOUNT OF CENVAT CREDIT. BEFORE THE LEARNED CIT (APPEALS), IT WAS AGAIN REITERATED THAT THE PURCHASES OF NON A LLOY STEEL BILLET FOR ITS UNIT SHANTI STEEL NEW ROLLING MILL-I I WAS MADE FROM VARIOUS NON-DUTY PAID SOURCES LIKE OPEN MARKET TRADES, ETC. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT PH YSICALLY RECEIVE THE MATERIAL FROM M/S HARYANA STEEL & ALLOY S LTD. BUT AN IDENTICAL QUANTITY OF INPUTS WERE PURCHASED FROM OTHER SOURCES. THE ASSESSEE PREFERRED NOT TO PRESS THE ISSUE OF CENVAT CREDIT BEFORE THE LEARNED CIT (APPEALS). F URTHER DETAILED SUBMISSIONS WERE MADE CHALLENGING THE REJE CTION OF BOOKS OF ACCOUNT AND ESTIMATION OF GROSS PROFIT RAT E. IT WAS SUBMITTED THAT DUE TO INCREASE IN POWER AND FUEL EX PENSES AS COMPARED TO EARLIER YEAR, THERE WAS FALL IN GP. 8. HOWEVER, THE LEARNED CIT (APPEALS) BY HOLDING T HE TREATMENT OF INCOME GIVEN BY THE ASSESSING OFFICER TO BE ERRONEOUS ISSUED AN ENHANCEMENT NOTICE DATED 18.9.2 013 TO THE ASSESSEE. THEREBY IT WAS PROPOSED THAT THE TO TAL AMOUNT OF PURCHASES OF RS.92,25,641/- SHOWN TO BE FROM M/S HARYANA STEEL & ALLOYS LTD. TO BE ADDED TO THE INCOME OF TH E ASSESSEE. 9. IN REPLY TO THE SAID NOTICE, THE ASSESSEE AGAIN MADE DETAILED SUBMISSIONS BEFORE THE LEARNED CIT (APPEAL S) 6 REITERATING THE SAME SUBMISSIONS AS WERE MADE BEFOR E THE ASSESSING OFFICER. THE ASSESSEE RELIED UPON THE J UDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE LEA DER VALVES PVT. LTD. I(SUPRA) AND ALSO THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANAT H POLYFAB PVT. LTD., 355 ITR 290 FOR THE PROPOSITION THAT NO ADDITION COULD BE MADE ON ACCOUNT OF BOGUS PURCHASES IN VIEW OF THE FACT THAT PHYSICALLY THE STOCK HAS ACTUALLY BEEN RE CEIVED, THOUGH FROM A DIFFERENT SOURCE. IT WAS ALSO SUBM ITTED THAT IN SUBSEQUENT YEARS 2004-05 TO 2006-07, THE ASSESSE E FILED APPLICATION BEFORE THE SETTLEMENT COMMISSION AND DE PARTMENT DID NOT PROPOSE FOR ADDITION FOR BOGUS PURCHASES. ONLY AMOUNT OF CANVAT CREDIT WAS OFFERED FOR TAXATION AN D NO OTHER ADDITION HAS BEEN MADE. 10. THE LEARNED CIT (APPEALS) REJECTING THE SUBMIS SIONS OF THE ASSESSEE HELD THAT THE ASSESSEE WAS CONSCIOU SLY INDULGED IN THE FICTITIOUS ARRANGEMENT FOR PURCHASE FROM M/S HARYANA STEEL & ALLOYS PVT. LTD. THE LEARNED CIT ( APPEALS) WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT BEE N ABLE TO PROVIDE ANY EVIDENCE TO THE EFFECT THAT SIMILAR QUA NTITY OF MATERIAL WAS PURCHASED FROM THE OPEN MARKET, THE ST ATEMENT SO MADE BY THE ASSESSEE CARRIES NO CREDENCE. FURT HER THE LEARNED CIT (APPEALS) HELD THAT NOWHERE THE ASSESSI NG OFFICER HAS STATED THAT SIMILAR QUANTITY FROM THE OPEN MARK ET WAS PURCHASED BY THE ASSESSEE. RELYING ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LA MEDICA, 168 CTR 314, THE LEARNED CIT (APPEALS) HELD THAT TH E 7 PAYMENTS TO M/S HARYANA STEEL & ALLOYS PVT. LTD. WE RE EMANATED FROM BOGUS PURCHASES AND FRAUDULENT CLAIM OF CENVAT. IN OTHER WORDS,, UNEXPLAINED EXPENDITURE EXPENDED TOWARDS THE BOGUS PURCHASES TO THE TUNE OF RS.92,25 ,641/-. IN THIS WAY, THE LEARNED CIT (APPEALS) MADE AN ADDI TION OF RS.1,04,49,201/- COMPRISING OF RS.92,25,641/- BEING THE TOTAL PURCHASES FROM M/S HARYANA STEEL & ALLOYS PVT. LTD. AND THE AMOUNT OF RS,.12,23,560/- BEING THE CENVAT CREDIT A VAILED BY THE ASSESSEE ON THE SAID PURCHASES. 11. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE ARG UING BEFORE US PREFERRED NOT TO PRESS GROUND NO.3, CHALL ENGING THE VALIDITY OF REOPENING U/S 147 OF THE IT ACT. HENCE , GROUND NO.3 IS DISMISSED AS NOT PRESSED. 12. GROUND NOS.1 & 2 ARE INTERRELATED. 13. WHILE ARGUING BEFORE US, THE LEARNED COUNSEL F OR THE ASSESSEE TOOK US TO THE VARIOUS PAGES OF THE PAPER BOOK FILED BY THE ASSESSEE. OUR ATTENTION WAS DRAWN TO PAPER BOOK PAGES 27 TO 36 WHICH ARE THE COPIES OF DOCUMENTS SE IZED BY THE DEPARTMENT DURING THE SEARCH AND SEIZURE OPERAT ION CARRIED ON THE BUSINESS PREMISES ON 3 RD MARCH, 2010. IT WAS SHOWN THAT THESE PAGES REVEAL THE DETAILS OF THE MA TERIAL PURCHASED FROM OPEN MARKET IN YEARS 2002-03 TO 200 5-06 WHICH WAS SHOWN TO HAVE BEEN PURCHASED FROM M/S. HA RYANA STEEL & ALLOYS PVT. LTD. IN THE BOOKS OF ACCOUNTS. THESE FACTS IN THIS PAPER BOOK WERE SHOWN TO EMPHASIZE THAT GOO DS HAVE ACTUALLY BEEN RECEIVED BY THE APPELLANT AND CONSUME D FOR THE 8 PURPOSES OF MANUFACTURING. THE CONTENTION OF THE L EARNED COUNSEL FOR THE ASSESSEE WAS THAT THE GOODS WERE PH YSICALLY PURCHASED IN THE SAME QUANTITY, NOT FROM M/S HARYAN A & STEEL & ALLOYS PVT. LTD. BUT FROM THE OPEN MARKET. 14. THE OTHER FACT WHICH THE LEARNED COUNSEL FOR T HE ASSESSEE DREW OUR ATTENTION WAS PAGES 19 AND 20 OF THE PAPER BOOK WHICH IS AN EXTRACT OF THE REPORT FILED BY THE COMMISSIONER OF INCOME TAX UNDER RULE 9 BEFORE THE SETTLEMENT COMMISSION DURING THE PROCEEDING IN SUCC EEDING YEARS BEFORE THE COMMISSION. THE EMPHASIS WAS LAID ON THE FOLLOWING PARAGRAPH: BOGUS PURCHASE TOOK PLACED DURING THE PERIOD 01.04.2003 TO 24.08.2005, HENCE, BOGUS CENVAT CREDIT AMOUNTING TO RS. 1,16,10,188/- RS. 1,27,82,132 AND RS. 1,55,68,957/- RESPECTIVELY ON SUCH BOGUS PURCHASES WOULD REPRESENT THE INCOME OF THE ASSESSEE FOR THESE ASSESSMENT YEARS I.E. 2004-05, 2005-06 & 2006-07. THE FACT WOULD REMAIN THAT ASSESSEE ACTUALLY DERIVED THE BENEFIT THE FIRST DAY IT MANUFACTURED AND SOLD THE GOODS AFTER BOOKING BOGUS PURCHASES. ACCORDINGLY, CLAIM OF CENTVAT ON BOGUS PURCHASE REPRESENTS ASSESSEES SUPPRESSED INCOME AND AS SUCH ADDITION ONLY ON THIS ACCOUNT WORKS OUT TO RS. 1,16,10,188/- RS. 1,27,82,132/- AND RS.1,55,68,957/- FOR THE A.Y.2004-05, 2005-06 &2006-07 RESPECTIVELY FOR WHICH ASSESSEE SHOULD ALSO BE LIABLE FOR PENALTY UNDER SECTION 271(1) (C ) OF THE INCOME TAX ACT. FROM THE ABOVE IT WAS EMPHASIZED THAT THE DEPARTME NT HAVING TAKEN A STAND TO ADD TO THE CENVAT CREDIT BE NEFIT 9 AVAILED BY THE ASSESSEE ON BOGUS PURCHASES IN THE S UBSEQUENT YEARS 2004-05 TO 2006-07 CANNOT TAKE THE DIFFERENT STAND OF MAKING ADDITION OF THE WHOLE AMOUNT OF PURCHASES IN THE CURRENT YEAR. 15. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO TOOK US TO PAPER BOOK PAGE 43 WHEREBY A CHART SHOWING THE CALC ULATION OF YIELD ON MONTHLY BASIS FOR ROLLING DIVISION WAS PREPARED. IT WAS SUBMITTED THAT WITHOUT TAKING INTO CONSIDERATIO N THE PURCHASES MADE FROM THE OPEN MARKET IN THE MONTH OF JANUARY AND FEBRUARY, 2003, THE YIELD COMES TO 101. 87 % AND 98.15%, WHICH IS UNREASONABLY HIGH AND NOT POSSIBLE IN THIS LINE OF MANUFACTURING. IT WAS SHOWN TO US TO EMPHAS IZE THAT THE PURCHASES WERE ACTUALLY MADE THOUGH NOT FROM HA RYANA STEEL & ALLOYS PVT. LTD. BUT FROM THE OTHER SOURCE S. 16. REGARDING THE ESTIMATION OF G.P MADE BY THE AO , REJECTING THE BOOKS OF ACCOUNT IT WAS SUBMITTED THA T GROSS PROFIT IN THE RELEVANT YEAR HAS FALLEN TO 7.6 PER C ENT AS AGAINST 8.4 PER CENT IN THE PRECEDING YEAR, WHICH IS ONLY A NOMINAL FALL. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING O FFICER AS WELL AS THE CIT(A) THAT THE REASON OF SAID FALL IN GROSS PROFIT WAS ON ACCOUNT OF INCREASE IN POWER OF FUEL EXPENSE S AS COMPARED TO THE PRECEDING YEARS. IN TERMS OF PERCEN TAGE EXPENSES OF POWER AND FUEL DURING HE ASSESSMENT YEA R 2002- 2003 IT WAS 5.36% WHEREAS DURING THE RELEVANT ASSES SMENT YEAR IT HAS COME TO 6.28 %. MERELY BECAUSE OF FALL IN GROSS PROFIT RATE DURING THE YEAR UNDER APPEAL COMPARED W ITH THE 10 GROSS PROFIT OF THE LAST YEAR, THE CONTENTION OF TH E ASSESSEE WAS THAT THE BOOKS SHOULD NOT HAVE BEEN REJECTED AN D PROFIT SHOULD NOT HAVE BEEN ESTIMATED AT AN ESTIMATED RATE . FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO MADE SUBMISSION TO THE EFFECT THAT THE ENHANCEMENT OF IN COME MADE BY CIT(A) IS ALSO BAD IN LAW. THE LEARNED CIT (AP PEALS) CANNOT CHANGE THE CHARACTER OF INCOME COMPUTED BY T HE ASSESSING OFFICER OR ITS SOURCE AND RELIED ON 251 I TR 864 (DELHI). 17. LD. DR RELIED UPON THE ORDERS OF ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS). 18. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. THE FIRST ISSUE TO BE DECIDED I S WHETHER THE ASSESSEE HAS ACTUALLY MADE PURCHASES OR NOT. IT CAN BE SEEN FROM THE PERUSAL OF ASSESSING OFFICERS ORDER, AT THE END OF PARA 5.2, THAT THE ASSESSING OFFICER HIMSELF ADM ITS THAT FROM THE REPLY SUBMITTED BY THE ASSESSEE, IT HAS TR ANSPIRED THAT THE ASSESSEE COMPANY HAD MADE PURCHASES FOR TH E SAID MATERIAL FROM THE OTHER SOURCES. THE MATERIAL SEIZE D BY THE DEPARTMENT DURING THE COURSE OF SEARCH, FORMING PAR T OF THE PAPER BOOK ALSO GIVES SUPPORT TO THE ARGUMENT OF TH E ASSESSEE THAT THE GOODS WERE ACTUALLY PURCHASED THOUGH NOT F ROM THE HARYANA STEEL & ALLOYS PVT. LTD. BUT FROM SOME OTHE R SOURCES. ALSO THE FACT THAT ASSESSEE HAVING SHOWN SUBSTANTIA LLY VOLUME OF GOODS MANUFACTURED AND SOLD DURING THE YEAR IT C ANNOT BE DENIED THAT THE SAME HAVE BEEN DONE WITHOUT PURCHAS ES. THERE CANNOT BE ANY GOODS MANUFACTURED OR SOLD WITH OUT THEIR 11 BEING ANY CORRESPONDING PURCHASES. NOWHERE, IN THEI R ORDER, ASSESSING OFFICER OR CIT(A) HAVE DOUBTED GOODS BEIN G MANUFACTURE OR SOLD. IN FACT WHILE ESTIMATING THE GROSS PROFIT ASSESSING OFFICER HAS MADE THE TURNOVER SHOWN BY TH E ASSESSEE AS ITS BASIS, WHICH SHOWS THAT HE DOES NOT DENY THE FACT THAT THE GOODS HAVE ACTUALLY BEEN MANUFACTURED AND SOLD. FURTHER, FROM THE PERUSAL OF MONTHWISE YIELD CHART FILED BY THE ASSESSEE. IT IS QUITE EVIDENT THAT WITHOUT THE RECEIPT OF SUCH HUGE QUANTITY OF MATERIAL PHYSICALLY, ASSESSEE COULD NOT HAVE MANUFACTURED FINISHED GOODS OR INDULGED IN SEL LING THE SAME. THE YIELD PER MONTH WOULD HAVE BEEN QUITE AB NORMAL AS COMPARED TO THE OTHER MONTHS IF PURCHASES MADE F ROM OPEN MARKET ARE NOT CONSIDERED. NO OTHER DEFECTS HAVE B EEN POINTED OUT IN THE BOOKS OF ACCOUNT. IT IS QUITE EVIDENT THAT THE PURCHASES HAVE IN FACT BEING MADE, THE SOURCE O F THESE MATERIAL PHYSICALLY, COMING NOT FROM HARYANA STEEL & ALLOYS PVT. LTD. BUT FROM OPEN MARKET. THE ISSUE AROSE BE CAUSE OF THE FACT THAT ASSESSEE RECEIVE EXCISE DUTY ELEMENT ON SALES FROM CUSTOMERS BUT PAID THE GOVERNMENT FROM THAT AM OUNT WHICH REMAINS PAYABLE AFTER REDUCING THE CENVAT CRE DIT AVAILABLE BECAUSE OF THE FACT THAT IT MADE PURCHASE S FROM HARYANA & STEEL ALLOYS PVT. LTD. THE WHOLE EXCISES CARRIED ON BY THE ASSESSEE WAS TO GET THE BENEFIT OF THESE CEN VAT CREDIT. THEREFORE, THE ONLY ADDITION WARRANTED IN SUCH CASE IS TO DISALLOW THE CENVAT CREDIT AVAILED BY THE ASSESSEE ON THE PURCHASES SHOWN TO HAVE BEEN MADE FROM HARYANA & ST EEL ALLOYS PVT. LTD. THE ASSESSEE HAS PREFERRED NOT TO PRESSED THE GROUND RELATED TO THESE CANVAT CREDIT BEFORE THE CI T(A), THE 12 SAME IS ALSO NOT CONTENDED BEFORE US. THE FALL IN GP RATE WAS DUE TO INCREASE IN POWER AND FUEL EXPENSES IN YEAR UNDER APPEAL AS COMPARED TO PRECEDING YEAR. THE LEARNED CIT (APPEALS) ENHANCED THE ADDITION BECAUSE THE ASSESSI NG OFFICER DID NOT STATE IN ASSESSMENT ORDER THAT SIMILAR QUAN TITY WAS PURCHASED FROM OPEN MARKET. THIS FINDING IS INCORR ECT BECAUSE THE ASSESSING OFFICER SO STATED IN THE ASSE SSMENT ORDER AND SAME FACT IS SUPPORTED BY SEIZED MATERIAL IN SEARCH (PB-27 TO 36). 19. OUR VIEW GETS STRENGTHENED BY THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LEADERS VA LVES (P) LTD.(SUPRA) WHICH HAS ALSO BEEN RELIED UPON BY THE ASSESSEE. IN THIS CASE, EXACTLY IN THE BACKGROUND OF SIMILAR FACTS, THE HONBLE HIGH COURT OBSERVED AS UNDER: THE ASSESSEES CONTENTION THAT OUT OF TOTAL PURCHASES OF NON-FERROUS METALS OF RS.2.44 CRORES, THE AO HAD TREATED PURCHASES WORTH RS.1.49 CRORES ONLY AS BOGUS AND IT WAS IMPOSSIBLE TO MANUFACTURE THE GOODS SHOWN TO HAVE BEEN MANUFACTURED BY IT OUT OF THE REMAINING PURCHASES IF THE AOS CONCLUSION I S ACCEPTED, ALSO FOUND FAVOUR WITH THE TRIBUNAL. THIS , IN OUR VIEW, IS A SIMPLE FINDING OF FACT BASED UPON APPRECIATION OF THE MATERIAL ON RECORD AND, THUS, HARDLY GIVES RISE TO ANY QUESTION OF LAW. IN ANOTHER JUDGEMENT OF HONBLE GUJRAT HIGH COURT, IN THE CASE OF CIT VS. BHOLANATH POLY FAB PVT LTD.(2013) 3 55 ITR 290(GUJ) HONBLE GUJRAT HIGH COURT HELD AS UNDER: 13 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, TH E PURCHASES THEMSELVES WERE NOT BOGUS. THE TRIBUNAL ADVERTED TO THE FACTS AND DATA ON RECORD AND CAME T O THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY TH E ASSESSEE. THEREFORE, THE PURCHASES OF ENTIRE 102514 METERS OF CLOTH WERE SOLD DURING THE YEAR UNDER CONSIDERATION. THE TRIBUNAL, THEREFORE, ACCEPTED TH E ASSESSEES CONTENTION THAT THE FINISHED GOODS WERE PURCHASED BY THE ASSESSEE, MAY BE NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURCES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL W AS OF THE OPINION THAT NOT THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EARLIE R DECISION IN THE CASE OF M/S. SANKET STEEL TRADERS A ND ALSO MADE REFERENCE TO THE TRIBUNALS DECISION IN T HE CASE OF VIJAY PROTIENS. 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL FINISHED GOODS. IN THAT VIEW OF THE MATTER , AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UN DER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT, 316 ITR 274(GUJ.) SUCH DECISION IS ALSO FOLLOW ED BY THIS COURT IN A JUDGEMENT DATED 16.8.2011 IN TAX 14 APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLAL PATEL. IN THE RESULT, TAX APPEAL IS DISMISSED. 20. ANOTHER POINT TO BE APPRECIATED IS THAT IN SUBSEQUENT YEARS I.E., 2004-05 TO 2006-07, THE ASSE SSEE WAS BEFORE THE INCOME TAX SETTLEMENT COMMISSION, WHEREBY THE SAME PLEA WAS TAKEN BY IT. DURING THE S AID PROCEEDINGS ON THE PERUSAL OF REPORT OF THE CIT(CEN TRAL) GURGAON, AS SUBMITTED TO THE SETTLEMENT COMMISSION, WHICH WE HAVE ALREADY QUOTED, IT CAN BE SEEN THAT DEPARTMENT HAS NOT PROPOSED ANY ADDITION ON ACCOUNT OF THESE PURCHASES. ONLY THE AMOUNT OF CENVAT CREDIT S O AVAILED BY THE ASSESSEE WAS OFFERED FOR TAXATION IN ITS APPLICATION BY THE ASSESSEE BEFORE THE INCOME TAX SETTLEMENT COMMISSION AND THE DEPARTMENT HAS ACCEPT ED THE SAME. NO ADDITION ON ACCOUNT OF SAID BOGUS PUR CHASES HAS BEEN MADE. 21. IN VIEW OF THE ABOVE DISCUSSION, IT IS QUITE E VIDENT THAT THE ASSESSEE HAD MADE PURCHASES FROM THE OPEN MARKET AND SHOWN THE SAME TO BE MADE FROM HARYANA STEEL & ALLOYS PVT. LTD. JUST TO AVAIL THE CENVAT CREDIT. THEREFOR E, NO ADDITION ON ACCOUNT OF TOTAL PURCHASES IS WARRANTED . THE ASSESSEE HAVING ALREADY OFFERED THE CENVAT CREDIT S O AVAILED AS ITS INCOME. FURTHER THE DEPARTMENT HAVING ACCEPT ED THE FACT THAT THE ONLY ISSUE REMAINING IN THE SAID FACT UAL BACK GROUND IS THAT OF CENVAT CREDIT, HAVING NOT PROPOSE D ANY ADDITION ON ACCOUNT OF BOGUS PURCHASES IN SUBSEQUEN T YEARS, 15 NO DIFFERENT STAND CAN BE TAKEN IN THE RELEVANT ASS ESSMENT YEAR. OUR VIEW GETS STRENGTHENED BY THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VI KAS CHEMI GUMS INDIA(2005) 276 ITR 32 (P&H),. WHEREBY IT HAS BEEN HELD THAT DEPARTMENT HAVING NOT CHALLENGED THE EARL IER YEAR ORDER CANNOT RAISE THE ISSUE IN CURRENT YEAR. IN TH E CASE OF UNION OF INDIA VS. SATISH PANALAL SHAH(2001), 249 I TR 221(SC), HONBLE APEX COURT HAS GONE TO THE EXTENT THAT REVE NUE HAVING NOT FILED APPEAL ON THE SAME ISSUE IN EARLIER YEAR IN CASE OF ONE ASSESSEE, IT CANNOT CHALLENGE THE SAME IN THE S UBSEQUENT YEAR IN CASE OF ANOTHER ASSESSEE. PRINCIPLE OF CONS ISTENCY HAS ALSO BEEN EMPHASIZED BY THE APEX COURT IN THE CASE OF RADHA SAWAMI SATSANG (193) ITR 321(SC). THE ADDITION MADE BY THE LEARNED CIT (APPEALS) BY ENHANCING THE ADDITION ON BOGUS PURCHASES WAS NOT JUSTIFIED. MAY BE BOOKS ARE REJE CTED NEED NOT NECESSARILY TO MAKE ADDITION. WE RELY ON THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF GOTAN LIME KHANIJ UDYOG, 256 ITR 243. HOWEVER, IN THE FACTUA L BACKGROUND OF THE CASE, IT WOULD NOT BE APPROPRIATE FOR REVENUE TO CHALLENGE THE POSITION WHICH IT HAS BEEN SUSTAINING IN THE OTHER YEAR ON IDENTICAL FACTS. T HE ADDITION MADE BY THE AUTHORITIES BELOW IN SUM OF RS.12,23,5 60/- ON ACCOUNT OF CANVAT CREDIT, THEREFORE, STANDS AS NOT CHALLENGED. HOWEVER, THE ORDERS OF AUTHORITIES BEL OW ARE SET ASIDE TO DELETE ENTIRE ADDITION ON ACCOUNT OF GP AN D BOGUS PURCHASES. 16 22. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE LEARNED CIT(A) ON ACCOUNT OF TOTAL PURCHASES OF RS.92,25,641/- IS HEREBY DELETED. 23. IN THE RESULT, THE APPEAL OF THE ASSESEE IS PA RTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF AUGUST, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED : 3 RD AUGUST, 2015 RATI / PRAMOD COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH