The Dy. C.I.T. Central Circle-2(1), Ahmedabad V. M/s N. K Industries Ltd, Ahmedabad

ITA 3854/AHD/2002

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9336 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-08-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 13-12-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S GAHLOT
• Assessee Lawyers: A C SHAH AR
• Keywords: Bogus purchase; Block assessment

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, B - BENCH,AHMEDABAD . BEFORE : SHR I R.V.EASWAR, VICE - PRESIDENT, AND SHRI P.K.BANSAL, ACCOUNTANT MEMBER. ITA NO. 3854/AHD/2002 (ASSESSMENT YEAR 1999 - 00) THE DCIT, CENTRAL CIRCLE 2(1), AHMEDABAD. VERSUS M/S.N.K.IND USTRIES LTD., 7 TH FLOOR, POPLULAR HOUSE, ASHRAM ROAD, AHMEDABAD. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI B.S.GAHLOT, CIT - DR FOR THE RESPONDENT SHRI A.C.SHAH,AR ORDER SHRI R.V.EASWAR, VICE - PRESIDENT : THIS IS AN APPEAL BY THE DEPARTME NT RELATING TO THE ASSESSMENT YEAR 1999 - 00. THE ASSESSEE - RESPONDENT IS A COMPANY ENGAGED IN THE MANUFACTURE OF NON - EDIBLE OIL FOR LOCAL CONSUMPTION AND EXPORT. 2. IN THE FIRST GROUND, THE REVENUE HAS CHALLENGED THE DECISION OF THE CIT(A) DELETING THE DISA LLOWANCE OF THE BOGUS PURCHASES OF RS.1,66,81,435. WHILE COMPLETING THE ASSESSMENT U/S.143(3) OF THE IT ACT, THE ASSESSING OFFICER DISALLOWED PURCHASES OF RS.2,03,22,288 ON THE GROUND THAT THEY WERE BOGUS. THEY WERE MADE FROM SOMNATH INDUSTRIES AND KRISHNA MARKETING, IN THE AMOUNTS OF RS.1,42,00,442 AND RS.61,21,796 RESPECTIVELY. THE DISALLOWANCE WAS MADE ON THE STRENGTH OF MATERIALS GATHERED DURING THE SEARCH OF THE ASSESSEE AND GROUP CONCERNS. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO NOTICED THA T THE PURCHASES FROM SOMNATH INDUSTRIES AND KRISHNA MARKETING WERE RS.1,15,06,943 AND RS.51,74,492 RESPECTIVELY, TOTALLING TO RS.1,66,81,435. HE FURTHER NOTED THAT THE DISALLOWANCE WAS CONSIDERED IN THE BLOCK ASSESSMENT MADE ON THE ASSESSEE U/S.158BC BUT W AS DELETED BY THE CIT(A) ON THE GROUND THAT NO SEARCH MATERIAL WAS FOUND IN RESPECT OF THE SAID PARTIES. THE CIT(A) ALSO CONSIDERED THE MATTER INDEPENDENTLY AND FOUND THAT THERE WAS NO BASIS FOR MAKING THE DISALLOWANCE, VIDE PARAGRAPH 2.9 OF THE IMPUGNED O RDER. ITA NO. 3854/AHD/2002 C.I.T. VS.M/S.N.K.INDUSTRIES LTD ASSESSMENT YEAR 1999 - 0 0 2 3. THE REVENUE IS IN APPEAL. AT THE TIME OF THE HEARING IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE OF THE PURCHASES MADE IN THE BLOCK ASSESSMENT WAS TAKEN UP IN APPEAL BY THE DEPARTMENT TO THE TRIBUNAL IN IT(SS)A NO.38/AHD/2002 AND THE ORDER OF THE TRIBUNAL IS REPORTED IN (2004) 83 TTJ 904, THAT IN THE SAID ORDER AT PARAGRAPH 105 ONWARDS THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL, THAT AFTER ELABORATELY CONSIDERING THE ISSUE THE TRIBUNAL, FOLLOW ING ITS DECISION IN VIJAY PROTEINS, HELD IN PARA.117 THAT IT WOULD BE JUST AND PROPER TO DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION IN RESPECT OF THE UNDISCLOSED INCOME RELATING TO THE PURCHASES FROM SOMNATH INDUSTRIES AND KRISHNA MARKETING TO 2 5% OF THE TOTAL PURCHASES. IT WAS ACCORDINGLY PRAYED THAT SINCE THE ADDITION OF UNDISCLOSED INCOME IN RESPECT OF THE PURCHASES HAS BEEN MADE AND CONFIRMED TO THE EXTENT OF 25% IN THE BLOCK ASSESSMENT, NO ADDITION OR DISALLOWANCE CAN BE MADE AGAIN IN RESPEC T OF THE SAME IN THE REGULAR ASSESSMENT. IT WAS ALSO SUBMITTED THAT BOTH THE SIDES ARE BEFORE THE HONBLE GUJARAT HIGH COURT AGAINST THE ABOVE ORDER OF THE TRIBUNAL (CITED SUPRA) AND THE RELEVANT ORDERS OF THE HIGH COURT ADMITTING THE APPEALS WERE FILED AT OUR INSTANCE. 4. ON A CONSIDERATION OF THE MATTER, WE ARE INCLINED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE. WHEN THE ADDITION FOR UNDISCLOSED INCOME TO THE EXTENT OF 25% OF THE IMPUGNED PURCHASES HAS ALREADY BEEN SUSTAINED BY THE TRIBUNAL IN APPEAL ARI SING OUT OF THE BLOCK ASSESSMENT, NO ADDITION CAN BE MADE FOR THE SAME PURCHASES, EITHER WHOLLY OR PARTLY IN THE REGULAR ASSESSMENT PROCEEDINGS. OTHERWISE, IT WOULD AMOUNT TO DOUBLE ADDITION. WE ACCORDINGLY CONFIRM THE DECISION OF THE CIT(A) DELETING THE D ISALLOWANCE, ON THE GROUND THAT NO SECOND ADDITION CAN BE MADE IN THE REGULAR ASSESSMENT WHEN AN ADDITION HAS BEEN MADE IN THE BLOCK ASSESSMENT. WE EXPRESS NO OPINION ON THE MERITS OF THE DISALLOWANCE SINCE THE MATTER IS PENDING BEFORE THE HONBLE HIGH COU RT AS TO, INTER ALIA, WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER HAD RIGHTLY MADE THE ADDITION DESPITE THE FACT THAT NO MATERIAL WAS FOUND IN THE SEARCH IN RELATION TO SOMNATH INDUSTRIES AND KRISHNA ITA NO. 3854/AHD/2002 C.I.T. VS.M/S.N.K.INDUSTRIES LTD ASSESSMENT YEAR 1999 - 0 0 3 MARKETING AND WHETHER THE T RIBUNAL WAS JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES TO 25%. THE FIRST GROUND IS THUS DISMISSED. 5. THE SECOND GROUND RELATES TO THE FOREIGN TRAVEL EXPENSES OF RS.4,19,478. THE ASSESSEE HAS POINTED OUT BEFORE THE CIT(A) THAT THE NET TRAVEL EXPENSES ARE ONLY RS.3,31,420, BUT THE GROUND BEFORE US MENTIONS THE FIGURE OF RS.4,19,478. BE THAT AS IT MAY, THE FINDINGS OF THE CIT(A) IN PARAGRAPH 5.2 OF HIS ORDER ARE THAT (A) THE REPORT OF NIMISH K. PATEL, CHAIRMAN - CUM - MANAGING DI RECTOR, SHOWS THAT HE VISITED LONDON AND NEW YORK IN CONNECTION WITH THE EXPORTS WHICH WERE TO THE TUNE OF RS.14.13 CRORES DURING THE YEAR; (B) N.P. SHAH AND SHANKARAN, EMPLOYEES OF THE COMPANY, VISITED LONDON IN CONNECTION WITH THE RECONCILIATION OF THE A CCOUNT WITH AN AGENT THERE AS A RESULT OF WHICH THE COMPANY GOT A REFUND OF RS.2.37 CRORES. ACCORDINGLY HE HELD THAT THE EXPENSES WERE ALLOWABLE, HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. 6. WE HAVE HEARD BOTH THE SIDES. THERE IS NO SPECIFIC CHALLENGE TO THE FINDINGS RECORDED BY THE CIT(A) NOR WAS ANY MATERIAL OR EVIDENCE BROUGHT BEFORE US TO IMPEACH THE CORRECTNESS OF THE FINDINGS. ON THE FACTS FOUND BY THE CIT(A), HIS DECISION CAN HARDLY BE FAULTED. WE CONFIRM THE SAME AND DISMISS THE GROUND. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN OPEN COURT THIS DAY OF 21 ST AUGUST, 2009 . SD/ - SD/ - (P.K.BANSAL) ACCOUNTANT MEMBER. ( R.V.EASWAR) VICE - PRESIDENT DATE: 21.8.09 (H.K.PADHEE) SENIOR PRIVATE SECRETARY. ITA NO. 3854/AHD/2002 C.I.T. VS.M/S.N.K.INDUSTRIES LTD ASSESSMENT YEAR 1999 - 0 0 4 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.