The ITO, Ward-1(3), Surat V. M/s. Nova Dyestuff Industries Pvt. Ltd., Surat

ITA 3863/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6101 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-05-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 15-10-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: RASESH SHAH
• Keywords: Document seized; Documents seized

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T. K. SHARMA, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WARD-1(3), SURAT. V/S . NOVA DYE STUFF INDUSTRIES (P) LTD., 251, GIDC INDUSTRIES ESTATE, PANDESARA, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI H.P. MEENA, SR. DR RESPONDENT BY:- SHRI RASESH SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE REVENUE FOR ASS T. YEAR 1999-00 AND 2000-01 RAISING COMMON GROUNDS FOR THE TWO YEAR S AS UNDER :- ASST. YEAR 1999-00 (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,27,828/- MADE ON ACCO UNT OF UNACCOUNTED SALES NOT REFLECTED IN THE REGULAR BOOK S OF ACCOUNTS. ASST. YEAR 2000-01 (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.6,02,482/- MADE ON ACCO UNT OF UNACCOUNTED SALES NOT REFLECTED IN THE REGULAR BOOK S OF ACCOUNTS. ITA NO.3863 & 3864/2007 ASST. YEAR :1999-00 & 2000-01 2 2. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APP EALS, THESE ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF MANUFACTURING AND SALE OF DISPERSED DYES. NARCOTIC CONTROL BUREAU HAD CARRIED OUT A SEARCH AT THE BUSINESS PREMISES OF THE ASSESSEE. DU RING THE COURSE OF THAT SEARCH A LOOSE PAPER MARKED AS PAGE NO.78 WAS SEIZED. IT CONTAINED THE HEAD NOTE NOVA DYESTUFF . VARIOUS AMOUNTS WERE WRITTEN THEREON WHICH PERTAINED TO THE PERIOD FROM DECEMBER, 1998 TO JULY , 1999. THE TOTAL OF THESE FIGURES WAS RS.13,30,310/-. THE DETAILS THERE ON ARE AS UNDER :- THE AO PROCURED THE SEIZED DOCUMENTS FROM NARCOTIC CONTROL BUREAU. A COPY OF THE SAID PAPER NO.78 WAS GIVEN TO THE ASSES SEE WHO WAS ASKED TO SHOW WHETHER TRANSACTIONS RECORDED IN THIS DOCUMENT ARE REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. IT WAS CLAIMED THAT THESE WERE THE AMOUNTS PERTAINING TO THE CLAIM MADE BY M/S ANJANI DYEING & PRINTING MILLS WITH M/S BRILLIANT CHEMICALS (P) LTD. WHO IS THE AUTHORI SED AGENT OF THE PRODUCT OF THE ASSESSEE. THE CLAIMS WERE FOR THE DA MAGE OF THE FABRICS DUE TO SUB-STANDARD PRINTING QUALITIES OF THE DYES USED THEREIN. M/S ANJANI DEC. 98 231911=00 JAN 99 268308=00 FEB 99 111339=00 MARCH 99 116270=00 APRIL 99 332259=00 MAY 99 127578=00 JUNE 99 117057=00 JULY 99 25588=00 1330310=00 3 DYEING & PRINTING MILLS HAD PURCHASED DYES MANUFACT URED BY THE ASSESSEE THROUGH THEIR COMMISSION AGENT M/S BRILLIA NT CHEMICALS (P) LTD. THUS M/S ANJANI DYEING & PRINTING MILLS HAD PUT UP A CLAIM OF RS.13,30,310/- WITH M/S BRILLIANT CHEMICALS (P) LTD . FOR THE DAMAGE CAUSED TO THEIR FABRICS. IT WAS CLAIMED THAT AFTER NEGOTIATIONS THE CLAIM WAS FINALLY SETTLED FOR RS.3,01,928/- ON 31.3.2004. THE ASSESSEE FURNISHED A COPY OF THE LETTER WRITTEN BY M/S ANJANI DYEING & PRINTING MILLS TO M/S BRILLIANT CHEMICALS (P) LTD FOR THE CLAIM OF RS.13, 30,310/- ALONG WITH A COPY OF CREDIT NOTE DATED 31.3.2004 FOR RS.3,01,928 /- ISSUED BY M/S BRILLIANT CHEMICALS (P) LTD TO M/S ANJANI DYEING & PRINTING MILLS. THE AO REJECTED THE ARGUMENTS ON THE GROUND THAT THE AS SESSEE HAS FAILED TO PROVE THE NEXUS BETWEEN THE DETAILS MENTIONED AT PA GE 78 SEIZED DURING SEARCH AS WELL AS THE RECORDS OF THE DISTRIBUTOR M/ S BRILLIANT CHEMICALS (P) LTD. ACCORDINGLY, THE AO MADE THE ADDITIONS IN THE TWO YEARS WHICH COVER THE TRANSACTIONS RECORDED AT PAGE 78. THIS RE SULTED IN AN ADDITION OF RS.7,27,828/- IN THE ASST. YEAR 1999-00 AND OF RS.6 ,02,482/- IN THE ASST. YEAR 2000-01. THE LD. CIT(A) UPHELD THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITIONS BY OBSERVING AS UNDER :- 3.6.1 I HAVE CONSIDERED THE SUBMISSION MADE BY T HE APPELLANT AND OBSERVATION OF THE AO. FOLLOWING FACTS ARE ON RECOR D:- THE APPELLANT HAS FILED BEFORE THE AO A LETTER WRI TTEN BY BRILLIANT CHEMICALS (P) LTD. TO THE AO THAT THERE WAS A DISPU TE BETWEEN BRILLIANT CHEMICALS (P) LTD. AND ANJANI DYEING & PR INTING MILLS IN RESPECT OF CLAIM OF RS.13,30,310/-. IT IS ALSO CLEAR THAT THERE IS A LETTER DATED 14.8 .99 WRITTEN BY ANJANI DYEING & PRINTING MILLS WRITTEN TO BRILLIANT CHEMIC ALS (P) LTD. MAKING A CLAIM OF RS.13,30,310/-. FURTHER IT IS SEE N THAT THE CLAIM WAS SETTLED FOR A SUM OF RS.3,01,928/- AND THE LETT ER DATED 31.3.04 BY BRILLIANT CHEMICALS (P) LTD. TO ANJANI DYEING & PRINTING MILLS CLEARLY SHOWS THIS. 4 SIMILAR VIEW HAS BEEN TAKEN IN ASST. YEAR 2000-01. 3. AGAINST THIS, LD. DR SUBMITTED THAT THE LD. CIT( A) WRONGLY ADMITTED AGREEMENT DATED 21.8.97 WHICH WAS NEW EVID ENCE WITHOUT GIVING OPPORTUNITY TO THE AO. FURTHER NO REIMBURSEM ENT BY THE ASSESSEE COMPANY IS MADE AND, THEREFORE, THERE IS NO EXPLANA TION AS TO WHY THESE DETAILS HAD COME TO THE PREMISES OF THE ASSESSEE. T HE ASSESSEE DID NOT FURNISH ANY EVIDENCE WHICH PROVED THAT TRANSACTIONS RELATING TO M/S ANJANI DYEING & PRINTING MILLS AND M/S BRILLIANT CH EMICALS (P) LTD. WERE GENUINE. THE REASONS AS SUBMITTED BY LD. DR AR E AS UNDER :- (I) NO COPY OF RELEVANT ACCOUNT MENTIONING THE TRA NSACTION REFLECTED ON LOOSE PAPER WAS EITHER SUBMITTED OUT OF BOOKS OF ACCOUNTS OF M/S ANJANI DYEING & PRINTING MILLS OR BRILLIANT CHEMICA LS (P) LTD. OR APPELLANT; (II) NO COPY OF DELIVERY CHALLANS RELEVA NT TO THE GOODS SO CLAIMED TO BE SENT BY BRILLIANT CHEMICALS (P) LTD. WERE FURNISHED; (III) NO EVIDENCE OF TRANSPORTATION, LOADING/UNLOADING, OCTR OI, GATE PASSES ETC. WERE FURNISHED IN SUPPORT OF THESE TRANSACTIONS; (I V) THE TRANSACTIONS RELATED TO ASST. YEAR 1999-00, HOWEVER, SETTLEMENT WAS CLAIMED THROUGH CREDIT NOTE ON 31.03.2004 I.E. AFTER THE DATE OF SE ARCH AND SURVEY CARRIED OUT. WHY THE AFFECTED PARTY WAS SILENT MORE THAN 4 YEARS. WHY CIVIL SUIT WAS NOT FILED; (V) IT WAS CLAIMED THAT THE CHEMICAL CREATED BLEEDING PROBLEMS, WHAT HAPPENED TO SUCH DEFECTED CHEMICALS, NO WHERE IT IS CLARIFIED; (VI) IT IS CLAIMED MR. KHANNA, TECHNICAL PERSON FROM THE ASSESSEE VISITED THE GOODS, WHERE IS HIS REPORT; (V II) THE SETTLEMENT WAS MADE BETWEEN BRILLIANT CHEMICALS (P) LTD. AND M/S A NJANI DYEING & PRINTING MILLS AND NO WHERE THE ASSESSEE IS INVOLVE D, WHY SUCH DETAILS ARE LYING WITH THE ASSESSEE COMPANY; AND (VIII) NO WHERE THE NAMES OF SO CALLED COMPANIES WERE MENTIONED IN THE LOOSE PAPER. THE LD. DR SUBMITTED THAT ONCE ALL THESE QUESTIONS REMAINED UNANSWERED THE CLAIM OF THE ASSESSEE COMPANY SHOULD NOT HAVE B EEN ACCEPTED BY THE LD. CIT(A). 5 4. ON THE OTHER HAND, LD. AR REFERRED TO THE DECISI ON OF HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTR IES (2002) 258 ITR 654 FOR THE PROPOSITION THAT IF AT ALL ADDITION IS TO BE MADE IT COULD BE IN RESPECT OF GP ONLY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT DOCUMENT NO.7 8 WAS FOUND FROM THE PREMISES OF THE ASSESSEE. THEREFORE, ONUS IS ON THE ASSESSEE TO EXPLAIN THE NATURE OF TRANSACTIONS RECORDED THEREIN. THE LD. DR CLEARLY POINTED OUT THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE TRAN SACTIONS WERE BETWEEN ANJANI DYEING & PRINTING MILLS AND BRILLIANT CHEMI CALS (P) LTD. NO DETAILS AS POINTED OUT BY LD. DR HAVE BEEN FILED. A CCORDINGLY EXPLANATION FURNISHED BY THE ASSESSEE CANNOT BE ACCEPTED. THERE FORE, ABOVE AMOUNTS HAS TO BE TAKEN AS SALES MADE BY THE ASSESSEE OUTSI DE THE BOOKS. BUT WHERE INVESTMENT IS NOT PROVED TO HAVE BEEN MADE OU TSIDE THE BOOKS THEN ADDITION CANNOT BE MADE OF ENTIRE SALE PROCEEDS AND ONLY PROFITS EMBEDDED IN SALE PROCEEDS ALONE CAN BE TAXED AS HEL D BY HON. GUJARAT HIGH COURT IN CIT VS. PRESIDENT INDUSTRIES (SUPRA). THE AO WILL ACCORDINGLY APPLY GP RATE AS DECLARED IN THE REGULA R BOOKS OF ACCOUNT AND WORK OUT THE PROFITS EMBEDDED IN THE SALES AND MAKE ADDITION ACCORDINGLY. THUS ADDITION TO THE EXTENT OF GP ON THESE SALES IS RESTORED. THE MATTER IS RESTORED TO THE AO FOR DOING NEEDFUL. ACCORDINGLY THE APPEALS FILED BY THE REVENUE ARE ALLOWED BUT FOR ST ATISTICAL PURPOSES. 6 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 04/06/2010 SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED :04/06/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD