Shri Premswaroop Khandelwal, Indore V. The Income Tax Officer, 4(2), Indore

ITA 443/IND/2010

• Counselvise Citation: 44322714 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 05-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: KAMLESH JAIN
• Keywords: Bogus purchase; Unexplained investment; Depreciation; Peak credit
• Section: 131; 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.491/IND/2010 A.Y. 2002-03 ITO, WARD-4(2), INDORE ...... APPELLANT VS. PREMSWAROOP KHANDELWAL, INDORE PAN - ACFPK 5519 B ...... RESPONDENT AND, ITA NO.443/IND/2010 A.Y. 2002-03 PREMSWAROOP KHANDELWAL, INDORE PAN - ACFPK 5519 B ...... APPELLANT VS. ITO, WARD-4(2), INDORE ...... RESPONDENT 2 REVENUE BY SHRI ARUN DEWAN, SR. DR ASSESSEE BY SHRI KAMLESH JAIN, ADV. DATE OF HEARING 29.3.2012 DATE OF PRONOUNCEMENT 10.4.2012 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS-AP PEALS AGAINST THE IMPUGNED ORDER DATED 19.3.2010, PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY, INDORE. FIRST, W E SHALL TAKE UP THE APPEAL OF THE REVENUE (ITA NO.491/IND/2010) WHE REIN THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS CONTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE FIRST APPELLATE AUTHORITY ERRED IN GIVING RELIEF OF RS.13 ,11,183/-, RS.25,000/- AND RS.31,000/- ON ACCOUNT OF BOGUS PUR CHASE, TELEPHONE EXPENSES AND VEHICLE RUNNING EXPENSES, RESPECTIVELY. 3. THE APPELLANT CRAVES LEAVE TO ADD TO OR DEDUCT FROM OR OTHERWISE AMEND THE ABOVE GROUNDS OF APPEAL. 2. DURING HEARING, WE HAVE HEARD SHRI ARUN DEWAN, L EARNED SENIOR DR AND SHRI KAMLESH JAIN, LEARNED COUNSEL FO R THE ASSESSEE. THE GROUND NOS. 1 AND 3 IN THE GROUNDS OF APPEAL, BEING GENERAL IN NATURE, WERE NOT PRESSED BY THE LE ARNED CIT DR, THEREFORE, BOTH THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 3 NOW REMAINS GROUND NO. 2 WHICH IS HAVING THREE PORT IONS, NAMELY, RELIEF OF RS.13,11,183/-, RS. 25,000/- AND RS. 31,000/- ON ACCOUNT OF BOGUS PURCHASES, TELEPHONE EXPENSES A ND VEHICLE RUNNING EXPENSES, RESPECTIVELY. FOR BOGUS PURCHASES , THE LEARNED SENIOR DR CONTENDED THAT THE ASSESSEE MADE BOGUS PU RCHASES AMOUNTING TO RS.1,12,00,000/- APPROXIMATELY AND ON INQUIRY BY THE ASSESSING OFFICER, THE ALLEGED SUPPLIERS DENIED HAVING MADE ANY SALES TO THE ASSESSEE, THEREFORE, THE PURCHASES ARE BOGUS. IT WAS ALSO PLEADED THAT SET OFF OF UNEXPLAINED PURCHA SES CANNOT BE GIVEN TO THE ASSESSEE. A STRONG PLEA WAS RAISED TH AT WHEN THE PURCHASES ARE BOGUS, AS TO HOW THE COMMISSIONER OF INCOME TAX (APPEALS) REACHED TO A PARTICULAR CONCLUSION FOR WH ICH OUR ATTENTION WAS INVITED TO PAGE 12 PARA 4.3 OF THE IM PUGNED ORDER AND PAGE 14 OF THE ASSESSMENT ORDERS BY POINTING OU T THAT THE GOODS WERE PURCHASED FROM THE GREY MARKET. 2.1 ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THERE IS NO OPT ION BUT TO ADOPT THE NET PROFIT RATE ESPECIALLY WHEN THE BOOKS OF ACCOUNTS ARE AUDITED AND THE TURNOVER IS ACCEPTED BY THE COM MERCIAL TAX DEPARTMENT. IT WAS ALSO PLEADED THAT THE TRIBUNAL V IDE ORDER IN 4 ITA NO. 453/IND/2006 IN THE CASE OF SHRI GIRDHARKUM AR KHANDELWAL AND IN SIMILAR CIRCUMSTANCES PURCHASES F ROM M/S NANDI ENTERPRISES (ONE OF THE PARTIES IN THE PRESEN T APPEAL ALSO), THE PURCHASES WERE HELD TO BE GENUINE BY THE COMMIS SIONER OF INCOME TAX (APPEALS) AND THAT ORDER WAS AFFIRMED BY THE TRIBUNAL. A PLEA WAS ALSO RAISED THAT THE FOOD GRA IN LICENCE IS OBTAINED FROM THE FOOD DEPARTMENT AS WELL AS FROM T HE MANDI SAMITI AND SINCE ALL THE IMPUGNED PARTIES OBTAINED THEIR LICENCES UNDER FOOD GRAIN, COMMERCIAL TAX, ETC., THEREFORE, SUCH PARTIES CANNOT BE DECLARED AS BOGUS. IT WAS CLAIMED THAT NE CESSARY DOCUMENTS LIKE RELEVANT BILLS, COPY OF THEIR ACCOUN TS, THEIR DECLARATION BEFORE THE MANDI SAMITI, ETC., REGARDIN G THESE PARTIES, WERE SUBMITTED BEFORE COMMISSIONER OF INCOME TAX (A PPEALS). IT WAS ARGUED THAT THE STATEMENT OF TWO PARTIED WAS RE CORDED BEHIND THE BACK OF THE ASSESSEE AND OPPORTUNITY OF CROSS- EXAMINATION WAS NOT AFFORDED TO THE ASSESSEE FOR WH ICH RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF KISHANC HAND CHELARAM (125 ITR 713). IT WAS ALSO CLAIMED THAT SI NCE THE BOOKS HAVE BEEN REJECTED, PEAK CREDIT CAN BE WORKED OUT O N THE BASIS OF SAME FOR WHICH RELIANCE WAS PLACED UPON THE DECISIO N IN THE CASE OF CIT V. K.M.N. NAIDU; 221 ITR 451 (MAD). THE APP LICATION OF 5 NET PROFIT RATE AT 2.5% WAS CLAIMED TO BE EXCESSIVE . THE CRUX OF THE ARGUMENTS IS THAT IN THE BUSINESS OF FOOD GRAIN THE VOLUME IS NORMALLY HIGH BUT THE MARGIN IS LOW. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. TH E FACTS, IN BRIEF, ARE THAT THE ASSESSEE, AN INDIVIDUAL, DEALS IN PURC HASE AND SALE OF FOOD GRAINS, OIL SEEDS, ETC. DECLARED INCOME OF RS.1,49,420/- IN ITS RETURN FILED ON 17.10.2002 ALONG WITH AUDIT REP ORT AND OTHER ENCLOSURES. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSEE CLAIMED TO HAVE PRODUCED BOOKS OF ACCOUNTS , PURCHASE BILLS, ETC. TO ASCERTAIN THE GENUINENESS OF THESE B ILLS, THE LEARNED ASSESSING OFFICER ISSUED NOTICES U/S 131 OF THE ACT TO SOME OF THE PARTIES TO VERIFY THE PURCHASES. IT HAS BEEN OBSER VED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT ORDER T HAT THE SUMMONS ISSUED TO THE BELOW MENTIONED PARTIES WERE RETURNED UNSERVED :- SL. NO. NAME ADDRESS AMOUNT IN RS. 1. M/S DEEPAK TRADERS 56/3, DESHWALIPURA, MANAWAR 30,46,668 2 M/S SANGEETA TRADING CO. 10/1, MURAI MOHALLA, INDORE 10,88,006 3 M/S LAXMI CORPORATION 48, LIG, SECTOR-B, INDORE 14,78,721 6 4 M/S NANDI ENTERPRISES 82, GANDSHGANJ, INDORE 7,72,675 5 M/S SHARDA CORPORATION 36-A VAIBHAV NAGAR, INDORE 4,25,122 6 SHRI GANESH TRADERS 86, RNT MARG, INDORE 5,38,650 7 M/S NAYAN TRADERS, 8, BAKSHI GALI, INDORE 4,39,303 8 M/S JAIN SHRI CORPORATIONS 21/2, JAIL ROAD, INDORE 8,11,437 3.1 THE LEARNED ASSESSING OFFICER DIRECTED THE INSP ECTOR TO VERIFY THE ADDRESSES OF THE PARTIES AND AS PER HIS REPORT, THE PARTIES WERE FOUND TO BE NON-EXISTENT. THE ASSESSEE WAS AS KED TO PRODUCE THE AFOREMENTIONED PARTIES FROM WHOM THE PU RCHASES WERE CLAIMED TO BE MADE BY CHEQUE. THE ASSESSING OF FICER ALSO RECORDED THE STATEMENT OF ONE SHRI MAHENDRA KALA, P ROPRIETOR, KARTIKEYA FOODS ON 23.2.2005 AND IT HAS BEEN MENTIO NED IN THE ASSESSMENT ORDER THAT MR. KALA EXPLAINED THAT HE ON LY ISSUED BILLS. IDENTICAL STATEMENT WAS TENDERED BY SHRI VI SHNU AGRAWAL, PROPRIETOR SUSHIL TRADERS COMPANY (PAGE 8 AND 9 OF THE PAPER BOOK). IN VIEW OF THIS FACT, THE LEARNED ASSESSING OFFICER CONCLUDED THAT THE PURCHASES AMOUNTING TO RS.1,12,9 5,615/- ARE BOGUS PURCHASES ON TWO COUNTS FIRSTLY THE PARTIES W ERE NOT PRODUCED AND SUMMONS SENT TO THEM WERE RETURNED UNS ERVED. 4. THE ASSESSEE PREFERRED APPEAL BEFORE COMMISSION ER OF INCOME TAX (APPEALS) WHO VIDE ORDER DATED 19.3.2010 PARTLY 7 ALLOWED THE APPEAL OF THE ASSESSEE WHICH IS UNDER C HALLENGE BY THE REVENUE AS WELL AS BY THE ASSESSEE. THE RELEVA NT PORTIONS FROM THE IMPUGNED ORDER IS REPRODUCED HEREUNDER :- 3.1 THE WRITTEN SUBMISSIONS AND THE PAPER BOOK FIL ED WERE FORWARDED TO THE A.O. FOR COMMENTS KEEPING IN VIEW THE REQUIREMENT OF RULE 46A OF THE IT RULES. THE A.O. SUBMITTED HIS REPORT DATED 17.1.06 REBUTTING THE CONTENTIONS OF T HE APPELLANT. THE SAME IS ENCLOSED AS ANNEXURE A WITH THE APPEAL ORDER. THE SAME WAS MADE AVAILABLE TO THE APPELLANT FOR CO UNTER- COMMENTS AND THE APPELLANT SUBMITTED COUNTER-COMMEN TS ON 22.2.06. THE MATTER WAS REFERRED TO THE A.O. PER T HIS OFFICE LETTER DATED 27.2.05 ALLOWING OPPORTUNITY FOR CROSS -EXAMINATION OF SHRI MAHENDRA KALA PROP. KARTHIKEYA FOODS AND SH RINVISHNU AGRAWAL, PROP. SUSHIL TRADING CO. TO THE APPELLANT. THE A.O. WAS ALSO REQUIRED TO COMMENT THAT WHY TRANSACTIONS WITH KARTHIKEYA FOODS AND SUSHIL TRADING CO WERE NOT TAK EN INTO CONSIDERATION FOR WORKING OUT THE PEAK INVESTMENT I N PURCHASES. SUBSEQUENTLY, THE A.O. AFTER SEVERAL RE MINDERS MAINTAINED THROUGH LETTER DATED 29.6.06 THAT THE AP PELLANT WAS REQUESTED TO COOPERATE IN THE MATTER AND TO PRODUCE THE PERSON CONCERNED IN CROSS-EXAMINATION PER LETTER DATED 19. 5.06 AND AGAIN ON 14.6.06 AND IN RESPONSE THERETO IT WAS MAI NTAINED BY THE COUNSEL AND THE APPELLANT THAT THEY WERE NOT IN TOUCH WITH BOTH THE PERSONS AND THERE WAS NO BUSINESS DEALINGS WITH SUCH PERSONS. THE A.O. ACCORDINGLY SUBMITTED THAT THE ST ATEMENT ON OATH RECORDED BY A.O. DURING COURSE OF ASSESSMENT P RO OF SUCH PERSONS AND THE APPELLANT CAN BE RELIED UPON AS MEN TIONED EARLIER PER EARLIER LETTER DATED 17.1.06. XXX XXX XXX XXX XXX XXX 4.3 IT HAS BEEN HELD EMPHATICALLY BY HONBLE SUPRE ME COURT AS WELL IN OTHER DECISIONS OF HONBLE HIGH COURT TH AT DECISIONS ARRIVED IN ANY PARTICULAR CASE IS BASED ON THE FACT S NOTICED IN THAT CASE AND EVEN A CHANGE IN SINGLE MATERIAL FACT OF CASE UNDER CONSIDERATION VIS-A-VIS THE EARLIER REPORTED DECISION RECORDED MAKE THE DECISION INAPPLICABLE TO A LATER CASE UNDER CONSIDERATION. THE CONCLUSION DRAWN BY THE A.O. BA SED ON THE DETAILED INQUIRES MADE FROM WHICH IT EMERGED CLEARL Y THAT THE APPELLANTS SON HIMSELF HAS MADE CASH WITHDRAWAL FR OM THE ACCOUNT OF ONE OF THE PARTIES, M/S DEEPAK TRADERS. THE EXPLANATION OFFERED FOR HIS SIGNATURE APPEARING ON SUCH BOGUS 8 IS FOUND TO BE TOTALLY LACKING CONVICTION AS THE AP PELLANTS SON WAS NOT THE ONLY AVAILABLE PERSON FOR PROVIDING IDE NTIFICATION FOR THE SAID PARTY AND THAT TOO IN RESPECT OF TRANSACTI ONS CONCERNING THE APPELLANTS OWN CONCERN. THE EXPLANATION OFFERE D IS FOUND TO BE TOO FANCIFUL TO BE ACCEPTED. 4.4 PROCEEDING FURTHER, SHRI MAHENDRA KALA, PROP. KARTHIKEYA FOODS AND SHRI VISHNU AGRAWAL, PROP. SUS HIL TRADING CO. HAS VERY CLEARLY AND CATEGORICALLY STAT ED THAT NO ACTUAL SALES WERE AFFECTED BY BOTH THE PERSONS DURI NG THE RELEVANT F.Y. AND THOUGH HAD ONLY ISSUED ACCOMMODATION/BOGUS BILL TO THE APPELLANT AND THE A PPELLANT WHEN CONFRONTED WITH THEIR STATEMENT HAD NO EXPLANA TION TO OFFER AND MERELY MAINTAINED THAT HE HAS MADE GENUIN E PURCHASES AND HE WAS NOT CONCERNED WITH THE STATEME NTS GIVEN BY THEM. THE STAND OF THE APPELLANT IN SUCH SITUAT ION IS FOUND TO BE NOTHING BUT OBVIOUS AS THE APPELLANT IN SUCH SITUATION CANNOT DO ANYTHING BETTER EXCEPT DENYING AGAINST TH E OTHER ALTERNATIVE LEFT THERETO TO ACCEPT THE BOGUS NATURE OF THE TRANSACTIONS WHICH THE APPELLANT WAS NOT WILLING TO ADMIT. THUS IT HAS TO BE NECESSARILY CONCLUDED THE A.O.S FINDI NG ABOUT THE PURCHASES MADE THROUGH 8 PARTIES NAMED ABOVE BY THE APPELLANT WERE NOT GENUINE PURCHASES HAVE TO BE NEC ESSARILY APPROVED. ACCORDINGLY, THE A.O.S ACTION IN REJECTIN G PEAK RESULTS BY INVOKING PROVISIONS OF SECTION 145 AS A NECESSAR Y COROLLARY HAS TO BE NECESSARILY APPROVED BECAUSE IN THE FACT OF MORE THAN 15% OF THE PURCHASE TRANSACTION BEING BOGUS IN NATU RE, THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT CANNO T BE HELD TO BE CORRECT AND COMPLETELY RELIABLE IN ANY MANNER . IT HAS TO BE ALSO OBSERVED THAT THE APPELLANT HAS SHOWN A VER Y INSIGNIFICANT PROFIT OF RS. 1.5 LAKHS ON HUGE TURNO VER OF NEARLY RS. 7 CRORES WHICH DEFIES LOGIC AND BROADLY THE SAM E STATE OF AFFAIRS CONTINUED IN THE CASE OF THE APPELLANT IN T HE IMMEDIATELY PRECEDING AND LATER YEARS AS EMERGED FORM THE DISCU SSION WITH THE ASSESSING OFFICER PRESENT. 4.5 NOW IN THESE FACTS, THE ISSUE TO BE DETERMINED IS WHAT SHOULD BE APPROPRIATE AMOUNT TO BE ADDED IN RESPECT OF SUCH BOGUS PURCHASES/BILLING TRANSACTIONS. HERE, IT MAY BE OBSERVED THAT EVEN IF THE APPELLANTS CONTENTIONS THAT NO SA LES ARE POSSIBLE WITHOUT CORRESPONDING PURCHASES HAVE TO BE ACCEPTED THEN ALSO THE QUESTION REMAINS WHETHER THE PURCHASE PRICE RECORDED IN SUCH DUBIOUS BILLS CAN BE HELD TO BE R ELIABLE. THE 9 SECOND SITUATION WHICH IS NOTICED IN VARIOUS CASES IF SUCH SALES ARE HELD TO BE GENUINE THAT BOGUS BILLS ARE OBTAINE D FROM ONE CONCERN AND THE CORRESPONDING PURCHASES ARE EFFECTE D FROM DIFFERENT PERSONS AS IS A.O.S CASE BASED ON WHICH HE HAS WORKED OUT THE PEAK UNEXPLAINED INVESTMENT IN AFFEC TING SUCH PURCHASES FROM ALTERNATE SOURCES. THE APPELLANT HAS COME FORWARD WITH THE PLEA IN RESPECT OF PEAK ADDITION T HAT IF PEAK AMOUNT IS TO BE CONSIDERED THEN THE CASH AVAILABLE AS PER CASH BOOK SHOULD BE CONSIDERED FOR THE PURPOSE OF SET OF F AGAINST SUCH PEAK AMOUNT AND HE HAS POINTED OUT THAT THE CA SH BALANCE ON THE DATE 5.11.01 PEAK AMOUNT HAS BEEN WO RKED OUT BY THE A.O. AT RS. 30,61,183/- STOOD AS PER CASH BO OK AT RS. 29,66,795/-. IT HAS ALSO BEEN CLARIFIED SUCH CASH AVAILABLE DOES NOT INCLUDE PAYMENTS MADE BY CHEQUE TILL SUCH DATE 5.11.01. BUT THE QUESTION STILL REMAINS THAT THE D IFFERENCE BETWEEN THE CASH AVAILABLE AND THE PEAK AMOUNT WORK ED OUT BY THE A.O. ON 5.11.01, THOUGH IS NOT A SIGNIFICANT AMOUNT I.E. LESS THAN RS. 1 LAC, BUT ON OTHER DAY IT MAY AGAIN VARY SUBSTANTIALLY. IT MAY BE SIMULTANEOUSLY OBSERVED T HAT THE CLAIM PUT UP BY THE APPELLANT FOR SET OFF OF CASH A VAILABLE CANNOT BE IGNORED OR BRUSHED ASIDE ALTOGETHER EITHE R. 4.6 THE AFORESAID DISCUSSION AGAIN LEADS TO ONE INE VITABLE CONCLUSION THAT THE BOOKS OF ACCOUNTS AND OTHER REC ORDS MAINTAINED BY THE APPELLANT DEPICTING THE TRADING R ESULTS ARE NOT IN ANY WAY RELIABLE. IF SUCH BOGUS PURCHASES T RANSACTIONS ARE CONSIDERED TO BE ENTERED INTO BY THE APPELLANT AGAIN, IN TURN FOR EARNING SOME COMMISSION INCOME ON BOGUS SALES B ILL ISSUED BASED ON PURCHASES BILLS OBTAINED FROM DUBIOUS PART IES WHO HAVE BEEN FOUND TO HAVE EVADED MANDI TAX PAYMENTS, AGAIN IT HAS TO BE NECESSARILY HELD THAT THE APPELLANT WOULD NOT INDULGE IN SUCH TRANSACTIONS UNLESS HE HAD A REASONABLE MARGIN/COMMISSION ON SUCH TRANSACTIONS BECAUSE FOR SOME PERIOD, HIS FUNDS WERE ALSO DEPLOYED FOR MAKING PAY MENTS THROUGH BANKING CHANNEL AND WITHDRAWING THE SAME TH ROUGH SELF CHEQUE AND THEN THE TIME LACK BETWEEN THE REAL ISATION OF SALES PAYMENT FOR SALES BILLS ISSUED. AS HAS BEEN NOTICED BY THE DEPARTMENT THAT NORMALLY THE COMMISSION CHARGED FOR SUCH BOGUS BILLING TRANSACTIONS VARIES FROM 1% TO 3% AND EVEN MORE DEPENDING UPON THE NATURE OF COMMODITY AND OTHER RE LEVANT FACTORS LIKE RATES OF LOCAL TAXES, ETC. 10 4.7 ON CONSIDERATION OF ENTIRE FACTS AND CIRCUMSTAN CES OF THE CASE, IT IS FELT THAT IT WILL BE APPROPRIATE TO REJ ECT THE ENTIRE BOOK RESULTS AND APPLY A NET PROFIT RATE ON THE TOTAL TU RNOVER OF THE APPELLANT WHICH STAND AT RS. 698.84 LAKHS OR ROUNDE D TO SAY RS. 7 CRORES BECAUSE NO CASE HAS BEEN MADE BY A.O. FOR SUPPRESSION OF SALES AND HENCE THE SALES FIGURE AS REFLECTED IN THE ACCOUNTS AS A RESULT OF THESE BOGUS BILLING TRA NSACTIONS IS CONSIDERED FOR THE PURPOSE OF ESTIMATING OF NP. FUR THER, CONSIDERING THE FINDING OF A.O. IN THE MATTER OF PE AK CREDIT, ANOTHER FACTS AND CONSIDERATION OF THE CASE, IT IS HELD THAT APPLICATION OF N.P. RATE OF 2.5% WOULD BE JUST AND PROPER IN THE CASE OF THE APPELLANT AND THE SAME WOULD ALSO COVER THE DISALLOWANCE MADE BY THE A.O. FOR PERSONAL COMPONEN T INVOLVED AND THE TOTAL INCOME IN THE CASE OF THE AP PELLANT IS ACCORDINGLY DIRECTED TO BE TAKEN AT RS. 17,50,000/- . 5. IF THE FINDING CONTAINED IN THE ASSESSMENT ORDER, IMPUGNED ORDER AND THE ASSERTION MADE BY THE LEARNE D RESPECTIVE COUNSEL ARE KEPT IN JUXTAPOSITION AND ANALYSED, WE FIND THAT THE LEARNED ASSESSING OFFICER AT PAGE 12 (PARA 17) HAS OBSERVED THAT THE ASSESSEE HIMSELF HAS WITHDRAWN THE CHEQUE AMOUN T FOR SOME CHEQUES ISSUED TO DEEPAK TRADERS, KARTIKEYE FOODS A ND SUSHIL TRADING COMPANY AND IN VIEW OF THESE OBSERVATIONS, HE CONCLUDED THAT THE PURCHASES ARE BOGUS BECAUSE THES E PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER IN S PITE OF SPECIFIC DIRECTION. WITH REGARD TO NANDI ENTERPRISES, THE P URCHASES WERE EFFECTED BY ANOTHER ASSESSEE FROM M/S NANDI ENTERPR ISES WHICH WERE FOUND TO BE GENUINE BY THE COMMISSIONER OF INC OME TAX (APPEALS) AND THE SAME WERE AFFIRMED BY THE TRIBUNA L (PAGES 7 TO 9 OF PAPER BOOK) IN ORDER DATED 31 ST DECEMBER, 2008 (ITA NO. 11 453/IND/2006). WE FURTHER FIND THAT THE LEARNED AS SESSING OFFICER FRAMED THE ASSESSMENT BY ADOPTING THE PEAK CREDIT FROM 29.5.2001 TO 31.3.2002 AND CONCLUDED THAT ON 5.11.2 001 THE PEAK CREDIT COMES TO RS.30,61,183/- WHEREAS ACTUALL Y ON THE DAY OF PEAK CREDIT, THE CASH AVAILABLE WAS RS.29,66,795 /- (AS PER BOOKS OF ACCOUNTS). EVEN IF THE ASSUMPTION OF THE LEARNED ASSESSING OFFICER THAT THE CASH WAS WITHDRAWN AGAIN ST THE CHEQUE PAYMENT IS CONSIDERED TO BE CORRECT, STILL T HE FACT REMAINS THAT THE PAYMENTS WERE MADE THROUGH CHEQUE AND THAT MUCH CASH WAS AVAILABLE WITH THE ASSESSEE, MEANING THERE BY, EVEN IF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AR E TREATED TO BE NON-RELIABLE, STILL THERE IS NO OPTION BUT TO AD OPT THE NET PROFIT FROM THE TRANSACTIONS MADE BY THE ASSESSEE. THE LE ARNED FIRST APPELLATE AUTHORITY APPLIED A NET PROFIT AT 2.5% OF THE TURNOVER WHICH IS NEARLY RS. 7 CRORES AS PER AUDITED BOOKS O F ACCOUNTS. THE GROSS PROFIT AND NET PROFIT RATE OF LAST THREE YEARS ARE SUMMARISED AS UNDER :- A.Y. SALES IN RS. GROSS PROFIT (IN %) NET PROFIT (IN %) 2002-03 6,98,84,225 2.71 0.21 2001-02 9,38,33,505 2.66 0.26 12 2000-01 17,19,65,712 2.52 0.23 1999-00 10,00,73,134 1.77 0.21 IF THE AFORESAID TABLE IS ANALYSED, ONE FACT IS OOZ ING OUT THAT THE DEPARTMENT IN THE PREVIOUS YEARS HAS ACCEPTED THE N ET PROFIT BETWEEN 0.21% TO 0.26% WHEREAS THE COMMISSIONER OF INCOME TAX (APPEALS) HAS APPLIED THE NET PROFIT AT 2.5%, T HEREFORE, THERE SHOULD BE NO GRIEVANCE TO THE REVENUE UNDER THE FAC TS NARRATED HEREINABOVE. 5.1 SO FAR AS GRANTING RELIEF OF RS.25,000/- AND RS. 31,000/- ON ACCOUNT OF TELEPHONE EXPENSES AND VEHIC LE RUNNING EXPENSES/DEPRECIATION, RESPECTIVELY, IS CONCERNED, WE FIND THAT OUT OF THE CLAIM OF RS. 1,23,657/- THE LEARNED ASSE SSING OFFICER MADE DISALLOWANCE OF RS. 25,000/- (TELEPHONE EXPENS ES) FOR PERSONAL USE AND DEPRECIATION OF RS.20,000/- OUT OF RS.96,896/- ON ACCOUNT OF VEHICLE RUNNING EXPENSES. WE FIND THA T COMMISSIONER OF INCOME TAX (APPEALS) HAS ADOPTED A REALISTIC VIEW, THEREFORE, WE FIND NO INFIRMITY IN THE SAME, THEREFORE, THE IMPUGNED ORDER IS AFFIRMED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. 13 6. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE WHEREIN THE FIRST GROUND RAISED PERTAINS TO APPLICATION OF NET PROFIT RATE AT 2.5% DETERMINING THE INCOME AT RS.17,50,000/- OUT O F THE TOTAL TURNOVER OF RS.698.84 LACS (ROUGHLY RS. 7 CRORES). WHILE DECIDING THE APPEAL OF THE REVENUE, SINCE WE HAVE UPHELD THE STAND OF THE COMMISSIONER OF INCOME TAX (APPEALS), THEREFORE, TH IS GROUND HAS REMAINED FOR ACADEMIC INTEREST ONLY, CONSEQUENTLY, WE FIND NO MERIT IN THIS GROUND OF THE ASSESSEE, THEREFORE, DI SMISSED. 7. THE NEXT GROUND PERTAINS TO CONCLUSION OF COMMIS SIONER OF INCOME TAX (APPEALS) REGARDING BOGUS PURCHASES ON T HE BASIS OF ASSUMPTION IS CONCERNED, AFTER HEARING THE RIVAL SU BMISSIONS, WE FIND THAT THIS GROUND HAS ALSO REMAINED FOR ACADEMI C INTEREST BECAUSE THE BOOKS OF ACCOUNTS WERE NOT FOUND RELIAB LE, THE PARTIES FROM WHOM THE PURCHASES WERE CLAIMED WERE A LSO FOUND NON-EXISTENT AS THE SUMMONS UNDER SECTION 131 OF TH E ACT ISSUED TO THEM WERE RETURNED UNSERVED AND THE REPORT OF TH E INSPECTOR WAS ALSO THAT SUCH PARTIES WERE NON-EXISTENT, THERE FORE, THERE IS NO MERIT IN THIS GROUND ALSO. 8. SO FAR AS THE CHALLENGE OF HIGHER NET PROFIT RAT E OF 2.5%, APPLIED BY COMMISSIONER OF INCOME TAX (APPEALS), IS CONCERNED, UNDER THE FACTS STATED HEREINABOVE, WE AFFIRM THE S AME. EVEN 14 OTHERWISE, THE GROUND NO. 3, RAISED BY THE ASSESSEE , HAS BEEN DISCUSSED WHILE DISPOSING OF GROUND NO.2 OF THE APP EAL OF THE REVENUE AND GROUND NO. 1 OF THE APPEAL OF THE ASSES SEE, THEREFORE, THERE IS NO MERIT IN THIS GROUND ALSO. 9. THE LAST GROUND I.E. GROUND NO. 4 IS GENERAL IN NATURE REQUIRES NO DELIBERATION FROM OUR SIDE. FINALLY, (I) THE APPEAL OF THE REVENUE IS DISMISSED (II) THE APPEAL OF THE ASSESSEE IS ALSO DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 29.3.2012. SD SD (R.C.SHARMA) (JO GINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 .4.2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/- 15