Diwan Chand Garg(HUF), Bhubaneswar V. ACIT, Bhubaneswar

ITA 491/CTK/2012

• Counselvise Citation: 49122114 RSA 2012
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 09-10-2012
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: D K SHETH MOHIT SHETH ARS
• Keywords: Bogus purchase; Document seized; Documents seized
• Section: 40A(3); 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 491/CTK/2012 / ASSESSMENT YEAR 2005 - 06 DIWAN CHAND GARG (HUF), PROP. GARG TRADINGCO., OLD STATION BAZAR,BHUBANESWAR 751 006 PAN: AABHD 6390 R - - - VERSUS - ASST.CO MMISSIONER OF INCOME - TAX,CIRCLE 1(2), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SHETH/MOHIT SHETH, ARS / FOR THE RESPONDENT: / S MT. PARAMITA TRIPATHY, CIT - DR / DATE OF HEARING: 26.11.2012 / DATE OF PRONOUNCEMENT: 30.11.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.7. 9.2012 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2005 - 06 RAISING THE FOLLOWING GROUNDS. 1. FOR THAT THE ADDITION OF 2,23,780 AS MADE UNDER HEAD SUNDRY CREDITORS IS ARBITRARY AND UNJUSTIFIED AND THE LEARNED COMMISSIONER SHOULD NOT HAVE CONFIRMED THE SAME. 2. FOR THAT THE DISALLOWANCE OF GOODS EXPENSES AS SUSTAINED ATRS.5,00,000 IS ILLOGICAL AND UNJUSTIFIED. 3. FOR THAT THE ADDITION OF RS.1,51,418 UNDER THE HEAD COMMISSION & INTEREST AS MADE BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED COMMISSIONER IS ALSO IMPROPER AND UNJUSTIFIED . 2. AT THE TIME OF HEARING THE LEARNED AR OF THE ASSESSEE DID NOT PRESS GROUND NO.3 AND AS SUCH GROUND NO.3 IS DISMISSED AS NOT PRESSED. 3. AS REGARDS GROUNDS NO.1, THE FACTS IN BRIEF ARE THAT M/S.GARG TRADING CO., IS A PROPRIETORSHIP CONCERN OF SRI DIWAN CHAND GARG (HUF).THE I.T.A.NO. 491/CTK/2012 2 CONCERN DEALS IN TRADING OF SANITARY WARES AND BUILDING MATERIALS. ON 29.11.2005, A SEARCH OPERATION U/S.132 OF THEI.T.ACT,1961 WAS CONDUCTED IN RESPECT O F GARG GROUP CASES. DURING THE COURSE OF SEARCH OPERATION THE BUSINESS PREMISES OF M/S.GARG TRADING CO., AS WELL AS RESIDENTIAL PREMISES OF SRI DIWAN CHAND GARG (HUF) WERE COVERED. ON EXAMINATION OF THE SEIZED DOCUMENTS IDENTIFIED AS GLS - 6, THE ASSESSING O FFICER NOT ICED THAT THE SUNDRY CREDITOR FIGURE STANDS AT 94,25,449 WHEREAS AS PER THE AUDITED P & L ACCOUNT ANNEXED TO THE RETURN (SCHEDULE - III) THE FIGURE WAS 95,78,393. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE DISCREPANCY. THE ASSESSEE FURNISHED T HE LEDGER COPIES AND SUBMITTED THAT THE FIGURES APPEARING IN THE SEIZED DOCUMENT ARE NOT FINAL FIGURE AND THE FIGURES SHOWING FINAL FIGURES ARE SELF EXPLANATORY AND HENCE, THERE IS NO CAUSE TO TREAT THE DIFFERENCE AS UNACCOUNTED. THE ASSESSING OFFICER OBSE RVED THAT THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM THE RESPECTIVE CREDITORS ALONG WITH BOOKS OF ACCOUNTS AND AS SUCH THE AUTHENTICITY OF THE ASSESSEES CLAIM COULD NOT BE VERIFIED. THEREFORE, HE TREATED THE DIFFERENTIAL AMOUNT OF 1,52,944 ON ACCOUNT OF SUNDRY CREDITORS AS THE RESULT OF THE INFLATED PURCHASES AND ACCORDINGLY HE MADE THE IMPUGNED ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER THE ASSESSING OFFICER FOUND DISCREPANCIES IN RESPECT OF PARTIES LIKE, EID PARY INDIA LTD.,SUSHILA INDUSTRIES AND SAVOIR FAIRE MERCHANDIZING CO., FOR TOTAL AMOUNT OF 70,836. THE DIFFERENCE COULD NOT BE RECONCILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER MADE THE ADDITION OF 2,23,780 ( I.E.,1,52,944 + 70,836). ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAME ON THE OBSERVATION THAT THE ASSESSEE FAILED TO SATISFACTORILY EXPLAIN THE DISCREPANCIES IN CASE OF SUNDRY CREDITORS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A.NO. 491/CTK/2012 3 4. THE LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT NO SPECIFIC DISCREPANCY IS POINTED OUT BY THE ASSESSING OFFICER. HE REITERATED THE SUBMISSIONS AS WERE RAISED BEFORE THE AUTHORITIES BELOW AND PRAYED FOR DELETION OF THE IMPUGNED ADDITION. 5. THE LEARNED CIT - DR ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW FOR HER PART SUBMISSIONS. 6 . HAVING HEARD BOTH THE PARTIES AND CONSIDERING THE MATERIAL AVAILABLE ON RECORD , WE FIND THAT WITH RESPECT TO THE SUNDRY CREDITORS WHICH THE ASSESSING OFFICER H AS CONFIRMED WHICH HAS BEEN SUBMITTED THAT THE DOCUMENT GLS - 6 WHICH WAS FOUND AT THE TIME OF SEARCH INDICATED THE CREDITORS AT 95,17,043 WHEN A DEBIT ON ACCO UNT OF EXCESS PAYMENT HAD BEEN SHOWN AGAINST THOSE PARTIES INDICATING 91,594 RECEIVABLE FROM THEM OR TO BE ADJUSTED AGAINST PURCHASES. THE ASSESSING OFFICER NETTED THE TWO AND FURTHER PROCURED INFORMATION BY HOLDING A VIEW THAT CREDITORS AMOUNTED TO 70,836 INDICATED THE CREDIT BALANCE AGAINST THE ASSESSEE, WHICH THE ASSESSEE HAD NOT SHOWN. THE LEARNE D COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CREDITORS CANNOT BECOME DEBTORS INSOFAR AS THE SEARCH DOCUMENT AND THE FINANCIAL STATEMENTS SUBMITTED AT THE TIME OF ASSESSMENT WOULD HAVE INDICATED EXACTLY DOUBLE OF THE SUM OF 91,594 AND NOT 1,52,944 WHICH H AS BEEN CONSIDERED BY THE ASSESSING OFFICER CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THE BALANCES SHOWN BY THE ASSESSEE WERE CORRECT INSOFAR AS THE PURCHASES AGAINST 91,594 HAD NOT BEEN SHOWN. HE SHOULD HAVE RATHER EQUATED THE SUM OF 70,836 AGA INST 91,594 FOR THE PURPOSE OF HOLDING PURCHASES NOT ENTERED INTO THE BOOKS OF ACCOUNT AMOUNTING TO APPROXIMATELY 20,000. IN ANY CASE, WE HAVE PERUSED THE SEARCH DOCUMENT AND FINANCIAL STATEMENT, WHICH CLEARLY INDICATE THAT THERE IS NO PURPOSE FOR BRINGI NG TO TAX THE SUM OF 2,2,3,780 AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE IN I.T.A.NO. 491/CTK/2012 4 VIEW OF THE ASSE SSMENT HAVING BEEN FRAMED U/S.1 53A R.W.S. 143(3) INSOFAR AS THE SEARCH DOCUMENT DOES NOT INDICATE ANY UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF BOGUS PURCHASES WHEN THE ASSESSING OFFICER HIMSELF HAS TRIED TO VERIFY THE CREDIT BALANCE IN THE HANDS OF THE THIRD PARTY WHICH HE PROPERLY CONSIDERED AS NOT ENTERED IN THE BOOKS OF ACCOUNT BY SQUARING OFF THE DEBTS IF ANY. ON THIS ISSUE ALONE, THEREFORE, WE DO NOT FIND ANY MERIT IN THE ADDITION OF 2,23,783 WHICH HAS BEEN CONFIRMED BY THE LEARNED CIT(A). THEREFORE, WE SET ASIDE THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DIRECT DELETION OF THE ADDITION OF 2,23,780 BY ALLOWING THE GROUND RAISED BY THE ASSESSEE IN THIS REGARD. 7. A S REGARDS THE DISALLOWANCE OF GOODS EXPENSES AS RAISED IN GROUND NO.2 , THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM OF AN AMOUNT OF 12,37,546 UNDER THE HEAD GOODS EXPENSES ON THE FINDING THAT DESPITE GIVING SEVERAL OPPORTUNITIES TO THE ASSESS EE IT FAILED TO FURNISH THE DETAILS OF PAYESS ALONG WITH BOOKS OF ACCOUNT, BILLS & VOUCHERS TO SUBSTANTIATE ITS CLAIM OF SUCH EXPENSES. 8. BEFORE THE LEARNED CIT(A) THE ASSESSEE SUBMITTED THAT THE GOODS EXPENSES RELATE TO INWARD CARRIAGE OF GOODS RECEIVED FROM OUT OF BHUBANESWAR. HE FURTHER SUBMITTED THAT MOST OF THE PURCHASES ARE FROM OUTSIDE AND NO PURCHASE CAN BE MADE WITHOUT INCURRING EXPENDITURE ON ACCOUNT OF TRANSPORTATION. CONSIDERING SUCH SUBMISSION OF THE ASSESSEE, THE LEARNED CIT(A) REDUCED THE DISALLOWANCE TO 5,00,000 ON THE FINDING THAT IT CANNOT BE SAID THAT NO EXPENDITURE ON TRANSPORTATION HAVE BEEN INCURRED. 9. HAVING HEARD BOTH THE PARTIES AND PERUSING THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAD DIS ALLOWED THE ENTIRE EXPENSES ON THE OBSERVATION THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM BY PRODUCING DETAILS OF BILLS AND VOUCHERS ETC. HOWEVER, THE I.T.A.NO. 491/CTK/2012 5 LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAD DISALLOWED A SUM OF 5,00,000 OUT OF 12,37,546 ON AD HOC BASIS. THE LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT SIMILAR SUCH ADDITION HAS BEEN DELETED BY THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AYS 2003 - 04 AND 2004 - 05 IN ITS CONSOLIDATED ORDER DT.18.11.2011 IN ITA NOS.427 ,428 AND 429/CTK/2011,WHICH IS NOT DISPUTED BY THE LEARNED DR. THE RELEVANT PARAGRAPHS IN THE SAID ORDER ARE PARAGRAPHS 8 AND 16,WHICH ARE REPRODUCED AS UNDER : 8. WITH RESPECT TO NEXT GROUND RELATING TO THE GOODS EXPENSES AS MENTIONED ABOVE, THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL INSOFAR AS THE ASSESSING AUTHORITIES HAVE TRIED TO CONTINUE TO TAKE THE STAND TAKEN BY THEM FOR THE 2001 - 02 AND 2002 - 03 WHEN THEY REQUIRE THE ASSESSEE TO MATCH THE INCURRI NG OF EXPENSES FOR INWARD FREIGHT PAID BY THE ASSESSEE ON THE GOODS PURCHASED BY THEM SENT BY LORRY FROM AP AND RAJSTAHAN WHICH LORRIES WERE PAID IN CASH ON A PARTICULAR DATE WITHOUT ANY FORMALITY OF ENTERING INTO CONTRACT AND AS PER THE DIRECTION OF THE MANUFACTURERS. THE INCREASING OF INWARD FREIGHT EXPENSES INCIDENTAL TO THE PURCHASES THAT HAD INCREASED FROM 90 LAKHS TO 6 CRRES IN THE IMPUGNED ASSESSMENT YEAR THEREFORE REQUIRES NO VERIFICATION IN THE LINE AS REQUIRED BY THE ASSESSING OFFICER BY LINK ING THE PURCHASES TO THE FREIGHT PAID. THE AUDITORS HAVE VERIFIED THE EXPENSES AND THAT IS THE REASON THE ASSESSING OFFICER WAS ABLE TO RELATE THE EXPENSES PAID TO THE TRUCK DRIVERS ON THE DELIVERY OF THE GOODS. THERE WAS NO REQUIREMENT FOR FURTHER VOUCHER S FOR THE CASH PAID WHICH HAS BEEN HELD AGAINST THE ASSESSEE BY THE AUTHORITIES BELOW AS SELF - MADE VOUCHERS ARE BOGUS. THE LORRY RECEIPTS INSCRIBE THE FREIGHT TO BE PAID BY THE ASSESSEE AS DIRECTED BY THE MANUFACTURERS OF THE GOODS DEALT WITH BY THE ASSESS EE. THEREFORE IT WAS NOBODYS CASE THAT THE DISALLOWANCE COULD BE MADE EITHER UNDER THE PROVISIONS OF SECTION 40A(3) OR U/S.40(A)(IA). THE CULMINATION OF DISALLOWANCE THEREFORE HAS BEEN ONLY ON HOLDING THE SAME AS BOGUS. THEREFORE, THE ISSUE REMAINS COVERE D BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2001 - 02 AND 2002 - 03 WHICH COPY HAS BEEN PLACED ON RECORD. HE PRAYED THAT THE DISALLOWANCE OF 3,66,088 IN THE ASSESSMENT YEAR 2003 - 04, 9,11,520 IN THE ASSESSMENT YEAR 2004 - 05 AND 50.88.438 IN THE ASSESSMENT YEAR 2007 - 08 MAY KINDLY BE DIRECTED TO BE DELETED. XX XX XX XX 16. WITH RESPECT TO THE GOODS EXPENSES ISSUE, WE HAVE ADJUDICATED THEREUPON AS PER THE TRIBUNALS ORDER, IS DIRECTED TO BE DELETED. I.T.A.NO. 491/CTK/2012 6 IN VIEW OF THE ABOVE , WE HOLD THAT THE DISALLOWANCE OF THE CLAIM OF GOODS EXPENSES AS MADE BY THE ASSESSING OFFICER AND EVEN AS SUSTAINED BY THE LEARNED CIT(A) IN THE ASSESSMENT YEAR UNDER CONSIDERATION, IS NOT AT ALL JUSTIFIED. WE , THEREFORE, SET ASIDE THE IMPU GNED ORDERS OF THE LOWER AUTHORITIES IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO ALLOW THE GOODS EXPENSES AS CLAIMED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: 30.11.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : DIWAN CHAND GARG (HUF), PROP. GARG TRADINGCO., OLD STATION BAZAR,BHUBANESWAR 751 006. 2 / THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX,CIRCLE 1(2), BHUBANESWAR . 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 28.11.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACE D BEFORE THE DICTATING MEMBER 28.11.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE F ILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.