Doshi Cotton Industries, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-4, Surendranagar

ITA 523/RJT/2013

• Counselvise Citation: 52324914 RSA 2013
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANT B JHAVERI
• Assessee Lawyers: RK DOSHI
• Keywords: Bogus purchase; Principle of natural justice; Revised return
• Section: 131; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL, SMC BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM ITA NO. 523/RJT/2013 ASSESSMENT YEAR : 2009-10 DOSHI COTTON INDUSTRIES, RAJKOT HIGHWAY, AT GODAVARI TAL. MULI, DIST. SURENDRANAGAR PAN : AACFD 3308 G ( / APPELLANT) THE INCOME-TAX OFFICER, WARD-4 SURENDRANAGAR / RESPONDENT / ASSESSEE BY SHRI R.K. DOSHI, CA / REVENUE BY SHRI JAYANT B. JHAVERI, DR / DATE OF HEARING 11.02.2014 !'# / DATE OF PRONOUNCEMENT 14.02.2014 / ORDER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DA TED 28.10.2013 OF CIT(A)- XVI, AHMEDABAD FOR THE ASSESSMENT YEAR 2009-10. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN MANUFACTURING OF COTTON AND COTTON BALES AND COTTON SEEDS. FOR THE A SSESSMENT YEAR UNDER APPEAL IT FILED RETURN OF INCOME BY E-FILING ON 19.09.2009 AN D SUBSEQUENTLY FILED REVISED RETURN ON 22.07.2010 SHOWING TOTAL INCOME AT RS.35,900/-. THE ASSESSING OFFICER FRAMED ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT ON 14.1 2.2011, WHEREIN HE MADE ADDITION OF RS.3,50,877/- ON THE GROUND THAT THE AS SESSEE-FIRM HAS FABRICATED THE CONFIRMATION LETTERS FROM TWO FARMERS WHO SOLD KAPA S TO THE ASSESSEE-FIRM. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDE D THAT THE TRANSACTIONS WITH THE FARMERS ARE GENUINE AND THESE ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNTS OF THE FIRM ARE AUDITED. THE PURC HASES ARE FOLLOWED BY SALES TO REGISTERED DEALERS, HAVING VAT NOS., HAVING LARGE F ACTORIES (LIKE ADANI WILMAR LIMITED FROM WHOM PAYMENT IS RECEIVED BY BANK (RTGS ). IT WAS FURTHER CONTENTED THAT THE ASSESSING OFFICER WITHOUT EXAMINING THE SA ME, REJECTED THE EXPLANATION AND MADE THE ADDITION OF RS.3,50,877/- ON DOUBT AND SUS PICION. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, LD. C IT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER FOR THE DETAILED REASON GIVEN IN PARAGRAPH 2.5 OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 2 523-RJT-2013 DOSHI COTTON INDUSTRIES (SMC) 2.5 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE BY THE APPELLANT. THE ARGUMENT OF THE APPELLAN T THAT IT HAS MADE SALES AND THAT THERE CAN BE NO SALES WITHOUT PURCHASES AR E UNTENABLE. THE ISSUE AT HAND IS NOT ABOUT VERIFICATION OF SALES OF THE APPE LLANT BUT ABOUT THE GENUINENESS OF THE IMPUGNED PURCHASES. IN THE SUBMI SSIONS REPRODUCED SUPRA, THE APPELLANT HAS NOT BEEN ABLE TO CONTROVER T THE FACT RECORDED BY THE AO ABOUT THE DEAD PERSON. THE APPELLANT HAS ALSO NO T BEEN ABLE TO EFFECTIVELY CONTROVERT THE FINDING OF THE ASSESSING OFFICER AS TO WHY THE APPELLANT FILED TWO SETS OF CONFIRMATIONS ONE WITH SIGNATURES AND THE O THER WITH THUMB IMPRESSIONS PARTICULARLY IN VIEW OF THE FACT THAT T HE FARMERS WERE NOT REPORTED TO BE LITERATE PEOPLE CAPABLE OF SIGNING ANY CONFIR MATIONS. THE ARGUMENT THAT THE INSPECTOR DOES NOT HAS AN AUTHORITY TO ASSESS T HE ASSESSING OFFICER FOR CONDUCTING ANY ENQUIRIES ARE ALSO UNFOUNDED. UNDER THE POWERS ENSHRINED UNDER SECTION 131 THE ASSESSING OFFICER IS EMPOWERE D TO ISSUE COMMISSION TO ANY AUTHORITY FOR CONDUCTING AN ENQUIRY. CONSEQUENT LY, THERE WAS NO INFRACTION OF LAW TO AUTHORIZE THE INSPECTOR TO OBTAIN INFORMA TION AND STATEMENTS FROM THE IMPUGNED FARMERS. THE ARGUMENT THAT THE OFFICE OPEN S AT 10 30 AM AND THE SUMMONS INDICATED TIME OF COMPLIANCE ALSO AT 10 30 AM IS UNFOUNDED SINCE THE SAME WAS JUST A ROUTINE EXERCISE BECAUSE IN ANY CASE IT WAS THE INSPECTOR WHO WAS CONDUCTING ENQUIRIES. CONSIDERING THE ABOVE , IT IS HELD THAT THE ADDITION MADE BY THE LD. AO OF RS.3,50,877/- DOES N OT REQUIRES ANY INTERFERENCE AT THIS STAGE AND THE SAME IS SUSTAINE D THE GROUND OF APPEAL NO.1,2, & 3RAISED IS DISMISSED. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSESS EE IS NOW IN APPEAL BEFORE THIS TRIBUNAL, ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS BAD IN LAW AND CONTRARY TO THE FACTS OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS.3,50,877/- MADE BY THE LEARNED AO AS ALLEGED BOG US PURCHASES. 3. THE ORDER OF THE LEARNED CIT(A) IS ILLEGAL, UNJU STIFIED AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 4. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANT C RAVES LEAVE TO ADD, AMEND, ALTER, VARY OR WITHDRAW ALL OR ANY OF THE GR OUNDS ON OR BEFORE THE HEARING OF APPEAL. 3. AT THE TIME OF HEARING, ON BEHALF OF THE ASSESSE E, SHRI R.K. DOSHI, CA, APPEARED AND FILED A PAPER BOOK CONTAINING 44 PAGES , WHICH INTER-ALIA INCLUDES BILLS OF PURCHASES, AUDIT REPORT U/S 44AB, AUDITED P&L AC COUNT, BALANCE-SHEET AND STATEMENT RECORDED BY THE ASSESSING OFFICER AS WELL AS NOTICES ISSUED. IT WAS CONTENDED THAT THE ASSESSEE PURCHASED COTTON FROM D ISPUTED AGRICULTURIST AT A PRICE COMPARABLE WITH OTHER NON-DISPUTED PURCHASES AND TH E ASSESSING OFFICER HAS NOT DISPUTED THE PURCHASE PRICE. THE QUANTITY ACCOUNT I S MAINTAINED AND TALLIED. SALES QUANTITIES ARE NOT DISPUTED. HAVING ACCEPTED QUANTI TATIVE ACCOUNT AND SALES QUANTITY, PURCHASES CANNOT BE DENIED. HE FURTHER CONTENDED TH AT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER ACCEPTED THE GP AS DECLARED BY TH E ASSESSEE. DISPUTED 3 523-RJT-2013 DOSHI COTTON INDUSTRIES (SMC) AGRICULTURISTS HAVE CONFIRMED THE SALES MADE TO KIR ITBHAI DOSHI & SURESHBHAI DOSHI WHO ARE PARTNERS OF THE ASSESSEE-FIRM. AGRICULTURIS TS ARE ILLITERATE PERSONS AND IN VILLAGES. TRANSACTIONS ARE DONE WITH PERSONAL NAME RATHER THAN THE FIRM. AAMBABHAI PUNABHAI KOLI HAS GIVEN STATEMENT U/S 131(1) OF THE ACT ON BEHALF OF HIS FATHER PUNABHAI VASARAMBHAI KOLI AND THE SAME IS CLARIFIED BY HIM IN HIS STATEMENT. FINALLY, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT TH E PRODUCE HAS BEEN SOLD BY DISPUTED AGRICULTURIST THROUGH BROKER MISTRI MANSUK HLAL AMRUTLAL AND THE SAID BROCKER ALSO CONFIRMED THE TRANSACTION. THEREFORE, SIMPLY BECAUSE THERE IS VARIATION IN SIGNATURE, THE PURCHASE CANNOT BE TREATED AS BOGUS WHEN OTHER OVERWHELMING EVIDENCES ARE PRODUCED. HE ACCORDINGLY CONTENDED TH AT THE PURCHASES MAY BE ACCEPTED. ALTERNATIVELY, THE ENTIRE PURCHASE CANNOT BE ADDED; AT THE MOST ESTIMATED INFLATED COST MAY BE ADDED I.E. AT THE MOST CAN BE 12% AS HELD BY HONBLE GUJARAT HIGH COURT IN THE FOLLOWING TWO CASES :- I. CIT V. SMIIT P. SHETH, (2013) 356 ITR 451 (GUJ) II. CIT V. SATHYANARAYAN P. RATHI, (2013) 351 ITR 1 50 (GUJ) 4. ON THE OTHER HAND, SHRI JAYANT B. JHAVERI, DR, A PPEARED ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT( A). THE LD. DR TOOK US THROUGH THE ASSESSMENT ORDER AND POINTED OUT THAT THE IMPUG NED ADDITION OF RS.3,50,877/- WAS MADE ON THE BASIS OF CROSS VERIFICATION U/S 131 OF THE ACT IN RESPECT OF 25 PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES. IN 23 CA SES, THE SUPPLIERS HAD DENIED TO MADE SALES OF COTTON TO THE ASSESSEE AND IN REMAINING TWO PERSONS THE CONFIRMATION FILED BY THE ASSESSEE BORE SIGNATURE W HEREAS IN THE STATEMENT RECORDED UNDER SECTION 131 OF THE ACT, THEY HAD PUT THUMB IM PRESSION; THEREFORE, THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF BOGUS PURCHASES. THE LD. CIT (A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. WITH REGARD TO THE PLEA OF 12% OF PURCHASE PRICE BE ADDED, THE LD. DR POINTED OUT THAT BEFORE NONE OF THE AUTHORITIES BELOW THE ASSESSEE CLAIMED THAT THOSE 2 5 PERSONS WERE ONLY NAMELENDERS. THEREFORE, 100% OF BOGUS PURCHASES ARE TO BE DISALLOWED. IN SUPPORT OF THIS, THE LD. DR RELIED UPON THE FOLLOWING TWO D ECISIONS:- I. ACIT VS. AMAR MINING CO., ITAT, AHMEDABAD (THIRD MEMBER) 121 ITD 273 II. M/S. SHRI GANESH RICE MILLS V. CIT (ALL) 294 ITR 316. 4 523-RJT-2013 DOSHI COTTON INDUSTRIES (SMC) 5. IN REJOINDER, THE LD. COUNSEL OF THE ASSESSEE PO INTED OUT THAT NONE OF THE DECISIONS RELIED UPON BY THE LD. DR ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AS IN THE PRESENT CASE QUANTITATIVE ACCOUNT IS MAIN TAINED AND TALLIED. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALES QUANTITY. WHEN T HE ASSESSING OFFICER HAS ACCEPTED THE QUANTITATIVE ACCOUNT AND SALES QUANTITY, THE EN TIRE PURCHASES CANNOT BE DISALLOWED AND, AT THE MOST, ESTIMATED INFLATED COS T MAY BE ADDED. 6. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER HAS ACCEPTED THE QUANTITATIVE ACCOUNT AND SALES QUANTITY. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED U/S 44AB OF THE INCOME-TAX ACT. THE AL LEGED PURCHASES ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH REPORTED IN 356 ITR 451 HELD THAT WHEN THE ASSESSING OFFICER ACCEPTED THE TOTAL SALE, HE COULD NOT HAVE QUESTION THE VERY BASIS OF PURCHASES. THE SIMILAR VIEW IS TAKEN BY THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT V. SATHYANARAYAN P. RATHI, REPORTED IN 351 ITR 150. TH E RATIO OF THESE TWO DECISIONS IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. I AM, THEREFORE, OF THE VIEW THAT IT WILL MEET THE END OF JUSTICE IF THE ESTIMAT ED INFLATED COST OF RS. 42,105/- BEING 12% OF RS.3,50,877/- IS ALLOWED. ON THIS BASIS, TH E ADDITION WORKS OUT TO RS.42,105/- (12% OF THE ESTIMATED ADDITION OF RS.3,50,877/-). I HOLD ACCORDINGLY AND DIRECT THE ASSESSING OFFICER TO DISALLOW ONLY RS.42,105/- AS A GAINST THE ENTIRE PURCHASES OF RS.3,50,877/- DISALLOWED BY THE ASSESSING OFFICER I N THE ASSESSMENT ORDER. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- ( $.. &' / T. K. SHARMA) ( ) /JUDICIAL MEMBER *)& +) ,/ ORDER DATE: 14.02.2014 !$ /RAJKOT *BT 5 523-RJT-2013 DOSHI COTTON INDUSTRIES (SMC) / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT- DOSHI COTTON INDUSTRIES, RAJKOT HIGHW AY, AT GODAVARI TAL. MULI, DIST. SURENDRANAGAR 2. / RESPONDENT- THE INCOME-TAX OFFICER, WARD-4,SUREN DRANAGAR 3. ,0,1 * * 2 / CONCERNED CIT-V, AHMEDABAD 4. * * 2- / CIT(A)-XVI, AHMEDABAD 5 . 567 1, * 1#, !$ / DR, ITAT, RAJKOT 6 . 79 :; / GUARD FILE *)& / BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT