The ACIT, Circle-9, Surat V. M/s. Anand Exports, Surat

ITA 535/AHD/2009

• Counselvise Citation: 53520514 RSA 2009
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 535/ AHD/2009 (ASSESSMENT YEAR 2005-06) ACIT, CIRCLE 9, SURAT VS. M/S. ANAND EXPORTS, 709/710, PRINCESS PLAZA, NEAR MINI BAZAR, VARACHHA ROAD, SURAT PAN/GIR NO. : AAHFA4063C (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI B L YADAV, SR. DR RESPONDENT BY: SHRI SAPNESH R SHETH, AR DATE OF HEARING: 23.05.2012 DATE OF PRONOUNCEMENT: 15.06.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS THE REVENUES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A) V, SURAT DATED 27.11.2008 FOR THE ASSESSMENT YEAR 2005-06. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. C.I.T. (A) HAS ERRED IN DELETING THE ADDITION O F RS.8,85,798/- MADE BY THE A.O. ON ACCOUNT OF PURCHASES, WITHOUT A PPRECIATING THE FACTS OF THE CASE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ID. C.I.T.(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7,00,000/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF CLAIM OF LOSS DUE TO THEFT, WITHOUT APPRECIATING THE FACTS OF THE CASE. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. I.T.A.NO.535 /AHD/2009 2 2. BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAG E REGARDING 1 ST ISSUE ARE NOTED BY LD. CIT(A) ON PAGE 1 & 2 OF HIS ORDER AND THE RELEVANT PARA OF THE ORDER OF LD . CIT(A) IS REPRODUCED BELOW: DURING THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED THAT THE ASSESSEE HAD PURCHASED POLISHED DIAMONDS FROM 5 PAR TIES WHOSE DETAILED LIST IS PRODUCED BY THE ASSESSING OFFICER AT PARA 4 AT PAGE NO. 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICE R SERVED NOTICE DATED 29.11.2007 U/S. 133(6) OF THE ACT TO T HE ABOVE SAID PARTIES. HOWEVER THESE NOTICES WERE RETURNED UNSERV ED BY THE POSTAL AUTHORITY IN TWO CASES. FURTHER SPOT INQUIRI ES WERE CARRIED OUT AT THE GIVEN ADDRESS OF THOSE PARTIES REVEALED THAT SINCE LAST 10 YEARS NO BODY NAMED DOSHI GEMS AND SHRI VIMAL D DOS HI WERE STAYING THERE ABOUT THAT MATTER CARRYING ON SUCH BU SINESS FURTHER IN CASE OF ONE M/S. SHRI HARESH J KATHARIA IT WAS REVE ALED THAT AT THE GIVEN ADDRESS ONE TAILOR WAS OPERATING HIS EMBROIDE RY WORK. SIMILARLY ONE MR. PRAVIN S VORA WAS DOING BUSINESS IN CLOTH AND WHERE AS SHRI VASANT M SHAH WAS DOING BROKERAGE BUS INESS SINCE LAST THREE YEARS AND THEREFORE THE ASSESSING OFFICE R ISSUED LETTER DATED .1.0.12.2007 WHICH IS REPRODUCED BY THE ASSES SING OFFICER AT PARA NO. 4.3 OF THE ASSESSMENT ORDER [PAGE NO. 3]. WHERE IT WAS INTERALIA STATED THAT WHEN THE PARTIES WERE NOT AVA ILABLE AT THE GIVEN ADDRESSES HOW THEIR CONFIRMATIONS WERE FILED BY THE APPELLANT IN ITS SUBMISSION AND THEREFORE VIDE THIS LETTER THE APPEL LANT WAS ALSO ASKED TO PRODUCE SUCH PARTIES. FURTHER THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE COULD NOT REPLY TO THE A FORESAID LETTER AND SO HE ISSUED SHOW CAUSE NOTICE DATED 18.12.2007 WHICH IS REPRODUCED BY THE ASSESSING OFFICER AT PARA NO. 4.4 OF THE ASSESSMENT ORDER [PAGE NO. 5]. ASSESSEE FILED SUBMI SSION DATED 24.12.2007 WHICH IS DISCUSSED BY THE ASSESSING OFFI CER AT PARA NO. 4.5 OF THE ASSESSMENT ORDER [PAGE NO. 5]. THE ASSES SING OFFICER REJECTED THE BOOK RESULTS OF THE ASSESSEE U/S. 145( 3) OF THE ACT AS PER HIS FINDINGS GIVEN AT PARA NO. 5 OF THE ASSESSM ENT ORDER [PAGE NO. 6J. THUS CONSIDERING THE OVERALL FACTS OF THE C ASE AO REJECTED THE BOOK RESULT AND ADDED SUM OF RS. 853798/- ON AC COUNT OF LOWER G P MARGIN. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THE ADDITION AND NOW, TH E REVENUE IS IN APPEAL BEFORE US. I.T.A.NO.535 /AHD/2009 3 4. THE FACTS REGARDING THE SECOND ISSUE ARE NOTED B Y LD. CIT(A) ON PAGE 7 OF HIS ORDER AND THE RELEVANT PARA OF HIS OR DER IS REPRODUCED BELOW: DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS SHOWN RS.7,00,000/-ON ACCOUNT OF LOSS DUE TO THEFT OF DIA MONDS. THE LOSS DUE TO THEFT WAS ON ACCOUNT OF ROUGH DIAMONDS. THE THEFT OCCURRED WHEN THE ROUGH DIAMONDS WERE GIVEN FOR CUTTING THRO UGH MACHINE THE ASSESSING OFFICER VIDE LETTER DATED 10.12.2007 ASKED ASSESSEE TO PROVE THE LOSS DUE TO THEFT OF RS.7,00,000/-. AS SESSEE VIDE LETTER DATED 13.12.2007 & 24.12.2007 MADE NECESSARY SUBMIS SIONS. THE ASSESSING OFFICER WAS NOT SATISFIED WITH ASSESSEE'S REPLY AND THUS HE MADE ADDITION OF RS.7,00,000/- TO THE TOTAL INCO ME OF THE ASSESSEE ON ACCOUNT OF LOSS DUE TO THEFT. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) ON THIS ISSUE ALSO AND HE DELETED THIS ADDITION ALS O AND THE REVENUE IS IN APPEAL BEFORE US ON THIS ISSUE ALSO. 6. LD. D.R. SUPPORTED THE ASSESSMENT ORDER. REGAR DING THE FIRST ISSUE HE HAS SUBMITTED THAT PURCHASES ARE NOT VERIFIABLE AND NO STOCK REGISTER WAS MAINTAINED AND THE ORDER OF LD. CIT(A) SHOULD B E REVERSED AND THAT OF THE A.O. SHOULD BE RESTORED. AS AGAINST THIS, L D. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. THE FIRST ISSUE WAS DECIDED BY LD. CIT(A) AS PER RELEVANT PAR A ON PAGE 5 & 6 OF HIS ORDER AND THE SAME IS BEING REPRODUCED BELOW: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE A.O. I FIND THAT A.O. HAS DRAWN ADVERSE INF ERENCE ON THE GROUND THAT SOME OF THE PARTIES ARE NOT FOUND AT TH E ADDRESSES GIVEN BY ASSESSEE & FURTHER ON THE BASIS OF THE INQUIRIES CONDUCTED THROUGH THE INSPECTOR. HOWEVER, IT IS ALSO A FACT T HAT ASSESSEE HAS FILED COPY OF ACKNOWLEDGMENT OF RETURNS OF INCOME O F ALL THE SUPPLIERS WHICH CONTAINS COMPLETE DETAILS VIZ. PAN, ADDRESS, WARD IN WHICH ASSESSED ETC. ASSESSEE ALSO POINTED OUT TH AT IN TWO CASES NOTICES U/S 133(6) COULD NOT BE SERVED AS THERE IS CHANGE IN ADDRESS OF THE PARTIES. BESIDES THIS, I FIND THAT PAYMENTS FOR PURCHASES ARE I.T.A.NO.535 /AHD/2009 4 ALSO MADE THROUGH ACCOUNT PAYEE CHEQUES & THE A.O H AS ALSO NOT BROUGHT ANY EVIDENCE ON RECORD BY MAKING INQUIRIES FROM THE BANK THAT THE PAYMENTS HAVE NOT GONE INTO THE ACCOUNT OF SUPPLIERS OR THAT THE SAME HAS BEEN RECEIVED BACK BY ASSESSEE. I T IS ALSO TO BE NOTED HERE THAT ASSESSEE HAS MADE PURCHASES FROM AB OVE PARTIES ONLY & AFTER PURCHASING DIAMONDS FROM THEM, THE SAM E HAVE BEEN EXPORTED. THE QUANTITATIVE DETAILS ARE ALSO GIVEN I N THE TAX AUDIT REPORT. NOW, IF THE PURCHASES ARE NOT GENUINE IN TH AT CASE, IT WOULD NOT BE POSSIBLE TO MAKE ANY EXPORT SALES. THEREFORE , IN MY CONSIDERED OPINION ADVERSE INFERENCE CANNOT BE DRAW N PURELY ON THE GROUND THAT SUPPLIERS ARE NOT FOUND TO BE EXIST ING AT THE ADDRESSES AS MENTIONED IN THE PURCHASE BILLS. THIS IS MORE SO BECAUSE ASSESSEE HAS ALSO SHOWN VERY GOOD G.P MARGI N OF 18.86% & THE SAME IS ALSO HIGHER AS COMPARED TO THE G.P RA TIO OF 16.10% OF IMMEDIATELY PRECEDING YEAR. RELIANCE CAN ALSO BE PLACED ON THE FINDINGS OF HONOURABLE GUJARAT HIGH COURT IN THE CA SE OF CIT V. KASHIRAM TEXTILE MILLS P. LTD - 284 ITR 61 WHEREIN, IT WAS HELD THAT REVENUE HAS NOT DISPUTED DETAILS OF CLOSING ST OCK & THAT THERE WERE NO MATERIALS ON RECORD TO CONCLUDE THAT BESIDE S ALLEGED FICTITIOUS PURCHASES THERE WERE OTHER PURCHASES OF SAME MATERIALS UNDER DIFFERENT INVOICES WHICH COULD BE REFLECTED I N CLOSING STOCK GOODS. THUS, CONSIDERING THE OVERALL FACTS OF THE C ASE I AM OF THE CONSIDERED VIEW THAT AO'S ACTION IN MAKING DISALLOW ANCE AT THE RATE OF 25% OF PURCHASES IS NOT JUSTIFIED. THE ADDI TION IS THEREFORE HEREBY DELETED. 8. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), IT IS SEEN THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THE ASSES SEE HAS FILED COPIES OF ACKNOWLEDGEMENT OF RETURN OF INCOME OF ALL THE SUPP LIERS WHICH CONTAINS COMPLETE DETAILS VIZ. PAN, ADDRESS, WARD IN WHICH A SSESSED ETC. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT IN TWO CASES, N OTICES U/S 133(6) COULD NOT BE SERVED AS THERE IS CHANGE IN ADDRESS OF THE PARTIES. THIS IS ALSO THE FINDING OF LD. CIT(A) THAT THE PAYMENTS WERE MADE T HROUGH A/C PAYEE CHEQUES AND THE A.O. HAS NOT BROUGHT ANY EVIDENCE O N RECORD BY MAKING INQUIRY FROM THE BANK THAT HE PAYMENTS HAVE NOT GON E TO THE ACCOUNTS OF THE SUPPLIERS AND THAT THE SAME HAVE BEEN RECEIVED BACK BY THE ASSESSEE. THIS FINDING IS ALSO GIVEN BY THE LD. CIT(A) THAT T HE ASSESSEE HAS MADE I.T.A.NO.535 /AHD/2009 5 PURCHASES FROM THESE PARTIES ONLY AND AFTER PURCHAS ING DIAMONDS FORM THEM, THE SAME HAVE BEEN EXPORTED AND THE QUANTITAT IVE DETAILS ARE GIVEN IN THE TAX AUDIT REPORT. HIS DECISION IS MAINLY ON THIS BASIS THAT IF THE PURCHASES ARE NOT GENUINE, THEN IT IS NOT POSSIBLE TO MAKE EXPORT SALES. THIS FINDING IS ALSO GIVEN BY LD. CIT(A) THAT GP RA TE SHOWN BY THE ASSESSEE IN THE PRESENT CASE IS 18.8% AS AGAINST 16 .10% IN THE IMMEDIATELY PRECEDING YEAR. THESE FINDINGS OF FACT OF LD. CIT(A) COULD NOT BE CONTROVERTED BY LD. D.R. AND HENCE, WE DO NO T FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.1 OF THE REVENUE IS REJECTED. 9. REGARDING THE 2 ND ISSUE, WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AS PER PAGE 8 OF HIS ORDER WHICH IS REPRODUC ED BELOW: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO. THE AO HAS DISALLOWED THE CLAIM SINCE AC CORDING TO HIM THE APPELLANT HAD NOT MAINTAINED ANY STOCK REGI STER WHERE FROM IT COULD BE ASCERTAINED SUCH LOSS AS ALSO ACCO RDING TO THE AO IT IS UNLIKELY THAT THE APPELLANT HAD NOT SECURED I TS STOCK BY WAY OF INSURANCE POLICY, WHERE AS ACCORDING TO THE APPELLA NT IT HAD SUBMITTED THE QUANTITATIVE DETAILS ADDUCED FROM THE SALES AND PURCHASE INVOICES AND THAT THEFT WAS FOUND ON 29-3- 2007 ON THE SAME DAY THE FIR WAS FILED WITH THE POLICE DEPARTME NT AND ALSO THIS FACT IS CLEARLY INDICATED IN THE AUDITORS REMA RKS IN HIS REPORT AND THEREFORE AO SHOULD NOT HAVE DENIED SUCH CLAIM MERELY STATING THAT APPELLANT HAD FAILED TO ESTABLISH THE THEFT. O N CAREFUL CONSIDERATION OF FACTS IT IS NOT IN DISPUTE THAT TH E APPELLANT HAD REPORTED THEFT AND FILED FIR WITH THE POLICE DEPART MENT. FURTHER AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW T HAT SUCH THEFT HAS NEVER OCCURRED OR FOR THAT MATTER SUCH FIR WAS FAKE. FURTHER AO HAD ANY DOUBT ABOUT SUCH CLAIM HE COULD HAVE INQ UIRED WITH THE AUTHORITIES CONCERNED WHO WERE RESPONSIBLE FOR FINDING OUT THE TRUTH OF SUCH THEFT TRUE THAT INITIAL ONUS LIES ON THE ASSESSEE TO PROVE HIS CLAIM BUT ONCE AN INDEPENDENT EVIDENCES ARE PRO DUCED IT IS THE DUTY OF THE AO TO VERIFY SUCH CLAIM WITH REGARDS TO ITS GENUINENESS AND THAT AO COULD NOT TAKE HIS DECISION MERELY ON S URMISE OR CONJECTURE. FURTHER AO HAS NOT BROUGHT ON RECORD AN Y MATERIAL WHICH COULD LEAD TO CIRCUMSTANTIAL EVIDENCE WHICH W OULD REBUT THE I.T.A.NO.535 /AHD/2009 6 CLAIM EVEN BASED ON HUMAN PROBABILITIES AND THEREFO RE MERELY BECAUSE THE ASSESSEE HAD NOT MAINTAINED THE STOCK R ECORD OR FOR THAT MATTER MERELY BECAUSE THE STOCK WAS UNINSURED NO ADVERSE VIEW COULD BE TAKEN AND THEREFORE CONSIDERING THE F ACTS OF THE CASE DISALLOWANCE MADE BY THE AO IN THIS REGARD IS DELET ED. 10. WE FIND THAT THE CLAIM OF THE ASSESSEE WAS REJE CTED BY THE A.O. ON THIS BASIS THAT THE ASSESSEE COULD NOT PROVE THE LO SS DUE TO THEFT. CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THE QUANTITATIV E DETAILS WERE ADDUCED FROM THE SALE AND PURCHASE INVOICES AND THE THEFT W AS FOUND ON 29.03.2007 AND ON THE SAME DAY, FIR WAS FILED WITH THE POLICE DEPARTMENT. A FINDING IS GIVEN BY LD. CIT(A) THAT ALTHOUGH THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND FOR THIS MATT ER THAT MERELY BECAUSE STOCK WAS UNINSURED, NO ADVERSE INTERFERENCE CAN BE DRAWN. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CI T(A) ON THIS ISSUE ALSO CONSIDERING THE FACTS OF THE PRESENT CASE AND, THER EFORE, THE 2 ND GROUND OF THE REVENUES APPEAL IS ALSO REJECTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.535 /AHD/2009 7 1. DATE OF DICTATION 5/6 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6/6.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.7/6 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 15/6 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.15/6 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15/6 /12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .