The ITO, Ward-1, Nadiad V. M/s. Unichem Industries, Tal.Nadiad

ITA 627/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9170 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-08-2009
• Assessment Year: 1996-1997
• Appeal Filed On: 25-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SENIOR
• Assessee Lawyers: DIVYAKANT PARIKH
• Keywords: Bogus purchase; Business income; Income from undisclosed sources

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI R V EASWAR VICE-PRESIDENT] [AND SHRI P K BANSAL - ACCOUNTANT MEMBER) ITA NO.627/AHD/2005 (ASSESSMENT YEAR: 1996-97) THE INCOME-TAX OFFICER, WARD-1,NADIAD V/S M/S UNICHEM INDUSTRIES, NR. PATEL WADI, PIPLAG, TAL: NADIAD (APPELLANT) (RESPONDENT) ITA NO.930/AHD/2005 (ASSESSMENT YEAR: 1996-97) M/S UNICHEM INDUSTRIES, NR. PATEL WADI, PIPLAG, TAL: NADIAD V/S THE INCOME-TAX OFFICER, WARD-1,NADIAD (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SMT. NEETA SHAH, SENIOR DR RESPONDENT BY:- SHRI DIVYAKANT PARIKH O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF THE CIT(A) DAT ED 02-12- 2004. 2 GROUND NO.1 IN THE REVENUES APPEAL AS WELL AS GROUND NO.4 IN ASSESSEES APPEAL RELATE TO THE ESTI MATION OF PROFIT @ OF 5% OF THE VALUE. THE LEARNED AR POINTED OUT THAT IN AY 1997-98 THE PROFIT HAS BEEN ESTIMATED @ 5% OF TH E SALES. 2 THIS ORDER OF THE CIT(A) WAS CONFIRMED BY THE TRIBU NAL VIDE ITS ORDER DATED 30-04-2008 IN ITA NO.1837/AHD/2004 IN T HE CASE OF THE ASSESSEE. ATTENTION WAS DRAWN TO PARA-7 OF THE ORDER OF THE TRIBUNAL. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE ASSESSING OFFICER. 3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH TH E ORDER OF THIS TRIBUNAL DATED 30-04-2008 IN ITA NO.1837/AHD/2 004 IN THE CASE OF THE ASSESSEE, IN WHICH THIS TRIBUNAL UNDER PARA-7 HAS HELD AS UNDER:- 7 WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED RI VAL SUBMISSIONS. THE FACTS AND CIRCUMSTANCES BEING SIMI LAR TO THE CASE OF PRATIK CHEMICALS (SUPRA), WHEREIN THE TRIBUNAL DELE TED THE ADDITION IN RESPECT OF PURCHASES FROM SUPPLIER. IN VIEW THEREOF , WE UPHOLD THE ORDER OF LD. CIT(A) IN RESTRICTING THE ADDITION OF 5%. REVENUES APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE T RIBUNAL, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITI ON ONLY UPTO 5% OF THE SALE BILLS RELATED TO THE BOGUS PURCHASES. T HUS, GROUND NO.1 OF THE REVENUES APPEAL STANDS DISMISSED WHILE THAT OF THE ASSESSEE IS ALLOWED. 4 GROUND NO.2 IN THE REVENUES APPEAL RELATES TO DELETION OF THE ADDITION OF RS.32,11,970/- MADE ON ACCOUNT OF BOGUS PURCHASES. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED AR POINTED OUT THAT THIS ISSUE IS ALSO COVERED BY THE DECISION OF THIS TRIBU NAL DATED 30- 04-2008 IN ITA NO.1837/AHD/2004 IN THE CASE OF THE ASSESSEE, IN 3 WHICH THE TRIBUNAL HAS RESTRICTED THE ADDITION ONLY TO 5% OF THE TOTAL BOGUS PURCHASES. 5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH TH E ORDER OF THIS TRIBUNAL DATED 30-04-2008 IN ITA NO.1837/AHD/2 004 IN THE CASE OF THE ASSESSEE. WE NOTED THAT THIS TRIBUNAL H AS DEALT WITH SIMILAR ISSUE IN THE CASE OF THE ASSESSEE FOR AY 19 97-98 IN THE FOLLOWING MANNER:- 2. BRIEF FACTS ARE THAT DURING THE COURSE OF SEARC H IN THE PREMISES OF SHRI NIKUNJ K. SHAH AND SHRI JITENDRA K. SHAH, I T WAS FOUND THAT THESE PERSONS WERE ISSUING BOGUS SALE BILLS IN CONS IDERATION OF COMMISSION @ 1% TO 1.25%. THE AMOUNT OF SALE BILLS WERE RECEIVED THROUGH CHEQUE / DEMAND DRAFT AND AFTER RETAINING T HE SAID COMMISSION, BALANCE AMOUNT WAS RETURNED TO THE PART IES. ASSESSEE IS ONE OF THE PURCHASERS. THE A.O FOUND THAT THE ASSES SEE HAS MADE SUCH BOGUS PAPER TRANSACTION AT RS.10,31,900/- AND ADDED THE SAME TO THE TOTAL INCOME REJECTING THE EXPLANATION OF THE ASSES SEE. 3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL. THE LD. CIT(A) RESTRICTED THE ADDITION TO 5% OF THE TOTAL VALUE OF THE SALE BILLS BY FOLLOWING OBSERVATIONS:- 4.7 I HAVE CAREFULLY GONE THROUGH THE ABOVE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE AND TH E ORDER OF THE AO AND ARGUMENTS MADE BY THE AO DURING THE APPELLATE PROCEEDINGS. THE AO HAS NARRATED THE FACTS IN PARA 3.2 OF THE ASSESSMENT ORDER. THE STATEMENT RECORDED IN CASE OF SHRI NIKUNJ K SHAH, SHRI JITEND RA K SHAH CLEARLY REVEAL THE FACT THEY WERE INVOLVED IN ISSUING BILLS ONLY AND NO GENUINE TRANSACTIONS OF MATERIAL SUPPLY WAS DONE BY THEM. DURING THE COURSE OF RECORDING STATEMENT IN CASE OF JITENDRA K SHAH HAS CATEGORICA LLY STATED THAT ONLY PAPER TRANSACTIONS WERE DONE AND G OODS WERE NEVER DELIVERED. THE PARTIES WERE EITHER APPROACHING DIRECTLY OR THROUGH BROKERS AND AS PER THEIR REQUIREMENTS BILLS OF PARTICULAR COMMODITY WERE ISS UED. 4 ON RECEIPT OF THE CHEQUES/DEMAND DRAFTS AND WITHDRAWING CASH FROM THE BANK AND DEDUCTING THE COMMISSION @ 1% TO 1.25% CASH WAS RETURNED TO THE PARTY OR BROKER. THE CLAIM OF APPELLANT THAT PURCHA SES ARE GENUINE, IS THEREFORE FOUND TO BE NON-ACCEPTABL E IN VIEW OF THE ABOVE FACTUAL POSITION AND I AM OF THE VIEW THAT ENTIRE PURCHASES ARE BOGUS AND NOT BACKED BY DELIVERY OF GOODS. THEREFORE, SALES TURNOVER OF THE APPELLANT IS ALSO COMPLETELY BOGUS. THESE ARE ONLY PAPER TRANSACTIONS NOT BACKED BY DELIVERY OF GOODS. 4.8 THE ALTERNATE PLEA OF THE APPELLANT THAT IN SUC H A CASE, ONLY REASONABLE ESTIMATE OF PROFIT BE MADE, I S MORE ACCEPTABLE BECAUSE THE APPELLANT APPEARS TO BE INVO LVED IN THE BUSINESS OF ISSUING BOGUS SALES BILLS. SINCE ENTIRE PURCHASES ARE BOGUS, THEREFORE, ALL ITS SALES ARE A LSO BOGUS AND RECORDED IN ITS BOOKS WITH THE PURPOSE TO GIVE ENTRY TO OTHERS WHO MIGHT HAVE SHOWN IN THEIR BOOKS AS PURCHASES FROM THE APPELLANT. IN PROCESS, SOME MARG IN MIGHT HAVE BEEN RETAINED BY THE APPELLANT AND THERE FORE IT WOULD BE JUST AND PROPER TO ESTIMATE 5% VALUE OF TOTAL SALES BILLS ISSUED AS PROFIT EARNED BY THE APPELLAN T. THE AO IS THEREFORE DIRECTED TO RESTRICT THE ADDITION T O THE EXTENT OF ESTIMATED PROFIT EARNED ON ISSUE OF SALES BILLS ONLY. THE BALANCE ADDITION IS THEREFORE DIRECTED TO BE DELETED. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. LD. D.R. CONTENDS THAT THE BURDEN TO ESTABLISH THE GENUINENE SS OF PURCHASE WAS ON THE ASSESSEE. RELIANCE WAS PLACED ON THE JUDGMEN T OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS LA MEDICA, 2 50 ITR 575 (DEL.), WHEREIN THE ENTIRE AMOUNT OF PURCHASE WAS H ELD AS INCOME FROM UNDISCLOSED SOURCES. 5. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND , CONTENDS THAT THE CASE LAW CITED BY REVENUE IS NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE. IN THE CASE OF LA MEDICA (SUPRA), THE GOODS WERE ACTUALLY PURCHASED WHEREAS IN ASSESSEES CASE, IT I S A MATTER OF FACT THAT THE PURCHASES WERE NOT MADE AT ALL AND THESE B ILLS WERE BOGUS BILLS WITHOUT DELIVERY OF GOODS AND ONWARD SALES AR E ALSO BOGUS WITHOUT DELIVERY. SINCE THERE WAS NO ACTUAL TRANSAC TION, THE ESTIMATE DRAWN BY THE LD. CIT(A) IS JUSTIFIED. RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CA SE OF ITO VS PRATIK CHEMICALS, IN ITA NO.3090 AND 3091/AHD./2003 , WHEREIN THE FACTS ARE SIMILAR AND THE ADDITIONS WERE MADE ON TH E BASIS OF BOGUS 5 CONCERNS OF SHRI N.K. SHAH AND SHRI J.K. SHAH. IN T HIS CASE, THE ENTIRE ADDITION MADE BY THE A.O WAS DELETED BY THE LD. CIT (A). TRIBUNAL UPHELD THE ORDER OF LD. CIT(A) BY FOLLOWING OBSERVA TIONS:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE ASSESSE E IS ENGAGED IN TRADING OF OF CHEMICALS. THE A 0 TREATED THE PURCHASES RRIADE FROM THE FOLLOWING 7 CONCERNS WHIC H WERE OF ALLEGEDLY OWNED BY SHRI J. K. SHAH AS BOGUS : 1. M/S. DIPEN ENTERPRISE RS.174050 2. M/S. JAY ASSOCIATES RS.280495 3. M/S. UNNATI SALES CORPN. RS.940940 4. M/S. S. B. CORPN. RS.243000 5. M/S. R G. ENTERPRISE RS.543750 6. GOKULENDU SALES AGENCY RS.103762 7. K. B. SALES CORPN. RS.437080 ------------- RS.2725077 ------------- AFTER HOLDING SO, A0 DISALLOWED 25% OF THE SAID PURCHASES AT RS.6,81,269/- AND RS.2,90,294/- IN THE ASSESSMENT YEARS 1996-97 AND 1998-99 RESPECTIVELY A ND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE REASONS FOR THE ABOVE WAS THAT A SEARCH OPERATION W AS CARRIED OUT AT THE PREMISES OF SHRI N. K. SHAH ARID SHRI J. K. SHAH AND IN THE STATEMENT RECORDED U/S 132(4) THEY HAVE STATED THAT 'THEY HAVE OPENED SEVERAL BANK ACCOUNTS IN THE NAME OF BOGUS CONCERNS AND OPERATED BY THEM IN WHICH CHEQUES WERE COLLECTED FROM THE BILL PURCHASERS AND CASH WAS WITHDRAWN EITHER FROM THE BANK ACCOUNT AND AFTER ROTATION THROUGH SEVERAL BAN K ACCOUNT. THEY WERE ISSUING BOGUS BILLS FROM VARIOUS CONCERNS FLOATED BY THEM AND NO GENUINE TRANSACTION S HAVE BEEN DONE BY THEM. AS PER THE STATEMENT OF SHR I J. K. SHAH RECORDED ON OATH ON 6-8-1997 WHEREIN IN RESPONSE TO REPLY OF QUESTION NO.12 HE STATED THAT SHRI DINESH B. SHAH, ONE OF THE DIRECTORS WAS WORKING AS A DALAI FOR OBTAINING BOGUS BILLS FOR PRATIK CHEMICAL S I.E. THE ASSESSEE FROM THE CONCERN OF SHRI N. K. SHAH AN D SHRI J. K. SHAH. THE LEARNED CIT(A) OBSERVED THAT THE ONLY MATERIAL ON THE BASIS OF WHICH THE AFORESAID DISALLOWANCE WAS MADE BY THE A0 WAS THE STATEMENT O F SHRI J.K. SHAH AND SHRI DINESH B. CHAD. IT WAS OBSE RVED 6 THAT THESE STATEMENTS WERE RECORDED AT THE BACK OF THE ASSESSEE AND THE ASSESSEE WAS NOT ALLOWED OPPORTUNI TY TO CROSS EXAMINE THEM. IN THE CIRCUMSTANCES, THE LEARN ED CIT(A) OPINED THAT THESE STATEMENTS COULD NOT BE RE AD AGAINST THE ASSESSEE AND HENCE FINDING NO OTHER MAT ERIAL ON RECORD TO SUPPORT THE DISALLOWANCE HE DELETED TH E SAME. WE FIND THAT THE ABOVE FINDINGS OF THE LEARNE D CIT(A) THAT THE ASSESSEE WAS NOT ALLOWED TO CROSS EXAMINE THE PERSONS ON WHOSE STATEMENTS THE A0 HAS RELIED UPON TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE COULD NOT BE CONTROVERTED BY THE REVENUE. THE REVENUE COULD NOT BRING ANY MATERIAL BEFORE US TO S HOW WHY THE STATEMENTS OF THE ASSESSEE SHOULD NOT BE ACCEPTED AND WHY THE STATEMENTS OF SHRI J. K. SHAH AND SHRI DINESH B. SHAH SHOULD HE TREATED AS SACROSANCT FURTHER, IT IS OBSERVED THAT SALES SHOWN BY THE ASS ESSEE WERE ACCEPTED BY I HE DEPARTMENT. THE REVENUE COULD NOT CONTROVERT THE SUBMISSIONS OF THE ASSESSEE THAT WITHOUT PURCHASING, THE GOODS COULD NOT HAVE BEEN S OLD BY THE ASSESSEE. IN THE CIRCUMSTANCES, WE FIND THAT NO MATERIAL COULD BE BROUGHT ON RECORD BEFORE US BY TH E REVENUE THAT THE PURCHASES FROM THE AFORESAID CONCE RNS AS SHOWN BY THE ASSESSEE WERE MORE THAN THE MARKET VALUE OF THESE PRODUCTS AT THE RELEVANT TIME. ON TH E OTHER HAND, WE FIND THAT THE A0 HAS OBSERVED IN THE ORDER THAT THE RATES AT WHICH THE ASSESSEE HAS SHOWN PURCHASES FROM 7 CONCERNS IN QUESTION IS AT TIMES MORE THAN T HE PURCHASES SHOWN BY THE ASSESSEE FROM OTHER PARTIES AND AT TIMES THE SAME WAS ALSO LESS THAN THE PURCHASES SHOWN FROM OTHER PARTIES.IN THESE CIRCUMSTANCES, TH E REVENUE COULD NOT BRING ANY MATERIAL TO SHOW THAT T HE TOTAL VALUE OF THE PURCHASES SHOWN BY THE ASSESSEE FROM THESE CIRCUMSTANCES, THE MORE THAN THE MARKET VALUE . HENCE, CONSIDERING THE FULL FACTS AND CIRCUMSTANCES , OF THE CASE, WE DO NOT FIND ANY GOOF REASONS TO INTERF ERE WITH THE ORDER OF THE LEARNED CIT(A) WHICH IS CONFI RMED AND THE GROUNDS OF APPEAL OF THE REVENUE IN BOTH TH E YEARS ARE DISMISSED. 6. IN THE CASE OF PRATIK CHEMICALS (SUPRA), THE EN TIRE ADDITION HAS BEEN DELETED WHEREAS IN ASSESSEES CASE, 5% ADDITIO N HAS BEEN MADE WHICH HAS BEEN ACCEPTED BY THE ASSESSEE. THE ORDER OF THE LD. CIT(A) WAS RELIED ON. 7 7. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED RI VAL SUBMISSIONS. THE FACTS AND CIRCUMSTANCES BEING SIMI LAR TO THE CASE OF PRATIK CHEMICAL (SUPRA), WHEREIN THE TRIBUNAL DELET ED THE ADDITION IN RESPECT OF PURCHASES FROM SUPPLIER. IN VIEW THEREOF , WE UPHOLD THE ORDER OF LD. CIT(A) IN RESTRICTING THE ADDITION OF 5%. REVENUES APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THIS TRIBUNAL, IN OUR OPINION, NO SEPARATE ADDITION CAN BE MADE IN RE SPECT OF BOGUS PURCHASES EXCEPT TO THE EXTENT OF 5% OF THE S ALE BILLS ISSUED RELATING TO THE SAID BOGUS PURCHASES. WE, TH EREFORE, DISMISS THE GROUND TAKEN BY THE REVENUE. 6 THE ASSESSEE SINCE DID NOT PRESS GROUND NOS.1, 2 AND 3, THEREFORE, THESE GROUNDS STAND DISMISSED, AS NOT PRESSED. GROUND NO.4 HAS ALREADY BEEN ALLOWED WHILE DEALING WITH GROUND NO.1 OF THE REVENUES APPEAL. 7 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED WHILE THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-09-2009 SD/- SD/- (R V EASWAR) VICE-PRESIDENT (P K BANSAL) ACCOUNTANT MEMBER DATE : 04-09-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S UNICHEM INDUSTRIES, NR. PATEL WADI, PIPLAG, TAL: NADIAD 2. THE INCOME-TAX OFFICER, WARD-1,NADIAD 3. THE CIT CONCERNED 4. THE CIT(A)-V, BARODA 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE 8 BY ORDER DY.R/AR, ITAT, AHMEDABAD