The Kalind Stainless Steel Products Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(2), Ahmedabad

ITA 663/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6284 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 27-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWA LA
• Assessee Lawyers: CHIRAG R SHAH
• Keywords: Bogus purchase

Judgement Text

ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENCHBAHMEDA BAD ( BEFORE SHRI D. K. TYAGI & SHRI A. K. GARODIA) I.T.A. NO. 663/AHD/2009 (ASSESSMENT YEAR : 2004 -2005) THE KALIND STAINLESS STEEL PRODUCT PVT. LTD., 152-GIDC ROAD NO.5, POST KATHWADA, TAL: DASKROI, DISTRICT AHMEDABAD. (APPELLANT) VS. INCOME TAX OFFICER, WARD 4(2) AHMEDABAD. (RESPONDENT) PAN: AABCK 4913 C APPELLANT BY : SHRI CHIRAG R.SHAH RESPONDENT BY : SHRI SAMIR TEKRIWALA, SR. D.R. ( )/ ORDER PER: SHRI A.K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL; DIRECTED AGAINST THE ORDER OF LEARNED C.I.T.(A0-VIII,AHMEDABAD DATED 12-12-2008 FOR ASSES SMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ASSESSMENT ORDER PASSED BY THE ASSESSING OF FICER AND PARTLY CONFIRMED BY THE CIT (APPEALS) IS BAD IN LAW AND DE SERVES TO BE UNCALLED FOR. 2. THE CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN MAKING ADDITION OF RS. 18,74,000/- TOWARDS BOGUS PURCHASES . THE SAID ADDITION OF RS. 18,74,000/- DESERVES TO BE DELETED. ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 2 3. BRIEF FACTS ARE THAT THE ASSESSEE IS A PRIVATE L IMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF SS INGOTS AND SS F LATS. THE ASSESSEE COMPANY DECLARED LOSS OF RS.34.36 LAKHS IN THE RETURN OF IN COME FILED BY IT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. HAS NOTED THAT THE ASSESSEE HAS CLAIMED BURNING LOSS OF 81863 KGS OF THE MATERIAL CONSUMPTI ON. HE WAS OF THE VIEW THAT THIS BURNING LOSS OF 13% IS EXCESSIVE KEEPING IN VI EW THE NATURE OF BUSINESS OF THE ASSESSEE AND HE HELD THAT 8% OF THE BURNING LOS S IS JUSTIFIED. HE MADE THE DISALLOWANCE OF THE EXCESS BURNING LOSS TO THE EXTE NT OF RS.5,98,234/-. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) AS PER PARAGRAPH 4.4 OF HIS ORDER, HAS HELD THA T THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF BURNING LOSS IS NOT JUSTIFIE D AND HE ALLOWED THIS GROUND OF THE ASSESSEE. THEREAFTER, IN PARAGRAPH 5 OF HIS ORDER, THE LD. CIT (A) NOTED THAT WHILE ANALYZING QUANTITATIVE DETAILS FORMING P ART OF FORM NO.3CD FILED BY THE LD. A.R. OF THE ASSESSEE IN COURSE OF APPELLATE PROCEEDINGS, THE DISCREPANCY WITH REGARD TO ALLEGED PURCHASES FOR TRADING WEIGHI NG 105000 KG WAS DETECTED. HE REPRODUCED THE QUANTITATIVE DETAILS FILED BY THE ASSESSEE ALONG WITH FORM NO.3 CD. HE HAS ALSO NOTED THAT A SEARCH OPERATION WAS CARRIED OUT AT THE FACTORY PREMISES OF THE ASSESSEE BY THE CENTRAL EXC ISE DEPARTMENT ON 1-4-2004 AND IT WAS FOUND IN COURSE OF SUCH SEARCH THAT THER E IS A SHORTAGE OF 19100 KG OF S.S. FLATS (FINISHED GOODS) AND SHORTAGE OF 105618 KG OF IRON AND STEEL SCRAP. IT IS ALSO NOTED BY HIM THAT A DEMAND OF RS.2,53,483/- WITH REGARD TO CENTRAL EXCISE DUTY @ 16% WAS RAISED BY THE EXCISE DEPARTME NT IN CONNECTION WITH SUCH SHORTAGE AND THE ASSESSEE HAS MADE PAYMENT OF THE DEMAND REGARDING CENTRAL EXCISE DUTY. IN PARAGRAPH 5.2 OF HIS ORDER, THE LD. CIT (A) HAS NOTED THAT THE DIRECTOR OF THE ASSESSEE COMPANY HIMSELF A CCEPTED THAT THE APPELLANT SOLD 105618 KG OF IRON AND STEEL SCRAP IN CASH AT F ACTORY GATE DURING THE LAST ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 3 WEEK OF FEBRUARY, 2004 TO VARIOUS UNKNOWN DEALERS. THE LD. CIT (A) ASKED THE LD. AR OF THE ASSESSEE TO RECONCILE THE PRODUCT ION FIGURES WITHOUT CONSIDERING THE ALLEGED PURCHASES MADE FOR TRADING WEIGHING 105000 KG. OF SCRAP. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE B EFORE THE LD. CIT (A) THAT THE ASSESSEE HAS ALREADY SHOWN SALES OF 105000 KG OF SC RAP AND THE SAME WAS ALREADY SHOWN IN THE TRADING ACCOUNT. IT WAS ALSO S UBMITTED THAT IN COURSE OF SURVEY BY THE CENTRAL EXCISE DEPARTMENT, THE ASSESS EE COMPANY HAS DISCLOSED 105618 OF STOCK AT THAT TIME. IT WAS ALSO SUBMITTED THAT UNACCOUNTED GOODS FOUND BY THE EXCISE DEPARTMENT WAS A TYPE OF RAW MA TERIAL AND SAME WAS NEVER USED FOR MANUFACTURING PROCESS. THEREAFTER, IT IS NOTED BY THE LD. CIT (A) IN PARAGRAPH 5.5 THAT THE ASSESSEE COMPANY BOOKED BOGU S PURCHASES OF 105000 KG OF METAL SCRAP IN ORDER TO NULLIFY THE UNACCOUNTED SALES ACCEPTED BEFORE THE EXCISE AUTHORITIES IN COURSE OF SEARCH BY THEM. TH E LD. CIT(A) ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WH Y THE VALUE OF THE SCRAP WEIGHTING 105618 KG NOT PURCHASED DURING THE RELEVA NT PERIOD SHALL BE ADDED IN THE INCOME OF THE ASSESSEE AND HIS INCOME IS ENHANC ED IN TERMS OF THE PROVISIONS OF SECTION 251(2) OF THE ACT. IN REPLY I T WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESSEE COMPANY HAS SHOWN SALES OF 1 ,05,500 KG OF METAL SCRAP AND THE SAME WAS SHOWN AS TRADING SALES IN THE BOO KS AND HENCE, NO ADDITION IS CALLED FOR. THEREAFTER, THE LD. CIT(A) HAS HELD IN PARAGRAPH 5.8 OF HIS ORDER THAT THE ASSESSEE WITH A VIEW TO DEFRAUD REVENUE CLAIMED BOGUS PURCHASES WEIGHING 105618 KG IN ORDER TO OFFSET THE UNACCOUNTED SALES OF SIMILAR MAGNITUDE ACCEPTED BEFORE THE EXCISE AUTHORITIES. IT IS ALSO HELD BY HIM THAT IF ASSESSEES CLAIM FOR ALLEGED PURCHASES OF SCRAP IS ACCEPTED TH EN THE SCRAP GENERATED DURING THE MANUFACTURING PROCESS WEIGHING 105000 KG DOES N OT GET RECONCILED. ON THIS BASIS, HE MADE ADDITION OF RS.18,74,000/- AND HELD THAT THE ASSESSEE HAS ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 4 DELIBERATELY CLAIMED BOGUS PURCHASES OF SCRAP WEIGH ING 105618 KG. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. IT IS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THAT THE ASSESSEE HAS NOT MADE ANY PURCHASE OF SCRAP OF 105618 KG VALUING RS. 18,74,000/- AND THE TOTAL PURCHASES BY THE ASSESSEE IS ONLY 1421380 KG OF THE VALUE OF RS. 246.05 LAKHS, THE DETAILS OF WHICH ARE AVAILABLE ON PAGES 6 TO 10 OF THE PAPER BOOK. AT THIS JUNCTURE, A QUERY WAS RAISED BY THE BENCH REGARDING ANNEXURE-IX OF THE TAX AUDIT REPORT IN FORM NO.3CD GIVING QUANTITATIVE DET AILS AS APPEARING ON PAGE- 12 OF THE PAPER BOOK AND IT WAS POINTED OUT THAT AS PER THESE DETAILS, THE FOLLOWING PICTURE EMERGES:- ITEM. QUANTITY IN KG. OPENING STOCK. - PURCHASES. ADD:-PURCHASES FOR TRADING. LESS: PRODUCTION BALANCE. LESS: SHORTAGE. SHOULD BE CLOSING STOCK 14,21,380 1,05,000 15,26,380 10,97,096 4,29,284 81,863 3,47,421 5. IT WAS POINTED OUT THAT AS PER THESE FIGURES, TH E CLOSING STOCK OF THE ASSESSEE SHOULD HAVE BEEN TO THE EXTENT OF RS.3,47, 421 KG. THE ASSESSEE IS SHOWING CLOSING STOCK OF 137421 ONLY AND IN ADDITIO N TO THAT, THE ASSESSEE IS CLAIMING THAT IT HAS SHOWN SALES OF SCRAP OF 105500 KG AND HENCE, EVEN AFTER CONSIDERING THIS, THERE IS SHORTAGE OF 104500 KG AN D THEREFORE, HOW THE LD. CIT (A) IS NOT JUSTIFIED IN HOLDING THAT THE CLAIM OF T HE ASSESSEE RELATING TO PURCHASE ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 5 OF 105000 KG OF SCRAP FOR TRADING IS CLAIM OF BOGUS PURCHASE. INSPITE OF THIS, LD. AR OF THE ASSESSEE COULD NOT SATISFY US REGARDING T HE DISCREPANCY. HE MERELY SUBMITTED THAT THERE IS NO OTHER PURCHASE BY THE AS SESSEE FOR TRADING TO THE EXTENT OF 105000 KG. HE DID NOT PRODUCE BEFORE US T HE TRADING AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY TO BRING HOME HIS CLAIM THAT THERE IS NO PURCHASE CLAIMED BY THE ASSESSEE IN ADDITION TO PUR CHASE OF 1421380 KG SCRAP VALUING RS.246.05 LAKHS. THE LD. D.R. OF THE REVENU E SUPPORTED THE ORDER OF THE LD. C.I.T.(A) . 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT AS PER THE QUANTITY DETAILS AS PER ANNEXURE-IX TO TAX AUDI T REPORT IN FORM NO.3CD AS APPEARING ON PAGE-12 OF THE PAPER BOOK, SUMMARY OF WHICH HAS BEEN REPRODUCED IN THE ABOVE PARAGRAPH, IT IS SEEN THAT THERE IS DISCREPANCY OF 104500 KG EVEN AFTER CONSIDERING THIS CLAIM OF THE ASSESSEE THAT THE ASSESSEE HAS ALREADY TAKEN THE INCOME ON ACCOUNT OF SALE OF THE SCRAP TO THE EXTENT OF 105500 KG FOR THE VALUE NOT SHOWN BEFORE US. THE ASSESSEE HAS NOT SUBMITTED A COPY OF THE TRADING AND PROFIT AND LOSS ACCOUNT TO SHOW THA T THE ASSESSEE HAS CREDITED SALE PROCEEDS OF 105500 KGS OF METAL SCRAP FOR WHIC H IT IS AN ALLEGATION OF THE EXCISE DEPARTMENT THAT SUCH SALE WAS MADE BY THE AS SESSEE WITHOUT PAYING CENTRAL EXCISE DUTY BUT EVEN IF WE ACCEPT THIS CLAI M OF THE ASSESSEE BECAUSE THE SAME WAS ACCEPTED BY THE AUTHORITIES BELOW, WE FIND THAT THERE IS STILL A DIFFERENCE OF 104500 KG OF METAL SCRAP AS PER THE Q UANTITY DETAILS SUBMITTED BY THE ASSESSEE ON PAGE-12 OF THE PAPER BOOK AND HENCE , WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) WHEREIN IT WAS HELD BY HIM THAT THE CLAIM OF THE ASSESSEE REGARDING PURCHASE FOR TRADING TO THE EXTE NT OF 105000 KG IS BOGUS. THE ASSESSEE COULD NOT SATISFY US BY BRINGING EVIDE NCE ON RECORD THAT THERE IS NO ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 6 SUCH ACTUAL PURCHASE OF 105000 KGS SCRAP. WE THEREF ORE, DECLINE TO INTERFERE IN THE ORDER OF THE LD. C.I.T. (A) ON THIS ISSUE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 30- 06 - 2011. SD/- SD/- (D. K. TYAGI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. DATED: 30 - 06 - 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-VIII, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.663/AHD /2009 ASSESMENT YEAR 2004-05. 7 1.DATE OF DICTATION 22 - 06 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 23 06- 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..