SHRI PANKAJ KANWAR, Indore V. THE ACIT 5(1), Indore

ITA 692/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6250 (ITAT-INDORE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S SOLANKI
• Keywords: Bogus purchase; Difference of opinion
• Section: 40A(3); 147; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NOS.692 & 693/IND/2015 A.Y. : 2005-06 & 2006-07 SHRI PANKAJ KANWAR, ACIT, 11/11, LOHA BHAWAN, VS 5(1), INDORE . INDORE. APPELLANT RESPONDENT PAN NO. AJTPK5223B APPELLANTS BY : SHRI S.S.SOLANKI, C. A. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R PER D.T.GARASIA, J.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE ORDERS OF CIT(A)-II, BHOPAL, DATED 30.04.2015 FOR THE ASSESSMENT YEAR 2005-06. DATE OF HEARING : 05 . 0 4 .2016 DATE OF PRONOUNCEMENT : 05. 0 4 .2016 SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 2 2 2. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE, WHICH READ AS UNDER :- 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) INSPITE OF THE FACT THAT THER E WAS NO SATISFACTION OF THE AO W.R.T. EITHER CONCEALMENT OF FURNISHING OF INACCURATE PARTICUALRS EITHER AT THE TIME OF INITIATION OF THE PENALTY OR AT THE TIME OF IMPOSITION. THE PENALTY SO CONFIRMED BEING ILLEGAL AND WRONG. THE SAME, THEREFORE, REQUIRE TO BE CANCELLED. WITHOUT PREJUDICE TO THE ABOVE 3. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) ON ESTIMATED ADDITIONS AND ON THE FACT TH AT NO FURTHER APPEAL WAS FILED BY THE ASSESSEE. THE PENAL TY SO CONFIRMED BEING ILLEGAL AND WRONG, THE SAME REQU IRE TO BE DELETED. 4. THE ASSESSEE IS INDIVIDUAL ENGAGED IN THE BUSINESS OF IRON AND STEEL. A SEARCH U/S 132 WAS CONDUCTED AT TH E PREMISES OF BHARAT KOTHARI GROUP AND DURING THE COU RSE OF STATEMENT OF SHRI MAYUR KOTHARI, HE STATED THAT THE Y ARE SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 3 3 ISSUING THE BILLS WITHOUT MAKING ANY DELIVERY OF IRO N AND STEEL. THEY FURTHER STATED THAT THEY HAVE RECEIVED THE CON SIDERATION OF SUCH SALE BY AN ACCOUNT PAYEE CHEQUE AND AFTER K EEPING THE COMMISSION, THE AMOUNTS ARE RETURNED. SHRI MAYUR KO THARI IN HIS STATEMENT HAS STATED THAT THEY ARE ENGAGED IN I SSUING THE BILLS AND THEY HAVE ALSO SUBMITTED THAT THEY HAVE R ECEIVED THE CONSIDERATION ON SUCH SALE BY ACCOUNT PAYEE CHEQUES AND AFTER KEEPING THE COMMISSION, THE REMAINING AMOUNTS ARE RETURNED BACK TO THE RESPECTIVE PARTIES. ON THE BAS IS OF THE STATEMENT, THE CASE OF THE ASSESSEE WAS REOPENED U/ S 147. THE AO HAS MADE THE ADDITION ON PROFIT OF BOGUS PUR CHASE @ 6% AND DISALLOWED THE AMOUNT OF PURCHASE U/S 40A(3) BEING CASH PURCHASE AND FURTHER MADE THE ADDITION ON ACCO UNT OF CASH PURCHASE AND FURTHER MADE THE ADDITIONS ON ACC OUNT OF INVESTMENT IN PURCHASES IN VARIOUS ASSESSMENT YEAR S. 5. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS DELETED THE ADDITION U/S 40A(3) AND ESTIMATED T HE NET PROFIT IN THESE PURCHASES. THE AO HAS GIVEN SHOW CAU SE NOTICE AND AFTER GIVING SHOW CAUSE NOTICE, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS CONCEALED 6% PROFIT ON THE AB OVE SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 4 4 PURCHASES. THEREFORE, THE PENALTY WAS IMPOSED ON SUC H PURCHASES. 6. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS CONFIRMED THE PENALTY IN BOTH THE APPEALS. 7. IN SIMILAR GROUP CASES, WE HAVE DEALT IN WITH THE IDENTICAL FACTS AND THE SAME ISSUE WAS INVOLVED IN THE CASES OF M/S.PRIYA STEELS AND OTHERS IN I.T.A.NOS. 481/IND/2 014 ETC. WHEREIN WE HAVE DELETED THE PENALTY IN THE GROUP CAS ES BY OUR FINDING GIVEN IN THOSE CASES, WHICH ARE AS UNDER :- 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE IS A PARTNERSHIP FIRM DOING THE BUSINESS OF TRADING OF STEELS. THE BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB AND QUANTITATIVE DETAILS HAVE BEEN MAINTAINED BY THE ASSESSEE. A SEARCH U/S 132 WAS CONDUCTED AT THE PREMISES OF BHARAT KOTHARI GROUP AND DURING THE COURSE OF STATEMENT SHRI MAYUR KOTHARI THAT THEY ARE ISSUING THE BILLS WITHOUT MAKING ANY DELIVERY OF SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 5 5 IRON AND STEEL. THEY FURTHER STATED THAT THEY HAVE RECEIVED THE CONSIDERATION OF SUCH SHARE BY ACCOUNT PAYEE CHEQUES AND AFTER KEEPING THE COMMISSION, AMOUNTS ARE RETURNED. ON THE BASIS OF THIS STATEMENT, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 AND THE AO HAS MADE THE ADDITION OF PROFIT ON SUCH BOGUS PURCHASE @ 6%. THE TRIBUNAL HAS UPHELD THE ACTION OF AO AND THE LD. CIT(A) FOR DISALLOWANCE OF 6% OF PURCHASE PRICE IN RESPECT OF ACCOMMODATION BILLS OF KOTHARI GROUPS. THE 6% PROFIT WAS ESTIMATED ON ESTIMATE BASIS. THE PROFIT FOR SUCH TRANSACTIONS HAVE ALREADY BEEN DISCLOSED BY THE ASSESSEE. THE ADDITIONS HAVE BEEN SUSTAINED BY THE LD. CIT(A) AND TRIBUNAL BY ESTIMATING THE GROSS PROFIT AT 6% ON THESE PURCHASES AND DISALLOWANCE OF EXPENDITURE OF 6% ON THESE PURCHASES. THE ASSESSEE HAS PURCHASED THE GOODS WHICH IS UNDISPUTED FACT. THE KOTHARI GROUP MIGHT HAVE ARRANGED THE BILLS BUT SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 6 6 PURCHASE CANNOT BE TREATED AS NON-GENUINE, SINCE THE SAME QUANTITY OF GOODS HAVE BEEN SOLD BY THE ASSESSEE. WE FIND THAT IN THE ASSESSMENT ORDER, THE AO HAS ESTIMATED THE PROFIT OF THE ASSESSEE ON THE GROUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED THE QUANTITATIVE TALLY, WHICH SHOWS THAT THE ASSESSEE HAS SOLD THE GOODS TO OTHER PARTIES AND ISSUED THE BILLS AND AMOUNTS RECEIVED FROM THEM THROUGH CHEQUES. AS SUCH, IT APPEARS THAT THE SALES WERE ACTUALLY MADE. AS PURCHASES WERE NOT MADE FROM THE BILLS PROVIDERS AS IT IS AND EVIDENT THAT THE PURCHASES WERE MADE FROM THE THIRD PARTY. IT IS WELL KNOWN FACT THAT THERE WAS LEVY OF COMMERCIAL TAX @ 4% ON BILLING PRICE, WHICH WAS ONE TIME LEVY AT THE TIME OF IMPORT FROM OUT OF M.P. OR AT THE TIME OF FIRST SALE AFTER PRODUCTION WITHIN THE STATE. THE ASSESSEE HAS SAVED THE AMOUNT EQUIVALENT TO COMMERCIAL TAX BY PURCHASING THE GOODS WITHOUT SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 7 7 BILLS AND OBTAINING THE BILLS FROM BILL PROVIDERS SHOWING M.A.C.T. PAID GOODS PURCHASES. THE SAME MODUS OPERANDI WAS ADOPTED BY SHRI PIYUSH GUPTA AND IN THAT CASE, IT WAS FOUND THAT THERE WERE SOME BILLS, WHICH WERE NOT ENTERED IN THE BOOKS, BUT THE BILLS FROM THE BILLS PROVIDE FOR THE SAME ADDED AND QUANTITIES WERE ENTERED INTO BOOKS AND IT WAS FOUND THAT AMOUNT OF BILLS OF ENTRY PROVIDER WAS HIGHER THAN THAT OF BILLS FROM WHICH THE GOODS WERE ACTUALLY PURCHASED. THE PURCHASE AMOUNT WAS MENTIONED AS PER SWEET WILL OF THE ASSESSEE AND THE SAME ARE NOT VERIFIABLE AND AS SUCH 6% PROFIT RATE ON SALE WAS APPLIED. FROM THE ORDER OF THE AO, WE FOUND THAT THE AO HAS ESTIMATED THE INCOME ON THE BILLS ISSUED BY THE ASSESSEE AND THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS SAVED 4% COMMERCIAL TAXES. THE KOTHARI GROUPS MIGHT HAVE ARRANGED THE BILLS, THE ASSESSEE HAS MADE PURCHASES AND SAME QUANTITATIVE DETAILS HAVE BEEN SHOWN. SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 8 8 THEREFORE, THE AO HAS ESTIMATED THE INCOME ON PURE GUESS WORK. THE SIMILAR ISSUE HAD COME BEFORE THE HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. SHIVNARAYAN JAMNALAL, (1998) 232 ITR 311 ( MP), WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT PROPERLY MAINTAINED AND IF ASSESSEE HAS NOT CONCEALED ANY MATERIAL AND NOT TRIED TO DEFRAUD THE AUTHORITIES, THE PENALTY CANNOT BE LEVIED, BECAUSE THE INCOME WAS ASSESSED ON ESTIMATE BASIS. WE FOUND THAT SIMILAR CASE HAS COME UP BEFORE THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH VS. CIT, 258 ITR 85 (P&H), WHEREIN IT IS HELD THAT IT WAS A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME SO AS TO ATTRACT THE PROVISIONS OF SECTION 271(1)(C). IN THE INSTANT CASE, THE ASSESSEE HAS FILED THE RETURN OF INCOME SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 9 9 AND WHICH WAS REOPENED ON THE BASIS OF THE STATEMENT OF SHRI MAYUR KOTHARI AND ON THE BASIS OF THE STATEMENT, THE ASSESSEES INCOME WAS ESTIMATED ON THE GROUND THAT THE ASSESSEE HAS SAVED THE COMMERCIAL TAX @4% AND HIS INCOME WAS ESTIMATED. IN ORDER TO PROTECT THE CLAUSE (C) OF SECTION 271(1) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF PARTICULARS OF HIS INCOME OR IF HE FURNISHES THE INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND HE HAS FILED THE RETURN OF INCOME AND DURING THE COURSE OF SEARCH, THE AO HAS ESTIMATED 6% PROFIT ON THE GROUND THAT THE ASSESSEE MIGHT HAVE SAVED 4% OF COMMERCIAL TAX BY OBTAINING BOGUS BILLS. THE ASSESSEE MIGHT HAVE MADE PURCHASES WITHOUT BILLS. THEREFORE, THE ADDITION WAS MADE AND INCOME WAS ESTIMATED. THEREFORE, THE ADDITION WAS MADE ON ESTIMATED BASIS. SHRI PANKAJ KANWAR, INDORE VS. ACIT, I.T.A.NOS. 692 & 693/IND/2015- A.YS. 2005-06 AND 2006-07 10 10 THEREFORE, WE ARE OF THE VIEW THAT THE PENALTY CANNOT BE LEVIED. 8. SINCE THE FACTS AND CIRCUMSTANCES BEING SIMILAR , WE, FOLLOWING OUR DECISION GIVEN IN THE CASE OF M/S. PRI YA STEELS & OTHERS (SUPRA), DELETE THE PENALTY IN BOTH THE APPE ALS. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 5 TH APRIL, 2016. CPU* 5.4