M/s G G Alloys & Metals, Mandi Gobindgarh V. ITO, Mandi Gobindgarh

ITA 73/CHANDI/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8981 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 19-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS INOSHI SHARMA
• Keywords: Bogus purchase; Rejection of books of accounts; Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.73/CHD/2015 (ASSESSMENT YEAR : 2008-09) M/S G.G. ALLOYS & METALS, VS. THE INCOME TAX OFFICER, G.T. ROAD, MANDI GOBINDGARH. WARD 1, MANDI GOBINDGARH. PAN: AAHFG2637C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT BY : MRS.INOSHI SHARMA, DR DATE OF HEARING : 08.11.2016 DATE OF PRONOUNCEMENT : 11.11.2016 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 23.6.2014 FOR ASSESSMENT Y EAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL : 1. THAT THE ORDER OF LEARNED C.I.T. (A) IS BAD AND AGAINST THE FACTS & LAW. 2. THAT THE LEARNED CIT(A) HAS ERRED BY CONFIRMED TH E REJECTION OF BOOKS OF ACCOUNTS WITHOUT ANY SPECIFIC DEFECT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL) 2 HAS WRONGLY CONFIRMED ADDITION AMOUNTING TO RS.20,00,000/- ON ACCOUNT OF APPLICATION OF GROSS P ROFIT RATE APPLIED BY ASSESSING OFFICER WITHOUT MATERIAL EVIDENCE ON RECORDS . 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL) HAS WRONGLY CONFIRMED THE ADDITION OF RS 2320698/- AGAINST THE LIABILITY OUTSTANDING IN THE NAME OF RO HIT ISPAT. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL) HAS WRONGLY CONFIRMED THE ADDITION OF RS.60000/- ON ACCOUNT OF SALE OF SALVAGE OUT OF EXPENSES INCURRED ON MACHINERY REPAIR. 3. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURIN G OF STEEL INGOTS. DURING THE YEAR UNDER CONSIDERATION, IT WAS SEEN THAT THE ASSESSEE HAD MADE PURCHASE OF PIG IRO N AMOUNTING TO RS.68,20,608/- FROM M/S ROHIT ISPAT (I NDIA), MANDI GOBINDGARH, WHO WAS FOUND TO BE INDULGING IN ONLY PAPER TRANSACTION AND NOT ACTUALLY CONDUCTING ANY BUSINESS. DURING ASSESSMENT PROCEEDINGS, THE ASSES SEE WAS CONFRONTED WITH THE ABOVE, WHO, HOWEVER, STATED THAT THE PURCHASES WERE GENUINE AND PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSING OFFIC ER, HOWEVER, REJECTED ASSESSEES CLAIM AND HELD THAT TH E BILLS OF PURCHASE OBTAINED FROM M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH WERE BOGUS. HE, THEREFORE, REJECTED BOO KS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED GP AT 3.02% A ND MADE ADDITION OF RS.26,76,315/-. FURTHER, THE ASSE SSING OFFICER MADE ADDITION OF RS.23,20,698/- ON ACCOUNT OF CREDIT BALANCE OUTSTANDING AGAINST M/S ROHIT ISPAT 3 (INDIA), MANDI GOBINDGARH HOLDING THE SAME TO BE BO GUS IN NATURE. THE ASSESSING OFFICER ALSO MADE ADDITIO N ON ACCOUNT OF SALE OF SALVAGE, AMOUNTING TO RS.60,000/ - SINCE THE ASSESSEE HAD AGREED TO THE SAME. 4. AGGRIEVED BY THE SAME, THE ASSESSEE CAME UP IN APPEAL BEFORE THE LD. CIT (APPEALS), WHO UPHELD THE ADDITION MADE ON ACCOUNT OF GP TO THE EXTENT OF RS. 20 LACS AND FURTHER UPHELD THE BALANCE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF OUTSTANDING BALANCE OF M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH AND SALE OF SALVAGE. 5. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. DURING THE COURSE OF HEA RING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE STA TED THAT VIS--VIS GROUND NOS.2, 3 AND 4 RAISED ELATING TO T HE ADDITIONS MADE ON ACCOUNT OF APPLICATION OF GP RATE AND ON ACCOUNT OF OUTSTANDING LIABILITY IN THE NAME OF M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH, THE LIMITED PRAYER WAS THAT THE BENEFIT OF TELESCOPING BE GIVEN TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE STA TED THAT SINCE BOTH THE ADDITIONS AROSE ON ACCOUNT OF T HE BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH, THE BENEFIT OF TELESCOPING OUGHT TO BE GIVEN TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF T HE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF NORTHERN INDIA STEEL ROLLING MILLS VS. DCIT IN ITA NO.591/CHD/2014 4 DATED 23.12.2014, WHEREIN, LD. COUNSEL OF THE ASSES SEE POINTED OUT THAT, IN IDENTICAL CIRCUMSTANCES THE E FFECT OF TELESCOPING HAD BEEN GIVEN ON ACCOUNT OF IDENTICAL ADDITIONS MADE IN ASSESSMENT PROCEEDINGS. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE OFFERED THAT HIGHE R OF THE TWO ADDITIONS BE UPHELD AND THE OTHER ADDITION BE TELESCOPED AGAINST THE SAME. 6. THE LEARNED D.R., HOWEVER, RELIED UPON THE ORDE R OF THE CIT (APPEALS). 7. HAVING HEARD BOTH THE PARTIES, WE FIND MERIT IN THE LIMITED PRAYER OF THE LD. COUNSEL OF THE ASSESS EE. THE ADDITIONS BEING DISPUTED IN THE PRESENT GROUNDS ARE ON ACCOUNT OF APPLICATION OF G.P. RATE, AFTER REJECTIN G THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AND ADDITION OF THE CREDIT BALANCE OUTSTANDING IN THE NAME OF FROM M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH, A PARTY FROM WHICH THE ASSESSEE ALLEGEDLY MADE PURCHASES. BOTH THE ADDITI ONS HAVE BEEN MADE ON ACCOUNT OF THE FINDINGS OF THE LO WER AUTHORITIES THAT ALL TRANSACTIONS OF PURCHASES MADE WITH FROM M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH WERE BOGUS, SINCE NEITHER ANY SUCH ENTITY EXISTED, NOR I T CONDUCTED ANY BUSINESS IN TRADING OF PIG IRON, BUT ON THE CONTRARY, INDULGED ONLY IN PAPER TRANSACTIONS. BOT H THE ADDITIONS BEING TRADING ADDITIONS, ONE ON ACCOUNT O F APPLICATION OF G.P. RATE AND THE OTHER ON ACCOUNT O F BOGUS CREDIT BALANCE OUTSTANDING OF CREDITOR OF PURCHASE, THE BENEFIT OF TELESCOPING HAS TO BE GIVEN TO THE ASSES SEE. THE 5 I.T.A.T., CHANDIGARH BENCH, HAS ON IDENTICAL SET OF FACTS ALLOWED THE BENEFIT OF TELESCOPING TO THE ASSESSEE FOR THE IDENTICAL SET OF ADDITION MADE, IN THE CASE OF NORT HERN INDIA STEEL ROLLING MILLS VS. DCIT, IN ITA NO.591/CHD/2014 DATED 23.12.2014. THE RELEVANT PAR AS 14 TO 18 OF THE ORDER ARE REPRODUCED HEREUNDER : 14. GROUND NO. 4 - AFTER HEARING THE RIVAL SUBMISS IONS WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM M/S ROHIT ISPAT (INDIA) ON AN AVERAGE RATE OF RS.19,900/-. PURCHASES FROM OTHER DEALERS WERE SHOWN AT RS.17,600/- WHICH CLEARLY MEAN THAT PURCHASES HAVE BEEN INFLATED. THEREFORE GROSS PROFI T OF THE ASSESSEE WHICH WAS DECLARED AT 2.4% WAS ENHANCED TO 2.55% AND A SUM OF RS.6,94,283/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 15. ON APPEAL AFTER CONSIDERING THE SUBMISSIO NS, THE LD. CIT(A) RESTRICTED THIS ADDITION TO RS.6,50,000/-. 16. BEFORE US, IT WAS SUBMITTED THAT GROSS PROFIT R ATE IN THIS YEAR WAS BETTER THAN EARLIER YEAR. FURTHER IN ANY CASE THE ASSESSING OFFICER HAS MADE SEPARATE ADDITION OF RS.18,68,9957 - ON ACCOUNT OF OUTSTANDING BALANCE IN THE ACCOUNT OF M/S ROHIT ISPAT (INDIA) AS A BOGUS LIABILITY. THEREFORE AT LEAST THIS TRADING ADDITION SHOULD HAVE BEEN SET OFF AGAINST THAT ADDITION I.E. TELESCOPING SHOULD HAVE BEEN ALLOWED. 17 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A). 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE 6 ASSESSEE. FURTHER WE HAVE CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS LIABILITY IN THE LATTER PARAGRAPHS OF THIS ORDER. THEREFORE IN OUR OPINION, THE ADDITION ON ACCOUNT OF GROSS PROFIT SHOULD NOT HAVE BEEN MADE PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEE HAS SHOWN BETTER GROSS PROFIT THAN EARLIER YEARS. THEREFORE WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THIS ADDITION. 8. IN VIEW OF THE ABOVE, WE CONFIRM THE ADDITION O F RS.23,20,698/- MADE ON ACCOUNT OF OUTSTANDING LIABI LITY IN THE NAME OF M/S ROHIT ISPAT (INDIA), MANDI GOBIN DGARH AND DIRECT THAT THE ADDITION AMOUNTING TO RS.20 LAC S ON ACCOUNT OF APPLICATION OF GROSS PROFIT RATE BE TELE SCOPED AGAINST THE SAME. 9. THE GROUND NOS.2, 3 AND 4 RAISED BY THE ASSESSEE ARE ACCORDINGLY DECIDED IN THE ABOVE MANNE R. 10. GROUND NO.5 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.60,000/- MADE ON ACCOUNT OF SALE OF SALVAGE. 11. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.6,00,107/- UND ER THE HEAD MACHINERY REPAIR. HOWEVER, NO SALE OF S ALVAGE WAS SHOWN DURING THE YEAR. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE AGREED TO AN ADDITION OF RS.60,000/- ON ACCOUNT OF THE SAME, WHICH WAS MADE BY THE ASSESSING OFFICER ACCORDINGLY AND UPHELD FOR TH E SAME REASON BY THE LD. CIT (APPEALS). 7 12. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E COULD NOT PRODUCE ANY EVIDENCE TO PROVE THAT THE AD DITION WAS NOT AN AGREED ADDITION. IN THE BACKGROUND OF TH E ABOVE FACTS ,WE HOLD THAT THE ASSESSEE HAVING AGREE D TO AN ADDITION DURING ASSESSMENT PROCEEDINGS ,CANNOT AGIT ATE AGAINST THE SAME IN APPELLATE PROCEEDINGS. IN VI EW OF THE SAME, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) UPHOLDING THE ADDITION MADE. 13. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THEREFORE DISMISSED. 13. IN EFFECT THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH NOVEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH