Chopda Vaishali Nilesh, Ahmednagar V. Deputy Commissioner of Income-tax,

ITA 773/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0793 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 40A(3); 143(3)

Judgement Text

] ]] ] ... IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.771/PN/2014 ASSESSMENT YEAR : 2008-09 CHOPDA SUDHIR ZUMBARLAL, PROP. M/S S.S. SUPPLIERS, D-60, M.I.D.C., AHMEDNAGAR. PAN : AARPC7559D . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . RESPONDENT ITA NO.773/PN/2014 ASSESSMENT YEAR : 2008-09 CHOPDA VAISHALI NILESH, PROP. M/S S.S. SUPPLIERS, H-3, KARACHIWALA NAGAR, SARJEPURA, AHMEDNAGAR. PAN : ACWPC4900B . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI MAHESH AKHADE / DATE OF HEARING : 07.12.2015 / DATE OF PRONOUNCEMENT: 09.12.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE ABOVE CAPTIONED TWO APPEALS FILED BY THE TWO DI FFERENT ASSESSEES RELATE TO SAME ASSESSMENT YEAR I.E. A.Y. 2008-09 BU T INVOLVE A COMMON ISSUE. THEREFORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHE R AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BRE VITY. 2 ITA NO.771/PN/2014 ITA NO.773/PN/2014 2. BOTH THE CAPTIONED APPEALS ARE DIRECTED AGAINST THE ORDER OF CIT(A)-IT/TP, PUNE DATED 20.02.2014 PASSED UNDER SE CTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 3. SINCE THE FACTS AND CIRCUMSTANCES IN BOTH THE AP PEALS ARE IDENTICAL, THE APPEAL OF THE ASSESSEE RELATING TO ASSESSMENT YEAR 2008-09 IN ITA NO.771/PN/2014 IS TAKEN AS THE LEAD CASE. IN THIS APPEAL, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UND ER :- THE APPELLANT WOULD LIKE TO OBJECT THE IMPUGNED OR DER OF THE CIT (APPEALS) ON FOLLOWING GROUNDS OF APPEAL WHICH ARE RAISED WITHOU T PREJUDICE TO EACH OTHER: 1. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.148267.00 ON ACCOUNT OF INFLATED PURCHASES AND RS.112000.00 ON ACCOUNT OF ADHOC DISALLOWANCE OF EX PENSES MADE BY THE AO. 2. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF THE AO IN MAKING AN ADDITION OF RS.148267 .00 TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF INFLATED PURCHASES OF FIREWOOD. 3. THE LEARNED CIT (APPEALS) HAS ERRED IN NOT APPRE CIATING THE FOLLOWING IMPORTANT FACTORS: A. THAT FIREWOOD IS REQUIRED FOR MANUFACTURING OF WOODEN BOXES. B. THE AO HAS ACCEPTED THE SALES MADE BY THE APPEL LANT. C. THE SELF MADE VOUCHERS ARE MADE AS FIREWOOD IS P URCHASED FROM VILLAGERS AND HAWKERS. D. THE LEARNED AO HAS IGNORED THE PAYMENT VOUCHERS WHICH CONTAIN DETAILS ABOUT PERSON, DESCRIPTION AND AMOUNT OF PAY MENT AS WELL AS SIGNATURE OF THE SUPPLIER. E. ADDITIONS CANNOT BE MADE ON THE GROUND THAT THE APPELLANT HAS NOT MAINTAINED DAY-TO-DAY QUANTITATIVE RECORD. F. THE DEPARTMENT HAS ACCEPTED THE RESULTS OF THE A PPELLANT IN THE PAST U/S 143(3) OF THE ACT. G. THE AO IN CASE OF OTHER SIMILAR TRADERS IN THE L INE HAS ACCEPTED THE BOOKS RESULTS. H. THERE IS NO DOWNFALL IN GROSS PROFIT AND NET PR OFIT RATIO. I. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDIT ED NOT ONLY UNDER THE PROVISIONS OF INCOME TAX ACT BUT ALSO UNDER THE PRO VISIONS OF MVAT ACT. 4. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADHOC ADDITION OF RS.112000/- MADE BY THE AO WI THOUT APPRECIATING THAT AO HAS NOT HELD THAT THE EXPENDITURE IS SHAM OR BOG US AND NOT FOR THE PURPOSE OF BUSINESS. 5. THE APPELLANT MAY KINDLY BE PERMITTED TO ADD TO OR ALTER ANY OF GROUNDS OF 3 ITA NO.771/PN/2014 ITA NO.773/PN/2014 APPEAL, IF DEEMED NECESSARY. 4. AS PER THE GROUNDS OF APPEAL, THE ASSESSEE HAS R AISED TWO ISSUES FOR ADJUDICATION. THE FIRST ISSUE IS REGARDING THE ADD ITION OF RS.1,48,267/- ON ACCOUNT OF INFLATED PURCHASES AND SECOND ISSUE PERT AINS ADHOC DISALLOWANCE OF EXPENSES OF RS.1,12,000/-. GROUND NO.1 IS GENERAL IN NATURE. GROUND NOS.2 AND 3 RELATES TO FIRST ISSUE AND GROUND NO.4 RELATE S TO SECOND ISSUE. THE GROUND NO.4 PERTAINING TO SECOND ISSUE HAS NOT BEEN PRESSED AT THE TIME OF HEARING AND THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. THUS, WE ARE LEFT WITH ONLY ONE ISSUE RELATING TO ADDITION ON ACCOUNT OF INFLATED PURCHASES FOR ADJUDICATION. 5. BRIEFLY STATED, THE RELEVANT FACTS OF THE CASE A RE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING AND TRADING OF WOODEN BOXES. THESE WOODEN BOXES ARE USED FOR PACKING FOR HOME APPLIANCES. DU RING THE RELEVANT ASSESSMENT YEAR 2008-09, THE ASSESSEE DECLARED GROS S PROFIT (GP) OF RS.49,27,273/- AND NET PROFIT (NP) OF RS.8,61,338/- ON A TOTAL TURNOVER OF RS.4,43,39,679/-. ACCORDINGLY, THE GP WAS WORKED O UT AT 11.11% AND NP RATIO WAS WORKED AT 1.94%. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT IN THE IMMEDIATE PRECEDING YEAR, THE GP AND NP WERE AL MOST IDENTICAL. THERE IS ONLY MARGINAL DECLINE IN GP RATIO. IT WAS ALSO OBS ERVED BY THE ASSESSING OFFICER THAT THE TAX AUDIT REPORT DOES NOT SPECIFY THE QUANTITATIVE DETAILS OF THE PRINCIPAL ITEMS SUCH AS RAW MATERIALS, FINISHED GOO DS, ETC.. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT NO STOCK REG ISTER HAS BEEN MAINTAINED. THE ASSESSEE HAS, INTER-ALIA , PURCHASED FIREWOOD FROM DIFFERENT SUPPLIERS AMOUNTING TO RS.7,41,335/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT ESTABLISHED THE GENUINENESS OF THESE WOODS PURCHASES WHICH IS SUPPORTED BY SELF-DRAWN VOUCHERS ONLY AND NOT AUTHE NTICATED BY THE RECIPIENTS TO WHOM THE PAYMENTS WERE CLAIMED TO HAVE BEEN MADE . THE ASSESSING OFFICER ALSO NOTED THAT NO DESCRIPTION OF PURCHASE OF FIREWOODS ARE MENTIONED AND ALSO NO NAME OF VILLAGE OR PLACE WAS ALSO MENTI ONED. THE PAYMENTS TOWARDS PURCHASES WERE FOUND TO BE MADE BY DRAWING BEARER CHEQUES. THE 4 ITA NO.771/PN/2014 ITA NO.773/PN/2014 ASSESSING OFFICER FINALLY HELD THAT THE ONUS IS CAS T UPON THE ASSESSEE TO ESTABLISH THE BONAFIDES OF THE EXPENDITURE CLAIMED WHICH HAS NOT BEEN DISCHARGED. THE FIREWOOD PURCHASES RS.7,41,335/- R EQUIRED TO MANUFACTURE THE WOODEN BOXES WAS HELD BY THE ASSESSING OFFICER AS I NFLATED AND LACKS BONAFIDE. ACCORDINGLY, THE ASSESSING OFFICER RESOR TED TO THE ESTIMATION OF DISALLOWANCE TO THE EXTENT OF 20% OF THE EXPENDITUR E TOWARDS PURCHASE OF FIREWOOD ON THE GROUND THAT ALTHOUGH FIREWOOD IS NE CESSARY TO MANUFACTURE THE WOODEN BOXES ONLY, THE ONUS OF ESTABLISHING THE BON AFIDES IS NOT DISCHARGED. HE, THEREFORE, DISALLOWED RS.1,48,267/- OUT OF FIRE WOOD PURCHASES OF RS.7,41,335/-. 6. THE CIT(A) ENDORSED THE ACTION OF THE ASSESSING OFFICER. THE CIT(A) OBSERVED THAT ALTHOUGH THE ASSESSEE DEALS WITH THE UNORGANIZED SUPPLIERS FOR PURCHASE OF FIREWOOD, IT IS DIFFICULT TO BELIEVE TH E BONAFIDES OF THE EXPENSES INCURRED IN THE ABSENCE OF ANY DOCUMENTATION TOWARD S DELIVERY OF GOODS, ETC.. IN THE ABSENCE OF UNSIGNED DELIVERY CHALLAN BY THE WOODS SELLERS AND ABSENCE OF NAME OF THE SELLERS ON IT, THE ONUS WHICH LAY UP ON THE ASSESSEE IS NOT DISCHARGED IN THE ABSENCE OF ANY SUPPORTING EVIDENC E. THE CIT(A) ALSO JUSTIFIED THE ESTIMATION OF DISALLOWANCE BY REFERRI NG TO THE FACT THAT THE ASSESSEE HAS FREQUENTLY MADE PAYMENTS JUST BELOW RS.20,000/- TO CIRCUMVENT THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ACCORDING TO HIM, FREQUENT PAYMENT OF SUCH NATURE FAILED THE TEST OF PROBABILITY IN TH E BUSINESS. 7. AGGRIEVED BY THE ACTION OF THE REVENUE, THE ASSE SSEE IS IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING OF THE APPEAL, THE LD. AU THORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE IDENTICAL ISS UE HAS BEEN CONSIDERED BY THE PUNE BENCH OF THE TRIBUNAL IN CHOPDA NILESH SUBHASH IN ITA NO.1852 - 1854/PN/2013 RELATING TO ASSESSMENT YEAR 2007-08 VI DE ORDER DATED 30.11.2015 WHEREIN AFTER DELIBERATION ON IDENTICAL FACTS, THE TRIBUNAL RESTRICTED 5 ITA NO.771/PN/2014 ITA NO.773/PN/2014 THE ESTIMATION OF DISALLOWANCE TO 10% AS AGAINST 20 % ESTIMATED BY THE ASSESSING OFFICER. THE OPERATIVE PARA OF THE ORDER OF THE TRIBUNAL DATED 30.11.2015 (SUPRA) IS REPRODUCED HEREINBELOW FOR RE ADY REFERENCE :- 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE SUBMISSIONS MADE ON BEHALF OF THE RESPECTIVE PARTIE S. THE TOTAL PURCHASES DURING THE YEAR STAND AT RS.6,93,33,119/- OUT OF WHICH FIR EWOOD PURCHASES TO RS.69,33,311/. IT IS BORNE OUT FROM ASSERTIONS MADE THAT FIREWOOD PURCHASES ARE MADE FROM FARMERS, CULTIVATORS, HAWKERS, STREET VENDORS, ETC. WHO ARE NON-DESCRIPT TRADERS. THE PURCHASE IS ADMITTEDLY SUPPORTED BY SELF MADE VOUCH ERS ONLY. WE FIND THAT THE RATIO OF THE FIREWOOD PURCHASES TO THE TOTAL PURCHASES AR E SOMEWHAT COMPARABLE AND SO IS THE CASE OF THE NP RATIO. THEREFORE, WHILE WE ARE OF THE VIEW THAT IN THE ABSENCE OF COMPLETE DETAILS OF PURCHASES, SOME ESTIMATION OF D ISALLOWANCE IS JUSTIFIED, WE FEEL THAT ESTIMATION OF DISALLOWANCE TO THE EXTENT OF 20 % OF THE FIREWOOD PURCHASES IS EXCESSIVE IN THE CIRCUMSTANCES OF THE CASE. HAVING REGARD TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW T HAT ESTIMATION OF DISALLOWANCE SHOULD BE RESTRICTED TO 10% AS AGAINST 20% ESTIMATE D BY THE ASSESSING OFFICER. 9. FOLLOWING THE SAME PARITY OF REASONINGS, THE EST IMATED DISALLOWANCE OUT OF FIREWOOD PURCHASES IS RESTRICTED TO 10% OF THESE PURCHASES. ACCORDINGLY, ASSESSEE PARTLY SUCCEEDS IN THIS APPEAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.771/PN/2014 IS PARTLY ALLOWED. 11. NOW, WE MAY TAKE-UP THE APPEAL OF THE ASSESSEE IN ITA NO.773/PN/2014 RELATING TO ASSESSMENT YEAR 2008-09. 12. IN THIS APPEAL, THE IDENTICAL ISSUE HAS BEEN RA ISED BY THE ASSESSEE PERTAINING TO ESTIMATED DISALLOWANCE OUT OF FIREWOO D PURCHASES. IN THIS APPEAL ALSO, THE OTHER ISSUE TOWARDS ESTIMATED DISALLOWANC E EXPENSES HAS NOT BEEN PRESSED IN THE COURSE OF HEARING. FOLLOWING THE SA ME PARITY OF REASONINGS, THE ESTIMATED DISALLOWANCE OUT OF FIREWOOD PURCHASES IS RESTRICTED TO 10% OF THESE PURCHASES ALSO. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.773/PN/2014 RELATING TO ASSESSMENT YEAR 2008-09 IS ALSO PARTLY ALLOWED. 6 ITA NO.771/PN/2014 ITA NO.773/PN/2014 14. RESULTANTLY, BOTH THE CAPTIONED APPEALS OF THE RESPECTIVE ASSESSEES ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 09 TH DAY OF DECEMBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 09 TH DECEMBER, 2015. & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-I, PUNE; 5) THE DR SMC BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE