Mayank Diamonds Pvt. Ltd., V. The Income tax Officer, Ward-1(3),

ITA 879/AHD/2004

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73024 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-01-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 18-03-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: R N VEPARI
• Keywords: Bogus purchase; Rejection of books of accounts; Question of law
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 879 /AHD/2004 (ASSESSMENT YEAR:1997-98) MAYANK DIAMONDS PVT. LTD., 8, GUNATIT SOCIETY, DALICHAND NAGAR, ATHWAGATE, SURAT V/S THE ITO, WARD1(3), SURAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.N. VEPARI, A.R. RESPONDENT BY : SHRI K.C. MATHEWS SR. D.R. ( )/ ORDER DATE OF HEARING : 21-01-2014 DATE OF PRONOUNCEMENT : 21 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-I, SURAT DATED 27.02.2004 FOR A.Y. 1997-98. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING OF POLISHED DIAMONDS. IT FILED ITS RETURN OF INCOME FOR AY 1997 -98 ON 27.11.97 DECLARING THE TOTAL LOSS OF RS 12,230/-. WHILE FINALIZING THE ASSESSMENT AO REJECTED THE BOOKS OF ACCOUNTS U/S. 145 OF THE ACT BY CONSIDERIN G THE PURCHASE OF ROUGH DIAMONDS AMOUNTING TO RS 1,68,48,663/- MADE BY THE ASSESSEE AS BOGUS PURCHASES AND THEREAFTER MADE ADDITION OF THE TOTAL AMOUNT OF BOGUS PURCHASES. IN FIRST APPEAL, CIT(A) UPHELD THE ORDE R OF AO BUT IN 2 ND APPEAL ITA NO 879/ AHD/2004 . A.Y. 1997 - 98 2 TRIBUNAL UPHELD THE ORDER OF A.O. IN REJECTING THE BOOKS OF ACCOUNTS U/S. 145 BUT THEREAFTER APPLYING THE GROSS PROFIT RATE OF 12 .5% ON THE TOTAL TURNOVER RESTRICTED THE ADDITION TO RS 21,36,451/-. AGAINST THE ORDER OF TRIBUNAL IN QUANTUM PROCEEDINGS ASSESSEE MOVED HON'BLE HIGH COU RT. HONBLE HIGH COURT VIDE ORDER DATED 23.07.2003 IN TAX APPEAL NO 200 OF 2003 ADMITTED THE APPEAL OF ASSESSEE. 4. ON THE QUANTUM ADDITION THAT WAS SUSTAINED BY TR IBUNAL, AO VIDE PENALTY ORDER DATED 29.12.2003 LEVIED PENALTY OF RS 9,18,67 3/- U/S. 271(1)(C) WHICH WAS ALSO UPHELD BY CIT(A) BY ORDER DATED 27.2.2004. AGAINST THE ORDER OF CIT(A), ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL. TRIBUNAL VIDE ORDER DATED 29.6.2007 (ITA NO 879/AHD/2004) DELETED THE PENALTY FOR THE REASON THAT NO PENALTY IS LEVIABLE WHEN THE PLEA OR A CLAIM IS HEL D BY THE HIGH COURT TO GIVE RISE TO SUBSTANTIAL QUESTION OF LAW. AGGRIEVED BY T HE ORDER OF TRIBUNAL, REVENUE PREFERRED APPEAL BEFORE HON'BLE GUJARAT HIG H COURT. HON'BLE HIGH COURT VIDE ORDER DATED 21.10.2008 (TAX APPEAL NO 64 5 OF 2008) RESTORED THE APPEAL TO ITAT TO DECIDE THE SAME ON MERITS AND THE REFORE THE ASSESSEE IS NOW BEFORE US. 5. BEFORE US, THE LD.A.R. SUBMITTED THAT IN THE QUA NTUM APPEAL, THE TRIBUNAL VIDE ORDER DATED 30.9.2002 (ITA NO 341/AHD/2002) HA D BY APPLYING THE GROSS PROFIT RATE OF 12.5% RESTRICTED THE ADDITION TO RS 21,36,451/- AS AGAINST THE ADDITION OF RS 16848663 MADE BY THE AO. HE FURTHER SUBMITTED THAT AGAINST THE ORDER OF TRIBUNAL, ASSESSEE HAS FILED APPEAL BE FORE HON'BLE HIGH COURT AND THE HON'BLE HIGH COURT VIDE ORDER DATED 23.7.20 03 (TAX APPEAL NO 200 OF 2003) HAS ADMITTED THE APPEAL OF THE ASSESSEE HE PL ACED ON RECORD THE COPY OF THE AFORESAID ORDERS. HE THEREFORE SUBMITTED THA T AFTER THE ORDER OF TRIBUNAL, THE ORDER OF CIT(A) HOLDING THE PURCHASES TO BE BOGUS DOES NOT SURVIVE AS THE ORDER OF THE SUBORDINATE AUTHORITY M ERGES WITH THE ORDER OF THE SUPERIOR AUTHORITY (IN THE PRESENT CASE THE ORDER O F CIT(A) MERGES WITH THE ORDER OF TRIBUNAL). HE FURTHER SUBMITTED THAT AGAIN ST THE ORDER OF TRIBUNAL, ITA NO 879/ AHD/2004 . A.Y. 1997 - 98 3 HON'BLE HIGH COURT HAS ADMITTED THE APPEAL OF ASSES SEE WHICH IS YET TO BE DISPOSED OFF. HE FURTHER SUBMITTED THAT THE TRIBUNA L HAVING CONFIRMED THE ADDITION SUSTAINED BY CIT(A) ON ACCOUNT OF BOGUS PU RCHASES ON A DIFFERENT GROUND NAMELY FALL IN GP RATE, IT CANNOT BE SAID TH AT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE P ARTICULARS OF INCOME SO AS TO LEVY PENALTY U/S 271(L)(C). HE ALSO PLACED RELIA NCE ON THE DECISION IN THE CASE OF SUDESH KHANNA VS ACIT (2005) 98 TTJ (AHD) 1 06. LD D.R. ON THE OTHER HAND TOOK US THROUGH THE ORDER OF CIT(A) AND POINTED TO THE FINDINGS OF CIT(A) WHEREIN HE HAD CONFIRMED THE PURCHASES TO BE BOGUS. HE THEREFORE SUBMITTED THAT WHEN THE PURCHASE HAS BEEN HELD TO B E BOGUS, PENALTY U/S 271(L)(C) WAS LEVIABLE. HE FURTHER PLACED RELIANCE ON THE DECISIONS IN THE CASE OF VIJAY PROTIENS LTD VS ACIT ( 2004) 2 SOT 116 (RA JKOT), CIT VS MAHAVEER MIRROR IND. P. LTD (2013) 353 ITR 553 (MAD), KALPAK A BAZAR VS CIT (2013) 313 ITR 414 (KER), YOGESH T VANI VS ITO (2011) 129 ITD 61 (AHD) AND A.M.SHAH & CO VS CIT (1999)238 ITR 415 (GUJ). HE TH US SUPPORTED THE ORDER OF AO AND CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT AO MADE ADDITION OF RS 1.68 CRORE AS BEING BOGUS PURCHASES, BUT IN 2 ND APPEAL THE ADDITION WAS RESTRICTED BY THE TRIBUNAL TO RS 21,36,451/- (BY APPLYING THE GROSS PROFIT RATE OF 1 2.5%) BUT ON A DIFFERENT GROUND. THUS IT IS SEEN THAT THE PENALTY THAT WAS L EVIED BY A.O.(ON ACCOUNT OF BOGUS PURCHASE) DID NOT SURVIVE BECAUSE THE ADDITIO N WAS CONFIRMED BY TRIBUNAL ON A DIFFERENT REASON (APPLYING GROSS PROF IT RATE). IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT IT CANNOT BE SAID THAT THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR C ONCEALED THE PARTICULARS OF INCOME SO AS TO ATTRACT THE PENALTY U/S 271(L)(C) F OR WHICH WE ALSO GET SUPPORT FROM THE DECISION OF THE CO-ORDINATE BENCH IN THE C ASE OF SUDESH KHANNA (SUPRA) WHERE IT HAS BEEN HELD AS UNDER: ITA NO 879/ AHD/2004 . A.Y. 1997 - 98 4 'TRIBUNAL HAVING CONFIRMED THE ADDITION SUSTAINED B Y CIT(A) ON ACCOUNT OF UNACCOUNTED SALES ON A DIFFERENT GROUND VIZ FALL IN GP RATE, IT CANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED THE PARTICULAR S OF INCOME OR FURNISHED INACCURATE PARTICULARS AND THER EFORE PENALTY U/S 271(L)(C) WAS NOT LEVIABLE. APART FROM THE FOREGOING, IT IS ALSO A FACT THAT AG AINST THE ORDER OF TRIBUNAL SUSTAINING QUANTUM ADDITION, ASSESSEE HAS PREFERRED APPEAL BEFORE HONBLE HIGH COURT AND THE HIGH COURT HAS ADMITTED THE APPE AL HOLDING THE QUESTION RAISED TO BE A SUBSTANTIAL QUESTION OF LAW. BEFORE US, LD D.R. HAS PLACED RELIANCE ON VARIOUS DECISIONS BUT WE FIND THAT THE DECISIONS RELIED BY HIM ARE DISTINGUISHABLE ON FACTS AND THEREFORE HAVE NO APPL ICATION TO THE PRESENT FACTS. WE THEREFORE CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, ARE OF THE VIEW THAT NO PENALTY CAN BE LEVIED IN THE PRESENT C ASE AND THEREFORE DIRECT THE DELETION OF PENALTY LEVIED BY AO U/S 271(L)(C) OF T HE ACT. THUS THIS GROUND OF ASSESSEE IS ALLOWED 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 21- 02 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD