The Spunpipe & Construction Co.(Baroda)Pvt.Ltd., Baroda V. The Income tax Officer,Ward-4(4), Baroda

ITA 972/AHD/2010

• Counselvise Citation: 97220514 RSA 2010
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHR B L YADAV
• Assessee Lawyers: A C SHAH
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Earning of tax free income
• Section: 143(3); 234B; 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JU DICIAL MEMBER THE SPUNPIPE & CONSTRUCTION CO.(BARODA)PVT. LTD BARODA (APPELLANT) PAN NO. AAACT6738 R VS. THE ITO, WARD- 4(4), BARODA (RESPONDENT) REVENUE BY : SHR B.L. YADAV, SR. D.R. ASSESSEE BY : SRI A.C. SHAH, A.R DATE OF HEARING : 19-07-2012 DATE OF PRONOUNCEMENT : 24-09-2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-III, BARODA DAT ED 10-11-2009. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED QT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS. 37,926 UNDER SEC. 69 AS BUGUS PURCHASES FROM MINAXI ENTERPRISE IN AS MUCH AS: (I). THE GOODS WERE PURCHASED AND WERE RECEIVED BY THE COMPANY, WHICH IS EVIDENT FROM THE DELIVERY CHALLAN; I.T.A. NO 972/AHD/2010 A.Y.:-2006-07 ITA NO. 972/AHD/2010 A.Y.:-2006-07 PAGE NO. THE SPUNPIPE & CONSTRUCTION CO.(BARODA) PVT. LTD VS . THE ITO 2 THE GOODS RECEIVED WERE ENTERED IN THE STOCK REGIST ER AND WAS CONSUMED FOR THE PURPOSE OF MANUFACTURING. (III) THE GOODS WERE PURCHASED AT THE PREVAILING MARKET RATE; (IV) THE PAYMENT FOR THE PURCHASES MADE WAS MADE BY ACCOUNT PAYEE CHEQUE; (V) THE LEARNED AO HAS NOT ADDUCED ANY EVIDEN CE TO PROVE THAT THE AMOUNT PAID HAS BEEN RECEIVED BACK BY THE ASSESSEE; (VI) THE EXISTENCE OF THE PARTIES ARE NOT DISP UTED BY THE LEARNED AO; AND THEREFORE THE GOODS HAVE BEEN PURCHASED AND CONSUMED AND THEREFORE THERE IS NO QUESTION OF TREATING THE SAME AS UNEXPLAINED EXPENDITURE, 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF RS. 19,968 UNDER SEC. 14 A IN AS SUCH AS NO SUCH EXPENDITURE IS INCURRED FOR EARNING THE EXEMPT INCOME. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS, 1,16,730 ON ADHOC BASIS OUT OF MANUFACTURIN G AND RENT EXPENSES OF RS. 3,47 CRORC IN AS MUCH AS THE ENTIRE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 4. THE INTEREST UNDER SEC. 234B & 234-C IS WRONGLY CHA RGED. 2. THE BRIEFLY STATED FACTS ARE THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 19661 (HEREINAFTER REFERRED T O AS THE ACT) WAS CONCLUDED WHEREBY THE INCOME WAS ASSESSED AT RS. 23 ,50,150/- AGAINST THE NET BUSINESS INCOME OF RS. 21,46,238/-. THE ASSESS ING OFFICER MADE ADDITION ON ACCOUNT OF BOGUS PURCHASE UNDER SECTION 69 AND OTHER DISALLOWANCES. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT WHO AFTER CONSIDERING THE SUBMISSIONS DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO. 972/AHD/2010 A.Y.:-2006-07 PAGE NO. THE SPUNPIPE & CONSTRUCTION CO.(BARODA) PVT. LTD VS . THE ITO 3 3. THE FIRST GROUND IS AGAINST THE ADDITION OF RS. 37,926/- UNDER SECTION 69 OF THE ACT. LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE GOODS WERE PURCHASED AND RECEIVED BY THE ASSESSEE COMPANY WHIC H IS EVIDENT FROM THE DELIVERY CHALLAN, THE GOODS RECEIVED WERE ENTERED I NTO STOCK REGISTER AND CONSUMED FOR THE PURPOSE OF MANUFACTURING, THE GOOD S WERE PURCHASED AT THE PREVAILING MARKET AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. HE SUBMITTED THAT THE REVENUE HAS NOT BEEN PLACED ANY EVIDENCE THAT THE AMOUNT PAID HAS BEEN RECEIVED BACK BY THE ASSESSEE. THE EXISTENCE OF THE PARTIES ARE NOT DISPUTED BY THE ASSESSING OFFICER. ON THE CONTRARY, LD. SR- DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. LD. SR. D.R. SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR THE ASSE SSMENT YEAR 2005-06. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER OBSERVE D IN ORDER TO VERIFY GENUINENESS OF THE PURCHASE STATEMENT ON OATH UNDER SECTION 131 WAS RECORDED FROM SRI KANTILAL SHARMA, THE PROPRIETOR O F MINAXI ENTERPRISES ON 12-09-2006 WHEREIN HE ADMITTED THAT THEY HAVE NOT M ADE ANY ACTUAL SALES BUT THEY ISSUED BOGUS SALE BILLS TO PARTIES AGAINST DALALI. HE USED TO GIVE CHEQUE TO THE ASSESSEE, HE USED TO ISSUE BOGUS SALE S BILLS OF CHEQUES TO THE PARTIES. FURTHER, ON INQUIRY THROUGH INSPECTOR, TH E ASSESSING OFFICER FOUND THAT NO BUSINESS WAS CARRIED OUT FROM THE ADDRESS GIVEN ON INVOICE ISSUED AGAINST BOGUS SALES. ON THIS BASIS THE ASSESSING O FFICER MADE ADDITION. HOWEVER, THE LD. CIT(A), CONFIRMED THE ADDITION FOL LOWING THE DECISION OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2005-06. IT IS BROUGHT TO OUR NOTICE THAT THE ASSESSEE HAD FILED AN APPEAL AGAINST THE ORDER OF CIT(A) IN RESPECT OF THE ASSESSMENT YEAR 2005-06 WHERE THE SIMILAR ISSUE WAS DECIDED BY THE HONBLE ITA NO. 972/AHD/2010 A.Y.:-2006-07 PAGE NO. THE SPUNPIPE & CONSTRUCTION CO.(BARODA) PVT. LTD VS . THE ITO 4 TRIBUNAL CONFIRMING THE DISALLOWANCE TO THE EXTENT OF 20 PERCENT OF BOGUS PURCHASES. IN THIS VIEW OF THE MATTER, IN THE INTE REST OF JUSTICE, THE DISALLOWANCE OF RS. 37,926/- MADE ON ACCOUNT OF BOG US PURCHASES IS RESTRICTED TO 20% OF RS.37,926/- I.E., RS.7,600/- THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 5. NEXT GROUND IS AGAINST THE CONFIRMATION OF DISAL LOWANCE OF RS. 19,960/- MADE UNDER SECTION 14(A). LD. A.R. SUBMIT TED THAT THE PAID UP CAPITAL OF THE COMPANY IS RS. 20,04,500/- WHICH IS INVESTED OUT OF FREE FUNDS. THUS, APPLICATION OF SECTION 14(A) DOES NOT ARISE. IT IS SUBMITTED THAT DIVIDEND RECEIVED FROM COOPERATIVE BANK ARE BROUGHT INTO NOTICE. ON THE CONTRARY, DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE ASSESSEE HAS R ECEIVED DIVIDEND FROM THE COOPERATIVE BANK. SINCE IT IS NOT DISPUTED THAT TR ANSACTIONS WERE EFFECTED THROUGH BROKER, THE CONTENTIONS OF THE ASSESSEE THA T NO CHARGES WERE PAID TO THE BROKER IS NOT ACCEPTABLE. MOREOVER, THE ASSESS EE MIGHT HAVE INCURRED ADMINISTRATIVE EXPENSES. AFTER CONSIDERING ALL ASP ECTS OF THE MATTER THE DISALLOWANCE OF RS. 19,968/- IS RESTRICTED TO RS. 1 0,000/-, THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 7. NEXT GROUND IS CONFIRMATION OF DISALLOWANCE OF RS. 1,16,730/. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE PA YMENTS WERE PAID TO THE CONCERNED PARTIES AS IS DONE IN NORMAL COURSE OF BU SINESS. HE SUBMITTED THAT ALL THE DETAILS OF PAYMENTS WERE FURNISHED BEF ORE THE ASSESSING OFFICER. ON THE CONTRARY, LD. SR. D.R. SUPPORTED THE ORDER O F THE AUTHORITIES BELOW. ITA NO. 972/AHD/2010 A.Y.:-2006-07 PAGE NO. THE SPUNPIPE & CONSTRUCTION CO.(BARODA) PVT. LTD VS . THE ITO 5 HE SUBMITTED THAT THE PAYMENTS WERE MADE IN CASH AN D SUCH PAYMENTS REMAINED UNVERIFIABLE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE PAYMENTS WERE MADE IN CASH ONLY, HOWEVER THE CONTENTION OF ASSESSEE IS THAT THE PAYM ENTS WERE MADE FOR BUSINESS PURPOSE. IT WAS INCUMBENT UPON THE ASSESSE E TO PROVE THE EXPENDITURE MADE IN CASH. WE ARE IN AGREEMENT WITH THE OBSERVATIONS OF LD. CIT(A) THAT NO COMPLETE VERIFICATION COULD BE MADE FOR EXPENSES DEBITED UNDER THE HEAD OUT OF POCKET EXPENSES. HAVING CONSI DERED ALL ASPECTS OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT DISAL LOWANCE OF RS. 1,16,730/- IS EXCESSIVE WHICH INCLUDES DISALLOWANCE OF RS. 1 L AKH OUT OF MANUFACTURING EXPENSES OF RS.345.93 LAKHS. IN OUR CONSIDERED OPIN ION, OUT OF MANUFACTURING EXPENSES RENT AND OUT OF POCKET EXPEN SES, DISALLOWANCE OF RS.50,000/- WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. THIS GROUND OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDIC IAL MEMBER AHMEDABAD : DATED 24 /09/2012 AK. ITA NO. 972/AHD/2010 A.Y.:-2006-07 PAGE NO. THE SPUNPIPE & CONSTRUCTION CO.(BARODA) PVT. LTD VS . THE ITO 6 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *