The DCIT, Circle-1, Surat V. M/s. Abhishek Exim Pvt.Ltd., Surat

ITA 989/AHD/2011

• Counselvise Citation: 98920514 RSA 2011
• Duration Of Justice: 4 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KK SHAH
• Keywords: Reasonable cause
• Section: 40A(3); 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA / CO NO. AY APPELLANT RESPONDENT ITA NO. 2704/AHD/2008 2005-06 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, SURAT M/S. ABHISHEK EXIM PVT LTD, ABHISHEK HOUSE, OPP. JIVAN BHARTI SCHOOL, NANPURA, SURAT PAN : AADCA 7202 N CO NO. 109/AHD/2010 2005-06 ASSESSEE REVENUE ITA NO. 1597/AHD/2009 2006-07 REVENUE ASSESSEE CO NO. 175/AHD/2009 2006-07 ASSESSEE REVENUE ITA NO. 1195/AHD/2010 2007-08 REVENUE ASSESSEE ITA NO. 545/AHD/2010 2007-08 ASSESSEE REVENUE ITA NO. 2748/AHD/2011 2008-09 REVENUE ASSESSEE ITA NO. 988/AHD/2011 2005-06 REVENUE ASSESSEE ITA NO. 989/AHD/2011 2006-07 REVENUE ASSESSEE REVENUE BY : SHRI VILAS SHINDE, SR. DR WITH SHRI M.P. SINGH, CIT-DR ASSESSEE(S) BY : SHRI K.K. SHAH, AR / DATE OF HEARING : 20/08/2015 / DATE OF PRONOUNCEMENT: 29/09/2015 / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: ITA NOS. 2704/AHD/2008 AND 1597/AHD/2009 ARE THE AP PEALS FILED BY THE REVENUE AND CO NOS. 109/AHD/2010 AND 1 75/AHD/2009 ARE THE CROSS-OBJECTIONS THEREOF FILED BY THE ASSES SEE AGAINST THE ORDERS ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 2 OF THE CIT(A)-I, SURAT DATED 22.05.2008 AND 13.03. 2009 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. ITA NOS. 11 95/AHD/2010 AND 545/AHD/2010 ARE THE CROSS APPEALS FILED BY THE REV ENUE AND ASSESSEE RESPECTIVELY AGAINST THE ORDER OF THE CIT(A)-I, SUR AT DATED 04.02.2010 FOR ASSESSMENT YEAR 2007-08. ITA NOS. 2748/AHD/201 1, 988/AHD/2011 AND 989/AHD/2011 ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A)-I, SURAT D ATED 09.08.2011, 17.01.2011 AND 20.01.2011 FOR ASSESSMENT YEARS 2008 -09, 2005-06 AND 2006-07 RESPECTIVELY. SINCE THESE APPEALS INVOLVE COMMON ISSUES, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE CROSS-OBJECTION FILED BY THE ASSESSEE IS LAT E BY 573 DAYS. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTED BY T HE LEARNED COUNSEL FOR THE ASSESSEE THAT FOR THE ASSESSMENT YEAR 2005- 06 THE REVENUE FILED THE APPEAL ON 08.09.2008. HOWEVER, BY MISTAKE BY T HE STAFF OF THE ITAT, THE ACKNOWLEDGEMENT WAS ISSUED IN THE NAME OF ABHISHEK EXPORTS INSTEAD OF CORRECT NAME OF ASSESSEE, I.E., ABHISHEK EXIM PVT LTD. THAT, THE COPY OF APPEAL FILED BY THE REVENUE WAS ALSO SUPPLIED TO ABHISHEK EXPORTS; THEREFORE, THE COPY OF THE MEM O OF THE APPEAL FILED BY THE REVENUE IN THE CASE OF ASSESSEE, I.E., ABHISHEK EXIM PVT LTD., WAS PUT BY THE STAFF OF THE ASSESSEE IN THE F ILE OF M/S. ABHISHEK EXPORTS. THE LEARNED COUNSEL CLARIFIED THAT ABHISH EK EXPORTS IS ANOTHER FIRM OF THE SAME GROUP. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL PRODUCED PHOTOCOPY OF THE ACKNOWLED GEMENT-CUM- NOTICE ISSUED BY THE ITAT FOR FILING OF THE APPEAL BY THE DEPARTMENT ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 3 FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF ASSESSEE , I.E., ABHISHEK EXIM PVT LTD AS WELL AS THE PHOTOCOPY OF THE ENVELO PE BY WHICH THE APPEAL MEMO WAS SUPPLIED. THAT THE APPEAL WAS FIXE D FOR HEARING FOR THE FIRST TIME IN SURAT CAMP ON 28.05.2010 FOR WHIC H NOTICE WAS ISSUED ON 08.04.2010. ON SERVICE OF THE NOTICE FOR HEARING OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005-06, THE ASSESSEE B ECAME AWARE OF THE APPEAL HAVING BEEN FILED BY THE REVENUE FOR ASS ESSMENT YEAR 2005-06. THEREAFTER, IMMEDIATELY ON 28.04.2010, TH E ASSESSEE FILED THE CROSS-OBJECTION. HE, THEREFORE, REQUESTED THAT THE DELAY IN FILING OF THE APPEAL IS ON ACCOUNT OF WRONG SERVICE OF THE APPEAL MEMO, I.E., THE APPEAL MEMO WAS SERVED UPON ANOTHER ASSESSEE THAN A BHISHEK EXIM PVT LTD. IN SUPPORT OF THIS CONTENTION, SHRI KIRAN SHAH, THE COUNSEL OF THE ASSESSEE HAS FILED THE AFFIDAVIT. THE LEARNED C OUNSEL ALSO RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATI ON LTD., REPORTED IN (2011) 334 ITR 0269, IN SUPPORT OF HIS CONTENTION FOR CONDONATION OF DELAY. 3. THE EARNED DEPARTMENTAL REPRESENTATIVE, ON THE O THER HAND, STATED THAT THE FACTS STATED BY THE LEARNED COUNSEL MAY BE VERIFIED FROM THE ITATS RECORD AND THEREAFTER, THE BENCH MA Y DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE HAVE VERIFIED OUR RECORD AND FOUND THE CONTENTION OF THE LEARNED COUN SEL FOR THE ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 4 ASSESSEE TO BE CORRECT. ITA NO.2704/AHD/2008 IS T HE APPEAL FILED BY THE REVENUE IN THE CASE OF M/S. ABHISHEK EXIM PVT L TD, BUT WE FIND THAT THE ACKNOWLEDGEMENT HAS BEEN ISSUED IN THE NAM E OF ABHISHEK EXPORTS. EVEN IN THE ORDER-SHEET OF THE ITAT, THE N AME OF THE RESPONDENT IS MENTIONED AS ABHISHEK EXPORTS. ON THE FILE COVER OF THE ITAT ALSO NAME OF THE RESPONDENT WAS MENTIONED AS A BHISHEK EXPORTS, WHICH IS SUBSEQUENTLY RECTIFIED AS ABHISHE K EXIM PVT LTD. THESE FACTS SUPPORT THE CONTENTION OF THE LEARNED C OUNSEL THAT THE COPY OF THE APPEAL MEMO FOR FILING OF THE APPEAL BY THE REVENUE IS SERVED ON THE WRONG ASSESSEE. THE ASSESSEE CAME TO KNOW ABOUT THE FILING OF THE APPEAL BY THE REVENUE FOR THE FIRST T IME WHEN THE CASE WAS FIXED FOR HEARING AT SURAT CAMP ON 28.05.2010 FOR WHICH THE NOTICE WAS ISSUED ON 08.04.2010. THE ASSESSEE HAS FILED C ROSS-OBJECTION ON 28.04.2010 WHICH WAS THE EARLIEST OPPORTUNITY WHEN THE ASSESSEE CAME TO KNOW OF THE APPEAL FILED BY THE REVENUE FOR ASSE SSMENT YEAR 2005- 06. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE OPIN ION THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE FOR DELAY IN FILI NG OF THE CROSS- OBJECTION. WE ARE, THEREFORE, CONDONE THE DELAY IN FILING OF THE CROSS- OBJECTION BY THE ASSESSEE AND ADMIT THE CROSS-OBJEC TION FOR HEARING ON MERITS. ITA NO.2704/AHD/2008 - REVENUES APPEAL: AY 2005-0 6 CO NO.109/AHD/2010 BY ASSESSEE : AY 2005-06 5. THE ONLY GROUND RAISED IN THE REVENUES APPEAL I S AGAINST THE REDUCTION IN DISALLOWANCE OUT OF PURCHASES. THE ASS ESSING OFFICER HAD DISALLOWED 10% OUT OF PURCHASES. ON APPEAL, THE CI T(A) REDUCED THE ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 5 DISALLOWANCE TO 2% OF THE PURCHASES. THE REVENUE I S IN APPEAL AGAINST THE REDUCTION IN DISALLOWANCE WHILE THE ASSESSEE IS IN CROSS-OBJECTION VIDE GROUND NO.2 OF THE CROSS-OBJECTION AGAINST THE DISALLOWANCE SUSTAINED. THE FACTS OF THE CASE ARE THAT THE ASSES SEE DERIVES INCOME FROM VARIOUS ACTIVITIES WHICH INCLUDED PURCHASE, IM PORT, MANUFACTURING, SALES AND EXPORT OF DIAMOND, PRECIOU S STONE, TEXTILE GOODS, READYMADE GARMENT GENERATION & DISTRIBUTION OF POWER BY WINDMILL. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT THE PURCHASES MADE B Y THE ASSESSEE IS NOT VERIFIABLE AS THE NOTICE ISSUED U/S 133(6) AT T HE ADDRESS OF THE SELLER HAVE BEEN RETURNED UNSERVED. THOUGH THE ASSESSEE HA S PRODUCED THE CONFIRMATION OF ALL THE PARTIES AS WELL AS COPY OF THE PURCHASE BILL AND THE DETAILS OF PAYMENT HAVING BEEN MADE BY CHEQUE, BUT THE ASSESSING OFFICER DISALLOWED 10% OF THE PURCHASES WITH THE FO LLOWING FINDING:- 3.5 THE ASSESSEE HAS FAILED TO PRODUCE THESE PART IES. THE TOTAL AMOUNT OF TRANSACTIONS WITH THESE EIGHT PARTIES COMES TO RS.10,05,14,555/-. THIS IS THE AMOUNT OF PURCHASES SHOWN BY THE ASSES SEE MADE FROM THESE CONCERNS. FROM THE ABOVE DISCUSSION, IT IS AMPLY C LEAR THAT THE AVAILABLE EVIDENCES IN SUPPORT OF THE ASSESSEE ARE NOT RELIABLE. HENCE, THE FACTUAL ANALYSIS OF THE ASSESSEES CASE FIGURES OUT THAT THE PURCHASES MADE BY THE ASSESSEE ARE NOT GENUINE TRANSACTIONS. HOWEVER, SALES IN TERMS OF EXPORT HAS BEEN EFFECTED SO THE ASSESSEE M UST HAVE PURCHASED THE GOODS FOR EXPORT, BUT IT IS NOT CLEAR THAT THE ASSESSEE HAD PURCHASED GOODS FROM WHICH PARTIES. AS SUCH, THE ACTUAL PURCH ASE EXPENSE OF THE ASSESSEE MUST BE AT MUCH LOWER AMOUNT THAN WHAT CLA IMED BY THE ASSESSEE. 3.6. IT IS PERTINENT TO MENTION HERE THAT IN THE SU BMISSION, THE ASSESSEE ITSELF HAS STATED THAT WITHOUT PREJUDICE TO THE SUB MISSION MADE THERE IS A POSSIBILITY OF PURCHASES FROM UNAUTHORIZED DEALER S AND IN THAT CASE ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 6 SOME LUMPSUM DISALLOWANCE MAY BE MADE. RELIANCE IS PLACED ON THE DECISION IN THE CASE OF INCOME TAX OFFICER VS. SUN STEEL ITAT AHD. B BENCH (2005) 92 TTJ 1126. IN THE SAID CASE THE HO NBLE ITAT HAS LAID DOWN THAT ON THE BASIS OF ABOVE FACTS, AT THE MOST IT CAN BE PRESUMED THAT THE ASSESSEE DID NOT MAKE PURCHASE FR OM ABOVE PARTIES BUT MADE FROM OTHER UNREGISTERED DEALERS AND GOT BE NEFIT OF MARGIN OF PURCHASES FROM UNREGISTERED DEALER. WE FIND THAT TO THAT EXTENT AND THE ESTIMATE OF PROFIT CAN BE MADE WHICH WOULD BE FAIR AND REASONABLE UNDER FACTS AND CIRCUMSTANCES OF THE CASE. RELIANC E IS ALSO PLACED ON THE DECISIONS IN THE CASES OF MILK FOOD LTD. VS. DC IT (1999) 065 TTJ 0848 (DELHI ITAT) & CIT VS. M.K . BROTHERS (1987) 163 ITR 249 (GUJ). IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT WOULD BE FAIR AND REASONABLE TO DISALLOW 10% OF THE ABOVE PURCHASES TREATING IT AS NOT VERIFIABLE. ACCORDINGLY, RS.1,00 ,51,455/- BEING 10% OF RS. 10,05,14,555/- IS DISALLOWED AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE A CT ARE BEING INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. 6. ON APPEAL, THE CIT(A) SUSTAINED THE DISALLOWANCE AT 2% OF THE PURCHASES WITH THE FOLLOWING FINDING:- 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THE AO HAS STATED IN PARA 3. 6, THAT IN THE SUBMISSION, THE ASSESSEE ITSELF HAS STATED THAT WI THOUT PREJUDICE TO THE SUBMISSION MADE THERE IS A POSSIBILITY OF PURCHASES FROM UNAUTHORIZED DEALERS AND IN THAT CASE, SOME LUMPSUM DISALLOWANCE MAY BE MADE. RELYING ON THIS STATEMENT AS WELL AS CASE LAWS AS M ENTIONED ABOVE, THE AO MADE THE DISALLOWANCE OF 10% OF THE PURCHASES. T HE AO HAS ADMITTED THAT THE ASSESSEE HAS GIVEN CONFIRMATIONS FROM ALL THESE PARTIES AND THE COPIES OF DEMAND DRAFTS / ACCOUNT PAYEE CHE QUES THROUGH WHICH THE APPELLANT HAD MADE PAYMENT TO THESE PARTIES. IT IS ALSO CLEAR THAT THE AO HAS NOT BEEN ABLE TO BRING ON RECORD ANY MATERIA L TO SHOW THAT THE PURCHASES WERE BOGUS SO THE PAYMENTS WERE BOGUS. TH IS IS ALSO CLEAR FROM THE FACT THAT THE AO HAS NOT DISALLOWED THE SP ECIFIC PURCHASES BUT HAS DISALLOWED AT AN ADHOC 10%. THE APPELLANT HAS A LSO RIGHTLY ARGUED THAT ITS BOOK RESULTS ARE BETTER THAN LAST YEAR. DU RING THE YEAR, THE GROSS PROFIT RATE IS 9.01% AS COMPARED TO 4.92% IN THE LA ST YEAR. THE NET ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 7 PROFIT RATE DURING THE YEAR IS 4.57% AS COMPARED TO 1.17% IN THE LAST YEAR. THE APPELLANT HAS FURTHER ARGUED THE DISALLOW ANCE IS MADE MOSTLY IN THE GARMENT PURCHASES. THE GROSS PROFIT RATE IN RESPECT OF GARMENT DIVISION IS ALSO HIGHER AT 15.29% AS COMPARED 11.91 % IN THE LAST YEAR. THE APPELLANT HAS FURTHER STATED THAT THE DISALLOWA NCE IS ADHOC AND WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW THA T THE PURCHASES ARE BOGUS OR THE PAYMENT IS BOGUS. FURTHER THE AO HAS G IVEN NO REASON AS TO WHY THE DISALLOWANCE SHOULD BE AT THE RATE OF 10 %. NO BASIS FOR ADOPTING THIS PERCENTAGE HAS BEEN GIVEN, HENCE ACCO RDING TO THE APPELLANT, THE DISALLOWANCE IS ADHOC AND BASED ON C ONJECTURES AND SURMISES. IN VIEW OF THESE REASONS, I AGREE WITH TH E APPELLANT THAT THE DISALLOWANCE MADE BY THE AO IS ADHOC AND ALSO THE A O HAS NOT GIVEN ANY REASON FOR ADOPTING THE FIGURE OF 10%. BUT IT I S ALSO TRUE THAT THE APPELLANT HAS NOT BEEN ABLE TO GIVE THE CORRECT ADD RESS OF THESE PARTIES. IN VIEW OF THESE REASONS AND CONSIDERING THE HIGHER GROSS PROFIT RATE AND HIGHER NET PROFIT RATE COMPARED TO THE LAST YEA R IT WOULD BE REASONABLE TO KEEP THE DISALLOWANCE AT 2% OF THE PU RCHASES, THEREFORE, THE DISALLOWANCE OF RS. 1,00,51,455/- IS RESTRICTED TO RS.20,10,291/-. HENCE THIS GROUND OF APPEAL IS PARTLY ALLOWED. 7. BOTH THE PARTIES, AGGRIEVED WITH THE ORDER OF TH E CIT(A), ARE IN APPEAL BEFORE US. REVENUE IS AGGRIEVED FOR THE RE DUCTION MADE BY THE ASSESSING OFFICER WHILE THE ASSESSEE IS AGGRIEVED F OR THE DISALLOWANCE SUSTAINED. 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR ARGUMENTS AND HAVE ALSO PERUSED THE ORDERS OF THE L OWER AUTHORITIES AS WELL AS THE MATERIAL PRODUCED BEFORE US. WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS RECORDED THE FINDING THAT THE G OODS PURCHASED BY THE ASSESSEE WHICH IS FOUND TO BE UNVERIFIABLE HAVE ACTUALLY BEEN EXPORTED BY THE ASSESSEE AND EXPORTS SALES HAVE BEE N DISCLOSED. THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE GOODS HAVE ACTUALLY BEEN RECEIVED BY THE ASSESSEE, BUT HE WAS OF THE OPINION ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 8 THAT INSTEAD OF PURCHASING THE GOODS FROM THE PARTI ES IN WHOSE NAME PURCHASE BILL IS THERE, ASSESSEE MIGHT HAVE PURCHAS ED THE GOODS FROM SOME OTHER PARTIES AND ACTUAL PURCHASE PRICE MIGHT BE LOWER THAN WHAT IS CLAIMED BY THE ASSESSEE. HE, THEREFORE, DIS ALLOWED 10% OF THE PURCHASE AMOUNT ON ESTIMATE BASIS. THE CIT(A) NOTI CED THAT FOR THE YEAR UNDER CONSIDERATION THE GROSS PROFIT RATE AS W ELL AS THE NET PROFIT RATE BOTH IS BETTER THAN THE IMMEDIATELY PRECEDIN G YEAR WHICH WAS ACCEPTED BY THE REVENUE. HE WAS, THEREFORE, OF THE OPINION THAT EVEN AFTER THE REJECTION OF BOOKS OF ACCOUNT, THERE WAS NO JUSTIFICATION FOR THE DISALLOWANCE OF AS HIGH AS 10% OF THE PURCHASES, BU T AT THE SAME TIME, THE ASSESSEE BEFORE ASSESSING OFFICER HAS SUBMITTED THAT WHEN THE PURCHASES ARE NOT VERIFIABLE, THEN A LUMP-SUM DISAL LOWANCE MAY BE MADE. AFTER CONSIDERING ALL THE FACTS AND THE ASSE SSEES SUBMISSIONS, THE CIT(A) DEEMED IT PROPER TO SUSTAIN THE DISALLOW ANCE AT 2% OF THE PURCHASES AND THEREFORE, THE DISALLOWANCE WAS REDUC ED TO RS.20,10,291/- AS AGAINST RS.1,00,51,455/- MADE BY THE ASSESSING OFFICER. AFTER CONSIDERING THE FACTS OF THE CASE A ND THE ARGUMENTS OF BOTH THE SIDES, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A). SO FAR AS THE REVENUES APPEA L IS CONCERNED, THE CIT(A) HAS ALREADY RECORDED THAT THE GP AS WELL AS NP OF THE YEAR UNDER CONSIDERATION IS BETTER THAN THE PRECEDING YE AR WHICH WAS ACCEPTED BY THE REVENUE. THEREFORE, THE REVENUE SH OULD NOT BE AGGRIEVED BECAUSE OF REDUCTION IN THE DISALLOWANCE BY THE CIT(A). SO FAR AS THE ASSESSEES CROSS-OBJECTION IS CONCERNED, THE ASSESSEE ITSELF HAS STATED BEFORE THE CIT(A) THAT WITHOUT PREJUDICE TO THE SUBMISSION MADE THERE IS A POSSIBILITY OF PURCHASES FROM UNAUTHORIZ ED DEALERS AND IN THAT CASE, ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 9 SOME LUMPSUM DISALLOWANCE MAY BE MADE . IN VIEW OF ABOVE ADMISSION ON THE PART OF THE ASSESSEE, THE DISALLOWANCE RESTR ICTED AT 2% OF THE PURCHASES CANNOT BE SAID TO BE UNREASONABLE OR UNJU STIFIED. WE, THEREFORE, DEEM IT PROPER TO SUSTAIN THE ORDER OF T HE CIT(A) AND REJECT THE REVENUES APPEAL AS WELL AS GROUND NO.2 OF THE ASSESSEES CROSS- OBJECTION. 9. GROUND NO.1 OF THE ASSESSEES CROSS-OBJECTION RE ADS AS UNDER:- 1. THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING ADDIT ION OF RS.2,31,33,256/- ON ACCOUNT OF PAYMENT OF JOB CHARG ES AS PER PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS PER PAR A 2.3 OF THE APPEAL ORDER. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED THE JOB CHARGES ON THE GROUND THAT THERE WAS DELAY IN THE D EPOSIT OF TDS. AT THE TIME OF HEARING BEFORE US, IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT THE TDS WAS DEPOSITED WELL BEFORE THE DUE DATE FOR FILING OF THE RETURN. HE SUBMITTED THAT THE HONBLE JURISDICTION AL HIGH COURT HAS CONSIDERED THE IDENTICAL ISSUE IN THE CASE OF CIT V S. J.K. CONSTRUCTION CO., REPORTED IN [2014] 361 ITR 181 (GUJ.), WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT IF THE TDS H AS BEEN DEPOSITED BEFORE THE DUE DATE FOR FILING OF THE RETURN, NO DI SALLOWANCE U/S 40(A)(IA) IS TO BE MADE. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHO RITIES BELOW. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. J.K. CONSTRUCTION CO. (SUPRA) HAS HELD AS UNDER:- ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 10 HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE HAD TO MAKE DEDUCTION BEFORE 31 ST MARCH OF THE YEAR AND AS LONG AS SUCH AMOUNTS WERE DEPOSITED BEFORE THE LAST DATE FOR FILING OF THE RE TURN, THE REQUIREMENTS OF LAW WOULD BE FULFILLED. IT WAS ON THIS BASIS THAT T HE TRIBUNAL WAS OF THE OPINION THAT THE ASSESSEE COMMITTED NO WRONG AND WA S, THEREFORE, ENTITLED TO SEEK DEDUCTION OF PAYMENTS TO CONTRACTO RS OF RS.32,94,149/- FROM WHICH AMOUNT THE ASSESSEE HAD DEDUCTED TAX AND DEPOSITED IT WITH THE REVENUE BEFORE THE LAST DATE FOR FILING OF THE RETURN. THERE WAS NO ILLEGALITY IN THE ORDER OF THE TRIBUNAL. 11. ADMITTEDLY, IN THE CASE UNDER APPEAL BEFORE US, THE TDS WAS DEPOSITED BEFORE THE DUE DATE FOR FILING OF THE RET URN. THE ASSESSING OFFICER HAS GIVEN THE CHART IN PAGE NO.2 OF THE ASS ESSMENT ORDER FROM WHICH IT IS EVIDENT THAT THE TDS WAS DEPOSITED ON 3 0.05.2005 WHICH WAS MUCH BEFORE THE DUE DATE FOR FILING OF THE RETU RN. THEREFORE, THE ABOVE DECISION OF HONBLE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE SAM E, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40(A )(IA) AND ALLOW GROUND NO.1 OF THE ASSESSEES CROSS-OBJECTION. 12. GROUND NO.3 OF THE ASSESSEES CROSS-OBJECTION I S AGAINST THE 20% DISALLOWANCE OUT OF WAGES. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE ASSESSING OFFICER DISALLOWED 20% OUT OF WAGES ON THE GROUND T HAT THE WAGES WERE PAID IN CASH AND THEREFORE, SECTION 40A(3) WOU LD BE APPLICABLE. ACCORDINGLY, A SUM OF RS.49,94,612/- WAS DISALLOWED BY THE ASSESSING OFFICER SECTION 40A(3) OF THE ACT. ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 11 13. AT THE TIME OF HEARING BEFORE US, IT WAS SUBMIT TED BY THE LEARNED COUNSEL THAT WAGES PAYMENT TO EACH WORKER WAS BELOW RS.20,000/- AND THEREFORE, SECTION 40A(3) WAS NOT APPLICABLE. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, POI NTED OUT THAT IN ASSESSMENT YEAR 2008-09, THE CIT(A) HAS RESTRICTED THE DISALLOWANCE OUT OF WAGES TO RS.5,00,000/- WHICH WAS ACCEPTED B Y THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT IF THE ITAT ACCEPTS THE A SSESSEES CONTENTION THAT SECTION 40A(3) IS NOT APPLICABLE, THEN A LUMP- SUM DISALLOWANCE OUT OF WAGES SHOULD BE MADE. 14. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. ADMITTE DLY, FOR APPLICABILITY OF SECTION 40A(3), IT IS ESSENTIAL TO ESTABLISH THAT THERE WAS PAYMENT EXCEEDING RS.20,000/- IN CASH FOR THE WAGES . IN THE CASE UNDER CONSIDERATION BEFORE US, THE ASSESSING OFFICE R HAS NO WHERE POINTED OUT ANY SPECIFIC ITEM OF PAYMENT, WHICH WAS EXCEEDING RS.20,000/-. HE MERELY PRESUMED THAT ALL THE CASH PAYMENTS WOULD BE EXCEEDING RS.20,000/-. THE DISALLOWANCE U/S 40A( 3) CANNOT BE MADE ON THE BASIS OF PRESUMPTION. AS NOT A SINGLE PAYMENT IN CASH EXCEEDING RS.20,000/- FOR WAGES HAVE BEEN POINTED O UT; THEREFORE, IN OUR OPINION, SECTION 40A(3) IS NOT APPLICABLE. 15. NOW, WE FIND THAT IN ASSESSMENT YEAR 2008-09 TH E CIT(A) WHILE DELETING THE DISALLOWANCE OUT OF WAGES U/S 40A(3) H AVE SUSTAINED LUMP-SUM DISALLOWANCE OF RS.5,00,000/- OUT OF WAGES AND SUCH DISALLOWANCE HAVE BEEN ACCEPTED BY THE ASSESSEE. T HEREFORE, FOR THE ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 12 SAKE OF CONSISTENCY, WE SUSTAIN THE DISALLOWANCE OU T OF WAGES AT RS.5,00,000/-. ITA NO.1597/AHD/2009 - REVENUES APPEAL: AY 2006-07 & CO NO.175/AHD/2009 BY ASSESSEE : AY 2006-07 16. THE ONLY GROUND RAISED IN THE REVENUES APPEAL IS AGAINST THE RESTRICTION OF DISALLOWANCE OUT OF PURCHASES AT 2% AS AGAINST 10% DISALLOWED BY THE ASSESSING OFFICER; WHILE GROUND N O.1 OF THE CROSS- OBJECTION OF THE ASSESSEE IS AGAINST THE SUSTENANCE OF 2% DISALLOWANCE OUT OF PURCHASES. IT WAS ADMITTED BY BOTH THE PART IES THAT THIS ISSUE IS SIMILAR TO THE GROUND RAISED BY THE ASSESSEE AS WEL L AS REVENUE IN ASSESSMENT YEAR 2005-06; AND FOR THE DETAILED DISCU SSION THEREIN, WE UPHOLD THE DISALLOWANCE AT 2% OF THE PURCHASES. AC CORDINGLY, THE GROUND RAISED IN THE REVENUES APPEAL AS WELL AS GR OUND NO.1 OF THE CROSS-OBJECTION, BOTH ARE REJECTED. 17. THE ONLY OTHER GROUND RAISED IN THE ASSESSEES CROSS-OBJECTION IS AGAINST THE DISALLOWANCE OF RS.36,27,518/- OUT OF W AGES. BOTH THE PARTIES ADMITTED THAT THESE GROUNDS ARE IDENTICAL T O THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION FOR ASSESSME NT YEAR 2005-06; AND FOR THE DETAILED DISCUSSION THEREIN, WE SUSTAIN THE DISALLOWANCE OUT OF WAGS AT RS.5,00,000/-. ITA NO.1195/AHD/2010 - REVENUES APPEAL: AY 2007-08 ITA NO. 545/AHD/2010 - ASSESSEES APPEAL : AY 2007- 08 18. THE ONLY GROUND RAISED IN THE REVENUES APPEAL IS AGAINST THE RESTRICTION IN THE DISALLOWANCE OUT OF PURCHASES AT 2% AS AGAINST THE 10% DISALLOWED BY THE ASSESSING OFFICER, WHILE THE FIRST GROUND OF THE ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 13 ASSESSEES APPEAL IS AGAINST THE SUSTENANCE OF DISA LLOWANCE AT 2% OF PURCHASES. BOTH THE PARTIES ADMITTED THAT THIS ISS UE IS IDENTICAL TO THE ISSUE RAISED BY BOTH THE PARTIES FOR ASSESSMENT YEA R 2005-06; AND FOR THE DETAILED DISCUSSION THEREIN, THE GROUND RAISED BY THE REVENUE AS WELL AS GROUND NO. 1 OF THE ASSESSEES APPEAL, BOTH ARE REJECTED. 19. THE ONLY OTHER GROUND RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS.39,35,948/- OUT OF WAGES. THIS GROUND IS ALSO ADMITTED TO BE SIMILAR TO THE GROUND RAISED BY THE ASSESSEE IN CROSS- OBJECTION FOR ASSESSMENT YEAR 2005-06; AND FOR THE DETAILED DISCUSSION THEREIN, WE SUSTAIN THE DISALLOWANCE OF RS.5,00,000 /- OUT OF WAGES. ITA NO.2748/AHD/2011 - REVENUES APPEAL: AY 2008-09 20. THE GROUND NO.1 IN THE REVENUES APPEAL IS AGAI NST THE REDUCTION IN DISALLOWANCE OUT OF PURCHASES AT 2% AS AGAINST THE DISALLOWANCE MADE AT 10% BY THE ASSESSING OFFICER. THE GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST THE REDUCTION IN THE DISALLOWANCE OUT OF WAGES FROM RS.37,90,158/- TO RS.5,00,000/-. AT THE TIME OF HEARING BEFORE US, BOTH THE PARTIES AGREED THAT BOT H THESE GROUNDS ARE SIMILAR TO THE GROUND RAISED BY THE REVENUE AND ASS ESSEE IN EARLIER YEARS AND FOR THE DETAILED DISCUSSION THEREIN, WE U PHOLD THE ORDER OF THE CIT(A) AND REJECT BOTH THE GROUNDS OF THE REVEN UES APPEAL. ITA NO.988/AHD/2011 - REVENUES APPEAL: AY 2005-06 21. THE ONLY GROUND RAISED IN THE APPEAL BY THE REV ENUE IS AGAINST THE DELETION OF PENALTY LEVIED U/S 271(1)(C), WHICH WAS CANCELLED BY THE CIT(A). ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 14 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSING OFFICER HAS LEVIED THE PE NALTY U/S 271(1)(C) FOR DISALLOWANCE U/S 40(A)(IA) RS. 2,31,33,256/-, DISALLOWANCE OUT OF UNVERIFIABLE PURCHASES-RS.20,10,291/- AND DISALLOWA NCE U/S 40A(3)- RS.49,94,612/-. WHILE DECIDING THE ASSESSEES CRO SS-OBJECTION, WE HAVE DELETED THE DISALLOWANCE MADE U/S 40(A)(IA) AS WELL AS 40A(3). SO FAR AS THE DISALLOWANCE OUT OF PURCHASES ARE CONCERNED, WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS ADMITTED THAT THE GOO DS HAVE BEEN ACTUALLY PURCHASED BY THE ASSESSEE BECAUSE THE GOOD S HAVE BEEN EXPORTED BY THE ASSESSEE AND SALE CONSIDERATION FRO M SUCH EXPORT OF THE GOODS WAS DISCLOSED. THE ASSESSING OFFICER DOUB TED THE GENUINENESS OF THE PURCHASES MERELY BECAUSE THE PAR TIES WERE NOT FOUND AT THE ADDRESS GIVEN. ON THESE FACTS, THE ASS ESSING OFFICER PRESUMED THAT THE GOODS MIGHT HAVE BEEN PURCHASED B Y THE ASSESSEE FROM SOME OTHER DEALERS THAN THE DEALERS MENTIONED IN THE PURCHASE BILLS. HE, THEREFORE, DISALLOWED 10% OUT OF THE PU RCHASES. ON APPEAL, THE SAME WAS REDUCED TO 2% OF THE PURCHASES. THUS, THE DISALLOWANCE WAS SUSTAINED ON THE BASIS OF ESTIMATE ONLY. SO FA R AS THE ASSESSEE IS CONCERNED, IT HAS PRODUCED THE CONFIRMATION FROM AL L THE SELLERS AND HAS ALSO PRODUCED THE SALES VOUCHERS ISSUED BY THEM AND THE EVIDENCE OF THE PAYMENTS HAVING BEEN MADE BY CHEQUE. NONE OF THESE EVIDENCES PRODUCED BY THE ASSESSEE WERE FOUND TO BE INCORRECT, FALSE OR FABRICATED. MERELY BECAUSE THE SELLER PARTY WAS NOT FOUND AVAILABLE AT THE ADDRESS GIVEN BY THEM IN THEIR SALE BILL, SO ME DISALLOWANCE ON ESTIMATE BASIS MAY BE JUSTIFIED; BUT THAT IS NOT SU FFICIENT TO LEVY THE PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT. NONE O F THE PARTIES FROM ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 15 WHOM THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED THE GOODS DENIED HAVING SOLD THE GOODS TO THE ASSESSEE. THEREFORE, T HE PURCHASES FROM THOSE PARTIES HAVE NOT BEEN FOUND TO BE FALSE OR BO GUS. SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED, THE ASSESSEE HAS DULY SUBSTANTIATED THE PURCHASES CLAIMED TO HAVE BEEN MA DE BY IT BY PRODUCING CONFIRMATION OF SELLER PARTIES AS WELL AS VOUCHERS, AND DETAILS OF PAYMENT MADE THROUGH BANKING CHANNEL. I N THE ABOVE CIRCUMSTANCES, IN OUR OPINION, THE CIT(A) RIGHTLY H ELD THAT THE ASSESSEE IS NOT LIABLE TO BE PENALIZED U/S 271(1)(C), MERELY BECAUSE PART OF THE DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE PURCHASES W AS SUSTAINED BY THE CIT(A) AND EVENTUALLY BY US. SIMILARLY, FOR LU MP-SUM DISALLOWANCE OUT OF WAGES, NO PENALTY U/S 271(1)(C) IS LIABLE TO BE IMPOSED. THE ASSESSING OFFICER HAD MADE THE DISALL OWANCE U/S 40A(3) AMOUNTING TO RS.49,94,612/-. WHILE DECIDING THE QUANTUM APPEAL, WE HAVE GIVEN THE FINDING THAT THE DISALLOW ANCE U/S 40A(3) IS NOT CALLED FOR BECAUSE THERE IS NO EVIDENCE OF CASH PAYMENT OF RS.20,000/- EACH TO ANY WORKER. THOUGH WE HAVE SUST AINED THE LUMP- SUM DISALLOWANCE OUT OF WAGES AT RS.5,00,000/- OUT OF TOTAL WAGES PAYMENT TO WORKERS OF RS.2,49,73,063/-; HOWEVER, FO R SUCH LUMP-SUM DISALLOWANCE OUT OF WAGES ON THE BASIS OF PRESUMPTI ON, NO PENALTY U/S 271(1)(C) IS LEVIABLE. THEREFORE, WE UPHOLD THE OR DER OF THE CIT(A) IN THIS REGARD AND DISMISS THE APPEAL FILED BY THE REV ENUE. ITA NO.989/AHD/2011- REVENUES APPEAL: AY 2006-07 23. THE ONLY GROUND RAISED IN THIS APPEAL BY THE RE VENUE IS AGAINST THE DELETION OF THE PENALTY LEVIED U/S 271(1)(C). BOTH THE PARTIES FAIRLY ITA NOS. 2704/AHD/2008 & CO 109/AHD/2009 ITA NO.1957/AHD/ & CO 175/AHD/2010 ITA NO.545 & 1195/AHD/2010 AND 988, 989, 2748/AHD/2 011 TOTAL 9 APPEALS- ABHISHEK EXIM PVT LTD AY 2005-2006, 2006-07, 2007-08 & 2008-09 16 ADMITTED THAT THE PENALTY HAS BEEN LEVIED FOR PART OF THE DISALLOWANCES OUT OF PURCHASES AND OUT OF LABOUR PAYMENT. ON BOT H THESE COUNTS, PENALTY WAS LEVIED FOR ASSESSMENT YEAR 2005-06; THE REFORE, BOTH THE PARTIES ADMITTED THAT THE FACTS OF THIS YEAR ARE ID ENTICAL TO THE FACTS FOR ASSESSMENT YEAR 2005-06. FOR THE DETAILED DISCUSSI ON MADE IN ASSESSMENT YEAR 2005-06, WE UPHOLD THE ORDER OF THE CIT(A) WHEREIN HE CANCELLED THE PENALTY LEVIED U/S 271(1)(C). 24. IN THE RESULT, ALL THE APPEALS BY THE REVENUE A RE DISMISSED AND ASSESSEES CROSS-OBJECTIONS/CROSS-APPEALS ARE PARTL Y ALLOWED. ORDER PRONOUNCED IN THE COURT ON 29 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 29/09/2015 BIJU T., PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. $%& '' , , / DR, ITAT, AHMEDABAD 6. &,-. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD