The DCIT, Circle-4, Surat V. Taha Wires Pvt.Ltd., Surat

ITSSA 227/AHD/2012

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7901 (ITAT-SURAT)
• Duration Of Justice: 9 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained investment; Business expenditure; Rule of consistency; Set aside
• Section: 133(6); 250; 80IA; 191; 13; 147; 131; 148

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO.1483/AHD/2010 (AY 2006-07) (H EARING IN VIRTUAL COURT) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, SURAT. VS. TAHA WIRES PRIVATE LIMITED, 10, HAJOORI CHEMBERS, SALABATPURA, SURAT. PAN: AAACT 8700 H APPLICANT RESPONDENT IT(SS)A NO.227/AHD/2012 (AY 2007-08) (H EARING IN VIRTUAL COURT) THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, SURAT. VS. TAHA WIRES PRIVATE LIMITED, 10, HAJOORI CHEMBERS, SALABATPURA, SURAT. PAN: AAACT 8700 H APPLICANT RESPONDENT ASSESSEE BY SHRI SAURABH SUPARKAR, SENIOR ADVOCATE WITH MRS.URVASHI SHODHAN, ADVOCATE. REVENUE BY SHRI SREENIVAS T. BIDARI CIT(DR) DATE OF HEARING 04.08.2021 DATE OF PRONOUNCEMENT 27.08.2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THESE TWO APPEALS BY REVENUE ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, AHMEDABAD FOR THE ASSESSMENT YEAR (AY) 2006-07 AND 2007-08 DATED 17.02.2010 AND 13.02.2012 RESPECTIVELY. IN BOTH THE APPEALS, THE ASSESSEE HAS RAISED CERTAIN COMMON GROUNDS OF APPEALS, FACTS IN BOTH THE YEARS ARE ALMOST SIMILAR, EXCEPT VARIATION OF FIGURES OF DISALLOWANCES OF BOGUS PURCHASES. THEREFORE, WITH THE CONSENT OF PARTIES, BOTH THE APPEALS WERE CLUBBED, HEARD AND DECIDED ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 2 TOGETHER BY COMMON ORDER. FOR APPRECIATION OF FACTS, WITH THE CONSENT OF THE PARTIES, THE APPEAL FOR THE A.Y. 2006-07 IS TREATED AS LEAD CASE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO 25% OF TOTAL NON-GENUINE PURCHASE MADE, FOLLOWING THE RATIO OF DECISION HON'BLE ITAT AHMEDABAD IN THE CASE OF VIJAY PROTEINS IGNORING THAT IN THE CASE OF VIJAY PROTEINS ASSESSEE HAD PROVIDED QUANTITATIVE DETAILS BUT IN THE INSTANT CASE ASSESSEE HAS NEITHER PROVIDED THE QUANTITATIVE DETAILS NOR HAS GOT IT TALLIED WITH PURCHASE SHOWN IN THE BOOKS OF ACCOUNT. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE RATIO OF CASE LAWS IN THE CASE OF CIT VS LA-MEDICA (2001) 250 ITR 575 (DEL) BY HON'BLE DELHI HIGH COURT WHERE IN IT WAS HELD THAT SINCE THE PURCHASE FROM SPECIFIC PARTY WAS NOT PROVED BY THE ASSESSEE, IT CANNOT BE CLAIMED AS BUSINESS EXPENDITURE AND ITAT CANNOT MAKE OUT A CASE THAT THE ASSESSEE WOULD HAVE MADE PURCHASE FROM THIRD PARTIES WHICH WAS NOT EVEN CLAIMED BY THE ASSESSEE ITSELF. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE RATIO OF THE FOLLOWING CASE LAWS WHILE DECIDING TO RESTRICT THE ADDITIONS, WHEREIN IT WAS HELD THAT THE ONUS OF PROVING THE GENUINENESS OF TRANSACTION IS ON THE ASSESSEE AND NOT ON THE DEPARTMENT WHICH THE ASSESSEE HAS FAILED TO DISCHARGE IN THE INSTANT CASE. A) CIT VS CALCUTTA AGENCY LTD. (1951) 19 ITR 191 B) CIT VS IMPERIAL CHEMICAL INDUSTRIES (INDIA) PVT. LTD.(1969) 74 ITR 17 C) CIT VS C.PAREKH AND CO.(INDIA) LTD. (1956) 29 ITR 661 SC D) CIT VS CHADRAVILAS HOTEL (1987) 164 ITR 102(GUJ.) 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S.80IA OF THE ACT HOLDING THAT ASSESSEE IS DERIVING INCOME FROM SSI UNIT LOCATED IN A NOTIFIED AREA ENTITLED TO THE DEDUCTION IGNORING THAT THE INCOME ARISED FROM UNEXPLAINED INVESTMENT IS NOT ENTITLED FOR DEDUCTION U/S.80IA OF THE ACT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF COPPER WIRE BARE. THE ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 3 ASSESSEE HAS NOT SHOWN ANY OTHER SOURCE OF INCOME. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 WAS FILED ON 31.12.2006, DECLARING INCOME OF RS.28,53,006/-. LATER ON, CASE WAS REOPENED UNDER SECTION 147 OF THE ACT. A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 20.02.2008. THE CASE WAS REOPENED ON THE BASIS OF CERTAIN INTELLIGENCE RECEIVED BY THE ASSESSING OFFICER THAT ASSESSEE CLAIMED HUGE DEDUCTION ON ACCOUNT OF PURCHASE OF ENAMELED COPPER WIRE WHICH IS NOT GENUINE. THE OTHER TAX COLLECTING AGENCIES (EXCISE DEPARTMENT) COLLECTED CERTAIN INCRIMINATING EVIDENCE AGAINST CERTAIN COMPANIES. THE ASSESSING OFFICER DURING THE RE- ASSESSMENT PROCEEDINGS ISSUED SHOW CAUSE NOTICE DATED 19.12.2008 AS TO WHY THE PURCHASE SHOWN FROM THREE (03) COMPANIES I.E. 1) BHARAT INSULATION COMPANY (INDIA) LTD.; 2) PRECISION WIRE INDIA LTD AND 3) BHAGWAT WIRE INDUSTRIES AGGREGATING OF RS. 6.45 CRORE BE NOT ADDED TO THE TOTAL INCOME. THE ASSESSEE FILED ITS REPLY DATED 24.12.2008. IN THE REPLY, THE ASSESSEE STATED THAT ASSESSEE IS ENGAGED IN MANUFACTURING OF BARE COPPER WIRES, REQUIRES COPPER IN VARIOUS FORMS I.E. COPPER SCRAP, COPPER OF HIGH PURITY AND COPPER INGOTS. THE COPPER PURCHASED ARE SENT TO ROLLING MILLS AT KATODARA FOR MELTING IT AND ADJUSTING TO THE PURITY REQUIRED BY THE ASSESSEE. THE ASSESSEE ALSO STATED THAT DURING THE YEAR 2006, A SEARCH WAS CARRIED OUT BY EXCISE DEPARTMENT IN SEVERAL UNITS LOCATED IN DAMAN AND SILVASSA. DURING THE SAID SURVEY AND SEARCH, IT WAS ALLEGED THAT THE MATERIAL PURCHASED WAS NOT BROUGHT TO THE FACTORY PREMISES AND WAS NOT USED IN THAT ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 4 FORM IN THE PROCESS OF MANUFACTURING AND THAT CENVAT CREDIT PAID ON THE PURCHASE OF RAW MATERIAL IS NOT ALLOWABLE. THE ASSESSEE SPECIFICALLY STATED THAT THEY COMPLY ALL RELEVANT PROVISION UNDER THE CENTRAL EXCISE ACT, 1944 AND RULES AND FILING REGULAR RETURN UNDER THE RELEVANT PROVISIONS OF CENTRAL EXCISE. THE ASSESSEE MANUFACTURED AND CLEARED FINISHED GOODS OF PAYMENT OF DUTY. THERE CANNOT BE ANY CASE OF NON-RECEIPT OF INPUT BECAUSE OF THE DEPARTMENT CANNOT PRESUME THAT THE ASSESSEE PAID DUTY WITHOUT MANUFACTURING AND CLAIMING THE FINISHED GOODS OR THE GOODS MANUFACTURED AND CLEARED FINISHED GOODS WITHOUT RECEIVING AND USING INPUTS. THE OFFICER OF DIRECTOR GENERAL OF CENTRAL EXCISE (DGCEI) OFFICERS VISITED THE ASSESSEES FACTORY TWICE, THEY CARRIED OUT INVENTORY OF HIS STOCK AND FINISHED GOODS AS WELL AS INPUT AND COMPARED THE SAME WITH THE STOCK AND ENTERED IN THE RELEVANT PRODUCTION REGISTER AND CENVAT CREDIT REGISTER. NO DISCREPANCY WAS FOUND IN THE STOCK POSITION OR FINISHED GOODS OF THE DUTY PAID INPUTS. THE ASSESSEE MAINTAINED ALL STATUTORY AND OFFICIAL RECORD HAVE THOROUGHLY SCRUTINISED. NOT ONLY THE PRODUCTION RECORD, CENVAT CREDIT REGISTER, PURCHASE AND SALE RECORD MAINTAINED BY THE ASSESSEE, BUT TRANSPORTATION RECORD FOR LIFTING THE DUTY PAID INPUT FROM TRANSPORT COMPANY. THE ASSESSEE FURTHER STATED THAT M/S. BHARAT INSULATION COMPANY (INDIA) LTD AND PRECISION WIRE INDIA LTD MUST HAVE TRANSPORTED OTHER GOODS BY MAKING USE OF THEIR DOCUMENT, SO THAT CONSIGNMENT CAN REACH SAFELY. WHEN A TRANSPORT AND DELIVERY GOODS TO ITS DESTINATION OTHER THAN WHAT HAS ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 5 MENTIONED ON MTR ON THE INSTRUCTION OF THE CONSIGNOR, IT IS CLEAR THAT GOODS DO NOT BELONG TO THE ASSESSEE. THE ASSESSEE SPECIFICALLY DENIED ALLEGATION IN THE SHOW CAUSE NOTICE AND SUBMITTED THAT THE SHOW CAUSE NOTICE IS NOT BASED ON DOCUMENTARY OR OTHER EVIDENCE. THE SAME IS BASED ON SOME CONFESSIONAL STATEMENT. IN ABSENCE OF ANY DOCUMENTARY EVIDENCE SUCH CONFESSIONAL STATEMENT HAVE NOT EVIDENTIARY VALUE AND CANNOT BE TAKEN INTO CONSIDERATION. THE ASSESSEE ALSO EXPLAINED THAT CONCEPT OF INCOME AND ITS TAXATION IS DIFFERENT FROM THE CONCEPT OF MANUFACTURING CENTRAL EXCISE. 3. THE EXPLANATION FURNISHED BY ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HELD THAT IT IS THE ALLEGATION OF EXCISE DEPARTMENT THAT NO GOODS HAVE ACTUALLY CAME TO THE FACTORY PREMISES OF THE ASSESSEE THAT ONLY BOGUS VOUCHERS WERE RECEIVED FROM THE SUPPLIER. THE ASSESSEE CANNOT CLAIM THE DEDUCTION OF PURCHASE MATERIAL WHICH ARE NOT ACTUALLY PURCHASED PHYSICALLY. THE PURCHASES ARE ON PAPER AND NOT ELIGIBLE FOR DEDUCTION UNDER THE INCOME TAX ACT. IT IS NOT POSSIBLE FOR TAX AUTHORITIES TO PHYSICALLY VERIFIED CERTAIN ASPECTS DURING THE ASSESSMENT PROCEEDINGS AS THE MATTER ARE RELATED TO A PERIOD WHICH IS OVER A LONG BACK AND THAT IS NOT POSSIBLE TO VERIFY WHETHER MATERIAL WERE ACTUALLY RECEIVED OR NOT!. HOWEVER, AS PER THE FINDINGS OF THE EXCISE DEPARTMENT, NO GOODS WERE ACTUALLY RECEIVED BY ASSESSEE. THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHASES FROM ALL THREE PARTIES AGGREGATING OF RS. 6.45 CRORE, IN ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 6 THE ASSESSMENT ORDER DATED 30.12.2008 PASSED UNDER SECTION 143 R.W.S 147 OF THE ACT. 4. AGGRIEVED BY THE ADDITIONS, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). BEFORE LD CIT(A), THE ASSESSEE ALSO FILED DETAILED STATEMENTS OF FACTS. THE ASSESSEE ALSO RAISED GROUNDS THAT THERE IS ERROR IN COMPUTATION OF DEDUCTION UNDER SECTION 80IA OF THE ACT THAT THE MISTAKE MAY BE CORRECTED. THE ASSESSEE IN ITS SUBMISSIONS BESIDES THE OTHER CONTENTION STATED THAT THEY ARE IN MANUFACTURING OF COPPER WIRE. FOR THE PURPOSE OF MANUFACTURING PROCESS REQUIRES COPPER READILY AVAILABLE IN THE MARKET. FOR THE PURPOSE OF PROCURING HIGH PURITY COPPER AS WELL AS LOW PRIORITY COPPER SCRAP ARE SENT TO ROLLING MATERIAL, WHERE BOTH ARE MELT AND MISSED AND ROLLED INTO A COPPER WIRES OF THE REQUIRED PURITY. DURING THE RELEVANT PERIOD, THE EXCISE DEPARTMENT ISSUED SHOW CAUSE NOTICE AND PURCHASED FROM THREE (03) PARTIES AGGREGATING TO RS.6.45 CRORE WERE IDENTIFIED AND CENVAT CREDIT IN RESPECT THEREOF WERE DISALLOWED. THE ASSESSING OFFICER ON THE BASIS OF THOSE INFORMATION REOPENED THE CASE. THE ASSESSEE IN REPLY TO SHOW CAUSE, FURNISHED DETAILED REPLY. IT WAS ALSO STATED THAT NONE OF THE SUPPLIERS HAS DENIED THE SUPPLY OF THE MATERIAL. ALL PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. PURCHASES ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. FINISHED GOODS ARE ALSO RECORDED IN THE BOOKS OF ASSESSEE. NO INFIRMITY IN THE BOOKS OF ACCOUNTS WAS POINTED OUT. THE ASSESSING OFFICER BASED HIS SHOW CAUSE NOTICE ON THE BASIS OF ACTION OF EXCISE DEPARTMENT ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 7 WHICH HAD TO BE ADJUDICATED. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALES OF THE ASSESSEE, WHICH WERE MADE OUT OF THE PURCHASES. THE ASSESSING OFFICER ACCEPTED THE QUANTITY ACCOUNT OF ASSESSEE. THE PURCHASE INVOICES ALSO INCLUDE CENVAT DUTY. THE ASSESSEE STATED THAT HIS CASE IS TOTAL DISTINCT FROM THE CASE OF N.K. PROTEINS [2016] 76 TAXMANN.COM 241 (GUJARAT) . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT DURING THE APPELLATE PROCEEDINGS, VARIOUS PURCHASES AND SALES BILLS WERE SEEN, TEST CHECK BASIS. ON PERUSAL OF CERTAIN BILLS, THE LD.CIT(A) CONCLUDED THAT PRICE OF THE FINISHED COPPER WIRE WAS OF RS.180/- PER KG TO RS.220/- PER KG AND COPPER WIRE BARE AND COPPER INGOT WAS RS.164/- PER KG. THE ASSESSEE CLAIMED WHO HAVE USED AN ENAMELLED COPPER WHICH IS COST OF RS.226/- PER KG WHICH IS HIGHER THAN THE SALE PRICE OF FINISHED GOODS. THUS, THE ASSESSEE WOULD NOT BUY A HIGHER PRICE RAW MATERIAL I.E ENAMELLED COPPER WINDING WIRE FOR MANUFACTURING LOW PRICE FINISHED PRODUCT OF BAYER COPPER WIRE, RELATING INTO LOSSES. THE CLAIM OF ASSESSEE THAT ENAMELLED COPPER WIRE GIVES BETTER QUALITY IS NOT SUPPORTED BY ANY EVIDENCE. THE EXCISE DEPARTMENT MADE ENQUIRIES FROM TRANSPORT COMMISSIONER OF GUJARAT, WHICH REVEAL THAT NONE OF THE VEHICLES MENTIONED ON THE INVOICES OF ALLEGED PURCHASE AND IT IS RELATED LORRY RECEIPTS FOR TRANSPORTATION OF ENAMELLED COPPER WINDING WIRE FROM AURANGABAD FACTORY AND BIWANDI GO- DOWN OF BHARAT INSULATION COMPANY ENTERED IN GUJARAT. ON THE BASIS OF SUCH AFORESAID OBSERVATION AND REPORT OF EXCISE DEPARTMENT, THE LD. CIT(A) ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 8 CONCLUDED THAT PURCHASES ARE NOT PROVED TO BE GENUINE. HOWEVER, THE ASSESSEE CLAIMED THAT PAYMENTS WERE MADE THROUGH CHEQUES AND PURCHASED ARE GENUINE, WHICH IS NOT ACCEPTABLE AS THERE IS NO CONCLUSIVE EVIDENCE. HOWEVER, THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION OF ENTIRE PURCHASES AND TREATING IT AS UNDISCLOSED INCOME. THE ASSESSEE HAD MANUFACTURED THE CORRESPONDING FINISHED GOODS AND SOLD IT AND BRING THE MONEY IN THE BOOKS AND OFFERED FOR TAXATION. THE ASSESSEE MUST HAVE PURCHASED RAW MATERIAL FROM OPEN MARKET FROM THIRD PARTY IN THE FORM OF COPPER WIRE OR ENAMELLED WIRE HAS CLAIMED. WITHOUT CONSUMPTION OF RAW MATERIAL PRODUCTION IS NOT POSSIBLE AND ACCORDINGLY ADDITION OF ENTIRE AMOUNT OF PURCHASES IS NOT JUSTIFIED. THE LD. CIT(A) BY FOLLOWING THE DECISION OF VIJAY PROTEINS VS. ACIT [58 ITD 428] HELD THAT IN SUCH SITUATION RESTRICTING THE ADDITION TO 25% OF BOGUS PURCHASES WOULD BE REASONABLE. ACCORDINGLY, THE LD. CIT(A) UPHELD THE ADDITION TO THAT EXTENT. 5. ON THE DEDUCTION OF 80IA, THE ASSESSEE STATED THAT ON ACCOUNT OF ADDITION OF RS.6.45 CRORE MADE ON ACCOUNT OF BOGUS PURCHASES, THE ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSEE IS DERIVING PROFIT FROM SMALL SCALE INDUSTRY (SSI) LOCATED IN NOTIFIED AREA ELIGIBLE TO SUCH DEDUCTION. THE ASSESSING OFFICER ENHANCED THE PROFIT BY DISALLOWING THE PURCHASES, WHILE ALLOWING THE DEDUCTION, THE ASSESSING OFFICER COMMITTED MISTAKE IN NOT ALLOWING THE DEDUCTION IN ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 9 RESPECT OF INCOME OF INDUSTRIAL UNDERTAKING AS ASSESSED BY HIM. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE CONCURRED WITH THE SUBMISSION OF THE ASSESSEE THAT ONLY SOURCE OF ASSESSEE IS DERIVING THE PROFIT FROM SSI UNIT IN NOTIFIED AREA. THE AO ALLOWED THE DEDUCTION ON THE INCOME DISCLOSED, THUS, ACCEPTING THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA ON ITS OPERATION. WHEN THE PART OF PURCHASE IS DISALLOWED AND INCOME IS ENHANCED, THE ENHANCED PROFIT OF UNITS IS ALSO ELIGIBLE FOR DEDUCTION. WHEN UNIT IS ELIGIBLE FOR DEDUCTION AND ACCORDINGLY DIRECTED THE LD.AO TO ALLOW THE DEDUCTION UNDER SECTION 80IA OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THIS TRIBUNAL. 6. WE HAVE HEARD BOTH THE SUBMISSIONS OF LD. CIT (DR) FOR THE REVENUE AND SHRI SAURABH SUPARKAR, SENIOR ADVOCATE ASSISTED BY MRS. URVASHI SHODHAN, ADVOCATE [HEREINAFTER CALLED LD. SENIOR ADVOCATE FOR THE ASSESSEE]. GROUND NO.1 TO 3 RELATES TO RESTRICTING THE DISALLOWANCE OF BOGUS PURCHASE TO 25% OF TOTAL NON-GENUINE PURCHASES. THE LD. CIT(DR) FOR THE REVENUE SUPPORTED THE ORDER OF THE LD.AO. THE LD. CIT(DR) SUBMITS THAT ASSESSEE HAS SHOWN BOGUS PURCHASES FROM THREE (03) PARTIES. THE EXCISE DEPARTMENT MADE INVESTIGATION OF VEHICLE OWNERS, WHOSE VEHICLES WERE USED FOR SO-CALLED TRANSPORTATION AND FOUND THAT NO SUCH MATERIAL FROM THE PREMISES OF ITS MANUFACTURE HAVE TRANSPORTED TO THE ASSESSEES PREMISES. THE ASSESSEE COULD NOT PROVE BEYOND DOUBT TO THE EXCISE AUTHORITY THAT ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 10 ACTUAL MATERIAL WAS TRANSPORTED. THE AO AFTER GIVING OPPORTUNITY TO THE ASSESSEE DISALLOWED THE PURCHASES. THE LD. CIT(DR) FOR THE REVENUE PRAYED FOR RESTORING THE ORDER OF THE LD.AO BY REVERSING THE ORDER OF THE LD. CIT(A). 7. ON THE OTHER HAND, THE LD. SENIOR COUNSEL FOR THE ASSESSEE SUBMITS THAT THE AO RELIED ON THE REPORT OF THE THIRD PARTY. NO INDEPENDENT ENQUIRY OR INVESTIGATION WAS CARRIED OUT BY THE LD.AO. THE AO HAS NOT ISSUED ANY NOTICE UNDER SECTION 133(6) OF SUMMON UNDER SECTION 131 TO THE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES. THE PURCHASES WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. GOODS PURCHASED WERE SHOWN IN THE INWARD REGISTER. ON THE BASIS OF RAW MATERIAL, THE ASSESSEE PREPARED FINISHED GOODS. THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS NOR DISPUTED THE SALE OF ASSESSEES FINISHED GOODS. MANUFACTURING IS NOT POSSIBLE IN ABSENCE OF RAW MATERIAL. THE AO DURING THE ASSESSMENT, RECORDED THAT IT IS NOT POSSIBLE FOR THE INCOME TAX AUTHORITY TO VERIFY THE CERTAIN ASPECT AS MATTER RELATING TOE PERIOD WHICH LONG BACK. THE AO HAS NO EVIDENCE, EXCEPT THE SHOW CAUSE NOTICE ISSUED BY EXCISE DEPARTMENT. THE LD. SR. COUNSEL SUBMITS THAT NO ADDITION WAS MADE BY EXCISE DEPARTMENT ON SUCH SHOW CAUSE NOTICE. THE LD. SR. COUNSEL SUBMITS THAT FACTS OF THE CASE OF ASSESSEE IS DIFFERENT AND CASE OF N.K. PROTEINS (SUPRA). TO SUPPORT HIS SUBMISSIONS THE LD. SR. COUNSEL RELIED ON THE DECISIONS BELOW: ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 11 I) ITAT RAJKOT IN ITA NO.95/RJT/2013 GANGA GLAZED TILES; II) HON'BLE GUJARAT HIGH COURT IN GANGA GLAZED TILES OF 107 TAXMANN.COM 108; III) HON'BLE GUJARAT HIGH COURT IN FUTURA CERAMIC PVT. LTD., OF SCA NO.1038 OF 2013 AND IV) HON'BLE GUJARAT HIGH COURT IN KISHOR AMRUTLAL PATEL OF TA.A NO.679 OF 2010. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE AO MADE ADDITIONS OF RS. 6.45 CRORE ON ACCOUNT OF BOGUS PURCHASES ON THE BASIS OF SHOW CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT THAT THE ASSESSEE HAS SHOWN BOGUS PURCHASES. WE FIND THAT DURING THE ASSESSEE, THE AO MADE NO INDEPENDENT ENQUIRY. THE BOOKS OF ACCOUNTS OF ASSESSEE WAS NOT REJECTED. THE AO HAS NOT MADE ANY INVESTIGATION FROM THE PARTIES FROM WHOM THE ASSESSEE HAS SHOWN THE PURCHASES. THE SALES OF FINISHED GOODS WAS NOT DISPUTED. THE AO MADE ADDITION SOLELY ON THE BASIS OF SHOW CAUSE NOTICE OF EXCISE DEPARTMENT. 9. WE FIND THAT THE LD. CIT(A) EXAMINED THE CERTAIN BILLS AND VOUCHERS ON TEST, CHECK BASIS. NO SPECIFIC DISCREPANCIES WAS FOUND BY THE LD. CIT(A). THE LD. CIT(A) HELD THAT THE LD.AO WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF ENTIRE PURCHASES. THE ASSESSEE MUST HAVE PURCHASED THE CORRESPONDING RAW MATERIAL FROM THE OPEN MARKET USED FOR MANUFACTURING PROCESS. IT WAS ALSO HELD THAT WITHOUT CONSUMPTION OF RAW MATERIAL PRODUCTION CANNOT BE MADE. THE LD.CIT(A) BY FOLLOWING THE DECISION OF ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 12 VIJAY PROTEINS (SUPRA) UPHELD THE ADDITION THE EXTENT OF 25% OF ALLEGED BOGUS PURCHASES. EVEN OTHERWISE WE ARE ALSO OF THE VIEW THAT IN CASES, WHERE THE PURCHASES ARE NOT FULLY SUBSTANTIATED, THE ENTIRE PURCHASES ARE NOT TO BE DISALLOWED AND ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION IS TO DISALLOWED TO AVOID THE POSSIBILITY OF REVENUE LEAKAGE BY TAKING VIEW THAT THE ASSESSEE HAS MANUFACTURED THE CORRESPONDING FINISHED GOODS AND SOLD IT AND BRING THE MONEY IN THE BOOKS AND OFFERED FOR TAXATION. THE ASSESSEE MUST HAVE PURCHASED RAW MATERIAL FROM OPEN MARKET FROM THIRD PARTY IN THE FORM OF COPPER WIRE OR ENAMELLED WIRE HAS CLAIMED. WITHOUT CONSUMPTION OF RAW MATERIAL PRODUCTION IS NOT POSSIBLE AND ACCORDINGLY ADDITION OF ENTIRE AMOUNT OF PURCHASES IS NOT JUSTIFIED. WE FURTHER FIND THAT NEITHER THE ASSESSING OFFICER MADE ANY INDEPENDENT ENQUIRY NOR BROUGHT ANY INDEPENDENT MATERIAL ON RECORD, EXCEPT MAKING RELIANCE ON THE SHOW CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT. 10. THE HONBLE GUJARAT HIGH COURT IN PCIT VS. GANGA GLAZED TILES (P.) LTD., 117 TAXMANN.COM 107 HELD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION IN THE RE-ASSESSMENT PROCEEDINGS IN RESPECT OF PROFIT EARNED ON SUPPRESSED SALES AS THERE WAS NO INDEPENDENT MATERIAL BROUGHT ON RECORD BY ASSESSING OFFICER OTHER THAN THOSE COLLECTED BY THE EXCISE DEPARTMENT AND WHICH, WERE YET TO BE VERIFIED. WE FIND THAT THE REVENUE FILED SPECIAL LEAVE PETITION BEFORE, CHALLENGING THE ORDER OF HIGH COURT ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 13 BEFORE HONBLE SUPREME COURT AND THE SAME WAS DISMISSED VIDE ORDER DATED 27.01.2020 REPORTED VIDE [2020] 117 TAXMANN.COM 108 (SC). 11. NOW ADVERTING TO THE FACT OF PRESENT CASE, AS NOTED ABOVE, THE LD.CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF THE ALLEGED BOGUS PURCHASES. IN OUR VIEW, THE DISALLOWANCE OF 25% OF ALLEGED BOGUS PURCHASES ARE SUFFICIENT TO FULFIL THE POSSIBILITY OF REVENUE LEAKAGE. THUS, WE AFFIRM THE ORDER OF THE LD. CIT(A). 12. IN THE RESULT, THE GROUND NO.1 TO 3 OF THE REVENUE ARE DISMISSED. 13. GROUND NO.4 RELATES TO ALLOWING DEDUCTION UNDER SECTION 80IA OF THE ACT. 14. THE LD. CIT(DR) FOR THE REVENUE SUBMITS THAT THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER THAT PART OF PURCHASES IS DISALLOWED, THE INCOME IS ENHANCED, THE ENHANCED PROFIT IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. THE LD. CIT(DR) SUBMITS THAT NO SUCH GROUND WAS RAISED BY ASSESSEE. 15. ON THE OTHER HAND, THE LD. SR. COUNSEL SUBMITS THAT ASSESSING OFFICER ALLOWED DEDUCTION UNDER SECTION 80IA ON THE INCOME DISCLOSED, THEREFORE, ACCEPTED THAT ASSESSEE WAS ELIGIBLE FOR SUCH DEDUCTION ON ITS MANUFACTURING ACTIVITIES. THE ASSESSING OFFICER MADE ADDITION OF BOGUS PURCHASES OF RS.6.45 CRORE, WHICH WAS ULTIMATELY RESTRICTED TO 25% OF SUCH PURCHASES. THE ONLY SOURCE OF INCOME OF ASSESSEE IS PROFIT FROM ELIGIBLE UNIT IN NOTIFIED AREA. THE AO ENHANCED THE PROFIT BY DISALLOWING PURCHASES, HOWEVER, CORRESPONDING DEDUCTION WAS NOT ALLOWED. THE DISALLOWANCE OF SUCH ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 14 PURCHASES AMOUNTS TO ENHANCEMENT OF TOTAL INCOME AND THE ASSESSEE IS ALLOWED FOR SUCH DEDUCTION. THE LD. CIT(A) APPRECIATED THE FACT AND DIRECTED THE AO TO ALLOW SUCH DEDUCTION ON RESULTED TOTAL INCOME. THE LD. SR. COUNSEL SUBMITS THAT THE ASSESSEE HAS RAISED SPECIFIC GROUND VIDE GROUND NO.3 BEFORE THE LD.CIT(A) FOR SUITABLY AMENDING THE DEDUCTION UNDER SECTION 80IA OF THE ACT. 16. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND FIND THAT BEFORE THE LD.CIT(A) THE ASSESSEE MADE A PRAYER THAT ONCE SOURCE OF INCOME OF ASSESSEE FROM ELIGIBLE UNIT IS ACCEPTED, THE ASSESSEE IS ENTITLED FOR ENHANCED PROFIT OF ELIGIBLE DEDUCTION UNDER SECTION 80IA OF THE ACT. THE LD.CIT(A) AFTER APPRECIATING THE FACT HELD THAT WHEN PART OF THE PURCHASES IS DISALLOWED AND THE INCOME IS ENHANCED, THE ENHANCED PROFIT OF THE UNIT IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. IT WAS ALSO HELD THAT DEDUCTION IS ALLOWED ON TOTAL INCOME FINALLY ASSESSED AND NOT ON THE BOOK PROFIT ALONE, ACCORDINGLY THE ASSESSING OFFICER WAS DIRECTED ALLOW THE DEDUCTION UNDER SECTION 80IA ON RESULTANT INCOME CONFIRMED IN FIRST APPEAL. IN OUR VIEW THE LD CIT(A) TOOK A REASONABLE VIEW, WHICH WE AFFIRM. NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW, THUS, WE AFFIRM THE ORDER OF THE LD. CIT(A). 17. IN THE RESULT, GROUND NO.4 OF THE APPEAL IS DISMISSED. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 15 IT(SS)A NO. 227/AHD/2012 FOR A.Y. 2007-08 19. THE REVENUE HAS RAISED SOLE GROUND OF APPEAL FOR PARTLY DELETING THE ADDITION OF BOGUS PURCHASES. WE FIND THAT THIS THE GROUND OF APPEAL RAISED BY THE REVENUE, IS SIMILAR AS OF GROUND NO.1 TO 3 IN APPEAL FOR A.Y. 2006- 07, WHICH WE HAVE DISMISSED, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR DIRECTION. 20. IN THE RESULT, BOTH APPEALS OF THE REVENUE ARE DISMISSED. ORDER ANNOUNCED ON 27 AUGUST, 2021 BY PLACING THE RESULT ON THE NOTICE BOARD. SD/- SD/- (DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 27/08/2021 / SGR COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR 6. GUARD FILE BY ORDER / / TRUE COPY / / SENIOR PRIVATE SECRETARY, ITAT SURAT ITA NO.1483/AHD/2010 & IT(SS)A NO.227/AHD/2012 TAHA WIRES PVT. LTD., (AY 2006-07 & 2007-08) 16 STANDARD PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1 DATE OF DICTATION .08.2021 2 DRAFT PLACED BEFORE THE AUTHOR .08.2021 3 DRAFT PROPOSED & PLACED BEFORE SECOND MEMBER .08.2021 4 DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER .08.2021 5 APPROVED DRAFT COMES TO SR. PS /PS .08.2021 6 KEPT FOR PRONOUNCEMENT ON .08.2021 7 DATE OF UPLOADING ORDER ON THE WEB SITE .08.2021 8 FILE SENT TO BENCH CLERK .08.2021 9 DATE ON WHICH FILE GOES TO THE A.R. FOR SIGNATURE .08.2021 10 DATE ON WHICH FILE GOES TO HEAD CLERK .08.2021 11 DATE OF DISPATCH OF ORDER .08.2021