Appeal Details
Counselvise Citation
[2015] 122 COUNSELVISE.COM (IT) 0598 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
26-03-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
12-02-2015
Assessment Year
2006-2007
Appeal Filed On
07-03-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL C HATURVEDI, A.M.) I.T(SS). A. NOS. 256 & 270/AHD/2011 (ASSESSMENT YEAR: 2006-07) PRATIBHA SYNTEX LTD. 301, ACME PLAZA, KURLA ROAD, SURAT V/S THE A.C.I.T., CENTRAL CIRCLE- 4, SURAT (APPELLANT) (RESPONDENT) THE A.C.I.T., CENTRAL CIRCLE- 4, SURAT V/S PRATIBHA SYNTEX LTD. 301, ACME PLAZA, KURLA ROAD, SURAT (APPELLANT) (RESPONDENT) PAN: AABCP4207C APPELLANT BY : SHRI S.N. SOPARKAR WITH UR VASHI SHODHAN, A.R. RESPONDENT BY : SHRI SUBHASH BAINS. CIT/D.R. ( )/ ORDER DATE OF HEARING : 12-02-2015 DATE OF PRONOUNCEMENT : 26-03-2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS, ONE FILED BY THE ASSESSEE AND TH E OTHER FILED BY THE REVENUE, ARE AGAINST THE ORDER OF CIT(A)-II, AHMEDA BAD DATED 21.12.2010 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 2 3. ASSESSEE IS A COMPANY STATED TO BE A MEMBER RELATED TO PRATIBHA GROUP AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF COTTON YARN, KNITTED FABRICS AND TRADING IN TEXTILE GOODS HAVING ITS FACTORY AT PITH AMPUR AND OFFICES AT INDORE AND MUMBAI. IN THIS CASE SEARCH AND SEIZURE OPERATI ON U/S 132 OF THE ACT WAS CARRIED OUT ON 8.2.2007. THEREAFTER NOTICE U/S 153A(A) WAS ISSUED ON 19.5.2008 WHICH WAS SERVED ON ASSESSEE REQUESTING I T TO FILE THE RETURN OF INCOME FOR A.Y. 2001-02 TO 2006-07 AND PURSUANT TO WHICH ASSESSEE FILED RETURN OF INCOME. FOR RETURN OF INCOME FILED ON 30 -06-2008 FOR AY 2006-07 ASSESSEE DECLARED TOTAL INCOME AT RS. NIL AFTER CLA IMING UNABSORBED DEPRECIATION OF EARLIER YEARS. THEREAFTER THE ASSES SMENT WAS FRAMED U/S 143(3) R.W.S 153A OF THE ACT VIDE ORDER DATED 29.12 .2008 AND THE TOTAL INCOME WAS DETERMINED AT RS 2,99,03,076/- BEFORE SE TOFF OF BROUGHT FORWARD DEPRECIATION LOSSES. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 21.12.201 0 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. BEFORE US, THE GROUND RAISED BY THE ASSESSEE READS AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) HAS GROSSLY ERRED IN RESTRICTING THE DISALLOWANCE OF TRADING PURCHASES T O 25% INSTEAD OF DELETING THE ENTIRE DISALLOWANCE ERRONEOUSLY MADE BY THE AO, EVEN THOUG H - THE APPELLANT COMPANY HAS MADE SALES OF THE CO RRESPONDING GOODS AT A PROFIT WHICH IS DULY OFFERED FOR TAXATION - THE APPELLANT COMPANY HAS MAINTAINED CO MPLETE QUANTITATIVE DETAIL OF THE PURCHASE AS ALSO THE SALES - PURCHASES STANDS CONFIRMED BY THE SUPPLIER PAR TY IN RESPONSE TO THE NOTICE U/S. 133(6) ISSUED BY THE AO. HENCE, IT IS MOST HUMBLY PLEADED THAT THE DISALLOWA NCE OF RS. 65,55,450/- BEING 25% OF THE TOTAL TRADING PURCHASE OF RS. 2,62,11,805/- AS RESTRICTED BY THE ID. CIT(A) NEEDS TO BE DELETED IN TOTALITY 2. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, SUBST ITUTE, MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL, IF NECESSARY, ON THE BASIS OF SU BMISSIONS TO BE MADE AT THE TIME OF PERSONAL HEARING. IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 3 4. ON THE OTHER HAND THE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN RESTRICTING THE ADDITION AT 25 % OF RS, 2,62,21,805/- MADE ON ACCOUNT OF BOGUS PURCHASE BY RELYING ON THE DECISION OF HON'BL E ITAT IN THE CASE OF VIJAY PROTEINS LTD ACIT 58 ITD 428 IGNORING THAT THE FACT S OF THE INSTANT CASE IS QUITE DIFFERENT FROM THE FACTS OF VIJAY PROTEINS LTD. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN RESTRICTING THE ADDITION AT 25 % OF RS. 2,62,21,805/- MADE ON ACCOUNT OF BOGUS PURCHASE HOLDING THAT THE ASSESSEE HAD MAINTA INED THE QUANTITATIVE DETAILS OF PURCHASES AND SALES AND ALSO THE ASSESSEE HAS MADE SALES OF THE CORRESPONDING GOODS AND BROUGHT THE MONEY IN THE BOOKS WHICH IS OFFERED FOR TAXATION, IGNORING THAT THE UNEXPLAINED EXPENDITURES MADE OUT OF BOOKS BY THE A SSESSEE ARE COVERED BY THE PROVISIONS OF SECTION 69C OF THE IT ACT, WHEREBY SU CH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE IS NOT A LLOWED AS DEDUCTION UNDER ANY HEAD OF INCOME. 3. ON THE FACTS ARID CIRCUMSTANCES OF THE CASE AND IN LAW, IT IS PRAYED THAT THE ORDER OF THE LD CIT(A) BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER MAY BE RESTORED. 5. THE ISSUE IN THE GROUNDS RAISED BY ASSESSEE AND REV ENUE BEING INTERCONNECTED ARE CONSIDERED TOGETHER. 6. DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A AT THE BUSINESS PREMISES OF THE ASSESSEE LOCATED AT ACME PLAZA, ANDHERI, MUM BAI, SHRI E. C. PEETHAMBARAN, THE BRANCH MANAGER IN THE STATEMENT R ECORDED HAD STATED THAT HE HAD NO EVIDENCE TO PROVE THAT MATERIALS ALLEGED TO HAVE BEEN PURCHASED BY THE ASSESSEE (PRATIBHA SYNTEX LTD) FROM CERTAIN PARTIES AS LISTED AT PAGE 6 OF THE ORDER WERE ACTUALLY DELIVERED BY THE SELLE RS CONCERNED AS PER THE PURCHASE BILLS AND THUS IT WAS ADMITTED THAT BOGUS PURCHASES HAVE BEEN MADE BY THE ASSESSEE. AO ALSO NOTED THAT WHILE CORROBORA TING THE STATEMENT OF SHRI E.G. PEETHAMBARAN, IN CONFORMITY STATEMENT, SH RI MADANLAL BAGRECHA OF MUMBAI HAS STATED THAT HIS BUSINESS IS TO ISSUE BOGUS SALES BILLS OF VARIOUS CONCERNS FLOATED BY HIM TO INTERESTED PARTIES ON CO MMISSION BASIS. VARIOUS CONCERNS FLOATED BY HIM COMPRISED OF THE NINE CONCE RNS LISTED BY THE AO AT PAGE 6 OF THE ORDER. IT WAS ALSO STATED BY HIM THAT THE ASSESSEE WAS ONE OF THE IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 4 PARTIES TO WHOM HE HAD ISSUED BOGUS SALE BILL THROU GH HIS VARIOUS CONCERNS. IT WAS FURTHER STATED BY HIM THAT THE ASSESSEE USED TO ISSUE ACCOUNT PAYEE CHEQUES AGAINST THE BOGUS SALES BILL ISSUED TO IT A ND IN TURN MR BAGRECHA, AFTER DEDUCTING MUTUALLY AGREED COMMISSION OF 0.60 %, USED TO RETURN CASH TO THE ASSESSEE. MR. BAGRECHA HAD ALSO ADMITTED TO HAVE NEVER DONE ANY REAL BUSINESS WITH THE ASSESSEE NOR SUPPLIED ANY GOODS T O THE ASSESSEE. ON THE BASIS OF IMPOUNDED MATERIAL, THE YEAR WISE DETAILS OF BOGUS PURCHASE FOR A.Y. 06-07 & 07-08 WAS LISTED AT PAGE 7 OF THE ORDE R AND THE AGGREGATE AMOUNT OF BOGUS PURCHASE FOR THE YEAR UNDER CONSIDE RATION WAS WORKED OUT RS 2,62,21,805/-. ASSESSEE WAS ASKED TO FURNISH ACC OUNT NUMBER, CHEQUE NUMBER AND NAME OF THE BANK THROUGH WHICH THE AMOUN T WAS PAID AND ALSO PRODUCE THE SELLER PARTIES FOR PERSONAL VERIFICATIO N ALONG WITH THE BOOKS OF ACCOUNT AND PROVE THEIR IDENTITY. ASSESSEE INTERALI A SUBMITTED THAT THAT THE PURCHASES WERE MADE THROUGH DEBIT NOTE WHEREBY AS P ER ASSESSEE'S INSTRUCTIONS THE PURCHASE PARTIES DELIVERED THE GOO DS DIRECTLY AT THE PREMISES OF THE SELLER AND THE BILL WAS RAISED ON THE ASSESS EE AND FURTHER THE GUARANTEE OF PURCHASE PAYMENT WAS ON THE ASSESSEE. THE SUBMIS SION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO. AO ALSO NOTED T HAT ASSESSEE HAD FAILED TO PRODUCE THE SELLERS OR THE PERSONS IN CONTROL OF THE SELLER CONCERNS TO CORROBORATE THE FACT OF ACTUAL SALES. AO THUS CONCL UDED THAT ASSESSEE HAS FAILED TO ESTABLISH WITH POSITIVE AND ADMISSIBLE EV IDENCE THAT THE PURCHASES HAVE ACTUALLY BEEN UNDERTAKEN. HE ALSO NOTED THAT N OTICES SENT U/S 133(6) FOR VERIFICATION AND INDEPENDENT INQUIRIES WERE RETURNE D UNSERVED WHICH ACCORDING TO THE A.O INDICATED THAT NO GENUINE CONC ERNS EXISTED AT THE GIVEN ADDRESSES. HE FURTHER CONCLUDED THAT THE PURCHASES THROUGH 'DEBIT NOTE' WAS AN AFTERTHOUGHT. HE THEREFORE CONCLUDED THAT THE AM OUNT WHICH WAS RETURNED BACK BY MR BAGRECHA IN CASH HAVE BEEN UTILIZED FOR MAKING OUT OF BOOKS IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 5 PURCHASES AND THUS WAS HIT BY THE PROVISIONS OF SEC TION. 69C OF THE ACT AS THE ASSESSEE HAD NOT SATISFACTORILY EXPLAINED THE S OURCE OF EXPENSES OF PURCHASES AND IS THEREFORE TO BE CONSIDERED AS INCO ME AND FURTHER AS PER PROVISO TO SECTION INSERTED BY FINANCE (NO. 2) ACT, 1998, W.E.F. 1.04.1999, NO DEDUCTION CAN BE ALLOWED IN RESPECT OF SUCH EXPE NDITURE. . HE ALSO NOTED THAT ASSESSEE HAD ADMITTED A SUM OF RS. 3,58,96,924 /- FOR A.Y. 07-08 AS UNACCOUNTED INCOME DUE TO BOGUS PURCHASE CLAIMS (AN D CONSEQUENT INFLATION OF EXPENSES) ON THE BASIS OF FACTS EMERGING FROM SU RVEY AT MUMBAI OFFICE AND CONFESSION STATEMENT OF SHRI E.C. PEETHAMBARAN. HE ACCORDINGLY CONSIDERED THE PURCHASES TO BE FICTITIOUS AND ADDED RS. 2,99,03,076/- TO INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARR IED THE MATTER BEFORE CIT(A) WHO DECIDED THE ISSUE BY HOLDING AS UNDER:- 5. I HAVE CONSIDERED THE FACTS AND THE SUBMISSIONS. IN THE STATEMENT RECORDED, SHRI E.C.PEETHAMBARAN, LOCAL BRANCH MANAGER IN MUMBAI AD MITTED THAT BOGUS PURCHASES HAVE BEEN MADE BY THE COMPANY AND NO GOODS AS MENTI ONED ON THE BILLS ISSUED WERE ACTUALLY RECEIVED BY THE APPELLANT COMPANY. THE SAM E WAS ALSO CORROBORATED BY SHRI MADANLAL. H. BAGRECHA WHO -ADMITTED THAT HE HAS ISS UED BOGUS BILLS TO THE APPELLANT COMPANY ONLY FOR COMMISSION AND HE USED TO RETURN T HE CASH TO THE COMPANY. ON THIS BASIS, EVEN THE APPELLANT HAS ADMITTED THE BOGUS PU RCHASES FOR A.Y.2007-08. FURTHER, THE APPELLANT ALSO FAILED TO ESTABLISH WITH EVIDENCE TH AT DELIVERY OF GOODS HAVE TAKEN PLACE. THEREFORE, IT IS HELD THAT THE ASSESSING OFFICER WA S JUSTIFIED IN TREATING THE PURCHASES AS BOGUS PURCHASES HOWEVER, IN MY VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.2,62,21,805/- BY DISALLOWING ENT IRE PURCHASE AMOUNT AND TREATING IT AS INCOME FROM UNDISCLOSED SOURCES. IT IS A FACT THAT THE APPELLANT HAS MADE SALES OF THE CORRESPONDING GOODS AND BROUGHT THE MONEY IN THE BO OKS WHICH IS OFFERED FOR TAXATION. FURTHER, THE APPELLANT HAS MAINTAINED QUANTITATIVE DETAILS OF PURCHASES AND SALES. HENCE, MAKING ADDITION BY DISALLOWING ENTIRE AMOUNT CF PUR CHASES IS NOT JUSTIFIED. IN SUCH A SITUATION, THE HON'BLE ITAT., AHMEDABAD BENCH HAS D ECIDED IN THE CASE OF VIJAY PROTEINS LTD. VS ACIT 58 ITD 428 THAT IN SUCH A SITUATION, I T WILL BE REASONABLE TO RESTRICT THE ADDITION AT 25% OF THE BOGUS PURCHASES. FOLLOWING T HE RATIO OF THE DECISION OF ITAT AHMEDABAD, THE ADDITION IS RESTRICTED TO RS.65,55,4 .50/-[25% OF RS.2,62,21,805/-] AND THE APPELLANT IS ALLOWED RELIEF FOR THE BALANCE AMO UNT O F RS.1,96,66,355/-. 7. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVE NUE ARE NOW IN APPEAL BEFORE US. IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 6 8. BEFORE US LD AR APART FROM REITERATING THE SUBMISSI ONS MADE BEFORE AO AND CIT(A) SUBMITTED THAT THE PURCHASES WERE BY WAY OF DEBIT NOTE WHERE AS PER THE INSTRUCTIONS OF THE ASSESSEE, THE PURCHASE PARTIES DELIVERED THE GOODS DIRECTLY AT THE PREMISES OF THE SALES PARTIES AND T HE PURCHASE BILL WERE RAISED ON THE ASSESSEE SINCE THE GUARANTEE FOR THE PAYMENT OF PURCHASES WAS ON THE ASSESSEE. HE FURTHER SUBMITTED THAT THE GOODS PURCH ASED HAVE BEEN SOLD TO THE PARTIES LISTED AT PAGE 109 OF THE PAPER BOOK. H E ALSO SUBMITTED THAT ASSESSEE HAS MAINTAINED COMPLETE QUANTITATIVE DETAI LS OF THE GOODS TRADED. HE FURTHER SUBMITTED THAT THERE CANNOT BE SALES WIT HOUT THE PURCHASES AND IF THE PURCHASES ARE CONSIDERED TO BE FICTITIOUS THEN THERE CANNOT BE SALES AND ALSO PROFIT FROM ITS SALE. HE FURTHER SUBMITTED THA T THE ADDITIONS HAVE BEEN MADE BY THE AO BY PURELY RELYING ON THE STATEMENT O F SHRI E.C.PEETHAMBARAN U/S 133A OF THE ACT AND IT IS SETT LED LAW THAT A STATEMENT RECORDED U/S 133A HAS NO EVIDENTIARY VALUE. HE FURT HER PLACED RELIANCE ON THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF T OTARAM SHARMA VS. ITO (ITA NO 2239 & 2291/A/2004 ORDER DATED 25.1.2008. H E FURTHER SUBMITTED THAT THE AFORESAID DECISION OF THE TRIBUNAL HAS ALS O BEEN UPHELD BY HON'BLE HIGH COURT IN THE CASE OF ITO VS TOTARAM SHARMA (TA X APPEAL NO 1344 OF 2008 ORDER DATED 9.2.2010). HE FURTHER SUBMITTED TH AT THE ENTIRE AMOUNT CANNOT BE DISALLOWED AND FOR THIS PROPOSITION HE RE LIED ON THE JUDGMENTS RENDERED IN THE CLAIM OF SANJAY OILCAKE INDUSTRIES VS. CIT (2009) 316 ITR 274, CIT VS. BHOLANATH POLY FAB PVT.LTD (2013) 355 ITR 290 (GUJ). HE FURTHER SUBMITTED THAT HON 'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS GUJARAT AMBUJA EXPORTS (2014) 43 TAXMANN.COM 244 (G UJ) HAS UPHELD THE ADDITION OF 5% OF THE PURCHASE AMOUNT. HE ALSO RELI ED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS NANGALIA F ABRICS (P) LTD (2013) 40 IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 7 TAXMANN.COM 206 (GUJ). THE LD AR THEREFORE SUBMITTE D THAT THE ADDITION AS SUSTAINED BY THE CIT(A) IS ON A HIGHER SIDE. THEREF ORE, HE PRAYED THAT ADDITION EITHER BE DELETED OR REDUCED. 9. THE LD DR ON THE OTHER HAND POINTED TO THE FINDINGS OF AO AND SUBMITTED THAT WHEN THE EMPLOYEE OF THE ASSESSEE HAS CLEARLY ADMITTED THAT THE PURCHASES ARE BOGUS, HAS NOT RETRACTED THE STATEMEN T AND IN VIEW OF THE STATEMENT OF THE SELLER OF THE GOODS THAT THE SALES MADE BY HIM TO THE ASSESSEE WAS BOGUS, AO WAS FULLY JUSTIFIED IN MAKIN G THE ADDITION. HE FURTHER SUBMITTED THAT THE ONUS IS ON ASSESSEE TO P ROVE THE FACTUM OF BUSINESS EXPENDITURE; THE ASSESSEE HAS GROSSLY FAIL ED TO DISCHARGE THE SAME. ON THE CONTRARY, IT IS EVIDENT FROM THE INQUIRIES M ADE DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE ADOPTED THE FRAUDULEN T MEANS TO EVADE TAX LIABILITY. HE FURTHER SUBMITTED THAT THE LD. CIT(A ) HAS ERRED IN GRANTING THE RELIEF ON THE BASIS OF THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTIENS (SUPRA) BECAUSE THE FACTS IN THOSE CASE AR E DISTINGUISHABLE AND CANNOT BE APPLIED TO THE PRESENT FACTS. HE THUS SUP PORTED THE ORDER OF AO. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF SURVEY AT THE PREMISES OF ASSESSEE, THE STATEMENT OF THE BRANCH MANAGER (SHRI PEETHAMBARAN) WERE RECORDED WHEREIN HE ADMITTED THAT THE PURCHASES MAD E BY THE ASSESSEE FROM THE PARTIES LISTED OUT IN THE ASSESSMENT ORDER ARE BOGUS AND NO PURCHASE HAS IN FACT BEEN MADE BY THE ASSESSEE. IT IS ALSO A FAC T THAT THE SO CALLED SELLER OF THE GOODS TO THE ASSESSEE (MR BAGRECHA) HAS ALSO CO RROBORATED THAT HE HAD ISSUED BOGUS BILLS FOR SALE OF GOODS TO THE ASSESSE E AND THE AMOUNT RECEIVED THROUGH ACCOUNT PAYEE CHEQUE BY HIM WERE RETURNED TO THE ASSESSEE AFTER IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 8 DEDUCTING THE AGREED COMMISSION. AO HAS NOTED THAT MR BAGRECHA IN HIS STATEMENT HAS ADMITTED TO HAVE NEVER DONE ANY REAL BUSINESS NOR SUPPLIED ANY GOODS TO THE ASSESSEE. IT IS ALSO A FACT THAT T HE STATEMENTS MADE BY MR PEETHAMBARAN AND BAGRECHA HAVE NOT BEEN RETRACTED O R HAVE BEEN PROVED TO BE UNTRUE NOR ANY MATERIAL HAS BEEN PLACED ON RECOR D BY THE ASSESSEE TO DEMONSTRATE THAT THE STATEMENTS GIVEN BY THEM ARE W RONG. AO HAS ALSO NOTED THAT ASSESSEE FOR A.Y. 07-08 HAS ADMITTED A SUM OF RS. 3.58 CRORE AS UNACCOUNTED INCOME DUE TO BOGUS PURCHASE CLAIMS ON THE BASIS OF FACTS EMERGING FROM SURVEY AND CONFESSION STATEMENT OF MR . PEETHAMBARAN. BEFORE US, IT IS ASSESSEE'S SUBMISSION THAT THE GOO DS HAVE INDEED BEEN PURCHASED AND HAVE BEEN SOLD AND THE TRANSACTION WA S OF TRADING NATURE AND IT HAS MAINTAINED THE QUANTITATIVE RECORDS OF THE S AME. HOWEVER FROM THE PERUSAL OF THE AUDITED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 ST MARCH 2006, PLACED AT PAPER BOOK NO 13 TO 30 IT IS SEEN THAT TRADING ACTIVITY OF PURCHASE AND SALE OF THE GOODS HAS NOT BEEN DISC LOSED THOUGH THE SAME IS MANDATORILY REQUIRED TO BE DISCLOSED AS PER SCHEDUL E VI OF THE COMPANIES ACT, 1956. HERE IT WOULD BE RELEVANT TO REPRODUCE T HE RELEVANT PORTION OF SCHEDULE VI OF THE COMPANIES ACT,1956, WHICH WERE A PPLICABLE TO THE ASSESSEE AT THE RELEVANT TIME, REQUIRING THE DISCLO SURE TO BE MADE AS UNDER:- PART II TO SCHEDULE VI OF THE COMPANIES ACT, 1956 'REQUIREMENTS AS TO THE PROFIT & LOSS ACCOUNT: 3.THE PROFIT & LOSS ACCOUNT SHALL SET OUT THE VARIO US ITEMS RELATING TO THE INCOME AND EXPENDITURE OF THE COMPANY ARRANGED UNDER THE MOST CONVENIENT HEADS AND IN PARTICULAR, SHALL DISCLOSE THE FOLLOWING INFORMATION IN RESPECT OF THE PERIOD COVERED BY THE ACCOUNT (I) (A) THE TURNOVER, THAT IS, THE AGGREGATE AMOUNT FOR WHICH SALES ARE EFFECTED BY THE COMPANY, GIVING THE AMOUNT OF SALES IN RESPECT OF E ACH CLASS OF GOODS DEALT WITH BY THE COMPANY, AND INDICATING THE QUANTITIES OF SUCH SALE S FOR EACH CLASS SEPARATELY'. 3. (2) THE OPENING AND CLOSING STOCK OF GOODS PRODU CED, GIVING BREAKUP IN RESPECT OF EACH CLASS OF GOODS AND INDICATING THE QUANTITIES T HEREOF (B) IN CASE OF TRADING COMPANIES, THE PURCHASES MAD E AND THE OPENING AND CLOSINGS STOCKS, GIVING BREAKUP IN RESPECT OF EACH CLASS OF GOODS TRADED IN BY THE COMPANY AND INDICATING THE QUANTITIES THEREOF. IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 9 11. (C)........ 12. (D) IN CASE OF A COMPANY WHICH FALLS UNDER MORE THA N ONE OF THE CATEGORIES MENTIONED IN (A) (B) (C) ABOVE, IT SHALL BE SUFFICIENT COMPLIANC E WITH THE REQUIREMENTS HEREIN IF THE TOTAL AMOUNTS ARE SHOWN IN RESPECT OF THE OPENING AND CLO SING STOCKS, PURCHASES, SALES AND CONSUMPTION OF RAW MATERIAL WITH VALUE AND QUANTITA TIVE BREAKUP AND THE GROSS INCOME FROM SERVICES RENDERED IS SHOWN. NOTE 1: THE QUANTITATIVE OF RAW MATERIALS PURCHASE, STOCKS AND THE TURNOVER SHALL BE EXPRESSED IN THE QUANTITATIVE DENOMINATIONS IN WHIC H THESE ARE NORMALLY PURCHASED OR SOLD IN THE MARKET 13. SEEN IN THE LIGHT OF THE MANDATORY DISCLOSURE REQUI REMENTS OF THE COMPANIES ACT 1956, IT IS SEEN THAT THE IMPUGNED PURCHASES AN D SALES HAVE NOT BEEN DISCLOSED BY THE ASSESSEE IN ITS AUDITED ACCOUNT AN D THEREFORE THE SUBMISSION OF THE ASSESSEE THAT IT HAD ENTERED INTO TRADING TR ANSACTIONS AND HAD MAINTAINED THE QUANTITATIVE RECORDS DOES NOT CARRY ANY FORCE AND THEREFORE, NO DISCLOSURE OF SALES AND PURCHASES ON THE PART OF THE ASSESSEE GOES TO PROVE, THAT NO SUCH SALE AND PURCHASES WERE MADE. 14. BEFORE US, LD AR HAS RELIED ON THE DECISION OF HON' BLE GUJARAT HIGH COURT IN THE CASE OF ITO VS TOTARAM SHARMA (SUPRA).WE FIN D THAT THE FACTS OF THE CASE OF THE AFORESAID CASE RELIED UPON BY THE ASSES SEE ARE DISTINGUISHABLE AND ARE THEREFORE NOT APPLICABLE TO THE FACTS OF TH E PRESENT CASE BECAUSE IN THE CASE OF TOTARAM SHARMA (SUPRA) THE HON'BLE HIGH COURT HAS NOTED THAT AO HAD STARTED THE DISCUSSION ON THE ISSUE OF BOGUS PURCHASES AND ULTIMATELY CAME TO THE CONCLUSION THAT THOUGH THE PURCHASES CA N BE SAID TO BE GENUINE, THE PAYMENTS HOWEVER WERE MADE IN CASH WHICH WERE U NACCOUNTED AND THEREFORE THE HON'BLE HIGH COURT HAS HELD THAT THER E WAS NO BASIS FOR ARRIVING AT SUCH CONCLUSION. IT WAS FURTHER NOTED B Y THE HON'BLE HIGH COURT THAT TRIBUNAL HAD RECORDED THAT THE PURCHASES MADE FROM 4 PARTIES WERE RECORDED AND THE GENUINENESS OF THE SALES WERE NOT DOUBTED BY THE REVENUE. IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 10 HOWEVER IN THE PRESENT CASE, THE FACTS ARE DIFFEREN T AND THEREFORE THE RATIO OF DECISION IS NOT APPLICABLE. SIMILARLY THE RATIO OF THE DECISION IN THE CASE OF CIT VS AMBUJA EXPORTS (SUPRA) ARE ALSO NOT APPLICAB LE BECAUSE IN THAT CASE THE FACTS WERE THAT THE STOCK REGISTER WAS PROPERLY MAINTAINED AND THE IMPUGNED PURCHASES WERE REFLECTED IN SUCH STOCK REG ISTER AND THUS WHEN THERE WERE INTERNAL CONTRADICTION IN THE STATEMENTS OF THE SUPPLIER OF GOODS AND IN SUCH CIRCUMSTANCES THE TRIBUNAL HAD REDUCED THE ADDITION TO 5% OF THE AMOUNT IN QUESTION. THE RATIO OF THE DECISION I N THE CASE OF CIT VS. BHOLANATH POLY FAB PVT.LTD (SUPRA) IS ALSO NOT APPL ICABLE TO THE FACTS OF THE CASE BECAUSE IN THAT CASE THE HON'BLE HIGH COURT HA S NOTED THAT TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MAD E FROM BOGUS PARTIES, NEVERTHELESS, THE PURCHASES THEMSELVES WERE NOT BOG US. FURTHER, THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY THE ASSESSEE. THE RATIO OF THE DECISION IN THE C ASE OF SANJAY OIL CAKES (SUPRA) IS ALSO NOT APPLICABLE TO THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT AS IN THAT CASE ASSESSEE HAD PRODUCED CR EDIBLE EVIDENCE IN THE FORM OF CERTIFICATES AND STATEMENTS TO THE EFFECT T HAT IT WAS PURCHASING COMPONENT SETS FOR MAKING TINS (CONTAINERS) BY WEIG HT AND THE SAME WERE RECORDED IN NUMBERS IN THE BILLS TO COMPLY WITH CER TAIN REGULATIONS. WE ALSO FIND THAT LD CIT(A) WHILE GRANTING RELIEF TO THE AS SESSEE HAD RELIED ON THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF VIJAY PROTIENS (SUPRA). WE ARE OF THE VIEW THAT THE FACTS IN THE CASE OF VIJAY PROTIENS (SUPRA) ARE DIFFERENT AND THEREFORE THE RATIO IS NOT APPLICABLE TO THE PRESENT FACTS BECAUSE IN THE CASE OF VIJAY PROTIENS (SUPRA) GOODS WERE FO UND TO HAVE BEEN PURCHASED AND SOLD WHICH REMAINED UNACCOUNTED, THE GOODS WHICH WERE PURCHASED WERE USED BY THE ASSESSEE IN THE PRODUCTI ON ACTIVITY AND THEREFORE IT(SS)A NO 256 & 270/AHD/2011 . A.Y. 2006-0 7 11 IN THOSE CIRCUMSTANCES 25% OF THE PURCHASES WERE DI SALLOWED. HOWEVER IN CASE IN HAND THE ASSESSEE COULD NOT PROVE THE SALE AND PURCHASES BY PLACING ANY CREDIBLE MATERIAL ON RECORD. 15. THUS AFTER CONSIDERING THE TOTALITY OF THE FACTS NA RRATED HEREINABOVE, WE ARE OF THE VIEW THAT CIT(A)'S ACTION OF RESTRICTING THE ADDITION CANNOT BE UPHELD AND THEREFORE IN THE PRESENT FACTS, THE AO WAS JUST IFIED IN MAKING THE ADDITION AND THEREFORE WE UPHOLD THE ACTION OF THE AO. THEREFORE THE GROUND RAISED IN ASSESSEES APPEAL IN IT(SS)A NO. 256/AHD/ 2011 ARE HEREBY REJECTED AND THE GROUND RAISED IN REVENUES APPEAL IN IT(SS)A NO. 270/AHD/2011 ARE ALLOWED. 16. IN THE RESULT THE APPEAL OF ASSESSEES APPEAL IN IT (SS)A NO. 256/AHD/2011 IS DISMISSED AND THAT OF REVENUES APPEAL IN IT(SS) A NO. 270/AHD/2011 IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 03 - 2015. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER 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
