VIJAY STEEL INDUSTRIES,GANDHIDHAM V. THE INCOME TAX OFFICER, WARD-2, GANDHIDHAM

ITA 373/RJT/2024

AI Insights

The case involves Vijay Steel Industries appealing against the order of the Learned Commissioner of Income Tax (Appeal), which confirmed the addition of Rs.3,67,160/- as profit element on alleged bogus sales. The Assessing Officer had initially treated these sales as unaccounted and added a profit element of 15%. The Tribunal's decision to partly allow the appeal was based on the smallness of the amount and the fact that the sales had already been taxed at a rate of 15%. Both parties agreed to an additional estimated addition of 8% on the disputed amount, which was accepted by the Tribunal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473087 (ITAT-RAJKOT)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV
• Assessee Lawyers: AA ST HA M AN IA R
• Keywords: Reopening of assessment; Bogus
• Section: 143(3); 44AD

Judgement Text

" Page | 1 ITA No.373/RJT/2024-A.Y. 2012-13 Vijay Steel Industries vs. ITO IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकरअपीलसं./ITA No.373/RJT/2024 (\u000bनधा\u000fरणवष\u000f / Assessment Year: (2012-13) (Hybrid Hearing) Vijay Steel Industries Plot No.42, Sector – 10C, Gandhidham (Kutch), Gujarat 370201 Vs. The Income Tax Officer Ward – 2, Gandhidham \u0013थायीलेखासं./जीआइआरसं./PAN/GIR No.: AACFV2509H (Assessee) (Respondent) Assessee by : Smt. Aastha Maniar, AR Respondent by : Shri Abhimanyu Singh Yadav, Sr.DR Date of Hearing : 09/10/2024 Date of Pronouncement : 16/10/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee is directed against the order passed by the Learned Commissioner of Income Tax (Appeal), ADDL/JCIT(A),[in short ‘Ld. CIT(A)’], dated 20.03.2024, which in turn arises out of an assessment order passed by the Assessing Officer (AO) under Section 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) vide order dated 28.12.2017. 2. The grounds raised by the assessee are as follows: Page | 2 ITA No.373/RJT/2024-A.Y. 2012-13 Vijay Steel Industries vs. ITO “1. The Ld. Addl/JCIT(A) erred in law and on facts in not adjudicating the ground of the Assessee challenging the reopening of the assessment for the reasons recorded by the AO. 2. The Ld. Addl / JCIT(A) erred in law and on facts in confirming the addition of Rs.3,67,160/- made by the AO treating the same as profit element on the alleged bogus sales made by the Appellant. 3. The Appellant craves leave to add, amend, delete or alter one or more grounds of appeal.” 3. The brief facts qua the issue are that during the assessment proceedings, the AO noticed that M/s. Shiv Impex is a bogus and sham concern as admitted by Mr. Bhavesh H. Thacker proprietor of M/s Shiv Impex in his statement recorded on 10.11.2017 wherein he has deposed that he had provided entry only and has never taken loans/goods in physical form from the parties. The Assessing Officer noticed that actually, M/s Shiv Impex has Export-Import Code in his name since long time. In spite of various license and bank accounts opened in his name, he did not undertake any real business activities. It existed on paper only and the parties concerned used his account to show high seas sales and goods were not transferred by the parties and the assessee never received the goods in physical. The modus operandi was to accommodate unaccounted cash generated through unaccounted sale though under invoicing of timber by showing high seas sales as VAT on high seas sales are not applicable. In reality, the high seas sales goods were traded with local parties and unaccounted income generated was deposited in the bank account of M/s Shiv Impex and again routed to the bank accounts M/s Shiv Impex. The investigation so far carried out in the assessee’s case, it was noticed by A.O. that M/s Shiv Impex was engaged in money transfer Page | 3 ITA No.373/RJT/2024-A.Y. 2012-13 Vijay Steel Industries vs. ITO through bank account on percentage of 0.25% on transaction in bank accounts of M/s Shiv Impex evident from bank statement. No trading activity has been carried out by M/s Shiv Impex and M/s Shiv Impex was only facilitator of various concerns including the assessee. Such importers including the assessee enter into the high sea sale agreement, filing of bill of entry and clearance of goods are made in the name of the M/s Shiv Impex. The possessions of goods are taken by the actual importers i.e. the assessee deposits cash in his bank accounts of M/s Shiv Impex and subsequently M/s Shiv Impex issues cheques in favour of the assessee to show completion of sham high sea transactions. 4. It was observed by the A.O. that, the reasons behind this operation was to avoid 15% VAT on sales, for which the assessee was using the bank account of M/s. Shiv Impex and in turn Mr. Bhavesh H. Thacker Prop. M/s Impex issued cheques to the assessee after deducting expenses. In actual practice, the assessee did show sales on paper but the goods were sold to local parties. The modus operandi was to avoid VAT and in doing so, the assessee executed sales to the local traders on mutually agreed rate than the prevailing market rate. During the assessment proceedings, the Assessing Officer issued notice to explain the transaction. In response, the assessee replied to the show cause notice reiterating that sales were made to M/s Shiv Impex. There is no proper reply filed by the assessee, hence, the sales of Rs.33,50,000/- was treated as unaccounted sales and the profit element @ 15% was treated by A.O. as income of the assessee. The profit element is coming to Rs.5,02,500/- and the amount declared by the appellant was Rs.1,35,340/-. Therefore, addition of balance amount of Rs. 3,67,160/- was confirmed by the A.O. 5. On appeal, ld. CIT(A) confirmed the action of the Assessing Officer. Page | 4 ITA No.373/RJT/2024-A.Y. 2012-13 Vijay Steel Industries vs. ITO 6. Aggrieved by the order of the Ld. CIT(A), the assessee is further in appeal before us. 7. Learned Counsel for the assessee, at the outset, submitted that there is a small addition to the tune of Rs.3,67,160/- only. The assessee has already paid the tax on estimated addition @15%. Therefore, due to smallness of the amount @8% of Rs.3,67,160/- may be added in the hands of the assessee and therefore, a part relief may be given to assessee. If the above relief is given to the assessee than in that circumstances, the assessee is not going to press ground No. 1 in respect of reopening of assessment. 8. On the other hand, Ld. DR doesn’t have any objection if the addition @ 8% of Rs.3,67,160/- is added which is prescribed u/s.44AD of the Act as the assessee’s sales have already suffered tax @ 15% on estimated basis. 9. We have heard both the parties. We note that the profit element embedded in sales should be taxable and not the entire sales. The Assessing Officer has already made addition on estimated basis on sales of Rs.33,50,000/- at the rate of 15%. Due to smallness of the amount, the Ld. Counsel stated that end of justice would be met if addition @ 8% is sustained on the impugned addition of Rs.3,67,160/-. The Ld. DR for the revenue fairly agreed that it would be sufficient if further addition @ 8% on Rs.3,67,160/- is made which is the rate prescribed under Section 44AD of the Act and provided the assessee does not press ground No. 1 in respect of reopening of assessment. 10. We have considered submissions of both the parties. The Ld. Counsel stated before the Bench that assessee does not press ground No. 1 relating to reopening of assessment, therefore, we dismiss ground No.1 as Page | 5 ITA No.373/RJT/2024-A.Y. 2012-13 Vijay Steel Industries vs. ITO not pressed. We note that sale of Rs. 33,50,000/- has already been taxed by the Assessing Officer at the rate of 15% which came to Rs. 5,02,500/- and amount declared by the assessee in return of income was Rs. 1,35,340/-. Therefore, the Assessing Officer made the balance addition to the tune of Rs.3,67,160/- (Rs.5,02,500 – Rs.1,35,340/-). On appeal, Ld. CIT(A) confirmed the action of Assessing Officer. We note that the Ld. DR for the revenue as well as the Ld. Counsel for the assessee both have agreed that further estimated addition @ 8% may be made on Rs.3,67,160/-. We accept the prayer of both the parties and direct the Assessing Officer to make addition of Rs.29,372/- (8% of Rs. 3,67,160/-) in the hands of assessee. Thus, assessee’s appeal is partly allowed. 11. In the result, assessee’s appeal is allowed partly in above terms. Order is pronounced in the open court on 16/10/2024 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot \u001bदनांक/ Date: 16/10/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Rajkot "