Income Tax Appellate Tribunal - Ahmedabad
Tejus Rohitkumar Kapadia, Surat vs Acit.,Circle-3,, Surat on 16 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
ITA. Nos: 1994, 1990 & 2095/AHD/2010
(Assessment Years: 2006-07 & 2007-08)
Tejus Rohitkumar V/S ACIT, Circle-3, Surat
Kapadia Prop. M/s. Tejus
28, Nehru Nagar Society,
Umra Jakat Naka, Surat
ACIT, Circle-3, Surat V/S Tejus Rohitkumar Kapadia
Prop. M/s. Tejus 28, Nehru
Nagar Society, Umra Jakat
Naka, Surat
(Appellant) (Respondent)
PAN: ABGPK3824M
Appellant by : Shri Rashesh Shah, AR
Respondent by : Shri Dharmvir D. Yadav, Sr. D.R.
(आदे श)/ORDER
Date of hearing : 11 -01-2017
Date of Pronouncement : 16 -01-2017
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:
2 ITA Nos. 1994, 1990 & 2095/Ahd/2010
. A.Ys. 2006-07 & 2007-08
1. ITA Nos. 1994 & 1990/Ahd/2010 are appeals by the assessee preferred against two separate orders of the Ld. CIT(A)-II, Surat dated 31.03.2010 pertaining to A.Y. 2006-07 & 2007-08 respectively and ITA No. 2095/Ahd/2010 is the cross appeal by the revenue preferred against the order of the ld. CIT(A)-II, Surat 31.03.2010 pertaining to A.Y. 2007-08.
2. All these appeals were heard together and are disposed of by this common order for the sake of convenience.
ITA No. 1994/Ahd/2010 for A.Y. 2006-07 Assessee's appeal3. The assessee has raised two substantive grounds of appeal. Ground no. 1 relates to the addition of Rs. 8,18,683/- being made on account of G.P. addition and the second grievance relates to the addition of Rs. 5,68,610/- being made on account of alleged peak of unaccounted investment made in purchases.
4. The assessee is engaged in the business of manufacturing of yarn, trading of yarn and grey cloth and high sea sales in the name of M/s. Tejus
5. A search operation was conducted by Department of Revenue Intelligence (DRI), Surat at the business premises of the assessee. Taking a leaf out of the proceedings of the DRI and the subsequent report of the DRI, the A.O. issued show cause notice to the assessee to explain the invoices and the notings on the back side of the invoices as alleged by the DRI. Assessee filed 3 ITA Nos. 1994, 1990 & 2095/Ahd/2010 . A.Ys. 2006-07 & 2007-08 a detailed reply explaining each and every invoice and the notings on the said invoices.
6. It was explained that the variation in the purchase price of yarn is on account of difference in quality of yarn purchased. It was explained that 60 Denier yarn is costlier than 80 Denier yarn. It was pointed out that the comparable case of M/s. Reva Export is in fact not comparable because the invoice does not mention anywhere the quality of the yarn. It was further pointed out that the invoice issued by M/s. S. K. Fibers, Indonesia was inadvertently referred to USD 1.92 per kg instead of 1.40 per Kg. It was for this reason; two invoices were found by the DRI with different rates.
7. The detailed submissions of the assessee could not impress the A.O. who was of the firm belief that the assessee has imported goods which were not recorded in the books of accounts and the assessee is indulged in under valuation of imports name. The A.O. computed the differential amount invested in unaccounted purchases of materials at Rs. 2,20,66,914/- and applying G.P. rate of 3.71% made an addition of Rs. 8,18,683/-. Proceeding further, the A.O. was of the view that the transactions in which under valuation took place, the assessee must have invested in the purchase of yarn and reported lesser amount of investment in the purchase of said yarn. The A.O. computed the peak of unaccounted investment at Rs. 5,68,810/- which was based on Invoice No. E 2511026 of M/s. S.K. Keris and made the addition of Rs. 5,68,810/-.
4 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
8. Aggrieved by this, the assessee carried the matter before the ld. CIT(A) but without any success.
9. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. Per contra, the ld. D.R. strongly supported the findings of the revenue authorities.
10.We have given a thoughtful consideration to the orders of the authorities below and have carefully perused the related documentary evidences placed before us in the form a paper book.
11.A perusal of the record shows that a preventive action was conducted by the DRI on 09.03.2007. A perusal of the assessment order shows that the Assessing Officer has based his findings totally on the basis of the show cause notice issued by the DRI. We find that the two invoices referred to by the DRI/A.O. bearing no. E-11067-2A and E-11067-2B are dated 22.11.2006. It can be seen that these invoices pertained to F.Y. 2006-07 pertaining to A.Y. 2007-08.
12.Be that as it may, it is true that the purchase price of yarn varies with the quality i.e. Denier of yarn. We find that the assessee has imported the yarn Polyester Filament Yarn (PFY) from M/s. S.K. Keris and M/s. S.K. Fibres, Indonesia had different values ranging from USD 1.14 to USD 2.00 per kg. This variation in price is on account of difference in the quality of yarn imported.
5 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
13.We find that the A.O. has referred to a comparable case of M/s. Reva Export who declared the value of Yarn before the customs authority is USD 1.95 per kg. But it is not known what quality of yarn has been imported by M/s. Reva Export @ USD 1.92 per kg. Further, the price difference in one bill of competitor cannot be a bench mark and applied to the entire quantity of the appellant.
14.We find that the lower authorities have referred to two invoices bearing similar numbers dated 22.11.2006 issued by S.K. Fibres, Indonesia. A perusal of the sale contract entered into with M/s. S.K. Fibres, Indonesia shows that it was for purchases of 80/48 SDAA grade yarn @ USD 1.40 per kg and for which the assessee had opened a bank LC on 30.10.2006 @ USD 1.40 per kg. The sale contract is exhibited at pages 25 of the paper book and at page 26 of the paper book S.K. Fibres, Indonesia has clarified that inadvertently they have mentioned the rate as USD 1.92 per kg. in stead of agreed rate of USD 1.40 per kg. It is also clarified by S.K. Fibers, Indonesia they have immediately sent another commercial invoice bearing same number, date, quality and quantity and only the rate therein has been rectified. We have also perused the LC of Bank of America exhibited at pages 27 to 29 of the paper book wherein we find that the LC is for USD 1.40 kg.
15.The A.O. has also based his finding on the notings found on the reverse side of a Performa invoice which is as under:-
6 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
1.85
1.14
0.71
19968
14177.28
16.We find that the DRI has interpreted the aforementioned working as USD 1.85 as actual purchase price of the goods and assumed that the invoice has been prepared at USD 1.14 and treated the differential amount of USD 0.71 as the amount payable to the Foreign Supplier and multiplied the same with the quantity of 19968 kgs to work out the alleged suppressed amount at USD 14,177.28.
17.The Assessing Officer has based his findings influenced by the aforementioned assumption of the DRI. There is no evidence whatsoever brought on record which could suggest that the assessee has actually paid the differential amount as calculated hereinabove. Although, a reference is made to the statement given before the DRI but no cognizance has been taken for the affidavit of the assessee by which he has retracted from the statement given before the DRI. The affidavits are exhibited at pages 33 to 36 of the paper book.
18.In our considered opinion in the absence of any documentary evidence, the impugned additions cannot be made solely based on the action of the third 7 ITA Nos. 1994, 1990 & 2095/Ahd/2010 . A.Ys. 2006-07 & 2007-08 person that is the DRI on the allegation that the assessee has under-valued its import of PFY and has made payments by under invoicing.
19.It would be pertinent to refer to the decision of the Co-ordinate Bench in the case of ITO vs. Pukhraj N. Jain 99 TTJ (Mumbai) 364 wherein the relevant findings read as under:-
".... The contention of the Departmental Representative that the Customs Collector having had conducted the inquiry and having marshalled / ascertained the facts and then having passed his order under the Customs Act, the AO, for framing assessment under IT Act and, for that purpose, for making an addition u/s. 69A in the hands of the assessee in respect of the value of gold seized from KNJ by Customs officials was not required to make any inquiry, seems to be misplaced / fallacious, reflective of a non-understanding or misunderstanding of the very basic concept of judicial / quasi-judicial adjudication by a judicial or quasi-judicial authority.
It may be of some benefit to observe here that although an AO, while making an assessment, does not strictly act as a the proceedings before the AO are, in general, in the nature of quasi-judicial though for specific purpose, the same are deemed judicial proceedings as provided in section 136.
An AO, being a quasi-judicial authority, has, while framing assessment, to discharge his duty / function judicially and in that process the AO has to apply his own mind independently to the facts of the case, ascertained by him and then to draw his own conclusion / decision on the finding of any authority under any other Act / law, and thus adopt the finding / conclusion of that authority.8 ITA Nos. 1994, 1990 & 2095/Ahd/2010
. A.Ys. 2006-07 & 2007-08 The decision to be drawn by the AO has to be his own and independent one. AO cannot base his decision on the finding /conclusions of Customs Collector drawn in the, order of Customs Co/lector under the Customs Act ......"
20.It would be further relevant to refer to another decision of the Co-ordinate Bench in the case of Kirtilal Kalidas & Co. 1999 64 TTJ (Mad) 77. The relevant observations read as under:-
"....The inquiries by the AO for making the assessment of income are quasi- judicial proceedings and the act of framing the assessment is quasi-judicial act. It is a trite law that a judicial or quasi-judicial authority should act independently and that there shall not be any interference, nor any advice, opinion, instructions, directions, direction can be given to any IT authority in such proceedings, etc. by any stranger/outsider even if such stranger/outsider is higher or highest authority in the hierarchy of the Department.
If an order is passed or a decision is rendered by an IT authority in such quasi judicial proceeding at the behest of a or upon the directions of instructions, of any superior officer or authority then such an order/decision is illegal and a nullity in law because it shall deemed in law that such an order/decision is not of that quasi judicial authority but some other authority who directed or issued orders/instructions to the lower authority to act and thereafter pass an order/decision in a particular manner. "
21.Considering the totality of the facts, in the light of our observations mentioned hereinabove and considering the relevant observations of the Co-ordinate Bench on the points in issue, in our considered opinion, the impugned additions do not hold any water. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition of Rs.
9 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08 8,18,683/- on account of G.P. addition and Rs. 5,68,610/- on account of alleged peak of unaccounted investment made in purchases. Both the grounds are allowed and in the result, the appeal filed by the Assessee is allowed.
ITA No. 1990/Ahd/2010 A.Y. 2007-08 Assessee's Appeal22.The assessee has raised two substantive grounds of appeal. Ground no. 1 relates to the addition of Rs. 6,32,055/- on account of G.P. addition and Rs. 8,15,791/- on account of alleged peak of unaccounted investment made in purchases.
23.The impugned additions are made on the identical set of facts which have been considered by us in ITA No. 1994/Ahd/2010 (supra). For our detailed discussion therein and following our own findings, we direct the A.O. to delete the impugned additions. Appeal filed by the Assessee is allowed.
ITA No. 2095/Ahd/2010 Revenue's appeal for A.Y. 2007-0824.The grievance of the revenue is twofold. Firstly, the revenue is aggrieved by the deletion of the addition of Rs. 5,19,86,585/- on account of bogus purchases and is further aggrieved by the deletion of the addition of Rs. 5,00,000/- on account of estimation of oil gain.
10 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
25.Briefly stated the facts of the case are that on the basis of a report of the ADIT(Investigation)-III,Surat and on the basis of information with regard to Banking Cash Transaction Tax (BCTT) in the case of M/s. Sai Corporation and M/s. Sai Enterprises who were operating as Shroffs, the A.O. came to know that the proprietor of the aforementioned two firms Shri Kulwant Singh Yadav in his statement recorded u/s. 131 of the Act had apparently stated that as a practice he noted the names of the beneficiaries on the reverse of the cheques and also issued a slip of acknowledgement. He delivered the cash on production of the acknowledgement slip. The A.O. found that one of the beneficiaries of the cheques discounted by Shri Kulwant Singh Yadav was the assessee.
26.On perusal of the bank accounts of M/s. Sai Corporation and M/s. Sai Enterprises revealed that substantial transactions were done with bank Account No. CA2024 with Sarvodaya Bank Ltd., Surat which was held by M/s. Raj Impex. On further verification, the A.O. found that most of the credit entries were from the prop. concern M/s. Tejus. The ADIT made further investigation and found that the cheque book of Raj Impex was in the possession of the assessee and his father.
27.On the basis of such report of the ADIT, the A.O. was of the opinion that the transactions with Raj Impex were found to be bogus and came to the conclusion that the purchases totaling to Rs. 5,19,86,585/- shown to have 11 ITA Nos. 1994, 1990 & 2095/Ahd/2010 . A.Ys. 2006-07 & 2007-08 made from M/s. Raj Impex was completely bogus and accordingly made the additions.
28.Assessee carried the matter before the ld. CIT(A) and strongly submitted that the A.O. has grossly erred in treating the transactions with M/s. Raj Impex as bogus. Confirmations of M/s. Raj Impex along with PAN details were filed. I.T. returns of M/s. Raj Impex for the year under consideration was filed along with audited statement of accounts of M/s. Raj Impex. The assessee also filed the bank statements showing payment of purchases by account payee cheques along with the copies of the bills of M/s. Raj Impex.
29.After considering the facts and the submissions, the ld. CIT(A) found that what has been disallowed are the purchases claimed to have been made by the assessee from M/s. Raj Impex. The ld. CIT(A) further found that all the payments made by the assessee were by account payee cheques to M/s. Raj Impex. The ld. CIT(A) further observed that since the assessee was a trader, therefore the purchases made from M/s. Raj Impex have been found to be sold and the sales have been accepted by the A.O. The ld. CIT(A) concluded by holding that there was no basis or evidence to treat the purchases from M/s. Raj Impex as bogus and accordingly directed the A.O. to delete the addition of Rs. 51,98,656/-.
30. Aggrieved by this, the revenue is before us. The ld. D.R. strongly supported the findings of the A.O. The ld. counsel for the assessee reiterated what has been stated before the lower authorities.
12 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
31.We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the purchases made from M/s. Raj Impex were duly supported by bills and all the payments have been made by account payee cheques. There is also no dispute that M/s. Raj Impex have confirmed all the transactions. There is no evidence to draw the conclusion that the entire purchase consideration which the assessee had paid to M/s. Raj Impex had come back to the assessee in cash.
32.It is also true that no adverse inference has been drawn so far as the sales made by the assessee is concerned. We also find that the entire purchases made by the assessee from M/s. Raj Impex have been accounted by Raj Impex and have paid the taxes accordingly. Considering the facts in totality well appreciated by the First Appellate Authority, we do not find any error or infirmity in the findings of the First Appellate Authority. Ground No. 1 is accordingly dismissed.
33.The second grievance relates to the deletion of the addition of Rs. 5,00,000/-
34.During the course of the scrutiny assessment proceedings, the A.O. found that the assessee has shown yield of 7,59,905.90 kgs of crimped yarn on the consumption of the same quantity of POY. The A.O. further found that in F.Y. 2004-05, the assessee has shown oil gain of 1.63%. Taking a leaf out of the findings of the A.O. estimated the oil gain t Rs. 5,00,000/- and made the impugned addition.
13 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
35.Before the ld. CIT(A), it was brought to the notice of the ld. CIT(A) that the impugned additions made in 2004-05 were deleted by the First Appellate Authority and the revenue has not preferred any further appeal.
36.It was further explained that during the year under consideration, the assessee has produced crimped yarn and not texturised Yarn and, therefore, there was no oil gain.
37.After considering the facts and the submissions, the ld. CIT(A) found that the A.O. has made the impugned additions only on the basis of the findings given by his predecessor. The ld. CIT(A) was convinced that there is no evidence for the year under consideration for making the impugned addition and accordingly directed the A.O. to delete the same.
38.Before us, the ld. D.R. strongly relied upon the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
39.It is true that the A.O. has made the additions taking a leaf out of the findings given in A.Y. 2004-05. Except for this, there is nothing on record which could suggest that the assessee has made oil gain during the year under consideration. In the absence of any corroborative evidence, we decline to interfere with the findings of the ld. CIT(A). Ground no. 2 is accordingly dismissed.
14 ITA Nos. 1994, 1990 & 2095/Ahd/2010. A.Ys. 2006-07 & 2007-08
40.In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 16 - 01- 2017
Sd/- Sd/-
(MAHAVIR PRASAD) (N. K. BILLAIYA)
JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER
Ahmedabad: Dated 16 /01/2017
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,Ahmedabad