Kerala High Court
Sree Rajvel And Co. vs Commissioner Of Income Tax on 21 August, 2003
Equivalent citations: (2003)184CTR(KER)508, [2004]268ITR267(KER)
Bench: G. Sivarajan, Kurian Joseph
JUDGMENT
1. The Tribunal, Cochin Bench has referred the following question of law for decision by this Court :
"Whether, on the facts and the circumstances of the case, the Tribunal is correct in sustaining the additions on the ground that there were bogus purchases against the names of three identifiable persons and also against a number of unidentifiable parties ?"
2. The brief facts necessary for decision of this question are as follows. The applicant is a partnership-firm carrying on the business of procuring Copra for a sister concern by name M/s MM. Nagalinga Nadar Son's, Quilon, who had their office in the same premises. While purchasing Copra the assessee was deducting an estimated quantity as driage and paying the suppliers the price for the net quantity only. In the course of the assessment proceedings for the asst. yr. 1990-91 the AO found that even though during the previous year there was gross purchase of Copra to the extent of 52,918.78 quintals; the assessee had accounted by way of sales to the sister concern only 50,212.76 quintals. The AO was of the view that as Copra purchased on a particular day was transferred to the sister concern on the same day or the next day, there was no possibility of any driage and so the difference must have been accounted by the assessee as bogus purchases. The AO found that even after giving a reasonable deduction for driage, still there was a balance quantity of 576 quintals, which has to be treated as bogus purchases. Out of the total quantity of 576 quintals, 139 quintals was considered as bogus purchases from Karunakaran & Sons and the purchase cost of Rs. 2,07,582 was disallowed in the assessment. With regard to the remaining quantity of 437 quintals it was treated as bogus purchases against the names of sundry parties. The assessing authority had disallowed a sum of Rs. 6,50,434 representing the value of 437 quintals at the rate of Rs. 1,488 per quintal. The total additions on these two counts came to Rs. 8,58,016, which was disallowed. In appeal filled by the assessee the CIT(A) accepted the plea that there was in fact on claim of driage as the entire quantity purchased by the assessee had been transferred to the sister concern without even making payment and so there was no justification for any addition. However, in the appeal filed by the Revenue the Tribunal took the view that the CIT(A) was not correct in deleting the addition merely because there was no driage claimed by the assessee. The Tribunal noted that the addition made by the AO was not on the ground that there was excess claim of driage in the Copra account, The Tribunal also noticed that even though the AO had started with the quantification of the. driage, the addition of Rs. 8,58,016 had been made by way of disallowance of bogus purchases only. The Tribunal ultimately held that the AO was correct in the view that the purchase of 139 quintals from Shri Karunakaran and others was not proved to be genuine and so there was justification for disallowance of the sum of Rs. 2,07,582, claimed as the cost for such purchases. The Tribunal also held that there was justification for treating the quantity of 437 quintals as bogus purchase of Copra from sundry parties and for making the addition by way of disallowance of the purchase cost.
3. Though notice was served on the applicant, there is no appearance. We have heard Sri George K. George, learned standing counsel for Government of India, Taxes. We have also perused the orders of the three authorities. We find that the Tribunal has entered a clear finding regarding the difference of 576 quintals of Copra as bogus purchases. The Tribunal had particularly noted in para 7 of the appellate order as follows :
"It is not disputed that Shri Karunakaran of Karunagappally and his sons Shri Rajan and Shri Raghu were regular suppliers of Copra to the assessee, When the assessee has claimed deduction for an amount as the purchase price of Copra and the AO finds that there was no such purchase, the onus was on the assessee to rebut that finding and prove that in spite of the denial by the persons concerned, there were in fact such purchases effected from them. The assessee did not even want to cross-examine the three persons; as they were regularly supplying Copra to the assessee, there would have been no difficulty in getting the transaction proved through cross-examination, But instead of making any attempt to prove that there were genuine purchases, the assessee's response was "we are not bothered as to whether they had accounted for the sales or not."
4. The Tribunal has also noted the facts brought out in the assessment order as follows :
"8. The facts brought out in the assessment order are :
(1) The purchase of 139.47 quintals claimed by the assessee is not supported by independent evidence. (2) The assessee has not produced the Khatta Register and other primary books before the AO. (3) The parties in whose names the purchases are claimed had denied the sales to the assessee. (4) Form-19B register and the stock register maintained by them were verified by the AO and found that there were no such sales to the assessee."
5. It is mainly on the basis of these circumstances the Tribunal has taken the view that the AO was correct in taking the view that the purchase of 139 quintals was not proved to be genuine purchase and, therefore, there was justification for the disallowance of the cost claimed for 139 quintals. Similarly the Tribunal with reference to the difference of 437 quintals of Copra considered the matter in para. 10 and observed as follows :
"The facts clearly show that apart from the assessee's own bought notes there is no independent evidence in respect of the purchases. The AO has pointed out the unreliable nature of the bought notes, and how a large number of persons on the same dates corning from different areas could not have sold the same quantity of Copra to the assessee. In the circumstances of the case, we hold that the AO was justified in treating purchase of 437 quintals of Copra as not proved. The disallowance of the cost of 437 quintals of bogus purchase is to be therefore, sustained."
6. The Tribunal however, issued the following direction :
"In the assessment, the AO has made the disallowance at Rs. 6,50,431 at the rate of 1,488 per quintal. But then, from para 6 of the appellant order, we find that before the CIT(A), the AO had furnished another computation showing the amount to be disallowed at Rs. 4,90,645 in the place of Rs. 6,50,434. That computation has not been shown to us. In the circumstances of the case, we direct the AO to restrict the disallowance to the actual amount claimed as the cost of purchase of 437 quintals of Copra treated as bogus purchase."
7. We are of the view that the aforesaid findings with regard to the quantity of 576 quintals of Copra treated as bogus purchases are findings of fact entered purely on appreciation of the facts and circumstances of the case. We do not find any question of law arising from the said order of the Tribunal.
8. We accordingly decline to answer the question referred in para. 1 of the order. The IT reference is disposed of.