Income Tax Appellate Tribunal - Chandigarh
G G Alloys & Metals , Mandi Gobindgarh vs Ito, Mandi Gobindgarh on 11 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.73/Chd/2015
(Assessment Year : 2008-09)
M/s G.G. Alloys & Metals, Vs. The Income Tax Officer,
G.T. Road, Mandi Gobindgarh. Ward 1, Mandi Gobindgarh.
PAN: AAHFG2637C
(Appellant) (Respondent)
Appellant by : Shri Ajay Jain
Respondent by : Mrs.Inoshi Sharma, DR
Date of hearing : 08.11.2016
Date of Pronouncement : 11.11.2016
O R D E R
PER ANNAPURNA GUPTA, A.M. :
This appeal has been filed by the assessee against the order of learned Commissioner of Income Tax (Appeals), Patiala dated 23.6.2014 for assessment year 2008-09.
2. The assessee has raised the following grounds of appeal :
"1. That the order of Learned C.I.T. (A) is bad and against the facts & Law.
2. That the learned CIT(A) has erred by confirmed the rejection of books of accounts without any specific defect.
3. That the Learned Commissioner of Income Tax (appeal) 2 has wrongly confirmed addition amounting to Rs.20,00,000/- on account of application of gross profit rate applied by assessing officer Without material evidence on records .
4. That the Learned Commissioner of Income Tax (appeal) has wrongly confirmed the addition of RS 2320698/- against the liability outstanding in the name of Rohit Ispat.
5. That the Learned Commissioner of Income Tax (appeal) has wrongly confirmed the addition of Rs.60000/- on account of sale of salvage out of expenses incurred on machinery repair."
3. Brief facts relating to the case are that the assessee company is in the business of manufacturing of steel ingots. During the year under consideration, it was seen that the assessee had made purchase of pig iron amounting to Rs.68,20,608/- from M/s Rohit Ispat (India), Mandi Gobindgarh, who was found to be indulging in only paper transaction and not actually conducting any business. During assessment proceedings, the assessee was confronted with the above, who, however, stated that the purchases were genuine and payments were made through account payee cheques. The Assessing Officer, however, rejected assessee's claim and held that the bills of purchase obtained from M/s Rohit Ispat (India), Mandi Gobindgarh were bogus. He, therefore, rejected books of account of the assessee and estimated GP at 3.02% and made addition of Rs.26,76,315/-. Further, the Assessing Officer made addition of Rs.23,20,698/- on account of credit balance outstanding against M/s Rohit Ispat 3 (India), Mandi Gobindgarh holding the same to be bogus in nature. The Assessing Officer also made addition on account of sale of salvage, amounting to Rs.60,000/- since the assessee had agreed to the same.
4. Aggrieved by the same, the assessee came up in appeal before the Ld. CIT (Appeals), who upheld the addition made on account of GP to the extent of Rs.20 lacs and further upheld the balance addition made by the Assessing Officer on account of outstanding balance of M/s Rohit Ispat (India), Mandi Gobindgarh and sale of salvage.
5. Aggrieved by the same, the assessee filed the present appeal before us. During the course of hearing before us, the learned counsel for the assessee stated that vis-à-vis ground Nos.2, 3 and 4 raised elating to the additions made on account of application of GP rate and on account of outstanding liability in the name of M/s Rohit Ispat (India), Mandi Gobindgarh, the limited prayer was that the benefit of telescoping be given to the assessee. The learned counsel for the assessee stated that since both the additions arose on account of the bogus purchases allegedly made by the assessee from M/s Rohit Ispat (India), Mandi Gobindgarh, the benefit of telescoping ought to be given to the assessee. The learned counsel for the assessee relied upon the order of the I.T.A.T., Chandigarh Bench in the case of Northern India Steel Rolling Mills Vs. DCIT in ITA No.591/Chd/2014 4 dated 23.12.2014, wherein, Ld. counsel of the assessee pointed out that, in identical circumstances the effect of telescoping had been given on account of identical additions made in assessment proceedings. Further the learned counsel for the assessee offered that higher of the two additions be upheld and the other addition be telescoped against the same.
6. The learned D.R., however, relied upon the order of the CIT (Appeals).
7. Having heard both the parties, we find merit in the limited prayer of the Ld. counsel of the assessee. The additions being disputed in the present grounds are on account of application of G.P. Rate, after rejecting the books of accounts of the assessee, and addition of the credit balance outstanding in the name of from M/s Rohit Ispat (India), Mandi Gobindgarh, a party from which the assessee allegedly made purchases. Both the additions have been made on account of the findings of the lower authorities that all transactions of purchases made with from M/s Rohit Ispat (India), Mandi Gobindgarh were bogus, since neither any such entity existed, nor it conducted any business in trading of pig iron, but on the contrary, indulged only in paper transactions. Both the additions being trading additions, one on account of application of G.P. rate and the other on account of bogus credit balance outstanding of creditor of purchase, the benefit of telescoping has to be given to the assessee. The 5 I.T.A.T., Chandigarh Bench, has on identical set of facts allowed the benefit of telescoping to the assessee for the identical set of addition made, in the case of Northern India Steel Rolling Mills Vs. DCIT, in ITA No.591/Chd/2014 dated 23.12.2014. The relevant paras 14 to 18 of the order are reproduced hereunder :
"14. Ground No. 4 - After hearing the rival submissions we find that during assessment proceedings it was noticed that the assessee has shown purchases from M/s Rohit Ispat (India) on an average rate of Rs.19,900/-. Purchases from other dealers were shown at Rs.17,600/- which clearly mean that purchases have been inflated. Therefore gross profit of the assessee which was declared at 2.4% was enhanced to 2.55% and a sum of Rs.6,94,283/- was added to the income of the assessee.
15. On appeal after considering the submissions, the Ld. CIT(A) restricted th i s addition to Rs.6,50,000/-.
16. Before us, it was submitted that gross profit rate in this year was better than earlier year. Further in any case the Assessing officer has made separate addition of Rs.18,68,9957- on account of outstanding balance in the account of M/s Rohit Ispat (India) as a bogus l i ab il i ty . Therefore at least this trading addition should have been set off against that addition i.e. telescoping should have been allowed.
17 On the other hand, the Ld. DR for the revenue supported the order of the Ld. CIT(A).
18. After considering the rival submissions we f i n d force in the submissions of the Ld. Counsel for the 6 assessee. Further we have confirmed the addition on account of bogus l iability in the latter paragraphs of th is order. Therefore in our opinion, the addition on account of gross profit should not have been made particularly in view of the fact that the assessee has shown better gross profit than earlier years. Therefore we set aside the order of Ld. CIT(A) and delete th is addition."
8. In view of the above, we confirm the addition of Rs.23,20,698/- made on account of outstanding liability in the name of M/s Rohit Ispat (India), Mandi Gobindgarh and direct that the addition amounting to Rs.20 lacs on account of application of gross profit rate be telescoped against the same.
9. The ground Nos.2, 3 and 4 raised by the assessee are accordingly decided in the above manner.
10. Ground No.5 raised by the assessee is against the addition of Rs.60,000/- made on account of sale of salvage.
11. Brief facts relating to the case are that the assessee had debited an amount of Rs.6,00,107/- under the head "machinery repair". However, no sale of salvage was shown during the year. During assessment proceedings, the assessee agreed to an addition of Rs.60,000/- on account of the same, which was made by the Assessing Officer accordingly and upheld for the same reason by the Ld. CIT (Appeals).
7
12. Before us, the learned counsel for the assessee could not produce any evidence to prove that the addition was not an agreed addition. In the background of the above facts ,we hold that the assessee having agreed to an addition during assessment proceedings ,cannot agitate against the same in appellate proceedings. In view of the same, we find no infirmity in the order passed by the Ld.CIT(A) upholding the addition made.
13. The ground of appeal raised by the assessee is therefore dismissed.
13. In effect the appeal of the assessee is partly allowed.
Order pronounced in the open court.
Sd/- Sd/-
(BHAVNESH SAINI) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 11 t h November, 2016
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh