Gujarat High Court
Commissioner Of Income Tax Ii vs Gujarat Ambuja Export ... on 10 February, 2014
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/845/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 845 of 2013
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COMMISSIONER OF INCOME TAX II....Appellant(s)
Versus
GUJARAT AMBUJA EXPORT LTD....Opponent(s)
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Appearance:
Mr M.R BHATT Sr Advocate with Mrs MAUNA M BHATT, Advocates for the Appellant
Mr B S SOPARKAR, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Ms. JUSTICE SONIA GOKANI
10th February 2014
ORAL ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI)
Revenue has challenged the judgment of the Income Tax Appellate Tribunal, Ahmedabad {"Tribunal" for short} dated 17th April 2013 raising following questions for our consideration : {A} "Whether the Appellate Tribunal has substantially erred in restricting the addition made by the Assessing Officer to 5% of the total bogus purchases of Rs.
36,28,531/= made from M/s. Vishal Traders ?"
{B} "Whether the Appellate Tribunal has substantially erred in holding that provisions of Section 40A (3) of the Act are not attracted to the cash purchases of Rs. 36,28,531/= claimed to have been made from other parties ?"Page 1 of 9
O/TAXAP/845/2013 ORDER
{C} "Whether the Appellate Tribunal has substantially
erred in holding that because the Assessing Officer of the supplier company treated the URD purchases as genuine, the consequential sales made by Amber Trading Company to the assessee is also genuine ?"
{D} "Whether the Appellate Tribunal has substantially erred in upholding the decision of the CIT [A] in deleting the addition of Rs. 31,37,41,680/= made by the Assessing Officer treating the purchases from Amber Trading Company to that extent as bogus and nongenuine ?"
{E} "Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT (A) in deleting the addition of Rs. 2,01,82,782/= made on account of disallowance of speculation loss relying on the decision of this Court in case of Pankaj Oil Mills v. CIT, 115 ITR 824 when the said decision was in favour of the revenue and the facts of the said case are identical to the facts of the assessee's case ?"
{F} "Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT (A) in deleting addition made by the Assessing Officer on account of unutilized Cenvat/Modvat credit of Rs. 33,25,541/= ?"
{G} "Whether the Appellate Tribunal has substantially erred in applying the ratio of the Hon'ble Supreme Court's decision in the case of Indo Nippon Chemicals Company Limited even after the amendment to the provisions of Section 145A by the Finance (No.2) Act, 1998 with effect from 1st April 1999 ?"
In Tax Appeal No. 843 of 2013, we have considered identical set of Questions; of course with varying figures involving this very assessee, in which we passed the following order today : Page 2 of 9 O/TAXAP/845/2013 ORDER "Leave to amend Question 2 {B}.
Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Ahmedabad {"Tribunal" for short} dated 17th April 2013 raising following questions for our consideration : {A} "Whether the Appellate Tribunal has substantially erred in restricting the addition made by the Assessing Officer to 5% of the total bogus purchases of Rs. 2,25,52,526/= made from M/s. Vishal Traders ?"
{B} "Whether the Appellate Tribunal has substantially erred in holding that provisions of Section 40A (3) of the Act are not attracted to the cash purchases of Rs. 61,67,077/= claimed to have been made from other parties ?"
{C} "Whether the Appellate Tribunal has substantially erred in holding that because the Assessing Officer of the supplier company treated the URD purchases as genuine, the consequential sales made by Amber Trading Company to the assessee is also genuine ?"
{D} "Whether the Appellate Tribunal has substantially erred in upholding the decision of the CIT [A] in deleting the addition of Rs. 21,19,45,382/= made by the Assessing Officer treating the purchases from Amber Trading Company to that extent as bogus and non genuine ?"
{E} "Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT (A) in deleting the addition of Rs. 1,33,42,544/= made on account of disallowance of speculation loss relying on the decision of this Court in case of Pankaj Oil Mills v. CIT, 115 ITR 824 when the said decision was in favour of the revenue and the facts of the said case are identical to the facts of the assessee's case ?"
{F} "Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT (A) in deleting addition made by the Assessing Officer on account of unutilized Cenvat/Modvat credit of Rs. 19,31,769/= ?"
{G} "Whether the Appellate Tribunal has substantially erred in applying the ratio of the Hon'ble Supreme Court's decision in the case of Indo Nippon Chemicals Company Limited even after the amendment to the provisions of Section 145A by the Finance (No.2) Act, 1998 with effect from 1st April 1999 ?"
Page 3 of 9
O/TAXAP/845/2013 ORDER Questions {A} & {B} pertain to the purchases made by the assessee from one M/s. Vishal Traders. Assessing Officer doubted such purchases and deleted entire amount of Rs. 2.25 Crores [rounded off] for such purchases. The Tribunal reduced the addition to 5% of the said amount. In case of this very assessee, under similar circumstances, we have rejected the Revenue's appeal making following observations : "Revenue has challenged the judgment of the Income Tax Appellate Tribunal, Ahmedabad {"Tribunal" for short} dated 17th April 2013 raising following questions for our consideration : {A} "Whether the Appellate Tribunal has substantially erred in restricting the addition made by the Assessing Officer to 5% of the total bogus purchases of Rs. 61,67,077/= made from M/s. Vishal Traders ?"
{B} "Whether the Appellate Tribunal has substantially erred in holding that provisions of Section 40A (3) of the Act are not attracted to the cash purchases of Rs. 61,67,077/= claimed to have been made from other parties ?"
Issue pertains to addition of Rs. 61.67 lakhs [rounded off] made by the Assessing Officer in case of the respondentassessee for the A.Y 2007
08. The respondentassessee is in the business of manufacturing and exports of deoiled cake, starch, glucose and cotton yarn. For the year under consideration, the Assessing Officer examined various purchases made by the assessee for the purpose of production of edible oil, and in particular, purchases said to have been made from one M/s. Vishal Traders of Virpur came up for consideration. The Assessing Officer noted that the payments though were made through cheques, such cheques were deposited and the amount withdrawn shortly thereafter in cash. On the basis of such evidence and other materials on record, he held that the purchases were bogus. He, therefore, added the entire amount to the total income of the assessee.
Assessee carried the matter in appeal. Before CIT [A], assessee Page 4 of 9 O/TAXAP/845/2013 ORDER contended that the payments were made through cheques. That full details of the goods received were available on the record. That the truck numbers were mentioned in the bills; delivery challans, weigh slips, inward register, goods notes and Lab. reports of the materials received were maintained and produced before the Assessing Officer. It was also pointed out that the rate at which the material was purchased matched exactly with the rate of the purchases made on the same day from other suppliers.
The assessee also contended that one Mr. Madanlal Chandak was controlling M/s. Vishal Traders and supplying the goods in the name of the said agency, though he himself was supplying the goods since he did not have registration for such purpose. Assessee also pointed out that the purchases were made through brokers and the assessee had no direct dealing with M/s. Vishal Traders.
CIT [A] granted partial relief to the assessee. He apparently was of the opinion that the purchases were not bogus. He, however, taxed 25% of the amount relying on the decision of this Court in case of Sanjay Oilcake Industries v. Commissioner of IncomeTax, reported in [2009] 316 ITR 274 (Guj).
Revenue as well as assessee both carried this issue in appeal before the Tribunal. Revenue urged that the entire purchases were bogus and therefore Assessing Officer's order adding the entire amount to the income of the assessee should be restored. Assessee contended that the purchases were genuine and the payments were made through cheques, no disallowance therefore should be made at all.
The Tribunal in the impugned judgment noted that the GP rate and the net profit rate of the year under consideration were better than the previous year. The stock register was properly maintained and the purchases in question were reflected in such stock register and finding Page 5 of 9 O/TAXAP/845/2013 ORDER that there were internal contradictions in the statements made by the representative of M/s. Vishal Traders and said Shri Madanlal Chandak, the Tribunal reduced the addition to 5% of the amount in question. Revenue has therefore preferred this appeal and also filed Tax Appeal No. 842 of 2013 raising this question.
Having heard learned counsel for the parties and having perused the materials on record, we are of the opinion that the entire issue is based on materials on record. The Tribunal did not accept the Revenue's stand that the purchases were bogus, in the sense that no material was received. Perusing the order of the Tribunal and the material discussed at length by the CIT [A] in his order, this issue gets further support. If we were to therefore not depart from the Tribunal's view that the material was actually received for which payments were made, only question would be did the Tribunal err in adding 5% of the purchases and not 25% as was vehemently urged before us by the learned counsel for the Revenue.
Here also, we do not find that the Tribunal has committed any error so as to give rise to any question of law. The Tribunal looking to the material noted above, retained portion of the above by giving cogent reasons. The decision of this Court in case of Sanjay Oilcake Industries {Supra] was rendered in a slightly different fact situation. In the said case, the assessee had made purchases but the parties were not traceable. They had opened the bank accounts and immediately upon credit of the cheques, withdrawn the amount by bearer cheques. On such basis, the Tribunal had held that such parties were creation of the assessee itself for the purpose of banking purchases into books of account because the purchases with bills were not feasible. The Tribunal therefore, observed that such parties became conduit pipes between the assesseefirm and the sellers of the raw materials. It was on this basis that 25% of the purchase price was added by way of income of the assessee observing that Page 6 of 9 O/TAXAP/845/2013 ORDER possibility of inflating the price of the raw material cannot be ruled out. It was this decision that this Court upheld.
In the present case, though it may appear that the purchases have been shown to have been made through M/s. Vishal Traders but supplied by some other agency, in absence of other additional facts noted by this Court in case of Sanjay Oilcake Industries [Supra] gross ad hoc addition of 25% may not be justified. In the present case, the assessee could produce before the authorities the precise rate at which the purchases were made from M/s. Vishal Traders and other suppliers to demonstrate that the purchases made on the same day carried the same price. This would substantially eliminate the angle of the purchase price being artificially inflated. Additionally, the Tribunal also noted other parameters such as higher net and gross profit rates of the present year compared to the earlier years of the recent past.
Under the circumstances, no question of law arises. Tax Appeal is, therefore, dismissed."
These questions are therefore not considered.
Questions {C} & {D} pertain to purchases made by the assessee through one M/s. Amber Trading Company, Dahod. Assessing Officer disallowed the purchases on the ground that M/s. Amber Trading Company had made purchases from an unregistered dealer. He, in fact, doubted the purchases by M/s. Amer Trading Company itself.
Learned counsel for the assessee would however correctly point out that CIT [A] as well as the Tribunal both noted that in the case of the assessment of M/s. Amber Trading Company itself, such purchases were accepted and found genuine. That being the situation, the Tribunal in our opinion correctly did not accept the Revenue's appeal, making following observations : Page 7 of 9 O/TAXAP/845/2013 ORDER "3.9 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that the disallowance in respect of purchases from Amber Trading Company was made by the Assessing Officer on this basis that out of total purchases claimed by the assessee from Amber Trading Company of Rs. 4123.10 lacs, total unregistered dealers [URD] purchases made by Amber Trading Company in assessment year 200809 is Rs. 2119.45 lacs. The A.O was of the view that the URD purchases of Amber Trading Company is bogus and as a consequence, the purchases of the assessee company from Amber Trading Company is also to be held as bogus to the extent of URD purchases of Amber Trading Company. Hence, it is seen that the disallowance in the present case was made on this basis that to the extent of URD purchases of Amber Trading Company held to be bogus, the purchases of the assessee company from Amber Trading Company is also to be held as bogus. Now, we find that it is noted by learned CIT [A] in the above para that the A.O of the firm M/s. Amber Trading Company treated the URD purchases of M/s. Amber Trading Company as genuine. Once, the URD purchases of M/s. Amber Trading Company is accepted as genuine by the A.O of that party, the disallowance made by the A.O in this regard cannot be sustained because it has no legs to stand. Accordingly, we decide this aspect of the matter in favour of the assessee. Thus, Ground No. 3 of the revenue's appeal is also rejected."
These questions are, therefore, not required to be considered. Question {E} pertains to addition of Rs. 1.33 Crores [rounded off] made by the Assessing Officer treating the loss suffered by the assessee as speculation loss. CIT [A] as well as the Tribunal concurrently, on the basis of evidence on record, held that it was a case of hedging transaction and not one of speculation loss. Such being pure question of fact and the Tribunal's decision not being shown to be per verse, such question is also not required to be considered.
With respect to Question {F}, counsel pointed out that similar question is being considered in various Tax Appeals. Such question is therefore required to be admitted.
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O/TAXAP/845/2013 ORDER Question {G} being element of Question {F}, it is not entertained. In the result, Tax Appeal is admitted for consideration of following substantial question of law : {F} "Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT [A] in deleting addition made by the Assessing Officer on account of unutilized CENVAT/MODVAT credit of Rs. 19,31,769/= ?"
To be heard with Tax Appeal No. 604 of 2013."
In the result, Tax Appeal is admitted for consideration of following substantial question of law : {F} "Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT [A] in deleting addition made by the Assessing Officer on account of unutilized CENVAT/MODVAT credit of Rs. 33,25,541/=?"
To be heard with Tax Appeal No. 604 of 2013.
{Akil Kureshi, J.} {Ms. Sonia Gokani, J.} Prakash* Page 9 of 9