Income Tax Appellate Tribunal - Ahmedabad
Simit P.Sheth L/H Of Late Pankaj ... vs Assessee
आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद Ûयायपीठ 'बी बी' बी Ûयायपीठ' Ûयायपीठ अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH "B" AHMEDABAD ौी मुकुल कुमार ौावत, Ûयाियक सदःय एवं ौी ए.मोहन अलंकामोनी, लेखा सदःय Before Shri Mukul Kumar Shrawat, Judicial Member and Shri A Mohon Alankamony, Accountant Member आयकर अपील सं./ ITA No.3238 and 3293/Ahd/2009 िनधा[रण वष[ / Assessment Year:-2006-07 Shri Simit P Sheth L/R बनाम Incom e Tax Officer, of Shri Pankaj J Sheth /V/s. W ard-2(2), Baroda C/o Manish G Shah, 38/101 Gautam nagar Soc, Race Course Circle, Vadodara PAN No. ADBPS9145C बनाम Income Tax Officer, Shri Simit P Sheth, W ard-2(2), 1 s t Floor, /V/s. L/R of Lt. Pankaj J Aayakar Bhavan, Race Sheth, Prop M/s.
Course Circle, Baroda Paraswanath Steel,
755/G Gore Complex,
GIDC Makarpura,
Baroda
अपीलाथȸ/ Appellant .. ू×यथȸ/Respondent
आवेदक कȧ ओर से/By assessee Shri S.N.Soparkar, SR-AR &
Ms. Urvashi Shodhan, AR
राजःव कȧ ओर से /By Respondent Shri Samir Tekriwal, SR-DR
सुनवाई कȧ तारȣख/Date of Hearing 21-02-2012
घोषणा कȧ तारȣख/Date of Pronouncement 24 -02-2012
आदे श /O R D E R
ौी मुकुल कुमार ौावत, Ûयाियक सदःय /PER Mukul Kumar Shrawat, Judicial
Member:-
ITA No.3238 & 3293/Ahd/2009 A.Y. 2006-07
Sh. Simit P Sheth v. ITO Wd-2(2), BRD Page 2
These are cross-appeals filed by the assessee as well as Revenue arising from the order of Ld. Commissioner of Income-tax (Appeals)-II, Baroda dated 18-09-2009 for the assessment year 2006-07.
2. As far as assessee's appeal is concerned grounds No. 1 to 3 and 5 are general in nature and as per the statement of Ld. AR, Mr. S.N.Soparkar not relevant to decide the main issue. In view of his statement these grounds are hereby dismissed being general in nature.
3. The main issue of the appellant is about the confirmation of addition of Rs.12,71,471/- on account of alleged bogus purchases of the assessee.
Likewise, due to the part relief Revenue has also challenged that Ld. CIT(A) has erred in restricting the addition of Rs.41,04,903/- to Rs.12,31,471/-. These two appeals are connected to each other, hence consolidate and hereby decided by this common order.
4. Facts in brief as emerged from the corresponding assessment order passed u/s.143 r.w.s. 147 of the I.T. Act dated 31-12-2008 were that assessee individual is in the business of trading in steel on wholesale basis. It may not be out of place to mention that Gross Profit of Rs.7,42,524/- on sale of Rs.3,04,52,701/- was declared having GP rate at 2.43% as against the GP of the immediate past year at 3.56%. An intimation was received by the Assessing Officer from DDIT (Inv.)-I, Baroda. According to the said intimation, during the course of verification of banking transactions in the case of Shri Amratbhai Poonambhai Prajapati, Prop of Bhavna Trading Co. & Bhagyodaya Enterprises, Shri Kantilal Mangilal Shaarma, Prop of Miakshi Enterprises and Shri Jayantilal Mangilal Sharma, Prop of Arun Industrial Corporation and as per the admission in their statements recorded on oath, it was found that no sales were made by them to any party. It was intimated that those parties were simply issuing sale bills against those sales bills they were receiving "dalali". The modus operandi was that on issuance of sales bills the amount of ITA No.3238 & 3293/Ahd/2009 A.Y. 2006-07 Sh. Simit P Sheth v. ITO Wd-2(2), BRD Page 3 cheque was received and on encashment of the said cheque after deducting "dalali" the balance amount was withdrawn in cash and returned to the respective parties. Therefore, the issuance of bogus sale bills was confirmed by those parties. On the basis of these facts, the Assessing Officer has held that barring invoices and delivery chllans, there was no other document to prove that the purchases have actually been made by the assessee. There was no lorry receipt, transportation details, number of weighment, excise gate pass etc., no document was produced during the assessment proceedings. After examining the bank accounts and other evidences AO has held that alleged purchases from Bhavna Trading Co., Minaxi Enterprise and Arun Ind. Corporation was not genuine purchase and therefore the said amount of bogus purchases of Rs41,04,903/- was taxed in the hands of the assessee. It may not be out of place to mention that books of account u/s.145(3) of the Act was rejected and profit of the assessee was estimated at Rs.5 lakh. Both the additions were contested before the Ld. CIT(A).
5. After examining the book results of the past year, Ld. CIT(A) has held that there was a regular arrangement of providing accumulation sales bills. However, he was of the view that taking into account the business results 30% of the purchases cost would be reasonable amount to be confirmed to cover the profits of the assessee. Resultantly, to the extent to Rs.12,31,471/- was deleted. This is the reason that both the sides are now in appeal. As far as addition of estimated income of Rs.5 lakh is concerned same was deleted, however, Revenue is not in appeal.
6. Ld. AR Mr. Soparkar has contested that the assessee has maintained the quantitative details of purchases and sale of steel. He has pleaded that the auditor has given the quantitative details as per the Special Auditor which confirms the maintenance of quantitative record. It was enquired from the Bench that whether the stock register and quantity-wise purchases and sales are available on record, however, the answer is negative. Further, it has also been enquired that whether the weighment details, excise gate pas, ITA No.3238 & 3293/Ahd/2009 A.Y. 2006-07 Sh. Simit P Sheth v. ITO Wd-2(2), BRD Page 4 transportation details etc., are on record and again the answer was a negative. The Ld. AR has informed that almost in identical situation in the case of ACIT v. M/s Kulubi Steel in ITA No1568/Ahd/2008 order dated 16-12- 2010 vide para-8 has held as under:-
"8. From the above, it is evident that the assessee did not make any effort to controvert the finding recorded by the DDIT (Investigation) and it made no efforts to produce the seller parties on the other hand it claimed that it is not his responsibility to produce the seller. It is a settled law that onus is on the assessee to establish the genuineness of the purchase. The assessee has produced various evidence with regard to the receipt of the goods by it, it. Stock register, receipt of weigh-bride for weighment of goods purchased by the assessee, octroi receipt of the payment of octroi duty etc. After considering the entire material, we are of the opinion that the assessee did not purchase the goods from the parties mentioned in the sales bill. At the same time, it did purchase the goods from some other suppliers, may be without bill. Therefore, purchase rate as mentioned in the alleged sales bill cannot be accepted. Any person indulging in the practice of purchasing goods from the grey market and obtaining bogus bills of some other parties, would do so for getting some benefit. But what would be the magnitude of the benefit would depend upon facts of each case. In the case of Vijay Proteins, ITAT held that such benefit to be 25% and therefore sustained the disallowance for bogus purchase at 25%. In the case of Sunsteel (supra), the ITAT deemed it fit to sustain the disallowance for a lumpsum amount of Rs.50,000/-. However, we find that in the case of Shri Anubhai Shivlal (supra) the ITAT has considered both the decisions in the case of Vijay Proteins and Sunsteel (supra) and thereafter sustained the disallowance at 12.5%. Relevant findings of the ITAT in the case of Anubhai Shivalal reads are under:
3. At the time of hearing before us, it is submitted by the learned counsel that the addition sustained is excessive. In support of this contention he referred to the decision of the Tribunal in the case of ITO Vs. Sun Steel 92 TTJ (Ahd) 1126 wherein the Tribunal has sustained the addition of Rs.50,000/-on account of bogus purchases. However, we find that the facts in the above case were different. In the above case, the assessee has shown purchases of Rs.27,39,410/-, sale of Rs.28,17,207/- and GP at Rs.94,740/-. The Assessing Officer made the addition of Rs.27,39,407/- for bogus purchases. If the above sum is added to the GP, the GP works out Rs.28,34,1247/- which was more than the sale itself. The Tribunal held that6 it is impossible that the GP is more than the sale itself. The Tribunal also found that the assessee has maintained the quantitative details in respect of ITA No.3238 & 3293/Ahd/2009 A.Y. 2006-07 Sh. Simit P Sheth v. ITO Wd-2(2), BRD Page 5 materials purchased and sold. Considering peculiar facts of that case, the Tribunal arrived at the conclusion that it would be fair and reasonable to estimate the addition at Rs.50,000/- as against the addition of Rs.27,39,407/- made by the Assessing Officer.
However, the learned Commissioner of Income Tax (Appeals) considering the facts of the assessee's case, has sustained the addition at 12.5%. While doing so, he has also relied upon the decision of the Tribunal in the case of M/s. Vijay Proteins Ltd. 55 TTJ (Ahd) 76. In the case of M/s. Vijay Proteins Ltd., the Tribunal has sustained the addition of 25% of the bogus purchases. However, considering the facts of the assessee's case the CIT(A) restricted the disallowance to 12.5% as against 25% made in the case of M/s. Vijay Proteins Ltd. From these facts it is evident that the CIT(A) has sustained the addition at 12.5% of the non- genuine purchases considering the facts of the assessee's case. We, therefore, do not find any justification to interfere with the order of the CIT(A) in this regard. The same is sustained.' Likewise, in another appeal decided by ITAT Ahmedabad bench "D" in the case of Smt. Sajjandevi B Jain vs. ITO in ITA No.609/Ahd/2009 A.Y. 2005-06 order dated 13-01-2012. Again it was held that in respect of bogus purchases the addition is to be restricted to 12.5%, relevant para- 7.1 reproduced below:-
"7.1 Considering the facts and circumstances of the case and the findings of the ld. AO and following the ratio of the decision in the case of Vijay Proteins (supra) and in the case of M/s. Bholanath Ply Fab P. Ltd. -vs- ITO in ITA No.137/Ahd/2009 and M/s. Raj Exports -vs- ITO in ITA No.2801/Ahd/2008, relied on by the ld. A.R., we restrict the addition to 12.5% of the bogus purchase made by the assessee. Thus, 12.5% of Rs.12,86,373/- i.e. Rs.1,60,797/- is added to the income of the as instead of the addition of Rs.12,86,373/- added by the ld. AO and confirmed by the Ld. CIT(A). The ld. AO is hereby directed to make addition, as indicated above. Thus, this ground of the assessee is partly allowed."
7. Having heard the submissions of both sides, we have been informed that the malpractice of bogus purchase is mainly to save 10% sales tax etc. It has also been informed that in this industry about 2.5% is the profit margin. Therefore, respectfully following the decisions of the co-ordinate bench pronounced on identical circumstances, we hereby direct that the ITA No.3238 & 3293/Ahd/2009 A.Y. 2006-07 Sh. Simit P Sheth v. ITO Wd-2(2), BRD Page 6 disallowance is required to be sustained at 12.5% of the purchases from those parties. With these directions, we hereby decide. The grounds of the rival parties which are partly allowed.
8. In the result, assessee's appeal as well as Revenue's appeal are partly allowed.
इस आदे श कȧ घोषणा Ǒदनांकः 24/02/2012 को खुले Ûयायालय मɅ कȧ गई । This Order pronounced in Open Court on /0/2012.
Sd/- Sd/-
(ए.मोहन अलंकामोनी) (मुकुल कुमार ौावत)
(लेखा सदःय) (Ûयाियक सदःय)
(A. Mohan Alankamony) (Mukul Kumar Shawart)
(Accountant Member) (Judicial Member)
Ǒदनांकः- 24/02/2012 अहमदाबाद ।
DKP*
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, //True Copy// उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।