Income Tax Appellate Tribunal - Ahmedabad
Acit.,Circle-4,, Surat vs Sunday Exports Ltd.,, Surat on 25 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH AHMEDABAD
BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER
AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER.
ITA. No. 764/Ahd/2013
(Assessment Year:2003-04)
A.C.I.T.,
Circle-4, Room No.223,
Aayakar Bhavan, Majuragate, Surat Appellant
Vs.
M/s. Sunday Exports Ltd.,
"Sunday House" A.K. Road,
Varachha, Surat Respondent
PAN: AADCS1501J
राज व क ओर से/By Revenue : Shri Prasoon Kabra, Sr. D.R.
आवेदक क ओर से/By Assessee : Shri M. K. Patel, A.R.
सन
ु वाई क तार ख/Date of Hearing : 25.10.2016
घोषणा क तार ख/Date of
Pronouncement : 25.11.2016
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
This Revenue's appeal for assessment year 2003-04 arises against the CIT(A)-II, Surat's order dated 24.12.2012, in appeal no. CAS-
ITA No. 764/Ahd/2013 (ACIT vs. M/s. Sunday Exports Ltd.)2003-04 -2- II/49/TRFD/12-13, in proceedings under section 143(3) r.w.s. 254 of the Income Tax Act, 1961; in short "the Act".
2. The Revenue's sole substantive ground pleads that the CIT(A) has erred in restricting bogus purchases addition of Rs.3,02,53,360/- to Rs.37,81,670/- as made by the Assessing Officer in assessment order dated 24.03.2006. Its main argument is that the same has violated this tribunal's remand directions in ITA No.2089/Ahd/2007 decided on 19.07.2007 in first round of proceedings.
3. We come to the relevant facts now. The Assessing Officer treated the above entire sum of Rs.3,02,53,360/- incurred on grey cloth purchases mainly on the ground that although assessee had claimed that the said purchases were executed through agents only, they were never produced in the course of assessment proceedings. Its payees parties were not found on the given addresses. All notices issued u/s.133(6) of the Act stood returned. And that there was no other evidence in order to support the impugned purchase claims. All this made the Assessing Officer to treat the entire purchases sum as investments made out of undisclosed sources of income. This resulted in the impugned disallowance/addition.
4. We notice from the case file that the CIT(A) also upheld the above addition in his lower appellate order dated 28.02.2007. This assessee filed ITA No.2089/Ahd/2007 before this tribunal. A co-ordinate bench in its order dated 19.07.2007 admitted assessee's additional evidence and directed the CIT(A) to readjudicate the issue afresh. The CIT(A) has thereafter passed the order under challenge restricting the above purchases disallowance as under:
"4. I have carefully considered the facts of the case, remand report of Assessing Officer and the submissions of appellant. From the facts, it is apparently ITA No. 764/Ahd/2013 (ACIT vs. M/s. Sunday Exports Ltd.) 2003-04 -3- clear that the assessee has not been able to prove the genuineness of purchases. He has not even tried to bring any new evidence or details to strengthen his case. Repeatedly he has been filling the same set of submissions during appellate proceedings, remand proceedings and even during proceedings before ITAT. Even during remand proceedings, when AO requested him to furnish the copy of bank statement to verify the genuineness of payments made by him, no compliance was made by appellant. All these actions of appellant shows that he is not serious about his efforts to prove the genuineness of purchases. The copies of affidavits filed by appellant are also identical in each and every case with same wordings except the amounts and names of seller parties. Only Para 4 of the affidavits is relevant and in that para also it is not clearly mentioned that who has sold the goods to whom and the payments were made from/ to whom. At the cost of repetition, para 4 of the affidavits in one case is reproduced as under.
(i) During the financial year 2002-03, we have received various orders from M/s. Suday Exports Ltd., 9, Supreme Chambers, Mulchand Market, Ring Road, Surat for supply of grey art silk cloth and accordingly we had arranged and supplied goods worth Rs. 24,44,550/- to M/s. Reshma Textiles, Natraj Industrial Estate, Dhastipura, Surat.
Further, the assessee has not been able to produce any of the creditors or even to the brokers through whom purchases were executed. The notices sent by AO remained unserved or if served the properties denied to have made any sales to the appellant. The onus was on assessee to prove that purchases are genuine which he failed to discharge. However, it is apparent form the record that the AO has made an investigation and examined all the relevant facts and has rightly come to the conclusion that the above creditors are not genuine. The AO has also rightly come to a conclusion that the books 'of account of the appellant are not correct and are incomplete in the sense that the same do not reflect the actual state of affairs of the appellant. It is evident from the above that the AO has been able to prove that the purchases made by appellant from the aforesaid parties are not genuine and he has merely obtained bogus purchase bills with inflated cost. Considering all these facts, it is held that the said purchases of Rs. 3,02,53,360/- are bogus purchases. But, in my opinion, it would not be fair just to add the entire amount to the income of appellant. Such cases of bogus purchases have been dealt with by Hon'ble Jurisdictional ITAT in many cases. In the case of Vijay Proteins Ltd., reported in 58ITD 428, 25% of such purchases were disallowed and added to the income of assessee. However, following the ratio of the decision in the case of Vijay Proteins (supra), Hon'ble ITAT has decided the issue in many other cases also but the percentage has been restricted to 12.5%. Some of the cases are as under.
i. M/s. pholanath Poly Fab P. Ltd. -vs- ITO in ITA No. 137/Ahd/2009 ii. M/s. Raj Exports -vs- ACIT in ITA No. 1827/Ahd/2005 iii. M/s. Sanket Steel Traders -vs- ITO in ITA No. 2801/Ahd/2008 ITA No. 764/Ahd/2013 (ACIT vs. M/s. Sunday Exports Ltd.) 2003-04 -4- iv. Smt, Sajjandevi B. Jain -vs- ITO, OSD-1 in ITA No. 609/Ahd/2009 Thus, in the case of appellant also, I hereby apply the ratio given by Hon'ble ITAT in the decisions of aforesaid cases and restrict the addition to 12.5% of the bogus purchases made by appellant. Thus, 12.5% of Rs. 3,02,53,360/-which comes to Rs. 37,81,670/- is added to the income of appellant in place of addition of Rs. 3,02,53,360/- made by AO. The AO is hereby directed to make the addition of Rs. 37,81,670/-.
4.1 During the appellate proceedings, appellant relied on the decisions of CIT(A)-V, Surat in the cases of M/s. Hariom Silk Mills and Smt. Geetaben R. Gandhi, which are group cases of appellant and based on the similar facts. Taking into consideration the legal discipline, it is considered fair to follow the decision already given by other CIT(A) on the same facts. But, I have deviated from that procedure for the reason that I have many decisions available with me for my guidance on the similar facts delivered by Hon'ble Jurisdictional ITAT. Further, in place of following the decision of colleague CIT(A), it is always preferable to follow the decision of superior authority -which is binding also on lower authorities. Therefore, following the decision of Hon'ble ITAT, the issue has been decided by me."
5. Heard both sides reiterating their respective pleadings. The Revenue's main argument is that the CIT(A)'s above extracted findings traverse beyond the above remand directions. It also places before us this tribunal's order on record. We find that the above Revenue's plea is entirely misconceived since the said co-ordinate bench merely admitted assessee's additional evidence to direct the CIT(A) for afresh adjudication of the issue. The lower appellate authority has duly considered the same in its order to agree with the Assessing Officer's findings in principle that the assessee has not been able to prove genuineness of its grey cloth purchases. It thereafter is of the opinion that it is not the entire purchases but only the gross profit element therein has to be added @12.5% of the amount in question. Ld. Departmental Representative fails to dispute the fact that assessee's sales/exports of the grey cloth already stand accepted. Nor does it file before us any material to conclude that the above percentage of the addition is in any way unreasonable. We thus find no reason to interfere with the lower appellate order restricting the impugned bogus purchases addition in ITA No. 764/Ahd/2013 (ACIT vs. M/s. Sunday Exports Ltd.) 2003-04 -5- peculiar facts of the case. It is made clear that the above percentage shall not be treated as a precedent in any preceding or succeeding assessment year in assessee's cases.
6. This Revenue's appeal is dismissed.
[Pronounced in the open Court on this the 25th day of November, 2016.] Sd/- Sd/-
(AMARJIT SINGH) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 25/11/2016
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आयु!त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।