Income Tax Appellate Tribunal - Ahmedabad
Jayantilal Joitaram Patel, Ahmedabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
Before Shri D.K.Tyagi, Judicial Member and
Shri T.R. Meena, Accountant Member
ITA No. 878 & 879/Ahd/2012
Assessment Years :2005-06 & 2006-07
Shri Jayantilal Joitaram V/s. Asst. Commissioner of
Patel C/o. Ketan H. Incom e Tax, Circle-6,
Shah, Advocate 903, Ahm adabad.
Sapphire Complex,
C.G.Road, Navrangpura,
Ahm adabad.
P AN No. AFTPP5830R
(Appellant) .. (Respondent)
अपीलाथȸ कȧ ओर से Shri K.H.Shah
By Appellant
ू×यथȸ कȧ ओर से/By Respondent Shri T. Sankar, Sr. D.R.
सुनवाई कȧ तारȣख/Date of Hearing
11.09.2012
घोषणा कȧ तारȣख/Date of Pronouncement 26.10.2012
ORDER
PER : T.R.Meena, Accountant Member
These two appeals are filed by the Assessee in ITA Nos. 878 & 879/Ahd/2012, which have been emanated from the order of the learned CIT(A)-XI, Ahmedabad, dated 22-02-2012 for A.Ys. 2005-05 & 2006-07 respectively. These appeals were heard together and are being disposed of I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 2 by way of this common order for the sake of convenience. The effective grounds of appeals are as under:
Grounds of ITA No. 878/Ahd/2012 (A.Y. 05-06) "1. In not appreciating the fact as well as law that the proceedings under sec.147 is itself bad in law, void ab-initio, illegal and liable to be quashed.
1.1 In not appreciating the fact as well as law that the reopening cannot be made merely on the basis of information received from ADI/DDI Wing without any application of mind by the Assessing Officer, who has recorded the reasons, and as such, it is prayed that since there is no such own application of mind, the proceedings is bad in law and liable to be quashed.
2. In confirming the addition of Rs.64,86,985/- treating the purchases as bogus purchase.
2.1 In not appreciating the fact and/or law that the assessee has discharged the onus regarding purchase made by assessee, more particularly, the aforesaid purchases were supported by valid invoices and delivery challans as also the payment is made by account payee demand draft as same was purchased by issuing account payee cheque.
2.2 In not appreciating the fact that there is no evidence that whatever payment given by the assessee has come back to the assessee by way of cash from the so-called disputed purchase parties.
2.3 In not appreciating the facts and/or law and erred in merely relying upon the statement of the persons associated with the firms before Investigating Officer to conclude the addition based on alleged bogus purchases, and more particularly, the assessee has not been allowed to cross examine the so-called disputed parties.
I T A No s . 8 78 & 8 79 / A hd / 20 1 2
A. Y . 2 00 5- 06 & 2006-07 Page 3
2.4 In not appreciating the facts that even before ADI/DDI
Wing, the assessee has initially stated that the assessee has received the delivery of goods and payment has not been received back as cash from the disputed parties. Thereafter, no further evidence was brought on record by present Assessing Officer before invoking section 147 of the Act. 2.5 In not appreciating the fact and/or law that the assessee has already denied alleged bogus purchases and confirmed genuine purchase made during the course of proceeding under sec.131 of the Act on 05.02.2007 and 13.12.2010."
Grounds of ITA No. 878/Ahd/2012 (06-07) "1. In not appreciating the fact as well as law that the proceedings under sec.147 is itself bad in law, void ab-initio, illegal and liable to be quashed.
1.1 In not appreciating the fact as well as law that the reopening cannot be made merely on the basis of information received from ADI/DDI Wing without any application of mind by the Assessing Officer, who has recorded the reasons, and as such, it is prayed that since there is no such own application of mind, the proceedings is bad in law and liable to be quashed.
2. In confirming the addition of Rs.24,33,735/- treating the purchases as bogus purchase.
2.1 In not appreciating the fact and/or law that the assessee has discharged the onus regarding purchase made by assessee, more particularly, the aforesaid purchases were supported by valid invoices and delivery challans as also the payment is made by account payee demand draft as same was purchased by issuing account payee cheque.
2.2 In not appreciating the fact that there is no evidence that whatever payment given by the assessee has come back to the I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 4 assessee by way of cash from the so-called disputed purchase parties.
2.3 In not appreciating the facts and/or law and erred in merely relying upon the statement of the persons associated with the firms before Investigating Officer to conclude the addition based on alleged bogus purchases, and more particularly, the assessee has not been allowed to cross examine the so-called disputed parties.
2.4 In not appreciating the facts that even before ADI/DDI Wing, the assessee has initially stated that the assessee has received the delivery of goods and payment has not been received back as cash from the disputed parties. Thereafter, no further evidence was brought on record by present Assessing Officer before invoking section 147 of the Act. 2.5 In not appreciating the fact and/or law that the assessee has already denied alleged bogus purchases and confirmed genuine purchase made during the course of proceeding under sec.131 of the Act on 05.02.2007 and 13.12.2010."
2. The first ground of both appeals is against reopening the case u/s. 147 and remaining grounds of appeal are against addition on account of bogus purchase. The factual matrix of the case is that Investigation Wing of Department had carried out certain proceedings in respect of following persons:
1] Shri Kanitlal Maganlal Sharma
Prop. Minaxi Enterprises/ Baroda.
2] Amratbhai Prajapati
Prop. Bhagyodaya Enterprises/Bhavana Trading Co/Baroda 3] Shri Jayantilal M. Sharma Prop. M/s. Arun Industrial corporation/Baroda.
I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 5 2.1 During the course of such proceedings it is noticed that the above three
persons have admitted under oath that on 08/09/2006 have admitted that they have issued bogus purchase bills to various persons in lieu of commission received. They further stated the above three persons have issued bogus bills with the following names.
1. Minaxi Enterprises,
2. Bhagyodaya Enterprises
3. Bhavna Trading Co.
4. Arun Industrial Corporation They further confirmed that the above concerns are mere paper entities and not done any real business of sending material. They further stated and confirmed they have given such bogus purchase bills to one Shri Jayantilal Joitaram Patel Prop. M/s. Pragati Tool Room, Ahmadabad the assessee. It is also found by the investigation wing that the modus operandi of the transaction is explained as under:
1. Issuing bogus bills/fake invoices.
2. Obtaining account payee cheques.
3. Depositing in the bank account.
4. Withdrawing the cash.
5. Returning back cash after adjustment of commission for accommodating the above bogus purchase transactions.
2.2. The investigation wing has already carried out open enquiries and the assessee was summoned by deputy director of Income Tax(Inv.) - Unit 1(1), I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 6 Ahmadabad on 05/02/2007 and statement under oath was recorded from Shri Jayantilal Joitaral Patel and books of Accounts and other documents were duly impounded by passing a n order u/s.131(3) of I.T. Act.
2.3 On the basis of Information available and gathered and statement recorded and evidences found. It is seen that the assessee has shown purchases from the above persons for both assessment years as under:
For A.Y. 05-06 Sr. No. Name F.Y. Amount 1 Minaxi Enterprises 2004-05 Rs.22,07,754/-
2 Arun Industrial Corporation 2004-05 Rs.16,98,632/- 3 Bhavna Trading & Co. 2004-05 Rs.25,80,589/-
TOTAL Rs.64,86,975/-
For A.Y.06-07
Sr. No. Name F.Y. Amount
1 Minaxi Enterprises 2005-06 Rs.5,25,355/-
2 Arun Industrial Corporation 2005-06 Rs.13,97,100/-
3 Bhavna Trading & Co. 2005-06 Rs.5,11,280/-
TOTAL Rs.24,33,735/-
2.4 Thus the assessee has claimed purchases of Rs.64,86,975/- for A.Y.
05-06 and Rs. 24,33,735/- For A.Y. 06-07, which are not true and there by the claim of expenses is incorrect. Thus the income chargeable to tax has escaped assessment. Accordingly a notice u/s 148 was issued on 18/11/2009 enclosing eh reasons for reopening of assessment for the assessment year 2005-06 & 06-07.
2.5 The appellant's reply vide letter dated 23.12.2009 against the notice u/s. 148 and reasons for reopening for both years. The notice u/s.143(2) and I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 7 142(1) were issued from time-to-time and additions of Rs. 64,86,975/- for A.Y. 05-06 and Rs.24,33,735/- in 06-07 were proposed to add by the A.O. vide letter dated 27.08.2010 in both the years. The appellant filed objection vide letter dated 03.12.2010 and various reasons for not making addition was given before the A.O. After considering the assessee's reply and case laws on 147 and considering the objection, contention, submission, explanation, details and information emerged with statement recorded u/s.131, he made addition of Rs.64,86,975/- on account of bogus purchase in A.Y. 05-06 and Rs.24,33,735/- in A.Y. 06-07.
3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had dismissed the appeal against reopening in paragraph nos.2.2 and confirmed the addition by giving detailed reasonings from page no.1 to 26 in both assessment years. The operative portions of the orders are as under:
CIT(A)'s findings for reopening "2.2 I have carefully considered the submissions made by the appellant. I have also gone through the case laws relied upon by the appellant. It is seen that return for the A.Y. 2005-06 was processed us.143(1) and the assessment was not made us.143(3) of I.T. Act.
Secondly, notice u/s.148 was issued by the A.O. on 18.11.2009. This way, notice u/s.148 was issued within four years from the end of relevant A.Y. This way, provisions of proviso to section 147 is not attracted in this case. It is an established proposition of law that for issuing notice u/s.148 within four years from the end of relevant Asst.Year, the A.O. enjoys vast powers. It is held by Hon'ble Gujarat High Court in the case of Prafull Chunnilal Patel V/s. MJK Makwana I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 8 reported at 236 ITR 822 that to make assessment or re-assessment within four years from the end of relevant A.Y. would be attracted even in the cases where there is complete disclosure of facts, based on which correct assessment can be made. Thus, Hon'ble Gujarat high Court has held that within four years from the end of relevant A.Y. the A.O. has got wide powers to reopen the assessment. In the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. v/s. CIT reported at 291 ITR 500 (S.C.), Hon'ble Supreme Court has held that if the A.O. for whatever reasons, has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment, where the case is not covered by proviso to section 147. Since this case is not covered by proviso to section 147, accordingly the ratio of decision of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) will be applicable in the case of appellant. In addition to this, I noticed that the A.O. had taken due care to dispose off assessee's objections concerning the reopening of assessment, vide his letter dtd. 22-12-2010. The reopening of the assessment can be further justified in view of the fact that the A.O. was having information from the investigation wing indicating that appellant had made bogus purchases. In view of the above facts, I am inclined to agree with the contentions of the ld. A.O. Accordingly, I hold that notice u/s. 148 dtd. 18-11-2009 was issued validly. These ground of appeals are dismissed."
CIT(A)'s findings for confirmation of addition "3.5 I have carefully considered rival submissions. It is seen that concerns namely, M/s. Minaxi Enterprise, Arun Industrial Corporation and Bhavna Trading & Co. were generating following documents to cover the fact of bogus purchases.
1. Issuing bogus bills/fake invoices
2. Obtaining account payee cheques
3. Depositing in the bank account I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 9
4. Withdrawing the cash
5. Returning back cash after adjustment of commission for accommodating the above bogus purchase transactions. 3.6 This way, these concerns were generating above mentioned evidences to cover up the facts of bogus purchases and the payments were also received through banking channels. The appellant during the assessment proceedings as well as appellate proceedings kept on repeating the fact of payments made through banking channels. In my considered view, payments made through banking channels are not disputed at all. The real dispute is about actual delivery of goods, its entry into the original books like stock register, its issuance and use for the purpose of business. The appellant during the assessment proceedings as well as appellate proceedings had miserably failed to file these basic documentary evidences. The appellant's contention that in the business of job work, he is not required to maintain stock register does not hold good. In the absence of cogent documentary evidences, I am inclined to agree with the contentions of the ld. A.O. treating these purchases as bogus. It is also a fact that appellant had failed to produce these parties during the assessment proceedings in spite of specific opportunities given to it. On page 12 of the submissions, appellant mentioned that A.O. was requested to summon these parties for cross examination. When specific inquiry is made about this submission during the appellate proceedings, appellant has submitted that request for summoning these parties were made orally and written request was not made. This way, the submissions made by the appellant are not found to be very reliable also. In view of the above facts, I am inclined to agree with the addition made by the A.O. against bogus purchases. The addition of Rs.64,86,975/- made by the A.O. against bogus purchases is confirmed. These grounds of appeals are dismissed."
I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 10
Similar findings were given for A.Y. 06-07 and addition of Rs.24,33,735/- had been confirmed.
4. Now the assessee carried the matter before us. Ld. Counsel for the appellant filed two paper books, which includes copy of computation income, copy of gross profit working in the assessment years 03-04 to 06-07, copy of 'Note' in reference to nature of business carried out, copy of submission dated 20.12.2010 filed before the A.O., copy of submission dated 15.12.2010 filed before the A.O., copy of submission dated 23.12.2009 filed before the A.O., copy of submission dated 26.06.2010 filed before the A.O., copy of submission dated 03.12.2010 filed before the A.O., copy of submission dated 20.12.2010 filed before the A.O., copy of statement recorded of the assessee, proprietor dated 13.12.2010 (English), copy of statement recorded of the assessee, proprietor dated 05.02.2007 (English), copy of statement recorded of the assessee, proprietor dated 05.02.2007 (Gujarati) & copy of written submission made before C.I.T.(Appeals) dated 06.01.2012 and second paper book is of legal propositions on Section 147 & 148 and reference to bogus purchase. The following case laws referred by the appellant:
i. Chhugamal Rajpal (SC) - 79 ITR 603 ii. Ahmadabad Bench 'D' in the case of Golden Theatre vs. ITO - ITA
No.1351 and 1352 wherein as per Para 9, SC in 79 ITR 603 iii. Sheo Narain Jaiswal (Patna) - 176 ITR 352 iv. C.I.T. vs. T.R.Rajakumari - 96 ITR 78 (Mad) v. M.B. Traders - 132 TTJ 490 (Nagpur) I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 11 vi. CIT vs. Aslamulla Khan - 321 ITR 150 vii. CIT vs. Sfil Stock Broking - 325 ITR 285 (Delhi) viii. Jt. CIT vs. George Williamson (Gau) - 258 ITR 126 ix. CIT vs. M.K. Brothers (Guj.) 163 ITR 249 x. Balaji Textile Industries (P) Ltd. Vs. I.T.O. - (1994) 49 ITD 177 (Bom) xi. 78 Taxman 175 - ITO vs. Aggrawal Steel Traders xii. ITO vs. Permanand - 107 TTJ 395 (Jodhpur) xiii. 103 ITR 437 (SC) in the case of Lakhmani Mewaldas xiv. 303 ITR 95 (Delhi) Pradipkumar Gupta xv. Shipra Srivastava - 319 ITR 221 (Delhi) xvi. P.S. Veerappa (Mad) 127 ITR 247 xvii. C.I.T. vs. Kashiram Textiles Mills (P) Ltd. - (2006) 284 ITR 61 xviii. A.C.I.T. vs. Adinath Industries - (2001) 252 ITR 476 (Guj) xvix. C.I.T. vs. Hi Lux Automotive (P) Ltd. - (2009) 23 DTR 385 (Del) xx. G.G. Diamond iNternational vs. D.C.I.T. - (2007) 11 SOT 33 xxi. YFC Projects (P) Ltd. vs. D.C.I.T. - (2010) 37 SOT 130 (Delhi) xxii. I.T.O. vs. Kanchwala Gems - (2009) 33 SOT 27 (JP) (URO) xxiii. Bansal Rice Mills vs. I.T.O. - (2001) 78 ITD 326 (Chd)(TM) xxiv. J.R. Solvent Industries (P) Ltd. vs. A.C.I.T. - (1999) 63 TTJ 165 xxv. I.T.O. vs. Surana Traders - (2005) 92 ITD 212 (Mum) xxvi. I.T.O. vs. Aggarwal Steel Traders - 78 Taxman 175 (Chd) xxvii. D.C.I.T. vs. Narendra Lunavat - 90 TTJ 468 (Jaipur) xxviii. I.T.O. vs. pukhraj N. Jain - (2006) 99 TTJ 364 (Mum) I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 12 xxix. Mahesh Gulabrai Joshi vs. C.I.T. - (2005) 95 ITD 300 (Mum) xxx. Shri Rama Multi Tech Ltd. vs. A.C.I.T. - (2005) 92 TTJ 568 (Ahd) xxxi. Jagdamba Trading Company vs. I.T.O. - (2007) 107 TTJ 398 (Jd) Ld. Counsel for the appellant claimed that reopening of the case merely on presumption based on the contents of statements of third parties without bringing any other evidence on record. The facts of the case relied upon by the A.O. are different from the facts of assessee's case. From the side of the Revenue, ld. D.R. vehemently relied upon the orders of the CIT(A) and A.O. and requested to confirm the addition.
5. We have perused the orders of the authorities below and gone through the case laws cited by both the parties. It is seen that the return of income was filed on 28.10.2005 and process u/s. 143(1) on 01.10.2006 for A.Y. 05-
06. Similarly the return of income for A.Y. 06-07 was filed on 20.12.2006 and process u/s.143(1) on 07.05.2007. The assessee's cases were not scrutinized u/s.143(3) of the I.T. Act in both the years. The Investigation wing had found that four concerns, namely, Minaxi Enterprises, Bhagyodaya Enterprises, Bhavna Trading Co. & Arun Industrial Corporation issued bogus bills. The appellant had made purchase of Rs.64,86,975/- in A.Y. 05-06 and Rs. 24,33,735/- in A.Y. 06-07. The ld. A.O. had verified the record and satisfied himself then recorded reasons for reopening u/s.147 of the IT Act from the end of relevant assessment year within four years on 18.11.2009 in both the years. The ld. A.O. had also disposed of objections raised by the appellant against the reasons recorded u/s.147 on 22.12.2010.
I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 13
The case laws mentioned by the appellant on 147 are either notice issued after four years or in case of scrutiny assessment made u/s.143(3). The A.O. has ample powers u/s.147 when case is not scrutinized u/s.143(3) and notice u/s.148 is issued u/s.148 within four years. Even in case of re-assessment after scrutiny assessment within four years and full disclosure of facts by the assessee he has vast power. Therefore, the reopening made by the A.O. in both the years is justified and accordingly, the actions of the A.O. and CIT(A) are confirmed. The appeals on this ground of the assessee are dismissed.
6. The A.O. made addition of full amount of bogus purchase but it had been admitted by Shri Kantilal M. Sharma, Amrutbhai Prajapati & Shri Jayantilal M. Sharma that they had issued bogus purchase to various persons in lieu of commission received in the name of four concerned as mentioned above. They further confirmed the above concern are mere paper entries and not done any real business of sending materials to the appellant. The modus operandi as discussed above was that issuing bogus bill, obtaining account payee cheque, withdrawing cash and returned cash back to the concern parties. The A.O. made addition of Rs. 64,86,975/- in A.Y. 05-06 as bogus and incorrect purchase which has been confirmed by the CIT(A). The assessee has shown net profit in A.Y. 05-06, 7.5% on total sale of Rs.1.45 crores. If the full value of bogus purchase is added in the income of the assessee, the net profit would be 52% which is impossible in any line of business. Therefore, it is reasonable in the interest of justice to apply net I T A No s . 8 78 & 8 79 / A hd / 20 1 2 A. Y . 2 00 5- 06 & 2006-07 Page 14 profit rate on bogus purchase @ 12.5% for both the years. Therefore, the A.O. is directed to re-calculate the income, as per above findings.
7. In the result, the Assessee's appeals in both assessment years are partly allowed.
This Order pronounced in open Court on 26.10.2012 Sd/- Sd/-
(D.K.Tyagi) (T.R. Meena)
Judicial Member Accountant Member
True Copy
S.K.Sinha
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, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
Strengthen preparation & delivery of orders in the ITAT
1) Date of taking dictation 19 & 22.10.2012
2) Direct dictation by Member straight on XXX computer/laptop/dragon dictate
3) Date of typing & draft order place before Member 22.10.2012
4) Date of correction ,, ,,
5) Date of further correction XXX
6) Date of initial sign by Members 26.10.2012
7) Order uploaded on ,, ,,
8) Original dictation pad has been enclosed in this file Yes
9) Final order and 2nd copy send to Bench Clerk on 26.10.2012