M/s. Shafeeq Shameel and Co.,, CHENNAI v. ACIT, CHENNAI

ITA 1055/CHNY/2011 | 2008-2009
Pronouncement Date: 18-11-2011 | Result: Allowed

Appeal Details

RSA Number 105521714 RSA 2011
Assessee PAN AAAFS1863R
Bench Chennai
Appeal Number ITA 1055/CHNY/2011
Duration Of Justice 5 month(s) 9 day(s)
Appellant M/s. Shafeeq Shameel and Co.,, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 18-11-2011
Date Of Final Hearing 15-11-2011
Next Hearing Date 15-11-2011
Assessment Year 2008-2009
Appeal Filed On 08-06-2011
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI D BENCH CHENNAI. BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO. 1055/MDS/2011 ASSESSMENT YEAR: 2008-09 M/S. SHAFEEQ SHAMEEL AND CO. NO. 55 E V K SAMPATH ROAD CHENNAI 7. [PAN: AAAFS1863R] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX BUSINESS CIRCLE VII CHENNAI - 600 034. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D. ANAND ADVOCATE REVENUE BY : SHRI ANIRUDH RAI CIT- DR DATE OF HEARING : 1 5 . 1 1 .2011 DATE OF PRONOUNCEMENT : 18.11.2011 ORDER PER N.S. SAINI ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A) IX CHENNAI DATED 29.04.2011 RAISING FOLLOWI NG GROUNDS OF APPEAL: 1. THE APPELLANT IS A PARTNERSHIP FIRM AND IS ENG AGED IN THE BUSINESS OF LEATHER EXPORTS. 2. THE APPELLANT'S CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED MAKING CERTAIN ADDITIONS AND DISALLOWANCE S. AS AGAINST THIS THE APPELLANT HAD PREFERRED AN APPEAL BEFORE T HE LEARNED CIT (A)- IX. THE LEARNED CIT (A) ALLOWED ALL THE GROUNDS BUT RESTRICTED THE DISALLOWANCE ON ACCOUNT OF SUNDRY CREDITORS FOR PUR CHASES TO 10% OF PURCHASES. 3. THE LEARNED CIT (A) FAILED TO APPRECIATE THE FA CT THAT THE APPELLANT HAD DULY PROVIDED ALL THE DETAILS FOR PURCHASE AND SALES EVEN THE COMPLETE QUANTITATIVE DETAILS OF THE PURCHASES SAL ES OPENING AND CLOSING STOCK WERE ALSO FURNISHED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 1 11 1055 055055 055/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 2 4. THE LEARNED CIT (A) FAILED TO JUSTIFY ADHOC DIS ALLOWANCE OF 10% OF TOTAL PURCHASES WHEN THE GENUINENESS OF THE TRANSA CTION WERE NOT DISPUTED. 5. THE LEARNED CIT (A) FAILED TO APPRECIATE THE FA CT THAT THESE RECORDS WERE DULY VERIFIED BY OTHER GOVERNMENT AGENCIES LIK E SALES TAX ETC. 6. THE LEARNED CIT (A) FAILED TO JUSTIFY THIS ADHO C DISALLOWANCE WHEN THE BOOKS OF ACCOUNTS WERE AVAILABLE AND NOT REJECT ED. THESE BOOKS WERE ALSO SUBJECTED TO AUDIT. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED DUR ING THE COURSE OF HEARING IT IS HEREBY SINCERELY PRAYED THAT THE ADH OC DISALLOWANCE MAY KINDLY BE DELETED AND THUS RENDER JUSTICE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER MADE ADDITION OF ` .3 13 92 083/- BEING THE DIFFERENCE OF THE TOTAL SU NDRY CREDITORS OF ` .4 69 65 277/- AND TOTAL PURCHASES MADE DURING THE MONTH OF MARCH ` .1 05 73 194/- AS ON 31.03.2008 BY TREATING THE SAM E AS BOGUS SUNDRY CREDITORS BY OBSERVING AS UNDER: I. THE PEOPLE WHO ARE COMING TO THE SHANDIES ARE VERY POOR AND RUNNING THEIR LIFE ON DAY TODAY BASIS. THEY CAN'T W AIT FOR THE PAYMENT FOR THE MONTHS TOGETHER. II. WITHOUT PURCHASE PARTY ADDRESS IT IS VERY DIFFI CULT TO MAKE THE PAYMENTS. III. WHEN WE SEE THE LEDGER THERE IS NO PURCHASE F ROM SOME OF THE PARTIES DURING THE YEAR ONLY PAYMENT IS MADE THROUG HOUT THE YEAR FOR THE OUTSTANDING BALANCE AS ON 31.03.2007. IV. ALL THE PAYMENTS ARE MADE BY CASH ONLY. THEREFO RE GENUINENESS OF THE PURCHASES CANNOT BE VERIFIABLE. V. SINCE THE ADDRESS IS NOT AVAILABLE WE COULD NOT VERIFY NUMBER OF PIECES PURCHASED AND RATE PER PIECE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 1 11 1055 055055 055/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 3 FOR THE REASONS STATED ABOVE EVEN THOUGH THE PURCH ASES MADE THROUGH THE LOCAL SHANDIES THE SUNDRY CREDITORS APPEAR IN T HE BOOKS OF THE ASSESSEE BOGUS. THE ASSESSEE HAS STATED THAT ALL TH E SUNDRY CREDITORS ARE RELATED TO PURCHASES MADE DURING MARCH 2008. AS PER THE DETAILS PROVIDED BY THE ASSESSEE TOTAL PURCHASES MADE DURI NG THE MONTH OF MARCH IS ` .1 05 73 194. AT THE SAME TIME TOTAL QUANTUM OF SUN DRY CREDITORS (RELATED TO FOUR PURCHASING CENTER AT DEL HI AHEMADNAGAR MIRAJ SHOLAPUR) IS ` . 4 19 65 277/-. I HAVE ACCEPTED THE THEORY OF THE ASSESSEE THAT ALL THE SUNDRY CREDITORS ARE RELATED TO PURCHASES MADE DURING MARCH 2008. EVEN THOUGH WE WILL CONSIDER THE ASSESSEES CONTENTION STILL OUTSTANDING SUNDRY CREDITORS BALA NCE IS THERE. THEREFORE THE DIFFERENCE OF ` .3 13 92 083/- (TOTAL SUNDRY CREDITORS ` . 4 19 65 277 - TOTAL PURCHASES MADE DURING THE MONTH OF MARCH IS ` .1 05 73 194/-) IS TREATED AS BOGUS SUNDRY CREDITOR S AND ADDED AS INCOME. 3. ON APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 10% O F THE TOTAL PURCHASES AND THEREBY CONFIRMED THE DISALLOWANCE OF ` .65 17 186/-. WHILE DOING SO THE LD. CIT(A) HAS HELD AS UNDER: 8.8 I HAVE GONE THROUGH THE AO AS WELL AS THE SUB MISSIONS GIVEN BY THE AR OF THE APPELLANT AND ALSO THE REMAND REPORT GIVEN BY THE AO DATED 26.4.2011. THE AO IS OF THE OPINION THAT THE SUNDRY CREDITORS RELATED TO 4 PURCHASING CENTERS DELHI AHMADNAGAR MIRAJ AND SHOLAPUR COMES TO ` . 4 19 65 277/- AND THE PURCHASES MADE IN MARCH IN THE 4 CENTRES COMES TO ` . 1 05 73 194/- AND THE BALANCE ` . 3 13 92 083/- ( ` .4 19 65 277 ` . 1 05 73 194/-) STATING THE REASON THAT AS THE PAYMENTS WERE MADE IN CASH ONLY AND THE PURC HASES WERE NOT GIVEN FOR VERIFICATION AND THE REASONS ARE AS. UNDE R :- I. THE PEOPLE WHO ARE COMING TO THE SHANDIES ARE V ERY POOR AND RUNNING THEIR LIFE ON DAY TODAY BASIS. THEY CAN'T W AIT FOR THE PAYMENT FOR THE MONTHS TOGETHER. II. WITHOUT PURCHASE PARTY ADDRESS IT IS VERY DIFFI CULT TO MAKE THE PAYMENTS. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 1 11 1055 055055 055/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 4 III. WHEN WE SEE THE LEDGER THERE IS NO PURCHASE F ROM SOME OF THE PARTIES DURING THE YEAR ONLY PAYMENT IS MADE THROUG HOUT THE YEAR FOR THE OUTSTANDING BALANCE AS ON 31.03.2007. IV. ALL THE PAYMENTS ARE MADE BY CASH ONLY. THEREFO RE GENUINENESS OF THE PURCHASES CANNOT BE VERIFIABLE. V. SINCE THE ADDRESS IS NOT AVAILABLE WE COULD NOT VERIFY NUMBER OF PIECES PURCHASED AND RATE PER PIECE. 8.9 DURING THE COURSE OF APPELLATE HEARING THE AR OF THE APPELLANT REPRESENTS THAT IT IS TRUE THAT ALL THE P URCHASES ARE MADE THROUGH THE ABOVE 4 CENTERS IN CASH ONLY THROUGH TH E LOCAL SHANDIES WHO ARE DOING TRADE IN THAT SHANDIES REGUL ARLY BUT NOT HAVING PERMANENT ESTABLISHMENT. THE AO HAS CALLED F OR CERTAIN DETAILS AND THE APPELLANT HAS PROVIDED THEM TO A GR EAT EXTENT BUT SINCE THE VERY NATURE OF THIS TRADE WHICH IS UNORGANIZED FURNISHING COMPLETE AND PRECISE DETAILS IS NOT POSSIBLE. I HAVE ALSO NOTED THAT THE AO HAS NOT OBJECTED TO THE QUANTITATIVE DETAILS FUR NISHED BY THE APPELLANT. IT IS A WELL SETTLED LAW THAT WITHOUT PU RCHASES THERE CANNOT BE ANY SALES AND IT IS SEEN HERE THAT THE AO HAS ACCEPTED THE SALES IN TOTAL BOTH IN VALUE AND IN QUANTITY. I T IS ALSO SEEN THAT THE APPELLANT ENJOYS BANK FACILITY AND THAT THEY AR E SUBJECT TO BANK STOCK AUDITS WHEREIN THESE DETAILS ARE ALSO PROVID ED THE APPELLANT IS ALSO SUBJECT TO SALES TAX AND AGAIN THESE DETAIL S ARE AVAILABLE THERE. HENCE RULING THAT ALL THE PURCHASES BEFORE M ARCH ARE BOGUS IS NOT JUSTIFIED. 8.10 ON PERUSAL OF THE ASSESSMENT ORDER IT IS UNDE RSTANDABLE THAT THE AO IS NOT SATISFIED WITH THE GENUINENESS OF THE PUR CHASES IN THE FOUR PURCHASING CENTERS VIZ. DELHI AHMADNAGAR MIRAJ AN D SHOLAPUR AS THE PURCHASES ARE ALL MADE IN CASH ONLY THROUGH LOCAL S HANDIES AS THE PURCHASES WERE MADE ONLY IN CASH I.E. THROUGH BOUGH T NOTES THE POSSIBILITY OF INFLATION CANNOT BE RULED OUT. HOWEV ER THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 3 30 92 083/- IS O N A HIGHER SIDE AND TO MY OPINION THE ADDITION IS RESTRICTED TO 10% OF THE TOTAL PURCHASES MADE IN THE FOUR PURCHASING CENTERS WILL MEET THE E ND OF JUSTICE WHICH COMES TO ` . 65 17 186/-. THE APPELLANT GETS RELIEF OF ` . 2 65 74 897/- I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 1 11 1055 055055 055/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 5 AND ` . 65 17 186/- IS CONFIRMED. ACCORDINGLY THIS GROUN D OF APPEAL IS PARTLY ALLOWED. 4. THE LD. AR OF THE ASSESSEE ARGUED BEFORE US THA T HE ASSESSING OFFICER HAS MADE THE ADDITION ON SUSPICION AND SURM ISES AND THE LD. CIT(A) ALTHOUGH ARRIVING AT THE CONCLUSION THAT THE PURCHA SES SHOWN BY THE ASSESSEE WAS GENUINE BUT MADE ADDITION ON AD-HOC B ASIS AT 10% OF THE TOTAL PURCHASE OF FOUR CENTRES WITHOUT BRINGING ANY MATERIAL ON RECORD SUCH AS THE GROSS PROFIT SHOWN IN THE PRESENT YEAR WAS LOWER THAN THAT SHOWN BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR OR T HAT THE COST OF GOODS SOLD TO THE TOTAL TURNOVER OF THE ASSESSEE AS COMPA RED TO THE COST OF GOODS SOLD TO THE TOTAL TURNOVER OF THE ASSESSEE IN THE C URRENT YEAR WAS HIGHER THAN THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE LD. AR ALSO SUBMITTED THAT IT WILL BE SEEN FROM THE ASSESSMENT ORDER THAT THE VALUATION OF THE CLOSING STOCK WITH THE QUANTITATIVE DETAILS APP EARING IN THE BOOKS OF ACCOUNT WAS FOUND CORRECT. THE NUMBER OF SKINS AND HIDES PURCHASED FROM THE MARKET HAD BEEN PROPERLY ACCOUNTED AND THESE NU MBERS TALLY TO THE LAST DIGIT. IN SUCH A SITUATION THE ASSESSEE HAS SUBMIT TED BEFORE THE ASSESSING OFFICER THAT THE PURCHASES WORTH ` .3 13 92 083/- BEING THE DIFFERENCE OF THE TOTAL SUNDRY CREDITORS AND THE TOTAL PURCHASES FOR THE MONTH OF MARCH WERE TO BE TREATED AS BOGUS HOW WOULD THE CORRESPONDING NUMBERS SUBSTITUTE THE QUANTITATIVE VALUE OF CLOSING STOCK. RELYING ON THE SAME SUBMISSIONS THE LD. AR SUBMITTED THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) SHOULD ALSO BE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 1 11 1055 055055 055/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 6 DELETED. 5. ON THE OTHER HAND THE LD. DR SUBMITTED THAT TH E LD. CIT(A) WAS FULLY JUSTIFIED ON RESTRICTING THE DISALLOWANCE AT 10% OF THE PURCHASES MADE ON ACCOUNT OF POSSIBILITY OF INFLATION IN PURCHASES BY THE ASSESSEE AND THEREFORE SUBMITTED THAT THE ORDER OF THE LD. CIT( A) SHOULD BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANCE CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LEATHER EXPO RT. THE ASSESSING OFFICER DISALLOWED ` .3 13 92 083/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) RESTRICTED THE ABOVE DISALLOWANCE TO ` .65 17 186/- BEING 10% OF PURCHASE MADE BY THE ASSE SSEE FROM 4 CENTRES NAMELY AHMADNAGAR SHOLAPUR MIRAJ AND DELHI. THE R EVENUE IS NOT IN APPEAL BEFORE US IN RESPECT OF THE DELETION OF THE ADDITION MADE BY THE LD. CIT(A). THE ASSESSEE BEING AGGRIEVED BY THE DISALL OWANCE OF ` .65 17 186/- IS IN APPEAL BEFORE US. WE FIND THAT THE DISALLOWAN CE OF ` .65 17 186/- WAS MADE BY THE LD. CIT(A) ONLY ON THE BASIS OF SUSPICI ON THAT THERE MIGHT BE INFLATION IN THE PURCHASES. FURTHER THE DISALLOWAN CE OF ` .65 17 186/- IS WITHOUT ANY BASIS. THE REVENUE HAS BROUGHT NO MATER IAL ON RECORD TO SHOW THAT THE PURCHASES CLAIMED BY THE ASSESSEE WERE NOT REASONABLE CONSIDERING THE PREVAILING MARKET CONDITION AT THE MATERIAL TIME. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE INCOME DISCLOSED B Y THE ASSESSEE WAS NOT REASONABLE COMPARED TO THE INCOME DISCLOSED BY OTHE R ASSESSEES IN THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 1 11 1055 055055 055/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 7 SAME LINE OF BUSINESS OR IN VIEW OF THE PAST ACCEPT ED POSITION IN THE CASE OF THE ASSESSEE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE IN OUR CONSIDERED VIEW THE DISALLOWANCE OF ` .65 17 186/- MADE ON THE BASIS OF SUSPICION ALONE WITHOUT ANY BASIS CANNOT BE SUSTAIN ED. WE THEREFORE DELETE THE ADDITION OF ` .65 17 186/- AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI DATED THE 18.11.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.