The ITO, Ward-5(4),, Morbi v. M/s Oris Ceramics,, Morbi

ITA 1122/RJT/2010 | 2007-2008
Pronouncement Date: 15-12-2011 | Result: Dismissed

Appeal Details

RSA Number 112224914 RSA 2010
Assessee PAN AABFO0198G
Bench Rajkot
Appeal Number ITA 1122/RJT/2010
Duration Of Justice 1 year(s) 3 month(s) 21 day(s)
Appellant The ITO, Ward-5(4),, Morbi
Respondent M/s Oris Ceramics,, Morbi
Appeal Type Income Tax Appeal
Pronouncement Date 15-12-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 15-12-2011
Date Of Final Hearing 26-09-2011
Next Hearing Date 26-09-2011
Assessment Year 2007-2008
Appeal Filed On 25-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT. BEFORE SHRI T. K. SHARMA (JM) AND SHRI A. L. GEHL OT AM). ITA NO. 1122/RJT/2010. (ASSESSMENT YEAR 2007-08) THE I.T.O. VS. M/S. ORIS CERAMICS RAJKOT WARD 5(4). C/O. VALAAMJI R. PATEL MORBI PANKAJ NEW ADARSH SOCIETY SANALA ROAD MORBI. PAN:AABFO0198G.. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J. M. SAHAY D. R. ASSESSEE BY : SHRI R. K. DOSHI.. DATE OF HEARING : 02-12-2011. DATE OF PRONOUNCEMENT : 15 -12-2011. O R D E R. PER A. L. GEHLOT (A.M.) : THIS APPEAL BY THE REVENUE AGAINST THE APPELLATE ORDER OF COMMISSIONER OF INCOME TAX (APPE ALS)-IV RAJKOT DATED 30- 06-2010 FOR ASSESSMENT YEAR 2007-08. 2. THE EFFECTIVE GROUNDS RAISED IN THIS APPEAL ARE REPRODUCED AS BELOW:- (1) THE LD. CIT(A)-IV RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS..27 55 376/- ON ACCOUNT OF SUNDR Y CREDITORS (RELATED TO PURCHASE OF AW MATERIAL CHEMICAL.AND CO LOUR) OF WHICH THE ASSESSEE FAILED TO PROVE THE GENUINENESS THEREO F. (2) THE LD. CIT(A)-IV RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1 29 85 264/- ON ACCOUNT OF SUND RY DEBTORS WHICH WERE GIVEN IN THE NAME OF ADVANCES OF WHICH THE ASS ESSEE FAILED TO PROVE THE GENUINENESS THEREOF.. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING PORSOLIN. DURING THE ASS ESSMENT PROCEEDINGS THE AO NOTICED NEW SUNDRY CREDITORS OF RS.13 02 68 979/ -. THE AO ASKED THE ITA 1122-RJT-2010 A.Y. 2007-08. 2 ASSESSEE TO FURNISH THE DETAILS BUT THE SAME WAS NO T PRODUCED. THEREFORE THE AO MADE THE ADDITION OF RS.13 02 68 979/- AS UNEXPL AINED SUNDRY CREDITORS. BEFORE THE CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE DETAILS AND BOOKS COULD NOT BEE PRODUCED AS THE OFFICE PREMISES OF TH E ASSESSEE WERE UNDER POSSESSION OF STATE BANK OF SAURASHTRA MAIN BRANCH MORBI. THE AO DID NOT PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSEE. HO WEVER THE ASSESSEE FURNISHED THE DETAILS BEFORE THE CIT(A). THE CIT(A) FOUND SU FFICIENT CAUSE FOR ADMISSION OF THE DETAILS FILED BY THE ASSESSEE. THE CIT(A) CALL ED THE REMAND REPORT FROM THE AO WHICH WAS SUBMITTED ON 14-06-2010. THE REMAND R EPORT OF THE AO WAS FORWARDED TO THE ASSESSEE AND ASSESSEE HAS ACCORDIN GLY SUBMITTED THEIR REPLY. AFTER CONSIDERING ASSESSEES SUBMISSION AND AOS RE MAND REPORT THE CIT(A) FOUND IN THE REMAND PROCEEDINGS UNDER RULE 46A THE AO MADE CERTAIN INQUIRIES AND FURTHER MADE SOME AVERMENTS AGAINST THE ASSESSE E AND OBJECTED ON ADMISSION OF ADDITIONAL/NEW EVIDENCES. HOWEVER TH E CIT(A) ADMITTED THE NEW ADDITIONAL EVIDENCE FOLLOWING TH JUDGMENT OF CALCUT TA HIGH COURT IN THE CASE OF RAI KUMAR SRIMAL VS. CIT. THE CIT(A) EXAMINED THE ITEMWISE ADDITION INCLUDING THE ADDITION OF RS.13 02 68 979/- ON ACCOUNT OF SUN DRY CREDITORS. IN TWO CASES IN CASE OF H & R JONHSON (INDIA) LTD. MIMBAI THE OUTS TANDING BALANCE AS ON 31-03- 2006 RS.21 19 936/- AND IN CASE OF BHELL & PEARI CE RAMICS LTD. AHMEDABAD THE OUTSTANDING BALANCE AS ON 31-03-2006 RS.6 35 440/-. THE TOTAL OF BOTH ITEMS COMES TO RS.27 55 376/-. THE NOTICES UNDER SECTION 133(6) ISSUED TO BOTH THEN PARTIES WERE RETURNED BY POSTAL AUTHORITY WITH REMA RK NOT KNOWN. ON EXAMINATION OF THE ASSESSEE BY THE CIT(A) HE FOUND THAT EXPLANATION SUBMITTED BY THE ASSESSEE PROVE THAT THE ENTIRE TRANSACTIONS ARE FULLY EVIDENCED AND HAVE BEEN ENTERED THROUGH BANKING CHANNEL. THE ASSESSIN G OFFICER HAS VERIFIED THE ABOVE TRANSACTIONS FROM THE STATE BANK OF INDIA WHO CONFIRMED THE ABOVE TRANSACTION. HOWEVER IN CASE OF H & R JOHNSON (IN DIA) LTD. AND BHELL & PEARI CERAMICS LTD. THE AO WAS OF THE VIEW BEFORE THE CI T(A) THAT THE ASSESSEE HAS FAILED TO JUSTIFY THE GENUINENESS OF THE CREDITORS. IN REJOINDER THE ASSESSEE FURNISHED THE EXPLANATION AND DETAILS WHICH HAS BEE N CONSIDERED BY THE CIT(A) AND FOUND THAT THERE ARE ENOUGH DOCUMENTARY EVIDENC E TO SUGGEST THAT ITA 1122-RJT-2010 A.Y. 2007-08. 3 TRANSACTION IS GENUINE WITH THE PARTIES AND IDENTIT Y OF THE VENDOR STANDS PROVED. IN THE CASE OF H & R JOHNSON (INDIA) LTD. MUMBAI I T WAS NOTICED THAT THE SAID CREDITOR IS IN RESPECT OF PURCHASE OF CAPITAL GOODS AND THEREFORE IT IS A CAPITAL EXPENDITURE WHICH WAS NOT DEBITED IN PROFIT AND LOS S ACCOUNT AND AS SUCH NO ADDITION CAN BE MADE. IN THE CASE OF BHELL & PEARI CERAMICS LTD. AHMEDABAD IT WAS FOUND THAT THE CREDITOR IS IN RESPECT OF PURCHA SE OF MATERIAL WHICH HAS BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNTS AND ALSO IN CLOSING STOCK. BOTH THE PARTIES ARE REGISTERED WITH THE EXCISE AUTHORITIES AND HAVI NG CT AND VAT NO. ON VARIOUS EVIDENCES THE CIT(A) HELD THAT THE GENUINE NESS OF BOTH THE CREDITORS AMOUNTING TO RS.27 55.376/- HAS BEEN PROVED. THERE FORE NO ADDITION IS REQUIRED TO BE MADE. 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES RECORD PERUSED. WE FIND THAT THE CIT(A) HAS GIVEN HIS FINDING AFTER CONSIDERING THE RELEVANT EVIDENCE AND MATERIAL AND AFTER PROVIDING OPPORTUNI TY OF HEARING TO THE AO BY OBTAINING REMAND REPORT. THE SOLE OBJECTION OF THE E AO IN RESPECT OF THE ADDITION OF AMOUNT OF THESE TWO PARTIES WAS THAT NOTICES ISS UED UNDER SECTION 133(6) WERE RETURNED BY THE POSTAL AUTHORITY WITH THE REMARK N OT KNOWN WHEREAS THE ASSESSEE EXPLAINED THE ENTIRE TRANSACTION IDENTITY OF THE SUPPLIER THAT IN CASE OF H & R JOHNSON (INDIA) LTD. THE ASSESSEE PURCHASED PLAN AND MACHINERY. COPIES OF INVOICE SHOWING THE SAID PURCHASES WERE FURNISHE D. THE PARTY IS A LISTED COMPANY. THE INVOICE BEARING EXCISE REGISTRATION NO . VAT NO. AND CST NP. WHICH ESTABLISHES THE GENUINENESS AND IDENTITY OF T HE SUPPLIER. COPY OF VAT FORM NO.403 ISSUED BY THE VENDOR TRANSPORT L.R. TO SUPPORT THAT THE GOODS WERE DELIVERED THE NOTICES MIGHT BE RETURNED BACK DUE TO INSUFFICIENT ADDRESS ON WHICH THE AO SENT THE NOTICES. THEE ALTERNATE CONT ENTION OF THE ASSESSEE THAT THE TRANSACTION IS IN RESPECT OF PURCHASE OF CAPITA L GOODS WHICH WAS NOT DEBITED TO THE TRADING AND PROFIT AND LOSS ACCOUNT BUT IT W AS DEBITED IN PLANT AND MACHINERY ACCOUNT HENCE NO ADDITION CAN BE MADE. AS REGARDS THE ANOTHER PARTY BHELL & PEARI CERAMICS LTD. WE FIND THAT THE SIMILAR TYPE OF DETAILS WERE FURNISHED. THE ASSESSEE PURCHASED COLOUR CHEMICAL AND SAME WAS ACCOUNTED ITA 1122-RJT-2010 A.Y. 2007-08. 4 FOR IN BOOKS OF ACCOUNTS. IT IS PERTINENT TO NOTED THAT THE PURCHASE OF PLANT AND MACHINERY AND COLOUR AND CHEMICAL FROM THESE PARTIE S WERE NOT DOUBTED BY THE AO. WHEN THE PURCHASES WERE NOT DOUBTED THE CORRE SPONDING THEIR CREDIT ENTRY CANNOT BE DOUBTED. THERE IS NO FINDING OR ALLEGATI ON OF THEE REVENUE THAT THE PURCHASES MADE FROM BOTH THE PARTIES WERE NOT ACCOU NTED FOR IN THE BOOKS OF ACCOUNTS. 5. IN THE LIGHT OF THE DETAILED DISCUSSION OF THE C IT(A) AND IN THE LIGHT OF ABOVE FACTS NOTED BY US WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE CIT(A) PARTICULARLY WHEN THE REVENUE DID NOT POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT(A) SUCH ADDITION CANNOT BE SUST AINED MERELY ON THE BASIS THAT THE NOTICES SENT U/S.133(6) WERE RETURNED BY THE PO STAL AUTHORITIES. RETURNING OF NOTICES ISSUES U/S.133(6) BY POSTAL AUTHORITIES MIG HT HAVE A NUMBER OF REASONS AND ON SOLE BASIS OF THAT IT CANNOT BE HELD THAT T HE PARTIES WERE NON-GENUINE PARTICULARLY WHEN BOTH THE PARTIES ARE LIMITED COMP ANIES GOVERNED BY THE COMPANIES ACT AND WORKING UNDER CONCERNED AUTHORITI ES OF THE COMPANIES ACT. IN THE LIGHT OF THE FACT WE CONFIRM THE ODE OF CIT (A) ON THE ISSUE. 6. THE BRIEF FACTS OF THE SECOND GROUND ARE THAT TH E AO MADE ADDITION OF RS.1 29 85 264/-. THE AO MADE THE ADDITION AS THE ASSESSEE FAILED TO PRODUCE DETAILS BEFORE THE AO. THE ASSESSEE FURNISHED THE DETAILS BEFORE THE CIT(A). THE CIT(A) CONSIDERED THOSE DETAILS AS PER DETAILED DISCUSSION MADE IN ABOVE PARA-5 OF THIS JUDGMENT. BEFORE THE CIT(A) THE AO OBJECTED ABOUT THE GENUINENESS OF THE 32 CREDITORS AMOUNTING TO RS.1 2 9 85 264/- OF WHICH DETAIL IS GIVEN AT PAGE-15 OF CIT(A) ORDER. THE CIT(A) ACCEP TED THE ASSESSEES CONTENTION THAT MOST OF THE DEBTORS ARE TRADE DEBTO RS AND COPIES OF THEIR ACCOUNTS WERE FILED WHICH SHOWS THAT THE ASSESSEE W AS HAVING REGULAR TRANSACTION WITH THOSE PARTIES. IN SOME OF THEE AC COUNTS THERE WAS OPENING BALANCES WHICH WERE CARRIED FORWARD TO THIS YEAR WI THOUT ANY TRANSACTION OF PURCHASE AND ALES DURING THE YEAR. THE CIT(A) WAS OF THE VIEW THAT IN THESE CIRCUMSTANCES NO ADDITION IS WARRANTED. IT HAS BE EN ALSO NOTED BY CIT(A) THAT ITA 1122-RJT-2010 A.Y. 2007-08. 5 VARIOUS DEBTORS HAVE ALSO CONFIRMED THAT TRANSACTIO N WITH THE ASSESSEE. THE CIT(A) FOLLOWED THE ORDER OF ITAT MUMBAI BENCH IN CASE OF SANCHITA MARINE PRODUCTS (P) LTD. VS. DCIT 15 SIT 280 AND HELD THAT MERELY BECAUSE SOME DEBTORS HAVE NOT REPLIED TO THE NOTICE U/S.133(6) O F THE ACT MERELY ON THAT BASIS THE TRANSACTION CANNOT BE DOUBTED. THE CIT(A) ALSO NOTED THE FACT THAT THE ASSESSEE HAS PRODUCED SUFFICIENT EVIDENCE TO EXPLAI N THE GENUINENESS OF THE PARTIES AND TRANSACTIONS. THE CIT(A) ACCORDINGLY D ELETED THE ADDITION OF RS. 1 29 85 264/-. 7. THE LD. D.R. RELIED UPON THE ORDER OF AO. THE L D. A.R. SUBMITTED THAT IN ASSESSMENT ORDER THE AO DID NOT MAKE ANY ADDITION OF RS.1 29 85 264/-. THE AO ONLY IN THE REMAND REPORT DOUBTED ABOUT THE GENU INENESS OF THE TRADING DEBTORS. THE LD. A.R. SUBMITTED THAT THE ASSESSEE C ANNOT BE PENALISED FOR NON- SERVICES/NON COMPLIANCE BY DEBTORS IN RESPONSE TO N OTICE U/S.133(6) OF THE ACT. THE LD. A.R. IN SUPPORT OF HIS CONTENTION RELIED UP ON A JUDGMENT OF SUPREME COURT IN THE CASE OF ANIS AHMED & SONS (SC) CASE NO .582/2008 ORDER DATED 22- 01-2008 ARISING OUT OF SLP NO.3135/2005 AND ITAT R AJKOT ORDER IN CASE OF CHOTANI LAXMIDAS TULSIDAS ITA NO.202/RJT/2007. TH E LD. A.R FURTHER SUBMITTED THAT THERE IS OPENING BALANCE IN MOST OF THE ACCOUN TS THERE WAS NO TRANSACTIONS DURING THE YEAR. THE BALANCES IN THOSE ACCOUNTS HA VE BEEN ACCEPTED BY THE AO HIMSELF WHILE MAKING THE ASSESSMENT U/S.143(3) IN A .Y.2006-07. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES RECORD PERUSED. WE FIND THAT IT IS A MATTER OF FACTUAL VERIFICATION OF THE TRANSACTION RECORDED IN THE BOOKS OF ACCOUNTS. THE DETAILS COULD NOT BE PRODUC ED BEFORE THE AO ON ACCOUNT OF SUFFICIENT REASON WITH THE ASSESSEE. THE DETAIL S FILED BEFORE THE CIT(A). THE CIT(A) AFTER PROVIDING OPPORTUNITY OF HEARING TO TH E AO AND AFTER OBTAINING REMAND REPORT FOUND THAT THESE TRANSACTIONS ARE RO UTINE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNTS ON DAY-TO-DAY BASIS. IN MOST OF THE CASES THERE WERE NO OPENING BALANCES AND THERE WERE NO TRANSACTIONS DUR ING THE YEAR. AS DISCUSSED ABOVE THAT MERELY THE NOTICES ISSUED BY AO U/S.133( 6) OF THE ACT ARE NOT ITA 1122-RJT-2010 A.Y. 2007-08. 6 RESPONDED BY THE CONCERNED PARTIES. THE ASSESSEE C ANNOT BE PENALISED BY MAKING ADDITION IN THE HANDS OF THE ASSESSEE. WE F IND THAT THE SOLE REASON FOR MAKING ADDITION BY THE AO WAS THAT SOME OF THE NOTI CES ISSUES U/S.133(6) WERE NOT COMPLIED WITH. CONTRARY TO THAT THE ASSESSEE H AS FURNISHED SUFFICIENT MATERIAL EVIDENCE AND BOOKS OF ACCOUNTS TO SHOW THAT THE TRA NSACTIONS WITH PARTIES WERE THE REGULAR TRANSACTIONS RECORDED IN THE BOOKS OF A CCOUNTS. IN ABSENCE OF CONTRARY MATERIAL AND IN LIGHT OF ABOVE DETAILED DI SCUSSION WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.1 29 85 264/-. 9. IN THE RESULT APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-12-201 1. SD/- SD/- ( T. K. SHARMA ) ( A. L. GEHLOT ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT. DATED: 15 -12-2011. NVA/ COPY TO:- 1.THE I.T.O RAJKOT WARD 5(4) MORBI. 2.M/S. ORIS CERAMICS MORBI. 3.THE C.I.T.(A)-II RAJKOT. 4.THE C.I.T. RAJKOT. 5.THE D.R. ITAT RAJKOT. TRUE COPY. BY ORDER ASSTT. REGISTRAR ITAT RAJKOT.