M/s. Madhupuri Steel Suppliers,, Ahmedabad v. The Income tax Officer, Ward-2(2),, Ahmedabad

ITA 153/AHD/2007 | 2003-2004
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 15320514 RSA 2007
Assessee PAN AAEFM7692L
Bench Ahmedabad
Appeal Number ITA 153/AHD/2007
Duration Of Justice 3 year(s) 7 month(s) 17 day(s)
Appellant M/s. Madhupuri Steel Suppliers,, Ahmedabad
Respondent The Income tax Officer, Ward-2(2),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 27-08-2010
Date Of Final Hearing 19-08-2010
Next Hearing Date 19-08-2010
Assessment Year 2003-2004
Appeal Filed On 09-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING :23 8 10 DRAFTED ON: 23-8-10 ITA NO. 153 /AHD/ 2007 ASSESSMENT YEAR :2003-04 M/S. MADHUPURI STEEL SUPLIERS C/O.SHRI SANJAY SHAH AAKASH GANGA D/14 AAKASHCOMPLEX NEAR AAKASH VANI MAKARPURA BARODA. VS. INCOME TAX OFFICER WARD 2(2) AAYAKAR BHAVAN NEAR RACE COURSE CIRCLE BARODA. PAN/GIR NO. : AAEFM7692L (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI ANIL R. SHAH C.A. RESPONDENT BY: SHRI R. K. DHANESTA D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II BARODA DATED 15-11-2006. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- II BARODA (HEREINAFTER REFERRED TO AS THE CITA) HAS ER RED ON FACTS AND IN LAW IN PASSING ORDER ON THE FOLLOWING AMONGST TH E OTHER GROUNDS. 1. THE CITA HAS ERRED IN CONFIRMING THAT AMOUNTS PAYAB LE TO THE FOLLOWING PARTIES ARE PAID OUT OF UNDISCLOSED I NCOME AND SINCE THE LIABILITY/CREDITORS HAVE CEASED THE AMOUNTS ARE RIGHTLY DISALLOWED BY THE LEARNED ASSESSING OFF ICER. 1. M/S. GIRNAR SALES CORPORATION `. 8 24 209/- 2. M/S. SHIV METALCORPORATION. `. 7 32 227/- 3. M/S. HINDUSTAN METAL CORPORATION. `. 5 90 840/- 4. M/S. PRAKASH STEEL (INDIA) `. 20 94 373/- 5. MS. PRAKASH INDUSTRIAL CORPORATION. `. 23 32 429 /- TOTAL. `.65 74 078/- - 2 - 2. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE THE C ITA HAS ERRED IN NOT ADJUDICATING THE ALTERNATIVE CONTENTIO N AND HAS THEREBY DISALLOWED THE ALTERNATIVE CLAIM THAT I F AT ALL ANY DISALLOWANCE HAS TO BE MADE IT OUGHT TO HAVE B EEN CONFINED TO THE VALUE OF THE TRANSACTIONS DURING TH E YEAR AND THE OPENING CREDITS/BALANCES OUGHT NOT TO HAVE BEEN DISALLOWED. IT IS THEREFORE SUBMITTED THAT RELIEFS CLAIMED ABO VE BE ALLOWED AND THE ORDER OF THE LEARNED ASSESSING OFFI CER BE MODIFIED ACCORDINGLY. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESS ING OFFICER ISSUED LETTERS OF INQUIRY UNDER SECTION 133(6) TO FIVE PAR TIES COULD NOT BE SERVED BECAUSE THE PARTIES DID NOT EXIST AT THE ADD RESSES FURNISHED BY THE ASSESSEE. SUBSEQUENTLY SUMMON WERE ISSUED T HROUGH THE INSPECTOR AND TWO OF THE PARTIES STATED ON OATH THA T THEY HAVE NOT SOLD ANY MATERIAL TO THE ASSESSEE. IT WAS NOTICED B Y THE LEARNED ASSESSING OFFICER THAT THE SAID PARTIES HAD SIMPLY PROVIDED BILLS TO THE ASSESSEE AND NO GOODS IN FACT WERE SUPPLIED B Y THEM. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE THE CRED ITS APPEARING IN THE NAME OF THESE FIVE PARTIES WERE DISALLOWED TREA TING THE LIABILITY TO HAVE BEEN CEASED. FOR READY REFERENCE PARA 11.3 OF THE ASSESSMENT ORDER IS EXTRACTED BELOW: IN VIEW OF THIS IT CAN SAFELY BE INFERRED THAT ASS ESSEE HAS ONLY MADE ARRANGEMENT OF BILLS TOWARDS THE PURCHASE S MADE FROM OPEN MARKET IN CASH. IN FACT ASSESSEE FIRM HAS PURCHASED THE GOODS FROM OPEN MARKET IN CASH AND TO OK THE BILLS FROM AFORESAID ALLEGED SUPPLIER FOR THE SAME. THEREAFTER THE ASSESSEE MADE THE PAYMENTS TO THE AFORESAID SUP PLIER BY CHEQUES AS AND WHEN IT WAS HAVING SUFFICIENT FUN DS FOR THE PAYMENT OF ALLEGED PURCHASES. THE AFORESAID PAR TIES AFTER GETTING CHEQUES TENDERED THESE CHEQUES IN TH EIR BANK ACCOUNTS AND WITHDREW CASH FROM IT AND HANDED OVER THE SAME TO THE ASSESSEE. THUS FROM THE FACTS OF THE C ASE IT EMERGES THAT THE ASSESSEE HAS MADE PURCHASED IN CAS H BY MAKING SPOT PAYMENT AND PROCURED BOGUS BILLS FROM T HE AFORESAID PARTIES WITH AN INTENTION TO COVER UP THE UNEXPLAINED INVESTMENT IN PURCHASE/STOCK. THE ASSES SEE HAS SHOWN CLOSING CREDIT BALANCES AGAINST THE NAMES OF FIVE ALLEGED SUPPLIERS WHICH HAVE BEEN PROVED BOGUS. DET AILS OF SUCH BOGUS CREDITORS ARE AS UNDER :- - 3 - SR.NO. NAME AMOUNT.(`) 1. M/S.GIRNAR SALES CORP. 8 24 209/ - 2. M/S.SHIV METAL CORPORATION 7 32 227/ - 3. M/S.HINDUSTAN METAL CORPN. 5 90 840/ - 4. M/S. PRAKASH STEEL(INDIA) 20 94 373/ - 5. M/S. PRAKASH INDUSTRIAL CORP. 23 3 2 429/ - TOTAL 65 74 078/ - IN VIEW OF THE ABOVE DISCUSSION IT IS CONCLUSIVELY PROVED THAT THE CREDITORS AMOUNTING TO `.65 74 078/- HAVE BEEN ALREADY PAID UP OUT OF THE UNDISCLOSED INCOME OF THE ASSESS EE WHICH IS LIABLE TO BE TAXED. CONSEQUENTLY THE LIABILITY TO THAT EXTENT HAS CEASED AND EVENTUALLY THE CREDITORS SO CLAIMED ARE BOGUS. THEREFORE AN ADDITION OF `.65 74 078/-IS BE ING MADE ON THIS ACCOUNT. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE BEING INITIATED ON THIS ISSUE. 4. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) IT WAS CONTENDED BY THE LD. COUNSEL THAT THE GOODS FROM THE FIVE PARTIES WERE PURCHASED BEFORE 31 ST MARCH 2003 AND IT IS LIKELY THAT THOSE PARTIES MIGHT HAVE CHANGED THEIR BUSINESS PLACE OR MIGHT HAVE CLOSED THEIR BUSINESS. IT WAS FURTHER CONTENDED THAT THE APPELLANT HAS NOT BEEN GIVEN OPPORTUNITY TO CRO SS EXAMINE THE TWO PARTIES WHOSE STATEMENTS WERE RECORDED BY THE A SSESSING OFFICER. IT WAS FURTHER CONTENDED THAT THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE PARTIES HAVE THEIR SA LES TAX NUMBER. IT WAS ALSO CONTENDED THAT IN SOME CASES TH E CLOSING CREDIT BALANCES ALSO INCLUDE THE OPENING BALANCES. IT WAS FURTHER CONTENDED THAT THE ADDITION HAVE BEEN MADE BY THE A SSESSING OFFICER UNDER SECTION 69 OF THE I.T. ACT WHICH IS N OT APPLICABLE IN THE PRESENT CASE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- (1) ACIT VS. SHIVALIK LOHA MILLS PR. LTD. 126 TAXMAN 10 1 (2) BABROS MACHINERY MFG. PVT.LTD. VS. DCIT 269 ITR 36 (3) KISHANCHAND CHELLAVAN VS. CIT 125 ITR 713 (SC) (4) PRATHANA CONSTRUCTION (PR.)LTD. VS. DCIT 60 TTJ 122 (5) ITO VS. JANAK KUMAR VYAS 92 TTJ 1232 (AHD). (6) T.V. VENKATESAN VS. ACIT 74 ITD 298(CAL) (7) CIT VS. KASHIRAM TEXTILE MILLS PVT.LTD. 284 ITR 61 (8) CIT VS. M.K. BROTHERS 163 ITR 249 (GUJ) (9) RAJESH P. SONI VS. ACIT 100 TTJ 892 (AHD) (10) CIT VS. PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) (11) ITO VS. SUNSTEEL 92 TTJ 1126 (AHD) - 4 - (12) B BROS. ENG. WORKS VS. DCIT 78 TTJ 876 (AHD) (13) BABULALC. BORANA VS. ITO 282 ITR 251 (BOM) (14) CIT VS. LEADER VALUES (P)LTD. 285 ITR 435 (PUN) (15) SHRI RAM MULTI TECH (PVT.) LTD. VS. ACIT 92 TTJ 568(AHD) (16) ITO VS. TWINKLE PAPERS (PVT.)LTD. 95 ITD 253 (17) CIT VS. DAYABHAI & CO. ITA NO.31 OF 1972 (18) BANSIDHAR AGRAWAL PANNA VS. CIT 148 ITR 523 (19) UPASANA HOSPITAL AND NURSING HOME VS. CIT 229 ITR 220 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) AFTER CONSIDERING THE SUBMISSIONS OBSERVED AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNS EL AND FACTS OF THE CASE. THE ONUS WAS ON THE APPELLANT TO PROVE THE GENUINENESS OF THE TRANSACTIONS INVOLVING PURCHASES FROM THE FIVE PARTIES. IT IS QUITE UNLIKELY THAT THE APPELL ANT WAS NOT HAVING THE CURRENT ADDRESSES OF THE PARTIES SINCE L ARGE AMOUNTS WERE DUE TO THEM. LETTERS UNDER SECTION 133 (6) AND SUMMONS UNDER SECTION 131 WERE ISSUED BY THE ASSESS ING OFFICER AT THE ADDRESSES FURNISHED BY THE APPELLANT ITSELF. THE CASE LAWS RELIED UPON BY THE APPELLANT ARE DISTINGU ISHABLE ON FACTS. UNDER THESE FACTS AND CIRCUMSTANCES OF THE C ASE I DO NOT INTEND TO INTERFERE WITH THE INFERENCE DRAWN BY THE ASSESSING OFFICER THAT THE LIABILITIES IN RESPECT O F THESE FIVE PARTIES HAVE IN FACT CEASED. THEREFORE THE ADDIT ION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SH OWN OUTSTANDING LIABILITIES IN RESPECT OF FOLLOWING FIV E PARTIES AS UNDER IN RESPECT OF PURCHASES MADE DURING THE YEAR:- SR.NO. NAME AMOUNT.(`) 1. M/S.GIRNAR SALES CORP. 8 24 209/ - 2. M/S.SHIV METAL CORPORATION 7 32 227/ - 3. M/S.HINDUSTAN METAL CORPN. 5 90 840/ - 4. M/S. PRAKASH STEEL(INDIA) 20 94 373/ - 5. M/S. PRAKASH INDUSTRIAL CORP. 23 32 429/ - TOTAL 65 74 078/ - 7. THE LEARNED ASSESSING OFFICER ISSUED NOTICES U NDER SECTION 133(6) TO ALL THE ABOVE PARTIES OUT OF WHICH NOTICE TO TWO PARTIES COULD BE SERVED AND THE NOTICE TWO THE REMAINING TH REE PARTIES - 5 - WERE RETURNED UNSERVED AS THE PARTIES WERE NOT FOUN D AT THE GIVEN ADDRESS. THE TWO PARTIES NAMELY M/S. GIRNAR SALES CORPORATION AND M/S. SHIV METAL CORPORATION TO WHOM THE NOTICES WER E SERVED THEIR PROPRIETORS APPEARED AND FILED AFFIDAVITS WHEREIN T HEY CLAIMED THAT THEY PROVIDED BOGUS BILLS TO THE ASSESSEE. FROM THE ABOVE FACTS THE LEARNED ASSESSING OFFICER INFERRED THAT THE ASSESSE E ACTUALLY MADE PURCHASES IN CASH AND HAS SHOWN BOGUS LIABILITY OF `.65 74 078/- IN THE BOOKS. THE LEARNED ASSESSING OFFICER FURTHER I NFERRED THAT THE ASSESSEE SUBSEQUENTLY GAVE CHEQUES TO THE SAID FIVE PARTIES AND RECEIVED BACK CASH IN LIEU OF CHEQUES. THE LEARNED ASSESSING OFFICER THEREFORE MADE ADDITION OF `.65 74 078/- O N ACCOUNT OF BOGUS LIABILITY. 8. ON APPEAL THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSES SING OFFICER. 9. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT NO OPPORTUNITY OF CROSS EXA MINATION WAS ALLOWED BY THE LEARNED ASSESSING OFFICER TO THE ASS ESSEE BEFORE RELYING UPON THE AFFIDAVITS OF THE TWO PARTIES. HE ALSO SUBMITTED THAT PAYMENTS WERE SUBSEQUENTLY MADE BY ACCOUNT PAY EE CHEQUES TO ALL THE PARTIES AND NO MATERIAL WAS BROUGHT ON R ECORD TO SHOW THAT ASSESSEE RECEIVED BACK CASH FROM THOSE PARTIES . HE ALSO SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) WAS JUSTIFIED IN NOT DEALING WITH THE SIMILAR CONTE NTION RAISED BY THE ASSESSEE WHEN HE CONFIRMED THE ACTION OF THE LEARNE D ASSESSING OFFICER. 10. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 11. WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT OPPORTUNITY OF CROSS EXAMINATI ON WAS ALLOWED TO THE ASSESSEE BY THE LEARNED ASSESSING OF FICER BEFORE RELYING UPON THE AFFIDAVITS OF THE CREDITORS. IN O UR CONSIDERED OPINION THE ABOVE PROCEDURE FOLLOWED BY THE LEARNE D ASSESSING - 6 - OFFICER IS NOT TENABLE. FURTHER IN RESPECT OF REMA INING THREE PARTIES THE ASSESSEE CLAIMED THAT PAYMENTS WERE MADE TO THE M BY ACCOUNT PAYEE CHEQUES. THE LEARNED ASSESSING OFFICE R HAS MADE NO INVESTIGATION FROM THE BANK FROM WHICH THE CHEQU ES WERE CLEARED BEFORE DRAWING ADVERSE INFERENCE AGAINST TH E ASSESSEE FOR ITS INABILITY TO PRODUCE THE CREDITORS. IN OUR CON SIDERED VIEW ADVERSE VIEW CANNOT BE DRAWN AGAINST AN ASSESSEE ME RELY BECAUSE HE IS UNABLE TO PRODUCE HIS CREDITORS AS IT IS NOT POSSIBLE TO EXERCISE CONTROL OVER THE CREDITORS SPECIALLY WHEN PAYMENTS WERE ALREADY MADE TO SUCH CREDITORS. FURTHER AN ASSESSEE CANNOT BE EXPECTED TO KEEP TRACK OF ADDRESSES OF ALL ITS CREDITORS SPE CIALLY WHEN PAYMENTS HAVE ALREADY BEEN MADE. IT IS OBSERVED TH AT NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT PURCHASES WERE A CTUALLY MADE BY TENDERING CASH BY THE ASSESSEE AND THE ASSESSEE ACTUALLY RECEIVED CASH IN LIEU OF CHEQUES GIVEN TO THE CRERD ITORS. HOWEVER IT IS ALSO OBSERVED THAT THE ASSESSEE COULD NOT PRO DUCE BEFORE US THE DETAILS OF SUBSEQUENT PAYMENTS MADE TO THE SAID FIVE CREDITORS AND PRODUCED NO MATERIAL IN SUPPORT OF THE SAME. TH US IT IS NOT CLEAR THAT THE ALLEGED SUBSEQUENT PAYMENTS WERE MAD E AFTER THE COMMENCEMENT OF ASSESSMENT PROCEEDINGS OF THE YEAR UNDER CONSIDERATION OR MUCH BEFORE THAT. IN THE CIRCUMSTA NCES IN OUR CONSIDERED OPINION IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR PROPER VERIFICATION IN LIGHT OF THE DISCUSSIONS MAD E HEREINABOVE. WE ORDER ACCORDINGLY. THE LEARNED ASSESSING OFFICER SHALL ALLOW PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFOR E ADJUDICATING THE ISSUE AFRESH AS PER LAW. THUS THE GROUND OF AP PEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 27 TH AUGUST 2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOU NTANT MEMBER AHMEDABAD: ON THIS 27 TH DAY OF AUGUST 2010 - 7 - COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II BARODA. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 23-8-2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 23-8-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 26-8-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 26-8-2010 ------------------- JM 5. APPROVED DRAFT COMES TO P.S 27-8-2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 27-8-2010 --------- ----------- 7. FILE SENT TO THE BENCH CLERK 27-8-2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------