Investment & Precision Casting Ltd.,, Rajkot v. The Jt.CIT.,Range-1,, Bhavnagar

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON' BLE SHRI A.N. PAHUJA A.M. ) I.T.A. NO. 798/AHD/2008 ASSESSMENT YEAR : 2004-05 INVESTMENT & PRECISION CASTING LTD. -VS.- ASSISTANT COMMISSIONER OF INCOME TAX BHAVNAGAR (PAN : AAACI 4650 D) C IRCLE-1 BHAVNAGAR (APPELLANT) (RESPONDENT) & I.T.A. NO. 852/AHD./2008 ASSESSMENT YEAR : 2004-2005 ASSISTANT COMMISSIONER OF INCOME TAX -VS.- INV ESTMENT & PRECISION CASTING LTD. CIRCLE-1 BHAVNAGAR BHAVNAGAR (PAN : AAACI 4650 D) (APPELLANT) (RESPONDENT) & I.T.A. NO. 2666/AHD/2007 ASSESSMENT YEAR : 2003-04 ASSISTANT COMMISSIONER OF INCOME TAX -VS.- M/S. INVESTMENT & PRECISION CASTING LTD. CIRCLE-1 BHAVNAGAR BHAVNAGAR (APPELLANT) (RESPONDENT) & I.T.A. NO. 284/AHD./2009 ASSESSMENT YEAR : 2005-2006 INVESTMENT & PRECISION CASTING LTD. -VS.- JOINT COMMISSIONER OF INCOME TAX BHAVNAGAR (PAN : AAACI 4650 D) R ANGE-1 BHAVNAGAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL DEPARTMENT BY : SHRI K. MADHUSUDAN S R. D.R. O R D E R PER BENCH : ALL THE FOUR APPEALS WERE HEARD ON THE SAME DATE ARGUED BY COMMON LD. REPRESENTATIVE THEREFORE THESE ARE DECIDED BY THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE. 2. ITA NO. 798/AHD/2008 . THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER DATED 13.11.2007 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XX AHMEDABAD FOR THE ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUNDS :- 2 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 (1) THAT THE LEARNED CIT(A.)-XX AHMEDABAD HAS GRIEVOUS LY ERRED IN CONFIRMING THE DISALLOWANCE OF THE APPELLANTS CLAI M U/S. 35(I)(IV) AMOUNTING TO RS.76 84 180/-. (2) THAT THE LD. CIT(A.)-XX AHMEDABAD HAS GRIEVOUSLY E RRED IN FAILING TO APPRECIATE THE TRUE IMPORT OF THE SUBMISSIONS MA DE BY THE APPELLANT IN THIS REGARD. (3) THAT THE LD. CIT(A.)-XX AHMEDABAD HAS GRIEVOUSLY E RRED IN FAILING TO ADJUDICATE UPON GROUND NUMBER 12 RAISED BY THE A PPELLANT RELATING TO THE DISALLOWANCE OF THE APPELLANTS CLAIM FOR 100 % DEPRECIATION ON ENERGY SAVING DEVICES AMOUNTING TO RS.14 08 475/-. (4) THAT ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABO VE THE LD. CIT(A.)- XX AHMEDABAD HAS GRIEVOUSLY ERRED IN FAILING TO AD JUDICATE UPON GROUND NUMBER 14 RAISED BY THE APPELLANT RELATING T O THE DENIAL TO THE APPELLANT OF THE NORMAL DEPRECIATION U/S. 32 ON THE SAID ASSETS RELATING TO WHICH THE APPELLANT HAD CLAIMED THE DED UCTION @ 100%. ITA NO. 852/AHD/2008 . THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 13.11.2007 OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XX AHMEDABAD F OR THE ASSESSMENT YEAR 2004-05. THE SOLE GROUND RAISED IN THIS APPEAL IS AS UNDER :- THE LD. CIT(A.) ERRED IN LAW AND ON FACTS IN DIREC TING TO DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCO UNT OF DISALLOWANCE OF CLAIM OF PURCHASES FROM FOLLOWING P ARTIES HOLD TO BE NOT GENUINE : (1) ASHISH CORPORATION RS.26 71 000/-; (2) C.N. STEEL PVT. LTD. RS.58 46 357/- (3) ALANG ENTERPRISE RS.6 01 214/-. ITA NO. 2666/AHD/2007 . THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER DATED 30.03.2007 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XIX AHMEDABAD FOR THE ASSESSMENT YEAR 2003-04. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDER :- THE LEARNED CIT(A.) ERRED ON FACTS AND IN LAW IN D IRECTING TO DELETE THE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF DISALL OWANCE OF CLAIM OF PURCHASES FROM FOLLOWING PARTIES HELD TO BE NOT GEN UINE :- (1) ASHISH CORPORATION RS.17 87 150/- (2) C.N. STEEL PVT. LTD. RS.45 12 853/- (3) ALANG ENTERPRISE RS.24 83 839/-. 3 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 ITA NO. 284/AHD/2009 . THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 12.08.2008 OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XX AHMEDABAD F OR THE ASSESSMENT YEAR 2005-06. THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER :- THAT THE LD. CIT(A.)-XX AHMEDABAD HAS GRIEVOUSLY ERRED IN DISALLOWING THE APPELLANTS CLAIM U/S. 35(I)(IV) AMO UNTING TO RS.2 09 820/-. 3. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUNDS NO. 1 & 2 OF ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004-05 AND ONLY GROUND OF ASSE SSEE FOR THE ASSESSMENT YEAR 2005-06 ARE THAT IN THE ASSESSMENT ORDERS THE ASSESSING OFFICER DISALLOWED RS.76 84 180/- AND RS.2 09 820/- BEING THE CLAIM OF THE ASSESSEE UNDER SECTION 35(I) (IV) OF THE INCOME TAX ACT 1961. THE REASONING GIVEN BY THE ASSESSING OFFICER IN BOTH TH ESE ASSESSMENT YEARS IS IDENTICAL. IN BOTH THE ASSESSMENT ORDERS ONE OF THE REASONING GIVEN BY TH E ASSESSING OFFICER FOR DISALLOWING THE CLAIM UNDER SECTION 35(I)(IV) OF THE ACT IS THAT HE HAS R EFERRED THE MATTER TO THE PRESCRIBED AUTHORITY ON THIS ISSUE AND THEIR DECISION IS AWAITED. APART FRO M THIS IN THE ASSESSMENT ORDER 2004-05 HE HAS MENTIONED THAT MACHINERY HAS ALSO BEEN UTILIZED IN MANUFACTURING ACTIVITIES THEREFORE DEPRECIATION ONLY AT A NORMAL RATE UNDER SECTION 32 OF THE INCOME TAX ACT CAN BE ALLOWED ON THE MACHINERY ACTUALLY USED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 4. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER FOR BOTH THE ASSESSMENT YEARS. 5. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI M.K. PATEL LD. COUNSEL APPEARED AND CONTENDED THAT THERE WAS NO NECESSITY FOR MAKING REFERENCE TO THE RELEVANT AUTHORITIES. THE LD. COUNSEL OF THE ASSESSEE FURTHE R SUBMITTED THAT IT IS NOT KNOWN WHETHER RELEVANT AUTHORITY HAS TAKEN ANY DECISION. HE THER EFORE SUGGESTED THAT THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TH AT ASSESSING OFFICER MAY FIND OUT WHETHER THE DECISION OF THE RELEVANT AUTHORITY IS RECEIVED. HE SUGGESTED THAT THE ASSESSING OFFICER BE DIRECTED TO CONSIDER THE ALLOWANCE OF DEDUCTION UNDER SECTIO N 35(I)(IV) DE NOVO. 4 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 6. ON THE OTHER HAND SHRI K. MADHUSUDAN LD. SR. D .R. APPEARING ON BEHALF OF THE REVENUE COULD NOT CONTROVERT THE SUBMISSIONS MADE BY THE LD . COUNSEL OF THE ASSESSEE. 7. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE ASSESSME NT ORDER FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSING OFFICER HAS MENTIONED THAT THE MATTER IS REFERRED TO THE RELEVANT AUTHORITY AND AWAITED SUCH DECISION AND SUBJECT TO THE SAME HE HAS DISAL LOWED THE CLAIM UNDER SECTION 35 OF THE INCOME TAX ACT 1961 HOLDING THAT EXPENDITURE CLAIM ED ON PURCHASE OF MACHINERY TO BE NOT DIRECTLY RELATED TO R & D ACTIVITY. KEEPING IN VIEW THESE PECULIAR FACTS WE ARE OF THE VIEW THAT IT WILL MEET THE END OF JUSTICE IF THE ORDER OF LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE FOR BOTH THE ASSESSMENT YEARS IS SET ASI DE AND THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT HE MAY VE RIFY WHETHER THE DECISION OF RELEVANT AUTHORITIES RECEIVED ASSESSING OFFICER WILL CONFRO NT THE SAME TO THE ASSESSEE AND RE-ADJUDICATE THE CLAIM OF THE ASSESSEE UNDER SECTION 35 OF THE I NCOME TAX ACT 1961 FOR BOTH THE ASSESSMENT YEARS UNDER APPEALS. RESULTANTLY FOR STATISTICAL P URPOSES THE GROUNDS NO. 1 & 2 OF ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004-05 AND ONLY GRO UND OF ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 ARE TREATED AS ALLOWED. 8. THE GRIEVANCE OF THE ASSESSEE IN GROUNDS NO. 3 & 4 OF ITA NO. 798/AHD/2008 FOR THE ASSESSMENT YEAR 2004-05 IS THAT THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) HAS NOT ADJUDICATED THE GROUND NO. 12. THE LD. D.R. FAIRLY STATED THAT HE HAS NO OBJECTION IF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE DIRECTED TO ADJUDICATE THE GROUND NO. 12 RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE ACCORDINGLY DIRECT THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) TO DECIDE THE GROUND NO. 12 OF THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004-05 IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. RESULTANTLY FOR STATISTICAL PURPOSES GROUNDS NO. 3 & 4 OF ASSESSEES APPEAL FOR THE ASSE SSMENT YEAR 2004-05 ARE TREATED AS ALLOWED. 9. THE FACTS RELATING TO CONTROVERSY INVOLVED IN TH E ONLY GROUND OF REVENUES APPEALS FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 ARE THAT I N BOTH THE ASSESSMENT YEARS THE ASSESSING OFFICER DISALLOWED THE CLAIM OF PURCHASES FROM THE FOLLOWING PARTIES HOLDING TO BE NOT GENUINE:- 5 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 ASSESSMENT YEAR 2003-04 SR. NO. NAME OF THE PARTY AMOUNT 1. ASHISH CORPORATION RS.17 87 150/- 2. C.N. STEEL PVT. LTD. RS.45 12 853/- 3. ALANG ENTERPRISE RS.24 83 839/- ASSESSMENT YEAR 2004-05 SR. NO. NAME OF THE PARTY AMOUNT 1. ASHISH CORPORATION RS.26 71 000/- 2. C.N. STEEL PVT. LTD. RS.58 46 357/- 3. ALANG ENTERPRISE RS.6 01 214/- 10. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION AF TER CALLING THE REMAND REPORT DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR BOTH THE ASSESSMENT YEARS FOR CLAIM OF PURCHASES FROM THE AFORESAID PARTIES. THE REASONING GIVEN BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE ASSESSMENT YEAR 2003-04 IS CONTAIN ED IN PARAS 4.5. TO 4.9. THESE ARE EXTRACTED BELOW :- 4.5. I HAVE CAREFULLY CONSIDERED THE ORAL ARGUMENT S AS WELL AS WRITTEN SUBMISSION OF THE AUTHORIZED REPRESENTATIVE AND PER USED THE CASE LAW RELIED UPON. I HAVE CONSIDERED THE FACTS BROUGHT ON RECORD IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT. I HAVE PERUSED THE MATERIALS GATHERED BY THE PRESENT ASSESSING OFFICER FROM THE SALES TAX DEPARTMENT DURING THE COURSE OF REMAND PROCEEDINGS. I HAVE GONE THROUGH THE STATEMENTS OF VARIOUS PERSONS RECORDED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS IN REMAND PROCEEDINGS. 4.6. THE APPELLANT IS A PUBLIC LIMITED COMPANY AND IT HAS BEEN MAINTAINING ITS PROPER BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNTS ARE AUDITED AND THE AUDITOR HAS NOT POINTED OUT ANY DEF ECTS IN THE BOOKS OF ACCOUNT AS ALLEGED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECTS I N THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT BUT WHILE EXAMINING THE THIRD PARTIES TO ASCERTAIN THE GENUINENESS OF PURCHASES THE ASSESSI NG OFFICER FOUND CERTAIN IRREGULARITIES IN THEIR BOOKS OF ACCOUNT AND ON THA T BASIS THE ASSESSING OFFICER HAS DRAWN HIS CONCLUSION THAT PURCHASES MAD E FROM M/S. ASHISH CORPORATION M/S. C.N. STEEL PVT. LTD. AND M/S. ALA NG ENTERPRISES ARE NOT 6 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 GENUINE AND THE APPELLANT HAS MERELY USED THESE PAR TIES FOR INFLATION OF ITS PURCHASES. ON PERUSAL OF THE STATEMENTS AND FACTS A VAILABLE ON RECORD IT IS FOUND THAT THE INFERENCE DRAWN BY THE ASSESSING OFF ICER IS MERELY BASED ON THE STATEMENT OF THIRD PARTIES AND WITHOUT ASCERTAI NING THE CORRECTNESS OF THE FACTS. THE APPELLANT HAS MADE TOTAL PURCHASES O F RS.87 83 842/- FROM THESE THREE PARTIES AND ALL PURCHASES ARE STATED TO HAVE BEEN SUPPORTED BY VOUCHERS. DURING THE COURSE OF REMAND PROCEEDINGS THE PRESENT ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNTS BANK ST ATEMENTS AND OTHER MATERIAL TO ASCERTAIN THE CORRECTNESS OF FACTS. HE HAS MENTIONED THAT ALL THESE THREE PARTIES ARE MAINTAINING THEIR BOOKS OF ACCOUNT AND SALES MADE TO THE APPELLANT ARE DULY REFLECTED IN THEIR BOOKS OF ACCOUNTS. ALL THESE THREE PARTIES ARE ASSESSED TO INCOME-TAX WITH ITO WARD-2 BHAVNAGAR. HE HAS ALSO REPORTED THAT THE APPELLANT HAS MADE PURCH ASES FROM M/S. C.N. STEEL PVT. LTD. AND M/S. ASHISH CORPORATION SINCE F Y 1999-2000 TO 2004- 05. WHILE FROM M/S. ALANG ENTERPRISES IT HAD MADE PURCHASES SINCE FY 2000-01 TO 2004-05. ALL THESE PURCHASES/ SALES MADE FROM THESE PARTIES HAVE BEEN ACCEPTED BY THE DEPARTMENT UP TO ASSESSME NT YEAR 2002-03 IN THE HAND OF THE APPELLANT AS WELL AS IN THE HANDS O F SAID PARTIES. THE APPELLANT HAS MADE PAYMENT FOR THESE PURCHASES BY A CCOUNT PAYEE CHEQUES. THE ASSESSING OFFICER HAS NOWHERE STATED T HAT THE PAYMENTS MADE BY CHEQUES HAVE BEEN RECEIVED BACK BY THE ASSESSEE IN CASH. THE APPELLANT HAS MAINTAINED QUANTITATIVE DETAILS OF RAW MATERIAL S AS WELL AS FINISHED GOODS BUT IT APPEARS THAT THE ASSESSING OFFICER HAS MADE NO ATTEMPT TO ANALYZE THE CONSUMPTION OF RAW MATERIAL VIS--VIS P RODUCTION. BUT SIMPLY ON THE BASIS OF STATEMENT OF THIRD PARTIES AND STRA Y INCIDENCES OF IRREGULARITIES FOUND IN THEIR BOOKS OF ACCOUNTS TH E ASSESSING OFFICER HAS DERIVED HIS CONCLUSION THAT PURCHASES MADE FROM THE SE PARTIES ARE INGENUINE/ BOGUS. THE CONCLUSION OF ASSESSING OFFIC ER IS NOT FOUND TO HAVE BEEN BASED ON CORRECT FACTS HENCE I AM UNABLE TO SUSTAIN THE FINDINGS OF THE ASSESSING OFFICER. 4.7. THE ASSESSING OFFICER HAD EXAMINED CHIRAG M. S HAH DIRECTED OF C.N. STEELS PVT. LTD. WHO HAS STATED TO HAVE SOLD GOODS TO I &PCL AND ALL SALES ARE SUPPORTED BY VOUCHERS OCTROI RECEIPTS AN D EXCISE RECORD. BUT MERELY ON INCOMPLETE RTO NUMBERS OF VEHICLES ON VOU CHERS THE ASSESSING OFFICER HAS HELD THAT PURCHASES MADE FROM M/S. C.N. STEELS PVT. LTD. ARE NOT GENUINE. THE ASSESSING OFFICER HAS IGNORED THE VITAL EVIDENCES LIKE STOCK REGISTER EXCISE REGISTER OCTROI RECEIPTS P URCHASE VOUCHERS ETC. NO ENQUIRIES WERE EITHER MADE FROM RTO OFFICE OF OCTR OI NAKA TO ASCERTAIN THE CORRECTNESS OF THE FACTS. THE CONCLUSION OF THE ASSESSING OFFICER IS MERELY BASED ON SUSPICION. HE HAS NOT MADE OUT A CA SE FOR ESTABLISHING BOGUS PURCHASES FROM M/S. C.N. STEELS PVT. LTD. 4.8. IN RESPECT OF PURCHASES MADE FROM M/S. ASHISH CORPORATION THE ASSESSING OFFICER HAS NOWHERE ESTABLISHED THAT THIS PARTY HAS BEEN USED BY THE APPELLANT TO INFLATE ITS PURCHASES. THE ASSESSI NG OFFICER HAS DRAWN HIS 7 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 CONCLUSION THAT ALL THE PURCHASES MADE BY THESE PAR TIES ARE BELOW RS.20 000/- AND VOUCHERS ARE PREPARED MANUALLY. FUR THER THIS PARTY HAS NO INFRASTRUCTURE TO CARRY OUT ITS BUSINESS. THEREF ORE ALL THE SALES MADE TO I & PCL ARE HELD INGENUINE. THE ASSESSING OFFICER HA NOT MADE ANY ENQUIRIES TO ASCERTAIN THE GENUINENESS OF BUSINESS CARRIED O0UT BY THIS PARTY. THE PARTY IS REGULARLY ASSESSED TO INCOME-TA X WITH ITO WARD-1(2) BHAVNAGAR AND ALL THE SALES MADE BY IT INCLUDING TH E SALES MADE TO I & PCL ARE ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS NOWHERE ESTABLISHED THAT THE APPELLANT HAS UTILIZED THIS PARTY TO INFLATE ITS PURCHASES. THE INFERENCE DRAWN BY THE ASSESSING OFF ICER IS MERELY BASED ON SURMISES AND CONJECTURES. HENCE I AM UNABLE TO SUSTAIN THE ACTION OF THE ASSESSING OFFICER WHICH IS NOT BASED ON PROPER FACTS. 4.9. IN RESPECT OF M/S. ALANG ENTERPRISES THE ASSE SSING OFFICER HAS HELD THAT THIS PARTY ADMITTED TO HAVE ISSUED ACCOMMODATI VE BILLS BEFORE SALES TAX DEPARTMENT. THIS FINDING OF THE ASSESSING OFFIC ER IS ALSO NOT BASED ON CORRECT FACTS. I HAVE ASKED THE PRESENT ASSESSING O FFICER TO COLLECT THE MATERIAL FROM THE SALES TAX DEPARTMENT BHAVNAGAR. THE PRESENT ASSESSING OFFICER HAS INFORMED THAT SALES TAX DEPAR TMENT (ENFORCEMENT WING) HAS CONDUCTED SEARCHES AT THE PREMISES OF M/S . VASMIN CORPORATION ON 19.5.2004 FROM WHICH M/S. ALANG ENTERPRISES HAD MADE PURCHASES. THE SEARCH ACTION REVEALED THAT THIS PARTY WAS FOUND TO HAVE ENGAGED IN UNACCOUNTED SALES. THE SALES TAX DEPARTMENT HAS FIL ED COMPLAINT AGAINST THIS PARTY WHERE IT IS ALLEGED THAT IT HAS MADE VAR IOUS PAPER ENTITIES TO MAKE UNACCOUNTED SALES IN GUJARAT AS WELL AS OUTSID E PARTIES. THE SALES TAX DEPARTMENT HAS PROVIDED A LIST OF PARTIES TO WH OM THIS CONCERN HAD MADE UNACCOUNTED SALES. I HAVE VERIFIED THE LIST AT TACHED WITH THE COMPLAINT TO THE POLICE DEPARTMENT WHEREIN NEITHER THE NAME OF M/S. ALANG ENTERPRISES NOR THE APPELLANT HAS BEEN MENTIO NED. THE PARTY HAS NOWHERE ADMITTED BEFORE THE SALES TAX DEPARTMENT TO HAVE ISSUED ACCOMMODATIVE BILLS. THUS THE FINDING GIVEN BY THE ASSESSING OFFICER FOR INDULGING IN ISSUING ACCOMMODATIVE BILLS IS NOT FOU ND TO BE CORRECT. IT IS ALSO SURPRISING THAT M/S. ALANG ENTERPRISES HAD MAD E PURCHASES OF ONLY 5 INVOICES FROM M/S. VASMIN CORPORATION AMOUNTING TO RS.6 26 754/- WHILE M/S. ALANG ENTERPRISES HAS MADE TOTAL SALES TO THE APPELLANT OF RS.24 83 839/- BUT ON THE BASIS OF M/S. VASMIN CORP ORATION THE ENTIRE SALES OF RS.24 83 839/- HAS BEEN DISALLOWED TREATIN G IT AS A BOGUS/ INGENUINE. THUS THE ASSESSING OFFICER HAS FAILED T O VERIFY THE CORRECT FACTS IN EACH CASE AND ACCORDINGLY THE CONCLUSION DRAWN BY HIM FOR INGENUINE/ BOGUS PURCHASES IS NOT FOUND TO BE CORRECT IN THE E YES OF LAW. AS THE FINDING OF THE ASSESSING OFFICER IS NOT BASED ON CORRECT FA CTS HENCE I AM UNABLE TO SUSTAIN THE ACTION OF THE ASSESSING OFFICER. THEREF ORE ADDITION OF RS.87 83 842/- MADE ON ACCOUNT OF BOGUS PURCHASES IS HEREBY DELETED. THUS GROUNDS NO. 2 TO 7 ARE ALLOWED. 8 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 10.1. IN THE ASSESSMENT YEAR 2004-05 ALSO THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING HIS ORDER FOR THE ASSESSMENT YE AR 2003-04 DELETED THE ADDITION. 11. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 12. AT THE TIME OF HEARING BEFORE US SHRI K. MADHU SUDAN LD. SR. D.R. APPEARED ON BEHALF OF THE REVENUE AND RELYING ON THE REASONING GIVEN BY T HE ASSESSING OFFICER CONTENDED THAT THE DISALLOWANCE WAS RIGHTLY MADE. ON THE OTHER HAND S HRI M.K. PATEL LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORD ER OF AUTHORITIES BELOW. 13. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AU THORITIES BELOW AS WELL AS THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER. IN THE I MPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE-COMPANY HAS BEEN MAINTAINING ITS PROPER BOOKS OF ACCOUNTS WHICH ARE AUDITED AND THE AUDITORS HAD NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS AS ALLEGED BY T HE ASSESSING OFFICER IN THE ASSESSMENT ORDERS BUT WHILE EXAMINING THE THIRD PARTIES TO ASCERTAIN THE GENUINENESS OF PURCHASES THE ASSESSING OFFICER FOUND CERTAIN IRREGULARITIES IN THEIR BOOKS OF ACCOUNT AND ON THAT BASIS THE ASSESSING OFFICER HAS DRAWN HIS CONCLUSION THAT PURCHASES MAD E FROM M/S. ASHISH CORPORATION M/S. C.N. STEEL PVT. LTD. AND M/S. ALANG ENTERPRISES ARE NOT GENUINE AND THE APPELLANT HAS MERELY USED THESE PARTIES FOR INFLATION OF ITS PURCHASES. ON PE RUSAL OF THE STATEMENTS AND FACTS AVAILABLE ON RECORD IT IS FOUND THAT THE INFERENCE DRAWN BY THE ASSESSING OFFICER IS MERELY BASED ON THE STATEMENT OF THIRD PARTIES AND WITHOUT ASCERTAINING THE CORRECTNESS OF THE FACTS. THE ASSESSEE HAS MADE TOTAL PURCHASES OF RS.87 83 842/- FROM THESE T HREE PARTIES AND ALL PURCHASES ARE STATED TO HAVE BEEN SUPPORTED BY VOUCHERS. DURING THE COURSE OF REMAND PROCEEDINGS THE PRESENT ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNT S BANK STATEMENTS AND OTHER MATERIAL TO ASCERTAIN THE CORRECTNESS OF FACTS. ALL THESE THREE PARTIES ARE ASSESSED TO INCOME-TAX WITH ITO WARD-2 BHAVNAGAR. HE HAS ALSO REPORTED THAT THE AP PELLANT HAS MADE PURCHASES FROM M/S. C.N. STEEL PVT. LTD. AND M/S. ASHISH CORPORATION SINCE F Y 1999-2000 TO 2004-05. WHILE FROM M/S. ALANG ENTERPRISES IT HAD MADE PURCHASES SINCE FY 2 000-01 TO 2004-05. ALL THESE PURCHASES/ SALES MADE FROM THESE PARTIES HAVE BEEN ACCEPTED BY THE DEPARTMENT UP TO ASSESSMENT YEAR 2002- 9 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 03 IN THE HAND OF THE ASSESSEE AS WELL AS IN THE HA NDS OF SAID PARTIES. THE ASSESSEE HAS MADE PAYMENT FOR THESE PURCHASES BY ACCOUNT PAYEE CHEQUE S. THE ASSESSING OFFICER HAS NOWHERE STATED THAT THE PAYMENTS MADE BY CHEQUES HAVE BEEN RECEIVED BACK BY THE ASSESSEE IN CASH. THE ASSESSEE HAS MAINTAINED QUANTITATIVE DETAILS OF RAW MATERIALS AS WELL AS FINISHED GOODS BUT IT APPEARS THAT THE ASSESSING OFFICER HAS MADE NO ATTE MPT TO ANALYZE THE CONSUMPTION OF RAW MATERIAL VIS--VIS PRODUCTION. BUT SIMPLY ON THE BA SIS OF STATEMENT OF THIRD PARTIES AND STRAY INCIDENCES OF IRREGULARITIES FOUND IN THEIR BOOKS O F ACCOUNTS THE ASSESSING OFFICER HAS DERIVED HIS CONCLUSION THAT PURCHASES MADE FROM THESE PARTI ES ARE INGENUINE/ BOGUS. THE ASSESSING OFFICER HAD EXAMINED CHIRAG M. SHAH DIRECTED OF C. N. STEELS PVT. LTD. WHO HAS STATED TO HAVE SOLD GOODS TO I &PCL AND ALL SALES ARE SUPPORTED BY VOUCHERS OCTROI RECEIPTS AND EXCISE RECORD. BUT MERELY ON INCOMPLETE RTO NUMBERS OF VEHICLES ON VOUCHERS THE ASSESSING OFFICER HAS HELD THAT PURCHASES MADE FROM M/S. C.N. STEELS PVT. LTD. ARE NOT GENUINE. THE ASSESSING OFFICER HAS IGNORED THE VITAL EVIDENCES LIKE STOCK REGISTER EX CISE REGISTER OCTROI RECEIPTS PURCHASE VOUCHERS ETC. NO ENQUIRIES WERE EITHER MADE FROM RTO OFFICE OF OCTROI NAKA TO ASCERTAIN THE CORRECTNESS OF THE FACTS. THE CONCLUSION OF THE ASSESSING OFFIC ER IS MERELY BASED ON SUSPICION. HE HAS NOT MADE OUT A CASE FOR ESTABLISHING BOGUS PURCHASES FR OM M/S. C.N. STEELS PVT. LTD. IN RESPECT OF PURCHASES MADE FROM M/S. ASHISH CORPORATION THE AS SESSING OFFICER HAS NOWHERE ESTABLISHED THAT THIS PARTY HAS BEEN USED BY THE APPELLANT TO I NFLATE ITS PURCHASES. THE ASSESSING OFFICER HAS DRAWN HIS CONCLUSION THAT ALL THE PURCHASES MADE BY THESE PARTIES ARE BELOW RS.20 000/- AND VOUCHERS ARE PREPARED MANUALLY. THE ASSESSING OFFIC ER HAS NOT MADE ANY ENQUIRIES TO ASCERTAIN THE GENUINENESS OF BUSINESS CARRIED OUT BY THIS PAR TY. THE PARTY IS REGULARLY ASSESSED TO INCOME- TAX WITH ITO WARD-1(2) BHAVNAGAR AND ALL THE SALE S MADE BY IT INCLUDING THE SALES MADE TO I & PCL ARE ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS NOWHERE ESTABLISHED THAT THE APPELLANT HAS UTILIZED THIS PARTY TO INFLA TE ITS PURCHASES. THE INFERENCE DRAWN BY THE ASSESSING OFFICER IS MERELY BASED ON SURMISES AND C ONJECTURES. IN RESPECT OF M/S. ALANG ENTERPRISES THE ASSESSING OFFICER HAS HELD THAT TH IS PARTY ADMITTED TO HAVE ISSUED ACCOMMODATIVE BILLS BEFORE SALES TAX DEPARTMENT. TH IS FINDING OF THE ASSESSING OFFICER IS ALSO NOT BASED ON CORRECT FACTS. THE ASSESSING OFFICER I NFORMED THAT SALES TAX DEPARTMENT (ENFORCEMENT WING) HAS CONDUCTED SEARCHES AT THE PR EMISES OF M/S. VASMIN CORPORATION ON 19.5.2004 FROM WHICH M/S. ALANG ENTERPRISES HAD MAD E PURCHASES. THE SEARCH ACTION REVEALED THAT THIS PARTY WAS FOUND TO HAVE ENGAGED IN UNACCO UNTED SALES. THE SALES TAX DEPARTMENT HAS 10 ITA NOS. 798-AHD-2008 852-AHD-2008 2666-AHD-2007 & 284-AHD-2009 PROVIDED A LIST OF PARTIES TO WHOM THIS CONCERN HAD MADE UNACCOUNTED SALES. I HAVE VERIFIED THE LIST ATTACHED WITH THE COMPLAINT TO THE POLICE DEPA RTMENT WHEREIN NEITHER THE NAME OF M/S. ALANG ENTERPRISES NOR THE APPELLANT HAS BEEN MENTIONED. T HE PARTY HAS NOWHERE ADMITTED BEFORE THE SALES TAX DEPARTMENT TO HAVE ISSUED ACCOMMODATIVE B ILLS. THUS THE FINDING GIVEN BY THE ASSESSING OFFICER FOR INDULGING IN ISSUING ACCOMMOD ATIVE BILLS IS NOT FOUND TO BE CORRECT. IT IS ALSO SURPRISING THAT M/S. ALANG ENTERPRISES HAD MAD E PURCHASES OF ONLY 5 INVOICES FROM M/S. VASMIN CORPORATION AMOUNTING TO RS.6 26 754/- WHILE M/S. ALANG ENTERPRISES HAS MADE TOTAL SALES TO THE APPELLANT OF RS.24 83 839/- BUT ON THE BASIS OF M/S. VASMIN CORPORATION THE ENTIRE SALES OF RS.24 83 839/- HAS BEEN DISALLOWED TREATIN G IT AS A BOGUS/ INGENUINE. THE ASSESSING OFFICER HAS FAILED TO VERIFY THE CORRECT FACTS IN E ACH CASE AND ACCORDINGLY THE CONCLUSION DRAWN BY HIM FOR INGENUINE/ BOGUS PURCHASES IS NOT FOUND TO BE CORRECT IN THE EYES OF LAW. WE THEREFORE DECLINE TO INTERFERE WITH THE ORDER OF L EARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE COMMON GROUND OF REVENUES APPEALS FOR BOTH THE ASSESSMENT YEARS. 14. IN THE RESULT THE APPEALS BEING ITA NOS. 852/A HD/2008 AND 2666/AHD/2007 FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2004-05 AND 20 03-04 RESPECTIVELY ARE DISMISSED AND THE APPEALS BEING ITA NO. 798/AHD/2008 AND ITA NO. 284/ AHD/2009 FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY A RE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 28.01.20 11 SD/- SD/- (A.N. PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28/ 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.