Shri Kantilal Devchand Patel, Ahmedabad v. The Dy.CIT.,Circle-12,, Ahmedabad

ITA 3262/AHD/2010 | 2007-2008
Pronouncement Date: 25-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 326220514 RSA 2010
Assessee PAN ACTPP1019P
Bench Ahmedabad
Appeal Number ITA 3262/AHD/2010
Duration Of Justice 11 month(s) 15 day(s)
Appellant Shri Kantilal Devchand Patel, Ahmedabad
Respondent The Dy.CIT.,Circle-12,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 25-11-2011
Date Of Final Hearing 18-11-2011
Next Hearing Date 18-11-2011
Assessment Year 2007-2008
Appeal Filed On 10-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE SHRI G. C. GUPTA HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.3262 / AHD/2010 (ASSESSMENT YEAR 2007-08) KANTILAL DEVCHANDDAS PATEL PROP. PATEL STEEL & SHAFTING SUPPLIERS 428/10/FP MANGALDAS SONI CHAWL NAGERVEL HANUMAN ROAD RAKHIAL AHMEDABAD VS DCIT CIRCLE 12 AHMEDABAD PAN/GIR NO. : ACTPP1019P (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N DIVETIA AR RESPONDENT BY: SHRI SAMIR TEKRIWAL SR. DR DATE OF HEARING: 18.11.2011 DATE OF PRONOUNCEMENT: 25.11.2011 O R D E R PER SHRI A. K. GARODIA AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) XX AHMEDABAD DATED 14.10.2010 FOR THE ASSESSMENT Y EAR 2007-08. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1.1 THE ORDER PASSED U/S.250 ON 14.10.2010 F OR A.Y.2007-08 . BY CIT(A)-XX ABAD IS WHOLLY ILLEGAL UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN PASSING THE IMPUGNED ORDER WITHOUT CONSIDERING T HE SUBMISSION MADE AND EVIDENCE PRODUCED. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.2 05 137 MADE U/S .40A(2)(B). 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE DI SALLOWANCE U/S.40A(2)(B). I.T.A.NO. 3262 /AHD/2010 2 2.3 THE LD. CIT(A) HAS ERRED IN OBSERVING THAT GENERAL SUBMISSIONS ABOUT THE RATE DIFFERENCE WERE MADE WIT HOUT SUPPORTING EVIDENCE THOUGH THE NECESSARY EVIDENT W AS PRODUCED BEFORE BOTH THE LOWER AUTHORITIES. IT IS THEREFORE PRAYED THAT THE ADDITION UPHELD B Y THE GIT(A) MAY KINDLY BE DELETED. 2. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY THE LD. CIT(A) IN PARA 4.2 OF HIS ORDER WHICH IS REPRODUCED BELOW: AS FAR AS THE DISALLOWANCE U/S.40A(2)(B) IS CONCER NED THE AO HAS AN ADDITION OBSERVING AS UNDER: ..... ' ON VERIFICATION OF THE PURCHASES MADE BY TH E ASSESSEE IT IS SEEN THAT THE ASSESSEE HAD MADE EXCESS PAYMENT AND THE FORM OF EXCESS PURCHASE PRICE PAID TO PRAMUKH STEEL CORPORA TION. THE EXCESS PAYMENT IS AS UNDER: S. NO. ITEM QUANTITY RATE PAID TO PRAMUKH STEEL RATE PAID TO OTHERS EXCESS PAYMENT 1 REEL BAR 4.087 27 600 21 240 25 993 2 ANGLE AND CHANNEL JO. 395 2 3 081 /- 19 751 34 615 3 -DO- 11.69 23 5007- 20 151 42 656 4 -DO- 9.14 24 2 51 /- 20 751 31 990 5 -DO- 5.28. 25 05/7- 21 251 20 064 6 -DO- 73.505 25 2907- 21 601 49 819 TOIAL 2 05 137 AN AMOUNT OF RS.2 05 137/- IS DISALLOWED U/S.W40A(2 )(A) OF THE IT ACT AS THE PURCHASE PRICE PAID TO PRAMUKH STEEL CORPORATION IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS FOR WHICH THE PAYMENT IS MADE AS THE ASSE SSEE HAS MADE PURCHASES FROM OTHER PARTIES WHEREIN THE PURCHASE R ATE PAID BY THE ASSESSEE TO OTHERS IS MUCH LESS THAN THE PURCHASE R ATE PAID TO PRAMUKH STEEL CORPORATION. I.T.A.NO. 3262 /AHD/2010 3 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESSES AND NOW THE ASSES SEE IS IN FURTHER APPEAL BEFORE US. 4. IT IS SUBMITTED BY THE LD. A.R. THAT THE RELATED PARTY I.E. M/S. PRAMUKH STEEL CORPORATION IS NOT A MANUFACTURER BUT A WHOLE SELLER WHEREAS THE OTHER PARTIES FROM WHOM THE SAME MATERI AL WAS PURCHASED BY THE ASSESSEE ARE MANUFACTURER AND BECAUSE OF THIS R EASON THE RATE CHARGED BY OTHER PARTIES ARE LOWER AS COMPARED TO THE RATES CHARGED BY M/S. PRAMUKH STEEL CORPORATION. ONE MORE SUBMISSION WAS MADE THAT CHARGING OF RATES DEPENDS ON MANY FACTORS SUCH AS Q UANTUM OF ORDER AND THE PAYMENT TERMS. IT WAS SUBMITTED THAT IN THE CASE OF M/S. PRAMUKH STEEL CORPORATION THE QUANTITY WAS SMALL AND THE P AYMENT TERMS WERE ON CREDIT FOR TWO MONTHS WHEREAS QUANTITY PURCHASED FR OM OTHER SUPPLIERS WAS LARGE AND ON THE TERMS OF PAYMENT OF CASH AGAIN ST SUPPLY. IT WAS SUBMITTED THAT UNDER THESE FACTS IT CANNOT BE SAID THAT EXCESSIVE RATES HAVE BEEN PAID BY THE ASSESSEE TO M/S. PRAMUKH STEE L CORPORATION AND THEREFORE SECTION 40A(2)(B) IS NOT APPLICABLE. 5. AS AGAINST THIS THE LD. D.R. OF THE REVENUE SUP PORTED THE ORDERS OF AUTHORITIES BELOW AND IT WAS ALSO SUBMITTED THAT FR OM THE CHART GIVEN BY THE ASSESSEE ITSELF IT IS APPARENT THAT THE HIGHER RATES WERE CHARGED BY M/S. PRAMUKH STEEL CORPORATION AND HENCE THE ADDIT ION MADE BY THE A.O. IS CORRECT AND THEREFORE THE ORDERS OF AUTHOR ITIES BELOW SHOULD BE CONFIRMED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT ON PAGE 2 OF THE PAPER BOOK IS A COPY OF CHART SUBMITTED BY THE ASSESSEE BEFORE THE A.O. SHOWING THE RATES CHARGED BY M/S. PRAMUKH STEEL CORPORATION AND OTHER PARTIES FOR SUPPLY OF V ARIOUS ITEMS. THE FIRST I.T.A.NO. 3262 /AHD/2010 4 ITEM IS RECT. BAR FOR WHICH THE RATE CHARGED BY M/S . PRAMUKH STEEL CORPORATION IS RS.27 600/- PER MT WHEREAS THE RATE CHARGED BY OTHER PARTY I.E. M/S. MAHAVIR ROLLING MILLS LTD. IS ONLY RS.21 240/- PER MT. THE DATES ARE VERY CLOSE I.E. 10 TH MAY 2006 AND 08 TH MAY 2006. REGARDING THE QUANTITY ASPECT WE FIND THAT THE QUA NTITY PURCHASED FORM M/S. PRAMUKH STEEL CORPORATION IS MORE I.E. 4.087 M T WHEREAS QUANTITY PURCHASED FROM M/S. MAHAVIR ROLLING MILLS LTD. IS O NLY 0.645 MT. HENCE THIS ARGUMENT OF THE LD. A.R. THAT THE RATES ARE DEPENDENT ON THE QUANTITY AND THE RATES ARE LOWER WHEN QUANTITY IS H IGH DOES NOT HOLD GOOD UNDER THESE FACTS. THE OTHER ITEM IS ANGLES AND CHANNELS. FOR THIS ITEM M/S. PRAMUKH STEEL CORPORATION HAS CHARGED THE RATE OF RS.22 800/- PER MT TO RS.25 490/- PER MT WHEREAS OTHER PARTY M/S. Y OGI STEELS PVT. LTD. CHARGED BETWEEN RS.19 751/- TO RS.23 451/-. WE FIN D THAT FOR THIS ITEM ALSO SUPPLY MADE BY PRAMUKH STEEL CORPORATION IS N OT LOWER IN QUANTITY AS COMPARED TO QUANTITY SUPPLIED BY M/S. YOGI STEEL S PVT. LTD. ON VARIOUS DATES. IN THE MONTH OF NOV. 2006 THE QUAN TITY SUPPLIED BY M/S. YOGI STEEL PVT. LTD. WAS 10.310 MT AND THE QUANTITY SUPPLIED BY M/S. PRAMUKH STEEL CORPORATION IS 13.505 MT. SIMILARLY IN THE MONTH OF OCTOBER 2006 THE QUANTITY SUPPLIED BY M/S. YOGI ST EEL PVT. LTD. 1.150 MT WHEREAS QUANTITY SUPPLIED BY M/S. PRAMUKH STEEL WAS 5.280 MT. HENCE THIS ARGUMENT IS NOT RELEVANT REGARDING QUAN TITY ASPECT FOR BOTH THESE ITEMS. NOW THE 2 ND ARGUMENT WAS TERMS OF PAYMENT. THE COPY OF THE LEDGER ACCOUNT OF M/S. PRAMUKH STEEL CORPORATIO N IS AVAILABLE ON PAGE 17 OF THE PAPER BOOK. WE FIND THAT AS PER THI S ACCOUNT THERE IS NO OUTSTANDING BALANCE AS THE OPENING BALANCE AND CLOS ING BALANCE. FOR THE PURCHASE ON 26.03.2007 OF RS.75 449/- THE PAYMENT WAS MADE ON 31.03.2007 FOR THE SAME. THERE ARE SOME PAYMENTS F OR PURCHASES MADE AFTER SOME CREDIT PERIOD BUT THE ASSESSEE HAS ALSO MADE SALES TO THAT PARTY IN THE MONTH OF NOVEMBER DECEMBER 2006 OF RS.9.01 LACS BUT THE I.T.A.NO. 3262 /AHD/2010 5 PAYMENT WAS RECEIVED BY THE ASSESSEE FROM M/S. PRAM UKH STEEL CORPORATION ON 15.03.2007. THIS GOES TO SHOW THAT IT IS NOT THE CASE THAT M/S. PRAMUKH STEEL CORPORATION ONLY ALLOWED CREDIT TO THE ASSESSEE BUT THE ASSESSEE HAS ALSO ALLOWED CREDIT TO THIS PARTY AND MOREOVER EVEN IF SOME CREDIT IS ALLOWED THE RATE DIFFERENCE MAY BE TO THE EXTENT OF INTEREST PORTION FOR SUCH CREDIT ALLOWED BY THE SUPPLIER BUT IN THE PRESENT CASE THE DIFFERENCE IS HUGE BECAUSE AGAINST THE RATE OF RS.2 1 240/- PER MT CHARGED BY M/S. MAHAVIR ROLLING MILLS LTD. M/S. PRAMUKH ST EEL CORPORATION IS CHARGING RS.27 600/- PER MT. SIMILARLY AGAINST TH E RATES OF RS.19 751/- PER MT CHARGED BY M/S. YOGI STEEL PVT. LTD. ON 30.0 6.2006 M/S. PRAMUKH STEEL CORPORATION HAS CHARGED THE RATE OF R S.23 081/- PER MT ON 5.07.2006. SUCH HIGH RATES CANNOT BE FOUND AS E XPLAINED ON ACCOUNT OF CREDIT ALLOWED BY M/S. PRAMUKH STEEL CORPORATION . AT THE BEST PRICE DIFFERENCE OF 2% CAN BE CONSIDERED AS REASONABLE ON ACCOUNT OF CREDIT ALLOWED BY M/S. PRAMUKH STEEL CORPORATION. 7. IN ADDITION TO THESE TWO ARGUMENTS REGARDING QUA NTITY AND CREDIT ALLOWED BY M/S. PRAMUKH STEEL CORPORATION THERE WA S ONE MORE CONTENTION RAISED BY LD. A.R. THAT M/S. PRAMUKH STE EL CORPORATION IS NOT A MANUFACTURER BUT A WHOLE SELLER WHEREAS THE OTHE R PARTIES I.E. M/S. MAHABIR ROLLING MILLS LTD. AND M/S. YOGI STEEL PVT. LTD. ARE MANUFACTURERS AND FOR THIS REASON THE PRICE CHARGE D BY M/S. PRAMUKH STEEL CORPORATION HAS TO BE HIGHER AS COMPARED TO T HE PRICE CHARGED BY THE MANUFACTURERS. WE FIND MERIT IN THIS CONTENTIO N OF THE LD. A.R. IN OUR CONSIDERED OPINION A G.P. ELEMENT OF 5% SHOULD BE CONSIDERED REASONABLE FOR A WHOLE SELLER AND HENCE TO THE EXT ENT OF PRICE DIFFERENCE OF 5% AS COMPARED TO THE PRICE CHARGED BY MANUFACT URERS IT SHOULD NOT BE CONSIDERED AS EXCESSIVE PRICE CHARGED BY M/S. PR AMUKH STEEL CORPORATION. IN THE PRESENT CASE THE TOTAL ADDITI ON MADE BY THE A.O. IS OF RS.2 05 137/- WHEREAS THE TOTAL PURCHASES FORM M/S. PRAMUKH STEEL I.T.A.NO. 3262 /AHD/2010 6 CORPORATION IS RS.14 54 906/- AS PER COPY OF LEDGER ACCOUNT OF M/S. PRAMUKH STEEL CORPORATION APPEARING ON PAGE 17 OF T HE PAPER BOOK. IN OUR CONSIDERED OPINION THE ASSESSEE DESERVES A TOT AL PRICE DIFFERENCE TO THE EXTENT OF 7% OF THE PRICE CHARGED BY M/S. PRAMU KH STEEL CORPORATION AS COMPARED TO PRICE CHARGED BY OTHER SUPPLIERS BEI NG MANUFACTURERS WHICH INCLUDE 5% ON ACCOUNT OF M/S. PRAMUKH STEEL C ORPORATION BEING WHOLE SELLER WHEREAS OTHER PARTIES ARE MANUFACTURER S AND 2% ON ACCOUNT OF CREDIT ALLOWED BY M/S. PRAMUKH STEEL CORPORATION . HENCE OUT OF TOTAL ADDITION OF RS.2 05 137/- ASSESSEE DESERVES RELIEF OF RS.1 LAC WHICH IS AROUND 7% OF RS.14.54 LACS. WE THEREFORE DELETE THE ADDITION OF RS.1 LAC OUT OF THE TOTAL ADDITION MADE BY THE A.O. OF R S.2 05 137/-. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) BY ORDER 5. THE DR AHMEDABAD 6. THE GUARD FILE AR ITAT AHMEDABAD I.T.A.NO. 3262 /AHD/2010 7 1. DATE OF DICTATION 18/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21/11.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 23/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 25/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.25/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25/11/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..