The DCIT, Circle-1,, Surat v. M/s. G.Tex Prints Pvt.Ltd.,, Surat

ITA 3862/AHD/2007 | 2004-2005
Pronouncement Date: 05-02-2010 | Result: Dismissed

Appeal Details

RSA Number 386220514 RSA 2007
Bench Ahmedabad
Appeal Number ITA 3862/AHD/2007
Duration Of Justice 2 year(s) 3 month(s) 20 day(s)
Appellant The DCIT, Circle-1,, Surat
Respondent M/s. G.Tex Prints Pvt.Ltd.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 05-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 05-02-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2004-2005
Appeal Filed On 15-10-2007
Judgment Text
1 IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI DEEPAK R. SHAH AND SHRI D.T. GARASIA. ITA NO. 3862/ AHD/2007 (ASSESSMENT YEAR :2004-05) THE DEPUTY COMMISSIONER OF INCOME TAX CIR.1 ROM NO.108 AAYAKAR BHAVAN MAJURA GATE SURAT. VS M/S.G. TEX PRINTS PVT. LTD. PLOT NO.254/255-A G.I.D.C. PANDESARA SURAT. (APPELLANT) (RESPONDENT) PAN:AABCG7566P APPELLANT BY : SHRI U.B. MISHRA RESPONDENT BY : SHRI RAJESH DESAI ( (( ( )/ )/)/ )/ ORDER PER: SHRI D.T. GARASIA. THIS IS AN APPEAL FILED BY THE REVENUE. REGARDING G ROUND NO.1 THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE HAS PURPORT ED PURCHASES FROM THE CONCERNS BELONGING TO SHRI ROHIT PANWALA. DURING TH E ASSESSMENT YEAR 2002-03 ACCORDING TO THE ASSESSEE HAS SHOWN CREDITS AS ON 1 -4-2003 BELONGING TO ROHIT PANWALA GROUP THE DETAILS OF WHICH ARE AS UNDER:- 2 SR.NO. NAME OF BOGUS CONCERNS. AMOUNT OF OP. CREDIT BALANC E AS ON 1.4.2003(RS.) 1. NEHA SYNTHETICS 542875 2. POOJA DHE CHEMICAL 632850 3. SHRI MAHAPRABHUJI TEXTILES. 2100 00 4. SHRI PARAS TEXTILES. 208100 5. SAI TEXTILES. 208425 6. SHRI TAPI TRADING CO. 673925 7. SHREEJI TEXTILES. 203875 8. SHREENATH TEXTILES. 199525 TOTAL 2879575 2. THE A.O. WAS OF THE VIEW THAT ROHIT PANWALA HAS CREATED BOGUS/BENAMI CONCERNS IN THE NAME OF HIS RELATIVES AND ASSESSEE HAS ISSUED THE SALES BILLS OF COLOUR CHEMICALS ETC. AND COLLECTED COMMISSION FOR THOSE FAKE BILLS FROM THE CUSTOMERS. THE A.O. THEREFORE GIVEN SHOW CAUSE NOT ICE AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE A.O. WAS OF THE VIEW THAT ROHIT PANWALA IS ENGAGED IN CHEQUE DISCOUNTING BUSINESS IN THE NAME OF HIS PROPRIETARY CONCERN ABHI CORPORATION. HE HAS ALSO BEEN ENGAGED IN THE B USINESS IN RESPECT OF COLOUR CHEMICALS AND YARN IN THE NAMES OF VARIOUS CONCERNS FLOATED BY HIM IN THE NAME OF HIS RELATIVES AND HE WAS EARNING COMMISSION FROM THIS BUSINESS WHICH RANGED FROM 01.5% TO 0.25% OF THE BILL AMOUNT. HE HAS GIV EN THE COMPLETE DETAILS OF BENAMI CONCERNS FLOATED BY HIM INCLUDING THE NAME O F THE PROPRIETOR OF EACH CONCERN AND ALSO THE DETAILS OF BANK ACCOUNT OF EAC H CONCERN. HE HAS ALSO GIVEN LIST OF 45 PROCESS/DYEING HOUSES OF SURAT TO WHOM S UCH BOGUS BILLS WERE GIVEN BY HIM. THEREFORE AFTER CONSIDERING THE REPLY THE A.O. TREATED THAT THE OPENING CREDIT FOUND AS OPENING BALANCE AMOUNTING TO RS.28 79 575/- IS TREATED AS BOGUS AND NOT GENUINE AND THE SAME IS DISALLOWED AN D ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3 3. THE MATTER CARRIED TO THE C.I.T.(A) AND THE C.I. T.(A) HAS ALLOWED THE CLAIM BY DISALLOWING AS UNDER:- I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPE LLANT AND OBSERVATION OF THE A.O. ADMITTEDLY AS PER THE AO HIMSELF THE ENTIRE AMOUNT OF RS.28 79 575/- IS REPRESENTING THE OPENING BALANCE OF THE CREDITORS AS PER THE TABLE PREPARED IN PARA 4.1 ON PAGE-2 OF THE ASS ESSMENT ORDER. AS PER THE SETTLED POSITION OF LAW BOGUS CREDITOR CAN ONLY BEADED IN THE YEAR IN WHICH THE CREDIT AROSE. THE OPENING BALANCE IS NATU RALLY CONSEQUENCE OF CLOSING BALANCE WHICH ARE BROUGHT FORWARD FROM THE EARLIER YEAR. HENCE IF ON MERIT THE PURCHASES BELONGING TO THE FIRMS MENTI ONED IN THE TABLE PREPARED IN PARA 4.1 WERE BOGUS THEN THE ENTIRE PUR CHASES AS WELL AS CREDITORS WOULD BE BOGUS IN THE A.Y. 2003-04 BUT NO T IN THE CURRENT YEAR. IN ANY CASE NO ADDITION CAN BE MADE ON THIS ISSUE IN THE CURRENT YEAR AND HENCE THE ADDITION OF RS.28 79 575/- IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 4. THE LEARNED D.R. SUBMITTED THAT A SEARCH WAS CAR RIED OUT IN THE CASE OF ROHIT PANWALA. DURING THE COURSE OF SEARCH SHRI ROH IT PANWALA WAS NOT AVAILABLE AND SHRI ROHIT PANWALA IN HIS STATEMENT HAS STATED THAT IN EARLIER YEARS HE WAS ENGAGED IN THE BUSINESS OF ISSUING BILLS IN RESPECT OF COLOUR CHEMICALS AND YARN IN THE NAME OF VARIOUS PERSONS FLOATED BY HIM IN THE NAME OF HIS RELATIVES AND HE WAS EARNING COMMISSION FROM THIS B USINESS AND HE HAS GIVEN THE COMPLETE DETAILS OF BENAMI CONCERNS FLOATED BY HIM INCLUDING THE NAME OF PROPRIETOR OF EACH CONCERNS. MR.ROHIT PANWALA STATE D THAT HE IS NOT SUPPLYING THE GOODS AS PER THE BILLS RECEIVED BY HIM FROM HIS BEN AMI CONCERNS BY HIM RECEIVED AGAINST THE BILLS CREDITED THE BANK ACCOUNT OF BOG US CONCERNS. THEREFORE AS PER THE INCOME TAX ACT ONLY REAL CLAIM CAN BE ALLOWED A ND NO BOGUS CLAIM CAN BE ALLOWED WHILE COMPUTING THE INCOME OF THE ASSESSEE. HERE THE CREDITORS ARE GENUINE OR NOT THE ASSESSEE DID NOT PRODUCE ANY EVI DENCE THEREFORE THE CIT (A) IS NOT JUSTIFIED IN DELETING THIS AMOUNT. 4 5. THE LEARNED A.R. SUBMITTED THAT AO HIMSELF HAS T REATED THAT THIS OPENING BALANCE OF CREDITORS AND THESE CREDITORS AROSE IN T HE LAST YEAR AS PER THE SETTLED PROVISIONS OF LAW. THEREFORE IT CANNOT BE ADDED DU RING THE YEAR. THEREFORE ON TECHNICAL GROUND ALSO THIS ADDITION SHOULD BE DELET ED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. AS PER THE A.O. ENTIRE AMOUNT OF RS.28 79 57/- IS PERTAINING TO THE OPENING BALANCE OF CREDITORS AS PER THE ASSESSMENT ORDER. AS PER THE LEGAL POSIT ION THE BOGUS CREDITS CAN BE ADDED IN THE YEAR IN WHICH THE CREDIT AROSE. THE OP ENING BALANCE IS NATURALLY CONSEQUENCE OF CLOSING BALANCE WHICH ARE BROUGHT FO RWARD FROM EARLIER YEARS. THE PURCHASES BELONGING TO THE FIRMS WERE BOGUS THE N THE ENTIRE PURCHASES AS WELL AS CREDITORS WOULD BE BOGUS IN A.Y. 2003-04 AN D NOT IN THE CURRENT YEAR. THEREFORE WE ARE OF THE VIEW THAT CIT(A) IS JUSTIF IED IN DELETING THE SAME AND OUR INTERFERENCE IS NOT REQUIRED. IN THE RESULT THE APP EAL OF THE DEPARTMENT IS DISMISSED. 7. THE SECOND GROUND OF APPEAL RAISED IS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.40 57 360/- MADE ON ACC OUNT OF ESTIMATION OF FURTHER PROFIT FOR LOW G.P. 8. THE A.O. FOUND THAT THERE WAS FALL IN G.P. BY 3. 59%. THE ASSESSEE IS INVOLVED IN SHOWING BOGUS PURCHASES AND THE RESULTA NT BOGUS OPENING CREDITORS THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE. THE A.O . STATED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING OF FABRICS ON JOB WORK. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN TURNOVER OF 11.3 CRORES AND G.P. @ 6.6% WHEREAS IN EARLIER YEARS THE TURNOV ER WAS 14.85 CRORES AND G.P. RATE WAS 10.19%. THE A.O. WAS OF THE VIEW THA T THE ASSESSEE WAS ENGAGED IN SHOWING BOGUS PURCHASES IN EARLIER YEARS SALES. THEREFORE ACCORDING TO THE A.O. THE BOOKS OF ACCOUNTS ARE NOT RELIABLE. THE A.O. ALSO FOUND THAT CONSUMPTION REGISTER WAS NOT PREPARED. ACCORDI NG TO A.O. IN THE MONTH OF MARCH 2004 THE CLAIM OF CONSUMPTION OF COLOUR CHEMI CALS WAS RS.5.11 PER 5 METER THE AVERAGE RATE OF JOB WORK WAS RS.14.65 PE R METER WHEREAS IN APRIL THE CLAIM OF CONSUMPTION WAS COMPARATIVELY WAS HIGHER A T RS.5.40 AND YET THE AVERAGE RATE OF JOB WORK CHAGES PER METER WAS RS.9. 52 ONLY AS COMPARED TO THE CONSUMPTION OF COLOUR CHEMICALS AND RATE OF JOB WOR K CHARGES FOR THE MONTHS OF JANUARY & FEBRUARY 2004 THE VARIATIONS ARE VAST TH EREFORE THERE WAS NO RHYME OR RHYTHM IN CLAIMS OF CONSUMPTION OF INPUTS AND RA TES OF JOB CHARGES PER METER. THE ASSESSEE HAS TWO STENTERS 8 CHAMBERS AND 8 PRI NTING MACHINES. THE ASSESSEE HAS PROCESSED 84 71 016 METERS OF FABRICS WHICH IS CONSIDERABLY LOW WITH REFERENCE TO THE INSTALLED CAPACITY. THEREFOR E RELYING UPON THE DECISION OF DCIT VS. SAMIR DIAMONDS EXPORTS LTD. (71 ITD-75) A ND VARIOUS DECISIONS OF HIGH COURT THE A.O. WAS OF THE VIEW THAT THEY ARE D ESTROYED AND CLAIM OF CONSUMPTION OF CRORES OF RUPEES REMAINED UNVERIFIAB LE AND IN VIEW OF THE FACTS THAT ASSESSEE HAS SHOWN BOGUS PURCHASES AND BOGUS C REDITORS THE FALL IN GROSS PROFIT BY 3.59% IS NOT EXPLAINED AND THEREFORE THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT AND ADOPTED LAST YEARS G.P. AND MADE THE A DDITION OF RS.40 57 360/-. 9. THE MATTER CARRIED TO THE COMMISSIONER OF INCOME TAX(APPEALS) AND THE CIT(A) HAS DELETED THE SAME BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND OBSERVATION OF THE A.O. IT IS A FACT THAT THERE IS A DECLINE OF GP% BY 3.59%. IN THE CURRENT YEAR THE G.P. RATE IS 6.69% COMPARED TO10.1 9% IN THE LAST YEAR. HOWEVER ONE OF THE REASON CITED BY THE AO THAT THE RE HAS BEEN BOGUS PURCHASES AND BOGUS CREDITORS IN THE EARLIER YEAR I S NOT RELEVANT BECAUSE THE BOGUS PURCHASES IF ANY AND BOGUS CREDITORS IF A NY OF EARLIER YEAR CANNOT LEAD TO THE RESULT THAT THE CURRENT YEARS BOOKS OF ACCOUNTS ARE ALSO UNRELIABLE. BESIDES THIS THE ONLY OTHER REASO N GIVEN BY HE AO FOR REJECTING THE BOOKS OF ACCOUNTS IS THAT IN THE MONT HLY CONSUMPTION BASIS THERE IS VARIATION IN JOB CHARGES CONSUMPTION OF C OLOUR CHEMICALS FROM ONE MONTH TO ANOTHER. THE AO HAS POINTED OUT NO DEF ECTS IN CURRENT YEARS BOOKS OF ACCOUNTS. THE AO HAS BROUGHT NOTHING ON RE CORD TO SAY THAT THERE WERE BOGUS PURCHASES OR BOGUS EXPENSES RELATI NG TO TRADING 6 ACCOUNT IN THE CURRENT YEAR. THE AO HAS BROUGHT NOT HING ON RECORD TO SHOW THAT THERE WAS SALES OUTSIDE THE BOOKS OF ACCO UNTS. THE CONSUMPTION REGISTER HAS BEEN MAINTAINED BY THE APP ELLANT. THE ONLY SUBMISSION MADE BY THE AO IS THAT THE BASIC RECORD FROM WHICH THE CONSUMPTION REGISTER IS PREPARED HAS NOT BEEN SHOWN . HOWEVER THE AO HAS POINTED NO DEFECT IN CONSUMPTION REGISTER OF VA RIOUS RAW MATERIALS INCLUDING COLOUR AND CHEMICALS. THE APPELLANT HAS B EEN ABLE TO EXPLAIN THE ENTIRE FALL IN GP RATE OF 3.59%. THE APPELLANT HAS EXPLAINED THAT THERE WAS INCREASE IN POWER AND FUEL EXPENSES TO THE EXTE NT OF RS.0.64 PER METRE. THERE WAS INCREASE IN LABOUR EXPENSES TO THE EXTENT OF 0.40 PER METRE THERE WAS INCREASE IN WATER CHARGES TO THE E XTENT OF RS0.16 PER METRE AND THERE WAS INCREASE IN DESIGN AND SKETCH E XPENSES TO THE EXTENT OF RS. 0.16 PER METRE AS PER THE TABLE PREPARED BY THE APPELLANT AND CITED ABOVE. THIS LED TO TOTAL INCREASE OF RS.1.36 PER ME TRE. THE APPELLANT HAS POINTED OUT THAT THERE WAS NET DECLINE IN VARIOUS O THER EXPENSES TO THE EXTENT OF RS.0.62 PER METRE AND THEREFORE THE NET I NCREASE IN VARIOUS EXPENSES WAS RS.0.74 PER METRE. THERE WAS AN INCREA SE IN JOB CHARGES ALSO TO THE EXTENT OF RS.0.26 PER METRE AND THEREFO RE THE NET DECLINE IN GP PER METRE OF CLOTH WAS RS0.48 WHICH TRANSLATED O N THE TOTAL PRODUCTION OF 84 71 016 METRES TO A FALL IN GP OF RS.40 66 000 /- WHICH IS ALMOST EXACTLY THE FALL IN GP WORKED OUT BY THE AO AMOUNTI NG TO RS.40 57 360/-. HENCE THE APPELLANT HAS BEEN ABLE TO EXPLAIN THE E NTIRE FALL IN GP WITH FACTS AND FIGURES. THE AO WAS UNABLE TO FIND ANY DE FECT IN THIS CALCULATIONS AND COMPUTATIONS. THEREFORE IT IS CLEAR THAT ALTHO UGH THE APPELLANT HAS EXPLAINED THE FALL OF GP RATE THE AO WAS UNABLE TO COUNTERACT AS TO WHY THE SAME WAS EITHER UNVERIFIABLE OR NOT RELIABLE. I N VIEW OF THESE REASONS THE DECLINE IN GP IS FULLY EXPLAINED BY THE APPELLA NT AND HENCE FOLLOWING THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF V IKRAM PLASTICS (SUPRA) AND DECISION OF KERALA HIGH COURT IN THE CASE OF ST . TERESAS OIL MILL (SUPRA) THE ADDITION MADE BY THE AO IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 7 10. THE LEARNED D.R. SUBMITTED THAT THE A.O. HAS VE RIFIED THE DETAILS OF CONSUMPTION AND PRODUCTION AND AO NOTICED THAT THER E WAS VAST VARIATION OF CONSUMPTION OF COLOUR CHEMICALS AND RATE OFJOB C HARGES IN CERTAIN MONTHS OF FINANCIAL YEAR AND THERE WAS NO RYTHEM IN CLAIM OF CONSUMPTION RATE OF JOB CHARGES. THE ASSESSEE HAS TWO STENTERS 8 CHAMBERS AND 8 PRINTING MACHINES BUT THE PRODUCTION SHOWN BY THE A SSESSEE WAS LOW WITH REFERENCE TO THE INSTALLED CAPACITY. THE ASSESSEE WAS ASKED TO PRODUCE BASIC RECORDS OF CONSUMPTION REGISTER. FURTHER THE ASSESSEE DID NOT PRODUCE THE SAME BEFORE THE A.O. ADVANCING REASON T HAT THEY WERE DESTROYED. THEREFORE THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145(3) AND HE HAS TAKEN THE G.P. OF LAST YE AR THEREFORE CIT(A) IS NOT JUSTIFIED IN DELETING THE SAME. 11. THE LEARNED A.R. SUBMITTED THAT ASSESSEE WAS MA INTAINING RECORDS AS PER THE REGULAR SYSTEM OF ACCOUNTING INWARD SLI PS INPUTS REGISTER STOCK ISSUE SLIP STOCK REGISTER DAILY CONSUMPTION REGISTER ITEM WISE LEDGER AND CLOSING REGISTER. DETAILS OF BOOKS OF AC COUNT AND SUPPORTING RECORDS ARE ALSO MAINTAINED AND AVAILABLE FOR VERIF ICATION FOR ALL THE TIME. THE BOOKS OF THE ASSESSEE ARE AUDITED THEY ARE SUBJ ECTED TO AUDIT AND ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNTS IN ACCORDANCE WITH THE INCOME TAX ACT CENTRAL EXCISE ACT AND FURTHER IT IS AUDITED BY AUDITOR AND NO ADVERSE OBSERVATIONS WERE POINTED OUT BY THE M. THEREFORE THE ASSESSEE HAS GIVEN THE REASON FOR DECLINE AND INCRE ASE OF JOB WORK CHARGES THEREFORE THE CIT (A) HAS RIGHTLY DELETED . 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE CIT(A) HAS HELD THAT BOGUS PURCHASES AND B OGUS CREDITORS IN EARLIER YEARS IS NOT RELEVANT BECAUSE BOGUS PURCHAS ES IF ANY AND BOGUS CREDITORS IF ANY OF EARLIER YEARS CAN NOT LEAD TO R ESULT FOR CURRENT YEARS BOOKS OF ACCOUNTS ARE ALSO UNRELIABLE. THE ASSESSEE HAS NOT POINTED OUT 8 ANY DEFECT IN CURRENT YEARS BOOKS OF ACCOUNT. THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO SAY THAT THERE WAS BOGUS PURC HASE OR BOGUS EXPENSES RELATED TO TRADING ACCOUNT IN CURRENT YEAR . THERE WERE NO SALES OUTSIDE THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS EXP LAINED THAT THERE WAS INCREASE IN POWER AND FUEL EXPENSES TO THE EXTE NT OF 0.62 PER METRE. THERE WAS INCREASE IN LABOUR EXPENSES TO THE EXTENT OF 0.40 PER METRE THERE WAS INCREASE IN WATER CHARGES TO THE EXTENT O F 0.16 PER METRE AND THERE WAS INCREASE IN DESIGN AND SKETCH EXPENSES OF 0.16 PER METRE PREPARED BY THE ASSESSEE. THEREFORE OVERALL THERE WAS TOTAL INCREASE OF EXPENDITURE OF 1.36 PER METRE AND DUE TO INCREASE I N EXPENDITURE THERE WAS FALL IN GP. THEREFORE THE ENTIRE FALL IN G.P. WERE EXPLAINED. THEREFORE CIT(A) HAS FOLLOWING THE DECISION OF HON. GUJART HI GH COURT IN THE CASE OF VIKRAM PLASTICS & OTHERS (239 ITR-161) THE ADDITION HAS BEEN DELETED AND OUR INTERFERENCE IS NOT REQUIRED. IN THE RESULT T HE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 5 /02/2010. SD/- SD/- (DEEPAK R. SHAH) (D.T. GARASIA) ACCOUNTANT MEMBER. JUDICIAL MEMBER. AHMEDABAD. DATED: 5 /02/2010. PATKI COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. 9