Shri Zaveri Paper & Board Mills, Dahod v. The Dy.CIT.,Panchmahal Circle, Godhra

ITA 4076/AHD/2007 | 2005-2006
Pronouncement Date: 31-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 407620514 RSA 2007
Assessee PAN AAAFZ1293J
Bench Ahmedabad
Appeal Number ITA 4076/AHD/2007
Duration Of Justice 2 year(s) 6 month(s) 23 day(s)
Appellant Shri Zaveri Paper & Board Mills, Dahod
Respondent The Dy.CIT.,Panchmahal Circle, Godhra
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 31-05-2010
Date Of Final Hearing 31-05-2010
Next Hearing Date 31-05-2010
Assessment Year 2005-2006
Appeal Filed On 07-11-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE SHRI MUKUL SHRAWAT JM & SHRI A N PAHUJA AM] ITA NO.4076/AHD/2007 (ASSESSMENT YEAR:-2005-06) ZAVERI PAPER & BOARD MILL AT & PO: PALLI TALUKA: LIMKHEDA [PAN: AAAFZ 1293 J] V/S DEPUTY COMMISSIONER OF INCOME-TAX PANCHMAHAL CIRCLE GODHRA [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI SAKAR SHARMA AR REVENUE BY:- SHRI M C PANDIT DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 06-08-2007 OF THE LD. CIT(APPEALS)-VI BARODA RAIS ES THE FOLLOWING TWO GROUNDS: 1 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS.88 684/- OUT OF THE PURCHASES MADE. 2 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFI RMING ADDITION OF RS.2 49 900/- U/S 68 OF THE I.T. ACT. 2 ADVERTING FIRST TO GROUND NO.1 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING LOSS OF RS.4 21 79 0/- FILED ON 31-10- 2005 BY THE ASSESSEE ENGAGED IN THE BUSINESS OF MA NUFACTURING CRAFT PAPER AFTER BEING PROCESSED ON 7.11.2005 U/S 143(1) OF THE INCOME-TAX ACT 1961 [ HEREINAFTER REFERRED TO AS T HE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 14.7.2006. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE GROSS PROFIT ON TURN OVER OF RS.2 05 09 654/- WAS 7.78% IN THE YEAR UNDER CONSIDERATION AS AGAINS T GP OF 9.39% IN THE PRECEDING YEAR ON TURNOVER OF RS.2 65 39 774 /-. THE AO FURTHER NOTICED THAT THE ASSESSEE HAD MADE URD PURC HASES OF RS.70 76 545/- AND FIREWOOD PURCHASES OFT RS.17 91 847/-. SOME PURCHASES HAVING BEEN MADE IN CASH THE AO ASKED TH E ASSESSEE TO ITA NO.4076/AHD/2007 FOR AY 2005-06 ZAVERI PAPER & BOARD MILL 2 JUSTIFY THESE PURCHASES. THE ASSESSEE REPLIED THAT WASTE MATERIAL WAS PURCHASED FROM UNORGANIZED SECTOR & UNKNOWN PER SONS WHO INSISTED ON CASH PAYMENTS WHILE THE PAYMENT FOR EAC H PURCHASE WAS BELOW RS.15 000/- AND COMPLETE RECORDS WERE MAINTAI NED. HOWEVER THE AO DID NOT ACCEPT THESE SUBMISSIONS ON THE GROU ND THAT THERE WAS NO CHECK OVER THE CASH PURCHASES OF RS.88 68 3 97/- AND THEREFORE DISALLOWED 2% OF SUCH PURCHASES TO COVER UP POSSIBLE REVENUE LOSS RESULTING IN ADDITION OF RS.1 77 368. 3 ON APPEAL THE ASSESSEE WHILE REITERATING THEIR S UBMISSIONS BEFORE THE AO CONTENDED THAT DISALLOWANCE HAD BEEN WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS NOR WAS TH ERE ANY ALLEGATION THAT THE PURCHASE PRICE STATED IN BOOKS WAS HIGHER COMPARED TO MARKET RATE . IN THE LIGHT OF THESE SUBMISSIONS THE LEARNED CIT(A) RESTRICTED THE DISALLOWANCE TO 1% OF THE PURCHASES I.E. RS.88 684/-. 4 THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE LEAR NED AR ON BEHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LEARNED CIT(A) AND CONTENDED THAT SINCE NO DEFECT S WERE FOUND IN THE BOOKS OF ACCOUNTS AND COMPLETE RECORDS WERE MA INTAINED THERE WAS NO JUSTIFICATION FOR ESTIMATED ADDITION. THE LE ARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE AO. 5 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE FACTS OF THE CASE. AS IS APPARENT FROM THE FACTS NARRATED IN THE IMPUGNED ORDERS NEITHER ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS HAS BEEN POINTED OUT NOR GENUINENESS OF ANY PARTICULAR PURCHASE OR PAYMENT THEREFOR OR EVEN SALE HAS BEEN DOUBTED. THE ASSESSING OFFICER HAS GIVEN ANY INSTANCE OF THE COMPARABLE CASE. IN T HESE CIRCUMSTANCES THERE IS NO JUSTIFICATION FOR ANY ESTIMATED DISALLOWANCE OUT OF THE PURCHASES . THEREFOE DISALLOWANCE OF 1% SUSTAINED BY THE LD. CIT(A) IS D ELETED. CONSEQUENTLY GROUND NO.1 IS ALLOWED.. ITA NO.4076/AHD/2007 FOR AY 2005-06 ZAVERI PAPER & BOARD MILL 3 6. GROUND NO.2 RELATES TO ADDITION U/S 68 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED TH AT THE ASSESSEE HAD ACCEPTED CASH DEPOSITS FROM VARIOUS PE RSONS DETAILED HEREUNDER: SR. NO. NAME DEPOSIT AMOUNT (RS.) 1 SHRI BABU BHAIJEE PATEL 18 500 2 SHRI DALSUKH BHODU PATEL 19 600 3 SHRI DHANSUKH MANSING MAHIDA 18 900 4 SHRI GANPAT SORAM PATEL 19 500 5 SHRI GOPAL MAMA 19 500 6 SHRI KANA SABUR CHAUHAN 16 000 7 SHRI MADHUR MANIA PATEL 15 500 8 MONA MADHUR PATEL 16 500 9 SHRI MUKESH SORAB PATEL 17 000 10 SHRI NARAN MANSUKH CHAUHAN 14 500 11 SHRI NATHABHAI BHAIJEE CHAUHAN 19 000 12 SHRI SABURBHAI DAHYABHAI PATEL 17 900 13 SHRI SANABHAI BHAIJEEBHAI PATEL 18 500 14 SHRI SORAMBHAI BHAIJEE CHAUHAN 19 000 TO A QUERY BY THE AO THE ASSESSEE SUBMITTED CONFI RMATION LETTERS FROM THE VARIOUS DEPOSITORS. SINCE THESE CONFIRMATI ONS DID NOT INDICATE THAT THE DEPOSITORS WERE FINANCIALLY CAPAB LE TO ADVANCE MONEY TO THE ASSESSEE A SHOW CAUSE NOTICE WAS ISS UED ON 22-02- 2007 ASKING THE ASSESSEE TO ESTABLISH IDENTITY OF THE DEPOSITOR GENUINENESS OF THE TRANSACTIONS AND CREDIT WORTHINE SS OF THE DEPOSITORS FAILING WHICH THE AFORESAID DEPOSITS WOULD BE TREATED AS U NEXPLAINED CASH CREDITS U/S 68 OF THE ACT. IN RESPONSE THE ASSESSEE SUBMITTED COPIES OF 7/12 EXTRACTS IN RESPECT OF DEPOSITORS MENTIONED AT SL. NO. 1 3 4 9 &11 ABOVE WHILE IN RESPECT OF DEPOSITORS AT SL. NO.2 5 TO 8 10 & 12 TO 14 THE AS SESSEE FURNISHED COPY OF ITA NO.4076/AHD/2007 FOR AY 2005-06 ZAVERI PAPER & BOARD MILL 4 ELECTION ID CARDS AND RATION CARDS. THE ASSESSEE AR GUED THAT THE TRIBALS DID NOT MAINTAIN ANY BANK ACCOUNT AND IN A SMALL VI LLAGE LLIKE PALLI THESE ILLITERATE TRIBALS USED TO KEEP THE CASH. SINCE THE ARGUMENT OF THE ASSESSEE WAS NOT SUPPORTED BY ANY EVIDENCE AND THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION AND CREDIT-WORTHINES S OF THE DEPOSITOR NOR EVEN COULD INFORM THE SOURCE OF INCOME OF THE AFORESAID DEPOSITORS THE AO ADDED THE AMOUNT OF RS.2 49 900/- U/S 68 OF THE ACT. 7 ON APPEAL THE LD. CIT(A) UPHELD THE ADDITION IN THE FOLLOWING TERMS:- 5.3. I HAVE GONE THROUGH THE CONTENTIONS OF THE AP PELLANT AND ALSO THE VIEW OF THE ASSESSING OFFICER. IT IS SEEN THAT ALL THE DEPOSITS WERE CLAIMED TO BE MADE IN CASH ON 1.4.2004. THE APPELLANT HAD F URNISHED CONFIRMATION LETTERS FROM THE DEPOSITORS. HOWEVER THE CONFIRMATI ON LETTERS DID NOT INDICATE THE FINANCIAL CAPACITY OF THE DEPOSITORS T O ADVANCE MONEY TO APPELLANT. FURTHER IN RESPECT OF SHRI GANPATBHAI RA TANSINH OF RS.35 900 NO CONFIRMATION WAS FILED. THE APPELLANT HAD FILED COPY OF 7/12 IN RESPECT OF SOME OF THE DEPOSITORS TO INDICATE THEIR LAND HOLDI NG / CROPS SOWN AND COPY OF ELECTION ID CARDS AND RATION CARDS .IN RESPECT O F SOME OTHERS. HOWEVER THESE DETAILS DO NOT ESTABLISH THE CAPACITY OF THE DEPOSITORS TO EARN SAVE AND ADVANCE MONIES AND ALSO THAT THE TRANSACTIONS W ERE GENUINE. IT IS ARGUED THAT THE DEPOSITORS WERE ILLITERATE TRIBALS AND DID NOT MAINTAIN BANK ACCOUNTS AND LOANED THE AMOUNT IN CASH TO THE APPEL LANT. THE APPELLANT COULD NOT EXPLAIN AS TO WHY THE POOR FARMERS CHOOSE TO MAKE DEPOSITS ON SAME DATE I.E. 1.4.2004 WITH THE APPELLANT. 5.3.1. THE APPELLANT'S TURNOVER IN THE PAST IS IN T HE REGION RS 2 CRORES. IT IS RATHER STRANGE THAT PERSONS OF SMALL MEANS WOULD AD VANCE THEIR HARD EARNED INCOME TO A BUSINESS ENTITY. FURTHER THE APP ELLANT HAS FAILED TO DISCHARGE THE BASIC ONUS CAST UPON IT TO ESTABLISH THE CREDITWORTHINESS OF THE DEPOSITORS. THE APPELLANT HAD MORE THAN ENOUGH OPPORTUNITY TO ESTABLISH THE IDENTITY OF THE CREDITORS AND THEIR C REDITWORTHINESS BUT NO DETAILS WERE SUBMITTED AT THE TIME OF ASSESSMENT / APPEAL PROCEEDINGS. IT HAS ALSO BEEN HELD THAT MERE FILING THE CONFIRMATIO N DOES NOT DISCHARGE THE ONUS OF THE ASSESSEE. RELIANCE IS PLACED ON BHARATI PVT. LTD. 111 ITR 950(CALCUTTA). THE AUTHORIZED REPRESENTATIVE ALSO E XPRESSED HIS INABILITY TO PRODUCE THESE PERSONS AT THE TIME OF ASSESSMENT PRO CEEDINGS AS WELL AS IN THE APPELLATE PROCEEDINGS. NO DETAILS WERE FURNI SHED IN REGARD TO THE CREDITWORTHINESS OF THESE