ACIT CEN CIR 8, MUMBAI v. SIA LIFESTYLES P. LTD, MUMBAI

ITA 4311/MUM/2010 | 2007-2008
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 431119914 RSA 2010
Assessee PAN AAFCS0567G
Bench Mumbai
Appeal Number ITA 4311/MUM/2010
Duration Of Justice 1 year(s) 5 month(s) 30 day(s)
Appellant ACIT CEN CIR 8, MUMBAI
Respondent SIA LIFESTYLES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 25-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2007-2008
Appeal Filed On 26-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER A ND SHRI V. DURGA RAO JUDICIAL MEMBER ITA NO. 4465/MUM./2010 (ASSESSMENT YEAR : 2005-06 ) M/S. SIA LIFESTYLES P. LTD. 301 DEV PLAZA OPP. OPP. FIRE BRIGADE STATION S.V. ROAD ANDHERI (W) MUMBAI 400 056 PAN AAFCS0567G .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8 MUMBAI .... RESPONDENT ITA NO. 4310/MUM./2010 (ASSESSMENT YEAR : 2006-07 ) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8 MUMBAI .. APPELLANT V/S M/S. SIA LIFESTYLES P. LTD. 301 DEV PLAZA OPP. OPP. FIRE BRIGADE STATION S.V. ROAD ANDHERI (W) MUMBAI 400 056 PAN AAFCS0567G .... RESPONDENT ITA NO. 4466/MUM./2010 (ASSESSMENT YEAR : 2006-07 ) M/S. SIA LIFESTYLES P. LTD. 301 DEV PLAZA OPP. OPP. FIRE BRIGADE STATION S.V. ROAD ANDHERI (W) MUMBAI 400 056 PAN AAFCS0567G .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8 MUMBAI .... RESPONDENT M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 2 ITA NO. 4311/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8 MUMBAI .. APPELLANT V/S M/S. SIA LIFESTYLES P. LTD. 301 DEV PLAZA OPP. OPP. FIRE BRIGADE STATION S.V. ROAD ANDHERI (W) MUMBAI 400 056 PAN AAFCS0567G .... RESPONDENT ITA NO. 4467/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) M/S. SIA LIFESTYLES P. LTD. 301 DEV PLAZA OPP. OPP. FIRE BRIGADE STATION S.V. ROAD ANDHERI (W) MUMBAI 400 056 PAN AAFCS0567G .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8 MUMBAI .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. PAVAN VED DATE OF HEARING 03.11.2011 DATE OF ORDER 25.11.2011 O R D E R PER J. SUDHAKAR REDDY A.M. APPEAL IN ITA NO.4465/MUM./2010 FILED BY THE ASSE SSEE IS FOR ASSESSMENT YEAR 2005-06 APPEAL IN ITA NO.4310/MUM. /2010 AND ITA NO. 4466/MUM./2010 ARE CROSS APPEALS FOR ASSESSMENT YE AR 2006-07 AND APPEAL IN ITA NO.4311/MUM./2010 AND ITA NO.4467/MUM ./2010 ARE CROSS M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 3 APPEALS FOR ASSESSMENT YEAR 2007-08. ALL THESE APPE ALS ARE DIRECTED AGAINST SEPARATE IMPUGNED ORDERS DATED 29 TH MARCH 2010 PASSED BY THE COMMISSIONER (APPEALS)-XXXVII MUMBAI. SINCE THE IS SUES ARISING IN ALL THESE APPEALS ARE COMMON FOR THE SAKE OF CONVENIEN CE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. BRIEF FACTS OF THE CASE AS BROUGHT OUT BY THE COMM ISSIONER (APPEALS) IN PARAS-2.3.1 TO 2.3.7 OF THE IMPUGNED ORDER DATE D 29 TH MARCH 2010 FOR ASSESSMENT YEAR 2005-06 ARE EXTRACTED BELOW FOR RE ADY REFERENCE:- 2.3.1 . THE UNDISPUTED FACTS ARE THAT THE APP ELLANT A PRIVATE LIMITED COMPANY IS A RETAILER IN ARTIFICIAL JEWELR IES AND ACCESSORIES. SEARCH AND SEIZURE ACTION U/S.132(1) OF THE ACT WAS UNDERTAKEN ON 11/4/2007 AT THE PREMISES OF THE APPELLANT WHEREIN CERTAIN MATERIALS LOOSE PAPERS DOCUMENTS VALUABLES ETC. WERE SEIZED. DURING THE PREVIOUS YEARS RELEVANT TO A.Y. 2005-06 AND 200 6-07 THE APPELLANT HAD SHOWN CERTAIN PURCHASES FROM CERTAIN PERSONS W HO WERE AVAILABLE AT THE GIVEN ADDRESS AT THE TIME OF SERVICE OF NOTI CES ISSUED LD. ASSESSING OFFICER AND THE APPELLANT COULD NOT PRODU CE THESE PARTIES FOR VERIFICATION BEFORE THE LD. ASSESSING OFFICER. CONS EQUENTLY ASSESSING OFFICER TREATED SUCH PURCHASES AS BOGUS PURCHASES A ND 25% OF SUCH PURCHASES WERE DISALLOWED FOLLOWING THE DECISION O F HONBE ITAT AHMEDABAD BENCH IN THE CASE OF VIJAY PROTINES LTD. VS. ACIT (SUPRA). ON THE OTHER HAND IT IS CASE OF THE APPELLANT THAT THE APPELLANT HAD DEVELOPED BAR CODE AND COMPUTERIZED INTERNAL CONTRO L SYSTEM WHICH RECORDED ALL THE TRANSACTIONS FROM PURCHASES TO SAL ES INCLUDING STOCK TRANSFERS ON DAY TO DAY AND ITEM TO ITEM BASIS. THE ENTIRE PROCESS OF PURCHASES PURCHASE RETURNS TRANSFERS TO VARIOUS B RANCHES OUTLETS SALES SALES RETURNS AND STOCK IN HAND WAS COMPUTER IZED AND BAR CODED. AFTER PURCHASING THE GOODS THE BAR CODING PR OCESS IS MANDATORY. IT WAS SUBMITTED BY THE LD AR BEFORE THE LD. ASSESSING OFFICER THAT THE FOOLPROOF OF ACCOUNTING AND INVENT ORY CONTROL WAS FOLLOWED BY THE APPELLANT. IT WAS SUBMITTED THAT TH E APPELLANT IS THE TRADER OF GOODS AND THERE WAS A ONE TO ONE RECONCIL IATION BETWEEN GOODS PURCHASED AND SOLD BY THE ASSESSEE. THEREFORE IT WAS ARGUED THAT THERE WAS NO BOGUS PURCHASE MADE BY THE APPELL ANT. ON THE OTHER HAND LD. ASSESSING OFFICER HAS OBSERVED VIDE PARA 7.5 AND 9.3.1 OF THE IMPUGNED ASSESSMENT ORDER AS UNDER: 7.5. IN SUCH CIRCUMSTANCES. THE ONLY INFERENCE THA T CAN BE DRAWN IS THAT THE GOODS HAVE BEEN PURCHASED BY T HE ASSESSEE BUT FROM OTHER SUPPLIERS. ONLY THE BILLS O F THE ITEMS WERE OBTAINED FROM THE ABOVEMENTIONED CONCERN S. IN OTHER WORDS THE ASSESSEE HAS MADE PURCHASES FRO M GREY MARKET AND TRIED TO GIVE THE PURCHASE A COLOU R OF GENUINENESS. BY OBTAINING FICTITIOUS INVOICES FOR T HE SAME FROM THE CONCERNS MENTIONED ABOVE. 9.3.1. THE SUBMISSIONS OF THE ASSESSEE HAVE BEE N EXAMINED. REGARDING THE PURCHASES OF RS.1 27 47 454 /- M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 4 THE ASSESSEE HAS NOT BEEN ABLE TO REFUTE THE FINDIN G OF THE DEPARTMENT. IT BECOMES CLEAR THAT THE PURCHASES WHICH HAVE BEEN DEBITED IN THE BOOKS ARE FROM BOGUS SUPPLIERS WHEREAS THE ASSESSEE HAS IN REALITY PURC HASES GOODS FROM OTHER SUPPLIERS. IN SUCH SITUATION THE INQUIRIES CONDUCTED BY THE DEPARTMENT SHOW THAT THE MATERIAL HAS NOT BEEN PURCHASED FROM SUPPLIER REFLE CTED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE HAS NOT BE EN ABLE TO REFUTE THIS FINDING THE ELEMENT OF INFLATI ON OF PURCHASES DEBITED IN THE BOOKS OF ACCOUNT NEEDS TO BE ESTIMATED. 2.3.2. BEFORE ME LD.AR VEHEMENTLY ARGUED THAT APPE LLANTS PURCHASES AND SALES WERE ACCEPTED BY SALES TAX DEPARTMENT OF GOVT. OF MAHARASHTRA AND THAT THE SALES TAX SCRUTINY ASSESSM ENTS WERE COMPLETED WITHOUT MAKING ANY ADVERSE COMMENTS. LD. ASSESSING OFFICER HAS ALSO NOT DISPUTED THE CORRECTNESS OF TH E SALES TAX ASSESSMENT. BESIDES THE ABOVE; APPELLANTS BOOKS OF ACCOUNTS ARE AUDITED UNDER COMPANY LAW AS WELL AS UNDER SECTION 44AB OF THE ACT AND NO ADVERSE COMMENTS MADE. LD. ASSESSING OFFICER HAS ACCEPTED THE AFORESAID ACCOUNTS WHILE HOLDING THE GREY MARKE T PURCHASES AND OBSERVING THAT ALL PURCHASED GOODS ARE ACCOUNTED FO R IN THE BOOKS AND ARE ACCOUNTED FOR IN THE BOOKS AND ARE EITHER SOLD OR LYING IN THE CLOSING STOCK. LD. ASSESSING OFFICER HAS NOT POINTE D OUT ANY DISCREPANCY IN THE APPELLANTS BOOKS OF ACCOUNTS. L D. AR HAS FURTHER ARGUED THAT THE APPELLANT WAS NEVER PROVIDED A COPY OF ALLEGED STATEMENT OF MR. K.K. GUPTA. WHICH HAS BEEN HEAVILY RELIED UPON BY THE LD. ASSESSING OFFICER. MOREOVER LD. ASSESSING OFFICER NEVER GAVE ANY OPPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE T HE SAID MR.K.K. GUPTA. THEREFORE THE STATEMENT MADE IF ANY BY THE SAID MR. K.K GUPTA HAS NO EVIDENTIARY VALUE AND LD. ASSESSING OF FICER HAS ERRED IN LAW AND IN FACTS WHILE MAKING ADDITIONS ON THE BASI S OF SUCH NON- EVIDENTIARY STATEMENT. LD. AR HAS ALSO FURTHER RELI ED AN THE FOLLOWING CASE LAWS (I) AMBESHWARI GRIH NIRMAN SAHAKARI SAMITI LTD. (2003) 78 TTJ 94 (JAI); (II) JAGDAMBA TRADING COMPANY VS. ITO (2007) 107 TT J 398; (JODHPUR) 2.3.3 IT IS NOTICED THAT THE APPELLANT HAD GIVEN THE WORKING OF PEAK INVESTMENT IN THE GREY MARKET PURCHASES BEFORE THE LD. ASSESSING OFFICER AGAINST SUCH PEAK WORKING OF RS.6 39 123/- FOR A.Y. 2005-06 AND ADDITION OF RS.6 78 592/- WAS MADE BY THE LD. A SSESSING OFFICER. SIMILARLY AGAINST THE PEAK WORKING FURNISHED BY TH E APPELLANT AT RS.20 71 694/- FOR A.Y. 2006-07 AN ADDITION OF RS.3 1 86 864/- WAS MADE BY THE LD. ASSESSING OFFICER LD. ASSESSING OFF ICERS DISALLOWANCE IS ONLY BASED ON ADHOC DISALLOWANCE OF 25% OF THE G REY MARKET PURCHASES. SUCH ADHOC DISALLOWANCE IS SOLELY BASED ON THE HONBLE AHMEDABAD TRIBUNAL DECISION DATED 15/1/1996 IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT. 2.3.4. IT IS CONTENDED BY THE LD. AR THAT THE LD. A SSESSING OFFICER ESTIMATED THE DISALLOWANCE AT 25% OF THE GREY MARKE T PURCHASES M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 5 WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF AC COUNTS AND WITHOUT ANY EVIDENCES. LD. AR ALLEGED THAT THE ASSESSING OF FICERS ESTIMATION IS BASELESS WITHOUT EVIDENCE UNCALLED FOR IRRATIONA L AND ARBITRARY. LD. ASSESSING OFFICER HAS SIMPLY RELIED ON THE DECISION OF HONBLE ITAT AHMEDABAD IN THE CASE OF M/S. VIJAY PROTEIN LTD. W HICH IS AN OLD CASE DATED 15/1/1996. WHEREAS THE LD. ASSESSING OFFICER HAS RELIED ON HONBLE ITAT AHMEDABADS DECISION DATED 15/1/1996 HE HAS IGNORED THE RECENT DECISION OF HONBLE ITAT AHEMODABAD DATE D 25/1/2008 IN THE CASE OF TOTARAM B. SHARMA AND HONBLE GUJARAT H IGH COURTS DECISION IN THE SAID CASE OF TOTARAM B. SHARMA DATE D 9/2/2010. I FIND CONSIDERABLE FORCE IN THE ARGUMENTS OF THE LD. AR T HAT THE RECENT DECISION OF THE SAME TRIBUNAL SHOULD BE PREFERRED O VER THE OLD DECISION AND THAT HONBLE GUJARAT HIGH COURTS DECISION WILL HAVE PRECEDENCE OVER THE HONBLE AHMEDABAD TRIBUNAL AS ARGUED BY HI M. 2.3.5. WHILE AGREEING WITH THE SUBMISSIONS OF TH E APPELLANT LD. ASSESSING OFFICER HAS ESTIMATED 25% OF THE PURCHASE S MADE THROUGH THE SAID IMPEX SALES CORPORATION AND N.B. ENTERPRIS ES FOR A.Y. 2005- 06 AS BOGUS AND DISALLOWED THE SAME. SUCH ADHOC DIS ALLOWANCE WITHOUT ANY EVIDENCE AND WITHOUT ANY MATERIAL IN PO SSESSION AND WITHOUT ANY COGENT REASONS ARE NOT SUSTAINABLE AS S UCH. THEREFORE ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE LD. A SSESSING OFFICER HAS NOT RELIED ON ANY SEIZED MATERIAL NOR ANY INCRIMINA TING MATERIAL NOR ANY UNACCOUNTED CASH NOR ANY OTHER INCRIMINATING BO OKS OF ACCOUNT SEIZED FROM APPELLANTS PREMISES TO PROVE THE CASE OF THE LD. ASSESSING OFFICER. HONBLE ITAT IN THE CASE OF MILK FOOD LTD. VS. CIT - 55 TTJ - 848 (DEL.) HAD DELETED THE DISALLOWANCE OF PURCHASES ON THE REASONS THAT THE ASSESSEE HAD REGULARLY MAINTAINED AND TAX AUDITED ITS BOOKS OF ACCOUNT AND NO IRREGULARITY WAS POINTED OU T IN THE ASSESSMENT THUS REJECTION OF BOOKS U/S. 145 WAS ER RONEOUS. IT WAS ALSO HELD THAT REVENUE HAD NOT CONDUCTED ANY ENQUIR Y TO PROVE CONTRARY THAT THE MATERIALS WERE NOT RECEIVED BY TH E ASSESSEE. NO MATERIAL EVIDENCES WERE FOUND NOR SEIZED DURING SEA RCH & SEIZURE ACTION. THERE WAS NO MATERIAL EVIDENCE BROUGHT ON R ECORD BY THE REVENUE TO ESTABLISH THAT CASH WAS RECEIVED BY THE ASSESSEE AGAINST ITS CHEQUE PAYMENT MADE TOWARDS PURCHASES. THE CONSUMPT ION OF RICE HUSK IN MILK PROCESSING WAS ESTABLISHED BY THE ASSE SSEE AND CONSUMPTION RATIO WAS PROVED. APPELLANTS CASE IS A RGUED AS VERY MUCH SIMILAR TO THE SAID CASE OF MILK FOODS LTD.(SU PRA). I ALSO FIND CONSIDERABLE FORCE IN THE DECISIONS CITED BY LD. AR AND AS DISCUSSED IN THE PRECEDING PARAGRAPHS AND IN HIS WRITTEN SUBMISS IONS FILED BEFORE ME. 2.3.6 HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE AND LIGHT OF THE VARIOUS DECISIONS INCLUDING THE MOST R ECENT DECISION OF HONBLE HIGH COURT IN THE CASE OF TOTARAM B SHARMA VS. ITO IS (SUPRA) IT IS FELT THAT THE APPELLANTS WORKING OF PEAK IN THE GREY MARKET PURCHASES HAVE TO BE ACCEPTED AT RS.6 39 123 /- FOR A.Y. 2005- 06 AND RS.20 71 694/- FOR A.Y. 2006-07. 2.3.7. NEVERTHELESS THE STATEMENT OF MR. K.K. GUPT A AND NON- AVAILABILITY OF THE SUPPLIER OF GOODS AND NON-PRODU CTION OF SUCH SUPPLIERS BY THE APPELLANT BEFORE LD. ASSESSING OFF ICER AND BEFORE APPELLATE AUTHORITIES DO CONFIRM THAT THE APPELLAN T HAD INDULGED IN BILL TRADING AND HAD OBTAINED CORRESPONDING BILLS THROUG H IMPEX SALES M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 6 CORPORATION AND N.B. ENTERPRISES. ON THE OTHER HAND THE PRESENCE OF THE EVIDENTIORY DOCUMENTS AND THE INTERNAL ACCOUNTI NG DOCUMENTS OF THE APPELLANT SHOW THAT THE MATERIALS WERE PURCHASE D AND ONE-TO-ONE RECONCILIATION BETWEEN THE MATERIALS PURCHASED AND SOLD OR LYING IN THE CLOSING STOCK. EVEN THE LD. ASSESSING OFFICER HAS A CCEPTED THAT THE APPELLANT HAS PURCHASED THE NECESSARY MATERIALS FRO M SOME WHERE BECAUSE THE SALES HAVE NOT BEEN DOUBTED. 3. THEREAFTER THE COMMISSIONER (APPEALS) AT PARA-2.3 .8 OF HIS ORDER HELD AS FOLLOWS:- 2.3.8. IT IS A WIDELY PREVALENT PRACTICE IN BUSIN ESS CIRCLES THAT MATERIALS LIKE SAY OF STEEL CHEMICALS HDPE GRANU LES ETC. THEY ARE PROCURED FROM UNREGISTERED DEALERS TO AVOID SALES-T AX EXCISE DUTY ETC. AND THE BILLS FOR THE SAME ARE OBTAINED FROM S OME OTHER PARTIES FOR ACCOUNTING PURPOSES. IN FACT THIS IS KNOWN AS BILL TRADING THE SALES- TAX DEPARTMENT FOR WHICH A SEPARATE WING IS OPERATING IN THE DEPARTMENT TO FIND OUT THESE SALES-TAX EVASIONS THR OUGH THIS BILL TRADING PRACTICE. THE MAXIMUM PROFIT MAKING ZEAL PR EVALENT IN THE BUSINESS CIRCLES AND THE COROLLARY NAKED REALITY IN THE WORLD HAS TO BE TAKEN INTO ACCOUNT WHILE DETERMINING THE INCOME OF ASSESSEE WHERE ONLY THE REAL INCOME HAS TO BE TAXED AND NOT NOTION AL INCOME. THEREFORE I AM INCLINED TO ACCEPT THAT THE APPELLA NT HAS PURCHASED SAME RAW MATERIALS FROM SOMEWHERE IF NOT FROM THE SAID IMPEX SALES CORPORATION AND N.B ENTERPRISES. BUT WHEN SOMEONE B UYS THE MATERIALS FROM OUTSIDE THROUGH THE UNREGISTERED DEA LERS THE PURCHASE COST WOULD BE LITTLE LESS THAN WHAT HAS BEEN DEBITE D IN THE BOOKS OF ACCOUNTS SINCE THESE PURCHASES WOULD NOT NORMALLY I NCLUDE SALES-TAX AND EXCISE-DUTY ELEMENTS. THUS THE APPELLANT WOULD HAVE PURCHASED THE MATERIALS AT A LESSER COST. TAKING INTO CONSIDE RATION THE EXISTING PRACTICE AND TAKING INTO ACCOUNT THE ASSESSEES COMP ARABLE G.P. RATE DISCLOSED IN THE RETURNS OF INCOME I HOLD THAT A CO NSERVATIVE DISALLOWANCE OF 2% GP RATE ON GREY MARKET PURCHASES WOULD MEET THE ENDS OF JUSTICE IN ADDITION TO THE TAXATION OF RS.6 39 123/- FOR A.Y. 2005-06 AND RS.20 71 694/- FOR A.Y. 2006-07 ON ACCO UNT OF PEAK INVESTMENTS IN GREY MARKET PURCHASES CONFIRMED BY M E. ON THE OTHER HAND LD. ASSESSING OFFICERS DISALLOWANCE @ 25% IS NOT BASED ON ANY EVIDENCE NOR ANY DOCUMENTS NOR ANY INCRIMINATING MA TERIALS AND SUCH ESTIMATE IS ARBITRARY UNREASONABLE AND IRRATIONAL AND CANNOT BE SUSTAINED IN TOTO. THEREFORE THE ADDITION MADE BY THE LD. ASSESSING OFFICER IS RESTRICTED TO RS.6 39 123/- PLUS TWO PER CENT OF GROSS PROFIT ON GREY MARKET PURCHASES AS DISCUSSED ABOVE FOR A.Y . 2005-06. HOWEVER THE SAME BEING A LITTLE MORE THAN THE ADDI TION OF RS.6 78 592/- MADE BY THE LD. ASSESSING OFFICER I CONFIRM ADDITION OF RS.6 78 592/- IN A.Y. 2005-06. HOWEVER IN A.Y. 200 6-07 THE ADDITION SHALL BE REDUCED TO RS.20 71 694/- PLUS TWO PERCENT OF GROSS PROFIT ON GREY MARKET PURCHASES AS DISCUSSED ABOVE. GROUND NO S. 1 TO 3 FOR A.YS 2005-06 & 2006-07 ARE ACCORDINGLY PARTLY ALLOW ED. 4. FOR ASSESSMENT YEARS 2005-06 2006-07 AND 2007-08 THE ASSESSEE FILED APPEALS ON THE FOLLOWING COMMON GROUNDS:- M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 7 2. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FAC TS IN CONFIRMING THE ADDITION ON ACCOUNT OF GP ON GREY MARKET PURCHA SES @ 2 % OF SUCH PURCHASES. 3. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACT S IN CONFIRMING THE ADDITION OF RS.6 78 592/- ON ACCOUNT OF PEAK IN VESTMENTS IN GREY MARKET PURCHASES. 4. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACT S IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN REJECTING THE BE NEFIT OF TELESCOPING IN RESPECT OF DISCLOSURE MADE IN THE RETURN OF INCOME ON ACCOUNT OF UNACCOUNTED STOCK OF RS.1 49 90 334/- FOUND DURING THE COURSE OF SEARCH. 5. REVENUE HAS NOT FILED ANY APPEAL FOR ASSESSMENT YEA R 2005-06. FOR ASSESSMENT YEARS 2006-07 AND 2007-08 THE REVENUE H AS FILED APPEALS BY RAISING FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT A CONSERVATIVE DISALLO WANCE OF 2% G.P. RATE ON GREY MARKET PURCHASES AND PEAK INVESTMENTS IN PURCHASES WILL MEET THE END OF JUSTICE WITHOUT APPRECIATING THE FA CT THAT THE ASSESSING OFFICER HAS CORRECTLY RELIED ON THE DECIS ION OF THE VIJAY PROTEINS VS. ACIT (58 ITD 248) AND ESTIMATED DISALL OWANCES @ 25% DUE TO FAILURE ON THE PART OF THE ASSESSEE TO PRODU CE RELEVANT MATERIAL FACT NECESSARY FOR ASSESSMENT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE BENEFIT ON TELESCOPING IN RESPECT OF UNACCOUNTED STOCK OF RS.1 49 90 334/- FOUND DURING THE COURSE OF SEARCH HOLDING THAT PURCHASES HAS ONE TO ONE RECONC ILIATION WITH UNACCOUNTED STOCK; EVEN THOUGH THE ASSESSING OFFICE R HAS CLEARLY MENTIONED IN THE ORDER THAT NO SUCH RECONCILIATION WAS MADE IN RESPECT OF UNACCOUNTED STOCK DURING THE ASSESSMENT PROCEEDINGS. 6. BEFORE US LEARNED DEPARTMENTAL REPRESENTATIVE MR. PAVAN VED ON BEHALF OF THE REVENUE SUBMITTED THAT HE WOULD ADVI SE THE ASSESSING OFFICER TO FILE AN ADDITIONAL GROUND OF APPEAL FOR ASSESSME NT YEAR 2006-07 AS WELL AS 2007-08 WHEREIN THE TRIBUNAL WOULD BE REQUESTED TO ENHANCE THE DISALLOWANCE TO 100% OF THE GREY MARKET PURCHASES INSTEAD OF 25% DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDER. ON A QUERY FROM THE BENCH AS TO WHETHER THE REVENUE CAN FILE SUCH A GROUND WHICH WOULD BE CHALLENGING BY THE ORDER OF THE ASSE SSING OFFICER LEARNED DEPARTMENTAL REPRESENTATIVE STATED THAT HE CAN DO S O. RELIANCE WAS PLACED M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 8 ON THE JUDGMENT OF HON'BLE SUPREME COURT IN NATIONA L THERMAL POWER CORPORATION V/S CIT [1998] 229 ITR 0383. HE ALSO RELIED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN CIT V/S LA MEDICA 1 17 TAXMAN 628 (DEL.) AND IT WAS SUBMITTED THAT WHEN THE ASSESSEE FAILS TO PR OVE THE BONAFIDE OF THE SELLER FROM WHOM IT CLAIMED TO HAVE PURCHASED RAW MATERIAL THE QUESTION OF PARTLY ALLOWING THE EXPENDITURE DOES NOT ARISE. ON A QUERY FROM THE BENCH THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE TRIBUNAL CAN ENHANCE THE ASSESSMENT AND DISALLOW A GREATER AMOUN T THAN WHAT THE ASSESSING OFFICER HAS DISALLOWED IN THE ASSESSMENT ORDER AND IN SUPPORT OF THIS PROPOSITION HE RELIED ON THE JUDGMENT OF HON' BLE SUPREME COURT IN CIT V/S ASSAM TRAVELS SHIPPING SERVICES [1993] 199 ITR 001 (SC). THE BENCH EXPRESSED ITS PRIMA FACIE VIEW THAT SUCH ADDITIONAL GROUNDS CHALLENGING THE FINDING OF THE ASSESSING OFFICER CANNOT BE FILED BY THE ASSESSING OFFICER HIMSELF. LEARNED DEPARTMENTAL REPRESENTATIVE IN RE SPONSE CONTINUED HIS ARGUMENTS ON MERIT AND SUBMITTED THAT 3.40% OF THE TOTAL PURCHASES OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 REMAINED UNPRO VED AND THE PRESUMPTION OF THE ASSESSING OFFICER THAT THE PURCH ASES WOULD HAVE BEEN MADE FROM CERTAIN OTHER PERSONS OR FIRMS AND NOT FR OM THE PERSONS WHO GAVE THE BILLS AND IS BAD-IN-LAW. HE TOOK THIS BENC H THROUGH EACH OF THE FINDINGS OF THE ASSESSING OFFICER AND FOUND FAULT W ITH THE SAME. ON A QUERY FROM THE BENCH AS TO WHETHER THE TRIBUNAL HAS THE P OWER TO DISTURB THE FACTUAL FINDINGS OF THE ASSESSING OFFICER WHEN THE COMMISSIONER (APPEALS) CONFIRMED THE SAME AND THE REVENUE HAS NOT DISPUTED THE SAME IN APPEAL LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE INCONSISTENCIES AND ERRORS COMMITTED BY THE ASSESSING OFFICER IN HIS FI NDINGS CAN BE DISPUTED BEFORE THE TRIBUNAL BY THE ASSESSING OFFICER HIMSEL F AND THE TRIBUNAL GIVEN A FINDING ON SUCH ERRORS. HE RELIED ON THE JUDGMENT O F HON'BLE SUPREME COURT IN BHAVANA CHEMICALS LTD. V/S CIT [1998] 231 ITR 0 507 (SC). 7. ON MERITS THE LEARNED DEPARTMENTAL REPRESENTATIVE S SUBMISSIONS ARE SUMMARIZED AS FOLLOWS:- (I) THE BURDEN LIES ON THE ASSESSEE TO PROVE HIS CLAIM OF PURCHASES; M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 9 (II) THE PRINCIPLE OF ESTOPPLE BY ELECTION APPLIES AND T HE ASSESSEE CANNOT BE ALLOWED TO APPROBATE AND REPROBA TE I.E. THE ASSESSEE SHOULD NOT BE ALLOWED TO STATE T HAT HE PURCHASED GOODS FROM X AND THEREAFTER ALLOWED TO CHANGE HIS STATEMENT AND STATE THAT IT PURCHASED GO ODS FROM Y INSTEAD; (III) THE ASSESSING OFFICER IS WRONG IN INFERRING THAT GO ODS HAVE BEEN PURCHASED BY THE ASSESSEE FROM OTHER SUPPLIERS AND WHEREAS BILLS WERE OBTAINED FROM THE PARTIES MENTIO NED IN THE ASSESSMENT ORDER I.E. IMPEX SALES CORP. AND N. B. ENTERPRISES; (IV) THAT ONE-TO-ONE RECONCILIATION BETWEEN GOODS PURCHA SED AND SOLD CANNOT BE ACCEPTED AS A PRESUMPTION THAT T HE SALES IN QUESTION WAS FROM UNACCOUNTED STOCKS; (V) PAYMENT IN CHEQUE WAS MADE TO ONE PERSON AND WHEREA S CASH PAYMENT WOULD HAVE BEEN MADE FOR PURCHASE IN G REY MARKET AND THIS RESULTED IN ATTRACTION OF THE PROVI SIONS OF SECTION 40A(3) AND THAT 40A(3) IS AN OVERRIDING SEC TION. SOURCE FOR PURCHASES IS NOT KNOWN AND HENCE ADDIT IONS SHOULD HAVE BEEN MADE UNDER SECTION 69C AND IF SO THE PROVISO TO SECTION 69C COMES INTO PLAY AND THE ASSE SSEE WOULD NOT BE ALLOWED A DEDUCTION; AND (VI) THAT TELESCOPING CAN BE ALLOWED ONLY IN CASES WHERE GROSS PROFIT ADDITION HAS BEEN HAS BEEN ACCEPTED; AND (VII) THE WORKING OF PEAK ADDITION IS GIVEN BY THE ASSESS EE AND HENCE THERE CANNOT BE ANY DISPUTE IN THE SAME. 8. ALTERNATIVELY AND WITHOUT PREJUDICE THE ASSESSING OFFICER HAS RIGHTLY FOLLOWED THE JUDGMENT OF HONBLE AHMEDABAD HIGH COU RT IN VIJAY PROTEINS LTD. V/S ACIT [1996] 058 ITD 0428 (AHD.) AND THE C OMMISSIONER (APPEALS) HAS WRONGLY REDUCED THE SAME BY 2%. IF THE ASSESSEE WAS TO GIVE GAIN 2% NO BOGUS PURCHASES NEED TO BE BOOKED. M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 10 9. LEARNED COUNSEL MR. VIJAY MEHTA ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE TRIBUNAL HAS NO POWER TO ENHANCE THE ASSESSMENT. IN SUPPORT OF HIS ARGUMENTS HE RELIED ON THE FOLLOWIN G CASE LAWS:- ACIT V/S MS. AISHWARYA K. RAI [2010] 127 ITD 0204 (MUM.); ITO V/S ANANT Y. CHAVAN (2009) 126 TTJ 984 (PUNE); MCORP GLOBAL P. LTD. V/S CIT [2009] 309 ITR 0434 (SC); AND MAHENDRA & MAHENDRA LTD. V/S DCIT (2009) 313 ITR ( AT) 263 (SB) 10. HE SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN C ERTAIN FACTUAL FINDINGS AND THESE FACTUAL FINDINGS WERE CONFIRMED BY THE COMMISSIONER (APPEALS) AND THAT UNDER THOSE CIRCUMSTANCES IT WA S NOT OPEN FOR THE LEARNED DEPARTMENTAL REPRESENTATIVE TO ARGUE AGAINS T THESE FACTUAL FINDINGS. HE DISTINGUISHED THE JUDGMENTS OF HON'BLE SUPREME C OURT IN ASSAM TRAVELS SHIPPING SERVICES (SUPRA) AND BHAVANA CHEMICALS LTD . (SUPRA) AND PRAYED THAT THE ADDITIONAL GROUND SEEKING ENHANCEMENT OF A SSESSMENT BY WAY OF DISALLOWANCE OF 100% OF PURCHASES WHEREIN THE ASSE SSING OFFICER HAS JUST DISALLOWED 25% OF PURCHASES SHOULD NOT BE ENTERTAIN ED. ON MERITS THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEES CASE IS THAT THE PURCHASES IN QUESTION ARE GENUINE AND HAVE BEEN MADE FROM REGIST ERED DEALERS AND PAYMENTS WERE MADE THROUGH CROSSED CHEQUES. HE ARGU ED THAT MERE FACT THAT THESE ENTERPRISES HAVE NOT BEEN LOCATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS CANNOT LEAD TO A CONCLUSION THAT THE PURCHASES ARE NOT GENUINE OR THAT THESE PARTIES ARE FICTITIOUS. T HE QUESTION OF APPLYING PRINCIPLES OF ELECTION DOES NOT ARISE AS THE ASSESS EE HAS ALWAYS CONTENDED THAT THE PURCHASES ARE GENUINE AND HAVE BEEN MADE O NLY FROM THESE PARTIES WHO GAVE BILLS DELIVERY CHALLAN AND RECEIVED PAYME NT IN CHEUES. THE ASSESSEE WAS A TRADING CONCERN AND DID NOT HAVE ANY MANUFACTURING ACTIVITY AND THAT ALL THE PURCHASES AND SALES WERE RECONCILE D ONE-TO-ONE. THAT IF THERE ARE NO PURCHASES THERE CANNOT BE ANY QUESTIO N OF SALES. THAT THE GROSS PROFIT SHOWN BY THE ASSESSEE IS 39.04% AND IF FURTHER 25% IS DISALLOWED THE GROSS PROFIT WOULD BE MORE THAN 65% WHICH WOULD BE ABNORMAL. THAT THE ASSESSING OFFICER ACCEPTS THAT T HE ASSESSEE HAS PURCHASED GOODS AND THE ONLY ISSUE IS WHETHER HE PU RCHASED THE GOODS FROM M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 11 IMPEX SALES CORPORATION AND N.V. ENTERPRISES OR FRO M SOME OTHER PARTY. THAT THE JUDGMENT OF HONBLE AHMEDABAD HIGH COURT I N VIJAY PROTEINS LTD. (SUPRA) WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. THAT THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN LA MEDICA (SUPRA) AL SO DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE AND IN FACT IT SUPPORTS I TS CASE THAT THE TRIBUNAL CANNOT MAKE OUT THE THIRD CASE. 11. HE SUBMITTED THAT AS THE FACTUM OF PURCHASES HAS BE EN ACCEPTED BY THE REVENUE AND AS THE PAYMENTS WERE MADE BY CROSS CHEQUE AND THE SOURCES OF PAYMENT IS NOT DOUBTED OR FOUND INSUFFIC IENT THERE IS NO QUESTION OF EITHER MAKING ADDITION UNDER SECTION 69C OF THE ACT OR SUSTAINING THE PEAK ADDITION. THAT THE ASSESSEE HAS SUBMITTED BEFORE TH E ASSESSING OFFICER THAT NO ADDITION SHOULD BE MADE AND ONLY AS A WITHOUT PR EJUDICE ARGUMENT SUBMITTED CALCULATION OF PEAK CREDIT. THAT WHEN THE CASE OF THE REVENUE IS THAT THE ASSESSEE HAS INFLATED ITS PURCHASES BY CER TAIN PERCENTAGE THE QUESTION OF PEAK ADDITION DOES NOT ARISE. THAT THE TELESCOPING BENEFIT SHOULD BE GIVEN TO THE ADDITION SUSTAINED. THAT THE TELESC OPING BENEFIT SHOULD BE GIVEN OF THE PROFIT ASSESSED THIS YEAR INTO THE UND ISCLOSED INVESTMENTS OF THE SUBSEQUENT YEAR. THAT THE TELESCOPING SHOULD BE ALL OWED IN THE UNDISCLOSED STOCKS OFFERED BY THE ASSESSEE. IN SUPPORT OF HIS A RGUMENTS HE RELIED ON THE FOLLOWING CASE LAWS:- CIT V/S K.S.M. GURUSWAMY NADAR & SONS [1984] 149 I TR 0127 (SC); CIT V/S JAWANAL GEMAJI GANDHI [1985] 151 ITR 0353 (BOM.); AND ACIT V/S DHARAMDAS AGARWAL [1983] 144 ITR 0143 (MP ). 12. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD AS WELL AS THE CASE LAWS CITED BEFORE US WE HOLD AS FOLLOW S:- 13. WE FIRST DEAL WITH THE ADDITIONAL GROUND SOUGHT TO BE RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. TO RECAPITULAT E THE FACTS THE ASSESSING OFFICER HAS COME TO A CONCLUSION THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE 3.4% OF PURCHASES MADE. AS THE SALES A RE NOT IN DISPUTE AND AS THE ASSESSEE HAS RECONCILED THE PURCHASE WITH SA LES ON ONE-TO-ONE BASIS M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 12 THE ASSESSING OFFICER ON THE FACTS OF THE CASE CA ME TO A CONCLUSION THAT THE ASSESSEE HAS IN FACT PURCHASED THESE GOODS FROM C ERTAIN PARTIES BUT HAD OBTAINED BILLS FROM CERTAIN OTHER PARTIES. ACCORDIN G TO THE ASSESSING OFFICER THE ASSESSEE HAS DONE SO TO INFLATE ITS COST OF PUR CHASES. THUS 25% OF SUCH PURCHASES WERE DISALLOWED AND TO THAT EXTENT THE P ROFITS WERE TAXED. ON APPEAL THE FIRST APPELLATE AUTHORITY RESTRICTED TH E DISALLOWANCE TO 2% OF THE PURCHASES AS THE ASSESSEE HAS SHOWN A GROSS PROFIT OF 39.04% . FOR THE ASSESSMENT YEAR 2005-06 THE REVENUE HAS NOT FILED ANY APPEAL DISPUTING THIS FINDING OF THE COMMISSIONER (APPEALS). FOR ASS ESSMENT YEARS 2006-07 AND 2007-08 THE REVENUE FILED APPEALS SEEKING DISA LLOWANCE OF SUCH PURCHASES TO BE RESTORED TO 25% AS HELD BY THE ASS ESSING OFFICER. 14. LEARNED DEPARTMENTAL REPRESENTATIVE RAISES A GROUND BEFORE US THAT 100% OF THE PURCHASES SHOULD BE DIRECTED TO BE DISA LLOWED BY THE ASSESSING OFFICER. IN OUR OPINION SUCH A GROUND CANNOT BE TA KEN BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AT THIS STAGE. WE DO NO T UNDERSTAND AS TO HOW THE ASSESSING OFFICER CAN FILE A GROUND AGAINST HIS OWN FINDINGS. THE MUMBAI BENCH OF THE TRIBUNAL IN MS. AISHWARYA K. RAI (SUPR A) HELD THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE CAN SUPPORT THE ACTION OF THE ASSESSING OFFICER WITH ANY ARGUMENTS AND THAT HE CAN RELY ON ANY CASE LAW IN SUPPORT OF THE ASSESSING OFFICERS CASE BUT HE CANNOT MAKE OUT ANY NEW CASE WHICH WAS NOT THE SUBJECT MATTER OF CONSIDERATION BY THE ASSESSIN G OFFICER OR THE FIRST APPELLATE AUTHORITY. IT FURTHER HELD THAT TO FIND F AULT IN THE ASSESSMENT ORDER IS OUTSIDE THE DOMAIN OF THE ARGUMENT OF THE LEARNE D DEPARTMENTAL REPRESENTATIVE AS SUCH POWERS VESTS WITH THE COMMIS SIONER UNDER SECTION 263 FOR REVISING ANY ORDER WHICH IS ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE. 15. THE TRIBUNAL PUNE BENCH IN ANANT Y. CHAVAN (SUPRA) HAS HELD AS FOLLOWS:- THE DEPARTMENTAL REPRESENTATIVE ONLY REPRESENTS THE AO WHO CAN DO BETTER THAN TO JUSTIFY HIS OWN ACTION ON THE GROUND S WHICH HAVE BEEN DISCUSSED IN THE ASSESSMENT ORDER OR PERHAPS EVEN O N EXTENDED GROUNDS. UNDOUBTEDLY THERE CART BE OCCASIONS WHEN ASSESSING OFFICER FAILS TO BRING AN INCOME TO TAX OR GRANT EXCESSIVE DEDUCTION AND THE REMEDY FOR THESE LAPSES ARE PRESCRIBED BY THE PROVI SIONS OF SS. 147 M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 13 154 AND 263 ETC. BUT ALL THESE SECTIONS HAVE CERTA IN TIME-LIMITS WITHIN WHICH THESE SECTIONS CAN BE INVOKED. WHETHER IT IS A RECTIFICATION OF A MISTAKE OR INITIATION OF PROCEEDINGS FOR INCOME ES CAPING ASSESSMENT OR EVEN A REVISION PROCEEDING EVERYTHING MUST BE CO MPLETED WITHIN THE PRESCRIBED TIME-LIMIT. TO SUGGEST THAT EVEN A PROCE EDING BEFORE THE TRIBUNAL IS A CONTINUATION OF ASSESSMENT PROCEEDING S AND THEREFORE THE AO CAN BE ALLOWED TO MAKE UP FOR HIS DEFICIENCI ES WILL AMOUNT TO RENDERING ALL THESE TIME-LIMITS AS NUGATORY AND RED UNDANT. IT IS INDEED NOT OPEN FOR THE TRIBUNAL TO TAKE AWAY THE BENEFIT GIVEN BY THE AO. WHEN THE AO DECIDED TO GRANT DEDUCTION UNDER S. 80- 113(10) IN RESPECT OF RESIDENTIAL UNITS IT WAS T WELL-CONSIDER ED AND CONSCIOUS DECISION ON HIS PART TO HAVE GRANTED THE BENEFIT OF DEDUCTION. WITH THE BENEFIT OF HINDSIGHT THIS BENEFIT OF DEDUCTION MIGH T HAVE BEEN LITTLE MORE GENEROUS THAN WHAT IS FOUND TO BE ADMISSIBLE B Y THE TRIBUNAL BUT THEN THE DECISION OF THE TRIBUNAL HAS NOT YET R EACHED FINALITY AND IT IS NOT AN END OF THE ROUTE SO FAR AS LEGAL DEVELOPM ENTS IN THAT REGARD ARE CONCERNED.IT IS NOT THE SCHEME OF THE ACT THAT ENTIRE ASSESSMENT IS OPEN BEFORE THE TRIBUNAL AND IT MUST CONSIDER TH E SAME. GROUND WHICH WAS RAISED BY THE REVENUE WAS CONFINED TO PRO FITS RELATABLE TO COMMERCIAL UNITS AND THEREFORE IT IS NOT REALLY OP EN TO THE TRIBUNAL TO GO BEYOND THE SAID GROUND.JEYPORE TIMBER & VENEER MILLS (P) LTD. VS. CIT (1982) 137 ITR 415 (GAU.) APPLIED; CIT VS. ASSAM TRAVELS SHIPPING SERVICE (1993) 199 ITR I (SC) AND JT. CIT VS. SAKURA BANK LTD. (2006) 99 TTJ (MUMBAL) 689: (2006) 100 LTD 215 (MUMBAI) DISTINGUISHED; MCORP GLOBAL (P) LTD. VS. CIT (2009) 222 CM (SC) 110: (2009)19 DTR (SC) 153 : (2009) 309 ITR 434 (SC) FOL LOWED. 16. MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN MAHINDRA & MAHINDRA LTD. V/S DCIT (2009) 313 ITR (AT) 263 (SB) HELD AS FOLLOWS :- IN OUR CONSIDERED OPINION THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO JURISDICTION TO GO BEYOND THE ORDER PASSED B Y THE ASSESSING OFFICER. HE CANNOT RAISE ANY POINT DIFFERENT FROM T HAT CONSIDERED BY THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS). HIS SCOPE OF ARGUMENTS IS CONFINED TO SUPPORTING OR DEF ENDING THE IMPUGNED ORDER. HE CANNOT SET UP AN ALTOGETHER DIFF ERENT CASE. IF THE LEARNED DEPART. MENTAL REPRESENTATIVE IS ALLOWED TO TAKE UP A NEW CONTENTION DE HORS THE VIEW TAKEN BY THE ASSESSING OFFICER THAT WOULD MEAN THE LEARNED AUTHORISED REPRESENTATIVE STEPPING INTO THE SHOES OF THE COMMISSIONER OF INCOME-TAX EXERCISING JURISDICT ION UNDER SECTION 263. WE THEREFORE DO NOT PERMIT THE LEARNED DEPAR TMENTAL REPRESENTATIVE TO TRANSGRESS THE BOUNDARIES OF HIS ARGUMENTS. SIMILAR VIEW HAS BEEN TAKEN BY THE JODHPUR BENCH OF THE TRI BUNAL IN THE CASE OF KWAL PRO EXPORTS V. ASST. CIT [2008] 297 ITR (AT ) 49. THIS CONTENTION IS THEREFORE REPELLED AS DEVOID OF ANY M ERIT. 17. THE HON'BLE SUPREME COURT IN MCORP GLOBAL P. LTD. ( SUPRA) HAS HELD AS FOLLOWS:- HELD THAT UNDER SECTION 254(1) OF THE ACT THE AP PELLATE TRIBUNAL HAD NO POWER TO TAKE BACK THE BENEFIT CONFERRED BY THE ASSESSING M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 14 OFFICER OR ENHANCE THE ASSESSMENT. SINCE THE ASSESS ING OFFICER HAD GRANTED DEPRECIATION IN RESPECT OF 42 000 BOTTLES T HAT BENEFIT COULD NOT BE WITHDRAWN. 18. IN VIEW OF THE AFORESAID JUDICIAL PRONOUNCEMENTS W E HAVE NO HESITATION IN REJECTING THE PLEA OF THE LEARNED DEP ARTMENTAL REPRESENTATIVE THAT THE ASSESSMENT IN THIS CASE HAS TO BE ENHANCED BY THE TRIBUNAL ON AN ADDITIONAL GRUOND THAT THE ASSESSING OFFICER MAY BE ASKED TO FILE AGAINST THE ASSESSING OFFICERS OWN FINDING OF FACT. 19. COMING TO THE JUDGMENT OF HON'BLE SUPREME COURT IN ASSAM TRAVELS SHIPPING SERVICES (SUPRA) IT HAS BEEN HELD THAT TH E APPELLATE ACIT WAS WRONG IN TAKING THE VIEW THAT HE HAD NO POWER TO EN HANCE PENALTY AND IN SUCH CIRCUMSTANCES THE TRIBUNAL HAD THE POWER TO R EMAND THE CASE TO THE AUTHORITY COMPETENT TO MAKE AN ORDER IN ACCORDANCE WITH LAW. THIS IS NOT A CASE WHERE THE FACTUAL FINDINGS OF THE ASSESSING OF FICER ARE DISPUTED BY THE REVENUE AT THE STAGE OF THE TRIBUNAL WITHOUT ANY FU RTHER MATERIAL AND REMAND SOUGHT. IN OUR OPINION THIS CASE DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. 20. THE HON'BLE SUPREME COURT IN BHAVANA CHEMICALS LTD. (SUPRA) WAS NOT INCLINED TO GO INTO THE QUESTION AS THE MATTER WAS REMANDED. IT HELD THAT IT WAS NOT NECESSARY TO EXAMINE THE QUESTION OF THE PO WER OF TRIBUNAL IN THIS MATTER. 21. THUS THIS CASE DOES NOT COME TO THE RESCUE OF THE REVENUE. UNDER THESE CIRCUMSTANCES WE REJECT THE ARGUMENTS OF THE REVENUE THAT IT BE PERMITTED TO FILE ADDITIONAL GROUNDS CHALLENGING TH E FINDINGS OF THE ASSESSING OFFICER AND TO ENHANCE THE DISALLOWANCE TO 100% . WE CONSIDER ONLY THE GROUNDS OF APPEAL THAT ARE FILED IN THE APPEALS FIL ED BY THE ASSESSEE AS WELL AS THE REVENUE. 22. COMING TO THE MERITS OF THE CASE WE FIND THAT THE FACTUM OF PURCHASES FROM IMPEX SALES CORP. AND N.B. ENTERPRISES WERE DI SBELIEVED BY THE ASSESSING OFFICER FOR THE REASON THAT THE PARTIES W ERE NOT AVAILABLE AT THE M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 15 ADDRESS GIVEN. THESE PARTIES WERE HAVING STATE SALE S TAX REGISTRATION AS WELL AS CENTRAL SALES TAX REGISTRATION NUMBER. THE FACT THAT THE ASSESSEE HAD PURCHASED THE GOODS HAS BEEN ACCEPTED BY THE ASSESS ING OFFICER AT PARA- 7.4/PAGE-4 OF THE ASSESSMENT ORDER WHEREIN IT HAS BEEN OBSERVED AS FOLLOWS:- 7.4 THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN EXAMI NED. IN SUCH CIRCUMSTANCES THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT THE GOODS HAVE BEEN PURCHASED BY THE ASSESSEE BUT FROM OTHER SUPPLIERS ONLY THE BILLS OF THE ITEMS WERE OBTAINED FROM THE ABOVE MENTIONED CONCERNS. IN OTHER WORDS THE ASSESSEE HAS MADE PUR CHASES FROM GREY MARKET AND TRIED TO GIVE THE PURCHASES A COLOUR OF GENUINENESS BY OBTAINING FICTITIOUS INVOICES FOR THE SAME FROM THE CONCERNS MENTIONED ABOVE. 23. ON A QUERY FROM THE BENCH THE LEARNED COUNSEL EMPH ASISED ON THE PERCENTAGE OF DISALLOWANCE TO AVOID PROTECTED LITIG ATION WHILE NOT LEAVING THIS GROUND THAT THE ENTIRE PURCHASES WERE GENUINE AND THAT THE ASSESSEE HAS PURCHASED FROM GENUINE DEALERS. WE DO FIND FORC E IN THIS ARGUMENT AS THE SELLERS ARE REGISTERED DEALER UNDER THE STATE A ND CENTRAL SALES TAX ACT PAYMENTS WERE MADE BY CROSSED CHEQUES AND AS THE AS SESSING OFFICER HAS NOT VERIFIED THE EXISTENCE OF THE DEALERS FROM THE SALES TAX AUTHORITIES OR THE BANKS. WE ALSO NOTICE THAT LESS THAN 4% OF THE PURC HASES ARE FOUND FAULT WITH. IN ANY EVENT AS THE ASSESSEE IS NOW DISPUTIN G ONLY THE GROSS PROFIT WE DEAL WITH THIS ASPECT ONLY. ON THE FACTS OF THE CAS E WE FIND THAT THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS DISCLOSED GROSS PROFIT OF 39.04% ON THE TURNOVER. THIS IS RECORDED AT PAGE-2/PARA-4 OF THE ASSESSMENT ORDER. UNDER THESE CIRCUMSTANCES IF A FURTHER 25% IS DISA LLOWED THE GROSS PROFIT WOULD COME TO ABOUT 65% WHICH IN OUR OPINION IS H IGHLY EXCESSIVE. THUS WITHOUT GOING INTO THE FACT WHETHER THE PURCHASES H AVE BEEN PROVED TO BE GENUINE BY THE ASSESSEE OR NOT WE UPHOLD THE FINDI NGS OF THE COMMISSIONER (APPEALS) WHEREIN HE HAS ESTIMATED THE DISALLOWANC E AT 2% OF THE GROSS PURCHASES. THE FINDINGS OF THE COMMISSIONER (APPEAL S) VIDE PARA-2.3.8 OF HIS ORDER IS EXTRACTED IN PARA-3 ABOVE. WE UPHOLD THOSE FINDINGS AND DISMISS THE REVENUES APPEAL. M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 16 24. COMING TO THE DECISION OF AHMEDABAD BENCH OF THE TR IBUNAL IN VIJAY PROTEINS LTD. (SUPRA) THE FACTS ARE DIFFERENT AS T HAT WAS A CASE OF AN OIL MILL. IT WAS NOT THE TRADING ACTIVITY. IN FACT IT WAS EN GAGED IN THE BUSINESS OF PRODUCING EDIBLE OIL. THE TRIBUNAL HAD CONSIDERED V ARIOUS FACTORS SUCH AS YIELD OF OIL ETC. WHILE COMING THE A CONCLUSION TH AT PURCHASES OF OIL CAKE FROM 33 BOGUS SUPPLIERS SHOULD BE ADDED IN FULL. IT WAS A CASE WHERE THE ASSESSEE COMPANY HAD FAILED TO PROVE GENUINENESS OF TRANSACTIONS. THE FACTS IN THE PRESENT CASE ARE DIFFERENT AND THE ASSESSEE IN THIS CASE HAS DEMONSTRATED THAT THERE IS A ONE-TO-ONE CO-RELATION BETWEEN PURCHASES AND SALES. WE HAVE GONE THROUGH THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN LA MEDICA (SUPRA). THAT WAS A CASE WHERE THE ASSESSING OFFICER TREATED THE VALUE OF RAW MATERIAL AS ASSESSEES INCOME. THIS WA S ALSO A CASE OF A MANUFACTURER OF ALLOPATHIC MEDICINES AND IT WAS NOT A CASE OF A TRADER. THE HONBLE COURT HELD THAT IT WAS NOT OPEN TO THE TRIB UNAL TO MAKE OUT A THIRD CASE WHICH WAS NOT EVEN THE CASE OF THE ASSESSEE T O HOLD THAT THE TRANSACTIONS WERE REAL AND NOT FACTITIOUS AS CLAIME D BY THE REVENUE. IN THE PRESENT CASE IT IS THE CASE OF THE ASSESSEE THAT T RANSACTIONS ARE REAL AND IT IS A TRADING CONCERN WHERE QUANTITATIVE RECONCILIATION OF PURCHASES SALES AND STOCK ARE NOT DISPUTED BY THE REVENUE. 25. THUS IN VIEW OF THE ABOVE DISCUSSION WE DISMISS G ROUND NO.2 OF THE ASSESSEE AS WELL AS GROUND NO.1 OF THE REVENUE WHER EIN THE ADDITION ON ACCOUNT OF PERCENTAGE DISALLOWANCE OF PURCHASES MAD E OF ALLEGED BOGUS PURCHASES WAS THE ISSUE. 26. COMING TO THE ADDITION ON ACCOUNT OF PEAK INVESTMEN T WHICH IS IN GROUND NO.3 RAISED BY THE ASSESSEE AS ONLY 2% OF THE PURCHASES ARE DISALLOWED THAT QUESTION OF MAKING AN ADDITION ON T HE GROUND THAT THE SOURCE OF PURCHASES IS UNEXPLAINED DOES NOT ARISE. THE AS SESSEE ON A DIRECTION FROM THE ASSESSING OFFICER HAD WITHOUT PREJUDICE T O HIS BASIC ARGUMENT THAT THE PURCHASES WERE GENUINE HAD GIVEN A CALCULATION FOR PEAK CREDIT. FILING OF SUCH CALCULATION AT THE DIRECTION OF THE ASSESSING OFFICER DOES NOT WARRANT AN ADDITION OF PEAK. MERE DISALLOWANCE OF A SMALL PERC ENTAGE OF THE PURCHASES DOES NOT LEAD TO A CONCLUSION THAT UNACCOUNTED INVE STMENTS WERE MADE IN M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 17 PURCHASES. THUS WE DELETE THE ADDITION SUSTAINED B Y THE COMMISSIONER (APPEALS) ON ACCOUNT OF PEAK INVESTMENT. GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. 27. GROUND NO.4 OF THE ASSESSEES APPEAL AND GROUND NO .2 OF REVENUES APPEAL IS ON THE CLAIM OF THE ASSESSEE FOR TELESCOP ING. 28. THE COMMISSIONER (APPEALS) VIDE PARA-3.2.1 OF HIS ORDER OBSERVED AS FOLLOWS:- 3.2.1. 1 HAVE CAREFULLY AND DISPASSIONATELY CONSIDE RED THE FACTS AND CIRCUMSTANCES OF THE CASE WHEREAS THE BOGUS PURCHA SES WERE MADE AND CONFIRMED IN PREVIOUS YEARS RELEVANT TO A.Y. 20 05-06 AND 2006- 07. NO CORRESPONDING UNACCOUNTED STOCK HAVE BEEN FO UND NOR DISCLOSED BY THE APPELLANT IN THE RESPECTIVE ASSESS MENT YEARS. THERE IS NO EVIDENCE LEAST THE SEIZED MATERIAL TO INDICATE THAT ANY SUCH UNACCOUNTED INCOME EARNED THROUGH GREY MARKET PURCH ASES OR ANY SUCH UNACCOUNTED INCOME WERE INVESTED IN THE UNEXPL AINED STOCK OF THE CORRESPONDING PREVIOUS YEARS RELEVANT TO A.Y. 2 005-06 AND 2006- 07. THE BENEFIT OF TELESCOPING CAN BE GIVEN ONLY WH EN THE UNACCOUNTED INCOME EARNED HAS BEEN INVESTED IN THE SAME ASSESSM ENT YEAR OR THERE IS A NEXUS BETWEEN SUCH UNACCOUNTED INCOME AN D ITS INVESTMENT. UNDER THE CIRCUMSTANCES BENEFIT OF TEL ESCOPING IN RESPECT OF UNACCOUNTED INCOME EARNED BY THE APPELLANT DURIN G A.Y. 2005- 06 AND 2006-07 CANNOT BE GIVEN AGAINST THE UNACCOUNTED STOCK FOUND IN THE SUBSEQUENT PREVIOUS YEAR RELEVANT TO A.Y. 2007- 08. LD. ASSESSING OFFICERS ACTION IN REJECTING THE BENEFIT OF TELESC OPING FOR A.YS. 2005-06 AND 2006-07 IS CONFIRMED FOR THE AFORESAID REASONS. GROUND NO.4 IS ACCORDINGLY DISMISSED. 29. IN OUR CONSIDERED OPINION WHEN IT IS THE CASE OF R EVENUE THAT CERTAIN FUNDS WERE GENERATED IN A PARTICULAR YEAR BY THE AS SESSEE BY INFLATION OF PURCHASES THEN THE LOGICAL CONCLUSION WOULD BE TH AT SUCH SURPLUS FUNDS WERE UTILISED FOR INVESTMENTS IN STOCK ASSETS EXP ENDITURE ETC. THIS IS THE PRINCIPLE THAT WAS LAID DOWN BY VARIOUS COURTS OF L AW. WE REFER TO THE FOLLOWING CASE LAWS FOR THIS PROPOSITION:- CIT V/S K.S.M. GURUSWAMY NADAR & SONS [1984] 149 IT R 0127 (MAD.); AND CIT V/S JAWANAL GEMAJI GANDHI [1985] 151 ITR 0353 (BOM.). M/S. SIA LIFESTYLES P. LTD. A.YS 05-06 06-07 & 07-08 18 30. AS THIS EXERCISE HAS TO BE DONE AFRESH BY THE ASSES SING OFFICER WE SET ASIDE THIS GROUND TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH IN ACCORDANCE WITH LAW. THUS THIS GROUND IS ALLOWED F OR STATISTICAL PURPOSE. 31. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED IN PA RT AND THE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER 2011 SD/- V. DURGA RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 25 TH NOVEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR G BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI