The Spunpipe & Construction Co.(Baroda)Pvt.Ltd.,, Baroda v. The Income tax Officer,Ward-4(4),, Baroda

ITA 464/AHD/2009 | 2005-2006
Pronouncement Date: 27-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 46420514 RSA 2009
Assessee PAN AAACT6738R
Bench Ahmedabad
Appeal Number ITA 464/AHD/2009
Duration Of Justice 2 year(s) 5 month(s) 15 day(s)
Appellant The Spunpipe & Construction Co.(Baroda)Pvt.Ltd.,, Baroda
Respondent The Income tax Officer,Ward-4(4),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 27-07-2011
Date Of Final Hearing 27-07-2011
Next Hearing Date 27-07-2011
Assessment Year 2005-2006
Appeal Filed On 12-02-2009
Judgment Text
I TA NO.464/AHD/2009 A SSESSMENT YEAR 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BEN CH AHMEDABAD BEFORE SHRI G. D. AGARWAL VICE PRESIDENT & SHRI T. K.SHARMA I.T .A. NO. 464/AHD/2009 (ASSESSMENT YEAR : 2005-2006 ) THE SPUNPIPE & CONSTRUCTION CO. (BARODA) PVT. LTD. A-505 -506 5 TH FLOOR ALKAPURI ARCADE OPP. HOTEL WELCOME GROUP R.C. DUTT ROAD BARODA-390007 (APPELLANT) VS. THE INCOME TAX OFFICER. WARD 4(4) AYAKAR BHAVAN NR. RACE COURSE CIRCLE BARODA. (RESPONDENT) PAN: AAACT 6738R APPELLANT BY : SHRI A. C. SHAH. RESPONDENT BY : SHRI B. L. YADAV D.R. ( (( ( )/ )/)/ )/ ORDER PER: SHRI T.K. SHARMA J.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DA TED 2-12-2008 OF LD. CIT (A)-III BARODA FOR ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S BEING ENGAGED IN MANUFACTURING OF HS STEEL RCC PIPES AND CONTRACTOR . FOR THE ASSESSMENT YEAR UNDER APPEAL IT FILED THE RETURN OF INCOME ON 31-10 -2005 DECLARING TAXABLE INCOME AT RS. NIL AFTER SET OFF OF CARRIED FORWARD LOSSES. THIS RETURN OF INCOME WAS ACCOMPANIED BY TAX AUDIT REPORT U/S. 44AB IN FORM N O.3CA AND 3CD ALONG WITH AUDITED PROFIT AND LOSS ACCOUNT BALANCE SHEET ETC. I TA NO.464/AHD/2009 A SSESSMENT YEAR 2005-06 2 3. THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S. 143 (3) ON 27-12-2007 AT TOTAL INCOME OF RS. 6 81 359/-. IN THIS ASSESSMENT ORDER THE ASSESSING OFFICER MADE ADDITION OF RS. 8 88 815/- U/S. 69 BY TREATING THE PURCHASES OF MS PLATES FOR RS. 7 90 737/- FROM MINAXI ENTERPRISES 205 STEEL CHAMB ERS LAKADPITH BARODA AND MS PLATES AMOUNTING TO RS.1 79 078/- FROM BHAGYODAY ENTERPRISES C-163 RAJ RATAN SOCIETY OPP. POLOGROUND BARODA. 4. ON APPEAL BEFORE THE LD. CIT (A) ASSESSEE CONT ENDED THAT PURCHASES MADE ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THEREFO RE THE ADDITION MADE IS NOT PROPER. THE ASSESSEE RELIED ON THE DECISION OF BOMB AY HIGH COURT IN THE CASE OF BABULAL C. BORANA VS. ITO 282 ITR 251. 5. IT WAS FURTHER SUBMITTED THAT ENTIRE QUANTITY OF PURCHASE WAS GONE INTO MANUFACTURING AND FINISHED PRODUCT. QUANTITY TALLY STARTING FROM RAW MATERIAL PURCHASE TILL SALE OF FINISHED PRODUCT ALSO SHOW TH AT ASSESSEE HAS PURCHASED THE MATERIAL AND HENCE PURCHASE CANNOT BE BOGUS. 6. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN T HE IMPUGNED ORDER THE LD. CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF BOGUS PURCHASE AMOUNT OF RS.8 88 815/- AND ALSO DISALLOWED 20% U/S. 40A(3) OF RS. 8 88 815/-. 7. AGGRIEVED WITH THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.8 88 815/- UNDER SECTION 69 AS BOGUS PURCHASES FROM MINAXI ENT ERPRISE AND BHAGYODAY ENTERPRISE TO THE EXTENT OF 25% THEREOF IN AS MUCH AS: I TA NO.464/AHD/2009 A SSESSMENT YEAR 2005-06 3 (I) THE GOODS WERE PURCHASED AND WERE RECEIVED BY THE C OMPANY WHICH IS EVIDENT FROM THE DELIVERY CHALLAN; (II) THE GOODS RECEIVED WERE ENTERED IN THE STOCK REGIST ER AND WAS CONSUMED FOR THE PURPOSE OF MANUFACTURING; (III) THE GOODS WERE PURCHASED AT THE PREVAILING MARKET R ATE; (IV) THE PAYMENT FOR THE PURCHASES MADE WAS MADE BY ACCO UNT PAYEE CHEQUE; (V) THE LD. AO HAS NOT ADDUCED ANY EVIDENCE TO PROVE TH AT THE AMOUNT PAID HAS BEEN RECEIVED BY THE ASSESSEE; (VI) THE EXISTENCE OF THE PARTIES ARE NOT DISPUTED BY TH E LD. A.O. AND THEREFORE THE GOODS HAVE BEEN PURCHASED AND CON SUMED AND THEREFORE THERE IS NO QUESTION OF TREATING THE SAME AS UNEXPLAINED EXPENDITURE. 2. THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS.8 88 815/- TO THE EXTENT OF 20% THEREOF IN ADDITION TO 25% THE REOF UNDER SEC. 40A(3) IN AS MUCH AS THE ASSESSEE HAS NOT MADE ANY PAYMENT IN CASH AND THAT THE LD. CIT(A) HAS ERRED IN PRESUMING THAT ASSESSEE MIGHT HAVE PAID THE CASH TO OTHER SUPPLIERS AND THAT NO A DDITION CAN BE MADE ON PRESUMPTION BASIS. 8. AT THE TIME OF HEARING BEFORE US ON BEHALF OF TH E ASSESSEE SHRI A.C. SHAH C.A. APPEARED AND RELYING ON THE DECISION OF ITAT A BENCH DATED 16-12-2010 IN THE CASE OF M/S. KULUBI STEEL IN ITA NO.1568/AHD /2008 FOR ASSESSMENT YEAR 2004-05 CONTENDED THAT ADDITION ON ACCOUNT OF BOGUS PURCHASE BE SUSTAINED AT 12.5% OF THE PURCHASES FROM 2 PARTIES. WITH REGAR D TO INVOKING OF PROVISIONS CONTAINED IN SECTION 40A (3) OF THE ACT COUNSEL OF THE ASSESSEE POINTED OUT THAT I TA NO.464/AHD/2009 A SSESSMENT YEAR 2005-06 4 PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUE THER EFORE NO DISALLOWANCE U/S. 40A (3) OF THE I.T. ACT CAN BE MADE. 9. ON THE OTHER HAND SHRI B.L. YADAV APPEARED ON B EHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT (A). THE LD. D.R. POINTED OUT THAT ADMITTEDLY NO PURCHASES WERE MADE BY THE ASSESSEE F ROM AFORESAID TWO PARTIES. THEREFORE ADDITION OF RS.8 88 815/- WAS RIGHTLY M ADE BY THE ASSESSING OFFICER. ON BEING POINTED OUT THAT THERE IS NO APPEAL OF THE REVENUE LD. D.R. POINTED OUT THAT VIEW TAKEN BY LD. CIT (A) IN THE IMPUGNED ORDE R BE UPHELD BECAUSE BY MAKING CASH PURCHASES ASSESSEE IS BENEFITED ON ACCO UNT OF SALES TAX EXCISE DUTY ETC. FURTHER DISALLOWANCE OF 20% U/S. 40A (3) BE A LSO UPHELD AS THE ASSESSING OFFICER RECORDED THE STATEMENTS OF TWO PERSONS NAME LY SHRI KANTILAL N. SHARMA AND SHRI AMRITBHAI PRAJAPATI PROPRIETOR OF MINAXI ENTERPRISE AND BHAGYODAY ENTERPRISE RESPECTIVELY. THE STATEMENTS WERE VERY CATEGORICAL THAT NO ACTUAL SALES WERE MADE BY THEM. THEY RECEIVED CHEQUE AND ISSUED BILLS AND THEREAFTER WITHDREW MONEY FROM THE BANK ACCOUNT AND REFUNDED THE AMOUNT TO THE PARTIES IN CASH. IN THEIR STATEMENTS THEY ALSO STATED THAT THEY HAVE NO GODOWNS AND PURCHASES AND AS SUCH NOT GIVEN ANY DELIVERY OF THE GOODS. WHEN THES E FACTS WERE CONFRONTED TO THE ASSESSEE IT RELIED UPON THE BILLS CHEQUE PAYMENT DELIVERY CHALLAN ETC. ALL THESE FACTS CLEARLY INDICATE THAT PURCHASES IF AT ALL WER E MADE THESE WERE MADE IN CASH. THEREFORE DISALLOWANCE OF 20% U/S. 40A (3) IS RIGH TLY MADE. 10. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULL Y GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY FROM THE STATEMENTS OF TWO PERSONS FROM WHOM THE ASSESSEE SHOWN ALLEGED PURCHASES HAVE CATEGORICALLY DENIED HAVING SOLD GOODS TO THE ASSESSEE. BOTH THE PERSONS RECEIVED CHEQUE FRO M THE ASSESSEE ISSUED BILL AND THEREAFTER WITHDREW MONEY FROM THE BANK ACCOUNT AND REFUNDED THE AMOUNT TO THE I TA NO.464/AHD/2009 A SSESSMENT YEAR 2005-06 5 PARTIES IN CASH. IN THESE CIRCUMSTANCES IT IS SELF EVIDENT THAT PURCHASES WERE MADE BY THE ASSESSEE IN CASH WHICH IS EVIDENT FROM QUANT ITY TALLY VERIFIED BY THE LD. CIT (A). IN THE ASSESSMENT ORDER THERE IS NO ALLEGATION THAT PURCHASES WERE MADE AT HIGHER PRICE THAN PREVAILING IN THE MARKET. WE ARE THEREFORE OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE IN CASE THE DISALLOWANCE BE MADE ONLY U/S. 40A (3). WE ACCORDINGLY CONFIRM THE DISALLOWANCE OF RS.1 77 76 3.- (BEING 20% OF RS.8 88 815) AND DELETE THE DISALLOWANCE OF 25% OF RS.8 88 815/- . 10. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 27 - 07 - 2011. SD/- SD/- (G. D .AGARWAL) (T. K. SHARMA) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD. DATED: 27 -07- 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-III BARODA. 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. I TA NO.464/AHD/2009 A SSESSMENT YEAR 2005-06 6 1.DATE OF DICTATION 27 - 07 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 27 /07 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 27 -07 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 27 - 07 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 28 -07 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 8 -07 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FSOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..