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Income Tax Appellate Tribunal, “RAJKOT” BENCH, RAJKOT
Before: SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR
IN THE INCOME TAX APPELLATE TRIBUNAL “RAJKOT” BENCH, RAJKOT [Conducted through E-Court at Ahmedabad] BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR
आयकर अपील सं./I.T.A. No. 351/Rjt/2014 (�नधा�रण वष� / Assessment Year : 2008-09)
Income Tax Officer Shri Rajesh Gulabrai बनाम/ Ward-3(2), Jamnagar Shayani Vs. Shraddha Udyognagar, Harshadpur Road, Jam Khambhalia, Jamnagar �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AFHPS5254C .. (अपीलाथ� /Appellant) (��यथ� / Respondent)
अपीलाथ� ओर से/Appellant by : Shri Sanjeev Jain, CIT.D.R. ��यथ� क� ओर से / Shri Chetan Agarwal, A.R. Respondent by : सुनवाई क� तार�ख / Date of 22/02/2022 Hearing घोषणा क� तार�ख /Date of 28/02/2022 Pronouncement
ORDER PER MAHAVIR PRASAD, JM:
The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals), Jamnagar (‘CIT(A)’ in short) vide Appeal No. CIT(A)/Jam/295/10-11/197, dated 20.07.2011 arising in the assessment order dated 24.12.2010 passed by the Assessing
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 2 - Officer (AO) under s. 144 of the Income Tax Act, 1961 (the Act) concerning AY. 2008-09.
The grounds of appeal raised by the Revenue read as under:
“1. The Ld. CIT (A) has erred on facts and law by deleting the addition of Rs. 10,08,76,757/-made by the AO on account of unexplained purchase. 2. The Ld. CIT(A) has erred on the facts and law by deleting the addition of Rs. 1,91,459/-made by the AO on account of discount. 3. That on the facts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order of assessing officer. 4. It is therefore prayed that the order of the ld. CIT(A) be set aside and that of the Assessing officer be restored.”
The facts of the case as emanates from the impugned order are that the assessee has shown total turnover of Rs. 27,61,19,626/- and GP of Rs. 20,62,542/- i.e. 0.75% of total turnover. As discussed the assessee has not produced the books of accounts therefore the learned AO has made efforts to verify the trading [transactions of the assessee from Sales Tax Department. The Deputy Sales Tax Commissioner (Investigation), Dep. - 7, Rajkot vide his letter No. STO(l)/INV/Dep. 7/RAJ/2010-11 dated Nil, has informed that they carried out a search action on 18/07/2008 and seized certain books of accounts of the assessee. He provided a copy of his order dated 31/03/2010 passed after verification of the seized books of accounts and giving opportunity to the assessee.
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 3 - On perusal of the order passed for FY 2007-08 it is found that the assessee has purchased goods from following four parties during the year .under consideration as under: -
Name Amount M/s. Shri Dev Enterprises Rs. 3,60,73,468/- M/s. Poonam Corporation Rs. 2,12,68,219/- M/s. Jain Enterprise Rs. 4,29,04,603/- M/s. Shiv Oil Industries Rs. 6,30,467/- Total Rs. 10,08,76,757/-
3.1 It is further found by the Sales Tax Department that all the above four parties were involved in billing activity. The billing activities are a transaction of purchase or sale made by a party without any physical delivery of the goods. The Sales Tax Department has canceled the registration of these four concerns even prior to the dates of purchases shown by the assessee. The assessee could not explain the above purchases before the Sales Tax Department and they asked the assessee to pay Rs.1,04,83,777/- accordingly on account of Sales Tax interest and penalty. The\ assessee was provided a copy of this order by this office along with show cause notice dated 20/12/2010 asking him to explain the above purchases by producing cogent documentary evidences. However, the assessee did not give any explanation in this regard. Under the circumstances, it is clear that the assessee has nothing to say in this matter and has, thus, accepted the purchases of Rs. 10,08,76,757/- entered in the books of accounts without taking physical delivery of the goods. It is pertinent to mention here that majority of payment to the aforesaid four parties were shown as made in cash,
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 4 - majority of everyday of the year in the range of Rs.17,000 to 19,500/-. This practice also makes it clear that this is a book entry on account of purchases without taking physical delivery of the goods with only motive to reduce his legitimate tax liability.
3.2 Further, on going through the quantity details given in tax audit report found that the assessee shown production of ground nut oil, oil-cake and husk of 32,56,306 kgs from consumption of 34,73,198 kgs ground nut. Thus, it shows that there was loss in process of 2,16,892 kgs. Besides, the assessee has again shown shortage in ground nut husk of 1,62,113 kgs. Once the assessee has shown shortage in the process, the further claim of shortage, though made in husk, is not acceptable. The assessee has deliberately shown shortage in husk, which is of minimum value amongst the oil, cake, and husk. Without any evidence it cannot be believed that the shortage can be in husk. The assessee has merely provided statistics of "production, whereas the suppression in production of oil of the quantum claimed in further shortage of husk, cannot be ruled out. As discussed in pre-paras, the assessee has shown purchases from the parties involved in billing activities, it is clear that this further shortage was aimed to accommodate lower production in quantum on account of the raw material shown as purchased without taking physical delivery of the goods. The assessee has though entered the value of raw material in financial accounts^ he tried to adjust quantity by way of making such shortage in addition to loss in quantity during the manufacturing process. This circumstantial evidence clearly establishes that the value
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 5 - of raw material was enhanced by making book entries for bogus purchases.
3.3 Moreover, it is seen from copies of sundry creditors and debtors provided in the only submission that number of accounts of debtors and creditors were adjusted by making journal entries in the name of other debtors and creditors. There are number of such accounts but a glimpse of such accounts is given by following names.
Arvind Export Solvent Oil Industries Aadesh Enterprises Bharat Food Co-operative Ltd. Mangal Oils Pvt. Ltd. Tanna Brokers. Pvt. Ltd. Cargil India Pvt. Ltd. Swastik Oil Industries K. M. Shroff Shri Rajmoti Industries R. K. Agencies Neminath Traders Shivam Trading Company Saraswati Industries Soham Agencies Mitesh Enterprises Asha Traders Pravin & Co. Narayan Oil Mill Kiran Oil Mill Hareshkumar U. Patel
3.4 The adjustment of accounts of sundry creditors with sundry debtors shows that the assessee has manipulated his books of accounts by making fake entries without any substance. The motive is also clear for this act to hide, adjustment and accommodation of such this enhancement in purchase.
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 6 - 3.5 It is pertinent to mention here that after search action of the Sales Tax Department, on 18/07/2008, the assessee has reduced the business volume substantially. This shows that after revelation of such suppression of profit, he stopped the business. In the action of Sales Tax Department, that the concern was involved in the same activity of claiming bogus purchases in the preceding year also. Under the circumstances, it is clear that the assessee is suppressing its profit by claiming bogus purchases from-the aforesaid parties which are engaged in billing activities. The purchases of Rs. l0,08,76,757/-is therefore unexplained. In view of the above facts, no deduction on account of unexplained purchases of Rs.10,08,76,757/- was allowed by the learned AO.
Thereafter, the assessee preferred first statutory appeal before the learned CIT(A) who partly allowed the appeal of the assessee.
We have gone through the relevant records and heard both sides. In this case, an ex parte order was passed under s.144 of the Act by the AO. The whole case depends upon the information was being given to the learned AO by the Sales Tax Department wherein his purchases were doubted. It is pertinent to mention her that sales have not been doubted by the department. In such case, we fail to understand the analogy of the department for unexplained purchases. Moreover, assessee has paid taxes on the profit earned by him. There are several judgments of the higher forum which says that if sales have not been doubted in that case purchases cannot be doubted.
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 7 - Therefore, we do not find any infirmity in the order passed by the learned CIT(A) granting relief for addition of Rs.10,08,76,757/-.
Now, we come to next ground relating to addition of Rs.1,91,459/-. On going through the P&L account it was noticed that the assessee has incurred boiler license fee of Rs.1100/-, insurance expenses of Rs.65,301/-, weighing machine repairing expenses Rs.1,300/- and kapachi purchase expenses of Rs.1,10,800/- totaling to Rs.1,91,459/- but above assets particulars are not owned by the assessee but neither before lower authorities nor before us assessee furnished only details in this regard. Hence, we confirm the action of learned CIT(A) for disallowing the expenses under s.37 of the Act. Moreover, assessee could not give any plausible explanation either before the lower authorities nor before us for making cash payment of Rs.8000/- and lower authority has rightly disallowed Rs.80,000/-. Same does not require any sort of interference at our end. Thus, we confirm the action of the learned CIT(A). It has been mentioned by the learned CIT(A) in his order that assessee has been non-cooperative and defiant. Moreover, no submissions were filed either before AO or before the CIT(A). It appears from the conduct of the assessee that he does not want to say anything in his favour as he has failed to discharge his onus. Therefore, we confirm the action of learned CIT(A) on disallowance of Rs.1,19,459/- under s.37 of the Act as well as cash payments made by the assessee totaling to Rs.80,000/- are hit by provision of Section 40A(3) of the Act as no explanation has been given by the assessee with regard to
ITA No. 351/Rjt/2014 [ITO vs. Shri Shri Rajesh G. Shayani] AY 2008-09 - 8 - Rs.80,000/-. In this ground also, we confirm the action of the CIT(A).
Resultantly, we do not find any infirmity in the order passed by the learned CIT(A). So, finally we confirm the action of the CIT(A) deleting the addition of Rs.10,08,76,757/-, however, confirm the addition of Rs.1,91,459/- & an amount of Rs.80,000/- cash payment made by the assessee for the purchases.
In the result, the appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 28/02/2022
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 28/02/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
Deputy/Asstt. Registrar ITAT, Rajkot