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TMI Blog2014 (5) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... sion has been retrospectively amended by Finance Act, 2008 w.e.f. 01.04.2005? 3. The facts are that the assessee was engaged in designing, manufacturing, marketing and trading telecommunication equipments, public address system and flood matters. In its return for AY 2005-06, the assessee declared an income of Rs.1,08,85,191/-; it was initially processed under Section 143(1) of the Act. During the year under consideration, a search operation was conducted by the Central Excise Department in the manufacturing unit of the assessee. It was alleged that the assessee had claimed CENVAT credit for inputs, and that it was using bogus purchases bills from non-existent parties. The Central Excise Department identified 19 such fictitious vendors. On the strength of these allegations, the Income Tax Department also took up the assessee's case for scrutiny and issued notice under Section 133(6) of the Act to 16 parties. 4. After considering the materials on record, the AO rejected the books of accounts and determined the net profit at 10% to the total sale of business at Rs.16,40,91,000/- in addition to other income declaration by the assessee. A further addition was made to the tune of Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, and in the second place many of them were proved to be wrong or not established before the Settlement Commission. In other words, the order of the Settlement Commission can be said to be the right basis for settling facts as no evidence was brought on record by either party to displace such findings." 7. The ITAT also took note of further aspects such as the complete stock tally made on 04.01.2006, which established that though some vendors were not in existence, yet the goods were actually used in the process of manufacturing of final products, and that the facts involved in addition to such purchases were drawn in cash sometimes directly and sometimes by the two concerns. The ITAT took note of the material facts and found that there was no evidence showing that monies flowed back to the assessee or its directors. The ITAT, therefore, further reasoned as follows: "9.1 On the basis of aforesaid facts, it cannot be said that the books of account contained material defects so as to lead to their rejection on account of incompleteness or unreliability. The only thing which can be said is that the purchase price of the goods from 10 vendors does not stand established on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had relied on cash withdrawals to state that such expenditure had been incurred. Given the conspectus of these facts and circumstances, the disallowance of such expenditure and adding back was justified and should not have been interfered by the ITAT. It was urged by counsel for the Revenue that the materials before the Settlement Commission at best showed that 5 parties from whom the material was purchased were common with the list of suppliers available with Income Tax authorities. Furthermore, the AO had given valid reasons for rejection of books of accounts. In these circumstances, the ITAT could not have rejected the addition at 10% purchases from 4 parties only by relying on the findings of the Excise Commission. 9. The assessee urged that the impugned orders of the Tribunal made an in depth analysis of the Settlement Commission's order as well as the materials available. The learned counsel pointed out that the statutory registers and gate passes clearly pointed to the assessee in fact having used the inputs. That some of the vendors did not participate in the assessment proceedings was one adverse factor, but could not have been the conclusive one to decide that all purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd what was made available were only copies of computerized ledger accounts. The assessee had contended that books of accounts and other material had been seized by the Excise authorities. The Tribunal noted here that though the AO was aware of the search and seizure operations, he made no attempt to obtain the books of accounts from the Excise authorities. This could have been done even in the proceedings before the CIT (Appeals) when the remand report was filed. The failure of the Revenue, therefore, could not oblige the assessee's disadvantage. This Court confirms the said finding of the ITAT. 13. So far as the Revenue's complaint that the ITAT ought not to have substantially accepted the assessee's contention is concerned, this Court is of the opinion that the findings recorded in Para 8.8 and Para 9, 9.1 to 9.5 in the impugned order in favour of the assessee are warranted. The findings of the Settlement Commission were based upon assessment of the materials before that authority; it was satisfied that the inputs had been used to a large measure. That the assessee was unable to pinpoint or ensure the presence of the vendors in the assessment proceedings could not have been sol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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