9911796707
TMI Blog2014 (8) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... inery. Assessee filed its return of income for A.Y. 05-06 on 31.10.2005 declaring total income of Rs. 33,08,210/-. The Assessment was framed u/s. 143(3) vide order dated 28.12.2007 and the total income was determined at Rs. 1,08,65,424/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) vide order dated 23.01.2009 granted partial relief to Assessee. Aggrieved by the order of CIT(A), Assessee and Revenue are now in appeal before us. We now first take up Revenue's appeal in ITA No. 951/AHD/2009 5. The effective ground raised by Revenue reads as under:- 1. On the facts and in the circumstances of the case, the CIT(A) has erred in scaling down the addition from Rs. 33,11,173/- to Rs. 10,00,423/- on account of bogus purchases, overlooking the fact that, bills and delivery challans did not conclusively prove that transactions made by the suppliers, M/s. Paresh Steel and M/s. Shree Bhagyalaxmi Steels were genuine, as the assessee had procured bills on paymente of commission. 6. In this case the survey action was carried out at the business premises of the Assessee on 24.11.2004 and physical stock was taken. During the course of assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock register for verification. In respect of Minaxi Steel, A.O noted that it did not comply with the summons. From the copy of the summary of purchases vis-à-vis consumption ratio of M.S material furnished by the Assessee, A.O noticed that Assessee himself had arrived at shortage of 24927 kg. of material which according to the A.O proved that the purchases made from the 3 parties were not genuine. On verification of the order-wise consumption of M.S Material, A.O noticed that Assessee had shown much higher consumption of M.S. material in comparison to the details found in the impounded material and the consumption was not supported by drawings, purchase order or other documentary evidence and therefore the A.O was of the view that the purchases could not be considered as reliable. A.O thereafter, in the absence of reliable technical details of consumption of MS material, worked out the consumption on the basis of impounded material and accordingly worked out the difference of 1,15,196 kg. of M.S material which was not found during the course of survey. He thus concluded that the purchases shown by Assessee were merely paper transactions to inflate the purchase. A.O also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entered into the books of account, being in knowledge of Vipinbhai, could not be ruled out. The circumstances under which purchases from these parties were booked on 26.11.2004 are therefore, explained. Appellant has submitted bifurcation of sales figures for the post survey and pre-survey period to show that majority of sales took place in the post survey period. Thus, it cannot be said that purchase of MS material in large quantity to manufacture tailor made machinery items was without orders. While Assessing Officer's conclusion is that bogus purchases were booked, appellant worked out book stock of Rs. 28,29,723/- as against the stock found physically of Rs, 47,73,274/-. Through letter filed in the office of Addl. CIT, Anand on 16.12.2004, appellant had worked out the difference in stock found physically to be Rs. 19,43,551/- more than the book stock and agreed to offer the same as additional income. In the return of income for A.Y.2005-06 filed subsequently, additional income of Rs. 15,00,000/- on this account was offered. The Assessing Officer made further addition of Rs. 4,43,551/-, i.e. the balance out of amount of Rs. 19,43,551/- offered as excess unaccounted stock f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain them can not imply bogus purchases. As far as M/s. Minakshi Enterprises is concerned, since the party had not attended before the AO, though confirmation had been filed during appellate proceedings, the AO was directed to carry out enquiry from this party again. As a result of this enquiry, it has been found that this party was gjving accommodation entries only. Appellant's comments to AO's enquiry report are that during the survey, this party had confirmed the transactions and all the payments were made through account payee cheques much later and hence the admitted modus operandi of paying back the cash simultaneously with receipt of bogus sale bills is not substantiated due to appellant making the payments much later. Further, as per appellant, Shri Kantibhai Sharma made the admission to save his own skin etc. The fact that the party had confirmed the transaction earlier is of no consequence, when it has subsequently admitted the transactions to be bogus and has explained its modus operandi. Appellant has emphasized the fact that payments were made by it much later than the raising of bills, which is contradictory to the modus operandi of Shri Sharma. However, this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal unlawful and against the principles of natural justice. 1.2. The ld. CIT(A) has grievously erred in upholding the additions without considering fully and properly the explanation offered and evidence produced by the appellant. 2.1 The ld. CIT(A) has grievously erred in law and/or on facts in upholding the following reasons. (a) Bogus Purchases : Rs. 33,11,173 (b) Unexplained entry : Rs. 11,65,951/- (c) Disallowance U/s. 40(a)(ia) : Rs. 1,52,226 Ground no. 1.1 and 1.2 are general and requires no adjudication and therefore dismissed. Ground no. 2.1(a) is with respect to the additions of Rs. 10,00,423/- on account of bogus purchases:-. 11. Before us both the parties submitted that this ground of Assessee's appeal is connected with ground no. 1 of Revenue's appeal in ITA No. 951/AHD/2010. While deciding the issue hereinabove in Revenue's appeal, the reasoning given by ld. CIT(A) has been confirmed by us, we therefore for similar reasons, dismiss this ground of Assessee. Thus this ground of Assessee is dismissed. . Ground no. 2.1(b) is on account of upholding the addition made on account of unexplained entry of Rs. 11,65,951/-. 12. A.O noticed that in Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of CIT(A), Assessee is now in appeal before us. 14. Before us ld. A.R. reiterated the submissions made before CIT(A). He further submitted that the addition was made on the basis of letter of the Chartered Accountant wherein the entry of Rs. 11,65,591/- was accepted to be a mistake. He further submitted that in the subsequent letter the Chartered Accountant, Shri P.D. Parikh had clarified the matter but the same was not considered by the A.O He therefore in fairness submitted that the matter may be remitted to the file of A.O so that the contents of the letter can be examined by him. The ld. D.R. on the other hand supported the order of A.O and CIT(A). 15. We have heard the rival submissions and perused the material on record. We find that CIT(A) has noted that Assessee's claim of calculation of Rs. 11,65,591/- in sales or closing stock was not backed by any evidence and the claim that the raw material worth Rs. 11,65,591/- which represents value of investment in unaccounted raw material found at the time of survey was in quantity terms included in the sale or closing stock was also not substantiated by Assessee . Before us the ld. A.R. has submitted that the letter filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is now in appeal before us. Before us, at the outset ld. A.R. pointed to the table of payments reproduced at page 11 of the order of A.O and pointed out that the Assessee has deposited the TDS belatedly but before filing the return of income. He further submitted that the Hon'ble Gujarat High Court in the case of CIT vs. Praful Kantilal Shah (Tax Appeal No. 973/AHD/2013 order dated 25.11.2013) has held that amendment to Section 40(a)(ia) with effect from 1.04.2010 was having retrospective effect. He therefore submitted that since the Assessee has deposited the TDS amount before the due date of filing of return, no disallowance u/s. 40(a)(ia) was called for. The ld. D.R. on the other hand relied on the order of A.O and CIT(A). 18. We have heard the rival submissions and perused the material on record. From the table of payments reproduced by A.O at page 11 of the order, we find that Assessee had deducted tax u/s. 194C from the payment made to Gujarat Perfect Engineers Ltd. and Varia Engineering Works and the TDS was deposited on 07.06.2005 and the return of income was filed by Assessee on 3.10.2005 and thus TDS was deposited before the filing of return. We find that the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was claimed that Assessee had purchased CR sheets and Copper Flat of Rs. 20,69,102/- from Minakshi Steel, Shri Bhagyalaxmi Traders and Paresh Steel and the entry of the bills were not made in the books of accounts prepared on the date of survey as the bills were lying with Shri Vipin Patel. A.O noted that no documentary evidence evidencing that the goods had arrived at the business premises before the date of survey was produced. Further on analyzing the purchases vis-à-vis sales A.O concluded that the consumption of C.R sheets and Copper Flat with the production of distribution/panel board was excessively high in the period in which the alleged bills were credited and the consumption was very less in the period before the date of survey though same type of finished goods were manufactured in both the periods. Thereafter to ascertain the genuineness of the purchases, summons u/s. 131(1) were issued to all the three parties namely Minaxi steel, Shri Bhagyalaxmi Traders and Paresh steel. A.O noted that Paresh Steel and Bhagayalaxmi Steel did not produce the books of accounts or the stock register but only produced the copies of the bills and delivery challans but however co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ober for manufacturing tailor made items though there were no orders on hand, failure to explain the difference of 32,316 kgs. in CRC sheet and 630.82 kgs. in Copper Flats as per working on page 5 of the assessment order, failure of M/s. Paresh Steel & M/s. Shree Bhagyalaxmi Steel to produce books of accounts and stock register in response to summons u/s.131 issued by the Assessing Officer and non attendance by M/s. Minakshi Enterprises before the Assessing Officer in response to summons u/s.131. Assessing Officer's final finding was that bogus purchases of Rs. 15,40,497, i.e. the value of 32,316 kgs. of CRC sheet and 630.82 kgs. of Copper Flats were debited by the appellant. The disallowance is with reference to and out of purchases claimed to be made from M/s.Minakshi Enterprises, M/s. Paresh Steel and M/s. Shree Bhagyaaxmi Steel. As explained by the appellant, on the day of survey, bills of these three parties were in the custody of Shri Vipinbhai Patel, CEO of the Company, looking after sales and purchases, who was critically ill and was at Bangalore on the date of survey. The purchase bills from these three parties were not posted in the books of account on 24.11.2004 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to come to a conclusion that purchases from aforesaid three parties were partly bogus. It is noted that A.O. has not disallowed entire purchases from these three parties but has disallowed purchases only to the extent of shortage worked out by him. Thus, the Assessing Officer held part of the purchases from the parties to be genuine and held part of purchases from same parties to be bogus. This is quite unusualConfirmation from these three parties had been filed before the Department during post survey investigation proceedings and verification was carried out at that time. Besides, the Assessing Officer during the assessment proceedings summoned these three parties u/s.131 and regarding two parties viz. M/s. Paresh Steel and M/s. Shree Bhagyalaxmi Steel, in the assessment order, para 5(a) observed that "the submissions received from the above two parties confirms that all the goods were dispatched as per the billing date and transport were arranged by the assessee himself". The parties produced bills and delivery challans before the AO and confirmed that they had made sales to the appellant as claimed by the appellant. The fact that they did not produce books of account or st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that CIT(A) has noted that in response to summons, M/s. Paresh Steel and Shree Bhagyalaxmi Steel had confirmed the dispatch of goods as per the billing dates. We also find that CIT(A) has noted that A.O has held part of the purchases to be genuine and part of the purchases to be bogus which according to him is quite unusual. We also find that CIT(A) by well reasoned and detailed order held the purchases of Rs. 10,00,423/- from Minaxi Enterprises to be bogus but the addition on account of purchases made from two other parties and for the reasons stated in his order, were deleted. Before us, the Revenue has not brought any material to controvert the findings of CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. 24.In the result, the appeal of Revenue is dismissed. ITA No. 957/AHD/2010 (Assessee's appeal). The effective grounds raised by Assessee are as under:- 2.1 The ld. CIT(A) has grievously erred in law and/or on facts in upholding the following additions:- (a) Bogus purchases :Rs. 5,00,100 (b) Unexplained Entry :Rs. 5,69,856 (c) Disallowance of purchases : Rs. 27,73,962 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate proceedings quantitative tally of the stock was not filed to demonstrate that the entry in quantitative terms in respect of Rs. 5,69,856/- was incorporated in the sales or in closing stock. The onus of establishing that sales or closing stock did increase in quantity terms by Rs. 5,69,856/-was squarely on the appellant, which has not been satisfactorily discharged. Without satisfactorily demonstrating this, the debit entry of Rs. 5,69,856/- amounts to nullification of income disclosed on account of excess stock found during the survey. In view of this, addition of Rs. 5,69,856/- is confirmed. 26.Aggrieved by the order of CIT(A), Assessee is now in appeal before us. 27. Before us ld. A.R. reiterated the submissions made before CIT(A). He further submitted that the addition was made on the basis of letter of the Chartered Accountant wherein the entry of Rs. 5,69,856/- was accepted to be a mistake. He further submitted that in the subsequent letter the Chartered Accountant, Shri P.D. Parikh had clarified the matter but the same was not considered by the A.O He therefore in fairness, submitted that the matter be remitted to the file of A.O so that the contents of the letter is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of A.O, Assessee carried the matter before CIT(A). CIT(A) confirmed the addition by holding as under:- 4.2. I have carefully considered the matter. On 24.11.2004, when survey U/S.133A was carried out at appellant's premises as well as the premises of Bharat Machinery & Profit Co., its sister concern, appellant was found in possession of 24 LT panels/distribution board in semi finished stage, which were valued and duly included in appellant's stock as per Annexure. S-I. At the time of assessment, from the quantitative tally of distribution boards/ LT panels, Assessing Officer found that 12 Panels were not accounted for either in sales or in closing stock. The stock as on date of survey was 24 panels, purchases after survey were of 12 panels from Bharat Machinery & Profile Co. and total 24 panels were sold to Government of Sikkim. Thus, there should have been 12 panels in the closing stock, which were not shown. Appellant's explanation was that since 12 panels were defective and not as per specification by the customer, these had to be scrapped and in order to meet the commitment to the customer, i.e. Government of Sikkim, 12 panels were purchased from M/s, Bharat Machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the panels had been declared to be defective after inspection by representative of the customer. The A.R. expressed his inability to produce any such documentary evidence and denied that any inspection was carried out. In a major order like this, that too with a Government Department, where written correspondence is the usual mode of communication, absence of such correspondence casts serious doubts about genuineness of the claim regarding 12 panels being declared defective. It is also relevant that the business of M/s. Bharat Machinery & Profile Co., as per Shri Jariwala's statement u/s. 133A, is of manufacturing spares and components (mechanical parts) as per customer's design and specification. M/s. Bharat Machinery &. Profile Co. is not in the business of manufacturing LT panels and did not have the required expertise or experience to manufacture such panels within a short period of one month. Though the Purchase Order is claimed to have been placed on 19.10.2004 and supply is claimed to have been made on 29.12.2004; on the day of survey, i.e. 24.11.2004, no semi finished panels were found in the possession of M/s. Bharat Machinery &. Profile Co., where also sur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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