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2016 (7) TMI 63 - GUJARAT HIGH COURT

2016 (7) TMI 63 - GUJARAT HIGH COURT - TMI - Disallowance of purchase expenditure - corresponding sales against these very purchases have been offered and accepted for tax - Held that:- This is not a case where purchases have accounted for and suppliers were not traceable or not available at the address given by the assessee. This is a case where the amount has been received back to the assessee from the suppliers of which expenditure on account of purchases accounted for in the books of account .....

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PPEAL NO. 936 of 2008 - Dated:- 16-6-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MRS SWATI SOPARKAR, ADVOCATE FOR THE OPPONENT : MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By filing these appeals, the assessee has challenged the order dated 30.12.2005 passed by the Income Tax Appellate Tribunal, Ahmeabad Bench 'A' in ITA No.1823/Ahd/2000 and order dated 16.1.2008 passed by Income Tax Appellate Tribunal, Rajkot Bench, Rajko .....

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ered and accepted for tax? (ii) Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in not granting deduction for purchase expenditure at all when material is purchased from one and bill is obtained from another? 3. At the time of admission of Tax Appeal No.936 of 2006, following questions of law were framed for our consideration:- (i) Whether on the facts and circumstances of the case the ITAT was right in upholding the addition on account of u .....

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mmitted an error in disallowing the purchase expenditure by treating the same as bogus when admittedly corresponding sales against these very purchases have been offered and accepted for tax. In support of his submissions he has relied upon the decision of this Court in Vijay Proteins Ltd. v. Commissioner of Income Tax reported in [2015] 58 taxmann.com 44 (Gujarat), wherein it was observed as under:- 16. It is a matter of fact that the goods were not received from the parties from whom it is sho .....

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his Court in Commissioner of Income Tax-II v. Gujarat Ambuja Export Ltd. reported in [2014] 43 taxmann.com 244 (Gujarat), wherein it was observed as under:- Having heard learned counsel for the parties and having perused the materials on record, we are of the opinion that the entire issue is based on materials on record. The Tribunal did not accept the Revenues stand that the purchases were bogus, in the sense that no material was received. Perusing the order of the Tribunal and the material dis .....

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to the material noted above, retained portion of the above by giving cogent reasons. The decision of this Court in case of Sanjay Oilcake Industries {Supra] was rendered in a slightly different fact situation. In the said case, the assessee had made purchases but the parties were not traceable. They had opened the bank accounts and immediately upon credit of the cheques, withdrawn the amount by bearer cheques. On such basis, the Tribunal had held that such parties were creation of the assessee i .....

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ase, though it may appear that the purchases have been shown to have been made through M/s. Vishal Traders but supplied by some other agency, in absence of other additional facts noted by this Court in case of Sanjay Oilcake Industries [Supra] gross ad hoc addition of 25% may not be justified. In the present case, the assessee could produce before the authorities the precise rate at which the purchases were made from M/s. Vishal Traders and other suppliers to demonstrate that the purchases made .....

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see through one M/s. Amber Trading Company, Dahod. Assessing Officer disallowed the purchases on the ground that M/s. Amber Trading Company had made purchases from an unregistered dealer. He, in fact, doubted the purchases by M/s. Amer Trading Company itself. Learned counsel for the assessee would however correctly point out that CIT [A] as well as the Tribunal both noted that in the case of the assessment of M/s. Amber Trading Company itself, such purchases were accepted and found genuine. That .....

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unregistered dealers [URD] purchases made by Amber Trading Company in assessment year 2008- 09 is ₹ 2119.45 lacs. The A.O was of the view that the URD purchases of Amber Trading Company is bogus and as a consequence, the purchases of the assessee company from Amber Trading Company is also to be held as bogus to the extent of URD purchases of Amber Trading Company. Hence, it is seen that the disallowance in the present case was made on this basis that to the extent of URD purchases of Amber .....

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s no legs to stand. Accordingly, we decide this aspect of the matter in favour of the assessee. Thus, Ground No. 3 of the revenues appeal is also rejected. These questions are, therefore, not required to be considered. 6. He has relied upon the decision of this Court in Tax Appeal No.679 of 2010 decided on 16.8.2011, wherein it was observed as under:- 7.0 In the present case also, the Commissioner of Income-tax (Appeals) had observed that, it can be logically presumed that the assessee was motiv .....

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e total purchases were procured in dubious manner. It is view of the CIT (Appeals) which to the above extent came to be confirmed by the Tribunal. The Tribunal, of course, modified the order of the CIT (Appeals) and reinstated additions to the extent of 25% relying on the decision in the case of Sanjay Oilcake Industries (supra). 8.0 In the present case also there was evidence on record to suggest that though purchases may not have been made from M/s. Shreenathji Industries as initially suggeste .....

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ra). It is true that the Delhi High Court treated the issue somewhat differently. However, when the decision of our Court lays down certain ratio, in the absence of any special reason to differ, we would have to follow the same. 7. In view of above observations, he prayed to allow these appeals by setting aside the impugned orders. 8. On the other hand, learned counsel for the revenue submitted that the impugned order is just and proper and the same is not required to be interfered with in the p .....

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t materials. The fact that the alleged sellers have been found to be persons with no means to effect purchases or to carry on business is a factor which does not appear to have been considered by the Tribunal in its proper perspective. Materials on record clearly establish that Chedi Lal was a petty employee of a concern of which Satya Pal Jain was a partner. In fact Satya Pal Jain was partner of M/s Medipac, one of the sister concerns of the assessed firm. On enquiries conducted by the authorit .....

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by it. The question before the Tribunal was not whether purchases were made from another concern. What was under consideration was whether the purchases were made from M/s Kalpana Enterprises as was claimed by the assessed. Ample material has been brought on record by the Revenue to show that the purchases were in fact not made from M/s Kalpana Enterprises. These are some of the relevant materials which have not been considered by the Tribunal. Tribunal's conclusion that even if it is accept .....

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with the Tribunal as a factor in favor of the assessed. The conclusions of the Tribunal are, therefore, clearly erroneous, contrary to materials on record and have been arrived at without taking into consideration relevant material and placing reliance on irrelevant materials. It is to be noted that assessed's stand was not that it had effected purchases from anybody else. Its stand throughout was that it had effected purchases from M/s Kalpana Enterprises. It was not open to the Tribunal to .....

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n if it is perverse or there is no direct nexus or link between conclusion of fact and the primary fact upon which that conclusion is based. Where Tribunal acts on partly relevant and partly irrelevant materials, and it is not possible to say as to what extent latter has influenced its mind, the finding is vitiated because of use of irrelevant material. That gives rise to a question of law. This position has been succinctly stated by the Apex Court in Dhirajlal Girdharilal v. Commissioner of Inc .....

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o dismiss these appeals. 10. Having heard learned counsel for the parties and having perused the materials on record, we are of the opinion that the entire issue is based on materials on record. This is not a case where purchases have accounted for and suppliers were not traceable or not available at the address given by the assessee. This is a case where the amount has been received back to the assessee from the suppliers of which expenditure on account of purchases accounted for in the books o .....

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owed in both these cases. We answer the questions posed for our consideration accordingly. Both the questions are answered in favour of the assesee and against the revenue. Accordingly, both these appeals are allowed to the aforesaid extent. 1. Both these appeals are placed before this Court in view of the note filed by the learned advocate for the appellant stating that in paragraph 10 of judgment dated 16.6.2016, by mistake, instead of 75%, figure is mentioned as 25%, as the disallowance was t .....

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