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2015 (8) TMI 1305

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..... tan Lime Khanij Udyog,[2001 (7) TMI 19 - RAJASTHAN High Court ]. However, in the factual background of the case, it would not be appropriate for Revenue to challenge the position which it has been sustaining in the other year on identical facts. The addition made by the authorities below in sum of ₹ 12,23,560/- on account of CANVAT credit, therefore, stands as not challenged. However, the orders of authorities below are set aside to delete entire addition on account of GP and bogus purchases. - Decided in favour of assessee. - ITA No. 38/Chd/2014 - - - Dated:- 3-8-2015 - SHRI BHAVNESH SAINI AND SHRI T.R.SOOD JJ Shri Ashwani Kumar for the Appellant. Dr.Amar Veer Singh AND DR Singh for the Respondent. ORDER: This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)(Central), Gurgaon dated 14.11.2013 for assessment year 2003-04, challenging addition of ₹ 92,25,641/- on purchases on ground Nos.1 and 2. Ground No.3 is challenged to reopening of assessment under section 147 of the Act. 2. In this case, the original return of income was filed on 28.11.2003 showing total income of ₹ 11,42,98,9 .....

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..... w material purchases, consumption and also production and sales records of finished goods which were verified. The copies of inward gate pass for raw material purchased was also produced. The chart showing the monthly yield was also submitted before the Assessing Officer and it was contended that for yield for January, 2003, if the purchases from open market are not carried comes to 101.87%, which was not possible in assessee s line of manufacture. It was further contended that the closing stock would have been negative without considering the open market purchases, which is never possible. Thus, the assessee stated that the material had been actually received and went to the production of the finished goods. Therefore, the contention of the assessee was that no disallowance on account of such purchases was warranted. The assessee relied upon the judgment of the Punjab Haryana High Court in the case of CIT Vs. Leader Valves Pvt. Ltd., 285 ITR 435. 5. From the reply submitted by the assessee, the Assessing Officer came to the conclusion that the assessee had made purchases for the said material from other sources including open market purchases. He came to the conclusion .....

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..... ryana Steel Alloys Ltd. to be added to the income of the assessee. 9. In reply to the said notice, the assessee again made detailed submissions before the learned CIT (Appeals) reiterating the same submissions as were made before the Assessing Officer. The assessee relied upon the judgment of Hon'ble Punjab Haryana High Court in the case Leader Valves Pvt. Ltd. I(supra) and also the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Bholanath Polyfab Pvt. Ltd., 355 ITR 290 for the proposition that no addition could be made on account of bogus purchases in view of the fact that physically the stock has actually been received, though from a different source. It was also submitted that in subsequent years 2004-05 to 2006-07, the assessee filed application before the Settlement Commission and Department did not propose for addition for bogus purchases. Only amount of CANVAT credit was offered for taxation and no other addition has been made. 10. The learned CIT (Appeals) rejecting the submissions of the assessee held that the assessee was consciously indulged in the fictitious arrangement for purchase from M/s Haryana Steel Alloys Pvt. Ltd. The learned .....

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..... ort filed by the Commissioner of Income Tax under Rule 9 before the settlement commission during the proceeding in succeeding years before the Commission. The emphasis was laid on the following paragraph: Bogus purchase took placed during the period 01.04.2003 to 24.08.2005, hence, bogus Cenvat Credit amounting to ₹ 1,16,10,188/- ₹ 1,27,82,132 and ₹ 1,55,68,957/- respectively on such bogus purchases would represent the income of the assessee for these assessment years i.e. 2004-05, 2005-06 2006-07. The fact would remain that assessee actually derived the benefit the first day it manufactured and sold the goods after booking bogus purchases. Accordingly, claim of CENTVAT on bogus purchase represents assessee s suppressed income and as such Addition only on this account works out to ₹ 1,16,10,188/- ₹ 1,27,82,132/- and ₹ 1,55,68,957/- for the A.Y.2004-05, 2005-06 2006-07 respectively for which assessee should also be liable for penalty under section 271(1) (c) of the Income Tax Act. From the above it was emphasized that the department having taken a stand to add to the CENVAT Credit benefit availed by the assessee on bogus purchases in .....

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..... ade purchases for the said material from the other sources. The material seized by the Department during the course of search, forming part of the paper book also gives support to the argument of the assessee that the goods were actually purchased though not from the Haryana Steel Alloys Pvt. Ltd. but from some other sources. Also the fact that assessee having shown substantially volume of goods manufactured and sold during the year it cannot be denied that the same have been done without purchases. There cannot be any goods manufactured or sold without their being any corresponding purchases. Nowhere, in their order, Assessing officer or CIT(A) have doubted goods being manufacture or sold. In fact while estimating the gross profit Assessing Officer has made the turnover shown by the assessee as its basis, which shows that he does not deny the fact that the goods have actually been manufactured and sold. Further, from the perusal of monthwise yield chart filed by the assessee. It is quite evident that without the receipt of such huge quantity of material physically, assessee could not have manufactured finished goods or indulged in selling the same. The yield per month would h .....

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..... ab Pvt Ltd.(2013) 355 ITR 290(Guj) Hon ble Gujrat High Court held as under: 5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of entire 102514 meters of cloth were sold during the year under consideration. The Tribunal, therefore, accepted the assessee s contention that the finished goods were purchased by the assessee, may be not from the parties shown in the accounts, but from other sources. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. The Tribunal relied on its earlier decision in the case of M/s. Sanket Steel Traders and also made reference to the Tribunal s decision in the case of Vijay Protiens. 6. We are of the opinion that the Tribunal committed no error. Whether t .....

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..... on of India vs. Satish Panalal Shah(2001), 249 ITR 221(SC), Hon ble Apex Court has gone to the extent that revenue having not filed appeal on the same issue in earlier year in case of one assessee, it cannot challenge the same in the subsequent year in case of another assessee. Principle of consistency has also been emphasized by the Apex Court in the case of Radha Sawami Satsang (193) ITR 321(SC). The addition made by the learned CIT (Appeals) by enhancing the addition on bogus purchases was not justified. May be books are rejected need not necessarily to make addition. We rely on the judgment of Hon'ble Rajasthan High Court in the case of Gotan Lime Khanij Udyog, 256 ITR 243. However, in the factual background of the case, it would not be appropriate for Revenue to challenge the position which it has been sustaining in the other year on identical facts. The addition made by the authorities below in sum of ₹ 12,23,560/- on account of CANVAT credit, therefore, stands as not challenged. However, the orders of authorities below are set aside to delete entire addition on account of GP and bogus purchases. 22. In view of the above, the addition made by the learned CIT(A .....

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