TMI Blog2013 (9) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... icial to the interest of revenue and hence the order passed u/s. 263 may be quashed. 2) The learned Commissioner of Income-tax erred in passing order u/s. 263 stating that the Assessing officer passed order without examination of facts, without appreciating that the Assessing officer vide its show cause notice dt. 14/12/2009 had raised the issue in regards to the aspect as to whether total purchases should be disallowed or G.P. addition should be sustain and the assessee had replied to the said query vide letter dt. 21/12/2009 and hence, the view adopted by the A.O. was after proper verification and application of mind supported by various judicial pronouncement and thus, the order of the A.O. cannot be held erroneous or prejudicial to the interest of the revenue only because the CIT feels that total purchases ought to be added, thus order passed u/s. 263 of the Act is liable to be quashed. B. Assessment Year 2008-09 1) The learned Commissioner of Income Tax erred in passing the order under Section 263 of the Act without appreciating the fact that the order passed by the Assessing Officer u/s.143(3) r.w.s. 147 dt. 29/03/2010 was after proper verification and applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and M/s. Golden Steel Corporation at Pimpri, Pune, in which it was found that those companies were issuing bogus tax invoices without supplying any material to the different parties. As noted by the Assessing Officer the trucks vehicles nos. shown in the invoices issued by those companies were found to be false. As noted by the Assessing Officer the bogus bills were issued for the purpose of availing wrong credit for CENVAT by the assessee company without being actual buying scrap from those companies. The scrap was allegedly transported by M/s. Shivmalhar Transport, Jejuri. 4. One Shri Nilesh Kudale is looking after the business of said transport company was issued summoned u/s. 131 of the Income-tax Act and he was asked to furnish all the vehicles movement registers, vehicle booking slips etc. As noted by the Assessing Officer as per the record of that transport company the vehicles which were stated to have plied between Jejuri, the assessee s unit and Bhosari on a particular date were not present but had gone to some distant locations far from Pune i.e. Aurangabad, Mumbai etc. In respect of two specific trucks bearing registration nos. MH-12-F-8919 and MH-12-F-8909. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the extent of ₹ 2,87,68,252/-, the assessee company has inflated the purchase cost showing the bogus purchases and during the course of the Survey action Shri Sanjiv R Gupta, Director, declared the additional undisclosed income of the assessee company for the A.Ys. 2007-08 and 2008-09 but subsequently retracted the statement as well as declaration. The Assessing Officer has also considered the inventory of stock lying in the factory of the assessee company during the course of the Survey action. The Assessing Officer has also noted that Shri Sanjiv R Gupta admitted that there was a difference in the figure after considering the tentative trading account and Shri Gupta admitted that there was a difference in the stock to the extent of ₹ 2,87,68,252/-. As noted by the Assessing Officer that the said difference was due to inflated purchases shown from M/s. Golden Scrap Traders and M/s. Golden Steel Corporation. The assessee filed the reply before the Assessing Officer denying that the assessee has inflated the purchases. The Assessing Officer rejected the books of account of the assessee by giving following reasons and finally held that 20% of the non-genuine purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-genuine purchases in the A.Y. 2007-08 amounting to ₹ 1,43,08,200/-, instead of adding the said whole amount. The major concern of the Ld. CIT is that there was sufficient evidence by way of statement of the transporter recorded u/s. 131 of the Act that the bogus bills were prepared in the name of the assessee company. The Ld. CIT also referred to the Survey report of the DDIT (Inv.), Pune dated 07-05- 2008 in which Shri Sanjeev R. Gupta admitted that there was difference in the actual physical stock and the stock arrived in the tentative trading account and also admitted to declare the said income difference as an addition income. Even though the assessee resisted the action of the Ld. CIT but finally on the basis of the Survey report by the DDIT (Inv.) u/s. 133 of the Act the Ld. CIT cancelled the assessment for the A.Y. 2007-08 and directed the Assessing Officer to re-examine the issue in the light of the Survey report of the DDIT (Inv.), Unit-I, Pune. 9. So far as in the A.Y. 2008-09 is concerned, the assessee filed the return of income declaring total income of ₹ 38,05,422/-. It appears that the assessee s case was re-opened on the basis of the report of DDI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts. Learned Counsel argued that preparing the trading account tentatively on the date of Survey cannot be said to be the perfect working of the stock-in-trade. The Learned Counsel placed his heavy reliance on the following precedents: (i) Malbar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) (ii) CIT Vs. Max India Ltd. 295 ITR 282 (SC) (iii) Ranka Jewellers Vs. Addl. CIT 328 ITR 148 (Bom) (iv) CIT Vs. Saluja Exim Ltd. 329 ITR 603 (P H) (v) CIT Vs. Gabriel India 203 ITR 117 (Bom) 11. He submits that there was no justification for exercising the powers u/s. 263 by the Ld. CIT as the assessment order is not erroneous. He argued that law is well settled that both the mandates of Sec. 263 must be fulfilled that are (i) order must be erroneous and (ii) it should also be prejudicial to the interest of the revenue. Merely because there is a revenue loss, that alone cannot be reason for exercising the powers u/s. 263 of the Act. He pleaded for quashing the orders passed by the Ld. CIT u/s. 263 of the Act. Per contra the Ld. DR supported the impugned orders. 12. In the present case, as per the facts on record on the basis of the search and seizure acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there is a confusion as regards the admission by representative of the assessee company with respect to bogus purchase which is wrong. We state that there is no such admission made by Shri D B Shah of any such alleged bogus purchase. In fact only statement recorded during the course of survey reveals (which is retracted) any such admission and at no other place. You are requested to kindly take a note of the above fact and remove any such misconception or confusion. Under the instruction from our client, and in the subject our submission is given as under: A). AS REGARDS STATEMENT GIVIEN BY THE DIRECTORS SHRI SANJEEV GUPTA 1. The assessee is company registered under companies act engaged in the business of manufacturing of Iron Ingots. The manufacturing unit is located at E-15, MIDC, 3ejun, Tal. Purandar, Dist- Pune. 2. The Survey proceedings were carried out at the premises of the assessee and during the course of survey a statement 'on oath was recorded (Copy is available with us) where in assessee had stated that purchases from some of the seller have not reached our factory premises only bills were prepared in respect of such purchases . 3. The survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus and that too to the tune of 60% to 80% of purchases form M/s. Golden Scrap Traders and M/s. Golden Steel Corporation. There are no evidences supporting such estimate. Whereas the audited accounts for the year 2006-2007, quantitative records and excise records produced before your honor correctly reflects the transaction of purchases and stock tally. 9. The addition cannot be made on the basis of estimates and presumption without any Justifiable evidence available on record. 10. The tentative Trading a/c. as on 12.3.2008 referred to in the para 2(iv) was NEITHER found during the course of survey NOR is reflected in the books of accounts that was available during the course of survey. On the contrary this trading account is prepared to reflect the purchases as estimated above and to calculate the gross profit. 11. The Gross profit was worked out at 36.32% (Anne-2) which is unreasonable for the industry. Again, while preparing tentative trading account value of bogus purchases, estimated at ₹ 2,87,68,2 (₹ 1,43,08,200 for A.Y.-20.07-2008 and ₹ 1,44,60,052 for A.Y.20 08-09) was added to the value of inventory. We are unable to understand when value of ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Shiv Malhar Transport for .lifting the scrap from supplier and to be delivering' at' their factory premises. Assessee is concerned with delivery j of its purchases from supplier's place to its 'factory. The transporter lifts the material from supplier's place which is evidenced by the goods carriage note cum bill received from transporter. The goods are received and unloaded at the factory premises and payment for the same are made through a/c. payee cheques. 2. This fact is also confirmed by the transporter who has confirmed the transaction with the assessee. Account confirmation and copy of bill issued by the transporter are already submitted during the course of proceedings. 3. It is alleged that M/s. Shive Malhar Transport has not deliver material at the factory and is slued the bills only and thus case is made out for proposed disallowance of an amount of ₹ 1,43,08,200 for A.Y.2007-2008. Contrary to this general assumption, the value of raw material purchase from M/s. Golden Scrap Traders and M/s. Golden Steel Corporation and transported through M/s. Shiv Malhar Transport is of ₹ 16,89,779. Statement showing value of goods lifted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad L Thakkar Vs ACIT 3 SOT 277 (Mum). 3. The assessee is within its right to state and submit the details in support of the return of income filed and this right is independent of the statement recorded during the course of survey. The assessee herein above has clarified all the relevant facts along with details and evidences. Without prejudiced to whatever stated above, we submit as follows: The proposed addition is on the bases of the statement of the director to the effect that the purchases from the suppliers are not genuine and thus goes to increase the closing stock. However, the quantitative details submitted reveals that these purchases are not lying in stocks and thus gets consumed. In such circumstances only Gross Profit can be worked on such purchases (from Golden Scrap Trader and Golden Steel Corporation amounting to ₹ 1,43,08,200) and added as income. There is thus no justification of addition of entire value of purchase. This facts is also indirectly accepted in para (iv) of the show cause notice which states that both sales and purchases are inflated and it is a case of the assessee company indulging in the transactions to take CENVAT Credit. Thus e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Assessing Officer has accepted the claim of the assessee that the goods under bogus purchases were actually received and consumed even when it was proved that there was no receipt of goods. The said observation is not correct. Nowhere the Assessing Officer has accepted the difference in the stock explained by the assessee was genuine one. But what we find that he accepted the alternate plea that only the gross profit on the said bogus purchases should be added to the total income and not the entire bogus purchases. The Ld. CIT has given more emphasis on the Survey report of the DDIT (Inv.). The Assessing Officer has considered the Survey report of the DDIT (Inv.) and on the said basis and after considering the same and also considering the fact that the statement given during the course of Survey by the Director of the assessee company was retracted, he decided to give the particular treatment in respect of the bogus purchases detected during the course of the Survey action. Law is also well settled that there is no provision u/s. 133A to record the statement on oath unlike in the case of the search and seizure action u/s.132. In para no. 9.2 the Ld. CIT has admitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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