9911796707
TMI Blog1999 (11) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... prices and bogus purchases. The assessee declared gross profit of Rs. 76,47,926 on turnover of Rs. 25.48 crores, which resulted G.P. rate of 3.007 per cent. In the preceding year the G.P. shown was 3.000 per cent for turnover of Rs. 22.06 crores. The AO had doubts about the correctness of the accounts on the ground that the G.P. percentage for the year under consideration was almost the same as that of last year. He also examined the burning loss as well as melting scrap and observed that they were consistently the same as in the past, which also raised doubts in his mind about the correctness of the assessee's accounts. 2.1. The AO examined purchases from M/s Jay Shree Industries India, Jay Shree Steel and M/s Shree Ram Steel Centre and also referred to the investigations conducted by Central Excise Department in the cases of the first two parties, where they had held that the said two parties were doing only paper transactions in sale and purchases and they were not engaged in actual manufacturing activities. Scrutiny of bank accounts of the said two parties indicated that whatever payments for the transactions had been received by cheques had been withdrawn on the same day, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Rs. 3,43,177 in respect of the purchases from the said two parties. 2.5. The AO also examined the purchases shown from the aforesaid third party, namely, M/s Shree Ram Steel Centre amounting to Rs. 10,99,890 showing 99.99 M.T. of raw materials. He referred to the findings given by the ITO, Ward-I in respect of the said concern, wherein the AO had held that the said concern was only issuing bills and no activities were actually carried out by it. He also referred survey conducted in the premises of M/s Siya Ram Pipes (P) Ltd. a company in which the proprietor of M/s Shree Ram Steel Centre was a Director. From the company's premises blank cheques and bills of M/s Shree Ram Steel Centre and similar other papers concerned were found, which substantiated the fact that M/s Shree Ram Steel Centre was a bogus firm. A copy of the bank account of the said concern showed that the cash was withdrawn on the same date of depositing the cheques of the buyers meaning thereby that the amount was being returned to the buyers on the same day. The AO here also instead of adding the entire amount of bogus purchases added only Rs. 51,995 for estimated inflation of the purchase price as in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been made for the total amount of purchases from these three parties and not merely for inflation of purchase prices being the difference between the average purchase price from other parties and the purchase price from the said three parties. He, therefore, issued enhancement notice to the assessee. 2.8. In response to the show-cause notice issued by the learned CIT(A) for enhancement of the income, the assessee asked for copies of relevant documents, informations, etc. from the Central Excise authorities so as to prepare the reply. Later on written submissions were filed by the assessee. The assessee contended that the learned CIT(A) could not exercise the power of enhancement in the case because it would amount to change of opinion upon the matter which had already been considered by the AO and the view had been taken by him. He submitted that the copies of documents, informations, etc. on the basis of which the learned CIT(A) had issued the enhancement notice had also not been furnished to the assessee as asked for because the learned CIT(A) did not have such documents, informations, etc. against the assessee and as such it was only the matter of difference of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparately discussed that the shortage shown in the stock register and in the books of accounts was shown on predetermined level month to month and there was no change except slight variation at the third decimal point which only went to show that the assessee had manipulated the shortages to cover up the bogus purchases to the extent of 547 M.T. of raw materials. He, therefore, held that there was no basis for the AO to make presumption that the assessee had purchased some raw materials without bills at a lower rate especially when such a proposition could not be supported by accounting point of view or any material on record. 2.10. The learned CIT(A) observed that it had already been proved from the facts gathered by the AO that the aforesaid three firms from whom the alleged purchases had been shown were bogus concerns and were only issuing paper bills. These three firms had admitted their modus operandi in their respective assessments before the IT Department. It was further proved that the goods were not transported from their factory premises to the premises of the assessee-firm, because the trucks on which the goods were transported were non-existent and were cars, scooters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no concrete basis before the AO to hold that the purchase price from the aforesaid three parties was higher than the average purchase price from the other parties and hence addition was liable to be made for the difference. It was further contended that such addition was arbitrary and liable to be deleted. 2.13. As regards the enhancement made by the learned CIT(A), the learned counsel submitted that the same was unjustified and wrong because the power of enhancement was confined to that which was the subject-matter of assessment and specifically limited to the same sources and basis. The power of enhancement could not be exercised to bring in any new sources of income and in regard to matters which were altogether neither considered nor dealt with by the AO. He, therefore, contended that the enhancement made by the learned CIT(A) being beyond the subject-matter of assessment, was liable to be reversed. He relied on the decisions in (1962) 44 ITR 891 (SC) and (1967) 66 ITR 44 (SC). 2.14. The learned counsel further submitted that the learned CIT(A) had wrongly conferred jurisdiction upon himself to consider the new sources of income and new subject-matter which had not been par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported by bills, books of accounts, registers, payments made by account-payee cheques, etc. None of these evidences has been proved to be false. He argued that it was for the learned CIT(A) to prove the allegations of bogus purchases and the assessee could not be called upon to rebut to unfounded allegations. He contended that the reliance placed by the learned CIT(A) on the decision reported in 24 ITR 610 (sic) was unjustified and wrong and he should have taken into account the other judgments on the issue reported in (1962) 44 ITR 891 (SC) and (1967) 66 ITR 44 (SC). In this connection, he relied on the decisions in 178 ITR 40 (sic). Regarding the onus to prove the allegation of bogus purchases being on the learned CIT(A), the learned counsel referred to the decisions Udaipur Distillery Co. vs. CIT (1973) 87 ITR 516 (Raj) and Kishan Chand Chella Ram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC). As regards the contention that after the setting aside of the order of the Collector of Central Excise by the CEGAT, the basis of the enhancement by the learned CIT(A) did not survive and hence the enhancement was liable to be reversed, the learned counsel sought support from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhancement by the learned CIT(A) was not on account of a new source of income or on account of new subject-matter. He contended that the subject-matter of purchases from the aforesaid three parties had been duly considered by the AO in the assessment but despite his finding to the effect that the purchases from the said three parties were bogus and non-genuine, the AO had made addition only on account of difference in the purchase rates instead of making addition for the purchase price of the bogus purchases. Since this finding of the AO was wrong, the learned CIT(A) was justified in considering the matter on his own and after giving show-cause notice and considerable opportunity to the assessee, and after considering all the relevant materials on record, and after discussing those in the appellate order, he was justified in holding that the addition was liable to be made for the purchase price of the purchases of raw materials from the said three parties. Thus, the subject-matter of enhancement was not outside the assessment under consideration but the same was based on materials on record before the AO. He argued that the decisions relied upon by the learned counsel for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We, therefore, hold that the additions of Rs. 3,43,177 and Rs. 51,995 were unwarranted and uncalled for. 2.22.2 As regards the enhancement of total income by Rs. 57,98,103 made by the learned CIT(A) we find that the CIT(A) had held that the addition of Rs. 61,93,275 was liable to be made in the case on account of bogus and non-genuine purchases of the aforesaid three parties. However, since the AO had already made additions of Rs. 3,43,177 plus Rs. 51,995, he made only the balance addition of Rs. 57,98,103 by way of enhancement of the total income in exercise of powers conferred upon him under s. 251 of the IT Act. Sec. 251 of IT Act provides as under: "251(1) In disposing of an appeal, the Dy. CIT(A) or, as the case may be, the CIT(A) shall have the following powers: (a) in an appeal against an order of assessment, he may, confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the AO for making a fresh assessment in accordance with the directions given by the Dy. CIT(A) or, as the case may be, the CIT(A) and after making such further inquiry as may be necessary, and the AO shall thereupon proceed to make such fresh as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the learned CIT(A) relating to the subject-matter or a source of income which had not been considered by the AO. What the learned CIT(A) had done by way of enhancement is that he had held that the approach of the AO in making the aforesaid additions instead of addition for the price of the bogus purchases was wrong when he had himself held that the said purchases were bogus and non-genuine. The view of the learned CIT(A) that if the purchases from the aforesaid three parties were bogus and non-genuine, the addition had to be made for the entire purchase price from the said three parties and not for difference between the purchase prices and the average purchase prices from other parties was found on appreciation of the fact, and material on AO's records. 2.24. In the above view of the matter, we hold that the contention of the learned counsel for the assessee that the learned CIT(A) was not competent to exercise the power of enhancement in the case, was not tenable and acceptable. The various decisions cited by the learned counsel were not applicable to the facts of the present case because the facts in those cases were distinguishable. 2.25. We also find that the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same had not been properly and fully examined by the learned CIT(A) in the present case. While it may be correct to take into account the materials and evidences gathered by the Central Excise Department against the aforesaid three parties, it will not be legally proper and valid to impliedly adopt the findings of the Central Excise Department in this regard. In the present case we find that the learned CIT(A) in the course of the enhancement proceedings had by and large adopted the findings of the AO and the Central Excise authorities, without making his own independent examination and evaluation of the materials. Since enhancement proceedings were a serious and independent proceedings before the learned CIT(A), he ought to have followed the due process of law before coming to his own conclusion regarding the purchases from the aforesaid three parties. In the present case we find that this is wanting. 2.27. Moreover, since the AO and the learned CIT(A) had based their findings regarding the non-genuineness of the purchases from the aforesaid three parties, on the order of the Collector Central Excise, the basis of their orders did not survive after CEGAT had set aside the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and convinced with the aforesaid contentions. He observed that the due date of 15th of the next month could not be extended and the grace period of 5 days had been allowed to deposit the same without charging any damages thereon. This did not extend the date in anyway. He, therefore, held that since the payment of Rs. 45,964 had been made delayed after 15th, deduction for the same was not allowable under s. 43B r/w s. 36(1)(va) and 2(24)(x) of the Act. He, therefore, confirmed the disallowance. 3.2. Aggrieved further the assessee has come up in second appeal before this Tribunal. 3.3. The learned counsel submitted that the deposit of the PF contributions on the aforesaid dates were within the grace period of 5 days allowed by the PF department and as such the same should be treated as deposits made within the due date and deductions should be allowed under s. 43B of the Act. He relied on the decisions Allied Motors (P) Ltd. vs. CIT (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC), Fluid Air (India) Ltd. vs. Dy. CIT (1997) 63 ITD 182 (Mumbai) and ITO vs. Sea Pearl Industries (1996) 56 ITD 505 (Coch). 3.4. The learned Departmental Representative, on the other hand, support ..... X X X X Extracts X X X X X X X X Extracts X X X X
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