9911796707
TMI Blog2014 (8) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... cked by any evidence and the claim that the raw material worth ₹ 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 – assessee has submitted that the letter filed by the Chartered Accountant on 27.12.2003 clarifying the issue has not been considered by the AO - the matter needs to be re-examined at the end of AO – the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Payments made of interest and payment to contractors – TDS deposited after the prescribed due date u/s. 194 A and 194C or not - Held 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 - CIT vs. Praful Kantilal Shah [2014 (8) TMI 808 - GUJARAT HIGH COURT] - the amendment to Section 40(a)(ia) of the Income Tax Act brought out by Finance Act, 2010 with effect from 01.04.2010 was having retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls by the Revenue as well as Assessee are against the order of CIT(A)-IV, Baroda dated 23.01.2009 29.01.2009 for A.Y. 2005-06 in the case of Amin Machinery Pvt. Ltd. and Amin Panels respectively. 2. Before us, at the outset, both the parties submitted that though the Assessee are different but belong to the same group the issue involved are similar and therefore all the appeals can be disposed off together. We therefore proceed to dispose of all the appeals by a consolidated order for the sake of convenience. We thus proceed with the facts in the case of Amin Machinery Pvt. Ltd. 3. The facts as culled out from the material on record are as under. 4. Assessee is a company stated to be engaged in the business of manufacturing of machinery. Assessee filed its return of income for A.Y. 05-06 on 31.10.2005 declaring total income of ₹ 33,08,210/-. The Assessment was framed u/s. 143(3) vide order dated 28.12.2007 and the total income was determined at ₹ 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if the Assessee had really made the purchases from the 3 parties, ( Minaxi Enterprise, Paresh Steel and Shri Bhagyalaxmi Steel) the names and addresses of those parties would have been known to Shri Jariwala more so when it was for the first time when the Assessee had bought such a huge quantity of M.S. material apart from the regular purchase. A.O was therefore of the view that Assessee had made doubtful transaction with the above 3 parties. Thereafter to ascertain the genuineness of the purchases, summons were issued under section 131(1) to the 3 parties who had claimed to have sold MS material to Assessee. A.O noted that Paresh Steel and Bhagayalaxmi Steel only produced the copies of bills and delivery challans but did not produce the books of account and the stock 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- -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were subsequently posted into the books of accounts on 26.11.2004, after contacting Smt. Varshaben, Director of the company, who was also at Bangalore at that time. Assessing Officer has relied upon Shri P. A, Jariwala's statement to hold that purchases from these three parties were bogus because he did not mention names of these three parties during statement u/s.133A. Since Shri Jariwala was not looking after sales and purchases, which were looked after by Shri Vipinbhai, CEO, it was possible for him not to mention names of all purchase parties. Shri Jariwala had also mentioned that possibility of some bills being not 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 purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged to be bogus is concerned, confirmation from these three parties had been filed before the Department on 16.12.2004. Verification was carried out by the Department immediately after survey. Besides, the Assessing Officer himself summoned these three parties u/s. 131 and regarding two parties, viz. M/s. Paresh Steel and M/s.Shree Bhagyalaxmi Steel, his conclusion recorded in para 5(a) of the assessment order, is 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 of MS material to the appellant. The fact that they did not produce books of account or stock register or did not maintain 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. Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easoned and detailed order has confirmed the purchases of ₹ 10,00,423/- from Minakshi Enterprises to be bogus but the other addition made from two other parties were deleted for the reason that the 2 parties in their statement recorded u/s. 131 had confirmed the dispatch of goods as per the billing dates. Before us Revenue has been 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. 9. In the result, the appeal of Revenue is dismissed. We now take up Assessee's appeal (ITA No. 958/A/2009). 10. The grounds raised the Assessee reads as under:- 1.1. The order passed u/s. 250 of the Act on 23.01.2009 for A.Y. 2005-06 by CIT(A)-IV, Baroda by upholding the additions made by A.O is wholly illegal 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. In other words, appellant has not been able to substantiate its claim that raw material worth ₹ 11,65,591/-, which represents value of investment in unaccounted raw material found at the time of survey was, n quantity terms included in the sales or closing stock. During appellate proceedings quantitative tally of the stock was not filed to demonstrate that the entry in quantitative terms in respect of ₹ 11,65,591/- was incorporated in the sales or in closing stock. The onus of establishing that sales or closing stock did increase in quantity terms by ₹ 11,65,591/-was squarely on the appellant, which has not been satisfactorily discharged. Without satisfactorily demonstrating this, the debit entry of ₹ 11,65,591/- amounts to nullification of income disclosed on account of excess stock found during the survey. In view of this, addition of ₹ 11,65,591/- is confirmed. 13. Aggrieved by the order 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 ₹ 11,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS in respect of which was deposited to the credit of Government before the due date of filing of return. Regarding payment to contractors, except for two items of ₹ 44,434/- (Gujarat Perfect Engineering Ltd), and ₹ 1,05,792/- (Varia Engg. Works) totaling to ₹ 1,50,226/-, all the expenses were credited in the month of March, 2008 and corresponding tax deducted at source was deposited to the credit of Government before the due date of filing of return in appellant's case. Thus, in view of amendment carried out in section 40(a)(ia) by Finance Act, 2008 with retrospective effect from 1,04,2005, disallowance of ₹ 26,36,539/-needs to be restricted to ₹ 1,50,226/-. 5.2. I have considered the submissions. In view of the provisions of section 40(a)(ia) as amended by Finance Act, 2008, out of addition of ₹ 26,36,539/-, addition of ₹ 1,50,226/- is confirmed and the balance, .e. ₹ 24,86,313/- is deleted. 17. Aggrieved by the order of CIT(A) the Assessee 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 deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 The grounds 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 ₹ 21,84,167/- to ₹ 5,00,100/- on account to 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 payment of commission. 2. The appellant craves leave to add, to amend or alter the above grounds as may be deemed necessary. 21. A survey u/s. 133A was carried out at the business premises of the Assessee on 24.11.2004 wherein the inventory of stock was taken. During the course of physical verification, there was a difference of ₹ 5,69,856/- in the valuation of stock which was admitted by the Assessee. During the course of post survey proceedings, statement of Smt. Varshben Amin, a partner of the firm was recorded u/s. 131(1) of the Act on 10.12.2004 and in her statement it was claimed that Assessee had purchased CR sheets and Copper Flat of ₹ 20,69,102/- from Minakshi Steel, Shri Bhagyalaxmi Traders and Paresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he month of April and May that is earlier to the arrival of alleged purchases and there were no major sales after that date. A.O. thus concluded that Assessee has failed to corroborate the consumption of CRC sheets and copper flat with the manufacturing of distribution board and L.T. panels. He therefore concluded that the purchases from 3 parties were merely paper transactions. He accordingly made addition of ₹ 15,40,597/- on account of bogus purchases and added to the total income. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee and the remand report, granted partial relief to the Assessee by holding as under:- 2,2. I have carefully considered the matter. Assessing Officer has disallowed purchases of ₹ 15,40,497/- out of total purchases from three parties namely M/s.Minakshi Enterprises, M/s. Paresh Steel and M/s.Shree Bhagyalaxmi Steel amounting to ₹ 20,69,102/- mainly due to the purchases being made in the months of August, September and October for manufacturing tailor made items though there were no orders on hand, failure to explain the difference of 32,316 kgs. in CRC she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... physically on day of survey exceeding the book stock and on the other hand, on the basis of working on page 5 of assessment order, Assessing Officer has- held that the stock of CRC sheets/copper flats stock found physically on the date of survey was short of the book stock. These two scenarios are contradictory to each other and only one can be correct. The working done by the A.O. to arrive at shortage of 32,316 kgs. of CRC sheets and 630.82 kgs. of copper flats has been challenged by the appellant as mentioned in the previous para. Appellant has pointed out that the weight of 24 semi finished panels remained to be included in the raw material consumption of 2,211 kgs. taken by the A.O. for working out the shortage. Thus, the shortage worked out by the Assessing Officer in terms of weight does have shortcomings and cannot be the governing factor for coming to a conclusion regarding bogus purchases. Also, shortage of stock could imply sales outside books, meaning thereby suppression of gross profit on such sales. The AO has used the working on page 5 of assessment order to come to a conclusion that purchases from aforesaid three parties were partly bogus. It is noted that A.O. has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. In this context, it is noted that the appellant could have paid the dalali to Shri Sharma at the time of bill also or the same could have been adjusted later at the time of payment. Minor variations in the stated modus operandi cannot negate the clear cut admission by Shri Sharma regarding accommodation bills. Judicial decisions relied upon by the appellant are on different facts and are not applicable here. The purchases of ₹ 5,00,100/- from M/s. Minakshi Enterprises are held to be bogus. Thus, out of the addition of ₹ 15,40,597/- on account of bogus purchases, addition to the extent of ₹ 5,00,100/- is confirmed and balance, i.e. ₹ 10,40,497/- is deleted. 22. Aggrieved by the aforesaid order of CIT(A), the Revenue is now in appeal before us. Before us, ld. D.R. took us through the findings of observations of A.O and strongly supported the order of A.O. The ld. A.R. on the other hand reiterated the submissions made before A.O and CIT(A) and supported the order of CIT(A). 23. We have heard the rival submissions and perused the material on record. We find that CIT(A) has noted that in response to summons, M/s. Paresh Steel and Shree Bhagyalaxmi Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 5,69,856/- to be a mistake. In this letter, the said amount was requested to be treated as income of the appellant, The appellant has now claimed that another letter dated 27.12.2007 was also filed under the signatures of Shri P. D. Parikh himself clarifying the matter and the same was not taken into account by the Assessing Officer. The sum and substance of appellant's contention in letter dated 27.12,2007 and during appellate proceedings is that the debit entry of ₹ 5,69,856/- termed as discrepancy in stock and added to the purchases/consumption was balanced by either sales or the closing stock. In addition, income of ₹ 5,69,856/- attributable to excess stock found during survey was added directly in the computation of income. Appellant's claim regarding inclusion of ₹ 5,69,856/- in sales or closing stock is not backed by any evidence. In other words, appellant has not been able to substantiate its claim that raw material worth ₹ 5,69,856/-, which represents value of investment in unaccounted raw material found at the time of survey was, n quantity terms included in the sales or closing stock. During appellate proceedings quantitative tal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹ 27,73,962/-, 29. During the course of assessment proceedings, A.O noticed that during the course of survey 24 LT panels found and subsequently Assessee had purchased 12 LT panels and sold 24 LT panels, the details of which are listed by A.O on page 6 of the order. Thus according to A.O there should have been 12 LT panels in closing stock but in the details of closing stock no panels were found. Assessing Officer asked the Assessee to explain the discrepancy to which Assessee interalia submitted that 12 LT panels were not as per specification of the buyer and therefore it had no value and therefore not considered in closing stock. The submission of Assessee was not found acceptable to A.O for the reason that at the time of survey neither the partner nor the key person in their statement had mentioned about the panel being not as per specification. He also noted that no stock of scrap of such item was found at the time of survey. He therefore concluded that the submission of the Assessee was not supported by evidence/confirmation. He accordingly considered the value of 12 LT panels amounting to ₹ 27,73,962/- as unaccounted sale and added to the income. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng semi finished panels being found at the time of survey to be comprising some defective panels and subsequent purchase from M/s. Bharat Machinery Profile Co., in the Notes to the accounts filed with the return of income. The same was detected by the Assessing Officer. Even though the panels were claimed to be scrapped, their value was not included, whatever it might have been, in the closing stock as on 31.3.2005. In the written submissions filed during the appellate proceedings, it has been claimed that during post survey period, alternatives were being suggested to Sikkim Power Department for repairing or rectifying the 12 panels declared defective by the Government of Sikkim. When purchase order was already placed with M/s.Bharat Machinery Profile Co, on 19.10.2004, there was no question of further efforts by the appellant with Government of Sikkim to rectify the defects in the post survey period. Thus, there are several inconsistencies in appellant's explanation regarding the transaction of purchase of ₹ 26,10,000/- of 12 LT panels from M/s. Bharat Machinery and Profile Co. The A.R. was asked to produce copy of correspondence with the customer regarding the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before us, ld. A.R. reiterated the submissions made before ld. CIT(A). ld. D.R on the other hand pointed out the findings of ld CIT(A) and supported his order. 31.We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to the value of 12 LT panels which has been considered by A.O to be unaccounted sale. It is Assessee's submission that the LT panels were manufactured for Sikkim Government and since they were defective it was considered as scrap and not included in stock. Before us, ld. A.R. could not produce any correspondence entered by it with Sikkim Government to demonstrate that the LT panels were scrapped on the basis of the letter from Sikkim Government. Ld. CIT(A) has also, while upholding the addition has noted that there were several inconsistencies in the Assessee's explanation and further Assessee had not produced any documentary evidence to support its contention. We further find that ld. CIT(A) by a well reasoned order upheld the addition. Before us, ld. A.R. has not brought any material on record to controvert the findings of ld CIT(A). We therefore find no reasons to interfere with his order. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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