2008-VIL-422-ITAT-JAI
Equivalent Citation: TTJ 122, 854, [2009] 33 SOT 27 (JP.) (URO)
Income Tax Appellate Tribunal JAIPUR
ITA No. 381/Jp/2008
Date: 30.06.2008
KANCHWALA GEMS.
Vs
INCOME-TAX OFFICER.
BENCH
Member(s) : I. C. SUDHIR., B. P. JAIN.
JUDGMENT
The Revenue has questioned first appellate order in :—
1. deleting the trading addition of Rs. 5,54,318 made by the AO by applying the GP rate; and
2. directing to allow deduction under s. 80HHC on delayed payment received.
2. We have heard and considered the arguments advanced by the parties in view of the orders of the lower authorities, material available on record and the decisions relied upon by the party.
Ground No. 1
3. The assessee, an exporter of precious and semi-precious stones had claimed to have made purchases Of goods from different parties. The AO during the course of assessment proceedings held that purchases made from M/s M.D. Exports, Akshita Exports, Ambika Exports and Colour Gem Exports are not genuine. He accordingly rejected the books of accounts and estimated income of the assessee by applying GP rate of 35 per cent resulting into trading addition of Rs. 5,54,318. The learned CIT(A) has deleted these trading additions in view of several decisions of the Tribunal as well as of the Hon'ble Gujarat High Court referred in para No. 3.4 of the first appellate order. The learned CIT(A) has accepted the submissions made on behalf of the assessee that purchases made from the above 4 parties are genuine as all the necessary documents were furnished to the AO and the payments were made by cheques to these parties, which were duly credited in their bank accounts, hence, subsequently the assessee cannot be held responsible for conduct of the other party. It was also contended the application of GP rate of 35 per cent by the AO is without any basis. Now Revenue has questioned the action of the learned CIT(A) before the Tribunal in deleting the trading addition.
4. The learned Departmental Representative submitted that the claimed suppliers M/s M.D. Exports, Akshita Exports, Ambica Impex and Colour Gem Exports were neither found on the given addresses nor they were in the business as per the report of Inspector deputed by the AO. In the case of Sanjeev Prakash an Group of Jaipur search and seizure operations were conducted and subsequent investigations wherein it was revealed that a major racket of arranging entries of export, import and purchase bills is prevalent in gems and jewellery market in Jaipur and outside. On interrogation these parties have accepted that they did not supply any goods to those parties who have claimed purchases and have given merely accommodation entries for purchases. Bank accounts of these main lenders and subsequent transfers and flow funds were minutely analyzed and it was observed that cheques issued by purchasers for purchase were first deposited in bank account of bill provider, then transferred to other accounts and finally entire amount was withdrawn in cash. Under these circumstances, the AO while disbelieving the genuineness of claimed purchases made from these four parties had rightly rejected the books of accounts and estimated the income of the assessee by applying GP rate. The learned CIT(A) has however deleted that trading addition without assigning reasons for the same.
5. The learned Authorised Representative on the other hand, tried to justify first appellate order on the issue with this submission that during the course of assessment proceedings the assessee had furnished copies of the sale bills issued by the parties from whom the goods were purchased. The sale bills are containing all particulars i.e. item sold, weight in carats, rate per carat, amount, RST/CST numbers and PAN. Entire payments of the goods purchased were made by account payee cheque by the assessee. During the course of assessment the assessee has furnished even the bank account where the amount has been debited to the account of assessee and credited to the accounts of supplier. The assessee had also furnished confirmations of the suppliers. The goods purchased were exported in the same shape and form to foreign buyers through customs after appraisal by the customs authorities. The payments have also been directly remitted to the bank accounts of the assessee by the foreign buyers. Thus, when sale and delivery have taken place and subsequent to sale even the said parties have confirmed the transaction, the assessee had discharged its onus to establish the genuineness of the claimed purchases and the AO was not justified in denying the same. If subsequently, those four suppliers are not found on the given address due to some unknown reason, the assessee cannot be made responsible for that because assessee was having no control over them after completion of the transaction nor was it in the control of the assessee as to how they are using purchased price once the payment was made by the assessee to them against the supply of goods. The AO was also not justified in using adversely against the assessee some statements made by the persons related to some suppliers in the case of Sanjeev Prakashan Group that too without affording an opportunity to the assessee to cross-examine those persons. The learned Authorised Representative referred page Nos. 29 to 31 of the paper book i.e. copy of letter dt. 14th Nov., 2005 addressed to ITO with ING Vysya Bank certificate and statement of account, page Nos. 42 to 51 of the paper book i.e. copies of sale bills and confirmation of accounts of the suppliers M/s M.D. Exports. M/s Akshita Exports, M/s Ambica Impex and M/s Colour Gem Exports. The learned Authorised Representative submitted further that there is no evidence that money withdrawn by the supplier was ultimately returned by them to the assessee. The learned Authorised Representative placed reliance on the following decisions:
(i) Dy. CIT vs. Adinath Industries (2001) 170 CTR (Guj) 262 : (2001) 252 ITR 476 (Guj);
(ii) CIT vs. M.K. Bros. (1986) 52 CTR (Guj) 228 : (1987) 163 ITR 249 (Guj);
(iii) C.M. Francis & Co. (P) Ltd. vs. CIT (1970) 77 ITR 449 (Ker);
(iv) CIT vs. Daulatram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC);
(v) CIT vs. Orissa Corpn. (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC);
(vi) Khandelwal Constructions vs. CIT (1998) 145 CTR (Gau) 65 : (1997) 227 ITR 900 (Gau);
(vii) Dy. CIT vs. Rohini Builders upheld by the Hon'ble Supreme Court (2002) 254 ITR (St) 275;
(viii) CIT vs. S.M. Omer (1992) 107 CTR (Cal) 272 : (1993) 201 ITR 608 (Cal);
(ix) ITO vs. Naresh Fabrics (2002) 75 TTJ (Jd) 386;
(x) ITO vs. Ligakat Ali Mohd. Sadik (2003) 81 TTJ (Jd) 769;
(xi) Radha Mohan Agarwal vs. ITO 30 Tax World 190 (Jp);
(xii) Shiv Trading Co. vs. ITO 30 Tax World 117 (Jp);
(xiii) Sagarmal Daga vs. ITO 32 Tax World 40 (Jp);
(xiv) CIT vs. Kishan Malpani 32 Tax World 122 (Jp);
(xv) Asstt. CIT vs. Gem Stones 26 Tax World 511 (Jp);
(xvi) Om Metals & Minerals Ltd. vs. Jt. CIT 32 Tax World 54 (Jp);
(xvii) Sambhav Gems vs. Asstt. CIT 36 Tax World 254 (Jp);
(xviii) Parasmal Jain vs. Dy. CIT 36 Tax World 67 (Jp).
6. Considering the above submissions in view of the decisions cited above, we find substance in the contention of learned Authorised Representative that by furnishing necessary information supported with documents like bills issued against the purchases by the above named four parties bearing details of the goods supplied including rates, RST/CST numbers, their PAN and that the payments have been made through account payee cheques, the assessee had discharged its initial onus to establish the genuineness of the transaction. Besides, the assessee had also furnished confirmations from the above named four parties confirming the purchases claimed to have been made by the assessee from them. During the course of assessment proceedings the assessee has also furnished bank account, wherein the amount has been debited to the account of the assessee and credited to the accounts of the sellers. Confirmations of accounts as obtained from the concerned parties were also submitted before the AO and the very important aspect of the matter is that entire purchases made from the abovementioned four parties have been exported in the same shape, size and weight duly verified by the customs authorities. Payments towards such exports have also come through proper banking channel. Copies of these documents have been placed at page Nos. 21 to 51 of the paper book. The assessee had furnished all the necessary information including name, address and telephone number of the supplier, as discussed above supported with documents which is expected from a prudent purchaser to establish the genuineness of the claimed transaction besides the payments have been made through account payee cheques and goods purchased from the above named four parties have been exported by the assessee. Under these circumstances, we are of the view that the AO was not justified in doubting the genuineness of the claimed purchases made by the assessee from the said four suppliers merely on the basis that on subsequent occasion the parties were not found on the given addresses or in some other cases some connected person to the supplier had stated that they were only issuing bills without supplying the goods or that the money paid by the assessee against the purchases was withdrawn by those parties. Undisputedly, after completion of transaction a purchaser cannot have any control over the suppliers and suppliers are always at liberty to use the money paid to them against the goods sold by them. We are thus of the view that in absence of any positive evidence that the goods were not purchased from the above named parties but from some named person or that the money paid by the assessee against the goods was ultimately returned to the assessee by the suppliers, there was no occasion before the AO to deny the claimed purchases especially when the genuineness of the export of those goods by the assessee has been accepted by the AO. The learned CIT(A) has thus rightly deleted the addition of Rs. 5,54,318 made by the AO by applying GP rate after disbelieving the genuineness of the claimed purchases made from the above named four parties. The first appellate order in this regard is thus upheld. The ground No. 1 is accordingly rejected.
Ground No. 2
7. In support of this ground the learned Departmental Representative submitted that the learned CIT(A) was not justified in directing the AO to allow deduction under s. 80HHC on the delayed payment received especially when the assessee himself had withdrawn the exemption claimed by the assessee in this regard before the AO.
8. The learned Authorised Representative on the other hand submitted that the learned CIT(A) has directed the AO to recompute the deduction under s. 80HHC on the basis of business income finally determined in view of his decision on other grounds. What the Revenue has questioned before the Tribunal in ground No. 2 is entirely different than what was directed by the learned CIT(A) which is clear on reading of para No. 5.3, of the first appellate order. When the learned CIT(A) has deleted trading addition as such ultimately even nothing would have effected as far as deduction under s. 80HHC is concerned. As far as disallowance on remittance is concerned, during the course of assessment proceedings detailed submissions were made and assessee's claim was withdrawn which has been specifically mentioned by the AO at page Nos. 9 and 10 of the assessment order. The learned Departmental Representative has however, raised entirely a new ground which does not emerge out of the assessment order or records. Both the grounds one and two are separate having different issues. The lower authorities have not doubted the remittance. Entire remittance has been received on or before the framing of the assessment order dt. 31st Jan., 2006 though belated. The AO has referred these facts only for the purpose of claim under s. 80HHC which ultimately was withdrawn by the assessee before the AO.
9. Considering the above submission in view of the orders of the lower authorities we are of the view that there was no occasion before the learned CIT(A) to entertain those claims of deduction under s. 80HHC which were ultimately withdrawn by the assessee before the AO and the learned CIT(A) was to restrict to the extent of remittance received within time or extended time and in the alternative to be computed on the basis of business income. We however, from the contents of para No. 5.3 of the first appellate order find that the learned CIT(A) in conclusion of the issue raised before him vide ground No. 5 regarding disallowance of deduction under s. 80HHC has directed the AO only to recompute the deduction under s. 80HHC on the basis of business income finally determined in view of his decision in respect of ground Nos. 1 to 4. In the ground Nos. 1 to 4 before him the issues raised were regarding trading addition, disallowance made out of office expenses, telephone expenses and car expenses. We thus do not find substance in the issue raised in ground No. 2 of the appeal as not arising out of the first appeal in question. The ground No. 2 is thus rejected.
la, In result, appeal is dismissed.
C.O. No. 25/Jp/2008
11. The assessee has objected to the first appellate order on the basis that the lower authorities have erred in:
1. disallowing an amount of Rs. 4,048 out of a total of Rs. 40,485 towards office expenses;
2. disallowing an amount of Rs. 11,837 out of Rs. 59,485 towards office expenses; and
3. disallowing Rs. 5,032 out of Rs. 14,113 towards car expenses.
12. In support of the above objections, the learned Authorised Representative submitted that looking to the turnover of the assessee and nature of business, the lower authorities are not justified in making the above disallowances which are otherwise excessive also. The learned Departmental Representative on the other hand, placed reliance on the orders of the lower authorities on the issue. On perusal of orders of the lower authorities, we find that the AO had made above disallowances on account of personal user of telephone and car and office facilities in absence of maintenance of proper record @ 10 per cent out of office expenses, 20 per cent out of car expenses and depreciation thereon and 20 per cent out of telephone expenses. We, however, considering the totality of facts and circumstances of the case especially nature of the business i.e. export are of the view that disallowance of 10 per cent out of the claimed expenses on office, car and telephone will meet the end of justice. We order accordingly. The cross-objection is partly allowed.
13. In result, ITA No. 381/Jp/2008 is dismissed and C.O. No. 25/Jp/ 2008 is partly allowed.
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