Taxap/40/2006 Of Commissioner Of Income Tax v. Vimal Trading Co

O/TAXAP/1865/2005 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1865 of 2005 With TO TAX APPEAL NO. 39 of 2006 TAX APPEAL NO. 40 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================COMMISSIONER OF INCOME TAX....Appellant(s)VersusSHREE BALAJI INDUSTRIES....Opponent(s) ================================================================ Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1SERVED BY AFFIX.-(R) for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 13/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and orders passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as ‘the Tribunal’) dated 07.04.2005 and 28.12.2004 in ITA Nos. 3213/Ahd/2004, 3139/Ahd/2004 & 3140/Ahd/2004 for the Assessment Years 1996-97, 1997-98 & 1998-99 respectively, the revenue has preferred the present Tax Appeals for consideration of the following substantial question of law which was framed while admitting the matters: Tax Appeal No. 1865 of 2005 “Whether, the Appellate Tribunal is right in law and on facts in holding that only 25% of the purchase price is disallowable out of the addition made on account of bogus purchases?” Tax Appeals Nos. 39 & 40 of 2006 “Whether, the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to allow deduction on account of purchases at 75% of the purchases exclusively proved to be bogus?” 2. The assessment u/s 143(3) read with section 147 was completed on the total income of the assesee firms and while completing the assessment, the Assessing Officer made addition of certain amount on account of bogus purchases which were noticed during the course of serach. On appeal by the assessee, the CIT (Appeals) directed to work out the computation of profit after reducing the purchase price by 25%. On appeal before the Tribunal by the revenue, by impugned judgment and orders, Tribunal dismissed the appeal and upheld the order of CIT(A). Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the revenue has preferred the present Tax Appeals for consideration of the aforesaid substantial question of law. 3.Mr. Manish Bhatt, learned Senior Counsel appearing with Ms. Bhatt, learned advocate on behalf of the appellant– revenue has submitted that the decision of the Tribunal is erroneous. He submitted that the Tribunal ought to have confirmed the addition of purchase from party which was found non existent and amount of purchase price was considered as income from undisclosed sources. 3.Mr. Manish Bhatt, learned Senior Counsel appearing with Ms. Bhatt, learned advocate on behalf of the appellant– revenue has submitted that the decision of the Tribunal is erroneous. He submitted that the Tribunal ought to have confirmed the addition of purchase from party which was found non existent and amount of purchase price was considered as income from undisclosed sources. 4.We have heard Mr. Bhatt, learned Senior Counsel appearing on behalf of the Department. The Tribunal in the impugned order dated 07.04.2005 has observed that since corresponding sales had been made by the appellant, the nexus between purchased goods and sales has been established and that the Assessing Officer has not been able to establish that money paid through account payee cheques by the appellant was received back by it. 4.1Similarly, in order dated 28.12.2004, the Tribunal has observed that there is no material on record to nullify the findings of CIT(A) that there were corresponding sales against the purchases shown by the assessee and also that it was not proved that the purchase price paid by the assessee travelled back to the pocket of the assessee. We are in complete agreement with the reasonings adopted by the Tribunal on facts also. 5.A similar question came up before this Court in the case of Sanjay Oilcake Industries vs. Commissioner of Income–Tax reported in [2009] 316 ITR 274 (Guj) and this Court while deciding the said issue has held as under: “12Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal have concurrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law. matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law. 13In the aforesaid set of facts and circumstances of the case, the impugned order of the Tribunal is an order which is made in accordance with law and does not require any interference. The questions referred at the instance of the assessee as well as the Revenue are, therefore, answered in the affirmative, i.e., in favour of the Revenue and against the assessee in relation to the questions at the instance of the assessee, and in favour of the assessee and against the Revenue in relation to the questions at the ”instance of the Revenue.. 5.1In view of the aforesaid, we are not giving any elaborate reasons for the same as in the case of Sanjay Oilcakes Industries (supra) this Court has upheld the finding of the authorities below in a case where the assessee by evidence on record made it possible for the receipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee had been actually received by the apparent sellers. 6. In view of the above, the question raised in the present Tax Appeals is answered in favour of the assessee and against the department. Consequently, the impugned judgment and orders passed by the Tribunal is confirmed. Appeals are dismissed. (K.S.JHAVERI, J.) divya (K.J.THAKER, J)