Axis Galvanizing Industries, Hyderabad v. ITO, Hyderabad

CO 2/HYD/2010 | 2005-2006
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 222523 RSA 2010
Assessee PAN AAJFA6208P
Bench Hyderabad
Appeal Number CO 2/HYD/2010
Duration Of Justice 1 month(s) 12 day(s)
Appellant Axis Galvanizing Industries, Hyderabad
Respondent ITO, Hyderabad
Appeal Type Cross Objection
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 18-02-2010
Assessment Year 2005-2006
Appeal Filed On 06-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.:1171/HYD/2009 ASSTT. YEAR : 2005-06 INCOME TAX OFFICER WARD 11(3) HYDERABAD VS M/S AXIS GALVANIZING INDUSTRIES D NO.5-43 SY.NO.303 HYDERABAD. (AAJFA 6208 P/A -446) (APPELLANT) (RESPONDENT) CO.NO.2/HYD./2010 ASSESSMENT. YEAR : 2005-06 M/S AXIS GALVANIZING INDUSTRIES D NO.5-43 SY.NO.303 HYDERABAD. (AAJFA 6208 P/A -446) VS INCOME TAX OFFICER WARD 11(3) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. TRIPATHY RESPONDENT BY : SHRI S. RAMA RAO ADVOCATE O R D E R PER: CHANDRA POOJARI ACCOUNTANT MEMBER THESE TWO APPEALS ONE PREFERRED BY THE REVENUE AN D THE CROSS APPEAL BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDE R PASSED BY THE CIT(A) TIRUPATHI DATED 14.9.2009 AND PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 2. THE CIT(A) IS NOT CORRECT IN DISALLOWING MADE U/S 4 0A(IA) OF THE IT ACT 1961 WITHOUT AFFORDING AN OPPORTUNITY TO THE A SSESSING OFFICER ON THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE TH AT ONLY RS.16 47 478 PERTAINS TO THE PAYMENTS/CREDITS MADE BEFORE THE MONTH OF MARCH 2005 AND BALANCE PERTAINS TO THE PAYMENTS /CREDITS OF MARCH 2005. 2 2 3. THE CIT(A) ERRED IN DETERMINING THAT CONTRACT PAYME NTS/CREDITS AMOUNTING OF RS.1 40 35 858/- PERTAINS TO THE MONTH OF MARCH 2005 WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFF ICER ON THE ADDITIONAL EVIDENCE PRODUCED BEFORE THE CIT(A). 4. THE CIT(A) OUGHT TO HAVE OFFERED AN OPPORTUNITY AS REQUIRED UNDER RULE 46(A) OF THE IT RULES 1961. 5. THE CIT(A) ERRED IN ALLOWING THE ASSESSEE APPEAL ON THE DISALLOWANCE OF RS.9 90 781/- BEING BOGUS PURCHASES BY OBSERVING THAT THE SUFFICIENT ENQUIRIES WERE NOT CAUSED. 6. THE CIT(A) ERRED IN STATING THAT THREE LIMB TEST AP PLICATION TO SEC.68 IS NOT APPLICABLE IN CASE OF BOGUS PURCHASES. 7. THE CIT(A) ERRED IN HOLDING THAT MERE PRODUCTION OF BILLS BEARING APGST NO. AND TRANSPORT VEHICLES IS SUFFICIENT PROO F. 8. THE CIT(A) ERRED IN STATING THAT SUFFICIENT ENQUIRI ES WERE NOT CAUSED ESPECIALLY WHEN THE ENQUIRIES CAUSED BY THE INSPECT OR REVEALED THAT THE PARTIES WERE NOT EXISTING AT THE GIVEN ADDRESS. 9. THE CIT(A) ERRED IN HOLDING THE PURCHASES AS GENUIN E ESPECIALLY FOR THE FACT THAT THE ASSESSEE COULD NOT PRODUCED THE P ARTIES FOR VERIFICATION. 10. THE CIT(A) ERRED IN NOT FOLLOWING THE DECISION IN THE CASE OF CIT VS. PRECISION FINANCE LTD. (208 ITR 465) (CAL.) 1994 WH EREIN IT WAS HELD THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT S ACROSANCT NOR IT CAN MADE A NON GENUINE TRANSACTION A GENUINE TRANSA CTION. 3. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN THE C ROSS APPEAL: 1. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT TH AT THE AMOUNT OF ERECTION CHARGES PAID DURING THE YEAR ARE NOT HIT B Y THE PROVISIONS OF SEC.40(A)(IA) OF THE IT ACT. 2. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN APPLYING THE PROVISIONS OF SEC.68 OF THE IT ACT TO THE SUNDRY CREDITORS. 3. THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS.1 3 01 764/- OUT OF RS.22 92 545/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE IT ACT. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE P ROVISIONS OF SEC.68 APPLY ONLY TO CASH CREDIT AND NOT TO THE SUNDRY CRE DITORS. 4. THE MAIN GRIEVANCE OF THE DEPARTMENT IS THAT T HERE IS A VIOLATION OF RULE 46(A) OF THE INCOME TAX RULES 1961 SINCE THE CIT (A) 3 3 ADMITTED CERTAIN FRESH EVIDENCE WITHOUT CONFRONTING THE SAME TO THE ASSESSING OFFICER. IN OUR OPINION THE CIT(A) DELETED CE RTAIN ADDITIONS MADE ON ACCOUNT OF VIOLATION OF PROVISIONS OF SEC.40A (I A) BY ADMITTING CHALLAN DATED 28.10.2005 AS FRESH EVIDENCE. THE CIT( A) MUST HAVE GIVEN AN OPPORTUNITY TO THE ASSESSING OFFICER TO GO THRO UGH THIS CHALLAN TO SEE FOR WHICH PERIOD THIS IS RELATING TO. THERE IS A VIOLATION OF RULE 46(A) OF THE IT RULES. ACCORDINGLY WE SET ASIDE THE I SSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION AND TO DECIDE IN ACCORDANCE WITH LAW. 5. REGARDING DELETION OF ADDITIONS ON ACCOUNT OF BOG US PURCHASE THE ASSESSING OFFICER HAS ISSUED SUMMONS TO SAID PAR TIES ON 20.11.2007 FOR CONFIRMING THE CREDIT PURCHASES. SINCE TH E SUMMONS WERE RETURNED UNSERVED BY THE NOTICE SERVER THAT SUCH P ARTIES ARE NOT AVAILABLE IN THE ADDRESS GIVEN THE INSPECTOR HAS BEEN CO MMISSIONED TO CAUSE ENQUIRIES. IN TURN HE SUBMITTED HIS REPORT ON 26. 11.2007 STATING THAT NO SUCH PARTIES WERE EXISTING BY THAT NAME DURING THE RELEVANT PERIOD. ACCORDINGLY SHOW CAUSE NOTICE WAS SERVED ON THE A SSESSEE CALLING FOR EXPLANATION. THE ASSESSING OFFICER HAS STATED IN HIS ORDER THAT ENQUIRIES WERE CAUSED AT BANKS ALSO WHICH HAD REVEALED TH AT CREDIT PURCHASES FROM THREE PARTIES NAMELY M/S NOBLE TRADERS M/ S SHRI VENKATESWARA TRADERS AND M/S SRI SAI TRADERS ARE PROVED TO BE BOGUS TRANSACTIONS. ONCE AGAIN ANOTHER SHOW CAUSE NOTICE WAS ISSUE D ON 14.12.2007 REQUESTING TO PROVE THE IDENTITY CREDIT W ORTHINESS OF THE SUPPLIER AND THE GENUINENESS OF THE TRANSACTION. IN REP LY THE ASSESSEE HAD SUBMITTED THAT THE IDENTITY OF THE SUPPLIERS WERE PROVED BY FURNISHING AND SO WAS THE GENUINENESS. REGARDING CREDITW ORTHINESS THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT WOULD BE DIFFICULT FOR HIM TO PROVE CREDITWORTHINESS OF THE SUPPLIER AS THE Y DID NOT HAVE ANY RELATION AFTER THE PAYMENT IS COMPLETED. THE SUB MISSIONS BY THE ASSESSEE WAS REJECTED AND THE ASSESSING OFFICER RELYING ON T HE RATIO IN 4 4 THE CASES OF PRECISION FINANCE (P) LTD. (208 ITR 465) (CA L.) AND LA MEDICA (2001) (250 ITR 575 ) (DELHI) AND TREATED TH E ENTIRE PURCHASES AS BOGUS CREDIT PURCHASES. 6. HOWEVER ON APPEAL CIT(A) DELETED THE ADDIT IONS ON THE REASON THAT THE ASSESSING OFFICER SHOULD HAVE CONDUCTE D THE ENQUIRIES WITH THE A.P.G.S.T. AUTHORITIES AND ALSO WIT H ASSESSEES RECORDS WHETHER SUCH MATERIAL HAS BEEN RECEIVED IN HIS R ECORDS OR NOT. ACCORDING TO CIT(A) IT SEEMS THAT THE MATERIAL PURCHASE D FROM THESE DEALERS IS ALL HARDWARE ITEMS. IN THE LINE OF BUSINESS OF THE ASSESSEE THE ASSESSEES MAIN PURCHASES WOULD BE IRON AND STEEL ITEMS L IKE ANGLES BARS GUDDERS NUTS BOLTS AND OTHER HARDWARE ITEMS BESI DES GALVANIZING MATERIAL. WITHOUT VERIFYING THE RECEIPT OF MATERIA LS IN THE STOCK RECORDS IT WOULD BE PREMATURE TO COME TO A CONCLUSION TH AT THE PURCHASES WERE BOGUS MERELY BASED ON INSPECTORS REPORT ESPECIALLY IN THE BACK DROP OF THE FACT THAT THE PARTIES WERE REGISTE RED WITH REPORT ESPECIALLY IN THE BACK DROP OF THE FACT THAT THE PARTI ES WERE REGISTERED WITH APGST AND THE PAYMENTS WERE RECEIVED THROUGH B ANK CHEQUES. IT IS ALSO NOT CORRECT FROM THE ASSESSING OFFICER TO APPLY THE THREE LIMB ACID TEST APPLICABLE FOR SECTION 68 FOR THE ALLEGED BOGU S PURCHASES. THESE TWO AREAS ARE ENTIRELY DIFFERENT THOUGH THE FOR MER GETS TELESCOPED INTO THE LATTER AND IS MUCH MORE. IT IS ALSO SUBMITTED BY THE AR THAT THE PURCHASES FROM THESE PARTIES CONSTITUTE LESS THAN 5% OF THE TOTAL PURCHASES ON HARDWARE ITEMS. HENCE IT IS NOT PROPER TO TR EAT THE ENTIRE EXPENDITURE AS NOT GENUINE. ON THE OTHER HAND THE ASSESSEE HAS FURNISHED BILLS BEFORE THE ASSESSING OFFICER BUT COULD N OT FURNISH COPIES OF ALL BILLS BEFORE THE CIT(A). THE ASSESSEE HAD FURNISHED COPIES OF BILLS TO THE EXTENT OF RS.22 54 352 BEFORE CIT(A). ACCORDINGLY CIT(A) DELETED THE ADDITIONS. 5 5 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. IN OUR OPINION THE CIT(A) IS NOT JUSTIFI ED IN DELETING THE ADDITIONS. IF THE ASSESSING OFFICER FAIL TO CARRY OUT THE NECESSARY ENQUIRY HE SHOULD HAVE GIVEN DIRECTION TO THE ASSESSING OFFICER TO CARRY OUT SUCH ENQUIRY AS HE THINKS FIT. ON THE OTHER HAND HE DELETED THE ADDITION WHICH IS IN CORRECT. HENCE WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO MAKE PROPER ENQUIRY AND DECIDE THE I SSUE THEREUPON IN ACCORDANCE WITH LAW. SINCE WE HAVE SET ASIDE THE ISSUE INVOLVED IN THE REVENUE APPEAL TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION THE CROSS APPEAL FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. ACCORDINGLY CROSS APPEAL IS DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSE AND THE CROSS APPEAL FILED BY THE AS SESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT : 18.2.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 18 TH FEBRUARY 2010 COPY FORWARDED TO: 1. THE ITO WARD 11 (3) ROOM NO.546 5 TH FLOOR D BLOCK IT TOWER MASABTANK HYDERABAD 2. M/S. AXIS GALVANIZING INDUSTRIES D.NO.5-43 SY. NO .303 ADJ. TO RAMIREDDY NAGAR JETIMETLA HYDERABAD 3. CIT(A)- TIRUPATHI CIT(A) HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP