M/s. P.C. Chemicals, New Delhi V. ITO, New Delhi

CO 10/DEL/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5748 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-02-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-02-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Keywords: Search and seizure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESID ENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NOS.4421 TO 4424/DEL./2009 (ASSESSMENT YEARS : 2001-02 TO 03-04 & 05-06) ITO, WARD 29(2), VS. M/S P.C. CHEMICALS, GHAZIABAD. 770/72, TILAK BAZAR, DELHI. (PAN/GIR NO.AAAFP4707B) AND C.O. NOS.8 TO 11/DEL./2010 (IN ITA NOS.4421 TO 4424/DEL./2009) (ASSESSMENT YEARS : 2001-02 TO 03-04 & 05-06) M/S P.C. CHEMICALS, VS. ITO, WARD 29(2), DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADV. REVENUE BY : SHRI H.K. LAL, SR.DR ORDER PER A.D. JAIN: JM THESE ARE DEPARTMENTS APPEAL AND ASSESSEES CROSS OBJECTIONS FOR AYS 2001-02 TO 03-04 & 2005-06. 2. IN I.T.A. NOS.4421 & 4423, THE DEPARTMENT HAS CHALL ENGED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S 69A O F THE I.T. ACT, 1961 ON ACCOUNT OF CASH LOANS ADVANCED THROUGH HUNDI AND THE DELETION OF THE ADDITION MADE BY THE AO U/S 68 OF THE I.T. ACT, 1961 ON ACCOUNT OF INTEREST EARNED ON THE CASH LOANS ADVANCED THROUGH HUNDI. 2 3. IN I.T.A. NO.4422, THE DEPARTMENT HAS CHALLENGED THE A CTION OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT ON ACCOUNT OF INTEREST EARNED ON THE CASH LOANS ADVANCED THROUGH HUNDI. IN I .T.A. NO.4424, THE DEPARTMENT HAS CHALLENGED THE ACTION OF THE CIT(A) IN DEL ETING THE ADDITION MADE BY THE AO U/S 69A OF THE I.T. ACT, ON ACCOUNT OF CAS H LOANS ADVANCED THROUGH HUNDI. 4. IN ALL THE CROSS OBJECTIONS, THE ONLY OBJECTION TAK EN BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO CARRIED OUT U/S 147/148 OF THE I.T. ACT. 5. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE HAS STATED AT THE BAR THAT ALL THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE NOT BEING PRES SED. ACCORDINGLY, ALL THE FOUR CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE DISMI SSED AS NOT PRESSED. 6. APROPOS THE ADDITIONS MADE BY THE AO U/S 69A AND 68 OF THE ACT, CONCERNING CASH LOANS ADVANCED THROUGH HUNDI AND INT EREST EARNED ON SUCH CASH LOANS, THE FACTS ARE THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 15.12.2004 IN THE CASE OF SHRI BRIJ MOHAN GUPTA OF TIL AK BAZAR, DELHI. VARIOUS INCRIMINATORY DOCUMENTS/DIARIES WERE FOUND AND SEIZED. IN THE SEARCH PROCEEDINGS, STATEMENTS OF SHRI B.M. GUPTA, HIS SON SHR I RAJIV GUPTA AND ACCOUNTANT, SHRI RAM AVTAR SINGHAL WERE RECORDED. IN THE ASSESSMENT PROCEEDINGS, SHRI B.M. GUPTA ADMITTED HIS INVOLVEMENT IN UNACCOUNTED HUNDI TRANSACTIONS/CASH LOAN TRANSACTIONS. THE COMPLETED ASSESSMENTS OF THE ASS ESSEE WERE, THEREFORE, REOPENED. THE ASSESSEE WAS FOUND NOT TO HAVE DISCLOSED ANY TRANSACTIONS CARRIED OUT WITH SHRI B.M. GUPTA GROUP IN THE NATURE OF CASH L OAN TRANSACTION. THE DEPARTMENT, ON THE OTHER HAND, AS PER THE AO, WAS IN POS SESSION OF INFORMATION OF THE ASSESSEE HAVING TRANSACTED THROUGH SHRI B.M. GUPTA AN D HIS ASSOCIATES. 3 7. THE AO MADE ADDITIONS OBSERVING, INTER ALIA, THAT T HE ASSESSEE HAD NOT OFFERED ANY EXPLANATION REGARDING ITS TRANSACTIONS WITH SHRI B.M. GUPTA AND HIS ASSOCIATES. 8. BY VIRTUE OF THE IMPUGNED ORDERS, THE CIT(A) DELETED THE ADDITIONS. IT WAS OBSERVED THAT THE ASSESSEE HAD CATEGORICALLY DENIED HAVING A NY FINANCIAL OR BUSINESS TRANSACTIONS WITH SHRI B.M. GUPTA; THAT A SP ECIFIC REQUEST HAD BEEN MADE TO PROVIDE THE MATERIAL AND DOCUMENTS AVAILABLE WITH THE AO, WHICH FORMED THE BASIS FOR MAKING THE ADDITIONS; THAT THE AO HAD MERELY REFERRED TO TRANSACTIONS WHICH SUGGESTED THAT LOANS WERE GIVEN FOR DIFFERENT PARTI ES RANGING FROM DAYS TO MONTHS; THAT NO COPY OF STATEMENT OF SHRI B.M. GUPTA ADMITTING INVOLVEMENT IN UNACCOUNTED HUNDI TRANSACTIONS/LOAN TRANSACTION ON B EHALF OF THE VARIOUS PARTIES, INCLUDING THE ASSESSEE, WAS PROVIDED TO THE ASSESSEE, NOR R EQUISITE OPPORTUNITY AFFORDED TO THE ASSESSEE TO CROSS EXAMINE SHRI B.M. GHPTA, WHOSE STATEMENT WAS BEING RELIED ON TO MAKE THE ADDITIONS; THAT THE AO HAD CO MPLETELY FAILED TO ESTABLISH ANY CASE AGAINST THE ASSESSEE; THAT NO ENQUIRY O R INVESTIGATION WAS CARRIED OUT ON THE INFORMATION PASSED ON BY THE DCIT, C ENTRAL CIRCLE XIX, NEW DELHI; THAT NO CORROBORATIVE EVIDENCE SUPPORTING THE MATER IAL FOUND DURING THE SEARCH OF SHRI B.M. GUPTA WAS GATHERED IN RELATION TO TH E ASSESSEE; THAT THE AO MERELY SUMMARIZED THE SALIENT FEATURES OF THE ASSESSMENT PRO CEEDINGS RELATING TO SHRI B.M. GUPTA AND REJECTED THE REPLY OF THE ASSESSEE; AND THAT THE ADDITIONS WERE BASED ON CONJECTURES AND WERE WITHOUT ANY EVIDENCE CORROBO RATIVE TO THE MATERIAL FOUND DURING THE SEARCH. 9. BEFORE US, CHALLENGING THE IMPUGNED ORDER, THE LD.DR. H AS CONTENDED THAT WHILE WRONGLY DELETING THE ADDITIONS RIGHTLY MADE BY THE AO, THE CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE CASH LOAN ENTRIES WERE NOT OPEN TO ACCOUNTING 4 VERIFICATION, AS THEY WERE UNACCOUNTED ENTRIES AND COUNT ER ENTRIES FOR THESE CASH LOANS COULD NOT HAVE BEEN REFLECTED IN THE REGULAR BOOKS OF ACCOUNT; THAT THE ORDERS PASSED BY THE CIT(A) ARE, THEREFORE, LIABLE TO BE SET ASIDE BY ALLOWING THE DEPARTMENTS APPEALS, WHEREAS THE AOS ORDERS ARE ENTITLED TO BE REVIVED. 10. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT IN THE AB SENCE OF ANY MATERIAL TO SUPPORT THE ADDITIONS AND IN THE ABSENCE OF GRANT OF REQ UISITE OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE SHRI B.M. GUPTA, WHOSE STATEMENT H AS BEEN RELIED ON TO MAKE THE ADDITIONS AT THE BACK OF THE ASSESSEE, THE CIT(A ) CANNOT BE SAID TO HAVE COMMITTED ANY ERROR IN DELETING THE ADDITIONS MADE. IT H AS FURTHER BEEN CONTENDED THAT THE TRIBUNAL, VIDE ITS ORDER DATED 11.09.09 IN I.T .A. NO.1156/DEL./09 FOR AY 2005-06 (COPY PLACED ON RECORD), HAS DISMISSED THE AP PEAL OF THE DEPARTMENT UNDER SIMILAR CIRCUMSTANCES, IN THE CASE OF ANIL KUMAR BANSAL (HUF), IN WHOSE CASE ALSO, THE ADDITIONS HAD BEEN BASED ON THE STATEMENT OF SHRI B.M. GUPTA. 11. HAVING HEARD THE PARTIES AND HAVING PERUSED THE MATERI AL ON RECORD, WE DO NOT FIND ANY FORCE IN THE CONTENTIONS OF THE DEPARTMENT. UNDENIABLY, THERE IS NO MATERIAL BROUGHT ON RECORD BY THE AO TO SUPPORT THE ADD ITIONS, WHICH WERE BASED ON MERE CONJECTURES AND SURMISES, WITHOUT ANY EVIDENCE CALL ING FOR SUCH ADDITIONS. FURTHER, THE VERY STATEMENT FORMING THE BASIS OF THE ADDIT IONS, I.E., THE STATEMENT OF SHRI B.M. GUPTA, WAS NEVER PROVIDED TO THE ASSESSEE. THE AS SESSEE WAS THUS NEVER CONFRONTED WITH THE MATERIAL ON WHICH THE ADDITIONS WERE BASED. THE ACTION OF THE AO WAS, THEREFORE, HIT BY THE PRINCIPLES OF NATURAL JUST ICE. THE ASSESSEE WAS CONDEMNED UNHEARD. 5 12. FURTHER, IN ITS ORDER DATED 11.09.09 (SUPRA), IN T HE CASE OF ANIL KUMAR BANSAL (HUF), UNDER SIMILAR CIRCUMSTANCES, THE TRIBUNAL HAS DISMISSED THE DEPARTMENTS APPEAL. 13. IN VIEW OF THE ABOVE, FINDING NO MERIT THEREIN, THE GR IEVANCE RAISED BY THE DEPARTMENT BY WAY OF THE GROUNDS OF APPEAL TAKEN IN ITS FOUR APPEALS, THE SAME IS REJECTED. 14. IN THE RESULT, ALL THE APPEALS FILED BY THE DEPARTMENT ARE DISMISSED, WHEREAS ALL THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON 25.02.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D.JAIN) VICE PRESIDENT JUDICIAL MEMBER DELHI, DATED : FEB. 25, 2011. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT, 4.CIT(A), XXV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT