M/s Hansa Tubes Pvt. Ltd., Chandigarh V. DCIT, CC-I, Chandigarh

CO 12/CHANDI/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 5574 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRAJEET SINGH
• Keywords: Bogus purchase; Gross profit estimation; Unexplained investment; Rectification of order; Earning of tax free income; Tax effect
• Section: 143(3); 153A; 14A; 13; 132; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NOS. 06/CHD/2018 / ASSESSMENT YEAR : 2012-13 THE DCIT, CENTRAL CIRCLE-1, CHANDIGARH VS. M/S HANSA TUBES PVT LTD., 181/25, INDUSTRIAL AREA, PHASE-1, CHANDIGARH ./ PAN NO:AAACH7966H / APPELLANT / RESPONDENT C.O. NO. 12/CHD/2018 (IN ITA NO. 06/CHD/2008) / ASSESSMENT YEARS : 2012-13 M/S HANSA TUBES PVT LTD., 181/25, INDUSTRIAL AREA, PHASE-1, CHANDIGARH VS. THE DCIT, CENTRAL CIRCLE-1, CHANDIGARH ./ PAN NO: AAACH7966H / APPELLANT / RESPONDENT & ./ ITA NOS. 07/CHD/2018 / ASSESSMENT YEAR : 2013-14 M/S HANSA TUBES PVT LTD., 181/25, INDUSTRIAL AREA, PHASE-1, CHANDIGARH VS. THE DCIT, CENTRAL CIRCLE-1, CHANDIGARH ./ PAN NO:AAACH7966H / APPELLANT / RESPONDENT / REVENUE BY : SHRI CHANDRAJEET SINGH, CIT DR !' / ASSESSEE BY : SHRI AJAY JAIN, CA # $'% / DATE OF HEARING : 16.10.2019 &'()'% / DATE OF PRONOUNCEMENT : 30.10.2019 ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 2 ') / ORDER PER SANJAY GARG, JUDICIAL MEMBER: WITH THIS COMMON ORDER, WE WILL DISPOSE OF THE APP EAL OF THE REVENUE FOR ASSESSMENT YEAR 2012-13 AND CORRESPONDI NG CROSS OBJECTIONS OF THE ASSESSEE OF ASSESSMENT YEAR 2012- 13 PREFERRED AGAINST THE ORDER DATED 18.10.2017 OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-3, GURGAON [HEREINAFTER REFERRED TO AS CI T(A)] AND THE APPEAL OF THE ASSESSEE FOR 2013-14 PREFERRED AGAINST THE ORDER DATED 31.10.2017 OF THE CIT(A). 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUES IN ITA NO. 6/CHD/2018 FOR THE ASSESSMENT YEAR 2012-13. ITA NO. 6/CHD/2018 FOR A.Y. 2012-13. I. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), HAS ERRED IN DELETING THE ADDITION OF RS. 1,85,23,135/- MADE AS GROSS PROFIT ADDITION BY REJECTING THE BOOKS RESULTS OF THE ASSESSEE. II. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), HAS ERRED IN HOLDING THAT THE ASSESSEE HAS PRODUCED THE RECEIPTS OF TRANSPORTATIO N OF GOODS, DURING THE ASSESSMENT PROCEEDINGS WHICH IS AWAY FROM THE FACTS. III. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE STOCK POSITION OF THE ASSESSEE ON THE DATE OF SEARCH DID NOT MATCH WITH THE STOCK POSITION AS PER THE BOOKS OF ACCOUNTS. ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 3 IV. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT IGNORING THE FACT THAT EARNING OF EXEMPT INCOME IN THAT YEAR IN NOT A PRE-REQUISITE FOR THE DISALLOWANCE. V. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) MAY BE QUASHED AND THAT THE ORDER OF THE AO MAY BE RESTORED. VI. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR MODIFY ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2. INITIALLY, THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDING S CARRIED OUT U/S 153A READ WITH SECTION 143(3) OF T HE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') HAD MADE THE ADDITION OF RS. 1,85,23,135/- ON ACCOUNT OF BOGUS PURCHASES. FURTHER, AN AMOUNT OF R S. 4,38,400/- IN RESPECT OF AGREEMENT TO SALE AND AMOUNT OF RS. 7,59 ,628/- ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT WAS MADE TOTALING T HE ADDITION OF A SUM OF RS. 1,97,21,563/- , WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A). SUBSEQUENTLY THE ASSESSEE FILED A R ECTIFICATION APPLICATION TO THE ASSESSING OFFICER PLEADING THAT THERE WAS A CALCULATION MISTAKE IN COMPUTING THE GROSS PROFIT A ND THE ASSESSING OFFICER PASSED RECTIFICATION ORDER U/S 154 OF THE A CT DATED 31.7.2015 AND DEDUCTED THE EXCESS ADDITION MADE OF RS. 1,24,8 5,445/- FROM THE TOTAL ADDITION MADE OF RS. 1,85,23,135/- ON ACCOUN T OF GROSS PROFIT DETERMINED IN RESPECT OF BOGUS PURCHASES. THOUGH, T HE LD. CIT(A) DELETED THE ADDITIONS ON MERITS, HOWEVER, THE FIGU RES WERE NOT CORRECTLY TAKEN BY THE LD. CIT(A) IN THE IMPUGNED ORDER. IF THE CORRECT FIGURES ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 4 ARE TAKEN, THEN THE ADDITION CHALLENGED BY THE REVE NUE IN RESPECT OF GROUND NOS.1 TO 3 WILL BE RS. 60,37,699/-. THE SEC OND ADDITION DELETED BY THE LD. CIT(A) IS IN RESPECT OF DISALLOW ANCE U/S 14A OF THE ACT AMOUNTING TO RS. 7,59,628/-. 3. BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAVE SUBMITTED THAT, UNDER THE CIRCUMSTANCES, THE TOTAL TAX EFFECT INVOL VED IN THIS APPEAL IS LESS THAN RS. 50 LACS I.E. BELOW THE MONETARY LIMIT PRESCRIBED BY THE CBDT CIRCULAR NO. 17/2019. IT IS, THUS, NOTICED THAT THIS APPEAL FILED BY THE DEPARTMENT IS NOT MAINTAINABLE IN VIEW OF TH E RECENT CIRCULAR NO. 17/2019 DT. 08/08/2019 ISSUED BY CBDT, WHEREIN, TH E MONETARY LIMIT FOR FILING THE APPEALS BY THE DEPARTMENT BEFORE THE ITAT HAS BEEN INCREASED TO RS. 50,00,000/- FROM RS. 20,00,000/- A S SPECIFIED IN THE EARLIER CIRCULAR NO. 3/2018 DATED 11.07.2019. IT HAS BEEN FURTHER CLARIFIED BY THE CBDT VIDE F.NO . 279/MISC./ITJ DATED 20.08.2019 THAT THE REVISED MON ETARY LIMIT MENTIONED IN CIRCULAR NO. 17 OF 2019 IS APPLICABLE TO ALL THE PENDING SLPS/ APPEALS/ CROSS-OBJECTIONS / REFERENCES AND TH AT ALL SUCH PENDING APPEALS WITHIN THE REVISED LIMIT SHALL BE WITHDRAWN BY THE DEPARTMENT ON OR BEFORE 31.10.2019. 4. IN VIEW OF THE AFORESAID DISCUSSION, THE PRESENT APPEAL FILED BY THE DEPARTMENT IS DISMISSED DUE TO LOW TAX EFFEC T. IT IS, HOWEVER, CLARIFIED THAT THE DISMISSAL OF THE ABOVE APPEAL SHALL NOT BE TAKEN TO BE AFFIRMATION OF THE ORDER OF THE CIT(A) ON MERITS. THE LEGAL ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 5 ISSUE RAISED BY THE REVENUE IS BEING LEFT OPEN TO B E ADJUDICATED IN AN APPROPRIATE CASE. IN VIEW OF THIS THE APPEAL OF THE REVENUE IS DISMIS SED DUE TO LOW TAX EFFECT. 5. NOW COMING TO THE CROSS OBJECTIONS OF THE ASSESS EE FOR THE ASSESSMENT YEAR 2012-13. C.O. 12/CHD/2018: 6. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE IN ITS CROSS OBJECTIONS:- 1. THAT THE LEARNED CIT (A) HAS WRONGLY UPHELD THE ADDITION OF RS. 4,38,800/-SIMPLY ON THE BASIS OF ORAL STATEMENT WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH . 2. THAT THE ADDITION OF RS 60,37,689/- HAS BEEN WRONGLY MADE BY AO ON ACCOUNT OF LOW GROSS PROFIT WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING COURSE OF SEARCH & THEREFORE THE ADDITION ON ACCOUNT OF LOW GROSS PROFIT IS BEYOND SCOPE OF ASSESSMENT FRAMED U/S 153A OF INCOME TAX ACT CONSEQUENT UPON SEARCH UNDER SECTION 132(1) OF INCOME TAX . 7. THE ASSESSEE THROUGH ITS CROSS OBJECTIONS (GROU ND NO.1) HAS AGITATED THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 4,38,800/- IN RESPECT OF AGREEMENT TO SELL FOUND DURING SEARCH CO NDUCED U/S 132 OF THE ACT AT THE PREMISES OF THE ASSESSEE. AN AGREEMENT DATE D 4.11.2011 ENTERED INTO BY THE ASSESSEE WITH SHRI HARJEET SINGH AND SHRI MA JOR SINGH WAS FOUND FOR ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 6 PURCHASE OF LAND AS VILLAGE DARIA VIDE WHICH THE AS SESSEE HAD PAID TO THE SELLER AN AMOUNT OF RS. 5 LACS IN CASH AS EARNEST MONEY. TO FURTHER ENQUIRE ABOUT THE MATTER, THE ASSESSING OFFICER RECORDED TH E STATEMENT OF ONE OF THE SELLER NAMELY SHRI HARJEET SINGH, WHEREBY, HE ADMI TTED THAT HE HAD TAKEN A SUM OF RS. 10 LACS IN CASH FROM SHRI ARUN GUPTA AND HANDED OVER THE SAME TO SHRI MAJOR SINGH FOR PURCHASE OF LAND. WHEN CONFRON TED WITH THE AFORESAID STATEMENT OF SHRI HARJEET SINGH, SHRI ARUN GUPTA, D IRECTOR OF THE COMPANY STATED THAT HE HAD PAID RS. 5.6 LACS IN CASH TO PUR CHASE THE STAMP PAPERS TO SHRI HARJEET SINGH AND THAT NO OTHER CASH PAYMENTS HAD BEEN PAID BY HIM. HE FURTHER STATED THAT THE COPY OF THE AGREEMENT SEIZE D WAS A ROUGH DRAFT AND NOT ACTUAL AGREEMENT. SHRI ARUN GUPTA ALSO PRODUCED A C OPY OF THE AGREEMENT DATED 3.11.2011 WHICH CONTAINED THE SAME TERMS AND CONDITIONS EXCEPT THE PAYMENT OF RS. 5 LACS IN CASH. HOWEVER, THE LD. ASSESSING OFFICER DID NOT AGREE WI TH THE CONTENTION OF THE ASSESSEE AND MADE THE ADDITION OF THE REMAIN ING AMOUNT OF RS. 4,38,800/- OUT OF RS. 10 LACS STATED TO BE PAID BY SHRI ARUN GUPTA IN CASH OUT OF WHICH RS. 5,61,200/-, PAID FOR STAMP PAPERS WAS DULY REFLECTED IN THE BOOKS OF ACCOUNT. IN APPEAL, THE LD. CIT(A) CONFIRM ED THE ADDITION SO MADE BY THE ASSESSING OFFICER. 8. BEFORE US, LD. AR HAS SUBMITTED THAT THE AFORESA ID ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON ASSUMPTION AND PRE SUMPTION BASIS. HE HAS FURTHER INVITED OUR ATTENTION TO THE STATEMENT RECO RDED OF SHRI HARJEET SINGH. A PERUSAL OF THE SAID STATEMENT REVEALS THAT IN FAC T SHRI HARJEET SINGH WAS NOT ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 7 OWNER OF THE SAID LAND, RATHER, THE SAME WAS OWNED BY SOME DERA SAI LOK SANT SUKHA SINGH OF RAWALPINDI. SHRI P.B. SINGH GE NERAL SECRETARY OF THE DERA WHO WAS ALSO POWER OF ATTORNEY HOLDER FOR THE LAND IN QUESTION CAME INTO CONTACT WITH ONE DR. MAJOR SINGH FOR SALE OF S AID LAND. DR. MAJOR SINGH FURTHER ASKED SHRI HARJEET SINGH TO BE PARTNER IN T HAT TRANSACTION OF SALE AND PURCHASE OF LAND. THUS, SHRI HARJEET SINGH WAS EN TERED AS A PARTY (PROPOSED PURCHASER) ON THE ASKING OF DR. MAJOR SINGH, FOR TH E PURCHASE OF SAID LAND BY THEM FROM SHRI P.B. SINGH. HE DID NOT KNOW THE EXAC T AMOUNT OF MONEY PAID BY SHRI ARUN GUPTA. SHRI HARJEET SINGH WAS NEITHER OWNER NOR ACTUAL SELLER OF THE LAND AND EVEN HE WAS NOT AWARE OF THE FULL F ACTS RELATING TO THE TRANSACTION AS IS REVEALED FROM HIS STATEMENT. 9. ON THE OTHER HAND, THE SHRI ARUN GUPTA HAD DULY EXPLAINED FOR CASH PAYMENT OF RS. 5.6 LACS FOR PURCHASE OF STAMP PAPE R WHICH WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. UNDER THE CI RCUMSTANCES, THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF ROUGH AGREEMENT TO SELL CANNOT BE HELD TO BE JUSTIFIED AND THE SAME IS ACCORDINGLY ORDERED TO BE DELETED. 10. SINCE THE GROUND NO.2 OF THE CROSS OBJECTIONS RAISED ABOVE HAS NOT BEEN PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE, T HE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. IN THE RESULT, THE CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO. 7/CHD/2018 (A.Y. 2013-14) 11. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 8 1. THAT THE LD. CIT(A) HAS WRONGLY UPHELD THE ADDITION OF RS. 2,73,562/- ON ACCOUNT OF NEGLIGIBLE DIFFERENCE OF 0.33% IN STOCK FOUND DURING THE COURSE OF SEARCH. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR WITHDRAWN ANY GROUND OF APPEAL BEFORE FINAL HEARING. 12. A PERUSAL OF THE ABOVE GROUNDS OF APPEAL REVEAL S THAT THE ASSESSEE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMATION OF PROF ITS ON ACCOUNT OF DIFFERENCE IN THE AMOUNT OF STOCK FOUND ON PHYSICAL VERIFICATION AND THE STOCK AS PER THE BOOKS. ON VALUATION, IT WAS FOUND THAT THERE WAS 10.55 MT EXCESS STOCK WHICH WAS VALUED AS RS. 2,73,562/-. THE ASSE SSING OFFICER ADDED THE SAID AMOUNT AS UNEXPLAINED INVESTMENT OF THE ASSESS EE. THE LD. CIT(A) CONFIRMED THE ADDITION SO MADE BY TH E ASSESSING OFFICER. 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE TOTAL STOCK OF THE ASSESSEE WAS 3805.625 MT AND THAT THE EXCESS STOCK WAS JUST 0.33% OF THE STOCK AS PER BOOKS. THAT IT WAS A MIN OR DIFFERENCE WHICH MAY OCCUR WHILE WEIGHING THE STOCK. IN FACT, THE DEPART MENT HAD NOT WEIGHED THE STOCK BUT HAD TAKEN THE WEIGHT ONLY ON COUNTING TH E BUNDLES. THAT THE SCRAP WAS ALSO TAKEN ON ESTIMATION BASIS IN THE BOOKS, W HEREAS, IT IS ACTUALLY WEIGHED AT THE TIME OF SALE. FURTHER, THE ASSESSEE ALSO GAVE ITEM WISE EXPLANATION OF THE DIFFERENCE OF STOCK. CONSIDERING THE EXPLANATION OF THE ASSESSEE AND ALSO CONSIDERING THE MINOR VARIATION A S COMPARED TO THE ACTUAL ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 9 STOCK OF THE ASSESSEE, WE FIND FORCE IN THE CONTENT ION OF THE ASSESSEE THAT IN SUCH A HUGE STOCK MINOR VARIATION IN WEIGHT / VALUA TION MAY OCCUR. MOREOVER, THE ASSESSEE HAS ALSO EXPLAINED THAT THE WEIGHT OF THE STOCK MATERIAL AND FURNISHED GOODS IS TAKEN ON ESTIMATION BASIS WHICH ARE ACTUALLY WEIGHED AT THE TIME OF THE SALE. FURTHERMORE, THE TOTAL STOCK WAS NOT ACTUALLY WEIGHED, RATHER, THE SAME WAS TAKEN BY COUNTING THE BUNDLES. CONSIDERING THE OVERALL FACTS, WE AGREE THAT THE CONTENTION RAISED BY THE A SSESSEE THAT THE MINOR DIFFERENCE IN THE STOCK MAY BE DUE TO SOME WEIGHING AND VALUATION ERROR. IN VIEW OF THIS, THE ADDITION MADE BY THE LOWER AUT HORITIES ON THIS ISSUE IS ORDERED TO BE DELETED. THIS APPEAL OF THE ASSESS EE IS HEREBY ALLOWED. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA 6/C HD/2019 IS DISMISSED AND THE CORRESPONDING CROSS OBJECTION IS PARTLY ALL OWED. THE APPEAL OF THE ASSESSEE IN ITA NOS. 7/CHD/2019 STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.10.2019. SD/- SD/- ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 30.10.2019 .. '+ ',- .-' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # /' / CIT 4. # /' ( )/ THE CIT(A) ITA NO.6 & 7-CHD-2018 & C.O. 12-C-2018 M/S HANSA TUBES PVT. LTD, CHANDIGARH 10 5. -01 ' 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 / ASSISTANT REGISTRAR