M/s Goodwill Impex, New Delhi V. ITO, New Delhi

CO 199/DEL/2009

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1890 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-12-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 20-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: VED JAIN ADV SH ASHISH GOEL; ASHISH CHAD
• Keywords: Income from undisclosed sources; Competent authority; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 2151/DEL/2009 A.Y. : 2000-01 INCOME TAX OFFICER, WARD 33(2), ROOM NO. 206(B), C.R. BUILDING, I.P. ESTATE, NEW DELHI 110 002 VS. M/S GOODWILL IMPEX 12A/6, SARASWATI MARG, CHANNA MARKET, WEA KAROL BAGH, NEW DELHI (PAN: AACFQ5716E) (APPELLANT) (RESPONDENT) AND C.O. NO. 199/DEL/2009 (IN ITA NO. 2151/DEL/2009) A.Y. : 2000-01 M/S GOODWILL IMPEX 12A/6, SARASWATI MARG, CHANNA MARKET, WEA KAROL BAGH, NEW DELHI (PAN: AACFQ5716E) VS. INCOME TAX OFFICER, WARD 33(2), ROOM NO. 206(B), C.R. BUILDING, I.P. ESTATE, NEW DELHI 110 002 (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. T. VASANTHAN, SR. DR ASSESSEE BY : SH. VED JAIN, ADV.; SH. ASHISH GOEL, CA AND SH. ASHISH CHADHA, CA DATE OF HEARING : 17-12-2015 DATE OF ORDER : 15-1-2016 ORDER PER H.S. SIDHU : JM THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSION ER OF INCOME TAX (APPEALS)-XXII, NEW DELHI DATED 16.1.2009 PERTAINI NG TO ASSESSMENT YEAR 2000-01. ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 2 2. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 1,25,0 0,000/- MADE BY THE AO AS INCOME FROM UNDISCLOSED SOURCES, ON ES TIMATED BASIS, ON ACCOUNT OF INVESTMENT MADE IN PURCHASES FROM OUTSIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED IN RELYING UPON ASSESSMENT / RE-AS SESSMENT IN THE CASE OF M/S GARG FORGING AND CASTINGS LTD. AND CIT(A)S ORDER IN THE CASE OF M/S GARG CONCAST LTD., IGNORIN G THE FINDINGS OF DRI, AMRITSAR WHICH WAS ALSO CONFIRMED BY THE CO MMISSIONER OF CUSTOMS. 3. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJEC TION READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN LAW IN HOLDING THAT THE INITIA TION AND FURTHER COMPLETING REASSESSMENT PROCEEDINGS UNDER SECTION 1 47 OF THE INCOME TAX ACT, 1961 IS VALID, EVEN THOUGH THE LD. AO DISPOSED OFF OBJECTION WITHOUT JUDICIOUS APPLICATION OF MIND AND MECHANICAL MANNER WITHOUT DEALING WITH THE OBJECTIO NS RAISED BY THE APPELLANT. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN LAW IN HOLDING THAT EXTRAPOLATING T HE FINDINGS OF THE DRI, AMRITSAR IS VALID OF THE DRI, AMRITSAR IS VALID IN RESPECT OF GOODS TO BE EXPORTED OUT OF INDIA IN THE MONTH OF MAY, 2000 TO GOODS LAREADY EXPORTED DURING THE FINANCIAL YEAR 1999- 2000. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MERCHANT EXPORTER DURING THE FINANCIAL YEAR 1999-2000. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSTT. YEAR 2000-01 DECLARING INCOME AT RS. 12,48,600/- ON 31.10.2000. THE RETUR N OF THE ASSESSEE FIRM WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TA X ACT, 1961. ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 3 SUBSEQUENTLY, THE AO VIDE NOTICE DATED 29.3.2007 ISSUED U/S. 148 REOPENED THE CASE OF THE ASSESSSEE FIRM AND COMPLET ED ASSESSMENT PROCEEDINGS AT AN INCOME OF RS. 1,37,48,600/-, THER EBY MAKING AN ADDITION OF RS. 1,25,00,000/- VIDE ORDER DATED 31.12.2007 PA SSED U/S. 143(3)/148 OF THE I.T. ACT, 1961. 5. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSE SSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 16.1 .2009 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION IN DISPUTE. 6. AGGRIEVED WITH THE IMPUGNED ORDER, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 7. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 8. ON THE CONTRARY, LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT THE ORDER OF THE LD. CIT(A) IS A WELL REASONED ORDER AND THEREFORE, THE SAME MAY BE UPHELD AND REVENUES APPEAL MAY BE DISMISSED ACCORDINGLY. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E RELEVANT RECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AND ADJUDICATED THE ISSUE IN DISPUTE AS UNDER VIDE PARA 6.1 TO 6.3 AT PAGES 10 TO 13 OF HIS IMPUGNED ORDER. 6.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E ON BEHALF OF THE APPELLANT THE FINDINGS OF THE AO AND THE FA CTS ON RECORD. THE AO HAS MADE THE ADDITION ON THE BASIS OF THE FINDINGS OF THE DIRECTORATE OF REVENUE INTELLIGENCE (REFERRED TO AS DRI HEREINAFTER) AND THE SUBSEQUENT ADJUDICA TION ORDER PASSED BY THE COMMISSIONER OF CUSTOMS ON 29.3.2005. ACCORDING TO THE AO, THE INVESTIGATION CONDUCTED BY THE DRI CLEARLY PROVES THAT THE ASSES SEE WAS ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 4 MIS-DECLARING ITS EXPORT PRODUCTS IN ORDER TO CLAIM HIGHER AMOUNT OF DUTY DRAWBACK. THE RELEVANT PORTION OF T HE FINDINGS OF THE AO MADE IN THE ASSESSMENT ORDER IS REPRODUCED BELOW:- THE MAIN ISSUE INVOLVED DURING THE DRI INVESTIGATION WAS THAT THE FIRMS AND COMPANIES MANAGED AND CONTROLLED BY SH. VINOD KUMAR GARG AND HIS ASSOCIATES HAS EXPORTED THE INVOICED GOODS OR NOT AND WHETHER THE INVOICED PRICE WAS THE REAL PRICE OR WAS INFLATED ONE. OVER SEAS ENQUIRIES MADE HAS REVEALED THAT NEITHER THE ASSESSEE HAS PROVED THE LAWFUL EXISTENCE OF UNITS IN INDIA NOR ABROAD O R LEGAL REALIZATION OF EXPORT PROCEEDS AND ALSO FAILE D TO PROVE WHY EXPORT GOODS ON HIGH SEA SALES WERE SOLD AT A LOW COST ON COMPARISON WITH THE FOB VALUE. DURING ENQUIRIES 16 CONTAINERS EXPORTED BY THIS GROUP WERE CHECKED AND SAMPLES WERE TAKEN. THE RESULTS OF SUCH EXAMINATION BY THE COMPETENT AUTHORITY REVEALED THAT GOODS ACTUALLY FOUND DID NO T MATCH TO THE INVOICED GOODS. THE GOODS WERE CONSIGNED TO UK & USA BUT WERE ACTUALLY UNLOADED/CLEARED AT DUBAI. THE SAME EXPORTED GOODS WERE SOLD TO DUBAI CUSTOMERS BY BUYERS AT SIGNIFICANTLY LOWER PRICES, FOR EXAMPLE THE FOB VAL UE OF GEAR CUTTING TOOLS WERE DECLARED BETWEEN RS. 350/- TO RS. 400/- PER KG. WHEREAS THE SAME WAS SHOWN AT THE TIME OF CLEARANCE AT DUBAI ABOUT RS. 5/- PER KG. FROM THE ORDER OF THE DRI IT IS ESTABLISHED THAT:- I) THAT THE FIRM AND COMPANIES RELATED TO THIS GROUP ARE NON EXISTENT AND BOGUS. ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 5 II) THE PURCHASE OF THE MATERIAL CLAIMED TO HAVE BEEN EXPORTED REMAIN UNVERIFIED III) THE FOB PRICE HAS BEEN DECLARED MUCH MORE THAN THE REAL PRICE OF THE GOODS EXPORTED BY THE ASSOCIATE COMPANIES AND FIRM OF THIS GROUP JUST TO RECEIVE THE DEPB & DUTY DRAWBACK AT HIGHER AMOUNT. DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION IT IS NOTICED THAT ASSESSE E HAS MADE PAYMENT OF RS. 41,77,800/- ON THE INSTRUCTIONS OF THE M/S NANDAN AUTO TECH LTD (FORMERLY KNOWN AS GARG FORGINGS & CASTINGS LTD) TO M/S JINDAL ALLOYS AND RS. 53,81,3901- TO M/S JYOTI STEEL WHICH ARE NON EXISTENCE & BOGUS. M/S GARG FORGINGS & CASTING LIMITED MADE PURCHASES FROM M/ JINDAL ALLOYS. SINCE ALL THE COMPANIES AND FIRMS AR E INTER LINKED AND ARE MANAGED AND CONTROLLED BY FAMILY OF VINOD GARG AND HIS ASSOCIATES WHO ARE PROVED TO BE NON EXISTENT AND BOGUS AS PER DRI ORDER. SINCE THE GOODS CLAIMED TO HAVE BEEN EXPORTE D ARE CLAIMED TO HAVE BEEN PURCHASED FROM THESE NON EXISTENT AND BOGUS COMPANIES AND FIRM CONTROLLED AND MANAGED BY THE SAME GROUP, IT IS HELD THAT NO PURCHASES HAVE BEEN MADE FROM THESE COMPANIES WHO IN TURN CLAIMED TO HAVE PURCHASED THE GOODS FROM THE COMPANIES AND FIRMS RELATED TO THIS GROUP AND ONLY PAPER ENTRIES HAVE BEEN PASSED. FROM THE ABOVE DISCUSSION AND ORDER MADE BY THE DR! IT BECOME OBVIOUS THAT THE GOODS EXPORTED HAVE BEEN OVER INVOICED WHERE AS THESE WERE NOT OF WORTH AT WHICH THESE WERE INVOICED IN THESE ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 6 CIRCUMSTANCES I HOLD THAT THE ASSESSEE FIRM HAS PURCHASED GOODS FROM THE OUTSIDE AT MUCH LOWER PRICE. THE AMOUNT OF INVESTMENT IN SUCH PURCHASES MADE FROM OUTSIDE IS ESTIMATED AT RS. 1,25,00,000/- AND IS ADDED TO THE INCOME FROM UNDISCLOSED SOURCES BEING THE INVESTMENT MADE IN SUCH OUTSIDE PURCHASES. 6.2 THERE IS NO DISPUTE OVER THE FACT THAT THE APPE LLANT HAS MADE PAYMENT OF RS. 41,77,800/- TO M/S JINDAL ALLOY S AND RS. 53,81,390/- TO M/S JYOTI STEELS THROUGH ACCOUNT PAYEE CHEQUES DURING THE RELEVANT ASSESSMENT YEAR. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED BY THE APPELLANT THAT PAYMENTS TO JYOTI STEELS AND JINDAL ALLOYS HAVE BEEN MADE ON BEHALF OR GARG FORGING & CASTINGS LTD. (PRESENTLY KNOWN AS M/S NANDAN AUTO TECH. LTD.) WH O HAD PURCHASED CERTAIN ITEMS FROM THE AFOREMENTIONED PARTIES. IN THE COPIES OF ACCOUNTS AS PER THE BOOKS OF THE APPELLANT, THE PAYMENTS TO JINDAL ALLOYS & JYOTI ST EELS HAVE NOT BEEN MARKED AGAINST ANY PURCHASES BUT THE AMOUNTS OF PAYMENTS TO THE RESPECTIVE PARTIES HAVE BEEN TRANSFERRED TO THE ACCOUNT OF GARG FORGING & CASTIN GS LTD. THE FACT THAT THERE WERE NO PURCHASES FROM JINDAL A LLOYS & JYOTI STEELS AS PER ACCOUNTS AND THE AMOUNT OF PAYM ENTS TO THESE PARTIES HAVE BEEN TRANSFERRED TO THE ACCOU NT OF GARG FORGING & CASTINGS LTD. DO SUPPORT THE CONTENT ION OF THE APPELLANT THAT PAYMENTS TO THESE TWO PARTIES AR E NOT IN RESPECT OF THE PURCHASES OF THE APPELLANT. SINCE NO EXPENSES RELATABLE TO THE PAYMENT HAVE BEEN DEBITED IN THE ACCOUNTS OF THE APPELLANT, THE A.O. TECHNICALLY COU LD NOT HAVE DISALLOWED ANY PART OF SUCH PAYMENT TO JINDAL ALLOYS & JYOTI STEELS. ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 7 6.3 IT HAS ALSO BEEN THE VIEW OF THE A.O. THAT SINC E THE APPELLANT HAS MADE PURCHASES FROM GARG FORGING & CASTINGS LTD. AND GARG FORGING & CASTING LTD IN TUR N HAD MADE PURCHASES FROM FICTITIOUS CONCERNS NAMELY JIND AL ALLOYS & JYOTI STEELS, THE APPELLANT HAS INDIRECTLY MADE PURCHASES FROM THESE FICTITIOUS CONCERNS. THE VIEW COULD HAVE BEEN ESTABLISHED, HAD THERE BEEN ANY EVIDENCE THAT MIS JINDAL ALLOYS & JYOTI STEELS HAVE SUPPLIED TO T HE GROUP CONCERNS ANY MATERIAL OTHER THAN THE DISCLOSED MATE RIALS OR THAT SUCH SUPPLIES OTHER THAN THE DISCLOSED ITEMS A RE ALSO FICTITIOUS. THERE IS NO SUCH FINDING IN THE ORDER O F THE COMMISSIONER OF CUSTOMS EITHER. SECONDLY, M/S GARG FORGING & CASTINGS LTD. IS ASSESSED TO INCOME TAX A ND IT IS REGULARLY FILING ITS RETURN OF INCOME. THE CASE OF M/S GARG FORGING & CASTINGS LTD. WAS SUBJECT TO THE SCRUTINY ASSESSMENT PROCEEDINGS ULS 143(3) BY DCIT, CENTRAL CIRCLE- 3,NEW DELHI AND THEN TO THE RE-ASSESSMENT PROCEEDIN GS ULS 147 OF THE ACT BY ACIT, CIRCLE-13(1 ),NEW DELHI AND IN BOTH THE PROCEEDINGS NO ADVERSE VIEW WAS TAKEN IN REGARD THE SALES BY THE SAID COMPANY TO THE APPELLANT WHILE COMPLETING THE ASSESSMENT/RE-ASSESSMENT IN THE CASE OF THE SAID COMPANY. THEREFORE, IT CAN WELL BE INFERRE D THAT THE SALES MADE BY M/S GARG FORGING & CASTINGS LTD. TO THE APPELLANT FIRM WERE TREATED AS GENUINE BY THE ASSES SING OFFICER(S) OF M/S GARG FORGING& CASTINGS LTD. AS A LOGICAL CONSEQUENCE, IT IS NOT POSSIBLE TO TAKE A DIFFERENT AND ADVERSE VIEW IN REGARD TO THE CORRESPONDING PURCHAS ES MADE BY THE APPELLANT FIRM FROM M/S GARG FORGING & CASTINGS LTD. IT IS ALSO APPROPRIATE TO REFER TO TH E ORDER OF LD. CIT(A)-XV, NEW DELHI DT. 23-05-2008 IN THE CASE OF M/S GARG CONCAST LTD. (A SISTER COMPANY OF THE GROU P IN QUESTION) WHEREIN THE IDENTICAL ISSUE WAS INVOLVED . IN THE SAID CASE, THE LD. CIT(A)-XV, NEW DELHI HAS HELD TH AT THE ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 8 APPELLANT (M/S GARG CONCAST LTD.) HAS NOT RECEIVED ANY MATERIAL ON ACCOUNT OF PURCHASE FROM THE FICTITIOUS CONCERNS NAMELY JINDAL ALLOYS, JYOTI STEELS & KRISHNA HARDWA RE MILLS STORE INDIRECTLY THROUGH GARG FORGING & CASTI NGS LTD. AND THE PAYMENT OF RS. 1,38,32,000/- TO THE THREE F ICTITIOUS ENTITIES AT THE INSTRUCTION OF ITS SISTER CONCERNS DOES NOT BECOME THE INCOME OF THE APPELLANT. IN VIEW OF THE AFORESAID IT IS HELD THAT APPELLANT HAS NOT RECEIVE D ANY SUCH MATERIAL FROM THE SAID TWO CONCERNS INDIRECTLY THROUGH GARG FORGING & CASTINGS LTD. AND THEREFORE THE PAYM ENT OF RS.95,59,190/- (RS.41,77,800/- PLUS RS.53,81,390/-- )TO THE SAID CONCERNS AT THE INSTRUCTION OF ITS SISTER CONCERNS CANNOT BECOME THE INCOME OF THE APPELLANT. AS A RES ULT, THE ADDITION OF RS. 95,59,190/- MADE ON ACCOUNT OF PAYM ENTS MADE TO M/S JINDAL ALLOYS & M/S JYOTI STEELS IS DEL ETED. BESIDES THE ABOVE, FURTHER ADDITION OF RS. 29,40,81 0/- HAS BEEN ON ESTIMATE BASIS THEREBY MAKING TOTAL ADDITIO N OF RS.1,25,00,000/-. IT IS WELL-SETTLED THAT IN A BEST JUDGMENT ASSESSMENT OR IN AN ASSESSMENT COMPLETED ON ESTIMAT E BASIS THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WOR K. BUT THE A.O. CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSE SSMENT AND HE SHOULD NOT ACT TOTALLY ARBITRARILY. IN MY OP INION THERE WAS ARBITRARINESS IN THE PRESENT CASE ON THE PART OF THE A.O. AS HE HAD NO MATERIAL AVAILABLE WITH HIM T O FURTHER ESTIMATE THE INCOME TO THE TUNE OF RS. 29,40,810/- ON ACCOUNT OF THE INVESTMENT IN PURCHASES FROM OUTSIDE . IN VIEW OF THE DISCUSSION MADE ABOVE, IT IS HELD THAT THE ACTION OF A.O. IN FURTHER ENHANCING THE INCOME BY T HE SUM OF RS.29,40,810/- WAS NOT JUSTIFIED AND THEREFORE N OT SUSTAINABLE IN LAW. HENCE THE ADDITION OF RS 29,40, 810/- IS DELETED. ACCORDINGLY, THE A.O. IS DIRECTED TO DELET E THE ITA NO.2151/DEL/2009 & CO NO. 199/DEL/2009 9 ADDITION OF RS. 1,25,00,000/-(RS.95,59,190/- PLUS RS.29,40,810/-). AS A RESULT GROUND NO. 2 IS ALLOW ED. 9.1 ON GOING THROUGH THE AFORESAID FINDING OF THE L D. CIT(A) ON THE ISSUE IN DISPUTE AND THE CASE LAWS CITED IN THE IMPUGNE D ORDER, WE ARE OF THE VIEW THAT THE ADDITION IS NOT LEGALLY SUSTAINABLE A ND THEREFORE, WAS RIGHTLY DELETED BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) AND D ECIDE THE ISSUE AGAINST THE REVENUE. 10. THE CROSS OBJECTION FILED BY THE ASSESSEE, WHIC H IS IN SUPPORT OF THE IMPUGNED ORDER, IS ALSO DISMISSED AS INFRUCTUOUS. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/1/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 15/1/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES