Sh. Rajiv Mahajan, New Delhi V. ITO, New Delhi

ITA 1100/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6908 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 03-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Accommodation entries; Cancellation of registration
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.L.P.SAHU, ACCOUNTANT MEMBER I.T.A .NO. -1100/DEL/2016 (ASSESSMENT YE AR-2008-09) RAJIV MAHAJAN, (PROP. D.R.EXPORTS), H.NO.15, KHASRA NO.311/20, CHHATARPUR, NEW DELHI-110074. PAN-AALPM8184A (APPELLANT) VS IT O , WARD-24(3), NEW DELHI (RESPONDENT) APPELLANT BY SH. VED JAIN, ADV. & SH. ASHISH CHADHA, CA RESPONDENT BY SH. MANOJ KUMAR CHOPRA, SR.DR DATE OF HEARING 0 3 .05.2016 DATE OF PRONOUNCEMENT 27 .0 7 .2016 O R D E R PER DIVA SINGH, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 30.12.2015 OF CIT(A)-11, NEW DELHI PERT AINING TO 2008-09 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A )] IS BAD BOTH IN THE EYES OF LAW AS WELL AS ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE AO, DESPITE THE FACT THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 14 7, READ WITH SECTION 148 ARE BAD AS THE CONDITIONS AND PROCEDURE PRESCRIBED UNDER THE STATUTE HAVE NOT BEEN COMPLIED WITH. (II) THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE AO DESPITE THE FACT THAT THE INITI ATION OF PROCEEDINGS ARE BAD IN LAW AS THE REASONS RECORDED FOR ISSUE OF NOT ICE UNDER SECTION 148 ARE BAD IN THE EYE OF LAW. I.T.A .NO.-1100/DE L/2016 PAGE 2 OF 7 (III) THAT THE LEARNED CIT(A) HAS ERRED BOTH O N FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE AO DESPITE THE FACT THAT THE INITI ATION OF PROCEEDINGS HAS BEEN DONE ON THE BASIS OF REASONS WHICH DO NOT HAVE ANY LIVE NEXUS WITH THE BELIEF FORMED BY THE AO. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.4,29,058/- MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. (II) THAT THE ADDITION HAS BEEN CONFIRMED REJE CTING EXPLANATION AND EVIDENCES FURNISHED BY THE ASSESSEE. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION MADE BY THE AO DESPITE THE FACT THAT THE SAME HAS BEEN MADE ON THE BASIS OF MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE WITHOUT GIVIN G HIM AN OPPORTUNITY TO REBUT THE SAME IN CLEAR VIOLATION OF PRINCIPLE OF N ATURAL JUSTICE. (II) THAT THE LEANED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE ON THE BASIS OF STATEMENT OF SOME PERSON RECORDED, WITHOUT GIVING ASSESSEE AN OPPORTUNITY FOR CROSS EXAMINING THE SAME. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 2. THE LD.AR INVITING ATTENTION TO THE COPY OF THE REASONS RECORDED IN PARA 3 OF THE ASSESSMENT ORDER AND RELYING UPON THE FULL EXTRACT OF THE REASONS RECORDED SUBMITTED THAT IN THE FACTS OF THE PRESENT CASE, NO REASONS HAVE B EEN SET OUT WHICH CAN BE SAID TO BE AN INDEPENDENT VIEW OF THE AO THAT THE INCOME HAS ESCA PED ASSESSMENT. EVEN ON MERIT, THE LD.AR SUBMITTED THAT THE REVENUE HAS NO CASE. CAR RYING US THROUGH THE FINDING RECORDED IN THE ASSESSMENT ORDER IT WAS HIS SUBMISSION THAT THE AO HAS PROCEEDED ENTIRELY ON SURMISES AND CONJECTURES. REFERRING TO THE FOLLOWI NG FACTS AS FOUND RECORDED IN THE SHOW CAUSE NOTICE DATED 07.02.2014 IT WAS QUESTIONED THA T ON READING THE SAME IT IS UNCLEAR WHAT IS THE BASIS OF THE CONCLUSION THAT THESE WERE BOGUS PURCHASES. READING THEREFROM IT WAS SUBMITTED IT WAS UNCLEAR WHERE IS THE ALLEGED A DMISSION MADE BY SH. VAISHALI GUPTA AND SH. RAKESH GUPTA THAT THE TRANSACTIONS WERE BOG US. NONE OF THESE FACTS ARE BROUGHT OUT IN THE ORDER. FOR READY-REFERENCE, THE SAME I S REPRODUCED HEREUNDER:- I HAVE INFORMATION ON RECORD THAT PURCHASE MADE FR OM M/S PASHUPATI ENTERPRISES FOR A SUM OF RS.4,12,566/- ARE IN THE N ATURE OF ACCOMMODATION ENTRY ONLY, SINCE SHRI VAISHALI GUPTA AND SHRI RAKESH GUP TA, WHO HAVE FLOATED THESE I.T.A .NO.-1100/DE L/2016 PAGE 3 OF 7 CONCERNS HAVE ADMITTED THAT NO SALES HAVE BEEN MADE BUT THEY HAVE PROVIDED ONLY BILLS AND CHARGING THEIR COMMISSION @ 2.5% TO 3%. PLEASE PROVE THE GENUINENESS OF PURCHASES. FALLING WHICH, I PROPOSE TO DISALLOW A SUM OF RS.4,12,566/- BEING BOGUS PURCHASE DETAILED IN BOOK S. 3. CARRYING US THROUGH THE REPLY OF THE ASSESSEE OF FERED BEFORE THE AO DATED 14.02.2014 EXTRACTED IN PARA 5 IT WAS SUBMITTED THE SAID REPLY WAS NOT ACCEPTED BY THE AO. THE REASONS FOR NON-ACCEPTANCE ARE SET OUT IN PARA 6 AND THE ASSESSEES REPLY THERETO DATED 13.03.2014 AND 18.03.2014 THOUGH EXTRACTED IN PARA 7 OF THE ASSESSMENT ORDER HAD STILL NOT MET WITH SUCCESS BEFORE THE AO. THESE RE PLIES WERE READ OUT AND HEAVILY RELIED UPON. ON THE BASIS OF THE SAME, IT WAS SUBMITTED T HAT THE ASSESSEE HAD ESTABLISHED THAT THE SPECIFIC ENTERPRISES M/S PASHUPATI ENTERPRISES H AD FILED A DVAT RETURN THUS IT WAS SUBMITTED THAT THE TRANSACTIONS COULD NOT BE BOGUS. THE SUBSEQUENT FACT THAT ITS TIN HAD BEEN CANCELLED AS PER INFORMATION CONVEYED ON 13.03 .2014 IT WAS SUBMITTED WAS NOT RELEVANT AS DURING THE PERIOD THE TRANSACTIONS WERE DONE I.E. 01.02.2008 TO 31.03.2008 ITS TIN WAS VERY MUCH ACTIVE. ACCORDINGLY THE CONCLUSI ON DRAWN WITHOUT CONFRONTING THE ASSESSEE WITH THE ALLEGED STATEMENTS OF THE TWO PER SONS WAS STRONGLY OBJECTED TO AND IT WAS ARGUED THAT THE ADDITION BASED ON SUSPICIONS DE SERVES TO BE DELETED. 4. THE LD. SR. DR RELYING UPON THE FINDINGS OF THE AO AND THE CIT(A) SUBMITTED THAT ADMITTEDLY THE SAID CONCERN WAS BOGUS AS DUE TO ITS CONDUCT ITS TIN ETC. GOT CANCELLED. APART FROM THAT IT WAS ALSO ARGUED THAT THE AO HAS ACTED ON SOME DEFINITE INFORMATION WHICH MAY NOT HAVE BEEN ELABORATELY DISCUSSED AS TH ERE MAY HAVE BEEN MANY SUCH PERSONS WHO HAD BOGUS TRANSACTIONS. IT WAS SUBMITTED THAT T HE MERE FACT THAT DVAT RETURN HAD BEEN FILED IS NEITHER HERE NOR THERE AS CREATING PA PER TRAIL BY UNSCRUPULOUS COMPANIES IN BOGUS FICTITIOUS TRANSACTIONS TO DEFRAUD THE STATE EXCHEQUER IN CUSTOMS, EXCISE AND DIRECT TAX RELATED CONCERNS IS A HARD REALITY OF THE TIMES . IT WAS HIS SUBMISSION THAT THE AO I.T.A .NO.-1100/DE L/2016 PAGE 4 OF 7 PROCEEDED ON DEFINITE INFORMATION AND HIS FINDING H AS BEEN UPHELD BY THE CIT(A). IN THESE CIRCUMSTANCES IT WAS HIS SUBMISSION THAT THE ADDITI ON DESERVES TO BE SUSTAINED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE RECORD SHOWS THAT THE AO HAD THE BENEFIT OF STA TEMENTS OF MR. VAISHALI GUPTA AND MR.RAKESH GUPTA ADMITTING THAT NO SALES HAVE BEEN M ADE BY THEM AND THEY WERE PROVIDING ACCOMMODATION ENTRIES AND CHARGING COMMISSION ON BI LLS ISSUED. SINCE THE ASSESSEE HAD ONE TRANSACTION WITH THE SAID ENTERPRISE THE ASSESS EE WAS ISSUED NOTICE U/S 148. IN RESPONSE THERETO THE ASSESSEE REPLIED STATING THAT ORIGINAL RETURN FILED ON 29.09.2008 MAY BE CONSIDERED AS HAVING BEEN FILED IN COMPLIANCE TH ERETO. ACCORDINGLY AFTER ISSUANCE OF NOTICE U/S 143(2) THE AO SHOW CAUSED THE ASSESSEE T O PROVE GENUINENESS OF THE PURCHASES TO THAT EXTENT. THE RELEVANT EXTRACT FROM THE SHOW CAUSE NOTICE DATED 07.02.2014 IS REPRODUCED FROM THE ORDER:- I HAVE INFORMATION ON RECORD THAT PURCHASE MADE FR OM M/S PASHUPATI ENTERPRISES FOR A SUM OF RS.4,12,566/- ARE IN THE N ATURE OF ACCOMMODATION ENTRY ONLY, SINCE SHRI VAISHALI GUPTA AND SHRI. RAKESH GU PTA, WHO HAVE FLOATED THESE CONCERNS HAVE ADMITTED THAT NO SALES HAVE BEEN MADE BUT THEY HAVE PROVIDED ONLY BILLS AND CHARGING THEIR COMMISSION @ 2.5% TO 3%. PLEASE PROVE THE GENUINENESS OF PURCHASES. FAILING WHICH, I PROPOSE TO DISALLOW A SUM OF RS.4,12,566/- BEING BOGUS PURCHASE DETAILED IN BOOK S. 5.1. WE FIND THAT IN VIEW OF THE SUBSEQUENT CANCEL LATION OF THE TIN OF THE SAID CONCERN THE REPLY OF THE ASSESSEE ALONGWITH EVIDENCES THAT THE SAID CONCERN HAD FILED ITS DVAT RETURN DURING THE RELEVANT PERIOD WAS CONSIDERED TO BE NOT RELEVANT AND THE TRANSACTION WAS HELD TO BE BOGUS. THIS FINDING HAS BEEN AFFIRMED B Y THE CIT(A). ON A PERUSAL OF THE ORDERS OF THE TAX AUTHORITIES, WE FIND THAT THE ENTIRE INF ORMATION AVAILABLE WITH THE REVENUE HAS NOT BEEN BROUGHT OUT IN THE ORDER AS REFERENCE IS ONLY MADE TO STATEMENTS GIVEN BY SH. VAISHALI GUPTA AND SH. RAKESH GUPTA WHERE WERE THE ALLEGED S TATEMENTS GIVEN WHEN AND TO WHOM I.T.A .NO.-1100/DE L/2016 PAGE 5 OF 7 HAS NOT BEEN REFERRED TO BY THE TAX AUTHORITIES. C ONSIDERING THE OVERALL FACTUAL MATRIX, WE FIND THAT THE CORRECTNESS OF THE ORDERS OF THE TAX AUTHORITIES WITHOUT HAVING ACCESS TO THE EXACT STATEMENTS OF THE SH. VAISHALI GUPTA AND SH. RAKESH GUPTA CANNOT BE ASCERTAINED. WHERE, WHEN AND BEFORE WHOM, THE ALLEGED STATEMENT S HAVE BEEN GIVEN BY THE TWO PERSONS ARE RELEVANT FACTS AND THE STATEMENT SO REL IED UPON IN ALL FAIRNESS NECESSARILY MUST BE CONFRONTED BY THE REVENUE TO THE ASSESSEE BEFORE DRAWING ANY ADVERSE CONCLUSION RELYING THEREON. NO DOUBT THE ASSESSING OFFICER FO LLOWING DUE PROCEDURE ON FACTS MAY BE JUSTIFIED TO DRAW ADVERSE CONCLUSIONS QUA THE ASSES SEE, HOWEVER THE LAW DOES NOT CONFER ANY ENTITLEMENT TO DRAW ADVERSE CONCLUSIONS ON INFO RMATION NOT CONFRONTED. IF THE FACTS BASED ON EVIDENCES CLAIMED BY THE ASSESSEE ARE TO B E UPSET BY THE TAX AUTHORITIES AND THE ASSESSMENT IS SOUGHT TO BE RE-OPENED THEN THE EVIDE NCE TAKEN INTO CONSIDERATION MUST BE EFFECTIVELY CONFRONTED. A STATEMENT NOT CONFRONTED CANNOT BE RELIED UPON. WE ARE OF THE VIEW THAT THE MERE FACT THAT THE VAT DEPARTMENT CAN CELLED REGISTRATION IN SOME SUBSEQUENT PERIOD BY ITSELF CANNOT LEAD TO THE CONCLUSION THAT ALL PREVIOUS TRANSACTIONS WERE BOGUS IT CAN AT BEST MERELY TRIGGER AN ALARM. THE SPECIFIC CAUSE OF CANCELLATION OF REGISTRATION BY VAT DEPARTMENT MUST BE ADDRESSED. TO RECTIFY THIS PROCEDURAL DEFECT THE ISSUE IS RESTORED BACK TO THE AO DIRECTING HIM TO CONFRONT THE ASSESS EE WITH THE STATEMENTS OF THE PERSONS CLAIMING THAT THE M/S PASHUPATI ENTERPRISES WAS ENGA GED IN PROVIDING ACCOMMODATION ENTRIES BY ISSUING BILLS ON COMMISSION. SUPPORT IS DRAWN FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAMDHENU STEEL & ALLOYS LTD. & ORS REPORTED IN 361 ITR 220. A PERUSAL OF THE SAID DECISION WOULD SHOW THAT TH E HONBLE DELHI HIGH COURT HELD THEREIN THAT NOT PROVIDING OP PORTUNITY OF CROSS-EXAMINATION OF WITNESS IS A VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND UPHELD THE ACTION OF THE TRIBUNAL IN REMITTING I.T.A .NO.-1100/DE L/2016 PAGE 6 OF 7 THE MATTER TO THE ASSESSING OFFICER. THE RELEVANT F INDING OF THE HONBLE DELHI HIGH COURT IS REPRODUCED HEREUNDER: 55. IN OUR DISCUSSION ON THE ASPECT OF REMAND IN I T APPEAL NO. 972 OF 2009, WE HAVE INDICATED THAT IF THE ADDITION IS SET ASIDE ON LY BECAUSE OF SOME PROCEDURAL DEFECT OR IRREGULARITY, VIZ., VIOLATION OF PRINCIPL E OF NATURAL JUSTICE, THEN MATTER CAN BE REMITTED BACK TO GIVE OPPORTUNITY TO THE ASSESSE E TO CROSS-EXAMINE THE WITNESS IF IT WAS NOT DONE. THE CLINCHER ON THIS AS PECT IS NOW THE ORDER OF THE SUPREME COURT IN THE CASE OF ITO VS. M. PIRAI CHOOD I (CIVIL APPEAL NOS. 9756 & 9757 OF 2010, DECIDED ON 19TH NOV., 2010 [REPORTED AT (2011) 245 CTR (SC) 233 : (2011) 63 DTR (SC) 187ED.] WHERE THE COURT HELD AS UNDER : 'HEARD LEARNED COUNSEL ON BOTH SIDES. LEAVE GRANTED. IN THIS CASE, THE HIGH COURT HAS SET ASIDE THE ORDE R OF ASSESSMENT ON THE GROUND THAT NO OPPORTUNITY TO CROSS-EXAMINE WAS GRANTED, A S SOUGHT BY THE ASSESSEE. WE ARE OF THE VIEW THAT THE HIGH COURT SHOULD NOT H AVE SET ASIDE THE ENTIRE ASSESSMENT ORDERS. AT THE HIGHEST, THE HIGH COURT S HOULD HAVE DIRECTED THE AO TO GRANT AN OPPORTUNITY TO THE ASSESSEE TO CROSS-EX AMINE THE CONCERNED WITNESS. BE THAT AS IT MAY, WE ARE OF THE VIEW THAT, EVEN ON THIS PARTICULAR ASPECT, THE ASSESSEE COULD HAVE GONE IN APPEAL TO CIT(A). THE A SSESSEE HAS FAILED TO AVAIL THE STATUTORY REMEDY. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE HIGH COURT SHOULD NOT HAVE QUASHED THE ASSESSMENT PROCEE DINGS VIDE IMPUGNED ORDER. CONSEQUENTLY, THE IMPUGNED ORDER IS SET ASID E. LIBERTY IS GRANTED TO THE ASSESSEE TO MOVE CIT(A). IT IS MADE CLEAR THAT THE ASSESSEE HEREIN WILL MOVE THE CIT(A) WITHIN A PERIOD OF SIX WEEKS FROM TODAY.' 56. ACCORDINGLY, WE FIND NOTHING WRONG IN THE APPRO ACH OF THE TRIBUNAL IN REMITTING THE CASE BACK TO THE AO IN THE INSTANT CA SE. THIS APPEAL IS ACCORDINGLY DISMISSED. 5.2. ACCORDINGLY IN VIEW OF THE ABOVE FACTUAL AND L EGAL POSITION, WE DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER AND RESTORE THE ISSUE BACK TO THE AO WITH A DIRECTION TO ADDRESS THE PROCEDURAL SHORTCOMINGS AND PASS A SPEA KING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH OF JULY, 2016. SD/- SD/- (L.P.SAHU) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A .NO.-1100/DE L/2016 PAGE 7 OF 7 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI