M/s. Rishap Industries Pvt. Ltd., Pune V. Dy. CIT, Circle-10, Pune

ITA 1205/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8469 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Keywords: Bogus purchase
• Section: 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1205/PN/2013 (ASSESSMENT YEAR : 2008-09) M/S. RISHAP INDUSTRIES PVT. LTD., PLOT NO.28/29, D-11, BLOCK MIDC, CHINCHWAD, PUNE - 411019 .. APPELLANT PAN NO. AAACR8953N VS. DY.CIT, CIRCLE-10, PUNE .. RESPONDENT ASSESSEE BY : NONE REVENUE BY : SMT. M.S. VERMA, CIT DATE OF HEARING : 19-08-2014 DATE OF PRONOUNCEMENT : 09-09-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28-03-2013 PASSED U/S.263 OF THE I.T. ACT BY THE CIT-V, PUNE RELATING TO ASSESSMENT YEAR 2008-09. 2. THIS CASE WAS FIRST FIXED FOR HEARING ON 27-05-2 014. SINCE NONE APPEARED ON THAT DATE NOTICE BY RPAD WAS SENT FIXIN G THE CASE FOR HEARING ON 19-08-2014. ALTHOUGH THE SAID NOTICE TH ROUGH RPAD WAS DULY SERVED ON THE ASSESSEE, HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE NAME OF THE ASSESSEE WAS CALLED. NO PETITION SEEKING ADJOURNMENT OF THE CASE WAS FILED. THEREFO RE, THE APPEAL IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. 2 3. THE ASSESSEE IN THE GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE CIT IN INVOKING THE JURISDICTION U/S.263 OF THE I.T. ACT. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URING OF FERROUS AND NON-FERROUS CASTINGS. IT FILED ITS RETURN OF I NCOME ON 29-09-2008 DECLARING TOTAL INCOME AT RS.1,05,04,529/-. THE AS SESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) ON 31-12-2010 D ETERMINING THE TOTAL INCOME AT RS.56,53,900/- AFTER SETTING OFF BR OUGHT FORWARD LOSS OF EARLIER YEARS AMOUNTING TO RS.1,31,48,669/-. IN TH E SAID ASSESSMENT THE ASSESSING OFFICER MADE VARIOUS ADDITIONS INCLUD ING ADDITION OF RS.42,36,071/- WHICH RELATES TO INTRODUCTION OF CAS H BY THE DIRECTORS FROM TIME TO TIME WHICH WAS FOUND REFLECTED IN THE IMPOUNDED BOOKS IMPOUNDED DURING THE COURSE OF SURVEY U/S.133A ON 0 5-03-2008. SIMILARLY, THE ASSESSING OFFICER HAD ALSO MADE ADDI TION OF RS.22,59,315/- WHICH RELATES TO THE TRANSACTION WIT H M/S. MONIKA METAL AND WHICH WAS NOT INCLUDED IN THE INCOME OF THE ASS ESSEE. THE ASSESSEE WENT IN APPEAL AND THE CIT(A) VIDE ORDER D ATED 04-04-2012 GAVE PART RELIEF TO THE ASSESSEE. THE LD.CIT(A) AP ART FROM DELETING THE VARIOUS ADDITIONS DELETED THE ADDITION OF RS.22,59, 315/- AND SUSTAINED ADDITION OF RS.42,36,071/-. 4.1 SUBSEQUENTLY, THE LD.CIT CALLED FOR THE RECORDS . HE NOTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS PRIMA- FACIE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE FOR THE FAILURE OF THE ASSESSING OFFICER BY NOT CONSIDERING THE IMPOUNDED MATERIALS PROPERLY ESPECIALLY WHEN DETAILS WERE AVAILABLE IN PAGE 14 O F A6. FURTHER, THE 3 ASSESSING OFFICER ALLOWED SET OFF OF BROUGHT FORWAR D BUSINESS LOSS AGAINST THE INCOME ASSESSABLE UNDER DEEMING PROVISI ONS OF SECTION 68 TO 69D. HE, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ASKING IT TO EXPLAIN AS TO WHY PROCEEDINGS U/S.263 SHOULD NOT BE TAKEN. 5. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND RELYING ON VARIOUS DECISIONS THE LD.CIT HELD THAT T HE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJU DICIAL TO THE INTEREST OF THE REVENUE SINCE THE ASSESSING OFFICER HAS NOT CONSIDERED PROPERLY THE VARIOUS TRANSACTIONS APPEARING IN THE LEDGER IM POUNDED DURING THE COURSE OF SURVEY. FURTHER, THE ADDITIONS, WHICH AR E MADE IN THE DEEMING PROVISIONS OF SECTION 68 TO 69D, ARE REQUIR ED TO BE ASSESSED UNDER THE HEAD OTHER SOURCES AND SUCH INCOME WILL NOT BE AVAILABLE FOR SET OFF AGAINST BUSINESS LOSS. THIS ASPECT WAS NOT VERIFIED BY THE ASSESSING OFFICER. THIS WAS ALSO NOT A SUBJECT MAT TER OF APPEAL BEFORE THE CIT(A). THEREFORE, HE SET-ASIDE THE ORDER OF T HE ASSESSING OFFICER WITH A DIRECTION TO REDO IT AFTER GIVING DUE OPPORT UNITY TO THE ASSESSEE. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT, THE ASSESS EE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE HONORABLE THE COMMISSIONER OF INCOME TAX V PUNE IS NO T JUSTIFIED IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER DCIT CIR CLE 10 PUNE DATED 31/12/2010. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE HONORABLE THE COMMISSIONER OF INCOME TAX V PUNE HAS E RRED IN TREATING THE ASSESSMENT MADE BY THE AO AS ERRONEOUS AND P REJUDICIAL- TO THE INTEREST OF REVENUE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE HONORABLE THE COMMISSIONER OF INCOME TAX V PUNE HAS N OT REALIZE THE FACT THAT THE ASSESSING OFFICER HAS MADE ASSESSMENT TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF THE CA SE INCLUDING THE 4 RECORDS IN HIS POSSESSION. THE ASSESSING OFFICER HAS MADE THE ASSESSMENT CALLING THE REQUISITE INFORMATION, WHICH WAS D ULY VERIFIED BY HIM. THE ASSESSING OFFICER HAS MADE THE ASSESSMENT AFTER FULLY EXERCISING THE STATUTORY POWERS AND OBLIGATIONS VESTED I N HIM. 4. THE ASSESSEE HAS FURNISHED ALL DETAILS AND INFORMATIO N BEFORE THE HONORABLE CIT V PUNE RESPONDING TO THE LETTER OF PRO POSED ACTION U/S 263. THOUGH ALL THE QUERIES RAISED BY THE CIT WERE SAT ISFACTORILY EXPLAINED, THE CIT HAS TREATED THE ORDER OF AO AS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND SET ASIDE T HE ASSESSMENT OF AO ARBITRARILY. 5. THE HONORABLE CIT V PUNE HAS GROSSLY ERRED IN INT ERVENING THE ISSUES THAT ARE INVOLVED AND DECIDED IN THE APPELLATE ORDER PASSED BY THE CIT(A)-V, PUNE VIDE ORDER DATED 04/04/1 2, 6. THE ACT OF THE CIT V TO DISTURB THE ISSUES DECIDED BY THE CIT (APPEAL) IS WITHOUT JURISDICTION AND AS SUCH IS NOT LAWF UL. IN VIEW OF THE ABOVE THE ORDER PASSED BY THE CIT-V PU NE U/S.263 (1) IS NOT LEGALLY SUSTAINABLE AND IS AGAINST THE SPIRIT OF PR OVISION OF SECTION 263 OF THE I.T. ACT, 1961, THUS THE ORDER OF THE CIT -V PASSED U/S.263 MAY KINDLY BE ANNULLED. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MOD IFY, ALTER, REVISE, SUBSTITUTE AND DELETE ANY OR ALL GROUND OF APP EAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 7. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THE LD.CIT INVOKED JURISDICTION U/ S.263 IN THIS CASE ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSING OFFICER TO CONSIDER PROPERLY THE TRANSACTIONS APPEARING IN PAGE 14 OF A 6 OF THE IMPOUNDED PAPERS. FURTHER, ACCORDING TO THE LD.CIT, THE ADDI TIONS MADE UNDER THE DEEMING PROVISIONS OF SECTION 68 TO 69D ARE REQ UIRED TO BE ASSESSED UNDER THE HEAD OTHER SOURCES AND THE SAME IS NOT AVAILABLE FOR SET OFF AGAINST BUSINESS LOSSES. THE ASSESSING OFFICER WIT HOUT PROPER ENQUIRY HAS ALLOWED THE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES. 7.1 SO FAR AS THE FIRST ISSUE IS CONCERNED, I.E. NO N CONSIDERATION OF TRANSACTIONS APPEARING IN PAGE 14 OF A6 OF THE IMP OUNDED DOCUMENTS 5 PROPERLY, WE FIND THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER HAS DISCUSSED THE TRANSACTIONS APPEARING IN P AGE 14 OF LOOSE PAPER FILE A6 AND HAS MADE ADDITION OF RS.22,59,315/- ON ACCOUNT OF TRANSACTIONS NOTED ON THE ABOVE PAPER WHICH HAS NOT BEEN INCLUDED IN THE RETURN OF INCOME. SIMILARLY, HE HAS ALSO MADE ADDITION OF RS.42,36,071/- ON THE BASIS OF CERTAIN ENTRIES RELA TING TO CASH DEPOSITS BY THE DIRECTORS FOUND IN THE ROUGH CASH BOOK. WE FIND THE LD.CIT(A), WHILE DELETING THE ADDITION OF RS.22,59,315/- HAS S USTAINED THE ADDITION OF RS.42,36,071/-. THUS, THERE WAS APPLICATION OF MIND BOTH BY THE ASSESSING OFFICER AS WELL AS THE CIT(A) ON THE FIRS T ISSUE. SINCE THIS ISSUE WAS A SUBJECT MATTER OF APPEAL BEFORE THE CIT (A) AND THERE WAS APPLICATION OF MIND BY THE ASSESSING OFFICER, THERE FORE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT IS NOT JUSTIFIE D IN INVOKING PROVISIONS OF SECTION 263 ON THIS ISSUE. 7.2 IT HAS BEEN HELD IN VARIOUS JUDICIAL DECISIONS THAT MERELY BECAUSE THE LD.CIT DOES NOT AGREE WITH THE MANNER IN WHICH THE ASSESSING OFFICER HAS CONDUCTED THE ENQUIRY AND WANTS TO SUBS TITUTE HIS OWN FINDINGS IS NOT SUFFICIENT TO MAKE THE ORDER ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE IN THE INSTANT CASE, THE ASSESSING OFFICER HAS MADE ENQUIRIES, CALLED FOR THE DETAILS FROM THE ASSESSEE AND MADE THE ADDITION, WHICH WAS ALSO A SUBJECT MATTER OF APPEAL BEFORE THE CIT(A), THEREFORE, IT CANNOT BE SAID THERE WAS LACK OF ENQUIRY. THEREFORE THE ORDER OF THE ASSESSING OFFICER, ON TH E FIRST ISSUE, IN OUR OPINION, CANNOT BE REVISED U/S.263 OF THE I.T. ACT. 6 7.3 SO FAR AS THE SECOND ISSUE IS CONCERNED, I.E. S ET OFF OF BROUGHT FORWARD LOSS AGAINST ADDITION UNDER THE DEEMING PRO VISIONS OF SECTION 68 TO 69D OF THE I.T. ACT, 1961 IS CONCERNED, WE F IND THE LD.CIT HELD THE ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS BY FOLLOWING THE DECISION OF THE HONBLE CHATTISGARH HIGH COURT IN T HE CASE OF DHANUSH GENERAL STORES VS. CIT REPORTED IN 339 ITR 651 ACCO RDING TO WHICH ADDITIONS UNDER THE DEEMING PROVISIONS OF SECTION 6 8 TO 69D ARE REQUIRED TO BE ASSESSED UNDER THE HEAD OTHER SOURC ES. IN THE INSTANT CASE THE ADDITION HAS BEEN MADE ON THE BASIS OF CER TAIN ENTRIES WHICH ACCORDING TO THE ASSESSING OFFICER IS TOWARDS BOGUS PURCHASES. FROM THE COPY OF THE ASSESSMENT ORDER, WE FIND THERE IS NEITHER ANY DISCUSSION BY THE ASSESSING OFFICER NOR ANY REPLY FILED BY THE ASSESSEE TO SUBSTANTIATE AS TO WHY THE ADDITIONS MADE UNDER DEE MING PROVISIONS OF SECTION 68 TO 69D WILL QUALIFY FOR SET OFF AGAINST BROUGHT FORWARD BUSINESS LOSS. THIS MATTER WAS ALSO NOT A SUBJECT MATTER OF APPEAL BEFORE THE LD.CIT(A). IN THIS CASE, THERE IS NEITH ER APPLICATION OF MIND NOR ANY ENQUIRY WAS CONDUCTED. THEREFORE, TO THIS EXTENT, THE ORDER OF THE CIT, IN OUR OPINION, IS JUSTIFIED FOR INVOKING THE PROVISIONS OF SECTION 263. NON APPLICATION OF MIND OR NO ENQUIRY ON AN IMPORTANT ISSUE BY THE ASSESSING OFFICER WILL MAKE THE ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE THERE IS NEITHER APPLICATION OF MIND NOR ANY ENQUIRY REGARDING THE S ET OFF OF BROUGHT FORWARD LOSS AGAINST ADDITIONS UNDER THE DEEMING PR OVISIONS OF SECTION 68 TO 69D, THEREFORE, THE ORDER OF THE ASSESSING OF FICER, IN OUR OPINION, IS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INT EREST OF THE REVENUE. THEREFORE, THE CIT IN OUR OPINION IS JUSTIFIED IN I NVOKING JURISDICTION 7 U/S.263 ON THIS ISSUE. GROUND RAISED BY THE ASSESS EE IS ACCORDINGLY DECIDED IN THE TERMS INDICATED ABOVE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 09-09-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 09 TH SEPTEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT-V, PUNE 4. THE D.R, A PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE