ACIT, Circle-16(1), V. Hindustan Times Ltd.,

ITA 1436/DEL/2006

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5777 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-01-2010
• Assessment Year: misc
• Appeal Filed On: 27-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: STEPHEN GEORGE
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B: NEW DELHI BEFORE SHRI RAJPAL YADAV AND SHRI R.C. SHARMA ITA NO.1436/D/2006 ASSESSMENT YEAR : 1988-89 ASSTT. C.I.T., VS. M/S THE HINDUSTAN TIMES LTD., CIRCLE 16(1), 18-20, KASTURBA GANDHI MARG, NEW DELHI NEW DELHI PAN/GIR NO. ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI STEPHEN GEORGE, CIT- DR RESPONDENT BY : SHRI AJAY VOHRA WITH MS. MADH U SHARMA. O R D E R PER R.C. SHARMA, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 10.01.2006, IN THE MATTER OF ORDER PASSED U/S 250 OF THE INCOME TAX ACT, 1961 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN T AKEN BY THE REVENUE, WHICH READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,5 1,48,090/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BONUS P URCHASES. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSING OFFICER IN THE COURSE OF ASS ESSMENT PROCEEDINGS FOR THE RELEVANT ASSESSMENT YEAR CAME TO THE CONCLUSION THAT THE CONSUMPTION OF WHITE PRINTING PAPER HAD GONE UP AS COMPARED TO THE IMMEDIATELY PRECEDING I.TA N0.1436/D/2006 2 ASSESSMENT YEAR. BASED ON THE ENQUIRIES, THE ASSES SING OFFICER HELD THAT PURCHASE OF WHITE PRINTING PAPER TO THE EXTENT OF 1 948.46 MT FROM THE VARIOUS PARTIES WERE BOGUS. THE ASSESSING OFFICER ALSO NOTED THAT THERE WAS EXCESSIVE WASTAGE OF THE PAPER TO THE EXTENT OF 195 8.50 MT. NO SEPARATE ADDITION WAS MADE FOR THE EXCESS WASTAGE SINCE THE ASSESSING OFFICER MADE ADDITION FOR THE BOGUS PURCHASES AMOUNTING TO RS.2, 51,48,090/-. THE LEARNED CIT(A)-XIX VIDE ORDER DATED 7.3.1996 IN APP EAL NO.258/92-93 DELETED THE ADDITION ON THE BASIS THAT IF THE PURCH ASES IN DISPUTE HAD NOT ACTUALLY TAKEN PLACE, THE PATNA AND DELHI EDITIONS OF THE NEWSPAPER BROUGHT OUT BY THE APPELLANT COULD NOT HAVE BEEN PUBLISHED. THE LEARNED CIT(A) HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. AS PER THE REPORT DATED 26.6.95 SUBMITTED BY THE ASSESSING OFF ICER, THE APPELLANT HAD DECLARED THE FOLLOWING WASTAGE DURING THE ASSESSMENT YEAR 1985-86 TO 1988-89: AY PAPER DAMAGED IN TRANSIT REELEND PAPER TARE & CORE WASTAGE DURING PROCESS & PKG. TOTAL 1985- 86 5.72% 1,21% 1.90% 3.62% 12.45% 1986- 87 5,70% 1.21% 1.86% 3.55% 12.32% 1987- 88 5.83% 1.86% 1.85% 6.08% 15.62% 1988- 89 6.10% 1.83% 1.73% 5.30% 14.96% I.TA N0.1436/D/2006 3 AS IS CLEAR FROM THE ABOVE, THE WASTAGE OF 14.96% C OMPUTED BY THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERAT ION IS LESS THAN THE WASTAGE OF 15.62% COMPUTED FOR THE ASSESSM ENT YEAR 1987-88. THE ADDITIONS MADE ON ACCOUNT OF EXCESSIV E WASTAGE IN ASSESSMENT YEAR 1987-88 WAS DELETED BY MY PREDEC ESSOR VIDE HIS ORDER DATED 4.7.94 IN A.NO.59/94-95. WHILE DEL ETING THE ADDITION FOR ASSESSMENT YEAR 1987-88 MY PREDECESSOR OBSERVED THAT THERE WAS NO POINT FOR THE ASSESSING OFFICER T O FIRST INDICATE THAT NO CASE COULD BE MADE OUT AGAINST THE ASSESSEE ON /THE GROUNDS OF EXCESS CONSUMPTION AND THEN BRUSH ASIDE THIS CONCLUSION AND REITERATE THE CONCLUSION OF ORIGINAL ASSESSMENT ORDER. THESE HAD BEEN DULY ADJUDICATED UPON BY THE ITAT AND IT LIMITED THE ENTIRE ISSUE TO ENTERTAINING WHETHER THE PATNA EDITION OF HINDUSTAN TIMES AND HINDUSTAN COULD NOT HAVE BEEN BROUGHT OUT WITHOUT THE IMPUGNED PURCHASE FROM M/S PREM PAPER MART. THE ASSESSING OFFICER HAS CLEARLY ADMI TTED THAT THE PATNA EDITION OF NEWSPAPER COULD NOT HAVE BEEN BROU GHT OUT IF THE PURCHASES FROM PREM PAPER MART IS IGNORED. THI S WOULD SHOW THAT THE GENUINENESS OF THE PURCHASE FROM PAPE R MART HAD BEEN ACCEPTED IN THE YEAR 1987-88 AND THE WASTAGE O F 15.62% WAS ALSO CONSIDERED TO BE REASONABLE. IN HIS REPORT THE ASSESSING OFFICER HAS RELIED UPON THE REPORT OF CHEMICAL EXAMINER AND THE LIMITS OF WASTAGE PROVIDE D BY THE REGISTRAR OF NEWS PAPER AND THE ABC. IT MAY BE MEN TIONED HERE THAT THE ASSESSING OFFICER WAS SPECIFICALLY DI RECTED TO EXAMINE THE ASSESSEES CLAIM OF WASTAGE IN THE LIGH T OF DIRECTIONS ISSUED BY /THE ITAT FOR ASSESSMENT YEAR 1987-88. THE ASSESSING OFFICER WAS TO REPORT AS TO WHETHER I T WAS POSSIBLE FOR THE ASSESSEE TO PRODUCE SO MUCH NEWSPA PERS WITHOUT TAKING INTO CONSIDERATION THE ALLEGED BOGUS PURCHASES. THIS ASPECT HAS NOT BEEN DEALT WITH BY THE ASSESSIN G OFFICER IN HIS REMAND REPORT. DURING THE COURSE OF HEARING OF THE APPEAL, THE ASSESSING OFFICER WAS SPECIFICALLY ASKED TO COM MENT UPON THIS ASPECT. IT WAS ADMITTED BY THE ASSESSING OFFI CER THAT WITHOUT THE PURCHASE OF THE PAPER FROM THE ABOVE ME NTIONED FIVE CONCERNS, THE PRODUCTION OF NEWSPAPERS ON CERT AIN DAYS WOULD NOT HAVE BEEN POSSIBLE. IF THIS BE SO, THEN HOW CAN THE CLAIM FOR PURCHASES FROM ANY OF THE FIVE PERSON COU LD BE I.TA N0.1436/D/2006 4 DOUBTED. THIS IS PARTICULARLY SO WHEN A SIMILAR AD DITION MADE IN ASSESSMENT YEAR 1987-88 WAS DELETED IN APPEAL. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER COMPUTED THE WASTAGE AT 1948.46 MT ON PAGE 61 OF THE ASSESSM ENT ORDER. HOWEVER, IN THE REMAND REPORT DATED 26.6.1995 THE W ASTAGE HAS BEEN REDUCED TO 1515.425 MT. THE REASONS FOR THE V ARIATION HAVE NOT BEEN EXPLAINED. IT APPEARS THAT WHILE FRA MING THE ASSESSMENT, THE ASSESSING OFFICER MAINLY RELIED ON THE WASTAGE CRITERIA LAID DOWN BY REGISTRAR OF NEWSPAPERS WHERE AS IN THE REMAND REPORT THE ASSESSING OFFICER PLACED HIS RELI ANCE ON THE LIMITS FIXED BY THE ABC. THIS SHOWS THE INCONSISTE NCY. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE REPORT O F THE CHEMICAL EXAMINER. THIS REPORT WAS NOT ACCEPTED BY THE HONBLE MEMBERS OF THE ITAT IN THEIR ORDER FOR THE ASSESSMENT YEAR 1987-88. IT WAS OBSERVED BY THE HONBLE MEMBE RS THAT THE WASTAGE OF SINGLE DAY CANNOT BE MADE THE BASIS FOR COMPUTING THE CONSUMPTION FOR THE WHOLE YEAR. AS P ER /THE HONBLE MEMBERS THE CONSUMPTION AND WASTAGE WAS TO BE COMPUTED ON THE BASIS OF DAY TO DAY PURCHASE, ISSUE OF PAPER WASTAGE IN PRODUCTION AND THE WASTAGE IN CONSUMPTIO N ETC. THE RELEVANT DETAILS WERE FURNISHED TO THE ASSESSING OF FICER. WITHOUT REFERRING TO THE DETAILS IN HIS REPORT, THE ASSESSING OFFICER VERBALLY ADMITTED THAT ON THE BASIS OF DETA ILS SO FURNISHED THERE WOULD NOT BE EXCESSIVE WASTAGE. THE ASSESSING OFFICER HAS COMPUTED THE WASTAGE IN T HE YEAR UNDER CONSIDERATION AT 14.96% IN HIS REPORT DATED 2 6.6.95. IN THE ASSESSMENT ORDER THIS WASTAGE WAS COMPUTED AT 1 5.08%. THE WASTAGE FOR THE IMMEDIATE PRECEDING YEAR RELEVA NT TO THE ASSESSMENT YEAR 1987-88 HAS BEEN WORKED OUT AT 15.6 2%. THE ADDITIONS MADE ON THE BASIS OF 15.62% WASTAGE WERE DELETED BY MY PREDECESSOR. KEEPING IN VIEW THE DIRECTIONS OF THE ITAT AND THE ORDER OF MY PREDECESSOR FOR THE ASSESSMENT YEAR 1987- 88, THE WASTAGE OF 14.96% WHICH IS LOWER THAN THE W ASTAGE OF ASSESSMENT YEAR 1987-88 HAS TO BE ACCEPTED. THEREF ORE, THE ADDITION OF RS.2,51,48,090/- MADE BY THE ASSESSING OFFICER DOES NOT SURVIVE. THE ADDITION SO MADE IS DELETED. I.TA N0.1436/D/2006 5 ON APPEAL BY THE DEPARTMENT, THE TRIBUNAL OBSERVED THAT THOUGH THE ISSUE IN DISPUTE WAS COVERED IN FAVOUR OF THE A PPELLANT BY THE DECISION OF THE TRIBUNAL IN APPELLANTS OWN CASE FO R ASSESSMENT YEAR 1987-88, RENDERED ON IDENTICAL FACTS, THE MATTER WA S SET ASIDE TO TAKE INTO ACCOUNT THE DECISION OF THE DELHI HIGH COURT I N THE CASE OF CIT VS. LA MEDICA: 250 ITR 575. THE TRIBUNAL WHILE SET TING ASIDE THE ISSUE TO THE FILE OBSERVED AS UNDER:- IN OUR OPINION, THE ORDER OF THE TRIBUNAL FOR ASSE SSMENT YEAR 1987-88 IS SQUARELY APPLICABLE IN CASE WE WERE TO R ESTRICT OURSELVES TO THE SAME SET OF FACTS AS CANVASSED AND ADJUDICATED UPON VIZ. THE ENTRY INTO THE PRINTING PROCESS OF TH E PURCHASES MADE FROM THE NUMEROUS PARTIES IN THE ASSESSMENT UN DER APPEAL AND WHICH HAVE BEEN FOUND TO BE NON GENUINE BY THE ASSESSING OFFICER. IN OTHER WORDS WHAT WOULD BE THE POSITION IN CASE SUCH PURCHASE ARE REMOVED FROM THE PRINTING PROCESS AND THIS ASPECT OF THE MATTER DULY CONSIDERED BY THE TRIBUNAL IN IT S SECOND ORDER PERTAINING TO ASSESSMENT YEAR 1987-88 BUT IN OUR OPINION THE QUESTION AS TO WHETHER THE PURCHASES ARE GENUIN E OR OTHERWISE HAS TO BE EXAMINED AND FOR COMING TO SUCH A CONCLUSION, WE DERIVE GREAT SUPPORT FROM THE JUDGME NT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF LA MEDICA ( SUPRA). WE DO NOT WISH TO MAKE FURTHER OBSERVATIONS AS IT M AY PREJUDICE THE CASE OF THE PARTIES BEFORE THE CIT(A) , TO WHOSE FILE WE NOW PROPOSE TO RESTORE THE POINT AT ISSUE F OR RECONSIDERATION ON MERITS ASKING HIM TO EXAMINE THE QUESTION OF THE NUMEROUS PURCHASES, WHICH ACCORDING TO THE REVE NUE ARE BOGUS AFTER GIVING REASONABLE OPPORTUNITY TO BOTH T HE PARTIES. I HAVE CONSIDERED THE ORAL AND WRITTEN ARGUMENTS A DVANCED BY THE LEARNED COUNSEL FOR THE APPELLANT AND REMAND RE PORT OF THE ASSESSING OFFICER. THE FIRST ISSUE THAT NEEDS ADJU DICATION IS WHETHER THE APPELLANTS CASE IS IDENTICAL TO THE FA CTS OF THE CASE OF LA MEDICAS CASE (SUPRA). THE FIRST DISTINGUISH ING FACTOR OF THE CASE OF LA MEDICA WITH THE APPELLANTS CASE IS THAT IN THE CASE OF LA MEDICA THE PURCHASES OF RAW MATERIAL OF RS.3,82,750/- WAS MADE FROM ONE M/S KALPANA ENTERPR ISES OF CALCUTTA. THE ASSESSING OFFICER IN THAT CASE FOUND THAT RATE AT WHICH PURCHASES WERE MADE WAS HIGHER THAN /THE NORM AL I.TA N0.1436/D/2006 6 PURCHASE RATE. THIS WAS THE BASIS ON WHICH THE ASS ESSING OFFICER INITIATED HIS INVESTIGATIONS. IN THE APPEL LANTS CASE NO SUCH EXCESSIVE RATE WAS FOUND BY THE ASSESSING OFFI CER. IN THE CASE OF LA MEDICA THE PAYEE PARTY M/S KALPANA ENTER PRISES DID NOT EXIST WHEREAS IN THE CASE OF APPELLANT THERE IS NO DISPUTE REGARDING /THE IDENTITY OF SELLER. IN THE CASE OF LA MEDICA THERE WAS NO DIRECT COLLUSION BETWEEN THE PERSON OPERATIN G BANK ACCOUNT IN THE NAME OF M/S KALPANA ENTERPRISES IN A S FAR AS THE PERSON SH. CHEDDI LAL WHO WAS OPERATING THE ACCOUNT WAS INTRODUCED TO BANK BY ONE SH. SATPAL JAIN PARTNER O F MEDIPAC ONE OF THE SISTER CONCERNS OF M/S LA MEDICA. IN TH AT CASE THE AMOUNT IN QUESTION WAS WITHDRAWN BY SHRI CHEDDI LAL . IN THAT CASE IN FACT SH. CHEDDI LAL WAS NEVER MADE AVAILABL E AND EVEN SH. SATYA PAL WAS NOT PRODUCED. IN THE CASE OF APP ELLANT THERE IS NO SUCH CONNECTION BETWEEN THE PAYEE AND THE APP ELLANT COMPANY. IN OTHER WORDS THE APPELLANT COMPANY WAS IN NO POSITION TO HAVE ANY CONTROL OVER THE PAYEES. IN T HE CASE OF LA MEDICA DURING THE COURSE OF PROCEEDINGS BEFORE THE HONBLE TRIBUNAL ALTOGETHER A NEW PERSON SH. INDER SAIN JAI N (HUF) APPEARED AND CLAIMED TO HAVE SUPPLIED THE MATERIAL TO M/S LA MEDICA. THE SELLERS OF PAPER IN THE CASE OF APPELL ANT MAY HAVE MANY REASONS TO GIVE STATEMENTS AGAINST THE APPELLA NT. ONE SUCH REASON MAY BE TO EVADE THEIR OWN TAX LIABILITY . THE MOST IMPORTANT LINK IN TESTIMONY OF THE SELLERS OF PAPER IS THE IDENTITY OF THE PERSON WHO HAS RECEIVED CASH ON PAYMENT OF C HEQUES ON BEHALF OF APPELLANT COMPANY. A COMPANY BEING A LEG AL ENTITY CANNOT OPERATE ON ITS OWN AND WOULD BE DEPENDENT ON INDIVIDUALS WHO CONTROL ITS TRANSACTIONS. THUS IN SUCH CASES IT IS ABSOLUTELY NECESSARY TO EXAMINE THE PERSON WHO, IF AT ALL, DID SUCH TRANSACTIONS ON BEHALF OF APPELLANT COMPANY. WITHOUT THE NAME OF SUCH PERSON AND HIS EXAMINATION THE TESTIMO NY OF WITNESSES CANNOT BE SAID TO BE COMPLETE. MORE SO W HEN AS STATED EARLIER NEITHER THE APPELLANT COMPANY NOR AN Y EMPLOYEE/DIRECTOR WAS IN A POSITION TO HAVE ANY CON TROL OVER THE RECIPIENTS OF MONEY. ANOTHER DISTINGUISHING FA CTOR OF THE CASE OF APPELLANT WITH THAT OF LA MEDICA IS THAT IN THE CASE OF APPELLANT IT HAS BEEN VERIFIED BY LEARNED CIT(A)-XI X AND ADMITTED BY HONBLE ITAT THAT BUT FOR THE PURCHASES MADE FROM THE PARTIES DELHI AND PATNA EDITIONS WOULD NOT HAVE BEEN PRINTED. IN OTHER WORDS THE STOCK TALLY HAS BEEN T REATED AS I.TA N0.1436/D/2006 7 CORRECT. THERE WAS NO SUCH CASE IN THE CASE OF M/S LA MEDICA. THUS, I AM OF THE VIEW THAT THE CASE OF APPELLANT I S CLEARLY DISTINGUISHABLE FROM THE FACTS OF LA MEDICA (SUPRA) RELIANCE ON WHICH HAS BEEN PLACED BY THE ASSESSING OFFICER. TH IS BEING THE CASE THE DECISION OF THE HONBLE ITAT FOR ASSESSMEN T YEAR 1987-88 SQUARELY APPLICABLE TO THE FACTS OF THIS YE AR AS WELL. THE DECISION OF THE LEARNED CIT(A)-XIX FOR THIS ASS ESSMENT YEAR IN MY VIEW ALSO DOES NOT SUFFER FROM ANY INFIR MITY. THUS, I AM OF THE VIEW THAT ASSESSING OFFICER WAS NOT JUS TIFIED IN DISALLOWING THE PURCHASES OF PAPER OF RS.2,51,48,09 0/-. THE SAME IS DELETED. AGGRIEVED BY THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, WE FOUN D THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN PRINTING AND PUBL ISHING OF NEWSPAPER AND PERIODICALS. FOR PRINTING AND PUBLISHING OF NE WSPAPERS AND PERIODICALS, THE ASSESSEE HAD TO USE NEWSPRINT, WHITE PRINTING P APER, BESIDES PRINTING PAPER, ART PAPER AND AIR MAIL TISSUE PAPER. SUPPLY OF NEWSPRINT FROM THE SPECIFIED SOURCES BEING INSUFFICIENT, THE ASSESSEE HAS TO BUY WHITE PRINTING PAPER/CREAM WOVE PAPER FROM THE MARKET TO CONTINUE TO CARRY ON BUSINESS OF PRINTING AND PUBLISHING OF NEWSPAPERS AND PERIODICA LS. DURING THE COURSE OF ASSESSMENT, THE AO MADE AN ADDITION ON ACCOUNT OF P URCHASES BY OBSERVING THAT CONSUMPTION OF WHITE PRINTING PAPER HAD GONE U P AS COMPARED TO THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IN AN APPEA L FILED BY THE ASSESSEE, I.TA N0.1436/D/2006 8 THE CIT(A) DELETED THE ADDITION AFTER RECORDING DET AILED FINDING AS CONTAINED AT PAGES 2 TO 4 OF THIS ORDER. IN AN APPEAL FILED BY THE REVENUE, THE TRIBUNAL FOUND THAT ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR, HOWEVER IN VI EW OF THE DECISION IN THE CASE OF LA MEDICA 250 ITR 575, THE TRIBUNAL RESTO RED THE MATTER BACK TO THE CIT(A) AND DIRECTED HIM TO EXAMINE THE ISSUE OF PURCHASES WITH RESPECT TO THE OBSERVATION MADE IN THE CASE OF LA MEDICA. THE CIT(A) IN THE SECOND ROUND EXAMINED EACH ASPECT OF THE MATTER AND FOUND THAT FACTS IN THE CASE OF LA MEDICA WERE DISTINGUISHABLE. HE HAS NARRATED EA CH AND EVERY ASPECT OF THE DISTINGUISHING FEATURE AND CAME TO THE CONCLUSI ON THAT WITHOUT PURCHASES, THE ASSESSEE COULD NOT HAVE PUBLISHED ITS PAPER AT DELHI AND PATNA. AFTER CONSIDERING ALL ASPECTS OF THE ISSUE AND GIVING ITS DETAILED FINDING, HE HELD THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY T HE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING A Y 1987-88. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), NO INTER FERENCE IS REQUIRED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THIS ORDER PRONOUNCED IN THE COURT ON 31-03-2010 . SD/- SD/- ( RAJPAL YADAV ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31.03.2010 NS : I.TA N0.1436/D/2006 9 COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY DY. REGISTRAR,