ACIT, CHENNAI V. M/s. Samrat Houseware P Ltd., CHENNAI

ITA 1821/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1188 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2013
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 18-03-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-10-2012
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Bogus purchase; Earning of tax free income
• Section: 143(3); 153A; 14A; 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NOS.1820, 1821 AND 1822/MDS/2012 ASSESSMENT YEARS : 2006-07, 2007-08 AND 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE IV (1), 46, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 34. VS. M/S. SAMRAT HOUSEWARE P. LTD., 1-7, VYASARPADI CO-OP. INDL. ESTATE, ERUKANCHERY HIGH ROAD, VYASARPADI, CHENNAI 38. [PAN:AAICS8653G] (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI S . DAS GUPTA , JCIT RESPONDENT BY : SHRI B. RAMAKRISHNAN, C.A. DATE OF HEARING : 18.03.2013 DATE OF PRONOUNCEMENT : 21.03.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THESE THREE REVENUES APPEALS PERTAIN TO THE ASSES SMENT YEARS 2006-07, 2007-08 AND 2008-09. THEY ARISE OUT OF THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -I, CHENNA I DATED 23.07.2012 IN ITA NO. 93 TO 97/2011-12, IN PROCEEDINGS UNDER SECT ION 143(3) R.W.S. 153A OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. IN THE COURSE OF HEARING, THE REVENUE VEHEMENTL Y CONTENDS BEFORE US THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` .86,95,336/-, ` .4,05,70,453/- AND ` .56,41,447/- MADE BY THE ASSESSING OFFICER ON ACCOU NT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822/M/ /M/ /M/ /M/12 1212 12 2 OF BOGUS PURCHASE SHOWN BY THE ASSESSEE IN THE ASSE SSMENT YEARS 2006- 07, 2007-08 AND 2008-09 RESPECTIVELY. IN THE SAME T ONE, IT ALSO ARGUES THAT THE CIT(A) HAS ALSO ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D OF ` .33,201/- AND ` .62,896/- FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08. REITERATI NG THE GROUNDS AFORESAID, IT PRAYS FOR ACCEPTANCE OF THE APPEALS. 3. OPPOSING THIS, THE ASSESSEE CHOOSES TO SUPPORT CIT(A)S ORDER AS WELL AS REASONS CONTAINED THEREIN AND PRAYS FOR UPHOLDIN G THE SAME. IN SUPPORT, IT HAS ALSO FILED A SHORT PAPER BOOK AND PRAYS FOR REJECTION OF APPEALS. WE HAVE HEARD BOTH PARTIES. KEEPING IN MIND THE SI MILARITY OF GROUNDS RAISED IN ALL CASES, WE TAKE UP I.T.A. NO. 1820/MDS /2012 AS THE LEAD CASE. 4. BRIEF FACTS OF THE AFORESAID CASE ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING S TAINLESS STEEL PRODUCTS OF HOUSEHOLD MATERIALS LIKE KETTLES, TEAPOTS, KITCH ENWARE, ETC. ON 01.09.2006, IT HAD FILED ITS RETURN DISCLOSING IN COME OF ` .29,76,350/-. 5. ON 11.03.2010, THE DEPARTMENT HAD CONDUCTED A SEARCH LEADING SEIZURE IN ASSESSEES BUSINESS PREMISES. ON THIS, A NOTICE UNDER SECTION 153A OF THE ACT STOOD ISSUED TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE REITERATED THE EARLIER RETURN SUBMITTED (SUPRA). I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822/M/ /M/ /M/ /M/12 1212 12 3 6. IN SCRUTINY PROCEEDINGS, THE ASSESSING OFFICE R CAME ACROSS THE ASSESSEES ENCLOSURES ATTACHED WITH THE RETURN. T HE ASSESSEE HAD SHOWN AN AMOUNT OF ` .6,21,145/- [ ` .6,13,545/- FROM MUTUAL FUND OF ` .7,600/- AS DIVIDEND] AS EXEMPT INCOME. IN THE ASSESSMENT ORDER DATED 14.11.2011, THE ASSESSING OFFICER INVOKED RULE 8D OF THE INCOME TAX RULES AND MADE ADDITION OF ` .33,201/- BY NEGATING ASSESSEES PLEA THAT IT HAD N OT INCURRED ANY EXPENDITURE IN EARNING THE EXEMPT INCOME. 7. THEREAFTER, THE ASSESSING OFFICER EXAMINED ASSE SSEES CLAIM OF ` .86,95,336/- AS EXPENDITURE FOR MAKING PURCHASES FR OM THREE ENTITIES NAMELY M/S. SUBHAM STEEL, SANTOSH STEEL AND MEENAKS HI METAL CORPORATION TO THE TUNE OF ` .39,40,812/-, ` .29,27,644/- AND ` .18,26,880/- RESPECTIVELY. IN ALLEGED VERIFICATION OF AFORESAID PAYEES FROM COMMERCIAL TAX DEPARTMENT, HE IS STATED TO HAVE FOUND THAT M/S . SUBHAM STEEL AND SANTOSH STEEL WERE SITUATED IN THE SAME PREMISES [T HE PLACES ARE DIFFERENT] HAVING ONE PP TELEPHONE NUMBER AND THEIR INITIALS O N THE PURCHASE INVOICES WERE ALSO NOT SUBSTANTIATED BEING HAND WRITTEN WHIC H MADE THE ASSESSING OFFICER TO CONCLUDE THAT THE SAID ENTITIES WERE FAK E. AT THE SAME TIME, THE ASSESSING OFFICER ALSO NOT ICED THAT SO FAR AS THE PAYMENTS MADE BY THE ASSESSEE TO THE AFORESAID THRE E ENTITIES WERE THROUGH ACCOUNT PAYEE CHEQUES IN THE CURRENT ACCOUNT OF THE THREE PAYEES IN CANARA BANK BRANCH OF SOWCARPET, CHENNAI AND ON THE SAME D AY, THE ENTITIES IN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822/M/ /M/ /M/ /M/12 1212 12 4 QUESTION HAD ISSUED CHEQUES TO SOME OTHER PERSON WH O WITHDREW THE MONEY ON THE SAME DAY. 8. ON BEING GIVEN OPPORTUNITY TO EXPLAIN, THE ASSE SSEE PLEADED THAT SINCE THE PAYEE HAD BEEN PAID FOR PURCHASE OF RAW M ATERIALS THROUGH ACCOUNT PAYEE CHEQUES, IT HAD NOT VERIFIED THEIR WH EREABOUTS. ITS FURTHER PLEA, INTER ALIA, WAS THAT IN THE COURSE OF SEARCH , THE VERIFICATION OF PHYSICAL INVENTORY HAD GIVEN RISE TO EXCESS STOCK OF THE MAN UFACTURED PRODUCTS, WHICH WOULD PROVE THE GENUINENESS OF THE PURCHASE I NVOICES IN QUESTION. 9. AS WE FIND FROM THE ASSESSMENT ORDER, AFORESAID EXPLANATION TENDERED BY THE ASSESSEE COULD NOT MAKE THE ASSESSING OFFICE R AGREE. THEREFORE, HE MADE ADDITION OF ` .86,95,336/- (SUPRA) BY HOLDING THAT THE PAYEES OF THE ASSESSEE WERE NOT TRACEABLE LEADING TO DOUBTS ABOUT THEIR EXISTENCE. HE ALSO HELD THAT THERE WAS FAILURE ON ASSESSEES PART TO ESTABLISH THE IDENTITY OF ITS PAYEES AS WELL AS THE PERSON WHO HAD WITHDRAWN THE MONEY ON THE SAME DAY (SUPRA). ACCORDINGLY, THE ADDITION IN QUESTION WAS MADE IN ASSESSEES HANDS. 10. AGGRIEVED BY BOTH ADDITIONS, THE ASSESSEE PREF ERRED APPEAL. WE FIND FROM THE ORDER UNDER CHALLENGE THAT QUA ADDITION MA DE BY THE ASSESSING OFFICER UNDER RULE 8D (SUPRA), THE CIT(A) HOLDS THA T THE SAME WAS NOT APPLICABLE IN THE ASSESSMENT YEARS 2006-07 AND 2007 -08. IN THE SAME I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822/M/ /M/ /M/ /M/12 1212 12 5 MANNER, REGARDING ADDITION MADE BY THE ASSESSING OF FICER PERTAINING TO PURCHASES (SUPRA), HE HAS HELD THAT IF IT WOULD A C ASE OF BOGUS PURCHASES ON THE PART OF ASSESSEE, NO EXCESS STOCK WOULD ARISE I N THE COURSE OF SEARCH AND MERELY BECAUSE THE SUPPLIER OF RAW MATERIALS AR E NOT TRACEABLE, THE CLAIM COULD NOT BE REJECTED. IN THIS MANNER, ASSESS EES APPEAL STANDS ACCEPTED. THEREFORE, THE REVENUE IS IN APPEAL. 11. WE HAVE HEARD BOTH PARTIES AT LENGTH AND PERUS ED THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS CIT(A). AS FAR AS DISA LLOWANCE UNDER RULE 8D IS CONCERNED, EVEN THE REVENUE IS UNABLE TO SUPPORT TH E ASSESSMENT ORDER IN VIEW OF THE FACT THAT IN THE ASSESSMENT ORDERS 2006 -07 AND 2007-08, THE PROVISION ITSELF WOULD NOT BE APPLICABLE. HENCE, WE REJECT THE CONTENTIONS AFORESAID ADVANCED BY THE REVENUE. 12. COMING TO OTHER ADDITION RELATING TO PURCHASES (SUPRA), THERE IS HARDLY ANY ISSUE BETWEEN THE PARTIES THAT THE ASSESSEE HAD MADE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES WHICH WERE DULY ENCAS HED BY THE PAYEES CONCERNED. THE CONTENTIONS ADVANCED BY THE REVENUE ARE THAT DESPITE BEST EFFORTS UNDERTAKEN BY THE ASSESSING OFFICER, NEITHE R HE COULD FIND THE PAYEES NOR THE INDIVIDUAL (SUPRA), IN OUR VIEW, THE SAID A RGUMENT IS ENTIRELY MISCONCEIVED. ONCE THE ASSESSEE/PAYER ISSUED ACCOUN T PAYEE CHEQUES WHICH STOOD DULY ENCASHED. FOR THE SUBSEQUENT TRANS ACTION BETWEEN THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822/M/ /M/ /M/ /M/12 1212 12 6 PAYEE AND THE INDIVIDUAL CONCERNED WHO ENCASHED THE CHEQUES, THE ASSESSEE COULD NOT BE BLAMED FOR WHATEVER TRANSPIRE S AFTER THE ENCASHMENT OF THE CHEQUES. AS RIGHTLY HELD BY THE CIT(A), ADMI TTEDLY, ASSESSEES INVENTORY FOUND IN THE COURSE OF SEARCH ALSO POIN TED OUT EXCESS STOCK, WHICH COULD NOT ARISE IN ABSENCE OF PURCHASE OF RAW MATERIALS. 13. THERE IS YET ANOTHER ASPECT OF THE MATTER. THE IMPUGNED ASSESSMENT ORDER IS 2006-07 FOR WHICH THE RETURN WAS FILED O N 01.09.2006, WHEREAS, THE SEARCH TOOK PLACE ON 11.03.2010. EVEN THE REVENUE DOES NOT DISPUTE THAT THE ASSESSEE HAS NOT FILED ANY RETURN AFRESH IN PUR SUANCE TO THE NOTICE UNDER SECTION 153A OF THE ACT. MEANING THEREBY, THE CON TENTIONS OF THE ASSESSEE ARE NOT AFTER THOUGHT OR ANY COVER UP EXERCISE. IN THIS CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER QUA PURCHASES IN QUESTION. I.T.A. NOS. 1821 & 1822/MDS/2012 [A.Y. 2007-08 & 20 08-09] 14. REGARDING THESE APPEALS, BOTH PARTIES AGREE TH AT THE FACTS ARE SIMILAR TO THOSE INVOLVED IN THE ASSESSMENT YEAR 2006-07. 15. WE HAVE EXAMINED THE AFORESAID FAIR SUBMISSION S OF BOTH REPRESENTATIVES AND FIND THE SAME TO BE CORRECT. AC CORDINGLY, FOR THESE ASSESSMENT YEARS AS WELL, WE AFFIRM THE FINDINGS OF THE CIT(A). I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822 820, 1821 & 1822/M/ /M/ /M/ /M/12 1212 12 7 16. AS SEQUEL TO OUR ABOVE DISCUSSION, ALL THE THR EE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 21 ST OF MARCH, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 21.03.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.