Plus Electronics Associates (P) Ltd., New Delhi V. ITO, New Delhi

ITA 1847/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3785 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 22-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Assessee Lawyers: J K JAIN
• Keywords: Bogus purchase; Business income; Onus to prove
• Section: 40A(3); 143(3)

Judgement Text

I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : F NEW DELHI) BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A. NO. 1847/DEL./2010 (ASSESSMENT YEAR : 2006-07) PLUS ELECTRONICS ASSOCIATES (P) LIMITED. VS. ITO, WA RD 14(3, B-5, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI. NEW DELHI-110 020 (PAN/GIR NO.AAACP1190P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.K. JAIN, CA REVENUE BY : SMT. SRUJANI MOHANTY, SR.DR ORDER PER K.D. RAJNAN, AM THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 2006 -07 ARISES OUT OF THE ORDER OF CIT(A)-XVII, NEW DELHI. IN THIS CASE EX -PARTE ORDER PASSED ON 26.10.2010 WAS RECALLED VIDE ORDER DATED 4.3.2011 VI DE MA NO.524/DEL./2010 FOR ASSESSMENT YEAR 2006-07 IN ITA NO.1847/DEL./201 0. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO SUSTAINI NG THE ADDITION OF ` 3,50,397/- ON ACCOUNT OF BOGUS SALES/PURCHASE. TH E RELEVANT GROUNDS OF APPEAL ARE REPRODUCED AS UNDER: 1. THAT THE AUTHORITIES BELOW ERRED BOTH IN LAW AND ON FACTS IN MAKING AND/OR SUSTAINING ADDITION OF `3,50,397/- ALLE GING THE SAME ON ACCOUNT OF BOGUS SALES/PURCHASES WITHOUT CONSI DERING THE FACTS IN TOTALITY AND ALSO WITHOUT ANY BASIS AND MATERI AL ON RECORD WHEN SUCH LIKE SALES/PURCHASES WERE ALWAYS A LLOWED ACCEPTED AND THE RESULTANT PROFIT OR LOSS OF THE TRADING AND PROFIT AND LOSS ACCOUNT WAS ALWAYS ACCEPTED IN PAST. 2. THAT THE AUTHORITIES BELOW ERRED BOTH IN LAW AND ON F ACTS IN DISALLOWING THE BUSINESS LOSS ALLEGING THE SAME ON AC COUNT OF BOGUS SALES/PURCHASES WITHOUT CONSIDERING THE FACTS IN TOTALITY AND ALSO WITHOUT ANY BASIS AND MATERIAL ON RECORD WHEN SUCH LIKE LOSS WAS ALWAYS ALLOWED IN PAST. 3. THAT THE AUTHORITIES BELOW ERRED BOTH IN LAW AND ON F ACTS IN NOT ALLOWING SET OFF OF BUSINESS LOSS FROM THE INCOME FRO M HOUSE PROPERTY WHEN THE SAME IS DULY ALLOWABLE UNDER THE PRO VISIONS I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 2 OF INCOME-TAX LAWS WITHOUT CONSIDERING THE FACTS IN TOTALI TY AND ALSO WITHOUT ANY BASIS AND MATERIAL ON RECORD. 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASS ESSEE IN THE RETURN OF INCOME HAD DECLARED INCOME FROM BUSINESS IN TRADI NG IN CLOTH AND RENTAL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SHOWN PURCHAS ES OF `3,68,736/- AND SALES OF ` 3,92,640/-. THE ASSESSEE HAD ALSO SHOWN CLOSING STOCK OF ` 2,730/-. THE ASSESSING OFFICER IN ORDER TO VERIFY THE GENUINE NESS OF BUSINESS TRANSACTIONS ASKED THE ASSESSEE TO PRODUCE THE DETAILS OF SALES AND PURCHASES AND WAS ALSO ASKED TO PRODUCE THE BOOKS OF ACCOUNT. ON THE DATE OF HEARING, THE BOOKS OF ACCOUNTS AND DOCUMENTS WERE N OT PRODUCED. THE ASSESSING OFFICER VIDE ORDER SHEET ENTRY DATED 21.10. 2008 AGAIN ASKED THE ASSESSEE TO PRODUCE ALL PURCHASE AND SALE BILLS ON 3 1.10.2008. ON THIS DATE, THE ASSESSEE PRODUCED SOME VOUCHERS, PHOTOCOPIES OF V OUCHERS AND LOOSE BILLS. HE WAS ASKED TO PRODUCE ORIGINAL SALE BILLS AND THE CASE WAS ADJOURNED TO 29.10.2008. ON THIS DATE ALSO, THE ASSESSEE DID NOT PRODUCE ORIGINAL PURCHASE AND SALE BILLS. FROM THESE FACTS, THE ASSESS ING OFFICER CAME TO CONCLUSION THAT ASSESSEE HAD CLAIMED BOGUS SALE AND P URCHASE AND ALSO CLAIMED UNACCOUNTED EXPENSES AGAINST THE SAME JUST TO R EDUCE THE INCOME FROM RENT. THE ASSESSING OFFICER ASSESSED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AFTER ALLOWING THE STATUTORY D EDUCTIONS. 4. ON APPEAL IT WAS SUBMITTED THAT BUSINESS OF THE COMPAN Y DURING THE YEAR WAS TRADING IN CLOTH AND RENTAL INCOME. THE ASSE SSEE PRODUCED COPY OF BANK STATEMENT AND OTHER INFORMATION AND DOCUMENTS AS REQ UIRED BY THE ASSESSING OFFICER WHICH WERE EXAMINED AND VERIFIED BY THE HIM. THE ASSESSEE, HOWEVER, COULD NOT PRODUCE THE ORIGINAL PUR CHASE AND SALE BILLS. THE ASSESSEE HAD PRODUCED ALL DETAILS BEFORE THE ASSE SSING OFFICER BUT THE ASSESSING OFFICER HAD STILL HELD THAT PURCHASE AND SA LE OF CLOTHS WERE BOGUS AND DISALLOWED THE EXPENSES. THEREFORE, THERE WAS AN APPARENT CONTRADICTION IN THE FINDINGS OF THE ASSESSING OFFICER. THE CIT(A) FORWARDED THE SUBMISSION OF THE ASSESSEE FOR COMMENTS OF ASSESSING OFFICER. T HE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 17.8.2009, SUBMITTED THAT THE SUBMISSIONS I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 3 MADE BY THE ASSESSEE WERE NOT CORRECT. THE CIT(A) OBTA INED THE COMMENTS OF THE ASSESSEE ON REMAND REPORT SUBMITTED BY THE ASSESS ING OFFICER 5. LD.AR OF THE ASSESSEE WAS ASKED TO SUBMIT CONFIRMATI ON LETTERS FROM THE PARTIES FROM WHOM PURCHASES WERE MADE AND TO WHOM SALES HAD BEEN MADE. ON THE APPOINTED DATE, THE ASSESSEE DID NOT ATTEND TH E HEARING. NEITHER, THE CONFIRMATIONS LETTERS WERE SUBMITTED NOR THE R EQUEST FOR ADJOURNMENT WAS RECEIVED. THE CIT(A) AGAIN ISSUED N OTICE FOR HEARING ON 30.12.2009 FIXING THE DATE FOR HEARING ON 7.1.2010. ON THIS DATE, ADJOURNMENT WAS SOUGHT BY THE LD.AR OF THE ASSESSEE ON THE GROUND THAT HE WAS BUSY IN ITAT. THE CIT(A) AGAIN FIXED THE CASE F OR HEARING ON 13.1.2010. ON THIS DATE ALSO, LD.AR. OF THE ASSESSEE REQUESTED FOR ADJOURNMENT ON THE SAME GROUND WHICH WAS GRANTED. WHEN THE CASE CAME UP FOR HEARING ON 25.1.2010, THE LD.AR. OF THE ASSESSEE FAILED TO ATTEND TH E HEARING. THE CIT(A) AGAIN ISSUED ONE MORE NOTICE ON 15.2.2010 FIX ING THE CASE FOR HEARING ON 20.2.2010. ON THIS DATE, THE ASSESSEE AGAIN REQUES TED FOR ADJOURNMENT ON THE GROUND THAT THEY COULD NOT PREPARE THE DETAILS AS R EQUIRED BY LD.CIT(A). THE CASE WAS ADJOURNED FOR 25.2.2010. ON THIS DATE, LD.AR OF THE ASSESSEE FILED WRITTEN SUBMISSION, BUT FAILED TO PRODUC E THE CONFIRMATION LETTERS FROM THE PARTIES FROM WHOM PURCHASES WERE MADE OR TO WHOM SALES WERE MADE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS N OT IN A POSITION TO PRODUCE THE CONFIRMATION LETTERS IN RESPECT OF PURCHASE AND SALES. 6. THE CIT(A) CONSIDERED THE SUBMISSION IN THE LIGHT O F THE FACTS OF THE CASE. HE HELD THAT ONUS TO PROVE A CLAIM WAS UPON THE PERSON, WHO MADE SUCH CLAIM. IF AN ASSESSEE IS MAKING A CLAIM OF DE DUCTION ON ACCOUNT OF CERTAIN EXPENSES, ONUS LIES UPON HIM TO PRIMA FACIE D ISCHARGE THE ONUS OF GENUINENESS OF EXPENSES BY PROVIDING NAMES AND ADDR ESSES OF THE PARTIES AND CONFIRMATION FROM THEM. IT IS ONLY WHEN ASSESSEE DISCHARGES THIS PRIMA FACIE ONUS, THE ONUS SHIFTS TO THE ASSESSING OFFICER. IN THE CASE OF THE ASSESSEE, THE INITIAL ONUS WAS NOT DISCHARGED. THE AO WAS NOT SATISFIED WITH THE GENUINENESS OF THE PURCHASE AND SALES. AS REGARD S THE AUDITED BOOKS OF ACCOUNT UNDER I.T. ACT, 1961, THE CIT(A) OBSERVED THAT A SSESSEE HAD NOT FILED ANY AUDITED ACCOUNTS ALONG WITH RETURN OF INCOME. ON P ERUSAL OF SERIAL NO.15 I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 4 OF THE INCOME-TAX RETURN FILED BY THE ASSESSEE, IT WAS S EEN THAT THE ASSESSEE HIMSELF HAD MENTIONED THAT TAX AUDIT WAS NOT APPLICABLE TO THE ASSESSEES CASE. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE AUDITED WAS AN AFTERTHOUGHT. HE FURTHER MENTIONED TH AT TOTAL TURNOVER OF THE ASSESSEE WAS LESS THAN `40 LAKHS. THEREFORE, THERE WAS NO NEED FOR AUDIT OF ACCOUNTS U/S 44AB OF THE ACT. THE CIT(A) IN V IEW OF THESE FACTS HELD THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY CONFIRMATION FROM THE ALLEGED PARTIES FROM WHOM PURCHASES HAVE BEEN MADE OR SALES WERE MADE. THE ASSESSEE WAS GIVEN SPECIFIC OPPORTUNITY BY HIM TO PRO DUCE THE CONFIRMATION LETTER WHICH HE HAD FAILED TO DO. 7. IN VIEW OF ABOVE, THE CIT(A) CAME TO CONCLUSION TH AT SINCE ALL THE PURCHASES WERE MADE IN CASH AND PAYMENTS HAD BEEN MA DE EXCEEDING ` 20,000/-, THE PROVISIONS OF SECTION 40A(3) OF THE I. T. ACT, 1961 WILL BE APPLICABLE. HOWEVER, THE DISALLOWANCE WAS NOT MADE U /S 40A(3) OF THE ACT ON THE GROUND THAT ENTIRE PURCHASE, SALES AND EXPENSES HAV E BEEN HELD AS BOGUS. THE CIT(A) ACCORDINGLY UPHELD THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER . 8. BEFORE US, LD.AR OF THE ASSESSEE SUBMITTED THAT ASSES SEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING OF ELECTRONI C GOODS, SINCE ITS INCEPTION, BUT FOR THE LAST 2-3 YEARS IT COULD NOT CARRY ON THE SAID MANUFACTURING BUSINESS DUE TO TOUGH COMPETITION BY THE CH INESE MARKET DUE TO LIBERALIZED IMPORT POLICY OF GOVT. OF INDIA. THE A SSESSEE WAS LEFT WITH NO OTHER ALTERNATIVE EXCEPT EITHER TO CLOSE DOWN THE BUSINES S ENTITY COMPLETELY OR SELL CHINESE GOODS OR START OTHER BUSINESS IN ORDER TO SAVE FROM LOSSES DUE TO FIXED EXPENDITURE. THE CLOSURE OF BUSINESS ENTITY C OMPLETELY OR STARTING OF IMPORT OF CHINESE GOODS WAS NOT FEASIBLE FOR THE TIME B EING. THEREFORE, THE ASSESSEE STARTED BUSINESS OF TRADING OF CLOTH 2-3 YEARS BACK AND WAS ASSESSD TO INCOME-TAX UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AND HOUSE PROPERTY FOR LAST SO MANY YEARS. IT WAS ALSO SU BMITTED THAT ASSESSEE HAD RECENTLY STARTED IMPORT OF ELECTRONIC GOODS FOR SALE IN INDIA. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS CARRYING O N BUSINESS OF TRADING IN CLOTH. THE PURCHASE AND SALE OF CLOTH WAS ACCEPTED IN THE IMMEDIATELY I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 5 PRECEDING YEAR. THEN WHY THE SAME COULD NOT BE ACCEP TED IN THE YEAR UNDER CONSIDERATION WHEN THE FACTS AND CIRCUMSTANCES WERE SI MILAR TO THAT OF IMMEDIATELY PRECEDING YEAR. IT WAS ALSO SUBMITTED THAT A SSESSEES BOOKS OF ACCOUNT ARE AUDITED AND ASSESSEE HAS FILED COPY OF BA LANCE SHEET, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31.3.2005 AS WELL AS 31.3.2006 IN SUPPORT OF HIS CONTENTIONS THAT SALES AND PURCHASES WERE MADE I N THE YEAR UNDER CONSIDERATION. HENCE LD.CIT(A) WAS NOT JUSTIFIED TO UPH OLD THE ORDER PASSED BY THE ASSESSING OFFICER. 9. ON THE OTHER HAND, LD.SR.DR SUBMITTED THAT IT IS A CASE OF BOGUS PURCHASE AND SALES WHICH HAS BEEN ESTABLISHED BY THE ASSESSING OFFICER. THE ASSESSEE HAD NOT PRODUCED THE ORIGINAL BILLS AND VOUC HERS IN SUPPORT OF THE CONTENTION. FURNISHING OF PHOTOSTAT COPY WILL NOT BE SU FFICE. AS THE ASSESSEE HAD SHOWN LOSS FROM BUSINESS IN ORDER TO SET OFF THE R ENTAL INCOME, THE CIT(A) IS JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSING O FFICER. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATER IAL AVAILABLE ON RECORDS. BEFORE US, THE ASSESSEE HAS FILED KACHA PU RCHASE BILLS FOR PURCHASE OF CLOTH. THE COPY THEREOF ARE PLACED IN PAPER BOOK AT PAGES 35-41. THE ASSESSEE HAD ALSO FILED PHOTOCOPIES OF SALE BILLS ON ITS LETTER HEAD. THE CIT(A) HAD RECORDED A FINDING OF FACT THAT IN COLUMN NO.15 OF INCOME-TAX RETURN, THE ASSESSEE HAS MENTIONED THAT PROVISIONS OF SECTION 44AB OF THE ACT, WERE NOT APPLICABLE. THE ASSESSEE HAD NOT FILED THE COPY OF A UDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT WITH THE RETURN OF INCOME. AS P ER PROFIT AND LOSS ACCOUNT PLACED AT PAGE 29 OF THE PAPER BOOK, THERE IS N O OPENING BALANCE OF CLOTH. THE ASSESSEE HAD SHOWN NET PROFIT OF `1,83,603 /- AFTER CLAIMING EXPENSES AGAINST ALLEGED BUSINESS INCOME AND RENTAL I NCOME OF `5,34,000/-. THEREFORE, THE RENTAL INCOME OF `5,34,000/- WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY HAS BEEN REDUCED TO ` 1,83,603/-. THE ASSESSEE HAD NOT PRODUCED THE ORIGINAL PURCHASE BILLS AND SALE BILLS AND ALSO HAD NOT FILED CONFIRMATIONS FROM SELLERS AND BUYERS O F THE CLOTH. THEREFORE, THE INITIAL ONUS CAST ON THE ASSESSEE HAS NOT BEEN DISCH ARGED BY IT THAT IT WAS ENGAGED IN THE BUSINESS OF TRADING IN CLOTH. THE ASSE SSEE HAD CLOSED DOWN BUSINESS IN MANUFACTURE AND SELLING OF ELECTRONIC GOO DS AND HAD EARNED I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 6 INCOME FROM HOUSE PROPERTY AT ` 5,34,000/-. THE INCO ME FROM HOUSE PROPERTY AS PER SETTLED PROVISION OF LAW, WILL BE ASSE SSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NO DEDUCTION IS ALLOWA BLE EXCEPT STATUTORY DEDUCTIONS. THE RENTAL INCOME CANNOT BE ASSESSED UNDE R THE HEAD BUSINESS INCOME. THE ASSESSEE IN ORDER TO REDUCE THE INCIDENC E OF TAX ON RENTAL INCOME HAS DECLARED IT AS BUSINESS INCOME AND HAD DE BITED EXPENSES OF ALLEGED TRADING IN CLOTH BUSINESS WHICH HAS NOT BEEN P ROVED BY THE ASSESSEE TO BE GENUINE. BEFORE US, LD.AR OF THE ASSESSEE HAD NOT PRODUCED ORIGINAL BILLS FOR PURCHASE AND SALE OF CLOTH. THER EFORE, THE CONTENTION OF THE ASSESSEE THAT IT WAS ENGAGED IN BUSINESS OF TRADING IN CLOTH CANNOT BE HELD TO BE GENUINE. THE CONTENTION OF THE ASSESSEE THAT IN EA RLIER YEARS, THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED. THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 WAS NOT MADE U/S 143(3) OF THE ACT. IF THE RETU RN OF INCOME HAS BEEN ACCEPTED U/S 143(1) OF THE ACT, THE ASSESSEE CANNO T CLAIM THAT THE DEPARTMENT HAS ACCEPTED THE BUSINESS OF THE ASSESSEE IN EARLIER YEARS TO BE GENUINE. THEREFORE, THIS CONTENTION OF THE ASSESSEE DE SERVES TO BE REJECTED. 11. FROM THE ABOVE DISCUSSIONS IT IS CLEAR THAT THE ASS ESSEE HAD PRODUCED PHOTOCOPY OF CASH MEMOS WITHOUT INDICATING THE NAME OF S ELLER, ARE NOTHING BUT COOKED UP STORY SO AS TO REDUCE INCIDENCE OF TAX O N RENTAL INCOME FROM HOUSE PROPERTY. THEREFORE, IN OUR CONSIDERED OPINIO N, THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE ORDER OF ASSESSING OFFICER . SINCE ASSESSEE HAD NOT CARRIED OUT GENUINE BUSINESS OF PURCHASE AND SALE OF CLOTH, TH E LOSS ALLEGED TO HAVE BEEN SUFFERED BY THE ASSESSEE CANNOT BE SET OFF AGAINS T THE RENTAL INCOME. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) UPHOLDING THE ASSESSMENT ORDER. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- (RAJPAL YADAV) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: JUNE 17, 2011 SKB I.T.A. NO.1847/DEL./2010 (A.Y. : 2006-07) 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XVII, NEW DELHI. 5. DR DEPUTY REGISTRAR