ACIT, New Delhi V. M/s Jay Dee Exports, New Delhi

ITA 2001/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65799 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-09-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 21-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHUMANA SEN
• Assessee Lawyers: SM MATHUR
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Onus to prove
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI U.B.S.BEDI, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A .NO.2001/DEL/2011 (ASSESSMENT YEAR-2001-02) ACIT, VS JAY DEE EXPORTS, CIRCLE-20(1), ROOM NO.-F-308, DIV. OF JAINCO DRES SES (REGD.), VIKAS BHAWAN, A-35, GT KARNAL ROAD, NEW DELHI. AZADPUR, NEW DELHI PAN-AAHPJ4951E (APPELLANT) (RESPONDEN T) APPELLANT BY: MS. SHUMANA SEN, SR. DR RESPONDENT BY: SH. S.M.MATHUR, CA ORDER PER B.C.MEENA, AM THIS APPEAL FILED BY THE REVENUE EMANATED BY THE OR DER OF LD. CIT(A)-XXII, NEW DELHI DATED 17.01.2011. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 44,99,920/- MADE BY THE ASSESSING O FFICER UNDER SECTION 69C ON ACCOUNT OF UN-EXPLAINED EXPENDITURE BECAUSE THE ASSESSEE HAS FAILED TO EXPLAIN AS TO HOW SH. N.K.JA IN OR HIS CONCERNS CAME INTO PICTURE WHEN BILLS WERE ISSUED BY ALTOGET HER DIFFERENT PARTIES AND ALSO CHEQUES HAD BEEN ISSUED IN FAVOUR OF THESE PARTIES. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS. 44,99,920/- MADE BY THE ASSESSING O FFICER UNDER SECTION 69C ON ACCOUNT OF UN-EXPLAINED EXPENDITURE CLAIMED BY THE ASSESSEE HAVING PAID TO SIX DIFFERENT PARTIES WHOSE IDENTITY HAS NOT BEEN ESTABLISHED AND IN FACT FOUND AS NON-EXISTENT AND ON ENQUIRIES MADE THROUGH LETTERS TO THOSE PARTIES HAVE BEEN REC EIVED BACK BY THE ASSESSING OFFICER AS UNSERVED. I.T.A .NO.2001/DEL/2011 2 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND ADD ANY OTHER G ROUND OF APPEAL. 3. IN THIS CASE, ORIGINAL ASSESSMENT WAS COMPLETED ON 26.03.2004 U/S 143(3). IN THE APPEAL, THE LD. CIT(A) OBSERVED THAT THE ASS ESSEE HAS NOT DISCHARGED THE ONUS PLACED UPON HIM TO PROVE THE GENUINENESS OF TH E TRANSACTIONS. HONBLE ITAT IN ITS ORDER DATED 26-02-2008 WHILE DECIDING ITA NO . 4337/DEL/2005, SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR EXAMINATION THE MAT TER AFRESH IN ACCORDANCE WITH LAW AND ALSO AFFORD REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. IN COMPLIANCE OF THE ITAT DIRECTIONS, THE AO PROVIDED THE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND ALSO REQUIRED TO PRODUC E THE PURCHASERS FOR EXAMINATION ON 22.08.2008, 09.09.2008, 26.06.2008, 22.07.2009, 10.08.2009 AND 19.11.2009. BY THE LETTER DATED 11.11.2009, THE AS SESSEE WAS GIVEN FINAL OPPORTUNITY TO PROVE THE GENUINENESS OF PURCHASES A ND ALSO ASKED TO PRODUCE THE CREDITORS FOR EXAMINATION ON 19.11.2009. IN REPLY TO THAT THE ASSESSEE FILED A LETTER WHERE IT IS STATED THAT THE ASSESSEE HAS SENT THE L ETTER THROUGH REGISTERED AD TO THE PERSONS FROM WHOM THE GOODS WERE STATED TO BE PURCH ASED. FOR PERSONAL APPEARANCE OF THESE PARTIES, ASSESSEE REQUESTED TO ISSUE SUMMONS U/S 131. SUMMONS WERE ISSUED AND HANDED OVER TO THE ASSESSEE TO SERVE THEM DASTI. HOWEVER, THE ASSESSEE SENT THESE SUMMONS BY REGIST ERED AD TO THESE PARTIES AND SENDERS NAME WAS GIVEN AS ACIT, DELHI. ALL THESE N OTICES WERE RECEIVED BACK UNSERVED. THE AO INQUIRED ABOUT THE PAYMENT MADE. IN RESPECT OF THE PAYMENT, THE ASSESSEE ADMITTED THAT CHEQUES WERE ISSUED IN F AVOUR OF THESE PARTIES. I.T.A .NO.2001/DEL/2011 3 HOWEVER, THESE CHEQUES WERE ENDORSED IN FAVOUR OF T HE THIRD PARTIES M/S CP EXPORTS OR PRIYA MILLS AND M/S JAIN CLOTH SUPPLY. THUS ACTUAL PAYMENT HAD NOT GONE TO THESE SIX PARTIES FROM WHOM PURCHASES WERE CLAIMED TO HAVE BEEN MADE. AO ARRIVED AT THE CONCLUSION THAT ASSESSEE FAILED T O PROVE AND ESTABLISH THE IDENTITY OF PERSONS AND GENUINENESS OF THE TRANSACTION. AO ALSO CONCLUDED THAT SO CALLED SUPPLIERS WERE NOT IN EXISTENCE. PURCHASES WERE HE LD TO BE NON GENUINE. THUS, ASSESSING OFFICER ADDED TO THE INCOME OF RS.44,99,9 20/- U/S 69C OF THE INCOME TAX ACT ON A/CIT(A) OF BOGUS PURCHASES. 4. THE CIT(A) GRANTED THE RELIEF TO THE ASSESSEE ON THE BASIS OF COPIES OF THE PURCHASE INVOICE, THE BANK CERTIFICATE AND ENDORSEM ENT OF THE CHEQUES IN FAVOUR OF THE NARENDER KUMAR JAIN. LD. CIT(A) HAS ALSO BELIE VED ON THE ASSESSEES SUBMISSIONS THAT FABRIC PURCHASE FROM THESE PARTIES HAS BEEN USED IN THE PRODUCTION OF GARMENTS. LD. CIT(A) ALSO ACCEPTED THE GENUINEN ESS OF THE PAYMENT BY CHEQUE AND HELD THAT THE ASSESSEE HAD DISCHARGED THE ONUS THAT THE EXPENDITURE HAD BEEN INCURRED. THE RELEVANT PARA OF CIT(A) ORDER IS AS UNDER:- I HAVE PERUSED ALL THE DOCUMENTS FILED BY THE APP ELLANT BEFORE ME, WHICH ARE COPIES OF THE PURCHASE INVOICES, THE BANK CERTIFICATE, AND THE ENDORSEMENT OF THE CHEQUES IN FAVOUR OF THE CON CERNS OF SH. NARENDER KUMAR JAIN. I HAVE ALSO CONSIDERED THE SU BMISSION OF THE APPELLANT THAT ALL THE FABRICS PURCHASED FROM THE S IX PARTIES WERE USED IN THE PRODUCTION OF GARMENTS WHICH HAVE SUBSEQUENTLY BEEN EXPORTED. NO DEFECTS ARE POINTED OUT IN THE BOOKS OF ACCOUNTS PRODUCED BEFORE THE ASSESSING OFFICER AND THE DECLARED TRADING RESULTS HAVE BEEN ACCEPTED BY HIM. MOREOVER, THE ASSESSING OFFICER HAS NOT RE BUTTED THE APPELLANTS I.T.A .NO.2001/DEL/2011 4 ASSERTION THAT THE PAYMENTS ARE DULY DEBITED TO ITS BANK ACCOUNT, AND STAND CREDITED IN THE ACCOUNTS OF THE BUSINESS CONC ERNS OF SH. N.K.JAIN, WHO HAS NEVERTHELESS DENIED ANY BUSINESS CONNECTION WITH EITHER THE SIX PARTIES AT ERODE, OR M/S JAY DEE EXPORTS. SO FAR A S THE APPELLANT IS CONCERNED, IT IS HELD THAT IT HAS DISCHARGED ITS ON US OF ESTABLISHING THAT IT HAS INCURRED THE CLAIMED EXPENDITURE. THEREFORE, T HE IMPUGNED ADDITION OF RS.44,99,920/- IS HEREBY DELETED. 5. LD. DR SUBMITTED THAT THE SUMMONS WERE ISSUED BY THE ASSESSING OFFICER ON THE REQUEST OF ASSESSEE TO THESE PERSONS. THE SUMM ONS WERE GIVEN TO ASSESSEE TO SERVE DASTI. ASSESSEE FAILED TO DO SO AND SEND T HESE SUMMONS BY REGISTERED AD WHICH WERE RETURNED UNSERVED. THUS AO HAD DONE WH ATEVER HE COULD DO. IT WAS ONUS ON ASSESSEE TO DISCHARGE THE BURDEN TO PROVE T HE GENUINENESS OF TRANSACTIONS. SH. NARENDER KUMAR JAIN HAS ALSO NOT BEEN PRODUCED BEFORE THE ASSESSING OFFICER TO CONFIRM THE TRANSACTIONS. THE ASSESSING OFFICER GRANTED AMPLE OPPORTUNITY WHICH ARE EVIDENT FROM THE FACT THAT 7-8 OPPORTUNIT IES WERE GRANTED TO THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES AND ALSO TO P RODUCE THE CREDITORS. IN THESE FACTUAL MATRIX, THE CIT(A) FINDINGS ARE PER VERSE A ND DESERVED TO BE SET ASIDE. 6. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT LD. CIT(A) HAS ASKED THE ASSESSING OFFICER TO GRANT OPPORTUNITY TO CROSS- EXAMINATION TO SH. NARENDER KUMAR JAIN BUT IT HAS N OT BEEN DONE. HE PLEADED TO SUSTAIN THE ORDER OF CIT(A). 7. WE HAVE HEARD BOTH SIDES ON THIS DECISION. HON BLE ITAT IN THE FIRST ROUND OF LITIGATION, HAS HELD THAT STATEMENT RECORDED ON 25.03.2004 BY ADIT (INV.) ERODE I.T.A .NO.2001/DEL/2011 5 OF SH. N.K.JAIN HOW COULD REACH AT DELHI SO THAT AS SESSING OFFICER COULD MAKE THE ASSESSMENT ORDER ON THAT BASIS ON 26.03.2004. IN V IEW OF THESE FACTS, HONBLE ITAT CONCLUDED THAT THE ASSESSMENT ORDER WAS MADE W ITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINATION TO THE PARTY CONCERN AND WITHOUT PROVIDING COPY OF THE STATEMENT RECORDED TO THE ASS ESSEE. HONBLE ITAT HELD AS THE VIOLATION OF NATURAL JUSTICE AND RESTORED ISSUE TO AO. 8. HONBLE ITAT SET ASIDE THE ORDER TO RESTORE TO T HE FILE OF THE ASSESSING OFFICER TO EXAMINE THE MATTER AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD. IN THE SECON D ROUND, THE ASSESSING OFFICER GRANTED 7-8 OPPORTUNITIES WHICH ARE EVIDENT FROM RE CORDS. IN THESE OPPORTUNITIES, IT WAS MADE CLEAR THAT THE ASSESSEE SHOULD PROVE THE G ENUINENESS OF THE PURCHASES AND ALSO TO PRODUCE THE CREDITORS FOR EXAMINATIONS. THE SUMMONS WERE ALSO ISSUED BY THE ASSESSING OFFICER ON THE REQUEST OF THE ASSE SSEE AND THESE SUMMONS WERE HANDED OVER TO THE LD. AR OF THE ASSESSEE FOR SERVI CE DASTI RATHER THAN SERVING THESE SUMMONS DASTI, THE ASSESSEE DISPATCHED THER EBY THE REGISTERED AD SHOWING THE ADDRESS OF THE SENDER AS ACIT, CIRCLE-2 0, DELHI. ALL THESE SUMMONS RETURNED BACK UNSERVED. IN OUR CONSIDERED VIEW, AO WAS FAIR ENOUGH TO PROVIDE SO MANY OPPORTUNITIES TO ASSESSEE. AO WAS ALSO GENUIN ELY TRIED TO HELP ASSESSEE TO PRODUCE THESE PERSONS BY ISSUING SUMMONS ON ASSESSE ES REQUEST AND ALSO GIVING THESE TO ASSESSEE TO SERVE DASTI. THUS AOS ACTI ON TO INVESTIGATE CASE WAS IN COMPLIANCE OF NATURAL JUSTICE AND FAIR. FURTHER, TH E ASSESSEE HAS NEVER REQUESTED TO THE ASSESSING OFFICER TO ISSUE SUMMONS SH. N.K.JAIN FOR CROSS-EXAMINATION. LD. I.T.A .NO.2001/DEL/2011 6 CIT(A)S OBSERVATION THAT THE ASSESSEE HAS DISCHARG ED THE ONUS BY ESTABLISHING THE IDENTITY OF PERSONS AND EXPENDITURE INCURRED DOES N OT BORNE OUT OF THE FACTS OF THE CASE. THESE OBSERVATIONS ARE NOT BASED ON ANY EVI DENCES. IT IS SIMPLY BELIEVING THE ASSESSEES SUBMISSIONS WITHOUT VERIFICATION OR INQUIRY. 9. IN OUR CONSIDERED VIEW, THE ONUS WAS ON ASSESSEE TO PROVE THE GENUINENESS OF TRANSACTION WHEN THE ASSESSING OFFICER GRANTED A MPLE OPPORTUNITIES. ALL THE SUMMONS ISSUED TO THE CREDITORS, RETURNED BACK UNSE RVED. THE LD. CIT(A)S OBSERVATION THAT FABRIC PURCHASED HAD BEEN UTILIZED FOR PRODUCTION OF GARMENTS IS ALSO NOT BASED ON ANY EVIDENCE. IT IS SIMPLY ACCEP TING THE CLAIM WITHOUT EVIDENCE AND VERIFICATION. BELIEVING THE PURCHASE INVOICE, THE BANK CERTIFICATE AND THE ENDORSEMENT OF CHEQUES IN THIRD PARTY NAME IS NOT J USTIFIED IN THE ABSENCE OF ANY EVIDENCE. ENDORSEMENT OF CHEQUES IN THIRD PARTY NA ME RATHER WEAKEN THE CASE OF ASSESSEE. IT SUGGESTS THAT CHEQUES WERE ISSUED IN THE NAME OF NON-EXISTING PARTIES. LD. CIT(A)S REASONING TO OVER TURNING THE AOS FIN DINGS ARE NOT BASED ON SOUND REASONING HENCE NOT JUSTIFIED. CIT(A) MERELY RECOU NTED THE ARGUMENT MADE ON BEHALF OF THE ASSESSEE. ASSESSEE FAILED TO JUSTIFY HOW N.K.JAIN AND HIS CONCERNS GOT CHEQUE ENDORSED IN THEIR NAMES. THE IDENTITY O F THOSE SIX PARTIES WAS NOT ESTABLISHED. IN OUR CONSIDERED VIEW, ASSESSEE CANN OT BE PERMITTED TO TAKE ADVANTAGE OF HIS OWN ILLEGAL ACT. IT WAS HIS UTMOS T DUTY TO PLACE ALL RELEVANT FACTS TRUTHFULLY BEFORE AO. IF HE FAILS TO PERFORM HIS D UTY OR DISCHARGE ONUS CASTED UPON IT THEN IT CANNOT BE ALLOWED TO SAY THAT AO FAILED TO REJECT THE BOOK RESULTS. IT WAS IN PERSONAL KNOWLEDGE OF ASSESSEE, THEREFORE, IT WA S BURDEN ON HIM TO PROVE THE I.T.A .NO.2001/DEL/2011 7 GENUINENESS OF TRANSACTION. THE DIRECT AND CORROBO RATIVE EVIDENCES SHOWS THAT TRANSACTIONS WERE NOT GENUINE. ASSESSEE HAD MISERA BLY FAILED TO DISCHARGE THE ONUS CASTED ON IT. IN VIEW OF THESE FACTS, WE ALLOW REV ENUE APPEAL AND SET ASIDE ORDER OF LD. CIT(A). 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26.10.2012. SD/- SD/- (U.B.S.BEDI) (B.C.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26.10.2012 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI