M/s Shiva Rubber Industries, New Delhi V. ITO, Gurgaon

ITA 2555/DEL/2013

• Counselvise Citation: 255520114 RSA 2013
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2003-2004
• Appeal Filed On: 01-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: ASHWANI TANAEJA
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G: NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTAN T MEMBER ITA NO. 2555/DEL/2013 ASSESSMENT YEAR 2003-04 M/S. SHIVA RUBBER INDUSTRIES VS. ITO HARI NAGAR, WAR D - 2(2) GURGAON GURGAON (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANAEJA, ADVOCATE RESPONDENT BY : SMT. RENUKA JAIN GUPTA, SR. DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE FIRST APPELLATE ORDER HAS BEEN IMPUG NED BY THE ASSESSEE ON THE FOLLOWING GROUNDS :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AR IN MAKING ADDITION OF RS. 1,28,857/- ON ACCO UNT OF ALLEGED UNEXPLAINED CASH PAYMENT AND THAT TOO WITHOUT APPRE CIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN MAKING AGGREGATE ADDITION OF RS. 7,42,680 /- (I.E. RS. 25,810/- + RS. 26,060/- + RS. 6,90,810/-), MORE SO WHEN SPECIFIC SUBMISSION HAS BEEN MADE THAT THE SAID AMOUNT MAY K INDLY ADJUSTED AGAINST THE LOSS OF REJECTION FROM DEBTOR AS ALREADY ACCEPTED BY LD. AO HIMSELF IN AY 2007-08 AND THE IM PUGNED ADDITION HAS BEEN MADE BY RECORDING INCORRECT FACTS AND FINDING AND WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, IMPUGNED ADDITION/DISALLOWANCE AND IMPUGNED ASSESSMENT ORDER ARE BAD IN LAW, ILLEGAL, UNJUSTIFIED, BARRED BY LIMITATION, CO NTRARY TO FACTS & LAW ITA NO. 2555/DEL/13 2 AND BASED UPON RECORDING OF INCORRECT FACTS AND FIN DING, WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEARING, IN VIOLATIO N OF PRINCIPLES OF NATURAL JUSTICE AND THE SAME DESERVES TO B E QUASHE D. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAD ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN FRAMING THE IMPUGNED ASSESSMENT ORDER FRA MED BY LD. AO WITHOUT COMPLYING WITH MANDATORY CONDITION AS EN VISAGED U/S 147 TO 151 OF INCOME TAX ACT, 1961. 2. AT THE OUTSET OF HEARING THE LD. AR SUBMITTED THAT HE DID NOT WISH TO PRESS GROUND NOS. 1 & 2 ONLY. WE THUS REJECT THE REMAINI NG GROUNDS AS NOT PRESSED. 3. RAISING A PRELIMINARY OBJECTION THE LD. SR. D R OPPOSED THE APPEAL RELATING TO THE ADDITION OF RS. 7,42,680/- QUESTIONED IN GROUND NO. 2 OF THE APPEAL ON THE BASIS THAT THIS GROUND WAS NOT RAISED IN THE FIRST APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORIGINAL ASSESSMENT ORDER AND THE SAME WAS NOT PRESSED BEFORE THE LD. CIT(A) IN SECOND ROUND AGAINST THE A SSESSMENT ORDER FRAMED IN COMPLIANCE OF THE ORDER OF THE TRIBUNAL, HENCE THE GROUND NO. 2 CANNOT BE ENTERTAINED BY THE TRIBUNAL IN ITS SECOND ROUND. SH E SUBMITTED THAT THE ORIGINAL ASSESSMENT ORDER WAS FOUND DEFECTIVE BY THE TRIBUNA L ONLY TO THE EXTENT THAT REASONS RECORDED FOR THE INITIATION OF REOPENING OF THE ASSESSMENT PROCEEDINGS WAS NOT SUPPLIED TO THE ASSESSEE. THE TRIBUNAL ACCE PTING THE CONTENTION OF THE DEPARTMENTAL REPRESENTATIVE HELD THAT SUCH DEFECT C AN BE CURED AND THUS SET ASIDE THE MATTER TO THE FILE OF THE AO TO REMOVE TH E DEFECT AND PASS A FRESH ASSESSMENT ORDER. ITA NO. 2555/DEL/13 3 4. LD. AR SUBMITTED THAT THE GROUND RELATING TO THE ADDITION OF RS. 7,42,680/- WAS RAISED BEFORE THE LD. CIT(A) IN THE FIRST ROUND OF THE APPEAL AND SUBMISSIONS OF THE ASSESSEE QUESTIONING THE ADDITION WERE ALSO FILED BEFORE THE LD. CIT(A). HENCE IT IS NOT CORRECT TO SAY THAT THIS GROUND WAS NOT PRESSED BEFORE THE FIRST APPELLATE AUTHORITY IN THE FIRST ROUND. HE SUBMITTE D FURTHER THAT ORIGINAL ASSESSMENT ORDER WAS DEFECTIVE AND AS SUCH IT WAS S ET ASIDE BY THE TRIBUNAL AND IN SETTING ASIDE THE ASSESSMENT ORDER THE AO HAS UP HELD THE ADDITION OF RS. 7,42,680/- AFTER APPLICATION OF HIS MIND WHICH HAS BEEN UPHELD BY THE LD. CIT(A), THUS GROUND NO. 2 RAISED IN THE PRESENT APP EAL IS VERY MUCH MAINTAINABLE FOR THE ADJUDICATION OF THE TRIBUNAL. 5. CONSIDERING THE ABOVE SUBMISSION WE FIND THA T THE SOLE ISSUE INVOLVED IN THE PRESENT CASE IS AS TO WHETHER ORIGINAL ASSESSME NT ORDER CAN BE TREATED AS DEFECTIVE AS HELD BY THE TRIBUNAL TO THE EXTENT OF PROCEEDINGS INITIATED U/S 148 OF THE ACT OR ENTIRE ASSESSMENT ORDER WILL BE TREATED AS DEFECTIVE INCLUDING THE ACTION OF THE AO IN MAKING SEVERAL ADDITIONS IN THE ORIGINAL ASSESSMENT ORDER. 6. TO FIND THE ANSWER TO THE ABOVE ISSUE, WE R AISE A QUESTION TO OURSELVES AS TO WHETHER A DEFECTIVE ORDER CAN BE ENFORCED AGAINS T THE ASSESSEE FOR THE RECOVERY OF THE ADDITIONS MADE THEREIN BY THE AO ? ANSWER WOULD BE IN THE NEGATIVE ESPECIALLY IN THE PRESENT CASE WHERE AFTER SUPPLYING THE REASONS RECORDED FOR THE INITIATION OF THE REOPENING PROCEE DINGS TO THE ASSESSEE TO ITA NO. 2555/DEL/13 4 REMOVE THE DEFECT IN THE ORIGINAL ASSESSMENT ORDER THE AO HAS TO FOLLOW THE SUBSEQUENT PROCEDURE BY INVITING OBJECTION THERETO, IF ANY, FROM THE ASSESSEE AND TO CONSIDER THE SAME BEFORE PROCEEDING FURTHER. THUS APPLICATION OF MIND IS REQUIRED BY THE AO. IT IS ALSO A TRITE LAW THAT AN ORDER CAN NOT BE TREATED AS DEFECTIVE IN A PART. IT WILL BE DEFECTIVE OR VALID AS A WHOLE ORDER. THUS WHEN SUCH ORDER WAS HELD BY THE TRIBUNAL AS DEFECTIVE, THEN E NTIRE ORDER INCLUDING THE ADDITIONS MADE THEREIN WILL BE TREATED AS DEFECTIVE . ONCE IT WAS HELD DEFECTIVE, THE NEXT STEP WOULD BE REMOVAL OF THE DEFER WHICH T HE TRIBUNAL FOUND CURABLE. UNLESS AND UNTIL THE DEFECT IS REMOVED THE WHOLE OR DER WILL BE TREATED AS DEFECTIVE. IT ALSO APPEARS FROM THE FRESH ASSESSMEN T ORDER THAT THE AO HAS HEARD THE ASSESSEE ON THE PROPOSED ADDITIONS AND AFTER AP PLYING HIS MIND HE HAS FOUND THAT SIMILAR ADDITIONS WERE RIGHTLY MADE ON THE EAR LIER OCCASION. ON PERUSAL OF THE ORDER DATED 4.9.2009 OF THE TRIBUNAL, RELEVANT PARA NO. 2.3 THEREOF HAS BEEN REPRODUCED BELOW, WE FIND THAT WHILE RESTORING THE MATTER TO THE AO TO REMOVE THE DEFECT BEFORE PASSING THE ORDER ON MERIT AGAI N, THE CONCLUDING SENTENCE IS THUS ALL THE GROUNDS RAISED BY THE ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. IN PARA NO. 2.1 OF THE ORDER, THE TRIBUN AL HAS NOTED AS IN THIS APPEAL APART FROM MERITS, THE ASSESSEE HAS ALSO CHALLENGED THE VALIDITY OF RE-OPENING FOR THE REASON THAT CONDITIONS MENTIONED U/S 147/14 8 WITH REGARD THERETO WERE NOT COMPLIED WITH. THUS THE TRIBUNAL WHILE USING T HE WORD ALL THE GROUNDS RAISED BY THE ASSESSEE STAND ALLOWED FOR STATISTICA L PURPOSE AND BEFORE PASSING THE ORDER ON MERITS AGAIN WHILE RESTORING THE MATT ER TO THE AO HAS CLEARLY ITA NO. 2555/DEL/13 5 INTENDED THAT AFTER REMOVAL OF THE DEFECT THE AO WI LL FRAME THE ASSESSMENT DENOVO ON MERITS ALSO ON THE OTHER GROUND RAISED BE FORE THE TRIBUNAL AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 2.1 IN THIS APPEAL APART FROM MERITS, THE ASSESSEE HAS ALSO CHALLENGED THE VALIDITY OF RE-OPENING FOR THE REASON THAT CONDITIONS MENTIONED U/S 14 7/148 WITH REGARD THERETO WERE NOT COMPLIED WITH. 2.3. THE LEARNED DR, ON THE OTHER HAND SUBMITTED THAT IT WAS A CURABLE DEFECT, HENCE THE MATTER COULD BE R ESTORED TO THE FILE OF THE ASSESSING OFFICER TO FURNISH THE REA SONS TO THE ASSESSEE AND DEAL WITH THE OBJECTIONS, IF ANY, R AISED BY THE ASSESSEE THEREUPON, BEFORE PASSING THE ORDER ON MERIT AGAIN. ACCORDINGLY, WE RESTORE ALL THE ISSUES RA ISED IN THIS APPEAL TO THE FILE OF ASSESSING OFFICER WHO SHALL F URNISH THE COPY OF THE REASONS RECORDED BY HIM TO RE-OPEN THE CA SE AND THEREAFTER PROCEEDED WITH THE MATTER AS PER LAW. IT IS NEEDLESS TO MENTION THAT ASSESSING OFFICER SH ALL GRANT ADEQUATE OPPORTUNITY TO THE ASSESSEE IN DISPOSING OFF THE CASE. THUS, ALL THE GROUNDS RAISED BY THE ASSESSEE STAND ALLOW ED FOR STATISTICAL PURPOSES. 7. WE THUS DO NOT FIND SUBSTANCE IN THE PRELIM INARY OBJECTION OF THE LD. DR THAT AFTER REMOVAL OF THE DEFECT BY THE AO IN COMPL IANCE OF THE ORDER OF THE TRIBUNAL BY SUPPLYING TO THE ASSESSEE THE REASONS TO BELIEVE RECORDED U/S 147/148, NO GRIEVANCE OF THE ASSESSEE SURVIVES AND GROUND NO. 2 CAN NOT BE ENTERTAINED. THE OBJECTION IS ACCORDINGLY REJECTED. NOW COMING TO THE MERITS OF THE ADDITION QUESTIONED IN THIS GROUND WE FIND THAT THE GRIEVANCE OF THE ASSESSEE IS THAT THE ADDITION OF RS. 7,42,680/- (RS . 25,810/- + RS. 26,060/- + RS. 6,90,810/-) DESPITE SPECIFIC SUBMISSION HAS NOT BEE N ADJUSTED AGAINST THE LOSS OF REJECTION FROM DEBTOR WHICH WAS ACCEPTED BY THE AO HIMSELF IN THE ASSESSMENT ITA NO. 2555/DEL/13 6 YEAR 2007-08 AND THE ADDITION HAS BEEN MADE BY RECO RDING INCORRECT FACTS WITHOUT CONSIDERING THE SUBMISSION OF THE ASSESSEE. LD. AR SUBMITTED THAT THE LD. CIT(A) HAS SIMPLY AFFIRMED THE ADDITION AND HAS REJECTED THE SUBMISSION OF THE ASSESSEE FOR ALLOWING ADJUSTMENT OF THE LOSS ON ACCOUNT OF THE REJECTION FROM DEBTORS SIMPLY ON THE BASIS THAT THE SAME CANNOT BE DONE AT THIS STAGE SINCE THE ASSESSEE NEVER CLAIMED THIS AMOUNT IN ITS RETURN OF INCOME. THE LD. AR REFERRED PAGE NO. 56 OF THE PAPER BOOK I.E. COPY OF THE ASSE SSMENT ORDER U/S 143(3) FOR THE ASSESSMENT YEAR 2007-08 WHEREIN THE AO HAS ALLO WED THE OFFERED ADDITION OF OLD CREDITORS PERTAINS TO EARLIER YEARS AMOUNTING T O RS. 7,40,969/- AGAINST THE CURRENT YEAR LOSS ON ACCOUNT OF SALE REJECTION. THE LD. AR ALSO REFERRED PAGE NO. 34, 37 AND 40 OF THE PAPER BOOK WHICH ARE COPIES OF THE SUBMISSION DATED 27.12.2010 AND 8.12.2010 BEFORE THE AO FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION, AND FURNISHING OF FURTHER INFORMATIO N AS DESIRED BY THE AO RESPECTIVELY. 8. THE LD. SR. DR ON THE OTHER HAND PLACED RELI ANCE ON THE ORDERS OF THE AUTHORITIES BELOW, DISCUSSED ABOVE. 9. CONSIDERING THE ABOVE SUBMISSION WE FIND THA T THE AO HAD MADE ADDITION OF RS. 7,79,285/- ON ACCOUNT OF BOGUS PURCHASES ON THE BASIS THAT DESPITE OPPORTUNITIES THE ASSESSEE FAILED TO FURNISH ANY RE ASONABLE AND SUSTAINABLE EVIDENCE REGARDING GENUINENESS OF THESE PURCHASES. THE LD. CIT(A) HAS HOWEVER ITA NO. 2555/DEL/13 7 RESTRICTED THE ADDITION TO RS. 7,42,680/- WITH THIS OBSERVATION THAT THE ASSESSEE WAS ABLE TO FURNISH BILL NO. 11023 DATED 16.9.2009 FOR RS. 88,475/- OF ANIL CHEMICAL, FARIDABAD ALONGWITH REPLY DATED 9.12.2010 BEFORE THE AO HENCE THIS AMOUNT SHOULD HAVE BEEN ALLOWED. SINCE THE ASSESSEE COULD NOT IMPROVE ITS CASE BEFORE THE TRIBUNAL FOR ESTABLISHING GENUINENESS OF THE CLAIMED PURCHASES WORTH RS. 7,42,680/-, WE ARE NOT INCLINED TO INTERFERE WI TH THE FIRST APPELLATE ORDER IN THIS REGARD. WE HOWEVER FIND THAT THE AO HAS NOT AD DRESSED THE SUBMISSION OF THE ASSESSEE REGARDING ALLOWING ADJUSTMENT OF THE LOSS ON ACCOUNT OF REJECTION FROM DEBTOR. LD. CIT(A) HAS ALSO UPHELD THIS ACTION OF THE AO ON THE BASIS THAT THE SAME CANNOT BE DONE AT THE APPELLATE STAGE AS T HE ASSESSEE NEVER CLAIMED THIS AMOUNT IN ITS RETURN OF INCOME. WE ARE OF THE VIEW THAT THE AIM AND OBJECT OF THE LEGISLATURE IS TO FRAME JUST ASSESSMENT. WE THUS IN THE INTEREST OF JUSTICE SET ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMI NE THIS CLAIM OF THE ASSESSEE ON ITS MERITS AND DECIDE THE ISSUE AFRESH AFTER CON SIDERING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 AND RELATED DECISION AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 2 TO THE E XTENT OF THE ABOVE CLAIMED ADJUSTMENT IS THUS ALLOWED FOR STATISTICAL PURPOSES . 10. IN SUPPORT OF GROUND NO. 1 THE LD. AR REITE RATED THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE AUTHORITIES BELOW. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ADDITION MADE BY THE AO. ITA NO. 2555/DEL/13 8 11. ON PERUSAL OF ORDERS OF THE AUTHORITIES BE LOW WE FIND THAT THE AO MADE ADDITION OF RS. 1,28,857/- ON ACCOUNT OF UNEXPLAINE D CASH PAYMENT BY THE ASSESSEE. THE LIST OF SUNDRY CREDITORS AS ON 31.3.2 003 GIVEN BY THE ASSESSEE INCLUDED THE FOLLOWING PERSONS :- S.NO. NAME OF THE PARTY CR. BALANCE 1. PASHUPATI AUTO LTD. 20,000 2. RIBBER CHEMICALS 42,300 3. SARASWATI CHEMICALS 4,977 4. SHIVA INDUSTRIES 61,580 TOTAL 1,28,857 12. THE PARTIES SHOWED NIL BALANCE. AS PER TH E STATEMENT OF ACCOUNT GIVEN BY THESE PARTIES THE AMOUNT OUTSTANDING WAS PAID IN CASH BY THE ASSESSEE FIRM. OBSERVING THESE FACTS THE AO INFERRED THAT THESE PA YMENTS WERE MADE OUTSIDE THE BOOKS OF ACCOUNTS AND ADDED THE AMOUNT OF RS. 1 ,28,857/- BEING UNEXPLAINED CASH PAYMENT. THE SUBMISSION OF THE ASS ESSEE BEFORE THE AUTHORITIES BELOW REMAINED THAT NO PAYMENTS HAVE BE EN MADE BY THE ASSESSEE AND THERE IS NO JUSTIFICATION TO ACCEPT CONFIRMATIO N OF THESE PARTIES AS SACROSANCT. IT WAS CONTENDED THAT THERE WAS NO EVIDENCE OF ANY PAYMENT HAVING BEEN MADE BY THE ASSESSEE. SINCE THE ASSESSEE COULD NOT RECON CILE THE DIFFERENCE IN ACCOUNT OF SUNDRY CREDITORS APPEARING IN BALANCE SHEET AND AS PER SUNDRY CREDITORS THE ITA NO. 2555/DEL/13 9 ENTIRE AMOUNT OUTSTANDING WAS PAID IN CASH, THE LD. CIT(A) HAS UPHELD THE ADDITION IN ABSENCE OF ANY EVIDENCE BY THE ASSESSEE TO SUBSTANTIATE THE FACT THAT NO PAYMENT HAS BEEN MADE BY IT TO THE SUNDRY CREDIT ORS. SINCE THE ASSESSEE HAS FAILED TO IMPROVE ITS CASE EVEN BEFORE THE TRIBUNAL , WE ARE NOT INCLINED TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISS UE ONLY ON THE BASIS OF THE STATEMENT OF THE ASSESSEE THAT NO PAYMENT HAS BEEN MADE BY IT. GROUND NO. 1 IS ACCORDINGLY REJECTED. 13. CONSEQUENTLY APPEAL IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER,2013. SD/- SD/- (B.C. MEENA) ( I .C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 22 ND NOVEMBER 2013 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT