M/s. Hanung Processor Pvt. Ltd., Noida V. ACIT, Noida

ITA 2562/DEL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6275 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: DR RAKESH GUPTA; ABHISHEK ANAND
• Keywords: Bogus purchase; Salary income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.L.P.SAHU, ACCOUNTANT MEMBER I.T.A .NO.-2562/DE L/2011 (ASSESSMENT YEAR-2006- 07) HANUNG PROCESSOR PVT.LTD., B-7, HOSIERY COMPLEX, PHASE-II, NOIDA. PAN-AABCH1700Q (APPELLANT) VS ACIT CIRCLE NOIDA (RESPONDENT) I.T.A .NO.-3056/DEL/2011 (ASSESSMENT YEAR-2006- 07) ACIT CIRCLE NOIDA, G BOCK, SHOPPING COMPLEX, SEC-20, NOIDA (APPELLANT) VS HANUNG PROCESSOR PVT.LTD., B-7, HOSIERY COMPLEX, PHASE-II, NOIDA. PAN-AABCH1700Q (RESPONDENT) APPELLANT BY DR.RAKESH GUPTA, ADV. & MR. SOMIL AGARWAL, ADV. & MR. ABHISHEK ANAND, ADV. RESPONDENT BY SH.SURENDER PAL, SR.DR ORDER PER DIVA SINGH, JM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 25.03.2011 OF CI T(A), GHAZIABAD PERTAINING TO 2006-07 ASSESSMENT YEAR. THE GROUNDS FILED BY THE PARTIES IN THEIR RESPECTIVE APPEALS ARE AS UNDER:- ITA NO.2562/DEL/2011 1. THAT ON THE FACTS AND UNDER THE CIRCUMSTANCES O F THE CASE, THE ID CIT (A) HAS ERRED BY UPHOLDING AND CONFIRMING THE ADDIT ION OF RS. DATE OF HEARING 16.02.2016 DATE OF PRONOUNCEMENT 29 . 03 .201 6 I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 2 OF 11 14,29,241/-, ALLEGEDLY HOLDING THE PURCHASES FROM T HE IMPUGNED PARTY UNDER DISPUTE, AS INFLATED PURCHASES AT EXCESSIVE R ATE AND THE FINDING SO MADE IS BASED ON HYPOTHECATIONS AND THE VARIOUS SUB MISSIONS MADE BY THE APPELLANT ON THE ISSUE AND THE MATERIAL ON RECO RD HAVE NOT BEEN CONSIDERED IN THE RIGHT PERSPECTIVE THEREOF. 2. THAT THE ID CIT (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY UPHOLDING THE ACTION OF THE LD A.O TO TREAT THE TRANSFER OF APPELLANT'S UNDERTAKING AS A WHOLE AS SLUMP SALE IN TERMS OF SE C. 50B OF THE INCOME TAX ACT, 1961 AND THE FACTS ON RECORD AND SUBMISSIO NS OF THE APPELLANT WERE NOT CONSIDERED IN THE RIGHT PERSPECTIVE THEREO F. 3. WITHOUT PREJUDICE TO ABOVE, THE ID CIT (A) HAS ERRED IN LAW IN UPHOLDING THE ACTION OF THE A.O TO WORK OUT CAPITAL GAINS U/S 50B IGNORING THE FACT THAT THE TRANSFER CONSIDERATION O F THE UNDERTAKING AND SETTLEMENT THEREOF BY ISSUANCE OF SHARES OF THE TRA NSFEREE COMPANY DID NOT REPRESENT THE REAL MONETARY CONSIDERATION WORKE D OUT/PAID/RECEIVED AND THEREFORE WAS NOT TO BE REGARDED AS SALE IN REA L SENSE, NOT EXIGIBLE TO TAX AS CAPITAL GAINS. 4. THAT WITHOUT PREJUDICE TO GROUNDS NO. 2 &3, IN ANY CASE EVEN IF, THE TRANSFER OF UNDERTAKING IS HELD TO BE SLUMP SALE, T HE CALCULATION OF CAPITAL GAINS AT RS. 4,39,79,415/- IS TOTALLY UNJUST AND UN LAWFUL IN VIEW OF UNASCERTAINABILITY OF COST OF THE UNDERTAKING TRANS FERRED, ITS SALES CONSIDERATION AND SETTLEMENT OF SUCH CONSIDERATION. 5. THAT WITHOUT PREJUDICE TO ABOVE GROUNDS, THE CA LCULATION OF TAXABLE CAPITAL GAINS AT RS. 4,39,79,415/- U/S 50B IS HIGHL Y EXCESSIVE AND REASONABLE. 6. THAT WITHOUT PREJUDICE TO ABOVE, THE CONFIRMATI ON OF THE ADDITIONS OF RS. 14,29,241/- & RS.4,39,79,415/- IS WHOLLY UNJUST , UNLAWFUL & UNWARRANTED AND THE ADDITIONS SO CONFIRMED DESERVE TO BE DELETED. 7. THE ASSESSEE CRAVES LEAVE TO ADD, DELETE AND/OR MODIFIES ANY GROUND OF APPEAL. ITA NO.-3056/DEL/2011 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS B Y ALLOWING RELIEF OF RS.47,02,584/- TO THE ASSESSEE ON ACCOUNT OF PUR CHASE OF RAW MATERIALS, INSTEAD OF APPRECIATING THE FACTS MENTIO NED BY THE AO IN THE ASSESSMENT ORDER. 2. HENCE ORDER OF LD. CIT(A) DESERVES TO BE SET-ASIDE AND ORDER OF THE AO BE RESTORED. 2. THE AR SUBMITTED THAT THE POINT AT ISSUE ADDRES SED IN GROUND NO.1 BY THE ASSESSEE IN THE PRESENT APPEAL AND THE SOLE GRO UND RAISED BY THE REVENUE IN ITS APPEAL IS COVERED BY THE ORDER OF THE ITAT IN T HE CASE OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IT WAS SUBM ITTED THAT THE FACTS AND CIRCUMSTANCES REMAIN THE SAME. THE ASSESSEE IT WAS SUBMITTED WAS ENGAGED IN THE BUSINESS OF PROCESSING OF TEXTILE. THE FACT R ELATABLE TO GROUND NO.1 IT WAS SUBMITTED ARE ADDRESSED IN PAGE 1 OF THE ASSESSMENT ORDER AND AT PAGES 10 & I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 3 OF 11 11 OF THE ASSESSMENT ORDER. REFERRING TO PARA 7 OF THE SAME IT WAS SUBMITTED THAT THE AO WHILE REJECTING THE CLAIM OF THE ASSESS EE MAKES A SPECIFIC REFERENCE TO THE FACTS AS CONSIDERED ON THE ISSUE IN 2005-06 ASSESSMENT YEAR AND AFTER REFERRING TO THESE FACTS HE HAS CONCLUDED THAT THE PURCHASES MADE FROM M/S PARAG TRADERS AMOUNTING TO RS.61,31,825/- WERE BOGU S PURCHASED. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE SAID ISSU E IT WAS SUBMITTED WAS CONSIDERED IN PAGES 23-26 OF HIS ORDER BY THE CIT(A ) WHEREIN AGAIN REFERRING TO THE POSITION TAKEN BY THE AO AND THE CIT(A) IN 2005 -06 ASSESSMENT YEAR IN THE YEAR UNDER CONSIDERATION CONSIDERING THE VIEW TAKEN BY THE CIT(A) IN HIS ORDER DATED 15.03.2011 IN 2005-06 ASSESSMENT YEAR, PART R ELIEF WAS GRANTED TO THE ASSESSEE. ADDRESSING THE BACK GROUND IT WAS SUBMIT TED IN 2005-06 ASSESSMENT YEAR BOTH THE ASSESSEE AND THE REVENUE CAME IN APPE AL BEFORE THE ITAT. INVITING ATTENTION TO THE ORDER DATED 28.06.2013 IN ITA NO.2 561/DEL/2011 & 3055/DEL/2011 PASSED BY THE CO-ORDINATE BENCH IN AS SESSEES OWN CASE IN 2005-06 ASSESSMENT YEAR, THE ISSUE IN THE REVENUES APPEAL WERE ADDRESSED IN PAGE 4 GROUND NO.2 OF THE REVENUE AND GROUND NO.3 I N ASSESSEES APPEAL WERE DISCUSSED IN PARA 6 & 7 RESPECTIVELY. THE TRIBUNAL THEREIN IT WAS SUBMITTED PARTIALLY AGREEING WITH THE FINDING OF THE CIT(A) DISMISSED THE REVENUES APPEAL AND THE ISSUES RAISED BY THE ASSESSEE WERE RESTORED BACK TO THE FILE OF THE AO. ACCORDINGLY IT WAS HIS SUBMISSION THAT SINCE THE FA CTS AND CIRCUMSTANCES CONTINUE TO REMAIN THE SAME AND IDENTICAL DIRECTION ON THE PARITY OF ISSUES REMAINING THE SAME IS PRAYED FOR. 3. THE LD. SR. DR, SH. SURENDER PAL ON THE OTHER HA ND CONSIDERING THE ORDER OF THE ITAT SUBMITTED THAT IN THE FACTS OF THE PRES ENT CASE HE WOULD WANT TO RELY UPON THE ASSESSMENT ORDER AS THE REVENUE WOULD WANT TO KEEP THE ISSUES ALIVE I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 4 OF 11 AS AFTER CONDUCTING A SEARCH AND THE DETAILED EFFOR TS OF THE REVENUE TO CONFRONT THE CONCERNED PERSON WITH THE EVIDENCES THE DEPARTM ENT DOES NOT WANT TO GIVE UP THE ISSUE. HOWEVER, THE SUBMISSION OF THE ASSESS EE THAT FACTS REMAIN THE SAME AND IDENTICAL ISSUES HAVE BEEN CONSIDERED BY T HE ITAT IN 2005-06 ASSESSMENT YEAR WERE NOT DISPUTED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CONSIDERING THE SAME, WE FIND THAT T HE RELEVANT FACTS AND CIRCUMSTANCES AS ARE FOUND DISCUSSED IN THE ASSESSM ENT ORDER IN THE YEAR UNDER CONSIDERATION WHICH WHEN READ WITH THE FINDIN GS OF THE ITAT IN 2005-06 ASSESSMENT YEAR AND THE FINDING ARRIVED AT IN THE I MPUGNED ORDER WOULD SHOW THAT THE FACTS CONTINUE TO REMAIN THE SAME AS CONS IDERED IN 2005-06 ASSESSMENT YEAR. FOR READY-REFERENCE, WE REPRODUCE THE RELEVANT FINDING FROM THE ASSESSMENT ORDER:- 7. DURING THE YEAR, ASSESSEE MADE PURCHASES OF RS. 61,31,825/- FROM M/S PARAG TRADERS, 1 ST FLOOR CHHABRA COMPLEX, SHAKARPUR, DELHI. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y.2005-06, ENQUIRIES WERE CONDUCTED TO EXAMINE THE GENUINENESS OF PARTY AND PAYMENTS WITH REGARD TO PURCHASES MADE AND PURCHASE S OF EPCG LICENSE TO M/S PARAG TRADER; DELHI. AFTER INQUIRY, IT WAS FOUND THAT WITHIN FEW DAYS OF RECEIPT OF MONEY FROM ASSESSEE F OR ALLEGED LICENSE/QUOTA PURCHASE, CHEQUES HAVE BEEN ISSUED BY PARAG TRADERS, FROM ITS BANK ACCOUNT IN AXIS BANK, DELHI TO M/S SI NGHAL FINCAP PVT LTD AND SRI I.C. SINGHAL IS THE DIRECTOR OF SINGHAL FIN CAP PVT LTD. INQUIRIES WERE MADE FROM SRI I.C. SINGHAL, WHO STALED (AS PER HIS STATEMENT DTD 24.12.2007) THAT SOME CAS HAD COME TO HIM IN 2005 A ND DEPOSITED THE CHEQUES WITH HIM AND ALSO OBTAINED BLANK CHEQUE ON THE PRETEXT THAT THEY WILL BE UTILIZED BY THEM FOR PURCHASING OF SHA RES. THOSE ACCOUNT WERE SQUARED UP IN HIS BOOKS OF ACCOUNT AND HE RECE IVED COMMISSION FOR THIS TRANSACTION. HOWEVER THIS AMOUNT IT WAS NOT CR EDITED IN HIS BOOKS OF ACCOUNT IN THE NAME OF M/S PARAG TRADERS. THIS SHOW S THAT THESE WERE ADJUSTMENT ENTRIES FOR WHICH COMMISSION WAS ALSO GI VEN TO M/S SINGHAL FINCAP PVT LTD, AND IT WAS HELD THAT WHOLE PAYMENT MADE BY THE ASSESSEE HAS EITHER BEEN WITHDRAWN IN CASH OR HAVE BEEN TRANSFERRED IN THE NAME OF SOME PARTIES, WHO WERE PROVIDING ADJUST MENT ENTRIES FOR WHICH ASSESSEE WAS ONE OF THE BENEFICIARIES. IT IS ALSO SEEN FROM THE NOTINGS IN COPIES OF THE BANK ACCOUNT (AXIS BANK) O F M/S PARAG TRADERS THAT SOME OTHER PERSON LIKE S.K.SHARMA, WHICH SHOWS THAT SOME PERSONS ARE USING ACCOUNTS, HAS WITHDRAWN THE CASH. FURTHE R INQUIRIES WERE ALSO MADE TO ENQUIRE ABOUT THE INCOME-TAX RETURNS/DETAIL S OF THE PROPRIETORS I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 5 OF 11 OF THESE THREE CONCERNS FROM WHICH THE ALLEGED QUOT A PURCHASE HAS BEEN SHOWN. FROM INQUIRIES FROM INCOME TAX OFFICE, DELHI , IT WAS REVEALED THAT SHRI SANTOSH KUMAR JHA [PROPRIETOR OF PARAG TRADER S AND PARAS ENTERPRISES) WAS ASSESSED TO TAX IN WARD - 36(3), DELHI AND HE HAS NOT FILED ANY RETURN FOR ASTT. YEAR. 2004-05 AND 2005-0 6. HOWEVER RETURN FOR A.Y. 2006-2007 WAS FILED BY HIM ON 29.6.2007 AND IN THIS RETURN HE HAS SHOWN ONLY SALARY INCOME FROM M/S SLICK AUTO ACCES SORIES PRIVATE LIMITED, 102, CHHABRA COMPLEX, 8, VEER SABARKAR C HOWK, SHAKARPUR, DELHI AND HE GOT THIS SALARY AS ACCOUNTS MANAGER. EVEN SIGNATURE ON RETURN AND SIGNATURE ON FORM NO.L6A ATTACHED WITH T HE RETURN ARE SAME. SIMILARLY, ADDRESS OF SRI SANTOSH KUMAR JHA AND M/S AUTO SLICK AUTO ACCESSORIES PVT LTD IS SAME [CHHABRA COMPLEX] AND T OTAL SALARY RECEIVED BY HIM WAS RS. 1,06,000/- AND NET TAX WAS PAID BY H IM ONLY AT RS.122/-. 7.1. IN VIEW OF THE ABOVE DISCUSSION, PURCHASES MAD E FROM M/S PARAG TRADERS, AMOUNTING TO RS.61,31.825/- IS BOGUS PURCH ASES AS THE GENUINENESS OF THE TRANSACTION IS NOT PROVED. ACCOR DINGLY, THE ADDITION OF RS.61,31,825/- BEING MADE TO THE INCOME OF THE ASSE SSEE. ADDITION OF RS.61,31,825/- 4.1. THE ISSUE IT IS SEEN CAME UP IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO FOLLOWING THE ORDER OF THE CIT(A) DATED 15.03.2 011 IN A.NO.184/2007- 08/GZB/NOIDA PASSED BY HIM IN 2005-06 ASSESSMENT Y EAR AS REFERRING TO PARA 7.2.2 OF THE SAID ORDER CAME TO THE FOLLOWING CONCL USION:- FOLLOWING MY ORDER, REFERRED TO ABOVE, I HOLD THAT THE DISALLOWANCE OF THE PURCHASES MADE FROM THE SAID PARTY, NAMELY, M/S PARAG TRADERS, CAN NOT BE SUSTAINED IN TOTAL. I HAVE TAKEN NOTE THAT 35039 METER FABRICS @ RS.175/-PER METER WAS PURCHASED FROM THE SAID PARTY AS AGAINST THE AVERAGE PURCHASE RATE OF RS.134.21P. LIKE LAST YEAR , I HOLD THAT THE PRICE OF RS.175/- PER METER PAID TO THE SAID PARTY AS COM PARED TO THE AVERAGE PURCHASE RATE OF RS.134.2IP IS EXCESSIVE AND THEREF ORE THE PRICE PAID OVER & ABOVE THE AVERAGE PURCHASE PRICE IS DIRECTED TO BE DISALLOWED AND THE ADDITION TO THE EXTENT OF RS. 14,29,241/- (I.E. 35,039 X RS.40.79 BEING THE DIFFERENCE IN THE AVERAGE PRICE AND THE P RICE PAID TO THE SAID PARTY) IS CONFIRMED AND THE BALANCE AMOUNT OF ADDIT ION OF RS.47,02,584/- IS HEREBY DELETED. (RELIEF: RS.47,02,584/-) 4.2. IT IS SEEN THAT THE CO-ORDINATE BENCH IN THE I MMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2005-06 ASSESSMENT YEAR QUA TH E ISSUES WERE SEIZED OF THE FOLLOWING GROUNDS AS GROUND NO.2 AND 3 IN RESPECTIV E APPEALS OF THE REVENUE AND THE ASSESSEE:- I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 6 OF 11 6.. 1 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS BY ALLOWING RELIEF OF RS.2,46,31,5 40/- TO THE ASSESSEE ON ACCOUNT OF PURCHASE OF RAW MATERIALS, I NSTEAD OF APPRECIATING THE FACTS MENTIONED BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER. 7 1 2 3. THAT ON THE FACTS AND UNDER THE CIRCUMSTANCES OF TH E CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY U PHOLDING AND CONFIRMING THE ADDITION OF RS.78,69,384/-, ALLEGEDL Y HOLDING THE PURCHASES FROM THE IMPUGNED 3 PARTIES UNDER DISPUTE , AS INFLATED PURCHASES AND THE FINDINGS SO MADE IS BASED ON HYPO THECATIONS AND THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT O N THE ISSUES AND THE MATERIAL ON RECORD HAVE NOT BEEN CONSIDERED IN THE RIGHT PERSPECTIVE THEREOF. 4.3. THE CO-ORDINATE BENCH IN THE IMMEDIATELY PRECE DING ASSESSMENT YEAR HAS ADDRESSED THE FACTS ON THE ISSUE. THE DISCUSSION O N THE IDENTITY OF THE TWO PARTIES I.E M/S PARAS ENTERPRISES (WITH WHICH WE AR E NOT CONCERNED IN THE PRESENT PROCEEDINGS) AND PARAG TRADERS WITH WHICH WE ARE CONCERNED IN THE FACTS OF THE PRESENT CASE IT IS SEEN HAS BEEN CARRI ED OUT IN PARA 12 AS UNDER:- 12. ON THE FIRST ISSUE OF ADDITION OF RS.1,09,99,5 35/- WE FIND THAT THE AO MADE THE ADDITION ON THE GROUND THAT THE PURCHAS ES OF EXPORT ENTITLEMENT QUOTA ARE NOT GENUINE FOR THE VARIOUS R EASONS GIVEN IN HIS ORDER. SIMILARLY PURCHASES WERE DISALLOWED ON THE G ROUND THAT THE SAME WERE NOT VERIFIABLE. THE PURCHASES IN QUESTION ARE CLAIMED TO HAVE BEEN MADE FROM(I) PARAS ENTERPRISES; (II) PARA G TRADERS. THE VERIFICATION DONE BY THE AO FAILED TO ESTABLISH THE IDENTITY OF THESE PARTIES AS WELL AS THE GENUINENESS OF THE TRANSACTI ONS. THE LD.CIT(A) OBSERVED THAT THE AO HAS NOT DISPUTED THE EXPORT OF GOODS MADE BY THE ASSESSEE. HE ALSO OBSERVED THAT THE AO COULD NO T PRODUCE ANY MATERIAL TO DISPUTE THE FACT THAT THE ASSESSEE HAS USED THE EXPORT ENTITLEMENT QUOTA FOR THE EXPORTS. ON THESE FACTS T HE LD.CIT(A) IN OUR OPINION, HAS RIGHTLY COME TO THE FOLLOWING CONCLUSI ONS: ON WEIGHING THE RIVAL ARGUMENTS; I FIND THAT WHAT CAN NOT BE DISPUTED IN THAT ASSESSEE DID MADE EXPORTS. THIS IS NOT BEEN DOUBTED BY THE AO. FURTHER, IT IS ALSO NOT THE CASE OF THE AO THAT THESE EXPORTS WERE POSSIBLE WITHOUT THE USE OR EXPORT ENTITLEMENT S/QUOTAS. THIS, IN TURN, IMPLIES THAT ASSESSEE MUST HAVE PURCHASED SUC H EXPORT ENTITLEMENTS. MOREOVER, THE PURCHASE PRICE OF THE E XPORT ENTITLEMENT/QUOTAS WAS PAID THROUGH ACCOUNT-PAYEE C HEQUES. IN VIEW OF SUCH FINDINGS, THE PURCHASE AND UTILIZA TION OF THE EXPORT ENTITLEMENTS/QUOTAS IS ESTABLISHED AND, HENC E, THE PURCHASE AS SUCH CANNOT BE FULLY DISALLOWED. I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 7 OF 11 THIS IS ALSO OBSERVED THAT AO MADE ENQUIRY FROM M/S KRISHNA EXPORTS, WHICH PARTY WAS NEVER CLAIMED AS 'SELLER' BY THE ASSESSEE. HOWEVER, FROM THE ENQUIRY OF THE AO, AN IMPORTANT F ACT COMES OUT THAT M/S KRISHNA ENTERPRISES SOLD SUCH EXPORT ENTITLEMEN TS OF SAME CATEGORY (TEXPROCIL-USA-GRADE II) TO ONE M/S PUSHPA TI FABRICS LTD. AT A RATE OF RS. 8 PER SQ. MTR EQUIVALENT. BUT THIS IS ALSO ON RECORD THAT THE ALLEGED SELLERS OF THESE EXPORTS ENTITLEMENTS NAMELY M/S PARAS ENTERPRISES A ND M/S PARAG TRADERS, ALTHOUGH ASSESSED TO TAX, ARE NOT PHYSICAL LY TRACEABLE AND DID NOT COME FORWARD OR CONFIRM TO HAVE MADE THOSE SALES. ALTHOUGH ASSESSEE CAN NOT BE FASTENED WITH THE DUTY/RESPONSI BILITY OF CATCHING/TRACKING THESE THIRD PARTIES AND PROVIDING THEM BEFORE AO; BUT AT THE SAME TIME, THERE DOES ARISE A QUESTION O VER THE AUTHENTICITY OF THE PURCHASE PRICE PAID FOR SUCH PURCHASES OF EX PORT ENTITLEMENTS. 4.4. THE ISSUE OF BOGUS PURCHASES ADDRESSED BY THE REVENUE AS THE ASSESSEES GROUND WAS ALLOWED BY THE CIT(A) HAS BEEN ADDRESSED IN PARAS 12.1 AND 13 IN THE FOLLOWING MANNER:- 12.1. SIMILARLY ON THE ISSUE OF BOGUS PURCHASES TH E FIRST APPELLATE AUTHORITY AT PARA 7.2.3 OBSERVED AS FOLLOWS. 7.2.3 CONCLUSION: I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIO NS OF THE AR, THE EVIDENCE SUBMITTED U/R 46A, REMAND REPORT AND REJOI NDER AS WELL AS OTHER MATERIAL ON RECORD. I HAVE CONSIDERED THE QUA NTITATIVE DETAILS OF PURCHASES AND SALES AS SUBMITTED BY THE APPELLANT A ND ALSO THE FACT THAT THE SALES OF THE APPELLANT WERE ACCEPTED BY TH E ASSESSING OFFICER HAVE ALSO FOUND THAT THE 8 MATERIAL PURCHASED FROM THE SAID THREE PARTIES WAS ISSUED IN DUE COURSE OF BUSINESS AGAINS T ISSUE SLIPS MAINTAINED BY THE APPELLANT FOR THE ISSUE OF RAW MA TERIAL FOR PRODUCTION OF FINISHED GOODS. NO DEFECT HAS BEEN BR OUGHT ON RECORD IN THE QUANTITATIVE DETAILS OF MATERIAL RECEIVED AND I SSUED FOR CONSUMPTION, PRODUCTION OF FINISHED GOODS AND SALES THEREOF. ON THESE FACTS AND THERE BEING NO COMPARATIVE CONSUMPTION FI GURES, THE RECEIPTS OF THE MATERIAL PURCHASED FROM THE PARTIES UNDER RE FERENCE AND CONSUMPTION THEREOF CANNOT BE DISPROVED. I HAVE ALS O CONSIDERED THAT THE SUPPLIERS OF THE MATERIAL WERE IN EXISTENCE HAV ING PAN, AND FILING I.T. RETURN ALTHOUGH NOT SHOWING THESE TRANSACTIONS , AND NOT COMING FORWARD IN RESPONSE TO NOTICES U/S 133(B). PAYMENTS WERE MADE TO THEM THROUGH ACCOUNT PAYEE CHEQUES. IT IS ALSO ON R ECORD THAT ASSESSEE HAS PRODUCED VARIOUS PRIMARY EVIDENCES LIK E ISSUE SLIPS FOR INPUT AND PRODUCTION OUTPUT RECORDS, WHICH HAVE BEE N TEST CHECKED. STOCK-REGISTER WAS ALSO PRODUCED BEFORE THE AG. IT IS TRUE THAT COMPLETE DETAILS AND EVIDENCES WERE NOT FURNISHED B Y THE APPELLANT; APPELLANT ASCRIBES THE REASON TO BE CLOSURE OF THE BUSINESS. BUT AT THE SAME TIME, AO HAS ALSO NOT BEEN ABLE TO GIVE ANY CO MPARABLE CASE AND TO SHOW THAT INPUT-OUTPUT RATIO AS BEING DISCLO SED BY THE APPELLANT IN ITS ACCOUNTS IS AT UNACCEPTABLE VARIAN CE WITH ANY COMPARABLE CASE. 13. WE AGREE WITH THESE FINDINGS. THUS ON BOTH THES E COUNTS, THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 8 OF 11 4.5. THE ASSESSEES GROUND WAS DECIDED BY THE CO-OR DINATE BENCH IN THE AFORESAID ORDER VIDE PARAS 15 TO 18.2 IN THE FOLLOW ING MANNER:- 15. COMING TO THE ASSESSEES APPEAL, THE FIRST ISS UE IS WHETHER THE PRICE PAID FOR PURCHASE OF EXPORT ENTITLEMENTS SHOU LD BE @ RS.8/- PER SQ.METRE OR RS.8.46 PER SQ.METRE. THE FIRST CONTENT ION OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS COMMITTED AN ERROR IN TAK ING THE EXPORT ENTITLEMENT AT RS.12,35,450/- SMES PURCHASED BY TH E ASSESSEE AND WHEREAS THE CORRECT FIGURE IS 13,00,138. THESE FIGU RES HAVE TO BE VERIFIED BY THE LD.AO. HENCE WE SET ASIDE THE SAME TO THE FILE OF LD.AO FOR FRESH ADJUDICATION. 16. ON THE ISSUE OF POSSIBLE INFLATION IN THE PRICE , WE FIND THAT THE FINDING OF FACT IS THAT THE SELLERS ARE INCOME TAX ASSESSES AND HAVE FILED THEIR RETURN OF INCOME. THEY WERE NOT PHYSICA LLY TRACED AND THE ASSESSEE SUBMITS THAT THIS IS BECAUSE OF CLOSURE OF BUSINESS AND LAPSE OF TIME. THE RATE PAID BY THE ASSESSEE IS CLAIMED A T 8.46 PER SQ.METRE. THIS RATE IS MARGINALLY HIGHER THAN THE RATE OF RS. 8/- ACCEPTED BY THE LD.COMMISSIONER OF INCOME TAX (APPEALS). ON EXAMINI NG THESE FACTS, WE ARE OF THE OPINION THAT THE DISALLOWANCE IS NOT CALLED FOR AS THE RECIPIENT I.E. THE SELLER IS AN INCOME TAX ASSESSEE AND HAS FILED ITS RETURN OF INCOME. THE DISALLOWANCE IS BASED ON SUSP ICION AND SURMISES AND NOT ON ANY EVIDENCE. THUS WE AGREE WIT H THE CONTENTION OF THE ASSESSEE AND ALLOW THIS GROUND. 17. AS FAR AS THE ADDITION ON ACCOUNT OF INFLATION OF PURCHASES IS CONCERNED THE LD.CIT(A) AT THE LAST TWO PARAS OF HI S ORDER HAS HELD AS FOLLOWS. IN VIEW OF SUCH FINDINGS AND VARIOUS JUDICIAL PRON OUNCEMENTS RELIED UPON BY THE APPELLANT, I HOLD THAT TOTAL DIS ALLOWANCE OF THE PURCHASES MADE BY THE APPELLANT FROM THE SAID T HREE PARTIES WOULD NOT BE APPROPRIATE. HOWEVER, CONSIDER ING THE FACT THAT THE SAID PARTIES DID NOT CONFIRM THE SALES MAD E BY THEM TO THE APPELLANT, THE PURCHASES BY THE APPELLANT CANNO T BE ACCEPTED AS SUCH. FROM ALL ANGLES, THIS APPEARS TO BE A CASE OF INFLA TED PURCHASE CONSIDERATION. I HAVE NOTED FROM THE DETAILS ON REC ORD THAT THE AVERAGE RATE OF PURCHASES OF FABRICS MADE BY THE AP PELLANT DURING THE YEAR UNDER REFERENCE FROM ALL THE PARTIE S IS RS.125.35 PER MTR AND THE AVERAGE RATE OF PURCHASES OF 196489 MTRS PURCHASED FROM THE ALLEGED THREE PARTIES IS RS .165.40 PER MTR. THESE PURCHASE RATES HAVE BEEN PHYSICALLY VERI FIED BY THE ASSESSING OFFICER, IN HIS REMAND REPORT. IN MY CONS IDERED VIEW THE PURCHASE PRICE PAID TO THE SAID 3 PARTIES IN EX CESS OF THE AVERAGE RATE OF PURCHASES OF RS.125.35 PER MTR DESE RVES TO BE DISALLOWED AND THEREFORE THE ADDITION TO THE EXTENT OF RS.7869384/- (I.E. 196489 MTRS X RS.40.04) IS HEREB Y CONFIRMED AND THE BALANCE AMOUNT OF ADDITION TO THE EXTENT OF RS.24631541/- IS HEREBY DELETED. 18. IN THIS ISSUE OF PROBABLE INFLATION IN PURCHASE PRICE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT, IN OU R VIEW, GIVEN ADEQUATE OPPORTUNITY TO THE ASSESSEE. HE OBSERVED T HAT THE SELLERS, I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 9 OF 11 HAVE NOT CONFIRMED THE TRANSACTIONS. HE ALSO RECORD S THAT THE SELLERS ARE INCOME TAX ASSESSES, AND THAT THEY HAVE NOT REC ORDED THESE TRANSACTIONS. THE ASSESSEE PRODUCES BILLS GIVEN TO THEM BY THE SELLER, EVIDENCE OF PAYMENT BY WAY OF CROSSED CHEQUES THROU GH BANKING CHANNELS AND SUBMITS THAT NO FAULT CAN BE FOUND IN THE TRANSACTION AS FAR AS THE ASSESSEE IS CONCERNED. 18.1. THE ASSESSEE ALSO FURNISHES DETAILS OF PURCHA SES, RATE OF PURCHASES ETC. OF THE EARLIER AYS IN SUPPORT OF ITS CONTENTION THAT THERE IS NO INFLATION IN THE PRICE. COPIES OF STOCK REGI STERS ARE ALSO FURNISHED. DETAILED ARGUMENTS HAVE BEEN MADE SUPPO RTING THE PURCHASE PRICE. UNDER THESE CIRCUMSTANCES WE ARE O F THE CONSIDERED OPINION THAT THE ISSUE SHOULD BE SET ASIDE TO THE F ILE OF THE A.O. FOR EXAMINING THESE CLAIMS OF THE ASSESSEE, DE-NOVA, AS HE HAD NOT EXAMINED THE CLAIM. 18.2. THUS, WHILE WE AGREE WITH THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) THAT THERE COULD BE NO EXPORT SALES WITHO UT PURCHASES, ON THE ISSUE OF INFLATION OF PRICE, WE SET ASIDE THE M ATTER OF THE FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION IN ACCO RDANCE WITH LAW. IN THE RESULT THIS GROUND OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 4.6. IN THE AFORE-MENTIONED PECULIAR FACTS AND CIRC UMSTANCES, WE ARE OF THE VIEW THAT THERE BEING NO CHANGE IN FACTS AND CIRCUM STANCES OF THE CASE FOLLOWING THE PRECEDENT, GROUND NO.1 OF THE REVENUE IS DISMIS SED AND THE ISSUES RAISED IN GROUND NO.1 OF THE ASSESSEE ARE RESTORED BACK TO THE FILE OF THE AO FOR EXAMINING THE CLAIMS OF THE ASSESSEE DENOVO IN LINE WITH THE DIRECTIONS GIVEN BY THE CO-ORDINATE BENCH IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. 5. ADDRESSING THE ISSUE RAISED IN GROUND NO.2 TO 6 OF THE ASSESSEE, THE LD.AR HAS SUBMITTED THAT IN THE FACTS OF THE PRESEN T CASE THE RUNNING BUSINESS OF THE ASSESSEE WAS TRANSFERRED TO M/S HANUNG TOYS INDIA LTD. NEW DELHI ON 21.10.2015 WITH EFFECT FROM 29/30.10.2005. THE TRA NSFER IT WAS SUBMITTED WAS NOT EFFECTED BY WAY OF SALE AND INFACT THE ASSETS O F THE COMPANY WERE TRANSFERRED IN KIND. THE REVENUE IT WAS SUBMITTED HAS TREATED THE ISSUE AS A SLUMP SALE AND HAS SOUGHT TO HOLD THAT SECTION 50B IS APPLICAB LE. IT WAS HIS SUBMISSION THAT THE ISSUE MAY BE RESTORED BACK NOT ONLY ON THE GROUND TO EXAMINE THE CLAIM THAT SALE HAS NOT TAKEN PLACE AND ONLY THE AS SETS HAVE BEEN TRANSFERRED IN I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 10 OF 11 KIND FOR WHICH PURPOSES RELEVANT DECISIONS APPLICAB LE TO THE ISSUE WERE NOT PLACED ON RECORD. IT WAS HIS HUMBLE REQUEST THAT T HOUGH MOST OF THE DECISIONS CAME SUBSEQUENT TO THE PASSING OF THE IMPUGNED ORDE R BUT EVEN OTHERWISE RELEVANT FACTS COULD NOT BE HIGHLIGHTED. ACCORDINGL Y IT WAS HIS PRAYER THAT THE ASSESSEE WOULD BE SATISFIED IF THE ISSUES ARE RESTO RED BACK FOR CONSIDERATION IN THE LIGHT OF THE DECISIONS AVAILABLE ON RECORD. TO DEMONSTRATE THAT THE PRAYER MADE IS NOT CASUALLY REQUESTED ATTENTION WAS INVITE D TO ORDER DATED 11.03.2011 IN ITA NO.6410/MUM/2008 IN THE CASE OF M/S BHARAT B IJLI LTD. WHICH WAS SUBSEQUENTLY PUBLISHED IN 54 SOT 0501 (MUM.). THE SAID DECISION IT WAS SUBMITTED WAS AFFIRMED BY THE MUMBAI HIGH COURT IN CIT VS BHARAT BIJLI [2014] 365 ITR 0258. THE LD. AR SUBMITTED THAT HE WOULD B E FAILING IN HIS DUTY IF HE DID NOT POINT OUT THAT THERE WAS A DECISION OF THE DELHI HIGH COURT IN THE CASE OF SRIE INFRASTRUCTURE LTD. VS INCOME TAX SETTLEMENT C OMMISSION DATED 30.03.2012 TAKING A CONTRARY VIEW, HOWEVER IT WAS H IS SUBMISSION THAT THIS DECISION HAS BEEN CONSIDERED BY THE HONBLE MUMBAI HIGH COURT WHILE UPHOLDING THE DECISION OF THE ITAT IN BHARAT BIJLI LTD. RELIANCE WAS ALSO PLACED UPON AVAYA GLOBAL CONNECT VS ACIT [2009] 121 TTJ (M UM.) 300; ZINGER INVESTMENT PVT. LTD. 147 ITD 0694. ACCORDINGLY IT WAS HIS SUBMISSION THAT THE REQUEST FOR REMANDING THE ISSUE BACK WAS NOT MADE L IGHTLY. 5.1. THE LD. SR. DR CONSIDERING THE DECISIONS ON T HE POINT WHICH THE ASSESSEE WANTS THE AO TO CONSIDER HAD NO OBJECTION IF THE I SSUES ARE RESTORED BACK FOR CONSIDERATION ON MERITS AND A DECISION IS ARRIVED A T DENOVO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE ARISING ON FACTS FROM THE TRANSFER OF ASSESSEES UNIT AS A WHOLE ALONG WITH ALL ASSETS INCLUDING LAN D BUILDING AND LIABILITIES TO I.T.A .NO.-2562 & 3056/DEL/2011 PAGE 11 OF 11 ANOTHER GROUP CONCERN M/S HANUNG TOYS LTD. WAS HELD BY THE AO AS A SLUMP SALE AND THE GAINS ARISING THEREFROM WERE HELD TO B E TAXABLE U/S 50B AS CAPITAL GAINS. THE LD. AR HAS CANVASSED THAT THE TRANSFER IS NOT EFFECTED BY SALE AND THE ASSETS WERE TRANSFERRED IN KIND. ACCORDINGLY, IN ORDER TO ADDRESS THE ISSUES AFRESH IN THE LIGHT OF THE SUBMISSIONS OF THE PARTI ES BEFORE THE BENCH THE ISSUES RAISED IN GROUND NO.2 TO 6 ARE RESTORED BACK TO THE FILE OF THE AO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WI TH LAW AFTER TAKING INTO CONSIDERATION THE DECISIONS RELIED UPON. NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE GIVEN AN OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2016. SD/- SD/- (L.P.SAHU) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/03/2016 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTAN T REGISTRAR ITAT NEW DELHI