H.P. Knitting & Finishing Mills (P) Ltd., New Delhi V. ITO, New Delhi

ITA 265/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4532 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KR YADAV
• Assessee Lawyers: SUMIT GOE L
• Keywords: Bogus purchase; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: C , NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 265 /DEL/201 5 A.Y. 2006 - 07 H.P. KNITTING & FINISHING MILLS (P) LTD. C/O RAJ KUMAR & ASSOCIATES, CAS 4435/7, ANSARI ROAD DARYA GANJ NEW DELHI 110 002 PAN: AAACH 2808 J VS . ITO, WARD 12(4) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUMIT GOEL, C.A. RESPONDENT BY SH. ARUN KR.YADAV , SR.DR DATE OF HEARING 12 TH SEPT., 2017 DATE OF PRONOUNCEMENT 14 TH SEPTEMBER, 2017 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT. 28.10.2014 OF THE LD. CIT( APPEALS ) - XV , NEW DELHI PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2006 - 07 ON THE FOLLOWING GROUNDS. ITA NO. 265/DEL/2015 A.Y. 2006 - 07 HP KNITTING & FINISHING MILLS (P) LTD. 2 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, LD. AO ERRED IN LAW AS WELL AS ON MERITS IN IMPOSING PENALTY OF RS. 1,88,607/ - @100% ON ADDITIONS OF RS. 5,60,331 / - AND THE LD. CIT(A) FURTHER ERRED IN LEVYING / SUSTAINING THE PENALTY OF RS. 1,85,585/ - @100% ON FRESH ADDITION OF RS.5,46,800/ - MADE BY CIT(A) HIMSELF AFTER DELETING THE ADDITIONS OF RS. 5,21,000/ - MADE BY THE AO. 2. THAT THE LD. CIT (A) GRAVELY ERRED IN LAW AND ON FACTS IN SUSTAINING PENALTY ON THE FOLLOWING ADDITIONS WHICH WERE DELETED BY CIT (A) IN QUANTUM APPEAL ORDER DTD. 17.09.2014 G.P. ADDITION RS.3,54,000/ - DISALLOWANCE U/S. 40 A (3) RS. 1,67,000/ - TOTAL RS.5,21,000/ - 3. THAT LD. CIT (A) FURTHER ERRED IN LAW AND ON FACTS, IN LEVYING / SUSTAINING PENALTY ON ADDITION OF RS. 5,46, 800/ - WHICH WAS INDEPENDENTLY MADE BY THE CIT (A) FOR THE FIRST TIME IN QUANTUM APPEAL ORDER DTD. 17.09.2014 BY REJECTING BOOKS OF A/CS AND CONSEQUENTIALLY BY MAKING AN ADDITION OF RS. 5,46,800 / - FOR ALLEGED BOGUS PURCHASES. THE AO DID NOT MAKE THIS ADDITION / ANY ADDITION FOR BOGUS PURCHASES WHICH HAS BEEN MADE FO R THE FIRST TIME BY CIT (A). 4. THAT THE LD. CIT (A) FURTHER ERRED IN NOT ISSUING MANDATORY SHOW CAUSE NOTICE U/S. 271 (1) (C) BEFORE LEVYING THE PENALTY ON THE FRESH ADDITION MADE BY C I T (A) WHILE DISPOSING OF QUANTUM APPEAL, THEREFORE, THE PENALTY IMPO SED WITHOUT PROVIDING MANDATORY ITA NO. 265/DEL/2015 A.Y. 2006 - 07 HP KNITTING & FINISHING MILLS (P) LTD. 3 REASONABLE OPPORTUNITY OF BEING HEARD U / S. 274(1) IS UN - SUSTAINABLE IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.4 ,11, 955/ - . THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE SCRUTINY PROCEEDINGS THE ASSESSING OFFICER (A.O.) ASSESSED THE ASSESSEE S INCOME AT RS.9,72,286/ - AS AGAINST THE RETURNED INCOME OF RS.4,11,955/ - BY MAKING ADDITION OF RS.5,60,331/ - UNDER THE FOLL OWING 3 HEADS: LOW G.P. RATE RS.3,54,000/ - CASH PURCHASES RS. 1,67,000/ - ESIC AND EPF RS. 39,331/ - . THE MATTER TRAVELLED BEFORE THE LD. CIT(A). LD. CIT(A) CONFIRMED THE ADDITIONS MADE BY THE A.O. AS WELL AS INCREASE IN THE TRADING PROFIT RESULTS OF RS. 5,46,000/ - BY STATING THAT UNPREDICTABLE CASH PURCHASES. THE A.O. INITIATED PENALTY PROCEEDINGS AND IMPOSED PENALTY OF RS.1,88,607/ - AND THE LD. CIT(A) ALSO IMPOSED PENALTY ON THE ADDITION MADE BY HIM. 3. LD. A.R. AT THE OUTSET OF THE HEARING SUBMITTED TH AT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE ORDER PASSED BY THE ITAT IN THE QUANTUM PROCEEDINGS WHEREIN THE ADDITION MADE BY THE LD. CIT(A) IS DELETED BY T HE HON BLE ITAT IN ITA NO. 265/DEL/2015 A.Y. 2006 - 07 HP KNITTING & FINISHING MILLS (P) LTD. 4 ITA NO. 6176/DEL/2014 FOR THE A.Y. 2006 - 07 DT. 7.1.2016. H E FURTHER SUBMITTED THAT T HEREFORE THE PENALTY PROCEEDINGS INITIATED BY BOTH THE A.O. AS WELL AS THE LD. CIT(A) CAN NOT SURVIVE. 4. LD.D.R. RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 5. AFTER HEARING BOTH THE SIDES, PERUSING MATERIAL AVAILABLE ON RECOR D, WE FIND THAT SINCE THE COORDINATE BENCH OF THIS TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE , T HEREFORE THE PENALTY PROCEEDINGS HAVE BECOME INFRUCTUOUS. HENCE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT ASSESSEE S APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT O N 1 4 . 0 9 . 2 0 1 7 . S D / - S D / - ( H.S.SIDHU ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 1 4 T H SEPTEMBER, 2017 * GMV ITA NO. 265/DEL/2015 A.Y. 2006 - 07 HP KNITTING & FINISHING MILLS (P) LTD. 5 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES NEW DELHI