M/s. Rupali Trade Impex P Ltd., Delhi V. ITO, New Delhi

ITA 3150/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0053 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: TDS
• Section: 143(3); 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DLEHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA.NO3150/DEL/2017 ASSESSMENT YEAR: 2012-13 RUPALI TRADE IMPEX P. LTD., VS. INCOME-TAX OFFICER , B-4, SHANKAR GARDEN, WARD 21(4), NEW DELHI VIKASPURI, DELHI PAN AAECR0300B (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: SH. SURENDER PAL, SR. DR. DATE OF HEARING: 27/11/2019 DATE OF ORDER : 31/12/2019 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 28/02/2017 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-36, NEW DELHI (LD. CIT(A)), FOR ASSESSMENT YEAR 2012-13, M/S RUPALI TRADE IMPEX PRI VATE LIMITED (THE ASSESSEE) FILED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY WAS ENGAGED IN THE BUSINESS OF TRADING IN FABRIC ITEMS. FOR THE ASSESSMENT YEAR 2012- 13 IT HAD FILED ITS RETURN OF INCOME ON 06/02/2013 DECLARING AN INCOME OF 2 RS. 15,47,16/-. LEARNED ASSESSING OFFICER, HOWEVER, COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 (FOR SHORT THE ACT) BY ORDER DATED 27/3/2015 AT A RS. 1,62,3 9,060/-AFTER MAKING ADDITION ON THREE COUNTS, NAMELY, RS.1,43,48,448/-O N ACCOUNT OF M/S MAHAVEER FORGING P LTD HOLDING IT TO BE BOGUS CREDI TOR BECAUSE SUCH AN ENTITY HAS NO PHYSICAL EXISTENCE AND NOT TO BE FOUN D IN THE GIVEN ADDRESS AND THE COMPUTER GENERATED BILLS IN THIS CASE WERE UNTRUSTWORTHY, RS. 2,83,988/-ON ACCOUNT OF DISALLOWANCE OF PERSONAL EX PENSES AND RS.59,000/-ON ACCOUNT OF DISALLOWANCE OF LEGAL AND PROFESSIONAL FEE. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT( A) AND ARGUED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THAT THE OFFICE OF M/S. MAHAVEER FORGINGS WAS AT A CHANDANI CHOWK AND LOCATED IN THE COMMERCIAL AREA; THAT THERE IS NO WAY THAT THE SAME CAN BE USED AS A RESIDENTIAL AREA; WHEREAS THE INSPECTOR HAD CARRIED OUT LOCAL ENQUIRY AND AS PER HIS REPORT NO SUCH PARTY BY NAME MAHAVIR FOR GING WAS OPERATING; THAT IT IS VERY LIKELY THAT THE INSPECTOR HAD VISIT ED THE SITE AND ENQUIRED FROM THE COUPLE OF PEOPLE WHO MAY HAVE NO IDEA AT A LL ABOUT THE BUSINESS ETC. IT WAS FURTHER PLEADED THAT THERE IS NO RULE THAT REQUIRES THAT THE BILLS MUST NOT BE COMPUTER-GENERATED SO AS TO TREAT THEM BOGUS. IT WAS FURTHER ARGUED THAT THE MATERIAL PURCHASED D URING THE YEAR ARE DULY ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSES SEE AND THE SAME WAS SUPPORTED BY DOCUMENTARY EVIDENCE, AND THE SAID MAT ERIAL WAS SUBSEQUENTLY SOLD BY THE ASSESSEE AND PROFIT WAS EA RNED THEREON WHICH WAS OFFERED TO TAX. HAVING ACCEPTED THE SALES DURIN G THE YEAR, THE ASSESSING OFFICER CANNOT SUSPECT THE TRADE CREDITOR S. ACCORDING TO THE ASSESSEE, BEFORE THE LD. CIT(A) THE LEARNED ASSESSI NG OFFICER WAS NOT IN A 3 POSITION TO STATE WHICH EXPENSES WERE FOR BUSINESS AND WHICH EXPENSES WERE NOT AND THEREFORE ANY DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER CANNOT BE SUSTAINED. 4. LD. CIT(A) APPRECIATED ALL THE CONTENTIONS RAISE D BEFORE HER BUT HELD THAT SUCH CONTENTIONS HAVE NO RELEVANCY TO THE ISSUES RAISED BY THE LEARNED ASSESSING OFFICER; AND THAT IN VIEW OF THE REASONS GIVEN BY THE LEARNED ASSESSING OFFICER FOR MAKING THE ADDITIONS IT WAS FOR THE ASSESSEE TO ESTABLISH THE EXISTENCE OF MRS MAHAVIR FORGING P RIVATE LIMITED AND THE GENUINENESS OF THE TRANSACTION, WITHOUT WHICH THE C ASE OF THE ASSESSEE CANNOT BE ACCEPTED BASING ON LOGIC AND AUGMENTS. IN SOFAR AS THE DISALLOWANCE OF THE EXPENSES ARE CONCERNED, LD. CIT (A) RECORDED THAT ALL THESE EXPENSES WERE MADE IN CASH AND ON SELF-MADE V OUCHERS AND THE ASSESSEE WAS UNABLE TO EXPLAIN AS TO WHY SHOULD THE EXPENSES BE CONSIDERED FULLY MADE FOR THE BUSINESS PURPOSE. LD. CIT(A), HOWEVER, ACCEPTED THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE LEGAL/PROFESSIONAL FEE TO THE TUNE OF RS. 59,000/- TO THE EFFECT THAT SUCH AN AMOUNT WAS PAID TO TWO DIFFERENT PERSONS AND, TH EREFORE, NO TDS WAS DEDUCTED ON IT. TO SUCH EXTENT, LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE, WHILE CONFIRMING THE ADDITION ON THE OTHER TWO COUN TS. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) SUSTAIN ING THE ADDITION OF RS. 1,43,48,493/-ON ACCOUNT OF CREDITORS AND RS.2,8 3,998/-ON ACCOUNT OF DISALLOWANCE OF PERSONAL EXPENSES, ASSESSEE PREFERR ED THIS APPEAL BEFORE US CONTENDING THAT THE DETAILS PROVIDED BY THE ASSE SSEE BEFORE THE ASSESSING OFFICER WERE GENUINE AND ALL RELEVANT DET AILS INCLUDING THE BILLS AND ADDRESSES WERE PROVIDED TO THE LEARNED ASSESSIN G OFFICER, BUT THE ASSESSING OFFICER, HOWEVER, COULD NOT PHYSICALLY VE RIFY SUCH DETAILS AND 4 THAT DOES NOT IMPLY THAT THE TRANSACTION WAS A BOGU S TRANSACTION AND THE ADDITION COULD BE JUSTIFIED ON THAT GROUND. IT WAS FURTHER CONTENDED BY THE ASSESSEE IN THE GROUNDS OF APPEAL, ON THIS ASPE CT, THAT THE LEARNED ASSESSING OFFICER CALLED FOR AND RECEIVED CONFIRMAT ION DIRECTLY FROM THE PARTY WHICH PRECEDES GENUINENESS, AND EVEN ASSUMING THAT THE CREDIT CARDS WERE BOGUS, IT FAILED TO ACKNOWLEDGE THAT ONL Y THE PROFIT ELEMENT COULD BE ADDED AND NOT THE ENTIRE CREDITORS. IN THE GROUNDS OF APPEAL IT IS FURTHER CONTENDED BY THE ASSESSEE THAT THE DISALLOW ANCE OF 25% OF THE EXPENSE ON ACCOUNT OF STAFF WELFARE, DIWALI EXPENSE S ETC ON THE GROUND THAT THESE WERE IN THE NATURE OF PERSONAL EXPENSES HAVING NO NEXUS WITH THE BUSINESS OF THE ASSESSEE IS NOT JUSTIFIED AND T HE DISALLOWANCE BEING CERTAIN PERCENTAGE OF EXPENSES CARRIED OUT ON AD HO C BASIS AND WITHOUT ANY SUBSTANCE OR MATERIAL IS THE RESULT OF NON- APP LICATION OF MIND AND IT IS NOT JUSTIFIED. 6. HOWEVER, WHEN THE MATTER IS CALLED, NEITHER THE ASSESSEE NOR ANY AUTHORISED REPRESENTATIVE ENTERED APPEARANCE. IT CO ULD BE SEEN FROM THE RECORD THAT THE NOTICE SENT TO THE ADDRESS GIVEN IN FORM NO. 36 IS RETURNED WITH THE ENDORSEMENT OF THE POSTAL SERVANT THAT THE ADDRESSEE LEFT. IF THE ASSESSEE IS AVAILABLE IN SUCH ADDRESS, SUCH NOTICE SHOULD HAVE BEEN SERVED ON THE ASSESSEE. IF FOR ANY REASON, THE ASSESSEE IS NOT AVAILABLE THERE, IT IS FOR THE ASSESSEE TO MAKE ARR ANGEMENTS FOR SERVICE OF SUCH NOTICE BY FURNISHING THE ADDRESS WHERE THE ASS ESSEE WOULD BE AVAILABLE, OR TO DELIVER IT TO SOME AUTHORISED PERS ON, OR BY MAKING REQUEST TO THE POSTAL DEPARTMENT TO DETAIN THE MAIL TILL THE ASSESSEE CLAIMS THE SAME. ASSESSEE DOES NOT SEEM TO HAVE ADO PTED ANY OF THESE METHODS. ADDRESS OF THE ASSESSEE IS AVAILABLE EITHE R WITH THE TRIBUNAL OR 5 WITH THE DEPARTMENT, AND THEREFORE, THERE IS NO POI NT INITIATING NOTICES OF THE NOTICES TO THE ADDRESS WHERE THE ASSESSEE IS NO T TO BE FOUND. IN THE CIRCUMSTANCES, WE ARE THE CONSIDERED OPINION THAT N O TIME COULD BE GRANTED. BASING ON THE RECORD WE PROCEED TO HEAR TH E COUNSEL FOR REVENUE AND DECIDE THE MATTER ON MERITS. 7. IT IS THE SUBMISSION OF THE LD. DR THAT THE ORDE RS OF THE AUTHORITIES BELOW ARE VERY DETAILED AND REASONED ONES AND ARE S ELF-EXPLANATORY IN NATURE. HE, THEREFORE, PLACED HEAVY RELIANCE ON THE REASONING GIVEN AND CONCLUSIONS REACHED BY THE AUTHORITIES BELOW. 8. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. INSOFAR AS THE 1 ST ADDITION ON ACCOUNT OF CREDITORS IS CONCERNED, DURING THE SCRUTINY PROCEEDINGS, LEARNED ASSESSING OFFICER NOTICED THAT A CREDIT BALANCE OF RS. 1,43,48,493/-W AS SHOWN OUTSTANDING AGAINST M/S MAHAVIR FORGING (P) LTD AND INITIALLY T HE NOTICE WAS RETURNED WITH THE ENDORSEMENT OF THE POSTAL SERVANT TO THE E FFECT THAT IT WAS WRONG ADDRESS. SUBSEQUENTLY FRESH NOTICE UNDER SECT ION 133(6) OF THE ACT WAS ISSUED ON 20/01/2015 TO WHICH CONFIRMATION WAS ISSUED. LD. CIT(A) SUMMARISED THE FINDINGS OF THE LEARNED ASSESSING OF FICER FOR NOT BELIEVING THE VERSION OF THE ASSESSEE IN RESPECT OF THIS CRED ITOR, AND IT RELATES IT THUS,- A) LEARNED ASSESSING OFFICER OF THE CREDITOR INFORMED THE LEARNED ASSESSING OFFICER OF THE ASSESSEE THAT DURI NG THE SCRUTINY OF M/S MAHAVIR FORGING PRIVATE LIMITED, NO OUTSTANDING AMOUNT WAS SHOWN AGAINST THE ASSESSEES NAME; B) THE INSPECTOR OF THE LEARNED ASSESSING OFFICER, AFT ER VISITING THE ADDRESS GIVEN BY THE ASSESSEE, REPORTED THAT TH ERE WAS 6 NO SUCH COMPANY FOUND AT THE GIVEN ADDRESS AND NO O NE IN THE VICINITY WAS AWARE OF IT; C) ASSESSEE WAS ASKED TO PRODUCE THE PARTY AND THE ASS ESSEE SUBMITTED THAT IT IS NOT IN A POSITION TO PRODUCE S UCH PARTY; AND D) THE LETTERHEAD OF THE CONFIRMATION SENT BY THE ALLE GED CREDITOR HAD NO PHONE NUMBERS, NO NAMES OF THE SIGN ATORY AND EVEN THE COPY OF THE BALANCE SHEET WAS DOWNLOAD ED FROM THE ROC SITE AND NOT SIGNED BY ANYBODY. 9. COMING TO THE ARGUMENTS BEFORE THE LD. CIT(A), I T WAS OBSERVED BY THE LD. CIT(A) THAT WITHOUT SUBMITTING ANY SUPPORTI NG DOCUMENT, ASSESSEE JUST INSISTED THAT THE CREDITOR WAS GENUIN E AND THAT THE OFFICE OF THE CREDITOR COULD NOT BE LOCATED BY THE INSPECTOR AS IT WAS IN CHANDANI CHOWK AND VARIOUS STRANGE REASONS WERE GIVEN BY THE ASSESSEE AS TO WHY A COMPANY CANNOT BE LOCATED IN THE CHANDANI CHOWK M ARKET. FURTHER IT WAS ARGUED, AS OBSERVED BY THE LD. CIT(A), THAT THE LEARNED ASSESSING OFFICER FAILED TO EXPLAIN PROPERLY AS TO HOW THE CO MPUTER-GENERATED BILLS COULD BE BOGUS. 10. ON A CAREFUL CONSIDERATION OF THE IMPUGNED ASSE SSMENT ORDER, WE FIND THAT IT WAS INFORMED BY THE LEARNED ASSESSING OFFICER OF THE ALLEGED CREDITOR WHILE TRANSMITTING THE BALANCE SHEET AND T HE LIST OF SUNDRY CREDITORS, THAT THE NAME OF THE ASSESSEE WAS NOT TO BE FOUND IN SUCH LIST. FURTHER, THE INSPECTOR WHO TRIED TO LOCATE THE PREM ISES OF M/S, MAHAVIR FORGING (P) LTD COULD NOT FIND SUCH AN ENTITY AT TH E GIVEN ADDRESS. HE WAS INFORMED THAT SUCH BUILDING WAS USED AS RESIDENCE B Y ITS PREVIOUS OWNER THREE YEARS BACK AND NO COMPANY LIKE M/S MAHAVIR FO RGINGS HAD EVER LOCATED IN THAT PREMISES. FURTHER, ON DOWNLOADING T HE BALANCE SHEET FILED WITH THE LETTER FROM THE ROC SITE, IT WAS FOUND THA T IT WAS NOT SIGNED BY 7 AUDITOR OR DIRECTOR OF THE COMPANY, LEADING TO THE INFERENCE THAT THE ASSESSEE WAS MISUSING NAME OF SOME ASSESSEE TO SHOW BOGUS CORRIDOR IN ITS BOOKS OF ACCOUNTS. 11. THERE IS NO PROPER EXPLANATION FROM THE ASSESSE E IN RESPECT OF THESE REASONS RECORDED BY THE LEARNED ASSESSING OFF ICER TO DRAW THE INFERENCE THAT THE TRANSACTION IS A BOGUS ONE. IN T HE ABSENCE OF ANY MATERIAL TOUCHING ON THE ASPECT, WE ARE OF THE CONS IDERED OPINION THAT THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDIT ION. THERE ARE NO REASONS WARRANTING INTERFERENCE WITH THE SAME. 12. INSOFAR AS THE 2 ND ADDITION ON ACCOUNT OF THE DISALLOWANCE OF EXPENSES IS CONCERNED, THE IMPUGNED ORDER SPEAKS TH AT THE ASSESSEE WAS ISSUED A NUMBER OF NOTICES, BUT THERE WAS NO COMPLI ANCE WITH THE REQUIREMENT OF THE AUTHORITIES TO SUBMIT FURTHER DE TAILS AND THE DETAILS OF GP AND NP RATIO FOR 5 YEARS. LEARNED ASSESSING OFFI CER OBSERVED THAT A VERY SHODDY AND VAGUE SUBMISSION WAS MADE WITHOUT F URNISHING SUCH DETAILS. LD. CIT(A) OBSERVED THAT WITHOUT COMPLYING THE REQUIREMENT OF THE LEARNED ASSESSING OFFICER, THE ASSESSEE WAS RAI SING THE ISSUE AS TO WHETHER THE ADDITION SHOULD BE 5% OR 50% OR 25%. AC CORDING TO HER WHEN THE ASSESSEE CANNOT PROVE THAT THE EXPENDITURE WAS MADE FOR BUSINESS PURPOSE, AND NO CASE WAS MADE IN SUPPORT O F ITS CASE AS TO WHY THE DISALLOWANCE SHOULD NOT BE MADE, THE PERCENTAGE OF DISALLOWANCE IS IRRELEVANT AND IN VIEW OF THE DECISION TAKEN BY THE LEARNED ASSESSING OFFICER TO DISALLOW 25% OF SUCH EXPENSES, SHE DECLI NED TO INTERFERE WITH IT. 8 13. EVEN BEFORE US ALSO THERE IS NO MATERIAL TO TAK E A CONTRARY VIEW. LD.ASSESSING OFFICER WHO IS THE FIRST AUTHORITY DIR ECTLY DEALING WITH THE ASSESSEE AND ITS BUSINESS DETAILS HAD TAKEN A VIEW THAT 25% OF THE EXPENSES SHOULD BE DISALLOWED. TO TAKE ANY CONTRARY VIEW OR TO MODIFY IT, THERE SHALL BE SOME MATERIAL BEFORE US OR SOME ACCE PTABLE EXPLANATION FROM THE ASSESSEE. SINCE THE ASSESSEE HAD NOT TAKEN SUFFICIENT PRECAUTION FOR PROSECUTION OF THE CASE ON MERITS, WE FIND IT D IFFICULT TO INTERFERE WITH THE DISCRETION OF THE LEARNED ASSESSING OFFICER. WE , THEREFORE, UPHOLD THE SAME. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. PRONOUNCED IN OPEN COURT ON THIS THE 31 ST DECEMBER, 2019. SD/- SD/- (G.S. PANNU) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 31/12/2019 AKS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI