DCIT, New Delhi V. M/s. Newlight Marketing Pvt. Ltd., New Delhi

ITA 3402/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3640 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Assessee Lawyers: BHUPESH KUMAR DINGRA
• Keywords: Bogus purchase; Unexplained expenditure; Search and seizure; Peak credit; Accommodation entries
• Section: 69C; 153A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SMT BEENA A PILLA I , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3402 /DEL/2014 (ASSESSMENT YEAR: 2008 - 09 ) DCIT, CENTRAL CIRCLE - 17, NEW DELHI VS. NEWLIGHT MARKETING PVT. LTD, RZ, F - 7, DWARKA PURI, VIJAY ENCLAVE, NEW DELHI PAN:AACCN5421B (APPELLANT) (RESPONDENT) REVENUE BY : MS NIRUPAMA KOTRU, CIT DR ASSESSEE BY: SH. BHUPESH KUMAR, DINGRA, CA DATE OF HEARING 23/02/ 2017 DATE OF PRONOUNCEMENT 10 / 0 4 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - II, NEW DELHI DATED 06.03.2014 FOR THE ASSESSMENT YEAR 2008 - 09 WHERE IN FOLLOWING GROUNDS ARE RAISED : - .1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE UNEXPLAINED PURCHASE U/S 69C OF THE INCOME TAX ACT, 1961 AND IN DIRECTING THE ASSESSING OFFICE TO CONSIDER ONLY THE ADDITION OF THE PEAK OF FINANCIAL TRANSACTION. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 346294/ - MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWANCE OF EXPENSES CLAIMED AND IN DIRECTING THE ASSESSING OFFICER BY WAY OF DISALLOWANCE OF EX PENSES CLAIMED AND IN DIRECTING THE ASSESSING OFFICER TO CONSIDER ONLY THE ADDITION OF THE PEAK OF FINANCIAL TRANSACTION. 3. BRIEF FACTS OF THE CASES THAT ASSESSEE IS A COMPANY WHICH DEALING IN WHOLESALE TRADING OF FABRICS, TEXTILES AND GEN FOODS ETC , FILED ITS RETURN OF INCOME ON 05/01/2009 IN RESPONSE TO NOTICE UNDER SECTION 143 (2) OF THE ACT ISSUED BY THE LD. ASSESSING OFFICER ON 30/09/2009 DECLARING TOTAL INCOME OF RS. 4 960/ - . THE LD. ASSESSING OFFICER NOTED THAT COMPANY IS ONE OF THE CONCER NS RELATED TO M/S THAPER HOMES GROUP OF CASES ON WHOM SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT ON 20/10/2008. THE LD. ASSESSING OFFICER NOTED THE MODUS OPERANDI OF THE THAPAR GROUP STATING THAT THIS GROUP IS HAVING SEVERAL CONCERNS WITH DUMMY DIRECTO RS AND SHAREHOLDERS ENGAGED IN CAPITAL FORMATION, WHICH HAVE HUGE BUILDUP OF RES ERVES AND SURPLUSES OVER THE YEARS INVESTED IN STOCK OF TEXTILES . AS AND WHEN CAS H IS REQUIRED, THE PAGE 2 OF 5 STOCK OF FABRIC IS SOLD, AND THE MONEY IS UTILIZED FOR OTHER PURPOSES AS PER REQUIREMENT . HE ALSO NOTED THAT DURING THE COURSE OF SEARCH NO STOCK O F TEXTILE FABRIC WAS FOUND . THE ABOVE COMPANY WAS INCORPORATED ON 31 ST . DECEMBER 2002 AND SUBSEQUENTLY IN ASSESSMENT YEAR 2003 04 TO 2009 10 UNDER SECTION 153A AND 153C THE SALES AND PURCHASES MADE BY THE ASSESSEE WERE HELD AS NONGENUINE. THEREFORE , ON THE SAME SET OF FACTS, D URING THE CURRENT YEAR THE ASSESSEE HAS MADE PURCHASES OF RS. 8 517740 AND NET SALES OF RS. 6 909972/ WERE RECORDED . THE ASSESSEE WAS ASKED TO PROVE I TS TRADING ACTIVITIES AND TO PRODUCES TAX RECORDS . THE ANSWER OF THE ASSESSEE WAS THAT SINCE IT DEALS WITH TAX - FREE GOODS ONLY TH ERE IS NO NECESSITY FOR IT TO FILE THE SALES TAXES RETURNS . CONSEQUENTLY, THE ENTIRE PURCHASE AND ADMINISTRATIVE EXPENSES OF THE ASSESSEE WERE HELD BY THE LD. ASSESSING OFFICER AS UNEXPLAINED EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT OF RS. 8517740 / - ON ACCOUNT OF PURCHASES AND RS. 346294 / - ON ACCOUNT OF ADMINISTRATIVE EXPENSES. ON TH AT BASIS ASSESSMENT UNDER SECTION 143 (3) WAS FRAMED ON 31 ST . DECEMBER 2010 AT RS. 8868994/ . AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFICER THE ASSESSEE - PREFERRED APPEAL BEFORE THE LD. CIT (A) WHO IN TURN DELETED THE ABOVE ADDITION AND ONLY RETAINED ADDITION OF RS. 1392364/ ON PEAK BALANCE BASIS. THEREFORE AGGRIEVED BY THE ORDER OF THE LD. CIT APPEAL REVENUE IS IN APPEAL BEFORE US. 2. THE FIRST AND SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT (A) HAS REDUCED THE ADDITION OF RS. 8517740 / - ON ACCOUNT OF PURCHASES AND RS. 346294/ ON ACCOUNT OF ADMINISTRATIVE EXPENSES UNDER SECTION 69C OF THE I NCOME T AX A CT TO RS. 1392364/ ONLY. 3. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODAT ION ENTRIES AND DURING THE COURSE OF SEARCH ON 20/10/2008, IT CAME TO NOTICE THAT THIS COMPANY HAS BOGUS AND ALSO FICTITIOUS CAPITAL, WHICH IS USED AS BOOK ENTRIES TO INFUSE UNACCOUNTED MONEY IN OTHER COMPANIES OF THE GROUP. HE FURTHER REFERRED TO PARA NO. 7.3 OF THE ORDER OF THE LD. CIT APPEAL TO SAY THAT ASSESSEE OPERATED AS ACCOMMODATION ENTRY PROVIDERS . HE FURTHER SUBMITTED THAT WHEN THE LD. CIT APPEAL HAS CONFIRMED REJECTION OF THE BOOKS OF ACCOUNTS THERE IS NO REASON TO NOT TO SUSTAIN THE ADDITI ON OF BOGUS PURCHASES. PAGE 3 OF 5 HE FURTHER REFERRED TO PARA NO. 7.9 OF THE ORDER OF THE LD. CIT APPEAL WHEREIN IT HAS BEEN MENTIONED THAT THE APPELLANT WAS ONE OF THE SEVERAL ENTITIES IN THE WHOLE SCHEME OF NETWORK OF COMPANIES BELONGING TO ONE GROUP WHICH WERE USE D TO INFUSE UNACCOUNTED MONEY IN OTHER COMPANIES OF THE GROUP THROUGH A WELL ORCHESTRATED ARRANGEMENT OF INFUSING UNACCOUNTED TRANSACTIONS EMANATING FROM THEIR AUDITED FINANCIAL STATEMENT, BUT WHEREIN REALITY THE ONLY ACTIVITY WAS OF BOOK BUILDING. HE FURT HER REFERRED TO PARA NO. 7.10 OF THE ORDER OF THE LD. CIT APPEAL WHEREIN HE HAS HELD THAT KEEPING THE SEPARATE JURIDICAL ENTITY OF THE ASSESSEE IN MIND AND IN THE INTEREST OF JUSTICE , , IF IN SUCH CASE, THE ADDITION OF THE PEAK OF THE FINANCIAL TRANSACTIONS IS WORKED OUT FROM THE RELEVANT CASHBOOK OF ENTITY. HE SUBMITTED THAT THIS IS NO REASON NOT TO MAKE THE SEPARATE ADDITION WITH RESPECT TO THE PURCHASE OF THE GOODS. HE THEREFORE SUBMITTED THAT 1 ST APPELLATE AUTHORITY HAS ERRED IN REDUCING THE ADDITION TO THE PEAK AMOUNT INVESTED. 4. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT IN IDENTICAL SITUATION IN THE CIRCUMSTANCES AS LD. CIT APPEAL HAS MENTIONED AT PARA NO. 7.12 OF HIS ORDER THAT IDENTICAL ADDITION HAS BEEN DELETED BY THE COORDINATE BE NCH IN CASE OF ONE OF THE GROUP ENTITY. HE FURTHER REFERRED TO THE SEVERAL DECISIONS MENTIONED IN HIS PAPER BOOK AT SERIAL NUMBER 09 TO 13 WHEREIN ON IDENTICAL CIRCUMSTANCES THE ADDITION HAS BEEN DELETED . IT WAS FURTHER SUBMITTED THAT THE ISSUE IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF AN RADHIKA CREATIONS [ 10 TAXMANN.COM 138 (DELHI) ] . HE FURTHER SUBMITTED THAT THAT NAME OF THE ASSESSEE HAS ALREADY BEEN STUCK OF F BY THE REGISTRAR OF COMPANIES BY LETTER DATED 24/12/2010 AND THEREFORE THERE CANNOT BE ANY ASSESSMENT PROCEEDINGS ON THE COMPANY, WHICH HAS ALREADY BEEN DISSOLVED UNDER SECTION 560 OF THE COMPANIES ACT. HE THEREFORE REFERRED TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF V IVID M ARKETING SERVICES PRIVATE LIMITED IN ITA NO. 273/2009 DATED 17/09/2009 WHEREIN ON IDENTICAL CIRCUMSTANCES OF THE FACTS THE ORDER OF THE TRIBUNAL HAS BEEN UPHELD HOLDING THAT THERE COULD NOT HAVE BEEN ANY ASSESSMENT ORDER PASSED AGAINST THE COMPANY WH ICH WAS NOT IN EXISTENCE. AS OF THE DATE IN THE EYES OF THE LAW AS IT HAD ALREADY BEEN DISSOLVED , NO SUCH ORDER COULD HAVE BEEN PASSED. PAGE 4 OF 5 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS , ORDERS PASSED BY THE LOWER AUTHORITIES, AS WELL AS THE PAPER BOOK S UBMITTED BY THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AT PAGE NO. 31 OF THE PAPER BOOK IT HAS BEEN STATED THAT DETAILS OF PARTY WISE PURCHASES FOR THE YEAR ENDING 31 ST OF MARCH 2008 WAS SUBMITTED WHEREIN 7 PARTIES WERE LISTED STATING TH EIR NAMES, ADDRESS AND PERMANENT ACCOUNT NUMBER ALONG WITH THE AMOUNT OF TOTAL PURCHASES MADE . A T PAGE NO. 39 OF THE PAPER BOOK IT HAS ALSO BEEN MENTIONED THAT THE COPY OF STOCK REGISTER WHEREIN ITEMS PURCHASED ENTERED WERE ALSO SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AT PAGE NO. 44 OF THE PAPER BOOK IT IS SHOWN THAT THE ASSESSEE HAS GIVEN A COMPARABLE INSTANCE OF 4 PARTIES STATING THEIR PERMANENT ACCOUNT NUMBER ALONG WITH THE COMPARABLE GROSS PROFIT RATIO A S WELL AS THE NET PROFIT RATIO EARNED BY THEM , WHICH ARE LESS THAN WHAT, IS EARNED BY THE ASSESSEE. ON ALL THESE DETAILS SUBMITTED BY THE ASSESSEE THERE IS NO EXAMINATION MADE BY THE ASSESSING OFFICER BUT HE HAS MERELY GONE BY THE FACT THAT ASSESSEE B ELONG S TO THAPAR GROUP AND IS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. WE HAVE ALSO PERUSED THE DECISION OF THE COORDINATE BENCH IN CASE OF N EW LIFE M ISSION DISCOUNT C ARD P RIVATE L IMITED VERSUS ACIT IN ITA NO. 1684/DEL/2014 FOR ASSESSMENT YEAR 2008 0 9 DATED 23/12/2016 WHEREIN ON IDENTICAL FACTS AND CIRCUMSTANCES THE COORDINATE BENCH HAS DIRECTED FOR DELETION OF THE WHOLE ADDITION. ON PERUSAL OF THE ORDER OF THE LD. CIT APPEAL WHO HAS DISTINGUISHED THE FACTS CASE OF ANOTHER ASSESSEE BLUE L UXURY T AX P RIVATE LIMITED WHERE COORDINATE BENCHES HAS DELETED THE ADDITION . IN THE PRESENT CASE ALSO, THERE IS NO AVERMENT BY ANY OF THE PARTIES THAT THE FINDING GIVEN BY THE LD. CIT APPEAL IN PARA NO. 7.12 WHEREIN HE HAS NOT FOLLOWED THE DECISION OF THE COORD INATE BENCH GIVING SPECIFIC REASONS , IS ERRONEOUS . THE LD. 1 ST APPELLATE AUTHORITY HAS HELD THAT THE FACTS OF THOSE CASES DO NOT APPLY TO THE FACTS OF THIS CASE BECAUSE IN THE PRESENT CASE THE BOOKS OF ACCOUNTS OF APPELLANT ARE NOT MAINTAINED ON ACC OUNT OF ANY REGULAR BUSINESS ACTIVITY BUT MERELY IT RECORD S MAKE - BELIEVE TRANSACTION S THAT EXISTED ONLY ON PAPER, TO BUILD A RESERVOIR OF BOGUS STOCK EARNINGS IN CRORES WHICH COULD BE TRANSACTED ON PAPER SO AS TO EXPLAIN THE INTRODUCTION OF UNACCOUNTED CASH IN THE OTHER ACTUAL RUNNING BUSINESS OF THE PAGE 5 OF 5 GROUP OR OF OTHERS . THEREFORE, THE ENTR IES WERE BEREFT OF REALITY AND ARE PREPARED ONLY TO ESCAPE ANY NEGATIVE OBSERVATIONS OF THE AUDITORS AND AUTHORITIES. FURTHER, AS THE TOTAL AMOUNT INVESTED BY THE ASSESSEE COMPANY IN THE ABOVE TRANSACTION WILL PROPERLY BE TAXED IF THE PEAK AMOUNT IS TA KEN AS INCOME OF THE ASSESSEE WHICH LD. CIT APPEAL HAS A DJUDICATED, WITH WHICH WE ALSO AGREE . IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT APPEAL IN RESTRICTING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AND BOGUS ADMINISTRATI VE EXPENSES OF RS. 8517740/ AND RS. 346294/ TO THE EXTENT OF RS. 1392364/ ON THE PEAK BASIS. IN THE RESULT GROUND, NO. 1 AND 2 OF THE APPEAL OF THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 1 0 / 0 4 / 2017 . - SD / - - S D / - ( BEENA A PILLA I ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 0 / 0 4 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI