Northern Strips Ltd., New Delhi V. ACIT, New Delhi

ITA 3588/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82140 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 09-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GUNJAN PRASHAD
• Assessee Lawyers: VED JAIN SH V CHOURASIYA
• Keywords: Business income; Rectification of order; Search and seizure; Opportunity of being heard; Assessment record
• Section: 142(1); 153A; 132

Judgement Text

ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3588/DEL/2012 ASSESSMENT YEAR : 2005-06 NORTHERN STRIPS LTD., VS ASSTT.COMMISSIONER O F INCOME TAX, 1, CENTRAL MARKET, CE NTRAL CIRCLE-13, WEST AVENUE ROAD, NEW D ELHI. PUNJABI BAGH, NEW DELHI. (PAN: AAACN0642C) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VED JAIN, SH. V. CHOURASIYA RESPONDENT BY : SHRI GUNJAN PRASHAD, CIT DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A)-I, NEW DELHI DATED 1.5.2012 IN APPEAL NO.99 /11-12 FOR AY 2005-06. 2. IN THE BEGINNING OF THE ARGUMENT, LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO. 1 TO 5, BEING LEGAL GROUNDS AND WE DISMISS THE SAME AS NOT PRESSED. 3. ON CAREFUL PERUSAL OF THE GROUNDS OF THE ASSESSE E ON MERITS, WE OBSERVE THAT EXCEPT GROUND NO. 6(I), OTHER GROUNDS OF THE A SSESSEE ARE ARGUMENTATIVE AND SUPPORTIVE TO THIS MAIN GROUND WHICH READS AS UNDER :- ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 2 6(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF AMOUNT OF RS.66,01,4 49/- ON ACCOUNT OF PURCHASES MADE BY THE ASSESSEE COMPANY. 4. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT, 19 61 WAS CARRIED OUT IN THE SWASTIK PIPES GROUP OF CASES ON 28.2.2008. SUBSEQU ENTLY, THE CASE OF THE ASSESSEE INCLUDING OTHER RELATED CASES WAS CENTRALI SED BY THE CIT, DELHI-V, NEW DELHI VIDE ORDER DATED 17.6.2009. IN RESPONSE TO T HE NOTICE SERVED ON THE ASSESSEE U/S 153A OF THE ACT, THE ASSESSEE COMPANY FILED RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.14,25,528/- ON 28.1. 2010. FURTHER, A NOTICE U/S 143(2) AND 142(1) ALONG WITH QUESTIONNAIRE WAS ALSO SERVED ON THE ASSESSEE. THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED THAT T HE SALES HAVE BEEN UNDER REPORTED BY JINDAL POLYFILMS LTD. BUT HAS NOT FILED ANY EVIDENCE OR CONFIRMATION FROM M/S JINDAL POLYFILMS REGARDING ALLEGED INFLAT ED PURCHASE OF RS.55,72,112/-. THE AO HELD THAT THE EXPLANATION O FFERED BY THE ASSESSEE IS AN AFTERTHOUGHT AND THE ASSESSEE INFLATED PURCHASES TO THE EXTENT OF RS.66,01,449 AND THE SAME WAS DISALLOWED. BEING AGGRIEVED BY TH E ABOVE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALSO DISMISSED BY PASSING THE IMPUGNED ORDER. NOW, THE EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE MAIN GROUNDS AS REPRODUCED HEREIN ABOVE. 5. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 3 THE AO WRONGLY OBSERVED THAT THE ASSESSEE HAS INFLA TED ITS AMOUNT OF PURCHASE AS THE ASSESSEE SUBMITTED RECONCILIATION AND RECTIF ICATION FROM JINDAL POLYFILMS LTD. WHICH WAS WRONGLY CONSIDERED AN AFTERTHOUGHT. LD. COUNSEL FURTHER CONTENDED THAT THE CIT(A) HAS ALSO ERRED IN NOT TAK ING INTO CONSIDERATION THE RECTIFICATION OF MISTAKE OF RS.55,72,112/- CONFIRM ED BY JINDAL POLYFILMS LTD. VIDE ITS LETTER DATED 28.12.2010 (PAPER BOOK PAGE NO. 80 AND 81) WHEREBY IT WAS CONFIRMED BEYOND DOUBT THAT THE TOTAL SALES MAD E BY THE SELLER JINDAL POLYFILMS LTD. TO THE ASSESSEE WERE OF RS.2,66,65,0 78 AS WHILE SUBMITTING DETAILS ON EARLIER OCCASION, IT HAS LEFT OUT PURCHA SES OF RS.55,72,112/- IN THE MONTH OF SEPTEMBER, 2004. LD. COUNSEL HAS DRAWN OU R ATTENTION TOWARDS PAPER BOOK PAGE NO. 103 AND SUBMITTED THAT IN THE FY 2004 -05 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2005-06, THE SALE OF SEPTEMBER 2004 TO DECEMBER 2004 HAS NOT BEEN REFLECTED IN THE RELEVANT COLUMN IN THE DETAILS AVAILABLE OF MONTH WISE SALES MADE BY M/S JINDAL POLYFILMS LTD. TO THE ASSESSEE. LD. COUNSEL FURTHER POINTED OUT THAT THIS MISTAKE WAS R ECONCILED AND RECTIFICATION BY M/S JINDAL POLYFILMS LTD. THROUGH ITS LETTER DATED 28.12.2010 WAS IGNORED BY THE AUTHORITIES BELOW. LD. COUNSEL FINALLY SUBMITTED T HAT THE ORDERS OF THE AUTHORITIES BELOW MAY BE SET ASIDE BY HOLDING THAT THE TOTAL AMOUNT OF SALES MADE BY THE ASSESSEE DURING FINANCIAL YEAR 2004-05 WAS RS.2,66,65,078/-. 6. REPLYING TO THE ABOVE, LD. DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY PROOF IN SUPPORT OF ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 4 SHORT REPORTED SALE AND NO EVIDENCE OF REVISED CONF IRMATION FROM M/S JINDAL POLYFILMS LTD. HAD BEEN FILED BEFORE THE AO. LD. D R FURTHER CONTENDED THAT THE SEARCH OPERATION IN THE CASE OF ASSESSEE COMPANY HA D TAKEN PLACE ON 28.8.2008; THE CLAIM OF THE ASSESSEE THAT THE PURCHASES OVERBO OKED STAND RECTIFIED ON 31.3.2009 WAS ONLY AN AFTERTHOUGHT EXPLANATION TO C ONTROVERT THE FINDINGS AND OUTCOME OF THE SEARCH PROCEEDINGS. THE DR FURTHER CONTENDED THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION FOR THE INFLATION I N THE PURCHASES OF RS.2,44,106/-. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, WE OBSERVE THAT THE MAIN CONTROVERSY SURROUNDS THE ALLEGATION OF THE AO THAT THE ASSESSEE HAS INFLATED ITS PURCHASES BY THE AMOUNT OF IMPUGNED AD DITION. THE AO ALSO HELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS AN AFTERTHOUGHT AND NO CONFIRMATION, PROOF OR DETAIL WAS FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS, HENCE THE AO MADE DISALLOWANCE OF PART OF ALLEGED INFLATED PURCHASE. 8. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT( A) REJECTED THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE ASSES SEE HAS NOT BEEN ABLE TO ESTABLISH THROUGH THE BANK STATEMENT THAT IT HAS PA ID AN AMOUNT OF RS.2,76,94,515/- TO M/S JINDAL POLYFILMS LTD. WHIC H WOULD HAVE SERVED AS A DOCUMENTARY EVIDENCE SUPPORTING THE CONTENTION OF T HE ASSESSEE. THE CIT(A) FURTHER HELD THAT NO SUCH EXERCISE WAS CARRIED OUT EITHER AT THE ASSESSMENT STAGE ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 5 OR DURING THE APPELLATE STAGE. THE CIT(A) ALSO HEL D THAT IF M/S JINDAL POLYFILMS LTD. HAS SHOWN A HIGHER AMOUNT OF SALES TO THE ASS ESSEE COMPANY IN THE REVISED LETTER, THEN THEY SHOULD HAVE ALSO REVISED THE RET URN OF INCOME BY INCREASING THEIR PROFIT TO THAT EXTENT AND NO SUCH EXERCISE HA S BEEN CARRIED OUT BY M/S JINDAL POLYFILMS LTD. 9. LD. DR HAS NOT DISPUTED THAT THE LETTER DATED 28 .12.2010 CONTAINED IN PAPER BOOK PAGE NO. 80 TO 81 WAS SUBMITTED BEFORE T HE AO AND THE CIT(A). FROM THE LETTER DATED 12.11.2010 OF M/S JINDAL POLY FILMS LTD. ADDRESSED TO THE AO SHOWS THAT IN THE FY 2004-05, THE SALE OF JUNE 2 004 TO AUGUST 2004 AND JANUARY 2005 AND FEBRUARY 2005 HAVE BEEN REFLECTED BUT SALE OF SEPTEMBER 2004 TO DECEMBER HAS NOT BEEN MENTIONED THEREIN. I N THE REVISED LETTER DATED 28.12.2010, M/S JINDAL POLYFILMS LTD. HAS MENTIONED REVISED SALE OF SEPTEMBER 2014 AS RS.55,72,112/-. THIS FACT HAS NOT BEEN PRO PERLY CONSIDERED AND ADJUDICATED BY THE AUTHORITIES BELOW. WE ARE NOT I N AGREEMENT WITH THE OBSERVATIONS OF THE CIT(A) THAT THE ASSESSEE SHOULD HAVE ESTABLISHED THROUGH THE BANK STATEMENT THAT IT HAS PAID AN AMOUNT OF RS .2,76,94,515/- TO M/S JINDAL POLYFILMS LTD. AS THE ASSESSEE IS CLAIMING PURCHASE S OF RS. 2,66,65,078/-. WE ALSO NOTE THAT WITHOUT VERIFICATION OF RELEVANT CON FIRMATION IN A PROPER MANNER, IT CANNOT BE SAID AND PRESUMED THAT THE ASSESSEE HA S NOT ESTABLISHED THIS FACT THAT THE ASSESSEE MADE PURCHASES OF RS.2,66,65,078/- BY SUPPORTIVE EVIDENCE AND DETAILS INCLUDING BANK STATEMENT. THE CIT(A) WENT ON HYPER TECHNICAL APPROACH ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 6 WHILE OBSERVING THAT SELLER M/S JINDAL POLYFILMS LT D. SHOULD HAVE ALSO REVISED THEIR RETURN OF INCOME BY INCREASING THEIR PROFIT T O THE EXTENT OF HIGHER AMOUNT OF SALES TO THE ASSESSEE COMPANY OF THE PRESENT APP EAL BECAUSE THIS IS THE PREROGATIVE OF MS. JINDAL POLYFILMS LTD. AND ITS AO TO VERIFY AND EXAMINE THE HIGHER AMOUNT OF SALES AS RECONCILED AND RECTIFIED BY THE SELLER M/S JINDAL POLYFILMS LTD. FROM ITS ASSESSMENT RECORD. THIS EX ERCISE CANNOT BE CONDUCTED EITHER BY THE ASSESSEE OR BY THE AO OF THE PRESENT ASSESSEE. THE AUTHORITIES BELOW HAVE NOT DOUBTED THE CONTENTS AND AMOUNT OF S ALES BY M/S JINDAL POLYFILMS LTD. TO THE ASSESSEE AS STATED IN THE CON FIRMATION DATED 28.12.2010, HENCE, THE SAME CANNOT BE REJECTED AT THE THRESHOLD BY MERELY HOLDING THAT THE CONFIRMATION IS AN AFTERTHOUGHT ONLY BECAUSE IT WAS FILED AFTER MORE THAN TWO YEARS. THE AO SHOULD HAVE VERIFIED AND RECONCILED THE SAME FROM THE BANK STATEMENT OF THE ASSESSEE AND ALSO BY VERIFYING THE AMOUNT PAID TO M/S JINDAL POLYFILMS LTD. BY THE ASSESSEE TOWARDS PURCHASES PE RTAINING TO RELEVANT FINANCIAL YEAR I.E. 2004-05 RELATED TO AY 2005-06, THE ASSESSMENT YEAR UNDER CONSIDERATION. 10. IN VIEW OF ABOVE, WE OBSERVE THAT THE REVENUE A UTHORITIES FAILED TO APPRECIATE THE RECTIFICATION AND RECONCILIATION GIV EN BY THE SELLER M/S JINDAL POLYFILMS LTD. REGARDING REVISED SALE AMOUNT OF SEP TEMBER 2004 IN A PROPER AND JUDICIOUS MANNER. THUS, WE ARE OF THE CONSIDERED O PINION THAT THE QUANTIFICATION OF AMOUNT OF PURCHASES OF THE ASSESS EE DURING F.Y. 2004-05 ITA 3588/DEL/2012 ASSTT.YEAR: 2005-06 7 REQUIRES PROPER AND DETAILED VERIFICATION AND EXAMI NATION AT THE END OF AO AND, THEREFORE, THE ISSUE IS RESTORED TO THE FILE OF AO WITH A DIRECTION THAT THE AO SHALL EXAMINE AND VERIFY THE AMOUNT OF PURCHASES OF THE ASSESSEE EMERGED FROM BOOKS OF ACCOUNTS, CONFIRMATION AND BANK STATEMENT ETC., PROVIDING OPPORTUNITY OF BEING HEARD FOR THE ASSESSEE AND WITHOUT BEING P REJUDICED WITH THE EARLIER ASSESSMENT ORDER AND IMPUGNED ORDER. ACCORDINGLY, SOLE GROUND NO. 6(I) IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON GR OUND NO. 1 TO 5 IS PARTLY DISMISSED AND PARTLY DEEMED TO BE ALLOWED FOR STATI STICAL PURPOSES ON GROUND NO. 6(I) OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 14 TH NOVEMBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR