DCIT, Circle-II(I), V. Fena Ltd.,

ITA 3966/DEL/2001

• Counselvise Citation: 396620114 RSA 2001
• Duration Of Justice: 10 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-04-2012
• Assessment Year: 1998-1999
• Appeal Filed On: 05-11-2001
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Assessee Lawyers: SAMER ROHTAGI CAS; SSH RAJ KUMAR
• Keywords: Bogus purchase; Search and seizure; Block assessment; Revenue expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 3966/DEL/2001 ASSESSMENT YEAR: 1998-99 DEPUTY COMMISSIONER OF IT, VS. M/S. FENA LIMITED, CIRCLE 11(1), 237 OKHLA INDUSTRIAL AREA, NEW DELHI. PHASE-I, NEW DELHI. (PAN: NIL) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RIS GILL , CIT(DR) RESPONDENT BY: S/SH. RAJ KUMAR & SAMER ROHTAGI, CAS ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 13.08.2001 PASSED FOR ASSESSMENT YEAR 1998-99. IN THE FIRST GROUND OF APPEAL, REVENUE HAS PLEADED THAT LE ARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.2,53,965. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS INCORPORATED AS A PRIVATE LIMITED COMPANY IN THE YE AR 1986 UNDER THE NAME AND STYLE OF M/S. SYNDET & CHEMICALS IND. PVT. LTD. ON 9 TH MAY 1997. IT HAS CHANGED ITS NAME TO M/S. FENA LIMITED. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 3 RD OF SEPTEMBER, 1997 AND A BLOCK ASSESSMENT UNDER SEC. 158BC WAS PASSED ON 27.9.1999. THE 2 ASSESSEE HAS FILED THE RETURN FOR ASSESSMENT YEAR 1 998-99 ON 30 TH NOVEMBER 1998 DECLARING A TOTAL INCOME OF RS.273,78,895. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, LEARNED ASSESSING OFFICER H AS OBSERVED THAT IN THE BLOCK ASSESSMENT INQUIRIES WERE MADE REGARDING THE ADVERTISEMENT EXPENSES BOOKED BY THE ASSESSEE IN THE NAME OF SPARK ADVERTI SER. THE ASSESSING OFFICER HAS NOTED THAT EXPENSES OF RS.25,39,322 HAV E BEEN DEBITED BY THE ASSESSEE FROM FINANCIAL YEAR 1990-91 UP TO 01.04.19 97 TO 3 RD OF SEPTEMBER, 1997. THESE WERE THE AMOUNTS RAISED BY M/S. SPARK A DVERTISER UNDER DIFFERENT BILLS IN THE DIFFERENT YEARS. ASSESSING O FFICER ON AN ANALYSIS OF THESE BILLS AND OTHER EVIDENCE, ARRIVED AT A CONCLU SION THAT THESE WERE TREATED AS BOGUS IN THE BLOCK ASSESSMENT ORDER. THE PERIOD FROM 4 TH OF SEPTEMBER 1997 UP TO 31.3.1998, IS INVOLVED IN THE PRESENT AP PEAL BECAUSE PERIOD PRIOR TO 3 RD OF SEPTEMBER, 1997 HAS BEEN CONSIDERED BY THE ASSE SSING OFFICER IN THE BLOCK ASSESSMENT. ON THE BASIS OF HIS OUTCOME I N THE BLOCK ASSESSMENT, HE WORKED OUT THE EXPENSES INCURRED ON ADVERTISEMEN T THROUGH M/S. SPARK ADVERTISER FOR THE PERIOD 4 TH SEPTEMBER, 1997 UP TO 31.3.1998 AND WORKED OUT SUCH EXPENSES AT RS.2,53,965. ASSESSING OFFICER HAS MADE THE ADDITION OF THIS AMOUNT. 3 3. ON APPEAL, LEARNED CIT(APPEALS) HAS DELETED THE ADDITION ON THE GROUND THAT THE TOTAL ADDITION MADE IN THE BLOCK AS SESSMENT FOR A SUM OF RS.25,39,322 HAS BEEN DELETED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE ORDER OF THE ITA T PASSED IN IT(S.S)A NO.136/DEL/2001 AND C.O. NO. 71/DEL/2002 FOR THE BL OCK PERIOD STARTING FROM 01.04.1987 AND ENDING ON 3 RD SEPTEMBER, 1997. HE POINTED OUT THAT THE ADDITION IN THE PRESENT ASSESSMENT YEAR IS BEING MA DE BY THE ASSESSING OFFICER ON AN ESTIMATE BASIS PERTAINING TO THAT AMO UNT WHICH COULD NOT BE INCLUDED IN THE BLOCK ASSESSMENT. NOW, IN THE BLOCK ASSESSMENT, THE MAIN ADDITION STANDS DELETED AND THE ITAT UPHELD THE ORD ER OF THE LEARNED CIT(APPEALS). HE DREW OUR ATTENTION TOWARDS PAGE 68 OF THE PAPER BOOK WHERE DISCUSSION MADE BY THE ITAT IN PARAGRAPH 3.2 IS AVAILABLE. LEARNED DR WAS UNABLE TO CONTROVERT THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE OBSERVATIONS OF THE ITAT READ AS UNDER: 4 3.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND R IVAL SUBMISSIONS. WE FIND THAT THE ASSESSMENT ORDER DOES NOT REFER TO ANY SEIZED MATERIAL IN RESPECT OF M/S. SPARK ADVERTISERS. IT IS STATED THAT ENQUIRIES WERE MADE REGARDING ADVERTISEMENT EXPENDITURE BOOKED IN THE NAME OF M/S. SPARK ADVERTISERS. THUS, THE AMOUNT STOOD DEBI TED IN THE BOOKS AND IN RESPECT THEREOF NO INCRIMINATING DOCUMENT WA S STATED TO BE FOUND IN THE COURSE OF SEARCH. IN SUCH A CASE, NO U NDISCLOSED INCOME CAN BE COMPUTED, AS HELD IN THE CASE OF RAVI KANT ( SUPRA). RELYING ON THAT DECISION, IT IS HELD THAT THE A.O. ERRED IN CO MPUTING UNDISCLOSED INCOME IN RESPECT OF EXPENDITURE INCURRED ON ADVERT ISEMENT THROUGH M/S. SPARK ADVERTISERS. THUS, GROUND NO.3 IS ALSO D ISMISSED. 6. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT REV EALS THAT THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT DISCUSSION RAT HER HE MADE REFERENCE TO THE BLOCK ASSESSMENT AND HOW HE MADE THE ADDITION O F THIS SMALL AMOUNT OF RS.2,53,965 WHICH PERTAINS TO THE PERIOD FROM 4 TH SEPTEMBER, 1997 TO 31.3.1998. THUS, IN OUR OPINION, THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE AND NO INTERFERENCE IS CALLED FOR IN T HE ORDER OF THE LEARNED CIT(APPEALS). THEREFORE, FIRST GROUND OF APPEAL IS REJECTED. 7. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS,92,82,843. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITT ED THAT THIS ISSUE IS ALSO 5 COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE ITAT PASSED IN THE BLOCK PERIOD BECAUSE THE ASSESSING OFFICER HAS MADE THE ADDITION FOR THE PERIOD FROM 4 TH SEPTEMBER 1997N TO 31.3.1998 IN THIS ASSESSMENT YE AR. THE MAIN ADDITION MADE BY THE ASSESSING OFFICER IN THE BLOCK PERIOD HAS ALREADY BEEN DELETED. HE ALSO POINTED OUT THAT A SIMILAR AD DITION WAS MADE IN ASSESSMENT YEAR 2001-02 WHICH HAS ALSO BEEN DELETED BY THE ITAT IN ITA NO.4218/DEL/2004. THE ORDER OF THE ITAT HAS BEEN UP HELD BY THE HON'BLE DELHI HIGH COURT IN ITA NO.24 OF 2009. HE PLACED ON RECORD BOTH THESE ORDERS. ON THE OTHER HAND, LEARNED DR RELIED UPON T HE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE BRIEF FACTS OF THE CASE ARE T HAT ACCORDING TO THE ASSESSING OFFICER, DURING THE COURSE OF SEARCH, CER TAIN PAPERS WERE SEIZED FROM THE MAIN OFFICE OF FENA GROUP WHICH REVEALED T HAT FENA LTD. WAS DEFECTO MANAGER AND CONTROLLER OF AFFAIRS OF UTKARS H UDYOG SAMITI. THE UTKARSH UDYOG SAMITI HAD PURCHASED ACID SLURRY FROM KANISKH CHEMICALS PVT. LTD., A SISTER CONCERN. ASSESSING OFFICER HAS OBSERVED THAT UTKARSH UDYOG SAMITI HAD INFLATED ITS PURCHASES BY SHOWING SUCH BOGUS PURCHASES FROM SISTER CONCERN AND CONSEQUENTLY PURCHASES OF T HE ASSESSEE HAD BEEN 6 INFLATED. HE MADE AN ADDITION OF RS.92,82,843 FOR T HE PERIOD PERTAINING TO 4.9.1997 UP 31.3.1998. ITAT HAS CONSIDERED THIS ISS UE IN THE BLOCK ASSESSMENT WHERE IT HAS DELETED AN ADDITION OF RS.3 8,97,725 AND RS.1,10,11,670 FOR ASSESSMENT YEARS 1997-98 AND 199 8-99. THE DISCUSSION OF THE ITAT READS AS UNDER: 4.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS MADE BEFORE US. FROM THE ORDER OF THE TRIBUNAL IN THE CA SE OF THE UTKARSH (SUPRA), IT IS SEEN THAT THE DISALLOWANCE OF PURCHA SES IN THAT CASE FROM KANISHKA CHEMICALS (P) LTD. WAS DELETED. CONSEQUENL TY, IT CAN BE SAID THAT THE UTKARSH HAD PRODUCED THE GOODS, WHICH WERE SOLD TO THE ASSESSEE. THUS, THE ADDITIONS MADE BY THE A.O. CANN OT BE SUSTAINED IN THE LIGHT OF THE ORDER IN THE CASE OF THE UTKARSH. THUS, THIS GROUND IS ALSO DISMISSED. 9. ON AN ANALYSIS OF THE ITATS ORDER IN IT(S.S) A NO.136/DEL/2001 AND C.O. NO.71/DEL/2002, ORDER PASSED IN ITA NO.4218/DE L/04 AND THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN ITA NO. 24 OF 2009 PASSED IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2001-0 2, WE ARE OF THE OPINION THAT SIMILAR ADDITIONS HAVE BEEN MADE BY THE ASSESS ING OFFICER IN OTHER ASSESSMENT YEARS BY TREATING THE PURCHASES BY UTKAR SH UDYOG SAMITI ALLEGED TO BE ON BEHALF OF THE ASSESSEE AS BOGUS. IN THESE ORDERS, THE PURCHASES HAVE BEEN TREATED AS GENUINE AND ADDITIONS MADE HAVE BEE N DELETED. IN THE PRESENT APPEAL, ONLY A PART PERIOD IS BEING INVOLVED I.E. 4 TH SEPTEMBER 1997 UP TO 7 31.3.1998, THE ADDITIONS PRIOR TO 4 TH SEPTEMBER 1997 EVEN IN THIS ASSESSMENT YEAR ON SIMILAR GROUND HAS BEEN DELETED BY THE LEAR NED CIT(APPEALS) AND THE ORDER HAS BEEN UPHELD BY THE ITAT. CONSIDERING ALL THE ASPECTS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL RAISED BY THE REVENUE. IT IS REJECTED. 10. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.98,255. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD THAT ASS ESSEE HAS MADE A PAYMENT TO OKHLA, PHASE-I & II, INDUSTRIES CETP SOCIETY FOR INSTALLATION OF COMMON AFFLUENT TREATMENT PLANT AS DIRECTED BY THE HON'BLE SUPREME COURT. IT HAD CLAIMED DEDUCTION U/S. 35AC OF THE ACT. HOWEVER, LA TER ON, CHANGED THE BASE OF ITS CLAIM AND CONTENDED THAT IT BE ALLOWED AS A REVENUE EXPENDITURE BECAUSE THE EXPENDITURE HAD BEEN INCURRED AS PER TH E DIRECTIONS OF THE HON'BLE SUPREME COURT. IT IS AN AMOUNT PAID TO A SO CIETY AS CONTRIBUTION FOR INSTALLATION OF POLLUTION CONTROL PLANT. THE PLANT WOULD BE HELD BY THE SOCIETY AND, THEREFORE, EXPENSES DESERVES TO BE ALLOWED AS A REVENUE EXPENDITURE. LEARNED CIT(APPEALS) HAS CONSIDERED THE CLAIM OF AS SESSEE AND ALLOWED THE DEDUCTION. 8 11. BEFORE US, LEARNED DR HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS). ON DUE CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES, WE FIND THAT THE ASSESSING OFFICER H AS DENIED THE CLAIM ON THE GROUND THAT NECESSARY CERTIFICATE UNDER SEC. 35 AC OF THE ACT HAS NOT BEEN FILED. LEARNED CIT(APPEALS) HAS ALLOWED THE CL AIM UNDER SEC. 37(1) OF THE ACT. CONSIDERING THE PAYMENT MADE BY THE ASSESS EE AS A CONTRIBUTION AND THE CIRCUMSTANCES UNDER WHICH IT WAS MADE, WE ARE O F THE VIEW THAT IT IS AN EXPENDITURE INCURRED BY THE ASSESSEE IN CONNECTION WITH THE BUSINESS OTHERWISE ITS BUSINESS COULD NOT BE RUN. LEARNED CI T(APPEALS) HAS RIGHTLY ALLOWED THE DEDUCTION AND NO INTERFERENCE IS CALLED FOR IN HIS ORDER. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 04.05.20 12 SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04/05/2012 MOHAN LAL 9 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR