M/s. Priya Tissue Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4239/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6773 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 01-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Opportunity of being heard; Corroborative evidences; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-II NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO. -4239/DEL/2015 (ASSESSMENT YEAR-2010-11) PRIYA TISSUE PVT.LTD., 13/34, 4 TH FLOOR, W.E.A. KAROL BAGH, NEW DELHI-110005. PAN-AACCP7231P (APPELLANT) VS DCIT, CENTRAL CIRCLE-4, NEW DELHI ( RESPONDENT) ASSESSEE BY SH. ANUNAV KUMAR, ADV. REVENUE BY MS. ANIMA BARNWAL, SR. DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 11.02.2015 OF CIT(A)-30, NEW DELHI PERT AINING TO 2010-11 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THAT THE CIT(A) ERRED IN PASSING THE IMPUGNED O RDER OBSERVING THAT THE COMPANY WAS A DUMMY / PAPER COMPANY AND, THEREFORE, NO GENUINE EXPENSES HAD BEEN INCURRED WHEREAS HE HAS CONFIRMED THE TAXABILITY OF INTEREST INCOME OBSERVING THE SAME TO BE REAL INCOM E, WHICH WAS RS.24,73,843/- AND UPHOLDING THE TAXABILITY OF THE SAME WITHOUT APPRECIATING THAT ABOVE OBSERVATION OF AO / CIT(A) ARE CONTRADIC TING TO EACH OTHER. 2. THAT THE CIT(A) FAILED TO APPRECIATE THAT ONCE THE APPLICANT HAD EARNED THE INTEREST INCOME OF RS.24,73,843/-, HE WOULD HAV E OBVIOUSLY INCURRED EXPENDITURE ON PAYMENT OF SALARY ETC. AND, THEREFOR E, THERE WAS NO BASIS FOR DISALLOWING TOTAL SALARY EXPENSES AMOUNTING TO RS.2 3,98,000/- DEBITED TO P & L ACCOUNT. 3. THAT THE CIT(A) ALSO ERRED IN NOT ALLOWING ADJOURNM ENT IN THE CIRCUMSTANCE WHEN MR. TARUN GOYAL WAS NOT AVAILABLE TO PROVIDE THE DETAILS WHEN ADMITTEDLY TARUN GOYAL WAS LOOKING AFTER THE A FFAIRS OF THE COMPANY AND HAD ALSO APPEARED BEFORE THE AO AND, ACCORDINGLY, F AILED TO PROVIDE REASONABLE OPPORTUNITY TO THE APPLICANT. 4. THAT THE ORDER PASSED BY CIT(A) IS UNJUSTI FIABLE, UNREASONABLE AND BAD IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND SAME DESERVES TO BE SET ASIDE AND MATTER MAY BE RESTORED TO THE FILE OF AO / CIT( A) TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY TO THE APPELLANT. 5. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND, WITHDRAW, MODIFY OR VARY ANY OF THE GROUNDS ROSE ABOVE ON OR BEFORE THE DATE OF HEARING. DATE OF HEARING 01.08.2016 DATE OF PRONOUNCEMENT 28 .10.2016 I.T.A .NO. -4239/DEL/2015 PAGE 2 OF 6 2. BOTH PARTIES HAVE BEEN HEARD. THE RECORD SHOWS THAT THE AO REQUIRED THE ASSESSEE TO SUPPORT ITS SALARY EXPENSES OF RS.23,98,000/-. THE AO HELD THAT DESPITE OPPORTUNITY THE ASSESSEE COULD NOT PRODUCE SUPPORTING DOCUMENTS. ACCORDINGLY DISALLOWANCE OF EXPENSES CLAIMED WAS MADE HOLDING THAT THE SAID COMPANY WAS ONE OF THE COMPANIES FLOATED BY SH. TARUN GOYAL AS ONE OF THE MANY PAPER COMPANIES WHO OWNED NO PHYSI CAL ASSETS. 3. THE ISSUE TRAVELLED IN APPEAL TO THE CIT(A). EVE N BEFORE THE CIT(A), IT WAS FOUND THAT DESPITE SEEKING ADJOURNMENTS, SH. ANUNAV KUMAR, APP EARING ON BEHALF OF THE ASSESSEE FAILED TO PUT UP ANY ARGUMENT LEADING TO CONFIRMING OF THE ADDITION MADE. THE RELEVANT EXTRACT FROM THE IMPUGNED ORDER IS REPRODUCED HEREU NDER:- 5.2. DECISION I HAVE CONSIDERED THE ASSESSMENT ORDER FACTS OF TH E CASE & GROUND OF APPEAL. THE ASSESSING OFFICER HAS MADE THE ADDITIO N MAINLY ON THREE GROUNDS NAMELY:- I) IN PRECEDING FINANCIAL YEAR 2008-09, THERE WAS N O CLAIM OF EXPANSE UNDER THIS HEAD. II) IT HAS ALREADY BEEN PROVED THAT THE COMPANIES F LOATED BY SH. TARAN GOYAL ARE ONLY PAPER COMPANIES & NO ACTUAL BU SINESS IS CARRIED OUT BY THESE PAPER COMPANIES. HENCE QUESTI ON OF INCURRING EXPENSE DOES NOT ARISE. III) DURING THE ASSESSMENTS PROCEEDINGS THE APPELLA NT COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE THIS EXPENSE. DURING THE APPELLATE PROCEEDING NO NEW FACTS HAVE B EEN BROUGHT IN SPITE OF VARIOUS OPPORTUNITIES GIVEN TO THE APPELLANT. I HAVE PASSED APPEAL ORDER IN VARIOUS CASES OF TARU N GOYAL GROUP OF COMPANIES. SH. TARUN GOYAL HIMSELF HAS ADMITTED THAT HE IS PRO VIDING ACCOMMODATION ENTRIES THROUGH VARIOUS DUMMY/PAPER C OMPANIES. THE PRESENT APPELLANT IS ALSO ONE OF SUCH DUMMY CONCERN . IN THE STATEMENT OF FACTS FILED ALONGWITH FORM NO. 35, ARGUMENT IS TAKE N THAT AFTER SEARCH ONLY GENUINE BUSINESS ACTIVITY IS CARRIED OUT I.E. BUSIN ESS OF INVESTMENT. I DO NOT AGREE WITH THE ABOVE ARGUMENT. ONCE A COMPANY W AS ACCEPTEDLY A DUMMY/PAPER COMPANY. ITS ENTIRE BALANCE SHEET I.E. ASSET & LIABILITY ''WAS FICTITIOUS.*'UNLESS ENTIRE BALANCE SHEET AS ON DATE OF SEARCH IS RECASTED AFTER THE REMOVAL OF THOSE ACCOMMODATION ENTRIES, HOW IT CAN BE PRESUMED THAT SUBSEQUENT ACTIVITY ON BASIS OF EARLIER BALANCE SHE ET CAN BE TREATED AS GENUINE BUSINESS ACTIVELY. IN VIEW OF THE ABOVE, I AGREE WITH THE CONCLUSION OF THE ASSESSING OFFICER THAT THERE CANNOT BE ANY GENU INE EXPENSE. HOWEVER, SINCE THE APPELLANT HAS EARNED REAL INCOME BY-WAY O F INTEREST, THESE INTEREST INCOME HAS TO BE TAXED. CONSIDERING THE ENTIRE FACT S & CIRCUMSTANCE OF THE CASE, ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF S ALARY EXPENSE OF RS. 23,98,000/- IS HEREBY CONFIRMED. THIS GROUND OF APP EAL IS HEREBY DISMISSED. (EMPHASIS PROVIDED) I.T.A .NO. -4239/DEL/2015 PAGE 3 OF 6 4. THE LD.AR FILING A PAPER BOOK SUBMITTED THAT IT CONTAINS EVIDENCES IN THE FORM OF AFFIDAVITS FROM EACH OF THE EMPLOYEES WHICH HAD BEE N OBTAINED FOR FILING BEFORE THE CIT(A) AND FOR THE SAID PURPOSES, TIME HAD BEEN SOUGHT. A CCORDINGLY, IT WAS HIS SUBMISSION THAT THE CONCLUSIONS DRAWN IN HASTE BY THE CIT(A) LEAD T O THE PASSING OF THE ORDER. ADDRESSING GROUND NO.3 RAISED, IT WAS SUBMITTED THAT THE EVID ENCES WHICH THE ASSESSEE WANTED TO PLACE BEFORE THE CIT(A) FOR WHICH PURPOSES TIME HAD BEEN SOUGHT ARE CRUCIAL FOR DECIDING THE ISSUE AND THE OPPORTUNITY TO PLACE THEM ON RECO RD HAS BEEN DENIED BY THE CIT(A). 4.1. CONSIDERING THAT THESE DOCUMENTS WERE NOT BEFO RE THE AO NOR WERE THEY BEFORE THE CIT(A) THUS ADMITTEDLY THESE WOULD CONSTITUTE FRESH EVIDENCES ACCORDINGLY THE LD.AR WAS REQUIRED TO SHOW WHY THEY SHOULD BE ADMITTED WITHOU T A PETITION UNDER RULE 29. 4.2. THE LD.AR SUBMITTED THAT OPPORTUNITY TO PLACE THEM BEFORE THE CIT(A) HAD BEEN SOUGHT AND TIME AS PER RECORD HAD BEEN SOUGHT FROM THE SAID AUTHORITY. THUS IT WAS HIS PRAYER THAT THEY MAY BE CONSIDERED FOR GRANTING RE LIEF AS THE ASSESSEE AS PER RECORD HAS STATED THAT HE HAS STARTED DOING LEGITIMATE BUSINES S. THE EVIDENCES IT WAS ELABORATED CONSIST OF AFFIDAVITS OF THE EMPLOYEES AND COPIES OF THEIR PAN CARD AT PAGES 52 TO 73; AND 74 TO 77 OF THE PAPER BOOK WHICH WOULD ESTABLISH TH AT THE ASSESSEE COMPANY WAS NOT A PAPER COMPANY. IN THESE CIRCUMSTANCES, IT WAS SUBM ITTED THE ADDITION ON FACTS WAS NOT WARRANTED. 5. THE LD.SR.DR SUBMITTED THAT THE ADDITION DESERVE S TO BE CONFIRMED AND AT BEST THE EVIDENCES CAN BE RESTORED TO THE AO AND NOT TO THE CIT(A) AS THESE ARE EVIDENCES WHICH WERE NEVER MADE AVAILABLE TO THE AO. HOWEVER IT WA S SUBMITTED THEY MAY NOT NOW BE CONSIDERED AT THIS STAGE FOR GRANT OF ANY RELIEF. 6. BOTH THE PARTIES HAVE BEEN HEARD. CONSIDERING T HE RESPECTIVE STANDS, I AM OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES O F THE CASE THE EVIDENCES WHICH THE I.T.A .NO. -4239/DEL/2015 PAGE 4 OF 6 ASSESSEE STATES IT HAD WANTED TO PLACE BEFORE THE C IT(A) AND ARE NOW PLACED IN THE PAPER BOOK FILED MAY BE ADMITTED IN THE INTERESTS OF JUST ICE. HOWEVER, ACCEPTING THE DEPARTMENTAL REQUEST THE EVIDENCES ADMITTEDLY NOT AVAILABLE TO THE AO ARE RESTORED TO THE AO FOR HIS CONSIDERATION WITHOUT ANY COMMENT ON THEIR GENUINEN ESS OR OTHERWISE. 6.1. WHILE SO DIRECTING IT MAY NOT BE OUT OF PLACE TO SUM UP THE CLAIM PUT FORTH BY THE LD.AR NAMELY THAT THE ASSESSEE WAS ENGAGED IN THE A CTIVITY OF SHARE CAPITAL. CONSIDERING THE SAID CLAIM PUT FORTH IN THE COURSE OF THE ARGUM ENTS, I FIND THAT THE TAX AUTHORITIES HAVE NOT MADE ANY EFFORT TO REFER ANYWHERE IN THE IMPUGNED O RDER AS TO WHAT WAS THE STATED BUSINESS OF THE COMPANY AS PER ITS CONSTITUTION. FURTHER, IT IS SEEN THAT NOTHING HAS BEEN PLACED ON RECORD BY THE LD.AR ALSO TO SUPPORT THE ORAL ASSERT ION. THE ISSUE NEEDS TO BE ADDRESSED ON FACTS AND NOT AS PER CONJECTURES AND SURMISES. THE LD.AR AS PER RECORD IT IS SEEN HAS TAKEN TWO PLEAS; THE FIRST PRAYER BEING THAT LEGITIMATE BUSINESS WAS BEING DONE BY THE ASSESSEE STATED TO BE EVIDENCED BY AFFIDAVITS OF EMPLOYEES W HOSE IDENTITY IS SOUGHT TO BE ESTABLISHED BY PAN CARDS ETC; AND SECONDLY AS AN ALTERNATE ARGU MENT WITHOUT PREJUDICE THAT SUBSEQUENTLY GENUINE BUSINESS WAS CONDUCTED. I FIN D THAT IN ORDER TO ADDRESS THE ARGUMENTS IT WOULD BE NECESSARY TO FIRST ADDRESS ON FACTS WHAT WAS THE STATED BUSINESS OF THE ASSESSEE COMPANY AS PER INDEPENDENT THIRD PARTY EVIDENCES BY WAY OF DOCUMENTS FILED BY THE ASSESSEE BEFORE THE ROC. IT IS NECESSARY TO CALL FOR AND EXAMINE THE MEMORANDUM AND/OR ARTICLE OF ASSOCIATION ESPECIALLY THE OBJEC TS CLAUSE OF THE ASSESSEE WHICH WOULD THROW LIGHT ON WHAT WAS THE BUSINESS OF THE ASSESSE E. IT IS ONLY THEN THE SUPPORTING EVIDENCES WOULD BE CAPABLE OF THROWING LIGHT ON THE STATED CLAIM THAT THE BUSINESS WAS CARRIED ON. IT IS SEEN THAT NONE OF THESE FACTS AR E AVAILABLE ON RECORD. 6.2. IT MAY ALSO NOT BE OUT OF PLACE TO TAKE NOTE O F THE PREVALENT PUBLIC PERCEPTIONS THAT THE FILING OF AFFIDAVITS BY THE PARTIES IS A ROUTIN E EXERCISE WHEREIN PERCEIVED MINOR DEVIATIONS FROM TRUTH ARE MINOR TRANSGRESSIONS WITH NO SERIOUS CONSEQUENCES FOR THE DEPONENT. I.T.A .NO. -4239/DEL/2015 PAGE 5 OF 6 THE GENERAL PERCEPTION THAT CARELESS OR DELIBERATE MIS-STATEMENT OF FACTS AND PLACING ON RECORD MISLEADING STATEMENT OF FACTS IS A ROUTINE HARMLESS EXERCISE WITH NO CONSEQUENCES IS AN INCORRECT APPRECIATION OF LAW. THE INCORRECT AND ERRONEOUS BELIEF THAT NO SERIOUS CONSEQUENCES ARE VISITED UPON SUCH DEPONENTS MAY H AVE ITS SEED IN EXAMPLES IN THE SOCIAL MILEU WHERE PERSONS APPEAR TO GO SCOT-FREE D ESPITE HAVING DANGEROUSLY FLIRTED WITH THE TRUTH. THESE SOCIAL PERCEPTIONS REFERRED TO IN MEDIA MAY HAVE LENT A SEMBLANCE OF APPROVAL TO THE CREDENCE THAT FALSE STATEMENTS IS A ROUTINE CASUAL EXERCISE WHICH IS GENERALLY OVER-LOOKED BY THE AUTHORITIES. HOWEVER, I FIND IT MAY NOT BE OUT OF PLACE TO HIGHLIGHT THE FACT THAT JUST BECAUSE THE AUTHORITIE S DO NOT ADDRESS THE INCORRECT ASSERTIONS IN AN AFFIDAVIT BY CARRYING THE WRONG AFFIDAVITS TO TH EIR LOGICAL CONCLUSION DOES NOT LAY DOWN THE LAW THAT FILING OF FALSE AFFIDAVITS IS A HARMLESS E XERCISE. THE FACT THAT THE STATE MAY BE OVER BURDENED WITH MEETING THE DAILY, MONTHLY TARGETS OF THEIR ASSIGNED TASK DOES NOT ABSOLVE THE CRIME OF FALSE AFFIDAVIT AS THE INACTION BY THE QUA SI JUDICIAL AUTHORITIES DOES NOT PROTECT A PERSON FOUND TO HAVE COMMITTED PERJURY FROM PROSECU TION. FOR THE PURPOSES OF THE PRESENT CASE IT MAY ALSO NOT BE OUT OF PLACE TO STATE THAT THE FILING OF SUCH AN AFFIDAVIT IS NOT A REQUIREMENT OF LAW AS THERE IS NO SUCH STATUTORY RE QUIREMENT TO DO SO. IN STRICT TERMS, IT MAY NOT CONSTITUTE AN EVIDENCE. THE AFFIDAVIT IS ONLY IN SUBSTITUTION OF A DIRECT PRIMARY EVIDENCE WHICH HAS NOT BEEN FILED. IF A FACT WHICH IS CAPAB LE OF BEING DEMONSTRATED BY AN EVIDENCE BY WAY OF A DOCUMENT OR FACT THEN AN AFFIDAVIT CANN OT BE CONSIDERED TO BE ACCEPTABLE EVIDENCE FOR SUCH DOCUMENT. IN THE FACTS OF THE PR ESENT CASE, IT CAN BE AT BEST CONSIDERED TO BE A WRITTEN STATEMENT OF FACTS VOLUNTARILY MADE BY AN AFFIANT OR DEPONENT UNDER AN OATH OR AFFIRMATION ADMINISTERED BY A PERSON AUTHORIZED TO DO SO BY LAW. SINCE THE AFFIDAVITS FILED IN THE PRESENT CASE ARE AT THE INSTANCE OF THE TAX PAYER AND NOT MANDATED UNDER ANY LAW, THE ASSESSING OFFICER IN ORDER TO HIGHLIGHT THE SER IOUS CONSEQUENCES WHICH MAY FOLLOW A FALSE AFFIDAVIT OR STATEMENT UNDER OATH REFERRING T O SECTIONS 191, 193, 195, 199 OF THE INDIA I.T.A .NO. -4239/DEL/2015 PAGE 6 OF 6 PENAL CODE WHICH MAKES FILING A FALSE AFFIDAVIT A C RIMINAL OFFENCE, MAY REQUIRE THE ASSESSEE IN ITS OWN SELF INTEREST TO ENSURE THAT THE DEPONEN TS ARE AWARE THAT FILING OF FALSE AFFIDAVITS HAS SERIOUS CONSEQUENCES. THE CLAIM OF ANY FACT OR KNOWLEDGE KNOWN TO THE DEPONENT TO BE FALSE WHICH HE BELIEVE TO BE FALSE AND/OR ATLEAS T DID NOT KNOW TO BE TRUE IS OPEN TO THE CHALLENGE OF PERJURY WHICH THOUGH TRADITIONALLY MAY NOT BE INVOKED BY THE LAW ENFORCEMENT AGENCIES IN EVERY SITUATION DOES NOT MEAN THAT IT I S LEGALLY ACCEPTABLE TO FILE IRRESPONSIBLE AFFIDAVITS. ASSERTION OF FALSE FACTS KNOWINGLY IS A CRIMINAL OFFENCE. 6.3. ACCORDINGLY CONSIDERING THE SUBMISSIONS OF THE PARTIES, THE ISSUE IS SET ASIDE AND RESTORED BACK TO THE AO PERMITTING THE ASSESSEE FOR FILING FRESH EVIDENCES ON SUPPORT OF THE CLAIM. NEEDLESS TO STATE THAT THE AO SHALL PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD.. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2016. SD/- (DIVA SING H) JUDICIAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI