Mohan Clothing Co. Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4304/DEL/2011

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2750 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 28-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Depreciation; Period of limitation; Accommodation entries; Reassessment proceedings; Set aside
• Section: 195; 250; 72; 13; 153; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.6093/DEL/2010 ASSESSMENT YEAR: 2002-03 AND ITA NO.4304/DEL./2011 ASSESSMENT YEAR: 2003-04 M/S. MOHAN CLOTHING CO. PVT. LTD, 2E/22, JHANDEWALAN EXTN., NEW DELHI VS. ACIT, CIRCLE-5(1), NEW DELHI PAN :AAACM1374L (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: OUT OF THE ABOVE TWO APPEALS, THE APPEAL BEARING IT A NO. 6093/DEL./2010 FOR ASSESSMENT YEAR 2002-03 HAS ARIS EN DUE TO REMISSION BACK BY THE HONBLE DELHI HIGH COURT VIDE DECISION DATED 29/08/2012 FOR DECIDING ON MERIT. THE APPEAL BEARING ITA NO. 4304/DEL./2011 FOR ASSESSMENT YEAR 2003-04 HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 0 9/08/2011 APPELLANT BY SHRI K. SAMPATH, ADV. SHRI RAJA KUMAR, ADV. RESPONDENT BY MS. RAKHI VIMAL, SR. DR DATE OF HEARING 21.01.2020 DATE OF PRONOUNCEMENT 17.03.2020 2 ITA NO.6093/DEL./2010 & 4304/DEL/2011 PASSED BY THE LEARNED CIT(APPEALS)-VIII, NEW DELHI [IN SHORT THE LD. CIT(A)]. IN BOTH THESE APPEALS OF SAME ASSESSE E, IDENTICAL ISSUES ARE INVOLVED, THEREFORE, BOTH WERE HARD TOGE THER AND DISPOSED OFF BY THE OF THIS CONSOLIDATED ORDER FOR CONVENIENCE. ITA NO.6093/DEL/2010 ASSESSMENT YEAR: 2002-03 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE BEARIN G ITA NO. ITA NO.6093/DEL./2010 FOR ASSESSMENT YEAR 2002-03. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UN DER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE FOLLOWIN G ACTIONS OF THE ASSESSING OFFICER:- (I) INITIATING PROCEEDINGS U/S 147 OF THE INCOME TA X ACT AND COMPLETING THE ASSESSMENT U/S 147/143(3) OF THE ACT ON INCOME OF RS.43,68,472/-; (II) MAKING AN ADDITION OF RS.38,99,527/- ON ACCOUN T OF ALLEGED UNDISCLOSED PURCHASE ON SURMISES AND CONJECTURES; A ND (III) MAKING AN ADDITION OF RS.38,995/- AS UNEXPLAI NED EXPENDITURE ALLEGEDLY BY WAY OF COMMISSION PAID EVE N THOUGH THERE WAS NO MATERIAL IN SUPPORT OF SUCH ALLEGATIONS. 2.1 THIS APPEAL WAS EARLIER DECIDED BY THE TRIBUNAL VI DE ORDER DATED 14/10/2011 WHEREIN THE FIRST GROUND OF APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT ISSU ANCE OF NOTICE U/S 148 AND THE COMMUNICATION AND FURNISHING OF THE REASONS WOULD GO HAND-IN-HAND. IT WAS FURTHER HELD THAT THE REASONS WERE TO BE SUPPLIED TO THE ASSESSEE BEFORE THE EXPIRY OF THE PERIOD OF THE SIX YEARS. THE TRIBUNAL QUASHED THE REASSESSMEN T ON THE GROUND THAT REASONS WERE NOT SUPPLIED BEFORE THE E XPIRY OF THE 3 ITA NO.6093/DEL./2010 & 4304/DEL/2011 SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT Y EAR. THE TRIBUNAL DID NOT ADJUDICATE THE GROUND NOS. (II) & (III) OF THE APPEAL. ON FURTHER APPEAL BY THE REVENUE, THE HONB LE DELHI HIGH COURT VIDE DECISION DATED 29/08/2012, AFTER CONSIDE RING VARIOUS PRECEDENTS ON THE ISSUE IN DISPUTE, SET ASIDE THE O RDER OF THE TRIBUNAL AND REMANDED THE MATTER BACK TO THE TRIBUN AL FOR DECIDING ON MERIT, OBSERVING AS UNDER: 7 . THIS COURT HAS CONSIDERED THE ARGUMENTS OF TH E PARTIES. THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE REVE NUE ARE EXACTLY ON THE ISSUE THAT ARISES IN THIS CASE. THE RELEVANT PR OVISIONS TO THE EXTENT THEY ARE MATERIAL, ARE REPRODUCED BELOW: '147. IF THE ASSESSING OFFICER HAS REASON TO BELIEV E THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LO SS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTE R IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : *** '148. BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, THE ASSESSING OFFI CER SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM TO FUR NISH WITHIN SUCH PERIOD... ***' 149 (1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR,-- (A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UNDER CLAUSE (B); (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAV E ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE 4 ITA NO.6093/DEL./2010 & 4304/DEL/2011 INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEE S OR MORE FOR THAT YEAR. *** THE SUPREME COURT EMPHASIZED THE NEED TO ISSUE NOTI CE, WITHIN THE PRESCRIBED PERIOD, IN R.K. UPADHYAYA V. SHANABHAI P . PATEL [1987] 166 ITR 163 (SC), IN THE FOLLOWING TERMS: 'SECTION 148(1) PROVIDES FOR SERVICE OF NOTICE AS A CONDITION PRECEDENT TO MAKING THE ORDER OF ASSESSMENT. ONCE A NOTICE IS ISSUED WITHIN THE PERIOD OF LIMITATIONS, JURISDICTI ON BECOMES VESTED IN THE INCOME-TAX OFFICER TO PROCEED TO REAS SESS. THE MANDATE OF SECTION 148(1) IS THAT REASSESSMENT SHAL L NOT BE MADE UNTIL THERE HAS BEEN SERVICE. THE REQUIREMENT OF ISSUE OF NOTICE IS SATISFIED WHEN A NOTICE IS ACTUALLY ISSUE D. IN THIS CASE, ADMITTEDLY, THE NOTICE WAS ISSUED WITHIN THE PRESCRIBED PERIOD OF LIMITATION AS MARCH 31, 1970, WAS THE LAS T DAY OF THAT PERIOD. SERVICE UNDER THE NEW ACT IS NOT A CON DITION PRECEDENT TO CONFERMENT OF JURISDICTION IN THE INCO ME-TAX OFFICER TO DEAL WITH THE MATTER BUT IT IS A CONDITI ON PRECEDENT TO MAKING OF THE ORDER OF ASSESSMENT. THE HIGH COURT I N OUR OPINION LOST SIGHT OF THE DISTINCTION AND UNDER A W RONG BASIS FELT BOUND BY THE JUDGMENT IN [1964]53ITR100(SC) .' IN G.K.N. DRIVESHAFTS (SUPRA), IT WAS HELD THAT: '[W]E CLARIFY THAT WHEN A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT IS ISSUED, THE PROPER COURSE OF ACTI ON FOR THE NOTICE IS TO FILE RETURN AND IF HE SO DESIRES, TO S EEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REA SONS, THE NOTICE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE O F NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SA ME BY PASSING A SPEAKING ORDER.' A.G.HOLDINGS (SUPRA) HELD THAT: 'THERE IS NO REQUIREMENT IN SECTION 147 OR SECTION 148 OR SECTION 149 ITA 317/2012 PAGE 5 THAT THE REASONS RE CORDED SHOULD ALSO ACCOMPANY THE NOTICE ISSUED UNDER SECTI ON 148. THE REQUIREMENT IN SECTION 149(1) IS ONLY THAT THE NOTICE UNDER SECTION 148 SHALL BE ISSUED. THERE IS NO REQU IREMENT THAT IT SHOULD ALSO BE SERVED ON THE ASSESSEE BEFOR E THE PERIOD OF LIMITATION. THERE IS ALSO NO REQUIREMENT IN SECT ION 148(2) THAT THE REASONS RECORDED SHALL BE SERVED AL ONG WITH 5 ITA NO.6093/DEL./2010 & 4304/DEL/2011 THE NOTICE OF REOPENING THE ASSESSMENT. THE REQUIRE MENT, WHICH IS MANDATORY, IS ONLY THAT BEFORE ISSUING THE NOTICE TO REOPEN THE ASSESSMENT, THE ASSESSING OFFICER SHALL RECORD HIS REASONS FOR DOING SO. AFTER THE DECISION OF THE SUP REME COURT IN GKN DRIVESHAFTS (INDIA) LTD. (SUPRA) THE ASSESSI NG OFFICER IS DUTY BOUND TO SUPPLY THE REASONS RECORDED FOR REOPE NING THE ASSESSMENT TO THE ASSESSEE, AFTER THE ASSESSEE FILE S THE RETURN IN RESPONSE TO THE NOTICE ISSUED UNDER SECTI ON 148 AND ON HIS MAKING A REQUEST TO THE ASSESSING OFFICER TO THAT EFFECT.' 8. THE DECISIONS CITED ABOVE POINT OUT THE FALLACY IN THE IMPUGNED ORDER. R.K. UPADHYAYA CLARIFIES THAT SERVING OF THE NOTICE IS A PRE- CONDITION TO MAKING THE ASSESSMENT ORDER UNDER SECT ION 148. IT IS NOT THE SERVICE OF NOTICE UPON THE ASSESSEE THAT CO NFERS JURISDICTION IN THE ASSESSING OFFICER TO REOPEN ASSESSMENT; INST EAD, HIS JURISDICTION IS DERIVED FROM THE CONDITIONS SPECIFI ED IN SECTION 147, VIZ. THE EXISTENCE OF REASONS TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT. THUS, SINCE THE NOTICE WAS ISSUED WITHI N THE SIX YEAR LIMIT PRESCRIBED UNDER SECTION 149, I.E., ON 27.3.2 009, THERE IS NO INFIRMITY WITH THE ASSUMPTION OF JURISDICTION BY TH E AO EVEN THOUGH THE SERVICE OF THE NOTICE WAS AFTER THE EXPIRY OF T HE SIX YEAR PERIOD. 9. SECONDLY, A.G. HOLDINGS, A DECISION OF AN EARLIE R DIVISION BENCH OF THIS COURT, ELUCIDATES THAT THERE IS NO REQUIREMENT UNDER THE ACT, OR UNDER EVEN THE JUDICIALLY LAID DOWN PROCEDURE TO FU RNISH THE ASSESSEE WITH THE 'REASONS TO BELIEVE' ON THE BASIS OF WHICH REASSESSMENT PROCEEDINGS UNDER SECTION 147 ARE INTI MATED. THE CONTENTIONS OF THE ASSESSEE, IN THIS REGARD, HAVE N O MERIT ARE THUS REJECTED. THE DECISION IN HARYANA ACRYLIC (SUPRA), ITA 317/2012 PAGE 6 BEING CONSISTENT WITH THAT IN G.K.N. DRIVESH AFTS (SUPRA), MERELY HELD THAT WHEN REASONS ARE SOUGHT, THEY SHOU LD BE SUPPLIED WITHIN REASONABLE TIME. IN HARYANA ACRYLIC THE REAS ONS WERE SUPPLIED MORE THAN THREE AND A HALF YEARS AFTER THE Y WERE SOUGHT. IN THE PRESENT CASE, HOWEVER, THE ASSESSEE FILED HIS R ESPONSE TO THE NOTICE UNDER SECTION 148 ON 10.4.2009. THE RECORD F URTHER REVEALS THAT THE REASONS RECORDED FOR REOPENING WERE MADE A VAILABLE TO THE ASSESSEE COMPANY ON 31.9.2009. THE REASSESSMENT ORD ER WAS MADE ON 15.12.2009, AND IT IS CLEAR FROM THE SAME T HAT THE ASSESSEE HAD ADEQUATE NOTICE OF THE 'REASONS RECORDED', AND HAD PRESENTED OBJECTIONS AGAINST IT. IT IS CLEAR THAT THE OPPORTU NITY THAT WAS CONCEIVED IN G.K.N. DRIVESHAFTS TO BE GIVEN TO ASSE SSEES BEFORE REASSESSMENT WAS SATISFACTORILY ACCORDED TO THE ASS ESSEE IN THE PRESENT CASE. HENCE, THERE WAS NO SHORTCOMINGS IN T HE REASSESSMENT PROCEEDINGS. 10. FOR THE ABOVE REASONS THIS COURT IS OF THE OPIN ION THAT THE TRIBUNAL'S ORDER CANNOT BE SUSTAINED. THE SAME IS A CCORDINGLY SET 6 ITA NO.6093/DEL./2010 & 4304/DEL/2011 ASIDE. THE MATTER IS REMANDED BACK TO THE TRIBUNAL, WHICH SHALL CONSIDER ASSESSEE'S APPEAL ON ITS MERITS AND DECIDE IN ACCORDANCE WITH LAW. 2.2 IN VIEW OF THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT, WE ARE REQUIRED TO ADJUDICATE THE GROUND NO. (II) AND (III) OF THE APPEAL ONLY. 3. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED ADDIT ION OF 38,99,527/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF UNDISCLOSED PURCHASES WHICH HAS BEEN CONFIRMED BY T HE LD. CIT(A). THE GROUND NO. 3 IS IN RELATION TO ADDITION OF 38,995/- AS UNEXPLAINED EXPENDITURE BY WAY OF COMMISSION PAID F OR ARRANGING THE ACCOMMODATION ENTRIES BILLS OF PURCHASE AMOUNTI NG TO 38,99,527/-. 3.1 THE BRIEFLY STATED FACTS QUA THE ISSUE IN DISPUTE A RE THAT THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE ADD ITIONAL COMMISSIONER OF INCOME-TAX, RANGE-14, MUMBAI. AS PE R THE INFORMATION, THE ASSESSEE HAD OBTAINED ACCOMMODATIO N PURCHASE BILLS OF 38,99,527/- FROM THREE PARTIES, NAMELY, SHRI RAKESH KUMAR M. GUPTA, PROP. OF M/S. MANOJ MILLS (RS.22,11 ,176/-); SMT. HEMA R GUPTA PROP. OF M/S AASTHA SILK INDUSTR IES (RS.5,00,013/-) AND SHRI MOHIT GUPTA PROP. OF M/S. SHREE RAM SALES AND SYNTHETICS (RS. 11,88,338/-), WHO WERE RU NNING THEIR ACTIVITIES OF ISSUING ACCOMMODATION ENTRIES BILLS F ROM THE PREMISES OF SHOP NO. 4, RAM GALLY, PANKAJ MARKET ,C HAMPA GALLY X-LANE, KALBA DEVI, MUMBAI-400002. SH. RAKESH KUMAR GUPTA, WHO WAS RESPONSIBLE FOR MANAGING AND CONTROLLING AL L THE AFORESAID CONCERNS, IN HIS STATEMENT RECORDED ON OA TH ADMITTED THAT HE WAS ENGAGED IN THE ACTIVITY OF PROVIDING AC COMMODATION 7 ITA NO.6093/DEL./2010 & 4304/DEL/2011 ENTRIES BILLS FOR THE PAST NINE YEARS AND EARNING C OMMISSION AT THE RATE OF 1% ON AMOUNT OF SALE BILLS ISSUED. HE A DMITTED THE MODUS OPERANDI OF ISSUING SALE BILLS ON THE REQUIREMENT OF THE PARTIES AFTER RECEIPT OF CHEQUE FOR THE AMOUNT AS P ER THE BILLS, WHICH WAS DEPOSITED IN THE BANK ACCOUNT AND SAME AM OUNT OF CASH WAS RETURNED TO THE PARTY CONCERNED AFTER REDU CING HIS COMMISSION CHARGES. HE ADMITTED THAT TO CORRELATE T HE SALES, THE PURCHASE BILLS WERE PREPARED BY HIMSELF BY GETTING THE BILL BOOK PRINTED IN THE NAME OF THE VARIOUS FIRMS. DURING TH E COURSE OF THE ASSESSMENT PROCEEDING THE ASSESSEE WAS ASKED TO JUS TIFY THE ABOVE REFERRED PURCHASES OF 38.99 LAKHS FROM THE CONCERNED PARTIES. THE ASSESSEE EXPLAINED THAT THESE PURCHASE S WERE GENUINE IN VIEW OF THE COPY OF THE BILLS, GOODS REC EIVED NOTES (GRN), ORDERS PLACED ON THE BROKERS FOR SUPPLY OF G OODS, PAYMENTS MADE BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE FURTHER SUBMITTED THAT DURING THE COURSE OF INCOME-TAX SURV EY AT THE PREMISES OF THE ASSESSEE ON 03/12/2002, UNEXPLAINED STOCK OF 1.36 CRORE WAS FOUND AND THE ASSESSEE ALREADY PAID ADVANCE TAX OF RS. 50 LAKHS AGAINST THAT ADDITIONAL STOCK AND T HUS NO ADDITION SHOULD BE MADE ON ACCOUNT OF UNEXPLAINED OR BOGUS P URCHASES. 3.2 ABOVE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER MAINLY ON THE GROUND THAT THE GOO DS WERE ALLEGEDLY PURCHASED FROM THE ABOVE THREE PARTIES AT MUMBAI, BUT THE ASSESSEE FAILED TO FILE ANY EVIDENCE AND PROOF OF TRANSPORTATION OF THOSE GOODS FROM MUMBAI TO GORGON, WHERE THE ASS ESSEES FACTORY IS LOCATED AND ALSO FAILED TO FILE EVIDENCE OF TRANSPORT EXPENSES INCURRED AGAINST THOSE PURCHASES. THE ASSE SSING OFFICER NOTED THAT THE ASSESSEE HAD FILED COPY OF 17 SALES BILLS OF THE 8 ITA NO.6093/DEL./2010 & 4304/DEL/2011 PARTIES BUT IN NONE OF THE BILLS MODE OF TRANSPORT, LR NUMBER, PACKING CHALLAN NUMBER, NAME OF THE AGENT, DOCUMENT TO WHICH SALES MADE ETC. HAD BEEN MENTIONED. HE ALSO OBSERVE D THAT BILL NUMBER WAS ALSO NOT PRINTED AND NUMBER WAS WRITTEN IN HAND. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE CO NFIRMATION OF ITS ACCOUNT FROM THE ABOVE THREE PARTIES, HOWEVER THE A SSESSEE FAILED TO FILE SAID CONFIRMATION. IN VIEW OF ABOVE FACTS, THE LEARNED ASSESSING OFFICER HELD THE PURCHASE OF 38.99 LAKHS AS UNEXPLAINED AND ALSO ADDED COMMISSION OF RS.38,995/ - AT THE RATE OF THE 1% OF UNEXPLAINED PURCHASES FOR GETTING THE ACCOMMODATION ENTRIES BILLS FROM SRI RAKESH KUMAR G UPTA. 3.4 DURING FIRST APPELLATE PROCEEDINGS, THE ASSESSEE W AS ALSO PROVIDED COPY OF STATEMENT OF SHRI RAKESH KUMAR GUP TA. BEFORE THE LD. CIT(A) ALSO, THE ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE TRANSFER OF GOODS FROM MUMBAI TO GURGAON, LOADING AND UNLOADING EXPENSES E TC. AFTER CONSIDERING THE ARGUMENTS OF THE LEARNED COUNSEL OF THE ASSESSEE, THE LD. CIT(A) UPHELD THE ADDITION IN DISPUTE OBSER VING AS UNDER: 4.3 FURTHER, IN THE COURSE OF APPELLATE PROCEEDING S, THE LEARNED COUNSEL FOR THE APPELLANT WAS REQUIRED TO PRODUCE T HE NECESSARY RECORDS AND PROVE THE PAYMENT OF FREIGHT, CARTAGE A ND LOADING AND UNLOADING EXPENSES, IF ANY, INCURRED BY THE APPELLA NT IN CONNECTION WITH THE PURCHASES ALLEGEDLY MADE FROM THE AFORESAI D CONCERNS CONTROLLED BY SH. RAKEHS KUMAR GUPTA. HOWEVER, THE LD. COUNSEL HAS FAIRLY CONCEDED THAT IT WAS NOT POSSIBLE TO COR RELATE ANY SUCH EXPENDITURE WITH SPECIFIC PURCHASES. THUS, THERE IS NO INDEPENDENT PROOF WHICH MAY SUPPORT THE PURCHASES FROM THE AFOR ESAID CONCERNS. AS SAID EARLIER, THE ACCOMMODATION PURCHASE BILLS A RE NORMALLY OBTAINED BY AN ASSESSEE EITHER TO UTILIZE THEM FOR UNDISCLOSED MANUFACTURING/PRODUCTION OR INFLATE THE COST OF PRO DUCTION. THEREFORE, IN THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT WAS REQUIRED TO SUBMIT A NOTE ON THE MANUFACTURING PROC ESS, SPECIFICALLY 9 ITA NO.6093/DEL./2010 & 4304/DEL/2011 EXPLAINING THE STAGES WHERE SHORTAGES/LEAKAGES/WAST AGES TAKE PLACE. HOWEVER, ON A CAREFUL EXAMINATION OF THE NOT E SUBMITTED BY THE APPELLANT COMPANY IT WAS FOUND THAT THERE WAS N O SYSTEMATIC/SCIENTIFIC METHOD TO RECORD THE AFORESAI D ITEMS OF SHORTAGES NOR THERE WAS ANY PLAUSIBLE EXPLANATION F OR SUCH SHORTAGES. THE ID. COUNSEL AS WELL AS SH. NIKHIL MO HAN, THE DIRECTOR COULD NOT GIVE ANY SPECIFIC REPLY RATHER A VAGUE AN D INDIRECT AND UNSPECIFIC EXPLANATION WAS GIVEN BY THEM TO THE EFF ECT THAT IN SOME CASES SHORTAGE IS ON ACCOUNT OF DEFECTIVE RAW MATER IAL RECEIVED FROM THE SUPPLIERS OR THE SHRINKAGES AND DEFECTS POINTED OUT BY THE JOB WORKERS. IT WAS ALSO EXPLAINED THAT DEFECTIVE PIECE S AND CUTTINGS ETC ARE DISPOSED OF IN BULK/ BY HOLDING LOCAL SALES ETC . THEREFORE, IN MY VIEW, THE APPELLANT IS NOT PROPERLY RECORDING THE D ETAILS OF PRODUCTION ACTIVITIES, PERHAPS, DELIBERATELY, AND THE SAME IS PROVIDING REQUIRED SPACE TO ADJUST THE ACCOUNTS BY WAY OF OBTAINING AC COMMODATION PURCHASE BILLS. 4.4 IN VIEW OF THE AFORESAID DISCUSSION, I HOLD THA T THE AO WAS FULLY JUSTIFIED IN BRINGING TO TAX THE AMOUNTS OF RS 3899 527 AND RS 38995 REPRESENTING VALUE OF ACCOMMODATION PURCHASE BILLS AND PAYMENT OF COMMISSION THEREON RESPECTIVELY. ACCORDINGLY, BOTH THE ADDITIONS ARE BEING SUSTAINED. 3.5 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE HAS FILED A PAPER-BOOK CONTAINING PAGES 1 TO 34 AND RELIED ON T HE SUBMISSION MADE BEFORE THE LOWER AUTHORITIES. THE L EARNED COUNSEL HAS SUBMITTED THAT ADDITION HAS BEEN SUSTAI NED MERELY ON THE STATEMENT OF THE THIRD-PARTY AND NO OTHER CO RROBORATIVE EVIDENCE HAS BEEN FOUND TO SUPPORT THE CONTENTION O F THE THIRD- PARTY. 3.6 ON THE CONTRARY, THE LEARNED DR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE H AS NEITHER FILED ANY CONFIRMATION FROM THIRD PARTIES IN SUPPOR T OF THE ALLEGED PURCHASES NOR FILED ANY PROOF OF TRANSPORT OF THE G OODS FROM MUMBAI TO GURGAON AND THUS ASSESSEE FAILED TO DISCH ARGE ITS ONUS. THE LEARNED DR SUBMITTED THAT EXCESS STOCK FO UND CANNOT BE ADJUSTED AGAINST THE BOGUS PURCHASES AS THE ASSE SSEE HAS 10 ITA NO.6093/DEL./2010 & 4304/DEL/2011 FAILED TO CO-RELATE THE EXCESS STOCK WITH THE ACCOM MODATION ENTRIES BILLS. ACCORDING TO THE LEARNED DR, THE LEA RNED ASSESSING OFFICER HAS NOT MADE ADDITION ONLY ON THE BASIS OF THE STATEMENT OF THE THIRD PARTIES BUT IN VIEW OF THE FAILURE ON THE PART OF THE ASSESSEE TO SUBSTANTIATE THE ALLEGED PURCHASES AND, THEREFORE, PROVIDING OF CROSS EXAMINATION OF THOSE PARTIES WAS NOT SINE QUA NON FOR MAKING THE ADDITION. SHE RELIED ON FOLLOWING DE CISIONS IN SUPPORT OF HER CLAIM: 1. N K PROTEINS LTD. VS. CIT (2017-TIOL-23-SC-IT) N K PROTEINS LTD. VS. CIT (2016-TIOL-3165-HC-AHM-IT ) 2. N.K. INDUSTRIES LTD. VS. DCIT [2016] 72 TAXMANN. COM 289 (GUJARAT)/[2017] 292 CTR 354 (GUJARAT) 3. CIT VS. ARUN MALHOTRA, 47 TAXMANN.COM 385 (DELHI )/[2014] 363 ITR 195 4. CIT VS. LA MEDICA [2001] 117 TAXMAN 628 (DELHI)/ [2001] 250 ITR 575 (DELHI)/[2001] 168 CTR 314 (DELHI) 5. VIJAY PROTEINS LTD. VS. ACIT, [2015] 58 TAXMANN. COM 44 (GUJARAT) 3.7 IN SUPPORT OF THE CONTENTION THAT ENTIRE UNDISCLOS ED INCOME GENERATED OUT OF BOGUS TRANSACTION DESERVE TO BE AD DED, THE LEARNED DR RELIED ON FOLLOWING DECISIONS: 1. ITO VS. M PIRAI CHOODI [2012] 20 TAXMANN.COM 733 (SC)/[2011] 334 ITR 262 (SC)/[2011] 245 CTR 233 (SC) (SUPREME C OURT). 2. M/S. PEBBLE INVESTMENT AND FINANCE LTD. VS. ITO [2017-TIOL-238- SC-IT] (SUPREME COURT) 3. CIT VS. KUWER FIBERS (P.) LTD. [2017] 77 TAXMANN .COM 345 (DELHI) 4. CIT VS. SONAL CONSTRUCTION [2012-TIOL-851-HC-DEL -IT] (DELHI) 5. NOKIA INDIA (P.) LTD. VS. DCIT [2015] 59 TAXMANN .COM 2012 (DELHI TRIB.) 6. GTC INDUSTRIES LTD. VS. ACIT [1998] 65 ITD 380 ( BOM) 3.7 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE INS TANT CASE, THE 11 ITA NO.6093/DEL./2010 & 4304/DEL/2011 ASSESSEE IN ITS BOOKS OF ACCOUNTS, HAVE SHOWN PURCH ASES FROM THE ABOVE-MENTIONED THREE PARTIES AMOUNTING TO 38.99 LAKHS. IN VIEW OF THE INFORMATION IN THE POSSESSION OF THE AS SESSING OFFICER, THAT THE ASSESSEE HAS OBTAINED ONLY ACCOMMODATION E NTRIES BILLS IN THE FORM OF THE PURCHASES WITHOUT ANY ACTUAL PUR CHASE OF THE GOODS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBSTANTIATE THE PURCHASES. FROM THE ORDERS OF THE LOWER AUTHORI TIES, WE FIND THAT THE ASSESSEE NOT ONLY FAILED IN PRODUCE CONFIR MATION FROM THOSE PARTIES BUT ALSO FAILED TO SUBSTANTIATE TRANS PORT OF GOODS MENTIONED IN THOSE BILLS FROM MUMBAI I.E. THE PLACE OF PURCHASE TO THE FACTORY LOCATED AT GURGAON I.E. THE PLACE OF CONSUMPTION OF GOODS. EVEN BEFORE US, THE ASSESSEE HAS NOT FILED A NY SUCH EVIDENCE TO REBUT THE FINDING OF THE ASSESSING OFFI CER AS WELL AS THE LEARNED CIT(APPEALS). MERE FILING OF COPY OF PU RCHASE BILLS, GOODS RECEIVED NOTES OR PAYMENT BY CHEQUE WAS NOT S UFFICIENT TO ESTABLISH THE PURCHASES. THE ASSESSEE WAS REQUIRED TO DISCHARGE ITS ONUS OF SUBSTANTIATING THE PURCHASES WITH DELIV ERIES OF GOODS. THE RESPONSIBILITY OF THE ASSESSEE TO SUBSTANTIATE PURCHASES WAS FURTHER INCREASED IN VIEW OF THE STATEMENT OF SHRI RAKESH KUMAR GUPTA THAT HE HAD PROVIDED ACCOMMODATION ENTRY BILL S WITHOUT SUPPLYING THE GOODS PHYSICALLY. BUT IN VIEW OF THE FAILURE ON THE PART OF THE ASSESSEE IN DISCHARGING ITS ONUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES ON THE ISSUE IN DISPUTE AND ACCORDINGLY WE UPHOLD THE SAME. THE GRO UND NO. 2 AND 3 OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 12 ITA NO.6093/DEL./2010 & 4304/DEL/2011 ITA NO. 4304/DEL./2011 ASSESSMENT YEAR: 2003-04 4. IN ITA NO. 4304/DEL/2011 FOR ASSESSMENT AT 2003-04 , THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF THE APPEAL : THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED CONFIRMING THE FOLLOWING ACTIO NS OF THE ASSESSING OFFICER:- (I) INITIATING PROCEEDINGS U/S 147 OF THE INCOME TA X ACT AND COMPLETING THE ASSESSMENT U/S 147/143(3) OF THE ACT ON INCOME OF RS.1,19,20,170/- (II) MAKING AN ADDITION OF RS.22,63,222/- ON ACCOUN T OF ALLEGED UNDISCLOSED PURCHASE ON SURMISES AND CONJECTURES; A ND (III) MAKING AN ADDITION OF RS.22,632/- AS UNEXPLAI NED EXPENDITURE ALLEGEDLY BY WAY OF COMMISSION PAID EVE N THROUGH THERE WAS NO MATERIAL IN SUPPORT OF SUCH ALLEGATIONS. 5. THE GROUND NO. 1 OF THE APPEAL BEING IDENTICAL TO THE GROUND NO. 1 OF THE APPEAL FOR ASSESSMENT YEAR 2002-03 AND , THEREFORE, IT IS SQUARELY COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YE AR 2002-03. THE ASSESSEE ALSO DID NOT PRESS THIS GROUND BEFORE US. ACCORDINGLY, THIS GROUND OF THE APPEAL IS DISMISSED . 6. IN GROUND NOS. 2 AND 3, THE ISSUE OF UNDISCLOSED P URCHASES AND COMMISSION THEREON IS INVOLVED. IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN ASSESSMENT YEAR 2002-03. IN TH E INSTANT YEAR, THE LD. CIT(A) HAS ALSO UPHELD THE ADDITION F OLLOWING HIS FINDING IN ASSESSMENT YEAR 2002-03. IN THE PRESENT APPEAL, THE ASSESSEE HAS ALSO FILED PAPER-BOOK CONTAINING PAGES 1-35, COMPRISING OF COPY OF THE BILLS ISSUED BY THE ACCOM MODATION ENTRIES PROVIDERS. ON PERUSAL OF THE BILLS, IT IS A PPARENT THAT THERE 13 ITA NO.6093/DEL./2010 & 4304/DEL/2011 IS NO MENTION OF MODE OF TRANSPORT ON THOSE BILLS, AND THUS ASSESSEE HAS FAILED TO SUBSTANTIATE ITS PURCHASES. TO HAVE CONSISTENCY OF OUR DECISION, WE UPHOLD ADDITIONS MA DE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). THE GROUND NO. 2 AND 3 OF THE INSTANT APPEAL ARE ALSO DISMISSE D ACCORDINGLY. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2020. SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH MARCH, 2020. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI