M/s. Paras Arora, New Delhi V. DCIT, New Delhi

ITA 4368/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86723 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 10-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Competent authority
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA NO.4368/DEL/2012 ASSESSMENT YEAR : 2007-08 PARAS ARORA, M/S PARAS ELECTRONICS, 14, AGCR ENCLAVE, NEW DELHI. PAN: AAGPA4572K VS. DCIT, WARD 35(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.V.S. GUPTA, ADVOCATE DEPARTMENT BY : SHRI VIKRAM SAHAY, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 04.06.2012 IN RELATION TO THE ASSESSM ENT YEAR 2007-08. 2. THE ONLY ISSUE RAISED THROUGH VARIOUS GROUNDS IS AGAINST THE CONFIRMATION OF ADDITION OF RS.15,34,416/- BY TREAT ING THE PURCHASES FROM M/S ANKIT ELECTRONICS AS BOGUS. ITA NO.4368/DEL/2012 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF ELECTRICAL/ELECTRONIC ACCESSORIES. ON PERUSAL OF THE RECORDS, THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HAD MADE PURCHASES AMOUNTING TO RS.15,34,416/- FROM M/S ANKIT ELECTRONICS, 9/2830, KAILASH NAGAR, DELHI-31 IN THE MONTHS OF MAY AND JUNE, 2006. THIS AMOUNT WAS SEEN TO HAVE BEEN PAID IN CASH IN SMALL INSTALLMENTS BETWEEN JULY, 2006 TO MARCH, 2007. NO PAYMENT WAS MADE THROUGH CHEQUES OR DRAFTS. TO ASCERTAIN THE GENUIN ENESS OF THESE PURCHASE TRANSACTIONS, THE AO ISSUED SUMMONS U/S 13 1 OF THE INCOME- TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) ON M/S ANKIT ELECTRONICS FOR PERSONAL ATTENDANCE ALONG WITH BOOKS OF ACCOUNT. T HE SUMMONS WERE RECEIVED BACK WITH THE POSTAL REMARKS TO THE EFFECT THAT NO PERSON BY THAT NAME EXISTS ON THE GIVEN ADDRESS. VIDE ORDER SHEET ENTRY DATED 23.11.2009, THE ASSESSEE WAS ASKED TO PRODUCE THE P ARTNER/PROPRIETOR OF M/S ANKIT ELECTRONICS ALONG WITH THEIR BOOKS OF ACC OUNT. THE ASSESSEE SUBMITTED THAT THE INVOICES WERE ISSUED BY M/S ANKI T ELECTRONICS ALONG WITH TRANSIT PASSES (F-3) ISSUED BY SALES-TAX DEPAR TMENT, GHAZIABAD. IT WAS ALSO STATED THAT THE PURCHASES MADE FROM M/S AN KIT ELECTRONICS ITA NO.4368/DEL/2012 3 WERE ONLY 2.5% OF TOTAL PURCHASES MADE DURING THE Y EAR. HOWEVER, NO REPRESENTATIVE OF M/S ANKIT ELECTRONICS WAS PRODUCE D BEFORE THE AO FOR VERIFICATION. THE AO ALSO OBSERVED THAT THE SO CAL LED BILLS ISSUED BY M/S ANKIT ELECTRONICS WERE NOT PROPER INASMUCH AS THE F IRST INVOICE DATED 11.5.2006 BORE INVOICE NO.345; THE SECOND INVOICE D ATED 17.5.06 BORE INVOICE NO.346; THIRD INVOICE DATED 19.5.2006 BORE INVOICE NO.347; FOURTH INVOICE DATED 25.5.2006 BORE INVOICE NO.384; FIFTH INVOICE DATED 30.5.2006 BORE INVOICE NO.386; SIXTH INVOICE DATED 3.6.2006 BORE INVOICE NO.387; SEVENTH INVOICE DATED 06.06.2006 BO RE INVOICE NO.388; AND THE EIGHTH INVOICE DATED 12.6.2006 BORE INVOICE NO.389. BY CONSIDERING THE SEQUENCE NOS. OF THE INVOICES ISSUE D BY M/S ANKIT ELECTRONICS, THE AO OBSERVED THAT THE SALES WERE AL LEGEDLY MADE BY THIS PARTY ONLY TO THE ASSESSEE INASMUCH AS THERE WAS NO INVOICE ISSUED BY THIS PARTY BETWEEN 11.5.2006 TO 19.5.2006 AND THEN FROM 23.5.2006 TO 12.6.2006. SINCE ALL THE PAYMENTS TO THIS CONCERN WERE MADE IN CASH RANGING FROM RS.15,000/- TO 19,500/- AND NO PERMANE NT ACCOUNT OF THIS PARTY WAS GIVEN, THE AO PROCEEDED TO CONDUCT FURTHE R INQUIRY. ON GOING THROUGH THE INVOICES CLAIMED TO HAVE BEEN ISSUED BY ANKIT ELECTRONICS, IT ITA NO.4368/DEL/2012 4 WAS SEEN THAT PHONE NO. 22544222 WAS MENTIONED THER EON. ON INQUIRY FROM MTNL, IT TRANSPIRED THAT THIS PHONE NO. BELONG ED TO M/S CIPLA INDUSTRIES AND WAS INSTALLED AT A DIFFERENT ADDRESS . WHEN A CALL WAS MADE AT THIS PHONE NUMBER, THE RESPONDENT CONFIRMED THAT IT BELONGED TO M/S CIPLA INDUSTRIES AND NOT TO M/S ANKIT ELECTRONI CS. CONSIDERING ALL THESE FACTS, THE AO HELD THE PURCHASES AMOUNTING TO RS.15.34 LAC AS BOGUS AND MADE ADDITION FOR THE ABOVE SUM. THE LD. CIT(A) SUSTAINED THE ADDITION. THE ASSESSEE IS AGGRIEVED AGAINST THI S ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DENIAL OF THE FACT THAT THE ASSESSEE MISERABLY FAILED TO SHOW THAT THESE INVOICES WERE I N ANY MANNER GENUINE. ALL THE INQUIRIES CONDUCTED BY THE AO AMP LY PROVED THAT THE ASSESSEE DEJECTEDLY FAILED TO EITHER PRODUCE ANY RE PRESENTATIVE OF THIS CONCERN OR SUBSTANTIATE ITS IDENTITY. SUMMONS ISSU ED ON THE GIVEN ADDRESS DIVULGED THAT THIS PARTY NEVER EXISTED AT T HE ADDRESS GIVEN ON INVOICES. THE TELEPHONE NUMBER MENTIONED ON THE IN VOICES TURNED OUT TO BE FAKE. WHEN M/S ANKIT ELECTRONICS FILED SOME CONF IRMATION BEFORE THE ITA NO.4368/DEL/2012 5 AO AT THE LATER STAGES OF THE ASSESSMENT THROUGH PO ST, A COPY OF WHICH IS AVAILABLE ON RECORD, INTERESTINGLY, TELEPHONE NUMBE R WAS CONSPICUOUSLY ABSENT THIS TIME FROM THE LETTER PAD OF THIS PARTY. ALL THESE FACTS LEAD TO THE ONLY IRRESISTIBLE CONCLUSION THAT THE INVOICES RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WERE FAKE AND BOGUS. 5. THE LD. AR LARGELY HARPED ON FORM NO.3, BEIN G TRANSIT PASSES ISSUED BY COMPETENT AUTHORITY, TO BRING HOME THE GE NUINENESS OF THE PURCHASE TRANSACTIONS. A PERUSAL OF THESE PASSES A ND ON A FURTHER QUERY TO THE LD. AR, IT EMERGES THAT THE AUTHORITY ISSUIN G SUCH PASSES SIMPLY CERTIFIED THE MOVEMENT OF GOODS. IT DID NOT CERTIF Y EITHER THE CORRECTNESS OF THE PARTICULARS OF THE SELLER OF GOODS OR THE GE NUINENESS OF TRANSACTIONS. SO, THESE PASSES, IN THEMSELVES, SIMP LY SHOW THE MOVEMENT OF GOODS AND DO NOT IN MANNER CERTIFY THE GENUINENE SS OF SELLER/INVOICES. 6. THE NEXT PLANK OF THE ARGUMENTS OF THE LD. A R WAS THAT THE ASSESSEE MAINTAINED ITS STOCK REGISTER AND WHEN THE STOCK RE GISTERS ARE PROPERLY MAINTAINED, THEN, NO ADDITION CAN BE MADE EVEN IF T HE PURCHASES ARE BOGUS. TO BUTTRESS THIS CONTENTION, HE RELIED ON C ERTAIN DECISIONS. IN ITA NO.4368/DEL/2012 6 PRINCIPLE, WE AGREE WITH THIS VIEW THAT WHEN STOCK REGISTERS ARE MAINTAINED AND VALUE OF THE GOODS IS NOT IN DISPUTE , THEN NO ADDITION CAN BE MADE ON THIS SCORE. HOWEVER, WE FIND THAT THE PO SITION OBTAINING IN THIS CASE IS QUITE AT VARIANCE. IT IS MANIFEST FROM THE AUDIT REPORT OF THE ASSESSEE THAT NO STOCK REGISTERS WERE MAINTAINED. THE AUDITOR HAS QUALIFIED HIS REPORT BY GIVING REMARKS AGAINST COLU MN NO. 28(A): IT IS NOT POSSIBLE TO VERIFY THE STOCK SINCE FIRM IS TRAD ING IN NUMBER OF SMALL ITEMS. FROM THE AUDIT REPORT, IT IS CLEAR THAT TH E ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER. IT CAN ALSO BE NOTICE D FROM THE ASSESSMENT ORDER/PROCEEDINGS THAT NO STOCK REGISTER WAS PRODUC ED BEFORE THE AO. IT IS ONLY DURING THE COURSE OF FIRST APPELLATE PROCEE DINGS THAT THE ASSESSEE CAME OUT WITH SOME STOCK REGISTER TO SUBSTANTIATE I TS CLAIM OF GENUINENESS OF PURCHASE TRANSACTION. SINCE THE ASS ESSEE WAS NOT MAINTAINING STOCK RECORDS IN THE REGULAR COURSE OF ITS BUSINESS, THERE CAN BE NO WAY TO ASCERTAIN QUANTITY-WISE AND VALUE-WISE BREAK-UP OF OPENING STOCK. ONCE THE QUANTITY OF OPENING STOCK I S NOT ASCERTAINABLE/VERIFIABLE, THERE CAN BE NO WAY TO GO AHEAD. UNDER SUCH CIRCUMSTANCES, WE REFUSE TO ACCEPT THE VERACITY OF SUCH STOCK REGISTER. ITA NO.4368/DEL/2012 7 7. HAVING COME TO THE CONCLUSION THAT TRANSACTI ONS WITH M/S ANKIT ELECTRONICS WERE FAKE AND THAT THERE WAS, IN FACT, SOME MOVEMENT OF GOODS TO THE ASSESSEE, THE ONLY POSSIBLE INFERENCE WHICH CAN BE DRAWN IS THAT THE ASSESSEE ARRANGED BOGUS BILLS WITH HIGHER INVOICE VALUE AND ACTUALLY MADE PURCHASES AT SOME LOWER PRICE FROM SO ME UNDISCLOSED PARTY. UNDER SUCH CIRCUMSTANCES, THE QUESTION ARIS ES AS TO WHETHER THE ENTIRE AMOUNT OF INVOICES SHOULD BE ADDED OR SOME P ROFIT ELEMENT. IN OUR CONSIDERED OPINION, IN SUCH A SCENARIO, IT IS THE E XCESS PRICE SHOWN, WHICH SHOULD BE ADDED RATHER THAN THE INVOICE VALUE ITSELF. WHEN WE CONSIDER THE OVERALL GROSS PROFIT RATE OF THE ASSES SEE, IT COMES TO THE FORE THAT THE CURRENT YEARS GP RATE AT 3.96% DIPPED FRO M THE PRECEDING YEARS GROSS PROFIT RATE OF 4.41%. IN THE ABSENCE OF ANY INDEPENDENT REASONS TO JUSTIFY DECLINE IN THE GP RATE, IT IS SU CH REDUCTION IN THE PROFIT, WHICH WAS SOUGHT TO BE ACHIEVED BY OVER-INVOICING T RANSACTIONS THROUGH FICTITIOUS BILLS RAISED IN THE NAME OF M/S ANKIT EL ECTRONICS. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE INST ANT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE PRECEDING YEARS GROSS PROFIT RATE OF 4.41% BE APPLIED ON THE TOTAL TURNOVER OF THE ASSESSEE AT RS.5,99,54,644/- FOR ITA NO.4368/DEL/2012 8 MAKING ADDITION TOWARDS THE INCOME WHICH THE ASSESS EE SOUGHT TO CONCEAL BY RAISING FAKE INVOICES. THIS WOULD MEAN SUSTENANCE OF ADDITION FOR A SUM OF RS.2,69,796/-. WE ORDER ACCO RDINGLY. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.02.201 5. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 11 TH FEBRUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.