Sh. Suman Sehgal, New Delhi V. ACIT, New Delhi

ITA 4506/DEL/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7047 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 21-11-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 27-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: G R AGNIHOTRI
• Keywords: Bogus purchase; Business income
• Section: 143(3); 80HHC; 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 4506/DEL/2009 ASSESSMENT YEAR: 1997-98 SHRI SUMAN SEHGAL, VS. ASSISTANT COMMISSIONER OF IT, PROP. M/S. CLASSIC CRAFTS, CIRCLE 24(1), B-110, GULMOHAR PARK, NEW DELHI. NEW DELHI-1100 49 (PAN: AARPS6551P) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GR AGNIHOT RI, ADV. RESPONDENT BY: SHRI S. MOHANTY, DR DATE OF HEARING : 21.11.2011 DATE OF PRONOUNCEMENT : 25.11.2011 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 05.10.2009 PASSED FOR ASSESSMENT YEAR 1997-98. THE GROUNDS OF APPEALS TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES, THEY ARE DESCRIPTIVE AND ARGUM ENTATIVE IN NATURE. BEFORE TAKING UP THE SPECIFIC GROUND RAISED BY THE ASSESSEE IN THE APPEAL, WE WOULD LIKE TO REFER THE BRIEF FACTS OF THIS CASE. I T EMERGES OUT FROM THE RECORD THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADIN G IN CUSHION COVERS WHICH WERE EXPORTED MAINLY TO THE GERMANY. IT HAS FILED I TS RETURN OF INCOME AND AN ASSESSMENT ORDER UNDER SEC. 144 OF THE INCOME-TA X ACT, 1961 WAS PASSED 2 ON 31.3.2000. DISSATISFIED WITH THE ASSESSMENT ORDE R, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). L EARNED CIT(APPEALS) HAS DECIDED THE APPEAL VIDE HIS ORDER DATED 28.3.20 02. IT REMITTED CERTAIN ISSUES FOR VERIFICATION AND READJUDICATION TO THE F ILE OF THE ASSESSING OFFICER. ASSESSING OFFICER IN PURSUANCE OF THE LEARNED CIT(A PPEALS)S ORDER HAS PASSED THE ASSESSMENT ORDER ON 3.6.2005. HE DETERMI NED THE INCOME OF THE ASSESSEE AS UNDER: ORDER UNDER SECTION 250/143(3) OF THE I.T.ACT,196 1 CONSEQUENT UPON THE RECEIPT OF APPELLATE ORDER IN A PPEAL NO.987/2000-01, DATED 28.3.2002, THE ASSESSEE WAS A FFORDED AN OPPORTUNITY TO PRODUCE THE PARTIES FROM WHOM PURCHA SES HAVE BEEN MADE. OUT OF THE FIVE PARTIES, THE ASSESSEE COULD P RODUCE ONLY FOLLOWING THREE PARTIES: I) M/S. PAWAN ENTERPRISES RS.22,37,500 II) M/S. N.K. PLASTICS RS. 12,930 III)M/S. R.K. PLASTICS RS. 14,416 TOTAL RS.22,64,846 THUS, OUT OF THE TOTAL PURCHASES OF RS.31,97,100, T HE ASSESSEE COULD FURNISH EVIDENCES IN RESPECT OF RS.22,64,846 AND FOR THE BALANCE PURCHASES OF RS.9,32,254, THE ASSESSEE HAS NO EXPLA NATION TO OFFER. THEREFORE, PURCHASES TO THE EXTENT OF RS.9,32,254 A RE TREATED AS BOGUS PURCHASES AND ARE ADDED TO THE INCOME OF THE ASSESS EE. 3 SINCE THE CIT(A) HAS DIRECTED THAT THE FOREIGN INWA RD REMITTANCE OF RS.66,56,834 BE TREATED AS GROSS EXPO RT RECEIPTS, AND THE ASSESSEE HAS HIMSELF CALCULATED HIS DEDUCTION U/S. 80-HHC BY TAKING EXPORT SALES AT RS.66,56,834, NO INTERFERENCE IS BE ING MADE TO THE DEDUCTION ALREADY CLAIMED. IN VIEW OF THE ABOVE, THE INCOME OF THE ASSESSEE IS RECOMPUTED AS UNDER: BUSINESS INCOME: NET PROFIT AS PER P & L ACCOUNT 24,27,955 ADD: BOGUS PURCHASES, AS DISCUSSED 9,32,254 RS.33,60,209 INCOME FROM OTHER SOURCES: BANK INTEREST, SAVINGS & FDR 12,36,572 INTEREST FROM DEBENTURES 360 RS.12,36,932 GROSS TOTAL INCOME: RS.45.97,141 LESS: DEDUCTION U/S. 80HHC, AS CLAIMED 24,40,548 DEDUCTION U/S.80H0I, AS CLAIMED 13,000 RS.24,51,548 TOTAL INCOME : RS.21,42,593 ROUNDED TO : RS.21,42,590 2. THE ASSESSEE DID NOT CHALLENGED THIS ORDER IN AP PEAL. ON 6.2.2006, AND AGAIN ON 20.2.2007, IT FILED APPLICATION UNDER SEC. 154 FOR RECTIFICATION OF THE 4 ASSESSMENT ORDER. THESE APPLICATIONS HAVE BEEN REJE CTED BY THE ASSESSING OFFICER BY WAY OF A BRIEF ORDER WHICH READ AS UNDER : SUB: RECTIFICATION APPLICATION U/S 154 OF THE IT A CT FOR ASST. YEAR 1997-98- REF: APPLICATION DATED 23.2.2007. PLEASE REFER TO THE ABOVE. AN APPLICATION HAS BEEN MOVED (SEEKING RECTIFICATI ON U/S 154) STATING THEREIN THAT THE ASSESSMENT ORDER DATED 3.6 .2005 U/S 143(3) SUFFERS FROM MISTAKES APPARENT ON RECORD WHILE SEEK ING RECTIFICATION IN TERMS OF SEC. 154 OF THE INCOME-TAX ACT, 1961. I T HAS BEEN CONTENDED THAT THE ASSESSEE HAS DISCHARGED THE BURD EN OF ESTABLISHING THE GENUINENESS OF PURCHASES AND THAT THE ADDITIONS AND DISALLOWANCES OF PURCHASES BY THE ASSESSING OFFICER ARE MISTAKES APPARENT ON RECORD. EXAMINATION OF THE CASE RECORDS DOES NOT BEAR OUT T HE CONTENTIONS OF THE ASSESSEE AS CORRECT. AS THERE IS NO MISTAKE APPARENT ON RECORD, THE APPLICATION FOR RECTIFICATION IS DIS MISSED. 3. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS ). IT HAS SUBMITTED DETAILED WRITTEN SUBMISSIONS WHICH HAVE DULY BEEN R EPRODUCED BY THE LEARNED CIT(APPEALS). ON AN ANALYSIS OF THE SUBMISS IONS, LEARNED FIRST 5 APPELLATE AUTHORITY DID NOT FIND ANY MERIT IN THE A PPEAL AND ACCORDINGLY DISMISSED IT. 4. IN THE GROUNDS, ASSESSEE HAS PLEADED THAT ASSESS ING OFFICER IN THE ASSESSMENT ORDER HAS TREATED THE PURCHASES TO THE E XTENT OF RS.22,64,846 AS GENUINE. ACCORDING TO THE ASSESSEE, THE PURCHASES F ROM M/S. PAWAN ENTERPRISES WERE TO THE EXTENT OF RS.24,37,500. IT HAS MADE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES AND IT HAS PRODUCED S HRI PAWAN AGGARWAL IN ORDER TO PROVE THE PURCHASES. HENCE, ASSESSING OFFI CER HAS ERRED IN ACCEPTING THE PURCHASES GENUINE TO THE EXTENT OF RS .22,37,500 ONLY QUA M/S. PAWAN ENTERPRISES. THIS ISSUE HAS BEEN PLEADED IN G ROUND NO.1 AND SIMILARLY IT HAS PLEADED THAT IT HAS MADE PURCHASES OF RS.7,5 9,600 FROM SHRI PAT RAM WHICH SHOULD HAVE BEEN ACCEPTED BY THE ASSESSING OF FICER AS GENUINE BECAUSE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQ UES. HAD THIS PURCHASE WAS NOT MADE THEN ASSESSEE WOULD NOT BE AB LE TO ACHIEVE THE GROSS EXPORT SALES AT RS.66,56,834. 5. IN THE NEXT GROUND OF APPEAL, IT HAS PLEADED TH AT ASSESSING OFFICER HAS ERRED IN DISALLOWING THE PURCHASE OF PACKING MATERI AL HAVING VALUE OF RS.21,768. 6 6. IN GROUND NO.3, WHICH, IN OUR OPINION, IS A SUPP ORTING ARGUMENT, ASSESSEE HAS PLEADED THAT ACCORDING TO THE CERTIFIC ATE OF CHARTERED ACCOUNTANTS, IT HAS MADE EXPORTS OF RS.66,56,834 AN D SHOWN EXPORT PROFITS OF RS.24,27,955 WHICH COULD BE ACHIEVED WITH THE HE LP OF PURCHASES OF RS.31,97,100 FROM TWO SUPPLIERS, NAMELY, RS.24,37,5 00 FROM M/S. PAVAN ENTERPRISES AND RS.7,59,600 FROM SHRI PAT RAM. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE BOOKS OF ACCOUNT WE RE PRODUCED AND ASSESSING OFFICER FAILED TO TAKE NOTE OF TRUE FACTS AND, THEREFORE, IT IS AN APPARENT ERROR ON THE RECORD. ON THE OTHER HAND, LE ARNED DR RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS) AND SUBMITTED THA T LEARNED FIRST APPELLATE AUTHORITY HAS EXAMINED THE ISSUE IN DETAI L. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE POWERS OF RECTIFICATION UNDER SEC. 154 CAN BE EXERCISED ONLY WHEN THE MISTAKE WHICH IS SOUGHT TO BE RECTIFI ED IS AN OBVIOUS AND PATENT MISTAKE WHICH IS APPARENT FROM THE RECORD AN D NOT A MISTAKE WHICH REQUIRES TO BE ESTABLISHED BY ARGUMENTS AND A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVEABLY BE TWO OPINIONS. ASSESSEE IN AN APPLICATION UNDER SECTION 154 IS C HALLENGING THE ACTION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE GENUI NENESS OF ITS PURCHASES. 7 TO OUR MIND, IT IS NOT A SUBJECT MATTER WHICH CAN B E AGITATED IN A PROCEEDINGS UNDER SEC. 154. THE ASSESSEE IF AGGRIEVED, OUGHT TO HAVE FILED THE APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER DATED 3 RD OF JUNE 2005. IN THE GARB OF RECTIFICATION APPLICATION, IT CANNOT GET THE ORD ER REVIEWED. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL TAKE N BY THE ASSESSEE ON MERIT. 8. THE ASSESSEE HAD MOVED AN APPLICATION FOR PERMIS SION OF ADMISSION OF ADDITIONAL GROUND. IT HAS PLEADED THAT ASSESSING OF FICER HAS ERRED IN NOT ALLOWING THE DEDUCTION OF EXPORT PROFITS AS PER CLA USE (A) OF SUB-CLAUSE(3) OF SEC. 80HHC OF THE ACT WHICH OUGHT TO HAVE BEEN COMP UTED BY THE ASSESSING OFFICER AFTER TAKING INTO CONSIDERATION THE DISALLO WANCES MADE OUT OF PURCHASE. THE LEARNED COUNSEL FOR THE ASSESSEE CONT ENDED THAT THIS GROUND GOES TO EFFECT THE TAXABILITY OF THE ASSESSEE WHICH EMERGES OUT FROM THE RECORD AND, THEREFORE, IT BE PERMITTED TO RAISE THI S GROUND. ON MERIT, HE POINTED OUT THAT THE ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING THE PURCHASE HAS BEEN ASSESSED AS A BUSINESS INCOME , THEREFORE, FOR THE PURPOSE OF DEDUCTION ADMISSIBLE UNDER SEC. 80-HHC, THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE ADDITION MADE BY THE A SSESSEE. LEARNED DR ON THE OTHER HAND SUBMITTED THAT THIS ISSUE WAS NOT AG ITATED BY THE ASSESSEE 8 BEFORE THE ASSESSING OFFICER, THEREFORE, IT CANNOT BE PERMITTED TO RAISE IT BEFORE THE ITAT. 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT ALONGWITH THE APPLIC ATION FOR PERMISSION TO RAISE ADDITIONAL GROUND OF APPEAL, THE ASSESSEE HAS SUBMITTED THAT THE ITAT IN THE CASE OF SRI RAM PISTON AND RINGS VS. ACIT RE PORTED IN 81 TAXMAN 164 HAS OBSERVED THAT DEDUCTION UNDER SEC. 80-HHC I S NOT TO BE RESTRICTED TO THE PROFITS FROM BUSINESS EXPORTS AS SHOWN IN RETUR N OF INCOME BUT HAS TO BE ALLOWED ON PROFITS FROM SUCH BUSINESS AS COMPUTED B Y THE ASSESSING OFFICER UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION. WE FIND THAT THIS ISSUE GOES TO EFFECT THE TAXABILITY OF THE ASS ESSEE. ASSESSING OFFICER AFTER MAKING THE DISALLOWANCE OUT OF PURCHASES OUGHT TO H AVE CONSIDERED THOSE AMOUNTS WHICH WERE ASSESSED AS A BUSINESS INCOME FO R THE PURPOSE OF GRANTING DEDUCTION UNDER SEC. 80-HHC OF THE ACT. TH EREFORE, WE ALLOW THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE AND REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AND R EADJUDICATION. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT. SD/- ( K.G. BANSAL ) SD/- ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/11/2011 MOHAN LAL 9 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR