DCIT, New Delhi V. Sh. Sanjeev Dhingra, Gurgaon

ITA 4509/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4105 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-04-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Unexplained cash credit; Business income; Additional evidence
• Section: 142(1); 80HHC; 153A

Judgement Text

1 N THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NOS. 4507 TO 4511 /DEL/20 13 A.YRS. : 2000-01 TO 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-18, ROOM NO. 37, ARA CENTRE, E-2, JHANDEWALAN EXTN. NEW DELHI - 110 055 VS. SH. SANJEEV DHINGRA, PROP. SHAH KNITS, A-40/21, DLF CITY, PHASE-I, GURGAON (APPELLANT) (RESPONDENT) CROSS OBJECTION NOS. 195 TO 198/DEL/2014 (IN ITA NOS. 4508 TO 4511/DEL/201 3 A.YRS. : 2001-02 TO 2004-05 SH. SANJEEV DHINGRA, PROP. SHAH KNITS, A-40/21, DLF CITY, PHASE-I, GURGAON (PAN: ADSPD3903E) VS. DCIT, CENTRAL CIRCLE -18, NEW DELHI (APPELLANT) (RESPONDENT) DEPARTMENT BY : S H. S.S. RANA, CIT(DR) ASSESSEE BY : NONE ORDER PER H.S. SIDHU : JM REVENUE HAS FILED THESE 05 APPEALS WHICH EMANATE FROM THE RESPECTIVE ORDERS FOR 2000-01 TO 2004-05 OF THE LD. CIT(A) AND THE ASSESSEE HAS FILED 04 CROSS OBJECTIONS AGAINST THE RESPECTIVE IMPUGNED 2 ORDERS OF THE LD. CIT(A) RELEVANT FOR THE ASSESSMEN T YEARS 2001-02 TO 2004-05. SINCE THE ISSUES INVOLVED IN THESE APPEA LS ARE COMMON AND IDENTICAL, HENCE, THE APPEALS AND THE CROSS OBJECTI ONS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER, BY DEALING WITH ASSESSMENT YEAR 2000-01. 2. THE COMMON GROUNDS RAISED IN REVENUE APPEALS REA D AS UNDER:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 80HHC B Y HOLDING THE EXPORT ACTIVITY OF THE ASSESSEE AS GENUINE. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 80HHC ON THE O NE HAND WHEREAS ON THE OTHER HAND UPHELD THE ACTION OF AO F OR REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECT ION 145. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ERRED IN IGNORING THE REMAND REPORT AND THEREBY VIOLATING THE PROVISIONS OF RULE 46 OF THE INCOME TAX RULE, 1962, BY NOT GIVING TWO STAGE OPPORTUNITY UNDER RULE 46A, I.E. FIRST BE FORE ADMISSION OF ADDITIONAL EVIDENCES AND SECOND AFTER ADMISSION OF ADDITIONAL EVIDENCE. IV) THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3 V) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASED ARE THAT SEARCH AN D SEIZURE OPERATION IN SL DHINGRA GROUP OF CASES WAS CONDUCTED ON 31.7.200 3. ON THE BASIS OF PANCHNAMA DRAWN IN THE CASE OF ASSESSEE, NOTICE U/S . 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) WAS ISSUED ON 17.2.2005. IN RESPONSE THERETO RETURN DECLARING INCOME OF RS. 90,000/- WAS FILED ON 28.4.2005. A DETAILED QUESTIONNAIRE ALONGWITH NOTI CE U/S. 142(1) OF THE ACT AND U/S. 143(2) OF THE ACT WERE ISSUED ON 09.1. 2006 FIXING THE CASE FOR 18.1.2006. FURTHER NOTICES U/S. 142(1) DATED 10 .2.2006 AND NOTICE U/S. 142(1) DATED 15.2.2006 ALONGWITH QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO THE NOTICES, THE A.R. OF THE ASSESSEE A TTENDED THE PROCEEDINGS FROM TIME TO TIME AND NECESSARY DETAILS AND CLARIFICATIONS AS REQUIRED HAVE BEEN FILED. THE ASSESSEE IS CARRYI NG BUSINESS UNDER THE PROPRIETORSHIP CONCERN IN THE NAME OF STYLE OF SHAH KNITS. AFTER TAKING INTO CONSIDERATION ALL THE RELIES FILED BY THE ASSE SSEE AND THE SEIZED MATERIALS, THE INCOME OF THE ASSESSEE WAS ASSESSED. THE ASSESSEE DECLARED NET PROFIT AS PER PROFIT AND LOSS ACCOUNT AMOUNTING TO RS. 42,99,422/- AND CLAIMED DEDUCTION U/S. 80HHC AGAINS T THIS PROFIT AMOUNTING TO RS. 42,99,422/-. THE INVESTIGATION I N THIS CASE WAS CONDUCTED TO ASSESS THE CORRECT INCOME OF THE ASSES SEE AND ACCORDINGLY, THE AO ASSESSED THE ASSESSEES INCOME AT RS. 82,28, 298/- AGAINST THE 4 RETURN INCOME OF RS. 90,000/-, BY MAKING FOLLOWING ADDITIONS AND PASSED THE ASSESSMENT ORDER DATED 28.3.2006. I) BOGUS EXPORT RECEIPTS : RS. 79,92,798/- II) UNEXPLAINED CREDIT IN THE CAPITAL ACCOUNT : RS. 85,500/- III) UNDISCLOSED HOUSEHOLD EXPENSES : RS. 1,50,00 0/- 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 08.5.2013 HAS DELETED SOME OF THE ADDITIONS AND PARTLY ALLOWED TH E APPEAL OF THE ASSESSEE. 5. AGGRIEVED WITH THE LD. CIT(A)S ORDER, THE REVEN UE IS IN APPEAL AND ASSESSEE HAS FILED CROSS OBJECTIONS. 6. LD. DR DURING THE HEARING HAS RELIED UPON THE OR DER OF THE AO AND REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 7. IN THIS CASE, NOTICE OF HEARING TO THE ASSESSEE W AS SENT BY THE REGISTERED AD POST, IN SPITE OF THE SAME, ASSESSEE, NOR HIS AUTHORIZED REPRESENTATIVE APPEARED TO PROSECUTE THE MAT TER IN DISPUTE, NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE I SSUE INVOLVED IN THE APPEALS, WE ARE OF THE VIEW THAT NO US EFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE, 5 THEREFORE, WE ARE DECIDING THE PRESENT APPEAL EXPART E QUA ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 8. WE HAVE HEARD LD. DR AND PERUSED THE RECORDS, ES PECIALLY THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND THAT IN ASSESSEES CASE IT WAS SEEN THAT SAME AND IDENTICAL FACTS ARE THERE AS WER E EXISTING IN THE ANIL DHINGRA AND RENU DHINGRA CASES, ACCORDINGLY, DURING THE APPELLATE PROCEEDINGS, ON THE FOLLOWING SPECIFIC QUERY, THE R EPORT OF THE AO WAS SOUGHT VIDE LETTER DATED 23.10.2006. TO MAKE NECESSARY ENQUIRIES WITH THE CUSTOM AUTHORITIES REGARDING THE GENUINENESS OF EXPORTS MA DE BY APPELLANT FROM ASSESSMENT YEAR 2000-01 TO 2004- 05. 8.1 WE NOTE THAT THE AO WITH REGARD TO THE ABOVE QU ERY VIDE HIS LETTER DATED 17.8.2007 STATED THAT THE REPORT REGARDING GENUINENESS OF EXPORT MADE BY THE ASSESSEE FIRM IS STILL AWAITED. HENCE Y OU ARE REQUESTED THAT THE CASE MAY BE DECIDED ON MERITS. 8.2 FURTHER EVEN ON 09.08.2012 THE ASSESSEE FILED A N AFFIDAVIT TO THE EFFECT THAT NO GOVT. AGENCIES HAVE INITIATED ANY PR OCEEDINGS FOR FRAUDULENT EXPORTS TILL DATE, AND THIS AFFIDAVIT TOO WAS FORWA RDED TO THE AO FOR ANY ADVERSE COMMENTS ON THE ASSESSEE'S AFFIDAVIT, IF AN Y. THE AO VIDE HIS LETTER DATED 21.1.2013 DIDN'T BROUGHT ANY IOTA OF E VIDENCES, TO THE EFFECT, SHOWING THAT ANY ADVERSE FINDING OR ACTION IS INITI ATED BY CUSTOM OR FEMA 6 AUTHORITIES LEADING TO CONCLUSION THAT NO GENUINE E XPORTS WERE CARRIED BY THE ASSESSEE. HENCE, IN VIEW OF THE ABOVE AND RELYI NG ON THE SPIRIT OF THE DECISION GIVEN BY JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M.S. INTERNATIONAL LTD. (ITA NO. 999/2006) DATED 28.09.2 012 AND ALSO RELYING ON THE ITAT'S ORDER DATED 21.11.1998 IN THE CASE OF RITA DHINGRA (ASSESSMENT YEARS 2001-02 TO 2004-05) AND ITATS OR DER DATED 04.01.2009 IN THE CASE OF ANIL DHINGRA (ASSESSMENT YEARS 1998-99 TO 2001-02), WHERE SIMILAR AND IDENTICAL FACTS WERE TH ERE AS THAT OF THE ASSESSEE AND ALSO TAKING INTO CONSIDERATION, TOTAL ITY OF ALL THE FACTS AND CIRCUMSTANCES AND EVIDENCES ON RECORD, LD. CIT(A) H AS RIGHTLY HELD THAT, IN THE FACTS OF THE ASSESSEE'S CASE ALSO, THE AO'S FINDING THAT (A) THERE WERE NO GENUINE EXPORTS AND (B) THE REMITTANCES REC EIVED IN HAWALA MONEY OF THE ASSESSEE IS NOT CORRECT, AS IT IS NOT BACKED BY ANY EVIDENCES TO THE COUNTRY. HENCE, IN VIEW OF THE AB OVE, THE EXPORT MADE BY THE ASSESSEE DURING THE ASSESSMENT YEARS 2000-01 TE-2004-05 WERE TREATED AS GENUINE EXPORT, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME. 8.3 WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE PECULIAR FACTS OF THIS CASE WHERE SALES ARE ADMITTED TO BE GENUINE BUT THE AUTHENTICITY OF PARTIES TO WHOM PAYMENTS HAVE BEEN MADE FOR PURCHAS ES; FABRICATION AND PACKING EXPENSES ETC. ARE IN DOUBT, THEREFORE TO PREVENT ANY - MISCARRIAGE OF JUSTICE, HAS RIGHTLY PROCEEDED TO ES TIMATE THE REASONABLE PROFIT OF THE ASSESSEE WHICH HE WOULD HAVE MADE ON MAKING EXPORT SALE OF RS.1,14,67,513 IN ASSESSMENT YEAR 2000-01. SIMIL ARLY IN ASSESSMENT 7 YEAR 2001-02, IT WAS OBSERVED THAT ASSESSEE HAD PAI D FABRICATION/PACKING EXPENSES OF RS. 23,65,704 TO ONE H.S. RAO & CO. AND MADE THE PURCHASES OF RS. 72,21,512. IT IS FURTHER NOTED THAT IN RESPE CT OF ALL THE PURCHASES/FABRICATION EXPENSES, THE ASSESSEE FAILE D TO PRODUCE THEM BEFORE THE AO AS WELL AS FAILED TO GIVE THE CONFIR MED COPY OF THE ACCOUNTS INCLUDING INCOME TAX PARTICULARS AND PROOF OF FILIN G THE RETURN OF INCOME TO THE AO. THEREFORE, IN ASSESSMENT YEAR 2001-02 ALSO, LD. CIT(A) HAS RIGHTLY HELD THAT THE BOOK RESULTS ARE NOT RELIABLE AND THEY DESERVE TO BE REJECTED, HENCE, THE SAME WAS REJECTED BY THE LD. C IT(A), WHICH DOES NOT NEED ANY INTERFERENCE. 8.4 WE FURTHER FIND THAT SINCE THE ASSESSMENT YEAR 2000-01 IS VERY FIRST YEAR OF THE ASSESSEES OPERATION AND NO PAST HISTOR Y IS AVAILABLE AND THE PRODUCTS WHICH ARE SOLD BY THE ASSESSEE ARE ALTOGET HER DIFFERENT ONE THAN THE PRODUCTS SOLD BY OTHER CONCERNS OF DHINGRA GRO UP, THEREFORE TO PREVENT LEAKAGES OF ANY REVENUE, LD. CIT(A) HAS RIG HTLY ESTIMATED THE NET PROFIT @ 35% OF SALES (INCLUDING EXPORT BENEFIT S) AS AGAINST THE NET PROFIT OF 32.33% SHOWN BY THE ASSESSEE. HENCE, THE AO WAS DIRECTED TO RE-COMPUTE THE INCOME BY GIVING CREDIT FOR ALLOWABL E DEDUCTIONS AVAILABLE TO THE APPELLANT IN THE LIGHT OF THE AFORESAID FIND INGS, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, THEREFORE, WE UPHOLD THE SAME. 8.5 AS DISCUSSED ABOVE HAVING HELD THAT THE EXPORT S ARE GENUINE THAN IN SUCH A SCENARIO IT IS QUITE OBVIOUS THAT THE PURCHA SES AS WELL FABRICATION/PACKING MATERIAL HAVE BEEN PURCHASED MA Y BE NOT FROM SAVITA ENTERPRISES AND LOYAT ENTERPRISES BUT DEFINITELY FR OM SOMEONE ELSE. AND, 8 CONSIDERING THE FACT THAT THERE IS NO CONCEPT OF FR EE LUNCH IN ANY COMMERCIAL TRANSACTION AND NO ONE WILL GIVE CREDIT FOR INDEFINITE PERIOD FOR EXTRA ORDINARY LONG PERIOD AS BY ALLEGED SUPPLI ER I.E. SAVITA ENTERPRISES AND LOYAT ENTERPRISES IN THE YEAR UNDER CONSIDERATI ON, ACCORDINGLY, LD. CIT(A) MADE FURTHER AN ADDITION OF RS.15,OO,000 AS CAPITAL REQUIRED TO CARRY THE ACTIVITIES OUTSIDE THE BOOKS IN THE FORM OF MAKING PURCHASES AS WELL FOR FABRICATION/PACKING EXPENSES OF RS.85,00,O OO APPROX. FROM THE SUPPLIERS OTHER THAN SAVITA ENTERPRISES AND LOYAT E NTERPRISES DURING THE ASSESSMENT YEAR 2000-01. 8.6 AS REGARDS THE PROFIT ESTIMATION FOR OTHER YE ARS VIZ. ASSESSMENT YEARS 2001-02 TO 2004-05, FOR WHICH THE ASSESSEE IS ALSO IN APPEAL BEFORE THE LD. CIT(A), IT WAS SEEN FROM THE DETAILS OF NE T PROFIT AND GROSS PROFIT, THAT THERE ARE WIDE FLUCTUATIONS AS IS EVIDENT FROM THE TABLE MENTIONED AT PAGE NO. 6 TO 7 OF THE IMPUGNED ORDER FOR ASSESSMEN T YEAR 2000-01 DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSE SSEE GAVE THE REASON FOR SUCH A WIDE FLUCTUATION IN THE PROFIT BUT THEY ARE TOO GENERAL IN NATURE. BUT AS DISCUSSED ABOVE SINCE IN ASSESSMENT YEAR 200 1-02 TO 2004-05 ALSO, WITH REGARD TO THE PURCHASES AND FABRICATION/ PACKING EXPENSES THERE ARE SERIOUS DOUBT ABOUT THE GENUINENESS OF EXPENDIT URES FROM THE PARTIES MENTIONED IN THE ASSESSEE'S BOOKS OF ACCOUNTS, THER EFORE IN THOSE YEARS TOO, LD. CIT(A) HELD THAT THE BOOKS RESULTS ARE NOT RELIABLE AND THEY DO NOT GIVE THE TRUE AND FAIR VIEW OF ASSESSEES STATE OF AFFAIR. ACCORDINGLY, BY INVOKING THE PROVISIONS OF SECTION 145, LD. CIT( A) HAS RIGHTLY REJECTED THE BOOKS RESULTS OF ASSESSMENT YEAR 2001-02 TO 20 04-05 ALSO, AND 9 ESTIMATE THE PROFIT ALSO @ 35% WHICH IS QUITE REASONABLE AND DOES NOT NEED ANY INTERFERENCE ON OUR PART. IN THE RESULT, T HE REVENUES APPEAL STAND DISMISSED. 8.7 AS REGARDS OTHER REVENUES APPEALS I.E. ASSE SSMENT YEAR 2001-02 TO 2004-05 ARE CONCERNED, FOLLOWING THE CONSISTENT VIEW AS TAKEN IN ASSESSMENT YEAR 2000-01, AS AFORESAID, THE REVENUE S APPEALS FOR THE ASSESSMENT YEAR 2001-02 TO 2004-05 ALSO STAND DISMI SSED. ASSESSEES CROSS OBJECTIONS:- 9. THE COMMON AND IDENTICAL GROUNDS ARE INVOLVED IN THE CROSS OBJECTION NO. 195 TO 198/DEL/2014 WHICH READ AS UND ER:- THE LD. CIT(A) ERRED, ON THE FACTS AND IN VIEW OF THE CIRCUMSTANCES OF THE CASE, IN CONFIRMING THE BUSINE SS INCOME OF THE APPELLANT @ 35% OF TOTAL EXPORTS AND EXPORT INCENTIVES, WHICH IS EXCESSIVE AND ARBITRARY . 10. SINCE WE HAVE ALREADY UPHELD THE ORDER OF THE L EARNED CIT(A) IN CONFIRMING THE BUSINESS INCOME OF THE ASSESSEE @35% OF TOTAL EXPORTS AND EXPORT, IN THE REVENUE APPEALS, AS AFORESAID, THE CONTENTION OF THE ASSESSEE MADE IN THE GROUNDS OF CROSS OBJECTIONS TH AT THE BUSINESS INCOME @35% OF TOTAL EXPORTS AND EXPORT IS EXCESSIV E AND ARBITRARY IS NOT JUSTIFIED, HENCE, THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND THEREFORE, THE SAME ARE DISMISSED AS SUCH. AS A RESULT, ALL THE 04 CROSS OBJECTIONS FILED BY THE ASSESSEE A LSO STAND DISMISSED. 10 11. IN THE RESULT, ALL THE 05 REVENUES APPEALS AN D 04 ASSESSEES CROSS OBJECTIONS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06-10-2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 06/10/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES