ITO, New Delhi V. M/s. Bhadana Housing & Construction Pvt. Ltd., New Delhi

ITA 5024/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7366 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL SENIOR
• Assessee Lawyers: M G ARORA
• Keywords: Bogus purchase; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.5024/DEL./2012 ASSESSMENT YEAR : 2006-07 ITO, WARD 2 (4), VS. M/S. BHADANA HOUSING & CONST RUCTION PVT. LTD., NEW DELHI. C 710, NEW FRIENDS COLONY, NEW DELHI 110 065. (PAN : AAACB6467F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.G. ARORA, CA REVENUE BY : SHRI K.K. JAISWAL, SENIOR DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIR ECTED AGAINST THE ORDER OF THE CIT (APPEALS)-V, NEW DELHI DATED 05.07.2012 FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS FILED THE AMENDED GROUNDS OF APP EAL WHICH READ AS UNDER:- 1. THE LD. CIT (A) HAS ERRED ON FACT AND IN LAW IN DELETING THE ADDITION OF RS.97,85,383/- MADE ON ACCOUNT OF DISAL LOWANCE OF LOSS SUFFERED IN TRADING OF FOAM AND FABRICS. 2 ITA NO.5024/DEL/2012 2. THE LD. CIT (A) HAS IGNORED THE FACT THAT THE AS SESSEE DID NOT PRODUCE THE NECESSARY BOOKS OF ACCOUNTS AND VOU CHERS FOR VERIFICATION DESPITE HAVING BEEN PROVIDED AMPLE OPP ORTUNITIES BY THE AO. 3. THE APPELLANT CRAVES LEAVE OR RESERVING THE RIGH T TO AMEND, MODIFY, ALTER, ADD OR FORGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED THE RETURN ON 30.10.2006 DECLARING INCOME OF RS.85,833/-. THE CASE WAS PROCE SSED U/S 143 (1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON 11. 07.2007 AND THE ASSESSMENT U/S 143 (3) OF THE ACT WAS COMPLETED ON 29.12.2008 AT AN INCOME OF RS.98,71,216/- AFTER MAKING AN ADDITION OF RS.97,85 ,383/-. THE ADDITION OF RS.97,85,383/- WAS MADE ON ACCOUNT OF DISALLOWANCE OF LOSS CLAIMED ON ACCOUNT OF SALE AND PURCHASE OF FOAM AND FABRIC. ON APPEAL, THE LD. CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 27.11.2009. BEING AGGRIEVED, THE REVENUE FILED AN APPEAL BEFORE THE I TAT AND THE ITAT IN ITS ORDER DATED 12.11.2010 PASSED IN ITA NO.463&464/DEL /2010 RESTORED THE ASSESSMENT BACK TO AO FOR DE NOVO ASSESSMENT AFTER PROVIDING THE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3.1 FOLLOWING THE DIRECTIONS OF THE TRIBUNAL, THE A O ISSUED NOTICE/LETTER TO THE ASSESSEE TO FILE NECESSARY DETAILS. AFTER GOIN G THROUGH THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE, THE AO OBSERVED THAT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED VIDE NOTE-SHEET ENTRY DATED 24.08.2011 TO PROVIDE THE LATEST ADDRESSES OF THE B UYERS & SUPPLIERS AND ALSO TO 3 ITA NO.5024/DEL/2012 PRODUCE COMPLETE BOOKS OF ACCOUNTS WITH VOUCHERS. T HE AO OBSERVED THAT VIDE ITS REPLY DATED 08.09.2011, THE ASSESSEE SUBMITTED THE PAPERS WHICH WERE PRODUCED BEFORE AO DURING THE COURSE OF ORIGINAL AS SESSMENT PROCEEDING. THE AO PROVIDED ANOTHER OPPORTUNITY TO THE ASSESSEE TO FILE THE QUALITATIVE AND QUANTITATIVE DETAILS OF SALES AND PURCHASES WITH TH E ADDRESSES OF THE BUYERS AND SELLERS BUT NO REPLY WAS FILED. FURTHER, THE AO AS KED THE ASSESSEE TO FILE THE NECESSARY DETAILS AND ALSO TO PRODUCE STOCK REGISTE R AND RATES OF DIFFERENT ITEMS AND COMPLETE LEDGER ACCOUNTS OF THE PARTIES FROM WH OM SALES AND PURCHASES HAD BEEN MADE. THE AO OBSERVED THAT THE ASSESSEE ONLY F ILED CHART CONTAINING OF SALES AND PURCHASES. ACCORDINGLY, THE ASSESSEE WAS PROVIDED FINAL OPPORTUNITY VIDE NOTE-SHEET ENTRY DATED 21.12.2011 TO PRODUCE C OMPLETE BOOKS OF ACCOUNTS INCLUDING STOCK REGISTER AND ALL THE SUPPORTING VOU CHERS FOR VERIFICATION. THE AO OBSERVED THAT AGAIN, NO NEW EVIDENCE WAS PRODUCED A ND EVEN BOOKS OF ACCOUNTS WERE NOT PRODUCED. THE AO OBSERVED THAT IN THE ORI GINAL ASSESSMENT ORDER U/S 143 (3) DATED 29.12.2008, THE ASSESSEE COMPANY HAD SHOWN PURCHASES OF RS.3,37,29,782/- AND HAD BEEN ADJUSTED AGAINST SALE OF RS.2,39,24,400/- THEREBY CLAIMING LOSS OF RS.97,87,382/- ON SALE AND PURCHAS E. ACCORDING TO AO, THERE WAS NO SUCH BUSINESS ACTIVITY CONDUCTED DURING THE YEAR UNDER CONSIDERATION. THE AO FURTHER OBSERVED THAT THE ASSESSEE COMPANY H AD SHOWN PURCHASES OF RS.1,39,80,200/- FROM M/S ALLIED FOAMS AND SALE OF RS.1,34,80,200/- TO THE SAME PARTY; AND PURCHASE OF RS.14,58,207/- AND SALE OF RS.5,10,335/- TO M/S R.S.M. ENTERPRISES. THE AO ALSO NOTED THAT ASSESSE E HAD NO OPENING AND 4 ITA NO.5024/DEL/2012 CLOSING STOCK. THE AO HELD THAT SINCE THE ASSESSEE COMPANY HAD NOT DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF THE SALES AN D PURCHASES MADE DURING THE YEAR, AS DISCUSSED IN THE EARLIER ORDER U/S 143 (3) DATED 29.12.2008 WHICH WAS RESTORED BY THE TRIBUNAL, AND AS NO FRESH EVIDENCE HAD BEEN BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THE GENUINENESS OF THE SAL ES AND PURCHASES, IT LED TO THE CONCLUSION THAT IN FACT NO PURCHASES AND SALES WERE MADE BY THE ASSESSEE DURING THE YEAR. ACCORDING TO AO NO FUNDS WERE AVAILABLE W ITH THE ASSESSEE FOR MAKING THE PURCHASES; AND LOSSES CLAIMED WAS ON ACCOUNT OF BOGUS/SHAM SALES AND PURCHASES. ACCORDINGLY, THE AO MADE AN ADDITION OF RS.97,87,382/- MADE ON ACCOUNT OF DISALLOWANCE OF LOSS SUFFERED IN TRADING OF FOAM AND FABRICS AND COMPLETED THE ASSESSMENT ON TOTAL INCOME OF RS.98,7 1,216/-, AS WAS ASSESSED IN THE ORIGINAL ASSESSMENT ORDER DATED 29.12.2008. 4. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E LD. CIT (A) AND THE LD. CIT (A) DELETED THE ADDITION BY OBSERVING AS UNDER :- THE ISSUE INVOLVED AND SUBMISSIONS MADE BY THE AP PELLANT HAVE BEEN CONSIDERED.: (A) IT IS NOT CLEAR WHAT THE AO HAS TO DO WITH THE LATEST ADDRESSES OF THE BUYERS AND SUPPLIERS; IF HE HAS TO EXAMINE T HE GENUINENESS OF THE SAME, HE COULD HAVE CALLED THEM ON THE OLD A DDRESSES AS PER THE RECORD AND IN CASE OF ANY DISCREPANCY/LACK OF R ESPONSE COULD HAVE FORMED AN ADVERSE VIEW AND COULD HAVE CONFRONT ED THE APPELLANT WITH THE SAME. THE AO HAS NOT DISCHARGED ITS ONUS AND NEITHER HAS SHIFTED THE BURDEN OF THE SAME TO THE A PPELLANT. (B) IT IS NOT POSSIBLE TO DISAGREE WITH THE APPELLA NT THAT IT CANNOT COMPEL THE AO TO WRITE IN ITS NOTE SHEET THAT THE B OOKS OF A/CS WERE PRODUCED BEFORE HIM. 5 ITA NO.5024/DEL/2012 (C) THE SAME ISSUE WAS BEFORE THE CIT(A) IN THE FIR ST ROUND AND THE SUBMISSIONS WERE MADE ON SIMILAR LINES BEFORE H IM. THE CIT(A) AFTER DISCUSSING IN DETAIL IN PARA 3.4 TO 3. 6 OF HIS ORDER HAS ALLOWED THE CLAIM OF THE APPELLANT AFTER CONSIDERIN G THE VERSION OF THE APPELLANT SUBMITTED BEFORE HIM. THE PARA 3.4 TO 3.6 ARE REPRODUCED AS UNDER:- 3.4 THE SUBMISSIONS OF THE ASSESSEE WHICH AO HAS ACCEPTED IN ASST. ORDER ARE AS UNDER :- 1. ASSESSEE FILED VARIOUS DETAILS ASKED FOR; 2. ASSESSEE FILED AUDITED FINAL ACCOUNTS; 3. DETAILS OF ALL THE EXPENSES/SALES/PURCHASES WERE PRODUCED; AND 4. CONFIRMATIONS WERE ALSO PRODUCED. THE AO DID NOT MENTION EVEN A SINGLE DISCREPANCY OR MISTAKE OR WRONG FACTS. REGARDING NON PRODUCTION OF BOOKS OF ETCS THE ARGUMENT OF THE ASSESSEE'S COUNSEL SEEM ED VALID THAT AO WAS UNDER PRESSURE AND TIME WAS NOT GIVEN T O THE ASSESSEE, WHENEVER COUNSEL TRIED TO PRODUCE THE BOO KS OF ACCOUNTS. AO HAS FIXED THE CASE FOR 30.12.08 AND CO MPLETED THE ASST. ON 29.12.08 SHOWS THE PRESSURE ON AO TO C OMPLETE THE ASSESSMENT. COUNSEL OF THE ASSESSEE ALSO ARGUED THAT IF THE EVIDENCE/ CONFIRMATION/ BOOKS OF ACCOUNTS WERE NOT TO BE CONSIDERED BY THE AO THEN WHY CASE WAS FIXED FOR 30 .12.08. 3.5 I HAVE GONE THROUGH THE DOCUMENTS FILED BY THE ASSESSEE BEFORE AO. REFERENCE OF THE DOCUMENTS MENT IONED IN ASST. ORDER VERIFIED. BOOKS OF /CS WERE PRODUCE D BEFORE ME AND TEST CHECKED. CONFIRMATIONS FROM THE 100% SUPPLIERS AND 90% OF THE BUYERS WHO ARE ALL ASSESSE ES, ARE BEING FILED BY THE ASSESSEE. 3.6 IN VIEW OF THE ABOVE I GIVE A RELIEF TO THE ASS ESSEE AND ADDITION OF RS.97,85,383/- HAS BEEN DELETED. IN VIEW OF THE ABOVE DISCUSSION, THE UNDERSIGNED DO ES NOT FIND ANY REASON TO DEVIATE FROM THE FINDING GIVEN BY THE CIT (A) IN HIS ORDER DATED 27.11.2009. ADDITION OF RS.97,85,383/- IS TH EREFORE DELETED AND THE GROUNDS OF APPEAL ARE ALLOWED. 6 ITA NO.5024/DEL/2012 5. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFOR E US AGAINST THE DELETION OF ADDITION OF RS.97,85,383/- MADE ON ACCOUNT OF DI SALLOWANCE OF LOSS SUFFERED IN TRADING OF FOAM AND FABRICS AND NOT PRODUCING TH E NECESSARY BOOKS OF ACCOUNTS AND VOUCHERS FOR VERIFICATION DESPITE HAVI NG BEEN PROVIDED AMPLE OPPORTUNITIES BY THE AO. 6. LD. DR SUBMITTED THAT THE ASSESSEE HAS TWO TYPES OF INCOME I.E. COMMISSION AND SALES/PURCHASE INCOME. THE ITAT RES TORED THE MATTER TO CONDUCT DE NOVO IN THE ORIGINAL ASSESSMENT. HE SUB MITTED THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS AND STOCK REGISTE R. HE SUBMITTED THAT THE ASSESSEE CLAIMED LOSS OF ABOUT RS.97 LAKHS. LD. DR DREW OUR ATTENTION TO DETAILS OF SALE AND PURCHASE AT PAGES 63 & 62 OF TH E PAPER BOOK. HE SUBMITTED THAT A PERUSAL OF THE PAGE 62 REVEALS THAT THERE AR E ONLY FOUR PARTIES TO WHOM THE SALE WERE MADE AND THE PURCHASES WERE ALSO MADE FRO M THESE PARTIES. ACCORDING TO THE DR, BOGUS PURCHASE AND SALES WERE CLAIMED AND SET OFF THE PROFIT. HE SUBMITTED THAT THIS IS THE MODUS OPERAN DI OF BUY AND SALE AND ALL THESE THINGS DID NOT TAKE PLACE PHYSICALLY. HE SUB MITTED THAT NO PARTIES WERE PRODUCED AND THERE IS NO REAL TRANSACTION. HE PLEA DED TO REVERSE THE ORDER OF THE LD. CIT (A) AND RESTORE THE ORDER OF THE AO. 7. ON THE OTHER HAND, LD. AR REITERATED THE SUBMISS IONS MADE BEFORE THE LD. CIT (A) AND SUBMITTED THAT THE BOOKS OF ACCOUNT WER E NOT REJECTED AND NO GROUND HAS BEEN RAISED BY THE DEPARTMENT IN THIS RE GARD. AS REGARDS THE AOS OBJECTION THAT THE LATEST ADDRESSES OF THE BUYERS A ND SUPPLIERS OF FABRIC WERE NOT 7 ITA NO.5024/DEL/2012 GIVEN DURING THE ASSESSMENT PROCEEDINGS, LD. AR SUB MITTED THAT THE ADDRESSES GIVEN BY THE ASSESSEE WERE THE LATEST AND THERE WAS NO CHANGE, WHEREAS THE AO INSISTED FOR GIVING THE LATEST ADDRESSES. HE FURTH ER SUBMITTED THAT THE AO NEVER TRIED TO COMMUNICATE WITH THE BUYER AND SUPPLIER EI THER THROUGH MAIL OR THROUGH INSPECTOR OF THE WARD; AND ALSO THE AO HAD NOT MENT IONED ANY DISCREPANCY IN THE ASSESSMENT ORDER AS FAR AS ADDRESSES OF THE BUY ER AND SUPPLIERS ARE CONCERNED. HE FURTHER SUBMITTED THAT THE CONFIRMAT ION FROM 90% OF THE BUYERS AND SUPPLIERS WERE AVAILABLE WHICH WAS ALSO CONFIRM ED BY THE LD. CIT (A) IN THE EARLIER APPELLATE ORDER. WITH REGARD TO BOOKS OF A CCOUNTS AND VOUCHERS WERE NOT PRODUCED, THE LD. AR SUBMITTED THAT DETAILED STATEM ENT OF QUALITATIVE AND QUANTITATIVE DETAILS OF SALES AND PURCHASE WITH PRI CE MADE FROM BILLS WAS FILED BEFORE THE AO AND THE AO HAD GIVEN A REFERENCE IN P ARA 3 OF HIS ASSESSMENT ORDER BUT HE NEVER TRIED TO MATCH THE DETAILS WHICH WERE FILED. HE SUBMITTED THAT THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS NUMBER OF T IMES, BUT THOSE WERE NOT CHECKED BY THE AO. HE SUBMITTED THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF CONSTRUCTION AND WAS GETTING GOOD INCOME. HE SUBMI TTED THAT THE ASSESSEE WENT FOR THE FABRIC INDUSTRY FOR THE FIRST TIME THIS YEA R AND TRIED INTO THIS NEW BUSINESS BUT SUFFERED HEAVY LOSS AND TOOK OUR ATTENTION TO P AGES 2, 5, 3 & 89 OF THE PAPER BOOK. HE SUBMITTED THAT ACCORDING TO THE AO, THE A SSESSEE DID NOT PRODUCE BOOKS BUT THE AO WAS NOT LOOKING INTO IT, HOWEVER, DETAILS WERE PRODUCED. HE DREW OUR ATTENTION TO PAGES 64 TO 71 WHEREIN THE DE TAILS WERE GIVEN AND SPECIFICALLY PAGE 67 OF THE PAPER BOOK. THE LD. AR SUBMITTED THAT THERE WERE 8 ITA NO.5024/DEL/2012 MOVEMENTS OF THE GOODS, GODOWN WAS THERE AND ACTUAL BUYING AND SELLING TOOK PLACE. SINCE THE ASSESSEE WAS IN THE INITIAL YEAR OR FABRIC BUSINESS SUFFERED HEAVY LOSS, THEREFORE, WANTS US NOT TO INTERFERE IN THE ORDER OF LD. CIT (A). 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE NOTI CE THAT IN THE FIRST ROUND, THE CIT (A) HAD DELETED THE SAID ADDITION ON THE BA SIS THAT COMPLETE BOOKS OF ACCOUNTS WERE PRODUCED, EXAMINED AND VERIFIED ON TE ST-CHECK BASIS. FURTHER, ALL THE TRANSACTIONS OF PURCHASES WERE DULY CONFIRMED A ND 90% OF THE SALES ARE ALSO CONFIRMED. HOWEVER, THE PLEA OF THE DR WHICH WAS A CCEPTED BY THE TRIBUNAL WAS THAT THE EVIDENCES ACCEPTED HAD NOT BEEN CONSID ERED BY THE AO, THUS THE AO IN THE SECOND ROUND, OUGHT TO HAVE EXAMINED THE AFORESAID EVIDENCE AND ARRIVED AT A CONCLUSION. HOWEVER, IT IS NOTICED TH AT THE AO HAS SIMPLY BORROWED THE CONCLUSION FROM THE ORIGINAL ORDER OF ASSESSMEN T. THIS APPROACH IS IN BLATANT DISREGARD OF THE OWN STAND OF THE REVENUE B EFORE THE TRIBUNAL IN THE FIRST ROUND. THUS, TO THIS EXTENT, THE APPROACH OF THE A O IS PATENTLY ERRONEOUS. NOW, COMING TO THE MERITS OF THE MATTER, IT IS SEEN THAT ASSESSEE HAS DECLARED SALES OF RS.2,39,24,400/- AND PURCHASE OF RS.3,37,29,782/-. THE TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS WHICH HAVE BEEN E XAMINED AND ACCEPTED IN THE FIRST ROUND BY CIT (A) AND NO SPECIFIC OBSERVAT ION VIS--VIS THE SAID BOOKS OF ACCOUNTS BY THE AO IN THE SECOND ROUND. MOREOVE R, THESE ARE AUDITED BOOKS OF ACCOUNTS. THE CASE OF THE AO IS THAT NEW ADDRES SES OF THE PARTIES HAVE NOT BEEN FURNISHED. IN OUR OPINION, WITHOUT CARRYING O UT ANY INVESTIGATION IN RESPECT OF EVIDENCES ON RECORD, SUCH A CONCLUSION I S PERVERSE. FURTHER, NON- 9 ITA NO.5024/DEL/2012 PRODUCTION OF STOCK-REGISTER OR RATES BY ITSELF CAN NOT BE A GROUND TO REJECT THE CONFIRMATIONS FURNISHED BY THE ASSESSEE IN WHICH PA N NUMBER/WARD NUMBER, ADDRESS OF PARTIES, DETAILS OF THE TRANSACTIONS HAV E BEEN MENTIONED. NO DOUBT CLAIMING A LOSS ON PURCHASE AND SALE TO THE SAME PA RTY MAY RESULT INTO A DOUBT, BUT SUCH A DOUBT WITHOUT ANY VERIFICATION OR INVEST IGATION VIS--VIS THE EVIDENCE TENDERED DOES NOT ACQUIRE THE CHARACTER OF EVIDENCE SO AS TO HOLD THAT THE TRADING TRANSACTIONS ARE BOGUS OR SHAM. MORE-SO, WHEN THE REVENUE HAD REQUESTED FOR EXAMINATION OF THE EVIDENCE AND SUCH REQUEST WAS AC CEPTED BY THE TRIBUNAL IN THE FIRST ROUND AND YET AO FAILED TO CARRY OUT INVE STIGATION. THUS, THIS IS A CASE OF LACK OF INVESTIGATION WHICH VITIATES THE ADVERSE CONCLUSION DRAWN BY THE AO. WE, THEREFORE, SEE NO REASON TO DEVIATE FROM THE CO NCLUSION OF THE FIRST APPELLATE AUTHORITY. ACCORDINGLY, WE FIND NO INFIRMITY IN TH E ORDER OF THE LD. CIT (A) AND THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS DAY OF 1 5 TH JANUARY, 2016. SD/- SD/- (J.S. REDDY) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 15 TH DAY OF JANUARY, 2016/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NOIDA. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.