ACIT 6(3), MUMBAI V. PREMIUM PAPER & BOARD INDUSTRIES LTD, MUMBAI

ITA 5269/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3031 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 143(3); 14A; 145; 132

Judgement Text

M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 5 269 /MUM/20 1 1 (ASSESSMENT YEAR :200 7 - 0 8 ) ACIT CIR - 6(3), R. NO. 522, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS M/S PREMIUM PAPER & BOARD INDUSTRIES LTD , 1 ST FLOOR, JOHN ROBBER COMPOUND, SEWRI FORT ROAD, SEWRI (EAST), MUMBAI - 400 015 .: PAN: AA A C G 35 99 F (APPELLANT (RESPONDENT) APPELLANT BY : SHRI B S BIST RESPONDENT BY : NONE /DATE OF HEARING : 20 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : 15 - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL HA S BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 2 1 . 03 .201 1 PASSED BY CIT(A) - 12 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 200 7 - 0 8 ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ARGUMENT THAT THE TRANSACTION ON TH E BASIS OF WHICH GROSS PROFIT HAD BEEN ESTIMATED PERTAINED TO AY 2008 - 09, THE CLAIM NEVER MADE BEFORE THE AO. M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE ARGUMENT OF THE ASSESSEE THAT BOTH PURCHA SES AND CHEQUE PAYMENT WERE MADE IN FY 2006 - 07 RELEVANT TO AY 2007 - 08 WHICH IS FOR TOTAL DIFFERENT TRANSACTIONS. 2. DESPITE SERVICE OF NOTICE TO THE RESPONDENT - ASSESSEE THROUGH DEPARTMENT, NONE APPEARED ON BEHALF OF THE ASSESSEE ON ANY OF THE DATES NOR ANY ADJOURNMENT APPLICATION WAS FILED . A CCORDINGLY, APPEAL WAS HEARD AFTER HEARING LD. DR IN ABSENCE OF ASSESSEES REPR ESENTATIVE. 3. THE BRIEF FACTS ARE THAT, IN THIS CASE RETURN OF INCOME WAS FILED AT A LOSS OF RS. 56,32,720/ - UNDER THE NORMAL PROVISIONS OF THE ACT AND B OOK PROFIT OF RS. 1,28,93,890/ - WAS SHOWN U/S 115 JB. THE ASSESSMENT WAS COMPLETED AT A LOSS OF RS. 34,71,729/ - AFTER MAKING THE DISALLOWANCE U/S 14A AT RS. 6,145/ - AND ADDITION ON ACCOUNT OF UNDISCLOSED INCOME FROM ALLEGED BOGUS PURCHASES OF RS. 21,54,846/ - . 4. THE BRIEF FACTS QUA THE MAIN ADDITION CHALLENGED BY THE REVENUE IS THAT, A SEARCH AND SURVEY ACTION WAS CARRIED OUT IN THE CASE OF A DIFFERENT PERSON , SHRI PRAVEEN KUMAR JAIN AND PANKAJ KUMAR JAIN. DURING THE COURSE OF SUCH ACTION, IT WAS FOUND THAT THESE PERSONS WERE PROVIDING ACCOMMODATION BILL THROUGH FOLLOWING CONCERN S , VIZ. NEW PLANET TRADI NG CO. PVT LTD AND OSWAL TRADING INDIA PVT LTD. THE ASSESSEE WAS ALSO FOUND TAKING THE ACCOMMODATION BILLS , FROM THESE PARTIES . THE AO IN THE IMPUGNED ASSESSMENT ORDER HAS NOTED THAT, FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD ENTERED INTO A TRADING TRANSACTION OF PURCHASE, WHICH WAS CARRIED OUT WITH THESE CONCERNS AMOUNTING TO RS. 1,00,42,997/ - . T HESE PURCHASED GOODS WERE AGAIN SOLD TO M/S CAPETOWN MERCANTILE COMPANY PVT LTD AND FASTSTONE TRADING FOR AN AMOUNT OF RS. 1,07,46,388/ - . THUS , THE NET PROFIT SHOWN BY THE M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 3 ASSESSEE WAS AT RS. 7,03,391/ - ON THESE ALLEGED TRANSACTIONS. THE AO DISAGREED WITH THE CONTENTION OF THE ASSESSEE THAT THESE WERE GENUINE TRANSACTION AS IN THE STATEMENT RECORDED ON 17.05.2008, SHRI PANKAJ KUMAR JAIN COULD NOT EXPLAIN THE GENUINENESS OF THE TRANSACTION AND THESE TRANSACTIONS WERE HELD TO BE IN THE NATURE OF PROVIDING OF ACCOMMODATION BILLS. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145 AND DETERMINED THE UNDISCLOSED INCOME IN THE FOLLOW ING MANNER : - THE INTENTION OF THE ASSESSEE COMPANY IN ENTERING INTO SUCH A TRANSACTION IS TO NOT ONLY INFLATE THE PURCHASES AND SALES BUT TO GIVE A TRUE COLOUR TO THE GOODS WHICH HAVE BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNT. BUT, BY DOING THIS, THE ASSES SEE HAS NOT BROUGHT THE TRUE PROFIT TO THE BOOKS OF ACCOUNT. AS IT IS CERTAIN THAT THE ASSESSEE HAS SOLD THE GOODS OUT OF THE BOOKS OF ACCOUNT, THE GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION ON THE AFORESAID SALE, AS REDUCED BY THE PROFIT DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT OF RS.7,03,391/ - IS CONSIDERED AS THE UNDISCLOSED INCOME OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION. AT THIS JUNCTURE, THE ASSESSEE COMPANY MIGHT TAKE A PLEA THAT THEY ARE ENTITLED FOR EXPENSES ON THIS INCOME AND THE NET PROFIT ONLY CAN BE TAXED. HOWEVER, THIS PLEA OF THE ASSESSEE COMPANY MERITS ONLY REJECTION, AS ALL THE EXPENSES ARE DEBITED TO THE PROFIT & LOSS ACCOUNT. MOREOVER, THE ASSESSEE COMPANY HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO PROVE ANY EXPENSES INCURRED FOR EARNING OF THE INCOME. AS PER ANNEXURE 9 TO THE TAX AUDIT RATE, THE G.P. RATE FOR THE YEAR UNDER CONSIDERATION IS 28.46%. THE UNDISCLOSED INCOME IS COMPUTED AS UNDER : - PURCHASE 1,00,42,997 GROSS PROFIT @ 28.46% 28,58,2 37 PROFIT DECLARED IN THE BOOKS OF ACCOUNT 7,03,391 UNDISCLOSED INCOME 21,54,846 M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 4 5. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE TRANSACTIONS WHICH HAS BEEN DOUBTED BY THE AO DID NOT PERTAINED TO THE YEAR UNDER CONSIDERATION I.E. AY 2007 - 08 AS THE GOODS CONCERN RELATE TO THE PURCHASES MADE IN DECEMBER, 2007 AND JANUARY, 2008 AND, THEREFORE, ANY ADDITION IF AT ALL IS CALLED FOR , THEN SAME SHOULD HAVE BEEN CONSIDERED IN AY 2008 - 09. ALTERNATIVELY, IT WAS STATED THAT THE ENTIRE MATERIAL PURCHASES DURING THE YEAR HAS BEEN SOLD AND IF THERE IS NO PURCHASES THEN THERE COULD NOT HAVE BEEN ANY CORRESPONDING SALES ALSO. THE ASSESSEE HAD ALSO FILED THE DETAILS OF THE TRANSACTION FOR THE AY 2008 - 09 TO SHOW THAT NONE OF THE TRANSAC TION AS SAID BY THE AO WERE ENTERED INTO AY 2007 - 08. 6. THE LD. CIT(A) NOTED THE ENTIRE FACTS AND DISCUSSED THE ENTIRE ISSUE VIDE PARA 4.2 TO 4.5 OF HIS APPELLATE ORDER AND NOTED THAT THE STATEMENT RECORDED OF THE DIRECTOR OF THE ASSESSEE ON 05.06.2008, ESTABLISHES THE FACT THAT BILLS REFERRED TO IN RESPECT OF PANKAJ KUMAR JAIN IN RESPECT OF NEW PLANET TRADING CO. PVT. LTD AND OSWAL TRADING INDIA PVT LTD , PERTAINED TO AY 2008 - 09 AS THE PURCHASES WERE MADE IN THE MONTH OF DECEMBER, 2007 AND JANUARY, 2008. THIS IS ALSO EVIDENT FROM THE CHEQUE NUMBERS, NAME OF THE BANK, THE PERSON TO WHOM CHEQUES HAVE BEEN ISSUED AND THE AMOUNT. HOWEVER, HE HELD THAT AOS OBSERVATION ABOUT THE NON - GENUINENESS OF THE PURCHASES IS OTHERWISE CORRECT AND THE ASSESSEES BOOKS OF A CCOUNT AND TRADING RESULT DO NOT REFLECT TRUE PROFIT AND THEREFORE , BOOKS OF ACCOUNTS HA VE RIGHTLY BEEN REJECTED. BUT SUCH A N ADVERSE INFERENCE CAN NOT BE TAKEN FOR THIS YEAR , THAT IS , AY 200 7 - 0 8, BUT IN AY 2008 - 09. THE RELEVANT FINDING OF THE CIT(A) IN THI S REGARD READS AS UNDER : - 4.4 THEREFORE, I FIND THAT THE AOS OBSERVATION THAT THE GENUINENESS OF THE PURCHASE CANNOT BE ESTABLISHED AND THAT THESE TRANSACTIONS AS RECORDED BY THE AO IN HIS BOOKS ARE ONLY TO INFLATE THE PURCHASES AND SALES OF THE APPELL ANT WHICH HAS RESULTED IN THE TRUE PROFIT NOT BEING REVEALED WAS M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 5 ABSOLUTELY CORRECT. THEREFORE BOOKS OF ACCOUNTS NEED TO BE REJECTED WHICH I FIND THAT THE AO HAS RIGHTLY DONE. I ALSO FIND THAT THE METHOD ADOPTED BY THE AO IN APPLYING THE GP RATE ON THE PUR CHASES HELD TO BE UNPROVED CANNOT BE FAULTED WITH. HOWEVER WHAT IS TO BE CONSIDERED HERE NOW IS THE YEAR UNDER WHICH THESE TRANSACTIONS ARE TO BE CONSIDERED FOR CALCULATING THE INCOME OF THE APPELLANT. I FIND THAT IN THE STATEMENT RECORDED OF THE DIRECTOR OF THE COMPANY ON 5/6/2008 IT HAS CLEARLY BEEN MENTIONED IN THE ANSWER TO QUESTION NUMBER 11 THAT THE SAID PURCHASES AGAINST WHICH THE CHEQUES HAVE BEEN FOUND PERTAIN TO DECEMBER AND JANUARY 2007/2008. THIS IS INDICATIVE OF THE FACT THAT THE SAME WOULD NEE D TO BE DEALT WITH THIS AY 2008 - 09 AND NOT IN THIS YEAR THAT IS AY 2007 - 08 AS DONE BY THE AO. I ALSO FIND THAT IN THE BOOKS OF ACCOUNTS FOR AY 2008 - 09 THE APPELLANT HAS TAKEN INTO CONSIDERATION THE ABOVE MENTIONED PURCHASES AND THE ASSESSING OFFICER WHILE ASSESSING THE CASE OF THE APPELLANT UNDER SECTION 143(3) HAS NOT DISPUTED WITH THIS. THE ORDER OF THE ASSESSMENT FOR AY 2007 - 08 IS SILENT REGARDING THE DATE OF SEARCH UNDERTAKEN. 4.5 HOWEVER THE LETTER DATED 16.06.2008 OF THE ADDITIONAL DIRECTOR OF INCOME TAX (INVESTIGATION) UNIT IX, MUMBAI CLEARLY STATES THAT THE SEARCH ACTION WAS CONDUCTED UNDER SECTION 132 OF THE INCOME TAX ACT ON 31.3.2008. THE LETTER FURTHER GOES TO STATE THAT DURING TH E COURSE OF STATEMENT RECORDED OF SHRI PRAVEEN KUMAR JAIN ON 17.5.2008 IN ANSWER TO QUESTION NUMBER 9, SHRI JAIN HAD CLEARLY STATED HE HAD GIVEN ACCOMMODATION ENTRIES IN THE YEAR 2003, 2004 AND 2005 TO VARIOUS PARTIES. HE HAD THEN PROCEEDED TO NAME A FEW P ARTIES. THE APPELLANT IS NOT ONE OF THESE PARTIES. THE CHEQUE OF THE APPELLANT FOUND WITH MR. PRAVEEN KUMAR JAIN HAS FURTHER BEEN DISCUSSED IN THE SAID LETTER. IT HAS CLEARLY BEEN STATED THAT AS ON DATE OF THE LETTER THE APPELLANT COMPANY HAD NOT PAID ANY TAX FOR AY 2008 - 09. THE ADDITIONAL DIRECTOR OF M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 6 INCOME TAX (INVESTIGATION) HAS PROCEEDED TO REQUEST THE AO TO LOOK INTO THE MATTER. IT WOULD THEREFORE STAND THAT THE TRANSACTION UNDER CONSIDERATION RELATED TO AY 2008 - 09 AND NOT AY 2007 - 08. UNDER THE CIRCUMS TANCES, I HAVE NO OPTION BUT TO GIVE RELIEF TO THE APPELLANT REGARDING THIS ADDITION IN THIS YEAR FOR THE REASON THAT THE TRANSACTIONS DO NOT PERTAIN TO AY 2007 - 08 BUT TO AY 2008 - 09 AS IS VERY EVIDENT FROM THE STATEMENT RECORDED AND ALSO FROM THE LETTER OF THE ADDITIONAL DIRECTOR OF INVESTIGATION DATED 16.06.2008 EVEN THOUGH THE GENUINENESS OF THE PURCHASES REMAIN TO BE ESTABLISHED BY WAY OF NEXUS REGARDING PAYMENTS MADE AND GOODS BROUGHT. THE ADDITION SO MADE IS THEREFORE DELETED IN THE CURRENT YEAR. 7. AFTER HEARING THE LD. DR AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT, SO FAR AS THE FACTUM OF THE TRANSACTION OF PURCHASE S , THAT IT PERTAINS TO THE PURCHASES MADE IN DECEMBER, 2007 AND JANUARY, 2008 HAS NOT BEEN REBUTTED BY THE DEPARTMENT , EITHE R BEFORE CIT(A) OR BEFORE US, WHICH CLEARLY INDICATE S THAT AT ALL ANY SUCH ADDITION OF UNDISCLOSED INCOME IS TO BE MADE THEN SAME IS TO BE CONSIDERED IN AY 2008 - 09 AND NOT IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THE FINDING OF THE CIT(A) AS RECORDED AB OVE IS UPHELD AND THERE COULD BE NO DEVIATION WITHOUT THERE BEING ANY ADVERSE MATERIAL OR REBUTTAL BY THE DEPARTMENT. ACCORDINGLY, GROUND RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER , 2015. SD/ - SD/ - ( . ) ( ) ( D. KARUNAKARA RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 15 TH OCTOBER , 2015 M/S PREMIUM PAPER & BOARD INDUSTRIES LTD ITA 5269/M/2011 7 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 12 , MUMBAI. 4 ) THE CIT CITY - 6 , MUMBAI. 5 ) , , / THE D.R. C BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS