DCIT, New Delhi V. M/s. Accurate Meters Ltd., Delhi

ITA 5312/DEL/2011

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8092 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 29-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Bogus purchase; Reasonable cause
• Section: 143(3); 37; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 5866/DEL/2011 : ASSTT. YEAR : 2002-03 ITA NO. 5312/DEL/2011 : ASSTT. YEAR : 2003-04 DCIT, CENTRAL CIRCLE-22, NEW DELHI VS M/S ACCURATE METERS LTD., 8, LOCAL SHOPPING CENTRE, 2 ND & 3 RD FLOOR, VARDHMAN SIDHARTH PLAZA, SAVITA VIHAR, DELHI-110092 (APPELLANT) (RESPONDENT) PAN NO. AA ACA6996J ASSESSEE BY : NONE REVENUE BY : SH. SATPAL GULATI, CIT DR DATE OF HEAR ING: 01 . 0 7 .20 2 1 DATE OF PRONOUNCEMENT: 02 .0 9 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF LD. CIT(A)-III, DELHI DATED 1 5.09.2011 AND 05.10.2011. 2. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS A RE IDENTICAL, WHICH WERE HEARD TOGETHER. 3. IN ITA NO. 5312/DEL/2011, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G ITA NOS. 5312 & 5866/DEL/2011 ACCURATE METERS LTD. 2 THE ADDITION OF RS.13,51,500/- MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF UNACCOUNTED SALE OF SCRAP. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING SPEED MONEY EXPENSED AT 17,94,500. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.1,03,12,050/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF COMMISSION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS. 1,00,000/- MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF UNVOUCHED EXPENSES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.2,94,98,958/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASE. 4. BRIEF FACTS OF THE CASE ARE THAT SEARCH & SEIZUR E ACTION U/S 132 OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT IN ACCURATE GROUP OF CASES ON 26.07.2006 RELEVANT TO THE ASSESS MENT YEAR 2007-08. 5. THE ISSUES BEFORE US PERTAIN TO ASSESSMENT YEARS 2002-03 AND 2003-04 WHEREIN THE ASSESSEE FILED ORIGINAL RET URN OF INCOME ON 31.10.2002 AND 02.12.2003. HENCE IT IS HE REBY HELD THAT THE ASSESSMENTS BEFORE US ARE TO BE TREATED AS COMPLETED ASSESSMENTS BUT NOT ABATED ASSESSMENTS WHICH CREATE AN OBLIGATION ON THE REVENUE TO MAKE ANY ADDITION ONLY BASED ON THE MATERIAL AND DOCUMENTS FOUND AND SEIZED DURING THE SEARCH ACTION. ITA NOS. 5312 & 5866/DEL/2011 ACCURATE METERS LTD. 3 6. THE GROUNDS RAISED BY THE REVENUE HAVE BEEN MENT IONED ABOVE. 7. WE HAVE GONE THROUGH THE RECORD BEFORE US AND HE ARD THE ARGUMENTS OF LD. DR. 8. THE ADDITION MADE ON ACCOUNT OF SALE OF SCRAP IS NOT BASED ON ANY SEIZED MATERIAL. THE SEIZED MATERIAL REFLECT ING THE SCRAP BELONGS TO THE FINANCIAL YEAR 1999-2000 AND ALSO DO ESNT BELONG TO THE ASSESSEE. THE LD. CIT (A) HAS GIVEN A CATEGO RICAL FINDING THAT THE ADDITION IS BASED ON ESTIMATION. IN THE AB SENCE OF ANY SEIZED MATERIAL PRODUCED BEFORE US PROVING CONTRA, WE DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 9. WITH REGARD TO THE SPEED MONEY, THE AO MADE ADDI TION OF AMOUNT @ 0.5% ON THE SALES OF RS.35.69 CRORES MADE TO SEBS. THE LD. CIT (A) GAVE A CATEGORICAL FINDING THAT THE AMOUNT HAS BEEN ADDED ON ESTIMATE BASIS AND NO INCRIMINATING M ATERIAL IS FOUND OR SEIZED. THE LD. CIT (A) HAS ALSO HELD THAT THE EXPENSES HAVE NOT BEEN CLAIMED IN THE BOOKS OF ACCOUNTS AND HENCE NO DISALLOWANCE IS ATTRACTED AS PER SECTION 37 OF THE INCOME TAX ACT, 1961. IN THE ABSENCE OF ANY SEIZED MATERIAL PR ODUCED BEFORE US PROVING CONTRA, WE DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 10. APROPOS, DISALLOWANCE OF COMMISSION, WE FIND TH AT THE ADDITION HAS BEEN MADE BASED ON THE INFORMATION REC EIVED FROM THE ADDL. CIT, RANGE-3, KOLKATA THAT THE CASE OF ON E OF THE RECIPIENTS OF COMMISSION HAS BEEN REOPENED U/S 148. THIS ISSUE HAS BEEN EXAMINED DURING THE PROCEEDINGS U/S 143(3) . DULY CONSIDERING THIS FACT ON RECORD, STILL THE ISSUE DO ESNT CROSS THE ITA NOS. 5312 & 5866/DEL/2011 ACCURATE METERS LTD. 4 THRESHOLD OF BEING EMANATED FROM THE SEIZED MATERIA L. HENCE, IN THE ABSENCE OF ANY SEIZED MATERIAL NO ADDITION IS C ALLED FOR. THE ACTION OF THE LD. CIT (A) IS NOT INTERFERED WITH. 11. IN RELATION TO THE UNVOUCHED EXPENSES OF RS. 1, 00,000/-, THE AO MADE THE ADDITION ON THE GROUNDS THAT THE AS SESSEE HAS NOT PRODUCED BILLS & VOUCHERS. SUCH DISALLOWANCE MA DE DO NOT FALL UNDER THE PURVIEW OF SECTION 153A. HENCE, WE D ECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 12. IN CONNECTION WITH THE BOGUS PURCHASES AND WRON G CLAIM OF CENVAT WHILE THE CLAIM OF THE ASSESSEE WAS THAT THE ADDITION HAS BEEN MADE MERELY BASED ON THE SHOW CAUSE NOTICE ISSUED BY THE EXCISE AUTHORITIES THE FINALITY OF WHICH WAS STILL PENDING. THE LD. CIT (A) DELETED THE ADDITION AFTER OBTAININ G THE REMAND REPORT FROM THE AO. FOR THE SAKE OF READY REFERENCE , THE REMAND REPORT AND THE FINDINGS OF THE LD. CIT (A) I S REPRODUCED AS UNDER: IN THE REMAND REPORT DATED 15.07.2011, THE ASSESSI NG OFFICER HAS STATED AS UNDER: BOGUS TRADING LOSS (AY 2003-04) ON PERUSAL OF CASE RECORDS IT IS SEEN THAT IN THE A SSESSMENT ORDER, ADDITION OF RS.2,93,61,596/- HAS BEEN MADE B Y THE THEN ASSESSING OFFICER BY TAKING THE TRADING PURCHASE AT RS. 3,11,23,930/- AND SALES AT RS. 17,62,334/-. AS PER THE DETAILS AVAILABLE ON RECORDS, THE TRADING PURCHASES ARE SHO WN AT RS. 3,11,23,930/- AND SALES AT RS. 3,23,83,313/- AND IF THESE ITA NOS. 5312 & 5866/DEL/2011 ACCURATE METERS LTD. 5 FIGURES ARE TAKEN FOR COMPUTATION THEN THE RESULTAN T PROFIT COMES TO RS. 12,59,383/-. FINDING OF THE LD. CIT (A): FROM THE FINDING IN ASSESSMENT ORDER WITH RESPECT T O ABOVE GROUND OF APPEAL IT IS SEEN THAT THE AO HAS DISALLOWED THE HUGE LOSS OF RS.2,93,61,596/- INCURRED BY ASSESSEE DURING THE YE AR ON TRADING AS THE LIST OF TRADING PURCHASES AND CORRESPONDING SAL ES AMOUNTED TO RS.3,11,23,930/-AND RS.17,62,334/-, RESPECTIVELY. T HE AO HAS NOTED THAT THERE APPEARS NO REASONABLE CAUSE FOR HAVING I NCURRED HUGE LOSS ON THE TRADING TRANSACTIONS. THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OF STOCK INVENTORY TO SHOW THAT ANY TRADING STOCK WAS INCLUDED IN THE INVENTORY. FROM THE ABOVE FACTS THE AO IS OF THE VIEW THAT THE ASSESSEE HAD MADE BOGUS TRADING PURCHASES AND SALES TO REDUCE THE TAXABLE PROFIT. ON RECEIPT OF THE REMAND REPORT ON THE ISSUE IT IS OBSERVED THAT THERE HAS BEEN A FACTUAL INACCURACY IN THE ORDER OF THE AO WHICH IS NOW BEEN CORRECTLY REPORTED IN THE REMAND REPORT WH ICH SHOWS THAT THE TRADING PURCHASES ARE AT RS.3,11,23,930/-AND CO RRESPONDING SALES ARE AT RS.3,23,83,313/- WHICH RESULTS IN A PR OFIT OF RS.12,59,383/-. THE BASIC REASON FOR DISALLOWANCE OF THE LOSS FOR R S.2,93,61,593/- BY THE A.O. IS ON ACCOUNT OF THE FACT THAT THERE WAS N O REASONABLE CAUSE FOR HAVING INCURRED HUGE LOSS ON THE TRADING TRANSA CTIONS AND THAT THE ASSESSEE HAD MADE BOGUS TRADING PURCHASES AND S ALES TO REDUCE ITS TAXABLE PROFIT. NOW AS FACTUALLY THE ABOVE STA TE OF AFFAIRS IS PROVED TO BE INCORRECT THEREFORE THE BASIC PREMISE ON WHICH THE ADDITION TO INCOME IS MADE GOES OFF. IN A RESULT TH E SAID DISALLOWANCE AND THEREBY ADDITION TO INCOME FOR RS.2,93,61,593/- , IS ALSO DIRECTED TO BE DELETED. ITA NOS. 5312 & 5866/DEL/2011 ACCURATE METERS LTD. 6 13. SINCE, THE FINDING OF THE LD. CIT (A) COULD NOT BE CONTROVERTED ON FACTS AND AS WELL AS ON JURISDICTIO NAL ISSUE, WE HEREBY AFFIRM THE ORDER OF THE LD. CIT (A). 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/09/2021. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 02/09/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR