ACIT, New Delhi V. M/s. AGS Retail Pvt. Ltd., New Delhi

ITA 5375/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1044 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESHWAR PD
• Assessee Lawyers: SANJOG KAPOOR
• Keywords: Search and seizure; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 5375/DEL/2016 ASSESSMENT YEAR: 2011-12 ACIT, CENTRAL CIRCLE-18, NEW DELHI. VS M/S. AGS RETAIL PVT. LTD., PLOT NO. 1, LOCAL SHOPPING CENTRE, SHARDA NIKETAN, PITAMPURA, NEW DELHI PAN :AAHCA 3643H APPELLANT RESPONDENT ASSESSEE BY SH. SANJOG KAPOOR, SR. DR REVENUE BY SH. RAJESHWAR PD. C.A. ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 24/6/2016 IN APPEAL NO . 174/14- 15/17/15-16 PASSED BY THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS)-25, DELHI (CIT) IN THE CASE OF M/S AGS RETAIL PRIVATE LIMITED (THE ASSESSEE) FOR THE ASSESSMENT YEAR 2011-12, R EVENUE FILED THIS APPEAL. 2. BRIEF FACTS OF THE CASE AS COULD BE CULLED OUT F ROM THE RECORD AND DOCUMENTS, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITIES IN INDIA OR ELSEWHERE AS TRADERS, MERCHANTS, RETAILERS , LISTENERS, STOCKIST, DISTRIBUTORS, IMPORTERS ETC UNDER THE NAME AND STYL E OF M/S AGS RETAILS DATE OF HEARING 11.12.2019 DATE OF PRONOUNCEMENT 18.12.2019 2 PRIVATE LIMITED. THERE WAS SEARCH AND SEIZURE OPERA TIONS UNDER SECTION 132/133A OF THE INCOME TAX ACT, 1961 (FOR SHORT TH E ACT) ON 17/08/2011 IN THE CASE OF THE GROUP AT VARIOUS RESI DENTIAL AND BUSINESS PREMISES. ASSESSEE FILED RETURN OF INCOME DECLARING AN INCOME OF RS.3,55,164/-. LEARNED ASSESSING OFFICER NOTED THAT DURING THE SEARCH PROCEEDINGS AT THE OFFICE OF THE AGS GROUP OF OFFIC ES AT GURGAON DOCUMENTS IMPOUNDED AS ANNEXURE A-5 PAGE NO. 57 AND ANNEXURE A-8 PAGE NO. 58. ACCORDING TO THE LEARNED ASSESSING OFF ICER ANNEXURE A5 SHOWS THAT THE ASSESSEE HAD RAISED AN INVOICE DATED 31/3/2011 FOR RS.1,97,15,545/-AS COMMISSION FOR SUPPLY OF MEDICIN ES TO M/S VIVEK FORMCHEM (INDIA) LTD, AJMER, JAIPUR, RAJASTHAN WHER EAS ANNEXURE 8 SHOWS THAT THE ASSESSEE RAISED ANOTHER INVOICE FOR RS. 60.41 LACS IN THE NAME OF M/S MASTER CAPITAL SERVICE LIMITED ON 31/3/ 2011 FOR SERVICES PROVIDED DURING THE FINANCIAL YEAR 2010-11, BUT NO DETAILS OF SERVICE WAS MENTIONED IN THE INVOICE. 3. ASSESSEE PLEADED BEFORE THE LEARNED ASSESSING OF FICER THAT THE ASSESSEE HAS NOT BOOKED ANY BOGUS EXPENDITURE AND I N FACT IN THE BOOKS OF ASSESSEE THIS TRANSACTION WHEREBY THE ASSESSEE H AS EARNED INCOME WAS SHOWN AND TAXES WERE PAID. ASSESSEE ALSO SUBMIT TED THE COMPLETE DETAILS OF THE CONTRACT AND INVOICES ARE APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IN SUPPORT OF ITS CLAIM T HE ASSESSEE ALSO SUBMITTED THE COPY OF LEDGER ACCOUNT OF THE PARTY I N THE BOOKS OF THE ASSESSEE, COPY OF AS-26 REFLECTING THE TDS DEDUCTIO N BY THE PARTY AND THE COPY OF BANK STATEMENT AND OTHER RELEVANT DOCUMENTS . ASSESSEE ALSO PLEADED THAT WITHOUT PREJUDICE TO THE SAID CONTENTI ON, IF FOR ANY REASON THE REVENUE CONSIDERS THE TRANSACTION TO BE BOGUS A ND TREATS THE 3 EXPENSES AS BOGUS/UNEXPLAINED, THE CORRESPONDING RE CEIPTS SHOULD ALSO NOT BE TREATED AS ACTUAL RECEIPTS. 4. LEARNED ASSESSING OFFICER, HOWEVER, DID NOT FIND THE EXPLANATION OF THE ASSESSEE AS CONVINCING AND STATED THAT THE A SSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE ON WHICH RELIANC E COULD BE PLACED SUCH AS ANY COPY OF AGREEMENT SIGNED BETWEEN THE PA RTIES OR ANY SUCH OTHER DOCUMENT WHICH HAS NOT BEEN PREPARED BY THE A SSESSEE COMPANY ON ITS OWN. IN RESPECT OF THE BANK ACCOUNT, LEARNED ASSESSING OFFICER NOTED THAT THE RELATIONSHIP BETWEEN THE PARTIES AND THE MANNER IN WHICH THE TRANSACTION WAS NOT ENTERED IS NOT CLEAR FROM T HIS DOCUMENT. LEARNED ASSESSING OFFICER, THEREFORE, TREATED THE INVOICE A MOUNT AS BOGUS EXPENSES AND BROUGHT TO TAX A SUM OF RS. 2,61,56,54 5/-. 5. AGGRIEVED BY THE SAID ADDITION, ASSESSEE PREFERR ED AN APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT, APART FRO M OTHER ACTIVITIES, THE ASSESSEE ALSO ACTS AS A LIASONERS, STOCKISTS AND BR OKER WHICH IS VERIFIABLE FROM THE MEMORANDUM OF ASSOCIATION PLACED ON RECORD DURING THE ASSESSMENT PROCEEDINGS. ACCORDING TO THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION THE ASSESSEE RAISED THE INVOICE AMOUN T INTO RS.1,97,15,545/-TO M/S VIVEK PHARMACHEM AGAINST PRO VIDING LIAISON SERVICES TO THEM. ASSESSEE SUBMITTED THE COPY OF AG REEMENT BETWEEN M/S VIVEK PHARMACHEM AND THE ASSESSEE. ASSESSEE FUR THER SUBMITTED THAT A SIMILAR ADDITION WAS MADE IN THE CASE OF REC EIPTS FROM M/S CAPITAL SERVICES LTD AGAINST THE BROKERAGE SERVICES PROVIDE D AMOUNTING TO RS. 64.61 LACS SOLELY ON THE BASIS OF INVOICE MARKED AS ANNEXURE P-8. ACCORDING TO THE ASSESSEE, THE LEARNED ASSESSING OF FICER WAS NOT JUSTIFIED IN MAKING THE ADDITION BECAUSE THE RECEIPTS FROM TH E INVOICES RAISED ON 4 THE CONCERNED PARTIES WERE BEING DULY RECORDED IN T HE BOOKS OF ACCOUNTS AND IF THE SAME AMOUNT IS ADDED AGAIN, IT WOULD LEA D TO DOUBLE TAXATION. 6. LD. CIT(A) CONSIDERED THE CONTENTIONS OF THE ASS ESSEE IN THE LIGHT OF THE DOCUMENTS PRODUCED BY THE ASSESSEE AND ALSO REAPPRAISED THE EVIDENCE ON RECORD. LD. CIT(A) OBSERVED THAT THE TW O INVOICES IN QUESTION DO NOT REPRESENT EXPENSES, BUT RATHER REPRESENT INC OME. ACCORDING TO THE LD. CIT(A) IF THE LEARNED ASSESSING OFFICER SUS PECTS THAT BOGUS EXPENSES WERE BOOKED AGAINST THE INCOME FROM INVOIC ES, THE LEARNED ASSESSING OFFICER SHOULD HAVE GATHERED EVIDENCE WIT HOUT WHICH THE ADDITION COULD NOT BE SUSTAINED. LD. CIT(A) FURTHER FOUND THAT THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER THAT THE AMOUNTS IN QUESTION AS PER THE TWO INVOICES WERE NOT FINDING P LACE IN THE ACCOUNTS/BOOKS OF ASSESSEE ARE BASELESS. LD. CIT(A) WAS ALSO OF THE OPINION THAT FORM AS-26 IS AN INDEPENDENT DOCUMENT PREPARED BY A GOVERNMENT AGENCY OF THE INCOME TAX DEPARTMENT AND SUCH FORM AS-26 REFLECTS THE DEDUCTION OF TDS BY BOTH THE PARTIES I N QUESTION. ON THESE FACTS AND CIRCUMSTANCES, LD. CIT(A) REACHED TO CONC LUSION THAT THERE WAS NO JUSTIFICATION FOR THE ADDITION OF RS. 2,61,56,54 5/-AND, THEREFORE, DIRECTED THE DELETION OF THE SAME. 7. REVENUE IS, THEREFORE, AGGRIEVED OF SUCH FINDING S OF THE LD. CIT(A) AND PREFERRED THIS APPEAL. CONTENTION OF THE LD. DR IS THAT WHEN THE LD. CIT(A) WAS RELYING ON THE AGREEMENT BETWEEN M/S VIV EK PHARMACHEM AND THE ASSESSEE WHICH WAS SUBMITTED DURING THE PRO CEEDINGS BEFORE LD. CIT(A), IN ALL FAIRNESS LD. CIT(A) SHOULD HAVE SOUG HT THE REMAND REPORT FROM THE LEARNED ASSESSING OFFICER BEFORE REACHING A CONCLUSION AS TO THE GENUINENESS OF THE DOCUMENT AND THE TRANSACTION. HE THEREFORE PRAYED 5 THAT THE MATTER MAY BE REMANDED TO THE FILE OF THE LEARNED ASSESSING OFFICER IN ORDER TO VERIFY THE VERACITY THIS DOCUME NT. LD. DR PLACED RELIANCE ON THE DECISION REPORTED IN CIT VS. JANSAM PARKADVERTISING &MARKETING (P) LTD (2015) 56 TAXMANN.COM 286 (DELHI ) IN SUPPORT OF HIS CONTENTION THAT IT IS INCUMBENT ON THE LD. CIT(A) T O ENSURE THAT THE MATTER OF ASSESSMENT REACHES FINALITY WITH ALL THE REQUISITE FACTS ON RECORD AND IF FOR ANY REASON THE LD. CIT(A) FEELS T HAT THE ASSESSING OFFICER WENT WRONG IN GATHERING THE FACTS NECESSARY FOR THE FINAL ASSESSMENT, LD. CIT(A) IN ALL FAIRNESS SHOULD HAVE CALLED FOR A REM AND REPORT. 8. LD. AR SUBMITTED THAT THE ASSESSEE HAS NO OBJECT ION FOR THE REMAND OF THE MATTER FOR VERIFICATION AT THE END OF THE LEARNED ASSESSING OFFICER BUT SUBMITTED THAT THE ENQUIRY MAY BE DIREC TED TO BE LIMITED FOR SUCH VERIFICATION. HE FURTHER SUBMITTED THAT THE LE ARNED ASSESSING OFFICER WAS IN A CONFUSED STATE OF MIND WHILE DEALING WITH THE AMOUNT COVERED BY THESE 2 INVOICES, INASMUCH AS THE ASSESSING OFFI CER WAS OF THE OPINION THAT THE ASSESSEE USING SUCH INVOICES FOR TAKING A TURNOVER ENTRY ARE FOR BOOKING BOGUS EXPENSES AGAINST THE CERTAIN INCOME O R FOR PROVIDING BOGUS BILL OF EXPENSES TO OTHER PARTIES, WHEREAS HE BROUGHT THE ENTIRE AMOUNT COVERED BY THE INVOICES TO TAX, WHICH WAS AL READY SHOWN IN THE BOOKS OF ACCOUNTS FOR THE TAX PURPOSES AND TAXES WE RE PAID. 9. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. ASSESSEE ADMITTED TO HAVE RECE IVED THE AMOUNTS COVERED BY THE INVOICES. THERE IS NO COMMENT ON THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY THE LEARNED ASSESSING OFFICER, B UT ACCORDING TO THE LEARNED ASSESSING OFFICER THERE IS NO DOCUMENT WHIC H HAS NOT BEEN PREPARED BY THE ASSESSEE COMPANY ON ITS OWN IN SUPP ORT OF THE 6 CONTENTIONS OF THE ASSESSEE. IT IS ALSO AN ADMITTED FACT THAT THE PARTY WHO PAID THE SUMS TO THE ASSESSEE HAVE DEDUCTED TDS ON SUCH AMOUNTS AS REFLECTED IN FORM AS-26. THESE RECEIPTS OF THE ASSE SSEE, AS OBSERVED BY THE LD. CIT(A), ARE REFLECTED IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE. FINALLY, LEARNED ASSESSING OFFICER WAS OF THE OPINI ON THAT THE BOGUS EXPENSES BOOKED AND SUCH BOGUS EXPENSES WERE TO BE DISALLOWED. ON THIS PREMISE LEARNED ASSESSING OFFICER ADDED THE RE CEIPTS OF RS. 2,61,56,545/-TO THE INCOME OF THE ASSESSEE. IT IS, THEREFORE, CLEAR THAT THE ASSESSING OFFICER IS NOT SURE WHETHER HE WAS ADDING THE INCOME OR DISALLOWING THE EXPENSES. IT IS NOT THAT THE ASSESS EE CLAIMED THE EXPENSES TO THE TUNE OF RS. 2,61,56,545/-WHICH THE LEARNED A SSESSING OFFICER WANTED TO DISALLOW. 10. IN VIEW OF THE FACT THAT THE VERACITY OF THE AG REEMENT BETWEEN M/S VIVEK PHARMACHEM AND THE ASSESSEE NEEDS TO BE V ERIFIED BY THE LEARNED ASSESSING OFFICER, AS SUBMITTED BY BOTH THE COUNSEL, WE ARE OF THE CONSIDERED OPINION THAT THIS IS A FIT MATTER TO SET ASIDE THE IMPUGNED ORDER AND TO REMAND THE ISSUE TO THE FILE OF THE LE ARNED ASSESSING OFFICER FOR VERIFICATION OF THE AGREEMENT AND TO REACH A RI GHT CONCLUSION. WE ORDER SO. GROUNDS OF APPEAL OF THE REVENUE ARE ACCO RDINGLY ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2019 SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHAR Y) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH DECEMBER, 2019/AKS