ITO, New Delhi V. Mr. Dinesh Bansal, Delhi

ITA 5744/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7087 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K MISRA
• Keywords: Bogus purchase; Additional evidence; Accommodation entries
• Section: 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA NO. 5744/DEL/2013 ASSTT. YR: 2005-06 INCOME TAX OFFICER, VS. MR. DINESH BANSAL, WARD 25(1), NEW DELHI. C/0 KRISHAN LAL DINESH KUM AR, 148B, G&JU-BLOCK, PITAMPURA, DELHI-110034. PAN: AGEPB 8000 H AND C.O. NO. 108/DEL/2014 ( IN ITA NO. 5744/DEL/2013) ASSTT. YR: 2005-06 MR. DINESH BANSAL, VS. INCOME TAX OFFICER, C/0 KRISHAN LAL DINESH KUMAR, WARD 25(1), NEW DELH I. 148B, G&JU-BLOCK, PITAMPURA, DELHI-110034. ( APPELLANT ) (RESPONDENT) REVENUE BY : SHRI NEEHAR RANJAN PANDEY SR. DR ASSESSEE BY : SHRI NEERAJ JAIN CA & SHRI P.K. MISRA CA . DATE OF HEARING : 17/12/2015. DATE OF ORDER : 03/02/2016. O R D E R PER S.V. MEHROTRA, A.M: THE CAPTIONED APPEAL BY THE REVENUE AND THE CROSS-O BJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 02.08 .2013 PASSED BY THE LD. 2 CIT(A),XXIV, NEW DELHI IN APPEAL NO. 215/12-13, REL ATING TO A.Y. 2005- 06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED RETURN OF INCOME DECLARING INCOME AT RS. 1,97,413/-, WHICH WAS ACCEP TED U/S 143(1). SUBSEQUENTLY INFORMATION WAS RECEIVED FROM DI(INV. ) THAT DUE TO SEARCH CARRIED OUT IN THE CASE OF SH. NAVNEET KUMAR JAIN A ND OTHERS ON 26.4.2010 IT TRANSPIRED THAT THEY WERE ENGAGED IN PROVIDING ACCO MMODATION ENTRIES IN THE FORM OF BOGUS SALES BILL. THE MODUS OPERANDI SUGGES TED THAT THEY ISSUED BOGUS BILLS FROM THEIR CONCERNS TO THE BENEFICIARIE S AND TOOK CHEQUES AND AFTER DEDUCTING THEIR COMMUNICATION CASH WAS RETURN ED TO THE BENEFICIARIES. THE LIST INCLUDED THE NAME OF ASSESSEE, WHICH SHOWE D THAT ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES OF RS. 48,60,000/- FRO M NAVNEET KUMAR JAIN & SONS AND RS. 13,88,000/- FROM VEE KAY INTERNATION AL. ACCORDINGLY, AO ISSUED NOTICE U/S 148 AND SINCE THE ASSESSEE DID NO T FILE ANY EXPLANATION, MADE ADDITION OF RS. 62,48,000/-. 3. THE LD. CIT(A) UPHELD THE REOPENING MADE BY AO, INTER ALIA, OBSERVING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. THE FIRST GROUND OF APPEAL IS GENERAL IN NATURE AND, THEREFOR E, REQUIRES NO SPECIFIC COMMENTS. IN THE SECOND GROUND OF APPEA L, THE APPELLANT HAS CONTESTED THAT THE ORDER U/S 143(3)/1 48 WAS 3 PASSED BY THE ITO, WARD 26(4) WHO WAS HAVING NO JUR ISDICTION OVER THE APPELLANT. IT IS OBSERVED THAT THE CASE OF THE APPELLANT WAS TRANSFERRED FROM, ~TO, WARD 25 (1) TO ITO WARD 26(4) BY THE APPROPRIATE AUTHORITY. THEREFORE, THE CONTENTIO N OF THE APPELLANT THAT THE ASSESSMENT ORDER WAS PASSED WITH OUT JURISDICTION HAVE NOT MERIT AND THE SAME IS HEREBY REJECTED. IN THE THIRD AND FOURTH GROUNDS OF APPEAL, THE APPE LLANT HAS CONTESTED THE REOPENING OF THE ASSESSMENT. THE ID. AR HAS CONTENDED THAT THE CASE OF THE APPELLANT WAS REOPEN ED BY THE AO WITHOUT APPLYING HIS MIND AND INDEPENDENTLY VERI FYING THE INFORMATION RECEIVED FROM A THIRD PARTY I.E. DIT(LN V), NEW DELHI. IT IS OBSERVED THAT DURING THE COURSE OF SEA RCH ACTION CARRIED OUT IN THE CASE OF SH. NAVNEET KR. JAIN AND HIS SON, VAIBHAV JAIN ALONG WITH JAQUAR GROUP, ON 26.4.2010, THEY HAVE ACCEPTED THAT THEY WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRY IN THE FORM OF BOGUS SALE BILLS . THESE ENTRIES WERE PROVIDED DIRECTLY OR THROUGH AN AGENT. THE ENTRY PROVIDERS HAD FLOATED ABOUT 37 PROPRIETORSHIP CONCE RNS IN THE NAME OF THE FAMILY MEMBERS, EMPLOYEES, AND THEMSELV ES TO CONDUCT THIS BUSINESS. THEY ISSUED BOGUS BILLS FROM THE CONCERN TO THE BENEFICIARIES AND TOOK CHEQUES AGAINST THEM. THESE CHEQUES WERE DEPOSITED IN THE BANK ACCOUNT OF THE R ESPECTIVE CONCERN. SUBSEQUENTLY, CASH WAS WITHDRAWN AND THE S AME WAS RETURNED TO THE BENEFICIARIES AFTER DEDUCTING THEIR COMMISSION. THE LIST OF BENEFICIARIES WHO TOOK ACCOMMODATION EN TRY FROM SH. NAVNEET KR. JAIN AND HIS GROUP CONCERN INCLUDED THE NAME OF THE APPELLANT. THE APPELLANT HAS TAKEN ACCOMMODA TION ENTRY OF RS.48.60 LACS FROM THE ACCOUNT OF MIS NAVNEET KR . JAIN & SONS (A/C NO. 1005460) AND OF RS.13,88,OOOI- FROM T HE A/C OF M/S VEE KAY INTERNATIONAL ( A/C NO.941803) TOTALING TO RS.62.48 LACS. ON THE BASIS OF RECEIPT OF INFORMATI ON, THE AO RECORDED HIS SATISFACTION/ REASON FOR REOPENING OF THE CASE AND A NOTICE WAS ISSUED U/S 148 OF THE IT ACT TO THE AP PELLANT. THUS, THERE IS A LIVE CONNECTION BETWEEN THE INFORMATION IN REASONS 4 RECORDED AND ADDITIONS MADE BY ASSESSING ~OFFICER. FROM THE ABOVE FACTS, IT IS ALSO CLEAR THAT THE AO HAD DEFIN ITE INFORMATION SUCH AS THE NAME OF ACCOMMODATION ENTRY PROVIDER, I TS BANK ACCOUNT AND THE MODUS OPERANDI OF PROVIDING ACCOMMO DATION ENTRY IN RESPECT OF THE APPELLANT. IT IS ALSO OBSER VED THAT THE CASE OF APPELLANT FOR THE RELEVANT A.Y. WAS ONLY PR OCESSED U/S 143(1) AND IT WAS NOT SUBJECTED TO SCRUTINY EARLIER . FOR REOPENING OF A CASE U/S 147/148, IT IS WORTHWHILE T O MENTION THAT ONLY THE PRIMA FACIE INFORMATION IS REQUIRED A ND IT NEED NOT REQUIRE DETAILED INVESTIGATION REGARDING THE INVOLV EMENT OF AN ASSESSEE IN ESCAPEMENT OF INCOME. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS: RAJESH JHAVARI STOCK BROKERS (P) LTD. 291 ITR 5 00(SC) WHEREIN THE HON'BLE SUPREME COURT HELD THAT IN DETE RMINING WHETHER THE COMMENCEMENT OF THE REASSESSMENT PROCEE DINGS ARE VALID, IT IS ONLY TO BE SEEN THAT THERE WAS A P RIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY/CORRECTNESS OF THE MATERIAL I S NOT A THING TO BE CONSIDERED AT THAT STAGE. IN THE PRESENT CASE , AFTER RECEIPT OF INFORMATION ABOUT THE APPELLANT FROM THE INVESTI GATION WING, THE AO HAS DULY APPLIED HIS MIND AND RECORDED THE R EASONS FOR REOPENING OF THE CASE OF THE APPELLANT. THE AO HAS ALSO PROVIDED DURING THE COURSE OF REASSESSMENT PROCEEDI NGS, THE COPY OF REASONS RECORDED TO THE APPELLANT AND THE A PPELLANT HAS NOT RAISED ANY OBJECTION DURING THE COURSE OF ASSES SMENT PROCEEDINGS ABOUT THE REOPENING. OF THE CASE AND PA RTICIPATED IN THE ASSESSMENT PROCEEDINGS WITHOUT ANY GRIEVANCE / OBJECTION. THE CASE LAWS RELIED UPON BY THE APPELLANT IN THIS REGARD ARE DISTINGUISHABLE ON THE FACTS FROM THE CASE OF T HE APPELLANT. IN THE CASE OF CIT VS ATUL JAIN(SUPRA) , THE AO HAD ONLY A VAGUE INFORMATION THAT THE ASSESSEE HAD TAKEN A BOG US ENTRY OF CAPITAL GAINS BY PAYING CASH ALONG WITH PREMIUM, FO R W TAKING A CHEQUE OF THAT AMOUNT. THE INFORMATION DID NOT IN DICATE THE 5 SOURCE OF CAPITAL GAINS. THE DETAILS OF SHARES AND PARTIES TO THE TRANSACTION WERE NOT RECORDED IN THE SATISFACTION N OTE OF THE AO. THE INFORMATION SUPPLIED TO THE AO WAS SCANTY A ND EXTREMELY VAGUE. THE AO HAD EVEN FAILED TO RECORD H IS SATISFACTION ABOUT THE CORRECTNESS AND MERELY ACCEP TED THE TRUTH OF THE VAGUE INFORMATION IN A MECHANICAL MANNER. SI MILARLY, IN THE OTHER CASE OF CIT V/S SFIL BROKING LTD(SUPRA), THE AO HAD RECEIVED INFORMATION FROM THE DEPUTY DIRECTOR OF IN COME TAX(LNV) ALONG WITH DIRECTIONS TO ISSUE NOTICE UNDE R SECTION 148. THE AO HAD ALSO RECEIVED A DIRECTION FROM ADD! . CIT TO INITIATE PROCEEDINGS U/S 147 IN RESPECT OF THE ASSE SSEE CONCERNED. ON THESE FACTS, THE HON'BLE COURT HELD T HAT THESE DIRECTIONS CANNOT BE CONSIDERED AS THE REASONS FOR PROCEEDINGS U/S 147 1148 OF THE ACT AND THE AO HAD CLEARLY FAIL ED TO APPLY HIS MIND TO THE INFORMATION IN ARRIVING AT INDEPEND ENT BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. IN THE OTHER CA SE OF LAKSHYA EXIM PVT. LTD. V/S ITO , IT WAS NOTICED BY THE HON'BLE ITAT THAT THERE WAS NO DISCREET NEXUS OR LIVE LINK BETWEEN THE INFORMATION RECEIVED AND THE SATISFACTION RECORDED BY THE AO. THE AO HAD ENTERTAINED A BELIEF MERELY ON THE BASIS OF UNFOUNDED AND NON-EXISTENT INFORMATION SUPPLIED BY DC IT, CC-6, KOLKATA, WITHOUT MAKING ANY EFFORT TO SATISFY HIMSELF AS TO WHETHER THE INFORMATION RECEIVED FROM THE OFFICE OF THE DCIT,CC-66, KOLKATA IS BASED ON SOME RELEVANT MATER IAL OR NOT. IN THE CASE OF CIT V/S INDIAN SUGAR AND GENERA L INDUSTRY EXPORT IMPORT CORP LTD (SUPRA), THE HON'BLE HIGH CO URT OF DELHI FOUND THAT THE CASE OF THE ASSESSEE WAS REOPE NED ON THE BASIS OF OBJECTION RAISED BY THE AUDIT PARTY AND TH E AO HAD FAILED TO APPLY HIS MIND TO THE OBJECTIONS RAISED B Y THE AUDIT. ON THESE FAC~; AND CIRCUMSTANCES, THE HON'BLE COURT HELD THAT THE REASONS DISCLOSED WAS NOTHING BUT MERELY A CHAN GE OF OPINION. AS DISCUSSED EARLIER, THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE OF THE APPELLANT ARE CLEARLY DISTINGUI SHABLE FROM 6 THE FACTS OF THE CASES RELIED UPON. BY THE APPELL ANT. IN THE PRESENT CASE, THERE IS LIVE LINK OR DIRECT NEXUS BE TWEEN THE INFORMATION RECEIVED AND SATISFACTION RECORDED FOR REOPENING OF THE CASE U/S 147/148 OF THE IT ACT. THEREFORE, THE CONTENTION OF THE APPELLANT REGARDING THE REOPENING OF THE CASE I S HEREBY REJECTED. 4. WE ARE IN AGREEMENT WITH THESE FINDINGS OF LD. CIT(A), BECAUSE THE REOPENING HAS BEEN DONE ON THE BASIS OF SPECIFIC IN FORMATION IN POSSESSION OF AO, ON THE BASIS OF WHICH HE PRIMA FACIE HAD REA SON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. ACCORDINGLY, THE GRO UND RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS REJECTED. 5. BEFORE LD. CIT(A) THE ASSESSEE FILED COPIES OF L ETTER DATED 19.12.2012 AND CONFIRMATION FROM THE PARTIES NAMELY, NAVNEET K UMAR JAIN & SONS AND VEE KAY INTERNATIONAL. FROM THESE CONFIRMATIONS, IT TRANSPIRED THAT DURING THE PERIOD RELEVANT TO AY 2005-06 THE ASSESSEE HAD MADE TOTAL PURCHASES FROM THESE PARTIES AS UNDER: NAVNEET KUMAR JAIN & SONS RS. 1,77,00,076/- VEE KAY INTERNATIONAL RS. 1,44,63,206/- TOTAL: RS. 3,21,63,282/ - 6. THE ASSESSEE POINTED OUT THAT OUT OF THESE TOTAL PURCHASES, THE AO HAD ONLY CONSIDERED THE PURCHASES TO THE TUNE OF RS. 62 ,48,000/- AS BOGUS PURCHASES. 7 7. IT WAS FURTHER POINTED OUT THAT THE AO HAD ACCEP TED THE TRADING RESULTS FILED VIDE PROFIT & LOSS A/C. FURTHER, COMPLETE QUA NTITATIVE DETAILS OF PURCHASES AND SALES MADE BY THE ASSESSEE WERE ALSO FILED VIDE ANNEXURE ATTACHED TO THE TAX AUDIT REPORT AND THE SAME HAD NOT BEEN CONTROVERTED BY THE AO. THEREFORE, THE SALES AND PURCHASES IN QUANT ITATIVE AND FINANCIAL TERMS HAD BEEN ACCEPTED. IT WAS FURTHER SUBMITTED T HAT ON ONE HAND THE AO HAD ACCEPTED THE SALES AND ON THE OTHER HAND HE HEL D THAT PURCHASES WERE BOGUS, WHICH WAS CONTRADICTORY STAND BECAUSE THERE COULD NOT BE ANY SALES WITHOUT PURCHASES. LD. CIT(A) CALLED FOR FOLLOWING DOCUMENTS IN ORDER TO VERIFY THE ASSESSEES CONTENTION. A) COPY OF SALES TAX ASSESSMENT ORDER. B) COPIES OF SALES BILLS ALONG WITH SUPPORTING DOCUMEN TS EVIDENCING MOVEMENT OF GOODS. C) DETAILS OF TRADING ACCOUNT BIFURCATING THE PURCHASE S MADE FROM THE ABOVE PARTIES AND OTHER PARTIES AND THE CORRESPONDI NG SALES AND GROSS PROFIT EARNED AND DECLARED BY THE ASSESSEE. D) COPIES OF BANK ACCOUNTS FROM WHERE THE PAYMENTS FOR PURCHASES MADE. 8. THE ASSESSEE FILED COPIES OF SALES BILLS ALONG W ITH COPIES OF GRS ISSUED BY ROADWAYS CARRIERS AND OTHER STATUTORY DOC UMENTS SUCH AS FORM C & H, EVIDENCING THE MOVEMENT OF GOODS INTER STATE A ND OUT OF COUNTRY (FOR 8 EXPORTS), WHICH HAD ALSO BEEN FILED BEFORE THE SALE S TAX AUTHORITIES FOR ASSESSMENT PURPOSES. THE ASSESSEE HAD ALSO FILED ST OCK MOVEMENT DETAILS AND STOCK SUMMARY FOR THE FY 2004-05. THE ASSESSEE HAD ALSO PREPARED A DETAILED TRADING ACCOUNT, DULY BIFURCATING THE PURC HASES FROM THE ALLEGED ACCOMMODATION ENTRY PROVIDERS AND OTHER PARTIES AND THE GROSS PROFIT EARNED ON CORRESPONDING STALES. 9. ON CONSIDERATION OF THESE DOCUMENTS, LD. CIT(A) OBSERVED THAT THE SALES OF THE ASSESSEE WERE GENUINE AND HE FURTHER O BSERVED THAT SINCE THE SALES HAD TAKEN PLACE, THEREFORE, THERE MUST ALSO BE PURCHASES. 10. AS REGARDS PURCHASES, LD. CIT(A) OBSERVED THAT AO HAD TAKEN A CONTRADICTORY STAND BY TREATING PURCHASES TO THE EX TENT OF RS. 62,48,000/- OUT OF RS. 3,21,63,282/- AS BOGUS. CONSIDERING THE TOTA L SALES BEING OF RS. 5,38,89,008/-, LD. CIT(A) OBSERVED THAT HE WAS OF T HE OPINION THAT THE ASSESSEE HAD INDULGED IN ARRANGING ACCOMMODATION EN TRIES IN THE FORM OF PURCHASES TO SUBSTITUTE HIS PURCHASES FROM SOME OTH ER SOURCE WHICH HAD BEEN UTILIZED TO MAKE SALES. HE OBSERVED THAT ASSES SEE HAD USED THE ACCOMMODATION ENTRIES TO COVER UP THE PURCHASE FROM SOME OTHER PARTIES AT LOWER RATES RESULTING IN INFLATION OF PURCHASES OF SUPPRESSION OF GROSS PROFIT RATE DECLARED BEFORE THE DEPARTMENT. HE NOTED THAT THE ASSESSEE HAD EARNED GROSS PROFIT RATE OF 7.85% ON THE MANUFACTURING OPE RATIONS AND HAD DECLARED 9 GROSS PROFIT RATE OF 2.23% ON THE SALES EFFECTED U TILIZING THE PURCHASE OF RS. 3.21 CRORES ARRANGED FROM THE ENTRY OPERATORS. HE, THEREFORE, DETERMINED THE G.P. RATE OF 7.85% ON ENTIRE SALES MADE BY THE ASSE SSEE AND ACCORDINGLY RESTRICTED THE ADDITION TO RS. 18,49,921/- AS AGAIN ST RS. 62,48,000/- MADE BY AO. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) TH E DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) HAS ERRED IN- 1. RESTRICTING THE ADDITION OF RS. 32,48,0001- TO RS. 18,49,921/- MADE BY AO WHEREAS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE SO CALLED PURCHASES CLAIMED TO HAVE BEEN MADE FROM M/S. NAVNEET KUMAR JAIN & SONS AND M /S. VEE KAY INTERNATIONAL RESPECTIVELY. 2. ADMITTING ADDITIONAL EVIDENCE WITHOUT GRANTING OPPORTUNITY TO THE ASSESSING OFFICER TO COUNTER THE SAME. 3. THE APPELLANT CRAVES THE RIGHT TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CO NSIDERED OPINION, THE REASONING GIVEN BY LD. CIT(A) DOES NOT REQUIRE ANY INTERFERENCE BECAUSE HE HAS CLEARLY DEMONSTRATED THAT THE SALE TO THE EXTEN T OF RS. 5 CRORES AND ODD COULD NOT HAVE TAKEN PLACE WITHOUT THERE BEING SUBS TANTIAL PURCHASES. 10 HOWEVER, KEEPING IN VIEW THE FACT THAT SPECIFIC INF ORMATION WAS RECEIVED REGARDING PROVISION OF ACCOMMODATION ENTRIES BY THE SE TWO SUPPLIERS TO ASSESSEE, HE RIGHTLY CONCLUDED THAT THE ENTIRE EFFO RT OF THE ASSESSEE WAS TO COVER UP THE PURCHASES FROM SOME OTHER PARTIES AT L OWER RATES, RESULTING IN INFLATION OF PURCHASES OR SUPPRESSION OF GROSS PROF IT RATE. HE HAS RIGHTLY APPLIED THE G.P. RATE OF 7.85% ON THE ENTIRE SALES. WE, ACCORDINGLY, DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). IT IS PERTINENT TO OBSERVE THAT THE ASSESSEE HAS NOT FILED ANY CROSS A PPEAL AGAINST THE ADDITION OF RS. 18,49,921/- SUSTAINED BY LD. CIT(A). 12. IN THE RESULT, REVENUES APPEAL AS WELL AS ASSE SSEES CROSS OBJECTION STAND DISMISSED. ORDER PRONOUNCEMENT IN OPEN COURT ON 03/02/2016. SD/- SD/- (SUCHITRA KAMBLE ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03/02/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.