R.S. Switchgears, Noida V. ITO, New Delhi

ITA 5872/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7566 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: K P GARG
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH F FF F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .5871/DEL/2010 & 5872/DEL/2010 5871/DEL/2010 & 5872/DEL/2010 5871/DEL/2010 & 5872/DEL/2010 5871/DEL/2010 & 5872/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007- -- -08 0808 08 M/S R.S. SWITCHGEARS, M/S R.S. SWITCHGEARS, M/S R.S. SWITCHGEARS, M/S R.S. SWITCHGEARS, B BB B- -- -1/43A, HAUZ KHAS, 1/43A, HAUZ KHAS, 1/43A, HAUZ KHAS, 1/43A, HAUZ KHAS, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AACFR6439A. PAN : AACFR6439A. PAN : AACFR6439A. PAN : AACFR6439A. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -24(2), 24(2), 24(2), 24(2), NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P. GARG, CA. RESPONDENT BY : SHRI VIKRAM SAHAY, SR.DR. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: : THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXIII, NEW DELHI DATED 27 TH OCTOBER, 2010 FOR THE AY 2007-08. 2. ITA NO.5871/DEL/2010 IS THE APPEAL FOR AY 2007-0 8 AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3). IN T HIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ADDITION OF `30,29,109/ - MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. 3. ITA NO.5872/DEL/2010 IS THE APPEAL FOR AY 2007-0 8 AGAINST THE ORDER PASSED UNDER SECTION 271(1)(C). IN THIS APPE AL, THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY UNDER SECTION 271(1) (C) AT `10,19,597/-. 4. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHI CH IS ENGAGED IN THE ITA-5871 & 5872/D/2010 2 BUSINESS OF TRADING OF ELECTRICAL GOODS. FOR THE Y EAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN DECLAR ING TOTAL INCOME OF `2,48,638/-. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER OBSERVED THAT OUT OF THE TOTAL PU RCHASES OF `5,20,69,461/-, THERE WAS CASH PURCHASES OF `30,29, 109/- FROM THE TWO PARTIES, THE DETAILS OF WHICH ARE AS UNDER:- (I) M/S AGGARWAL TRADERS - RS.13,28,062/- 460, NEAR GURUDWARA RAILWAY ROAD, BAZARIA, GHAZIABAD. (II) M/S SHIVA ENTERPRISES, - RS.1701047/- SHOP NO.2, KAILASH MANDIR ROAD, SIKANDRABAD, AGRA 5. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTIO N 133(6) TO BOTH THE PARTIES IN RESPONSE TO WHICH M/S AGGARWAL TRADE RS VIDE LETTER DATED 6.5.2009 INFORMED THAT THERE WAS NO TRANSACTION OF SALE OR PURCHASE BETWEEN THEM AND M/S R.S. SWITCHGEARS I.E., THE ASS ESSEE. NO REPLY WAS RECEIVED FROM M/S SHIVA ENTERPRISES. THEREAFTE R, THE ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF SHRI DAVENDE R GUPTA, PROPRIETOR OF M/S AGGARWAL TRADERS ON 15.12.2009 BEHIND THE BA CK OF THE ASSESSEE IN WHICH, AS MENTIONED IN THE ASSESSMENT O RDER, SHRI DAVENDER GUPTA DENIED FOR MAKING ANY SALES TO R.S. SWITCHGEARS, I.E., THE ASSESSEE. HE SUBMITTED THAT THE STATEMENT OF S HRI DAVENDER GUPTA WAS BROUGHT TO THE NOTICE OF THE ASSESSEE ON 15 TH DECEMBER, 2009 BY ORDER SHEET ENTRY AND THE ASSESSEE WAS REQU IRED TO FURNISH THE EXPLANATION ON THE NEXT DATE OF HEARING I.E. 17 TH DECEMBER, 2009, I.E., JUST TWO DAYS WERE ALLOWED TO THE ASSESSEE. THAT ANY STATEMENT RECORDED BEHIND THE BACK OF THE ASSESSEE CANNOT BE RELIED AGAINST THE ASSESSEE UNLESS THE ASSESSEE IS ALLOWED TO CROSS-EX AMINE SUCH PERSON. ITA-5871 & 5872/D/2010 3 THAT SHRI DAVENDER GUPTA DENIED TO HAVE MADE SALES TO THE ASSESSEE BECAUSE HE MUST HAVE NOT RECORDED THE SALES IN HIS BOOKS OF ACCOUNT SO AS TO AVOID PAYMENT OF EXCISE DUTY ETC. THE ASS ESSEE HAD DULY RECORDED THE PURCHASES AS WELL AS SALES OF THE GOOD S WHICH WERE PURCHASED FROM M/S AGGARWAL TRADERS. HE, THEREFORE , SUBMITTED THAT THE ADDITION OF `13,28,062/- IN RESPECT OF PURCHASE S FROM M/S AGGARWAL TRADERS SHOULD BE EITHER DELETED OR THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR ALLOWING THE OPPO RTUNITY OF CROSS- EXAMINING SHRI DAVENDER GUPTA. HE FURTHER SUBMITTE D THAT SO FAR AS M/S SHIVA ENTERPRISES IS CONCERNED, MERELY BECAUSE THE PARTY CHOOSES NOT TO REPLY TO THE LETTER OF THE ASSESSING OFFICER , DOES NOT IPSO-FACTO LEAD TO THE CONCLUSION THAT THE PURCHASES MADE BY T HE ASSESSEE FROM THEM ARE BOGUS. THE ASSESSING OFFICER HAS NOT MENT IONED THAT THE NOTICE ISSUED UNDER SECTION 133(6) TO M/S SHIVA ENT ERPRISES WAS NOT SERVED. IT MEANS THAT THE PARTY IS IN EXISTENCE. IF THEY DID NOT REPLY, BEFORE DRAWING ANY ADVERSE INFERENCE, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INVESTIGATION. LEARNED COUNSEL F URTHER SUBMITTED THAT EVEN IF WHATEVER IS MENTIONED IS ACCEPTED AS C ORRECT, THEN AT THE MOST, IT IS A CASE OF NON-VERIFIABILITY OF PURCHASE AND CONSEQUENCE THEREOF COULD BE THE REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF PROPER GROSS PROFIT RATE. BUT, BY NO STRETCH OF IM AGINATION, FOR UNEXPLAINED PURCHASES, THE ADDITION CAN BE MADE UND ER SECTION 68 FOR UNEXPLAINED CASH CREDIT. HE REFERRED TO LAST PAGE OF THE ASSESSMENT ORDER AND POINTED OUT THAT THE ADDITION HAS BEEN MA DE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT UNDER SECTION 68. HE, THEREFORE, SUBMITTED THAT EITHER THE ADDITION MAY B E DELETED OR MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFIC ER FOR FURTHER ENQUIRY AND ALLOWING OPPORTUNITY OF CROSS-EXAMINATION OF CO NCERNED PARTIES TO THE ASSESSEE. ITA-5871 & 5872/D/2010 4 6. LEARNED DR, ON THE OTHER HAND, POINTED OUT THAT AS SOON AS THE STATEMENT OF SHRI DAVENDER GUPTA, PROPRIETOR OF M/S AGGARWAL TRADERS AND NON-COMPLIANCE ON THE PART OF M/S SHIVA ENTERPR ISES WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSEES COUNSEL VIDE ORD ER SHEET ENTRY DATED 15.12.2009, THE ASSESSEE ON THE NEXT DATE OF HEARING I.E. 17.12.2009, FILED A LETTER WHICH IS SIGNED BY SHRI AJAY AGGARWAL, PARTNER OF THE FIRM WHEREIN THE ASSESSEE SURRENDERE D PURCHASE OF `30,29,109/- FROM THE ABOVE TWO PARTIES. WHEN THE ASSESSEE HAS ALREADY SURRENDERED THE PURCHASES FROM THE ABOVE TW O PARTIES, NOW IN THIS APPEAL, THE ASSESSEE HAS NO RIGHT TO DISPUTE T HE ADDITION MADE THERE FOR. HE, THEREFORE, SUBMITTED THAT THE APPEA L OF THE ASSESSEE IN RESPECT OF ADDITION AS WELL AS PENALTY BOTH SHOULD BE DISMISSED. 7. IN THE REJOINDER, LEARNED COUNSEL FOR THE ASSESS EE STATED THAT THE ASSESSEE MADE THE SURRENDER OF INCOME WITH THE COND ITION NOT TO INITIATE ANY PENALTY PROCEEDINGS UNDER SECTION 271( 1)(C) OF THE ACT. SINCE THE REVENUE HAS INITIATED PENALTY PROCEEDINGS AND ALSO LEVIED THE PENALTY UNDER SECTION 271(1)(C), THE SURRENDER MADE BY THE ASSESSEE CANNOT REMAIN BINDING ON THE ASSESSEE BECA USE IT WAS A CONDITIONAL SURRENDER. HE STATED THAT THE ASSESSEE HAS MADE THE PURCHASES FROM BOTH THE PARTIES AND THE GOODS PURCH ASED FROM THEM WERE DULY SOLD BY THE ASSESSEE. THAT MERELY BECAUS E ONE PARTY FROM WHOM THE PURCHASE WAS MORE THAN `17 LAKHS CHOOSES N OT TO REPLY TO THE LETTER OF THE ASSESSING OFFICER, THAT BY ITSELF CANNOT MAKE THE PURCHASE AS BOGUS. MOREOVER, IF AGGARWAL TRADERS C HOOSES NOT TO DISCLOSE THE SALES IN ITS BOOKS OF ACCOUNT SO AS TO SUPPRESS ITS INCOME, THE ADDITION SHOULD BE MADE IN THEIR HANDS AND NOT IN THE CASE OF THE ASSESSEE. THAT THE ASSESSEE MADE THE SURRENDER SO AS TO EXPEDITE FINALIZATION OF THE ASSESSMENT PROCEEDINGS AND TO A VOID THE LONG DRAWN LITIGATION TO GAIN PEACE OF MIND. BY SURRENDER, TH E ASSESSEE NO WAY HAS ADMITTED ANY CONCEALMENT. ON THE OTHER HAND, T HE SURRENDER WAS ITA-5871 & 5872/D/2010 5 A CONDITIONAL SURRENDER OF INCOME. HE REITERATED T HAT THE ASSESSEE STILL ABIDES BY THE SURRENDER IF NO PENALTY IS LEVIED. H E, THEREFORE, SUBMITTED THAT EITHER THE ENTIRE MATTER I.E. THE AD DITION AS WELL AS PENALTY MAY BE SET ASIDE TO THE FILE OF THE ASSESSI NG OFFICER OR IF THE DEPARTMENT WANTS TO RELY UPON THE SURRENDER OF THE ASSESSEE FOR CONFIRMING THE ADDITION, THEN THE PENALTY SHOULD BE CANCELLED. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. AF TER CONSIDERING THE FACTS OF THE CASE AND ARGUMENTS OF BOTH THE SIDES, IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE IF THE ADDITION OF ` 30,29,109 IS SUSTAINED AND THE PENALTY LEVIED UNDER SECTION 271( 1)(C) TO BE CANCELLED. IT IS A SETTLED LAW THAT ANY STATEMENT RECORDED BEHIND THE BACK OF THE ASSESSEE CANNOT BE UTILIZED AGAINST THE ASSESSEE UNLESS HE IS ALLOWED AN OPPORTUNITY TO CROSS-EXAMINE SUCH PER SON. SIMILAR IS THE POSITION WITH REGARD TO COLLECTION OF EVIDENCE AGAI NST THE ASSESSEE BEHIND HIS BACK. THEREFORE, THE LETTER OF AGGARWAL TRADERS AND STATEMENT OF THE PARTNER OF AGGARWAL TRADERS CANNOT BE UTILIZED AGAINST THE ASSESSEE UNLESS THE ASSESSEE IS SUPPLIE D THE COPY OF THE MATERIAL/STATEMENT AND IS GIVEN AN OPPORTUNITY TO C ROSS-EXAMINE SUCH PERSON. ON 15 TH DECEMBER, 2009, THE ASSESSING OFFICER ALLOWED THE OPPORTUNITY TO THE ASSESSEE AND NEXT DATE OF HEARIN G WAS FIXED ON 17 TH DECEMBER, 2009. OBVIOUSLY, THE TIME ALLOWED WAS TO O SHORT. THE ASSESSEE CHOOSES TO SURRENDER THE PURCHASE OF `30,2 9,109/- FROM THE ABOVE MENTIONED PARTIES WITH THE CONDITION THAT NO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) TO BE INITIATED . THE REVENUE WANTS TO RELY UPON THIS SURRENDER MADE BY THE ASSES SEE FOR SUSTAINING THE ADDITION BUT THIS SURRENDER WAS A CONDITIONAL S URRENDER AND IF REVENUE WANTS TO RELY UPON THIS SURRENDER, THEN THE FULL EFFECT IS TO BE GIVEN TO THE LETTER. IF REVENUE DOES NOT WANT TO R ELY UPON THE LETTER, ITA-5871 & 5872/D/2010 6 THEN THE RULE OF NATURAL JUSTICE IS TO BE FOLLOWED AND THE ASSESSEE TO BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. AFTER C ONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES AND ALSO THAT THE MA TTER IS ALREADY ABOUT TEN YEARS OLD, IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE IF THE ADDITION IS SUSTAINED AND PENALTY IS CANCELLED. WE ORDER ACCORDINGLY AND THE ADDITION OF `30,29,109/- MADE F OR UNEXPLAINED PURCHASES IS SUSTAINED AND PENALTY LEVIED UNDER SEC TION 271(1)(C) OF THE ACT FOR `10,19,597/- IS CANCELLED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE VIDE I TA NO.5871/DEL/2010 IS DISMISSED WHEREAS VIDE ITA NO.5 872/DEL/2010 IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 12 TH DECEMBER, 2014. SD/- SD/- ( (( (H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 12.12.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S R.S. SWITCHGEARS, M/S R.S. SWITCHGEARS, M/S R.S. SWITCHGEARS, M/S R.S. SWITCHGEARS, B BB B- -- -1/43A, HAUZ KHAS, NEW DELHI. 1/43A, HAUZ KHAS, NEW DELHI. 1/43A, HAUZ KHAS, NEW DELHI. 1/43A, HAUZ KHAS, NEW DELHI. 2. RESPONDENT : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -24(2), NEW DELHI 24(2), NEW DELHI 24(2), NEW DELHI 24(2), NEW DELHI 110 002. 110 002. 110 002. 110 002. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR