M/s Northern India Steel Rolling Mills, Mandi Gobindgarh V. DCIT, Mandi Gobindgarh

ITA 591/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81104 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Bogus purchase; Income from undisclosed sources; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 591/CHD/2014 ASSESSMENT YEARS : 2008-09 NORTHERN INDIA STEEL V D.C.I.T. ROLLING MILLS CIRCLE GURU KI NAGRI MANDI GOBINDGARH MANDI GOBINDGARH AABFN 1838 L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR RESPONDENT BY: SMT. JYOTI KUM ARI DATE OF HEARING 09.12.2014 DATE OF PRONOUNCEMENT 23.12 .2014 O R D E R PER T.R. SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD CIT (A), PATIALA DATED 24.3.2014. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT ORDER PASSED U/S 250(6) OF THE IT ACT BY TH E LD. CIT(A), PATIALA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH HE WAS NOT JUSTIFIED TO HOLD THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE RIGHTLY REJECTED BY THE ASSESSING OFFICER. 2 THAT HE WAS FURTHER NOT JUSTIFIED TO NEGATE THE C ONTENTIONS OF THE APPELLANT THAT PRINCIPLES OF NATURAL JUSTICE W ERE GROSSLY VIOLATED BY THE ASSESSING OFFICER WHILE FRAMING ASS ESSMENT. 3 THAT LD. CIT(A) GRAVELY ERRED IN UPHOLDING THAT A N AMOUNT OF RS. 495,239/- REPRESENTING THE AMOUNT OF CENVAT CRE DIT ON PURCHASES MADE FROM M/S M/S ROHIT ISPAT (INDIA) WAS LIABLE TO BE ADDED WHEREAS NO EXPENDITURE HAD BEEN CLAIMED BY TH E APPELLANT. 4 THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD AN AD DITION OF RS. 650,000/- ON ACCOUNT OF ALLEGED EXTRA PROFIT IN RES PECT OF PURCHASES MADE BY THE APPELLANT FROM GREY MARKET. 5 THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD AN AD DITION OF RS. 18,68,995/- PAYABLE TO M/S M/S ROHIT ISPAT (INDIA) AS AN ALLEGED BOGUS LIABILITY. 6 THAT HE FURTHER GRAVELY ERRED IN UPHOLDING THE DI SALLOWANCE OF RS. 158,382/- BY RESTRICTING THE CLAIM OF INTERE ST AT 12% AS AGAINST PAID AT 15% BY RESORT TO PROVISIONS OF SECT ION 40A(2)(B). 2 3 GROUND NO. 1 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE PURCHASES OF PIG IRON AM OUNTING TO RS. 39,18,995/- FROM M/S ROHIT ISPAT (INDIA), MANDI GOBINDGARH. IT WAS NOTICED THAT CENTRAL EXCISE AUT HORITIES CONDUCTED CERTAIN INVESTIGATIONS AND A REPORT WAS R ECEIVED BY THE DEPARTMENT THROUGH REGIONAL ECONOMIC INTELLIGEN CE COUNCIL, CHANDIGARH AND IT WAS REVEALED THAT SHRI S URESH YADAV PROPRIETOR OF M/S ROHIT ISPAT (INDIA) WAS IND ULGING IN PAPER TRANSACTIONS AND WAS ALSO INDULGING IN PASSIN G ON CENVAT CREDIT FRAUDULENTLY WITHOUT ACTUAL RECEIPT, DISPATC H AND STORAGE OF EXCISEABLE GOODS. THE GIST OF FINDINGS OF EXCISE AUTHORITIES HAVE BEEN NOTED BY THE ASSESSING OFFICER AT PAGE 2 TO 6 WHICH ARE AS UNDER: GIST OF THE FINDINGS BY EXCISE AUTHORITY (I) ROHIT ISPAT (INDIA), MGG PROP. SHRI. SURESH YAD AV, HAD OBTAINED CENTRAL EXCISE REGISTRATION S A REGISTERED DEALER F RAUDULENTLY BY SUBMITTING A FAKE AND BOGUS RENT DEED. HIS INTENTIO N WAS AB-INITIO MALAFIDE AS IT HAD TAKEN THE CENTRAL EXCISE REGISTR ATION WITH A SINGLE MOTIVE OF MISUSING THE SAME TO DUPE THE EXCHEQUER B Y INDULGING IN PAPER TRANSACTION OF CENVATABLE INVOICES. (II) IT NEITHER EXISTED OR CONDUCTED ANY BUSINESS F ORM THE PREMISES FOR WHICH REGISTRATION WAS GRANTED TO HIM AND THE SAID PREMISES HAD NEVER BEEN LET OUT BY ANY OF THE THREE RESPECTIVE OWNERS OF THE GODOWN DURING THE RELEVANT PERIOD. (III) M/S ROHIT ISPAT DID NOT HAVE ANY GODOWN TO ST ORE THE EXCISABLE GOODSAND HAD NO OFFICE TO KEEP THE RECORDS. IT WAS ISSUING THE INVOICES ONLY FROM THE COMPUTE INSTALLED AT THE RESIDENCE OF SH. SURESH YADAV, PROP. WITHOUT ACTUAL RECEIPT / STORAGE/DISPATCH OF PIG IRON. (IV) THE REGISTRATION CERTIFICATE OF M/S ROHIT ISPA T (INDIA) DATED 20.12.2006 WAS CANCELLED RETROSPECTIVELY W.E.F 20.1 2.2006 BY THE EXCISE AUTHORITIES VIDE ORDER DATED 19.02.2008. THUS, THE INVOICES ISSUED BY THE ROHIT ISPAT (INDIA) ARE INVALID DOCUMENTS ON WHICH CENVAT CREDIT IS NOT ADMISSIBLE. (V) SH. SURESH YADAV IN HIS STATEMENTS DATED 03.02. 2008 GIVEN BEFORE EXCISE AUTHORITIES HAD CLEARLY CONFESSED TO HAVE INDULGED IN PAPER TRANSACTIONS ONLY WITHOUT ACTUAL RECEIPT/STOR AGE/DISPATCH OF PIG IRON. HE ADMITTED THAT HE WAS NOT AN ACTUAL TRADER BUT INDULGED IN ISSUANCE OF INVOICES ONLY WHENEVER THERE WAS DEMAND OF BILLS. (VI) THE ECONOMIC CONDITION OF SH. SURESH YADAV, PR OP. OF THE SAID FIRM WAS POOR. HE DID NOT HAVE HUGE CAPITAL ACTUALL Y REQUIRED BY ANY BUSINESS CONCERN TO CONDUCT BUSINESS AT SUCH A LARG E SCALE. BOTH THE SUPPLIERS NAMELY M/S IDCOL, KEONJHAR, ORISSA AND AI SPL, GOA, THE 3 MANUFACTURERS OF PIG IRON FROM WHOM M/S ROHIT ISPAT (INDIA) CLAIMED TO HAVE MADE PURCHASES DELIVERED THE GOODS AGAINST ADV ANCE PAYMENTS ONLY, BUT SH. SURESH YADAV WAS INCAPABLE OF RAISIN G HUGE AMOUNT RUNNING INTO CRORES OF RUPEES FOR BUSINESS TO PURCH ASE THE PIG IRON. FURTHER HE DID NOT HAVE THE TYPE OF INFRASTRUCTURE REQUIRED TO HANDLE HUGE CONSIGNMENTS OF PIG IRON AND THAT TOO AT PLACE S AWAY FROM MANDI GOBINDGARH I.E. AT BATALA AND DHANDARI KALAN. IT DI D NOT HAVE A SINGLE EMPLOYEE LIKE CLERKS, CHOWKIDARS, ACCOUNTANT AS ETC . IT IMPLIES THAT THERE WERE FORCES BEHIND THE ROHIT ISPAT (INDIA) WHICH WE RE USING IT, TO ACTUALLY OBTAIN AND CONSUME PIG IRON AT BATALA BY CONSIGNING THE SAME IN THE NAME OF THE M/S ROHIT ISPAT (INDIA) FURTHER ISSUING CENVATABLE INVOICES BY INDULGING IN PAPER TRANSACTIONS ONLY. SH. YADAV DENIED HAVING ANY ACTIVE ROLE IN RUNNING OF THE ROHIT ISPAT AND NAMED SH. SUBASH AS THE PERSON WHO WAS RUNNING AND MANAGING THE FIRM BY PAY ING HIM RS. 15,000/- PER MONTH. SH. JAGDISH AGGARWAL OF BHARAT FOUNDARYMAN ASSOCIATION (BFA), BATALA ALSO STATED THAT HE DID N OT KNOW SH. SURESH YADAV AS HE HAD DEALT ONLY WITH SH. SUBASH BOTH REG ARDING THE BOOKING OF ORDERS FOR THE M/S ROHIT ISPAT (INDIA). FURTHER, THE FILLING OF DEPOSIT FORMS AND CHEQUES OF DIFFERENT PARTIES ISSUED ARE I N THE HANDWRITING OF SH. SUBASH, CONFIRMS THAT SH.SUBHASH WAS ACTUALLY R UNNING ROHIT ISPAT (INDIA). THUS INVOLVEMENT OF SH. SUBASH IN THE ROHI T ISPAT (INDIA) FIRM IS CONFIRMED. SH. SUBASH CONFESSED THAT BFA WAS RUNNIN G AND MANAGING THE ENTIRE SHOW. (VII) BFA WAS ACTIVELY INVOLVED IN ALL THESE TRANSA CTION OF PIG IRON CONDUCTED BY THE M/S ROHIT ISPAT (INDIA) AND IT WAS BFA THAT HAD PLACED THE PURCHASE ORDERS WITH BIPL IN RESPECT OF PIG IRO N PROCURED FROM AISPL. IT IS AGAIN BFA WHICH HAD PROVIDED THE DETAI LS OF M/S ROHIT ISPAT(INDIA) AS THE CONSIGNEE OF THE GOODS IN ITS F AX MESSAGES TO AISPSL. TOKEN MONEY OF RS. 10 LACS IN RESPECT OF TH E ROHIT ISPAT HAD BEEN DEPOSITED BY BFA, WHICH WAS TO BE REFUNDED BY AISPL TO BFA ON CLEARANCE OF THEIR DUES BY THE M/S ROHIT ISPAT WITH AISPL. IT IS CLEARLY ESTABLISHED THAT THE ORDER TO SUPPLIERS WERE ISSUED BY USING PRE SIGNED BANK LETTER HEADS OF M/S ROHIT ISPAT (INDIA). (VIII) AS PER LIST OF 20 MEMEBERS OF BFA PROVIDED B Y SH. JAGDISH AGGARWAL, IT WAS OBSERVED THAT THE M/S ROHIT ISPAT WAS NOT MEMBER OF BFA. (IX) DELIVERY OF MOST OF THE CONSIGNMENTS OF PIG IR ON HAD BEEN TAKEN BY THE M/S ROHIT ISPAT AT PLACES OTHER THAN MANDI GOBI NDGARH I.E. AT BATALA / DHANDHARI KALAN WHEREAS THEY HAD ISSUED CENVATABL E INVOICES TO THE FURNACE UNITS OF MANDI GOBINDGARH. IF ROHIT ISPAT W AS TO SELL PIG IRON TO FURNACE UNITS OF MANDI GOBINDGARH WHY WOULD IT PAY EXTRA FREIGHT TO RAILWAY TO BATALA/DHANDARI KALAN AND THEN TO THE TR ANSPORTERS FROM BATALA / DHANDARI KALAN TO MANDI GOBINDGARH. FURTHE R, ROHIT ISPAT DID NOT HAVE THE MANPOWER AND INFRASTRUCTURE TO HANDLE HUGE CONSIGNMENTS AT BATALA / DHANDARI KALAN / MANDI GOBINDGARH. (X) BATALA IS A HUB OF FOUNDRY INDUSTRY FAMOUS ALL OVER INDIA AND PIG IRON IS THE MAIN RAW MATERIAL FOR FOUNDRY INDUSTRY. FRUTHER, ALL THE CONSIGNMENTS OF PIG IRON DISPATCHED BY IDCOL AND AI SPL WERE OF FOUNDRY GRADE FIT FOR USE IN FOUNDRY INDUSTRY ONLY. THERE APPEARS TO BE A SYSTEMATIC DIVERSION OF CENVAT CREDIT ON THE BASI S OF INVOICES ISSUED BY THE M/S ROHIT ISPAT TO THE FURNACE UNITS OF MAND I GOBINDGARH. THUS, IT APPEARS THAT THE FOUNDRY UNITS OF BATALA HAD RECEIV ED AND CONSUMED THE CONSIGNMENTS OF PIG IRON WITHOUT ACCOUNTING IN THEI R RECORDS AND FINISHED GOODS SO MANUFACTURED TOO HAD BEEN CLEARED CLANDEST INELY BY THEM WITHOUT ACCOUNTING IN THEIR RECORDS ENABLING THEM T O REMAIN WITHIN THE CENTRAL EXCISE, SSI EXEMPTION LIMIT. ON THE OTHER H AND THE FURNACE UNITS SEEM TO HAVE TO PROCURED NON-DUTY PAID SCRAP FROM T HE OPEN MARKET AND COVERED UP THE SAME BY RECEIVING CENVATABLE INVOIC ES FROM THE ROHIT ISPAT AND OTHER SIMILAR SOURCES. (XI) NONE OF THE FURNACE UNITS THAT HAD AVAILED THE CENVAT CREDIT ON THE INVOICES ISSUED BY THE ROHIT ISPAT, HAD VERIFIED TH E ADDRESS AND BUSINESS PREMISES OF THE M/S ROHIT ISPAT. THEY EVEN DID NOT KNOW THE NAME OF THE PROP. FURTHER, THEY COULD NOT EVEN PROVIDE THE TELE PHONE NOS. OF THE SAID 4 M/S ROHIT ISPAT (INDIA). THEY MERELY SHIFTED THE RE SPONSIBILITY ON SOME UNKNOWN BORKERS BY SAYING THAT THE DEAL WERE STRU CK THROUGH BROKERS WHOSE NAMES AND ADDRESSES THEY COULD NOT RECOLLECT. (XII) NONE OF THE FURNACE UNITS COULD TELL THE GRAD E AND COMPOSITION OF THE PIG IRON RECEIVED BY THEM FROM THE ROHIT ISPAT (INDIA). NONE OF THEM HAD MAINTAINED SEPARATE STOCK ACCOUNT OF THE PIG IR ON AND THE SAME HAD BEEN ACCOUNTED FOR BY THEM IN THEIR RAW MATERIAL RE GISTER ALONGWITH THE DUTY PAID SCRAP. THIS SEEMS TO HAVE BEEN DONE DELIB ERATELY TO AVOID DETECTION BY THE LAW ENFORCING AGENCIES AND APPEARS TO BE A MODUS OPERANDI FOR SUBSTITUTION OF PIG IRON WITH NON-DUTY PAID SCRAP, IN WHICH CENVATABLE INVOICES OF PIG IRON WERE OBTAINED FROM ROHIT ISPAT BUT ACTUALLY NON-DUTY PAID SCRAP WAS CONSUMED, AS DISCU SSED SUPRA PIG IRON APPEARS TO HAVE BEEN USED IN FOUNDRY INDUSTRY AT BA TALA. XIII) PIG IRON IS CLASSIFIED UNDER CHAPTER HEADING 72.01 AND MELTING CRAP UNDER CHAPTER HEADING 72.04. PIG IRON IS NOT A MELTING SCRAP BUT A DIFFERENT COMMODITY IN ITSELF. PIG IRON PELLETS ARE INPUTS FOR THE FOUNDRY INDUSTRY AS STEEL INGOTS ARE INPUTS OF THE ROLLING MILLS. THUS PIG IRON AND MELTING SCRAP CAN NOT BE CLUBBED TOGETHER. ON BEING ASKED AS TO WHY SEPARATE ACCOUNT IN RESPECT OF PIG IRON HAD NOT BEE N MAINTAINED; THE MOST COMMON REPLY BY THE FURNACE UNITS WAS THAT THE Y HAD NOT MADE ANY DISTINCTION BETWEEN THE TWO AND FOR THEM PIG IRON A ND SCRAP WERE ONE AND THE SAME THING. (XIV) THE M/S ROHIT ISPAT (INDIA) HAD GIVEN HEAVY D ISCOUNTS TOTALING RS. 9,93,949/- TO THE FURNACE UNITS, DESPITE SELLING PI G IRNO AT HEAVY LOSSES, IN ADDITION TO THE EXPENSES INVOLVED IN TRANSPORTAT ION BY ROAD, LOADING / UNLOADING AND HANDLING CHARGES, WHICH DOES NOT APPE AR TO BE GENUINE. IT IS POSSIBLE ONLY REGARDING PAPER TRANSACTIONS AS TH ERE IS NOT ACTUAL LOSS ON PASSING OF DISCOUNTS INVOLVED AND IT IS ONLY IN THE ACCOUNT BOOKS. (XV) M/S ROHIT ISPAT (INDIA) WAS HAVING AN OUTSTAND ING AMOUNT OF RS. 1,66,79,761/- AGAINST 16 FURNACE UNITS, YET IT HAD TAKEN NO STEPS TO RECOVER THE SAME ALONGWITH INTEREST FROM THE DEFAUL TERS. THIS IS POSSIBLE ONLY IN RESPECT OF PAPER TRANSACTIONS AS NO GENUINE TRADER CAN AFFORD TO KEEP PAYMENTS OUTSTANDING FOR SUCH A LONG PERIOD. (XVI) ROHIT ISPAT (INDIA) HAD ISSUED PARALLEL INVOI CE NO. 47 TO TWO DIFFERENT UNITS; THIS IS POSSIBLE ONLY REGARDING PA PER TRANSACTIONS. HAD THE GOODS ACTUALLY BEEN DELIVERED WITH THE INVOICE, SUCH GLARING MISTAKE COULD HAVE NEVER OCCURRED. (XVII) BOTH SH. SUBHASH AND SH. SURESH YADAV WERE A RRESTED BY THE POLICE ON THE BASIS OF THE FIR LODGED AGAINST THEM AND THEY REMAINED IN JUDICIAL CUSTODY FROM 12.10.2007 TO 23.11.2007 IN C ENTRAL JAIN, NABHA AS THEY WERE FOUND CONDUCTING FRAUDULENT TRANSACTIONS THROUGH THE PUNJAB SALES TAX ICC BARRIER BY SHOWING BOGUS EXPORT OF GO ODS OUT OF PUNJAB STATE. THIS IS FURTHER SUBSTANTIATED BY THE RECOVER Y OF A STAMPING MACHINE OF PUNJAB SALE TAX BARRIER, BALONGI AND 19 SALE INVOICES OF M/S PATIALA STRIPS (P) LTD., FROM THE RESIDENCE OF SH. SUBASH. (XVIII) THE ROHIT ISPAT (INDIA) HAD DELIBERATELY NO T PRODUCED ITS RECORDS BEFORE THE INVESTIGATING OFFICERS AND HAD FALSELY A LLEGED THE SAME TO HAVE BEEN TAKEN AWAY BE THE SALE TAX / POLICE DEPAR TMENT, WHICH WAS DENIED BY BOTH THE DEPARTMENTS. 4 IN THIS BACKGROUND AND AFTER MAKING FURTHER ENQUI RIES BY THE DEPARTMENT THE BOOKS WERE REJECTED. THE ACTION OF T HE ASSESSING OFFICER WAS CONFIRMED BY THE LD. CIT(A). 5 5 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT NO SPECIFIC DEFECT HAS BEEN POINTED AND THEREFORE REJE CTION OF BOOKS IS NOT CORRECT. 6 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STR ONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND N O FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE BEC AUSE DETAILED ENQUIRIES CLEARLY REVEALED THAT THE ASSESSEE HAS IN DULGED IN SHOWING PURCHASE FROM M/S ROHIT ISPAT (INDIA) WHICH ARE BOGUS. FURTHER THE ENTRIES OF CENVAT CREDIT HAS BEEN REVER SED BY THE ASSESSEE ITSELF AND THEREFORE THAT CHARGE OF REVENU E IS CORRECT. THEREFORE IN OUR OPINION, BOOKS HAVE BEEN RIGHTLY R EJECTED. 8 GROUND NO. 2 IN RESPECT OF THIS GROUND THAT OPP ORTUNITY OF NATURAL JUSTICE HAS NOT BEEN PROVIDED TO THE ASSESS EE, NO CONTENTIONS WERE RAISED. PERUSAL OF ASSESSMENT ORDE R CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS CONFRONTED TO THE AS SESSEE THAT ENQUIRIES CONDUCTED BY THE EXCISE DEPARTMENT AS WEL L INCOME TAX DEPARTMENT AND THEREFORE IN OUR OPINION, IT CANNOT BE SAID THAT OPPORTUNITY OF NATURAL JUSTICE HAVE BEEN VIOLATED. THEREFORE THIS GROUND IS REJECTED. 9 GROUND NO. 3 AFTER HEARING THE RIVAL SUBMISSION S WE FIND THAT THE ASSESSING OFFICER AFTER NOTING THE ENQUIRI ES DONE BY THE EXCISE AUTHORITIES FURTHER REFERRED TO THE ENQUIRIE S CONDUCTED BY THE DEPARTMENT. IT WAS FOUND THAT M/S ROHIT ISPAT (INDI A) WAS NOT DOING ANY MATERIAL BUSINESS. SHRI RAJ KUMAR GOYAL PARTNER OF THE ASSESSEE WAS CONFRONTED BY THE EXCISE AUTHORITIES T HAT THEIR FINDINGS REGARDING PURCHASE OF PIG IRON FROM M/S ROHIT ISPAT (INDIA) AND THE ENTRIES WERE LATER ON REVERSED, THE CENVAT CREDIT A MOUNTING TO RS. 4,95,239/- DURING FINANCIAL YEAR 2008-09 I.E. ASSES SMENT YEAR 6 2009-10. DURING ASSESSMENT PROCEEDINGS THE ASSESSE E WAS FURTHER CONFRONTED WITH THE REPORT RECEIVED FROM EXCISE DEP ARTMENT AND THE ASSESSEE WAS ALSO INFORMED ABOUT THE ENQUIRIES COND UCTED BY THE INCOME TAX DEPARTMENT. IN RESPONSE IT WAS STATED A S UNDER: REGARDING PURCHASES FROM M/S ROHIT ISPAT (INDIA) I T IS SUBMITTED THAT THE ASSESSEE IS RUNNING A MANUFACTURING UNIT. THE PROD UCTION COULD ONLY BE OBTAINED BY ISSUING THE MATERIAL. HAD THERE BEEN N O PURCHASE AS ALLEGED BY YOUR HONOUR, THEN PRODUCTION WOULD NOT H AVE BEEN POSSIBLE. THE FACT THAT MATERIAL WAS PURCHASED AND ISSUED FOR PRODUCTION CANNOT BE DENIED. EVEN THE EXCISE AUTHORITIES HAVE NOT DO UBTED THE GENUINENESS OF THE PRODUCTION RECORDS, MAINTAINED B Y THE ASSESSEE. THE SALES WERE MADE FROM THE GOODS MANUFACTURED OUT OF THE MATERIAL PURCHASED FROM M/S ROHIT ISPAT (INDIA) ALSO. THE CE NTRAL EXCISE DEPARTMENT HAS DISALLOWED THE CLAIM OF THE ASSESSEE FOR CREDIT OF THE AMOUNT PAID TOWARDS DUTY IN ITS CENVAT ACCOUNT . THE PURCHASES MADE FROM M/S ROHIT ISPAT (INDIA) HAV E BEEN DULY ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOU NTS. THE PURCHASES MADE HAVE BEEN ENTERED IN THE DAY TO DAY STOCK REGI STER MAINTAINED IN THE ORDINARY COURSE OF BUSINESS AS PER THE REQUIREM ENTS OF THE CENTRAL EXCISE LAWS. THE MATERIAL HAS DULY BEEN ISSUED AS IS EVIDENT FROM THE STOCK RECORDS AND PRODUCTION HAS BEEN OBTAINED. AS SUCH THERE IS NO CAUSE FOR DOUBTING THE ENTRIES RECORDED IN THE STOC K AND PRODUCTION RECORDS. THE SALES OF END PRODUCTS ARE DULY VERIFI ABLE. THE MAJOR SALES HAVE BEEN MADE IN THE LOCAL MARKET. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION S AND OBSERVED THAT IT IS ESTABLISHED BEYOND DOUBT THAT M/S ROHIT ISPAT (INDIA) WAS INDULGING ONLY IN PAPER TRANSACTIONS. IT WAS CONCL UDED IN THIS BACKGROUND THAT CENVAT CREDIT AMOUNTING TO RS. 4,95 ,239/- ON SUCH BOGUS PURCHASE WOULD RAISE INCOME OF THE ASSESSEE A ND ACCORDINGLY A SUM OF RS. 4,95,239/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 10 ON APPEAL THE LD. CIT(A) ADJUDICATED THE ISSUE V IDE PARA 4.6 WHICH IS AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS MADE. AS REGARD GROUND NO. 2 TO 5 THE FACTS OF THE CASE SHOWS THAT HE APPELLANT HAS S HOWN BOGUS PURCHASE FROM M/S M/S ROHIT ISPAT (INDIA). THE FACTS MARSHA LED BY THE ASSESSING OFFICER IS DISCUSSED IN THE PRECEDING PARAGRAPHS AM PLY PROVES THAT THE ENTIRE PURCHASES FROM M/S ROHIT ISPAT (INDIA) IS BO GUS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CONFRONTED WITH THE REPORT OF THE EXCISE AUTHORITIES INCLUDING THE STATEMENT OF S R. YADAV, SR. SUBHAS AND SR. RAJ KUMAR GOYAL, DIRECTOR OF THE ASSESSEE-C OMPANY. THE ASSESSEE WAS FURTHER INFORMED ABOUT THE ENQUIRIES C ONDUCTED BY THE DEPARTMENT WHICH REVEALS THAT M/S ROHIT ISPAT (INDI A) WAS NOT CARRYING OUT ANY ACTIVITY. THE ASSESSEE WAS ALSO ASKED TO P RODUCE THE PROPRIETOR OF M/S ROHIT ISPAT (INDIA) WHICH WAS NOT COMPLIED W ITH, THE ASSESSEE FAILED TO DISCHARGE HIS ONUS. LOOKING INTO THE FAC TS OF THE CASE, IT CAN NOT BE SAID THAT THE ASSESSING OFFICER HAS BASED HI S OPINION ONLY ON THE BASIS OF REPORT OF EXCISE AUTHORITY. AS REGARDS TH E CONTENTIONS OF THE APPELLANT THAT NO OPPORTUNITY TO CROSS EXAMINATION WAS GIVEN, I AM OF THE OPINION THAT IT WAS THE DUTY OF THE APPELLANT TO S UBSTANTIATE THE TRANSACTIONS PARTICULARLY LOOKING INTO THE CLINCHIN G REPORT OF THE EXCISE 7 AUTHORITY AND THE VARIOUS STATEMENTS OF THE PARTIES CONCERNED. THESE WERE DULY CONFRONTED TO THE APPELLANT AND HE WAS NO T PRECLUDED FROM PRODUCING THE PERSONS WITH WHOM HE ENTERED INTO THE TRANSACTIONS. SUMMON FROM THE DEPARTMENT COULD NOT BE SERVED ON S HRI YADAV AS HE WAS NOT TRACEABLE. FURTHER THE ASSESSMENT IS MADE O N THE BASIS OF ABOVE FACTS GATHERED AND DULY CONFRONTED TO THE APPELLANT . |THE CASE LAWS CITED BY THE APPELLANT, ARE THEREFORE DISTINGUISHAB LE. THEREFORE THE GROUNDS NO. 2 TO 5 OF THE APPELLANT CAN NOT BE ACCE PTED. LOOKING INTO THE FACTS OF THE CASE, I AM OF THE OPI9NION THAT BO OKS OF ACCOUNTS ARE RIGHTLY REJECTED BY THE ASSESSING OFFICER. 11 BEFORE US, IT WAS SUBMITTED THAT THE ASSESSEE HA S NOT CLAIMED CENVAT AS EXPENDITURE AND THEREFORE ADDITION WAS NO T JUSTIFIED. 12 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE ST RONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 13 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE O F THE VIEW THAT THE ASSESSEE HAS SHOWN THE CENVAT RECEIVABLE ON ACC OUNT OF BOGUS PURCHASES, THEREFORE CLEARLY IT BECOMES INCOME OF T HE ASSESSEE. THIS FACT FURTHER GETS FORTIFIED FROM THE FACT THAT THE ASSESSEE HAS ITSELF REVERSED THE ENTRY IN THE NEXT YEAR. THEREF ORE WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE ADDITION OF RS. 4,95,239/-. 14 GROUND NO. 4 AFTER HEARING THE RIVAL SUBMISSIO NS WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED T HAT THE ASSESSEE HAS SHOWN PURCHASES FROM M/S ROHIT ISPAT ( INDIA) ON AN AVERAGE RATE OF RS. 19,900/-. PURCHASES FROM OTHER DEALERS WERE SHOWN AT RS. 17,600/- WHICH CLEARLY MEAN THAT PURCH ASES HAVE BEEN INFLATED. THEREFORE GROSS PROFIT OF THE ASSESSEE WHICH WAS DECLARED AT 2.4% WAS ENHANCED TO 2.55% AND A SUM OF RS. 6,94 ,283/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 15 ON APPEAL AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT(A) RESTRICTED THIS ADDITION TO RS. 6,50,000/-. 16 BEFORE US, IT WAS SUBMITTED THAT GROSS PROFIT RA TE IN THIS YEAR WAS BETTER THAN EARLIER YEAR. FURTHER IN ANY CASE THE ASSESSING OFFICER HAS MADE SEPARATE ADDITION OF RS. 8 18,68,995/- ON ACCOUNT OF OUTSTANDING BALANCE IN TH E ACCOUNT OF M/S ROHIT ISPAT (INDIA) AS A BOGUS LIABILITY. T HEREFORE AT LEAST THIS TRADING ADDITION SHOULD HAVE BEEN SET OF F AGAINST THAT ADDITION I.E. TELESCOPING SHOULD HAVE BEEN ALLOWED. 17 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU PPORTED THE ORDER OF THE LD. CIT(A). 18 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE . FURTHER WE HAVE CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS LIABILITY IN THE LATTER PARAGRAPHS OF THIS ORDER. THEREFORE IN OUR OPINION, THE ADDITION ON ACCOUNT OF GROSS PROFIT SHOULD NOT HAVE BEEN MADE PARTICULARLY IN VIEW OF THE FACT THAT THE ASSE SSEE HAS SHOWN BETTER GROSS PROFIT THAN EARLIER YEARS. THER EFORE WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THIS ADDI TION. 19 GROUND NO. 5 AFTER HEARING THE RIVAL SUBMISSIO NS WE FIND THAT DURING ASSESSMENT PROCEEDINGS ASSESSING O FFICER NOTICED THAT A SUM OF RS. 18,68,995/- WAS SHOWN AS CREDIT AGAINST M/S ROHIT ISPAT (INDIA) AS ON 31.3.2008 AND ALSO OBSERVED THAT PURCHASES FROM THIS PARTY WERE FOUND TO BE BOGUS AND M/S ROHIT ISPAT (INDIA) WAS INDULGING ONL Y IN ISSUE OF PAPER BILLS. THIS AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. 20 ON APPEAL IT WAS MAINLY STATED THAT THIS LIABILI TY HAS BEEN PAID LATER ON BY ISSUING OF CHEQUE IN FINANCIAL YEA R 2010-11. 21 THE LD. CIT(A) DID NOT FIND FORCE IN THE SUBMISS IONS AND CONFIRMED THE ADDITION. 22 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO AGA IN 9 SUBMITTED THAT IF THIS ADDITION IS CONFIRMED THEN A T LEAST TELESCOPING SHOULD BE ALLOWED FOR GROSS PROFIT ADD ITION. 23 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 24 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) VIDE P ARA 5 WHICH IS AS UNDER: AS REGARDS GROUND NO. 9. IT IS SEEN THAT THE APPEL LANT HAS DISCHARGED LIABILITY OF RS. 18,68,995/- PERTAINING TO M/S ROHIT ISPAT (INDIA) FOR ASSESSMENT YEAR 2008-09. THE LIABILIT Y WAS DISCHARGED DURING FINANCIAL YEAR 2010-11. ON THE BASIS OF ABO VE THE FACTS, THE ASSESSING OFFICER CONSIDERED THIS AS BOGUS LIAB ILITY AND ADDED THE SAME TO THE INCOME OF THE APPELLANT. THE ASSES SING OFFICER CONTENDED THAT : CREDIT FROM M/S ROHIT ISPAT (INDIA): A SUM OF RS. 18,68,995/- STAND CREDITED AGAINST M/S ROHIT ISPAT (INDIA) IN T HE BOOKS OF THE ASSESSEE FOR THE YEAR ENDING 31.3.2008. THE POSITI ON REMAINED SAME FOR THE NEXT YEARS. HOWEVER, DURING FINANCIAL YEAR 2010-11 THE ASSESSEE HAS SHOWN TO HAVE DISCHARGED IS LIABIL ITY BY REMITTING AMOUNT OF RS. 18,68,995/- THROUGH CHEQUES TO M/S RO HIT ISPAT (INDIA), MGG. AS ALREADY DISCUSSED, M/S ROHIT ISPAT (INDIA) AS A DMITTED BY ITS PROPRIETOR SHRI SURESH YADAV AND ESTABLISHED BY EXCISE AS WELL AS BY THIS DEPARTMENT WAS ONLY ISSUING BILLS WITHOU T EVER BEING INDULGED IN ACTUAL TRADING. HE WAS NOT CAPABLE OF SUPPLYING GOODS ON CREDIT AS HIS FINANCIAL CONDITION WAS VERY BAD. THIS SUM OF RS. 18,68,995/- APPEARING AS LIABILITY TOWARDS M/S ROHIT ISPAT (INDIA) THUS ACTUALLY IS A BOGUS CR EDIT REPRESENTING ASSESSEES OWN INCOME FROM UNDISCLOSED SOURCES. THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENE SS OF TRANSACTION BY NOT PRODUCING PROP OF M/S ROHIT ISPA T (INDIA) FOR PERSONAL EXAMINATION. THESE FACTS WHEN SEEN AGAINS T THE BACKDROP OF FINDINGS OF EXCISE DEPARTMENT AS WELL A S ENQUIRIES CONDUCTED BY THIS DEPARTMENT PROVES BEYOND ANY DOUB T THAT THE SAID CREDIT OF RS. 18,68,995/- IS NOT GENUINE AND T HAT M/S ROHIT ISPAT (INDIA) WAS NEVER CREDIT WORTHY FOR SUCH TRAN SACTION. ACCORDINGLY THIS AMOUNT OF RS. 18,68,995/- IS ADDED BACK TO THE INCOME OF THE ASSESSEE AS ITS INCOME FROM UNDISCLOS ED SOURCES BEING BOGUS CREDIT. (ADDITION OF RS. 18,68,995/-.) IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY DECIDE D THE ISSUE PARTICULARLY WHEN IT WAS ESTABLISHED BEYOND DOUBT T HAT M/S ROHIT ISPAT (INDIA) WAS INDULGING ONLY IN PAPER TRA NSACTION. WE HAVE ALREADY TAKEN CARE OF THE ALTERNATIVE CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE THAT TELESCOPING SHOULD BE ALLOWED AND THAT IS WHY WE HAVE DELETED THE TRADING ADDITIO N ON 10 ACCOUNT OF GROSS PROFIT VIDE PARA 18. THEREFORE WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CON FIRM THE SAME. 25 GROUND NO. 6 AFTER HEARING THE RIVAL SUBMISSIO NS WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTI CED THAT THE ASSESSEE HAD PAID INTEREST @ 15% TO SMT. KRISHAN GO YAL, SMT. SWETA GOYAL AND MISS ISHANI GOYAL. IT WAS ALSO NOT ICED THAT INTEREST WAS PAID TO FEW PARTIES @ 12%. ACCORDING TO THE ASSESSING OFFICER THE INTEREST WAS UNREASONABLE AND IN RESPONSE TO THIS QUERY IT WAS SUBMITTED AS UNDER: THE LOANEES APPROACHED THE ASSESSEE TO TAKE BACK THE LOANS IN VIEW OF THE INCREASED RATE OF INTEREST IN THE MARKE T. THE ASSESSEE KEEPING IN VIEW THE BUSINESS EXCEGENCIES AND THE FA CT THAT THE LOANS ARE WITHOUT ANY SECURITY AGREED TO PAY THE IN TEREST RATE @ 15% P.A. THOUGH THESE PERSONS ARE RELATED TO THE PA RTNERS OF THE ASSESSEE FIRM BUT IN VIEW OF THE BUSINESS EXCEGENCI ES THE INTEREST PAID @ 15% P.A. CANNOT BE TERMED EXCESSIVE. IT MAY BE SUBMITTED HERE THAT OUT OF THE ABOVE THREE PERSONS TWO ARE IN THE HIGHER TAX BRACKET. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SUB MISSIONS AND INVOKED PROVISIONS OF SECTION 40A(2)(A)(B) OF IT A CT AND MADE AN ADDITION OF RS. 1,58,382/-. 26 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY THE LD. CIT(A). 27 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STAT ED THAT PAYMENT OF INTEREST DEPENDS ON THE NEGOTIATIONS THE ASSESSEE HAS MADE WITH A PARTICULAR PARTY AND AVAILABILITY O F FUNDS. EVEN FROM BANK THE FUNDS CANNOT BE RAISED AT LESS THAN 1 2 TO 15% AND THAT TOO AFTER CREATION OF SECURITY. THEREFORE PAYMENT OF INTEREST @ 15% IS REASONABLE. 28 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF THE LD. CIT(A). 29 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AGREE WITH THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE BEC AUSE THE 11 PAYMENT OF INTEREST @ 15% SEEMS TO BE REASONABLE AN D THEREFORE IT CANNOT BE SAID THAT EXCESSIVE PAYMENT HAS BEEN MADE. THEREFORE WE SET ASIDE THE ORDER OF LD. CIT( A) AND DELETE THIS ADDITION. 30 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23.12.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR