Century Plyboard (I) Ltd., Kolkata V. CIT,--IV, Kolkata, Kolkata

ITA 643/KOL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3399 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2014
• Court: TRIBUNAL
• Assessee Lawyers: TRADING OF PLYWOOD
• Keywords: Bogus purchase; Business income; Revision of order; Depreciation; Principle of natural justice; Assessment record; Onus to prove
• Section: 143(3); 14A; 263; 63

Judgement Text

ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH , JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 643/KOL/2014 ASST YEAR 2009-10 M/S. CENTURY PLYBOARDS (I) LTD VS. C.I.T KOL -IV, KOLKATA PAN: AAACW 2805Q (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.S DAMLE, FCA, LD .AR DATE OF HEARING: 21-12-2015 DATE OF PRONOUNCEMENT: 20 -01- 2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORD ER OF THE LEARNED CIT, KOL-IV, KOLKATA IN PROCEEDINGS M.NO. CIT.KOL-IV/263/2013-14 DATED 28.3.2014 PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED AO U/S 143(3) O F THE ACT. 2. THE BRIEF FACTS OF THIS CASE IS THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PLYWOOD AND ITS RELATE D PRODUCTS UNDER THE BRAND NAME CENTURY PLY HAVING ITS MANUFACTURING UNIT IN WEST BENGAL; MANUFACTURE OF FERRO ALLOYS AND GENERATION OF POWER IN MEGHALAYA AND CON TAINER FREIGHT STATION IN KOLKATA PORT. . THE RETURN OF INCOME FOR THE ASST YEAR 200 9-10 WAS FILED ON 21.9.2009 DECLARING A TOTAL LOSS OF RS. 6,56,25,395/- . THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 26.12.2011 DETERMINING TOTAL LOSS OF RS. 6,35,41,001/- AFTER MAKING DISALLOWANCES U/S 14A OF THE ACT AND TOWARDS ADVANC ES WRITTEN OFF. THE SAID ASSESSMENT WAS SUBJECTED TO REVISION PROCEEDINGS U/ S 263 OF THE ACT BY THE LEARNED CIT BY ISSUANCE OF SHOW CAUSE NOTICE DATED 21.3.201 4 TREATING THE ORDER PASSED BY THE ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 2 LEARNED AO AS ERRONEOUS IN SO FAR AS IT WAS PREJUDI CIAL TO THE INTERESTS OF REVENUE. IN THE SAID NOTICE, THE LEARNED CIT FELT THAT THE ASSE SSEE HAD CLAIMED DEPRECIATION ON VEHICLES @ 30% WHICH IS APPLICABLE ONLY FOR ASSESSE ES ENGAGED IN THE BUSINESS OF RUNNING THE VEHICLE ON HIRE INSTEAD OF 15%. ACCORD ING TO LEARNED CIT, SINCE THE ASSESSEE WAS NOT IN THE BUSINESS OF RUNNING THE VEH ICLES ON HIRE, IT IS NOT ENTITLED FOR ACCELERATED DEPRECIATION. THE LEARNED CIT ALSO MENTIONED IN THE SHOW CAUSE NOTICE U/S 263 OF THE ACT THAT ASSESSEE HAD MADE BOGUS PUR CHASES OF RS. 3,94,90,558/- FROM M/S DURALLOY CUTTERS LTD BASED ON INFORMATION RECEI VED FROM DGIT (INV.) , MUMBAI. SINCE THESE TWO ASPECTS WERE NOT CONSIDERED IN THE ORIGINAL ASSESSMENT, THE LEARNED CIT FOUND THE ORDER PASSED BY THE LEARNED AO TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND SET ASIDE THE ASSESSMENT TO FRAME THE ASSESSMENT DENOVO . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT GROSSLY ERRED IN LAW AND ON FACTS IN PASSING TH E ORDER UNDER SECTION 263 FOR THE ASSESSMENT YEAR 2009-10 EVEN THOUGH THE ASSESSMENT ORDER U/S 143(3) DATED 26.12.2011L FOR THE AY 2009-10 WAS NE ITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN LAW AND ON FACTS IN HOLDING THE ASSESS MENT ORDER TO BE ERRONEOUS ON THE GROUND THAT THE VEHICLES PURCHASED BY THE APPELLANT DID NOT QUALIFY FOR DEPRECIATION AT THE RATE OF 30% BEC AUSE VEHICLES WERE USED IN THE APPELLANT'S OWN BUSINESS. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRONEOUSLY HELD THAT THE AO DID NOT PROPERLY E XAMINE THE ISSUE OF DEPRECIATION AT THE TIME OF ASSESSMENT EVEN THOUGH ALL RELEVANT MATERIAL WAS AVAILABLE BEFORE THE AO AT THE TIME OF ASSESSME NT AND THE DEPRECIATION WAS ALLOWED ON VERIFICATION OF THE RELEVANT FACTS. 4. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE APPELLANT HAVING RECEIVED THE CHARGES FOR TRANSPORT ATION OF GOODS AND THE SAME HAVING BEEN ASSESSED IN THE ASSESSMENT AS INCO ME DERIVED FROM OPERATING OF CONTAINER FREIGHT STATION ('CFS') THE AO HAD RIGHTLY ALLOWED ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 3 THE DEPRECIATION ON VEHICLES @ 30% AND IN THAT VIEW OF THE MATTER THE CIT WAS UNJUSTIFIED IN CONSIDERING THE ASSESSMENT AS ER RONEOUS. 5. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN HOLDING THE ASSESSMENT ERRONEOUS ON TH E ALLEGED GROUND THAT THE APPELLANT HAD CLAIMED DEDUCTION FOR BOGUS PURCH ASES AND THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM THAT GOODS PURCHASED WERE CORRESPONDINGLY SOLD BY THE ASSESSEE AND THE INCOME WAS OFFERED TO TAX. 6. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN SETTING ASIDE THE ASSESSMENT ON THIS I SSUE OF ALLEGED BOGUS PURCHASES AND DIRECTING AO TO CONDUCT VERIFICATION OF FACTS AFRESH WITHOUT POINTING OUT ANY SPECIFIC ERROR IN THE ASSESSMENT O RDER. 7. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT WAS LEGALLY AND FACTUALLY UNJUSTIFIED IN SETTIN G ASIDE THE ASSESSMENT ORDER AND DIRECTING THE AO TO PASS THE ASSESSMENT D E NOVO EVEN THOUGH IN THE SHOW CAUSE NOTICE THE ASSESSMENT WAS CONSIDERED ERRONEOUS ONLY FOR TWO SPECIFIC ISSUES AND IN THAT VIEW OF THE MATTER THE CIT COULD NOT SET ASIDE THE ASSESSMENT AND DIRECT THE AO TO MAKE THE FRESH ASSESSMENT DE NOVO. 8. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE CIT U/S. 263 BE SET ASIDE AND T HE ORDER OF THE AO U/S 143(3) BE RESTORED. 9. FOR THAT THE APPELLANT RESERVES THE RIGHT TO ADD TO, ALTER OR AMPLIFY THE ABOVE GROUNDS OF APPEAL. 3. THE LEARNED AR ARGUED , WITH REGARD TO CLAIM OF DEPRECIATION AT THE RATE OF 30% ON VEHICLES BEING THE RATE APPLICABLE TO VEHICLES U SED IN THE BUSINESS OF RUNNING THEM ON HIRE, THAT THE LEARNED CIT MADE FACTUAL MISTAKES IN NOT APPRECIATING THE INCOME OFFERED IN THE FORM OF TRANSPORTATION HIRE CHARGES BY USING THE VEHICLES IN THE BUSINESS OF RUNNING THEM ON HIRE. HENCE THE ORDER PASSED U /S 263 OF THE ACT ON THE BASIS OF WRONG APPRECIATION OF FACTS IS BAD IN LAW. HE FURT HER ARGUED THAT THE LEARNED AO IN THE SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) OF T HE ACT DATED 27.2.2015 FOR THE ASST YEAR 2011-12 HAD ALLOWED THE DEPRECIATION ON THESE VEHICLES @ 30% APPRECIATING THE CONTENTIONS OF THE ASSESSEE. 3.1. WITH REGARD TO BOGUS PURCHASES OF RS. 3,94,90 ,558/- FROM M/S DURALLOY CUTTERS LTD, THE LEARNED AR ARGUED THAT THE LEARNED CIT DID NOT EVEN BOTHER TO FURNISH WHAT ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 4 INFORMATION WAS OBTAINED BY HIM FROM DGIT (INV.) , MUMBAI , WITH REGARD TO THE SUBJECT MENTIONED PURCHASES MADE BY THE ASSESSEE. INFACT HE ARGUED THAT TILL DATE, THE INFORMATION ALLEGED TO HAVE BEEN RECEIVED FROM DGIT (INV.), MUMBAI, IS YET TO BE SUBMITTED TO THE ASSESSEE FOR ITS REBUTTAL. HE FU RTHER PLEADED THAT THE ASSESSEE HAD FACTUALLY MADE PURCHASES FROM M/S DURALLOY CUTTERS LTD TO THE TUNE OF RS. 3,94,90,558/- AND HAD SOLD THEM FOR RS. 6,02,09,313 /- WHICH FACT IS ALSO MENTIONED IN THE LEARNED CIT ORDER. HE ARGUED THAT THE LEARNED CIT FAILED TO UNDERSTAND THE CORRELATION MADE BY THE ASSESSEE BETWEEN THE PURCHA SES MADE FROM M/S DURALLOY CUTTERS LTD VIS A VIS THE SALES MADE BY THE ASSESSE E. 3.2. WE HAVE HEARD THE LEARNED AR AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE. WE FIND THAT THE LEARNED DR WAS NOT PRESENT AT THE TIME THE CASE WAS CALLED ON FOR HEAR ING , EVENTHOUGH HE WAS VERY MUCH PRESENT IN TRIBUNAL ON THE SAID DATE BEFORE ANOTHER BENCH. ACCORDINGLY THIS CASE WAS PASSED OVER IN ORDER TO WAIT FOR THE ARRIVAL OF LEA RNED DR. BUT WE FIND THAT THE LEARNED DR AFTER COMPLETING HIS CASES BEFORE THE OT HER BENCH , CHOSE NOT TO PRESENT HIMSELF BEFORE US FOR ADVANCING THE ARGUMENTS. HEN CE WE DEEM IT FIT AND APPROPRIATE TO PROCEED FURTHER BASED ON THE ARGUMENTS ADVANCED BY THE LEARNED AR AND THE MATERIALS AVAILABLE ON RECORDS. FOR THE SAKE OF CONVENIENCE, THE SHOW CAUSE NOTICE U/S 263 OF THE ACT ISSUED BY THE LEARNED CIT IS REP RODUCED HEREUNDER:- OFFICE OF THE COMMISSIONER OF INCOME TAX, KOLKATA- IV, KOLKATA P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 NO. CIT/KOL-IV/U/S. 263/2013-14/8121 DAT ED: 21/03/2014 TO, THE PRINCIPAL.OFFICER, . MLS. CENTURY PLYBOARD (I) LTD., 6, LIONS RANGE, KOLKATA-700 001. SIR, SUB: - NOTICE U/S. 263 IN THE CASE OF MLS.CENTURY PLYBORDS (I) LTD. A.Y.- 2009-10- REGARDING. ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 5 ******** IN THIS CASE THE ASSESSEE COMPANY HAD FILED ITS RET URN ON 29.09.2009 DECLARING TOTAL LOSS OF RS. 6,56,25,3951-. THE ASSE SSMENT ULS 143(3) WAS COMPLETED ON 26.12.2011 DETERMINING TOTAL LOSS AT R S. 6,35,41,001/- . ON VERIFICATION OF ASSESSMENT RECORD IT IS FOUND TH AT THE ASSESSEE COMPANY CLAIMED DEPRECIATION @ 15% IN 30% BLOCK AMO UNTING RS. 82,43,974/- AGAINST PURCHASE OF VEHICLES AFTER 30.09.2008 AT A COST OF RS. 5,79,59,825/-. DEPRECIATION ON VEHICLES @ 30% BLOCK IS ADMISSIBLE WHEN THE SAME VEHICLES ARE USED IN THE. BUSINESS OF RUNNING THEM ON HIRE. BUT THE ASSESSEE COMPANY NOT ENGAGED IN BUSINESS OF VEHICLES ARE USED IN THE BUSINESS OF RUNNING THEM ON HIRE. BUT THE ASSESSEE COMPANY NOT ENGAGED IN BUSIN ESS OF VEHICLES RUNNING AND NOT SHOWING ANY INCOME ON ACCOUNT OF VEHICLES HIRE CHARGES DURING THE PREVIOUS YEAR 2008-09. IN THIS CASE DEPRECIATION IS ALLOWABLE @ 7.5% IN 15% BLOCK TO THE TUNE OF RS. 41,21,987/-. AT THE TIME O F ASSESSMENT ULS.L43(3), A.O. DID NOT DISALLOW EXCESS DEPRECIATION CLAIM OF RS. 4 1,21,987/- (RS.82,43,974/-) - RS.41,21,987/.,). FURTHER, AS PER INFORMATION RECEIVED FROM DGIT(LNV) , MUMBAI DURING THE F.Y.2008-09 THE ASSESSEE COMPANY HAD MADE A BOG US PURCHASE OF RS. 3,94,90,558/- FROM M/S. DURALLOY CUTTERS LTD. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND REQUIRES TO BE R EVIEWED UNDER SECTION 263 OF THE INCOME TAX-ACT, 1961. YOU ARE THEREFORE REQUESTED TO ATTEND THE OFFICE OF THE UNDERSIGNED ON 26-03-2014 AT 03.30 P.M. EITHER PERSONALLY OR THROU GH AN AUTHORIZED REPRESENTATIVE AND SHOW CAUSE AS TO WHY THE ASSESSM ENT ORDER REFERRED ABOVE SHOULD NOT BE CANCELLED AND MODIFIED U/S 263 OF THE INCOME TAX ACT, 1961. YOURS FAITHFULLY, SD/- (DEVENDRA NATH MISHRA) COMMISSIONER OF INCOME TAX,KOLKATA-IV KOLKATA ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 6 3.3. DEPRECIATION ON VEHICLES WHETHER TO BE ALLOW ED @ 30% OR 15% WE FIND THAT THE ASSESSEE OPERATES A CUSTOM NOTIFIE D CONTAINER FREIGHT STATION (CFS) AT SONAI, KHIDDERPORE, KOLKATA, FOR WHICH PURPOSE, THE ASSESSEE HAS OBTAINED LEASEHOLD LAND FROM KOLKATA PORT TRUST . ADMITTEDLY THIS WAS ALLOTTED TO THE COMPANY FOR THE SPECIFIC OBJECTIVE OF SETTING UP OF CFS FACILITY C LOSE TO KOLKATA PORT FOR STORING AND COMPLETING CUSTOM CLEARING FORMALITIES RELATED TO I MPORTED AND EXPORTABLE CARGO. THE PREMISES OF THE CFS HAVE BEEN DECLARED TO BE CUSTO MS AREA/ THE CFS IS AN EXTENDED ARM OF THE KOLKATA PORT WHERE GOODS MEANT FOR IMPOR T / EXPORT ARE KEPT TILL COMPLETION OF CLEARANCE FORMALITIES. FOR THE SERVICES PROVIDE D TILL COMPLETION OF FORMALITIES, CHARGES ARE RAISED BY CFS ON THE PERSON WHOSE CARGO / GOODS PASS THROUGH THE CFS. THE GOODS WHICH ARE TO BE IMPORTED / EXPORTED FROM THE KOLKATA PORT ARE HANDLED AND STORED AT THE ASSESSEES CFS FOR WHICH THE ASSESSEE PROVIDES THE SUPPORT INFRASTRUCTURE IN THE FORM OF VEHICLES FOR TRANSPORT OF THE EXPORT / IMPORT GOODS BETWEEN THE KOLKATA PORT AND THE CFS. FOR LOADING, UNLOADING, TRANSPOR T OF GOODS TO CFS FROM KOLKATA PORT AND VICE VERSA, THE ASSESSEE RECOVERS TRANSPOR TATION CHARGES FROM THE IMPORTERS / EXPORTERS ON PER CONTAINER BASIS. WE FIND FROM T HE SAMPLE INVOICES SUBMITTED BEFORE US IN THE PAPER BOOK THAT ASSESSEE RAISES SEPARATE CHARGES FOR TRANSPORTATION OF GOODS FROM CFS TO KOLKATA PORT TRUST AND VICE VERSA ON PE R CONTAINER BASIS. HENCE IT IS PROVED THAT THE TRANSPORTATION HIRE CHARGES INCOME IS DULY OFFERED BY THE ASSESSEE IN THE SUM OF RS. 53.60 LACS WHICH IS INCLUDED IN THE TOTAL RECEIPTS OF RS. 349.28 LACS UNDER THE HEAD INCOME FROM SERVICES. THIS GOES TO PROVE THAT THE VEHICLES OF THE ASSESSEE WERE USED FOR TRANSPORTING GOODS OF THE PE RSONS USING ASSESSEES CFS FACILITY. HENCE IT CAN BE SAFELY CONCLUDED THAT THE VEHICLES WERE USED BY THE ASSESSEE IN THE BUSINESS OF RUNNING THEM ON HIRE THEREBY BECOMING E LIGIBLE FOR DEPRECIATION @ 30% AS AGAINST 15% STATED BY THE LEARNED CIT IN HIS SECTIO N 263 ORDER. HENCE WE FIND THAT THE LEARNED AO HAD RIGHTLY APPRECIATED THE FACTUAL POSITION OF THE ASSESSEE AND HAD GRANTED DEPRECIATION @ 30%. WE ALSO FIND THAT THE LEARNED AO EVEN IN SUBSEQUENT ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 7 ASSESSMENT YEAR 2011-12 U/S 143(3) PROCEEDINGS DATE D 27.2.2015 HAD ALLOWED THE DEPRECIATION ON THESE VEHICLES @ 30%. HENCE WE H OLD THAT THE ORDER PASSED BY THE LEARNED AO CANNOT BE TERMED AS ERRONEOUS. HENCE IN VOKING REVISION JURISDICTION IN TERMS OF SECTION 263 OF THE ACT BY THE LEARNED CIT IS NOT WARRANTED. 3.4. BOGUS PURCHASES RS. 3,94,90,558/- WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF MANUFACTURE, TRADING AND MARKETING OF PLYWOOD AND ITS ALLIED PRODUCTS . IN ADDITION TO THIS, THE ASSESSEE HAS MANUFACTURING UNITS LOCATED IN WEST BENGAL AND MEGH ALAYA FOR FERRO ALLOY PLANT AND POWER PLANT RESPECTIVELY AND CFS IN KOLKATA. WE FIND FROM THE RECORDS THAT THE ASSESSEE PURCHASES PLYWOOD AND BOARDS FROM LOCAL DE ALERS LOCATED ACROSS INDIA. THE ASSESSEE HAS BRANCH OFFICES AND REGIONAL OFFICES ON PAN INDIA BASIS. WE FIND THAT DURING THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESS EE HAD MADE PURCHASES FROM M/S DURALLOY CUTTERS LTD (IN SHORT DCL) FOR RS. 3,94, 90,558/- . WE FIND FROM THE RECORDS THAT THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS OF THE PURCHASES MADE FROM DCL ALONG WITH COPIES OF INVOICES AND CHALLANS, PROOF O F PAYMENTS, BANK STATEMENTS, TRANSPORTATION PAYMENT VOUCHERS ETC FOR MOVEMENT OF GOODS THEREON. THE LEARNED AR ARGUED THAT THE SAID SUPPLIER HAD MENTIONED ITS VALUE ADDED TAX (VAT) REGISTRATION NUMBER AND VAT HAS BEEN LEVIED ON THE PURCHASES AND PAYMENTS WERE MADE TO THE SUPPLIERS BY ACCOUNT PAYEE CHEQUES. W E ALSO FIND FROM THE RECORDS THAT TRANSPORTATION VOUCHERS FROM THE VARIOUS TRUCK OPER ATORS / LORRY DRIVERS EVIDENCING THE TRANSPORT OF PURCHASES MADE FROM THESE PARTIES TO T HE CUSTOMERS / DEPOTS. WE FIND FROM THE RECORDS THAT THE ASSESSEE HAD SUBMITTED TH E STATEMENT SHOWING THE SALES MADE OUT OF THE MATERIALS PURCHASED FROM DCL. ACCORDINGL Y, WE FIND THAT THE TOTAL SALES MADE THEREON IS RS. 6,02,09,313/- OUT OF PURCHASES FROM DCL TO THE TUNE OF RS. 3,94,90,558/- YIELDING PROFIT OF RS. 2,07,18,755/-. THE DETAILS OF STATEMENT SHOWING SALES ARE ALSO PART OF OUR RECORDS. THE LEARNED AR HAS ALSO PRODUCED EVIDENCES FOR PAYMENT OF VAT BY DCL TOGETHER WITH THEIR COPY OF V AT RETURNS FILED WITH DEPARTMENT OF SALES TAX. WE FIND FROM THE ABOVE DO CUMENTS PLACED BEFORE US IN THE ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 8 PAPER BOOK WHICH WAS ALSO PLACED BEFORE THE LOWER A UTHORITIES, THE ASSESSEE HAS DISCHARGED ITS COMPLETE ONUS TO SUBSTANTIATE THE PU RCHASES MADE FROM DCL AND ITS GENUINITY THEREON. 3.4.1. NOW LET US GET INTO THE SHOW CAUSE NOTICE I SSUED U/S 263 OF THE ACT BY THE LEARNED CIT ON THE IMPUGNED ISSUE. IT STATES AS BE LOW:- FURTHER , AS PER INFORMATION RECEIVED FROM DGIT (IN V.), MUMBAI DURING THE F.Y. 2008-09 THE ASSESSEE COMPANY HAD MADE A BOGUS PURCHASE OF RS. 3,94,90,558/- FROM M/S DURALLOY CUTTERS LTD. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND REQUIRES TO BE REVI EWED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. WE FIND NO DETAILS / EVIDENCE WHATSOEVER HAS BEEN M ENTIONED IN THE IMPUGNED SHOW CAUSE ELABORATING ON THE SO CALLED INFORMATION. WE FIND THAT NO SPECIFIC INFORMATION IS DISCERNIBLE FROM THE IMPUGNED NOTICE. WE ALSO F IND THAT THE ASSESSEE HAS NOT BEEN PROVIDED WITH ANY SPECIFIC EVIDENCE WHICH WOULD IN ANY MANNER SUGGEST THAT THE PURCHASES MADE BY THE ASSESSEE WERE BOGUS. WHETHER ANY STATEMENT ON OATH HAS BEEN RECORDED FROM M/S DCL IS NOT ON RECORD BEFORE US AN D EVEN IF IT BE, THE SAME HAS NOT BEEN PROVIDED TO THE ASSESSEE FOR HIS RECORDS AND R EBUTTAL. HENCE WE FIND THAT THE SHOW CAUSE NOTICE ISSUED BY THE LEARNED CIT ON THIS ISSUE IS ONLY A MERE ALLEGATION THAT HAS BEEN RAISED AGAINST THE ASSESSEE WITHOUT A NY MATERIAL EVIDENCE ON RECORD. THE INFORMATION ALLEGED TO HAVE BEEN OBTAINED FROM DGIT (INV.), MUMBAI BY THE LEARNED CIT OUGHT TO HAVE BEEN SHARED WITH THE ASSE SSEE FOR HIS REBUTTAL IN LINE WITH THE PRINCIPLES OF NATURAL JUSTICE. EXPECTING AN AS SESSEE TO REPLY IN A QUASI JUDICIAL PROCEEDING WITHOUT KNOWING FOR WHAT PURPOSE HE HAS BEEN ASKED TO DO SO, IS NOT IN ACCORDANCE WITH LAW. ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 9 3.4.2. WE FIND THAT THE RELIANCE PLACED BY THE LEA RNED AR ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS JMD COMPUTERS & COMMUNICATIONS LIMITED REPORTED IN 180 TAXMAN 485 D ATED 16.1.2009 IS WELL FOUNDED. IN THAT CASE, ON INVESTIGATION CARRIED OUT AT THE P REMISES OF A CERTAIN PARTY, THE DEPARTMENT GATHERED THAT BOGUS PURCHASES WERE M ADE BY THE ASSESSEE FROM THAT PARTY WHICH WAS DISALLOWED. ON APPEAL, THE COURT O BSERVED THAT COMPLETE DETAILS OF PURCHASES WERE FILED BY THE ASSESSEE ALONG WITH CO RRESPONDING SALES. THE QUANTITATIVE ANALYSIS DONE BY THE ASSESSEE WAS NOT DISPUTED NOR WAS ANY INFIRMITY POINTED OUT BY THE DEPARTMENT. IT WAS OBSERVED THA T THE AO HAD PROCEEDED SOLELY ON THE STATEMENT OF THE SUPPLIER. IT WAS OBSERVED THA T THE INFORMATION GATHERED BY THE INVESTIGATION WING WAS NEVER FURNISHED TO THE ASSES SEE. THE ASSESSEE WAS ALSO NOT GIVEN OPPORTUNITY TO CROSS EXAMINE THE DEPARTMENTAL WITNESS. IN THE CIRCUMSTANCES, THE ORDER OF THE ITAT DELETING THE IMPUGNED ADDITIO N WAS UPHELD BY THE HIGH COURT. SIMILARLY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS PRECIOUS JEWELS CORPORATION REPORTED IN 17 TAXMANN.COM 264 DATED 10 .10.2011 FOUND IN RESPECT OF ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES, THE AS SESSEE HAD FURNISHED COMPLETE INVOICES ALONG WITH PROOF OF PAYMENTS THROUGH ACCOU NT PAYEE CHEQUES. THE ASSESSEE HAD ALSO SUBMITTED THE DETAILS OF CORRESPONDING SAL ES MADE AND THAT THE PROFIT DERIVED FORMED PART OF THE BOOKS OF ACCOUNTS. THE COURT OB SERVED THAT MERELY BECAUSE THE SUPPLIERS CHOSE NOT TO PAY THE SALES TAX AND INAPPR OPRIATELY UTILIZED THE PAYMENTS CANNOT BE VIEWED ADVERSELY IN THE MATTERS OF ANOTHE R ASSESSEE. THE COURT HELD THAT THE ASSESSEE CANNOT BE EXPECTED TO CONTROL THE ACTIVITI ES OF THE SUPPLIER. IT WAS OBSERVED THAT THE ASSESSEE HAD ESTABLISHED THE ONUS OF DISCH ARGING THE GENUINENESS OF PURCHASES. IN THE CIRCUMSTANCES, THE IMPUGNED ADDI TION MADE ON ACCOUNT OF BOGUS PURCHASES WAS DIRECTED TO BE DELETED IN FULL . IN THE INSTANT CASE BEFORE US, THE ASSESSEE IS DEFINITELY IN A MUCH BETTER POSITION TH AN THAT OF THE ASSESSEES MENTIONED IN THE AFORESAID JUDGEMENTS. AS IN THE CASE BEFORE US , THE ASSESSEE HAD EVEN FURNISHED THE DETAILS OF VAT PAYMENTS AND FILING OF VAT RETUR NS BY THE SUPPLIER BEFORE THE DEPARTMENT OF SALES TAX. THE FACTS IN THE AFORESAI D CASE ARE SQUARELY APPLICABLE TO THE ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 10 FACTS OF THE CASE BEFORE US AND HENCE WE HOLD THAT THE ASSESSEE HAD DULY DISCHARGED ITS COMPLETE ONUS TO PROVE THE GENUINITY OF PURCHASES M ADE FROM DCL AND THERE IS NO SCOPE FOR DRAWING ANY ADVERSE INFERENCE WITH REGARD TO THE SAME IN THE FACTS OF THE CASE. 3.4.3 WE FIND THAT THE LEARNED CIT IN HIS SECTION 2 63 ORDER HAD NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD TO PROVE HOW THE ORDER PASSED BY THE LEARNED AO IS ERRONEOUS. HENCE WE HOLD THAT THE ORDER PASSED BY THE LEARNED AO CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE INVOKING REVISION JURISDICTION IN TERMS OF SECTION 263 OF THE ACT BY THE LEARNED CIT IS NOT WARRANTED. 3.4.4. WE ALSO FIND THAT THE FOLLOWING CASE LAWS S UPPORT THE CASE OF THE ASSESSEE BEFORE US :- DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS M.K.BROTHERS REPORTED IN (1987) 30 TAXMAN 547 (GUJ ) DATED 25.10.1985. DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E CASE OF ITO VS SRI PUSPAL KUMAR DAS IN ITA NO. 1442/KOL/2012 DATED 10. 12.2015. DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E CASE OF ITO VS T C J MERCANTILE PVT LTD IN ITA NO. 381/KOL/2012 DATED 7. 10.2015. DECISION OF COORDINATE BENCH OF ITAT JODHPUR IN THE CASE OF ITO VS PERMANAND REPORTED IN (2008) 25 SOT 11 (JODH.) (URO ) DATED 11.8.2006. DECISION OF COORDINATE BENCH OF ITAT MUMBAI IN THE CASE OF ITO VS SHRI DEEPAK POPATLAL GALA IN ITA NO. 5920/MUM/2013 AND I TA NO. 6203/ MUM/2013 DATED 27.3.2015. 3.4.5. WE ALSO FIND THAT ADMITTEDLY THE LEARNED CI T HAD INVOKED REVISION JURISDICTION U/S 263 OF THE ACT ON THIS ISSUE ONLY BASED ON THE INFORMATION OBTAINED FROM AN EXTERNAL SOURCE NAMELY DGIT (INV), MUMBAI. HENCE I T COULD BE INFERRED THAT THE ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 11 DECISION TO FORM A BELIEF THAT PURCHASES FROM DCL A RE BOGUS DOES NOT EMANATE FROM THE RECORD OF THE ASSESSEE. AS PER SECTION 263, THE LEARNED CIT COULD INVOKE REVISION JURISDICTION IF HE FINDS FROM THE RECORD O F ANY PROCEEDING UNDER THIS ACT THAT THE ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FIRST OF ALL, WHAT INFORMATION WAS R ECEIVED FROM DGIT (INV), MUMBAI BY THE LEARNED CIT WAS NEVER MADE KNOWN TO THE ASSESSE E FOR HIS REBUTTAL AND EXPLANATION. SECONDLY, THE INFORMATION OF DGIT (I NV), MUMBAI DOES NOT EMANATE OUT OF THE RECORD OF THE ASSESSMENT OR REASSESSMENT P ROCEEDINGS OF THE ASSESSEE HEREIN AS IT IS ONLY AN EXTERNAL SOURCE. HENCE WE HOLD THA T THE FORMATION OF BELIEF OF LEARNED CIT FOR INVOKING REVISION JURISDICTION U/S 263 OF T HE ACT THAT ORDER PASSED BY THE LEARNED AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDIC IAL TO THE INTEREST OF THE REVENUE, IS NOT BASED ON ANY RECORD OF PROCEEDINGS OF AO AND IT IS EVIDENT THAT THE SUBSTRATUM FOR INVOKING REVISION JURISDICTION IS NOT LAID IN THE S HOW CAUSE NOTICE OF LEARNED CIT , BUT ON MATERIAL EXTRANEOUS THERETO. UNDER THESE CIRCUM STANCES, THE BASIC REQUIREMENT OF ASSUMPTION OF REVISION JURISDICTION U/S 263 OF THE ACT IS NOT SATISFIED IN THE PRESENT CASE. 3.5. WE ALSO HOLD THAT FOR INVOKING JURISDICTION U/ S 263 OF THE ACT, THE LEARNED CIT HAS TO SATISFY THE DUAL CONDITIONS CUMULATIVELY I.E THE ORDER PASSED BY THE LEARNED AO SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS REGARD , WE PLACE RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD VS CIT REPORTED IN (2000 ) 243 ITR 83 (SC) WHEREIN IT WAS HELD : A BARE READING OF SECTION 263 OF THE INCOME-TAX ACT, 1961, MAKES IT CLEAR THAT THE PRE-REQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L L TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED O F TWIN CONDITIONS, NAMELY, (I) THE ORDER THE ASSESSING OFF ICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT- IF THE ORDER OF THE INCOME-TAX ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 12 OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-RE COURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CAN NOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQU IREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITH OUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS N OT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLEC T TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENT RUSTED TO THE REVENUE . IF DUE TO AN ERRONEOUS ORDER OF THE INCOM E-TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON , IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. T HE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS T O BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICE R ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESUL TED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE IN COME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME- TAX OFFICER IS UNSUSTAINABLE. 4. WE ALSO FIND THAT THE LEARNED CIT HAVING ISSUED SHOW CAUSE NOTICE U/S 263 OF THE ACT TO EXAMINE TWO SPECIFIC ISSUES OF ALLOWANCE OF DEPRECIATION ON VEHICLES AND BOGUS PURCHASES, OUGHT NOT TO HAVE SET ASIDE THE ENTIRE A SSESSMENT TO BE DONE DENOVO AS IT WOULD ONLY RESULT IN GIVING ANOTHER INNINGS TO THE LEARNED AO TO HAVE A REVIEW ON THE CONCLUDED ISSUES. ACCORDINGLY, THE SPECIFIC GROUND NO. 7 RAISED BY THE ASSESSEE ON THIS ASPECT IS ALLOWED. ITA NO. 643/KOL/2014-D-AM M/S. CENTURY PLYBOARDS (I) LTD 13 5. IN VIEW OF THE AFORESAID FACTUAL FINDINGS AND JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE , WE HAVE NO HESITATION IN QUASHING THE SECTION 263 ORDER PASSED BY THE LEARNED CIT AND ACCORDINGLY THE GROUNDS RAISED BY T HE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 2 0 -01-2016 1.. THE APPELLANT: M/S. CENTURY PLYBOARDS (I) 6 L YONS RANGE, KOL-1. 2 THE RESPONDENT: COMMISSIONER OF INCOME-TAX, KO- IV, AAYKAR BHAWAN P-7 CHOWRINGHEE SQ. KOL-69. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 20 -01/2016 COPY OF THE ORDER FORWARDED TO: -