Warana Dairy and Agro Industries Ltd., Kolhapur V. Assistant Commissioner of Income-tax,

ITA 694/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7541 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 13-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Bogus purchase; Unexplained investment; Depreciation; Principle of natural justice; Opportunity of cross examination

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.694/PUN/2015 / ASSESSMENT YEAR : 2011-12 WARANA DAIRY AND AGRO INDUSTRIES LIMITED, WARANANAGAR, PANHALA, KOLHAPUR. PAN : AAACW7988G. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE -1, KOLHAPUR. . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI MUKESH JHA, JCIT. / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A) 1&2, KOLHAPUR , DT.27.01.2015 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF CHILLING OF MILK AND ITS SALES, PROCESSING AND SALE OF JUICES. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 201 1-12 ON 30.09.2011 DECLARING TAXABLE INCOME OF RS.NIL AND CLAIMING / DATE OF HEARING : 28.08.2017 / DATE OF PRONOUNCEMENT: 08.09.2017 2 CARRY FORWARD OF CURRENT YEAR LOSSES OF RS.10,89,61,277/- . THEREAFTER ON 24.02.2012 ASSESSEE REVISED ITS RETURN OF IN COME DECLARING TAXABLE INCOME AT RS.NIL AND CLAIMING CARRY FORWARD OF CURRENT YEAR LOSSES OF RS.5,94,31,690/-. THE CASE WAS S ELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3 ) OF THE ACT VIDE ORDER DT.11.03.2014 AND THE TOTAL LOSS WAS DETER MINED AT RS.5,14,28,066/- BY INTER-ALIA DISALLOWING BOGUS PURCHASES OF RS.80,03,624/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.27.01.2015 (IN APP EAL NO.KOP/154/14-15) UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.80 ,03,624/- ON ACCOUNT OF BOGUS PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT H AS NEITHER CLAIMED THE EXPENDITURE OF RS.80,03,624/- IN PROFIT AND LOS S ACCOUNT NOR HAS CLAIMED DEPRECIATION ON THIS AMOUNT AS THIS EXPENDI TURE WAS ADDED TO WORK IN PROGRESS AND NO DISALLOWANCE WAS THEREFO RE CALLED FOR. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF R S.80,03,624/- MADE BY THE AO WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE/ 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT NEITHE R THE COPY OF AFFIDAVIT / STATEMENT OF DEALER MADE BEFORE THE SAL ES TAX AUTHORITIES WAS PROVIDED BY THE AO TO THE APPELLANT NOR THE OPPORTUNITY OF CROSS EXAMINATION OF THE DEALER WAS ALLOWED BEFORE MAKING SUCH A HUGE ADDITION. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) ERRED IN TREATING THE EXPENDITURE INCURRE D ON THE PURCHASE OF THE ASSET AS UNEXPLAINED INVESTMENT, WHEN THE SO URCE OF INVESTMENT WAS FULLY EXPLAINED. 3 3. THE CASE FILE REVEALS THAT ON EARLIER OCCASION SINCE NO BODY APPEARED, THE CASE WAS ADJOURNED TO 28.08.2017. ON THE DATE OF PRESENT HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. IN THE ABSENCE OF ANY REQUEST FOR ADJOURNMENT, WE PROCEED TO DISPOSE OF THE APPEAL EX -PARTE QUA THE ASSESSEE ON THE BASIS OF MATERIAL ON RECORD AND AFTE R HEARING THE REVENUE. 4. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHER. 5. ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, IT WAS FOUND THAT ASSESSEE WAS A BENEFICIARY OF BOGUS HAWALA TRANSACTION, BY INFLATING PURCHASES ON THE BASIS OF FAKE BILLS ISSUED BY HAWALA DEALERS. IT WAS NOTICED THAT ASSESS EE WAS ONE OF THE BENEFICIARIES, AS IT HAD MADE PURCHASES TO THE EXTENT OF RS.80,03,620/-. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE TRANSACTION NOT BE DISALLOWED AS BEING BOGUS, TO WHICH ASSESSEE INTER-ALIA SUBMITTED THAT IT HAD PURCHASED MACH INERY AND THE MACHINERY WAS UNDER INSTALLATION AND SHOWN AS WORK-IN - PROGRESS IN THE BALANCE-SHEET. IT WAS FURTHER SUBMITTE D THAT THE AMOUNT WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT NOR CLAIMED AS AN EXPENDITURE AND THEREFORE NO DISALLOWANCE OF EXPENSES WAS CALLED FOR. THE SUBMISSION OF THE ASSESSEE W AS NOT FOUND ACCEPTABLE TO THE AO. HE NOTED THAT ASSESSEE HA D NOT FURNISHED EVIDENCE TO PROVE THAT THE TRANSACTION WAS GE NUINE NOR HAD FURNISHED THE BIFURCATION OF THE CAPITAL WORK-IN-PROGRES S. HE 4 DISALLOWED THE COST OF MACHINERY AND ADDED TO THE INCOME . AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO. 6. ON THE ABOVE FACTS I FIND THAT THE APPELLANT CL AIMS TO HAVE PURCHASED MACHINERY FROM A DEALER WHO HAS CONCEDED THAT IT ONLY PROVIDES ENTRIES AND NOT ACTUAL GOODS. APPELLANTS CONTENTION IS THAT PURCHASED ITEM IS AN ASSET AND NOT AN ITEM OF EXPENDITURE. NO EXPENDITURE HAS BEEN CLAIMED IN PROFIT AND LOSS ACC OUNT THEREFORE, NO DISALLOWANCE CAN BE MADE. HOWEVER, IT HAS NOT E STABLISHED THAT THE COMPANY HAS ACTUALLY PURCHASED THIS ASSET. THE RE IS NO EVIDENCE OF TRANSPORTATION AND INSTALLATION OF MACH INERY BROUGHT ON RECORD. IT HAS BEEN CLAIMED THAT PAYMENT HAS BEEN DULY MADE IN NEXT ASSESSMENT YEAR. COPIES OF BILLS WERE ALSO F URNISHED. HOWEVER, JUST BECAUSE PAYMENT HAS BEEN MADE AND INV OICE HAS BEEN OBTAINED THE PURCHASE DOES NOT BECOME A GENUIN E PURCHASE. IN FACT, THIS IS THE VERY ALLEGATION AGAINST THE CO MPANY. IT HAS OBTAINED BOGUS INVOICE AND MADE THE PAYMENT WITHOUT ACTUALLY PURCHASING THE ITEM. APPELLANTS CLAIM OF ACQUIRIN G ASSET AND SHOWING IT AS WORK IN PROGRESS IS NOT ACCEPTED. IN VESTMENT IN THE SAID ASSET IS TREATED AS UNEXPLAINED INVESTMENT. A DDITION MADE BY THE ASSESSING OFFICER IS HEREBY CONFIRMED AND THE G ROUNDS TAKEN BY THE APPELLANT ARE REJECTED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO AN D LD.CIT(A). 6. WE HAVE HEARD THE LD.D.R. AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT T O BOGUS PURCHASE OF MACHINERY. WE FIND THAT LD.CIT(A) WHILE UPHOLDING THE ADDITION HAS GIVEN A FINDING THAT ASSESSEE HAS NOT ESTABLIS HED THE PURCHASE OF ASSET NOR HAD FURNISHED ANY EVIDENCE OF TRA NSPORTATION OR INSTALLATION OF MACHINERY. HE ALSO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE COPIES OF THE BILL AND THE PAYM ENTS MADE IN NEXT YEAR PROVES THE PURCHASE TO BE GENUINE. HE AC CORDINGLY UPHELD THE ADDITION AS AN UNEXPLAINED INVESTMENT. BEFORE US, 5 ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD TO CON TROVERT THE FINDINGS OF LD.CIT(A). THE ASSESSEE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THE ACTUAL PURCHASE OF MACHINERY. INVIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS, THE GROUNDS OF ASSESSEE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED ON 8 TH DAY OF SEPTEMBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 8 TH SEPTEMBER, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-1&2, KOLHAPUR. CIT I/II, KOLHAPUR / CIT (CENTRAL), PUNE. #$% &&'(,* '(, / DR, ITAT, A PUNE; %-.// GUARD FILE. / BY ORDER , // / TRUE COPY / / //T // TRUE COPY // 012&3'4 / SR. PRIVATE SECRETARY * '(, / ITAT, PUNE.