DCIT, New Delhi V. M/s Norma India Ltd., New Delhi

ITA 86/DEL/2010

• Counselvise Citation: 8620114 RSA 2010
• Duration Of Justice: 5 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 07-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Bogus purchase; Assessment record
• Section: 133(6)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 86/DEL/2010 (ASSESSMENT YEAR: 2005 - 06) DCIT, CIRCLE - 13(1), ROOM NO.406, C. R.BUILDING, I.P. ESTATE, N EW DELHI VS. NORMA INDIA LTD., X - 43, LOHA MANDI, NARAINA, NEW DELHI PAN:AAACN4323J (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, CA REVENUE BY: SH. P DAM KANUNJNA, SR. DR DATE OF HEARING 24 .11.2015 DATE OF P RONOUNCEMENT 08 .12.2015 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) - XVI, NEW DELHI DATED 16.10.2009 PASSED FOR THE ASSESSMENT YEAR 2005 - 06 . THE REVENUE RAISED THE FO LLOWING GROUNDS OF APPEAL: 1. THAT THE LD CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE DISALLOWANCE OF EXPENSES OF RS.25,70,462/ - MADE BY THE ASSESSING OFFICER ON EXPENSES RELATING TO TOOLS AND CONSUMABLES MACHIN ERY REPAIR AND PACKING EXPENSES. DCIT V NORMA INDIA LIMITED ITA NO 86/DEL/2010 A Y 2005 - 06 2 | P A G E 2. THAT THE LD CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE CREDITOR AND GENUINENESS OF THE PURCHASES MADE FROM M/S. R. K. ENTERPRISES AN D M/S. VASU TRADING CORPORATION. 2 . THE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF FORGINGS, IRON AND STEEL IN FORM OF BILLETS AND BLOOMS WERE PURCHASED AND WITH FORGE HAMMERS SAME WERE CONVERTED INTO FLANGES PRIMARILY USED IN PIPELINES. IN ADDITION TO COMPANY ALSO CARRIED OUT JOB WORK IN RESPECT OF FORGING. THE ASSESSEE COMPANY FILED RETURN OF INCOME ON 30.10.2005 DECLARING TOTAL INCOME OF RS.1,94,87,746/ - . THE CASE WAS SELECTED FOR SCRU TINY ASSESSMENT AND PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). NOTICES U/S 143(2) WAS ISSUED. 3 . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FIRM SUBMITTED THAT THERE WAS A STEEP RISE IN THE EXPENSES REL ATED TO TOLL AND CONSUMABLES, MACHINERY AND PACKING EXPENSES. FURTHER, HE NOTICED THAT THE ASSESSEE COMPANY HAD NOT MAINTAINED ANY QUANTITATIVE DETAILS OR STOCK REGISTERS. THE ASSESSING OFFICER WERE ISSUED NOTICES TO BOTH THE FIRMS U/S 133(6) TO VERIFY THE PURCHASES, AND FOUND THAT M/S. R. K. ENTERPRISES WAS CLOSED AND ANOTHER M/S. VASU TRADING CORPORATION COULD NOT BE TRACEABLE. THE ASSESSEE COMPANY COULD NOT FURNISH ANY EVIDENCE TO VERIFY THE EXISTENCE OF THESE FIRMS. THE ASSESSEE COMPANY SUBMITTED DCIT V NORMA INDIA LIMITED ITA NO 86/DEL/2010 A Y 2005 - 06 3 | P A G E BEFORE THE ASSESSING OFFICER THAT PAYMENTS TO THESE PARTIES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES IN THE NEXT YEAR. IN ORDER TO SHOW THAT MATERIAL PURCHASED FROM THESE FIRMS THE ASSESSEE COMPANY FILED AN AFFIDAVIT OF ONE SH. VIDHYA NAND CLAIMED THAT HE OWNED T RU NO.DL - 1LC - 1081 AND HAD LIFTED THE MATERIAL FROM THE PREMISES OF M/S. R.K. ENTERPRISE AND M/S. SHRI VASU TRADING CORPORATION TO THE PREMISES OF THE ASSESSEE COMPANY. IN ORDER TO PROVE THE GENUINENESS OF EXISTENCE OF THESE FIRMS, THE ASSESSEE COMPANY FURN ISHED COPY OF FORM 15 OF IP TRADE TAX. FURTHER, THE ASSESSEE COMPANY CONTENDED THAT MERE ABSENCE OF CONFIRMATION FROM THESE PARTIES SHOULD NOT LEAD TO CONCLUSION THAT PURCHASES FROM THESE PARTIES WERE NOT GENUINE. IN VIEW OF THE ABOVE, THE ASSESSING OFFICE R NOTED THAT PURCHASE MADE FROM M/S. R.K. ENTERPRISE AS WELL AS FROM M/S. SHRI VASU TRADING CORPORATION WERE NOT OF RAW MATERIAL USED FOR MANUFACTURING OF FORGING AND THEREFORE WERE NOT PART OF EXCISE RECORDS, THEREFORE ARGUMENT OF HIGH YIELD ON ACCOUNT OF THESE PURCHASE AND ACCEPTANCE OF MANUFACTURING RECORDS BY EXCISE AUTHORITY IS OF NO RELEVANCE. ALL THE ITEMS CLAIMED TO HAVE BEEN PURCHASED WERE FOR MACHINERY REPAIRS, TOOLS, CONSUMABLES, AND PACKING MATERIAL. FURTHER, HE OBSERVED THAT NO GENUINE BUSINESS ENTITIES EXISTED. THE ASSESSEE PROCURED MERE BILLS FROM SOME PERSON ENGAGED IN PROVIDING BILLS IN NAME OF SUCH FICTITIOUS ENTITIES; THEREFORE ALL THE CHEQUES WERE ISSUED IN NOVEMBER 2005. BILLS WERE TAKEN FOR THE ITEMS FOR WHICH NO VERIFICATION IS POSSIBL E WITH THE HELP OF EXCISE RECORD OR BY COMPARING YIELD ETC. THEREFORE THE ASSESSING OFFICER DCIT V NORMA INDIA LIMITED ITA NO 86/DEL/2010 A Y 2005 - 06 4 | P A G E DISALLOWED THE TOTAL EXPENSES OF RS.25,70,462/ - AND ADDED TO THE INCOME OF THE ASSESSEE. SINCE, BOOKS OF ACCOUNTS OF ASSESSEE ARE NOT RELIABLE IT IS NOT VERIFIABLE AS TO WHAT PART OF SUCH CONSUMABLES DEBITED REMAINED UNCONSUMED AT THE YEAR - END . FURTHER ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE OUTSIDE THE BOOKS OF ACCOUNTS TO ARRANGE FOR FICTI TI OUS BILLS. THEREFORE, AN ADDITION OF RS.5,00,000/ - IS MADE TO THE TOT AL INCOME OF THE ASSESSEE. THUS, TOTAL RS.30,70,462/ - ADDED TO THE INCOME OF THE ASSESSEE. 4 . AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), WHO DELETED DISALLOWANCE ON THE BASIS OF FOLLOWING INFORM ATION SUBMITTED BY ASSESSEE A . COPIES OF LEDGER ACCOUNT OF BOTH THE PARTIES B . COPIES OF BILLS PROVIDED BY BOTH THE PARTIES C . DATE WISE LIST OF MATERIAL RECEIVED / PROCURED D . BANK STATEMENT OF ASSESSEE WHERE THE PAYMENTS MADE TO THESE PARTIES BY ACCOUNT PAYEE CH EQUES E . AFFIDAVIT OF TRANSPORTER WHO TRANSPORTED GOODS TO THE FACTORY OF ASSESSEE F . SALES TAX REGISTRATION NUMBER AND ASSESSMENT DETAILS OF THE PARTIES FROM WHOM PURCHASES WERE MADE AND SALES TAX ASSESSMENT ORDER IN CASE OF ONE PARTY CIT (A) WAS OF THE V IEW THAT ON SUBMISSION OF ABOVE DETAILS ASSESSEE HAS DISCHARGED THE ONUS OF THE [PURCHASES MADE AND IN ABSENCE OF ANY CONTRARY EVIDENCE IN POSSESSION OF AO DCIT V NORMA INDIA LIMITED ITA NO 86/DEL/2010 A Y 2005 - 06 5 | P A G E DESPITE 133(6) NOTICES NOT SERVED ON THE PARTIES NO DISALLOWANCE CAN BE MADE ON ACCOUNT OF BOGUS PURCHASES. AGGRIEVED THE REVENUE IS BEFORE US IN THIS APPEAL. 5 . LD DR REITERATED THE FINDINGS OF THE AO AND SUBMITTED THAT IN ABSENCE OF 133(6) NOTICES SERVED ON THE SELLERS THE AO HAS RIGHTLY TREATED PURCHASES MADE AS BOGUS. 6 . LD AR OF THE APPELL ANT SUBMITTED THE SAME ARGUMENTS WHICH WERE ADVANCED BEFORE CIT (A) AND HE SUBMITTED THAT THE ASSESSEE HAS DISCHARGED ITS ONUS FULLY AND AO HAS MADE DISALLOWANCE WITHOUT ANY BASIS. THEREFORE CIT (A) HAS DELETED THE DISALLOWANCE CORRECTLY. 7 . WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF LOWER AUTHORITIES. IT SEEMS THAT MAINLY THE DISALLOWANCE IS MADE BECAUSE OF THE PETITION FILED TAX EVASION PETITION BY ONE OF THE DIRECTOR OF THE COMPANY SHRI SAMEER KHANDELWAL WHO ALLEGED THAT ASSESSEE IS EVADI NG THE TAXES BY DEBITING BOGUS EXPENSES IN THE NATURE OF REPAIR EXPENSES. HOWEVER, IN THE ORDER OF AO WE COULD NOT GATHER WHAT EVIDENCE HE HAS LAID BEFORE AO TO PROVE THAT ASSESSEE IS EVADING TAXES BY BOOKING BOGUS EXPENSES. IN THE OFFICE NOTE ATTACHED WITH THE ASSESSMENT ORDER, WHICH IS FILED BEFORE US, DID NOT SHOW ANY EVIDENCE AVAILABLE WITH AO OR SUPPLIED BY THE PETITIONER. IN ABSENCE OF ANY POSITIVE EVIDENCE LED BY THE PETITIONER AND ITS INDEPENDENT EXAMINATION BY AO, IT REMAINS A MERE ALLEGATIO N AND BASED ON MERE ALLEGATION NO ADDITION/ DISALLOWANCE CAN BE MADE. CONTRARILY, ASSESSEE HAS SUBMITTED OVERWHELMING EVIDENCE IN THE FORM OF COPIES OF DCIT V NORMA INDIA LIMITED ITA NO 86/DEL/2010 A Y 2005 - 06 6 | P A G E LEDGER ACCOUNT OF BOTH THE PARTIES, COPIES OF BILLS PROVIDED BY BOTH THE PARTIES, D ATE WISE LIST O F MATERIAL RECEIVED / PROCURED, B ANK STATEMENT OF ASSESSEE WHERE THE PAYMENTS MADE TO THESE PARTIES BY ACCOUNT PAYEE CHEQUES, A FFIDAVIT OF TRANSPORTER WHO TRANSPORTED GOODS TO THE FACTORY OF ASSESSEE, S ALES TAX REGISTRATION NUMBER AND ASSESSMENT DETAIL S OF THE PARTIES FROM WHOM PURCHASES WERE MADE AND SALES TAX ASSESSMENT ORDER IN CASE OF ONE PARTY AND FURTHER THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH ARE ALSO SUBJECT TO SCRUTINY BY EXCISE AND SALES TAX AUTHORITIES AS ON THESE ITEMS INPUT CREDIT U NDER BOTH THE ACTS ARE AVAILABLE. ASSESSEE HAS ALSO GIVEN THE DETAILS OF THE ADDRESS, WHICH ARE AVAILABLE WITH IT AT THE TIME OF PURCHASES AND SALES TAX ASSESSMENT RECORDS OF THAT ASSESSEE WHICH PROVES THAT ASSESSEE HAS NOT PROVIDED INCORRECT ADDRESS. FUR THER PURCHASE BILLS SHOWS ALL THE REQUI SI TE DETAILS OF THE SUPPLIERS IN THE BILLS, IN OUR VIEW IT IS A CONTEMPORANEOUS CONFIRMATION IN ITSELF BY SUPPLIERS. LD. AO IS OF THE VIEW THAT AS BOTH THE SUPPLIERS HAVE PAN HOWEVER BOTH OF THEM ARE NOT ASSESSED TO INCOME TAX. ON THIS ASPECT NO FAULT CAN BE FOUND WITH THE ASSESSEE. FURTHER DISPROPORTIONATE INCREASE IN PACKING MATERIAL MACHINERY EXPENDITURE COMPARED TO SALES IS THE FIRST POINT, WHICH SHOULD PROVOKE AO TO MAKE FURTHER INVESTIGATION , WHICH HAS NO T BEEN DONE . IN ABSENCE OF FURTHER INVESTIGATION SUCH AS WITH SALES TAX AUTHORITIES, BANKERS WHO HAVE RECEIVED THE CHEQUE ON BEHALF OF SUPPLIERS ETC. ADDITIONS/ DISALLOWANCE MADE ON BASIS OF DISPROPORTIONATE INCREASE BECOME A MERE DCIT V NORMA INDIA LIMITED ITA NO 86/DEL/2010 A Y 2005 - 06 7 | P A G E STATISTICAL EXERCI SE , WHICH CANNOT BE SUSTAINED. MERELY BECAUSE NOTICES U/S 133(6) COULD NOT BE SERVED ON THE SUPPLIERS, A SSESSEE - BUYER CANNOT BE PUT TO AN INCONVENIENCE OF DISALLOWANCE WHEN HE HAS PROVIDED THE CORRECT ADDRESS OF THOSE PARTIES . IN VIEW OF THIS WE CONFIRM THE ORDER OF CIT (A) IN DELETING THE DISALLOWANCE OF RS 25,70,462/ - ON ACCOUNT OF BOGUS PURCHASES. 8 . IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 . 12.2015. - SD/ - - SD/ - (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 /12/2015 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI