M/s Hillcrest Foods, Solan V. ITO, Parwanoo

ITA 957/CHANDI/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8978 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS INOSHI SHARMA
• Assessee Lawyers: RAJIV SAHAI ITP
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.957/CHD/2014 (ASSESSMENT YEAR : 2010-11) M/S HILLCREST FOODS, VS. THE INCOME TAX OFFICER, PLOT NO.12A, SECTOR 3, PARWANOO. PARWANOO, DISTT. SOLAN(H.P.). PAN: AAEFH2773F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV SAHAI, ITP RESPONDENT BY : MRS.INOSHI SHARMA, DR DATE OF HEARING : 08.11.2016 DATE OF PRONOUNCEMENT : 17.11.2016 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA DATED 04.09.2014 RELATING TO ASSESSMENT YEAR 2010-11.AT THE OUTSET IT MAY BE STATED THAT THE PRESENT APPEAL WAS EARLIER DISMISSE D FOR NON-PERSECUTION VIDE ORDER DT.05-05-2015 ,BUT LATER RECALLED VIDE ORDER IN MA NO.77/CHD/2015 DATE D 18-12 -2015, IN PURSUANCE TO A MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE. 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING REVISED GROUNDS OF APPEAL BEFORE US : 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE TOTAL ADDITION OF RS.71,77,603/- MADE BY THE AO VIDE ITS ORDER U/S 143(3) DATED 11/02/2013. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS.59,56,645/- BY TREATING THE CASH PURCHASES AS BO GUS AND NOT GRANTING ANY DEDUCTION U/S 80 1C ON THE SAM E. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A O'S ADDITION OF RS.12,20,958/- BY TREATING 25% OF THE T OTAL PURCHASES FROM 3 PARTIES NAMELY I) M/S GURCHARAN BANGA FRUIT CO., OF RS.58,13,166/- II) SHRI GURMEET SINGH OF RS. 40,84,229/- AND III) M/S B.K FRUIT COM PANY OF RS.1,86,50,187/-, AND APPLYING AN NP RATE OF 14. 16% THEREON. 4. ALTERNATIVELY, AND WITHOUT PREJUDICE, TO THE ABO VE, THE CIT(A) OUGHT TO HAVE CONSIDERED THAT THE AFOREMENTI ONED ADDITION/DISALLOWANCES WERE IN RESPECT OF ELIGIBLE BUSINESS FOR WHICH DEDUCTION U/S 80 1C IS AVAILABLE. THE LEARNED CIT ERRED IN NOT GRANTING THE DEDUCTION U/S 80IC OF THE ACT ON THE ADDITION/ DISALLOWANCES MADE. 5. THE APPELLANT CRAVES THE INDULGENCE TO MODIFY, A LTER, ADD, DELETE ANY ONE OR MORE GOAS. 3. BRIEF FACTS RELATING TO THE CASE IS THAT RETURN DECLARING INCOME OF RS.45,769/--WAS FILED BY THE ASSESSEE ON 13.10.2010, AFTER CLAIMING HUNDRED PERCENT DEDUCTION OF PROFITS UNDER SECTION 80 IC AMOUNTING TO RS.1,85,29,002/. ASSESSMENT UNDER SECTION 143(3) WAS FRAMED, TREATING THE CASH PURCHASES MADE BY THE ASSESSEE TO THE TUNE OF 3 RS.3,48,18,553/- AS BOGUS, ON ACCOUNT OF THE INABIL ITY OF THE ASSESSEE TO FURNISH THE NAMES AND ADDRESSES OF PARTIES AS WELL AS BILLS OF THE PARTIES FROM WHOM T HESE CASH PURCHASES WERE MADE. FURTHER PURCHASES MADE FROM THE FOLLOWING PARTIES WAS ALSO TREATED AS BOGU S TO THE EXTENT OF 25%, SINCE LETTERS OF BALANCE CONFIRMATIONS ,SENT TO THEM BY THE AO ,WERE RECEIVE D BACK UNSERVED AND NO CONFIRMATION WAS FILED BY THE ASSESSEE ALSO. M/S GURCHARAN BANGA FRUIT CO. RS.58,13,166/- SH.GURMEET SINGH RS.40,84 ,229/- M/S B.K.FRUIT CO. RS.1,86 ,50,187/- TOTAL RS.2,85 ,47,582/-. 25% OF THE ABOVE PURCHASES TREATED AS BOGUS RS. 71, 36, 896/ 4. THE ASSESSING OFFICER, THEREAFTER, CALCULATED THE SALES ATTRIBUTABLE TO THE AFORESTATED BOGUS PURCHA SES BY APPLYING THE RATIO OF RAW MATERIAL CONSUMED TO THE SALES MADE BY THE ASSESSEE. HE THEN WORKED OUT THE PROFI TS ON THE SALES ATTRIBUTABLE TO THE BOGUS PURCHASES MADE BY THE ASSESSEE BY APPLYING THE NET PROFIT RATE SHOWN BY T HE ASSESSEE OF 14.61% TO THE SALES, AND CALCULATED THE SAME AT RS.59,56,645 ON THE CASH PURCHASES AND RS.12,20,958/- ON ACCOUNT OF THE THREE PARTIES. TH E ASSESSING OFFICER TREATED THESE PROFITS AS INCOME O F THE ASSESSEE FROM UNDISCLOSED SOURCES ON WHICH NO DEDUC TION UNDER SECTION 80 IC WAS AVAILABLE AND ADDED THE SAM E THE TAXABLE INCOME OF THE ASSESSEE. 4 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(A), WHERE THE ASSESSEE FILED DETAILED SUBMIS SIONS, REPRODUCED AT PARAGRAPH 4 OF THE CIT(A) ORDER, CHAL LENGING THE ADDITIONS MADE. THE MAIN THRUST OF THE ARGUMENT S MADE BEFORE THE CIT(A), WAS THAT THE BOOKS OF ACCOU NTS HAVING BEEN EXAMINED BY THE AO AND NO DISCREPANCY HAVING BEEN POINTED OUT IN THE SAME, THE AO COULD N OT HAVE TREATED THE PURCHASES MADE IN CASH AS BOGUS MO RE SPECIFICALLY IN VIEW OF THE FACT THAT THE ASSESSEE IS AN AGRO-BASED INDUSTRIAL UNIT IN HIMACHAL PRADESH INDU LGING IN THE ACTIVITY OF PRESERVING AND PROCESSING FRUITS AND VEGETABLES AND DURING THE COURSE OF CARRYING ON ITS ACTIVITIES SOME PURCHASES ARE MADE FROM SMALL FARME RS TO WHOM PAYMENTS ARE MADE IN CASH . AS FOR THE PURCHAS ES MADE FROM THE AFORESTATED THREE PARTIES, THE ASSESS EE SUBMITTED THAT THE BOOKS OF ACCOUNTS HAD BEEN THORO UGHLY EXAMINED BY THE AO, ALL BILLS AND VOUCHERS WERE TES T CHECKED BY HIM, THE RELATED VOUCHERS AND BILLS OF T HESE PARTIES WERE ON RECORD, PAYMENTS WERE MADE TO THESE PARTIES THROUGH CHEQUES/BANK TRANSFERS AND THE BANK ACCOUNT OF THE ASSESSEE HAD ALSO BEEN CHECKED BY TH E AO. THE ASSESSEE THEREFORE HELD THAT THERE WAS NO REASO N TO TREAT THE IMPUGNED PURCHASES AS BOGUS MORE PARTICUL ARLY IN VIEW OF THE FACT THAT THE REST OF THE PARTIES HA D RESPONDED AND FILED CONFIRMATIONS IN RESPONSE TO LE TTERS ISSUED UNDER SECTION 133 (6).THE ASSESSEE FURTHER SUBMITTED THAT THE ENTIRE ADDITION HAD BEEN MADE ON LY ON THE BASIS OF SURMISES AND CONJECTURES. HE FURTHER 5 SUBMITTED THAT THE AO HAD NOT COME ACROSS ANY DISCREPANCY RELATED TO THE SALES AND THEREFORE COU LD NOT HAVE TREATED A PART OF SALE AS BOGUS MERELY ON ACCO UNT OF TREATMENT OF PURCHASES AS BOGUS. THE CIT(A), AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, UPHELD THE DISALLOWANCE MADE, FOR THE REASON THAT THE ASSESSE E HAD FAILED TO FILE ANY EVIDENCE IN SUPPORT OF THE PURCH ASES MADE. THE CIT(A)HELD AT PARAGRAPH 6 OF HER ORDER AS FOLLOWS: 6. I HAVE GONE THROUGH THE FACTS OF THE CASE, APPE LLANT'S SUBMISSIONS, CASE LAWS RELIED UPON. DURING THE COU RSE OF ASSESSMENT PROCEEDING ASSESSEE HAD FAILED TO FURNISH DETAILS OF PARTIES FROM WHOM CASH PURCHASES WERE MADE AND N O BILLS WERE PRODUCED IN SUPPORT OF ITS CLAIM THAT THE CASH PURCHASES WERE GENUINE. AT APPELLATE STAGE ASSESSEE 'S MAIN CONTENTION IS ASSESSEE HAS MADE PAYMENTS BY RTGS TO SOME PARTIES. HOWEVER, MERE PAYMENTS DOES NOT SUBSTANTIAT ES THE NATURE OF TRANSACTION. THUS IN ABSENCE OF ANY EVIDEN CE IN SUPPORT OF THE FACT THAT PURCHASES WERE MADE FOR THE INDUSTRIAL UNDERTAKING ACTION OF AO IS UPHELD A ND THE APPEAL OF ASSESSEE IS DISMISSED. 6. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US, CHALLENGING THE TREATMENT OF PURCHASES MADE IN CASH AS ALSO PURCHASES MADE FROM THREE PARTIES, AS BOGUS AND MAKING ADDITION ON ACC OUNT OF ESTIMATED PROFIT EARNED ON THE SAME. THE ASSESSE E ALSO CHALLENGED THE DISALLOWANCE OF DEDUCTION UNDER SECT ION 80 IC TO THE ADDITIONS MADE. 6 7. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE ARGUMENTS MADE BEFORE THE CIT(A), WHILE THE LD .DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE DOCUMENTS PLACED BEFORE. WE FIND THAT BEFORE THE C IT(A), THE ASSESSEE HAD MADE DETAILED SUBMISSIONS, SUPPORT ED BY EVIDENCES, IN SUPPORT OF ITS CONTENTIONS THAT THE I MPUGNED PURCHASES WERE NOT BOGUS AND THAT IN ANY CASE DEDUC TION UNDER SECTION 80 IC SHOULD NOT HAVE BEEN DENIED TO THE ASSESSEE ON THE ENHANCED PROFITS. THE ENTIRE SUBMI SSIONS OF THE ASSESSEE ARE REPRODUCED AT PARA 4 OF THE ORD ER. WE FIND THAT FOR THE DISALLOWANCE MADE ON ACCOUNT OF CASH PURCHASES MADE BY THE ASSESSEE THE ASSESSEE HAD SUBMITTED THAT IT WAS AN AGRO-BASED INDUSTRY INVOLV ED IN THE BUSINESS OF PRESERVING AND PROCESSING FRUITS AN D VEGETABLES AND THAT IT QUALIFIED FOR DEDUCTION UNDE R SECTION 80 IC OF THE INCOME TAX ACT, 1961, WHICH HA D BEEN ALLOWED TO IT FROM ASSESSMENT YEAR 07-08 ONWARDS. T HE ASSESSEE FURTHER SUBMITTED THAT IT MADE PURCHASES B OTH FROM AGENTS/PRODUCERS- FARMERS AND THAT SMALL PURCH ASES WERE MADE FROM FARMERS WHO WERE PAID IN CASH WHILE PURCHASES MADE FROM ESTABLISHED TRADERS WERE EITHER MADE BY CHEQUES OR BANK TRANSFERS. THE ASSESSEE FURTHER SUBMITTED THAT BILLS WERE NOT USUALLY RAISED BY THE SMALL AGRICULTURISTS SINCE THEY DID NOT HAVE ANY BILL BOO KS AND SINCE THEIR PRODUCTS WERE NOT TAXABLE UNDER VAT/CST . 7 HAVING DESCRIBED THE NATURE OF THE BUSINESS AND THE MANNER OF CARRYING OUT THE BUSINESS, THE ASSESSEE F URTHER STATED THAT THE AO HAD CONDUCTED DETAILED HEARINGS IN THE PRESENT CASE AND LISTED THE VARIOUS DATE OF HEARING AND THE SUBJECT MATTER OF THE HEARING AND POINTED OUT T HAT THE AO HAD EXTENSIVELY EXAMINED THE BOOKS OF ACCOUNTS O F THE ASSESSEE PRODUCED AT VARIOUS DATES AND AFTER EXAMIN ING THE SAME HAD NOT REJECTED THE SAME. THE ASSESSEE SUBMITTED THEREFORE THAT THERE WAS NO REASON TO DO UBT THE PURCHASES MADE IN CASH. 9. AS FOR THE PARTIES FROM WHOM PURCHASES MADE WERE HELD TO BE BOGUS SINCE CONFIRMATIONS OF THEIR BALANCES WAS NOT RECEIVED THE AO, THE ASSESSEE STAT ED THAT ALL BILLS AND VOUCHERS OF PURCHASES HAD BEEN PRODUCED BEFORE THE ASSESSING OFFICER TIME AND AGAI N AND HAD BEEN EXAMINED BY THE AO ALSO. THE LD. COUNSEL F OR THE ASSESSEE FURTHER STATED THAT ALL PAYMENTS WERE MADE TO THEM BY CHEQUES OR BY BANK TRANSFERS. THE LD. COUNS EL DREW OUR ATTENTION TO THE COPY OF PURCHASE ACCOUNT PLACED AT PAPER BOOK PAGE NUMBER 96-191 AND COPY OF ACCOUN T OF GURCHARAN BANGA FRUIT CO. PLACED AT PB-39-46, GURPR EET SINGH, PLACED AT PB-47 AND B.K. FRUIT CO. PALCED AT PB- 27-34 CONFIRMING THE SAME. AS FOR THE CLAIM OF THE CIT(A) THAT NO AMOUNTS WERE MENTIONED IN CERTAIN BILLS LD. COUNSEL FOR THE ASSESSEE STATED THAT THE AO HAD CON FUSED THE COPY OF INWARD ENTRY CHALLAN OF RECEIPTS OF GOO DS WITH BILLS/VOUCHERS OF PURCHASES AND HAD THEREFORE PROCE EDED 8 ON INCORRECT PREMISES TO DRAW A WRONG CONCLUSION. HE DREW OUR ATTENTION TO THE CHALLANS PLACED AT PB-89- 95. 10. LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT THE AO HAD NOT DOUBTED THE SALES BY MADE BY THE ASSESSE E AND THEREFORE THERE WAS NO REASON AT ALL TO DISALLO W THE PROFIT MADE ON ACCOUNT OF THE PURCHASE AND SALE TRANSACTION ATTRIBUTED TO THE PURCHASES HELD BOGUS 11. ALTERNATIVELY LD. COUNSEL FOR THE ASSESSEE STA TED THAT THE ADDITION MADE ON ACCOUNT OF INFLATED PROFI TS HAD ONLY INCREASED THE PROFIT OF THE BUSINESS OF THE AS SESSEE AND THERE WAS NO REASON OR EVIDENCE WITH THE AO TO HOLD THAT THE SAME WAS ON ACCOUNT OF INCOME FROM OTHER SOURCES. LD.COUNSEL FOR THE ASSESSEE STATED THAT T HE CBDT HAD ISSUED A CIRCULAR NO.37/2016 DATED 2 ND NOV, 2016 WHEREIN IT HAD DIRECTED THAT ADDITIONS MADE O N ACCOUNT OF DISALLOWANCES MADE, WHICH RESULTED IN ENHANCEMENT OF PROFITS OF ASSESSEES ELIGIBLE TO DED UCTION UNDER CHAPTER VIA, SHOULD NOT BE DENIED DEDUCTION O F THE ENHANCED PROFITS. 12. IT IS EVIDENT FROM THE ABOVE THAT ON ALL ASPEC TS OF THE ADDITION MADE THE ASSESSEE HAD FILED DETAILE D SUBMISSIONS AND EVIDENCES. A PERUSAL OF THE ORDER O F THE CIT(A) ,ON THE OTHER HAND REVEALS THAT SHE HAS NOT DEALT WITH THE VOLUMINOUS SUBMISSIONS MADE BY THE ASSESSE E BUT ON THE CONTRARY HAS PASSED A CRYPTIC AND NON- SPEAKING ORDER. THE LD. CIT(A) HAS MERELY REITERATE D THE 9 FINDINGS OF THE AO AND HAS MISERABLY FAILED TO DEAL WITH THE ARGUMENTS AND EVIDENCES FILED BY THE ASSESSEE I N SUPPORT OF ITS CONTENTIONS. IN THE INTEREST OF JUS TICE THEREFORE, WE CONSIDER IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF THE CIT(A) TO CONSIDER THE ISSUE AFRESH AND PASS A SPEAKING ORDER IN THE LIGHT OF SUBMISSIONS AND EV IDENCES FILED BY THE ASSESSEE AND ALSO AFTER TAKING INTO CONSIDERATION THE CBDT CIRCULAR NO.37/2016 DATED 2 ND NOV, 2016 REFERRED TO BY THE ASSESSEE IN THIS REGAR D. WE MAY ADD THAT THE ASSESSEE BE GIVEN DUE OPPORTUNITY OF HEARING. 13. IN VIEW OF THE ABOVE, ALL THE GROUNDS RAISED B Y THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH NOVEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH 10