M/s Encore Technologies Pvt. Ltd.,, New Delhi v. ACIT, New Delhi

ITA 255/DEL/2016 | 2008-2009
Pronouncement Date: 29-11-2019 | Result: Allowed

Appeal Details

RSA Number 25520114 RSA 2016
Assessee PAN AABCE0859M
Bench Delhi
Appeal Number ITA 255/DEL/2016
Duration Of Justice 3 year(s) 10 month(s) 9 day(s)
Appellant M/s Encore Technologies Pvt. Ltd.,, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 29-11-2019
Assessment Year 2008-2009
Appeal Filed On 19-01-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.K. PANDA ACCOUNTANT MEMBER AND SHRI KULDIP SINGH JUDICIAL MEMBER ITA NO.253/DEL./2016 (ASSESSMENT YEAR : 2006-07) ITA NO.254/DEL./2016 (ASSESSMENT YEAR : 2007-08) ITA NO.255/DEL./2016 (ASSESSMENT YEAR : 2008-09) ITA NO.256/DEL./2016 (ASSESSMENT YEAR : 2009-10) ITA NO.257/DEL./2016 (ASSESSMENT YEAR : 2010-11) M/S. ENCORE TECHNOLOGIES PVT. LTD. VS. ACIT CENTR AL CIRCLE 11 C 160 OKHLA INDUSTRIAL AREA PHASE I NEW DELH I. NEW DELHI - 110 020. (PAN : AABCE0859M) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI S.S. RANA CIT DR DATE OF HEARING : 25.11.2019 DATE OF ORDER : 29.11.2019 O R D E R PER KULDIP SINGH JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN ALL THE AFORESAID APPEALS THE SAME ARE BEING DI SPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUS SION. ITA NO.4511/DEL./2016 2 2. APPELLANT M/S. ENCORE TECHNOLOGIES PVT. LTD. (H EREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEALS SOUGHT TO SET ASIDE THE IMPUGNED ORDERS ALL DATED 31.10.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXXI NEW DELH I QUA THE ASSESSMENT YEARS 2006 07 2007-08 2008-09 2009-10 & 2010-11 ON THE GROUNDS INTER ALIA THAT:- AY 2006-07 THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE L EARNED AO AND THE CIT (A) ERRED IN : (1) DISALLOWANCE OF RS.53 89 420/- IN AY 2006-07 ON ACC OUNT OF BOGUS PURCHASES. AY 2007-08 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ITO AND THE CIT(A) ERRED IN : 1) DISALLOWING PURCHASES AMOUNTING TO RS.50 39 398 ON ACCOUNT OF BOGUS PURCHASES. 2) UPHOLDING THE ASSESSMENT & ADDITION OF RS.2 50 0 00/-U/S 14A INSPITE OF THE FACT THAT THE ASSESSMENT FOR THE YEAR HAD ABATED IN TERMS OF SECTION 153A & NO INCRIMINATING MATERIAL WAS UNEARTHED IN THE COURSE OF SEARCH & SEIZURE OPERATI ONS. 3) DISALLOWING RS.2 50 000 U/S 14A OF THE INCOME TA X ACT. 4) DISALLOWING THE EXPENDITURE U/S 14A WITHOUT THE ASSESSING OFFICER GIVING ANY FINDING IN THE ASSESSM ENT ORDER REGARDING THE AMOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX-FREE INCOME. 5) NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL H IGH COURT IN THIS. AYS 2008-09 2009-10 & 2010-11 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ITO AND THE CIT(A) ERRED IN : ITA NO.4511/DEL./2016 3 1) UPHOLDING THE ASSESSMENT & ADDITION OF RS.4 22 0 00/- EACH IN AYS 2008-09 2009-10 & 2010-11 RESPECTIVELY U/S 14A INSPITE OF THE FACT THAT THE ASSESSMENT FOR THE YEA R HAD ABATED IN TERMS OF SECTION 153A & NO INCRIMINATING MATERIAL W AS UNEARTHED IN THE COURSE OF SEARCH & SEIZURE OPERATI ONS. 3) DISALLOWING RS.4 22 000/- EACH IN AYS 2008-09 2 009-10 & 2010-11 RESPECTIVELY U/S 14A OF THE INCOME TAX AC T. 4) DISALLOWING THE EXPENDITURE U/S 14A WITHOUT THE ASSESSING OFFICER GIVING ANY FINDING IN THE ASSESSM ENT ORDER REGARDING THE AMOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX-FREE INCOME. 5) NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL H IGH COURT IN THIS.. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND IN ALL THE AFORESAID APPEALS ARE : AS SESSING OFFICER (AO) NOTICED THAT THE ASSESSEE COMPANY HAS MADE PUR CHASES OF RS.52 89 420/- AND RS.50 39 398/- IN AYS 2006-07 & 2007-08 RESPECTIVELY FROM M/S. JAY ENN INFOTECH LTD. 105-A /2 SARASWATI HOUSE 27 NEHRU PLACE NEW DELHI. AO ALSO NOTICED THAT THE ASSESSEE COMPANY BEING GROUP COMPANY OF TULIP GROUP ON WHOSE PREMISES SEARCH WAS CONDUCTED AND SHRI H.S. BEDI C MD OF THE COMPANY ADMITTED THAT THE GROUP COMPANIES HAVE BEEN INVOLVED IN MAKING BOGUS PURCHASES FROM SOME OF THE ENTITIES. AO DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE PROCEEDED TO CONCLUDE THAT SINCE M/S. JAY ENN INFOTECH PVT. LTD. IS NOT CARRYI NG OUT SUBSTANTIAL BUSINESS ACTIVITIES AT THE ADDRESS GIVEN AND NO DET AILS IN RESPECT OF DISPATCH OF GOODS ARE AVAILABLE DISALLOWED AN AMOU NT OF ITA NO.4511/DEL./2016 4 RS.52 89 420/- AND RS.50 39 398/- IN AYS 2006-07 & 2007-08 RESPECTIVELY ON ACCOUNT OF BOGUS PURCHASES. 3. AO MADE ADDITION OF RS.4 12 280/- RS.4 83 780/- RS.5 52 417/- AND RS.70 72 280/- IN AYS 2007-08 20 08-09 2009- 10 & 2010-11 RESPECTIVELY BY INVOKING THE PROVISION S CONTAINED U/S 14A OF THE INCOME-TAX ACT 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES 1962 (FOR SHO RT THE RULES) ON THE GROUND THAT EXPENDITURE INCURRED ON ACCOUNT OF DIVIDEND INCOME IS LIABLE TO BE DISALLOWED. 4. ASSESSEE CARRIED THE MATTER BY WAY OF APPEALS BE FORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITIONS OF RS.52 89 420/- AND RS.50 39 398/- IN AYS 2006-07 & 2007-08 RESPECTIVEL Y ON ACCOUNT OF BOGUS PURCHASES RESTRICTED THE DISALLOWANCES MA DE BY THE AO U/S 14A TO RS.2 50 000/- RS.4 22 000 RS.4 22 000/ - & RS.4 22 000/- IN AYS 2007-08 2008-09 2009-10 & 20 10-11 RESPECTIVELY BY PARTLY ALLOWING THE APPEALS. FEELIN G AGGRIEVED THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 5. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE AND CONSEQUENTLY WE PROCEED ED TO DECIDE THE PRESENT APPEAL WITH THE ASSISTANCE OF THE LD. D R AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. ITA NO.4511/DEL./2016 5 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE TO THE APPEAL GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 OF AYS 2006-07 & 2007-08 7. WHEN WE EXAMINE THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) PARTICULARLY PARA 4.2.5 AND 4.2.6 OF AY 2006-07 THE ASSESSEE HAD COME UP WITH A SPECIFIC STAND THAT IT HAS NOT O NLY DEBITED PURCHASES TO PROFIT & LOSS ACCOUNT AND IT HAS ALSO CREDITED PROFIT & LOSS ACCOUNT WITH SALE PROCEEDS AND IF THERE WERE N O PURCHASES THERE WOULD NOT ALSO BE SALES. LD. CIT (A) WITHOUT GIVING ANY FINDINGS ON THESE PLEADINGS ABRUPTLY PROCEEDED TO C ONFIRM THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ON THE BASIS OF CONJECTURES AND SURMISES THAT FROM THE INVOICES SUBMITTED DURING THE APPELLATE PROCEEDINGS WHICH ARE COMPUTER PRINTOUTS WHERE VERY HUGE QUALITY OF COMPUTER PERIPHERALS LIKE ROUTERS MODEMS SWITCHES CONVERTERS HAVE BEEN SHOWN TO HAVE BEEN TRANSPORTED/DISPATCHED BY HAND WHICH IS NOT BELIEVA BLE ON THE VERY FACE OF IT. SUCH LARGE QUANTITY OF GOODS HAD TO BE TRANSPORTED BY SOME MODE OF VEHICULAR TRANSPORT WHICH IS MISSING I N THE CASES. FURTHER TULIP TELECOM LTD. ITSELF WAS AN IMPORTANT PARTNER OF ITA NO.4511/DEL./2016 6 CISCO IN INDIA AND THERE WERE NO VALID REASONS FOR PURCHASE OF THESE PRODUCTS FROM AN IN DESCRIPT COMPANY. 8. WE ARE OF THE CONSIDERED VIEW THAT WHEN ENTIRE P URCHASES HAVE BEEN DULY DEBITED IN THE PROFIT & LOSS ACCOUNT MATC HED WITH SALE PROCEEDS AND ACCOUNT BOOKS HAVE NOT BEEN REJECTED T HEN IT IS DIFFICULT TO AGREE WITH THE REASONING GIVEN BY THE LD. CIT (A ) THAT THE PURCHASES CANNOT BE BELIEVED. MOREOVER WHEN A COM PANY HAS STATED TO HAVE PURCHASED THE COMPUTER PERIPHERALS ETC. WHI CH ARE STATED TO HAVE BEEN TRANSPORTED/DISPATCHED BY HAND THE SAME CANNOT BE DECLARED BOGUS ON THE GROUND THAT THE SAME WERE REQ UIRED TO BE TRANSPORTED BY WAY OF MODE OF VEHICULAR TRANSPORT. BECAUSE IT IS A MATTER OF COMMON KNOWLEDGE THAT MANY OF THE COMPANI ES MAKE AVAILABLE PURCHASES MADE FROM THEM AT THE DOORSTEP OF THE BUYERS. 9. IN THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT LD. CIT (A) HAS NOT DECIDED THE ISSUE ON THE BASIS OF EVIDENCE LED BY THE ASSESSEE RATHER DECIDED THE ISSUE ON THE BAS IS OF PRESUMPTIONS WHICH IS NOT SUSTAINABLE IN THE EYES O F LAW. SO IN THE INTEREST OF JUSTICE WE DEEM IT NECESSARY TO REMIT THE CASE BACK TO THE LD. CIT (A) TO DECIDE AFRESH AFTER EXAMINING TH E ENTIRE EVIDENCE LED BY ASSESSEE BY PROVIDING FURTHER OPPORTUNITY OF BEING HEARD. CONSEQUENTLY GROUND NO.1 OF AYS2006-07 & 2007-08 I S DETERMINED IN FAVOUR OF THE ASSESSEE FOR STATISTICA L PURPOSES. ITA NO.4511/DEL./2016 7 GROUNDS NO.2 3 4 & 5 OF AY 2007-08 GROUNDS NO.1 2 3 4 & 5 OF AYS 2008-09 2009-10 & 2010-11 10. UNDISPUTEDLY THE ASSESSEE HAS RECEIVED DIVIDEN D INCOME OF RS.22 00 930/- RS.19 73 245/- RS.15 94 579/- AND RS.40 76 753/- IN AYS 2007-08 2008-09 2009-10 & 2010-11 RESPECTI VELY AND CLAIMED THE SAME AS EXEMPT INCOME FROM TAX. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT MADE SUO MOTU DIS ALLOWANCE ON ACCOUNT OF EXPENSES INCURRED TO EARN THE DIVIDEND I NCOME. 11. WHEN WE EXAMINE IMPUGNED ORDERS PASSED BY THE L D. CIT(A) RESTRICTING THE ADDITION MADE BY THE AO U/S 14A TO RS.4 12 280/- RS.4 83 780/- RS.5 52 417/- AND RS. 70 72 280/- IN AYS 2007-08 2008-09 2009-10 & 2010-11 RESPECTIVEL Y IT IS APPARENT ON RECORD THAT IN ALL THE CASES DISALLOWA NCE HAS BEEN MADE BY THE AO ON ACCOUNT OF ADMINISTRATIVE CHARGES I.E. EQUAL TO 0.50% OF AVERAGE VALUE OF INVESTMENT. BUT WE FAIL TO UNDERSTAND AS TO HOW AND UNDER WHAT CIRCUMSTANCES LD. CIT (A) HAS RESTRICTED THE ADDITION WHICH IS OTHERWISE REQUIRED TO BE MADE ON THE BASIS OF SET FORMULA GIVEN UNDER RULE 8D IN THE LIGHT OF THE EVIDENCE LED BY THE ASSESSEE. 12. MOREOVER WHEN WE PERUSE PARA 4.3.1 OF THE IMPU GNED ORDER PASSED BY THE LD. CIT (A) IN AY 2007-08 HE HAS SPE CIFICALLY COME ITA NO.4511/DEL./2016 8 UP WITH THE FINDINGS INTER ALIA THAT THE AO HAS NOT GIVEN ANY FINDING THAT HE HAS NOT SATISFIED WITH THE APPELLAN T/ASSESSEES CLAIM THAT NO EXPENDITURE HAS BEEN INCURRED ON THE INVEST MENT ACTIVITY; THAT INVESTMENT IS AN OPENING BALANCE AND THAT THER E IS NO INTEREST PAYMENT MADE ON THE LOANS AND IN FACT THE COMPANY H AS NOT RAISED ANY INVESTMENT FOR THE PURPOSE OF INVESTMENT AND TH AT RULE 8D IS EFFECTIVE FROM 2008-09 AND NOT FROM THE CURRENT ASS ESSMENT YEAR. DESPITE RECORDING ALL THESE FACTS LD. CIT (A) AGAI N PROCEEDED TO APPLY RULE 8D FOR AY 2007-08. SO WE ARE OF THE CO NSIDERED VIEW THAT ORDERS PASSED BY THE LD. CIT (A) IS A CRYPTIC ONE AND NEED TO BE PASSED ON THE BASIS OF EVIDENCE LED AND ARGUMENTS A DDRESSED BY THE ASSESSEE. 13. WHEN WE PERUSE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) FOR AYS 2008-09 2009-10 & 2010-11 AGAIN LD. CIT (A) ADMITTED INTER ALIA THAT THE AO HAS NOT RECORDED HI S DISSATISFACTION AS TO THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED TO EARN THE DIVIDEND INCOME; THAT NO FRESH INVESTMENT HAS BEEN MADE BY THE APPELLANT DURING THE YEAR UNDER AS SESSMENT; THAT INTEREST TAKEN FOR COMPUTING THE DISALLOWANCE U/S 8 D I.E. RS.66 500/- HAS NOT BEEN PAID TOWARDS ANY LOAN RATH ER THE SAID INTEREST PAYMENT RELATES TO INTEREST PAID ON LATE D EPOSIT OF TDS ON SALARY BUT DESPITE ALL THESE FINDINGS LD. CIT (A) PROCEEDED TO ITA NO.4511/DEL./2016 9 RESTRICT THE ADDITIONS TO RS.4 12 280/- RS.4 83 78 0/- RS.5 52 417/- AND RS.70 72 280/- IN AYS 2007-08 2008-09 2009-10 & 2010-11 RESPECTIVELY BY APPLYING THE RULE 8D MECHANICALLY. 14. THERE ARE INHERENT CONTRADICTIONS IN THE IMPUGN ED ORDER PASSED BY THE LD. CIT(A) SO IN THESE CIRCUMSTANCE S WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE IS REQUIRED TO BE RE MITTED BACK TO THE LD. CIT (A) TO DECIDE AFRESH AFTER EXAMINING THE EN TIRE DETAILS AND PLEADINGS MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED NOR ANY FRESH INVESTMENT HAS BEEN MADE AN D THAT NO INTEREST PAYMENT HAS BEEN MADE ON THE AMOUNT OF INV ESTMENT DURING THE YEARS UNDER ASSESSMENT AFTER PROVIDING O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. CONSEQUENTLY GROUNDS NO.2 3 4 & 5 OF AY 2007-08 AND GROUNDS NO.1 2 3 4 & 5 OF AYS 2008-09 2009-10 & 2010-11 ARE DETERMINED IN FAVOUR OF THE ASSESSEE FOR STATISTICAL PURPOSES. 13. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE ALL T HE AFORESAID APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF NOVEMBER 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF NOVEMBER 2019 TS ITA NO.4511/DEL./2016 10 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXI NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.