ACIT, New Delhi v. Sh. Nakul Kapur, New Delhi

ITA 3098/DEL/2010 | 2006-2007
Pronouncement Date: 03-09-2010 | Result: Dismissed

Appeal Details

RSA Number 309820114 RSA 2010
Bench Delhi
Appeal Number ITA 3098/DEL/2010
Duration Of Justice 2 month(s) 12 day(s)
Appellant ACIT, New Delhi
Respondent Sh. Nakul Kapur, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 03-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 03-09-2010
Date Of Final Hearing 24-08-2010
Next Hearing Date 24-08-2010
Assessment Year 2006-2007
Appeal Filed On 21-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NOS. 3096 3097 & 3098(DEL)/2010 ASSESSMENT YEARS: 2003-04 2005-06 & 2006-07 ASSISTANT COMMISSIONER OF INCOME SHRI NAKUL KAPUR TAX CENT. CIRCLE 5 NEW DELHI. VS. B-34 MALCHA MARG CHANKYAPURI NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S. NAWTH CIT D R RESPONDENT BY: SHRI AD ESH K. JAIN & SHRI SUNIL KUMAR MAINI FCA ORDER PER BENCH THESE THREE APPEALS OF THE REVENUE INVOLVE COMMO N GROUNDS. THEREFORE THESE WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. DR AND THE LD. COUNSEL FOR THE ASSESSEE. IN VIEW TH EREOF A CONSOLIDATED ORDER IS PASSED. 1.1 THE APPEALS WERE ARGUED WITH REFERENCE TO TH E FACTS OF THE CASE FOR ASSESSMENT YEAR 2003-04 IN ITA NO. 3096(DEL)/2010 . THEREFORE THE FACTS OF THIS YEAR ARE DISCUSSED IN DETAIL. THE REVEN UE HAS TAKEN UP TWO GROUNDS IN THE APPEAL THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE ITA NOS. 3096 3097&3098(DEL)/2010 2 AND IN LAW THE LD. CIT(APPEALS) ERRED IN (I) FAILING TO APPRECIATE THE SCOPE OF SECTION 153A OF THE INCOME-TAX ACT 196 1 BY HOLDING THAT ADDITION UNDER THIS SECTION COULD ONLY BE MADE ON THE BASIS OF MATERIAL FOUND DURING THE SEARCH; AND (II) DELETING THE ADDITION OF RS. 8 50 812/- MADE ON ACCOUNT OF VIOLATION OF SECTION 40A(3) AN D FOR PAYMENT OF COMMISSION FOR GENERATION OF BOGUS BILLS BY IGNO RING DETAILS AND FINDINGS GIVEN BY THE AO IN THE ASSESSMENT ORDER. GROUND N OS. 3 AND 4 WERE STATED TO BE IN AID OF GROUND NO. 2. 2. THE FACTS OF THE CASE AS MENTIONED IN THE A SSESSMENT ORDER ARE THAT SEARCH AND SEIZURE OPERATIONS WERE CONDUCT ED IN THE CASE OF THE ASSESSEE ON 14.12.2007 AND THEREAFTER. CONSEQUEN TLY NOTICE U/S 153A WAS ISSUED ON 11.10.2007. THE ASSESSEE FILED TH E RETURN OF INCOME ON 14.7.2008 DECLARING TOTAL INCOME OF RS. 1 90 36 710 /-. ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUE OF A NOTICE U/S 143(2) AND A QUESTIONNAIRE ON 6.10.2008. IT WAS FOUND THAT THE ASSESSEE HAD SHOWN PURCHASES AMOUNTING TO RS. 38 67 325/- FROM FIVE PARTIES NAMELY CHHAVI TRADING CO PIYUSH TEXTILES MAMTA TEXTILES SAT N ARAIN & SONS (HUF) AND PRATEEK TRADING CO. IT ALSO APPEARS THAT E NQUIRIES WERE CONDUCTED BY THE INVESTIGATION WING IN THOSE CASES AND IT APPEARED THAT THESE ITA NOS. 3096 3097&3098(DEL)/2010 3 CONCERNS WERE NOT GENUINE AND THEY WERE FURNI SHING ACCOMMODATION BILLS TO VARIOUS PARTIES. IN THIS CONNECTION ST ATEMENTS OF SHRI RAKESH GUPTA S/O SHRI SAT NARAIN GUPTA SHRI GAURAV S/O SHRI SANJEEV GUPTA SHRI PARMESH KUMAR GARG S/O LATE SHRI NARESH CHAND AN D RAJEEV GUPTA S/O SHRI OM PRAKASH GUPTA WERE RECORDED. THESE STATEMENTS INDICATED THAT THEY WERE MERELY FURNISHING ACCOMMODATIO N BILLS. SOME OF THEM ALSO STATED THAT THEY WERE PURCHASING FABRIC FROM SHANTI MOHALLA AND SUPPLYING THE GOODS TO THE ASSESSEE AND OTHERS O N THEIR BILLS. THEREFORE THE AO ASKED THE ASSESSEE TO SUBSTANTIATE THE P URCHASES. THE ASSESSEE FILED AFFIDAVITS FROM THESE PARTIES EVIDENCING SALES TO THE ASSESSEE. ON THE BASIS OF THESE FACTS THE AO CAME TO THE CON CLUSION THAT PURCHASE CONSIDERATION TO THESE PARTIES WAS MADE OTHERWIS E THAN BY CROSSED OR ACCOUNT PAYEE CHEQUES. THEREFORE 20% OF THE AGG REGATE AMOUNT OF PURCHASES WAS DISALLOWED U/S 40A(3). AN ADDITI ON OF RS. 77 347/- WAS ALSO MADE AS THE ESTIMATED COMMISSION PAID TO THE SE PARTIES FOR PROVIDING BOGUS BILLS. THUS THE TOTAL INCOME OF THE ASSESS EE WAS COMPUTED AT RS. 1 99 51 490/-. 2.1 AGGRIEVED BY THIS ORDER THE ASSESSEE MOVED A N APPEAL BEFORE THE CIT(APPEALS)-I NEW DELHI WHO DISPOSED IF OFF IT APPEAL NO. 678/09-10. ITA NOS. 3096 3097&3098(DEL)/2010 4 HE DELETED THE ADDITION BY GIVING FINDINGS INTE R-ALIA THAT THE ASSESSEE HAD MADE PAYMENTS TO THE PURCHASERS BY WAY OF ACCOU NT PAYEE CHEQUES AS REFLECTED IN THE BANK ACCOUNT AND THAT PURCHASE B ILLS WERE FOUND IN THE COURSE OF SEARCH OF THE ASSESSEE. THE ANALYSIS OF THE BOOKS OF ACCOUNT SHOWED THAT THE PURCHASES WERE ACTUALLY MADE AS OTHERWISE IT WOULD NOT HAVE BEEN FEASIBLE TO SELL THE CORRESPONDING FINIS HED GOODS WHICH HAD BEEN ADMITTED BY THE AO. THUS THE ADDITION MA DE BY THE AO WAS DELETED ON BOTH THE GROUNDS. HIS FINDINGS IN RESP ECT OF APPLICABILITY OF THE PROVISION CONTAINED IN SECTION 40A(3) READ AS U NDER:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE AP PELLANT AND FINDINGS CONTAINED IN THE ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD ALONG WITH VARIOUS JUDICIAL PRO NOUNCEMENTS CITED BY THE LEARNED COUNSEL FOR THE APPELLANT. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD DIS ALLOWED AN AMOUNT OF RS. 7 73 465/- U/S 40A(3)/ I.T.ACT 1961 BEING 20% OF PURCHASES OF RS. 38 67 325/- MADE FROM M/S CH HAVI TRADING CO. M/S PIYUSH TEXTILES M/S MAMTA TEXTI LES M/S SAT NARAIN & SONS HUF AND M/S PARTEEK TRADING C O. ON THE ALLEGATION THAT THE ABOVE PAYMENTS MADE TO THE SAID PARTIES WERE IN CONTRAVENTION OF PROVISION OF SECTION 40A( 3). THE AO CONCLUDED THAT THE CHEQUES ISSUED TO SUCH PA RTIES ARE NOT ON ACCOUNT OF ANY PURCHASES MADE FROM THEM BUT O NLY TO PROVIDE ENTRIES TO COVER UP THE FACT THAT PURCHAS ES THAT HAVE BEEN UTILIZED BY HIM TO MANUFACTURE ITEMS FOR EXP ORTS HAVE BEEN ACTUALLY PURCHASED FROM SOME OTHER PARTY B Y PAYMENT IN CASH. THE LD. ASSESSING OFFICER FURTHER ALLEGE D THAT THE APPELLANT HAS GENERATED BOGUS PURCHASE BILLS B Y PAYMENTS TO THE PARTIES WHO ARE NOT IN THE BUSINESS OF FABRI CS TRADING BUT IN THE BUSINESS ONLY PROVIDING ENTRIES AS HAS BEEN ITA NOS. 3096 3097&3098(DEL)/2010 5 DEMONSTRATED BY THE STATEMENTS ANALYSIS OF BANK ACCOUNTS AND THE FAILURE OF THE PARTIES TO CONFIRM ANY TR ANSACTION IN ACTUAL SALE & PURCHASE OF FABRICS BY PRODUCTION OF THEIR BOOKS OF ACCOUNT. THE LD. ASSESSING OFFICER FURTHER A LLEGED THAT THE FABRICS HAVE BEEN PURCHASED FROM THE GREY MARKE T AND BOGUS BILLS GOT GENERATED TO SUPPRESS THE REAL MODUS O PERANDI AND TO SHOW COMPLIANCE TO THE PROVISIONS OF THE INC OME-TAX ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT VEHEMENTLY OPPOSED THE CONTENTION OF THE AO AND ASSERTED THAT THE APPELLANT HAS NOT MADE ANY PAYMENTS IN CASH TO THE SAID PARTIES AGAINST PURCHASE OF FABRICS AND THE PURCHASES MADE FROM THE SAID PARTIES ARE DULY ACCOUNTED F OR IN THE BOOKS OF ACCOUNT OF THE APPELLANT. IN SUPPORT OF HIS ASSERTION THE APPELLANT SUBMITTED LEDGER ACCOUNTS OF TH E SAID PARTIES ALONG WITH COPIES OF RELEVANT PORTION OF BANK STATEMENT SHOWING THAT THE PAYMENTS MADE TO THEM WERE MAD E THROUGH ACCOUNT PAYEE CHEQUES. THE APPELLANT ALSO SUBM ITTED THAT TAX AUDITOR HAS ALSO CERTIFIED THAT NO CASH PA YMENT EXCEEDING RS. 20 000/- HAS BEEN MADE TO ANYONE I N THE TAX AUDIT REPORT UNDER SECTION 44AB OF THE INCOME-T AX ACT 1961. SEARCH AND SEIZURE OPERATION U/S 132 OF THE INC OME-TAX ACT 1961 WAS CARRIED OUT AT HIS RESIDENTIAL AND BU SINESS PREMISES ON 14.2.2007 AND NO EVIDENCE OR INCRIMINATING D OCUMENT HAS BEEN FOUND WHICH SHOWS THAT THE APPELLANT HAS MAD E CASH PAYMENTS OR RECEIVED CASH FROM SUPPLIERS IN L IEU OF CHEQUES ISSUED TO THEM. ON THE CONTRARY DOCUMEN TS IN THE FORM OF BILLS AND CONFIRMATION OF ACCOUNTS OF T HE SAID PARTIES WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. THE APPELLANT FURTHER SU BMITTED THAT THE APPELLANT HAS PURCHASED SIMILAR FABRICS FR OM OTHER PARTIES ALSO AND THE PURCHASE PRICES OF THE FABR ICS ARE ALMOST SAME. KEEPING IN VIEW OF THE SAID FACTS ASSER TING TO APPELLANT THE PROVISIONS OF SECTION 40A(3) OF TH E INCOME-TAX ACT 1961 ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT AND HENCE NO DISALLOWANCE SHOULD BE MADE. IT IS WELL SETTLED LAW THAT PROVISIONS OF SECTIO N 40A(3) ARE APPLICABLE ONLY WHERE EXPENDITURE MUST HAVE BEEN I NCURRED AND SUCH EXPENDITURE MUST HAVE BEEN INCURRED IN C ASH EXCEEDING RS. 20 000/-. ON PERUSAL OF THE IMPUGN ED ORDER IT ITA NOS. 3096 3097&3098(DEL)/2010 6 IS QUITE EVIDENT THAT THE LD. ASSESSING OFFICER HAS NOT DISPUTED THE PURCHASES MADE FROM THE SAID PARTIES. THE SALES RECORDED IN THE BOOKS OF ACCOUNT WERE ALSO NOT D ISPUTED BY THE LD. ASSESSING OFFICER AND ACCEPTED IN TOTO. THE LD. ASSESSING OFFICER ALSO ACKNOWLEDGED THE FACT THA T THE APPELLANT HAS MADE PAYMENTS TO THE SAID PARTIES THROUGH CHEQUES ONLY. THE BOOKS OF ACCOUNT AND OTHER DOCU MENTS SHOWING THAT THE PURCHASES WERE MADE FROM THE SAID PARTIES AND PAYMENTS WERE MADE TO THEM THROUGH ACCOUNT PAYEE CHEQUES HAVE BEEN FOUND AND SEIZED. IT IS PERT INENT TO NOTE THAT NO DOCUMENTS ETC. WAS FOUND DURING THE C OURSE OF SEARCH AND SEIZURE OPERATION WHICH SUGGESTS THAT APPELLANT MADE PURCHASES IN CASH FROM PARTIES OTHER THAN S AID PARTIES IN GREY MARKET AND GENERATED BOGUS BILLS FROM THE SAID PARTIES AS ALLEGED BY THE LD. ASSESSING OFFICER IN THE IMP UGNED ORDER. THERE WAS ALSO NO DOCUMENT FOUND WHICH SUGGESTS T HAT THE APPELLANT RECEIVED CASH FROM THE SAID PARTIES AGAINST PAYMENTS MADE TO THEM THROUGH CHEQUES ONLY. THE ALLEGATION MADE BY THE AO ARE ONLY ON CONJECTURES AND SUR MISES NOT BASED ON ANY FACT ON EVIDENCE. THE APPELLANT HAS NOT VIOLATED THE PROVISION OF SECTION 40A(3) AS DISCUSSED ABOV E. AS THE APPELLANT HAS NOT MADE ANY CASH PAYMENT FOR THE SAID PURCHASES AND NO INCRIMINATING DOCUMENTS SUGGEST ING PAYMENTS MADE IN CASH WAS FOUND DURING THE COURS E OF SEARCH AND SEIZURE OPERATION THE DISALLOWANCE OF PAYMENTS UNDER SECTION 40A(3) IS NOT APPLICABLE IN THE CA SE OF THE APPELLANT. HENCE THE DISALLOWANCE MADE BY THE A O IS NOT SUSTAINABLE ON FACTS AS WELL AS IN LAW. HENCE THE ADDITION OF RS. 7 73 465/- IS DIRECTED TO BE DELETED. 2.2 FURTHER HIS FINDINGS IN RESPECT OF DELETION O F THE ESTIMATED COMMISSION IS CONTAINED IN PARAGRAPH 7 WHICH IS R EPRODUCED BELOW:- 7. I HAVE CONSIDERED THE SUBMISSIONS OF THE AP PELLANT AND FINDINGS CONTAINED IN THE ORDER OF ASSESSMENT AND THE MATERIAL PLACED ON RECORD. ON PERUSAL OF PROFIT AND LOSS A CCOUNT OF THE PROPRIETORSHIP CONCERN OF THE APPELLANT IT IS FOUN D THAT THE ITA NOS. 3096 3097&3098(DEL)/2010 7 APPELLANT HAS NOT CLAIMED ANY EXPENSES ON ACCOU NT OF COMMISSION PAID ON SUCH PURCHASES. THE APPELLAN T HAS NOT MADE ANY PAYMENT ON ACCOUNT OF COMMISSION AND NO INCRIMINATING DOCUMENTS SUGGESTING PAYMENTS MADE OF COMMISSION WERE FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. THE ADDITION REFERRED TO IN TH IS GROUND OF APPEAL ARE MADE CONSEQUENT UPON THE ADDITION M ADE IN THE FIRST GROUND OF APPEAL ALSO STANDS ALLOWED. 3. BEFORE US IT WAS THE COMMON CASE OF BOTH THE PARTIES THAT GROUND NO. 1 DOES NOT ARISE OUT OF THE ORDER OF THE LD. CIT(A) AND NO ADVERSE FINDING HAS BEEN GIVEN AGAINST THE REVENUE IN THI S MATTER. IN VIEW OF THIS COMMON POSITION GROUND NO. 1 IS DISMISSED. 4. IN REGARD TO GROUND NO. 2 THE LD. DR RELIE D ON THE FINDINGS OF THE AO. IN ESSENCE HIS FINDING IS THAT THE ASSESSE E DID NOT REALLY PURCHASE THE GOODS FROM THE PARTIES WHOSE NAMES WERE ENTERED IN THE BOOKS OF ACCOUNT. THE BANK ACCOUNT OF THESE PARTIES SHOWED DEPOSI T OF CHEQUES AND SUBSEQUENT WITHDRAWAL OF CASH WHICH MEANS THAT T HE REAL PURCHASERS WERE PAID IN CASH INDIRECTLY AND THEREFORE THE PROV ISION CONTAINED IN SECTION 40A(3) IS APPLICABLE. AS AGAINST THE AFORESAID THE FINDING OF THE LD. CIT(A) IS THAT THE GOODS WERE PURCHASED FROM T HESE PARTIES AND USED IN THE PROCESS OF THE BUSINESS OF THE ASSESSEE BUT FOR WHICH THE CORRESPONDING SALES COULD NOT HAVE BEEN MADE. T HE PAYMENTS IN RESPECT ITA NOS. 3096 3097&3098(DEL)/2010 8 OF PURCHASES TO THESE PARTIES WERE MADE BY WAY OF THE MODE MENTIONED IN SECTION 40A(3). THEREFORE THERE HAS BEEN NO INFRINGEMENT OF THE PROVISION CONTAINED IN SECTION 40A(3). FURTHER NO EVIDENCE HAS BEEN FOUND IN THE COURSE OF SEARCH TO SUGGEST THAT TH ESE PARTIES RETURNED SUBSTANTIAL PART OF CONSIDERATION RECEIVED BY T HEM IN CASH TO THE ASSESSEE AND THEREFORE THE CONCLUSION OF CASH PURCHASES I S BASED ONLY ON SURMISES AND CONJECTURES. HAVING CONSIDERED THE FINDINGS O F THE LD. CIT(A) WHICH HAVE NOT BEEN DISPLACED BY THE LD. DR IT IS CLEA R THAT THE ASSESSEE HAS MADE PAYMENTS BY WAY OF ACCOUNT PAYEE CHEQUES TO THE PARTIES FROM WHOM IT PURCHASED GOODS. THERE IS NO EVIDENCE THAT MONEY WAS RECEIVED IN CASH FROM THEM WHICH WAS UTILIZED F OR PAYMENT TO THE PERSONS WHO ACTUALLY SUPPLIED GOODS TO THE ASSESSEE. IN SUCH A CIRCUMSTANCE THE PROVISION CONTAINED IN SECTION 40A(3) COULD NOT HAVE BEEN INVOKED BY THE AO. THUS THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 4.1 THE REVENUE HAS ALSO NOT BEEN ABLE TO BRING O N RECORD ANY EVIDENCE REGARDING PAYMENT OF COMMISSION TO THESE PARTIES FOR ALLEGEDLY SUPPLYING BOGUS BILLS. IN ABSENCE OF EVIDENCE THIS ADDITI ON HAS ALSO BEEN RIGHTLY DELETED BY THE LD. CIT(A). ITA NOS. 3096 3097&3098(DEL)/2010 9 4.2 AS MENTIONED EARLIER THE FACTS OF THE CASE FOR ASSESSMENT YEARS 2005-06 AND 2006-07 ARE SIMILAR TO THE FACTS FOR ASSESSMENT YEAR 2003- 04 EXCEPT FOR THE AMOUNTS DISALLOWED AND COM MISSION ESTIMATED BY THE AO. IN VIEW OF THE ACCEPTED POSITION THAT THE F ACTS ARE OTHERWISE IDENTICAL THE ORDER FOR ASSESSMENT YEAR 2003-04 (SUPRA) IS MADE APPLICABLE TO OTHER TWO YEARS ALSO. 5. IN THE RESULT ALL THE APPEALS ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 3RD SEPTEMBER 2010. SD/- SD/- (A.D.JAIN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 3 RD SEPT. 2010. SP SATIA COPY OF THE ORDER FORWARDED TO: SHRI NAKUL KAPUR NEW DELHI. ACIT CENTRAL CIRCLE 5 NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.