Mahesh Kumar Jain, Sonepat v. ITO, Sonepat

ITA 4274/DEL/2009 | 2006-2007
Pronouncement Date: 15-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 427420114 RSA 2009
Bench Delhi
Appeal Number ITA 4274/DEL/2009
Duration Of Justice 2 month(s) 10 day(s)
Appellant Mahesh Kumar Jain, Sonepat
Respondent ITO, Sonepat
Appeal Type Income Tax Appeal
Pronouncement Date 15-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 15-01-2010
Assessment Year 2006-2007
Appeal Filed On 05-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO. 4274/DEL/2009 ASSESSMENT YEAR : 2006-07 SHRI MAHESH KUMAR JAIN H. NO. 279 WARD-13 JAIN GALI GANAUR. VS. INCOME TAX OFFICER WARD-12 SONIPAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P. GARG C.A. RESPONDENT BY : SHRI G.S. SAHOTA SR. D.R. O R D E R PER: C.L. SETHI J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 11.09.2009 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUND NOS. 1 TO 4 RAISED BY THE ASSESSEE AR E DIRECTED AGAINST THE ORDER OF LD. CIT(A) IN SUSTAINING THE ADDITION TO THE EXT ENT OF RS. 4 02 008/- OUT OF THE TOTAL ADDITION OF RS 5 35 911/- MADE BY THE A.O. 3. IN THIS CASE THE ASSESSEE FILED HIS RETURN OF I NCOME SHOWING TOTAL INCOME AT RS. 97 500/- ON 14.08.2006. THE CASE WAS SELECTED FOR SCRUTINY TO MAKE A REGULAR ASSESSMENT U/S 143(3) OF THE ACT. DURING THE YEAR THE ASSESSEE DERIVED INCOME FROM HIS PROPRIETORY BUSINESS IN THE NAME AND STYLE OF M/S. MAHESH TEXTILES. THE SALES HAVE INCREASED FROM RS. 20 47 364/- TO RS . 36 88 495/-. IN THE COURSE OF ITA NO. 4274/DEL/2009 2 OF 9 ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED COPY OF ACCOUNT OF PARTIES FROM WHOM PURCHASES WERE MADE DURING THE YEAR. 4. THE A.O. ASKED THE ASSESSEE TO FILE CONFIRMATION IN RESPECT OF THE FOLLOWING SUNDRY CREDITORS FROM WHOM PURCHASES WERE MADE BY T HE ASSESSEE:- S. NO. NAME OF THE PARTY OPENING BALANCE PURCHASES PAYMENT MADE BALANCE DUE FOR PAYMENT BALANCE AS ON 25.03.08 1. PEARL FASHION - 292060 100000 119060 119060 2. RAHIL TEXTILES - 21516 - 21516 21516 3. DHANLAXMI SILK MILLS - 249433 136158 113330 113330 4. JASDA CREATION - 75102 - 75102 75102 5. CLAIBORNE VIMAL POL. PVT. LTD. - 1389155 1255252 133903 133903 5. FROM THE AFORESAID DETAILS IT WAS NOTICED BY TH E A.O. THAT ASSESSEE MADE PURCHASES FROM PARTIES AT SERIAL NO. 2 AND 4 OF RS. 21 516/- AND RS. 75 102/- RESPECTIVELY BUT NO PAYMENT WERE MADE DURING THE YE AR AND THE AMOUNT REMAINED OUTSTANDING TILL END OF THE YEAR. WITH REGARD TO T HE PARTY AT SERIAL NO. 1 3 AND 5 THE ASSESSEE MADE PURCHASES AGAINST WHICH AN AMOUNT OF RS. 1 19 060/-/- RS. 1 13 330/- AND RS. 1 33 903/- REMAINED STILL OUTSTA NDING AS AT THE END OF THE YEAR. SINCE THE ASSESSEE DID NOT FILE ANY CONFIRMATION FR OM THE ABOVE PARTIES INSPITE OF VARIOUS OPPORTUNITIES PROVIDED BY THE A.O. THE A.O . WAS OF THE VIEW THAT THE AMOUNT STILL OUTSTANDING AGAINST THE PARTIES AT THE END OF THE YEAR HAS CEASED TO EXIST AND THE A.O. TREATED THE SAME TO BE IN THE N ATURE OF CESSATION OF LIABILITY U/S 41(1) OF THE INCOME TAX ACT AND ADDED THE AMOUNT OF RS. 5 35 911/- TO THE INCOME OF THE ASSESSEE. ITA NO. 4274/DEL/2009 3 OF 9 6. ON AN APPEAL THE LD. CIT(A) REDUCED THE ADDITIO N BY RS. 1 33 903/- AND SUSTAINED THE BALANCE. 7. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE TH E LD. CIT(A) THE ASSESSEE FURNISHED CERTAIN EVIDENCES AND DOCUMENTS WHICH WER E NOT FILED BEFORE THE A.O. AND ASSESSEE MADE AN APPLICATION FOR ADMISSION OF A DDITIONAL EVIDENCES BEFORE THE LD. CIT(A). THE SUBMISSION OF THE ASSESSEE ALO NGWITH EVIDENCES WERE REFERRED TO THE A.O. FOR HIS EXAMINATION AS PER THE LD. CIT(A)S LETTER DATED 04.03.2009. THE A.O. SUBMITTED HIS REMAND REPORT A S PER HIS LETTER DATED 11.08.2009. THE REPORT OF THE A.O. WAS CONFRONTED TO THE ASSESSEE FOR HIS COMMENT. THE LD. CIT(A) THEN CONSIDERED THE REPORT OF THE A.O. AS WELL AS THE ASSESSEES SUBMISSION WITH REGARD TO THE ISSUES INV OLVED. IT WAS NOTED BY THE LD. CIT(A) THAT OUT OF THE FIVE PARTIES IN RESPECT OF W HICH THE ADDITIONS WERE MADE BY THE A.O. THE ASSESSEE FURNISHED CONFIRMATION ONLY IN THE CASE OF M/S. CLAIBORNE VIMAL POL. PVT. LTD. WHEREFROM IT WAS REVEALED THA T THE ASSESSEE SUBSEQUENTLY MADE THE PAYMENT OF RS. 1 33 903/- BY ACCOUNT PAYEE CHEQUE ON 01.04.2006. HAVING FOUND NO ADVERSE COMMENT FROM THE A.O. IN RE SPECT OF THE PAYMENT OF RS. 1 33 903/- PAID TO M/S. CLAIBORNE VIMAL POL. PV T. LTD. THE LD. CIT(A) DELETED THE ADDITION. HOWEVER WITH REGARD TO THE OTHER FO UR PARTIES IT IS MENTIONED BY THE LD. CIT(A) THAT IN PURSUANCE TO HIS LETTER DATE D 04.03.09 TO SUBMIT REPORT THE A.O. HAD ISSUED LETTER TO THE SAID FOUR PARTIES TO CONFIRM THE PURCHASES BUT NO INFORMATION OR CONFIRMATION WAS RECEIVED BY THE A.O . FROM THE FOUR CREDITORS. THE LD. CIT(A) HAS GIVEN THE FOLLOWING REASONS IN C ONFIRMING THE ADDITION:- ITA NO. 4274/DEL/2009 4 OF 9 . (I) INSPITE OF THE EFFORTS OF THE ASSESSING OFFICER THE FOUR PARTIES DID NOT SEND ANY CONFIRMATION EVEN DURING PENDENCY OF A PPEAL BEFORE THE UNDERSIGNED. (II) THE ADDITIONAL EVIDENCE IN THE FORM OF THE MATTER A S TO THE DISPUTE WITH THE FOUR PARTIES BEING REFERRED TO DELHI HINDU STAN MERCANTILE ASSOCIATION DOES NOT HAVE ANY MERIT IN IT BECAUSE T HE LETTERS OF THE MERCANTILE ASSOCIATION NOMINATING SOME BODY AS PANC H ARE DATED 24.10.2008 I.E. AFTER THE FILING OF APPEAL ON 17.04 .2008 THE APPELLANT IS TRYING TO GIVE IT A COLOUR OF DISPUTE WITH THE ABOVE MENTIONED FOUR CREDITORS TO GET RELIEF FROM THE UND ERSIGNED DURING APPEAL PROCEEDINGS. THE FACT IS THAT THESE ARE NON EXISTING FOUR PARTIES FROM WHOM NO PURCHASES WHATSOEVER WERE MADE AND IT STANDS CONFIRMED FROM (I) ABOVE ALSO I.E. THE PARTI ES HAVE NOT RESPONDED EVEN TO TH LETTERS OF THE ASSESSING OFFIC ER AFTER THE MATTER WAS REFERRED TO THE ASSESSING OFFICER DURING APPEAL PROCEEDINGS. (III) IT IS SIMPLY NOT A CASE OF CESSATION OF LIABILITY IT IS MORE A CASE OF BOGUS ENTRIES MADE BY THE APPELLANT AS TO THE PURCH ASES MADE BY IT SHOWING FALSE CREDITORS IN ITS BOOKS OF ACCOUNT S. (IV) THE DECISION OF THE HONBLE ITAT IN THE CASE OF M/ S.A.K. AUTOMOBILES VS. ACIT IN ITA NO. 685/DEL/08 DATED 28 .01.2009 IS NOT RELEVANT KEEPING IN VIEW THE FACTS AND CIRCUMST ANCES OF THE CASE BECAUSE IN THE CASE OF THE APPLICANT IT HAD NO T PRODUCED BOOKS OF ACCOUNTS VOUCHERS ETC. INSPITE OF A NUMBER OF O PPORTUNITIES GIVEN TO THE APPELLANT WHEREAS IN THE CASE OF M/S. A.K. AUTOMOBILES VS. ACIT THE BOOKS OF ACCOUNTS WERE DUL Y MAINTAINED. MORESO THE APPELLANT AS NOTED ABOVE IN (II) IS TRYI NG TO CREATE EVIDENCE TO PRESENT IT AS A CASE OF DISPUTE WITH TH E FOUR CREDITORS WHICH FURTHER CONFIRMS THAT THE VERSION OF THE APPE LLANT AS TO THE GENUINENESS OF THE FOUR CREDITORS IS WRONG. (V) IN THE REJOINDER THE APPELLANT HAS REFERRED TO CLER ICAL MISTAKES IN THE REPORT OF THE ASSESSING OFFICER AS TO THE FIGUR ES GIVEN BY HIM WHICH IS NOT RELEVANT BECAUSE SUCH CLERICAL MISTAKE S DO OCCUR IN THE NORMAL COURSE OF LIFE. OUR OF THE TOTAL ADDITION OF RS. 5 35 911/- RELIEF IS ALLOWED TO THE EXTENT OF RS. 1 33 903/- AS NOTED ABOVE AND THE REM AINING ADDITION IS CONFIRMED. THE GROUND OF APPEAL PERTAINING TO T HIS ITEM IS PARTLY ALLOWED. 8. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 4274/DEL/2009 5 OF 9 9. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ADDITIONAL EVIDENCES IN THE FORM PROCEEDINGS OF ARBITRATION WI TH REGARD TO THE DISPUTE WITH THE FOUR PARTIES BEING REFERRED TO DELHI HINDUSTAN MERCANTILE ASSOCIATION HAS NOT BEEN CONSIDERED BY THE LD. CIT(A) MERELY BY RAISING THE PRESUMPTION THAT SINCE THE DISPUTE PROCEEDINGS WERE INITIATED AFTER FILING OF THE APPEAL BY THE ASSESSEE BEFORE THE LD. CIT(A) THESE ARE NOTHING BUT AFTER THOUGHT OF THE ASSESSEE TO CREATE EVIDENCE AS TO THE GENUINENESS OF THE AMOUNT PAYABL E TO THE FOUR CREDITORS WHICH VIEW OF THE CIT(A) IN THE LIGHT OF THE EVIDENCES PR ODUCED BY THE ASSESSEE IS NOT TENABLE. HE FURTHER SUBMITTED THAT THE ARBITRATION PROCEEDINGS REFERRED TO PUNCH OF DELHI HINDUSTAN MERCANTILE ASSOCIATION CANNOT BE CONSIDERED TO BE SHAME AND FABRICATED EVIDENCES UNLESS CONTRARY IS ESTABLISHED AND PROVED BY THE DEPARTMENT. HE FURTHER SUBMITTED THAT THE A.O. HAS NOT MADE ANY ENQUIRY FROM THE DELHI HINDUSTAN MERCANTILE ASSOCIATION ABOUT THE GENUINEN ESS OF THE DISPUTE BETWEEN THE ASSESSEE AND THE AFORESAID FOUR PARTIES BEFORE REJECTING AND/OR DISREGARDING THE EVIDENCES FURNISHED BY THE ASSESSEE. HE FURTHE R SUBMITTED THAT MERE BECAUSE PARTIES HAVE NOT GIVEN ANY REPLY TO THE LETTERS TO THE A.O. THE ASSESSEE CANNOT BE HELD RESPONSIBLE AND THE PURCHASES MADE BY THE ASS ESSEE FROM THE AFORESAID PARTIES CANNOT BE CONSIDERED TO BE THE BOGUS PURCHA SES. HE FURTHER SUBMITTED THAT IN THE LIGHT OF THE EVIDENCES PRODUCED BEFORE THE L D. CIT(A) THE AMOUNT LYING OUTSTANDING IN THE NAME OF THE FOUR PARTIES IS TO B E CONSIDERED AS GENUINE AND PROVISIONS OF SECTION 41(1) SHALL NOT BE APPLICABLE . ITA NO. 4274/DEL/2009 6 OF 9 10. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE HAS N OT BEEN ABLE TO PROVE AND ESTABLISH THAT THE PURCHASES MADE BY THE ASSESSEE F ROM THESE FOUR PARTIES WERE GENUINE AND ANY GENUINE LIABILITY PAYABLE BY THE A SSESSEE WAS EXISTING AT THE END OF THE YEAR. HE FURTHER SUBMITTED THAT IN THE LIGH T OF THE VARIOUS DECISIONS OF THE TRIBUNAL AS WELL AS HONBLE HIGH COURT IT IS WELL ESTABLISHED THAT IT IS THE ONUS OF THE ASSESSEE TO PROVE AND ESTABLISH THAT THE ASSESS EE HAS MADE PURCHASES ON CREDIT AND THE AMOUNT OUTSTANDING AT THE END OF THE YEAR I S THE GENUINE AND BONAFIDE ONE. BUT IN THE PRESENT CASE THE ASSESSEE HAS NO T PRODUCED HIS BOOKS OF ACCOUNTS AS WELL AS CONFIRMATION FROM THESE PARTIES TO PROVE THAT THE PURCHASES MADE FROM THESE PARTIES WERE GENUINE AND THE AMOUNT SHOWN AS OUTSTANDING WAS REALLY PAYABLE BY THE ASSESSEE TO THOSE FOUR PARTIE S. HE THEREFORE SUBMITTED THAT THE LD. CIT(A) WAS VERY MUCH JUSTIFIED IN SUSTAININ G THE ADDITION TO THE EXTENT OF RS. 4 02 008/- BEING THE BOGUS AMOUNT SHOWN OUTSTAN DING IN THE NAME OF THE FOUR PARTIES. 11. IN COUNTER REPLY THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT IT IS NOT CORRECT TO SAY THAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT. THE DETAILS OF THE PURCHASES WERE AVAILABLE WITH THE A.O. BEING TAKEN OUT FROM THE BOOKS OF ACCOUNT ONLY AND THEREFORE IT IS CLEAR THAT THE D ETAILS OF PURCHASES WERE INVARIABLY FURNISHED BY THE ASSESSEE BEFORE THE A.O . IN SUPPORT THEREOF THE ASSESSEE HAS SUBMITTED AN AFFIDAVIT CONTENDING THAT THE BOOKS OF ACCOUNT WERE SUBMITTED TO THE A.O. WHICH WAS EXAMINED BY HIS IN SPECTOR. ITA NO. 4274/DEL/2009 7 OF 9 12. WE HAVE CONSIDERED RIVAL CONTENTION OF BOTH THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 13. FROM THE ORDER OF THE AUTHORITIES BELOW AS WELL AS FROM THE VARIOUS DOCUMENTS FILED BY THE ASSESSEE BEFORE US AS WELL A S BEFORE THE AUTHORITIES BELOW IT IS CLEAR THAT NO CONFIRMATION FROM THE RESPECTIV E PARTIES ABOUT THE AMOUNT SHOWN AS OUTSTANDING IN THE NAME OF THE AFORESAID F OUR PARTIES HAS BEEN FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS BEEN RELYING ONL Y UPON THE ARBITRATION INITIATED BY THE ASSESSEE BEFORE THE DELHI HINDUSTAN ASSOCIAT ION AGAINST ONE M/S. R. PRATAP RAY AND CO. CLAIMED TO BE A COMMISSION AGENT THROUGH WHOM THE PURCHASES WERE MADE. THE ASSESSEE HAS SUBMITTED BEF ORE US A LETTER DATED 19.12.2009 ISSUED TO M/S. R. PRATAP RAY AND COMPANY FILED BEFORE THE ARBITRATION PROCEEDINGS BEFORE DELHI HINDUSTAN ASSO CIATION WHERE THE AFORESAID AGENT HAVE STATED THAT ON THEIR GUARANTEE FEW PART IES OF SURAT HAD SOLD GOODS TO THE ASSESSEE VALUED AT RS. 5 51 641/- AND IN SAID DEALS THEY STOOD AS GUARANTOR AND OUT OF THE AFORESAID AMOUNT THE ASSESSEE HAD P AID ONLY RS. 1 50 013/- AND HAVE DEFAULTED IN PAYING THE BALANCE AMOUNT OF RS. 4 01 636/-. IT WAS FURTHER MENTIONED IN THE SAID LETTER THAT SINCE THEY WERE G UARANTOR TO THE DEALS THE BALANCE PAYMENT HAS BEEN PAID BY THEM TO THE SAID P ARTY ON BEHALF OF THE ASSESSEE AND SUCH AMOUNT IS NOW BEING DEMANDED BY THEM FROM THE ASSESSEE BUT THE ASSESSEE HAS BEEN AVOIDING TO PAY THE SAME ON O NE OR OTHER FALSE PRETEXT AND WITH A VIEW TO COUNTER THE SAID CLAIM THE ASSESSEE FILED A FALSE CLAIM AGAINST THEM. FROM THE AFORESAID DOCUMENTS IT IS THUS C LEAR THAT THE PURCHASES WERE ITA NO. 4274/DEL/2009 8 OF 9 ACTUALLY MADE BY THE ASSESSEE FROM THE AFORESAID PA RTIES AND THE PAYMENT HAVE NOT YET BEEN PAID BY THE ASSESSEE TO THEM OR EITHER TO THE AGENT THROUGH WHOM DEALS WERE EFFECTED. THESE DOCUMENTS CANNOT BE REGA RDED AS SELF-GENERATED DOCUMENT TO SUPPORT THE ASSESSEES CASE BUT THESE D OCUMENT RATHER CLEARLY SHOWS THAT THE CERTAIN DISPUTE WAS PENDING WITH REGARD TO THE LIABILITY OF THE AMOUNT OF PURCHASES PAYABLE BY THE ASSESSEE. THEREFORE IN SO FAR AS THE PRESENT ASSESSMENT YEAR IS CONCERNED I.E. ENDING ON 31.03.2006 THE LI ABILITY TO PAY THE AMOUNT TO THE AFORESAID PARTIES WAS STILL EXISTING. FROM THE AFO RESAID LETTER IT IS SEEN THAT THE ASSESSEE HAS MADE A COUNTER CLAIM AGAINST WHICH THE ASSESSEE IS TRYING TO SET OFF THE AMOUNT PAYABLE TO THE AFORESAID FOUR PARTIES. T HE ASSESSEE HAD MADE A CLAIM AGAINST M/S. R. PRATAP RAY AND COMPANY WHICH IS ST ILL PENDING ADJUDICATION AS WOULD BE CLEAR FROM THE LETTER OF M/S. R. PRATAP RA Y AND COMPANY DATED 19.12.2009. THEREFORE IN SO FAR AS THE PRESENT AS SESSMENT YEAR IS CONCERNED IT IS CLEAR THAT THE LIABILITY TO PAY THE AMOUNT TO THE A FORESAID FOUR PARTIES HAS NOT CEASED TO EXIST. HOWEVER IN CASE IT IS ULTIMATEL Y FOUND THAT THESE LIABILITIES ARE NO LONGER REQUIRED TO PAY BY THE ASSESSEE IN LATER YEARS THE SAME MAY BE BROUGHT TO TAX IN THE YEAR IN WHICH THE LIABILITY SHALL CEA SE TO EXIST. WE THEREFORE DELETE THE ADDITION WITH THE ABOVE OBSERVATION. 14. NEXT GROUND RAISED BY THE ASSESSEE IS DIRECTED AGAINST THE DISALLOWANCE OF RS. 4 748/- BEING 1/4 TH OF THE TOTAL TELEPHONE EXPENSES OF RS. 19 147/- CL AIMED BY THE ASSESSEE AS BUSINESS EXPENSES. ITA NO. 4274/DEL/2009 9 OF 9 15. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE LIGHT OF ABSENCE OF DETAILS OF THE TELEPHONE EXPENSES AND HAVING REGARD TO THE FACT THAT IT IS A PROPRIETORY CONCERN AND THE TELEPHONE WAS ALSO BEING USED BY THE PROPRIETOR FOR HIS PERSONAL PURPOSE WE DO NOT FIND ANY UNJUSTIFICATION IN DISALLOWING 1/4 TH OF THE TELEPHONE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE BUSINESS. TH EREFORE THIS GROUND RAISED BY THE ASSESSEE IS REJECTED. 16. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. 17. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 15 TH JANUARY 2010. (K.G. BANSAL) ACCOUNTANT MEMBER (C.L. SETHI) JUDICIAL MEMBER DATED: 15 TH JANUARY 2010. MAMTA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. BY ORDER DEPUTY REGISTRAR