M/s. Elite Cables,, Pune v. ITO,Wd, 5(4),, Pune

ITA 665/PUN/2006 | 2002-2003
Pronouncement Date: 31-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 66524514 RSA 2006
Assessee PAN AAACJ5786H
Bench Pune
Appeal Number ITA 665/PUN/2006
Duration Of Justice 4 year(s) 8 month(s)
Appellant M/s. Elite Cables,, Pune
Respondent ITO,Wd, 5(4),, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-01-2011
Assessment Year 2002-2003
Appeal Filed On 31-05-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I C SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO 665/PN/06 (ASSTT. YEAR 2002-03) M/S ELITE CABLES PUNE .. APPELLANT VS. INCOME-TAX OFFICER WARD 5(4) PUNE .. RESPONDENT PAN AAACJ5786H APPELLANT BY :SHRI V L JAIN RESPONDENT BY :SHRI KRISHNA MURARI ORDER PER G S PANNU A.M: THIS IS AN APPEAL BY ASSESSEE DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II PUNE DATED 1.3.2006 WHICH IN TURN HAS ARISEN FROM AN ORDER DATED 2.2.2005 PASSE D BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2002-03. 2. THE FIRST ISSUE IN THIS APPEAL RELATES TO AN AD DITION OF RS 11 51 225/- MADE BY THE ASSESSING OFFICER BY TREATI NG THE SAID SUM AS AN INFLATION OF EXPENSES DONE BY THE ASSESSEE BY RECOR DING BOGUS PURCHASES. THE SAID ADDITION HAS BEEN UPHELD BY THE COMMISSION ER OF INCOME-TAX (APPEALS) AGAINST WHICH THE ASSESSEE IS IN APPEAL B EFORE US. 3. IN THIS CONTEXT THE PRIMARY SUBMISSION OF THE LEARNED COUNSEL FOR THE APPELLANT IS THAT THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAD SUSTAINED THE ADDITION WITHOUT APPRECIATING THE PLE AS SET UP BY THE ASSESSEE ITA NO 665/PN/06 E LITE CABLES PUNE 2 BEFORE HIM. BEFORE THE COMMISSIONER OF INCOME-TAX ( APPEALS) ASSESSEE HAD POINTED OUT THAT EVEN THOUGH THE PURCHASE VOUCHERS IN QUESTION MAY NOT BE GENUINE BUT AS THE SALES DECLARED HAVE BEEN ACCEPT ED SUCH SALES COULD NOT HAVE BEEN EFFECTED IF THE PURCHASES WERE NOT MADE. IT WAS SOUGHT TO BE MADE OUT BY THE ASSESSEE THAT PURCHASES WERE FACTUA LLY MADE IN ORDER TO ACHIEVE THE SALES DECLARED AND WHICH HAVE BEEN ACC EPTED IN ASSESSMENT AND THEREFORE EVEN IF IMPUGNED PURCHASE VOUCHERS WERE FOUND INGENUINE CREDIT HAS TO BE ALLOWED FOR THE EXPENDITURE MADE O N PURCHASE ACCOUNT BECAUSE OTHERWISE SALES COULD NOT HAVE BEEN EFFECT ED. AS PER HIM THE NON- ALLOWANCE OF THE CREDIT FOR THE EXPENDITURE ON PURC HASES WOULD REFLECT A HIGH PROFIT WHICH IS NOT FEASIBLE. 4. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. IT HAS ALSO BEEN POINTED OUT THAT ASSE SSEE HAD CONFESSED BEFORE THE ASSESSING OFFICER THAT THE IMPUGNED PURC HASES RECORDED IN THE BOOKS OF ACCOUNT WERE AS PER BOGUS BILLS PREPARED B Y THE ASSESSEE AND THE THREE CONCERNS IN QUESTION WERE NOT IN EXISTENCE. U NDER THESE CIRCUMSTANCES THE ADDITION WAS MAINTAINABLE AND TH E ASPECTS OUGHT TO BE MADE OUT BY THE ASSESSEE WAS NOT RELEVANT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THIS CASE IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSE SSING OFFICER CARRIED OUT CERTAIN VERIFICATION EXERCISES TO EXAMINE THE PURCH ASES DECLARED BY THE ASSESSEE. THE EXERCISE CARRIED OUT BY THE ASSESSING OFFICER REVEALED THAT THREE CONCERNS NAMELY M/S PLATINUM CABLES P LTD M/S JANATA TRADING CO. AND M/S NIKITA ENTERPRISES WERE NOT EXISTING A T THE GIVEN ADDRESSES AS THE LETTERS WERE RECEIVED BACK UNSERVED. STATEMENT OF THE ASSESSEE WAS RECORDED UNDER SECTION 131 OF THE ACT BY THE ASSESS ING OFFICER IN THE COURSE ITA NO 665/PN/06 E LITE CABLES PUNE 3 OF WHICH IN AN ANSWER TO QUESTION NO 4 (REPRODUCED BY THE ASSESSING OFFICER IN PARAGRAPH 5 OF THE ASSESSMENT ORDER) ASSESSEE E XPLAINED THE RETURNING OF LETTERS AND DEPOSED THAT THE ABOVE THREE CONCERNS ARE NOT IN EXISTENCE AND THE PURCHASES RECORDED IN THE BOOKS AS PER THE BOGU S BILLS PREPARED BY US ARE NOT THE ACTUAL PURCHASES ... ON THE BASIS OF THE RESULT OF ENQUIRIES AND ALSO THE CONFESSION OF THE ASSESSEE THE AMOUNT OF PURCHASES FROM SUCH TRANSACTIONS AT RS 11 51 225/- WAS ADDED TO THE TOT AL INCOME OF THE ASSESSEE BY TREATING THE SAME AS INFLATION OF EXPENSES BY R ECORDING BOGUS PURCHASES. 6. IN DEFENCE OF ITS STAND ASSESSEE NOW CANVASSES THAT THOUGH IMPUGNED PURCHASES ARE BOGUS BUT NEVERTHELESS PUR CHASES MUST HAVE BEEN MADE BECAUSE WITHOUT MAKING SUCH PURCHASES SA LES COULD NOT HAVE BEEN EFFECTED. QUITE CLEARLY ASSESSEE DOES NOT DEV IATE FROM THE CONFESSION RENDERED BEFORE THE ASSESSING OFFICER REGARDING THE NON-EXISTENCE OF THE THREE PARTIES FROM WHOM IMPUGNED PURCHASES WERE CLA IMED TO HAVE BEEN MADE. ASSESSEE ALSO DOES NOT DEVIATE FROM THE CONFE SSION THAT THE IMPUGNED PURCHASES RECORDED IN THE BOOKS OF ACCOUNT WERE AS PER BOGUS BILLS WHICH DID NOT REFLECT ACTUAL PURCHASES. THE P LEA SET UP ON THE BASIS OF THE SALES IN OUR VIEW IS UNTENABLE BECAUSE EVEN O N THIS ASPECT ASSESSING OFFICER HAD PUT A SPECIFIC QUESTION I.E. QUESTION NO 6 TO THE ASSESSEE DURING HIS STATEMENT RECORDED UNDER SECTION 131 OF THE ACT WHICH READS AS UNDER: FROM ANSWER TO QUESTION NO 5 ABOVE IT IS CLEAR THA T THE PURCHASE RECORDED BY YOU ARE BOGUS TO THE TUNE OF RS 11 51 225/- WHIC H CLEARLY SHOWS THAT THE SALES RECORDED YOU ARE OUT OF THE ACTUAL PURCHASES I.E. PURCHASES RECORDED LESS BOGUS PURCHASES I.E. RS 107 64 083 RS 11 51 225 = RS 96 12 858/- PLUS THE OPENING STOCK OF RS 9 51 946/-. DO YOU CON FIRM THIS? IN ANSWER TO SUCH QUESTION ASSESSEE CONFIRMED THE POSITION THAT SALES DECLARED ARE OUT OF THE ACTUAL PURCHASES I.E. PURC HASES RECORDED LESS IMPUGNED BOGUS PURCHASES. IN THE FACE OF SUCH ADMIS SION BEFORE THE ASSESSING OFFICER QUITE CLEARLY THE ABOVE PLEA SET UP BEFORE THE ITA NO 665/PN/06 E LITE CABLES PUNE 4 COMMISSIONER OF INCOME-TAX (APPEALS) AND WHICH HAS BEEN REITERATED BEFORE US IS CONTRARY TO WHAT WAS ADMITTED BEFORE T HE ASSESSING OFFICER. THEREFORE BURDEN IS ON THE ASSESSEE TO ESTABLISH T HE JUSTIFICATION FOR GOING BACK ON THE ADMISSION MADE BEFORE THE ASSESSING OFF ICER AND IN OUR VIEW SUCH BURDEN HAS NOT BEEN DISCHARGED IN THIS CASE. T HERE IS NO MATERIAL TO SUGGEST THAT THE ADMISSION SO MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS UNDER A MISCONCEPTION OF LAW OR FACTS. THEREFORE THE SAID PLEA CANNOT BE ACCEDED TO AND THE COMMISSIONER OF INCOME -TAX (APPEALS) MADE NO MISTAKE IN THIS REGARD. NEVERTHELESS FACTUALLY SPEAKING IT IS CLEAR THAT THE THREE CREDITORS IN QUESTION DID NOT EXIST AND IN F ACT AS PER THE LIST OF CREDITORS AS ON 31.3.2002 AMOUNTS PAYABLE TO THEM WERE OUTST ANDING. IT HAS ALSO BEEN NOTED BY THE LOWER AUTHORITIES THAT AMOUNTS HA VE BEEN PAID OFF IN THE SUBSEQUENT YEAR BY WAY OF BEARER CHEQUES. ONCE IT I S ACCEPTED THAT SUPPLIERS DO NOT EXIST AND THE PURCHASE VOUCHERS AR E BOGUS IT WOULD LEAD TO AN INEVITABLE INFERENCE THAT THE STATED SUPPLIES WE RE NEVER EFFECTED AND THE ADDITION ON ACCOUNT OF BOGUS PURCHASE WOULD BE FULL Y JUSTIFIED. UNDER THESE CIRCUMSTANCES THE PLEA THAT PURCHASES WOULD HAVE B EEN MADE BUT FROM SOME OTHER CONCERN IS NOT RELEVANT SO AS TO DELETE THE ADDITION MADE ON THE BASIS OF BOGUS VOUCHERS FOUND AND ADMITTED BY THE A SSESSEE. THE AFORESAID PROPOSITION IS WELL SUPPORTED BY THE JUDGMENT OF TH E HONBLE DELHI COURT IN THE CASE OF CIT V LA MEDICA 250 ITR 575 (DEL). UNDE R THESE CIRCUMSTANCES IN OUR CONSIDERED OPINION COMMISSIONER OF INCOME-T AX (APPEALS) MADE NO MISTAKE IN UPHOLDING THE IMPUGNED ADDITION. ACCORDI NGLY GROUND RAISED BY THE ASSESSEE IS DISMISSED. 7. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH R EGARD TO A DISALLOWANCE OF RS 1 35 000/- OUT OF INTEREST EXPEN DITURE. ASSESSING OFFICER NOTED THAT ASSESSEE HAD ENTERED INTO AN AGREEMENT D ATED 22.11.2000 WITH ITA NO 665/PN/06 E LITE CABLES PUNE 5 M/S KARMAKSHETHRA BUILDERS FOR PURCHASE OF A FLAT. AS PER THE ASSESSING OFFICER ASSESSEE HAD DIVERTED BUSINESS FUNDS TO TH E TUNE OF RS 10 40 000/- BY PAYING ADVANCE TO M/S KARMAKSHETHRA BUILDERS FOR PURCHASE OF A RESIDENTIAL FLAT WHILE AT THE SAME TIME INTEREST AT THE RATE OF 15% WAS BEING PAID ON BANK CASH CREDIT LIMITS AVAILED BY THE ASSE SSEE. ACCORDINGLY INTEREST COMPUTED AT RS 1 35 385/- ON PRO RATA BASIS WAS DIS ALLOWED AND ADDED TO THE TOTAL INCOME. 8. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) ASSESSEE POINTED OUT THAT DURING THE YEAR UNDER CON SIDERATION ONLY A SUM OF RS 2 50 000/- WAS ADVANCED AND THE BALANCE OF RS 7 90 000/- WAS ADVANCED IN THE PRECEDING YEARS. FURTHER IT WAS POINTED OUT THAT ADVANCE OF RS 2 50 000/- WAS GIVEN FROM A CURRENT ACCOUNT MAINTAI NED WITH M/S UNITED WESTERN BANK AND NOT OUT OF THE CC LIMIT ACCOUNT MA INTAINED WITH BANK OF INDIA. ACCORDINGLY ADDITION WAS SOUGHT TO BE ASSAI LED. THE COMMISSIONER OF INCOME-TAX (APPEALS) DIRECTED ASSESSING OFFICER IN THE REMAND PROCEEDINGS TO EXAMINE THE SOURCE OF ADVANCE GIVEN DURING THE Y EAR AND TO FURNISH COMPLETE DETAILS. THE COMMISSIONER OF INCOME-TAX (A PPEALS) NOTED THAT ASSESSEE DID NOT FURNISH REQUISITE DETAILS BEFORE T HE ASSESSING OFFICER AND THEREFORE HE HAS SUSTAINED THE ADDITION. 9. AFTER HAVING CONSIDERED THE RIVAL STANDS WE FI ND THAT ASSESSEE HAD CATEGORICALLY ASSERTED BEFORE THE LOWER AUTHORI TIES THAT ADVANCE GIVEN DURING THE YEAR WAS OUT OF A NON-INTEREST BEARING B ANK ACCOUNT AND THERE IS NO REPUDIATION OF SUCH PLEA. MOREOVER COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOTED THAT ONLY A SUM OF RS 2 50 000/ - HAS BEEN ADVANCED DURING THE YEAR WHEREAS HE HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER ON A MISNOMER THAT ENTIRE AMOUNT OF RS 10 4 0 000/- HAD BEEN ADVANCED DURING THE YEAR. THEREFORE CONSIDERING TH E FACTUAL POSITION ON ITA NO 665/PN/06 E LITE CABLES PUNE 6 RECORD ON THIS COUNT WE FIND AMPLE FORCE IN THE P LEA OF THE ASSESSEE AND THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S) IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N OF RS 1 35 385/-. ACCORDINGLY ON THIS ISSUE ASSESSEE SUCCEEDS. 10. THE THIRD ISSUE RAISED BY THE ASSESSEE WITH RE GARD TO A SUM OF RS 1 50 000/- WHICH HAS NOT BEEN PRESSED AT THE TI ME OF HEARING AND IS ACCORDINGLY DISMISSED. 11. THE LAST ISSUE IS ON ACCOUNT OF AN ADDITION OF RS 42 684/- COMPRISED IN THE TOTAL ADDITION OF RS 85 217/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER IN TERMS OF THE DISC USSION IN PARAGRAPH 8 OF THE ASSESSMENT ORDER MADE AN ADDITION OF RS 85 217 /- WITH RESPECT TO 9 CREDITORS WHOSE LIABILITY WAS HELD TO HAVE CEASED TO EXIST IN TERMS OF SECTION 41(1) OF THE ACT. THE LEARNED COUNSEL POINTED OUT B EFORE US THAT THE LIMITED PLEA OF THE ASSESSEE BEFORE THE COMMISSIONER OF INC OME-TAX (APPEALS) WAS THAT A SUM OF RS 42 683/- DISALLOWED WITH RESPECT T O ITEM 8 OF THE LIST NAMELY M/S GLUCK ENTERPRISES WAS NOT MAINTAINABLE INASMUCH AS SAID AMOUNT HAS ALREADY BEEN OFFERED BY THE ASSESSEE AS ADDITION IN THE ASSESSMENT YEAR 2001-02 AND THE DETAILS IN THIS RE GARD HAVE BEEN PLACED IN THE PAPER BOOK AT PAGE 114. WE ALSO NOTICE THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS MECHANICALLY SUSTAINED THE ADDITION IN THE ABSENCE OF ANY DETAILS AS TO WHICH AMOUNTS ADDED BY THE ASSESSING OFFICER RS 42 683/- COMPRISES OF. 12. HAVING EXAMINED THE ORDERS OF THE AUTHORITIES BELOW WE FIND NO JUSTIFICATION FOR THE IMPUGNED ADDITION INASMUCH A S THE ASSESSEE CLAIMED THAT THE SAID SUM HAS BEEN OFFERED FOR TAXATION IN THE ASSESSMENT YEAR 2001- 02. THE DETAIL OF THE AMOUNTS ADDED BY THE ASSESSI NG OFFICER ARE APPEARING ITA NO 665/PN/06 E LITE CABLES PUNE 7 AT PARAGRAPH 8 OF THE ASSESSMENT ORDER WHICH INCLU DES A SUM OF RS 42 683/- WHICH HAS BEEN INCLUDED IN THE INCOME FOR THE ASSE SSMENT YEAR 2001-02 AS PER THE DETAIL PLACED AT PAGE 114 OF THE PAPER BOOK . WE FIND NO NEGATION TO THE AFORESAID FACTUAL MATRIX AND ACCORDINGLY WE FI ND NO JUSTIFICATION FOR THE IMPUGNED ADDITION BEING A DOUBLE ADDITION. HENCE SAID ADDITION IS DIRECTED TO BE DELETED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31ST DAY OF J ANUARY 2011. SD/- SD/- (I C SUDHIR) (G.S. PA NNU) JUDICIAL MEMBER ACCOUNTA NT MEMBER PUNE DATED: 31ST JANUARY 2011. COPY TO:- 1) M/S ELITE CABLES PUNE 2) THE ITO WD 5(4) PUNE 3) THE CIT (A)II PUNE. 4) THE CIT III PUNE. 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I.T.A.T. PUNE. BY ORDER TRUE COPY ASST. REGISTRAR I.T.A.T. PUNE B