Iapl/284/2017 Of Principal Commissioner Of Income-Tax Meerut v. M/S Meerut Roller Flour Mills P Ltd

Reserved on: 04.01.2019Delivered on:17.01.2019 Court No. - 35 Case :- INCOME TAX APPEAL No. - 284 of 2017 Appellant :- Principal Commissioner Of Income-Tax MeerutRespondent :- M/S Meerut Roller Flour Mills (P) Ltd.Counsel for Appellant :- Manu GhildyalCounsel for Respondent :- Suyash Agarwal Hon'ble Bharati Sapru,J.Hon'ble Piyush Agrawal,J. (Delivered by Hon'ble Piyush Agrawal, J.) The present appeal has been filed under section 260-A ofthe Income Tax Act, 1961 (hereinafter referred to as, 'the Act')against the judgment and order dated 13.04.2017 passed inIncome Tax Appeal No. 3895/Del/2013 (Assessment Year2009-10) by the Income Tax Appellate Tribunal, Delhi, Bench'E', New Delhi (hereinafter referred to as, 'the Tribunal'). On 04.10.2017, the present appeal was admitted by this Court on the following questions of law: "A. Whether on the facts and circumstances of the case, theITAT has erred in law and fact by not setting aside the issue ofaddition of Rs. 3,38,72,852/- on non-genuine purchases to thefile of the CIT(A) while the learned ITAT quashed the directionof CIT(A) on the same especially in view of the fact that theITAT is the ultimate fact finding authority, it should have eithersettled the issue on the basis of material on record or set asidethe matter to the CIT(A) for deciding within the powers vested in it?" The facts of the case are that the assessee – respondent isengaged in the business of manufacture and sale of wheatproducts, like maida, suji, aata and bread. For the year underconsideration, the respondent – assessee filed return of incomeon 25.09.2009 declaring income of Rs. 47,26,344/- in thestatus of a Company. The return was processed under section143(1) of the Act and later on, the case was selected under thescrutiny with the approval of Chief Commissioner of IncomeTax, Ghaziabad. On 23.09.2010, notice under section 143(2)of the Act was issued fixing the date of hearing as 28.09.2010.The notice was duly served. Thereafter, notice under section142(1) of the Act was issued along with the questionnairedated 12.02.2011 fixing the date of hearing as 23.02.2011. Inresponse to the said notice, details were furnished by therespondent – assessee. In order to verify the genuineness ofpurchase declared by the assessee – respondent, notices undersection 133(6) of the Act were issued to 19 parties, out ofwhich, notices upon two parties, namely, Mohit TradingCompany, A-1/307, Sector – 6, Rohini, Delhi – 85 and SuranaBrothers, C – 106, MP Enclave, Pitampura, Delhi – 34, werereturned back unserved. The total purchase of the said two parties were declared to the tune of Rs. 3,38,72,852/-. TheAssessing Authority, while framing the assessment order, hasobserved as under:- “Since both the addresses were of residential colonies in Delhi,where possibility of existence of any such entity that could supplythe material worth crores without maintaining and godowns wasnot there, the field verifications were made. It was found that atboth these addresses, no such companies existed. Vide ordersheet entry dated 28.12.2011, this fact of their non-existence atthe address provided was brought to the knowledge of theassessee. Since the parties have not been found at the addressprovided by the assessee, assessee has also not filed theirconfirmed copy of the account, these purchases of Rs.3,38,72,852/- are not treated as genuine. Accordingly, they arebeing added to the income of the assessee as non-genuinepurchases.” Being aggrieved by the aforesaid order, the respondent – assessee preferred an appeal before the Commissioner ofIncome Tax (Appeals), Meerut, who by its order dated28.03.2013 partly allowed the appeal of the assessee. Whileallowing the said appeal, the Commissioner has observed asfollows:- Being aggrieved by the aforesaid order, the respondent – assessee preferred an appeal before the Commissioner ofIncome Tax (Appeals), Meerut, who by its order dated28.03.2013 partly allowed the appeal of the assessee. Whileallowing the said appeal, the Commissioner has observed asfollows:- “Never the less, the assessee was requested to ascertain why theenquiry letters issued to the two parties had been returnedunserved. It now transpires that both the parties are theconcerns of a single individual Shri Chagganlal Jain, who hasgiven a letter saying that he had closed his business and for thisreason, the enquiry letters issued by the Department had been returned unserved. Never the less, keeping in view the quantumof disallowance and as a measure of abundant caution, the AO isdirected to conduct enquiry with the AO having jurisdiction overthe PAN of this party and ascertain whether return of income hadbeen filed for the relevant year by this party and if so, he haddisclosed turnover of business in such return, in excess of theamount of purchases, shown by the assessee as having made fromthe said party. If the result of such verification is negative, theaddition is confirmed. Otherwise, the AO is directed to delete theaddition.” Feeling aggrieved by the aforesaid order, cross-appealswere filed before the Tribunal. The Tribunal has quoted thegrounds of appeal taken by the Revenue at internal page 2 ofits judgment. Ground nos. 2 and 3 are quoted below:- “2. Whether in the facts and circumstances of the case, theCIT(A) has erred in law in deleting the addition of Rs.3,38,72,852/- made by the AO on account of unprovedpurchases, subject to verification of the PAN, assessment statusof the suppliers from the concerned AOs, ignoring that the samewere unproved purchases, which are liable to be added in theincome as the assessee had failed to prove the genuineness oftransactions and even notices sent to the suppliers u/s133(6) ofthe IT Act, 1961 were returned back unserved. 3. Whether in the facts and circumstances of the case, the CIT(A)has erred in law in deleting the addition of Rs. 2,06,85,086/-made by the AO without appreciating the fact that addition wasmade on account of inflated purchase where notices sent to thesuppliers were returned back unserved despite which the AO hadmade a very reasonable addition of mere 10% of totalpurchases.” The Tribunal, in the impugned order, has set aside thedirection of the Commissioner of Income Tax (Appeal) toconduct an inquiry by the Assessing Officer. We have heard Shri Manu Ghildyal, learned counsel forthe appellant and Shri R.R. Agrawal, learned senior counselassisted by Shri Suyash Agrawal, learned counsel for therespondent – assessee. On 29.12.2011, the assessment was completed undersection 143(3) of the I.T. Act on the total income of Rs. 6.25crores. The Assissing Officer has made an addition of Rs.3,38,72,852/- in respect of certain purchases made by therespondent – assessee from Mohit Trading Company(amounting to Rs. 2.10 crores) and Surana Brothers(amounting to Rs. 1.28 crores). Feeling aggrieved by the aforesaid assessment order, therespondent – assessee preferred an appeal before theCommissioner of Income Tax (Appeal), who by order dated28.03.2013, has observed that both, during the course ofassessment as well as remand proceedings, the enquiry lettersissued to the aforesaid two parties, had been returned unservedand the assessee could not produce the said two identities before the Assessing Officer. The Commissioner of IncomeTax (Appeal) directed Assessing Officer to conduct an inquirywith the Assessing Officer having jurisdiction over the PAN ofthe said parties and ascertain whether return of income hasbeen filed for the relevant year by the party and if so, he haddisclosed the turnover of business in such return, in excess ofamount of purchases, shown by the assessee, as have beenmade from the said party. before the Assessing Officer. The Commissioner of IncomeTax (Appeal) directed Assessing Officer to conduct an inquirywith the Assessing Officer having jurisdiction over the PAN ofthe said parties and ascertain whether return of income hasbeen filed for the relevant year by the party and if so, he haddisclosed the turnover of business in such return, in excess ofamount of purchases, shown by the assessee, as have beenmade from the said party. The respondent – assessee preferred a writ petition beforethis Court against the order dated 28.03.2013 passed by theCommissioner of Income Tax (Appeal). The said writ petitionwas disposed by a learned Single Judge of this Court on16.05.2013 on the ground of availability of alternative remedy. In pursuance of the direction dated 28.03.2013, theAssessing Authority passed an order dated 24.02.2014 inexercise of powers under section 251 of the Act. In the saidassessment, it was brought on record that the returns were notfiled by the respective parties and therefore, the said amounts,disclosed by the respondent – assessee, were non-genuinepurchases. Against the said assessment order dated 24.02.2014, the assessee preferred Writ Tax No. 163 of 2014. The order dated24.02.2014 was set aside by this Court on the ground ofviolation of principles of natural justice. However, this Courthas clarified that the Assessing Officer was not precluded frompassing a fresh order in accordance with law after due notice tothe assessee – respondent. Thereafter, again, an order dated 08.08.2014 was passedby the Assessing Officer and it was again brought on recordthat there was neither information regarding filing of return ofincome of the said party, i.e., Shri Chhaggan Lal Jain,Proprietor of M/s Mohit Trading Company & M/s SuranaBrothers, nor has been furnished by the said assessee. Thisinformation is vital for verification of purchases made by theassessee from the said party as per direction given by theCommissioner of Income Tax (Appeal), Meerut in his orderdated 28.03.2013. The aforesaid information was also provided to therespondent – assessee, but no contrary material was brought onrecord to show that the returns of income were filed by the saidparty and therefore, the purchase of Rs. 3,38,72,852/- wasconfirmed as non-genuine. The Tribunal, being the last court of fact and law, oughtto have considered the materials on record, especially, when ithas come on record that the said party has not filed the returnof income. The Tribunal was swayed away by the contentionof the respondent – assessee, but lost sight of the fact that theRevenue has also raised the issue of addition of Rs.3,38,72,852/- to be non-genuine purchases. In view of the aforesaid facts and circumstances of the case, the impugned judgment and order dated 13.04.2017passed in Income Tax Appeal No. 3895/Del/2013by theIncome Tax Appellate Tribunal, Delhi, Bench 'E', New Delhicannot be sustained and it is set aside to that extent. The appeal succeeds and is allowed. The matter isremanded back to the Tribunal concerned to re-hear the matterafresh and decide the appeal on merits. The question of law is answered in favour of the Revenueand against the respondent – assessee. Order Date :-17.01.2019Amit Mishra