Ita v. Cll, Patiala,Itr

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.264 of 2013 (O&M)Date of decision: 28.01.2014 Rajesh Kumar Prop. M/s Madan Lal Rajesh Kumar, Dandial Road,Patran (Punjab) PAN: Vs, .....- Appe Commissioner of Income Tax, Patiala (Punjab) ....mesponden CORAM: HON’BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MS. JUSTICEK ANITA CHAUDHRY Present: Mr. Pankaj Jain and)Ms. Divya Suri, Advocates for the appellant. Ms. Savita Saxena, Advocate for the respondent.| Ajay Kumar Mittal,J, inThis appeal has been preferred by the assessee under Section260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated 29.4.2013, Annexure A.ll passed by the Income Tax AppellateTribunal, Chandigarh Bench ‘A’ (in short, “the Tribunal’) in ITANo.195/CHD/2011 for the assessment year 2007-08, claiming followingsubstantial questions of law:- “'1) Whether under the facts and circumstances of the casethe Tribunal's order is sustainable while making purchaseadditions, overlooking the provisions of section 145, andreturning unreasonable findings being de hors to the‘material facts' containing ‘material particulars"?11) Whether under the facts and circumstances of the case,the Tribunal's conclusions are unreasonable, while passing‘such orders’ under section 254(1) without exhibiting the‘application of mind’ to the ‘material on record’ and beingeven opposite to the assessment order and CIT(A) order? ) -A few facts relevant for the decision of the controversy asnarrated in the appeal may be noticed. The assessee 1s engaged in thebusiness of trading of bye-products of rice,|phakand|nakku.The income taxreturn was filed at an income of.L1,17,680/- which was processed underSection 143(1) of the Act. The assessee made purchases during the periodfrom 15.2.2006 to 3.2.2007 from M/s Luxmi Industries, Saroop Singh WalaRoad, Guru Harsahai, District Ferozepur. In consequence of the initiationof the assessment proceedings under section 143(3) of the Act, notice undersection 133(6) of the Act was issued on 25.8.2009 through speed post toLuxmi Industries, Ferozepur for explaining the transaction. The said noticewas received back with the remarks “Refused to receive” and on 9.9.2009,order sheet entry was made requiring the assessee to produce the creditorwith books of account for an amount of.an43,15,660/- namely LuxmiIndustries. Commission under section 131(1) (d) of the Act was issuedthrough letter No.[TO/W-3/PTA/2009-10/463 to Assistant Commissioner ofIncome Tax Circle II], Ferozepur requiring verification of the aforesaidamount of liability. Reply was given by the assessee to the effect that business was done. Second notice issued to M/s Luxm1 Industries was alsoreceived back with the remarks ‘refused to take delivery’. The statement ofthe assessee was recorded in consequence to the notice of final opportunityissued on 20.11.2009 wherein assessee furnished copy of account for thesubsequent year ending 31.3.2008. The summons under Section 131 of theAct issued through speed post to Dashmesh Transport Company, GuruHarsahai, calling for books, GR, Book Register for verification werereceived back with the remarks ‘there 1s no such transport company’. Theassessment was completed through order under Section 143(3) of the Actmaking therein addition for purchases amounting to Ly43,15,660/- and forL1,95,925/- towards the freight charges. Aggrieved by the order dated21.12.2009, Annexure A.3, the assessee filed appeal before theCommissioner of Income Tax (Appeals) |[CIT(A)]. Vide order dated31.12.2010, Annexure A.9, the appeal was allowed. Not satisfied with theorder, the revenue filed appeal before the Tribunal. Vide order dated29.4.2013, Annexure A.I1, the appeal was allowed upholding theassessment order and reversing the findings recorded by the CIT(A). Hencethe present appeal by the assessee. 3]Learned counsel for the appellant-assessee submitted followingthree arguments:- (1)M/s Luxmi Industries had paid the tax on the saidtransaction;transaction; 3]Learned counsel for the appellant-assessee submitted followingthree arguments:- (1)M/s Luxmi Industries had paid the tax on the saidtransaction;transaction; (11)Notices were sent to M/s Luxmi Industries but theyrefused to accept. Therefore, the said firm was inexistence; andrefused to accept. Therefore, the said firm was inexistence; and (111)Payments had been made to M/s Luxmi Industriesthrough cheques.through cheques. ITA No.264 of 2013 (O&M) 4.On the other hand, learned counsel for the respondent reliedupon decision of this Court 1n M/s J.R.Solvent Industries (P) Limited,Sangrur v. Cll, Patiala,ITR No.105 of 1997, decided on 16.4.2012 tosubmit that it was a pure finding of fact that no purchases were made fromLuxmi Industries, as claimed and, therefore, no substantial question of lawarises. 4S.After hearing learned counsel for the parties, we do not findany merit in the appeal. 6.|It would be apposite to refer to the relevant findings recordedby the Assessing Officer and the Tribunal, JoThe Assessing Officer while framing assessment vide orderdated 21.12.2009, Annexure A.3, noticed as under:- 2.5. From the above, it 1s emerged that the purchaseInvoices issued by M/s Luxmi Industries, Guru Harsahai, 1ncontinuous serial numbers after a gap ranging between oneto nine days, on different dates, are not the genuinepurchases. Similarly, the GRs issued by M/s DashmeshTransport Co., Guru Harsahai in continuous serial numbersafter a gap of days ranging between | to 9 days are not thegenuine one. It may not be out of place to mention here thatsummons under Section 131 of the Income Tax Act, 1961,dated 3.12.2009 were also issued through speed post toM/s Dashmesh Transport Company, Guru Harsahai, callingfor their books of account, GR books and booking register,for verification, fixing the case for 10.12.2009. However,the said envelop has returned back with the postalauthorities remarks ‘there 1s no such transport company’. Accordingly, an attempt has been made on randombasis to check the genuineness of the truck numbersmentioned in the GRs through which the goods have purportedly been transported. Accordingly, information hasbeen called for under section 133(6) of the Income Tax Act,1961, from district Transport Officer, Sangrur, 1n respect ofthe truck numbers pertaining to that station. However, it 1snoticed that the following Registration Numbers are not oftrucks but are the registration number of other vehicles, thedetail of which 1s given as under:- From the above, it has become very much clear that the GRsissued for carrying the goods are also not genuine asbesides having continuous serial numbers, the vehiclenumbers mentioned therein are also not of trucks but ofsome other vehicles.’ | Further, 1n addition to the aforesaid findings, the Tribunal vide order dated 29.4.2013, Annexure A.1l1 observed as under: “We have heard the rival submissions carefully. The CIT(A) has given his findings vide para 4.4. which 1s as under:-In view of the facts and circumstances of the case andrival submissions of both the Assessing Officer in hisremand report and the counsel in his_ writtesubmissions it 1s seen that the appellant has to a largeextent discharged the onus cast on him for showing thegenuineness of the purchases made. The appellant hasgiven plausible and reasonable explanation and hasaptly stated that he is not responsible for third party'sacts which are subsequent to the transaction done inthe year under consideration. The appellant has fairlyexplained from the books of account and all necessary order dated 29.4.2013, Annexure A.1l1 observed as under: “We have heard the rival submissions carefully. The CIT(A) has given his findings vide para 4.4. which 1s as under:-In view of the facts and circumstances of the case andrival submissions of both the Assessing Officer in hisremand report and the counsel in his_ writtesubmissions it 1s seen that the appellant has to a largeextent discharged the onus cast on him for showing thegenuineness of the purchases made. The appellant hasgiven plausible and reasonable explanation and hasaptly stated that he is not responsible for third party'sacts which are subsequent to the transaction done inthe year under consideration. The appellant has fairlyexplained from the books of account and all necessary vouchers produced before the Assessing Officerregarding the genuineness of the purchases. He hasmade all possible efforts to produce the necessaryevidence to discharge the onus cast upon him to provethe entries in his books of account. In view of thecategorical reply of the appellant which has not beenrebutted by the Assessing Officer there 1s no ground tomake the impugned addition. No material has beenbrought on record by the Assessing Officer to showthat these are of purchase vouchers not beingcontinuous or GR receipts of transporter not being inorder. There has been no conclusive evidence beforethe Assessing Officer to doubt the genuineness ofpurchases and treat the same as sham. The AssessingOfficer himself has accepted the subsequent paymentsmade by the appellant to the third party in thefollowing Assessing years either in cash or in chequeswhereby this liability has been discharged. In view ofall the averments of the learned counsel there is noscope left but to treat these purchases as genuinelyrecorded in the books of account. The addition 1s,therefore, directed to be deleted.’ A reading of above show that the learned CIT(A) hasallowed relief on general observations withOut meeting thespecific points raised by the Assessing Officer. First of allthe Assessing Officer categorically gave specificopportunities to the assessee to produce the party 1.e. M/sLuxmi Industries to prove the genuineness of the labilitywhich was not availed by the assessee. Thereafter theAssessing Officer sent enquiry letter under Section 133(6)through speed post which was returned by the postalauthorities with the comments ‘'refused to receive’. Thassessee had challenged this fact before the learned CIT(A)without providing any evidence and simply raising the issue that there was no evidence to show that M/s LuxmlIndustries has refused to receive the letter. We are of theopinion that remark of the postal authorities woulddefinitely constitute a good evidence. In any case theAssessing Officer has taken the caution by appointing thecommission through ACIT, Circle 3, Ferozepur vide letterNO [TO/W-3/PTA/2009-10/463 dated 169.2009. Thecomments of the CIT, Circle 3, Ferozepur has beenextracted at page 2 of the assessment order:- ‘In this regard, an effort was made to call for the booksof account by issue of summons under section 131 dated17.9.2009. The summons could not be served on the saidassessee and it was reported by the special messenger ofthis office that the premises M/s Luxmi Industries (A RiceSheller) is stated to have been closed down since last 6-7years and no business is done there. Another notice sentthrough speed post has been received back with thecomments ‘Refused to take delivery’. Then I alongwith myInspector personally visited Guru Harsahai and found thatthe premises of M/s Luxmi Industries, Guru Harsahai 1s 1ndilapidated condition and no business 1s being done there.Local enquiries made revealed that the Rice Sheller hasbeen closed down since long about 5-6 years back.Therefore, in the given circumstances, the informationrequired to be verified could not be verified. This is foryour information and necessary action. It is also informedthat the jurisdiction over this case vests with ITO, Ward III(1) Ferozepur. Yours faithfully, Yours faithfully, (Sukhdev Singh)Assistant Commissioner of Income JaxCircle II], Ferozepur.’ We fail to understand why the ACIT Ferozepur would show that Rice Mill has been closed if the same was still inbusiness. This clearly shows that M/s Luxmi Industries wasnot functioning at all. This 1s further verified that theassessee was given final opportunity and the assesseeappeared in person on 25.11.2009. In response to Q.No.7and answer, read as under: 'Q.No.7. In the balance sheet for the financial year2006-07 relevant for the assessment year 2007-08 ahability of<a43,15,660/- has been shown 1n the nameof M/s Luxmi Industry, Guru Harsahai (Ferozepur). Inthis regard, you were required to produce the creditoralongwith his books of account. However, you havefailed to produce the creditor. Since the onus to provethe genuineness of liability lies upon you, which youhave failed, why the liability ofLy43,15,660/- shouldnot be treated as unexplained, please clarify thesame? Answer: In this regard, it is stated that we havepurchased phuck and nakoo from M/s_ LuxmiIndustries, Saroop Singh Wala Road, Guru Harsahal(Ferozepur) during the financial year 2006-07 in bulk.We have tried to locate the said party but it isgathered from the local persons that the said party hasclosed its business and the whereabouts of the partyare not known. As such we are unable to produce theparty for verification before you. The above clearly show that the assessee had categoricallyadmitted before the Assessing Officer that the said partyhad closed its business and whereabouts of the party werenot known. However, before us, the learned counsel hadpointed out to pages | and 2 of the paper book which arecopies of the accounts of the assessee 1n the books of M/sLuxmi Industries 1n their letter heads. When it was clearlystated that whereabouts of M/s Luxm1 Industries were not traceable then how the assessee was able to obtain thesecopies of accounts. We fail to understand how the assesseecould take a contradictory stand without explaining thereasons for such contradictory stand. Even before us, noplausible explanation was offered to show that how beforethe Assessing Officer it was stated that M/s LuxmiIndustries was not traceable and whereabouts were notknow then how later they were found and some informationwas obtained from them. We further find that the assesseehad shown discharge of liability mainly through cash andcheques of<a7.60 lakhs were paid. All these facts clearlyshow that infact no purchases were made and it 1s a case ofbogus liability.” It was further observed as under:- “10. In addition to above the Assessing office has also noticedthat M/s Luxmi Industries had issued bills 1n a seriatim and thedetails had been noted at pages 3 and 4 of the assessment orderwhich are as under:- From above it is clear that the bills from 216 to 236between the period of one month with gap of 4-5 days inbetween were issued to the assessee. If M/s Luxmi Industrieswas continuously selling the goods then how the bills can beissued to the assessee only. Though it may be correct that salestax barrier report may pertain to the goods carried out of theState and therefore, would not contain the names of the assesseebut at the same time endorsement made at various tax barriersin the form of 'radhart' are also conspicuously missing from theGRs issued by M/s Dashmesh Transport Co. (Refer GR at page12 of the paper book). In these circumstances, we are of theopinion that the learned CIT(A) has wrongly accepted theliability as genuine without giving any reason. Accordingly weset aside the order of the learned CIT(A) and restore that of theAssessing Officer.” Q_ Q_ Q_A perusal of the impugned order shows that the Tribunal afterconsidering the arguments made on behalf of the assessee had rejected thesame. No material had been produced to substantiate that payments weremade by cheque to M/s Luxmi Industries. The onus was upon the assesseeto have produced the material to establish that the purchases were madefrom M/s Luxmi Industries. As noticed by the Assessing Officer, the ITA No.264 of 2013 (O&M) 11 vehicles on which the alleged goods were said to have been transportedwere either scooters or tractors and none of them related to the trucks asclaimed by the assessee and moreover M/s Dashmesh Transport Companythrough whom the goods were said to have been transferred was a nonexistent entity. The findings of fact recorded by the Tribunal cannot befaulted. In view of the aforesaid pure findings of fact, no interference 1scalled for. No substantial question of law arises. 10.Accordingly, the appeal stands dismissed.J (Ajay Kumar Mittal)Judge January 28, 2014 (Anita Chaudhry) Judge|