Joneja Bright Steel Pvt. Ltd v. Commissioner Of Income Tax, Faridabad

IN THE HIGH COURT OF PUNJAB & HARYANA ATCHANDIGARH Date of Decision: 4[th]September, 2015. (1)ITA No. 205 of 2014 Joneja Bright Steel Pvt. Ltd. Appellant Versus. Commissioner of Income Tax, Faridabad ..Respondent (2)ITA No. 423 of 2014 Joneja Bright Steel Pvt. Ltd. Appellant Versus Commissioner of Income Tax, Faridabad ..Respondent CORAM:HON’B LE MR. JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICEHON’BLE MR. JUSTICE G.S .SANDHAW ALIA Present :Mr. Sanjay Bansal, Senior Advocate with Mr. Rajiv Sharma, Advocate, for the appellant. Mr. Teyjinder Joshi, Advocate, tor the respondent. _ TR OS S.J.VAZIFDAR, ACTING CHIEF JUSTICE Both the appeals are filed by the assessee against the common. order and judgment of the Income Tax Appellate Tribunal in respect of theassessment year 2008-09. |We are constrained to remand the matters to the Tribunal assome facts and questions of law have not been considered. Moreover, furtherevidence was called for by the order of the earlier Division Bench dated 26.11.2014. We may have considered the matters ourselves. However, as the issues of fact and appreciation of evidence are involved, it would beappropriate that the same are decided by the authorities under the IncomeTax Act, 1961 (hereafter referred to as ‘the Act’). We are informed that the Tribunal itself had remanded a similar|matter to the Assessing Officer. 3In ITA No. 205 of 2014, the appellant contends that thefollowing questions of law arise for consideration:- A.Whether the order passed by the Hon’ble Tribunal isperverse in nature as the Tribunal nas passed theimpugnedorder|witnoutappreciatingthe.evidences/pleadings and factual findings of CIT(A) andin contravention of the provisions of law? B..Whether Hon'ble Tribunal has erred in dismissing tneassessee’sS appeal and in upholding the action of thelearned CIT(A) in confirming the rejection of books of.ACCOUNT|of|theaSS@SSECandinsustainingthedisallowance of Rs. 10,000,00/-? 4 In ITA No. 423 of 2014, the appellant contends that the following question of law arise for consideration:- A.Whether the order passed by the Hon’ble Tribunal isperverse in nature as the Tribunal has passed theimpugned.order|withoutappreciatingtheevidences/pleadings and factual findings of CIT(A) andin contravention of the provisions of law?| B..Whether Hon'ble Tribunal has erred in reversing tnewell reasoned order of learned CIT(A) and has erred inlaw in disallowing purchases of Rs. 1,14,82,688/-? 5 _The Assessing Officer rejected the books of account anddisallowed the expenses with regard to the purchase of the material by theappellant to the extent of Rs.1,14,82,688/-. The assesse contended that thegoods of the value of Rs.90,43,204/-, Rs. 6,90,253/- and Rs. 17,49,231/-.respectively, were purchased by it trom M/s Rama Enterprises, M/s AGS”Enterprises and M/s Royal Industries Corporation. After rejecting the booksof account under Section 145(3) of the Act, the Assessing Officer added thesaid amounts to the assessee’s income. The assessment was also made under|Section 68 of the Act. 6_The Commissioner of Income Tax (Appeals) upheld the orderof the Assessing Officer rejecting the books of account but sustained theaddition of Rs.10,00,000/- on account of the rejection of books. The CIT(Appeals) held that the provisions of Section 68 were not applicable tosundry creditors. The CIT (Appeals) also held that the purchases from thethree parties were genuine. The orders of the Assessing Officer in this regardwere set-aside. The Assessee and the Revenue, therefore, filed appealsbefore the Income Tax Appellate Tribunal. The Tribunal dismissed theassessee’s appeal and allowed the appeal filed by the Revenue. ofThe main issues before the authorities were whether the books|had been rightly rejected and whether the addition has been correctly madeeven assuming that the books are rightly rejected. Section 68 of the Act hasnot been considered by the Tribunal. | ofThe main issues before the authorities were whether the books|had been rightly rejected and whether the addition has been correctly madeeven assuming that the books are rightly rejected. Section 68 of the Act hasnot been considered by the Tribunal. | 8As we mentioned earlier, the assessee claimed havingpurchased the material from three entities 1.e. M/s Rama Enterprises, M/s AGS Enterprises and M/s Royal Industries Corporation (we will forconvenience hereafter referred to them collectively as “the vendors’). TheAssessing Officer made the enquiries from the Excise & Taxation Officer-cum-Assessing Authority on the basis of the TIN’s Numbers shown in thepurchase invoices. It was found that the purchases had been made by thevendors and thereafter in turn sold to the appellant. The appellant paid theamounts which were credited in the bank accounts of the vendors. It appearsthat thereafter these amounts were withdrawn/paid over/credited to anotherentity, namely, M/s Maa Durga Trading Company who in turn withdrew thesame almost immediately. The summons were issued under Section 131(1) of the Actwhich admittedly could not be served by the Inspector who reported that thenames of the vendors appeared at the addresses given but they had left thepremises. The Excise & Taxation Authorities confirmed that the purchaseshad been made by the vendors from M/s Maa Durga Trading Company.However, the enquiries made by the Assessing Officer revealed that M/sMaa Durga Trading Company did not exist at any of the given addresses andthat the Excise & Taxation Authorities reported that the purchases of M/sMaa Durga Trading Company were not found to be genuine. It 1s importantto note that what was found not to be genuine were the purchases made byM/s Maa Durga Trading Company. It is difficult to ascertain whichpurchases were found not to be genuine. In other words, it is difficult toascertain that all or only some of the purchases of M/s Maa Durga TradingCompany were fake. It 1s also not clear whether the only stock lying with thevendors was purchased from M/s Maa Durga Trading Company or whether the vendors had also acquired stock from other sources as well. Evenassuming that their purchases from M/s Maa Durga Trading Company werefake, 1t would not necessarily reflect adversely upon the sales by the vendorsto the assessee. This evidence would be relevant while considering whetherthe purchases by the assessee were genuine or not. — 9By an order dated 26.11.2014, a Division Bench of this Courtnoted that a notice under Section 131 of the Act had been served upon M/sRama Enterprises. We are informed that PAN numbers were called for andhave now been produced. The vendors appear to have paid tax. The effectthereof would have to be considered. It would now be possible to ascertainin a more satisfactory manner the genuineness of the entries 1n the assessee’sbooks of account as well as the genuineness of the transactions. 10.While setting-aside the disallowance of the deductions onaccount of the purchases, the CIT (Appeals) undertook a detailed analysis ofthe production figures for the previous assessment years and for theassessment year in question. Having done so, it arrived at the GP ratio andinferred that the appellant had received the material corresponding to thepurchases made from the vendors. It was found for instance that theexistence of the vendors stood confirmed by the Excise & Taxation Officer.The assessee would rely upon the PAN numbers which were now producedduring the course of these appeals. The excise record was also analysed bythe ClT(Appeals). The CIT(Appeals) undertook a detailed analysis incoming to this conclusion. However, some of the crucial aspects have notbeen considered by the Tribunal. The Tribunal for instance held that thedetailed enquiry made by the Assessing Officer by issuing summons under Section 131 of the Act to the vendors and also the enquiry made from thebank authorities establishes that the purchases were not genuine. The orderdoes not indicate any reasons in support of this finding and in any eventvarious aspects which have been dealt with by the ClT(Appeals) have notbeen taken into consideration while arriving at this finding. Further, theeffect of the finding that the payments by the assessee to its vendors and ofM/s Maa Durga Trading Company having withdrawn the same 1s not dealtwith satisfactorily. Merely because M/s Maa Durga Trading Companywithdrew the amount which was paid by the assessee to its vendors wouldnot lead to the conclusion that the transactions between the assessee and thevendors were fictitious. Similarly, the Tribunal noted that the confirmationreceipts of the said supplies were signed by different persons while the bankaccounts were operated by other persons. This fact has been held against theassessee. This finding would be perverse. There is nothing unusual indifferent persons operating the bank accounts of a company and signing theconfirmation receipts of the supply of goods. 11.As we mentioned earlier, Section 68 of the Act has not beenconsidered at all. Had the only question in this appeal involved theinterpretation of section 68, we would have dealt with the issue ourselves.However, that is not the only question 1n these proceedings. 12.In the circumstances, the impugned order 1s set-aside and thematter is remanded to the Income Tax Appellate Tribunal for fresh decisionafter affording the parties an opportunity of being heard. It will be open tothe parties to produce the PAN Numbers before the Tribunal. It is clarifiedthat it would be open to the Tribunal to either decide the matter itself or remand the same to the Assessing Officer or to the Commissioner of Income Tax (Appeals). (S.J.VAZIFDAR)ACTING CHIEF JUSTICE 04.09.2015 |%&'()*+,&- (G.SSANDHAWALIA) |JUDGE