The Commissioner Of Income Tax-Iii, Ludhiana v. Bharat Bhushan

In the High Court of Punjab and Haryana, at Chandigarh Income Tax Appeal No. 183 of 2014 Reserved On: 20.7.2015 Date of Decision: 5.8.2015 The Commissioner of Income Tax-III, Ludhiana ... Appellant(s) Versus Bharat Bhushan, Proprietor M/s Khubi Ram Johri Lal ... Respondent(s) CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE. HON’BLE MR. JUSTICE G.S. SANDHAWALIA. Present: Mr. Rajesh Katoch, Advocate for the appellant(s). Mr. Rohit Jain, Advocatefor the respondent(s). G.S.Sandhawalia, J. 1.The present appeal, filed by the Revenue, is against the orderof the Income Tax Appellate Tribunal, Amritsar vide which the assesseehas been granted the benefit by deleting the additions made of a sum of` 2,64,95,897/-. The Tribunal came to the finding that the sugarpurchased had been duly recorded in the books of accounts, which areduly audited; there is nothing on record to show that the purchases hadbeen made outside the regular books of accounts; in the absencerejection of account books and of any adverse material, the addition ofthe income was held not to be justified. 2.The substantial questions of law are sought to be raised by theRevenue for consideration of this Court are as under:- “i)Whether on the facts and in the circumstances of ;the case the ITAT is right in law in not considering ii) iii) iv) v) that credit purchases and sales stated to berecorded in the books of account are shamtransactions and an afterthought after the seizure ofgoods by Food & Civil Supplies Department. Whether on the facts and in the circumstances ofthe case the ITAT is right in law in not consideringthe ratio of the decision of the Hon'ble SupremeCourt in the case of Durga Dass More, 82 ITR 540and in the case of Sumati Dayal, 214 ITR 801 whichwere relied upon by AO and CIT(A). Whether on the facts and in the circumstances ofthe case the ITAT is right in law in not consideringthe basic fact that the entire subject matter aroseonly after the seizure of sugar by Food & CivilSupplies Department and motive was to wriggle outof the situation. Whether on the facts and in the circumstances ofthe case the ITAT is right in law in ignoring the factthat the assessee himself stated before Departmentof Food and Civil Supplies on 17.9.2009 that he isthe owner of entire quantity of 97500 qtls. of sugarand further stated that he had no knowledge aboutstorage of more than 2000 qtl. of sugar and laterchanged stand of ownership of 53 parties to coverthe matter of storage of not more than 2000 qtls. aswell as source of funds for investment of 97500 qtls.of sugar. Whether on the facts and in the circumstances ofthe case the ITAT is right in law in not consideringthe statements given by the assessee beforeDepartment of Food and Civil Supplies that havedirect bearing to decide issue particularly in view ofjudgment of Supreme Court in the case of Sumati Dayal, 214 ITR 801 that held that AO can look intosurrounding circumstances.surrounding circumstances. vi)Whether on the facts and in the circumstances ofthe case the ITAT is right in law in ignoring the factthat all the parties who purchased and sold sugarhave done transactions without making actualpayments and such kind of transactions i.e. as iswhere is basis were never done in their businessand thus afterthought.the case the ITAT is right in law in ignoring the factthat all the parties who purchased and sold sugarhave done transactions without making actualpayments and such kind of transactions i.e. as iswhere is basis were never done in their businessand thus afterthought. Dayal, 214 ITR 801 that held that AO can look intosurrounding circumstances.surrounding circumstances. vi)Whether on the facts and in the circumstances ofthe case the ITAT is right in law in ignoring the factthat all the parties who purchased and sold sugarhave done transactions without making actualpayments and such kind of transactions i.e. as iswhere is basis were never done in their businessand thus afterthought.the case the ITAT is right in law in ignoring the factthat all the parties who purchased and sold sugarhave done transactions without making actualpayments and such kind of transactions i.e. as iswhere is basis were never done in their businessand thus afterthought. vii) Whether on the facts and in the circumstances ofthe case the ITAT is right in law in ignoring the factsthat purchases shown by the assessee are nothingbut accommodation by various parties as these weremere bills without the transactions of payments.the case the ITAT is right in law in ignoring the factsthat purchases shown by the assessee are nothingbut accommodation by various parties as these weremere bills without the transactions of payments. viii) Whether on the facts and in the circumstances ofthe case the ITAT is right in law in giving a findingthat the Department has accepted the books ofaccount whereas the AO in para 1.9 summarized theentire matter and gave its finding in para 2.1 and 3and thus did not accept the books of account.”the case the ITAT is right in law in giving a findingthat the Department has accepted the books ofaccount whereas the AO in para 1.9 summarized theentire matter and gave its finding in para 2.1 and 3and thus did not accept the books of account.” 3.The respondent-assessee, proprietor of M/s Khubi Ram JohriLal was doing the business of trading sugar, ghee and other items at oldGrain Market, Moga. The assessee filed his return of income for theassessment year 2010-11 on 13.10.2010 declaring the taxable incomeof ` 1,36,79,960/-, which was processed under Section 143(1) of theIncome Tax Act, 1961 (hereinafter referred to as “the Act”). During theassessment year 2010-11, a raid was conducted on its godown atLudhiana on 17.9.2009. The sugar weighing approximately 97500quintals was found and the godown was sealed by the Food & CivilSupplies Department under Section 7 of the Essential Commodities Act, 1955. A criminal case was also registered at Jodhewal Basti PoliceStation, Ludhiana against the assessee and the investigation wasconducted by the Revenue. In view of the information received, thenotice under Section 143(2) was issued on 5.9.2011. 4.The assessee took the plea that he had purchased the sugaron 9.8.2009 from 45 unrelated parties and had sold the major portionthereof to 53 other parties before the date of the raid. However, thesugar had not been yet lifted and no payment had been made by any ofthe parties to the assessee. The details of the parties was given to theAssessing Officer. The statement of one Vishal Gupta, who wasManager with M/s Gitansh International Limited, who was owner ofthe godowns which had been let out, was also taken into considerationby the Assessing Officer. The persons, who had purchased the sugarand sold on as is where is basis were also examined. The AssessingOfficer disbelieved the assessee that the sugar had been purchased oncredit though noticing that the parties had issued bills and accordinglyadded a sum of `26,64,68,073/- in the assessment order dated30.12.2011. 5.The assessee took the matter in appeal, which was dismissedon the ground that Bharat Bhushan, the proprietor, before the Food &Supplies Department, had admitted that he owned the sugar which hadbeen purchased from different sources but never stated that he had soldthe same. It was only on afterthought in the form of sale invoices beforethe date of seizure which had been structured with an intention toescape the rigors of law with reference to hoarding of sugar. The 5.The assessee took the matter in appeal, which was dismissedon the ground that Bharat Bhushan, the proprietor, before the Food &Supplies Department, had admitted that he owned the sugar which hadbeen purchased from different sources but never stated that he had soldthe same. It was only on afterthought in the form of sale invoices beforethe date of seizure which had been structured with an intention toescape the rigors of law with reference to hoarding of sugar. The godown owner having stated that the godowns had been let out on1.8.2009 in vacant position and the claim that the sales had beencancelled leading to the rejection of the profits and addition of the saidamount was also upheld while upholding the finding that the investmentfor the purchase of sugar was an unexplained investment. 6.The Tribunal allowed the said appeal as noticed above bytaking into consideration the factors that there was no dispute that therewas a purchase from the 45 parties from whom the appellant hadpurchased the sugar. The same had already been purchased from oneM/s S.M.Edible Private Limited and the sugar was already lying in thegodowns which had been taken on rent from M/s Gitansh InternationalLimited. The parties were the traders duly registered with the Sales TaxAuthorities whose TIN numbers are also mentioned in the bills issued.The VAT returns had been accepted by the authorities of the purchasesdeclared by the appellant. The parties having sold the sugar to theappellant had also been confirmed by recording the statement of thesaid parties by the department itself apart from the fact that thedocuments showing its sale. The copy of the account books were alsotaken into consideration. The factum of rent receipts issued by M/sGitansh International Limited to the said vendor and the confirmationsand the ledger accounts of the appellant in the books of the saidvendors were also noticed. Merely because the bills were not shown tothe raiding party which is the Department of Food & Civil Supplies andthe statement given to the said department would not have anyapplicability for deciding the issue in hand. The question involved before the said authority was whether that much amount of sugar waspermissible to be kept. 7.Once the delivery of the sugar was taken over on as is whereis basis at the godowns itself by taking the same on rent with theconsent of the landlord and it has been noticed that the Manager'sstatement was recorded twice and he got confused as to the factumwhether the same was lying vacant or in possession for the purposeother than specified which was wrongly interpreted by the AssessingOfficer. It was rightly noticed that a letter had been written on 22.9.2009by the assessee that the sugar had already been sold to various partiesand a complete list of the parties had been given to the DeputyCommissioner/Deputy Magistrate on 1.10.2009. Once the said partieshad confirmed the purchase which had been duly supported by the billsand they were regular traders and were unrelated to each other,therefore, the allegation made was held to be without any basis. 8.The said findings pertaining to the goods lying at the spot andwhether the purchases had been made on credit basis and thereaftersold are all questions of facts which are now being raised, which havebeen extensively dealt with in detail by the Tribunal. The findings havebeen recorded that the sellers and purchasers are all dealing in sugarand the purchases had been accounted for in the regular books ofaccounts maintained, duly audited and thus, there is nothing to showthat the quantity of sugar had been purchased and sold outside thebooks. Merely because the assessee was being prosecuted for keepingthe sugar beyond the permissible limit and was trading in the same by 8.The said findings pertaining to the goods lying at the spot andwhether the purchases had been made on credit basis and thereaftersold are all questions of facts which are now being raised, which havebeen extensively dealt with in detail by the Tribunal. The findings havebeen recorded that the sellers and purchasers are all dealing in sugarand the purchases had been accounted for in the regular books ofaccounts maintained, duly audited and thus, there is nothing to showthat the quantity of sugar had been purchased and sold outside thebooks. Merely because the assessee was being prosecuted for keepingthe sugar beyond the permissible limit and was trading in the same by sale and purchase on as is where is basis and as per his own case oncredit could not entitle the Assessing Officer to add the value of thesugar to his undisclosed income which was done on the basis ofconjectures. The said finding has been rightly reversed by the Tribunalafter going into the factual matrix of the case which in the facts andcircumstances cannot be held to be perverse and no substantialquestion of law arises for consideration in our opinion. 9.In the circumstances, the appeal is dismissed by holding thatno substantial questions of law arise for consideration. August 5, 2015“DK” (S.J. Vazifdar) Acting Chief Justice Judge (G.S.Sandhawalia)