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Northern Strips Ltd., 1, Central Market, West Avenue Road, Punjabi Bagh, New Delhi. Vs Asstt.Commissioner of Income Tax, Central Circle-13, New Delhi.
November, 17th 2014
ITA 3588/Del/2012
Asstt.Year: 2005-06

                 IN THE INCOME TAX APPELLATE TRIBUNAL
                        DELHI BENCH `E' NEW DELHI

             BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
                                AND
            SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                            I.T.A.No.3588/Del/2012
                           Assessment Year : 2005-06

Northern Strips Ltd.,             vs Asstt.Commissioner of Income Tax,
1, Central Market,                   Central Circle-13,
West Avenue Road,                    New Delhi.
Punjabi Bagh,
New Delhi.
(PAN: AAACN0642C)
(Appellant)                             (Respondent)

               Appellant by: Shri Ved Jain, Sh. V. Chourasiya
               Respondent by : Shri Gunjan Prashad, CIT DR

                                 ORDER


PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

       This appeal has been preferred by the assessee against the order of

CIT(A)-I, New Delhi dated 1.5.2012 in Appeal No.99/11-12 for AY 2005-06.


2.     In the beginning of the argument, ld. Counsel for the assessee submitted

that the assessee does not want to press ground no. 1 to 5, being legal grounds

and we dismiss the same as not pressed.


3.     On careful perusal of the grounds of the assessee on merits, we observe

that except ground no. 6(i), other grounds of the assessee are argumentative and

supportive to this main ground which reads as under:-
                                                                               1
ITA 3588/Del/2012
Asstt.Year: 2005-06

              "6(i) On the facts and circumstances of the case, the
         learned CIT(A) has erred both on facts and in law in
         confirming the disallowance of amount of Rs.66,01,449/- on
         account of purchases made by the assessee company."
4.     Briefly stated the facts giving rise to this appeal are that a search and

seizure operation u/s 132 of the Income Tax Act, 1961 was carried out in the

Swastik Pipes Group of cases on 28.2.2008. Subsequently, the case of the

assessee including other related cases was centralised by the CIT, Delhi-V, New

Delhi vide order dated 17.6.2009. In response to the notice served on the

assessee u/s 153A of the Act, the assessee company filed return of income

declaring a total income of Rs.14,25,528/- on 28.1.2010. Further, a notice u/s

143(2) and 142(1) along with questionnaire was also served on the assessee.

The AO noticed that the assessee has claimed that the sales have been under

reported by Jindal Polyfilms Ltd. but has not filed any evidence or confirmation

from M/s Jindal         Polyfilms regarding alleged inflated purchase of

Rs.55,72,112/-. The AO held that the explanation offered by the assessee is an

afterthought and the assessee inflated purchases to the extent of Rs.66,01,449

and the same was disallowed. Being aggrieved by the above assessment order,

the assessee preferred an appeal before the CIT(A) which was also dismissed by

passing the impugned order. Now, the empty handed assessee is before this

Tribunal with the main grounds as reproduced hereinabove.





5.     We have heard arguments of both the sides and carefully perused the

relevant material placed on record. Ld. Counsel for the assessee submitted that

                                                                               2
ITA 3588/Del/2012
Asstt.Year: 2005-06

the AO wrongly observed that the assessee has inflated its amount of purchase

as the assessee submitted reconciliation and rectification from Jindal Polyfilms

Ltd. which was wrongly considered an afterthought.         Ld. Counsel further

contended that the CIT(A) has also erred in not taking into consideration the

rectification of mistake of Rs.55,72,112/- confirmed by Jindal Polyfilms Ltd.

vide its letter dated 28.12.2010 (Paper Book page no. 80 and 81) whereby it

was confirmed beyond doubt that the total sales made by the seller Jindal

Polyfilms Ltd. to the assessee were of Rs.2,66,65,078 as while submitting

details on earlier occasion, it has left out purchases of Rs.55,72,112/- in the

month of September, 2004. Ld. counsel has drawn our attention towards paper

book page no. 103 and submitted that in the FY 2004-05 relevant to assessment

year under consideration i.e. 2005-06, the sale of September 2004 to December

2004 has not been reflected in the relevant column in the details available of

month wise sales made by M/s Jindal Polyfilms Ltd. to the assessee. Ld.

Counsel further pointed out that this mistake was reconciled and rectification by

M/s Jindal Polyfilms Ltd. through its letter dated 28.12.2010 was ignored by the

authorities below.    Ld. Counsel finally submitted that the orders of the

authorities below may be set aside by holding that the total amount of sales

made by the assessee during financial year 2004-05 was Rs.2,66,65,078/-.


6.     Replying to the above, ld. DR supported the orders of the authorities

below and submitted that the assessee has not filed any proof in support of


                                                                               3
ITA 3588/Del/2012
Asstt.Year: 2005-06

short reported sale and no evidence of revised confirmation from M/s Jindal

Polyfilms Ltd. had been filed before the AO. Ld. DR further contended that the

search operation in the case of assessee company had taken place on 28.8.2008;

the claim of the assessee that the purchases overbooked stand rectified on

31.3.2009 was only an afterthought explanation to controvert the findings and

outcome of the search proceedings. The DR further contended that the assessee

has not offered any explanation for the inflation in the purchases of

Rs.2,44,106/-.


7.     On careful consideration of above rival submissions, we observe that the

main controversy surrounds the allegation of the AO that the assessee has

inflated its purchases by the amount of impugned addition. The AO also held

that the explanation offered by the assessee was an afterthought and no

confirmation, proof or detail was filed before the AO during the assessment

proceedings, hence the AO made disallowance of part of alleged inflated

purchase.


8.     During the first appellate proceedings, the CIT(A) rejected the

explanation of the assessee and held that the assessee has not been able to

establish through the bank statement that it has paid an amount of

Rs.2,76,94,515/- to M/s Jindal Polyfilms Ltd. which would have served as a

documentary evidence supporting the contention of the assessee. The CIT(A)

further held that no such exercise was carried out either at the assessment stage

                                                                               4
ITA 3588/Del/2012
Asstt.Year: 2005-06

or during the appellate stage. The CIT(A) also held that if M/s Jindal Polyfilms

Ltd. has shown a higher amount of sales to the assessee company in the revised

letter, then they should have also revised the return of income by increasing

their profit to that extent and no such exercise has been carried out by M/s

Jindal Polyfilms Ltd.


9.     Ld. DR has not disputed that the letter dated 28.12.2010 contained in

paper book page no. 80 to 81 was submitted before the AO and the CIT(A).

From the letter dated 12.11.2010 of M/s Jindal Polyfilms Ltd. addressed to the

AO shows that in the FY 2004-05, the sale of June 2004 to August 2004 and

January 2005 and February 2005 have been reflected but sale of September

2004 to December has not been mentioned therein. In the revised letter dated

28.12.2010, M/s Jindal Polyfilms Ltd. has mentioned revised sale of September

2014 as Rs.55,72,112/-.      This fact has not been properly considered and

adjudicated by the authorities below.      We are not in agreement with the

observations of the CIT(A) that the assessee should have established through

the bank statement that it has paid an amount of Rs.2,76,94,515/- to M/s Jindal

Polyfilms Ltd. as the assessee is claiming purchases of Rs. 2,66,65,078/-. We

also note that without verification of relevant confirmation in a proper manner,

it cannot be said and presumed that the assessee has not established this fact that

the assessee made purchases of Rs.2,66,65,078/- by supportive evidence and

details including bank statement. The CIT(A) went on hyper technical approach


                                                                                 5
ITA 3588/Del/2012
Asstt.Year: 2005-06

while observing that seller M/s Jindal Polyfilms Ltd. should have also revised

their return of income by increasing their profit to the extent of higher amount

of sales to the assessee company of the present appeal because this is the

prerogative of Ms. Jindal Polyfilms Ltd. and its AO to verify and examine the

higher amount of sales as reconciled and rectified by the seller M/s Jindal

Polyfilms Ltd. from its assessment record. This exercise cannot be conducted

either by the assessee or by the AO of the present assessee. The authorities

below have not doubted the contents and amount of sales by M/s Jindal

Polyfilms Ltd. to the assessee as stated in the confirmation dated 28.12.2010,

hence, the same cannot be rejected at the threshold by merely holding that the

confirmation is an afterthought only because it was filed after more than two

years. The AO should have verified and reconciled the same from the bank

statement of the assessee and also by verifying the amount paid to M/s Jindal

Polyfilms Ltd. by the assessee towards purchases pertaining to relevant

financial year i.e. 2004-05 related to AY 2005-06, the assessment year under

consideration.





10.    In view of above, we observe that the revenue authorities failed to

appreciate the rectification and reconciliation given by the seller M/s Jindal

Polyfilms Ltd. regarding revised sale amount of September 2004 in a proper and

judicious manner.     Thus, we are of the considered opinion that the

quantification of amount of purchases of the assessee during F.Y. 2004-05


                                                                               6
ITA 3588/Del/2012
Asstt.Year: 2005-06

requires proper and detailed verification and examination at the end of AO and,

therefore, the issue is restored to the file of AO with a direction that the AO

shall examine and verify the amount of purchases of the assessee emerged from

books of accounts, confirmation and bank statement etc., providing opportunity

of being heard for the assessee and without being prejudiced with the earlier

assessment order and impugned order. Accordingly, sole ground no. 6(i) is

deemed to be allowed for statistical purposes.


11.        In the result, the appeal of the assessee on ground no. 1 to 5 is partly

dismissed and partly deemed to be allowed for statistical purposes on ground

no. 6(i) of the assessee.


           Order pronounced in the open court on 14.11.2014.

      Sd/-                                                     Sd/-

(G.D. AGRAWAL)                                  (CHANDRAMOHAN GARG)
VICE PRESIDENT                                       JUDICIAL MEMBER

DT. 14th NOVEMBER, 2014
`GS'
Copy forwarded to:-
      1.   Appellant
      2.   Respondent
      3.   C.I.T.(A)
      4.   C.I.T.
      5.   DR
                                                      By Order



                                                      Asstt.Registrar


                                                                                  7

 
 
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