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USHA IRON & FERRO METAL CORP LTD Vs. CIT
December, 27th 2013
$~11
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                              DECIDED ON: 02.12.2013
+                   ITA 132/2011, C.M. APPL.1020/2011
       USHA IRON & FERRO METAL CORP LTD               ..... Appellant
                     Through: Mr. Prakash Kumar, Advocate.

                          versus

       CIT                                               ..... Respondent
                          Through: Mr. Rohit Madan, Advocate.


       CORAM:
       HON'BLE MR. JUSTICE S. RAVINDRA BHAT
       HON'BLE MR. JUSTICE NAJMI WAZIRI

       MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)

       1.      The assessee in this appeal under Section 268 of the Income
       Tax Act urges that two questions of law arises for consideration.
       The first, it is submitted, pertains to the correctness of the ITAT
       directions to add Rs.22 lakhs towards alleged bogus freight and
       forwarding expenditure by an estimating exercise. The second
       question of law urged is that the lower authority fell into error in
       adding Rs.6,84,22,895/- on account of outstanding credit balance in
       the name of one M/s Smriti Sales Private Limited.
       2.      The facts necessary for the purpose of deciding the present
       appeal are that on 14.02.2001, the appellant's premises and other
       group companies numbering about 250 - were subject to search and







ITA 132/2011                                                          Page 1
       seizure proceedings.      Subsequently, the appellant and the other
       concerns which were subject to the search were issued with notice on
       30.08.2001 under Section 158 (BC) requiring the furnishing of return
       of income including undisclosed income for the period 1.4.1990 to
       14.2.2001. Apparently, during the course of the proceedings having
       regard to the complexity of accounts, special audit under Section 142
       (2) (A) of the Income Tax Act were also ordered. Though, this Court
       is not directly concern with details of those facts, yet to the extent it is
       relevant is worth noticing that the appellant did not cooperate with the
       Special Auditors who had to proceed with some difficulty and
       nevertheless filed the report within the time allocated.
       3.      On 16.10.2013, the Assessing Officer framed the assessment
       order directing a total addition of Rs.9,71,23,895/-. The appellant in
       these proceedings challenges the addition on account of alleged bogus
       freight and forwarding expenditure to the tune of Rs.22 lakhs for the
       said period and towards unexplained cash credit - added back by the
       Assessing Officer and upheld by the CIT to the tune of
       Rs.6,84,22,895/-.
       4.      It is urged that so far as the addition of Rs.22 lakhs goes, the
       Assessing Officer and the higher authorities fell into error in relying
       solely on the testimony and deposition of one Vineet Bhargava who
       stated that the freight expenses did not reflect actual expenditure or
       transactions. It was sought to be highlighted that the pre condition
       for adding back such amounts or disallowing the expenditure so that it
       could attract Section 68 was the exactitude with which the transaction
       could be pin pointed.        The counsel further submitted that the



ITA 132/2011                                                                 Page 2
       deposition of Vaibhav Bhargava cannot be termed as conclusive in
       these circumstances since the answer to question no.5 relied upon by
       the Assessing Officer and other officials nowhere indicated that the
       expenditure he was referring to pertains to the appellant.
       5.      On the second issue, i.e., the addition of Rs.6,84,22,895 under
       Section 68 of the Act, learned counsel urged that this amount was
       reflected even in the previous balance sheet, as on 31.3.2000 and is
       subject to regular assessment.       It was submitted that in these
       circumstances, the Assessing Officer dealt with this amount and
       concluded that the same have to be added back under Section 68 of
       the Act.
       6.      We notice from the reading of the assessment order - which is a
       fairly detailed one and has discussed threadbare the evidence placed
       before the authorities. The reference to the sum of Rs.22 lakhs was
       in the context of amounts claimed to have been spent towards freight
       and forwarding charges.      Although, the succeeding question and
       answers had mentioned specific companies, neither could the
       appellant dispute nor is it disputed before us that the sum of Rs.22
       lakhs pertains only to the appellant company. This was what was
       claimed as actual freight and forwarding charges which the concerned
       employee Vineet Bhargava clearly disclaimed in the course of his
       deposition. The appellant does not dispute that the Vineet Bhargava
       could have been subjected to cross examination.          His testimony
       remained unrebutted and unchallenged. In these circumstances, the
       addition in the opinion of this Court cannot be termed as unwarranted
       or contrary to law.






ITA 132/2011                                                             Page 3
       7.      So far as the addition of Rs.6,84,22,895/- goes, there is no
       dispute in the first place to the fact that an amount was received
       towards the credit balance.      However, the appellant's submission
       today appears to be that this credit balance had been reflected in the
       previous years' books and also subjected to assessment. That too in
       the opinion of this Court cannot be determinative because as on
       14.02.2001 as well as in the revised income tax returns and the
       relative supporting documents filed by the assessee, said amount
       appeared and was claimed.             That such amount remained
       unchallenged in the previous proceedings, in the opinion of this
       Court, no way shifted the burden of proving what the appellant
       claimed as a credit of Rs.6,84,22,895/- as on the date of search and
       seizure.    It was concededly unable to substantiate such credit in
       favour of third party concerned, i.e., M/s Smriti Sales Pvt. Ltd. That
       concern appears to have been a bogus one and part of the Usha Group
       Devices to claim unwarranted expenditure and thus reduce tax
       burden.
       8.      In view of the above discussion, this Court is satisfied that no
       question of law arises for interpretation in this appeal; the same is
       consequentially dismissed with no order as to costs.

                                                     S. RAVINDRA BHAT
                                                          (JUDGE)


                                                       NAJMI WAZIRI
                                                          (JUDGE)
       DECEMBER 02, 2013/vks/




ITA 132/2011                                                              Page 4

 
 
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