IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B': NEW DELHI
BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER
AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No. 3739/Del/2011
Assessment Year 2005-06
Callina Care Overseas Pvt. Ltd. Vs. ITO, Ward 3(2),
Plot No.2, Ananad Industrial Estate New Delhi.
Mohan Nagar,
Ghaziabad
(PAN AABCC 9735 E)
ITA No. 3953/Del/2011
Assessment Year 2005-06
ITO, Ward 3(2), Callina Care Overseas Pvt. Ltd.
New Delhi Plot No.2, Ananad Industrial Estate
Mohan Nagar,
Ghaziabad
(PAN AABCC 9735 E)
(Appellant) (Respondent)
Date of hearing : 17.03.2015
Date of Pronouncement : 20.03.2015
Appellant by : Shri Ved Jain And
Shri V. Mohan, CAs.
Respondent by: Smt. Parwinder Kaur, Sr. D.R.
ORDER
PER SHRI GEORGE GEORGE K, JM:
1. These are cross appeals directed against the CIT(A)'s order dated 06.06.2011.
The relevant assessment year is AY 2005-06.
ITA Nos.3739 & 3953/Del /2011 2
2. In the assessee's appeal (ITA No. 3739/Del/2011), the solitary ground that is
raised is whether the CIT(A) is justified in confirming the addition of Rs.67,21,611/-
made by the Assessing Officer on account of expenses on packaging material. In the
Revenue's appeal (ITA No.3953/Del/2011), the solitary issue that is raised is
whether the CIT(A) is justified in deleting the addition of Rs.12,00,000/- made by
the AO u/s 68 of the Act on account of unexplained share application money. We
shall first take up for adjudication the assessee's appeal.
Assessee's appeal ITA No. 3739/Del/2011
3. Brief facts with regard to assessee's appeal are as follows.
The assessee had debited in its P&L account a sum of Rs.67,21,611/-, being
expenses incurred in purchase of packaging material from M/s. S.R. Enterprises.
The Assessing Officer had issued notice u/s 133(6) of the Act to M/s S.R.
Enterprises in the address furnished by the assessee. The notice of summon was
returned unserved. The assessee was duly intimated of the notice being unserved.
The inspector attached to the Assessing Officer was directed to conduct field
enquiries. The inspector filed a report that there is no concern by the name M/s SR
Enterprises in address given by the assessee. The assessee was also informed about
the report of the Inspector. It was submitted before the Assessing Officer that
assessee has purchased special packing material i.e. PP bags for its export
merchandise. Copy of the purchased order received from overseas buyers was also
furnished to the Assessing Officer. It was further stated by the assessee's counsel
ITA Nos.3739 & 3953/Del /2011 3
before the AO merely because notice u/s 133(6) was returned unserved, the
existence of S.R. Enterprises is verifiable from the registration certificate granted by
the various tax authorities.
4. The AO rejected the contentions raised by the assessee. The AO held that
assessee had claimed `nil' packing expenses during the previous financial year while
exporting goods worth 32,99,000. It was stated by the AO that the total export of
BOPP film was Rs.17,83,763/-, and assessee had claimed packing expenses to the
tune of Rs.67,21,611/-. The Assessing Officer after analyzing the invoices submitted
by the seller of the packing material, namely, S.R. Enterprises opined that the
assessee's company was a major buyer from the M/s SR Enterprises and still the
assessee was unable to produce the party. According to the AO, the contention of
the assessee that M/s Enterprises had sales tax no. did not make the transaction
genuine, particularly when the assessee was specifically confronted with the adverse
evidences gathered by the Department. The ld.AO further drew an inference that
M/s SR Enterprises had not been paid during the year even though purchases were
made as early as 2nd April, 2004 (beginning of the financial year). Accordingly, the
AO disallowed the expenditure for purchase of packing material amounting to
Rs.67,21,611/-/
5. Aggrieved by the addition of Rs.67,21,611/- being unexplained expenses, the
assessee preferred an appeal before the CIT(A). Before the CIT(A), assessee
submitted an affidavit of Shri Rajnish Tyagi detailing the purchases made by the
ITA Nos.3739 & 3953/Del /2011 4
assessee from M/s SR Enterprises. The additional evidence filed by the assessee was
placed on record by the CIT(A). The CIT(A) called for the comments of the
Assessing Officer. The Assessing Officer furnished detailed remand reports. The
assessee also filed a rejoinder to the remand report. The CIT(A) after examining the
additional evidence, the remand report and the rejoinder, decided the issue against
the assessee. The relevant finding of the CIT(A) reads as follows:-
"11. I have gone through the order of the Id. AO and the submissions made by
the Id. AR of the assessee. The remand reports as well as the rejoinder filed by the
Id. AR has been carefully gone through. It is undisputable that during the time of
assessment proceedings, the Id. AO isued notices to M/s SR Enterprises. This was
issued on the address given by the assessee. The notices remained unserved and
returned undelivered. The Id. AO informed the assessee about this development
and also issued a show cause notice. Further, the Id. AO sent Inspectors of Income
Tax for verification on the field. The entity, M/s SR Enterprises was not found and
was reported to have never existed. During the appellate stage, the assessee
reiterated that direct supplies were made by M/s SR Enterprises to the purchasers
and also submitted the respective invoices/bills. An affidavit from Shri Rajnish
Tyagi was also filed. The said Shri Tyagi confirmed the existence of M/s SR
Enterprises and the existence of its owner Shri Rahul Aggarwal. On enquiries uls
250(4), the reports of the Inspectors, yet again drew a blank. They could not trace
M/s SR Enterprises. Enquiries from the bank also revealed that the owner of M/s
SR Enterprises was not Rahul Agarwal but Shri Vijay Gupta. Addresses obtained
from the bank also proved futile in as much as one of the notices was returned
undelivered. The second notice issued at Kavi Nagar, remained uncomplied with,
though.
12. The assessee is repeatedly stating that he has no connection with M/s SR
Enterprises. This may or may not be true. However, page 4 of the impugned order
clearly suggests that there was a close connection between the assessee and M/s SR
Enterprises. Out of the 36 bills raised by M/s SR Enterprises, 20 of them pertained
to the assessee. The goods were sold on credit. Assuming for a moment, that there
was no connection between the assessee and M/s SR Enterprises, goods would not
have been sold on credit even on the 2nd April of the financial year. No payment
was made by the assessee during the entire financial year. How can there be no
connection between the two parties, where goods are sold on credit and remain
outstanding for more than 12 months? Further, some payments were made by the
assessee in subsequent years to M/s SR Enterprises. It cannot be appreciated that
who took the payments. It cannot also be ascertained that who approached the
assessee for the said payments. It is unbelievable that the assessee was not in
contact with M/s SR Enterprises, in case it existed. To my mind, the proprietorship
ITA Nos.3739 & 3953/Del /2011 5
concern did not exist, not withstanding the sales tax number that it had. The
existence of the sales tax number does not have a bearing on the case considering
the fact that sustained investigations by the Income Tax authorities clearly reveal
the non-existence of the firm, but for certain paper transactions on the file/bank,
details of which are also not clearly available.
13. In view of the discussions above, I hold that M/s Enterprises was nothing
but a bogus organization, created by the assessee itself to execute bogus
transactions. The bogus transactions helped the assessee in inflating its
expenditure. While on the issue, I also reject the books of accounts u/s 145 of the
Act. The assessee fails in ground of appeal No.1. Addition of Rs.67,21,611/- is
upheld."
6. The assessee being aggrieved is in appeal before us. The Ld. counsel
submitted that the CIT(A) had erred both on facts and law in confirming the
addition and holding the transaction of purchase of packing material from M/s S.R.
Enterprises was a bogus transaction. It was submitted that all material and evidences
were placed on record to prove the genuineness of the transaction. It was further
contended that the CIT(A) has erred both on facts and law in considering
material/remand report of the AO without giving an opportunity to the assessee to
rebut the same. The Ld. DR on the other hand, strongly relied on the
findings/conclusion of the Income Tax Authorities.
7. We have heard rival submissions and perused the material on record. The
only issue in the appeal filed by the assessee is with regard to the addition of
Rs.67,21,611/- made by the Assessing Officer on account of purchase expenses
on packing material. The addition was made by the AO holding the purchases to
be bogus. It is indisputable fact during the course of assessment proceedings, the
Assessing Officer had issued summon to M/s S.R. Enterprises (seller of packing
material). The notices were returned unserved and same was duly intimated to the
ITA Nos.3739 & 3953/Del /2011 6
assessee. The two Inspectors who carried out local enquiries on 18.10.2010 also
could not locate the address of M/s SR Enterprises given by the assessee. None of
the outlets in the area had ever heard of M/s SR Enterprises. In the course of
appellate proceeding, the assessee had given an affidavit of Sri Rajnish Tyagi,
detailing the dealings of the assessee with that of M/s SR Enterprises. It was
categorically found by the Assessing Officer in the course of remand proceeding
that Sri Rajnish Tyagi was no way connected with either of M/s SR Enterprises
nor the assessee. The Bank account of M/s SR Enterprises also was verified by
the Assessing Officer. It was noted the amount that was received from the
assessee was withdrawn immediately by cash. Though the goods were sold in
beginning of the financial year by SR Enterprises no payment was made by the
assessee during the entire financial year. Some payments were made in the
subsequent year to M/s SR Enterprises and as mentioned earlier the beneficiaries
of these payments could not verified. The findings of the Income Tax authorities
have clearly established that so called purchases made by the assessee from M/s
SR Enterprises are nothing but bogus transactions, just to inflate the expenses.
These findings of the lower authorities have not been dispelled by the assessee by
placing on record any material/evidence. Therefore, we confirm the orders of the
Income Tax Authorities and reject the grounds raised by the assessee.
ITA Nos.3739 & 3953/Del /2011 7
8. Revenue's appeal ITA No. 3953/Del/2011
In revenue's appeal, the solitary issue that is raised is whether the CIT(A)
is justified in deleting the addition made u/s 68 of the Act amounting to
Rs.12,00,000/-.
9. At the very outset the Ld. Counsel for the assessee submitted that the tax
effect in the appeal of the revenue is below the prescribed limit for filing of
appeal before the ITAT. It was submitted the tax effect is below Rs. 4 lakhs. The
Ld. Counsel for the assesses submitted instruction No. 5/2014 which prescribed
the revised monetary limits for filing appeal to Tribunal at Rs. 4 lacs is applicable
to pending cases and relied on the recent Kolkata Tribunal Bench order in the
case of DCIT vs. Sushila Saraogi reported in 2014 (11) TMI 294 ITAT Kolkata.
10. Ld. DR present was duly heard.
11. We have heard rival submissions and perused the material on record. The
Tribunal in the case of Deputy Commr.Of Income Tax vs. Sushila Saraogi (supra)
after considering the precedents on the subject held instruction No. 5/14 issued by
the CBDT on 10.7.2014 is applicable to the pending appeals. The Tribunal
followed the dictum laid down the judgments of the various High Courts
including the two judgments of the Hon'ble Jurisdictional High Court in the case
of CIT vs. M/s. P.S. Jain & Co. in ITA No.179/1991dated 2.8.2010 and in the
case of Commissioner of Income Tax vs. Delhi Race Club Ltd. dated 3.3.2011. In
view of the order of the Tribunal in the case of Deputy Commissioner of Income
ITA Nos.3739 & 3953/Del /2011 8
Tax vs. Sushila Saraogi which have elaborately considered the identical issue, we
hold that instruction No. 5/2014 issued by the CBDT on 10.7.2014 is applicable
to the pending appeals. In the instant case, the tax effect being below Rs. 4 lacs,
without going into the issue on merit, we dismiss the appeal of the revenue in
liminee. It is to be mentioned that Ld. DR was unable to point out any exceptional
circumstances /situation (mentioned inboard instruction No. 5 /2014) for filing an
appeal despite the monetary limit being below the prescribed limit.
12. Therefore, Revenue's appeal is dismissed.
13. In the result, appeal filed by the assessee and revenue are dismissed.
The decision was pronounced in the open Court on 20th March, 2015.
Sd/- Sd/-
(B.C. MEENA) (GEORGE GEORGE K.)
Accountant Member Judicial Member
Dated: 20th March, 2015.
Aks/-
Copy forwarded to
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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