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:-
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"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
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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
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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
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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
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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
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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
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