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The Income Tax Officer Versus Smt. Rita Dhingra

2015 (5) TMI 346 - ITAT DELHI

Income from other sources -assessee declared total export sale of ₹ 4,59,95,595/- against which certain expenses under various heads were claimed - AO considering the fact that the major expenses consisted of consumable store, dyeing and processing embroidery charges, fabrication charges, packing material and labour charges etc. and guided by the fact that in the preceding assessment year, it had been held that the major expenses were bogus wherein the export sale were also found to be not .....

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s of such parties and also of producing the same for examination cannot be shifted on the assessee, as these are third parties who for various reasons may not choose to heed to the assessee's request for appearance before Income Tax authorities. In the appellant's own case wherein it was held that the adverse findings of earlier years were applicable with reference to those particular parties only and if those parties do not appear in the other years, no cognizance of the adverse finding .....

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,594/- is directed to be deleted. - Decided in favour of assessee.

Introduction of further capital - CIT(A) deleted addition - Held that:- So far as sources of other credits in the bank account are concerned, the same is duly supported with the audited accounts. The AO's objection in the remand report regarding source of credits in the Bank A/c of UTI Bank from which withdrawal has been made for making investment for ₹ 12,88,000/- has been examined from the Cash Book and the .....

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of ₹ 10 lakh to wife and the same has been credited by her in her capital account. The explanation regarding the source of FDR for ₹ 10 lakhs has been accepted in the appeal order dated 02.05.2011 in Appeal No. 393/07-08 in case of Shri Anil Dhingra. Therefore, the question of any additional investment by way of this FDR does not arise in appellant's case. In view of above discussion, the additions of ₹ 12,88,000/- and the ₹ 10,00,000/- stand deleted. - Decided in fav .....

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,594/- made by the AO on account of income from other sources. 2. On the facts and on the circumstances of the case the Ld. IT(A) has erred in deleting the addition of ₹ 22,88,000/- made by the AO on account of introducing further capital in the absence of any evidence or confirmation in support of the same. 3. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the source of hearing of the appeal. 2. The relevant facts of the case are that the a .....

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f Hearing 05.03.2015 Date of Pronouncement 16.04.2015 depth investigation done by the Investigation Wing, addition of the said amount was made by him observing as under:- 1. During the year, the assessee has declared total export sale of ₹ 4,59,95,595/-. Against this export sale, the assessee has claimed expenses under various heads. The major expenses claimed are on account of purchases, consumable store, dyeing and processing, embroidery charges, fabrication charges, packing material and .....

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ala transfer through banking channel. The earlier assessments were made on the basis of in-depth investigation carried out by the Investigation Wing, New Delhi at the time of search on Dhingra group of cases, and subsequent findings of the AO. Accordingly the AR of the assessee was repeatedly asked vide order sheet dated 26.11.2007 and 05.12.2007 to produce the parties from whom purchases have been claimed before me and furnish confirmation in respect of each of them. During discussions on vario .....

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lat year s assessment order) are treated as not genuine and bogus. Accordingly the income declared by the assessee on account of export sales is treated as income from other sources. Penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income and concealment of such income, as discussed, are also being initiated separately. 2. From the above details it is noticed that the assessee did not make any purchases of stock of raw-material during the year under consideration as th .....

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of elaborate findings as recorded by the AO in the order. Accordingly, the assessee s income from sales too were held to be not genuine and thus income from undisclosed sources. Hence, the assessee s claim under the various heads of expenses during the instant year too are evidently pretentious and bogus. The assessee has thus not conducted any business of the nature claimed by him during the year and consequently the entire expenses claimed by him are hereby disallowed and added back to the de .....

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he entire expenses claimed by the appellant and holding the same as bogus. From the assessment order it is noted that the AO, during the assessment proceedings, found that the appellant has declared total export sales of ₹ 4,59,94,595/- against which there is a claim of expenses under various heads. Major expenses claimed by the appellant are on account of purchases, consumable stores, dyeing and processing, embroidery charges, fabrication charges, packing material and labour charges. That .....

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h banking channels. It was further observed by the AO that earlier assessments were made on the basis of in-depth investigation carried out by the Investigation Wing of the Department at the time of search on Dhingra Group of cases and subsequent findings of the AO. As per AO, the appellant was required to produce before the AO the parties from whom purchases have been claimed to be made and also to furnish confirmations in respect of each of them. That as the assessee during assessment proceedi .....

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there has not been any corresponding stock/raw material for production of article against which there is a claim of manufacturing and other related expense. In view of the fact that in the preceding assessment year i.e. A. Y 2004-05, entire purchase made by the appellant were held to be not genuine/bogus on the basis of elaborate findings recorded by the AO in the order for the above assessment year and accordingly, claim of all expenses were disallowed and added back to the declared total inco .....

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erial placed before him. The books of account alongwith complete vouchers had been produced and the assessing officer has not found any fault in the books of account maintained by the assessee in the regular course of business. Question arises as to how the information emanating from the earlier years assessments are to be used and no doubt such information cannot be ignored but such information cannot have overriding effect, so as to change the complexion of the things which are duly supported .....

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idered that all the expenses and purchases are duly supported by the vouchers produced and the assessing officer if had any doubt could have conducted enquiry on the basis of the vouchers produced. If as a result of such enquiry, it is found that the purchase and expenses are not genuine then he could have supported his conclusion with the history of the assessee to bring home the point that the assessee as a matter of routine is in the habit of booking bogus purchase and expenses to show bogus .....

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dings. It need be noted that every year is a independent year and involves independent proceedings and independent findings are required to be recorded in each proceedings although the findings in favour of or against the assessee in any proceedings may have a reference to earlier years findings but earlier years finding cannot be the sole basis for arriving at a conclusion adverse to the assessee ignoring the material and evidences furnished relevant for the proceedings under consideration. In .....

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the assessing officer and the assessing officer has not found the same to be credible in view of the judgments given in the assessments of the earlier years. This is against the principles of natural justice and the scheme of taxation provided in the statute which provides that assessments have to be made on the basis of the material and the facts relevant for concerned assessment year, In view of this it is prayed that both the above findings are perverse and are contrary to the facts and mater .....

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for the purpose of manufacture of products for exports. The names of the concerns, in regard to which adverse finding has been given in the above assessment year are as under:- 1. Naina Fab 2. Paul International 3. Goswmy India 4. Elegance Fabrics 5. Archana Enterprises In the other years i.e. assessment year 2002-03, again parties at serial nos. 1, 2 and 5 have been mentioned against which there is adverse finding by the then assessing officer. Further in assessment year 2003-04, there is no sp .....

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ssessment years 2001-02 and 2002-03 have been restored to the file of Ld. CIT(A) in decide the matter afresh. For assessment year 2003-04, Hon'ble ITAT has approved the decision of the Hon'ble CIT(A) allowing deduction of the purchases and job work charges. The assessment for assessment year 2004-05 was framed u/s 144 which has been annulled by the Ld. CIT(A) and Hon'ble ITAT has upheld the order of the Ld. CIT(A) annulling the assessment framed by the assessing officer. The crux of .....

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gainst whom there was adverse finding in assessment years 2001-02 and 2002-03 and therefore the assessing officer has misapplied the above information to take adverse view for the year under consideration ignoring the fact that each assessment is a separate assessment and the facts relevant for the year under consideration were distinctly different from the facts in the earlier years. In view of this the action of the assessing officer is not appropriate in view of the facts of the case. The ass .....

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lowing the powers to the assessing officer equivalent to a civil court u/s 131 of the Income Tax Act? The Hon'ble Supreme Court in CIT vs Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 laid down that it is the bounden duty of the assessing officer to examine evidence fairly, objectively, independently and without bias. It is a judicial act to be performed judiciously, with all earnestness and to arrive at the truth. The Apex court further held that when names and address of the creditors wit .....

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the impugned order:- 5. The above submission along with the copies of accounts/confirmation of suppliers, job workers were forwarded to the AO for his comments and the AO vide remand report dated 10/5/10 has objected to admission of the above evidences on the ground that these are fresh evidences and there was no plausible explanation offered by the appellant for not filing these evidences during assessment proceedings. On the merits of the submissions of the appellant, the comments of the AO ar .....

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e judgment based upon the findings given in earlier years. ii.) The assessee has not properly explained why she was not in a position to produce the parties concerned or to furnish the confirmations from them during assessment proceedings. (iii) That the self maintained books of account and vouchers are not conclusive evidence in support of large amount of expenses claimed by the assessee under various heads. (iv) As the assessee had claimed large expenses under various heads as discussed in the .....

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extracted in para 6 at pages 7 - 11 of the order. A perusal of the same shows that it was contended that the AO proceeded in pre-determined fashion and the so-called opportunities to furnish the evidence vide order sheet entry dated 26.11.2007 & 05.12.2007 requiring the assessee to produce the parties from whom purchases have been claimed and to furnish confirmation in response to each of them was incorrect on facts as only 35 days were provided to furnish the confirmation which were filed i .....

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ies and the fabrication work done by them were already placed before the AO thus the primary onus of the assessee stood discharged. This fact has not been disputed by the AO either in the assessment order or in the Remand Report. Accordingly filing of the confirmation at this stage it was submitted is merely to strengthen the claim but the fact remains that the primary onus to support the expenses claimed in the P&L A/c by supporting vouchers stood discharged. It was also canvassed that even .....

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out the investigation/inquiry but such input cannot be considered as a substitute for evidence which only is relevant for making the assessment. In support of the remaining evidences considered as additional evidences by the AO the following comments were given:- S.No. Particulars Remarks (iii) Copy of capital account of the assessee in the proprietor firm. (pages 154 to 155). This cannot be considered as additional evidence because it is part of the books of account produced = before the A.O. .....

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account (pages 165) This is no fresh evidence but compilation of the addition to the capital account and source of investment involved. (xi) Copy of TDS return (pages 166 to 169) This also cannot be called fresh evidence as this is copy of the TDS return which is filed before the Income Tax Department therefore, the evidence in question was available to the department and the A.O. in case, A.O. wished to refer to the same. (xii) Copy of bank statement (pages 170 to 176) The copy of the bank stat .....

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to do so was not provided and the evidence on record was discarded only on the basis of the past history which is not the correct approach as it does not justify non-consideration of primary evidence in the year under consideration. 3.5. A perusal of the impugned order further shows that the assessee was required by the CIT(A) to furnish an affidavit confirming the fact that the parties from whom purchases were made and /or fabrication work done during the year under consideration were differen .....

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purchases and fabrication expenses. These facts are found recorded in para 7 of the impugned order and reproduced hereunder for readyreference:- 7. The appellant was subsequently required by my predecessor CIT (A) to furnish sworn affidavit of the appellant confirming the fact that the parties from whom purchases made and/or fabrication work done during the year under consideration were different from the parties which were found to be non genuine in the earlier assessment years and the appellan .....

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ication expenses. That no dispute has been raised by the revenue about the actual production of books of accounts and vouchers by the appellant during assessment proceedings which is evident from the fact that the AO has noted in the Order that in response to the notices, Shri Anil Dhingra, husband and A/R of the assessee attended the proceedings and filed details called for and accordingly, the AO has not raised any objection about the production of books of accounts and vouchers in the observa .....

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ombined order for A.Y 2001-2002 to 2004-05 in the appellant's own case and my attention was particularly drawn to the finding of the Hon'ble ITAT while deciding the appeal for A. Y 2003-04 on page 22 of the above Order wherein the following findings are relevant to the issue in hand: 22. We have considered rival submissions. As rightly canvassed by Shri Keshaw Prasad, the facts for assessment year 2003-04 are not same as appeared in the assessment year 2001-02. The AD has noted from whom .....

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ed by the assessee in convertible foreign exchange is hawala transaction. At least, there is no material brought out for raising such contention. We, therefore, are in agreement with the reasoning adopted by Commissioner's (Appeals) in deleting the addition. The grounds no. J &2 accordingly fails. " (emphasis provided) 4. Considering these facts the CIT(A) allowed the appeal of the assessee. The ld. Sr. DR relying upon the assessment order contended that the AO was justified on fact .....

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orting evidence has been pointed out by the Revenue either in the assessment proceedings or in the remand proceedings and also in the present proceedings. It was his submission that it is a matter of record that the AO required the assessee to file confirmations from about 82 different concerns/people to confirm the fact that they have done fabrication work etc. for the assessee and in the remand proceedings these confirmations have been made available to the AO which has not been disputed by th .....

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unassailed on record. 5. We have heard the rival submissions and perused the material available on record. On a consideration of the same we are of the view that no doubt the past history is crucial and can be a relevant starting point of an inquiry by the AO however the past history itself does not warrant that the evidence and facts on record be ignored. In a case, where the past history of the assessee shows that bogus claims have been raised, the AO would be fully justified in considering t .....

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ays the AO open to the allegation of being arbitrary and having proceeded on conjectures and surmises. We have taken ourselves through the Paper Book filed and the material available on record which has been taken into consideration by the CIT(A) also and on a consideration thereof we are of the view that in the absence of any specific infirmity pointed out by the Revenue interference in the finding arrived at is not warranted on facts. It is seen that the CIT(A) before arriving at the conclusio .....

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t when all necessary primary vouchers in support of the expenses claimed in the P&L A/c were available before the AO the onus accordingly placed on the assessee it was stated stood discharged and it was submitted that there should be no need for the assessee to consequently file an affidavit before the CIT(A) in the manner directed. However affidavit to this extent was filed and considered. The relevant finding has already been extracted in the earlier part of this order. 5.1. Accordingly in .....

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ng of the confirmations, and non-production of parties before the AO, are on record. There is no adverse finding specifically regarding the parties from whom the material was procured and also regarding the parties to whom payment for expenses were made or incurred. Once the evidences in support of the claim of purchases/expenses were produced before the AO and that after production of the same, the AO is not satisfied, he is required to give cogent reasons to reject the evidences produced. The .....

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ase of Winstral Petrochemicals P. Ltd. 41 DTR 139. I further respectfully agree with the findings of the Hon'ble ITAT in the Order of appeal (supra) in the appellant's own case wherein it was held that the adverse findings of earlier years were applicable with reference to those particular parties only and if those parties do not appear in the other years, no cognizance of the adverse findings in earlier years can be imported in the assessment of other years in absence of adverse materia .....

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y the Revenue is addressed in para 3 of the assessment order. The same is reproduced hereunder for ready-reference:- 3. During the year, the assessee has made an addition of ₹ 22,88,000/- to her Capital Account. Neither the source of addition in Capital Account has been explained nor any confirmation been furnished in this regard. Hence, the same is added to the income of the assessee under the head Income from Other Sources as unexplained investment. Penalty proceedings u/s 271(1)(c) for .....

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was referred to. The same is extracted form the impugned order and reproduced hereunder for ready-reference:- Date Amount Mode Source 18.04.2004 350,000.00 Cash Out of the cash available as per cash book, the immediate source is withdrawal of ₹ 3,75,000/- from UTI Bank saving account on 15.05.2004. 10.06.2000 100,000.00 Cash Out of cash available as per cash book, the immediate source is withdrawal on difference dates as per cash book from UTI Bank saving account. 20.11.2004 100,000.00 Ca .....

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5 1,60,000.00 Cash Out of the cash available as per cash book. 31.03.2005 1,000,000.00 FDR FDR of Sh.Anil Dhingra, husband of the assessee allowed to be used as security, which is confirmed by him. He is assessed to Income Tax and FDR in question has been considered in his assessment. Total addition 2,510,000.00 Less: Withdrawals 422,000.00 2,088,000.00 8. These were forwarded to the AO who objected to the same as per his Remand Report dated 10.05.2010. The assessee in re-joinder is also found t .....

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als from the bank accounts. Similarly the objections of the AO that her husband Sh. Anil Dhingra had provided his FDR of ₹ 10 lacs as a security for his wife for obtaining a bank loan is a matter of record and even if the evidences were considered to be fresh evidence it goes to the root of the matter. Considering these facts, submissions and arguments the CIT(A) came to the following conclusion reproduced hereunder for ready-reference:- 10. I have carefully considered the facts of the cas .....

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; 10 lakh by way of FDR), the AO has raised further objection about the opening capital of the appellant and sources of credits in the bank accounts. I have during the present proceedings asked the appellant to furnish the statement of affairs of the appellant as on 31/3/04 which is the basis for assessment for the preceding assessment year i.e. assessment year 2004-05. I have also required appellant to produce the cash book for the year under consideration i.e. F.Y. 2004-05 to support the sourc .....

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