TMI Blog2017 (12) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... that company without having any substances has got the outstanding credit of ₹ 35 crores for purchases. As a final fact finding authority we cannot close our eyes to the startling facts reveled before us. The ld AR has objected to the report of the ld AO placed before us wherein the transactions of the assessee were detailed for last three years. We do not hesitate to reject the objection of the assessee. In fact the report of the Ld AO has demonstrated the modus operandi of the assessee company prevailing for consecutive three years. Matter remanded back to AO - the ld. AO may examine the whole trail of these transactions of purchase and sales and find out the real beneficiaries of all these unusual transactions of purchase and sales entered by assessee without flow of consideration. Appeal of the revenue is allowed for statistical purposes. - ITA No. 5629/Del./2012 - - - Dated:- 30-11-2017 - Shri H.S. Sidhu, Judicial Member And Shri L.P. Sahu, Accountant Member For The Appellant : Shri Naveen Chandra, Sr. DR For The Respondent : Shri Salil Kapoor, Advocate ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the Revenue against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,00,000/- Eskay Knit (India) Limited 14,00,00,000/- Tayal Energy Limited 7,00,00,000/- There was no any cash / bank transaction made during the year and no direct or indirect expenses were incurred by the assessee for doing its business. When these facts were confronted to the assessee, it was submitted that freight is directly paid by the seller of goods to the assessee company and in respect of transportation charges, he submitted that there was no cost incurred by the assessee towards transportation and no godown is maintained by the company. The AO further observed that the assessee has passed entries in the books of account in the name of Tayal Energy Ltd. For ₹ 7.00 crores and it has been shown under the head loans advance whereas the assessee had shown sales in his books of account in the name of other companies. The AO also observed that the assessee company was incorporated on 20.08.2007 with registered capital of ₹ 1,00,000/- only and during the F.Y. 2007-08 it had very small transactions and started trading of fabrics during F.Y. 2008-09, which is under appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales are bogus, then the profit from the same will also be bogus and as such there will be no taxable income. It is seen that AO has not pointed out the source from which he came to the conclusion that the undisclosed income has come to the appellant's accounts. 5.2 I find that the AO has added whole of the amount of sales as undisclosed income to the returned income, when the returned income itself is based on the audited annual accounts of the appellant and the net profit is arrived after considering sales, purchases and other costs, in that event in my humble view there is no basis for addition of amount of sales all over again. In coming to this conclusion I rely on the decision of Jharkhand High Court in the case of Amitabh Construction Pvt. Ltd. (335 ITR 523). 5.3 With regard to the conversion of Debtors to Loan and Advances it is quite obvious that both Debtors and Loan and Advances appear on the asset side of the balance sheet and the mere act of switching of the same from current assets to loans and advances cannot give rise to income, much less undisclosed income. These are merely the book entries and no new funds or any other asset has been intro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 1.2. The AO has narrated relevant facts in the Assessment order (which inter-alia include the facts in paras 3.1 to 3.22). A total unbelievable situation has been presented. 2.1 The AO might not have said in so many words but it is clear case of disallowances of deduction claimed in respect of purchases. 2.2 There is ample material on record to shift onus on assessee to prove the genuineness of purchases which assessee failed to discharge and AO came to the conclusion that the purchases are bogus. Even before CIT(A) no material evidence has been placed to discharge this onus. 2.3 The Hon'ble Delhi High Court while delivering judgment dated 15 March, 2001 in case of CIT Vs. La Medica Vs. Commissioner of Income-tax (2001) 168 CTR Del 314 held that that It is to be noted that assessee s stand was not that it was not open to the appellate Authority to make out a third case, which was not even the case of the assessee, to hold that the transactions were real and not fictitious as claimed by the revenue. 2.4 The relevant portion of the judgment is reproduced as under: .. ...the question whether the purchases were made from some other source oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition to the income. The Hon'ble High Court considered and rejected arguments of the asssessee that section 68 can be invoked only when books of accounts show cash entry and not otherwise. Paras 3 and 4 of the judgment are reproduced below : 3. Learned counsel, appearing for the assessee placing reliance on the decision of the Supreme Court in Baladin Ram v. CIT (1969) 71 ITR 427 and the decisions of the Bombay and Allahabad High Courts in CIT v. Bhaichand H. Gandhi [1983] 141 ITR 671 and Sundar Lal Jain v. CIT [1979] 117 ITR 316, respectively, contended, that section 68 of the Act can be invoked only, when, the books of account of the assessee show the cash entry and not otherwise. 4. We are afraid, such a narrow and restricted interpretation of the provisions, contained in section 68 was advanced by learned counsel for the appellant/assessee, cannot be accepted. If the liability shown in the said account, which, is found to be bogus and in the absence of any plausible and reasonable explanation offered by the assessee, then, certainly, the amount can be added towards the income of assessee and brought to tax in the hands of the assessee. 5.3 Hon ble Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en sold for ₹ 35,12,58,1267-.The Assessing Officer ( AO ) has added total sales of ₹ 35,12,58,126/- to the income of the assessee. It may be pointed out that no addition has been made on account of purchases made by the assessee. The books of account are not rejected, the only observation in paragraph 10.1 of the assessment order is that the sale and purchase transactions are sham and consequently trading results are rejected. Whereas the AO has himself assessed the income from said sale and purchase, after deducting the expense at ₹ 13,090/-. 2. On 05.12.2016, the Ld. DR has filed written submission stating that the AO has not said so in clear words but actually the AO has disallowed the purchases. This is factually not true as it is clear from assessment order that the AO has made the addition of total sales. This fact is clearly noted by CIT(A) also in paragraph 5 of his finding and CIT(A) has also rightly noted that the amount of sale cannot be added as income when the assessee has already credited the same in the Profit Loss account. 3. The DR cannot make a new case, which is not the case of the AO. The DR only represents the AO, his scope of ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is outside the domains of the arguments of the learned D.R. as such power vests with the learned CIT under section 263 for revising any order which is erroneous and prejudicial to the interest of the revenue. We are, therefore, not inclined to accept these grounds as they do not emanate from the orders of the authorities below... Ericsson AB v. Deputy Director of Income Tax [2012] 25 taxmann.com 466, the Delhi ITAT at paragraph 26 made the following observation: 26, Even otherwise, the Ld. Departmental Representative cannot make out a new case, which is not of the case of the Assessing Officer. The Mumbai Bench of the Tribunal in Asstt. CIT v. Ms. Aishwarya K. Rai [2010] 127ITD204 (Mum.) held that the learned D.R. can support the action of the A.O. with any arguments and that he can rely on any case law in support of the A.O's case but he cannot make out any new case which was not the subject matter of consideration by the A. O. or the first appellate authority. It further held that to find fault in the assessment order is outside the domain of the argument of the Ld. D.R. as such powers vests with the Commissioner u/s 263 for revising any order which is erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as follows:- In our considered opinion the Id. D.R. has no jurisdiction to go beyond the order passed by the A.O. He cannot raise any point different from that considered by the AO or the C1T(A). His scope of arguments is confined to supporting or defending the impugned order. He cannot set up an altogether different case. If the Id. D.R. is allowed to take up a new contention de hors the view taken by the AO that would mean the Id. D.R. stepping into the shoes of the CIT exercising jurisdiction u/s 263. We. therefore, do not permit the Id. D.R. to transgress the boundaries of his arguments. Similar view has been taken by the Jodhpur Bench of the Tribunal in the case of Kwal Pro Exports v. Asstt. CIT [20081 110 ITD 59 (Jodh.1 This contention is therefore repelled as devoid of any merit. The Hon'ble S.C. in MCorp Global (P.) Ltd. (supra) has held as follows:- Held, that u/s 254(1) of the Act, the Appellate Tribunal had no power to take back the benefit conferred by the A.O. or enhance the assessment. Since the A.O. had granted depreciation in respect of 42,000 bottles that benefit could not be withdrawn. In view of the discussion, we hold that the Ld. Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit Loss Account. The CIT(A) has rightly observed that the loan/advance is merely the conversion from the account of Sundry Debtors and there is no movement of any cheque or cash. 8. On the date of hearing on 10.10.2017, the DR has filed a report dated 26.04.2016 obtained from the AO. The filing of the said report after the assessment proceedings are over, is objected. Without prejudice to the same, it is submitted that the report has referred to the assessment proceedings for A.Y. 2010-11 and A.Y. 2011-12 on the ground that the figures of loan/advances have gone up from the figures for A.Y. 2009-10. As per instruction, all the accounts have been squared up in A.Y. 2012-13. It may be submitted that the assessee has been regularly filing income tax return and the cases for A.Y. 2010- 11 and A.Y. 2011-12 have been accepted by the Income Tax Department. Even the proceedings for A.Y. 11-12 have been accepted u/s 143(3). The proof of filing of returns for A.Y. 2010-11 and the assessment order for A.Y. 2011-12 u/s 143(3) are enclosed herewith. It means that even for later assessment years, where the loans/advances have increased, the position is accepted by the Income Tax Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT and relief was given to the assessee following the decision of Hon'ble Bombay High Court in the case of CIT v. Nikunj Eximp Enterprises Pvt. Ltd. [2013] 35 taxmann.com 384. In view of the above noted submissions, the appeal of the Department is liable to be dismissed. 6. We have carefully considered the rival contention and also perused the orders of the lower authorities. In brief, facts of the case are that assessee is a company allegedly engaged in the business of purchase and sale of fabric. During the year, the Ld. assessing officer noted that assessee has made a purchase of ₹ 35.11 crores and has also made sales of ₹ 35.12 crores resulting in sundry creditors of ₹ 34.99 crores arising out of the unpaid purchase consideration and loans and advances of ₹ 35 crores arising as a debtor on sale of goods converted into loans and advances by the assessee. Whole transaction of purchase and sales entered into by the assessee were not settled by payment of sales consideration to the suppliers who have supplied the fabric to the assessee as well as no consideration is received by the assessee from the buyer of the goods. Therefore it is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of entry was provided by this company to the buyers from the assessee for the above sales made by the assessee. Further, the Ld. assessing officer also noted that the goods sold and transferred to the parties, were shown as loans and advances during the year under consideration in the balance sheet of the assessee. However, the AO further observed that the parties, to whom the goods were sold have returned the purchase worth ₹ 15.00 crores in the next year, but no evidences of transporting goods from the seller to the original buyer or to the assessee was shown. No material is produced either before the AO or before us to show the effect of these sales returned. Therefore, the Ld. assessing officer stated that the above transaction of purchase and sale of fabrics made by the assessee are not genuine business transactions as these transactions are rather an effort to introduce the unaccounted money of the assessee company in the books of accounts under the garb of purchase and sale of fabrics. Therefore, the Ld. assessing officer made addition of these ₹ 35.12 crores of the sales recorded by the assessee. On appeal by the assessee, the Ld. CIT appeal deleted the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchases booked by them. It results into deflating the profit of those parties as well as the bogus purchases in the hands of the assessee on account of several parties who are not traceable. Merely because the books of accounts of the company are audited, the Ld. CIT (A) has accepted them, but he has not looked into the facts of the case that the purchases have never been paid, the sales have never been realized, there is no bank account of the company, there are no expenditure incurred by the assessee company for the purchases and sales entered into, what are the modus operandi ?, where the goods have been kept ? etc. All these questions raised by the Ld. assessing officer remained unanswered and unverified in the order of the Ld. CIT (A ). Furthermore none of the debtors as well as the creditors could remain present before the assessing officer for their examination to show that how they have purchased and sold fabrics to the assessee. In these peculiar circumstances, the decision of Hon ble Gujarat High Court in case of Ambuja exports Ltd vs DCIT, 86 Taxmann.com 69 is applicable where in it is held that where purchases made by assessee from a proprietary concern were bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stice, we set aside the whole issue back to the file of the Ld. assessing officer with a direction to the assessee to produce the purchasers of goods from the assessee i.e. buyers, the sellers of the goods to the assessee, i.e. creditors and further to adduce evidences with respect to the movement of goods to the buyers from the assessee and then from sellers of goods to the assessee. It is also necessary to examine in this particular nature of transactions the reasons that for consecutive 3 years whether there is any transfer of material between the buyer and seller or not, so that the Ld. assessing officer may apply his mind to this aspect also. It is also interesting to note that there is no transaction of payment of consideration for sale of goods as well as for the purchase of goods through cheques as assessee does not have any bank account and merely the share capital of ₹ 1 lakh. Therefore how the whole transactions have been carried on by the assessee of such a huge magnitude without banking facilities is also required to be examined. We are constrained to state on looking at the nature of the transactions placed before us that the activities of the assessee company i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
