Income Tax Appellate Tribunal - Delhi
Jay Dee Exports, New Delhi vs Department Of Income Tax on 17 January, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'D' NEW DELHI
BEFORE SHRI U.B.S.BEDI, JUDICIAL MEMBER
AND
SHRI B.C.MEENA, ACCOUNTANT MEMBER
I.T.A .NO.2001/Del/2011
(ASSESSMENT YEAR-2001-02)
ACIT, Vs Jay Dee Exports,
Circle-20(1), Room No.-F-308, Div. of Jainco Dresses (Regd.),
Vikas Bhawan, A-35, GT Karnal Road,
New Delhi. Azadpur, New Delhi
PAN-AAHPJ4951E
(APPELLANT) (RESPONDENT)
Appellant by: Ms. Shumana Sen, Sr. DR
Respondent by: Sh. S.M.Mathur, CA
ORDER
PER B.C.MEENA, AM
This appeal filed by the revenue emanated by the order of Ld. CIT(A)-XXII, New Delhi dated 17.01.2011.
2. The revenue has raised following grounds of appeal:-
"1. The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 44,99,920/- made by the Assessing Officer under section 69C on account of un-explained expenditure because the assessee has failed to explain as to how Sh. N.K.Jain or his concerns came into picture when bills were issued by altogether different parties and also cheques had been issued in favour of these parties.
2. The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 44,99,920/- made by the Assessing Officer under section 69C on account of un-explained expenditure claimed by the assessee having paid to six different parties whose identity has not been established and in fact found as non-existent and on enquiries made through letters to those parties have been received back by the Assessing Officer as unserved.2 I.T.A .NO.2001/Del/2011
3. The appellant craves leave to amend or alter all or any of the aforesaid grounds of appeal and add any other ground of appeal.
3. In this case, original assessment was completed on 26.03.2004 u/s 143(3). In the appeal, the Ld. CIT(A) observed that the assessee has not discharged the onus placed upon him to prove the genuineness of the transactions. Hon'ble ITAT in its order dated 26-02-2008 while deciding ITA No. 4337/Del/2005, set aside the issue to the file of the AO for examination the matter afresh in accordance with law and also afford reasonable opportunity of being heard to the assessee. In compliance of the ITAT directions, the AO provided the opportunity to the assessee of being heard and also required to produce the purchasers for examination on 22.08.2008, 09.09.2008, 26.06.2008, 22.07.2009, 10.08.2009 and 19.11.2009. By the letter dated 11.11.2009, the assessee was given final opportunity to prove the genuineness of purchases and also asked to produce the creditors for examination on 19.11.2009. In reply to that the assessee filed a letter where it is stated that the assessee has sent the letter through registered AD to the persons from whom the goods were stated to be purchased. For personal appearance of these parties, assessee requested to issue summons u/s 131. Summons were issued and handed over to the assessee to serve them 'Dasti". However, the assessee sent these summons by registered AD to these parties and senders name was given as ACIT, Delhi. All these notices were received back unserved. The AO inquired about the payment made. In respect of the payment, the assessee admitted that cheques were issued in favour of these parties. 3 I.T.A .NO.2001/Del/2011 However, these cheques were endorsed in favour of the third parties M/s CP Exports or Priya Mills and M/s Jain Cloth Supply. Thus actual payment had not gone to these six parties from whom purchases were claimed to have been made. AO arrived at the conclusion that assessee failed to prove and establish the identity of persons and genuineness of the transaction. AO also concluded that so called suppliers were not in existence. Purchases were held to be non genuine. Thus, Assessing Officer added to the income of Rs.44,99,920/- u/s 69C of the Income Tax Act on A/CIT(A) of bogus purchases.
4. The CIT(A) granted the relief to the assessee on the basis of copies of the purchase invoice, the bank certificate and endorsement of the cheques in favour of the Narender Kumar Jain. Ld. CIT(A) has also believed on the assessee's submissions that fabric purchase from these parties has been used in the production of garments. Ld. CIT(A) also accepted the genuineness of the payment by cheque and held that the assessee had discharged the onus that the expenditure had been incurred. The relevant para of CIT(A) order is as under:-
"I have perused all the documents filed by the appellant before me, which are copies of the purchase invoices, the bank certificate, and the endorsement of the cheques in favour of the concerns of Sh. Narender Kumar Jain. I have also considered the submission of the appellant that all the fabrics purchased from the six parties were used in the production of garments which have subsequently been exported. No defects are pointed out in the books of accounts produced before the Assessing Officer and the declared trading results have been accepted by him. Moreover, the assessing officer has not rebutted the appellant's 4 I.T.A .NO.2001/Del/2011 assertion that the payments are duly debited to its bank account, and stand credited in the accounts of the business concerns of Sh. N.K.Jain, who has nevertheless denied any business connection with either the six parties at Erode, or M/s Jay Dee Exports. So far as the appellant is concerned, it is held that it has discharged its onus of establishing that it has incurred the claimed expenditure. Therefore, the impugned addition of Rs.44,99,920/- is hereby deleted."
5. Ld. DR submitted that the summons were issued by the Assessing Officer on the request of assessee to these persons. The summons were given to assessee to serve 'Dasti'. Assessee failed to do so and send these summons by registered AD which were returned unserved. Thus AO had done whatever he could do. It was onus on assessee to discharge the burden to prove the genuineness of transactions. Sh. Narender Kumar Jain has also not been produced before the Assessing Officer to confirm the transactions. The Assessing Officer granted ample opportunity which are evident from the fact that 7-8 opportunities were granted to the assessee to prove the genuineness of purchases and also to produce the creditors. In these factual matrix, the CIT(A) findings are per verse and deserved to be set aside.
6. On the other hand, Ld. AR relied on the order of the CIT(A) and submitted that Ld. CIT(A) has asked the Assessing Officer to grant opportunity to cross- examination to Sh. Narender Kumar Jain but it has not been done. He pleaded to sustain the order of CIT(A).
7. We have heard both sides on this decision. Hon'ble ITAT in the first round of litigation, has held that statement recorded on 25.03.2004 by ADIT (Inv.) Erode 5 I.T.A .NO.2001/Del/2011 of Sh. N.K.Jain how could reach at Delhi so that Assessing Officer could make the assessment order on that basis on 26.03.2004. In view of these facts, Hon'ble ITAT concluded that the assessment order was made without giving any opportunity to the assessee to cross-examination to the party concern and without providing copy of the statement recorded to the assessee. Hon'ble ITAT held as the violation of natural justice and restored issue to AO.
8. Hon'ble ITAT set aside the order to restore to the file of the Assessing Officer to examine the matter afresh in accordance with law after affording reasonable opportunity of being heard. In the second round, the Assessing Officer granted 7-8 opportunities which are evident from records. In these opportunities, it was made clear that the assessee should prove the genuineness of the purchases and also to produce the creditors for examinations. The summons were also issued by the Assessing Officer on the request of the assessee and these summons were handed over to the Ld. AR of the assessee for service 'DASTI' rather than serving these summons 'DASTI', the assessee dispatched thereby the registered AD showing the address of the sender as ACIT, circle-20, Delhi. All these summons returned back unserved. In our considered view, AO was fair enough to provide so many opportunities to assessee. AO was also genuinely tried to help assessee to produce these persons by issuing summons on assessee's request and also giving these to assessee to serve 'DASTI'. Thus AO's action to investigate case was in compliance of natural justice and fair. Further, the assessee has never requested to the Assessing Officer to issue summons Sh. N.K.Jain for cross-examination. Ld. 6 I.T.A .NO.2001/Del/2011 CIT(A)'s observation that the assessee has discharged the onus by establishing the identity of persons and expenditure incurred does not borne out of the facts of the case. These observations are not based on any evidences. It is simply believing the assessee's submissions without verification or inquiry.
9. In our considered view, the onus was on assessee to prove the genuineness of transaction when the Assessing Officer granted ample opportunities. All the summons issued to the creditors, returned back unserved. The Ld. CIT(A)'s observation that fabric purchased had been utilized for production of garments is also not based on any evidence. It is simply accepting the claim without evidence and verification. Believing the purchase invoice, the bank certificate and the endorsement of cheques in third party name is not justified in the absence of any evidence. Endorsement of cheques in third party name rather weaken the case of assessee. It suggests that cheques were issued in the name of non-existing parties. Ld. CIT(A)'s reasoning to over turning the AO's findings are not based on sound reasoning hence not justified. CIT(A) merely recounted the argument made on behalf of the assessee. Assessee failed to justify how N.K.Jain and his concerns got cheque endorsed in their names. The identity of those six parties was not established. In our considered view, assessee cannot be permitted to take advantage of his own illegal act. It was his utmost duty to place all relevant facts truthfully before AO. If he fails to perform his duty or discharge onus casted upon it then it cannot be allowed to say that AO failed to reject the book results. It was in personal knowledge of assessee, therefore, it was burden on him to prove the 7 I.T.A .NO.2001/Del/2011 genuineness of transaction. The direct and corroborative evidences shows that transactions were not genuine. Assessee had miserably failed to discharge the onus casted on it. In view of these facts, we allow revenue appeal and set aside order of Ld. CIT(A).
10. In the result, appeal of the revenue is allowed.
Order pronounced in the Open Court on 26.10.2012.
Sd/- Sd/-
(U.B.S.BEDI) (B.C.MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 26.10.2012
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI