RAJESH KUMAR vs. COMMISSIONER OF INCOME TAX PATIALA

ITA No.264 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.264 of 2013 (O&M) Date of decision: 28.01.2014 Rajesh Kumar Prop. M/s Madan Lal Rajesh Kumar, Dandial Road, Patran (Punjab) PAN: AGOPK7494A ……Appellant Vs. Commissioner of Income Tax, Patiala (Punjab) …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. Pankaj Jain and Ms. Divya Suri, Advocates for the appellant. Ms. Savita Saxena, Advocate for the respondent. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 29.4.2013, Annexure A.11 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A' (in short, “the Tribunal”) in ITA No.195/CHD/2011 for the assessment year 2007-08, claiming following substantial questions of law:- Singh Gurbax 2014.03.18 17:08 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.264 of 2013 (O&M) 2 “i) Whether under the facts and circumstances of the case, the Tribunal's order is sustainable while making purchase additions, overlooking the provisions of section 145, and returning unreasonable findings being de hors to the 'material facts' containing 'material particulars'? ii) Whether under the facts and circumstances of the case, the Tribunal's conclusions are unreasonable, while passing 'such orders' under section 254(1) without exhibiting the 'application of mind' to the 'material on record' and being even opposite to the assessment order and CIT(A) order? 2. A few facts relevant for the decision of the controversy as narrated in the appeal may be noticed. The assessee is engaged in the business of trading of bye-products of rice, phak and nakku. The income tax return was filed at an income of `1,17,680/- which was processed under Section 143(1) of the Act. The assessee made purchases during the period from 15.2.2006 to 3.2.2007 from M/s Luxmi Industries, Saroop Singh Wala Road, Guru Harsahai, District Ferozepur. In consequence of the initiation of the assessment proceedings under section 143(3) of the Act, notice under section 133(6) of the Act was issued on 25.8.2009 through speed post to Luxmi Industries, Ferozepur for explaining the transaction. The said notice was received back with the remarks “Refused to receive” and on 9.9.2009, order sheet entry was made requiring the assessee to produce the creditor with books of account for an amount of ` 43,15,660/- namely Luxmi Industries. Commission under section 131(1) (d) of the Act was issued through letter No.ITO/W-3/PTA/2009-10/463 to Assistant Commissioner of Income Tax Circle III, Ferozepur requiring verification of the aforesaid amount of liability. Reply was given by the assessee to the effect that Luxmi Industries had been closed since last 6-7 years and therefore no Singh Gurbax 2014.03.18 17:08 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.264 of 2013 (O&M) 3 business was done. Second notice issued to M/s Luxmi Industries was also received back with the remarks 'refused to take delivery'. The statement of the assessee was recorded in consequence to the notice of final opportunity issued on 20.11.2009 wherein assessee furnished copy of account for the subsequent year ending 31.3.2008. The summons under Section 131 of the Act issued through speed post to Dashmesh Transport Company, Guru Harsahai, calling for books, GR, Book Register for verification were received back with the remarks 'there is no such transport company'. The assessment was completed through order under Section 143(3) of the Act making therein addition for purchases amounting to ` 43,15,660/- and for ` 1,95,925/- towards the freight charges. Aggrieved by the order dated 21.12.2009, Annexure A.3, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 31.12.2010, Annexure A.9, the appeal was allowed. Not satisfied with the order, the revenue filed appeal before the Tribunal. Vide order dated 29.4.2013, Annexure A.11, the appeal was allowed upholding the assessment order and reversing the findings recorded by the CIT(A). Hence the present appeal by the assessee. 3. Learned counsel for the appellant-assessee submitted following three arguments:- (i)M/s Luxmi Industries had paid the tax on the said transaction; (ii)Notices were sent to M/s Luxmi Industries but they refused to accept. Therefore, the said firm was in existence; and (iii)Payments had been made to M/s Luxmi Industries through cheques. Singh Gurbax 2014.03.18 17:08 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.264 of 2013 (O&M) 4 4. On the other hand, learned counsel for the respondent relied upon decision of this Court in M/s J.R.Solvent Industries (P) Limited, Sangrur v. CIT, Patiala, ITR No.105 of 1997, decided on 16.4.2012 to submit that it was a pure finding of fact that no purchases were made from Luxmi Industries, as claimed and, therefore, no substantial question of law arises. 5. After hearing learned counsel for the parties, we do not find any merit in the appeal. 6. It would be apposite to refer to the relevant findings recorded by the Assessing Officer and the Tribunal. 7. The Assessing Officer while framing assessment vide order dated 21.12.2009, Annexure A.3, noticed as under:- “2.5. From the above, it is emerged that the purchase invoices issued by M/s Luxmi Industries, Guru Harsahai, in continuous serial numbers after a gap ranging between one to nine days, on different dates, are not the genuine purchases. Similarly, the GRs issued by M/s Dashmesh Transport Co., Guru Harsahai in continuous serial numbers after a gap of days ranging between 1 to 9 days are not the genuine one. It may not be out of place to mention here that summons under Section 131 of the Income Tax Act, 1961, dated 3.12.2009 were also issued through speed post to M/s Dashmesh Transport Company, Guru Harsahai, calling for their books of account, GR books and booking register, for verification, fixing the case for 10.12.2009. However, the said envelop has returned back with the postal authorities remarks 'there is no such transport company'. Accordingly, an attempt has been made on random basis to check the genuineness of the truck numbers mentioned in the GRs through which the goods have Singh Gurbax 2014.03.18 17:08 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.264 of 2013 (O&M) 5 purportedly been transported. Accordingly, information has been called for under section 133(6) of the Income Tax Act, 1961, from district Transport Officer, Sangrur, in respect of the truck numbers pertaining to that station. However, it is noticed that the following Registration Numbers are not of trucks but are the registration number of other vehicles, the detail of which is given as under:- Registration No. Description of vehicles PB13-G-3555 Scooter PB13-F-4580 Scooter PB13-8215 Tractor PB 13-F-6024 Tractor PB 13-G-4489 Scooter From the above, it has become very much clear that the GRs issued for carrying the goods are also not genuine as besides having continuous serial numbers, the vehicle numbers mentioned therein are also not of trucks but of some other vehicles.” 8. Further, in addition to the aforesaid findings, the Tribunal vide order dated 29.4.2013, Annexure A.11 observed as under:- “We have heard the rival submissions carefully. The CIT (A) has given his findings vide para 4.4. which is as under:- 'In view of the facts and circumstances of the case and rival submissions of both the Assessing Officer in his remand report and the counsel in his written submissions it is seen that the appellant has to a large extent discharged the onus cast on him for showing the genuineness of the purchases made. The appellant has given plausible and reasonable explanation and has aptly stated that he is not responsible for third party's acts which are subsequent to the transaction done in the year under consideration. The appellant has fairly explained from the books of account and all necessary Singh Gurbax 2014.03.18 17:08 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.264 of 2013 (O&M) 6 vouchers produced before the Assessing Officer regarding the genuineness of the purchases. He has made all possible efforts to produce the necessary evidence to discharge the onus cast upon him to prove the entries in his books of account. In view of the categorical reply of the appellant which has not been rebutted by the Assessing Officer there is no ground to make the impugned addition. No material has been brought on record by the Assessing Officer to show that these are of purchase vouchers not being continuous or GR receipts of transporter not being in order. There has been no conclusive evidence before the Assessing Officer to doubt the genuineness of purchases and treat the same as sham. The Assessing Officer himself has accepted the subsequent payments made by the appellant to the third party in the following Assessing years either in cash or in cheques whereby this liability has been discharged. In view of all the averments of the learned counsel there is no scope left but to treat these purchases as genuinely recorded in the books of account. The addition is, therefore, directed to be deleted.' A reading of above show that the learned CIT(A) has allowed relief on general observations with0ut meeting the specific points raised by the Assessing Officer. First of all the Assessing Officer categorically gave specific opportunities to the assessee to produce the party i.e. M/s Luxmi Industries to prove the genuineness of the liability which was not availed by the assessee. Thereafter the Assessing Officer sent enquiry letter under Section 133(6) through speed post which was returned by the postal authorities with the comments 'refused to receive'. The assessee had challenged this fact before the learned CIT(A) without providing any evidence and simply raising the Singh Gurbax 2014.03.18 17:08 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.264 of 2013 (O&M) 7 issue that there was no evidence to show that M/s Luxmi Industries has refused to receive the letter. We are of the opinion that remark of the postal authorities would definitely constitute a good evidence. In any case the Assessing Officer has taken the caution by appointing the commission through ACIT, Circle 3, Ferozepur vide letter NO.ITO/W-3/PTA/2009-10/463 dated 16.9.2009. The comments of the CIT, Circle 3, Ferozepur has been