CIT vs. VICTORIA FOODS PVT LTD

* IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA No.51 of 2O11 ITA No.76 of 2O11 o/o Decision Delivered On: 19th AUGUST, 2011 + ITA No.61/2O11 CoMMISSIoNERoFINcoMETAX...Appe||ant VERSUS VICTORIA FOODS PVT' LTD' ' ' 'Respondent '.-' + ITA No.76l2O11 r GoMMISSIONER OF INCOME TAX . . . Appellant VERSUS VICTORIA FOODS PVT. LTD. ' ' 'Respondent Counsel for the Revenue: Mr. Sanjeev Rajpal, Sr' Standing Counsel. Counsel for the Assessee: Mr. ' Saubhagya Aggarwal, Advocate. - i coRAM :- HON'BLE MR. JUSTICE A.K. SIKRI * HON'BLE MR. JUSTTCE J.R. MrDHA 1, Whether Reporters of Local newspapers may be allowed to see the Judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? A.K. SrKRr, J. (ORAL) 1. These two appeals relate to the Assessment Years 2005-2006 and 2006-07. The assessee aS well as issue raised is common ,1 ITA Nos.61/207I & 76/207L Page 1 of 5 Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified

; in both the appeals. The assessee is a company ru.nning flour mill where it is producing wheat flour choker, suji, maida, etc. It is also trading in these items. In the return filed for Assessment Year 2005-06, the respondent-assessee had shown to have purchased fixed assets for a va'lue of 74,94,94,8521-. The AO wanted to investigate into the genuineness of the aforesaid addition to the fixed assets and thus, asked the assessee to file the details of additions made to the fixed assets, source of investment and the documents in support of the purchase of these assets. In response to it, the assessee filed along with letter dated 19.07.2007, supporting bills and vouchers of various aSSetS purchased during the year. lt was further stated that for procuring these bssets, the assessee had obtained a term loan of t4.94 Crores from State Bank of Mysore, Naya Bazar, Delhi. The AO randomly picked three suppliers from whom the assessee had purchased various types of steel sheets, machinery and electrical installations. On the bills and vouchers issued by these three concerns, the AO found that these bills did not bear telephone number and even the sales tax was not charged. He nurtured doubts about the genuineness of purchases from these persons and thus, deputed one Income Tax Inspector to carry out spot a J 2. r 3. .t ITA Nos.61/ZOIL & 76/2OLL Page 2 of 5

6 4. 5. inspection. The Inspector reported that these concerns did not exist on the given addresses. On this basis, the AO disbelieved the purchases made from these concern, which had supplied capital assets to the extent of t30,62 ,82,3411-. He held the purchases of assets to that extent as bogus and also disallowed the depreciation @ 25% claimed by the assessee on these assets amounting to <57,42,7941- in, the Assessment Years 2005-06 and 2006-07, Likewise, interest paid on the term loan to the on the aforesaid purchases was also disallowed' Aggrieved by the aforesaid order of the AO, the assessee went in appeal before the CIT (Appeals) where the appeal of the assessee was, however, allowed. Against the order of the CIT (A), the Revenue preferred appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal'). In respect of As5essment Year 2005-06, the appeal was dismissed by the Tribunal vide orders dated 26.02.2010. Following that order, another appeal pertaining to Assessment Year 2006-07 had also been dismissed vide orders dated 14.05.2010. The perusal of the order of the Tribunal would show that the two authorities below accepted the genuineness of the purchases and addition to fixed assets keeping in mind the following material on records: -t t 6. ITA Nos.61 l2OIL &.76/2017 Page 3 of 5

(i) The assets were duly reflected in the audited accounts. They were existing at the premises. In fact, the assessee had requested the AO to verify the assets physically or depute an Inspector in its letter dated 27.12.2003. However,'instead of doing so, the AO deputed the Inspector to visit the place of manufacturers. (ii) Ledger account of the three parties whose expenses were doubted by the AO 'was produced by the ASSCSSCC. (iii) The assessee was able to demonstrate that after the addition of the aforesaid fixed/capital assets, the production of the assessee had increased from 100 tonnes to 400 tonnes. Likewise, sales had gone up from t41 Crores to 86 Crores in the Assessment Year 2005-06. In a similar manner, there was enhanced electric load. 7 i I a 7. The veracity of the report of the Inspector stating that the ! parties were not available at the given addresses, was doubted who purportedly visited all the three places on same date, though they were located at places far away from each other. The lnspector had not even recorded the statement of neighbours or collected any material. Moreso, the payments to the said three parties were made through banking channels, ITA Nos.61 /201I e. 76/2011 Page 4 of 5