Commissioner Of Income Tax, ... vs Jindal Vegetables Products ...
2008 Latest Caselaw 1965 Del

*           THE HIGH COURT OF DELHI AT NEW DELHI

                                          Judgment reserved on : 08.09.2008
%                                       Judgment delivered on : 06.11.2008

+                              ITA No. 428/2007

COMMISSIONER OF
INCOME TAX DELHI-II                                        .....   Appellant

                                      -versus-

JINDAL VEGTABLES PRODUCTS LTD
                                                            ...... Respondent

Advocates who appeared in this case:

For the Appellant              :    Mr R D Jolly
For the Respondent             :    Ms Bhakti Pasrija

CORAM :-

HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER

1.    Whether the Reporters of local papers may
      be allowed to see the judgment ?                             Yes

2.    To be referred to Reporters or not ?                         Yes
3.    Whether the judgment should be reported
      in the Digest ?                                              Yes

RAJIV SHAKDHER, J

1. This is an appeal under Section 260A of the Income Tax Act,

1961 (hereinafter referred to as "the Act"). The Revenue has preferred

the present appeal against the judgment of the Income Tax Appellate

Tribunal (hereinafter referred to as the "Tribunal") dated 11.8.2006

passed in ITA No 1567/Del/2001, in respect of, the assessment year

1997-98. The Revenue, being aggrieved by the impugned judgment,

has primarily raised the following two issues in the appeal which,

according to it, raises substantial questions of law:-

(i) Whether the Tribunal had wrongly deleted the addition of

Rs 22,67,980/- made by the Assessing Officer by disallowing the claim

of depreciation made by the assessee, in respect of, certain machinery

items supplied by one Deepak Glycerides Process India (P) Ltd?

(ii) Whether the Tribunal had erred in deleting an addition of

Rs 39,46,250/- made by the Assessing Officer by disallowing the claim

of the assessee, in respect of, expenditure made by assessee on

purchase of machinery, on the ground that, they were both outside the

books of accounts and unexplained?

1.1 According to us both these issues involve appreciation of

evidence placed before the authorities below. Both the Commissioner

of Income Tax (Appeals) [hereinafter referred to as CIT(A)] and the

Tribunal after closely examining the evidence placed before them

returned findings of fact in favour of the assessee.

2. Before us, however, the learned counsel for the Revenue sought

to submit that the findings of the authorities below were perverse. To

appreciate this submission of the Revenue, we examined for ourselves

the orders of the authorities below. After doing so, we are of the

opinion that the impugned judgment deserves to be sustained for the

reasons given hereinafter. But before we delineate the reasons for our

conclusion, the following facts are required to be noted:-

2.1 The assessee had filed a return under Section 115JA of the Act on

28.11.1997, declaring an income of Rs 36,74,512/-. The Assessing

Officer issued notices to the assessee under Section 143(2) of the Act.

The return of the assessee was processed under Section 143(3) of the

Act. Consequent thereto, the assessee participated in the proceedings

before the Assessing Officer through his authorized representative.

2.2 The Assessing Officer in the course of the assessment

proceedings raised queries in respect of eight items of machinery,

which are referred to hereinafter. The assessee was asked to furnish

details of such items alongwith bills and vouchers. The assessee

furnished details vide letter dated 30.07.1999. A perusal of the bills

demonstrated that the eight items of machinery, in respect of, which a

query had been raised by the Assessing Officer had been purchased

from one, Deepak Glycerides Process (India) Pvt. Ltd. The assessee

had claimed 100% depreciation on the eight items of machinery. The

details of items on which the assessee had claimed 100% depreciation

as given in the assessment order are as follows:-

      Name of item              Bill No.        Date             Amount


H.P.Cylinder                      262        03.09.1996          3,58,750


Temperature & Controllers         255        01.07.1997               49,610


Sensers                           -do-          -do-                  20,295


Air Heat Recovery Unit            250        22.06.1996          1,99,875


Dust Collector Water TA           249        22.06.1996          5,38,125


Heat Exchanger                    256        01.07.1996          1,10,700


Water Oil Separator               253        24.06.1996          1,02,500


H.P.Cylinder                      241        02.05.1996          7,19,000

2.3 It was the case of assessee that the said items of machinery had

been purchased from Deepak Glycerides Process India (P) Ltd.

2.4 The Assessing Officer, in order to verify the claim of the

assessee, sought the help of DDI (Investigation), Kanpur. The report

of DDI (Investigation) Kanpur was accompanied by a copy of the

statement of one, Shri Deepak Chauhan, Managing Director of Deepak

Glycerides Process India (P) Ltd, wherein he denied having supplied

any goods to the assessee except those mentioned in Bill Nos 239 dated

03.07.1996 and 242, dated 22.07.1996. Shri Deepak Chauhan claimed

to have supplied machinery to other parties against the bill numbers

referred to hereinabove. Based on this, the Assessing Officer came to

the conclusion that the aforesaid items on which 100% depreciation has

been claimed by the assessee were not supplied by Shri Deepak

Chauhan. For this purpose the Assessing Officer relied heavily on the

statement of Shri Deepak Chauhan, Managing Director of Deepak

Glycerides Process India (P) Ltd. Accordingly, 100% depreciation

claimed on the items referred to hereinabove amounting to

Rs 22,67,980/- was added back by the Assessing Officer.

2.5 As regards the addition of sum of Rs 39,46,250/-, the Assessing

Officer again relied upon the statement of Shri Deepak Chauhan,

Managing Director of Deepak Glycerides Process India (P) Ltd,

wherein as indicated above, he denied having supplied any goods

except those which were mentioned in two bills bearing numbers 239

and 242. In the context of this aspect of the matter, the Assessing

Officer recorded the stand of the assessee wherein, the assessee

accepted the fact that the goods referred to in bill number 242 had been

received by it. The assessee, however, claimed that the goods referred

to in bill number 242 formed part of the bills bearing number 243 and

246, and were included in the sum of Rs 1.24 crores, being the total

purchases made for the factory, and hence, was expenditure which

stood reflected in the books of account; contrary to what the Assessing

Officer had held.

2.6 The Assessing Officer, however, rejected the evidence produced

by the assessee and accordingly made an addition towards unexplained

expenditure, in respect of, two machines stated to have been supplied

by Deepak Glycerides Process India (P) Ltd amounting to Rs 39,46,250/-.

The assessment was completed under Section 143(3) of the Act.

3. Aggrieved by the assessment order, the assessee preferred an

appeal to the Commissioner of Income-tax (Appeals) [hereinafter

referred to as the CIT(A)]. The CIT(A) examined the evidence

produced by the assessee in detail after which he came to a categorical

conclusion that the statement of Shri Deepak Chauhan, Managing

Director of Deepak Glycerides Process India (P) Ltd was not credible.

The CIT(A) categorically noted that the assessee was not given any

opportunity to cross-examine the supplier of the said items of which

depreciation had been claimed i.e., Shri Deepak Chauhan, Managing

Director of Deepak Glycerides Process India (P) Ltd. The CIT(A)

accepted the evidence produced by the assessee in the form of bills,

invoices, bank details whereby payments have been demonstrably made

to the supplier, i.e., Deepak Glycerides Process India (P) Ltd. The

CIT(A) disagreed with the conclusion of the Assessing Officer that the

money was being funnelled back to the assessee only because of the

fact that, the payments which were made by the assessee towards

supply of machinery were withdrawn in cash immediately after receipt

of payments. The CIT(A) was of the view that without any further

evidence it could not be concluded that the money flowed back to the

assessee.

3.1 As regards the other aspect with regard to the addition of

unexplained expenditure, the CIT(A) observed that the reliance placed

by the Assessing Officer on bills no 239 & 242 purportedly issued by

the supplier revealed that they referred to the same challan numbers and

GR numbers even though they bore different dates.

3.2 The CIT(A) in fact accepted the stand taken by the assessee that

the machinery mentioned in bill number 242 had in fact been supplied

by Deepak Glycerides Process India (P) Ltd even though under a

different bill number. In these circumstances, the CIT(A) came to the

conclusion that the Assessing Officer had erred in treating the value of

the said purchases as unexplained expenditure by the assessee. The

CIT(A) concluded that the statements of Shri Deepak Chauhan,

Managing Director of Deepak Glycerides Process India (P) Ltd were

unreliable, and on the other hand, the evidence produced by the

assessee in the form of relevant invoices, correspondence with the

supplier, as well as, sales tax declaration form given by the said

supplier, and also, the fact that transactions were duly reflected in the

books of accounts of the assessee lent credence to the stand taken by

the assessee. Based on the aforesaid, the CIT(A) deleted both the

additions in the sum of Rs 22,67,980 /- towards denial of depreciation

claimed by the assessee, as well as, a sum of Rs 39,46,250/- towards

unexplained expenditure.

4. Being aggrieved, the Revenue preferred an appeal to the

Tribunal. By the impugned judgment, the Tribunal dismissed the

appeal of the Revenue. The Tribunal has given its utmost consideration

and thought to the evidence produced by the assessee. The reasons for

dismissing the appeal of the assessee are recorded, in detail, in

paragraph 8 of the impugned judgment.

5. We have heard the learned counsel for the Revenue. After

perusing the orders, we find that the Tribunal has correctly concluded

as follows:-

(i) no reliance can be placed on the statements made by Shri

Deepak Chauhan, Managing Director of Deepak Glycerides Process

India (P) Ltd as the statements were inherently contradictory and

unreliable;

(ii) no opportunity was given to the assessee by the Assessing

Officer to examine Shri Deepak Chauhan;

(iii) eventhough the books of accounts for the relevant year were

available, Shri Deepak Chauhan, Managing Director of Deepak

Glycerides Process India (P) Ltd did not produce bills and vouchers by

holding forth that same had been lost;

(iv) two bills bearing Nos. 239 and 242, issued on two different

dates i.e. 3.7.96 and 22.7.96, were filed by Shri Deepak Chauhan,

claiming that the said bills were raised on the assessee company for

supply of certain items of machinery. The bills, however, contained the

same delivery challan number, as well as, lorry receipt number. As

against this, the assessee had claimed that the machinery stated to have

supplied were actually supplied to the assessee under Bill No.243

which has been duly recorded in the books of accounts of the assessee;

(iv) the payments with respect to eight bills referred to

hereinabove which added upto, a sum of Rs 22,67,980/- and against

which, 100% depreciation had been claimed, were paid by way of

account payee cheques/drafts which were duly confirmed by the

bankers of the assessee. This evidence was not put by the Assessing

Officer to Shri Deepak Chauhan at any point in time. The Assessing

Officer by solely relying upon the information received from the

bankers of the suppliers, that the amount paid by the assessee company

had been withdrawn in cash questioned the genuineness of the purchase

of eight items of machinery, without appreciating that the supplier,

Deepak Glycerides Process India (P) Ltd, has neither denied receipt of

payments from the assessee company, nor stated that the said money

was returned to the assessee company in cash, as concluded by the

Assessing Officer.

6. In view of the aforesaid findings of fact, we have no difficulty in

sustaining the order of the Tribunal. There is no question of any

perversity in the findings of fact. There is, in our opinion, no question

of law, much less a substantial question of law, which has arisen for our

consideration. In the result, the appeal is dismissed.

RAJIV SHAKDHER, J

BADAR DURREZ AHMED, J November 06, 2008 da