Judgment:
1. By means of present application assessee-appellant seeks to grant stay of outstanding demand for the asst. yr. 1993-94 and submitted that for the asst. yr. 1993-94 the appellant filed a return of income showing a total income of Rs. 9,71,010. Against the income returned an order of assessment was passed under s. 143(3) of the IT Act by the AO enhancing the total income to Rs. 11,89,140 vide order of regular assessment dt. 22nd March, 1996. While making the assessment, the AO made an addition of Rs. 3,43,117 in respect of the alleged difference in inflated purchases made from M/s. Jay Shree Steels and M/s. Jay Shree Industries and he also made an addition of Rs. 51,995 on the same alleged ground in respect of purchases from M/s. Shree Ram Steel Centre. There were a few minor additions and disallowances made in the assessment by the AO against which the applicant filed an appeal before the CIT(A).
The appeal came to be heard by the CIT(A), II, Meerut, camp Ghaziabad, who not only confirmed the illegal additions and disallowances arbitrarily and vexatiously made by the AO but also resorted to an enhancement of income of the appellant to the extent of Rs. 57,98,103 which is an imaginary, fictitious, arbitrary, frivolous and vexatiously taken figure assumed by the authorities below without any basis or reasons valid and justifiable in law. The authorities below have confirmed that neither of them has any evidence, record, document or proof to substantiate the allegations made in the orders passed and in spite of their being no evidence and no proof whatsoever is alleged, the authorities below have vexatiously and in a mala fide manner resorted to an arbitrary enhancement of the income of the appellant imaginarily for extraneous reasons solely to cause hardship and harassment to the appellant. As a result of the illegal action of enhancement made by the first appellate authority without any jurisdiction or justification valid in law and also by confirming the illegal additions and disallowances made by the AO without any basis or justification and without any application of mind in a fair and objective manner, the appellant has been saddled with a huge tax liability as well as interest liability all of which are imaginary, fictitious, mischievous and mala fide. The result is that the appellant is assumed to have derived an imaginary income of Rs. 69,87,240 which is totally artificial and fictitious as may be seen from the appeal effect order read with the appellate order. The consequence that the appellant has been saddled with a huge legal demand of Rs. 44,96,333 comprising of Rs. 25,91,765 towards income-tax and balance Rs. 19,04,570 towards interest charged illegally under s. 234B, 234C and 220(2) of the IT Act, 1961.
The entire actions and orders of the authorities below being mala fide and motivated by extraneous reasons not authorised by law and without being guided by any of the correct legal positions and the facts and materials on record, the entire demand as well as the impugned orders of the authorities below are liable to be set aside and quashed by this Tribunal.
2. The applicant further prays that the authorities below be summoned to appear in person before the Tribunal and to explain their conduct and behaviour in the most vexatious, arbitrary and mala fide manner for causing deliberately hardship and harassment to the appellant to create fictitious demands and to justify their existence by doing so. In view of the atrocious nature of the illegal and high-handed action of both the lower authorities and the total non-application of mind by both of them on the facts and the law applicable, this Tribunal may be pleased to grant unconditional stay of the collection and recovery of the disputed demands towards tax and interest and also so summon the records of the lower authorities besides granting early out of turn hearing of the appeal to resolve the controversy and to render effective justice to the appellant, which is most essential and for which there is no alternative and equally efficacious remedy in any other forum to the appellant and hence the stay application is being filed for immediate hearing and decision thereon. It was further submitted that the entire demand is frivolous, vexatious, arbitrary and mala fide. The additions were based on the adjudication order of the Commissioner of Excise, Meerut which had been quashed by the Customs Excise and Gold (Control) Appellate Tribunal, Delhi. The applicant has exhausted every alternate remedy and has no means to pay the huge imaginary demand of Rs. 44,96,335. In case the recovery proceedings are not stayed, irreparable loss and hardship would be caused to the applicant. It was thus pleaded for stay of recovery proceedings in respect of the disputed outstanding demand till disposal of the appeal and in the alternative the assessee pleaded for early hearing of the appeal. It was also submitted that financial resources are severely strained due to severe recession in the iron and steel industry and it is facing acute liquidity crunch, the bank account is already heavily overdrawn. Thus, the applicant is not in a position to pay this huge demand. Any coercive proceedings for collection and recovery of the demand at this juncture will cause serious hardship and harassment to the applicant and will adversely affect the business. Bank a/c stands already attached.
In order to support the contention for grant of stay and to highlight the infirmities in the order of authorities below reliance was placed on CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC), CIT vs.
Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC), Coca-Cola Expert Corpn. vs. ITO & Anr. (1998) 231 ITR 200 (SC), Security & Detective Bureau Ltd. vs. Asstt. CIT (1993) 45 TTJ (Mad) 240 : (1993) 44 ITD 452 (Mad), Raja Textiles Ltd. vs. ITO (1973) 87 ITR 539 (SC) and Tissan Joseph vs. CIT & Ors. (1999) 235 ITR 619 (Ker).
3. The learned Departmental Representative while opposing the move of the assessee has pleaded that while making enhancement the learned CIT(A) has relied upon relevant material and evidence and after giving due opportunity to the assessee has ordered enhancement of the income by passing reasoned order. The admitted facts of the case are that the assessee has shown a g.p. rate of 3 per cent for the year under consideration and this exactly tally with the g.p. rate of last year.
The turnover of the assessee this year is more than Rs. 25 crores while that of last year was of Rs. 22 lakhs and odd. As per chart given in the appellate order in para 4 which shows the percentage of production, burning loss and melting scrap clearly reveals that the production percentage and the burning loss and melting scrap has been shown in the stock register at a predetermined level because there is only some minor variation at the third decimal points and even variation is very minor. It was held that this cannot be a coincidence as stated by the assessee. Even this show of pre-determined basis and these should have been reconciled at the end of the year when the stock inventory was physically verified and tallied with the stock register but no such reconciliation was placed before the AO or before the appellate authority. Further no worthwhile explanation has been submitted to explain such a strange coincidence in the g.p. rate of two years as well as the percentage shown in the production account. Similarly purchases made from M/s. Jai Shree Steels and M/s. Jain Shree Industries India and M/s. Shree Ram Steel Centre are concerned, it is evident from the facts recorded by the AO that manufacturing activities were not being done in the two concerns and this is further proved by the fact that the goods were transported in such vehicles which were found non-existent trucks or through scooters or motor cycles. It was noted by the learned CIT(A) that no one can believe that such a heavy material in the shape of scrap/forgings to the factory premises would be transported on scooter or motor cycles or even through non-existent trucks and when the assessee was asked by the AO to explain these non-existent trucks and transportation by them explained by the assessee. No evidence was filed before the AO and even during the course of appellate proceedings to prove as to how the goods were transported to the factory premises of the assessee. The mere fact that payments were made through cheques does not mean that the purchases were genuine especially when the payments so made by cheque were withdrawn in cash on the same day meaning thereby that these were returned to the buyers on the same day in cash once they paid through cheque. It was noted by the learned CIT(A) that there was no manufacturing activity by these two concerns and the mere growth of grass of 5 to 6 feet height in the factory premises only shows that these two concerns were only name-lending concerns and bogus concerns.
Their only purpose was to issue paper bills without giving actual goods. Thus, it was submitted that assessee has not made out any prima facie case for which stay could be granted whereas on the contrary Department has a strong case which deserves to be confirmed. While relying upon Asstt. Collector of Central Excise vs. Dunlop India Ltd. & Ors. (1985) 154 ITR 172 (SC) it was submitted that request for stay of demand deserves to be dismissed.
4. We have heard rival submissions, perused the record, gone through the relevant papers to which our attention was drawn. We have also gone through the case law as cited. From the documentary evidence we find that the assessee has paid the entire demand as created by the AO and stay of demand is being urged for the demand created on the basis of enhancement order passed by the learned CIT(A) against which the present appeal is pending. After carefully considering the request of the assessee we are of the view that the assessee has been able to make out a case for stay of recovery of demand. Therefore, while accepting the application of the assessee we stay the demand as outstanding, on date, till 30th June, 1999, or disposal of the appeal, whichever is earlier, and direct the Registry to fix the case out of turn in the month of March, 1999, subject to the condition that the assessee shall not seek any adjournment and in case any adjournment is sought by the assessee, the stay granted herein shall stand vacated and arrangement of out of turn fixation shall also be withdrawn and the case will be reverted back on routine fixation. However, the assessee shall give an undertaking to the satisfaction of the AO that it shall not dispose of or alienate any of its properties till the disposal of the present appeal. With these stipulations as made above, the stay application of the assessee is accepted.