Shri Gobindram C.Agarwal, Surat V. The Income tax Officer,Ward-2(3), Surat

CO 112/AHD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7556 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 02-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM AVTAR DALMIA
• Assessee Lawyers: T SHANKAR
• Section: 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 456/ AHD/2010 (ASSESSMENT YEAR 2006-07) ITO, WARD 2(3), SURAT VS. SHRI GOBINDRAM C AGARWAL PROP. M/. SANCHI SAREES, 318, ABHISHEK TEXTILE MARKET, RING ROAD, SURAT PAN/GIR NO. : AEDPA3492E C.O.NO.112/AHD/2012 ASSESSMENT YEAR 2006-07 SHRI GOBINDRAM C AGARWAL VS. ITO WARD 2(3), PROP. M/. SANCHI SAREES, SURAT 318, ABHISHEK TEXTILE MARKET, RING ROAD, SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI T SHANKAR, SR. DR RESPONDENT BY: SHRI RAM AVTAR DALMIA AR DATE OF HEARING: 28.08.2012 DATE OF PRONOUNCEMENT: 21.09.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL AND THE CROSS OBJECTION I S FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDER OF LD . CIT(A) II, SURAT DATED 13.11.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE. TH E GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS.40,41,540/- ON ACCOUNT OF UNEXPLAINED SUNDRY CRE DITORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) MAY BE SET ASIDE AND THAT OF A.O. MAY BE RESTORED TO THE A BOVE EXTENT. 3. BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARAS 4 TO 4.4 OF HIS ORDER AND THE SAME ARE REPRO DUCED BELOW: 4. THE AO NOTED THAT THE ASSESSEE HAD SHOWN SUND RY CREDITORS FOR GOODS OF RS,46,58,293 (53 PARTIES) AND SUNDRY C REDITORS FOR PROCESSING OF RS,11,84,911 (19 PARTIES). THE ASSESS EE FURNISHED DETAILS OF ALL SUCH CREDITORS, OUT OF WHICH THE AO ISSUED NOTICES U/S.133(6) TO 22 PARTIES, WHO HAVE BEEN LISTED ON PAGE-3 OF THE ASST. ORDER. EXCEPT FOR 2(TWO) PARTIES, M/S. NIHARI KA DYEING &. PRINTING MILLS (P) LTD AND ARADHANA INDUSTRIES (P) LTD, NO CONFIRMATION WAS RECEIVED FROM THE REMAINING 20 PAR TIES. IN FACT, THE NOTICES ISSUED WERE RETURNED BACK UNSERVED. THE ASSESSEE EXPLAINED (PAGES 4-6) THAT THE ADDRESSES WE RE FURNISHED ON THE BASIS OF BILLS RECEIVED FROM THE PARTIES. THE NOTIC ES U/S,133(6) WAS ISSUED ALMOST AFTER 3 (THREE) YEARS OF THE TRANSACT IONS HAVING TAKEN PLACE BETWEEN THE ASSESSEE AND SUCH PARTIES. MOST O F THEM MAY HAVE CHANGED THEIR PL-ACES OF BUSINESS OR CLOSED TH EIR BUSINESS OR MOVED OUT OF SURAT. ON THE OTHER HAND, IT WAS ARGUE D THAT THE IDENTITY OF THE SUPPLIERS AS ALSO THE GENUINENESS OF THE TRANSACTIONS HAD BEEN DULY PROVED. IT WAS SUBMITTED THAT FOUR PARTIES HAD CONFIRMED THE CLOSING BALANCES DIRECTLY TO THE AO WHICH INCLUDED THE TWO PARTIES MENTIONED ABOVE. IT WAS FURTHER ARGUED THAT WHERE THERE WAS SALE OF GOODS, THERE N ECESSARILY WOULD HAVE TO BE PURCHASES MADE. SINCE THE SALES WERE ACC EPTED, THE PURCHASES WOULD ALSO HAVE TO BE ACCEPTED. AT BEST, AN ADDITION COULD BE MADE ON ACCOUNT OF GP ON SALES BUT THE PUR CHASES COULD NOT BE DISALLOWED AS BOGUS. IN SUPPORT OF SUCH CONT ENTIONS, THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE-LAWS :- 1. UPPER INDIA PUBLISHING HOUSE (P) LTD VS C IT(1979) 117 ITR 569 (SC) 2. ATTAR SINGH GURMUKH SINGH VS ITO (1991) 1 91 ITR 667 (SC) 3. GIRDHARI LAL GOENKA VS CIT(1998) 229 ITR 229 (SC) I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 3 4. CIT VS P. MOHANAKAIA (2007) 161 TAXMAN 16 9/291 ITR 278 (SC) 5. NEMICHAND KOTHARI VS CIT(2003) 264 ITR 25 4 (GUJ.) 4,1 IT WAS ONCE AGAIN CONTENDED THAT SIMPLY BECAUSE THE NOTICES U/S. 133(6) ISSUED TO THE SAID CREDITORS WERE RETUR NED UNSERVED, AN ADVERSE VIEW COULD NOT BE TAKEN AND THE PURCHASES D ISALLOWED WITHOUT BRINGING ON RECORD MATERIAL EVIDENCE TO SHO W THAT SUCH EXPENSES WERE NOT INCURRED BY THE ASSESSEE AT ALL. 4.2 THE AO REJECTED THE ASSESSEE'S S UBMISSIONS. HE OBSERVED THAT CONFIRMATIONS HAD BEEN RECEIVED ONL Y FROM FIVE CREDITORS, FOUR OF WHICH WERE' JOB-WORK (PROCESSING ) PARTIES. THE NOTICES ISSUED WERE TO THE PARTIES FROM WHOM FINISH ED GOODS HAD BEEN PURCHASED. OUT OF SUCH PARTIES, ONLY FOUR-CRED ITORS HAD CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE (PAGE- 7). THIS MEANT THAT A TOTAL OF 5+ 4 CREDITORS HAD FURNISHED CONFIR MATIONS. THE AO THUS NOTED THAT IN RESPECT OF CREDITORS TOTALLING R S,43,96,164, NO CONFIRMATION HAD BEEN FURNISHED. THE ASSESSEE HAD F AILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF SU CH LIABILITIES. THE AO THEREFORE ISSUED A SHOW-CAUSE NOTICE PROPOSI NG TO TREAT SUCH CREDITORS AS UNVERIFIABLE, AND TO ADD T HE SUM OF RS.43,96,164 TO THE ASSESSEE'S TOTAL INCOME. IN RES PONSE TO THE SHOW-CAUSE NOTICE, THE ASSESSEE FURNISHED A DETAILE D REPLY WHICH HAS BEEN REPRODUCED BY THE AO ON PAGES 7-10 OF THE ASST, ORDER. IT WAS THUS ARGUED BY THE ASSESSEE THAT THE SUNDRY CRE DITORS COULD NOT BE DISALLOWED, WHILE SIMPLY ADOPTING AND TRIAL AND ERROR METHOD. THE SAID PARTIES OUGHT TO HAVE BEEN SUMMONED AS SOM E OF THEM WERE NOT CO-OPERATING. IN SUPPORT OF THE PURCHASES AND/OR CREDITORS, COPIES OF CHALLANS AND BILLS HAD BEEN FU RNISHED. THE CHALLANS CLEARLY SHOWED THAT THE GREY WAS SENT TO THE DYEING MILLS FOR JOB-WORK AND THE JOB-WORK PARTIES HAD ALREADY B EEN VERIFIED TO BE GENUINE. THE OUTSTANDING BALANCES IN THEIR NAMES HAD BEEN ACCEPTED BY THE AO. IT WAS ALSO SUBMITTED THAT TH E BALANCES SHOWN IN THE NAMES OF 3(THREE) PARTIES TOTALLING RS , 3,54,624 (PAGE-9) REPRESENTED OPENING BALANCES. OUT OF THE R EMAINING RS.40.41 LACS, A SUM OF RS.37.64 LACS REPRESENTED T HE SUNDRY CREDITORS FOR FINISHED GOODS WHICH REPRESENTED 27% OF THE TOTAL TURNOVER OF RS.141.25 LACS. THERE WAS NO CASE FO R REJECTING ALL SUCH SUNDRY CREDITORS AND CONSEQ UENTLY THE CORRESPONDING PURCHASES, ESPECIALLY WHEN ALL RELEVA NT DOCUMENTARY EVIDENCES HAD BEEN FURNISHED. IN SUPPORT OF HIS I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 4 CONTENTIONS, THE ASSESSEE PLACED RELIANCE ON TH E FOLLOWING CASE- IAWS:- 1. NEMICHAND KOTHARI VS CIT(2003) 264 ITR 254 (GU J.) 2. UPPER INDIA PUBLISHING HOUSE (P) LTD VS CIT (1 979) 117 ITR 569(SC) 3. ATTAR SINGH GURMUKH SINGH VS ITO (1991) 191 ITR 667 (SC) 4. GIRDHARI LAL GOENKA VS CIT(1998) 229 ITR 229 ( SC) 5. CIT VS P. MOHANAKALA (2007) 161 TAXMAN 169/291 ITR 278 (SC) 4.3 THE ASSESSEE THEN FURNISHED, VIDE LETTER D TD. 26.12.2008, A LIST OF THE SUNDRY CREDITORS ALONG WITH LED GER COPIES OF THEIR ACCOUNTS FROM THE ASSESSEE'S BOOKS AN D A COPY OF THE ASSESSEE'S BANK STATEMENT. IT WAS CLAIMED THAT ALL THE LIABILITIES HAD BEEN DISCHARGED IN THE SUBSEQUENT YEARS. ON VER IFICATION, THE AO FOUND THAT THE ASSESSEE'S CONTENTION REGARDING T HE OPENING BALANCES OF THE THREE PARTIES TOTALLING RS.3,54,624 WAS CORRECT. OUT OF THE REMAINING RS.40,41,540, THE ASSESSEE HAD SHOWN PAYMENTS IN CASH AMOUNTING TO RS.7,73,365. SUCH PAYMENTS WERE NOT SUPPORTED BY THE CASH BOOK OR VOUCHERS AND HENCE, NOT VERIFIABLE. REGARDING THE OTHER PAYMENTS, THE AO OB SERVED THAT THE BANK ACCOUNTS DID NOT REFLECT THE NAMES OF THE RECI PIENTS. IN RESPONSE TO THE NOTICE U/S. 133(6) OF THE IT ACT, T HE JAMMU & KASHMIR BANK, SURAT HAD PROVIDED PHOTOCOPY OF SO ME CHEQUES. FROM AN ANALYSIS (PAGE-11) THE AO FOUND THA T WHILE A CHEQUE WAS ISSUED TO 3 PARTICULAR PARTY, TH E SAID PARTY HAD ENDORSED THE CHEQUE TO A THIRD PARTY WHO HAD GOT TH E CHEQUE CLEARED. THIS WAS DONE BY CANCELLING THE ACCOUNT-PA YEE CHEQUE AND CONVERTING IT INTO A BEARER CHEQUE (PAGE-12). 4.4 ON THE BASIS OF SUCH FINDINGS AND OBSERVATIONS, THE AO TREATED THE SUNDRY CREDITORS TOTALLING RS.40,41,540 AS NON- VERIFIABLE, AND HENCE, BOGUS. CONSEQUENTLY HE ADDED THE SAID SUM TO THE ASSESSEE'S TOTAL INCOME. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). LD. CIT(A) HAS ASKED FOR REMAND REPORT FORM THE A.O. AND THEREAFTER, HE HAS DELETED THE ADDITION MADE BY THE A.O. AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. SUPPORTED THE ASSESSMENT ORDER. HE FU RTHER DRAWN OUR ATTENTION TO PARA 6.1 OF THE ORDER OF LD. CIT(A) PO INTING OUT THAT IT IS I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 5 OBSERVED BY LD. CIT(A) IN THIS PARA THAT AS PER HIM , THE A.O. SHOULD HAVE ISSUED ANOTHER ROUND OF NOTICES U/S 133(6) AND EVEN SUMMONS U/S 131 OF THE INCOME TAX ACT, 1961 BECAUSE QUITE OFTEN THE PE RSON RESPONSIBLE FOR RECEIVING SUCH NOTICES ON BEHALF OF THE PARTIES CON CERNED MAY NOT BE AVAILABLE OR COULD EVEN REFUSE TO RECEIVE A NOTICE FROM THE INCOME TAX DEPARTMENT. HE FURTHER OBSERVED THAT THE A.O. COUL D HAVE ALSO CONDUCTED FIELD INQUIRY BECAUSE ALL THE CREDITORS ARE FROM SU RAT ITSELF. HE FURTHER POINTED OUT THAT EVEN AFTER MAKING THESE OBSERVATIO NS, LD. CIT(A) DID NOT ENSURE TO MAKE SUCH INQUIRIES AS HAS BEEN SUGGE STED BY HIM IN THAT PARA OF HIS ORDER. HE ALSO SUBMITTED THAT THE POWE RS OF LD. CIT(A) ARE CO-TERMINUS WITH THAT OF THE A.O. AND HENCE, IF AS PER LD. CIT(A), SOME FURTHER INQUIRIES WERE REQUIRED TO BE MADE BY THE A .O., THE SAME SHOULD HAVE BEEN MADE BY LD. CIT(A) HIMSELF OR HE SHOULD H AVE DIRECTED THE A.O. TO MAKE THESE INQUIRIES IN REMAND PROCEEDINGS AND WITHOUT DOING SO, DELETION OF ADDITION MADE BY THE A.O. IS NOT JU STIFIED. 6. LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THAT THE A.O. HAS NOT PRODUCED ANY EVIDENCE THAT PA YMENT MADE BY THE ASSESSEE IN FUTURE YEARS HAS COME BACK TO THE ASSES SEE. HE HAS STATED THAT THE PAYMENTS WERE MADE IN SUBSEQUENT YEARS BY A/C P AYEE CHEQUES. HE ALSO SUBMITTED THAT BOOK RESULTS AND PURCHASE/SALES /G.P. WERE NOT REJECTED BY THE A.O. HE ALSO SUBMITTED THAT ON PAGES 85-86 OF THE PAPER BOOK, IS THE COPY OF THE CHALLANS AND BILLS ISSUED BY B M IN DUSTRIES I.E. ONE OF THE CREDITORS. THE SIMILAR BILLS AND CHALLANS ARE AVAI LABLE FROM ALL THE CREDITORS. HE ALSO POINTED OUT THAT SIMILAR BILLS AND CHALLANS OF THE SAME PARTY ARE AVAILABLE ON PAGES 63-64 OF THE PAPER BOO K ALSO. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT AS PER THE COPIES OF THE BILLS AND CHALLANS OF M/S. B M INDUSTRIES I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 6 AVAILABLE ON PAGES 63-64 AND 85-86 OF THE PAPER BOO K, THE BILLS ON PAGES 63 & 85 ARE ISSUED ON THE LETTER PAD OF M/S. B M IN DUSTRIES. CORRESPONDING CHALLANS ARE AVAILABLE ON PAGE 64 AND 86 OF THE PAPER BOOK AND IN BOTH THESE CHALLANS, THE NAME OF THE ISSUER IS UPASNA TRADERS AND NOT B M INDUSTRIES. THESE CONTRADICTION IN THE NAM E AS PER BILLS AND CHALLANS WERE POINTED OUT TO THE LD. A.R. IN THE CO URSE OF HEARING AND IT WAS ALSO POINTED OUT THAT SIMILAR DIFFERENCES ARE T HERE IN OTHER BILLS AND CHALLANS ALSO. THE LD. A.R. COULD NOT EXPLAIN THIS DISCREPANCY. REGARDING THIS ISSUE THAT PAYMENTS WERE MADE IN THE SUBSEQUENT YEARS BY WAY OF A/C PAYEE CHEQUES, WE FIND THAT THIS FINDING IS GIVEN BY THE A.O. IN THE ASSESSMENT ORDER THAT CHEQUE NO.004236 DATED 20 .05.2006 AMOUNTING TO RS.16,760/- HAS BEEN DEBITED BY THE ASSESSEE IN THE ACCOUNT OF VIVEK FASHIONS IN HIS BOOKS OF ACCOUNT BUT ON VERIFICATIO N OF THE PHOTOCOPY OF THE CHEQUE, IT IS SEEN THAT THE CHEQUE WAS ISSUED T O ONE M/S. BALAJI CREATIONS AND ON THE BACK SIDE OF THE CHEQUE, BALAJ I CREATIONS HAS ENDORSED TO ONE M/S. KRISHNA TEXTILES AND THEREAFTE R, THE CHEQUE WAS CLEARED FROM THE BANK ON 23.05.2006. HE HAS GIVEN A FINDING THAT NO PAYMENT HAS BEEN MADE TO VIVEK FASHIONS. HE HAS AL SO GIVEN A FINDING THAT A/C PAYEE CROSSING HAS BEEN CANCELLED UNDER TH E SIGNATURE OF THE ASSESSEE. HE ALSO MADE PHOTOCOPY OF THIS CHEQUE A PART OF THE ASSESSMENT ORDER, WHICH CAN BE SEEN ON PAGE 12 OF THE ASSESSME NT ORDER. ALTHOUGH ONLY ONE INSTANCE IS MADE PART OF THE ASSESSMENT OR DER BUT THE A.O. HAS STATED ON PAGE 12 OF THE ASSESSMENT ORDER THAT THIS MODUS OPRANDI OF THE ASSESSEE THAT THE CHEQUES ARE ISSUED IN THE NAME OF THIRD PERSON AND THE PAYMENTS RETUNED BACK BY CANCELING THE CROSSING OF THE CHEQUE. IN SPITE OF THIS, NOTHING HAS BEEN BROUGHT ON RECORD BEFORE US THAT SUCH DISCREPANCY IN THE PAYMENTS IN THE CHEQUE IS ONLY I N RESPECT OF ONE CHEQUE POINTED OUT BY THE A.O. AND ALL OTHER CHEQUE S WERE ISSUED IN THE I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 7 NAME OF THE CORRECT PARTIES AND WERE CLEARED IN THE SAME NAME FROM THE BANK OF THE ASSESSEE. THE ASSESSEE HAS FILED VOLUM INOUS PAPER BOOK BUT NO SUCH PHOTOCOPY OF ANY OTHER CHEQUE WAS MADE PART OF THE PAPER BOOK. THE OBSERVATION OF THE LD. CIT(A) IN PARAS 6.1 & 6. 2 ARE VERY IMPORTANT AND RELEVANT AND HENCE, THESE PARAS OF THE ORDER OF LD. CIT(A) ARE REPRODUCED BELOW: 6.1 THE FINDINGS AND THE CONCLUSION OF THE AO WAS BASED ON THE INABILITY TO SERVE THE NOTICES U/S. 133(6) ON 20 SU NDRY CREDITORS, WHICH ACCORDING TO HIM MEANT THAT THE PARTIES DID N OT EXIST, AND HENCE, THE SUNDRY CREDITS APPEARING AGAINST THEIR N AMES WERE BOGUS, I AM OF THE VIEW THAT, WHETHER BECAUSE OF TI ME CONSTRAINT OR BECAUSE OF ANY OTHER REASON, THE AO SIMPLY FAILED T O TAKE THE ISSUE TO ITS LOGICAL CONCLUSION. TO BEGIN WITH, HE OUGHT TO HAVE ISSUED ANOTHER ROUND OF NOTICES U/S.133(6) OR EVEN SUMMONS U/S.131 OF THE IT ACT THIS IS BECAUSE, QUITE OFTEN THE PERSONS RESPONSIBLE FOR RECEIVING SUCH NOTICES ON BEHALF OF THE PARTIES CON CERNED MAY NOT BE AVAILABLE OR COULD EVEN REFUSE TO RECEIVE A NOTI CE FROM THE INCOME-TAX DEPARTMENT, A SECOND ROUND OF NOTICES CO ULD PERHAPS BRING SUCH PERSONS AROUND TO ACCEPT OR RECEIVE THEM AND RESPOND. SECONDLY, THE AO COULD HAVE ALSO CONDUCTED FIELD EN QUIRIES, SINCE ALL THE CREDITORS APPEARED TO BE FROM SURAT ITSELF. IT IS ALSO TRUE THAT THE TRANSACTIONS WERE MORE THAN THREE YEARS OLD WHE N THE AO STARTED TO MAKE THE REQUISITE ENQUIRIES AND IT IS Q UITE POSSIBLE THAT THE ADDRESSES OF AT LEAST SOME OF THE PURCHASE PART IES WOULD HAVE CHANGED. THUS, WHILE ON ONE HAND THE AO FAILED TO CARRY OUT HIS ENQUIRES TO THEIR LOGICAL CONCLUSION ON THE OTHER, ASSESSEE HAD FURNISHED EVIDENCE IN THE FORM 'OF BANK STATEMENT(S) TO CLAIM THAT THE SUNDRY CREDITORS WERE PAID OFF IN THE SUBSEQUENT YEARS AND HENCE, I T COULD NOT BE SAID THAT THEY DID NOT EXIST. THE AO HOWEVER WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE'S CLAIM ON THE GROUND THAT THE NAMES OF THE PARTIES TO WHOM THE PAYMENTS WERE ALLE GEDLY MADE DID NOT APPEAR ON THE BANK STATEMENT(S). THIS DOES NOT NECESSARILY HAPPEN IN AL THE BANKS. IN ANY CASE, THE AO COULD H AVE EASILY CARRIED OUT FURTHER ENQUIRIES TO ASCERTAIN AND VERI FY THE DESTINATION OF SUCH CHEQUES INSTEAD OF REJECTING THE ASSESSEE'S CLAIM OUTRIGHT. THE AO ALSO PROVIDED THE EXAMPLE OF A PAYMENT TO A PARTICULAR PARTY WHICH WAS MADE BY ACCOUNT-PAYEE CHEQUE WHICH WAS I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 8 SUBSEQUENTLY CANCELLED AND THE CHEQUE END ORSED TO A THIRD PARTY. THE EXPLANATION PROVIDED BY THE AR IS NOT IMPROBABLE. IT HAS BEEN EXPLAINED THAT THE PARTY IN FAVOUR OF WHOM THE CHEQUE WAS DRAWN HAD A PAYMENT TO MAKE TO A T HIRD PARTY AND THEREFORE, WITH THE CONSENT OF THE ASSESSEE, THE 'ACCOUNT-PAYEE' WAS STRUCK OFF AND THE CHEQUE WAS E NDORSED TO THE THIRD PARTY. THE AO TOOK THIS GROUND TO SHOW THAT T HE PAYMENTS WERE BOGUS, WHICH WAS NOT REALLY JUSTIFIED. 8. FROM THE ABOVE TWO PARAS OF THE ORDER OF LD. CIT (A), WE FIND THAT VARIOUS OBSERVATIONS WERE MADE BY LD. CIT(A) THAT F URTHER INQUIRIES SHOULD HAVE BEEN MADE BY THE A.O. BUT IN SPITE OF M AKING THESE OBSERVATIONS, LD. CIT(A) NEITHER MADE INQUIRY HIMSE LF NOR ASKED THE A.O. TO MAKE INQUIRY ON THIS LINE. REGARDING THE D ISCREPANCY IN THE NAMES OF PARTIES ON CHEQUES POINTED OUT BY LD. A.O. , LD CIT(A) HAS OBSERVED THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT IMPROBABLE. HE HAS NOTED THAT IT WAS EXPLAINED THAT THE PARTIES IN FAVOUR OF WHOM CHEQUES WERE DRAWN HAD TO MAKE PAYMENT TO 3 RD PARTY AND THEREFORE, WITH THE CONSENT OF THE ASSESSEE, THE A/C PAYEE WAS STRU CK OFF AND THE CHEQUE WAS ENDORSED TO THE THIRD PARTY. WE ARE NOT SATISF IED ON THIS EXPLANATION OF THE ASSESSEE PARTICULARLY WHEN THE ASSESSEE HAS NOT BROUGHT OUT ON RECORD ANY PHOTOCOPY OF OTHER CHEQUES BY PROCURING THE SAME FROM THE BANK OF THE ASSESSEE TO ESTABLISH THAT IN ALL THE R EMAINING CASES, THERE IS NO SUCH DISCREPANCY AND THIS IS NOT THE MODUS OPERA NDI OF THE ASSESSEE. CONSIDERING ALL THESE FACTS AND IN VIEW OF THE ABOV E DISCUSSION, WE FEEL THAT THE ORDER OF LD. CIT(A) IS NOT SUSTAINABLE. W E FEEL THAT IN THE INTEREST OF JUSTICE, THIS MATTER SHOULD GO BACK TO THE FILE OF LD. CIT(A) FOR A FRESH DECISION AFTER EXAMINING THIS ASPECT AS TO WHETHER THE PAYMENTS MADE TO OTHER CREDITORS IN THE SUBSEQUENT YEARS WER E BY WAY OF A/C PAYEE CHEQUES IN THE NAME OF THE CREDITORS THEMSELVES AND THERE IS NO SUCH AMBIGUITY OR INCONSISTENCY IN THE CHEQUES REGARDING THE NAMES OF THE I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 9 PAYEES. THE ASSESSEE SHOULD PRODUCE PHOTOCOPY OF S UCH CHEQUES BY OBTAINING THE SAME FROM THE BANK OF THE ASSESSEE. AS SUGGESTED BY LD. CIT(A) FOR MAKING FURTHER INQUIRY BY ISSUING NOTICE U/S 133(6) AND/OR SUMMONS U/S 131 AND FIELD INQUIRY, WE WOULD LIKE TO OBSERVE THAT THE SAME SHOULD BE MADE AS MAY BE CONSIDERED REASONABLE IN VIEW OF THE LAPSE OF TIME BY NOW. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE TO DECIDE T HE ISSUE AFRESH AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO BOTH THE SIDES. 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. NOW, WE TAKE UP THE C.O. FILED BY THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D LAW, THE LD, ASSESSING OFFICER HAS ERRED IN ADDITION OF RS. 40,4 1,540/- ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS. 2. ON THE FACTS OF THE CASE, THE LD. ASSESSING OF FICER HAS FAILED TO UNDERSTAND THE LOGIC THAT WITHOUT 'PURCHASES' HOW C AN ANYBODY 'SELL' THE GOODS. IF A.O. ACCEPTS 'SALES', AND HAS NOT MADE ANY ALTERATION OR REMARKS ON GROSS PROFIT RATIO, THEN T HE 'PURCHASES' ALSO SHOULD BE ACCEPTED AND CANNOT BE DISALLOWED AS 'BOGUS'. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. A.O. MUST FIRST PROVE THAT THE PURCHASES ARE EXCESSIVE AND UN REASONABLE KEEPING IN VIEW THE SALES OF THE APPELLANT. THE LD. A.O. HAS FAILED TO BRING ON RECORD MATERIAL FROM WHICH IT COULD BE CONCLUDED THAT SUCH EXPENSES IN FACT ARE NOT MADE BY THE APPELLANT . 4. ON THE FACTS OF THE CASE, THE LD. AO FAILED TO CARRY OUT HIS ENQUIRIES TO THEIR LOGICAL CONCLUSION AS THE APPELL ANT HAD FURNISHED EVIDENCE IN THE FORM OF BANK STATEMENT(S) TO CLAIM THAT THE SUNDRY CREDITORS WERE PAID OFF IN THE SUBSEQUENT YEARS AND HENCE IT COULD NOT BE SAID THAT THEY DID NOT EXIST. 5. ON THE FACTS OF THE CASE, LD. AO HAS NOT REJEC TED THE BOOKS OF ACCOUNTS PRODUCED AND ACCEPTED THE SAME BUT MERELY GOT STICK TO THE POINT THAT NOTICES SERVED TO CREDITORS UNDER 13 3(6) WERE RETURNED UN-SERVED AND ON SUCH AMBIGUOUS BASIS, THE CREDITORS I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 10 WERE REJECTED AS UNEXPLAINED AND ADDITION OF RS. 40 ,41,540/- WAS MADE. 6. ON THE FACTS OF CASE, THE LD. AO HAVE NOT MADE EFFORTS TO ENQUIRE ABOUT THE SUNDRY CREDITORS DURING ANOTHER O PPORTUNITY PROVIDED TO HIM BY THE CIT(A) SURAT DURING REMAND P ROCEEDINGS THOUGH THE APPELLANT HAS FULLY COOPERATED WITH THE LD. AO DURING REMAND PROCEEDINGS AND PRODUCED ALL THE REQUIRED DO CUMENTS BUT A STEREOTYPE REMAND REPORT WAS SUBMITTED BY AO TO T HE CIT(A). 7. IT IS, THEREFORE, PRAYED THAT THE APPEAL MADE BY THE AO SHOULD BE REJECTED AND ORDER OF THE CIT(A) MAY BE RESTORED TO THE ABOVE EXTENT. 11. FROM THE ABOVE GROUNDS OF THE ASSESSEE IN THE C .O., WE FIND THAT THE C.O. FILED BY THE ASSESSEE IS MERELY IN SUPPORT OF THE ORDER OF LD. CIT(A). WHILE DECIDING THE APPEAL OF THE REVENUE, WE HAVE ALREADY RESTORED THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR A FRESH DECISION AND HENCE, THE C.O. FILED BY THE ASSESSEE DOES NOT SURV IVE. 12. IN THE RESULT, C.O. OF THE ASSESSEE IS DISMISSE D. 13. IN THE COMBINED RESULT, APPEAL OF THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES AND C.O. OF THE ASSESSEE IS DI SMISSED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 45 6/AHD/200-10 C.O.NO.112/AHD/2012 11 1. DATE OF DICTATION 19/9 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/9.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/09/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/9/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/9/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .