Jaykumar Babulal Chauhan, Kolhapur V. Income-tax Officer,

CO 16/PUN/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2394 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-06-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 19-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUHAS P KULKARNI
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Reason to believe; Reassessment proceedings
• Section: 143(3); 133A; 68; 69; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA , JM AND SHRI R.K. PANDA , AM I TA NO S . 206 TO 210 /PN/201 2 ASSESSMENT YEARS : 1999 - 2000 TO 2003 - 04 THE INCOME TAX OFFICER, WARD 1(1), KOLHAPUR. . APPELLANT VS. SHRI JAYKUMAR BABULAL CHOUHAN ALIAS OSWAL, PROP. OF M/S M. M. CHOUHAN STEELS, 1511, C WARD, LAXMIPUR, KOLHAPUR. PAN : AAUPC6166H . RESPONDENT CO NO S . 14 TO 18 /PN/201 5 ARISING OUT OF ITA NO S . 206 TO 210 /PN/201 2 ASSESSMENT YEARS : 1999 - 2000 TO 2003 - 04 ASSESSMENT YEARS : 1999 - 2000 TO 2003 - 04 SHRI JAYKUMAR BABULAL CHOUHAN ALIAS OSWAL, PROP. OF M/S M. M. CHOUHAN STEELS, 1511, C WARD, LAXMIPUR, KOLHAPUR. PA N : AAUPC6166H . APPELLANT VS. THE INCOME TAX OFFICER, WARD 1(1), KOLHAPUR. . RESPONDENT DEPARTMENT BY : SHRI SUHAS P. KULKARNI A SSESSEE BY : SMT. DEEPA KHARE / DATE OF HEARING : 24 .0 8 .201 6 / DATE O F PRONOUNCEMENT: 31 . 0 8 .201 6 2 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 / ORDER PER SUSHMA CHOWLA, JM : THIS BUNCH OF FIVE APPEALS FILED BY THE REVENUE ARE AGAINST THE CONSOLIDATED ORDER OF CIT(A), KOLHAPUR, DATED 30.11.2011 RELATING TO ASSESSMENT YEARS 1999 - 2000 TO 2003 - 04 AGAINST RES PECTIVE ORDERS PASSED UNDER SECTIONS 144 R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . THE ASSESSEE HAS ALSO FILED ITS CROSS OBJECTIONS AGAINST THE APPEALS FILED BY THE REVENUE. 2. THE APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FIL ED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. FIRST, WE SHALL TAKE UP THE CROSS OBJECTIONS OF THE ASSESSEE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUE IN CO NO. 1 4 /PN/201 5 TO ADJUDICATE THE ISSUE. 4. THE ASSESSEE IN CO NO.14/PN/2015 HAS RAISED THE FOLLOWING GROUNDS OF OBJECTIONS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDINGS U / S 147 WHICH WERE INITIATED WITHOUT THERE BEING REQUISITE BELIEF ABOUT THE ESCAPEMENT OF INCOME FOR THE RELEVANT ASSESSMENT YEAR IN THE HANDS OF THE APPELLANT. 2. THE REASSESSMENT PROCEEDINGS INITIATED MAY KINDLY BE HELD TO BE BA D IN LAW. 5 . THE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US WAS THAT THE SAID GROUNDS OF APPEAL RAISED BY WAY OF CROSS OBJECTION IS A JURISDICTIONAL ISSUE AND HENCE NEEDS TO BE ADDRESSED FIRST. THE ASSESSEE HAS 3 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 CHALLENGED THE V ALIDITY OF THE RE - ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE CAPTIONED ASSESSMENT YEARS I.E. A.YS. 1999 - 2000 TO 2003 - 04, THE PROCEEDINGS UNDER SECTION 147 OF TH E ACT WERE INITIATED WITHOUT THERE BEING REQUISITE BELIEF OF ESCAPEMENT OF INCOME FOR THE RELEVANT YEARS. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT NO PROPER PROCEEDINGS UNDER SECTION 147 OF THE ACT HAVE BEEN INITIATED. SHE FURT HER PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF BROTHERS OF THE ASSESSEE WHEREIN , IN BUNCH MATTERS , IT HAS BEEN HELD THAT THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT HAVE NOT BEEN VALIDLY INITIATED. THE LD. AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE WAS ASKED TO FILE THE REASONS RECORDED FOR RE - OPENING THE ASSESSMENT IN THE CAPTIONED ASSESSMENT YEARS. HOWEVER, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS UNABLE TO FILE THE SAME. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE WAS THUS DIRECTED TO FILE THE REASONS RECORDED FOR RE - OPENING THE ASSESSMENT FOR THE RELEVANT ASSESSMENT YEARS. IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE R EVENUE FILED THE REPORT OF THE ASSESSING OFFICER (ITO), WARD - 1(1), KOLHA PUR DATED 02.06.2016 ALONG WITH COPIES OF NOTICE ISSUED UNDER SECTION 148 OF THE ACT, PROOF OF SERVICE OF THE SAID NOTICE AND COPIES OF REASONS RECORDED BY THE ASSESSING OFFICER FOR RE - OPENING THE ASSESSMENT UNDER RELEVANT ASSESSMENT YEARS. THE ASSESSING OFFICER IN THE SAID LETTER DATED 02.06.2016 FURTHER POINTED OUT THAT THE CASE OF THE ASSESSEE RELEVANT TO ASSESSMENT YEAR 2003 - 04 WAS TAKEN UP FOR SCRUTINY UNDER COMPULSORY SELECTION CRITERIA ISSUED BY THE BOARD AND HENCE THE COPIES OF NOTICE ISSUED UNDER SECTION 143(2) ALONG WITH PROOF OF SERVICE OF NOTICE WAS ENCLOSED. HE FURTHER POINTED OUT THAT THE REASONS RECORDED FROM YEAR TO YEAR IN THE CASE OF THE 4 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 ASSESSEE OF ESCAPEMENT OF INCOME WERE ON THE BASIS OF EXAMINATION OF THE INFORMATION AVAILABLE IN RESP ECT OF SUNDRY DEBTORS/CREDITORS AND ALSO PURCHASES AND SALES AND THE REQUISITE BELIEF OF THE ASSESSING OFFICER OF SUPPRESSION OF TURNOVER AND THE ENQUIRY CARRIED OUT BY THE ASSESSING OFFICER BEFORE RECORDING THE REASONS FOR RE - OPENING THE ASSESSMENT UNDER SECTION 147 AND ISSUING THE NOTICE UNDER SECTION 148 OF THE ACT. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER POINTED OUT THAT THE REASONS WHICH WERE RECORDED IN THE CASE OF RELATED PARTIES WERE AT VARIANCE. 7 . THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE, IN REJOINDER, POINTED OUT THAT THE BASIS FOR RE - OPENING THE ASSESSMENT WAS THE SURVEY CARRIED OUT ON THE THREE BROTHERS ON 13.01.2004 . S INCE THERE WAS A M IX UP IN THE LIST OF SUNDRY CREDITORS, THE ASSESSEE ALONG WITH HIS TWO BROT HERS HAD OFFERED FOR TAXATION THE SAME IN ASSESSMENT YEAR 2004 - 05. SHE FURTHER POINTED OUT THAT THE EARLIER YEARS WERE RE - OPENED ON THE BASIS OF THE SAID SURRENDER MADE BY THE ASSESSEE ON ACCOUNT OF SUNDRY CREDITORS. SHE FAIRLY ADMITTED THAT THE PROCEEDI NGS FOR ASSESSMENT YEAR 2003 - 04 WERE COMPLETED UNDER SECTION 143(3) UNDER COMPULSORY SCRUTINY AND NOT UNDER SECTION 147 OF THE ACT. 8 . FURTHER, THE PERUSAL OF THE ORDER OF THE CIT(A) REFLECTS THAT THE ASSESSEE THOUGH HAD RAISED GROUNDS AGAINST RE - OPENING OF ASSESSMENT UNDER SECTION 147/148 IN EACH OF THE YEAR. HOWEVER, THE SAID GROUND S OF APPEAL WERE WITHDRAWN BY THE ASSESSEE BEFORE THE CIT(A) AND THE SAME WERE DISMISSED AS WITHDRAWN. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POIN TED OUT THAT THE ISSUE OF RE - OPENING OF ASSESSMENT UNDER SECTION 147/148 OF THE ACT IS A LEGAL GROUND AND THE ASSESSEE C AN RAISE AN ADDITIONAL GROUND OF APPEAL IN THIS REGARD. 5 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 RELIANCE WAS PLACED UPON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT I N CIT VS. PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. (2012) 349 ITR 336 (BOM) . 9 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAS RAISED THE JURISDICTIONAL ISSUE AGAINST THE RE - OPENING OF THE ASSESSMENT UNDER SECTION 147 IN A SSESSMENT YEARS 1999 - 2000 TO 2003 - 04. IN THE FACTS OF THE PRESENT CASE, PURSUANT TO SURVEY CONDUCTED ON THE PREMISES OF THE ASSESSEE AND HIS TWO BROTHERS ON 13.01.2004, THE SURVEY TEAM NOTED CERTAIN MIX UP IN THE LIST OF SUNDRY CREDITORS . T HE ASSESSEE IN ORDER TO BUY PEACE OFFERED ADDITIONAL INCOME OF RS.1 CRORE IN THREE HANDS IN ASSESSMENT YEAR 2004 - 05. THE ASSESSEE CLAIMS THAT SINCE THE ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE IN THE YEAR OF SURVEY, THE ASSESSING OFFICER RE - OPENED THE ASSESSMENT I N THE EARLIER YEAR AFTER RECORDING THE REASONS FOR RE - OPENING THE ASSESSMENT UNDER SECTION 147 AND THEN ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE WAS THUS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. THE ASSESSEE HAS CHALLENGED THE RE - OPENING OF THE ASSESSMENT BEING WITHOUT ANY BASIS OF ESCAPEMENT OF INCOME IN THE HANDS OF THE ASSESSEE. ON T HE PERUSAL OF THE ORDER OF THE CIT(A) WITH SPECIAL REFERENCE TO PAGE S 6 AND 7 OF THE APPELLATE ORDER, WE FIND THAT THE ASSESSEE CHALLENGED THE ORDER OF THE ASSESSING OFFICER IN INITIATING THE RE - ASSESSMENT PROCEEDINGS UNDER SECTION 147 AND 148 OF THE ACT BEING WITHOUT JURISDICTION BY WAY OF ITS VARIOUS FACETS VIDE GROUNDS OF APPEAL NOS .1 TO 5 AND BY WAY OF GROUND OF APPEAL NO.7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE VIDE LETTER DATED 27.07.2011 REQUESTED FOR WITHDRAWAL OF GROUNDS OF APPEAL NO.1 TO 5 AND 7. HENCE, THE GROUNDS OF APPEAL WERE DISMISSED AS WITHDRAWN BY THE CIT(A) . ONCE, THE ISSUE RAISED BY THE ASSESSEE BEFORE THE CIT(A) HAS BEEN SUO MOTU WITHDRAWN BY THE ASSESSEE THEN THE SAME CANNOT BE CHALLENGED BY WAY OF 6 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 RAISING ANY CROSS OBJECTION IN THIS REGARD. THE ISSUES STAND SETTLED AGAINST THE ASSESSEE BY THE ORDER OF THE ASSESSING OFFICER AND THAT DECISION HAS BEEN ACCEPTED BY THE ASSESSEE BY WITHDRAWING THE GROUNDS OF APPEAL BEFORE THE CIT(A) AGAINST THE SAID ISSUES. ONCE, THE ASSESSEE HAS OPTED TO WITHDRAW THE ISSUE BEFORE THE APPELLATE AUTHORITY THEN THE ASSESSEE CANNOT BE SAID TO BE AGGRI EVED ON THE SAME ISSUE AND IS PRECLUDED FROM FILING ANY GROUNDS OF APPEAL BEFORE THE TRIBUNAL IN THIS REGARD. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE ISSUE IN HAND WAS A LEGAL GROUND AND COULD BE RAISED AT ANY POINT OF TIME EV EN BY WAY OF ADDITIONAL GROUND OF APPEAL. WE AGREE TO THE PROPOSITION RAISED BY THE ASSESSEE IN THIS REGARD. HOWEVER, THE SAID PLEA IS AVAILABLE TO THE ASSESSEE IN CASE IT HAD NOT RAISED THE SAID GROUND OF APPEAL BEFORE THE CIT(A) AND HAS RAISED BY WAY O F ADDITIONAL GROUND OF APPEAL BEFORE THE TRIBUNAL , THEN IN SUCH A SCENARIO , THE SAID GROUND OF APPEAL RAISED BY THE ASSESSEE IS BY WAY OF ADDITIONAL GROUND OF APPEAL AND IN CASE THE ISSUE RAISED IS PURELY LEGAL THEN THE SAME COULD BE RAISED BY WAY OF ADDIT IONAL GROUND OF APPEAL. THE CASE OF THE ASSESSEE, ON THE OTHER HAND, IS QUITE DIFFERENT. FIRST OF ALL, IT IS NOT AN ADDITIONAL GROUND OF APPEAL RAISED BEFORE US. SECONDLY, THE ISSUE RAISED BY THE ASSESSEE BY WAY OF CROSS OBJECTION HAS ALREADY BEEN ADJUD ICATED AGAINST THE ASSESSEE BY THE CIT(A) , NOT ON MERITS BUT THE FACT THAT THE ASSESSEE HAD WITHDRAWN THE GROUND OF APPEAL . W HE RE SUCH A WITHDRAWAL HAS BEEN MADE BY THE ASSESSEE BEFORE THE CIT(A), NO GROUND OF APPEAL OR CROSS OBJECTION CAN BE RAISED BY TH E ASSESSEE ON THE AFORESAID ADDITION. ACCORDINGLY, WE FIND NO MERIT IN THE CROSS OBJECTION RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 1999 - 2000 TO 2002 - 03. HENCE, THE SAME ARE DISMISSED. 10 . THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN RESPECT O F ISSUE OF EXERCISE OF JURISDICTION UNDER SECTION 147/148 OF THE ACT ALSO POINTED OUT THAT THE 7 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN BUNCH OF APPEAL WITH LEAD ORDER IN ITA NO.961/PN/2008 RELATING TO ASSESSMENT YEAR 1998 - 99 IN THE CASE O F SHRI SURESH BABULAL CHOUHAN. THE TRIBUNAL VIDE ORDER DATED 23 RD DECEMBER, 2011 HAD NOTED THE REASONS RECORDED FOR RE - OPENING OF THE ASSESSMENT WHICH WERE SOLELY ON THE BASIS OF THE SURVEY CONDUCTED BY THE DEPARTMENT UNDER SECTION 133A OF THE ACT ON 13.0 1.2004 AND CONSEQUENT OFFER OF ADDITIONAL INCOME. THE ASSESSING OFFICER IN THAT CASE NOTED THAT THE ASSESSEE HAD ADMITTED THAT THE CREDITORS WERE RUNNING ACCOUNT FOR SEVERAL YEARS AND THE SAME WERE REQUIRED TO BE TAXED IN THE HANDS OF THE ASSESSEE FOR THE RESPECTIVE YEARS OF CREDIT. IN VIEW THEREOF, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME. HOWEVER, PERUSAL OF THE REASONS RECORDED IN THE PRESENT CASE REFLECT A DIFFERENT PICTURE. THE ASSESSING OFFICER HAD CONFRONTED WITH THE ASSESSEE WITH THE LIST OF CREDITORS AND THE LIST OF SUNDRY DEBTORS ALSO, WHICH WERE NOT IN RECONCILIATION WITH THE BOOKS OF ACCOUNT AND ALSO CERTAIN UNRELATED SALES AND PURCHASES WERE FOUND. HOWEVER, THE ASSESSEE FAILED TO EXPLAIN THE SAME FOR T HE EARLIER YEARS AND THE ASSESSING OFFICER IN THIS REGARD RECORDED THE REASONS FOR RE - OPENING THE ASSESSMENT. THOUGH IN THE PARA HEREINABOVE, WE HAVE HELD THAT THE ASSESSEE HAS NO CASE SINCE THE SAID ISSUE HAD BEEN WITHDRAWN BY THE ASSESSEE BEFORE THE CIT (A). HOWEVER, EVEN ON MERITS, WE FIND THAT THE ASSESSEE HAS WRONGLY PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE PRESENT SET OF FACTS. THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME AND WHERE THE ASSESSING OFFICER HAD RECORDED THE REASONS FOR RE - OPENING THE ASSESSMENT FROM YEAR TO YEAR ON ACCOUNT OF UN - RECONCILIATION OF SUNDRY DEBTORS AND CREDITORS AND CERTAIN UNRELATED SALES AND PURCHASES, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD AND WE UPHOLD TH E RE - OPENING OF THE ASSESSMENT UNDER SECTION 148 OF THE ACT IN ASSESSMENT YEARS 1999 - 2000 TO 2002 - 03. 8 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 11. NOW, COMING TO THE APPEAL IN ASSESSMENT YEAR 2003 - 04, THOUGH THE ASSESSEE HAS RAISED THE CROSS OBJECTION BUT AS POINTED OUT BY THE ASSESSING OFFICER A ND AS IS APPARENT FROM THE RECORD, THE ASSESSMENT RELATING TO THE SAID YEAR WAS COMPLETED UNDER SECTION 143(3) AND NOT BY INVOKING THE PROVISIONS OF SECTION 147/148 OF THE ACT. IT WAS A CASE OF COMPULSORY SCRUTINY AS PER INSTRUCTION OF THE BOARD. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FAIRLY ACCEPTED THAT THE ASSESSMENT COMPLETED IN ASSESSMENT YEAR 2003 - 04 WAS UNDER NORMAL PROVISIONS OF SECTION 143(3) OF THE ACT. ACCORDINGLY, WE DISMISS THE GROUND OF CROSS OBJECTION RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2003 - 04 AGAINST REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT . 12 . IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IN ASSESSMENT YEARS 1999 - 2000 TO 2003 - 04 ARE DISMISSED. 13 . NOW, COMING TO THE APPEAL FILED BY THE RE VENUE, WHEREIN THE REVENUE IN ALL THE YEARS RAISE D SIMILAR GROUNDS OF APPEAL. HOWEVER, WE REFER TO THE GROUNDS OF APPEAL IN ASSESSMENT YEAR 1999 - 2000 IN ORDER TO ADJUDICATE THE BUNCH OF APPEALS RELATING TO ASSESSMENT YEARS 1999 - 2000 TO 2003 - 04. THE GROUN DS OF APPEAL FILED BY THE REVENUE RELATING TO ASSESSMENT YEAR 1999 - 2000 READ AS UNDER : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING ADDITION OF RS. 24 LAKHS U/S 68 OF THE IT RELYING MERELY ON THE REMAND REPORT SENT BY THE THEN A .O . DISTORTING FACTS OF THE ASSESSMENT PROCEEDINGS WHEN THE ASSESSMENT ORDER REVEALED THAT THE ASSESSEE FAILED TO SUBMIT CONFIRMATIONS FROM THE SUNDRY CREDITORS AND ALSO FAILED TO CO - OPERATE AUDITOR FOR SPECIAL AUDIT SET UP U/S 142(2A) OF THE ACT DURING THE ASSESSMENT PROCEEDINGS FOR MAKING A SPECIAL AUDIT DUE TO COMPLEXITY OF THE ACCOUNTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING ADDITION OF RS. 1,25,000/ - ON ACCOUNT OF G. P. WHEN ASSESSEE FAILED TO GET HIS BOOKS OF ACCOUNTS AUDITED U/S 9 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 142 (2A) OF THE ACT AND PROVIDE THE RELEVANT DETAILS AND ACCOUNTS IN CONNECTION WITH THE ASSESSEE'S BUSINESS THO UGH SUFFICIENT OPPORTUNITY WAS OFFERED TO HIM BY THE A . O. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING ADDITION OF RS.6,75,000/ - ON ACCOUNT OF UNEXPLAINED INVESTMEN TS IN PURCHASES EVEN THOUGH HE WAS OFFERED SUFFICIENT OPPORTUNITY TO PROVE GENUINENESS OF TRANSACTIONS, SUNDRY DEBTORS/ CREDITORS BEFORE THE A .O . DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. 4. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL) BE VACAT ED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OTHER GROUNDS OF APPEAL AT THE TIME OF HEARING. 14 . BRIEFLY , IN THE FACTS OF THE CASE, SURVEY OPERATION AS POINTED OUT IN PARAS HEREINABOV E WAS CONDUCTED UNDER SECTIO N 133A OF THE ACT ON 13.01.2004. V ARIOUS DEFECTS WERE FOUND IN THE FORM OF NON - GENUINE CREDITORS AND/OR DEBTORS AND FURTHER SHORTAGE OF STOCK IN THE CASE OF THE ASSESSEE TO THE TUNE OF RS.50,62,774/ - . THE ASSESSEE AND HIS BROT HER UNDOUBTEDLY DECLARED ADDITIONAL INCOME OF RS.1 CRORE IN ASSESSMENT YEAR 2004 - 05 IN THE FORM OF UNEXPLAINED CREDIT S UNDER SECTION 68 OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THE FIGURES OF SUNDRY CREDITORS/DEBTORS WERE NOT POSTED CORRECTLY AND TH E SAID FIGURES CONTINUED FOR SEVERAL YEARS AND IN ALL THE YEARS , ENTRIES IN THE SUNDRY CREDITORS AND DEBTORS WERE BY WAY OF ACCOUNT PAYEE CHEQUES /DDS AND IT WOULD TAKE A LONG TIME TO RECONCILE THE SAME. THE ASSESSING OFFICER RE - OPENED THE ASSESSMENT FOR T HE CAPTIONED ASSESSMENT YEARS IN VIEW THEREOF AND THE ASSESSEE WAS CONFRONTED WITH THE SUNDRY CREDITORS AND THE SUNDRY DEBTORS SHOWN BY THE ASSESSEE FROM YEAR TO YEAR. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD FAILED TO ISSUE THE SALE BILLS TO VAR IOUS PARTIES WHO ARE LISTED IN SUNDRY DEBTORS AND HAD ALSO FAILED TO ENTER PURCHASE BILL S RECEIVED FROM SEVERAL PARTIES, WHO WERE ENTERED IN THE LIST OF SUNDRY CREDITORS. THE ASSESSING OFFICER, THUS, SHOW - CAUSE D THE ASSESSEE AS TO WHY ALL THE PURCHASES AN D SALES SHOULD NOT BE TREATED AS SUPPRESSED TURNOVER AND INCLUDED IN THE TRADING ACCOUNT. HOWEVER, THERE WAS NON - COMPLIANCE FROM THE ASSESSEE AND ANOTHER DETAILED 10 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 QUESTIONNAIRE MENTIONING THE FIGURES OF SUNDRY BOGUS CREDITS AND ASSETS FOUND FROM THE POS SESSION OF THE ASSESSEE TO THE TUNE OF RS.11.56 CRORES , WAS ISSUED . SHOW - CAUSE NOTICE WAS ISSUED TO THE ASSESSEE, WHICH REMAINED UN - COMPLIED WITH. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AN ENDEAVOR WAS MADE TO REFER THE MATTER FOR SPECIAL AUDIT UND ER SECTION 142(2A) OF THE ACT, WHICH ALSO COULD NOT BE COMPLETED BECAUSE OF THE TOTAL NON - COMPLIANCE S BY THE ASSESSEE. THE ASSESSEE FAILED TO COMPLY WITH THE NOTICES ISSUED ; THE OBJECTION RAISED BY THE ASSESSEE AGAINST THE SPECIAL AUDIT WAS REJECTED. THE ASSESSING OFFICER NOTED THAT THE STIPULATED DATE FOR SUBMISSIONS OF THE AUDIT REPORT HAD EXPIRED ON 15.05.2005 AND THE ASSESSEE FAILED TO COMPLY WITH THE DIRECTION ISSUED UNDER SECTION 142(2A) OF THE ACT. FURTHER, SPECIAL AUDITOR VIDE LETTER DATED 09.05. 2005 WAS ALSO RE P ORTED THAT THE ASSESSEE HAS EXPRESSED HIS INABILITY TO MAKE AVAILABLE THE RECORD FOR AUDIT. THE ASSESSING OFFICER HAS TABULATED THE LIST OF NOTICES ISSUED TO THE ASSESSEE AT PAGE 15 OF THE ASSESSMENT ORDER AND HAS OBSERVED THAT THE ASSESS EE HAS FAILED TO COMPLY WITH THE NOTICES. ACCORDINGLY, THE ASSESSING OFFICER PROPOSED THAT THE ASSESSMENT PROCEEDINGS WERE TO BE COMPLETED UNDER SECTION 144 OF THE ACT. THE ASSESSING OFFICER AFFORDED AN OPPORTUNITY OF HEARING TO T HE ASSESSEE TO EXPLAIN I TS CASE. IN REPLY, THE ASSESSEE SOUGHT FURTHER TIME OF 30 DAYS ON THE GROUND THAT THE CHARTERED ACCOUNTANT WAS OUT OF STATION. THE SAID PLEA OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER BECAUSE OF LACK OF COOPERATION. HOWEVER, ON 03.06.2005, TH E COUNSEL APPEARED ON BEHALF OF THE ASSESSEE AND FURNISHED SOME INFORMATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT IN THE PRESENT CASE, THE ASSESSMENT NEEDS TO BE COMPLETED UNDER SECTION 144 OF THE ACT BY RESORTING TO ESTIMATION , SINCE THE ASSESSEE W AS MAKING UNACCOUNTED SALES AND PURCHASES. THE ASSESSING OFFICER ALSO NOTED THAT THE MODUS OPERANDI USED BY THE ASSESSEE OF DELIBERATELY NOT RECORDING AND POSTING CREDITORS AND DEBTORS ACCOUNT AND FURTHER THE 11 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 DETECTION OF EXCESS / SHORTAGE OF STOCK AND AD DITIONAL INCOME OFFERED DURING THE SURVEY AND ALSO IN THE ABSENCE OF ANY QUANTITATIVE RECORD CORROBORATING THE FINDINGS OF ASSESSEE , THE INCOME HA D TO BE COMPUTED IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER ALSO NOTED VIDE PARA 10.2 AT PAGE 21 OF THE ASSESSMENT ORDER THAT IN RESPECT OF THE PROPRIETARY CONCERN OF THE ASSESSEE, THE TURNOVER THROUGH BANK WAS RS.9.97 CRORE FOR FINANCIAL YEAR 2000 - 01, RS.5.07 CRORE FOR ASSESSMENT YEAR 2001 - 02 AND RS.4.07 CRORE FOR FINANCIAL YEAR 2002 - 03. THE ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE WAS SUPPRESSING THE SALES AND ALSO THE COMMISSION EARNED ON CONSIGNMENT SALES. BECAUSE OF THIS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS UNACCOUNTED INCOME , WHICH WAS REFLECTED IN THE FORM OF NON - GENUINE CR EDITOR AND UNEXPLAINED INVESTMENT IN PURCHASE S, FOR WHICH SEPARATE ADDITION HAS TO BE MADE UNDER SECTION 68 AND 69 OF THE ACT. THE ASSESSING OFFICER ALSO TRIED TO VERIFY THE GENUINENESS OF THE CREDITORS AND DEBTORS. HOWEVER, IT WAS FOUND THAT THOUGH THE ASSESSEE HAS SHOWN THE BALANCES BUT SIMILAR BALANCES WERE NOT SHOWN BY THE SAID PARITIES. ELABORATE VERIFICATION IN THIS REGARD WAS MADE BY THE ASSESSING OFFICER IN THE CASE OF ALL THE THREE BROTHERS. THE ASSESSING OFFICER ALSO FOUND THAT ON VERIFICATION OF THE ACCOUNT EXTRACT GIVEN BY THE PURCHASERS FROM THE ASSESSEE THAT THERE WAS SUPPRESSION OF SALES. IN THIS REGARD, THE ASSESSING OFFICER RE - CASTED THE TRADING ACCOUNT FOR THE RELEVANT ASSESSMENT YEARS AND MADE THE ADDITION ON ACCOUNT OF GROSS PROFIT A T THE RATE OF 5% O F UNRECORDED SALES AND FURTHER ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE S. THE ASSESSING OFFICER ALSO MADE ADDITION ON ACCOUNT OF UNEXPLAINED TRADE CREDITORS UNDER SECTION 68 OF THE ACT. 15. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND FURNISHED INFORMATION, WHICH WAS FORWARDED TO THE ASSESSING OFFICER FOR VERIFICATION IN RESPECT OF SUNDRY 12 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 CREDITORS. THE ASSESSEE CLAIMS TO HAVE PRODUCED THE CONFIRMATION FROM CREDITORS, COPIES OF BILLS, ACCOUNT EXTRACT S O F CREDITORS, ETC.. THE ASSESSEE CLAIMED THAT CERTAIN DISCREPANCIES AROSE WITH REGARD TO THE CREDITORS AS A RESULT OF WRONG POSTING OF PAYMENTS IN THE ACCOUNT S . IT WAS FURTHER EXPLAINED THAT THE PAYMENTS MADE WERE WRONGLY CREDITED BY THE A CCOUNTANT TO THE GENERAL SUNDRY CREDITORS ACCOUNT, WHICH WAS MORE OR LESS A KIND OF SUSPENSE ACCOUNT. THE ASSESSEE FURTHER EXPLAINED THAT THE PAYEE HAD BEEN RECONCILED IN THE ASSESSMENT YEAR 2004 - 05 AND THE AMOUNT WHICH COULD NOT BE RECONCILED WAS OFFER ED TO TAX IN THA T YEAR. THE CIT(A) VIDE PARA 28 OBSERVED AS UNDER : - 28. THE AO IN HIS REMAND REPORT DT. 22/01/2008, HAS VERIFIED THE AMOUNTS OF ABOVE CREDITORS BASED ON LEDGER ACCOUNTS, LIST OF CREDITORS RELATING TO LAST YEARS, CONFIRMATIONS OBTAINED. IN THE REMAND R EPORT, THE AO ALSO REPORTED THAT HE HAS VERIFIED THE CREDITS AND CONFIRMATIONS OF THIRD PARTY, AND HAS RECONCILED THE ACCOUNTS. THE UN - RECONCILED BALANCES WERE WRITTEN OFF AND OFFERED FOR TAXATION IN THE A.Y. 2004 - 05. THE AO IN HIS REMAND REPORT FURTHER REPORTED THAT 'DURING VERIFICATION OF CREDITORS, IT IS FOUND THAT VERY FEW CREDITORS APPEAR TO BE SLIGHT INCREMENTAL, REMAINING CREDITORS ARE EITHER FOUND TO BE CORRECT OR SINCE THE AMOUNT IS PAID BY OTHER (SISTER CONCERNS), THE CREDIT OR TO BE CORRECT OR SINCE THE AMOUNT IS PAID BY OTHER (SISTER CONCERNS), THE CREDIT OR PART OF CREDI T SHALL APPEAR IN HIS NAME. IT IS ALSO NOTICED THAT THERE ARE ACCOUNTING MISTAKES SUCH AS CREDIT IS WRONGLY POSTED TO OTHER ACCOUNTS OF CREDITORS OR POSTED TO SUNDRY CREDITORS/ DEBTORS ACCOUNT. IN VIEW OF THIS MY PREDECESSOR A. O . MIGHT HAVE ADDED THE AM OUNT OF CREDITORS/ LOANS ON INCREMENTAL BASIS. IT WAS FOR THE A. O . THEN TO GET THE ACCOUNT AUDITED U/ S 142(2A) OF THE ACT WHICH IS NOT DONE. I HAVE VERIFIED THE AMOUNTS OF CREDITORS BASED ON LEDGER ACCOUNTS, LIST OF CREDITORS RELATING TO LAST YEARS, C ONFIRMATION OBTAINED BY MY PREDECESSOR AS WELL AS OBTAINED BY THE ASSESSEE. IN FACT, THE CREDITORS WERE REQUIRED TO BE EXAMINED. HOWEVER, IT IS FOUND THAT THE MOST OF THE CREDITORS ARE BELONGING TO LONG DISTANCE PLACES AND MUCH OF THE CREDITORS ARE COR PORATE PERSONS, THEREFORE, AS DIRECTED, CONFIRMATIONS RECEIVED ARE CONSIDERED DURING VERIFICATION . 1 6 . THE CIT(A) AT PARE 29 OBSERVED THAT THE MAJOR CREDITORS OUTSTANDING WERE VERIFIED BY THE ASSESSING OFFICER AND REPORTED IN HIS REMAND REPORT DATED 22. 01.2008. HE FURTHER OBSERVED THAT IN MOST OF THE CASES, THE CREDITORS HAD CONFIRMED THE TRANSACTIONS AND SALES. THE IDENTITY OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS HAVE BEEN ESTABLISHED. THE ASSESSEE FURTHER CLAIM ED THAT THE BALANCE , I F ANY , OUTSTANDING IN THE ACCOUNT OF THE SUNDRY CREDITOR 13 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 HAS BEEN OFFERED TO TAX IN ASSESSMENT YEAR 2004 - 05 AND HENCE THE SAME HAS BEEN WRITTEN OFF. THE CIT(A) VIDE PARA 30 CONCLUDED AS UNDER : - 30. IN SUMMARY, OUT OF CREDIT BALANCE OF RS.32,03,823/ - , (A FTER DEDUCTING LOAN CRE D ITORS OF RS.5,03,347/ - , AND OPENING CREDI T BALANCES OF SUNDRY CREDITORS OF RS.3,09,345/ - AND SMALL CREDITORS OF RS.2,40,930/ - ), THE MAJOR CREDITORS WERE OF RS.21,50,202/ - . IN THE REMAND REPORT DT. 22/01/2008, THE A.O. REPORTED THAT THE ASSESSEE HAS RECONCILED THE DIFFERENCE TO THE TUNE OF RS.15,12,954/ - AND THE UN - RECONCILED AMOUNT OF RS.6,37,248/ - (RS.140423 + RS.118555 + RS.378270) WAS WRITTEN OFF BY THE ASSESSEE IN THE A.Y. 2004 - 05 AND OFFERED TO TAX. THE WRITE OFF HAS BEEN VERI FIED FROM THE RECORDS OF A.Y. 2004 - 05 AND CONFIRMED IN THE REMAND REPORT. IN VIEW OF THE FACTUAL STATUS RECORDED ABOVE, THE ADDITION OF RS.24,00,000/ - IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 1 7 . THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE C IT(A). 1 8 . THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRESSED THAT NO PROPER VERIFICATION EXERCISE HAS BEEN CARRIED OUT BY THE ASSESSING OFFICER DURING THE APPELLATE PROCEEDINGS IN REMAND . HE STRESSED THAT THE CIT(A) HAD DIRECTED THE ASSESSING OFFICER ONLY TO GET THE CONFIRMATIONS AND NOT TO CALL FOR THE PARTIES AND ASSESSING OFFICER ONLY TO GET THE CONFIRMATIONS AND NOT TO CALL FOR THE PARTIES AND HENCE PROPER VERIFICATION COULD NOT BE CARRIED OUT. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE SUBMITTED THAT WHERE NO PROPER VERIFICATION HAS BEEN CARRIED OUT BY THE ASSE SSING OFFICER OR THE CIT(A), THE MATTER SHOULD GO BACK FOR PROPER VERIFICATION. 1 9 . THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, ON THE OTHER HAND, POINTED OUT THAT DURING THE APPELLATE PROCEEDING, DETAILS WERE FURNISH ED BEFORE THE CIT(A) , WHO IN T URN HAD OBTAINED THE REMAND REPORT AND THE ADDITION WAS DELETED. SHE FURTHER STRESSED THAT THE ORDER OF THE CIT(A) MERITS TO BE UPHELD. 20 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ADDITION WHICH HAS BEEN DELETED BY THE CI T(A) AND WHICH IS RAISED BEFORE US BY THE 14 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 REVENUE IS AGAINST THE DELETION OF THE SUNDRY CREDITORS BALANCE. THE CASE OF THE REVENUE AUTHORITIES WAS THAT THE ASSESSEE HAD FAILED TO RECONCILE THE SUNDRY CREDITORS THOUGH SEVERAL OPPORTUNITIES WERE GIVEN TO TH E ASSESSEE TO RECONCILE THE SAME. HOWEVER, BEFORE THE CIT(A), THE ASSESSEE FURNISHED THE DETAILS IN RESPECT OF THE SUNDRY CREDITORS WHICH ADMITTEDLY WERE FORWARDED TO THE ASSESSING OFFICER AND THE REMAND REPORT WAS OBTAINED. THE ASSESSEE CLAIMS TO HAVE F ILED THE CONFIRMATION LETTERS BEFORE THE CIT(A) IN RESPECT OF THE SAID SUNDRY CREDITORS AND ALSO THE RECONCILIATION STATEMENT IN RESPECT OF EACH OF THE PARTIES. THE LIST OF SUNDRY CREDITORS ON THE BASIS OF WHICH ADDITION UNDER SECTION 68 OF THE ACT HA D BE EN MADE IN THE HANDS OF THE ASSESSEE AND THEIR RECONCILIATION ARE REPRODUCED BY THE CIT(A) AT PAGES 12 AND 13 OF THE APPELLATE ORDER. THE PERUSAL OF THE SAME REFLECTS THAT IN RESPECT OF ONE OF THE PARTIES GANGA IRON & STEEL TRADING CO. THE CREDIT BALANCES AS SHOWN BY THE ASSESSEE MATCHED WITH THE CONFIRMATION FILED BY THE ASSESSEE AND THERE WAS NIL DIFFERENCE. SIMILARLY, IN RESPECT OF ANOTHER PARTY SHRI MAHALAXMI STEEL INDUSTRIES, THE BALANCE SHOWN WAS CREDIT BALANCE OF RS.2,85,347/ - WHICH WERE ADJUSTED A GAINST THE CHEQUES PAID BY THE ASSESSEE. HOWEVER, THE CHEQUES WERE WRONGLY POSTED TO MAHALAXMI STEEL INDUSTRIES IN THE BOOKS OF THE ASSESSEE. THE BALANCE OF RS.1,18,555/ - COULD NOT BE RECONCILED AND WAS OFFERED TO TAX IN ASSESSMENT YEAR 2004 - 05 AS PART O F RS.1 CRORE. SIMILAR EXPLANATION HAS BEEN GIVEN BY THE ASSESSEE IN RESPECT OF THE OTHER PARTIES. 21. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL BEFORE US IS IN RELATION TO THE AFORESAID ADDITION MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT SUNDRY CRE DITORS. BEFORE THE ASSESSING OFFICER, THERE WAS TOTAL NON - COMPLIANCE BY THE ASSESSEE AND THE RECONCILIATION EXERCISE OF THE BALANCES SHOWN AND AS APPEARING IN THE BOOKS OF ACCOUNT OF THE SUNDRY CREDITORS, COULD NOT BE RECONCILED AND CONSEQUENTLY ADDITION 15 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 WAS MADE IN THE HANDS OF THE ASSESSEE. THE ADDITION WAS THUS MADE BECAUSE OF THE NON - COOPERATION OF THE ASSESSEE. HOWEVER, BEFORE THE CIT(A), THE ASSESSEE CLAIMS TO HAVE FILE D COMPLETE INFORMATION AND THE SAID INFORMATION WAS UNDOUBTEDLY CHECKED BY THE A SSESSING OFFICER DURING THE PENDENCY OF THE APPELLATE PROCEEDINGS. IN VIEW OF THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER, WHEREIN MAJORITY OF THE TRANSACTIONS HAVE BEEN CONFIRMED BY THE CREDITOR, AND/OR ADJUSTED AGAINST THE PAYMENT MADE BY THE A SSESSEE, WHICH W ERE WRONGLY SHOWN IN OTHER ACCOUNT, THE ASSESSEE HAVING DISCHARGED HIS DUTY OF RECONCILIATION, CANNOT BE PUT TO DISADVANTAGE SPECIALLY IN CASE RELATING TO ASSESSMENT YEAR 1999 - 2000. THOUGH THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVEN UE STRESSED THAT THE MATTER SHOULD GO BACK SINCE NO PROPER VERIFICATION HAD BEEN CARRIED OUT BY THE ASSESSING OFFICER OR THE CIT(A). HOWEVER, WE FIND NO MERIT IN THE SAID PLEA OF THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE SPECIALLY WHERE THE INFO RMATION COLLECTED BY THE SURVEY TEAM RELATING TO ASSESSMENT YEAR 2004 - 05 WAS FURTHER USED TO REOPEN THE ASSESSMENT FOR THE RELEVANT ASSESSMENT YEARS. THE PERUSAL OF THE REASONS RECORDED FOR REOPENING CLEARLY REFLECT THAT THOUGH BEFORE THE ASSESSING OFFICE R THERE WAS SOME MISMANAGEMENT BUT BEFORE THE CIT(A) COMPLETE DETAILS AND RECONCILIATION OF SUNDRY CREDITORS HAD BEEN CARRIED OUT. THE CIT(A) VIDE PARA 30 HELD AS UNDER: - 30. IN SUMMARY, OUT OF CREDIT BALANCE OF ` 32,03,823/ - , (AFTER DEDUCTING LOAN CREDI TORS OF ` 5,03,347/ - , AND OPENING CREDIT BALANCES OF SUNDRY CREDITORS OF ` 3,09,345/ - AND SMALL CREDITORS OF ` 2,40,930/ - ), THE MAJOR CREDITORS WERE OF ` 21,50,202/ - . IN THE REMAND REPORT DT. 22/01/2008, THE A.O. REPORTED THAT THE ASSESSEE HAS RECONCILED THE DIFFERENCE TO THE TUNE OF ` 15,12,954/ - AND THE UN - RECONCILED AMOUNT OF ` 6,37,248/ - ( ` 140423 + ` 118555 + ` 378270) WAS WRITTEN OFF BY THE ASSESSEE IN THE A.Y. 2004 - 05 AND OFFERED TO TAX. THE WRITE OFF HAS BEEN VERIFIED FROM THE RECORDS OF A.Y. 2004 - 05 AND CONFIRMED IN THE REMAND REPORT. IN VIEW OF THE FACTUAL STATUS RECODED ABOVE, THE ADDITION OF ` 24,00,000/ - IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 22. IN VIEW THEREOF, WHERE THE ASSESSEE HAS EXPLAINED THE NATURE OF THE ENTRIES IN HIS BOOK S OF ACCOUNT AND ALSO THE DISCREPANCY IN SUNDRY CREDITORS, THERE IS NO 16 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 MERIT IN MAKING ANY ADDITION UNDER SECTION 68 OF THE ACT. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. 23. ANOTHER ASPECT OF THE ISSUE NEEDS TO BE TAKEN NOTE OF WHILE DECIDING THE SI MILAR ISSUE RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NO.1 IN ALL THE CAPTIONED ASSESSMENT YEARS. THE CIT(A) HAS DELETED THE ADDITION IN THE HANDS OF ASSESSEE ON RECONCILIATION OF DIFFERENT ACCOUNTS AND HAS FURTHER HELD THAT NO ADDITION HAS TO BE MADE ON THE BALANCE UN - RECONCILED ACCOUNTS, IN EACH OF THE YEAR, WHICH WAS WRITTEN OFF BY THE ASSESSEE IN ASSESSMENT YEAR 2004 - 05 AND OFFERED TO TAX. THE CIT(A) OBSERVED THAT WRITE OFF HAD BEEN VERIFIED FROM THE RECORDS OF ASSESSMENT YEAR 2004 - 05 AND CONFIRMED IN THE REMAND REPORT. HOWEVER, ON PERUSAL OF THE ORDER OF CIT(A), WE FIND THAT IN ASSESSMENT YEARS 1999 - 2000 TO 2003 - 04. THE FOLLOWING AMOUNTS WERE CLAIMED TO HAVE BEEN OFFERED AS ADDITIONAL INCOME BY THE ASSESSEE: - ASSESSMENT YEAR AMOUNT (IN RS.) 1 999 - 2000 RS.6,37,248/ - 2000 - 01 RS.8,51,856/ - 2001 - 02 RS.4,91,023/ - 2002 - 03 RS.13,62,273/ - 2003 - 04 RS.1,41,623/ - 24. THE ASSESSING OFFICER IS THUS, DIRECTED TO VERIFY EXACT AMOUNTS OF DISCLOSURE MADE BY THE ASSESSEE IN ASSESSMENT YEAR 2004 - 05 ON ACCOU NT OF WRITE OFF OF SUNDRY CREDITORS AND THE YEARS TO WHICH IT RELATES. THE ASSESSING OFFICER IS FURTHER DIRECTED TO RECONCILE THE SAME WITH THE WRITE OFF MADE BY THE ASSESSEE IN ASSESSMENT YEARS 1999 - 2000 TO 2003 - 04 AS TABULATED ABOVE AND IN CASE OF ANY S HORTFALL, THE BALANCE ADDITIONAL INCOME MERITS TO BE ADDED IN THE HANDS OF ASSESSEE IN THE RESPECTIVE YEARS, IF ANY. 17 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 2 5 . NOW, COMING TO THE SECOND ISSUE RAISED BY THE REVENUE AGAINST THE DELETION OF ADDITION OF RS.1,25,000/ - ON ACCOUNT OF GROSS PROFIT. T HE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE SINCE THE ASSESSEE HAD FAILED TO COOPERATE AND FILE THE NECESSARY VERIFICATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, WHILE COMPUTING THE ESTIMATED GROSS PROFIT IN THE C ASE OF THE ASSESSEE, THE ASSESSING OFFICER AT PAGE 34 OF THE ASSESSMENT ORDER NOTED THAT THE TOTAL CREDIT BALANCE IN THE DEBTORS ACCOUNT WAS RS.39, 95,621/ - FROM WHICH THE CREDIT BALANCE OF SISTER CONCERN AMOUNTING TO RS.15 LAKHS WAS DEDUCTED AND BALANCE AM OUNT OF RS.25 LAKHS WAS TREATED AS UNACCOUNTED SALES. THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,25,000/ - WHILE COMPUTING THE GROSS PROFIT AT THE RATE OF 5% OF TOTAL UNRECORDED SALES OF RS.25 LAKHS. 2 6 . BEFORE THE CIT(A), THE ASSESSEE HAS RECONCILED CREDIT BALANCE IN DEBTOR S LIST AND HAS POINTED OUT THAT THE ASSESSING OFFICER HAD NOT EVEN CONSIDERED THE OPENING BALANCE IN SUNDRY DEBTORS ACCOUNT AND HAD TAKEN INCORRECT CREDIT BALANCE OF SISTER CONCERN. THE RECONCILED FIGURES ARE AVAILABLE AT PAGE 15 O F THE APPELLATE ORDER . T HE CIT(A) NOTED THAT UN - RECONCIL ED BALANCE WAS OF RS.90,336/ - ONLY AND THE AMOUNT WAS CONSIDERED AS UNRECORDED SALES AND GROSS PROFIT AT THE RATE OF 5% WAS APPLIED AND ADDITION OF RS.4,517/ - WAS CONFIRMED. THE ASSESSEE GOT RELIEF OF RS.1,20,483/ - . NO DOUBT, THE REVENUE HAS RAISED GROUND OF APPEAL AGAINST THE DELETION OF RS.1,25,000/ - BUT I N ACTUAL FACT , THE DELETION OF ADDITION WAS MADE ONLY AT RS.1,20,483/ - . 2 7 . THE ISSUE ARISING IN THE PRESENT GROUND HAS TO BE CONSIDERED IN COM PLETE PROSPECTIVE. THE ADDITION OF SUPPRESSED GROSS PROFIT TO THE TUNE OF RS.1,25,000/ - WAS MADE BY THE ASSESSING OFFICER ONLY ON ACCOUNT OF BALANCE IN SUNDRY DEBTORS 18 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 ACCOUNT. THE CASE OF THE REVENUE WAS THAT SINCE BALANCE WAS UN - RECONCILED, T HE SAME REP RESENTED UNEXPLAINED INCOME. HOWEVER, NO EXPLANATION WAS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND HENCE THE ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE. NOW, BEFORE THE CIT(A) THE ASSESSEE HAS EXPLAINED THAT OUT OF TOTAL DEBTORS ACCOUNT OF RS.39,95,621/ - , C REDIT BALANCE OF RS.17,33,797/ - RELATED TO HIS SISTER CONCERN AND THE BALANCE IS AVAILABLE WITH HIM OF RS.22,61,824/ - AS AGAINST WHICH, THE OPENING CREDIT BALANCE OF SUNDRY CREDITOR/DEBTORS ACCOUNT OF RS.13,03,856/ - . HENCE, THE ASSESSE E HAD ONLY TO EXPLAIN THE DIFFERENTIAL OF RS.9,58,238/ - , WHICH WAS EXPLAINED BY THE ASSESSEE BEING RELATABLE TO VARIOUS CONCERN S AND THE BALANCE WHICH REMAIN UN - RECONCILED WAS RS.90,336/ - . THE ADDITION OF RS.4,517/ - MADE IN THE HANDS OF THE ASSESSEE ON SU CH UN - RECONCILED ACCOUNT MERITS TO BE UPHELD IN THE HANDS OF THE ASSESSEE. THERE IS NO MERIT IN THE CLAIM OF THE REVENUE IN THIS REGARD , WHERE THE DISCREPANCIES WERE EXPLAINED BY THE ASSESSEE , WHO HAD FAILED TO PARTICIPATE IN THE ASSESSMENT PROCEEDINGS; B UT HAD FILED COMPLETE DETAILS BEFORE THE CIT(A) , WHICH HA D BEEN RECONCILED . T HEN THERE IS NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE. HENCE, UPHOLDING THE ORDER OF THE CIT(A), WE DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE. 2 8 . T HE GROUND OF APPEAL NOS.1 AND 2 RAISED BY THE REVENUE IN THE PRESENT APPEAL IN ASSESSMENT YEAR 1999 - 2000 ARE THUS DECIDED AS INDICATED ABOVE . T HE REVENUE IN ASSESSMENT YEAR S 2000 - 01 TO 2003 - 04 HAS RAISED IDENTICAL GROUND OF APPEAL NOS.1 AND 2 IN ALL THE A PPEALS AND IN LINE WITH OUR DECISION IN THE PARAS HEREINABOVE, THE SAID GROUND S OF APPEAL OF THE REVENU E ARE DECIDED AS INDICATED ABOVE, ALONG WITH OUR DIRECTIONS FOR VERIFICATION IN PARA 2 4 ABOVE . 19 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 2 9 . NOW, COMING TO THE GROUND OF APPEAL NO.3 RAISED BY TH E REVENUE IN ASSESSMENT YEAR 1999 - 2000 ONLY. THE R EVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITION OF RS.6,75,000/ - WHICH WAS MADE BY THE ASSESSING OFFICER BY RECASTING THE TRADING ACCOUNT AND EXCESS UNRECORDED SALES OVER UNRECORDED PURCHASES BEING TR EATED AS UNEXPLAINED INVESTMENT. THE FIGURE OF UNRECORDED SALES AS COMPUTED BY THE ASSESSING OFFICER IN PARA 36 , READS AS UNDER : - I. DEBTORS WITH CREDIT BALANCES (UNRECORDED SALES) : RS.25,00,000 LESS : II. GROSS PROFIT @ 5% ON UNRECORDED SALES : R S.1,25,000 III. INVESTMENT IN UNRECORDED SALES [(I) MINUS (II)] : RS.23,75,000 IV. CREDITORS WITH DEBIT BALANCES [UNRECORDED PURCHASES] : RS.17,00,000 V. YEARWISE UNRECORDED PURCHASES : RS.17,00,000 VI. YEARWISE UNEXPLAINED INVESTMENT IN PURCHASE [(II I) MINUS ( VI )] : RS.6,75,000 30 . THE ASSESSEE FILED THE RECONCILIATION BEFORE THE CIT(A) WHICH WAS VERIFIED BY THE ASSESSING OFFICER BY WAY OF REMAND REPORT. THE CIT(A) DELETED THE ADDITION OBSERVING AS UNDER : - 44 . I HAVE CONSIDERED THE APPELLANTS SUB MISSION. FROM THE ABOVE DISCUSSIONS, IT IS SEEN THAT THE APPELLANT HAS ESTABLISHED THE FACT THAT THE A. O. WAS WRONG IN PRESUMING THAT CREDITORS HAVING DEBIT BALANCES WHICH ARE APPEARING IN THE TOTAL DEBTORS LIST REPRESENTS UNRECORDED SALES, SINCE THE CREDIT BALANCES IN TOTAL DEBTORS LIST AROSE DUE TO ACCOUNTING MISTAKES AND WRONG POSTINGS, ETC. HOWEVER, AS WORKED OUT AT ABOVE IN PARA 39 SUPRA, IT IS EVIDENT THAT THERE IS UN - RECONCILED CREDIT BALANCE IN TOTAL DEBTORS LIST TO THE TUNE OF RS. 90,337/ - . THIS UN - RECONCILED CREDIT BALANCE IN DEBTORS LIST IS HELD TO BE UNRECORDED SALES. THE GROSS PROFIT ADDITION @ 5% ON UNRECORDED SALES AMOUNTING TO RS. 4,517/ - IS ALREADY UPHELD, VIDE PARA 34 OF THIS ORDER. THEREFORE, THE UNEXPLAINED INVESTMENT IN PURCHASE S WORKS OUT AT RS. 85,820/ - . 45. IN VIEW OF THE DISCUSSION ABOVE, THE TRADING ACCOUNT FOR A.Y. 1999 - 2000, AS GIVEN BY A.O. AT PAGE NO.33 OF THE ASSESSMENT ORDER, WILL BE RE - CASTED AS UNDER : - RS. RS. OPENING STOCK 4,72,340 SALES 71,36,724 PURCHASES 61 ,65,690 UNRECORDED SALES 90,337 TRANSPORT & OCTROI 1,85,336 CLOSING STOCK 1,53,368 LOADING & UNLOADING 16,816 UNRECORDED PURCHASES 0 G. P. @ 5% ON UNRECORDED SALES 4,517 UNEXPLAINED INVESTMENT IN PURCHASE S 85,820 GROSS PROFIT 4,49,910 TOTA L 73,80,429 TOTAL 73,80,429 20 ITA NOS.206 TO 210/PN/2012 CO NOS.14 TO 18/PN/2015 31 . THE CIT(A) HAD RESTRICTED THE ADDITION TO RS.85,820/ - . THE REVENUE IS IN APPEAL AGAINST THE DELETION OF RS.6,75,000/ - . THOUGH IN THE ACTUAL FACT, THE CIT(A) HAD DELETED THE ADDITION TO THE EXTENT OF RS.5,89,180/ - ONLY. IN VIEW OF THE RECONCILIATION EXERCISE CONFIRMED BY THE CIT(A), WE FIND NO MERIT IN THE ISSUE RAISED BY REVENUE. ACCORDINGLY, THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS DISMISSED. 3 2 . RESULTANTLY, ALL THE CAPTIONED APPEALS OF THE REVENUE AS WELL AS CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF AUGUST , 201 6 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER PUNE ; DATED : 31 ST AUGUST , 201 6 . / GCVSR / COPY OF THE O RDER IS FORWARDED TO : 1 ) THE ASSESSEE; 2 ) THE DEPAR TMENT; 3 ) THE CIT(A), KOLHAPUR ; 4 ) THE CIT - II, KOLHAPUR; 5 ) THE DR A BENCH, I.T.A.T., PUNE; 6 ) GUARD FILE. / BY ORDER , //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE