M/s Classic Distributors Co., Bangalore V. ACIT, Bangalore

CO 19/BANG/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4814 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 12-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ SHRI S R KIRON
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.881(BNG)/09 (ASSESSMENT YEAR : 2004-05) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 8(1), BANGALORE. VS. CLASSIC DISTRIBUTORS COMPANY, NO.6/1, CUNNINGHAM ROAD, BANGALORE. APPELLANT. RESPONDENT. C.O. NO.19(BNG)/10 (ASSESSMENT YEAR : 2004-05) (BY ASSESSEE) REVENUE BY : SHRI JASON P BOAZ. ASSESSEE BY : SHRI S.R. KIRON. O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE CIT(A) IS ERRONEOUS AND BAD IN LAW TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 2. THE LEARNED CIT(A) HAS ERRED IN GIVING RELIEF OF RS .60,50,550 TO THE ASSESSEE. IT WAS CLEARLY ESTABLISHED IN THE SURVEY THAT THE ASSESSEE HAD ALTERED HIS BOOKS OF ACCOUNTS WHEN COMPARED WITH TH E PRINT OUTS TAKEN FROM THE COMPUTER IN HIS OFFICE PREMISES. IT IS EVIDENT THAT THE SUM OF RS.6,95,440 BELONGED TO THE PARTNERS OF THE ASSESSE E FIRM WHICH WAS SHOWN BY THE ASSESSEE UNDER SUNDRY CREDITORS TRADE SCHE DULE TO THE BALANCE SHEET. 3. THE LEARNED CIT(A) ERRED IN GIVING RELIEF OF RS.29, 01,873 TO THE ASSESSEE ON THE GROUND THAT AO HAS DRAWN CONCLUSIO N WITHOUT VERIFICATION OF THE CREDITOR. AMPLE OPPORTUNITIES WERE GIVEN T O THE ASSESSEE TO PRODUCE THE LOAN CREDITORS AND PROPER DOCUMENTARY EVIDENCES , BUT THE ASSESSEE WAS NOT ABLE TO SATISFACTORILY EXPLAIN THE GENUINENESS OF THE LOANS, WHICH AGGREGATE TO RS.29,01,873. THE ASSESSING OFFICER I S JUSTIFIED IN INVOKING ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 2 - SECTION 68 OF THE INCOME TAX ACT, 1961 AND BRINGING THIS SUM TO TAX AS UNEXPLAINED CREDIT. 4. THE LEARNED CIT(A) HAS ERRED IN GIVING A RELIEF OF RS.27,55,090 TO THE ASSESSEE AS THE ASSESSEE HAD MADE CASH WITHDRAW ALS AS MENTIONED IN THE CASH BOOK MUCH EARLIER TO THE ACTUAL DATE OF WITHDR AWAL FROM THE BANK. DURING THE COURSE OF ASSESSMENT THE ASSESSEE HAD NO T SATISFACTORILY OFFERED ANY EXPLANATION EXCEPT FILING AN UNSIGNED L ETTER. THE ASSESSEE HAS CLEARLY TRIED TO BRING INTO BOOKS OF ACCOUNT UNACCO UNTED CASH AVAILABLE WITH THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. THUS T HE ASSESSING OFFICER IS JUSTIFIED IN INVOKING SECTION 68 OF THE INCOME TAX ACT, 1961 IN BRINGING THIS SUM TO TAX AS UNEXPLAINED CREDIT. EVEN THE LEARNED CIT(A) HAS CONFIRMED ADDITION TO THE EXTENT OF RS.6,95,523 ON SIMILAR GR OUNDS. 5. THE LEARNED CIT(A) HAS ERRED IN GIVING A RELIEF OF RS.2,30,000 AND RS.22,338 TO THE ASSESSEE AS THE ASSESSEE HAD MADE EXPENSES LIKE CONVEYANCE & TRAVELING, SALES PROMOTION, STAFF WELF ARE, TELEPHONE AND VEHICLE MAINTENANCE EXPENSES. THE ASSESSEE HAD NO PROPER R ELIABLE VOUCHERS AND PROOFS TO PRODUCE THE ENTIRE EXPENDITURES INCURRED. THE ASSESSING OFFICER IS JUSTIFIED IN MAKING ADDITIONS. 6. THE APPELLANT CRAVES TO ADD, DELETE OR MODIFY ANY G ROUNDS OF APPEAL. 7. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF APPEAL IT IS PRAYED THAT THE ADDITION MENTIONED HER EIN ABOVE DELETED BY THE LEARNED CIT(A) MAY BE RESTORED AND APPEAL MAY BE AL LOWED. 3. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT GROUND NOS.1, 6 & 7 ARE GENERAL IN NATURE AND THE REVENUE IS PRESSING ONLY GROUND NOS.2 TO 5. 4. THE BRIEF FACTS ARE THAT THE ASSESSEE IS A REGIS TERED PARTNERSHIP FIRM DOING BUSINESS OF WHOLESALE DEALER AND DISTRIBUTOR OF IML , BEER, WINE AND COMMISSION AGENT. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 1.11 .2004 DECLARING A TOTAL INCOME OF RS.8,88,720. A SURVEY WAS CONDUCTED ON THE BUSINES S PREMISES OF ASSESSEE ON 23.5.2005 WHEREIN THE STATEMENT OF ONE OF THE PARTN ER SRI D.M. PURNESH WAS RECORDED AND IT HAS BEEN STATED THAT THE ASSESSEE IS MAINTAI NING BOOKS OF ACCOUNTS IN THE COMPUTER AND THE PRINT OUTS OF THE BALANCE SHEET AN D PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2004 AND ALL OTHER LEDGER ACCOUNTS FROM THE COMPUTER WERE HANDED ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 3 - OVER TO THE DEPARTMENT. THE ASSESSING OFFICER NOT ICED THAT THE LEDGER BALANCES SHOWN IN THE TRIAL BALANCE ARE IN TOTAL AGREEMENT W ITH THE AFORESAID TRADING PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2004 AND ALSO THE BALANCE SHEET AS AT 31.3.2004 FILED BY THE ASSESSEE AT THE TIME OF SURVEY. HOWEV ER DURING SCRUTINY PROCEEDINGS WHEN HE VERIFIED THE BOOKS OF ACCOUNTS WITH THE SAID PRI NT OUTS, HE OBSERVED THAT THE PRINT OUT INFORMATION GIVEN AT THE TIME OF SURVEY WAS NOT IN AGREEMENT WITH THE AUDITED ACCOUNTS FILED ALONG WITH THE RETURN OF INCOME. HE OBSERVED THAT THE ASSESSEE HAS ALTERED SOME OF THE LEDGER ACCOUNTS AND ALSO OPENED A NUMBER OF ACCOUNTS IN THE BOOKS OF ACCOUNTS. HE, THEREFORE, CONCLUDED THAT THE COP IES OF BOOKS OF ACCOUNT PRODUCED BEFORE HIM FOR THE YEAR UNDER CONSIDERATION ARE ALL FALSE AND ALTERED WITH AN INTENTION TO EVADE TAX. HE ALSO OBSERVED THAT THE ASSESSEE HA S ALSO FILED FALSE DOCUMENTARY EVIDENCES AND PROOF. HE, THEREAFTER, PROCEEDED TO C OMPLETE THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. HE OBSERVED THAT AT THE TIME OF S URVEY, PARTNERS CURRENT ACCOUNT, INVESTMENT PARTNERS SHOWED A SUM OF RS.70 LAKHS WHICH HAS BEEN SHOWN ON THE LIABILITIES SIDE OF THE BALANCE SHEET WHILE FROM THE SCHEDULE TO THE BALANCE SHEET AS ON 31.3.2004 FILED ALONG WITH THE RETURN OF INCOME, IT IS SEEN THAT THE CURRENT LIABILITIES HAVE BEEN DECLARED AS RS.92,53,690 OF WHICH (A) SUN DRY CREDITORS-EXPENSES IS RS.3,96,100 (B) SUNDRY CREDITORS-FINANCE IS RS.8,21 ,490 AND (C) SUNDRY CREDITORS-TRADE IS RS.80,36,100. AFTER PERUSAL OF THE SUNDRY CREDI TORS-TRADE ACCOUNT, HE OBSERVED THAT THE SUNDRY CREDITORS ARE ONLY RS.66,95,440, AN D THAT THERE IS A DIFFERENCE OF RS.3,04,559=85 BETWEEN RS.70 LAKHS AND RS.66,95,440 . HE FURTHER OBSERVED THAT ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 4 - THERE IS EXACTLY THE SAME DIFFERENCE OF RS.3,04,559 =85 BETWEEN THE OPENING STOCK OF RS.57,76,499=50 SHOWN IN THE TRADING, PROFIT AND LO SS ACCOUNT AS PER THE PRINT OUT TAKEN AT THE TIME OF SURVEY AND THE OPENING STOCK O F RS.54,71,939 SHOWN IN THE TRADING, PROFIT AND LOSS ACCOUNT FILED WITH THE RET URN OF INCOME. THEREFORE HE CAME TO THE CONCLUSION THAT THIS SUM OF RS.66,95,440 BELONG ED TO THE ASSESSEES PARTNERS INVESTMENT DURING THE YEAR UNDER CONSIDERATION. T HEREFORE THE ASSESSEES EXPLANATION AS REGARDS THE PARTNERS OF THE ASSESSEE FIRM TO WHO M THE SAID SUM OF RS.66,95,440=85 BELONGED WAS CALLED FOR BUT THE ASS ESSEE DID NOT FILE ANY EXPLANATION. THEREFORE THE ASSESSING OFFICER MADE THE ADDITION O F RS.66,95,440=10 TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES AND BROUGHT IT TO TAX. SIMILARLY, HE FOUND THAT ASSESSEE HAS SHOWN TH E LOAN CREDITORS OF RS.29,01,873 BUT THE ASSESSEE HAS FAILED TO GIVE ANY DETAILS NOR HAS BEEN ABLE TO PRODUCE THE LOAN CREDITORS BEFORE THE ASSESSING OFFICER FOR EXAMINAT ION, THEREFORE ASSESSING OFFICER MADE THE ADDITION OF THE ENTIRE AGGREGATE SUM OF RS .29,01,873 AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 5. SIMILARLY, THE ASSESSING OFFICER FO UND FROM THE COPIES OF THE CASH BOOK PRODUCED DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS ACCOUNTED IN THE CASH BOOK, CASH WITHDRAWALS STATED TO HAVE BEEN MAD E FROM CORPORATION BANK MUCH EARLIER TO THE ACTUAL DATE OF WITHDRAWAL FROM THE B ANK. THE SAID DISCREPANCY WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE BUT THE AS SESSEE COULD NOT SATISFACTORILY OFFER ANY EXPLANATION WITH REGARD TO THE SAID DISCR EPANCIES, THE ASSESSING OFFICER ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 5 - MADE THE ADDITION OF AN AMOUNT OF RS.34,50,613 UNDE R THE HEAD INCOME FROM OTHER SOURCES UNDER SECTION 68 OF THE INCOME TAX ACT, 1 961. HE ALSO MADE DISALLOWANCE OF RS.1,25,000 OUT OF TOTAL CONVEYANCE AND TRAVELING E XPENSES OF RS.11,11,758.80 FOR WANT OF RELIABLE VOUCHERS AND PROOF. SIMILARLY HE MADE T HE DISALLOWANCE OF OTHER EXPENDITURE CLAIMED BY THE ASSESSEE SUCH AS SALES P ROMOTION EXPENSES, STAFF WELFARE, TELEPHONE AND VEHICLE MAINTENANCE EXPENSES TOTALING TO RS.10,43,720. AGGRIEVED BY THE ABOVE ADDITIONS MADE BY THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) ALONG WITH ALL THE DETAILS. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND AFTER CONSIDERING THE SAME, T HE CIT(A) HAS OBSERVED THAT A SUM OF RS.19,24,968 AS PAYABLE TO SALES TAX AS ON 1.4.2 003 OUT OF WHICH RS.4,03,718 WAS PAID IN THE SUBSEQUENT YEAR AND THE AMOUNT OF RS.11 ,19,653 AND RS.3,10,782 REPRESENT TRADE CREDITOR AND THE LIABILITY TO THE EXTENT OF R S.23,51,175 WAS TRANSFERRED TO M/S. MSIL. AFTER CONSIDERING THE RECONCILIATION STATEME NT FILED BY THE ASSESSEE, THE CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSING OF FICER DID NOT EXAMINE THE CREDITORS AND SIMPLY BECAUSE EXPLANATION FURNISHED BY THE ASSESSEE WAS FOUND UNSATISFACTORY, HE HELD THAT IT CANNOT BE A GROUND FOR CONSIDERING IT AS THE INCOME FROM OTHER SOURCES. HE, THUS, HELD THAT THE ADDIT ION TO THE EXTENT OF RS.25,50,000 WAS ADDED MERELY ON PRESUMPTION AND SURMISES WHICH CANNOT BE SUSTAINED. HE, HOWEVER, CONFIRMED THE ADDITION OF RS.6,44,890 WITH REGARD TO WHICH THE ASSESSEE COULD NOT FURNISH THE NAME AND ADDRESSES OF THE CRE DITORS. HE THUS GRANTED RELIEF TO THE EXTENT OF RS.60,50,550. ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 6 - 6. SIMILARLY, AS REGARDS THE ADDITI ON OF UNSECURED LOAN OF RS.29,01,873, THE CIT(A) CONSIDERED THE RECONCILIATION STATEMENT FILE D BY THE ASSESSEE AS WELL AS THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER WH EREIN IT WAS MENTIONED THAT THE ASSESSING OFFICER HAD DRAWN CONCLUSION WITHOUT VERI FICATION OF THE CREDITORS, THE CIT(A) DELETED THE ADDITION. AS REGARDS ADDITION O F UNACCOUNTED CASH TO THE EXTENT OF RS.34,50,613, THE ASSESSEE SUBMITTED THAT THE MI SMATCH OF THE ENTRIES IN THE CASH BOOK AND THE BANK ACCOUNT WAS DUE TO THE FACT THAT THE BANK ACCOUNT IS OPERATED BY TWO PARTNERS AND THAT SINCE THE ACCOUNTS ARE ENTERE D WITH THE AID OF TALLY SYSTEM, THE SYSTEM DOES NOT GENERATE A VOUCHER UNLESS BOTH THE PARTNERS AFFIX THEIR SIGNATURES AND THAT THE DELAY IN THE ENTRIES IN THE PASS BOOK IS DUE TO ABSENCE OF ANY ONE OF THE PARTNERS AND IT COULD NOT LEAD TO THE CO NCLUSION THAT THERE WAS UNACCOUNTED INCOME. THE CIT(A) CONSIDERED THE EVIDENCES FILED BEFORE HIM AND OBSERVED THAT THE ASSESSING OFFICER THOUGH OBSERVED THAT THE TRANSACT IONS WERE OUT OF UNACCOUNTED CASH AVAILABLE WITH THE ASSESSEE, THE ASSESSING OFF ICER DID NOT BRING ON RECORD ANY EVIDENCE AS TO HOW THE UNACCOUNTED CASH WAS INTRODU CED AND NO CORROBORATIVE EVIDENCE OR FINDING WAS DISCUSSED. HOWEVER, AS REGARDS CAS H DEFICIENCY SHOWN ON CERTAIN DATES TOTALING TO RS.6,95,523 HE CONFIRMED THE ADDITION A ND HE GRANTED RELIEF OF RS.27,55,090. 7. AS REGARDS THE ADHOC DISALLOWANC E OF EXPENDITURE, HE HELD THAT THE SAME IS UNJUSTIFIED AND DELETED THE ADDITION OF RS.2,30, 000 AND CONFIRMED THE ADDITION OF RS.14,152 AND RS.13,510 BEING 10% OF THE TELEPHONE AND VEHICLE MAINTENANCE EXPENSES AND GRANTED RELIEF OF RS.22,338. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A), THE ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 7 - REVENUE IS IN APPEAL BEFORE US AND THE ASSESSEE HAS FILED A CROSS OBJECTION SUPPORTING THE ORDER OF THE CIT(A). 8. AT THE TIME OF HEARING THE LEARN ED DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON THE ORDER OF THE ASSESSING OFFIC ER AND THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED WRITTEN SUBMISSION FILED BY HIM BEFORE THE CIT(A) AND THE REMAND REPORT OF THE ASSESSING OFFICER. AFTER HEARING BOT H THE PARTIES AND HAVING CONSIDERED THE MATERIAL ON RECORD, WE FIND THAT THE ORDER OF T HE CIT(A) IS BASED ON THE COMMENTS OF THE ASSESSING OFFICER IN THE REMAND REPORT AND A LSO THE EVIDENCES FILED BY THE ASSESSEE BEFORE HIM. THE CIT(A) HAS APPRECIATED TH E EVIDENCES FILED BEFORE HIM AND AS HIS POWERS ARE CO-TERMINUS WITH THAT OF THE ASSE SSING OFFICER, WE FIND THAT HIS ORDER IS REASONABLE AND THE DELETION OF THE ADDITIO NS IS JUSTIFIED. 9. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND THE SAME IS CONFIRMED. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS THE GROUNDS RAISED IN THE CROSS OBJECTION. EVEN OTHERWISE THE SAID CROSS OBJECTION IS IN SUPPORT OF THE CIT(A)S ORDER AND THEREFORE NEEDS NO ADJUDICATION AND HENCE IT IS DISMISSED. 10. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED AND THE CROSS OBJECTION IS ALSO DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24 TH OF JUNE, 2010. SD/- SD /- (A. MOHAN ALANKAMONY) (P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DT.24-06-2010. ITA NO.881(BNG)/09 & C.O. 19(BNG)/10 - 8 - COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. 7. GUARD FILE, ITAT, NEW DELHI. * GPR BY OR DER ASSISTANT R EGISTRAR