ITO, Bangalore V. Shri. B. Raja Reddy, Mangalore

ITA 1017/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1455 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 19-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1017/BANG/2010 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER, WARD 1(1), MANGALORE. : APPELLANT VS. SHRI B. RAJA REDDY, M/S. MANGALA ROADLINES, PANAMBUR, MANGALORE. : RESPONDENT APPELLANT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. CIT (DR) RESPONDENT BY : NONE O R D E R PER SMT. P. MADHAVI DEVI, JUDICIAL MEMBER THIS APPEAL IS REVENUES APPEAL FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT (APPEALS) DATED 24.6.2010 IN DELETING THE ADDITION OF RS.9,52,387 M ADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE INCOME-TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACT UNDER THE NAME AND S TYLE OF M/S. MANGALA ROAD LINES. THE ASSESSEE FILED HIS RETURN OF INCOM E FOR THE ASSESSMENT ITA NO.1017/BANG/10 PAGE 2 OF 6 YEAR 2006-07 ON 8.3.07 DECLARING TOTAL INCOME OF RS .2,51,274. DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE I.T. ACT, THE ASSESSING OFFICER OBSERVED FROM THE PROFIT & LOSS ACCOUNT THAT THE AS SESSEE HAS RECEIVED TOTAL CONTRACT RECEIPTS FROM SUB-CONTRACT WORKS OF RS.84,98,187 FROM M/S. SHAKUN LOGISTICS, FOR WHOM THE ASSESSEE HAS DONE TR ANSPORTATION WORK. THE LEDGER ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF M/S. SHAKUN LOGISTICS WAS CALLED FOR U/S. 133(6) OF THE I.T. ACT AND FROM THE SAID ACCOUNT IT WAS NOTICED THAT THERE IS A CREDIT BALAN CE OF RS.9,52,387, WHEREAS AS PER THE BOOKS OF THE ASSESSEE, THE AMOUN T RECEIVABLE/PAYABLE FOR THE YEAR ENDING 31.3.2006 IS SHOWN AS NIL. M /S. SHAKUN LOGISTICS WAS ASKED TO EXPLAIN THE DIFFERENCE AND VIDE LETTER DATED 4.12.2008 IT WAS EXPLAINED THAT AS PER THEIR BOOKS A SUM OF RS.9,52, 387 IS DUE TO M/S. MANGALA ROADLINES AND THE REASON FOR THE DIFFERENCE IS THAT THE ASSESSEE HAS NOT ACCOUNTED FEW TRANSACTIONS AS APPEARING IN THEIR BOOKS AND HAS ACCOUNTED FEW TRANSACTIONS WHICH ARE NOT CARRIED BY THEM. THEREFORE, THEY CONFIRMED THE EXISTENCE OF CREDIT BALANCE AS ON 31. 3.2007 AT RS.9,52,287 AS PAYMENT WAS NOT MADE BECAUSE THE LOADS DELIVERED WERE NOT RECONCILED. 4. AFTER CONSIDERING THE SAID EXPLANATION AND ALSO THE ANNEXURE THERETO GIVING THE WORKING OF THE DIFFERENCE, THE ASSESSING OFFICER HELD THAT THE CREDIT BALANCE IN THE BOOKS OF M/S. SHAKUN LOGISTIC S IS DUE TO THE CASH PAYMENTS STATED TO BE RECEIVED BY THE ASSESSEE FROM M/S. SHAKUN LOGISTICS, WHICH THE LATTER HAS DENIED AND THEREFOR E, THESE CASH PAYMENTS ARE TO BE TREATED AS CASH CREDITS U/S. 68 OF THE I. T. ACT. HE ACCORDINGLY MADE THE ADDITION. ITA NO.1017/BANG/10 PAGE 3 OF 6 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(APPEALS), STATING THAT THE AO HAD ARBITRARILY A SSESSED THE AMOUNT OF RS.9,52,387 TO TAX WITHOUT APPRECIATING THAT THE AS SESSEE HAD MAINTAINED BOOKS OF ACCOUNT AND HAD DULY ACCOUNTED FOR ALL THE AMOUNTS RECEIVED IN CASH. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NO CONTROL OVER THE BOOKS OF ACCOUNT OF THE THIRD PARTY AND WAS NOT RES PONSIBLE FOR THE ENTRIES IN THE THIRD PARTYS BOOKS. THE CIT(APPEALS) AFTE R CONSIDERING THE ASSESSEES SUBMISSIONS CALLED FOR A REMAND REPORT F ROM THE AO BY CALLING FOR AND EXAMINING THE RELEVANT BOOKS OF ACCOUNT OF M/S. SHAKUN LOGISTICS WITH REFERENCE TO THE SAID CREDIT BALANCE AND ALSO TO EXAMINE ON OATH THE MANAGING PARTNER OR ANY OTHER RESPONSIBLE PERSON O F THE FIRM ABOUT THE FACT OF EXISTENCE OR OTHERWISE OF THE CREDIT BALANC E OF RS.9,82,387. 6. THE ASSESSING OFFICER IN HIS REMAND REPORT DATED 11.3.10 STATED THAT ALTHOUGH SUMMONS WAS ISSUED TO MANAGING PARTNER OF M/S. SHAKUN LOGISTICS, NOBODY APPEARED BEFORE HIM ON THE SAID D ATE, BUT CONFIRMATION WAS SENT VIDE LETTER DATED 2.3.10 ALONG WITH AN EXT RACT OF ASSESSEES ACCOUNT, BILLS RAISED BY THE ASSESSEE AND COPIES OF THE CORRESPONDENCE WITH THE ASSESSEE AND THAT FROM THE STATEMENT OF AC COUNTS AND BILLS SUBMITTED BY M/S. SHAKUN LOGISTICS, THE ISSUE OF SH ORTAGE IN TRANSPORTATION AROSE ON ACCOUNT OF THE FINAL BILL DATED 25.7.2005 FOR AN AMOUNT OF RS.62,67,389 CREDITED IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE ON 31.7.2005 AND AFTER DEDUCTING AN AMOUNT OF RS.1,69, 207 AS SHORTAGE. IT WAS ALSO REPORTED THAT THIS CLEARLY SHOWED THAT THE DEDUCTION ON ACCOUNT OF SHORTAGE HAD ALREADY BEEN CONSIDERED AND THEREFORE FURTHER SHORTAGES SEEMED IMPROBABLE, THAT THE ISSUE OF SHORTAGE REQUI RED FURTHER VERIFICATION ITA NO.1017/BANG/10 PAGE 4 OF 6 AND THE ISSUE OF REVERSAL IN THE BOOKS OF M/S. SHAK UN LOGISTICS OF THE DEBIT BALANCE OF RS.9,52,387 BEING REFLECTED AS THE INCOM E OF THE ASSESSEE FOR THE A.Y. 2009-10 WAS REQUIRED TO BE EXAMINED. 7. AFTER CONSIDERING THE ABOVE REMAND REPORT, THE C IT(APPEALS) OBSERVED THAT THE CREDIT BALANCE OF RS.9,52,387 AP PEARING IN THE LEDGER ACCOUNT OF M/S. SHAKUN LOGISTICS COULD NOT BE CONSI DERED AS ASSESSEES ADDITIONAL INCOME IN VIEW OF THE AOS OWN ASSERTION IN THE REMAND REPORT THAT THE FINAL BILL DATED 25.7.2005 FOR AN AMOUNT O F RS.62,67,839 WAS CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ON 31.7.2005. HE HELD THAT UNLESS IT WAS ESTABLISHED THAT THE ASSESSEE HA D MADE SALES OUTSIDE THE BOOKS OF ACCOUNT AND HAD NOT ACCOUNTED FOR REVE NUE THEREFROM, A DISPUTED CREDIT BALANCE IN ITSELF COULD NOT BE TREA TED AS INCOME AND FOR A LEDGER ACCOUNT BEING A RUNNING ACCOUNT BETWEEN TWO PARTIES, DIFFERENCES IN FIGURES MIGHT OCCUR OWING TO SUCH REASONS AS PASSIN G OF WRONG ENTRIES OR WRONG TIMING OF ENTRIES. FROM THE CORRESPONDENCE B ETWEEN THE ASSESSEE AND M/S. SHAKUN LOGISTICS ALSO, HE OBSERVED THAT, T HERE WAS SOME DISPUTE GOING ON BETWEEN THE TWO PARTIES AND THE RECONCILIA TION STATEMENT ITSELF SHOWS THAT THE AMOUNT OF RS.9,52,387 WAS A PART OF THE AMOUNT OF RS.13,32,837 SHOWN IN THE ENTRIES MADE IN THE ASSES SEES BOOKS OF ACCOUNT. HE THEREFORE HELD THAT ADDITION IS NOT CA LLED FOR. 8. AS REGARDS THE AOS OBSERVATION IN THE REMAND RE PORT THAT THE ASSESSEE HAD REFLECTED AN AMOUNT OF RS.9,52,387 AS HIS INCOME FOR THE A.Y. 2009-10, HE HELD THAT IT APPEARS TO BE FACTUAL LY INCORRECT, SINCE, AS PER THE ASSESSEES BOOKS OF ACCOUNT, NO AMOUNT WAS RECE IVABLE FROM M/S. SHAKUN LOGISTICS FOR THE RELEVANT ASSESSMENT YEAR A ND IT WAS SUBMITTED ITA NO.1017/BANG/10 PAGE 5 OF 6 THAT NO FURTHER BUSINESS WAS CARRIED ON WITH THAT P ARTY DURING THE A.Y. 2009-10. HE ACCORDINGLY DELETED THE ADDITION. 9. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(APPEALS ) TO THE ASSESSEE, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR STR ONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE DIFFERENCE OF RS.9,52,387 BETWEEN THE ACCOUNTS OF THE ASSESSEE AN D M/S. SHAKUN LOGISTICS REPRESENTED ACTUAL CASH CREDIT IN THE BOO KS OF THE ASSESSEE, FOR WHICH THE ASSESSEE WAS UNABLE TO PROVIDE SATISFACTO RY EXPLANATION AND THEREFORE THE SAID SUM WAS REQUIRED TO BE TREATED A S UNEXPLAINED CASH CREDIT. SHE ALSO SUBMITTED THAT THE CIT(APPEALS) H AS NOT CONSIDERED THAT THE OTHER PARTY, SHAKUN LOGISTICS, HAS SUBSEQUENTL Y DECLARED THE SAID DIFFERENCE OF RS.9,52,387 AS THEIR INCOME BY WAY OF CESSATION OF LIABILITY FOR THE A.Y. 2009-10, WHICH CLEARLY SHOWS THAT SHAKUN L OGISTICS HAS NOT MADE ANY PAYMENT OTHER THAN THE ONE REFLECTED IN THEIR B OOKS OF ACCOUNT IN RESPECT OF THE ASSESSEE. 10. NONE APPEARED FOR THE ASSESSEE IN SPITE OF SERV ICE OF NOTICE AND THEREFORE, AFTER HEARING THE LD. DR, THE APPEAL IS DISPOSED OF EX PARTE, QUA THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS REFLE CTED ALL THE ENTRIES IN ITS BOOKS OF ACCOUNT AND THE CIT(APPEALS) AFTER CALLING FOR A REMAND REPORT FROM THE AO HAS FOUND THAT ALL THE ENTRIES HAVE BEE N PROPERLY REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. AS REGARDS THE SHORTAGE OF RS.9,52,387 IS CONCERNED, HE OBSERVED FROM THE LETT ER OF M/S. SHAKUN LOGISTICS, WHICH IS REPRODUCED IN THE ASSESSMENT OR DER ITSELF, THAT THERE WAS SOME DISPUTE WITH REGARD TO THE SAID PAYMENT BE TWEEN THE ASSESSEE AND THE SAID FIRM AND THE REVENUES ARGUMENT THAT I N THE A.Y. 2009-10 ITA NO.1017/BANG/10 PAGE 6 OF 6 SHAKUN LOGISTICS HAS ITSELF REFLECTED THE SAID AMOU NT AS ITS INCOME ON CESSATION OF LIABILITY ALSO SHOWS THAT THE ASSESSEE HAS NOT RECEIVED THE PAYMENT. IN VIEW OF THE SAME, WE FIND THAT THE CI T(APPEALS) HAS PROPERLY APPRECIATED THE EVIDENCE FILED BY THE ASSESSEE COMP ANY AND ALSO THE REMAND REPORT BY THE ASSESSING OFFICER BEFORE DELET ING THE ADDITION AND, THEREFORE, HIS ORDER NEEDS NO INTERFERENCE. 11. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2011. SD/- SD/- ( DR. O.K. NARAYANAN ) ( SMT. P. MADHAVI DEVI ) VICE PRESIDENT JUDICIAL M EMBER BANGALORE, DATED, THE 23 RD MARCH, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.