Shri Dipak S. Shah, V. The ACIT, Cent.Cir-2(3),

ITA 1034/AHD/2004

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0415 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-09-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 02-04-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Set aside
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1034/AHD/2004 ASSESSMENT YEAR:2000-01 DATE OF HEARING:16.9.09 DRAFTED:19.10.09 SHRI DIPAK S SHAH, C/O. M/S. LAXMI INTERNATIONAL, 312-MADHUKANT II, OPP. LAKAJI KUVARJI HALL, BARDOLPURA, AHMEDABAD PAN NO.ACKPS9188H V/S . ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(3), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI DHIREN SHAH, AR RESPONDENT BY:- SHRI ANIL KUMAR, CIT, DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VI, AHMEDABAD IN APPEAL NO. CI T(A)-VI/WD.2(3)/40/03-04 DATED 30-01-2004. THE ASSESSMENT WAS FRAMED BY THE INCOME-TAX OFFICER, AHMEDABAD WARD-2(3), AHMEDABAD U/S.144 R.W.S. 143(3 ) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 27-03-2003 FOR THE ASSESSMENT YEAR 2000-01. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AS REGARDS TO VALIDITY OF ORDER PASSED U/S.144 R.W.S. 143(3) OF THE ACT. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THIS ISSUE, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. ITA NO.1034/AHD/2004 A.Y.2000-01 SH. DIPAK S SHAH V. ACIT, CC-2(3) ABD PAGE 2 4. THE SECOND AND THIRD ISSUE HAVE RAISED BY THE AS SESSEE ARE INTER-CONNECTED AND IN CONSEQUENTIAL, HENCE WILL DISPOSE OFF BY CON SOLIDATED ORDER AND THE RELEVANT ISSUE AS REGARDS TO UNEXPLAINED CASH CREDIT AMOUNTI NG TO RS.5,16,96,624/- AND CONSEQUENTIAL DISALLOWANCE OF INTEREST OF RS.6,09,5 76/-. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO. II AND III :- II. ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT RS.5,16,96,624/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.5,16,96,624/- OUT OF TOTAL ADDITION OF RS.7,1 7,6,816/- AS MADE BY THE A.O ON THE OBSERVATION THAT THE APPELLANT DID NOT D ISCHARGE THE ONUS EITHER AT THE ASSESSMENT STAGE OR IN THE COURSE OF APPELLA TE PROCEEDINGS. 2. THE LEARNED CIT(A) AS WELL AS THE A.O ERRED IN L AW AND ON FACTS IN FAILING TO CONSIDER THE CONFIRMATION OF CERTAIN PARTIES FIL ED BY THE APPELLATE IN THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS AT APPE LLATE STAGE. III. ADDITION ON ACCOUNT OF INTEREST EXPENSES RS.6, 09,576/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.6,09,576/- OUT OF TOTAL ADDITION OF RS.1,20,2 9,935/- AS MADE BY THE A.O ON THE OBSERVATION THAT THE GENUINENESS OF THE AMOUNTS CREDITED TO THEIR ACCOUNTS IN THE BOOKS OF APPELLATE HAS NOT BE EN ESTABLISHED. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE CONFORMATIONS OF THE PARTIES NAME LY M/S. MADHUKANT AGROTECH PVT. LTD. AND M/S. KANTILAL & CO. ARE ALRE ADY AVAILABLE ON RECORD OF THE LEARNED CIT(A) AND ALSO ON RECORD OF THE A.O . 5. WE FIND FROM THE RECORDS AS WELL AS ARGUMENTS FR OM BOTH THE SIDES THAT THE ASSESSEE HAS FILED THE DETAILS BEFORE THE ASSESSING OFFICER AS REGARDS TO AMOUNT CREDITED IN THE NAME OF FOLLOWING PARTIES:- SR. NO. NAME OF THE CREDITOR AMOUNT 1. M/S MADHUKANT AGROTECH PVT. LTD. RS.2,68,19,916/- 2. M/S. MADHUKANT EXPORT PVT. LTD. RS.2,21,61,156/- 3. MS KAILASBEN K SHAH RS. 30,000/- 4. M/S. KANTILAL S & CO. RS. 23,00,000/- 5. M/S. KIRTI CHEM INDUSTRIES RS. 2,92,152/- 6. M/S. MADHUKANT DEVELOPERS RS. 30,000/- 7. SHRI SANJAYKUMAR (DELHI) RS. 38,000/- 8. M/S. SARITA TRADING CO. RS. 25,000/- TOTAL RS.5,1 6,96,624/- ITA NO.1034/AHD/2004 A.Y.2000-01 SH. DIPAK S SHAH V. ACIT, CC-2(3) ABD PAGE 3 SINCE THE AMOUNTS WERE CREDITED IN THE NAME OF THE ABOVE PARTIES AND IN THE BOOKS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION BU T THE ASSESSEE COULD NOT PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANS ACTION IN RESPECT OF THESE TRANSACTIONS. BEFORE US, THE LD. COUNSEL FOR THE A SSESSEE FILED A DETAILED PAPER BOOK CONSISTING OF VARIOUS DOCUMENTS LIKE ACKNOWLED GEMENTS OF RETURNS, COMPUTATION OF INCOME, COPIES OF ACCOUNT IN THE BOO KS OF THE ASSESSEE AS WELL AS OTHER PARTIES AND TO PROVE THAT THE PAYMENTS ARE BY CHEQUES. IT SEEMS THAT THE ASSESSEE HAS FILED THIS INFORMATION FOR THE FIRST T IME AND IN THE ASSESSEES PAPER BOOK CONSIDERING OF PAGES 1 TO 19. WE FIND THAT THE SE EVIDENCES ARE VITAL FOR DECIDING THE INTER-CONNECTED ISSUE AND THESE ARE NO T APPRISED BY THE LOWER AUTHORITIES AS THESE WERE NOT BEFORE THEM, AFTER AD MITTING THE SAME, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. T HE ASSESSING OFFICER WILL DECIDE AS REGARDS TO CASH CREDIT OF RS.5,16,96,624/- AND CONS EQUENTIAL DISALLOWANCE OF INTEREST AS PER LAW AFTER PROVIDING REASONABLE OPPORTUNITY B EING HEARD TO THE ASSESSEE. ACCORDINGLY, THE INTER-CONNECTED ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER AS INDICATED ABOVE. 6. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE RATE DIFFERENCE OF RS.47.55 LAKHS. F OR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.IV :- IV. ADDITION ON ACCOUNT OF RATE DIFFERENCE RS47, 55,000/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.47,55,000/- ON THE OBSERVATION T HAT THE TRANSACTIONS ARE DEFINITELY ARE IN THE NATURE OF SPECULATIVE TRA NSACTIONS WITHIN THE MEANING OF SECTION 43(5). 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE TRADING LOSS INCURRED BY THE APPELLANT FROM HEDGING AGAINST IMPORT OF RBD PALMOLIN OIL TO FIX FUTURE RISK AND ENTERED INTO FO RWARD CONTRACT WHICH IS AS PER THE COMMODITY TRADE PRACTICE AND APMC REGULATIO NS. 7. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE RECORDS, WE FIND THAT THE ASSESSING OFFICER HAS NOT ALLOWED THE TRADING LOSS INCURRED BY THE ASSESSEES PROPRIETARY CONCERN FROM HEDGING AGAINST IMPORT OF RBD PALMOLIN OIL TO FIX FUTURE RI SK AND ENTERED INTO FORWARD CONTRACT WHICH IS A PER THE COMMODITY TRADE PRACTICE AND APM C REGULATION AND THE ITA NO.1034/AHD/2004 A.Y.2000-01 SH. DIPAK S SHAH V. ACIT, CC-2(3) ABD PAGE 4 EXPENSE OF RATE DIFFERENCE ARE TRULY IN THE NATURE OF BUSINESS REVENUE EXPENSE AND ARE ALLOWABLE. THE ASSESSEE HAS IMPORTED THE RBD P ALMOLIEN OIL AND IN THIS TRADE, IT IS CUSTOMARY TO SETTLE BUSINESS IN THIS STYLE AN D AS PER COMMODITY TRADE PRACTICES AND APMC REGULATIONS FORWARD CONTRACTS ARE ALLOWED TO HEDGE AGAINST IMPORT COST AS WELL AS TO FIX FUTURE RISK AND ONE CAN ENTER INT O FORWARD CONTRACT AND ON THE DATE OF DELIVERY IF THE MARKET RATES ARE LOW / HIGH THEN TH E BUYER HAS THE OPTION TO TAKE DELIVERY OR TO SETTLE THE CONTRACT BY ADJUSTING THE PRICE DIFFERENCE. IT IS GENERALLY ADVISABLE TO SETTLE THE ACCOUNT WHEN PRICES ARE FAL LING BECAUSE IF ONE TAKE DELIVERY OF GOODS, ADDITIONAL COST ARE ADDED TO IT AND THERE AR E CHANCES OF FURTHER PRICE REDUCTION AND WOULD LEAD TO FURTHER LOSS WHICH OTHE RWISE WOULD BE ALLOWABLE TO THE ASSESSEE-FIRM TO AVOID HUGE LOSS AND ALSO TO REDUCE THE LOSS HAD ENTERED INTO SUCH TRANSACTION. 8. WE FIND FROM THE ABOVE, THAT THE RELEVANT FACTS REGARDING THE TRANSACTIONS OF HEDGING ARE NOT AVAILABLE ON THE RECORDS OF THE LOW ER AUTHORITIES. THE ASSESSEE HAS FILED THESE DETAILS FOR THE FIRST TIME BEFORE US. A CCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO DECIDE THE CLAIM IN TERMS OF THE ABOVE. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 9. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF SERVICE CHARGES PAID TO M/S.K.K. CONSULTANCY SERVICES. FOR THIS, THE ASSESSEE HAS RAISED THE FO LLOWING GROUND NO.V :- V ADDITION OUT OF SERVICE CHARGES RS.3,00,000/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF SERVICE CHARGES PAID TO M/S./ K.K. CONSULTANCY SERVICES. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER THE FACT THAT THE SERVICE CHARGES OF RS.3,00,000/- HAS BEEN PAID BY THE APPELLANT TO M/S. K.K. CONSULTANCY SERVICES FOR ACC OUNTING CHARGES AND ADMINISTRATIVE CHARGES FOR F.Y. 1999-2000. 10. AFTER HEARING THE RIVAL CONTENTIONS AND GOING T HROUGH THE CASE RECORDS, WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ABOVE ADDITION BY GIVING FOLLOWING OBSERVATION SINCE THE ASSESSEE HAS NOT SUBMITTED DETAILS IN SU PPORT OF HIS CLAIM OF SERVICE CHARGES, IT APPEAR THAT NO SUCH EXPENSE WER E INCURRED AND THE CLAIM I BOGUS. THE SERVICE CHARGE OF RS.3,00,000/- CLAIMED BY THE ASSESSEE ARE THEREFORE ITA NO.1034/AHD/2004 A.Y.2000-01 SH. DIPAK S SHAH V. ACIT, CC-2(3) ABD PAGE 5 DISALLOWED AND ADDED TO THE TOTAL INCOME. THE ASSESSEE VIDE LETTER DATED 10-03- 2003 FILED WITH THE OFFICE OF ASSESSING OFFICER ON 28-03-2003 INTIMATED THE ASSESSING OFFICER THAT SINCE LAST TWO YEARS, THE BUSINESS OF ASSESSEE REMAINED CLOSED AND THERE IS NO FULL TIME STAFF TO LOOK AFTER THE AFFAI RS OF THE ASSESSEE AND ALSO THE FINANCIAL POSITION OF ASSESSEE IS ALSO BADLY ATTACH ED DUE TO HEAVY LOSS AND NOT IN A POSITION TO TAKE THE ASSISTANCE FROM ANY PROFESSION AL. IT IS ALSO TO BE NOTED THAT THERE WAS ALSO NO STAFF IN THE ACCOUNTS SECTION. THE ASS ESSEE VIDE ANOTHER LETTER DATED 21-03-2003 FILED WITH THE OFFICE OF ASSESSING OFFIC ER SUBMITTED ALL THE DETAILS REQUIRED BY THE AO VIDE HIS NOTICE DATED 17-03-2003 WHICH CO NTAIN ALMOST ALL THE DETAILS REQUIRED BY THE AO FOR THE ASSESSMENT PROCEEDINGS A ND AO WITHOUT CONSIDERING THE EFFORTS MADE BY THE ASSESSEE TO COMPLY WITH THE VAR IOUS NOTICES ISSUED BY THE AO PASSED THE ASSESSMENT ORDER U/S.144 OF THE ACT WITH A BIASED AND ARBITRARY MANNER TO MAKE HUGE PITCH ADDITION. WE FIND THAT THE ABOV E PLEA OF THE ASSESSEE HAS NEITHER BEEN CONSIDERED BY THE CIT(A) NOR BY THE AS SESSING OFFICER. ACCORDINGLY, WE FEEL THAT THIS ISSUE NEEDS RE-VERIFICATION IN TERMS OF ABOVE PLEA MADE BY THE ASSESSEE. ACCORDINGLY, THIS ISSUE OF THE ASSESSEE S APPEAL IS SET ASIDE TO THE FILE OF ASSESSING OFFICER. IT IS THE CONTENTION OF THE ASS ESSEE AND IN VIEW OF THE ABOVE FACTS, THESE DETAILS WERE FILED BEFORE THE AO BUT T HE AO HAS NOT CONSIDERED THESE DETAILS. EVEN NOW BEFORE US, THE ASSESSEE HAS FILE D THE DETAILS IN ITS PAPER BOOK, SINCE THESE WERE NOT EXAMINED BY LOWER AUTHORITIES, WE FEEL THAT THIS ISSUE NEEDS VERIFICATION AT THE END OF THE AO. ACCORDINGLY, TH IS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 20/11/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 20/11/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VI, AHMEDABAD ITA NO.1034/AHD/2004 A.Y.2000-01 SH. DIPAK S SHAH V. ACIT, CC-2(3) ABD PAGE 6 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD