Suburban Industries Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 106/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65132 (ITAT-CUTTACK)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 11-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2012
• Court: TRIBUNAL
• Department Lawyers: MATI PARAMITA TRIPATHY
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Opportunity of being heard; Principle of natural justice; Source of fund; Deemed to accrue or arise in india; Onus to prove
• Section: 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 106/CTK/2012 / ASSESSMENT YEAR 20 06 - 07 SUBURBAN INDUSTRIES LIMITED, CNI COMPLEX, PO KIIT, BHUBANESWSAR 751024 PAN: AAECS 1750 N - - - VERSUS - ACIT, CIRCLE 2(1), BH UBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI B.K.MOHAPATRA, AR / FOR THE RESPONDENT: / SHRI MATI PARAMITA TRIPATHY, CIT - DR / DATE OF HEARING: 12 .09.2012 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY GROUND THAT A SUM OF 1,34,11,725 HAS BEEN CONFIRMED BY THE LEARNED CIT(A ) FOR TAXATION AS ASSESSED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 68. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CYLINDERS. IT FILED ITS RETURN ON 30.11.2006 SHOW ING A TOTAL LOSS OF 99,955. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THE ASSESSEE TO HAVE SHOWN HUGE ADDITION OF LIABILITY OF 1,34,11,725 UNDER THE HEAD UNSECURED LOANS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS AND CONFIRMATION LETTERS FROM THE CREDITORS TO PROVE THE GENUINENESS OF THE LIABILITY. THE ASSESSING OFFICER OBSERVED IN HIS ORDER THAT I.T.A.NO. 106/CTK/2012 2 THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATION LETTERS FROM THE THRE E CREDITORS NAMELY CHIRAG ASSOCIATES, ROYAL EXPORTS AND B.ENGINEERS & BUILDERS. HE, THEREFORE, TREATED THIS AMOUNT OF 1,34,11,725 AS BOGUS LIABILITY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S.68. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. HE OBSERVED THAT THE ASSESSING OFFICER DID NOT SUBMIT THE REPORT. NEITHER THE ASSESSING OFFICER APPEARED BEFORE HIM. FURTHER HE OBSERVED THAT THE ASSESS EE DID NOT APPEAR BEFORE HIM ON THE DATE FIXED FOR HEARING. HE, THEREFORE, IN HIS EXPARTE ORDER CONFIRMED THE ADDITION OF 1,34,11,725 AS MADE BY THE ASSESSING OFFICER U/S.68. AGAINST THIS ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FACT REMAINS THAT THE LOAN TRANSACTIONS WITH THE ABOVE PARTIES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND DEPOSITED OR ROUTED THROUGH BANK ACCOUNTS. ALL THE PARTIES ARE INCOME TAX ASSESSEES HAVING PERMANENT ACCOUNT NUMBERS. THEIR NAMES AND ADDRESS ARE APPROPRIATELY REPORTED BY THE TAX AUDITOR IN THEIR TAX AU DIT REPORT WHICH COULD HAVE BEEN EXAMINED BY THE LEARNED ASSESSING OFFICER SO AS TO KNOW THE IDENTITY AND GENUINENESS OF THE LOAN CREDITORS. FURTHER, PAYMENT OF INTEREST AND DEDUCTION OF TAX AT SOURCES AND THE PARTICULARS FURNISHED IN THE TDS CERTIFICATE I SSUED BY THE ASSESSEE INDICATING THE NAME, ADDRESS AND PAN OF CREDITORS ESTABLISHING THE IDENTITY AND GENUINENESS OF THE TRANSACTION SHOULD HAVE BEEN VERIFIED, FURTHER THE ABOVE LOANS WERE OBTAINED BY THE ASSESSEE THROUGH PROPERLY EXECUTED AGREEMENT. PROPE R EXAMINATION OF DOCUMENTS SUBMITTED BY THE ASSESSEE WOULD HAVE LED THE ASSESSING OFFICER IN ARRIVING PROPER CONCLUSION ON I.T.A.NO. 106/CTK/2012 3 IDENTITY AND GENUINENESS OF THE TRANSACTION. FURTHER, THE AMOUNT COVERED IN T HE ASSESSMENT ORDER REGARDING M/ S CHIRAG ASSOCIATES AND ROYAL EXPORTS REPRESENTS THE NET INCREASE IN BALANCE OF UNSECURED LOAN ARRIVED AFTER CONSIDERING THE LOAN RECEIVED AND AMOUNT CREDITED AND DEBITED TOWARDS PAYMENT AND TDS RESPECTIVELY. IN CASE OF B.E ENGINEERING AND BUILDERS THE BALANCE OF 4,01,000 (INCL UDING OPENING BALANCE 2,00,000 AND INTEREST OF 1000 WAS REPAID DURING THE YEAR. THE OPENING BALANCE OF 2,00,000 TAKEN FROM B.E ENGINEER & BUILDERS APPEARS TO HAVE BEEN ACCEPTED AS GENUINE, THE CREDIT ENTRY APPEARING IN R ESPECT OF FURTHER LOAN OF 2, 00 , 000 AND CREDIT OF 1,000 TOWARDS INTEREST WAS NOT ACCEPTED AS GENUINE. AGAIN THE REPAYMENT OF LOAN OF 4,01,000 THROUGH ACCOUNT PAYEE CHEQUE DULY REFLECTED IN BANK ACCOUNT APPEARS TO HAVE BEEN ACCEPTED AS GENUINE BY THE LEARNED ASSESSING OFFICER SINCE THE RE WAS NO OBSERVATIONS ON THESE ASPECTS OF THE TRANSACTIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT B EFORE TREATING ANY LIABILITIES AS BOGUS CORRESPONDING BOGUS EXPENDITURE OR ASSET OR CORRESPONDING REDUCTION OF OTHER LIABILITIES SHOULD HAVE B EEN IDENTIFIED OR DETERMINED BY THE LEARNED ASSESSING OFFICER DURING THE COURSE OF TEST CHECKING ADOPTED BEFORE COMPLETION OF ASSESSMENT. THE ABOVE FACTS COULD HAVE BEEN WELL VERIFIED FROM THE LEDGER COPY OF ACCOUNT VIS - - VIS BANK ACCOUNTS AND TAX AUDIT RE PORT PRODUCED DURING THE COURSE OF ASSESSMENT. THE LEARNED ASSESSING OFFICER COULD HAVE ISSUED SUMMONS UNDER SECTION 131 OF INCOME TAX ACT TO THE LOAN CREDITORS AS THE NAMES, ADDRESSES AND PAN WERE FURNISHED BY THE ASSESSEE IN THE TAX AUDIT REPORT SO TO SA TISFY HIMSELF ON IDENTITY, GENUINENESS AND CREDIT WORTHINESS OR CAPACITY OF THE CREDITOR TO LEND MONEY. THE LEARNED ASSESSING OFFICER HAS NEITHER MADE ANY FURTHER ENQUIRY OR INVESTIGATION NOR GIVEN ANY OPPORTUNITY FOR FINAL HEARING I.T.A.NO. 106/CTK/2012 4 BEFORE INVOKING THE SECT ION 68 OF IN THE INSTANT CASE. NO INDEPENDENT MATERIAL OR EVIDENCE WAS BROUGHT ON RECORD BEFORE TREATING ANY LIABILITY AS BOGUS LIABILITY. THOUGH THE ASSESSEE FAILED TO PRODUCE THE CONFIRMATION LETTERS BUT BY PRODUCING THE BANK ACCOUNT, LEDGER ACCOUNT AND TDS CERTIFICATES AUDIT REPORT, LEDGER COPY OF LOAN CREDITORS ACCOUNTS AND TAX AUDIT REPORT WHERE IN SUFFICIENT PARTICULARS OF CREDITORS WERE AVAILABLE. IT HAS DISCHARGED ITS PRIMARY BURDEN OF PROOF COST ON IT IN PROVING THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS. REGARDING CREDIT WORTHINESS OR CAPACITY TO ADVANCE MONEY, IT IS NOT POSSIBLE ON THE PART OF THE ASSESSEE TO ASK FOR THE SOURCE OF FUNDS FROM WHICH SUCH LOAN HAD ADVANCED WAS GIVEN TO THE ASSESSEE . THE BORROWER STANDS IN A VERY WEAK POSITION A S COMPARED TO THE LENDER. IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITOR AND SUB CREDITORS NOR IT IS THE BURDEN THE ASSESSEE TO PROVE THAT THE SUB - CREDITORS HAS THE CREDIT WORTHINESS TO ADVANCE THE CA SH CREDIT TO THE CREDITORS FROM WHICH THE CASH CREDIT HAS BEEN EVENTUALLY RECEIVED BY THE ASSESSEE SINCE THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE . BEFORE MAKING A CONCLUSION ADVERSE WHOLLY OR IN PART TO THE INTEREST OF THE ASSE SSEE , IT IS INCUMBENT ON THE LEARNED ASSESSING OFFICER TO INTIMATE OR INFORM THE CONCLUSION ARRIVED AS TO THE ASSESSEE SO AS TO ENABLE HIM TO FURNISH FURTHER EXPLANATION OR INFORMATION TO SUPPORT ITS CONTENTION. THUS THE PRINCIPLE OF NATURAL JUSTICE HAS BE EN FLAGRANTLY VIOLATED WHILE FRAMING ASSESSMENT. ON THESE BASIS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT W ITHOUT PROPER EXAMINATION OF DOCUMENTS AND JUDICIAL APPRECIATION OF EVIDENCES THE ADDITION MADE TOWARDS INCREASE IN UNSECURED LOAN FOR RS 1,34,1 1,725 AS DEEMED INCOME I.T.A.NO. 106/CTK/2012 5 U/S 68 OF LT ACT IS UNFAIR, UNJUST UNWARRANTED AND BAD IN LAW AND DESERVES TO BE DELETED. 4. THE LEARNED CIT - DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. SHE SUBMITTED THAT THE LEARNED CIT(A) RIGHTLY NOTED THAT THE ASSESS ING OFFICER DID NOT FURNISH THE REMAND REPORT AS REQUIRED BY HIM. THEREAFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) RIGHTLY HELD THAT THE ASSESSEE HAD NOT DISCHARGED ITS PRIMARY ONUS THAT LAY UPON HIM FOR THE DELETION OF TH E ADDITION MADE U/S.68. HOWEVER, ON THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE, THE MATTER MAY KINDLY BE RESTORED TO THE ASSESSING OFFICER FOR VERIFICATION. 5. WE HAVE HE ARD THE RIVAL SUBMISSIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FURNISHED THE VARIOUS AGREEMENTS RELATING TO OBTAINING OF UNSECURED LOANS FROM THE RESPECTIVE PARTIES AL ONG WITH THE BANK STATEMENTS WHICH INDICATE THE RECEIPTS THEREOF ALONG WITH THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY WHICH INDICATE THAT THESE AMOUNTS HAVE BEEN RECEIVED BY CHEQUES AND THE CREDITORS ARE HOLDING PAN S AS PER REQUIREMENT OF LAW. IT W AS A MATER OF CONSIDERATION THEREOF NOT AS A MATTER OF CHOOSING TO TAX THE SOLITARY ITEM WHEN THE ASSESSEE HAS FILED RETURN OF LOSS AMOUNTING TO 99,00,955. IN OTHER WORDS, THE ASSESSING OFFICER HAS ONLY ASSESSED THE INCOME OF THESE LOAN CREDITORS BY ACKNO WLEDGING THAT THE BROUGHT FORWARD LOSSES ARE TO BE ALLOWED BY CREATING A NIL DEMAND. ON THE BASIS OF THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE AND THE PRAYER OF THE LEARNED CIT - DR, WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE ASSESS ING OFFICER FOR VERIFICATION OF THE LOAN CREDITORS IN ACCORDANCE I.T.A.NO. 106/CTK/2012 6 WITH THE PROVISIONS OF THE I.T.ACT AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28.09.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SUBURBAN INDUSTRIES LIMITED, CNI COMPLEX, PO KIIT, BHUBANESWSAR 751024 2 / THE RESPONDENT: ACIT, CIRCLE 2(1), B HUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATI ON 1 2 .09.2012.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13 .09.2012OTHER 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 DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 29.06.2012. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SEC RETARY.