Supreme Polymers Pvt. Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 107/CTK/2012

• Counselvise Citation: 10722114 RSA 2012
• 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: 12-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Opportunity of being heard; Principle of natural justice; Deemed to accrue or arise in india
• 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. 107/CTK/2012 / ASSESSMENT YEAR 2006 - 07 SUPREME POLYMERS PRIVATE LIMITED, A - 6, POLYMER COMPLEX, P.O. KIIT, BHUBANESWAR 751 024 PAN: AAFCS 2552 K - - - VERSUS - ACIT, CIRCLE 2(1), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI B.K.MOHAPATRA, AR / FOR THE RESPONDENT: / SHRI N.K.NEB, 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 48,36,421 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 POLYMER PRODUCTS. IT FILED ITS RETURN ON 30.11.2006 SH OWING A TOTAL LOSS OF 44,67,381. 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 49,75,921 UNDER THE HEAD UNSECURED LOANS. THE ASSESS ING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS AND CONFIRMATION LETTERS FROM THE CREDITORS TO PROVE THE GENUINENESS OF I.T.A.NO. 107/CTK/2012 2 THE LIABILITY. THE ASSESSING OFFICER OBSERVED IN HIS ORDER THAT THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATION LETTERS AND HAS FA ILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF THE SAID LIABILITIES TO THE EXTENT OF 48,36,421. HE, THEREFORE, TREATED THIS AMOUNT OF 48,36,421 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 ASSESSEE DID NOT APPEAR BEFORE HIM ON THE DATE FIXED FOR HEARING. HE, THEREFORE, IN HIS EXPARTE ORDER CONFIRMED THE ADDITION OF 48,36,421 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 LOAN TRANSACTIONS WERE M OSTLY TAKEN THROUGH ACCOUNT PAYEE CHEQUES EXCEPTING SUBURBAN INDUSTRIES LTD ., AND DULY REFLECTED IN BANK ACCOUNTS AS WELL AS IN THE LEDGER COPIES OF THE ASSESSEE . THE FACTS OF TAKING / ACCEPTING OF LOAN ALONG WITH CHEQUE NO / DATE OF RECEIPT AND FULL TRANS ACTIONS WITH ALL THE ABOVE PARTIES WERE FULLY NARRATED IN THE CASH BOOK AND LEDGER ACCOUNT. IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH THE CONFIRMATION LETTERS FROM THE CREDITORS SO AS TO PROVE THE GENUINENESS OF THE LIABILITY. T HE ASSESSEE HAS PRODUCED THE NAMES, DETAILS AND ADDRESSES OF ALL THE PARTIES AND COULD PRODUCE CONFIRMATION LETTER ONLY IN RESPECT OF SUBURBAN INDUSTRIES LTD. THE ASSESSMENT OF SUBURBAN INDUSTRIES LTD WAS ALSO COVERED UNDER THE JURISDICTION OF THE SAME LEA RNED ASSESSING OFFICER. INCIDENTALLY THE ACCOUNTS OF SU BURBAN INDUSTRIES LTD. FOR THE SAME ASSESSMENT YEAR 2006 - 07 WAS ALSO COVERED UNDER SCRUTINY ASSESSMENT UNDER SECTION 143 (3) OF THE INCOME I.T.A.NO. 107/CTK/2012 3 TAX ACT. THE FACT OF SUCH TRANSACTIONS WITH THE ASSESSEE WITH THE ABOVE PARTY HAVE BEEN DULY EXAMINED WHERE IN CERTAIN TRANSACTIONS MADE WERE IN THE NATURE OF LOAN. IN TERMS OF COMMON DIRECTORSHIP OF SRI PRASANT SATPATHY IT CAN BE CONSIDERED AS A SISTER CONCERN. IN SPITE OF PRODUCTION OF COPY OF ACCOUNT AND CONFIRMAT ION FROM SUBURBAN INDUSTRIES, THE NET INCREASE IN LIABILITIES WAS ADDED AS DEEMED INCOME BY TREAT IT AS BOGUS LIABILITY. IN RESPECT OF LOAN TRANSACTIONS MADE BY THE ASSESSEE WITH INTERNATIONAL, PRATAP CHANDRA AND SINCLAIR BUILDERS (P) LTD DURING THE YEAR, THOUGH THE LOAN WERE TAKEN THROUGH ACCOUNT PAYEE CHEQUES AND THE IDENTITY OF EACH PARTY INCLUDING THEIR ADDRESSES HAS BEEN FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDING. EXCEPTING SUBURBAN INDUSTRIES LTD. , THE ASSESSEE COULD NOT PRODUCE THE CONFIRMA TION LETTERS FROM ALL OTHER CREDITORS BEFORE THE COMPLETION OF ASSESSMENT. FURTHER IN ONE CASE I.E M/S SINCLAIR BUILDERS (P) LTD THE ASSESSEE COULD EXPRESS ITS GENUINE DIFFICULTY IN PRODUCING THE CONFIRMATION LETTERS AS THE CONCERNED PERSON WAS OUT OF STAT ION. AS IT IS TIME BARRED ASSESSMENT THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATION LETTER BEFORE THE COMPLETION OF ASSESSMENT. BY FURNISHING THE NAME, ADDRESS AND LEDGER COPY OF ACCOUNT OF LOAN TRANSACTIONS THE ASSESSEE DISCHARGED THE PRIMARY BURDEN OF P ROOF CAST ON IT REGARDING IDENTITY AND GENUINENESS OF THE CREDITORS, MERELY BECAUSE THE ASSESSEE FAILED TO PRODUCE CONFIRMATION LETTERS IT IS NOT PROPER TO SAY THAT THE ASSESSEE HAS COMPLETELY FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF THE SAME LIABILITY AND TREATING THE SAME AS BOGUS LIABILITY AND CONSIDERED IT AS DEEMED INCOME IN THE LIGHT OF HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANCES. IN PAYMENT OR INTEREST TO SINCLAIR BUILDERS WAS ALLOWED IN THE ASSESSMENT. MERELY BECAUSE, THE ASS ESSEE COULD NOT PRODUCE THE CONFIRMATION LETTERS FROM CERTAIN PARTIES WHOSE NAME ADDRESS IDENTIFY AND PARTICULARS OF TRANSACTIONS WERE DULY I.T.A.NO. 107/CTK/2012 4 DISCLOSED OR FURNISHED, THE LEARNED ASSESSING OFFICER TREATED THE NET INCREASE IN UNSECURED LOANS TO THE RETURNED IN COME AS BOGUS LIABILITY AND ADDED IT AS DEEMED INCOME BY APPLYING THE PROVISIONS OF SECTION 68 OF INCOME TAX ACT. THE LEARNED ASSESSING OFFICER SHOULD HAVE ISSUED SUMMONS AS PROVIDED UNDER SECTION 131 OF INCOME TAX ACT TO THE LOAN CREDITORS OR SHOULD HAVE CONDUCTED FURTHER ENQUIRY OR INVESTIGATION BEFORE COMING TO A CONCLUSION THAT THE NET INCREASE IN AD DITION TO UNSECURED LOANS FOR 48,36,421 .00 DURING THE YEAR AS DEEMED INCOME U/S 68 OF THE INCOME TAX ACT. THE LEARNED ASSESSING OFFICER HAS NOT PROPERLY EXAMINED THE BOOKS OF ACCOUNTS AND ENTRIES RECORDED THERE IN AND SO AS TO KNOW THE IDENTITY OF THE PARTY AND GENUINENESS OF THE TR ANSACTIONS. IT IS NOT FAIR AND PROPER ON THE PART OF THE ASSESSING OFFICER TO DISBELIEVE THE AUDITED FINANCIAL STATEMENTS AND BANK STATEMENT BY APPLYING TEST OF HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANCES. AT THE TIME OF TREATING ANY SUM OF BOGUS LIA BILITIES THE LEARNED ASSESSING OFFICER SHOULD HAVE EXAMINED THE CORRESPONDING BOGUS EXPENDITURE OR ASSET OR REDUCTION OF ANY OTHER LIABILITY BEFORE TREATING IT AS BOGUS LIABILITIES. THE ENTRIES WERE NOT PROVED TO BE FICTITIOUS. REGARDING CREDITWORTHINESS T HE LEARNED ASSESSING OFFICER SHOULD HAVE COLLECTED INDEPENDENT MATERIAL OR INFORMATION AND BROUGHT IT ON RECORD. MOREOVER, IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT WHETHER THE SOURCE OR SOURCES FROM WHICH THE CREDITOR HAD AGREED TO ADVANCE THE AM OUNT WERE GENUINE OR NOT AS THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE . BEFORE COMING TO A FINAL ADVERSE CONCLUSION WHOLLY OR IN PART TO THE INTEREST OF THE ASSESSEE OPPORTUNITY FOR HEARING SHOULD HAVE BEEN AFFORDED TO THE ASSESS EE FINAL FOR PRODUCTION OF FURTHER INFORMATION OR EVIDENCE. THE PRINCIPLE OF NATURAL JUSTICE HAS BEEN FLAGRANTLY VIOLATED WHILE FRAMING THE ASSESSMENT. THE LEDGER COPIES OF ACCOUNTS OF LOAN TRANSACTIONS AND BANK ACCOUNTS WERE NOT I.T.A.NO. 107/CTK/2012 5 THOROUGHLY EXAMINED NOT CO VERED UNDER TEST CHECKING ADOPTED BY THE LEARNED ASSESSING OFFICER. THE FACT REMAINS THAT IN CASE OF MAKS INTERNATIONALS THERE WAS AN OPENING BALANCE OF 2,00,000 WHICH APPEARS TO HAVE BEEN ACCEPTED AS GENUINE IN CASE SINCLAIR BUILDERS (P) LTD LOAN OF 40,00,000 WAS RECEIVED DURING THE YEAR AND 1,08,000 TOWARDS INTEREST ON LOAN WAS CREDITED TO ITS ACCOUNT AND A SUM OF 1 ,32,234 WAS DEBITED TO ITS ACCOU NT AND THUS ARISING A NET CREDIT BALANCE OF 39,75,766 AS AT 3 1 ST MARCH 2006. EVEN INTEREST PAID ON SUCH LOAN WAS ALLOWED DURING THE ASSESSMENT. THUS THE LEARNED ASSESSING OFFICER HAS NOT APPLIED HIS MIND BEFORE TREATING IT AS BOGUS LIABILITY OR DEEMED IN COME. FURTHER NO OTHER INDEPENDENT MATERIAL OR EVIDENCE HAS BEEN COLLECTED BEFORE COMING TO SUCH CONCLUSION. ASSESSMENT HAS BEEN COMPLETED WITHOUT MAKING ANY FURTHER ENQUIRY OR ISSUING OF SUMMONS TO CREDITORS AS PROVIDED U/S 131 OF THE INCOME TAX ACT. THUS THE ORDER OF ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER IS MADE WITHOUT JUDICIAL APPLICATION OF MIND AND MERELY ON SURMISES AND CONJECTURES AND WITHOUT ANY MATERIAL IS UNJUST, UNFAIR, UNWARRANTED, UNSUSTAINABLE AND IS PERVERSE AND LIABLE TO BE DELET ED. 4. THE LEARNED CIT - DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. SHE SUBMITTED THAT THE LEARNED CIT(A) RIGHTLY NOTED THAT THE ASSESSING OFFICER DID NOT FURNISH THE REMAND REPORT AS REQUIRED BY HIM. THEREAFTER CONSIDERING THE FACTS AND CIRCUMSTANCE S OF THE CASE, THE LEARNED CIT(A) RIGHTLY HELD THAT THE ASSESSEE HAD NOT DISCHAR GED ITS PRIMARY ONUS THAT LAY UPON HIM FOR THE DELETION OF THE 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 HEARD THE RIVAL SUBMISSIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE I.T.A.NO. 107/CTK/2012 6 ASSESSEE HAS FURNISHED THE VARIOUS AGREEMENTS RELATING TO OBTAINING OF UNSECURED LOANS FROM THE RESPECTIVE PARTIES ALONG WITH THE B ANK 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 PANS AS PER REQUIREMENT OF LAW. IT WAS A MATTER 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 ACKNOWLEDGING 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 ASSESSING OFFICER FO R VERIFICATION OF THE LOAN CREDITORS IN ACCORDANCE 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 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 107/CTK/2012 7 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SUPREME POLYMERS PRIVATE LIMITED, A - 6, POLYMER COMPLEX, P.O. KIIT, BHUBANESWAR 751 024 2 / THE RESPONDENT: ACIT , CIRCLE 2(1), BHUBANESWAR. 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 DICTATION 12.09.2012.. 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 24.09.2012 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 ..