ITO, Noida V. Sh. Naveen Kumar Jain, Noida

ITA 1095/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7299 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL KR SHARMA
• Keywords: Gift; Opportunity of being heard; Additional evidence; Onus to prove
• Section: 133(6); 68

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI B.C.MEENA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 1095 /DEL/ 2012 (ASSESSMENT YEAR: 2008 - 09 ) ITO WARD - 2, G - BLOCK SHOPING COMPLEX, SECOTOR - 20, NOIDA VS. NAVEEN KUMAR JAIN, C - 309, SECTOR - 26 NOIDA PAN:ABWPJ2580M (APPELLANT) (RESPONDENT) C.O. 166/DEL/2012 (IN ITA NO. 1095 /DEL/ 2012) (ASSESSMENT YEAR: 2008 - 09 ) ITO WARD - 2, G - BLOCK SHOPING COMPLEX, SECOTOR - 20, NOIDA VS. NAVEEN KUMAR JAIN, C - 309, SECTOR - 26 NOIDA PAN:ABWPJ2580M (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SUNIL KR SHARMA, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), GHAZIABAD ORDER DATED 27.12.2011 FOR ASSESSMENT YEAR 2008 - 09 AND C ROSS - O BJECTION HAS BEEN PREFERRED BY THE ASSESSEE . 2. THE GROUNDS OF APPEAL OF REVENUE ARE AS FOLLOWS: - 1. THE LD CIT(A) ERRED IN LAW AND ON FACTS BY HOLDING THAT PROPER OPPORTUNITY OF BEING HEARD IS NOT GRANTED TO THE ASSESSEE TO EXPLAIN THE GENUINENESS OF THE SUNDRY CREDITORS WHILE THE ASSESSING OFFICER HAD ALLOWED SUFFICIENT OPPORTUNITIES OF BEING HEAD TO TH E ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 2. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS BY IGNORING THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASED OF SHRI RAM LAL VS. CIT 280 ITR 547 (ALLAHABAD) WHEREIN LAW HAD BEEN LAID DOWN THAT THE BURDEN OF PROOF VESTED IN THE ASSESSEE TO PROVE GENUINENESS AND CREDITWORTHINESS OF THE SUNDRY CREDITORS WHICH WAS NOT DISCHARGED BY THE ASSESSEE. PAGE NO. 2 3. AND THE GROUND RAISED IN C . O . BY THE ASSESSEE ARE AS FOLLOWS: - 1. BECAUSE THE DEPARTMENTAL APPEAL IS BA D IN LAW AS WELL AS ON FACTS AND IS LIABLE TO BE DISMISSED. 2. BECAUSE THE ASSESSEE HAD DULY DISCHARGED HIS DUTY TO PROVED THE GENUINENESS AND CREDIT WORTHINESS OF THE SUNDRY CREDITORS BEFORE THE LD CIT(A). 4. GROUND NOS. 1 AND 2 OF THE REVENUE AND THE S OLITARY GROU ND RAISED BY THE ASSESSEE IS TH E SAME AND IS REGARDING ADDITION OF RS.26,59,300/ - REPRE SENTING ALLEGED BOGUS CREDITORS. 5 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGA GED IN THE MANUFACTURE OF READY MADE GARMENTS ON JOB WORK BASIS. AS PER THE BALANCE - SHEET FILED BY THE ASSESSEE HAD SHOWN SUNDRY CREDITORS OF RS.26,14,350/ - . THE AO IN ORDER TO VERIFY GENUINENESS OF THE CREDITORS CALLED FOR INFORMATION U/S 133(6) OF THE INCOME TAX ACT 1961 (HEREIN AFTER THE ACT) . THESE LETTERS WERE RECEI VED BACK WITH POSTAL REMARK NO SUCH PARTY/ PERSON EXISTS IN THE GIVEN ADDRESS ES . HE THUS HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS OF PROVIDING THE GENUINENESS OF THE CREDITORS AS PER THE VERDICT OF THE HONBLE ALLAHABAD HIGH COURT IN THE C ASE OF RAM LAL AGGARWALA VS. CIT 280 ITR 547. IN THE SAID CIRCUMSTANCES HE TREATED THE SUNDRY CREDITORS AS BOGUS AND ADDED THE AMOUNT OF RS.26,59,300/ - . 6 . IN THE APPELLATE PROCEEDINGS BEFORE THE LD CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE IS IN BUSINE SS OF FABRICATION FOR EXPORTERS AND MAJORITY OF JOB WORK IS OUT - SOURCED TO VARIOUS OUTSIDE PARTIES. IT WAS FURTHER SUBMITTED THAT THE AO DID NOT REJECT ANY FABRICATION CHARGES PAID TO THE CREDITORS DURING THE YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMI TTED THAT SHOW - CAUSE NOTICE TO PROVE THE GENUINENESS OF THE T RANSACTION WAS GIVEN AT THE FAG - END OF THE ASSESSMENT PROCEEDINGS. AND DESPITE THAT CONFIRMATION FROM TWO PARTIES WERE FURNISHED, WHICH WERE NOT ADMITTED BY THE AO. IT WAS SUBMITTED THAT IT IS HI GHLY IMPRACTICAL FOR THE ASSESSEE TO OBTAIN CONFIRMATION FROM ALL THE CREDITORS WITHIN A SHORT PERIOD OF TIME , PARTICULARLY WHEN THE PERSON S ARE ILLITERATE PEOPLE EARNING LIVELIHOOD FROM HANDICRAFTS JOB AND SITUATED IN REMOTE TOWN OF SHAHIBABAD IN UTTAR PR ADESH. FURTHER THE ASSESSEE FURNISHED COPIES OF ACCOUNTS CONTAINING PAN DETAILS OF ALL THE CREDITORS UNDER RULE 46A OF THE INCOME TAX RULES 1962 (HEREIN AFTER THE RULES) . THE PAGE NO. 3 LD CIT(A), AFTER CALLING FOR A REMAND REPORT FROM THE AO VIDE LETTER DATED 2 ND DECEMBER 2011 HAS DELETED THE ADDITION, BY CONCLUDING AS UNDER: - 8.2 I FIND THAT PROPER OPPORTUNITY WAS NOT GIVEN BY THE AO DURING ASSESSMENT PROCEEDINGS AS ONLY TIME OF 5 DAYS WAS GIVEN (EVEN PRESUMING THAT LETTER DATED 23.12.2010 WAS SERVED ON THAT VE RY DATE ON THE ASSESSEE) TO EXPLAIN THE GENUINENESS OF SUNDRY CREDITORS. THIS IS WHY, WHEN THE ASSESSEE FILED CONFIRMATION OF THESE SUNDRY CREDITORS DURING APPELLATE PROCEEDINGS; IT WAS DESIRABLE TO ADMIT THIS AS ADDITIONAL EVIDENCES AND REMAND THE MATTE R TO THE AO FOR VERIFICATION. BUT THE AO AND THE JCIT BOTH HAVE SIMPLY HARPED ON DECISION TAKEN DURING ASSESSMENT PROCEEDINGS. IT IS REGRETFUL TO DAY THAT THE AO, ALTHOUGH HE MAY RAISE OBJECTION TO ADDITION OF ADDITIONAL EVIDENCES BUT, HE CAN NOT SIT OVER THE PREROGATIVE OF CIT(A) TO CONSIDER THE ADDITIONAL EVIDENCES, AS ADMISSIBLE OR NOT. THEREFORE, WHAT WAS MORE IMPORTANT FOR THE AO TO DO, IS TO GIVE THE REPORT/ COMMENT ON MERITS OF THE ADDITIONAL EVIDENCES ALSO, BESIDES MAKING TECHNICAL OBJECTION TO ADMI SSION OF SUCH ADDITIONAL EVIDENCES. BUT THE AO HAS NOT DONE THIS DUTY. THE AO SHOULD HAVE MADE VERIFICATION OF THE ADDITIONAL EVIDENCES, AS CONFIRMATIONS, ADDRESSES AS WELL AS PAN NO OF THESE SUNDRY CREDITORS WERE PROVIDED. BUT I REGRET TO SAY THAT THE AO HAS NOT DONE ANY EXERCISE OF VERIFICATION OR POINTING OUT ANY DISCREPANCY OR FAULT IN SUCH CONFIRMATION/ DETAILS. 8.3 I FIND THAT PROPER CONFIRMATION HAVE BEEN BROUGHT ON RECORD AND HENCE UNLESS THE AO PROVIDED SOME DISCREPANCIES THEREIN; THE CONFIRMATION ARE TO BE TREATED AS REQUISITE SUPPORT FOR CREDIT BALANCES AS SHOWN IN THE ASSESSEES BALANCE SHEET. IT IS ALSO NOTED THAT THE AO WAS OTHERWISE ALSO WRONG IN ADDING THE ENTIRE BALANCES. THE MAJOR PORTIONS OF BALANCES, AS ON 31.03.2008, WERE BROUGHT FORW ARD FROM EARLIER YEAR I.E. THE BALANCES AS ON 31.03.2007. WHAT IT IMPLIES IS THAT AT MOST, ONLY ACCRETION TO BALANCE COULD HAVE BEEN ADDED IN THIS YEAR. IT IS ALSO NOTED THAT THE AO HAS NOT TAKEN ANY SUCH CONSISTENT OR REMEDIAL ACTION IN EARLIER YEARS WHEN CREDIT BALANCES WERE CREATED. 8.4. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE AO WAS HASTY AND WRONG IN MAKING ADDITION IN THE ASSESSMENT ORDER AND WAS EVEN MORE FAULTY IN NOT VERIFYING THE CONFIRMATION OF THE CREDITORS, DURING REMAND PROCEEDINGS. ON THE BASIS OF DOCUMENT AVAILABLE ON RECORD, I FIND THAT CREDIT BALANCES ARE DULY EXPLAINED. HENCE, ADDITIO N OF RS.26,59,300/ - IS DELETED. 7 . IN THE APPEAL BEFORE US, THE LD DR RELIED UPON THE ORDER OF THE AO AND CONTENDED THAT THE LD CIT(A) WAS INCOR RECT IN HOLDING THAT PROPER OPPORTUNITY WAS NOT GRANTED TO THE ASSESSEE. HE SUBMITTED THAT THE ADDITION WAS CORRECTLY MADE IN VIEW OF THE CASE OF SHRI RAM LAL AGGARWALA (SUPRA). THE LD AR SUPPORTED THE ORDER OF THE LD CIT(A). 8 . WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IN THE INSTANT CASE, THE ORDER OF ASSESSMENT DATED 29 TH DECEMBER 2010 AND THE PAGE NO. 4 SHOW - CAUSE NOTICE TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE CREDITORS WAS ISSUED ON 23 RD DECEMBER 2010 I.E. JUST 06 (SIX) DAYS BEFORE THE ASSESSMENT ORDER. IN VIEW OF THE SAID UNDISPUTED FACTUAL ASPECT, WE CONCUR WITH THE VIEW OF THE LD CIT(A), THAT SUFFICIENT OPPORTUNITY WAS NOT GRANTED TO THE ASSESSEE BEFORE THE ADDITION WAS MADE. IN ANY CASE, BESIDE THE SAID ISSUE, CONFIRM ATION FILED BEFORE THE LD CIT(A) OF ALL SUNDRY CREDITORS DISPEL L S THE DOUBT RAISED BY THE AO. IN THE REMAND REPORT WE FIND THAT THE AO DID NOT CARE TO CARRY OUT ANY INVESTIGATION IN RESPECT TO THE CONFIRMATION FILED BY THE ASSESSEE. ABOVE ALL, WE FIND THAT OUT OF THE 5 (FIVE) SUNDRY CREDITORS, HELD TO BE BOGUS CREDITORS, FOUR OF THEM HAD OPENING BALANCES AT THE BEGINNING OF THE YEAR. IN OTHER WORDS, OUT OF SUNDRY CREDITORS OF RS.26,59,300/ - THE AMOUNT PERTAINING TO THE YEAR UNDER CONSIDERATION WAS ONLY RS.1 2,49,893/ - WHICH TOO HAS BEEN ALLOWED AS EXPENDITURE BY THE AO WHILE DETERMINING THE INCOME OF THE ASSESSEE. AT THIS JUNCTURE WE ARE REMINDED OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS PANCHAM DASS JAIN 20 5 CTR 444 WHEREIN IT HAS BEEN HELD AS UNDER: - 3. WE HAVE HEARD SHRI SHAMBHOO CHOPRA, LEARNED STANDING COUNSEL FOR THE REVENUE. HE SUBMITTED THAT AS THE RESPONDENT - ASSESSEE WAS UNABLE TO PRODUCE THE ALLEGED CREDITORS THE PROVISIONS OF SECTION 68 OF THE ACT WAS SQUARELY ATTRACTED IN THE PRESENT CASE AND THE ASSESSING AUTHORITY HAS RIGHTLY ADDED THE TWO AMOUNTS AT THE HANDS OF THE RESPONDENT - ASSESSEE. ACCORDING TO HIM SECTION 68 OF THE ACT ALSO COVERS UP THE CASE OF PURCHASES MADE ON CREDIT. 4. THE SUBMISS ION IS MISCONCEIVED. THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING OF FACT BASED ON APPRECIATION OF MATERIALS AND EVIDENCE ON RECORD THAT THE AO HAD ACCEPTED THE PURCHASES, SALES AS ALSO THE TRADING RESULT DISCLOSED BY THE RESPONDENT - ASSESSEE. IT HAD REC ORDED A FINDING THAT THE AFORESAID TWO AMOUNTS REPRESENTED THE PURCHASES MADE BY THE ASSESSEE ON CREDIT AND, THEREFORE, THE PROVISIONS OF SECTION 68 OF THE ACT COULD NOT BE ATTRACTED IN THE PRESENT CASE. WE FULLY AGREE WITH THE VIEW TAKEN BY THE TRIBUNAL O N THIS ISSUE, INASMUCH AS, ON THE BASIS OF THE FINDINGS RECORDED BY IT THAT THESE TWO AMOUNTS REPRESENTED PURCHASES MADE BY THE RESPONDENT - ASSESSEE ON CREDIT AND THE PURCHASES AND SALES HAVING BEEN ACCEPTED BY THE DEPARTMENT, THE QUESTION OF ADDITION OF TH E AFORESAID TWO AMOUNTS UNDER SECTION 68 OF THE ACT DID NOT ARISE INASMUCH AS THE PROVISIONS OF SECTION 68 OF THE ACT WOULD NOT BE ATTRACTED ON THE PURCHASES MADE ON CREDIT. 5. WE, ACCORDINGLY, ANSWER THE QUESTION REFERRED TO US IN AFFIRMATIVE, I.E., IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THERE WILL BE NO ORDER AS TO COSTS. PAGE NO. 5 8. HAVING REGARD TO THE AFORE - RATIO AND FACTUAL POSITION, WE HOLD THAT ONCE THE FABRICATION CHARGES HAS BEEN ALLOWED AS EXPENDITURE BY THE AO, THEN THE CORRESPONDING CREDIT IN SHAPE OF SUNDRY CREDITORS CANNOT BE HELD AS BOGUS ; AND THE CASE OF SHRI RAM LAL AGGARWALA (SUPRA) HAS NO APPLICATION TO THE FACTS OF THIS CASE, AS THAT WAS THE CASE WHERE GIFT WAS RECEIVED BY THE ASSESSEE, WHICH IS NOT THE CASE ON HAND. THEREFORE FOR THE REASONS AFORESAID WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD CIT(A) AND DISMISS THE GROUND OF THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND C . O . OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 . 09 . 2014. - S D / - - S D / - ( B.C.MEENA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 6 / 09 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI