M/s. Srinivas Agencies, Ranebennur V. ITO, Haveri

ITA 120/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0680 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: P C CHADAGA
• Keywords: Unexplained cash credit; Unexplained investment; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 120/BANG/2009 ASSESSMENT YEAR : 2005-06 M/S. SRINIVAS AGENCIES, B.V. PATIL BUILDING, APMC YARD, RANEBENNUR. : APPELLANT VS. THE INCOME TAX OFFICER, WARD-1, HAVERI. : RESPONDENT APPELLANT BY : SHRI P.C. CHADAGA RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE A PARTNERSHIP FIRM IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A), HUBLI, FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE FIRM IN ITS GROUNDS OF APPEAL HAS R AISED FIVE GROUNDS, OUT OF WHICH, GROUND NOS: 1 AND 5 ARE GENERAL IN NA TURE AND NO SPECIFIC ISSUES INVOLVED AND, THEREFORE, THEY ARE DISMISSED AS NON-CONSEQUENTIAL. IN THE REMAINING THREE GROUNDS, THE SUBSTANCE AND E SSENCE OF THE ISSUES ARE REFORMULATED IN CONCISE MANNERS AS UNDER: ITA NO.120/BANG/09 PAGE 2 OF 6 THE CIT(A) ERRED (I) IN CONFIRMING THE ADDITION OF RS.87027/- BEING EXCE SS OF ASSETS OVER LIABILITIES ON COMPARISON OF BALANCE SHEET OF PRECE DING YEAR; (II) IN SUSTAINING THE ADDITION OF CREDITS OF RS.75000/ - WRONGLY SHOWN AS DEBTS BY THE ASSESSEE WITHOUT REALIZING THE BALANCE WAS ACTUALLY A DEBIT BALANCE; & (III) IN SUSTAINING THE ADDITION OF RS.3 LAKHS WHICH ALLE GED TO HAVE BEEN REPRESENTED THE EXCESS CREDIT NOT PROPERLY EXPLAINE D. 3. ADDITION OF RS.87027: ON VERIFICATION OF CASH FLOW STATEMENT WITH REFEREN CE TO THE BALANCE SHEET, THE AO FOUND THAT THERE WAS A DIFFERENCE OF RS.8702 7/-. 3.1. UNEXPLAINED INVESTMENT: (1) WITH REGARD TO ADVANCE MADE TO KESHWAR COTTON C OMPANY A SUM OF RS.1.75 LAKHS, ON VERIFICATION WITH THE LOANEE (WHO HAD DENIED ANY BALANCE), THE AO FOUND THAT THERE WAS NO BALANCE AS CLAIMED BY THE ASSESSEE; & (2) IN THE CASE OF JINENDRA TRADING COMPANY FOR AL LEGED TO HAVE BEEN ADVANCED OF RS.3 LAKHS BY THE ASSESSEE, THE FORMER IN THEIR LETTER DATED 9.L10.2007 HAVE DENIED FOR HAVING MADE ANY TR ADING WITH THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05. 3.3. IN VIEW OF THE ABOVE, THE AO HAD MADE (I) UNEX PLAINED INVESTMENT OF RS.87027/- (II) UNEXPLAINED INVESTMENTS OF RS.4.75 LAKHS. 4. AGITATED, THE ASSESSEE FIRM TOOK UP THE ISSUES W ITH THE CIT(A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTIONS, THE CIT(A) HAD OBSERVED THUS: ITA NO.120/BANG/09 PAGE 3 OF 6 (1) CASH DIFFERENCE : THOUGH IT IS CLAIMED THAT THE AO HAS NOT CONSIDERE D THE OPENING AND CLOSING CASH BALANCE, BUT THE APPELLANT HAS NOT FILED THE ENTIRE DETAILS OF CASH TRANSACTION INCLUD ING OPENING AND CLOSING BALANCE OF BOTH BANK AND CASH BOOK ENTR IES. THEREFORE, THE AO WAS DIRECTED TO VERIFY TO ARRIVE AT A CORRECT POSITION OF THE DIFFERENCE . (2) UNEXPLAINED INVESTMENTS : IN RESPECT OF RS.4.75 LAKHS AS UNEXPLAINED IT IS ST ATED IN CASE OF M/S.KESHWAR COTTON CO, THAT THE APPELLANT HAS TA KEN HAND LOAN OF RS.75000/- ON 17/8/2004 AND IT IS PAID BACK ON 7/2/05 I.E., WITHIN THE FINANCIAL PERIOD MEANING THEREBY I T WILL NOT AFFECT THE BALANCE SHEET AT ALL. HOWEVER, IT IS EX PLAINED AS A MISTAKE OF THE ACCOUNTANT AS PER WRITTEN SUBMISSION DT.30.1.08. IN SUCH CASE TO THE EXTENT OF RS.75000/- THE CREDIT ORS ARE ALSO SHOWN EXCESS AND THEY ARE NOT EXPLAINABLE. UNDER T HE CIRCUMSTANCES, THE UNEXPLAINED CREDITS TO THE EXTE NT OF RS.75000/- WHICH IS WRONGLY SHOWN AS A DEBTOR ADDIT ION MADE BY THE AO WITH A CHANGE AS DISCUSSED IS BEING CONFI RMED. SIMILARLY APPELLANT HAS TAKEN HAND LOAN OF RS.1 LAK H ON 4/2/05 AND REPAID ON 30/3/05 BY CASH FROM KESHWAR COTTON C O. AND BY MISTAKE IT IS SHOWN AS A DEBTOR WHEN ACTUALLY TH ERE IS NO EFFECT ON THE BALANCE SHEET SINCE THE ENTRIES ARE S QUARED UP WITHIN THE FINANCIAL PERIOD. AGAIN THIS MEANS THAT TO THE EXTENT OF RS.1 LAKH APPELLANT HAS SHOWN EXCESS CREDITS WHI CH ARE NOT EXPLAINED. THEREFORE THE ADDITION MADE BY THE AO W ITH DIFFERENT DISCUSSION IS HEREBY CONFIRMED. IN RESPE CT OF JINENDRA TRADING CO. [JTC], THE APPELLANT HAS PAID THE CHEQUE AMOUNT OF RS.3 LAKH ON 12.12.01 AND RECEIVED BACK T HE SAME AMOUNT BY CHEQUE ON 24.12.01 BUT JTC HAS ISSUED THE CHEQUE OF RS.3 LAKHS IN THE NAME OF SRINIVASA ASSOCIATES M EANING THEREBY THE PAYMENT IS NOT RECEIVED BACK FROM THE PARTY AND IN THE B/S HE HAS SHOWN AS DEBTOR FOR RS.3 LAKH. SRIN IVASA ASSOCIATES IS A SISTER CONCERN OF THE APPELLANT AND IT IS STATED TO BE A MISTAKE WHICH IS RECTIFIED IN THE NEXT YEAR AS PER AUDIT REPORT OF THE CA FOR AY 07-08. IN SUCH CASE THE AP PELLANT HAS COMMITTED FURTHER MISTAKE THAT INSTEAD OF RECTIFYIN G THEIR OWN BOOKS FOR THE CURRENT YEAR THEY HAVE RECTIFIED IN T HE AY 07-08 I.E., AFTER TWO YEARS OF THE ACTUAL TRANSACTION, TH US IT CLEARLY SHOWS THAT THE APPELLANT IS WILLFULLY SHOWING JTC A S A DEBTOR AGAINST WHICH IN THE B/S THERE IS A EXCESS CREDITS SHOWN OF RS.3 LAKH. EVEN IF THE CHEQUE IS ISSUED BY JTC IN THE NAME OF SRINIVASA ASSOCIATES (SISTER CONCERN) INSTEAD OF IN THE NAME OF SRINIVASA AGENCIES, THE APPELLANT, THERE WAS ENOUG H TIME OR ITA NO.120/BANG/09 PAGE 4 OF 6 EVEN OTHERWISE THE MISTAKE PERTAINS TO THE CURRENT YEAR AND IT IS NOT KNOWN WHY SUCH MISTAKE IS RECTIFIED ONLY DURIN G AY 07-08. THUS, THE APPELLANT IS WILLFULLY TRYING TO COVER UP THE MISTAKE FOR THE CURRENT YEAR AND AGAIN TAKING THE BENEFIT F OR THE AY 07- 08. THEREFORE, AS DISCUSSED ABOVE EXCESS CREDITS O F RS.3 LAKHS MADE BY AO IS HEREBY CONFIRMED. 5. AGITATED, THE ASSESSEE HAS COME UP WITH THE PRES ENT APPEAL. THE LD. A R REITERATED MORE OR LESS WHAT HAS BEEN CONTE NDED BEFORE THE FIRST APPELLATE AUTHORITY. BUTTRESS HIS STAND, HE HAD FU RNISHED A PAPER BOOK CONTAINING 1 52 PAGES WHICH CONSIST OF, INTER ALI A, COPIES OF STATEMENTS OF INCOME, TRADING ACCOUNT, P & L ACCOUNT, CASH FLOW S TATEMENT, BANK STATEMENT ETC., THE LD. D.R PRESENT WAS HEARD. 5.1. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT RECORD AND ALSO THE PAPER-BOOK OF THE LD.A .R. 5.2. ON VERIFICATION OF CASH FLOW STATEMENT (FURNI SHED BY THE ASSESSEE) WITH REFERENCE TO BALANCE SHEET, THE AO FOUND THAT THERE WAS A DIFFERENCE OF RS.87027/- AND, ACCORDINGLY, THE ASSESSEE WAS, P ERHAPS, ASKED TO RECONCILE THE SAME. IN THE ABSENCE OF ANY COMPLIAN CE, THE AO WENT AHEAD TO ADD THE SAME TO THE INCOME OF THE ASSESSEE. 5.3. ON THE OTHER HAND, THE CIT(A) WAS OF THE VIEW THAT IN THE ABSENCE OF DETAILED CASH TRANSACTIONS INCLUSIVE OF OPENING AND CLOSING BALANCE OF BANK AND CASH BOOK ENTRIES, THE AO HAD C ONCLUDED THAT THERE WAS A CASH DIFFERENCE. THUS, THE CIT(A) HAD DIRECTE D THE AO TO VERIFY THE ISSUE AND TO ARRIVE AT THE CORRECT POSITION OF THE DIFFERENCE [EVEN THOUGH THE ITA NO.120/BANG/09 PAGE 5 OF 6 CIT(A) HAS BEEN DISPENSED WITH THE POWER OF REMITTI NG BACK/SET-ASIDE AN ISSUE TO THE AO FINANCE ACT, 2001, W.E.F. 1.6.200 1.] 5.4. AS COULD BE SEEN FROM THE ASSESSEES LETTER D ATED: 22.11.2007 [ ON PAGE 20 OF PB AR] HE HAD RECONCI LED THE FIGURES WHEREAS THE AO HAD CONCLUDED THE ASSESSMENT ON 21.1 1.2007. IN THE INTEREST OF NATURAL JUSTICE AND FAIR-PLAY, THE ISSU E IS REMITTED BACK ON THE FILE OF THE AO WITH A SPECIFIC DIRECTION TO LOOK INTO TH E ISSUE AFRESH WITH REFERENCE TO THE RECONCILIATION FIGURES FURNISHED B Y THE ASSESSEE AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROV ISIONS OF THE ACT AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IT IS ORDERED ACCORDINGLY. 5.5. WITH REGARD TO THE ADDITIONS OF RS.1.75 LAKHS AND RS.3 LAKHS, IT IS SEEN FROM THE RECORDS THAT THE AO HAD VIDE HI S LETTERS DATED: 13/10/2007 AND 25/10/2007 REQUIRED THE ASSESSEE TO EXPLAIN AND RECONCILE THE DIFFERENCES AS BOTH THE PARTIES HAVE VIRTUALLY DENIED THE ALLEGED CLAIM OF THE ASSESSEE. HOWEVER, THE ASSESSEE PURPORTED T O HAVE WRITTEN LETTERS ON 23.11.2007 ADDRESSED TO THE AO GIVING OUT CERTA IN DETAILS. FURTHERMORE, DURING THE COURSE OF HEARING BEFORE US , THE LTD. A R HAD FURNISHED COPIES OF CHEQUE LEAVES, COPIES OF BANK S TATEMENTS [ON PAGES 33.34 AND 41,42 OF PB A R ], COPIES OF LEDGER ACC OUNTS IN RESPECT OF JINENDRA TRADING CO. [ON PAGES 43,44 & 45 OF PB]. THESE CRUCIAL PARTICULARS WERE NOT PLACED BEFORE THE AO AT THE TI ME OF FINALIZATION OF ASSESSMENT PROCEEDINGS. WE ARE, THEREFORE, OF THE UNANIMOUS VIEW THAT THE AO SHOULD BE GIVEN A FAIR CHANCE - TO UPHOLD TH E INTEREST OF NATURAL ITA NO.120/BANG/09 PAGE 6 OF 6 JUSTICE - TO LOOK INTO THE THOSE PIECE OF INFORMATI ON WHICH WERE NOT BEFORE HIM AT THAT RELEVANT TIME, THIS ISSUE SHOULD BE RE MITTED BACK ON THE FILE OF THE AO WHICH WOULD FACILITATE HIM TO LOOK INTO THE VERACITY OF THE ASSESSEE AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH T HE PROVISIONS OF ACT. WHILE DOING SO, THE AO SHALL GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IN THE MEANWHILE, THE ASSESSEE, THROUGH HIS A.R, IS ADVISED TO FURNISH ALL THE RELEVANT INFORMATION, EVIDENCE ETC. AT HIS POSSESSION TO THE AO WHICH WOULD ENABLE HIM TO FINALIZE THE ISSUE EX PEDITIOUSLY. IT IS ORDERED ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF NOVEMBER, 2009. SD/- SD/- ( GEORGE GEORGE ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH NOVEMBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.