Sri.Jagadish Babulal Velani, Bangalore V. ITO, Bangalore

ITA 1473/BANG/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9439 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Peak credit

Judgement Text

ITA.1473/BANG/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.1473/BANG/2013 (ASSESSMENT YEAR : 2007- 08) SHRI. JAGADISH BABULAL VELANI, PROP : SRI GANESH TIMBER & PLYWOOD, NO.54-56, HORAMAVU MAIN ROAD, KALYAN NAGAR POST, BENGALURU 560 043 .. APPELLANT PAN : ABMPV5209P V. INCOME-TAX OFFICER, WARD 6(2), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. SURESH MUTHUKRISHNAN, CA REVENUE BY : SHRI. BIPIN, C. N, JCIT HEARD ON : 14.07.2016 PRONOUNCED ON : 26 .08.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE DIRECTED AGAINST AN ORDER DT.05.06.2013 OF CIT (A)-III, BENGALURU, IT HAS ALT OGETHER RAISED TEN GROUNDS. I FIND THAT THERE IS A DELAY OF 204 DAYS IN FILING THE APPEAL. ITA.1473/BANG/2013 PAGE - 2 ASSESSEE HAS FILED A CONDONATION PETITION. IN THE PETITION IT IS MENTIONED BY THE ASSESSEE THAT THE DELAY WAS CAUSED DUE TO ALTER NATIVE REMEDY BEING PURSUED. AS PER THE ASSESSEE IT HAD FILED A PETITI ON U/S.154 OF THE INCOME- TAX ACT, 1961 (THE ACT IN SHORT), WHICH CAME TO BE DISPOSED OFF ONLY ON 14.07.2013. AVERMENT OF THE ASSESSEE IS THAT THE A PPEAL WAS FILED AFTER DISMISSAL OF SUCH PETITION, WHEN THE NEW AUDITOR A PPOINTED BY THE ASSESSEE ADVISED THAT IT WAS NECESSARY TO FILE AN APPEAL AGA INST THE ORDER OF CIT (A). THUS ACCORDING TO ASSESSEE DELAY WAS NOT CAUSED DUE TO ANY NEGLIGENCE ON ITS PART. OPPOSING THE CONDONATION LD. DR SUBMITTE D THAT THERE WAS NO REASON TO CONDONE THE DELAY. CONSIDERING THE PETIT ION FILED BY ASSESSEE AND THE AVERMENTS MADE THEREIN, I AM INCLINED TO CONDON E THE DELAY. DELAY IS CONDONED AND THE APPEAL IS ADMITTED. 02. THE EFFECTIVE GRIEVANCE IS WITH REGARD TO SUSTE NANCE OF AN ADDITION OF RS.5,42,345/- FOR DIFFERENCE IN TRADE CREDITORS AND AN ADDITION OF RS.14,68,250/- AS CASH CREDITS. FACTS APROPOS ARE THAT ASSESSEE A DEALER IN TIMBER, PLY WOOD, HARDWARE AND GLASS HAD FILED HIS RETURN DECLARING INCOME OF RS.3,82,630/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS REQUIRED TO FILE CONFIRMATION LETTERS IN RESPEC T OF TRADE CREDITORS. BASED ON THE INFORMATION GIVEN BY THE ASSESSEE LETTERS WE RE ISSUED BY THE AO TO ITA.1473/BANG/2013 PAGE - 3 THE PARTIES. RESPONDING TO THESE LETTERS CONCERNED TRADE CREDITORS SENT CONFIRMATIONS. BASED ON THE DIFFERENCE BETWEEN BAL ANCES SHOWN IN SUCH CONFIRMATION AND THE BALANCES SHOWN BY ASSESSEE IN ITS BOOKS OF ACCOUNT, AN ADDITION OF RS.13,14,579/- WAS MADE. 03. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTED THAT ASSESSEE HAD INTRODUCED AS CASH CREDITS LOAN FROM A LARGE NU MBER OF PERSONS, EACH OF WHICH WAS BELOW RS.20,000/-. AS PER THE AO THESE L OANS WERE SHOWN AS REPAID DURING THE RELEVANT PREVIOUS YEAR ITSELF. T HERE WERE NO BALANCES IN THE NAMES OF SUCH PERSONS AT THE END OF THE YEAR. HOWEVER IT SEEMS THE CONFIRMATION LETTERS FILED BY ASSESSEE DID NOT CARR Y THE ADDRESS OF THE PARTIES. AS PER THE AO ASSESSEE COULD NOT ESTABLIS H THE IDENTITY OF THE PERSONS FROM WHOM LOANS WERE TAKEN. HE MADE AN ADD ITION OF RS.14,68,250/- U/S.68 OF THE ACT. 04. AGGRIEVED OVER THE TWO ADDITIONS ASSESSEE MOVED THE CIT (A). BEFORE THE CIT (A) ARGUMENT OF THE ASSESSEE WAS THA T PAYMENTS TO THE TRADE CREDITORS WERE THROUGH BANK BUT THIS ASPECT WAS NOT CONSIDERED BY THE AO WHILE WORKING OUT THE DIFFERENCES IN THE TRADE CRED ITORS. AS PER THE ASSESSEE AO HARDLY GAVE TEN DAYS TIME TO FURNISH RE CONCILIATION FOR THE TRADE CREDITORS. IN SO FAR AS CASH CREDITORS WERE CONCERNED, ARGUMENT OF THE ITA.1473/BANG/2013 PAGE - 4 ASSESSEE WAS THAT THE CONFIRMATION LETTERS WERE REJ ECTED WITHOUT GIVING PROPER OPPORTUNITY. AS PER THE ASSESSEE THE AO HAD NOT MADE SUFFICIENT EXAMINATION OF THE EVIDENCE PRODUCED BY HIM. CIT ( A) SOUGHT A REMAND REPORT FROM THE AO. AO FURNISHED TWO REMAND REPORT S, ONE DATED.22.11.2012 AND THE SECOND DATED.17.12.2012. AFTER PERUSING THE REMAND REPORT AND SUBMISSIONS OF THE ASSESSEE, CIT (A) REACHED A CONCLUSION THAT ASSESSEE WAS GIVEN MORE THAN SUFFIC IENT OPPORTUNITY BY THE AO FOR FURNISHING EVIDENCE IN SUPPORT OF ITS CLAIMS . AS PER THE CIT (A) ASSESSEES CONTENTION THAT SUFFICIENT TIME WAS NOT GIVEN TO IT WAS NOT CORRECT. CIT (A) WAS OF THE OPINION THAT APPROACH OF THE ASSESSEE DID NOT INDICATE A GENUINE DESIRE TO PUT FORWARD ITS LEGAL CONTENTIONS FOR VERIFICATION, AS PER THE DUE PROCESS OF LAW. HE TH US HELD THAT ASSESSEE DID NOT COOPERATE WITH THE DEPARTMENT AND CONFIRMED THE ADDITIONS MADE BY THE AO. 05. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF CIT (A) DREW MY ATTENTION TO REMAND REPORT DT.07.09.2011 PLACED AT PAPER BOOK PAGE 146 TO 148. AS PER THE LD. AR, AO HAD HIMSELF ACCEPTED THE CORRECTNESS OF THE BALANCES IN TRADE CREDITORS ACCOUNTS. LD. AR SUBMI TTED THAT ASSESSEE HAD FURNISHED FRESH CONFIRMATION LETTERS THE PARTIES SI LICON LAVENDER, AARON ITA.1473/BANG/2013 PAGE - 5 ENTERPRISES, ANAND ENTERPRISES, CENTURY LAMINATES C O. LTD, AND GANGA TRADING CO. LTD. AO COULD NOT FIND ANY DEFECT OR V ARIATION. AS PER THE LD. AR WHAT WAS LEFT WAS ONLY THE DIFFERENCES IN THE AC COUNT OF FOLLOWING TRADE CREDITORS : FURTHER AS PER THE LD. AR, AO HIMSELF HAD REQUESTED THE CIT (A) TO CONSIDER THE ISSUE ON MERITS SINCE ASSESSEE HAD FIL ED CONFIRMATIONS IN RESPECT OF MANY OF THE PARTIES. 06. VIS-A-VIS ADDITION MADE U/S.68 OF THE ACT, LD. AR SUBMITTED THAT NAMES AND ADDRESS OF EACH OF THE PARTIES WERE GIVEN BY THE ASSESSEE. RELYING ON PAPER BOOK PAGES 34 AND 35, LD. AR SUBMI TTED THAT ADDRESS OF EACH OF THE PERSONS FROM WHOM LOANS WERE OBTAINED W ERE GIVEN BEFORE THE ASSESSING AUTHORITY. FURTHER AS PER THE LD. AR EAC H OF THE PERSON HAD CONFIRMED THE LOANS GIVEN TO THE ASSESSEE. IN ANY CASE, ACCORDING TO HIM, IF THE LOANS WERE TREATED AS BOGUS THEN THESE HAD TO B E CONSOLIDATED INTO A SINGLE ACCOUNT AND ONLY THE PEAK CREDIT COULD BE RE CKONED FOR AN ADDITION. ITA.1473/BANG/2013 PAGE - 6 RELIANCE WAS PLACED ON PAPER BOOK PAGES 142 & 143 W HICH GAVE THE PEAK CREDIT WORK-OUT. FURTHER AS PER THE LD. AR TELESCO PING SHOULD ALSO BE GIVEN TO THE ASSESSEE SINCE THE ADDITIONS MADE FOR DIFFERENCE IN TRADE CREDITORS COULD BE SET OFF AGAINST THE ALLEGED CASH CREDITS. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. M. GURUSWAMY [149 ITR 127] AND OF CALCUTTA TRIBU NAL IN THE CASE OF ITO V. SADANANDA SINGHA [151 ITD 714]. 07. PER CONTRA LD. DR SUBMITTED THAT THE DIFFERENCE IN THE CASE OF TRADE CREDITORS COULD NOT BE SHOWN BY THE ASSESSEE AS PRO PERLY RECONCILED. IN SO FAR AS THE LOAN CREDITORS WERE CONCERNED, LD. DR SU BMITTED THAT ASSESSEE HAD NOT SATISFIED THE THREE CONDITIONS REGARDING TH E CREDIT WORTHINESS, GENUINENESS AND IDENTITY OF THE CONCERNED PARTIES. ASSESSEE COULD NOT EVEN GIVE THE PAN OF THE VARIOUS CREDITORS. THUS ACCORD ING TO HIM, ADDITIONS WERE RIGHTLY CONFIRMED BY THE CIT (A). 08. I HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. FIRST TAKING UP THE ISSUE OF ADDITION MADE FOR DIFFERENCE S IN THE BALANCE OF TRADE CREDITORS, THE REMAND REPORT OF THE AO PLACED AT PA PER BOOK PAGE NO.146 TO 148 CLEARLY MENTIONS THAT ASSESSEE HAD FILED CONFIR MATION LETTERS IN THE CASE OF FOUR PARTIES. PARA 3 OF THE REMAND REPORT IS RE PRODUCED HEREUNDER : ITA.1473/BANG/2013 PAGE - 7 09. IT IS CLEAR FROM THE OBSERVATION OF THE AO ABOV E THAT CONFIRMATION FILED BY ASSESSEE IN RESPECT OF THE BALANCE TRADE C REDITORS STOOD ACCEPTED. HENCEIN MY OPINION THAT THE ADDITIONS THAT COULD BE SUSTAINED IS RS.8,43,259/- ONLY. RELIEF TO THIS EXTENT IS GIVEN TO THE ASSESSEE. 10. COMING TO THE ADDITION MADE FOR LOAN CREDITORS TOTALLING TO RS.14,68,250/-, CONTENTION OF THE ASSESSEE IS THAT IT HAD GIVEN NAMES AND ADDRESSES OF EACH OF THE PARTIES, BUT AO HAD NOT DO NE PROPER ENQUIRIES. CONFIRMATION LETTERS FILED IN RESPECT OF EACH OF TH E PARTIES IS TYPICALLY WORDED. ONE OF THEM IS REPRODUCED HEREUNDER : ITA.1473/BANG/2013 PAGE - 8 ITA.1473/BANG/2013 PAGE - 9 11. IT IS CLEAR FROM THE ABOVE THAT ASSESSEE HAD TA KEN A COPY OF THE ACCOUNT OF CREDITOR IN HIS BOOKS AND JUST OBTAINED A SIGNATURE PURPORTEDLY FROM THE CREDITOR. IT DID NOT SHOW THE SOURCE OF T HE CREDITOR, CREDIT WORTHINESS OF THE CREDITOR. IN MY OPINION ASSESSEE COULD NOT SATISFY THE CONDITIONS FOR ACCEPTANCE OF CASH CREDITS AS GENUIN E. ASSESSEE COULD NOT SHOW THAT THE CREDITS WERE GENUINE NOR COULD IT SHO W THAT THE CONCERNED CREDITORS WERE HAVING A WORTH TO JUSTIFY THE LOAN T O THE ASSESSEE. CREDITS WERE SHOWN AT A FIGURE LESS THAN RS.20,000/- AND TH IS ONLY REFLECTED THE ENDEAVOUR OF THE ASSESSEE TO ESCAPE THE CLUTCHES OF LAW, SINCE ACCOUNT PAYEE CHEQUES WERE REQUIRED IF THE LOANS WERE RS.20 ,000/- OR IN EXCESS OF THAT FIGURE. I THEREFORE CANNOT ACCEPT THE CONTENT ION OF THE ASSESSEE THAT THE LOAN CREDITORS STOOD PROVED. 12. IN SO FAR AS THE PLEADING FOR TELESCOPING IS CO NCERNED, THE ADDITIONS MADE FOR TRADE CREDITORS AND LOAN CREDITORS WERE EN TIRELY DIFFERENT AND THERE IS NO REASON WHY TELESCOPING COULD BE ALLOWED IN BE TWEEN THESE TWO. IN THE RESULT GROUNDS 2 AND 3 RAISED BY THE ASSESSEE ARE T REATED AS PARTLY ALLOWED WHEREAS ITS GROUNDS 4 TO 8 ARE DISMISSED. 13. GROUNDS 1 AND 10 ARE GENERAL NEEDING NO ADJUDIC ATION. GROUND.9 IS ON LEVY OF INTEREST WHICH IS CONSEQUENTIAL. ITA.1473/BANG/2013 PAGE - 10 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF AUGUST, 2016. SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR