Rajendra Kumar Saha, Baripada V. Principal CIT, Cuttack

ITA 154/CTK/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8230 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-09-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIYUS KOLHE
• Keywords: Unexplained cash credit
• Section: 133(6); 131; 68

Judgement Text

P A G E 1 | 11 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 154 /CTK/201 8 ASSESSMENT YEAR : 201 3 - 2014 RAJENDRA KUMAR SAHA, WARD NO.5, BADABAZAR, BARIPADA. VS. ITO, WARD - 1, BARIPADA. PAN/GIR NO. AIVPS 8616 B (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE (WRITTEN SUBMISSION) REVENUE BY : SHRI PIYUS KOLHE, CIT DR DATE OF HEARING : 2 7 /0 9 / 2018 DATE OF PRONOUNCEMENT : 28 /0 9 / 2018 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PR. COMMISSIONER OF INCOME TAX, CUTTACK D ATED 2 8.3.2018 FOR THE ASSESSMENT YEAR 2013 - 14. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE PR. COMMISSIONER OF INCOME TAX, CUTTACK WAS NOT WAS NOT JUSTIFIED IN HOLDING THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE PR. COMMISSIONER OF INCOME TAX, CUTTACK OBSERVED THAT ON EXAMINATION OF ASSESSMENT ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 2 | 11 RECORDS, IT IS FOUND THAT THE ASSESSEE HAD CLAIMED LIABILITY OF RS. 1,98,31,756/ - UNDER THE HEAD 'UNSECURED LOAN' IN THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. ON FURTHER REQUIREMENT OF DETAILS, THE ASSESSEE FURNISHED A LIST OF 27 LOAN CREDITORS . HE OBSERVED THAT AS SEE N FROM THE LIST OF PARTIES WHO HAVE EXTENDED UNSECURED LOAN DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED FRESH UNSECURED LOANS FROM THE FOLLOWING PARTIES. S L. NO. UNSECURED LENDERS RS 1 RAJ DAYAL SAHA 10,00,000 2 SEEMA PRASAD 4,00,000 3 SUREKHA SAHA 2,00,000 4 KUSUM SAHA 2,40,000 5 SNEHALATA SAHA 2,50,000 6 JAY PRAKASH SAHA 6,00,000 7 SANJEEB KUMAR SAHA 8,00,000 TOTA L 34,90,000 THE ASSESSING OFFICER HAD REQUESTED THE ASSESSEE TO FURNISH CONFIRMATION LETTER, PAN CARD COPY, IT RETURN COPY, CAPITAL ACCOUNT OF LAST FIVE YEARS AND BANK ACCOUNT COPY OF THE LOAN CREDITORS. THERE WAS N O COMPLIANCE FROM THE ASSESSEE. THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE INCOME TAX ACT, 1961 TO ALL THE 27 PARTIES ON 7.8.2015 REQUESTIN G THEM TO FURNISH THE FOLLOWING DETAILS : ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 3 | 11 I) PAYMENT MADE OR RECEIVED II) CLOSING BALANCE (LEDGER COPY) III) BANK ACCOUNT COPY. IV) DETAILS OF TRANSACTION WITH ASSESSEE V) PAN VI) OPENING BALANCE VII) TRANSACTION DURING THE YEAR. HE OBSERVED THAT OUT OF ABOVE, NOTICES TO THE FOLLOWING PARTIES WERE RETURNED UNSERVED WITH POSTAL REMARKS NOT KNOWN AND INSUFFICIENT ADDRESS: NAME & ADDRESS OPENING BALANCE AS ON 1.4.2012 BALANCE AS ON 31.3.2013 BABITA BEHERA 4,51,559.35 50,165.20 NURSINGHA BEHERA 5,26,819 5,83,525.86 SUSHIL KUMAR AGARWAL 2,76,910 2,76,910 HE OBSERVED THAT IN RESPONSE TO NOTICE U/S.133(6) OF THE ACT, REPLY WAS RECEIVED ONLY FROM ONE PARTY I.E. SUSHIL KUMAR AGARWAL, WHO DENIED HAVING ANY TRANSACTION WITH THE ASSESSEE. IN TWO MORE CASES, NAMELY (I) BABITA BEHERA AND (II) NURSINGHA BEHERA, LETTERS ISSUED U/S.133(6) OF THE ACT CAME BACK UNSERVED WITH POSTAL REMARKS INSUFFICIENT ADDRESS AND NOT KNOWN, RESPECTIVELY. NO REPLY WAS RECEIVED IN RESPECT OF THE BALANCE 24 LOAN CREDITORS TILL TH E DATE OF COMPLETION OF ASSESSMENT. THEREFORE, THE GENUINENESS OF THE CLAIM OF LIABILITY OF RS.1,98,31,756/ - UNDER THE HEAD UNSECURED LOAN REMAINED UNEXPLAINED AND UNVERIFIED TO THE HILT. ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 4 | 11 HENCE, THE UNSECURED LOAN DURING THE YEAR OF RS.34,90,000/ - WAS REQUIRED TO BE ASSESSED TO TAX AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION U/S.68 OF THE ACT. 4. SIMILARLY, THE BALANCE LIABILITY OF RS.1,63,41,756, WHICH WAS THE OPENING BALANCE OF UNSECURED LOAN AS ON 1.4.2012 ALSO NEEDED TO BE ADDED U/S.41(1) OF THE I.T.ACT, IF SUCH CREDITORS WERE FOUND TO BE BOGUS AFTER ENQUIRY. FAILURE TO DO SO BY THE ASSESSIN G OFFICE, HAS RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE PR. COMMISSIONER OF INCOME TAX, CUTTACK FURTHER OBSERVED THAT ANOTHER ERROR FOUND IN THE ASSESSMENT ORDER WAS THAT IN THE BALANCE SHEET, T HE ASSESSEE HAS CLAIMED LIABILITY OF RS.1,88,71,406/ - UNDER THE HEAD SUNDRY CREDITORS . LD A.R. OF THE ASSESSEE SUBMITTED DURING THE ASSESSMENT THE DETAILS OF SUNDRY CREDITORS AS UNDER: I) M/S. M.P. RICE MILL - 121 PARTIES RS. 85,89,758.15 II) GA RMENT A/C - 44 PARTIES RS.1,02,81,647.68 TOTAL; RS.1,88,71,405.83 6. HE OBSERVED THAT THE TURNOVER OF MP RICE MILL, ONE OF THE UNITS OF THE ASSESSEE, WAS RS.1,50,79,561 DURING THE RELEVANT YEAR. BUT, SUNDRY CREDITORS OF RS.85,89,75 8 APPEARING IN ITS BOOKS, ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 5 | 11 WHEN COMPARED WITH ITS TURNOVER OF RS.1,50,79,561 - , APPEARED VERY HIGH. THE A SSESSING OFFI C ER CALLED FOR DETAILS OF SUNDRY CREDITORS WITH ACCOUNT CONFIRMATION OF PARTIES HAVING BALANCE ABOVE RS.10,000 BY NOTICE DATED 22/05/2015 AND AGAIN VIDE THE ORDER SHEET ENTRY DATED 15/07/2015 , O NLY A LIST OF SUNDRY CREDITORS WAS FURNISHED BUT NO CONFIRMATION LETTER FROM ANY OF THE CREDITORS WAS FURNISHED IN SPITE OF REPEATED QUERIES B Y THE ASSESSING OFFICER. THEREFORE, THE A SSESSING OFFICE R ISSUED NOTICES U/S 133(6) OF THE IT ACT DIRECTLY TO THE SUNDRY CREDITORS. BUT HE WAS HAMPERED BECAUSE IN MAJORITY OF THE CASES ADDRESSES OF THE CREDITORS WERE NOT MENTIONED. REPLY TO NOTICES U/S.133(6) HAS NOT BEEN RECEIVED IN A MAJORITY OF CASES. NOTI CE TO THE FOLLOWING PARTIES WERE RETURNED UNSERVED WITH THE POSTAL REMARKS NOT KNOWN AND INSUFFICIENT ADDRESS: SR. NO. NAME AMOUNT REMARKS 1. HADIBANDHU BEHERA 38,334 2. NIRMAL BEHERA 1,97,625 I HAVE NOTHING TO PAY OR RECEIVE 3. SAROJ KR MISHRA 1,25,000 - DO - 4. AJIT KR DASH 3,74,850 I DONT KNOW ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 6 | 11 HE OBSERVED THAT THE ASSESSEE WAS NOT CONFRONTED WITH THESE DEFICIENCIES/ADVERSE EVIDENCE S AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS PASSED A ROUTINE ASSESSMENT ORDER AFTER GLOSSING OVER THE ADVERSE EVIDENCE AND WITHOUT MAKING FURTHER ENQUIRY AND VERIFICATION, WHICH THE CIRCUMSTANCES OF THE CASE SO DEMANDED. SO THE NATURE AND SOURCE OF SUNDRY CREDITORS OF RS 1,88,71,405/ - REMAINED UNEXPLAINED AND SHOULD HAVE BEEN CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR CONCERNED U/S 68 OF THE ACT. HE FURTHER OBSERVED THAT THE CORRESPONDING PURCHASES SIMILAR TO THE AMOUNT OF BOGUS SUNDRY CREDITORS, SHOULD ALSO HAVE BEEN DISALLOWED AT THE TIME OF COMPUTING PROFIT FROM THE ASSESSEE'S RICE MILL BUSINESS. FAILURE TO DO SO ON THE PART OF THE A SSESSING OFFICER HAS RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, HE SE T ASIDE THE ORDER OF THE ASSESSING OFFICER PASSED U/S.143(3) OF THE ACT DT.8.3.2016 AND RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWING DIRECTIONS. I) THE AO WOULD PROVIDE ANOTHER OPPORTUNITY U/S.133(6) TO THE REMAINING UNSECU RED LOAN CREDITORS FOR COMPLIANCE, CALLING FOR DETAILS SUCH AS CONFIRMATION LETTER, AADHAR CARD, PAN CARD COPIES, IT RETURNS FOR LAST THREE YEARS, STATEMENT OF INCOME FOR LAST THREE YEARS, CAPITAL ACCOUNT COPY FOR THE LAST 05 YEARS, BANK STATEMENT FOR THE ENTIRE YEAR. II. THE AO WOULD PROVIDE ANOTHER OPPORTUNITY U/S 133(6) TO THE REMAINING 'SUNDRY CREDITORS' FOR ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 7 | 11 COMPLIANCE, CALLING FOR DETAILS SUCH AS CONFIRMATION LETTER, AADHAR CARD, PAN CARD COPIES, LEDGER ACCOUNT COPIES ETC. III. EXAMINE THEM FOR THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS IN RESPECT OF THE LOAN CREDITORS BY ISSUING THEM SUMMONS U/S 131 OF THE ACT, WHEREVER DOUBT ARISE AFTER THEIR RESPONSE TO THE REQUISITION U/S 133(6), IV. DECIDE ON THE CHARGEAB ILITY OF THE ABOVE SUM RS3,87,03,162 REPRESENTING UNEXPLAINED CASH CREDIT IN THE FORM OF UNSECURED LOANS AND SUNDRY CREDITORS, TO INCOME TAX AS THE INCOME IN ADDITION TO THE RETURNED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR CONCERNED U/S 68 OR 41(1) OF THE IT ACT. NEEDLESS TO SAY, WHILE REFRAMING THE ASSESSMENT ORDER, THE AO WOULD CONFRONT TH E ASSESSEE WITH ADVERSE EVIDENCE COLLECTED IF ANY AGAINST HIM AND PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE TO REBUT THE SAME. THE ASSESSING OFFICER IS DIRECTED TO PASS THE FRESH ASSESSMENT ORDER L ATEST BY 31/12/2018, AS MANDATED U/S 153(3) OF THE ACT . 7. BEFORE US, LD A.R. OF THE ASSESSEE HAS FILED WRITTEN SUBMISSION, WHEREIN, IT HAS BEEN STATED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND, THEREAFTER THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 5% AND ASSESSED THE INCOME OF THE ASSESSEE AT RS .24,70,990/ - IN PLACE OF RETURN ED INCOME OF RS.14,13,390/ - . HE SUBMITTED THAT WHEN THE INCOME OF THE ASSESSEE WAS ESTIMATED BY APPLYING NET PROFIT RATE AND, ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 8 | 11 THEREAFTER, THE ASSESSING OFFICER RELYING ON THE SAME BOOKS OF ACCOUNT COULD NOT HAVE MADE ADDITION U/S.68 OF THE ACT TO THE INCOME OF THE ASSESSEE. 8. LD D.R. SUPPORTED THE ORDER OF THE PR. COMMISSIONER OF INCOME TAX, CUTTACK. 9. W E HAVE HEARD THE LD D. R., PERUSED THE ORDERS OF LOWER AUTHORITIES AND WRITTEN SUBMISSION FILED BY LD A.R. OF THE ASSESSEE. IN THE INSTANT CASE THE PR. COMMISSIONER OF INCOME TAX, CUTTACK OBSERVED THAT THE ASSESSEE HAD CLAIMED LIABILITY OF RS. 1,98,31,756/ - UNDER THE HEAD 'UNSECURED LOAN' IN THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. SINCE NOTICES U/S.133(6) OF THE ACT WERE EITHER RETURNED UNSERVED OR NO REPLY WAS RECEIVED FROM THE LOAN CREDITORS, THEREFORE, THE ASSESSING OFFICER SHOULD HAVE ASSESSED RS.1,63, 41,756/ - AS INCOME U/S.41(1) OF THE ACT AFTER REDUCING THE OPENING BALANCE OF RS.34,90,000/ - . FURTHER, HE OBSERVED THAT THE ASSESSEE HAD SUNDRY CREDITORS OF RS.85,89,758.15 FROM M.P.RICE MILLS AND RS.1,02,81,647.68 FROM GARMENT ACCOUNT AGGREGATING TO RS.1 ,88,71,405.83. THE ASSESSING OFFICER CALLED FOR DETAILS OF CREDITORS HAVING BALANCE OF RS.10,000/ - BUT NO CONFIRMATION LETTERS OF THE CREDITORS WERE FURNISHED BY THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S.133(6) OF THE ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 9 | 11 ACT TO THE CREDITORS DIRECTLY AND IN MAJORITY OF CASES, NOTICES WERE RETURNED BACK UNSERVED WITH THE POSTAL REMARKS NOT KNOWN OR INSUFFICIENT ADDRESSES. THESE WERE NOT CONFRONTED TO THE ASSESSEE AND THE ASSESSING OFFICER PASSED THE ORDER IN A ROUTINE MANNER WIT HOUT MAKING FURTHER INQUIRY AND VERIFICATION. HENCE, THE NATURE AND SOURCE OF SUNDRY CREDITORS OF RS.1,88,71,405/ - REMAINED UNEXPLAINED, WHICH HAVE BEEN CHARGED TO TAX U/S.68 OF THE ACT. HE HELD THAT THEREFORE, THE ORDER OF THE ASSESSING OFFICER WAS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND SET ASIDE THE SAME BY PASSING THE IMPUGNED ORDER U/S.263 OF THE ACT. 10. THE CONTENTION OF THE ASSESSEE IS THAT IN THE INSTANT CASE, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE ASSESSIN G OFFICER AND INCOME WAS DETERMINED BY APPLYING NET PROFIT RATE OF 5% ON GROSS RECEIPTS FROM THE BUSINESS OF RICE MILL OF RS. 1,50,79,561/ - AT RS.7,53,978/ - . SIMILARLY, THE NET PROFIT RATE OF 3.5% WAS APPLIED ON THE GROSS RECEIPTS OF RS.4,39,80,709/ - ON GARMENT BUSINESS AND THE INCOME WAS DETERMINED AT RS.15,39,325/ - . SIMILARLY, THE NET PROFIT RATE OF 8% WAS APPLIED ON THE GROSS RECEIPTS FROM TRUCK AND H&T CONTRACT OF RS.9,98,650/ - AND THE INCOME WAS ESTIMATED AT RS.79,892/ - . IN THIS MANNER, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 10 | 11 RS.25,17,321/ - AFTER ADDING ON ACCOUNT OF DISCOUNT SHOWN AT RS.1,02,625/ - AND INCOME FROM INTEREST OF RS.32,835/ - . 11. THEREFORE, THE CONTENTION OF THE ASSESSEE IS THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THEN N O OTHER ADDITION CAN BE MADE U/S.68 OF THE ACT BY RELYING ON THE VERY SAME BOOKS OF ACCOUNT FOR WHICH HE RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. J.K.CONTRACTOR, 19 DTR 305 (RAJ) AS WELL AS THE DECISION OF HONBLE ALLAH ABAD HIGH COURT IN THE CASE OF DEVI PRASAD VISHWANATH PRASAD VS COMMISSIONER OF INCOME - TAX, 50 ITR 641 ( ALL ) AND HONBLE A.P. HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS COMMISSIONER OF INCOME - TAX, 232 ITR 776 (AP). 12. WE FIND THAT HONBLE RAJASTH AN HIGH COURT IN THE CASE OF . J.K.CONTRACTOR(SUPRA) HAS HELD AS UNDER: THE ASSESSING OFFICER HAVING ESTIMATED THE PROFIT BY APPLYING A HIGHER PROFIT RATE ON TOTAL CONTRACT RECEIPTS AFTER REJECTION OF THE BOOKS OF ACCOUNT INVOKING THE PROVISIONS UNDER SECTION 145(3) , NO SEPARATE ADDITIONS CAN BE MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER S ECTION 68 OF THE ACT OF 1961 EVEN THOUGH THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PRO OF IN E XPLAINING THE AMOUNT SHOWN IN THE BOOKS AS MARKET OUTSTANDING. 13. THUS, WE FIND THAT THE ORDER OF THE ASSESSING OFFICER IS IN CONFORMITY WITH THE ORDER OF THE HONBLE RAJASTHAN HIGH COURT QUOTED ABOVE. HENCE, WE HOLD THAT PR. COMMISSIONER OF INCOME ITA NO. 154/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 P A G E 11 | 11 TA X, CUTTACK WAS NOT JUSTIFIED, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, TO SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND REMAND THE MATTER BACK TO HIS FILE FOR DENOVO ASSESSMENT. HENCE, WE SET ASIDE THE ORDER OF THE LD PR. COMMISSIONER OF INCOM E TAX AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED ON 28 /0 9 /2018. S D/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 28 /0 9 /2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT : RAJEN DRA KUMAR SAHA, BRIPAD 2. THE RESPONDENT. ITO, WARD - 1, BARIPADA 3. THE CIT(A) - 4. PR.CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//