Sanjay Mittal, V. ITO Ward 28 (3),

ITA 1580/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9919 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 06-08-2009
• Assessment Year: 1996-1997
• Appeal Filed On: 30-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: VK SABHARWAL
• Keywords: Unexplained investment; Opportunity of being heard; Set aside
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.C.SHARMA, AM ITA NO.1580/DEL/2007 ASSESSMENT YEAR : 1996-97 SHRI SANJAY MITTAL, 3010, GALI KALKA MISSHAN, BALLIMARAN, DELHI. PAN/GIR NO.S-2122. VS. INCOME TAX OFFICER, WARD-28(3), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K.SABHARWAL, CA. RESPONDENT BY : SHRI B.K.GUPTA, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 7.2.2007 FOR THE AY 1996-97, IN THE MATTER OF ORDER PASSED U/S 143(3)/254 OF THE IT ACT. 2. FACTS IN BRIEF ARE THAT THERE WAS SURVEY AT THE ASSESSEES BUSINESS PREMISES ON 19.6.1996. IT WAS FOUND THAT ASSESSEE HAS ISSUE D A SALE BILL NO.1296 DATED 18.3.1996 FOR RS.2,36,320/- TO M/S KUBER FIBERS PVT .LTD. WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE WAS ASKED A SPECIFIC QUERY, THE ASSESSEE HAS CATEGORICALLY REPLIED AND STATED THAT HE NEVER MADE ANY SALE TO M/S KUBER FIBERS PVT.LTD. AGAINST BILL NO.1296 DATED 18.3.1996, RATH ER AN ACCOMMODATION ENTRY WAS GIVEN ON THE REQUEST OF M/S KUBER FIBERS PVT.LTD. D UE TO FRIENDLY RELATIONS, WITHOUT ANY CHARGES. IT WAS ALSO CATEGORICALLY REP LIED THAT MERELY BECAUSE OF THE ACCOMMODATION ENTRY ONLY, NO GOODS WERE PROCURED NO R DELIVERED TO THEM. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION AND HEL D THAT SALE OF RS.2,36,320/- WAS MADE OUT OF BOOKS. ACCORDINGLY, AN ADDITION WA S MADE ON ACCOUNT OF THIS TO ITA-1580/DEL/2007 2 THE PROFIT AND LOSS ACCOUNT AFTER HOLDING THAT CORR ESPONDING PURCHASES ARE DULY ACCOUNTED FOR IN THE PURCHASE ACCOUNT. THE CIT(A) CONFIRMED THE ACTION OF THE AO AND IN AN APPEAL FILED BY THE ASSESSEE BEFORE TH E TRIBUNAL, THE TRIBUNAL VIDE ITS ORDER DATED 25.6.2004 OBSERVED AS UNDER:- SO FAR AS ADDITIONS OF RS.2,36,320/- IS CONCERNED, I FIND THAT THE EXPLANATION OF THE ASSESSEE THAT THE BILL WAS ISSUE D AS AN ACCOMMODATION ENTRY WAS NEITHER EXAMINED BY THE AO NOR BY THE CIT(A). THE VERACITY OF THE EXPLANATION SHOULD HAV E BEEN EXAMINED EITHER BY SUMMONING M/S KUBER FIBERS PVT.LTD. OR AN Y OTHER MODE BEFORE MAKING AN ADDITION. MOREOVER, ONCE IT IS HE LD THAT THE SALES WERE OUTSIDE BOOKS, THE AO SHOULD HAVE ALSO LOOKED INTO THE ASPECT WHETHER ADDITION OF ENTIRE SALE IS CALLED FOR OR ON LY THE PROFIT EARNED ON THE SALES OUTSIDE BOOKS. SINCE ALL THESE QUESTI ONS REMAINED UNANSWERED, I AM OF THE VIEW THAT THIS ISSUE SHOULD BE EXAMINED AFRESH BY THE AO. MOREOVER, BOTH THE PARTIES HAVE ALSO AGREED FOR THE RESTORATION OF THIS ISSUE TO THE AO. I, THEREF ORE, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE F ILE OF THE AO FOR RE-ADJUDICATION OF THE IMPUGNED ISSUE IN TERMS INDI CATED ABOVE AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 3. HOWEVER, WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, THE LOWER AUTHORITIES DID NOT COMPLY WITH THE SPECIFIC DIRECT ION OF TRIBUNAL REGARDING EXAMINING THE VERACITY OF EXPLANATION GIVEN BY THE ASSESSEE, AS M/S KUBER FIBERS PVT.LTD. DID NOT APPEAR BEFORE THE AO, THE SUMMONS SO ISSUED WERE ALSO RETURNED BACK UNSERVED WITH THE REMARKS LEFT WITHOUT ADDRES S. THE AO AGAIN MADE THE ADDITION U/S 69 ON ACCOUNT OF UNEXPLAINED INVESTMEN T, AND THE SAME WAS CONFIRMED BY THE CIT(A), AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, STATEMENT OF THE ASSESSEE RECORDED DURING THE COURSE OF SURVEY AND ALSO THE ORDER OF THE TRIBUNAL WHEREIN M ATTER WAS RESTORED BACK TO THE FILE OF THE AO WITH THE OBSERVATION THAT THE EXPLAN ATION OF THE ASSESSEE THAT THE BILL WAS ISSUED AS AN ACCOMMODATION ENTRY WAS NEITHER EX AMINED BY THE AO NOR BY THE CIT(A), THE VERACITY OF EXPLANATION SHOULD HAVE BEE N EXAMINED EITHER BY ITA-1580/DEL/2007 3 SUMMONING M/S KUBER FIBERS PVT.LTD. OR ANY OTHER MO DE BEFORE MAKING AN ADDITION. IN TERMS OF THE ORDER PASSED BY THE TRIB UNAL, THE ADDITION WAS REQUIRED TO BE MADE ONLY AFTER THE VERIFICATION OF VERACITY OF THE EXPLANATION REGARDING ISSUE OF BILL AS AN ACCOMMODATION ENTRY. HOWEVER, THE AO COULD NOT CONFIRM ANYTHING FROM M/S KUBER FIBERS PVT.LTD. BEFORE THE AO, THE ASSESSEE HAS PRODUCED THE SALES TAX ASSESSMENT ORDER TO SUBSTANTIATE THE ACTU AL SALES MADE BY IT, ACCORDING TO WHICH NO SALES HAVE BEEN EFFECTED TO M/S KUBER FIBE RS PVT.LTD. IN RESPECT OF BILL NO.1296 DATED 18.3.1996 AMOUNTING TO RS.2,36,320/-. IT IS ALSO NOT THE CASE OF REVENUE THAT ASSESSEE HAD MADE ANY UNACCOUNTED PURC HASES NOR THAT ASSESSEE RECEIVED THE PAYMENT OF ALLEGED SALES AND UTILIZED THE SAME IN HIS BUSINESS. NOW THE QUESTION ARISES BEFORE US FOR DETERMINATION, AS TO WHETHER ANY ADDITION WAS CALLED FOR WHEN THE MATTER WAS RESTORED BACK TO THE AO WITH CERTAIN DIRECTIONS BY THE TRIBUNAL. AS PER THE DIRECTIONS EITHER THE AO SHOULD HAVE SUMMONED M/S KUBER FIBERS PVT.LTD. TO EXAMINE THE VERACITY OF ST ATEMENT OF ASSESSEE MADE DURING COURSE OF SURVEY ITSELF TO THE EFFECT THAT S ALE BILL WAS MERELY AN ACCOMMODATION ENTRY OR BY ANY OTHER MODE BEFORE MAK ING AN ADDITION. SINCE THE AO FAILED TO SUMMON M/S KUBER FIBERS PVT.LTD., HE S HOULD HAVE BROUGHT ON RECORD SOME OTHER MATERIAL TO SUBSTANTIATE THE ADDI TION SO MADE AND TO CONTROVERT THE STATEMENT MADE DURING THE COURSE OF SURVEY ITSE LF TO THE EFFECT THAT BILL SO ISSUED WAS ONLY AS AN ACCOMMODATION ENTRY AND NO AC TUAL SALES HAVE BEEN EFFECTED BY THE ASSESSEE. THE AO HAS NOT BROUGHT ANY OTHER MATERIAL TO SUBSTANTIATE THE ADDITION OR TO CONTROVERT THE STATEMENT OF THE ASSE SSEE, BUT THE ASSESSEE HAS BROUGHT ON RECORD THE SALES TAX ASSESSMENT ORDER PASSED BY THE SALES TAX AUTHORITY ACCORDING TO WHICH NO SALES WERE EFFECTED TO M/S KU BER FIBERS PVT.LTD. VIDE BILL NO.1296 DATED 18.3.1996 AMOUNTING TO RS.2,36,320/-. UNDER THESE CIRCUMSTANCES, THE POSITIVE MATERIAL BROUGHT ON RECORD BY THE ASSE SSEE TO SUBSTANTIATE ITS STATEMENT TO THE EFFECT THAT NO ACTUAL SALES HAVE BEEN MADE V IDE BILL NO.1296 AND THE SAME WAS ISSUED ONLY AS AN ACCOMMODATION ENTRY WITHOUT A NY CHARGE DUE TO THE FRIENDLY RELATIONS, CANNOT BE BRUSHED ASIDE. HOWEVER, AT TH E VERY SAME TIME, THE ACT OF ASSESSEE ISSUING ACCOMMODATION BILL IS ALSO NOT APP RECIABLE. IT IS A MATTER OF ITA-1580/DEL/2007 4 RECORD THAT NO SALES HAVE BEEN EFFECTED BY THE ASSE SSEE AND THE AO HAS ALSO RECORDED A FINDING TO THE EFFECT THAT ALL THE PURCH ASES OF THE ASSESSEE ARE DULY ACCOUNTED FOR. THE ASSESSEE WAS ALSO NOT IN RECEIP T OF ANY PAYMENT ON ACCOUNT OF THIS BILL, THEREFORE, THERE IS NO OCCASION FOR USIN G SUCH AMOUNT IN THE BUSINESS. UNDER THESE FACTS AND CIRCUMSTANCES, THE ADDITION M ADE BY AO U/S 69 FOR UNEXPLAINED INVESTMENT IS NOT SUSTAINABLE. UNDER S ECTION 69, ADDITION IS TO BE MADE WHERE ASSESSEE HAD MADE ANY INVESTMENT WHICH I S NOT RECORDED IN THE BOOKS OF ACCOUNTS AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF INVESTMENT. IN THE INSTANT CASE, NO INVESTMENT HAS BEEN ALLEGED BY THE AO HAVING NOT RECORDED IN THE BOOKS OF ACCOUNT. NEITHER THE ASSESSEE WAS IN RECEIPT OF SALE CONSIDERATION NOR ANY QUESTION AROSE REGARDING ITS INVESTMENT. UNDER THESE CIRCUMSTANCES, TO PENALIZE THE ACTION OF THE ASSESS EE FOR ISSUING ACCOMMODATION BILL, WE DIRECT THE AO TO MAKE ADDITION EQUAL TO TH E AVERAGE GP RATE ADOPTED BY THE ASSESSEE IN THE LAST THREE YEARS. WE DIRECT AC CORDINGLY. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2009. SD/- SD/- (R.P.TOLANI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :31.08.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR