ITO, Faridabad V. Sh. Harpal Singh, Faridabad

ITA 1592/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52533 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PSH
• Assessee Lawyers: K C SINGHAL SHRI SALIL MISH
• Keywords: Income from undisclosed sources; Opportunity of being heard; Additional evidence; Onus to prove
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.1592/DEL/2010 ASSESSMENT YEAR : 2007-08 ITO, WARD 11 (4), FARIDABAD. VS. HARPAL SINGH, PROP. M/S SUNRISE ELECTRICALS, 2A/18B, NIT, FARIDABAD. PAN : BBYPS4693H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C. SINGHAL, ADVOCATE REVENUE BY : SHRI SALIL MISHRA, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 15 TH FEBRUARY, 2010 FOR ASSESSMENT YEARS 2007-08. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.10,89,658/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNEXPLAINED SUNDRY CREDITORS ESPECIALLY WHEN THE ASSE SSEE HAD FAILED TO DISCHARGE HIS ONUS TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS DESPITE SPECIFIC REQUIREMENT. 2. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HE ARING OF APPEAL. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF EL ECTRICAL GOODS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSEE WAS REQUIRED TO PRODUCE SUNDRY CREDITORS FOR THE PURPO SE OF CONFIRMATION/VERIFICATION WHICH, INTER ALIA, INCLUD ED M/S SHAKTI ENTERPRISES AND M/S VAISHNO TRADING COMPANY HAVING OUTST ANDING ITA NO.1592/DEL/2010 2 BALANCE OF ` 7,52,297/- AND ` 3,37,361/- RESPECTIVEL Y AS LETTER SENT TO THEM WERE RECEIVED BACK WITH THE REMARKS NOT IN EXI STENCE. THE ASSESSEE COULD NOT PRODUCE THE SUNDRY CREDITORS. HOWEVER , HE PRODUCED CONFIRMATION WITH RESPECT TO CERTAIN PARTIE S WHICH DID NOT INCLUDE THE CONFIRMATION FROM THESE TWO CREDITORS. T HE ASSESSEE ALSO COULD NOT PRODUCE LATEST COMPLETE ADDRESS OF THESE PART IES. THEREFORE, THE ASSESSING OFFICER OBSERVED THAT HIS OFFICE IS NOT IN A POSITION TO VERIFY FROM THESE PARTIES REGARDING THE OUTSTANDING CR EDIT BALANCE. FROM THE EXAMINATION OF THE VOUCHERS WHICH WERE SUBMI TTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAD MADE CASH PAYMENTS OF ` 15,000/- EA CH ON VARIOUS DATES TO M/S SHAKTI ENTERPRISES, BUT, THESE VOUCH ERS WERE NOT SIGNED BY THE PERSON RECEIVING THE PAYMENT AND HE OBT AINED PHOTO COPY OF SUCH VOUCHERS AND HAS PLACED ON RECORD WHICH A RE FIVE ENTRIES FOR AN AGGREGATE SUM OF ` 75,000/-. IT IS IN THIS MAN NER LD. ASSESSING OFFICER HAS ADDED AN AGGREGATE AMOUNT OF ` 10,89,658 /- IN RESPECT OF THESE TWO PARTIES TO THE INCOME OF THE ASSESSEE BY TREATI NG THE SAME AS INCOME FROM UNDISCLOSED SOURCES BY HOLDING THAT THESE SUNDRY CREDITORS ARE NOT GENUINE AND THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THESE SUNDRY CREDITORS BY PRODUCING NECESSA RY EVIDENCE. 3. THE ADDITION MADE BY THE ASSESSING OFFICER WAS CHALLE NGED IN AN APPEAL FILED BEFORE THE CIT (A). BEFORE CIT (A), T HE ASSESSEE FILED CERTAIN ADDITIONAL EVIDENCE AND SUBMITTED AN APPLICA TION FOR ADMISSIBILITY THEREOF UNDER RULE 46A OF INCOME-TAX RU LES, 1962 WHICH INCLUDED CONFIRMATION OF THE TRADE CREDITORS, NAMELY , M/S SHAKTI ENTERPRISES, FARIDABAD AND M/S VAISHNO TRADING COMPANY, WHICH, ACCORDING TO THE ASSESSEE COULD NOT BE SUBMITTED EARLIER OWING TO PAUCITY OF TIME AND NON-AVAILABILITY THEREOF WITH T HE ASSESSEE AND THIS FACT HAS BEEN CLEARLY RECORDED IN PARA 4 OF THE ORDE R OF LD. CIT (A). IT ITA NO.1592/DEL/2010 3 WAS PLEADED THAT THE ASSESSEE WAS NOT ALLOWED SUFFICIENT T IME AND OPPORTUNITY TO OBTAIN AND FURNISH THESE EVIDENCES BEFO RE THE ASSESSING OFFICER AND, THUS, HE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THEM BEFORE THE ASSESSING OFFICER AND THE EVIDENCE NOW PRODUCED WILL BE RELEVANT AND VITAL TO THE GROUNDS OF APPEAL. THE SAID APPLICATION FILED BY THE ASSESSEE WAS FORWARDED BY LD. CIT (A) TO TH E ASSESSING OFFICER FOR HIS COMMENTS AND THE ASSESSING OFFICER SUBMITT ED HIS REPORT DATED 15 TH FEBRUARY, 2010 AND HE OBJECTED TO THE ADMISSIBILITY OF FRESH EVIDENCE ON THE GROUND THAT SUFFICIENT TIME AND SEVER AL OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS. HOWEVER, THE ASSESSEE OBJECTED TO SUCH SUBMISSIO N OF LD. ASSESSING OFFICER ON THE GROUND THAT TRADE LIABILITY CA NNOT BE TREATED AT PAR WITH CASH CREDIT AS THE TRADE LIABILITY ARISES AGAI NST THE TRADING PURCHASES AND IF THE PURCHASES ARE NOT SUBJECT MATTER OF CONTROVERSY, THEN, LIABILITY OF SUCH TRADE ITSELF WILL BE BEYOND D OUBT AND THE EXAMINATION OF TRADE CREDITOR WOULD NOT BE NECESSARY IF THE CREATION OF LIABILITY IS NOT A SUBJECT MATTER OF ANY DISPUTE. TH E EXAMINATION OF TRADE CREDITORS IS NOT ENVISAGED BY THE PROVISIONS OF TH E ACT OR RULES MADE THEREUNDER AS THE TRADE CREDITOR MAY LOCATE IN FAR-FLUNG AREAS AND ASKING FOR PERSONAL PRODUCTION OF SUCH TRADE CREDI TOR MAY NOT BE WITHIN THE COMPETENCY OF THE ASSESSING OFFICER. ON THE SE SUBMISSIONS, LD. CIT (A) HAS RECORDED A FINDING IN PARA 5. LD. C IT (A) OBSERVED THAT THE ASSESSEE HAD SUBMITTED AS MANY AS 23 CONFIRMATIONS OF T RADE CREDITORS WHICH INCLUDED M/S VAISHNO TRADING COMPANY A ND ONLY ONE CONFIRMATION WAS LEFT WHICH WAS OF M/S SHAKTI ENTERPRI SES AND WHICH COULD NOT BE PRODUCED FOR THE REASON THAT ITS PROPRIE TOR WAS OUT OF STATION. HE ALSO OBSERVED THAT ALL THESE CONFIRMATIONS WERE IN THE SAME FASHION AND WHEN OTHER CONFIRMATIONS WERE ADMITTE D BY THE ASSESSING OFFICER AS GENUINE, THE CONFIRMATION OF M/S VAI SHNO TRADING COMPANY WAS NOT ACCEPTED BY HIM AND WHAT HAS BEEN PRO DUCED BY THE ASSESSEE NOW ONLY IS A SUPPORTING DOCUMENT. THE ASSESSIN G ITA NO.1592/DEL/2010 4 OFFICER HAD EXAMINED THE LEDGERS AND VOUCHERS AND SALE AND PURCHASE EXPENSES ON TEST CHECK BASIS. THE ASSESSEE WAS FACING SCRUTIN Y FOR THE FIRST TIME, THEREFORE, THERE WERE CIRCUMSTANCES BY WHI CH THE ASSESSEE WAS UNABLE TO PRODUCE THE SUNDRY CREDITORS OR THEIR CO NFIRMATIONS WHICH WERE THE CIRCUMSTANCES BEYOND THE CONTROL OF TH E ASSESSEE AND THIS BEING THIRD PARTY EVIDENCE WAS REQUIRED ADMISSION UNDER RULE 46A OF THE IT RULES. ON MERITS, LD. CIT (A) HAS GIVEN A F INDING THAT THESE LIABILITIES BEING TRADE LIABILITIES ARE RELATIVELY CU RRENT CREDITS WHICH CANNOT BE CONSIDERED UNDER SECTION 68 OR 69 OF THE I NCOME-TAX ACT AS NO CASH CREDIT IS INVOLVED. SECTION 41 (1) ALSO COULD NOT BE APPLIED, THEREFORE, ADDITION OF ` 10,89,658/- IS WHOLLY UNSUSTA INABLE AND, IN THIS MANNER, LD. CIT (A) HAS DELETED THE ADDITION. 4. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY LD. DR THAT THE ASSESSEE, DESPITE VARIOUS OPPORTUNITIES PROVIDED TO HIM BY THE ASSESSING OFFICER, COULD NOT PRODUCE CONFIRMATIONS IN RE SPECT OF AFOREMENTIONED TWO PARTIES, THEREFORE, THE ASSESSING OFF ICER HAD RIGHTLY TREATED THEM BEING THE INCOME OF THE ASSESSEE F ROM UNDISCLOSED SOURCES AS THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THESE SUNDRY CREDITORS BY PRODUCING NECESSA RY EVIDENCE. HE SUBMITTED THAT THERE IS A FALSITY IN THE CLAIM OF THE ASSESSEE THAT CONFIRMATION COULD NOT BE OBTAINED BY HIM FROM M/S SHAKTI ENTERPRISES AS THE PROPRIETOR OF THE SAID CONCER N WAS OUT OF STATION. REFERRING TO THE COPY OF CONFIRMATION SUBMI TTED BY THE ASSESSEE AT PAGE 14 OF HIS PAPER BOOK, HE SUBMITTED THAT THE SAID CONFIRMATION IS DATED 31 ST DECEMBER, 2008 WHICH IS PRIOR TO THE INVESTIGATION CARRIED OUT BY THE ASSESSING OFFICER WITH REGARD TO THESE ENTRIES AND, THUS, IT WAS SUBMITTED THAT THE ASSESSEE DESPIT E HAVING THE CONFIRMATION WITH HIM DID NOT PRODUCE IT BEFORE THE ASSESSING OFFICER AND IT WAS ONLY SUBMITTED BEFORE THE CIT (A) AS AN ADDITIONAL EVIDENCE. SO AS IT RELATES TO CONFIRMATION RELATING TO VAISHNO TRADING ITA NO.1592/DEL/2010 5 COMPANY, THE COPY OF WHICH IS PLACED AT PAGE 21 OF T HE PAPER BOOK, IT WAS SUBMITTED BY LD. DR THAT THERE WAS NO DATE ON WHIC H THE CONFIRMATION WAS GIVEN BY THE SAID PARTY TO THE ASSESSEE AND THERE IS NO PERMANENT ACCOUNT NO. (PAN) OR OFFICE NO. STATED THEREON. THUS, HE SUBMITTED THAT EVEN NOW THE ASSESSEE CANNOT BE SAID TO HA VE PROVED THE GENUINENESS OF THESE SUNDRY CREDITORS AND, THEREFORE , THE ADDITION HAS WRONGLY BEEN DELETED BY THE LD. CIT (A). 5. ON THE OTHER HAND, RELYING UPON THE FINDINGS RECO RDED BY THE LD. CIT (A) AND THE DOCUMENTS SUBMITTED BY THE ASSESSEE BEFOR E THE CIT (A), COPY OF WHICH ARE PLACED IN THE PAPER BOOK, IT IS THE CASE OF LD. AR THAT LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION AN D HIS ORDER SHOULD BE UPHELD. HE REFERRED TO THE FOLLOWING DOCUMENTS FROM THE PAPER BOOK. AT PAGE 14, A CONFIRMATION OF M/S SHAKTI ENTERPRISES O N WHICH PAN OF THE CREDITOR HAS BEEN SUBMITTED. AT PAGE 15, THE CON FIRMED COPY OF ACCOUNT IN THE BOOKS OF THE CREDITORS IS SUBMITTED WHER EIN THE CREDITOR WAS HAVING OPENING DEBIT BALANCE OF ` 10,41,477.36 A ND THE CLOSING BALANCE HAS BEEN SHOWN AT ` 7,52,927.46. AT PAGE 16, COPY OF PURCHASE BILL OF ` 1,12,837/- IS SUBMITTED AT PAGE 17 AND 18 COPY OF ACCOUNT OF THE SAID PARTY IN THE BOOKS OF THE ASSESSEE IS SUBMITTED. AT PAGE 19, CERTIFICATE OF REGISTRATION OF M/S VAISHNO TR ADING COMPANY IS SUBMITTED. AT PAGE 21, CONFIRMATION OF VAISHNO TRADIN G COMPANY IS SUBMITTED. AT PAGES 22-27, COPY OF PURCHASE BILLS OF M /S VAISHNO TRADING COMPANY ARE SUBMITTED. AT PAGE 28, COPY OF M /S VAISHNO TRADING COMPANY FROM THE ACCOUNTS OF THE ASSESSEE IS SUBM ITTED WHEREIN THE ASSESSEE HAS MADE TOTAL PURCHASES FROM THE SAID PARTY DURING THE YEAR UNDER CONSIDERATION IS A SUM OF ` 5,96 ,182/- OUT OF WHICH THE ASSESSEE HAS MADE THE PAYMENT OF ` 2,58,821/- ON THREE DATES THROUGH CHEQUE OF GURGAON GRAMEEN BANK, FARIDA BAD, LEAVING A CREDIT BALANCE OF ` 3,37,361/-. IN VIEW OF THESE EV IDENCES, IT WAS ITA NO.1592/DEL/2010 6 SUBMITTED BY LD. AR THAT LD. CIT (A) HAS RIGHTLY DELE TED THE ADDITION AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT IS THE CASE OF THE ASSESSEE THAT THESE OUTSTANDING BALANCE ARE ONLY IN RESPECT OF PURCHASES MA DE BY HIM FROM THESE TWO PARTIES. IT IS MENTIONED IN THE ASSESSMEN T ORDER THAT LETTERS ISSUED BY THE ASSESSING OFFICER WERE RECEIVED BACK FROM THESE PARTIES. UNDER THESE FACTS, IT HAS TO BE SEEN THAT WHET HER LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION. WE HAVE CAREFULLY GONE THROUGH THE PAPERS REFERRED TO BY BOTH THE PARTIES. ACCORDING TO LD. DR, COPY OF CONFIRMATION OF M/S SHAKTI ENTERPRISES IS PLACED AT PAG E 14 OF THE PAPER BOOK. IT IS DATED 31 ST DECEMBER, 2008. THE PERMANENT ACCOUNT NO. OF THE SAID PARTY HAS BEEN GIVEN AND THE COPY OF ONE BILL IS ALSO ENCLOSED IN THE PAPER BOOK. THE ASSESSMENT ORDER IS DATE D 29 TH DECEMBER, 2009. IF THE CONFIRMATION OF THE SAID PAR TY WAS IN POSSESSION OF THE ASSESSEE ON 31 ST DECEMBER, 2008, THEN, WHY IT WAS NOT SUBMITTED TO THE ASSESSING OFFICER. IT WAS AN OLD CO NFIRMATION WHICH WAS LYING WITH THE ASSESSEE. THEREFORE, NO FRESH C ONFIRMATION AFTER THE DATE OF ENQUIRY MADE BY THE ASSESSING OFFICER HAS BEEN SUBMITTED BY THE ASSESSEE. THE CONFIRMED COPY OF ACCOUN T AS PLACED AT PAGE 15 OF THE PAPER BOOK IS DATED 1 ST APRIL, 2007 WHICH IS ALSO PRIOR TO THE DATE OF INITIATION OF ASSESSMENT PROCEEDINGS. TH E COPY OF BILL WHICH IS PLACED AT PAGE 16 IS ALSO DATED 18 TH AUGUST, 2006. IN NUTSHELL, NO PAPER HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SH OW THAT CONFIRMATION WAS SUBMITTED AFTER THE INITIATION OF ASSE SSMENT PROCEEDINGS. THEREFORE, AFTER THE LETTER SENT BY THE ASSESSING OFFICER HAS BEEN RECEIVED BACK, THERE IS NO EVIDENCE PLACED O N RECORD BY THE ASSESSEE WHICH CAN BE SAID TO HAVE BEEN SUBSEQUENTLY OBTAI NED. THIS MADE THE FINDINGS OF CIT (A) WRONG AS RECORDED BY HIM IN PARA 5 OF HIS ORDER IN WHICH HE HAS SAID THAT CONFIRMATION IN RESPEC T OF M/S SHAKTI ITA NO.1592/DEL/2010 7 ENTERPRISES COULD NOT BE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS ITS PROPRIETOR WAS OUT OF STATION FOR THE REASON THAT THE SAID CONFIRMATION WHICH HAS BEEN FURNISHED IN THE PAPE R BOOK IS MUCH PRIOR TO THE INQUIRY INITIATED BY THE ASSESSING OFFICER . SIMILARLY, IN RESPECT OF ANOTHER PARTY, THE CONFIRMATION IS UNDATED , THERE IS NO PERMANENT ACCOUNT NO., THERE IS NO CONFIRMED COPY OF ACCOUNTS PLACED ON RECORD. FOR THAT PARTY ALSO THERE IS NO EVIDENCE ON RECORD WHICH CAN BE SAID TO HAVE BEEN GIVEN AFTER THE INQUIRY MADE BY THE ASSESSING OFFICER. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS PRODUCED ON RECORD THE EVIDENCE TO SUPPORT THE CONTENTION THA T THE OUTSTANDING BALANCE IN THE ACCOUNTS OF THESE SUNDRY CREDITORS WAS GE NUINE. THE ADDITION CANNOT BE SIMPLY DELETED FOR THE REASON THAT THE NATURE OF THE TRANSACTION IN QUESTION IS PURCHASE WHICH DOES NOT MATCH WITH THE TRANSACTION OF CASH CREDIT. THE ASSESSING OFFICER HAS POW ERS UNDER THE ACT TO EXAMINE AND VERIFY THE PURCHASES AND IN THIS PR OCESS ASSESSEE HAS TO SUBSTANTIATE HIS PURCHASE. HOWEVER, AS IT IS NOT T HE CASE OF THE ASSESSEE THAT THESE PARTIES ARE NOT AVAILABLE FOR VERIFIC ATION, WE CONSIDER IT JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO ENABLE THE ASSESSEE TO SUBSTANTIATE ITS CLAIM R EGARDING BALANCE OUTSTANDING IN THE ACCOUNT OF THESE SUNDRY CRE DITORS, SO THAT THE END OF JUSTICE IS MET. WE, THEREFORE, RESTORE THI S ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND THEREAFTER TO RE-ADJUDICATE THIS ISSUE AS PER THE PROVISIONS OF LAW. WE DIRECT ACCOR DINGLY. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL F ILED BY THE REVENUE IS ALLOWED IN THE MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05.08.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 05.08.2011. ITA NO.1592/DEL/2010 8 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES