Sayona Colors Pvt. Ltd, Ahmedabad V. The DCIT, Circle-4(1)(1), Ahmedabad

ITA 1616/AHD/2019

AI Insights

Sayona Colors Pvt. Ltd. appealed against the orders of the Commissioner of Income Tax (Appeals)-8, Ahmedabad, which confirmed the additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961, for the assessment years 2013-14 and 2014-15. The additions were based on the premise that the company received unexplained cash credits amounting to Rs. 1,42,78,300 from M/s Jalaram Finvest Group. The Tribunal examined the materials and statements from a search and seizure operation and found that the assessee had made legitimate sales to M/s Shaikh Traders, and the payments received through M/s Jalaram Finvest were for these sales. The Tribunal noted that the revenue failed to substantiate the claim that these were accommodation entries and did not adequately challenge the evidence provided by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134524 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 23-10-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH JHA
• Assessee Lawyers: UMEDSINGH BHATI
• Keywords: Unexplained cash credit; Accommodation entries; Onus to prove; Set aside
• Section: 131; 68; 139; 143(3); 133(6); 191

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ B’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI T.R SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./ITA Nos. 1616 & 1617/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Years: (2013-2014 & 2014-2015) Sayona Colors Pvt. Ltd., 201, University Plaza, Vijay Char Rasta, Navrangpura, Ahmedabad. PAN: AAKCS8327F Vs. D.C.I.T, Circle-4(1)(1), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Umedsingh Bhati, A.R Revenue by : Shri Ramesh Jha, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 10/05/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 30/06/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned two appeals have been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-8, Ahmedabad arising in the matter of assessment order passed under s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2013-2014 & 2014-15. ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 2 2. The assessee has raised the following concise grounds of appeal: 1. That on facts and in law the learned CIT(A) has grievously erred in confirming the re- opening of assessment u/s.147 of the Act 2. That on facts, and in law, the learned CIT(A) has grievously erred in not appreciating that the adverse materials, statements relied by A.O are not supplied to appellant, nor an opportunity is given to cross-examine the deponents. 3. That on facts, and in law, the learned CIT(A) has grievously erred in confirming the addition of Rs.1,42,78,300/- made u/s.68 of the Act. 4. That the confirmation of the above addition amounts to double taxation as the said amount is already included in sales of appellant. 5. The appellant craves leave to add, alter, amend any ground of appeal. 3. At the outset, the learned counsel for the assessee submitted that he has been instructed by the assessee not to press ground No. 1 and 2 challenging the validity of the reopening of the assessment under section 147 of the Act on various counts. Accordingly, we dismiss the grounds raised by the assessee as not pressed. 4. The solitary and effective ground of appeal raised by the assessee in ground numbers 3 and 4 is that the learned CIT-A erred in confirming the addition made by the AO for ₹ 1,42,78,300.00 on account of unexplained cash credit under section 68 of the Act. 5. In the present case, the proceedings against the assessee were initiated based on the materials found and the statements recorded during search and seizure operation conducted dated 16 January 2014 in the case of Shri Dahyalal Ishwarlal Thakkar and M/s Jalaram Finvest Ltd. As such the revenue based on search materials and the statements recorded of various persons concluded that M/s Jalaram Finvest Group was engaged in providing the accommodation entries to the beneficiaries and Shri Dahyalal Ishwarlal Thakkar is the key person of the group. ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 3 5.1 In the search proceedings, there were found materials evidencing that the assessee has received payment through the banking channel from the M/s Jalaram Finvest group amounting to ₹ 1,42,78,300 only. On question by the AO about the nature of transaction i.e. receipt of money from the group, the assessee submitted that it has received money against the sales made to the 3 rd parties. It was pointed out that the assessee is not concerned how the customers to whom it has made sales are making the payment to it. Thus, as such it has no dealing or transactions of whatsoever with M/s Jalaram Finvest Group. Accordingly, the impugned receipt of money cannot be treated as unexplained cash credit under section 68 of the Act. 5.2 However, the AO was not satisfied with the contention of the assessee on the reasoning that assessee has not disclosed the parties name to whom the sales have been made and the payment has been made by such party through the involvement of M/s Jalaram Finvest Group to the assessee. In the absence of such information, the AO treated the sum of ₹ 1,42,78,300.00 as unexplained cash credit under section 68 of the Act. 6. Aggrieved assessee preferred an appeal to the learned CIT-A 7. The assessee before the learned CIT-A submitted that it has made sales to the party namely M/s Shaikh Traders and against such sales it has received the payment from the M/s Jalaram Finvest Group. The assessee in support of the sales made to M/s Shaikh Traders has furnished the sales ledgers and sample copy of the invoice. It was accordingly contended by the assessee that it has no role to play how the party is making payment to it (the assessee). The assessee also pointed out that the sale made to M/s Shaikh Traders in the year under consideration was of ₹ 1,25,56,800.00 and not at ₹ 1,42,78,300.00 as alleged by the AO. ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 4 8. However, the learned CIT-A disagreed with the submission of the assessee on the reasoning that the onus was upon the assessee to submit the confirmation letter from M/s Shaikh Traders that the assessee has been made payment by Jalaram group on his behalf, but the assessee failed to discharge the onus. Accordingly, the learned CIT-A confirmed the addition made by the AO. 9. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 10. The learned AR before us filed paper books running from pages 1 to 191 and 1 to 135 along with written submissions and case laws. The ld. AR contended that the assessee cannot be penalized on account of the payment made by its debtors through the third party. The assessee furnished the necessary details about the sales made to the third party which evidences that the primary onus was discharged. The ld. AR reiterated the submissions made before the authorities below. 11. On the contrary, the learned DR before us vehemently supported the order of the lower authorities. 12. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee has received a sum of ₹ 1,42,78,300.00 from the M/s Jalaram Finvest Group which was justified as receipt against the sales made to M/s Shaikh Brothers. However, the revenue has treated such amount as unexplained cash credit under section 68 of the Act for the following reasons: i. The Revenue in the group case of M/s Jalaram Finvest has concluded that it was engaged in providing the accommodation entries. ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 5 ii. The assessee has failed to discharge the onus to prove its contention by furnishing the documentary evidence from the parties namely M/s Jalaram Finvest Group or M/s Shaikh Brothers that M/s Jalaram Finvest Group has made the payment on behalf of M/s Shaikh Traders. 12.1 At the threshold, we note that the assessee before the learned CIT-A has pointed out that M/s Jalaram Finvest Group is engaged in the business of cheque discounting in the capacity of Shroff and not in the activity of providing accommodation entries as alleged by the AO. The fact that M/s Jalaram Finvest Group is engaged in the business of cheque discounting was accepted by the learned CIT-A in the case of M/s Jalaram Finvest Ltd and Shri Dahyalal Ishwarlal Thakkar which was also upheld by the ITAT. The relevant contention of the assessee before the learned CIT-A vide letter dated 29-08-2019 is reproduced as under: 14 Notwithstanding the above fact, it is also submitted that if the AO would have taken care to verify the facts stated in the reasons recorded with the AO of the Jalaram Group, he would gained knowledge about the fact that no addition in their case have been made on account of accommodation entries as alleged by him in the reasons recorded. That apart, it was also acknowledged in their case that they are in the business of cheque discounting in the capacity of shroff, which is a valid business activity duly accepted by the Reserve Bank of India also. Further, if the AO would have taken further pain to verify the allegations made in the reasons recorded, he would also gained knowledge about the fact that whatever additions were made in the assessment order in the case of Dahyabhai Thakkar and Jalaram Finance Ltd. have been deleted by the Id. CIT(A)-11, Ahmedabad vide appellate orders passed in March, 2018 i.e. almost 5 months prior to the assessment order passed in case of the appellant company and the department's appeal against CIT(A)'s orders before the ITAT have also been dismissed. 12.2 The above contention of the assessee before the learned CIT-A has not been disputed by him (the ld. CIT-A). Likewise, the learned DR at the time of hearing has also not brought anything on record contrary to the argument advanced by the assessee as discussed above. Thus, in such a situation, we can draw an inference that the parties namely M/s Jalaram Finvest Ltd and Shri Dahyalal Ishwarlal were not engaged in providing the accommodation entries as alleged by the Revenue. ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 6 12.3 Besides the above, we also note that the assessee was subject to audit under the provisions of section 44 AB of the Act. The return of income under section 139 of the Act was filed by the assessee dated 30 September 2013 declaring total income of Rs. 41,10,565.00 only. All these facts can be verified from the details placed on pages 1 to 20 of the paper book. In simple words, the assessee has already shown the receipt of money from M/s Jalaram Finvest Ltd against the sales made to M/s Shaikh Traders. Thus, it cannot be said that the assessee has misrepresented the facts in the return of income filed under the provisions of section 139 of the Act in order to avoid from the rigors of the provisions of section 68 of the Act with respect to the money received from M/s Jalaram Finvest Ltd. As such, the transaction showing the receipt of money against the sales made to M/s Shaikh Traders was only disclosed much before the search and seizure operation conducted at M/s Jalaram Finvest Group. Furthermore, there remains no ambiguity with respect to the cheque received by the assessee from M/s Jalaram Finvest Ltd. against the sales made to Shaikh traders in view of the fact that ITAT in the case of M/s Jalaram Finvest Ltd and Shri Dahyalal Ishwarlal has accepted that M/s Jalaram Finvest Group was engaged in the activity of cheque discounting which is not an illegal activity. Thus, based on these facts, the amount received by the assessee from M/s Jalaram Finvest Ltd against the alleged sales to Shaikh traders cannot be deemed unexplained cash credit under section 68 of the Act in the given facts and circumstances. 12.4 Furthermore, the assessee has furnished the necessary details before the authorities below i.e. the details of the sales made to M/s Shaikh Traders and the amount received from M/s Jalaram Finvest Limited on behalf of M/s Shaikh Traders. Now, once the assessee has discharged the primary onus by furnishing the basic details, the onus shifts upon the revenue to disprove the contention of the assessee based on cogent reasons. But the revenue has simply refused to accept the version of the assessee merely on the reasoning that no document from the 3 rd party either from M/s Jalaram Finvest Ltd or M/s Shaikh Traders was ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 7 furnished by the assessee. To our understanding, the revenue at least before denying the version of the assessee should have enquired from the concern party by issuing the notice under section 131 or 133(6) of the Act. But what we find is this that the Revenue without exercising the power granted under the statute has shifted the entire onus upon the assessee by stating that it is the duty of the assessee to furnish the confirmation or other supporting details of the parties/ transactions. It is not out of place to mention that collecting details by the assessee from the 3 rd party is time consuming job. Furthermore, the 3 rd party, though having dealt with the assessee, is not under any obligation to furnish the details under the provisions of law. But the revenue has enough powers to compel the 3 rd party to produce necessary evidence. Thus in the given facts and circumstances, we are of the view that the learned AO/ CIT-A in the interest of justice and fair play should have conducted the enquiries from the concern party. But we find that such enquiries have not been carried out by the authorities below. 12.5 On perusal of the assessment order, it is noticed that the company namely M/s Jalaram Finvest Limited was preparing the accommodation entries voucher which was containing the details of the parties and the cash/ cheque received from such parties or given to such parties. The relevant observation in this regard of the AO is as under: Further, it has been stated by him that whenever a cheque is discounted or cheque/RTGS/DD etc is issued against cash they prepare accommodation entries voucher. On this voucher, name of the party from whom cash/cheque has been received and details of such cash/cheque received is mentioned. Details of cheque/RTGS/DD or cash given, against such cash/cheque received is also mentioned. Details of commission received, is also mentioned in the voucher. 12.6 However, the AO in his assessment order has nowhere pointed out the name of the assessee appeared on such vouchers. Thus, merely third-party has accepted to be engaged in the activity of accommodation entries does not authorize the revenue to draw an adverse inference against the assessee. ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 8 12.7 Moving further, the sales shown by the assessee in the name of M/s Shaikh Traders have been duly accepted by the revenue without pointing out any ambiguity. However, the adjustment made by the assessee of the payment received from M/s Jalaram Finvest Limited against the sales made to M/s Shaikh traders was not believed by the AO. It is the settled business practice that one has to recover the money from the party against sales. If the version of the department is accepted, then it is implied that no payment has been received by the assessee from M/s Shaikh Traders which is against the prevailing business norms. As such, the revenue before doubting the adjustment entry made by the assessee, should have brought something on record so as to justify that the sale was bogus, or the payment was received by the assessee in an unaccounted form or in the undisclosed bank account of the assessee or by any other mode. But no such detail has been brought on record by the revenue. 12.8 It is also pertinent to note that the AO in his remand report has clearly stated that receipt of money of ₹ 17,21,500 does not pertain to the year under consideration as it was received on 24 th February 2012 financial year 2011-12 but the addition has wrongly been made in the year under consideration. Be that as it may be, it will not have any bearing on the given facts of the case. It is for the reason that the addition made by the AO which was subsequently confirmed by the learned CIT-A is not sustainable for the reasons elaborated above. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. 12.9 In the result, the appeal of the assessee is partly allowed. Coming to ITA No. 1617/AHD/2019 an appeal by the assessee for A.Y. 2014-15 ITA nos.1616 & 1617/AHD/2019 A.Y. 2013-14 & 2014-15 9 13. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2014-15 are identical to the issues raised by the assessee in ITA No. 1616/AHD/2019 for the assessment year 2013-14. Therefore, the findings given in ITA No. 1616/AHD/2019 shall also be applicable for the assessment years 2014-15. The appeal of the assessee for the AY 2013-14 has been decided by us vide paragraph No. 12 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment years 2014-15. Hence, the grounds of appeal filed by the assessee is hereby partly allowed. 13.1 In the result, the appeal filed by the assessee is partly allowed. 14. In the combined result, both the appeals filed by the assessee are partly allowed. Order pronounced in the Court on 30/06/2023 at Ahmedabad. Sd/- Sd/- (T.R SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 30/06/2023 Manish