The ACIT, Circle-1, Bhavnagar V. M/s. Shreeji Industrial Gases Pvt. Ltd., Bhavnagar

ITA 1760/AHD/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9097 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-09-2009
• Assessment Year: 1993-1994
• Appeal Filed On: 21-07-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: S N SOPARKAR WITH SH M K KAJI
• Keywords: Unexplained cash credit; Depreciation; Loose papers; Opportunity of being heard
• Section: 143(3); 131; 132; 2

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI N.S.SAINI ITA NO.1760 /AHD/2006 (ASSESSMENT YEAR : 1993-94) ACIT, CIRCLE-1, BHAVNAGAR. VS. M/S SHREEJI INDUSTRIAL GASES PVT. LTD. PLOT NO.1 & 3 BHAVNAGAR- RAJKOT ROAD, SIHOR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT, SR. D.R. RESPONDENT BY : SHRI S.N.SOPARKAR WITH SH.M .K.KAJI ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE OR DER OF CIT(A)- XIX, AHMEDABAD DATED 04.5.2006 RELATING TO ASSESSMENT YEAR 1993-94. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER: THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE FOLLOWING ADDITIONS OUT OF UNEXPLAINED VOUCHER OF RS.1 0,54,529/- EVEN THOUGH THE SAID ADDITION NOT COVERED IN DISCLOSURE: (I) UNEXPLAINED CREDIT ENTRIES OF RS.1,92,350/- (II) UNEXPLAINED DEBIT ENTRIES RS.3,85,358/- THE ABOVE ADDITIONS HAS BEEN MADE BY THE A.O. ON THE BASIS OF NOTING ON PAGE NO. 17 & 18 DURING THE SEARCH U/S 132 O F THE I.T.ACT INVENTORISED AT ANNEXURE A-2. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS INVOLVED IN BOTTLING AND SALE OF OXYGEN GASES. SEARCH U/S 132 OF THE 2 I.T.ACT, 1961 (IN SHORT THE ACT) HAD BEEN CONDUCTED IN THE GROUP CASES OF THE ASSESSEE ON 27.7.1992. VARIOUS BOOKS OF ACCOUNT WERE LATER ON IMPOUNDED U/S 131 OF THE ACT ON THE BASIS OF DISCREPANCI ES NOTED THEREIN. CERTAIN DOCUMENTS WERE SEIZED FROM THE RESIDENCE OF SH RI MOHAN LAL GOPAL DAS PATEL ONE OF THE DIRECTORS OF THE COMPANY. OUT OF THIS, PAGE NOS. 17 AND 18 OF ANNEXURE A-2 WERE TWO LOOSE PAPERS, ON WHICH CERTAIN ENTRIES RELATED TO THE ASSESSEE COMPANY, WERE NOTED. ACCORD ING TO ASSESSING OFFICER, THE ASSESSEE COULD NOT EXPLAIN THESE TRANSACT IONS NOR HE COULD CORRELATE THESE ENTRIES WITH THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSING OFFICER FURTHER NOTED THAT THERE WERE NUMBER O F UNSIGNED VOUCHERS WHICH WERE NOT PROPERLY ACCOUNTED FOR IN THE BO OKS OF THE ASSESSEE PRIOR TO THE DATE OF SEARCH. THE TOTAL UNSIGNED VOUCHERS OF EXPENSES DETECTED FROM THE IMPOUNDED MATERIALS AS WELL A S SEIZED FROM SHRI M.G.PATEL WAS RS.13,04,529/-. THE ASSESSING OFFICER A FTER TAKING INTO CONSIDERATION THE REPLY OF ASSESSEE DATED 6.2.1995 MADE A N ADDITION OF RS.10,54,529/-. THE ASSESSING OFFICER HAS GIVEN CREDIT OF O NLY RS. 2.5 LACS AS DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SEARCH. HOWEVE R, THE ASSESSING OFFICER DID NOT GIVE THE BENEFIT OF DISCLOSURE O F RS. 6 LACS WHICH WAS DISCLOSED BY THE ASSESSEE ON ACCOUNT OF UNDER INVOICING. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER. HOWEVER, THE REV ENUE DID NOT ACCEPT THE APPELLATE ORDER AND FILED APPEAL BEFORE TH E TRIBUNAL. THE TRIBUNAL DECIDED THE APPEAL VIDE ITS ORDER DATED 29. 4.2005 WHEREIN ADDITION OF RS. 10,54,529/- MADE ON ACCOUNT OF UNEXPLA INED AND UNRECORDED EXPENSES, WHICH WAS DELETED BY THE CIT(A) WA S RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VER IFY THE TRANSACTION IN RESPECT OF PAGE NOS. 17 AND 18 OF THE SEIZED MATERIA L INVENTORIESED AS ANNEXURE A-2. BEFORE GIVING EFFECT TO THE DIRECTION O F THE TRIBUNAL, THE ASSESSING OFFICER GAVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND RECOMPUTED TOTAL INCOME AT RS.8,81,281/-. THE EXPLANAT ION GIVEN BY THE 3 ASSESSEE IN RESPECT OF CREDIT ENTRIES OF RS.1,92,350/- AND D EBIT ENTRIES OF RS. 3,85,358/- WAS NOT FOUND SATISFACTORY AND, THEREFO RE, THE ASSESSING OFFICER ADDED BACK CREDIT AS WELL AS DEBIT ENTRIES WHILE GIVING EFFECT TO THE TRIBUNALS ORDER. ACCORDINGLY, THE ASSESSING OFFICER REVISE D THE TOTAL INCOME OF THE ASSESSEE AS UNDER: TOTAL INCOME AS PER CIT(A) ORDER DATED 26.02.97 (BEFORE ADJUSTMENT OF DEPRECIATION) 3,03,573 ADD: THE ADDITIONS RETAINED BY THIS ORDER (I) CREDITS NOT PROVED 1,92,350/- II) EXPENSES 3,85,358 5,77,708 REVISED INCOME 8,81,281 LESS: C/F DEPRECIATION FOR A.Y.92-93 TO THE EXTENT 8,81,281 TOTAL INCOME NIL 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER DATED 13.9.2005 PASSED U/S 143(3) READ WITH SEC. 254 OF THE ACT, THE ASSESSE E FILED AN APPEAL BEFORE THE CIT(A). 5. AS REGARDS THE ADDITION OF RS. 1,92,350/-, THE ASSESSEE TOOK THE FOLLOWING LINE OF ARGUMENTS BEFORE THE CIT(A): I) THAT THE ASSESSING OFFICER HAS FAIALED TO APPRECIATE THE EXPLANATION GIVEN IN RESPECT OF THE SEIZED MATERIAL INVENTORISED AS ANNEXURE A-2 IN RESPECT OF PAGE NOS. 17 AND 18. THE NOTINGS ON PAGE NOS. 17 AND 18 OF ANNEXURE A- 2 HAVE BEEN TREATED BY THE ASSESSING OFFICER AS CREDITS AS FAR AS IT IS MENTIONED ON THE LEFT SIDE OF THE PAPERS AND A RE TREATED AS EXPENDITURE WHICH ARE WRITTEN ON THE OTHER SIDE OF THE PAPERS. II) THAT ALL THE CREDITS MENTIONED IN THE LOOSE PAPERS ARE EITHER WITHDRAWALS FROM THE BANK ACCOUNT OR RETURNED FROM THE 4 AMOUNT TAKEN BY THE PRINCIPAL/EMPLOYEE ON PREVIOUS DA TE INCURRING IN THE LOOSE PAPERS ITSELF. SIMILARLY, ALL T HE OUTGOINGS ARE NOT EXPENSES OF THE ASSESSEE. MOST OF THE AMOUNTS REPRESENT THE MONETARY TRANSACTIONS. III) THAT THE ASSESSEE WAS NOT ABLE TO EXACTLY PIN-POINT THE CLARIFICATION AS REGARDS TO RS. 80,400/- COMPRISING OF AM OUNT OF RS. 200/-, 10,000/-, 12,000/-, 7900/-, 500/- AND 50,000/- MENTIONED ON THE CREDIT SIDE OF THE LOOSE PAPERS. THI S AMOUNT REMAINED UNEXPLAINED. IV) THAT THE ABOVE AMOUNT HAS ALREADY BEEN INCLUDED AS INC OME OF THE ASSESSEE WHICH IT HAD DISCLOSED DURING THE COURSE OF 132 PROCEEDINGS OF RS.8,50,000/- REPRESENTED BY SUPPRESSED RECEIPTS OF RS.6 LACS AND UNEXPLAINED EXPENSES OF RS.2,50,000/- AS REFERRED TO IN THE ORIGINAL ASSESSMENT O RDER AT PAGE 6 AND WHICH IS ALREADY SHOWN IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. V) THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SEPARATE ADDITION OF RS.1,92,350/- TO THE TOTAL INCOME . IN VIEW OF THE ABOVE, IT WAS SUBMITTED BY THE ASSESSEE B EFORE THE CIT(A) THAT THE ADDITION OF RS. 1,92,350/- MAY BE DE LETED. 6. THE CIT(A) DELETED THE ADDITION OBSERVING AS UNDER : 6.6 I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISSION O F THE APPELLANT. I HAVE ALSO GIVEN DUE THOUGHT TO THE ARGUMENT PUT FORTH BY THE AUTHORISED REPRESENTATIVE. THE ENTRIES R ECORDED ON PAGE NOS. 17 & 18 OF ANNEXURE A-2 HAVE ALSO BEEN VERI FIED. AS PER THE ASSESSING OFFICER THE ENTRIES RECORDED ON PAGE NOS. 1 7 & 18 TALLIED WITH THE BANK STATEMENT AND WHATEVER ENTRIES TALLIED HAVE BEEN ACCEPTED BY HIM AS GENUINE. DURING THE COURSE OF SEA RCH, THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF ENTRIES MENTIONE D ON THE PAPERS AND HENCE, IT HAD MADE DISCLOSURE OF RS.8,50,000/ - FOR THE SAKE OF MENTAL PEACE. THE APPELLANT HAS EXPLAINED THAT ALL THE CREDITS (AS PER ASSESSING OFFICER) ARE NOT IN THE NATURE OF REVENUE AND THIS FACT IS PROVED BY THE VERIFICATION MADE BY THE ASSESSING 5 OFFICER. THUS, MAJOR ENTRIES RECORDED ON PAGE NOS. 17 & 18 OF ANNEXURE A-2 ARE CASH WITHDRAWALS FROM THE BANKS AND SO URCE OF AMOUNTS DEPOSITED IN BANKS IN RESPECT OF THOSE ENTRIES A RE FOUND GENUINE BY THE ASSESSING OFFICER. FOR REST OF ENTRIES WHI CH HAVE BEEN TREATED AS CREDIT ENTRIES, NATURE IS NOT ASCERTAINE D I.E. WHETHER IT IS REVENUE OR CAPITAL. NO DOUBT, THE BURDE N LIES UPON THE APPELLANT TO PROVE THE NATURE OF TRANSACTIONS RECORDED ON THOSE SEIZED PAPERS. BUT DURING THE COURSE OF SEARCH, THE ASSESSEE WAS UNABLE TO EXPLAIN THE NATURE OF ENTRIES RECORDED ON T HOSE PAPERS, HENCE THEY MADE DISCLOSURE OF RS.6 LAKH TO COVER UP TRANSA CTIONS OF REVENUE NATURE. AS NATURE OF REST OF ENTRIES IS NOT A SCERTAINABLE, HENCE, THE SAME MAY BE TREATED AS COVERED BY DISCLOSURE O F RS.6 LAKH AND NO SEPARATE ADDITION ON THIS ACCOUNT IS FOUND T O BE JUSTIFIABLE. THEREFORE, THE ASSESSING OFFICER IS DIRECTED T O DELETE THE ADDITION OF RS.1,92,350/-. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS SEEN THAT DURING THE COURSE OF SEARCH, THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF ENTRIES MENTIONED IN THE PAPERS AND HENCE, IT HAD MADE DISCLOSU RE OF RS. 8,50,000/-. IT IS ALSO RELEVANT TO STATE THAT MAJOR EN TRIES RECORDED ON PAGE NOS.17 AND 18 OF ANNEXURE A-2 ARE CASH WITHDRAWAL S FROM THE BANK AND SUMS OF AMOUNTS DEPOSITED IN BANKS IN RESPECT OF THOSE ENTRIES ARE FOUND GENUINE BY THE ASSESSING OFFICER. HOWEVER, REST OF E NTRIES COULD NOT BE EXPLAINED BY THE ASSESSEE. IN OUR VIEW, THE BURDEN W AS UPON THE ASSESSEE TO PROVE THE NATURE OF TRANSACTIONS RECORDED ON THOSE SEIZED PAPERS. IT IS APPARENT FROM THE ORIGINAL ASSESSMENT RECOR D THAT DURING THE COURSE OF SEARCH, THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF ENTRIES RECORDED ON THOSE PAPERS, HENCE THEY MADE DISCLOSURE OF RS. 6 LAKHS TO COVER UP TRANSACTIONS OF REVENUE NATURE. IN OUR VIEW, T HE CIT(A) HAS CORRECTLY HELD THAT THE IMPUGNED ADDITION MAY BE TREA TED AS COVERED BY DISCLOSURE OF RS.6 LAKHS AND NO SEPARATE ADDITION ON THIS ACCOUNT IS JUSTIFIED. THUS, IT IS CLEAR THAT THE AMOUNT OF RS.1,92 ,350/- IS COVERED BY THE DISCLOSURE OF RS. 6 LAKHS MADE DURING THE COURSE OF SE ARCH AND, THEREFORE, NO SEPARATE ADDITION IS REQUIRED. ACCORDINGL Y, WE UPHOLD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 1,92,350/-. 6 8. THE NEXT ISSUE RELATES TO DELETION OF ADDITION OF R S. 3,85,358/- MADE ON ACCOUNT OF UNEXPLAINED DEBIT ENTRIES RECORDED O N PAGE NOS. 17 AND 18 OF ANNEXURE A-2. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 4 OF ORDER DATED 13.9.2005 PASSED U/S 143(3) READ WITH SEC. 254 OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT TOTAL EXPENSES RECORDED ON PAGE NOS. 17 AND 18 OF ANNEXURE A-2 ARE RS.4,52,239/- . HE FURTHER OBSERVED THAT THE ASSESSEE HAD MADE DISCLOSURE OF RS. 2,50,0 00/- ON ACCOUNT OF EXPENSES WHICH HAS BEEN ALLOWED TO BE SET OFF AGAINST EXPENSES OF RS.1,83,118/- RECORDED ON SEIZED PAPERS OTH ER THAN PAGE NOS. 17 AND 18. HE FURTHER OBSERVED THAT REMAINING AMO UNT OF RS.66,881/- IS ALLOWED TO BE ADJUSTED AGAINST THE EXPE NSES RECORDED ON PAGE NOS. 17 AND 18 AMOUNTING TO RS.4,50,239/-. BUT, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF REMAINING AMOUNT OF RS. 3,85,358/-. HE, THEREFORE, MADE THE ADDITION OF RS.3,85,358/-. 9. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSERV ING AS UNDER: 7.4 THE CONTENTION OF' AUTHORISED REPRESENTATIVE HAS B EEN CAREFULLY CONSIDERED. PROPER THOUGHT TO THE WRITTEN SU BMISSION OF THE APPELLANT, HAS BEEN GIVEN. TRANSACTION RECORDED ON PAGE'NO.17 & 18 OF ANNEXURE A-2 HAS BEEN PERUSED. IT IS A FACT TH AT DURING THE COURSE OF SEARCH, THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF TRANSACTIONS RECORDED IN THOSE .SEIZED PAPER AND FOR THE SAKE OF MENTAL PEACE, A DISCLOSURE OF RS.8,50,000/- WHICH CONSISTS O F RS.6 LAKH FOR COVERING REVENUE RECEIPTS AND RS.2,50,000/- F OR EXPENSES, WAS MADE. ON PERUSAL OF PAGE NOS.L7 & 18, IT IS NOTICED THAT THE AMOUNT TREATED AS PAYMENTS BY THE ASSESSING OFFICER ARE E ITHER MADE TO PRADIP, ARVIND, ATUL, RANABHAI OR FOR PETRO L AND RENT. THE APPELLANT HAS CONTENDED THAT ALL PAYMENTS SHOWN ARE NOT IN THE NATURE OF EXPENSES. CERTAIN DEBIT ENTRIES ARE MADE FOR MAKING CASH DEPOSIT IN BANK AND SOME IN THE FORM OF LOAN. THEREFO RE, ALL THE DEBIT ENTRIES TREATED BY THE ASSESSING OFFICER AS EXPENSE S ARE NOT JUSTIFIABLE. THE ASSESSING OFFICER HAD EXAMINED THE BAN K STATEMENT AND MAJOR CREDIT ENTRIES RECORDED ON PAGE NO. 17 A 18 AND WERE FOUND TO BE TALLIED. IT APPEARS THAT THE PA YMENTS SHOWN ON THESE PAPERS ARE FROM OUT OF CREDIT AMOUNT RECORDED THEREIN. THEREFORE, SEPARATE ADDITION ON ACCOUNT OF EXPENSES, IS NOT FOUND JUSTIFIABLE BECAUSE THE MAJOR CREDIT ENTRIES ARE BY WAY OF 7 WITHDRAWALS FROM THE BANKS AND THE SOURCE ,OF DEPOSIT IN SAID BANK WAS FOUND GENUINE BY THE/ASSESSING OFFICER. AS ALL THE PAY MENTS RECORDED ON THESE PAPERS APPEAR TO BE NOT IN THE NATUR E OF REVENUE AND THE ASSESSEE HAS MADE DISCLOSURE OF RS.2,50,000/- TO COVE R UP THE EXPENSES OF REVENUE NATURE, HENCE SEPARATE ADDITION ON ACCOUNT OF EXPENSES WORKED OUT BY THE ASSESSING OFFICER IS NOT FOUND TO BE JUSTIFIED. IN VIEW OF THESE FACTS, THE ASSESSI NG OFFICER IS DIRECTED TO DELETE, THE ADDITION OF RS.3,85.358/-. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI S.N.SOPA RKAR, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS A NEGATIVE BALANCE AS ON 16.7.1992 OF RS. 1,55,450/- ONLY. AS REGA RDS SOURCE OF THIS AMOUNT, THE ASSESSEE HAS ALREADY DISCLOSED INCOME BY WAY OF SALES OUTSIDE THE BOOKS OF ACCOUNT OF RS.8,50,000/- FOR THE AS SESSMENT YEAR UNDER CONSIDERATION. THIS AMOUNT HAS ALREADY BEEN SHOWN IN THE RETURN OF INCOME. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, T HE ABOVE AMOUNT OF RS.1,55,450/- IS MET, OUT OF THE ABOVE INCOM E. HE FURTHER SUBMITTED THAT OUT OF ABOVE MENTIONED OUTGOINGS, EXPE NSES ARE TO THE TUNE OF RS.20,139/- WHICH CAN BE SAID TO BE EXPENSES WHICH WERE MET WITH OUT OF ABOVE MENTIONED DISCLOSURE OF EXPENSES OF R S.2,50,000/- WHICH WAS THOUGH SPENT FOR THE BUSINESS OF THE ASSESSEE F OR THE EARNING OF DISCLOSED AMOUNT, THE ASSESSEE HAS OFFERED TO TAX AND IS INCLUDED IN THE ABOVE AMOUNT OF RS.8,50,000/- AND, THEREFORE, NO SEPARATE ADDITION COULD HAVE BEEN MADE. IN OUR VIEW, THE CIT(A) HAS CORR ECTLY HELD THAT THE IMPUGNED ADDITION IS NOT SUSTAINABLE. THE CIT(A) HAS CA TEGORICALLY HELD THAT THE PAYMENT SHOWN ON THESE PAPERS ARE FROM OUT OF CREDIT AMOUNT RECORDED THEREIN. HE, THEREFORE, HELD THAT SEPARATE AD DITION ON ACCOUNT OF EXPENSES WAS NOT JUSTIFIED BECAUSE THE MAJOR CREDIT ENTRIE S WERE BY WAY OF WITHDRAWALS FROM THE BANKS AND THE SOURCE OF DEPOSIT IN THE SAID BANK WAS FOUND GENUINE BY THE ASSESSING OFFICER. THUS, CONSIDERIN G THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VI EW THAT THE ORDER OF THE CIT(A) REQUIRES NO INTERFERENCE AT OUR L EVEL AND, THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A). 8 11. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11.9 .2009. SD/- (N.S.SAINI) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED:11.9.2009 PSP* COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.