ACIT, Varanasi V. M/s Carpet International (P)Ltd., Bhadohi

ITA 185/ALLD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63392 (ITAT-ALLAHABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP CHAUHAN
• Assessee Lawyers: A K THUKRAL
• Keywords: Bogus purchase; Unexplained expenditure; Search and seizure; Loose papers; Principle of natural justice; Onus to prove
• Section: 69C; 40A(3); 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.185/ALLD/2011 ASSESSMENT YEAR: 2009-10 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. CARPET INTERNATIONAL PVT. LTD., CENTRAL CIRCLE, VARANASI. GYANPUR ROAD, BHADOHI. (PAN : AACCC 5203 E). APPELLANT BY : SHRI SANDEEP CHAUHAN, CIT D.R. RESPONDENTS BY : SHRI BHUPENDRA SHAH, C.A. & SHRI A.K. THUKRAL, C.A. DATE OF HEARING : 06.11.2012 DATE OF PRONOUNCEMENT : 13.12.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 20.06.2011 PASSED BY THE LD. CIT(A), VARANASI FOR THE ASSESSME NT YEAR 2009-10. 2. THE REVENUE HAS RAISED AS MANY AS 6 GROUNDS OF A PPEAL BUT THE EFFECTIVE GROUND OF APPEAL IS ONLY ONE GROUND PERTAINING TO A DDITION OF RS.10,69,69,000/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AN D SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTE R THE ACT) WAS CONDUCTED IN ITA NO.185/ALLD/2011 AYS. 2009-10 2 THE RESIDENTIAL AND BUSINESS PREMISES OF M/S. CARPE T INTERNATIONAL, M/S. CARPET INTERNATIONAL PVT. LTD., BHADOHI, ITS DIRECTORS, IT S PARTNERS, ITS SISTER CONCERNS AND OTHER GROUP CASES ON 11.02.2009. THE WARRANTS OF A UTHORIZATION FOR SEARCH OF RESIDENTIAL AND BUSINESS PREMISES WAS ISSUED BY THE DIRECTOR OF INCOME TAX (INV.), KANPUR ON 03.02.2009. DURING THE COURSE OF SEARCH, LOOSE PAPERS, DOCUMENTS, FDRS. AND COMPUTERS, ETC. AS PER ANNEXURES TO THE V ARIOUS PANCHANAMAS DRAWN, WERE FOUND AND SEIZED. 4. THE ASSESSEES RETURN OF INCOME FOR THE A.Y. 200 9-10 WAS FILED ON 30.09.2009 IN ITR-5, DISCLOSING TOTAL INCOME OF RS. 1,27,45,890/-. THE CASE WAS PROCESSED AS SUCH. THE CASE WAS SELECTED OR SCRUTI NY AND NOTICE UNDER SECTION 143(2) DATED 10.06.2010 WAS ISSUED AND SERVED UPON THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTI CED THAT THE LEDGER OF M/S. CARPET INTERNATIONAL FOR THE PERIOD F.Y. 2008-09 WA S SEIZED AS PER ANNEXURE-A PAGE 1 SL. NO. 9 OF PANCHANAMA DATED 11.02.2009. A S PER PAGE 211 OF SAID LEDGER THE PAYMENT OF RS.10,69,69,000/- VIDE CHEQUE NO.834 495 DATED 19.07.2008 WAS MADE TO M/S. CARPET INTERNATIONAL PVT. LTD., BHADOH I, SISTER CONCERN OF THE ASSESSEE FIRM. LEDGER OF M/S. CARPET INTERNATIONAL (SL. 9 P AGE 1 OF ANNEXURE A TO PANCHANAMA DATED 11.02.2009) SHOWS THAT RS.10,69,69 ,000/- WERE PAID TO THE ITA NO.185/ALLD/2011 AYS. 2009-10 3 ASSESSEE, M/S. CARPET INTERNATIONAL PVT. LTD. VIDE CHEQUE NO.834495 DATED 19.07.2008. 6. THE A.O. REPRODUCED SCANNED COPIES OF LEDGER ACC OUNT FROM BOOKS OF ACCOUNT OF BOTH THE PARTIES, M/S. CARPET INTERNATIO NAL PVT. LTD. AND M/S. CARPET INTERNATIONAL AT PAGE NO.2 OF HIS ORDER. THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE PAYMENT OF RS.10,69,69,000/-. THE ASSESSEE EXPLAIN ED IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT THAT AT THE TIME OF SEARCH, DURING THE COURSE OF AGREEMENT IN FAMILY PARTITION, M/S. CARPET INTERNAT IONAL WAS TO PURCHASE FINISHED GOODS FROM SISTER CONCERN I.E. THE ASSESSEE M/S. CA RPET INTERNATIONAL PVT. LTD. IN COMPENSATION OF THE SAME THIS PAYMENT WAS MADE. TH E CONTENTS OF STATEMENTS OF SHRI PRAMOD KUMAR BARANWAL DATED 11.02.204 UNDER SE CTION 132(4) IS REPRODUCED AT PAGE NO.3 OF A.O.S ORDER. DURING POST SEARCH E NQUIRY, STATEMENT ON OATH OF BOTH SHRI PRADEEP KUMAR BARANWAL, DIRECTOR OF M/S. CARPET INTERNATIONAL PVT. LTD. (CLAIMED TO BE SELLER) AND SHRI PRAMOD KUMAR BARANW AL, PARTNER OF M/S. CARPET INTERNATIONAL (CLAIMED TO BE BUYER) WERE RECORDED U NDER SECTION 131 OF THE ACT. THE A.O. HAS REPRODUCED THE SCANNED CONTENTS IN HIS ORDER AT PAGE NOS.4 TO 6 (STATEMENT OF SHRI PRAMOD KUMAR BARANWAL DATED 14.0 3.2009 & 20.03.2009 AND STATEMENT OF SHRI PRADEEP KUMAR BARANWAL DATED 17.0 3.2009). THE A.O. MADE ADDITION OF RS.10,69,69,000/- AS UNDER:- (PARAGRAPH NOS.6.2 & 6.3, PAGE NO.11) ITA NO.185/ALLD/2011 AYS. 2009-10 4 6.2 IN THE LIGHT OF THE ABOVE DISCUSSION, IT IS AM PLY CLEAR THAT THE ALLEGED PURCHASES WERE NEVER BEEN MADE AND THE ASSE SSEE HAS MERELY DONE A WINDOW DRESSING KIND OF A THING JUST TO ACCO MMODATE UNACCOUNTED RECEIPTS AFTER FAMILY PARTITION TOOK PL ACE IN THE FAMILY. SUBMISSION OF A SALE CERTIFICATE CANNOT BELIE THE F ACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE. 6.3 THEREFORE, AMOUNT OF RS.10,69,69,000/- RECEIVED BY THE ASSESSEE IS NOTHING BUT WINDFALL GAIN WITHOUT DOING ANY BUSINESS ACTIVITIES FOR THAT MATTER AND THE SAME IS TREATED AS INCOME FROM OTHER SOURCES AND ACCORDINGLY ADDED TO THE TOTAL INCOME O F THE ASSESSEE. PENALTY U/S 271(1)(C) R.W.S. 274 OF THE ACT, IS BEI NG INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 7. THE CIT(A) HAS DELETED THE ADDITION. BEFORE DEL ETING THE ADDITION, THE CIT(A) CONSIDERED ASSESSEES SUBMISSIONS AND EXPLAN ATIONS. HE HAS CONSIDERED A.O.S CASE RECORD WHICH HAS BEEN PRODUCED BY THE A .O. BY HIS PERSONAL APPEARANCE DATED 25.03.2011. THE FINDING OF CIT(A) IS REPRODUCED AS UNDER :- (PARAGRAPH NO.8 PAGE NOS.7 TO 12) 8. ON GOING THROUGH THE FACTS OF THE CASE AS PER G ROUNDS TAKEN BY THE ASSESSEE AND CONSIDERING THE AOS FINDINGS AS W ELL AS PLEADING OF ASSESSEES COUNSEL, IT IS FOUND THAT THE LEDGER OF THE ASSESSEE COMPANY AND THAT OF M./S. CARPET INTERNATIONAL WERE SEIZED VIDE PANCHANAMA DATED 11.02.2009 MARKED AS ANNEXURE-A, PAGE 1, S. N O.9. A PERUSAL OF THE SAME REVEALS THAT THE PAYMENT OF RS.10,69,69 ,000/- WAS RECEIVED BY THE ASSESSEE COMPANY VIDE CHEQUE NO.834 495 DATED 19.07.2008 AND THE SAME TRANSACTION IS REFLECTED IN THE LEDGER OF M/S. CARPET INTERNATIONAL. THE RELEVANT PAGES OF THE TW O LEDGERS HAVE BEEN SCANNED IN THE ASSESSMENT ORDER. WHAT LED TO THE ADVERSE INFERENCE OF THE ASSESSING OFFICER IS THAT THE PURC HASE REGISTER AND BILLS/VOUCHERS WERE NOT FOUND DURING SEARCH AND THE SAME WERE ALSO NOT PRODUCED DURING POST SEARCH ENQUIRIES. BUT WHE N THE PURCHASE REGISTER WAS PRODUCED BEFORE HIM DURING THE ASSESSM ENT PROCEEDINGS, HE DID NOT TAKE ANY PAIN TO MAKE ANY ENQUIRY FROM T HE SELLERS ON TEST CHECK BASIS SO AS TO ESTABLISH THAT THE PURCHASE RE GISTER WAS CONCOCTED AFTER THOUGHT. THE ASSESSEE WAS ALSO NOT ALLOWED AN ITA NO.185/ALLD/2011 AYS. 2009-10 5 OPPORTUNITY TO GET THE PURCHASES VERIFIED DIRECTLY. I FIND THAT THE REGISTER CONTAINS NAMES AND ADDRESSES OF THE SELLER S AND BEFORE MAKING THE ENTIRE ADDITION TO THE MAGNITUDE OF RS.1 0,69,69,000/- THE ASSESSING OFFICER SHOULD HAVE ENQUIRED SO AS TO EST ABLISH THAT THE PURCHASES WERE ACTUALLY BOGUS. HE SIMPLY RELIED ON THE VERSION OF THE SEARCH PARTY PUTTING HIS LEGS IN THE SHOES OF OTHER S. THE A.O. HAS VIOLATED THE PRINCIPLE OF JUSTICE. IN THE CASE OF GARGI DIN JWALA PRASAD VS. CIT (1974) 96 ITR 97 (ALLD), THE HONBLE ALLAHABAD HIGH COURT HAS HELD THAT THE PRINCIPLE OF NATURAL JUSTICE ARE APPLICABLE TO THE ASSESSMENT PROCEEDINGS. THE ELEM ENTARY PRINCIPLE OF NATURAL JUSTICE IS THAT THE ASSESSEE SHOULD HAVE KNOWLEDGE OF THE MATERIAL WHICH IS GOING TO BE USED AGAINST HIM SO T HAT HE MAY BE ABLE TO MEET IT. THE ASSESSING OFFICER HAS STATED THAT THE PAYMENT B Y ACCOUNT PAYEE CHEQUE IS NOT VERIFIABLE WHEREAS THE PAYMENT IS FULLY VERIFIABLE FROM BANK STATEMENT OF THE ASSESSEE. IN CASE THE P AYMENT HAS BEEN MADE BY OTHER THAN CROSSED OR ACCOUNT PAYEE CHEQUE, THE CLUTCHES OF SECTION 40A(3) IS AVAILABLE IN CASE OF M/S. CARPET INTERNATIONAL AND NO ADVERSE INFERENCE CAN BE TAKEN AGAINST THE ASSES SEE. THE STATEMENTS OF THE DIRECTOR OF ASSESSEE COMPANY SHRI PRADEEP KUMAR BARANWAL AND PARTNER OF M/S. CARPET I NTERNATIONAL SHRI PRAMOD KUMAR BARANWAL WERE RECORDED U/S 132(4) DURING SEARCH AND SEIZURE OPERATION ON 11.02.2009 AND DURI NG POST SEARCH ENQUIRY ON 14.03.2009, 17.03.2009 AND 20.03.2009 DU LY SCANNED IN THE ASSESSMENT ORDER. BOTH THE PERSONS HAVE ADMITT ED THAT THE PAYMENTS WERE MADE AGAINST PURCHASES ALTHOUGH AT ON E PLACE SHRI PRAMOD KUMAR BARANWAL SAID THAT DURING THE COURSE O F AGREEMENT IN FAMILY PARTITION, HIS FIRM M/S. CARPET INTERNATIONA L WAS TO PURCHASE FINISHED GOODS FROM SISTER CONCERN M/S. CARPET INTE RNATIONAL (P) LTD. AND IN COMPENSATION OF THE SAME, THIS PAYMENT HAS B EEN MADE. THE STATEMENT OF FAMILY PARTITION ALONE DOES NOT ESTABL ISH THAT THE PAYMENT WAS MADE OUT OF UNACCOUNTED MONEY ON PARTITION. A SIMPLE MEANING CAN BE DERIVED THAT THE ASSESSEE WAS BOUND TO SELL THE FINISHED GOODS TO M/S. CARPET INTERNATIONAL ON THE LATTERS DEMAND ED QUANTITY AND COST IN COMPENSATION OF FAMILY DISRUPTION. THE ASS ESSING OFFICER HAS NOT ALLOWED AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE. SHRI PRAMOD KUMAR BARANWAL FOR THE SAID STATEMENT ALTHOU GH A WRITTEN REQUEST WAS MADE BY THE ASSESSEE. AS SUCH THE STAT EMENT OF SHRI PRAMOD KUMAR BARANWAL CANNOT BE USED AGAINST THE AS SESSEE COMPANY. ITA NO.185/ALLD/2011 AYS. 2009-10 6 A DIARY AS PER ANNEXURE-A, S.NO.A-8 OF PANCHANAMA D ATED 12.02.2009 WAS SEIZED FROM M/S. CARPET INTERNATIONA L, BYE PASS ROAD, BHADOHI WHICH CONTAINS SOME NOTINGS SCANNED I N THE ASSESSMENT ORDER. THE DIARY IS IN THE HAND WRITING OF SHRI PRAMOD KUMAR BARANWAL AND IT WAS SEIZED FROM HIS BUSINESS PREMISES I.E., M/S. CARPET INTERNATIONAL, BHADOHI. IT IS INDEED TRUE THAT AFTER 31.03.2008, THEASSESSE S COMPANY WAS EXCLUSIVELY OWNED BY SHRI PRADEEP KUMAR BARANWA L AND HIS FAMILY MEMBERS AND M/S. CARPET INTERNATIONAL WAS EX CLUSIVELY TAKEN OVER BY SHRI PRAMOD KUMAR BARANWAL AND HIS FAMILY M EMBERS. BUT NOTINGS ON DIARY MADE BY SHRI PRAMOD KUMAR BARANWAL AFTER 01.04.2008 HAVE NOTHING TO DO WITH THE ASSESSEE COM PANY WHEN IT SERVED THE JOINT BUSINESS RELATIONSHIP WITH SHRI PR AMOD KUMAR BARANWAL. FROM 01.04.2008, SHRI PRAMOD KUMAR BARAN WAL WAS A THIRD PERSON AND THE SEIZED MATERIAL FOUND IN HIS POSSESSION AND WRITTEN BY HIM CANNOT BE USED AGAINST ASSESSEE FOR TREATING A GENUINE TRANSACTION OF RS.10,69,69,000/- AS NON-GENUINE. E VEN OTHERWISE THE ASSESSEE COMPANY WAS NOT ALLOWED TO CROSS EXAMINE S HRI PRAMOD KUMAR BARANWAL, WHEN HIS DIARY WAS USED TO FORM AN OPINION AGAINST THE ASSESSEE COMPANY. AS PER SEVERAL CASE LAWS CIT ED BELOW IT IS THE DUTY OF THE A.O. TO ENFORCE ATTENDANCE OF A WITNESS IF HIS EVIDENCE IS MATERIAL. THUS IF THE A.O. DOES NOT EXERCISE HIS P OWER TO CALL THE WITNESS AND EXAMINE HIM, HE CANNOT TREAT ANY EVIDEN CE AGAINST ASSESSEE. IN A PROPER CASE THE A.O. SHOULD EXERCIS E ALL HIS POWERS TO COLLECT ALL EVIDENCE AND COLLECT ALL MATERIALS BEFO RE COMING TO PROPER CONCLUSION. THIS IS THE LEGAL DUTY OF THE OFFICER CONCERNED WHO IS VESTED U/S 131 WITH CERTAIN POWERS IN RESPECT TO CE RTAIN MATTERS. SEVERAL JUDICIAL PRONOUNCEMENTS ARE AVAILABLE ON TH IS ISSUE LIKE I) EMC WORKS PVT. LTD. VS. ITO (1963) 49 ITR 650 (A LLD) II) MEHBOOB SINGH SUBHAS CHAND ARHATI VS. CST (1988 ) 69 STC 229, 230 (ALLD) III) RADHEY SHYAM JAGDISH PD. (1979) 117 ITR 186 (A LLD) ONE CRYSTAL SPIRAL NOTE BOOK WAS SEIZED FROM THE RE SIDENCE OF THE DIRECTOR OF THE ASSESSEE COMPANY AS PER ANNEXUR E A, S.NO.A-2 OF PANCHANAMA DATED 11.02.2009, WHICH HAS BEEN SCANNED IN THE ASSESSMENT ORDER IN PARA NO.5. THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS HAS STATED THAT HE HAS PROVED ALL THE ENTRIES OF TRANSACTION OF THE SAID DIARY PERTAINING TO HIS FAM ILY MEMBERS BEFORE THE LEARNED ASSESSING OFFICER EXCEPT CASH OF RS.1,5 5,00,000/- WHICH HAS BEEN SURRENDERED BY THE DIRECTOR OF ASSESSEE CO MPANY SHRI ITA NO.185/ALLD/2011 AYS. 2009-10 7 PRADEEP KUMAR BARANWAL U/S 132(4) IN HIS PERSONAL C ASE. THE ENTRIES OF TRANSACTION IN CASES OF FAMILY MEMBERS O F SHRI PRADEEP KUMAR BARANWAL HAVE BEEN ACCEPTED BY THE LEARNED AS SESSING OFFICER IN THEIR INDIVIDUAL CASES, I DO NOT FIND ANY JUSTIF ICATION TO DOUBT THE ENTRY OF RS.10,69,69,000/- BY THE ASSESSING OFFICER ON THE SAID NOTE BOOK WHEN OTHER PART OF THE ENTRIES OF TRANSACTION RELATING TO THE FAMILY MEMBERS OF SHRI PRADEEP KUMAR BARANWAL HAVE BEEN ACCEPTED BY HIM. THE ASSESSEES COUNSEL HAS ARGUED THAT EVEN IF THE ASSESSING OFFICERS INFERENCE IS TAKEN FOR GRANTED THAT THE S UM OF RS.10,69,69,000/- IS A WINDFALL GAIN BY THE ASSESSE E ON FAMILY SETTLEMENT, IT WILL ALSO BE OUT OF THE SCOPE OF TAX ATION. FOR THIS HE HAS RELIED ON THE FOLLOWING CASE LAWS:- 1. CIT VS. A.L. RAMBATHAN (2203) 128 TAXMAN 87 (MAD RAS) 2. MRS. P. SHEELA VS. ITO VIDE ITATS BANGALORE ORD ER DATED 19.03.08 3. KAYAAR ENTERPRISE VS. JCIT (2009) 99 TTJ (CHENNA I) 411 I AM NOT IN A POSITION TO ACCEPT THE A.O.S FINDING FOR TAKING THE SUM OF RS.10,69,69,000/- TREATING IT A WINDFALL GAI N ON FAMILY PARTITION IN VIEW OF THE ABOVE CASE LAWS AND THE FACT THAT TH E A.O. COULD NOT ESTABLISH WITH COGENT EVIDENCES THAT THE SAID AMOUN T CAME OUT ON FAMILY SETTLEMENT FROM UNACCOUNTED MONEY. ON THE O THER HAND I FIND THAT THE TRANSACTION WAS DULY RECORDED IN THE TWO L EDGERS SEIZED DURING SEARCH. THE MONEY RECORDED IN THE BOOKS OF ACCOUNT CANNOT BE TREATED AS UNACCOUNTED. THE SAID LEDGERS UNDER SEI ZURE CANNOT BE SAID TO BE PREPARED AFTER THOUGHT. THE ASSESSING OFFICER HAS REJECTED THE CERTIFICATE ISSUED BY M/S. CARPET INTERNATIONAL CERTIFYING THAT THE SAME LOT O F CARPETS WHICH WERE PURCHASED BY THEM FROM THE ASSESSEE COMPANY WA S SOLD TO M/S. IKEA TRADING (INDIA) LTD., SAYING ONLY THAT SUBMISS ION OF A SALE CERTIFICATE CANNOT BELIE THAT FACTS AND CIRCUMSTANC ES OF OTHER FACTS. ALTHOUGH, THE A.O. HAS NOT DISPUTED THE SALES MADE TO IKEA TRADING (INDIA) LIMITED, I FURTHER FIND THAT IN STATEMENT R ECORDED ON 14.03.2009, SHRI PRAMOD KUMAR BARANWAL ADMITTED THA T THE SAID CARPETS WERE SOLD TO THE ABOVE COMPANY. NOW THE QU ESTION ARISES THAT HOW THE SALE OF GOODS WAS MADE TO THE ABOVE COMPANY WHEN THEIR PURCHASES FROM THE ASSESSEE COMPANY ARE DEEMED TO B E BOGUS. THE APPEAL IN CASE OF M/S. CARPET INTERNATIONAL FOR THE YEAR UNDER ITA NO.185/ALLD/2011 AYS. 2009-10 8 CONSTITUTION IS ALSO PENDING BEFORE THE UNDERSIGNED AND THE ADDITION OF RS.10,69,69,000/- HAS ALSO BEEN MADE IN THE CASE OF M/S. CARPET INTERNATIONAL AGAINST BOGUS PURCHASES. IT IS PRIMA FACIE SEEN THAT THE ADDITIONS HAVE BEEN MADE ON SUBSTANTIVE BASIS IN BO TH THE CASES. SAME ADDITION CANNOT BE SUBSTANTIVE IN TWO ASSESSME NTS. THERE SHOULD HAVE ONE PROTECTIVE ASSESSMENT WITH PROPER R ECORDING OF REASON THEREOF. ANOTHER INFIRMITY IS SEEN THAT THE ASSESSING OFFICER IS NOT SURE WHETHER THE ADDITION OF RS.10,69,69,000/- IS TO BE MADE AS BOGUS PURCHASES/UNEXPLAINED EXPENDITURE U/S. 69C AS PER HIS FINDING IN PARA 4.4 OF ASSESSMENT ORDER OR IS TO BE MADE AS WINDFALL GAIN FROM UNACCOUNTED MONEY AFTER FAMILY SETTLEMENT AS PER HI S FINDING IN PARA 6.3 OF ASSESSMENT ORDER. THE ADDITION ON CONFUSED FINDING CANNOT SURVIVE. MOREOVER ON PERUSAL OF THE CASE RECORDS AND ASSESSE ES SUBMISSION IT IS FOUND THAT THE ASSESSING OFFICER H AD ASKED VIDE QUESTION NO.10 OF HIS QUESTIONNAIRE DATED 09.11.201 0 THAT THE ASSESSEE TO SUBMIT HIS REPLY REGARDING WHY THE SAID AMOUNT OF RS.10,69,69,000/- MAY NOT BE TREATED AS UNEXPLAINED EXPENDITURE AND ACCORDINGLY ADDED TO THE TOTAL INCOME U/S 69C OF TH E I.T. ACT 1961. IT IS NOT UNDERSTOOD THAT HOW THE A.O. HAS COME ON SUCH CONCLUSION BY ISSUING QUESTIONNAIRE THAT THE ALLEGED AMOUNT OF RS .10,69,69,000/- PERTAINS TO EXPENDITURE OF THE ASSESSEE ALTHOUGH IT IS AMPLE CLEAR FROM THE VARIOUS SEIZED MATERIALS AND ASSESSEES SUBMISS ION THAT THE ALLEGED AMOUNT IS AN INCOMING AMOUNT OF THE ASSESSE E AND NOT THE OUTGOING AMOUNT. IT IS ALSO SURPRISING TO NOTE THA T THE A.O. HAS HIMSELF TREATED THE ALLEGED AMOUNT AS WINDFALL GAIN IN ASSESSMENT ORDER EVEN TREATING THE SAME AMOUNT AS SO CALLED EX PENDITURE IN HIS QUESTIONNAIRE AND IN THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE HAS ALSO SUBMITT ED THE REPLY STATING THAT THE AMOUNT OF RS.10,69,69,000/- RELATE S TO SALE OF CARPETS TO M/S. CARPET INTERNATIONAL THE A.O. HAS NOT EVEN TAKEN PAIN TO PERUSE THE REPLY OF THE ASSESSEE. IT ONLY SHOWS TH E CLOSE MIND OF THE A.O. TO MAKE ADDITIONS EVEN ON WRONG COUNT WITH SUC H A CASUAL APPROACH THAT TOO IN FINALIZING THE CASES OF SEARCH AND SEIZURE ASSESSMENT. IN THE LIGHT OF ABOVE FACTS AND DISCUSSION, THE ADD ITION OF RS.10,69,69,000/- FOR BOGUS PURCHASES VIS-A-VIS WIN DFALL GAIN CANNOT BE SUSTAINED AND HENCE DELETED AND IN THIS WAY THE ASSESSEE GETS RELIEF OF RS.10,69,69,000/-. ITA NO.185/ALLD/2011 AYS. 2009-10 9 8. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE UNDISPUTED FACTS OF THE CASE ARE THAT ANNEXURE- A TO PANCHANAMA DATED 11.02.2009 SHOWS THAT RS.10,69,69,000/- WERE PAID T O THE ASSESSEE, M/S. CARPET INTERNATIONAL PVT. LTD VIDE CHEQUE NO.834495 DATED 19.07.2008 BY SISTER CONCERN M/S. CARPET INTERNATIONAL. THE EXPLANATION OF THE ASSESSEE WAS THAT THE AMOUNT WAS RECEIVED AGAINST THE CARPET SOLD BY THE ASSESSE E AND WHICH WAS PURCHASED BY THE SISTER CONCERN M/S. CARPET INTERNATIONAL. THE SAID GOODS PURCHASED FROM THE ASSESSEE BY THE SISTER CONCERN WAS SOLD TO M/S. IKE A TRADING (INDIA) LIMITED. THE ASSESSEE FURNISHED THE NECESSARY EVIDENCE IN SUPPOR T OF THIS TRANSACTION INCLUDING A CERTIFICATE FROM M/S. IKEA TRADING (INDIA) LIMITED. THE BOOKS OF ACCOUNT WERE SUBJECT TO AUDIT AND BOOKS OF ACCOUNTS AND AUDIT RE PORT WERE SUBMITTED BEFORE THE A.O. THE QUANTITY DETAILS OF PURCHASE, SALES & STO CK WERE ALSO FURNISHED AND THE SAME IS ALSO INCLUDED IN TAX AUDIT REPORT. THE A.O . MADE THE ADDITION ON THE BASIS OF ASSUMPTION THAT THE ASSESSEE DID NOT FURNISH EVI DENCE IN RESPECT OF PURCHASE OF GOODS SOLD TO SISTER CONCERN M/S. CARPET INTERNATIO NAL AGAINST WHICH THE ASSESSEE RECEIVED THE IMPUGNED SALE CONSIDERATION OF RS.10,6 9,69,000/-. THE A.O. NOTED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE PRODUCED THE PURCHASE REGISTER, BUT IN THE VIEW OF A.O. WHICH HAS GOT NO EVIDENTIAR Y VALUE BECAUSE THE SAME HAS BEEN PREPARED AFTER THE ASSESSEE WAS CAUGHT. THE A .O. HAS FAILED TO POINT OUT ANY OTHER DEFECT IN THE SAID PURCHASE REGISTER PRODUCED BY THE ASSESSEE. THE OBSERVATION OF THE A.O. IS ON PRESUMPTION BASIS THA T THE SAID PURCHASE REGISTER WAS ITA NO.185/ALLD/2011 AYS. 2009-10 10 PREPARED AFTER THE ASSESSEE HAS BEEN CAUGHT. THIS FINDING OF THE A.O. IS NOT CORRECT AS THESE FACTS HAVE BEEN NOTED BY THE CIT(A) IN HIS ORDER. TRANSACTION WAS RECORDED IN LEDGER ACCOUNTS WHICH WERE FOUND AND SE IZED AT THE TIME OF SEARCH. 9. THE A.O. ASKED THE ASSESSEE, AS NOTED BY HIM IN PARA NO.4.4 OF HIS ORDER, THAT WHY THE IMPUGNED AMOUNT MAY NOT BE TREATED AS UNEXP LAINED EXPENDITURE AND ACCORDINGLY ADD TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. FINALLY, THE A.O. MADE THE ADDITION WITH THE OBSERV ATION THAT THE ALLEGED PURCHASES WERE NEVER MADE BY THE ASSESSEE. THE ASSESSEE HAS DONE A WINDOW DRESSING FOR ACCOMMODATING THE UNACCOUNTED RECEIPT AFTER A FAMIL Y PARTITION. IN THE LIGHT OF THE FACT, IF WE CONSIDER SECTION 69C OF THE ACT WHICH P ROVIDES THAT WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDI TURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE A.O., SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE MAY BE DEEME D TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. AS STATED ABOVE THAT THE IMPUGNED AMOUNT IS RECEIVED TO THE ASSESSEE AND NOT AN AMOUNT OF EXPEN DITURE, WHEREAS, SECTION 69C OF THE ACT IS IN RESPECT OF EXPENDITURE. IT IS PRESUM PTION OF THE A.O. THAT THE IMPUGNED AMOUNT RECEIVED TO THE ASSESSEE IS AGAINST THE SALE OF GOODS AND THE SAID GOODS WERE NOT IN FACT PURCHASED BY THE ASSESSEE. THE FINDING OF THE A.O. IS A VAGUE FINDING. IT IS MERELY A PRESUMPTION OF THE A .O. THE A.O. MERELY ON ITA NO.185/ALLD/2011 AYS. 2009-10 11 PRESUMPTION STATED THAT NO EVIDENCE OF ALLEGED PURC HASE WAS FOUND AND SEIZED DURING SEARCH. NO OTHER RELEVANT CONTRARY MATERIAL WAS FOUND AT THE TIME OF SEARCH. THE ASSESSEE DISCHARGED ITS BURDEN BY FURNISHING PU RCHASE REGISTER AND OTHER RECORDS BEFORE THE A.O. THE A.O. HAS SIMPLY REJEC TED ON THE PRESUMPTION THAT IT WAS PREPARED LATER ON. IN SUCH A CIRCUMSTANCES, WH ERE THE AMOUNT FOUND TO BE RECEIVED TO THE ASSESSEE AND THE A.O. WANT TO TAX T HE SAME, THE BURDEN IS ON THE A.O. TO ESTABLISH THAT IT WAS INCOME OF THE ASSESSE E. THE HONBLE SUPREME COURT IN THE CASE OF SUMAI DAYAL VS. CIT, 214 ITR 801 (SC ) HELD THAT IN SUCH A SITUATION THE BURDEN LIES ON THE DEPARTMENT. THE RELEVANT AB STRACT OF THE OBSERVATION OF THE HONBLE APEX COURT IS AS UNDER:- IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TA XED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF THE RECEIPT IS IN THE NATURE OF IN COME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WIT HIN THE EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. 10. IF WE APPLY THE SAID LAW OF THE LAND LAID DOWN BY THE HONBLE APEX COURT TO THE FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT THE A.O. HAS COMPLETELY FAILED TO DISCHARGE HIS ONUS TO PROVE THAT THE IMPU GNED AMOUNT IS WITHIN THE TAXING PROVISION. EVEN THE A.O. HAS FAILED TO ESTABLISH U NDER WHICH SECTION OF I.T. ACT HE IS GOING TO MAKE THE ADDITION. WHEN THE A.O. HAS F AILED TO DISCHARGE THE ONUS, THE ADDITION IS NOT WARRANTED. ITA NO.185/ALLD/2011 AYS. 2009-10 12 11. ON A PERUSAL OF THE ORDER OF CIT(A), WE NOTICE THAT THE CIT(A) RECORDED THE FACT THAT THE A.O. HAS FAILED TO MAKE ANY INDEPENDE NT ENQUIRY. HE HAS SIMPLY RELIED UPON THE VERSION OF SEARCH PARTY BY PUTTING HIS LEGS IN THE SHOES OF OTHERS. THE CIT(A) NOTED THAT THE A.O. HAS WRONGLY OBSERVED THAT THE PAYMENT OF ACCOUNT PAYEE CHEQUE IS NOT VERIFIABLE, WHEREAS, THE PAYMEN T IS FULLY VERIFIABLE FROM THE BANK STATEMENT OF THE ASSESSEE. THE SO-CALLED DIAR Y AS PER ANNEXURE-A, S.NO.A-8 OF PANCHANAMA DATED 12.12.2009 ON WHICH THE A.O. HA S HEAVILY RELIED WAS SEIZED FROM M/S CARPET INTERNATIONAL AND NOT FROM THE PREM ISES OF THE ASSESSEE. THE CIT(A) DID NOT AGREE WITH THE A.O. TREATING THE AMO UNT AS WINDFALL GAIN ON FAMILY PARTITION. THE CIT(A) HELD THAT THE A.O. COULD NOT ESTABLISH WITH COGENT EVIDENCE THAT THE SAID AMOUNT CAME OUT OF FAMILY SETTLEMENT ON UNACCOUNTED MONEY. CONTRARY, THE CIT(A) FOUND THAT THE TRANSACTION WAS DULY RECORDED IN TWO LEDGERS SEIZED DURING THE SEARCH. HE HELD THAT THE MONEY W HICH HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT CANNOT BE TREATED AS UNACCOUNTED. THE SAID LEGERS UNDER SEIZURE CANNOT BE SAID TO BE PREPARED AFTER THOUGHT. 12. IN THE LIGHT OF ABOVE DISCUSSIONS AND THE DETAI LED DISCUSSIONS MADE BY THE CIT(A), THE ADDITION MADE BY THE A.O. IS ON THE BAS IS OF PRESUMPTION WITHOUT POINTING OUT THE PARTICULAR SECTION UNDER WHICH THE ADDITION HAS BEEN MADE, AND WITHOUT DISCHARGING ONUS THAT SO-CALLED AMOUNT RECE IVED IS INCOME OF THE ASSESSEE ITA NO.185/ALLD/2011 AYS. 2009-10 13 AND, THEREFORE, WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. IN THE LIGHT OF THE FACTS, WE CONFIRM THE ORDER OF THE CIT(A). 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY