ACIT, Meerut V. M/s. Gangol Sahkari Dugdh Utpadak Sangh Ltd., Meerut

ITA 1871/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6416 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARAT BHUSHAN GARG
• Assessee Lawyers: RK GARG
• Section: 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH MEERUT CAMP AT MEERUT ) BEFORE SHRI I.C. SUDHIR AND SHRI P RASHANT MAHARISHI ITA NO. 18 71 /DEL/201 5 ASSESSMENT YEAR: 20 1 0 - 1 1 ACIT, VS. GANGOL SAHKARI DUGDH CIRCLE - 1, UTPADAK SANGH LTD., MEERUT. GANGOL ROAD, PARTAPUR, MEERUT. (PAN: AAAAG0147K ) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI R.K. GARG , ADV. DEPARTM ENT BY: SHRI BHARAT BHUSH AN GARG , SR. DR DATE OF HEARING : 1 8 . 1 2 .201 5 DATE OF PRONOUNCEMENT: 16 : 0 3 .201 6 ORDER PER I.C. SUDHIR : JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER WHEREBY THE LEARNED C IT(APPEALS) HAS DELETED THE ADDITION OF RS.4,51,24,795 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNCONFIRMED LIABILITY. 2. IN SUPPORT OF THE GROUND, THE LEARNED SENIOR DR HAS PLACED RELIANCE ON THE ASSESSMENT ORDER WITH THE SUBMISSION THAT THE LEARNED C IT(APPEALS) HAS ACCEPTED THE VERSION OF THE ASSESSEE REGARDING UNCONFIRMED BALANCES OF SUNDRY CREDITORS WORTH RS.4,51,24,795 WITHOUT PROPER VERIFICATION OF THE FACT. 2 3. THE LEARNED AR ON THE OTHER HAND HAS PLACED RELIANCE ON THE FIRST APPELLATE ORDER. HE REITERATED SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND PLACED RELIANCE ON THE DECISIONS CITED BEFORE THEM. 4. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT ASSESSEE IS A COOPERATIVE SOCIETY PARTLY OW NED BY THE GOVERNMENT OF U.P. ON THE STUDY OF BALANCE SHEET OF THE ASSESSEE, THE LEARNED CIT(APPEALS) HAS NOTED THAT MOST OF CAPITAL OF THE ASSESSEE IS BY WAY OF GOVERNMENT GRANTS OR FUNDS FROM GOVERNMENT AGENCY. BEING A SEMI - GOVERNMENT AGENCY, THE BOOKS O F ACCOUNT OF THE ASSESSEE ARE SUBJECT TO MULTIPLE AUDIT TEST - CHECK. THE BOOKS ARE FIRST AUDITED BY GOVERNMENT APPOINTED AUDITORS AND THEN AUDITED UNDER THE PROVISIONS OF SEC. 44AB OF THE INCOME - TAX ACT, 1961. HE HAS NOTED FURTHER THAT AUDIT REPORT IN FORM 3CD CONTAINING THE BALANCE SHEET AND THE NET PROFIT AND LOSS ACCOUNT OF THE ASSESSEE WAS SUBMITTED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD MADE THE ADDITION IN QUESTION MAINLY ON THE GROUND THAT THE CREDITORS WERE NOT PRODUCED BEFORE THE A SSESSING OFFICER. THE ASSESSEE HAD SHOWN CURRENT LIABILITY OF RS.8,93,12,284. THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO FILE DETAILS OF SUCH LIABILITY ALONG WITH CONFIRMATION OF SUNDRY CREDITORS WHERE OUTSTANDING BALANCE EXCEEDED RS.1 LAC. THE ASS ESSING OFFICER MENTIONED 3 THAT ALTHOUGH THE ASSESSEE SUBMITTED A LIST OF 35 SUCH CREDITORS, CONFIRMATION WITH SUPPORTING DOCUMENTS WAS NOT FILED BY THE ASSESSEE. THE ASSESSING OFFICER THEREAFTER SENT NOTICES UNDER SEC. 133(6) OF THE ACT TO ALL SUCH PARTIES. OUT OF THE 35 SUCH PARTIES REPLY WAS RECEIVED FROM SIX AND ONLY P A RTIES HAD CONFIRMED THE CREDIT BALANCE AS SHOWN BY THE ASSESSEE. THE TOTAL AMOUNT CONFIRMED BY THE FIVE SUNDRY CREDI T ORS WAS ONLY RS.19,47,395. THE ASSESSING OFFICER, THEREFORE, CONCLUDED T HAT OUT OF TOTAL LIABILITY OF RS.4,70,94,931, LIABILITY OF RS.4,51,24,795 HAS NOT BEEN CONFIRMED. THE ASSESSING OFFICER ON THIS BASIS MADE THE ADDITION IN QUESTION OF RS.4,51,24,795 TO THE TOTAL INCOME OF THE ASSESSEE. 5. DISCUSSING THE CASE OF THE PART IES ON THE ISSUE IN DETAIL , THE LEARNED CIT(APPEALS) HAS GIVEN FOLLOWING FINDINGS: I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSION OF THE AR. THE ASSESSEE IS A COOPERATIVE SOCIETY WHICH IS PARTLY OWNED BY THE GOVERNMENT OF UP. F ROM A STUDY OF BALANCE SHEET OF THE ASSESSEE IT IS SEEN THAT MOST OF THE CAPITAL OF THE ASSESSEE IS BY WAY OF GOVERNMENT GRANTS OR FUND FROM GOVERNMENT AGENCIES. BEING A SEMI - GOVERNMENT AGENCY THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE SUBJECT TO MULTIPLE AU DIT TEST CHECKS. THE BOOKS ARE FIRST AUDITED BY GOVERNMENT APPOINTED AUDITORS. THE BOOKS ARE THEN AUDITED UNDER THE PROVISION OF SEC. 44AB OF THE INCOME - TAX ACT. THE BALANCE SHEET AND 4 THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE BEARS TESTIMONY TO THE FACT THAT THE BOOKS HAVE BEEN AUDITED BY GOVERNMENT APPOINTED AUDITORS. AUDIT REPORT IN FORM 3CD CONTAINING THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE WAS SUBMITTED BEFORE THE A.O. FROM THE ASSESSMENT ORDER IT IS SEEN THAT NO DISCUSSI ON HAS BEEN MADE AS TO HOW CREDIT FROM THESE SUNDRY CREDITORS HAS COME INTO EXISTENCE. IT IS FURTHER SEEN FROM THE FACTS THAT IN CASE OF 11 CREDITORS THERE WAS ONLY OPENING BALANCE AND NEITHER ANY PURCHASES NOR PAYMENT WAS MADE DURING THE YEAR. DESPITE THI S EVEN THE OPENING BALANCE WAS ADDED BY THE A.O. THE ASSESSEE HAD SUBMITTED BOOKS OF ACCOUNT BEFORE THE A.O. AND NO ADVERSE REMARK WAS MADE ON THE BOOKS OF ACCOUNT. IT IS SEEN FROM THE WRITTEN SUBMISSIONS THAT THE ASSESSEE HAD FILED COMPLETE BOOKS OF ACCOU NT INCLUDING PURCHASE BILL, SALE BILL AND STOCK REGISTER ETC. THE AR HAS ALSO ARGUED THAT CREDIT PURCHASES CAN BE VERIFIED FROM THE BOOKS OF ACCOUNT AND BANK STATEMENT THROUGH WHICH PAYMENT HAS BEEN MADE. IT CAN ALSO BE VERIFIED THAT THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES. THERE MAY BE MANY REASONS WHY A LETTER OF ENQUIRY CAN COME BACK UNDELIVERED. THE ENQUIRY WAS BEING MADE BY THE A.O. IN FEBRUARY/MARCH, 2013 WHILE THE TRANSACTION RELATES TO FINANCIAL YEAR 2009 - 10. THUS THERE IS A CONSIDERABLE TIME GAP BETWEEN THE CREDIT TRANSACTION AND LETTERS OF ENQUIRY . MOREOVER, MERE NON - DELIVERY OF ENQUIRY LETTERS OR ABSENCE OF REPLY FROM CREDITORS CANNOT BE A GROUND FOR MAKING ADDITION. THIS WILL ESPECIALLY BE TRUE IN A SITUATION WHERE THE ASSESSEE HAS SUBMITT ED SUFFICIENT DETAILS FROM WHICH THE GENUINENESS OF TRANSACTION LEADING TO CREDIT CAN BE DETERMINED ONCE 5 THE ASSESSEE HAS SUBMITTED NAMES AND ADDRESSES OF THE CREDITORS AND OTHER RELEVANT DETAILS, THE ONUS SHIFTED TO THE A.O. TO BRING IN POSITIVE EVIDENCE BEFORE MAKING ANY ADDITION. IT IS SEEN FROM THE FACTS OF THE CASE THAT THE A.O. DID NOT EVEN MAKE AN ATTEMPT TO KNOW WHETHER THE CREDIT STANDING IN ASSESSMENT YEAR 2010 - 11 HAS BEEN SQUARED OFF IN THE NEXT ASSESSMENT YEAR. IN A RECENT JUDGMENT GIVEN BY THE JURISDICTIONAL ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JAGDISH PRASAD TEWARI 220 TAXMANN 0141 (2014), IT HAS BEEN HELD THAT IF THE PAYMENTS HAVE BEEN MADE BY THE CHEQUES AND ARE REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, NO ADVERSE INFERENCE CA N BE DRAWN. 3.7 FROM THE ASSESSMENT ORDER IT IS CLEAR THAT ONE OF THE PRIMARY REASON FOR MAKING THIS ADDITION WAS BECAUSE THE CREDITORS WERE NOT PRODUCED BEFORE THE A.O. IN THIS CONTEXT, IT IS TO BE UNDERSTOOD THAT AN ASSESSEE CANNOT BE ACCEPTED TO COMPL Y WITH UNREASONABLE INSTRUCTION OF THE A.O. THREE YEARS AFTER THE BUSINESS TRANSACTIONS BETWEEN TWO PARTIES, CAN THE ASSESSEE HAVE ENOUGH CONTROL OVER THE OTHER PARTY TO FORCE HIS ATTENDANCE BEFORE THE A.O. SIMILARLY, THE ASSESSEE CANNOT BE REASONABLY EXPE CTED TO FORCE THE CREDITORS TO REPLY TO THE A.O. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE A.O. DID NOT TAKE ANY ACTION FRO HIS SIDE TO ENFORCE ATTENDANCE OF THE SUNDRY CREDITORS. IN A JUDGMENT GIVEN BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF DIAGNOSTICS VS. CIT 334 ITR 111 ON A SIMILAR QUESTION, IT HAS BEEN HELD BY THE HONBLE COURT THAT IF AN ASSESSEE TOOK CARE TO PURCHASE MATERIAL BY WAY OF ACCOUNT PAYEE CHEQUES FROM A THIRD PARTY AND SUBSEQUENTLY, THREE YEARS AFTER THE PURCHASE, THE SAID THIRD PARTY DOES NOT APPEAR BEFORE THE A.O. PURSUANT TO THE NOTICEOR EVEN HAS STOPPED 6 BUSINESS, THE CLAIM OF THE ASSESSEE ON THAT ACCOUNT CANNOT BE DISCARDED AS NON - EXISTENCE. ON A SIMILAR MATTER, THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF CIT ORIS SA VS ORISSA CORPORATION (P) LTD. 159 ITR 78 THAT HELD THAT, IN THIS CASE THE RESPONDENT HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASSESSEES. THEIR INDEX NUMB ERS WERE IN THE FILE OF REVENUE. THE REVENUE APART FROM ISSUING NOTICES U/S. 131 AT THE INSTANCE OF THE RESPONDENT DID NOT PURSUE THE MATTER FURTHER.. THERE WAS NO EFFORT MADE TO PURSUE THE SO CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE RESPONDE NT COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE RESPONDENT HAD DISCHARGED THE BURDEN THAT LAY ON IT, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. CONSIDERING THE ABOVE FACTS AND JUDICIAL PRONOUNCEMENTS, GROUNDS OF APPEAL NO. 1 & 2 IS ALLOWED AND ADDITION OF RS.4,51,24,795 IS DELETED. 6. AS DISCUSSED ABOVE, THE FIRST APPELLATE ORDER IS COMPREHENSIVE AND REASONED ONE TO WHICH WE FULLY CONCUR WITH. IT IS AN ESTABLISHED PROPOSITION OF LAW THAT ONCE THE ASSESSEE HAS SUBMITTED NAMES AND ADDRESSES OF THE CREDITORS AND OTHER RELEVANT DETAILS, THE ONUS SHIFTS UPON THE ASSESSING OFFICER TO BRING IN POSITIVE EVIDENCE TO JUSTIFY THE MAKING OF THE PROPOSED ADD ITION BY HIM. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT EVEN MAKE AN ATTEMPT TO KNOW WHETHER THE CREDIT STANDING IN THE ASSESSMENT YEAR 7 2010 - 11 HAS BEEN SQUARED OFF IN THE NEXT ASSESSMENT YEAR. CONSIDERING THIS MATERIAL ASPECT OF THE CASE AND OTHE RS AS DISCUSSED BY THE LEARNED CIT(APPEALS) HEREINABOVE IN THE PARAGRAPHS REPRODUCED, WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION IN QUESTION. THE SAME IS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. 7 . IN RESUL T, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 . 0 3 . 201 6 S D/ - SD/ - ( PRASHANT MAHARISHI ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 / 0 3 /201 6 MOHAN LAL COPY FORWAR DED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 8 DATE DRAFT DICTATED DIRECTLY ON COMPUTER 1 6 . 0 3 .201 6 DRAFT PLACED BEFORE AUTHOR 1 6 . 0 3 .2016 DRAFT PROPOSED & PLACED BEFO RE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 1 6 . 0 3 .2016 APPROVED DRAFT COMES TO THE SR.PS/PS 1 7 . 0 3 .2016 KEPT FOR PRONOUNCEMENT ON 1 6 . 03. 2016 FILE SENT TO THE BENCH CLERK 1 7 . 0 3 .2016 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.