Sanjay Shivlal Kokate, Solapur V. Income-tax Officer,

ITA 1995/PUN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1134 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-06-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 12-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Unexplained cash credit; Reassessment proceedings
• Section: 143(3); 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1995/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2003-04 SANJAY SHIVLAL KOKATE, PROP.: HOTEL SUMIT EXECUTIVE, A/P. TEMBHURNI, TAL.-MAHDA, DISTT.-SOLAPUR PAN : AGKPK9910B ....... / APPELLANT ' / V/S. INCOME TAX OFFICER, WARD 1(3), PANDHARPUR / RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 07-07-2016 / DATE OF PRONOUNCEMENT : 19-08-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 30-0 9-2013 FOR THE ASSESSMENT YEAR 2003-04. IN APPEAL, THE ASSESSEE HAS PRIMARILY ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING ADDITION OF 2 ITA NO. 1995/PN/2013, A.Y. 2003-04 ` 2,84,300/- ON ACCOUNT OF OUTSTANDING EXPENSES PAYABLE TO SHRI S.S. DHAGE ` 1,89,000/- AND SHRI B.M. GAIKWAD ` 95,300/- AND IN UPHOLDING THE VALIDITY OF PROCEEDING U/S. 147/148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE ASSESSEE BY WAY OF ADDITIONAL GROUND OF APPEAL HAS ASSAILED THE IMPUGNED ORDER IN NOT H OLDING THE REASSESSMENT PROCEEDINGS U/S. 147/148 OF THE ACT AS BA D IN LAW, SINCE, NO SEPARATE ORDER WAS PASSED IN DECIDING THE OBJECTIONS FILED BY THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A CIVIL CONTRACTOR. THE ASSESSEE FILED HIS RETU RN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 28-11-2003 DECLARIN G TOTAL INCOME OF ` 4,96,790/- AND AGRICULTURAL INCOME OF ` 16,995/-. THE COPY OF TRADING, PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND AUDIT REPORT WAS FURNISHED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME . A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PRE MISES OF THE ASSESSEE ON 10-03-2005. THE ASSESSING OFFICER INTER ALIA M ADE ADDITION OF ` 2,84,300/- ON ACCOUNT OF UNPROVED/UNEXPLAINED CREDITORS. AGGRIEVED BY THE ASSESSMENT ORDER DATED 24-03-2006 P ASSED U/S. 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF I NCOME TAX (APPEALS) VIDE IMPUGNED ORDER CONFIRMED THE ADDITION MA DE BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS) W HILE DISMISSING THE APPEAL OF THE ASSESSEE OBSERVED THAT THE ASSESSEE IN ORDER TO ESCAPE THE CLUTCHES OF SECTION 68 OF THE ACT H AS TO DISCHARGE NOT ONLY THE ONUS OF IDENTIFYING THE CREDITORS AND CONFIR MING OF CREDITS BUT ALSO ESTABLISH CAPACITY OF THE CREDITORS TO ADVANCE M ONEY AND THE GENUINENESS OF THE TRANSACTIONS BY ADDUCING SATISFACTORY EVIDENCE. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER REJECTED THE CONTENTIONS 3 ITA NO. 1995/PN/2013, A.Y. 2003-04 OF ASSESSEE WITH REGARD TO VALIDITY OF PROCEEDINGS U/S. 14 7/148 OF THE ACT. AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APP EALS) THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI S.N. PURANIK APPEARING ON BEHALF OF THE ASSESSEE SU BMITTED THAT HE IS WITHDRAWING GROUND NO. 6 AND THE ADDITIONAL GR OUND RAISED IMPUGNING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEA LS) IN UPHOLDING THE VALIDITY OF REOPENING U/S. 147/148 OF THE ACT. THE LD. AR OF THE ASSESSEE SUBSEQUENTLY FILED LETTER STATING THAT ON INSTRUCTIONS FROM THE ASSESSEE THE ADDITIONAL GROUND AND GROUND NO. 6 CHALLENGING THE VALIDITY OF PROCEEDINGS U/S. 147/148 OF THE ACT ARE WIT HDRAWN. IN RESPECT OF GROUND NOS. 1 TO 5 WHICH DEAL WITH THE SINGLE IS SUE OF CONFIRMING ADDITION ON ACCOUNT OF OUTSTANDING EXPENSES/UNP ROVED CREDITORS PAYABLE TO SHRI S.S. DHAGE ` 1,89,000/- AND SHRI B.M. GAIKWAD ` 95,300/-, THE LD. AR CONTENDED THAT NO ADDITION CAN BE MA DE U/S. 68 OF THE ACT. THE LD. AR SUBMITTED THAT THE ASSESS EE HAS UTILIZED THE SERVICES OF SHRI S.S. DHAGE AND SHRI B.M. GAIKWAD AND HA D NOT PAID FOR THE SERVICES UTILIZED. IT WAS IN THIS CONTEXT THE ASSESSEE HAS SHOWN THE ABOVE TWO PERSONS AS CREDITORS. THE ASSESS EE HAS NOT OBTAINED ANY ADVANCES OR LOANS FROM THE AFORESAID PERSON S. SHRI S.S. DHAGE IS A DRIVER AND IS ALSO ENGAGED IN ARRANGING JCB M ACHINES ON RENTAL. THE ASSESSEE HAD UTILIZED THE SERVICES OF SHRI S.S. DHAGE IN RESPECT OF PROVIDING JCB MACHINES. THE LD. AR CONTENDED T HAT THE STATEMENT OF SHRI S.S. DHAGE WAS RECORDED AT THE BACK O F ASSESSEE, BY THE ASSESSING OFFICER AND NO OPPORTUNITY OF CROSS-EXAMINAT ION WAS AFFORDED TO THE ASSESSEE. EVEN DURING THE REMAND PROCE EDINGS NO FAIR OPPORTUNITY WAS GRANTED TO THE ASSESSEE TO CROSS-EXA MINE SHRI S.S. DHAGE. THE SUMMONS WERE RECEIVED BY THE ASSESSEE ON 19-08-2011, 4 ITA NO. 1995/PN/2013, A.Y. 2003-04 WHEREIN THE ASSESSING OFFICER HAD DIRECTED THE ASSESSEE TO APPEAR ON 18-08-2011. 4. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE ASSE SSEE HAS MEASURABLY FAILED TO SHOW THAT ANY AMOUNT WAS PAYABLE B Y THE ASSESSEE TO SHRI S.S. DHAGE AND SHRI B.M. GAIKWAD. THE AS SESSEE COULD NEITHER PRODUCE SHRI B.M. GAIKWAD NOR ANY CONFIRMATION S LETTER FROM HIM WAS FILED. WHEREAS, SHRI S.S. DHAGE IN HIS STATEMENT HAS CATEGORICALLY STATED THAT NO AMOUNT IS OUTSTANDING/RECE IVABLE BY HIM FROM ANY PERSON. THE ASSESSEE HAS FAILED TO ADDUCE ANY RELIABLE EVIDENCE IN SUPPORT OF HIS CLAIM. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ONLY ADDITION WHICH HAS BEEN IMPUGNED BY THE ASSESSEE IS IN RESPECT OF UNPROVED/UNEXPLAINED CREDITORS SHRI S.S. DHAGE ` 1,89,000/- AND SHRI B.M. GAIKWAD ` 95,300/-. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CATEGORICALLY OBSERVED THAT THE ADDITION IN RESPECT OF UNPROVED CREDITORS HAS BEEN MADE U/S. 68 OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE ADDITION MADE IN RESPECT OF UNPROVED CREDITORS CANNOT BE MADE UNDER THE PROVISIONS OF SECTION 68 AS THE ASSESSEE HAD NOT ACCEPTED ANY ADVANCES/LOANS OR ANY AMOUNT FROM THE AFORESAID PERSONS. IN FACT, THE ASSESSEE WAS TO PAY TO SHRI S.S. DHAGE AND SHRI B.M. GAIKWAD FOR THE SERVICES RENDERED BY THEM. 6. BEFORE PROCEEDING FURTHER IT WOULD BE RELEVANT TO FIRST REFER TO THE PROVISIONS OF SECTION 68 OF THE ACT WHICH ARE AS UNDER : 5 ITA NO. 1995/PN/2013, A.Y. 2003-04 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOK OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSES SING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR: [PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED)AN D THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATIO N OFFERED BY SUCH ASSESSEE COMPANY SHALL BE DEEMED TO BE NOT SATISFAC TORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CRE DIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSIN G OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY : PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO TH EREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY A S REFERRED TO IN CLAUSE (23FB) OF SECTION 10.] A BARE READING OF SECTION 68 WOULD SHOW THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSE E DURING THE PREVIOUS YEAR AND THE ASSESSEE EITHER OFFERS NO EXPLANAT ION OR THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AN D SOURCE OF SUCH CREDIT, IN THE OPINION OF ASSESSING OFFICER, IS NOT SATISFAC TORY. IT IS ONLY IN SUCH CIRCUMSTANCES THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF ASSESSEE. IN OTHER WORDS, FOR MAKING ADDITION U/S. 68 OF THE ACT, THE ASSESSEE SHOULD HAVE RECEIVED CASH . 7. IN THE PRESENT CASE THE STAND OF THE ASSESSEE IS THAT SHRI S.S. DHAGE AND SHRI B.M. GAIKWAD ARE SHOWN AS CREDITORS AS TH EY HAD RENDERED SERVICES AND THE ASSESSEE WAS TO MAKE PAYME NT TO THE AFORESAID PERSONS FOR THE SERVICES RENDERED. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSE SSING OFFICER HAS MADE ADDITION WITHOUT QUOTING ANY SECTION IN THE ASSESSMENT ORDER. IN FIRST APPEAL THE COMMISSIONER OF INC OME TAX 6 ITA NO. 1995/PN/2013, A.Y. 2003-04 (APPEALS) CLARIFIED THAT THE ADDITION HAS BEEN MADE U/S. 68 O F THE ACT. THE ADDITION MADE IN RESPECT OF OUTSTANDING EXPENSES PA YABLE TO SHRI S.S. DHAGE AND SHRI B.M. GAIKWAD CANNOT BE MADE U/S. 68 O F THE ACT. THE PROVISIONS OF SECTION 68 ARE NOT ATTRACTED WHERE SE RVICES ARE RECEIVED BY THE ASSESSEE AND AN ENTRY IS MADE IN THE BOOKS CREDITING LIABILITY IN ACCOUNT OF PERSON FROM WHOM SERVICES ARE RECEIVED. 8. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF DELHI BEN CH OF THE TRIBUNAL IN THE CASE OF ANNAMARIA TRAVELS AND TOURS (P) L TD. VS. DY. CIT REPORTED AS 95 TTJ 71 (DELHI-TRIB.). THE RELEVANT EX TRACT OF THE FINDINGS IN THE SAID CASE ARE AS UNDER : 19. .WHEN THE PAYMENTS TO THE CREDITORS HAVE NO T BEEN DOUBTED AND WHEN THE COMMISSION INCOME IN RESPECT OF THE SA LES OF THOSE VERY TICKETS FOR WHICH PAYMENTS ARE OUTSTANDING AS ON 31S T MARCH, 1998, HAS BEEN ASSESSED AS THE INCOME OF THE ASSESSEE, IT IS NOT JUSTIFIED ON THE PART OF THE IT AUTHORITIES TO ADD THE OUTSTANDING B ALANCES UNDER S. 68 OF THE ACT. WE ARE ALSO INCLINED TO HOLD THAT S. 68 HA S NO APPLICATION TO SUCH A SITUATION. THE ASSESSEE HAS NOT RECEIVED ANY MONE YS FROM THE AIRLINE COMPANIES. THE CREDIT REPRESENTS AMOUNT DUE TO THEM FOR PURCHASE OF TICKETS. SEC. 68 COMES INTO PLAY ONLY WHERE ANY SUM IS FOUND CREDITED IN THE ACCOUNT OF A THIRD PERSON AND THE ASSESSEE IS U NABLE TO GIVE SATISFACTORY EXPLANATION IN RESPECT OF THE NATURE A ND SOURCE OF THE SUM. THE SECTION CANNOT APPLY WHERE GOODS OR SERVICES AR E ACQUIRED BY THE ASSESSEE ON CREDIT AND AN ENTRY IS MADE CREDITING T HE LIABILITY IN THE ACCOUNT OF THE PERSON FROM WHOM THE GOODS AND SERVI CES ARE ACQUIRED. IN THIS VIEW OF THE MATTER ALSO, THE ADDITION OF RS. 1 1,24,407 CANNOT BE SUSTAINED. IT IS ACCORDINGLY DELETED. 9. IN VIEW OF THE FACTS OF THE CASE AND THE PROVISIONS OF SECTION 68 OF THE ACT, THE ADDITIONS CONFIRMED BY THE COMMISSIONER OF INC OME TAX (APPEALS) U/S. 68 OF THE ACT ARE NOT SUSTAINABLE. ACCORDING LY, THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE ARE SET ASIDE AND THE GROUND NOS. 1 TO 5 RAISED IN THE APPEAL B Y THE ASSESSEE ARE ALLOWED. 7 ITA NO. 1995/PN/2013, A.Y. 2003-04 10. THE LD. AR OF THE ASSESSEE HAS STATED AT THE BAR THAT HE IS WITHDRAWING GROUND NO. 6 AND THE ADDITIONAL GROUND OF APPE AL CHALLENGING THE VALIDITY OF PROCEEDINGS U/S. 147/148 OF THE ACT. ACCORDINGLY, THE GROUND NO. 6 AND THE ADDITIONAL GROUND OF APPEAL ARE DISMISSED AS WITHDRAWN. 11. THE GROUND NO. 7 AND 8 RAISED IN THE APPEAL ARE GEN ERAL IN NATURE, HENCE REQUIRE NO ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 19 TH DAY OF AUGUST, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 19 TH AUGUST, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-IV, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE