C.K. Plastics Pvt. Ltd., Kolkata V. ITO, Ward - 6(3), Kolkata, Kolkata

ITA 2076/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3110 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 20-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR CIT DR REVENU
• Keywords: Unexplained cash credit; Source of fund; Question of law; Onus to prove
• Section: 131; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD.........................................................................APPELLANT 3 RD FLOOR SUIT NO. 12 7, POLLOCK STREET KOLKATA 700 069 [PAN : AADCC 3067 F] INCOME TAX OFFICER, WARD-6(3), KOLKATA........................................................RESPONDENT APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI SAURABH KUMAR, ADDL. CIT, D/R. APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JULY 4 TH , 2018 DATE OF PRONOUNCING THE ORDER : AUGUST 24 TH , 2018 ORDER PER J. SUDHAKAR REDDY, AM :- THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 2, KOLKATA (HEREINAFTER THE LD. CIT(A)), DT. 05/07/2017, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), RELATING TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF MANUFACTURING OF POLYTHENE LINERS BAGS. IT FILED ITS RETURN OF INCOME ON 27/11/2014, DISCLOSING NIL INCOME FOR THE ASSESSMENT YEAR 2013-14. THE ONLY ISSUE THAT ARISES FOR OUR CONSIDERATION IN THIS APPEAL IS THE ADDITION MADE U/S 68 OF THE ACT. 3. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- THE FACTS LEADING TO THE ADDITION ARE BROUGHT OUT BY THE ASSESSING OFFICER AS FOLLOWS:- ON EXAMINATION OF BOOKS OF ACCOUNTS AND OTHER DETAILS AND DOCUMENTS AVAILABLE ON RECORD AND FURNISHED BY THE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOLLOWING DISCREPANCIES HAVE BEEN REVEALED 2 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD 1. UNEXPLAINED CASH CREDIT U/S 68 (UNSECURED LOAN) OF THE I.T. ACT 1961 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A/R HAS BEEN ASKED TO FURNISH THE DETAILS OF SHORT TERM BORROWINGS. THE A/R OF THE ASSESSEE COMPANY SUBMITTED THE DETAILS SUCH OF THE SHORT TERM BORROWINGS (UNSECURED LOAN). TO VERIFY THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS AND GENUINENESS OF THE TRANSACTIONS, SUMMONS U/S 131 OF THE OF THE I.T. ACT WERE ISSUED TO THE FOLLOWING LOAN CREDITORS ON 08/12/2015 ASKING THEM TO APPEAR PERSONALLY ALONG WITH THE REQUISITE DETAILS AND DOCUMENTS AS MENTIONED IN THE SUMMONS WITHIN 7 DAYS OF THE RECEIPT THE SUMMONS. 1. SUBHLABH FISCAL SERVICES (P) LTD. 2. MINDTRACK VENTURES PRIVATE LIMITED 3. CONTSHIP COMMODITIES PRIVATE LIMITED. IN RESPONSE TO THE SUMMONS ISSUED TO THE ABOVE LOAN CREDITORS, NONE APPEARED PERSONALLY. HOWEVER, THE LOAN CREDITORS AS MENTIONED IS SERIAL NO.-1 AND 2 ABOVE HAVE SUBMITTED THE REPLY ON 30/12/2015 IN RESPONSE TO THE SUMMONS ISSUED U/S 131 OF THE I.T. ACT. M/S. CONTSHIP COMMODITIES PRIVATE LIMITED SUBMITTED THE REPLY ON 08/01/2016. AS THE LOAN CREDITORS FAILED TO APPEAR PERSONALLY, SUMMONS WERE FURTHER ISSUED U/S 131 ON 17/02/2016 TO THE FOLLOWING LOAN CREDITORS:- 1. ANGAD CHEMICAL (P) LTD. 2. B R TRADING CO 3. SNV ENTERPRISES 4. CONTSHIP COMMODITIES (P) LTD. 5. MINDTRACK VENTURES PVT. LTD. 6. SUBHLABH FISCAL SERVICES PVT LTD. NOTICES ISSUED TO SNV ENTERPRISES AND B R TRADING CO RETURNED BACK UNSERVED ON 26/02/2016 BY POSTAL DEPARTMENT WITH THE REMARKS INSUFFICIENT ADDRESS. HOWEVER, CONTSHIP COMMODITIES (P) LTD. AND ANGAD CHEMICALS (P) LTD. HAVE SUBMITTED THE REPLY IN RESPONSE TO THE SUMMONS ISSUED U/S 131 OF THE I.T. ACT ON 29/02/2016. FURTHER, SHOW CAUSE LETTER ALONG WITH SUMMONS U/S 131 WAS ISSUED ON 10/03/2016 TO THE MANAGING DIRECTOR OF M/S C K PLASTICS (PJ LTD. ASKING HIM TO PRODUCE THE LOAN CREDITORS AS IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS COULD NOT BE VERIFIED. IN RESPONSE TO THE SAID SHOW CAUSE THE AIR OF THE ASSESSEE COMPANY SUBMITTED EXPLANATIONS 021/03/2016 CITING VARIOUS CASE LAWS. THE A/R ALSO FURNISHED DETAILS/ DOCUMENTS OF THE LOAN CREDITORS EXCEPT THE M/S B R TRADING CO AND M/S S N V ENTERPRISES. HOWEVER, NO LOAN CREDITORS APPEARED PERSONALLY AS REQUIRED VIDE SUMMONS ISSUED U/& 131 OF THE I.T ACT. IT IS OBSERVED THAT THE ASSESSEE WAS NOT SERIOUS ENOUGH TO ESTABLISH ITS CASE, OTHERWISE HE WOULD HAVE COMPLIED WITH THE SUMMONS ISSUED BY THE ASSESSING OFFICER AND IT OUGHT TO HAVE PRODUCED THE DIRECTORS OF THE LOAN CREDITORS BEFORE THE ASSESSING OFFICER SO THAT THEY COULD EXPLAIN THE SOURCES FROM WHICH THE LOAN WAS GIVEN. 3 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD 3.1. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. FIRST APPELLATE AUTHORITY WITHOUT MUCH DISCUSSION UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROOF THAT LAY ON IT BY PRODUCING NECESSARY EVIDENCES, A COPY OF WHICH WAS PLACED IN THE PAPER BOOK FILED BEFORE US, TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. HE TOOK THIS BENCH THROUGH EACH ONE OF THE FINDINGS OF THE ASSESSING OFFICER AND THE EVIDENCE PLACED BY HIM, BEFORE US AND POINTED OUT THAT THE ADDITION WAS MADE SOLELY BECAUSE, THE ASSESSEE COULD NOT PRODUCE THE LOAN CREDITORS, IN PERSON, BEFORE THE ASSESSING OFFICER. HE SUBMITTED THAT IN CASE OF TWO CREDITORS I.E., M/S. SNV ENTERPRISES AND M/S. B R TRADING CO., NOTICE ISSUED BY THE ASSESSING OFFICER WAS RETURNED WITH THE REMARKS INSUFFICIENT ADDRESS AND THIS FACT WAS NEVER PUT TO THE ASSESSEE AND HENCE THE ASSESSEE COULD NOT FURNISH THE CORRECT ADDRESS. HE SUBMITTED THAT, DOCUMENTS FROM THESE TWO CREDITORS WERE GIVEN BEFORE THE LD. CIT(A). 6. THE LD. D/R, RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THEY WERE CREDITS IN THE ACCOUNTS OF THE CREDITORS, IMMEDIATELY PRIOR TO GIVING OF LOAN TO THE ASSESSEE WHICH POINTS THAT THESE CREDITORS DID NOT HAVE CREDITWORTHINESS. HE SUBMITTED THAT THE ASSESSEE WAS BOUND TO PRODUCE THE CREDITORS BEFORE THE ASSESSING OFFICER FOR EXAMINATION AND HAVING FAILED TO DO SO, THE ADDITION WAS RIGHTLY MADE. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THERE WERE NO CASH DEPOSITS IN THE HAND OF THE CREDITORS ACCOUNTS AND TRANSFER OF FUNDS THROUGH BANKING CHANNELS WAS DONE IN THE NORMAL COURSE OF BUSINESS AND THE SOURCE OF SOURCE WAS ALSO EXPLAINED BY THE CREDITORS. BOTH THE PARTIES RELIED ON CASE-LAW, WHICH WE WOULD CONSIDER AND DEAL WITH AS AND WHEN REQUIRED. 7. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ONLY ON THE GROUND THAT THE LOAN CREDITORS DID NOT APPEAR IN RESPONSE TO THE SUMMONS ISSUE U/S 131 OF 4 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD THE ACT. IT IS WELL SETTLED THAT NO ADVERSE INFERENCE CAN BE TAKEN, JUST BECAUSE LOAN CREDITORS HAVE NOT APPEARED IN RESPONSE TO SUMMONS OR HAVE NOT BEEN PRODUCED BEFORE THE ASSESSEE. WE DRAW STRENGTH FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION P. LTD. 159 ITR 78 (SC) WHEREIN IT WAS HELD AS FOLLOWS:- IN THIS CASE THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE THE INCOME-TAX ASSESSEES. THEIR INDEX NUMBER WAS IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANY FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAD DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION WAS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH COULD ARISE. (EMPHASIS OURS) 8. THE OTHER GROUND ON WHICH THE ASSESSING OFFICER MADE THE ADDITION WAS THAT CERTAIN FUNDS WERE TRANSFERRED INTO THE ACCOUNTS OF THE LOAN CREDITORS FROM THIRD PARTIES, PRIOR TO THE LOAN BEING GIVEN TO THE ASSESSEE. 8.1. NO ADDITION CAN BE MADE BASED ON SUCH INFERENCE AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JAMNA DASS GUPTA, IN ITAT NO. 20 OF 2011, G.A. NO. 289 OF 2011, JUDGEMENT DT.15 TH FEBRUARY, 2011 . 9. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DATAWARE PVT. LTD. 2011 (9) TMI 175, HELD AS FOLLOWS:- BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE TRIBUNAL BELOW HAVE IN DETAILS CONSIDERED THE FACT THAT THE SHARE APPLICATION MONEY WAS PAID BY ACCOUNT PAYEE CHEQUE, THE CREDITOR APPEARED BEFORE THE ASSESSING OFFICER, DISCLOSED ITS PAN NUMBER AND ALSO OTHER DETAILS OF THE ACCOUNTS BUT IN SPITE OF THAT THE ASSESSING OFFICER DID NOT ENQUIRE FURTHER FROM THE ASSESSING OFFICER OF THE CREDITOR BUT IN STEAD, HIMSELF PROCEEDED TO CONSIDER THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR AND OPINED THAT HE HAD SOME DOUBT ABOUT THE GENUINENESS OF SUCH ACCOUNT. IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN 5 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENESS OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. 10 . APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN EACH OF THESE CASES TO THE FACTS OF THIS CASE, WE NOW EXAMINE EACH OF THE LOAN CREDITORS. THE ASSESSEE FURNISHED THE FOLLOWING DETAILS IN THE CASE OF EACH OF THESE CREDITORS:- 1) ANGAD CHEMICAL (P) LTD. - (I) ITR ACKNOWLEDGEMENT AND FINAL ACCOUNTS FOR THE AY.: 20L3-14 (II) COPY OF CONFIRMATION CERTIFICATE (III) COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ANGAD CHEMICAL (P) LTD. (IV) COPY OF BANK STATEMENT (V) REPLY OF THE NOTICE U/S. 131 2) CONTSHIP COMMODITIES (P) LTD. - (I) ITR ACKNOWLEDGEMENT AND FINAL ACCOUNTS FOR THE AY.: 2013-14 (II) COPY OF CONFIRMATION CERTIFICATE ALONGWITH TYPED COPY (III) COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OFCONTSHIP COMMODITIES (P) LTD. (IV) COPY OF BANK STATEMENT (V) REPLY OF THE NOTICE U/S. 131 3) MINDTRACK VENTURES (P) LTD. - (I) ITR ACKNOWLEDGEMENT AND FINAL ACCOUNTS FOR THE AY.: 20L3-14 (II) COPY OF CONFIRMATION CERTIFICATE (III) PAYMENT DETAILS AND SOURCE OF FUND (IV) COPY OF BANK STATEMENT (V) REPLY OF THE NOTICE U/S. 131 6 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD 4) SUBHLABH FISCAL SERVICES (P) LTD. - (I) ITR ACKNOWLEDGEMENT AND FINAL ACCOUNTS FOR THE A.Y.: 2013-14 (II) COPY OF CONFIRMATION CERTIFICATE (III) PAYMENT DETAILS AND SOURCE OF FUND (IV) COPY OF BANK STATEMENT (V) REPLY OF THE NOTICE U/S. 131 5) S.N.V. ENTERPRISES- (I) FINAL ACCOUNTS FOR THE A.Y.: 2013-14 (II) COPY OF CONFIRMATION CERTIFICATE (III) COPY OF TRADE LICENCE 6) B.R TRADING CO. (I) FINAL ACCOUNTS FOR THE A.Y.: 2013-14 (II) COPY OFCCNFINNATION CERTIFICATE (III) COPY OF TRADE LICENCE 11. A PERUSAL OF THE SAME DEMONSTRATES THAT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED. IN THE CASE OF M/S ANGAD CHEMICALS LTD., IT HAS TOTAL ASSETS OF MORE THAN 10.17 CRORES. INCOME EARNED DURING THE YEAR CANNOT BE THE ONLY CRITERIA TO DETERMINE THE CREDITWORTHINESS. HENCE, THE ADDITION MADE ON THE LOAN GIVEN BY M/S ANGAD CHEMICAL PVT. LTD., IS HEREBY DELETED. IN THE CASE OF CONTSHIP COMMODITIES (P) LTD. THE TOTAL NET ASSETS ARE WORTH OF RS.22.46 CRORES. THIS PROVES THE GENUINENESS OF THE TRANSACTION AND BOTH THE IDENTITY AND THE CREDITWORTHINESS OF THE CREDITORS ARE PROVED. IN THE CASE OF MINDTRACK VENTURES (P) LTD THE TOTAL NET ASSETS ARE WORTH OF RS. 15.32 CRORES. THIS PROVES THE GENUINENESS OF THE TRANSACTION AND BOTH THE IDENTITY AND THE CREDITWORTHINESS OF THE CREDITORS ARE PROVED. IN THE CASE OF SUBHLABH FISCAL SERVICES (P) LTD. THE TOTAL NET ASSETS ARE WORTH OF RS. 88.81 CRORES. THIS PROVES THE GENUINENESS OF THE TRANSACTION AND BOTH THE IDENTITY AND THE CREDITWORTHINESS OF THE CREDITORS ARE PROVED. 7 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD THUS, THE ADDITIONS MADE ON LOANS BORROWED FROM ALL THE ABOVE ENTITIES, ARE HEREBY DELETED. 12. COMING TO THE LOANS BORROWED FROM M/S. SNV ENTERPRISES AND M/S B R TRADING CO. THOUGH, THE ASSESSEE HAS FURNISHED CERTAIN DETAILS IN SUPPORT OF ITS CLAIM AS NOTICES COULD NOT BE SERVED ON THESE CREDITORS BY THE ASSESSING OFFICER DUE TO THE REASON THAT, HE DID NOT HAVE THE LATEST ADDRESS, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION, IN ACCORDANCE WITH LAW. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. KOLKATA, THE 24 TH DAY OF AUGUST, 2018. SD/- SD/- [ S.S. GODARA ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24.08.2018 {SC SPS} 8 ITA NO. 2076/KOL/2017 ASSESSMENT YEAR: 2013-14 C.K. PLASTICS PVT. LTD COPY OF THE ORDER FORWARDED TO: 1. C.K. PLASTICS PVT. LTD 3 RD FLOOR SUIT NO. 12 7, POLLOCK STREET KOLKATA 700 069 2. INCOME TAX OFFICER, WARD-6(3), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES