The I.T.O., Bhagalpur V. M/s Silk Cenre, Bhagalpur

ITA 210/PAT/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9626 (ITAT-PATNA)
• Duration Of Justice: 4 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 24-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAU SHIK KUMAR DAS
• Assessee Lawyers: K N PRASAD
• Section: 143(3); 133(6); 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA BEFORE SH. N. K. SAINI, AM AND SH. AMIT SHUKLA , JM ITA NO. 210 /PAT. /2013 : ASSTT. YEAR : 2006 - 07 INCOME TAX OFFICER, WARD - 1(3), BHAGALPUR VS M/S SILK C ENTRE, HAZARI SAH LANE, NATH NAGAR, BHAGALPUR - 812004 (APPELLANT) (RESPONDENT) PAN NO. A A VFS0591F ASSESSEE BY : SH. K. N. PRASAD, ADV. REVENUE BY : SH. KAUSHIK KUMAR DAS, SR. DR DATE OF HEARING : 06 .03 .201 8 DATE OF PRONOUNCE MENT : 08 .0 3 .201 8 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 21.03.2013 OF LD. CIT( A ) - I , PATNA . 2 . FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: I) THE ORDER OF THE CIT(A) IS PERVERSE AND BAD IN LAW & FACTS IN AS MUCH AS SHE DID NOT CONSIDER THE BASIC FACT THAT THE ASSESSEE/ASSESSEES AR HAD RESORTED TO COMPLETE NON - COOPERATION AND NON - COMPLIANCE THROUGHOUT THE FRESH ASSESSMENT PRO CEEDING U/S 263/143(3) AND PRESENTED WRONG AND MISLEADING PLEA THAT REASONABLE OPPORTUNITY WAS NOT GRANTED WHEN THEY FAILED TO MAKE COMPLIANCES TO REPEATED OPPORTUNITIES OVER PERIOD OF 14 MONTHS (DETAILED FACTS AT PARA 1 OF STATEMENT OF FACTS. II) THE O RDER OF CIT(A) IS PERVERSE AND BAD - IN - LAW & FACTS AS MUCH AS HER OBSERVATION THAT SALE & PURCHASE HAVE BEEN ACCEPTED BY THE AO..& THE TRADING RESULTS IS ABSOLUTELY INCORRECT BECAUSE THE ASSESSEE NEVER COMPLIED WITH ANY NOTICES INCLUDING NOTICE U/S 142(1 ) OF THE ACT AND NEVER PRODUCED BOOKS OF ACCOUNTS IN THE FORM OF CASH BOOK, LEDGER, PURCHASE & SALE LEDGER & THEIR VOUCHERS BEFORE ITA NO . 210 /PAT. /201 3 SILK CENTRE 2 THE AO, AND THE DELETION OF RS.1,36,37,183/ - IS ILLEGAL & BAD - IN - LAW & FACTS; III) THE ORDER OF CIT(A) IS PERVERSE AND BAD - I N - LAW IN AS MUCH AS SHE HAS ACCEPTED THE LEGER A/CS OF THE TRADE CREDITORS PRODUCED BEFORE HER WITHOUT GIVING OPPORTUNITY TO THE AO TO EXAMINE THE SAME IN TERMS OF RULE 46A O THE INCOME - TAX RULES, 1962; IV) THE ORDER OF CIT(A) IS PERVERSE AND BAD - IN - LAW & FACTS IN AS MUCH AS THAT SUB - SEC (4) OF SECTION 254 OF THE ACT CLEARLY LAYS DOWN THAT THE CIT(A) MAY MAKE SUCH FURTHER ENQUIRY AS HE THINKS FIT OR MAY DIRECT THE AO TO MAKE FURTHER ENQUIRY (THROUGH REMAND REPORT), BUT OVERLOOKING THE FACT THAT NUMEROUS NO TICES WERE ISSUED, AND OPPORTUNITIES WERE PROVIDED BUT ASSESSEE/ASSESSEES AR RESORTED TO COMPLETE NON - COMPLIANCE & EVEN AFTER SEEKING ADJOURNMENT ON FIRST OCCASION FAILED TO COMPLY/PRODUCE CREDITORS FOR EXAMINATION SUBSEQUENTLY SHE DID NOT RESORT TO PROVI SIONS OF SEC. 254(4) OF THE ACT AND DECIDED THE CASE ON INCOMPLETE FACTS, AND THEREFORE NOT ON MERITS. 3 . FROM AB OVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF RS.1,36,37,183/ - MADE BY THE A O ON ACCOUNT OF TRADE CREDITORS. 4 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS DEALING IN SILK & ARTIFICIAL CLOTHS ON WHOLESALE BASIS AND ITS ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.1,60,000/ - ON 18.09.2007 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). LATER ON, THE CIT, BHAGALPU R VIDE HIS ORDER DATED 06.12.2009 U/S 263 OF THE ACT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED TO MAKE FRESH ASSESSMENT. CONSEQUENTLY, THE AO STARTED THE ASSESSMENT PROCEEDINGS AND NOT ICED THAT IN THE BALANCE SHEET FURNISHED BY THE ASSESSEE, THE SUNDRY CREDITORS WERE SHOWN AT RS.1,36,37,183/ - AND THE ASSESSEE HAD FURNISHED DETAILS OF CLOSING BALANCE OF ALL THE ITA NO . 210 /PAT. /201 3 SILK CENTRE 3 SUNDRY CREDITORS AMOUNTING TO RS.1,33,54,093/ - DURING THE COURSE OF REGULAR A SSESSMENT. HE ASKED THE ASSESSEE TO FURNISH THE NAME S AND COMPLETE POSTAL ADDRESS ES OF ALL SUNDRY CREDITORS ALONGWITH THEIR CONFIRMATION OF ACCOUNTS. THE ASSESSEE SUBMITTED THAT THE COMPLETE LIST OF ALL THE SUNDRY CREDITORS WITH FULL POSTAL ADDRESS ES HAD A LREADY BEEN FILED BEFORE THE DEPARTMENT DURING THE COURSE OF HEARING. THEREAFTER, THE AO ISSUED NOTICE S U/S 133(6) OF THE ACT WHICH WERE RETURNED UNSERVED WITH THE REMARKS INCORRECT ADDRESS. SUBSEQUENTLY, THE AO ASKED THE ASSESSEE TO SUBSTANTIATE THE IDE NTI T Y, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS. ACCORDING TO THE AO, THE ASSESSEE DID NOT PRODUCE THE BASIC DOCUMENTS LIKE PURCHASES BILLS/VOUCHERS, PROOF OF PAYMENTS TO PARTIES/SUPPLIERS TO ESTABLISH THE GENUINENESS OF TRANSACTIO NS. HE, THEREFORE, HELD THAT THESE LIABILITIES WERE UNEXPLAINED HAVING BEEN CREATED JUST TO REDUCE THE TAXABLE INCOME. ACCORDINGLY, ADDITION OF RS.1,36,37,183/ - WAS MADE. 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE SUMM ONS U/S 131 OF THE ACT DATED 08.10.2010 WERE ISSUED TO SMT. SONAM BUDHIA, MR. PRAVEEN KUMAR BUDHI A, HUF, SH. OM PRAKASH BUDHIA AND SH. SHIV KUMAR BUDHIA TO APPEAR BEFORE THE AO IN THE CASE OF GAURAV KUMAR SAH , PROP. M/S J.B. LUBRICANTS, PATAL BABU ROAD , BHAGALPUR WITH WHOM THE ASSESSEE HAD NO BUSINESS TRANSACTION S WHATSOEVER. THE PHOTO COPIES OF THE SAID SUMMONS WERE FURNISHED BEFORE THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT IN CASE THE ASSESSEE FAILED TO PRODUCE THE TRADE CREDITORS AND BOO KS OF ACCOUNTS WERE NOT RELIED UPON, THEN THE AO SHOULD HAVE ESTIMATED THE PROFIT INSTEAD OF MAKING THE ADDITION OF THE AMOUNT OF TRADE CREDITORS. IT WAS ITA NO . 210 /PAT. /201 3 SILK CENTRE 4 POINTED OUT THAT THE ADDITION OF THE ENTIRE TRADE CREDITS BOTH OLD AND NEW WAS LEGALLY WRONG AND UNWAR RANTED. THE ASSESSEE ALSO FURNISHED THE TRADING CHART FOR THE YEAR UNDER CONSIDERATION AND THE IMMEDIATELY TWO PRECEDING YEARS WHICH REVEALED THAT THE GP RATE FOR THE YEAR UNDER CONSIDERATION WAS 5.99% IN COMPARISON TO 5.41% & 5.88% FOR THE ASSESSMENT YEAR S 20 04 - 05 AND 2005 - 06 RESPECTIVELY. IT WAS POINTED OUT THAT GP RATE FOR THE PRECEDING TWO YEARS HAD BEEN ACCEPTED BY THE AO AND IF THE ENTIRE TRADE CREDITORS ARE ADDED TO THE INCOME OF THE ASSESSEE THAN THE GP RATE WOULD COME TO 42.82% WHICH WAS QUITE ABSU RD AND ILLOGICAL IN THE NATURE OF TRADE CARRIED ON BY THE ASSESSEE FOR THE PAST MANY YEARS. IT WAS STATED THAT ALL THE TRADE CREDITS REPRESENTED THE LOCAL WEAVERS FROM WHOM THE ASSESSEE HAD MADE PURCHASES OF HANDLOOM CLOTHS TO S ELL TO OTHER OUTSIDE PARTIES AND THAT ALL THE SALES WERE VERIFIABLE AND PROPERLY SUPPORTED WITH THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS AND THE AO HAD NOT FOUND ANY OF THE ITEMS OF PURCHASES AND SALES BOGUS OR INFLATED A ND/OR SUPPRESSED TO JUSTIFY ADDITION OF THE TRADE CREDITORS. IT WAS ALSO STATED THAT THE AO ACCEPTED THE TRADE RESULTS I.E. SALE AND PURCHASES AS DISCLOSED BY THE ASSESSEE AND FOUND NOTHING ADVERSE IN THE TRADING RESULTS ACCEPTING THE RATE OF GROSS PROFIT AS SHOWN BY THE ASSESSEE WHICH WAS A BIT HIGHER THAN THE GROSS PROFIT RATE SHOWN IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSEE ALSO FURNISHED THE SWORN AFFIDAVIT S OF ALL THE TRADE CREDITORS STATING THEREIN THAT NONE OF THEM HAD BEEN SERVED ANY SUMMON U/S 131 OF THE ACT. IT WAS POINTED OUT THAT THE ASSESSEE WAS HAVIN G OUTSTANDING LIABILITY OF SUNDRY CREDITORS FOR GOODS SUPPLIED OF RS.1,36,37,184/ - AND AT THE SAME TIME, IT HAD SUNDRY DEBTORS OF RS.1,59,71,666/ - AND THE CLOSING STOCK OF RS.63,36, 936/ - WHICH CLEARLY DEMONSTRATED THAT ON THE ONE HAND, THE ASSESSEE HAD LIA BILITY TOWARDS THESE CREDITORS AND ON THE OTHER HAND, IT HAD ASSETS IN THE FORM OF TRADE DEBTORS AND ITA NO . 210 /PAT. /201 3 SILK CENTRE 5 STOCK. IT WAS ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE AO MAY BE DELETED. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE O BSERVED THAT THE AO COULD NOT FIND ANY ITEM OF PURCHASE S AND SALES AS BOGUS OR INFLATED OR SUPPRESSED TO JUSTIFY THE ADDITION OF THE TRADE CREDITORS TO THE INCOME OF THE ASSESSEE AND MOREOVER, THE SALES AGAINST THE PURCHASES HAD BEEN ACCEPTED BY THE AO. SH E FURTHER OBSERVED THAT THE AO HAD ACCEPTED TRADING RESULTS I.E. SALE AND PURCHASES AND FOUND NOTHING ADVERSE IN THE TRADING RESULTS AND THAT MANY OF THE TRADE CREDITORS WERE OLD HAVING THEIR BUSINESS RELATIONSHIP WITH THE ASSESSEE AS WAS APPARENT FROM THE LEDGER COPIES WHICH REVEALED THAT MOST OF THEM HAD OPENING BALANCES TO THEIR CREDITS. THE LD. CIT(A) ALSO POINTED OUT THAT THE AO ISSUED NOTICES TO THE FEW OF THE TRADE CREDITORS BUT MADE THE ADDITION OF THE ENTIRE TRADE CREDITORS WITHOUT GIVING ANY BASIS OR POINTING OUT AN Y DEFECT IN THE BOOKS OF ACCOUNT. SHE, THEREFORE, DELETED THE ADDITION MADE BY THE AO. 7. NOW THE DEPARTMENT IS IN APPEAL. THE LD. STANDING COUNSEL OF THE DEPARTMENT REITERATED THE OBSERVATION MADE BY THE AO AND FURTHER SUBMITTED THAT S INCE THE CREDITORS DID NOT APPEAR BEFORE THE AO, H E COULD NOT EXAMINE D THEM AND THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT BEFORE THE AO. THEREFORE, THE ADDITION WAS RIGHTLY MADE. 8. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND DREW OUR ATTENTION TOWARDS PAGE NOS. 7 TO 9 OF THE ASSESSEES PAPER BOOK WHICH IS THE COPY OF ORIGINAL ASSESSMENT ORDER DATED 18.09.2007 WHEREIN THE AO CATEGORICALLY STATED THAT THE ASSESSEE A PPEARED FROM TIME TO TIME ALONGWITH THE PAPERS / DOCUMENTS AND PRODUCED THE BOOKS OF ACCOUNTS WHICH WERE TEST CHECKED AND THAT THE REPLIES TO ITA NO . 210 /PAT. /201 3 SILK CENTRE 6 QUESTIONNAIRE FILED BY THE ASSESSEE WERE DULY EXAMINED. IT WAS FURTHER STATED THAT THE AO IN SCRUTINY ASSESSMENT ACC EPTED THE TRADE CREDITORS. THEREFORE, THE ADDITION MADE WAS NOT JUSTIFIED PARTICULARLY WHEN ALL THE TRADE RESULTS WERE ACCEPTED BY THE AO AND THE BOOK S OF ACCOUNTS WERE NOT REJECTED, AS SUCH THE LD. CIT(A) RIGHTLY DELETED THE IMPUGNED ADDITION. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT IN THE ORIGINAL ASSESSMENT FRAMED U/S 143(3) OF THE ACT, THE AO ACCEPTED THAT THE ASSESSEE FUR NISHED BOOKS OF ACCOUNTS AND ALSO THE DETAILS /DOCUMENTS ASKED FOR WHICH WERE DULY EXAMINED. THEREAFTER, THE BOOK RESULTS WERE ACCEPTED. IN THE PRESENT ASSESSMENT PROCEEDINGS ON THE DIRECTION OF THE LD. CIT(A), THE AO HAD ACCEPTED THE BOOK RESULTS AND ALSO DID NOT DOUBT THE TRADE RESULTS. HE HAD NOT POINTED OUT ANY INFLATED PURCHASES OR SUPPRESSED SALES, THE GROSS PROFIT RATE WAS ALSO NOT DOUBTED WHICH WAS BETTER THAN THE PRECEDING YEAR. IN OUR OPINION , WHEN THE AO CONSIDERED THE PURCHASE S FROM THE CREDITORS AS GENUINE THAN CONSIDERING THE CREDITORS AS NON - GENUINE AND MAKING THE ADDITION FOR THEM IN TOTAL, PARTICULARLY WHEN THE SUNDRY CREDITORS WERE OLD ONE HAVING OPENING BALANCE, THE IMPUGNED ADDITION MADE BY THE AO WAS NOT JUSTIFIED. THEREFORE, THE LD. CIT( A) RIGHTLY DELETED THE ADDITION. WE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 10 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. (ORDER P RONOU NCED IN THE COURT ON 08 /03 /2018 ) SD/ - SD/ - ( AMIT SHUKLA ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 /0 3 /2018 *SUBODH*