M/s Astha Enterprises Pvt. Ltd., Mandi Gobindgarh V. ITO, Mandi Gobindgarh

ITA 219/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8496 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-12-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Peak credit; Accommodation entries
• Section: 234B; 260A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.582/CHD/2008 (ASSESSMENT YEAR : 2000-01) M/S ASTHA ENTERPRISES PVT. LTD., VS. THE INCOME TAX OFFICER, LOHA BAZAR, MANDI GOBINDGARH. WARD, RAJPURA. PAN: AABCA4599A AND ITA NO.651/CHD/2008 (ASSESSMENT YEAR : 2000-01) THE INCOME TAX OFFICER, VS. M/S ASTHA ENTERPRISES PVT. LTD., WARD-1, MANDI GOBINDGARH. LOHA BAZAR, MANDI GOBINDGARH. PAN: AABCA4599A AND ITA NO.219/CHD/2013 (ASSESSMENT YEAR : 2000-01) M/S ASTHA ENTERPRISES PVT. LTD., VS. THE INCOME TAX OFFICER, LOHA BAZAR, MANDI GOBINDGARH. WARD-1, MANDI GOBINDGARH. PAN: AABCA4599A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL DEPARTMENT BY : MS.CHANDER KANTA, DR DATE OF HEARING : 09.12.2015 DATE OF PRONOUNCEMENT : 08.02.2016 2 O R D E R PER RANO JAIN, A.M . : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 2.5.2008 FOR ASSESSMENT YEAR 2000-01 AND THE APPEAL OF THE A SSESSEE IN ITA NO.219/CHD/2013 IS DIRECTED AGAINST THE ORDER O F LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 12.10.2012 FOR ASSESSMENT YEAR 2000-01. 2. WE WILL FIRST TAKE UP THE CROSS APPEALS IN ITA NOS.582/CHD/2008 AND ITA NO.651/CHD/2008. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE HAD OPENED A BANK ACCOUNT NO.2758 WITH J&K BANK LIM ITED, KANPUR FROM WHICH IT MADE PAYMENT OF RS.5,20,00,000 /- TO V.V.S. ALLOYS LTD. AGAINST THE PURCHASES MADE DURIN G THE YEAR. TO VERIFY THE GENUINENESS OF THESE TRANSACTI ONS, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR THE A SSESSMENT YEAR 1999-2000, I.E. THE PRECEDING ASSESSMENT YEAR. ON THE BASIS OF HIS OBSERVATION THAT FOR ASSESSMENT YEAR 1 999-2000 THE ASSESSEE HAS IN PRINCIPLE AGREED BEFORE THE SET TLEMENT COMMISSION THAT IT HAS BEEN CARRYING ON ACTIVITIES OUTSIDE THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER TREATED THE TRANSACTION AGGREGATING TO RS.6,00,21,000/- AS ENT ERED IN TO 3 BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT AND MA DE ADDITION. 4. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMIT TED THAT TOTAL AMOUNT OF RS.6,00,21,000/- CANNOT BE TRE ATED THE INCOME OF THE ASSESSEE AND ONLY PEAK CREDIT CAN BE ADDED. THE LEARNED CIT (APPEALS) SUSTAINED THE ADDITION TO RS.40.12 LACS BEING THE AMOUNT OF PEAK CREDIT IN THE SAID BA NK ACCOUNT. FURTHER HE DIRECTED THE ASSESSING OFFICER TO BRING TO CHARGE GROSS PROFIT OF 2.49% BY TREATING THE DEPOSI T OF RS.6,00,21,000/- AS SALES OF THE ASSESSEE. 5. AGGRIEVED BY THIS, BOTH THE ASSESSEE AS WELL AS DEPARTMENT HAS COME IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET MADE A PRAYER TO SEND BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO REDECIDE THE CASE ON THE BASIS OF DIRECTION OF HON'BLE SETTLEMENT COMMISSION FOR THE ASSESSMENT YEAR 1999-2000. 7. THE LEARNED D.R. DID NOT HAVE ANY OBJECTION FOR THE SAME. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE ORDER OF THE HON'BLE SETTLEMENT COMMISSION FOR ASSESSMENT YEAR 1999-2000 IN ASSESSEES CASE, ON TH E 4 BACKGROUND OF SAME FACTS, THE HON'BLE COMMISSION HA S RECORDED THE FOLLOWING FINDINGS : 7.1 HAVING CAREFULLY EVALUATED THE FACTS AND CIRCUMSTANCES PERTAINING TO DEPOSITS IN THE BANK ACCOUNT IN M/S J&K BANK LTD., KANPUR AS WELL AS CONCLUSIONS DRAWN BY THE SALES TAX DEPARTMENT AFTER INTENSIVE INVESTIGATIONS IN THE CASE OF VVS, WE FIND THE APPLICANT'S CONTENTION S TO BE ON A STRONGER FOOTING. 7.2 WHILE IT IS TRUE THAT THE SAID BANK ACCOUNT WAS OPERATED IN THE APPLICANT'S NAME, IT IS NOT IN DISP UTE THAT THE TRAIL OF DEPOSITS THEREIN FOUND THEIR DESTINATION WITH VVS. THE DEPARTMENT HAS N OT CONTROVERTED THIS ALL-IMPORTANT COMPONENT. THIS BEINGS SO, THE QUESTION REQUIRING ANSWER IS AS TO WHAT WAS THE REASON THEREFOR. BY ANY MEANS, IT CANNOT BE ACCEPTE D THAT THIS WAS FOR SALES MADE BY VVS TO THE APPLICAN T. THE SALES TAX DEPARTMENT HAS HELD THESE INTER SE TRANSACTIONS BETWEEN VVS AND THE APPLICANT TO BE A MODUS OPERANDI FOR EVASION OF SALES TAX BY DEPICTIN G SUCH SALES TO PUNJAB. MOREOVER, WE APPEAR CONVINC ED WITH THE APPLICANT'S PLEA THAT THE ENTIRE EXERCISE COMMENCING FROM DESPATCH OF GOODS FROM' KANPUR; TRANSPORTATION TIME TO MANDIGOBINDGARH; ONWARD SALE S IN MANDIGOBINDGARH AND REALISATION OF PROCEEDS; RETURN OF TRANSPORT, VEHICLES FROM MANDIGOBINDGARH TO KANPUR ALONGWITH THESE PROCEEDS OR DEPOSIT IN BANK ACCOUNT IN KANPUR; AND, THEREAFTER, ACTUAL DEPOSIT FOLLOWED BY RELEASE OF PAYMENT THROUGH CHEQUE IN FAVOUR OF VVS. - WAS IMPOSSIBLE TO BE ACCOMPLISHED WITHIN ONE DAY. GIVEN THIS SCENARIO, THE WEIGHT OF EVIDENCE TILTS THE PREPONDERANCE OF PROBABILITY AGA INST ANY TRADING OR SALES TRANSACTIONS HAVING BEEN EFFEC TED BETWEEN VVS AND APPLICANT COMPANY INSOFAR AS THE SA ID DEPOSITS IN J&.K BANK LTD., KANPUR ARE CONCERNED; 5 VIEWED IN THIS PERSPECTIVE, THE ONLY PLAUSIBLE INFE RENCE IS THAT THESE DEPOSITS WERE SOURCED BY VVS FOR SIPHONING BACK TO THEM AS SALES PROCEEDS. 7.3 WHILE THE DEPARTMENT'S MAIN OBJECTIONS ARE TAKEN CARE OF BY OUR FINDINGS IN PARA 7.2, ITS ALTERNATE PREMISE THAT THE APPLICANT COULD HAVE DISPOSED OF GOODS IN KANPUR ITSELF APPEARS PURELY SPECULATIVE SINCE AS NO EVIDENCE TO SUPPORT THIS PRIMA-FACIE THEORETICAL PRESUMPTION ST OOD ADDUCED, AT ANY STAGE, DURING' THE SETTLE MENT PROCEEDINGS. 7.4 IN THE CIRCUMSTANCES, WE ARE INCLINED TO ACCEPT THE APPLICANT'S PRAYER FOR TREATING THESE DEPOSITS AS ACCOMMODATION ENTRIES AND FOR BEING TAXED ON COMMISSION COMPONENT THEREON. IN ITS SOF, THE APPLICANT'S ADDITIONAL INCOME OFFER HAS BEEN COMPUT ED @ 0.5%WHICH, IN OUR OPINION, IS NOT COMMENSURA TE WITH EVEN MINIMUM RATE PREVALENT IN SUCH MARKET PRACTICE S. ACCORDINGLY, WE PROPOSE TO APPLY A COMMISSION RATE OF 1% ADDITIONAL INCOME OFFER. 7. 5 IT TRANSPIRED DURING THE COURSE OF SETTLEMENT PROCEEDINGS THAT, VIDE ASSESSMENT ORDER DATED 19.07.2001, THE DEPARTMENT HAS TREATED DEPOSITS IN THE APPLICANT'S KANPUR BANK ACCOUNT AS UNEXPLAINED CASH CREDITS IN THE HANDS OF VVS AND, AS OF NOW, TH E MATTER APPEARS TO BE IN APPEAL BEFORE HON'BLE ALLAHABAD HIGH COURT U/S 260A OF THE ACT WH ERE THE DEPARTMENT IS SUPPORTING THIS ASSESSMENT ORDER. 8. ALL; CONSIDERED, RS.5,00,000/- IS TREATED AS FURTHER ADDITIONAL INCOME OVER AND ABOVE THE DISCLOSURE OF RS.5,00,000/- MADE IN THE SETTLE MENT APPLICATION THEREBY SETTLING THE TOTAL ADDITIONAL INCOME AT RS.10,00,000/-. 6 ORDER 9.1 KEEPING IN THE FOREGOING DISCUSSION, THE APPLICANT'S ADDITIONAL AY 1999-2000 IS DETERMINED AS UNDER: DISCLOSURE IN THE SETTLEMENT RS.5,00,000/- APPLICATION FURTHER ADDITIONAL INCOME RS.5,00,000/- TOTAL ADDITIONAL INCOME RS.10,00,000/- 9.2 THE ASSESSING OFFICER IS DIRECTED TO CALCUL ATE THE TAX ALONG WITH INTEREST PAYABLE BY THE APPLICANT. 10. AS FOR INTEREST CHARGEABLE U/S 234A, 234 B AND 234C OF THE ACT, THE SAME ARE MANDATORY. HOWEVE R, INTEREST U/S 234B OF THE ACT WILL BE CHARGED UPTO THE DATE OF ORDER U/S 245D (1) OF THE ACT AS APEX COURT JUDGMENT DATED 21.10.2010 IN THE CASE OF BRIJ LAI V S. CIT (C.A. NOS. 516-527 OF 2004 & OTHERS). INTE REST U/S 2 THE ACT, AS MAY BE APPLICABLE ON THE SU STAINED OUTSTANDING PER THE AND ORS 0(2) OF DEMAND AS ON VARIOUS DATES, IF ANY, IS TO BE CHARGED IN ACCORDAN CE WITH LAW. 8. WE HEREBY DIRECT THE ASSESSING OFFICER TO PASS THE ORDER FOR THE IMPUGNED ASSESSMENT YEAR ALSO IN LINE WITH THE DIRECTION OF THE HON'BLE SETTLEMENT COMMISSION. 9. THE APPEAL OF THE ASSESSEE AND THE DEPARTMENT A RE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.219/CHD/2013 : 10. THIS IS AN APPEAL AGAINST THE PENALTY UNDER SE CTION 271(1)(C) OF THE ACT LEVIED BY THE ASSESSING OFFICE R ON THE 7 ADDITION MADE ON THE FACTS, AS EXPLAINED IN ITA NO/582/CHD/2008 AND ITA NO.651/CHD/2008. SINCE THE SE CASES HAVE BEEN SET ASIDE TO THE FILE OF THE ASSESS ING OFFICER TO DECIDE AFRESH, THE APPEAL FOR CONCEALMENT OR FU RNISHING OF INACCURATE PARTICULARS DOES NOT SURVIVE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO.582/CHD/2008 AND THE APPEAL OF THE REVENUE IN IT A NO.651/CHD/2008 ARE ALLOWED FOR STATISTICAL PURPOSE S. THE APPEAL OF THE ASSESSEE IN ITA NO.219/CHD/2013 IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF FEBRUARY, 2016. SD/- SD/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 8 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH