M/S. VIKRAM ELECTRO CHEMICAL INDUSTRIES PVT. LTD, JAIPUR V. ITO, WARD-4(2), JAIPUR

ITA 23/JPR/2020

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4938 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 09-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA JCIT DHK
• Keywords: Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Additional evidence; Tax effect; Set aside
• Section: 143(3); 133(6); 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES B, JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA - @ ITA NO. 23/JP/2020 FU/KZKJ.K O'KZ @ ASSESSMENT YEAR : 2005-06 VIKRAM ELECTRO CHEMICAL INDUSTRIES PVT. LTD., A-138, ROAD NO. 12, V.K.I. AREA, JAIPUR, RAJASTHAN- 302013. CUKE VS. I.T.O., WARD 4(2), JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AAACV 8304 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS S@ ASSESSEE BY : SHRI AKSHAY SHAH (CA) JKTLO DH VKSJ LS @ REVENUE BY : MS. CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[K @ DATE OF HEARING : 19/02/2020 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/02/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29/11/2019 PASSED BY THE LD CIT(A)-2, JAIPUR FOR A.Y. 2005-06, WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE HON'BLE CIT(A) FAILED TO APPRECIATE THAT THE LD. ASSESSING OFFICER HAS GROSSLY VIOLATED THE PRINCIPLE OF NATURAL JUSTICE IN PASSING THE ORDER U/S 143(3) OF THE ACT AND VIOLATED THE SPECIFIC DIRECTION ISSUED BY HON'BLE ITAT, JAIPUR BENCH ITA NO. 707/JP/2011, AS NO OPPORTUNITY FOR CROSS EXAMINATION OF M/S TINKA STONE PVT. (FORMERLY KNOWN AS M/S NAGMA STONE PVT. LTD.) WHOSE STATEMENTS ARE RELIED UPON BY THE LD. AO HAS BEEN PROVIDED TO THE APPELLANT EVEN ON SPECIFIC REQUESTS. ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT(A) ERRED IN LAW IN SUSTAINING THE ADDITION OF RS. 10,00,000 MADE BY THE LD. ASSESSING OFFICER BEING ARBITRARY, ILLEGAL AND VOID. (TAX EFFECT RS. 3,65,925/-) 3. THE HON'BLE CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAVE DULY DISCHARGED HIS DUTY BY PROVIDING ALL THE REQUISITE EVIDENCES TO PROVE HIS GENUINENESS AND THE LD. AO HAVE NOT REBUTTED ANY SUCH EVIDENCES PLACED ON RECORD. 4. THAT THE APPELLANT CRAVES RIGHT TO AMEND. ADD, DELETE OR WITHDRAW ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 2. DURING THE COURSE OF HEARING, THE LD AR SUBMITTED THAT IN THE PRESENT CASE, M/S TINKA STONE PVT. (FORMERLY KNOWN AS M/S NAGMA STONE PVT. LTD.) HAS PLACED AN ORDER WITH THE ASSESSEE COMPANY FOR A GANGSAW MACHINE AND PAID RS 10 LACS AS AN ADVANCE AGAINST THE ORDER ON 23.09.2004. AFTER RECEIVING THE ADVANCE, THE ASSESSEE MANUFACTURED THE MACHINE AND AFTER COMPLETION, INFORMED TINKA STONE FOR CHECKING OF MACHINE AND TO MAKE BALANCE PAYMENT. HOWEVER, TINKA STONE DID NOT RESPOND TO IT AND THAT'S WHY THE SAID AMOUNT WAS SHOWN AS ADVANCE RECEIVED FROM CUSTOMER AGAINST THE MACHINE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TO CONFIRM THE BALANCE, THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 133(6) OF THE ACT TO TINKA STONE TO PROVIDE THE DETAILS OF BALANCE OUTSTANDING ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 3 OF THE ASSESSEE IN HIS BOOKS OF ACCOUNTS. THE TINKA STONE IN HIS REPLY SUBMITTED TO THE AO THAT AGAINST THE ADVANCE GIVEN TO THE ASSESSEE OF INR 10 LACS FOR MACHINERY, TWO CHEQUES OF INR 5 LACS EACH (HAVING CHEQUE NO. 489635 AND 489641) WAS RECEIVED BACK FROM THE ASSESSEE ON 24.12.2004 AND THE SAME WERE DEPOSITED IN TINKA STONESS BANK ACCOUNT MAINTAINED WITH ORIENTAL BANK OF COMMERCE, MALAD, MUMBAI. REGARDING THE ABOVE STATEMENT OF TINKA STONES, THE ASSESSEE SUBMITTED TO THE AO THAT HE HAD NOT PAID ANY AMOUNT TO TINKA STONES DURING THE YEAR AND THESE CHEQUES ARE NOT RELATED TO THE ASSESSEE AND SUBMITTED VARIOUS DOCUMENTS EVIDENCING THAT THE CHEQUES ARE NOT RELATED TO THE ASSESSEE IN THE ERSTWHILE PROCEEDINGS. ON FURNISHING ALL THE EVIDENCES, THE ASSESSEE VEHEMENTLY REQUESTED THE AO TO PROVIDE AN OPPORTUNITY OF CROSS EXAMINATION OF TINKA STONE BY EXERCISING THE POWER GIVEN UNDER SECTION 133/131 OF THE ACT. HOWEVER, THE AO STATED THAT THE EXAMINATION ASKED BY THE ASSESSEE COULD NOT BE PROVIDED AS THE PROCEEDINGS WAS GETTING TIME BARRED AND THEREFORE, HE MADE AN ADDITION OF RS 10 LACS AS UNDISCLOSED INCOME OF THE ASSESSEE IN THE ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT AND THE SAME WAS UPHELD BY THE LD CIT(A) AND LATER, SET ASIDE BY THE ITAT JAIPUR ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 4 BENCH VIDE ITS ORDER DATED 28/08/2014 WITH THE SPECIFIC DIRECTIONS ISSUED TO AO AS UNDER: ' WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AS PER THE PRINCIPLES OF NATURAL JUSTICE, THE ASSESSE IS TO BE PROVIDED CROSS EXAMINATION OF M/S NAGMA STONES PVT. LTD., MUMBAI. THEREFORE IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ASSESSEE'S CASE TO THE ASSESSING OFFICER FOR DE NOVA AND IT IS DIRECTED THAT REASONABLE OPPORTUNITY OF BEING HEARD IS GIVEN TO THE ASSESSE BEFORE DECIDING THE CASE IN ACCORDANCE WITH LAW. THE APPELLANT IS ALSO DIRECTED TO COOPERATE WITH THE ASSESSING OFFICER TO PRODUCE ALL THE EVIDENCES IN SUPPORT OF ITS CLAIM. IN THE RESULT, THE OSSESSEE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 4. IT WAS SUBMITTED BY THE LD AR THAT THE AO HAS AGAIN PASSED AN ORDER ON 30 MARCH 2016 WITHOUT FOLLOWING THE DIRECTION OF THE ITAT. THE A.O. HAS NOT PROVIDED ANY OPPORTUNITY FOR CROSS EXAMINATION OF M/S TINKA STONE PVT. LTD. AND HAS GROSSLY VIOLATED THE DIRECTIONS OF THE ITAT. 5. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) IN THE ORDER AT PARA 2.3 HAS MENTIONED THE FACT THAT THE PROCEEDINGS WERE SET ASIDE BY THE ITAT ON THE DIRECTION TO PROVIDE CROSS EXAMINATION OF TINKA STONE TO ASSESSEE WHICH WAS NOT DONE BY THE ASSESSING OFFICER. THE LD. CIT(A) HAVE ALSO MENTIONED THE FACT IN THE ORDER AT PARA 2.3.1, THAT IN ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 5 RESPONSE TO THE NOTICE U/S 133(6) OF THE AO, THE BANK HAS FAILED TO SEND THE COPIES OF CHEQUE. EVEN AFTER THAT, THE LD. CIT (A) UPHELD THE ORDER OF THE AO ON THE GROUND THAT THE ASSESSEE HAS NOT REBUTTED THE EVIDENCE. NO FRESH ADDITIONAL EVIDENCE WAS COLLECTED OR PRODUCED BY AO THEREFORE THERE WAS NO NEED TO REBUT THE SAME INFORMATION AGAIN. THUS THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE WHILE UPHOLDING THE ORDER OF THE AO. 6. IT WAS FURTHER SUBMITTED THAT IN THE ORIGINAL PROCEEDINGS OF THE CASE, EACH AND EVERY POSSIBLE EVIDENCE THAT COULD HAVE BEEN GATHERED OR FURNISHED, HAVE BEEN DULY PROVIDED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES VIZ. AFFIDAVITS OF DIRECTORS STATING THAT NO REPAYMENT HAS BEEN MADE AND BANK STATEMENT OF THE ASSESSEE COMPANY EVIDENCING THAT NO SUCH REPAYMENT HAS BEEN MADE FROM THE BANK OF THE ASSESSEE COMPANY AND SUCH FACTS HAS BEEN DULY MENTIONED BY THE AO IN THE ORIGINAL ASSESSMENT ORDER PASSED ON 28 DECEMBER 2007. THE ASSESSEE COMPANY HAS ALSO MADE EFFORTS TO COLLECT THE INFORMATION FROM THE BANKER OF TINKA STONE BUT THE BANKER HAS TURN DOWN THE REQUEST OF ASSESSEE COMPANY STATING THAT THE SAME COULD ONLY BE PROVIDED TO ITS ACCOUNT HOLDER. ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 6 7. IT WAS FURTHER SUBMITTED BY THE LD AR THAT IN ORDER TO UNVEIL THE TRUTH, THERE ARE ONLY TWO DECIDING FACTORS EITHER CROSS EXAMINATION OF TINKA STONE OR SPECIFIC INFORMATION OF CHEQUE DETAILS FROM TINKA STONE'S BANK ACCOUNT. CONTRARY TO THE DIRECTION OF THE ITAT, THE AO HAS DONE ENTIRE PROCEEDING OF SET ASIDE CASE IN SUCH A MANNER AS IF THE ASSESSEE COMPANY COULD NOT PRODUCE CONFIRMATION DUE TO TIME CONSTRAINT. THE AO HAS ALSO MENTIONED THE SAME FACT IN THE FIRST PARA OF HIS ORDER WHICH IS REPRODUCED HERE UNDER: 'DURING THE COURSE OF HEARING BEFORE THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR A/R HAS TAKEN THE GROUND THAT DUE TO TIME CONSTRAINT, ASSESSEE COULD NOT PRODUCE THE CONFIRMATION DURING THE COURSE OF ASSESSMENT PROCEEDING BEFORE THE INCOME TAX OFFICER. CASE HAS BEEN SET ASIDE BY THE HONBLE ITAT VIDE ASSESSMENT ORDER DATED 28.08.2014, ITA NO. 707/JP/2011. 8. IT WAS SUBMITTED BY THE LD AR THAT IT IS WELL SETTLED THAT THE PROCEEDING BEFORE THE INCOME TAX APPELLATE TRIBUNAL SHALL BE DEEMED TO BE JUDICIAL PROCEEDINGS AND THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE HON'BLE BOMBAY HIGH COURT CONSIDERED THE ISSUE OF HIERARCHICAL DISCIPLINE IN THE CASE OF BANK OF BARODA VS. H.C. SHRIVATSAVA AND ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 7 ANOTHER [2002] 122 TAXMAN 330 (BOM.). THE HIGH COURT CONSIDERED THE ACTION OF THE ASSESSING OFFICER AS AN ACT OF 'HIERARCHICAL INDISCIPLINE'. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW: 'AT THIS JUNCTURE, WE CANNOT RESIST OBSERVING THAT THE JUDGMENT DELIVERED BY THE INCOME-TAX TRIBUNAL WAS VERY MUCH BINDING ON THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS BOUND TO FOLLOW THE JUDGMENTS IN ITS TRUE LETTER AND SPIRIT. IT WAS NECESSARY FOR JUDICIAL UNIT AND DISCIPLINE THAT ALL THE AUTHORITIES BELOW THE TRIBUNAL MUST ACCEPT AS BINDING THE JUDGMENTS OF THE TRIBUNAL. THE ASSESSING OFFICER BEING AN INFERIOR OFFICER VIS-O-VIS THE TRIBUNAL, WAS BOUND BY THE JUDGMENT OF THE TRIBUNAL AND THE ASSESSING OFFICER SHOULD NOT HAVE TRIED TO DISTINGUISH THE SAME ON UNTENABLE GROUNDS. IN THIS BEHALF IT WILL NOT BE OUT OF PLACE TO MENTION THAT 'IN THE HIERARCHICAL SYSTEM OF COURTS' WHICH EXISTS IN OUR COUNTRY, 'IT IS NECESSARY FOR EACH LOWER TIER' INCLUDING THE HIGH COURT, 'TO ACCEPT LOYALLY THE DECISIONS OF THE HIGHER TIERS'. SUCH PRINCIPLE IN THE PRESENT CASE HAS BEEN GROSSLY VIOLATED BY THE THE AO AND LD CIT(A) AS THEY HAVE FAILED IN ADHERING TO THE DIRECTION OF THE HON'BLE ITAT, JAIPUR ORDER. SINCE THE AO HAS MADE ADDITION WITHOUT FOLLOWING THE DIRECTION OF THE HON'BLE ITAT JAIPUR BENCH ORDER AND GROSSLY VIOLATING THE PRINCIPLE OF NATURAL JUSTICE BY NOT PROVIDING OPPORTUNITY TO ASSESSEE OF CROSS-EXAMINING M/S TINKA ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 8 STONE, THEREFORE THE ADDITION OF INR 10 LACS AS MADE BY AO SHOULD BE DELETED. 9. WITHOUT PREJUDICE TO ABOVE, IT WAS SUBMITTED BY THE LD AR THAT THE DISPUTED ADVANCE APPEARING AS OUTSTANDING IN THE BOOKS OF ACCOUNTS HAS BEEN WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT IN THE FINANCIAL YEAR 2018-19 AND OFFERED TO TAX IN THE RETURN OF INCOME AND TAX HAS BEEN PAID ON RS 10 LACS IN AY 2019-20 . WHEN THE ASSESSEE HAS PAID TAX, THE SAME SUM SHOULD NOT BE TAXED TWICE, THEREFORE THE ADDITION OF RS 10 LACS MADE BY AO SHOULD BE DELETED. IN SUPPORT, OUR REFERENCE TO DRAWN TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31.03.2019 WHEREIN UNDER THE HEAD OTHER INCOME, CREDIT BALANCE OF RS 13 LACS HAS BEEN WRITTEN OFF AND CREDITED TO THE PROFIT/LOSS ACCOUNT. FURTHER, A COPY OF LEDGER OF NAGMA STONES PVT LTD (NOW KNOWN AS M/S TINKA STONES) WAS SUBMITTED WHICH REFLECT OPENING CREDIT BALANCE OF RS 10 LACS AS ON 1.4.2018 AND ENTIRE BALANCE WRITTEN OFF AS ON 31.03.2019. 10. PER CONTRA, THE LD DR IS HEARD WHO HAS SUBMITTED THAT A COMMISSION WAS ISSUED TO ACIT, MUMBAI FOR MAKING NECESSARY ENQUIRES AND IN RESPONSE, M/S TINKA STONES HAS FILED CONFIRMATION/BANK STATEMENT AND CLAIMED THAT ADVANCE MONEY WAS ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 9 RETURNED BACK THROUGH BANK, HOWEVER, BEING AN OLD MATTER, THE CHEQUE DETAILS WERE NOT GIVEN. FURTHER, SHE HAS RELIED ON THE ORDER OF LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A CASE OF SET-ASIDE PROCEEDINGS AND THE MATTER WAS EARLIER SET-ASIDE BY THE TRIBUNAL WITH A SPECIFIC DIRECTION TO PROVIDE CROSS-EXAMINATION OF M/S TINKA STONES TO THE ASSESSEE COMPANY. BOTH THE LOWER AUTHORITIES HAVING ACKNOWLEDGED THIS FACT HAVE FAILED TO FOLLOW THE SPECIFIC DIRECTION AND THUS, IT IS NOT JUST A CASE OF JUDICIAL INDISCIPLINE BUT ALSO A VIOLATION OF PRINCIPLE OF NATURAL JUSTICE WHERE LIABILITY HAS BEEN FASTENED ON THE ASSESSEE MERELY BASED ON CONFIRMATION FILED BY A CONCERN WITHOUT PROVIDING AN OPPORTUNITY OF CROSS EXAMINATION. IT IS NOT A CASE WHERE THE WHEREABOUTS OF M/S TINKA STONES WAS NOT KNOWN TO THE REVENUE AS APPARENT FROM COMMISSION OF ENQUIRY CONDUCTED THROUGH ACIT MUMBAI ON SUCH ENTITY OR ANYTHING ON RECORD TO SUGGEST THAT THERE WAS ANY PRACTICAL DIFFICULTY IN ARRANGING THE CROSS-EXAMINATION. FURTHER, ON MERITS, WE FIND THAT THE ASSESSEE HAS ALREADY WRITTEN OFF THE SAID AMOUNT IN ITS FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31.03.2019 AND HAS OFFERED THE AMOUNT TO TAX IN ITS RETURN OF INCOME FILED FOR AY 2019-20. THEREFORE, WHERE THE UNDISPUTED FACTS ITA 23/JP/2209_ VIKRAM ELECTRO CHEMICAL INDUSTRIES VS ITO 10 ARE THAT THE AMOUNT OF ADVANCE WRITTEN OFF HAS ALREADY BEEN OFFERED TO TAX, THE SAME AMOUNT CANNOT BE BROUGHT TO TAX AGAIN. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION SO MADE IS DIRECTED TO BE DELETED AND THE SOLE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKA D@ DATED:- 21 ST FEBRUARY, 2020 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- VIKRAM ELECTRO CHEMICAL INDUSTRIES PVT. LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE I.T.O., WARD 4(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 23/JP/2020) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR