M/s Shyam Cold Storage, Farrukhabad V. Addl. CIT, Farrukhabad

ITA 238/AGR/2006

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67502 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-07-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 03-07-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: WASEEM ARSHAD
• Assessee Lawyers: PANKAJ GARGH
• Keywords: Unexplained investment; Opportunity of being heard; Revised return
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO. 238/AGRA/2006 ASSTT. YEAR : 2002-03 M/S. SHYAM COLD STORAGE, VS. ADDL. C.I.T., GHATIAGHAT ROAD, FARRUKHABAD. RANGE-2, FARRUKHA BAD. (PAN: AAFFS 7247 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE RESPONDENT BY : SHRI WASEEM ARSHAD, SR. DR DATE OF HEARING : 17.12.2013 DATE OF PRONOUNCEMENT OF ORDER : 20.12.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A), GHAZIABAD DATED 01.05.2006 FOR THE ASSESSMENT YEAR 2002-03. 2. IN THIS CASE, EARLIER THIS APPEAL WAS DISPOSED O F BY THE ITAT, AGRA BENCH VIDE ORDER DATED 27.08.2010 AND REASSESSMENT PROCEE DINGS U/S. 147/148 WERE QUASHED. THEREFORE, THE APPEAL WAS NOT DECIDED ON M ERITS. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY ALLOWED. THE REVENUE PREFE RRED APPEAL BEFORE THE HONBLE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL N O. 28 OF 2011 AND THE HONBLE HIGH COURT VIDE THEIR JUDGMENT DATED 21.02. 2013 DECIDED THE APPEAL OF ITA NO. 238/AGRA/2006 2 THE REVENUE IN THEIR FAVOUR AND ALLOWED THE DEPARTM ENTAL APPEAL. HOWEVER, THE MATTER ON MERITS WAS RESTORED BACK TO THE TRIBUNAL TO DECIDE THE CASE ON MERITS. ACCORDINGLY, THE OFFICE HAS RE-FIXED THIS APPEAL FO R HEARING ON MERITS. 3. WE HAVE HEAD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 4. GROUND NO. 1 RELATES TO RE-ASSESSMENT PROCEEDING S, WHICH IS ALREADY DECIDED BY THE HONBLE HIGH COURT. 5. ON GROUNDS NOS. 2 & 3, THE ASSESSEE CHALLENGED T HE ADDITION OF RS.2,37,340/- AS UNEXPLAINED INVESTMENT IN PURCHASE OF VARDANA. THE AO MADE ADDITION OF RS.2,37,340/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF VARDANA. THE ASSESSEE FIRM IS RUNNING A COLD STORAG E FOR PRESERVATION OF POTATOES. THE AO CALLED SHRI B.K. KATIAR IN HIS OFFICE IN THE ABSENCE OF ASSESSEE AND SHRI B.K. KATIAR ACCEPTED IN HIS CONFESSIONAL STATEMENT THAT HE HAS RECEIVED CONSIDERATION OF RS.2,37,000/- OVER AND ABOVE THE C HEQUES AMOUNT IN CONSIDERATION OF SALE OF 61500 BAGS. ACCORDING TO THE AO, THE ASS ESSEE HAS FAILED TO EXPLAIN THIS ISSUE. THEREFORE, THE ADDITION WAS MADE. ITA NO. 238/AGRA/2006 3 6. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THA T THE AO HAS MADE THE ADDITION WRONGLY ON THE BASIS OF CONFESSIONAL STATE MENT OF SHRI B.K. KATIAR WHO HAS NOT INCREASED HIS INCOME IN THE REVISED RETURN OF THE AMOUNT OF ADDITION OF RS.2,37,340/-. THE AO HAS NOT LOOKED INTO VARDANA A CCOUNT WHERE THE ASSESSEE HIMSELF HAS SHOWN PROFIT ON SALE OF VARDANA. THE LD . CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS WHOLLY UNJUSTIFIED. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PB-22, WHICH IS NOTICE OF THE AO CALLING INFORMATION, IN W HICH THE AO HAS NOT MENTIONED IT TO BE A CASE OF SURVEY AND IN THE REPLY OF ASSES SEE (PB-23), THE ASSESSEE ALSO EXPLAINED THAT IT IS NOT A CASE OF SURVEY. THEREFOR E, THERE IS NO ADVERSE MATERIAL AVAILABLE AGAINST THE ASSESSEE. PB-7 IS THE BILL OF B.K. TRADERS REGARDING TRANSACTION OF SALE OF GUNNY BAGS. PB-9 TO 14 ARE T HE SUPPORTING BILLS. PB-15 IS CONFESSIONAL STATEMENT OF B.K. KATIAR. PB-36 IS VAR DANA ACCOUNT. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT NUMBER OF BAGS SOLD ARE NOT IN DISPUTE. THE LD. DR ACCEPTED THAT SURVEY WAS CONDUCTED IN EARLIER YE ARS AND SINCE PAPERS WERE IN THE HAND WRITING OF THE ASSESSEE, THEREFORE, THE AD DITION IS JUSTIFIED. IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE AO HAS MADE ADDIT ION ON THE BASIS OF CERTAIN PAPERS AND CONFESSIONAL STATEMENT OF SHRI B.K. KATIAR, COP Y OF WHICH IS FILED AT PAGE 15 OF ITA NO. 238/AGRA/2006 4 THE PAPER BOOK, IN WHICH HE MADE A CONFESSIONAL STA TEMENT OF RECEIVING CASH OF RS.2,37,340/- FROM THE ASSESSEE OVER AND ABOVE THE CHEQUES AMOUNT FOR SALE OF GUNNY BAGS. THE ASSESSEE MADE A REQUEST TO THE AO T O ALLOW CROSS EXAMINATION OF SHRI B.K. KATIAR IN HIS REPLY/EXPLANATION DATED 27. 03.2005, COPY OF WHICH IS FILED AT PAGE 29 OF THE PAPER BOOK. THE AO DID NOT ALLOW CROSS EXAMINATION OF B.K. KATIAR BECAUSE THE PAPERS / BILLS WERE IN THE HAND WRITING OF THE ASSESSEE. THE AO, HOWEVER, FAILED TO NOTE THAT IF ANY ADVERSE MATERIA L IS COLLECTED AT THE BACK OF THE ASSESSEE, THE ASSESSEE SHALL HAVE TO BE CONFRONTED AND RIGHT OF CROSS EXAMINATION OF SUCH STATEMENT SHOULD HAVE BEEN ALLOWED IN FAVOUR O F THE ASSESSEE. OTHERWISE SUCH STATEMENT WOULD NOT BE ADMISSIBLE AT THIS STAGE. WE RELY UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KISHAN CHAND C HELARAM, 125 ITR 713 AND DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF S.M.C. SHARE BROKER LTD., 288 ITR 345. SINCE THE AO MADE ADDITION AGAINST THE ASS ESSEE ON THE BASIS OF CONFESSIONAL STATEMENT OF SHRI B.K. KATIAR, WHICH W AS RECORDED AT THE BACK OF THE ASSESSEE AND THE ASSESSEE WAS NOT ALLOWED CROSS EXA MINATION OF SUCH STATEMENT (PB-15), SUCH STATEMENT WOULD NOT BE ADMISSIBLE IN EVIDENCE AGAINST THE ASSESSEE. THERE IS NO OTHER INCRIMINATING MATERIAL FOUND AGAI NST THE ASSESSEE TO SUSTAIN THE ADDITION. IN VIEW OF THE ABOVE DISCUSSION, WE SET A SIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION OF RS.2,37,340/-. THE SE GROUNDS OF APPEAL OF THE ASSESSEE ARE, ACCORDINGLY ALLOWED. ITA NO. 238/AGRA/2006 5 8. ON GROUND NO. 4 & 5, THE ASSESSEE CHALLENGED THE ADDITION OF RS.13,00,000/- (RS.5,00,000 + RS.8,00,000) ON ACCOUNT OF UNEXPLAIN ED INVESTMENT IN POTATOES. THE AO NOTED THAT THE ASSESSEE HAS DEBITED COST OF FREIGHT OF FOUR RAILWAY WAGONS BOOKED BY HIM FOR DISPATCH OF POTATOES TO GAUHATI A ND RECEIVED PAYMENT IN DRAFT. THE ASSESSEE WAS REQUIRED TO SUBMIT THE DETAILS OF ASSOCIATED EXPENSES FOR TRANSPORTATION AND COPY OF BEEZAK OR DETAILS OF SAL E CONSIDERATION. THE AO PUT ONUS UPON THE ASSESSEE TO EXPLAIN THIS ISSUE BECAUS E HE HAD DISPATCHED THE AALOO AND RECEIVED THE DRAFT OF PAYMENTS. IN THE ABSENCE OF PROPER EXPLANATION AND EVIDENCE, THE AO WANTED TO TAX THE RECEIPT IN THE N AME OF THE ASSESSEE. THE SUMMONS TO THE FARMERS WERE ISSUED WHEREVER THEY HA VE APPEARED, NO ADVERSE INFERENCE WAS TAKEN. HOWEVER, IN RESPECT OF ONE SUR ENDRA TIWARI, HIS STATEMENT WAS RECORDED ON 31.03.2005 WHO EXPRESSED HIS IGNORA NCE REGARDING THE POTATOES STORED IN HIS NAME. THE DETAILS OF OTHERS ARE MENTI ONED IN ANNEXURE A1 BUT NONE OF THE FARMERS ATTENDED. THE AO, THEREFORE, FOUND T HAT ASSESSEE STORED HIS OWN POTATOES. ANNEXURE A-3 TO THE ASSESSMENT ORDER SHOW S TRUCK NUMBER, DATE OF DISPATCH OF AALOO FROM COLD STORAGE TO VARIOUS ARHA TIAS, BUT THESE WERE OF DIFFERENT YEARS, BUT IT SHOWED THE PRACTICE OF ASSESSEE OF DI SPATCH AND SALE OF AALOO. IN THE ABSENCE OF PROPER EVIDENCE, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT IN POTATOES AND ACCORDINGLY, RS.13,00,000/- (8 LACS + 5 ITA NO. 238/AGRA/2006 6 LACS) WERE ADDED TO THE INCOME OF THE ASSESSEE. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) AND IT WAS EXPLAINED THAT AMAD REGIS TER WAS SEIZED BY THE AO, WHICH MENTIONED POTATOES RECEIVED FOR STORAGE FROM DIFFERENT FARMERS. THE AO ISSUED SUMMONS TO VARIOUS FARMERS AND MANY OF THEM APPEARED BEFORE THE AO AND DUE TO PAUCITY OF TIME, NO TIME WAS ALLOWED FOR FUR THER VERIFICATION AND STATEMENT OF SHRI SURENDRA TIWARI WAS RECORDED ON THE DATE OF ASSESSMENT ORDER ON 31.03.2005. THE AO MADE ADDITION ON PRESUMPTION. TH E LD. CIT(A), HOWEVER, CONFIRMED THE ADDITION BECAUSE THE ASSESSEE WAS CON SIGNEE OF THE RAILWAY WAGONS FOR BOOKING OF THE POTATOES AND IN THE ABSENCE OF A NY EVIDENCE AND CONSIDERING THE STATEMENT OF SURENDRA TIWARI, WHO HAS EXPRESSED INA BILITY OF STORING POTATOES WITH THE ASSESSEE, CONFIRMED THE ADDITION. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW, THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE ASSESS ING OFFICER. THE AO/CIT(A) HEAVILY RELIED UPON THE STATEMENT OF SHRI SURENDRA TIWARI, WHO HAS EXPRESSED IGNORANCE REGARDING THE POTATOES STORED IN HIS NAME , BUT HIS STATEMENT WAS RECORDED ON THE LAST DATE OF PASSING THE ASSESSMENT ORDER. THEREFORE, NO PROPER OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE TO EXPLA IN THE ABOVE ISSUE. THE AO ALSO SPECIFICALLY NOTED THAT THOSE FARMERS, WHO APPEARED BEFORE HIM, NO ADVERSE NOTICE IS TAKEN AGAINST THE ASSESSEE. THEREFORE, THE PRACT ICE OF THE ASSESSEE WAS FOUND ITA NO. 238/AGRA/2006 7 ESTABLISHED THAT THE FARMERS HAVE STORED THEIR POTA TOES WITH THE ASSESSEE. ANNEXURE A3 PERTAINS TO THE SENDING OF POTATOES TO DIFFERENT ARAHTIAS, BUT THESE WERE FOR DIFFERENT ASSESSMENT YEAR. THE AO WAS HAVING POSSES SION OF AMAD REGISTER, BUT IT APPEARS THAT THE SAME WAS NOT EXAMINED BY THE AO WH ICH WAS HAVING THE DETAILS OF RECEIPT OF POTATOES FOR STORAGE AND THEIR RELEASE S UBSEQUENTLY. WE MAY ALSO NOTE HERE THAT THE LD. DR DURING THE COURSE OF ARGUMENTS ADMITTED THAT THE ASSESSEE HAS A VALID LICENSE TO RUN A COLD STORAGE FOR STORING POT ATOES. THE NATURE OF BUSINESS OF ASSESSEE IS, THUS, SERVICE PROVIDER AND INCOME OF T HE ASSESSEE HAS BEEN ASSESSED AS PER RETURN OF INCOME FOR RECEIVING INCOME ON ACCOUN T OF STORAGE CHARGES. THE AO HAS, THUS, FAILED TO CONSIDER THAT SUCH TYPE OF BUS INESS ARE SUBJECTED TO U.P. REGULATIONS OF COLD STORAGE ACT, 1976, WHICH REGULA TE THE FUNCTIONING OF THE COLD STORAGES AND EXTENDED TO WHOLE OF UTTAR PRADESH. IT PROVIDES DIFFERENT DEFINITIONS CONNECTED WITH COLD STORAGE, ITS CAPACITY, LICENSE, LICENSEE AND COMMENCEMENT OF BUSINESS ETC. IT IS ALSO PROVIDED IN THIS ACT THAT LICENSEE SHALL NOT REFUSE TO STORE POTATOES OF BONA FIDE CULTIVATORS. IT HAS PROVIDED THE RIGHTS OF THE FARMERS AND ISSUE OF RECEIPTS OF STORAGE AND PAYMENT RECEIPT ETC. ALL THE STATUTORY RECORDS AS PER THIS SPECIAL ACT HAVE TO BE MAINTAINED BY THE LICENSEE. IN THE ABOVE ACT, THE LICENSEE IS NOT AUTHORIZED TO STORE THEIR OWN AGRICULTURAL PROD UCE FOR BUSINESS PURPOSES IN THE SAME COLD STORAGE. NO VIOLATION OF THE ABOVE ACT HA S BEEN NOTICED OR BROUGHT ON RECORD BY THE AO IN THIS CASE. THEREFORE, THE AO SH OULD NOT HAVE MERELY ACTED ITA NO. 238/AGRA/2006 8 UPON THE FACT THAT THE ASSESSEE HAS BOOKED FOUR RAI LWAY WAGONS FOR THE PURPOSE OF DISPATCH OF AALOO TO GAUHATI. NO ACTUAL INVESTMENT WAS FOUND TO HAVE BEEN INVESTED BY THE ASSESSEE. IT APPEARS THAT THE AO ME RELY ON PRESUMPTION HAS CONSIDERED THIS ISSUE WITHOUT PROPER VERIFICATION O F THE FACTS AND MATERIAL ON RECORD IN THE LIGHT OF ABOVE SPECIAL ACT DEALING WITH THE COLD STORAGES. IN OUR VIEW, THE MATTER REQUIRES RECONSIDERATION BECAUSE THE AO HAS PARTLY ACCEPTED THE CLAIM OF ASSESSEE OF STORING AALOO BY DIFFERENT FARMERS, BUT HAS CONSIDERED THE INVESTMENT AS UNEXPLAINED. WE ACCORDINGLY, SET ASIDE THE ORDER S OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF AO WITH THE DIREC TION TO RE-DECIDE THIS ISSUE IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD AND THE R ECEIPTS AND STATUTORY REGISTERS MAINTAINED BY THE ASSESSEE. THE AO SHALL ALSO CONSI DER THIS ISSUE IN THE LIGHT OF THE ABOVE SPECIAL ACT AND SHALL PASS A REASONED ORDER B Y GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 10. ON GROUND NO.6, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.75,000/- U/S. 69C AS ASSOCIATED EXPENSES INCURRED ON POTATOES. TH E AO ON THE BASIS OF MAKING ADDITION OF RS.13,00,000/- MADE ADDITION OF RS.1,25 ,000/- BEING ASSOCIATED EXPENSES U/S. 69C OF THE IT ACT. THE ASSESSEE SUBM ITTED BEFORE THE LD. CITA) THAT THE ADDITION IS MADE WITHOUT ANY WORKING AND WITHOU T ANY BASIS. THE ASSESSEE HAS ITA NO. 238/AGRA/2006 9 NOT INCURRED ANY SUCH EXPENSES. THE LD. CIT(A) ACCE PTED THE ARGUMENT THAT THE AO HAS ESTIMATED THE EXPENSES WITHOUT ANY WORKING AND BASIS, BUT THE ASSOCIATED EXPENSES WERE FOUND JUSTIFIED TO SOME EXTENT AND AC CORDINGLY, THE ADDITION OF RS.1,25,000/- WAS REDUCED TO RS.75,000/-. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY JUSTIFICATION TO SUSTAIN THE ADDITION OF RS.75,000/-. THE AO HAS NOT GIVEN ANY FINDING AND NO MATERIAL IS BROUGHT ON RECORD FOR MAKING ADDITION O F RS.1,25,000/-. THE AO MERELY IN THE COMPUTATION OF INCOME ADDED RS.1,25,000/- AS ASSOCIATED EXPENSES U/S. 69C OF THE IT ACT. SINCE NO REASONS OR BASIS HAS BEEN G IVEN FOR MAKING THIS ADDITION, WHICH IS ALSO ACCEPTED BY THE LD. CIT(A), THEREFORE , THE LD. CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION INSTEAD OF RESTRICTING THE ADDITION TO RS.75,000/-. IN THE RESULT, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ADDITION IS DELETED. GROUND NO. 6 IS, ACCORDINGLY, ALLOWED. 12. ON GROUND NO. 7, THE AO SIMILARLY MADE ADDITION OF RS.15,000/- ON CAR EXPENSES IN THE ABSENCE OF LOG-BOOK WITHOUT MENTION ING ANY REASONS FOR MAKING ADDITION. THE LD. CIT(A) CONFIRMED THE ADDITION. SI NCE THE AO HAS NOT GIVEN ANY REASONS FOR MAKING ADDITION AND ADDED RS.15,000/- I N THE COMPUTATION OF INCOME ONLY. THEREFORE, IN THE ABSENCE OF ANY REASON, THE AO WAS NOT JUSTIFIED IN MAKING ITA NO. 238/AGRA/2006 10 THE ADDITION. THE ADDITION OF RS.15,000/- IS DELETE D AND GROUND NO. 7 OF APPEAL OF THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRAMOD KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY