P.K.S.Engineering, Kollam V. ITO, Kollam

ITA 250/COCH/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52263 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 07-04-2010
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: K VIJAYA MOHAN VALIATHAN FCAAR
• Keywords: Peak credit
• Section: 44AD; 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NO. 250/COCH/2010 ASSESSMENT YEAR: 2003-04 P.K.S. ENGINEERING, MUNDAKKAL, KOLLAM-691001. [PAN:AAAAP 4345G] VS. THE INCOME TAX OFFICER, WARD-2, KOLLAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI K. VIJAYA MOHAN VALIATHAN, FCA-AR REVENUE BY MS. S. VIJAYAPRABHA, JR.DR DATE OF HEARING 26/09/2011 DATE OF PRONOUNCEMENT 21/10/2011 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE ARISING OUT OF T HE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIVANDRUM (THE CIT(A) FO R SHORT) DATED 18.12.2009, CONFIRMING ITS ASSESSMENT U/S. 143(3) OF THE INCOME -TAX ACT, 1961 (`THE ACT HEREINAFTER) DATED 31/12/2007 FOR THE ASSESSMENT YEAR (A.Y.) 200 3-04. 2.1 AT THE VERY OUTSET, IT WAS URGED BY THE LD . AR, ITS COUNSEL, THAT THE ASSESSEE IS NOT PRESSING ITS GROUND NOS. 2 & 3, I.E., IN RELATION T O S. 44AD OF THE INCOME-TAX ACT, 1961 ('THE ACT', HEREINAFTER), WHILE GD. # 1 IS GENERAL IN NATURE. AS REGARDS THE ASSESSEES GROUND NOS. 4 TO 8, IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND FACTS OF THE CASE. A PERUSAL OF THE ASSESSEES - A FABRICATOR AND MANUFA CTURER OF MACHINERY COMPONENTS - TURNOVER FOR THE ASSESSMENT YEAR 2004-05 REVEALED I T TO BE SHORT RECORDED (IN ITS BOOKS OF ACCOUNT) IN THE SUM OF ` 6,75,000/-. THE ASSESSEE EXPLAINED THE DIFFERENCE A S ARISING ON ACCOUNT OF THE SAID SUM, RECEIVED IN MAY, 2003 (FRO M THE DEFENCE ACCOUNTS DEPARTMENT, I.T.A. NO. 250/COCH/2010 (ASSTT. YEAR: 2003-04) 2 OFFICE OF CDA(R&D), HYDERABAD VIDE THEIR BILL NO. 2 99 DATED 30.4.2003), BEING AGAINST ITS INVOICE NO.17 DATED 08.01.2003 (FOR JOB WORK CH ARGES), SO THAT IT FELL UNDER AND, STOOD ACCORDINGLY ACCOUNTED FOR IN ITS ACCOUNTS FOR ASSES SMENT YEAR 2003-04. HOWEVER, THE SAID AMOUNT DID NOT REFLECTION AS AN OUTSTANDING FROM TH E SAID DEPARTMENT AS AT 31/3/2003, WHICH, IF SO, OUGHT TO HAVE BEEN THE CASE. A VERIFI CATION OF THE ASSESSEES BOOKS REVEALED THAT IT HAD ACCOUNTED FOR THE SAID INVOICE (SALE TR ANSACTION) AS A CASH SALE AND, ACCORDINGLY, INTRODUCED CASH TO THAT EXTENT IN ITS BOOKS OF ACCOUNT FOR THE RELEVANT PREVIOUS YEAR, I.E., F.Y. 2002-03. THE SOURCE OF TH E CASH BEING UNEXPLAINED, NOTICE U/S. 148 OF THE ACT WAS ISSUED FOR THE CURRENT ASSESSMEN T YEAR, I.E., A.Y. 2003-04. THE ASSESSEES EXPLANATION IN RESPECT OF THE PROPOSED A DDITION WAS THAT THE SALE TRANSACTION STOOD ALREADY ACCOUNTED FOR AS REVENUE AND INCLUDED IN COMPUTING ITS INCOME FOR THE CURRENT YEAR AND, TWO, THE CASH ENTRY, WHICH WAS BY WAY OF A MISTAKE, REVERSED IN THE SUBSEQUENT YEAR, SO THAT NO ADDITION FOR EITHER YEA R IS CALLED FOR. THE ASSESSING OFFICER (AO), REJECTING THE ASSESSEES PLEA, BROUGHT THE SA ID SUM TO TAX AS BOGUS CREDIT, INVOKING SEC. 68 OF THE ACT. THE SAME STOOD CONFIRMED BY THE LD. CIT(A) IN APPEAL ON THE GROUND THAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION T OWARD THE SOURCE OF CASH OF ` 6.75 LACS, WHICH THUS HAD BEEN RIGHTLY CONSIDERED BY THE ASSES SEE AS A BOGUS CREDIT, SO THAT THE ASSESSEE, BEING AGGRIEVED, IS IN SECOND APPEAL. ON AN ENQUIRY BY THE BENCH DURING HEARING, AS TO WHETHER THE ASSESSEE HAD, OVER THE P ERIOD BETWEEN THE INTRODUCTION AND REVERSAL OF CASH, UTILISED THE SAME, THE LD. AR ANS WERED IN THE AFFIRMATIVE, STATING IT TO BE TO THE EXTENT OF ` 2.82 LAKHS. 2.2 THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THA T THE ORDERS BY THE REVENUE AUTHORITIES WARRANT ACCEPTANCE, AS IT HAS BEEN CLEA RLY PROVEN, UPON THE ASSESSEES OWN EXPLANATION, THAT IT HAD NO BASIS FOR THE RECEIPT O F CASH IN THE SUM OF ` 6.75 LAKHS DURING THE RELEVANT PREVIOUS YEAR, WHICH IT HAD ASCRIBED I N ITS BOOKS TO JOB WORK CHARGES RAISED ON A DEFENCE DEPARTMENT, WHILE IT WAS ADMITTEDLY NO T RECEIVED THEREFROM, AND WHICH HAD PAID ONLY IN THE SUBSEQUENT YEAR, THROUGH THE BANKI NG CHANNEL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. I.T.A. NO. 250/COCH/2010 (ASSTT. YEAR: 2003-04) 3 3.1 WITHOUT DOUBT, THE ASSESSEE HAS NO EXPLANAT ION WHATSOEVER FOR THE CASH RECEIPT OF ` 6.75 LAKHS IN JANUARY, 2003; THE RELEVANT SALE BILL , I.E., TO WHICH IT IS ASCRIBED, BEING OUTSTANDING AS AT THE RELEVANT YEAR-END, WITH THE A MOUNT IN ITS RESPECT HAVING BEEN RECEIVED ONLY IN THE SUBSEQUENT YEAR (I.E., IN MAY, 2003), THROUGH THE BANKING CHANNEL. WE ARE ALSO IN AGREEMENT WITH THE LD. DR THAT THE S UBSEQUENT CASH REVERSAL WOULD NOT OBLITERATE THE FACT OF INTRODUCTION OF CASH TO THE EXTENT OF ` 6.75 LAKHS DURING THE RELEVANT YEAR. SO, HOWEVER, THE FACT REMAINS THAT IF AND TO THE EXTENT THE CASH HAS NOT BEEN UTILIZED, AND CONTINUES TO OUTSTAND AS SUCH IN THE ASSESSEES BOOKS OF ACCOUNT DURING THE INTERVENING PERIOD BETWEEN THE DATE OF ITS INTRODUC TION AND THE DATE OF ITS REVERSAL (EXIT) IN THE ASSESSEES BOOKS, HOW COULD THE SAID ENTRY IMPU GN THE ASSESSEES CASE? THE CASH CREDIT U/S. 68 IMPLIES A VALID ENTRY, I.E., A REAL INTRODUCTION OF FUNDS TO THAT EXTENT, AND NOT ONE NOT REPRESENTING SO. HOWEVER, TO THE EXTENT THA T THE SAID CASH HAS BEEN UTILISED, THERE IS NO DENYING THE FACT THAT THE CASH INTRODUCTION I S REAL, AND THE SOURCE OF RECEIPT OF CASH TO THAT EXTENT IS CLEARLY UNEXPLAINED. THOUGH THE A SSESSEE STATES THE SAID UTILISATION TO BE AT ` 2.82 LAKHS, THE AO HAS OBSERVED THAT BUT FOR THE SA ID INTRODUCTION, THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO DISCHARGE A LOAN LIABILITY TO THE TUNE OF ` 2,82,448/- AND OTHER EXPENSES IN CONNECTION WITH ITS BUSINESS. THERE BEING NO RELEVANT FINDING, INCLUD ING WITH REGARD TO THE STATED REVERSAL OF THE CASH ENTRY (TO ANY EXTENT) IN THE ASSESSEES BOOKS OF ACCOUNT FOR THE FOLLOWING YEAR, WE ONLY CONSIDER IT PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR NECESSARY VERIFICATION, ISSUE OF FINDINGS, AND AN ADJUDICATIO N ON MERITS IN CONFORMITY WITH OUR OBSERVATIONS AS MADE IN THIS ORDER. TO THE EXTENT T HERE HAS BEEN A UTILIZATION OF THE `CASH INTRODUCED IN THE SUM OF ` 6.75 LAKHS (OSTENSIBLY AGAINST ITS INVOICE NO.17 DA TED 08.01.2003), THERE IS NO CORRESPONDING LIABILITY OR SOURCE, AND THE SAID INTRODUCTION IS CLEARLY REAL AND UNEXPLAINED, AND THE CASH RECEIPT FROM THE CUSTOMER ONLY A BOGUS ENTRY. ALSO, TO THE EXTENT OF THE UTILIZATION, SO THAT THE EXISTENCE OF CASH WITH IT IS PROVED, THE ASSESSEES CLAIM OF THE CASH ENTRY IN ITS BOOKS BEI NG ONLY BY WAY OF A MISTAKE, SINCE CORRECTED/REVERSED, IS NOT VALID. WE DECIDE ACCORDI NGLY. WE MAY FURTHER CLARIFY THAT THOUGH WE ARE REMITTING THE MATTER BACK TO THE FILE OF THE AO, THE SAME DOES NOT IMPLY A SET ASIDE OF THE ASSESSMENT IN ANY MANNER, AND THE RESTORATION ONLY FOLLOWS ITS AFFIRMATION I.T.A. NO. 250/COCH/2010 (ASSTT. YEAR: 2003-04) 4 IN PRINCIPLE, AND IS ONLY FOR DETERMINING THE QUANT UM OF THE ADDITION WHICH WE CONSIDER AS SUSTAINABLE IN LAW. 3.2 THOUGH THE ASSESSEE DID NOT ADVERT TO ANY CASE LAW DURING HEARING; THE ISSUE BEING BASED ON FACTUAL FINDING/S, WE FIND IT HAS PLACED T HE GIST OF TWO DECISIONS IN ITS PAPER- BOOK (PB PGS. 8 & 9). THE FIRST, CIT V. PRADEEP KUMAR GUPTA (2008) 303 ITR 95 (DEL), IS IN RESPECT OF THE VALIDITY OF REASSESSMENT PROCE EDINGS, WHICH IS NOT IN ISSUE IN THE PRESENT APPEAL. IN THE FACTS OF THE SECOND CASE, I. E., PRAKASH INDUSTRIES LTD. V. CIT (ASSTT.) , 16 DTR (DEL)(TRIB) 66, THE ADDITION U/S. 68 IN RESP ECT OF PEAK CREDIT OF RECEIPTS FROM ITS CUSTOMER, SEW, WAS DELETED BY THE TRIBUNAL ON FINDI NG THE ASSESSEE TO HAVE ADDUCED EVIDENCE EXPLAINING NOT ONLY THE SOURCE OF MONEY WI TH SEW, BUT ALSO THE SOURCE OF SOURCE. IN CONTRAST, IN THE PRESENT CASE, THERE IS NO EXPLANATION QUA THE CASH INTRODUCED IN ITS BOOKS, WITH THE ASSESSEE RATHER PLEADING IT TO BE A `MISTAKE, SINCE RECTIFIED, AND WHICH WE HAVE FOUND ACCEPTABLE SUBJECT TO THE FINDING OF ITS REVERSAL IN ITS BOOKS SUBSEQUENTLY AND, FURTHER, ONLY TO THE EXTENT THERE HAS BEEN NO UTILIZATION OF `CASH PER THE ASSESSEES BOOKS OVER THE PERIOD OF TIME INTERVENING THE DATE OF ITS INTRODUCTION AND REVERSAL. THE SAID CASE LAW, THUS, HAVE NO BEARING IN THE FACTS O F THE PRESENT CASE. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 21ST OCTOBER, 2011 GJ/COPY TO: 1. P.K.S. ENGINEERING, MUNDAKKAL, KOLLAM-691 001 2. THE INCOME TAX OFFICER, WARD-2, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .