Shri Padamram Devram Chaudhari, Ahmedabad V. The Income tax Officer,Ward-2(2), Baroda

ITA 251/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80547 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: MUKESH M PATEL
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER ITA NO . 251 /AHD/20 1 1 A. Y. 200 7 - 0 8 SHRI PADAMRAM DEVRAM CHAUDHARI. (PROP. DHARNIDHAR INDUSTRIES) C/O MUK ESH M. PATEL & CO., 3 - 4, VITHALBHAI BHAVAN, NR. S.P. COLONY RAILWAY, CROSSING, AHMEDABAD - 13 PAN: AFQPC 3432H VS THE ITO, WARD 2 ( 2 ), AHMEDABAD . (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M .K. SINGH , SR. D.R. , ASSESSEE(S) BY : SHRI MUK ESH M. PATEL , A.R. / DATE OF HEARING : 10 / 11 /201 4 / DATE OF PRONOUNCEMENT: 28 / 1 1 /201 4 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN A PPEAL FILED BY THE AS SESSEE EMANATING FROM THE ORDER OF THE L EARNED CIT (A ) - II , BARODA , DAT ED 2 0 / 10 /201 0 FOR A.Y. 200 7 - 0 8 AND THE GROUNDS RAISED ARE REPRODUCED BELOW: 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF UNEXPLAINED LIABILITIES OF RS.22,02,879/ - , EVEN WHEN THE APPELLANT HAD FURNISHED COPY OF CONFIRMATION LETTERS FROM CREDITORS. 2. THAT THE LEARNED CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.1,66,968/ - U/S. 40A(3) OF THE IT ACT. ITA NO. 251 /AHD/201 1 SHRI PADAMRAM D. CHAUDHARI VS. ITO, WARD - 2 ( 2 ), AHMEDABAD . FOR A.Y. 200 7 - 0 8 - 2 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 23.03.2012 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS IN THE BUSINESS OF TRADING IN FERROS AND NON FERROS METALS. IT WAS NOTICED BY THE AO THA T UNDER THE HEAD SUNDRY CREDITORS THERE WAS A HUGE AMOUNT OF RS.52,88,932/ - SHOWN IN THE ACCOUNTS OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO FURNISH THE COMPLETE NAMES AND ADDRESSES AND ADDRESSES OF ALL THE CREDITORS. THE ASSESSEE HAS FURNISHED THE REQUI SITE DETAILS BUT IN RESPECT OF FOLLOWING THREE PARTIES THE CONFIRMATIONS WERE NOT FURNISHED. NAME OF THE CREDITORS AMOUNT OUTSTANDING (RS.) 1. BHAGYODAY ENTERPRISE 874567 / - 2. BHAVANA TRADING CO. 712165 / - 3. AKSHAR ENTERPRISES 4,46,147/ - + 1,70, 000/ - 2.1 THE AO WAS NOT SATISFIED BY THE EXPLAINED OFFERED BY THE ASSESSEE; HENCE TAXED THE ENTIRE AMOUNT BY ASSIGNING FOLLOWING REASONS: 4.3 IN THESE CIRCUMSTANCES, IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THE OUTSTANDING BALANCES SHOWN IN THE N AMES OF ABOVE CREDITORS WERE IN FACT EXISTED OR NOT AS ON 31 ST MARCH, 2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE WAS AGAIN ASKED TO FURNISH CONFORMATIONS FROM THE ABOVE TWO PARTIES AND PAN OF M/S. AKSHA R ENTERPRISE. HOWEVER, THE ASSESSEE COULD PRODUCE NEITHER CONFIRMATIONS FROM M/S. BHAGYODAY ENTERPRISE AND BHAVANA TRADING CO. NOR PAN OF AKSHAR ENTERPRISE NOR ASSIGNED ANY REASON FOR NON - SUBMISSION OF THE SAME. THE ONUS OF PROVING THE AUTHENTICITY OF THE CREDITORS SQUARELY LIES ON THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT EVEN SUBSEQUENT PAYMENTS TO THESE PARTIES WERE NOT SHOWN BY THE ASSESSEE. THEREFORE, THE ASSESSEE HAS FAILED TO PROVE THE AUTHENTICITY OF THE ABOVE MENTIONED CREDITORS. SINCE THE ASSESSEE HAS FAILED TO PROVE THE AUTHENTICITY OF THE ABOVE CREDITORS, THE LIABILITIES SHOWN IN THESE NAMES ARE TREATED AS NON - EXISTENT AS ON 31 ST MARCH, 2007. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, VIDE ORDER SHEET ENTRY DATED 25 - 11 - 2009, THE AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY THE LIABILITIES IN THE NAMES OF ABOVE THREE CREDITORS SHOULD NOT BE TREATED AS UNEXPLAINED LIABILITY WITHOUT CONSIDERING PAYMENT OF RS.1,70,000/ - ACTUALLY PAID TO M/S. MANIDHARI & CO AND WHY THE SAME SHOULD NOT BE ADDED TO THE INCOME DECLARED BY THE ASSESSEE. THE REPLY TO THE SHOW CAUSE WAS REQUIRED ON 30 - 11 - 2009. IT WAS ALSO CATEGORICALLY MENTIONED IN THE NOTE SHEET DATED 25 - ITA NO. 251 /AHD/201 1 SHRI PADAMRAM D. CHAUDHARI VS. ITO, WARD - 2 ( 2 ), AHMEDABAD . FOR A.Y. 200 7 - 0 8 - 3 11 - 2009 THAT IN CASE ASSESSEE FAILS TO PRODUCE CONFIRMATION OF ABOVE CREDITORS WHY CREDITORS' BALANCE REMAINED TO BE CONFIRMED SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THOUGH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED ON 04 - 12 - 2009, HE NEITHER FURNISHED ANY REPLY NOR PRODUCED / FURNISHED ANY CONF IRMATIONS OF ABOVE CREDITORS. THUS, IT CAN BE SEEN THAT DESPITE AVAILING SUFFICIENT OPPORTUNITIES, THE ASSESSEE COULD NOT FURNISH CONFIRMATIONS OF THE ABOVE CREDITORS NOR STATED ANY REASON FOR THE SAME. THEREFORE, IT IS PRESUMED THAT THE ASSESSEE HAS NOTHI NG TO SAY AGAINST THE SHOW CAUSE GIVEN VIDE NOTE SHEET ENTRY DATED 25 - 11 - 2009. IT IS PERTINENT TO MENTION HERE THAT ONUS IS ON ASSESSEE TO PROVE THE CREDIT BALANCE SHOWN IN THE NAME OF CREDITORS AND THE ASSESSEE HAS FAILED TO FURNISH NOT ONLY CONFIRMATION OF THE ASSESSEE BUT ALSO ANY SORT OF EVIDENCE TO PROVE THAT CREDIT BALANCES SHOWN BY IT FOR THE ABOVE CREDITORS WERE IN FACT EXISTED AS ON 31ST MARCH 2007. ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO PROVE THE CREDIT BALANCES SHOWN, BALANCE OUTSTA NDING AGAINST THE ABOVE CREDITORS AS ON 31ST MARCH 2007 ARE TREATED AS NON - EXISTENT AS ON 31ST MARCH 2007. ACCORDINGLY, THE AMOUNT OF RS.22,02,879/ - BEING UNEXPLAINED LIABILITIES ARE ADDED TO INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(L)(C) OF THE I.T. ACT ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME/CONCEALMENT OF INCOME. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE AO PRIMARILY ON THE GROUND T HAT ALTHOUGH THE PAYMENT WAS MADE THROUGH CHEQUE TO THOSE PARTIES DURING THE YEAR BUT THE COPY OF BANK ACCOUNT WERE NOT FURNISHED. FOR THE SAKE OF COMPLETENESS RELEVANT PARAGRAPH IS REPRODUCED BELOW: 2.3 I HAVE GIVEN CAREFUL CONSIDERATION TO SUBMISSION MA DE AND EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER. IT IS UNDISPUTED THAT DOCUMENTS/CONFIRMATION AS REQUIRED BY THE ASSESSING OFFICER WERE NOT FILED. IT IS ARGUED THAT THESE DOCUMENTS/EVIDENCES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER BECAUSE SUFFICIENT TIME WAS NOT PROVIDED. THIS CONTENTION IS AGAINST THE FACTS ON RECORD. THE ASSESSMENT ORDER IS DATED 23.12.2009. FINAL SHOW CAUSE WAS ISSUED ON 25.11.2009. THIS MEANS THAT PRELIMINARY QUERIES WERE RAISED MUCH EARLIER. ASSESSMENT WAS FRAMED ONE MONTH AFTER THE FINAL SHOW CAUSE NOTICE. THERE IS NO MERIT IN THIS CONTENTION THAT SUFFICIENT TIME WAS NOT GIVEN. BEFORE ME CONFIRMATION LETTER FROM BHAGYODAYA ENTERPRISES AND BHAVNA TRADING CO. HAS BEEN FILED BOTH HAVING SAME PAN ABLPP8814E. HOWEVER, NO R EASON HAS BEEN GIVEN WHY THESE WERE NOT FILED BEFORE THE ASSESSING OFFICER. THE CONFIRMATION LETTER CONTAINS DETAIL OF CHEQUE PAYMENTS. COPY OF BANK ACCOUNT HAS NOT BEEN FILED IN SUPPORT OF THE CLAIM. NARRATION IN THE CONFIRMATION LETTERS DOES NOT INSPIRE CONFIDENCE IN VIEW OF THE FACT THAT THE ASSESSING OFFICER FOUND OUT THAT THE APPELLANT HAD FILED WRONG CONFIRMATION FROM AKSHAR ENTERPRISE. LOOKING INTO TOTALITY OF FACTS . I AGREE WITH THE ASSESSING OFFICER AND THE ADDITION ARE SUSTAINED. ITA NO. 251 /AHD/201 1 SHRI PADAMRAM D. CHAUDHARI VS. ITO, WARD - 2 ( 2 ), AHMEDABAD . FOR A.Y. 200 7 - 0 8 - 4 4. FROM THE SIDE OF THE APPELLANT, LEARNED AR, MR. MUKESH M. PATEL APPEARED AND INFORMED THAT IN RESPECT OF M/S. BHAGYODAY ENTERPRISE AND M/S. BHAVANA TRADING CO. THE PAN IS THE SAME BECAUSE BOTH ARE PROPRIETORY CONCERNS OF MR. A.P. PRAJAPATI, THEREFORE, PAN SHOULD BE THE SAME. HE HAS FURTHER EXPLAINED THAT DURING THE YEAR THERE WAS COMMON OPENING BALANCE AND FURTHER PURCHASES HAVE BEEN MADE AND AN AMOUNT OF RS.3,20,000/ - WAS PAID AND THEREAFTER THERE WAS AN OUTSTANDING BALANCE OF RS.8,74,567/ - . LIKEWISE, IN THE OTHER ACCO UNT OF BHAVANA TRADING COMPANY THERE WAS AN OPENING BALANCE OF RS.10,29,165/ - AGAINST WHICH PAYMENTS HAVE BEEN MADE AND FINALLY AT THE END OF THE YEAR THE CLOSING BALANCE REMAINED AT RS.7,12,165/ - . IN RESPECT OF AKSHAR ENTERPRISES, LEARNED AR HAS INFORMED THAT THERE WAS AN OPENING BALANCE OF RS.6,16,147/ - AND DUE TO A MISTAKE IN THIS ACCOUNT A SUM OF RS.1,70,000/ - WAS CREDITED WHICH IN FACT BELONGED TO AN ANOTHER PARTY . HE HAS PLEADED THAT DURING THE YEAR PURCHASES WERE TO THE TUNE OF RS.75,16,549/ - , THEREF ORE, THE OUTSTANDING BALANCE WAS REFLECTED IN THE ACCOUNTS OF THESE PARTIES. ALTHOUGH HE HAS OBJECTED THAT THERE WAS NO INVOCATION OF THE PROVISIONS OF SECTION 41(1) OF IT ACT BUT ALSO DRAWN OUR ATTENTION THAT THE AO HAD DOUBTED THE AUTHENTICITY OF THE CRE DITORS AND TAXED THE IMPUGNED AMOUNT ON THE GROUND THAT THE LIABILITIES DID NOT EXIST. 5. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., MR. M.K. SINGH HAS SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT AS FAR AS THE ACCOUNTS OF M/S. BHAGYODAY ENTERPRISES AND M/S. BHAVANA TRADING COMPANY, BOTH UNDER ITA NO. 251 /AHD/201 1 SHRI PADAMRAM D. CHAUDHARI VS. ITO, WARD - 2 ( 2 ), AHMEDABAD . FOR A.Y. 200 7 - 0 8 - 5 PROPRIETORSHIP OF ONE MR. A.P. TRIPATHI WERE NOT REQUIRED TO BE DIS BELIEVED BECAUSE OF THE REASON THAT THE LIABILITY OUTST ANDING AS ON 31 ST MARCH, 2007 WAS NOT AN OLD LIABILITY; HENCE, COULD NOT BE CONSIDERED AS A DOUBTFUL LIABILITY. ACCOUNTS AS APPEARED IN THE COMPILATION HAVE REFLECTED THAT IN ONE CASE PURCHASES HAVE BEEN MADE AND PAYMENT DURING THE YEAR WAS ALSO MADE THROU GH ACCOUNT PAYEE CHEQUE. IN THE OTHER ACCOUNT, THERE WAS AN OPENING BALANCE AGAINST WHICH THE ASSESSEE HAS MADE PAYMENT OF RS.3,17,000/ - THROUGH ACCOUNT PAYEE CHEQUE. SINCE, THE ACCOUNTS WERE ALIVE AND THE ASSESSEE WAS SETTLING THE ACCOUNTS BY MAKING PAYME NTS THROUGH ACCOUNT PAYEE CHEQUES, THEREFORE, IT IS NOT PROPER AS WELL AS JUSTIFIABLE TO HOLD THAT THOSE LIABILITIES HAVE CEASED TO EXIST SO AS TO INVOKE THE PROVISIONS OF SECTION 41(1) OF IT ACT. WE, THEREFORE, DIRECT NOT TO MAKE ANY ADDITION IN RESPECT O F THESE TWO ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 41(1) OF IT ACT. THE RESULT OF THIS DISCUSSION IS THAT THE OUTSTANDING BALANCE OF RS.8,74,567/ - IN THE ACCOUNT OF BHAGYODAY ENTERPRISES AND RS.7,12,165/ - IN THE ACCOUNT OF BHAVANA TRADING COMPANY T OTALING RS.15,86,762/ - SHOULD BE DELETED. 6.1 IN RESPECT OF AKSHAR ENTERPRISES, WE HAVE INQUIRED FROM LEARNED AR THAT SINCE HOW LONG THE LIABILITY OF RS.6,16,147/ - WAS OUTSTANDING AND WHETHER THE ASSESSEE HAD MADE ANY ATTEMPT TO LIQUIDATE THIS LIABILITY. W E HAVE ALSO INQUIRED THAT WHETHER THIS AMOUNT WAS SQUARED UP BY MAKING PAYMENT IN ANY OF THE SUBSEQUENT YEARS. IN THE ABSENCE OF SUITABLE EVIDENCE ON RECORD , SO AS TO SATISFY OUR ABOVE QUERY , WE HEREBY DEEM IT PROPER TO REFER THIS PART OF THE DISPUTE BACK TO THE STAGE OF THE AO TO INQUIRE FROM M/S. AKSHAR ENTERPRISES ABOUT THE NATURE OF THE OUTSTANDING LIABILITY AND WHETHER THE ASSESSEE HAS SQUARED UP THE ACCOUNT BY MAKING ITA NO. 251 /AHD/201 1 SHRI PADAMRAM D. CHAUDHARI VS. ITO, WARD - 2 ( 2 ), AHMEDABAD . FOR A.Y. 200 7 - 0 8 - 6 THE PAYMENT. NATURALLY IF THE LIABILITY IS IN EXISTENCE THEN IT SHOULD HAVE BEEN PAI D BY THE ASSESSEE FOR WHICH A SATISFACTORY EXPLANATION SHOULD BE OFFERED WITH SUPPORTING COGENT EVIDENCES. WITH THESE DIRECTIONS, THIS PART OF THE GROUND IS RESTORED BACK TO AO FOR RE - ADJUDICATION AS PER THE DIRECTIONS. RESULTANTLY, GROUND NO.1 OF THE ASSE SSEE IS PARTLY ALLOWED. 7. APROPOS TO GROUND NO.2, THE AO HAS INVOKED THE PROVISIONS OF SECTION 40A(3) BEING CASH PAID IN EXCESS TO RS.20,000/ - . IN TOTAL THE ASSESSEE HAD MADE CASH PAYMENT TO ELEVEN PARTIES TOTALING RS.8,34,829/ - AND IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION 20% OF THE SAME AMOUNTING TO RS.1,66,968/ - WAS TAXED IN THE HANDS OF THE ASSESSEE. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(A) HAS HELD THAT NO EXPLANATION WAS OFFERED; HENCE, AFFIRMED THE ADDI TION. EVEN BEFORE US THIS GROUND HAS NOT BEEN CONTESTED, THEREFORE, WE HEREBY AFFIRM THE FINDINGS OF THE AUTHORITIES BELOW AND DISMISS THIS GROUND. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - ( ANIL CHATURVEDI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28 / 1 1 / 20 1 4 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, I TAT, AHMEDABAD ITA NO. 251 /AHD/201 1 SHRI PADAMRAM D. CHAUDHARI VS. ITO, WARD - 2 ( 2 ), AHMEDABAD . FOR A.Y. 200 7 - 0 8 - 7 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD