ITO, New Delhi V. M/s. Bhagwati Agencies (P) Ltd., New Delhi

ITA 2587/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6809 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PRATIMA KAUSHIK
• Assessee Lawyers: R S AHUJA
• Keywords: Unexplained cash credit
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESI DENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.2587/DEL/2010 ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER, WARD 2 (4), ROOM NO.381, CR BUILDING, NEW DELHI. VS. M/S BHAGWATI AGENCIES (P) LTD., C-118, EAST OF KAILASH, NEW DELHI 65. PAN : AABCB4163F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. AHUJA, CA REVENUE BY : MRS. PRATIMA KAUSHIK, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER OF THE CIT (A) DATED 9 TH FEBRUARY, 2010 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL READ AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DECISION OF LD. CIT (A) DELETING THE ADDITION OF RS.1,00,00,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS IS NOT ACCEPTABLE AS THE CI T (A) HAS NOT APPRECIATED THE FACTS THAT THE ASSESSEE WOULD NOT BE AB LE TO SELL THE GOLD BARS BEFORE TAKING THE DELIVERY OF THE SA ME FROM BANK AND THAT THE ASSESSEE NEVER DISCLOSED THE NAME OF THE CUSTOMERS FROM WHOM ADVANCES WERE RECEIVED FOR PURCH ASE OF GOLD BARS AND DEPOSITED IN THE BANK. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DECISION OF LD. (A) DELETING THE ADDITION OF RS.5,61,152/- BEING 0 .5% OF TURNOVER, IS NOT ACCEPTABLE AS ASSESSING OFFICER HAD F ACTUALLY DEMONSTRATED IN THE ASSESSMENT ORDER THAT TRANSACTION AS SHOWN BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT DID NOT ACTUALLY TAKE PLACE. ITA NO.2587/DEL/2010 2 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND (S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF GO LD AND BULLIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE ALL THE SALES IN CASH. THE ASSESSEE WAS REQUIRED TO ADDUCE EVIDENCE REGAR DING SALES BY PRODUCING THE NAMES AND ADDRESSES OF THE PARTIES TO W HOM THE SALES EXCEEDING ` 5 LACS WERE MADE. IN RESPONSE, THE ASSE SSEE FILED COPIES OF SALE BILLS, PURCHASE BILLS FROM SBI GOLD CELL AND THE DETAILS OF STOCK. THE PERUSAL OF THE SALE BILL, BANK STATEMENT OF THE ASSESSEE REVEALED THAT CASH OF ` 1 CRORE WAS DEPOSITED ON 28 TH JANUARY, 2005. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. THE SOURCE WAS EXPLAINED TO BE CASH SALES TOTALING TO ` 1,28,46,200/- FROM INVOICES 1 TO 11. THE ASSESSING OFFICER OBSERVED THAT THE SAID EXPLANA TION OF THE ASSESSEE IS FALSE ON THE BASIS OF SEQUENCE OF EVENTS. THE MA IN CONTENTION OF THE ASSESSING OFFICER IS THAT WITH THE HEL P OF THE SAID DEPOSIT OF ` 1 CRORE, THE AVAILABLE CREDIT BALANCE I N THE BANK ACCOUNT WAS ` 1,35,55,100/- AND UPON DEPOSIT ONLY THE BANK H AD ISSUED GOLD DELIVERY ORDER FOR 21 KGS. OF GOLD BAR FOR AN AMOUNT OF ` 1,25,75,897/-. THUS, THE MAIN CASE OF THE ASSESSING OFFICER IS THAT THE D EPOSIT IN THE BANK ACCOUNT WAS A STEP AHEAD OF THE SALE MADE BY THE ASSESSEE ON THE SAME DATE. THEREFORE, THE ASSESSING OFFICER TREATED THE SAID AMOUNT OF ` 1 CRORE AS UNEXPLAINED DEPOSIT IN THE BAN K ACCOUNT AND MADE THE ADDITION ACCORDINGLY. 3. SO AS IT RELATES TO THE SECOND ADDITION OF RS.5,61,1 52/-, THE ASSESSING OFFICER DISBELIEVED THE SALES MADE BY THE ASSESSEE O N THE GROUND THAT THESE SALES ARE MADE IN CASH TO UNIDENTIFIE D SMALL BUYERS AND, THEREFORE, SHAM. HE DOUBTED THE BUSINESS ACTIVITY OF THE ITA NO.2587/DEL/2010 3 ASSESSEE ON THE GROUND THAT MOST OF THE SALES HAVE BEEN MA DE BY THE ASSESSEE FROM ITS KAROL BAGH OFFICE ON MONDAY AND MONDAY IS A CLOSED DAY IN THE MARKET OF KAROL BAGH. SIMILARLY, REFERR ING TO THE OFFICE OF THE ASSESSEE SITUATED IN KUCHA MAHAJANI, CHANDNI CHOWK, THE ASSESSING OFFICER FOUND THAT AS PER INSPECTORS REPORT, THERE WA S NO SUCH OFFICE AND, IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER REJECTE D THE BOOKS OF THE ASSESSEE U/S 145 (3) AND ADOPTED 5% NET PROFIT OF THE GOLD PURCHASED DURING THE YEAR WHICH WAS TO THE TUNE OF ` 11,22,30,544/- AND ASSESSED AN INCOME OF ` 5,61,152/-. 4. BEFORE CIT (A) IT WAS SUBMITTED BY THE ASSESSEE THAT M AKING SALE IN CASH IS USUAL FEATURE OF THE BUSINESS ACTIVITY OF THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE COURTS EVEN AND REFERENC E WAS MADE TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE C ASE OF M/S JINDAL DYECHEM INDUSTRIES PVT. LTD. VS. SALES TAX OFFICER IN W RIT PETITION (CIVIL) NO.17166 OF 2004 DATED 7 TH JULY, 2005. IT WAS SUBMITTED THAT CHRONOLOGY OF EVENTS HAPPENED ON ANY BUSINESS DAY ARE A S UNDER:- I. ASSESSEE RECEIVES DEMAND FROM THE CUSTOMERS VIA INFORMA L COMMUNICATION LINKS E.G. TELEPHONE OR, BY PERSONAL ME ETINGS. II. ASSESSEE RAISES THE BILLS TO THE CUSTOMERS AND RECEIVES C ASH FROM THEM. III. THE AFORESAID CASH IS RECEIVED IN THE BANK PREMISE S. IV. HE DEPOSITS THE CASH IN HIS BANK ACCOUNT. V. BANK MARKS LIEN ON THE SAID MONEY AND ISSUES A DELIVE RY ORDER. VI. BANK DELIVERS THE GOLD TO THE ASSESSEE. VII. ASSESSEE SIMULTANEOUSLY DELIVERS THE GOLD TO THE BUYE RS IN THE BANK PREMISES, ON THE SAME DAY. ITA NO.2587/DEL/2010 4 5. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE DERIVES THE FOLLOWING ADVANTAGES OF THE ABOVE STRATEGY ADOPTED FOR A TRANSAC TION:- I. SECURITY TO THE BUYERS BECAUSE THEY PAY MONEY IN T HE BANK. II. SAFE FOR BOTH THE BUYER AND SELLER BECAUSE IT IS A GUARDED ATMOSPHERE. III. SAFE FOR SELLER BECAUSE ISSUE OF COUNTERFEIT CURRE NCY IS TAKEN CARE OFF BAD NOTES RETURNED THERE AND THEN. IV. BUYERS FEEL SECURE ABOUT QUALITY OF GOLD BECAUSE T HE ASSESSEE GETS DELIVERY OF SEALED UNITS OF GOLD IN THE BANK AND THESE ARE IMMEDIATELY DELIVERED TO THE BUYERS. THERE IS ABSOLUT ELY NO POSSIBILITY OF TAMPERING WITH THE QUALITY OF GOLD. V. THERE IS NO HOLDING RISK FOR BOTH BUYER AND SELLE R IN TERMS OF PRICE FLUCTUATION ETC. 6. IT WAS FURTHER SUBMITTED THAT THERE IS NO REQUIREME NT IN THE LAW TO STATE THE NAME AND ADDRESS OF THE PURCHASER ON THE SA LE BILL FOR CASH SALE AND THE REQUIREMENT, IF ANY, PUT BY SECTION 50 (5) OF VAT ACT, 2005 IS WITH REGARD TO TRANSACTION WHICH ARE MADE IN THE COURSE OF INTER-STATE TRADE OR COMMERCE. THE CIT (A) HAS ACCE PTED THE SAID SUBMISSION OF THE ASSESSEE AND HAS DELETED THE ADDITION. T HE DEPARTMENT IS AGGRIEVED, HENCE, IN APPEAL. 7. AFTER NARRATING THE FACTS AND RELYING UPON THE OR DER OF ASSESSING OFFICER IT WAS PLEADED BY LD. DR THAT THE ASSESSEE REMAI NED UNABLE TO EXPLAIN THE DEPOSIT MADE WITH THE BANK BEFORE DELIVE RY OF GOLD BY THE BANK AND, THEREFORE, THE ASSESSING OFFICER HAD ADDED TH E SAID AMOUNT AS UNEXPLAINED CREDIT IN THE BANK. LD. DR SUBMITTED THAT THE AMOUNT OF DEPOSIT IN THE BANK WAS CASH AND IT WAS NOT FROM THE SALE OF GOLD BARS MADE IN CASH. THE EXPLANATION GIVEN BY THE ASSESSEE WAS FALSE AND WAS NOT SATISFACTORY AND IT IS IN THESE CIRCUMSTANCE S THE ASSESSING OFFICER WAS RIGHT IN TREATING THE CASH CREDIT APPEARI NG IN THE BOOKS OF ITA NO.2587/DEL/2010 5 ACCOUNT OF THE ASSESSEE AS UNEXPLAINED INCOME. HE SUBMIT TED THAT THE CIT (A) HAS WRONGLY GRANTED RELIEF TO THE ASSESSEE B Y ACCEPTING THE SUBMISSION OF THE ASSESSEE AND, THEREFORE, HIS ORDER SHOULD BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ARGUING FOR GROUND NO.2, IT WAS SUBMITTED BY HIM THAT THE ASSESSING OFFICER WAS RIGHT IN MAKING THE ADDITION OF 0.5% OF THE TURNOVER AS ASSESSABL E INCOME OF THE ASSESSEE AND LD. CIT (A) HAS WRONGLY DELETED THE SAME . 8. ON THE OTHER HAND, RELYING UPON THE ORDER OF CIT (A), IT WAS PLEADED BY LD. AR THAT AFTER APPRECIATION OF FACTS, LD. CIT (A) HAS RIGHTLY HELD THAT ADDITION ON ACCOUNT OF UNEXPLAINE D DEPOSIT AND ADDITION ON ACCOUNT OF ESTIMATION OF PROFIT WAS NOT C ALLED FOR AND, RELYING UPON THE FINDINGS RECORDED BY CIT (A), HE SUB MITTED THAT DEPARTMENTAL APPEAL HAS NO MERITS. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT WAS THE CASE OF THE ASSESSEE THAT THE GOLD BEING A PRECIOUS ITEM, THE ASSESSEE FIND OUT THE CU STOMERS AND TAKE THEM TO THE PREMISES OF THE BANK WHERE THE AMOUN T PAYABLE TO THE ASSESSEE IN CONSIDERATION OF GOLD WAS FIRST DEPOSITED I N THE BANK ACCOUNT OF THE ASSESSEE FOR RELEASE OF GOLD AND THE DELI VERY OF GOLD WAS MADE THEN AND THERE. THE ASSESSEE HAS NOT FURNISHED T HE NAME AND ADDRESSES OF SUCH BUYERS. HOWEVER, HE HAS RELIED UPO N THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF J INDAL DYECHEM INDUSTRIES PVT. LTD. VS. SALES TAX OFFICER (SUPRA). REL YING ON THAT DECISION, IT IS THE CASE OF THE ASSESSEE THAT TO MAKE SALE IN THE ITEM OF GOLD IS A USUAL BUSINESS PRACTICE AND IT IS THE CASE OF TH E ASSESSEE THAT THAT PRACTICE HAS BEEN ACCEPTED BY HONBLE DELHI HIG H COURT IN THE AFOREMENTIONED CASE. IF THE CONTENTIONS OF THE ASSESSEE ARE CONSIDERED AS RECORDED IN PARA 4 OF THIS ORDER, THEN, IT CAN BE SAID THAT DEPOSITING CASH RECEIVED FROM PROSPECTIVE CUSTOMER IN T HE BANK ITA NO.2587/DEL/2010 6 ACCOUNT CANNOT BE A GROUND TO HOLD THE TRANSACTIONS A S FALSE. THE REASONS STATED BY THE ASSESSEE REGARDING THE SEQUENCE OF TH E TRANSACTIONS APPEARS TO BE NORMAL AND CANNOT BE REJECT ED ON THE FACE OF IT. IF A PERSON DOES NOT HAVE THE MONEY TO TAKE T HE DELIVERY OF GOODS, THEN, HE CAN APPROACH THE PROSPECTIVE BUYERS TO PAY THE MONEY FIRST AND THEN DELIVER THE GOODS AND THAT IS WHAT IN T HE PRESENT CASE HAS BEEN DONE. THE ASSESSING OFFICER HAS ACCEPTED THE SAL ES AS WELL AS THE PURCHASE OF THE ASSESSE AS THE SAME HAVE NOT BEEN DI STURBED BY HIM AND IT CAN BE SEEN THAT NO ADDITION ON ACCOUN T OF EITHER SALE OR PURCHASE HAS BEEN MADE DOUBTING THE TURNOVER OF THE A SSESSEE. THE PURCHASES MADE BY THE ASSESSEE ARE SUPPORTED BY THE INVOIC ES ISSUED BY THE BANK. IT HAS NOT BEEN SHOWN THAT ANY EXTRA PU RCHASES HAVE BEEN MADE BY THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT UNEXPLAINED DEPOSITS MADE BY THE ASSESSEE IN THE BANKS WER E NOT BELONGING TO THE PROSPECTIVE CUSTOMERS WHO HAVE PURCHA SED THE SAID GOLD FROM THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY MATERIAL TO ASSAIL THE FINDINGS OF CIT (A) ACCORDING TO WHICH IT H AS BEEN HELD THAT DEPOSITS OF ` 1 CRORE IN THE BANK ACCOUNT OF THE ASSESSEE TO PURCHASE THE GOLD FOR DELIVERY IN TURN TO THE PROSPECTIVE CUST OMERS WAS EXPLAINED. THEREFORE, WE UPHOLD THE DELETION OF ` 1 CRORE MADE BY THE CIT (A). 10. NOW, COMING TO THE NEXT ISSUE REGARDING ESTIMATION OF PROFIT, IT HAS ALREADY BEEN OBSERVED THAT THERE IS NO DEFECT FOUN D BY THE ASSESSING OFFICER IN THE SALE AND PURCHASES OF THE ASSESSEE AS NO ADDITION HAS BEEN MADE ON THAT ACCOUNT. THEREFORE, IT IS NOT A FIT CASE WHERE PROVISIONS OF SECTION 145 (3) CAN BE ATTRACTED. THEREFORE, WE ARE OF THE OPINION THAT CIT (A) HAS RIGHTLY DELETED THIS ADDITION ALSO AND WE DECLINE TO INTERFERE. ITA NO.2587/DEL/2010 7 11. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO MERIT IN THE APPEAL FILED BY THE REVENUE AND THE SAME IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 04.11.20 10. SD/- SD/- [G.E. VEERABHADRAPPA] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 04.11.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES