JCIT, Meerut V. Sh. Bal Kishan Garg, Meerut

ITA 2651/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5508 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Rejection of books of accounts; Opportunity of being heard
• Section: 133(6)

Judgement Text

ITA NOS. 2354 & 2651/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2354/DEL/2013 A.Y. : 2009-10 BAL KISHAN GARG, THROUGH LEGAL HEIR HIS WIFE SMT. SAROJ GARG, R/O K-177, BOMBAY BAZAR, MEERUT CANTT-250001 (PAN:- AFOPG9731K) VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE-I, MEERUT AND AND AND AND I.T.A. NO. 2651/DEL/2013 A.Y. : 2009-10 JOINT COMMISSIONER OF INCOME TAX, RANGE-1, MEERUT VS. SH. BAL KISHAN GARG, K-177, BOMBAY BAZAR, MEERUT (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. C.S. ANAND, ADV. DEPARTMENT BY : MS. Y. KAKKAR, DR ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THESE ARE THE CROSS APPEALS BY THE ASSESSEE AND RE VENUE EMANATE OUT OF ORDER OF THE LD. CIT(A) DATED 13.2 .2013 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED IN THE ASSESSEES APPEAL REA D AS UNDER:- ITA NOS. 2354 & 2651/DEL/2013 2 1. THAT ON THE FACTS OF THE CASE AND UNDER THE LA W, THE LD. CIT(A) HAS ERRED IN MAKING ENHANCEMENT (BY APPLYING NP RATE OF 4%) WITHOUT ALLOWING ANY OPPORTUNITY TO THE ASSESSEE OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT. 2. THAT ON THE FACTS OF THE CASE AND UNDER THE LA W, THE LD. CIT(A) HAS ERRED IN APPLYING NP RATE OF 4% ON TOTAL TURNOVER. VARIOUS OBSERVATION OF LD. CIT(A) ARE EITHER FACTUALLY INCORRECT AND LEGALLY UNTENABLE. 3. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION OF RS. 45,92,272/- TOWARDS UNEXPLAINED SUNDRY CREDITORS IGNORING THAT THE ASSESSEE TOTALLY FAILED TO DISCHARGE THE ONUS CAST UPON IT TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF TRANSACTIONS. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN RESTRICTIN G THE ADDITION OF RS. 45,48,005/- TO THE AMOUNT OF RS. 7,01,755/- MADE BY THE AO ON ACCOUNT OF INFLATED PURCHASE BEING HELD TO BE NON GENUINE PURCHASES IGNORING THE FACT THAT EVEN THE ENQUIRY NOTICES SENT U/S. 133(6) OF THE I.T. ACT, 1961 TO THE PARTIES REMAINED UN-COMPLIED WITH NOR THE ASSESSEE FURNISHED CONFIRMED COPIES OF ITA NOS. 2354 & 2651/DEL/2013 3 A/CS OF THE ALLEGED SUPPLIERS AND, THUS, ONUS CAST ON THE ASSESSEE REMAINED TOTALLY DISCHARGED. RELIANCE IS FURTHER PLACED ON THE RATIO LAID DOWN IN FOLLOWING CASES:- (I) CIT VS. LA MEDICA (2001) 250 ITR 575 (DELHI) (II) SRI GANESH RICE MILLS VS. CIT (2007) 294 ITR 316 (ALLD.) (III) CIT VS. UNITED COMMERCIAL AND INDUSTRIAL CO. (199) 187 ITR 596 CAL. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADD ITION OF RS. 5,88,775/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE BETWEEN THE PURCHASES AS PER P&L ACCOUNT AND LEDGER ACCOUNT IGNORING THE FACT THAT SAME WAS ADDED AS NET INFLATED PURCHASES DEBITED TO THE P&L ACCOUNT ALREADY AFTER DULY CONSIDERING THE LEDGER A/C OF LOOSE BAGASSEE OF RS. 3,09,077/-. 4. APROPOS ADDITION OF RS. 45,48,005/- ON ACCOUNT O F INFLATED PURCHASES. THE ASSESSEE IN THIS CASE IS ENGAGED MAINLY IN THE BUSINESS OF SALE OF POWER TO UP ASBESTOR LTD. AS WELL AS DOING C IVIL CONTRACT WORK FOR TURBINE INSTALLATION ETC. FOR UP ABESTORS LTD. ASSESSEE ALSO EARNED INCOME FROM RUNNING HIRING AND MAINTENANCE OF DG SETS BESIDES SOME OTHER INCOME. DURING THE COURSE OF ASSESSMEN T, AO OBSERVED THAT PURCHASE BILLS WERE NOT PROPER. IT WAS FURTH ER NOTICED THAT THE ITA NOS. 2354 & 2651/DEL/2013 4 VOUCHERS / INVOICES THAT WERE AVAILABLE OF ALL THE SUPPLIERS WERE MOSTLY IN THE SAME FORMAT EXCEPT THE CHANGE OF NAME AND ADDR ESS AT THE TOP. AO FURTHER NOTED THAT IN THE ADDRESS IN THE INVOIC ES WERE ALSO NOT COMPLETE. AO NOTED THAT THERE WAS TOTAL PURCHASE O F PADDY FROM DIFFERENT PERSONS WAS AMOUNTING TO RS. 1,28,08,387/- . HE FURTHER OBSERVED THAT IN SPITE OF THE FACT THAT THESE INVO ICES WERE OF SUBSTANTIAL AMOUNT. ALL THE AMOUNTS WERE MADE IN CASH IN A SMALL DENOMINATIONS AND IT WAS CONSCIOUS EFFORT BY THE ASS ESSEE TO KEEP THE PAYMENTS BELOW RS. 20,000/-. ASSESSEE WAS ASKED TO P ROVIDE THE EXACT ADDRESS SO THAT THE FIELD VERIFICATION COULD BE MA DE. HOWEVER, THE SAME WAS NOT PROVIDED BY THE ASSESSEE. AO NOTED THAT MANY OF THE SUPPLIERS ARE STILL EXISTING AS SUNDRY CREDITORS A ND THE NOTICES ISSUED TO THEM UNDER SECTION 133(6) HAVE ALSO BEEN RETURNED BACK UNSERVED. IN THESE CIRCUMSTANCES, AO DISALLOWED 15% OF THE TOTAL PURCHASES MADE DURING THE YEAR OF RS. 3,06,20,031/- I.E. RS. 45,48 ,005/- AS INFLATED PURCHASES TO REDUCE THE PROFITS. 5. UPON ASSESSEES APPEAL LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. HE ALSO OBTAINED THE REMAND REPORT. LD. CIT(A) NOTED THAT AO COULD NOT HAVE RESORTED TO ESTIMATION WITHOU T REJECTING THE BOOKS OF ACCOUNTS. HOWEVER, HE NOTED THAT APPELLATE AUTHORITY HAS ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITIE S MAY HAVE IN THE MATTER. LD. CIT(A) REFERRED TO SOME OTHER DECISIONS. HE OBSERVED THAT IN VIEW OF THE ABOVE, THE ERROR, IF ANY, COMMITTED B Y THE AO IN RESORTING TO SOME ESTIMATION WITHOUT REJECTING THE B OOKS OF ACCOUNTS CAN BE CURED AT THE FIRST APPELLATE STAGE PROVIDED THE FACTS OF THE CASE WARRANT SUCH REJECTION. LD. CIT(A) HELD THAT BOOK S OF ACCOUNTS OF THE ASSESSEE ARE LIABLE TO BE REJECTED. LD. CIT(A) FURT HER OBSERVED THAT AO HAS DISALLOWED 15% OF THE TOTAL PURCHASES ON ADHOC BASIS. HE HELD ITA NOS. 2354 & 2651/DEL/2013 5 THAT THIS ACTION IS NOT SUSTAINABLE FOR THE REASONS THAT WHEN ONLY HUSK PURCHASES AGGREGATING TO RS. 1,28,08,387/- WAS THE FOCUS OF VERIFICATION BY THE AO, THE ENTIRE PURCHASES COULD NOT HAVE BEEN MADE BASIS FOR MAKING THE ADDITION. LD. CIT(A) WAS OF TH E OPINION THAT IT WOULD BE APPROPRIATE TO DETERMINE THE INCOME OF THE ASSESSEE ON THE BASIS OF THIS TURNOVER. CONSIDERING THE PRECEDING TWO YEARS, THE LD. CIT(A) OPINED THAT IT WOULD BE FAIR AND REASONABLE TO DETERMINE THE NET PROFIT FOR THE CURRENT YEAR AT 4% OF THE TURNOVER O F THE BUSINESS I.E. RS. 4,04,26,635/-. THIS WORKS OUT TO RS. 16,17,065/- AS AGAINST RS. 9,15,310/- SHOWN IN THE PROFIT AND LOSS ACCOUNT. THUS, LD. CIT(A) HELD THAT THERE WILL BE AN ADDITION OF RS. 7,01,755/-. 6. APROPOS ADDITION OF RS. 45,92,272/- ON ACCOUNT O F SUNDRY CREDITORS. ON THIS AO NOTED THAT NOTICES U/S. 133(6) WERE ISS UED TO THE CREDITORS FOR CONFIRMATION OF THE BALANCE. HOWEVE R DUE TO LACK OF CONFIRMATION AO TREATED THE SUNDRY CREDITORS TO BE NON-GENUINE. HE MADE ADDITION OF RS. 45,92,272/-. 7. UPON ASSESSEES APPEAL LD. CIT(A) NOTED THAT ASS ESSEE HAS PRODUCED SOME OF THE CONFIRMATIONS. HE ALSO ACCEPT ED THE ASSESSEES CONTENTION THAT THE TIME BETWEEN THE PERIOD WHEN TH E ENQUIRY LETTERS WERE ISSUED AND THE ASSESSMENT WAS FINALISED WAS EXT REMELY SHORT IS VALID. THE CREDITORS WERE UNDISPUTABLY VILLAGE BASE D PERSONS WHO MAY HAVE, FOR THEIR OWN REASONS, AVOIDED SERVICE OF THE NOTICES. LD. CIT(A) ALSO REJECTED THE AOS CONTENTION THAT THE CONFIRMAT IONS WERE MANAGED UNLESS INDEPENDENTLY CONFIRMED BY THE PARTIE S CONCERNED DIRECTLY TO THE AO. HE HELD THAT ASSESSEE HAS DISC HARGED THE BURDEN OF ITA NOS. 2354 & 2651/DEL/2013 6 PROVING THE GENUINENESS OF THE CREDITORS AND ACCORD INGLY, HE DELETE THE ADDITION IN THIS REGARD. 8. APROPOS ADDITION OF RS. 5,88,775/- ON ACCOUNT OF DIFFERENCE BETWEEN THE PURCHASES AS THE PROFIT LOSS ACCOUNT A ND AS PER THE LEDGER ACCOUNT. ON THIS ISSUE AO NOTED ON VERIFICATION OF THE BO OKS OF ACCOUNTS IT WAS NOTED THAT THOUGH PURCHASES AS SHOWN IN THE PR OFIT AND LOSS ACCOUNT WERE OF RS. 3,06,29,109/-, AS PER LEDGER TO TAL VERIFIED FOR DIFFERENT PURCHASES, IT WAS ONLY RS. 2,97,31,236/-. ACCORDINGLY, AO TREATED THIS DIFFERENCE OF RS. 5,88,775/- AS ADDIT IONAL INFLATED PURCHASES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 9. BEFORE THE LD. CIT(A) ASSESSEE SUBMITTED THAT RE CTIFICATION APPLICATION IN THIS REGARD HAS BEEN MOVED. LD. CIT( A) FURTHER OBSERVED THAT ONCE THE AO HAD MADE THE ADDITION OF @15% OF PURCHASES, IMPLICITLY REJECTING THE BOOK RESULTS, IT IS NOT AP PROPRIATE TO ONCE AGAIN RELY ON THE BOOKS OF ACCOUNTS ITSELF TO MAKE FURTH ER DISALLOWANCE FOR THE SAME HEAD OF EXPENSES. LD. CIT(A) FURTHER OBS ERVED THAT AT THE REMAND STAGE THE AO APPEARS TO HAVE ACCEPTED THE EXP LANATION GIVEN IN THE SUBMISSIONS MADE DURING THE APPELLATE PROCEEDI NGS. HENCE, LD. CIT(A) DELETED THE ADDITION. 10. AGAINST THE ABOVE ORDER THE ASSESSEE AND REVENU E ARE IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE NOTE THAT AO HAS TREATED 15% OF THE PURCHASE AS NON -GENUINE. THIS HAS BEEN DONE IN THE GROUND THAT THERE WAS SUSPICION I N RELATIONSHIP TO THE VERACITY OF PURCHASE BILL OF THE PADDY. IN TH IS REGARD, IT IS NOTED ITA NOS. 2354 & 2651/DEL/2013 7 THAT AO HAS REJECTED THE BOOKS OF ACCOUNT. LD. CIT( A) HAS NOT ACCEPTED THE AOS OPINION THAT 15% OF THE PURCHASES ARE LIABLE TO BE DISALLOWED. HE HAS PROCEEDED TO MAKE ESTIMATE OF TH E NET PROFIT AND ACCORDINGLY AND MADE AN ADDITION OF RS. 7,01,755/- A ND DELETED THE ADDITION OF 45,48,005/- BY THE AO ON ACCOUNT OF INF LATED PURCHASES. 12. UPON CAREFUL CONSIDERATION, WE NOTE THAT AUTHOR ITIES BELOW HAVE NOT ADJUDICATED UPON THIS ISSUE PROPERLY. WHILE TH E AO HAS FAILED TO DO PUT FORWARD THE COGENT BASIS FOR REJECTING THE BOOKS OF ACCOUNT. HE HAS INDIRECTLY REJECTED THE BOOKS OF ACCOUNT BY DIS ALLOWANCE OF 15% OF THE TOTAL PURCHASES TREATING THE SAME AS INFLATED P URCHASE. IN THIS REGARD, WE NOTE THAT LD. CIT(A) HAS ACCEPTED THE PA RT OF THE ASSESSEES EXPLANATION IN THIS REGARD WITH REFERENCE TO THE CO PIES OF THE BILLS, PURCHASE OF KANTA SLIPS, ADDRESS OF THE SUPPLIER AL ONGWITH TAN/PAN ETC. THE LD. CIT(A) HAS REJECTED THE BOOKS OF ACCOUNTS. THEREAFTER, L.D CIT(A) HAS REJECTED THE AOS ADDITION OF 15% OF THE PURCHASES. HE DELETED THE ADDITION OF RS. 45,48,005/- ON THIS ACC OUNT. IN STEAD HE PROCEEDED TO MAKE AN ESTIMATE OF THE NET PROFIT OF THE ASSESSEE. IN LIGHT OF THE ABOVE, IN OUR CONSIDERED OPINION, THE ISSUE HAS NOT BEEN PROPERLY ADJUDICATED BY THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION, INTEREST OF JUSTICE WILL BE SERVED IF THE MA TTER IS REMITTED TO THE FILES OF THE AO TO CONSIDER THE ISSUE AFRESH. WE HOLD AND DIRECT ACCORDINGLY. NEEDLESS TO ADD THAT THE ASSESSEE SH OULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 13. WE FURTHER NOTED THAT AO HAS MADE THE ADDITION O F RS. 45,92,272/- ON ACCOUNT OF UNCONFIRMED SUNDRY CREDIT ORS. IN THIS REGARD, LD. CIT(A) HAS ACCEPTED THAT ALL CONFIRMATI ONS WERE FILED. HE ACCEPTED THAT THE NON-COMPLIANCE COULD BE DUE TO T HE FACTS THAT ITA NOS. 2354 & 2651/DEL/2013 8 SOME OF THE CREDITORS WERE VILLAGE BASED ILLITERA TE PERSONS WHO MAY NOT HAVE BEEN FAMILIAR WITH INCOME TAX PROCEEDINGS. FURTHER, THE TIME AVAILABLE BETWEEN THE ISSUE OF ENQUIRY LETTERS AND COMPLETION OF ASSESSMENT WAS EXTREMELY SHORT. LD. CIT(A) HAS REJE CTED THE AOS CONTENTION THAT THE SOCALLED CONFIRMATION, COPIES OF ACCOUNTS FILED BY THE ASSESSEE CANNOT BE FULLY RELIED UPON. UNLESS THE SAME WERE CONFIRMED BY THE SUPPLIERS TO THE AO. IN OUR CONSID ERED OPINION THIS ISSUE ALSO NEEDS TO BE REMITTED TO THE FILE OF THE A O, AS IT IS NOTED THAT THE PARTIES HAVE NOT CONFIRMED THE BALANCE TO THE A O, NOR THEY WERE PRODUCED FOR EXAMINATION. UNDER THE CIRCUMSTANCES, THE MATTER NEEDS TO BE EXAMINED BY THE AO AFRESH, HENCE, WE REMIT TH IS ISSUE TO THE FILE OF THE AO. 14. APROPOS ADDITION OF RS. 5,88,775/-. IN THIS RE GARD, WE NOTE THAT ADDITION HAS BEEN MADE BY THE AO DUE TO DIFFERENCE FOR PURCHASE OF PROFIT AND LOSS ACCOUNT AND AS REFLECTED IN THE LED GER ACCOUNT. IN THIS REGARD, DURING THE APPELLATE PROCEEDINGS, LD. CIT (A) HAS NOTED THAT RECTIFICATION APPLICATION HAS BEEN MOVED. FURTHERMO RE, LD. CIT(A) HAS NOTED THAT AO APPEARS TO HAVE ACCEPTED THE EXPLANAT ION GIVEN IN THE SUBMISSIONS MADE DURING THE APPEAL PROCEEDINGS. WE FIND THAT THIS PRESUMPTION BY THE LD. CIT(A) IS NOT BACKED BY COGEN T BASIS. FURTHERMORE, LD. CIT(A) HAS NOTED THAT ONCE THE BOOK S OF ACCOUNTS HAVE BEEN REJECTED THEY CANNOT BE RELIED FOR FURTHE R DISALLOWANCE IN THE SAME HEAD OF EXPENSE. WE NOTE THAT WE HAVE A LREADY REMITTED THE ISSUE OF ADDITION ON ACCOUNT OF INFLATED PURCHA SES AND THE ESTIMATION OF INCOME TO THE FILE OF THE AO. HENCE, W E REMIT THIS ISSUE TO THE FILE OF THE AO. ITA NOS. 2354 & 2651/DEL/2013 9 15. IN THE RESULT, ALL THE ISSUES RAISED IN THE APP EALS OF THE REVENUE AND ASSESSEE ARE REMITTED TO THE FILE OF THE AO. TH E AO IS DIRECTED TO CONSIDER THE ISSUES AFRESH, AFTER GIVING THE ASSESS EE PROPER OPPORTUNITY OF BEING HEARD. 16. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE AND REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/3/2014. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [R RR R.P. TOLANI .P. TOLANI .P. TOLANI .P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 24/3/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT- SMT. SAROJ GARG, C/O SANJAY KUMAR & CO., CHARTERED ACCOUNTANTS, 318, SADAR BUNDELA, DALMANDI, MEERUT CA NTT., (UP) 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NOS. 2354 & 2651/DEL/2013 10