ACIT circle-16 (1), New Delhi V. Tripati Structural Ltd, New Delhi

ITA 2680/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9915 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 10-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 12-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C S AGGARWAL
• Keywords: Set aside
• Section: 143(3); 205; 251; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NO.2680/DEL/2008 ASSESSMENT YEAR : 2005-06 ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-16(1), NEW DELHI. VS. M/S TIRUPATI INTERNATIONAL LIMITED, 81, FIE, PATPARGANJ, DELHI 110 092. PAN NO.AAACT3824C. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.VANDANA RAMACHANDRAN, SR.DR. RESPONDENT BY : SHRI C.S.AGGARWAL, SR.ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 16.5.2008 FOR THE AY 2005-06, IN THE MATTER OF ORDE R PASSED BY THE AO U/S 143(3) OF THE IT ACT. 2. THE SOLITARY GRIEVANCE OF THE REVENUE RELATES TO DELETION OF ADDITION OF RS.78 LAKHS BY THE CIT(A) WHICH WAS MADE BY THE AO U/S 68 OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MA NUFACTURING PVC PIPES, HDPE PIPES, PVC FITTINGS, WATER TANKS UNDER THE BRAND NA ME OF TIRUPATI. DURING THE RELEVANT PREVIOUS YEAR UNDER CONSIDERATION, THE ASS ESSEE RECEIVED A SUM OF RS.78 LAKHS FROM M/S MEETA INDUSTRIES, T-171, BALJEET NAG AR, NEW DELHI. THE NAME OF M/S MEETA INDUSTRIES WAS INCLUDED IN THE LIST OF SU NDRY CREDITORS AS ON 31.3.2005. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO FO UND THAT THE ASSESSEE WAS IN RECEIPT OF CHEQUES OF RS.78 LAKHS ON VARIOUS DATES AGAINST WHICH ASSESSEE HAS PAID BACK THE SUM OF RS.68 LAKHS ON VARIOUS DATES. ONE OF THESE CHEQUES ISSUED BY THE ASSESSEE WAS DISHONORED BY THE ASSESSEES BANKERS F OR RS.10 LAKHS. THE ASSESSEE ITA-2680/D/2008 2 WAS ASKED TO DISCHARGE ITS ONUS U/S 68. VIDE ITS R EPLY DATED 5.10.2007, THE ASSESSEE STATED THAT AT PRESENT IT IS HAVING NO BUS INESS RELATION WITH THE ALLEGED CREDITOR, AS SUCH, IT WAS NOT IN A POSITION TO MAKE NECESSARY COMPLIANCE. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD ALREADY BEEN ASKED TO PRODUCE THE PRINCIPAL OFFICER OF M/S MEETA INDUSTRIES ALONGWITH ITS RESPE CTIVE BANK ACCOUNTS, COMPUTATION OF INCOME AS WELL AS INCOME TAX RETURN. THE AO OBSERVED THAT ASSESSEE DID NOT DISCHARGE ITS ONUS DESPITE OF AVAI LING VARIOUS OPPORTUNITIES. ACCORDINGLY, A SPECIFIC QUERY WAS MADE BY THE AO FR OM THE PAYERS RESPECTIVE BANK ACCOUNT WHICH REVEALED THAT ON ALL THE DATES, THE CREDITOR ISSUED CHEQUES TO THE ASSESSEE, CASH WAS DEPOSITED. THE AO FURTHER O BSERVED THAT THOUGH THE LENDER HAD OBTAINED PAN NUMBER, IT DID NOT FILE ITS RETURN OF INCOME FOR THE RELEVANT YEAR UNDER CONSIDERATION, THEREFORE THE FINANCIAL CAPABI LITY OF THE LENDER REMAINS UNSUBSTANTIATED. THE AO ALSO OBSERVED THAT THE FAC T THAT UNPROVED, UNSECURED LOANS INTRODUCED BY THE ASSESSEE INTO ITS BOOKS OF ACCOUNT AS ADVANCE FROM CUSTOMERS LEADS TO THE CONCLUSION THAT THE ASSESSEE RESORTED TO INTRODUCE THESE SUMS INTO ITS BOOKS OF ACCOUNT IN THE GARB OF ADVAN CE FROM CUSTOMERS SO THAT IT ESCAPES ONUS CAST UPON HIM U/S 68 OF THE IT ACT. F INALLY, SINCE THE ASSESSEE HAS FAILED TO PROVE THE FINANCIAL CAPABILITY IN RESPECT OF THE LENDER, AN ADDITION WAS MADE U/S 68 OF THE IT ACT. 4. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE AD DITION BY OBSERVING THAT ISSUE IN DISPUTE IS RELATED TO THE TRADE ADVANCE WH ICH HAS BEEN SUBSEQUENTLY RETURNED BACK TO THE PERSON CONCERNED. THE CIT(A) ALSO STATED THAT THE IDENTITY OF THE PERSON CONCERNED IS NOT IN DISPUTE NOR THERE WA S ANY DENIAL OF THE SAID PAYMENT MADE TO THE ASSESSEE. THE PAYMENT HAS BEEN MADE THROUGH REGULAR BANK TRANSACTION. AS PER CIT(A), THE REVENUE HAS NOT SH OWN THAT THE DEPOSITS WERE REALLY THE FUNDS OF THE ASSESSEE, THEREFORE EVEN IF THE AO HAS SOME DOUBT ABOUT THE CAPACITY OF THE PERSON, AT BEST, THAT WOULD BE A GO OD GROUND FOR TAKING ACTION AGAINST THAT PERSON AND NOT AGAINST THE ASSESSEE. BY RELYING ON THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN TH E CASE OF STELLER INVESTMENT ITA-2680/D/2008 3 251 ITR 263 AND SOPHIA FINANCE 205 ITR 98, HE DEL ETED THE ADDITION MADE BY THE AO U/S 68 OF THE IT ACT. AGGRIEVED BY THE SAME , THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. LEARNED SR.DR CONTENDED THAT ASSESSEE GROSSLY FA ILED TO DISCHARGE THE ONUS CASTED ON HIM U/S 68 OF THE IT ACT. THE FINANCIAL CAPABILITY OF THE CONCERN PAYING RS.78 LAKHS TO THE ASSESSEE WAS NOT PROVED IN VIEW OF THE FACT THAT FOR THE RELEVANT ASSESSMENT YEAR NO RETURN OF INCOME WAS FILED BY TH E LOAN CREDITOR. FOR JUSTIFYING THE ACTION OF THE AO FOR MAKING ADDITION U/S 68, RE LIANCE WAS PLACED ON THE DECISIONS REPORTED AT 232 ITR 820 AND 126 ITR 63. 6. ON THE OTHER HAND, LEARNED SENIOR COUNSEL SUBMIT TED THAT NOWHERE THE AO HAS DISPUTED THAT IMPUGNED ADVANCE OF RS.78 LAKHS W AS RECEIVED BY ACCOUNT PAYEE CHEQUES, HE HAS ALSO NOT DISPUTED THAT THE ASSESSEE HAS RETURNED A SUM OF RS.68 LAKHS BY ACCOUNT PAYEE CHEQUES ONLY AND THAT ASSESS EE DID NOT REMAIN THE ULTIMATE BENEFICIARY OF THE ADVANCE MONEY. OUR ATTENTION WA S DRAWN TO THE CONFIRMATION FILED BY M/S MEETA INDUSTRIES, WHICH IS PLACED AT P AGE 38 & 39 OF THE PAPER BOOK AS PER ANNEXURE-12. THE CONFIRMATION OF ACCOUNT FO R THE PERIOD 1 ST APRIL, 2004 TO 31 ST MARCH, 2005 WAS DULY ACKNOWLEDGED BY THE PROPRIETO R OF M/S MEETA INDUSTRIES. OUR ATTENTION WAS DRAWN TO A LETTER DA TED 10.4.2004 WRITTEN BY M/S MEETA INDUSTRIES, AS PLACED AT PAGE 81 OF THE PAPER BOOK, WHEREIN M/S MEETA INDUSTRIES HAVE PLACED AN ORDER OF 400 MT PVC RESIN GRADE K-6701. OUR ATTENTION WAS ALSO DRAWN TO THE SALES TAX REGISTRAT ION CERTIFICATE OF M/S MEETA INDUSTRIES, AS PLACED AT PAGE 82. IN VIEW OF THESE DOCUMENTS, LEARNED SENIOR COUNSEL STRESSED THAT BOTH THE IDENTITY AND GENUINE NESS OF THE TRANSACTION IS FULLY PROVED, SINCE THE PAYMENT WAS ALSO MADE THROUGH ACC OUNT PAYEE CHEQUES THROUGH BANKING CHANNELS, THE FINANCIAL CAPACITY OF M/S MEE TA INDUSTRIES IS ALSO ESTABLISHED ON RECORD. HE FURTHER CONTENDED THAT T HE AO HAS NOT DISPUTED THE IDENTITY OF THE PAYER, WHICH FACT EVEN OTHERWISE ST OOD CORROBORATED BY HIS SPECIFIC ENQUIRY MADE WITH THE PAYERS BANK. AS PER LEARNED SENIOR COUNSEL, THE AO HAS ITA-2680/D/2008 4 IGNORED THE FACT THAT PAYER OF THE IMPUGNED AMOUNT WAS A TRADER DEALING IN PVC RESIN, DULY REGISTERED WITH THE SALES TAX AUTHORITI ES. HE CONTENDED THAT THE PAYER HAS ADVANCED THE MONEY IN TERMS OF THE PURCHASE ORD ER WHICH WAS NOT MATERIALIZED, THEREFORE THE ADVANCE MONEY WAS REPAI D ALSO. HE FURTHER STATED THAT AO HAS FAILED TO APPRECIATE THAT IN BUSINESS REALIT Y, IT IS NOT AN UNUSUAL BUSINESS BEHAVIOUR THAT IN THE ABSENCE OF ANY CONTINUED BUSI NESS RELATIONSHIP, A SUPPLIER HAS NO CONTROL OVER HIS CUSTOMER TO FORCE HIM TO AP PEAR BEFORE AN INCOME TAX AUTHORITY ALONGWITH DESIRED PAPERS. ACCORDINGLY, N O NEGATIVE INFERENCE CAN BE DRAWN FROM THE ASSESSEES INABILITY TO PRODUCE A CU STOMER WITH WHOM THERE WAS NO BUSINESS RELATIONSHIP FOR THE LAST TWO YEARS. I T WAS ALSO THE CONTENTION OF THE LEARNED AR THAT IT WAS TOTALLY AN INTERNAL AFFAIR O F THE CUSTOMER, HOW HE CREATED NECESSARY CASH BALANCE IN HIS BANK ACCOUNT TO MAKE PAYMENTS TO THE ASSESSEE. LEARNED AR ALSO DRAWN OUR ATTENTION TO THE REPLIES FILED BEFORE THE AO DATED 10.9.2007, 5.10.2007 AND 9.10.2007, WHICH ARE PLACE D ON RECORD, ACCORDING TO WHICH, THE ASSESSEE DISCHARGED ITS BURDEN OF IDENTI TY, GENUINENESS AND CREDITWORTHINESS OF M/S MEETA INDUSTRIES. IN SUPPO RT OF THE PROPOSITION THAT ONCE THE ASSESSEE ESTABLISHES IDENTITY OF THE CREDITOR A ND GENUINENESS OF THE TRANSACTION, NO ADDITION CAN BE MADE U/S 68, HE CITED VARIOUS PR ONOUNCEMENTS OF LAW REPORTED AT 49 ITR 561, 87 ITR 349, 154 ITR 591, 154 ITR 244 ETC. RELIANCE WAS ALSO PLACED ON THE DECISION REPORTED AT 292 ITR 682 AND IT WAS CONTENDED THAT ONLY AGAINST PURCHASE ORDER THE PAYMENT WAS RECEIVED THR OUGH ACCOUNT PAYEE CHEQUES, ACCORDINGLY NO ADDITION WAS WARRANTED U/S 68 OF THE IT ACT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED UPON VARIOUS CASE LAWS CITED BY THE LEARNED AR WITH REFERENCE TO FACTUAL MATRIX OF THE INSTANT CASE. WE HAVE ALSO MINUTELY GONE THROUGH THE DOCUMENTS PLACED ON RECOR D TOWARDS WHICH OUR ATTENTION WAS DRAWN, SPECIFICALLY THE CONFIRMATION LETTER ACKNOWLEDGED BY M/S MEETA INDUSTRIES, WHEREIN VARIOUS PAYMENTS WERE SHO WN TO HAVE BEEN RECEIVED THROUGH ACCOUNT PAYEE CHEQUES FROM 12.4.2004 TO 23. 8.2004. IN THIS CONFIRMATION, ITA-2680/D/2008 5 REPAYMENT WAS ALSO MADE BY THE ASSESSEE FROM 27.11. 2004 TILL 29.3.2005. AFTER MAKING REPAYMENT OF RS.68 LAKHS, THERE REMAINS A CL OSING BALANCE OF RS.10 LAKHS. THIS CONFIRMATION WAS SIGNED BY THE PROPRIETOR OF M /S MEETA INDUSTRIES, ALSO GIVING THEIR PAN NUMBER. WE HAVE ALSO GONE THROUGH MINUTELY THE LETTER DATED 10.4.2004 WRITTEN BY M/S MEETA INDUSTRIES TO THE AS SESSEE FOR SUPPLY OF 400 MT OF PVC RESINS, WHICH WAS ALSO SIGNED BY THE PROPRIETOR OF M/S MEETA INDUSTRIES. IN THE INSTANT CASE, IT IS AN UNDISPUTED FACT THAT ALL THE PAYMENTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND THE REPAYMENT WAS ALSO MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES. THUS, THERE WAS TRA NSACTION OF ONLY RECEIPT OF CHEQUES AND REPAYMENT OF CHEQUES DURING THE YEAR UN DER CONSIDERATION AS WELL AS IN THE SUBSEQUENT YEAR WHEN THE BALANCE PAYMENT OF RS.10 LAKHS WAS MADE. THERE WAS NO TRADE TRANSACTION OF ANY PURCHASE, SALES ETC . INDICATING THE RELATION OF M/S MEETA INDUSTRIES WITH THE ASSESSEE AS TRADE CREDITO R. THE CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT IT WAS A TRADE ADVANCE W HICH HAS BEEN SUBSEQUENTLY WRITTEN BACK TO THE PERSON CONCERNED, THEREFORE, IN GREDIENTS OF SECTION 68 ARE NOT REQUIRED TO BE FULFILLED. HOWEVER, WE DO NOT FIND ANY MATERIAL ON RECORD EVIDENCING THE NATURE OF TRANSACTION AS TRADE, CONT RARY TO IT THE TRANSACTION WAS A FINANCIAL TRANSACTION, WHEREIN MONEY WAS GIVEN TO T HE ASSESSEE AND THE SAME WAS REPAID BY ASSESSEE. EVEN IN THE EARLIER OR SUBSEQU ENT YEAR, THE ASSESSEE HAS NOT ENTERED INTO ANY TRADE TRANSACTION WITH MEETA INDUS TRIES. SINCE IT WAS CASE OF LOAN CREDITOR, ALL THE INGREDIENTS OF SECTION 68 WITH RE GARD TO IDENTITY OF CREDITOR, GENUINENESS OF TRANSACTION OF ADVANCING LOAN AND FI NANCIAL CAPACITY OF PERSON ADVANCING MONEY IS REQUIRED TO BE SATISFIED. TO ME ET WITH THE REQUIREMENT OF SECTION 68 DURING THE COURSE OF SCRUTINY ASSESSMENT , THE AO HAS ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICER OF M/S ME ETA INDUSTRIES ALONGWITH RESPECTIVE BANK ACCOUNTS THROUGH WHICH PAYMENT WAS EFFECTED. HOWEVER, THE SAME WAS NOT MET WITH. THE AO MADE AN INDEPENDENT ENQUIRY WITH THE BANK OF MEETA INDUSTRIES AND FOUND THAT ON ALL THE DATES ON WHICH THE LOAN CREDITOR ISSUED THE CHEQUES TO THE ASSESSEE, CASH WAS DEPOSITED IN HER BANK ACCOUNT. THE AO ALSO RECORDED A FINDING TO THE EFFECT THAT THOUGH THE LE NDER HAS OBTAINED PAN NUMBER ITA-2680/D/2008 6 BUT NO RETURN OF INCOME FOR THE CORRESPONDING PERIO D WAS PLACED ON RECORD TO SUBSTANTIATE THE FINANCIAL CAPABILITY OF THE LENDER DEPOSITING HUGE CASH IN THE BANK ACCOUNT IMMEDIATELY BEFORE ISSUING CHEQUES. WITHOU T CONTROVERTING ALL THESE FINDINGS OF THE AO AND WITHOUT BRINGING ANY POSITIV E MATERIAL ON RECORD TO NEGATE THE OBSERVATION OF THE AO TO THE EFFECT THAT CASH W AS DEPOSITED IN THE BANK ACCOUNT ON ALL THE DATES OF ISSUING THE CHEQUES, THE CIT(A) HAS DELETED THE ADDITION BY RELYING ON THE DECISIONS OF HON'BLE DELHI HIGH COUR T WHICH ARE PERTAINING TO THE AMOUNT RECEIVED FROM THE SHAREHOLDER, WHEREIN ONLY IDENTITY OF SHAREHOLDER IS NEEDED TO BE SHOWN. IN THE INSTANT CASE, THE PERSO N ADVANCING THE MONEY WAS NOT SHAREHOLDER OF ASSESSEE COMPANY, THEREFORE THE JUDI CIAL PRONOUNCEMENTS RELIED BY CIT(A) FOR DELETING THE ADDITION MADE U/S 68 ARE NO T RELEVANT. WE ALSO FOUND THAT CONFIRMATION LETTER AS PLACED AT PAGE 39 WAS SIGNED BY NEELAM AS PROPRIETOR OF M/S MEETA INDUSTRIES, WHEREAS ANOTHER LETTER DATED 10.4.2004 TO WHICH OUR ATTENTION WAS INVITED BY THE LEARNED AR WAS SIGNED BY BHARTI SHARMA AS PROPRIETOR OF M/S MEETA INDUSTRIES. ON SPECIFIC QU ERY OF THE BENCH WITH REGARD TO ACTUAL PROPRIETOR OF M/S MEETA INDUSTRIES, AND THE DIFFERENT PERSON SIGNING AS PROPRIETOR, IT WAS REPLIED BY THE LEARNED AR THAT I T IS FOR THE AO TO ENQUIRE, AND SINCE THE AO HAS NOT DOUBTED THE GENUINENESS OF THI S CONFIRMATION AND THE LETTER WRITTEN BY M/S MEETA INDUSTRIES, NO ADVERSE INFEREN CE SHOULD BE DRAWN BY THE TRIBUNAL, EVEN IF DIFFERENT PROPRIETOR IS THERE SIG NING THE LETTER IN THE NAME OF M/S MEETA INDUSTRIES. UNDISPUTEDLY, THE SIGNATURE PLAC ED ON VARIOUS DOCUMENTS BY DIFFERENT PERSONS CLAIMING TO BE THE PROPRIETOR OF M/S MEETA INDUSTRIES RAISE A SERIOUS DOUBT REGARDING GENUINENESS OF DOCUMENTS PL ACED ON RECORD BY RELYING ON WHICH CIT(A) HAD DELETED THE ADDITION. THE AO HAS ALSO SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE M/S MEETA INDUSTRIES, BUT THE S AME WAS ALSO NOT MET WITH. THE OBSERVATION OF THE AO TO THE EFFECT THAT ON ALL THE OCCASIONS OF ISSUING THE CHEQUES, THERE WAS DEPOSIT OF CORRESPONDING CASH IN THE BANK ACCOUNT OF M/S MEETA INDUSTRIES, HAS NOT BEEN CONTROVERTED BY THE CIT(A). SINCE THE RETURN FOR RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION WAS NO T PLACE ON RECORD, THE ITA-2680/D/2008 7 CREDITWORTHINESS OF LOAN CREDITOR TO DEPOSIT CASH O F RS.78 LAKHS IN THE BANK ACCOUNT, WAS ALSO NOT ESTABLISHED. 8. IN VIEW OF ABOVE DISCUSSION, WE SET ASIDE THE OR DER OF CIT(A) DELETING THE ADDITION OF RS.78 LAKHS U/S 68, AND IN THE INTEREST OF JUSTICE, RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AND THE ASSESSEE IS DIRECTED TO CLARIFY WITH REGARD TO OUR OBSERVATION CONTAINED HE REINABOVE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE COPY OF INCOME-TAX RETURN OF M /S MEETA INDUSTRIES FOR THE CORRESPONDING PERIOD FILED WITH THE INCOME TAX DEPA RTMENT, WHEREIN CORRESPONDING TRANSACTION IN THE BOOKS OF ACCOUNT O F MEETA INDUSTRIES, ALSO FINDS PLACE. IN CASE OF ASSESSEES INABILITY TO PRODUCE M/S MEETA INDUSTRIES, AO IS TO EXERCISE ITS POWER U/S 131 TO CALL M/S MEETA INDUST RIES. WE DIRECT ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2009. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :31.08.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR