The Dy. Commissioner of Income-tax, Jammu V. Sh. Rakesh Kumar, Samba

ITA 28/ASR/2013

• Counselvise Citation: 2820914 RSA 2013
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Unexplained cash credit
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.28(ASR)/2013 ASSESSMENT YEAR:2007-08 PAN :AJZPK5806C DY.COMMR. OF INCOME TAX, VS. SH. RAKESH KUMAR, PROP . CIRCLE-1, JAMMU. M/S. R.K. ENTERPRISES, SAMBA, (J&K). (APPELLANT) (RESPONDENT) APPELLANT BY:SH.MAHAVIR SINGH, DR RESPONDENT BY:SH. P.N.ARORA, ADVOCATE DATE OF HEARING: 02/01/2014 DATE OF PRONOUNCEMENT:17/01/2014 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 05.11.2012 RELATING TO ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.16,00,000/- MA DE ON ACCOUNT OF CLOSING WORKS IN PROGRESS WHEN THE ASSESSEE HAS FAILED TO RECONCILE HIS ACCOUNTS WITH THE ACCOUNTS OF 31- BRT F BEFORE THE AO ON THE ISSUE OF CLOSING WIP. ITA NO.28(ASR)/2013 2 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.16,00,000/- MA DE ON ACCOUNT OF CLOSING WORKS IN PROGRESS WHEN THE LD. CIT(A) HA S HIMSELF ADMITTED IN THE ORDER THAT THE ACCOUNTS OF THE ASSE SSEE DO NOT TALLY EXACTLY WITH THE ACCOUNTS OF 31-BRTF. 3. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE AS ARISING FROM THE AOS ORDER ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: 2.1 THE ASSESSEE IS A CONTRACTOR AND IN HIS PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION, HE HAS SHOWN WORK DON E OF RS.54,64,064/-, WIP OF RS.16,00,000/- AND SALE OF C HIPS AT RS.6,89,530/-. THE ASSESSEE HAS ALSO REFLECTED INTE REST ON FDR AT RS.4,885/- IN HIS PROFIT & LOSS ACCOUNT. 3. WORK IN PROGRESS: THE ASSESSEE HAS REFLECTED WIP OF RS.16,00,000- LACS IN HIS P & L A/C. IT WAS SURPRIS ING TO NOTE THAT THIS FIGURE OF WIP WHICH IS THE CLOSING STOCK IS MISSING IN THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR. THI S SHOWS THAT THE ASSESSEE HAS THESE ASSETS AND WHEN THE SAME ARE ACCOUNTED/ADJUSTED IN THE ASSET SIDE OF THE BALANCE SHEET RESULTANTLY THERE ARE SOME UNEXPLAINED CREDITS ON T HE LIABILITY SIDE WHICH HAS NOT BEEN REFLECTED BY THE ASSESSEE. TO CLEAR THIS AMBIGUITY AND TO FIND OUT THE EXACT POSITION, THE A SSESSEE VIDE LETTER DATED 01.12.2009 WAS ASKED TO EXPLAIN THE SA ME. THE RELEVANT PART OF THE LETTER DATED 01.12.2009 IS REP RODUCED AS UNDER: IN YOUR AUDITED PROFIT & LOSS ACCOUNT STATEMENT FI LED WITH RETURN OF INCOME AND ALSO IN THE DETAILS SUBMI TTED DURING THE ASSESSMENT PROCEEDINGS, YOU HAVE SHOWN WORK IN PROGRESS OR IN OTHER WORDS CLOSING STOCK OF RS.16,00,000/- A T THE END OF THE YEAR. THIS CLOSING STOCK OR WORK IN PROGRESS IS NOT APPEARING ANYWHERE IN THE BALANCE SHEET, RATHER THE RE IS NO FIGURE OF SUCH QUANTUM WHICH CAN ADJUST THIS WIP. T HIS IS DIFFERENCE IN THE BALANCE SHEET. PLEASE OFFER YOUR COMMENTS AND ITA NO.28(ASR)/2013 3 EXPLAIN WHY THE SAME MAY NOT BE TREATED AS SUCH AND ADDED BACK TO YOUR INCOME FOR THE YEAR. YOU ARE REQUESTED TO PRODUCE COMPLETE BOOKS OF AC COUNT AND VOUCHERS IN THE NEXT DATE OF HEARING. YOUR CASE STANDS FIXED FOR HEARING ON 09.12.2009 AT 11.00 A.M. IN THIS REGARD THE ASSESSEE FURNISHED THE REPLY AN D STATED AS UNDER: RS.16 LAC IS ACTUALLY SALE MADE TO 31-BRTF (GREF AND WIP HAS BEEN WRONGLY TYPED. COPY OF ACCOUNT 31-BR TF ENCLOSED AS PER WHICH THERE IS A DEBIT BALANCE OF R S.8,58,724/- APPEARING IN BALANCE SHEET. COPY OF ACCOUNT OF 310BRTF IN THE BOOKS OF M/S. R. K. ENTERPRISES. DATE PARTICULARS TYPE DR. C R. 01.04.06 CR. OP.BAL. 84152 13.04.06 DR. JK BANK 1270 RECEIPT 674751 17.04.06 DR. JK BANK 1270 RECEIPT 497666 24.04.06 DR. JK BANK 1270 RECEIPT 97960 13.06.06 DR. JK BANK 1270 RECEIPT 434647 01.08.06 DR. JK BANK 1270 RECEIPT 634092 21.08.06 DR. PNB-409 RECEIPT 253500 07.09.06 DR. PNB 409 RECEIPT 272000 06.10.06 DR. PNB-409 RECEIPT 87437 23.12.06 DR. JK BANK1270 RECEIPT 972249 28.12.06 DR. JK BANK 1270 RECEIPT 335511 05.02.07 DR. JRB, RAJOURI RECEIPT 773004 13.03.07 DR. JK BANK 1270 RECEIPT 1134277 31.03.07 CR. WORK DONE JOURNAL 5341668 CR. WORK IN PROGRESS JOURNAL 1600000 7025820 6167094 DR. CLOSING BALANCE 858726 7025820 7025820 3.1. ACCORDINGLY, TO PROVE THE CONTENTION OF THE A SSESSEE INFORMATION WAS CALLED U/S 133(6) FROM 31 BRTF VIDE THIS ITA NO.28(ASR)/2013 4 OFFICE LETTER NO.692 DATED 09.12.2009. ACCOUNTS OFF ICER, 31 BRTF VIDE HIS LETTER DATED FURNISHED THE REQUIRED I NFORMATION WHICH IS REPRODUCED AS UNDER: S.NO. CA NO. AMT. PAID BY CHEQUE DETAILS OF TO TAL AMT. RECOVERY. 1. CDR 31 TF/11/05-06 346000 IT 9356 375 878 SEC 20522 2. CDR 31 TF/11/05-06 435955IT 9031 44498 6 3. CDR 31 TF/01/06-07 636000 IT 16097 652097 4. CDR 31 TF/01/06-07 253500 IT 6290 2597 90 5. -DO 87547 IT NIL 87547 6. CDR 31 TF/01/06-07 580435 IT 13300 593735 7. CDR.31TF/05/06-07 272000 IT 6967 278967 8. -DO- 51410 IT 396 5185 3 SUR. 39 EC 8 9. CE(P)SPK/24/06-07 1072000 IT 24048 1104439 SUR. 2405 EC 481 ADD 5505 ------------------------------ 37,34,847 3849,292 3.2. IT IS EVIDENT FROM ABOVE, THAT THE CONTENTION OF TH E ASSESSEE CANNOT BE BELIEVED AS BOTH THESE ACCOUNTS DO NOT TALLY AT ALL. THERE IS HUGE DIFFERENCE IN ENTRIES A S PER THE INFORMATION PROVIDED BY THE ACCOUNTS OFFICER 31 BRT F AND AS PER THE COPY OF ACCOUNT PROVIDED BY THE ASSE SSEE. TE ARGUMENT OF THE ASSESSEE THAT SAID RS.16 LACS REPRESENTS THE SALES MADE TO THE 31 BRTF AND NOT TH E WIP IS NOT ACCEPTABLE IN VIEW OF THE FACT THAT IF R S.16 LACS IS THE SALES MADE TO 31 BRTF AND NOT THE WIP, THEN WHAT IS THE CLOSING STOCK, IN THIS CASE WIP. AS PER THE VERSION OF THE ASSESSEES COUNSEL AS ON 31.03.2007 THERE WAS NO WIP OR CLOSING STOCK, THIS CANNOT BE ACCEPTE D IN ANY CASE. THE EXECUTION OF CONTRACTS IS A CONTINUOU S PROCESS AND ALL OF THEM ARE NOT EXPECTED TO BE COMP LETED EXACTLY AT THE CLOSE OF THE FINANCIAL YEAR. THE BIL LS ARE ITA NO.28(ASR)/2013 5 RAISED AS AND WHEN ACCORDING TO THE PROGRESS MADE I N THE COMPLETION OF PROJECT AND FINAL BILLS ARE RAISED ON LY AFTER COMPLETION OF THE PROJECT. HENCE, IT CANNOT BE SAID THAT ALL THE CONTACTS/PROJECTS OF THE ASSESSEE HAS BEEN COMPLETED TOTALLY ON 31.03.2007. THE ASSESSEES CONTENTION IS AGAIN NOT TENABLE AS HE HAS MADE SALE S OF CHIPS AND AS PER HIS VERSION THAT THERE IS AGAIN NO STOCK OF CHIPS IS BEYOND ANY STRETCH OF IMAGINATION AND CANN OT BE RELIED UPON ALTOGETHER. MOREOVER, THE ASSESSEE HAS NOT PRODUCED HIS BOOKS OF ACCOUNT AND IN THE ABSENCE OF SAME HIS CLAIM IS NOT SUBSTANTIATED. THIS ALSO PROV ES THAT ASSESSEE IS NOT REFLECTING THE TRUE PARTICULARS AND FAILED TO ESTABLISH THE SAME. 3.3. AS APPARENT FROM THE ABOVE TWO COPIES OF ACCOUNT, T HE ASSESSEE, IN THE COPY OF ACCOUNT OF 31 BRTF, IS SHO WING EXCESS CREDITS ENTRIES PURPORTED TO HAVE BEEN RECEI VED FROM 31 BRTF, WHICH ARE NOT VERIFIABLE AND NOT APPEARING IN THE DETAILS PROVIDED BY 31 BRTF (GREF) . THE ASSESSEE FAILED TO RECONCILE AND EXPLAIN THESE CREDIT ENTRIES. IF THERE ARE MORE CREDITS FROM 31 BRTF TH AN WHAT HAS BEEN STATED BY THE DEPARTMENT 31 BRTF, THE N THERE SHOULD BE LIABILITIES AS ADVANCES FROM 31 BRT F WHICH HAS REMOTE POSSIBILITIES. THESE GOVT. DEPARTM ENTS MAKE PAYMENTS IN PIECE MEANS DURING THE PROGRESS OF PROJECTS, BUT DO NOT MAKE ADVANCES. HENCE, THE CONTENTION CANNOT BE ACCEPTED. 3.4. HOWEVER, IF IN ANY CASE, IF THE CONTENTION OF THE A SSESSEE IS BELIEVED THEN THE LEDGER ACCOUNT OF 31 VRTF WOUL D SHOW A CREDIT BALANCE OF RS.7,41,274/- (16,00,000- 8,58,726). THIS AMOUNT BEING ON THE CREDIT SIDE SHO ULD HAVE BEEN SHOWN AS INCOME IN THE P & L ACCOUNT. THU S AGAIN, THE CONTENTION OF THE ASSESSEE IS NOT PROVED . 3.5. IN VIEW OF THE ABOVE DISCUSSIONS, IT IS PROVED THAT THE ASSESSEE HAS FAILED TO RECONCILE THE TWO VERSIONS A S WHICH HAVE CAME FORTH DURING THE COURSE OF ASSESSMENT PROCEEDINGS. MOREOVER, THE CONTENTION OF THE ASSESS EE ITA NO.28(ASR)/2013 6 HAS NOT BEEN PROVED PARTICULARLY, WHEN THE INFORMAT ION WAS RECEIVED FROM THE 31 BRTF. HENCE, I MAKE AN ADDITION OF RS.16,00,000/- TO THE INCOME OF THE ASS ESSEE UNDER THIS HEAD. 3. THE LD. CIT(A) DELETED THE ADDITION AND THE RELE VANT PARA IS REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: 4.2. THE AO HAS CALLED THE INFORMATION DIRECTLY U/ S 133(6) FROM 31 BRTF. HE FOUND THAT BOTH ACCOUNT WERE NOT TALLYING. THE APPELLANT IN HIS SUBMISSION DATED 24.04.2011 STATED THAT RS. 16 LACS WAS DEBITED TO BRTF WAS IN FACT BILLS RAISED FOR SALE AND THERE IS NO CLOSING STOCK WHICH FIND REFLECTION IN THE BALANCE SHEET. THE PAY MENT OF RS. 16 LACS ALONG WITH OTHER PAYMENT WERE RECEIVED NEXT YEAR FO R WHICH THERE IS A CERTIFICATE FROM ACCOUNTS OFFICER 31 BRTF AND LACED ON RECORD. THE COPY OF ACCOUNT 31 BRTF IN THE BOOKS OF APPELLANT A ND THE CERTIFICATE ISSUED BY AO 31 BRTF THOUGH DO NOT TALLY EXACTLY PA YMENT WISE BUT THE ACCOUNT IS BY AND LARGE RECONCILIABLE. THE APPE LLANT HAS PLACED BEFORE THE AO THAT THE AMOUNT OF RS.16 LACS HAS WR ONGLY BEEN WRITTEN BY MISTAKE IN PROFIT & LOSS ACCOUNT AS WIP WHICH IN FACT WAS SALE. THE AO DID NOT BELIEVE HIM AND HE CALLED FOR COPY OF AC COUNT DIRECTLY FROM 31 BRTF AND THE ADDED THE AMOUNT DESPITE THE FACT THAT BUT FOR MINOR VARIATIONS THE ACCOUNT WAS RECONCILIABLE. IN MY VIEW THE AO HAS NOT GONE INTO DETAIL AND JUMPED TO A CONCLUSION BASED ON GUESS WORK. THE ADDITION IS NOT BASED ON COGENT FINDINGS, HENCE CANNOT BE SUSTAINED. THE ADDITION OF RS.16 LACS IS DELETED. 4. THE LD. DR, SH. MAHVIR SINGH, RELIED UPON THE OR DER OF THE ASSESSING OFFICER AND ARGUED THAT THERE IS NO EVIDENCE OF ANY SALES MADE AS CONTENDED BY THE ASSESSEE BEFORE THE CIT(A). THE DETAILS SUBM ITTED IN CERTIFICATE ISSUED BY THE ACCOUNTS OFFICER WERE FROM 31 BRTF AND THE COPY OF ACCOUNT 31 BRTF IN THE BOOKS OF THE ASSESSEE ARE NOT AT ALL RE CONCILIABLE. THE LD CIT(A) IS NOT JUSTIFIED IN MAKING OBSERVATION THAT THE ACCOUNT IS BY AND LARGE ITA NO.28(ASR)/2013 7 RECONCILIABLE. THE LD. CIT(A) HAS SIMPLY AGREED TO THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO, WHICH SUBMISSIONS ONLY WERE RELIED UPON BEFORE THE LD. CIT(A) AS WELL. THERE IS NO EVIDENCE WITH R EGARD TO THE SALE OF RS.16 LACS SUBMITTED BY THE ASSESSEE EITHER AS AN EVIDENC E BY THE ASSESSEE OR BY 31 BRTF. THEREFORE, THE LD. DR PRAYED TO REVERSE THE O RDER OF THE LD. CIT(A) AND CONFIRM THE ORDER OF THE A.O. 5. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ON THE OTHER HAND, ARGUED ON THE SIMILAR LINES AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) AND STATED THAT THE SAID AMOUNT OF RS. 16 LACS IS I N FACT THE SALE AND NOT WORK IN PROGRESS. THE AO, IN FACT, DID NOT MAKE ANY ADDI TION WITH RESPECT TO THE NON-RECONCILIABLE ITEMS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N. ARORA, A DVOCATE, HAS SUBMITTED THE PAPER BOOK CONTAINING 8 PAGES WHICH ARE WRITTE N SUBMISSION DATED 25.4.2011 BEFORE THE CIT(A), COPY OF REPLY BEFORE T HE DCIT, CIRCLE-1, JAMMU AND COPY OF MANUFACTURING TRADING AND PROFIT & LOSS ACCOUNT AND THE STATEMENT OF FACTS BEFORE THE ITAT. THERE IS NO OTHER EVIDENCE PLACED ON RECORD TO JUSTIFY THE WIP OF RS.16 LACS DECLARED AS WIP (PB-6). THERE IS NO ITA NO.28(ASR)/2013 8 EVIDENCE OF SALES OF RS.16 LACS PLACED ON RECORD. THERE IS NO COPY OF ACCOUNT PLACED ON RECORD WHERE SUCH WIP IS TREATED AS SALE IN ASSESSEES BOOKS OF ACCOUNT. ON THE OTHER HAND, THERE IS NOTHI NG ON RECORD FROM 31 BRTF, THE OTHER PARTY, WHERE THE SAID PARTY HAS TRE ATED THE SAID RS.16 LACS AS PURCHASES. NOTHING OF THE SORT ON THIS ACCOUNT HAS BEEN PLACED ON RECORD. THE LD. CIT(A) SIMPLY HAS AGREED TO THE SUBMISSIONS MADE BEFORE THE AO WHICH IN FACT, HAS BEEN RELIED UPON BY THE ASSESSEE S AR BEFORE HIM. THE OBSERVATION OF THE LD. CIT(A) THAT ACCOUNT IS BY AN D LARGE IS RECONCILIALE WITH MINOR VARIATION IS INCORRECT. WHEREAS THE DIFF ERENCE OF RS.16 LACS IS APPARENTLY ON RECORD. NO ADDITION OF SINGLE ITEM O R RECEIPT OR PAYMENT IS RECONCILIABLE AS IS EVIDENT FROM THE COPY OF ACCOUN T IN THE BOOKS OF ASSESSEE AS WELL. THE FINDINGS OF THE LD. CIT(A) ARE TOTALLY PERVERSE TO THE FACTS OF THE PRESENT CASE AND THERE IS NOT EVEN A SINGLE ITEM WH ICH IS RECONCILIABLE. NO EVIDENCE OR ANY COGENT EXPLANATION HAS BEEN PLACED ON RECORD BEFORE THE AUTHORITIES BELOW OR EVEN BEFORE US WITH REGARD TO THE AMOUNT OF RS.16 LAC WHICH HAS BEEN CLAIMED AS SALE. IN THE FACTS AND CI RCUMSTANCES OF THE CASE, THE LD. CIT(A)S ORDER IS INCORRECT ORDER AND THERE FORE, THE SAME IS REVERSED AND THE ORDER OF THE AO IS RESTORED. ACCORDINGLY, T HE APPEAL OF THE REVENUE IS ALLOWED. ITA NO.28(ASR)/2013 9 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.28(ASR)/2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH JANUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17TH JANUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.RAKESH KUMAR PROP. M/S. R.K. ENTERP RISES, SAMBA. 2. THE DCIT, CIRCLE-1, JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR