Vasundhra Marbles, Ghaziabad V. ACIT, Ghaziabad

ITA 2806/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66062 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 04-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUKHVEER CHAUDHARY
• Keywords: Gift
• Section: 68; 145; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO. 2806/DEL/2009 ASSESSMENT YEAR: 2005-06 VASUNDHRA MARBLES, C-52, SECTOR-9, VIJAY NAGAR, GHAZIABAD. PAN NO. AAEPU4208 K VS. ACIT, RANGE-2, GHAZIABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SALIL KAPOOR, ADV. RESPONDENT BY: SH. SUKHVEER CHAUDHARY, SR. DR O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A) DATED 16/04/2009 FOR A.Y. 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF PUR CHASE AND SALE OF ITA NO. 2806/D/2009 2 MARBLE STONE, KOTA STONE AND GRANITE. IT HAD FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 1,830/-. 3. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT A T A TOTAL INCOME OF RS. 15,49,138/- AFTER MAKING FOLLOWING ADDITIONS: - 1. ADDITION ON ACCOUNT OF BOGUS LIABILITY RS. 8 ,05,189/- 2. ADDITION ON ACCOUNT OF CASH CREDIT/DEPOSITS RS. 1,26,000/- 3. ADDITION ON ACCOUNT OF CREDITORS RS. 6,16,1 19 /- TOTAL RS. 15,49,138 /- 4. LD. CIT(A), WHILE PARTLY ALLOWING THE ASSESSEES APPEAL, CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS LIABILITY AGGREGATING TO RS. 8,05,189/- AND ADDITION ON ACCOUNT OF TRADE CREDITORS AGGREGATING TO RS. 6,16,119/-. HOWEVER, HE PARTLY DELETED THE ADDITION IN RESPECT OF ADDITION U/S 68. 5. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL : - 1. THAT THE LD. CIT(A) WRONGLY REJECT THE ASSESSEE GROUND FOR ILLEGAL ADDITION OF RS. 805189/- AS MADE BY THE ITO UNDER THE HEAD OF BOGUS LIABILITIES BOTH ITO AS WELL AS CIT(A) MISDIRECTED WHILE MAKING AND CONFIRMING SUCH ADDITION WHILE THE ABOVE TYPE OF ADDITION ONLY BE MADE BY INVOKING PROVISION OF SECTION 145 OF INCOME TAX ACT WHICH IS NOT DONE BY THE AO. ITA NO. 2806/D/2009 3 2. THAT WHILE SUSTAINING THE ABOVE ADDITION THE FINDING OF THE CIT(A) IS WRONG THAT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE/EXPLANATION TO CONTROVERT THE FINDING OF THE AO ON THIS SCORE WHILE THE ASSESSEE SUBMIT VARIOUS EVIDENCE AND EXPLANATION AGAINST THE ILLEGAL FINDING OF THE AO WHICH HAS BEEN THROWN IN THE DUST BIN BY THE CIT(A). 3. THAT THE LD. CIT(A) WRONGLY SUSTAINED THE ADDITION OF RS. 70,000/- (1,26,000-56,000) BEING CASH CREDIT U/S 68 OF THE I.T. ACT AND WHEN THE ASSESSEE FIRM FILED CONFIRMATION AS WELL AS AFFIDAVIT OF SUCH LENDER/DEPOSITOR. 4. THAT THE LD. CIT(A) AGAIN WRONGLY REJECT THE ASSESSEE GROUND NO. 4 BEING ILLEGAL ADDITION OF RS. 6,16,119/- BEING CLOSING BALANCE OF 3 CREDITORS AND ONE DEBTOR HAVING CREDIT BALANCE DUE TO NOT RECEIVING THE CONFIRMATION THE LD. AO AS WELL AS CIT(A) ON ONE SIDE HAS ACCEPTED THE PURCHASES FROM THE SAID CREDITOR AND ON THE OTHER SIDE ADDED THE BALANCE PAYMENT IN THE INCOME OF THE FIRM. THE ADDITION OF RS. 616119/- AS MADE BY THE AO AND SUSTAINED BY CIT(A) ON THE ABOVE ISSUE IS ILLEGAL AND WRONG. MOREOVER SUCH TYPE OF ADDITION CANNOT BE MADE WITHOUT MENTIONED UNDER WHICH SECTION OF I. TAX ACT. THE SAID ADDITION HAS BEEN MADE BY THE AO AND THE CONFIRMED BY THE CIT(A). ITA NO. 2806/D/2009 4 5. THAT IN ANY CASE THE TOTAL ADDITION OF RS. 14,91,308/- (8,05,189 + 70,000 + 6,16,119) IS WRONG, ILLEGAL AND TOO EXCESSIVE. 6. THE LD. CIT(A) WRONGLY REJECT THE ASSESSEE GROUND THAT THE LD. ITO WRONGLY PROPOSED TO INITIATE THE PENALTY PROCEEDING U/S 271(1)(C) OF THIS INCOME TAX ACT. 6. BRIEF FACTS, APROPOS GROUND NO. 1 AND 2 ARE THAT IN COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSE E HAD SHOWN LIABILITY OF RS. 8,05,189/- UNDER THE HEAD MATERIAL ADVANCE IN THE BALANCE SHEET AS ON 31/03/2005. HE FURTHER NOTICED THAT ASSESSEE HA D FILED A TDS CERTIFICATE IN FORM NO. 16A DATED 30/06/2005 ISSUED BY M/S KANW ARJI CONSTRUCTION COMPANY, NEW DELHI ALONG WITH THE RETURN. THIS TDS CERTIFICATE WAS FOR RS. 8,858/-. THE ASSESSING OFFICER EXAMINED THE LEDGER ACCOUNT OF M/S KANWARJI CONSTRUCTION COMPANY, FILED BY THE ASSESSEE, AND FO UND THAT THE SAID ACCOUNT HAD BEEN DEBITED ON 31/03/2005 BY RS. 8,05, 189/- ON ACCOUNT OF MATERIAL ADVANCE LEAVING A DEBIT BALANCE OF RS. 7,96,331/- (RS. 8,05,189/- - RS. 8,858/-). THE ASSESSING OFFICER, AFTER CONSID ERING THE ASSESSEES SUBMISSIONS, CONCLUDED THAT THOUGH GOODS WERE SOLD TO M/S KANWARJI CONSTRUCTION COMPANY, NEITHER SALES ACCOUNT WAS CRE DITED BY RS. 8,05,189/- ON 31/03/2005 NOR PURCHASE ACCOUNT CREDITED AND, TH EREFORE, THE ASSESSEE HAD CREATED A FICTITIOUS LIABILITY BY CREDITING MAT ERIAL ADVANCE ACCOUNT AND ITA NO. 2806/D/2009 5 HAD SHOWN AS PAYABLE IN THE BALANCE SHEET AND, THER EFORE, ASSETS TO THE EXTENT OF RS. 8,05,189/- SHOWN IN THE BALANCE SHEET REMAINED UNEXPLAINED. 7. LD. CIT(A) CONFIRMED THE ADDITION. LD. COUNSEL REFERRED TO PAGE 44 OF PAPER BOOK, WHEREIN THE LEDGER ACCOUNT OF KANWARJI CONSTRUCTION COMPANY, NODA IN ASSESSEES BOOKS IS CONTAINED TO DEMONSTRAT E THAT A SUM OF RS. 8,05,189/- WAS DEBITED TO MATERIAL ADVANCE ACCOUNT AND RS. 8,858/- BEING TDS MADE BY THE SAID PARTY WAS CREDITED. HE POINTE D OUT THAT SALES WERE NOT AFFECTED DURING THE YEAR AND THE MATERIAL HAD B EEN SUPPLIED ON APPROVAL BASIS AS PER CHALLANS CONTAINED AT PAGES 132 ONWARD S. LD. COUNSEL FURTHER REFERRED TO THE MATERIAL ADVANCE ACCOUNT CONTAINED AT PAGE 45 TO DEMONSTRATE THAT THE SAID ACCOUNT HAD BEEN CREDITED WITH THE SAME AMOUNT ON 31/03/2012. LD. COUNSEL FURTHER REFERRED TO PAG E 50 OF PAPER BOOK, WHEREIN THE ACCOUNT OF KANWARJI CONSTRUCTION COMPAN Y FOR F.Y. 2005-06 IS CONTAINED TO DEMONSTRATE THAT ON 01/04/2005 ITSELF THIS ENTRY HAD BEEN REVERSED BY CREDITING THE ACCOUNT OF KANWARJI CONST RUCTION COMPANY AND DEBITING THE ACCOUNT OF MATERIAL ADVANCE IN ORDER T O BUTTRESS HIS SUBMISSIONS THAT SALES WERE NOT EFFECTED DURING THE RELEVANT AS SESSMENT YEAR. HE SUBMITTED THAT THE SALES WERE ACCOUNTED FOR IN THE SUBSEQUENT YEAR. 8. LD. DR RELIED ON THE ORDER OF LD. CIT(A). ITA NO. 2806/D/2009 6 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 10. ADMITTEDLY, THE SUM OF RS. 8,05,189/- WAS APPEA RING IN THE BALANCE SHEET AS ON 31/03/2005 BOTH ON LIABILITY (MATERIAL ADVANCE) AS WELL AS ASSET SIDE (KANWARJI CONSTRUCTION COMPANY). THUS, ASSESS EE HAD NOT ACCOUNTED FOR THIS AMOUNT IN SALES DURING THE YEAR BUT SINCE TDS HAD BEEN DEDUCTED BY KANWARJI CONSTRUCTION COMPANY, THEREFORE, ASSESSEE HAD MADE BOOK ENTRIES FOR THE SAME. SINCE TDS WAS CLAIMED BY AS SESSEE, THEREFORE, ASSESSEE WAS REQUIRED TO ACCOUNT FOR THE SALES ALSO . THE ASSESSEES CLAIM IS THAT SINCE SALES WERE NOT EFFECTED DURING THE YE AR, THEREFORE, MERELY ON THE BASIS OF TDS BEING MADE BY KANWARJI CONSTRUCTION CO MPANY TREATING THE ASSESSEE AS SUBCONTRACTOR, IT COULD NOT BE CONCLUDE D THAT ASSESSEE HAD ACTUALLY EFFECTED THE SALES. THEREFORE, SALES ACCO UNT WAS NOT CREDITED. LD. COUNSEL SUBMITTED THAT SALES WERE EFFECTED IN SUBSE QUENT YEAR. THUS, PRIMARILY DISPUTE IS WHETHER ASSESSEE HAD ACCOUNTED FOR SALES OR NOT. NORMALLY IF TDS IS CLAIMED THEN CORRESPONDING INCOM E SHOULD ALSO BE RETURNED IN THAT YEAR. HOWEVER, IF TDS HAS WRONGLY BEEN MADE THEN THERE IS NO PROVISION FOR REFUND OF TDS. UNDER SUCH CIRCUMS TANCES, THE ASSESSEE WAS LEFT WITH NO OPTION BUT TO CLAIM TDS IN ITS RET URN. IN THE PECULIAR FACTS OF THE CASE WE CONSIDER IT IN THE INTEREST OF JUSTICE, TO RESTORE THE MATTER TO THE FILE OF AO TO EXAMINE THE ASSESSEES CLAIM REGARDIN G BILLS BEING RAISED AGAINST THE CHALLANS ISSUED ON 29/03/2005 IN SUBSEQ UENT YEAR. IN CASE, ITA NO. 2806/D/2009 7 ASSESSEE ESTABLISHES THAT THE SALES HAD BEEN ACCOUN TED FOR IN THE SUBSEQUENT YEAR AGAINST THE CHALLANS CONTAINED AT P AGES 132 ONWARDS, THEN IN THE CURRENT ASSESSMENT YEAR MERELY ON THE BASIS OF TDS BEING MADE BY KANWARJI CONSTRUCTION COMPANY ADDITION CANNOT BE SU STAINED BY TREATING THE SAME AS BOGUS LIABILITY. 11. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATI STICAL PURPOSES. 12. GROUND NO. 3 REGARDING ADDITION U/S 68 OF RS. 7 0,000/- SUSTAINED BY LD. CIT(A) WAS NOT PRESSED BY ASSESSEE. 13. GROUND NO. 4 IS REGARDING ADDITION OF RS. 6,16, 119/- BEING CLOSING BALANCE OF THREE CREDITORS AND ONE DEBTOR HAVING CR EDIT BALANCE DUE TO NON- RECEIVING THE CONFIRMATION BY THE AO AS WELL AS CIT (A). 14. BRIEF FACTS, APROPOS THIS ISSUE ARE THAT THE AO NOTICED THAT THERE WERE SUNDRY CREDITORS TO THE TUNE OF RS. 17,45,324/- IN DIFFERENT NAMES. IN ORDER TO VERIFY THE GENUINENESS OF THE CREDIT BALANCE, OUT O F THESE CREDITORS THE SUMMONS WERE DULY SERVED ON THE FOLLOWING PARTIES T O FURNISH COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT A ND ALSO TO CONFIRM BALANCE AS ON 31/03/2005 SHOWN BY THE ASSESSEE AGAI NST THEIR NAMES: - M/S SINGHLA MARBLES, III-M/52, NEHRU NAGAR, GHAZIA BAD. RS. 2,63,697/- M/S SHIV TRADING CO., II-F/97, NEHRU NAGAR, GHAZIAB AD. RS. 1,55,917/- ITA NO. 2806/D/2009 8 M/S SAWAN ENTERPRISES, 10/107, SECT.3, RAJINDER NGR ., SBD, GHAZIABAD. RS. 82,328/- M/S M.C & COMPANY, II-F/94A, NEHRU NAGAR, GHAZIABAD RS. 1,14,177 /- TOTAL RS. 6,16,119 /- 15. SINCE NEITHER ANYBODY APPEARED IN RESPONSE TO S UMMONS NOR ASSESSEE, FILED CONFIRMED COPIES OF ACCOUNTS, THE A O MADE AN ADDITION OF RS. 6,16,119/- AS UNDISCLOSED INCOME. 16. LD. CIT(A) CONFIRMED THE ADDITION OBSERVING THA T ASSESSEE HAD FAILED TO FURNISH ANY COGENT EVIDENCE OR EXPLANATION TO CO NTROVERT THE FINDINGS OF THE AO. LD. COUNSEL SUBMITTED THAT PURCHASES HAVE NOT BEEN DISPUTED BY AO AND HE HAS NOT REJECTED THE BOOKS OF ACCOUNT ALS O. LD. COUNSEL RELIED ON THE DECISION OF SPL. BENCH OF ITAT IN 113 ITD 37 7, MANOJ AGGARWAL VS. DCIT AND REFERRED TO PAGE 535 OF THE ORDER, WHEREIN IT HAS BEEN OBSERVED AS UNDER: - THE ARGUMENT THAT SECTION 68 IS NOT APPLICABLE WHERE AN ASSET IS SOLD AND THE SALE PROCEEDS ARE CREDITED IN THE BOOKS OF ACCOUNT CANNOT BE ACCEPTED HAVING REGARD TO THE SETTLED LEGAL POSITION THAT IT IS ALWAYS FOR THE ASSESSEE TO EXPL AIN THE NATURE AND SOURCE OF THE SUMS CREDITED IN HIS BOOKS OF ACCOUNT. THE SECTION DOES NOT RECOGNIZE ANY DISTINCTION BETWEEN AMOUNTS CREDITED IN THE BOOKS AS GIFTS OR LOANS OR PURE RECEIPTS, ON THE ON E HAND, AND AMOUNTS CREDITED AS SALE PROCEEDS. IN EITHER CASE, WHEN CALLED UPON, THE ASSESSEE IS ITA NO. 2806/D/2009 9 BOUND TO EXPLAIN THE NATURE AND SOURCE OF THE AMOUNTS CREDITED. THERE MAY BE A FEW EXCEPTIONS TO THIS GENERAL RULE. FOR EXAMPLE, IN THE CASE OF CREDIT PURCHASES, THE ACCOUNT OF THE SUPPLIER IS CREDITED WITH THE AMOUNT PAYABLE. IN SUCH A CASE, WHERE THE PURCHASE IS ALLOWED AS EXPENDITURE, IT MAY NOT BE POSSIBLE FOR THE ASSESSING OFFICER TO AGAIN CALL UPON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF THE CREDIT. IMPLICITLY, THE NATURE A ND SOURCE OF THE AMOUNT CREDITED HAS ALSO TO BE TAKEN AS HAVING BEEN EXPLAINED SATISFACTORILY. ANOTHER POSSIBLE ARGUMENT CAN BE THAT IN SUCH A CASE, THE AMOUNT CREDITED IS NOT A CASH CREDIT IN THE SENSE THAT SOME MONIES HAVE BEEN RECEIVED BY THE ASSESSEE, BUT THE CREDIT REPRESENTS A MERE LIABILIT Y PAYABLE BY THE ASSESSEE IN FUTURE. UNDER ACCOUNTING PRINCIPLES, A LIABILITY CAN ONLY BE BROUGHT INTO ACCOUNT BY MAKING A CREDIT ENTRY IN THE BOOKS OF ACCOUNT IN FAVOUR OF THE PERSON TO WHOM THE MONEY IS PAYABLE. THUS, THERE IS MARKED DIFFERENCE BETWEEN A CREDIT REPRESENTING A LIABILIT Y PAYABLE BY THE ASSESSEE AND A CREDIT REPRESENTING MONIES RECEIVED FROM ANOTHER PERSON. IT IS BECAUSE OF THIS DISTINCTION, A LIABILITY FOR PURCHA SE WHICH HAS BEEN CREDITED IN THE ACCOUNT OF THE SUPPLIER CANNOT BE ADDED UNDER SECTION 68 OF THE ACT, MORE SO WHEN THE PURCHASE HAS BEEN ACCEPTED AS GENUINE AND A DEDUCTION THEREFORE, HAS BEEN ALLOWED. ITA NO. 2806/D/2009 10 17. LD. COUNSEL SUBMITTED THAT THE ACCOUNTS OF THES E CREDITORS ARE APPEARING AT PAGES 100 ONWARDS FROM WHICH IT WOULD BE EVIDENT THAT REGULAR TRANSACTIONS WERE ENTERED INTO WITH THESE PARTIES A ND THE BALANCES OUTSTANDING WERE PAID IN SUBSEQUENT YEARS. HE SUBM ITTED THAT ALL PURCHASES ARE TAX PAID PURCHASES AS IS EVIDENT FROM THE BILLS CONTAINED AT PAGES 116, 117 OF THE PAPER BOOK. 18. LD. DR RELIED ON THE ORDER OF LOWER REVENUE AUT HORITIES. 19. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THERE IS NO DISPUT E THAT WITH THESE CREDITORS THE ASSESSEE HAD REGULAR DEALINGS AND, THEREFORE, M ERELY ON THE BASIS OF CONFIRMATION BEING NOT THERE, ADDITION COULD NOT BE MADE. IT IS NOT THE AOS CASE THAT PURCHASES HAVE BEEN MADE FROM UNACCOUNTED MONEY AND FICTITIOUS CREDITORS HAVE BEEN CREATED TO ACCOUNT F OR THE SAME. UNDER SUCH CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF SPL. BENCH CITED (SUPRA), WE SET ASIDE THE ORDER OF LD. CIT(A). 20. IN THE RESULT, THIS GROUND IS ALLOWED. ITA NO. 2806/D/2009 11 21. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14/12/2012 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 14/12/2012 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR