Govind Singh, Noida V. ITO, Noida

ITA 2846/DEL/2013

• Counselvise Citation: 284620114 RSA 2013
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Non compliance
• Section: 68

Judgement Text

ITA NO.2846/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.2846/DEL/2013 ASSESSMENT YEAR : 2008-09 GOVIND SINGH, M/S ADHUNIK TELECOM SERVICES, D-12, SECTOR 10, NOIDA. PAN : AGGPS3549G VS. ITO, WARD-1, NOIDA. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI ANIL SHARMA, ADVOCATE DEPARTMENT BY : S HRI SATPAL SINGH, SR. DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 AGAINST THE ORDER DATED 22.02.2013, PASSED BY THE CIT (A), NOIDA, TAKING THE FOLLOWING GROUNDS:- 1. THAT THE ID C.I.T.(APPEALS) HAS GROSSLY ERRED IN MECHANICALLY UPHOLDING THE ASSESSMENT FRAMED BY THE AO DETERMINING TH E ALLEGED TOTAL INCOME AT RS.25,26,200/- AGAINST THE RETURNED INCO ME OF RS.2,63,714/- INTER ALIA MAKING WHOLLY ARBITRARY AND UNWARRANTED ADDITIONS. THE IMPUGNED ORDER PASSED BY THE ID C.I.T. (APPEALS) IS WHOLLY ILLEGAL AND UN-SUSTAINABLE AS THE SAME HAS BEE N PASSED WITHOUT APPLICATION OF MIND AND UTTERLY DISREGARDING THE SUBMI SSIONS MADE AND EVIDENCE PRODUCED BY THE ASSESSEE. ITA NO.2846/DEL/2013 2 2. THAT THE ID C.I.T.(APPEALS) HAS GROSSLY ERRED IN UPHOLDING THE ADDITION OF: I) RS.8,64,385/- BEING THE ALLEGED UNEXPLAINED REFU NDABLE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEES AT THE TIME OF JOINING THE EMPLOYMENT; AND II) RS.12,58,730/- ON ACCOUNT OF ALLEGED UNEXPLAIN ED LOANS. 3. THAT THE FINDING OF THE ID C.I.T. (APPEALS) THAT AM PLE OPPORTUNITY HAD BEEN GRANTED BY THE A.O. TO FURNISH NECESSARY EVID ENCE OR TO PRODUCE THE CREDITORS IS WHOLLY INCORRECT AND IS FACTUA LLY WRONG. IN ANY CASE, THE ID C.I.T.(APPEALS) AS WELL AS THE AO HAVE N OT CONSIDERED THE EVIDENCE FURNISHED BY THE ASSESSEE. 4. THAT THE FURTHER FINDING OF THE ID C.I.T.(APPEALS) TH AT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN U/S 68 IS IN DISREGARD OF THE FACT THAT THE EMPLOYEES HAD LEFT THE JOB DUE TO CLOSURE OF BUSINESS AND AS SUCH IT WAS NOT POSSIBLE TO TRACE THEM AND OBTAIN NEC ESSARY EVIDENCE OR TO PRODUCE THEM WITHIN A SHORT PERIOD OF 12 DAYS. 5. THAT THE ID C.I.T.(APPEALS) HAS ERRED IN FAILING TO APPRECIATE THAT THE IMPUGNED ADDITIONS HAVE BEEN MADE WITHOUT MAKING NECESSARY ENQUIRIES BY THE AO AND AS SUCH THE SAME WERE WHOLLY ILLEGAL AND UNSUSTAINABLE. 6. THAT THE ID C.I.T.(APPEALS) HAS GROSSLY ERRED IN U PHOLDING THE ADDITION OF RS.1,39,390/- BEING THE ADHOC ADDITION MAD E BY THE AO TO THE DECLARED TRADING RESULTS. NO VALID REASON OR BASIS HAS BEEN GIVEN FOR UPHOLDING THE ADDITION. THE FINDING THAT THE EXPENDI TURE INCURRED WAS NOT VERIFIABLE IS WHOLLY INCORRECT AND UNSUSTAINAB LE. 7. THAT THE ID C.I.T.(APPEALS) HAS FURTHER FAILED TO AP PRECIATE THAT THE IMPUGNED ADDITION WAS WHOLLY UNSUSTAINABLE AS NO DEFECT IN THE BOOKS OF ACCOUNT OR ANY DISCREPANCY IN THE METHOD OF A CCOUNTING HAD BEEN POINTED OUT BY THE AO. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS SUB MITTED THAT WHILE ILLEGALLY CONFIRMING THE DETERMINATION OF THE ASSESSEE S INCOME BY THE ASSESSING OFFICER AT ` 25,26,200/-, THE LD. CIT (A) HAS ERRED IN DISREGARDING THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BEFORE HIM B Y THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO PAGES 74 AND 75 OF THE ASSESSEES PAPER BOOK, WHICH IS A COPY OF THE ASSESSE ES WRITTEN SUBMISSIONS DATED 04.02.2013 FILED BEFORE THE LD. CIT ( A). THESE SHORT WRITTEN SUBMISSIONS ARE AS FOLLOWS:- ITA NO.2846/DEL/2013 3 DATED, 04.02.2013 TO, THE COMMISSIONER OF INCOME TAX (APPEAL) G BLOCK SHOPPING COMPLEX SECTOR-20 NOIDA SUB: FILING OF SUBMISSIONS IN THE CASE OF SHRI GOVIN D SINGH PAN AGGPS 3549G A.Y.2008-09 APPEAL NO.458/744/2011-12/NOIDA. DEAR SIR, PLEASE REFER AS ABOVE WE HAVE SOME SUBMISSION WHIC H ARE SUMMERISED AS BELOW. L. POINT NO.3 OF THE ORDER PASSED BY LD. ASSESSING O FFICER . A.IN RESPECT OF RECEIPTS OF EARNEST MONEY. THE A.O. HAD NOT GIVEN PROPER OPPORTUNITY FOR THE APPEA RANCE OF THE PERSON/EMPLOYEE FROM WHOM AMOUNT IS RECEIVED. THE EMPLOYEE/PERSON WERE NOT EMPLOYED WITH THE ASSESSEE AT THE TIME OF THE HEARING OF THE CASE. AS THE ASSESSEE HAD CLOSED THE BUSINESS DURING THE YEAR 2008-09. B. IN RESPECT OF LOANS AND ADVANCES. THE ASSESSEE HAD SUBMITTED SOME OF THE CONFIRMATION F ROM THEIR ADVANCES ABOVE RS.50000/- AND THE SAME IS WELL ADMITT ED BY THE LD. ASSESSING OFFICER. C. IN RESPECT OF IDENTITY, CAPACITY AND GENUINENESS THE ASSESSEE FIRM HAD A POLICY TO KEEP SOME AMOUNT AS EARNEST MONEY FROM THEIR EMPLOYEES TO SAFEGUARD THE INTEREST OF THE BUSINESS OF THE ASSESSEE. THE MONEY SO RECEIVED WAS REFUNDABL E AT THE TIME OF EMPLOYEE LEAVES THE JOB. THE AMOUNT HAD BEEN WELL REF UNDED TO THE RELEVANT PERSON AFTER THEIR FULL & FINAL SETTLEMENT FROM THE ASSESSEE FIRM, BESIDE OF ALL THE ADDITION MADE BY THE LD.A.O. INCLUDES AN OPENING BALANCE OF RS.420000/ FROM THE FRIENDS AND RELATIVE OF THE ASSESSEE WHICH DO NOT RELATE WITH THE CONCERNED A.Y. TH E LIST MAY BE PRODUCED (IF REQUIRED) THE SAME HAD ALREADY BEEN GIV EN ALONGWITH THE BALANCE CONFIRMATION TO THE LD. A.O. AT THE TIME OF THE HEARING THE CASE. NOW THE ASSESSEE HAD NO BALANCE O/S OF THE EMPLOYEE/P ERSON AS ON DATE, ALL THE AMOUNT HAD BEEN WELL REFUNDED TO THE CO NCERNED ITA NO.2846/DEL/2013 4 PERSON, NOW NO PERSON IS TRACEABLE BECAUSE ALL THOSE PERSONS ARE WELL ENGAGED WITH SOME OTHER ORGANIZATION TO EARN THEIR BREAD AND BUTTER. 2. POINT NO.4 OF THE ORDER PASSED BY THE LD. ASSESSING OFFICER . THE ADDITION WERE MADE ON ADHOC BASIS IS NOT PROPER A ND JUSTIFIED AS ALL THE BILL, VOUCHERS AND RELATED RECORDS WERE PROPE RLY AVAILABLE AND WERE SHOWN TO THE LD. ASSESSING OFFICER FOR THEIR VERI FICATION PURPOSES. WITH THE ABOVE SUBMISSION WE WOULD REQUEST YOUR HONOU R TO CONSIDER THE FACTS AND PASS THE ORDER IN FAVOUR OF THE ASSESSEE. THANKING YOU, FOR PANDEY K M & ASSOCIATES CHARTERED ACCOUNTANTS SD/- CA K M PANDEY 3. THE LD. CIT (A), IT IS SEEN, CONFIRMED THE ASSESSMENT ORDER AS FOLLOWS:- 1. IN THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSE RVED THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN OF RS.21,23,115/-. IN THIS REGARD, THE ASSESSEE STATED THAT THE SAID AMOUNT INCLUDE RS.8,64,3 85/- AS EARNEST MONEY RECEIVED FROM STAFF AND RS.12,58,730/- REPRESENTS UNSECURED LOAN. THE ASSESSEE FURNISHED THE LIST OF P ERSONS FROM WHOM HE HAD TAKEN EARNEST MONEY AND UNSECURED LOAN BUT NO CONFIRMATION WAS FURNISHED IN THIS REGARD. FROM THE LIST OF PERSON S SUBMITTED BEFORE THE A.O., IT IS SEEN THAT ASSESSEE HAS CLAIMED TO HAVE TAKEN EARNEST MONEY FROM 45 PERSONS WHEREAS THE UNSECURED LOANS HA VE BEEN RECEIVED FROM ANOTHER 30 PERSONS. IT IS ALSO OBSERVED THAT IN MOST OF THE CASES THE AMOUNT OF LOAN/EARNEST MONEY CLAIMED TO HA VE BEEN RECEIVED BY THE ASSESSEE IS MARGINALLY LESS THAN RS. 20,000/-. IN ORDER TO VERIFY THE GENUINENESS OF ABOVE TRANSACTIONS ASSESS EE WAS SPECIFICALLY ASKED TO PRODUCE ALL THE PERSONS BY 16/1 2/2010 FROM WHOM UNSECURED LOAN AND EARNEST MONEY HAVE BEEN RECEIVED BUT NO ONE ATTENDED, THEREAFTER, A SHOW CAUSE NOTICE WAS ISSUED ON 15 TH DECEMBER, 2010 ASKING ASSESSEE TO PRODUCE ALL THE ABO VE PERSONS AND IT WAS SPECIFICALLY BROUGHT TO THE NOTICE OF TILE ASSESSE E THAT IN CASE OF NON-COMPLIANCE THE ASSESSMENT WILL BE COMPLETED ON MER IT. ON THE FIXED DATED (21/12/2010) ASSESSEE ATTENDED BUT DID NOT P RODUCE ANY PERSON. AGAIN ON 24/12/2010 ASSESSEE ATTENDED BUT DID NOT PRODUCE THOSE CREDITORS. LATER ON ASSESSEE FURNISHED SOME CON FIRMATIONS AND IN FIVE CASES ALSO FURNISHED COPY OF ITR AND REQUESTED THE AO. TO ALLOW HIM TWO MORE DAYS TO PRODUCE THE CREDITORS. ACCORDINGLY , CASE WAS ITA NO.2846/DEL/2013 5 ADJOURNED FOR 27/12/2010 BUT ONCE AGAIN ASSESSEE DID NOT PRODUCE ANY CREDITORS. IN THE LIGHT OF ABOVE REPEATED NON CO-OPERATI ON FROM THE ASSESSEE THE AO. ASKED THE ASSESSEE TO EXPLAIN WHY UN SECURED LOAN OF RS.12,58,730/- AND EARNEST MONEY OF RS.8,64,385/- SH OULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. HOWEVER, THE A SSESSEE COULD NOT GIVE REPLY UP TO THE SATISFACTION OF AO. AC CORDING TO A,O, MERE SUBMISSION OF CONFIRMATORY LETTER AND COPY OF ITR (THAT TOO IN FEW CASES) IS NOT ENOUGH TO SHIFT THE ONUS ON TO THE AO., THOU GH THESE FACTS ALONG WITH OTHER RELATED FACTS BE RELEVANT IN ESTABLISHI NG THE GENUINENESS OF THE ABOVE TRANSACTIONS. IN THE LIGHT OF THE FACTS OF THE CASE, THE A.O. HELD THAT ASSESSEE HAS FAILED TO PROVE TH E IDENTITY, CAPACITY AND GENUINENESS OF THE ABOVE TRANSACTIONS. IN THIS REGARD, VIDE SUBMISSION DATED 4/2/2013 FILED BY THE APPELLANT IN THE COURSE OF APPELLATE PROCEEDINGS IT HAS BEEN CLAIM ED THAT ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY FOR PRODUCING THE PERS ONS FROM WHOM IT RECEIVED EARNEST MONEY AND UNSECURED LOAN. F ROM THE FACTS OF THE CASE AS SPELT OUT BY THE AO IN THE BODY OF THE ASSES SMENT ORDER AND DISCUSSED ABOVE, IT IS QUITE CLEAR BEYOND ANY DO UBT THAT THE ASSESSEE WAS GIVEN UMPTEEN NUMBER OF OPPORTUNITIES TO P RODUCE THE PERSONS FROM WHOM IT HAD TAKEN EARNEST MONEY AND UNSEC URED LOAN. THERE WERE REPEATED NON COMPLIANCE ON THE PART OF THE A SSESSEE WHICH ULTIMATELY FORCED THE A.O. TO CONCLUDE THAT THESE TRANSACTIO NS WERE NOT GENUINE AND ACCORDINGLY ALL THE UNSECURED LOAN AS WE LL AS EARNEST MONEY WERE TREATED AS BOGUS AND THE SAME WAS HELD TO B E INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. FROM THE ABOVE FACTS THE ALLEGATION OF THE ASSESSEE OF LACK OF REASONABLE OP PORTUNITY IS NOT SUSTAINABLE AND HENCE THE SAME IS REJECTED. EVEN DURING THE APPELLATE PROCEEDINGS' THE ASSESSEE DI D NOT FILE ANY EVIDENCE WHATSOEVER BEFORE THE UNDERSIGNED TO ESTABLISH GENUINENESS OF THE ABOVE TRANSACTIONS, I.E., IDENTITY, GENUINENESS AND CREDITWORTHINESS. VIDE WRITTEN SUBMISSION DATED 04.02.2 013 ASSESSEE HAS CLAIMED THAT THE AMOUNT RECEIVED FROM ABOVE PERSONS AS EARNEST MONEY AND UNSECURED LOAN HAVE SINCE BEEN REFUNDED TO THEM AND THAT AS ON THE DATE NO SUCH PERSON ARE TRACEABLE. HOWEVER A SSESSEE HAS PRODUCED NO EVIDENCE IN SUPPORT OF ABOVE CLAIM. FROM THE ABOVE DISCUSSION AND OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE I HOLD THAT THE ASSESSEE FAILED TO ESTABLISH GENUINENESS OF THE TRAN SACTION WITH ABOVE PERSONS IN THE FORM OF EARNEST MONEY AND UNSECU RED LOAN CLAIMED TO HAVE BEEN RECEIVED FROM AS MANY AS 75 PER SONS. ACCORDINGLY ADDITION OF RS.21,23,115/- MADE BY THE A. O. TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INCOME IS CONF IRMED. ITA NO.2846/DEL/2013 6 2. DURING THE ASSESSMENT PROCEEDINGS THE A.O. FOUND THA T AS AGAINST NET PROFIT RATIO OF 4.43% REPORTED BY THE ASSESSE E FOR IMMEDIATELY PRECEDING YEAR, THE NET PROFIT IN RESPECT O F CURRENT YEAR UNDER CONSIDERATION HAS BEEN SHOWN AT 1.73%, WHICH IS MUCH LOWER THAN THE PRECEDING YEAR. IN SUPPORT OF BUSINESS INCOM E ASSESSEE FURNISHED BILLS/VOUCHERS WHICH WAS NOT FOUND TO BE IN PROPER FORM BY THE A.O. THE AO HAS ALSO RECORDED THAT ASSESSEE, FAIL ED TO FURNISH COMPLETE BILLS/VOUCHERS WHICH WAS NOT FOUND TO BE IN PROPER FORM BY THE A.O. THE A.O.HAS ALSO RECORDED THAT ASSESSEE FAILE D TO FURNISH COMPLETE BILLS/VOUCHERS OF EXPENSE. IT WAS ALSO OBSE RVED BY THE A.O. THAT MOSTLY EXPENSES WERE INCURRED IN CASH WHICH WERE NOT VERIFIABLE. WITH ABOVE OBSERVATION IN ORDER TO CHECK POSSIBLE LEAK AGE OF REVENUE, AN AD-HOC ADDITION OF RS. 1,39,390/- ON ESTIMATE BASI S WAS MADE BY THE A.O, AND THE SAME WAS ADDED TO THE TOTAL INCOME OF AS SESSEE. I HAVE GONE THROUGH THE SUBMISSION MADE BY THE ASSESSEE IN THIS REGARD AND FIND THE SAME NOT TENABLE FOR THE REASON THAT EVEN AF TER ADDITION OF RS.1,39,390/~ MADE BY THE A.O, THE NET PROFIT RATIO W ORKS OUT TO 3% WHICH IS STILL LOWER THAN THE NET PROFIT RATIO OF 4.43% REPORTED BY THE ASSESSEE IN RESPECT OF PREVIOUS YEAR. ACCORDINGLY NO INTERFERENCE IS REQUIRED ON THIS ACCOUNT AND ADDITION OF RS.1,39,390/- IS CONFIRMED. 4. A PERUSAL OF THE IMPUGNED ORDER JUXTAPOSED WITH THE W RITTEN SUBMISSIONS FILED BY THE ASSESSEE SHOWS THAT THE GRIEVANCE OF THE ASSESSEE IS JUSTIFIED. IN THE WRITTEN SUBMISSIONS, THE ASSESSEE HAS SP ECIFICALLY STATED THAT THE EMPLOYEES/PERSONS FROM WHOM THE EARNEST MONEY WAS RECEIVED, WERE NOT EMPLOYED WITH THE ASSESSEE AT THE TIME OF THE HEARING BEFORE THE A.O., AS THE ASSESSEE HAD CLOSED ITS BUSINESS DURING ASSESSMENT YEAR 2008- 09 AND THE ASSESSING OFFICER HAD NOT GIVEN PROPER OPPO RTUNITY TO THE ASSESSEE FOR CAUSING THE APPEARANCE OF THESE EMPLOYEES/PER SONS. THIS ASPECT OF THE MATTER HAS NOT BEEN GONE INTO BY THE LD . CIT (A). THE ASSESSEE HAS ALSO SUBMITTED THAT THE AMOUNTS HAD BEEN REFUNDED TO THE EMPLOYEES/PERSONS AT THE TIME OF FULL AND FINAL SETTLEM ENT AND THE ADDITION MADE BY THE ASSESSING OFFICER INCLUDES AN OPENING BALANC E OF ` 4,20,000/- FROM FRIENDS AND RELATIVES OF THE ASSESSEE, WHICH DOES NO T RELATE TO THE YEAR UNDER CONSIDERATION. IT WAS ALSO STATED THAT THE ASSESSEE HAD NO BALANCE OUTSTANDING OF THE EMPLOYEES/PERSONS, AS ALL THE AMOUNT HAD BEEN REFUNDED TO THEM AND NO PERSON WAS, AT THE RELEVANT TIME, TRAC EABLE, HAVING LEFT THE ITA NO.2846/DEL/2013 7 EMPLOYMENT OF THE ASSESSEE ON THE CLOSURE OF ITS BUSINESS D URING THE YEAR. THIS ASPECT ALSO DOES NOT FIND MENTION, MUCH LESS ADJUDIC ATION IN THE IMPUGNED ORDER. THE ASSESSEE HAS FURTHER STATED THAT ALL THE BILLS AND VOUCHERS AND RELATED RECORDS WERE MADE AVAILABLE BEFO RE THE ASSESSING OFFICER FOR VERIFICATION PURPOSES. AGAIN, THE LD. CIT (A) MAKES NO COMMENT. 5. IN VIEW OF THE ABOVE, WE DEEM IT APPROPRIATE TO REMIT THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECISION AFRESH IN ACCORDANCE WITH LAW, ON AFFORDING DUE AND ADEQUATE OPPORTUNITY OF HEARING T O THE ASSESSEE. THE ASSESSEE, NO DOUBT, SHALL COOPERATE IN THE REMAND PROCEE DINGS BEFORE THE ASSESSING OFFICER. 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE ASSESSEES AP PEAL IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17.01.201 4. SD/- SD/- [S.V. MEHROTRA] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 17 TH JANUARY, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.