The Asstt. Commissioner of Income Tax, Central Circle-1(2), Surat V. M/s. Shanti Enterprise, Surat

ITA 3022/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1906 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVASH BIDARI
• Keywords: Unexplained cash credit; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 147; 148; 143(3); 142(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ITA NO.3022/AHD/2016 (ASSESSMENT YEAR : 2007-08) ACIT, CIRCLE -1(2), SURAT. VS. M/S. SHANTI ENTERPRISE, MILLENNIUM TEXTILE MARKET NO.1013-14, UMARWADA, KAMELA DARWAJA, RING ROAD, SURAT 395002. [PAN NO. AALFS 5217 L] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI NIVASH BIDARI, CIT(DR) RESPONDENT BY : SHRI HIREN VEPARI, A.R. DATE OF HEARING 22/11/2018 DATE OF PRONOUNCEMENT 20/12/2018 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 16.08.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 2, SURAT ARISING OUT OF THE ASSESSMENT ORDER DATED 31.03.2015 FOR THE ASSESSMEN T YEAR 2007-08 PASSED BY THE ACIT, CIRCLE-1(2), SURAT UNDER SECTION 143(3) OF TH E INCOME TAX ACT, 1961 (THE ACT) WITH THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACT AND THE CIRCUMSTANCE OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE CLAIM OF ASSESSEE WITHOUT EV IDENCE THAT THE SUMS WERE RECEIVED BY THE ASSESSEE DURING A.Y 2005-06 INSTEAD OF A.Y 2007-08 . 2. WHETHER ON THE FACT AND THE CIRCUMSTANCE OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN REJECTING THE FINDING OF THE AO BASED ON T HE INFORMATION SUPPLIED BY THE INVESTIGATION WING THAT THE ASSESSEE HAS ACCEPTED S UMS FROM M/S. NICE DIAMONDS DURING A.Y. 2007-08. - 2 - ITA NO.3022/A/16 ACIT VS. SHANTI ENTERPRISE, SURAT ASST.YEAR 2007-08 3. WHETHER ON THE FACT AND THE CIRCUMSTANCE OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING ENTRIES IN BOOKS OF ACCOUNT OF T HE ASSESSEE WHICH HAVE BEEN FOUND TO BE ERRONEOUS AND CONTRADICTORY. 4. WHETHER ON THE FACT AND THE CIRCUMSTANCE OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS RIGHT IN ACCEPTING THE CLAIM OF THE ASSESSEE TH AT THE SUMS WERE REPAID DURING A.Y 2007-08, DESPITE EXISTENCE OF FACTS ON RECORD T O THE CONTRARY. 5. WHETHER ON THE FACT AND THE CIRCUMSTANCE OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE REMAND REPORT SUBMITTED BY TH E AO WHEREIN THE AO HAS CLEARLY DEMONSTRATED AND STATED THAT CLAIMS OF THE ASSESSEE ARE FLAWED AND LIABLE TO REJECTION. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS'OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 7. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTE NT. 2. THE ASSESSEE FILED RETURNS OF INCOME FOR A.Y. 20 07-08 ON 29.09.2007 DECLARING TOTAL LOSS OF RS.1,80,77,168/-. THE CASE WAS PROCES SED U/S 143(1) OF THE ACT ACCEPTING THE RETURN OF INCOME; SUCH ASSESSMENT WAS COMPLETED ON 31.12.2009 BY MAKING ADDITION ON ACCOUNT OF SUPPRESSED INCOME RESULTING IN DETERMINA TION OF TOTAL INCOME OF RS.8,09,98,460/-. SUBSEQUENTLY, UPON RECEIVING INFO RMATION FROM DGIT (INV.) MUMBAI DATED 07.03.2014 THAT THE ASSESSEE HAS ACCEPTED BOG US ACCOMMODATION ENTRIES FOR UNSECURED LOANS AMOUNTING TO RS.1,42,45,000/- FROM M/S. NICE DIAMONDS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION NOTICE U/S 148 WAS ISSUED ON 29.03.2014 FOLLOWED BY A SUBSEQUENT NOTICE U/S 142(1) OF THE ACT DATED 20.08.2014. THE REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT WAS DULY MADE KNOWN TO THE ASSESSEE WHERE IT WAS MENTIONED THAT BOGUS ACCOMMODATION ENTRIES OF UNSEC URED LOANS AMOUNTING TO RS.142.45 LACS FROM M/S. NICE DIAMONDS IN A.Y. 2007-08 HAS MA DE BY THE ASSESSEE. THIS INFORMATION WAS NOT AVAILABLE AT THE TIME OF PASSIN G OF ORIGINAL ASSESSMENT ORDER. THE SAID ENTIRE BOGUS ACCOMMODATION ENTRIES OF UNSECURE D LOAN TO THE TUNE OF RS.142.45 LACS, ACCORDING TO THE LEARNED ASSESSING OFFICER HAS ESCA PED ASSESSMENT AND THUS HE HAS REASON TO BELIEVE THAT THE SAID INCOME IS CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO - 3 - ITA NO.3022/A/16 ACIT VS. SHANTI ENTERPRISE, SURAT ASST.YEAR 2007-08 DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS AND NE CESSARY FOR A.Y. 2007-08. IN REPLY TO THE NOTICE ISSUED TO THE ASSESSEE ON SEPTEMBER 3 RD , 2014, THE ASSESSEE REPLIED THAT NO SUCH AMOUNT WAS RECEIVED DURING THE PERIOD AS MENTIONED IN THE NOTICE UNDER CONSIDERATION. IN FACT, THE AMOUNTS WERE RECEIVED FROM M/S. NICE DIAM ONDS BY ACCOUNT PAYEE CHEQUE DURING THE YEAR ENDING ON 31 ST MARCH, 2005 WHICH WAS BROUGHT FORWARD ON 01.04.200 7 AND REPAID. SINCE NO AMOUNT IS RECEIVED DURING THE YEAR, THE ADDITION AS UNSECURED LOAN OF RS.142.45 LACS IS NOT JUSTIFIED. THERE CANNOT BE AN Y INCOME ESCAPED ASSESSMENT DURING THE YEAR AS CONTENDED BY THE LEARNED AR WHILE REOPE NING THE CASE FOR ASSESSMENT BY THE LEARNED AO. HE, THUS PRAYED FOR DROPPING OF THE PRO CEEDINGS ON THIS SCORE ALONE. HE, FURTHER ASKED FOR THE COPY OF THE INFORMATION FROM DGIT (INV.), MUMBAI DATED 07.03.2014 SO AS TO ASCERTAIN THE ACTUAL ALLEGATION LEVELED AGAINST THE ASSESSEE REGARDING THE ALLEGED AMOUNT RECEIVED IN A.Y. 2005-06 WHICH H AS BEEN TERMED AS BOGUS ACCOMMODATION ENTRY AS ALLEGED TO HAVE BEEN GIVEN B Y M/S. NICE DIAMONDS TO THE ASSESSEE. SUCH PLEA OF THE ASSESSEE WAS ULTIMATELY NOT ACCEPTED BY THE LEARNED AO. TREATING THE UNSECURED LOAN AMOUNT ENTIRELY OUTSIDE THE BOOKS OF ACCOUNTS THE LD AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CREDIT. IN APPEAL, THE LEARNED CIT(A) DELETED SUCH ADDITION MADE BY THE LE ARNED AO. HENCE, THE INSTANT APPEAL BEFORE US. 3. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED DR APPEARING FOR THE REVENUE SUBMITTED BEFORE US THAT THE LEARNED AR THO UGH STATED THAT UNSECURED LOAN FROM M/S. NICE DIAMONDS APPEARING FOR THE BALANCE SHEET OF 2007-08, NO SUCH UNSECURED LOAN HAS BEEN FOUND OUTSTANDING IN THE NAME OF M/S. NICE DIAMONDS AS PER THE LIST OF UNSECURED LOAN BEING A PART OF THE AUDIT REPORT OF THE ASSESSMENT ORDER. FURTHER THAT BY AND UNDER LETTER DATED 03.09.2014 THE ASSESSEE HAS ACKNOWLEDGED THE EXISTENCE OF THE IMPUGNED UNSECURED LOAN BUT SUBSEQUENTLY THE SAME W AS DENIED BY THE ASSESSEE WHILE REPLYING TO THE SHOW-CAUSE ISSUED TO THE ASSESSEE O N 25.03.2015. HENCE, THE SUBMISSIONS - 4 - ITA NO.3022/A/16 ACIT VS. SHANTI ENTERPRISE, SURAT ASST.YEAR 2007-08 ARE CONTRADICTORY TO EACH OTHER WHICH IS NOTHING BU T AN AFTERTHOUGHT AND DOES NOT HOLD MERIT. HE, FURTHER CONTENDED THAT THE BOOKS OF ACCO UNTS OF THE ASSESSEE ARE NOT RELIABLE AND THE ASSESSEE HAS NOT ABLE TO PROVE THE YEAR OF CREDIT AND DISPROVE THE YEAR DETECTED BY THE INVESTIGATION WING. ACCORDING TO THE LEARNED DR , IT IS A CLEAR CUT CASE THAT THE ASSESSEE HAS ACCEPTED THE AMOUNT DURING THE A.Y. 20 07-08 AND THE ASSESSEE HAS SIMPLY OBLITERATED THE SUMS WITHOUT ACTUAL PAYMENT. THE CL AIMS OF THE ASSESSEE REGARDING RECEIPT YEAR OF F.Y. 2004-05 IS DEVOID FOR ANY EVIDENCE, HE THEREFORE PRAYED FOR QUASHING OF THE ORDER OF DELETION AS MADE BY THE LEARNED CIT(A). ON THE OTHER HAND, LEARNED AR SUBMITTED BEFORE US THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE ON 31.03.2005 BY ACCOUNT PAYEE CHEQUE FROM M/S. NICE DIAMOND. THE SA ID AMOUNT WAS ULTIMATELY FORWARDED AND REPAID ON 01.04.2007 AND NO AMOUNT IS RECEIVED DURING THAT YEAR. THE QUESTION OF MAKING ANY ADDITION ON UNSECURED LOAN D OES NOT ARISE AND THEREFORE THE ADDITION ON THE COUNT OF ESCAPED ASSESSMENT DURING THE YEAR AS MADE BY THE LEARNED AO IS BAD IN LAW. HE, FURTHER ARGUED THAT SINCE THE AS SESSEE RECEIVED THE AMOUNT IN THE A.Y. 2005-06, THE REASSESSMENT PROCEEDINGS AS INITIATED BY THE AO IS ALSO TIME BARRED AND HENCE LIABLE TO THE QUASHED. 4. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE ORDER PASSED BY THE LEARNED AO AND THE FIRST APPELLATE AUTHORITY. WE FIND THAT THE LEARNED CIT(A) HAS CALLED FOR A REMAND REPORT AFTER VERIFICATION OF RECORDS REGARDI NG THE CLAIM OF THE APPELLANT. IN THE REMAND REPORT THE LEARNED AO STATED THAT THOUGH THE ASSESSEE POINTED OUT THE ENTRIES IN THE BANK STATEMENT CLAIMED TO HAVE BEEN RECEIVED FR OM M/S. NICE DIAMONDS, NO NARRATION HAS BEEN PROVIDED IN THE NARRATION COLUMN OF THE BANK STATEMENT AGAINST SUCH ENTRIES. THE BANK WAS FURTHER REQUESTED TO PROVIDE THE ACCOUNT NUMBER AND THE NAME OF THE PERSON CREDITING THE ALLEGED AMOUNTS TO THE BAN K ACCOUNT OF THE ASSESSEE. HOWEVER, SINCE SUCH INFORMATION WAS NOT AVAILABLE WITH THE B ANK AS THE STAND TAKEN BY THE BANK, - 5 - ITA NO.3022/A/16 ACIT VS. SHANTI ENTERPRISE, SURAT ASST.YEAR 2007-08 THE SAME COULD NOT BE PROVIDED. IN TERMS OF THE REV ENUE REPORT THE SAID ENTRIES CANNOT BE SAID TO BE PERTAINING TO THE AMOUNT RECEIVED FROM N ICE DIAMONDS. FURTHER THAT ON PERUSAL OF THE BANK ACCOUNT, NO REPAYMENT OF THE ALLEGED AM OUNT WAS SEEN. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY THAT THE LOANS ARE OUT OF BOOKS BY THE ASSESSEE FOR A.Y. 2007-08 WHICH REMAIN UNEXPLAINED BY THE ASSESSEE, THE ADDIT ION MAY BE SUSTAINED. BEFORE THE LEARNED CIT(A), AS IT APPEARS FROM THE RECORD, THE ASSESSEE DULY BROUGHT IT TO THE NOTICE THAT THE ASSESSMENT PROCEEDINGS HAS STARTED ON THE PREMISE OF INFORMATION THAT THE ASSESSEE HAS TAKEN BOGUS ACCOMMODATION ENTRIES OF U NSECURED LOAN AMOUNTING TO RS.142.45 LACS FROM M/S. NICE DIAMONDS IN A.Y. 2007 -08 AGAINST WHICH THE ASSESSEE RAISED HIS OBJECTION STATING THAT NO SUCH AMOUNT WA S RECEIVED BY THE ASSESSEE FROM THE SAID PARTY DURING THE A.Y. 2007-08 RATHER THE SAID AMOUNT WAS RECEIVED DURING THE A.Y. 2005-06 WHICH IS EVIDENT FROM THE ACCOUNTS OF NICE DIAMONDS FILED IN THE YEAR ENDING 31.03.2007 AND 31.03.2005 WHICH SHOWS THE AMOUNT RE CEIVED ON 31.03.2005 AND NOT DURING THE A.Y. 2007-08. THE INFORMATION RECEIVED B Y THE ASSESSMENT OFFICER FROM DGIT(INV.), MUMBAI SINCE NOT TRUE, THE VERY BASIS O F REASSESSMENT IS INCORRECT. IT WAS FURTHER CONTENDED BY THE ASSESSEE BEFORE THE LEARNE D CIT(A) THAT AS SOON AS THE SAME IS BROUGHT TO THE NOTICE OF LEARNED AO, THE LEARNED AO OUGHT TO HAVE DROPPED THE PROCEEDING. THE LEARNED CIT(A) CAME TO A FINDING TH AT THERE IS NO EVIDENCE, WHATSOEVER, TO SUGGEST THAT ANY AMOUNT WAS RECEIVED DURING THE A.Y. 2007-08. IT WAS THE FURTHER FINDING OF THE LEARNED CIT(A) THAT THE AMOUNT FROM M/S. NICE DIAMONDS WAS RECEIVED DURING THE A.Y. 2005-06 IS REFLECTED FROM THE COPIE S OF THE ACCOUNT OF THE NICE DIAMONDS FILED FOR THE YEAR ENDING 31.03.2005 AND 31.03.2007 . THE DETAILS OF PAYMENT RECEIVED WAS ALSO APPEARING IN THE SAID COPY OF THE ACCOUNT AND FURTHER REFLECTED IN THE BANKS BOOKS OF THE APPELLANT WHICH ARE VERIFIABLE FROM TH E BANK STATEMENT. THE AMOUNT RECEIVED BY M/S. NICE DIAMONDS IS ALSO REFLECTED IN THE FINANCIAL STATEMENT CONTRARY TO THE FINDING OF THE AO. IT WAS A CLEAR FINDING OF TH E LEARNED CIT(A) THAT THE AO HAS ERRONEOUSLY MENTIONED THAT THE AMOUNT WAS CLAIMED T O HAVE BEEN PAID IN A.Y. 2007-08 - 6 - ITA NO.3022/A/16 ACIT VS. SHANTI ENTERPRISE, SURAT ASST.YEAR 2007-08 BY THE ASSESSEE. THE RECTIFICATION APPLICATION FILE D BY THE ASSESSEE BEFORE THE AO REQUESTING HIM TO RECTIFY THE FINDING THAT THE AMOU NT WAS REPAID AS PER THE CLAIM OF THE APPELLANT IN A.Y. 2007-08 BUT THE SAME HAS NOT BEEN DISPOSED OFF. WE FIND FROM THE RECORDS THAT THE REPAYMENT OF THE AMOUNT OF M/S. NICE DIAMONDS IS ALSO DULY REFLECTED IN THE BANK STATEME NT AS WELL AS THE CONFIRMATION FILED FOR THE PERIOD 01.04.2007 TO 31.03.2008 WHICH PROVE S BEYOND DOUBT THAT THE AMOUNT WAS RECEIVED IN THE A.Y. 2005-06 FROM THE M/S. NICE DIA MONDS AND NOT IN A.Y. 2007-08, HAS RIGHTLY OBSERVED BY THE LEARNED CIT(A). HE ULTIMATE LY, THEREFORE, CAME TO A CONCLUSION THAT THE TRANSACTIONS RELATED TO M/S. NICE DIAMONDS WERE PERTAINING TO THE A.Y. 2005-06 & 2007-08. THEREFORE ON THAT COUNT THE VERY BASIS O F THE REOPENING BY THE LEARNED AO U/S 147 OF THE ACT WAS FOUND TO BE ERRONEOUS AND TH EREFORE THE SAME WAS QUASHED BY THE LEARNED CIT(A). WE FIND NO INFIRMITY IN THE ORDER P ASSED BY THE LEARNED CIT(A) WHICH IS SELF EXPLANATORY OF THE TRUE FACT REVEALED FROM THE RECORDS AS ALREADY INDICATED ABOVE BY US. WE, THEREFORE, FIND NO REASON TO INTERFERE W ITH THE SAME. THE ORDER PASSED BY THE LEARNED CIT(A) IS THUS HEREBY CONFIRMED. THE APPEAL PREFERRED BY THE REVENUE IS THUS DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/12/2018 SD/- SD/- ( AMARJIT SINGH ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 20/12/2018 PRITI YADAV, SR.PS - 7 - ITA NO.3022/A/16 ACIT VS. SHANTI ENTERPRISE, SURAT ASST.YEAR 2007-08 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-2, SURAT. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 13/12/2018 (DICTATION PAGES 9) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14/12/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S .. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER