The ITO, Ward-3(1), Surat V. M/s. Harish Silk Industries, Surat

ITA 3121/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50724 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3121 / AHD/2009 (ASSESSMENT YEAR 2006-07) ITO, WARD 3(1), SURAT VS. M/S. HARISH SILK INDUSTRIES, BEHIND SUB JAIL, KHATODARA, SURAT PAN/GIR NO. : ABFH5675B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S P TALATI, SR. DR RESPONDENT BY: SHRI J.P. SHAH, AR DATE OF HEARING: 29.09.2011 DATE OF PRONOUNCEMENT: 30-09-2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) II, SURAT DATED 21.08.2009 FOR THE ASSESSMEN T YEAR 2006-07. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. OF RS.1,08,99,938/- AS UNEXPLAINED CREDITS IN TERMS OF SECTION 68 OF THE ACT. 2) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) MAY BE SET ASIDE AND THAT OF THE A.O. MAY BE RESTORED TO T HE ABOVE EXTENT. 2. THE BRIEF FACTS OF THE CASE ARE NOTED BY THE A.O . IN PARA 2 OF THE ASSESSMENT ORDER THAT IN THE PRESENT CASE, THE ASSE SSEE CARRIED OUT JOB I.T.A.NO.3121 /AHD/2009 2 WORK OF RS.71,51,013/- AND THE ASSESSEE HAS SHOWN S UNDRY DEBTORS AT RS.8,73,56,644/- AND WHEN IT IS COMPARED WITH THE F IGURE WITH THE PRECEDING ASSESSMENT YEAR, IT IS SEEN THAT IN THAT YEAR, THE ASSESSEE HAS SHOWN SUNDRY DEBTORS AT RS.7,58,49,732/- AND IF THE COMPONENT OF JOB CHARGES EMBEDDED WITH THE LAST YEAR DEBTORS, THE TO TAL WILL BE LESSER THAN THE FIGURE OF RS.8,73,56,644/- SO SHOWN AS THE SUND RY DEBTORS FOR THE PRESENT YEAR. THE A.O. FURTHER NOTED THAT SIMILARL Y, REGARDING SUNDRY CREDITS ALSO, IT IS NOTED THAT THE SAME IS SHOWN AT RS.11,34,05,362/- IN THE PRESENT YEAR AS AGAINST THE CREDIT OF RS.10,25,05,4 24/- IN THE PRECEDING YEAR. THE A.O. FURTHER NOTED THAT AS PER THE P & L ACCOUNT, THE ASSESSEE HAS INCURRED MAJOR EXPENDITURE FOR THE PURPOSE OF C OLOUR CHEMICAL PURCHASES OF RS.22,67,678/- AND RS.28,19,074/- IN R ESPECT OF PRODUCTION OVERHEADS. THE A.O. OBSERVED THAT IF THIS FACT IS TAKEN INTO CONSIDERATION AND FOR ALL THE ITEMS WHICH HAVE BEEN DEBITED IN TH E TRADING AND P & L ACCOUNT THE INCREASE IN SUNDRY CREDITS CANNOT EXCEE D THE AGGREGATE AMOUNT OF EXPENDITURE. THE A.O. FURTHER NOTED THAT THE DIFFERENCE OF CREDITORS IN THE PRESENT YEAR AS COMPARED TO THE IM MEDIATELY PRECEDING YEAR IS IN EXCESS OF AGGREGATE EXPENDITURE. THE A. O. ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AND ASKED THE ASSESSEE TO FU RNISH NAMES AND ADDRESSES OF THE PERSONS IN WHOSE NAMES THE AMOUNT OF LIABILITY IS IN EXCESS OF RS.1 LACS AND ALSO ASKED TO FURNISH NATUR E OF TRANSACTION ENTERED INTO ALONG WITH DATE OF TRANSACTION AND LEDGER COPY OF SUCH CREDITORS FROM THE BOOKS OF THE ASSESSEE. THE A.O. ALSO ASKED THE ASSESSEE TO FURNISH PAN OF THOSE CREDITORS, WHERE LIABILITY IS EXCEEDIN G RS.5 LACS. THE A.O. HAS NOTED IN PARA 4 OF THE ASSESSMENT ORDER THAT IN REPLY TO THE SAID SHOW CAUSE NOTICE, THE ASSESSEE HAS FURNISHED THE LEDGER COPIES OF ACCOUNTS OF THE PARTIES NOT DULY CONFIRMED BY THE PARTIES CONCE RNED AND HAD NOT FURNISHED THE ADDRESS AND NATURE OF TRANSACTION ETC . AS SPECIFICALLY I.T.A.NO.3121 /AHD/2009 3 REQUIRED VIDE PARA 3 OF THE SHOW CAUSE NOTICE. THE A.O. MADE ADDITION OF THE ENTIRE AMOUNT OF INCREASE IN SUNDRY CREDITORS I N THE PRESENT YEAR AS COMPARED TO THE PRECEDING YEAR U/S 68 OF THE INCOME TAX ACT, 1961 AND THE AMOUNT OF ADDITION MADE BY THE A.O. AT RS.1,08, 99,938/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE LD. CIT (A). 5. IN PARA 5 OF THE APPELLATE ORDER, IT IS NOTED BY THE LD. CIT(A) THAT THE ASSESSEE HAS FURNISHED NAMES AND ADDRESSES OF S UNDRY CREDITORS ALONG WITH THEIR LEDGER ACCOUNTS. A NEW ARGUMENT WAS MAD E BY THE ASSESSEE BEFORE LD. CIT (A) THAT INCREASE IN SUNDRY CREDITOR S IN THE PRESENT YEAR IS ON ACCOUNT OF REGROUPING OF CERTAIN LIABILITIES. I T WAS THE SUBMISSION BEFORE THE LD. CIT (A) THAT IN THE IMMEDIATELY PREC EDING YEAR, THE CREDIT BALANCE AND DIFFERENCE WAS NETTED AND FIRST OUTSTAN DING DEBTORS OF SUCH ASSOCIATION UNDER THE HEAD HEADING OF SUNDRY CREDI TORS BUT IN THE PRESENT YEAR, SUCH CREDIT BALANCE HAD BEEN SHOWN SEPARATELY UNDER THE HEADING OF EARLIER LIABILITIES WHICH INFLATED THE FIGURES OF T OTAL CREDITORS. HE FURTHER NOTED THAT THE CLAIM OF THE LD. A.R. IS SUPPORTED B Y THE AUDIT REPORT OF THE SAID TWO YEARS COPIES OF WHICH HAVE BEEN DULY SUBMI TTED ALONG WITH THE WRITTEN SUBMISSION. HE DELETED THE ENTIRE ADDITION MADE BY THE A.O. NOW, THE REVENUE IS IN APPEAL BEFORE US. 6. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT (A). H E ALSO SUBMITTED THAT IN THE PAPER BOOK IS THE COPY OF WRITTEN SUBMISSI ONS FURNISHED BEFORE THE LD. CIT (A) AND THE AUDITED ACCOUNTS FOR THE PRESEN T YEAR AS WELL AS FOR THE PRECEDING ASSESSMENT YEAR . HE ALSO SUBMITTED ON PAGES 6 TO 20 OF THE PAPER BOOK WHICH IS THE COPY OF THE LETTER DATED 29 .12.2008 SUBMITTED BEFORE HE A.O. AND COPY OF WHICH WAS ALSO GIVEN TO THE LD. CIT(A). MUCH STRESS WAS LAID BY HIM ON THIS ASPECT THAT IN THE LAST YEAR, CREDIT BALANCE OF CUSTOMERS WAS REDUCED FROM THE OUTSTANDI NG AMOUNT OF I.T.A.NO.3121 /AHD/2009 4 DEBTORS WHEREAS IN THE PRESENT YEAR, THE CREDIT BAL ANCES OF THE CUSTOMERS WERE SHOWN BY THE ASSESSEE SEPARATELY UNDER THE HEA DING CURRENT LIABILITIES AND FOR THIS VERY REASON, THE CREDITORS HAS GONE UP IN THE PRESENT YEAR HENCE, NO INTERFERENCE IS CALLED FOR IN THE OR DER OF LD. CIT (A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING THIS FINDING THE LD. CIT (A) THAT THE OTHER CREDITO RS OF THE PRESENT YEAR ARE INCLUDING THE AMOUNT OF CREDIT BALANCE OF THE CUSTO MERS WHEREAS IN THE PRE CEDING YEAR, THE CREDIT BALANCE OF THE CUSTOMER S WERE REDUCED FROM THE AMOUNT OF OUTSTANDING SUNDRY CREDITORS, WE HAVE EXAMINED THE AUDITED BALANCE SHEET OF BOTH THE YEARS IN THIS REG ARD WHICH ARE AVAILABLE IN THE PAPER BOOK. THE AUDITED BALANCE SHEET FOR TH E YEAR ENDED 31-3- 2005 IS AVAILABLE ON PAGE 56 TO 95 OF THE PAPER BOO K. THE BALANCE SHEET FOR THIS YEAR IS AVAILABLE ON PAGE 74 OF THE PAPER BOOK, AS PER WHICH, CURRENT ASSET AND LOANS AND ADVANCES IS RS.801.93 L ACS, DETAILS OF WHICH IS AVAILABLE IN SCHEDULE F. THE SCHEDULE F FOR TH IS YEAR IS AVAILABLE ON PAGE 77 OF THE PAPER BOOK WHICH INCLUDES SUNDRY DEB TORS OF RS.758.49 LACS. PARTY-WISE LIST OF SUNDRY DEBTORS FOR THIS YE AR IS AVAILABLE ON PAGE 86-94 OF THE PAPER BOOK CONTAINING BOTH DEBIT AND C REDIT BALANCES FOR EACH PARTY. TOTAL OF DEBIT BALANCE OF SUNDRY DEBTOR S IS SHOWN AT RS.884.78 LACS AND THE TOTALS OF CREDIT BALANCE IS SHOWN AT RS.126.28 LACS. IF BOTH THESE DEBIT AND CREDIT BALANCES ARE NETTED, NET DEBIT BALANCE COMES TO RS.758.50 LACS AS SHOWN IN SCHEDULE F ON PAGE 77 OF THE PAPER BOOK. THIS GOES TO SHOW THAT THIS CLAIM OF THE ASSESSEE I N THE PRECEDING YEAR, THE CREDIT BALANCE OF THE CUSTOMERS WERE NETTED FRO M DEBIT BALANCE OF DEBTORS IS SUPPORTED BY AUDITED BALANCE SHEET. IN T HE CURRENT YEAR, THE AUDITED ACCOUNT IS AVAILABLE ON PAGE 21 TO 55 OF TH E PAPER BOOK AND THE BALANCE SHEET IS AVAILABLE ON PAGE 38 OF THE PAPER BOOK. IN THE SAID I.T.A.NO.3121 /AHD/2009 5 BALANCE SHEET, CURRENT ASSETS AND LOANS AND ADVANCE S ARE SHOWN AT RS.921.68 LACS THE DETAILS OF WHICH ARE AVAILABLE I N SCHEDULE F. THE RELEVANT SCHEDULE F IS AVAILABLE ON PAGE 42 OF THE PAPER BOOK, WHICH CONTAINS SUNDRY DEBTORS OF RS.823.56. THE PARTY-WIS E LIST OF TOTAL SUNDRY CREDITORS IS AVAILABLE ON PAGE 50-52 OF THE PAPER B OOK AND THIS PARTY-WISE LIST IS OF DEBIT BALANCES ONLY AND HENCE, CREDIT BA LANCES ARE NOT REDUCED FROM THE TOTAL DEBIT BALANCE OF THE CUSTOMERS. PART Y-WISE LIST OF OTHER LIABILITIES IS AVAILABLE ON PAGE 47-50 OF THE PAPER BOOK HAVING THE TOTAL OF RS.105.36 LACS. WHEN WE COMPARE THE NAMES ON TEST C HECK BASIS, TO ASCERTAIN AS TO WHETHER OUTSTANDING CREDIT BALANCE OF THE CUSTOMERS AS ON 31-03-2005 WHICH WAS REDUCED FROM THE TOTAL DEBIT B ALANCE OF THE CUSTOMERS AS ON 31.03.2005 CONTAINS SAME NAMES, WE FIND THAT MANY NAMES OF SUCH PARTIES ARE APPEARING IN THE LIST OF OTHER LIABILITIES AS ON 31- 03-2006. A FEW OF SUCH NAMES ARE BEING MENTIONED HE RE: 8. THERE IS OUTSTANDING BALANCE OF RS.577684/- IN T HE NAME OF AMIT FABRICS WHICH IS APPEARING IN THE LIST OF OTHER LIA BILITIES AS ON 31.03.2006 BUT AS ON 31.3.2005, THIS IS SHOWN AS CREDIT BALANC E OF THE CUSTOMERS TOTAL OF WHICH HAS BEEN REDUCED FROM THE TOTAL DEBIT BALA NCE OF THE CUSTOMERS. SIMILARLY, THE NAME OF JAYSHREE SILK MILLS HAVING C REDIT BALANCE OF RS.12,52,182/- IS ALSO COMING IN THE LIST OF OTHER LIABILITIES AS ON 31.03.2006 AND CREDIT BALANCE OF THE CUSTOMERS AS O N 31.3.2005. ONE MORE NAME OF KIRAN SILK MILLS HAVING OUTSTANDING CR EDIT BALANCE OF RS.4,55,258 AND THERE ARE VARIOUS OTHER NAMES, WHE RE THE AMOUNT AND NAME BOTH ARE SAME, APPEARING IN THESE TWO LISTS AR E COMMON. IN SOME OTHER CASES, THE NAMES ARE SAME ALTHOUGH THE AMOUNT S OUTSTANDING IS LESSER AS ON 31.03.2006. THESE FACTS ESTABLISH THA T THE FINDING GIVEN BY LD. CIT (A) IS IN FACT SUPPORTED BY THE AUDITED ACC OUNTS, WHICH WERE AVAILABLE BEFORE THE A.O. ALSO. I.T.A.NO.3121 /AHD/2009 6 9. IN THE LIGHT OF THESE FACTS, IT CANNOT BE SAID T HAT THE INCREASE IN THE AMOUNT OF SUNDRY CREDITORS IN THE PRESENT YEAR IS N OT PROPERLY EXPLAINED, THERE IS NO ANY OTHER OBJECTION OF THE A.O. WE, THE REFORE, DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT (A). 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEP., 2011 SD/- SD/- (T.K. SHARMA) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 30-09- 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER.. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..