Appeal details
Counselvise Citation
[2019] 115 COUNSELVISE.COM (IT) 8930 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-09-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Next Hearing Date
05-09-2019
Assessment Year
2015-2016
Appeal Filed On
26-11-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBE ITA NO. 3125/BANG/2018 ASSESSMENT YEAR : 2015 - 16 M/S. K N R ROOFING PVT. LTD., P 58, KIADB INDUSTRIAL AREA, 2 ND PHASE, ANTHARASANAHALLI, TUMKUR 572 106. PAN: AADCK 7823M VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, TUMKUR. APP ELLANT RESPONDENT APP ELLANT BY : SHRI SANDEEP C., CA RESPONDENT BY : DR. P.V. PRADEEP KUMAR, ADDL. CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 05 .09.2019 DATE OF PRONOUNCEMENT : 20 .09.2019 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 24.09.2018 OF THE CIT(APPEALS)-7, BENGALURU, RELATING TO ASSE SSMENT YEAR 2015-16. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING AND TRADING OF ROOFING SHEETS, ROOFIN G ACCESSORIES AND TURBO VENTILATORS. FOR THE AY 2-15-16, THE ASSESSEE FILE D A RETURN OF INCOME DECLARING A LOSS OF RS.30,58,063. IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE INCOME-TAX ACT, 1961 [THE ACT] , THE AO NOTICED THAT THERE WERE CREDITORS IN THE BALANCE SHEET AND THESE CREDITORS REPRESENTED PURCHASES ON CREDIT BY THE ASSESSEE TO THE TUNE OF RS.28,37,588. UNDER SECTION 68 OF THE ACT, ANY SUM CREDITED IN THE BOOK S OF TAXPAYER IN ANY ITA NO. 3125/BANG/2018 PAGE 2 OF 8 FINANCIAL YEAR SHALL BE TREATED AS SHALL BE TREATED AS INCOME OF TAXPAYER DURING SUCH FINANCIAL YEAR IF THE TAXPAYER OFFERS N O EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT; OR EXPLANATION OF FERED BY TAXPAYER ABOUT THE NATURE AND SOURCE OF SUCH CREDIT IS NOT SATISFA CTORY IN THE OPINION OF ASSESSING OFFICER. SUCH CREDIT IS REFERRED TO AS UN EXPLAINED CASH CREDIT. 3. THE AO CALLED UPON THE ASSESSEE TO FURNISH DETA ILS VIZ., NAME, PAN, ADDRESS AND AMOUNT OUTSTANDING AS ON 31.3.2015 OF E ACH OF THE CREDITORS AND ALSO TO PROVIDE CONFIRMATIONS FROM THE CREDITOR S. THE AO HAS REFERRED TO THE FACT THAT THE ASSESSEE WAS GIVEN OPPORTUNITI ES IN THIS REGARD ON 3 OCCASIONS, BUT HE ASSESSEE DID NOT UTILISE THE OPPO RTUNITY. SINCE THE ASSESSMENT WAS GETTING TIME BARRED, THE AO PROCEEDE D TO HOLD THAT CREDITORS FOR PURCHASES OF RS.28,38,588 WAS UNEXPLA INED AND ACCORDINGLY TREATED THE SAME AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. 4. THE AO ALSO HELD THAT SINCE THE ADDITION WAS MAD E U/S. 68 OF THE ACT, THE ASSESSEE WILL NOT BE ENTITLED TO SET OFF THE CU RRENT YEARS LOSS AGAINST INCOME WHICH IS TAXED U/S. 68 OF THE ACT IN VIEW OF THE PROVISIONS OF THE SECTION 115BBE(2) OF THE ACT. SECTION 115BBE WAS S UBSTITUTED BY THE TAXATION LAWS 2 ND AMENDMENT ACT, 2016 W.E.F. 1.4.2017, WHICH PROVIDE S THAT NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SET OFF OF ANY LOSS SHALL BE ALLOWED TO AN ASSESSEE IN COMPUTI NG INCOME WHICH IS ADDED U/S. 68 OF THE ACT. ACCORDINGLY, THE AO REFU SED TO ALLOW SET OFF OF CURRENT YEARS LOSS AGAINST THE INCOME ADDED U/S. 6 8 OF THE ACT. 5. BEFORE THE CIT(APPEALS), THE ASSESSEE MADE TWO S UBMISSIONS, VIZ., OUT OF THE SUM OF RS.28,37,588 ADDED AS UNEXPLAINED CREDITS ON ACCOUNT OF PURCHASES, MANY PURCHASES WERE OPENING BALANCE OF T HE EARLIER ASSESSMENT YEAR AND THEREFORE THE OPENING BALANCE O F EARLIER ASSESSMENT YEARS CANNOT BE ADDED AS INCOME U/S. 68 OF THE ACT BECAUSE UNDER SEC.68 ITA NO. 3125/BANG/2018 PAGE 3 OF 8 OF THE ACT APPLIES ONLY TO ANY SUM CREDITED IN THE BOOKS OF TAXPAYER IN ANY FINANCIAL YEAR. SINCE THE OPENING BALANCE IS NOT A SUM CREDITED IN THE BOOKS OF TAXPAYER DURING THE PREVIOUS YEAR, SEC.68 WILL NOT APPLY TO SUCH OPENING BALANCE. A SUM OF RS.14,92,988 OUT OF THE SUM OF RS.28,37,588 ADDED BY THE AO WAS CLAIMED AS OPENING BALANCE AS O N 31.3.2015 AND THEREFORE CANNOT BE CONSIDERED AS CREDIT ENTRY IN T HE BOOKS OF ACCOUNT OF THE PREVIOUS YEAR RELEVANT TO AY 2015-16. THE ASSE SSEE IN THIS REGARD SOUGHT TO FILE LEDGER ACCOUNT OF THE VARIOUS SUNDRY CREDITORS FOR PURCHASES. APART FROM THE ABOVE SUBMISSIONS, THE ASSESSEE ALSO SUBMITTED THAT THERE WERE CERTAIN ERRORS IN THE CREDIT BALANCES SHOWN IN THE BOOKS OF ACCOUNT WHICH WERE INADVERTENT ERRORS AND IF THOSE ERRORS A RE CONSIDERED, THEN THERE WOULD BE NO ADDITION THAT WOULD REMAIN FOR CONSIDER ATION. IN THIS REGARD, THE ASSESSEE FILED THE FOLLOWING ADDITIONAL EVIDENC E BEFORE THE CIT(A):- 1. LEDGER EXTRACT OF LANDMARK FASTENERS PVT.LTD. 2 LEDGER EXTRACT OF SIDDARAMAIAH- BHEEMSANDRA TMK 3 LEDGER EXTRACT OF SIDDARAMAIAH - TIPTUR 4 INVOICE COPY OF SIDDARAMAIAH - TIPTUR 5 LEDGER EXTRACT OF SHIVA SHANKARAIAH - MASTI GONDA NAHALLI 6. LEDGER EXTRACT OF SHIVASHANKAR TURUVEKERE TMK 7. INVOICE COPY OF SHIVA SHANKARAIAH - MASTI GONDAN AHALLI 8. LEDGER EXTRACT OF ANAND HARDWARE- MADHUGIRI 9. LEDGER EXTRACT OF ANAND TRADERS TMK 10. INVOICE COPY OF ANAND TRADERS 11. LEDGER EXTRACT OF KANTHARAJ LAKSHMIPURA MADHUGI RI TMK 12. LEDGER EXTRACT OF V P KANTHARAJU - VODDAGERE 13. INVOICE COPY OF V P KANTHARAJU - VODDAGERE 14. LEDGER EXTRACT OF HARISH - MAHADEVA HALLI 15. LEDGER EXTRACT OF HARISH - TUMKUR 16. INVOICE COPY OF HARISH 17. LEDGER EXTRACT OF SAGAR INDUSTRIES - ANTHRASANA HALLI 18. LEDGER EXTRACT OF YOGESH - ANTHARASANAHALLI TMK 19. INVOICE COPY OF YOGESH SAGAR INDUSTRIES 20. LEDGER EXTRACT OF YES BUILDERS - KYATHSANDRA 21. LEDGER EXTRACT OF DAYANANDHA - TUMKUR 22. INVOICE COPY OF DAYANAND ITA NO. 3125/BANG/2018 PAGE 4 OF 8 23. LEDGER EXTRACT OF KRISHNA MURTHY - DM PALYA 24. LEDGER EXTRACT OF KRISHNA MURTHY TMK 25. INVOICE COPY OF KRISHNA MURTHY 26. LEDGER EXTRACT OF RALCO STEEL PRIVATE LTD 27. LEDGER EXTRACT OF STEEL SUN 28. LEDGER EXTRACT OF SEDVIK INDUSTRIES 29. LEDGER EXTRACT OF SANJAY- PACIFIC PERTI PR OD & SERVICE PVT LTD 30. LEDGER EXTRACT OF M S TRADERS 31. LEDGER EXTRACT OF WIN MATRIX 32. LEDGER EXTRACT OF JSW STEEL LTD 33. LEDGER EXTRACT OF SREE JEE ENTERPRISES 34. LEDGER EXTRACT OF SREE MANJUNATHA HARDWARE & ST EELS 35. LEDGER EXTRACT OF GANGEES INTERNATIONAL PVT LTD 36. LEDGER EXTRACT OF LSSAR STEEL LTD 37. LEDGER EXTRACT OF IDEAL FIBER GLASS 38. LEDGER EXTRACT OF KRISHNA FAB TECH 6. THE ASSESSEE FILED AN APPLICATION BEFORE THE CIT (APPEALS) FOR ACCEPTING THE AFORESAID DOCUMENTS AS ADDITIONAL EVI DENCE. THE ASSESSEE SUBMITTED THAT IT HAD DISCONTINUED ITS BUSINESS OPE RATIONS IN JUNE, 2015 AND THEREFORE COULD NOT FILE CONFIRMATION LETTERS F ROM THE CREDITORS IN THE COURSE OF ASSESSMENT PROCEEDINGS. EVEN BEFORE THE CIT(APPEALS), THE ASSESSEE EXPRESSED INABILITY TO FILE CONFIRMATION F ROM THE PARTIES, BUT SUBMITTED THAT LEDGER EXTRACTS OF THE SUNDRY CREDIT ORS AND DEBTORS WOULD PROVE THE ERRORS IN THE CLOSING BALANCES IN THE SUN DRY CREDITORS ACCOUNT, WHICH WILL HAVE A BEARING ON THE QUANTUM OF ADDITIO N TO BE MADE. 7. THE ASSESSEE PRAYED THAT THE DOCUMENTS WHICH ARE SOUGHT TO BE FILED BEFORE THE CIT(APPEALS) SHOULD BE ADMITTED AS ADDITIONAL EVIDENCE TO ENABLE PROPER DISPOSAL OF APPEAL AND IN THE INTERES T OF JUSTICE. 8. THE CIT(APPEALS), HOWEVER, REFUSED TO ACCEPT THE ADDITIONAL EVIDENCE AS IN THE OPINION OF THE CIT(A), THE ASSES SEE CANNOT SEEK TO FILE ADDITIONAL EVIDENCE IN THE APPELLATE PROCEEDINGS AS A MATTER OF RIGHT AND HAS TO SATISFY THE CONDITIONS LAID DOWN IN RULE 46A OF THE I.T. RULES, 1963 ITA NO. 3125/BANG/2018 PAGE 5 OF 8 [THE RULES] FOR ADMISSION OF ADDITIONAL EVIDENCE. THE CIT(APPEALS) ACCORDINGLY CONFIRMED THE ORDER OF THE AO. ON THE ISSUE OF SET OFF OF CURRENT YEAR BUSINESS LOSS, AGAINST INCOME ADDED U/ S. 68, BY RELYING ON THE PROVISIONS OF SECTION 115BBE(2) OF THE ACT, THE CIT (APPEALS) HELD THAT THOUGH SUBSTITUTED PROVISIONS OF SECTION 115BBE ARE APPLICABLE ONLY W.E.F. 1.4.2017, THESE PROVISIONS ARE CLARIFICATORY IN NAT URE AND THEREFORE APPLICABLE FOR AY 2014-15 ALSO. 9. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. CO UNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE TH E CIT(APPEALS). THE LD. DR RELIED ON THE ORDER OF CIT(APPEALS). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE A RE OF THE VIEW THAT U/S. 68 OF THE ACT, IT IS ONLY THE CREDIT ENTRY APP EARING IN THE BOOKS OF ACCOUNT OF AN ASSESSEE FOR THE RELEVANT PREVIOUS YE AR, THAT CAN BE TREATED AS UNEXPLAINED CASH CREDIT IN THE ABSENCE OF PROPER EXPLANATION BY THE ASSESSEE. THEREFORE, THE OPENING BALANCES CANNOT B E ADDED U/S. 68 OF THE ACT. 12. THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY T HE ASSESSEE BEFORE CIT(A) WAS TO PROVE ITS CASE THAT OPENING BALANCES CANNOT BE ADDED AND ALSO TO EXPLAIN THE CORRECT QUANTUM OF CREDIT PURCH ASES DURING THE RELEVANT PREVIOUS YEAR. RULE 46A OF THE INCOME TAX RULES, 1 962 (RULES) READS THUS: PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE [ DEPUTY COMMISSIONER (APPEALS) ] [ AND COMMISSIONER (APPEALS) . 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, TH E COMMISSIONER (APPEALS)], ANY EVIDENCE, WHETHER ORAL OR DOCUMENTA RY, OTHER THAN THE ITA NO. 3125/BANG/2018 PAGE 6 OF 8 EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCE EDINGS BEFORE THE [ASSESSING OFFICER], EXCEPT IN THE FOLLOWING CIRCUM STANCES, NAMELY : ( A ) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED ; OR ( B ) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAU SE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE [ASSESSING OFFICER] ; OR ( C ) WHERE THE APP ELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODU CING BEFORE THE [ASSESSING OFFICER] ANY EVIDENCE WHICH I S RELEVANT TO ANY GROUND OF APPEAL ; OR ( D ) WHERE THE [ASSESSING OFFICER] HAS MADE THE ORDER AP PEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNIT Y TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS AD MISSION. (3) THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [ASSESSING O FFICER] HAS BEEN ALLOWED A REASONABLE OPPORTUNITY ( A ) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS- EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR ( B ) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, TH E COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTION OF ANY DOCUMENT , OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL , OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE [ASSESSING OFFICER]) UNDER CLAUSE ( A ) OF SUB-SECTION (1) OF SECTION 251 OR THE IMPOSITI ON OF PENALTY UNDER SECTION 271.] 13. THOUGH THE ASSESSEE DID NOT FILE LEDGER ACCOUNT S TO PROVE THE QUANTUM OF OPENING BALANCE APPEARING IN THE VARIOUS CREDITORS ACCOUNT, THE SAME OUGHT TO HAVE BEEN LOOKED INTO BY THE CIT(APPE ALS), IN EXERCISE OF POWERS UNDER RULE 46A(4) OF THE RULES. IT IS ALWAYS OPEN TO THE ITA NO. 3125/BANG/2018 PAGE 7 OF 8 CIT(APPEALS) TO CONFRONT THE MATERIAL IN THE FORM OF ADDITIONAL EVIDENCE TO THE AO AND THEN TAKE A DECISION ON THE STAND TAKEN BY THE ASSESSEE BEFORE THE CIT(APPEALS). WE ARE ALSO OF THE VIEW THAT THE CLOSURE OF BUSINESS OF ASSESSEE IN JUNE, 2015 WAS A SUFFICIENT CAUSE FOR N ON-PRODUCTION OF EVIDENCE BEFORE THE AO AND THEREFORE THE CIT(APPEAL S) OUGHT TO HAVE ADMITTED ADDITIONAL EVIDENCE IN TERMS OF RULE 46A(1 )(C) OF THE RULES. THE SAME REASON WOULD HOLD GOOD FOR THE ASSESSEES CLAI M WITH REGARD TO DISCREPANCIES IN THE CLOSING BALANCE OF SUNDRY CRED ITORS AS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. WE ARE THEREFORE OF THE VIEW THAT THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY THE ASSES SEE OUGHT TO HAVE BEEN ADMITTED FOR ADJUDICATION BY THE CIT(APPEALS). WE THEREFORE SET ASIDE THE ORDER OF CIT(APPEALS) AND REMAND THE ISSUE TO THE A O FOR FRESH CONSIDERATION WITH REGARD TO THE ISSUE OF ADDITION U/S. 68 OF THE ACT. THE AO WILL CONSIDER THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS) AND AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, DECIDE THE ADDITION U/S. 68 OF THE ACT AFRESH IN AC CORDANCE WITH THE LAW. 14. AS FAR AS THE REFUSAL OF THE AO TO ALLOW SET OF F OF CURRENT YEAR BUSINESS LOSS AGAINST INCOME ADDED U/S. 68 OF THE A CT BY RELYING ON THE PROVISIONS OF SECTION 115BBE(2) OF THE ACT WHICH WA S INSERTED BY THE FINANCE ACT, 2016 W.E.F. 1.4.2017, IT IS NOT IN DIS PUTE BEFORE US THAT THE CBDT IN CIRCULAR NO.11 OF 2019 DATED 19.6.2019 CLAR IFIED THAT THE AMENDMENT SOUGHT TO BE RELIED UPON BY THE AO IS APP LICABLE ONLY PROSPECTIVELY AND THEREFORE NOT APPLICABLE TO AY 20 15-16. HENCE EVEN IN THE EVENT OF ADDITION BEING MADE U/S. 68 IN THE SET ASIDE PROCEEDINGS, THE ASSESSEE SHOULD BE GIVEN THE BENEFIT OF SET OFF OF CURRENT YEARS BUSINESS LOSS AGAINST THE ADDITION U/S. 68 OF THE ACT. WE H OLD ACCORDINGLY. ITA NO. 3125/BANG/2018 PAGE 8 OF 8 15. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( B R BASKARAN ) ( N.V. VA SUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 20 TH SEPTEMBER, 2019. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FI LE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.
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