B.Sushila, Zaheerabad V. ITO, Sanga Reddy

ITA 338/HYD/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53592 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-08-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 27-02-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.338/HYD/2007 ASSESSMENT YEAR 1999-2000 SMT. B. SUSHILA , ZAHEERABAD (PAN ABHP 6086 D) VS THE I TO, SANGAREDDY APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI T. DIWAKAR PRASAD DATE OF HEARING : 29.8.2011 DATE OF PRONOUNCEMENT : 9.9.2011 ORDER PER CHANDRA POOJARI, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) III DATED 2 6.12.2006 AND PERTAINS TO THE ASSESSMENT YEAR 1999-2000. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IN H IS APPEAL IS WITH REGARD TO ADDITION OF RS.8,75,288/- TOWARDS UNEXPLAINED CREDIT IN THE NAME OF FOUR PARTIES VIZ: 1. S/SHRI SUDARSHAN & BROS. METPALLI, RS.1,80,000/ - KARIMNAGAR 2. PALLAVI & CO. METPALLI, KARIMNAGAR RS.57,988/- 3. VEERABHADRA TRADING CO. MOTHKUR RS.3,07,300/- 4. VEERANJENEYA TRADING CO. KHAMMAM RS.3,30,000/- =========== TOTAL RS.8,75,288/- =========== ITA NO. 338/HYD/2007 SMT. B. SUSHILA, ZAHEERABAD 2 3. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2000 -01 THE ASSESSING OFFICER CONDUCTED DETAILED ENQUIRIES REGARDING THE EXISTENCE OF THE ABOVE PARTIES FROM AGRICULTURAL MARKETING COMMITTEE/SALES TAX DEPARTME NT AND FOUND THAT THE ABOVE FIRMS DID NOT EXIST. DURI NG THE PROCEEDINGS OF ASSESSMENT YEAR 1999-2000 (PRESENT Y EAR), THE ASSESSEE WAS INFORMED ABOUT THE RESULT OF THESE ENQUIRIES AND REQUESTED TO FURNISH FULL AND COMPLET E ADDRESSES OF THE CREDITORS, BUT SHE HAS STATED THAT SHE DID NOT HAVE ANY FURTHER ADDRESS OR DETAILS OF THE PART IES EXCEPT THE DETAILS AS CONTAINED IN THE SALE BILLS ISSUED B Y THE COMMISSION AGENTS THROUGH WHOM THE PURCHASES WERE MADE. THE ASSESSEE ALSO CONTENDED THAT IF THE PURC HASES WERE NOT MADE BY IT, IT COULD NOT HAVE MADE SALES T O THAT EXTENT. HOWEVER, THE ASSESSING OFFICER DID NOT ACC EPT THE ABOVE EXPLANATION AND OBSERVED THAT IT WAS NOT A CA SE OF THE FIRMS CLOSING THEIR BUSINESS OR SHIFTING TO SOM E PREMISES, BUT A CASE WHERE THE FIRMS DID NOT EXIST AT ALL, AND THE DETAILS FURNISHED BY THE ASSESSEE PROVED TO BE BOGUS. FURTHER, THE ASSESSEE CLEARED THE ABOVE CRE DITORS IN SUBSEQUENT YEARS IN CASH RATHER THAN THROUGH CHEQUE . IN VIEW OF THIS, THE TOTAL AMOUNT OF RS.8,75,288/- WAS ADDED BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSES SEE AS UNEXPLAINED CREDITS. THEREFORE, SHE WENT IN APPEA L BEFORE THE CIT(A). 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS CONTENDED BEFORE THE CIT(A) THAT THE ASSESSEE NEVER HAD ANY OPPORTUNITY TO VISIT THE TRADE CREDIT ORS WHO ARRANGED FOR THE PRODUCE AT THE ASSESSEES PREMISES ITA NO. 338/HYD/2007 SMT. B. SUSHILA, ZAHEERABAD 3 THROUGH THEIR COMMISSION AGENTS, AND THE BILLS ISSU ED THE COMMISSION AGENTS BORE THE NAME OF THE DEALERS WHO WERE REPRESENTED BY THEIR COMMISSION AGENTS AND, IN THIS VIEW OF THE MATTER, THE ASSESSEE HAD NO OPPORTUNITY TO DOUB T THE EXISTENCE OF THE MAIN DEALERS AND, AS SUCH, THE PUR CHASES MADE WERE VERY MUCH GENUINE. IT HAS FURTHER CONTEN DED THAT THE ASSESSEE, BEING LADY, CANNOT MANIPULATE TH E ACCOUNTS AND THE BOOKS HAVE BEEN PREPARED ON THE BA SIS OF ACTUAL PURCHASES, SALES AND THE OVERHEAD EXPENSES. IT HAS ALSO BEEN SUBMITTED THAT THE PURCHASES IN THIS LINE OF BUSINESS ARE GENERALLY MADE THROUGH COMMISSION AGEN TS WHO ARE PRONE TO CHANGE THEIR PREMISES OR DISCONTIN UE THEIR BUSINESS, AND IT IS UNCOMMON IN SUCH BUSINESS TO PR ODUCE ANY EVIDENCE OR MATERIAL OTHER THAN THE BILLS ISSUE D AT THE TIME OF PURCHASE OF GOODS. HOWEVER, THE CIT(A) CO NFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS T HE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, IN THIS CASE THE ASSESSEE BEING A LADY PURCHASED THE MATERIALS THROU GH COMMISSION AGENTS AND HAD NO OCCASION TO VISIT THE PURCHASER. FURTHER, THE PURCHASES WERE SUPPORTED B Y BILLS ISSUED BY THE COMMISSION AGENTS WHICH BORE THE NAME OF THE DEALERS WHO WERE REPRESENTED BY THROUGH THE COMMISSION AGENTS. IN THIS VIEW OF THE MATTER, THE ASSESSEE HAD NO OPPORTUNITY TO DOUBT THE EXISTENCE OF THE MA IN DEALER AND MORE SO, THE PURCHASES MADE WERE VERY MU CH RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE PURCHASES RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THIS MANNER HAVE BEEN ACCEPTED IN TOT O BY THE ITA NO. 338/HYD/2007 SMT. B. SUSHILA, ZAHEERABAD 4 ASSESSING OFFICER WITHOUT ANY KIND OF CONTROVERSY WHATSOEVER. AFTER THE PURCHASES WHICH WERE SUPPORT ED BY BILLS HAVE BEEN ACCEPTED, ANY FURTHER VERIFICATION OF THE CREDITORS IS REALLY NOT NECESSARY; THE REASON BEING THAT IT IS ANOTHER PART OF THE SINGLE TRANSACTION. TO MAKE SA LES, THERE SHOULD BE A PURCHASE. WITHOUT PURCHASE THE ASSESSE E CANNOT EFFECT SALES. THE DEPARTMENT BEING ACCEPTED THE PURCHASE AND SALES AS GENUINE, THE CREDITORS EMERGE D FROM THE SAME PURCHASE CANNOT BE DOUBTED. IN THE PRESEN T CASE, THE ASSESSEE HAS FOLLOWED THE PRACTICE PREVAILING I N THIS TRADE. BEING SO, WE FAIL TO UNDERSTAND AS TO WHY N ON FURNISHING OF THE DETAILS OF THE CREDITORS SHOULD B E MADE AN ISSUE BY THE ASSESSING OFFICER FOR MAKING THE AD DITION. FURTHER, THE ASSESSEE HAS FURNISHED FULL ADDRESSES OF THE PARTIES AND THESE PARTIES MAY HAVE DISCONTINUED BUS INESS AFTER LAPSE OF TIME, HENCE WE CANNOT FIND FAULT WIT H THE ASSESSEE. IT WAS BROUGHT TO OUR NOTICE THAT THE CR EDITORS WERE PAID OFF IN THE SUBSEQUENT YEARS THROUGH CHEQUES/CASH. BEING SO, THE ASSESSEE CANNOT KEEP CONTINUOUS TRACK ON THEM. EVEN, WHEN THE CREDITORS IS NOT FOUND AT THE ADDRESSES AVAILABLE WITH THE ASSESSEE, IN THE PRESENT CASE NO ADVERSE INFERENCE CAN BE DRAWN IN T HE ASSESSMENT OF THE ASSESSEE IN RESPECT OF THESE CRED ITORS. THIS IS MORE SO IN A CASE LIKE THIS WHEN THE PURCHA SE AND SALES HAVE BEEN DULY ACCEPTED, UNLESS AND UNTIL THE DEPARTMENT HAS BROUGHT ON RECORD THE BOGUS NATURE O F THE PURCHASE, IT IS NOT POSSIBLE FOR US TO HOLD THAT TH E LIABILITY IS BOGUS. IN OUR OPINION, THE BOGUS LIABILITY PRESUPP OSES TWO THINGS. FIRSTLY, THERE IS A LIABILITY INCURRED AND SECONDLY, SUCH LIABILITY HAS BEEN DISCHARGED WITHOUT BEING RE CORDED IN THE BOOKS OF ACCOUNTS, AS SUCH, NO MATERIALS IS AVAILABLE ON RECORD. THE LIABILITY IN QUESTION CANNOT BE SAI D TO BE ITA NO. 338/HYD/2007 SMT. B. SUSHILA, ZAHEERABAD 5 BOGUS SO AS TO ATTRACT ANY ADDITION ON THIS COUNT. IT ALSO APPEARS TO US THAT THE ASSESSING OFFICER HAS TREATE D THE LIABILITY TO BE OF CASH CREDIT IN NATURE AND THAT IS WHY HE FELT ANXIOUS TO HAVE THE IDENTITY OF THE CREDITORS ESTABLISHED. IN THIS RESPECT, FIRST OF ALL WE HOLD THAT THE CRED ITS IN THE SUNDRY CREDITORS ARE REFERABLE TO THE PURCHASES MAD E ON CREDIT BASIS AND THE PURCHASES HAVE BEEN HOLD TO BE GENUINE AND ACCEPTED AND AS SUCH THE CREDITS EMERGE D FROM THAT PURCHASES WHICH REMAINED OUTSTANDING IN THE BO OKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE TREATED TO HAVE REMAINED UNEXPLAINED. THE BALANCE APPEARING IN THI S ACCOUNT WHICH INCLUDED THE DISPUTED ADDITIONS ALSO IS THE SAME TOTAL OF PURCHASE AT THE END OF THE YEAR AS TH E GENUINE OF SUCH PURCHASE HAS NOT BEEN DISPUTED RATHER THE S AME HAS BEEN ACCEPTED, HENCE THE CREDIT STANDS FULLY EX PLAINED AND NO ADVERSE INFERENCE IS CALLED FOR EITHER ON FA CTS OR ON LAW THUS ON TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ADDITIONS CANNOT BE MADE U/S 68 OF THE INCOME TAX ACT, 1961. THE LIABILITY AMOUNTING T O RS.8,75,288/- SHOWN AGAINST FOUR PERSONS COULD NOT BE TREATED AS BOGUS LIABILITY. ACCORDINGLY, WE DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE GRO UND RAISED BY THE ASSESSEE ON THIS COUNT IS ALLOWED. 6. THE NEXT GROUND IS WITH REGARD TO SUSTAINING OF ADDITION OF RS.22,288/- AT 10% OF RS.2,22,284/- AS AGAINST ADDITION OF RS.58,643/- MADE BY THE ASSESSING OFFIC ER. 7. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER HAS DISALLOWED 25% OF THE SALARIES AND 10% OF EXPEN SES ON THE LORRY FREIGHT AND PACKING MATERIALS DEBITED TO P&L ACCOUNT AMOUNTING AT RS.58,643/- THE CIT(A) HAS ITA NO. 338/HYD/2007 SMT. B. SUSHILA, ZAHEERABAD 6 SUSTAINED THIS AMOUNT TO 10% OF THESE EXPENSES ON RS.2,22,284/- WORKS OUT AT RS.22,288/-. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR OPINION, THE DISALLOWANCE OF RS.22,288/- IS VERY REASONABLE COMP ARED TO THE VOLUME OF BUSINESS OF THE ASSESSEE AND THE ASSE SSEE COULD NOT PRODUCE SUPPORTING BILLS AND VOUCHERS ON THESE EXPENSES AS THE SAME WERE LOST IN TRANSIT. AS THE ASSESSEE HAS NOT PRODUCED THE REQUISITE BILLS TO SUPPORT HER CLAIM, IN OUR OPINION, THE DISALLOWANCE OF 10% MADE BY THE CI T(A) IS VERY REASONABLE DISALLOWANCE. ACCORDINGLY, THE DISA LLOWANCE IS CONFIRMED. 9. IN THE RESULT, THE ASSESSEE APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT 9.9.2 011 SD/ - G.C. GUPTA SD/ - CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT M EMBER DATED THE 9 TH SEPT, 2011 COPY FORWARDED TO: 1. SMT. B. SUSHILA, PROP. BALAJI CORPORATION, 2-3-125 , SUBHASHGUNJ, ZAHEERABAD. 2. THE ITO, SANGAREDDY 3. THE CIT(A) -III 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/