Sh. Mohinder Singh, Ludhiana V. ITO, Ludhiana

ITA 349/CHANDI/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9796 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Additional evidence; Assessment record
• Section: 40A(3); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 349/CHD/2013 ASSESSMENT YEAR: 2009-10 SHRI MOHINDER SINGH, VS THE ITO , 2516, ST. NO. 14, WARD IV(1), GILL ROAD, DASHMESH NAGAR, LUDHIANA. LUDHIANA. PAN: ABHPG9770B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGA L RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 13.07.2016 DATE OF PRONOUNCEMENT : 21.07.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-II LUDHIANA DATED 30.01.2013 FOR ASSESSMENT YEAR 2009-10. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. 3. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NOS. 8, 13 AND 14. THESE GROUNDS ARE, THERE FORE, DISMISSED AS NOT PRESSED. 4. GROUND NOS. 1 TO 7 READ AS UNDER : 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 89,176/- ON ACCOUNT OF 2 DIFFERENCE IN OUTSTANDING BALANCE IN THE CASE OF M/ S B.K. INDUSTRIES BY NOT CONSIDERING THAT THE DIFFERENCE I N THE SAID OUTSTANDING BALANCE WAS DUE TO THE DIFFERENCE IN TH E OPENING BALANCE (AS DISCUSSED IN PAA-4.5(I) OF HIS ORDER), FOR WHICH, NO ADDITION U/S 68 OR U/S 41 (1) CAN BE MADE. 2. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 9,72,463/- ON ACCOUNT OF OUTSTANDIN G BALANCE IN THE CASE OF M/S KANWALJT SALES. 3. THAT THE WORTHY CIT (A) WHILE CONFIRMING TH E ABOVE SAID ADDITION OF RS.9,72,463/- HAS ERRED IN NOT CONSIDER ING THAT THE SAID AMOUNT WAS CARRIED FORWARD AS OPENING BALA NCE FROM PREVIOUS YEARS AND FOR WHICH NO ADDITION U/S 6 8 (AS MADE BY THE ASSESSING OFFICER) OR U/S 41 (1) [AS CO NFIRMED BY THE CIT (A)] CAN BE MADE (AS DISCUSSED IN PARA-4.5( II) OF THE ORDER OF THE CIT (A)). 4. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 6,99,975/- ON ACCOUNT OF OUTSTANDIN G BALANCE IN THE CASE OF M/S G.M. ENTERPRISES AND ADDITION OF RS. 1,50,015/- OUT OF OUTSTANDING BALANCE IN CASE OF M/ S SUNNY STEELS ( AS PER PARA 4.5 OF HIS ORDER). 5. THAT THE WORTHY CIT (A) WHILE CONFIRMING THE ADD ITION OF RS. 6,99,975/- IN THE CASE OF M/S G.M. ENTERPRIS ES AND RS. 1,50,015/- IN THE CASE OF M/S SUNNY STEELS HAS ERRE D IN NOT CONSIDERING THAT THE SAID AMOUNTS WERE CARRIED FORW ARD AS OPENING BALANCES FOR WHICH COPIES OF ACCOUNTS WERE FILED BY THE PARTIES) AND, AS SUCH, NO ADDITION U/S 68 (AS M ADE BY THE AO) AND ALSO U/S 41 (1) AS CONFIRMED BY THE CIT(A) CAN BE MADE. 6. THAT, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,37,903/- ON ACCOUNT OF OUTSTANDIN G BALANCE IN THE NAME OF M/S BEESON INDUSTRIES ( AS DISCUSSED IN PARA 4.5 OF HIS ORDER). 7. THAT THE WORTHY CIT (A) WHILE CONFIRMING THE AD DITION OF RS. 1,37,903/-IN THE CASE OF M/S BEESON INDUSTRIES HAS ERRED IN 3 NOT CONSIDERING THAT THE SAID PARTY HAD FILED COPY OF ACCOUNT IN HIS BOOKS OF ACCOUNT BEFORE HIM AND SAME WAS MATCHI NG WITH THE ASSESSEE'S BOOKS. AS SUCH, ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF SAID AMOUNT U/S 68 AND THAT OF W ORTHY CIT (A) U/S 41 (1) IS UNCALLED FOR. 5. THE ISSUE ON GROUND NOS. 1 TO 7 IS COMMON CHALLENGING THE ADDITION OF RS. 20,64,579/- IN RESP ECT OF SUNDRY CREDITORS. 6. BRIEF FACTS OF THE CASE ARE THAT THAT AO NOTED T HAT AS PER THE BALANCE SHEET, THE APPELLANT HAD SHOWN SUND RY CREDITORS OF RS. 1,65,53,574/-. THE AO ASKED THE APPELLANT TO PRODUCE CONFIRMED COPY OF ACCOUNTS IN RESPECT OF SUNDRY CREDITORS EXCEEDING RS.1.00 LAC. THE APPELLANT FAILED TO PRODUCE CONFIRMATIONS IN RESPEC T OF FOLLOWING CREDITORS :- NAME OF THE PARTY AMOUNT OUTSTANDING M/S B.K. INDUSTRIES RS. 1,04,223/- M/S BEESON INDUSTRIES RS.1,37,903/- M/S G.M. ENTERPRISES RS.6,99,975/- KANWALJIT SALES RS.9,72,463/- M/S SUNNY STEELS RS.1,50,015 /- RS.20,64,579/- 6(I) ANOTHER OPPORTUNITY WAS PROVIDED TO THE APPE LLANT VIDE LETTER DATED 10.12.2011 TO PRODUCE CONFIRMATIO NS IN RESPECT OF SUNDRY CREDITORS. THE APPELLANT FAILED T O PRODUCE THE ABOVE MENTIONED CONFIRMATIONS. THE AO H ELD 4 THAT THE AMOUNT OF RS.20,64,579/- WAS UNEXPLAINED LIABILITY AND ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT U/S 68 OF THE INCOME TAX ACT. 6(II) THE AR OF THE APPELLANT VIDE WRITTEN SUBMISS IONS DATED 08.10.2012, SUBMITTED THAT OUT OF THE FIVE CA SES IN WHICH ADDITION HAS BEEN MADE AS ABOVE, SOME OF THE CONFIRMATIONS WERE NOT FILED AT THE TIME OF ASSESSM ENT PROCEEDINGS WHILE SOME OF THE CONFIRMATIONS WERE REJECTED BY THE AO ON THE GROUND THAT CONFIRMATIONS WERE NOT FILED ON THE LETTER HEAD OF THE PARTIES. THE AR OF THE APPELLANT FURTHER SUBMITTED THAT IN THE CASE OF FOL LOWING THREE PARTIES SECTION 68 IS NOT APPLICABLE AS NO NE W CREDIT HAS BEEN RECEIVED DURING THE YEAR :- I) M/S G.M.ENTERPRISES II) M/S SUNNY STEEL III) M/S KANWALJIT SALES 6(III) THE AR OF THE APPELLANT FURTHER SUBMITTED THAT THE APPELLANT HAD TAKEN NEW CREDIT ONLY FROM TWO OU T OF THE FIVE PARTIES IN RESPECT OF WHICH AO HAD MADE TH E IMPUGNED ADDITION. THE AR OF THE APPELLANT ALSO FIL ED A TABLE REGARDING THE ACCOUNTS OF THE FIVE PARTIES, W HICH IS REPRODUCED AS UNDER:- SR.NO. NAME OF THE PARTIES OPENING BALANCE CLOSING BALANCE CREDIT TAKEN DURING THE YEAR. 1. B.K. INDUSTRIES 11 1,369 (DR.) 104,223(CR.) 215,612 2. BEESON INDUSTRIES 15,220 (CR.) 1 50,039 (CR.) 134,819 3. G.M. ENTERPRISES 699,975 (CR.) 699,975 (CR.) - 4. M/S SUNNY STEEL 649,1 13 (CR.) 150,01 5 (CR.) - 5. M/S KANWALJIT SALES 1,382,463 (CR.) 972,463(CR.) - 5 THE AR OF THE APPELLANT REQUESTED THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE ADDITIONAL EVIDENCE I N THE FORM OF CONFIRMATIONS FROM THE CREDITORS MAY BE ACCEPTED. 6(IV) THE APPELLANT'S REQUEST WAS FORWARDED TO TH E AO FOR HIS COMMENTS. THE AO VIDE HIS REPORT DATED 1 1.10.2012, SUBMITTED THAT THE ADDITIONAL EVIDENCES MAY NOT BE ADMITTED. AFTER CONSIDERING THE AR'S SUBMISS IONS AND AO'S REPORT, THE ADDITIONAL EVIDENCE WAS ADMITT ED VIDE LETTER DATED 15.11.2012 AND THE AO WAS REQUEST ED TO CONDUCT NECESSARY ENQUIRIES REGARDING THE ADDITIONA L EVIDENCE FILED AND SUBMIT HIS REPORT. 7. THE AO VIDE HIS REPORT DATED 07.12.2012, REPOR TED AS UNDER:- 'IN THIS REGARD, IT IS SUBMITTED THAT AS REQUIRED I NQUIRES WERE CONDUCTED IN THE SUNDRY CREDITORS IN WHICH ADDITION AL EVIDENCES WERE FILED BEFORE YOUR GOOD SELF AND THE SAME WERE FORWAR DED TO THIS OFFICE. IN THIS REGARD, SUMMON WERE ISSUED TO THE FOLLOWING PARTIES : I) BEESON INDUSTRIES, ST. NO. 2-1/2, OSWAL COMPLEX, DA BA ROAD, G.T. ROAD, LUDHIANA II) M/S G.M. ENTERPRISES, K-3, PHASE-VII, FOCAL POINT, LUDHIANA. III) M/S SUNNY STEEL COMPANY, 639, INDUSTRIAL AR EA-B, LUDHIANA. III) M/S B.K INDUSTRIES, 9578, ST. NO. 17, KOT MANGAL SI NGH, LUDHIANA. THE CONFIRMATION FROM M/S B.K INDUSTRIES, 9578, ST. NO. 17, KOT MANGAL SINGH, LUDHIANA ALONGWITH POWER OF ATTORNEY OF SH. AJAY 6 CHAUDHARY, ADVOCATE COUNSEL OF THE ASSESSEE HAS BEEN REC EIVED. THE OUTSTANDING BALANCE AS PER PARTY ACCOUNT IS RS. 1 5 ,047/- INSTEAD OF RS. 1,04,223/- AS SHOWN BY THE ASSESSEE. HENCE ADDI TION OF RS. 89,I76/- IS CALLED FOR U/S 41(1) OF THE INCOME TAX ACT, 1961. HOWEVER NO ACCOUNT BOOKS, VOUCHERS AND COPY OF I.T. RETURNS AS RE QUIRED IN THE SUMMON WERE PRODUCED. THE CONFIRMATIONS ALONGWITH COPIES OF SOME SALES BILLS FROM THE PARTIES AT SR. NO. 1 TO 3 HAVE BEEN RECEIVED ONLY TH ROUGH MESSENGERS ON 07.12.2012. NEITHER THE COUNSEL OF AS SESSEE NOR THE ASSESSEE IN PERSON ATTENDED, NO BOOKS OF ACCOUN TS AND COPY OF INCOME TAX. RETURNS AS REQUIRED IN THE SUMMONS WER E PRODUCED. THEREFORE THE CREDIT WORTHINESS & GENUINENE SS OF THESE TRANSACTIONS CAN NOT BE PROVED & JUSTIFY. THE ASSESSEE WAS ASKED TO PRODUCED THE ABOVE MENTIO NED PARTIES ALONGWITH BOOKS OF ACCOUNTS AND BILLS FOR TH E RELEVANT PERIOD IN ORDER TO JUSTIFY THE CREDIT WORTHINESS & GE NUINENESS. BUT HE IS FAILED TO DO SO. IT IS ALSO SUBMITTED THAT AS PER ORDER SHEET ENTRY DATED 29.11,2011. IT IS MENTIONED THAT 'SH. PARAMJIT SINGH , ADVOCATE ATTENDED CASE PARTLY DISCUSSED. NO INFORMATION PROD UCED. ON THE LAST DATE OF HEARING SOME INFORMATION WAS PRODU CED IN R/O SUNDRY CREDITORS. IT HAS BEEN POINTED OUT THAT THE CONFIRMATION PRODUCED ARE NOT ON THE LETTER HEAD OF THE PARTIES. AGAIN ASKED TO PRODUCE CONFIRMED COPIES OF A/C FROM SUNDRY CRED ITORS AS PER QUESTIONNAIRE DATED 17.10.2011 DULY SERVED UPON THE 'A'. THESE CONFIRMATIONS ARE NOT ACCEPTED & ARE RETUNED T O THE 'A '. TO PRODUCE COMPLETE INFORMATION FAILING WHICH THE CAS E WILL BE DECIDED AS PER MATERIAL ON RECORD. NO FURTHER OPPORT UNITY IS TO ALLOWED. ADJ. TO 05.12.201 1. '. FROM THE PERUSAL O F ABOVE, IT IS QUITE EVIDENT THAT THERE IS NO NAME OF THE ABOVE SAI D CREDITORS HAVE BEEN MENTION:- IN 4HE ORDER SHEET. HENCE IT CAN NOT BE PRESUMED THAT ASSESSEE HAS FURNISHED 'INFORMATION IN RESPECT OF ABOVE MENTIONED SUNDRY CREDITORS. ' 8. COPY OF THE REPORT WAS PROVIDED TO THE ASSESSEE' S COUNSEL WHO HAS SUBMITTED AS UNDER : ' ACCORDING TO US, REPRESENTATIVES OF ALL THE PARTI ES HAD APPEARED BEFORE THE ASSESSING OFFICER AND SALE OR PURCHASE B ILLS RELATED TO THE 7 ASSESSEE WERE FILED AND THEIR STATEMENTS WERE ALSO RECORDED DURING THE COURSE OF REMAND PROCEEDINGS. THIS FACT IS VERI FIABLE FROM THE ASSESSMENT RECORD OF THE ASSESSEE AND, THUS, UNDER SUCH CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIF IED IN TREATING THESE TRANSACTIONS AS IN GENUINE AND FURTHER REGARDING TH E CREDITWORTHINESS IS CONCERNED, IT MAY BE STATED THAT THESE ARE NOT T HE CASES OF CASH CREDITS, BUT THESE ARE TRADE TRANSACTIONS AND, AS S UCH, THESE FACTS ARE NOT RELEVANT TO THE FACTS OF THE CASE. ' 9. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER AND WAS REQUESTED TO EXAMINE THE MATTER AND PRODUCE THE ASSESSMENT RECORD ALONGWITH ASSESSMENT REPORT. THE ASSESSING OFFICER REITERATE D THE FACTS ALREADY SUBMITTED IN THE EARLIER REPORT AND PRODUCED THE ASSESSMENT RECORD AND REMAND PROCEEDIN GS BEFORE LD. CIT(APPEALS). THE REPORT OF THE ASSESSI NG OFFICER DATED 02.01.2013 IS AS UNDER : 1. THE. ASSESSEE' COUNSEL HAS PRODUCED ON 07.12.2012 O NLY PURCHASE BOOK AND LEDGER WHICH WERE TEST CHECKED IN RESPECT OF FOUR PARTIES IN WHICH CONFIRMATION WERE RECEIVED. COPY OF ACCOUNTS ALONGWITH PHOTOCOPIES OF SOME BILLS OF THESE PARTIES WERE ALS O FILED. IN THE REPORT OF THIS OFFICE DATED 07.12.2012 THIS FACT WA S NOT DENIED. 2. THE ASSESSEE HAS ALREADY FILED CONFIRMATION OF ACCO UNTS FROM THE PARTIES BEFORE YOUR GOODSELF THE SAME WERE FORWARDE D TO THIS OFFICE FOR FURTHER NECESSARY INQUIRIES IN THE MATTER. THE SUMMONS WERE ISSUED TO THE FOUR PARTIES ON 20.11.2012 FOR 29.11.2012 TO PRODUCE (1) COMPLETE BOOKS ACCOUNTS ALONGWITH ALL T HE VOUCHERS, BANK STATEMENT FOR THE PERIOD 01.04.2008 TO 31.03.2 009 (2) COPY OF INCOME TAX RETURN FOR THE A. Y. 2009-10. NONE ATTEN DED ON THE GIVEN DATE NOR ANY WRITTEN REPLY RECEIVED. THE SUMMO NS WERE ALSO ISSUED TO THE ASSESSEE ON 27.11.2012 FOR 04.12.2 012. 3. ON 03.12.2012 THE CONFIRMATION WAS RECEIVED FROM M/ S B.K. INDUSTRIES, LUDHIANA ALONGWITH POWER OF ATTORNEY OF SH. AJAY CHAUDHARY, ADVOCATE COUNSEL OF THE ASSESSEE. THERE WAS DIFFERENCE OF RS. 891761- BETWEEN INFORMATION FILED BY THE ASS ESSEE AND M/S 8 B.K. INDUSTRIES, LUDHIANA. 4. ON 04.12.2012 THE COUNSEL OF THE ASSESSEE SH. P ARAMJIT SINGH ATTENDED BUT NO INFORMATION WAS FILED. HE WAS AGAIN ASKED TO PRODUCE THE PARTIES ALONGWITH BOOKS OF (ACCOUNTS AN D BILLS FOR THE RELEVANT PERIOD IN RESPECT OF THESE PARTIES. THE CA SE WAS FIXED FOR 06.12.2012. NONE ATTENDED ON 06.12.2012. 5. ON 7.12.2012 IN THE CASE OF M/S SUNNY STEEL CO . SH. RAJ AN, SUPERVISOR ATTENDED AND FILED THE COPY OF ACCOUNT ONLY, SH. ONKAR SINGH ACCOUNTANT HAD ATTENDED IN THE CASE OF GM ENT ERPRISES, LUDHIANA AND FILED THE COPY OF ACCOUNT AND COPY OF SOME BILLS AND SH. JASVEER SINGH NEPHEW OF THE PROP. M/S BEESON IN DUSTRIES ATTENDED FILED COPY OF ACCOUNT AND SOME COPIES OF B ILLS. ONLY CONFIRMED COPIES OF ACCOUNT ALONGWITH BILLS WERE FI LED BY THE PARTIES THROUGH MESSENGER NEITHER ANY PROP./PARTNER OR COUN SEL OF THE ABOVE MENTIONED THREE PARTIES ATTENDED. NO STATEMEN T OF ANY PERSON WAS RECODED DURING THE REMAND PROCEEDINGS. ONLY PRE SENT WERE MARKED ON THE ORDER SHEET OF THE PERSONS WHO SUBMIT THE CONFIRMATIONS AS MENTIONED ABOVE. NONE OF THE PARTY HAD PRODUCED THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AS REQUIR ED. 6. AS REGARD TO THE DIFFERENCE IN ONE ACCOUNT NAMELY M /S B.K. INDUSTRIES THERE IS DIFFERENCE IN THE ACCOUNT SUBMI TTED BY THE ASSESSEE TO YOUR GOODSELF AND THE CONFIRMED COPY SUBMITTED T O THIS OFFICE. 7. NO AUTHORIZED REPRESENTATIVE OF THE THREE PARTIE S HAD APPEARED BEFORE THE ASSESSING OFFICER. THESE REPRESENTATIVE S HAVE NOT ATTENDED THE OFFICE ON THE GIVEN DATE BUT THEY HAVE ATTENDED THE OFFICE ON 07.12.2012 WHEN THE COUNSEL OF THE ASSESSEE WAS ASK ED TO PRODUCE THE SAME. STILL THE ASSESSEE HIMSELF HAD NOT ATTEN DED THE OFFICE BUT ONLY SUBMIT THE INCOMPLETE INFORMATIO N THROUGH MESSENGERS. THUS IN THE ABSENCE OF COMPETE INFORMA TION GENUINENESS OF THESE TRANSACTIONS CAN NOT BE PROVED. IT IS FURT HER SUBMITTED THAT THE REPORT IN THIS CASE HAS TO BE SUBMITTED TO YOUR GOODSELF BEFORE 10. 12.2012. THE MESSENGERS HAD ATTENDED THE OFFICE ON 07.12.2012 AT 05.00 P.M. APPROX. AND SUBMIT THE INCOMPLETE INFORM ATION. HENCE THE ASSESSING OFFICER WAS NOT IN A POSITION TO ENFORCE THE PARTIES AT THAT TIME. 8. TO REPRODUCE THE FINDING OF ORDER SHEET SHOWS THAT ENOUGH OPPORTUNITIES WERE GIVEN TO THE ASSESSEE BEFORE MAK ING SUCH ADDITIONS. 9. REGARDING THE ADDITION ON ACCOUNT OF G.P. RATE AND ADDITION OF EXPENSES, IT IS SUBMITTED THAT ON 07.12.2012 ONLY P URCHASE BOOK, LEDGER WERE PRODUCED AND TEST CHECKED IN RESPECT OF ABOVE MENTIONED FOUR PARTIES ONLY. MORE OVER AT THE TIME OF ORIGINA L ASSESSMENT AMPLE TIME/AMPLE OPPORTUNITY WERE GIVEN TO THE ASSESSEE B Y THE THEN 9 ASSESSING OFFICER. 10. THE ASSESSEE IN THE REJOINDER, REITERATED THE S AME FACTS AND SUBMITTED THAT IN VIEW OF THE FACTUAL POS ITION EXPLAINED BY ASSESSING OFFICER, NO ADDITION IS LIAB LE TO BE MADE. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEP T CONTENTION OF THE ASSESSEE AND CONFIRMED ALL THE ADDITIONS EXCEPT IN THE CASE OF B.K. INDUSTRIES IN WHICH PART ADDITION WAS CONFIRMED. HIS FINDINGS IN PARA 4.5 OF THE IMPUGNED ORDER READ AS UNDER : 4.5 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SU BMISSIONS. THE ADDITION IN THIS CASE HAS BEEN MADE ON ACCOUNT OF C REDITS IN THE NAME OF FOLLOWING FIVE PERSONS:- NAME OF THE PARTY AMOUNT OUTSTANDING M/S B.K. INDUSTRIES RS. 1,04,223/- M/S BEESON INDUSTRIES RS. 1,37,903/- M/S G.M. ENTERPRISES RS. 6,99,975/- KANWALJIT SALES RS. 9,72,463/- M/S SUNNY STEELS RS. 1,50,015/- RS.20,64,579/- EACH OF THESE CREDITORS IS DISCUSSED SEPARATELY FOR THE PURPOSE OF VERIFYING THE CLAIM REGARDING THE GENUINENESS OF TH E CREDITORS I) BK INDUSTRIES:- IN THIS CASE ADDITION OF RS.1,04, 223/-, WAS MADE. DURING THE VERIFICATION OF ADDITIONAL EVIDENCE BY THE AO, IT WAS NOTICED THAT THE OUTSTANDING BALANCE IN THE CASE OF M/S B.K. INDUSTRIES AS PER THE CONFIRMA TIONS FILED WAS RS. 15,047/ - INSTEAD OF RS. 1,04,223/-. THERE WAS THUS A DIFFERE NCE OF RS. 89,176/-.. THE AR OF THE APPELLANT FAILED TO RECONCILE THIS DIFFERENC E. THE ADDITION TO THIS EXTENT OF RS.89,176/- OUT OF 1,04,223/- IS THEREFORE, CONFIRM ED. 10 II) KANWAIJIT SALES:- IN THIS CASE ADDITION OF RS.9,72,463/- WAS MADE. NO CONFIRMATION WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR DURI NG THE COURSE OF APPELLATE PROCEEDINGS. THE APPELLANT HAS MERELY CLAIMED THAT NO ADDITION WAS MADE IN THIS ACCOUNT DURING THE CURRENT YEAR AND THEREFORE PROVISIONS OF SECTION 68 ARE NOT ATTRACTED. IN THIS REGARD IT MAY BE RELEVAN T TO MENTION HERE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT HAD NOT PRODUCED THE BOOKS OF ACCOUNT BEFORE THE AO NEITHER HAD THE APPE LLANT FILED THE CONFIRMATIONS OF ACCOUNTS, INSPITE OF REPEATED OPPO RTUNITIES. IN THESE CIRCUMSTANCES AO COULD NOT HAVE VERIFIED WHETHER TH E AMOUNT SHOWN AS SUNDRY CREDITORS IN THE NAME OF KANWAIJIT SALES WAS CREDITS ARISING DURING THE YEAR OR WAS ON ACCOUNT OF 'OPENING BALANCE CARRIED OVER FROM LAST YEAR. IN ANY CASE THE FACTS REMAINS THAT THE AMOUNT OF CREDIT IN THE HANDS OF KANWAIJIT SALES REMAINED UNCONFIRMED. IN THESE CIRCUMSTANCES, IN CA SE, THE CREDIT ENTRY WAS ON ACCOUNT OF CARRIED FORWARD OPENING BALANCE AS PER T HE APPELLANT, THEN IN THE ABSENCE OF CONFIRMATIONS FROM THE CREDITORS IT CAN BE HELD THAT THE LIABILITY OF ASSESSEE HAD CEASED TO EXIST AND THE ADDITION WAS T HEREFORE JUSTIFIED U/S 41(1) OF THE INCOME TAX ACT. IN VIEW OF THE AFORESAID FAC TS AND CIRCUMSTANCES OF THE CASE, THE ADDITION OF RS.9,72,463/- MADE ON ACCOUNT OF THIS CREDIT BALANCE IS CONFIRMED. III) M/S G.M. ENTERPRISES, M/S SUNNY STEEL CO. AND M/S BEESON INDUSTRIES:- IN THESE CASES, WHILE VERIFYING THE ADDITIONAL EVID ENCES FILED BY THE APPELLANT THE AO ISSUED SUMMONS TO THESE CONCERNS FOR PERSONA L APPEARANCE AND ALSO FOR PRODUCTION OF BOOK OF ACCOUNTS AND PURCHASE/SALES B ILLS. NO ONE APPEARED ON THE DATE FIXED FOR HEARING IN RESPONSE TO SUMMONS. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE APPELLANT'S AR AND THE APPELLANT' S AR WAS ALSO ASKED TO PRODUCE THE AFORESAID THREE PERSON ALONGWITH RESPEC TIVE BOOKS OF ACCOUNTS. ONCE AGAIN ON THE DATE FIXED FOR HEARING NONE APPEA RED. THEREAFTER ON THE SUBSEQUENT DATE, SHRI RAJAN, SUPERVISOR OF M/S SUNN Y STEEL CO. FILED A COPY OF ACCOUNT. NO BOOKS OF ACCOUNT WERE PRODUCED NOR ORIG INAL SALE AND PURCHASE BILLS WERE PRODUCED. SIMILARLY, IN THE CASE OF M/S BEESON INDUSTRIES, SHRI JASVEER SINGH, NEPHEW OF THE PROPRIETOR APPEARED AN D FILED COPY OF ACCOUNT AND COPY OF SOME DETAILS. THE BOOKS OF ACCOUNT AND ORIGINAL BILLS ONCE AGAIN WERE NOT PRODUCED IN THIS CASE ALSO. MERE FILING OF COPY OF ACCOUNT WITHOUT PRODUCING THE BOOKS OF ACCOUNT AND ORIGINAL BILLS W HICH WERE SPECIFICALLY ASKED FOR BY THE AO DOES NOT ESTABLISH THE GENUINEN ESS OF TRANSACTION. WITHOUT 11 EXAMINING THE BOOKS OF ACCOUNTS, THE AO COULD NOT H AVE VERIFIED WHETHER THE COPY OF ACCOUNTS REFLECTED THE TRUE PICTURE OF TRAN SACTIONS OR IT WAS ONLY A COLLUSIVE ARRANGEMENT BETWEEN THE APPELLANT AND THE SE CONCERNS. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE OF APPELLANT HAS FAIL ED TO PROVE, THE GENUINENESS OF THE CREDIT ENTRIES WITH REGARD TO AFORESAID THREE C ONCERNS ALSO. INSPITE OF SPECIFIC OPPORTUNITIES BEING GRANTED TO THE APPELLA NT TO PRODUCE THESE CREDITORS ALONGWITH BOOKS OF ACCOUNT AND ORIGINAL PURCHASE/SA LES BILLS FROM WHICH THE AO COULD HAVE VERIFIED THE FACTS, THE APPELLANT FAI LED TO PRODUCE THE CREDITORS. THE APPELLANT THUS FAILED TO DISCHARGE HIS ONUS. THE FA CT THAT IN SOME OF THE CASES NO NEW CREDIT HAD BEEN INTRODUCED AND ADDITION UNDE R SECTION 68 WAS NOT CALLED FOR IS MERELY ACADEMIC. IN THESE CIRCUMSTANC ES, AS DISCUSSED ABOVE, THE ADDITION WAS JUSTIFIED UNDER SECTION 41(1) OF THE I NCOME TAX ACT. KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMSTANCES OF TH E CASE, THE ADDITION ON ACCOUNT OF CREDIT BALANCES STANDING IN THE NAME OF THESE THREE PERSONS IS ALSO CONFIRMED. IN THE RESULT, THIS GROUND OF APPEAL IS PARTLY ALLO WED. 11. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS SUBMITTED THAT IN THE CASES OF M/S B.K. INDUSTRIES, M/S G.M. ENTERPRISES, M/S SUNNY STEEL COMPANY AND M/S BEESON INDUSTRIES, CONFIRMATIONS HAVE BEEN FILED BE FORE THE AUTHORITIES BELOW. NO CONFIRMATION WAS FILED I N THE CASE OF M/S KANWALJIT SALES BECAUSE OF THE DISPUTE WITH THE PARTY. THE PARTIES HAVE CONFIRMED THE OUTSTAND ING BALANCES COMING FROM THE PRECEDING ASSESSMENT YEARS . IN THE CASE OF M/S B.K. INDUSTRIES, THE DIFFERENCE IN THE ACCOUNT OF THIS PARTY WAS DUE TO DIFFERENCE IN THE OPENING BALANCE WHICH IS IN EXISTENCE SINCE PAST YE AR. THIS FACT WAS VERIFIED BY THE ASSESSING OFFICER. I N THE CASE OF M/S KANWALJIT SALES, IT IS OUTSTANDING BALA NCE 12 SINCE ASSESSMENT YEAR 2004-05. IN THE CASES OF M/S G.M. ENTERPRISES, M/S SUNNY STEELS AND M/S BEESON INDUSTRIES, THEY HAVE FILED CONFIRMED COPY OF THE ACCOUNTS AND APPEARED BEFORE ASSESSING OFFICER AND ALL THE TRANSACTIONS MATCH WITH THEIR ACCOUNTS. THESE WERE OLD BALANCES, THEREFORE, IN ALL THE CASES, NO ADDIT ION UNDER SECTION 41(1) OF THE ACT COULD BE MADE. HE H AS ALSO SUBMITTED THAT THE AMOUNTS ARE OLD BALANCES AN D ASSESSEE HAS NOT CLAIMED ANY ALLOWANCE OR DEDUCTION IN EARLIER YEARS, THEREFORE, PROVISIONS OF SECTION 41( 1) OF THE ACT WOULD NOT APPLY. THE ASSESSEE HAS NOT WRITTEN OFF ANY AMOUNT PAYABLE TO THESE PARTIES IN THE BOOKS OF ACCOUNT THEREFORE, ADDITION IS WHOLLY UNJUSTIFIED. HE HAS SUBMITTED THAT THE AMOUNTS WERE OUTSTANDING ON ACCO UNT OF PURCHASES MADE FROM THESE PARTIES AND RELIED UPO N FOLLOWING DECISIONS : 1. CIT V G.P. INTERNATIONAL LTD. 325 ITR 25 (P&H) 2. CIT VS SMT. SITA DEVI JUNEJA 325 ITR 593 (P&H) 3. CIT VS SUGAULI SUGAR WORKS (P) LTD. 236 ITR 518 (P&H) 11(I) ON THE OTHER HAND, LD. DR RELIED UPON ORD ERS OF THE AUTHORITIES BELOW. 12. I HAVE CONSIDERED RIVAL SUBMISSIONS. THE F ACTS NOTED ABOVE ARE NOT IN DISPUTE THAT IN RESPECT OF A LL THE PARTIES, THERE WERE CLOSING BALANCES COMING FROM TH E 13 EARLIER YEARS. IN THE CASES OF M/S G.M. ENTERPRISE S, M/S SUNNY STEEL AND M/S KANWALJIT SALES, NO CREDIT WAS TAKEN DURING THE ASSESSMENT YEAR UNDER APPEAL. IN THE CASE OF M/S B.K. INDUSTRIES, M/S G.M. ENTERPRISES, M/S SUNNY STEEL AND M/S BEESON INDUSTRIES, CONFIRMED CO PY OF THE ACCOUNTS HAVE BEEN FILED BY THE PARTIES. TH ESE ARE OUTSTANDING BALANCES FROM EARLIER YEARS ON ACCOUNT OF PURCHASES MADE. COPY OF THE ACCOUNT OF M/S B.K. INDUSTRIES IS FILED IN THE PAPER BOOK AT PAGE 63 IN WHICH ON 08.08.2008, THERE IS A CREDIT BALANCE OF RS. 1,04,223/- WHICH WAS ON ACCOUNT OF PURCHASES MADE FROM THIS PARTY. IN THE CASE OF M/S BEESON INDUSTR IES, COPY OF ACCOUNT IS FILED AT PAGE 70 IN WHICH ON 23.03.2009, THERE IS A CREDIT BALANCE OF RS. 1,34,9 03/- ON ACCOUNT OF PURCHASES MADE FROM THIS PARTY. COPY OF ACCOUNT OF M/S SUNNY STEEL COMPANY IS FILED AT PAGE 77 OF THE PAPER BOOK IN WHICH ON 22.08.2008, THERE IS A CREDIT BALANCE OF RS. 1,50,015/- ON ACCOUNT OF PURC HASES MADE BY ASSESSEE. COPIES OF PURCHASE BILLS ARE ALS O FILED. THE ASSESSING OFFICER DID NOT CONSIDER THE DIFFERENCE IN THE OPENING BALANCE IN THE CASE OF M/ S B.K. INDUSTRIES. IN THE CASES OF M/S G.M. INDUSTRIES AN D M/S SUNNY STEELS, M/S KANWALJIT SALES, NO CREDITS HAVE BEEN TAKEN IN ASSESSMENT YEAR UNDER APPEAL AND THESE WER E OLD BALANCES. THE LD. CIT(APPEALS) CONFIRMED THE AD DITION BY APPLYING PROVISIONS OF SECTION 41(1) OF THE ACT WITHOUT APPRECIATING THE ABOVE FACTS. 14 12(I) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF G.P. INTERNATIONAL LTD. (SUPRA) HELD AS UNDER : ASSESSEE HAVING SHOWN THE AMOUNT PAYABLE BY IT TO ANOTHER COMPANY AS AN EXISTING LIABILITY IN ITS BOOKS AND NOT WRITTEN BACK THE SAME, IT CANNOT BE SAID THAT THE AFORESAID LIABILITY HAS CEASED TO EXIST AND, THEREFORE IT CANNOT BE TREATED AS INCOME BY INVOKING THE PROVISI ONS OF S. 41(1). 12(II) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SMT. SITA DEVI JUNEJA (SUPRA) HELD AS UNDER : ASSESSEE HAVING SHOWN THE IMPUGNED LIABILITIES IN ITS BALANCE SHEET AND FILED COPIES OF ACCOUNTS OF SUNDRY CREDITORS SIGNED BY THE CONCERNED CREDITOR, SUCH LIABILITIES CANNOT BE TREATED TO HAV E CEASED MERELY BECAUSE THEY ARE OUTSTANDING FOR SIX YEARS AND, THEREFORE, THE ADDITION MADE BY INVOKING S. 41(1) CANNOT BE SUSTAINED, MORE SO WHEN THE ASSESSING OFFICER HAS FAILED TO SHOW THAT DEDUCTION HAS BEEN ALLOWED IN RESPECT OF ANY TRADING LIABILITY OR THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT CONCERNING SUCH LIABILITIES BY WAY OF REMISSION OR CESSATION T HEREOF IN THE RELEVANT YEAR. 12(III) HON'BLE SUPREME COURT IN THE CASE OF SUGAU LI SUGAR WORKS PVT. LTD. (SUPRA) HELD AS UNDER : UNILATERAL ENTRY BY ASSESSEE IN THE ACCOUNTS TRANS FERRING THE AMOUNT TO THE CAPITAL RESERVE ACCOUNT WOULD NOT BRING THE MAT TER WITHIN THE SCOPE OF S. 41(1). 13. THE ASSESSEE HAS SHOWN THE ABOVE AMOUNTS AGAI NST THESE PARTIES AS AN EXISTING LIABILITY AND HAS NOT WRITTEN BACK THE SAME. THEREFORE, IT COULD NOT BE SAID THA T AFORESAID LIABILITY HAS CEASED TO EXIST, THEREFORE, IT CANNOT BE TREATED AS INCOME BY INVOKING PROVISIONS OF SECTION 41(1) OF THE ACT. FURTHER, THE ASSESSING O FFICER HAS FAILED TO SHOW THAT DEDUCTION HAS BEEN ALLOWED IN 15 RESPECT OF ANY TRADING LIABILITY OR THAT ASSESSEE H AS OBTAINED ANY BENEFIT CONCERNING SUCH LIABILITIES BY WAY OF REVISION OR CESSATION THEREOF IN THE RELEVANT YEAR. THEREFORE, THE ENTIRE ADDITION IS UNJUSTIFIED BY AP PLYING PROVISIONS OF SECTION 41(1) OF THE ACT. IT MAY ALS O BE NOTED HERE THAT IN THE CASES OF M/S B.K. INDUSTRIES AND M/S BEESON INDUSTRIES, THE ASSESSING OFFICER DID NO T MAKE ANY ADDITION OF THE CREDIT TAKEN DURING THE YE AR UNDER CONSIDERATION. 14. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT NO ADDITION COULD BE MADE AGAINST THE ASSESSEE. I, THEREFORE, SET ASIDE THE ORDERS OF AU THORITIES BELOW AND DELETE THE ENTIRE ADDITION. 15. IN THE RESULT, GROUND NOS. 1 TO 7 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 16. GROUND NOS. 9 TO 12 READ AS UNDER : 9. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING T HE ADHOC ADDITION OF RS. 85,000/- MADE BY THE ASSESSING OFFI CER OUT OF LABOUR EXPENSES OF RS. 10,01,996/- PACKING EXPENSES OF RS. 1480/- AND WAGES TO THE TUNE OF RS. 4,21,200/- WITHOUT POINTING OUT ANY SPECIFIC DISCREPANCY IN THE BOOKS OF ACCOUNTS. 10. THAT THE WORTHY CIT (A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 20,000/- OUT OF ADHOC ADDITION OF RS. 40,000 /- MADE BY THE ASSESSING OFFICER OUT OF SCOOTER EXPENSES, MISCELLA NEOUS EXPENSES AND STAFF WELFARE DEBITED AT RS. 21,150/-, RS. 14,6 22/- AND RS. 28,970/- RESPECTIVELY WITHOUT POINTING OUT ANY DISC REPANCY AS DISCUSSED IN PAGE 15, 16 AND 17 OF HIS ORDER. 16 11. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRM ING THE ADDITION OF RS. 10,000/- OUT OF CAR MAINTENANCE AND TRAVELING EXPENSES WITHOUT POINTING OUT ANY DEFECT ( AS DISCU SSED IN PAGE 15,16 & 17 OF HIS ORDER). 12. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 25,000/- OUT OF ADDITION OF RS. 50,000/- MAD E BY THE ASSESSING OFFICER OUT OF POSTAGE, REPAIR AND MAINTENANCE, DIW ALI EXPS., PRINTING AND STATIONERY, CARTAGE OUTWARD, POST AND TELEGRAPH WITHOUT POINTING OUT ANY DISCREPANCY ( AS DISCUSSED BY HIM AT PAGE 15,16 & 17) OF HIS ORDER. 17. THE ASSESSING OFFICER NOTED THAT ASSESSEE FAI LED TO PRODUCE BOOKS OF ACCOUNT AND OTHER DETAILS OF PURCHASES/SALES ETC., THEREFORE, ASSESSING OFFICER HELD THAT TRADING RESULTS OF THE ASSESSEE WERE NOT RELIA BLE. THE ASSESSEE HAS SHOWN GP RATE OF 7.9%. THE ASSESS ING OFFICER ESTIMATING THE PROFIT RATE BY APPLYING PROF IT RATE @ 9% AND MADE ADDITION OF RS. 3,21,130/-. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION. THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL AND SAME WAS ACCORDINGLY, DISMISSED AS WITHDRAWN. THE ABOVE ADDITIONS ARE MADE ON ACCOUNT OF DISALLOWANCE OF TH E EXPENDITURE UNDER VARIOUS HEADS ON WHICH ASSESSEE H AS RAISED GROUND NOS. 9, 10, 11 AND 12. 18. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW ALL THESE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES ARE WHOLLY UNJUSTIFIED. HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SMT. SANT OSH 17 JAIN 296 ITR 324 FOLLOWING THE DECISION OF ALLAHABA D HIGH COURT IN THE CASE OF BANWARI LAL BANSHIDHAR 22 9 ITR 299 HELD AS UNDER : WHERE THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED BY APPLYING A GROSS PROFIT RATE, THERE IS NO NEED TO L OOK INTO THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961, AS APPLYING THE GROSS PROFIT RATE TAKES CARE OF EXPEND ITURE OTHERWISE THAN BY WAY OF CROSSED CHEQUES ALSO. 19. SINCE IN THE CASE OF THE ASSESSEE, THE INCO ME OF THE ASSESSEE HAS BEEN COMPUTED BY APPLYING HIGHER G ROSS PROFIT RATE, THEREFORE, SEPARATE ADDITION ON ACCOUN T OF DISALLOWANCE EXPENDITURE WOULD BE UNJUSTIFIED. I, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELO W AND DELETE THE ABOVE ADDITIONS ON GROUND NOS. 9, 10, 11 AND 12. THESE GROUNDS ARE, THEREFORE, ALLOWED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 21 ST JULY,2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH