M/s Sri Jagannath Cotton Ginning and Pressing Pvt. Ltd, Rayagada V. ACIT, Berhampur

ITA 35/CTK/2012

• Counselvise Citation: 3522114 RSA 2012
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 14-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 10-01-2012
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: J M PATTANAIK
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Peak credit; Source of fund
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM, AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 35/CTK/2012 (ASSESSMENT YEAR 2001 - 02) M/S. SRI JAGANNATH COTTON GINNING AND PRESSING PVT. LTD., RAYAGADA, PAN: AAFCS 7038 A VERSUS ASST.COMMISSIONER OF INCOME - TAX, BERHAMPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI J.M.PATTANAIK, AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, CIT - DR DATE OF HEARING : 14.03.2012 DATE OF PRONOUNCEMENT : 16.03.2012 ORDER S HRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE IS ON THE ORDER OF THE LEARNED CIT(A) WHO WAS DIRECTED BY THE TRIBUNAL TO RECONSIDER THE CASE OF THE ASSESSEE APPELLANT BEFORE HIM IN THE LIGHT OF THE REMAND REPORT OBTAINED BY THE LEARNED CIT(A) BUT NOT PUT FORTH BEFORE THE ASSESSEE APPELLANT BEFORE IT FOR REBUTTAL WHEN THE PRESENT CIT(A) MERELY INCORPORATED THE REMAND REPORT AND THE REBUTTAL OF THE ASSESSEE APPELLANT IN HIS ORDER BY CONCLUDING AS FOLLOWS: 4.3. I HAVE CAREFULLY CONSIDERED THE MATTER. AS PER DIRECTION OF THE HONBLE ITAT THE COPY OF THE REMAND REPORT HAS BEEN GIVEN TO THE APPELLANT AND THEREAFTER THE APPELLANT HAS FILED A WRITTEN SUBMISSION, THE EXTRACTS OF WHICH HAVE BEEN REPRODUCED AT PARA - 4.1 ABOVE. THERE IS ABSOLUTELY NOTHING NEW IN THE C ONTENTION OF THE APPELLANT RELATING TO THESE TWO ADDITIONS, THE ENTIRE FACTS NOW BEING STATED BEFORE ME WERE ALSO CONSIDERED BY MY PREDECESSOR IN OFFICE. THE LD. AIR DURING THE HEARING CORD NOT SPECIFY AS TO WHICH ASPECTS OR DETAILS ARISING OUT OF THE REMA ND REPORT WERE NOT CONSIDERED BY THE CIT(A) WHICH NEEDS TO BE RECONSIDERED NOW. IN VIEW OF THE SAME, SINCE ALL THE MATERIALS ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 2 AND THE ARGUMENTS NOW ADVANCED BEFORE ME WERE ALSO BEFORE MY PREDECESSOR WHO CONSIDERED THE SAME WHILE GIVING HIS DECISION, I AM AF RAID ANY ATTEMPT ON MY PART TO HAVE A RE - LOOK AT THE ADDITION WOULD AMOUNT TO REVIEWING THE ORDER OF MY PREDECESSOR WHICH IS CLEARLY NOT PERMITTED BY THE STATUTE. IN VIEW OF THE SAME, I HAVE NO ALTERNATIVE BUT TO RECONFIRM THE ADDITIONS OF 79,50,000 AND 20,50,000 BY RESPECTFULLY FOLLOWING THE DECISION OF MY PREDECESSOR. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE APPELLANT IS A PRIVATE LIMITED COMPANY AND CARRIED ON THE BUSINESS OF RAW COTTON MANUFACTURING AN D PRESSING , BEING A SSI UNIT IN THE BACKWARD DISTRICT OF ORISSA OF KBK REGION AT RAYAGARA. THE ASSESSEE HAS SETUP ITS BUSINESS IN THE FINANCIAL YEAR 1999 - 2000 (RELEVANT TO ASSESSMENT YEAR 2000 - 2001). IN THE SAID YEAR THE ASSESSEE COMPANY HAD NOT INSTALLED PRESSING MACHINES AND OPERATED ONLY WITH GINNING MACHINE. THE APPELLANT COMPANY HAS FILED THE RETURN OF INCOME AT LOSS ( - ) 2,32,100. THE PRESSING MACHINES WERE INSTALLED ONLY DURING F/Y. 2000 - 01. THE RETURN OF INCOME WAS FILED ON DT. 26.10.2001 BY DISCLOSING NET INCOME OF 1,04,920 AS PER THE AUDITED BOOKS OF ACCOUNTS. IN THE ASSESSMENT YEAR 2001 - 02, THE ASSESSEE COMPANY HAS UNDERTAKEN THE PROCUREMENT OF RAW COTTON AND RECEIVED ADVANCES FROM M/S RAUNAK ENTERPRISERS, SHIVA KRISHNA COTTON TRADERS AND SHRI BHAGIRATHI TEXTILES LTD, M/S BALAJI TRADING CO., R.M.MOHITE ETC. THE ASSESSING OFFICER , IN HIS ASSESSMENT ORDER DTD. 31/03/2 004 U/S 143(3) , HAS MADE THE FOLLOWING ADDITIONS. UNDER ADVANCE AND UNSECURED LOAN 1 . RAUNAK ENTERPRISES 79,50,000 ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 3 2 . SIVA KRISHNA COTTON TRADERS / M/S IDUPULAPADU COTTON MILLS PVT. LTD 49,00,000 3 . SRI GOPAL RAMESH KUMAR 5,00,000 4 . SHARADA TRADING 5,00,000 5 . UNDER SUNDRY CREDITOR: A . BAJAJ STEEL INDUSTRES 1,50,000 B . I KAMAL RAJU 7,56,910 C . BHABANI AGENCY 2,27,078 D . SANKAR ELECTRICALS 81,100 E . TARUNSRI COTTON 85,258 6 . UNDER INVESTMENT IN FACTORY BUILDING 1,01,961, 2.1. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A), OUT OF THE AFORESAID ADDITION S , HAS DELETED THE FOLLOWING VIDE HIS ORDER DATED 13.12.2005 IN IT APPEAL NO.0064/04 - 05: - A. SHIVA KRISHNA COTTON TRADER 28,50,000 B. SRI GOPAL RAMESH KURNAR 5,00,000 C. SARAD TRADING 5,00,000 D. BAJA STEEL INDUSTRIES LTD. 1,50,000 E. I KAMAL RAJU 7,56,910 F. UNEXPLAINED INVESTMENT IN BUILDING 1,01,961 HOWEVER, THE LEANED CIT(A) UPHELD THE ADDITION OF 79,50,000 ON ACCOUNT OF M/S.RAUNAK ENTERPRISES, 20,50,000 O N ACCOUNT OF SHIVA KRISHNA COTTON TRADERS AND 3,93,436 AS UNEXPLAINED SUNDRY CREDITORS IN RESPECT OF BHABI AGENCY, SANKAR ELECTRICALS AND TARUNSRI COTTON. 2.2. AGAINST THE SAID ORDER OF THE LEARNED CIT(A), THE ASSESSEE FILED APPEAL BEFORE THE ITAT,CUTTACK BENCH AGAINST THE SUSTENANCE OF ADDITIONS AS DETAILED ABOVE AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING THE FACTS AND CIRCUMSTANCES, THE TRIBUNAL IN ITA ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 4 NO.94/CTK/2006, VIDE ORDER DT.24.07.2007, WAS PLEASED TO RESTORE THE IS SUE TO THE FILE OF THE LEARNED CIT(A) FOR RE - DECIDING THE APPEAL AFRESH AFTER CONFRONTING THE REMAND REPORT AND GIVING DUE OPPORTUNITY TO THE ASSESSEE TO HAVE ITS SAY ON THE REMAND REPORT. PURSUANT TO THE SAID ORDER OF THE TRIBUNAL , THE LEARNED CIT(A) PAS SED THE IMPUGNED ORDER DT.16.11.2011 RECONFIRMING THE ADDITIONS OF 79,50,000 AND 20,50,000 UNDER ADVANCE AND UNSECURED LOAN FROM RANUAK ENTERPRISES AND SIVA KRISHNA COTTON TRADERS RESPECTIVELY. IT IS AGAINST THIS ORDER OF THE LEARNED CIT(A) DT .16.11.2011 , THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI J.M.PATTANAIK, THE LEARNED COUNSEL FOR THE ASSESSEE FURNISHED A VOLUMINOUS PAPER BOOK . IN RESPECT OF CONFIRMATION OF ADDITION OF 79,50,000 AS UNEXPLAINED CASH CREDIT, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT PURSUANT TO THE ORDER OF THE ITAT DT.24.7.2007, THE LEARNED CIT(A) HAS GONE THROUGH THE REMAND REPORT SUBMITTED ON THE BASIS OF OATH RECORDED FROM J.K. BAROT , P ROPRIETOR OF M/S. RUNAK ENTERPRISES (COPY PLACED IN THE PB UNDER ANNEXURE 11) . IN THE REMAND REPORT MR. J.N. BAROT PROPRIETOR OF M/S. RUNAK ENTERPRISES HAS IDENTIFIED AS THE PROPRIETOR OF M/S. RUNAK ENTERPRISES WHICH HAS FURTHER CERTIFIED THROUGH SUPPORTED DOCUMENTS VIZ. SALES TAX REG ISTRATION CERTIFICATE UNDER MAHARASHTRA STATE GOVT . AND CST REG ISTRATION CERTIFICATE ( PLACED AT PAGE S - 153/154 OF PAPER BOOK AND PAGE - 150 UNDER ANNEXURE - 11 ), WHICH IS THE LEDGER ACCOUNT MAINTAIN ED WITH THE APPELLANT COMPANY BEING TALLIED WITH THE ACCOUNT COPY OF M/S. RUNAK ENTERPRISES (SEE PAGES PAGE - 151 AS WELL AS PAGE - 159 OF THE PB) . HENCE, THERE IS NO DOUBT REGARDING THE TRANSACTIONS. ALL THE PAYMENTS OF M/S. RUNAK ENTERPRISES TO THE APPELLANT COMPANY HAS ROUTED THROUGH BANK ACCOUNT AS CLEARLY REVEALED FROM PAGE - 159, 151 OF THE PB AS WELL AS CORRESPO NDING BANK ACCOUNT UNDER ANNEXURE - 9 ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 5 RELATING TO BANK ACCOUNT OF M/S. RUNAK ENTERPRISES AT MAIN ROAD RAYAGARA VIDE CURRENT A/C. NO.01050/061004 ( PAGE - 160 OF THE PB) , ACCOUNT AT STATE BANK OF MYSORE AT KOLHAPUR VIDE CURRENT A/C. NO.464 ( PAGE - 166 OF PB) AND THE ASSESSEES ACCOUNT AT SBI, RAYAGARA BEARING A/C. NO.050293 AT SBI RAYAGARA (P AGE - 118 OF THE PB) . BESIDES THIS, M/S. ABHISHEK COTSPIN MILLS LTD. , HAS CONFIRMED BY WAY OF A CERTIFICATE OF CONFIRMATION ON DT.09/12/2005 ( PAGE - 177 OF THE PB) AS J.N. BAROT IS WORKING AS AGENT OF HIS COMPANY FOR PROCURING COTTON B ALES FROM M/S. SHREE JAGANNATH COTTON GINNING AND PRESSING PVT. LTD., RAYAGARA. M/S. ABHISHEK COTSPIN MILLS LTD. , HAS ALSO ISSUED A CERTIFICATE ON DT.13/07/2007 ( PAGE - 211 OF THE PB) DISCLOSING THE PAYMENTS MADE TO M/S. RUNAK ENTERPRISES AND AS SUCH M/S. RUNAK ENTERPRISES IS WORKING AS THE AGENT OF SO MANY ORGANIZATION S AS CLEARLY STATED IN HIS STATEMENT ON OATH RECORDED ON DT.09/12/2005, THEREBY THE CREDIT WORTHINESS OF M/S. RUNAK ENTERPRISES HAS BE EN ESTABLISHED. M/S. RUNAK ENTERPRISES HAS ALSO ISSUED A CONFIRMATION LETTER TO THE ASSESSEE COMPANY (PAGE 152 OF THE PB) STATING THAT THE OUTSTANDING DUES AS ON DT.31/03/2001 WAS AT 11,17,048, WHICH HAS COMPLETELY TALLIED AS PER THE STATEMENT OF ACCOUNT S ( PAGE - 151 AND 159 OF THE PB) . 3.1. SHRI PATTANAIK, LEARNED AR OF THE ASSESSEE, ON THE BASIS OF FACTS STATED IN THE EARLIER PARAGRAPH, VEHEMENTLY CONTENDED THAT THE LEARNED CIT(A) WITHOUT CAREFULLY GOING THROUGH THE RECORDS AND EVIDENCE PRODUCED BEFORE HIM, HAS PASSED THE IMPUGNED ORDER, HAS RECONFIRMED THE ADDITION SIMPLY OBSERVING THAT ALL THE MATERIALS AND ARGUMENTS ADVANCED BEFORE HIM WERE ALSO BEFORE HIS PREDECESSOR WHO HAS CONSIDER ED THE SAME WHILE GIVING HIS DECISION AND ANY ATTEMPT ON HIS PART T O HAVE A RELOOK AT THE ADDITION ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 6 WOULD AMOUNT TO REVIEWING THE ORDER OF HIS PREDECESSOR WHICH IS CLEARLY NOT PERMITTED BY THE STATUTE. 3.2. THE LEARNED AR OF THE ASSESSEE CONTINUED HIS ARGUMENTS SUBMITTING THAT W HEN THE IDENTITIES AND GENUINENESS OF TRAN SACTIONS AS WELL AS THE SOURCE OF FUND HAVE BEEN ESTABLISHED WITH NECESSARY EVIDENCES, THERE SHOULD NOT BE ANY ADDITION IN THE HAND OF THE APPELLANT COMPANY AS UNEXPLAINED CASH CREDIT. THE LD. CIT(A) IN THE ORDER OF APPEAL HAS TRIED TO BUILT UP A CASE AS IF THE ENTIRE MONEY BELONG ED TO ASSESSEE COMPANY FROM UNDISCLOSED SOURCES. 3.3. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNT IN DISPUTE IS ONLY A TRADE ADVANCE AND THE MONEY HAS BEEN PAID FOR TRADING ACTIVITIES NOT NECESSARILY FOR EAR NING INTEREST AS UNSECURED CREDITORS. THEREFORE, THE ADDITIONS MADE U/S. 68 ARE COMPLETELY UNCALLED FOR. FURTHER, HE SUBMITTED THAT J.N. BAROT , P ROPRIETOR OF M/S. RUNAK ENTERPRISES AND M/S. ABHISHEK COTSPIN MILLS LTD ., ARE THE INCOME TAX ASSESSEES HAVIN G PAN NO: - AFAPB00414 N AND AACCA0323P. FURTHER THE LEARNED AR OF THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT AS PER THE STATEMENT RECORDED ON OATH FROM THE PROPRIETOR OF M/S. RUNAK ENTERPRISES THAT THE ABHISHEK COTSPIN MILLS LTD., THEY HAD MADE ADVAN CE OF 1,87,65,540 TO M/S.RUNAK ENTERPRISES IN ORDER TO PURCHASE MATERIAL FROM THE ASSESSEE COMPANY AND IN TURN THE SAID M/S.RUNAK ENTERPRISES HAS ROUTED THE SAID FUND THROUGH BANK, WHICH IS CLEARLY REFLECTED IN THE LEDGER ACCOUNT OF THE ASSESSEE COMPANY ( PAGE - 150 OF THE PAPER BOOK UNDER ANNEXURE - 11 AS WELL AS THE ABSTRACT AT PAGE 159 OF THE PB) AND IN THE STATEMENT ON OATH ( PAGE 184 OF THE PB) MR. J.N. BAROT , PROPRIETOR OF M/S.RUNAK ENTERPRISES HAS ADMITTED THE REFUNDED AMOUNT WAS AT ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 7 1,16,20,000 AND CLOSIN G BALANCE AT 11,17,048 AS WELL AS RECEIPT OF COTTON BALES TO THE TUNE OF 60,28,492/ - AND COMMISSION AT 25,532. 3.4. ON THE BASIS OF ABOVE, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT WHERE THE EXISTENCE OF THE CREDITOR , AS IN THE INSTANT CASE, WAS NOT IN DOUBT AND THE CREDITOR HAS ADMITTED FOR GIVING ADVANCES, THE EXPLANATION FURNISHED BY THE SAID CREDITOR ABOUT HIS SOURCE OF SUCH ADVANCEMENT SUPPORTED BY VARIOUS DOCUMENTS PLACED ON THE PAPER BOOK AS STATED EARLIER, ANY PRESUMPTION THAT THE SOURCE O F SUCH ADVANCEMENT BY HIM EMANATED FROM THE ASSESSEE SO AS TO MAKE ADDITION OF THE SUM IN THE HANDS OF THE ASSESSEE , IS NOT AT ALL JUSTIFIED . THE ASSESSEE HAVING CLEARLY ESTABLISHED THE TRANSACTIONS WITH HIS CREDITOR AS GENUINE AND HIS IDENTITIES AND CRED IT WORTHINESS , BY PRODUCING ALL EVIDENCE/DOCUMENTS, THE ADDITION AS RECONFIRMED BY THE LEARNED CIT(A) IS NOT JUSTIFIED AND AS SUCH, THE ADDITION DESERVES TO BE DELETED. 3.5. AS REGARDS SUSTENANCE OF ADDITION OF 20,50,000 RELATING TO M/S. SHIV KRISHNA CO TTON TRADERS THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT M/S. SHIV KRISHNA COTTON TRADERS WAS WORKING AS AN AGENT OF M/S. IDUPULAPADU COTTON MILLS LTD., GUNTUR. M/S. IDUPULAPADU COTTON MILLS LTD., GUNTUR HAS ISSUED HIS CONFIRMATION ON DT.07/06/2007 (PAG E 238 OF THE PB) CONFIRMING M/S. SHIV KRISHNA COTTON TRADERS A S HIS AGENT FOR PURCHASE OF COTTON LINT AND IN THE SAID LETTER IT HAS ALSO BEEN CONFIRMED THAT THE SAID COMPANY HAD MADE TWO DEMAND DRAFTS ON DT.13/11/2000 VIDE D.D. NO.423533 AND 423534 AT 10 LAKHS EACH TO THE ASSESSEE COMPANY DIRECTLY. THE SAID 20 LAKHS HAS ALSO ENTERED IN THE BANK ACCOUNT OF THE ASSESSEE ON DT.14TH NOVEMEBER2000 (COPY PLACED AT PAGE - 141 OF THE PB) . THE LEARNED AR OF THE ASSESSEE ALSO FURNISHED A COPY OF LEDGER ACCOU NT OF M/S. IDUPULAPADU COTTON MILLS LTD., ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 8 GUNTUR ( PAGE - 239 OF THE PB). THE STATEMENT ON OATH W AS RECORDED FROM SRI G. RAMAIAH PROPRIETOR OF M/S. SHIV KRISHNA COTTON TRADER ON DT.09/12/2005 ( PAGE - 244 UNDER ANNEXURE - 14 OF THE PB) , WHERE HE HAS STATED ON OA TH THAT HE WAS WORKING AS COMMISSION AGENT AND ALSO ARRANGED COTTON BALES WORTH OF 49 LAKHS FROM THE ASSESSEE COMPANY FOR WHICH HE HAS TO GET COMMISSION 32,180 . AND FURTHER STATED HE IS WORKING AS A N AGENT OF SO MANY ORGANIZATIONS. BESIDES THIS, HE HAS ALSO ADMITTED M/S. IDUPULAPADU COTTON MILLS LTD., GUNTUR HAS MADE TWO DRAFT OF 10 LAKHS EACH IN FAVOUR OF THE ASSESSEE COMPANY DIRECTLY AND ALSO CONFIRM HE COULD NOT ABLE TO SAY ANYTHING REGARDING BALANCE 50,000 ALTHOUGH THE SAME HAS BEEN CONFIRMED IN THE LEASE AGREEMENT DT.14TH AUGUST2000 (P AGE - 8 OF THE PAPER BOOK ) . M/S. SHIV KRIS HNA COTTON TRADERS HAS ALSO CONFIRMED THE BALANCE LYING WITH THE APPELLANT COMPANY AT 32,180.24 ( PAGE - 297 OF THE PB) AS THE SAME RELATED TO HIS COMMISSION EXCLUSIVELY. AS M/S. SHIV KRISHNA COTTON TRADERS IS WORKING AS THE AGENT OF M/S. IDUPULAPADU COTTO N MILLS LTD., GUNTUR FOR WHICH THE DEMAND DRAFTS ON DT.13/11/2000 WAS ALSO REFLECTED IN ITS LEDGER ACCOUNT (PAGE - 298 OF THE PB) . 3.6. THE LEARNED AR OF THE ASSESSEE ELABORATED THE FACTS BY STATING THAT M/S. IDUPULAPADU COTTON MILLS LTD, GUNTUR(A.P) IN I TS CONFIRMATION LETTER AT (PAGE 229 PB) HAS ADMITTED THAT THE SAID COMPANY HAS MADE ADVANCE OF 20,00,000 ON DT.13.11.2000 VIDE DRAFT NOS: - 423534 AND 423533 @ 10,00,000 EACH AND ALSO RECEIVED MATERIALS WORTH 24,38,505 AND THE BALANCE OUTSTANDING AMOUNT AT 4,38,505 ON DT.08.10.2002. MR. G. RAMAIHA , PROPRIETOR OF M/S. SHIV KRISHNA COTTON TRADERS I S AN INCOME TAX ASSESSEE HAVING PAN: - AEUPC3117 I . M/S. IDUPULAPADU COTTON MILLS LTD., GUNTUR IS ALSO AN EXISTING INCOME TAX ASSESSEE BEARING PAN - AAACI 4789 F (PAGE 238 PB). IT ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 9 IS ON THESE BASIS, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT WHEN THE IDENTIT Y, GENUINENESS OF TRANSACTIONS AS WELL AS CREDIT WORTHINESS CLEARLY VISUALIZED FROM THE INCOME TAX RECORD OF IDUPULAPADU COTTON MILLS PVT. LTD ( PAGE 276 PB) WHO WAS HAVING PURCHASE OF RAW MATERIALS DURING THE YEAR WORTH 3,83,24,437 AND SALES TURNOVER AT 9,44,25,612 AND HAVING SHARE CAPITAL OF THE COMPANY AT 2,00,00,00 0, THE QUESTION OF DOUBTING THE PURCHASE OF COTTON AT 20,00,000 OF THE SAID COMPANY SHOULD NOT BE DOUBTED . HOWEVER, 20,00,000 HAS BEEN ENTERED IN THE BA NK ACCOUNT OF THE ASSESSEE ON DT.14.11.2000 ( PAGE 141 PB UNDER ANNEXURE: - 9 ) . HENCE, THE TRANSACTIONS ARE GENUINE. THE LD.CIT(A) HAS NOT VERIFIED THE BANK ACCOUNT OF THE ASSESSEE EVEN THOUGH IT IS VERY MUCH CLEAR AND TRANSPARENT, AND SUCH, THE ADDITION OF 20,00,000 RECONFIRMED BY THE LEARNED CIT(A) IN THE SECOND INNING DESERVES TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. REGARDING SUSTAINABILITY OF ADDITION OF 50,000 THE ASSESSING OFFICER HAS NOT PUT ANY QUESTION SO FAR AS AGREEMENT IS CONC ERNED WITH M/S. SHIVAKRUSHNA COTTON TRADERS . THE LEARNED AR OF THE ASSESSEE FURTHER CONTENDED THAT O NCE THE ASSESSEE IS ABLE TO ESTABLISH , AS IN THE PRESENT CASE, THAT HE HAS IN FACT RECEIVED MONEYS FROM ANOTHER ENTITY, THE ASSESSEE CANNOT BE BURDENED WITH A FURTHER ONUS OF ESTABLISHING THE SOURCE OF SOURCE. IT IS ALSO NOT BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN CREDITOR AND SUB - CREDITOR NOR IS IT THE BURDEN OF ASSESSEE TO PROVE THAT SUB - CREDITOR HAD CREDITWORTHINESS TO ADVANCE CASH CREDIT TO CREDITOR FROM WHOM CASH CREDIT HAD BEEN EVENTUALLY, RECEIVED BY THE ASSESSEE. WHERE THERE WAS NO LAPSES ON THE PART OF THE ASSESSEE TO SUBSTANTIATE ALLEGED DEPOSITS , THE LEARNED AR OF THE ASSESSEE VEHEMENTLY CONTENDED THAT NO ADDIT ION WAS CALLED FOR. FURTHER, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT WHERE THE EXISTENCE ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 10 OF THE CREDITOR WAS NOT IN DOUBT AND THAT CREDITOR HAS ADMITTED TO HAVE MADE TRADE ADVANCE TO THE ASSESSEE, THE FACT THAT THE EXPLANATION FURNISHED BY HIM ABOUT HIS SOURCE OF SUCH ADVANCEMENT HAD NOT BEEN ACCEPTED BY THE REVENUE AUTHORITY COULD NOT LEAD TO ANY PRESUMPTION THAT THE SOURCE OF SUCH ADVANCEMENT BY HIM EMANATED FROM THE ASSESSEE SO AS TO MAKE ADDITION OF THE SUM IN THE HANDS OF THE ASSESSEE. THE L EARNED AR OF THE ASSESSEE PRAYED FOR DELETION OF THE ADDITION OF 20,50,000 MADE U/S.68 . 4. THE LEARNED CIT - DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. SHE SUBMITTED THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS TRIED TO DIVERT FROM THE ISSUE ON HAND INSOFAR AS IT WAS CATEGORICALLY CONSIDERED BY T HE ASSESSING OFFICER THESE AMOUNTS FOR TAXATION UNDER THE PROVISIONS OF SECTION 68. THE ONUS WHICH LIED UPON THE ASSESSEE WAS NOT DISCHARGED TO THE SATISFACTION OF THE ASSESSING OFFICER WHO IN HIS ELABORATE ORDER INCLUDING THE CORRESPONDENCES WITH THE CRED ITORS AND OTHER MATERIAL COMPUTED THE PEAK CREDITS FOR THE PURPOSE OF TAXATION INFERRED THAT SOURCE AS SOUGHT TO BE HELD BY THESE CREDITORS WAS ACTUALLY THE FUNDS OF THE ASSESSEE ONLY. THE ASSESSEE HAS BEEN CONSTANTLY GIVEN DIFFERENT ANSWERS SHIFTING THE HOLDING OF AMOUNTS WHICH THE ASSESSING OFFICER WAS WITHIN HIS JURISDICTION TO HOLD AS TAXABLE IN THE HANDS OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 68. SHE ALSO SUPPORTED THE ORDER OF THE LEARNED CIT(A) WHO ON THE DIRECTION OF THE TRIB UNAL CONSIDERED THE SUBMISSIONS OF THE ASSESSEE APPELLANT WHEN THE REMAND REPORT WAS PUT FORTH BEFORE THE ASSESSEE APPELLANT AND FINDING NO CONTENTION WORTH ITS MERITS CONFIRMED THE ADDITION. HE, THEREFORE, CONFIRMED HIS PREDECESSORS ORDER WHICH WAS FULLY SUPPORTED FOR HER PART OF SUBMISSIONS. ON A SPECIFIC QUERY BY THE BENCH WHETHER THE LEARNED CIT(A) HAS CATEGORICALLY IDENTIFIED THE SOURCE OF MISMATCH THE EXPLANATION OF THE ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 11 ASSESSEE BEFORE THE ASSESSING OFFICER WHO FORMULATED THE REMAND REPORT VIS - - VIS THE FINDING OF THE LEARNED CIT(A) HAS BEEN CATEGORICALLY MADE THE LEARNED CIT - DR ANSWERED IN THE NEGATIVE. SHE SAID THAT THE LEARNED CIT(A) THEREFORE HAS RIGHTLY NOTED THAT THERE WAS NOTHING NEW TO BE BROUGHT ON RECORD FOR UPHOLDING THE PREDECESSORS CIT(A )S ORDER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND THE UNJUST MANNER IN WHICH THE DIRECTION OF THE TRIBUNAL HAS NOT BEE N DISPOSED OF IN ACCORDANCE AS SOUGHT FOR BY THE LEARNED CIT(A). THE LEARNED CIT(A) IN HIS ELABORATE ORDER QUOTED UNQUOTED THE REMAND REPORT AND ALSO THE ASSESSEE APPELLANTS REBUTTAL THEREUPON. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PUT FORTH HIS CASE W HICH TANTAMOUNT TO THE FACT FINDINGS THAT THERE WAS NO BASIS TO CONSIDER THE DISMISSAL OF ONUS WHICH LI ED UPON THE ASSESSEE WAS DISCHARGED FOR ESTABLISHING IDENTIFY, GENUINENESS AND CREDITWORTHINESS OF THE PURPORTED CASH CREDITORS U NDER THE PROVISIONS OF S ECTION 68. THE LEARNED CIT(A) AND THE LEARNED CIT - DR BEFORE US , THEREFORE, HAVE ONLY TRIED TO CONSIDER THE VARIOUS STATEMENTS TAKEN ON OATH AND THE ACTUAL FACT FINDING MORE AS A BUSINESS / PROFESSION TO BE CONDUCTED EITHER BY THE ASSESSEES AGENTS OR ASSESS EE ITSELF BEING PROCURER OF COTTON WHEN THE BALES ARE GINNED AND IS ALSO AVAILABLE AS A COMMODITY FOR TRADING WITH THE AGENTS OF COTTON AS WELL. THE PRICE OF COTTON AS QUOTED IS A CASH CROP AND IS PURELY NOT CASH CREDIT IN THE STRICT SENSE OF ITS TERM AS E NVISAGED IN SECTION 68. THE MONEY HAS BEEN RECEIVED FROM BOOKING THE COTTON AS AND WHEN THE BUYERS OF COTTON ARE AVAILABLE AT A PARTICULAR RATE WHICH MONEY WAS SCRUPULOUSLY UTILIZED BY BOTH THE CREDITORS AT THE INSTRUCTION OF THE ASSESSEE TO GET THE MAXIM UM AMOUNT. THIS IS THE REASON THE LEARNED ASSESSING OFFICER ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 12 SOUGHT TO DERIVE A PEAK CREDIT WHEN IT WAS NOT THE CASE OF THE ASSESSEE TO INVEST FUNDS FOR PURCHASE OF ITS OWN COTTON WHICH THE LEARNED CIT - DR HAS ASSUMED THE BUSINESS TRANSACTIONS OF PA RKING OF INCOME BY THE ASSESSEE. IT IS A MIXED CREDIT FOR AVAILING FORWARD TRADE WHEN THE GOODS ARE AVAILABLE WITH THE ASSESSEE AND THEREFORE CANNOT BE TERMED AS A CASH CREDIT REMAIN ING UNEXPLAINED IN THE HANDS OF THE ASSESSEE FOR INVOKING THE PROVISIONS OF SECTION 68. A VOLUMINOUS PAPER BOOK SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE , WHICH HAS BEEN PERUSED BY US, IS FOR DISCHARGE OF THE ONUS WHICH L IE UPON THE ASSESSEE UNDER THE PROVISIONS OF SECTION 68 FOR ESTABLISHING THE IDENTITY, GENUINENESS AND CREDITW ORTHINESS OF THE TWO CREDITORS WHO ARE ALSO DEALERS OF COTTON O N THEIR OWN. THEY DEPEND ON AGENTS WHO ROUTED THEIR FUNDS THROUGH THE ASSESSEE FOR THE PURCHASE OF COTTON CANNOT BE TERMED AS A CASH CREDIT BUT AS ADVANCE FOR PURCHASES. THE ENTITIES WHERE HE W ILL GET A BETTER PRICE IS THE SHIFTING OF STAND WHICH HAS BEEN CONSIDERED ADVERSELY BY THE ASSESSING OFFICER AND THE LEARNED CIT(A). WE FIND THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE APPROPRIATE TO THE EXTENT THAT NO EFFORT HAS BEEN MADE BY TH E LEARNED CIT(A) EVEN TO DEMOLISH THE STAND OF THE ASSESSEE ON THE REMAND REPORT MADE AVAILABLE TO THE LEARNED CIT(A). THE LEARNED CIT(A) , THEREFORE, HAS PUT FORTH THE FACTS AS THE BUSINESS CONDUCTED BY THE ASSESSEE AND ITS AGENTS WAS THE PURPOSE FOR THE M ONEY OR FUNDS BEING TRANSFERRED AND NOT THAT OF SUSTAINING THE ADDITION FOR THE PURPOSE OF TAXATION U/S.68. THE REAL IDENTIFY OF THE FUNDS REMAINS AS A CREDIT AVAILABLE TO THE ASSESSEE AGAINST WHICH THE ASSESSEE IS HOLDING SUFFICIENT STOCK OF COTTON TO BE SOLD AND THEREFORE, AT NO POINT OF TIME CAN IT BE SAID THAT THE ASSESSEE HAD P A RKED ITS OWN FUNDS FOR TAXATION IN THE IMPUGNED ASSESSMENT YEAR. NO CORROBORATIVE OR CONTROVERTING MATERIAL HAS ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 13 BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE REMAND REPORT EX CEPT THE ACTUAL FUNCTIONING WHICH MAY HAVE RAISED DOUBT IN THE METHOD OF ACCOUNTING BY THE SAID CREDITORS BUT NOT TO THE DETRIMENT OF THE ASSESSEE TO BE SUBJECTED TO BE TAXED U/S.68. IT WAS NEITHER A PREPON E MENT OF INCOME NOR POSTPONEMENT OF INCOME OF THE IMPUGNED ASSESSMENT YEAR WHICH HAS NOT BEEN ANALYZED BY THE LEARNED CIT(A) FOR UNILATERAL TAXATION U/S.41( 1) WHO WAS CONSTRAINED TO UPHOLD THE ORDER OF HIS PREDECESSOR CIT(A) INSPITE OF DIRECTION OF THE TRIBUNAL TO VERIFY THE REMAND REPORT VIS - - VIS THE SU BMISSIONS OF THE ASSESSEE APPELLANT THEREUPON. THE FINANCIAL TRANSACTIONS WOULD RATHER LEAN IN FAVOUR OF THE ASSESSEE OF SUBSTANTIATING ITS ONUS OF THE CREDITORS BEING GENUINE AND TRADING IN BANK TRANSACTIONS TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS . WE, THEREFORE, HAVE NO HESITATION IN DELET ING THE IMPUGNED ADDITION MADE U/S.68. IN VIEW OF THE ABOVE , THE ADDITION OF 79,50,000 AND 20,50,000 MADE U/S.68 IS DELETED. 6. BEFORE PARTING, WE MAY MENTION HERE THAT THE ASSESSEE HAS RAISED ANOTHER GROUND I.E., GROUND NO.3 RELATING TO UNEXPLAINED SUNDRY CREDITORS AMOUNTING TO 3,93,436 IN ITS GROUNDS OF APPEAL, BUT THIS WAS NOT THE SUBJECT MATTER OF APPEAL BEFORE THE LEARNED CIT(A) ADJUDICATED UPON BY HIM PURSUANT TO THE TRIBUNAL ORDER DT. 24.7.2007 IN ITA NO.94/CTK/2006. THIS WAS POINTED OUT TO THE LEARNED AR OF THE ASSESSEE , WHO FAIRLY CONCEDED. IN THIS VIEW OF THE MATTER, G ROUND NO.3 IS DISMISSED AS BEING NOT MAINTAINABLE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 16.03.2012 H.K.PADHEE, SENIOR PRIV ATE SECRETARY. ITA NO.35/CTK/2012 M/S.JAGANNATH COTTON GINNING & PRESSING PVT. LTD. V. ACIT ASSESSMENT YEAR 2001 - 02 14 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S. SRI JAGANNATH COTTON GINNING AND PRESSING PVT. LTD., RAYAGADA, 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, BERHAMPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.