M/s. Millat Fibers, Surat V. The ACIT., Circle-6, Surat

ITA 3885/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6103 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 18-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: RASESH SHAH
• Keywords: Bogus purchase; Unexplained cash credit; Income from undisclosed sources; Onus to prove; Revised return
• Section: 133A; 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K. SHARMA, JM AND D.C.AGRAWAL, AM M/S MILLAT FIBRES, 76/10, MOTA BORSARA, KIM STATION ROAD, SURAT. V/S . ASSTT. CIT, CIRCLE-4, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RASESH SHAH, AR RESPONDENT BY:- SHRI H.P. MEENA, SR. DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.3,03,300/- FOR CASH CREDIT U/S 68 OF THE I.T. ACT. (2) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.48,044/- FOR CLOSIN G STOCK. (3) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.1,14,490/- FOR SUND RY CREDITORS (4) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ITA NO.3885/AHD/2007 ASST. YEAR :2003-04 2 THE AO IN MAKING DISALLOWANCE OF RS.15,22,303/- FOR ALLEGED BOGUS EXPENDITURE. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GREY CLOTH FROM YARN. A SURVEY UNDER SECTION 133A WAS CARRIED ON 18.2.2003. A STATEMENT WAS ALSO RECORDED DURING THE COURSE SURVEY. THE PARTNER OF THE FIRM D ECLARED AN ADDITIONAL INCOME OF RS.65 LACS IN THE CURRENT F.Y. ON THE GRO UND THAT THE SAME HAS NOT BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND THIS INCOME WOULD BE OVER AND ABOVE REGULAR INCOME RECORDED BY THE AS SESSEE IN THE BOOKS. THE DISCLOSURE WAS MADE IN RESPECT OF FOLLOWING ITE MS :- RS.4,50,000 EXCESS CASH AT THE RESIDENCE OF THE PARTNER AND HIS RELATIVES RS.60,50,000 SUNDRY RECEIVABLES RS.65,00,000 TOTAL HOWEVER, WHEN THE RETURN WAS FILED ON 29.11.2003 TH E TOTAL INCOME DECLARED BY THE ASSESSEE INCLUDING THE DISCLOSURE W AS OF RS.47,92,306/- ONLY. THUS THERE WAS A GAP OF RS.17,07,694/- BETWEE N THE DISCLOSURE MADE BY THE ASSESSEE AND THE INCOME DECLARED IN THE RETURN OF INCOME. WHEN POINTED OUT THE ASSESSEE REVISED THE RETURN ON 20.2.2004 AND THE REMAINING INCOME OF RS.17,07,694/- WAS ALSO SHOWN A ND THE REVISED RETURN WAS FILED ON AN INCOME OF RS.65 LACS. THE AO WAS NOT SATISFIED AND HE CARRIED ON ENQUIRIES INTO VARIOUS ITEMS SHOW N IN THE RETURN. GROUND NO.1 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE HAS TAKEN AN UNSECURED LOAN OF RS.3.03,300 /- CASH FROM VARIOUS PARTIES AND EACH LOAN BELOW RS.20,000/- ON VARIOUS DATES AND REPAID THE 3 SAME DURING THE YEAR. THE AO REQUIRED THE ASSESSEE TO PROVIDE PAN AND CONFIRMATION FROM EACH CREDITOR. THE ASSESSEE FAILE D TO SUBMIT THE SAME. THE AO FURTHER REQUIRED THE ASSESSEE TO PRODUCE THE PARTIES FROM WHOM ABOVE LOAN WAS TAKEN AND SQUARED UP DURING THE YEAR . HOWEVER, THE CREDITORS WERE NOT PRODUCED. SUBSEQUENTLY CONFIRMAT IONS FROM ALL THE PARTIES WERE SUBMITTED BUT THOSE PARTIES WERE NOT P RODUCED BEFORE THE AO. THE ASSESSEE CONTENDED THAT THIS AMOUNT SHOULD BE CONSIDERED AS COVERED BY ADDITIONAL SUM OF RS.17,07,694/- DECLARE D IN THE REVISED RETURN. THE AO REJECTED THE CLAIM ON THE GROUND THA T (1) CONFIRMATIONS FILED DID NOT SHOW PAN AND CONTRA ACCOUNT FROM THE LOAN CREDITORS BOOKS OF ACCOUNTS. THE ASSESSEE HAS ONLY FILED COPY OF AC COUNT OF THE CREDITORS FROM ITS OWN BOOKS. THUS IDENTITY OF THE CREDITOR I S NOT PROVED. IT ALSO DID NOT PROVE THE CAPACITY OF THE CREDITOR AND GENUINEN ESS OF THE TRANSACTIONS; (2) THE ASSESSEE FAILED TO PRODUCE THE PARTIES EVEN THOUGH SUFFICIENT TIME WAS GIVEN; (3) THE VIEW OF THE DEPARTMENT IS SUPPOR TED BY THE DECISION OF HON. RAJASTHAN HIGH COURT IN RAJSHREE SYNTHETICS (P ) LTD. VS. CIT (2002) 256 ITR 331 (RAJ) AND THE DECISION OF THE TRIBUNAL (AMRITSAR) IN ACRON FINANCE (P) LTD. VS. ACIT (2006) 99 TTJ (ASR) 429; AND (4) THE ASSESSEE CANNOT BE GIVEN THE BENEFIT OF TELESCOPING AS DURIN G THE COURSE OF SURVEY PROCEEDINGS ADDITIONAL INCOME OF RS.65 LACS SO DECL ARED BY THE PARTNER OF THE FIRM WAS OVER AND ABOVE THE REGULAR INCOME IN T HE BOOKS. 4. THE LD. CIT(A) CONFIRMED THE ORDER OF AO ON THIS ISSUE BY OBSERVING AS UNDER :- 2.5 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. ADMITTEDLY, THE APPELLANT FA ILED DISCHARGE ITS ONUS OF PROVING THE LOAN. IT SIMPLY FILED COPY OF ACCOUN T WITHOUT PAN. THE APPELLANT FAILED TO PROVE THE IDENTITY OF THE PARTI ES, GENUINENESS OF 4 TRANSACTION AND CREDITWORTHINESS OF PARTIES. HENCE THE LOANS WERE CLEARLY BOGUS. THE SURRENDER OF RS.65 LACS MADE DURING THE COURSE OF SURVEY PROCEEDINGS DID NOT SPECIFY THAT IT WAS IN RESPECT OF UNACCOUNTED INCOME WHICH HAS BEEN INTRODUCED AS LOANS. IN FACT THE BRE AKUP GIVEN IS SUNDRY RECEIVABLES OF RS.60,5 LACS AND EXCESS CASH OF RS.4 ,5 LACS. THE APPELLANT HAS FAILED TO ESTABLISH THAT WHEN THE LOANS WERE GI VEN THE SAME WAS OUT OF UNACCOUNTED INCOME. IN FACT NEITHER DURING THE ASSE SSMENT PROCEEDINGS NOR IN APPELLATE PROCEEDINGS THE APPELLANT HAS STAT ED THAT THE LOANS WERE BOGUS AS THE SAME WAS OUT OF UNACCOUNTED INCOME SUR RENDERED DURING THE COURSE OF SURVEY. SINCE NO FURTHER SUBMISSION H AS BEEN MADE BY THE APPELLANT TO SAY THE EACH AND EVERY LOAN WAS OUT OF UNACCOUNTED INCOME EARNED WHICH HAS BEEN SURRENDERED AND THEREFORE THE ADDITION MADE BY THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DI SMISSED. 5. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT NO ASSET HAS BEEN IDENTIFIED AND ASSESSEE HAS DECLARED EXTRA INC OME IN THE REVISED RETURN. THERE WAS A LOSS IN THE REGULAR BUSINESS AS PER PROFIT AND LOSS ACCOUNT SUBMITTED BY THE ASSESSEE ALONG WITH THE RE TURN OF INCOME. HE REFERRED TO PAGE 23 OF THE PAPER BOOK WHICH SHOWED ADDITIONAL INCOME OF RS.65 LACS IN THE REVISED COMPUTATION OF INCOME AND FURTHER ADDITIONAL INCOME OF RS.17,07,694/-. THE LD, AR FURTHER SUBMIT TED THAT ASSESSEE HAS PAID A TAX LIABILITY OF RS.22,75,000/-. ADJUSTMENT OF THIS LIABILITY SHOULD BE GIVEN IN THE INCOME DECLARED. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW ADDITION OF RS.3, 03,300/- CANNOT BE SUSTAINED. IT IS BECAUSE A PERUSAL OF PROFITS AND L OSS ACCOUNT ANNEXED ON 5 PAGES 39 -40 OF ASSESSEES PAPER BOOK SHOWED THAT I T HAD DECLARED RS.65 LACS AS AN ADDITIONAL INCOME. THE AO HAS NOT MADE O UT A CASE THAT OTHER THAN THE DISCLOSURE OF RS.65 LACS BOOK RESULTS ARE NOT ACCEPTABLE. ONCE BOOK RESULTS ARE ACCEPTED THEN AO CANNOT QUESTION T HE DECLARED INCOME OF RS.47,92,306/- AS PER ORIGINAL RETURN. THEREFORE , FURTHER DISCLOSURE OF RS.17,07,694/- WOULD COVER UNEXPLAINED CASH CREDIT OF RS.3,03,300/-. THERE IS NO REASON NOT TO ALLOW THIS TELESCOPING AG AINST ADDITIONAL DISCLOSURE OF RS.17,07,694/-. ACCORDINGLY THIS GROU ND OF ASSESSEE IS ALLOWED. 8. GROUND NO.2 RELATES TO ADDITION FOR CLOSING STOCK OF RS.48,044 /- AND THE GROUND NO.3 RELATES TO ADDITION FOR SUNDRY CREDITORS OF RS.1,14,490/-. FOR THE REASONS DISCUSSED BY US WHIL E DISPOSING OF GROUND NO.1 WE HOLD THAT THESE TWO AMOUNTS WOULD ALSO BE C OVERED BY THE ADDITIONAL DISCLOSURE OF RS.17,07,694/-. THEREFORE, THE ADDITIONS WITH RESPECT TO THESE ITEMS ARE ALSO DELETED. THESE TWO GROUNDS ARE ALLOWED. 9. THE LAST GROUND IS REGARDING ADDITION IN RESPECT OF DISALLOWANCE O F BOGUS EXPENDITURE OF RS.15,22,303/-. THE FACTS RELA TING TO THIS ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO NOTICED THAT THERE WAS OUTSTANDING BALANCE OF RS.15,22,303/- IN RESPECT OF ONE RAABUG PETROL SYNTHETICS WHICH REPRESENTED PURCHASES MADE FROM THIS PARTY DURING THIS YEAR. NO CONFIRMATION FROM THAT PARTY W AS FURNISHED. THE ASSESSEE SUBSEQUENTLY EXPLAINED TO THE AO WITH THE HELP OF A CERTIFICATE FROM MEMON CO-OP. BANK TO SHOW THAT WHOLE OF THE PA YMENT WAS MADE TO THAT PARTY IN SUBSEQUENT YEAR. THE AO REJECTED T HE EXPLANATION ON THE GROUND THAT ASSESSEE DID NOT FURNISH ANY OTHER EVID ENCE LIKE PURCHASE INVOICE, LORRY RECEIPT, OCTROI RECEIPT. MERELY PAYM ENT DID NOT PROVE THAT 6 EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BU SINESS. IT IS NOT PROVED THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS. THE AO ACCORDINGLY MADE THE ADDITION OF R S.15,22,303/- AS BOGUS PURCHASES. THE LD. CIT(A) CONFIRMED THE ADDI TION. HE HELD AS UNDER :- 6.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THE ARGUMENT OF THE APPELLAN T THAT THIS ADDITION MAY BE TAKEN AS PART OF THE SURRENDER IS NOT CORREC T BECAUSE THE SURRENDER CONSISTED OF RS.60.5 LACS AS SUNDRY RECEI VABLES AND NOT BOGUS EXPENDITURE. FURTHER IF THE PURCHASE INVOICE WAS NO T AVAILABLE BECAUSE THE - SAME WAS-TAKEN BY THE EXCISE AUTHORITIES THEN XEROX COULD HAVE BEEN OBTAINED AND GIVEN TO THE DEPARTMENT. ALTERNAT IVELY THE APPELLANT COULD HAVE CONTACTED THE PARTY AND OBTAINED A COPY OF THE PURCHASE BILL OR CERTIFICATE OF THE SAME. AS STATED BY THE AO, AS PER THE DECISION OF HON'BLC DELHI HIGH COURT IN THE CASE OF SIDDHO MAL (SUPRA), IT WAS THE ASSESSEE'S ONUS TO PROVE THAT THE EXPENDITURE WAS F OR THE PURPOSE OF BUSINESS AND MERE PAYMENT DOES NOT ENTITLE A PERSON TO CLAIM THE SAME. THEREFORE THIS DISALLOWANCE IS CONFIRMED AND THIS G ROUND OF APPEAL IS DISMISSED. 10. BEFORE US, LD. AR FOR THE ASSESSEE SUBMITTED TH AT THIS AMOUNT SHOULD BE CONSIDERED AS COVERED IN RESPECT OF DISCL OSURE OF RS.60,50,000/- MADE BY THE ASSESSEE AGAINST SUNDRY RECEIVABLES. IT IS BECAUSE MONEY REALIZED FROM SUCH PURCHASES IS BLOCKED IN RECEIVAB LES. 11. AGAINST THIS, THE LD. DR RELIED ON THE ORDERS O F AUTHORITIES BELOW. 7 12. IN OUR CONSIDERED VIEW, NO SEPARATE ADDITION IN RESPECT OF BOGUS PURCHASES CAN BE MADE ONCE ASSESSEE HAS DECLARED A SUM OF RS.60,50,000/- AS SUNDRY RECEIVABLES. THE UNACCOUNT ED INCOME GENERATED IN ALLEGED BOGUS PURCHASES IS RE-CYCLED INTO RECEIV ABLES AND, THEREFORE, WOULD BE COVERED BY THE DISCLOSURE. ACCORDINGLY NO SEPARATE ADDITION FOR RS.15,22,303/- IS REQUIRED. THUS THE ADDITION IS DE LETED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 04/06/2010 SD/- SD/- (T. K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 04/06/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD