INCOME TAX OFFICER, WARD 3(2), SRINAGAR V. M/S M M I ENTERPRISES, SRINAGAR

ITA 392/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5726 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-02-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 20-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S NEGI
• Keywords: Unexplained cash credit; Unexplained investment; Principle of natural justice
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. R.S.SYAL, VICE PRESIDENT AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.392(ASR)/2017 ASSESSMENT YEAR:201 2-13 INCOME TAX OFFICER WARD3(2), SRINAGAR VS. M/S. MMI ENTERPRISES R/O NOOR BAGH SRINAGAR PAN:AANFM0364Q (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.S. NEGI (DR) RESPONDENT BY: NONE DATE OF HEARING: 19.02.2018 DATE OF PRONOUNCEMENT: 21.02.2018 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE REVENUE DEPARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 15.03.201 7 PASSED BY THE LD. CIT(A), J&K, JAMMU, IN APPEAL NO.427/14-15, BY RAISI NG THE FOLLOWING GROUNDS OF APPEAL. 1. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FAC T IN ALLOWING THE APPEAL OF THE ASSESSEE DESPITE THE FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE CORRECTNESS OF THE SUNDRY CREDITORS DESPITE BEI NG GIVEN SUFFICIENT OPPORTUNITIES BY THE AO.. 2. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN NOT APPRECIATING THE FAILURE OF THE ASSESSEE TO JUSTIFY HUGE INCREASE VI S--VIS EARLIER YEARS IN THE SUNDRY CREDITORS SHOWN DESPITE AMPLE OPPORTUNITIES GIVEN DURING THE ASSESSMENT PROCEEDINGS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLESALE/RETAIL DEALER OF KIRYANA AND HAS DECLARED A GROSS TURNOVER OF RS.95,23,045/- FROM THE SAID BUSINESS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND HAS ITA NO.392 /ASR/2017 (A.Y.2012-13) ITO VS. M/S MMI ENTERPRISES, SRINAGAR 2 DECLARED A NET PROFIT OF RS.21,273/- ON THE GROSS TURNO VER. DURING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO PRODUCE DET AILS OF PURCHASE, VARIOUS EXPENSES ETC, AS DEBITED IN THE PROFIT A ND LOSS ACCOUNT ALONG WITH THE SUPPORTING DOCUMENTS. THE ASSESSEE SUBMITTE D ALL THESE DETAILS AND THE SAME WAS EXAMINED BY THE AO, HOWEVER, ON PERUSAL OF THESE DETAILS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS SHO WN SUNDRY CREDITORS AT RS.85,89,800/- AS 'ADVANCES FROM BUYERS' AND RS.20,40,955/- 'FOR SUPPLIES' AGGREGATING TO A TOTAL OF RS.1,06,30,76 3/- AS ON 31/03/2012. IN ORDER TO VERIFY THE GENUINENESS OF THE SUNDRY CREDIT ORS, THE ASSESSEE WAS ASKED TO PROVIDE ADDRESSES OF THE CREDITORS AND TO SUBMIT CONFIRMATION FROM THEM, IN THOSE CASES, WHERE CREDIT BALANCE WAS SHOWN AT RS. 1,00,000/- OR MORE. IN RESPONSE TO THAT THE ASSESSEE FURNISHED A LIST OF THE CREDITORS AND THE AO ISSUED NOTICE U/S. 133(6) OF THE INCOME TAX ACT O N RANDOM BASIS, HOWEVER, NO CONFIRMATION WAS RECEIVED TILL THE COMPLET ION OF THE ASSESSMENT PROCEEDINGS. THEREAFTER, THE ASSESSEE WAS ASKED TO PRODUCE D OCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE CREDITORS AND R EASONS FOR CREATING SUCH A HUGE LIABILITY, HOWEVER, THE ASSESSEE COULD NOT PRO DUCE ANY EVIDENCE TO ESTABLISH THE GENUINENESS OF THESE LIABILITIES. THE AO , THEREFORE, ADDED A SUM OF RS.57,67,367/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF BOGUS CREDITORS. 3. FEELING AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT(A), WH O DELETED THE ADDITION OF RS.57,67,367/- ON ACCOUNT OF BOGUS LIABILITY WHICH WAS AD DED BY THE AO. 4. THE REVENUE AUTHORITY ON NOT BEING SATISFIED WITH THE ORD ER IMPUGNED HEREIN, PREFERRED THE INSTANT APPEAL AND IN SUPPORT O F ITS CASE, THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS NOT RIGHT IN LAW AN D FACT IN ALLOWING THE APPEAL OF THE ASSESSEE DESPITE THE FACT THAT THE ASSESSEE HA S FAILED TO ITA NO.392 /ASR/2017 (A.Y.2012-13) ITO VS. M/S MMI ENTERPRISES, SRINAGAR 3 SUBSTANTIATE THE CORRECTNESS OF THE SUNDRY CREDITORS, DESPI TE BEING GIVEN SUFFICIENT OPPORTUNITIES BY THE A.O. FURTHER THE LD. CIT(A) WAS NOT RIGHT IN LAW AND FACT IN NOT APPRECIATING THE FAILURE OF THE ASSESSEE TO JUSTIFY HUGE INCREASE VIS--VIS EARLIER YEARS IN THE SUNDRY CREDITORS SHOWN, DESPITE AMPLE OPPORTUNITIES GIVEN, DURING THE ASSESSMENT PROCEEDINGS. 5. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO SUBMISSION OF THE LD. DR AND REALIZED THAT THE ASSESSEE IN HIS RETURN OF INCOME HAS DECLARED SUNDRY CREDITORS AT RS.85,89 ,800/- AS ADVANCES FROM BUYERS AND RS.20,40,955/- FOR SUPPLIES AGGREGATING TO A TOTAL OF RS.1,06,30,763/- AS ON 31 ST MARCH, 2012 AND IN ORDER TO VERIFY THE GENUINENESS OF THE SUNDRY CREDITORS, THE ASSESSEE WAS ASKED TO EXPLAIN AND TO FURNISH NECESSARY DOCUMENTS EVIDENCE ALONG WITH COMPLETE LIST, CONTAINING COMMUNICABLE ADDRESSESS OF ALL SUNDRY CREDITORS AN D TO FILE THE CONFIRMATION/COPIES OF STATEMENTS FROM ALL SUCH PARTIES/CR EDITORS WHERE THE CREDIT BALANCE AS ON 31 ST MARCH, 2012 WAS AT RS. 1 LAC OR MORE, IT WAS REPLIED BY THE ASSESSEE BY FURNISHING A LIST OF PERSONS CLAI MED TO BE THE CREDITORS. THEREAFTER, THE A.O HAD ISSUED THE NOTICES U/S 133(6) OF THE I.T. ACT, IN VARIOUS CASES, ON RANDOM BASIS, CALLING FOR INFO RMATION IN THE CASE OF ASSESSEE, HOWEVER, TILL THE COMPLETION OF THE ASSESSMENT PRO CEEDINGS, NO CONFIRMATION WERE RECEIVED, THEREFORE, IT WAS PRESUMED BY THE ASSESSING OFFICER THAT DESPITE PROVIDING ADEQUATE OPPORTUNITY O F BEING HEARD, THE ASSESSEE HAS FAILED TO FURNISH ANY INFORMATION/DETAILS/RE PLY AT ANY STAGE DURING THE ASSESSMENT PROCEEDINGS REGARDING THE SUNDRY CRED ITORS. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCES AND CONFIRMATION, T HE ASSESSING OFFICER WHILE CONSIDERING THE LIABILITY AS SHOWN OF SUNDR Y CREDITORS FOR THE ASST. YEAR: 2010-11 AND 2011-12, CAME TO A CONCLUSION TH AT IT CAN BE REASONABLY INFERRED THAT THE ASSESSEE HAS INFLATED THE SAI D LIABILITY OF RS.1,06,30,763/- AND ACCORDINGLY AN AMOUNT EQUAL TO 48 ,63,396/- ONLY WAS ITA NO.392 /ASR/2017 (A.Y.2012-13) ITO VS. M/S MMI ENTERPRISES, SRINAGAR 4 ALLOWED AS LIABILITY BEING 51.05% OF THE TOTAL TURN OVER OF RS.95,23,045/- (BEING AVERAGE PERCENTAGE OF SUNDRY CREDITORS CLAIMED FO R TWO IMMEDIATELY PRECEDING ASSESSMENT YEARS) AND ACCORDINGLY AN ADDITION OF RS.57,67,367/- WAS MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNDISCLOSED/UNEXPLAINED INVESTMENT/ EXPENDITURE MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR:2011-12 RELEVANT TO THE ASSE SSMENT YEAR:2012-13, BECAUSE THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS BY NOT PROVIDING THE DETAILS/INFORMATION CALLED FOR AND ALSO HAS NOT SUBSTAN TIATED THE LIABILITIES BY NOT FURNISHING THE REQUISITE DOCUMENTARY EVIDENCES. THE LD. CIT(A) CONSIDERED THE FACTS THAT THE LD. AO H ERSELF HAS ACCEPTED AS PER ASSESSMENT ORDER, THAT THE ACCOUNTANT OF T HE ASSESSEE HAS ATTENDED AND PRODUCED NECESSARY DETAILS/INFORMATION AS CA LLED FOR FROM TIME TO TIME AND NOTHING ADVERSE STANDS DETECTED IN THE BOOK S OF ACCOUNTS OF THE ASSESSEE, THEREFORE, THE BOOK VERSION OF THE ASSESSEE STANDS ALMOST ACCEPTED BY THE AO AND IT IS EVIDENT, THAT ASSESSEE HAS NOT MADE ANY INCORRECT CLAIM OR CLAIMED ANY EXPENSES WHICH ARE NOT GENU INE NOR THE A.O HAS DOUBTED THE ACCOUNTS OF THE ASSESSEE AND THE ASSESSMENT MUST BE BASED ON FACTS AND EVIDENCES RATHER ON PRESUMPTIONS. FUR THER AS PER ASSESSMENT ORDER, THE LD. ASSESSING OFFICER ALTHOUGH DESIRED CONFIRMATION FROM SUNDRY CREDITORS BY ISSUING NOTICES U/S 133(6) OF THE I.T. ACT TO VARIOUS SUNDRY CREDITORS SELECTED ON RANDOM BASIS, HOWEVER, NEIT HER PROVIDED ANY INFORMATION AND LIST OF THE CREDITORS DURING THE ASSESSMEN T PROCEEDINGS TO THE ASSESSEE NOR THE SAME IS MENTIONED IN THE ASSESSMENT ORDE R TO WHOM NOTICE U/S 133(6) HAVE BEEN ISSUED, WHICH IS VERY CASUAL A PPROACH OF AN QUASI-JUDICIAL AUTHORITY, WITHOUT MAKING ANY SINCERE EFFORTS TO TAX THE CORRECT INCOME, RATHER IN A CASUAL MANNER HAS IMPOSED AN ADDITI ON OF RS.57,67,367/- TO A SMALL ASSESSEE, WHO HAS A TURNOVER RS.9 5,23,045/- ONLY, ON THE PRETEXT THAT NO CONFIRMATION HAS BEEN R ECEIVED FROM SUNDRY ITA NO.392 /ASR/2017 (A.Y.2012-13) ITO VS. M/S MMI ENTERPRISES, SRINAGAR 5 CREDITORS. FURTHER, THE LD. CIT(A) ALSO TAKEN INTO CONS IDERATION THE FACTS THAT BY PRODUCING THE BOOKS OF ACCOUNT, VOUCHERS AND LIST AND A DDRESSES OF THE SUNDRY CREDITORS, THE ASSESSEE DISCHARGE ITS RESPONSIBILITY AN D IN CASE OF NOT RECEIVING ANY CONFIRMATION FROM THE SUNDRY CREDITORS, FR OM WHOM SOUGHT CONFIRMATION, THEN THE AO WAS UNDER AN OBLIGATION TO BRING THE SAID FACTS BEFORE THE ASSESSEE IN ORDER TO PROVIDE HIM SUFFICIENT OP PORTUNITY, WHILE FOLLOWING PRINCIPLE OF NATURAL JUSTICE AND THE ADDITI ON CANNOT BE MADE ON THE PRESUMPTION RATHER ON EVIDENCES, WHEN THE AO HAS NOT DO UBTED THE BOOKS OF ACCOUNT OF ASSESSEE. WHILE RECORDING ITS FINDING IN THE ASSE SSMENT ORDER, THE AO TREATED THE ADDITION UNDER CHALLENGE AS UNDISCLOSED/ UNEXPLAINED INVESTMENT/EXPENDITURE WHILE CONCLUDING HER FINDING, T REATING THE ADHOC DISALLOWANCES OF RS.57,67,367/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THEREFORE, AO ITSELF IS NOT CLEAR ABOUT ITS ACTION AND FINDINGS, BECAUSE FINDING DOES NOT CO-RELATE WITH THE ACTION AS THE UNDISCL OSED/EXPLAINED INVESTMENT/EXPENDITURE AND UNEXPLAINED CASH CREDIT ARE TWO DIFFERENT CONCEPTS, WHILE THE PRIOR REPRESENTS ASSET SIDE OF BALANCE SHEET AND LATER LIABILITY SIDE OF BALANCE SHEET. FOR MAKING ANY ADDIT ION U/S 68 OF THE I.T. ACT, THE AO IS REQUIRED TO GIVE CLEAR FINDING THAT ANY PAR TICULAR CREDIT WAS NOT ACCEPTABLE BECAUSE THE ASSESSEE HAD FAILED TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AS WELL AS GENUINENESS OF THE TRANSACTION, HOWEVER, IN THE INSTANT CASE, NO SUCH FINDING WAS GIVEN BY THE AO AND HE HAD MADE ADDITION TO THE EXTENT OF 49% OF THE TOTAL CREDITORS ON ADHOC BASIS BY INVOKING THE PROVISIONS OF SEC.68, THEREFORE, THE A DDITION WAS NOT SUSTAINABLE. WHILE CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS D ECISION BY HONBLE ITAT, AGRA BENCH IN THE CASE OF MEENA GUPTA ALIGARH VS. ASSESSEE AND SH. MITHLESS AGRAWAL, LUCKNOW IN ITA NO. 748( LUCK)/2011 DECIDED BY HONBLE ITAT, LUCKNOW BENCH, LUCKNOW, IT WAS OBSERVED BY THE ITA NO.392 /ASR/2017 (A.Y.2012-13) ITO VS. M/S MMI ENTERPRISES, SRINAGAR 6 LD. CIT(A) THAT AD HOC ADDITION ON ESTIMATE BASIS CANNOT BE MADE ON ACCOUNT OF BOGUS SUNDRY CREDITORS, UNLESS, THE AO COMES TO A CLEAR CUT FINDING THAT A PARTICULARS OF SUNDRY CREDITORS FOUND TO BE BOGUS AS THE GENUINENESS OF THE CREDITORS COULD NOT BE ESTABLISHED BY THE ASSESSEE AND IN THE ABSENCE OF THAT ADHOC ADDITION ON ACCOUNT OF SUNDR Y CREDITORS CANNOT BE MADE. WHILE PERUSING THE IMPUGNED ORDER INDEPENDENTLY, WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSION OF THE LD. DR BECAUSE THE AO HAS MADE THE ADDITION ONLY ON THE BASIS OF ESTIMATE WITHOUT SPECIFYI NG ANY PARTICULARS OF SUNDRY CREDITORS AS FOUND TO BE BOGUS AND GENUINENESS OF T HE SAID CREDITORS COULD NOT BE ESTABLISHED BY THE ASSESSEE. THE ORDER UNDER CHALLENGE PASSED BY THE LD. CIT(A) BASED ON THE JUDGMENTS RENDERED BY THE VARIOUS BENCHES OF ITAT ON SIMILAR AND IDENTICAL FACTS AND CONCLUSION DR AWN BY THE CIT(A) IS BASED ON LOGICAL REASONING, HENCE, DOES NOT SUFFER FROM A NY ILLEGALITY, PERVERSITY OR IMPROPRIETY, AND THEREFORE DOES NOT REQ UIRE ANY INTERFERENCE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPA RTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.02.2018 . SD/- SD/- (R.S.SYAL) (N.K.CHOUDHRY) VICE PRESIDENT JUDICIAL MEMBER DATED:21.02.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S MMI ENTERPRISES, SRINAGAR (2) THE ITO, WARD,3(1), SRINAGAR (3) THE CIT(A) J&K, JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER