The ITO, Ward-6(2), Surat V. Shri Kishorchandra L.Jariwala, Surat

ITA 393/AHD/2010

• Counselvise Citation: 39320514 RSA 2010
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-08-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 08-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: KK SHAH
• Keywords: Business income
• Section: 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.393 / AHD/2010 (ASSESSMENT YEAR 2001-02) ITO, WARD 6(2), SURAT VS. SHRI KISHORCHANDRA L JARIWALA, 5/871, GHIA SHERI, MAHIDHARPURA, SURAT PAN/GIR NO. : AACFK8673P (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI B L YADAV, SR. DR RESPONDENT BY: SHRI K K SHAH, AR DATE OF HEARING: 22.03.2012 DATE OF PRONOUNCEMENT: 27.04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) IV, SURAT DATED 10.11.2009 FOR THE ASSESSMEN T YEAR 2001-02. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: [1] ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A)-IV, SURAT HAS ERRED IN RESTRICT ING THE ADDITION AT 25% INSTEAD OF RS.15,71,582/- MADE BY THE AO U/S .69C OF THE I.T.ACT. THE CIT(A) HAS ALSO ERRED IN HOLDING THAT THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION U/S.8OHHC OF THE ACT ON REVISED TAXABLE INCOME. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A)-IV, SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OF FICER RESTORED. I.T.A.NO. 393 /AHD/2010 2 2. BRIEF FACTS OF THE CASE ARE NOTED BY THE A.O. IN PARA 4.1 OF ASSESSMENT ORDER THAT ON SCRUTINY OF THE COPIES OF ACCOUNTS OF TWO PARTIES I.E. M/S. ST TRADERS AND HN KAPADIA, IT IS SEEN TH AT THE ASSESSEE HAS SHOWN TO HAVE MADE PURCHASES TO THE TUNE OF RS.1,80 ,882/- FROM H N KAPADIA BUT THE ENTIRE PAYMENT WAS SHOWN AS OUTSTAN DING AT THE YEAR END ALTHOUGH THE PURCHASES WERE MADE IN THE MONTH OF AP RIL 2000. HE ALSO NOTED THAT THE ASSESSEE HAS SHOWN TO HAVE MADE PURC HASE TO THE TUNE OF RS.13,90,700/- FROM M/S. S T TRADERS BUT THE ENTIRE PAYMENT WAS SHOWN AS OUTSTANDING AT THE YEAR END ALTHOUGH THE PURCHAS ES WERE SAID TO HAVE BEEN MADE DURING OCTOBER 2000 AND MARCH 2001. HE F URTHER NOTED THAT LETTERS ISSUED TO THESE PARTIES U/S 133(6) WERE RET URNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN. T HE A.O. ASKED THE ASSESSEE TO SHOW CAUSE AND TO PRODUCE BOTH THESE PA RTIES PERSONALLY BEFORE HIM. THE A.O. FURTHER NOTED THAT THE ASSESS EE COULD NOT PRODUCE THESE PARTIES BUT IT WAS CONTENDED BEFORE THE A.O. THAT THE PRESENT WHEREABOUT OF THESE TWO PERSONS ARE NOT KNOWN TO TH E ASSESSEE. IT WAS ALSO SUBMITTED THAT THE PAYMENTS TO THESE TWO PARTI ES WERE MADE IN SUBSEQUENT YEAR BY CHEQUE. COPIES OF ACCOUNTS OF T HE NEXT FINANCIAL YEAR 2001-02 WAS FURNISHED BEFORE THE A.O. AND ON SCRUTI NY OF THESE COPIES OF ACCOUNTS FOR THE NEXT FINANCIAL YEAR, IT WAS NOTED BY THE A.O. THAT THE ASSESSEE HAD SHOWN TO HAVE MADE FULL PAYMENT TO BOT H THESE PARTIES IN FINANCIAL YEAR 2001-02 BY CHEQUE. IT WAS CONTENDED BY THE ASSESSEE BEFORE THE A.O. THAT THESE PAYMENTS WERE MADE BY WA Y OF A/C PAYEE CHEQUES ONLY AND THE ASSESSEE ALSO FURNISHED WRITTE N EXTRACT FROM THE BANK STATEMENTS SHOWING CLEARANCE OF THESE CHEQUES ISSUED TO THESE TWO PARTIES. THESE DETAILS OF CHEQUE NOS. AND DATES ET C. ISSUED BY THE ASSESSEE TO THESE TWO PARTIES IN THE NEXT YEAR ARE NOTED BY THE A.O. ON PAGE 3 & 4 OF THE ASSESSMENT ORDER. HE FURTHER NOTED THAT 7 C HEQUES WERE ISSUED BY I.T.A.NO. 393 /AHD/2010 3 THE ASSESSEE TO M/S. S T TRADERS DURING OCTOBER-NOV . 2001 BUT THE CHEQUE NUMBERS RUN INTO SL. NUMBERS FORM 419216 TO 419226. FROM THIS, THE A.O. DRAWN INFERENCE THAT THE CHEQUES ISS UED TO M/S. S T TRADER WOULD HAVE BEEN ISSUED BY THE ASSESSEE AT A STRETCH THOUGH DIFFERENT DATES COULD HAVE BEEN PUT IN THE SAID CHEQUES TO GIVE SHA DE OF GENUINENESS TO THE ALLEGED TRANSACTION. THE A.O. ALSO OBTAINED CO PIES OF THE CHEQUES FROM THE BANK AND FROM THE SAME, THE A.O. OBSERVED THAT ONE CHEQUE OF RS.1,80,882/- ISSUED IN THE NAME OF H N KAPADIA WAS NOT A/C PAYEE CHEQUE AND IT WAS A CROSSED CHEQUE ONLY AND THE SAM E WAS ENDORSED TO M/S. SHRI SAI TRADERS. REGARDING 8 CHEQUES ISSUED TO M/S. S T TRADERS, THE A.O. NOTED THAT ONLY ONE CHEQUE WAS ISSUED IN T HE NAME OF S T TRADERS AND ALL OTHER CHEQUES WERE ISSUED IN SOME OTHER NAMES. THE A.O. CAME TO THE CONCLUSION THAT THESE TWO PARTIES HAVE ISSUED ACCOMMODATION BILLS TO THE ASSESSEE. HE CAME TO TH E CONCLUSION THAT GOODS WORTH RS.15,71,582/- WERE PURCHASED IN CASH B Y THE ASSESSEE FROM THE OPEN MARKET AND TO GIVE SHADE OF GENUINENESS TO THESE TRANSACTIONS, ASSESSEE HAS RESORTED TO ACCOMMODATION BILLS FROM T HESE TWO PARTIES. HE FURTHER NOTED THAT THE CASH SO UTILIZED FOR PURCHAS E OF YARN WORTH RS.15,71,582/- SHOULD HAVE COME FROM UNDISCLOSED IN COME OF THE ASSESSEE. ON THIS BASIS, HE MADE ADDITION OF THI S AMOUNT U/S 69C OF THE INCOME TAX ACT, 1961. BEING AGGRIEVED, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED 75% OF THE ADDITION AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE FURTHER SUBM ITTED THAT THE A.O. HAS ACTED ON PRESUMPTION ONLY AND THEREFORE, SECTIO N 69C IS NOT APPLICABLE. RELIANCE WAS PLACED BY HIM ON THE TRIB UNAL DECISION RENDERED IN THE CASE OF ACIT VS VARDHMAN EXPORT IN I.T.A.NO . 2278/AHD./2004 I.T.A.NO. 393 /AHD/2010 4 DATED 18.05.2007 AND OTHER TRIBUNAL DECISION IN THE CASE OF DCIT VS NARENDRA KUMAR AS REPORTED IN 90 TTJ 467 (JP.). HE FURTHER SUBMITTED THAT PURCHASES ARE DULY ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE AND FOR THIS REASON ALSO, SECIOTN 69C IS NOT APPLICABLE. HE ALSO SUBMITTED THAT BOOKS ARE NOT REJECTED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE REPRODUCE THE RELEVANT PARA OF THE ORDER OF LD. CIT (A) WHICH READS AS UNDER: THE APPELLANT'S AR SUBMITTED THAT THE PURCHASES A RE SUPPORTED BY BILLS AND THE PAYMENTS WERE MADE BY CROSS CHEQUES. THE APPELLANT ALSO SUBMITTED THAT THERE IS SALES TAX 7 CST NO. ON BILL AND THERE IS NO EVIDENCE THAT THE PAYMENTS WERE RETURNED TO HIM. HE ALSO SUBMITTED THAT BOOKS OF ACCOUNTS ARE NOT REJECTED. FINALLY, HE SUBMITTED THAT THE ENTIRE INCOME IS EXEMPT U/S. 80 HHC OF THE ACT AND, THERE IS NO SENSE IN ACCOUNTING THE BOGUS PURC HASE. HE ALSO SUBMITTED THAT PROVISIONS OF SECTION 69C ARE NOT AP PLICABLE AS ADDITIONS ARE IN RESPECT OF TRANSACTIONS WHICH ARE PART OF REGULAR ACCOUNTS. HE ALSO SUBMITTED THAT THERE IS NO EVIDEN CE OF ACTUAL PAYMENT OUT OF BOOKS OF ACCOUNTS I.E. OUT OF UNDISC LOSED INCOME. HE HAS RELIED UPON THE DECISIONS VIZ. ACIT V/S. VAR DHMAN EXPORT (ITA NO. 2278 / AHD. / 2004) DATED 18.05.2007 AND D CIT V/S. NARENDRAKUMAR LUNAWAT (2004) 90 TTJ (JP) 467 ON ISS UE OF ADDITION U/S. 69C OF THE ACT. THE APPELLANT'S AR AL TERNATIVELY SUBMITTED THAT THE ADDITION WOULD INCREASE THE INCO ME BECAUSE IT IS 100 % EXPORT UNIT, THE FINAL INCOME WOULD BE SUBJEC T TO DEDUCTION U/S. 80 HHC OF THE ACT. HE HAS RELIED UPON THE CASE LAWS, SUCH AS, DECISION OF SATPALSINGH V/S. ACIT (2000) 60 TTJ (CH D.) 602 AND K. UTTAMLAL EXPORT V/S. DCIT (ITAT -'H' BENCH, MUMB AI) 2004 36 BCAJ 518. THE APPELLANT ALTERNATIVELY SUBMITTED THAT, APPLYING THE RATIO OF VIJAY PROTEIN LTD 25 % OF SUCH UNVERIF IABLE PURCHASE MAY BE ADDED IN THE BUSINESS INCOME. I HAVE CONSIDERED THE CONTENTS OF THE ASSESSMENT OR DER AND THE SUBMISSION OF THE AR. I HOLD THAT THE PROVISIONS OF SECTION 69C ARE NOT APPLICABLE AS THE PURCHASES ARE PART OF REGULAR ACCOUNTS AND THE BOOKS OF ACCOUNTS ARE NOT REJECTED. SECONDLY, THE P RESUMPTION OF UNDISCLOSED INCOME SHOULD NOT BE MADE UNLESS THERE IS MATERIAL EVIDENCE OF EARNING SUCH INCOME. HOWEVER, WHEN THE PURCHASES I.T.A.NO. 393 /AHD/2010 5 ARE NOT FULLY VERIFIABLE, 25 % OF THE PURCHASES ARE DISALLOWED AND THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION U/S. 80 HHC OF THE ACT ON REVISED TAXABLE INCOME. 5. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS CONFIRMED THE ADDITION TO THE EXTENT OF 25% ON THE BASIS THAT WHEN THE PURCHASES ARE NOT FULLY VERIFIABLE, S OME DISALLOWANCE IS JUSTIFIED. THE ASSESSEE IS NOT IN APPEAL AGAINST T HIS PART DISALLOWANCE CONFIRMED BY LD. CIT(A). IT IS NOTED BY LD. CIT(A) THAT PROVISIONS OF SECIOTN 69C ARE NOT APPLICABLE AS THE PURCHASES ARE PART OF REGULAR ACCOUNT AND THE BOOKS OF ACCOUNT ARE NOT REJECTED. LD. D.R. COULD NOT CONTROVERT THESE FINDING OF LD. CIT(A). WE FIND TH AT HE ADDITION WAS MADE BY THE A.O. U/S 69C AS PER WHICH, IF THE ASSES SEE HAS INCURRED ANY EXPENDITURE AND EITHER NO EXPLANATION IS OFFERED BY HIM REGARDING THE SOURCE OF EXPENDITURE OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY AS PER THE A.O., THE AMOUNT SO COVERED BY SUCH EXPE NDITURE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FI NANCIAL YEAR. IN THE PRESENT CASE, NO EVIDENCE IS BROUGHT ON RECORD BY T HE A.O. IN SUPPORT OF HIS CONTENTION ASSUMING THAT FOR THE PURCHASES TO T HE EXTENT OF THIS AMOUNT, CASH PAYMENTS WERE MADE BY THE ASSESSEE AND THIS ASSUMPTION IS ONLY ON THIS BASIS ALONE THAT THESE PARTIES ARE NOT AVAILABLE AT THE ADDRESS GIVEN BY THE ASSESSEE. BUT THERE IS NO BASIS TO HO LD THAT SUCH PURCHASES WERE MADE BY MAKING PAYMENT IN CASH IN THE PRESENT YEAR. AS PER THE BOOKS OF THE ASSESSEE, PAYMENTS FOR THESE PURCHASES WERE MADE IN THE NEXT YEAR AND THAT TOO BY WAY OF CHEQUES ISSUED FRO M THE REGULAR BANK ACCOUNTS OF THE ASSESSEE. THE CASE OF THE A.O. IS THIS THAT THE CHEQUES SAID TO BE ISSUED TO THESE TWO PARTIES WAS ENCASHED BY DIFFERENT PERSONS. WHEN THE A.O. HIMSELF IS ALLEGING THAT THESE PARTIE S HAVE GIVEN ONLY ACCOMMODATION BILLS AND PURCHASES WERE MADE FROM OT HER PERSONS AND THEN EVEN IF CHEQUES ARE ULTIMATELY CLEARED IN OTHE R PERSONS ACCOUNT, IT I.T.A.NO. 393 /AHD/2010 6 CANNOT BE SAID THAT THE SOURCE OF PAYMENT FOR THESE PURCHASES IS UNEXPLAINED. UNDER THESE FACTS, WHEN THE A.O. COUL D NOT ESTABLISH THAT THESE PURCHASES WERE MADE BY WAY OF MAKING CASH PAY MENT IN THE PRESENT YEAR, WE FEEL THAT NO INTERFERENCE IS CALLE D FOR IN THE ORDER OF LD. CIT(A) AND HENCE ,WE DECLINE TO INTERFERE IN HIS OR DER. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 19/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER23/4.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 27/4 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.27/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27/4/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .