SHRI Rahul Ramkrishna Kaware, Nagpur V. ITO-WARD-2, AMRAVATI

ITA 406/NAG/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2195 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 133(6); 131; 11

Judgement Text

1 ITA NO. 406/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 406/NAG/2013 ASSESSMENT YEAR : 2009 - 10. SHRI RAHUL RAMKRISHNA KAWARE, THE INCOME - TAX OFFICER, AMRAVATI. VS. WARD - 2, AMRAVATI. PANABDPKK0892N. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAYANT M. RANADE. RESPONDENT : SHRI NARENDRA KANE. DATE OF HEARING : 06 - 04 - 2016 DATE OF PRONOUNCEMENT : 31 ST MAY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 02 - 09 - 2013 . THE GROUNDS RAISED BY THE ASSESSEE ARE HEREBY DECIDED AS FOLLOWS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 4,10,610 MADE BY AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.28,29,640 MADE BY AO. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) DAT ED 30 - 12 - 2011 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS WORKING AS A CIVIL CONTRACTOR. THE AO HAS EXAMINED THE EXPENDITURE INCURRED FOR MATERIAL PURCHASED AS PER THE PROFIT & LOSS ACCOUNT. IN ONE OF THE ACCOUNT 2 ITA NO. 406/NAG/2013 THERE WAS A CREDITOR, NAMELY, SACHIN S TEEL, AMRAVATI. IN THE SAID ACCOUNT AN OUTSTANDING LIABILITY WAS REFLECTED. ON ENQUIRY IT WAS NOTICED BY THE AO THAT THERE WERE CASH BILLS. AS AGAINST THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE SHOWN THOSE BILLS AS CREDIT BILLS. AN INFORMATION U/S 133(6) WAS CALLED FOR. THE EXPLANATION OF THE ASSESSEE WAS THAT THE BILLS WERE FACTUALLY THE CREDIT BILLS AND NO CASH PAYMENT WAS MADE. IT HAS ALSO BEEN SUBMITTED BEFORE THE AO THAT THE PAYMENTS WERE MADE IN THE NEXT FINANCIAL YEAR I.E. 2009 - 10. HOWEVER, THE AO WAS NOT CONVINCED AND HELD THAT A CASH PAYMENT WAS MADE TO M/S SACHIN STEEL AMOUNTING TO R.4,10,610/ - DURING THE YE A R. SINCE THAT PAYMENT W A S NOT REFLECTED IN THE BOOKS OF ACCOUNT, HENCE THE AO HAS HELD THAT THE PAYMENT WAS MADE FROM UNDISCLOSED SO URCES. ACCORDINGLY THE ADDITION WAS MADE. 3. IN RESPECT OF GROUND NO. 2, THE ACCOUNT IN QUESTION WAS OF ANOTHER CREDITOR, NAMELY, SHRI S.L. KHATRI. ON PERUSAL OF THE CASH LEDGER IT WAS FOUND BY THE AO THAT THE MATERIAL WERE PURCHASED ON CREDIT AMOUNTING TO RS.28,29,460/ - . THE AO HAS ALSO FOUND THAT THERE WERE NUMBER OF BILLS WHICH WERE ALLEGEDLY IN THE NATURE OF CASH BILLS. FOR VERIFICATION A SUMMON U/S 131 WAS ISSUED AND IN COMPLIANCE THE ACCOUNTS WERE FURNISHED BY SHRI KHATRI. ACCORDING TO THE AO THE AS SESSEE HAD MADE CASH PURCHASES FROM SHRI S.L. KHATRI DURING THE PERIOD 01 - 04 - 2008 TO 31 ST AUGUST, 2008 AMOUNTING TO RS.28,29,460/ - . AS AGAINST THAT THE EXPLANATION OF THE ASSESSEE WA S THAT THOSE PURCHASES WERE NOT CASH PURCHASES BU T CREDIT PURCHASES. THE A O WAS NOT CONVINCED AND HELD THAT THE CASH WAS PAID OUT OF THE UNDISCLOSED INCOME. HENCE TAXED IN THE HANDS OF THE ASSESSEE. 4. IN RESPECT OF BOTH THE ADDITIONS AN APPEAL WAS FILED BEFORE THE LEARNED CIT(APPEALS) WHO HAS HELD AS UNDER : 6.I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT A PROPER OPPORTUNITY OF 3 ITA NO. 406/NAG/2013 CROSS EXAMINATION HAS BEEN PROVIDED BY THE LD. AO TO THE APPELLANT. IT IS ALSO A FACT THAT THE APPELLANT DID MAKE PUR CHASES FROM THE SAID M/S. SACHIN STEEL, AMRAVATI. VARIOUS BILLS EVIDENCING THE SAID PURCHASES HAVE ALSO BEEN PERUSED BY ME. IT IS SEEN THAT ON EACH OF THE SAID BILLS THE WORD CASH HAS BEEN WRITTEN. THIS NOTING IS GENERALLY MADE ON A BILL WHEN IMMEDIATE CASH PAYMENT IS REQUIRED TO BE MADE FOR THE BILL RAISED. DURING THE COURSE OF CROSS EXAMINATION PROCEEDINGS OF M/S. SACHIN STEEL, THE PROPRIETOR IN HIS STATEMENT RECORDED ON OATH EXPLAINED THE FACT THAT THESE ARE CASH BILLS AND THE PAYMENTS AGAINST THE SAI D BILLS WERE RECEIVED BY HIM AT THE TIME OF SUPPLYING MATERIAL TO THE APPELLANT. THE APPELLANT WAS NOT ABLE TO CONTROVERT THE SAID FACT. THE APPELLANT IN HIS ANSWER ACTUALLY AGREED THAT THESE BILLS ARE CASH BILLS BUT FURTHER STATED THAT CASH WAS PAID BY HI M TO M/S. SACHIN STEEL AS & WHEN THE CASH WAS AVAILABLE WITH HIM. ON FURTHER ENQUIRY HOWEVER HE COULD NOT STATE AS TO WHY EVIDENCE IN THE FORM OF RECEIPT FOR HAVING MADE PAYMENT OF CASH WAS NOT AVAILABLE WITH HIM. WHENEVER ANY CASH PAYMENT IS MADE AGAINST ANY PURCHASE, A CASH RECEIPT IS ISSUED WHICH SHOULD HAVE BEEN IN THE POSSESSION OF THE APPELLANT TO PROVE HIS CONTENTION THAT PAYMENT WAS MADE IN CASH ON SUBSEQUENT DATES. THUS IT IS CLEAR THAT THE APPELLANT DID MAKE CASH PAYMENT IMMEDIATELY ON MAKING THE SAID PURCHASE OF RS.4,10,610/ - BUT DID NOT HAVE THE CORRESPONDING CASH BALANCE IN HIS BOOKS OF ACCOUNT ON THE SPECIFIED DATES AND IN VIEW OF THE SAID FACT THE ADDITION OF THE AMOUNT OF RS.4,10,610/ - MADE BY THE LD. AO IS CONFIRMED. 6.1 EVEN IN THE CASE OF SHRI S.L.KHATRI THE ENQUIRES HAVE LED TO A SIMILAR RESULT. OPPORTUNITY FOR CROSS EXAMINATION WAS PROVIDED AND HERE ALSO THE WORD CASH WAS MENTIONED IN THE BILLS AND SHRI KHATRI HAS CONFIRMED THE FACT THAT CASH WAS RECEIVED IMMEDIATELY ON MAKING THE SAID SALES. THE APPELLANT HAS NO EVIDENCE OF HAVING MADE PAYMENT IN CASH. WHENEVER ANY CASH PAYMENT IS MADE AGAINST ANY PURCHASE, A CASH RECEIPT IS ISSUED WHICH SHOULD HAVE BEEN IN THE POSSESSION OF THE APPELLANT TO PROVE HIS CONTENTION THAT PAYMENT WAS MADE I N CASH ON SUBSEQUENT DATES. THUS IT IS CLEAR THAT THE APPELLANT DID MAKE CASH PAYMENTS IMMEDIATELY ON MAKING THE SAID PURCHASE OF RS.28,29,460/ - BUT DID NOT HAVE THE CORRESPONDING CASH BALANCE IN HIS BOOKS OF ACCOUNT ON THE SPECIFIED DATES AND HENCE THE AD DITION OF RS.28,29,460/ - IS HEREBY CONFIRMED. 4 ITA NO. 406/NAG/2013 5. SINCE BOTH THE ADDITIONS WERE CONFIRMED BY THE LEARNED CIT(APPEALS) HENCE THE ASSESSEE IS FURTHER IN APPEAL. LEARNED A.R. MR. JAYANT M. RANADE APPEARED AND VEHEMENTLY PLEADED THAT THE AO SHOULD NOT HAVE RE LIED UPON A THIRD PARTY EVIDENCE I.E. THE ACCOUNTS OF THOSE PARTIES SPECIALLY WHEN THE PAYMENTS MADE IN THE SUBSEQUENT YEARS HAVE DULY BEEN REFLECTED IN THE BOOKS OF ACCOUNTS. LEARNED A.R. HAS PLEADED THAT AN ASSESSMENT WAS MADE FOR ASSESSMENT YEAR 2010 - 11 U/S 143(3) VIDE ORDER DATED 31 - 12 - 2012 AND THE POSITION OF ACCOUNTS HAVE BEEN VERIFIED WHEREIN THE ASSESSEE HAD DULY DISCLOSED THE DETAILS OF THE PAYMENTS MADE TO THE SAID TWO PARTIES. LEARNED A.R. HAS ALSO PLACED RELIANCE ON THE DECISION OF ITAT, CHANDI GARH BENCH PRONOUNCED IN THE CASE OF DCIT VS. NAGAR SPINNING MILLS LTD. 8 SOT 6 (CHD.). RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF ACIT VS. ABHISHEK EXPORTS 195 TAXMAN 59 AND THE DECISION IN THE CASE OF CIT VS. RA D HIKA CREATION 10 TAXMANN.COM 138 (DE L.). FEW MORE DECISIONS HAVE ALSO BEEN CITED BUT THOSE ARE ON DIFFERENT FACTS, HENCE MISPLACED, NEED NO DISCUSSION. 6. FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. NARENDRA KANE HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PLEADED THAT AFTER A THOROUGH ENQUIRY WITH THOSE PARTIES IT WAS FOUND BY THE AO THAT THE PURCHASES WERE MADE AGAINST CASH PAYMENT WHICH WAS REFLECTED IN THE RESPECTIVE BOOKS OF ACCOUNTS OF THOSE PARTIES. THE ASSESSEE HAS NOT CHALLENGED THOSE ENTRIES, THEREFORE, THE GROUNDS RAI SED DESERVE TO BE DISMISSED. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE CAREFULLY PERUSED THE CONTENTS OF THE PAPER BOOK FILED IN THE LIGHT OF THE CASE LAWS CITED. AS FAR AS THE FACTS OF THIS CASE ARE CONCERNED, IT APPEARS THAT THE AO HAD DETE CTED MISMATCH BETWEEN THE ACCOUNT OF THE ASSESSEE NOT TALLYING WITH THE ACCOUNTS OF THOSE PARTIES. ON ONE HAND THE ASSESSEE HAD CLAIMED THAT THE PURCHASES WERE ON CREDIT BASIS BUT ON THE OTHER HAND THE AO HAS ALLEGED THAT THE ACCOUNTS OF THOSE PARTIES HAV E SHOWN CASH TRANSACTION WHICH WAS DULY RECORDED IN THEIR RESPECTIVE 5 ITA NO. 406/NAG/2013 BOOKS OF ACCOUNTS AND AS A RESULT THE ACCOUNTS OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS HAVE BEEN SQUARED FOR THE YEAR UNDER CONSIDERATION. ACCORDING TO US THE SITUATION IS STRANGE THAT THE PAYMENTS WERE MADE IN THE SUBSEQUENT YEAR THAT TO THROUGH ACCOUNT PAYEE CHEQUES AND THE ASSESSMENT FOR ASSESSMENT YEAR 2010 - 11 WAS COMPLETED OF THE ASSESSEE U/S 143(3) VIDE AN ORDER DATED 31 - 12 - 2012 WHEREIN NO ADVERSE COMMENT WAS MADE. APART FROM THI S ANOMALY, ONE MORE POINT IS WORTH CONSIDERATION THAT IF THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT RELIABLE THEN THE AO WAS EXPECTED TO REJECT THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145. ONLY THEREAFTER IT WAS JUSTIFIABLE TO MAKE T HE IMPUGNED ADDITIONS BY REJECTING THE ACCOUNTS OF THE RESPECTIVE PARTIES. ALTHOUGH THE AO HAD MADE EFFORTS TO EXAMINE THOSE PARTIES BUT THE ALLEGATION WAS NOT CONCLUSIVE LY PRO VED TO THE HILT BY PLACING ON RECORD CORROBORATIVE EVIDENCE. IN ANY CASE ON PERU SAL OF ACCOUNTS OF THOSE PARTIES IN THE BOOKS OF THE ASSESSEE CERTAIN DOUBTS HAVE EMERGED THOSE CAN ONLY BE REMOVED BY FURTHER INVESTIGATION. THE ASSESSEE HAS FUR NISHED THE LIST OF THE MATERIAL PURCHASED IN CASH AS WELL AS THE LIST OF THE MATERIAL PURCHAS ED ON CREDIT BASIS. THE ASSESSEE HAS ALSO CLAIMED THAT THE ACCOUNTS HAVE BEEN SQUARED UP IN THE SUBSEQUENT YEARS BY MAKING THE PAYMENT TO THOSE PARTIES THAT TOO BY CHEQUES. THEREFORE, THE AO IS REQUIRED TO RE - EXAMINE THE POSITION OF ACCOUNTS OF BOTH THE Y EARS INVOLVED AS WELL AS THE ACCOUNTS OF THOSE PARTIES SO THAT THE CORRECT FACTUAL POSITION ABOUT THE PAYMENTS MADE EITHER IN CASH OR BY CHQUE COULD BE CONCLUSIVELY PLACED ON RECORD. AT THIS STAGE WHEN CERTAIN FACTS ARE YET TO BE ASCERTAINED , THEREFORE, T HE CASE LAWS CITED ARE NOT REQUIRED TO BE DISCUSSED IN EXTENSO. WE ARE RESTORING BACK BOTH THE GROUNDS TO THE FILE OF THE AO TO BE DECIDED DENOVO NEEDLESS TO SAY AFTER PROVIDING DUE OPPORTUNITY TO THE ASSESSEE. SIDE BY SIDE WE HEREBY DIRECT THE ASSESSEE T O FULLY COOPERATE WITH THE INVESTIGATION BY THE AO BY NOT SEEKING FRIVOLOUS ADJOURNMENTS SO THAT THE CONTROVERSY CAN BE RESOLVED AT AN EARLY DATE. SINCE THE MATTER HAS BEEN SET ASIDE, THEREFORE, THE GROUNDS MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE S. 6 ITA NO. 406/NAG/2013 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 31 ST MAY, 2016. COPY FORWARDED TO : 1. SHRI RAHUL RAMKRISHNA KAWARE, DEEP NAGAR NO. 1, DASTUR NAGAR ROAD, AMRAVATI. 2. I.T.O., WARD - 2, AMRAVATI. 3. COMMISSIONER OF INCOME - TAX - III,NAGPUR. 4. CIT(APPEALS) - II, NAG PUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.