Nirja Khatuwala, Nagaon V. Income Tax Officer, Ward-2, Nagaon

ITA 41/GTY/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2257 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA
• Section: 133(6); 201; 22; 68

Judgement Text

ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 1 | P A GE IN THE INCOME TAX APPELLATE TRIBUNAL GAUHATI BENCH, VIRTUAL HEARING AT KOLKATA ( . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 41/GAU/2019 ASSESSMENT YEARS: 2014-15 NIRJA KHATUWALA (PAN:AFFPK 9172 D ) VS. ITO, WARD-2, NAGAON APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 04.11.2020 DATE OF PRONOUNCEMENT 27.11.2020 FOR THE APPELLANT SHRI AKKAL DUDHWEWALA, A.R FOR THE RESPONDENT SHRI JAYANTA KHANRA, D.R ORDER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF LD. CIT(A)- GUWAHATI-1, GUWAHATI DATED 12.11.2018 FOR A.Y. 2014 -15. 2. THE SOLE ISSUE IS AGAINST THE ACTION OF LD. CI T(A) CONFIRMING THE ADDITION OF RS. 35,34,509/- U/S 68 OF THE INCOME TAX ACT, 1961 ( HEREIN AFTER, THE ACT). 3. BRIEF FACTS OF THE CASE AS NOTED BY THE AUTHORIT IES BELOW IS THAT THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS . 8,64,800/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS FOR LIMITED SCRUTINY WIT H THE POINTS OF IDENTIFICATION BEING LARGE SUNDRY CREDITORS IN COMPARISON TO LOW NET PRO FIT. THE ASSESSING OFFICER WHILE EXAMINING THE CASE OF ALL THE SUNDRY CREDITORS WHOS E BALANCE WERE OUTSTANDING AS OF THE END OF THE PREVIOUS YEAR, FOUND FOLLOWING THREE PARTIES DID NOT RESPOND TO HIS SECTION 133(6) NOTICE, THEREFORE HE DREW ADVERSE IN FERENCE AGAINST THE ASSESSEE AGAINST THESE THREE CREDITORS. SL. NO. CREDITORS AMOUNT ADDED (IN RS.) 1. M/S LHAKI STEELS AND ROLLING PVT. LTD., 1 ST FLOOR, RICBL COMPLEX, PHUENTSHOLING, BHUTAN, P. B. NO. 7,18,920/- ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 2 | P A GE 252 2. BHUTAN ROLLING MILLS, FLAT NO. 8, SAMDRUPLING HOUSE, PELKHIL LAM, PHUENSHOLING, BHUTAN, P.O. 114 20,47,374/- 3. BAJRANG TRADERS, GOLAPI MARKET, NH-37, LALMATI, BELTOLA, GUWAHATI-781029 7,68,215/- TOTAL 35,34,509/- ACCORDING TO THE ASSESSING OFFICER, EVEN THOUGH HE CONFRONTED THE ASSESSEE ABOUT NON SERVICE/RESPONSE OF NOTICE U/S 133(6) OF THE ACT TO THESE SUNDRY CREDITORS, NO SATISFACTORY REPLIES WERE RECEIVED FROM THE ASSESSE E, THEREFORE HE MADE AN ADDITION OF RS. 35,34,509/-. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF ASSESSING OFFICER BY HOLDIN G THAT EVEN THOUGH THE ASSESSEE DISCHARGED THE INITIAL ONUS ON HER TO FURNISH THE D ETAILS OF THE SUNDRY CREDITORS, HOWEVER WHEN THE AO VERIFIED THE CLAIM OF ASSESSEE, AND SENT NOTICE TO THESE THREE PARTIES EITHER IT COULD NOT BE SERVED OR IT DID NOT ELICIT ANY RESPONSE, THEREFORE ASSESSING OFFICER AFTER CONFRONTING THE ASSESSEE AB OUT THIS ADVERSE FACT AND COULDNT RECEIVE ANY SATISFACTORY REPLIES FROM THE ASSESSEE, HE DREW ADVERSE INFERENCE AGAINST THE GENUINENESS OF THE THREE SUNDRY CREDITORS. ACCO RDING TO LD. CIT(A) EVEN THOUGH ASSESSEE HAD DISCHARGED ITS INITIAL ONUS IN RESPECT OF THESE THREE SUNDRY CREDITORS BY FURNISHING DETAILS, ADDRESS ETC, HOWEVER, WHEN THE VERIFICATION WAS DONE BY THE AO IT FAILED, AND WHEN THIS ADVERSE FACT WAS CONFRONTED B Y AO TO ASSESSEE, BURDEN/ONUS SHIFTED FROM THE AO TO ASSESSEE TO PROVE THE GENUIN ENESS OF THE SUNDRY CREDITORS AND IN THAT PROCESS WHEN HE CONFRONTED THE ASSESSEE WIT H THE INFORMATION OF NON-RESPONSE FROM THE THREE SUNDRY CREDITORS, THE ASSESSEE FAILE D TO GIVE ANY SATISFACTORY REPLIES TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS. THER EFORE, ACCORDING TO LD. CIT(A), THE ASSESSING OFFICER RIGHTLY DREW ADVERSE INFERENCE AG AINST THE ASSESSEE, THEREFORE, HE CONFIRMED THE ADDITION. 5. AGGRIEVED THE ASSESSEE IS BEFORE ME. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. BEFORE ME, THE LD. A.R SHRI AKKAL DUDHWEWALA SUBMITTED THAT THESE ARE ROUT INE TRADE CREDITS WHILE DOING ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 3 | P A GE BUSINESS AND SINCE ASSESSEE IS A TRADER AND HAS PUR CHASED TRADABLE MATERIAL/GOODS I.E. EQUIPMENTS FROM THE THREE SUNDRY CREDITORS TO WHOM THE ASSESSEE WAS INDEBTED TO PAY FOR THIS TRADING LIABILITY WAS DULY REFLECTED WHICH ACCORDING TO HIM, COULD NOT HAVE BEEN ADDED U/S. 68 OF THE ACT. FURTHER, ACCORDING TO LD. AR, THESE TRADABLE MATERIALS WERE PURCHASED BY THE ASSESSEE IN RESPECT OF TWO SU NDRY CREDITORS TO THE TUNE OF RS.27,66,294/- EMANATES OUT OF BALANCES BROUGHT FOR WARD FROM THE EARLIER YEARS IN THE PREVIOUS YEAR (NOT IN THIS F.Y.) AND THE ASSESSEE H AD LATER SQUARED UP THIS CREDIT IN THE SUBSEQUENT ASSESSMENT YEAR. ACCORDING TO LD. A.R, T HESE ARE TRADE CREDITS AND NOT A SUM OF MONEY CREDITED IN THE BOOKS OF THE ASSESSEE AND THEREFORE SECTION 68 ADDITION IS NOT ATTRACTED. ACCORDING TO HIM SINCE NO SUM OF MONEY WAS CREDITED IN THE BOOKS OF THE ASSESSEE FROM THESE THREE SUNDRY CREDITORS, ADD ITION CANNOT BE MADE U/S SECTION 68 OF THE ACT AND IT WILL COME INTO PLAY ONLY WHEN SUM OF MONEY IS CREDITED IN THE BOOKS OF ASSESSEE. THE LD. A.R WONDERED AS TO HOW SECTION 68 OF THE ACT CAN BE APPLIED ON THE FACTS OF THIS CASE BECAUSE ACCORDING TO HIM, TH E ASSESSEE HAD RECEIVED GOODS FROM THESE THREE CREDITORS WHO ARE SUPPLIERS OF GOODS AN D CONSIDERATION (PURCHASE PRICE OF GOODS) HAS TO BE MADE BY ASSESSEE TO THESE CREDITOR S/SUPPLIERS, SO WHEN THE ASSESSEE MAKES THE PAYMENTS TO THEM, CONSIDERATION/AMOUNT/SU M OF MONEY WILL BE CREDITED IN THEIR BOOKS (SUPPLIERS) AND NOT THAT OF THE ASSESS EES AND THEREFORE ACCORDING TO HIM, NO ADDITION COULD HAVE BEEN MADE LEGALLY U/S 68 OF THE ACT AS HELD BY HONBLE DELHI HIGH COURT IN CIT VS. RITU ANURAG AGARWAL (2 DTL ON LINE 134). 7. COMING TO THE MERITS OF THE ADDITION, THE LD. A .R. SUBMITTED THAT OUT OF TOTAL OUTSTANDING SUNDRY CREDITORS, THE AO ISSUED NOTICES TO ALL THE ELEVEN (11) SUNDRY CREDITORS, AND PURSUANT TO WHICH EIGHT (8) RESPONDE D TO THE AOS NOTICE U/S 133(6), SO HE ACCEPTED THEIR GENUINENESS. HOWEVER, SINCE THREE SUNDRY CREDITORS COULD NOT RESPOND TO THE NOTICE, THE AO DREW ADVERSE INFERENC E AGAINST THEM. THEREAFTER THE LD. A.R DREW OUR ATTENTION TO THE DETAILS IN RESPECT OF EACH SUNDRY CREDITORS NAMELY (I) M/S LHAKI STEELS AND ROLLING PVT. LTD II) BHUTAN RO LLING MILLS AND III) BAJRANG TRADERS AND POINTED OUT THAT AMONG THESE SUNDRY CRE DITORS FIRST TWO SUNDRY CREDITORS WHO SUPPLIED GOODS TO THE ASSESSEE ARE FOREIGN ENTI TIES AND NON-RESIDENTS OF INDIA WHICH FACT IS DISCERNIBLE FROM THEIR POSTAL ADDRESS AND THEY ARE BOTH RESIDENTS OF ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 4 | P A GE BHUTAN. IN RESPECT OF M/S LHAKI STEELS AND ROLLING PVT. LTD. (SL. NO.1) (SUPRA) THE LD. AR DREW OUR ATTENTION TO PAGE NO. 15 OF THE PAP ER BOOK FROM WHICH I NOTE THAT THE ASSESSEE HAS PURCHASED GOODS WORTH RS. 7,18,920/- O N 30.09.2012 I.E. PREVIOUS ASSESSMENT YEAR (AY 2013-14) AND THIS AMOUNT HAD BE EN DEBITED IN M/S LHAKI STEELS ACCOUNT (SUPPLIER / CREDITORS ACCOUNT) I.E. AY 201 3-14 AND ASSESSEE HAS SQUARED UP THE PAYMENTS ON 27.03.2015 & 31.03.2015 THROUGH BAN K RTGS A SUM OF RS. 5,00,000/- AND RS. 2,18,920/- RESPECTIVELY (I.E. AY 2015-16) AND THEN THIS AMOUNT WAS CREDITED IN THE ACCOUNT OF M/S LHAKI STEELS AND ROL LING PVT. LTD. AND THE A.R DREW OUR ATTENTION TO PAGE 16 WHEREIN THE CONFIRMATION H AS BEEN RECEIVED FROM THE LHAKI STEELS AND ROLLING PVT. LTD. WHICH IS FOUND PLACED AT PAGE 17 OF PAPER BOOK WHICH IS REPRODUCED AS UNDER: 8. LIKEWISE IN RESPEC T OF TO PAGE 18 OF PB FROM WHICH I NOTE THAT THE ASSESSE E 30,47,374/- IN THE PREVIOUS ASSESSMENT YEAR I.E 13.09.2012, 14.09.2012, 24. MADE PAYMENT IN THIS ASSESSMENT YEAR 2014 BANKING CHANNEL RS. 5,00,000/ THIS FACT THE ASSESSING OFFICER MY NOTICE THAT THE ASSESSEE HAD IN THE SUBSEQUENT ASSESSMENT YEAR I.E. AY 2015 10.03.2015, 14.03.2015 , 14.03.2015 CRE DITED TO THIS SUNDRY CREDITOR. T FROM THE PARTY PLACED AT PAGE 19 ITA NO. NIRJA KHATUWALA. T OF SUNDRY CREDITOR SHOWN IN SL. NO. 2, HE DREW OUR ATTENTION TO PAGE 18 OF PB FROM WHICH I NOTE THAT THE ASSESSE E HAD PURCHASED GOODS WORTH RS. THE PREVIOUS ASSESSMENT YEAR I.E AY 2013-14 [ ON VARIOUS DATA 13.09.2012, 14.09.2012, 24. 09.2012, 25.09.2012 (AY 2013- 14)] AND THE ASSESSEE HAD MADE PAYMENT IN THIS ASSESSMENT YEAR 2014 - 15 TO THE TUNE OF RS. 10,00,000/ RS. 5,00,000/ - EACH ON 20.09.2013 AND 22.03.2014 AND THE ASSESSING OFFICER HAS ADDED ONLY RS. 20,47,374/- . A ND THE ASSESSEE HAD SQUARED UP THE BALANCE PAYMENT TO THIS SUNDRY CREDITOR IN THE SUBSEQUENT ASSESSMENT YEAR I.E. AY 2015 -16 ON 09.09.2014, 23.02.2015, 10.03.2015, 14.03.2015 , 14.03.2015 AND THUS THE TOTAL AMOUNT OF RS. 30,47,374/ DITED TO THIS SUNDRY CREDITOR. T HE LD. A.R DREW MY ATTENTION TO THE PAGE 19 OF PAPER BOOK, WHICH IS AS UNDER: ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 5 | P A GE SL. NO. 2, HE DREW OUR ATTENTION PURCHASED GOODS WORTH RS. ON VARIOUS DATA DATED 14)] AND THE ASSESSEE HAD 15 TO THE TUNE OF RS. 10,00,000/ - THROUGH AND TAKING NOTE OF ND IT WAS BROUGHT TO PAYMENT TO THIS SUNDRY CREDITOR ON 09.09.2014, 23.02.2015, RS. 30,47,374/ - WAS LD. A.R DREW MY ATTENTION TO THE CONFIRMATION ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 6 | P A GE 9. THEREAFTER THE LD A.R DREW OUR ATTENTION TO THE SUNDRY DEBTOR SHOWN AT SL. NO. 3. HE DREW MY ATTENTION TO PAGE 21 AND 22 OF THE PB FROM WHERE I NOTE THAT THE ASSESSEE HAS SQUARED UP THE SUM OF RS. 7,68,215/- O N 31.03.2014 (I.E. IN AY 2016-17). ACCORDING TO LD. A.R THIS SUNDRY CREDITOR WAS A PRO PRIETARY CONCERN FROM INCEPTION AND IT HAD TO BE CLOSED DOWN DUE TO FINANCIAL CONST RAINTS WHICH FACT IS EVIDENT FROM A PERUSAL OF COPY OF LETTER WHICH IS FOUND AT PAGE 22 OF THE PB. SINCE THE BUSINESS OF THIS SUNDRY CREDITOR M/S BAJRANG TRADERS, GAUHATI W AS CLOSED DOWN, THE AOS NOTICE U/S 133(6) COULD NOT BE SERVED UPON IT AND THIS WAS THE REASON WHY THE AO DREW ADVERSE INFERENCE AGAINST THE GENUINENESS OF THIS S UNDRY CREDITOR. 10. THUS FROM THE FACTS AND CIRCUMSTANCES DISCUSSE D SUPRA, I NOTE THAT THE OUT OF TOTAL OUTSTANDING CREDITS OF RS. 2,23,89,337/-[TOTA L NUMBER OF SUNDRY CREDITORS WERE ELEVEN (11)], THE ASSESSING OFFICER WAS NOT SATISFI ED ABOUT THE GENUINITY IN RESPECT OF CREDIT WORTH RS. 34,35,509/- I.E. ONLY IN RESPECT O F THREE SUNDRY CREDITORS WHICH COMES TO 16% OF TOTAL SUNDRY CREDITORS. IN OTHER WORDS, T HE ASSESSING OFFICER WAS SATISFIED ABOUT THE GENUINENESS IN RESPECT OF 84% OF SUNDRY C REDITOR AS CLAIMED BY THE ASSESSEE. AND THE REASON HE WAS NOT SATISFIED WITH THESE THRE E SUNDRY CREDITORS WAS THAT HE DID NOT GET REPLY FROM TWO OF THE CREDITORS SITUATED AT BHUTAN AND AS FAR AS THE ONE SITUATED AT GUWAHATI IS CONCERNED THE NOTICE HAD RE TURNED BACK TO HIM UN-SERVED. IT HAS BEEN DISCUSSED (SUPRA) THAT THE SUNDRY CREDITOR AT GAUHATI PROPRIETOR SHRI SOUGATA BHOWAL OF M/S BAJRANG TRADERS HAD CONFIRMED THAT HE HAS SHUT DOWN THE PROPRIETARY CONCERN DUE TO FINANCIAL CONSTRAINTS. IT IS NOTED T HAT THIS PARTY HAS FILED THE CONFIRMATION OF RECEIVING RS. 7,68,250/- IN FY 2015 -16 BY LETTER DATED 10.12.2016 (PAGE 22 OF PAPER BOOK) AND THOUGH THE ASSESSEE HAS GIVEN CONFIRMATION OF RECEIVING THE AMOUNT, THE AO REJECTED THE SAME ON THE FLIMSY REASON THAT ASSESSEE WAS FURNISHING THIS DOCUMENT BEFORE HIM AND NOT THE SUN DRY CREDITOR PROPRIETOR SHRI SOUGATA BHOWAL OF M/S BAJRANG TRADERS, WHICH ACTION OF AO CANNOT BE COUNTENANCED, BECAUSE, WHEN THE ASSESSEE PRODUCED THE CONFIRMATIO N FROM THE SAID PARTY, IF THE AO DOUBTS THE VERACITY OF THE DOCUMENT THEN HE WAS DUT Y BOUND TO CROSS-VERIFY THE VERACITY OF THE SAME. IT IS NOTED THAT IN RESPECT O F M/S BAJRANG TRADERS THE ASSESSEE HAS ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 7 | P A GE PLACED ON RECORD THE COPY OF THE INVOICE RAISED BY THE SAID SUPPLIER WHICH INTER ALIA COMPRISED OF THE DETAILS OF PURCHASES, NAME , ADDRE SS, PAN, VAT DETAILS OF THE SUPPLIER. THE QUANTITY AND VALUE OF PURCHASES FORME D PART OF THE AUDITED ACCOUNTS, QUANTITATIVE DETAILS, GROSS PROFIT MARGIN AND ALSO VARIOUS ACCOUNTING RATIOS OF THE APPELLANT. IN THE REPORT FURNISHED BY THE TAX AUDIT OR IN FORM 3CA, NO ADVERSE COMMENTS OR QUALIFICATIONS HAVE BEEN GIVEN IN THIS REGARD. FURTHER NO SPECIFIC INFIRMITY OR DEFECT HAS BEEN POINTED OUT BY THE AO IN RESPECT OF THE BOOKS OF ACCOUNTS OF THE APPELLANT. IN THE CONFIRMATION LETTER PLACE D AT PAGE 22 OF PB, IT HAS ALSO BEEN CLARIFIED BY SHRI SAUGATA BHOWAL, PROPRIETOR OF M/S BAJRANG TRADERS THAT HIS PROPRIETORSHIP CONCERN HAD BEEN CLOSED DOWN DUE TO FINANCIAL PROBLEMS SO IT CAN BE PRESUMED THAT IT WAS THE REASON WHY THE AOS NOTICE U/S 133(6) COULD NOT BE SERVED UPON IT, SO NO ADVERSE VIEW WAS WARRANTED AGAINST T HIS SUNDRY CREDITOR. AND AS I HAVE ALREADY NOTED (SUPRA) THE OTHER TWO SUNDRY CREDITOR S M/S LHAKI STEELS AND ROLLING PVT. LTD. AND M/S. BHUTAN ROLLING MILLS WERE NON-RESIDEN TS AND HAD BEEN DULY SERVED THE NOTICE ISSUED BY AO U/S 133(6) OF THE ACT, AND THEY BOTH HAVE ALREADY FURNISHED THEIR CONFIRMATION TO HAVE RECEIVED THE BALANCE AMOUNT FR OM ASSESSEE BY RTGS/NEFT. THE DETAILS HAVE ALREADY BEEN DISCUSSED SUPRA AFTER REF ERRING PAGE 19 (M/S. BHUTAN ROLLING MILLS LTD AS WELL AS PAGE 17 M/S LHAKI STEELS AND R OLLING PVT. LTD.) AND COPY OF CONFIRMATION HAS BEEN REPRODUCED SUPRA. AND I NOT T HAT THESE DETAILS AND FACTS WERE FILED BEFORE THE AO/LD. CIT(A) AND NO INFIRMITIES C OULD BE POINTED OUT BY THE LOWER AUTHORITIES, SO IN THE LIGHT OF AFORESAID FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT NO ADDITION WAS WARRANTED U/S 68 OF THE ACT AND THE REFORE, I DIRECT THE DELETION OF ADDITION OF RS 35,34,509/-. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.11.20 20. (JREDDY) SD/- (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27.11.2020 ITA NO. 41/GAU/2019 NIRJA KHATUWALA. A.Y. 2014-15 8 | P A GE SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- NIRJA KHATUWALA, C/O, RAHUL RAJ JAIN & C O, H. NO. 15, 1 ST FLOOR, BYE LANE-2, SHAKTIGARH PATH, BHANGAGARH, G.S. ROAD, GUWAHATI-5, ASSAM- 781005. 2. RESPONDENT- ITO, WARD-2, NAGAON 3. THE CIT(A)-GUWAHATI (SENT THROUGH E-MAIL) 4. CIT- , GUWAHATI 5. DR, GAUHATI BENCH, GUWAHATI (SENT THROUGH E-MAIL) TRUE COPY BY ORDER SR. PRIVATE SECRETARY/ DDO ITAT, GAUHATI BENCH, GUWAHATI