Asstt. Commissioner of Income Tax, Sitapur V. M/S Ashirwad Traders, Hardoi

ITA 413/LKW/2013

• Counselvise Citation: 41323714 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K R RASTOGI
• Keywords: Unexplained cash credit; Business income; Non compliance
• Section: 143(3); 131; 68; 28; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.413/LKW/2013 ASSESSMENT YEAR:2008-09 ACIT SITAPUR V. M/S ASHIRWAD TRADERS HARDOI TAN/PAN:AAIFA2963L (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. MANJU THAKUR, D.R. RESPONDENT BY: SHRI. K.R. RASTOGI, FCA & SHRI. SHUBHAM RASTOGI, FCA DATE OF HEARING: 14 07 2015 DATE OF PRONOUNCEMENT: 09 09 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) MAINLY ON TWO GROUNDS. 2. DURING THE COURSE OF HEARING, THE LD. D.R. HAS FILED REVISED GROUNDS OF APPEAL WITH A REQUEST TO TAKE THE SAME ON RECORD. ACCORDINGLY, THE REVISED GROUNDS FILED BY THE REVENUE ARE TAKEN ON RECORD. THE REVISED GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE ORDER, PASSED BY ASSESSING OFFICER UNDER SECTION 144 OF INCOME-TAX ACT, 1961, AS AN ORDER UNDER SECTION 143(3) OF THE ACT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DEDUCTION OF INTEREST AND SALARY PAID TO PARTNERS U/S 40B (IV) AND 40 B(V) OF :- 2 -: INCOME TAX ACT, 19.61. SINCE THE ASSESSING OFFICER HAS PASSED THE ORDER U/S 144 OF INCOME TAX ACT, 1961 FOR NON COMPLIANCE OF LEGAL NOTICE U/S 142(1)(II), THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION AND REMUNERATION BY WHATEVER NAME CALLED, MADE BY THE ASSESSEE TO ANY PARTNERS OF SUCH FIRM IN ACCORDANCE WITH THE SPECIFIC LEGAL PROVISIONS MENTIONED IN SECTION 184(5) OF INCOME TAX ACT, 1961 WHILE COMPUTING THE INCOME UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS AND PROFESSION'. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.42,08,000/- AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE I.T. ACT, 1961. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT APPRECIATED THE ASSESSING OFFICER WHO MADE THE ADDITION AFTER MAKING ENQUIRIES, AS THE ABOVE DEPOSITS WERE THE CASH CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE IN ORIENTAL BANK OF COMMERCE AND THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THESE CASH CREDITS DURING THE ASSESSMENT PROCEEDINGS. 4. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY BE CANCELLED AND THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 3. APROPOS GROUNDS NO.1 & 2, IT IS NOTICED THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND DURING THE YEAR HE CARRIED ON WORK FOR RAJYA KRISHI UTPADAN MANDI PARISHAD, SHAHJAHANPUR AND THE ASSESSING OFFICER VIDE NOTICE DATED 30.12.2009 REQUIRED THE ASSESSEE TO FURNISH/EXPLAIN VARIOUS DOCUMENTARY EVIDENCE/INFORMATION, BOOKS OF ACCOUNT I.E. CASH BOOK, LEDGER, BANK ACCOUNTS WAGES/SALARY REGISTERS, ETC AS MENTIONED IN THE NOTICE UNDER SECTION 142(1)(II) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). BUT DESPITE REPEATED REQUESTS MADE THROUGH :- 3 -: VARIOUS NOTICES AS WELL AS THROUGH ORDER SHEET ENTRIES, PART COMPLIANCE HAS BEEN MADE. THE ASSESSING OFFICER HAS RECORDED THE DATES OF HEARING AND THE REASONS FOR ADJOURNMENT IN PARA 2 OF HIS ORDER. DESPITE VARIOUS OPPORTUNITIES, REGULAR BOOKS OF ACCOUNT AND VOUCHERS HAVE NOT BEEN PRODUCED THOUGH MENTIONED IN THE WRITTEN SUBMISSION FILED BEFORE THE ASSESSING OFFICER. THE ASSESSEE WAS AGAIN SPECIFICALLY REQUIRED TO PRODUCE THE BOOKS OF ACCOUNT, VOUCHERS, REGISTERS, IF ANY, MAINTAINED IN RESPECT OF BUSINESS ALONG WITH BALANCE SHEET, PROFIT AND LOSS ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT THE SAME WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND ON ACCOUNT OF ADVERTENT FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS PROCEEDED UNDER SECTION 144 OF THE ACT FOR BEST JUDGMENT ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE NET PROFIT AS REFLECTED IN THE SHEET OF PAPERS WAS RS.2,46,031/- WHICH GIVES A NET PROFIT RATE OF 2.14% AND SINCE THE NET PROFIT DISCLOSED IS QUITE UNREASONABLE AND ON EXPENSES, EVEN NOT A SINGLE EXPENDITURE DEBITED IN THE SO CALLED ALLEGED PROFIT AND LOSS ACCOUNT ARE VERIFIABLE FROM ANY DOCUMENTARY EVIDENCES OR RECORD, THE PROFIT DECLARED BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. WHEN THE SAID FACTS WERE CONFRONTED TO THE ASSESSEE, THE ASSESSEE CAME OUT WITH A PROPOSAL TO APPLY NET PROFIT AT 8% THROUGH SL. NO.12 OF THE WRITTEN EXPLANATION FILED IN THE OFFICE ON 25.8.2010. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THOUGH ASSESSEE HAS REQUESTED THAT THE SALARY TO PARTNERS AND INTEREST ON CAPITAL BE ALLOWED, BUT THE ASSESSING OFFICER DID NOT ALLOW THE SAME HAVING RELIED ON THE PROVISIONS OF SECTION 184(5) OF THE ACT. THE ASSESSING OFFICER ACCORDINGLY CALCULATED THE NET PROFIT AT RS.9,19,280/- WHICH WAS 8% OF THE TOTAL CONTRACT PAYMENTS OF RS.1,14,91,101/- WHILE DOING SO, HE HAS PLACED RELIANCE UPON THE ORDER OF THE LUCKNOW BENCH OF THE TRIBUNAL IN :- 4 -: THE CASE OF M/S MODERN TRADERS, LUCKNOW VS. ACIT, LUCKNOW IN I.T.A. NO. 1786/ALLD/1994. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, HAS DIRECTED THE ASSESSING OFFICER TO ALLOW INTEREST AND SALARY FROM THE NET PROFIT ESTIMATED BY THE ASSESSING OFFICER. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT WHERE THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 144 OF THE ACT FOR MAKING BEST JUDGMENT ASSESSMENT IN THE CASE OF A FIRM, NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION AND REMUNERATION, BY WHATEVER NAME CALLED, MADE BY THE FIRM TO ANY PARTNER OF A FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEADS PROFIT & GAINS OF BUSINESS OR PROFESSION, AND SUCH INTEREST, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX ACT, UNDER CLAUSE (V) OF SECTION 28 OF THE ACT. THE LD. D.R. FURTHER CONTENDED THAT THE ASSESSEE HAS NOT PRODUCED COMPLETE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER DESPITE REPEATED REMINDERS AND REQUEST, AND THEREAFTER THE ASSESSING OFFICER HAD NO OTHER ALTERNATIVE BUT TO FRAME THE BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE ACT. THE FINDINGS OF THE ASSESSING OFFICER, FOR INVOKING THE PROVISIONS OF SECTION 144 OF THE ACT, WAS NOT DISTURBED BY THE LD. CIT(A) ALSO. ONCE THE BEST JUDGMENT ASSESSMENT IS TO BE FRAMED UNDER SECTION 144 OF THE ACT, NO FURTHER DEDUCTION OF INTEREST AND SALARY PAID TO THE PARTNERS CAN BE ALLOWED AS PER PROVISIONS OF SECTION 184(5) OF THE ACT. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). :- 5 -: 8. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSING OFFICER HAS AFFORDED VARIOUS OPPORTUNITIES TO THE ASSESSEE TO PRODUCE COMPLETE BOOKS OF ACCOUNT, BILLS AND VOUCHERS, ETC. FOR VERIFICATION. BUT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND RELEVANT EVIDENCE TO JUSTIFY THE CLAIM OF EXPENDITURE, ETC. IN THE ABSENCE OF COMPLETE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAD NO OPTION BUT TO PROCEED UNDER SECTION 144 OF THE ACT FOR BEST JUDGMENT ASSESSMENT. THE DISPUTE IS RAISED WITH REGARD TO FURTHER DEDUCTION OF INTEREST AND SALARY PAID TO PARTNERS AND FIRM IN TERMS OF SECTION 40B(IV) AND 40B(V) OF THE ACT FROM THE NET PROFIT ESTIMATED BY THE ASSESSING OFFICER. THE PROVISIONS OF SECTION 184(5) OF THE ACT IS VERY CLEAR AND ACCORDING TO WHICH NO FURTHER DEDUCTION CAN BE ALLOWED BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE TO ANY PARTNER OF SUCH FIRM. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PROVISIONS OF SECTION 184(5) OF THE ACT AS UNDER:- (1) A FIRM SHALL BE ASSESSED AS A FIRM FOR THE PURPOSES OF THIS ACT, IF-- (I) THE PARTNERSHIP IS EVIDENCED BY AN INSTRUMENT; AND (II) THE INDIVIDUAL SHARES OF THE PARTNERS ARE SPECIFIED IN THAT INSTRUMENT. (2) A CERTIFIED COPY OF THE INSTRUMENT OF PARTNERSHIP REFERRED TO IN SUB-SECTION (1) SHALL ACCOMPANY THE RETURN OF INCOME OF THE FIRM OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1993, IN RESPECT OF WHICH ASSESSMENT AS A FIRM IS FIRST SOUGHT. :- 6 -: EXPLANATION FOR THE PURPOSES OF THIS SUB-SECTION, THE COPY OF THE INSTRUMENT OF PARTNERSHIP SHALL BE CERTIFIED IN WRITING BY ALL THE PARTNERS (NOT BEING MINORS) OR, WHERE THE RETURN IS MADE AFTER THE DISSOLUTION OF THE FIRM, BY ALL PERSONS (NOT BEING MINORS) WHO WERE PARTNERS IN THE FIRM IMMEDIATELY BEFORE ITS DISSOLUTION AND BY THE LEGAL REPRESENTATIVE OF ANY SUCH PARTNER WHO IS DECEASED. (3) WHERE A FIRM IS ASSESSED AS SUCH FOR ANY ASSESSMENT YEAR, IT SHALL BE ASSESSED IN THE SAME CAPACITY FOR EVERY SUBSEQUENT YEAR IF THERE IS NO CHANGE IN THE CONSTITUTION OF THE FIRM OR THE SHARES OF THE PARTNERS AS EVIDENCED BY THE INSTRUMENT OF PARTNERSHIP ON THE BASIS OF WHICH THE ASSESSMENT AS A FIRM WAS FIRST SOUGHT. (4) WHERE ANY SUCH CHANGE HAD TAKEN PLACE IN THE PREVIOUS YEAR, THE FIRM SHALL FURNISH A CERTIFIED COPY OF THE REVISED INSTRUMENT OF PARTNERSHIP ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO SUCH PREVIOUS YEAR AND ALL THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE, IN RESPECT OF ANY ASSESSMENT YEAR, THERE IS ON THE PART OF A FIRM ANY SUCH FAILURE AS IS MENTIONED IN SECTION 144, THE FIRM SHALL BE SO ASSESSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE BY SUCH FIRM TO ANY PARTNER OF SUCH FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND SUCH INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE (V) OF SECTION 28. 9. WHILE ISSUING DIRECTIONS FOR ALLOWANCE OF INTEREST AND SALARY PAID TO PARTNERS, THE LD. CIT(A) HAS NOT EXAMINED THE PROVISIONS OF SECTION :- 7 -: 184(5) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE FINDINGS OF THE LD. CIT(A) ARE CONTRARY TO THE PROVISIONS OF THE ACT AND WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) IN THIS REGARD AND RESTORE THAT OF THE ASSESSING OFFICER. 10. APROPOS GROUND NO.3, IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED FROM THE SCRUTINY OF BANK ACCOUNT OF THE ASSESSEE WITH ORIENTAL BANK OF COMMERCE THAT THE ASSESSEE HAS MADE CASH DEPOSITS ON DIFFERENT DATES AT RS.42,08,000/-. THE ASSESSING OFFICER OBSERVED THAT SINCE ALL THE PAYMENTS IN RESPECT OF CONTRACT WORKS HAVE BEEN RECEIVED THROUGH ACCOUNT PAYEE CHEQUE FROM THE RESPECTIVE DEPARTMENT I.E. RAJYA KRISHI UTPADAN MANDI PARISHAD, SHAHJAHANPUR AND LUCKNOW AND THE SAME WERE CREDITED IN THE RESPECTIVE BANK ACCOUNTS WITH BANK OF BARODA AND ORIENTAL BANK OF COMMERCE, HARDOI SEPARATELY AND VERIFIABLE FROM THE BANK ACCOUNT, THE ABOVE CASH DEPOSITS DEFINITELY DID NOT FORM PART OF CONTRACT RECEIPTS. THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 142(1)(II) OF THE ACT ON 8.9.2007 ASKING THE ASSESSEE TO FURNISH THE SOURCE OF THESE CASH DEPOSITS, BUT THE ASSESSEE COULD NOT PRODUCE ANY SUCH RECORD FROM WHERE VERIFICATION TO THE BALANCE COULD BE MADE. THE ASSESSING OFFICER ACCORDINGLY HELD THAT SINCE THE ASSESSEE COULD NOT EXPLAIN THE CASH DEPOSIT IN THE BANK ACCOUNT, THE DEPOSITS REMAINED FULLY UNEXPLAINED, THEREFORE, THE SAME REPRESENTS ASSESSEES INCOME FROM UNDISCLOSED SOURCE CHARGEABLE TO TAX UNDER SECTION 68 OF THE ACT. WHILE MAKING THE ADDITION OF THE AFORESAID CASH DEPOSIT IN BANK OF RS.42.08 LAKHS, THE ASSESSING OFFICER HAS ALSO EXAMINED THE SUNDRY CREDIT OF RS.29.05 LAKHS SHOWN IN THE NAME OF DIFFERENT PERSONS. THE ASSESSING OFFICER HAS MADE ALL POSSIBLE EFFORTS TO VERIFY SUCH CREDITORS WITH A VIEW TO IDENTITY THE PERSONS AND GENUINENESS OF THE TRANSACTION AND THEIR CREDITWORTHINESS BY WAY OF ISSUING NOTICE UNDER SECTION 131 OF :- 8 -: THE ACT. THE NOTICES WERE RECEIVED BACK UNSERVED. THEREAFTER THESE FACTS WERE CONFRONTED TO THE ASSESSEE, BUT NEITHER THE ASSESSEE COULD PRODUCE A SINGLE CREDITOR IN WHOSE NAME CREDIT HAS BEEN SHOWN NOR ANYBODY RESPONDED TO THE NOTICE ISSUED FROM THE OFFICE OF THE ASSESSING OFFICER ON OR BEFORE THE SCHEDULED DATE FIXED FOR HEARING. THE ASSESSING OFFICER FINALLY CONCLUDED THAT THE UNEXPLAINED CREDIT OF RS.29.05 LAKHS WAS ALSO NOT EXPLAINED, BUT WHILE MAKING ADDITION UNDER SECTION 68 OF THE ACT, HE HAS GIVEN CREDIT OF THE SAME AND MADE ADDITION OF RS.42.08 LAKHS CASH DEPOSIT IN BANK ACCOUNT. 11. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) IN HIS ENTIRE ORDER HAS RECORDED THE FINDING OF THE ASSESSING OFFICER IN THIS REGARD. THEREAFTER, HE RECORDED ASSESSEES CONTENTIONS AND FINALLY IN FEW LINES HE DELETED THE ADDITION AND FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT FINDINGS OF THE LD. CIT(A) AS UNDER:- I HAVE CONSIDERED THE ASSESSING OFFICERS ORDER AND THE A.RS SUBMISSIONS. THE A.R. HAS BROUGHT ENOUGH EVIDENCE ON RECORD TO SHOW THAT CASH BALANCES WERE AVAILABLE FOR DEPOSIT IN BANK. IN ANY CASE, IT IS A SETTLED ISSUE THAT ONCE THE INCOME WAS ENHANCED ON ESTIMATE, NO FURTHER ADDITION WAS CALLED FOR. THE ADDITION IS DELETED. 12. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE ASSESSEE HAS MADE SUBSTANTIAL CASH DEPOSIT IN BANK ACCOUNT AND IN ADDITION TO THAT UNEXPLAINED CREDITORS WERE ALSO FOUND AND THE ASSESSING OFFICER HAS MADE ENQUIRIES WITH REGARD TO THE CASH DEPOSIT IN BANK AND ALSO UNEXPLAINED CASH CREDITS, BUT THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE BEFORE THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY MADE :- 9 -: ADDITION OF UNEXPLAINED CASH DEPOSITS. BEFORE THE LD. CIT(A), THE ASSESSEE HAS TRIED TO EXPLAIN THE DEPOSITS AND ON THE SUBMISSION OF THE ASSESSEE, THE LD. CIT(A) HAS CALLED A REMAND REPORT FROM THE ASSESSING OFFICER AND THE REMAND REPORT IS AVAILABLE AT PAGE 38 OF THE COMPILATION OF THE ASSESSEE, WHEREFROM IT IS CLEAR THAT IN COMPLIANCE TO THE DIRECTIONS OF THE LD. CIT(A), THE ASSESSING OFFICER HAS ISSUED A FRESH NOTICE TO THE ASSESSEE TO PRODUCE THE CASH BOOK, LEDGER AND OTHER DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM RAISED BEFORE THE LD. CIT(A), BUT THE ASSESSEE COULD ONLY PLACE CASH BOOK AND LEDGER AND NO SUPPORTING BILLS AND VOUCHERS WERE PRODUCED. ONLY SELF-MADE VOUCHERS WERE PRODUCED. THE MUSTER ROLL AND STOCK REGISTER WERE NOT PRODUCED. THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE HAS PRODUCED INCOMPLETE BOOKS OF ACCOUNT, THEREFORE, THE BOOK RESULTS ARE NOT OPEN FOR VERIFICATION. IT WAS FURTHER CONTENDED THAT EVEN IN THE REMAND PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE COMPLETE BOOKS OF ACCOUNT FOR VERIFICATION AND IN SUCH CIRCUMSTANCES, ADDITION MADE BY THE ASSESSING OFFICER DESERVES TO BE CONFIRMED BUT THE LD. CIT(A) WITHOUT DISCUSSING ANYTHING IN HIS ORDER, HAS DELETED THE ADDITION. 13. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE FILED COMPLETE DETAILS BEFORE THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) DISCLOSING THE SOURCE OF DEPOSITS IN THE BANK ACCOUNT, BUT THE SAME WERE NOT APPRECIATED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS OR IN THE REMAND PROCEEDINGS. SINCE ALL THE MATERIALS ARE AVAILABLE BEFORE THE LD. CIT(A), THE LD. CIT(A) HIMSELF HAS EXAMINED THE SAME AND HAS DELETED THE ADDITION. THE ASSESSEE HAS FILED THE COPY OF LEDGER ACCOUNT AND BANK STATEMENT WITH BANK OF INDIA AND BANK OF BARODA, ORIENTAL BANK OF COMMERCE, HARDOI. HE HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF DCIT VS. SHRI. PAWAN AGARWAL, LUCKNOW IN I.T.A. :- 10 -: NO. 374/LKW/2013; MOOGIPA INVESTMENT LTD. VS. INCOME TAX OFFICER, 30 TAXMANN.COM 113 (DELHI TRIB.) AND ACIT VS. BALDEV RAJ CHARLA, 121 TTJ 366 (DELHI) IN SUPPORT OF HIS CONTENTION THAT WHEN THE BOOKS OF ACCOUNT ARE PRODUCED, THE SAME SHOULD BE VERIFIED. RELIANCE WAS ALSO PLACED UPON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VIJAY CONSTRUCTIONS, 213 CTR 105 AND HON'BLE PATNA HIGH COURT IN THE CASE OF SHYAM BIHARI VS. CIT AND ANOTHER, 345 ITR 283 IN SUPPORT OF HIS CONTENTION THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED AND INCOME WAS ESTIMATED, NO FURTHER DISALLOWANCE CAN BE MADE. 14. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS AFFORDED A NUMBER OF OPPORTUNITIES TO PRODUCE THE COMPLETE BOOKS OF ACCOUNT FOR VERIFICATION, BUT THE ASSESSEE DID NOT PRODUCE THE SAME AND ULTIMATELY THE ASSESSING OFFICER HAD NO OTHER OPTION BUT TO PROCEED UNDER SECTION 144 OF THE ACT FOR BEST JUDGMENT ASSESSMENT. WHEN THE ISSUE OF NON-PRODUCTION OF COMPLETE BOOKS OF ACCOUNT WAS CONFRONTED TO THE ASSESSEE, THE ASSESSEE HAS COME OUT WITH AN OFFER FOR ESTIMATION OF NET PROFIT RATE @ 8% OF THE GROSS RECEIPT. ON THE BASIS OF THIS STATEMENT OF THE ASSESSEE, THE NET PROFIT RATE WAS ESTIMATED @ 8% OF THE TOTAL RECEIPTS. BESIDES, THE ASSESSING OFFICER HAS ALSO EXAMINED SUBSTANTIAL AMOUNT OF CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT WHEN THE ASSESSEE WAS DOING CONTRACT WORK FOR PUBLIC SECTORS OF THE STATE GOVERNMENT, THE CONTRACT RECEIPT WAS RECEIVED THROUGH CHEQUE WHICH WAS DEPOSITED IN THE BANK ACCOUNT. THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF DEPOSIT, BUT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF DEPOSITS AND THE ASSESSING OFFICER HAS ACCORDINGLY MADE ADDITION OF THE :- 11 -: CASH DEPOSIT IN THE BANK AT RS.42.08 LAKHKS. WHILE MAKING THE ADDITION OF RS.42.08 LAKHS, THE ASSESSING OFFICER HAS ALSO EXAMINED THE SUNDRY CREDITORS OF RS.29.05 LAKHS, FOR WHICH HE HAS ALSO MADE AN ENQUIRY AND ISSUED SUMMONS UNDER SECTION 131 OF THE ACT TO ALL THE CREDITORS, BUT THE SUMMONS WERE NEITHER DULY RESPONDED NOR CONFIRMATION OF ANY CREDITORS WAS FILED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO TREATED THESE SUNDRY CREDITORS TO BE UNEXPLAINED AND BOGUS, BUT INSTEAD OF MAKING SEPARATE ADDITION OF THE SAME UNDER SECTION 68 OF THE ACT, HE MADE AN ADDITION OF RS.42.08 LAKHS ON ACCOUNT OF CASH DEPOSITS IN THE BANK. NOW THE ASSESSEE HAS RAISED A PLEA THAT WHEN THE NET PROFIT RATE HAS BEEN ESTIMATED AFTER REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 144 OF THE ACT FOR FRAMING BEST JUDGMENT ASSESSMENT, NO FURTHER ADDITION UNDER SECTION 68 OF THE ACT IS CALLED FOR. IN SUPPORT OF THIS PLEA, THE ASSESSEE HAS PLACED RELIANCE UPON VARIOUS JUDGMENTS OF DIFFERENT HIGH COURTS INCLUDING THE JURISDICTIONAL HIGH COURT AND THE ORDER OF THE TRIBUNAL. IN THIS REGARD, WE WOULD LIKE TO MAKE REFERENCE TO THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. G.S. TIWARI & CO. IN I.T. APPEAL NO.5/1988, DATED 30.5.2013, IN WHICH THEIR LORDSHIPS HAVE HELD THAT EVEN AFTER REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 144 OF THE ACT, SEPARATE ADDITION UNDER SECTION 68 OF THE ACT ARE POSSIBLE. THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE EXTRACTED HEREUNDER:- IN THE INSTANT CASE, THE CONSISTENT PLEA OF THE ASSESSEE WAS THAT THE SUNDRY CREDITORS ARE GENUINE BUT AT ANY POINT OF TIME THE ASSESSEE TAKE THE STAND THAT THE SUNDRY CREDITORS ARE REFERABLE TO THE INCOME OF THE BUSINESS WHICH HAS BEEN DETERMINED ON ESTIMATE BASIS. HENCE, THE ASSESSEE MUST BE HELD TO HAVE FAILED TO ESTABLISH THAT THE UNEXPLAINED SUNDRY CREDITORS WERE REFERABLE TO THE BUSINESS INCOME. THE ADDITION OF THE UNEXPLAINED SUNDRY :- 12 -: CREDITORS AS INCOME FROM OTHER SOURCES BY THE AO, THEREFORE, WAS HELD VALID. FURTHER, THE HON'BLE APEX COURT IN THE CASE OF CIT VS. DEVI PRASAD VISHWANATH PRASAD; 72 ITR 194 OBSERVED THAT WHERE THERE IS AN UNEXPLAINED CREDIT, IT IS OPEN TO THE AO TO HOLD THAT IT IS INCOME OF THE ASSESSEE, AND NO FURTHER BURDEN LIES ON THE AO TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. IT IS FOR THE ASSESSEE TO PROVE THAT, EVEN IF THE SUNDRY CREDITORS REPRESENTS INCOME, IT IS INCOME FROM A SOURCE WHICH HAS ALREADY BEEN TAXED. THERE IS NOTHING IN LAW WHICH PREVENTS THE AO IN AN APPROPRIATE CASE IN TAXING BOTH THE SUNDRY CREDIT, THE SOURCE AND NATURE OF WHICH IS NOT SATISFACTORILY EXPLAINED, AND THE BUSINESS INCOME ESTIMATE, BY HIM AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE AS UNRELIABLE. IN THE VIEW OF ABOVE DISCUSSION AND BY CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET SIDE THE IMPUGNED ORDER PASSED BY THE TRIBUNAL AND REMIT THE MATTER BACK WITH A DIRECTION TO EXAMINE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS OF THE SUNDRY CREDITORS. THE TRIBUNAL IS FURTHER DIRECTED TO DISPOSE OF THE MATTER WITHIN A PERIOD OF THREE MONTHS, AS PER LAW. IN THE CIRCUMSTANCES, THE ANSWER TO THE SUBSTANTIAL QUESTION IS QUESTION IS DECLINED AND THE SAME WILL BE ANSWERED IN ANOTHER APPROPRIATE CASE. 15. THROUGH THE AFORESAID LATEST JUDGMENT OF THE JURISDICTIONAL HIGH COURT, IT HAS BEEN MADE ABUNDANTLY CLEAR THAT EVEN AFTER REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE NET PROFIT OF THE ASSESSEE, UNEXPLAINED CASH CREDITS IN THE ACCOUNTS CAN BE EXAMINED AND SEPARATE ADDITION UNDER SECTION 68 OF THE ACT IS POSSIBLE. SINCE NO CONTRARY JUDGMENT OF THE JURISDICTIONAL HIGH COURT ON THIS ISSUE HAS BEEN FURNISHED, WE HAVE TO DECIDE THE APPEAL FOLLOWING THE LEGAL POSITION LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT. ACCORDINGLY, IN THE LIGHT :- 13 -: OF THE AFORESAID JUDGMENT, WE HOLD THAT THE ASSESSING OFFICER IS WITHIN HIS POWERS TO EXAMINE THE SUNDRY CREDITORS AND CASH DEPOSITS IN THE BANK DESPITE ESTIMATING THE NET PROFIT RATE OF THE BUSINESS OF THE ASSESSEE. DURING THE COURSE OF HEARING, THE ASSESSEE HAS FILED COPY OF LETTER DATED 15.9.2010 AND OTHER LETTERS THROUGH WHICH HE SOUGHT ADJOURNMENT FROM THE ASSESSING OFFICER. HE HAS ALSO INVITED OUR ATTENTION TO THE CASH BOOKS AND BANK STATEMENTS WITH THE SUBMISSION THAT AS AND WHEN CASH WAS DEPOSITED THERE WAS SUFFICIENT CASH BALANCE IN HIS CASH BOOK. SINCE THE ENTIRE CASH DEPOSIT WAS DULY EXPLAINED, NO ADDITION UNDER THIS HEAD IS CALLED FOR. 16. HAVING CAREFULLY EXAMINED THESE DETAILS, WE FIND THAT THE DETAILS WERE NOT EXAMINED BY THE ASSESSING OFFICER EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR REMAND PROCEEDINGS. MOREOVER, WHILE DELETING THE ADDITION, THE LD. CIT(A) HAS ALSO NOT DISCUSSED HOW THE CASH DEPOSITS WERE DULY EXPLAINED BY THE ASSESSEE. 17. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DETAILS OF THE CASH DEPOSIT IN THE BANK BE RE-EXAMINED IN THE LIGHT OF THE CASH BOOK DULY MAINTAINED BY THE ASSESSEE. THEREFORE, IT REQUIRES A PROPER VERIFICATION BY THE ASSESSING OFFICER. DURING THE COURSE OF HEARING, OUR ATTENTION WAS ALSO INVITED TO THE FACT THAT WHILE MAKING ADDITION ON ACCOUNT OF CASH DEPOSIT IN BANK, THE ASSESSING OFFICER HAS ALSO EXAMINED THE SUNDRY CREDITORS OF RS.29.05 LAKHS, BUT HE HAS NOT MADE ANY ADDITION OF RS.29.05 LAKHS, AS HE HAS MADE AN ADDITION OF RS.42.08 LAKHS ON ACCOUNT OF CASH DEPOSIT IN THE BANK. THEREFORE, ONCE THE MATTER IS RESTORED BACK FOR VERIFICATION OF CASH DEPOSITS, SUNDRY CREDITORS OF RS.29.05 LAKHS BE ALSO VERIFIED. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO RE-ADJUDICATE THE ISSUE BY MAKING NECESSARY VERIFICATION WITH REGARD TO THE CASH DEPOSIT OF RS.42.08 LAKHS AND SUNDRY CREDITORS OF :- 14 -: RS.29.05 LAKHS. IF NEED BE, SUNDRY CREDITORS MAY ALSO BE SUMMONED FOR VERIFICATION. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE ALL THE RELEVANT BOOKS OF ACCOUNT TO JUSTIFY THE CASH DEPOSITS IN THE BANK AND SUNDRY CREDITORS. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO THE ASSESSING OFFICER TO RE-ADJUDICATE THE ISSUE IN TERMS INDICATED ABOVE. 18. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:9 TH SEPTEMBER, 2015 JJ:2708 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR