Sojiram Ispat Pvt.Ltd., Hyd, Hyderabad V. ACIT, Circle-3(2), Hyd, Hyderabad

ITA 416/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6361 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAM
• Keywords: Unexplained cash credit; Opportunity of being heard
• Section: 40A(3); 143(3); 131; 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 416/HYD/2015 ASSESSMENT YEAR: 2009-10 ` SOJIRAM ISPAT PVT. LTD., HYDERABAD. PAN AAJCS3789A VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 3(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MOHD. AFZAL REVENUE BY : SHRI U. MINICHANDRAM DATE OF HEARING 28-06-2016 DATE OF PRONOUNCEMENT 22-07-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) -3, HYDER ABAD FOR AY 2009-10. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY, ENGAGED IN THE BUSINESS OF STEEL TRADING, FILED ITS RETURN OF INCOME FOR AY 2009-10 DECLARING AN INCOME OF RS.56,18,340/-. S UBSEQUENTLY, VIDE AN ORDER U/S 143(3) DATED 26-12-2011, THE INCO ME WAS ASSESSED AT RS. 1,65,10,110/-. IN THE ORDER U/S 143(3) DATED 26-17.-2011, THERE WAS A SINGLE ISSUE OF ADDITION OF RS.1,08,91,771/- AS UNEXPLAINED CASH CREDIT U/S 68. 2 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. 3. THE BRIEF FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF SCRUTINY PROCEEDINGS, ON PERUSAL OF THE CASH BOOK O F THE ASSESSEE FOR THE FY 2008-09, IT WAS OBSERVED THAT THE ASSESSEE H AS SHOWN TO HAVE RECEIVED CASH OF RS. 1,08,91,771/- FROM M/S REDSUN ENGINEERS PVT. LTD DURING THE YEAR. ON FURTHER ENQUIRY, IT WAS SUB MITTED BY THE ASSESSEE THAT THIS CASH WAS PAID BY M/S REDSUN ENGI NEERS PVT. LTD IN FY 2008-09 TOWARDS THE OUTSTANDING BALANCE DUE TO T HE COMPANY FOR THE SUPPLIES MADE IN EARLIER YEARS, I.E. M/S. REDSU N ENGINEERS WAS A SUNDRY DEBTOR TO THE ASSESSEE COMPANY IN THE BEGINN ING OF THE YEAR AND WHEN THE DEBTOR PAID THE DUES IN CASH, THE DEBT OR WAS CREDITED AND THE CASH BOOK WAS DEBITED. 3.1 IN ORDER TO VERIFY THE TRUTH IN THE ABOVE SUBMI SSIONS, SUMMONS U/S 131 WERE ISSUED TO M/S. REDSUN ENGINEERS PVT. L TD. TO FURNISH THE ACCOUNT COPY OF THE ASSESSEE AND ALSO WAS ASKED TO CONFIRM IF ANY CASH PAYMENTS WERE MADE TO ASSESSEE IN FY 2008-09. IN RESPONSE, M/S. REDSUN ENGINEERS PVT. LTD. FURNISHED THE ACCOU NT COPY OF ASSESSEE IN ITS BOOKS OF ACCOUNT AND ALSO CONFIRMED THAT NO CASH PAYMENT DURING FY 2008-09 WAS MADE TO ASSESSEE. THE AO NOTED THAT IN FACT, AS PER THE ACCOUNT COPY OF THE ASSESS EE IN THE BOOKS OF M/S, REDSUN ENGINEERS PVT. LTD., NO PAYMENT WAS MAD E AT ALL DURING FY 2008-09 I.E. ASSESSEE REMAINED AS A SUNDRY CREDI TOR IN THE BOOKS OF M/S. REDSUN ENGINEERS PVT. LTD. AT THE BEGINNING OF THE YEAR AND ALSO AT THE END OF THE YEAR. HENCE THE SOURCE OF TH IS DEBIT IN THE CASH BOOK AND THE CREDIT IN THE SUNDRY DEBTORS ACCOUNT R EMAINED UNEXPLAINED. WHEN THE ASSESSEE WAS CONFRONTED WITH THIS DISCREPANCY IT HAD NO REPLY/EXPLANATION IN ITS SUPP ORT AND ACCORDINGLY AGREED FOR THE ADDITION OF THIS INCOME WITH THE PLE A THAT THE ADDITION WAS ACCEPTED TO AVOID LITIGATION AND BUY PEACE FROM THE DEPARTMENT. ACCORDINGLY, THIS AMOUNT OF RS. 1,08,91,771/- WAS T REATED AS INCOME FROM OTHER SOURCES AND THE SAME WAS ADDED U/S 68 OF THE I.T. ACT. 3 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. 4. THEREAFTER, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD CONC EALED ITS INCOME OF RS.1,08,91,771/- FROM UNKNOWN OTHER SOURCES WHIC H WAS IN FACT BROUGHT INTO ITS CASH BOOK AS CASH RECEIPT, BUT NOT CREDITED TO ITS P&L ACCOUNT. RATHER IT WAS CREDITED IN THE ACCOUNT OF S UNDRY DEBTOR, M/S. REDSUN ENGINEERS PVT. LTD. WHICH WAS USED AS A MEAN S TO CONCEAL ITS INCOME AND BRING IT INTO THE BOOKS OF ACCOUNT. AO W AS ALSO OF THE VIEW THAT IT IS ALSO A CASE OF FURNISHING OF INACCU RATE PARTICULARS AS THE VERY CASH BOOK AND THE SUNDRY DEBTOR, M/S. REDSUN E NGINEERS PVT. LTD. ACCOUNT, WERE FUDGED WITH CERTAIN NON EXISTING ENTRIES EVEN THOUGH THERE WAS NO CASH PAYMENT FROM M/S REDSUN E NGINEERS PVT. LTD. AGAINST OUTSTANDING BILLS. AO OBSERVED THAT TH E ASSESSEE SHOWED AS IF THIS CASH WAS INFUSED FROM M/S. REDSUN ENGINE ERS PVT. LTD. TOWARDS THE OUTSTANDING DUES. THEREFORE, THIS IS NO THING BUT FURNISHING OF INACCURATE PARTICULARS IN THE BOOKS O F ACCOUNT TO CONCEAL THE INCOME. HENCE, BASED ON THE ABOVE FACTS, THE AO OPINED THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE I.T. ACT, 1961 PLACING RELIANCE ON THE CASE LAWS WHOSE FACTS ARE SIMILAR TO THE FACTS OF THE CURRENT CASE AND STAND IN SUPPORT OF PENALTY U/S 271(1)(C), THE AO LEVIED A PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED, WHICH WORKED OUT TO RS. 37,02,113/-. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A). 6. BEFORE THE CIT(A), THE AR OF THE ASSESSEE SUBMIT TED THAT AS PER THE ASSESSEES ACCOUNT IN THE BOOKS OF REDSON, THE BALANCE PAYABLE AS ON 31/03/08 WAS RS. 98,53,492/- AND THAT REDSON HAD CLAIMED THAT THIS SUM OF RS. 98,53,492 HAD BEEN PAID BY CHEQUE D URING THE FY 2009-10, THE ASSESSEE HAD NOT RECEIVED ANY SUCH CH EQUES DURING THE FY 2009-10 FROM REDSON, THAT THE AO HAD FAILED TO E NQUIRE INTO THE DESTINATION OF THESE ALLEGED CHEQUE PAYMENTS DURING THE FY 2009-10, THAT UNLESS IT WAS PROVED BY THE AO THAT THE CHEQUE S OF RS. 98,53,492/- HAD ACTUALLY BEEN PAID TO THE ASSESSEE, IT COULD NO T BE SAID THAT THE ASSESSEE INTRODUCED UNEXPLAINED CASH OF RS. 1,08,91 ,771/- IN ITS 4 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. BOOKS. THE AR RELIED ON THE DECISION IN THE CASE OF CIT VS. JALARAM OIL MILLS [2002] 253 ITR 192 (GUJ.) WHERE IT WAS HE LD THAT MERELY BECAUSE AN ADDITION HAD BEEN MADE U/S 68, IT DID NO T FOLLOW THAT PENALTY U/S 271(1)(C) SHOULD BE LEVIED AND THAT IT WAS NECESSARY FOR THE DEPARTMENT TO PROVE THAT THE AMOUNT IN QUESTION WAS THE ASSESSEES INCOME. 7. IN VIEW OF THE SUBMISSIONS OF THE AR OF THE ASSE SSEE, THE CIT(A) DIRECTED THE AO TO MAKE ENQUIRES TO ASCERTAI N WHETHER THE CHEQUES ISSUED BY REDSUN DURING THE FY 2009-10 WERE CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE. IN HIS REMAND RE PORT THE AO SUBMITTED AS UNDER: A. THE FOLLOWING CHEQUES WERE ISSUED BY REDSUN: S.NO. CHEQUE NO. & DATE AMOUNT ISSUED TO PAID TO ENDOR SED BY 1 06/01/10, 436657 9,00,000 BASAL STEELS NARESH CORP. PROPRIETOR, BASAL STEELS 2 06/01/10, 436658 8,50,000 -DO- -DO- -DO- 3 06/01/10, 436659 7,50,000 -DO- -DO- -DO- 4 08/01/10, 43669 8,00,000 SOJIRAM ISPAT -DO- PARTNER, SOJIRAM ISPAT 5 08/01/10, 436670 9,00,000 -DO- -DO- -DO- 6 08/01/10, 436671 9,13,000 -DO- -DO- -DO- 7 26/03/10, 676321 9,00,000 -DO- KUBER CORP. MANAGER, SOJIRAM 8 26/03/10, 676322 9,00,000 -DO- -DO- -DO- 9 26/03/10, 676323 9,00,000 -DO- -DO- -DO- 10 26/03/10, 676324 9,00,000 -DO- -DO- -DO- 11 26/03/10, 676325 9,00,000 -DO- -DO- -DO- 12 26/03/10, 676326 2,40,492 -DO- -DO- -DO- B. REDSUN HAD SUBMITTED THAT CHEQUES HAD BEEN ISSUE D TO BASAI STEELS, A SISTER CONCERN OF THE ASSESSEE, AT THE RE QUEST OF THE ASSESSEE. C. THE CHEQUES WERE EVENTUALLY PAID TO NARESH CORPO RATION (PROPRIETOR SRI AMARCHANG AGARWAL, WHOSE BUSINESS W AS STATED TO BE 5 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. CHEQUES DISCOUNTING) AND KUBER CORPORATION (PROPRIE TOR SRI MUKESH KUMAR GUPTA.) D. THE CHEQUES ISSUED BY REDSON WERE BEARER CHEQUES , WHICH WERE ENDORSED IN FAVOUR OF NARESH CORPORATION AND KUBER CORPORATION. 8. IN RESPONSE TO THE REMAND REPORT, THE AR SUBMIT TED THAT THERE WAS NO BAR UNDER THE ACT TO MAKE CASH SALES, THAT O N THE OTHER HAND, THE BAR OPERATED U/S 40A(3) ON PURCHASES IN CASH, H E ALSO SUBMITTED THAT THE NAME OF THE ASSESSEE WAS SOJIRAM ISPAT PV T LTD AND THE NAME OF THE SISTER CONCERN WAS BASAI STEEL & POWER PVT LTD, BUT THE NAMES STATED IN THE CHEQUES WERE NOT IN THESE NAMES BUT IN THE NAMES OF SOJIRAM ISPAT AND BASAL STEELS, THAT THE E NDORSEMENT TO NARESH CORPORATION WAS BY A PERSON CLAIMING TO BE A PARTNER OF THESE CONCERNS WHEREAS THE APPELLANT AND ITS SISTER CONCE RN BOTH BEING COMPANIES WERE REPRESENTED BY THEIR MANAGING DIRECT OR/DIRECTOR AND THAT THESE PERSONS WHO HAD MADE THE ENDORSEMENTS WE RE NOT RELATED TO THE APPELLANT AT ALL. THE AR ALSO SUBMITTED THAT REDSON HAD NOT PRODUCED THE RECEIPT FOR THE CHEQUES ISSUED TO THE ASSESSEE. 8.1 THE AR ALSO SUBMITTED BEFORE THE CIT(A) THAT T HE MERE FACT THAT THE ASSESSEE HAD ACCEPTED THE ADDITION IN ORDE R TO AVOID LITIGATION SHOULD NOT BE CONSTRUED AS A WEAKNESS. T HE AR ALSO SUBMITTED THAT THERE WAS NO NEED FOR THE ASSESSEE T O REQUEST THE DEBTOR TO PAY IN MULTIPLE UNCROSSED AND BEARER CHEQ UES OF LESS THAN RS. 10,00,000/- EACH, WRITING THE NAME OF THE APPEL LANT INCORRECTLY SO AS TO ENCASH THESE CHEQUES IN AN IMPROPER MANNER TH ROUGH A CHEQUE DISCOUNTING AGENT, AND THAT SUCH ACTION BY REDSUN S HOWED THAT THEY INTENDED TO ENCASH THE CHEQUES SUBMITTED THAT THE F ACTS AND CIRCUMSTANCES PROVED THAT THE ASSESSEE HAS RECEIVED CASH DURING THE FY 2008-09 AND THAT THE CHEQUES ISSUED BY THE DEBTO R IN THE SUBSEQUENT YEAR WERE ENCASHED BY THE DEBTOR ITSELF. 6 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. 9. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND THE REMAND FROM THE AO, THE CIT(A) CONFIRMED THE ACTION OF THE AO IN IMPOSING PENALTY U/S 271(1)(C) BY OBSERVING AS UNDE R: 13. IT CANNOT BE DENIED THAT THE ENQUIRIES DURING THE APPELLATE PROCEEDINGS HAVE FAILED TO CLARIFY WHEN, IF AT ALL, THE PAYMENT HAD BEEN MADE BY REDSON TO THE APPELLANT. A S PER THE APPELLANT, REDSON HAD PAID CASH TO THE APPELLANT DU RING THE IMPUGNED YEAR ITSELF. AS PER REDSON, THE PAYMENT HA D BEEN MADE BY CHEQUE IN THE SUBSEQUENT YEAR. INVESTIGATIO N BY THE ASSESSING OFFICER SHOW THAT THE CHEQUES WERE NOT DE POSITED IN THE APPELLANT'S BANK ACCOUNT BUT WERE SUBJECTED TO CHEQUE DISCOUNTING. AS A RESULT, THERE IS NO CONCLUSIVE EV IDENCE IN THE FORM OF BANKING TRAILS TO ESTABLISH THE CLAIM OF PA YMENT BY REDSON IN THE SUBSEQUENT YEAR EITHER. TO PUT IT SIM PLY, NEITHER THE APPELLANTS CLAIM (THAT REDSON HAD MADE THE PAYM ENT TO THE APPELLANT DURING THE CURRENT YEAR IN CASH) NOR REDS ON'S CLAIM (THAT REDSON HAD MADE THE PAYMENT TO THE APPELLANT IN THE LOTER YEAR) HAS BEEN ESTABLISHED. 14. HOWEVER, WHAT TRANSPIRED IN THE LATER YEAR AND WHETHER PAYMENT WAS MADE BY REDSON IN THE LATER YEAR IS NOT THE SUBJECT MATTER OF THE ASSESSMENT OR THE PENALTY. WHAT IS MA TERIAL IS NOT WHETHER THE CLAIM OF REDSON FOR THE LATER YEAR ARE CORRECT BUT WHETHER THE CLAIMS OF THE APPELLANT FOR THE CURRENT YEAR ARE CORRECT. MERELY BECAUSE REDSON MAY NOT HAVE MADE TH E PAYMENT IN THE SUBSEQUENT YEAR DOES NOT LEAD TO THE CONCLUSION THAT REDSON HAD MADE THE PAYMENT IN THE PRECEDING Y EAR. REDSON HAVING CATEGORICALLY DENIED HAVING MADE THE PAYMENT TO THE APPELLANT DURING THE CURRENT YEAR, THE CASH CRE DITS IN THE APPELLANT'S BOOKS ARE RENDERED UNEXPLAINED. 15. THE DECISION IN THE CASE OF JALARAM OIL MILLS W AS RENDERED IN A SITUATION WHERE THE ASSESSING OFFICER HAD FAILED TO ADDUCE EVIDENCE OF CONCEALMENT OF INCOME AFTER THE ASSESSE E HAD AGREED TO THE ADDITION OF THE CASH CREDITS. IN THE APPELLANT'S CASE, THE ADDITION HAS NOT BEEN MADE MERELY ON THE BASIS OF THE ACCEPTANCE BY THE APPELLANT. THE ASSESSING OFFICER HAS ESTABLISHED THROUGH HIS ENQUIRIES WITH REDSON THAT THE CASH CREDITS HAD NOT COME FROM REDSON AS CLAIMED. THE AS SESSING OFFICER HAD THUS ADDUCED EVIDENCE OF CONCEALMENT OF INCOME WHICH THE APPELLANT HAD FAILED TO REBUT. ON THE OTH ER HAND, THE ASSESSING OFFICER HAS REFERRED TO SEVERAL DECISIONS WHICH ARE EMINENTLY APPLICABLE TO THE FACTS IN THE APPELLANT' S CASE. 16. THE CASH CREDITS IN THE BOOKS OF THE APPELLANT HAVE BEEN FOUND TO BE UNEXPLAINED. THE EXPLANATION OF THE APP ELLANT HAS ALSO BEEN FOUND TO BE FALSE. CONSEQUENTLY, THE APPE LLANT IS HELD TO HAVE CONCEALED THE PARTICULARS OF ITS INCOME. TH EREFORE, THE 7 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. LEVY OF PENALTY U/S 271(1)(C) IS UPHELD AND THE APP EAL IS DISMISSED. 10. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX, HYDERABAD-7, IS AGAINST THE LAW, WEIGHT OF EVI DENCE AND PROBABILITIES OF CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER, WHEREIN A PENAL TY OF RS.37,02,113/- HAS BEEN LEVIED. 3. THE LEARNED COMMISSIONER OF INCOME TAX CAME TO A CONCLUSION THAT THE REDSON ENGINEERS PVT LTD, MAY N OT HAVE MADE THE PAYMENT IN THE LATER YEAR, THEREFORE, ERRE D IN ASSUMING THAT IT HAS NOT PAID THE AMOUNT IN THE SUBJECT ASSE SSMENT YEAR. 4. THE ENQUIRIES MADE BY THE FIRST APPELLATE AUTHOR ITY ESTABLISHED THAT THE REDSON ENGINEERS PVT LTD HAS M ADE THE PAYMENT IN CASH IN THE SUBJECT ASSESSMENT YEAR, THE REFORE, THE ORDER OF THE FIRST APPELLATE AUTHORITY CONFIRMING T HE PENALTY IS ERRONEOUS. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR M ODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 11. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE IT ACT DOES NOT PROHIBIT THE ASSESSEE TO RECEIVE THE CASH AGAINST THE SALE PROCEEDS. THE RESTRICTION U/S 40A(3) APPLIES TO ONL Y PURCHASES. IT IS A COMMON PRACTICE THAT A PART OF SALE PROCEEDS ARE RE CEIVED IN CASH, THE LEARNED ASSESSING OFFICER POINTED OUT TWO PARTI ES WHO HAVE PAID A PART OF SALE PROCEEDS IN CASH, DURING THE PERIOD RE LEVANT TO THE SUBJECT ASSESSMENT YEAR. THE FIRST PARTY M/S ANJENE YA STEELS CONFIRMED CASH PAYMENT OF RS.3,12,87,161/-, WHEREAS , THE OTHER PARTY M/S REDSON ENGINEERS PVT LTD DENIED HAVING PAID THE CASH. THE ASSESSEE NOT TO HAVE A PROTRACTED LITIGATION WITH T HE DEPARTMENT AGREED FOR THE ADDITION OF RS. 1,08,91,771/- AND TO PURCHASE THE PEACE, WITH A PLEADING NOT TO INITIATE THE PENALTY PROCEEDINGS. HOWEVER, THE LEARNED ASSESSING OFFICER WITHOUT MAKI NG FURTHER ENQUIRIES AND ALSO ON THE SAME SET OF FACTS LEVIED A PENALTY OF 8 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. RS.37,02,113/- U/S 271(1)(C) OF THE IT ACT. THE FAC TS AND ENQUIRIES MADE AT THE TIME OF ASSESSMENT PROCEEDINGS FOR MAKI NG ADDITION ARE NOT SUFFICIENT FOR LEVY OF PENALTY. THE ASSESSING O FFICER SHOULD HAVE PROVED CONCLUSIVELY THAT WHAT HAS BEEN STATED BY TH E DEBTOR IS NOT CORRECT. 11.1 LD. AR FURTHER SUBMITTED, THERE IS NO PROHIBI TION TO RECEIVE THE CASH FROM THE TRADE DEBTORS, THEREFORE, THERE IS NO NECESSITY TO THE ASSESSEE TO REQUEST THE DEBTOR TO PROVIDE THE UNCRO SSED CHEQUES SO AS TO GET THEM DISCOUNTED THROUGH A CHEQUE DISCOUNT ING AGENT BY PAYING COMMISSION. IT IS A FACT THAT THE SALES ARE RECORDED IN THE BOOKS OF THE ASSESSEE AND THE ACCOUNTS COULD BE SQU ARED EITHER BY RECEIPT OF CASH OR CHEQUE. THERE IS NO NECESSITY FO R THE ASSESSEE TO GO TO A CHEQUE DISCOUNTING AGENT AND PAY A COMMISSI ON TO THE AGENT TO ENCASH THE UNCROSSED CHEQUE. 11.2. LD. AR ARGUED VEHEMENTLY THAT THE CHEQUES AR E WRITTEN IN THE NAME OF M/S BASAI STEELS AND SOJIRAM LSPAT, WHEREAS , THE CORRECT NAMES OF THE ASSESSEE AND ITS SISTER CONCERN ARE M/ S SOJLRAM LSPAT PVT LTD AND M/ S BASAL STEELS & POWER (PVT) L TD I.E. BOTH THE ENTITIES ARE PRIVATE LIMITED COMPANIES THE REFORE, IF ANYBODY IS ISSUING A CHEQUE IT SHOULD BE IN THE CORRECT NAME O F THE PERSON TO WHOM THE CHEQUE IS BEING ISSUED. FURTHER, ACCORDING TO THE REPORT OF THE ASSESSING OFFICER THE CHEQUES ARE ENCASHED THRO UGH A CHEQUE DISCOUNTING AGENT. IN RESPECT OF BASAI STEELS ENDOR SEMENT ON THE BACKSIDE OF THE CHEQUE AS 'PLEASE PAY TO NARESH COR PORATION' IS MADE BY A PERSON CLAIMING TO BE A PARTNER OF M/ S B ASAI STEELS, IN RESPECT OF SOJIRAM LSPAT FOR THREE CHEQUES, THE END ORSEMENT APPEARS TO HAVE BEEN MADE BY ONE LAKSHMAN CLAIMING AGAIN AS PARTNER, IN RESPECT OF BALANCE OF SIX CHEQUES THE ENDORSEMENT I S MADE BY A PERSON ALLEGED TO BE MANAGER. ALL THESE FACTS CLEAR LY PROVES THAT IT IS ONLY M/S REDSON ENGINEERS PVT LTD ISSUED CHEQUES I N THE NAMES OF BASAI STEELS AND SOJIRAM LSPAT AND THE CHEQUES WHIC H WERE ISSUED UNCROSSED AND ENCASHED THROUGH CHEQUE DISCOUNTING A GENT TO SAVE 9 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. ITSELF FROM THE PROVISIONS OF SECTION 40A(3) OF THE IT ACT. IT CLEARLY PROVES THAT IN THE SUBJECT ASSESSMENT YEAR THE DEBT OR MADE THE PAYMENT IN CASH AND APPEARS TO HAVE BEEN NOT RECORD ED IN THE BOOKS OF ACCOUNTS AND IN THE SUBSEQUENT YEARS IT HAS RECO RDED AS IF THE PAYMENTS ARE MADE BY CHEQUE AND SUBSEQUENTLY ENCASH ED THROUGH CHEQUE DISCOUNTING AGENTS. 11.3 LD. AR SUBMITTED THAT THE LEARNED CIT AGREED T HAT THERE IS NO CONCLUSIVE EVIDENCE IN THE FORM OF BANKING TRIALS T O ESTABLISH THE CLAIM OF PAYMENT BY REDSON ENGINEERS PVT. LTD. IN T HE SUBSEQUENT YEAR. 11.4 LD. AR RELIED ON THE CASE OF CIT VS JALARAM O IL MILLS (2002) 253 ITR 192, THE RATIO OF THE HON 'BLE GUJARAT HIGH COURT DECISION IS THAT THERE CANNOT BE A SITUATION WHERE MERELY BECAU SE AN ADDITION HAS BEEN MADE BY INVOKING SECTION 68, PENALTY U/S 2 71(1)(C) WOULD FOLLOW, AS A NATURAL COROLLARY-DEHORS PROVISIONS OF SECTION 68 IT CANNOT BE STATED WITH CERTAINTY THAT SAID SUMS WOULD BE CO NCEALED INCOME. THE FACTS AND CIRCUMSTANCES AND THE ENQUIRIES MADE BY THE ASSESSING OFFICER DURING REMAND PROCEEDINGS CLEARLY ESTABLISHED THAT THE ADDITION MADE U/S 68 CANNOT BE STATED THAT IT I S A CONCEALED INCOME. THEREFORE PROVISIONS OF SECTION 271(1)(C) A RE NOT ATTRACTED. 12. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE RS OF REVENUE AUTHORITIES AND SUBMITTED THAT THE DEBTOR M/S REDSU N ENGG. PVT. LTD. HAD CATEGORICALLY DENIED PAYING ANY CASH AND MOREOV ER, THE DEBTOR HAS ISSUED 12 CHEQUES IN THE SUBSEQUENT YEAR AS SET TLEMENT OF THE OUTSTANDING. THESE ASPECTS ARE NOT RELEVANT AS DURI NG THIS AY, ASSESSEE HAD ACCEPTED THE ADDITION AS IT COULD NOT EXPLAIN THE SOURCE OF SUCH RECEIPT OF CASH. 13. IN THE REJOINDER, LD. AR ARGUED THAT THE CHEQUE S ISSUED WERE NOT ADDRESSED TO THE ACTUAL NAME OF THE COMPANY, IT DOE S NOT PROVE THAT THE PAYMENTS WERE CORRECT AND M/S REDSUN ENGG. PVT. LTD. HAD NOT SUBMITTED ANY PROOF FOR PAYMENT CONFIRMATION FROM T HE ASSESSEE. 10 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. 14. CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL FACTS ON RECORD. THE ISSUE BEFORE US IS, T HE ASSESSEE IS CLAIMED TO HAVE RECEIVED CASH PAYMENTS FROM THE DEB TORS, NAMELY, M/S REDSUN ENGG. PVT. LTD., WHEREAS THE DEBTOR HAS DENIED OF MAKING SUCH HUGE CASH PAYMENTS AND SUBMITTED BEFORE THE AO THAT IT HAS ISSUED CHEQUE PAYMENTS TO SETTLE THE OUTSTANDING AM OUNT OF RS. 98,53,492/- IN THEIR BOOKS OF ACCOUNTS. AGGRIEVED W ITH THE PENALTY ORDER, ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT IT HAS NOT RECEIVED ANY SUCH CHEQUE PAYMENTS FROM THE DEBTOR AND REQUES TED FOR INVESTIGATION. BASED ON THE DIRECTION OF CIT(A), AO CONDUCTED INVESTIGATION ON SUCH BANKING TRANSACTIONS. BASED O N THE REMAND REPORT OF THE AO, CIT(A) HAS CONCLUDED THAT INVEST IGATION PROCEEDINGS HAVE FAILED TO CLARIFY PAYMENT HAD BEE N MADE BY M/S REDSON ENGG. PVT. LTD. TO ASSESSEE AND VICE VERSA, AS THE CHEQUES ISSUED BY M/S REDSUN WERE ALL BEARER CHEQUES, WHICH WERE DISCOUNTED BY SO CALLED PARTNER/MANAGER OF THE ASSE SSEE. IT IS PERTINENT TO NOTE THAT THESE CHEQUES WERE ISSUED AS BEARER CHEQUES FOR SETTLEMENT OF SUCH HUGE OUTSTANDING. WE ARE NOT SURE WHAT IS THE NECESSITY OF GOING FOR DISCOUNTING OF SUCH BEARER C HEQUES THAT TOO BY THE SO CALLED PARTNER/MANAGER OF THE ASSESSEE, WHEN THE CHEQUES WERE ISSUED TO THE PVT. LTD. COMPANY. ON THE OTHER HAND, ASSESSEE ITSELF WOULD HAVE DISCOUNTED IN THEIR OWN BANK. IT LEAVES US CERTAIN AMOUNT OF SUSPICION ON THE WHOLE TRANSACTION OR CLA IM OF THE DEBTOR I.E. M/S REDSUN ENGG. PVT. LTD. IT IS THE DUTY OF T HE DEBTOR TO COLLECT PAYMENT CONFIRMATION FROM THE ASSESSEE WHILE MAKING SUCH HUGE OUTSTANDING DUES. IN THE PRESENT CASE, THE DEBTOR FAILED TO SUBMIT ANY OF SUCH PROOF. IN THE ABOVE SAID CIRCUMSTANCES, WE ARE NOT IN A POSITION TO CONFIRM PENALTY ORDER AT THIS STAGE. IN OUR CONSIDERED VIEW, IT IS APPROPRIATE TO REMIT THIS CASE BACK TO THE FI LE OF THE AO WITH A DIRECTION TO INVESTIGATE BANKING TRANSACTIONS PROPE RLY. THE AO IS DIRECTED TO CALL FOR PROPER PROOF OF SETTLEMENT OF DUES BY M/S REDSON ENGG. PVT. LTD. IN THE INSTANT CASE, ONE OF THE PAR TIES I.E. ASSESSEE OR THE DEBTOR SUBMITTED IMPROPER PARTICULARS. THEREFOR E, WE NEED TO 11 ITA NO. 416/H/15 SOJIRAM ISPAT PVT. LTD. ESTABLISH WHO IS MAKING IMPROPER CLAIM. AO TO INVES TIGATE FURTHER AND DETERMINE WHETHER THE PARTICULARS SUBMITTED BY THE DEBTORS ARE PROPER. IN CASE, IT IS FOUND TO BE IMPROPER, PENALT Y PROCEEDINGS MAY BE DROPPED. IN CASE OF NECESSITY, ASSESSEE MAY BE G IVEN OPPORTUNITY OF BEING HEARD IN THE MATTER. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND JULY, 2016 KV COPY TO:- 1) M/S SOJIRAM ISPAT PVT. LTD., C/O MOHD. AFZAL, A DVOCATE, 11-5-465, SHERSONS RESIDENCY, FLAT NO. 402, CRIMINAL COUR T ROAD, RED HILLS, HYDERABAD 500 004. 2) ACIT, CIRCLE 3(2), IT TOWERS, HYDERABAD 3) CIT(A) - 3, HYDERABAD 4) CIT - 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.