ACIT 16(2), MUMBAI V. SHREE RAMDEV METAL MART, MUMBAI

ITA 4172/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2945 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Additional evidence
• Section: 143(3); 142(1); 131; 68; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 4172 /MUM/ 201 4 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) ASSISTANT COMMISSIONER OF INCOME TAX, 16(2), 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400007 / VS. M/S SHREE RAMDEO METAL MART, 60, 1 ST FLOOR, 1 ST CARPENTER STREET, C P TANK MUMBAI - 400004, ./ PAN : AACFS4818A / REVENUE BY SHRI VINOD KUMAR / ASSESSEE BY SHRI RAJKUMAR SINGH / DATE OF HEARING : 16 . 6. 2016 / DATE OF PRONOUNCEMENT : 24. 6. 2016 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST THE ORDER DATED 29.3.2014 PASSED BY LD.CIT(A) - 2 7 , MUMBAI , AND IT RELATES TO THE ASSESSMENT YEAR 20 0 9 - 10 . 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.9.2009 DECLARING TOTAL INCOME AT RS.64,02,583/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES U/S 143(2) AND 142(1) WERE DULY 2 4172 /MUM/ 201 4 SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO FOUND THAT THE ASSESSEE HAS UNEXPLAINED CREDIT TO THE TUNE OF RS.15 LAKHS WHICH COULD NOT BE CONFIRMED ON THE ADDRESSES GIVEN BY THE ASSESSEE. SIMILARLY, THE AO OBSERVED THAT THE ASSESSEE HAS AN OUTSTANDING ADVANCES TO M/S M P INDUSTRIES AMOUNTING TO RS.83,22,479/ - WHICH WAS STANDING SINCE 2007 AN D THERE BEING NO TRANSACTION OF SALE AND PURCHASE AND PARTICULARS OF THE SAID ADVANCES WERE NOT DISCLOSED B Y THE AS S ES SEE IN THE TAX AUDIT REPORT ATTACHED TO RETURN OF INCOME FILED BY T HE ASSESSEE. L ASTLY, THE AO OBSERVED THAT THE ASSESSEE HAS PURCHASED DEPB LICENSE FOR AN AMOUNT OF RS.52,97,563/ - DURING LAST TWO MONTHS (RS.20,31,404/ - IN FEBRUARY 2009 AND RS.32,66,161/ - IN THE MONTH OF MARCH 2009) . THESE LICENSES WERE PURCHASED FOR IMPORT OF G OODS AND THUS IT CONSTITUTES DIRECT COST OF PURCHASE AND WOULD FORM PART OF THE COST OF STOCK IN THE HANDS OF THE ASSESSEE AS PER THE AO. HOWEVER, THE AO FOUND THAT THE ASSESSEE HAS WRITTEN OFF AMOUNT OF UNUSED AMOUNT OF LICENSE IN IS FINANCIAL STATEME NTS AND H ENCE, THE EXPENSES OF THE ASSESSEE STOOD OVERSTATED TO THE EXTENT OF UNUSED AMOUNT OF LICENSE AS AT BALANCE SHEET DATE AND ACCORDINGLY PRESUMED 3 3 % OF DEPB LICENSE FEE EXPENSES OF RS.17 ,48,200/ - TO BE UNUSED AMOUNT A T THE BALANCE SHEET DATE W HICH WAS NOT INCLUDED IN THE CLOSING STOCK ON THAT DATE . FINALLY THE AO FRAMED THE ASSESSMENT ON 21.12.2011 PASSED UNDER SECTION 143(3) BY ASSESSING THE INCOME OF THE ASSESSEE AT RS.17,973,260/ - BY MAKING VARIOUS ADDITIONS VIZ DEPB LICENSE OF RS.17,48 ,200/ - , UNEXPLAINED CASH 3 4172 /MUM/ 201 4 CREDIT U/S 68 OF RS.15 LAKHS ADVANCES FROM CUSTOMERS M/S M P INDUSTRIES RS.83,22,479/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE BY CONSIDERIN G THE SUBMISSIONS FILED BY IT. 3. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ISSUE RAISED IN GROUND NO.1 BEFORE US IS IN RESPECT DELETION OF RS.15 LAKHS BY THE LD. CIT(A) AS MADE BY THE AO U/S 68 OF THE ACT WHICH REPRESENTS LOAN RECEIVED FROM MS. TEENA SANGHAVI. THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AND HOLDING AS UNDER : 2.4.7 GROUND NO.3 IS AGAINST THE ADDITION OF RS. 15,00,0001 - U/S.68 OF THE I T. ACT ON ACCOUNT OF A LOAN RECEIVED FROM TEENA SANGHVI. HERE AGAIN, AS PER THE REMAND REP ORT, LD. A O . HAS VERIFIED THE LOAN IN QUESTION BY ISSUING NOTICE U/S.131 AND HE HAS NOT RAISED ANY OBJECTION TO THE CREDITWORTHINESS OF THE SAID PERSON. LD. AR HAS ALSO POINTED OUT IN HIS REJOINDER THAT THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITOR HAVE NOT BEEN CONTROVERTED BY THE LD. A O . IN THE REMAND REPORT AND THEREFORE, THE ADDITION DOES NOT HAVE ANY LEGS TO STAND. 2.4.8 IN VIEW OF THE FINDING OF FACT RECORDED BY THE LD. A O . VERIFYING THE LOAN ACCOUNT BY ISSUING NOTICE U/S.131, I DO NOT FIND ANY GROUND FOR SUSTAINING THE ADDITION MADE. ACCORDINGLY, GROUND NO.3 IS ALLOWED.' 4 . THE LD.AR ARGUED BEFORE US THAT IN THE REMAND REPORT WHICH WAS CALLED FOR BY THE LD. CIT(A), THE AO VERIFIED THE LOAN BY ISSUING THE NOTICE U/S 131 AND NO OBJECTION WAS RAISED ABOUT THE CREDITWORTHINESS AND IDENTITY OF THE LOAN CREDITOR AND THUS SUBMITTED THAT THE AO IN THE REMAND PROCEEDINGS HAS NOT 4 4172 /MUM/ 201 4 DISPUTED THE IDENTITY , GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE LOAN CREDITOR. MOREOVER, THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND TH E LD.AR REQUEST ED FOR UPHOLDING THE ORDER OF LD.CIT(A) ON THIS ISSUE WHEREAS ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF AO HEAVILY AND REQU ESTED FOR RESTORING THE ORDER OF THE AO BY SETTING ASIDE THE ORDE R OF L D CIT(A). 5 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT IN THE REMAND PROCEEDINGS THE L D. CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO AND THE AO DURING THE REMAND PROCEEDINGS ISSUED NOTICE U/S 131 AND VERIFIED THE LOAN. WE ARE IN AGREEMENT WITH THE OBSERVATIONS OF T HE LD.CIT(A) THAT THE IDENTITY, GENUINENESS OF THE TRANSACTIONS AND CRED ITWORTHINESS OF THE CREDITORS W ERE NOT IN DOUBT OR DISPUTED WHICH HAS BEEN VERIFIED BY T HE AO DURING THE REMAND PROCEEDINGS AND T HER E FORE, FIND NO INFIRMITY OR ILLEGALITY IN THE ORDER OF LD. CIT(A) RELATING TO DELETION ADDITION MADE U/S 68 OF THE ACT. IN VIEW OF TH ESE FACT S , WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF LD.CIT(A, AND ACCORDINGLY CONFIRM HIS ORDER AND DISMISS THE GROUND RAISED BY THE REVENUE ON THIS ISSUE . 6 . IN THE SECOND GROUND, THE ISSUE RAISED BEFORE US IS REGARDING THE DELETI ON OF ADDITION OF RS.17,48,200/ - ASSUMING 33% OF DEPB PURCHASED DURING HE MONTH S OF FEBRUARY AND MARCH 2009 WHICH WAS UNUSED AND NOT INCLUDED IN THE CLOSING STOCK AT THE YEAR END. THE LD. CIT(A), DURING THE APPELLATE PROCEEDINGS 5 4172 /MUM/ 201 4 CALLED FOR REMAND REPO RT AND THAT THE ASSESSEE HAS INCLUDED UNUTILIZED DEPB AT RS.14,56,274/ - IN THE CLOSING STOCK OF THE ASSESSEE WHICH STOOD AT RS.7,22,64,223/ - AS ON 31.3.2009 AND THE SAID FACT WAS ALSO STATED IN TAX AUDIT REPORT . THE LD. CIT(A) VERIFIED THE ISSUE BY ADMITTING THE ADDITIONAL EVIDENCE UNDER RULE 46A OF T HE RULES AN D ALSO ON THE BASIS THE REMAND REPORT FROM THE AO AND FINALLY THE LD. CIT(A ) DELETED THE ADDITION BY HOLDING AS UNDER : 2.4.6 ON PERUSAL OF THE REMAND REPORT DATED 19.02.2014, IT IS SEEN THAT THE LD AO. HAS ACCEPTED THE FACT THAT AS PER THE TAX AUDIT REPORT U/S.44AB OF THE ACT, THE DETAILS OF CLOSING STOCK AS ON 31.3.2009 INCLUDED THE UNUSED DEPB LICENSE OF RS.1 4,56,274/- IN EXHIBIT 8. LD. AR HAS ALSO STATED THAT AS THE LD. AO. HAS HIMSEL F ACCEPTED THE FACT THAT UNUTILIZED DEPB LICENSE WAS INCLUDED IN THE CLOSING STOCK HENCE, THE ADDITION WAS MADE ON WRONG FACTS AND MERELY ON ASSUMPTIONS AND PRESUMPTIONS. AS THE LD.AO. HAS ALREADY VERIFIED THE FACT THAT UNUTILIZED DEPB LICENSE WAS INCLUDED IN THE CLOSING STOCK AS ON 31.3.2009, THERE DOES NOT REMAIN ANYTHING FURTHER TO BE ADDED TO THE TOTAL INCOME ON THE BASIS OF MERE ASSUMPTIONS AND PRESUMPTIONS AND HENCE, GROUND NO.2 IS ALLOWED. 7 . THE LD.AR ARGUED BEFORE US THAT THE ORDER OF THE LD.CIT( A) IS CORRECT AS THE LD. CIT(A) APPRECIATED THE FACT OF DEPB LICENSE FEE OF RS.14,56,274/ - HAVING BEEN INCLUDED IN THE VALUE OF CLOSING STOCK OF RS.7,22,64,223/ - AS ON 31.3.2009 AFTER CALLING REMAND REPORT FROM THE AO AND THEREFORE THE SAME BE UPHE LD BY DISMISSING THE APPEAL OF THE REVENUE. 8 . THE LD. DR RELIED HEAVILY ON THE ORDER OF AO. 6 4172 /MUM/ 201 4 9 . AFTER CONSIDERING T HE RIVAL SUBMISSIONS AND PERUSAL OF THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE AS S ES SEE HA S INCLUDED THE UNUTILIZED AMOUNT OF DEPB LI CENCE OF RS.14,56,274/ - IN THE CLOSING STOCK AS ON 31.3.2009 WHICH WAS ALSO DISCLOSED IN THE TAX AUDIT REPORT U/S 44AB OF THE ACT BY THE TAX AUDITOR. IN VIEW OF THIS FACT THE ACTION OF T HE AO WAS RIG H TLY REVERSED BY T HE LD.CIT(A) AND WE DO NOT FIND ANY POSSIBILITY TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DISMISS THE GROUND TAKEN BY THE REVENUE. 10 . GROUND THE NO.3 TAKEN BY THE ASSESSEE IS AGAINST THE DELETION OF ADVANCES RECEIVED FROM M/S M P INDUSTRIES BY THE LD.CIT(A) AMOUNTING TO RS.83,22,479/ - . THE SAID ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAID ADVANCE WAS NOT DISCLOSED IN THE TAX AUDIT REPORT AND THERE WAS NO TRANSACTION OF SALE AND PUR CHASE DURING THE CURRENT YEAR OR IN THE PREVIOUS YEAR . THE SAID ADVANCE WAS OUTSTANDING SINCE 2007. THE LD.CIT(A) DURING THE APPELLATE PROCEEDING CALLED FOR THE REMAND REPORT FROM THE AO AND THE AO IN THE REMAND REPORT SUBMITTED BEFORE THE LD.CIT(A) THAT THE TRANSACTIONS GRANTING ADVANCES TO THE ASSESSEE BY M/S M P I NDUSTRIES WERE VERIFIABLE AND THE AO FURTHER STA T ED IN THE REMAND REPORT THAT THE ASSESSEE HAD FREQUENT AND CONTINUOUS BUSINESS TRANSACTIONS WITH M/S M P INDUSTRIES. THE LD. CIT(A) FIN ALLY DELETED THE ADDITION BY OBSERVING AND HOLDING AS UNDER : 7 4172 /MUM/ 201 4 2.4.9 GROUND NO.4 IS AGAINST THE ADDITION OF RS. 83,22,479/ - MADE BY THE LD. A. O . BY TREATING THE ADVANCE AMOUNT FROM M/S. M.P. INDUSTRIES AS TRADE RECEIPT U/S.28(IV) OF THE ACT. LD. A O . MADE THE ADDITION BY OBSERVING THAT THE APPELLANT DID NOT HAVE ANY BUSINESS TRANSACTION WITH THE SAID CUSTOMER. HOWEVER, ON PERUSAL OF THE REMAND REPORT SUBMITTED BY THE LD. A O ., I FIND THAT HE HAS VERIFIED THE LEDGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF M/S. M.P. INDUSTRIES ALONG WITH BANK STATEMENTS REFLECTING THE TRANSACTIONS BETWEEN 1.4.2007 TO 31.3.2009 AND HELD THAT THE TRANSACTIONS OF M/S.M.P. INDUSTRIES WITH THE APPELLANT WERE VERIFIABLE. LD. AR HAS ALSO POINTED OUT THAT DURING THE REMAND PROCEEDINGS, H E HAD PROVIDED SUFFICIENT MATERIAL TO THE LD. AO BASED ON WHICH, HE VERIFIED THE CONTINUOUS BUSINESS TRANSACTIONS WHICH M/S. M.P. INDUSTRIES HAD WITH THE APPELLANT AND WHICH NEGATES THE FINDINGS OF THE LD A O . IN THE ORIGINAL ASSESSMENT PROCEEDINGS WHICH WAS BASED ONLY ON ASSUMPTIONS AND PRESUMPTIONS WITHOUT BRINGING ANY MATERIAL ON RECORD. 2.4.10 IN ABOVE VIEW OF THE MATTER, THE FINDINGS GIVEN BY THE LD. AD. IN THE ASSESSMENT PROCEEDINGS THAT THERE WAS NO PURCHASE AND SALE TRANSACTION WITH THE SAID PARTY I N TWO YEARS ARE FOUND TO BE INCORRECT AND HENCE, THE VERY BASIS FOR MAKING THE ADDITI ON DOES NOT SURVIVE. ACCORDINGLY, GROUND NO.4 IS ALLOWED. ' 1 1 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUT HORITIES BELOW. WE FIND THAT IN THE REMAND REPORT THE AO THAT THE ASSESSEE WAS HAVING CONTINUOUS AND REGULAR BUSINESS TRANSACTIONS WITH THE SAID PARTY AND RECORDED THE FINDINGS OF FACTS THA T THE SA I D ADVANCE WAS VERIFIABLE AND GENUINE AND THUS NEGATIVE D T HE FINDINGS OF AO AS MADE IN THE ORDER OF ASSESSMENT WHICH IN OUR VIEW WAS PURELY GUESS WORK OF T HE AO. THE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY T HE AO ON THE BASIS OF CONJUNCTURE AND SURMISES WITHOUT GOING INTO THE FACTS AND BOOKS OF THE 8 4172 /MUM/ 201 4 A CCOUNT OF THE ASSESSEE . WE, THEREFORE, FINDING NO INFIRMITY IN THE ORDER OF LD.CIT(A) , UPHOLD THE SAME ON THIS ISSUE. 1 2 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. SD SD ( SHAILENDRA KUMAR YADAV ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 24 .6.2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI