The ACIT, Ratlam V. M/s. Sandeep Enterprises, Neemuch

ITA 431/IND/2013

• Counselvise Citation: 43122714 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESH
• Keywords: Unexplained cash credit

Judgement Text

M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 431/IND/2013 A.Y.2007-08 ACIT, RATLAM ::: APPELLANT VS M/S SANDEEP ENTERPRISES NEEMUCH ::: RESPONDENT CO NO. 85/IND/2013 ARISING OUT OF ITA NO. 431/IND/2013 M/S SANDEEP ENTERPRISES NEEMUCH ::: OBJECTOR VS ACIT, RATLAM ::: RESPONDENT REVENUE BY SHRI R.A. VERMA ASSESSEE BY SHRI S.S. DESHPANDE DATE OF HEARING 1 7 .12.2015 DATE OF PRONOUNCEMENT 2 1 .12.2015 M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 2 O R D E R PER SHRI B.C. MEENA, AM THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTI ON FILED BY THE ASSESSEE EMANATE FROM THE ORDER OF THE LE ARNED CIT(A), UJJAIN, DATED 15.3.2013. 2. THE GROUNDS OF APPEAL OF THE REVENUE READ AS UNDER : - (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT (APPEALS) IS RIGHT IN DELETING THE ADDITION OF RS.1,46,09,482/- IN ENTIRETY EVEN WHEN TO THE EXTEN T OF RS.41,32,172/- THE SAID CREDITORS REMAINED UNEXPLAINED (II) WHETHER SUCH RELIEF WAS JUSTIFIED EVEN WHEN NO CONFIRMATIONS WERE FILED AND NO CREDITOR WAS PRODUC ED INSPITE THE A.O.S DIRECTIONS TO PRODUCE THE SAME. (III) WHETHER THE RELIEF OF RS.41,32,172/- WAS JUST IFIED INSPITE OF THE FACT THAT PAYMENTS WERE CLAIMED TO B E M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 3 MADE IN CASH AND NO EVIDENCE WAS PRODUCED TO ESTABLISH THE IDENTITY OF THE PAYEE AND GENUINENESS OF THE TRANSACTIONS AND THIS WAS ALSO NOT DONE DURING THE APPELLATE PROCEEDINGS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM DOING THE BUSINESS OF TRANSPORTATION, LOADING, UNLOADING, HANDLING AND SHIFTING OF MATERIAL F OR M/S. ISPAT INDUSTRIES, DOLVI DISTT. RAIGARH (MAHARASHTRA) WHICH IS A VERY SMALL PLACE. M/S ISPAT INDUSTRIES ARE I N MANUFACTURE OF STEELS AT DOLVI. IT RECEIVES IRON ORE THROUGH RAILWAYS WHICH IS UNLOADED AT ROHA AND THEN TRANSPORTED TO THE FACTORY AT DOLVI THROUGH SMALL TRANSPORTERS. THE DISTANCE BETWEEN THE TWO PLACES IS ONLY 35 KMS. THE ASSESSEE ALSO ENGAGES OTHER TRUCKS FOR TRANSPORTATION O F GOODS. THE MAJOR RECEIPTS ARE FROM THE TRANSPORTATION OF GOODS THROUGH OTHERS. THE BOOKS OF ACCOUNTS ARE AUDITE D. THE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME AT M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 4 RS.40,30,950/-. AFTER UNLOADING THE GOODS IN THE FAC TORY PREMISES THE TRANSPORTATION CHARGES ARE CHARGED FROM ISP AT COMPANY AND THE PAYMENTS ARE MADE ON THE BASIS OF MTRS CONTAINING THE QUANTITY OF MATERIAL TRANSPORTED. THE RECEIPTS OF GOODS ARE ACKNOWLEDGED BY THE ISPAT COMPANY WHICH CONTAIN THE TRUCK NUMBERS AND THE DATE OF TRANSPORTATION. THE DETAILS OF THE TRUCKS MTR NUMBERS, PASS NUMBER, CHALLAN, ENTRY GATE AND QUANTITIES WERE FILED BEFORE THE ASSESSING OFFICER. AFTER THE PAYMENTS ARE RECEIVED FROM THE ISPAT COMPANY THE ASSESSEE MAKES THE PAYMENT TO THE PETTY TRANSPORTERS WHO HAVE TRANSPORTE D THE GOODS. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER CALLED FOR THE BANK STATEMENTS DIREC TLY FROM THE BANK AND WITHOUT CONFRONTING THE SAME TO THE ASSESSEE TRIED TO TALLY THE NAMES OF THE PERSONS TO W HOM THE CHEQUES ARE ISSUED. WHILE FRAMING THE ASSESSMENT T HE M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 5 ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE THE PAYMENT THROUGH CHEQUES WHICH ARE OF DIFFERENT SERIES . THE ASSESSING OFFICER FURTHER ASKED THE ASSESSEE TO PRODUCE THE PERSONS WHOSE NAMES ARE APPEARING IN FORM NO. 15 J WITH THEIR DRIVING LICENSE, PROOF OF IDENT ITY AND PROOF OF ADDRESS WITH THE COPY OF THE BANK STATEMENT. THE BANK STATEMENTS WERE TALLIED WITH FORM NO. 15J AND IT W AS OBSERVED THAT SOME NAMES WERE NOT APPEARING IN THE BANK STATEMENT AND SOME OF THE NAMES WERE APPEARING IN THE BANK STATEMENTS WHICH ARE NOT APPEARING IN THE LIST OF PERSONS GIVEN IN FORM NO. 15J. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT HEAVY PAYMENTS HAVE BEEN MADE TO THESE PERSONS BUT THEIR NAMES ARE NOT APPEARING IN THE BANK STATEMENT. THE ASSESSING OFFICER, THEREFORE, RE JECTED THE BOOKS OF ACCOUNTS. HE MADE THE ADDITION OF RS. 92,26,833/- ON ACCOUNT OF PAYMENTS MADE TO 13 PERSON S WHOSE NAMES ARE APPEARING IN FORM NO. 15J BUT WHOSE M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 6 NAMES ARE NOT APPEARING IN BANK STATEMENT. HE FURTHER MADE AN ADDITION OF RS.1,46,09,482/- ON THE GROUND THAT THE ASSESSEE HAS SHOWN THE SUNDRY CREDITORS OF RS. 3,16,64,032/- COMPRISING 165 PERSONS. HE OBSERVED T HAT IN CASE WHERE THE NAME ARE NOT APPEARING IN THE BANK STATEMENT, THEY ARE NOT GENUINE PARTIES. HE FURTHER ASK ED THE ASSESSEE TO PRODUCE ALL THE PERSONS BEFORE HIM WI TH THEIR DRIVING LICENSE, PROOF OF IDENTITY AND PROOF O F ADDRESS WITH THE COPY OF THE BANK STATEMENT. THE ASSESSING OF FICER REFERRED THE MATTER TO ITO, PANVEL, WHO, TALLIED THE N AMES WITH EXISTING PAN NUMBERS AND OPINED THAT ROHA IS A VE RY SMALL PLACE AND THESE PERSONS ARE NOT INCOME TAX ASSESSEES. THE ASSESSING OFFICER ACCORDINGLY MADE THE ADDITION. 4. AGAINST THE ABOVE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 7 CIT(A) WHO AFTER DISCUSSING THE ISSUE AT LENGTH, DELE TED THE ADDITION BY OBSERVING AS UNDER :- 3.4.1 I HAVE CONSIDERED THE FINDING THE A.O. AND WRITTEN SUBMISSION OF THE APPELLANT CAREFULLY. THE APPELLANT HAS SHOWN SUNDRY CREDITORS AT RS.3,16,64,032/-. HE HAS VERIFIED THE SUNDRY CREDIT ORS ALONG WITH THE BANK STATEMENT AND FOUND PAYMENT MADE TO CREDITORS AT RS.1,69,11,180/- THROUGH BANK AND BALANCE AMOUNT AT RS.1,46,09,482/- WAS NOT APPEARING IN BANK STATEMENT. HE HAS ASKED THE APPELLANT TO PRODUCE ALL THESE CREDITORS WHICH APPE LLANT COULD NOT PRODUCE, THEREFORE, IT IS HELD BY THE A.O . THAT APPELLANT WOULD HAVE MADE PAYMENT TO THESE CREDITOR S FROM UNEXPLAINED SOURCES AND SHOWN BOGUS OUTSTANDING LIABILITIES IN THE BALANCE SHEET. THERE FORE, A.O. HAS TREATED THEM UNEXPLAINED CREDITORS AND ADD ED TO THE TAXABLE INCOME OF THE APPELLANT. M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 8 3.4.2 DURING THE APPELLANT PROCEEDINGS APPELLANT HAS TAKEN A PLEA THAT A.O. HAS MADE THE ADDITION ON LY ON ONE BASIS THAT PAYMENTS TO VARIOUS PARTIES WHICH ARE MADE THROUGH BANKING CHANNELS AND WHOSE NAMES ARE APPEARING IN THE BANK STATEMENT ARE ACCEPTED AND TH E PART BALANCES OF SUCH PARTIES AND WHOSE NAMES ARE N OT APPEARING IN THE BANK STATEMENT ARE NOT ACCEPTABLE BECAUSE THEIR IDENTITY IS NOT PROVED AND THE TRANSACTIONS ARE UNVERIFIABLE. IT WAS EXPLAINED BY THE APPELLANT THAT OUT OF TOTAL DISALLOWANCE OF RS.1.46 CRORES MOST OF THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES AND ARE APPEARING IN THE BANK STATEMENT. TH E A.O. HAS NOT CONFRONTED THE FACTS ABOUT THE PAYMENT S WITH THE APPELLANT. THE APPELLANT HAS FURTHER CONTE NDED THAT IT ENGAGED PETTY TRANSPORTERS FOR TRANSPORTATI ON OF SUCH GOODS AND MAJORITY OF SUCH PAYMENTS WERE MADE IN CASH AFTER UNLOADING THE GOODS IN FACTORY PREMIS ES. M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 9 THE APPELLANT IS CHARGING TRANSPORTATION FROM THE COMPANY AND PAYMENTS ARE MADE ON THE BASIS OF THE MTR CONTAINING THE QUANTITY OF MATERIAL TRANSPORTED . IN SUPPORT OF ITS CONTENTION APPELLANT HAS FILED FEW C OPIES OF MTRS OF SMALL TRANSPORTERS CONTAINING QUANTITY O F GOODS TRANSPORTED AND RECEIVED AT THE OFFICE OF ISP AT INDUSTRIES AND ON THAT BASIS APPELLANT HAS RAISED T HE BILLS. IT IS FURTHER CONTENDED BY THE APPELLANT THA T A.O. HAS NOT CHALLENGED THE RECEIPTS BUT HE HAS RAISED D OUBT ON THE GENUINENESS OF THE CREDITROS. PART OF THE PAYMENTS WERE MADE THROUGH THE CREDITORS THROUGH BANK ACCOUNT, THEREFORE, IDENTITY OF THE CREDITORS IS PROVED BEYOND DOUBT. IT IS ALSO CONTENDED THAT WHEN THE GOODS ARE TRANSPORTED THROUGH A PARTICULAR TRUC K THE ENTRY IS MADE IN THE M/S ISPAT INDUSTRIES ON THE GA TE AND ALSO IN THE STORES AND ON THAT BASIS ONLY THE B ILLS FOR PAYMENTS ARE PASSED. M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 10 3.4.3 IT IS OBSERVED THAT A.O. HAS DISALLOWED THE PAYMENT ON THE BASIS OF NAMES AND AMOUNT OF THE CREDITORS NOT APPEARING IN THE BANK STATEMENT. DUR ING THE APPELLANT PROCEEDINGS APPELLANT HAS FILED DETAI LS OF THE CREDITORS AND NAMES OF THE 67 PERSONS OUT OF 94 PERSONS WERE APPEARING IN THE BANK STATEMENT WHOM APPELLANT HAVE MADE PART PAYMENT THROUGH BANK. THE A.O. HAS TREATED 71 CREDITORS GENUINE OUT OF 165 OUTSTANDING CREDITORS WHOSE NAMES WERE APPEARING IN THE BANK STATEMENT. REMAND REPORT WAS CALLED FOR FR OM THE A.O. ON THE WRITTEN SUBMISSION OF THE APPELLANT AND HE FOUND THE CONTRACTOR OF THE APPELLANT CORRECT TH AT OUT OF REMAINING 94 PERSONS WHOM A.O. HAS TREATED BOGUS CREDITORS NAMES OF 71 PERSONS WERE APPEARING IN THE BANK STATEMENT AND WHOM PART PAYMENTS WERE MADE THROUGH BANK. BUT APPELLANT COULD NOT PRODUCE THESE CREDITORS DURING THE ASSESSMENT PROCEEDINGS FOR M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 11 VERIFICATION OF TRANSACTIONS, THEREFORE, A.O. REQUE STED THAT ADDITION SHOULD BE CONFIRMED IN THE CASE OF TH E APPELLANT. 3.4.4 THE AP HAS TAKEN A PLEA THAT ONCE IT IS ACCEPTED BY THE A.O. THAT PART PAYMENTS ARE MADE THROUGH BANKING CHANNELS THEN QUESTION OF ADDITION ON THIS GROUND CANNOT BE SUSTAINED. FOR NON PRODUCTION OF THE CREDITORS BEFORE THE A.O. APPELLANT HAS STATED THAT THE CREDITORS ARE VERY SMALL IN STATUS AND BALANCES WERE PAID THROUGH CHEQUE NO ADDITION CAN BE MADE ON THE GROUND THAT THEY WERE NOT PRODUCED. THESE SMALL PERSONS HAVE LEFT THE PLACE FOR SOME REASON AND AS SUCH THEY WERE NOT PRODUCED DURING THE ASSESSMENT. IT IS FURTHER CONTENDED BY THE APPELLANT WHEN THE BOOKS O F ACCOUNTS OF REJECTED THE ADDITION COULD BE MADE ON THE BASIS OF THE NET PROFIT RATE AND NOT ON THE BASIS O F DISALLOWANCE OF EXPENDITURE. THE APPELLANT HAS ALS O M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 12 PRODUCED THE PAYMENT VOUCHERS AND COPIES OF THE ACCOUNT OF THE CREDITORS WHOM PAYMENTS WERE MADE IN THE SUBSEQUENT YEAR. 3.4.5 THE APPELLANT HAS MADE THE PAYMENTS TO THE CREDITORS IN CASH AS WELL AS CHEQUES. IT HAS FILED THE PAYMENT VOUCHERS IN SUPPORT OF THE CASH PAYMENT AND COPY OF ACCOUNT OF THE SUBSEQUENT YEAR OF THE CREDI TORS. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED AND APPELLANT HAS MAINTAINED VOUCHERS FOR PAYMENT OF EXPENSES. THE APPELLANT HAS MADE THE PAYMENTS TO TH E CREDITORS ON THE BASIS OF MTR RECEIPTS. THE ENTRIES OF THE GOODS UNLOADED WERE MADE ON THE GATE OF M/S ISPAT INDUSTRIES AND STORES OF THE COMPANY WHOSE TRANSPORTATION CONTRACT APPELLANT HAD EXECUTED DURI NG THE YEAR. THE APPELLANT USED TO MAKE THE PAYMENTS O N THE BASIS OF THE MTR RECEIPTS ACKNOWLEDGED BY M/S ISPAT INDUSTRIES. THE A.O. HAS ASKED THE APPELLANT TO M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 13 PRODUCE ALL THE SUNDRY CREDITORS WHOSE NAMES ARE NO T APPEARING IN THE BANK ACCOUNT APPEARS UNREASONABLE. BECAUSE BEFORE DRAWING ANY ADVERSE INFERENCE NO INDEPENDENT INQUIRIES WERE CONDUCTED BY THE A.O. NO T EVEN BY TEST CHECK. THESE WERE SUNDRY CREDITORS AND NOT THE LOAN CREDITORS OR THE DEPOSITORS WHO HAD LE FT AFTER THE JOB DONE BY THEM AND RECEIPT OF THE PAYME NTS. ONLY ON THE BASIS OF THE NOM PRODUCTION OF THE SMAL L TRUCK OWNERS OR PAYMENTS WERE MADE TO THE CREDITORS ON LATER DATE DO NOT MAKE THE TRANSACTIONS NON GENU INE UNLESS A.O. BRINGS ANYTHING ADVERSE ON THE RECORD T HAT NO PAYMENTS WERE MADE TO THESE CREDITORS AFTER THE CLOSE OF THE YEAR. THE APPELLANT HAS SHOWN SUNDRY DEBTORS OF RS.2,36,25,953/-. IT SHOWS THAT APPELLAN T HAS ALSO RECEIVED THE PAYMENTS FROM THE PARTY AFTER THE CLOSE OF THE YEAR FOR WHOM IT HAS WORKED DURING THE YEAR UNDER CONSIDERATION. THE A.O. HAS NOT DOUBTED THE M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 14 RECEITPS THEN HOW COME THE EXPENDITURE BE HELD NON GENUINE TO SUCH A HUGE EXTENT ? THERE MUST BE SOME REASONABILITY IN MAKING SUCH ADHOC DISALLOWANCES. T HE A.O. CANNOT MAKE SUCH A HEAVY DISALLOWANCE MERELY O N THE BASIS OF SUSPICION, WITHOUT HAVING ANYTHING ADV ERSE IN HIS HAND. 5. NOW THE REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR REFUTTED THE FINDINGS OF THE LEARN ED CIT(A) WITH THE CONTENTION THAT SHE HAS GRANTED THE R ELIEF WITHOUT APPLICATION OF MIND. 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT IT IS ONLY AFTER APPRECIATION OF EACH AND EVERY FACT OF THE CASE THAT THE LEARNED CIT(A) HAS GRANTE D RELIEF TO THE ASSESSEE AND AS SUCH THE ORDER OF THE LE ARNED CIT(A) DESERVES TO BE UPHELD. M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 15 8. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES , WE FIND NO INFIRMITY IN THE FINDINGS RECORDED BY THE L EARNED CIT(A) AS SHE HAS DISCUSSED THE ISSUE AT LENGTH AND CONSIDERED ALL THE ASPECTS OF THE CASE. 9. IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND :- WHETHER ON THE FACTS AND CIRCUMSTANCES, THE LD. CI T(A) IS RIGHT IN APPLYING NET PROFIT RATE OF 4% WITHOUT ANY BASIS AND WITHOUT APPRECIATING THE FACTS THAT LD. C IT(A) HAS APPLIED NET PROFIT RATE OF 2.50% IN EARLIER YEA R. 10. AFTER HEARING BOTH THE SIDES ON THE ISSUE, WE FI ND THAT THE LEARNED CIT(A) HAS RIGHTLY APPLIED NET PROFIT RATE OF 4% AND WE ENDORSE HIS FINDINGS. THE CROSS OBJECTION OF THE ASSESSEE IS, THEREFORE, DISMISSED,. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AND CROS S OBJECTION OF THE ASSESSEE STAND DISMISSED. M/SSANDEEP ENTERPRISES ITA NO. 431.IND/2013 & CO NO./85/IND/2013 16 PRONOUNCED IN OPEN COURT ON 21 DECEMBER, 2015 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 21 DECEMBER, 2015 DN/-