The DCITNavsari Cucle, Navsari V. Gandevi Tube Industries Pvt.Ltd., Navsari

ITA 433/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85692 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 29-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Additional evidence
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACC OUNTANT MEMBER DY. COMMISSIONER OF INCOME-TAX, NAVSARI CIRCLE, NAVSARI (APPELLANT) VS GANDEVINTUBE INDUSTRIES PVT. LTD, VIJAY BAUG, GANDEVI, TAL. GANDEVI, NAVSARI, PAN: AAACG 8561 H (RESPONDENT) REVENUE BY: SMT. SONIA KUMAR, SR. D.R. ASSESSEE BY: SHRI. M.K. PATEL, AR DATE OF HEARING : 29-01-2015 DATE OF PRONOUNCEMENT : 13-02-20 15 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:- THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)- VALSAD, GUJARAT DATED 26-11-2010 FOR A.Y. 2007-08. ITA NO. 433/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NO. 433/AHD/2011 A.Y. 2007-08 PAGE NO DCIT VS. GANDEVINTUBE INDUSTRIES PVT. LTD 2 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY WHO ELECTRONICALLY FILED I TS RETURN OF INCOME FOR A.Y. 2007-08 ON 31-10-2007 DECLARING TOTAL INCO ME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED U/S. 143(3) ON 30-10-2009 AND THE TOTAL LOSS WAS DE TERMINED AT RS. 62,11,700/-. AGGRIEVED BY THE ORDER OF AO, ASSESSE E CARRIED THE MATER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 26-11-2010 P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED T HE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION O F RS. 3,80,000/- MADE ON ACCOUNT OF DISALLOWANCE OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION O F RS. 5,27,334/- MADE ON ACCOUNT OF NOT HAVING PROPER CHECK OVER THE CLOSING STOCK VALUE. 4. FIRST GROUND IS WITH RESPECT TO DELETION OF RS. 3,80,000 U/S. 68 OF THE ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE TAX AUDIT REPORT, AO NOTICED THAT ASSESSEE HAS STAT ED TO HAVE RECEIVED FRESH LOAN OF RS. 3,80,000/- FROM SURJEET SINGH GHU RA. ASSESSEE WAS ASKED TO PRODUCE CONFIRMATION, CONTRA-ACCOUNT, COPY OF BANK ACCOUNT OF THE DEPOSITORS TO WHICH ASSESSEE INTER ALIA SUBMITT ED THAT IT HAS NOT TAKEN LOAN OR DEPOSIT DURING THE YEAR UNDER CONSIDERATION AND THEREFORE THE FURNISHING OF CONFIRMATION OF ACCOUNTS DOES NOT ARI SE. THE SUBMISSION OF I.T.A NO. 433/AHD/2011 A.Y. 2007-08 PAGE NO DCIT VS. GANDEVINTUBE INDUSTRIES PVT. LTD 3 THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO AS HE WAS OF THE VIEW THAT ASESSEE IS REQUIRED TO PROVE PRIME FACIE THE T RANSACTIONS WHICH RESULTED IN CASH CREDIT. IN THE ABSENCE OF ANY CON FIRMATION, AO CONCLUDED THAT ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENE SS OF CASH CREDITS AND ACCORDINGLY ADDED TO RS. 3,80,000/- TO THE INCOME U /S. 68 OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER :- SUBMISSION OF THE A.R. :- THE AR SUBMITTED THAT THE APPELLANT HAS TAKEN INTER EST-FREE LOAN DURING THE YEAR FROM ONE OF THE DIRECTORS OF THE CO MPANY. IT IS FURTHER SUBMITTED THAT AFFIDAVIT OF THE DEPOSITORS, ACCOUNT CONFIRMATION AND COPY OF BANK STATEMENT TO PROVE THE GENUINENESS OF THE TRANSACTION , IDENTITY OF THE DEPOSITOR AND SOURCES OF DEPOSIT WE RE GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE DEPOSITOR HAS GIVEN SUCH ADVANCE OUT OF RECEIPT FROM NABARD ON REDEMPTI ON OF NABARD CAPITAL GAIN BONDS, THE COPY OF WHICH IS PRO DUCED FOR VERIFICATION. 3 CONCLUSION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTIONS RAISED BY THE AR O F THE APPELLANT IN THE WRITTEN SUBMISSION. THE APPELLANT COMPANY HAS T AKEN LOAN FROM ONE OF ITS DIRECTOR AND ALSO PRODUCED THE SOURCE OF THE INCOME BY PROVIDING CONFIRMATION, BANK STATEMENT, CONTRA ACCO UNT. THUS, THE APPELLANT PROVED THE GENUINENESS OF CREDITWORTHINES S AND IDENTITY OF THE DEPOSITOR. CONSIDERING THE FACTS OF THE CASE, THIS GROUND OF APPEAL IS ALLOWED. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. I.T.A NO. 433/AHD/2011 A.Y. 2007-08 PAGE NO DCIT VS. GANDEVINTUBE INDUSTRIES PVT. LTD 4 7. BEFORE US, LD. DR SUBMITTED THAT ASSESSEE DID N OT FILE ANY CONFIRMATION AS CALLED FOR BY THE AO AND FURTHER AL L THE DETAILS WERE SUBMITTED BEFORE LD. CIT(A) WHO DID NOT CALL FOR RE MAND REPORT FROM THE AO. HE THEREFORE SUBMITTED THAT ADDITION MADE BY T HE AO BE UPHELD. LD. AR ON THE OTHER HAND FAIRLY CONCEDED THAT ADDITIONA L EVIDENCE WAS FURNISHED BEFORE LD. CIT(A) BUT NO REMAND REPORT WA S CALLED BY CIT(A) FROM AO. HE THEREFORE SUBMITTED THAT THE MATTER MA Y BE REMITTED TO THE FILE OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT AO WHILE MAKING THE ADDITION HAS NOTED THAT ASSESSEE DID NOT FURNISH THE COPY OF THE ACCOU NT CONFIRMATION AND THE OTHER DETAILS CALLED FOR BY HIM TO PROVE THE GENUIN ENESS OF THE TRANSACTION. WE FURTHER FIND THAT BEFORE LD. CIT(A) THE DETAILS WERE FURNISHED BY AO AND ON THE BASIS OF THE AFORESAID DETAILS FURNISHED BY THE ASSESSEE, THE ADDITION WAS DELETED. RULE 46A OF THE I.T. RULES S TIPULATES THAT CIT(A) FOR THE REASONS TO BE RECORDED, CAN ADMIT THE EVIDENCE PRODUCED BY THE ASSESSEE IN THE APPEAL. HOWEVER THE EVIDENCE PRODU CED BY THE ASSESSEE UNDER RULE 46(A)(1) CANNOT BE CONSIDERED ON MERITS UNDER RULE 46A(3) UNLESS THE AO IS GIVEN AN OPPORTUNITY TO EXAMINE TH E EVIDENCE OR DOCUMENT PRODUCED BY THE ASSESSEE. IN THE PRESENT CASE, WE FIND THAT ON THE ADDITIONAL EVIDENCE SUBMITTED BY ASSESSEE BEFOR E CIT(A) NO REMAND REPORT OR COMMENTS OF THE AO WERE OBTAINED BY CIT(A ). WE ARE THEREFORE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE AO SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO EXAMINE THE EVIDENCE THAT WERE FURNI SHED FOR THE FIRST TIME BEFORE LD. CIT(A). WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW A ND AFTER CALLING REMAND I.T.A NO. 433/AHD/2011 A.Y. 2007-08 PAGE NO DCIT VS. GANDEVINTUBE INDUSTRIES PVT. LTD 5 REPORT FROM THE AO. IN THE RESULT THIS GROUND OF R EVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 9. GROUND NO. 2 IS WITH RESPECT TO DELETING THE ADD ITION OF RS. 5,27,334/- 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE AUDITOR, WITH RESPECT TO CLOSING STOCK, HAS MADE A REMARK ABOUT THE NON AVAILABILITY OF QUANTATIVE DETAILS OF STOCK AND HE HAD FURTHER COMMENTED THAT THE INFORMATION GIVEN IN THE ACCOUNTS WERE NOT VERIFIABLE AND WERE TAKEN AS PREPARED BY THE MANAGEMENT. IN VIEW OF TH E COMMENT OF THE AUDITOR, AO CONSIDERED 10% OF THE VALUE OF THE CLOS ING STOCK TO BE WITHOUT PROPER CHECK AND THEREFORE MADE ADHOC ADDITION OF 1 0% OF THE VALUE OF CLOSING STOCK. AGGRIEVED BY THE ORDER OF AO, ASSES SEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDI NG AS UNDER:- 7.3 I HAVE CONSIDERED THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTIONS RAISED BY THE AR OF THE APPELLANT IN THE WRITTEN SUBMISSION. THE AO FAILED TO ESTABLISH THAT THE APPELLANT HAS DONE EVERYTHING WRONG. THERE IS NO ADVERSE FINDING OR EVIDENCE ON RECORDS FOUND BY THE A.O. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. CONSIDERING THE FACTS O F THE CASE, THE DISALLOWANCE MADE BY THE AO IS DELETED. THUS, THIS GROUND OF APPEAL IS ALLOWED. 11. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 12. BEFORE US, LD. DR SUBMITTED THAT IN VIEW OF THE QUALIFICATION OF THE AUDITOR, AND IN THE ABSENCE OF PROPER CONTROL WITH RESPECT TO STOCK, THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE OF 10%. SHE F URTHER SUBMITTED THAT IN I.T.A NO. 433/AHD/2011 A.Y. 2007-08 PAGE NO DCIT VS. GANDEVINTUBE INDUSTRIES PVT. LTD 6 SUCH CIRCUMSTANCES THE ORDER OF AO SHOULD HAVE BEEN UPHELD BY LD. CIT(A). SHE THUS SUPPORTED THE ORDER OF AO. LD. AR ON THE OTHER HAND SUBMITTED THAT THE ADDITIONS HAVE BEEN MADE BY AO O N ADHOC BASIS WITHOUT POINTING ANY SPECIFIC DISCREPANCY AND THERE FORE, THE ADDITION WAS NOT JUSTIFIED. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT WHILE MAKING THE DISALLOWANCE, AO HAD RELIED ON THE COMMENT OF THE AUDITOR WHEREIN THE AU DITOR HAD OBSERVED ABOUT THE ABSENCE OF FULL QUANTITATIVE DETAILS OF S TOCK. WE FURTHER FIND THAT LD. CIT(A) HAS DELETED THE ADDITION ONLY FOR THE RE ASON THAT NO ADVERSE FINDING OR EVIDENCE HAS BEEN FOUND BY THE AO. BEFO RE US, ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO EXPLAIN THE M ETHODOLOGY ADOPTED FOR VALUATION OF CLOSING STOCK NOR HAS PRODUCED ANY QUA NTITATIVE RE-CONCILIATION. WE ARE THEREFORE OF THE VIEW THAT MATTER NEEDS TO B E RE-EXAMINED AT THE END OF LD. CIT(A) IN THE LIGHT OF THE QUALIFICATION OF THE AUDITOR AND THE METHODOLOGY ADOPTED BY THE ASSESSEE TO VALUE THE ST OCK. CIT(A) SHALL ALSO GIVE A CLEAR FINDING ABOUT THE SAME. WE THERE FORE REMIT THE ISSUE TO THE FILE OF LD. CIT(A) FOR A FRESH DECISION. NEEDL ESS TO STATE THAT LD. CIT(A) SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. ASSESSEE IS ALSO DIRECTED TO PRODUCE NECESSARY RECORDS ABOUT THE STOCK AND ANY OTHER DETAILS CALLED FOR BY THE AUTHORITIES. IN CA SE THE ASSESSEE IS FAILS TO FURNISH THE REQUIRED DETAILS, THE REVENUE SHALL BE FREE TO DECIDE THE ISSUE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. IN T HE RESULT, THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A NO. 433/AHD/2011 A.Y. 2007-08 PAGE NO DCIT VS. GANDEVINTUBE INDUSTRIES PVT. LTD 7 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 13/02/2015 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / , .