A.C.I.T., Circle-2, Gwalior V. M/s Agro Solvent Products Pvt. Ltd., Gwalior

ITA 460/AGR/2011

• Counselvise Citation: 46020314 RSA 2011
• Duration Of Justice: 42 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: S K SABOO
• Keywords: Unexplained cash credit; Assessment record
• Section: 133(6); 68; 69; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.460/AGR/2011 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S A GRO SOLVENT PRODUCTS PVT LTD, CIRCLE-2, GWALIOR. 2 ND FLOOR, GOPAL BHAWAN, SANJAY COMPLEX, JAYENDRA GANJ, LASHKAR, GWALIOR. (PAN: AACCA 7855 L). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA, JR. D.R. RESPONDENT BY : SHRI S.K. SABOO, C.A. DATE OF HEARING : 09.05.2012 DATE OF PRONOUNCEMENT : 18.05.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 28.09.2011 PASSED BY THE LD. CIT(A), GWALIOR FOR THE ASSESSMEN T YEAR 2005-06 ON THE FOLLOWING GROUNDS :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (APPEALS) WAS JUSTIFIED IN DELETING THE ADD ITION OF RS.9,54,157/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF CASH CREDIT U/S 69. ITA NO.460/AGR/2011 A.Y. 2005-06 . 2 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS JUSTIFIED IN DELETING THE ADD ITION OF RS.1,00,000/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF VARIOUS EXPENSES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS RUNNING BUSINESS OF SOLVENT EXTRACTION PLANT & VEGETABLE OIL REFINER Y. THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF RS.74,35,100/-. DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHO WN LOW G.P. & N.P. ON EXAMINATION OF BOOKS OF ACCOUNT, THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE HAS SHOWN CREDITORS IN THE BALANCE SHEET. THE ASSE SSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) TO VARIOUS PARTIES OF WHICH DETAILS HAS BEEN DISCUSSED BY THE ASSESSING OFFICER AT PAGE NO.2 OF HIS ORDER AS UNDER :- DURING THE ASSESSMENT PROCEEDING THE ASSESSEE FILE D DETAILS OF SUNDRY CREDITORS WITH NAME & FULL ADDRESSES. NOTICE S U/S 133(6) WERE ISSUED ON 24/09/2007 TO THE CREDITORS SHRI. GOPAL E NTERPRISES OF HAVING BALANCE OF RS.1,09,105/-, HERBAL INDUSTRIES OF HAVING BALANCE OF RS 1,94,061/-, BALAJI TRADING CO. OF HAVING BALA NCE OF RS.14,97,416/-, AWADH OILS PVT. LTD., MORENA OF HAV ING BALANCE OF RS.1,16,771/-, BHAIRAV NATH AGENCIES OF HAVING BALA NCE OF RS.1,53,575/-, PANNALAL CONTRACTOR OF HAVING BALANC E OF RS.1,01,886/, GLAMTECH AGRO PROCESS PVT. LTD., MUMBAI OF HAVING B ALANCE OF RS.1,20,943/-, FOR THIRD PARTY VERIFICATION AND THE Y WERE ASKED TO SEND INFORMATION ON OR BEFORE 5/10/2007. ON 5/10/2007 R EPLY OF ONLY SOME PARTIES WERE RECEIVED. ITA NO.460/AGR/2011 A.Y. 2005-06 . 3 3. THE ASSESSING OFFICER MADE THE ADDITION IN RESPE CT OF 4 PARTIES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE IDENTI TY, GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. THE ADDITION MA DE BY THE ASSESSING OFFICER WAS RS.9,54,157/-. THE RELEVANT FINDING OF THE ASSESSI NG OFFICER IS REPRODUCED AS UNDER :- VIDE ORDER SHEET DATED 7/11/07 AND 26/11/2007 THE COUNSEL OF THE ASSESSEE SHRI. S.K. SABOO CA ALONG WITH SHRI. G ANESH GUPTA, ACCOUNTANT WERE CONFRONTED ABOUT THESE FACTS AND WE RE ASKED TO GIVE THEIR EXPLANATION IN THIS REGARD AND PROVE THE IDEN TITY, GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. ON THE DATE OF HEARING 6/12/2007 THE ASSESSEE COULD GIVE HIS REPLY REGARDI NG DIFFERENCE IN THE BALANCE OF ACCOUNT OF GLAMTECH AGRO PROCESS PVT. LT D., AND CONFIRMATION OF PANNALAL SHAH ONLY. THE ASSESSEE CO ULD NOT GIVE ANY EXPLANATION REGARDING IDENTITY, GENUINENESS AND CRE DITWORTHINESS OF CREDITORS SHRI. GOPAL ENTERPRISES OF HAVING BALANCE OF RS.1,09,105/-, HERBAL INDUSTRIES OF HAVING BALANCE OF RS.1,94,061/ -, BALAJI TRADING CO. OF HAVING BALANCE OF RS.4,97,416/-, BHAIRAV NAT H AGENCIES OF HAVING BALANCE OF RS.1,53,575/-. THE ASSESSEE WAS GIVEN MANY OPPORTUNITIES TO PROVE THE IDENTITY, GENUINENESS & CREDITWORTHINESS OF THESE FOUR CREDITORS AMOUNTING TO TOTAL RS.9,54,157 /-, WHICH THE ASSESSEE FAILED TO DO. THEREFORE, THESE ARE TREATED AS UNEXPLAINED CASH CREDITORS AND RS.9,54,157/- IS ADDED TO THE INCOME OF THE ASSESSEE U/S 69 OF THE I.T. ACT, 1961. INITIATE PENALTY PROCEED INGS U/S 271(1)(C) OF THE I.T. ACT 1961. 4. THE CIT(A) DELETED THE ADDITION AS UNDER :- (CIT (A) PARAGRAPH NO.3.2) 3.2 APPELLANTS SUBMISSIONS HAVE BEEN CONSIDERED C AREFULLY ALONG WITH ASSESSMENT ORDER. ASSESSMENT RECORDS (IN 2 VOL S.) HAVE ALSO BEEN PERUSED. THE APPELLANT HAS DECLARED SUNDRY CREDITOR S AS PER ITS BALANCE SHEET ENCLOSED WITH THE RETURN FILED ON 29. 10.05 WHICH ARE AS UNDER :- ITA NO.460/AGR/2011 A.Y. 2005-06 . 4 SUNDRY CREDITORS : FOR GOODS 2823352.51 FOR EXPENSES 4698972.10 OTHER LIABILITIES 3057652.50 OUT OF ABOVE, A.O. HAS TREATED FOUR CREDITORS FOR GOODS, I.E. TRADE CREDITORS AS UNEXPLAINED CASH CREDITORS U/S 6 9 WHICH IS NOT ACCORDING TO THE PROVISIONS OF THE I.T. ACT. THE A PPELLANT HAS SUBMITTED COPY OF ACCOUNTS GIVING SALES TAX/TIN NO. ALONG WITH INVOICE CHALLAN NO .BROKERS NAME, NO. OF VEHICLE US ED FOR TRANSPORT ETC. ALONG WITH ITS BANK STATEMENTS. ALL THE TRANS ACTIONS MADE IN REGULAR COURSE OF BUSINESS WITH ABOVE MENTIONED FOU R PARTIES ARE FOUND DULY REFLECTED IN THE APPELLANTS BOOKS OF AC COUNTS. IN FACT, IN CASE OF M/S. BHAIRAV NATH AGENCIES, NO TRANSACTION HAS BEEN MADE DURING THE YEAR UNDER CONSIDERATION, AS THE AMOUNT OF RS.1,53,575/- REPRESENTS CLOSING BALANCE AS ON 31.03.03 WHICH HAS BEEN CARRIED FORWARD SUBSEQUENTLY AND FOR THE YEAR. SIMILARLY, ACCOUNTS OF HERBAL INDUSTRIES AND BALAJI TRADING CO. HAVE BEEN SQUARED UP DURING NEXT YEAR AS PER ITS BOOKS OF ACCOUNTS. A.O. HAS MISTAK ENLY MADE ADDITION U/S 69 FOR TRANSACTIONS OF SALES AND CREDIT BALANCE S APPEARING IN THE ACCOUNTS OF DEBTORS AS THE ADVANCE AGAINST FUTURE S UPPLY. THE TRADING LIABILITY, AS REFLECTED IN REGULAR BOOKS OF ACCOUNT S, CANNOT BE REJECTED UNLESS PROVED BOGUS OR FICTITIOUS. THE APPELLANT HA S SUBMITTED REQUIRED DETAILS SHOWING THAT IT HAD REGULAR BUSINE SS DEALINGS IN RESPECT OF TRANSACTIONS MADE WITH THESE PARTIES. S IMPLY BECAUSE NO REPLY HAS BEEN RECEIVED IN RESPONSE TO INFORMATION SOUGHT U/S 133(6) A.O. CANNOT JUMP TO THE CONCLUSION THAT THESE ARE B OGUS CREDITORS AND TREAT THE SAME AS UNEXPECTED CASH CREDITS IN ABSENC E OF ANY ADVERSE MATERIAL. THE INSTANT CASES ARE NOT FOUND TO BE CA SH CREDITS SIMPLICITER, BUT OF ADVANCES RECEIVED FROM PARTIES AGAINST WHICH SUPPLIES HAVE BEEN MADE IN DUE TIME. TRADING RESUL TS OF THE APPELLANT INCLUDING SALES AND PURCHASES ALONG WITH THE AUDITE D BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED BY THE A.O. AND THE FAC T THAT ADDITION MADE IN RESPECT OF ONE CREDITOR IS ACTUALLY OPENING BALANCE OF THE YEAR, A.O. IS NOT FOUND JUSTIFIED IN MAKING THE IMP UGNED ADDITION U/S 69 OF THE I.T. ACT. ON THE BASIS OF FACTS ABOVE AND AFTER PERUSAL OF RECORDS, ADDITION OF RS.9,54,157/- IS, HEREBY DELET ED. ITA NO.460/AGR/2011 A.Y. 2005-06 . 5 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE ASSESSING OFFICER MADE THE ADDITION IN RESPECT OF CREDITORS APPEARING IN THE BALANCE SHEET HAVING OUTSTANDING CREDIT BALANCES UN DER SECTION 69 OF THE ACT. WE NOTICE THAT THE ASSESSING OFFICER HAS WRONGLY MENTI ONED SECTION 69 INSTEAD OF SECTION 68 WHICH IS RECTIFIABLE IN ACCORDANCE WITH SECTION 292B OF THE ACT. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT TRADE C REDITORS ARE NOT COVERED BY SECTION 68 OF THE ACT IS NOT ACCEPTABLE IN VIEW OF THE DECISION OF I.T.A.T. IN THE CASE OF DAVINDER SINGH VS. ACIT, 104 ITD 325 (ASR.) WHEREIN IT HAS BEEN HELD THAT ANY SUM USED IN SECTION 68 IS VERY VIDE. IT COVE RS ALL CREDITS, INCLUDING LOAN, RECEIPTS AND ANY OTHER AMOUNT OF SIMILAR NATURE, BE THAT OF CASH OR KIND. IN THE CASE UNDER CONSIDERATION, THERE ARE TRADE CREDITORS WHICH ARE VERY MUCH COVERED BY SECTION 68 OF THE ACT. THEREFORE, THIS CONTENTION OF THE ASSESSEE IS REJECTED. HOWEVER, ON MERIT OF THE CASE, WE NOTICE THAT THE A SSESSING OFFICER HAS MADE OUT THE CASE THAT THE ASSESSEE HAS FAILED TO FURNISH ID ENTITY, CREDITWORTHINESS AND GENUINENESS OF THE CREDITORS. THE CIT(A) FOUND THA T THE OUTSTANDING BALANCES WERE ON ACCOUNT OF GOODS I.E. THE TRADE CREDITOR. THE A SSESSEE SUBMITTED COPY OF ACCOUNTS GIVING SALES TAX/TIN NO. ALONG WITH INVOIC E/CHALLAN NO., BROKER NAME, NO. OF VEHICLES USED FOR TRANSPORT ETC. ALONG WITH ITS BANK STATEMENTS. THE TRANSACTIONS WERE MADE IN THE REGULAR COURSE OF BUS INESS AND CORRESPONDING TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT HAVE BEEN ACCEPTED BY THE DEPARTMENT. THE OUTSTANDING BALANCES WERE ON ACCOU NT OF GOODS/TRADE. IN CASE OF ITA NO.460/AGR/2011 A.Y. 2005-06 . 6 M/S. BHAIRAV NATH AGENCIES, NO TRANSACTION HAS BEEN MADE DURING THE YEAR UNDER CONSIDERATION. THE BALANCE WAS CARRIED FORWARD FRO M LAST YEAR. THE ACCOUNT OF HERBAL INDUSTRIES AND BALAJI TRADING CO. HAVE BEEN SQUARED UP DURING THE NEXT YEAR AS PAYMENTS WERE MADE. WE NOTICE THAT THE ASS ESSEE FURNISHED SUFFICIENT MATERIALS TO SHOW THE IDENTITY, CREDITWORTHINESS AN D GENUINENESS OF THE TRANSACTIONS IN THE FORM OF VARIOUS DETAILS AS MENTIONED ABOVE I .E. SALES TAX/TIN NO. ETC. THE TRANSACTIONS ARE IN RESPECT OF ROUTINE BUSINESS OF THE ASSESSEE AND THE SAME IS FULLY SUPPORTED WITH MATERIALS IN THE FORM OF VOUCHERS BA NK ACCOUNTS AND OTHERS. ON AVAILABILITY OF SUCH SUPPORTING MATERIALS, THE ASSE SSING OFFICER IS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAS FAILED TO DISCHARGE T HE BURDEN IN RESPECT OF IDENTITY, CREDITWORTHINESS & GENUINENESS OF THE TRANSACTION. THE CIT(A) HAS RIGHTLY HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAK ING THE ADDITION MERELY ON THE GROUND THAT THE INFORMATION SOUGHT UNDER SECTION 13 3(6) OF THE ACT WAS NOT FURNISHED BY THE RESPECTIVE PARTIES, PARTICULARLY U NDER THE CIRCUMSTANCES WHERE THE ASSESSEE FURNISHED COMPLETE DETAILS, ADDRESSES AND IDENTITY OF CREDITORS. BEFORE DELETING THE ADDITION THE CIT(A) HAS EXAMINED THE N ATURE OF TRANSACTIONS WHICH WERE FOUND TO BE IN NATURE OF ROUTINE BUSINESS TRAN SACTIONS. HE FOUND THAT CONDITION LAID DOWN IN SECTION 68 HAS BEEN SATISFIE D. IN THE LIGHT OF THE FACTS, WE CONFIRM THE ORDER OF CIT(A). ITA NO.460/AGR/2011 A.Y. 2005-06 . 7 6. THE SECOND GROUND IS IN RESPECT OF ADDITION OF R S.1,00,000/- MADE BY THE ASSESSING OFFICER OUT OF VARIOUS EXPENSES. THE ASS ESSING OFFICER MADE THE DISALLOWANCE ON THE GROUND THAT THE EXPENSES WERE N OT FULLY SUPPORTED BY BILLS AND VOUCHERS AND SOME OF THE EXPENSES ARE PERSONAL IN N ATURE. THE DETAILS OF EXPENSES CLAIMED BY THE ASSESSEE AND ALLOWED AND DISALLOWED BY THE ASSESSING OFFICER NOTED FROM PAGE NO.9 OF CIT(A)S ORDER IS AS UNDER :- EXPENSES PARTICULARS CLAIMED ALLOWED DISALLOWED TRAVELING & CONVEYANCE INCLUDING DIRECTORS 20,45,080 20,20,080 25,000 REPAIRS TO MACHINERY 8,90,718 8,75,718 15,000 OTHER REPAIRS 10,98,643 10,78,643 20,000 PRINTING & STATIONARY 2,00,259 1,95,259 5,000 TELEPHONE, TRUNK CALLS AND POSTAGE 10,33,175 10,18,175 15,000 ADVERTISEMENT AND PUBLICITY 1,39,129 1,34,129 5,000 OFFICE UPKEEP AND MAINTENANCE 1,67,350 1,62,350 5,0 00 MISCELLANEOUS EXPENSES 1,82,536 1,72,536 10,000 TOTAL 1,00,000 7. THE ADDITION MADE BY THE ASSESSING OFFICER HAS B EEN DELETED BY THE CIT(A) ON FOLLOWING VARIOUS DECISIONS ON THE GROUND THAT A DHOC AND LUMPSUM ADDITION CANNOT BE SUSTAINED. 8. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE LUM PSUM ADHOC ADDITION AS THE ASSESSING OFFICER DID NOT POINT OUT ANY SPECIFIC IT EM OF EXPENSES WHICH IS IN ITA NO.460/AGR/2011 A.Y. 2005-06 . 8 PERSONAL NATURE OR NON-BUSINESS PURPOSE. AS REGARD S THE DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENSES, WE FIND THAT SUCH EXPENSES CA NNOT BE DISALLOWED IN THE LIGHT OF JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF SA YAJI IRON ENGINEERING CO. VS. CIT, 253 ITR 749 (GUJ.). 9. THE REVENUE HAS FAILED TO POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT(A). IN THE LIGHT OF THE FACTS AND IN THE L IGHT OF THE ABOVE DISCUSSIONS, ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT RESPONDENT CIT CONCERNED CIT (APPEALS) CONCERNED D.R., ITAT AGRA BENCH, AGRA GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY