M/s .R.B. Industries, Solan V. ITO, Solan

ITA 462/CHANDI/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0116 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Source of fund; Additional evidence
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.462/CHD/2012 (ASSESSMENT YEAR : 2008-09) M/S R.B. INDUSTRIES, VS. THE INCOME TAX OFFICER, VILLAGE DHAGAD, DISTT. SOLAN (H.P.) OLD KASUALI ROAD, SECTOR-4, PARWANOO. DISTT. SOLAN (H.P.) PAN: AAHFR8111Q (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 01.02.2016 DATE OF PRONOUNCEMENT : 04.04.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA DATED 27.2.2012, RELATING TO ASSE SSMENT YEAR 2008-09. 2. GROUND NO.1 RAISED BY THE ASSESSEE READS AS UNDER : 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) IS NOT JUSTIFIED IN UPHOLDING AN ADDITION OF RS 2 4,95,307/- MADE ON ACCOUNT OF ALLEGED UNACCOUNTED PURCHASES MADE BY THE ASSESSEE. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DRIVES INCOME FROM MANUFACTURING OF WRIST WATCHES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER DISCOVERED THAT THE ASSESSEE HAS NOT COMPLETELY ACC OUNTED FOR PURCHASE OF DIAMONDS USED IN THE WATCHES SOLD B Y IT. 2064 WATCHES WERE SOLD BY THE ASSESSEE TO M/S QUEST NET ENTERPRISES, WHICH CONTAINED DIAMONDS. ACCORDINGLY , AN ADDITION OF RS.4,95,307/- TOWARDS THE COST OF DIAMO NDS @ 240 PER WATCH WAS ADDED AS UNACCOUNTED PURCHASES. 4. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT SALE BILL BEARING NO.54, THE SALES M ANAGER HAS INADVERTENTLY MENTIONED THE WATCHES AS DIAMOND STUDDED, WHICH INFACT, WERE NOT DIAMOND STUDDED WAT CHES. ADDITIONAL EVIDENCES IN THE FORM OF CERTIFICATE FRO M M/S QUESTNET ENTERPRISES WAS FILED STATING THAT WRIST W ATCHES RECEIVED THROUGH INVOICE NOS.51, 52, 53 AND 54 DID NOT CONTAIN ANY DIAMONDS. THE LEARNED CIT (APPEALS) REJECTING THE CONTENTION OF THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. HE DID NOT ADMIT THE CERTIFICATE ISSUED BY M/S QUESTNET ENTERPRISES STATING THAT THE SAME IS A SELF SERVING DOCUMENT. HE HELD THAT THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE SALE BILL OF THE ASSESSEE ITSELF GOES TO PROVE THAT THE ASSESSEE HAD MADE SALE OF 264 DIAMOND STUDDED WATCHES WITHOU T 3 CORRESPONDINGLY RECORDING THE PURCHASE OF DIAMONDS IN ITS BOOKS OF ACCOUNT. 5. NO ONE APPEARED ON BEHALF OF THE ASSESSEE. ON PERUSAL OF WRITTEN SUBMISSIONS AND PAPER BOOK FILED BY THE ASSESSEE, WE SEE THAT FOR BILL NO.51, IT WAS ST ATED THAT A CLARIFICATION OF THE TYPOGRAPHICAL ERROR OCCURRIN G IN THE SAME WAS FILED ON RECORD. A COPY OF CERTIFICATE FR OM M/S QUESTNET ENTERPRISES WAS APPENDED AT PAPER BOOK PAG E 11, WHEREBY IT WAS STATED THAT THE WATCHES PURCHAS ED FROM THE ASSESSEE VIDE INVOICE NOS.51,52,53 AND 54 DID NOT CONTAIN ANY DIAMONDS. IT WAS ALSO STATED IN TH E SUBMISSIONS THAT THE ADDITION HAS BEEN MADE PURELY ON THE BASIS OF ASSUMPTION AND SURMISES. THE ASSESSIN G OFFICER HAS NOT BROUGHT ANY MATERIAL OR CONTRARY DOCUMENTARY EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE MADE ANY UNACCOUNTED PURCHASES. 6. THE LEARNED D.R. RELIED ON THE ORDER OF THE LOW ER AUTHORITIES. 7. WE HAVE HEARD THE LEARNED D.R., PERUSED THE FINDINGS OF LOWER AUTHORITIES AND WRITTEN SUBMISSIO NS FILED BY THE ASSESSEE. THE UNDISPUTED FACTS OF THE CASE ARE THAT SOME WATCHES WERE SOLD BY THE ASSESSEE TO M/S QUEST NET ENTERPRISES VIDE INVOICE NOS.51,52,53 AND 54. ON P ERUSAL OF THE COPIES OF THESE INVOICES FILED BEFORE US, WE OBSERVE THAT IN INVOICE NO.51, UNDER THE DESCRIPTION AND SPECIFICATION OF GOODS, IT IS WRITTEN AS UNDER : 4 WRIST WATCHES AS PER YOUR SPECIFICATION (BRAND LANON VELLE WRIST WATCH BLACK LEATHER STRAPS STAINLESS STEEL CASE WITH SAPPHIRE CRYSTAL GLASS DIAMOND STUDDED RONDA 507 SWISS PARTS MOVEMENT) 8. ON PERUSAL OF BILL NO.52,53 AND 54, WE OBSERVE THAT THE DESCRIPTION IS GIVEN AS UNDER : WRIST WATCHES AS PER YOUR SPECIFICATION 9. FROM THE ABOVE, WE DO NOT UNDERSTAND HOW THE ASSESSING OFFICER PRESUMED THAT EVEN IN CASE OF BIL L NOS.52,53 AND 54, THE WRIST WATCHES WERE DIAMOND STUDDED. THERE IS NO MENTION OF DIAMONDS IN THESE THREE BILLS. THIS IS NOT THE CASE OF THE ASSESSING OFFIC ER THAT EITHER THE ASSESSEE OR M/S QUESTNET ENTERPRISES DEA L ONLY IN THE DIAMOND STUDDED WATCHES. THE ADDITION HAS B EEN TRIGGERED ON THE BASIS OF BILL NO.51 IN WHICH THERE IS A MENTION OF DIAMONDS. THE ASSESSING OFFICER ASKED F OR AN EXPLANATION AND THE ASSESSEE HAS GIVEN ONE. THE ASSESSING OFFICER COULD NOT FURTHER CONTROVERT THE EXPLANATION GIVEN BY THE ASSESSEE, NOR HAS HE BEEN ABLE TO BRING ON RECORD ANY ADVERSE MATERIAL. THE WHOLE BA SIS OF ADDITION IS THE SUSPICION ARISING IN THE MIND OF TH E ASSESSING OFFICER. WE DO NOT FIND THIS APPROACH OF THE ASSESSING OFFICER TO BE RIGHT AND AS PER LAW. THER EFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDIT ION MADE ON ACCOUNT OF THESE THREE BILLS. AS REGARDS BILL NO.51, AT THE VERY FIRST INSTANCE, THE ASSESS EE STATED 5 THAT IT WAS AN INADVERTENT MISTAKE MADE BY HIS ACCOUNTANT. THE ASSESSING OFFICER JUST BRUSHED ASI DE THE SAID REPLY AND MADE THE ADDITION. THE EXPLANATION OF THE ASSESSEE, TO CULMINATE THE SAME INTO AN ADVERSE INF ERENCE, THE ASSESSING OFFICER WAS BOUND TO MAKE SOME FURTHE R ENQUIRIES, WHICH HE PREFERRED NOT TO DO. EVEN BEFO RE THE LEARNED CIT (APPEALS), AFTER HAVING EVIDENCE IN THE FORM OF CERTIFICATE FROM M/S QUESTNET ENTERPRISES, WHEREBY IT HAS BEEN CLEARLY MENTIONED THAT THEY HAVE NOT PURCHASED ANY DIAMOND STUDDED WATCH FROM THE ASSESSEE, HE ALSO JU ST BRUSHED IT ASIDE AND CONFIRMED THE ADDITION. WE DO NOT APPRECIATE THE WAY THE ISSUE HAS BEEN HANDLED AT TH E LOWER STAGES. IN THE ABSENCE OF ANY CONTRARY ADVER SE MATERIAL, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF BILL NO.51 AS WELL. GR OUND NO.1 OF THE ASSESSEE IS ALLOWED. 10. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDER : 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) IS NOT JUSTIFIED IN SUSTAINING AN ADDITION O F RS 89746- ON ACCOUNT OF ALLEGED UNACCOUNTED PURCHASES OF PACKING MATERIAL OF WATCHES. 11. THE AMOUNT IN THIS GROUND IS WRONGLY STATED AS RS.89,746/-, WHILE ADDITION SUSTAINED BY THE CIT (APPEALS) IS RS.8,97,462/-. 12. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER NOTED DURING THE ASSESSMENT 6 PROCEEDINGS THAT THE ASSESSEE HAD SOLD 52790 WATCHE S DURING THE YEAR. OUT OF THESE, 30946 WATCHES WERE LOW COST WATCHES, WHILE THE REMAINING 21844 WATCHES WER E HIGH END WATCHES. THE ASSESSEE CLAIMED THAT THE GUARANTEE CARD AND PACKING MATERIAL WAS USED ONLY I N RESPECT OF 9550 WATCHES. FURTHER, EVEN AMONGST THE SE 9550 WATCHES, WITH SOME THE GUARANTEE CARD WAS PROV IDED AND WITH SOME ONLY A PROPER PACKING WAS PROVIDED. THE EXPENDITURE ON GUARANTEE CARDS WAS RS.21 PER PIECE AND ON PACKING MATERIAL RS.52 PER PIECE. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAD SUPPRESSED THE PURCHASE OF GUARANTEE CARDS AND PACKING MATERIAL @ RS.73 PER WATCH FOR 12294 HIGH END WATCHES. SHE FURTHER CONCLUDED THAT EVEN THE REMAINING 30946 WATCHES COU LD NOT HAVE BEEN SOLD WITHOUT SOME KIND OF PACKING MAT ERIAL. SHE ACCORDINGLY, ESTIMATED THE EXPENDITURE OF RS.5 PER WATCH IN RESPECT OF PACKING MATERIAL FOR SAID WATCH ES. 13. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT THE ADDITION HAS BEEN MADE ON SURMIS ES AND CONJECTURES. IT WAS ALSO SUBMITTED THAT MOST O F THE WATCHES WERE SOLD IN POLYPROPYLENE BAGS WITHOUT THE PACKING MATERIAL AND THE PURCHASERS PREFER TO SELL THE WATCHES IN THEIR OWN PACKING MATERIALS. THE COPIES OF CERTIFICATES GIVEN TO THIS EFFECT, BY THE PURCHASER S WERE BROUGHT ON RECORD. THE LEARNED CIT (APPEALS) THOUG H DID NOT FIND HIMSELF IN AGREEMENT WITH THE CONTENTIONS OF THE ASSESSEE, HOWEVER, GAVE RELIEF TO THE EXTENT OF 7 RS.1,07,380/- BEING PURCHASE OF PACKING MATERIAL AN D GUARANTEE CARDS IN RESPECT OF 30496 LOW END WATCHES . 14. IN THE SUBMISSIONS FILED BEFORE US, IT WAS STA TED THAT DETAILS OF ALL WATCHES SOLD, WHETHER WITH OR W ITHOUT GUARANTEE CARD AND PACKING MATERIAL WAS FILED BEFOR E THE ASSESSING OFFICER. EVEN THE CONFIRMATION OF VARIOU S CUSTOMERS CERTIFYING THE PURCHASE OF WATCHES WITHOU T GUARANTEE CARDS AND PACKING BOXES WERE ALSO FILED. THE ASSESSING OFFICER HAD IGNORED THE REPLY FILED BY SE VERAL CUSTOMERS UNDER SECTION 133(6) OF THE INCOME TAX AC T,. 1961 ALSO, WHEREBY IT WAS CONFIRMED THAT THEY HAD PURCHASED WATCHES FROM ASSESSEE WITHOUT GUARANTEE C ARDS AND PACKING MATERIALS. IT HAS ALSO BEEN STATED THA T THE MAJOR SALES WERE MADE TO THE TRADERS, WHO USE THEIR OWN GUARANTEE CARDS AND PACKING MATERIAL CARRYING THEIR OWN LOGO/NAME SO AS TO PROMOTE THEIR OWN BRAND. 15. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 16. WE HAVE HEARD THE LEARNED D.R., PERUSED THE FINDINGS OF LOWER AUTHORITIES AND WRITTEN SUBMISSIO NS FILED BY THE ASSESSEE. WE OBSERVE THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER TOTALLY ON THE BASIS OF PRESUMPTION AND SURMISES. THE ASSESSEE HAS EXPLAIN ED TO HIM THAT NOT IN ALL CASES, THE GUARANTEE CARD OR PA CKING MATERIAL IS TO BE PROVIDED BY THE ASSESSEE. THIS I S ALSO NOT STRANGE THAT SOME OF THE CUSTOMERS MAY PREFER T O USE 8 THEIR OWN GUARANTEE CARD AND PACKING MATERIAL. IN THE PAPER BOOK, THERE ARE CONFIRMATIONS FILED BY SEVERA L SUCH PURCHASERS THAT THEY WANT TO PURCHASE THE WATCHES O NLY IN POLYPROPYLENE CASES. EVEN IN REPLY GIVEN DIRECT LY TO THE ASSESSING OFFICER, THIS HAS BEEN CONFIRMED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER AS WELL A S THE LEARNED CIT (APPEALS) PREFERRED NOT TO MAKE ANY FUR THER ENQUIRY TO BRING ON RECORD ANY ADVERSE MATERIAL, BU T JUST ON PRESUMPTION REJECTED THE CONTENTIONS OF THE ASSE SSEE. IN THIS VIEW, WE DO NOT FIND THE ADDITION MADE BY T HE ASSESSING OFFICER AS TENABLE. THE ASSESSING OFFICE R IS DIRECTED TO DELETE THE ADDITION. THIS GROUND OF AP PEAL RAISED BY THE ASSESSEE IS ALLOWED. 17. THE GROUND NO.3 RAISED BY THE ASSESSEE READS A S UNDER : 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT (A) IS NOT JUSTIFIED IN UPHOLDING AN ADDITION O F RS.13,50,000/- ON ACCOUNT OF ADDITION MADE IN RESPE CT OF CASH CREDITS UNDER SECTION 68 OF THE INCOME TAX ACT,1961.. 18. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE FIRM HAD INTRODUCED CASH AMOUNTING TO RS.13,50,000/- IN PART NERS CAPITAL ACCOUNT. THE AVAILABILITY OF CASH WITH THE PARTNERS WAS NOT ESTABLISHED BY THE ASSESSEE, HENCE THE ADDI TION WAS MADE. 19. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT ALL THE PARTNERS ARE REGULAR ASSESSE S AND 9 ASSESSED TO TAX IN MUMBAI. THEY ALL ARE MEN OF MEA NS AND HAD THE CAPACITY TO INTRODUCE THE CAPITAL. THE CASH WAS SAID TO BE REFLECTED IN THEIR INDIVIDUAL CASH B OOKS. THE LEARNED CIT (APPEALS) REJECTED THE CONTENTION O F THE ASSESSEE STATING THAT THE CASH BOOKS ARE SELF SERVI NG DOCUMENTS. THE ASSESSEE HAS NOT BEEN ABLE TO DISCH ARGE ONUS CAST UPON IT UNDER SECTION 68 OF THE ACT, HENC E THE ADDITION WAS SUSTAINED. 20. IN THE WRITTEN SUBMISSIONS, FILED BEFORE US, I T WAS STATED THAT THE ASSESSEE HAD PROVED THE IDENTIT Y, GENUINENESS AND CREDITWORTHINESS OF THE PARTNERS BY FILING EVIDENCES IN THE FORM OF CONFIRMATION, PAN CARD, IT R, BALANCE SHEET AND CASH BOOKS OF ALL THE FOUR PARTNE RS. THE PRIMARY ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED. THE ASSESSEE IS REQUIRED TO EXPLAIN ON LY THE SOURCE OF FUNDS AND NOT THE SOURCE OF SOURCE. 21. THE LEARNED D.R. RELIED ON THE ORDERS OF AUTHORITIES BELOW. 22. WE HAVE HEARD THE LEARNED D.R., PERUSED THE FINDINGS OF LOWER AUTHORITIES AND WRITTEN SUBMISSIO NS FILED BY THE ASSESSEE. THE ASSESSEE FIRM HAS FOUR PARTN ERS, NAMELY ANITA AGARWAL, MANOJ AGARWAL, PARMESHWARI AGARWAL AND PRAVEEN AGARWAL. THESE PARTNERS HAVE CONTRIBUTED FUNDS TO THE TUNE OF RS.3,75,000/-, RS.3,00,000/-, RS.3,75,000/- AND RS.3,00,000/- RESPECTIVELY TOTALING TO RS.13,50,000/- AS PARTNERS 10 CAPITAL IN THE ASSESSEE FIRM. UNDOUBTEDLY, THE CAP ITAL HAS BEEN INTRODUCED IN CASH. FROM THE PERUSAL OF THE P APER BOOK, WE SEE THAT WITH REGARD TO AN AMOUNT OF RS.3,75,000/- GIVEN BY SMT.ANITA AGARWAL, THE DETAI LS OF SOURCES ARE PLACED AT PAPER BOOK PAGE 33, STATING T HAT RS.1,54,800/- HAD COME FROM SIKKIM SECURITIES LTD. AS SALARY WHILE RS.2,20,200/- HAS COME FROM MANOJ AGAR WAL AS RENT. CONFIRMATION IS PLACED AT PAPER BOOK PAGE 34. PAN, ITR, BALANCE SHEET, ETC. ARE ALSO THERE. FORM NO.16 FROM SIKKIM SECURITIES LTD. PLACED AT PAPER BOOK PA GE 39 GOES TO PROVE THAT SMT.ANITA AGARWAL IS GETTING SAL ARY FROM THE SAID COMPANY. THE COPY OF CASH BOOK IS AL SO ON RECORD. SIMILAR DOCUMENTS WITH REGARD TO OTHER PAR TNERS ARE ALSO ON RECORD. FROM THE PERUSAL OF ALL THESE DOCUMENTS, WE UNDERSTAND THAT THE IDENTITY OF THE S AID PERSONS CANNOT BE DOUBTED AS ALL THE SAID PERSONS A RE PARTNERS OF THE ASSESSEE FIRM. FOR THE CREDITWORTH INESS OF THESE PERSONS, CASH BOOK HAS BEEN PROVIDED OUT OF W HICH THESE FUNDS ARE COMING AND SOURCES OF THESE FUNDS H AVE ALSO BEEN EXPLAINED. AS REGARDS THE GENUINENESS OF THE TRANSACTION, WE OBSERVE THAT THE ASSESSEE IS A FIRM AND THESE FUNDS ARE INTRODUCED AS PARTNERS CAPITAL, PA RTNERS HAVING EXPLAINED THEIR SOURCES, THE ASSESSING OFFIC ER CANNOT MAKE ADDITION IN THE HANDS OF THE FIRM. EVE N IF THERE IS SOME UNACCOUNTED MONEY INVOLVED IN SUCH TRANSACTION, AT BEST, THE ADDITION CAN BE MADE IN T HE HANDS OF PARTNERS AND NOT IN THE HANDS OF THE FIRM. ALL THE PARTNERS ARE INCOME TAX ASSESSES FILING REGULAR LY THEIR 11 RETURN OF INCOME. IN VIEW OF THE ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. THIS GRO UND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF APRIL, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 4 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH