Mohd. Qumar Aslam Siddqui, Lucknow V. Astt. Commissioner of Income Tax, Lucknow

ITA 462/LKW/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4036 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C AGARWAL SHRI AMIT NIG
• Keywords: Business income; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. P . K. BANSAL , ACCOUNTANT MEMBER AND SHRI ABY T VARKEY , JUDICIAL MEMBER ITA NO. 462/LKW/2015 ASSESSMENT YEAR: 2009 - 10 MOHD. QUMAR ASLAM SIDDIQUI M - 30, PAPER MILL COLONY LU CKNOW V. ACIT RANGE 2 LUCKNOW T AN /PAN : ALMPS1818D (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI S. C. AGARWAL, ADVOCATE RESPONDENT BY: SHRI AMIT NIGAM, D.R. DATE OF HEARING: 10 08 2016 DATE OF PRONOUNCEMENT: 30 08 2016 PER ABY T VARKEY, J.M : O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 1, LUCKNOW DATED 2.3.2015 FOR THE ASSESSMENT YEAR 2009 - 10. 2 . AT THE OUTSET ITSELF THE LD. A.R. OF THE ASSESSEE TOOK OUR ATTENTION TO GROUNDS NO.3, 4 AND 5 AND PLEADED THAT THE ASSESSEE HAD NOT BEEN GIVEN SUFFICIENT OPPORTUNITY OF HEARING , THEREFORE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE LD. CIT(A) . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS MAINLY ENGAGED IN CONSTRUCTION AND MAINTENANCE RELATED ACTIVI TIES ON CONTRACT BASIS FOR THE TELECOM COMPANIES OPERATING IN THE UP (EAST) CIRCLE IN THE NAME OF THE PROPRIETARY CONCERN, M/S NEXUS ENGINEERS. THE WORK INCLUDES OPERATION AND MAINTENANCE OF TELECOM TOWERS, CIVIL AND [ ITA NO.462/LKW/2015, A.Y. 2009 - 10 ] 2 ELECTRICAL WORKS OF TOWERS, SUPPLY OF MATERIAL AND HSD, HIRING OF VEHICLES, LABOUR SUPPLY, ETC. THE ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.1,05,44,790/ - AS AGAINST THE RETURNED INCOME OF RS.24,40,094/ - AFTER MAKING AN ADDITION OF RS.81,04,692/ - ON ACCOUNT OF BOGUS CREDIT LIABILITIES . 4 . AGGRIEVED BY THE SAID ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO UPHOLD THE ORDER OF THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US. 5 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE TAKE NOTE THAT THIS IS THE F IRST YEAR OF EXECUTION OF THE CONTRACT WITH HIS PRINCIPAL M/S INDUS TOWERS LTD AND THAT TOO FROM 1.9.2008 TO 313.2009 ; AND THE ASS ESSEE HAS ACCEPTED BEFORE THE LD. CIT(A) VIDE LETTER DATED 27.12.2014 THAT CERTAIN ADVERT MISTAKES HAVE CREPT IN WHILE MAKING SOME ENTRIES IN THE BOOKS. AND THAT THIS ASSESSMENT YEAR THE ASSESSEE HAS SHOWN A PROFIT OF 4.62% AND IN THE SUBSEQUENT ASSESSMEN T YEAR THE ASSESSEE HAS SHOWN AN N.P. RATE OF 6.10% WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. IN THE SAID BACKDROP, WE WOULD LIKE TO EXAMINE THE MATTER. THE ASSESSING OFFICER TOOK NOTE THAT IN THE BALANCE SHEET AN AMOUNT OF RS.2,34,42,046/ - WAS A PPEARING AS SUNDRY CREDITORS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF SUNDRY CREDITORS HAVING CREDIT BALANCE OF MORE THAN RS.2 LAKHS ALONG WITH THEIR NAMES, ADDRESSES, PANS AND COPIES OF ACCOUNTS DULY CONFIRMED BY THEM. PURSUAN T TO THE SAID DIRECTION OF THE ASSESSING OFFICER, THE ASSESSEE FILED REPLY ALONG WITH LIST OF SUNDRY CREDITORS AND COPIES OF THEIR CONFIRMATIONS. TO VERIFY THE GENUINENESS OF THE CREDIT BALANCES, THE ASSESSING OFFICER MADE ENQUIRY FROM THE SUNDRY CREDITOR S AND THE [ ITA NO.462/LKW/2015, A.Y. 2009 - 10 ] 3 REPLIES RECEIVED FROM FOUR OF THE CREDITORS, WHO ARE PETROL PUMP OWNERS I.E. (A) M/S KHETAN AUTOMOBILES (CREDIT BALANCE OF RS.22,12,899/ - AS CLAIMED BY ASSESSEE ), WHICH INFORMED THAT THE ASSESSEE HAD PURCHASED DIESEL OF RS.26,40,387/ - FROM IT AND THE ENTIRE AMOUNT WAS PAID THROUGH INDIAN OIL CORPORATION FLEET CARD AND NO BALANCE IS APPEARING IN ITS BOOKS OF ACCOUNT IN THE NAME OF THE ASSESSEE; (B) M/S HIRALAL SHEO PRASAD (CREDIT BALANCE OF RS.23,55,052/ - AS CLAIMED BY ASSESSEE ) WHICH CONFIRMED THA T THE ASSESSEE USED TO PURCHASE DIESEL FROM IT AND PAYMENTS WERE MADE THROUGH INDIAN OIL EXTRA POWER FLEET CARD AND THE BALANCE SHEET OF THE SAID FIRM DID NOT SHOW THAT THE ASSESSEE IS IN THE LIST OF SUNDRY DEBTORS AS ON 31.3.2009; (C) M/S NATIONAL AUTOMOB ILES (CREDIT BALANCE OF RS.16,64,348/ - AS CLAIMED BY ASSESSEE ) WHICH CATEGORICALLY CLARIFIED THAT THERE IS NO ACCOUNT IN THE NAME OF THE ASSESSEE IN ITS BOOKS OF ACCOUNT FOR THE SAID ASSESSMENT YEAR AND (D) M/S RAJ HIGHWAY SERVICES (CREDIT BALANCE OF RS.18 ,72,392/ - AS CLAIMED BY ASSESSEE ) WHICH FURNISHED THE COPY OF BALANCE SHEET AS ON 31.3.2009 AND SUBMITTED THAT NO SEPARATE ACCOUNT OF THE ASSESSEE IS MAINTAINED BY IT BECAUSE THE TOTAL SALES OF THE ASSESSEE IS THROUGH FLEET CARD. 6 . WHEN THE AO, CONFRONTED TH E ASSESSEE WITH THESE ADVERSE FACTS , THE ASSESSEE SUBMITTED THAT THERE IS AN AGREEMENT BETWEEN HIM AND HIS PRINCIPAL, M/S INDUS TOWER LTD. FOR USE OF INDIAN OIL FLEET CARD FOR PURCHASE OF DIESEL AND THE DIESEL WAS PURCHASED BY USING INDIAN OIL FLEET CARD O N BEHALF OF THE PRINCIPAL AND THAT THE ASSESSEE ALSO CLARIFIED THAT HE DID NOT OWN ANY INDIAN OIL FLEET CARD IN HIS OWN NAME. 7 . THEREAFT ER THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CHANGED HI S VERSION VIDE LETTER DATED 28.12.2011 AND SUBMITTED THAT T HE CREDIT BALANCE IN THE NAME OF M/S HIRALAL SHEO PRASAD; M/S NATIONAL AUTOMOBILES AND M/S RAJ HIGHWAY SERVICES WERE INADVERTENTLY SHOWN IN [ ITA NO.462/LKW/2015, A.Y. 2009 - 10 ] 4 THE BOOKS OF ACCOUNT AND THAT THE CREDIT BALANCE SHOWN IN THE NAME OF THE THREE PARTIES WERE ACTUALLY DUE TO THE PET TY DEALERS ASSOCIATED WITH THE ABOVE PARTIES. IN SUPPORT OF THIS CONTENTION OF THE ASSESSEE, THE ASSESSEE SUBMITTED A LIST OF PETTY DEALERS ALONG WITH THEIR CONFIRMATION LETTERS. THE ASSESSING OFFICER, HOWEVER, DID NOT AGREE WITH THE CHANGED /NEW VERSION OF THE ASSESSEE AND CONCLUDED THAT THE PURCHASES AND CREDIT BALANCES WERE SHOWN IN THE NAME OF FOUR PARTIES TO INFLATE HIS EXPENSES & LIABILITIES AND ACCORDINGLY MADE AN ADDITION OF RS.81,04,692/ - ON ACCOUNT OF BOGUS AND UNCONFIRMED CREDIT BALANCES IN THE NAMES OF FOUR CREDITORS. 8 . DURING THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT THE EXPENSES CLAIMED WAS UNDER THREE HEADS AS GIVE BELOW: - ( A ) DIESEL PURCHASE 1,40,56,946.00 ( B ) TRANSPORTATION EXPENSES 47,57,800.00 ( C ) VEHICLE FUEL EXPENSES 37,23,172.00 9 . IT WAS BROUGHT TO THE KNOWLEDGE OF THE LD. CIT(A) THAT THE EXPENSES INCURRED FOR PURCHASE OF DIESEL WORTH RS.1,40 , 56,946/ - WAS PURCHASED FOR THE PURPOSE OF OPERATION AND MAINTENANCE OF MOBILE TOWERS AS PER TERMS OF AGREEMENT IN 1 2 DISTRICTS OF EASTERN U.P. CONSISTING OF 1695 SITES AND THE SAID AMOUNT WAS REIMBURSED TO THE ASSESSEE BY THE PRINCIPAL, M/S INDUS TOWER LTD. ON THE BASIS OF THE TERMS AND CONDITIONS OF THE AGREEMENT UNDER WHICH THESE SERVICES WERE PROVIDED BY THE ASSESSE E TO THE PRINCIPAL . 10 . IT HAS BEEN EMPHASIZED THAT THE TOTAL LIABILITY OF RS.81,04,692/ - WHICH IS REFLECTED IN THE BOOKS ARE RELATED TO EXPENSES AND INCURRED ON ACCOUNT OF TRANSPORTATION OF DIESEL FOR THE PURPOSE OF PROVIDING [ ITA NO.462/LKW/2015, A.Y. 2009 - 10 ] 5 SERVICES IN TERMS OF AGREEMENT . A ND IT WAS CLARIFIED BEFORE THE LD. CIT(A) THAT THESE EXPENSES HAV E NOTHING TO DO WITH THE DIESEL PURCHASES AND IT WAS NECESSARY F OR MAINTENANCE OF THE TOWERS WHICH WERE BORNE BY THE ASSESSEE AND WERE NOT REIMBURSED TO THE ASSESSEE BY THE PRINCIPAL. TH E MAIN CONTENTION OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT THE AMOUNT OF CREDIT SHOWN AGAINST THE PARTIES WHICH WAS ACTUALLY DUE AS LIABILITY TOWARDS THE PETTY DEALERS WHO ARE ASSOCIATED WITH M/S KHETAN AUTOMOBILES; M/S HIRALAL SHEO PRASAD; M/S NATIO NAL AUTOMOBILES AND M/S RAJ HIGHWAY SERVICE. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE SUBMITTED A LIST OF SUCH PETTY DEALERS ALONG WITH THEIR CONFIRMATION LETTERS TO EXPLAIN THAT THE AMOUNT AS CREDITED AGAINST THESE CREDITORS WAS GENUINE AND ACCORDING TO THE ASSESSEE THE ASSESSING OFFICER ERRED IN TREATING THE SAME AS BOGUS. THE MAIN GRIEVANCE OF THE LD. A.R. OF THE ASSESSEE IS THAT THE AFFIDAVITS/CONFIRMATIONS FILED BY THESE PETTY DEALERS HAVE NOT BEEN CONSIDERED IN A PROPER PERSPECTIVE AND THE ASSESS ING OFFICER HAS BRUSHED ASIDE THE SAME EVEN IN THE REMAND PROCEEDINGS AND IN THE REMAND REPORT SUBMITTED TO THE LD CIT(A) . 11 . WE TAKE NOTE THAT THE LD. CIT(A) HAS CALLED FOR REMA ND REPORT , WHICH IS FOUND PLACED AT PAGES 5 4 TO 59 OF THE PAPER BOOK, WAS SUBMITT ED BY THE ASSESSING OFFICER VIDE LETTER DATED 29.5.2013 AND THE ASSESSING OFFICER WAS OF THE CONSIDERED OPINION THAT THE NEW VERSION OF THE ASSESSEE IS AN AFTERTHOUGHT AND CONTRADICTORY AND IS A CONCOCTED STORY, SO HE DISBELIEVED THE SAME. WE TAKE NOTE TH AT THE ASSESSEE HAD FILED REJOINDER TO THE REMAND REPORT VIDE HIS LETTER DATED 29.10.2013 (PAPER BOOK 5 & 6) WHEREIN THE ASSESSEE HAS POINTED OUT THAT THE DIRECTION OF THE LD. CIT(A) TO ASSESSING OFFICER TO VERIFY THE CORRECTNESS OF THE CLAIM OF THE ASSESS EE AND TO VERIFY WHETHER THE CREDIT BALANCE ARE ON ACCOUNT OF EXPENSES UNDER THE HEAD DIESEL PURCHASED OR [ ITA NO.462/LKW/2015, A.Y. 2009 - 10 ] 6 TRANSPORTATION EXPENSES OR VEHICLE FUEL EXPENSES HAS NOT BEEN COMPLI ED BY THE ASSESSING OFFICER. IT WAS ALSO POINTED OUT BY THE ASSESSEE THAT I N THE ABSENCE OF ASSESSING OFFICER NOT CONDUCTING THE ENQUIRY, THE LD. CIT(A) SHOULD EXERCISE THE SAME AS PER RULE 46A(4) OF THE RULES TO ASCERTAIN THE VERACITY OF THE CLAIM MADE BY THE ASSESSEE. HOWEVER, WE FIND THAT THE LD. CIT(A) HAS NOT MADE ANY SUCH EXERCISE TO FIND OUT THE VERACITY OF THE CLAIM MADE BY THE ASSESSEE. IT MAY BE NOTED THAT THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE AND THE ASSESSEES BUSINESS HAS COMMENCED FROM 1.9.2008 TO 31.3.2009 WHEREIN HE HAS SHOWN NET PROFIT RATE OF 4.62% AND IN THE SUBSEQUENT YEAR THE NET PROFIT RATE COMES TO 6.10% WHICH THE ASSESSEE CLAIMS TO HAVE BEEN ACCEPTED BY THE DEPARTMENT. TAKING INTO CONSIDERATION THE FACT THAT THIS IS THE FIRST YEAR OF COMMENCEMENT OF BUSINESS IN THIS PARTICULAR FI E L D WHEREIN H E ASSESSEE HAD TO PERFORM SERVICES IN 12 DISTRICTS AND HAS TO PROVIDE SERVICES TO 1695 UNITS AND ALSO THE FACT THAT THE ASSESSEE HAS ACCEPTED THAT THERE HAS BEEN SOME INADVERTENT ERRORS WHEREIN THE AMOUNT APPEARING UNDER THE HEAD TRANSPORTATION EXPENSES AN D VEHICLE FUEL EXPENSES WERE CLAIMED TO HAVE BEEN MISTAKENLY SHOWN AGAINST M/S KHETAN AUTOMOBILES; M/S HIRALAL SHEO PRASAD; M/S NATIONAL AUTOMOBILES AND M/S RAJ HIGHWAY SERVICE . TAKING INTO CONSIDERATION THE SUBSEQUENT YEAR ASSESSMENT OF THE ASSESSEE AND ALSO THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE MAY BE GIVEN AN OPPORTUNITY TO PLEAD AND PROVE THE VERACIT Y OF ITS CLAIM IN RESPECT OF SUNDRY CREDITORS SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE T O THE TUNE OF RS.81,04,692/ - . WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH . IT SHOULD BE REMEMBERED THAT ONUS TO PROVE THE GENUINENESS OF THE CLAIM IS ON THE ASSESSEE AND IT HAS TO BE DISCHARGED AS PER LAW AND THE ASSESSEE SHALL [ ITA NO.462/LKW/2015, A.Y. 2009 - 10 ] 7 CO - OPERATE WITH THE ASSESSING OFFICER TO PROVE HIS CASE IN ACCORDANCE WITH LAW. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.8.2016. SD/ - SD/ - [P. K. BANSAL ] [ ABY T VARKEY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH 1 . APPELLANT AUGUST , 2016 JJ: 1708 COPY FORWARDED TO: 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR