Dy C.I.T Central Circle-1(1), Nagpur V. Shri Dwarkadas Maniklal Bhutada, Nagpur

ITA 47/NAG/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2127 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Unexplained cash credit; Business income; Bogus loan

Judgement Text

1 ITA NO. 47/NAG/2013. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 47/NAG/2013. ASSESSMENT YEAR : 2006 - 07. DY. COMMISSIONER OF INCOME - TAX. SHRI DWARKADAS MANIKLAL BHUTADA, CENTRAL CIRCLE1(1), NAGPUR. VS. NAGPUR. PAN AGYPB4791P. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.R. NINAWE. . RESPONDENT BY : SHRI K.P. DEWANI. DATE OF HEARING : 19 - 07 - 2016 DATE OF PRONOUNCEMENT : 20 TH JULY, 2016 O R D E R THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) DATED 09 - 11 - 2012 AND PERTAINS TO ASSESSMENT YEAR 2006 - 07. THE GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.34,92 ,257/ - ON ACCOUNT OF UNEXPLAINED CREDITS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THE VIEW THAT NO ADDITION ON ACCOUNT OF UNEXPLAINED CREDITS CAN BE MADE ONCE THE INCOME OF THE ASSESSEE IS CALCUL ATED ON ESTIMATION BASIS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) FAIL E D TO APPRECIATE THE SETTLED POSITION OF LAW, WHEREIN THE APEX COURT HAD HELD IN CASES OF CIT VS DEVI PRASAD VISWANATH PRASAD AND KALE KHAN MOHAMMAD HAN IF VS CIT THAT CASH CREDIT CAN BE ASSESSED EVEN WHEN BUSINESS INCOME IS ESTIMATED. THERE IS NOTHING IN LAW WHICH PREVENTS ITO IN TAXING BOTH UNEXPLAINED CASH CREDIT AND BUSINESS INCOME ESTIMATED AFTER REJECTING BOOKS BEING UNRELIABLE. 2 ITA NO. 47/NAG/2013. 4. ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THE ASSESSEES DECLARATION OF PROFIT ON ESTIMATED BASIS DID NOT IMPLY THAT THE SOURCE FOR CREDITORS UNDER QUESTION WAS EXPLAINED. 2. THE ASSESSEE IN THIS CASE HAS SHOWN INC OME FROM BUSINESS OF EXECUTION OF CIVIL CONTRACT. THE AO NOTED THAT THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNTS, VOUCHERS ETC. THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS AND PART VOUCHERS AND BILLS. IT WAS STATED BY THE ASSESSEE THAT COMPLETE ORI GINAL VOUCHERS ARE NOT AVAILABLE. THE AO ALSO NOTED THAT THE ASSESSEE FAILED TO PRODUCE THE CREDITORS FOR VERIFICATION ON THE SCHEDULE DATE. THE ASSESSEE FURTHER OFFERED FOR TAXATION THE INCOME AT THE RATE OF 8% OF GROSS PROFIT, THIS WAS ACCEPTED BY THE AO . 3. TH E AO FURTHER OBSERVED THAT THE ASSESSEE HAS OBTAINED MACHINERY ON HIRE FROM VARIOUS PERSONS. HOWEVER, HUGE OUTSTANDING PAYMENTS IN THIS REGARD W ERE SHOWN. THE AO WANTED THE PRODUCTION OF THE CREDITORS FOR MACHINE HIRE CHARGES . THE AO NOTED THAT TILL THE DATE OF ORDER NOT A SINGLE PERSON WAS PRODUCED FOR VERIFICATION. HENCE THE AO HELD THAT THE CREDITORS WERE NOT GENUINE AND ADDED THE SUM OF RS.34,92 ,257/ - BEING CREDITS FOR MACHINE HIRE CHARGES PAYABLE. THIS WAS APART FROM THE INCOME AT THE RATE OF 8% AS OFFERED BY THE ASSESSEE. 4. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) DELETED THE ADDITION QUA SUNDRY CREDITORS OF MACHINE HIRE CHARGES PAYABLE BY HOLDING AS UNDER : I AGREE WITH THE APPELLANTS CONTENTION THAT ONCE THE ESTIMATION OF INCOME HAS B EEN DONE, NO FURTHER ADDITION CAN BE MADE ON ACCOUNT OF SUNDRY CREDITORS, ETC. THE ESTIMATION OF INCOME DENOTES THAT BOOKS MAINTAINED BY ASSESSEE ARE FOUND TO BE INACCURATE AND THEREBY REJECTED. THEREAFTER, ESTIMATION OF INCOME DEPENDING ON THE BUSINESS IS MADE. THE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF AGGARWAL ENGG. CO. (JA L ) ON THE SIMILAR ISSUE HAS HELD AS UNDER : NO SEPARATE ADDITION ON ACCOUNT OF CASH CREDIT AND ON ACCOUNT OF UNEXPLAINED PAYMENTS FOR PURCHASE MADE OUTSIDE THE BOOKS CAN BE M ADE 3 ITA NO. 47/NAG/2013. ONCE THE NET PROFIT RATE IS APPLIED ON CONTRACT RECEIPTS OF AN ASSESSEE FOR ESTIMATING HIS INCOME FROM CONTRACT WORK. IN VIEW OF THE FACTS, ABOVE JUDICIAL PRONOUNCEMENT, I DIRECT THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF SUNDRY CREDITORS OF RS. 34,92,257/ - . 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS . LEARNED D.R. RELIED UPON THE ORDER OF THE AO. HE FURTHER RELIED UPON THE HONBLE APEX COURT DECISION MENTIONED IN THE GROUNDS OF APPEAL AS ABOVE AND PLEADED THAT THE SUNDRY CREDITORS CAN BE ADDED EVEN WHEN THE BUSINESS INCOME IS ESTIMATED. 7. PER CONTRA, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CASE LAWS RELIED UPON BY THE REVENUE ARE NOT AT ALL APPLICABLE AS IN THE CASE LAWS REFERRED BY THE REVENUE THE ISSUE WAS BOGUS SUNDRY CREDITORS ON ACCOUNT OF CASH LOAN INTRODUCED. HOWEVER, IN THE PRESENT CASE THE ISSUE IS MACHINE HIRE CHARGES PAYABLE. LEARNED COUNSEL FURTHER SUBMITTED THAT WHEN THE AO HAS MADE AN ESTIMATE OF INCOME BY REJECTING THE BOOKS OF ACCOUNT AT CERTAIN PERCENTAGE OF TURNOVER, HE CANNOT AGAIN ADD THE MACHINE HIRE CHARGES PAYABLE ON THE B A SIS OF THE SAME BOOKS OF ACCOUNT WHICH HAVE BEEN REJECTED. LEARNED COUNSEL IN THIS REGARD PLACED RELIANCE UPON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (JAL) 302 ITR 246 AND THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 134 OF 2013 IN THE CASE OF M/S ADMANE CONSTRUCTION VIDE ORDER DATED 09 - 12 - 2015. 8. LE ARNED COUNSEL FURTHER SUBMITTED THAT THE AO HAS MADE THE ADDITION ON ACCOUNT OF SUNDRY CREDITORS FOR MACHINE HIRE CHARGES PAYABLE SIMPLY ON THE GROUND THAT THE CREDITORS WERE NOT PRODUCED FOR VERIFICATION. NO CASE HAS BEEN MADE OUT THAT THE NAMES AND ADDR ESSES GIVEN BY THE CREDITORS ARE BOGUS OR THAT THE AO HAS ISSUED ANY S UMMONS WHICH HAVE REMAINED UNCOMPLIED. LEARNED COUNSEL PLEADED THAT WITHOUT ANY FURTHER ENQUIRY AND VERIFICATION BY THE AO MERELY THAT CREDITORS COULD NOT BE PRODUCED, THE CREDITORS FOR MACHINE HIRE 4 ITA NO. 47/NAG/2013. CHARGES PAYABLE CANNOT BE HELD TO BE BOGUS AND ADDED TO THE INCOME OF THE ASSESSEE. 9 . I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. I FIND THAT THE ASSESSEE IN THIS CASE IS A CIVIL CONTRACTOR. BECAUSE OF THE INABILITY OF THE ASSESSEE TO PRODUCE THE COMPLETE BOOKS OF ACCOUNTS AND VOUCHERS THE ASSESSEE OFFERED 8% PROFIT TO BUY PEACE OF MIND WHICH WAS ACCEPTED BY THE AO. THEREAFTER THE AO PROCEEDED TO INSIST UPON THE PRODUCTION OF SUNDRY CREDITORS FOR MACHINE HIRE CHARGES PAYABLE. UPON FAILURE OF THE ASSESSEE TO DO SO HE FURTHER ADDED THE SAME TO THE INCOME OF THE ASSESSEE. IN THIS REGARD I FIND THAT THE HONBLE APEX COURT IN THE DECISION REFERRED BY THE REVENUE HAS HELD THAT APART FROM ESTIMATE OF INCOME BOGUS LOANS/CREDIT S CAN ALSO BE ADDED DEPENDING UPON THE FACTS OF THE CASE. ON THE FACTS OF PRESENT CASE I FIND THAT THIS ADDITION IS NOT WARRANTED. FIRSTLY BECAUSE THE AMOUNT INVOLVED IS MACHINE HIRE CHARGES PAYABLE WHICH IS USED IN THE CIVIL CONTRACT BUSINESS OF THE ASSE SSEE. AFTER NOT RELYING UPON THE BOOKS OF ACCOUNTS THE AO HAS MADE ESTIMATE OF INCOME , AND AGAIN ON THE BASIS OF SUCH BOOKS HE HAS ADDED MACHINE HIRE CHARGES PAYABLE . THIS ADDITION IS NOT SUSTAINABLE. THIS PROPOSITION IS DULY SUPPORTED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND HONBLE JURISDICTIONAL HIGH COURT CITED ABOVE. FURTHER MORE I ALSO AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT MERE NON PRODUCTION OF THE SUNDRY CREDITORS DEHORSE ANY OTHER ENQUIRY /FINDING BY THE AO, THE ADDITION IN THIS REGARD IS NOT JUSTIFIED. 5 ITA NO. 47/NAG/2013. 10 . IN THESE CIRCUMSTANCES IN VIEW OF THE DISCUSSION ABOVE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPE A LS). ACCORDINGLY I UPHOLD THE SAM E. 1 1 . IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY,2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 20 TH JULY, 2016. COPY FORWARDED TO : 1. SHRI DWARKADAS MANIKLAL BHUTADA, 905, B - WING, LOKMAT BHAWAN, RAMDASPETH , NAGPUR - 440 010. 2. D.C.I.T., CENTRAL CIRCLE - 1(1), NAGPUR. 3. C.I.T. - I,NAGPUR. 4. CIT(APPEALS), - I V , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.