ITO, New Delhi V. Sh. Prem Swaroop Srivastava, Noida

ITA 4765/DEL/2013

• Counselvise Citation: 476520114 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: ANAND KUMAR VERMA
• Keywords: Unexplained cash credit; Principle of natural justice
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F , NEW DELHI) BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.4765 /DEL/2013 ASSESSMENT YEAR : 2008-09 ITO, WARD 1(3), VS. SHRI PREM SWAROOP SRIVASTAVA, NOIDA-201301 PROP. M/S. ENMILL TECHNOLOGIES, P-2/06, BLOCK 06, KAILASH DHAM, SECTOR 50, NOIDA-201301 GIR / PAN: ACVPS2539K C.O. NO.34/DEL/2014 ASSESSMENT YEAR 2008-09 SHRI PREM SWAROOP SRIVASTAVA, VS. ITO, WARD 1(3), PROP. M/S. ENMILL TECHNOLOGIES, NOIDA-201301 P-2/06, BLOCK 06, KAILASH DHAM, SECTOR 50, NOIDA-201301 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKRAM SAHAY, SR. DR RESPONDENT BY : SHRI ANAND KUMAR VERMA, CA ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF LD. CIT(A) DATED 10.05.2013. THE REVENUE HAS TAKEN 7 GROUNDS OF APPEAL BUT THE CRUX OF GROUNDS OF APPEAL IS THE GRIEVANCE OF REVENUE WI TH THE ACTION OF LD. CIT(A) BY WHICH HE HAD DELETED THE ADDITION OFRS.15 ,29,891/- MADE BY A.O. U/S 68 OF THE ACT. THE C.O. FILED BY ASSESSEE IS B ASICALLY IN SUPPORT OF LD. CIT(A)S ORDER. ITA NO.4765/DEL/13 C.O.34/DEL/2014 2 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING ASSE SSMENT PROCEEDINGS, THE A.O. NOTED THE BALANCES RELATING TO TWO CREDITORS A ND ISSUED NOTICES U/S 133(6) WHICH REMAINED UNCOMPLIED WITH. AFTER GIVIN G NOTICE TO THE ASSESSEE TO EXPLAIN THE CREDITS AND TO PROVIDE CONFIRMATIONS , THE SAME WERE ADDED U/S 68 OF THE ACT. THE ASSESSEE HAD SUBMITTED THAT THE SE TWO CREDITS WERE WRITTEN BACK AND THE AMOUNTS WERE BROUGHT TO THE CR EDIT SIDE OF P & L ACCOUNT AS DISCOUNTS RECEIVED. IT WAS FURTHER SUBM ITTED THAT THE AMOUNT OF CREDIT BELONGING TO M/S. THREE STAR ENGINEERING WOR KS WAS BROUGHT TO CREDIT SIDE OF P & L ACCOUNT UNDER FINANCIAL YEAR 2008-09 WHILE THE ENTRIES IN THE NAME OF M/S. RAM ENGINEERS WAS BOOKED TO INCOME IN FINANCIAL YEAR 2009- 10. HOWEVER, THE A.O. WAS NOT SATISFIED WITH THE E XPLANATION AND MADE ADDITION U/S 68 BY HOLDING AS UNDER: DURING FY 2008-09, THE ASSESSEE HAD SHOWN LOSSES F OR THE FIRST TIME AND ONLY TIME IN THESE FOUR YEARS. WHILE DURING OTH ER YEARS, THE TURNOVER IS MORE THAN 4 CRORES, ALL OF A SUDDEN, TH E TURNOVER IS DIPPED TO RS.23.78 LAKH DURING FY 2008-09. AFTER THIS ONE YEAR, THE TURNOVER GOES BACK AT 4.13 CRORE. EVEN AFTER CREDITING THE A MOUNT OF CREDIT SHOWN AGAINST M/S THREE STAR ENGG WORKS, LOSS OF RS .11,12,289/- REMAINS AT THE END OF THE YEAR. THUS, THE ASSESSEE DID NOT PAY ANY TAX ON THIS SO CALLED 'ADDITIONAL INCOME' DECLARED. FROM THE PERUSAL OF THE P&L ETC. FOR THE FY 2009-10 , ANOTHER INTERESTING FACT IS NOTICED. DURING THIS YEAR, THE ASSESSEE HAS BROUGHT THE AMOUNT OF CREDIT SHOWN AGAINST SHRI RAM ENGG WO RKS AS 'DISCOUNT RECEIVED'. HOWEVER, A SEPARATE DISCOUNT A CCOUNT HAS BEEN CREATED DURING THIS YEAR IN WHICH RECEIPT OF DISCOU NT AGGREGATING RS.8,89,179/- HAS BEEN SHOWN FROM TWO PARTIES INCLU DING M/S SRI RAM ENGG. WORKS AND TO THE UTTER SURPRISE, HEAVY PAYMEN T OF DISCOUNT IS APPEARING IN THE NAME OF TWO OTHER PARTIES, WHICH A GGREGATE TO RS.12,07,163/- THE NET EFFECT IS PAYMENT OF DISCOUN T OF RS.3,17,983/-, WHICH HAS BEEN DEBITED TO THE P&L A/C AS AN EXPENDI TURE. IT IS WORTH MENTIONING THAT THE ASSESSEE HAS NOT SHOWN ANY DISC OUNT TO ANYONE ITA NO.4765/DEL/13 C.O.34/DEL/2014 3 DURING FY 2006-07, 2007-08 OR 2008- 09. THIS YEAR A LSO, THE ASSESSEE DID NOT PAY ANY TAX ON THIS SO CALLED 'ADDITIONAL I NCOME' DECLARED. FROM THE ABOVE, IT BECAME APPARENT THAT BOOKING OF CREDIT ENTRIES AS INCOME IS NOTHING BUT FABRICATION OF ACCOUNT AS PER THE SWEET WILL OF THE ASSESSEE. AS AND WHEN IT WAS FOUND CONVENIENT T O BRING THE CREDIT ENTRIES AS INCOME, THE SAME HAS BEEN DONE WITH A CL EAR MOTIVE OF AVOIDING THE PAYMENT OF TAX. IN THESE CIRCUMSTANCES , IT BECAME MORE IMPORTANT TO KNOW AS TO WHETHER THE CREDITORS WERE GENUINE OR BOGUS. AS ALREADY MENTIONED ABOVE, THE CREDIT ENTRY SHOWN IN THE NAME OF M/S SRI NATH JI ISPAT PVT. LTD HAD BEEN FOUND BOGUS . 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) ALLOWED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 2. M/S. SHRI RAM ENGINEERS: DURING THE ASSESSMENT PROCEEDINGS THE A.O. SENT A LETTER TO ABOVE PARTY F OR CONFIRMATION OF BALANCE OUTSTANDING BUT THE SAID LETTER RETURNED BA CK WITH A REMARK 'NO SUCH FIRM'. IN THIS REGARD, THE APPELLANT HAS O NLY CONTENDED THAT THE APPELLANT HAS PROVIDED LAST KNOWN ADDRESS OF AB OVE PARTY TO THE A.O. AND THIS FACT IS VERIFIABLE FROM THE COPY OF B ILLS ATTACHED. MOREOVER, THE ASSESSEE COMPLETELY FAILED IN FURNISH ING CONFIRMATION FROM THE ABOVE PARTY. BASED ON ABOVE FINDINGS, THE A.O. CONCLUDED THAT THE CREDIT BALANCE OF RS. 5,77,340/- SHOWN AGA INST THE ABOVE PARTY AS ON 31/3/2008 WAS UNEXPLAINED CASH CREDIT A PPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IN THIS REGARD, THE APPELLANT HAS SUBMITTED THAT DURING THE F.Y. 2006-07 THE ABOVE PA RTY DID SOME WORK AGAINST WHICH PAYMENTS WERE MADE BY THE APPELLANT O N REGULAR BASIS AND THE FACT IS VERIFIABLE FROM LEDGER ACCOUNT OF M /S. SHRI RAM ENGINEERING. IT IS FURTHER CONTENDED THAT DUE TO SO ME MANUFACTURING ERRORS IN THE MACHINERY SUPPLIED BY ABOVE PARTY THE APPELLANT HELD BACK THE PAYMENT OF RS. 5,77,340/- WHICH APPEARED A S CLOSING BALANCE IN APPELLANT'S BOOKS OF ACCOUNTS AS PAYABLE AS ON 3 1/3/2008. IT WAS ALSO SUBMITTED BY THE APPELLANT BEFORE THE AO. THAT DURING THE F.Y. 2009-10 THE APPELLANT HAS WRITTEN OFF RS. 5,77,340/ - (THE CREDIT BALANCE OF M/S. SHRI RAM ENGINEERING WORKS IN THE B OOKS OF ACCOUNTS AS ON 31/3/2Q'08) AND SHOWN IT AS HIS INCOME. IT IS ALSO CLAIMED BY THE ASSESSEE THAT FROM THE BILLS OF M/S. SHRI RAM E NGINEERING IT IS ITA NO.4765/DEL/13 C.O.34/DEL/2014 4 CLEAR THAT THIS PARTY IS REGISTERED WITH CENTRAL EX CISE DEPARTMENT AND HAS ISSUED EXCISE INVOICES TO THE APPELLANT. 3. M/S. THREE STAR ENGINEERING WORKS: DURING THE AS SESSMENT PROCEEDINGS AO. FOUND THAT LAST TRANSACTION WITH TH IS PARTY WAS ON 25/4/2005 (F.Y. 2005-06). NOTICE U/S. 133(6) WAS SE RVED UPON M/S. THREE STAR ENGINEERING WORKS REQUIRING COPY OF THE ACCOUNTS OF THE ASSESSEE AS APPEARING IN THEIR BOOKS OF ACCOUNTS. I N RESPONSE A REPLY WAS RECEIVED BY THE A.O. ON 31/12/2010 WHERE BY THI S PARTY CATEGORICALLY STATED THAT THEY HAD NO BALANCE OUTST ANDING IN THEIR BOOKS OF ACCOUNTS IN RESPECT OF M/S. ENMILL TECHNOL OGIES (PROPRIETOR SH. PREM SWAROOP SRIVASTAVA) AS ON 31/3/2008. IN VIEW OF ABOVE FINDINGS A.O. TREATED THE CREDIT BALANCE OF RS. 9,52,461/- SHOWN AGAINST THE ABOVE PARTY AS ON 31/3 /2008, AS UNEXPLAINED CASH CREDIT APPEARING IN THE BOOKS OF A CCOUNTS OF THE ASSESSEE. AGAINST THE ABOVE FINDINGS THE APPELLANT CONTENDED THAT DURING THE F .Y. 2004-05 THE SAID PARTY HAD DONE SO ME WORK OF MANUFACTURING OF MACHINERY ON BEHALF OF M/S. ENMILL TECHNOLOGY (EARLIER KNOWN AS OASIS TECHNOLOGY) DURING THE YEAR AND THE PAYMENTS WERE MADE ON REGULAR BASIS WHICH ARE VERIF IABLE FROM LEDGER ACCOUNTS. IT IS FURTHER CONTENDED THAT DUE T O SOME MANUFACTURING ERROR IN THE MACHINERY THE APPELLANT HELD UP THE PAYMENT OF RS. 9,52,461/- WHICH STOOD REFLECTED AS CLOSING BALANCE AS ON 31/3/2008. IT HAS FURTHER BEEN CLAIMED THAT DURI NG THE F.Y. 2008- 09 THE APPELLANT HAS WRITTEN OFF ALL THIS AMOUNT WH ICH HAS BEEN SHOWN AS HIS INCOME. IT HAS ALSO BEEN SUBMITTED BY THE AP PELLANT THAT THE PARTY IS DULY REGISTERED WITH EXCISE DEPARTMENT AND HAS ISSUED EXCISE INVOICES TO THE APPELLANT. FINALLY THE APPELLANT HAS TAKEN THE PLEA THAT SINCE THE ASSESSEE HIMSELF HAS TREATED RS.9,52,416/- AS HIS INCOME DUR ING THE F.Y. 2008- 09 AND RS. 5,77,340/- AS INCOME FOR THE FY. 2009-10 BY WAY OF CESSATION OF LIABILITY, THE QUESTION OF ABOVE AMOUN TS BEING TREATED AS UNEXPLAINED INCOME OF F.Y. UNDER CONSIDERATION DO N OT ARISE . REGARDING CESSATION OF LIABILITY AS CLAIMED BY THE APPELLANT THE A.O. HAS POINTED OUT IN HIS ASSESSMENT ORDER THAT E VEN AFTER CESSATION OF LIABILITY AS CLAIMED BY THE APPELLANT THE ASSESS EE DID NOT HAVE TO PAY ANY TAX IN THOSE YEARS AS THE ASSESSEE HAD SHOW N SUFFICIENT LOSS TO ABSORB ABOVE LIABILITY WHICH ACCORDING TO A.O. WAS DUE TO FABRICATION OF ACCOUNTS BY THE ASSESSEE. ITA NO.4765/DEL/13 C.O.34/DEL/2014 5 FROM THE MATERIAL AVAILABLE ON RECORD I FIND THAT T HE CREDIT BALANCE STANDING AGAINST THE ABOVE TWO PARTIES AS O N 31/3/2008 WERE AS A RESULT OF CARRY FORWARD OF LIABILITY FROM PREV IOUS YEARS WHICH WERE AS A RESULT OF SUPPLY OF MACHINES BY ABOVE CRE DITORS TO THE ASSESSEE. I ALSO FIND THAT THE A.O. HAS FOUND NO FA ULT WITH THE CLAIM BY THE APPELLANT THAT THESE CREDIT BALANCES ARE AS A R ESULT OF SUPPLY OF MACHINERY IN EARLIER YEARS. THE A.O. HAS ALSO NOT F OUND ANY FAULT WITH PART PAYMENTS MADE IN CHEQUE TO THESE TWO SUPPLIERS WHICH ARE RECORDED IN ASSESSEE'S BOOKS OF ACCOUNTS. SINCE THE SE LIABILITIES IN THE BOOKS OF ACCOUNTS OF ASSESSEE DID NOT ARISE DURING THE F.Y. UNDER CONSIDERATION, THE QUESTION OF TREATING THE SAME AS UNEXPLAINED CASH CREDIT U/S. 68 DOES NOT ARISE AS THE PROVISIONS OF SECTION 68 APPLIES ONLY IN THE CASE OF CREDITS SHOWN IN THE CURRENT F. Y. REGARDING A. O. 'S OBSERVATION THAT THE ASSESSEE FABRICATED ITS BOO KS OF ACCOUNT, I FIND THE SAME TO HAVE BEEN BASED ON GUESS WORK & MERE SU SPICION WHICH, HOWEVER STRONG, CANNOT TAKE PLACE OF HARD EVIDENCE. MOREOVER, A.O. HAS BROUGHT NO MATERIAL ON RECORD TO SUBSTANTIATE H IS SUSPICION REGARDING ALLEGED MANIPULATION OF BOOKS OF ACCOUNTS BY THE ASSESSEE. I FURTHER FIND THAT A.O. IS SILENT ON THE GENUINENE SS OF THE PURCHASE OF MACHINERY. THE A.O. HAS ALSO NOT QUESTIONED THE ASS ESSEE'S ACTION IN WRITING OFF THESE TWO LIABILITIES AND OFFERING THE SAME FOR TAXATION IN TWO DIFFERENT YEARS AS DISCUSSED ABOVE. I ALSO FIND THAT A.O. HAS FAILED TO CONFRONT THE ASSESSEE WITH HIS FINDINGS THAT NO BALANCES WERE REPORTED OUTSTANDING IN ASSESSEE'S NAME IN THE BOOK S OF ACCOUNTS OF M/S. THREE STAR ENGINEERING WORKS, WHEREAS, AS PER ASSESSEE'S BOOKS OF ACCOUNTS THERE WERE OUTSTANDING LIABILITY OF RS. 9,52,461/- IN THE NAME OF M/S. THREE STAR ENGINEERING WORKS. TO THAT EXTENT I FEEL THAT THE PRINCIPLE OF NATURAL JUSTICE HAS BEEN COMPROMIS ED WITH. MOREOVER, ANY DISCREPANCY REGARDING THE CLOSING BALANCE APPEA RING IN THE BOOKS OF ACCOUNTS IS THE SUBJECT MATTER OF RECONCILIATION BETWEEN THE TWO PARTIES WHICH HAS NOT BEEN ATTEMPTED BY THE A.O. IN THIS CASE FOR THE REASONS BEST KNOWN TO HIM. TAKING ALL THE ABOVE INTO CONSIDERATION I HOLD THAT THE ADDITION OF RS.15,29,891/- OF THE I.T.ACT ON ACCOUNT OF CLOS ING CREDIT BALANCE APPEARING IN THE NAME OF ABOVE TWO PARTIES (I.E. M/ S. SHRI RAM ENGINEERS AND M/S. THREE STAR ENGINEERING WORKS) IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS NOT JUSTIFIED AND HENCE THE SAME IS DELETED.'' ITA NO.4765/DEL/13 C.O.34/DEL/2014 6 4. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, LD. D.R. INVITED OUR ATTENTION TO ASSESSMENT ORDER AND SUBMITTED THAT THE NOTICE ISSUED U/S 133(6) ON THE CREDITORS OF ASSESSEE RETURNED UNSERVED WITH THE REMARKS NO SUCH FIRM EX ISTS AND FURTHER SUBMITTED THAT THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT RELATING TO THESE TWO SUNDRY CREDITORS WERE WRITTEN BACK IN ASS ESSMENT YEARS 2008-09 & 2009-10 WAS NOT ACCEPTED BY A.O. IN VIEW OF THE F ACT THAT IN THOSE YEARS, ASSESSEE HAD DECLARED LOSS AND WITH THE CREDIT OF T HESE AMOUNTS THE TAXABLE INCOME REMAINED NIL AND IN THIS RESPECT, WE WERE TAKEN TO A.O.S OBSERVATION AS CONTAINED IN PAGES 4 & 5 OF ASSESSME NT ORDER. 6. LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE CR EDITORS WERE GENUINE AND A PART OF PAYMENT BELONGING TO THEM WAS WITHHEL D DUE TO POSSIBILITY OF DEFECTIVE MATERIAL AND IN THE ASSESSMENT YEARS 2008 -09 AND 2009-10, THE AMOUNTS WERE WRITTEN BACK SUO MOTO AND INCOME WAS T AKEN IN THE P & L ACCOUNT OF RESPECTIVE YEARS AND, THEREFORE, THE ADD ITION IN THE CURRENT YEAR WOULD HAVE AMOUNTED DOUBLE ADDITION AND, THEREFORE, LD. CIT(A) AFTER EXAMINING ALL THE FACTS AND CIRCUMSTANCES, HAS DELE TED THE ADDITION. 7. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT OUT OF LIST OF CREDITORS, THE A.O. PICKED UP TWO CREDITORS NAMELY THREE STAR ENGINEERING WORKS AND R AM ENGINEERS AND ISSUED NOTICES TO THEM U/S 133(6). THE NOTICES ISS UED TO THESE FIRMS RETURNED UNSERVED THEREFORE, THE ASSESSEE WAS ASKED TO SUBMI T CONFIRMATION/DETAILS REGARDING THESE TWO PARTIES. WE FIND THAT LD. CIT( A) HAS PASSED A REASONED AND SPEAKING ORDER IN WHICH WE DO NOT FIND ANY INFI RMITY. THEREFORE, THE APPEAL FILED BY REVENUE IS DISMISSED. ITA NO.4765/DEL/13 C.O.34/DEL/2014 7 8. AS REGARDS C.O., THE SAME IS IN SUPPORT OF LD. C IT(A)S ORDER . AS WE HAVE ALREADY DISMISSED THE APPEAL OF REVENUE, THE C .O. FILED BY ASSESSES HAS BECOME INFRUCTUOUS AND IS DISMISSED. 9. IN VIEW OF ABOVE APPEAL OF REVENUE AS WELL AS C. O. OF ASSESSEE ARE DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JAN., 2015. SD./- SD./- ( H. S. SIDHU) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:16 TH JAN., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/1 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 15, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 16/1 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 16/1 SR. PS/PS 7 FILE SENT TO BENCH CLERK 16/1/15 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER