ITO VI (4), Lucknow V. Smt. Tarun Kumar Kohli, Lucknow

ITA 510/LKW/2011

• Counselvise Citation: 51023714 RSA 2011
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-07-2014
• Assessment Year: misc
• Appeal Filed On: 01-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 510/LKW/2011 ASSESSMENT YEAR: 2008 - 09 INCOME TAX OFFICER VI(4) LUCKNOW V. SHRI. TARUN KUMAR KOHLI PROP. M/S RIA TOYS 76, NADAN MAHAL ROAD ASHIRWARD PLAZA, LUCKNOW PAN: AHDPK5758P (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. AMIT NIGAM, D.R. RESPONDENT BY: SHRI. S. C. TIWARI, ADVOCATE DATE OF HEARING: 21 0 7 2014 DATE OF PRONOUNCEME NT: 25 0 7 2014 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND, WHICH IS EXTRACTED HEREUNDER: - 1 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN FAILING TO APPRECIATE THAT NOTICES UNDER SECTION 133(6) ISSUED TO THE SUNDRY CREDITORS AT THE ADDRESS PROVIDED BY THE ASSESSEE WERE RETURNED UNSERVED. THE ASSESSEE ALSO DID NOT PRODUCE THESE CREDITORS BEFORE THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTIFIED IN ADDING BACK THE CREDITORS AMOUNTING TO RS.19,56,030/ - TO THE INCOME OF THE ASSESSEE AS BEEN BOGUS AND BEING NOTHING BUT THE ASSESSEES OWN MONEY BEING INVESTED IN THE BUSINESS IN THE GARB OF CREDITORS. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : 2 . DURING THE COURSE OF HEARING OF THE APPEA L, OUR ATTENTION WAS INVITED TO THE FACT THAT THE ASSESSING OFFICER HAS EXAMINED THE ISSUE OF SUNDRY CREDITORS AND WITHOUT MAKING VERIFICATION HE MADE ADDITION OF RS.73,10,022/ - , WHEREAS THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN DETAIL IN PARAS 5.3 TO 5. 10 OF HIS ORDER. THE LD. D.R., HOWEVER, SUBMITTED THAT THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS BROUGHT OUT BY THE ASSESSING OFFICER AND HE DELETED THE ADDITION. 3 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A) WITH THE SUBMISSION THAT THE LD. CIT(A) HAS EXAMINED ALL THE SUNDRY CREDITS. HE SUBMITTED THAT THE LD. CIT(A) HAS DELETED THE ADDITION AFTER VERIFYING THE DETAILS OF THE CREDITORS FURNISHED BY THE ASSESSEE. 4 . HAVING HEARD THE RIVAL SUBMIS SIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF SUNDRY CREDITORS WITHOUT MAKING ANY ENQUIRY OR VERIFICATION. THE RELEVANT FINDING OF THE ASSESSING OFFICER IS EXTRA CTED HEREUNDER FOR THE SAKE OF REFERENCE: - 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO PRODUCE THE LIST OF SUNDRY CREDITORS. IN RESPONSE TO WHICH ASSESSEE SUBMITTED THE LIST OF SUNDRY CREDITORS. NOTICE UNDER SECTION 133(6) OF T HE INCOME - TAX ACT, 1961 WERE ISSUED SO AS TO VERIFY THE SUNDRY CREDITORS. BUT THE NOTICES WERE RECEIVED BACK UNSERVED. THEREFORE, GENUINENESS OF THE SUNDRY CREDITORS COULD NOT BE VERIFIED. HENCE, AMOUNT OF RS.73,10,022/ - IS BEING ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. 5 . THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN DETAIL IN HIS ORDER BY MAKING PROPER VERIFICATION OF THE ACCOUNTS OF THE TRADE CREDITORS AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE THAT THEY ARE TRADE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : CREDITORS, THE LD. CIT( A) HAS DELETED THE ADDITION. THE RELEVANT OBSERVATION OF THE LD. CIT(A) IS ALSO EXTRACTED HEREUNDER: - 5(3) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPELLANT. THE ISSUE IS ADDITION OF ALL TH E TRADE CREDITORS OF THE APPELLANT AMOUNTING TO RS. 73,10,022/ - . I FIND THAT THE AO REQUIRED SUBMISSION OF THE LIST OF SUNDRY CREDITORS AS PER BOOKS OF ACCOUNTS OF THE APPELLANT ALONG WITH THEIR NAMES AND ADDRESSES. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE APPELLANT FURNISHED A LIST OF 34 SUNDRY CREDITORS, WITH THEIR NAMES AND ADDRESSES TO THE AO. THE AO ISSUED A SHOW CAUSE TO THE APPELLANT ON 02.11.2010. IT APPEARS FROM THIS SHOW CAUSE, COPY OF WHICH HAS BEEN FILED BEFORE ME AND PLACED ON RECORD TH AT LETTERS UNDER SECTION 133(6) OF THE ACT WERE ISSUED TO 3 CREDITORS NAMELY, KUNDA N TOYS, PRAKASH TRADERS AND JAVED TOYS AND NOVELTIES. THE SHOW CAU SE WAS TO ADD THE AMOUNT OF RS. 19,56,030/ - IN RESPECT OF THESE 3 TRADE CREDITORS. THE ASSESSEE EXPLAINED T HE REASONS FOR NON - CONFIRMATION OF ACCOUNTS BY THE SAID 3 CREDITORS VIDE HIS LETTER DATED 02.12.2010. IT WAS EXPLAINED THAT THE LETTERS COULD NOT BE SERVED ON CREDITORS BECAUSE THEIR PLACE OF BUSINESS WAS ACQUIRED DUE TO METRO PROJECT OF THE GOVERNMENT, TH E PURCHASES FROM THEM WERE EX - UP ARID THEIR COPIES OF ACCOUNTS WERE FILED. HOWEVER, THE AO ADDED BACK TO THE INCOME OF THE APPELLANT ENTIRE SU NDRY CREDITORS AMOUNTING TO RS. 73,10,022/ - ON THE BASIS OF INQUIRIES CONDUCTED IN 3 CREDITORS. 5(4) I WILL FIRST E XAMINE WHETHER THE AO WAS JUSTIFIED IN ADDING BACK ALL THE CREDITORS ON THE BASIS OF INQUIRIES CONDUCTED FROM 3 CREDITORS ONLY. THE FIRST PART OF THE EQUATION IS THAT THE BALANCE ADDED BY THE AO IS THE CLOSING BALANCE OF THE YEAR UNDER CONSIDERATION. IT IN CLUDES THE CLOSING BALANCE OF THE IMMEDIATELY PRECEDING FINANCIAL YEAR, PURCHASES MADE FROM THE TRADE CREDITORS AND PAYMENTS MADE TO THEM. SINCE THE ISSUE IN QUESTION IS THAT OF A SUNDRY CREDITOR, THE APPELLANT HAS DISCHARGED HIS ONUS SUFFICIENTLY BY SUBMI TTING NAME AND ADDRESSES AND COPIES OF ACCOUNTS OF THE SUNDRY CREDITORS. NOW, THE SUNDRY CREDITORS BEING SUPPLIERS OF THE APPELLANT, THEIR SUPPLIES PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : ARE INCLUDED AS PURCHASES IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. I FIND THAT WHILE ADDING THE AMOUNT OF SUNDRY CREDITORS TO THE INCOME OF THE APPELLANT, THE AO HAS NOWHERE GIVEN ANY FINDING ON THE PURCHASES REFLECTED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE SALES CORRESPONDING TO THE PURCHASES MADE FROM THE SUNDRY CREDITORS HAS ALSO NOT BEEN DOUBTED, T HE APPELLANT HAS SHOWN A TURNOVER/SALES OF RS. 43,50,364/ - . BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED DURING THE COURSE OF BUSINESS. THE BOOKS OF ACCOUNTS HAVE BEEN AUDITED BY V.K.PAL & CO., CHARTERED ACCOUNTANTS. NO ADVERSE COMMENTS HAVE BEEN MADE IN RESPECT OF BOOKS OF ACCOUNTS. NO DISCREPANCIES HAVE BEEN NOTICED DURING THE AUDIT. 5(5) IT IS EVIDENT THAT THERE IS NO ADVERSE INFERENCE DRAWN BY THE AO IN SO FAR AS THE ENTRIES IN THE BOOKS OF ACCOUNTS ARE CONCERNED. IT MEANS THEREFORE THAT THE PURCHASES AND COR RESPONDING SALES HAVE BEEN VERIFIED BY THE AO WITH NO ADVERSE INFERENCE. DURING THE COURSE OF APPELLATE PROCEEDINGS, I REQUIRED THE APPELLANT TO FILE A STATEMENT SHOWING THE PAYMENTS MADE TO AND PURCHASES MADE FROM IMPUGNED SUPPLIERS/ SUNDRY CREDITORS. THE STATEMENT FILED BEFORE ME SHOWS THAT PAYMENTS TO MOST OF THE 34 SUNDRY CREDITORS, HAS BEEN MADE IN THE CURRENT YEAR AND THEIR OUTSTANDING BALANCES HAVE BEEN WORKED OUT ACCORDINGLY. THE OPENING STOCK OF THE APPELLANT DURING THE YEAR IS RS. 62,35,918/ - AND THE CLOSING STOCK IS RS. 73,11,517/ - . THE PURCHASES DURING THE YEAR ARE RS. 45,18,449/ - . THE DETAILS ARE AS UNDER - S. NO NAME OPENING BALANCE PURCHASES IN THE YEAR PAYMENTS MADE CLOSING BALANCE 1 ADITYA TOYS CENTRE 53850 101956 19500 136315 2 AJANTA PLASTIC STORE 156340 8985 0 165325 3 BARKHA TRADING CO. 38976 3461 38976 3461 4 BHANSI LAL ANIL KUMAR 151650 12686 0 164336 5 GOPAL TOYS 149986 86781 156266 80501 6 GUPTA TRADING CO. 85650 2184 85650 2184 7 HARM AN ENTERPRISES 141870 17256 0 159126 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : 8 JAVED TOYS 500121 566981 334118 732984 9 JUNEJA TRADERS 72715 7612 72715 7612 10 KUNDAN TOYS 378290 658001 420000 606291 11 MAHALAKSHMI 298467 213751 19500 492718 12 MAHASHAKTI 7603 7 2080 76037 2080 13 MAHESH TRADERS 134890 18366 0 153256 14 MANCHANDA TOYS 324536 96769 150000 271306 15 MARUTI TOYS 145670 16648 0 162318 16 NEW INDIA PLASTIC 578765 424390 978765 24390 17 PHOOL CHAND MADAN 234680 116853 0 351533 18 PRAKASH TRADERS 645908 470847 20000 616755 19 PREM NATH SUBASH 48118 37135 48118 37135 20 RAHUL TOYS 176530 34711 0 211241 21 RAJA PLASTIC 409909 7591 200000 217500 22 RAVI TOYS 222513 456241 400000 2 78754 23 ROSHAN ENTERPRISES 167950 15131 0 183081 24 RUBY DOLLS 92530 11357 3557 100330 25 SANJEEV ENTERPRISES 75820 89754 0 165574 26 SHAKTI ENTERPRISES 58001 15128 0 73129 27 SRI SAI ENTERPRISES 185659 47538 98190 13500 7 28 SUBASH BROTHERS 0 5564 0 5564 29 SUMAN TRADERS 0 7510 0 7510 30 SURENDRA PLASTIC 256474 482298 300000 438772 31 VIJAY ENTERPRISES 432870 144305 2839 574336 32 VINAYAKTOYS 123340 46567 0 171907 33 VISHAL TOYS 239 067 244484 40000 443551 34 191540 47514 104920 134134 TOTAL 6560724 4518449 3759152 7310022 5(8) IN APPELLANT'S TRADE, AS PER THE PRACTICE PREVALENT THE TOYS AND GOODS DEALT IN ARE SUPPLIED ON CREDIT. WHENEVER THE MATERIAL IS PURCHASED FROM PARTY, THE PURCHASE IS RECORDED IN THE PURCHASE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : REGISTER. AFTER THAT THE GOODS ARE SOLD TO CUSTOMERS FROM THE STOCK OF GOODS IN HAND. THE PAYMENTS TO SUPPLIERS ON ACCOUNT OF PURCHASES ARE MADE IN INSTALLMENTS ON REALIZATION OF SALE PROCEEDS. THIS IS A REGULAR CYCLE OF PAYMENT - SALE - RECEIPT OF PAYMENT AND PAYMENT TO SUPPLIERS. I FIND IT EVIDENT FROM THE AFORESAID CYCLE AND THE TABLE REPRODUCED ABOVE THAT THE CREDITORS ADDED BY THE AO AMOUNTING TO RS. 73,10,022/ - IN THE SIXTH COLUMN, INCLUDE PURCHASES OF RS. 45,18,449/ - IN THE THIRD COLUMN, WHICH ARE SHOWN IN THE PROFIT AND LOSS ACCOUNT. THESE CREDITORS HAVE CONTINUOUS TRANSACTIONS DURING THE CURRENT YEAR AS WELL AS IN IMMEDIATELY PRECEDING YEAR AS IS EVIDENT FROM OPENING BALANCE IN 3RD COLUMN. FURTHER, SA LES OF RS. 43,50,364/ - HAS BEEN MADE DURING THE YEAR OUT OF SUCH PURCHASES OF RS. 45,18,449/ - . WHEN THE PURCHASE AND SALES HAVE NOT BEEN DOUBTED BY THE AO, THERE IS NO JUSTIFICATION IN ADDING THE SUNDRY CREDITORS AS UNVERIFIED. 5(9) SIMILAR ISSUE HAD COME UP BEFORE THE HON'BLE ITAT, ALLAHABAD BENCH IN THE CASE OF JOINT COMMISSIONER OF INCOME TAX VS. MATHURA PRASAD ASHOK KUMAR 101 TTJ 0810 (ALL). IN THIS CASE THE APPELLANT WAS ENGAGED IN THE BUSINESS OF BANARSI SAREES. THEY ALSO PURCHASE SAREES FROM LOCAL K ARIGARS ON CREDIT AND SOLD IT CUSTOMERS. SIMILAR ADDITION ON ACCOUNT OF SUNDRY CREDITORS WAS DELETED IN THE 1ST APPEAL AND WHEN THE REVENUE WENT UP TO TRIBUNAL AGAINST THE ORDER OF CIT, THE HON'BLE BENCH OF ITAT AT ALLAHABAD HAS UPHELD THE ORDER OF CIT BY HOLDING THAT 'AO HAS TREATED THE LIABILITY TO BE OF 'CASH CREDIT' IN NATURE AND THAT IS WHY HE FELT ANXIOUS TO HAVE THE IDENTITIES OF THE CREDITORS ESTABLISHED. IN THIS RESPECT, FIRST OF ALL, WE HOLD THAT CREDITS 'IN THE SUNDRY CREDITORS (UDHAR KHAREED KH ATA)' ARE REFERABLE TO THE PURCHASES OF SAREES ON CASH BASIS. AS THE PURCHASES HAVE BEEN HELD TO BE GENUINE AND ACCEPTED AS SUCHF THE CREDITS THAT REMAINED OUTSTANDING IN SUCH ACCOUNT CANNOT BE TREATED TO HAVE REMAINED UNEXPLAINED. THE BALANCE APPEARING IN THIS ACCOUNT, WHICH INCLUDED THE DISPUTED ADDITION PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : ALSO, IS THE SUM TOTAL OF PURCHASES THAT REMAINED UNPAID AT THE END OF THE YEAR. AS THE GENUINENESS OF SUCH PURCHASES HAS NOT BEEN DISPUTED, RATHER, THE SAME HAS BEEN ACCEPTED, THE CREDITS STAND FULLY EXP LAINED AND NO ADVERSE INFERENCE IS CALLED FOR, EITHER ON FACTS AND LAW.' FURTHER, IN THE CASE OF ANNAMARIA TRAVELS AND TOURS (P) LTD VS DEPUTY COMMISSIONER OF INCOME TAX, ITAT, DELHI 'F' BENCH (2005) 95 TTJ 71 (DEL), IT HAS BEEN HELD THAT - INCOME - CASH CR EDIT - AMOUNT STANDING TO THE CREDIT OF SUNDRY CREDITORS FOR PURCHASES OF AIRLINE TICKETS - ADDITION MADE UNDER SECTION 68 ON THE GROUND THAT NO CONFIRMATION WAS FILED FROM AIRLINE COMPANIES - NOT JUSTIFIED - WHEN PAYMENTS TO CREDITORS WERE NOT DOUBTED AND COMMISSION INCOME IN RESPECT OF THOSE VERY TICKETS HAS BEEN ASSESSED AS INCOME OF ASSESSEE, AMOUNTS STANDING TO THE CREDITS OF AIRLINES TOWARDS PURCHASE OF TICKETS COULD NOT BE ADDED UNDER SECTION 68. IN THE INSTANT CASE ALSO, THE INCOME FROM SALE AND PUR CHASE OF GOODS FROM SUNDRY CREDITORS HAS BEEN ASSESSED AS INCOME OF THE ASSESSEE. PURCHASES, SALES AND PAYMENTS TO CREDITORS HAVE NOT BEEN DOUBTED. THE CONCLUSION HAS TO BE THEREFORE SAME I.E. THE AO IS NOT JUSTIFIED IN ADDING THE SUNDRY CREDITORS. 5 (10) I CONCLUDE ON THE BASIS OF MY EXAMINATION IN PARAGRAPHS ABOVE THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF ENTIRE SUNDRY CREDITORS OF RS.73,10,022/ - TO THE INCOME OF THE APPELLANT ON THE BASIS OF INQUIRES CONDUCTED FROM ONLY 3 TRADE CREDITORS. T HE PURCHASES AND SALES REFLECTED IN THE AUDITED BOOKS OF ACCOUNTS HAVE BEEN EXAMINED AND ACCEPTED. THERE IS NO ADVERSE INFERENCE IN RESPECT OF ANY ENTRY RELATING TO SALE, PURCHASE OR PAYMENTS MADE TO CREDITORS. THE APPELLANT FILED LETTERS OF BALANCES OF TH E 3 CREDITORS, WHO HAVE OUTSTANDING BALANCES AS PER S. NO. 8, 10 AND 18 OF THE TABLE ABOVE. THEY HAVE CONTINUOUS TRANSACTIONS WITH THE ASSESSEE. THE APPELLANT HAS FILED COMPLETE DETAILS OF PURCHASES FROM THESE 3 CREDITORS. NO DISCREPANCY WHATSOEVER HAS BEE N POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS, WHICH HAVE BEEN AUDITED. THE PURCHASES PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : WERE MADE FROM OUT OF THE STATE OF UP AND THE PURCHASES WERE COVERED BY ROAD PERMIT ISSUED BY THE TRADE TAX DEPARTMENT. COPY OF THE SALES TAX ASSESSMENT ORDER FILED AL SO IS IN ORDER. ALL FACTS AND CIRCUMSTANCES LEAD TO MY CONCLUSION THAT THE ADDITION OF RS. 73,10,022/ - , BEING THE CLOSING BALANCE OF SUNDRY CREDITORS ON THE BASIS OF INQUIRIES CONDUCTED WITH 3 CREDITORS, MADE BY THE AO IS UNJUSTIFIED. THE ADDITION MADE BY THE AO IS THEREFORE DELETED GIVING RELIEF TO THE APPELLANT. THE GROUND OF APPEAL IS ALLOWED. 6 . DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. D.R. COULD NOT POINT OUT ANY SPECIFIC DEFECT IN THE ORDER OF THE LD. CIT(A). HE HAS SIMPLY PLACED RELIANCE U PON THE ORDER OF THE ASSESSING OFFICER. IN THE LIGHT OF THESE FACTS, WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN DETAIL IN HIS ORDER AND NO INFIRMITY HA S BEEN POINTED OUT THEREIN . W E , THEREFORE, CONFIRM THE SAME. 7 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.7.2014. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH JU LY , 2014 JJ: 2107 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASS ISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )