DCIT, Ludhiana V. M/s Naresh Aggarwal Agencies (P) Ltd., Ludhiana

ITA 519/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60927 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Business income
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R. SOOD, AM AND MS. SUSHMA CHOWLA, JM ITA NO. 519/CHD/2010 ASSESSMENT YEAR: 2006-07 D.C.I.T. C-II, LUDHIANA V M/S NARESH AGGARWAL AGENCIES (P) LTD B-VII-1097-5A, VIKAS NAGAR LUDHIANA AABCN 7957 R (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. JAISHREE SHARMA RESPONDENT BY: SHRI HARI OM ARORA DATE OF HEARING: 2.07.2012 DATE OF PRONOUNCEMENT: 06.07.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING GR OUNDS: 1 THAT THE LD. CIT(A) ERRED IN LAW AND FACTS IN D ELETING THE ADDITION OF RS. 32,222,500/- MADE BY THE ASSESSING OFFICER BY I NVOKING THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 196 1. 2. THAT THE LD. CIT(A) ERRED IN NOT APPRECIATING T HE FACTS OF THE CASE THAT THE ASSESSEE HAD FAILED TO PROVE THE IDENTITY AS WELL AS THE CAPACITY OF THE CREDITORS. THE GENUINENESS OF THE TRANSACTI ONS WAS ALSO NOT PROVED AS THE ENTIRE CAPITAL AGGREGATING TO RS. 32, 22,500/- WAS INTRODUCED IN THE FORM OF CASH. FURTHER, ALL THE 3 7 ACCOUNTS WERE SQUARED UP BY ISSUING ONE SALE BILL IN THE FIRST WE EK OF MARCH. EVEN THE ASSESSEE HAD FAILED TO PRODUCE THE SALESMEN WHO HAD MADE THE ALLEGED SALES TO 37 PARTIES BEFORE THE ASSESSING OFFICER DU RING THE ASSESSMENT PROCEEDINGS. THEREFORE, THE PROVISIONS OF SECTION 68 WERE RIGHTLY INVOKED BY THE ASSESSING OFFICER. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED ADVANCES FROM CUSTOMERS. THE ADVANCES WERE IN THE RANGE OF RS. 1.00 LAKH AND WERE SHOWN TO HAVE RECEIVED THE AMOUNTS IN THE RANGE OF RS. 17,000 TO RS. 19,000 EACH IN THE MONTH OF NOVEMBER AND DECEMBER. THE TOTAL AMOUNTS OF THE ADVANCES WERE IN THE RANGE OF RS. 90,000 TO RS. 1.00 LAKH WHICH WAS SQUARED UP BY SHOWING THE SALE BILL IN THE MONTH OF MARCH. THESE ADVANCES WERE RECEIVED FROM 37 PARTIES AND KEEPING THE VARIO US FACTORS OF THE ADVANCES, THE ASSESSING OFFICER ENTERED THE DOUBTS REGARDING THE GENUINENESS OF THESE 2 ADVANCES AND ACCORDINGLY REQUIRED THE ASSESSEE TO FURNISH COMPLETE ADDRESSES OF THESE PARTIES, COPIES OF ACCOUNTS AND PAN ETC. IN RESPONSE IT WAS MAINLY STATED THAT THESE ADVANCES ARE NOT CASH CREDITORS BUT ADVANCES AGAINST THE SALE OF GOODS. IT WAS FURTHER STATED T HAT THE SALES WERE MADE BY THE SALESMEN OF THE COMPANY DURING INCENTIVE SCHEME CAM PAIGN. THE AMOUNTS WERE COLLECTED AGAINST SALE OF GOODS IN WHICH CHALL ANS WERE ISSUED AND LATER ON CONSOLIDATED BILLS WERE ISSUED. IT WAS FURTHER STA TED THE SALESMEN HAD ALREADY LEFT THE COMPANY SO THEY COULD NOT BE PRODUCED SIN CE THE SALES WERE MADE BY THE SALESMEN AND THE ASSESSEE WAS NOT AWARE OF THE ADDRESSES OF THE PARTIES. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THESE EXPLANATIONS AND WAS OF THE VIEW THAT THESE ADVANCES WERE BOGUS AND ACCORDINGLY MADE ADDITION OF RS. 32,22,500/-. 3. ON APPEAL BEFORE THE LD. CIT(A), SIMILAR SUBMISS IONS WERE MADE AND IT WAS FURTHER EMPHASIZED THAT THE ASSESSEE HAD MAINTA INED PROPER STOCK REGISTER AND ISSUE OF GOODS WAS DONE THROUGH CHALLANS AND SU CH ISSUE WAS DULY RECORDED IN THE STOCK REGISTER. IT WAS FURTHER SUB MITTED THAT THE ADDITION U/S 68 COULD BE MADE ONLY IF THE ASSESSEE FAILS TO OFFER T HE EXPLANATION REGARDING THE NATURE OF CREDIT BEFORE THE ASSESSING OFFICER. IT WAS PROVED THAT THE SALES WERE MADE TO VARIOUS PARTIES. ON EXAMINATION OF THESE S UBMISSIONS THE FIRST APPELLATE AUTHORITY AGREED WITH THE SAME AND DELETE D THE ADDITION VIDE PARA 3.2 WHICH IS AS UNDER: I HAVE ANALYSED THE MATTER AND I FIND THAT THE ASS ESSEE IS MAINTAINING PROPER STOCK REGISTER. THE BOOKS OF ACCOUNT ARE ALSO AUDI TED. THE SALES MADE TO 37 PARTIES ON ACCOUNT OF WHICH ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ALREADY STAND INCLUDED IN THE SALES MADE BY THE ASS ESSEE. AS SUCH THE SALES MADE TO THESE PARTIES ARE ALREADY A PART OF THE CRE DIT SIDE OF THE P&L ACCOUNT OF THE APPELLANT. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE SALES MADE BY THE APPELLANT DO NOT FORM PART OF TOTAL SALES TURNO VER SHOWN BY IT. AS THE SALES MADE TO THESE PARTIES HAVE BEEN TAKEN INTO ACCOUNT WHILE DETERMINING THE TAXABLE INCOME OF THE APPELLANT, SECTION 68 OF THE ACT CANNOT BE INVOKED. SECTION 68 CAN BE INVOKED ONLY WHEN A SUM IS CREDIT ED IN THE BOOKS OF ACCOUNT AND EXPLANATION FOR THE SAME IS NOT SATISFACTORY AN D THE SAME IS NOT SHOWN AS INCOME. IN THE INSTANT CASE THE SALES MADE TO THESE PARTIES AS ALREADY STATED ARE A PART OF THE SALES TURNOVER, SO NO FURTHER ADD ITION CAN BE MADE EVEN IF THE PARTIES ARE NOT IDENTIFIABLE AS IT WILL AMOUNT TO D OUBLE TAXATION. ON THESE FACTS AND POSITION OF LAW, I DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. 4. BEFORE US, THE LD. DR FOR THE REVENUE CARRIED US THROUGH VARIOUS PARAGRAPHS OF THE ASSESSMENT ORDER AND POINTED OUT VARIOUS ELEMENTS OF 3 SUSPICIOUS NATURE. SHE ARGUED THAT IN ALL THE ACC OUNTS AMOUNTS VARYING BETWEEN RS. 15,000/- TO RS. 19,000/- HAVE BEEN ACCE PTED ON VARIOUS DATES IN CASH AND AMOUNTS UPTO RS. 1.00 LAKH HAVE BEEN ACCEP TED FROM ALL THE 37 PARTIES. THESE ACCOUNTS HAVE BEEN SECURED UP IN TH E MONTH OF MARCH BY SHOWING THE SALES. IF THE AMOUNT WAS RECEIVED TOWA RDS SALES THEN WHY BILLS WERE NOT ISSUED REGULARLY. IN ANY CASE THE ASSESSE E HAS MISERABLY FAILED TO FURNISH THE NAMES AND ADDRESSES OF VARIOUS CUSTOMER S WHICH FORTIFIED THE DOUBTS OF THE ASSESSING OFFICER. SHE FURTHER CONTE NDED THAT THE LD. CIT(A) HAS GIVEN RELIEF WITHOUT GIVING ANY SPECIFIC REASON BY MAKING GENERAL OBSERVATION. 5. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUBMITTED THAT THE ADVANCES WERE RECEIVED FROM THE CUSTOMERS. THE ASS ESSEE IS DISTRIBUTOR OF NIRMA CONSUMER CARE LTD. DURING THE SAID PERIOD NIR MA CONSUMER CARE LTD HAD INTRODUCED A SCHEME BY WHICH CERTAIN SAFARI BRI EF CASES WERE TO BE DISTRIBUTED FOR PRIZE ACHIEVED BY LOCAL SHOP-KEEPER S FOR ACHIEVING RS. 50,000 TO RS. 1.00 LAKH SALES AS PER DETAILED BELOW:- AMOUNT OF GOODS PURCHASED BY THE CUSTOMER PRIZE DISTRIBUTED PURCHASE BETWEEN 50,000 TO 75,000 SAFARI BRIEFCASE MODEL SC PENTIUM 52 PURCHASE BETWEEN 75,000 TO 1,00,000 SAFARI BRIEFCAS E MODEL SC PENTIUM 60 PURCHASE ABOVE RS. 1,00,000 SAFARI BRIEFCASE MODEL SC PENTIUM 68 HE CONTENDED THAT THE SALES WERE MADE BY THE SALESM EN OF THE COMPANY. THE ASSESSEE WAS NOT AWARE ABOUT THE WHEREABOUTS OF THE SHOPKEEPERS. HOWEVER, THE ASSESSEE WAS SHOWING THE SALES IN THE STOCK REG ISTER AND HAD ALSO ISSUED THE CHALLANS AGAINST VARIOUS PAYMENTS AND SUCH CHAL LANS WERE PRODUCED BEFORE THE ASSESSING OFFICER AND IN THIS REGARD HE REFERRE D TO PARA 4 OF THE ASSESSMENT ORDER WHICH CONTAINED REPLY. HE ALSO REFERRED TO P AGE 36 OF THE PAPER BOOK WHICH IS A COPY OF THE ORDER U/S 131(3) THROUGH WHI CH VARIOUS CHALLANS WERE IMPOUNDED BY THE DEPARTMENT AND THAT IS WHY THE SAM E COULD NOT BE AGAIN PRODUCED BEFORE THE LD. CIT(A). THE SALES COULD HAV E BEEN DULY VERIFIED FROM THE CHALLANS. 4 6. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. THE ASSESSING OFFICER HAS EXTRACTED A COPY OF 37 ACCOUNTS AND WE GIVE EXA MPLES OF TWO ACCOUNTS AS BELOW:- 1. ACCOUNT OF SHAM KRISHAN DATE VR. NO PARTICULARS DEBIT CREDIT BALANCE 1.4.05 0-0 TO BALANCE B/F A 0.00 30.12.05 C-10 BY CASH RECEIVED 18000.00 18000.00 2.1.06 C-10 BY CASH RECEIVED 17500.00 35500.00 3.1.06 C-10 BY CASH RECEIVED 19000.00 54500.00 5.1.06 C-10 BY CASH RECEIVED 16000.00 70500.00 7.1.06 C-10 BY CASH RECEIVED 17000.00 87500.00 2.3.06 C-10 BY CASH RECEIVED 3220.00 90720.00 2.3.06 SB2- 4638 TO BILL NO. 4638 DT. 2.3.2006 90720.00 90720.00 90720.00 0.00 2. ACCOUNT OF SHAM LAL & SONS DATE VR NO. PARTICULARS DEBIT CREDIT BALANCE 1.4.05 C-0 TO BALANCE B/F A 0.00 19.11.05 C-3 BY CASH RECEIVED 16000.00 16000.00 21.11.05 C-8 BY CASH RECEIVED 19000.00 35000.00 22.11.05 C-5 BY CASH RECEIVED 19000.00 54000.00 23.11.05 C-6 BY CASH RECEIVED 18000.00 72000.00 24.11.05 C-5 BY CASH RECEIVED 18000.00 90000.00 2.3.06 C-6 BY CASH RECEIVED 6525.00 96525.00 2.3.06 SB2- 4636 TO BILL NO. 4636 DT 2.3.2006 96525.00 96525.00 96525.00 0.00 THE ABOVE CLEARLY SHOWS THAT NATURE OF THE ACCOUNTS IS DEFINITELY DOUBTFUL BECAUSE THE ADVANCES HAVE BEEN RECEIVED ON VARIOUS DATES IN THE RANGE OF RS. 16000 TO RS. 19000 AND THE SAME HAVE BEEN SECURED U P ON 2.3.2006. SIMILAR PATTERN IS THERE IN ALL THE OTHER 35 ACCOUNTS. IT IS DIFFICULT TO BELIEVE THAT THE ASSESSEE WAS MAKING SALES WITHOUT KNOWING THE NAMES AND ADDRESSES OF THE CUSTOMERS. HOWEVER, AT THE SAME TIME IF THE SALES ARE MADE THROUGH CHALLANS AND THE CHALLANS WERE DULY RECORDED IN THE STOCK RE GISTER THEN THE SALES COULD HAVE BEEN VERIFIED FROM SUCH CHALLANS AND STOCK REG ISTER. COPY OF CHALLANS HAVE BEEN IMPOUNDED BY THE DEPARTMENT WHICH BECOMES CLEAR FROM THE ORDER PASSED U/S 131(3) OF THE ACT. COPY OF WHICH IS AVA ILABLE AT PAGE 36 WHICH READS AS UNDER: NAME OF THE ASSESSEE M/S NARESH AGGARWAL AGENCIE S (P) LTD. VIKAS NAGAR, CLOCK TOWER 5 LUDHIANA PAN AABCN 7957 R STATUS COMPANY DATE OF ORDER 26.12.2008 ORDER U/S 131(3) OF THE INCOME-TAX ACT, 1961 DURING THE COURSE OF HEARING ON 26.12.2008 IN THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2006-07, CHALLA NS OF THE ASSESSEE FIRM, 210 IN NUMBER, PRODUCED BY THE ASSESSEE, ARE IMPOUN DED U/S 131(3) OF THE INCOME-TAX ACT, 1961 AS THE SAME DO NOT APPEAR TO B E RELIABLE EVIDENCES AND MAY BE REQUIRED TO BE PRODUCED BEFORE THE APPELLATE AUTHORITIES. SD/- (M.P.S. MALHOTR A) DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-II. LUDHIA NA 7. INTERESTINGLY THE CHALLANS WERE IMPOUNDED ON 26. 12.2008 AND THE ASSESSMENT ORDER IS ALSO PASSED ON 26.12.2008 WHICH MEANS THAT THE ASSESSING OFFICER NEVER VERIFIED THE GENUINENESS OF THE CHALLANS. ONCE SUCH CHALLANS WERE IMPOUNDED THE ASSESSING OFFICER SHOUL D HAVE VERIFIED THE SAME. AT THE SAME TIME, THE LD. CIT(A) ALLOWED THE RELIEF BY MAKING GENERAL OBSERVATIONS WITHOUT ASKING FOR REMAND REPORT FROM THE ASSESSING OFFICER AFTER VERIFICATION OF THE CHALLANS. THEREFORE, IN THE I NTEREST OF THE JUSTICE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BA CK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE GENUINENESS OF THE CHALLANS AND THE SAME SHOULD BE EXAMINED WITH REFERENCE TO STOCK REGISTER AND THEN DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE A SSESSEE SHOULD BE GIVEN SUFFICIENT OPPORTUNITY. 8 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES ORDER PRONOUNCED ON 06.07. 2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06.07.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 6