Prem Industries, Ranchi V. ACIT,Circle-3, Ranchi

ITA 52/RAN/2019

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The case involves Prem Industries, a partnership firm engaged in wholesale dealing of sanitary ware, pipes, and fittings, which faced scrutiny following a survey under section 133A of the Income-tax Act, 1961. The survey revealed discrepancies including excess stock, leading to additions in the assessee's income for the assessment year 2015-16. The primary issues contested were the addition of Rs. 91,81,313 for unaccounted stock and Rs. 2,56,59,658 for unexplained credits from sundry creditors. The Income Tax Officer (ITO) made these additions based on the survey findings and subsequent lack of satisfactory explanations or confirmations from the creditors. The Commissioner of Income-tax (Appeals) upheld these additions, which were then challenged before the Tribunal. The Tribunal found that the lower authorities had not adequately considered the assessee's explanations and evidence, leading to the decision to remand the issues back to the CIT(A) for a detailed examination.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 113039 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 15-11-2022
• Assessment Year: misc
• Appeal Filed On: 03-02-2019
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Reasonable cause
• Section: 69; 143(3); 142(1); 133A; 133(6); 250; 143(2); 48

Judgement Text

1. ITA No 52/Ran/2019 AY 2015-16 Prem Industries IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH VIRTUAL HEARING AT ITAT KOLKATA Before: Shri Manish Borad, Accountant Member and Shri Sonjoy Sarma, Judicial Member आयकर अपील सं.य/ ITA No. 52/Ran/19 Assessment Year: 2015-16 Prem Industries C/o Sri Vinay Kumar Jalan M/s. O.P Jalan & Associates Consultants LLP 48 Cart Sarat Road, Upper Bazar, Ranchi- 834001. बनाम V/s. Assistant Commissioner of Income- tax(ACIT),Circle-3, Central Revenue Building(Annexe), Ranchi-834001 PAN: AANFPO 501A अपीलाथ /Appellant .. यथ /Respondent अपीलाथ क ओर से/ By Appellant/Assessee Shri Vinay Jalan, Advocate, Ld. AR यथ क ओर से/ By Respondent/Department Rinku Singh, CIT/ Ld. DR स ु नवाई क तार ख/Date of Hearing 16-11-2022 घोषणा क तार ख/ Date of Pronouncement 20-12 -2022 आदेश /O R D E R PER MANISH BORAD, AM This appeal of the assessee for the assessment years 2015-16 is directed against the order dt. 05-12-2018 passed u/s. 250 of the Income-tax Act, 1961 [ hereinafter, referred to as ‘the Act’] by the ld. 2. ITA No 52/Ran/2019 AY 2015-16 Prem Industries Commissioner of Income-tax, Appeals [ in short, hereafter referred to as ‘the ‘ld. CIT(A), Ranchi, Jharkhand, which is arising from the assessment order dt. 28-12-2017 passed u/s. 143(3) of the Income-tax Act by the Assessing Officer (AO), A.C.I.T, Circle-3, Ranchi. 2. The assessee has raised the following common grounds of appeal for the AY 2015-16:- 1. Under the facts and circumstances of the case the ld. CIT(A) erred in confirming the addition so made by the Ld. Assessing Officer amounting to Rs. 91,81,313/- with respect to the difference in stock determined during the survey. 2.Under the facts and circumstances of the case, the ld. CIT(A) erred in confirming the addition so made by the Ld. Assessing Officer amounting to Rs. 2,56,59658/- as unexplained credit for those creditors who did not confirm. 3. Brief facts of the case are that the assessee is a partnership firm and whole sale dealers in sanitary ware, pipes & fittings. Survey proceedings were carried out u/s. 133A of the Act on 18-11-2014. Certain discrepancies including excess stock was found. Thereafter, the assessee filed ITR(Income Tax Return) on 30-09-2015 for the AY 2015- 16 declaring income at Rs. 68,05,870/-, which included an amount of Rs.60 lacs admitted as undisclosed income on account of excess stock found during the course of survey. After the case being selected for scrutiny followed by serving of valid notices u/s. 143(2) & 142(1) of the Act the ld. AO carried out the assessment proceedings. Further the submissions were filed reconciling the excess stock qua surrender of stock shown in the ITR(Income Tax Return), which was mainly on account of not considering some of the purchases made before 18-11- 3. ITA No 52/Ran/2019 AY 2015-16 Prem Industries 2014. The ld. AO considered the submissions of the assessee but did not find it to be acceptable and made addition of Rs. 91,81,013/- towards unaccounted investments made in stock u/s. 69 of the Act. The ld. AO also enquired about sundry creditors balance of Rs.3,58,03,103/-. Letters were sent u/s. 133(6) of the Act but since the case was getting time barred only few confirmations were received. After considering the same for the remaining balance of Rs. 2,56,59,658/- the ld. AO made addition towards unexplained credit at Rs. 2,56,59,658/-. Income assessed at Rs. 4,16,46,541/-. 4. Aggrieved, the assessee preferred appeal before ld. CIT(A), but failed to succeed. 5. Aggrieved, now the assessee is in appeal before this Tribunal challenging the addition(s) confirmed by the ld. CIT(A). 6. The Ld. Counsel for the assessee referred to the detailed paper book containing various details including purchase invoices not considered during the course of survey, details of sundry creditors and their confirmations. It was submitted that the ld. CIT(A) did not consider these details filed during the course of appellate proceedings. 7. On the other hand, the Ld. Departmental Representative vehemently argued supporting the orders of both the lower authorities. 8. We have heard the rival contentions and perused the records placed before us. The assessee has raised two rounds of appeal in which ground no. 1 relates to addition for difference in stock determined at Rs. 91,81,313/- during the survey and second ground relates to unexplained creditors at Rs. 2,56,59,658/-. Before adverting to the fact of the case we first would like to go through the findings of the ld. CIT(A) on the two issues raised before us which reads as follows:- 4. ITA No 52/Ran/2019 AY 2015-16 Prem Industries 9. Regarding the addition of Rs.91,81,313/- the excess stock the ld. CIT(A) observed as under:- “6.3 As can be seen from the above, the addition has been made on account of difference in stock after confronting the Appellant during the Survey proceedings u/s. 133A as well as during the appellate proceedings. The Authorised Representative furnished the written submission and tried to explain the difference in stock. The contention of the Authorised Representative is not acceptable as it appears to be after thought and the Appellant ought to have come out with this position with respect to stock during the statutory Survey proceedings as well as the assessment proceedings. The Appellant itself admitted Rs. 60,00,000/- as the additional income on account stock difference although the total stock difference was Rs. 1,51,81,313/-. There is no basis at all for the admission of only Rs. 60,00,000/- out of Rs. 1,51,81,313/-. In view of these reasons, I do not find any reason to interfere with the findings of the Assessing Officer. Therefore, the addition of Rs. 91,81,313/- is hereby confirmed. Accordingly, this of appeal is dismissed”. 10. As regards the addition for unexplained sundry creditors of Rs.2,56,59,658/- the findings of the ld. CIT(A) are as under:- “7.3 As can be seen from the above, the addition has been made on account of enquiries from sundry creditors and thereafter wherever the confirmation is not received, the Assessing Officer has taken adverse inference and added Rs. 2,56,59,658/-. During the appellate proceedings, the Authorised Representative has furnished certain evidences which are separately dealt with in Para 5 above. As stated therein, these new evidences are not admitted. As the third party have not confirmed the balance before the Assessing Officer during the assessment proceedings, this goes to suggest that the liabilities have either ceased or have been remitted by the creditors. Therefore, as per the provisions of Section 41(1) the Assessing Officer was justified in making the addition Rs. 2,56,59,658/-. In view of these reasons, I do not find any reason to interfere with the findings of the Assessing Officer. Therefore, the addition of Rs. 2,56,59,658/- is hereby confirmed. Accordingly this ground of appeal is dismissed.” 5. ITA No 52/Ran/2019 AY 2015-16 Prem Industries 11. From perusal of the above findings of the ld. CIT(A) it prima facie indicates that the assessee has filed various details to explain the difference amount of Rs. 91,81,313/-( Excess stock found during the course of survey Rs. 151,81,313 less undisclosed income admitted at Rs. 60,00,000/-). The assessee also filed various details including purchase invoice for the purchases made before the survey date i.e. 18- 11-2014 but were not considered neither by the survey team nor by the lower authorities. We find that the ld. CIT(A) has out rightly denied to go through the details making a general observation that they appear to be an afterthought. Similarly, regarding the issue of unexplained creditors, though the ld. AR furnished certain evidences, but they were not admitted. The ld. CIT(A) even failed to take note of the fact during the course of assessment proceedings the ld. AO issued letters u/s. 133(6) of the Act and without waiting for the reply of those letters on account of the reasons that assessment proceedings were getting time barred, only considered the confirmation letters received before passing of the assessment order and for the remaining confirmations the assessee did not get any opportunity to explain the sundry creditors. Even ld. CIT(A) neither admitted the documents nor made any comments on the facts of the case and rejected the assessee’s submissions in a cryptic manner. 12. Under these given facts and circumstances of the case and considering the principle of natural justice and being fair to both the parties, we are of the considered view that both the issues raised on merits needs to be restored to the ld. CIT(A) for afresh adjudication and to pass a speaking order after considering/going through the evidences filed by the assessee and if necessary to call remand report from the ld. AO on such documents and after considering the same and providing 6. ITA No 52/Ran/2019 AY 2015-16 Prem Industries reasonable opportunity of being heard should decide in accordance with law. The assessee is also directed to remain vigilant and to furnish necessary evidence as and when called for and not to seek any adjournment unless and otherwise required for reasonable cause. Thus, all the grounds raised by the assessee are allowed for statistical purpose. 13. In the result, the appeal of assessee is allowed for statistical purpose. Order pronounced in the open court 20-12-2022 Sd/- Sd/- (SONJOY SARMA) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated :20 -12 -2022 **PP/SPS आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1.अपीलाथ /Appellant/Assessee: Prem Industries, C/o Sri Vinay Kumar Jalan, M/s. O.P Jalan & Associates Consultants LLP 48 Cart Sarat Road, Upper Bazar, Ranchi-834001. 2. यथ /Respondent/Department: Assistant Commissioner of Income- tax(ACIT),Circle-3, Central Revenue Building(Annexe), Ranchi-834001 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त- अपील / CIT (A) 5. वभागीय त न ध, आयकर अपील य अ धकरण कोलकाता / DR, ITAT, Ranchi 6.गाड फाइल/Guardfile. By order/आदेश से, /True Copy/ Assistant Registrar ITAT, Kolkata