Smt. Nandini B Lingegowda, Bangalore V. ITO, Bangalore

ITA 566/BANG/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5461 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G KAMALADHAR
• Assessee Lawyers: PRATHIBHA
• Keywords: Additional evidence; Reasonable cause
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.566/BANG/2015 ASSESSMENT YEAR : 2009-10 SMT. NANDINI B. LINGEGOWDA, NO. J-11, GROUND BLOCK, PIPELINE, MALLESWARAM, BENGALURU-560003. PAN : AHUPB 0455 H VS. THE INCOME TAX OFFICER, WARD - 9(4), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SMT. PRATHIBHA, ADVOCATE REVENUE BY : SHRI. G. KAMALADHAR, STANDING COUNSEL DATE OF HEARING : 23.3.2017 DATE OF PRONOUNCEMENT : 27 . 4 .201 7 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A), INTERALIA, ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT (APPEALS) ERRED IN PASSING THE ORD ER IN THE MANNER HE DID. 2. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN CONF IRMING THE ADDITION IN PARTLY OF RS.30,87,616/- IN RESPECT OF SUNDRY CREDI TORS SHOWN BY THE APPELLANT OBSERVING THAT THE APPELLANT HAS FAILED T O PROVE THE SAME ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 566/BANG/2015 PAGE 2 OF 10 3. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIATE D THAT DOCUMENTS AND BOOKS OF ACCOUNT HAVE BEEN DESTROYED DUE TO FIRE IN THE PREMISES OF THE APPELLANT AND HENCE THE APPELLA NT COULD NOT FURNISH THE SAME AND ALSO SUFFICIENT OPPORTUNITY WA S NOT GIVEN TO THE APPELLANT TO COLLECT THE DETAILS FROM THE TRADE CRE DITORS OF THE APPELLANT AND ACCORDINGLY THE DISALLOWANCE AS CONFIRMED BY TH E LEARNED CIT (APPEALS) IS BAD IN LAW. 4. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE PART DISALLOWANCE AS MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATI NG THE FACT THAT THE EXPENDITURE WAS INCURRED IN THE COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS AND HENCE NO PART OF TH E SAME WAS LIABLE TO BE DISALLOWED. 5. WITHOUT PREJUDICE, THE ADDITIONS/DISALLOWANCES AS SUSTAINED BY THE LEARNED CIT (APPEALS) IS ARBITRARY, EXCESSIVE AND O UGHT TO BE DELETED IN FULL. 6. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTIONS 234B, 234C & 234D OF THE ACT. 7. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 2. THOUGH VARIOUS GROUNDS ARE RAISED BUT THEY ARE R ELATED TO ADDITION OF RS.30,87,616/- IN RESPECT OF THREE CRED ITORS I.E., M/S. COLOURTECH PRODUCT PVT. LTD., M/S. ORSON CHEMI CALS AND M/S. S & S POLYMERS, EXCEPT GROUND NO. 1 RELATING T O LEVY OF INTEREST UNDER SECTION 234B, 234C & 234D OF THE ACT. 3. DURING THE COURSE OF HEARING, OUR ATTENTION WAS INVITED TO THE FACT THAT THE APPEAL IS FILED LATE BY 164 DAYS FOR WHICH AN APPLICATION OF CONDONATION FOR DELAY IS FILED. HAVING CAREFULL Y PERUSED THE CONTENTIONS IN THE APPLICATION OF CONDONATION, WE F IND THAT THERE IS A REASONABLE CAUSE FOR THE DELAY IN FILING THE APPEAL AND ACCORDINGLY WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARI NG. ITA NO. 566/BANG/2015 PAGE 3 OF 10 4. FACTS AND BRIEFS BORNE OUT FROM THE RECORD WITH REGARD TO ADDITIONS ARE THAT OUT OF THE CLAIM OF SUNDRY CREDI TORS IN THE BALANCE SHEET AT RS.2,60,98,778/- THE ASSESSEE HAD SUBMITTE D CONFIRMATION BEFORE THE AO OF ONLY RS.1,06,04,917/-. IN THE ABS ENCE OF EVIDENCE THE AO TREATED THE BALANCE OF RS.1,54,93,861/- AS U NEXPLAINED INCOME OF THE ASSESSEE. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION WITH REGARD TO THE D ISALLOWANCE THAT THE BOOKS OF ACCOUNTS WERE LOST IN FIRE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, DURING THE COURSE OF HEARING OF THE APPEAL, THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS FROM THE 11 SUNDRY CREDITORS. THESE CONFIRMATIONS WERE SENT TO THE AO FOR EXAMINATION IN REMAND PROCEEDINGS AND THE AO ALSO O BTAINED INDEPENDENT CONFIRMATIONS ALSO FROM THEM. OUT OF T HE 11 CREDITORS, THE AO FOUND THAT IN 8 CASES, THE TRANSACTION BALAN CE OUTSTANDING AS SHOWN BY THE ASSESSEE MATCHED WITH THE REPLIES OF T HE CREDITORS. ACCORDINGLY, THE CIT(A) DIRECTED THE AO TO ACCEPT T HOSE CREDITS. BUT WITH REGARD TO 3 CREDITORS I.E., M/S. COLOURTECH PR ODUCT PVT. LTD., M/S. ORSON CHEMICALS AND M/S. S & S POLYMERS, THE C IT(A) DID NOT ACCEPT THE EXPLANATIONS OF THE ASSESSES AND CONFIRM ED THE ADDITIONS OF RS.30,87,616/- AFTER ACCEPTING THE EXPLANATION I N PART. ITA NO. 566/BANG/2015 PAGE 4 OF 10 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE TRIBUNAL WITH THE SUBMISSION THAT BEFORE THE CIT(A) , THE ASSESSEE HAS FURNISHED THE CONFIRMATION LETTERS OF ALL THE T HREE CREDITORS WHO HAVE CONFIRMED THE OUTSTANDING CREDITS APPEARED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. WHILE EXAMINING THESE CR EDITS, THE AO HAS LOST SIGHT OF THE CORRECT FIGURES AND HE HAS TA KEN THE DIFFERENT FIGURES WHILE SUBMITTING THE REMAND REPORT. THE SA ID FIGURES WERE TAKEN BY THE CIT(A) WHILE ADJUDICATING THE ISSUE WI THOUT VERIFYING THE FIGURES GIVEN IN THE CONFIRMATION LETTERS FILED BY THE ASSESSEE. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE APPLICATION FILED FOR ADMISSIO N OF ADDITIONAL EVIDENCES BEFORE THE CIT(A), THE LIST OF THE SUNDRY CREDITORS AND THE CONFIRMATION LETTERS OF ALL THE CREDITORS WITH THE SUBMISSION THAT THE ASSESSEE HAS FILED THE CONFIRMATION OF 11 SUNDRY CR EDITORS, WITH RESPECT TO WHOM THE ADDITION WAS MADE BY THE AO UND ER SECTION 68 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE F URTHER INVITED OUR ATTENTION TO THE CONFIRMATION LETTERS OF M/S. COLOU RTECH PRODUCT PVT. LTD., APPEARING AT PAGE NO. 62 AND THE DETAILS OF T HE TRANSACTIONS APPEARING AT PAGE NOS. 63 TO 68 OF THE COMPILATION OF THE ASSESSEE. IN THE CONFIRMATION LETTER AND THE DETAILS OF TRANS ACTIONS, THE CLOSING BALANCE OR THE OUTSTANDING DUES APPEARS TO BE RS.32 ,92,585.97/- AGAINST THE CREDIT BALANCE OF RS.31,91,585/-. THOU GH THE FIGURE DID ITA NO. 566/BANG/2015 PAGE 5 OF 10 NOT MATCH, BUT THE OUTSTANDING DUES IN THE BOOKS OF ACCOUNTS OF THE CREDITOR IS MORE THAN THE AMOUNT SHOWN BY THE ASSES SEE. BUT ONLY FOR THESE REASONS, THE GENUINENESS OF THE CREDIT CA NNOT BE DOUBTED AND THE ADDITION OF THE WHOLE AMOUNT CANNOT BE MADE . 6. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER INV ITED OUR ATTENTION TO THE CONFIRMATION LETTER OF M/S. ORSON CHEMICALS APPEARING AT PAGE NO. 77, ACCORDING TO WHICH THE OUTSTANDING DUES FROM THE ASSESSEE WAS OF RS.8,94,368/-, AGAINST THE FIGURES SHOWN IN THE BOOKS AT RS.8,91,368/-. THEREFORE, THE SLIGHT DIFF ERENCE IN THE FIGURES DID NOT WARRANT THE ADDITION UNDER SECTION 68 OF TH E ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENT ION TO THE CONFIRMATION LETTER OF M/S. S & S POLYMERS APPEARIN G AT PAGE NO. 82 OF THE COMPILATION ACCORDING TO WHICH THE OUTSTANDI NG AMOUNT OF RS.3,53,123.84/- WAS SHOWN IN THE ACCOUNTS OF THE C REDITORS AGAINST THE AMOUNT OF RS.3,53,123/- SHOWN AS CREDIT BALANCE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS FILED A LL CONFIRMATION LETTERS BEFORE THE CIT(A). THE SAME WAS REFERRED T O THE AO FOR VERIFICATION BUT UNFORTUNATELY THE AO HAS MENTIONED THE INCORRECT FIGURES IN THE REMAND PROCEEDINGS WHICH WERE RELIED UPON BY THE CIT(A) WHILE MAKING THE ADDITIONS. SINCE THE ASSES SEE HAS DISCHARGED ITS ONUS LAID UPON IT, IT IS FOR THE REV ENUE TO BRING ON ITA NO. 566/BANG/2015 PAGE 6 OF 10 SOMETHING RECORD TO DISBELIEVE THE CONFIRMATION LET TERS FILED BY THE ASSESSEE. 7. THE LEARNED DR PLACED RELIANCE UPON THE ORDER OF THE CIT(A). 8. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UN DISPUTEDLY BEFORE THE AO, THE ASSESSEE COULD NOT FILE THE COMPLETE CONFIR MATION LETTERS OF ALL THE CREDITORS AND FOR WANT OF CONFIRMATION LETT ER, THE AO HAS MADE ADDITION OF RS.1,06,04,917/- BUT DURING THE PENDENC Y OF THE APPEAL BEFORE THE CIT(A), THE ASSESSEE FILED THE CONFIRMAT ION LETTERS OF THE REMAINING 11 CREDITORS AND ON RECEIPT OF THE CONFIR MATION LETTERS, THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE AO FURTHER EXAMINED THE CONFIRMATION LETTERS FILED BY THE ASSE SSEE AND ALSO BY CALLING INDEPENDENT CONFIRMATION LETTERS. HE ACCEP TED THE 8 CREDITS BUT MADE THE ADDITION ON THE REMAINING CREDITORS. THE CIT(A) ACCEPTED THE REMAND REPORT AND MADE ADDITION OF RS. 30,87,616/-. THE OBSERVATIONS OF THE CIT(A) WHILE MAKING ADDITIO NS ARE AS UNDER: ONLY IN THE FOLLOWING THREE CASES THE DETAILS VAR IED AS EVIDENT FROM THE FOLLOWING TABLE SL. NO. NAME OF CREDITOR CREDIT BALANCE CLAIMED BY ASSESSEE BALANCE CONFIRMED BY CREDITOR 1 COLOURTECH PRODUCT PVT. LTD., RS.31,91,585 RS.21,84,194 2 ORSON CHEMICALS RS.8,91,368 COMPANY CLOSED 3 S & S POLYMERS RS.3,53,123 RS.53,123 ITA NO. 566/BANG/2015 PAGE 7 OF 10 7. IN THE OPPORTUNITY PROVIDED FOR SUBMITTING REJOINDER TO THE AOS ENQUIRY REPORT THE APPELLANT MADE NO FURTHER SUBMISSIONS IN THIS MATTER. THUS, OUT OF T HE ADDITION OF RS.1,54,93,861 ONLY THE DIFFERENCE IN RESPECT OF THE ABOVE THREE PARTIES TOTALING RS.21,98,759 AND THE C REDIT LIABILITY OF RS.30,87,616 FOR WHICH CONFIRMATION CO ULD NOT PRODUCED EVEN DURING APPEAL STAGE (RS.1,54,93,861 RS.1,24,06,245) ARE CONFIRMED. THE GROUNDS IN THIS REGARD, THEREFORE, PARTLY SUCCEED. 9. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE HAS FILED THE PAPERBOOK AND INVITED OUR AT TENTION TO THE LETTER WRITTEN TO THE CIT(A) FOR THE ADMISSION OF A DDITIONAL EVIDENCES WHICH IS APPEARING AT PAGE NOS. 56 AND 57 OF THE CO MPILATION. ALONG WITH THE LETTER, THE ASSESSEE HAS FILED THE LIST OF CONFIRMATIONS OF SUNDRY CREDITORS BALANCE AS ON 31.03.2009. 10. WITH REGARD TO M/S. COLOURTECH PRODUCT PVT. LTD ., APPEARING AT PAGE NO. 62 OF THE COMPILATION, WE FIND THAT THE CR EDITOR HAS CONFIRMED THAT THE BALANCE OUTSTANDING AS ON 31.03. 2009 IS RS.32,92,585.97/-. ALONG WITH THE CONFIRMATIONS, T HE ASSESSEE HAS ALSO FILED THE STATEMENT OF ACCOUNT IN THE BOOKS OF M/S. COLOURTECH PRODUCT PVT. LTD., AND AS PER THE BOOKS OF ACCOUNTS , THE CLOSING CREDIT BALANCE IS ALSO RS.32,92,585.97/- AGAINST THE CREDI T BALANCE SHOWN IN THE BOOKS OF THE ASSESSEE OF RS. 31,91,585/-. THE REVENUE HAS NOT BROUGHT OUT ANYTHING ON RECORD TO DISBELIEVE THE CO NFIRMATIONS AND THE STATEMENT OF TRANSACTIONS IN THE BOOKS OF ACCOU NTS OF ITA NO. 566/BANG/2015 PAGE 8 OF 10 M/S. COLOURTECH PRODUCT PVT. LTD. THEY ARE DISBELI EVING THE CONFIRMATION LETTERS ON ACCOUNT OF SLIGHT VARIATION IN THE FIGURES. BUT ACCORDING TO US, THIS CANNOT BE A GROUND FOR REJECT ION OF CONFIRMATIONS AS IT IS A TRADE TRANSACTION. 11. WITH REGARD TO OUTSTANDING BALANCE OF M/S. ORSO N CHEMICALS, OUR ATTENTION IS INVITED TO THE CONFIRMATION LETTER OF M/S. ORSON CHEMICALS AVAILABLE AT PAGE NO. 77 IN WHICH IT HAS BEEN MENTIONED THAT M/S. ORSON CHEMICALS HAVE CONFIRMED THE AMOUNT OUTSTANDING AS PER RECORD IS RS.8,94,368/-, AGAINST THE CREDIT BALANCE OF RS.8,91,368/-. SINCE IT IS A TRADE CREDIT, THE GEN UINENESS OF CREDITS CANNOT BE DOUBTED ON ACCOUNT OF SLIGHT DIFFERENCE. OUR ATTENTION WAS ALSO INVITED TO THE CONFIRMATION OF M/S. S & S POLY MERS APPEARING AT PAGE NO. 82 OF THE COMPILATION ACCORDING TO WHICH T HE OUTSTANDING DUE IS RS.3,53,123/- AS ON 31.03.2009. IN THIS FI GURE THERE IS NO DIFFERENCE. SINCE THE ASSESSEE HAS DISCHARGED ITS ONUS BY FILING THE CONFIRMATION LETTERS OF ALL THE CREDITORS, THE ONUS IS UPON THE REVENUE TO BRING SOMETHING ON RECORD TO DISBELIEVE THE CONF IRMATION LETTERS FILED BY THE ASSESSEE. 12. WE HAVE CAREFULLY EXAMINED THE REMAND REPORT AN D THE ORDER OF THE CIT(A). WE ARE AT LOSS TO UNDERSTAND AS TO FROM WHERE THE AO HAS PICKED UP THE FIGURES MENTIONED IN THE REMAND R EPORT AND ITA NO. 566/BANG/2015 PAGE 9 OF 10 COGNIZANCE OF THE SAME WAS TAKEN BY THE CIT(A) WITH OUT VERIFYING THE FIGURES. SINCE THE ASSESSEE HAS FILED THE CONFIRMA TION LETTERS OF ALL THE CREDITORS AND THE REVENUE HAS NOT BROUGHT OUT A NYTHING ON RECORD TO DISBELIEVE THE CONFIRMATION LETTERS FILED BY THE ASSESSEE, WE FIND NO JUSTIFICATION IN THE ADDITION MADE BY THE AO. ON A CCOUNT OF SLIGHT DIFFERENCE IN THE FIGURES, THE CREDIT BALANCE SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE DISBELIEVED. WE THEREFORE FIND NO MERIT IN THE ADDITIONS AND WE ACCORDINGLY SET AS IDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITIONS. THE OTHER GROUND OF APPEAL IS WITH REGARD TO CHARGEABILITY OF INTEREST UNDER SECTION 2 34B, 234C AND 234D. SINCE THIS GROUND IS CONSEQUENTIAL IN NATURE , IT NEEDS NO INDEPENDENT ADJUDICATION. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2017. SD/- SD/- ( INTURI RAMA RAO ) ( SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE. DATED:27 TH APRIL, 2017. /NSHYLU/ ITA NO. 566/BANG/2015 PAGE 10 OF 10 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.