ACIT, New Delhi V. M/s N.R. Digital Software P. Ltd., New Delhi

ITA 5868/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52821 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-10-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 23-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 5868(DEL)/2010 ASSESSMENT YEAR: 2001-02 ASSTT. COMMISSIONER OF INCOME M/S N .R.DIGITAL SOFTWARE TAX, CIRCLE 13(1), NEW DELHI. VS. P. L TD., 2281, SECTOR- 2, VASANT KUNJ, NEW DELHI. PAN: AABCN7800N (APPELLANT) (RESPON DENT) APPELLANT BY : SHRI R.S. NEGI, SR. DR RESPONDENT BY: SH RI R.S. SINGHVI, C.A. DATE OF HEARING : 11.10.2011 DATE OF PRONOUNCEMENT: 14.10.2011. ORDER PER K.G. BANSAL : AM THIS CASE HAS COME UP BEFORE THE TRIBUNAL FOR THE SECOND TIME. IN THE FIRST ORDER PASSED ON 22.07.2005, TWO MATTE RS WERE RESTORED TO THE FILE OF THE AO FOR DETERMINATION. THE FIRST ISSUE WAS REGARDING TAXATION OF PEAK AMOUNT INVOLVED IN PURCHASES FROM BOGUS PA RTIES. THE SECOND ISSUE WAS IN REGARD TO UNEXPLAINED CREDIT IN THE NAME O F AMTEK SYSTEMS & COMPUTERS (AMTEK FOR SHORT). THE AO MADE ADDIT IONS OF RS. 36.66 LAKH AND RS. 10.05 LAKH RESPECTIVELY IN THE FRESH ASS ESSMENT FRAMED ON 29.12.2006. BOTH THESE ADDITIONS ARE SUBJECT MATT ER OF APPEAL. ITA NO. 5868(DEL)/2010 2 2. IN CONNECTION WITH THE ADDITION OF RS. 36.66 LA KH IN RESPECT OF PEAK AMOUNT OF PURCHASES, THE AO REPRODUCED THE OBS ERVATIONS OF THE TRIBUNAL MADE IN THE FIRST ORDER. IT HAD BEEN OB SERVED THAT :- .AS THE PAYMENT MADE FOR THE PURCHASES HAS BEE N RECEIVED BACK, AND THE SUPPLIERS HAVE NOT BEEN FOUND TRACEABLE, THE PURCHASES FROM THESE SUPPLIERS H AVE RIGHTLY BEEN HELD AS NOT GENUINE. BUT SINCE THE SALES HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER WHO FOUND THEM GE NUINE AND ACCEPTABLE, IT IS OBVIOUS THAT THE ASSESSEE MUS T HAVE PURCHASES FROM SOME OTHER PARTIES UNACCOUNTED. IT IS ON ACCOUNT OF THESE UNACCOUNTED PURCHASES, THAT THE ADDITION HAS BEEN MADE U/S 69. IN THESE CIRCUMSTANCES, WE AG REE WITH THE LOWER AUTHORITIES THAT THE PROVISIONS OF SECTION 69 ARE ATTRACTED. ITAT FURTHER OBSERVED THAT END USE OF MONEY REC EIVED BACK FROM SUPPLIERS HAS NOT BEEN LOOKED INTO. WHETHER T HE MONEY RECEIVED BACK WAS UTILIZED FOR SOME OTHER PURPOS E OR IT WAS AVAILABLE FOR MAKING PURCHASES AND TO THAT EXTE NT HAS NOT BEEN EXAMINED. IT MAY ALSO PROBABLY REQUIRE WOR KING OF PEAK INVESTMENT IN PURCHASES AND IN THE LIGHT OF THESE OBSERVATIONS DIRECTED TO EXAMINE THE ISSUE AFRESH. 2.1 AFTER CONSIDERING THE MATTER, IT WAS CONCLUDED THAT THE ASSESSEE HAD NOT MADE PURCHASES FROM THE PARTIES WHOSE NAMES W ERE RECORDED IN THE BOOKS OF ACCOUNT AND THAT IT PURCHASED SOFTWARE IN CASH FROM THE UNACCOUNTED FUNDS FROM GREY MARKET. THEREAFTER, THE BILLS WERE OBTAINED IN THE NAME OF NON-EXISTENT SUPPLIERS AND PAYMENT S WERE MADE BY CHEQUES. THE AMOUNT RECEIVED FROM SUCH NON-EXIST ENT PARTIES WAS PAID TO ITA NO. 5868(DEL)/2010 3 THE SUPPLIERS IN THE GREY MARKET. THUS, A CHA IN OF TRANSACTION WAS UNDERTAKEN. THEREFORE, THE UNACCOUNTED INVESTMENT HAD TO BE WORKED OUT AS THE PEAK AMOUNT INVOLVED IN THE TRANSACTION. IN THIS CONNECTION, IT HAS BEEN NOTICED THAT THE PEAK WORKS OUT TO RS. 36 .66 LAKH ON 01.04.2000. ACCORDINGLY, THIS AMOUNT HAD BEEN BROUGHT TO TAX U /S 69 AS UNACCOUNTED MONEY AVAILABLE WITH THE ASSESSEE AS ON 01.04.2 000. 2.2 IT WAS REPRESENTED BEFORE THE LD. CIT(APPEALS ) THAT THE AFORESAID AMOUNT OF RS. 36.66 LAKH DOES NOT HAVE ANY NEXUS WITH THE PURCHASES OF THIS YEAR. THIS AMOUNT HAS BEEN BROUGHT FORWARD FROM EARLIER YEARS. THEREFORE, NOTHING COULD BE BROUGHT TO TAX IN THI S YEAR. THE LD. CIT(APPEALS) CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE HER. IT IS MENTIONED THAT THE PEAK AMOUNT WAS THE OPENING BALANCE BROUGHT FORWARD FROM THE PRECEDING YEAR. THERE FORE, IT MAY BE RELEVANT FOR THE PROCEEDINGS OF THE PRECEDING YEAR BUT TH ERE IS NO CASE OF ADDITION UNDER THE YEAR UNDER REFERENCE. 2.3 BEFORE US, THE LD. DR REFERRED TO THE FINDING S OF THE AO THAT THE PEAK OF UNACCOUNTED INVESTMENT BY WAY OF PURCHAS ES AMOUNTED TO RS. 36.66 LAKH ON 01.04.2000. THEREFORE, THE AO W AS JUSTIFIED IN ADDING ITA NO. 5868(DEL)/2010 4 THIS AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUN T DOES NOT PERTAIN TO PURCHASES OF THIS YEAR AND IT HAS BEEN BROUGHT FORWARD FROM THE EARLIER YEAR. ACCORDINGLY, IT HAS BEEN ARGUED THAT NO AMOUNT COULD BE ADDED TO THE INCOME AS THE ASSESSEE WAS IN POSSESSION OF SUFFICIENT CASH TO MAKE PURCHASES IN THIS YEAR. 2.4 WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. FROM THE IMPUGNED ORDER, IT IS CLEAR THAT THE LD. CIT(APPEALS) EXAMINED THE PEAK STATEMENT OF A NUMBER OF Y EARS AND FOUND THAT THE AMOUNT OF RS. 36.66 LAKH PERTAINS TO THE EARLIER YEAR. THIS AMOUNT HAS NOT BEEN ADDED TO THE INCOME OF THAT YEAR. THEREFORE , IT CANNOT BE SAID THAT THIS AMOUNT WAS AVAILABLE TO THE ASSESSEE IN THE BOOKS. THE ADDITION U/S 69 IS BASED ON THE UNACCOUNTED INVESTMENT FOUND TO HAVE BEEN MADE IN THE FINANCIAL YEAR, WHICH COINCIDES WITH THE P REVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR. THE TRIBUNAL HAD RECORDED A CLE AR FINDING THAT PURCHASES OF AFORESAID KIND HAVE BEEN DEBITED IN THE BOOKS OF THIS YEAR ALSO. THEREFORE, WHAT IS TO BE FOUND OUT IS THE PEAK AMOUNT INVOLVED IN BOGUS BILLS OF THIS YEAR. THE ASSESSEE IS NOT ENTITLED TO CLAIM THE SET OFF OF RS. 36.66 LAKH FROM THE AMOUNT OF THE PEAK OF UNAC COUNTED INVESTMENT MADE ITA NO. 5868(DEL)/2010 5 IN THIS YEAR. ACCORDINGLY, WE ARE OF THE VIEW THAT IN TERMS OF THE FIRST ORDER OF THE TRIBUNAL, THE ONLY MATTER WHICH HAD LOOKED INTO IS REGARDING THE PEAK AMOUNT OF THIS YEAR. THUS, THE PEAK AMOU NT OF THIS YEAR IS LIABLE TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPUTED FOR THIS YEAR. THEREFORE, IT IS HELD THAT THE LD. CIT(APPEALS) WAS NOT RIGHT IN DELETING THE WHOLE OF THE ADDITION BUT SHOULD HAVE REST RICTED HERSELF TO THE PEAK AMOUNT OF THIS YEAR, WHICH IS OBVIOUSLY TAXABLE AS PER THE EXISTING ORDER OF THE TRIBUNAL. THE AO IS DIRECTED TO WORK OU T THE PEAK AMOUNT OF THIS YEAR AND BRING THIS AMOUNT TO TAX IN PLACE OF AM OUNT OF RS. 36.66 LAKH. IN VIEW OF THIS FINDING, GROUND NOS. 1 AND 2 ARE P ARTLY ALLOWED. 3. IN REGARD TO THE SECOND ISSUE, THE AO EXAMINE D THE ACCOUNT OF M/S AMTEK AND FOUND THAT A SUM OF RS. 10.05 LAKH HAS BEEN CREDITED IN THE MONTH OF MARCH, 2001. HE ADDED THIS AMOUNT TO T HE TOTAL INCOME BY MAKING FOLLOWING OBSERVATIONS:- DURING THE COURSE OF PROCEEDINGS, COPY OF LEDGER ACCOUNT OF M/S AMTEK SYSTEMS & COMPUTERS WAS PRODUCED WHICH REVEALS AS UNDER:- PERIOD DEBIT AMOUNT CREDIT AMOUN T CUMULATIVE BALANCE JANUARY CR 30,58,400/- FEBRUARY 26,68,000 CR 3,90,400/- ITA NO. 5868(DEL)/2010 6 MARCH 13,61,000 10,05,0 00 CR 34,400/- ASSESSEE CLAIMED THAT RS. 10,05,000/- RECEIVED IN THE MONTH OF MARCH, 2001 WERE OUT OF ADVANCES GIVEN IN MON TH OF FEBRUARY, 2001 RS. 26,68,000/-. FROM THE COPY OF ACCOUNT IT IS CLEAR THAT AFTER MAKING PAYMENT OF RS. 26,68,0 00/- THERE WAS STILL CREDIT BALANCE OF RS. 3,90,400/-. THERE FORE, QUESTION OF ANY REFUND DOES NOT ARISE. MOREOVER, IN THE BA NK STATEMENT, THERE WERE NO PAYMENTS DURING THE MONTH OF MAR CH, 2001 TO M/S AMTEK SYSTEMS & COMPUTERS. HENCE, RECEIPT O F RS. 10,05,000/- IS CONTINUED TO BE UNEXPLAINED CAS H CREDIT AND ADDITION MADE U/S 68 OF THE ACT WAS CORRECT. 3.1 IT WAS REPRESENTED BEFORE THE LD. CIT(APPEAL S) THAT ADVANCES WERE MADE TO AMTEK IN THE MONTH OF FEBRUARY AND MARCH, 2001. THIS IS A RUNNING ACCOUNT AND FROM THIS ACCOUNT AN AMOUNT OF RS. 10.05 LAKH WAS REFUNDED. THE AO HAS ACCEPTED THE CORRECTNESS OF OTHER AMOUNTS AND, THEREFORE, HE OUGHT TO HAVE ACCEPTED THE CORRECTN ESS OF THIS AMOUNT ALSO. FURTHER, ALL THE TRANSACTIONS HAVE BEEN UNDERTA KEN THROUGH BANKING CHANNEL. THE LD. CIT(APPEALS) CONSIDERED THE FA CTS OF THE CASE AND SUBMISSIONS MADE BEFORE HER. IT IS MENTIONED THA T CHEQUES OF RS.25.29 LAKH AND RS. 12.00 LAKH WERE GIVEN TO AMTEK ON 07.02.2001 WHILE AMOUNTS OF RS. 5.05 LAKH AND RS. 5.00 LAKH HAVE B EEN RECEIVED ON 27.03.2001 AND 31.03.2001 RESPECTIVELY. THE TRI BUNAL HAD RECORDED A FINDING THAT SINCE BOTH PAYMENTS AND RECEIPTS ARE BY WAY OF CHEQUES, THEREFORE, EVEN IF THE PARTY IS NOT FOUND GENUI NE, IT WILL BE A CASE OF ITA NO. 5868(DEL)/2010 7 PAYMENT BY SELF AND RECEIPT BY ITSELF. THE AO HAD NOT RECORDED ANY FINDING ON THIS ASPECT. THEREFORE, IT HAS BEEN HELD THAT THERE WAS NO OCCASION TO MAKE ANY ADDITION IN RESPECT OF CREDI T OF RS. 10.05 LAKH. 3.2 BEFORE US, THE LD. DR SUBMITTED THAT AMTEK I S ONE OF THE VENDORS, WHO COULD NOT BE TRACED. THEREFORE, IT IS A BOG US PARTY. THERE ARE ALSO SOME DIFFERENCES IN THE AMOUNTS BUT FOR WHICH THE ACCOUNT IS CORRECT. ON THE OTHER HAND, THE LD. COUNSEL SUBMITTED THAT EVEN IF THIS ACCOUNT IS TAKEN TO BE THE ACCOUNT OF THE ASSESSEE ITSELF, NO AD DITION COULD BE MADE BECAUSE OF PRIOR CREDITS OF HIGHER AMOUNT. THUS , AT BEST IT COULD BE A CASE OF KEEPING THE MONEY APART AND BRINGING IT TO THE BOOKS AS AND WHEN REQUIRED. 3.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. FROM THE ACCOUNTS REPRODUCED ABOVE , IT IS CLEAR THAT THERE ARE DEBITS PRIOR TO THE IMPUGNED CREDIT OF RS. 10.0 5 LAKH. ALL OTHER ENTRIES HAVE BEEN TAKEN TO BE CORRECT. THEREFORE, THERE IS NO NEED TO DOUBT THIS ENTRY ALSO. FURTHER, EVEN IF THIS ENTRY IS DOUBT ED, THE EXPLANATION IS THAT THE MONEY WAS RECEIVED OUT OF ADVANCES MADE E ARLIER. IT IS ALSO EQUALLY TRUE IF THE ACCOUNT IS BOGUS BECAUSE IN T HAT CASE THE ADVANCES WILL ITA NO. 5868(DEL)/2010 8 HAVE TO BE TAKEN TO SELF OUT OF WHICH THIS MONE Y HAS BEEN RECEIVED. THEREFORE, SEEN FROM ANY ANGLE, THERE IS NO CASE OF MAKING ADDITION OF RS. 10.05 LAKH. THE RESULT OF THIS DISCUSSION IS THAT GROUND NOS. 3 AND 4 ARE ALSO DISMISSED. 4. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA- 14/10/2011 COPY OF THE ORDER FORWARDED TO:- N R DIGITAL SOFTWARE P. LTD., NEW DELHI. ACIT, CIRCLE 13(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.