ITO, Gwalior V. Smt. Poonam B.Kisnani, Gwalior

ITA 61/AGR/2005

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7693 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 04-02-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOHAIL AKHTAR
• Assessee Lawyers: P K SEHGAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice
• Section: 133(6); 131; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 61/AGRA/2005 ASSTT. YEAR : 2001-02 INCOME-TAX OFFICER, VS. SMT. POONAM B. KISHNANI, WARD 1(1), GWALIOR. L/H SHRI BANSIDHAR K. KISHANA NI, GANDHI MARKET, GWALIOR. (PAN : AEBPK 7470 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SOHAIL AKHTAR, JR. DR RESPONDENT BY : SHRI P.K. SEHGAL, ADVOCATE. DATE OF HEARING : 04.04.2012 DATE OF PRONOUNCEMENT OF ORDER : 20.04.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 12.10.2004 FOR THE ASSESSMENT YEAR 20 01-02. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW : 3. ON GROUND NO. 1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.2,80,628/-/- OUT OF EXPENSES OF DYEING, BLEACHIN G, PRINTING AND JOB WORK. ITA NO. 61/AGRA/2005 2 ACCORDING TO THE AO, THESE EXPENSES COULD NOT BE VE RIFIED AND ACCORDINGLY, HE REJECTED THE BOOK RESULTS U/S. 145 OF THE IT AC T AND DISALLOWED 10% OF THE EXPENSES OUT OF THE SAME. IT WAS SUBMITTED BEFO RE THE LD. CIT(A) THAT ALL THE BOOKS OF ACCOUNT WERE WITH THE AO AND HE COULD HAVE VERIFIED THE DETAILS OF THESE EXPENSES FROM THE BOOKS OF ACCOUNT . THE ASSESSEE OBJECTED TO THE REASONS RAISED BY THE AO FOR THE PURPOSE OF MAKING THE ADDITION. THE LD. CIT(A) CONSIDERING THE MATERIAL ON RECORD FOUND THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF AC COUNT AND QUANTITATIVE DETAILS WHICH WERE PRODUCED BEFORE HIM. THE LD. CIT (A) WAS, THEREFORE, OF THE VIEW THAT ADHOC DISALLOWANCE OF 10% OUT OF THE EXPENSES IS UNJUSTIFIED AND, ACCORDINGLY, DELETED THE ADDITION. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE AO NOTED TOTAL SALES, GROSS PROFIT, GROSS PROFIT RATE AND NET PROFIT RATE IN THE ASSESS MENT ORDER AND ADMITTEDLY, THE SALES EXCEEDED AS COMPARED TO THE LAST YEAR. TH E NET PROFIT RATE OF ASSESSEE IS SAME AS COMPARED TO THE EARLIER YEAR AN D IN SUM AND SUBSTANCE, THE TOTAL PROFIT OF ASSESSEE HAS BEEN ACCEPTED. THE REFORE, ADHOC DISALLOWANCE OF THE EXPENDITURE IS UNJUSTIFIED. THE LD. CIT(A) O N PROPER VERIFICATION OF ITA NO. 61/AGRA/2005 3 FACTS RIGHTLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 5. ON GROUND NO. 2, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.19833/- OUT OF THE TELEPHONE, PETROL AND CAR EXP ENSES. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE ABOVE EXPENDITURE WITHOUT POINTING OUT ANY INADMISSIBLE I TEM. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITION. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITI ON. THE AO HAS SPECIFICALLY NOTED IN THE ASSESSMENT ORDER THAT THERE IS POSSIBI LITY OF THESE EXPENSES INCURRED BY THE ASSESSEE FOR PERSONAL PURPOSES. THE DETAILS PRODUCED BEFORE THE AO WAS NOT SUBJECTED TO VERIFICATION. THEREFORE , THE AO DISALLOWED 1/6 TH OF THE EXPENSES ON ACCOUNT OF PERSONAL USER OF THES E EXPENSES BY THE ASSESSEE. THE ASSESSEE DID NOT PRODUCE ANY LOG BOOK AND DETAILS OF THESE EXPENSES EITHER BEFORE THE AO OR CIT(A). THEREFORE, IT WAS DIFFICULT TO ASCERTAIN THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. COUNSEL FOR THE ASSESS EE IN ALTERNATE CONTENTION, SUBMITTED THAT THE ADDITION MADE ON ACCOUNT OF DISA LLOWANCE OF 1/6 TH IS ITA NO. 61/AGRA/2005 4 EXCESSIVE AND SUBMITTED THAT 1/10 TH OF THE EXPENSES MAY BE DISALLOWED. CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND NATURE OF THE BUSINESS OF THE ASSESSEE, IT WOULD BE REASONABL E AND APPROPRIATE TO CONSIDER THE DISALLOWANCE OF THESE EXPENSES AT 1/10 TH OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE LD. CIT(A) FOR DELETING THE ADDITION AND RESTORE THE OR DER OF THE AO WITH THE DIRECTION TO DISALLOW 1/10 TH INSTEAD OF 1/16 TH OF THE EXPENDITURE OUT OF THE TOTAL CLAIM MADE BY THE ASSESSEE. THIS GROUND OF AP PEAL OF THE REVENUE IS PARTLY ALLOWED. 7. ON GROUND NO. 3, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.2,38,320/- U/S. 40A(2)(B) OF THE IT ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT SALARY AND INTEREST WERE GIVEN INTER ALIA TO THE FOLLOWING RELATIVES : (I). SMT. POONAM B. KISHNANI (II). SHRI RAMESH B. KISHNANI (III). SHRI KANHAIYALAL KISHNANI (IV). KU. RITU KISHNAMI THE AO FOUND THAT INTEREST AND SALARY RECEIVED BY T HESE PERSONS WERE DEPOSITED IN THEIR CAPITAL ACCOUNT. HE WAS OF THE V IEW THAT SINCE THE SALARY AND INTEREST WERE DEPOSITED IN THE CAPITAL ACCOUNT OF THE PERSON CONCERNED, IT WAS NOT POSSIBLE FOR THEM TO MAKE ANY EXPENDITURE F OR HOUSEHOLD NEEDS AND ITA NO. 61/AGRA/2005 5 FOR THEIR OWN NEEDS. THE AO CONSIDERED IT IMPOSSIBL E AND ALSO WAS OF THE VIEW THAT IN THE NORMAL COURSE, THE INCREASE IN CAP ITAL SEEMS TO BE VERY HIGH AND ACCORDINGLY DISALLOWED THE ABOVE AMOUNT. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE AO HAS NOT APPRECIATED THE FACT S OF THE CASE. ANNEXURE-1 OF AUDIT REPORT WAS REFERRED TO IN WHICH WITHDRAWAL S OF THESE PERSONS HAVE BEEN MENTIONED. IT WAS, THEREFORE, SUBMITTED THAT T HE ADDITION IS CLEARLY UNJUSTIFIED. THE LD. CIT(A) ACCEPTED THE EXPLANATIO N OF THE ASSESSEE AND DELETED THE ADDITION. 8. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT IT IS UNDISPUTED FACT THAT THESE PERSONS ARE COVERED BY S ECTION 40A(2)(B) OF THE ACT AND SINCE THERE WAS AN INCREASE IN THE CAPITAL AND NO WITHDRAWALS HAVE BEEN SHOWN AND FURTHER NO PROPER EXPLANATION IS GIV EN, THEREFORE, THE AO WAS JUSTIFIED IN MAKING THE ADDITION. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT IN EARLIER YEAR ALSO, THE SAME PAYME NTS OF INTEREST AND SALARY HAVE BEEN MADE TO THEM AND THE LD. CIT(A) ON EXAMIN ATION OF RECORD FOUND THAT WITHDRAWALS HAVE BEEN SHOWN BY THESE PERSONS. HE HAS SUBMITTED THAT NO ADDITION OF THE SIMILAR NATURE IS MADE IN THE EA RLIER YEAR. THEREFORE, THE ADDITION IS NOT JUSTIFIED. ITA NO. 61/AGRA/2005 6 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION. THE ASSESSEE EXPLAINED THE REASONS BEFORE THE LD. CIT(A) TO SHOW THAT THE ADDITION IS MADE WITHOUT APPRECIATING THE FACTS OF THE CASE. IN CASE, THE AO APPLIES PROVISIONS OF SECTION 40A(2)(B) OF T HE IT ACT, IT IS FOR THE AO TO MAKE OUT A CASE THAT THE EXPENDITURE INCURRED IS EXCESSIVE OR UNREASONABLE, HAVING REGARD TO THE FAIR MARKET VALU E OF SUCH SERVICES. NO EFFORTS IN THIS REGARD HAVE BEEN MADE BY THE AO. HO NBLE SUPREME COURT IN THE CASE OF UPPER INDIA PUBLISHING HOUSE PVT. LTD. VS. CIT, 117 ITR 569 (SC) HELD THAT BEFORE SECTION 40A(2) IS APPLIED, TH E AO SHOULD HAVE PROVED THAT THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE. THE LD. CIT(A) FOUND THAT THESE PERSONS HAVE MADE WITHDRAWALS AS PER AUDIT RE PORT. THEREFORE, THE FACTUAL FINDING OF THE AO WAS FOUND INCORRECT AND N O MATERIAL IS PRODUCED BEFORE US TO CONTRADICT SUCH FINDING OF THE LD. CIT (A). ACCORDING TO THE ASSESSEE, SIMILAR EXPENSES HAVE BEEN CLAIMED IN EAR LIER YEAR AND NO DISALLOWANCES HAVE BEEN MADE. NO COMPARABLE CASE HA S BEEN BROUGHT ON RECORD BY THE AO FOR DISALLOWING THE EXPENSES. NO E XCESSIVE OR UNREASONABLE PAYMENTS HAVE BEEN NOTED BY THE AO IN THE ASSESSMENT ORDER. THE AO WITHOUT ANY JUSTIFICATION DISALLOWED 50% OF THE EXPENDITURE. SINCE ITA NO. 61/AGRA/2005 7 THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD AGAIN ST THE ASSESSEE BEFORE APPLYING THE ABOVE PROVISIONS, WE DO NOT FIND ANY J USTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE AD DITION. GROUND NO. 3 OF APPEAL OF THE REVENUE IS, ACCORDINGLY, DISMISSED. 10. ON GROUND NO.4, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.9,55,239/- ON ACCOUNT OF UNEXPLAINED UNSECURED L OANS. THE AO MADE ADDITION OF RS.9,55,239/- IN RESPECT OF M/S. NAMASK AR KNITTING MILLS. THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE WAS ASKED TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE CREDITOR AND GENU INENESS OF THE TRANSACTION. THE ASSESSEE WAS ALSO DIRECTED TO FILE CONFIRMATION OF THE CREDITOR AND TO PRODUCE THE PARTY FOR EXAMINATION, BUT THE ASSESSEE DID NOT FILE CONFIRMATION FROM THE CREDITOR AND ALSO DID NOT PRODUCE THE PART Y FOR EXAMINATION. THUS, THE AO WAS OF THE VIEW THAT THE ASSESSEE FAILED TO EXPLAIN THE INGREDIENTS OF SECTION 68 OF THE IT ACT. ACCORDINGLY THE ADDITION WAS MADE. THE LD. CIT(A) , HOWEVER , NOTED IN THE APPELLATE ORDER THAT THE A SSESSEE FILED CONFIRMATION LETTER AND COPY OF ACCOUNT WHICH WERE NOT FOUND SUF FICIENT BY THE AO. THE ASSESSEE ALSO FILED WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) IN WHICH IT WAS EXPLAINED THAT THE AMOUNT REPRESENTS OUTSTANDING AS ON 31.03.2001 OF M/S. NAMASKAR KNITTING MILLS, WHICH HAS OLD INTEREST BE ARING LOAN, NOT CREDITED ITA NO. 61/AGRA/2005 8 DURING THE YEAR AND FRESH DEPOSIT IN THE ACCOUNT DU RING THE PERIOD OF CONSIDERATION WAS ONLY RS.12,000/- APART FROM INTER EST OF RS.18,440/-. THE PROPRIETOR OF ERSTWHILE FIRM M/S. NAMASKAR KNITTING MILLS IS POONAM B. KISHNANI HERSELF, WHO IS ALSO ASSESSED TO TAX. THE ASSESSEE FILED A CHART TO SHOW THAT THE OUTSTANDING AMOUNT IS GIVEN FROM EARL IER YEARS AND IN THE ASSESSMENT YEAR UNDER APPEAL, WHICH WAS RS. 9,55,23 9/- AND AS ON 31.03.2000 OUTSTANDING AGAINST THIS PARTY WAS RS.9, 24,799/-. COPY OF THE ACCOUNT ALONGWITH COPY OF RETURN OF INCOME WAS FILE D TO SHOW THAT THE OUTSTANDING AMOUNT CAME FROM EARLIER YEAR. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITION . 11. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY CONFIRMATION BEFORE THE AO AND EVEN PARTY WAS NOT PRODUCED BEFORE THE AO FOR EXAMINATION. THE ASSESSEE TOOK UP NEW PLEA BEFORE THE LD. CIT(A), ON WHICH NO REMAND REPO RT IS CALLED FOR FROM THE AO. THE ORDER OF THE LD. CIT(A) IS NOT SPEAKING. TH EREFORE, THE ADDITION SHOULD NOT HAVE BEEN DELETED BY THE LD. CIT(A) BECA USE WRONG FACTS HAVE BEEN NOTED BY THE LD. CIT(A) IN THE APPELLATE ORDER REGARDING CONFIRMATION FILED BEFORE THE AO. ITA NO. 61/AGRA/2005 9 12. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTE D THAT THE AMOUNT IN QUESTION WAS SUBSTANTIALLY OUTSTANDING IN THE LAST YEAR. THEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE ADDITION. HE HAS REFERRE D TO PB-19 TO SHOW THAT THE OUTSTANDING BALANCE AGAINST THIS PARTY ON 31.03 .1999 WAS RS.9,48,876/- AND REFERRED TO PB-20, WHICH IS BALANCE SHEET AS ON 31.03.2000 TO SHOW OUTSTANDING BALANCE AGAINST THIS PARTY AT RS.9,24,7 99/-. SIMILARLY, THE BALANCE SHEET FOR ASSESSMENT YEAR UNDER APPEAL IS R EFERRED TO AT PAGE 14 TO SHOW THAT THE BALANCE OUTSTANDING AS ON 31.03.2001 WAS RS.9,55,239/-. HE HAS, THEREFORE, SUBMITTED THAT THE ADDITION HAS BEE N RIGHTLY DELETED BY THE LD. CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD. THE AO HAS SPECIFICALLY NOTED IN THE ASSESSMENT ORDER T HAT THE ASSESSEE WAS DIRECTED THROUGH QUERY LETTER TO FILE THE CONFIRMAT ION FROM THE ABOVE CREDITOR TO PROVE IDENTITY OF THE CREDITOR, THEIR CREDITWORT HINESS AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE WAS ALSO DIRECTED TO PRODUCE THE PARTY FOR EXAMINATION BEFORE THE AO. THE AO FURTHER NOTED THA T THE ASSESSEE DID NOT FILE ANY CONFIRMATION AND EVEN NO COPY OF THE ACCOU NT IS FILED AND THE CREDITOR IS ALSO NOT PRODUCED BEFORE HIM FOR EXAMIN ATION. THUS, THE ASSESSEE ITA NO. 61/AGRA/2005 10 FAILED TO PROVE ANY OF THE INGREDIENTS OF SECTION 6 8 OF THE ACT BEFORE THE AO. BEFORE THE LD. CIT(A) THE ASSESSEE FILED WRITTEN SU BMISSIONS TO EXPLAIN THAT OUTSTANDING BALANCE IS COMING UP FROM THE EARLIER Y EAR. NO SUCH EXPLANATION WAS FILED BEFORE THE AO AND NO SUCH EXPLANATION WAS REFERRED TO THE AO BY THE LD. CIT(A) FOR CALLING REMAND REPORT FROM THE A O. THE LD. CIT(A) WRONGLY NOTED IN THE APPELLATE ORDER THAT THE ASSES SEE FILED CONFIRMATION LETTER AND COPY OF ACCOUNT OF THESE PARTIES. THE LD . CIT(A) DID NOT DISPUTE THE FACT THAT THE ASSESSEE FAILED TO PRODUCE THE PA RTY FOR EXAMINATION BEFORE THE AO IN ORDER TO FIND OUT THE TRUTH. MAY BE THE L EGAL HEIR OF THE ASSESSEE WAS PROPRIETOR OF THE CREDITOR FIRM, WAS NO GROUND TO DELETE THE ADDITION. THE LD. CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE AO IN TERMS OF RULE 46A OF THE IT RULES TO EXAMINE OR RE-EXAMINE THE DOCUMENTS WHICH ARE FILED FOR THE FIRST TIME BEFORE HIM AT THE APPELLATE STAGE. THUS, THE LD. CIT(A) VIOLATED THE PRINCIPLES OF NATURAL JUSTICE AS WELL AS VIOLATED T HE RULE 46A OF THE IT RULES IN THE MATTER BECAUSE NOTHING WAS PRODUCED BEFORE T HE AO AT ASSESSMENT STAGE. FURTHER, THE ASSESSEE HAS NOT PRODUCED ANY D ETAILS BEFORE THE LD. CIT(A) TO SHOW AS TO WHAT ARE THE DETAILS OF ACCOUN T OF THIS PARTY IN THE ASSESSMENT YEAR UNDER APPEAL AND HOW MANY TRANSACTI ONS HAVE BEEN CONDUCTED TO SHOW EXACTLY AS TO HOW MUCH AMOUNT HAS INCREASED BEING FRESH UNSECURED LOAN DURING THE ASSESSMENT YEAR UNDER APP EAL. THE LD. CIT(A) ITA NO. 61/AGRA/2005 11 WITHOUT EXAMINING THE DETAILS AND WITHOUT MENTIONIN G SPECIFIC FACTS IN THE APPELLATE ORDER, MERELY ACCEPTED THE EXPLANATION OF THE ASSESSEE FOR DELETING THE ADDITION EVEN WITHOUT CALLING FOR THE REMAND RE PORT FROM THE AO. WE, THEREFORE, ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE LD. CIT(A). WE, ACCORDINGLY SET ASIDE THE OR DER OF THE LD. CIT(A) RESTORE THIS ISSUE TO THE FILE OF LD. CIT(A) WITH T HE DIRECTION TO RE-DECIDE THIS GROUND BY GIVING FACTUAL FINDING ON THIS ISSUE IN T HE APPELLATE ORDER BY GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE AO AND THE ASSESSEE. THE LD. CIT(A) SHALL PASS THE ORDER IN TERMS OF RUL E 46A OF THE IT RULES. IN THE RESULT, THIS GROUND OF APPEAL OF REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. 14. ON GROUND NO. 5, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.18,80,077/- ON ACCOUNT OF ADVANCE FROM CUSTOMERS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND FROM SCHEDULE D OF THE BALANCE SHEET THAT AN AMOUNT TOTALING TO RS.18,80,077/- STOOD AS ADVANCE FROM 23 CUSTOMERS. THE NAMES AND AMOUNTS OF THE CUSTOMERS A RE MENTIONED AT PAGE 8 OF THE ASSESSMENT ORDER AND ARE NOT REPEATED HERE AGAIN. THE AO ISSUED LETTER ASKING FOR INFORMATION U/S. 133(6) TO H.P. T RADERS, GWALIOR. HOWEVER, THE INSPECTOR, WHO TOOK THE LETTER CAME BACK AND RE PORTED THAT THERE IS NO ITA NO. 61/AGRA/2005 12 FIRM IN THAT NAME AT THE ADDRESS GIVEN BY THE ASSES SEE. THE AO ALSO ISSUED LETTERS TO M/S. S.P. ENTERPRISES, AHMEDABAD AND SHI VAM PRODUCTS OF AHMEDABAD AND ACKNOWLEDGMENT WAS KEPT ON RECORD AND THE ASSESSEE WAS ALSO INTIMATED OF THE SAME FACT AT THE ASSESSMENT S TAGE. DESPITE THAT THE ASSESSEE DID NOT SUBMIT ANY REPLY BEFORE THE AO. TH E AO, THEREFORE, TREATED THE ADVANCE FROM THE CUSTOMERS AS UNEXPLAINED CREDI TS U/S. 68 OF THE IT ACT AND ADDITION OF RS.18,80,077/- WAS MADE. IT WAS SUB MITTED BEFORE THE LD. CIT(A) THAT ALL THE NAMES WHICH WERE GIVEN BY THE A SSESSEE DO REALLY EXIST AND THE ASSESSEE HAS REGULAR BUSINESS WITH THOSE PE RSONS. HE INSISTED THAT THE AO SHOULD HAVE ISSUED SUMMONS TO THE PERSONS INSTEA D OF ISSUING ORDINARY LETTERS AND IT WAS AFTER THE SERVICE OF THOSE SUMMO NS THAT THE AO SHOULD HAVE TAKEN SOME ACTION. SINCE THE AO HAS NOT DONE W HAT WAS REQUIRED FROM HIM, THE ADVANCE SHOULD NOT BE CONSIDERED AS UNEXPL AINED. THE LD. COUNSEL FOR THE ASSESSEE PRODUCED COPY OF THE ACCOUNT BOOKS TO PROVE THAT THE AMOUNTS WERE ADVANCED SPECIALLY IN THE CASES MENTIO NED BY THE AO AND SALES HAVE BEEN MADE TO THESE PERSONS. THE LD. CIT( A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND NOTED THAT SINCE THE ASSESSEE HAD FULL ADDRESSES OF THE PERSONS FROM WHOM ADVANCES HAVE BE EN TAKEN, THEREFORE, IT WAS THE DUTY OF THE AO TO ISSUE SUMMON U/S. 131 OF THE IT ACT TO ENFORCE THE ATTENDANCE OF THE PERSONS. HE HAS NOTED THAT IT IS IMPLICIT IN LAW THAT IT IS ITA NO. 61/AGRA/2005 13 THE DUTY OF THE AO TO ASSIST THE ASSESSEE BY EXERCI SING THE POWERS U/S. 131 FOR PRODUCTION OF THE EVIDENCE IN SUPPORT OF THE RE TURN. THE LD. CIT(A) ALSO NOTED THAT WHERE THE ASSESSEE IS DENIED SUCH OPPORT UNITY TO PRODUCE THE EVIDENCE, THE ASSESSMENT WOULD BE VITIATED. HE HAS PLACED RELIANCE ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF MU NNA LAL MURLIDHAR VS. CIT, 79 ITR 540 AND ADDL. CIT VS. RADHEY SHYAM JAGD ISH PRASAD, 117 ITR 186. THE LD. CIT(A) FURTHER NOTED THAT THE REPORT O F THE INSPECTOR WAS NOT CONFRONTED TO THE ASSESSEE. THEREFORE, THE ASSESSEE HAS NO OCCASION OR OPPORTUNITY TO REBUT THE SAME. HE HAS NOTED THAT TH E AO CAN MAKE ENQUIRY AT THE BACK OF THE ASSESSEE, BUT IT IS THE DUTY OF THE AO TO CONFRONT THE ASSESSEE WITH THE REPORT OF THE INSPECTOR. HE HAS NOTED THAT THE LETTERS SENT TO SP ENTERPRISES AND SHIVAM PRODUCTS, AHMEDABAD HAVE BEE N SERVED UPON THEM WOULD PROVE THEIR IDENTITY. THE LD. CIT(A) CONSIDER ING THESE FACTS DELETED THE ADDITION. 15. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE CLAIMED ADVANCE FROM CUSTOMERS IN THE BALA NCE SHEET. THEREFORE, SECTION 68 OF THE IT ACT WOULD BE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE FAILED TO FURNISH ANY CON FIRMATION BEFORE THE AO. THEREFORE, IDENTITY OF THE CREDITOR, THEIR CREDITWO RTHINESS AND GENUINENESS OF ITA NO. 61/AGRA/2005 14 THE TRANSACTION HAVE NOT BEEN PROVED BY THE ASSESSE E. HE HAS SUBMITTED THAT WHATEVER ENQUIRY WAS MADE BY THE AO WAS CONFRONTED TO THE ASSESSEE AS IS NOTED IN THE ASSESSMENT ORDER, BUT THE ASSESSEE FAI LED TO EXPLAIN THE CREDITS BEFORE THE AO. THEREFORE, THE LD. CIT(A) WAS NOT JU STIFIED IN DELETING THE ADDITION. HE HAS SUBMITTED THAT THE ASSESSEE FILED ADDRESS OF ONLY H.P. TRADERS, WHICH WAS ALSO FOUND INCORRECT. HE HAS SUB MITTED THAT SINCE NO MATERIAL WAS PRODUCED BEFORE THE AO AND NO REQUEST WAS MADE TO ISSUE SUMMONS U/S. 131 OF THE IT ACT, THEREFORE, THE LD. CIT(A) WRONGLY DELETED THE ADDITION. 16. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ADMITTED THAT ONLY COPY OF ACCOUNT WAS FILED BEFORE THE AO. NO CONFIRMATION WA S FILED BEFORE THE AO AND ADDRESS OF ONLY ONE PARTY WAS GIVEN. HE HAS FIL ED PAPER BOOK OF 63 PAGES, BUT NO DOCUMENT IS REFERRED FROM THE PAPER B OOK AND HE HAS ADMITTED THAT ASSESSEE IS NOT IN A POSITION TO EXPLAIN AND P ROVE IF ANY REQUEST IS MADE TO THE AO TO ENFORCE ATTENDANCE OF THE CREDITORS U/ S. 131 OF THE IT ACT. 17. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITI ON. THE ITAT, AMRITSAR ITA NO. 61/AGRA/2005 15 BENCH IN THE CASE OF DEVINDER SINGH VS. ACIT, 290 I TR (AT) 306 (ASR.) CONSIDERED THE FACTS OF AN ASSESSEE, WHO WAS KACHCH A ARHATIA AND HAD NOT CARRIED ON ANY TRADE OF HIS OWN, BUT EARNED INCOME BY WAY OF DAMI, BEING COMMISSION AGENT FOR SALE OF AGRICULTURAL PRODUCE. ON SCRUTINY OF THE LIST OF CREDITORS, CERTAIN CREDIT AMOUNTS WERE FOUND IN THE NAMES OF 52 PERSONS. THE AO MADE ADDITION U/S. 68 ON ACCOUNT OF UNEXPLAINED CREDITS. THE LD. CIT(A) CONFIRMED THE ADDITION. THE TRIBUNAL HELD THAT SINC E ALL THESE CREDITS APPEARED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, T HESE WERE LIABLE TO BE CONSIDERED IN THE HANDS OF THE ASSESSEE U/S. 68 OF THE IT ACT. THE PROVISIONS OF SECTION 68 ARE WIDE ENOUGH TO COVER ALL THE CRED ITS INCLUDING THE CREDITS OF THE NATURE FOUND IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE. THE SUBMISSION OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 68 APPL Y ONLY TO CASH RECEIPTS/LOANS, WAS WITHOUT ANY MERIT. TO GIVE SUCH A NARROW MEANING TO SECTION 68 WOULD BE CONTRARY TO THE LEGISLATIVE INT ENT AND RATIO OF JUDICIAL PRONOUNCEMENT OF HONBLE SUPREME COURT AND VARIOUS HIGH COURTS. THEREFORE, THE SUBMISSION OF THE ASSESSEE WAS REJEC TED. IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS SHOWN ADVANCE FROM THE C USTOMERS IN THE BOOKS OF ACCOUNT. THEREFORE, THE PROVISIONS OF SECTION 68 WO ULD APPLY IN THE CASE OF THE ASSESSEE AND BURDEN WOULD BE UPON THE ASSESSEE TO PROVE INGREDIENTS OF SECTION 68 OF THE IT ACT TO ESTABLISH IDENTITY OF T HE CREDITORS, THEIR ITA NO. 61/AGRA/2005 16 CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. ADMITTEDLY, THE ASSESSEE DID NOT FILE ANY CONFIRMAT ION FROM THE CREDITORS BEFORE THE AO AND BEFORE THE LD. CIT(A). ADDRESS OF ONLY H.P. TRADERS WAS GIVEN WHERE NOTICE U/S. 133(6) WAS ISSUED, BUT IT W AS FOUND THAT NO SUCH FIRM EXISTS AT THE ADDRESS. FURTHER TWO LETTERS WERE ISS UED TO THE AHMEDABAD PARTIES AND THEY HAVE NOT RESPONDED TO THE LETTERS OF THE AO. THESE INFORMATION WERE SUPPLIED TO THE LD. COUNSEL FOR TH E ASSESSEE AS PER ORDER SHEET RECORDED BY THE AO AND NOTED AT PAGE 9 OF THE ASSESSMENT ORDER. DESPITE CONFRONTING THESE FACTS TO THE ASSESSEE, TH E ASSESSEE DID NOT FILE ANY REPLY BEFORE THE AO. THEREFORE, THE AO WAS JUSTIFIE D IN MAKING ADDITION U/S. 68 OF THE ACT AGAINST THE ASSESSEE BECAUSE THE ASSE SSEE FAILED TO PROVE INGREDIENTS U/S. 68 OF THE IT ACT. THE ASSESSEE STR ANGELY BEFORE THE LD. CIT(A) CAME UP WITH THE SUBMISSION AND INSISTED BEF ORE THE LD. CIT(A) THAT THE AO SHOULD HAVE ISSUED SUMMONS TO THESE PERSONS INSTEAD OF ISSUING ORDINARY LETTERS. THE LD. CIT(A) CONTRARY TO THE PR OVISIONS OF LAW AND WITHOUT APPRECIATING THE PROVISIONS OF SECTION 68 O F THE ACT ACCEPTED THE BALD CONTENTION OF THE ASSESSEE. THE LD. CIT(A) NOT ED THAT IT WAS THE DUTY OF THE AO TO ISSUE SUMMON U/S. 131 TO ENFORCE ATTENDAN CE OF THESE PERSONS, WHICH IS IMPLICIT BY LAW. IN SUPPORT OF THESE FINDI NGS AND OBSERVATIONS, THE LD. CIT(A) RELIED UPON TWO DECISIONS OF ALLAHABAD H IGH COURT IN THE NAME ITA NO. 61/AGRA/2005 17 OF MUNNA LAL MURLIDHAR AND RADHEY SHYAM JAGDISH PRA SAD (SUPRA). WE HAVE GONE THROUGH THE JUDGMENT OF ALLAHABAD HIGH CO URT IN THE CASE OF RADHEY SHYAM JAGDISH PRASAD (SUPRA) IN WHICH EARLIE R DECISION IN THE CASE OF MUNNA LAL MURLIDHAR (SUPRA) HAS BEEN REFERRED TO . IN THE CASE OF RADHEY SHYAM JAGDISH PD. (SUPRA), THE ASSESSEE WANTED TO E XAMINE THE CONCERNED PARTIES IN ORDER TO JUSTIFY THE IMPUGNED CASH PAYME NTS AND THE ASSESSEE ASKED THE ITO TO SUMMON THEM AND AGREED TO BEAR THE NECESSARY EXPENSES. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E. HONBLE HIGH COURT IN THIS SET OF FACTS HELD THAT IT WAS THE DUTY OF THE ITO TO SUMMON THEM, OF COURSE, IF THE ASSESSEE WAS PREPARED TO BEAR THE EX PENSES AS HE REALLY WAS. THE FAILURE TO DO SO AMOUNTED TO DENIAL TO LET THE ASSESSEE PRODUCE EVIDENCE AND VITIATED THE ASSESSMENT. WE FAIL TO UNDERSTAND AS TO HOW THE DECISION CITED BY THE LD. CIT(A) IN THE IMPUGNED ORDER IS RE LEVANT TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE DID NOT FIL E ANY CONFIRMATION BEFORE THE AO AND HAS NOT MADE ANY REQUEST TO SUMMON ANY O F THE CREDITOR U/S. 131 OF THE ACT AND HAS NOT ALSO MADE ANY REQUEST TO BEA R THE EXPENSES OF SUMMONING OF THE 23 CREDITORS. NOTICE SENT TO H.P. TRADERS COULD NOT BE SERVED, AS THE PARTY DID NOT EXIST THERE. NO COMPLE TE DETAILS OF THE CREDITORS WERE FILED. THUS, THE ASSESSEE FAILED TO DISCHARGE THE BURDEN PROVIDED UPON HIM U/S. 68 OF THE IT ACT. THE LD. COUNSEL FOR THE ASSESSEE, THOUGH FILED PAPER ITA NO. 61/AGRA/2005 18 BOOK OF 63 PAGES, HAS NOT BEEN ABLE TO SHOW IF THE ASSESSEE MADE ANY REQUEST BEFORE THE AO OR BEFORE THE LD. CIT(A) TO ISSUE SUM MONS U/S. 131 OF THE ACT. RATHER, THE AO HAS SPECIFICALLY NOTED IN THE A SSESSMENT ORDER THAT WHEN ALL THE FACTS WERE CONFRONTED TO THE LD. COUNSEL FO R THE ASSESSEE AT THE ASSESSMENT STAGE AND REPLY OF THE ASSESSEE WAS CALL ED FOR, THE ASSESSEE DID NOT SUBMIT ANY REPLY BEFORE HIM. THUS, NO MATERIAL IS PRODUCED AT ANY STAGE TO PROVE IF THE ASSESSEE MADE ANY REQUEST FOR SUMMO NING OF ANY OF THE CREDITORS AT THE ASSESSMENT STAGE. THE ASSESSEE FAI LED TO EXPLAIN ANY OF THE CREDITS BEFORE THE AO. THE LD. COUNSEL FOR THE ASSE SSEE ALSO FAILED TO EXPLAIN AS TO HOW REQUEST WAS MADE TO SUMMON PARTIES U/S. 1 31 OF THE ACT WHEN NO DETAILS OR CORRECT ADDRESS HAS BEEN GIVEN TO THE AO . ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE ONLY COPIES OF ACCOUNTS WE RE FILED WHICH WOULD NOT BE SUFFICIENT TO PROVE THE GENUINE CREDITS IN THE M ATTER. THE POSITION OF CREDITOR UNDER LAW IS LIKE THE WITNESS OF THE ASSES SEE AND UNLESS AND UNTIL REQUEST IS MADE TO THE AO TO SUMMON THE CREDITORS T O PROVE HIS CASE, THE AO IS NOT DUTY BOUND TO ISSUE SUMMON U/S. 131 OF THE I T ACT. HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHARATI PVT. LTD. VS. CIT 111 ITR 951 HELD AS UNDER : IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOM E-TAX OFFICER FOUND THAT THE ASSESSEE HAD SHOWN RS.20,000 AS LOAN IN ITS BOOKS TAKEN FROM TWO PARTIES. THE ASSESSEE PROD UCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEF ORE THE ITA NO. 61/AGRA/2005 19 INCOME-TAX OFFICER IN SUPPORT OF THE TWO LOANS. THE INCOME-TAX OFFICER SERVED NOTICES UNDER SECTION 131 OF THE INC OME TAX ACT, 1961, ON THE ALLEGED CREDITORS AND SINCE THOSE NOTI CES CAME BACK UNSERVED, THE INCOME-TAX OFFICER TREATED THE L OAN AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. THE APP ELLATE ASSISTANT COMMISSIONER DISMISSED THE ASSESSEES APP EAL ON THE GROUND THAT THE ASSESSEE COULD NOT EVEN ESTABLISH T HE IDENTITY OF THE PARTIES. ON FURTHER APPEAL BY THE ASSESSEE, THE APPELLATE TRIBUNAL HELD THAT MERE FILING OF CONFIRMATORY LETT ERS DID NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE AND THE RE WAS NO MATERIAL ON THE RECORD TO ESTABLISH THE IDENTITY OF THE CREDITORS: HELD, THAT THE TRIBUNAL HAD TAKEN ALL THE RELEVANT FACTS INTO CONSIDERATION AND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL THAT THE LOANS REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES WAS NOT PERVERSE OR UNREASONABL E. 17.1 CONDUCT OF THE CREDITORS ARE UNNATURAL BECAUSE THE PARTIES WHO HAVE GIVEN ADVANCE TO THE ASSESSEE WERE FOUND UNTRACEABL E. HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE, 82 ITR 540 (SC) AND SUMATI DAYAL, 214 ITR 801 (SC) HELD THAT COURTS AN D TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES THE DECISIONS CITED BY THE LD. CIT(A) ARE, IN FACT, AGAINST THE ASSESSEE. THE LD. CIT(A) HAS NOWHERE MENTIONED IN THE APPELLATE O RDER IF THE ASSESSEE MADE ANY REQUEST TO THE AO TO ISSUE SUMMONS TO THE CONCERNED CREDITORS. THUS, THE LD. CIT(A) DELETED THE ADDITION WITHOUT H AVING ANY RELIABLE AND COGENT MATERIAL AVAILABLE ON RECORD IN FAVOUR OF TH E ASSESSEE. THEREFORE, THE ORDER OF THE LD. CIT(A) IS CLEARLY PERVERSE AND CAN NOT BE SUSTAINED IN LAW. ITA NO. 61/AGRA/2005 20 WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE LD. CIT (A) AND RESTORE THE ORDER OF THE AO. IN THE RESULT, GROUND NO. 5 OF THE APPEA L OF THE REVENUE IS ALLOWED. NO OTHER POINT IS ARGUED OR PRESSED. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY