The ACIT, 5(1), Indore V. Shri Amar Agrawal, Sendhwa

ITA 611/IND/2012

• Counselvise Citation: 61122714 RSA 2012
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 26-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESH
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 147; 148

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.611/IND/2012 A.Y.2007-08 ACIT 5(1), INDORE :: APPELLANT VS AMAR AGRAWAL SENDHWA PAN AESPB 1631A :: RESPONDENT CO NO.10/IND/2013 (ARISING OUT OF ITA NO.611/IND/2012) AMAR AGRAWAL SENDHWA :: OBJECTOR VS ACIT 5(1), INDORE :: RESPONDENT REVENUE BY SHRI R.A. VERMA ASSESSEE BY SHRI S.S. DESHPANDE AND SHRI R.P. MANDOVRA DATE OF HEARING 17.7.2013 DATE OF PRONOUNCEMENT 17.7.2013 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 31 ST OCTOBER, 2012 WHEREAS THE ASSESSEE HAS ALSO PREFERR ED CROSS OBJECTION CHALLENGING ISSUANCE OF NOTICE U/S 147 OF THE ACT. DURING HEARING WE HAVE HEARD SHRI R.A. VERMA, LEAR NED SENIOR DR, AND SHRI S.S. DESHPANDE, LEARNED COUNSEL FOR THE ASSESSEE. FIRST WE SHALL TAKE UP THE APPEAL OF THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED BY THE ORDER OF TH E LEARNED CIT(A) DELETING THE ADDITION OF RS. 77,10,534/- IGN ORING THE FACT THAT AS PER THE MANDI RULES, THE PAYMENT AGAINST TH E PURCHASES TO THE FARMERS IS TO BE DONE ON THE DATE OF PURCHAS ES AND IF THE ASSESSEE HAS ACTED OTHERWISE, THE ONUS IS ON HIM TO PROVE THE SAME MORE SPECIFICALLY WHEN THE ASSESSEE DID NOT PR ODUCE THE FARMERS FOR VERIFICATION OF HIS CLAIM THE LEARNED S ENIOR DR ADVANCED HIS ARGUMENT WHICH IS IDENTICAL TO THE GRO UND RAISED BY FURTHER SUBMITTING THAT THE PAYMENTS TO SUCH FARMER S WERE MADE BY THE ASSESSEE THROUGH UNDISCLOSED SOURCES AND THE CLAIM OF THE ASSESSEE THAT PAYMENTS WERE MADE AFTER CERTAIN PERI OD IS MERELY AN AFTER-THOUGHT. THE IMPUGNED ORDER WAS STRONGLY CHALLENGED BY THE LEARNED SENIOR DR THAT THE TRUE FACTS WERE N OT CONSIDERED 3 BY THE LEARNED CIT(A) WHILE DELETING THE ADDITION. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT THE COTTON WAS PU RCHASED FROM THE FARMERS OF THE NEARBY AREAS OF THE STATE O F MAHARASHTRA AND THE PAYMENTS WERE MADE AT A LATER DATE. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS RUNNING AN INDUSTRIAL UNDERTAKING IN TH E NAME OF M/S OM COTTON FIBRES ENGAGED IN GINNING OF RAW COTT ON I.E. KAPAS IN SENDHWA. THE ASSESSEE ORIGINALLY FILED HI S RETURN ON 27.8.2007 DECLARING INCOME OF RS.18,39,200/-. THE A SSESSMENT WAS COMPLETED AT AN INCOME OF RS. 25,07,020/- U/S 1 43(3) ON 1.12.2009. SUBSEQUENTLY INFORMATION WAS RECEIVED F ROM THE INVESTIGATION WING THAT THE ASSESSEE PURCHASED COTT ON FROM FARMERS AND AS PER MANDI ACT, THE ASSESSEE IS REQUI RED TO PAY THE FARMERS ON THE SAME DAY. IT WAS FOUND THAT THE ASS ESSEE HAS NOT RECORDED PAYMENTS TO THE FARMERS ON SUCH PURCHASES MADE BY HIM BUT RECORDED IN FUTURE DATE. IT WAS OBSERVED TH AT THE ASSESSEE PAID THE AMOUNTS TO SUCH FARMERS OUT OF UN DISCLOSED SOURCES. THE REASONS WERE RECORDED AND NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE TO WHICH IT WAS CLAIMED THAT THE RETURN 4 FILED ON 27.8.2007 MAY BE TREATED TO BE FILED IN RE SPONSE TO NOTICE U/S 148 OF THE ACT. THE COPY OF THE REASONS RECORDE D WAS PROVIDED TO THE ASSESSEE ON 20.4.2010. THEREAFTER, NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 18.4.2011 TO WHICH THE ASSESSEE RESPONDED AND FURNISHED THE DETAILS. THE ASSESSEE W AS ASKED AS TO WHY THE AMOUNT NOT RECORDED IN THE BOOKS OF ACCO UNTS ON THE DATE OF TRANSACTION SHOULD NOT BE ADDED TO HIS INCO ME. THE ASSESSEE FILED ITS REPLY AS HAS BEEN REPRODUCED IN PARA 2 ONWARDS OF THE ASSESSMENT ORDER. THE ASSESSEE ALSO PLACED R ELIANCE UPON CERTAIN DECISIONS WHICH HAVE BEEN MENTIONED AT PAGE 7 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO PRODUC E THE FARMERS WHO SOLD THEIR GOODS ON THE CLAIMED CREDIT. THE ASSESSEE COULD NOT PRODUCE THEM STATING THAT THE ASSESSEE IS UNABLE TO FIND SUCH AGRICULTURISTS AND MERELY PLACED RELIANCE UPON TWO DECISIONS OF THE TRIBUNAL. THE LEARNED ASSESSING O FFICER FOUND THAT THE FACTS OF THE CASES, RELIED UPON BY THE ASS ESSEE, ARE DIFFERENT. IT IS OBSERVED IN THE ASSESSMENT ORDER THAT AS PER MANDI TAX RULES, THE ASSESSEE IS EXPECTED TO MAKE T HE PAYMENT TO THE FARMERS ON THE DATE OF PURCHASE ITSELF AND I N THE ABSENCE OF ANY PROOF AND MORE SPECIFICALLY THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS WERE MADE AT A LATER DATE, THE IMPUGNE D ADDITION 5 WAS MADE. THE ASSESSING OFFICER ISSUED A LETTER TO THE SECRETARY OF KRISHI UPAJ MANDI SAMITI TO WHICH THROUGH REPLY DATED 16.8.2011 THE ASSESSING OFFICER WAS INFORMED THAT T HE ASSESSEE HAS NOT MADE ANY BELATED PAYMENT TO FARMER AND MADE THE PAYMENTS ON THE DATE OF TRANSACTION ITSELF. IN VIEW OF THESE FACTS, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 23. 9.2011 TO WHICH THE ASSESSEE REPLIED AS HAS BEEN MENTIONED IN PARA 7 ONWARDS OF THE ASSESSMENT ORDER. FINALLY, IT WAS CO NCLUDED BY THE ASSESSING OFFICER THAT THE PAYMENTS WERE MADE T O SUCH FARMERS BY THE ASSESSEE FROM UNDISCLOSED SOURCES AN D RECORDED SUCH PAYMENTS ON LATER DATES MORE SPECIFICALLY WHEN THE ASSESSEE WAS HAVING SUFFICIENT FUNDS. THE IMPUGNED ADDITION WAS MADE AS FROM UNDISCLOSED SOURCES. 3. THE LEARNED CIT(A) DELETED THE ADDITION BROADLY ON THE OBSERVATION THAT NO COMPLAINT WAS MADE TO THE MANDI SAMITI BY THE FARMERS FOR NON-PAYMENT ON THE SAME DAY AND THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON ASSUMPTION AND PRESUMPTION. IF THE TOTALITY OF FACTS, AVAILABLE O N RECORD AND THE ASSERTION MADE BY THE LEARNED RESPECTIVE COUNSEL, A RE KEPT IN JUXTAPOSITION AND ANALYSED, ONE FACT IS OOZING OUT THAT THE ASSESSEE WAS EXPECTED TO FURNISH THE COMPLETE NAMES AND 6 ADDRESSES OF THE FARMERS FROM WHOM THE KAPAS WAS PU RCHASED BUT THAT WAS NOT DONE BY THE ASSESSEE. NORMALLY THE RE IS PROXIMATE RELATION BETWEEN THE FARMERS/SELLER AND T HE ASSESSEE/PURCHASER IN SUCH TYPE OF BUSINESS. IF THE FARMERS ARE UNKNOWN AND ARE FROM DISTANT PLACES THEN NO FARMER WILL SELL ITS CROPS/KAPAS ON CREDIT BASIS AND IF THE FARMERS ARE CLOSELY KNOWN THEN THEIR ADDRESSES MUST BE AVAILABLE WITH THE ASS ESSEE. THEREFORE, THE ASSESSEE HAS NOT DISCHARGED HIS ONUS BY FURNISHING NAMES AND ADDRESSES OF SUCH FARMERS. EV EN NO CONFIRMATION FROM SUCH FARMERS THAT THE PAYMENTS WE RE TAKEN BY THEM ON LATER DATES WERE FILED BY THE ASSESSEE IN S PITE OF PROVIDING SUFFICIENT OPPORTUNITY. UNDER THESE CIRC UMSTANCES, CIT(A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE ADD ITION. HOWEVER, THE FACT REMAINS THAT PAYMENTS WERE MADE. THE LEARN ED REPRESENTATIVE FOR THE ASSESSEE SUGGESTED THAT A RE ASONABLE VIEW MAY BE TAKEN AS NO USEFUL PURPOSES WILL BE SERVED I N REMANDING THE MATTER TO THE FILE OF THE ASSESSING OFFICER AND THE ASSESSEE WILL BE PUT TO UNNECESSARY HARDSHIP. THE LEARNED SE NIOR DR CONTENDED THAT INTEREST OF REVENUE MAY BE SAFEGUARD ED. KEEPING IN VIEW THE TOTALITY OF FACTS, IT CAN BE SAID THAT THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE. WE ALSO OBSERVE THAT THE ADDITION MADE 7 BY THE ASSESSING OFFICER AND THE DELETION MADE BY T HE LEARNED CIT(A) ARE NOT PROPER. EVEN AS PER THE SPECIAL PROV ISION FOR COMPUTING PROFIT AND GAINS OF BUSINESS, AS PROVIDE D U/S 44AF, A SUM EQUAL TO 5% OF THE TOTAL TURNOVER IN THE PREVIO US YEAR SHALL BE DEEMED TO BE PROFIT AND GAINS OF SUCH BUSINESS C HARGEABLE TO TAX. EVEN AS PER PROVISO TO SUB-SECTION (1) TO SECT ION 44AF, IT SHALL NOT APPLY IN RESPECT OF AN ASSESSEE WHOSE TOT AL TURNOVER EXCEEDS AN AMOUNT OF RS. 40 LACS IN THE PREVIOUS YE AR. ONCE THE TURNOVER EXCEEDS THIS LIMIT, NORMALLY IT IS EXPECTE D TO BE LESS PROFIT. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS ACTUALLY PURCHASED THE GOODS AND ALSO MADE PAYMENT FOR THE S AME. THE GOODS SO PURCHASED WERE ALSO SOLD AND PROFIT ON SAL ES WAS OFFERED IN THE REGULAR COURSE OF BUSINESS. THE ENTRIES REGA RDING PAYMENT WERE MADE BY THE ASSESSEE AS PER THE DATES NOTED IN THE MANDI BILLS/RECEIPTS. THE ENTRIES OF PAYMENT WERE MADE ON THE RESPECTIVE DATES WHEREAS ENTRIES FOR PURCHASES WERE MADE ON THE DATES THE PURCHASES WERE MADE. THE PLEA OF THE ASS ESSING OFFICER WAS THAT MANDI RULES DO NOT PERMIT PAYMENT OF DUES TO THE FARMERS AT A LATER DATE. IN THE INSTANT CASE, T HE PAYMENTS WERE ACTUALLY MADE AT LATER DATES AS PER MANDI RECE IPTS. THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE PLEA THAT 8 THE ASSESSEE HAS NOT RECORDED TRANSACTION IN THE BO OKS OF ACCOUNTS REGARDING PAYMENT TO FARMERS ON THE DATES OF PURCHASES. HOWEVER, SUCH TRANSACTIONS WERE RECORDE D ON FUTURE DATES WHEN THE CASH WAS AVAILABLE WITH THE ASSESSEE . UNDER THESE CIRCUMSTANCES, WHEN THE ENTRIES REGARDING PUR CHASES OF GOODS AND ITS PAYMENT TO FARMERS HAVING BEEN RECORD ED IN THE BOOKS OF ACCOUNTS ARE NOT FOUND SATISFACTORY, SUCH BOOKS OF ACCOUNTS ARE LIABLE TO BE REJECTED. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THE ASSESSING OFFICER IS EMPOWERED TO EST IMATE THE PROFIT ON THE TOTAL TURNOVER CONSIDERING THE MATERIAL AVAI LABLE WITH HIM. ACCORDINGLY, IT IS A FIT CASE FOR REJECTION OF BOOK S OF ACCOUNTS. ACCORDINGLY, WE MODIFY THE ORDERS OF THE LOWER AUTH ORITIES SO AS TO COMPUTE THE NET PROFIT OF THE ASSESSEE BY TAKING 5% OF GROSS SALES AS REFLECTED IN THE P&L ACCOUNT. HOWEVER, UNDER THE FACTS AVAILABLE ON RECORD AND TO PUT AN END TO THE LITIGA TION, BY TAKING A LENIENT AND REASONABLE VIEW SO THAT THE INTEREST OF BOTH THE SIDES MAY BE SAFEGUARDED, WE DIRECT THE ASSESSING O FFICER TO CALCULATE THE INCOME BY TAKING NET PROFIT RATE AT 5 % OF THE GROSS SALES REFLECTED IN HIS PROFIT AND LOSS ACCOUNT. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. 9 4. NOW WE SHALL TAKE UP THE CROSS OBJECTION OF THE ASSESSEE WHEREIN REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT HAS BEEN CHALLENGED. THE ASSESSEE HAS FILED WRITTEN SUB MISSIONS/ SYNOPSIS WHICH HAS BEEN CONSIDERED BY US. WE FIND T HAT THE PROCEEDINGS U/S 147/148 WERE ALSO CHALLENGED BEFORE THE LEARNED CIT(A) WHO, AFTER RECORDING A DETAILED REASONING, D ECIDED THE ISSUE AGAINST THE ASSESSEE. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION FROM THE HONBLE DELHI HIGH COURT IN T HE CASE OF USHA INTERNATIONAL LIMITED (253 CTR 113), KALYANJI MAOJI & CO.; 102 ITR 287 (SC), ESSKEY ENGG. CO. PVT. LTD.; 247 I TR 818 (SC) AND PURSHOTTAMDAS BANGAR & OTHERS; 224 ITR 362. ON THE OTHER HAND, THE LEARNED SENIOR DR STRONGLY DEFENDED THE O RDER OF THE LEARNED CIT(A) IN CONFIRMING THE PROCEEDINGS INITIA TED U/S 147. 4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CASE WAS REOPENED ON THE BASIS OF REPORT FROM THE INVESTIGATION WING. AS PER ORDER SHEET NOTING DATED 8.10.2012, SPECIFIC QUERY WAS RA ISED ON THIS ISSUE AND SHOW CAUSE NOTICE WAS ISSUED ON THE SURVE Y REPORT AND DUE OPPORTUNITY WAS PROVIDED TO THE ASSESSEE. THE A SSESSEE ADMITTED THE FACT THAT NEITHER ANY QUERY WAS RAISED BY THE ASSESSING OFFICER NOR ANY SUBMISSION WAS MADE BY TH E ASSESSEE 10 BEFORE THE ASSESSING OFFICER, THEREFORE, NO OPINION WAS FORMED BY THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT, T HUS THERE IS NO CHANGE OF OPINION AS HAS BEEN CANVASSED BY THE LEAR NED COUNSEL FOR THE ASSESSEE. SO FAR AS THE RELIANCE UPON THE D ECISION IN THE CASE OF USHA INTERNATIONAL LIMITED (SUPRA) IS CONCE RNED, NO HELP CAN BE EXTENDED TO THE ASSESSEE BECAUSE IN THAT CAS E THERE WAS FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS AT T HE TIME OF ORIGINAL ASSESSMENT WITH REFERENCE TO INCOME ALLEGED TO HAVE BEEN ESCAPED. IT IS AN ADMITTED POSITION THAT DURING ORI GINAL ASSESSMENT, NO SUBMISSION HAS BEEN MADE ON THIS ISS UE, THUS THE RELIANCE MADE UPON THIS JUDICIAL DECISION MAY N OT HELP THE ASSESSEE. THERE IS A MATERIAL CHANGE AFTER INSERTIO N OF EXPLANATION 3 TO SECTION 147 BY THE FINANCE (NO. 2) ACT, 2009 WITH EFFECT FROM 1.4.1989. POWERS UNDER THE AMENDED PROVISION ARE WIDE ENOUGH AND ARE CONTEXTUALLY DIFFERENT PRIO R TO ITS AMENDMENT. THE ONLY CONDITION FOR ACTION IS THAT T HE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT. SUCH A BELIEF CAN BE REACHED IN ANY MAN NER AND IS NOT QUALIFIED BY A PRE-CONDITION OF FAITH MEANING T HEREBY THAT AFTER THE AMENDMENT, POWER TO REOPEN ASSESSMENT IS MUCH WIDER. AT THE SAME TIME, SUCH POWERS ARE NOT UNBRI DLED. FROM 11 THE FACTS AVAILABLE ON RECORD, WE ARE OF THE CONSID ERED OPINION THAT THE LEARNED ASSESSING OFFICER WAS UNDER A REAS ONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T, THEREFORE, WE FIND NO JUSTIFICATION TO INTERFERE WITH THE CONC LUSION DRAWN IN THE IMPUGNED ORDER. THE CROSS OBJECTION OF THE ASSE SSEE, THEREFORE, HAVING NO MERIT. FINALLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOW ED IN TERMS INDICATED HEREINABOVE WHEREAS THE CROSS OBJECTION O F THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17.7.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 17.7.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-1718 12