ITO,Ward-9(3), Kolkata, Kolkata V. M/s Chanakya Stock Broking Services Ltd., Kolkata

ITA 611/KOL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4615 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR KUREEL JCIT SRDR
• Assessee Lawyers: SARNATH GHOSH
• Keywords: Unexplained cash credit; Additional evidence; Corroborative evidences; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 143(3); 133(6); 194C; 131; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 611 / KOL / 2012 ASSESSMENT YEAR :2006-07 ITO WARD-9(3), P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 5TH FLOOR, ROOM 14, KOLKATA-700 069 V/S . M/S CHANAKYA STOCK BROKING SERVICES LTD., 14, INDIA EXCHANGE PLACE, 2ND FLOOR, KOLKATA-700 001 [ PAN NO.AABCC 1079 K ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI RAJAT KR. KUREEL, JCIT-SR-DR /BY RESPONDENT SHRI SOMNATH GHOSH, ADVOCATE & SARNATH GHOSH, ADVOCATE /DATE OF HEARING 09-05-2016 /DATE OF PRONOUNCEMENT 05-07-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA IN APPEAL NO.314 /CIT(A)-VIII/KOL/08-09 DATED 24.01.2012. ASSESSMENT WAS FRAMED BY ACIT, CI RCLE-9 KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 22.11.2008 FOR ASSESSMENT YEAR 2006 -07. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- 1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) IS CORRECT IN HOLDING THAT THE PROVISION OF SECTION 40(A)(IA) IS NOT APPLICABLE AS THE SAID EXPENDITURE WERE EXPENDED TOWARDS PURCHASE OF COMPUTER RELATED ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 2 SOFTWARE WHEREAS THE ASSESSEE HAS CLAIMED AS COMPUT ER MAINTENANCE EXPENSES. 2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) IS CORRECT BY NOT DISALLOWING THE CAPITAL EXPENDITU RE WHILE HOLDING THAT THE SAID EXPENDITURE WERE EXPENDED TOWARDS PURCHASE OF COMPU TER RELATED SOFTWARE BECAUSE PURCHASING OF COMPUTER OR COMPUTER SOFTWARE IS CAPITAL EXPENDITURE IN NATURE. 3) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) IS CORRECT IN HOLDING THAT THE SUNDRY CREDITORS ST ANDS DUE TO PURCHASE MADE IN CREDIT WHEREAS THE ASSESSEE HAS MADE PURCHASES FROM RECOGNIZED STOCK EXCHANGES WHERE NO CREDIT IS ALLOWED AND NOT ONLY T HAT, THERE IS NO NAME OF ANY STOCK EXCHANGES IN THE LIST PROVIDED BY THE ASS ESSEE BEFORE THE LD. CIT(A). 4) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) IS CORRECT IN ADMITTING NEW EVIDENCE WITHOUT RECORD ING THE REASONS FOR ITS ADMISSION IN CONTRAVENTION OF PROVISION OF RULE 46A (2) AND NOT GIVEN REASONABLE OPPORTUNITY TO THE ASSESSING AUTHORITY T O EXAMINE THE NEW EVIDENCE OR TO PRODUCE ANY EVIDENCE IN REBUTTAL AS REQUIRED UNDER RULE 46A(3). SHRI SOMNATH GHOSH AND SHRI SARNTH GHOSH, LD. AUTHO RIZED REPRESENTATIVES APPEARED ON BEHALF OF ASSESSEE AND SHRI RAJT KUMAR KURREL, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. FIRST ISSUED RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF EXPENSES INCURRED ON THE PURCHASE OF SO FTWARE RELATED TO COMPUTERS WHEREAS ASSESSEE HAS CLAIMED THE SAME AS COMPUTERS MAINTENANCE EXPENSES. 3. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A PUBLIC LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND ENGAGED IN THE BUSINESS OF SHARE BROKING AND IS ALSO REGISTERED WI TH SEBI AS A MEMBER OF THE NATIONAL STOCK EXCHANGE OF INDIA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS CLAIMED COMPUTERS AND SOFTWARE MAINTENANCE EXPENSES FOR 2,51,525/-. HOWEVER THE ASSESSEE FAILED ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 3 TO PRODUCE DOCUMENTARY EVIDENCE IN SUPPORT OF AFORE SAID EXPENSES AT THE TIME OF ASSESSMENT PROCEEDINGS. THEREFORE, AO HAS D ISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT THE DETAILS OF THESE EXPENS ES WERE NEVER CALLED FOR BY THE LD. AO. IN TODAYS ERA WHEN ENTIRE SHARE MAR KET RUNS ON COMPUTER, THEN EXISTENCE OF COMPUTER & SOFTWARE MAINTENANCE C HARGES ARE NATURAL. SINCE THE ACCOUNTS OF THE ASSESSEE ARE SUBJECT TO A UDIT UNDER VARIOUS ACTS, HENCE POSSIBILITY OF LACK OF SUPPORTING EVIDENCE IS REMOTE. THE NECESSARY DETAILS OF COMPUTER & SOFTWARE MAINTENANCE CHARGES SUCH AS DATE OF PAYMENT, NAME OF THE PARTY TO WHOM THE CHARGES WERE PAID & MODE OF PAYMENT WERE SUBMITTED. IT WAS ALSO SUBMITTED THAT PAYMENTS TO THESE PARTIES ARE NOT TOWARDS PAYMENT UNDER ANY CONTRACTUAL OBLIG ATIONS WHICH IS THE PRE- REQUISITE FOR TAX DEDUCTION AT SOURCE U/S 194C, RAT HER THESE ARE THE PAYMENTS FOR PURCHASE OF COMPUTER RELATED SOFTWARE. HENCE, P ROVISIONS OF SEC. 194C ARE NOT APPLICABLE TO THESE PAYMENTS. AFTER CONSIDE RING THE SUBMISSIONS OF ASSESSEE LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- . . I HAVE CONSIDERED THE SUBMISSIONS MADE ON BE HALF OF THE APPELLANT, THE CONTENTS OF THE REMAND REPORT AND TH E EVIDENCE PRODUCED BEFORE ME. CONSIDERING ALL THE FACTS, IN MY OPINION , THERE IS NO CASE FOR ANY DISALLOWANCE OUT OF THE EXPENSES CLAIMED. HAD I T BEEN DEFAULT UNDER SEC. 40(A)(IA) FOR FAILURE ON THE PART OF THE APPELLANT COMPANY DEDUCT TAX AT SOURCE UNDER SEC. 194C OF THE ACT, TH E ASSESSING OFFICER OUGHT TO HAVE GIVEN SPECIFIC FINDING IN THE ASSESSM ENT ORDER AFTER BRINING ON MATERIAL ON RECORD. THIS IS NOT THE CASE THEREFORE, THE CLAIM OF THE APPELLANT SHOULD PREVAIL. THE ADDITION OF RS.2, 51,525/- MADE BY WAY OF DISALLOWANCE OF EXPENSES OUT OF COMPUTER SOFTWAR E MAINTENANCE CHARGES IS DELETED. THIS GROUND OF APPEAL IS ALLOWE D. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US LD. AR SUBMITTED INDEX OF PAPER BOOK WHICH CONTENTS PAGES 1 TO 336 AND STATED THAT ASSESSEE-COMPANY DEAL IN S HARE BROKING ACTIVITIES. ACCORDINGLY HE HAD TO ABIDE BY THE RULES AND REGULA TIONS FRAMED BY THE ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 4 SECURITIES AND EXCHANGE BOARD OF INDIA. UNDER THEIR MANDATE, THE ASSESSEE HAD TO MAINTAIN THE RECORDS OF ITS CLIENTS IN THE C OMPUTER NETWORK AND ACCORDINGLY HAD TO OBTAIN THE DESIGNATED SOFTWARE F OR SUCH PURPOSE. IT HAD THEREFORE NO ALTERNATIVE BUT TO COMPULSORILY FOLLOW THE REQUIREMENTS OF ITS STATUTORY REGULATOR. THUS, THE EXPENSE ON ACCOUNT O F MAINTENANCE OF COMPUTER NETWORKS AND SOFTWARE OR UPDATING SUCH SOFTWARE DID NOT CREATE ANY ASSET OF ENDURING BENEFIT BUT MERELY SERVED THE PURPOSE OF C ARRYING ON THE ACTIVITIES OF THE ASSESSEE IN THE MANNER DESIRED BY THE STATUTORY REGULATOR WHICH WIELDED ABSOLUTE AUTHORITY ON ITS MEMBERS TO EXERCISE THEIR SUPERVISORY JURISDICTION. IN COURSE OF REMAND PROCEEDINGS, THE ASSESSEE HAD PROD UCED THE COPIES OF THE BILLS AND THE DETAIL OF PAYMENTS ON THAT BEHALF WHI CH WERE MOSTLY THROUGH BANKING CHANNEL. THE ASSESSEE MAINTAINED BOOKS OF A CCOUNT WHICH WERE DULY AUTHENTICATED BY SUPPORTING VOUCHERS AND THE COMPLE TE DETAILS IN THIS REGARD WERE PRODUCED BEFORE THE AO IN COURSE OF THE REMAND PROCEEDINGS. THE AO IN THE REMAND REPORT DID NOT COMMENT ADVERSELY ON THE EVIDENCE ADDUCED ON RECORD. AO HOWEVER CHOOSE TO IMPORT AN ALTOGETHER N EW DIMENSION TO DEAL WITH THE MATTER. THE ONLY GRIEVANCE RAISED BY THE A O IN THE REMAND REPORT IS THAT IT WAS OBSERVED THAT ASSESSEE HAD PAID IN EXCESS OF RS.20,000/- TO M/S SILPI SOFTWARE & M/S FINANCIAL TECHNOLOGIES (IN DIA) LTD WITHOUT DEDUCTION OF TDS. AS SUCH, SAME SHOULD BE DISALLOWE D. IT IS AN ADMITTED FACT THAT THE DETAILS OF PAYMENTS MADE BY THE ASSES SEE TO THESE ENTITIES WERE SUBMITTED BEFORE THE ASSESSING OFFICER. IN PURSUANC E OF ITS ACTIVITIES, THE ASSESSEE HAD TO PURCHASE SOFTWARE AND THEIR UPDATES FOR WHICH CONTENT WAS BOUGHT FROM THESE TWO CONCERNS. IN CURSE OF REMAND PROCEEDINGS, IT WAS APPRISED TO THE AO THAT SINCE THE PAYMENTS MADE TO THESE TWO CONCERNS WERE TOWARDS SALE BY THE ASSESSEE, THERE WAS NO NEED TO DEDUCT ANY TAX AT SOURCE FROM SUCH PAYMENTS MADE. THE AO HOWEVER, WAS NOT IMPRESSED WITH SUCH CONTENTION. IT WAS MISCONCEIVED BY THE AO THAT THE PURCHASE OF SOFTWARE AND ITS UPDATES BY THE ASSESSEE AROSE OUT OF CONTRA CTUAL OBLIGATION. IT IS THEREFORE, AN ADMITTED FACT THAT THE AO HAS NOT COR RECTLY APPRECIATED THAT THE TRANSACTIONS IS IN THE NATURE OF PURCHASE WHICH IS CONSEQUENTLY A SALE BY ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 5 THE OTHER PARTY. THE AO DID NOT PROVE THE EXISTENCE OF A CONTACT BETWEEN THESE TWO CONCERNS AND THE ASSESSEE AND ACCORDINGLY , HIS CONSIDERATION IN APPLICATION OF THE PROVISIONS OF 40(A)(IA) READ WIT H S. 194C OF THE ACT IS REDUNDANT IN THE CIRCUMSTANCES. IT IS NOT IN DISPUT E THAT THE ASSESSEE HAD PURCHASED SOFTWARE AND UPDATES THEREOF FROM THESE T WO CONCERNS. AS THE TRANSACTIONS OF SALES AND PURCHASE ARE OUTSIDE THE SCOPE AND AMBIT OF S. 194C OF THE ACT THEREFORE THE FINDING OF AO BY INVO KING THE PROVISIONS OF S. 40(A)(IA) OF THE ACT IN CIRCUMSTANCES OF THE CASE I S THOROUGHLY TENUOUS. IN OTHER WORDS, THE PROGNOSIS ARRIVED AT BY THE FUTILE IMAGINATION OF AO CAN NEVER BE THE CRITERION FOR TAKING THE TRANSACTIONS CONCER NED OUTSIDE THE PURVIEW OF PURCHASE AND SALE. THE ONLY RELATIONSHIP WHICH CA N SUBSIST IN THE CIRCUMSTANCES BETWEEN THE ASSESSEE AND SAID CONCERN S IS THAT OF PURCHASER AND SELLER. IT HAS BEEN CLARIFIED THAT THE PROVISIO NS OF THIS SECTION WILL NOT COVER CONTRACTS FOR SALE FOR GOODS [CIRCULAR NO.681/F.NO. 275/54/93-ITB (1994) 206 ITR (ST) 299]. THERE IS NO DISPUTE THAT THERE W AS A CONTRACT WHICH IN THE INSTANT CASE AMOUNTED TO CONTRACT FOR SALE OF GOODS AND NOT WORKS CONTRACT SO TO INVITE THE MISCHIEF OF S. 194C OF THE ACT. IN TH E INSTANCE CASE, THERE WAS NO CONTRACT SUBSISTING BETWEEN THE ASSESSEE AND THE TW O CONCERNS FOR CARRYING OUT ANY WORK ON ITS BEHALF AND NOTHING HAS BEEN BRO UGHT ON RECORD TO THE CONTRARY BY THE AO APART FROM IS BASELESS IMAGINATI ON ON THE ISSUE AND ACCORDINGLY, THE ALLEGED PROPOSAL TO INVOKE THE PRO VISIONS OF S. 40(A)(IA) OF THE ACT IN THE INSTANT CASE IS ULTRA VIRES THE SCOPE AND AMBIT OF SUCH ENACTMENT. IT IS THUS AXIOMATIC THAT THE PROVISIONS OF S. 40(A)(I A) READ WITH S. 194C OF THE ACT WERE NOT ATTRACTED IN THE CIRCUMSTANCES AND AS SUCH NO LIABILITY TO DEDUCT TAX AT SOURCE ARISES AND THEREFORE, THE ACTION CONCEIVE D IN THIS RESPECT IS WHOLLY UNFOUNDED IN THE CIRCUMSTANCES. IN SUCH AO MISCONST RUED THE LEGAL POSITION IN THIS RESPECT CONSIDERING EXTRANEOUS FACTORS NOT GER MANE TO THE ISSUE AND THE LD. CIT(A) IN APPRECIATING THE EVIDENCE IN THE CORR ECT PERSPECTIVE AND CAME TO THE OPPOSITE FINDING WITHIN THE STATUTORY PRESCRIPT ION IN THIS RESPECT. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO. ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 6 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT AO HAS MADE THE A SSESSMENT U/S. 144 OF THE ACT BY DISALLOWING THE EXPENSE CLAIMED BY ASSESSEE UNDER HEAD COMPUTER AND SOFTWARE MAINTENANCE ON THE GROUND THAT NO DOC UMENTARY EVIDENCE IN SUPPORT OF SUCH EXPENSES WERE FURNISHED. HOWEVER, L D. CIT(A) HAS DELETED THE ADDITION BY HOLDING THAT PROVISION OF TDS ARE N OT APPLICABLE TO THIS TRANSACTIONS AS THE EXPENSE WAS INCURRED FOR THE PU RCHASE OF SOFTWARE. IN APPELLATE STAGE, LD. CIT(A) HAS ALSO CALLED FOR REM AND REPORT FROM AO WHICH IS PLACED AT 24 PAGE OF PAPER BOOK, WHICH REPRODUCED B ELOW:- 4. ASSESSEE HAS PRODUCED LEDGER COPY OF COMPUTER & SOFTWARE MAINTENANCE WHEREIN IT WAS OBSERVED THAT ASSESSEE HAS PAID IN EXCESS OF RS.20,000/- TO M/S SHILPI SOFTWARE M/S F INANCIAL TECHNOLOGIES (INDIA) LTD WITHOUT DEDUCTION OF TDS. AS SUCH, SAME SHOULD BE DISALLOWED. IN REMAND REPORT AO SUBMITTED THAT PAYMENT MADE TO M/S SHILPI SOFTWARE AND M/S FINANCIAL TECHNOLOGIES (INDIA) LTD. WERE SUBJEC T TO TDS AND SAME HAS NOT BEEN COMPLIED WITH. HOWEVER, THE BILLS SUBMITTED OF THE ABOVE PARTIES WHICH ARE PLACED AT PAGES 79 TO 82 OF ASSESSEES PAPER BO OK, ON ITS PERUSAL, WE FIND THAT THESE EXPENSES HAVE BEEN INCURRED TOWARDS THE PURCHASE OF SOFTWARE AND AS SUCH NO SERVICE WAS INVOLVED. THEREFORE, IN OUR CONSIDERED VIEW, THAT SUCH TRANSACTIONS WERE OUT OF PURVIEW OF TDS PROVIS ION. THE ASSESSEE HAS ALSO SUBMITTED THE LEDGER COPY OF COMPUTER AND SOFT WARE MAINTENANCE WHICH IS AT PAGE 276 OF THE ASSESSEES PAPER BOOK WHERE T HE PAYMENT DETAILS THROUGH BANKING CHANNEL HAS ALSO BEEN PLACED. THERE FORE, THE GENUINENESS OF THE EXPENSE CANNOT BE DOUBTED. ACCORDINGLY, IN OUR CONSIDERED VIEW, WE UPHOLD THE ORDER OF LD. CIT(A) AND THIS GROUND OF R EVENUES APPEAL IS DISMISSED. 7. NEXT ISSUE RAISED BY REVENUE IN GROUND NO. 2 IS THAT LD. CIT(A) ERRED IN NOT DISALLOWING THE CAPITAL EXPENDITURE INCURRED BY ASSESSEE FOR PURCHASE OF SOFTWARE EXPENSE. ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 7 8. AT THE OUTSET WE FIND THAT THE ISSUE RAISED IN T HIS GROUND BY REVENUE IS CONNECTED WITH THE FIRST GROUND OF APPEAL AND IT WA S SUBMITTED THAT THE EXPENSE INCURRED ON THE PURCHASE OF SOFTWARE AMOUNT S TO CAPITAL EXPENDITURE BUT ASSESSEE INSTEAD OF CAPITALIZING THE SAME HAS C LAIMED AS REVENUE EXPENDITURE, THEREFORE, IT NEEDS TO BE DISALLOWED. HOWEVER, LD. CIT(A) HAS TREATED THE SAME AS REVENUE IN NATURE AND DELETED T HE SAME. 9. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US WITH T HE ISSUE THAT SUCH EXPENSE SHOULD BE TREATED AS CAPITAL IN NATURE. 10. FROM THE FACTS OF THE CASE, WE FIND THAT EXPENS E INCURRED ON ACCOUNT OF MAINTENANCE OF COMPUTER AND SOFTWARE OR UPDATE THEM DO NOT CREATE ANY ASSET OF ENDURING BENEFIT BUT MERELY ASSIST THE ASS ESSEE TO CARRY OUT ITS ACTIVITIES IN THE MANNER DESIRED BY STATUTORY REGUL ATOR. AS SUCH, WE FIND THAT NO FIXED ASSET IS COMING INTO EXISTENCE OUT OF THE EXP ENSE INCURRED FOR THE PURCHASE OF SOFTWARE. HENCE, IN OUR CONSIDERED VIEW , THE ISSUE OF CAPITALIZING THE SAME EXPENSE DOES NOT ARISE AND WE UPHOLD THE O RDER OF LD. CIT(A). IN THIS CONNECTION WE ARE PUTTING OUR RELIANCE IN THE JUDGMENT OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. SOUTHERN ROA DWAYS LTD. (2006) 282 ITR 379. THE RELEVANT EXTRACT OF THE ORD ER IS REPRODUCED BELOW. '(IV) WHETHER, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT RS. 24,12,000 PAID TO HCL FOR PURCHASE OF NEW COMPUTERS ALLOWABLE AS A DEDUCTION AS A REVENUE EXPENDITURE ? ' 7.2. INSOFAR AS FOURTH QUESTION IS CONCERNED, IT IS NOT IN DISPUTE THAT THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE FOR INSTALLA TION OF NEW COMPUTERS, BUT CLAIMED THE EXPENDITURE FOR THE UPGRADATION OF THE EXISTING COMPUTERS. FURTHER, THE EXPENDITURE WAS INCURRED FOR IMPROVING THE EFFICIENCY OF THE EXISTING SYSTEM WITH A VIEW TO KEEP PACE WITH IMPRO VEMENT OF TECHNOLOGY AND NO MACHINERY WAS BROUGHT INTO EXISTENCE. AS RIGHTLY POINTED OUT BY THE TRIBUNAL, THERE WAS NO COMPLETE STRUCTURAL ALTERATI ON AND, ON THE OTHER HAND, THERE WERE ONLY CHANGES IN CERTAIN AREAS FOR IMPROV ING EFFICIENCY AND ACHIEVING GOOD RESULTS. THE ASSESSEE HAS NOT ACHIEV ED ANY ENDURING BENEFIT. 7.3. THE SUPREME COURT IN ALEMBIC CHEMICAL WORKS CO. LTD . VS. CIT (1989) 77 CTR (SC) 1 : (1989) 177 ITR 377 (SC), AFTER REFE RRING TO B.P. AUSTRALIA LTD. ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 8 VS. COMMR. OF TAXATION OF THE COMMONWEALTH OF AUSTR ALIA (1966) AC 224 (PC), HELD THAT : 'WHAT IS CAPITAL EXPENDITURE AND WHAT IS REVENUE AR E NOT ETERNAL VERITIES BUT MUST NEEDS BE FLEXIBLE SO AS TO RESPOND TO THE CHAN GING ECONOMIC REALITIES OF BUSINESS. THE EXPRESSION 'ASSET OR ADVANTAGE OF AN ENDURING NATURE WAS EVOLVED TO EMPHASIS THE ELEMENT OF A SUFFICIENT DEG REE OF DURABILITY APPROPRIATE TO THE CONTEXT.' IT WAS ALSO HELD THAT THE PHRASE 'ENDURING BENEFIT' IS NOT THINKING OF ADVANTAGES THAT ARE PERMANENT. THERE IS A DIFFERENC E BETWEEN THE LASTING AND THE EVERLASTING. 7.4. IN THE LIGHT OF THE ABOVE RATIO LAID DOWN BY THE SU PREME COURT, WE ARE OF THE VIEW THAT UPGRADATION OF COMPUTERS BY CHANGING CERTAIN PARTS THEREBY ENHANCING THE CONFIGURATION OF THE COMPUTERS FOR IM PROVING THEIR EFFICIENCY, BUT, WITHOUT MAKING ANY STRUCTURAL ALTERATIONS IS N OT OF AN ENDURING NATURE. FURTHER, THE ASSESSEE HAD NOT ACQUIRED ANY COMPUTER SOFTWARE. THE EXPENDITURE INCURRED BY THE ASSESSEE HAS, THEREFORE , TO BE TREATED AS REVENUE EXPENDITURE. ACCORDINGLY, THE QUESTION IS ANSWERED IN THE AFFIRMATIVE, AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. IN THE RESULT, BOTH THE APPEALS STAND DISMISSED. CO NSEQUENTLY, TCMP NO. 1207 OF 2005 IS ALSO DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE F IND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). HENCE THIS GROUND OF APPEA L OF REVENUE IS DISMISSED. 11. NEXT GROUND RAISED BY REVENUE IN THIS APPEAL TH AT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF BOG US SUNDRY CREDITORS. DURING THE COURSE OF ASSESSMENT PROCEEDING ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS SUNDRY CREDI TORS SHOWN IN THE BALANCE- SHEET FOR AN AMOUNT OF 1,77,89,435/-. ACCORDINGLY, AO TREATED THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND DISAL LOWED THE SUNDRY CREDITORS OF 1,77,98,475/- ADDED TO THE TOTAL INCOME OF ASSESSEE . 12. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS IT WAS SUBMITTED THAT AO HAS NOT GIVEN TO US SUFFICIEN T OPPORTUNITY TO SUBMIT THE DETAILS & PRODUCE EVIDENCES. THE LD. AO ACTION OF E VOCATION OF PROVISION OF SEC. 68 TO ADD THE AMOUNT OF SUNDRY CREDITORS IN WA NT OF EVIDENCE AS CASH ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 9 CREDIT IS NOT A JUSTIFIED ACT. THE LD. AO FORGOT TH AT THE ASSESSEE HAS SHOWN PURCHASE / SALE OF SHARE IN THE AUDITED ACCOUNTS SU BMITTED BEFORE HIM. WHEN THERE IS SALE / PURCHASE, THERE WILL REMAIN SUNDRY DEBTORS / SUNDRY CREDITORS. FURTHER THE ASSESSEE EARNS INCOME FROM SHARE BRAKIN G. IN SHARE MARKET IF A CLIENT SALES OR PURCHASE SHARES, THE TRANSACTION OF PAYMENT TAKES PLACE AFTER 2-3 DAYS DEPENDING UPON THE DELIVERY OF SHARES RECE IVED/ MADE. IT IS THE GUIDELINE PRESCRIBED BY THE SEBI, THE SHARE MARKET REGULATORY IN INDIA. TILL THEN THE DEBIT / CREDIT ENTRIES WILL REFLECT IN THE BOOKS OF ACCOUNT OF THE BROKER. CONSIDERING THOSE BALANCES AS CASH CREDIT IS TOTALL Y WRONG & UNJUSTIFIED. THE DETAILS OF SUNDRY CREDITORS WHICH CONTAIN DETAILS S UCH AS NAME OF THE PARTY, ADDRESS, PAN & AMOUNT DUE TO HIM. THE COPIES OF LED GER PRINT OUT OF SOME OF THOSE PARTIES, CONFIRMATION FROM SOME OF THE PARTIE S, COPIES OF THEIR IT RETURN & COPIES OF KYC FORMS IS AN EVIDENCE TO PROVE THE SUN DRY CREDITORS GENUINENESS AS WELL AS THEIR EXISTENCE. IT IS WORTH MENTIONING THAT SCRUTINY PROCEEDING OF THE SAME ASSESSEE HAS ALSO TAKEN PLACE FOR THE AYS 2007-08 AND 2009-10, THE SAME LD. AO WHO HAS PASSED THIS ORDER HAS ALSO COMPLETED THE SCRUTINY PROCEEDINGS FOR THE ASST. YEAR 207-08 U/S. 143(3) A ND ALLOWED THE SAME SET OF SUNDRY CREDITORS. FURTHER FOR THE ASST. YEAR 2009-1 0, THE PRESENT AO HAVE VERIFIED SOME OF THE SUNDRY CREDITORS (ALMOST SAME SET OF SUNDRY CREDITORS) BY ISSUING NOTICE U/S. 133(6) OF THE IT ACT & DULY GOT REPLIES THEREOF. WE ARE SUBMITTING HEREWITH COPIES OF ASST ORDER PASSED U/S . 143(3) FOR THE ASST. YEAR 2007-08 & 2009-10 FOR YOUR KIND REFERENCE. AS REGAR D THE LD. AO COMMENTS UNDER THE REMAND REPORT SUBMITTED BY HIM THAT THE A SSESSEE HAS PRODUCED LIST OF SUNDRY CREDITORS, BUT GENUINENESS OF SUNDRY CRED ITORS COULD NOT BE FOUND. IT IS SUBMITTED HEREWITH CONFIRMATION LETTER, COPIES O F THEIR IT RETURNS & COPIES OF KYC FORMS AS PROOF OF THEIR GENUINENESS & EXISTENCE . THESE ARE THE ADDITIONAL EVIDENCE WHICH MAY PLEASE BE ADMITTED SI NCE THE LD. AO HAS NOT GIVEN US SUFFICIENT OPPORTUNITY TO PRODUCE THE DETA ILS & EVIDENCE. IN VIEW OF THE ABOVE SUBMISSION MADE, IT IS HUMBLY PRAYED THAT THE GROUNDS RAISED BY THE ASSESSEE MAY PLEASE BE ALLOWED. ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 10 13. CONSIDERING THE SUBMISSIONS MADE BEFORE THE LD CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT, AND THE MATERIAL PLACED ON RECORD. I HAV E ALSO GONE THROUGH THE REMAND REPORT OF THE ASSESSING OFFICER. APPAREN TLY, THE ASSESSMENT HAS BEEN MADE IN HASTE WITHOUT AFFORDING ADEQUATE O PPORTUNITY TO THE APPELLANT COMPANY. EVEN THE ASSESSING OFFICER HAS N OT DISCHARGED HIS BURDEN OF PROOF IN SPITE OF THE FACT THAT THE APPEL LANT HAS FURNISHED COMPLETE LIST OF THE SUNDRY CREDITORS. IT IS UNDENI ABLE FACT THAT THERE ARE BOUND TO BE SUNDRY CREDITOR AND DEBTORS EVEN FOR TH E LAST DAY OF THE FINANCIAL YEAR. IT IS TRUE THAT SCOPE OF SECTION 68 IS NOT RESTRICTED ONLY TO CASH ENTRIES IN ACCOUNTS AND THAT IF CREDITS IN ACC OUNT FOUND BOGUS, THE SAME CAN BE ADDED. HOWEVER THIS IS NOT THE CASE OF THE APPELLANT. THE SUNDRY CREDITOR ARE EVIDENTLY TRADE CREDITORS. EVEN THE SAME ASSESSING OFFICER HAS FOUND EXISTENCE OF SAME SET OF SUNDRY C REDITORS AFTER VERIFICATION UNDER SEC. 133(66) OF THE IT ACT AS GE NUINE IN ASSESSMENTS MADE UNDER SCRUTINY FOR SUBSEQUENT ASSESSMENT YEARS , I.E. FOR ASSESSMENT YEARS 2007-08 AND 2009-10. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUPPORT HIS FINDING THAT THE SUNDRY CREDITORS ARE NOT GENUINE OR UNEXPLAINED OR BOGUS IN SPITE OF THE FACT THAT THE ASSESSING OFFICER HAS BEEN GIVEN AN O PPORTUNITY TO EXAMINE THE ADDITIONAL EVIDENCE PUT FORTH BY THE AP PELLANT IN THE REMAND STAGE. ON THE OTHER HAND THE MATERIALS EVIDE NCE REGARDING THE SUNDRY CREDITORS PLACED ON RECORD SUPPORTS THE CLAI M OF THE APPELLANT. IN THE VIEW OF THE MATTER, THE ADDITION MADE BY THE AS SESSING OFFICER ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS IS NOT SUST AINABLE. (RELIANCE IS ALSO PLACED ON THE DECISION OF THE HON'BLE DELHI HI GH COURT INCOME CIT VS. P.S.JAIN & CO. LTD. (210) 322 ITR 320 (DEL)) IN THIS REGARD. THERE IS ANOTHER ASPECT OF THE MATTER IN THE CASE O F CIT VS. PANCHAM DAS JAIN (2006) 205 CTR (ALL) 444, IT WAS HELD THAT PROVISI ONS OF SEC.68 ARE NOT ATTRACTED TO AMOUNTS REPRESENTING PURCHASES ON CREDITS. IT WAS OBSERVED. THE TRIBUNAL HAS RECORDED A CATEGORIC FIN DINGS OF FACT BASED ON APPRECIATION OF MATERIALS AND EVIDENCE ON RECOR D THAT THE AO HAD ACCEPTED THE PURCHASES, SALES AS ALSO THE TRADING R ESULTS DISCLOSED BY THE ASSESSEE. IT HAD RECORDED A FINDING THAT THE TW O AMOUNTS REPRESENTED THE PURCHASES MADE BY THE ASSESSEE ON C REDIT AND THEREFORE, THE PROVISIONS OF SECTION 68 COULD NOT B E ATTRACTED IN THE PRESENT CASE. THE VIEW TAKEN BY THE TRIBUNAL ON THI S ISSUE IS SUSTAINABLE INASMUCH AS ON THE BASIS OF THE FINDING S RECORDED B IT THAT THESE TWO AMOUNTS REPRESENTED PURCHASES MADE BY THE ASSESSEE ON CREDIT AND THE PURCHASES AND SALES HAVING BEEN ACCE PTED BY THE DEPARTMENT, THE QUESTION OF ADDITION OF THE SAID TW O AMOUNTS UNDER SECTION 68 DID NOT ARISE INASMUCH AS THE PROVISIONS OF SECTION 68 WOULD NOT BE ATTRACTED ON THE PURCHASES MADE ON CREDIT. ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 11 IN VIEW OF THE ABOVE AND CONSIDERING THE FATS AND I N THE CIRCUMSTANCES OF THE CASES AND THE EMERGING LEGAL POSITION, THE A DDITION OF RS.1,77,98,435/- ON ACCOUNT OF EXPLAINED SUNDRY CR EDITORS IS HELD TO BE UNJUSTIFIED AND UNWARRANTED. THE ADDITION IS, TH4ER EFORE, DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 14. BEFORE US LD. DR SUBMITTED THAT CREDITORS WERE NOT VERIFIED AT THE TIME OF ASSESSMENT PROCEEDINGS U/S 144 OF THE ACT WITH R EGARD TO THEIR IDENTITY, CREDITWORTHINESS. HE FURTHER OBSERVED THAT ASSESSEE HAS SUBMITTED THE COMPUTER PRINTS OUT IN SUPPORT OF ITS CLAIM FOR SUN DRY CREDITORS BUT THE VERIFICATION OF THE SAID CREDITORS HAS NOT BEEN DON E BY AO DURING THE ASSESSMENT PROCEEDINGS. LASTLY, HE PRAYED BEFORE TH E BENCH THAT ISSUE MAY BE REMITTED BACK TO THE FILE OF AO FOR FRESH ADJUDI CATION. IN REJOINDER LD. AR SUBMITTED THAT IT IS AN ADMITTE D FACT THAT IN THE INSTANT CASE THE AO HAD MADE AN ADDITION OF RS.1,77,98,435/- BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT BY CONCEIVING THAT THE OUTSTA NDING AMOUNT PAYABLE ON ACCOUNT OF SUNDRY CREDITORS WERE ALLEGEDLY UNEXPLAI NED. HE STATED THAT THERE IS NO DISPUTE THAT THE ASSESSEE MAINTAINED BOOKS U/ S. 44AA OF THE ACT WHICH WAS DULY AUDITED UNDER THE STATUTORY REQUIREMENT OF SECTION 44AB OF THE ACT. THE PROVISIONS OF SECTION 68 OF THE ACT COME INTO P LAY ONLY WHERE THE AO FOUND THAT A CASH CREDIT IS RECORDED IN THE BOOKS A ND THE ASSESSEE OFFERED NO EXPLANATION AS TO THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED IS NOT SATISFACTORY IN HIS OPINION THEN SUCH CREDIT MA Y BE DEEMED TO BE THE INCOME OF THE TAXPAYER FOR THE CORRESPONDING ASSESS MENT YEAR. HE FURTHER STATED THAT THE CONDITIONS PRECEDENTS ARE AS UNDER (1) THERE SHALL BE A CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE; (2) AN OPPORTUNITY FOR SUBMITTING AN EXPLANATION A S TO THE NATURE AND SOURCE OF SUCH CREDIT ENTRY APPEARING WITHIN THE BO OKS OF ACCOUNT IS TO BE PROVIDED TO THE ASSESSEE; AND ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 12 (3) THE ASSESSEE OFFERS NO EXPLANATION OR SUCH EXP LANATION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING AUTHORITY, ONLY THEN THE AMOUNT MAY BE DEEMED TO BE INCOME OF THE ASSESS EE. THERE IS NO DOUBT OR DISPUTE THAT THE ADDITION OF RS. 1,77,98,4 35/- WAS MADE WITHOUT GIVING ANY OPPORTUNITY TO THE RESPONDENT. IN THE REMAND PROCEEDINGS THE AO DID NOT ISSUE ANY SUMMONS U/S. 131 OF THE ACT AND/OR NOTICE U/S. 133(6) OF THE ACT TO SUCH AD DRESSES AS PROVIDED BY THE ASSESSEE TO VERIFY THE EXISTENCE OF SUCH CREDITORS. HE FURTHER STATED THAT IT IS ALSO NOT IN DISPUTE THAT THE RESPONDENT HAD REGULAR BUSINESS TRANSACTIONS WITH THESE CLIENTS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. THE ASSESSEE HAD MADE PURCHASES TRANSACTIO NS AND/OR SETTLEMENT WORTH RS. 2,74,36,705/- IN AGGREGATE DURING SUCH PE RIOD IN RESPECT OF THESE CLIENTS. FURTHER ASSESSEE MADE SALE TRANSACTIONS AN D/OR SETTLEMENT OF RS. 2,53,69,738/- IN AGGREGATE DURING THE RELEVANT PREV IOUS YEAR. HE STATED THAT ASSESSEE HAD AN OPENING BALANCE OF RS.1,57,31,469/- AS ON 01-04-2005 AND ACCORDINGLY AN AMOUNT OF RS.1,77,98,436/- IN AGGREG ATE IN RESPECT OF THE 75 CLIENTS WAS DISCLOSED AS SUNDRY CREDITOR AS ON 31-0 3-2006. A 'CASH CREDIT' AS CONCEIVED WITHIN THE SCOPE OF SECTION 68 OF THE ACT DOES NOT ARISE FROM A TRADING TRANSACTION BUT INVOLVES MERELY DEPOSITS AN D WITHDRAWALS. HE STATED THAT IN THE INSTANT CASE, THE ITEM UNDER 'SUNDRY CR EDITORS' REPRESENTS THE PAYMENTS DUE TO CLIENTS ON ACCOUNT OF SALE OF SHARE S. IN OTHER WORDS THE AMOUNT IS BASICALLY CREDIT BALANCE ON ACCOUNT OF SU NDRY DEBTORS. HE FURTHER STATED THAT AO DID NOT ALLOW OPPORTUNITY TO THE RES PONDENT TO EXPLAIN THE NATURE OF THE ITEMS SUBSUMED IN THE ITEM 'SUNDRY CR EDITORS' AND REACHED THE CONCLUSION IN EXTREME HASTE. IN PURSUANCE OF ITS AC TIVITIES AS A SHARE BROKER, THE ASSESSEE HAD TO DEAL ON BEHALF OF ITS CLIENTS. LD. AR STATED THAT IN THE SHARE MARKET WHEN A CLIENT PURCHASE OR SALES SHARES THEN THE TRANSACTIONS OF PAYMENTS TAKES PLACE AFTER A HIATUS OF TWO TO THREE DAYS WHICH DEPENDS UPON DELIVERY OF SHARES. THUS AT THE END OF MARCH 2006 S UCH AMOUNT REMAINED OUTSTANDING. THIS IS NOT A UNIQUE FUTURE OF THE BUS INESS OF THE ASSESSEE FOR THE INSTANT ASSESSMENT YEAR. IT IS A COMMON ENOUGH ITEM APPEARING IN THE PREVIOUS AS WELL AS SUBSEQUENT ASSESSMENT YEARS. IT IS AN ADMITTED FACT THAT ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 13 IN THE REMAND PROCEEDINGS THE ASSESSEE PRODUCED THE LEDGER ACCOUNT OF THE SUNDRY CREDITORS ALONG WITH THEIR CONFIRMATIONS AS WELL AS BANK STATEMENTS AND ALSO PRODUCED COPIES OF RETURNS OF INCOME IN RESPEC T OF SOME OF THEM. HE HOWEVER NEVERTHELESS CONCEIVED THAT GENUINENESS OF THE SUNDRY CREDITORS COULD NOT BE ESTABLISHED. THIS IS A MISNOMER IN THE CIRCUMSTANCES OF THE CASE. FURTHER. THE AMOUNT OF RS. 1,77,98,436/- DISCLOSED ON ACCOUNT OF 'SUNDRY CREDITORS' BY THE ASSESSEE WERE ACTUALLY OUTSTANDIN G AMOUNT TO BE PAID TO ITS CLIENTS AND WERE PAID SUBSEQUENTLY DURING THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-2008. HE STATED THAT AO FRAMED THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT FOR THE AY 2007-08 WHEREIN H E HAD ACCEPTED THE ITEM 'SUNDRY CREDITORS' AS THE SAID SUM OF RS.1,77,98,43 6/- WAS A MERE OUTSTANDING AMOUNT AGAINST SALES AND HENCE THE PROV ISIONS OF SEC. 68 OF THE ACT DO NOT COME INTO PLAY IN AS MUCH AS THE SALES R ECORDED IN THE ACCOUNTS WERE NOT DISPUTED. THE AMOUNTS OUTSTANDING WERE SHO WN IN THE BALANCE SHEET AS SUNDRY CREDITORS AS ON 31.03.2006 THOUGH THEY WE RE MAINLY CREDIT BALANCE OF THE DEBTORS. LD. AR VEHEMENTLY RELIED ON THE ORD ER OF LD. CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID D ISCUSSION, WE FIND THAT ASSESSMENT FRAMED BY AO U/S 144 OF THE ACT BY TREAT ING THE SUNDRY CREDITORS OF 1,77,98,455/- AS BOGUS. HOWEVER, LD. CIT(A) DELETED THE SAME BY HOLDING THAT AO HAS NOT FOUND OUT ANY DEFECT IN THE PURCHAS E/ SALES CLAIMED BY ASSESSEE IN THE BOOKS OF ACCOUNT. WE ALSO FIND FROM THE REMAND REPORT OF AO THAT ASSESSEE HAS PRODUCED LEDGER COPY OF SUNDRY CR EDITORS BUT AO COULD NOT VERIFY THE GENUINENESS OF SUCH SUNDRY CREDITORS. NO W THE QUESTION BEFORE US ARISES SO AS TO WHETHER THE SUNDRY CREDITORS CLAIME D BY ASSESSEE THE AMOUNT TO UNEXPLAINED CASH CREDIT WHEN THE RELEVANT PURCHA SE/SALES HAVE ALREADY BEEN ACCEPTED BY AO. FROM THE FACTS OF THE CASE, WE FIND THAT ONCE THE PURCHASE/ SALES CLAIMED BY ASSESSEE HAD ACCEPTED BY AO THEN CORRESPONDING SUNDRY CREDITORS/ DEBTORS CLAIMED BY ASSESSEE CANNOT BE DOUBTED. IN THE INSTANT CASE, AO HAS NOT ACCEPTED T HE PURCHASE/SALES AS ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 14 CLAIMED BY ASSESSEE WITHOUT BRINGING ANY RELEVANT F ACT BUT THE CORRESPONDING CREDIT HAS BEEN DISALLOWED. THEREFORE, IN VIEW OF T HE FACTS OF THE PRESENT CASE, THE ADDITION MADE BY AO ON ACCOUNT OF BOGUS SUNDRY CREDITOR IS NOT SUSTAINABLE IN LAW. IN THIS CONNECTION, WE ALSO REL IED ON THE ORDERS OF VARIOUS CASE LAWS ITO V. SMT. UMADEVI SHANKARAPPA THIMMAIAH (2014) 49 TAXMANN.COM. 496 WHEREIN THE HON'BLE CO-ORDINATE BE NCH OF BANGALORE BENCH HAS HELD AS UNDER:- 3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIALS ON RECORD. IT IS, ADMITTED FACT THAT ALL THE CREDITS ARE TRADE CREDITS AND NONE OF THE SAID CREDIT OF RS.28,95,770 ARE CASH CREDIT. DURING LAST YEAR THE TRADE CREDITORS COVERING 26 IT EMS WERE TO THE TUNE OF RS.13,89,152. IN THE CURRENT YEAR THE TRADE CRED ITORS SWELLED TO RS.28,95,779 (51 ITEMS). IN FACT THE SUNDRY TRADE C REDITORS NOW UNDER CONSIDERATION INCLUDE CARRY FORWARD TRADE CREDITORS TO THE TUNE OF RS.12,24,290. THE ASSESSEE HAD PRODUCED LEDGER DETA ILS OF THE TRADE- CREDITORS AS WELL AS CONFIRMATORY LETTERS FROM FIVE MAJOR TRADE CREDITORS VIDE HER LETTER DT. 25 TH OCT., 2010. THE CONFIRMATION LETTERS FILED FOR CURRENT TRADE CREDITORS AMOUNT TO RS.12,16,474. THE AGGREGATE OF LAST YEARS CARRIED FORWARD TRADE CREDIT AND THE CONFIRM ATIONS FILED FOR CURRENT YEARS CREDIT AMOUNT TO RS.24,40,964 OUT OF RS.28, 95,770. THE AO HAS FAILED TO LOOK INTO THE INFORMATION ALREADY ON RECO RD AND WITHOUT MAKING ANY PROPER ENQUIRIES ON HIS OWN HA ADDED BACK TO IN COME THE ENTIRE TRADE CREDITORS OUTSTANDING WITHOUT ANY JUSTIFICATI ON. IN SUCH CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE AO. THEREFORE , WE UPHOLD THE ORDER OF THE CIT(A) AS CORRECT AND IN ACCORDANCE WI TH THE LAW. IT IS ORDERED ACCORDINGLY. HENCE, APPEAL F THE REVENUE IS DISMISSED. RELIANCE IN THE DECISION OF CO-ORDINATE BENCH OF LU CKNOW A BENCH THIRD MEMBER IN THE CASE OF ITO V. ZAZSONS EXPORTS LTD. (2015) 55 TAXMANN.COM 522 (LUK) WHEREIN THE HEAD NOTE: SECTION 68 OF THE INCOME-TAX ACT, 1961 CASH CRED ITS (SUNDRY CREDITORS) ASSESSMENT YEAR 2005-06 ASSESSEE COM PANY WAS CARRYING ON BUSINESS OF EXPORT OF FINISHED LEATHER AND MANUFACTURE OF SHOE UPPERS AND SHOES WHILE FRAMING ASSESSMENT, A SSESSING OFFICER REQUIRED ASSESSEE TO FURNISH COMPLETE LIT OF PERSON S FROM WHOM RAW HIDES OF GOATS WERE PURCHASED AND FROM WHOM ADVANCE IN SHAPE OF CREDIT HAD BEEN TAKEN BY ASSESSEE AND TO WHOM HUGE AMOUNTS WERE PAYABLE NOT BEING SATISFIED WITH REPLY GIVEN BY A SSESSEE, ASSESSING OFFICER MADE ADDITION UNDER SECTION 68 ON GROUND TH AT ASSESSEE FAILED TO GIVE POSTAL ADD5RESS, WHEREABOUTS, CREDITWORTHIN ESS OF VENDOR AND ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 15 ALSO COULD NOT PROVE GENUINENESS OF TRANSACTION W HETHER MERE NON- VERIFIABLITY OF SUNDRY CREDITORS IPSO FACTO WOULD NOT LEAD TO CONCLUSION THAT SUNDRY CREDITORS WERE BOGUS - HELD, YES WHET HER SINCE ASSESSING OFFICER HAD DRAWN AN ADVERSE CONCLUSION ONLY ON ACC OUNT OF NON- VERFIABILITY OF SUNDRY CREDITORS BUT THERE BEING NO DISPUTE AS REGARDS PURCHASES AND TRADING RESULTS HAVING BEEN ACCEPTED, ADDITION MADE UNDER SECTION 68 WAS NOT SUSTAINABLE HELD, YES [P ARAS 15.2 & 15.3] [IN FAVOUR OF ASSESSEE] FURTHER RELIANCE IN THE JUDGMENT OF HON'BLE ALLAHAB AD HIGH COURT IN THE CASE OF CIT V. PANCHAM DASS JAIN WHEREIN THE HEAD NOTE REPRODUCED BELOW:- SECTION 68 OF THE INCOME-TAX ACT, 1961 CASH CRED ITS ASSESSMENT YEAR 1976-77 ASSESSEE WAS A DEALER IN IRON GOODS AND AGRICULTURAL IMPLEMENTS ITO WHILE FRAMING ASSESSMENT OF ASSESS EE FOR RELEVANT ASSESSMENT YEAR FOUND CERTAIN DEPOSITS APPEARING IN BOOKS OF ACCOUNT OF SE IN NAME OF TWO PERSONS AND, THEREFORE, ASKED ASSESSEE TO EXPLAIN NATURE AND SOURCE OF VARIOUS DEPOSITS AS SE WAS N OT ABLE TO GIVE SATISFACTORY EXPLANATION WITH REGARD TO NATURE AND SOURCE OF AFORESAID DEPOSITS, ITO MADE ADDITION UNDER SECTION 68 TRIB UNAL, HOWEVER, RECORDED A CATEGORICAL FINDING OF FACT BASED ON APP RECIATION OF MATERIALS AND EVIDENCE ON RECORD THAT SAID AMOUNTS REPRESENTE D PURCHASES MADE BY ASSESSEE ON CREDIT; THEREFORE, IT HELD THAT PROV ISIONS OF SECTION68 WOULD NOT BE ATTRACTED IN SUCH CASES AND, ACCORDING LY, IT DELETED ADDITIONS- WHETHER, ON FACTS, TRIBUNAL WAS JUSTIFIE D IN DELETING ADDITIONS HELD, YES IT IS ALSO PERTINENT TO NOTE THAT THE ALMOST SAME S ET OF SUNDRY CREDITORS WERE ACCEPTED IN THE ASSESSMENT YEARS 2007-08 AND 2009-1 0 WITHOUT MAKING ANY DISALLOWANCE. THE LD. DR FAILED TO BRING ANYTHING CONTRARY TO THE ARGUMENT OF THE LD. AR. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS WE ARE OF THE VIEW THAT THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE AO. THEREFORE, WE UPHOLD THE ORDER OF LD. CIT(A) AS CORRECT AND IN AC CORDANCE WITH THE LAW. IT IS ORDERED ACCORDINGLY. HENCE, APPEAL OF THE REVENUE I S DISMISSED. 16. LAST GROUND RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN ADMITTING THE NEW EVIDENCE WITHOUT RECORDING THE RE ASON FOR ITS ADMISSION ITA NO.611/KOL/2012 A.Y. 2006-07 ITO WD-9(3) KOL V. M/S CHANAKYA STOCK BRO KING SERVICES LTD. PAGE 16 WHICH IS IN CONTRAVENTION OF PROVISION OF RULE 46A( 2) OF THE IT RULES 1962 AND WITHOUT GIVING REASONABLE OPPORTUNITY TO THE ASSESS ING OFFICER. 17. AT THE OUTSET, WE FIND THAT LD. CIT(A) HAS ADMI TTED ALL THE NEW EVIDENCE PRODUCED BY ASSESSEE AFTER TAKING REMAND REPORT FRO M THE AO. AS SUCH, IN OUR CONSIDERED VIEW, THE NEW FACT HAS BEEN ADMITTED AS PER RULE 46A OF THE IT RULES AND THEREFORE, THIS GROUND OF REVENUES APPEA L DOES NOT REQUIRE ANY ADJUDICATION. 18. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 05/ 07/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP $!% &- 05 / 07 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-9(3), P-7, CCHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 5 TH FLOOR, ROOM NO.1 4, KOLKATA-700 069 2. /RESPONDENT- M/S CHANAKYA STOCK BROKING SERVICES LT D., 14, INDIA EXCHANGE PLACE, 2 ND FLOOR, KOLKATA-700 001 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,