The ITO, Ward 4, Surendranagar V. M/s K P Cotton Industries,

ITA 650/RJT/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67220 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-03-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained cash credit
• Section: 68; 143(3)

Judgement Text

R Y : % : IN THE INCOME TAX APPELLATE TRIBULAL : RAJKOT BENCH : RAJKOT .. [, R .. , BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 650/RJT/2010 TR R/ ASSESSMENT YEAR 200 5 - 0 6 INCOME - TAX OFFICER, V. M/S. K P COTTON INDUSTRIES WARD - 4, OPP. MELA MAIDAN, SHEKHPER SURENDRANAGAR TAL. MULI PAN: AAEFK3756H DATE OF HEARING : 22 - 0 3 - 201 3 DATE OF PRONOUNCE MENT : 12 - 0 4 - 201 3 REVENUE BY: SHRI ANKUR GARG, CIT (DR) ASSESSEE BY: SHRI D. M. RINDANI, CA / ORDER .. / D. K. SRIVASTAVA : T HE APPEAL FILED BY THE REVENUE WAS EARLIER DISPOSED OF BY THIS TRIBUNAL ON 20 . 04 . 2012. THE ASSESSEE THEREAFTER FILED A MISCELLANEOUS APPLICATION (BEING MA NO.29/RJT/2012 ) , WHICH WAS ALLOWED BY THIS TRIBUNAL VIDE ITS ORDER DATED 30.10.2012 AND RESULTANTLY THE APPEAL FILED BY THE REVENUE WAS RESTORED FOR FRESH HEARING AND DISPOSAL. TH E APPEAL HAS BEEN REHEARD ON 22.03.2013. 2. THE R EVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) IS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.95,61,574/ - IN RESPECT OF NEW CREDITS AS LD. CIT(A) HAS FAILED TO GIVE SUF FICIENT DIRECTION/OPPORTUNITY TO AO TO VERIFY THE GENUINENESS OF LOANS CREDITORS. 2. THE LD. CIT(A) HAS FAILED TO GIVE A FINDING ON GENUINENESS OF THE ALL NEW CREDITORS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD T HE ORDER OF THE ASSESSING OFFICER, AS EVIDENCE FILED BEFORE CIT(A) DOES NOT COVER ALL THE CREDITORS. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT . 3 . R ETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31 - 10 - 2005 RETURNING LOSS AT RS. 93,400/ - AS AGAINST WHICH A SSESSMENT U/S 143(3) WAS COMPLETED ON 03 - 09 - 2007 ASSESSING THE TOTAL INCOME AT RS.1,40,38,600/ - . PERUSAL OF THE ASSESSMENT 2 ITA 650/RJT/2010 ORDER SHOWS THAT A S UM OF RS.1,20,00,000/ - WAS TREATED AS UNEXPLAINED CASH CREDITS BY THE A.O. WITH THE FOLLOWING OBSERVATIONS: - IT IS OBSERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE COMPLETE BOOKS OF ACCOUNTS AND VOUCHERS OF PURCHASE AND EXPENSES DURING THE COURSE OF HEAR ING AS WELL AS FAILED TO PRODUCE DETAILS LIKE CONFIRMATION LETTERS, PAN NO ETC. OF NEW DEPOSITS IN RESPECT OF ANNEXURE A OF THE CASH CREDITS WORTH RS.1,20,00,000/ - REFLECTED IN BOOKS AND AUDIT REPORT, WHICH WERE CREDITED IN CONCERNED CREDITORS ACCOUNT IN ASSESSEES BOOKS DURING THE YEAR F.Y. 2004 - 05. THE ASSESSEE HAS NOT COMPLIED WITH SHOW CAUSE NOTICE DTD.24/07/2007. THE ASSESSEE FAILED TO PROVE CASH CREDITS AS GENUINE OR SATISFACTORILY NOT EXPLAINED DURING THE COURSE OF HEARING EVEN AFTER PASSING OF ABOU T 1 MONTHS TIME TO SHOW CAUSE NOTICE. THE ASSESSEE FAILED TO PROVE CASH CREDITS AS GENUINE OR SATISFACTORILY NOT EXPLAINED AND THEREFORE REQUIRED U/S.68 OF THE ACT TO ADD AS CONCEALED INCOME WORTH RS.1,20,00,000/ - BEING CASH CREDITS NOT SATISFACTORILY EXP LAINED. I THEREFORE ADD RS.1,20,00,000/ - AMOUNT OF CASH CREDITS AS UNEXPLAINED U/S.68 OF THE ACT IN RETURNED INCOME OF THE ASSESSEE. 4 . ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER WHICH WAS SUBMITTED BY THE ASSESSING OFFICER VIDE HIS LETTER DATED 30 - 04 - 2009. IN HIS REMAND REPORT, THE AO HAS ACCEPTED THAT CASH CREDITS RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS DURING THE YEAR UNDER APPEAL EXCEPT TO THE EXTENT OF RS.95,61,574/ - WERE OLD. AS REGARDS THE NEW CASH CREDITS AMOUNTING TO RS.95,61,574/ - , THE ASSESSING OFFICER REPORTED AS UNDER: - THE ASSESSEE HAS GIVEN DETAILS IN RESPECT OF ABOVE MENTIONED NEW CASH CREDITORS I.E. THE NAME AND ADDRESS OF THE CREDITORS, P.A. NO., COPY OF THE RETURN OF INCOME FILED BY THE CREDITOR,(IN THE CASE OF SOME CREDITORS), COPY OF THE ACCOUNT OF THE CREDITOR AS PER THE BOOKS OF M/S. K. P. COTTON INDUSTRIES. THE ABOVE DETAILS ARE SUBMITTED BY THE ASSESSEE VIDE ITS LETTER DATED 17/04/2009 AND 27/04/2009. COPIES OF THE SAM E ARE ENCLOSED FOR READY REFERENCE OF YOUR HONOUR. THE ASSESSEE HAS GIVEN THE ABOVE MENTIONED DETAILS AS PER THE BOOKS OF M/S. K. P. COTTON INDUSTRIES, BUT THE ASSESSEE IS NOT ABLE TO PRODUCE CONTRA ACCOUNT OF THE CREDITORS AS PER THE BOOKS OF THE ACCOUNT OF THE CREDITORS. MOREOVER, THE ASSESSEE HAS NOT PRODUCED ANY CONFIRMATION LETTER FROM THE CREDITORS ACCEPTING THAT THE CREDITORS HAS GRANTED LOAN TO M/S. K. P. COTTON INDUSTRIES. CONSIDERING THIS FACT, CASH CREDITS IN RESPECT OF NEW CASH CREDITORS IS NOT EXPLAINED SATISFACTORILY. 5 . AFTER HEARING THE ASSESSEE AND CONSIDERING THE REMAND REPORT SUBMITTED BY THE AO, THE LD. CIT(A) DELETED THE ADDITION NOT ONLY WITH REFERENCE TO OLD CASH CREDITS BUT ALSO WITH REFERENCE TO NEW CASH CREDITS INTRODUCED DURING THE YEAR UNDER 3 ITA 650/RJT/2010 APPEAL. PARA - 6 OF THE APPELLATE ORDER PASSED BY THE LD. CIT(A) IN THIS BEHALF IS RELEVANT WHICH READS AS UNDER: - 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO PERUSED THE ASSESSMENT ORDER AND REMAND REPORT OF THE ASSES SING OFFICER. AS CAN BE SEEN FROM THE REPLY OF THE ASSESSING OFFICER HE DID NOT MAKE ANY ENQUIRY FROM THE NEW CASH CREDITORS. HE SIMPLY SAYS THAT THE CONTRA ACCOUNT OF THE CREDITORS AS PER THE BOOKS OF ACCOUNTS OF THE CREDITORS WERE NOT GIVEN NOR CONFIRMAT ION LETTERS WERE OBTAINED FROM THE CREDITORS, THEREFORE, ALL THE NEW CREDITORS ARE NOT EXPLAINED PROPERLY. I DO NOT UNDERSTAND AS TO WHAT DOES THE ASSESSING OFFICER MEANS BY NOT FURNISHING CONTRA ACCOUNT AND CONFIRMATION LETTERS. I FIND THAT ALL THE PARTIE S HAVE CONFIRMED THE ACCOUNT OF THE APPELLANT AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. A COPY OF ALL SUCH ACCOUNTS AND CONFIRMATION WAS SENT TO THE ASSESSING OFFICER ALONGWITH THE LETTER DATED 27 - 1 - 2009. THE ASSESSING OFFICER WAS DIRECTED TO MAKE NECESSARY ENQUIRIES IF HE FINDS THAT SOME CONFIRMATIONS FILED BY THE CREDITORS DOES NOT APPEAR TO BE GENUINE. BUT THE ASSESSING OFFICER PREFERRED NOT TO MAKE ANY ENQUIRY AND INSTEAD TRIED TO JUSTIFY THE ADDITIONS MADE U/S.68 ON IRRELEVANT GROUND THAT THE CONFIRMATIONS & CONTRA ACCOUNT OF THE CREDITORS IN THE BOOKS OF ACCOUNTS OF CREDITORS WERE NOT PRODUCED BEFORE HIM. I FIND THAT IN ALMOST ALL THE CASES THE APPELLANT HAS BEEN ABLE TO DISCHARGE HIS ONUS BY SUBMITTING NECESSARY DETAILS SUCH AS NAME & AD DRESS OF THE CREDITORS, THEIR PAN, COPY OF RETURNS FILED BY THE CREDITORS, COPY OF THE BANK/BOOK ACCOUNT OF THE APPELLANT SHOWING RECEIPT OF THE LOAN FROM THEM ETC. THE DETAILS WERE NEGATED BY THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY OR WITHOUT GIV ING ANY REASONS AS TO WHY HE DOES NOT ACCEPT THE ABOVE DETAILS AS CORRECT. INSTEAD HE GIVE VERY VERY IRRELEVANT REASONS FOR NO ACCEPTING THE SAME. HUGE ADDITIONS MADE WITHOUT APPLYING MIND BY THE ASSESSING OFFICER CANNOT BE SUSTAINED BY ME. I THEREFORE HAV E NO HESITATION IN HOLDING THAT THE ASSESSING OFFICER WAS NOT AT ALL JUSTIFIED IN MAKING ADDITION FROM NEW CASH CREDITORS. 6.1 THE ASSESSING OFFICER HAS ALSO ADMITTED THAT LOANS WERE OLD IN RESPECT OF 7 CREDITORS AS MENTIONED IN HIS REPORT. SINCE THE LOAN S ARE OLD, NO ADDITION CAN BE MADE IN A.Y. 2005 - 06. THEREFORE, THE ADDITIONS OF RS.1,20,00,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH CREDITS IS DELETED. 6 . IN SUPPORT OF APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSE D BY THE AO. HE SUBMITTED THAT THE LD. CIT(A) HAS DELETED THE ENTIRE ADDITION WITHOUT ANY MATERIAL ON RECORD TO ESTABLISH THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS UNDER WHICH CASH CREDITS WERE RECEIVED A ND THEREFORE THE ORDER PASSED BY THE CIT(A) SHOULD BE VACATED. 4 ITA 650/RJT/2010 7. IN REPLY, THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE CIT(A). 8 . WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. SECTION 68 PLACES THE BURDEN ON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF AMOUNTS CREDITED IN THE BOOKS OF ACCOUNTS FOR THE RELEVANT YEAR. JUDICIAL AUTHORITIES ARE CONSISTENT IN THE VIEW THAT A CASH CREDIT CANNOT BE TREATED AS SATISF ACTORILY EXPLAINED UNLESS THE ASSESSEE ESTABLISHES THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. IN THE MATTER UNDER APPEAL, THERE IS NO FINDING BY THE CIT(A) THAT THE ASSESSEE HAS SATISFACTORILY ESTABLISHED THE CREDITWORTHINESS OF THE CREDITORS OR GENUINENESS OF THE TRANSACTIONS. 9 . PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT RELEVANT DETAILS WERE NOT FILED BEFORE THE ASSESSING OFFICER. THEY WERE FILED FOR THE FIRST TIME BEFORE THE CIT(A) AS A RESULT OF WHIC H A REMAND REPORT WAS CALLED FOR FROM THE AO. THE AO OUGHT TO HAVE EXAMINED THE MATTER IN PROPER PERSPECTIVE AND IN CONFORMITY WITH LAW. HE HOWEVER, DID NOT DO SO. THE CIT(A), WHO HAD SIMILAR POWERS IN THE MATTER AS THOSE OF THE AO, ALSO PREFERRED NOT TO D O SO. HE HOWEVER, DELETED THE ADDITION ON THE GROUND THAT THE AO HAS NOT PERFORMED HIS DUTY. IN OUR VIEW, THE CIT(A) OUGHT TO HAVE RECORDED HIS FINDING ABOUT THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS BEFORE D ELETING THE IMPUGNED ADDITION. IN THIS VIEW OF THE MATTER, THE ORDER PASSED BY THE CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO HIM FOR A FRESH DECISION IN CONFORMITY WITH LAW AFTER RECORDING CATEGORICAL FINDING AS TO WHETHER THE ASSESSEE HAS SATISFAC TORILY EXPLAINED THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. REASONABLE OPPORTUNITY OF HEARING SHALL BE GIVEN TO BOTH THE PARTIES. APPEAL FILED BY THE DEPARTMENT IS TREATED AS ALLOWED FOR STATISTICAL PURPO SES. O 12 .04 . 2013 O ORDER PRONOUNCED ON 12 .04 . 201 3 SD/ - SD/ - ( R.. R / T. K. SHARMA) ( .. / D. K. SRIVASTAVA) %T / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE 12 . 0 4. 2013 /RAJKOT BT 5 ITA 650/RJT/2010 T RJO' IO / COPY OF ORDER FORWARDED TO: - . / APPELLANT - . THE ITO, WARD NO - 4, SURENDRANAGAR 2. V / RESPONDENT - M/S. K P COTTON INDUSTRIES, SHEKHPER, TAL. MULI 3. Y / C ONCERNED CIT 4. - / CIT (A) - XVI, AHMEDABAD. 5. VTTY, R Y, / DR, ITAT, RAJKOT 6. R / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY, ITAT , RAJKOT