Astt. Commissioner of Income Tax, Lucknow V. Shri Alkesh Chandra Soti, Lucknow

ITA 659/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1093 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YASHVENDRA SINGH
• Assessee Lawyers: ASHOK SETH
• Keywords: Onus to prove
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 659/LKW/2016 ASSESSMENT YEAR: 2013 - 14 ASSTT. CIT RANGE V LUCKNOW V. SHRI ALKESH CHA NDRA SOTI PROP. M/S A. K. TRADERS LUCKNOW T AN /PAN : ALSPS0282R (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI YASHVENDRA SINGH, D.R. RESPONDENT BY: SHRI ASHOK SETH, FCA DATE OF HEARING: 22 02 201 8 DATE OF PRONOUNCEMENT: 26 0 2 201 8 O R D E R PER P AR THA SARATHI CHAUDHURY, J.M : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) - II, LUCKNOW DATED 27/9/2016. 2 . THE GRIEVANCE OF THE REVENUE ARE ON TWO COUNTS. FIRST AGAINST THE DELETION OF ADDITION OF RS.1,39,84,675/ - ON ACCOUNT OF SUNDRY CREDITORS AND THE SECOND IS AGAINST RESTRICTING THE DISALLOWANCE S OF EXPENSES CLAIMED BY THE ASSESSEE UNDER VARIOUS HEADS . 3 . THE FACTS IN THIS CASE ARE THAT FOR ASSESSMENT YEAR 2013 - 14, ASSESSEE FILED ITS RETURN OF INCOME SHOWING TOTAL INCOME OF RS.16 ,46,970/ - . THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER AT AN INCOME OF RS.1,56,96,880/ - VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER HAS MADE VARIOUS ADDITIONS AND DISALLOWANCES AS PER REASONS GIVEN IN THE ASSESSMENT ITA NO.659/LKW/2016 PAGE 2 OF 8 ORDER. AGAINST THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). 4 . WITH REGARD TO ADDITION OF RS.1,39,84,675/ - , THE FACTS WERE ANALYSED BY THE LD. CIT(A) AND IT WAS FOUND THAT THE ASSESSING OFFICER HAD ISSUED NOTICES UNDER SECTION 133(6) TO VARIOUS SUNDRY CREDITORS WHERE THE CLOSING BALANCE AT THE END OF THE YEAR STOOD AT MORE THAN RS.5 LAKHS. THEY WERE REQUIRED TO FURNISH THE CONFIRMATION REGARDING THEIR TRANSACTION WITH THE ASSESSE E AND FURNISH COPY OF THEIR ACCOUNTS WITH THE ASSESSEE IN THEIR BOOKS. ONE OF THE TRANSACTION WAS WITH M/S LARSEN & TOUBRO LIMITED FOR AN AMOUNT OF RS.1,39,84,675/ - . THE CONFIRMATION WAS NOT RECEIVED BY THE ASSESSING OFFICER AND HENCE THE ENTIRE AMOUNT W AS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAD SUBMITTED BEFORE THE LD. CIT(A) TH E COPY OF ACCOUNT OF TWO PARTIES, M/S C D S ELECTRIC ALS LIMITED AND M/S LARSEN & TOUBRO LIMITED. THEIR BALANCE SHEET AS ON 31/3/2013 HAS BEEN AUDITED AND VERIF IED . T HE COPIES OF ACCOUNT OF TWO PARTIES WERE FILED. THE PARTIES ARE SUCH THEY CANNOT DENY THE ACKNOWLEDGEMENT OF NOTICE UNDER SECTION 133(6). THE ASSESSING OFFICER DID NOT ASK THE ASSESSEE TO CALL THEIR ACCOUNTS OR COPIES OF THE SUNDRY CREDITORS. ON THE ORDER SHEET ENCLOSED BEFORE THE LD. CIT(A) , IT WAS STATED THAT NOTHING IS MENTIONED ABOUT FURNISHING OF TWO PARTIES COPY OF ACCOUNT FROM THE PARTIES. THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT ALL THE TRANSACTIONS ARE THROUGH BANK AND THERE IS N O CASH PAYMENT. THE ACCOUNT BOOKS AND VOUCHERS WERE PRODUCED. 5 . THE ASSESSEE FURTHER STATED THAT THE ADDITION RELATES TO THE TRANSACTION OF TRADING ACCOUNT WHICH HAS BEEN ACCEPTED BY THE ASSESSING O FFICER AFTER VERIFICATION OF VOUCHER AND ACCOUNT BOOKS AND T HE ADDITION IS MADE SIMPLY FOR NO N - COMPLIANCE OF NOTICE UNDER SECTION 133(6) BY THE SUNDRY CREDITORS AND THE ASSESSEE PLACED RELIANCE ON THE ITA NO.659/LKW/2016 PAGE 3 OF 8 DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, CENTRAL KANPUR VS. ANURAG AGARWAL REPORTED IN 229 TAXMAN 532. THE ASSESSEE ALSO PLACED RELIANCE UPON THE DECISION IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHIV DHOOTI PEARLS & INVESTMENT LTD. 237 TAXMAN 104 AND CONTENDED THAT AS PER SECTION 106 OF THE EVIDENCE ACT , ASSESSEE HA S TO PROVE THE SOURCE OF INCOME AND HAS NO BURDEN TO PROVE THE SOURCE OVER THE SOURCE. THIS WAS RULED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DELOITTE CONSULT ING INDIA PVT. LTD. VS. ACIT AND OTHERS REPORTED IN 351 ITR 160 . 6 . THE LD. CIT(A) AFTER EXAM I NI NG THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE, HELD AS UNDER: - 4(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE AO H AS MA DE THE IMPUGNED ADDITION OF RS. 1,39,84,675/ - SOLELY ON THE GROUND THAT THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT WAS RECEIVED BACK UNSERVED WITH POSTAL REMARK. THE AO ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO 5 PARTIES OUT OF WHICH CON FIRMATIONS WERE NOT RECEIVED FROM M/S C & S ELECTRIC LIMITED (CREDIT BALANCE OF RS. 8,35,096/ - ) AND M/S LARSEN & TOUBRO LIMITED (CREDIT BALANCE OF RS. 1,31,49,578 / - ). THE AO THEREFORE MADE ADDITION OF RS. 1,39,84,675/ - TO THE INCOME OF THE APPELLANT. HON'BL E SUPREME COURT'S HELD IN THE CASE OF CIT VS. ORISSA CORPORATION (P) LTD. (1986) 159 ITR 78 (SC) THAT IF THE AO HAS ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT IT IS HIS DUTY TO BRING THE PROCESS TO A LOGICAL CONCLUSION AND NON - RESPONSE BY SUCH PERSON C ANNOT BE HELD AGAINST THE ASSESSEE. APROPOS DIFFERENCE IN BALANCES OF ASSESSEE AND SUPPLIER, THE SAME CANNOT BE ADDED UNDER SECTION 68 OF THE ACT AS THE EXISTENCE OF ASSESSEE, SUPPLIER AND PURCHASES ARE ADMITTED. 4(5)(I) THE FIRST PART OF THE EQUATION IS T HAT THE BALANCE ADDED BY THE AO IS THE CLOSING BALANCE OF THE YEAR UNDER CONSIDERATION. IT ITA NO.659/LKW/2016 PAGE 4 OF 8 INCLUDES THE CLOSING BALANCE OF THE IMMEDIATELY PRECEDING FINANCIAL YEAR, PURCHASES MADE FROM THE TRADE CREDITORS AND PAYMENTS MADE TO THEM. SINCE THE ISSUE IN QUEST ION IS THAT OF A SUNDRY CREDITOR, THE APPELLANT HAS DISCHARGED HIS ONUS SUFFICIENTLY BY SUBMITTING NAME AND ADDRESSES AND COPIES OF ACCOUNTS OF THE SUNDRY CREDITORS. NOW, THE SUNDRY CREDITORS BEING SUPPLIERS OF THE APPELLANT, THEIR SUPPLIES ARE INCLUDED AS PURCHASES IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. I FIND THAT WHILE ADDING THE AMOUNT OF SUNDRY CREDITORS TO THE INCOME OF THE APPELLANT, THE AO HAS NOWHERE GIVEN ANY FINDING ON THE PURCHASES REFLECTED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE SAL ES CORRESPONDING TO THE PURCHASES MADE FROM THE SUNDRY CREDITORS HAS ALSO NOT BEEN DOUBTED. IN FACT AT PARAGRAPH 2 OF THE ASSESSMENT ORDER THE AO HAS GIVEN A SPECIFIC FINDING AS UNDER - AFTER EXAMINATION OF BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS THE TR ADING RESULT SHOWN BY ASSESSEE ARE ACCEPTED. 4(5)(II) THE FINDING OF THE AO CLEARLY REVEALS THAT THE PURCHASES AND SALES ARE VERIFIED AND THE TRADING RESULTS OF THE APPELLANT HAVE BEEN ACCEPTED. THE SUNDRY CREDITORS ARE A RESULT OF THE PURCHASES AND SALES AND PAYMENTS FOR PURCHASES FOR WHICH NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE AO AS REGARDS THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNTS, WHICH MEANS THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN ACCEPTED AS CORRECT AND COMPLETE. THE COPY OF ACCOUNT OF M/S C& S ELECTRIC LIMITED (CREDIT BALANCE OF RS. 8,35,096/ - ) AND M/S LARSEN & TOUBRO LIMITED (CREDIT BALANCE OF RS. 1,31,49,578/ - ) SHOWS THAT THE BALANCE IS ON ACCOUNT OF PURCHASES AND ALL TRANSACTIONS OF PAYMENTS ARE THROUGH BANKING CHAN NELS. NO ADVERSE INFERENCE IS DRAWN BY THE AO. WHEN THE PURCHASE AND SALES HAVE NOT BEEN DOUBTED BY THE AO, THERE IS NO JUSTIFICATION IN ADDING THE SUNDRY CREDITORS AS UNVERIFIED. 4(6) SIMILAR ISSUE HAD COME UP BEFORE THE HON'BLE ITAT, ALLAHABAD BENCH IN T HE CASE OF JOINT COMMISSIONER OF INCOME TAX VS. MATHURA PRASAD ASHOK KUMAR 101 TTJ 0810 (ALL). IN THIS CASE THE APPELLANT WAS ENGAGED IN THE BUSINESS OF BANARSI SAREES. ITA NO.659/LKW/2016 PAGE 5 OF 8 THEY ALSO PURCHASE SAREES FROM LOCAL KARIGARS ON CREDIT AND SOLD IT CUSTOMERS. SIMILAR ADDITION ON ACCOUNT OF SUNDRY CREDITORS WAS DELETED IN THE 1ST APPEAL AND WHEN THE REVENUE WENT UP TO TRIBUNAL AGAINST THE ORDER OF CIT, THE HON'BLE BENCH OF ITAT AT ALLAHABAD HAS UPHELD THE ORDER OF CIT BY HOLDING THAT 'AO HAS TREATED THE LIABILITY TO BE OF 'CASH CREDIT' IN NATURE AND THAT IS WHY HE FELT ANXIOUS TO HAVE THE IDENTITIES OF THE CREDITORS ESTABLISHED. IN THIS RESPECT, FIRST OF ALL, WE HOLD THAT CREDITS 'IN THE SUNDRY CREDITORS (UDHAR KHAREED KHATA)' ARE REFERABLE TO THE PURCHASES OF SAREES ON CASH BASIS. AS THE PURCHASES HAVE BEEN HELD TO BE GENUINE AND ACCEPTED AS SUCH, THE CREDITS THAT REMAINED OUTSTANDING IN SUCH ACCOUNT CANNOT BE TREATED TO HAVE REMAINED UNEXPLAINED. THE BALANCE APPEARING IN THIS ACCOUNT, WHICH INCLUDED THE DISPUTED ADDITIO N ALSO, IS THE SUM TOTAL OF PURCHASES THAT REMAINED UNPAID AT THE END OF THE YEAR. AS THE GENUINENESS OF SUCH PURCHASES HAS NOT BEEN DISPUTED, RATHER, THE SAME HAS BEEN ACCEPTED, THE CREDITS STAND FULLY EXPLAINED AND NO ADVERSE INFERENCE IS CALLED FOR, EIT HER ON FACTS AND LAW.' FURTHER, IN THE CASE OF ANNAMARIA TRAVELS AND TOURS (P) LTD VS DEPUTY COMMISSIONER OF INCOME TAX, ITAT, DELHI 'F' BENCH (2005) 95 TTJ 71 (DEL), IT HAS BEEN HELD THAT - INCOME - CASH CREDIT - AMOUNT STANDING TO THE CREDIT OF SUNDRY CR EDITORS FOR PURCHASES OF AIRLINE TICKETS - ADDITION MADE UNDER SECTION 68 ON THE GROUND THAT NO CONFIRMATION WAS FILED FROM AIRLINE COMPANIES - NOT JUSTIFIED - WHEN PAYMENTS TO CREDITORS WERE NOT DOUBTED AND COMMISSION INCOME IN RESPECT OF THOSE VERY TICKE TS HAS BEEN ASSESSED INCOME OF ASSESSEE, AMOUNTS STANDING TO THE CREDITS OF AIRLINES TOWARDS PURCHASE OF TICKETS COULD NOT BE ADDED UNDER SECTION 68. ' 4 (7) I N THE INSTANT CASE ALSO, THE INCOME FROM SALE AND PURCHASE OF GOODS FROM SUNDRY CREDITORS HAS BEE N ASSESSED AS INCOME OF THE APPELLANT. PURCHASES, SALES AND PAYMENTS TO CREDITORS HAVE NOT BEEN DOUBTED. THE CONCLUSION HAS TO BE THEREFORE SAME I.E. ITA NO.659/LKW/2016 PAGE 6 OF 8 THE AO IS NOT JUSTIFIED IN ADDING THE SUNDRY CREDITORS. IN VIEW THEREOF THE ADDITION OF RS.1,39,84,675/ - M ADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 7 . AT THE TIME OF HEARING BEFORE US, THE LD. D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT AT THE TIME OF ASSESSMENT NO SUCH CONFIRMATION WAS AVAILABLE AND IN THE ABSENCE OF RESPONSE TO NOTICES UNDER SECTION 133(6), THE LD. CIT(A) COULD NOT HAVE ACCEPTED THE GENUINENESS OF THE TRANSACTION. 8 . THE LD. A.R. OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND REITERATED THE SUBMISSIONS PLACED BEFORE THE SUBORDINATE AUTHORITIES. 9 . WE H AVE PERUSED THE CASE RECORDS , ANALYSED THE FACTS AND CIRCUMSTANCES OF THE CASE AND WE FIND THAT THERE ARE CERTAIN FACTORS WHICH NEEDS TO BE CONSIDERED FROM THE ORDER OF THE LD. CIT(A). FIRSTLY THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING ON THE PU RCHASES REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND CORRESPONDING SALES TO THE PURCHASES MADE FROM THE SUNDRY CREDITORS HAS ALSO NOT BEEN DOUBTED WHICH IS EVIDENT FROM PARA 2 OF THE ASSESSMENT ORDER AND THE ASSESSING OFFICER HAS GIVEN A SPECIFIC FINDING TO THAT EFFECT. THAT FINDING OF THE ASSESSING OFFICER CLEARLY REVEALS THAT PURCHASES AND SALES ARE VERIFIED AND THE TRADING RESULTS OF THE ASSESSEE HAVE BEEN ACCEPTED. THE SUNDRY CREDITORS ARE A RESULT OF PURCHASES AND SALES AND PAYMENTS FOR PURC HASES, FOR WHICH NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE ASSESSING OFFICER AS REGARDS CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT WHICH MEANS THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN ACCEPTED AS CORRECT AND COMPLETE. THE DEPARTMENT HAS ALSO VERIFIED FROM THE COPY OF ACCOUNTS OF M/S LARSEN & TOUBRO LIMITED THAT THE BALANCE IS ON ACCOUNT OF PURCHASES AND ALL THE TRANSACTIONS OF PAYMENTS WERE MADE THROUGH BANKING CHANNEL. THE RELIANCE IN THIS ITA NO.659/LKW/2016 PAGE 7 OF 8 REGARD MAY BE PLACED ON THE ORDER OF THE AL LAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. MATHURA PRASAD ASHOK KUMAR, 201 TTJ 810 WHEREIN IT WAS OBSERVED THAT AS THE GENUINENESS OF SUCH PURCHASES HAS NOT BEEN DISPUTED, RATHER THE SAME HAS BEEN ACCEPTED, THE CREDITS STAND FULLY EXPLAINED AND NO ADVERSE INFERENCE IS CALLED FOR EITHER ON FACTS AND LAW. WE ALSO FIND THAT THE HON'BLE APEX COURT HAS HELD IN THE CASE OF CIT VS. ORISSA CORPORATION PVT. LTD., 159 ITR 78 THAT IF THE ASSESSING OFFICER ISSUES NOTICE UNDER SECTION 133(6), IT IS HIS DUT Y TO BRING THE PROCESS TO A LOGICAL CONCLUSION AND NON - RESPONSE BY SUCH PERSON CANNOT BE HELD AGAINST THE ASSESSEE. WE FIND THAT FROM THE ENTIRE FINDINGS OF THE ASSESSING OFFICER, NO EXERCISE HAS BEEN DONE SO AS TO VIRTUALLY SEE WHAT IS THE OUTCOME OF NOT ICE ISSUED UNDER SECTION 133(6) NOR ANY ENQUIRY OR POSSIBLE EFFORTS WERE MADE BY THE ASSESSING OFFICER REGARDING THE SAME. THE DISALLOWANCE WAS MADE ONLY FOR THE REASON THAT THERE WAS NO COMPLIANCE OF THE SAID NOTICE UNDER SECTION 133(6) OF THE ACT BY M/S LARSEN & TOUBRO LIMITED. WE HAVE ALSO TO UNDERSTAND THE PRACTICAL POSITION OF THE FACT THAT M/S LARSEN & TOUBRO LIMITED DOING HUGE BUSINESS IN INDIA WILL ALWAYS AS EXPECTED TO KEEP THEIR BOOKS OF ACCOUNT PROPER AND TRANSACTIONS PERFECT. IT IS SEEN THAT ALL THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNEL. THE DEPARTMENT HAS NOT DOUBTED THE GENUINITY OF THE TRANSACTIONS, THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT AS FOR THE FACTS DISCUSSED HEREINABOVE, THERE IS NO INFIRMITY WITH THE FINDINGS OF THE L D. CIT(A) AND, THEREFORE, THE RELIEF GRANTED TO THE ASSESSEE IN DELETING THE ADDITION OF RS.1,39,84,675/ - IS HEREBY SUSTAINED. 10 . THE NEXT GROUND RELATES TO THE RESTRICTION OF DISALLOWANCES UNDER VARIOUS HEADS AND IT IS OBSERVED BY THE LD. CIT(A) THAT THE A SSESSING OFFICER HAS NOT GIVEN ANY SPECIFIC FINDING AS REGARDS THE UNVERIFIABLE EXPENSES. AT THE SAME TIME, THE LD. CIT(A) HAS ALSO ITA NO.659/LKW/2016 PAGE 8 OF 8 OBSERVED THAT BUSINESS OF THE ASSESSEE IS P ROPRIETORSHIP AND PERSONAL EXPENSES IN RESPECT OF USE OF TELEPHONE AND VEHICLE C ANNOT BE COMPLETELY RULED OUT. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) HELD THAT THE DISALLOWANCES OF EXPENSES UNDER THE HEAD TELEPHONE AND VEHICLE IS RESTRICTED TO RS.10,000/ - OUT OF RS.40,747/ - ; RS.7,198/ - AND RS.16,634/ - MADE BY THE ASSESSING OFFICER . 11 . WE ARE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE IS A PROPRIETORSHIP CONCERN , THE ELEMENT OF PERSONAL USE OF TELEPHONE AND VEHICLE CANNOT BE RULED OUT . BUT WE FIND THAT THE DISALLOWANCES MADE BY THE ASSESSING OFFICER ARE O N HIGHER SIDE AND THE DISALLOWANCE RESTRICTED BY THE LD. CIT(A) TO THE EXTENT MENTIONED ABOVE ARE QUITE REASONABLE AND , THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCES TO THE EXTENT MENTIONED , WHICH IS HEREBY SUSTAINED. 12 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 / 0 2 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH FEBR UARY , 201 8 JJ: 2202 COPY FORWA RDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR