Pritam Singh Sahni, Rajahmundry V. The Income Tax Officer, Ward-4, Rajahmundry

ITA 689/VIZ/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5906 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SATYANARAYANA
• Keywords: Unexplained cash credit; Unexplained investment; Additional evidence; Assessment record; Set aside
• Section: 143(3); 37(1); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM , . . , BEFORE SHRI N.K.CHOUDHRY, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HONBLE ACCOUNTANT MEMBER ./ I.T.A. NO.6 89 /VIZ/2019 ( / A SSESSMENT Y EAR : 20 09 - 10 ) PRITAM SINGH SAHNI PROP : BOMBAY MOTOR HOUSE PLOT NO.242 & 243 AUTO NAGAR , DIWANCHERUVU MANDAL RAJAHMUNDRY [PAN : A VMPS9277L ] VS . INCOME TAX OFFICER WARD - 4 RAJAHMUNDRY ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI, AR / RESPONDENT BY : S HRI B.SATYANARAYANA, DR / DATE OF HEARING : 0 6 . 0 4 .202 1 / DATE OF PRONOUNCEMENT : 16 . 0 4 . 202 1 / O R D E R P ER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)[CIT(A)],RAJAMAHENDRAVARAM IN ITA NO.10017/CIT(A)/RJY DATED 30.09.2019FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10. 2 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY 2. IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143(3) BY AN ORDER DATED 21.12.2011 ON TOTAL INCOME OF RS.54 ,60,730/ - AGAINST THE RETURNED INCOME OF RS.6,88,582/ - . THE ASSESSING OFFICER (AO) MADE THE FOLLOWING ADDITIONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS : (I) DIFFERENCE IN STOCK 13,67,789 (II) FRESH SUNDRY CREDITORS FOR WANT OF CONFIRMATIONS 4,06,605 (III) DIFFERENCE IN SUNDRY CREDITORS AS PER THE CONFIRMATIONS AND THE BOOKS OF THE ASSESSEE 70,142 (IV) NON PRODUCTION OF SUNDRY CREDITORS, THAT WAS THE DIFFERENCE BETWEEN THE CLOSING STOCK AS ON 31.03.2008 AND 31.03.2009 28,90,610 3. GROUND NO.1 AND 4 ARE GENERAL IN NATURE WHICH DO NOT REQUIRE SPECIFIC ADJUDICATION. 4. GROUND NO.2 IS RELATED TO SUSTAINING THE ADDITION OF RS.13,67,789 / - MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN VALUE OF CLOSING STOCK AND OPENING STOCK AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE BANK. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE CLOSING STOCK AS ON 31.03.2008 WAS SHOWN AT RS.50,60,299/ - TO THE BANK, WHEREAS THE OPENING BALANCE AS ON 01.04.2008 WAS TAKEN AT RS.36,92,510/ - , THUS THERE WAS DIFFERENCE OF RS.13,67,789/ - SHORT ADMITTED I N THE OPENING STOCK AND THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE, HENCE, MADE THE ADDITION. 3 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY 5. AGAIN ST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) WHO CALLED FOR THE REMAND REPORT AND CONFIRMED THE ADDITION. 6. AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE US. DURING THE APPEAL HEARING, THE LD.AR SUBMITTED THAT THE CLOSING STOC K STATEMENT GIVEN TO THE BANK ON 31.03.2008 WAS PROVISIONAL STATEMENT BEFORE RECONCILIATION AND SUBSEQUENTLY, THE CLOSING STOCK WAS PHYSICALLY VERIFIED AND THE CORRECT STOCK WAS TAKEN TO THE FINANCIAL STATEMENTS, HENCE THERE WAS DIFFERENCE. SINCE THE STO CK STATEMENT GIV EN TO THE BANK WAS UNRECONCILED, THE DIFFERENCE CANNOT BE TREATED AS UNEXPLAINED INVESTMENT. THE LD.AR FURTHER STATED THAT CLOSING STOCK GIVEN TO THE BANK WAS MORE THAN THE OPENING STOCK DECLARED IN THE PROFIT AND LOSS ACCOUNT , HENCE , THER E WAS NO UNDERSTATEMENT OF INCOME. THE LD.AR HAS TAKEN OUR ATTENTION TO THE FINANCIAL STATEMENTS AND EXPLAINED THAT CLOSING STOCK AS PER THE BANK STATEMENT AS ON 31 . 03 . 2008 WAS RS.50,60,299/ - AND IF THE AO SUBSTITUTES THE SUM OF RS.50,60,299/ - TO THE OPEN ING STOCK IN PLACE OF RS.36,92,510/ - , THE PROFIT WOULD BE REDUCED, HENCE THERE IS NO CASE FOR MAKING ADDITION IN THE YEAR UNDER CONSIDERATION. THEREFORE, REQUESTED SET ASIDE THE ORDER OF THE AO AND DELETE THE ADDITION. 4 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY 7. ON THE OTHER HAND, THE LD.DR S UPPORTED THE ORDER OF THE AO. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE EXPLAINED THAT THE CLOSING STOCK AS ON 31.03.2008 WAS PROVISIONAL AND UNRECONCILED. THE ASSESSEE HAS TAKEN THE OPENING STOCK AT RS.36 ,92,510/ - AS ON 01.04.2008 AS AGAINST THE STOCK DECLARED TO THE BANK OF RS.50,60,299/ - . AS SUBMITTED BY THE ASSESSEE, IF THE OPENING STOCK IS TAKEN AT RS.50,60,299/ - , THE GROSS PROFIT WOULD BE REDUCED TO THE EXTENT OF RS.13,67,789/ - , THEREBY THE TAXABLE INCOME ALSO GETS REDUCED. THE ASSESSEE HAS FURNISHED DETAILS OF CLOSING STOCK VALUES MONTH - WISE AS PER BANK AND THE BOOKS OF ACCOUNTS FROM MARCH 2008 TO MARCH 2009, TAKING THE VALUE OF MARCH 2008 AT RS.50,60,299 AND WORKED OUT THE DIFFERENCE IN PA GE NO.37 OF PAPER BOOK AND IT SHOWS THE NEGATIVE BALANCE OF RS.36,92,510/ - . IF , THE CLOSING STOCK AS ON 31/03/2008 OF RS.50,60,299/ - AS PER BANK STATEMENT IS ADOPTED IT LEADS TO REDUCTION OF PROFIT AND REDUCES THE RETURNED INCOME. SUCH ADJUSTMENTS/ DI FFERENCES WERE NEITHER CONSIDERED BY THE AO NOR BY THE LD.CIT(A). THEREFORE, THIS ISSUE NEEDS TO BE VERIFIED WITH REGARD TO CLOSING STOCK OF THE BANK AND AS PER THE BOOKS OF ACCOUNTS AND NECESSARY RECONCILIATION NEEDS TO BE MADE BEFORE ARRIVING AT THE CO RRECT CLOSING STOCK AND TO TAKE FURTHER ACTION. THEREFORE, WE REMIT THE MATTER BACK TO THE FILE OF 5 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY THE AO WITH A DIRECTION TO MAKE NECESSARY RECONCILIATION, VERIFICATIONS WITH THE BOOKS OF ACCOUNTS AND THE STOCK STATEMENT SUBMITTED TO THE BANK AND MAKE THE ASSESSMENT AFRESH ON MERITS AFTER GIVING OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE DEPARTMENT AND SUBMIT THE REQUIRED INFORMATION. ACCORDINGLY THE ISSUE IS SET ASIDE AND THE APPEAL OF THE ASSESSEE ON THIS GROUND IS A LLOWED FOR STATISTICAL PURPOSE. 9. GROUND NO.2 IS RELATED TO THE ADDITION OF RS.28,90,610/ - REPRESENTING THE UNEXPLAINED/ UNRECONCILED DIFFERENCES IN OPENING SUNDRY CREDITORS. THE SUM OFRS.4,06,605/ - IS RELATED TO THE FRESH SUNDRY CREDITORS OF THE YEAR AND THE ASSESSEE FAILED TO SUBMIT THE CONFIRMATIONS. THE SUM OF RS.28,90,610/ - IS RELATED TO DIFFERENCE IN OPENING BALANCE AND CLOSING BALANCE OF THE EXISTING SUNDRY CREDITORS. THE AO ASKED THE ASSESSEE TO FURNISH THE CONFIRMATIONS IN RESPECT OF 18 CRED ITORS AS PER THE DETAILS IN PARA NO.6 OF THE ASSESSMENT ORDER FOR WHICH THE ASSESSEE FAILED TO SUBMIT THE INFORMATION AND THE AO MADE THE ADDITION OF RS.28,90,610/ - . SIMILARLY, THE ASSESSEE HAS MADE PURCHASES AND THE AO FOUND THAT 14 NEW CREDITORS AS PER THE DETAILS GIVEN IN PARA NO.4 OF THE ASSESSMENT ORDER AND REQUESTED THE ASSESSEE TO FURNISH THE CONFIRMATION LETTERS. SINCE , THE ASSESSEE FAILED TO FURNISH THE CONFIRMATIONS, THE AO MADE THE ADDITION. 6 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY 10. AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT O N APPEAL BEFORE THE CIT(A) AND FILED FRESH EVIDENCES. THE LD.CIT(A) CALLED FOR THE REMAND REPORT AND THE AO SUBMITTED THE REMAND REPORT MAKING SOME OBSERVATIONS FROM THE INFORMATION ALREADY AVAILABLE IN THE ASSESSMENT RECORD WITHOUT MAKING ANY FURTHER E NQUIRIES AND OBJECTING FOR ENTERTAINING THE ADDITIONAL EVIDENCE. THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO STATING THAT THE ASSESSEE FAILED TO CLARIFY THE DOUBTS EVEN THOUGH OPPORTUNITY WAS GIVEN TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. ON VERIFICATION OF THE ASSESSMENT ORDER, IT IS NOTICED THAT IN RESPONSE TO THE NOTICES ISSUED U/S 143 (2) AND 142(1), THE AR OF THE ASSESSEE HAD APPEARED, PRODUCED BOOKS OF ACCOUNTS, BILLS AND VOUCHERS ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE AO HA S VERIFIED THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS AND THE INFORMATION FURNISHED BY THE ASSE SSEE AND THEN ONLY COMPLETED THE ASSESSMENT . THE SUNDRY CREDITORS ARE RELATED TO THE PURCHASES, BUT NOT UNSECURED LOANS OR THE CASH CREDITS INTRODUCED BY THE ASSESSEE. ONCE THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS, PURCHASES VOUCHERS AND MADE AND THE PAYMENTS THROUGH THE 7 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY BANK ING CHANNELS , THE AO IS NOT PERMITTED TO MAKE ANY ADDITION AS HELD BY HONBLE CALCUTTA HIGH COURT IN 50 TAXMAN.COM 190 COMMISSIONER OF INCOME - TAX, KOLKATA - XII V. MANISH ENTERPRISES . FURTHER , THE AO ALSO CANNOT MAKE TH E ADDITION U/S 68 AS UNEXPLAINED CREDITS. THE ADDITION IS REQUIRED TO BE MADE BY DISALLOWING THE PURCHASES U/S 37(1) OF THE ACT OR AT BEST INVOKING SECTION 41(1) OF THE ACT DEPENDING ON THE FACTS . IN THE INSTANT CASE, THE AO MADE THE ADDITION AS UNPROVED CREDITORS WITHOUT INVOKING ANY SECTION OF THE ACT. THE LD.CIT(A) HAS NOT EXAMINED THE ISSUE AS TO WHY THE AO MADE THE ADDITION AS UNPROVED CREDITORS WITHOUT INVOKING ANY SECTION, WHEN THE ASSESSEE HA S FURNISHED THE ENTIRE INFORMATION BEFORE THE AO. IN TH E INSTANT CASE, IT IS MANDATORY FOR THE AO TO EXAMINE THE GENU INE NESS OF PURCHASES AND WHETHER THE PAYMENTS ARE MADE THROUGH CHEQUE OR CASH? IF NECESSARY THE AO MAY MAKE NECESSARY ENQUIRIES U/S 133(6)/131(1) AND ASCERTAIN AS TO WHETHER THE PURCHASES ARE G ENUINE OR NOT AND TAKE APPROPRIATE ACTION AS PER LAW. SINCE, NO ENQUIRIES W ERE MADE IN THIS CASE AND THE AO MADE THE ADDITION WITHOUT HAVING COLLECTED ANY EVIDENCE EXCEPT FOR WANT OF CONFIRMATIONS, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE REEXAMINED IN DETAIL AND MAKE THE ASSESSMENT AFRESH ON MERITS AS PER LAW. THEREFORE, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO TO DO THE 8 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY ASSESSMENT AFRESH AFTER GIVING OPPORTUNITY TO THE ASSESSEE. BOTH THE LD.DR AND LD.AR HAVE ACCEPTED TO REMIT THE MA TTER BACK TO THE FILE OF THE AO. ACCORDINGLY, WE DIRECT THE AO TO REDO THE ASSESSMENT AFTER GIVING OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE DEPARTMENT AND FURNISH NECESSARY INFORMATION. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL, 2021. S D/ - SD/ - ( ) ( . . ) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED : 16 .0 4 .2021 L.RAMA, SPS 9 I.T.A. NO . 6 89 /VIZ/20 19 , A.Y.20 09 - 10 PRITAM SINGH SAHNI, RAJAHMUNDRY / COPY OF THE ORDER FORWARDED TO : - 1 . / THE ASSESSEE PRITAM SINGH SAHNI , PROP : BOMBAY MOTOR HOUSE PLOT NO.242 & 243 , AUTO NAGAR , DIWANCHERUVU MANDAL , RAJAHMUNDRY 2 . / THE REVENUE INCOME TAX OFFICER, WARD - 4, RAJAHMUNDRY 3. THE PRINCIPAL COMMISSIONER OF INCOME TAX , RAJAMAHENDRAVARAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS) , RAJAMAHENDRAVARAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM