M/s. Sherali & Co., V. Income-tax Officer,

ITA 706/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0381 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-06-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 10-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Unexplained cash credit; Business income; Principle of natural justice; Condonation of delay; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NOS. 706 & 922/PN/2014 %' ( ')( / ASSESSMENT YEARS : 2001-02 & 2004-05 M/S. SHERALI & CO., 1396/97, MANGAL GATE, AHMEDNAGAR-414001 PAN : AAMFS9490E ....... / APPELLANT ' /VS. INCOME TAX OFFICER, WARD-2, AHMEDNAGAR / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI P.L. KUREEL / DATE OF HEARING : 26-10-2016 / DATE OF PRONOUNCEMENT : 25-11-2016 * / ORDER PER VIKAS AWASTHY, JM : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE. IN ITA NO. 706/PN/2014 THE ASSESSEE HAS ASSAILED THE ORDER OF COM MISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2001-02 DA TED 27-01-2014 AND IN ITA NO. 9222/PN/2014 THE ASSESSEE H AS ASSAILED 2 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE DATED 21-02-2014 FOR THE ASSESSMENT YEAR 2004-05. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS ARE SIMILAR, TH ESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED BY THIS COMMON ORDER. ITA NO. 706/PN/2014 (A.Y. 2001-02) 2. THE APPEAL OF THE ASSESSEE IN ITA NO. 706/PN/2014 FOR THE ASSESSMENT YEAR 2001-02 IS TIME BARRED BY TWO DAYS. T HE ASSESSEE HAS FILED A PETITION SEEKING CONDONATION OF DELAY CITING REASONS FOR DELAY IN FILING OF THE APPEAL. AFTER PERUSING THE SAME, WE ARE SATISFIED WITH THE DELAY IN FILING OF APPEAL IS UNINTENTIONAL. THE DELAY IN FILING OF AP PEAL IS CONDONED AND THE APPEAL IS ADMITTED TO BE HEARD ON MERITS. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN TRADING O F HIDES AND SKINS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASS ESSMENT YEAR 2001-02 ON 31-10-2011 DECLARING TOTAL INCOME OF ` 22,336/-. THE ASSESSMENT ORDER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS PASSED IN THE CASE OF ASS ESSEE ON 21-01-2004 DETERMINING TOTAL INCOME OF THE ASSESSEE AT ` 23,18,300/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS AD DITIONS WERE MADE ON THE FOLLOWING TWO COUNTS : I. UNDER VALUATION OF STOCK ` 2,84,319/-. II. FICTITIOUS CREDITORS LIABILITY ` 20,11,647/-. THE ASSESSEE CARRIED THE MATTER IN FIRST APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF I NCOME 3 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 TAX (APPEALS) VIDED ORDER DATED 15-06-2004 DELETED BOTH THE ADDITIONS. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) MADE ADD ITION ON ACCOUNT OF LOW GROSS PROFIT AND DIRECTED THE ASSESSING OFFIC ER TO MAKE ADDITION OF ` 2,08,096/-. THE DEPARTMENT CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 1455/PN/2004 AGAINST DELETIN G OF THE ADDITIONS. THE TRIBUNAL VIDE ORDER DATED 28-09-2007 DISM ISSED THE APPEAL OF THE DEPARTMENT. IN THE MEANTIME THE COMMISSION ER OF INCOME TAX (APPEALS) INITIATED PROCEEDINGS U/S. 263 OF THE A CT BY ISSUING NOTICE ON 20-02-2006. THEREAFTER, THE COMMISSIONER OF INCOME TAX (APPEALS) PASSED ORDER U/S. 263 ON 29-03-2006 DIRECT ING THE ASSESSING OFFICER TO VERIFY/SCRUTINIZE THE TRANSACTION BY T HE ASSESSEE WITH M/S. FARIDA LEATHER COMPANY, CHENNAI. IN PURSUANCE TO THE DIRECTIONS OF COMMISSIONER OF INCOME TAX (APPEALS) U/S. 263, T HE ASSESSING OFFICER PASSED ASSESSMENT ORDER ON 29-12-2006 MAKING ADDITIONS OF ` 54,20,000/- ON ACCOUNT OF FICTITIOUS CREDITORS LIABILITY. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CO MMISSIONER OF INCOME TAX (APPEALS) CHALLENGING THE ADDITIONS ON MERITS. TH E COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE T HE TRIBUNAL AGAINST THE ADDITION OF ` 54,20,000/- ON ACCOUNT OF FICTITIOUS CREDITORS LIABILITY. 4. THE SOLITARY GROUND RAISED BY THE ASSESSEE IN APPEAL READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LOWER AUTHORITIES ERRED IN MAKING AN ADDITION OF RS.54,20 ,000/- FOR ALLEGED FICTITIOUS LIABILITY ON ACCOUNT OF CREDITORS AND TH E SAME SHOULD BE DELETED. THE APPELLANT CRAVES FOR TO LEAVE, ADD, ALTER, MODI FY, DELETE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME HEARING, IN THE INTERE ST OF NATURAL JUSTICE. 4 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 5. SHRI PRAMOD SHINGTE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS EXCEEDED HIS JUR ISDICTION IN PASSING THE ASSESSMENT ORDER U/S. 143(3) R.W.S. 263 OF THE ACT. THE COMMISSIONER OF INCOME TAX IN HIS ORDER HAD DIRECTED THE ASSESSING OFFICER TO SCRUTINIZE/VERIFY THE TRANSACTIONS BY THE ASSES SEE WITH M/S. FARIDA LEATHER COMPANY, CHENNAI. THE ASSESSING OFFICER HAS TRAVELLED BEYOND THE DIRECTIONS OF COMMISSIONER OF INCOME TAX AND H AS REVISITED THE ENTIRE TRANSACTIONS WHICH HAVE ALREADY BEEN CONSIDER ED IN ORIGINAL ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT. THE AD DITIONS MADE BY THE ASSESSING OFFICER ON THE SAID TRANSACTIONS HAVE ALREAD Y BEEN SET ASIDE BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL HAS UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEA LS) IN APPEAL FILED BY THE DEPARTMENT. THE ASSESSING OFFICER HAS E RRED IN MAKING ADDITION ON ACCOUNT OF CREDITORS BEYOND THE SCOPE OF DIRECTIONS OF COMMISSIONER OF INCOME TAX (APPEALS) U/S. 263 OF THE ACT. 5.1 THE LD. AR SUBMITTED THAT THE HONBLE MADRAS HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GEO INDUSTRIES & I NSECTICIDES (I) PVT. LTD. REPORTED AS 234 ITR 541 HAS HELD THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX HAS TO BE READ IN THE CONTEX T IN WHICH REVISIONAL PROCEEDINGS WERE INITIATED AND THE ORDER PASSED IN THE REVISION. THE LD. AR FURTHER PLACED RELIANCE ON THE DECISION OF KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. UMA KANT NEWATIA REPORTED AS 99 TTJ 376 AND SUBMITTED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX SETTING ASIDE THE ASSESSMENT AND HIS DIRECTION TO MAKE A FRESH ASSESSMENT IN ACCORDANCE WITH LAW CANNOT BE READ IN ISOLATION, BUT IT MUST BE READ IN THE CONTEXT IN WH ICH THE COMMISSIONER OF INCOME TAX HAS EXERCISED HIS POWERS OF REVISION. 5 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 6. ON THE OTHER HAND SHRI P.L. KUREEL REPRESENTING THE D EPARTMENT VEHEMENTLY SUPPORTING THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS) SUBMITTED THAT THE ISSUE RAISED BY THE COMMIS SIONER OF INCOME TAX IN REVISION PROCEEDINGS WAS NOT CONSIDERED BY THE ASSESSING OFFICER DURING SCRUTINY ASSESSMENT PROCEEDINGS. THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN PURS UANCE TO THE DIRECTIONS OF COMMISSIONER OF INCOME TAX (APPEALS) U/S. 263 IS WELL WITHIN THE FOUR CORNERS OF DIRECTIONS OF COMMISSIONER OF INC OME TAX. THE ADDITION HAS BEEN MADE AFTER EXAMINING THE BOOKS OF T HE ASSESSEE IN CONTEXT WITH THE TRANSACTIONS OF THE ASSESSEE WITH M/ S. FARIDA LEATHER COMPANY, CHENNAI. THE LD. DR DEFENDED THE IMPUGNE D ORDER AND PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF T HE ASSESSEE HAS PLACED RELIANCE. THE ONLY ARGUMENT RAISED BY THE LD . AR AGAINST THE ADDITION CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS THAT THE ASSESSING OFFICER HAS TRAVELLED BEYOND THE DIREC TIONS OF COMMISSIONER OF INCOME TAX IN PASSING THE ASSESSMENT ORD ER. IT IS AN UNDISPUTED POSITION THAT WHEN ANY DIRECTION IS GIVEN BY TH E COMMISSIONER OF INCOME TAX IN REVISIONAL PROCEEDINGS THE AS SESSING OFFICER HAS TO PASS ASSESSMENT ORDER IN ACCORDANCE WITH THE DIRECTIONS OF THE COMMISSIONER OF INCOME TAX. THE SCOPE OF ASSESSM ENT IS ONLY LIMITED TO THE ISSUES IN RESPECT OF WHICH REVISIONAL JURISDICT ION HAS BEEN INVOKED. THE ASSESSING OFFICER CANNOT REOPEN THE ENTIRE A SSESSMENT. TO PROPERLY APPRECIATE THE FACTS IN PRESENT CASE IT WOU LD BE RELEVANT TO 6 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 FIRST SEE THE CONTENTS OF NOTICE U/S. 263 OF THE ACT. THE RELEVANT EXTRACT OF THE NOTICE DATED 20-02-2006 READS AS UNDER : 02. ON GOING THROUGH THE RECORDS, IT IS SEEN THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, YOUR COPY OF ACCOUNT WITH M /S. TATA INTERNATIONAL LTD. WAS CALLED FOR. ON COMPARISON O F THE COPY OF ACCOUNTS SO OBTAINED, WITH THE COPY OF ACCOUNT OF THAT COMPA NY IN YOUR BOOKS, DISCREPANCIES WERE NOTICED. THERE WAS NO OPENING B ALANCE IN BOTH THE ACCOUNTS. THE CLOSING BALANCE IN THE BOOKS OF TATA INTERNATIONAL LTD. WAS SHOWN AT RS.21,79,260/- (CR.). HOWEVER, IN YOU R BOOKS OF ACCOUNT THE BALANCE OF THE TATA INTERNATIONAL LTD. WAS SHOW N AT RS.68,02,627/- (DR.). THIS SUBSTANTIAL DISCREPANCY WAS EXPLAINED BY STATING THAT A PART OR RECEIPT FROM TATA INTERNATIONAL LTD. WAS CREDITE D TO THE ACCOUNT OF M/S. FARIDA LEATHER CO. OF CHENNAI. 03. IT WAS OBSERVED THAT YOUR ACCOUNTS WERE AUDITED AND TAX AUDIT REPORT WAS ALSO PREPARED. EVEN THEN, HOW THE AMOUN TS RECEIVED BY YOU FROM TATA INTERNATIONAL LTD. WERE CREDITED TO THE A CCOUNT OF ANOTHER PARTY OF CHENNAI AND YET ACCOUNTS WERE CLOSED, IS NOT CLE AR. THE AMOUNTS RECEIVABLE FROM TATA INTERNATIONAL LTD. WAS RECORDE D AS RECEIVED FROM CHENNAI IS INEXPLICABLE. RECORDS DO NOT SHOW THAT THE ACCOUNT OF M/S. FARIDA LEATHER CO. WAS REFERRED TO BY THE AO IN ORD ER TO VERIFY YOUR EXPLANATIONS AND CONTENTIONS. THE EXPLANATIONS APP EAR TO HAVE BEEN ACCEPTED ON THEIR FACE VALUE. 04. EVEN IF THE MISTAKE OCCURRED AT THE TIME OF CLO SING OF ACCOUNT AT THE YEAR END, THE SAME WAS NOT QUALIFIED BY THE AUD ITOR IN THE AUDIT REPORT. NARRATIONS IN THE COPIES OF THE ACCOUNTS D O NOT INSPIRE CONFIDENCE SO AS TO ACCEPT EXPLANATIONS OFFERED. 05. AS TO THE TRANSACTIONS WITH ANOTHER CHENNAI PAR TY, VIZ., M/S. M. MOHAMAD HABIBULLA, IN THE BALANCE SHEET IT IS A DEB TOR TO THE EXTENT OF RS.88,72,940/- AS ON 31-03-2001. ONE OF THE REASON S STATED BY THE ASSESSEE FOR THE SUBSTANTIAL OUTSTANDING IS THAT TH E FINANCIAL POSITION OF THIS PARTY WAS NOT GOOD. IT IS NOTICED THAT, EVEN THEN, THE TRANSACTIONS DURING THE YEAR HAVE BEEN SUBSTANTIAL. THIS ASPECT ALSO WAS NOT SCRUTINIZED AS TO THE GENUINENESS OF TRANSACTIONS A ND CORRECTNESS OF THE EXPLANATIONS OFFERED. 06. SINCE VARIOUS ASPECTS OF RELEVANT TRANSACTIONS INVOLVING SUBSTANTIAL AMOUNTS WERE NOT LOOKED INTO AND VERIFI ED AND THE EXPLANATIONS NOT SUBJECTED TO VERIFICATIONS/ENQUIRI ES, THE ASSESSMENT 7 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 MADE BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL IN THE INTEREST OF REVENUE. 8. THE COMMISSIONER OF INCOME TAX VIDE ORDER DATED 29-0 3-2006 DIRECTED THE ASSESSING OFFICER TO VERIFY THE TRANSACTIONS OF THE ASSESSEE WITH M/S. FARIDA LEATHER COMPANY, CHENNAI. THE OPERATIVE PART OF THE DIRECTIONS OF COMMISSIONER OF INCOME TAX READS AS UNDER : 14. IN THE PRESENT CASE ALSO THE A.O. FAILED TO SC RUTINIZE/VERIFY SUBSTANTIAL TRANSACTIONS BY THE ASSESSEE WITH M/S. FARIDA LEATHER CO., CHENNAI, IN THE LIGHT OF THE FACT THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED CERTAIN PAYMENTS FROM THE SAID COMPANY BY BEARER CHEQUES AND THERE ARE DIFFERENCES IN THE DETAILS OF PAYMENTS RE CEIVED FROM M/S. FARIDA LEATHER CO. 9. IN PURSUANCE TO THE ORDER OF COMMISSIONER OF INCOME TAX PASSED U/S. 263 OF THE ACT THE ASSESSING OFFICER PASSED THE ASSE SSMENT ORDER ON 26-12-2006 MAKING ADDITION OF ` 54,20,000/- ON ACCOUNT OF PAYMENTS ALLEGEDLY MADE BY M/S. FARIDA LEATHER COMPANY, CHENNAI. THE RELEVANT EXTRACT OF THE FINDINGS OF ASSESSING OFFICER MA KING ADDITION ARE AS UNDER : FURTHER, DURING THE COURSE OF SCRUTINY PROCEEDINGS , ENQUIRIES WERE CONDUCTED WITH M/S. FARIDA LEATHER COMPANY, CH ENNAI, ONE OF THE PURCHASERS OF GOAT SKIN FROM THE ASSESSEE FIRM. M/ S. FARIDA LEATHER COMPANY WAS ASKED TO SUBMIT ACCOUNT EXTRACT OF THE ASSESSEE FIRM IN THEIR BOOKS OF ACCOUNTS FOR FINANCIAL YEAR RELEVANT TO A.Y. 2001-02. ACCORDINGLY, M/S. FARIDA LEATHER COMPANY SUBMITTED THE ACCOUNT EXTRACT OF THE ASSESSEE FORM IN THEIR BOOKS OF ACCO UNTS FOR FINANCIAL YEAR 2000-01. ON GOING THROUGH THE DETAILS SUBMITTED BY M/S. FARIDA LEATHER COMPANY, FOLLOWING FACTS HAVE BEEN OBSERVED : PARTICULARS ACCOUNT OF ASSESSEE IN THE BOOKS OF M/S. FARIDA LEATHER COMPANY. ACCOUNT OF M/S. FARIDA LEATHER COMPANY IN THE BOOKS OF THE ASSESSEE. OPENING BALANCE RS.39,32,380/- RS.22,32,380/- 8 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 TOTAL PURCHASES RS.86,15,776/- . TOTAL SALES RS.86,15,776/- TOTAL PAYMENTS MADE DURING THE RELEVANT FINANCIAL YEAR. RS.1,25,48,156/- . TOTAL PAYMENTS SHOWN TO HAVE BEEN RECEIVED DURING THE RELEVANT FINANCIAL YEAR. .. RS.1,08,48,156/- ON PERUSAL OF THE INFORMATION RECEIVED FROM M/S FAR IDA LEATHER COMPANY, CHENNAI, IT IS REVEALED THAT DURING THE FI NANCIAL YEAR 2000-01 THE SAID PARTY HAS MADE TOTAL PAYMENTS OF R S. 1,25,48,156/- TO THE ASSESSEE FIRM WHEREAS THE ASSESSEE IS SHOWIN G TO HAVE RECEIVED TOTAL PAYMENTS OF RS.1,08,48,156/-. AS DISCUSSED EA RLIER AND AS CONTENDED BY THE ASSESSEE FIRM, AN AMOUNT OF RS. 37.20 LACKS ON ACCOUNT OF PAYMENTS RECEIVED FROM M/S TATA INTERNAT IONAL LIMITED HAS WRONGLY BEEN INCLUDED IN THE AFORESAID AMOUNT OF RS .1,08,48,156/-. IF THIS IS SO, THEN IF THE SAID AMOUNT OF RS.37.20 LAC KS HAS BEEN REDUCED FROM THE TOTAL PAYMENTS OF RS.1,08,48,156/- RECEIVED FROM, M/S FARIDA LEATHER COMOANY THEN THE AMOUNT OF PAYMENTS RECEIVED FROM M/S. FARIDA LEATHER COMPANY DURING FINANCIAL YEAR 2 000-01 COMES ONLY TO RS 71,28,156/- ( RS.1,08,48,156/- (-) RS.37 ,20,000). THIS MEANS THAT, M/A FARIDA LEATHER COMPANY IS CONT ENDING TO HAVE MADE PAYMENT OF RS.1,25,48,156/- WHERE AS THE ASSESSEE COMPANY IS SHOWING PAYMENTS OF RS.71,28,156/- DURIN G FINANCIAL YEAR 2000-01. THIS MEANS THAT THERE IS A DIFFERENCE OF R S.54,20,000/- ON ACCOUNT OF THE PAYMENTS CLAIMED TO HAVE BEEN MADE B Y M/S. FARIDA LEATHER COMPANY, HOWEVER NOT INCORPORATED BY THE AS SESSEE FIRM IN ITS REGULAR BOOKS OF ACCOUNTS MAINTAINED FOR FINANCIAL YEAR RELEVANT TO A.V. 2001-02. 10. THE ASSESSING OFFICER AFTER MAKING THE ABOVE SAID ADDIT IONS IN THE ASSESSMENT ORDER HAS FURTHER COMMENTED ON THE CO NDUCT OF THE ASSESSEE AND THE VARIOUS OTHER TRANSACTIONS ENTERED IN TO BY THE ASSESSEE AND HAS EXPLAINED HOW THE ASSESSEE HAS BEEN SHOWING FICTITIOUS CREDITORS. A PERUSAL OF THE ASSESSMENT ORDER SH OWS THAT IN SO FAR AS THE ADDITION IS CONCERNED THE ADDITION IS MADE ON THE BASIS OF 9 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 ENQUIRIES AND VERIFICATION OF THE TRANSACTIONS BETWEEN THE ASSESSEE AND M/S. FARIDA LEATHER COMPANY, CHENNAI. THE REST OF THE DISCUSSIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS ONLY TO REINFORCE THE REASONING AND TO SHOW THE CONDUCT OF THE ASSESSEE WHICH IS NOT VERY MATERIAL AS REGARDS THE ADDITION IS CONCERN ED. THE ASSESSEE WAS NOT ABLE TO RECONCILE THE ACCOUNTS OF M/S. FARIDA LEA THER COMPANY, CHENNAI. A PERUSAL OF NOTICE U/S. 263, DIRECTIONS OF COMMISSIONER OF INCOME TAX IN ORDER PASSED U/S. 263 AND THE ORDER OF ASSESSING OFFICER IN PURSUANCE OF THE ORDER OF COMMISSIONER OF INCOME TAX SHOWS THAT ALL THREE ARE COHERENT. THE ASSESSING O FFICER HAS MADE ADDITION AFTER VERIFYING/SCRUTINIZING THE TRANSACTIONS BETWE EN ASSESSEE AND M/S. FARIDA LEATHER COMPANY, CHENNAI IN ACCORDANCE W ITH THE DIRECTIONS OF COMMISSIONER OF INCOME TAX. WE DO NOT FIND AN Y MERIT IN THE SUBMISSIONS OF THE LD. AR THAT THE ASSESSING OFFICER HAS TRAVELLED BEYOND THE DIRECTIONS OF COMMISSIONER OF INCOME TAX IN MAK ING THE ADDITION. 11. UNDISPUTEDLY, THE TRANSACTIONS OF THE ASSESSEE WITH M/S. FARIDA LEATHER COMPANY, CHENNAI WERE NOT LOOKED INTO BY THE AS SESSING OFFICER AT THE TIME OF SCRUTINY ASSESSMENT PROCEEDINGS, THE REFORE, NO ADDITION WAS MADE AT THE TIME OF ORIGINAL ASSESSMENT. TH E ADDITION MADE BY ASSESSING OFFICER IN PURSUANCE TO ORDER OF COMMISS IONER OF INCOME TAX U/S. 263 WAS NOT SUBJECT MATTER OF APPEAL B EFORE THE TRIBUNAL. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER IN CONFIRMING THE ADDITION. ACCORDINGLY, THE APPEAL OF THE AS SESSEE IS DISMISSED BEING DEVOID OF ANY MERIT. 10 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 12. AS REGARDS CASE LAWS ON WHICH THE LD. AR HAS PLACED RELIANCE, WE FIND THAT THE SAME DO NOT APPLY IN THE FACTS AND CIRCUMS TANCES OF THE CASE IN HAND. ITA NO. 922/PN/2014 (A.Y. 2004-05) 13. IN APPEAL FOR THE ASSESSMENT YEAR 2004-05, THE ASSE SSEE HAS RAISED FOUR GROUNDS. THE LD. AR OF THE ASSESSEE HAS STA TED AT THE BAR THAT HE IS NOT PRESSING GROUND NOS. 2 TO 4 IN THE GROUN DS OF APPEAL. ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. 14. THE GROUND NO. 1 WHICH ONLY REMAINS FOR ADJUDICATION IN THE APPEAL READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LOWER AUTHORITIES ERRED IN MAKING AN ADDITION OF RS .13,71,474/- ON ACCOUNT ALLEGED FICTITIOUS CREDITORS LIABILITY BY D ISREGARDING APPELLANTS CONTENTION IN THIS REGARD. 15. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE GROUND NO. 1 RELATES TO THE ADDITION ON ACCOUNT OF FICTITIOUS CREDITORS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE ADDIT ION BY MERELY PLACING RELIANCE ON THE ORDER PASSED IN THE APPEA L FOR THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 CONFIRMING THE ADD ITION OF ` 54,20,000/-. THE ISSUE IN APPEAL FOR ASSESSMENT YEAR 2001 -02 AND ASSESSMENT YEAR 2004-05 ARE ON DIFFERENT FOOTING. THE CO -ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2001-02 HAS REJECTED THE APPEAL OF THE DEPARTMENT UP HOLDING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION ON ACCOUNT OF FICTITIOUS CREDITORS. 11 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 16. ON THE OTHER HAND LD. DR VEHEMENTLY DEFENDED THE FIN DINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION. 17. BOTH SIDES HEARD. A PERUSAL OF THE IMPUGNED ORDER S HOWS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS PRIMARILY CONFIR MED THE ADDITION ON ACCOUNT OF FICTITIOUS CREDITORS BY FOLLOWING HIS ORD ER IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 WHIC H WAS ARISING FROM THE ASSESSMENT ORDER PASSED U/S. 143(3) R.E.S. 263 OF THE ACT. IN THE SAID APPEAL THE MOOT ISSUE WAS THE VERACITY OF TRANS ACTIONS BETWEEN THE ASSESSEE AND M/S. FARIDA LEATHER COMPANY, CHENNAI A ND RECORDING OF THE TRANSACTIONS IN THE BOOKS OF ASSESSEE. IN THE ORIGINAL ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2001-0 2 THE ASSESSING OFFICER HAD MADE ADDITION ON ACCOUNT OF FICTITIOUS CREDITORS LIA BILITY WHICH WAS SET ASIDE BY THE COMMISSIONER OF INCOME TAX (A PPEALS) AND THE TRIBUNAL VIDE ORDER DATED 28 TH SEPTEMBER, 2007 IN ITA NO. 1455/PN/2004 BY THE DEPARTMENT HAS UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY OBSERVING AS UNDER : 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFER E IN THE MATTER THOUGH OUR REASONS OF ARRIVING AT THIS CONCLUSION ARE DIFF ERENT THAN THOSE ADOPTED BY THE CIT(A). AS FOR THE ADDITION OF RS.2 0,11,647/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT, WE ARE OF THE CONSIDERE D VIEW THAT IN THE GIVEN SITUATION AND HAVING REGARD TO THE NATURE OF ASSESSEES BUSINESS, THE ASSESSEE HAS GIVEN REASONABLE DETAILS TO SUBSTA NTIATE THE EXPLANATION FOR THIS AMOUNT. IT IS O RECORD THAT B AZAAR WISE DETAILS ARE ON RECORD AND THE NATURE OF BUSINESS AS SUCH THAT I NTERACTION WITH A LARGE NUMBER OF VILLAGERS INVOLVED. AN EXPLANATION GIVEN BY THE ASSESSEE IS NOT TO BE CONSIDERED IN ISOLATION BUT IN THE LIG HT OF THE PARTICULAR FACT SITUATION AND IN THE LIGHT OF GROUND REALITIES OF T HE BUSINESS THAT THE ASSESSEE IS INVOLVED IN. MERELY BECAUSE SEPARATE L EDGER IS NOT MAINTAINED FOR EACH CREDITOR, THE EXPLANATION CANNO T BE REJECTED. THE CIT(A) WAS THUS QUITE JUSTIFIED IN DELETING THE IMP UGNED ADDITION. 18. THUS, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE NE EDS A REVISIT TO THE FILE OF COMMISSIONER OF INCOME TAX (APPEALS). THE COM MISSIONER 12 ITA NOS. 706 & 922/PN/2014, A.YS. 2001-02 & 2004-05 OF INCOME TAX (APPEALS) SHALL DECIDE THIS ISSUE DE NOVO AFTER CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CAS E IN ASSESSMENT YEAR 2001-02. NEEDLESS TO SAY THAT WHILE DE CIDING THIS ISSUE THE COMMISSIONER OF INCOME TAX (APPEALS) SHALL AFFORD S UFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WIT H LAW. ACCORDINGLY, GROUND NO. 1 RAISED IN THE APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSE. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR ASSESS MENT YEAR 2001-02 IS DISMISSED AND THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 25 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 25 TH NOVEMBER, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-IT/TP, PUNE 4. ' / THE CIT-I, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE