ACIT, Trichur V. M/s.George Metals, Trichur

ITA 73/COCH/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64999 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 07-03-2012
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: V M KRISHNAKUMAR
• Keywords: Opportunity of being heard; Corroborative evidences
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 73/COCH/2012 ASSESSMENT YEAR: 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), TRICHUR VS. M/S. GEORGE METALS, 9/568, SUJATHA COMPLEX, S.T. NAGAR, NEAR HEART HOSPITAL, THRISSUR-680 001. [PAN:AACFG 6307N] (REVENUE-APPELLANT) (ASSESSEE -R ESPONDENT) C.O. NO. 13/COCH/2012 (ARSG. OUT OF I.T.A. NO. 73/COCH/2012) ASSESSMENT YEAR: 2008-09 M/S. GEORGE METALS, 9/568, SUJATHA COMPLEX, S.T. NAGAR, NEAR HEART HOSPITAL, THRISSUR-680 001. [PAN:AACFG 6307N] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), TRICHUR (ASSESSEE-APPELLANT) (REVENUE-R ESPONDENT) REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI V.M. KRISHNAKUMAR, CA DATE OF HEARING 19/11/2012 DATE OF PRONOUNCEMENT 07/12/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION F ILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 05-12-2011 PASSED BY THE LD. CIT(A)-V, KOCHI AND THEY RELATE TO THE ASSESSMENT YEAR 2008-09. I.T.A. NO.73/COCH/2012 & C.O. NO.13/COCH/2012 2 2. THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE ADDITION OF RS.22.00 LAKHS MADE BY THE AO U/S 68 OF THE ACT. T HE ASSESSEE HAS FILED THE CROSS OBJECTION TO SUPPORT THE ORDER PASSED BY LD CIT(A). 3. THE FACTS RELATING THERETO HAVE BEEN NARRAT ED AS UNDER BY LD CIT(A). 4. ACCORDING TO THE ASSESSING OFFICER THE ASSESSE E HAS ACCOUNTED RECEIPTS OF AMOUNTS ON VARIOUS DATES AS ADVANCES FROM CERTAIN INDIVIDUALS IN CASH TOWARDS PURCHASE OF GOODS. THE ASSESSEE WAS ASKED TO EXPLA IN THESE CASH ADVANCES WITH SUPPORTING EVIDENCE. THE ASSESSEE HAS CLARIFIED T HAT THE ADVANCES ARE GENUINE AND THAT IT CAN BE SEEN FROM THE BOOKS THAT ALL THE ACCOUNTS ARE LATER SETTLED BY SUPPLY OF GOODS. THE ASSESSEE HAS STATED THAT THES E ADVANCES ARE TAKEN MAINLY FOR THE ORDERS OF COLOUR ROOFING SHEETS FROM PERSON S WHO INSIST ON SPECIAL COLOURS. SPECIAL ORDERS ARE PLACED WITH THE MANUFA CTURERS FOR THESE GOODS WILL TAKE A MINIMUM PERIOD OF TWO MONTHS FOR DELIVERY AN D TO ENSURE THAT THE CLIENTS WILL TAKE DELIVERY AGAINST THE SPECIAL ORDERS AN AM OUNT EQUAL TO THE EXPECTED SALE PRICE IS COLLECTED IN ADVANCE. THE CLAIM OF THE ASSESSEE THAT ADVANCES ARE COLLECTED MAY BE CORRECT BUT THE ASSESSEE IS BOUND BY LAW TO PROVE THE CASH ADVANCES ACCOUNTED IN ITS BOOKS WITH SUPPORTING EVI DENCE. FURTHER THE ASSESSING OFFICER HAS ALSO STATED THAT THE VERIFICA TION OF THE BOOKS OF THE ASSESSEE SHOW THAT THE ASSESSEE HAS ACCOUNTED CASH ADVANCES ON VARIOUS DATES BUT ON CERTAIN SPECIFIED DATES THE ASSESSEE DID NOT HAVE SUFFICIENT CASH IN THE BOOKS TO MEET THE EXPENSES, IF THE ASSESSEE HAD NOT RECEIVED THE CASH ADVANCE ON THAT SPECIFIED DAY. THE DETAILS ARE AS UNDER:- DATE OF RECEIPT OF ADVANCE NAME OF PARTY AMOUNT REC EIVED DATE ON WHICH ADVANCE IS SETTLED BY SALE BILL 06.10.2007 ST. XAVIER 1,00,000 01.01.2008 06.10.2007 KRISHNANKUTTY 2,00,000 15.02.2008 24.11.2007 T.K.ABDUL KADEER 2,00,000 14.01.2008 30.11.2007 MAHADEVAN 5,00,000 18.01.2008 01.12.2007 SEBASTION 5,00,000 02.02.2008 06.12.2007 ZAMEER 5,00,000 19.01.2008 27.12.2007 RAJAN 2,00,000 22.02.2008 TOTAL 22,00,000 AS ON 27.12.2007 THE AO HAD INFORMED THE ASSESSEE THAT THE CASH BAL ANCE OF THE BOOKS WITHOUT THESE ADVANCES WILL BE NEGATIVE AS ON 27.12.2007 A ND HENCE THESE ADVANCES MUST BE PROVED WITH SUPPORTING EVIDENCE. THE ASSES SEE CLARIFIED THAT THE ONLY EVIDENCE AVAILABLE WAS THE COPY OF THE RECEIPT FOR ADVANCE RECEIVED AND COPY OF THE SALE BILL. THE ASSESSEE STATED THAT SPECIAL O RDERS ARE RECEIVED THROUGH THE RETAIL DEALERS ON BEHALF OF CLIENT AND AS A SECURI TY ADVANCES ARE COLLECTED AND NOTED IN ORDER BOOKS. ON RECEIPT OF THE GOODS THE Y ARE BILLED IN THE NAME OF CLIENT AND GOODS ARE DESPATCHED TO THE RETAIL DEAL ERS BUT AS THIS IS RELATING TO I.T.A. NO.73/COCH/2012 & C.O. NO.13/COCH/2012 3 EARLIER PERIODS, THEY WERE UNABLE TO COLLECT THE A DDRESS OF EACH CLIENT AN TO FILE CONFIRMATIONS FOR THESE ADVANCES. THE ASSESSEE AD MITTED THAT THEY WERE UNABLE TO FILE ANY OTHER EVIDENCE TO SUPPORT THEIR CLAIM BUT THE ADVANCES ARE SUPPORTED BY SALE BILLS. IN THE ASSESSING OFFICERS OPINION, THE SALE AND RECEIPT OF SALE PROCEEDS RECORDED IN THE BOOKS OF THE ASSESSEE CAN BE ACCEPTED AS EVIDENCE. BUT RECEIPT OF ADVANCE IN CASH IN HAND TO MEET THE EXPENSES RISES DOUBTS ABOUT THE RECEIPT OF THE AMOUNT ON THAT SPECIFIED DATE. CONSIDERING ALL THESE ISSUES THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKI NG A LUMP SUM OF RS. 22,00,000/-. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFIC ER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A), WHO DELETED THE ADDITION W ITH THE FOLLOWING OBSERVATIONS:- 6. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS MADE BY THE APPELLANT. DURING THE COURSE OF APPELL ATE PROCEEDINGS, THE APPELLANT HAD FILED A PAPER BOOK CONTAINING THE SUBMISSIONS MADE. A PERUSAL OF THE EXTRACTS OF THE CASH ACCOUNT FOR THE PRESCRIBED 7 DAYS WHICH HAVE BEEN INDICATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER W OULD SHOW THAT AT LEAST ON 3 OUT OF 7 DAYS THE APPELLANT WAS HAVING MORE THAN A DEQUATE CASH IN HAND TO MEET THE EXPENSES OF THE DAY EVEN WITHOUT CONSIDER ING THE IMPUGNED RECEIPTS. THE OPENING BALANCE OF CASH AVAILABLE ON THE RESPE CTIVE DATES AS WELL AS THE BALANCE AVAILABLE TO THE APPELLANT IN ITS BANK ACC OUNT HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. THE PERUSAL OF THE BANK STA TEMENTS (HDFC BANK LTD.) INDICATE THAT THE ASSESSEE HAD MORE THAN ADEQUATE BALANCE AVAILABLE ON THE IMPUGNED DATES WHICH IT COULD AND WOULD HAVE DRAWN IF REQUIRED AND THE ACTION OF THE APPELLANT IN NOT DRAWING FUNDS FROM ITS BAN K ACCOUNT ON THE SPECIFIED DATES IS ONLY THAT OF A PRUDENT BUSINESSMAN ENGAGE D IN PROPER FINANCIAL PLANNING AND UTILIZATION OF FUNDS. THE ASSESSING OFFICER H AS ACCEPTED THE SALE AND RECEIPT OF SALE PROCEEDS RECORDED IN THE BOOKS OF THE ASSE SSEE. MOREOVER, THE ADVANCES WERE SUPPORTED BY SALE BILLS WHICH HAVE BEEN RECOR DED IN THE BOOKS OF ACCOUNTS. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE ASSE SSING OFFICER WAS NOT JUSTIFIED IN ADDING AN AMOUNT OF RS. 22,00,000/- T O THE INCOME OF THE APPELLANT. THUS THE ADDITION MADE IS DELETED AND THE GROUNDS OF APPEAL IS ALLOWED AGGRIEVED BY THE ORDER OF LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE ASSESSEE HAS FILED THE CROSS OBJECTION SUPPORTING THE ORDER OF LD CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE CASH CREDITS DURING THE COURSE OF ASSESSMENT PROCEEDING. SHE FU RTHER SUBMITTED THAT THE LD CIT(A) HAS CONSIDERED CERTAIN ADDITIONAL DOCUMENTS WITHOUT CONFRONTING THE SAME TO THE AO. I.T.A. NO.73/COCH/2012 & C.O. NO.13/COCH/2012 4 WE NOTICE THAT THE ASSESSEE HAS FILED A PAPER BOOK BEFORE US, WHEREIN THE COPIES OF CASH BOOK, LEDGER EXTRACTS OF THE CUSTOMERS, COPIES OF BANK ACCOUNTS AND COPIES OF RELEVANT SALE INVOICES ARE INCLUDED, BESIDES THE CA SE LAW ON WHICH RELIANCE IS PLACED BY THE ASSESSEE. THE SUM AND SUBSTANCE OF THE CONTENT IONS OF LD A.R WAS THAT THE ASSESSEE HAD RECEIVED SALES ADVANCES AND THE SAID A CCOUNTS WERE CLOSED BY SUPPLYING GOODS THROUGH PROPER INVOICES. IT WAS FURTHER SUBM ITTED THAT THE ASSESSEE WAS HAVING SUFFICIENT DRAWING POWER IN ITS BANK ACCOUNT AND AC CORDINGLY IT WAS CONTENDED THAT THE PRESUMPTION OF THE AO THAT THESE ADVANCES WERE CRED ITED TO MAKE UP THE NEGATIVE BALANCE IS TOTALLY AGAINST THE FACTS. THE LD A.R A LSO PLACED RELIANCE ON HOST OF CASE LAW TO SUBMIT THAT THE SALES ADVANCES, IN SUCH CIRCUMST ANCES, CANNOT BE ASSESSED U/S 68 OF THE ACT. 6. THERE SHOULD NOT BE ANY DISPUTE THAT THE GEN UINE SALES ADVANCES CANNOT BE ADDED U/S 68 OF THE ACT AND IN SUPPORT OF THE SAID PROPOS ITION, THE ASSESSEE HAS PLACED RELIANCE ON VARIOUS CASE LAW. WE NOTICE THAT THE A O WAS CONSTRAINED TO MAKE THE ADDITION OF SALES ADVANCES U/S 68 OF THE ACT, SINCE THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO SUPPLY THE NECESSARY INFORMATION. ON T HE OTHER HAND, THE ASSESSEE HAS SUBMITTED THE BANK ACCOUNT DETAILS AND OTHER AVAILA BLE INFORMATION BEFORE THE LD CIT(A), WHICH HAVE BEEN CONSIDERED BY HIM FOR GRANT ING RELIEF TO THE ASSESSEE. HOWEVER, AS POINTED OUT BY LD. D.R, IT IS NOT BORNE OUT OF RECORD AS TO WHETHER THOSE DOCUMENTS WERE CONFRONTED TO THE ASSESSING OFFICER. THOUGH THE ASSESSEE MAY BE LEGALLY RIGHT IN ITS CONTENTION, YET THE NATURAL JU STICE DEMANDS THAT THE ASSESSEE SHOULD HAVE SUBMITTED THE RELEVANT DETAILS BEFORE THE AO. HENCE, IN OUR VIEW, THE VARIOUS DOCUMENTS FILED BEFORE THE LD CIT(A) NEEDS VERIFICA TION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AN D RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE VARIOUS DOCUMENTS THAT MAY BE FILED BEFORE HIM, CONSIDER THE VARIOUS CASE LAW THA T MAY BE RELIED UPON BY THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH TH E LAW. THE ASSESSEE SHOULD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. I.T.A. NO.73/COCH/2012 & C.O. NO.13/COCH/2012 5 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FILED BY THE ASSES SEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 07-12-2 012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 7TH DECEMBER, 2012 GJ COPY TO: 1. M/S. GEORGE METALS, 9/568, SUJATHA COMPLEX, S.T. NAGAR, NEAR HEART HOSPITAL, THRISSUR-680 001. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2(1), THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCH I. 4.THE COMMISSIONER OF INCOME-TAX, THRISSUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN