ITO,Ward-2, Malda, Malda V. M/s Tirupati Traders, Malda

ITA 762/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91964 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2012
• Court: TRIBUNAL
• Department Lawyers: SANJAY
• Assessee Lawyers: V N PUROHIT; H V BHARDWA
• Keywords: Unexplained cash credit; Unexplained investment; Assessment record
• Section: 143(3); 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE SHRI P.K.BANSAL, AM & SHRI MAHAVIR SINGH, JM ] ITA NO.762 /KOL/2012 ASSESSMENT YEAR : 2006 - 07 ( A PPELLANT ) (RESPONDENT) I.T.O., WARD - 2, - VERSUS - M/S. TIRUP ATI TRADERS MALDA MALDA (PAN: AAKFM 4688 Q) FOR THE APPELLANT: SHRI SANJAY, ADDL.CIT,DR FOR THE RESPONDENT: SHRI V.N.PUROHIT, FCA & SHRI H.V.BHARDWAJ DATE OF HEARING : 22.05.2015. DATE OF PRONOUNCEMENT : 22.05.2015. ORDER PER SHRI MAHAVIR SINGH, JM THIS APPEAL OF REVENUE IS ARISING OUT OF ORDER OF CIT(A) - JALPAIGURI IN APPEAL NO . 285/MLD/CIT(A)/JAL/08 - 09 DATED 29.02.2012 . ASSESSMENT WAS FRAMED BY I.T.O., WARD - 2, MALDA U/S 145(3)/ 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REF ERRED TO AS THE ACT ) FOR A.YR . 2006 - 07 VIDE ITS ORDER DATED 08 .12 .2008 . 2. THE FIRST TWO INTERCONNECTED ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION OF UNDISCLOSED INVESTMENT AMOUNTING TO RS.5,39,5 24/ - AND UNEXPLAINED CASH CREDIT OF RS.12,46,945/ - . FOR THIS THE REVENUE HAS RAISE THE FOLLOWING GROUND NOS. 1 AND 2 : - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A), JALPAIGURI ERRED IN DELETION OF THE ADDITION OF RS.5,39,524/ - ON THE BAS IS OF UNDISCLOSED INVESTMENT FOUND DURING THE COURSE OF SCRUTINY. 2. THAT THE CIT(A) ERRED IN DELETION OF RS.12,46,945/ - ON ACCOUNT OF UNEXPLAINED CASH CREDIT FOUND DURING THE COURSE OF SCRUTINY. 3. AS REGARDS TO THE FIRST ISSU E ON UNEXPLAINED INVESTMENT OF R S.5,39,534/ - THE AO REQUISITIONED THE INFORMATION FROM UNITED COMMERCIAL BANK, MALDA BRANCH U/S 133(6) OF THE ACT WHERE THE ASSESSEE HAS MAINTAINED A CASH CREDIT LIMIT. THE BANK PROVIDED THE INFORMATION THAT THE ASSESSEE HAS DISCLOSED THE VALUE OF CLO SING STOCK AS ITA NO. 762/KOL/2012 M/S. TIRUPATI TRADERS A.YR.2006 - 07 2 ON 31.03.2006 A T RS.51,00,000/ - . BUT AS PER BALANCE SHEET THE VALUE OF CLOSING STOCK WAS AT RS.45,60,476/ - . THE AO ISSUED SHOW CAUSE NOTICE AS TO WHY THE DIFFERENCE OF RS.5,39,524/ - BETWEEN THE STOCK STATEMENT AS PER BOOKS OF ACCOUNT AND STOC K STATEMENT GIVEN TO THE BANK AS ON 31.03.2006 BE ADDED AS UNEXPLAINED INVESTMENT U/S 69B OF THE ACT. THE ASSESSEE EXPLAINED THAT TO AVAIL THE LOAN FACILITY, ESTIMATED THE STOCK STATEMENT TO THE BANK. BUT THE AO WAS NOT SATISFIED WITH THE EXPLANATION AND HE ADDED THE SUM. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION BY OBSERVING AS UNDER : - I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE AR AND ALSO PERUSED THE ASSESSMENT ORDER. IT IS APPARENT THAT THE ASSESSEE HAD GIVEN THE STOCK STATEMENT IN ROUND FIGURE OF RS.51,00,000/ - TO THE BANK WHICH APPARENTLY CONFIRMED THE VIEW OF THE LD. AR THAT THE STATEMENT WAS MADE ON ESTIMATE BASIS. SECONDLY, THE LD AO DID NOT CONDUCT ANY FURTHER INVESTIGATION IN VIEW OF THE AFORESAID STOCK STATEMENT. IT IS INCORRECT TO SAY THAT THE ASSESSEE WAS NOT AVAILING ANY CREDIT FACILITY. NO DEFECT IN THE BOOKS OF A/C COULD BE POINTED OUT. IN SUCH SITUATION, THE ADDITION MADE BY THE AO ONLY ON THE BASIS OF SUCH STOCK STATEMENT CANNOT BE SUSTAINED, AS THE SAME WAS NOT CORROBORATED BY ANY OTHER MATERIAL. APART FROM THE DECISIONS CITED BY THE LD. AR, IN SIMILAR CIRCUMSTANCES, IN SEVERAL OTHER CASES, THE COURT HAS TAKEN SUCH VIEW. THE CASES OF DHANSIRAM AGARWALLA VS CIT (1993) 201 ITR 192 (GAU), CIT VS GEN ERAL METAL WORKS 172 ITR 173 (ALL), CIT VS N SWAMY 241 ITR 303 (MAD) CAN ALSO BE REFERRED TO IN THIS CONNECTION. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT T HE ASSESSEE HAS SUBMITTED THE STOCK STATEMENT AS GIVEN TO THE BANK IN ITS PAPER BOOK AND NOTED THAT THE ENTIRE STOCK STATEMENT IS BASED ON ESTIMATE BASIS. THERE IS NO DIFFERENCE IN QUANTITY ONLY VALUE IS INCREASED. ONCE THIS IS THE POSITION , THE ADDITION T O THE CLOSING STOCK CANNOT BE MADE . EVEN OTHERWISE , WE ARE IN AGREEMENT WITH THE FINDINGS OF CIT(A) THAT STOCK STATEMENT IS JUST ON THE BASIS OF E STIMATION AND NOT A REAL ONE. IN TERM OF THE ABOVE AND CASE LAWS CITED BY CIT(A) , WE CONFIRM THE ORDER OF CIT(A ). THIS ISSUE OF THE REVENUE IS DISMISSED. 5. AS REGARDS TO THE ADDITION OF UNEXPLAINED CASH CREDIT OF RS.12,46,945/ - AO HAS MADE ADDITION OF CASH CREDITS. THESE ARE BASICALLY TRADING CREDITORS OR PURCHASERS. THE ASSESSEE IS A DEALER IN MOTOR CYCLE AND SPA RE PARTS. THE ASSESSEE HAS SOLD THE MOTOR CYCLE AND RECORDED CREDIT ENTRIES IN THE NAME OF 62 PERSONS FROM WHOM PAYMENTS WERE RECEIVED LATER ON. WE FIND THAT CIT(A) HAS RECORDED THE FACTS AND DELETED THE ADDITION BY OBSERVING AS UNDER : - ITA NO. 762/KOL/2012 M/S. TIRUPATI TRADERS A.YR.2006 - 07 3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD AR AND ALSO PERUSED THE ASSESSMENT ORDER. I HAVE ALSO PERUSED VARIOUS DOCUMENTS PRODUCED BY THE AR IN THE PAPER BOOK AND THE ASSESSMENT RECORD. ON GOING THROUGH THE ASSESSMENT RECORD, IT APPEARS THAT ON 08.09.2008, THE LD AO HAS RECORDED THE STATEMENT OF SRI DIPANKAR CHATTERJEE WHEREIN HE HAD ADMITTED THAT ON 08.10.2005, HE HAD PURCHASED ONE YAMAHA CRUXS MOTORCYCLE AND ON THE SAME DATE, HE HAD PAID RS.11,146/ - TO THE ASSESSEE. OUT OF THE AFORESAID AMOUNT RS.7,810/ - WAS T HE DOWN PAYMENT AND REMAINING AMOUNT WAS PAID AS THREE INSTALLMENTS OF BANK LOAN @ RS.1,112/ - PER INSTALLMENT. HE HAD AVAILED FINANCED FROM HDFC BANK OF RS.30,300/ - FOR PURCHASING THE MOTORCYCLE. HE DENIED TO HAVE MAKE ANY CASH PAYMENT TO THE ASSESSEE ON 0 7.07.2005 OF RS.8,040/ - . FROM THE XEROX COPY OF THE SALES MEMO DATED 08.10.2005, APPEARS THAT THE SAID BIKE WAS SOLD TO SRI CHATTERJEE FOR RS.38,110/ - . FROM THE REPAYMENT SCHEDULE OF LOAN OF HDFC BANK, IT IS FOUND THAT SRI CHATTERJEE HAD TAKEN LOAN FROM TH E SAID BANK OF RS.30,330/ - ON WHICH INTEREST OF RS.9,732/ - WAS PAID AND THE LOAN ACCOUNT WAS FINALLY REPAID ON 05.08.2008. SIMILARLY, IN HIS STATEMENT DATED 25.07.2008, MD TAFFAZAL HOSSAIN ALSO ADMITTED THAT HE HAD PURCHASED ONE YAMAHA LIBERO G - 5 MOTORCYCL E ON 24.02.2006 AND ON THE SAME DATE, HE HAD PAID RS.22,000/ - TO THE ASSESSEE AT THE TIME OF PURCHASING OF THE BIKE AND ON 01.03.2006 HE PAID FURTHER AMOUNT OF RS.9,000/ - . HE HAD AVAILED FINANCE FROM HDFC BANK OF RS.15,000/ - . HE DENIED TO HAVE MADE ANY CAS H PAYMENT TO THE ASSESSEE ON 01.01.2006 AS ADVANCE. FROM THE XEROX COPIES OF THE SALES MENU DATED 24.02.2006, APPEARS THAT THE SAID BIKE WAS SOLD TO MD HOSSAIN AT RS.45,200/ - . FROM THE REPAYMENT SCHEDULE OF LOAN OF HDFC BANK IT IS FOUND THAT MD HOSSAIN HAD TA KEN LOAN FROM THE SAID BANK OF R S.15,000/ - ON WHICH INTEREST OF RS.2,100/ - WAS PAID AND THE LOAN ACCOUNT WAS SETTLED ON 06.08.2007 PAYING INSTALLMENTS @RS.950/ - . FROM THE AFORESAID FACTS, IT IS CLEAR THAT THOSE TWO PERSONS HAD PURCHASED MOTORCYCLES FROM THE ASSESSEE FIRM AND THEY MADE PART OF THE PAYMENTS IN CASH AND PART WAS FINANCED BY THE BANK. THERE IS NO CONFUSION SO FAR AS THIS FACT IS CONCERNED. BUT THE ONLY QUESTION, ON WHICH THE LD AO RELIED ON AND REJECTED THE BOOKS OF A/C OF THE ASSESSE, IS TH E TIME OF PAYMENT OF THE CASH BY THE AFORESAID TWO PURCHASERS. TO CLARIFY THIS SITUATION, THE AR EXPLAINED THAT WHILE GIVING THE STATEMENTS BEFORE THE AO, BOTH THE PURCHASERS HAD PRESENTED THE FACT FROM THEIR MEMORY, THEY HAD NO DOCUMENTARY EVIDENCE WITH T HEM TO PROVIDE EXACT DATE AND TIME. THEY DID NOT DENY THE PAYMENT OF CASH TO THE ASSESSEE. ON THE OTHER HAND, THE ASSESSEE MAINTAINED PROPER RECORDS SHOWING THE RECEIPTS AND ISSUED THE SALE BILLS TO THE PURCHASERS MENTIONING THE COST OF THE MOTORCYCLES. TH E BOOKS OF A/CS WERE DULY AUDITED AND THE AO HAS ALSO EXAMINED THE SAME. THE SAID SUBMISSION OF THE AR SOUNDS REASONABLE. THERE IS NO DOUBT THAT MOTORCYCLES WERE NOT SOLD TO THOSE PERSONS. AS PER THE PREVALENT PRACTICE OF BANK FINANCING, ON PAYMENT OF CER TAIN AMOUNT AS ADVANCE FOR BOOKING OF THE CAR/MOTORCYCLE, THE DOCUMENTS RELATING TO THE BANK FINANCE ARE PREPARED AND AS PER THE DOCUMENTS PROVIDED BY THE SELLER AND AFTER OBSERVING DUE FORMALITIES, THE FINANCIER SANCTIONS LOAN WHICH IS DIRECTLY PAID TO TH E SELLER. THUS, THE STATEMENTS OF THOSE TWO PURCHASERS THAT THEY DID NOT PAY ANY ADVANCE AND THE CASH AMOUNT WAS PAID AT THE TIME OF PURCHASE OF MOTORCYCLE SEEM TO BE UNREASONABLE AND CONTRARY TO THE PREVALENT PRACTICE. SECONDLY, THE PRESENT MARKET CONDITI ON OF SELLING OF VEHICLES IS ALSO HIGHLY COMPETITIVE. IN MOST OF THE CASES, THERE IS NO SCOPE OF CHARGING ANY PREMIUM FROM SALE OF VEHICLES. THUS, THERE CANNOT BE ANY VALID REASON FOR WHICH THE ASSESSEE WOULD ITA NO. 762/KOL/2012 M/S. TIRUPATI TRADERS A.YR.2006 - 07 4 INTRODUCE HIS OWN FUND IN THE NAME OF OTHER PER SONS FOR GETTING SUPPLY FROM THE MANUFACTURERS FOR SELLING IT AT PREMIUM. THIRDLY, OUT OF 62 PURCHASERS, THE LD AO HAS EXAMINED ONLY TWO (2) PERSONS AND ON THE BASIS OF THEIR STATEMENTS, HE HAS TAKEN UNIFORM DECISION WHICH IS APPARENTLY UNFAIR. THE ASSESSE E HAD PROVIDED THE NAMES AND ADDRESS OF ALL THOSE PERSONS (WHICH IS VIRTUALLY A MATTER OF GOVT. RECORD FOR THE PURPOSE OF REGISTRATION OF THE VEHICLES), BUT THE LD AO DID NOT MAKE FURTHER VERIFICATION BEFORE ARRIVING AT THE CONCLUSION. IN VIEW OF THE ABOVE FACTS, IT CANNOT BE SAID TO BE A CASE WHERE THE IDENTITY OF THOSE PURCHASERS AS WELL AS THEIR CREDITWORTHINESS WAS NOT ESTABLISHED. IT IS, THUS, HELD THAT IT IS NOT A FIT CASE FOR REJECTION OF THE BOOKS OF A/C U/S 145 OF THE ACT AND MAKING THE ADDITION U/ S 68. THUS, THE ADDITION MADE BY THE LD AO IS ORDERED TO BE DELETED. 6. AFTER GOING THROUGH THE FINDINGS OF CIT(A), IT IS SEEN THAT AO HAS REJECTED THE BOOK RESULTS BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. FROM THE ASSESSMENT ORDER IT CAN BE NOTICED THAT ASSESSMENT IS FRAMED U/S 145(3)/143(3) OF THE ACT AND ONCE THE BOOK RES ULTS ARE REJECTED THE LIABILITIES CANNOT BE ADDED , EXCEPT APPLYING THE GROSS PROFIT RATE. IN TERMS OF THE ABOVE FACTUAL FINDINGS GIVEN BY CIT(A) AS REPRODUCED ABOVE , WE C ONFIRM THE ORDER OF CIT(A). THIS ISSUE OF THE REVENUE S APPEAL IS DISMISSED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNC ED IN TH E COURT . SD/ - SD/ - [P.K. BANSAL] [MAHAVIR SINGH] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 22 ND MAY, 2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO : 1 . M /S. TIRUPATI TRADERS, N.H., 34, RATHBARI, MALDA. 2 THE I.T.O. - WARD - 2, MALDA . 3 . THE CIT, 4. THE CIT(A) - JALPAIGURI 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO. 762/KOL/2012 M/S. TIRUPATI TRADERS A.YR.2006 - 07 5