SMT. RANJANA RAWAT, Jaipur V. ACIT, Jaipur

ITA 827/JPR/2012

• Counselvise Citation: 82723114 RSA 2012
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 26-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Keywords: Unexplained cash credit; Assessment record
• Section: 40A(3); 143(3); 142(1); 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 827/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2004-05 RANJANA RAWAT, D-153, DURGA MARG, BANI PARK, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: ABOPR 3953 N VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MRS. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 15/06/2015 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 07/09/2015 VKNS'K @ ORDER PER: BENCH THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 27/08/2012 PASSED BY THE LEARNED CIT (A)-I, JAIPUR FOR A.Y. 2004-05. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN DISMISSING THE GROUND ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 2 OF ASSESSEE CHALLENGING THE LEGALITY OF ORDER PASSE D U/S 147 BY INCORRECTLY HOLDING THAT ASSESSEE HAS NOT MADE ANY SUBMISSION ON THIS GROUND OF APPEAL, HENCE TAKEN AS NOT PRESSED. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 20,06,973/- ON ACCOUNT OF ALLEGED UNEXPLAINED SUNDRY CREDITORS BY: A) CHANGING THE VERY BASIS ON WHICH A.O. MADE THE ADDITION AND INSTEAD CONSIDERING THE INCREASE IN CREDITORS FROM A.Y. 2003-04 TO A.Y. 2004-05 AT RS. 20,06,973/- (67,70,182- 47,63,209)AS UNEXPLAINED. B) PRESUMING THAT INCREASE IN SUNDRY CREDITORS FROM A.Y. 03-04 TO A.Y. 04-05 IS UNEXPLAINED WITHOUT ASCERTAINING THAT THE INCREASE PERTAIN TO YEAR UNDER CONSIDERATION OR TO EARLIER YEARS. C) HOLDING THAT THE TRADING ADDITION OF RS. 24,93,777/- CONFIRMED AFTER THE ORDER OF CIT(A)/ITAT (AS AGAINST RS. 43,17,346/- MADE BY A.O.) IN A.Y. 2005-06 DO NOT COVER THE DIFFERENCE IN SUNDRY CREDITORS OF RS. 24,47,617/- DETERMINED BY CIT(A) (AS AGAINST RS. 28,39,607/- DETERMINED BY A.O.) AND THEREFORE ADDITION FOR ALLEGED UNEXPLAINED SUNDRY CREDITORS MADE BY THE A.O. IN THE YEAR UNDER CONSIDERATION IS NOT COVERED BY THE TRADING ADDITION FINALLY SUSTAINED IN ASSESSMENT YEAR 2005-06. 2. BOTH THE GROUNDS OF THE ASSESSEES APPEAL ARE IN TERLINKED AND ARE AGAINST THE ORDER PASSED U/S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AS WELL AS CONFIRMING THE ADDITION OF RS. 20,06,973/- ON ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 3 ACCOUNT OF ALLEGED UNEXPLAINED SUNDRY CREDITORS. THE ASSESSEE IS DEALING IN EXPORT OF PRECISION ENGINEERING PARTS. TH E ASSESSEE FILED RETURN ON 30/10/2004 DECLARING TOTAL INCOME OF RS. 40,82,720/-. ORDER U/S 143(3) OF THE ACT WAS PASSED ON 10/02/2009. THE ASSESSEE IS A PROPRIETOR OF M/S USHA PRECISION EXPORT. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS FOR A.Y. 2005-06, IT WAS NOTI CED BY THE ASSESSING OFFICER THAT THE BALANCE OF SUNDRY CREDIT ORS RELATED TO A.Y. 2004-05 WERE NOT TALLIED AND THE ASSESSEE HAS NOT OF FERED ANY SATISFACTORY EXPLANATION IN THIS RESPECT. THEREFORE, INCOME CHARGEABLE TO TAX AMOUNTING TO RS. 28,39,607/- HAD ESCAPED ASS ESSMENT FOR THE ASSESSMENT YEAR 2004-05. THEREFORE, NOTICE U/S 148 O F THE ACT WAS ISSUED AFTER RECORDING THE REASONS IN COMPLIANCE TO THE NOTICE. THE LD AR FURNISHED HIS OBJECTION AS ON 11/8/2011, WHICH WAS DULY DISPOSED BY THE SPEAKING ORDER PASSED ON 09/12/2011 AS PER G UIDELINE DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF G.N.K. DRIVESHEFT (INDIA) LTD. VS. I.T.O. (2003) 259 ITR 19 (SC). THEREAFTER NOT ICE U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. THE LD ASSESSING O FFICER FURTHER HELD THAT THE ASSESSEES SUBMISSIONS IS NOT ACCEPTA BLE IN VIEW OF THE LD CIT(A)S ORDER DATED 18/11/2008 RELATED TO A.Y. 2005 -06. ON PAGE 5 ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 4 IN LAST PARA, IT STATED THAT REGARDING RECONCILIATION OF CREDITORS EVEN IF THE CONTENTION OF THE AR IS ACCEPTED, BALANCE APPEA RING IN THE CASE OF ANURAG SALES RS. 8,01,882/- REMAINS UNEXPLAINED. IN THE CASE OF PK INDUSTRIES THE DIFFERENCE OF RS. 7,02,932/-, IN THE CASE OF SWASTIK TRADING CO THE RS. 4,05,705/- WERE UNEXPLAINED. THE A. O. HAS NOT MADE ANY ADDITION U/S 40A(3) AS WELL AS ON ACCOUNT O F DIFFERENCE IN PURCHASE ACCOUNT BUT ONLY HAS MADE TRADING ADDITION BY APPLYING HIGHER NP RATE OF 18% AS AGAINST 7.34% DECLARED BY THE APPELLANT. THERE WAS NO ADDITION ON ACCOUNT OF DIFFERENCES IN TH E BALANCES WERE MADE IN A.Y. 2005-06. THE ASSESSEE VIDE HIS LETTER D ATED 14/12/2007 FOR A.Y. 2005-06 HAD ADMITTED THAT THE DISCREPANCY IN BALANCES OF SUNDRY CREDITORS LIKE M/S ANURAG SALES CORPORATION, M/S P.K. INDUSTRIES, M/S SWASTIK TRADING COMPANY ARE DUE TO PENDING RECONCILIATION OF EARLIER YEARS. FURTHER FOLLOWING D ETAILS WERE ALSO GATHERED BY THE ASSESSING OFFICER ON THE BASIS OF A SSESSMENT RECORD FOR A.Y. 2005-06, WHICH IS AS UNDER:- A) THE ACIT, CIRCLE-4, PROVIDED THE COPY OF CONFIRMAT ION DATED 03/10/2007 WHICH WAS SUBMITTED BY M/S ANURAG SALES CORPORATION VIDE WHICH IT HAS BEEN CONFIRMED T HAT THE CREDIT BALANCE OF SMT. RANJANA RAWAT PROP. M/S U SHA ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 5 PRECISION EXPORTS IN THE BOOKS OF ACCOUNTS OF M/S A NURAG SALES CORPORATION IS AT RS. 1271436/-. THE ASSESSEE SMT. RANJANA RAWAT PROP. M/S USHA PRECISIONS EXPORTS HAS SHOWN THE CREDIT BALANCE AT RS. 2373278/- IN HER RET URN OF INCOME BUT HAS GIVEN THE CONFIRMATION FOR THE BA LANCE OF RS. 1271436/- FOR THE ASSESSMENT PROCEEDINGS OF ANURAG SALES CORPORATION. THUS, THERE IS A DIFFERENC E OF RS. 1101842/- WHICH HAS ESCAPED ASSESSMENT. B) IN THE CASE OF SWASTIK TRADING COMPANY, THE NAME O F THE ASSESSEE SMT. RANJANA RAWAT PROP. M/S USHA PRECISION S EXPORTS DID NOT REFLECT IN THE BOOKS OF M/S SWASTIK TRADING COMPANY. THUS, AMOUNT OF RS. 344978/- HAS ESCAPED ASSESSMENT. C) M/S P.K. INDUSTRIES IS ALSO THE ASSESSED TO INCO ME TAX IN CIRCLE-4, JAIPUR. THE ACIT, CIRCLE-4, JAIPUR PROVIDED THE COPY OF THE LETTER WHICH WAS SUBMITTED BY HIS ASSESS EE VIDE WHICH HE HAS SUBMITTED CONFIRMATION FROM M/S US HA PRECISIONS EXPORTS AND THE SAME IS DULY CONFIRMED B Y M/S USHA PRECISIONS EXPORTS FOR RS. NIL. THE ASSESSEE SM T. RANJANA RAWAT PROP. M/S USHA PRECISIONS EXPORTS IS SHOWING THE CREDIT BALANCE OF RS. 702932/- IN HER RE TURN OF INCOME BUT SHE HAS GIVEN THE CONFIRMATION FOR TH E BALANCE OF RS. NIL FOR THE ASSESSMENT PROCEEDINGS O F M/S ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 6 R.K. INDUSTRIES. THEREFORE, INCOME OF RS. 702932/- HAS ESCAPED ASSESSMENT. D) IN RESPECT OF ALL THE THREE ASSESSEES (M/S ARIHA NT CORPORATION, M/S SUNRAJ STEEL AND M/S YESH ENTERPRI SES) NO CONFIRMATION HAS BEEN FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, AMOUNTS OF RS. 111715/-, RS. 405705/- AND RS. 172435/- HAVE ESCAPE D ASSESSMENT. E) THUS, THE TOTAL AMOUNT OF THE CLOSING BALANCE OF THE CREDITORS OF RS. 28,39,607/- WHICH WAS NOT TALLIED AN D THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION OF THIS EXPENDITURE AND THE OFFERED EXPLANATION BY THE ASSE SSEE WERE NOT CORRECT. THEREFORE, INCOME CHARGEABLE TO TA X AMOUNTING TO RS. 28,39,607/- HAS ESCAPED ASSESSMENT FOR THE A.Y. 2004-05. THEREFORE, HE MADE ADDITION OF RS. 28,39,607/- IN TH E INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 5.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE AR THE ASSESSMENT ORDER OF THE A .O. IN ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 7 2005-06 AND THE ASSESSMENT RECORDS OF THE ASSESSEE FOR A.YS. 2003-04, 04-05, 05-06. AFTER A CAREFUL STUDY OF THE ABOVE MATERIAL, I DO NOT AGREE WITH THE SUBMISSIONS OF THE AR ON THE FOLLOWING POINTS: 1. THE FIRST PLEA OF THE ASSESSEE IS THAT THE DIFFER ENCES IN THE ACCOUNTS OF CERTAIN SUNDRY CREDITORS HAS BEEN SPECIFICALLY CONSIDERED WHILE PASSING THE ORDER U/S 143(3) IN A.Y. 2005-06. THESE FACTS ARE NOT ENTIRELY CORRECT IN SO FAR THAT THE A.O. IN THE ASSESSMENT O RDER FOR A.Y. 2005-06 DATED 26/12/2006 HAS MENTIONED THAT THE GP HAD DECLINED CONSIDERABLY SINCE A.Y. 20 04- 05 & A.Y. 2002-03 & 2003-04 BEING 7.35% AS AGAINST 18.59% (A.Y. 2004-05) AND 19.51% IN (A.Y. 2003-04). THEREAFTER, SHE HAS LISTED 9 FACTORS ON THE BASIS OF WHICH SHE HAD PROCEEDED TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3). NON RECONCILIATION OF THE ACCOUNTS OF THE CREDITORS IS ONLY ONE OF THE REASONS AND NOT TH E ONLY REASON. TOTAL PAYMENTS OF RS. 10,40,000/- WERE MADE IN CASH AND SINCE NO SEPARATE ADDITION WERE BEING MADE THE NP RATE WAS ESTIMATED AT THE RATE OF 18% ON THE BASIS OF PAST HISTORY RESULTING IN A TRA DING ADDITION OF RS. 43,17,255/-. THUS NO SEPARATE ADDITIONS ON ACCOUNT OF UNEXPLAINED CREDITORS OF RS . ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 8 28,39,607/- AND UNEXPLAINED CASH PAYMENTS OF RS. 10,40,000/- WERE MADE. THE LD CIT(A) VIDE HIS ORDER ITA NO. 797/07-08 DATE D 18/11/2008 HAS HOLISTICALLY TAKEN ALL THE FACTS DISCUSSED BY THE A.O. IN HER ORDER AND CONFIRMED TH E ESTIMATE OF N.P. AT 13.5% ALLOWING RELIEF OF RS. 18,23,477/-. THIS WAS CONFIRMED SUBSEQUENTLY BY THE HONBLE ITAT VIDE ITS ORDER ITA NO. 68/JP/2009 DATE D 18/12/2009. THUS THE SUBMISSIONS OF THE AR THAT THE DIFFERENCES IN THE CREDITORS ACCOUNT WERE CONFIRMED BY THE CIT(A) IS NOT ENTIRELY CORRECT. THE UNEXPLAINED CREDITORS WERE OF RS. 28,39,607/- AND UNEXPLAINED CASH PAYMENTS WERE OF RS. 10,40,000/- AS PER THE NOTE ON PAGE 8 OF THE ASSESSMENT ORDER. A TOTAL OF THIS BEING RS. 38,79,607/- WAS INCLUDED IN THE TRADING ADDITION OF RS. 43,17,255/- MADE BY THE A.O.. THE TRADING ADDITION AT 13.5% CONFIRMED BY CIT(A) WAS ONLY OF RS. 24,93,777/- WHICH DOES NOT EVEN COVER TH E UNEXPLAINED CREDITORS LET ALONE THE ADDITIONS REQUI RED TO BE MADE U/S 40A(3) OF RS. 10,40,000/-. THUS, IT CANNOT BE CLAIMED THAT THE TRADING ADDITION CONFIRM ED BY CIT(A) COVERS ENTIRELY THE UNEXPLAINED CREDITORS. 2. ON PERUSAL OF THE ASSESSMENT RECORDS FOR A.Y. 20 03- 04, 2004-05 AND 2005-06 IT IS SEEN THAT IN ALL THE 3 YEARS THE CASE OF THE ASSESSEE WAS SELECTED FOR ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 9 SCRUTINY AND ON ORDER U/S 143(3) WAS PASSED. IN A.Y. 2003-04 THE ASSESSEE WAS SHOWING SUNDRY CREDITORS AT RS. 47,63,209/- IN HIS BALANCE SHEET. NO DETAILS REGARDING THE NAMES OF THE SUNDRY CREDITORS AND THE AMOUNT IS AVAILABLE ON RECORDS FOR THIS A.Y. IN A.Y . 2004-05 THE SUNDRY CREDITORS HAVE INCREASED FROM RS . 47,63,209/- TO RS. 67,70,182/- IN THE BALANCE SHEET THAT IS, AN INCREASE OF RS. 20,06,973/-. THE DETAILS OF SUNDRY CREDITORS FOR A.Y. 2004-05 AND A.Y. 2005-06 FURNISHED BY THE AR DURING THE ASSESSMENT PROCEEDINGS IS COMPILED AS BELOW: SUNDRY CREDITORS PARTICULARS A.Y. 2004-05 A.Y. 2005-06 DIFFERENCES ADVANCE FROM CUSTOMERS 4,96,604.72 7,09,254 2,12,254 ANIL ENGINEERING WORKS 2,00,010.00 15,20,931 13,20, 921 ANURAG SALES CROP. 8,01,882.00 23,73,278 15,71,396 ARIHANT CORPORATION - 1,11,715 1,11,715 DELHI TRADING CORP. 6,36,587.00 5,16,587 -(1,20,000 ) GOYAL SALES - 1,82,300 1,82,300 MAKHAN LAL & SONS 8,30,832.00 8,30,832 - PARAG INDUSTRIES 1,51,165.00 1,51,165 - PARAS STEEL 3,84,168.00 3,24,168 -(60,000) PIYUSH WIRE INDUSTRIES 3,71,185.00 2,71,185 -(1,00, 000) P.K. INDUSTRIES 7,33,860.00 7,02,932 -(30,928) R.C.S. WIRES 3,75,010.00 3,73,340 -(1,670) SEAH METAL PRODUCTS CO. PVT. LTD. SHRI SHYAM STEEL S.S. PANCHAL INDUSTRIES SUNRAJ STEELS 11,12,261.00 - 3,19,484.00 1,00,000 69,600 4,05,705 -(10,12,261) 69,600 86,221 ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 10 SWASTIK TRADING CO. YASH ENTERPRISES 3,57,134.00 - 3,44,978 1,72,435 -(12,156) 1,72,435 GRAND TOTAL 67,70,182 91,60,405 23,90,223 THUS THE SUBMISSIONS OF THE AR THAT THE SAME ADDITIO N ON ACCOUNT OF UNEXPLAINED CREDITORS HAS BEEN MADE TWICE IN A.Y. 2004-05 & 05-06 IS NOT BORNE OUT BY FACTS ON RECORD NAMELY THE SUNDRY CREDITORS IN A.Y. 2003-04 WERE OF RS. 47,63,209/- (DETAILS NOT AVAILA BLE ON RECORD). THESE INCREASED BY RS. 20,06,973/- TO RS . 67,70,182/- IN A.Y. 2004-05 AND THESE FURTHER INCREASED BY RS. 23,90,219/- TO RS. 91,60,401/- IN A.Y. 2005-06 (REFER TABLE ABOVE). THE INCREASE OF SUNDRY CREDCITORS IN A.Y. 2005-06 WAS OVER AND ABOVE THE INCREASE IN SUNDRY CREDITORS IN A.Y. 2004-05. THE TRADING ADDITION OF 13.5% CONFIRMED BY THE CIT(A) DI D NOT COVER THE UNEXPLAINED ADDITION OF SUNDRY CREDIT ORS OF RS. 23,90,219 IN A.Y. 2005-06 ALONE THE INCREASE OF RS. 20,06,973/- IN A.Y. 2004-05 NOT THE DISALLOWANCE U/S 40A(3) OF RS. 10,40,000/-. THE AR OF THE ASSESSEE WAS GIVEN AN OPPORTUNITY DURING THE COURSE OF APPELLATE PROCEEDINGS VIDE ORDERSHEET ENTRY DATED 24/08/2012 TO GIVE A LIST OF SUNDRY CREDITORS IN A.Y. 2003-04 AND TO BRING EVIDE NCE TO SUBSTANTIATE THE INCREASE IN SUNDRY CREDITORS IN A.Y. 2004-05 BY WAY OF COPIES OF LEDGER ACCOUNTS OF THE ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 11 ASSESSEE IN THE BOOKS OF THE SUNDRY CREDITORS. HE EXPRESSED HIS INABILITY TO DO SO. MOREOVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ENQUIRIES WERE MADE FROM M/S ANURAG SALES CORPORATION, M/S P.K. INDUSTRIES WHICH SHOW A MARKED DISCREPANCY IN THE LEDGER ACCOUNTS MAINTAINED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE CORRESPONDING LEDGER ACCOUN TS OF THE ASSESSEE IN THE BOOKS OF THESE PARTIES. THUS IN ABSENCE OF ANY EVIDENCE AND THE INABILITY OF THE ASSESSEE TO VERIFY THE ADDITION IN SUNDRY CREDITORS DURING THIS A.Y. AS COMPARED TO PREVIOUS A.Y. AND T HE ENQUIRIES CONDUCTED BY THE A.O. SHOWING THAT THERE ARE OBVIOUS DISCREPANCIES INDICATING INFLATION OF S UNDRY CREDITORS ACCOUNT THE INCREASE IN AMOUNT OF RS. 20,06,793/- REMAINS UNEXPLAINED DURING THIS A.Y. IN A.Y. 2005-06 A SIMILAR FINDING WAS GIVEN BY THE A .O. ON SIMILAR FACTS AND A TRADING ADDITION WAS MADE BY APPLYING A HIGHER NP RATE INSTEAD OF MAKING A SPECI FIC ADDITION ON ACCOUNT OF UNEXPLAINED INCREASE IN SUND RY CREDITORS. THE NP RATE WAS SUBSEQUENTLY REDUCED BY THE CIT(A) WHILE CONFIRMING THE FINDING REGARDING TH E UNEXPLAINED SUNDRY CREDITORS. HOWEVER, DURING THIS A.Y. THE A.O. HAS MADE A SPECIFIC ADDITION ON ACCOU NT OF UNEXPLAINED INCREASE IN SUNDRY CREDITORS RATHER THAN A TRADING ADDITION. SINCE THE PRINCIPLE OF RES JUDI CATA ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 12 DOES NOT APPLY IN THE I.T. PROCEEDINGS AND THE A.O. HAS TAKEN A VIEW THAT A SPECIFIC ADDITION SHOULD BE MADE ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS DURING THIS A.Y. THIS FINDING IS CONFIRMED. THUS THE UNEXPLAINED INCREASE IN SUNDRY CREDITORS IS OF RS. 20,06,973/- DURING THIS A.Y. THE ADDITION ON ACCOUN T OF UNEXPLAINED SUNDRY CREDITORS IS CONFIRMED TO THE EXTENT OF RS. 20,06,973/-. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. A .R. FOR THE ASSESSEE HAS SUBMITTED AS UNDER:- IT MAY BE NOTED THAT IN ASSESSMENT YEAR 2005-06 THE AO AFTER TAKING INTO ACCOUNT THE ABOVE DIFFERENCE MADE A TRA DING ADDITION OF RS.43,17,346/- BY APPLYING A G.P. RATE OF 18% AS AGAINST 7.34% DECLARED BY THE ASSESSEE. THE G.P. RAT E OF 18% IS APPLIED BY CONSIDERING THE G.P RATE OF 19.51% IN A.Y. 2003- 04 AND 18.59% IN A.Y. 2004-05. BY WAY OF A NOTE IN THE ASSESSMENT ORDER IT WAS CLARIFIED THAT ADDITION OF RS.43,17,346/- IS CORROBORATED BY THE FACT OF UNEXP LAINED CREDITOR FOR RS.28,39,604/-, UNEXPLAINED CASH PAYME NT OF RS.10,40,000/- (THESE ARE PAYMENT IN CASH FOR RS.200 00/- EACH ON VARIOUS DATES AS LISTED ON PAGE 3 & 4 OF TH E ORDER) AND OTHER DEFECTS IN THE BOOKS. FROM THIS ORDER, IT IS CLEAR THAT THE DIFFERENCE IN THE ACCOUNT OF ABOVE PARTIES HAS BEEN SPECIFICALLY ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 13 CONSIDERED AND THE TRADING ADDITION HAS BEEN MADE B Y TAKING INTO ACCOUNT THE SAID DIFFERENCE. THE CIT(A) THOUGH REDUCED THE TRADING FROM 43,17,346/ - TO RS.24,93,869/- BUT HE ALSO CONSIDERED THE DIFFERENC E IN THESE ACCOUNTS AT RS.21,47,653/- BY GIVING THE FOLLOWING F INDING 'REGARDING RECONCILIATION OF THE CREDITORS EVEN IF THE CONTENTION OF THE AR IS ACCEPTED, BALANCE APPEARING IN THE CASE OF ANURAG SALES AT RS.8,01,882/- REMAINS UNEXP LAINED. IN THE CASE OF P.K INDUSTRIES THE DIFFERENCE OF RS. 7, 02,932/-, IN CASE OF SWASTIK TRADING COMPANY THE DIFFERENCE OF R S. 2,37,134/-, IN CASE OF SUNRAJ STEELS THE DIFFERENCE OF RS. 4,05,705/- WERE UNEXPLAINED. THE AO HAS NOT MADE AN Y ADDITION UNDER SECTION 40A(3) AS WELL AS ON ACCOUNT OF DIFFERENCE IN PURCHASE ACCOUNT BUT ONLY HAS MADE TR ADING ADDITION BY APPLYING HIGHER NET PROFIT RATE OF 18% AS AGAINST 7.34% DECLARED BY THE APPELLANT. AFTER CONSIDERING THE EXPLANATION OF THE AR PARTICULARLY ON FALL IN G.P./ N.P. RATE AS WELL AS DIFFERENCE IN PURCHASE ACCOUNT, II WILL BE IN THE INTEREST OF THE JUSTICE IF NET PROFIT RATE OF 13.5% IS APPLI ED ON THE DECLARED SALES OF RS.4,05,21,730/-. THE AO IS THERE FORE DIRECTED TO APPLY NET PROFIT RATE OF 13.5% ON THE D ECLARED SALES AS AGAINST 18% APPLIED BY HIM. ESTIMATION OF THE NET PROFIT MADE BY THE AO AT RS.72,93,910/- WILL BE REDUCED TO RS.54,70,433/-. THUS THE APPELLANT GETS RELIEF OF R S. 18,23,477/.' FROM THE ABOVE ORDER OF THE AO AND THE CIT(A), IT I S EVIDENT THAT THE TRADING ADDITION HAS BEEN MADE MAINLY ON ACCOUN T OF DIFFERENCE IN THE ACCOUNT OF THE AFORESAID SIX CRED ITOR'S ACCOUNT. THIS DIFFERENCE IS FINALLY DETERMINED BY THE CIT(A) AT RS.21,47,653/-. THEREFORE THE CIT(A) APPLIED A NET P ROFIT RATE OF ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 14 13.5% RESULTING INTO THE TRADING ADDITION OF RS.24, 93,869/-, SO AS TO COVER THE DIFFERENCE OF RS.21,47,653/- IN THE CREDITORS ACCOUNT. THUS, IT IS INCORRECT ON THE PART OF THE L OWER AUTHORITIES IN HOLDING THAT NO ADDITION HAS BEEN MADE ON ACCOUNT O F DIFFERENCE IN THE BALANCES OF SUNDRY CREDITORS DURING A.Y. 200 5-06. THE ASSESSEE IN COURSE OF ASSESSMENT PROCEEDING FOR A.Y. 2005-06 HAS STATED THAT THE DIFFERENCE IN THE BALAN CES OF THE AFORESAID SUNDRY CREDITOR IS DUE TO PENDING RECONCI LIATION OF THE EARLIER YEARS. HOWEVER, THIS DIFFERENCE RELATES TO WHICH YEAR COULD NOT BE IDENTIFIED IN THE ABSENCE OF THE DETAI LS OF THE EARLIER YEARS. THEREFORE IT CANNOT BE PRESUMED THAT THE DIF FERENCE PERTAIN TO A.Y. 2004-05 ONLY. IN FACT ASSESSEE HAS GIVEN THE FOLLOWING RECONCILIATION IN A.Y. 2005-06:- NAME OF THE PARTY BALANCE AS PER BOOKS AS ON 31-03-2005 BALANCE AS PER PARTY AS ON 31 - 03-2005 DIFFERENCE PAID/ADJUSTE D IN NEXT YEARS DIFFEREN CE RELATED ANURAG SALES 2373278 1271436 1101842 300000 801842 P.K.INDUSTRIES 702932 - 702932 - 702932 SWASTIK TRADING 344978 - 344978 107840 237138 ARIHANT CORPORATION 11 1715 - 111715 111715 - SUNRAJ STEEL 405705 - 405705 - 405705 YASH ENTERPRISES 172435 - 172435 172435 - 4111043 1271436 2839607 691990 214761 FROM THE SAID RECONCILIATION, IT IS EVIDENT THAT AS SESSEE HAS NOWHERE STATED THAT THE DIFFERENCE PERTAIN TO A.Y. 2 004-05. THERE IS NO MATERIAL WITH THE LOWER AUTHORITIES TO ASSUME THAT ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 15 THIS DIFFERENCE PERTAIN TO A.Y. 2004-05. THE AO HAS CONSIDERED THIS DIFFERENCE IN A.Y. 2005-06 AND MADE THE TRADIN G ADDITION. THUS, WHEN AFTER CONSIDERING THE DIFFERENCE, ADDITI ON IS ALREADY MADE IN A.Y.2005-06, MAKING THE ADDITION AGAIN IN A .Y.2004- 05 BY CONSIDERING THE SAME DIFFERENCE HAS AMOUNTED TO DOUBLE ADDITION. IN THESE FACTS, THE REOPENING OF THE ASSESSMENT U/S 147 IS BAD IN LAW. CIT(A) WITHOUT CONSIDERING THE SAME INCORREC TLY OBSERVED THAT ASSESSEE HAS NOT PRESSED THE GROUND O F SECTION 148. FURTHER, THE ADDITION OF RS.20,06,973/- CONFIR MED BY CIT(A) IGNORING THE FACT THAT THE SPECIFIC PARTIES FOR WHI CH ADDITION IS MADE BY AO HAS ALREADY BEEN CONSIDERED IN A.Y. 2005 -06 WHILE MAKING THE TRADING ADDITION IS INCORRECT. HENCE, TH E ADDITION CONFIRMED BY THE CIT(A) BE DELETED. CIT(A) HAS OBSERVED THAT SUNDRY CREDITORS AS COMPAR ED TO A.Y. 2003-04 HAS INCREASED BY RS.20,06,973/- IN AY 2004- 05 AND AS COMPARED TO AY 2004-05 HAS INCREASED BY RS.23,90,21 9/- IN AY 2005-06. HE THEREFORE CONFIRMED THE ADDITION OF RS. 20,06,973/-. THIS IS INCORRECT. THE VERIFIABILITY/ UNVERIFIABILI TY OF SUNDRY CREDITORS CANT BE CONSIDERED ON OVERALL BASIS BUT ON PARTY BASIS. IN AY 2005-06, THOUGH THE SUNDRY CREDITORS INCREASE D BY RS.23,90,219/- , THE AO ON THE PARTY WISE BASIS OBS ERVED THAT SUNDRY CREDITORS OF RS.28,39,607/- IS NOT VERIFIABL E. THIS IS REDUCED BY CIT(A) TO RS.21,47,654/-. IT IS ACCEPTED BY CIT(A) THAT IN AY 03-04 (I.E. 31.03.2003), THE SUNDRY CRED ITORS ARE OF ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 16 RS.47,63,209/-. THIS IS MORE THAN THE AMOUNT OF RS. 21,47,654/. IN FACT THE PARTIES INVOLVED IN THE LIST OF SUNDRY CREDITORS FOR WHICH ADDITION IS MADE IS COMING FROM AY 03-04 OR EARLIER YEARS AND THEREFORE THE ADDITION CONFIRMED BY CIT(A) BY TREAT ING THE OVERALL INCREASE IN SUNDRY CREDITOR BALANCE FROM 31.03.2003 TO 31.03.2004 AS UNEXPLAINED IS INCORRECT MORE PARTICU LARLY WHEN THE PARTIES CONSIDERED BY THE AO FOR MAKING THE ADD ITION IS ALSO APPEARING ON 31.03.2005 AND CONSIDERED IN AY 05-06 IN MAKING THE ADDITION. CIT(A) AT PAGE 7-8 OF HIS ORDER HAS GIVEN A LIST OF SUNDRY CREDITORS AS ON 31.03.2004 & 31.03.2005. AS PER THIS LIST, TH E POSITION OF THE 6 PARTIES FOR WHICH ADDITION IS MADE BY AO IS A S UNDER:- PARTICULARS AY 2004- 05 AY 2005-06 DIFFERENCES ANURAG SALES CORP. 8,01,882 23,73,278 15,71,396 ARIHANT CORPORATION - 1,11,715 1,11,715 P.K. INDUSTRIES 7,33,860 7,02,932 -(30,928) SUNRAJ STEEL 3,19,484 4,05,705 86,221 SWASTIK TRADING COMPANY 3,57,134 3,44,978 -(12,156) YASH ENTERPRISES - 1,72,435 1,72,435 FROM THE ABOVE TABLE, IT CAN BE NOTED THAT IN RESPE CT OF SOME OF THE PARTIES, THERE IS INCREASE IN THE BALANCE WH EREAS IN CASE OF SOME OF THE PARTIES, THERE IS A DECLINE. THE CRED IT BALANCE IN THE NAME OF THE ABOVE PARTIES AS EXISTING ON 31.03. 04 & 31.03.05 WERE APPEARING EVEN ON 31.03.2003 AS IN THA T YEAR ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 17 THE TOTAL SUNDRY CREDITOR WERE OF RS.47,63,209/-. THE REFORE, ADDITION CONFIRMED BY CIT(A) BY TREATING THE DIFFERE NCE OF INCREASE IN SUNDRY CREDITOR FROM 31.03.2003 TO 31.0 3.2004 AT RS.20,06,973/- IS INCORRECT. 5. AT THE OUTSET, THE LD. DR SUPPORTED THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD ASSESSING OFFICER FOUND DIFFERENCE IN CREDITORS ACCOUNT IN CASE OF AN URAG SALES CORP. AT RS. 12,71,436/-, IN CASE OF SWASTIK TRADING CO. RS. 3 ,44,978/-, IN CASE OF P.K. INDUSTRY, RS. 7,02,932/-, IN CASE OF ARIHAN T CORP. AT RS. 1,11,715/-, IN CASE OF SUNRAJ STEEL RS. 4,05,708/- AND IN CASE OF RASH ENTERPRISES AT RS. 1,72,435/- WHILE THE ASSESSMENT F OR A.Y. 2005-06 WAS MADE BY THE ASSESSING OFFICER. THE TOTAL DIFFEREN CE IN CREDITORS ACCOUNT WAS FOUND AT RS. 28,39,607/- ON THAT BASIS T HE LD ASSESSING OFFICER RECORDED A REASON U/S 147 AND ISSUED NOTICE U/S 148 FOR A.Y. 2004-05 BY OBSERVING THAT THE ASSESSEE HAD PURCHASE D RAW MATERIAL FROM THE LOCAL MARKET FOR THIS PURPOSE AND ALSO THE ASSESSEE HAD NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS FOR HE R ASSESSMENT. THE LD ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 18 ARS CONTENTION IS THAT THESE CREDITORS ARE COMING FROM EARLIER YEARS BUT IN ABSENCE OF ANY RECORD, IT CANNOT BE QUANTIFI ED ON THE BASIS OF ASSESSMENT YEAR. THE BALANCES AS ON 31/3/2004 AND 31 /3/2005 ARE AS UNDER:- SL. NO. NAME OF THE PARTY AS ON 31/3/2004 AS ON 31/ 3/2005 1. ANURAG SALES 08,01,882/- 23,73,278/- 2. SWASTIK TRADING CO. 3,57,134/- 3,44,978/- 3. P.K. INDUSTRY 7,33,860/- 7,02,932/- 4. ARIHANT CORPORATION - 1,11,715/- 5. SUNRAJ STEEL 3,19,484/- 4,05,705/- 6. YASH ENTERPRISES - 1,72,435/- IT IS REVEALED FROM THE ABOVE CHART THAT IN CASE OF ANURAG SALES CORP, AND SUNRAJ STEEL, THE CREDIT BALANCE HAS INCREASED FROM 31/3/2004 AND 31/3/2005. IN CASE OF SWASTIK TRADING COMPANY AN D P.K. INDUSTRY, THE CREDIT BALANCE HAD GONE DOWN COMPARED TO 31/3/20 04 TO 31/3/2005, WHICH PROVED THAT ON 31/3/2005, THESE CRE DIT BALANCES WERE CUMULATIVE. THE LD ASSESSING OFFICER FOR A.Y. 2 005-06 HAD CONSIDERED THE G.P. ADDITION ON ACCOUNT ON DISCREPA NCY FOUND IN THESE CREDITORS ACCOUNT. NO SEPARATE ADDITIONS WERE MADE O N ACCOUNT OF DIFFERENT IN CREDITORS. THE CREDIT BALANCE AS ON 31/ 3/2005 I.E. FOR A.Y. 2005-06 CANNOT BE ADDED AS INCOME IN A.Y. 2004-05. THE LD ASSESSING OFFICER HAD NOT VERIFIED THE CREDITORS BALANCE AS ON 31/3/2004 FROM ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 19 THE ASSESSEES BOOKS AS WELL AS CREDITORS BOOKS AND HAD NOT QUANTIFIED THE EXACT DIFFERENCE IF ANY DIFFERENCE I N THEIR ACCOUNTS. HE SIMPLY MADE ADDITION ON THE BASIS OF DIFFERENCE IN THE CREDIT BALANCES IN THE ACCOUNTS OF THESE PARTIES FOR A.Y. 2005-06. IT IS FURTHER CONFIRMED FROM THE CIT(A)S ORDER WHEREIN SUNDRY CR EDITORS LIST REPRODUCED ON PAGE 7 AND 8 THAT IN CASE OF YASH ENT ERPRISES AND ARIHANT CORP. THERE WERE NO OUTSTANDING CREDITORS AS ON 31/3/2004. EVEN THE LD ASSESSING OFFICER CONSIDERED THESE PART IES FOR ADDITION TO THE TUNE OF RS. 1,11,715/- IN CASE OF ARIHANT CORP. AND RS. 1,72,435/- IN CASE OF YASH ENTERPRISES, WHICH IS NOT JUSTIFIABL E AS THERE WAS NO OUTSTANDING BALANCE AS ON 31/3/2004 IN CASE OF ABOV E TWO PARTIES. THE LD ASSESSING OFFICER MADE ADDITION IN A.Y. 2005- 06 AS WELL AS A.Y. 2004-05 IN CASE OF FOUR PARTIES AND IN CASE OF ARIH ANT CORP. AND YASH ENTERPRISES, HE MADE ADDITION WITHOUT ANY CREDITORS OUTSTANDING AS ON 31.03.2004. THEREFORE, THE LD CIT(A) WAS NOT RIGHT TO CONFIRMING THE ADDITION BETWEEN DIFFERENCE IN CREDITORS AS ON 31/3/ 2003 AND 31/3/2004, THIS INCREASE CAN BE ON THE BASIS OF FUR THER PURCHASE MADE BY THE ASSESSEE HERSELF. IN SOME OF THE CASES, THER E IS EVEN REDUCTION IN OUTSTANDING CREDITORS ON PAYMENT. THE ASSESSING OFFICER SHOULD ITA 827/JP/2012_ RANJANA RAWAT VS. ACIT 20 HAVE COLLECTED THE INFORMATION FROM THE CREDITORS D IRECTLY TO VERIFY THE OUTSTANDING CREDITORS AS ON 31/3/2004 AND SHOULD HA VE COMPARED WITH THE ASSESSEES BOOKS OF ACCOUNT BEFORE MAKING A NY ADDITION, WHICH HAS NOT BEEN CARRIED OUT BY THE ASSESSING OFFI CER. THUS, THE ADDITION CONFIRMED BY THE LD CIT(A) IS DELETED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON .. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 07 TH SEPTEMBER, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SMT. RANJANA RAWAT, JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT, CIRCLE-3, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 827/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR