M/S Best Buy Commodities Pvt Ltd, Ludhiana V. The Income Tax Officer, W-VI(I), Ludhiana

ITA 869/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1219 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARJINDER SINGH
• Assessee Lawyers: TEJ MOHAN SINGHPROXY
• Keywords: Principle of natural justice; Additional evidence; Accommodation entries; Set aside
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH SMC CHANDIGARH , ! BEFORE: SMT. DIVA SINGH, JM ./ ITA NO. 869/CHD/2018 !' # $# / ASSESSMENT YEAR : 2006-07 M/S BEST BUY COMMODITIES P.LTD., 70-NEW LAJPAT NAGAR, LUDHIANA. VS THE ITO, WARD VI(1), LUDHIANA. ./ PAN NO: AACCB7846C / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI TEJ MOHAN SINGH, PROXY COUNSEL / REVENUE BY : SHRI HARJINDER SINGH, ADDL. CIT / DATE OF HEARING : 23.05.2019 !'#$%& / DATE OF PRONOUNCEMENT : 04.06.2019 %&/ ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILING THE CORRECTNESS OF THE ORDER DATED 16.07.2018 OF CIT(A) -3, LUDHIANA PERTAINING TO 2006-07 ASSESSMENT YEAR WHEREIN THE ASSESSEE RAISES JURISDICTIONAL ISSUE VIDE GROUND NO. 1 AND AGITATES AGAINST THE ADDITION SUSTAINED VIDE GROUND NO. 2. 2. HOWEVER, BEFORE PROCEEDING TO THE GROUNDS, IT IS APPROPRIATE TO REFER TO ONE DAYS DELAY POINTED OUT BY THE REGISTRY. A PER USAL OF THE EXPLANATION AVAILABLE ON RECORD SHOWS THAT THE ASSESSEE HAS PLE ADED THAT HIS COUNSEL SHRI AJAY CHAUDHRY EXPIRED ON 16.03.2018 I.E. ON THE DAT E OF THE CIT(A)S ORDER AND ON ACCOUNT OF THE PECULIAR CIRCUMSTANCES PLEADI NG A HUMAN ERROR, ONE DAYS DELAY IS EXPLAINED AS INADVERTENT MISTAKE. T HE EXPLANATION OFFERED IS NOT OPPOSED BY THE LD. SR.DR. ACCORDINGLY, CONSIDER ING THE SAME, DELAY OF ONE DAY IS CONDONED. ITA 869/CHD/2018 A.Y. 2006-07 PAGE 2 OF 5 3. THE LD. AR HAS FILED AN APPLICATION SEEKING TIME . HOWEVER, CONSIDERING THE MATERIAL AVAILABLE ON RECORD, IT WAS DEEMED APP ROPRIATE TO REJECT THE APPLICATION. MR. T.M.SINGH, ADVOCATE APPEARING AS PROXY COUNSEL FOR THE LD. AR WAS PRESENT IN THE COURT. 3. THE DEPARTMENT WAS REPRESENTED BY MR. H.SINGH WH O RELIED UPON THE ORDERS. 4. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. A PERUSAL OF THE RECORD SHOWS THAT IN THE F ACTS OF THE PRESENT CASE THE ASSESSEE IS STATED TO BE TRADING IN COMMODITIES. TH E AO RE-OPENED THE ASSESSMENT RELYING UPON SECTION 147(B) OF THE INCOM E TAX ACT,1961. THE ASSESSEE WAS REQUIRED TO SUPPORT ITS COMPUTERIZED L EDGER CASH BOOK ETC. SINCE SUPPORTING CLIENT REGISTER, SAUDA BOOK, DAY B OOK WAS NOT PRODUCED BY THE ASSESSEE IN THE RE-ASSESSMENT PROCEEDINGS, THE ASSESSEE'S DEPOSITS IN THE BANK ACCOUNTS WERE QUESTIONED. THE DIRECTOR OF THE ASSESSEE COMPANY WAS CALLED FOR BY THE ASSESSING OFFICER. THE DIRECTOR STATED THAT THE CASH DEPOSITS IN THE BANK ACCOUNT REPRESENTED THE CASH RECEIPTS F ROM HIS CLIENTS ON WHOSE BEHALF THE COMPANY TRADED IN THE COMMODITIES. STAT EMENT WAS RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 20.1 2.2011. THE AO, HOWEVER CONSIDERING THE EVIDENCES MADE AVAILABLE HE LD IT TO BE NOT SUFFICIENT AS THE DETAILS OF THE CLIENTS AS PER LEDGER ACCOUNT WERE IN SINGLE NAMES LIKE ARUN, BAGGU, KAVITA ETC. ACCORDINGLY, IN VIEW THER EOF AFTER AFFORDING A REASONABLE OPPORTUNITY, ADDITION OF RS. 11,39,500/- WAS MADE IN THE HANDS OF THE ASSESSEE. 5. THE ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE CIT(A). BEFORE HIM ALSO SOME EVIDENCE WAS FILED. THE SAID EVIDENCE WAS CONFRONTED TO THE AO AND CONSIDERING HIS OBJECTION, THE SAME WAS DISCARDED A ND THE ADDITION WAS SUSTAINED. 6. THE RELEVANT EVIDENCE RELIED UPON BY THE ASSESSE E REJECTED BY THE AO AND CONFIRMED BY THE CIT(A) IS EXTRACTED HEREUNDER FOR READY REFERENCE : S.NO. CASH DEPOSITED DATE COMPANY COMMENTS 1 RS. 49,500 07.03.2006 - NO REPLY RECEIVED 2 RS. 15,000 10.03.2006 - NO REPLY RECEIVED ITA 869/CHD/2018 A.Y. 2006-07 PAGE 3 OF 5 3 RS. 3,25,000 14.03.2006 RENNY STEEL CASTINGS PVT. LTD. NO PAYMENT OF RS. 3,25,000/- MADE ON 14.03.2006 4 RS.5,00,000 18.03.2006 FIDELITY IMPEX PVT. LTD. THE COMPANY HAS SUBMITTED ITS REPLY COMPANY HAS CHANGED ITS NAME FROM FIDELITY IMPEX PVT. LTD. TO FIDELITY COMMODITY TRADERS LTD. W.E.F. 05.10.2006 AND THE ASSESSEE CONCERN IS NOT IN A POSITION TO COMMENT ON THE TRANSACTIONS OFR THE A. Y. 2005- 06 WHICH IS VERY OLD AND NOT PRESENT CURRENTLY 5 RS. 2,50,000 25.03.2006 F.M. STEEL ALLOYS PVT. LTD. THE COMPANY HAS SHOWN ITS INABILITY TO SUPPLY THE DESIRED THE INFORMATION AS THE PERIOD RELATES TO A DECADE BACK AND THE RECORDS AREN'T AVAILABLE WITH THE COMPANY. 7. A PERUSAL OF THE RECORD SHOWS THAT THE FOLLOWING EXPLANATION WAS OFFERED ON BEHALF OF THE ASSESSEE : KEEPING IN VIEW THE RATIO OF ABOVE MENTIONED DECISI ONS OF HON'BLE APEX COURT IT IS TO BE SUBMITTED THAT THOUGH DURING ASSESSMENT PROCEEDINGS THE CASE HAS BEEN MADE OUT BY THE ASSESSING OFFICER THAT CERTAIN CASH CREDITS HAD NOT BEEN EXPLAINED BY THE ASSESSEE, THE FACT REMAINS THAT THE ASSESSEE WAS CARRYING OUT ACTIVITI ES OF GIVING ACCOMMODATION ENTRIES AND EARNING SMALL PERCENTAGE OF COMMISSION INCOME FROM THE SAME. IN THESE ACTIVITIES CASH WAS BEING TAKEN FROM VARIOUS PERSONS. THE SAME CASH WAS DEPOSITED BY THE ASSESSEE IN HIS BANK ACCOUNT AND CORRESPONDING CHEQUES WERE ISSUED TO THE SAME PERSONS AS 'PROFIT FROM COMMODITY TRADING'. IN THESE TRANSACTIONS WHAT THE ASSESSEE RECEIVED WAS JUST A SMALL J PERCENTAGE OF THE AMOUNT INVOLVED WHICH WAS HIS COM MISSION INCOME FROM THE SAME. THAT THE ASSESSEE HAS RELIED ON THE STATEMENT RECOR DED BEFORE ADI (INVESTIGATION). HOWEVER THE ADDITIONAL EVIDENCE COULD NOT BE PRODUC ED. ANOTHER EVIDENCE TO PROVE THAT THE ASSESSEE WAS-CARRYING OUT SUCH ACTIVITIES IS TH E FACT THAT ALL THE PERSONS TO WHOM SUCH CHEQUES HAVE BEEN ISSUED HAD SHOWN THE AMOUNT SO RE CEIVED IN THEIR RESPECTIVE ACCOUNTS AS PROFIT FROM COMMODITY TRADING. IN VIEW OF THE ABOVE DISCUSSED LEGAL POSITIONS THAT IS THE AND THE FACTUAL POSITION ON THE BASIS OF EVIDENCE /FACTS PARTICULARLY THE STATEMENT OF THE ASSESSEE RECORDED WELL BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS, IT IS RESPECT FULLY PRAYED THAT THE ASSESSEE MAY BE PERMITTED TO FILE THIS ADDITIONAL EVIDENCE UNDER RU LE 46A OF THE INCOME TAX RULES, 1962. A COPY OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY ON 31.10.2007 IS ENCLOSED HEREWITH FOR THIS PURPOSE. FURTHER A LIST OF NAMES OF THE PERSONS ALONGWITH TH EIR PAN NUMBERS AND ADDRESSES IS ALSO BEINGS SUBMITTED. THESE ARE THE PERSON FROM WHOM AS SESSEE RECEIVED CASH AND TO WHOM CHEQUES WERE ISSUED ON ACCOUNT OF ACCOMMODATION ENT RIES OF COMMODITY PROFIT. AS THIS IMPORTANT EVIDENCE WAS NOT CONSIDERED BY TH E ASSESSING OFFICER IN SPITE OF THE FACT THAT THE STATEMENT DATED 31.10.2007 WAS VERY MUCH L YING IN ASSESSING OFFICER'S RECORD, IN THE INTEREST OF PRINCIPLES OF NATURAL JUSTICE AND F AIR PLAY THE ABOVE EVIDENCE MAY KINDLY BE ADMITTED UNDER RULE 46A OF THE INCOME TAX RULES 1962. ITA 869/CHD/2018 A.Y. 2006-07 PAGE 4 OF 5 8. THE FOLLOWING SUBMISSIONS EXTRACTED BY THE CIT(A ) IN THE IMPUGNED ORDER ALSO DISCLOSES THAT APPARENTLY REASONS RECORD ED JUSTIFYING THE RE- OPENING ITSELF WAS NOT COMMUNICATED TO THE ASSESSEE : THAT ASSESSMENT HAS BEEN FRAMED BY MAKING ADDITION OF RS. 11,39,500/- IN THE RETURNED INCOME BY TREATING THE CASH DEPOSITED IN B ANK ACCOUNT RELATING TO TRADING AS INCOME OF APPELLANT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING THE FACTS IN PROPER PERSPECTIVE. 1. THAT CASE HAS BEEN RE-OPENED UNDER SECTION 147/1 48 OF THE INCOME TAX ACT FOR ASSESSMENT YEAR 2006-07. THAT NEITHER THE ASSESSING OFFICER HAS COMMUNICATED REASONS NOR HE HAS MENITNED THE SAME IN THE ORDER ITSELF AS BASIS OF REOPENING AND AS SUCH THE ORDER IS AGAINST PRINCIPAL OF NATURAL JUSTICE AS TH E ASSESSEE COULD NOT OBJECT TO THE REASONS(IN THE ABSENCE OF REASONS COMMUNICATED TO T HE ASSESSEE/APPELLANT AS STATED BAOV.E RATHER THE LEARNED ASSESSING OFFICER IS PUT TO STRICT PROOF TO PROVE WHETHER ANY REASONS HAVE BEEN RECORDED AND NECESSARY ACPPROVAL HAS BEEN TAKEN FROM SUPERIOR AUTHORITIES BEFORE REOPENING THE: CASE. AS SUCH THE ORDER IS BAD IN LAW. 9. APART FROM THAT, IT IS SEEN THAT THE FOLLOWI NG EXPLANATION ON FACTS WAS ALSO OFFERED WHICH THOUGH EXTRACTED IN PARA 3.6 AT PAGE 8 OF THE IMPUGNED ORDER HAS REMAINED UNADDRESSED: THAT OUT OF FOUR NOTICES SERVED NONE OF THE ASSESSE E HAS APPEARED PERSONALLY TO RECORD THE STATEMENT. THE TWO PERSONS THAT IS M/S FIDELTYL MPEX PRIVATE LIMITED AND M/S F.M. STEEL ALLOYS PRIVATE LIMITED HAS SHOWN THEIR INABIL ITY TO SUBMIT ANY DATA. M/S PENNY STEEL CASTINGS PRIVATE LIMITED HAS DENIED THE TRANS ACTION WHILE AS PER ORDER SHEET M/S ROOPAM ARCADE PRIVATE LIMITED AS PER ORDER SHEET IS ALLEGED TO HAVE DENIED DEPOSIT OF CASH THROUGH COUNSEL. 10. ACCORDINGLY, ON A CONSIDERATION OF THE FACTUAL MATRIX AS HIGHLIGHTED HEREIN ABOVE I FIND THAT THE FINDING ON THE JURISDI CTIONAL ISSUE CANNOT BE SAID TO BE IN TERMS OF THE SETTLED LEGAL PRINCIPLE AS TH E ASSESSEE HAVING POSED THE OBJECTION AND PATENTLY HAS DOUBTED ABOUT THE REASON S RECORDED WHICH WERE NEVER MADE AVAILABLE TO HIM, IN THESE CIRCUMSTANCES , IT WAS INCUMBENT UPON THE CIT(A) TO ADDRESS THE JURISDICTIONAL ISSUE AND THEREAFTER TO PROCEED TO DECIDE THE ISSUE ON MERITS IF NEED BE. IT IS ALSO NECESSARY TO HIGHLIGHT THAT FOR A PROPER ADJUDICATION ON THE ISSUE ON MERITS, IT IS NECESSARY ALSO TO ADDRESS THE PAST HISTORY OF THE ASSESSEE MAY ALSO BE RELEVA NT. IT NEEDS TO BE KEPT IN MIND THAT THE AO BY HIS ORDER DATED 26.11.2011 IS Q UESTIONING A TAXPAYER WHO IS RETURNING INCOME OF RS. 11,000/- ODD TO EXPL AIN THE TRANSACTIONS OF 2005. THE FRESH EVIDENCES SHOW THAT THE SOME COMPAN IES HAVE CHANGED THEIR NAMES ETC. AND NEITHER DENY NOR ARE IN A POSITION T O CONFIRM THE TRANSACTION. ITA 869/CHD/2018 A.Y. 2006-07 PAGE 5 OF 5 ACCORDINGLY, IN THESE PECULIAR FACTS IT BECOMES INC UMBENT UPON THE TAX AUTHORITIES TO CONSIDER THE NATURE OF THE ACTIVITIE S OF THE ASSESSEE OVER THE YEARS. ACCORDINGLY, WITH THESE OBSERVATIONS, THE I MPUGNED ORDER IS SET ASIDE BACK TO THE FILE OF THE CIT(A) WITH THE DIRECTION T O FIRST ADDRESS THE JURISDICTIONAL CHALLENGE POSED BY THE ASSESSEE IN A CCORDANCE WITH LAW AND THEREAFTER PROCEED TO DECIDE THE APPEAL ON MERITS, IF NEED BE. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE,2019. SD/- ( ) (DIVA SINGH) ! / JUDICIAL MEMBER ) ' ''( )* +*% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' ' , / CIT 4. ' ' , ( )/ THE CIT(A) 5. *-. / , ' '/& , 012.3 / DR, ITAT, CHANDIGARH 6. . .2 4 / GUARD FILE ''( / BY ORDER, 5 / ASSISTANT REGISTRAR