ITO, Uttar Pradesh V. Sh. Atul Kumar Mittal, Baghpat

ITA 885/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86907 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Unexplained cash credit; Income from undisclosed sources; Principle of natural justice; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A NO. - 8 85/DEL/2012 (ASSESSMENT YEAR - 2007 - 0 8 ) ITO VS. ATUL KUMAR MITTAL BHAGWAN MAHAVIR MARG , BARAUT S/O SH. BALESHWAR DAYAL BAGHPAT U.P. MITTAL, PROP. M/S ATUL INTERNATIONAL MANDI GANDHI GANJ KHEKRA BAGHPAT, U.P. PAN: A DLPM8769J (APPELLANT) (RESPONDENT) REVENUE BY: - Y. KAKKAR, SR.DR. ASSESSEE BY: - SH. SANDEEP SAPRA, ADV. DATE OF HEARING: 2 5 .02.2015 ORDER PRONOUNCED ON: 04 .03.2015 ORDER PER N. K. SAINI, AM THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 29 . 12 .201 1 OF LD. CIT (APPEALS) - MEERUT . THE FOLLOWING GROUND RAISED IN THIS APPEAL: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.9,70,550/ - MADE BY THE AO ON A CCOUNT OF SUNDRY CREDITORS IN SPITE OF THE FACT THAT ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE CREDITORS. THE ONUS WAS CERTAINLY UPON THE ASSESSEE TO PROVE THE CREDITS APPEARING IN ITS BOOKS WHICH REMAINED TOTALLY UNDISCHARGED. RELIANCE IS PLACED ON THE FOLLOWING JUDGEMENTS: I.T.A NO. - 885/DEL/2012 2 I. CIT V/S KORLAY TRADING CO. LTD. (CAL.) 232 ITR 820. II. KRISHAN KUMAR JHANB V/S ITO AND ANR (P & H) 17 DTR 249 III. M/S SEJAI INTERNATIONAL LTD. V/S CIT MEERUT (ALD) APPEAL NO. 306 OF 2010 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.4,55,990/ - MADE BY THE AO ON ACCOUNT OF CASH AMOUNTS FOUND CREDITED IN BOOKS OF ACCOUNTS FROM TIME TO TIME, CLAIMED TO HAVE BEEN RECEIVED FROM UNPROVED DEBTOR. THUS THE ADDITION WAS COVERED U/S 68 OF IT ACT AND ASSESSEE FAILED TO DISCHARGE HIS ONUS TO PROVE THE SAME. RELIANCE IS AGAIN PALCED ON THE CASE LAWS CITED ABOVE. 2. FROM THE ABOVE GROUNDS IT WOULD BE CLEAR THAT T HE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF RS. 9,70,550/ - MADE BY THE AO ON ACCOUNT OF PAYMENTS MADE TO SUNDRY CREDITORS AND RS.4,55,990/ - ON ACCOUNT OF CASH RECEIVED FROM THE DEBTOR . 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING AND TRADING OF HANDLOOM CLOTHES AND FILED THE RETURN OF INCOME ON 31.10.2007, DECLARING AN INCOME OF RS.1,06,610/ - LATER ON, THE CASE WAS SELECTED FOR SCRUTINY . D URING THE CO URSE OF ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED PAYMENT OF RS.4,55,990/ - FROM THE PARTY NAMELY M/S PANKAJ INTERNATIONAL WHICH WAS OUTSTANDING IN ASSESSEE S BOOKS OF ACCOUNTS. T HE AO WAS OF THE VIEW THAT THE ACCOUNT IN THE NAME OF M/S PANKAJ INTERNATIONAL WAS OF SH. PANKAJ KUMAR MITTAL WHO WAS ALSO BEING ASSESSED BY I.T.A NO. - 885/DEL/2012 3 HIM AND THERE WAS NO CORRESPONDING CREDIT ENTRY IN HIS ACCOUNT . T HE AO HELD THAT THE RECEIPT OF RS.4,55,990/ - THROU GH M/S PANKAJ INTERNATIONAL WAS BOGUS AND WAS INTRODUCED FROM UNDISCLOSED INCOME INTO THE BUSINESS OF THE ASSESSEE . H E THEREFORE, MADE THE ADDITION OF RS.4,55,990/ - . THE AO ALSO OBSERVED THAT THERE WERE BROUGHT FORWARD CREDIT BALANCES IN THE NAME OF TWO PA RTIES M/S ANUSUYA HANDLOOM WORKS AND M/S HARI DARSHAN FOR RS.4,72,400/ - AND RS.4,98,150/ - RESPECTIVELY , T HE SAID CREDIT BALANCES WERE PAID DURING THE YEAR, ACCORDING TO THE AO THOSE CREDITORS WERE NOT FOUND AT THE GIVEN ADDRESSES , HE , THEREFORE, MADE THE A DDITION OF RS.9,70,550/ - . 4 . BEING AGGRIEVED , THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 1. THE RECEIPT OF CASH OF RS.4,55,990/ - FROM M/S PANKAJ INTERNATIONAL WAS THE RECEIPT AGAINST THE OPENING DEBIT BALANCE APPEARING IN T HE NAME OF THE SAID PARTY. THE ENCASHMENT OF AN ASSET BEING THE OPENING BALANCE OF SUNDRY DEBTOR DURING THE YEAR UNDER REFERENCE HAS WRONGLY BEEN INTERPRETED BY THE LD. AO SO AS TO HOLD THAT THE UNDISCLOSED INCOME IS INTRODUCED BY THE APPELLANT IN THE BOOKS OF ACCOUNT THROUGH THAT SOURCE. THE ASSESSEE HAS DULY EXPLAINED THE DEBIT BALANCE IN THE NAME OF M/S PANKAJ INTERNATIONAL, A DEBTOR DURING ASSESSMENT PROCEEDINGS VIDE LETTERS DATED 02.12.2 009 & 04.12.2009, COPIES OF WHICH ARE ENCLOSED HEREWITH FOR READY REFERENCES. EVEN IF, IN VIEW OF THE LD. AO THE SAID SUNDRY DEBTOR DID NOT EXIST, THE ONLY POSSIBLE CONCLUSION COULD HAVE BEEN DRAWN BY THE LD. AO WAS, THAT THE DEBIT APPEARING IN THE NAME OF THAT PARTY WOULD HAVE EITHER APPEARED UNDER SOME OTHER HEAD OR IN SOME OTHER NAME WHEREFROM THE APPELLANT HAS RECEIVED BACK THE AMOUNT DURING THE YEAR UNDER REFERENCE. FOR THE SAKE OF ARGUMENT, EVEN IF, IT IS ASSUMED, THOUGH NOT I.T.A NO. - 885/DEL/2012 4 ADMITTED, THAT THE SAID AM OUNT WAS KEPT BY THE APPELLANT IN THE FORM OF CASH AS ON 31.3.2005 AND AS ON 31.3.2006, THE SAME CASH MAY BE TREATED TO HAVE BEEN USED FOR CREDITING THE SAID AMOUNT AS RECEIPTS FROM THAT PARTY. IN ANY CASE THE ENCASHMENT OF ALREADY DECLARED ASSET CANNOT BE TREATED AS THE INTRODUCTION OF UNDISCLOSED INCOME IN THE BOOKS OF ACCOUNT AS NO UNEXPLAINED CREDIT IS MADE IN THE BOOKS OF THE ASSESSEE AND THEREFORE THE ADDITION OF RS.4,55,990/ - KINDLY BE DELETED. 2. WITH REFERENCE TO THE ADDITION OF RS.9,70,550/ - , IT IS RESPECTFULLY PRAYED THAT THE APPELLANT HAS PAID THE AMOUNT AGAINST THE CREDIT BALANCES OF TWO PARTIES BROUGHT OVER FROM THE EARLIER YEARS. THE LIABILITY TO THE SAID PARTIES WAS AGAINST THEIR BILLS RECEIVED BY THE APPELLANT DURING THE FINANCIAL YEAR 2005 - 06 RELEVANT TO ASSESSMENT YEAR 2006 - 07. THE PHOTOCOPIES OF BILLS RECEIVED FROM THOSE PARTIES WERE SUBMITTED DURING ASSESSMENT PROCEEDINGS VIDE LETTER DATED 02.12.2009 AND FURTHER EXPLANATION WAS MADE VIDE LETTER DATED 04.12.2009, COPIES OF WHICH ARE ENCLO SED HEREWITH. THE LD. AO HAS REFERRED TO THE REPORT OF THE LD. INCOME TAX INSPECTOR IN THE ASSESSMENT ORDER BUT NO REPORT WAS EVER CONFRONTED TO THE APPELLANT FOR HIS COMMENTS. THE LD. AO HAS ALSO NOT MENTIONED ANYTHING ABOUT CONFRONTING THE ITI REPORT TO THE ASSESSEE IN HIS ORDER AND THEREFORE THE RELIANCE PLACED BY THE LD. AO ON THAT REPORT IS TOTALLY UNLAWFUL & IS AGAINST THE PROCESS OF NATURAL JUSTICE. WITHOUT PREJUDICE TO ABOVE SUBMISSION IT IS FURTHER PRAYED THAT DURING THE YEAR UNDER REFERENCE THE AP PELLANT HAS ONLY PAID THE AMOUNT. NO CREDIT WHATSOEVER HAS ARISEN DURING THE YEAR UNDER REFERENCE IN THE NAMES OF THE SAID PARTIES AND THEREFORE THERE WAS NO OCCASION TO MAKE ADDITION TO THE INCOME OF THE APPELLANT ON THAT ACCOUNT. DURING THE YEAR UNDER RE FERENCE THERE WAS NO CREDIT IN THE ACCOUNTS OF THE SAID TWO PARTIES AND THEREFORE THE CREDIT BALANCES BROUGHT OVER FROM EARLIER YEARS TO THE CREDIT OF THE SAID PARTIES CANNOT BE ADDED DURING THE YEAR UNDER REFERENCE. IN ANY CASE, EVEN IF, THESE CREDITORS A RE TREATED AS BOGUS, THOUGH THE SAME ARE NOT, THE ADDITION OF THEIR CREDITS CANNOT BE MADE DURING THE YEAR UNDER REFERENCE AS NO CREDITS HAVE ARISEN IN THE BOOKS OF ACCOUNT OF THE APPELLANT FOR THIS YEAR. THE G.P. RATES DECLARED BY THE APPELLANT STAND ACCE PTED BY THE LD. AO I.T.A NO. - 885/DEL/2012 5 DURING THE YEAR UNDER REFERENCE AS WELL AS IN THE PRECEDING YEAR AND THEREFORE THE LIABILITY TO THE SAID TWO CREDITORS AGAINST PURCHASES FROM THEM DURING A.Y. 2006 - 07 CANNOT BE ADDED AS INCOME OF THE YEAR UNDER APPEAL OR EARLIER YEAR AT ALL. IN VIEW OF ABOVE, IT IS RESPECTFULLY SUBMITTED THAT THE ADDITION OF RS.9,70,550/ - BEING THE AMOUNT PAID BY THE APPELLANT TO THE CREDITORS AGAINST THEIR OPENING BALANCES DUE TO THEM ON ACCOUNT OF PURCHASE MADE FROM THEM CANNOT BE ADDED DURING THE YEAR UNDER REFERENCE AND THEREFORE THE ADDITION SO MADE KINDLY BE DELETED. 5 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT NO CASH CREDIT APPEARED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, NO ADDITION AS INCOME FROM UNDISCLOSED SOURCES WITH REFERENCE TO THE DECLARED RECEIPTS FROM DEBTORS CAN BE MADE. HE FURTHER OBSERVED THAT THE AMOUNT CLAIMED TO HAVE BEEN RECEIVED FROM AN ALREADY DECLARED DEBTORS BROUGHT OVER FROM EARLIER YEA RS CANNOT BE TREATED AS UNEXPLAINED INCOME . A CCORDING LY ADDITION OF RS.4,55,990/ - WAS DELETED. 6 . AS REGARDS TO THE REMAINING ADDITION OF RS. 9,70 , 550/ - THE LD. CIT(A) OBSERVED THAT THERE BEING NO CREDIT IN THE ACCOUNTS OF THE TWO PARTIES DURING THE YEAR AND THEIR CREDIT BALANCES WERE BROUGHT OVER FROM EARLIER YEARS AGAINST THEIR SUPPLY BILLS WHICH COULD NOT BE ADDED DURING THE YEAR UNDER CONSIDERATI ON. ACCORDINGLY, THE ADDITION MADE BY THE AO WAS DELETED. 7 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR REITERATED THE OBSERVATIONS MADE BY THE AO AND STRONGLY SUPPORTED THE ASSESSMENT ORDER DATED 4.12.2009 . I.T.A NO. - 885/DEL/2012 6 I N HIS RIVAL SUBMISSIONS T HE LD. COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT A SUM OF RS.4,55,990/ - WAS OUTSTANDING IN THE NAME OF M/S PANKAJ INTERNATIONAL AND THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE AO WAS OF THE VIEW THAT THE ACCOUNT IN THE NAME OF M/S PAN KAJ INTERNATIONAL BELONGED TO SHRI PANKAJ MITTAL IN WHOSE ACC OUNT, NO SUCH ENTRY WAS APPEARING. H OWEVER, THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE DEBTOR M/S PANKAJ INTERNATIONAL WAS NOT OUTSTANDING IN THE EARLIER YEAR. ON THE CO NTRARY THE CLAIM OF THE ASSESSEE WAS THAT THE AMOUNT WAS OUTSTANDING IN THE NAME OF SAID PARTY SINCE 31.3.2005 AND THE AMOUNT WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION. IN OUR OPINION WHEN THE DEBTOR W AS CONSIDERED GENUINE AT THE END OF THE PRECEDING YEAR , THE RECEIPT FROM THE SAID DEBTOR DURING THE YEAR UNDER CONSIDERATION CANNOT BE TREATED AS BOGUS. WE THEREFORE, ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 9. AS REGARDS TO THE REMAINING ADDITION OF RS.9,70,550/ - IS CONCERNED , IT APPEARS THAT THE SAID AMOUNT WAS OUTSTANDING IN THE NAME OF TWO CREDITORS NAMELY M/S ANUSUYA HANDLOOM WORKS AND M/S HARI DARSHAN , THE AMOUNT WAS OUTSTANDING AGAINST THE SUPPLY BILLS IN THE PRECEDING YEA R AND NOTHING WAS I.T.A NO. - 885/DEL/2012 7 RECEIVED DURING THE YEAR UNDER CONSIDERATION. IT IS THEREFORE, CLEAR THAT THE CREDITORS BELONGED TO THE EARLIER YEAR AND PAYMENT WAS MADE TO THEM IN THE YEAR UNDER CONSIDERATION. THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE CASH FOR MAKING THE PAYMENT TO THE OUTSTANDING CREDITORS WAS NOT AVAILABLE WITH THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE AO WAS NOT JUSTIFIED AND IT WAS RIGHTLY DELETED BY THE LD. CIT(A). WE DO NOT SEE ANY INFIRMITY IN THE IMPUGNED ORDER BY THE LD. CIT(A) ON THIS ISSUE. 10. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 /03/2015. SD/ - SD/ - (C. M. GARG) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04 /03/2015 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR