ACIT, Bangalore V. Smt. Syed Almas Banu, Bangalore

ITA 935/BANG/2011

• Counselvise Citation: 93521114 RSA 2011
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIIIDR
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Onus to prove
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NOS. 824/BANG/2011 ASSESSMENT YEARS : 2007-08 MRS. SYEDA ALMAS BANU, PROP. M/S. BHARAT TIMBER TRADERS, # 5, 15 TH MAIN ROAD, VASANTHNAGAR, BANGALORE 560 052. PAN : AFHPB 5421N VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. APPELLANT RESPONDENT ITA NOS. 935/BANG/2011 ASSESSMENT YEARS : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. VS. MRS. SYEDA ALMAS BANU, PROP. M/S. BHARAT TIMBER TRADERS, # 5, 15 TH MAIN ROAD, VASANTHNAGAR, BANGALORE 560 052. PAN : AFHPB 5421N APPELLANT RESPONDENT ASSESSEE BY : SHRI V. SRINIVASAN, C.A. REVENUE BY : SHRI ETWA MUNDA, CIT-III(DR) DATE OF HEARING : 10.09.2012 DATE OF PRONOUNCEMENT : 14.09.2012 ITA NO.824 & 935/BANG/11 PAGE 2 OF 13 O R D E R PER BENCH : ITA NO.935/BANG/2011 IS AN APPEAL BY THE REVENUE AND ITA 824/BANG/2011 IS AN APPEAL BY THE ASSESSEE. BOTH T HESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 14.07.2011 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSMENT YEAR 2007-08. 2. THE FACTS AND CIRCUMSTANCES GIVING RISE TO THE P RESENT APPEALS ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. SHE IS ENGAGED IN THE BUSINESS OF DEALING IN CENTERING WOOD MATERIAL UNDER THE NAM E, BHARATH TIMBER TRADERS. FOR THE AY 2007-08, THE ASSESSEE FILED A RETURN OF INCOME DECLARING INCOME OF Q 18,93,510. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD S HOWN SUNDRY CREDITORS IN THE BALANCE SHEET OF Q 1,86,79,207.75 . THE DETAILS OF SUNDRY CREDITORS ARE AS FOLLOWS:- ITA NO.824 & 935/BANG/11 PAGE 3 OF 13 3. IT IS NOT IN DISPUTE THAT THE AFORESAID CREDITOR S ARE TRADE CREDITORS WHO DO BUSINESS DEALINGS WITH THE ASSESSEE. THE ASSESS EE HAD TO MAKE PAYMENTS TO THESE CREDITORS FOR PURCHASES MADE FROM THEM IN THE COURSE OF ASSESSEES BUSINESS OF TRADING. THE AO ISSUED NOTI CES U/S. 133(6) OF THE ACT TO FOUR OF THE 16 CREDITORS LISTED ABOVE. THE FOUR CREDITORS TO WHOM SUCH NOTICES WERE ISSUED WERE M/S. EAST INDIA TRADI NG AGENCIES, M/S. APOLLO TRADING ENTERPRISES, M/S. ZENITH TRADERS & M /S. SOUTHERN ENTERPRISES. THE NOTICES SENT TO THESE PERSONS CAL LING UPON THEM TO CONFIRM THEIR TRANSACTIONS WITH THE ASSESSEE WERE R ETURNED BACK WITH A NOTING BY THE POSTAL AUTHORITIES THAT THERE WAS NO SUCH COMPANY AT THE GIVEN ADDRESS. ACCORDING TO THE AO, THE ENQUIRIES CONDUCTED BY HIM ALSO REVEALED THAT THOSE PERSONS WERE NOT IN EXISTENCE A T THE ADDRESSES GIVEN BY THE ASSESSEE. THE AO ISSUED SUMMONS U/S. 131 OF THE ACT AND EXAMINED THE ASSESSEE WITH REGARD TO THE LIST OF SU NDRY CREDITORS REFERRED TO EARLIER. THE GIST OF THE STATEMENT GIVEN BY THE AS SESSEE BEFORE THE AO (STATEMENT RECORDED ON 23.12.09) IS THAT THE ASSESS EE PURCHASED TIMBER FROM THE FOUR PERSONS TO WHOM THE AO ISSUED NOTICES U/S. 133(6) OF THE ACT. THE ASSESSEE ALSO GAVE THE PARTICULARS OF PAYMENTS MADE TO THE AFORESAID PARTIES. ON GETTING THOSE DETAILS AND MAKING ENQUI RIES FROM THE BANK, THE AO CAME TO THE FOLLOWING CONCLUSIONS:- 3.13 FROM THE FACTS DISCUSSED ABOVE IT IS CLEAR T HAT 1. THE ASSESSEE HAS NOT GIVEN COMPLETE ADDRESSES A ND PAN OF MANY CREDITORS. 2. THE BUSINESS PREMISES OF THE MAJOR CREDITORS WE RE NOT IN EXISTENCE AS THE ADDRESSES GIVEN BY THE ASSESSEE. ITA NO.824 & 935/BANG/11 PAGE 4 OF 13 3. INFORMATION GATHERED FROM THE BANK SHOWS THAT T HE ASSESSEE HAS BEEN SYSTEMATICALLY TRANSFERING HIS MO NEY FROM THE AMANAT BANK SHIVAJINAGAR BRANCH TO OTHER BRANCHES. THE CASH WAS ALSO IMMEDIATELY WITHDRAWN FROM THOSE ACCOUNTS. 4. IN RESPECT OF THE CASH WITHDRAWN FROM THE SHIVA JI NAGAR BRANCH, IT IS SEEN THAT THE PERSON WITHDRAWING THE CASH HAS GIVEN THE ADDRESS OF THE ASSESSEE AT THE BACK OF THE CHEQ UE SUGGESTING THAT, THE PERSON HAS GONE FROM THE ASSESSEES PREMI SES TO COLLECT THE MONEY. 5. SRI. MD ARIF THE HUSBAND OF THE ASSESSEE HAS ID ENTIFIED THE PHOTOGRAPH OF SRI PERVEZ AHMED WHO HAS OPENED THE B ANK ACCOUNT IN THE NAME OF TWO CONCERNS I.E. M/S APOLLO TRADING ENTERPRISES AND M/S UNITED TRADERS. THE PAN NO. GIV EN BY SRI. PERVEEZ AHMED TO THE BANK IS FALSE. 6. IN RESPECT OF THE UNCROSSED CHEQUE WHERE THE AM OUNTS ARE WITHDRAWN BY CASH, IT IS SEEN THAT ONE MR. SALIM HA S WITHDRAWN THE CASH FROM AMANAT BANK SHIVAJINAGAR BRANCH FOR M /S EAST INDIA TRADING AGENCY AND M/S SOUTHERN ENTERPRISES. 7. AS PER THE LETTER OF THE MANAGER OF THE N R ROA D BRANCH, ALL THE 4 CONCERNS I.E M/S ZENITH TRADERS, M/S EAST INDIA TRADING AGENCY, M/S APOLLO TRADING ENTERPRISE AND M/S NATIO NAL TIMBERS HAVE CLOSED THEIR ACCOUNTS IN THE YEAR 2007. 8. THE CREDITORS AND THE ASSESSEE WERE OPERATING F ROM AMANAT BANK. THE ACCOUNTS OF THE CREDITORS WERE OPE NED FOR A VERY BRIEF PERIOD BY GIVING FALSE ADDRESSES AND AFT ER THE TRANSACTION WITH THE ASSESSEE, THE ACCOUNTS WERE CL OSED. 9. IN SOME CASES THE ASSESSEE HAD FURNISHED COMPLE TE ADDRESSES, AND THE LETTERS FORWARDED TO THESE CREDI TORS HAVE RETURNED UNSERVED AS THERE WERE NO SUCH BUSINESS ES TABLISHMENT. 10. ENQUIRIES WERE CONDUCTED AND THE INSPECTOR REPO RTED THAT NO BUSINESS ESTABLISHMENT BY THE NAME OF M/S SOUTHE RN ENTERPRISES AND M/S UNITED TRADERS EXISTED AT THE A DDRESS GIVEN BY THE ASSESSEE. THESE TWO CONCERNS FORM THE MAJOR PAR T OF THE SUNDRY CREDITORS. THE BALANCE APPEARING AS ON 31.03 .07 FOR M/S SOUTHERN ENTERPRISES WAS RS. 90,49,128.50/- AND M/S UNITED TRADERS WAS RS.81,70,857/-. SRI PERVEEZ AHMED WHOM SRI MD. ARIF HAD RECOGNIZED, HAS OPENED THE ACCOUNT FOR M/S UNITED TRADERS APART FROM OPENING THE ACCOUNT FOR M/S APOL LO TRADING ENTERPRISES. SRI. SALIM WHO HAS SIGNED AT THE BACK OF THE CHEQUE GIVING ASSESSEES ADDRESS FOR WITHDRAWING THE CASH FROM AMANAT ITA NO.824 & 935/BANG/11 PAGE 5 OF 13 BANK SHIVAJINAGAR HAS WITHDRAWN THE AMOUNT FOR M/S SOUTHERN ENTERPRISES AND M/S EAST INDIA TRADING AGENCY. 11. THE STATEMENT OF SMT. SYEDA ALMAS BANU, (THE A SSESSEE) WAS RECORDED ON 23.12.09 U/S 131 OF THE I T ACT IN THE PRESENCE OF HER HUSBAND SRI MD. ARIF AND HER AUTHORIZED REPR ESENTATIVE SRI. BASAVARAJU. THE ASSESSEE STATED THAT, SHE DOES NOT KNOW THE PRESENT ADDRESS OF THE SUNDRY CREDITORS AND THAT SH E HAD NO EVIDENCE WITH REGARD TO THE EXISTENCE OF THESE CONC ERNS (REPLY TO QUES NO. 9 AND 13). IF SUCH BE THE CASE, THEN, HOW DID THE ASSESSEE OBTAIN THE CONFIRMATION LETTERS ALONG WITH THE PURCHASE ALONG WITH PURCHASE BILL AND FILE IT IN THIS OFFICE VIDE LETTER DATED 16.11.09. THE CONFIRMATION LETTERS FROM M/S APOLLO TRADING ENTERPRISES WAS DATED 06.11.09, M/S ZENITH TRADERS WAS DATED 15.09.09, M/S NATIONAL TIMBER WAS DATED 11.11.09, M /S EAST INDIA TRADING AGENCY WAS DATED 31.10.09 M/S SOUTHERN ENTE RPRISES WAS DATED 03.11.09 AND M/S UNITED TRADERS WAS DATED 08. 11.09. IF THE ASSESSEE COULD OBTAIN CONFIRMATION LETTERS QUITE RE CENTLY, THEN THE ASSESSEE MUST BE AWARE OF THE PRESENT ADDRESSES OF THESE CONCERNS. THE FACT THAT THE MOST OF THESE CREDITORS WERE NOT IN EXISTENCE AT THE GIVEN ADDRESS AND INSPITE OF THAT, THE ASSESSEE HAS PRODUCED THE CONFIRMATION LETTERS SUGGEST THAT THE CONFIRMATION LETTERS WERE FABRICATED. 12. AN OPPORTUNITY WAS ALSO GIVEN TO THE ASSESSEE TO PRODUCE THE CREDITORS. HOWEVER NO CREDITORS WERE PRODUCED B EFORE ME FOR VERIFICATION. THE ASSESSEE COULD NOT HAVE PRODUCED THE CREDITORS BECAUSE THEY WERE CREATED BY THE ASSESSEE TO SIPHON HIS MONEY AND REDUCE THE TAX LIABILITY. 13. THE ASSESSEE WAS GIVEN SEVERAL OPPORTUNITIES T O SUBSTANTIATE WITH EVIDENCE REGARDING THE SUNDRY CRE DITORS. IN THE CASE REPORTED IN 214 ITR 801, THE HONBLE SUPREME C OURT HAS HELD THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE CREDIT ENTRIES. IN THE ABSENCE OF PROPER EXPLAN ATION AND EVIDENCE, IT WILL BE PRESUMED THAT THE MONEY BELONG S TO THE ASSESSEE. 3.14 IN VIEW OF THE ABOVE, I HOLD THAT ALL THE SUN DRY CREDITORS APPEARING AS ON 31.03.07 ARE NOT GENUINE AND THEREF ORE THE AMOUNT OF RS.1,86,79,207/- IS TREATED AS UNEXPLAINED INCOME O F THE ASSESSEE U/S 68 OF THE I T ACT. 4. AGGRIEVED BY THE AFORESAID ADDITION MADE BY THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS). ITA NO.824 & 935/BANG/11 PAGE 6 OF 13 5. THE LD. CIT(A) AFTER GETTING THE REMAND REPORT F ROM THE AO FOUND THAT THE FOLLOWING WERE THE OPENING BALANCE, CLOSIN G BALANCE AND THE PURCHASES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR:- TOTAL 10538856 44541629 5 2681799 18679106 6. ON THE BASIS OF THE ABOVE CHART, THE CIT(A) FOUN D THAT THE PURCHASES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR WERE A SUM OF Q 5,26,81,799 WHEREAS IN THE PROFIT & LOSS ACCOUNT, T HE PURCHASES SHOWN WERE ONLY Q 4,89,92,777. ACCORDING TO THE CIT(A), THIS ASPECT ITSELF SHOWS THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT AND RELIABLE. THE LD. CIT(A) THEREFORE HELD THAT IT WOULD BE JUST AND APPROPRIATE TO ESTIMATE THE INCOME OF THE ASSESSEE AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE CIT(A) THEREFORE INVOKED THE PRO VISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. ITA NO.824 & 935/BANG/11 PAGE 7 OF 13 7. THE LD. CIT(A) THEREAFTER ESTIMATED THE INCOME O F THE ASSESSEE AT 11% OF THE SALES DECLARED BY THE ASSESSEE. IN VIEW OF THE ABOVE ESTIMATION OF THE PROFITS OF THE ASSESSEE, THE LD. CIT(A) HELD THAT THE ADDITION MADE BY THE AO WITH REGARD TO UNEXPLAINED CREDITS WILL NOT SURVIVE. ACCORDINGLY THE ASSESSEE WAS GIVEN PART RELIEF BY T HE CIT(A). 8. AGGRIEVED BY THE ACTION OF THE CIT(A) IN NOT DEL ETING THE ENTIRE ADDITION MADE BY THE AO AND NOT ACCEPTING THE BOOK RESULTS OF THE ASSESSEE, THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING TH E ADDITION MADE ON ACCOUNT OF UNEXPLAINED CREDITS AND SUSTAINING ONLY THE ADDITION OF ESTIMATION OF INCOME OF THE ASSESSEE, THE REVENUE H AS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. THE EFFECTIVE GROUNDS OF APPEAL BY THE REVENUE R EAD AS UNDER:- 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION OF RS.1,86,79,207/- BY THE AO ON ACCOUNT OF UNPROVED C REDITORS APPEARING IN THE AUDITED BALANCE SHEET AS ON 31.03. 2007 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE CREDITORS AND THE BURDEN OF PROV ING THE SAME IS ENTIRELY ON THE ASSESSEE. 3. THE LEARNED CIT(A) OUGHT NOT TO HAVE DELETED THE ADDITION OF RS.1,86,79,207/- MADE BY THE AO ON ACCOUNT OF UN PROVED CREDITORS AS THE ASSESSEE HAD FAILED TO FURNISH EVE N THE CORRECT AND COMPLETE ADDRESS OF THE CREDITORS BECAUSE OF WHICH THE AO COULD NOT EXAMINE CREDITORS BY ISSUING SUMMONS TO THEM. 4. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ACCOUNTS FILED BY THE APPELLANT ARE NEITHER CORRECT NOR RELIABLE AND IN INVOKING THE PROVISIONS OF SECTION 145(3) FOR AS SESSMENT OF INCOME BY ESTIMATING THE GROSS PROFIT OF THE ASSESS EE AT 11% ON THE SALES WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE HAD GOT HER BOOKS OF ACCOUNTS AUDITED U/S 44AB AND THE PRES CRIBED FORM 3CB AND FORM 3CD REPORTS OF A QUALIFIED CA WERE FUR NISHED ALONG WITH THE RETURN OF INCOME. ITA NO.824 & 935/BANG/11 PAGE 8 OF 13 5. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEA RNED CIT(A) WAS NOT JUSTIFIED IN ESTIMATING THE GROSS PR OFIT OF THE ASSESSEE AT 11% ON THE SALES OF RS.5,07 75 145/- ON AD-HOC BASIS, WITHOUT GIVING ANY COMPARABLE CASES FOR THE SAID ES TIMATION. 10. THE EFFECTIVE GROUNDS OF APPEAL OF THE ASSESSEE READ AS FOLLOWS:- 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN OBSERVIN G THAT THE ACCOUNTS OF THE APPELLANT ARE NOT RELIABLE AND THER EFORE, THE INCOME OF THE APPELLANT HAS TO BE DETERMINED ON EST IMATE BASIS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANTS CASE. 2.1 THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED TH AT THE APPELLANT HAD PROVED THE GENUINENESS OF THE TRADE C REDITORS TO WHOM PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES IN THE NEXT FINANCIAL YEAR AND THAT THEREFORE, HE OUGHT TO HAVE DELETED THE ENTIRE ADDITION OF RS. 1,86,79,207/- MADE BY THE LE ARNED A.O. INSTEAD OF DIRECTING THE LEARNED A.O. TO REJECT THE BOOKS OF ACCOUNTS AND DETERMINE THE INCOME OF THE APPELLANT ON ESTIMATE BASIS. THE RESULTANT ADDITION SUSTAINED BY THE LEAR NED CIT[A] DESERVES TO BE DELETED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. CO UNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE CIT(A)S CO NCLUSION WITH REGARD TO THE VARIATION IN THE PURCHASES SHOWN BY THE ASSESSE E IN ITS PROFIT & LOSS ACCOUNT AND THE CHART PREPARED BY THE CIT(A) ON THE BASIS OF THE REMAND REPORT OF THE AO IS NOT CORRECT. IN THIS REGARD, THE LD. COUNSEL DREW OUR ATTENTION TO ITEM NO.9 OF THE LIST OF PURCHASES MAD E BY THE ASSESSEE IN THE CHART GIVEN BY THE CIT(A) VIZ., OF M/S. SHANMUKHA W OOD INDUSTRIES, WHEREIN THE PURCHASES HAVE BEEN SHOWN AT A SUM OF Q 11,28,759. IN THIS REGARD, HE DREW OUR ATTENTION TO PAGE 31 OF THE ASS ESSEES PAPERBOOK AND SUBMITTED THAT IN EVERY PURCHASE MADE FROM THIS PAR TY, THERE WAS AN ELEMENT OF INPUT TAX. IT WAS SUBMITTED THAT THE CI T(A) HAS NOT IGNORED THIS INPUT TAX AND HAS COMPUTED THE PURCHASE AT Q 11,28,759, WHEREAS THE ITA NO.824 & 935/BANG/11 PAGE 9 OF 13 PURCHASES SHOWN BY THE ASSESSEE IN THE TRADING ACCO UNT WAS NOT INCLUSIVE OF THE INPUT TAX. IF THE INPUT TAX IS TAKEN INTO C ONSIDERATION, THEN THE PURCHASES AS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND THE STATEMENT PREPARED BY THE CIT(A) WOULD TALLY. IN T HIS REGARD, IT WAS ALSO SUBMITTED THAT THE CIT(A) DID NOT CONFRONT THE ASSE SSEE WITH REGARD TO THE DISCREPANCY AS NOTICED BY HIM AND HE HAS DRAWN ADVE RSE INFERENCE PURELY ON THE BASIS OF HIS OWN ASSUMPTIONS. THE LD. COUNS EL ALSO FILED BEFORE US A COPY OF THE SALES TAX ASSESSMENT ORDER OF THE ASSES SEE IN WHICH PURCHASES ELEMENT AND SALES ELEMENT HAVE BEEN CLEARLY GIVEN. IT WAS SUBMITTED THAT THE FIGURES AS PER BOOKS OF ACCOUNTS OF THE ASSESSE E AND THAT OF THE SALES TAX ASSESSMENT ORDER TALLIES IN ALL RESPECTS. IT WAS SUBMITTED THAT THERE WAS NO BASIS WHATSOEVER FOR THE CIT(A) FOR REJECTIN G THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 12. WITH REGARD TO THE CONCLUSIONS OF THE AO ON THE TRADE CREDITORS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO CONTROL OVER T HE MANNER IN WHICH CASH IS WITHDRAWN BY A TRADE CREDITOR FROM HIS BANK ACCOUNT. IN THIS REGARD, HE ALSO SUBMITTED BEFORE US THAT THE AO OUGHT TO HA VE ISSUED SUMMONS TO THE PARTIES CONCERNED AND EXAMINED THEM U/S. 131 OF THE ACT. IT WAS SUBMITTED THAT IT WAS NOT OPEN TO THE AO TO SHIFT T HE ENTIRE BURDEN ON THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE BURDEN OF PROOF IN THE CASE OF TRADE CREDITOR IS NOT EQUIVALENT TO BURDEN OF PROOF IN THE CASE OF NORMAL CASH CREDIT. IT WAS SUBMITTED THAT IN THE CASE OF A TRADE CREDIT, SUPPLIES ARE EFFECTED UNDER VALID DOCUMENT. OUR ATTENTION WAS A LSO DRAWN TO THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CAS E OF HANUMAN ITA NO.824 & 935/BANG/11 PAGE 10 OF 13 AGARWAL 151 ITR 150 (PAT) WHEREIN IT WAS HELD THAT THE AO OUGHT TO EXERCISE HIS POWERS U/S. 131 OF THE ACT AND CANNOT MERELY REST ON THE FACT THAT THE ASSESSEE WAS ASKED TO PRODUCE THE CREDITOR AND THE ASSESSEE FAILED TO PRODUCE THE CREDITOR. 13. THE LD. DR, ON THE OTHER HAND, STRONGLY RELIED ON THE ORDER OF THE AO. ACCORDING TO HIM, THE CONCLUSION DRAWN BY THE AO IN THE ORDER OF ASSESSMENT WERE SUFFICIENT TO MAKE THE IMPUGNED ADD ITION AND THE CIT(A) OUGHT NOT TO HAVE INTERFERED WITH THE ORDER OF THE AO. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRS T WE WILL TAKE UP FOR CONSIDERATION THE REASONS GIVEN BY THE AO FOR CONSI DERING THE TRADE CREDITS OF Q 1,86,79,207 AS UNEXPLAINED INCOME OF THE ASSESSEE U/S. 68 OF THE ACT. WE HAVE ALREADY SEEN THE LIST OF TRADE CREDIT ORS. THEY WERE IN ALL ABOUT 16 CREDITORS. THE AO MADE ENQUIRIES ONLY IN RESPECT OF FOUR CREDITORS VIZ., M/S. SOUTHERN ENTERPRISES, M/S. UNITED TRADER S, M/S. APOLLO TRADING ENGINEERS & M/S. ZENITH TRADERS. THE AO HAS HOWEV ER DRAWN CONCLUSION THAT THE ASSESSEE HAS NOT GIVEN COMPLETE ADDRESS AN D PAN OF MANY CREDITORS AND HAS FURTHER CONCLUDED THAT THE MAJOR CREDITORS WERE NOT IN EXISTENCE AT THE ADDRESSES GIVEN BY THE ASSESSEE. WHEN THE ASSESSEE WAS EXAMINED WITH REGARD TO THE WHEREABOUTS OF THE AFORESAID FOUR CONCERNS, THE ASSESSEE EXPLAINED THAT IT HAD TRANSA CTIONS WITH THE AFORESAID PARTIES IN JULY, 2007 AND DID NOT KNOW TH E PRESENT WHEREABOUTS OF THOSE CONCERNS. IT IS ALSO SEEN THAT THE STATEM ENT OF THE ASSESSEE WAS RECORDED IN DECEMBER, 2009 AND THE ENQUIRIES WERE M ADE BY THE AO AROUND DECEMBER, 2009 TO TRACE THE WHEREABOUTS OF T HE AFORESAID FOUR PARTIES. IN OUR VIEW, IT CANNOT BE SAID WITH CERTA INTY THAT SINCE THE FOUR TRADE ITA NO.824 & 935/BANG/11 PAGE 11 OF 13 CREDITORS WERE NOT IN EXISTENCE AT THE ADDRESSES GI VEN BY THE ASSESSEE THE CREDITORS WERE BOGUS OR THAT THOSE ADDRESSES OF THE CREDITORS GIVEN BY THE ASSESSEE WERE BOGUS. THIS IS BECAUSE OF THE TIME L AG BETWEEN THE PERIOD IN WHICH THE AO CONDUCTED THE ENQUIRIES AND THE PER IOD IN WHICH THE ASSESSEE HAD TRANSACTIONS WITH THOSE PARTIES. IN O UR VIEW, THE CONCLUSIONS DRAWN BY THE AO IN THIS REGARD CANNOT BE SUSTAINED. 15. ANOTHER REASON GIVEN BY THE AO WAS THAT THE ASS ESSEE WAS WITHDRAWING CASH FROM SHIVAJINAGAR BRANCH AND THE P ERSON WITHDRAWING THE CASH HAS GIVEN THE ADDRESS OF THE ASSESSEE. IN OUR VIEW, THIS CANNOT BE THE BASIS TO DOUBT THE GENUINENESS OF THE TRADE CRE DITORS. SIMILARLY, IN THE CASE OF APOLLO TRADING ENTERPRISES AND UNITED TRADE RS, THE AO WAS OF THE VIEW THAT WHEN THE BANK ACCOUNT WAS OPENED BY THESE PARTIES, THE HUSBAND OF THE ASSESSEE HAS IDENTIFIED PARVEZ AHMED WHO OPENED THE BANK ACCOUNT IN THE NAME OF AFORESAID TWO CONCERNS. THIS REASON, IN OUR OPINION, CANNOT HAVE ANY BEARING ON THE GENUINENESS OF THE TRADE CREDITORS, ESPECIALLY WHEN THE SALES BY THE ASSESSE E HAVE BEEN ACCEPTED AND THE PAYMENT TO THE PARTIES BY THE ASSESSEE HAS BEEN BY CHEQUES. THE AO HAS ALSO REFERRED TO THE FACT THAT ONE SALIM WAS WITHDRAWING CASH FROM AMANATH BANK, SHIVAJINAGAR BRANCH ON BEHALF OF M/S. EAST INDIA TRADING CO. AND M/S. SOUTHERN ENTERPRISES. THIS FACT AGAIN , IN OUR VIEW, IS NOT ENOUGH TO CONCLUSIVELY HOLD THAT THE TRADE CREDITOR S SHOWN BY THE ASSESSEE WERE NOT GENUINE. SO ALSO THE REASON THAT THE FOUR CONCERNS CLOSED THEIR ACCOUNTS IN THE YEAR 2007. SIMILARLY, THE ENQUIRI ES CONDUCTED BY THE INSPECTOR WERE AT A LATER DATE AND THE SAME CANNOT HAVE ANY BEARING ON THE CONCLUSIONS DRAWN BY THE AO THAT THE TRADE CRED ITS WERE NOT GENUINE. ITA NO.824 & 935/BANG/11 PAGE 12 OF 13 16. IT IS ALSO SEEN THAT THE ASSESSEE HAD FILED CON FIRMATIONS FROM THE FOUR PARTIES IN THE MONTH OF NOVEMBER, 2009, BUT IN DECEMBER, 2009 THE ASSESSEE WAS NOT ABLE TO GIVE THE PRESENT ADDRESS O F THOSE FOUR PARTIES. THIS FACTOR IS NO DOUBT MATERIAL, BUT CANNOT LEAD T O THE CONCLUSION THAT THE TRADE CREDITS WERE BOGUS. SIMILARLY, THE REQUEST O F THE AO TO PRODUCE THE TRADE CREDITORS AND THE REFUSAL OF THE ASSESSEE, CA NNOT BE THE BASIS TO HOLD THAT THE TRADE CREDITS WERE NOT GENUINE. WE ARE, T HEREFORE, OF THE VIEW THAT NONE OF THE REASONS GIVEN BY THE AO FOR COMING TO T HE CONCLUSION THAT THE TRADE CREDITS ARE NOT GENUINE CAN BE SUSTAINED. TH OSE REASONS, AT BEST, THROW SUSPICION WITH REGARD TO THE GENUINENESS OF T HE SUNDRY CREDITORS, BUT ARE NOT ENOUGH TO HOLD THAT THEY ARE NOT GENUINE AN D ARE LIABLE TO BE ADDED U/S. 68 OF THE ACT. WE HOLD ACCORDINGLY. 17. AS FAR AS THE ACTION OF THE LD. CIT(APPEALS) IN REJECTING THE BOOKS OF ACCOUNTS IS CONCERNED, WE FIND THAT THE CIT(A) HAS PROCEEDED ON THE BASIS THAT THE PURCHASES OF THE ASSESSEE AT Q 5,26,81,799, WHEREAS THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE SHOWED ONLY PURCHASES TO THE TUNE OF Q 4,89,92,777. THE FIRST SUBMISSION OF THE LD. COUN SEL OF THE ASSESSEE WAS THAT THIS ASPECT WAS NOT CONFRONTED TO THE ASSESSEE BY THE CIT(A). THE SUBMISSION WAS THAT THIS DISCREPANCY CAN BE PROPERL Y EXPLAINED BY THE ASSESSEE HAD THE CIT(A) CALLED UPON THE ASSESSEE TO EXPLAIN THE DISCREPANCY, THE ASSESSEE WOULD HAVE EXPLAINED THE SAME. IN THIS REGARD, OUR ATTENTION WAS DRAWN TO THE FACT THAT IN RESPECT OF SOME OF THE PURCHASES, INPUT TAX HAS NOT BEEN CONSIDERED WHILE RECORDING PURCHASES IN PROFIT & LOSS ACCOUNT. IN OUR VIEW, THIS ASPECT RE QUIRES EXAMINATION BY THE AO AND THE ORDER OF THE CIT(A) ON THIS ISSUE IS SET ASIDE FOR THE PURPOSE OF ITA NO.824 & 935/BANG/11 PAGE 13 OF 13 EXAMINATION BY THE ASSESSING OFFICER. IF THERE AR E DISCREPANCIES FOUND IN THE PURCHASES, THEN REJECTION OF BOOKS OF ACCOUNT I S TO BE UPHELD. HOWEVER, ON THE QUESTION OF ESTIMATION OF INCOME OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE PAST HISTORY IN ASSESSEES OWN CASE WOULD BE THE MOST RELEVANT AND THE MAIN CRITERION FOR ESTIMATING THE PROFITS. THE AO IS DIRECTED TO KEEP THIS IN MIND WHILE PASSING AN ORDE R GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL. IF THERE ARE NO DEFECT S FOUND IN THE BOOKS OF ACCOUNT, THEN THE INCOME DECLARED BY THE ASSESSEE H AS TO BE ACCEPTED. WITH THE AFORESAID OBSERVATIONS, WE ALLOW BOTH THE APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE ON THIS ISSUE FOR STATISTICA L PURPOSES. 18. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE AND BY THE REVENUE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPO SES. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2012. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASUD EVAN ) VICE PRESIDENT JUDICIAL MEMB ER BANGALORE, DATED, THE 14 TH SEPTEMBER , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.