N Ambalal (HUF), Adoni, Hyderabad V. ITO, Ward-1, Adoni

ITA 965/HYD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6088 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Revision of order; Assessment record; Condonation of delay
• Section: 143(3); 68; 263

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 965/HYD/2013 ASSESSMENT YEAR: 2008-09 SHRI N. AMBALAL (HUF), ADONI. PAN AAAHN 6446 F VS. INCOME-TAX OFFICER, WARD 1, ADONI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI KONDA RAMESH DATE OF HEARING : 23-12-2015 DATE OF PRONOUNCEMENT : 20-01-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT-III, HYDERABAD, DATED 6 TH MARCH, 2015, PASSED U/S 263 OF THE ACT, FOR THE AY 2008-09 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE- HUF IS ENGAGED IN THE BUSINESS OF COTTON GINNING UNDER THE NAME M/ S SHA THAKERJI NAVALMAL & CO AND FILED ITS RETURN OF INCOME FOR AY 2008-09 ON 25.8.2008 ADMITTING TOTAL INCOME OF RS.2,18,000/-. THE ASSESSING OFFICER AFTER SCRUTINIZING THE CASE, HAD COMPLETED THE ASSESSMENT U/S 143(3) ON 29.10.2009 DETERMINING THE TOTAL INCOME A T RS.3,50,760. 3. BY VIRTUE OF POWERS VESTED U/S 263 OF THE I.T. ACT, 1961, THE ASSESSMENT RECORD OF THE ASSESSSEE-HUF FOR AY 2008- 09 HAD BEEN CALLED FOR AND EXAMINED BY THE CIT. ON VERIFICATION OF THE ASSESSMENT RECORD OF THE ASSESSEE-HUF, IT WAS NOTICED THAT THE ASSESSEE-HUF HAD SHOWN A LIABILITY TO THE TUNE OF RS. 7,00,000/- TOWARDS M/S 2 ITA NO. 965 /HYD/2013 N. AMBALAL (HUF) BHUVANESWARI SEEDS, WHEREAS, THE SAID FIRM M/S BHUV ANESWARI SEEDS DURING THE COURSE OF ASSESSMENT PROCEEDINGS H AD STATED VIDE. ITS LETTER DTD. 2.11.2010 THAT THEY DID NOT HAVE AN Y TRANSACTIONS DURING THE FY 2007-08 WITH M/S SHA THAKERJI NAVALMAL & CO, WHICH IS A PROPRIETARY FIRM OF THE ASSESSEE-HUF. THE FIRM MIS BHUVANESWARI SEEDS HAD ALSO SUBMITTED VIDE ITS LETTER DTD. 2.11. 2010 THAT THEY DID NOT HAVE ANY TRANSACTIONS WITH THE FIRM OF THE ASSE SSEE-HUF DURING THE FY 2007-08. IT HAD FURTHER SUBMITTED THAT THEY HAD TRANSACTIONS WITH THE FIRM OF THE ASSESSEE-HUF IN THE EARLIER YE AR AND FILED A COPY OF THE LEDGER ACCOUNT FOR FY 2006-07. 3.1 THE CIT NOTED THAT WHILE COMPLETING THE ASSESSM ENT FOR THE AY 2008-09, THE AO FAILED TO EXAMINE THE ABOVE DISCREP ANCY AND ITS TAX IMPLICATIONS. WHEN THE ALLEGED CREDITOR M/S BHUVANE SWARI SEEDS HAS DENIED THE TRANSACTION, THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE OUTSTANDING LIABILITY OF RS. 7,00,00 0/- AS UNEXPLAINED U/S 68 OF THE I.T. ACT, 1961. HE, THEREFORE, WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSED FOR AY 2008-09 IS FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, A LETTER U/S 263 WAS ISSUED ON 7.1.2013 TO SHOW CA USE AS TO WHY THE ASSESSMENT SHOULD NOT BE REVISED U/S 263 OF THE I.T .ACT, 1961 IN VIEW OF THE ABOVE ISSUE. IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE FILED A LETTER AND SUBMITTED AS UNDER: M/S AMARESWARA AGRI TECH OF HYDERABAD HAS BUSIN ESS RELATION WITH US AND THEY PAID AMOUNT OF RS.7,00,0 00/- TO BHUVANESWARI SEED CENTRE, ADONI. AGAINST OUR DUE A MOUNT TO AMARESWARA, BHUVANESWARI MAKE PAYMENT TO US AGAINS T THE SAID TRANSACTIONS. IN FACT THIS AMOUNT SHOULD BE C REDITED IN THE NAME OF AMARESWARA AGRI TECH BUT BY OVERSIGHT WE C REDITED THIS AMOUNT TO BHUVANESWARI SEED. THIS IS A CLERIC AL MISTAKE. 3.2 THE LD. AR OF THE ASSESSEE RELIED ON THE DECISI ON OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. SHRI JAWA HAR BHATTACHARGEE IN ITA NO. 2 OF 2008, DT. 07/02/2012. HE ALSO RELIED ON VARIOUS CASE LAWS TO SUBMIT THAT THE ASSESSMENT ORD ER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IF P ROPER ENQUIRY IS NOT 3 ITA NO. 965 /HYD/2013 N. AMBALAL (HUF) CONDUCTED BY THE AO BY ASSUMING INCORRECT FACTS AND IF THE LAW APPLIED BY THE AO IS INCORRECT. 4. THE LD. CIT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, SET ASIDE THE ORDER PASSED U/S 143(3) WITH A DIRECT ION TO THE AO TO FRAME A FRESH ASSESSMENT TAKING INTO ACCOUNT THE UN EXPLAINED LIABILITY OF RS. 7,00,000/- IN THE BOOKS OF THE ASSESSEE AND CARRY OUT THE ENQUIRY, BY OBSERVING AS UNDER: 5. I HAVE PERUSED THE SUBMISSIONS MADE BY THE ASS ESSEE AS WELL AS VARIOUS DOCUMENTS BROUGHT ON RECORD BY THE ASSESSI NG OFFICER INCLUDING BANK ACCOUNT STATEMENTS FILED BY THE ASSESSEE. AS PER THE ASSESSEE, THEY HAD BUSINESS TRANSACTIONS WITH M/S AMARESWARA AGRI TECH OF HYDERABAD WHO OWED THEM RS.7,00,000/-. IN-TURN M/S AMARESWAR A AGRI TECH OF HYDERABAD PAID AN AMOUNT OF RS.7,00,000/- TO M/S B HUVANESWARI SEED CENTRE, ADONI. AGAINST THE AMOUNTS DUE TO THE ASSE SSEE FROM M/S AMARESWARA AGRI TECH OF HYDERABAD, M/S BHUVANESWAR I SEED CENTRE, ADONI MADE DIRECT PAYMENT OF RS.7,00,000/- TO THE ASSESSEE. THIS SHOULD HAVE BEEN CREDITED TO THE ACCOUNT OF M/S AMARESWAR A AGRI TECH, HYDERABAD IN THE BOOKS OF THE ASSESSEE INSTEAD OF THE ACCOUNT OF M/S BHUVANESWARI SEED CENTRE, ADONI SINCE THE AMOUNT O F RS.7,00,000/- RECEIVED FROM M/S BHUVANESWARI SEED CENTRE, ADONI WAS ON BEHALF OF M/S AMARESWARA AGRI TECH OF HYDERABAD. IF THE ASSESSEE 'S CONTENTION IS CORRECT, THEN ALONG WITH A LIABILITY OF RS.7,00,00 0/- TOWARDS M/S BHUVANESWARI SEED CENTRE, ADONI THERE SHOULD BE A CORRESPONDING UNPAID DEBT OF RS.7,,00,000/- DUE FROM M/S AMARESWARA AGR I TECH OF HYDERABAD. HOWEVER, A PERUSAL OF THE BALANCE SHEET AS ON 31/0 3/2008 FILED BY THE ASSESSEE ALONG WITH HIS RETURN OF INCOME DOES NOT REVEAL ANY SUCH DEBTOR/SUNDRY DEBTOR. MOREOVER IN THE STATEMENT OF ACCOUNT OF M/S BHUVANESWARI SEED CENTRE, ADONI FURNISHED BY THE A SSESSEE SHOWS RECEIPT OF RS. 7,00,000/- THREE CHEQUES OF RS.2,00 ,000/-, RS.2,00,000/- AND RS.3,00,OOOI- BETWEEN THE PERIOD FROM 17.5.200 6 TO 10,8.2006. THESE RECEIPTS ARE ALSO RECORDED IN THE BANK ACCOU NT STATEMENTS FURNISHED BY THE ASSESSEE. HOWEVER, NOT ONLY HAS M/S BHUVUNE SWARI SEED CENTRE, ADONI DENIED THESE TRANSACTIONS BUT IN-TURN, THE A CCOUNT OF M/S SHA THAKER JI NAVALMAL & CO IN THE BOOKS OF MIS BHUVANESWARI SEED CENTRE, ADONI SHOWS AN OPENING BALANCE OF RS.5,00,000/- AND A FU RTHER RECEIPT OF RS.2,00,000/- FROM THE ASSESSEE ON 13.5.2006 AND A LSO THAT THE RS.7,00,000/- PAID BY M/S BHUVANESWARI SEED CENTRE WAS AGAINST THE AMOUNTS DUE TO M/S SHA THAKERJI NAVALMAL & CO. HEN CE, THE ASSESSEE'S CONTENTION IS CLEARLY UNTENABLE AND UNACCEPTABLE. 5.1 THE ASSESSING OFFICER IN ACCEPTING THE LIABILI TY OF RS. 7,00,000- IN THE NAME OF M/S BHUVANESWARI SEED CENTRE IN THE BO OKS OF THE ASSESSEE HAS CLEARLY ERRED AND HENCE HIS ASSESSMENT ORDER U /S 143(3) DT.29.10.2009 IS ERRONEOUS IN AS MUCH AS IT IS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE. 5.2 ON THE FACTS OF THE CASE DISCUSSED ABOVE, THE LIABILITY OF RS.7,00,000/- TOWARDS M/S BHUVANESWARI SEED CENTRE APPEARS CLEARLY UNEXPLAINED AND HENCE THE ORDER U/S 143(3) SHOULD BE MODIFIED AND NECESSARY ACTION SHOULD BE TAKEN U/S 68 OF THE I.T . ACT, 1961. HOWEVER, BEFORE RE-ASSESSING THE CASE, THE ASSESSING OFFICE R SHOULD CARRY OUT DETAILED ENQUIRIES REGARDING THE NATURE OF TRANSAC TIONS WITH M/S 4 ITA NO. 965 /HYD/2013 N. AMBALAL (HUF) BHUVANESWARI SEED CENTRE AND THE REASONS FOR WHICH AMOUNTS WERE GIVEN TO IT WHICH ACCORDING TO THEM, THEY HAVE REPAID. 5. AGGRIEVED BY THE ORDER OF CIT, THE ASSESSEE IS I N APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E-TAX IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN HOLDING THAT THERE IS ANY ERROR IN THE ASSESSMENT MADE BY THE ASSESSING OFFICER ULS 143(3) ON 29.10.2009 IN THE CASE OF THE APPELLANT HEREIN. 3. THE LEARNED COMMISSIONER OF INCOME-TAX OUGHT TO HAVE CONSIDERED THE FACT THAT THE LIABILITY OF RS.7 IAKHS SHOWN IN THE BALANCE SHEET IS PROPERLY EXPLAINED AND WAS ACCEPTED BY THE ASSESSING OFFICE R AFTER DUE VERIFICATION. 4. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN OBSERVING THAT THE AMOUNT OF RS. 7 LAKHS SHOWN IN THE FINAL ACCOUNTS WAS UNEXPLAINED. 5. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN HOLDING THAT THE ORDER U/S 143(3) PASSED BY THE ASSESSING OFFICER IS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE 6. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN DIRECTING THE ASSESSING OFFICER TO FRAME A FRESH ASSESSMENT CONS IDERING THE AMOUNT OF RS.7 LAKHS AS UNEXPLAINED LIABILITY. 6. THE LD. AR PRAYED FOR CONDONATION OF DELAY FOR 1 2 DAYS AND LD. DR HAS NO OBJECTION, HENCE, THE DELAY WAS CONDONED . 7. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD RECEI VED RS. 7 LAKHS FROM M/S BHUVANESWARI SEEDS, IN THE FOLLOWING DATES IN THE AY 2007-08: DATE AMOUNT MODE DATE OF DEPOSIT IN BANK 17/05/2006 2, 00,000 CHEQUE 17/05/2006 10/07/2006 2,00,000 -DO- 10/07/2006 10/08/2006 2,00,000 -DO- 10/08/2006 TO SUPPORT THE ABOVE CLAIM, LD. AR SUBMITTED THE LE DGER EXTRACTS OF M/S BHUVANESWARI SEEDS IN THE BOOKS OF ACCOUNT OF T HE ASSESSEE, FILED CONFIRMATION OF ABOVE TRANSACTION FROM M/S BH UVANESWARI SEEDS AND ALSO SUBMITTED THE BANK STATEMENTS. (REFER PAGE S 10 19 OF PAPER BOOK). HE SUBMITTED THAT THE ABOVE TRANSACTIO NS ARE GENUINE 5 ITA NO. 965 /HYD/2013 N. AMBALAL (HUF) AND TRANSACTED IN THE REGULAR BUSINESS, ALSO THROUG H BANKING CHANNEL. ALL THESE EVIDENCES WERE ALREADY SUBMITTED BEFORE T HE LD. CIT. 7.1 LD. AR SUBMITTED THAT THE LD. CIT WAS WRONG IN HOLDING THE ASSESSMENT ORDER U/S 143(3) PASSED BY THE AO AS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND DOES NO T REQUIRE FRESH ASSESSMENT. 8. LD. DR RELIED ON THE ORDER OF CIT. 9. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON RECORD, ON PERUSAL OF THE FACTS, THE CIT H AD CONSIDERED THE ASSESSMENT U/S 143(3) AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE BY RELYING ON THE STATEMENT OF M/S BHUVANES WARI SEEDS AS THEY DO NOT HAVE ANY TRANSACTION IN FY 2007-08. BUT THE FACTS ALSO SUMMARIZE THAT THEY DO NOT HAVE ANY TRANSACTION WIT H THE ASSESSEE DURING FY 2007-08. THEY HAD TRANSACTED IN THE FY 20 06-07, TO THIS EFFECT, THE ASSESSEE HAD ALREADY SUBMITTED PROOF OF TRANSACTION BEFORE LD. CIT AND ALSO BEFORE THE AO AS CLAIMED BY THE LD . AR. THE CONFIRMATION OF M/S BHUVANESWARI SEEDS FILED BEFORE CIT AND CLAIM OF THE ASSESSEE ARE MATCHING AND ALSO THE CONFIRMATION WAS SUBMITTED BY M/S BHUVANESWARI SEEDS IN THEIR LETTER HEAD (REF ER PAGE 11 OF PAPER BOOK). IT CLEARLY ESTABLISHES THAT THE TRANSA CTIONS AND CLAIM OF THE ASSESSEE ARE GENUINE. LD. CIT OPINED IN HIS ORD ER THAT IN AY 2008-09, THE AO HAD NOT CARRIED OUT PROPER ENQUIRY AND COMPLETED THE ASSESSMENT. HE RELIED ON THE VARIOUS JUDICIAL P RONOUNCEMENTS. LD. CIT HAD DISCUSSION IN HIS ORDER THE TRANSACTION S BETWEEN M/S BHUVANESWARI SEEDS AND M/S AMARESWARA AGRI TECH OF HYDERABAD. THESE TRANSACTIONS WERE OUTSIDE THE BOOKS OF ACCOUN TS AND HAVE NO LEGAL BINDING OR EFFECT ON THE TRANSACTIONS RECORDE D BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. MOREOVER, THE CIT HAS NOT BROUGHT ANY COGENT MATERIAL ON RECORD TO CLAIM THAT THESE TRANS ACTIONS WERE TAKEN PLACE IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAD PRO DUCED THE RELEVANT RECORDS TO SUPPORT THE EXISTENCE OF THE LI ABILITY OF RS. 7 6 ITA NO. 965 /HYD/2013 N. AMBALAL (HUF) LAKHS. IN ABSENCE OF PROPER EVIDENCE TO THE CLAIM OF THE CIT, WE ARE OF THE VIEW THAT THE CIT HAS ACTED ON MERE SUSPICIO N AND BELIEF OF SUCH OUTSTANDING LIABILITY AS THE UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. IT ESTABLISHES THAT THE SUSPICION AND BELI EF OF CIT WAS WRONG, HENCE, THE ORDER OF CIT U/S 263 IS QUASHED AND THE ORDER OF AO PASSED U/S 143(3) IS HEREBY RESTORED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) VICE PRESIDENT A CCOUNTANT MEMBER HYDERABAD, DATED: 20 TH JANUARY, 2016 KV COPY TO:- 1) N. AMBALAL (HUF), SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H. NO. 3-6 -643, ST. NO. 9, HIMAYAT NAGAR, , HYDERABAD 500 029 2) ITO, WARD 1, ADONI 3) CIT - III, HYDERABAD 4) JCIT, KURNOOL RANGE, KURNOOL. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.