M/s. Chandrika Enterprise, Surat V. The ACIT., Circle-5, Surat

MA 265/AHD/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6297 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 13-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI T. K. SHARMA, JUDICIAL MEMBER AND SHRI D. C. AGARWAL, ACCOUNTANT MEMBER M.A. NO.264 & 265/AHD/2010 IN I.T.A. NOS. 2892 & 2893/ AHD/2006 (ASSESSMENT YEAR 2003-04) 1.M/S. CHANDRIKA CORPORATION 2.M/S. CHANDRIKA ENTERPRISES 9/887, NEAR CHOIRYASI DAIRY, AMBAJI ROAD, SURAT VS. ACIT, CIRCLE 5, SURAT PAN/GIR NO. :AACFC5475B (APPELLANT) .. (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: SHRI S P TALATI, D.R. O R D E R PER SHRI D.C.AGARWAL, AM:- THE ASSESSEES HAVE FILED THESE M.AS. IN RESPECT OF I.T.A. NOS. 2892 AND 2893/AHD/2006 FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSEES HAVE POINTED OUT IN MAS THAT DIRECTION GIVEN BY THE TRIB UNAL DETERMINING THE PEAK AMOUNT ARE NOT RESTRICTED. ACCORDING TO THE ASSESS EE, THE TRIBUNAL SHOULD HAVE ISSUED FOLLOWING DIRECTIONS: EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, N O THIRD PARTY COMPARABLE INSTANCES ARE RELIED UPON EI THER BY THE ASSESSEE OR THE DEPARTMENT. M.A.NOS.264,265/AHD/2010 2 HENCE, THE SCOPE OF VERIFICATION BY THE AO SHOULD B E RESTRICTED TO THE DATA AVAILABLE WITH HIM AND ACCORDINGLY, THE DIRECTION OF THE HON'BLE BENCH IN THIS REGARD MAY KINDLY BE MODIFIED, SUCH THAT THE A O WILL DETERMINE THE PEAK AMOUNT OF MONEY BLOCKED JN THE BOOK DEBTS ONLY TO THE EXTENT THEY ARE NOT FUNDED_OUT OF THE MONEY; DEPOSITED IN THE BANK, ACCOUNT IN FORM OF CHEQUES /BANK DRAFTS OF OTHER CUSTOMERS AND THE RESULTING BALANCE AMOUNT IF ANY, SHOULD ONLY BE CONSIDERED AS ASSESSEE'S OWN CAPITAL IN THE BUSINESS. FURTHER THE BASIC FACT THAT THE APPELLANT IS ENGAGE D ONLY IN THE BUSINESS OF CHEQUE / DRAFTS DISCOUNTING AND NOT MONEY LENDING IS INADVERTENTLY NOT CONSIDERED BY THE HON'BLE BENCH. HENCE, THE DIRECTIONS OF THE HON'BLE BENCH TO DETERMINE THE THEORY OF AVERAGING THE NUMBER OF DAY S FOR WHICH THE CAPITAL IS BLOCKED IN THE FINANCE IS ALSO EXTENDING THE SCOPE OF VERIFICATION ENORMOUSLY AND UNWARRANTEDLY. THEREFORE, THE APPELLANT MOST HUMBLY PLEA BEFORE TH E HON'BLE BENCH THAT SINCE THE CASH IS PAID TO THE CUSTOMER OUT OF CHEQUES / BANK DRAFTS OF THE SAID CUSTOMER OR OTHER CUSTOMERS, THE AMOUNT TEMPORARILY BLOCKED IN DEBTS BELONGS TO THE CUSTOMERS. 2. THE FACTS RELATING TO THE ALLEGED ERROR IS THAT THE ASSESSEE IS ENGAGED IN CHEQUES DISCOUNTING BUSINESS. SURVEY WAS CARRIED O UT AT ITS PREMISES. NO REGULAR BOOKS WERE FOUND TO HAVE BEEN MAINTAINED. THE RECORD OF TRANSACTION WAS MAINTAINED ON WRITING PADS AND LOOS E SHEETS ETC. THE A.O. ESTIMATED CIRCULATING CAPITAL BY WORKING PEAK BALAN CE OF 4 DAYS AT RS.94,40,146/- AND TREATED 1/3 RD THEREOF AS CIRCULATING CAPITAL AT RS.31,46,415/-. ON THIS CIRCULATING CAPITAL THE A. O. WORKED OUT INTEREST @ 18% AT RS.5,66,408/-. THE TRIBUNAL IN I.T.A.NO. 28 93/AHD/2006 FOLLOWED ITS DECISION IN I.T.A. NO. 2892/AHD/2006 WHEREIN UN DER SIMILAR FACTS AND M.A.NOS.264,265/AHD/2010 3 CIRCUMSTANCES DIRECTIONS WERE GIVEN TO CALCULATE CI RCULATING CAPITAL. FOLLOWING THE DIRECTIONS WERE ISSUED BY THE TRIBUNA L: (2) ESTIMATION OF CIRCULATING CAPITAL -FOR DETERMI NING CIRCULATING CAPITAL TWO APPROACHES SHOULD BE ADOPTE D ONE IS FROM PEAK BALANCE IN THE BANK AS WORKED OUT BY T HE AO AND OTHER IS PERIOD FOR WHICH CHEQUES/DRAFTS ARE BL OCKED. IN THE FIRST APPROACH PEAK BALANCE AS DETERMINED BY AO AND CONFIRMED BY LD. CIT(A) IS UPHELD. HOWEVER, APPLICATION OF 1/3 RD THEREOF AS CIRCULATING CAPITAL IS NOT SUPPORTED BY ANY EVIDENCE. THE AO WILL, THEREFORE, FIND OUT INSTANCES AS TO WHAT PERIOD FINANCE ARE BLOCKED WHETHER 90 DAYS OR LESS THAN THAT OR 120 DAYS OR MO RE. SUFFICIENT NUMBER OF RANDOM INSTANCES WILL BE SELEC TED AND AVERAGE THEREOF WILL BE TAKEN. FROM SUCH AVERAG E, THE PERCENTAGE OF PEAK BALANCE AS CIRCULATING CAPITAL W ILL BE DETERMINED: OTHER APPROACH IS TO FIND OUT ASSESSEE' S MONEY BLOCKED IN IRRECOVERABLE DEBTS I.E. CHEQUES/DRAFTS IN RESPECT OF WHICH CASH HAS BEEN PA ID BY THE ASSESSEE BUT WHICH WERE NOT HONOURED BY CLEARIN G IN THE BANKING CHANNEL. THE WORKING GIVEN TO THE TRIBU NAL AS ON THE DATE OF SURVEY, ABOUT THE AMOUNT OF IRREC OVERABLE DEBTS WILL LIE PROVIDED TO THE AO ALSO. IN ANY CASE THE AO WILL FIND OUT DATA ON THE BASIS OF MATERIAL AVAILAB LE WITH HIM AND ON THE BASIS OF MATERIAL COLLECTED FROM THE ASSESSEE OR ON INVESTIGATION, AND DETERMINE PEAK AM OUNT OF-MONEY BLOCKED IN IRRECOVERABLE DEBTS. IN ADDITIO N TO THIS, AO WILL FIND OUT CASH OUTFLOW AGAINST CHEQUES AND DRAFTS RECEIVED WHICH ARE ACTUALLY CLEARED ON THE D ATE WHEN PAYMENTS IN CASH ARE MADE TO THE CUSTOMER(S). THUS TOTAL OF THE TWO SUMS WILL BE A PRIMA FACIE ME ASURE ASSESSEE'S OWN CAPITAL INVOLVED IN THE BUSINESS. 3. IT IS MENTIONED BY THE TRIBUNAL THAT THE ASSESSE E WILL PROVIDE THE WORKING TO THE A.O. AS GIVEN BY IT TO THE TRIBUNAL AND DIRECTED THE A.O. TO DETERMINE PEAK AMOUNT OF MONEY BLOCKED IN IRRECOVER ABLE DEBTS. WHAT THE ASSESSEE NOW WANTS IS THAT WHILE CALCULATING IRRECO VERABLE DEBT, THE A.O. M.A.NOS.264,265/AHD/2010 4 SHOULD EXCLUDE MONEY DEPOSITED IN THE BANK ACCOUNT IN THE FORM OF CHEQUES/DEMAND DRAFTS ETC. 4. WE HAVE HEARD LD. D.R. AND PERUSED THE MISCELLAN EOUS APPLICATIONS. IN OUR CONSIDERED VIEW, THERE IS NO CASE TO REVIEW THE DIRECTIONS. THE TRIBUNAL HAS EXPLICITLY LEFT THE WORKING OPTION TO THE A.O. BY MENTIONING THAT A.O. WILL CARRY OUT THE WORKING ON THE BASIS OF DET AILS AVAILABLE WITH HIM, COLLECTED FROM THE ASSESSEE OR AFTER CARRYING OUT I NVESTIGATION. THEREFORE, IT IS NOT POSSIBLE TO RESTRICT NOW THE DIRECTION GIVEN TO THE A.O. IN THE EARLIER ORDER AS IT WOULD AMOUNT TO REVIEW. UNLESS THE PAR TIES PUT UP THE CASE OF UNWORKABLE DIRECTION, NO INTERFERENCE IS CALLED FOR . THE ASSESSEE WANTS DIRECTION TO BE CONFINED BY EXCLUDING THE FUNDS DEP OSITED IN THE BANK WHEREAS THE TRIBUNAL HAS LEFT THE MATTER OPEN TO TH E A.O. THUS, WHAT THE ASSESSEE WANTS NOW, WILL TANTAMOUNT TO REVIEW OF TH E ORDER OF THE TRIBUNAL. WE ACCORDINGLY DECLINE TO ENTERTAIN THE M.AS. THER EFORE, BOTH THE M.AS. ARE REJECTED 5. IN THE RESULT, BOTH THE MISCELLANEOUS APPLICATIO NS OF THE ASSESSEES ARE REJECTED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY 2011. SD./- SD./- (T. K. SHARMA) (D. C. AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 27 TH MAY, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE M.A.NOS.264,265/AHD/2010 5 1. DATE OF DICTATION 24/5/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER25/5/11. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 26/5/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 26/5/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 27/5/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27/5/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..