Income Tax Appellate Tribunal - Pune
Babanlal Bhikulal Fibres Pvt.Ltd., ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri I.C. Sudhir Judicial Member
and Shri R.K. Panda Accountant Member
ITA Nos. 845 /PN/2010
(Asstt. Year : 2006-07)
Babanlal Bhikulal Fibres Pvt.Ltd. ... Appellant
84/85, Main Road, Raver,
Tal Raver, Pin: 425508
Dist: Jalgaon
PAN : AACCB4219M
v.
Income Tax Officer ... Respondent
Ward 1(1), Jalgaon
Jalgaon 425 001
ITA No. 1045/PN/2010
(Asstt. Year : 2006-07
Income Tax Officer ... Appellant
Ward 1(1), Jalgaon
Jalgaon 425 001
v.
Babanlal Bhikulal Fibres Pvt.Ltd. ... Respondent
84/85, Main Road, Raver,
Tal Raver, Pin: 425508
Dist: Jalgaon
PAN : AACCB4219M
Assessee by : Shri. Sunil Ganoo
Department by : Shri. Alok Mishra
Date of Hearing : 13/3/12
Date of Pronouncement : -4-12
ORDER
Per I.C. Sudhir, JM
These are the cross appeals against the common first appellate order involving the same issue.
2 ITA . Nos. 845 & 1045/PN/2010
Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07
2. The assesse has questioned first appellate order whereby the ld CIT(A) has confirmed the addition of outstanding liability of Rs. 1,80,000/- on the basis that the assessee could not produce the seller Shri Arun Sonu Shete out of the sellers towards whom addition of Rs. 45,54,145/- made by the A.O on this account.
3. The revenue, on the other hand, has questioned the action of the Ld CIT(A) in deleting the addition of Rs. 43,74,145/- (Rs. 45,54,145/- - Rs. 1,80,000/-) made on account of fictitious liability holding that the creditors have confirmed the sale of cotton and receipt of payments.
4. Since the grounds raised in both the appeals are connected involving a common issue, regarding the validity of addition of Rs. 45,54,145/- by the A.O, both the appeals are being disposed of vide a consolidated order.
5. The relevant facts are that the assessee company engaged in the business of Ginning and Pressing of cotton and manufacturing of cotton bales and trading thereof, made purchases of cotton on cash basis from farmers. During the course of assessment proceedings, the A.O noticed that the assessee has shown an outstanding amount of Rs. 46,01,645/- as on 31st March 2006 payable to various farmers. From the available details, the A.O observed that the payments shown to be outstanding as on 31st March 2006 were paid only after a period of 5/6 months. He carried out enquiries and was not satisfied with the claim of the assessee and held that the same was fictitious. He accordingly disallowed an amount of Rs. 45,54,145/- after considering that payment of Rs. 47,500/- stated to have been paid by assessee at subsequent period. The Ld CIT(A) after discussing the issue in detail and considering the 3 ITA . Nos. 845 & 1045/PN/2010 Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07 remand report called by him time to time on the submission of the assessee, has come to the conclusion that the assessee has been able to establish its claim and deleted the addition of Rs. 43,74,145/- out of the addition of Rs. 45,54,145/- and upheld the addition of Rs. 1,80,000/- on the basis that the assessee was unable to produce Shri Arun Sonu Shete in whose case summons were returned un-served and the said amount was shown outstanding against his name.
6. The grievance of the assessee is that when the ld CIT(A) after detailed discussion of the subject on the issue, has come to the conclusion that assessee has not claimed any frivolous liability to the extent of Rs. 43,74,145/-, there was no reason with him to affirm the addition of Rs. 1,80,000/- out of the addition of Rs. 45,54,145/- (Rs. 45,54,145 - 1,80,000/-), only because the assessee could not produce Shri Arun Sonu Shete against whom the said amount of Rs. 1,80,000/- was shown payment outstanding.
7. The grievance of the Revenue, on the other hand, is that the Ld CIT(A) was not justified in deleting the addition of Rs. 43,74,145/- on account of fictitious liability holding that the creditors have confirmed the sale of cotton and receipt of payment without any documentary evidence such as bills and payment receipts.
8. Both the parties through their representative have advanced their arguments in support of their respective cases.
9. Having gone through the orders of the authorities below, we find that majority of the farmers have affirmed the claim of the assessee, thus we have to examine the genuineness of the claim keeping in mind the 4 ITA . Nos. 845 & 1045/PN/2010 Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07 totality of the facts and circumstances of the case as well as the real practice in the trade in this regard in the background of the farmers as sellers of cotton. Non-appearance of some farmers or their non- availability on given address cannot always be seen adversely to doubt the shown liability by assessee against them. There may be several reasons including fear of the Department for their non-appearance or non-cooperation with the A.O or assessee. We find that Ld CIT(A) while deciding the issue has taken care of the above aspect of the matter. He has discussed the case in details and has summarized his conclusion in para Nos. 7 to 9 of the first appellate order which have been reproduced hereunder for a ready reference :
"7. I have considered the detailed submissions of the appellant and the reasons given by the AO in the assessment order as well as the remand reports. It is an admitted fact that the sale of cotton by various farmers to the appellant was not in dispute. It is the contention of the AO that farmers could not have waited for such a long time to take the payment and doubted the outstanding amounts as on 31/03/2006 and concluded that the payments should have been made or cleared before 31/03/2006 out of their unexplained sources of income. The AO conducted the enquiries through the Inspector and was able to obtain letters from some of the persons stating that, in fact, they had received the payments within a short period of time. When these results of enquiry were put forward before one of the Directors of the appellant company, he agreed to produce the said persons. The AO also gave show cause notice to the appellant as to why the outstanding amounts should not be treated as fictitious liabilities as on 31/03/2006 in view of the findings of the enquiries conducted through his Inspector. The appellant produced three farmers who have confirmed to have sold the cotton to the appellant company and received the payments after 31/03/2006. However, the appellant was unable to produce other farmers/persons and chosen to file the Affidavits of 10 persons. The AO conducted further enquiries and found that two of the farmers written to him contradicting their statements and alleged that these signatures were taken on 5 ITA . Nos. 845 & 1045/PN/2010 Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07 blank papers. In view of these letters, the AO disbelieved the entire outstanding payment as on 31/03/2006 [except in respect of Rs. 47,500/- paid by cheque by the appellant after 31/03/2006].
Both the appellant and the AO made allegations and counter allegations on each other regarding influencing and exerting the pressure on the persons/farmers. But the fact remains that none of them were able to substantiate their allegations with any specific evidence. It may be seen from the assessment order that the AO relied on the letters filed by the following farmers on enquiry by ITI :
Sr.No. Name of the farmer 01 Shri Ganesh Shamu Mahajan, Kerhale 02 Shri Prahalad Bansi Mahajan, Wagod 03 Shri Rajaram Ganu Mahajan, Tandalwadi 04 Shri Ravindra Bhika Patil, Kerhale 05 Shri Pramod Jagannath Patil, Ainpur 06 Shri Anil Dattu Patil, Kerhale 07 Shri Prakash Ramchandra Bauskar/Baviskar, Thorgaon 08 Shri Shyamrao Sonu Koli, Morgaon 09 Shri Arun Sonu Shete, Wagodh
All of the above confirmed to have sold the cotton but stated to have received payments within a short period. During the remand proceedings, the appellant filed Affidavits from all the outstanding farmers including the above persons. The AO examined the persons during the remand proceedings and issued summons u/s. 131 of the Act in respect of the above person. Shri Rajaram Ganu Mahajan mentioned at Sr. No.3 could not appear due to ill-health and filed a letter confirming the transaction. The appellant was unable to produce Shri Anil Sonu Shete mentioned at Sr. No. 9 above as the summons sent were returned unserved. Thus, the persons mentioned at Sr. No.1, 2 and 4 to 8 have confirmed during the remand proceedings that they sold the cotton to the appellant and actually received the payment after 31/03/2006 confirming the affidavits filed. It is also seen from the remand report that Shri Anil Dattu Patil mentioned at Sr.No.6 stated in is statement that he 6 ITA . Nos. 845 & 1045/PN/2010 Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07 received the payment in August, 2006 and he was not having any brother by name Sunil Dattu Patil. It may be seen that a statement was stated to have recorded from Sunil Dattu Patil claimed to be brother of Anil Dattu Patil. Therefore, no reliance can be placed on the letter stated to have been obtained from Shri Sunil Dattu Patil claimed to be the brother of Anil Dattu Patil. The appellant produced the following three persons in response to the show cause notice during the assessment proceedings :
i) Shri Kisan Deoram Mahajan
ii) Shri Bhaskar Bangale
iii) Shri Manohar Krishna Rane.
During the course of statements recorded, all the three persons confirmed to have sold the cotton and received the payments after 31/03/2006. But the first two person viz.: Shri Kisan Deoram Mahajan and Shri Bhaskar Bangale filed letters contradicting the statements and alleging that their signatures were taken on the blank letters by the appellant. The AO heavily relied on these letters to come to the conclusion that the payments were actually paid before 31/03/2006. However, the same persons subsequently, appeared during the remand proceeding before the AO and stated during the course of the statement u/s. 131 of the Act that they had sold the cotton to the appellant and had received the payments as per the Affidavits filed. It was also stated by them that the retraction letters were filed because of the fear. Shri Manohar Kisan Rane never retracted his statement and filed the Affidavit confirming the payments after 31/03/2006 from the appellant.
9. The AO thus, examined 39 persons u/s. 131 of the Act during the remand proceedings, whose Affidavits were filed including some of those persons who appeared before him during the assessment proceedings. All these persons have confirmed the sale of cotton and receipt of payments after 31/03/2006. In view of the categorical statements of the said persons, no inference can be drawn that the payments were actually made by the appellant before 31/03/2006, particularly no contradictory material/ evidence was gathered by him during his enquiry at the time of remand 7 ITA . Nos. 845 & 1045/PN/2010 Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07 proceedings. The AO himself examined most of the persons and could not prove the affidavits filed were wrong/false. Hence, the AO's report that the affidavits cannot be admitted is baseless and not acceptable. The sworn statements recorded on oath by the AO during the remand proceedings definitely carry more evidential value than the letters stated to have been filed by some of the persons which were subsequently, retracted by filing the affidavits. There is also no positive evidence available on record to show that the appellant actually made the payments before 31/03/2006 out of their unexplained sources. The mere presumption of the AO is not justifiable in the absence of proper evidence and material. It may be seen that the AO himself admitted the cheque payments made after 31/03/2006 but doubted the cash payments on presumption. In view of the above detailed discussions, the findings of the AO that the amount of Rs. 45,54,145/- is fictitious liability, is not justifiable. However, the appellant was unable to produce Shri Arun Sonu Shete, in whose case summons were returned unserved and the payment outstanding in his name at Rs.1,80,000/- can be at best disallowed out of Rs. 45,54,145/-. Therefore, the addition of Rs. 43,74,145/- (45,54,145 - 1,80,000/-) is hereby deleted and the AO is directed accordingly."
10. We find that the first appellate order on the issue is comprehensive and reasoned one, hence we are not inclined to interfere therewith so far as his action in deleting the addition of Rs. 43,74,145/- out of the claimed liability is concerned. The same is upheld. The ground raised in the appeal of the Revenue is thus rejected.
11. We, however, find substance in the contention of the Ld. A.R. that only Shri Arun Sonu Shete in whose name summons issued were returned unserved and the assessee could not produce him before the A.O, the Ld CIT(A) was not justified in drawing an inference that the outstanding payment of Rs.1,80,000/- shown against his name was frivolous and thus deserves sustenance of addition to that extent. From 8 ITA . Nos. 845 & 1045/PN/2010 Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07 the reading of the relevant portion of Para No. 9 of the first appellate order, it appears that the Ld CIT(A) has sustained this addition of Rs. 1,80,000/- with this observation that at the best only this amount can be disallowed since assessee was unable to produce the person against whom this amount was shown as payment outstanding and summons issued to him were returned un-served. The Ld CIT(A) has not given his finding in clear words that the claim to the extent of Rs. 1,80,000/- shown as payment outstanding against Shri Arun Sonu Shete was frivolous especially when he, after discussing the issue in detail, has found the claimed liability of Rs. 43,74,145/- out of Rs. 45,54,145/- as genuine. Under these circumstances, we do not find the first appellate order upholding the addition of Rs. 1,80,000/- as justified. The same is thus directed to be deleted. The ground raised in the appeal of the assessee against this addition is thus allowed.
12. Consequently, appeal preferred by the assessee is allowed and that preferred by the Revenue is dismissed.
The order is pronounced in the open Court on 30th April 2012.
Sd/- Sd/-
(R.K. PANDA) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 30th April, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT - II, Nashik
4. The CIT(A)-II, Nashik
5. The D.R. "B" Bench, Pune
9 ITA . Nos. 845 & 1045/PN/2010
Babanlal Bhikulal Fibres P. Ltd.
A.Y 2006-07
6. Guard File
/-True Copy-/ By order
Senior Private Secretary
Income Tax Appellate Tribunal
Pune