Income Tax Appellate Tribunal - Delhi
Aakriti International Inc., vs Assessee on 30 June, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'Friday' ; NEW DELHI
BEFORE SHRI C.L. SETHI, JM AND SHRI R.C. SHARMA, AM
M.A. No.93/Del of 2010
(In I.T.A. No.3389 & 3340/Del of 2007)
Assessment Year: 2003-04
M/s Aakriti International Inc., DCIT, Circle 20(1),
4/5 Double Storey, Vijay Nagar vs New Delhi.
New Delhi.
Applicant Respondent
Applicant by: Shri Rajan Saxena, Advocate
Respondent by: Ms Banita Devi Raorem, Sr. DR
ORDER
PER C.L. SETHI, JM
The assessee has filed this miscellaneous Application in respect of the order dated 30th June, 2009 passed by this Tribunal in the above referred appeals filed by the revenue as well by the assessee.
2. In this case, an addition of Rs.7,37,96,894/- u/s 68 of the Act was made by the AO, out of which the learned CIT(A) deleted the addition to the extent of Rs.6,43,89,202/- and sustained the addition of Rs.1,07,09,320/-.
The revenue was in appeal against the addition of Rs.6,43,89,202/- deleted by the CIT(A) and the assessee was in appeal against the addition of Rs.1,07,09,320/- sustained by the CIT(A). Both the appeals were heard together by the Tribunal and the Tribunal passed the order on 30th June, 2009, whereby the matter was decided as under:
23. After considering assessee's submission, information supplied by Shri Mahesh Garg, and the report submitted by the Inspector, the A.O. treated the whole amount of Rs. 7,50,98,522/- as unexplained credit and added the same to the total income of the assessee. However, the ld.
CIT(A) has deleted the addition on account of loan taken from concerns/ persons not controlled or connected to Shri Mahesh Garg and confirmed the addition in respect of loan taken from concerns/ parties/ persons controlled by Shri Mahesh Garg. The ld. CIT(A) has deleted the addition in respect of loan taken from concerns/ persons not controlled by Shri Mahesh Garg on the reasoning that the assessee has furnished all the relevant details during the assessment proceedings including confirmation from each person, assessment particulars of the creditors etc. The ld. CIT(A) made a distinction between loan taken from concerns not controlled by Shri Mahesh Garg and the concerns controlled by Shri Mahesh Garg. The ld. CIT(A) has deleted the addition in respect of loan taken from concerns not controlled by Shri Mahesh Garg on the basis of evidences filed by the assessee in support of the genuineness of the transaction, but the ld. CIT(A) has ignored one important and vital aspect of the matter that the A.O. had issued summons to those concerns to make further enquiry to examine and verify the authenticity of the papers furnished by the creditors. The Inspector conducted a field enquiry and he could be able to serve summon only on 6 parties. However, the assessee has contended that the summons were served on 10 parties. These creditors were also not produced by the assessee. The assessee failed to produce the creditors except by giving a evasive reply that he would look to the reasons with regard to the report submitted by the Inspector. It is well settled that section 68 postulates an enquiry by the assessing office and, indeed, he has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of the assessee. The A.O. has jurisdiction to make proper enquiries regarding the truth and genuineness of the deposit or loan, and if he finds that the explanation offered is false or unbelievable, the A.O. would be justified to presume the whole receipt to be revenue provided it is a reasonable inference. When the A.O. expressed his doubt as to the genuineness of the loan, it was incumbent on the part of the assessee to prove the genuineness of the loan by producing the creditors and for that purpose, the assessee should have co-operated with the A.O. in securing their presence for examination when the creditors were not found traceable at the given address. The matter cannot be decided merely on the basis of confirmation letter filed alongwith other details without verifying the authenticity and reliability of the transaction by means of other independent evidences including personal appearance of the person concerned before the A.O. In the circumstances where the creditor was not found traceable at the given address when field enquiry was conducted by the A.O., the fact that the loan was received through banking channels would not be relevant till full investigation and enquiry as initiated by the A.O. is made. Therefore, in our considered opinion, the matter with regard to the loan taken form the concerns/ persons not controlled by Shri Mahesh Garg need to be examined and verified afresh by the A.O. by securing the presence of the concerned persons so that the authenticity and genuineness of various papers and documents filed by the assessee can be examined and determined. The assessee shall furnish the present whereabouts of the creditors to enable the A.O. to secure their presence. The A.O. shall provide reasonable and adequate opportunity of being heard to the assessee including cross examination of any person in case the statement of that person is intended to be used against the assessee. However, this direction to decide the matter afresh in respect of loans received from the concerns/ persons not controlled by Shri Mahesh Garg shall not apply to the case of loans from the concerns or persons to whom the summons were duly served by the Inspector during the field enquiry conducted by him at the behest of the A.O. The A.O. has stated in the assessment order that summons were served only on 6 persons, however, the assessee has contended that as per A.O.'s own version and notices issued by him, the notices served upon the 10 persons. This aspect whether the summons were served on 6 persons or 10 persons shall be examined and verified by the A.O. and in the case, where it is found that the summons were served upon the creditors, no addition in respect of the loan taken from them shall be made inasmuch as in those cases it can be said that the identity of the creditors has been established and further the genuineness of the transaction as well as creditworthiness of the creditors can also be considered to have been establish in the light of the various documents and evidences filed by the assessee which has been considered by the ld. CIT(A). Hence, the appeal filed by the revenue is partly allowed in the manner as indicated above for a statistical purpose.
24. Now, we shall come to the addition of Rs. 1,07,09,320/- on account of loan confirmed by the ld. CIT(A) taken from the concerns or persons controlled by Shri Mahesh Garg. The ld. CIT(A) has sustained the addition in the light of the statement of Shri Mahesh Garg before Investigation Wing and in the light of the affidavit sworn by Shri Mahesh Garg admitting that all these loans given by different companies controlled by him were merely accommodation entry and not genuine loan given by those companies. It is an admitted position that the information received from the Investigation Wing and as well as the statement of Shri Mahesh Garg given in the statement as well as in the affidavit were supplied to the assessee. The A.O. also examined Shri Mahesh Garg, and his statement was recorded. The A.O. as well as ld. CIT(A) has used the statement of Shri Mahesh Garg given to the Investigation Wing as well as his affidavit against the assessee. Though the assessee was apprised with the statement of Shri Mahesh Garg, no opportunity was given to the assessee to cross examine Shri Mahesh Garg. From the reply given by the assessee before the A.O. it is also seen that the assessee did not insist the A.O. to provide it any opportunity to cross examine Shri Mahesh Garg. But the fact remains that the statement of Shri Mahesh Garg given before the Investigation Wing and the statement given in the affidavit can only be used against the assessee provided Shri Mahesh Garg is cross examined by the assessee. It is not the case where the information collected by Investigation Wing has been used against the assessee at the back of the assessee. The assessee was duly apprised with the information or statement given by Shri Mahesh Garg. In these circumstances, we are, therefore, of the considered view that a further enquiry or investigation is necessary by way of giving assessee an opportunity to cross examine Shri Mahesh Garg and other related persons for proper adjudication of the matter. We, therefore, set aside the orders of the authorities below in so far as the addition of Rs. 1,07,09,320/- on account of the loan taken from concerns or persons controlled by Shri Mahesh Garg is concerned to the file of the A.O. for his fresh adjudication after making necessary enquiry and investigation as per law as A.O. thinks fit and proper. The A.O. shall provide reasonable opportunity of being heard to the assessee as well opportunity to cross examine Shri Mahesh Garg. The assessee shall be at liberty to produce and furnish any further documents or evidences to discharge the assessee's burden to prove and establish that the loan taken from the concerns or persons controlled by Shri Mahesh Garg are genuine. We order accordingly. Thus, the appeal filed by the assessee on this issue is allowed for statistical purpose as indicated above.
3. Now, the assessee has filed this Miscellaneous Application by contending as under:
"5. That the Hon'ble Bench have decided this appeal by observing at page 20 that the matter cannot be decided merely an the basis of confirmation letter filed along with other details without verifying the authority & reliability of the transaction by means of other independent evidence including personal appearance of the person concerned before the AO. In the circumstance where the creditors was not found traceable at the given address when filed enquiry was conducted by the AD the fact that the loan has received through banking channels would not be relevant till full investigation and enquiry as initialed by AO is made.
6. That the Hon'ble ITAT have ignored not only the arguments raised before him and paper book filed consisting of various submissions but also order of the CIT (A) who has discussed the facts involved in the present case in detail. The Hon'ble Bench have recorded the portion from CIT (A) order from page 11 to lb. The Hon'ble bench have also recorded para 11.4 where in Hon'ble CIT (A.) had clarified that the assessing officer has made an error by stating that Sh. Vinod Garg and Dinesh Goyal were not produced before him.
7 That Honbie ITAT have recorded observation of CIT (A) that Sh. Vinod Garg was duly produced and his statement recorded on oath during the Course of assessment proceeding. Sh. Dinesh Goyal also attended the office of the assessing officer. The Hon'ble CIT(A) has further recorded as noticed by Hon'ble bench that the AO was also not correct in observing that no confirmation were filed in respect of loan transactions from M/s Sri Bala Ji Enterprises and M/s Surya Kiran Textiles Pvt. Ltd. The Ld AR has filed copies of all confirmation during the course of assessment proceedings as well on opposite proceeding which includes the confirmation from the aforesaid to concerns as well.
8. That the Hon'ble Bench have decided the appeal filed by revenue on the basis of observation made by the assessing officer at page 13 of the assessment order wherein it was observed that assessee has filed to produce Sh.Mahesh Garg, Sh . Vinod Garg and Sh. Dinesh Goyal despite of the two fact that ample of the opportunities were offered to the assessee during the assessment proceedings.
9. That the Hon'ble bench have thus ignored the factual observation made by the Hon'ble CIT(A) which were made not merely appreciating the submission and arguments raised but after going into the assessment records that Sh Vinod Garg and Dinesh Goyal, who were managing the various companies other than Sh. Mahesh Garg, were appeared before the assessing officer. Certified copy of the statement of Sit Vinod Garg recorded on oath, taken by the assessee officer after the completion of the assessment, was furnished to the CIT(A) who thereafter called upon the assessment record and examined the facts as recorded by him in his order extract of which has been recorded in the order.
10. That the during the course of arguments it was explained that the incorrect observation made by the assessing officer is a serious offence which is against the principle of law and the Ld. DR could not reply thereto. It was argued that both these persons were managing most of the company's other than the companies managed by Sh. Mahesh Garg. It was argued that once the persons were produced and all the details were furnished the addition made by the assessing officers by giving wrong reasons in support is serious offence on the part of the assessing officers to be taken cognizance and forms necessary stricture against him- It was argued that assessee was not even informed about the recording of the statement as well as appearance of both the persons and there was no reasons to hide such vital information from the assessee who was unable to bring them along with him. Once persons were produced and statement was recorded those facts should have been brought on record in assessment order itself and any doubt in his mind would have been classified after allowing opportunities to the assessee to cross examine,
11. That Hon'ble bench have ignored these important these important facts by deciding the revenue's appeal without looking into the paper book consisting of submissions pages 1 to 33 which includes page 21 and asked assessee to produce them once again. Once the statement has been recorded and persons were appeared confirming the investments made by various companies managed by them there cannot be any addition in the hands of assessee as rightly observed by the Hon'ble bench in subsequent paragraphs. While observing for 6 to 10 companies director to he accepted after verifying the fact of appearance made/ summons received.
12. That the Hon'ble Bench therefore may recall the order to decide this issue in the light of aforesaid vital facts which were ignored and issue was decided on the ITAT. It is submitted that it settled law that if the ITAT has failed to consider the facts as evident from the paper Book a Miscellaneous Application Would lies before the ITAT. Reliance can be placed on the decision of Golden Midways reported in 149 Taxman 17(Mumbai Tri).
13. It is submitted that in view of the above submission a mistake of fact regarding appreciation of material from the Paper Book is crept in the order of the Bench relating to departmental appeal.
14. It is next submitted that while deciding assessee's appeal the Hon'ble Bench, at page 22 recorded as under:
The CIT (A) as well as the AC used the statement of Shri Mahesh Garg given to Investigation wing as well as the affidavit against the assessee. Though the assessee was aspired with the statement of the Sh. Mahesh Garg, no opportunity was given to cross examine the Sh. Mahesh Garg. From the reply given by the assessee.
15. It is submitted that Hon'ble Bench has failed to consider that the statement of Sh Mahesh Garg was also recorded by the AO during the course of assessment proceedings wherein he had confirmed the lending of money to the assessee.
This statement was also placed at pages 46 to 55 o. the paper book along with other document relating to various companies managed by the Mahesh Garg from page 56 to 94.
16. In fact the AO while examining him during assessment proceedings did not ask any question relating to lending of money to assessee. However impliedly it has been approved by him that he had given money to the assessee in as much as he had admitted that he was operating those companies from whom the assessee had taken loan.
17. It is submitted that Bench also omitted to note the argument of the AR of the assessee relating to contradictory statements of Sh.Mahesh Garg. The AR of the assessee pointed out that if Mahesh Garg was changing his stand then department could have initiated criminal proceedings against him under the provisions of IPC or any other law.
18. It is submitted that the Hon'ble Bench has failed to consider the judicial pronouncements copies of the same was also enclosed in the Paper Book from page 95 to 116.
19. The applicant, therefore, in terms of the instant application u/s 254(2) of the Income Tax Act' 1961 seeks rectification of the mistake which is apparent from record in as much as the assessment made under section 143(3) of the Act was without jurisdiction and therefore, deserved to be quashed as such.
20. In view of the above stated facts, it is prayed that the order dated 30th June 2009 may kindly be recalled and appeal of the assessee be directed to be disposed off after granting an opportunity of being heard to the assessee-appellant."
4. In the course of hearing of this application, the learned counsel for the assessee has reiterated the averments and contentions made in the Miscellaneous Application.
5. The learned DR, on the other hand, submitted that whatever point has been raised by the assessee cannot be a subject matter of mistake rectifiable u/s 254(2) of the Act, and, therefore, same deserves to be rejected.
6. We have heard both the parties and have carefully gone through the material on record. It is an admitted position that in this miscellaneous application, we are concerned with the scope of Section 254(2) of the Act, which authorizes or permits the Tribunal to rectify any mistake apparent from record, and amend any order passed by it under sub section (1), if the mistake is brought to its notice by the assessee or the AO. It is well settled that scope of the proceedings u/s 254(2) of the Act is limited and is narrower than the proceedings for review. The power of rectification u/s 254(2) of the Act does not imply the power to recall or review the order. It is explained that the power to rectify a mistake is not equivalent to a power of review or recall the order sought to be rectified. Rectification is a species of the larger concept of review. It is significant to note that under the Act, there is no express power to the Tribunal to review. The power of review cannot be exercised under the garb of rectification. In the present case, after considering the facts and circumstances of the case, the Tribunal had taken a view that certain more enquiry or investigation is necessary in respect of certain credits and the matter was then restored back to the AO for his fresh adjudication with certain observations of the Tribunal. The assessee's contention that Shri Mahesh Goyal, Shri Vinod Garg and Shri Dinesh Goyal attended the office of the AO, and therefore, the credits in respect of certain companies controlled by them should have been accepted, cannot be said to be a matter covered by the expression 'mistake apparent from record'. In the present case, the genuineness of the transaction, creditworthiness of the creditors were need to be examined, and mere because Shri Mahesh Garg, Shri Vinod Garg and Shri Dinesh Garg attended the office of AO, that by itself is not sufficient to prove and establish the creditworthiness and genuineness of transaction of loan taken from various companies, and, therefore, the Tribunal found it fit that the matter should go back to the AO for fresh adjudication. The Tribunal has nowhere stated that the statement of Shri Mahesh Garg, Shri Vinod Garg and Shri Dinesh Garg recorded by the AO should not be taken into account while deciding the matter afresh. In order to decide the issue, the totality of the facts and circumstances of the case available on record are to be considered. It was the burden on the assessee to prove the identity of the creditors and their creditworthiness as well genuineness of the credit, and mere because any person controlling the company appeared before the AO and admitted of lending money to the assessee, that by itself, cannot be a basis to accept the creditworthiness and identify of the creditor and genuineness of the transaction unless all the creditors are individually appeared before the AO to explain the genuineness of the transaction, creditworthiness and identify of creditors. In our order, we have already given the direction to the AO to provide reasonable and adequate opportunity of being heard to the assessee including cross-
examination of any person in case the statement of that person is intended to be used against the assessee. With regard to the addition confirmed by the CIT(A), we have taken into account the statement of Shri Mahesh Garg made before Investigation Wing, where he categorically stated that the loan given by the different companies controlled by him were merely accommodation entry. We have also noted the fact that the AO examined Shri Mahesh Garg and his statement was recorded. However, the AO as well as CIT(A) has used the statement of Shri Mahesh Garg given to the Investigation Wing and as it is stated in his affidavit. Whether the matter should be decided on the basis of first statement of Shri Mahesh Garg given to the Investigation Wing or given in the affidavit or whether it should be decided on the basis of later improved statement, is a matter of deliberation and cannot be a matter falling within the ambit of expression "mistake apparent from record". We have clearly stated in our order that since statement of Shri Mahesh Garg given before the Investigation Wing and given in the affidavit has been used against the assessee without providing an opportunity of cross examination, the matter has been restored to the AO for further enquiry or investigation. The assessee in the Miscellaneous Application has relied upon merely statement of Shri Mahesh Garg given to the AO without taking into account his earlier statement given before the Investigation Wing as well as in the affidavit, which matter, in our considered view, cannot be a subject matter of proceedings u/s 254(2) of the Act. After considering the totality of the facts and circumstances of the case, and in the light of our finding and observation in the order, we are of the considered view that the various points raised by the assessee in the Miscellaneous Application does not come under the ambit of the expression "mistake apparent from record" so as to rectify the same u/s 254(2) of the Act. This application filed by the assessee is, thus, found to be not maintainable.
7. In the result, Miscellaneous Application filed by the assessee is dismissed.
8. This decision was pronounced in the Open Court on 31st May, 2010 immediately after the hearing was over.
(R.C. SHARMA) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31st May, 2010
Vijay
Copy to:
1. Applicant.
2. Respondent.
3. CIT
4. CIT(A)
5. DR Assistant Registrar