Income Tax Appellate Tribunal - Delhi
Paras Dyes & Chemicals, New Delhi vs Department Of Income Tax on 7 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "F" NEW DELHI)
BEFORE SHRI I.C. SUDHIR AND SHRI T.S. KAPOOR
ITA No.6706/Del/2013
Assessment year: 2004-05
Assistant CIT, vs. M/s. Paras Dyes & Chemicals,
Central Circle-17, B-82, Defence Colony,
New Delhi. New Delhi.
(PIN: AADFP3428J)
(Applicant) (Respondent)
Cross Objection No. 162/Del/2014
( In ITA No.6706/Del/2013 )
Assessment year: 2004-05
M/s. Paras Dyes & Chemicals, vs. Assistant CIT,
B-82, Defence Colony, Central Circle-17,
New Delhi. New Delhi.
(PIN: AADFP3428J)
(Applicant) (Respondent)
Revenue by: Shri Sunil Bajpai, CIT (DR)
Assessee by : Shri Ven Jain & Ms. Rano Jain, ARs
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER Since in the cross-objection, the assessee has raised legal issues, hence, we prefer to hear it first. The assessee has raised following objections against the first appellate order:
"1. On the facts and circumstances of the case, Learned CIT(Appeals) has erred both on facts & in law in rejecting the contention of the assessee that the proceedings initiated under sec.2
153A and order passed by the Assessing Officer under sec. 153A/143(3) is without jurisdiction.
2. On the facts and circumstances of the case, Learned CIT(Appeals) has erred both on facts & in law in rejecting the contention of the assessee that the order passed by the learned A.O. under sec. 153A is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eye of law.
3. On the facts and circumstances of the case, Learned CIT(Appeals) has erred both on facts & in law in rejecting the contention of the assessee that the proceedings initiated under sec. 153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search.
4. On the facts and circumstances of the case, Learned CIT(Appeals) has erred both on facts and in law in going ahead with the reassessment order and not closing the reassessment proceedings,, despite the fact that no incriminating material belonging to the assessee was found and has been subject matter of addition in any of the reassessment under sec. 153A for all the six years.
5. On the facts and circumstances of the case, Learned CIT(Appeals) has erred both on facts and in law in ignoring the fact that the additions made by the A.O. are otherwise untenable since the same is not arising from the any incriminating material seized during 3 the course of search and reassessment under sec. 153A/143(3) consequent to search is to be confined only to the incriminating material belonging to the assessee found during the course of the search".
2. The facts in brief are that the search and seizure operation under section 132 of the Income-tax Act, 1961 was conducted at the business/residential premises of the assessee on 10.03.2010. The Assessing Officer issued notice under section 153A of the Income-tax Act, 1961 to the assessee. In response to which return was filed and the assessment under section 153A read with section 143(3) of the Act was framed. Learned Assessing Officer made addition of Rs.9,83,49,684 (Rs.6,44,11,974 + 2,87,10,000 ) on account of unexplained cash credits against returned income of Rs.52,27,710. The assessee questioned the action of the Assessing Officer on the issue of validity of acquisition of jurisdiction under sec. 153A by the Assessing Officer as the assessment was made in absence of any incriminating material found during the course of search. The assessee also questioned the additions made by the Assessing Officer. The assessee could not succeed before the Learned CIT(Appeals) on the validity of assessment framed under sec. 153A of the Act questioned before the Learned 4 CIT(Appeals). The assessee has, however, got relief from the Learned CIT(Appeals) on the additions made by the Assessing Officer as the same has been deleted by the Learned CIT(Appeals) after detailed discussion. The assessee is thus in cross-objection questioning the validity of the first appellate order on the issue of validity of acquisition of jurisdiction by the Assessing Officer under sec. 153A of the Act. The revenue is in appeal before the ITAT questioning the action of the Learned CIT(Appeals) in deleting the additions made by the Assessing Officer.
3. In support of the objections raised, learned AR submitted that proceedings under sec. 153A of the Act were initiated by the Assessing Officer in the absence of any incriminating material belonging to the assessee being found during the course of search. He also submitted the copy of statements of Shri Rakesh Jain recorded during the course of search proceedings to support his contentions that nothing incriminating was there as well in the statement of Shri Rakesh Jain to justify the proceedings initiated under sec. 153A of the Act and the additions made in the assessment framed under the said provisions of section 153A read with section 143(3) of the Income-tax Act, 1961. Learned AR placed reliance on the following decisions:
5
1) Shri Kabul Chawla vs. ACIT, ITA No. 779/Del/2013 (A.Y. 2002-
03) dated 23.5.2014;
2) Shri V.K. Fiscal Services P. Ltd. vs. DCIT, ITA No.5460/Del/12 & Ors. (A.Ys. 2004-05 to 2009-10) dated November 2013.
3) ACIT vs. Asha Kataria ITA No. 3105/Del/2011 order dated 20.5.2013.
4) Kusum Gupta vs. DCIT, ITA No. 4873/Del/2009 order dated 28.3.2013.
5. DCIT vs. Vrindavan Farms Pvt. Ltd. ITA Nos. 3359, 3360, 3361/Del/2013 dated 6.6.2014.
6. DCIT vs. DCM Shriram Ind Ltd. ITA Nos. 1648-1653/Del/2013 dated 11.10.2013 (Delhi Tri.);
7. V.K. Fiscal Services P. Ltd. vs. DCIT ITA Nos. 5460- 5465/Del/2012 dated 27.11.2013.
8. Jakson Engineering Ltd. vs. ACIT ITA No. 349-350/Del/13 dated 11.4.2014.
9. Dream Buildcon Pvt. Ltd. vs. DCIT ITA No. 5392/Del/2012;
10. Bharati Vidyapeeth Medical Foundation vs. ACIT ITA No. 36, 37, 39/2012 dated 10.4.2014 (Bom.);
11. ACIT vs. Prithvi Sound Products Co. Pvt. Ltd. ITA No. 3422- 6/Del/2011 dated 17.4.2014 (Delhi Tri.).
12. A1 Cargo Global Logistics Ltd. 23 Taxman.com 103(Mum)(S.B).
4. Learned CIT(DR) on the other hand tried to justify the first appellate order on the issue. He submitted that the plain reading of the statute is required to be gone through and in support he placed reliance on the following decisions:
i) 77 DTR 140 (AP) Gopal Lal Bhadrupa & Ors. vs. DCIT;
ii) Orissa State Warehousing Corpn. & another vs. CIT - 237 ITR 589 (S.C) 6
5. Learned CIT(DR) further submitted that there is no requirement of finding of incriminating material during the course of the search proceedings to initiate proceedings under sec. 153A of the Act. He contended that technicality of the proceedings should be avoided to make the just assessment as it has been an established proposition of the law. Learned CIT(DR) also placed reliance on the following decisions in this regard:
i) Madugula Veena vs. DIT & Ors., Writ Petition (C) 7656/2012, date of decision 14.12.2012 (Delhi High Court);
ii) CIT vs. Chetan Dass Laxman Dass ITA No. 2045 & /Del/2010, decision dated 07.08.2012 (D.HC).
6. Learned CIT(DR) also furnished the copy of the appraisal report with the submissions that additions are based on incriminating material as in the appraisal report, list of documents seized as well as hard disc of Laptop etc., ledger account were seized. In this regard, he referred page Nos. 7 to 15, page Nos. 34 to 36, 49 to 67 of the appraisal report.
7. In the rejoinder, learned AR with the assistance of appraisal report and the page numbers of the appraisal report referred by the Learned DR submitted that there was no incriminating material and only the abated assessment can be disturbed if incriminating document is found during the 7 course of search. He pointed out that in the assessment order, the Assessing Officer does not talk about any incriminating documents found during the course of the search. He submitted further that the event relating to this year can only be added in this year. Learned AR submitted further that assessee did not block the inquiries but provided all the necessary documents for verification of the Assessing Officer. Now, it has been settled by the decision of several decisions of the co-ordinate benches of the ITAT as well as special bench's decisions of the ITAT that only those assessments which are pending on the date of commencement of search would be abated under the provisions of sec. 153A of the Act and if on the date of commencement of search, the assessment has already reached its finality, thus such assessment will not be abated in absence of incriminating material found during the course of search. In the present case before us, undisputedly the assessment had reached its finality in absence of issuance of notice under sec. 143(2) of the Act within the prescribed time limit from the end of the month in which the return of income was filed and the return of income was processed under sec. 143(1)(a) of the Act. There is also no dispute that during the course of search, no incriminating material was found and seized as it is evident from the assessment order as nothing has been mentioned by 8 the Assessing Officer about the incriminating material, if any, found during the course of search on the basis of which he has made additions in question.
Under, almost similar facts in the decisions relied upon by the learned AR, an identical issue has been decided in favour of the assessee.
8. Considering the above submissions and having gone through the decisions relied upon, we find that the special bench of the Tribunal in the case of All Cargo Global Logistics Ltd. (supra) vide para No. 58 of its order has answered the issue as under :-
"58. Thus, question No. 1 before us is answered as under :-
(a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment year separately :
(b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search."
9. The issue raised before the special bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 9
10. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla vs. ACIT, ITA No. 783/D/2013 (asstt. year 2008-09) and others vide order dated 23.5.2014 has expressed the similar view. It has also discussed the decision of Hon'ble Jurisdictional Delhi High Court in the case of Anil Kumar Bhatia (supra) while deciding the issue. The relevant para No. 8 & 9 in this regard is being reproduced as under :-
"8. We are unable to accept the contention advanced on behalf of the Revenue for the reason that if both the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A( 1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating 10 material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon 'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the . following observations of the Hon'ble High Court :-
"20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search."
9. The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of 11 search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A( 1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before use.
"
11. The issue raised in the cross-objection preferred by the assessee is thus decided in favour of the assessee, with this finding that Learned CIT(Appeals) was not justified in upholding the validity of the proceedings 12 initiated under sec. 153A of the Act and the assessment framed under sec. 153A read with section 143(3) in furtherance thereto. We, thus, while setting aside orders of the authorities below in this regard hold that the initiation of proceedings under sec. 153A of the Act and framing of assessment under sec. 153A read with sec. 143(3) in furtherance thereto in absence of any incriminating material found during the course of search were not valid and in consequence the assessment is quashed. The related objection Nos. 1 to 5 of the C.O. on the issue are thus allowed.
12. The cross-objection is accordingly allowed.
ITA No. 6706/Del/2013:
13. Both the parties also insisted for disposal of the appeal preferred by the revenue which is on the merit of the addition deleted by the Learned CIT(Appeals).
14. The revenue has questioned first appellate order on the following grounds:
"1. The Learned CIT(Appeals) erred in law and on facts in deleting the addition of Rs.6,44,11,974 made on account of unexplained cash credits.13
2. The Learned CIT(Appeals) erred in law and on facts in deleting the addition of Rs.2,87,10,000 made on account of unexplained cash credits."
15. The facts in brief are that the Assessing Officer had made addition of Rs.6,24,94,470 received from the creditor M/s. Jayna Closure, Rs.19,17,500 from M/s. Jayco Pipes Ltd. and Rs.2,87,10,000 from M/s. Quasar India Fincap Pvt. Ltd. as unexplained under sec. 68 of the Act on the basis that assessee has failed to explain the identity, creditworthiness and genuineness and that the loan creditors were not produced for verification before the A.O. Before Learned CIT(Appeals) the assessee also, filed some additional evidence like audited balance sheet of various years, balance sheet of creditors for various years, ledger account of creditors for various years, bank statement of creditors, income-tax returns of the creditors, invoices raised by the assessee and reconciliation of accounts of assessee and creditors with request to admit them on the basis of that proper opportunity for the same was not given by the Assessing Officer to the assessee due to paucity of time. Learned CIT(Appeals) called for the remand report from the Assessing Officer who objected the admission of additional evidence on the ground that sufficient opportunities were given during the assessment 14 proceedings. Learned CIT(Appeals) after considering the remand report noted that the Assessing Officer had given the show-cause notice in respect of the creditors appearing in the books for the first time, on 14.12.2011 and had given just two days to the assessee to give detailed submissions/evidence to prove the genuineness of the transaction and after submission of its reply, the Assessing Officer did not raise any further query. Learned CIT(Appeals) accordingly noted that the time of two days notice given to the assessee was too short. He accordingly allowed the additional evidences and after discussing the cases of the respective parties in detail has deleted the additions made by the Assessing Officer against which the revenue is in appeal raising the above grounds.
16. Ground No.1: The facts in brief are that Assessing Officer made an addition of Rs.6,44,11,974 as unexplained income under sec. 68 of the Income-tax Act, 1961. The amount in addition comprises of two figures, viz.
(i) M/s. Jayco Closure Rs.6,24,94,474; and (ii) M/s. Jayco Pipes Ltd.
Rs.19,17,500. The reasons for the addition shown by the Assessing Officer remained that the above loan creditors were not produced before him for verification. The assessee had merely filed a photocopy titled as confirmation-cum-no dues certificate dated 31.10.2007. Learned Assessing 15 Officer thus came to the conclusion that the assessee had not been able to prove the identity, creditworthiness of the above loan creditors and genuineness of the loan. The assessee questioned the action of the Assessing Officer in this regard before the Learned First Appellate Authority and the Learned CIT(Appeals) being satisfied with the submissions of the assessee has deleted the addition which has been questioned by the revenue.
17. In support of the ground, Learned CIT(DR) has basically placed reliance on the assessment order. Learned CIT(DR) referred contents of page Nos. 2 & 3 of the assessment order. He submitted that as per the assessment order M/s. Jayco Closure, proprietaryship concern of M/s. Jayco Pipes Ltd. which is also a company owned by the family and Smt. Santosh Bala Jain is a director in this company. The above loans received from the said two persons were credited in the account of Shenectady Herdicia Ltd. ( in short SH Ltd. ) in the ledger of the assessee firm which continued to remain there up to 31.3.2006. The assessee stated that this amount was independently so. On 01.04.2006, this amount was transferred in the ledger account of Shri Rakesh Kumar (M/s. Jayco Proprietaryship firm ) on the same day i.e. 01.04.2006, this liability was written off by the firm M/s. Paras Dyes & Chemicals (the assessee) and the amount was credited in the accounts of 16 partners in the firm, Shri Parvesh Jain and Shri sarthan Jain (Rs.3,86,47,184 and Rs.2,57,64,789 respectively ). Learned CIT(DR) pointed out that the assessee had not paid the credited amount which castes doubt on the genuineness of transaction. The show-cause notice dated 14.12.2011 was accordingly issued to the assessee intimating that on examination of details during proceedings, this transaction needs explanation and in case the assessee claims this to be genuine loan then Shri Rakesh Kumar Jain and the principal officer of Jayco Pipes Ltd. may be produced for verification about the genuineness of this loan. The assessee failed to give any satisfactory explanation. The above loan creditors were not produced for verification. Instead assessee, merely filed a photocopy titled as confirmation-cum-no dues certificate dated 31.10.2007. Both these certificates have been signed by Shri Santosh Bala Jain, one as a director of M/s. Jayco Pipes Ltd. and the other as authorized signatory for and on behalf of M/s. Jayco Closure. Thus, it is very much apparent that the assessee had not been able to prove the identity, creditworthiness of the above loan creditors and the genuineness of the loan. Learned CIT(DR) submitted that the fact of full waiver at a subsequent date and credit in the partners on capital account gives rise to the doubt about the genuineness of these loans. Without appreciating these 17 material aspects, Learned CIT(Appeals) has deleted the addition. Learned CIT(Appeals) had given his own colour to the transaction and has even accepted the contradictory submissions of the assessee before him to the letter dated 22.12.2011 filed by the assessee before the Assessing Officer. In this regard, Learned CIT(Appeals) referred letter dated 22.12.2011 written on behalf of the assessee to the Assessing Officer during assessment proceedings under sec. 143(2)/153A of the Act mentioning that the funds received amounting to Rs.6,24,94,470 from Mrs. Jaina during the financial year 2003-04 was wrongly credited to S.H. Ltd.
18. Learned AR on the other hand submitted that before the Assessing Officer, it was brought on record by the assessee on 14.12.2011 that the mistake of crediting this loan amount taken from the above two parties in the account of S.H. Ltd. had occurred and after making the necessary corrections, this amount was transferred in the account of above two persons on 01.01.2006 though the details filed with the return of income showed credit in the account of partners Shri Parvesh Jain and Sarthak Jain by an amount of Rs.3,86,47,184 and Rs.2,57,64,789 respectively after waiver of the loans. It was pointed out and explained before the Assessing Officer that the list of loan creditors filed with the return of income for the earlier years 18 did not reflect loan outstanding in the name of the above two loan creditors. It was explained that it might be so at that time this amount was credited in the written account. In the confirmation letters filed by the assessee, the creditors have confirmed that there was no dues whatsoever in any manner from the assessee. With this further certification that old receivable stand settled and accounts remain squared up in all respect as on date, he tried to justify first appellate order on the issue. He submitted that the Learned CIT(Appeals) has discussed the issue in detail at page Nos. 9 to 20 of the first appellate order and on page Nos.21 & 22, he has given his findings. Learned CIT(Appeals) has also called for remand report from the Assessing Officer.
19. Having gone through the orders of the authorities below, we find that the Assessing Officer had made addition in question under sec. 68 of the Income-tax Act, 1961 mainly on the basis that he was having doubts about the genuineness of the transaction, as on the same date when the amount was transferred in the ledger account of Shri Rakesh Kumar (Jayna Proprietaryship Firm), this liability was written off by the assessee firm and the amount was credited in the account of partners in the firm, Shri Parvesh Jain & Sarthak Jain and further that the loan creditors were not produced 19 for verification. Learned Assessing Officer was thus of the view that identity, creditworthiness of the above loan creditors and the genuineness of the loan were not established by the assessee. He accordingly added the amount of Rs.6,44,11,974 to the total income of the assessee as unexplained cash credits under sec. 68 of the Act. Learned Assessing Officer was not satisfied with the explanation of the assessee made to him vide letter dated 14.12.2011 and 22.12.2012 and he alleged that mere filing of the confirmation-cum-no dues certificate dated 31.10.2007 of the creditors is not sufficient. Learned CIT(Appeals) meeting out the objections raised by the Assessing Officer after calling the remand report of the Assessing Officer and discussing the assessee in detail has come to the following conclusion vide paragraph No. 9.4 and 9.5 of the first appellate order, reproduced hereunder for a ready reference:
"9.4 M/s. Jayna Closure - Prop. Rakesh Kumar (Rs.6,24,94,470) I have gone through the assessment order, the written submissions, the remand report and the rejoinder filed by the appellant on the remand report and have perused the paper book filed by the appellant in support of its contention.
On going through the assessment order, it is noticed that the A.O. has made the addition of Rs.6,24,94,470 as unexplained credit in 20 the year under consideration in the name of Nayna Closure Prop. Rakesh Kumar. The allegation of the A.O. is that the appellant has failed to explain he creditworthiness, identity etc. under sec. 68 of the Income-tax Act, 1961 and hence the addition is to be made. The appellant on the other hand has filed evidences which shows that there is no actual credit per se, of the said amount received during the yaer under consideration from Jayna Closure Prop. Rakesh Kumar, but the same is mere journal entry passed in assessment year 2006-07.
From the facts and evidences available on record it is seen that the appellant has been regularly dealing with a company, named Schenectady Herdillia Ltd. to whom they are selling dyes and chemicals regularly and it has a running account with the company. In support of its contention the appellant has filed its balance sheet as on 31st March 2003 along with list of the debtors Rs.22,43,71,351.91 (paper book pages 86-101). This list of debtors includes a sum of Rs.2,24,29,046.71 due from Schenectady Herdillia Ltd. The appellant has also filed copy of account of the said company starting from financial year 2002-03 to financial year 2006-07.
On going through the above details filed by the appellant with respect to transactions of the appellant with Schenectady Herdillia Ltd., following facts emerge:
(i) In assessment year 2004-05 i.e. the year under consideration, the appellant had made sales to Schenectady Herdillia Learned. as part of its regular business activity for Rs.29,67,31,291 and against which 21 the appellant received Rs.28,45,14,154. However, in assessment year 2006-07 the appellant made a journal entry of Rs.6,24,94,474 comprising of following cheques which were already shown as part of the receipts of Rs.28,45,14,154 in assessment year 2004-05, by debiting the account of Schenectady Herdillia Ltd. and crediting he account of Schenectady Herdillia Ltd. (Current Account):
S.No. Cheque No. Amount (Rs.)
1 964042 40,74,761
2 966508 59,62,846
3 966706 47,08,804
4 966707 48,52,512
5 966800 71,96,448
6 969635 31,33,305
7 969644 39,00,983
8 970343 51,73,603
9 970630 45,57284
10 971393 61,59,144
11 972163 30,39,525
12 975897 67,35,259
Total 6,24,94,474
(ii) In assessment year 2006-07 the following journal entry was passed:
ENTRY 1
Schenectady Herdillia Ltd. A/C (Dr.)Rs.6,24,94,474
To Schenectady Herdillia Ltd. Current Account A/c (Cr.)Rs.6,24,94,474
(iii) In assessment year 2007-08 the following journal entry was passed:22
Entry 2 Schenectady Herdillia Ltd. Current Account A/c. (Dr.) Rs.6,24,94,474 To Jayna Closure Prop. Rakesh Kumar (Cr.) Rs.6,24,94,494 I have perused the copy of account of the appellant in the books of Schenectady Herdillia LTd. for the assessment year 2004-05 which also confirms that all these payments comprising of Rs.6,24,94,474 have duly been debited to the appellant's account. I find that there is no actual credit from Jayna Closure Prop. Rakesh Kumar amounting to Rs.6,24,94,474 in the books of the appellant during the year under consideration. Therefore, with these facts available, I fail to understand how in the year under consideration the A.O. can come to the conclusion that the appellant has received Rs.6,24,94,494 from Jayna Closure Prop. Rakesh Kumar when actually no such amount has been received from it.
The account statements submitted by the appellant support the above facts explained by the appellant. The identity and genuineness of the transactions with Schenectady Herdillia Ltd. has not been questioned by the A.O. also. Hence in view of these facts the contention of the appellant is correct that no addition can be made on account of unexplained credit of Rs.6,24,94,474 as has been made by the A.O. in the year under consideration.
In the remand report the A.O. has raised the issue that the appellant has not been able to establish that how an amount due to a limited company being a business associate of the appellant has been converted in the name of Jayna Closure. The A.O. has further stated 23 that the appellant has failed to provide any reason and the documents for transferring this amount in the name of Jayna Closure. In my humble view, this contention of the A.O. cannot be the sole ground for justifying an addition under sec. 68 of the Income-tax Act, 1961 as unexplained credit unless it is backed by any credible evidence that the said amount has come from the coffers of M/s. Jayna Closures. The appellant has filed copy of the account and the bank statement and all relevant supporting documents in respect of its transactions with Schenectady Herdillia Ltd. and during the remand proceedings and the A.O. has not been able to dispute these transactions and the entries as stated in the statement of account, sales invoices, bank statement etc. In my view, apparently the above stated accounting entries have been resorted to, as a sort of window dressing so as to put rosy picture its financial position, by increasing the debtors on one hand and correspondingly the capital on the other hand, probably to obtain enhanced credit facilities. There is no actual credit in the books of the appellant on account Jayna Closure Prop. Rakesh Kumar as stated by the A.O., whereas the same was accounting adjustment passed in the account of Schenectady Herdillia Ltd.
9.5 Jayco Pipes Ltd. (Rs.19,17,500) I have gone through the submission made by the appellant in this regard. On going through the same I notice that this amount was outstanding in the assessment year 2001-02 also. This is a carried 24 forward balance in the current year from the last many years. The assessment for the assessment year 2001-02 was completed under sec.
143(3) of the Income-tax Act, 1961. This balance is a continuing balance and the appellant has also filed a confirmation from Jayco Pipes Ltd. placed in paper book page 245 which gives complete name and address and telephone number of the creditor. The A.O. has made this addition even without verification of the facts by wrongly assuming to be a credit of the year consideration. In the remand report the A.O. has not been able to rebut and/or controvert the submission made by the appellant and the evidences filed in support thereof. Accordingly, since in the year under consideration no credit have been received from Jayco Pipes, therefore, in any case no addition can be made in the year under consideration. Accordingly, A.O. is directed to delete the addition of Rs.19,17,500".
20. From the perusal of the first appellate order on the issue, we note that the findings of the Learned CIT(Appeals) are supported with the evidence also filed by the assessee before the Tribunal in the shape of paper book. Based on these documents, the Learned CIT(Appeals) has come to this conclusion that there is no actual credit in the books of the assessee on account of M/s. Jayna Closure, Proprietor Rakesh Kumar as stated by the Assessing Officer whereas the same was accounting adjustment passed in the accounts of S.H. Ltd. and that since the identity of S.H. Ltd. is not in dispute, the source of payment is also not in dispute as well as the transaction entered into by the assessee with S.H. Ltd. are also not in 25 dispute. These material finding of the Learned CIT (Appeals) have not been successfully rebutted by the Learned D.R. We are thus having no reason to interfere with the first appellate order which, in our view, is a comprehensive and reasoned order. We, thus, uphold the action of the Learned CIT(Appeals) in deleting the addition of Rs.6,24,94,474 made by the Assessing Officer under sec. 68 of the Income-tax Act, 1961 in this regard as justified.
21. The revenue has also not been able to rebut the finding of the Learned CIT(Appeals) that the amount of Rs.19,17,500 was outstanding in the assessment year 2001-02 also, which was a carried forward balance in the current year from the last many years. The assessment for the assessment year 2001-02 was completed under sec. 143(3) of the Act. The balance was a continuing balance and the assessee had also filed confirmation from M/s. Jayco Pipe Ltd. giving complete name and address and telephone numbers of the creditors. In the remand report also, the Assessing Officer was not able to rebut or controvert the submissions made by the assessee and the evidence filed in support thereof. We are thus of the view that Learned CIT(Appeals) has rightly deleted the addition of Rs.19,17,500 made by the Assessing Officer under sec. 68 of the Income-tax Act, 1961. The same is upheld. The ground No.1 is accordingly rejected.
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22. In Ground No.2: the facts in brief that during the year, the assessee raised another loan of Rs.2,87,10,000 from Quasor India Fincap Pvt. Ltd. (in short QIFP Ltd.) 419-International Trade Tower, Nehru Place, New Delhi. The Assessing Officer asked the assessee to produce the owner of the said creditor company Shri Uday Dutt on 21.10.2011. The assessee could not produce him. The Assessing Officer conducted inquiry through the Inspector of the Circle from the given address of the company, who reported that this company was presently not running from the said address. The assessee was again given opportunity to produce Shri Uday Dutt for verification but the assessee again failed to produce him. On 12.12.2011, the assessee stated that they want to produce Shri Udai Dutt for verification on 18.12.2011 but the assessee again failed to produce him. The Assessing Officer observed that the assessee could not produce the loan creditor for verification about the loan and the waiver of substantial portion of the loan. He accordingly added the amount of Rs.2,87,10,000 and the total income of the assessee as unexplained cash credits under sec. 68 of the Income-tax Act, 1961 on the basis that the assessee was not able to prove the identity, creditworthiness of the above loan creditor and the genuineness of the loan. Learned CIT(Appeals) has, however, deleted the addition.
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23. In support of the ground, Learned DR has basically placed reliance on the assessment order. In this regard, he referred the contents of page No.3 of the assessment order. He submitted that though the assessee was in touch with the creditor but still the creditor was not produced before the Assessing Officer for verification identity was thus not established by the assessee nor any relevant evidence was filed by the assessee in support of the genuineness of the claim and further that substantial credit has been written off which also raised doubts about the genuineness of the transaction. In this regard, he placed reliance on the decision of Hon'ble Delhi High Court in the case of NAF Academy Pvt. Ltd. 2013 , TIOL.1017-XE-Del-IT.
24. Learned AR on the other hand placed reliance on the first appellate order. He also referred copies of several documents filed in the shape of paper book on behalf of the assessee in support of its claim before the Tribunal as well. He also referred the following case laws relied upon by him;
a) Addl. CIT Bihar vs. Hanuman Agarwal (1985) 151 ITR 151 (Patna);
b) Jalan Timber vs. CIT (1997) 223 ITR 11 (Gauhati High Court);
c) Neeru Devi Kothari vs. ITO (2001) 116 Taxman 224 (Jodhpur); 28
d) Sarogi Credit Corporation vs. CIT (1976) 103 ITR 344 (Patna HC);
e) Nemi Chand Kothari vs. CIT (2004) 264 ITR 254 (Gau.)
f) S. Hastimal vs. CIT 49 ITR 272;
g) CIT vs. K.S. Kanan Kunhi 87 ITR 3958;
h) CIT vs. Pithampur Conzima (P) Ltd. (2000) 244 ITR 442 (MP
High Court);
i) Tolaram Daga's case (1996) 59 ITR 632 (Assam); &
j) CIT vs. Mehrotra Brothers 270 ITR 157 (MP).
25. Having gone through the orders of the authorities below, we find that the revenue has not been able to rebut some material finding of facts by the Learned CIT(Appeals) before the ITAT. Learned CIT(Appeals) while giving relief to the assessee has noted that balance sheet of Quasar India Fincap Pvt. Ltd. i.e. the creditor (which was earlier known as Anita Leasing Pvt. Ltd. ) for the year 31.3.2002, 2003, 2004, 2005 & 2006 shows the net worth of the creditor as on 31.3.2004 was more than Rs. 10 crores. Learned CIT(Appeals) has further noted that the amount standing in the name of the assessee firm was being shown in the balance sheet of each of the year of the creditor company. The creditor has been filing its ITR (income-tax return) and these returns have been accepted. Learned CIT(Appeals) on going 29 through the account of the creditor has also noticed that the said account was a running account since earlier years. In the preceding year in the name of the creditor was Rs.4,97,43,593. This amount got increased to Rs.7,95,572 in the year under consideration. This includes interest of Rs.48,45,445 credited during the year and taxed deducted thereto was Rs.9,43,316. The net addition during the year was thus Rs.2,87,10,000 added by the Assessing Officer as an unexplained credits under sec. 68 of the Income-tax Act, 1961. For ready reference, Para No. 9.6 of the first appellate order is being reproduced hereunder:
"9.6 Quasar India Fincap Pvt. Ltd. (Rs.2,87,10,000) I have gone through submission made by the appellant and also the evidence filed in support thereof. I have perused the assessment order and the remand report submitted by the A.O. On going through the copy of account of Quasar India Fincap Pvt. Ltd., I notice that this account is a running account since earlier year. The name of the creditor earlier was Anila Leasing Pvt. Ltd. and the balance as on 31st March, 2003 i.e. in preceding year in the name of this company was Rs.4,97,43,,593. This amount got increased of Rs.48,45,445 credited during the year and tax deducted thereon was Rs.9.43,316. The net addition during the year thus was Rs.2,87,10,000 which has been added back by the A.O. as unexplained credit by invoking provision of sec. 68 of the Act.30
I have also perused the balance sheet of the Quassar India Fincap Pvt. Ltd. for the year 31st March, 2002, 2003, 2004, 2005 and 2006 and it is seen that the net worth of the Quasar India Fincap Pvt. Ltd. as on 31st March 2004 was more than Rs.10 crores. The amount standing in the name of the appellant firm is being shown in the balance sheet of each of the year of the creditor company. Further Quasar India Fincap P. Ltd. has been filing its income-tax return and these returns have been accepted and the assessment orders are placed in the paper book. No adverse inference has been drawn about these transactions and the financials of the creditor company by the tax authorities. Thus, it cannot be said that the creditor is not in existence. The appellant firm has filed sufficient evidences in support of its contention regarding the credit worthiness and genuineness of the transaction. The payments have been received through banking channel and the bank statement filed in support also in support of then contention of the appellant.
There is nothing incrimination material brought on record by the Assessing Officer. It is also not a case of the A.O. that anything adverse or incriminating material was found regarding this credit during the course of the search. There is no denial from any quarter nor any adverse statement from any person about these credits. The appellant firm has discharged its onus by filing necessary evidences.31
The A.O. in the remand report has not rebutted or contradicted any of these evidences submitted by the appellant. The documents available on record viz. Balance Sheet, income-tax assessment order establishes the identity creditworthiness and genuineness of the transaction and as such I hold that the A.O's contention that the assessee has not discharged the burden placed upon him under sec. 68 of the Act is not correct. Hence, in view of this the addition of Rs.2,87,10,000 made by the A.O. deserved to be deleted".
26. On the basis of above undisputed material facts noted by the Learned CIT(Appeals), we are of the view that the Learned CIT(Appeals) has rightly come to the conclusion that the creditor was very much in existence and the assessee had filed sufficient evidence to support its contention regarding the creditworthiness and genuineness of the transaction as the payments have been received through banking channel and the bank statement filed also supports the case of the assessee. In view of these unrebutted findings of the Learned CIT(Appeals), we are of the view that the Learned CIT(Appeals) was justified in deleting the addition of Rs.2,87,10,000 in question made by the Assessing Officer under sec. 68 of the Income-tax Act, 1961. The first appellate order in this regard is thus upheld. Ground No.2 is accordingly rejected.
27. In the result, the appeal is dismissed.
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28. Consequently, the cross-objection preferred by the assessee is allowed and the appeal preferred by the revenue is dismissed.
29. Order pronounced in the open court on 07.08.2014.
Sd/- Sd/-
( T.S. KAPOOR ) ( I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 07/08/2014
Mohan Lal
Copy forwarded to:
1. Applicant
2. Respondent
3. CIT
4. CIT(A)
5. DR:ITAT
ASSISTANT REGISTRAR