Income Tax Appellate Tribunal - Amritsar
Tirath Automobiles vs Income Tax Officer on 12 November, 2001
Equivalent citations: (2003)81TTJ(ASR)700
ORDER
N.K. Saini, A.M.
1. These are the appeals filed by the assessee against the separate orders of the CIT(A) each dt. 30th June, 1993, for the asst. yrs. 1988-89 & 1989-90. respectively. In both the appeals, the grounds raised are similar, having identical facts and the appeals were heard together, so, these are being disposed of by this consolidated order for the sake of convenience.
2. ITA No. 924/Asr/1993 : In this appeal, the following grounds have been taken by the assessee :
"1. That the learned CIT(A) has grossly erred in law and fact in upholding the addition of Rs. 53,979 on account of draft duly entered into books of account. The same has been wrongly upheld as unaccounted investment.
2. That the draft of Rs. 62,193 alleged to have been purchased on 10th Feb., 1988, was not purchased by the assessee and the addition has been made without any lawful basis.
3. That the facts and circumstances of the case and explanation given has not been properly considered and judicially appreciated. The addition of Rs. 62,193 was made without any evidence on record and the same was wrongly upheld. In any case the appellant was not confronted with any material on record in respect of that addition."
3. The relevant facts of the issues involved in brief are that the AO during the assessment proceedings noticed that the assessee purchased a draft of Rs. 53,979 on 22nd May, 1987. But there was no entry on that date in the books of account. The explanation of the assessee that the draft was entered on 23rd, May, 1987 when the assessee actually received the supply, was not accepted by the AO. It was also pleaded that on both the dates i.e., on 22nd May, 1987, and 23rd May, 1987, there was sufficient cash in hand in the books of the assessee which was evident from the cash book. However, the AO found that the explanation of the assessee was not convincing, therefore, he made the addition of Rs. 53,979.
3.1. It was further noticed by the AO that the assessee purchased another draft amounting to Rs. 62,193 on 10th Feb., 1988, and the same was not reflected in the books of accounts, that during the assessment proceedings, the assessee vide its reply dt. 19th Jan., 1993, stated before the AO as under :
"As regards the draft of Rs. 53,979 purchased on 10th Feb., 1988, it is submitted that I shall submit the reply within a day or two as the matter being very old needs proper perusal of the books."
The AO mentioned in his assessment order dt. 21st Jan., 1993, that the impounded books of account were shown to the assessee for careful perusal and submission of explanation, if any, and the case was adjourned to 21st Jan., 1993, on the request of the assessee, however, nobody appeared nor any explanation was received. Therefore, the addition of Rs. 62,193 was made as unexplained investment in the purchase of draft.
4. In the first appeal before the learned CIT(A), the same arguments were reiterated and reliance was also placed on the decision of the Tribunal, Chandigarh Bench in the case of the Sheonath Red Nanak Chand's (1974) 36 Taxation (6) 60 and the decision of the Hon'ble Punjab & Haryana High Court in the case of Shivcharan Dass v. CIT. The learned CIT(A) did not accept the plea that the entry could not be made on the date of purchase due to clerical error and also observed that the books of accounts were the primary documents and the entries made therein could not be ignored and the benefit could not be given to the assessee, regarding purchase of draft without there being any relevant entry in that regard. The learned CIT(A) did not accept the contention of the assessee that it was a case of mere irregularity. The learned CIT(A) observed in his order that there was sufficient gap between purchase of two drafts and since the purchase of draft of Rs. 53,979.65 was duly debited to the books of account on 23rd May, 1987, the amount was available outside the books of account for reinvestment on 10th Feb., 1988. The peak of investment, thus, worked out to Rs. 62,193. The learned CIT(A) further observed that the assessee had spent another amount of Rs. 63 as expenses for purchase of draft. Accordingly, he confirmed the addition of Rs. 62,256 (Rs. 62,193 + Rs. 63) considering the same as investment outside the books of account.
5. Being aggrieved, the assessee is in appeal before the Tribunal. The learned authorised representative submitted before us that there was no justification in making the addition by the AO and subsequently in confirming the peak addition by the learned CIT(A). It was further argued that due to oversight and clerical error, the draft purchased on 22nd May, 1987 was entered on 23rd May, 1987 on the basis of supply received by the assessee. It was also submitted that on 22nd May, 1987, the assessee was having opening cash in hand at Rs. 90,599,64 and the closing cash in hand was Rs. 94,199.35, similarly on 23rd May, 1987, the opening cash in hand was Rs. 94,199.35 whereas the closing cash in hand was Rs. 81,022.35. Accordingly, it was submitted that sufficient cash was available with the assessee on both the dates i.e., date of purchase of the draft and date when the draft was entered in the books of account. It was further stated that the books maintained by the assessee were accepted by the AO and no other discrepancy was pointed out. So there was no justification in making the addition of Rs. 53,979.
Regarding purchase of draft of Rs. 62,193 on 10th Feb., 1988, it was submitted that the assessee did not purchase the draft on that date and the material on record was not confronted to the assessee as the books of account were impounded by the Department so, there was no justification in making the addition without confronting the particulars to the assessee. The learned counsel for the assessee also relied on the decision of this Bench of the Tribunal in the case of Ashok Trading Co. v. ITO for the asst. yr. 1990-91, vide order dt. 29th June, 2001 passed in ITA No, 880/Asr/1993.
6. In his rival submissions, the learned Departmental Representative strongly supported the orders of the authorities below and also submitted that the drafts purchased by the assessee were not entered on the same date in the books of account. So the AO rightly made the addition as the investment in purchasing drafts was made by the assessee outside the books of account.
7. We have heard both the parties and carefully gone through the material available on the records. As regards the purchase of draft of Rs. 53,979 on 22nd May, 1987 in concerned, it is noticed that the assessee was having sufficient cash on that date. On perusing copies of the cash book placed on the record, it is noticed that the opening cash in hand on 22nd May, 1987 and 23rd May, 1987 was Rs. 90,599.64 and Rs. 94.199.35 respectively. Similarly, the closing balance of the cash in hand on the said dates was Rs. 94,199.35 and Rs. 81,022.35, respectively. Which shows that the assessee was having sufficient cash in hand to purchase the draft. A similar issue came before us in the case of Ashok Trading Co. v. ITO in ITA No. 880/Asr/1993 for the asst, yr. 1990-91, dt. 29th June, 2001 wherein vide para. 6, it has been held that :
"6. After considering the rival submissions, we are of the view that the impugned addition deserves to be deleted, Section 69 reads as under :
'69. Where in the financial year immediately preceding the assessment year the assessee has made investment which are not recorded in the books of accounts, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the AO satisfactorily, the value of the investments may be deemed to be the income of the assessee of such financial year.' In the instant case, it is apparent from the records that the assessee had purchased a bank draft of Rs. 60,000 on 28th Aug., 1989, which was entered in the books of account on 31st Aug., 1989. It was also explained by the assessee that the cash available on 28th Aug., 1989 was to the tune of Rs. 1,06,572 and out of this amount, the draft, in question, was purchased. It is true that the above contentions of the assessee have not been controverted by the Revenue. In fact, there is no material on record to show that the explanation given by the assessee was not plausible. It is not a case of the Revenue that the investment made by the assessee on purchase of draft was not found recorded in the books of accounts maintained by the assessee. In fact, the assessee had made the entries in the books of accounts on 31st Aug., 1989. It was explained by the assessee that the entry in the books of accounts was made on 31st Aug., 1989 because on the said date, the draft was sent to the party. Shri Salil Kapoor, advocate, the learned counsel for the assessee, submitted that entry could not be made on the date of purchase of draft due to clerical error.
7. Considering the above, we are of the view that the AO as well as the learned CIT(A) was not justified in rejecting the explanation of the assessee. We accordingly delete the impugned addition."
We are of the considered view that the facts of the present case are identical with the facts of Ashok Trading Co., v. ITO (supra). So by respectfully following our earlier order dt. 29th June, 2001, we direct the AO to delete the addition, on account of purchase of draft amounting to Rs. 53,979.
As regards another addition of Rs. 62,193 made by the AO is concerned, it is noticed that the assessee sought time to explain the matter on 19th Jan., 1993 and the AO framed assessment on 22nd Jan., 1993. It appears that proper opportunity was not afforded to explain its case. It is also noticed that the learned CIT(A) while confirming the addition had not considered this aspect. In view of that matter, we are of the opinion that the learned CIT(A) was not justified in sustaining the addition on the basis of peak. So we are of the view that the impugned order deserves to be set aside. Accordingly, we set aside the order of the learned CIT(A) and direct the AO to readjudicate afresh the issue relating to the purchase of draft on 10th Feb., 1988 amounting to Rs. 62,193. The AO is also directed to see whether sufficient cash was available with the assessee and the draft in question was in fact, purchased by the assessee because it was one of the contentions of the assessee before the authorities below that the draft was not purchased by it and no clear finding has been given on that contention of the assessee by the authorities below. The AO is further directed to afford reasonable opportunity of being heard to the assessee while disposing of this limited issue.
8. In the result, the appeal of the assessee is partly allowed.
ITA No. 925/Asr/19939. The only grievance, in this appeal of the assessee relates to the upholding the addition of Rs. 62,171 on account of purchase of draft on 12th March, 1989 and entered in the books of account on 13th, March, 1989.
9.1. The relevant facts related to this issue in brief are that during the assessment proceedings, the AO noticed that the assessee purchased a draft amounting to Rs. 62,171 on 12th March, 1989 and the same was entered in the books of accounts on 13th March, 1989. The assessee submitted that sufficient cash in hand was available with it on the date of purchase of the draft. This contention was not accepted by the AO who observed that a certificate to the effect that cash had actually and physically been checked and entered into the cash book and the same was the position on the date of investment. So, it was quite clear that the assessee had undisclosed capital on the date of purchase of the draft. Accordingly, an addition of Rs. 61,171 (wrongly mentioned in the ground of appeal as well as in the order of the CIT(A) at Rs. 62,171) was made.
9.2. In the first appeal, before the learned CIT(A), the same arguments were reiterated. The CIT(A) confirmed the addition on the basis of his order vide Appeal No. CIT(A)/IT/BTI/506/1992-93 for the preceding asst. yr. 1988-89. It is noticed that the similar issue was involved in the preceding assessment year which we have discussed in ITA No. 924/Asr/1993 in the preceding paras of this consolidated order and the facts are identical, even the rival contentions were similar. In the similar circumstances, we have already deleted the addition of Rs. 53,979 in the preceding assessment year while deciding the appeal of the assessee bearing ITA No. 924/Asr/1993 In view of that matter, we are of the opinion that the learned CIT(A) was not justified in confirming the addition on this issue. Accordingly, we set aside his order and delete the addition of Rs. 62,171 confirmed by him.
9.3. In the result, the appeal of the assessee is allowed.