Income Tax Appellate Tribunal - Delhi
Jrm Steels Pvt. Ltd., New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN
ITA Nos. 1869 & 1870/Del/2011
Asstt. Yrs: 2000-01 & 2001-02
JRM Steel Pvt. Ltd. Vs. DCIT Circle 4(1),
nd
D-16, S-1, 2 Floor, New Delhi.
City Centre, Central Market,
Prashant Vihar, Delhi.
PAN/GIR No. AAACJ0584D
ITA Nos. 1879 & 1880/Del/2011
Asstt. Yrs: 2000-01 & 2001-02
DCIT Circle 4(1), Vs. JRM Steel Pvt. Ltd.
New Delhi. D-16, S-1, 2nd Floor,
City Centre, Central Market,
Prashant Vihar, Delhi.
(Appellant ) ( Respondent )
Assessee by : Shri S. Krishnan Adv.
Revenue by : Shri Jayant Mishra
ORDER
PER BENCH:
These are cross appeals for A.Y. 2000-01 & 2001-02. All these appeals were heard together and are being disposed of by a consolidated order for the sake of convenience.
2. Respective grounds are as under:
Assessee's appeals:
A.Y. 2000-01 "On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the action of the Assessing Officer in making an addition of Rs. 24,50,500/- made u/s 69C ITA 1869, 1870, 1879 & 1880/Del/11 2 AY 2000-01 & 2001-02 of the Act on the allegation that cash payments have been made to M/s Jindal Electro Castings Pvt. Ltd.
2001-02:
On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the action of the Assessing Officer in making an addition of Rs. 20,51,356/- made u/s 69C of the Act on the allegation that cash payments have been made to M/s Jindal Electro Castings Pvt. Ltd.
Revenue's appeals:
A.Y. 2000-01 "02. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in restricting the addition u/s 69C of the Act to Rs. 24,50,500/- as against Rs. 86,87,000/-
made by the AO being the unexplained cash payments.
2.1. The Ld. CIT(A) has ignored the findings recorded by the AO and the fact that the assessee did not discharge the onus of proving the genuineness of the cash payments made either during the assessment or during the re-assessment proceedings."
A.Y. 2001-02 "02. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in restricting the addition u/s 69C of the Act to Rs. 20,51,356/- as against Rs. 2,42,71,186/- made by the AO being the unexplained cash payments.
2.1. The Ld. CIT(A) has ignored the findings recorded by the AO and the fact that the assessee did not discharge the onus of proving the genuineness of the cash payments made either during the assessment or during the re-assessment proceedings."
ITA 1869, 1870, 1879 & 1880/Del/11 3 AY 2000-01 & 2001-02
2. It is pleaded that the common major issue involved in both the years is in respect of alleged unexplained expenditure made by the AO u/s 69C.
3. Brief facts are : Assessee is in the business of manufacture and trading of steel bars. The assessee's original returns were accepted u/s 143(1). Consequent to a search carried out at the business premises of Jindal group of cases on 30-11-2000, the assessments were reopened u/s 148. According to AO, some incriminating documents revealed that M/s Jindal Electro Castings Pvt. Ltd., Hissar ("JECPL") received cash payments for purchase of steel, which were not entered in the account of the assessee, which is the subject matter of these appeals.
3.1. The above amounts were added in both the years where the assessee preferred appeals. CIT(A) allowed part relief of Rs. 62,37,000/- in A.Y. 2000-01 and Rs. 2,22,19,840/- in A.Y. 2001-02. It is pertinent to mention here that the orders of CIT(A) were accepted by the revenue and no further appeals were filed by it before ITAT. However, against part sustenance of addition of Rs. 24,50,500/- for A.Y. 2000-01 and Rs. 20,51,356/- for A.Y. 2001-02, the assessee preferred appeals before the ITAT. 3.2. The ITAT Delhi Bench 'C" in ITA nos. 821 & 822/Del/07 vide its order dated 23-3-2009 restored the matter, appealed by assessee, back to the file of AO to decide the same afresh by following observations:
"2. Both parties learned AR and learned DR are heard, who agreed for following propositions:
(i) The ground about re-opening of assessment will not be pressed by the assessee.
(ii) In view of Hon'ble Delhi High Court judgment in the case of CIT vs. SMC Stockbrokers Ltd., the matter will be set ITA 1869, 1870, 1879 & 1880/Del/11
4 AY 2000-01 & 2001-02 aside and restored back to the file of AO inasmuch as the statement of Shri Pradeep Jindal was neither shown to assessee nor it was made available for cross examination. His statement constitutes the major basis for additions made during eh course of re-assessment.
3. We have heard the rival contentions and perused the material on record. In view of the agreed propositions, we set aside the matter back to the file of AO to decide the same afresh. AO will provide the copies of the statement of Shri Pradeep Jindal and if desired by the assessee, afford an opportunity to cross-examine him and thereafter to make fresh assessment after giving assessee an opportunity of being heard. The assessee will not raise the issue about re-opening of assessment in fresh proceedings. These agreed propositions are accepted and matters are accordingly set aside, restored back to the file of AO."
3.3. Consequent to above ITAT order, AO proceeded to reframe the issues and instead of confining his order to the quantum which was the subject matter of assessee's appeal before the ITAT, repeated the entire original additions of Rs. 86,87,000/- and Rs. ,42,71,1986/- again for A.Y. 2000-01 & 20001-02 in these reframed orders.
3.4. Aggrieved thereon, assessee preferred first appeals before the CIT(A), where following was contended:
"In the appeal effect order, the AO has wrongly gone by the gross figures of Rs. 86,87,000/- and Rs. 2,42,71,186/- in assessment years 2000-01 and 2001-02 respectively. The AO little realized that a major component of this amount in the sum of Rs. 62,37,000/- and Rs. 2,22,19,840/- in assessment years 2000-01 and 2001-02 respectively had already been deleted by the CIT(A) in the first round of proceedings and that the Revenue had accepted that order. Such had become final. In that view of the matter, the AO could not re-assume jurisdiction with regard to the correctness or otherwise of that decision. During the course of the proceedings for giving effect to the ITA 1869, 1870, 1879 & 1880/Del/11 5 AY 2000-01 & 2001-02 order of the Tribunal, the Assessee had filed before the AO not only the Tribunal's order which was the foundation of the proceedings before him but also the grounds of appeal as canvassed before the Tribunal. It was also repeatedly brought to the notice of the AO that the Revenue had not appealed against the order of the CIT(A) in the first round of proceedings whereby CIT(A) had directed relief to the assessee. It was also submitted to the AO that he could not be in seisn vis a vis the entire addition of Rs. 86,47,000/- and Rs. 2,42,71,186/- in assessment years 2000-01 and 2001-02 respectively for he had no jurisdiction on the point concerning a quantum of Rs. 62,37,000/- Rs. 2,22,19,840/- in assessment years 2000-01 and 2001-02 respectively. Without any heed to these explanations and implorations, the AO once again brought to tax the entire monies of Rs. 86,87,000/- and Rs. 2,42,71,186/-- in assessment years 2000-01 and 2001-02 respectively including the sums of Rs. 62,37,000/- and Rs. 2,22,19,840/- which was clearly beyond his reach or purview.
As pointed out above, it is submitted, that the AO was reposed jurisdiction by the Tribunal only to consider and decide on the aspect of additions of Rs. 24,50,500/- and Rs. 20,51,356/- in assessment years 2000-01 and 2001-02 respectively being the amounts retained by the CIT(A) out of the total addition of Rs. 86,87,000/- and Rs. 2,42,71,186/- as originally made by the AO. The Revenue having accepted the deletion of the addition to the extent of Rs. 62,37,000/- & Rs. 2,22,19,840/- in assessment years 2000-01 & 2001-02 respectively and the assessee only having agitated against the additions of Rs. S24,50,500/- and Rs. 20,51,356/- in assessment years 2000-01 and 2001-02 respectively before the Tribunal, the sole issue left for consideration of the AO was the merits of the addition of Rs. 24,50,500/- and Rs. 20,51,356/- in assessment years 2000- 01 and 2001-02 respectively alone. The AO misled himself to return to the gross addition of Rs. 86,87,000/- and Rs. 2,42,71,186/- in assessment years 2000-01 and 2001-02 respectively in respect to which he had no authority or jurisdiction. The addition of Rs. 62,37,000/- and Rs. 2,22,19,840/- must, therefore, be quashed in limini.
ITA 1869, 1870, 1879 & 1880/Del/11 6 AY 2000-01 & 2001-02 With regard to the sum as added on merits, it is submitted that he concerned party M/s Jindal Electro Casting Pvt. Ltd. confirmed that it had sold MS Ingots to the appellant during the calendar year 2000. It further confirmed that payment for such material from the appellant had been received by it through account payee cheques, which were duly deposited in its current account maintained with the Oriental Bank of Commerce Samalkha (Haryana). The Director of the said company went on to confirm that on the basis of an authority granted by them to an employee of the appellant, cash withdrawals were made from that account which finds mention in the 'Kachhi Rokar' maintained by the Director. The amount was shown to the credit of the appellant in the Kachhi Rokar. This was confirmed by Sri P.R. Jindal on behalf of M/s Jindal Electro-Casting Pvt. Ltd. vide letter dated 12.10.2001. Further vide letter dated 04- 11-2010 Sri P.R. Jindal informed that personal appearance could not be made by Sri Pradeep jindal at the relevant time for he was down with viral fever and had been advised rest by the Doctors. Sri P.R. Jindal nevertheless submitted a copy of the bank statement with the Oriental Bank of Commerce Samalkha (Haryana) of their company M/s Jindal Electro-Casting Pvt. Ltd. He further informed that their company had stopped manufacturing and trading activities for the last so many years and that the issue in dispute pertained to old matters relevant to the A.Ys. 2000-01 and 2001-02.
The AO, however, glossed through these replies when he stated at page 3 in para 3 of the order "quote .... And admitted that this company has purchased M.S. Ingots from JRM Steel Pvt. Ltd. during the year 2000-01 and 2001-02 and showed his inability for his personal attendance due to health reasons..."
unquote. The AO for reasons best known to him ignored the confirmation and explanation tendered by the person owning the Kachhi Rokar. The AO also conveniently ignored the fact that he Appellant had paid monies by cheques during the normal and regular course of its business activity and any withdrawal of any amount, thereafter by the recipient of such monies from his bank account, was not of any concern or effect to the Appellant.
ITA 1869, 1870, 1879 & 1880/Del/11 7 AY 2000-01 & 2001-02 It is submitted the transactions in question were duly confirmed by the other party which had originally been the subject matter of search by the IT Department. The aid party had submitted copy of its bank account to show and prove that in respect of sales made by them to the appellant, the appellant had indeed remitted the sale consideration through cheques which had been banked by it with its account in the Oriental Bank of Commerce, Samalkha. In this way, there was just no blemish or error in respect of the reported transactions vis a vis your appellant. Sri P.R. Jindal, Director of the company supplying the material to the appellant had further confirmed that under this authority monies were withdrawn from the Oriental Bank of Commerce, Samalkha. In this way, there is a direct linkage and connectivity between the deposit of the sale consideration in the Oriental Bank of Commerce, Samalkha and withdrawal from that account in cash and its entry in the Kachhi Rokar. The transaction, thus was proved to the hilt right from its origin to its ultimate conclusion. There was nothing left unexplained with regard to any aspect of these transactions.
The AO erred in misunderstanding, the transaction as an act of sale by appellant through M/s Jindal Electro-Casting Pvt. Ltd. In fact the appellant herein was the purchaser. The AO also erred in not abiding by the directions of the Tribunal to afford to give an opportunity to cross examination Sri Pradeep Jindal. Be that as it may, the statement of Sri Pradeep jindal in this regard was exculpatory vis a vis of your appellant. That being the case even in the absence of a formal cross examination, the factum of your appellant having paid through banking channels for the purchases made by it, stood established incontrovertibly. Further, the factum of withdrawal in cash from the same bank account and their entry in the Kachhi Rokar of Sri P.R. Jindal also stood confirmed and was beyond denial or repudiation of the AO. There was no evidence to indicate that any cash deposit in the Kachhi rokar was made otherwise than through the withdrawals from the account of the Oriental Bank of Commerce, Samalkha of The M/s Jindal Electro-Casting Pvt. Ltd. The Kachhi Rokar was owned by Sri P.R. Jindal. Even legally there was a presumption in this regard in favour of Sri P.R. Jindal. The onus in terms of the presumption of Sri P.R. ITA 1869, 1870, 1879 & 1880/Del/11 8 AY 2000-01 & 2001-02 Jindal had also been discharged by him. At any rate the addition, if any, was relevant to Sri P.R. Jindal and his group and not to the appellant under any circumstance. In this background, the addition as made is grossly erroneous, wholly misconceived and totally unwarranted and must be quashed."
3.5. CIT(A) held that AO exceeded his jurisdiction in going beyond what the ITAT had restored to him. On merits, after hearing the assessee, repeated the additions made by CIT(A) in first round by following observations:
"5. I have considered the written submission on behalf of the appellant, the findings of the Assessing Officer and the facts on record. It is not in dispute that the Revenue did not file any appeal against the order of the CIT(A) granting relief of Rs. 62,37,000/- and Rs. 2,22,19,840/- to the assessee in assessment years 2000-01 and 2001-02 respectively. It implies that the order of the CIT(A) giving relief of Rs. 62,37,000/- and Rs. 2,22,19,840/- in assessment years 2000-01 & 2001-02 respectively became final and to that extent the order of the AO got merged with the order of the CIT(a), thereby obliterating any possibility of interference by the AO with regard to the said sum. Where an appeal is preferred and the subject matter of appeal, particularly raised, is the subject-matter before the appellate authority i.e. CIT(A), ITAT and so on, then that order, in my opinion, cannot be the subject matter of an order of reassessment &/or rectification by the Assessing Officer in terms of section 147 &/or 154 o of revision by the Commissioner in terms of section 263 of the Act. This principle was enunciated by the Supreme Court in the case of CIT v. Amritlal Bhogilal & Co. (1958) 34 ITR 130 (SC). In the case of Amritlal Bhogilal & Co. (supra), the question was:
"Where the appeal preferred by an assessee against his assessment had been decided by the Appellate Assistant Commissioner, does the order of registration along with the subsequent order of assessment merge in the appellate order."
ITA 1869, 1870, 1879 & 1880/Del/11 9 AY 2000-01 & 2001-02 The Supreme Court held that there can be no doubt that, if an appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the Tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law the position would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation of the decision of the Tribunal by the appellate authority the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement. This was also reiterated in the decision in the case of Jeewanlal (1929) Ltd. v. Addl. CIT (1977) 108 ITR 407 (Cal) and the decision in the case of Premchand Sitanath Roy v. Addl. CIT (1977) 109 ITR 751 (Cal). The Allahabad High Court and the jurisdictional High Court of Delhi reiterated the same principle in the case of J.K. Synthetics Ltd. v. Addl. CIT (1976) 105 ITR 344 (All) and CIT v. Eurasia Publishing House (P) Ltd. (1998) 232 ITR 381 (Delhi).
5.1. From the discussion made above, it can be safely concluded that as the order of the CIT(A) granting relief of Rs. 62,37,000/- and Rs. 2,22,19,840/- to the assessee in assessment years 2000-01 & 2001-02 respectively was not challenged by the Department by way of preferring appeal before ITAT, the Assessing Officer had no jurisdiction, in the facts and circumstances of this case, to pass any order on this aspect of the matter. This was precisely because of the fact the original assessment order dated 29-03-2006 was the subject matter of appeal before the CIT(A) and had subsequently merged in the order of the CIT(A) dated 16-11-2006. Therefore, I am of the considered view that the Assessing Officer's power to again bring the amounts of Rs. 62,37,000/- and Rs. 2,22,19,840/- to tax in assessment years 2000-01 & 2001-02 respectively was not available to him which had already been considered and decided by the CIT(A).
5.2. It is observed that the Assessing Officer has simply repeated the findings made in the assessment orders which were passed under section 147/143(3) of the Act on 29-03-2006 ITA 1869, 1870, 1879 & 1880/Del/11 10 AY 2000-01 & 2001-02 without properly appreciating the directions of the Hon'ble ITAT vide their order dated 23-03-3009. Since the Assessing Officer has followed the findings made in the assessment order which was passed under section 147/143(3) of the Act on 29- 03-2006, it is apposite to refer to the findings of my predecessor-in-office in Appeal nos. 24 & 25/2006-07 vide his order dated 16.11.2006 (where the subject-matter of the appeal was the assessment orders passed under section 147/143(3) of the act on 29-03-2006). The relevant portion of the order of my predecessor-in-office is extracted below:-
"As per the above-mentioned chart, the peak of cash received by M/s Jindal Electro-Casting Pvt. Ltd., as per the entries in the Kachha Rokar book, seized from Jindal group in excess to cash withdrawal from the bank account of M/s Jindal Electro-Casting Pvt. Ltd. works out at Rs.
24,50,500/- in the assessment year assessment years 2000-01 and Rs. 20,51,346/- in the assessment year 2001-02. Same are considered as unexplained expenditure from undisclosed sources of income under section 69C of the Income-tax Act. Accordingly, the appellant will get a relief of Rs. 62,37,000/- in the assessment year 2000-01 and Rs. 20,51,346/- in the assessment year 2001-
02. 5.3. It is clear from the perusal of the reframed assessment orders that not a single new fact has been brought about either by the Assessing Officer or by the appellant while reframing the assessments on 25-11-2010 for the purpose of giving effect to the order of the Hon'ble ITAT; rather the reframed assessment orders are simply the repetition of the assessment orders which were passed under section 147/143(3) of the act on 29-03-2006. As the facts and circumstances of the case remained unchanged, I find myself in agreement with the decision of my predecessor-in-office on the issues cited above confirming the additions of Rs. 24,50,500/- and Rs. 20,51,536/- in assessment years 2000-01 & 2001-02 respectively.
ITA 1869, 1870, 1879 & 1880/Del/11
11 AY 2000-01 & 2001-02 Aggrieved, both the parties are in appeal before us.
4. At the out set learned counsel for the assessee reiterated the facts of the case and adverted to ITAT's order, setting aside. It is contended that AO was directed to reframe orders on the directions given by ITAT. Having passed the original assessment orders, AO had become functus officio and his new jurisdiction and power was limited to what was set aside by the ITAT. In ITAT order it is clearly mentioned that the matter is set aside to the file of AO to decide the same afresh, which simply means that the issue as appealed by the assessee is set aside. Further, the order of AO stood merged in the order of CIT(A), which in turn also merged in the order of ITAT. What remained before AO was only the additions as appealed against by assessee before ITAT. There is no infirmity in the order of CIT(A) who relied on the Hon'ble Supreme Court judgment on the case of CIT V. Amritlal Bhogilal & Co. (supra). The department has undisputedly accepted the order of CIT(A) in original proceedings. The AO can rack up this issue on two counts:
(i) his jurisdiction was limited to the extent which is set aside by the ITAT;
(ii) the department has already taken a position by accepting the original order of CIT(A), giving part relief 4.1. In view thereof, revenue's grounds deserve to be dismissed. It is further pleaded that revenue has not raised a specific ground against CIT(A)'s order on this legal issue i.e. holding that the jurisdiction of AO in new proceedings was limited to the amounts appealed against by the assessee before ITAT i.e. 24,50,500/- and Rs. 20,51,536/-. In the absence of ITA 1869, 1870, 1879 & 1880/Del/11 12 AY 2000-01 & 2001-02 any specific ground against the order of CIT(A) on the jurisdictional aspect, the revenue's ground deserves to be dismissed as not maintainable.
5. Learned DR, on the other hand, contends that the grounds raised are not to be read in a restricted manner. The fact that revenue has agitated the particular deletion of addition, it will include all the aspects while allowing the part relief. On the scope of the ITAT order, ld. DR contends that the issue was of addition u/s 69C, which cannot be decided in part and ITAT while setting aside in para 3, line 4 & 5, has referred to a fresh assessment being framed after giving assessee an opportunity of being heard.
6. Learned counsel for the assessee, in rejoinder contends that any judicial order is to be read on its entirety. Parties cannot pick and choose particular words or phrase to defeat the entire meaning of the order. What was set aside was the matter raised by the assessee in appeal before ITAT. What is allowed by the order is allowing assessee's appeal statistically on the grounds raised. Consequently, use of word setting aside of the matter to decide the same afresh and allow the assessee's appeal unambiguously means that what was sent back to AO was to the extent of order appealed against before ITAT by assessee's ground as raised.
7. We have heard rival contentions and gone through the entire material available on record. Relevant portion of ITAT order is extracted above. It clearly emerges that in first round revenue did not challenge the CIT(A)'s order and assessee was before ITAT was only the assessee's grievance against the part relief. In this situation, the ld. DR pleads that ITAT order vests the AO with power to reframe the assessment of entire issue whereas assessee contends that ITAT set aside the matter only to the extent what was challenged by assessee and AO cannot assume jurisdiction beyond that. In our view CIT(A) has dealt with the issue in extenso and rightly relied on ITA 1869, 1870, 1879 & 1880/Del/11 13 AY 2000-01 & 2001-02 various case laws including Hon'ble Supreme Court judgment in the case of CIT Vs. Amritlal Bhogilal & Co. (1958) 34 ITR 130 (SC). What was set aside by the ITAT was the addition to the extent of Rs. 24,50,500/- for A.Y. 2000-01 and Rs 20,51,536/- for A.Y. 2001-02. The AO thus was vested with the jurisdiction to this extent and not beyond that. Though Revenue has not raised specific ground in this matter, in the interest of substantial justice, we are inclined to accept the plea that ground as raised will include this aspect. Consequently, we proceed to decide the same.
7.1. In our considered opinion, AO should not have traveled beyond the directions of ITAT, which are clear and unambiguous to reframe the addition to the extent of assessee's appeal only. Department has already taken a decision by accepting the part deletion made by CIT(A) in first round. AO has merely repeated his predecessor's order. In view CIT(A) rightly held that the AO should have restricted the reframing of issue to the above extent. We uphold his orders. Consequently, we dismiss the revenue's appeal for both the years.
8. Coming to assessee's appeals, learned counsel for the assessee adverted to the original assessment orders dated 29-3-2006, available at pages 8 to 14 of the paper book. At page 4 of the order, AO refers to the letter of Shri Pradeep jindal, MD of Jindal Electro Casting P. Ltd. ("JECPL") dated 8-3-2006, which is as under:
"(iii) That I confirm that M/s Jindal Electro-Casting Pvt. Ltd.
had sold MS Ingots to M/s JRM Steel Pvt. Ltd. during the calendar year 2000. copy of account as per Books of accounts is attached herewith. Payments for material as per copy of account were received through account payee cheques which M/s JRM Steel Pvt. Ltd used to deposit in our current account maintained with OBC Samalkha. It was practice that cash was withdrawn from this account from time to time on our behalf by the ITA 1869, 1870, 1879 & 1880/Del/11 14 AY 2000-01 & 2001-02 employees of JRM Steel Pvt. Ltd. and then they used to send the withdrawn cash to Jindal Electro casting as per their convenience. Whenever we received cash, we used to credit the name of Jai Bharat Steel Rolling Mills /Uttam Jindal (Associate of JRM Steel Pvt. Ltd.) in our Kachi Rokar. It is worthwhile to note that previous name of JRM Steel Pvt. Ltd. was Jai Bharat Foundry and Rolling Mills Pvt. Ltd. but we used to enter all transactions relating to JRM/ Steel Pvt. Ltd. in the name of Jai Bharat Steel Rolling Mills in our Kachhi Rokar.
(iv) Total cash which was received from JRM Steel Pvt. Ltd during the Calendar year 2000 and was entered in our Kachi Roakar in the name of Jai Bharat Steel Rolling Mills/ Uttam Jindal (Associate of JRM Steel Pvt. Ltd.) was Rs. 3,00,47,686/- and out of which Rs. 2,11,56,000/- was on account of amount withdrawn from our current account, Samalakha and received from time to time through the employees of above said company. Details of Rs. 3,00,47,686/- and Rs. 2,11,56,000/- are attached separately."
8.1. It is pleaded that Managing Director of JECPL has confirmed that the assessee paid the purchase amounts through a/c payee cheques, which were deposited in JECPL a/c in Oriental Bank of Commerce, Samalkha. It is pertinent to mention that the bank account in question does not belong to the assessee but the same belongs to JECPL. Shri Pradeep Jindal, MD further confirmed that it was the practice of the employees of the assessee to withdraw the cash from this account from time to time as per the convenience of JECPL. The department is misconstruing the words -
"practice of employees" and "as per their convenience", which in fact mean the convenience of JECPL. The department, in order to confirm the addition is relying on interpretation of these words as meaning to the convenience of the assessee.
ITA 1869, 1870, 1879 & 1880/Del/11 15 AY 2000-01 & 2001-02 8.2. Ld. Counsel contends that account in question i.e. Oriental Bank of Commerce, Samalkha, is owned by JECPL, which is confirmed by its Managing Director, with a further confirmation that the assessee made payments through a/c payee cheques only which were deposited in this account. By no stretch of imagination, this bank a/c and corresponding Kachhi Rokar maintained by JECPL it can be held to be assessee's account or its unaccounted purchase. It is matter of record that assessee has no authority over this bank a/c and does not have the power to operate this bank a/c. In this eventuality, the cash withdrawals in question can not come back to assessee. These withdrawals are by JECPL only from its own a/c, which by arbitrary interpretation are being added in the hands of the assessee. The assessee insisted on cross-examination of Shri Pradeep Jindal to clarify this fact, which has never been provided. 8.3. Ld. Counsel then adverted to the following observation of AO:
"The above discussion revealed that the assessee failed to prove the co-relation in the transactions recorded by the assessee in its books of accounts, payments made by way of cheques and the cash payments made on different dates. Further, assessee could not reconcile the transactions made in their books of accounts in spite of repeated opportunities and also could not furnish any satisfactory explanation for the cash transactions made during the year.
8.4. It is contended that the AO asked for an impossible thing inasmuch as the assessee can reconcile its books of account or the bank account owned by it. The AO by this arbitrary finding, wanted the assessee to reconcile the account of JECPL and their cash withdrawals from that account. Since the account has been owned by JECPL, the assessee cannot reconcile it. It is abundantly clear that JECPL owned this bank account. It is not the case of ITA 1869, 1870, 1879 & 1880/Del/11 16 AY 2000-01 & 2001-02 the revenue that Mr. Jindal expressed any doubt or linkage with the assessee. The Department accepted the fact that the a/c is owned by Shri Pradeep Jindal and assessee had no authority to operate the account in any manner. Shri Pradeep Jindal accepted that his employees withdrew the cash from this bank account from time to time. With these apparent facts, the addition cannot be imagined in the hands of the assessee. In the worst scenario even if it is assumed that the cash was withdrawn by assessee in that case also sec. 69C will not be applicable as the withdrawals do not amount to assessee's expenditure.
8.5. Ld. Counsel further adverted to the order of CIT(A) in original proceedings which records the submissions of the assessee before him. The relevant observations are as under:
"1. The allegation has been stated to be the result of the seized material, found from the residence of Shri Pradeep Jindal, Managing Director and Mr. Chander Bhan Sharma, Accountant of M/s Jindal Electro Casting Private Limited, (hereinafter referred to 'company') during the search proceedings conducted on them, by virtue of the execution of a search warrant on 30-11-2000. The material, identified as Annexure - A1, A6 and A12 was found and seized. From the annexures, the Ld. Deputy Commissioner of Income Tax, extracted an arbitrarily concluded the alleged cash payments, purportedly made by the appellant, to the supplier, M/s Jindal Electro Casting Private Limited, were out of unexplained sources. It is borne out from the record that the appellant had continuously made purchases of raw material, from the above supplier during the year and made the payments thereon in settlement of the suppliers made, through the crossed cheques drawn on its bank. These cheques were deposited in bank account number 10548 with OBC Samalkha, belong to Jindal Electro Casting Private Limited, where the operation of the bank account was exclusively with Mr. Pradeep Jindal, the Managing Director of the company. A certificate to this effect from Oriental Bank of Commerce, is enclosed.
ITA 1869, 1870, 1879 & 1880/Del/11 17 AY 2000-01 & 2001-02
2. The cash withdrawals out of the said bank account, maintained by M/s Jindal Electro Casting Private Limited, (Jindals) were received by Shri Pradeep Jindal, the director of the said company, either through the employees of M/s Jindal or at times, some employee of the appellant. However, the Ld. Deputy Commissioner of Income Tax, concluded the said receipts withdrawn from the regularly maintained bank account, as the payments received from the appellant, out of the alleged unexplained cash, allegedly available with the appellant. While doing so, the provisions of section 69C of the Income Tax Act were invoked by the Ld. Deputy Commissioner of Income Tax, as unexplained expenditure, without statutorily establishing that the said expenditure had been the result of no explanation in regard to the nature and source thereof. Needless to mention that the reasons, as recorded, for initiating the reassessment proceedings u/s 148, do not mention or indicate any such alleged unexplained expenditure, under which the Ld. Deputy Commissioner of Income Tax, has made the impugned addition. In the first place, the appellant denies having any interest, title or relation with the notations in the said 'Kachi Rokar'. Except the name, no other evidence, material or document ahs been indicated by the Ld. Deputy Commissioner of Income Tax,, to arrive at the conclusions that the amounts pertain or belong to the appellant in any way. Not only this, despite having requested for cross examination of said Mr. Pradeep Jindal, vide submissions dated 17-03-2006, the then Deputy Commissioner of Income Tax,, did not allow us such an opportunity. As a last resort, an affidavit from the Director of the appellant, deposing no connection with the payments, is being enclosed. Though this affidavit is purely of supportive in nature, still considering this to be additional evidence, it is requested to be admitted under rule 46A of the Income Tax Rules, as the appellant was prevented by sufficient cause in producing such affidavit during the assessment proceedings. No addition in fact should have been made in the assessment.
3. Without prejudice to the foregoing, on merits it is submitted that the addition of Rs. 86,87,000/- in assessment year 2000-01 and Rs. 2,42,71,186/- in assessment year 2001-02 ITA 1869, 1870, 1879 & 1880/Del/11 18 AY 2000-01 & 2001-02 being the alleged unexplained cash payments from alleged undisclosed sources, is without any valid basis or substantiated material. Neither any material nor any evidence has been confronted to the appellant, on the basis of which the aforesaid allegations were made.
4. In regard to the alleged payments from the appellant, the Ld. DCIT has drawn adverse inference on alleged statement of Mr. Pradeep Jindal, and concluded that the alleged payment from appellant were out of undisclosed sources, which entailed the addition of the impugned amount. This conclusion had been arrived at without confronting the alleged statement so recorded, to the appellant. There is no valid material to establish that appellant had ever such payments to M/s Jindal Electro Casting Private Limited. The learned DCIT should not have placed reliance on the un-confronted statement received, at the back of the appellant, for making the impugned addition. The appellant, was never confronted nor allowed any opportunity to cross-examine Shri Pradeep Jindal. It is the settled principle of law that the DCIT should not have utilized the testimony of the other person recorded at the back of the appellant, without giving appellant an opportunity to cross-examine him. It is submitted that such testimony is an unreliable testimony and that in any case, it could not have been used against the appellant, without confronting the same for his cross examination. If the learned DCIT desired to use the material against the appellant, the appellant must be informed of the evidence gathered against it and must be given an opportunity of explaining it by conducting the cross-examination. The minimum effort, as expected of the Ld. DCIT was to provide an opportunity to the appellant to cross examine the witness, before finalizing the assessment, who had appeared in response to the communication, addressed directly to him by the Ld. DCIT."
......
7. It is further submitted that the learned DCIT has not discharged the burden, which lay upon him, to establish that the apparent state of affairs was not the real one. In the facts of the instant case, apart from circumstances, which by themselves ITA 1869, 1870, 1879 & 1880/Del/11 19 AY 2000-01 & 2001-02 could be said to be neutral, there was no other material to doubt the state of affairs and to hold that the apparent is not real. The circumstances taken singly or cumulatively don't justify the conclusion, as arrived by the Ld. DCIT.
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9. The observation of the Ld. Deputy Commissioner of Income Tax, in the order of reassessment that the appellant was maintaining the bank account of M/s Jindal Electro Casting Private Limited, is wholly incorrect and devoid of factual substratum. The aid account was not allowed to be operated upon, by any other person, except Mr. Pradeep Jindal, the Managing Director of the Jindal group. The fact, which has not been appreciated by the Ld. Assessing Officer is that it was the money belonging to M/s Jindal Electro Casting Private Limited, itself which was withdrawn from their own bank account. There was no additional money, over and above the withdrawals, which was utilized for remitting to Jindals. This fact is also borne out from the statement recorded, on oath, of Mr. Pradeep Jindal, the Managing Director of the receiving company, wherein he had categorically stated the factual state of affairs, including the withdrawals from the bank account of M/s Jindal Electro Casting Private Limited and receipt of the same either through the employees of Jindals or some personnel of JRM Steel Private Limited.
....
16. Without prejudice, it is submitted though in the order of reassessment the month wise payments reckoning from January 2000 to March 2000 have been indicated but the Ld. Deputy Commissioner of Income Tax, had failed to detail the date wise cash payments, allegedly made by the appellant to M/s Jindal Electro Casting Private Limited. The aggregated quantum of the alleged cash payments, though calculated at Rs. 86,87,000/- in assessment year 2000-01 and of Rs. 2,42,71,186/- in assessment year 2001-02 but no dates for the respective payments have at all been indicated to the respective payments have at all been indicated to explain the source. In absence of the dates, it shall not be possible to clarify the nature and sources. The addition made is otherwise wholly unjustified because even if presuming but not admitting that the appellant did incur some expenditure, ITA 1869, 1870, 1879 & 1880/Del/11 20 AY 2000-01 & 2001-02 against the alleged supplies received, the equivalent debit in the profit and loss account will neutralize each other and no addition could be upheld, even in this ground. Yet another important factor for your consideration is that no corresponding document, material or evidence has been indicated to corroborate the allegations leveled against the appellant. The Ld. Deputy Commissioner of Income Tax, while making the impugned addition, ha at all indicated no such reference or reliance.
8.6. Ld. Counsel contends that in the fresh proceedings assessee insisted for cross examination of Shri Pradeep Jindal. Instead a reply of Shri Pradeep Jindal dated 12-10-2010 was furnished which reads the same position:
"(iii) That I confirm that M/s Jindal Electro-Casting Pvt. Ltd.
had sold MS Ingots to M/s JRM Steel Pvt. Ltd. during the calendar year 2000. copy of account as per Books of accounts is attached herewith. Payments for material as per copy of account were received through account payee cheques which M/s JRM Steel Pvt. Ltd used to deposit in our current account maintained with OBC Samalkha. It was practice that cash was withdrawn from this account from time to time on our behalf by the employees of JRM Steel Pvt. Ltd. and then they used to send the withdrawn cash to Jindal Electro casting as per their convenience. Whenever we received cash, we used to credit the name of Jai Bharat Steel Rolling Mills /Uttam Jindal (Associate of JRM Steel Pvt. Ltd.) in our Kachi Rokar. It is worthwhile to note that previous name of JRM Steel Pvt. Ltd. was Jai Bharat Foundry and Rolling Mills Pvt. Ltd. but we used to enter all transactions relating to JRM/ Steel Pvt. Ltd. in the name of Jai Bharat Steel Rolling Mills in our Kachhi Rokar.
(iv) Total cash which was received from JRM Steel Pvt. Ltd during the Calendar year 2000 and was entered in our Kachi Roakar in the name of Jai Bharat Steel Rolling Mills/ Uttam Jindal (Associate of JRM Steel Pvt. Ltd.) was Rs. 3,00,47,686/- and out of which Rs. 2,11,56,000/- was on account of amount withdrawn from our current account at Samalakha and after ITA 1869, 1870, 1879 & 1880/Del/11 21 AY 2000-01 & 2001-02 receipt of cash the same was entered with our Kachi Rokar on various dates."
8.7. It is contended that though the matter was set aside to allow the cross- examination of Shri Pradeep Jindal, instead of producing him a letter dated 12-10-2010 was produced. Thus, in fact ITAT directions of allowing the cross-examination also remain uncomplied with. Even if this statement of Mr. Jindal is correctly considered, it reflects following:
(1) Assessee used to make a/c payee cheque payment to JECPL which was deposited in JECPL a/c with Oriental Bank of Commerce, Samalkha.
(2) It was the practice to withdraw the cash from this account from time to time for giving to JRM Steel Pvt. Ltd. and then assessee used to send the cash in instalments to JECPL as per their convenience.
8.8. In that eventuality also, there is no allegation that amount more than the expenditure debited by assessee is incurred. This is a statement of Pradeep Jindal and confusion, if any, is to be clarified by him and unfortunately, this responsibility is being fastened on the assessee in an arbitrary manner. The Kachhi Rokar is written by JECPL and maintained by it. The assessee has no control or involvement in maintaining this Kachhi Rokar. In these circumstances, the responsibility to explain the Kachhi Rokar lies with the JECPL and not the assessee. It is pleaded that the addition is wholly unjustified and grossly misconceived.
9. Ld. DR, on the other hand, contends that the premises of Shri Pradeep Jindal, MD of JECPL group were searched. The Kachhi Rokar was found there. According to the department the case of the revenue is that transaction between JECPL and assessee were actually on cash basis. However, they ITA 1869, 1870, 1879 & 1880/Del/11 22 AY 2000-01 & 2001-02 were given a facade of bank account and the statement of Shri Pradeep Jindal which refers to "their employees", reflects the assessee and not Shri Pradeep Jindal. Therefore, the addition has been rightly retained by CIT(A).
10. We have heard rival contentions and gone through the entire material available on record. Following facts clearly emerge from the record:
(1) Kachhi Rokar was found during the course of search of JECPL. The handwriting therein and the ownership thereof has been owned by JECPL and assessee had no control over it.
(2) The alleged bank account i.e. Oriental Bank of Commerce, Samalkha is owned and operated by JECPL through Shri Pradeep Jindal, which is accepted by Shri Pradeep Jindal in original proceedings as well as fresh proceedings.
(3) Cross-examination of Shri Pradeep Jindal has not been given to the assessee, which was directed by the ITAT. Instead, a letter of Shri Pradeep Jindal was procured by the AO.
(4) Be that as it may, the new letter dated 12-10-2010 obtained from Pradeep Jindal does not throw any light on new facts and reiterates what he stated in the original proceedings.
(5) The whole case revolves round the interpretation of one or two sentences used by Shri Pradeep Jindal in the statement in his search proceedings, pointing out in particular -
"It was practice that cash was withdrawn from this account from time to time on our behalf by the employees of JRM Steel Pvt. Ltd. and then they used to send the withdrawn cash to Jindal Electro casting as per their convenience."
10.1. The information emanates from a third party, namely, JECPL. The impugned bank account and the Kachhi Rokar is owned, operated and ITA 1869, 1870, 1879 & 1880/Del/11 23 AY 2000-01 & 2001-02 maintained by JECPL. The third party in factual terms accepted that the assessee used to make the payment of purchases by way of a/c payee cheques, which are deposited in JECPL a/c in clear and unambiguous terms. In our considered opinion, looking at the entirety of facts and circumstances and in view of above observations, the addition on the basis of such a third party's evidence cannot be made in the hands of the assessee. The bank a/c is owned and operated by JECPL, assessee clearly has no role or involvement in operation of this bank a/c. In our considered opinion, by interpreting 2 or 3 sentences of third party's statement, which is not allowed for cross-examination by the assessee, cannot be made a basis to make these additions in the hands of the assessee u/s 69C as unexplained purchases. 10.2. In view of the foregoings, we delete the additions made by the AO in A.Y. 2000-01 & 2001-02. Assessee's appeals are allowed.
11. In the result, revenue's appeals are dismissed and that of the assessee are allowed.
Order pronounced in open court on 31-10-2011.
Sd/- Sd/-
(K.D. RANJAN ) ( R.P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31-10-2011.
MP
Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR
ITA 1869, 1870, 1879 & 1880/Del/11
24 AY 2000-01 & 2001-02