TMI Blog2012 (10) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... re it was held that amount credited in business books can normally be presumed as business receipts. The expression books with respect to s.68 is concerned, the Hon ble Punjab Haryana High Court in the case of SMT. SHANTA DEVI VERSUS COMMISSIONER OF INCOME-TAX [ 1987 (10) TMI 26 - PUNJAB AND HARYANA HIGH COURT] , held that such books denotes books of assessee himself and not of other parties. Addition made by the AO u/s 68 of the Act by considering the sale proceeds as cash credits cannot be sustained. Decision in favour of Assessee. - ITA No. 336/Ind/2012 - - - Dated:- 31-10-2012 - SHRI JOGINDER SINGH, JUDICIAL MEMBER And SHRI R.C. SHARMA, ACCOUNTANT MEMBER Appellant by Shri Darshan Singh Respondent by Shri P.D. Nagar ORDER PER JOGINDER SINGH, judicial member The Revenue is aggrieved by the impugned order dated 30th March, 2012 passed by the learned first appellate authority, Ujjain. 2. During hearing of this appeal, we have heard Shri Darshan Singh, learned CIT DR and Shri P.D. Nagar, learned counsel for the assessee. The first ground raised by the Revenue is that the learned CIT(A) erred on facts and in law in deleting the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posited. 3. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in manufacturing of refined Soyabean oil and DOC from soyabean seeds. The turnover of the assessee during the year, under consideration, was ₹ 149.58 crores on which a GP of 11.59% was shown. Before coming to any conclusion, we are reproducing hereunder the relevant portion from the impugned order :- In the grounds of appeal bearing from no. 1 to 10, the appellant has challenged the additions made u/s 68 of the Act as unexplained cash credits at ₹ 6,47,03,548/- being sale proceeds realised by the appellant from four debtors after deducting an amount equal to 11.59% towards gross profit on such sales. 2. The facts of the case are that the appellant company is engaged in manufacturing of soya oil and de-oiled cake from soya seed in its solvent extraction plant located at Dewas since 1994. The case was selected for the scrutiny. Assessee has shown sales of soyabeen refined edible oil to one Mis A.K. Impex, New Delhi and three other parties M/s Praveen Trading Company, Sarangpur, M/s Maa Jpagwati Traders, Agar (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived in cash/DD/pay order/cheque/RTGS from buyers against orders in advance. Following details were submitted before the AO in support of sales effected to such parties against which amounts were received i) Copies of accounts of buyers in the books of the appellant; ii) Copies of all sales invoices issued by the appellant to said buyer. iii) Copies of the cash receipts issued to the parties. iv) Copies of bank slips relating to cheques received. v) Copies of bank statements of the appellant. vi) Stock register maintained by the appellant. vii) Letter from brokers confirming transactions. viii) Brokerage bills issued by the brokers of said buyers. ix) Weighment slips issued at the time of dispatches. x) Description regarding Truck/Tankers No, DO No. etc. 05. Submissions in detail were made by the appellant from time to time, the Assessing Authority did not accept the genuineness of sales effected to four parties out of six parties (one from Delhi three dealers of MP). Enquiries were made by the Assessing Authority based on which the inference was drawn that such parties were non-exist. He, therefore, concluded that the appellant (selling deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of M/s. 1.K. Impex because commission was not received by him from the buyer. He was also not aware about the DDs issued by M/s. A.K. Impex to the appellant because' he was not responsible to collect the payment. f) There was no proof of transportation of goods to M/s. A.K. Impex. g) On enquiry from the bank, amounts were received through RTGS on behalf of MIs. A.K Impex which were remitted by other parties. Such parties were not dealers in edible oil. Notices issued U/S 133(6) of the Act to some of the parties, who remitted the amount on behalf of MIs. A.K. Impex, were returned un-served. On enquiry thorough Investigation Wing, New Delhi, it was reported that such firms did not exist at the addresses given. h) The broker MIs. Rajesh Kumar Arun Kumar, Gwalior confirmed the dealings between MIs. A.K. Impex and the appellant through him and he also provided Mobile number of MIs. A.K Impex. i) Mobile No. was provided by the broker and the Inspecter of Range-i, Gwalior talked to M/s. A.K. Impex on phone. The debtor also confirmed the address but on verification by Investigation Wing , Delhi, such address was again found incorrect. j) The appellant remitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not proved. The AD relied upon the ratio of judgment in the case of CIT Vs. Madhavnagar Cotton Mills Ltd 104 ITR 493 (Bom) which is distinguishable on facts. 1.6 Evidences furnished during the course of appellate proceedings were forwarded to the AO along with written submissions of the appellant for comments, who objected for admission of any new evidence. Copy of the comments received were given to the appellant. Regarding admissibility of evidences, the appellant claimed that no new evidence were furnished and supporting documents which already forms part of record or originals of which were produced during the course of assessment were submitted at the appellate stage. 02) In written submissions dated 02/09/2011, additions made by the A.O. have been challenged by the appellant on merits as well as on legal grounds which are reproduced here under:- Regarding Sales to A.I(. Impex, Delhi 3 buyers of M.P. 2.1 It is well known fact that parties are carrying on trading activities outside the books either by maintaining various bank accounts or by changing their addresses quite often. Such traders not only avoid payment of Income tax on the earnings but also VAT, Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd bonafidely sold the goods against the form. Tax cannot be recovered from selling dealer . It is, therefore, submitted that the appellant cannot be penalized in any manner if the purchasing dealers did not account for the transactions in their books of account and 'made the payment in cash against sales effected to them. Reliance is also placed on following judgments :_. Plestar Electronic vs. A CST (1978) 41 STC 409 (SC) State of Madras vs. Radio Electricals Ltd. (1996) 18 STC 222 (SC) Dy. CSTvs. Bharat Refineries (1978) 41 STC 409 (Kerala - DB) State of A.P. vs. Askin Fabs (1999) 112 STC 550 (AP-DB) State of Orissa vs .Bharat Petroleum (2001) 122 STC 559 (Orissa _ DB) Agfa-Gavert India Ltd. vs. State of Tamil Nadu (2001) 123 STC 108 (Madras-DB) 2.4 Bonofides of the appellant:- Genuineness of sales to M/s. A.K. Impex was proved from following documents (copies of which were not allowed to be submitted by the A.O):- a) Sale, effected were properly recorded and VAT was deposited on entire sales @ 4% and CST payable on such sales was deposited @ 2%; b) b) Quantitative records of purchase consumption of soya seed, production of crude oil, refined oil cake, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and the tanker no. was stated on every invoice by which the goods were lifted by the buyer. The amount remitted by various parties on behalf of Mis. A.K. Impex was also proved because the appellant was in possession of letters from such parties whenever the remittance were made by them and copies of such letters were also produced before the A 0 in support of the claim that such parties had remitted the amount on behalf of Mis. A.K Impex. However, these letters were not taken on record by the A 0 for the reasons best known to him. Copies of such letters and certificate from transporter who deliver the goods to Mis. A.K. Impex are annexed for kind perusal in support of submissions made above with a request to kindly consider the same because they support the existence of the buyer. 2.6 Sales to buvers in MP:- It is submitted that the intention of three parties of MP also appears as melafide because:- a) in spite of having huge purchases effected by them, they were not registered dealers under MP VAT Act: b) Entire purchases were effected by them in cash which is in contravention of provisions of sec. 40A(3) of the Act. c)TIN informed to the appellant were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary credit balance in the account of the debtor for a nominal period of a day or two but it cannot be termed as cash credit within the meaning of section 68 of the Act. Just because the amounts were received from the buyers in cash, the appellant cannot be penalized because the restriction placed for payment U/S 40A(3) of the Act applies to buyer and not the seller. There being no restriction under the Act to accept cash against sales, the appellant Company cannot be penalized. The AO relied upon certain judgments for the purpose of making addition u/s 68 of the Act which are not relevant at all because they related to amount received as share application money or share capital from the shareholders. The question for kind consideration is whether advances received in Cash against sale can be treated as un-explained cash-credit? Similar issue has been decided by Hon'ble Tribunal in following cases:- 1) Heera Steel Ltd Vs. ITO (2005) 4 ITJ 437 (Nagpur Bench) Held that Both the lower authorities failed to appreciate the case of the assessee that these were trade advances and not cash credits and against such advances, the assessee has supplied the material in due time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. 2) It is pertinent to note that out of such 33 parties of MP, who had deposited the amount in cash, the Assessing Authority had selected 3 parties only who had purchased the goods from the appellant and taxed the amount deposited in cash U/S 68 of the Act. Many dealers (20) remitted the .amount by DD and RTGS which was not doubted upon by the AO except the remittances made by Mis. A.K. Impex, Delhi. Break-up of sales realization from the dealers is as under :- a) Remittances in cash ₹ 6,36,31,328/- b) By pay orders ₹ 7,43,14,326/- c) Remittances through DD/RTGS ₹ 13,83,04,831/- d) Remittances by Cheques ₹ 30, 49, 07, 455/- e) Remittances by D/D ₹ 3,56,11,450/- j) Remittancesthrough NBOT ₹ 5,95,70,137/- Total Rs. 67,63,39,527/- Copies of accounts of va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mis. A.K. Impex, Delhi and three local parties of Shajapur in normal course of business were genuine sales. These sales were doubted only on the ground that the buyers could not be traced by the department. The existence of the buyers viz. M/s. A.K. Impex, Delhi was otherwise proved from various documentary evidences. In support of the fact that sales were made to existing parties further evidences were placed on record in the form of copy of cash receipts issued to them and correspondence in the form of letters received from M/s. A.K. Impex, Delhi. Such correspondence and cash receipts were supporting evidence only and they were in fact produced before A O in original at the time of assessment. On receipt of assessment order, it was found that the fact stated at page 14 (para 6.4) by the AD was not correct hence such correspondence from M/s. A.K. Impex, Delhi were submitted at appellate stage. Similarly, at para 6.6 of page 14 of the order, claim of the assessee that sales were made over the counter was disbelieved hence cash receipts were filed at appellate stage. Except filing of photo copies of the documents produced earlier (but not taken on record) no new evidence was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee parties can not be covered within the meaning of credits in the books of the assessee. Similarly, amount received from Mis. A.K. Impex, Delhi were advance against orders placed by it and immediately on receipt of advance, through brokers duly supported by covering letters from Mis. A.K. Impex, Delhi, detailed confirmation of account received in normal course of business, sales were effected within a weeks time. Such advance receipt against sale which were exclusively adjusted against sale bills raised to said party cannot be termed as cash credits within the meaning of Section 68 of the Act. Just because the party could not be traced after two years, the appellant cannot be held responsible to locate the party, as expected by AO. 4) The appellant made allegation in its letter dated 02.09.2011 with regard to melafide intention of the buyers but in para 9 of the letter, the AD has treated the same as assertions on the part of the assessee. The manner in which the trade is being carried out in various commodities in the Country was explained by the appellant just to appraise of the correctness of facts. Instead of appreciating' the fact, the AD has casted additional duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer should form the opinion objectively with reference to materials on record whereas in the instant case, the AO made the addition solely on the ground that the buyer could not be traced. Had it been a case of credits appearing at the close of the year in the account of the buyer by way of advance against sale and if the buyer who could not be traced, the addition would have been justified but there being no credits in the Balance sheet of the assessee and entire collection forms part of the sales appearing to the credit of profit and loss account duly confirmed by the buyer. at various stages, the A 0 did not appreciate the material facts of the business activity as a whole nor he considered-she regular quantitative books of accounts for the purpose of forming the opinion. The appellant has offered proper explanation regarding collection of sale proceeds and the burden regarding nature of such receipt was proved beyond doubt by various documents. It is, therefore, submitted that the addition so made U/S 68 of the Act equal to the amount of sale proceeds already credited to profit and loss account deserves to be quashed. 4. The additions made have also been challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laxmipat Singhania vs. CIT (1969) 72 ITR 291 (SC) b) Jotiprasad Agrawal Others vs. ITO (1959) 37ITR 107 (All) c) CIT MPvs. Mrs. BannoE. Cowasji (1984) 147ITR 744 (MP) The Apex Court in the case of CIT Vs. P. Mohankala (2007) 291 ITR 278 (SC) had laid down the principal regarding the expression appearing in section 68 of the Act i. e. the assessee offers no explanation means where the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion In the case of CIT Vs. Devi Prasad Vishwanath Prasad (1969) 72ITR 194 (SC) it was held that It is for the assessee to prove that even if the cash credit represents income, it is income from a source which has already been taxed . 05) Specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales effected to said party. Such certificates of the vehicle registration support the fact that the Truck numbers stated on the sale invoices are genuine and goods sold to these parties against payment were in fact transported to them. 5.1 The assessee had further relied on certain case laws in which the courts have held that the advances and receipts against sale of the goods, cannot be assessed to tax U/S 68 of the IT Act. The written submission of the appellant dated 20103/2012 is reproduced as under:- In continuation to submissions made earlier regarding sale proceeds assessed to tax u/s. 68 of the Act, we invite your kind attention to identical judgments wherein advances were received from the customers against sale of finished goods, supplies of which was made after few days. The courts have held that such advances were ultimately adjusted against sale of goods, can not be assessed to tax u/s. 68 of the' Act. The gist of the judgments are reproduced hereunder:- 1) ITO vs. Surana Traders 93 TTJ 875 (Mum.) Held - Merely because for he reasons that the purchase parties were not traceable, the assessee could not be penalized. In the sale documents the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and delivery of the oil to M/s A.K. Impex. This was submitted by the appellant during the course of appellate proceedings. A.O. again in his remand report dated 26/03/2012 requested to confirm the additions made by the then assessing officer without admitting any additional evidence. The appellant in its rejoinder dated 27/03/2012 submitted as under: This has a reference to the remand report submitted by the Asstt. Commissioner of Income Tax 1(1), Ujjain vide his letter dtd. 26.03.2012 copy of which was given to the appellant for its comment. In this connection we submit that during the course of appellate proceedings certificate regarding transportation of goods sold to M/s. A.K. Impex, Delhi was submitted by way of documentary evidence. In reply to remand report we submit as under: 1) The copies of sale invoices were already placed on record, from which it was evident that sales of oil was effected to M/s. A.K. Impex, Delhi in oil tankers. On every sale invoice oil tanker no. was specifically mentioned from it which was proved beyond doubt that transportation was infact carried out. In the body of the assessment order it was stated that proof was transportation was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has challenged the additions made by the AO U/S 68 of the Act as unexplained cash credits at ₹ 6,47,03,548/- being sale proceeds realized by the appellant from four sale parties after deducting an amount equal to 11.59% towards gross profit on such sales. 6.2 The AO suspected :the amount received against sales effected to M/s. A.K. Impex, Delhi in the form of ChequelDD/RTGS and the amounts from three parties of Shajapur Distt. (MP) namely Mis Praveen Trading Co., Mis Mohan Traders and Mis Maa Bhagwati Traders in cash on same day when the sales were effected. The AO has made the addition U/S 68 of the Act because the amounts were received in cash from the three parties of MP and the Commercial tax department confirmed that the TIN informed by these parties were not correct and they are not traceable atthe given addresses. The notices sent U/S 133(6) were returned back un-served with the remarks 'incomplete address', 'not found and 'no such name'. The AO made the enquiries through ITO Shajapur under whose jurisdiction the addresses of these parties fall. Similarly A. K. Impex was also not found existed at the given address after making enquiries. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such receipts were nothing else than the sale proceeds credited to the profit loss account of the appellant. None of the amounts from these three parties were received as advance for a single day. The AO over-looked these important factors and sales to such parties have been disbelieved. 6.16 As demonstrated by the appellant by filing copies of cash receipts, sale invoices as well proof of dispatch of goods on the same day and entries in the stock register regarding sale, such sales were in the nature of counter sales only to all the three parties. Claim of counter sales has been negatived by the AO only on the ground that in case of counter sales the business man does not maintain ledger accounts of clients to whom the goods are sold. The sales are shown entirely in cash and in the books the individual ledger accounts of the clients are not maintained, while in 'the assessee's case, it has maintained Individual ledger accounts of clients . 6.17 Aforesaid observations of the AO to disbelieve counter sales effected by the appellant is unsounded and unreasonable for the reason that the method of account followed by the appellant was more transparent and cannot be com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if the cash credit represents income, it is income from a source, which has already been taxed . The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of CIT vs Durga Prasad More (1969) 72ITR807 (SC) in which it was held If the amount represented the income of the assessee of the previous year, it was liable to be included in the total income and an enquiry whether for the purpose of bringing the amount to tax it was from a business activity or from some other source was not relevant . 6.22 Reliance is further placed on the decision of Hon 'ble Rajasthan High Court in the case of Smt. Harshila Chordia vs ITO (2008) 298 ITR 349 in which it was held that Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them . Also on the decision of Hon'ble ITAT, Nagpur Bench in the case of Mis Heera Steel Limited vs ITO (2005) 4 IT J 437 in which it was held that Both the lower authorities failed to appreciate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order, assertion made by the learned respective counsel and also in the absence of any positive material brought on record by the Revenue in support of its claim are kept in juxtaposition, we find that the learned CIT(A) has exhaustively dealt with the issue by following various decisions from various judicial forums right from the Hon ble Apex Court, Hon ble High Courts and the Tribunal. The main ground for rejecting the claim of the assessee is with respect of M/s A.K. Impex, Delhi. There is a finding in the impugned order that necessary evidence with the help of various documents regarding existence of the buyers like copy of bank account of the buyer, TIN of sales tax department, confirmation of broker, correspondence regarding receipt/remittance of DD/RTGS, detailed copy of account appearing in its books, sale invoices and confirmation certificate of the transporter with tanker numbers, who delivered the oil to M/s A.K. Impex against payment of freight were filed. In the statement of bank account of M/s A.K. Impex, reflecting payment of freight. The relevant portion from the conclusion of the learned CIT(A) is reproduced hereunder :- 6.4 As regard M/s. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts of the assessee. It has filed the copy of the accounts of the broker M/s Rajendra Kumar Arun Kumar, Gwalior through whom it had affected the sales to Mis A.K. Impex, Delhi. The appellant also filed the certificate from the transporter M/s H.G. Oil Carriers, 79, Transport Centre, Rohtak Road, New Delhi. It was certified by the transporter that it had loaded the Soya Refined Oil from the works of Mis Dewas Soya Limited, 96-97, Industrial Area, 3 A.B. Road, Dewas during the year 2007-08. The details of tanker nos. weight-of the oil and dates of dispatch were also provided. Perusal of the sale invoices shows that the assessee has maintained complete details of tankers, brokers and also who arranged the tankers by clearly mentioning in the sale invoices. 6.8 A.O. in his order has mentioned that appellant has not furnished any proof of transportation as it is not having lorry receipts or delivery challans as proof of transportation. Appellant has effected the sales of oil to M/s A.K. Impex, Delhi in oil tankers and on every sale invoice oil tanker no. was specifically mentioned. A.O. has not made any' investigation in respect of transportation of goods. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve records maintained by the appellant and its verification from sale invoices issued to above parties, it is evident that such receipts were against sale proceeds only. 6.12 The A.O has rejected the books of accounts uls 145 on account of non existence of the parties after 2 years, who purchases from. the appellant and payments made by him has been treated as cash credit uls 68 of the IT Act'61. The appellant is maintaining the quantitative stock records and the records show that the sales were effected to the party and goods were actually loaded and delivered on the tankers arranged by the buyer party. This fact is evident from the sales bills on which details of tankers nos., broker name and the person who has arranged the transport have been mentioned. The A.O. has not made any enquiry from the transporter, who transported the goods for the buyer party. The A.O. has also not given any finding on the quantitative stock record maintained by the assessee. If the A.O. has doubted the sales made by the appellant. then he was required to give effect to the closing stock tally shown by it in the trading account. The A.O. has not doubted the genuineness of the purchases mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike M/s Pravin Trading Co., M/s Mohan Traders and Maa Bhagwati Traders, etc. wherein the goods were delivered on the same day and sale invoices were issued quoting crossnumbers evidencing that such receipts were sale proceeds credited to the profit and loss account of the assessee. The entries were made in the stock register regarding sales which were in the nature of counter sales to these parties and such counter sales were doubted by the Assessing Officer without bringing any evidence on record. Uncontrovertibly, the brokers to whom brokerage was paid after deduction of TDS have also confirmed sale effected to these parties while recording their statement before the department. There is a further finding in the impugned order that the assessee effected sales of oil in tankers 279 dealers showing turnover to the tune of ₹ 67.63 crores out of which 6 dealers were out of the State of Madhya Pradesh. The transaction of cash deposit was in the nature of counter sale and delivery was given on the same day whereas DD/RTGS were received in advance either directly or through brokers against supplies which were effected within a week s time. Uncontrovertibly the assessee was maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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