TMI Blog2005 (4) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3 crores and another cheque No. 470216 for Rs. 2,50,000. Thereafter, the assessee returned money to the extent of Rs. 2 crores during the period 8th Oct., 1999 to 11th Oct., 1999. However, the sum of Rs. 2 crores was again received by the assessee during the period 3rd Feb., 2000 to 7th Feb., 2000, by cheque Nos. 352950 to 352954 of Rs. 40 lakhs each. The AO found that the series of the cheque numbers first was from 352210 to 352221 and thereafter it was from 352950 to 352954. The AO issued a letter dt. 3rd July, 2003, to the assessee wherein the AO pointed out that neither the letter of confirmation nor the copy of account had been filed in the case of Kamlesh Steel (P) Ltd. The AO asked the assessee to furnish certain specified information in respect of this account and, in particular, he asked the assessee to establish identity, creditworthiness and genuineness of the transaction, including PAN Number of the creditor and the particulars of assessment in case of the creditor. The AO also asked the assessee to explain the current position of the account as to whether the funds had been returned back and, if so, when and how? According to the AO, the case was fixed thereafter on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not genuine. 3. The learned AO held that in spite of opportunities, the assessee could not establish genuineness of the transactions recorded in the name of Kamlesh Steel (P) Ltd. The alleged creditor did not have the means to advance this kind of money to the assessee and appeared only to be a name lender without having any real funds. Balance sheet of Kamlesh Steel (P) Ltd. for asst. yr. 2000-01 revealed sundry creditors to the tune of Rs. 7.36 crores and unsecured loans of Rs. 6.98 crores, whose creditworthiness was not proved during the block assessment proceedings. It was, therefore, clear that Kamlesh Steel (P) Ltd. had no genuine business. Therefore, deposits in the name of that party in the books of the assessee remained unexplained within the parameters of s. 68. Even identity was not proved because it was a bogus concern just for the purpose of laundering money and to operate as a name lender. No director of that company was produced. The assessee did not even furnish complete and correct address of the party. It was only at the last leg of the case that the assessee supplied residential address of a director, who had already expired. The learned AO, therefore, held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of search. The summons issued by the AO to the four fictitious parties remained unserved. Kamlesh Steel (P) Ltd. showed commission payments of lakhs of rupees to a number of parties but all such parties were found to be non-existent. It showed professional receipts of crores of rupees which could not be substantiated. On these facts, the conclusion was clear that Kamlesh Steel was a mere name lender and was being operated for the purpose of giving accommodation entries. In case of the assessee, M/s Shiv Cable Wire Industries, the A 0 asked for the examination of a director of Kamlesh Steel but that was not done. The assessee furnished address of the deceased director and the information regarding the deceased director's son replacing the deceased was given later. Even the new director was not produced. There was no weight in the argument that creditworthiness of Kamlesh Steel was established by the bank account it maintained. It was a well known fact that most of the fictitious concerns engaged in the business of accommodation entries did so by opening accounts in one or the other bank. The entries of funds received in the bank account were in the names of non-existing par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the money had been received by assessee through account payee cheques. The amounts borrowed from Kamlesh Steel were eventually repaid by the assessee and the repayments were also through account payee cheques. The learned counsel argued that the assessee had done all that it could to establish the genuineness of its transactions with Kamlesh Steel. The burden was, therefore, entirely on the Revenue to establish that the apparent was not true. 9. The learned Departmental Representative argued that while on the question of burden of proof the fact should not be lost sight of that the addition had been made by the AO under the provisions of s. 68 of the Act. It was well known that the ploy of introducing one's own unaccounted income in the name of deposit from third party was rampant practice and, therefore, the provisions of s. 68 cast burden of proof upon the assessee. He in particular relied upon the findings of the learned CIT(A) at pp. 9 and 10 of the impugned order. The learned Departmental Representative argued that apart from the documentation which was carefully crafted by the assessee in collusion with Kamlesh Steel (P) Ltd., the assessee had done precious little to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention also of the learned AO that response of the assessee to his show cause letter was rather lukewarm. The assessee sought adjournments several times and while furnishing the address of Kamlesh steel (P) Ltd., did not inform the AO that it was residential house of Mr. N.K. Taneja, who had already died and was replaced by his son, Shri Munjal Taneja. We do not see force in the contentions of the assessee raised before the learned CIT(A) that the AO was not justified in relying upon the assessment proceedings in the case of Kamlesh Steel (P) Ltd. With a view to verify the financial capacity as well as genuineness of transaction of the assessee, the assessment records of Kamlesh Steel (P) Ltd. constituted the most relevant material There is clear finding of Hon'ble Supreme Court in the case of CIT vs. Orissa Corpn. (P) Ltd. (1986) 52 CTR (SC) 138: (1986) 159 ITR 78 (SC) that where it is in the knowledge of the AO that the creditor is income-tax assessee and the AO is in possession of the particulars of assessment records of the creditor, it is mandatory to examine the source of income of the alleged creditor to find out whether they were creditworthy or were such who could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter in April, the assessee was selling goods at the rates ranging from Rs. 22 to Rs. 24 per kg. The learned AO noted that there was an agreement also with M/s Mega Overseas for import of goods by them @ Rs. 32 per kg. in the month of June, 1999. As against that agreement, the assessee had sold goods to others at a much lower rate. During the course of assessment proceedings, the assessee contended that there was a slump in the market. The learned AO did not agree to this contention because Mega Overseas had agreed to purchase @ Rs. 32 per kg. in the month of June, 1999. The learned AO held that the assessee could have easily sold its entire purchases to Mega Overseas at higher rate. There was no reason as to why the assessee should be selling goods at around Rs. 24 per kg., while the same could be sold to Mega Overseas for Rs. 32 per kg. The assessee argued that the goods sold at lower rate were defective. The quality to be sold to Mega Overseas was much superior. According to the assessee, Mega Overseas had informed that on inspection, the material was found to be not acceptable. The learned AO did not accept this Explanation for want of further details as to who had inspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng before us, the learned counsel for the assessee argued that there was considerable amount of turmoil in the market because small-scale industries were being relocated. The authorities below had disbelieved this specific Explanation given by the assessee without any enquiry. The learned counsel referred to details of sale invoices at pp. 151 to 155 of the paper book. He submitted that in certain months, the assessee had sold at higher price. Price variation depended upon fluctuation in the market as well as variation in the quality of goods being sold. Thereafter, the learned counsel referred to working given at p. 148 of the paper book and he argued that the opening stock had been valued by the assessee @ Rs. 30.02 per kg. and not @ Rs. 32 per kg. as assumed by the AO as well as the learned CIT(A). According to the learned counsel the disallowance of the loss claimed was made based on suspicion. There was not even one instance of suppression of sale or any manipulation in the books of account brought on record by the authorities below. 14. The learned Departmental Representative emphasized that most of the sales of the assessee were in cash. The small amount of sale was made t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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