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TMI Blog2016 (9) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... essee participated in tender and was awarded three work orders from Bihar Government for lifting sand from river flown in three districts of Bihar namely Patna, Bhojpur and Chapra involving more than 60 villages. Thus assessee enjoyed monopoly in sand business in these three districts. The ld AO observed that assessee had commenced trading of sand from January 2006 onwards. He observed that the assessee had advanced a sum of Rs. 7,75,69,556/- to various mining authorities as below:- Assistant Mining Officer, Arrah Rs. 4,44,53,209.50 Assistant Mining Officer, Chapra Rs. 11,37,175.50 District Mining Officer, Patna Rs. 3,19,79,171.00 Rs. 7,75,69,556.00 The sources of sums advanced to the said mining authorities were explained to be advances received from various customers of the assessee in the sum of Rs. 7,75,34,884/- . The ld AO sought to verify the genuineness of such advances received from customers. The assessee explained that it had received advances from various customers which would get adjusted against future supplies made to them by the assessee. 3.1. The assessee took advances of Rs. 7,75,34,884/- from 470 customers for supply of sand to them for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 23 years. (f) 10-20 notice u/s. 133(6) were received by other persons on behalf of addressee in 3-4 villages. (g) Father's name in four cases did not match with master roll. (h) Response from creditors were received without receiving back A/D card. (i) The assessee has managed the local post offices. (j) The assessee couldn't prove the source of customers from where advances to the company were funded. (k) The assessee had removed the deficiency in address against unserved notice within 2- 3 days of show cause letter. (l) Three replies from Mr. Ram Pukur Singh, Mr. Subhash Yadav & Mr. Umesh Singh were received in Oct. 08 against non service of notice u/s. 133(6) to them. (m) Replies from customers residing in one village namely Bijay Kumar from P.O. Koilwar, Dist. Bhojpur, Rakesh Kumar Tiwari from P.O. Panchrukhiya Kala, Dist. Bhojpur, Rana Pratap from P.O. Daulatpur, Dist. Bhojpur, Rajnath Sharma from P.O. Panchrukhiya kala, Dist. Bhojpur, Asraf Hussain from P.O. Koilwar, Dist. Bhojpur and Rita Kumari from P.O. Panchrukhiya kala, Dist. Bhojpur. The replies were computer print out in English language in same paper, same contents and fashion.. (n) M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, contacting some known persons from the village etc. Moreover, the ld AO himself admitted at page 2 & 3 of his order that undelivered notices were shown to the ld AR who started work in compiling the full address for onward submission to ld AO with a view to co-operate in the enquiry. It was argued that the ld AO should have appreciated the promptness of the ld AR instead of being suspicious especially when time barring period was fast approaching. 4.2. With regard to another allegation leveled by the ld AO in his order that certain parties had replied in October when no notices were served on them. In this regard, it was submitted that the ld AO had already sent the notices to those parties in Aug / Sept 2008 which were replied by them in Oct 2008 and still those names were included by the ld AO in the list of parties not served. 4.3. Since the assessee had commenced its sand trading business only from Jan 2006 onwards, it is very unlikely that huge advances were received by it from 470 parties to the tune of Rs. 8,02,84,884/- scattered in various villages within a short span of one month. In this regard, it was submitted that the suspicion of the ld AO has no basis specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, the parties giving reply have stated their age to be around 24 years and have been stated to be doing business since last 10 to 12 years i.e when their ages are around 9 to 14 years. The ld AO observed that it is unbelievable that persons had been doing business of sand as well as agricultural production since the period when they were 8 to 14 years old. The ld AO in the aforesaid observation had raised question about the age of four customers, namely Rakesh Kumar Tiwary, Smt Rita Kumari, Rana Pratap and Jai Prakash Singh. The assessee replied in this regard as follows:- "Rakesh Kumar Tiwary -Voter identity card Paper Book No. 3, page no.194 to page no. 196 provided by the Rakesh Kumar Tiwary directly to the Ld. AO, reveals the age 19 years as on 01.01.2005 and the advances was given to the appellant in December 2005 meaning thereby age around 20 years". "Smt. Rita Kumari - Voter identity card of Smt Rita Kumari Paper Book No. 4, page no.54 to 56 reveals the age 20 years as on 01.01.2005 and the advances was given to the appellant in December 2005." "Rana Pratap - Age of Mr. Rana Pratap from voter identity card Paper Book No. 4, page no.19 to 21 reveals the age 19 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned that advances were proportionate with their income and they were not income tax assessee. It was submitted that how these two situations could be possible. 4.9. It was submitted that the ld AO had written the following names twice just to establish large number of non-service of notice u/s 133(6) of the Act in order to justify his addition :- Ram Singh Yadav Anil Kumar Yadav Yogendra Singh Ramlal Singh Smt Gita Devi R.N.Singh 4.10. It was submitted that the ld AO alleged that notice u/s 133(6) of the Act to the following parties were served but no reply was received from them. Still these names were further included in Para A claiming notice to the following parties were returned unserved :- Ashok Kumar Uday Kr Singh Rita Kumari Uma Devi Sri Umesh Kumar 4.11. It was further submitted that the ld AO vide its show cause letter dated 6.11.2008 had stated that out of 471 notices u/s 133(6) of the Act, 149 notices were returned back unserved. In reply to this show cause, the assessee had filed its submission dated 26.12.2008 wherein it was stated that the letters issued by the ld AO had numerous defects like wrong address, wrong district, wrong name e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAUPY6856E gave their PAN card in the compliance u/s 133(6) of the Act but those were ignored. 4.15. It was submitted that Mr Shambhu Roy had admitted to have given Rs. 49,875/- vide bank draft and had enclosed his election ID card for his identification. Similarly Mr Kuldip Yadav had also admitted to have given Rs. 49,900/- vide bank draft and enclosed his election ID card. Likewise all other replies were also received by the ld AO confirming to have given advances and adjustment of entire advance against supply of sand at subsequent date. It was submitted that Mr Bhola Prasad Yadav of Koilwar, Bhojpur had replied to ld AO with duly sworn affidavit together with his recent photograph confirming that he had given Rs. 5,00,000/- on 31.12.2005 vide DD No. 111208 and purchased 625 trucks of sand in Financial Year 2006-07 of total value of Rs. 5,00,000/- . 4.16. Without prejudice to the aforesaid arguments, it was submitted that the ld AO in his order had raised questions about specific 54 persons out of 470 persons and had not provided any specific explanation / objections about the remaining 416 customers from whom advances were received by the assessee. At least the advances rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d paid royalty of Rs. 5,01,25,001/- in the Asst Year 2006-07 and Rs. 14,76,67,588/- in the Asst Year 2007-08 to the Government of Bihar against the work order as evident from the audited profit and loss account of respective years. With regard to another case relied upon by the ld AO on the decision of CIT vs Durga Prasad More reported in 82 ITR 540 (SC), it was submitted that the said decision is actually in favour of the assessee in the facts of the instant case as it was held that 'Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real'. In the instant case, it is not in dispute that the supply of sand had been made by the assessee in the Asst Year 2007-08 to those customers from whom advances were received and the same were also subjected to due verification by the ld AO in the rectification proceedings u/s 154 of the Act. In these circumstances, 'What is apparent is real' is proved beyond doubt. 5. The ld CITA appreciating the aforesaid contentions of the assessee and on detailed examination of the relevant pages of the paper book filed before him, deleted the addition made towards advance received from customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, genuineness of transaction & capacities of parties in respect of cash credits should be satisfied cumulatively, which is not there in this case. (viii) On the facts & circumstances of the case the order of Ld CIT (A) is perverse, hence same may be set aside and order of AO be restored." The assessee had raised the following cross objections before us :- "1. That under the facts & circumstances of the case, Ld. CIT(a) erred in confirming the addition of Rs. 49,000/- being advance given by Mr. Jaykant against sale of sand at subsequent date despite the assessee submitted confirmation letter & other documentary evidence to prove its bonafide. 2. That the CIT(A) was not justified in sustaining addition Rs. 49,000/- on the basis of hostile & vindictive witness." 6. The ld DR reiterated the findings and observations made by the ld AO in his order for justifying the addition made u/s 68 of the Act. In response to this, the ld AR reiterated the submissions made before the ld CITA and took us to the relevant pages of the paper book filed before us. 7. We have heard the rival submissions and perused the materials available on record including the various paper books filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective Bihar Sales Tax Department containing customer wise details of the assessee. We find that the claim of sales to the depositors (i.e customers from whom advances were received) also tallied with that of the enquiries conducted u/s 133(6) of the Act. We find that the assessee had duly proved its case by showing that deposits so found credited in its books was the money belonging to the customers to whom sales had been made in the subsequent Asst Year 2007-08 and their account stood settled by the supply of sand to them. These facts were admitted and confirmed by all the customers except Mr Jaykant in an enquiry conducted u/s 133(6) of the Act by the ld AO. It is not in dispute the sales so confirmed and admitted by those depositors were duly reflected as such in the audited profit and loss account of the assessee for the year ended 31.03.2007. 7.2. We find that the ld AO had made a wild allegation that the assessee had managed the local post office. When an enquiry was conducted at the back of the assessee u/s 133(6) of the Act and notices were sent to more than 50 post offices in three districts of Bihar which admittedly worked under Central Government and not under ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (j) It has been proved beyond doubt that the general practice in the sand industry is that the willing customers would pay advance to the supplier of sand. In the instant case, some of the customers were even common who had previously purchased the sand from the cooperative society ( M/s Pareo Sramik Sahyog Samiti Ltd, Pareo, Bihar) by making advance payments, and had also transacted with the assessee by purchasing sand by following the age old practice of making advance payments. Since the work order is obtained by the assessee through the process of tender from the Bihar Government, the prospective customers would throng on the assessee to get their supplies ensured by making advance payments. This aspect cannot be doubted with in the facts and circumstances of the case when more so, it has been proved on record that the major source of income in Bihar is agriculture and business of sand. These facts are not disputed by the revenue before us. (k) All the allegations of the ld AO and discrepancies alleged to have existed have been duly met by the ld AR before us point by point and with sufficient evidences by making specific references to the detailed paper book filed and form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been received by the assessee is only trade deposit from customers which has been adjusted against supplies of sand and sales booked by the assessee have been duly accepted by the revenue in the Asst Year 2007-08. In these circumstances, holding that the receipt of money in the form of advance from customers is a mere colourable device by the ld AO is devoid of any merit. In any case, the provisions of section 68 of the Act could not be invoked in respect of trade deposits received from customers. Reliance in this regard is placed on the following decisions in support of this proposition :- (a) Decision of Third Member of Agra Tribunal in the case of ITO vs Laxman das Makhija reported in (2009) 116 ITD 47 (TM ) (b) Decision of Hon'ble Allahabad High Court in the case of CIT vs Bhital Das Modi reported in (2005) 276 ITR 517 (All) (c ) Decision of Hon'ble Delhi High Court in the case of CIT vs Tulip Finance Ltd reported in (2009) 178 Taxman 182 (Del) (d ) Decision of Hon'ble Delhi High Court in the case of CIT vs Chemi Kleen India (P) Ltd reported in (1990) 181 ITR 198 (Del) (e ) Decision of Hon'ble Bombay High Court in the case of CIT vs S.D. Investment & Trading C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a decision of the Supreme Court in the case of Udhavdas Kewalram Vs. Commissioner of Income-Tax, Bombay City reported in 66 ITR 462 In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must in deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT (Appeal) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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