Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2016 (9) TMI 915

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... esh, AM: This appeal by revenue and cross objection by assessee are arising out of order of CIT(A)-I, Kolkata vide appeal No. 446/CIT(A)-/3(4)/08-09 dated 16.01.2010. Assessment was framed by ITO, Ward-3(4), Kolkata u/s. 143(3)(ii) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2006-07 vide his order dated 30.12.2008. 2. The only issue to be decided in this appeal is as to whether the advance received from 469 parties by the assessee in the sum of ₹ 7,74,85,884/- could be taxed u/s 68 of the Act in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is engaged in the trading of Iron, Scrap and coal business. During the year under appeal, the assessee 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 ₹ 7,75,69,556/- to variou .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... The ld CITA observed that the more than 100 customers had also submitted affidavit affixing their respective photo confirming the advance payment and receipt of supply of sand in settlement of advance. The ld AO rejected the contentions of the assessee that advances were received from customers through bank drafts and sale made to those parties in subsequent years and advances getting knocked off and treated the entire receipt of advance as bogus and as belonging to the assessee and added the same u/s 68 of the Act on the following reasons:- (a) The assessee has no past experience in sand business. (b) The company had not commenced any business of sand trading and did not receive any advances. (c) Generally no advance is given in the nature of trade as carried on by the assessee. (d) Mr. Jaykant denied the transaction. (e) Age of 4 creditors out of 471 at the time of payment of advance were ranging between 20 to 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 rec .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... stranger by putting their Government job at stake. Accordingly the allegation leveled against the assessee was pointed as baseless and absolutely irrelevant. Moreover, all the 22 addressees on whose account, these allegations were leveled against by the ld AO, had duly complied to the notices u/s 133(6) of the Act and admitted to having given advances and confirmed the receipt of supply of sand in the financial year 2006-07 from the assessee against the said advance. 4.1. It was argued that no where the ld AO discussed the submission of those parties who had duly filed replies to notices u/s 133(6) of the Act together with their photo identity proof. It was submitted that the ld AO had sent letters on incomplete addresses, missing pin number, name of street, police station, district, etc. The same was brought to the notice of the ld AO during the course of assessment. The assessee took the pain and was able to find most of the defects in pin number, full postal addresses from internet, 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 t .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... assessee. 4.5. At page 6 para 6 of the order of ld AO , it was observed that M/s Shristi Developers Private Limited and Mr Chhotelal Shaw had paid advance of ₹ 45 lacs and ₹ 4.99 lacs against sale of sand of ₹ 15 lacs and ₹ 1.99 lacs respectively during the year and the balance amount remained outstanding as on 31st March 2006. It was explained that the above customers had categorically accepted to have given advances to the assessee against enquiry conducted u/s 133(6) of the Act. M/s Shristi Developers Private Limited is a regular income tax assessee and had also submitted a copy of ledger account of assessee as appearing in their books of accounts along with their audited accounts which duly tallied with assessee s records. In spite of this, the ld AO considered the balance amount of advances as unexplained cash credit u/s 68 of the Act after deducting the sales made during the year without having any adverse material on hand. 4.6. The ld AO in para 9 of his order had stated that in some cases, 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 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e for the reason best known to him. In respect of other two creditors, there might be typing error committed by the computer operator. Further, in response to notice u/s 133(6), the above two impugned customers have categorically accepted to have given advance to the appellant and also provided copy of their voter identity proof for their identification, paper book 2, page 203-205 paper book 4 page 6-9. These advances were subsequently settled against sales in assessment year 2007-08. The AO should have appreciated the factual position objectively rather than passively. The AO was erred in drawing adverse inference specifically when all other details are tallied identity is proved. 4.8. It was submitted that the ld AO had stated in part A of show cause letter dated 6.11.2008 that section 133(6) notices to parties like Subhash Pd. Yadav, Umesh Kumar, Manoj Kumar , Harendra Prasad and Ashok Kumar were returned unserved with remark Not found . But in page 9 of the assessment order, based on the replies received from these parties it was mentioned that advances were proportionate with their income and they were not income tax assessee. It was submitted that how these two sit .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... de letter dated 17.11.2008 to the ld AO. This was never given to the assessee and the assessee placed reliance on the decision of the Jaipur Tribunal in the case of Sohan Lal Jain vs ITO reported in 59 CTR (Tri)(JP) 17 wherein it was held that merely because a creditor turns hostile, the contention of the assessee setting up a cash credit should not be disbelieved otherwise the creditors could bring the assessee to ransom. 4.14. It was submitted that the ld AO at page 8 of his order had referred few names with the amount of advance admitted to have given to assessee are not income tax assessees and therefore concluded that they have no creditworthiness. It was argued that those parties had given factual position and admitted to have entered financial transaction with the assessee. It was stated that the fact as to whether those parties were income tax assessees or not were not the subject matter of their replies at all. Accordingly it was stated that the statement made by the ld AO in his order is untrue. Infact Mr Farid Hussain Khan, PAN AGFPK1148Q and Mr Subhash Pd. Yadav PAN AAUPY6856E gave their PAN card in the compliance u/s 133(6) of the Act but those were ignored. 4.15 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ponding income upon sale of sand to those impugned customers from whom advances were received by the assessee in the year under appeal. Detailed customer wise list of sales in the Asst Year 2007-08 were submitted to the ld AO in the rectification proceedings u/s 154 of the Act. The certified copy of the sales tax return relating to the financial year 2006- 07 obtained from Commercial Tax Officer was also furnished to corroborate the claim of sales in the subsequent year to those impugned customers. 4.19. It was argued that the ld AO had applied the ratio of judgment rendered in the case of Sumati Dayal vs CIT reported in 214 ITR 801 (SC) . The ld AO suspected that assessee has ever carried on business of sand in the absence of past experience and therefore possibility of receipt of advances is remote, consequently applied the above judgment. It was submitted that the reliance on the said judgment has no basis in view of the fact that the work order for raising sand were allotted by the Government of Bihar and the ld AO himself had allowed credit of TCS collected by Government of Bihar. Moreover, the assessee had paid royalty of ₹ 5,01,25,001/- in the Asst Year 2006-07 and .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ddition of ₹ 7,74,85,884 made u/s.68 of the I. T. Act, 1961 without properly appreciating the fact that the AO has brought adequate evidence on record to prove that the transactions with 469 parties were not genuine as the repayment by alleged sale of sand to such parties by assessee has not been conclusively established. (v) Ld. CIT(A) has erred on the facts circumstances of the case and in law in accepting the assessee's explanation that allowing credit of TCS in order u/s.154 of the I.T. Act proves the genuineness of sales made to 469 parties who have made advances. (vi) Ld. CIT(A) has erred on the facts circumstances of the case and in law in accepting the assessee's explanation that sales of sand to 469 parties in subsequent year are genuine without appreciating the fact that in respect of genuine sale of sand to other parties the payments are received only after sale of sand as per information given by assessee. (vii) Ld. CIT(A) has erred on the facts circumstances of the case and in law in deleting the addition of ₹ 7,74,85,884 made u/s.68 of the 1. T. Act, 1961 without appreciating that all these conditions viz. identities, genuin .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ffidavit affixing their recent photo confirming the entire transactions with the assessee. We find from the paper book that all the customers except Mr. Jaykant (advance received ₹ 49,000/-) had admitted that the advance deposit was made with the assessee out of their own money for purchase of sand. Some of them even admitted that advance to the assessee was paid by the group head of 8 to 10 persons out of money received from members of the respective group. 7.1. We find that the ld AO had duly accepted the fact of assessee supplying sand to these customers in Asst Year 2007-08 out of adjustment of advances received in the year under appeal during the course of granting credit of TCS in the rectification proceedings u/s 154 of the Act. It is not in dispute that the assessee had preferred rectification petition u/s 154 of the ct on 2.3.2009 for Asst Year 2007-08 seeking for credit of TCS deducted by Bihar Government u/s 206C(4) of the Act, enclosing the customer wise details corroborating the sales figure disclosed in the audited profit and loss account for the year ending 31.3.2007. The TCS credit was granted by the ld AO after extensive verification of the veracity of the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Year 2007-08 to the Bihar Government against the work order as evident from the audited financial statements of respective years and the same was allowed by the ld AO while determining the business income of the assessee. (e) Enquiries were conducted by the ld AO u/s 133(6) of the Act by sending notices to all the 470 customers of the assessee from whom the assessee had received advances against supply of sand. (f) All the 470 customers had duly responded to notice u/s 133(6) of the Act before the ld AO and confirming the fact of having paid the monies to the assessee and the same having got squared up against the supply of sand made by the assessee in the Asst Year 2007-08. (g) The sales made by the assessee in the Asst Year 2007-08 has been accepted by the ld AO in the rectification proceedings u/s 154 of the Act while granting the credit of TCS deducted by Bihar Government. (h) No adversity was found in the identity of the customers and their proof by the ld AO when replies were filed by the ld AO. (i) The ld AO had not commented in his order with any adverse remarks in respect of 416 customers who had replied in response to notices issued u/s 133(6) of the Act be .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 8377; 1.99 lacs respectively) and the balance amount that remained outstanding as on 31.3.2006 was treated as unexplained cash credit. This goes to prove that the ld AO had accepted the portion of advance as is attributable against sales made in the year under reference and treated the balance portion of the same advance amount an unexplained cash credit. (o) The entire sale of sand made by the assessee in the Asst Years 2006-07 and 2007-08 were duly subjected to Bihar VAT by the Bihar Government and certified copy of sales tax returns were also filed before us. The ld CITA had observed that the ld AO had also obtained certified copies of the sales tax compliances of the assessee directly from the Bihar Government in respect of sales of sand made by the assessee. 7.4. With regard to the advance received from Mr Jaykant in the sum of ₹ 49,000/- , we find that though the party had denied the fact of having transaction with the assessee and the ld CITA had stated that the assessee did not chose to cross examine Mr Jaykant when provided with an opportunity , the fact of monies received from him in the form of trade advance and subsequent sales made to him by supply of sand .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... try made in the order sheet which has no direct nexus with the present issue and while completely ignoring all the relevant materials and evidence available ? II. Whether the addition of ₹ 8,50,000/- to the income of the assessee as unexplained cash credit by the Tribunal is sustainable in law and/or is not unreasonable and perverse ? The decision rendered thereon is as under:- Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that ITO did not consider the material evidence showing credit worthiness and also other documents viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidi. These evidences were duly considered by the CIT (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the ITO. He further contended that when the Tribunal has relied on the entire judgment of the CIT (Appeals), therefore it was not proper to take up some portion of the judgment of the CIT (Appeals) .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ing 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. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the CIT (Appeals). We also found no single word has been spared to up set the fact finding of the CIT (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set asid .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates