Non submission of the details of creditors due to seized of books of accounts by the revenue cannot be treated as ground for making addition

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “B”, KOLKATA

Before Shri Mahavir Singh, Judicial Member.

and

Shri C.D.Rao, Accountant Member

ITA No.1256/Kol/2010

Assessment Year: 2007-08

I.T.O., Ward-1(2), Kolkata

(APPELLANT)

Vs

M/s.Bajrangbali

Engineering Co.Ltd.,

Kolkata

(PAN: AABCB 3139 R)

(RESPONDENT)

For the Appellant: Shri A.K.Pramanik

For the Respondent: Shri A.K.Banerjee

Date of Hearing: 05.06.2012.

Date of Pronouncement: 29.06.2012.

ORDER

Per Shri C.D.Rao, AM

The above appeal is filed by Revenue against order dated 31.03.2010 of the ld. CIT-(A)-I, Kolkata pertaining to A.Yr. 2007-08.

2. The Revenue has raised the following grounds of appeal:-

“1. Ld.CIT (A) has erred on the facts and circumstances of the case in deleting the addition of Rs.11,44,900, being bogus liability on the basis of assessee’s explanation that this amount was already added in ÀY. 1981-82 whereas the assessment order dated 3 1.03.1994 for A.Y. 1981-82 revealed that no such addition was made.

2. Ld. CIT(A) has erred on the facts and circumstances of the case in holding the outstanding liability of Rs.11,44,900 in respect of two creditors was a part of the amount addition of Rs.10,46,000 made u/s.68 of the I.T. Act, 1961 in the assessment order for A.Y. 1981-82 whereas the said addition of Rs.10,46,000 was made of the peak amount of cash credits from 23 persons who paid money in cash and received back  money in cash during the financial year 1980-81 and no part of outstanding liability as reflected in the balance sheet as on 3 1.03.1981 was included in the amount of said addition made.

3. Ld. CIT(A) has erred on the facts and circumstances of the case in deleting the addition of outstanding liability in the name of M/s. Radheshyam Laxmichand being part of the amount addition of Rs. 11,44,900 without verifying the fact that the list of creditors in respect of whom addition u/s.68 of the I.T. Act, 1961 was made for A.Y. 1981-82 did not include the name of the said creditor as claimed by the assessee. 4. Ld. CIT(A) has erred on the facts and circumstances of the case in deleting the addition of outstanding liability in the name of M/s. ABC Corporation Ltd. being part of the amount addition of Rs. 11,44,900 without verifying the fact that the list of creditors in respect of whom addition u/s 68 was made for A.Y.1981-82 included the name of the said creditor for cash, received and refunded, by the assessee during the financial year 1980-81 and not for any outstanding amount in the name of the said creditor appearing in the balance sheet as on 31.03.1981.

5. CITA has erred on the facts and circumstances of the case in deleting the addition Rs.34,82,972 being the amount of liability under the head ‘Sundry Creditors for Goods, Services and Expenses’ by accepting assessee’s explanation that such liability being more than 15 years old was genuinely payable in absence of any documentary evidence.

6. Ld. CIT(A) has erred on the facts and circumstances of the case in deleting the addition of Rs.34.82,972 by holding the said amount was a genuine liability by accepting the assessee’s explanation in contravention of the provisions of Rule 46A of the I. T. Rules, 1962 by not giving the Assessing Officer an opportunity to examine the evidence/document produced before him by the assessee.

7. The appellant craves leave to amend, modify and alter any grounds of appeal during course of hearing of the case.”

3. At the time of hearing before us the ld. DR appearing on behalf of the revenue has submitted a synopsis of the assessment and appellate proceedings for the Asstt.year 1981-82 which are as under:-

“1. The first assessment order was passed in this case u/s.143(3)/144B on 12.04.1984. A search & seizure operation was conducted in the case of the assessee on 04.11 .1982. Various documents and books of accounts were seized and the contents of such seized materials were duly considered while framing the assessment order. Specifically seized documents vide Identification Nos. JT-6, JT-8, AKB-1 & AKB-4, which recorded several squared off accounts in the names of various persons showing cash credit entries in the books of the assessee. There were 23 such accounts including that of M/s. ABC Corporation Ltd. Peak credit balance of each such account were taken together which amounted to Rs.22,05,000 and was added to the total income of the assessee treating the said amount as unexplained Cash Credit u/s.68 of the I.T. Act. 1961 since the assessee could not substantiate its claim regarding the source and reasons for such cash credit entries in its account.

2. Appellate order passed on 28.02.1985 setting aside the assessment order with the direction for “reframing order after issuing notice u/s.131 to all the loan creditors and also giving reasonable and sufficient opportunity to the appellant to place its case properly”.

3. Copy of confirmatory account of M/s. ABC Corporation Ltd. filed by the assessee along with its letter dated 05.03.1987 during the course of set aside assessment proceedings for the assessment year 1981-82 revealed that as on 31.03.1983 there was a credit balance of Rs.5,000 only and all other transactions were squared off prior to that period. Since, as admitted by the assessee, the normal business got discontinued after the search & seizure operation; there was no question of getting further advance for supply of goods. Therefore, the amounts shown as advance found in the balance sheet as on 31.03.2007 was not at all related to the alleged transaction with M/s. ABC Corporation Ltd., a part of which was added to the income of the assessee for the assessment year 1981-82.

4. As per the direction of the CIT(A) the assessee was given sufficient opportunity to represent its case and after considering the facts and circumstances of the case the assessment order was passed on 18.03.1987 making addition u/s.68 once again for unexplained Cash Credit entries in respect of all the 23 persons mentioned in the original assessment order. However, the quantum of addition on the ground got reduced to Rs.10,46,000.

5. The assessment order was again set aside by the Ld. CIT(A) vide order dated 16.06.1988 with the direction, inter alia, “to reconsider the addition of Rs.10,46,000 treated as Peak Cash Credit” after giving the assessee “a fair chance of explanation and defence’.

6. The assessee was once again given sufficient opportunities to defend its case and to explain why. inter alia. addition u/s.68 amounting to Rs.10,46,.000 on account of Peak Cash Credits should not be made. But, as usual, the assessee failed to substantiate or produce any evidence in support of its claims. Therefore, the assessment order was passed on 27.03.1991 computing the total income as per the order dated 18.03.1987.

7. The Ld. CIT(A), vide his order dated 15.11.1991 set aside the assessment order once again with the direction to reframe the order after reexamining the case afresh.

8. After giving sufficient opportunities to the assessee and issuing fresh notices u/s.131 to the creditors, all of which returned unserved, a fresh assessment order was passed on 31.03.1994 adding, inter alia, Rs.10,46,000 as unexplained Cash Credit u/s.68 with the total income of the assessee as was done in the previous assessment order passed for the same assessment year.

9. The Ld. CIT(A) vide his order dated 30.06.1994 deleted the addition and the Department preferred appeal before the ITAT. The Hon’ble ITAT ‘E’ Bench vide its order dated 02.09.2000. upheld the addition on account of unexplained Cash Credit u/s.68 amounting to Rs. 10.46.000. The assessee did not prefer further appeal.”

3.1. Keeping in view of the above, the ld. DR for the revenue requested to upheld the action of AO by setting aside the orders of ld. CIT(A).

4. On the other hand, the ld. Counsel appearing on behalf of assessee relied on the order of ld. CIT(A) and further submitted that in the facts and circumstances of the case provision of section 41(1) are not at all applicable. He further filed an additional evidence which is the receipt of Municipality Property Tax issued by Bally Municipality, Howrah. Therefore, he requested to upheld the action of ld. CIT(A).

5. After hearing the rival submissions and on careful perusal of materials available on record, it is observed that the ld. CIT(A) has deleted the advance of Rs.11,44,900/- by observing that the ld. CIT(A) while deleting the addition of Rs.11,44,900/- has accepted the contention of the assessee that the entire amount of such receipts was included in the total income of the assessee in the assessment for A.Yr.1981-82 where the assesee failed to prove such credit entries in the books on production. In support of this contention the ld. Counsel for assessee filed a copy of the said assessment order for A.Yr.1981-82. The acceptance of the above submission is factually incorrect. When once the assessee has shown this as advance this will not pertain to the character of the income.

5.1. As regarding the other addition of Rs.34,82,972/- on account of Sundry creditors the ld. CIT(A) has deleted the same by relying upon the decision of the Hon’ble Apex Court in the case of CIT vs. Sugauli Sugar Works (P) Ltd. 236 ITR 518 (SC) without going into the facts of the case. In this case the assessee has not filed even the details of the sundry creditors and when the Bench asked for the list of sundry creditors outstanding since several years, the ld. Counsel for assessee has submitted that the books of account relating to A.Yr. 1981-82 are already seized by the revenue and lying with the revenue authorities till now. Therefore he is unable to submit the details. Keeping in view of the above and since the assessee has filed the additional evidence in support of the demand of the municipality tax we consider it fit to set aside the order of the ld. CIT(A) and restore both the matters to the file of AO to re-decide the same afresh after giving a reasonable opportunity of being heard to assessee and after giving the certified copy of the relevant documents which was seized by the revenue to the assessee in order to substantiate its claim. We order accordingly.

6. In the result the appeal of revenue is allowed for statistical purposes.

Order pronounced in the court on 29.06.2012.

                                                   Sd/-                          Sd/-

                                          Mahavir Singh,            C.D.Rao,

                                        Judicial Member    Accountant Member.

Date: 29.06.2012.

R.G.(P.S.)

Copy of the order forwarded to:

1. M/s.Bajrangbali Engineering Co.Ltd., 264, G.T.Road, Howrah-711 204.

2 I.T.O, Ward-1(2), Kolkata.

3. The C.I.T.

4. CIT (A)-I, Kolkata.

5. The CIT (DR), Kolkata Benches, Kolkata

True Copy,

By order,

Deputy /Asst. Registrar, ITAT, Kolkata Benches