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Income Tax Appellate Tribunal, GAUHATI BENCH: GUWAHATI
Before: Shri A. T. Varkey, JM]
This is an appeal preferred by the assessee against the order of Ld. CIT(A)- Dibrugarh dated 16.10.2018 for A.Y. 2012-13
The relevant grounds of appeal
raised by the assessee are as under:
1. For that the claim for deletion of addition amounting to Rs. 9,07,239/- shown as advance against sale received from one Shri Hridayananda Konwar, Chowkidinghee Dibrugarh, FY 2011-12 was rightly contested before the Ld. CIT(A) in course of appeal hearing and should have been favourably considered by him.
2. For that the confirmation of addition of Rs. 9,07,239/- as unexplained cash credit u/s 68 of the Act duly shown as advance against sale received from Shri Hridayananda Konwar, Chowkidinghee, Dibrugarh is bad in law as well as in facts and needs deletion in full.
3. The sole issue raised by the assessee is against the action of Ld. CIT(A) in confirming the addition of Rs. 9,07,239/- u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as Act).
Brief facts as noted by the AO is that he noticed certain sums as outstanding liability of the assessee firm as on 31.03.2012, so he asked the Ld. AR to furnish the 1 | P a g e M/s Jain Enterprises A.Y. 2012-13 party-wise details of the liability and after receiving the same, in-order to verify the genuineness of the transaction between them, the AO issued notice u/s 133(6) of the Act to some of the creditors and the AO acknowledges that he also cross-checked the books of account of the assessee. According to AO, the liability shown by the assessee firm against Shri Hridayananda Konwar, Chowkidinghee, Dibrugarh (hereinafter referred to “H Konwar”) was to the tune of Rs. 9,07,239/- as on 31.03.2012. So, when he examined the veracity of this claim of assessee by issuing notice u/s 133(6) of the Act, the said party (H Konwar) informed the AO that there was no liability in existence in the year end and it was “Nil” as on 31.03.2012. This adverse fact was brought to the notice of the Ld. A.R of the assessee by the AO and certain correspondences between him and Shri Hridayananda Konwar has been re-produced in the assessment order. The AO notes that Shri Hridayananda Konwar submitted as under: “With reference to your query in connection of scrutiny proceeding of M/s Jain Enterprises, H. S. road, Dibrugarh, PAN- AABFJ4678C for the assessment year 2012-13, I submit as follows:
1. 1. During the Financial Year 2009-10 payment amounting to Rs. 3,00,000/- was given to M/s Jain Enterprises against full payment of the bills for my purchases of cement form them during the said year itself. No advance payment was given by me nor was any amount payable due to them. My account balance with M/s Jain Enterprises at the close of the financial year 2009-10 was Nil.
2. During the financial year 2010-11 total payment to Rs. 23,71,863/- was given to M/s Jain Enterprises against full payment of the bills for my purchases of cement from them during the said year itself. No advance payment was made by me nor was any amount payable due to me. My account balance with M/s Jain Enterprises at the close of the financial year 2011-12 was Nil.
3. During the financial year 2011-12 as informed to you earlier also vide my reply dated 28.10.2014, there was no transaction with M/s Jain Enterprises. There was no outstanding receivable from them nor was any amount payable due to them. My account balance with M/s Jain Enterprises at the close of the financial year 2011-12 was Nil.”
According to AO the aforesaid submission of M/s Jain Enterprises was confronted with the assessee on 08.12.2014 and he was asked to explain the difference of liability of Rs. 9,07,239/- shown as on 31.03.2012 for AY 2012-13. However, AO notes that since there was no satisfactory reply from assessee, the AO made an addition of Rs. 9,07,239/- as unexplained cash credit u/s 68 of the Act and passed the assessment order dated 20.03.2015. M/s Jain Enterprises A.Y. 2012-13 5. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the same by holding as under: “6. Ground No. 3: The ground is against addition of Rs. 9,07,239/-. 6.1. Assessee showed liability of Rs. 9,07,239/- payable to H. Konwar, Dibrugarh. The AO wrote letter u/s 133(6) to the said person asking him to confirm details of transactions with assessee. Shri Konwar replied that there were transactions between him and assessee in FYs 2009-10 and 2010-11. He paid sums of Rs. 3,00,000/- and Rs. 23,71,853/- in the respective years for full payment of bills raised in his case. No advance was given by him to assessee and that there was no transaction in FY 2011-12 which is relevant to assessment year under consideration. The A/R was shown copy of letter received from H. Konwar. According to the AO, no explanation was offered by the assessee. He therefore, treated the sum of unexplained cash credit u/s 68 of the Act. 6.2. In appeal, the A/R strongly contested the decision taken by the AO. He filed a reconciliation statement of accounts with Shri H. Konwar. On examination of the said reconciliation, it is seen that some bills were raised by Cement House, a partnership firm distinct from assessee. Some payments were also mentioned to have been received by Cement House. It is not understood how the accounts of Cement House and Jain Enterepise got mixed up when they were separate persons and liable to taxation separately. A/R did not produce copies of account of the two firms evidencing transactions between the two firms and Shri H. Konwar. It is not understood how the bills raised by Cement House got paid into account of assessee. It is also not explained as to how advance was given by customers for purchases of cement. Normally, purchasers will take the goods on credit. Assessee also gave copies of certificates from Punjab National Bank in which it was stated that certain cheques drawn on UCO Bank and SBI were credited into bank caccount of assessee. The A.R claimed that the cheques were received from H. Konwar as advances. But he is unable to give proof that the cheques were actually received from Mr. H. Konwar. 6.3 The party who was stated to have given the advance had denied having given any such advances to assessee. If assessee had been in regular business transaction with the said party, it would not be difficult for it to get positive confirmation from the party. Reconciliation submitted by assessee cannot be relied upon. Certificates from Bank also do not give any proof that cheques were actually received from H. Konwar. In view of above discussion, addition of Rs. 9,07,239/- is confirmed.”
Aggrieved the assessee is before me and raised this issue only.
The Ld. A.R of the assessee Shri R. K. Chowdhry assailing the impugned action of the Ld CIT(A) drew my attention to page 4 of his written submission in which the accounting details concerning the copies of account of Shri H. Konwar
ITA No. M/s Jain Enterprises A.Y. 2012-13 with the assessee in two concerns concerns i.e. M/s Jain Enterprises and M/s Cement House i.e. M/s Jain Enterprises and M/s Cement House (sister concern) for the period from 01.04.2009 to 31.03.2012 are captured as given (sister concern) for the period from 01.04.2009 to 31.03.2012 are captured as given (sister concern) for the period from 01.04.2009 to 31.03.2012 are captured as given below:
In order to support the above ledger account of In order to support the above ledger account of Shri H. Konwar in the books of Shri H. Konwar in the books of assessee (M/s. Jain Enterprise), the assessee has furnished the following details for assessee (M/s. Jain Enterprise), the assessee has furnished the following details for assessee (M/s. Jain Enterprise), the assessee has furnished the following details for ready reference. M/s Jain Enterprises A.Y. 2012-13 9. The Ld. A.R submitted that from a perusal of aforesaid details it would be clear that as against the sum of Rs. 1,49,672/- payable to customer, the even amount was receivable from M/s Cement House and in effect resulting in Nil balance in the customers’ account in assessee’s book during the account closer as on 31.03.2013. The Ld. A.R drew my attention to page 6 of his written submission wherein the assessee had given details of accounting entries effected from Shri Hridayananda Konwar in the records of M/s Cement House (sister concern) from 01.04.2009 to 31.03.2013 which is as under:
ITA No. M/s Jain Enterprises A.Y. 2012-13 10. Thereafter he drew my attention to the details of payment made by Shri Thereafter he drew my attention to the details of payment made by Shri Thereafter he drew my attention to the details of payment made by Shri Hridayananda Konwar which has been brought out to page 7 of W.S. which is as Hridayananda Konwar which has been brought out to page 7 of W.S. which is as Hridayananda Konwar which has been brought out to page 7 of W.S. which is as under:
According to Ld. A.R apart from the effective entries passed in accounts there According to Ld. A.R apart from the effective entries passed in accounts there According to Ld. A.R apart from the effective entries passed in accounts there in-house transfer entries were also passed with the sister concern M/s Jain Enterprise er entries were also passed with the sister concern M/s Jain Enterprise er entries were also passed with the sister concern M/s Jain Enterprise in the above ledger account of in the above ledger account of Shri Hridayananda Konwar in regards of M/s Cement in regards of M/s Cement House as given below: M/s Jain Enterprises A.Y. 2012-13 12. According to Ld. A.R from the above details it would appear that as against the sum of Rs. 1,49,672/- receivable from customer even amount was payable to Jain Enterprise which in effect resulted in NIL balance in the customer’s account in assessee’s books as on 31.03.2013.Thus, according to Ld. A.R. this indicates that balance in the name of Shri Hridayananda Konwar as on 31.03.2013 were NIL.
Moreover, the Ld. A.R. drew my attention to page 4 of AO wherein the AO has reproduced the letter / reply given by Shri Hridayananda Konwar pursuant to AO’s notice u/s 133(6) of the Act which was the basis from the AO to make addition of Rs. 9,07,239/- wherein it has been stated by Shri Hridayananda Konwar that the sum of Rs. 26,71,863/- (Rs. 3,00,000/- + Rs. 23,71,863/-) was paid by him. However, it was pointed out to the AO that it was not Rs.26,71,863/- but it was an amount of Rs. 29,12,838/- i.e. (Rs. 2,40,975/- + Rs. 3,00,000/- + Rs. 1,59,863/- + Rs. 22,12,000/-) which was paid by Shri Hridayananda Konwar as per the certificate issued by him as on 28.08.2019 which is placed at page 9 of PB.
The Ld. A.R. drew my attention to the letter / reply by Shri Hridayananda Konwar which is reproduced at page 4 of assessment order wherein Shri Hridayananda Konwar has confirmed that during FY 2010-11 NIL balance in the ledger account of M/s Jain Enterprise as per his records and that no advance of the assessee, a balance amount of Rs. 9,07,239/- was appearing as advance received from him as on 31.03.2011 which continued upto 31.03.2012 which fact the assessee has been constantly maintained.
The Ld. A.R. explained that there were two types of cement sales effected by it while dealing with Shri Hridayananda Konwar. They are i) local Sale and ii) Transit Sale. Giving details of local sale effected by the assessee he drew my attention to page 8 is as under:
ITA No. M/s Jain Enterprises A.Y. 2012-13
According to Ld. AR, the above transit sale of cement was effected by According to Ld. AR, the above transit sale of cement was effected by According to Ld. AR, the above transit sale of cement was effected by endorsement of Railway Receipt No. 262000390 dated 04.12.2010 endorsement of Railway Receipt No. 262000390 dated 04.12.2010 endorsement of Railway Receipt No. 262000390 dated 04.12.2010 loaded from Jhinkpani to New Tinsukia in favour of Shri Hridayananda Konwar. Jhinkpani to New Tinsukia in favour of Shri Hridayananda Konwar. Jhinkpani to New Tinsukia in favour of Shri Hridayananda Konwar.
Thereafter the Ld. A.R drew my attention to the above transit sale of cement Thereafter the Ld. A.R drew my attention to the above transit sale of cement Thereafter the Ld. A.R drew my attention to the above transit sale of cement (when cement was in transit and did not reach its destination) was effected by (when cement was in transit and did not reach its destination) was effected by (when cement was in transit and did not reach its destination) was effected by endorsement of Railway Receipt No. 262000390 dated 04.12.2010 loaded from ailway Receipt No. 262000390 dated 04.12.2010 loaded from ailway Receipt No. 262000390 dated 04.12.2010 loaded from Jhinkpani to new Tinsukia in favour of Shri Hridayananda Konwar . According to Jhinkpani to new Tinsukia in favour of Shri Hridayananda Konwar . According to Jhinkpani to new Tinsukia in favour of Shri Hridayananda Konwar . According to Ld. A.R., the difference between two sales are that in the case of local sale from Ld. A.R., the difference between two sales are that in the case of local sale from Ld. A.R., the difference between two sales are that in the case of local sale from Dibrugarh site local VAT / @12.5% local VAT / @12.5% /13.5% was charged on the purchaser which /13.5% was charged on the purchaser which converted into monetary value of Rs. 73,186.00 (Rs.26,775.00+Rs.46,410.50) against converted into monetary value of Rs. 73,186.00 (Rs.26,775.00+Rs.46,410.50) against converted into monetary value of Rs. 73,186.00 (Rs.26,775.00+Rs.46,410.50) against local sale of Rs. 5,58,036.50 (Rs. 2,14,200.00+Rs. 3,43,836.50). local sale of Rs. 5,58,036.50 (Rs. 2,14,200.00+Rs. 3,43,836.50).
According to Ld. AR on going through the details of transit ccording to Ld. AR on going through the details of transit ccording to Ld. AR on going through the details of transit sale appearing herein above it will be noticed that no local VAT was charged on transit sale effected herein above it will be noticed that no local VAT was charged on transit sale effected herein above it will be noticed that no local VAT was charged on transit sale effected to Sri H Konwar and resultantly he had been benefited by Rs.2,87,812.44( @ 13.5%) to Sri H Konwar and resultantly he had been benefited by Rs.2,87,812.44( @ 13.5%) to Sri H Konwar and resultantly he had been benefited by Rs.2,87,812.44( @ 13.5%) on sale of cement for Rs. 21,31,944.00. on sale of cement for Rs. 21,31,944.00.
According to Ld. AR, this According to Ld. AR, this practice was followed under the then prevailing was followed under the then prevailing Central Sales Tax Act, 1956 and the Assam Value Added Tax Act, Central Sales Tax Act, 1956 and the Assam Value Added Tax Act, 2003. 2003.
According to Ld. AR, t According to Ld. AR, the same benefit of transit sale was also availed by Sri H he same benefit of transit sale was also availed by Sri H Konwar against Cement sale effected to him Konwar against Cement sale effected to him from M/s. Cement House the sister Cement House the sister concern of M/s Jain Enterprise. The details of said sales are as under: concern of M/s Jain Enterprise. The details of said sales are as under: concern of M/s Jain Enterprise. The details of said sales are as under:- M/s Jain Enterprises A.Y. 2012-13 Bill No. Date Bill Amount Local Vat Total Sale Value Paper Book Page No. NIL 10,35,180.00 40 002 23.04.2010 10,35,180.00 NIL 21,09,240.00 41&44 008 29.09.2011 21,09,240.00 Note: (1) Cement against Bill No. 002 was sold in transit by endorsement of Railway Receipt (in favour of H. Konwar) No. 262000558 dtd. 18.04.2010 loaded from Yerraguntla P.O. Cuddapah ( A.P) to Tinsukia Town. (2) Cement against Bill No. 008 was sold in transit by endorsement of Railway Receipt (in favour of H. Konwar) No. 262001141,1142 dtd. 25.09.2011 loaded from Sitarampur ( A.P) to New Tinsukia.
Thus according to Ld. AR, on going through the details of transit sale appearing herein above it will be noticed that no local VAT was charged by M/s. Cement House as well on the transit sale effected to Sri H Konwar and resultantly he had been benefited by Rs.4,24,496.70 [@ 13.5%] on sale of cement for Rs. 31,44,420.00.
From above details, according to Ld. AR it can be concluded that by cement sale in transit by the assessee through its concern M/s. Jain Enterprise and M/s. Cement House together, the customer Sri H Konwar was financially benefited by legally avoiding Local VAT to the tune of Rs. 7,12.309.14 (Rs.2,87,812.44+Rs. 4,24,496.70) as against effective sale of Rs.52,76,364 (Rs.21,31,944+ Rs.31,44,420).
It was further brought to my notice that the assessee and its sister concern M/s Cement House had rather monopoly in Dibrugarh in selling cement while in transit. Explaining further the Ld. A.R. stated that when local tax benefit was available to customer for substantial amount, it is but natural on the part of the assessee to seek advance from customers and they obliged by doing so. And Shri Hridayananda Konwar has given advance to both the assessee and its sister concern M/s Cement House. In the light of aforesaid submission, the assessee referring to the ledger account of Shri Hridayananda Konwar in the books of the assessee for the period from 06.01.2010 to 31.03.2012 from where it has been contended that Shri Hridayananda Konwar had given a sum of Rs. 9,07,239/- as advance as detailed below:
ITA No. M/s Jain Enterprises A.Y. 2012-13
Therefore, according to Ld. A.R this amount should not have been added in the Therefore, according to Ld. A.R this amount should not have been added in the Therefore, according to Ld. A.R this amount should not have been added in the accounts of assessee u/s 68 of the Act. According to Ld. A.R from the aforesaid accounts of assessee u/s 68 of the Act. According to Ld. A.R from the aforesaid accounts of assessee u/s 68 of the Act. According to Ld. A.R from the aforesaid submissions made by the assessee the following submissions made by the assessee the following three questions arises ises as under:
(1) why the amounts were transferred from / transferred to (1) why the amounts were transferred from / transferred to M/s. Cement House in the Cement House in the records of the assessee as far as the transaction with Sri H Konwar are concerned and as far as the transaction with Sri H Konwar are concerned and as far as the transaction with Sri H Konwar are concerned and (2) whether Sri H Konwar paid sufficient amount in the records of (2) whether Sri H Konwar paid sufficient amount in the records of (2) whether Sri H Konwar paid sufficient amount in the records of M/s. Cement House before Rs. 9,02,500 could have been transferred from House before Rs. 9,02,500 could have been transferred from M/s. Cement House to the account of Sri H Konwar maintained by the a the account of Sri H Konwar maintained by the assessee and (3) whether there was and (3) whether there was sufficient balance with the sufficient balance with the assessee in the account of Sri H Konwar to transfer Rs. in the account of Sri H Konwar to transfer Rs. 5,35,180.00 to M/s Cement House d 5,35,180.00 to M/s Cement House dated. 28.02.2011.
Continuing further, Continuing further, the Ld. AR submits that in the records of M/s Cement submits that in the records of M/s Cement House, the year end balance of the year end balance of each year in the account of Sri H Konwar was kept at each year in the account of Sri H Konwar was kept at ‘NIL’ by transferring the same to or from, as the case may be, M/s Jain Enterprise to by transferring the same to or from, as the case may be, M/s Jain Enterprise to by transferring the same to or from, as the case may be, M/s Jain Enterprise to keep track over amount payable or receivable to/from Sri H Konwar during the four keep track over amount payable or receivable to/from Sri H Konwar during the four keep track over amount payable or receivable to/from Sri H Konwar during the four year period from 01.04.2009 to 31.03.2013. This fact year period from 01.04.2009 to 31.03.2013. This fact, according to Ld. AR , according to Ld. AR may be verified by the AO looking at the ledger account of Sri H Konwar looking at the ledger account of Sri H Konwar placed in the paper placed in the paper book.
According to Ld. AR According to Ld. AR, as far as balance transfer amounting to Rs. 9,02,500.00 , as far as balance transfer amounting to Rs. 9,02,500.00 dated 12.02.2010 from M/s Cement House to M/s Jain Enterprise is concerned, the d 12.02.2010 from M/s Cement House to M/s Jain Enterprise is concerned, the d 12.02.2010 from M/s Cement House to M/s Jain Enterprise is concerned, the ITA No. M/s Jain Enterprises A.Y. 2012-13 same was transferred out of Rs. 10,00,000.00 ( nsferred out of Rs. 10,00,000.00 (refer Page No. 22 of the Paper Book Page No. 22 of the Paper Book) received from Sri H Konwar through Cheque on d received from Sri H Konwar through Cheque on dated 30.10.2009. Consequently, the d 30.10.2009. Consequently, the year end balance in the account of Sri H Konwar with M/s Cement House became year end balance in the account of Sri H Konwar with M/s Cement House became year end balance in the account of Sri H Konwar with M/s Cement House became NIL as on 31.03.2010.
The Ld. AR while referring to the balance transfer of Rs. 5,35,180.00 from M/s hile referring to the balance transfer of Rs. 5,35,180.00 from M/s hile referring to the balance transfer of Rs. 5,35,180.00 from M/s Jain Enterprise to M/s. Cement House d Cement House dated 28.02.2011 submitted that a credit d 28.02.2011 submitted that a credit balance of Rs. 14,42,419.00 was available with the a balance of Rs. 14,42,419.00 was available with the assessee in the account of Sri H in the account of Sri H Konwar dated 08.12.2010 out of which Rs. 5,35,180.00 was transferred to .12.2010 out of which Rs. 5,35,180.00 was transferred to .12.2010 out of which Rs. 5,35,180.00 was transferred to M/s. Cement House as per detailed working for FY 2010 Cement House as per detailed working for FY 2010-11 (in the records of M/s Jain 11 (in the records of M/s Jain Enterprise) furnished herein below: Enterprise) furnished herein below:-
Thus, according to Ld. AR, t Thus, according to Ld. AR, the debit balance of Rs. 5,16,992.00 receivable from Sri H receivable from Sri H Konwar was squared up by transferring Rs.5,16,992.00 (Credit Balance) from his account Konwar was squared up by transferring Rs.5,16,992.00 (Credit Balance) from his account Konwar was squared up by transferring Rs.5,16,992.00 (Credit Balance) from his account with M/s Jain Enterprise on 01.04.2012 and ultimately the balance in Sri H Konwar’s account 01.04.2012 and ultimately the balance in Sri H Konwar’s account 01.04.2012 and ultimately the balance in Sri H Konwar’s account with both the assessee as well as as well as M/s. Cement House became NIL as on 31.03.2013. came NIL as on 31.03.2013.
Thus, according to Ld. AR, f Thus, according to Ld. AR, from above discussed facts the following facts can be the following facts can be discerned :
ITA No. M/s Jain Enterprises A.Y. 2012-13 (1) in the records of the assessee assessee i.e M/s Jain Enterprise as on 31.03.2012 a i.e M/s Jain Enterprise as on 31.03.2012 a sum of Rs. 9,07,239.00 was reflected as advance recei reflected as advance received from Sri H Konwar (2) That against above amount of Rs. 9,07,239.00 cement was supplied by the a (2) That against above amount of Rs. 9,07,239.00 cement was supplied by the a (2) That against above amount of Rs. 9,07,239.00 cement was supplied by the assessee to Sri H Konwar for an amount of Rs. 3,90,247.00 vide Bill No. BG/JRT/R/12 H Konwar for an amount of Rs. 3,90,247.00 vide Bill No. BG/JRT/R/12 H Konwar for an amount of Rs. 3,90,247.00 vide Bill No. BG/JRT/R/12-13/038 dated 24.02.2013 (refer Page No. 17 of the Paper Book) resulting i Page No. 17 of the Paper Book) resulting in balance amount payable to Sri n balance amount payable to Sri H Konwar Rs. 5,16,992.00 and H Konwar Rs. 5,16,992.00 and (3) the said sum of Rs. 5,16,992.00 was transferred in the account of Sri H Konwar he said sum of Rs. 5,16,992.00 was transferred in the account of Sri H Konwar he said sum of Rs. 5,16,992.00 was transferred in the account of Sri H Konwar maintained with M/s Cement House which was appropriated against amount receivable from maintained with M/s Cement House which was appropriated against amount receivable from maintained with M/s Cement House which was appropriated against amount receivable from him for supply of cement by them as detailed below: by them as detailed below:-
From the aforesaid facts, the Ld. AR concluded his submission by stating From the aforesaid facts, the Ld. AR concluded his submission by stating From the aforesaid facts, the Ld. AR concluded his submission by stating that as against credit balance of Rs.9,07,239.00 as on 31.03.2012 in the name of Sri H Konwar as per against credit balance of Rs.9,07,239.00 as on 31.03.2012 in the name of Sri H Konwar as per against credit balance of Rs.9,07,239.00 as on 31.03.2012 in the name of Sri H Konwar as per records of M/s. Jain Enterprise which was treated as unexplained Cash Credit by AO in Jain Enterprise which was treated as unexplained Cash Credit by AO in Jain Enterprise which was treated as unexplained Cash Credit by AO in course of assessment proceedings course of assessment proceedings it can be seen that firstly Cement worth Rs. 3,90,247.00 Cement worth Rs. 3,90,247.00 was supplied by the assessee as on ssessee as on 24.02.2013 vide Bill No. BG/JRT/R/12 24.02.2013 vide Bill No. BG/JRT/R/12-13/038 and secondly Balance amount of Rs. 5,16,992 was transferred from the a ance amount of Rs. 5,16,992 was transferred from the assessee’s ssessee’s records to the records of M/s. Cement House in the name of Sri H Konwar and, Cement House in the name of Sri H Konwar and, Cement House in the name of Sri H Konwar and, inter alia, partly appropriated against cement supplied by them to Sri H Konwar vide Bill No. CH/CST/R/11 appropriated against cement supplied by them to Sri H Konwar vide Bill No. CH/CST/R/11 appropriated against cement supplied by them to Sri H Konwar vide Bill No. CH/CST/R/11- 12/008 dated 29.09.2011 for Rs.21,09,240.00. And 29.09.2011 for Rs.21,09,240.00. And thus, it means that against deposit of Rs. it means that against deposit of Rs. 9,07,239.00, alleged to be treated as unexplained Cash Credit in course of assessment 9,07,239.00, alleged to be treated as unexplained Cash Credit in course of assessment 9,07,239.00, alleged to be treated as unexplained Cash Credit in course of assessment proceeding of the assessee for AY 2012 for AY 2012-13, cement for even amount was sold to Sri H 13, cement for even amount was sold to Sri H Konwar both by M/s. Jain Enterprise and Jain Enterprise and M/s. Cement House which won’t have been Cement House which won’t have been possible had there been bogus Cash Credit as treated by the possible had there been bogus Cash Credit as treated by the AO of Rs.9,07,239.00 in the of Rs.9,07,239.00 in the records of the assessee. In view of above, In view of above, the Ld. AR pleads that the addition of Rs. the addition of Rs. 9,07,239.00 u/s 68 of the Act treating the said amount as bogus unexplained cash credit in u/s 68 of the Act treating the said amount as bogus unexplained cash credit in u/s 68 of the Act treating the said amount as bogus unexplained cash credit in M/s Jain Enterprises A.Y. 2012-13 the order of assessment passed by the AO and further confirmed by the Ld. CIT(Appeals) may be deleted.
Therefore he referred to the decision of Hon’ble Supreme Court in the case of Sreelekha Banerjee vs. CIT wherein it has held as under: “Section 147 of Income Tax Act, 1961 [corresponding to section 34 of the Indian Income Tax Act, 1922] – Income escaping assessment- General- Assessment Year 1946-47- Whether if there is entry in account books of assessee which shows receipt of some on conversion of high denomination notes tendered for conversion by assessee himself, it is necessary for assessee if asked, what source of that money is and to prove that it does not bear nature of income- held, yes- Whether where assessee contended that high denomination notes represented not cash balance but some other money and he failed to explain source of said money, department was justified in treating value of said high denomination notes as income of assessee from undisclosed sources – Held, yes.” Observation- In the instant case, high denomination notes in possession of the assessee did not represent his explainable cash balance but was some other money for which no justifiable source was put forward and therefore, the amount was added as income from undisclosed source. Inference- In our case, neither any unjustifiable entry was passed in the account of Shri Hridayananda Konwar nor any cash was ever forthcoming calling for further explanation / supporting details.
The decision of Hon’ble Calcutta High Court in the case of Basantipur Tea Co. Pvt. Ltd. vs. CIT wherein it was held as under: “ The findings of the Tribunal are that the sum of Rs. 1,50,000/- credited in the books of the company on the first day of its incorporation represented the assessee’s income from other sources and not from business. That this sum of Rs. 1,50,000/- was includible as income was not disputed. The Tribunal has stated that it would not be unreasonable to infer from the fact of the case that the amount credited on the first day of the accounting year of the assessee – company was a credit item. If it was an income from business source even on the first day of the incorporation, it was for the assessee to explain how he earned that income. In the absence of such evidence or explanation, the Tribunal was right in treating the income as from other sources. Observation- In the present case, the assessee company credited a sum of Rs. 1,50,000/- on the first day of its existence on incorporation. The company was called upon to support the receipt as income from business which it could not substantiate and, therefore, the AO treated the same as income from other sources. Inference- On the basis of our records and ledger account of Shri Hridayananda Konwar no cash transaction was ever effected in course of transactions occurring during 09.04.2009 to 24.02.2013.”
Per contra, the Ld. D.R for the department vehemently opposed the aforesaid submission of the Ld. A.R and submitted that before the AO the assessee failed to M/s Jain Enterprises A.Y. 2012-13 give any satisfactory explanation when he was confronted with the reply of Shri Hridayananda Konwar denying any liability / advance which as claimed by the assessee. The Ld. DR brought to my notice that the reply of Shri Hridayananda Konwar pursuant to section 133(6) notice issued by the AO has been reproduced in the assessment order itself which could not be satisfactorily explained before the AO so he had made the addition of Rs. 9,07,239/-. According to Ld. DR, on appeal before the Ld. CIT(A) also the assessee miserably failed to prove that there was a liability subsisting of Rs. 9,07,239 as on 31.03.2012 with Shri Hridayananda Konwar. According to Ld. D.R, now at the second appeal stage the assessee has come out with entirely new story wherein he has brought out two kinds of sales i.e. local sale and transit sale and therefore he is trying to bring a new entity M/s Cement House into the picture and claims that it was a sister concern of assessee etc. According to Ld. D.R this is an afterthought and should not be admitted at this stage. Therefore, according to Ld. D.R., the action of the Ld. CIT(A) should be confirmed.
I have heard both the parties and perused the records. The facts narrated above are not repeated to avoid repetition and for the sake of brevity. The AO while going though the balance sheet of the assessee as on 31.03.2012 took note that the assessee had shown liability of Rs. 9,07,239/- from Shri Hridayananda Konwar. When the AO tried to cross-check the genuineness of the claim, Shri Hridayananda Konwar denied having any liability subsisting with the assessee as on 31.03.2012. This adverse fact was confronted by the AO with the assessee, and the AO notes that the assessee had not given any explanation so he made addition which action of the AO has been confirmed by the Ld. CIT(A). Now before me, the ld. A.R of the assessee has tried to justify the liability which is shown in its balance sheet as on 31.03.2012 against Shri Hridayananda Konwar by bringing in certain transactions of Shri H. Konwar with the assessee. For the ends of justice, the entire submission of Ld. AR along with the books of both the concerns [ M/s Jain Enterprises & M/s Cement House ] needs to be verified afresh as well as cross checked with that of Shri H. Konwar to find out the truth in the contention made before this Tribunal. Therefore, in the interest of justice and fair play, I set aside the impugned order of Ld. CIT(A) and remit this issue back M/s Jain Enterprises A.Y. 2012-13 to the file of AO with a direction to verify the correctness of the aforesaid submission. And the assessee is directed to fully cooperate with the AO and submit all the books/documents in respect of its claim along with material to substantiate the transaction between both M/s. Jain Enterprises and its sister concern M/s Cement House with Shri Hridayananda Konwar and reconcile the figure of Rs. 9,07,239/- shown as liability to Shri Hridayananda Konwar as on 31.03.2012 which is supposed to have been squared up as on 31.03.2013 (AY 2013-14) and the AO to verify the claim and if it is found to be correct and is legally valid then, no addition is required to be made. The AO after hearing the assessee to adjudicate this issue de-novo as per the direction given supra and in accordance to law.
In the result, appeal of the assessee is allowed for statistical purposes.