COMM OF INCOME TAX - I, LDH vs. M/S JAIRATH DYEING AND FINISHING MILLS

This order shall dispose of ITA Nos. 294 and 295 of 2005 as the same relate to assessment year 1993-94 arising out of the same order. In both the appeals, common question of law and facts are involved. For brevity, the facts are being extracted from ITA No. 294 of 2005. 2. ITA No. 294 of 2005 has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 5.11.2004 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 875/Chandi/1998, for the assessment year 1993-94 proposing following substantial question of law:- -2- “Whether on law, facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was justified in its interpretation of provision of section 68 of the I.T. Act, resulting in deletion of addition of Rs.3,30,000/- made under the said section?”

The facts of the case as narrated in the appeal may be noticed. The assessee filed its return on 9.12.1993 declaring an income of Rs.39,300/-. The assessment was completed at a total income of Rs.4,61,819/- after making additions of Rs.3,30,000/- on account of unexplained cash credit and Rs.92,519/- on account of difference in the accounts of the assessee and M/s Priya Textiles. Against the aforesaid additions, the assessee took the matter in appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT (A)”]. The CIT (A) vide order dated 18.5.1998 deleted the additions made by the Assessing Officer holding that no addition could be made for the unconfirmed cash receipts for the reasons that the payment received were either for the job work or for the sales made. Against the order of the CIT (A), the department went in appeal and the Tribunal vide order dated 5.11.2004 dismissed the appeal upholding the view of the CIT (A). Hence, the present appeal by the revenue.

We have heard learned counsel for the parties.

The Tribunal while upholding the aforesaid finding had recorded as under:- “We have considered the rival submissions. We have also perused the records. We find that in these cases both the assessees had received payment in -3- cash for the work or for selling of goods to M/s Priya Textiles. The copies of accounts for the assessment year 92-93 and the assessment year 95-96 had been confirmed by M/s Priya Textiles. M/s Priya Textiles is denying the payment of Rs.7,76,000/- received by M/s JI, Ludhiana for the assessment year 93-94. Similarly, M/s Priya Textiles is also denying the payment of Rs.3,30,000/- to M/s JDFM Ludhiana. The assessing officer is mainly relying on the fact that these payments had not been confirmed by the payers i.e. M/s Priya Textiles and subsequently Mr. T.R. Bedi, husband of the lady partner had also denied the payment to these two assessees. There is no dispute regarding the work carried out for M/s P.T. The only dispute relates to the amount due from M/s PT by these two concerns. It was stated that these receipts would not amount to cash credits which would be hit by the mischief of section 68. We find that confirmed copies of accounts had been filed by the assessee for the period 1.4.93 to 31.3.94 and also for the period 1.4.95 to 31.3.96 in respect of both the assessees. Copies of accounts for the period 1.4.93 to 31.3.94 showing the closing balance as on 31.3.93 of both the assessees were not in dispute. The closing and opening balances had also been confirmed by M/s Priya Textiles. The learned -4- AR has also submitted that the cash receipts had been issued in respect of this period not only to the Priya Textiles but to the other parties as well. In the cash receipts produced before the CIT (A) showed that the other parties had also made the payment during this year and there was no interpolation or subsequent entries being made in these cash receipts. The learned CIT (A) held that the cash book and ledger also appears to be written in the normal course of business. In the case of M/s JI Impounded cash books were also seen by the ld. CIT (A). As regards the signatures on receipts by Mr. Bedi, we agree with the opinion of the learned CIT(A) that receipts for money are signed by the payee and not by the payer. Learned CIT (A) also found that the assessing officer had written a letter for getting confirmation from M/s Priya Textiles regarding the confirmed copies of accounts, however, the assessing officer could not issue this letter to M/s Priya Textiles. We are also of the opinion that it was necessary for the assessing officer to make enquiry from M/s Priya Textiles in order to prove that the cash was not received from them. In the absence of such an evidence, the assessing officer was not justified in making addition in the hands of these two assessees. Learned CIT (A) also found that in the -5- subsequent years M/s Priya Textiles even doing business with the assessee respondents has never sought to make good the payment which they had denied making earlier. The department of the revenue has considered the denial of M/s Priya Textiles as authentic evidence whereas the circumstantial evidence produced by the assessee has been ignored. It is quite possible that M/s Priya Textiles might not have reflected the transaction in the books of accounts. In that case addition could have been made in their hands for payments outside the books of accounts. Since the assessing officer has not verified from M/s Priya Textiles as to how the closing balance as on 1.4.92 and the opening balance as on 1.4.93 tally when no payments had been made to the respondents. The CIT(A) in our view was justified in deleting the additions. Accepting the explanation of one assessee and rejecting that of the other assessee in our opinion without sound basis is not justified. Whereas the respondents have produced circumstantial evidence M/s Priya Textiles have merely denied the payments, therefore, the evidence of the respondents could not be brushed aside. We, therefore, sustain the order of the learned CIT (A) for the reasons given therein.”

The said finding was not shown to be perverse in any -6- manner by the learned counsel for the revenue. Learned counsel for the revenue made strenuous efforts for reappreciation of evidence which is not permissible under Section 260A of the Act. The Tribunal on appreciation of evidence and material on record had concluded that the transactions with M/s Priya Textiles were genuine. This being a finding of fact does not call for any interference by this Court.

Accordingly, the appeals are dismissed. (AJAY KUMAR MITTAL) JUDGE October 15, 2010 (ADARSH KUMAR GOEL) gbs JUDGE -7- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 295 of 2005 Date of Decision: 15.10.2010 Commissioner of Income Tax-I, Ludhiana ....Appellant. Versus M/s Jairath International ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the appellant. Ms. Jyoti, Advocate for Mr. S.K. Mukhi, Advocate for the respondent.