C.I.T.BIKANER vs. PAWAN SHARMA

PDF · subscribers
ITA/3/2012HC RajasthanRJHC01013060201213 July 2012Author: ARUN MISHRA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the addition made by the AO was unjustified. The AO's inference that the outstanding liabilities were not genuine was primarily based on the statements of a few truck owners. Crucially, the assessee requested cross-examination of 15 truck owners, but only 3 appeared. The ITAT observed that the cross-examination of two truck owners, Ramkishan and Harishchander, did not discredit the assessee's claim. Initially, they denied any outstanding payments, but upon being confronted with documentary evidence, they admitted their trucks were engaged by the assessee. The Court noted that statements recorded behind the assessee's back cannot be used against him. The appellate authorities found the statements of the truck owners who appeared for cross-examination not creditworthy. Excluding these statements, there was no material to justify doubting the entries. The Court concluded that the concurrent findings of the appellate authorities were findings of fact, not capricious or perverse, and thus no substantial question of law arose.

What were the facts?

The assessee, Pawan Sharma, runs a proprietorship concern engaged in transportation. For assessment year 2005-06, the assessee declared a total income of Rs. 3,35,440/-. During the assessment, the Assessing Officer (AO) noted outstanding liabilities of Rs. 34,14,910/- in the balance sheet, representing outstanding truck freights. The AO examined 21 truck owners, and based on their statements, concluded that these liabilities were not genuine and added the amount to the assessee's income. The Commissioner of Income Tax (Appeal) [CIT(A)] deleted this addition, finding that the assessee was deprived of the right of confrontation as most truck owners did not appear for cross-examination. The Income Tax Appellate Tribunal (ITAT) affirmed the CIT(A)'s order. The Revenue has appealed this decision to the High Court.

What were the issues?

1. Whether the Tribunal erred in law and on facts by upholding the deletion of the addition of Rs. 34,14,910/-, representing outstanding truck freights, when the Assessing Officer had found these liabilities to be unexplained and not genuine, based on the statements of truck owners (Section 68 of the Income Tax Act, 1961)? Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The findings of the Tribunal are contrary to facts and law and perverse. The assessee was obligated to explain the outstanding liabilities, which remained unexplained. The truck owners examined by the AO categorically denied outstanding payments, justifying the AO's addition. The Tribunal failed to appreciate the evidence in the correct perspective.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 131,Section 44AE,Section 68

AI-generated summary — verify with the full judgment below

1 (D.B.INCOME TAX APPEAL NO.3/12) Date of Judgment :- 13.7.2012. HON'BLE THE CHIEF JUSTICE MR.ARUN MISHRA HON'BLE MR.JUSTICE SANGEET LODHA Mr. K.K.Bissa, for the appellant. BY THE COURT:(PER HON'BLE MR. SANGEET LODHA,J.)

1.

This appeal u/s 260 A of Income Tax Act, 1961 ( for short “the Act”) is directed against the order dated 21.9.11 of the Income Tax Appellate Tribunal(ITAT), Jodhpur Bench,Jodhpur passed in ITA No.600/JDP/2008, whereby the appeal filed by the respondent-assessee against the order dated 28.8.08 of Commissioner of Income Tax(Appeal) [CIT(A)], Jodhpur allowing

the appeal preferred by the respondent-assessee against the assessment order dated 28.12.07 passed by the Assessing Officer(AO) for assessment year 2005-06 and deleting the addition of Rs.34,14,910/-, stands dismissed.

2

2.

Briefly the facts giving rise to the appeal are that the assessee runs a proprietorship concern namely, M/s Akash Ganga Cargo Movers, which is engaged in the work of transportation of the goods. The assessee used to transport insulators which were procured from local firms namely, Premier Sanitaryware, Rani Bazar, Bikaner and Taruna Dec Home Pvt. Ltd., Bikaner. The assessee does not own any truck and therefore, he had used trucks available in the market for transportation of the goods. During the relevant assessment year assessee filed return of income on 26.10.05 declaring total income of Rs.3,35,440/-. The return was processed by the AO under Section 143(3) of the Income Tax Act, 1961 ('the Act').

3.

During the relevant assessment year, the assessee has received freight charges a sum of Rs.1,23,41,750/-, against which a sum of Rs.1,18,97,227/- was paid as freight. In the balance sheet, outstanding liabilities of Rs. 34,14,910/- were shown. On query being made by AO, the assessee furnished the details of outstanding liabilities showing these to be liabilities representing outstanding truck freights. The AO collected the addresses of the truck owners from the Regional Transport Authority and issued summon to them. The statement of some of the truck owners were recorded and out of them a few were subjected to cross examination on behalf of the assessee.

4.

After considering the explanation furnished by the assessee

3 and the material on record, AO arrived at the finding that no trade liability as disclosed in the balance sheet by the assessee is existing, the outstanding liabilities of Rs.34,14,910/- remain unexplained and accordingly, while passing the assessment order dated 28.12.07, the same was added back to the total income of the assessee.

5.

Aggrieved by the assessment order dated 28.12.07 , the respondent-assessee preferred an appeal before the CIT(A). The CIT(A) found that the respondent-assessee during the assessment proceedings requested the AO to call all the 21 truck owners, whose statements were recorded u/s 131 of the Act for cross examination but except three, none of the truck owners turned up for cross examination inspite of issuance of notice to them. The CIT(A) observed that the respondent-assessee has been deprived of the basic right of confrontation . The statement of three truck owners who were cross examined were also not found relevant in view of the apparent contradiction and non denial of the outstanding dues. The CIT(A) arrived at the finding that on the basis of the material on record, AO has erred in drawing inference that outstanding liabilities of the appellant against truck payments are not genuine. Accordingly, while allowing the appeal preferred by the respondent-assessee, the CIT(A) deleted the addition made by AO as aforesaid.

6.

On appeal by the Revenue, ITAT has affirmed the order

4 passed by CIT(A) . Hence, this appeal.

7.

Learned counsel for the appellant submitted that the findings recorded by the tribunal are contrary to facts and law and ex facie perverse. Learned counsel submitted that ITAT has failed to appreciate the evidence on record in correct perspective. Learned counsel submitted that the respondent- assessee was under an obligation to explain the outstanding liabilities of Rs.34,14,910/-, however, the same remain unexplained and therefore, AO was justified in making addition of the said amount to the total income of the assessee. Learned counsel submitted that the truck owners who were examined by AO have categorically denied the outstanding payments shown by the respondent-assessee and therefore, AO has committed no error in drawing the inference that the liabilities shown outstanding are not existing. Accordingly, it is submitted that the addition made cannot be faulted with.

8.

We have considered the submissions of the learned counsel and perused the material on record.

9.

Indisputably, the respondent-assessee does not own any truck and he had transported the goods by using the trucks available in the market. The dispute raised by AO was regarding the outstanding liabilities of Rs.34,14,910/- disclosed by the assessee in his balance sheet. A perusal of the assessment order passed by AO reveals that the inference regarding outstanding

5 liabilities disclosed by the respondent-assessee being fake has been drawn by AO basically on the basis of the statements of 21 truck owners examined by him. It is pertinent to note that out of 21 truck owners examined by AO, the respondent-assessee had not shown any liability towards 6 persons. The assessee requested for cross examination of remaining 15 persons and accordingly, the notices were issued by AO to all the 15 persons, however, only 3 appeared for cross examination. Having gone through the cross examination of 2 persons namely, Shri Ramkishan and Harishchander, ITAT opined that these truck owners were not maintaining books of accounts and they must be offering the tax on their income , if any, u/s 44 AE of the Act and they may not be under an obligation to maintain the accounts. The ITAT opined that a perusal of their cross examination suggest their irresponsible attitude . It is pertinent to note that in the first instance, during the examination in chief , they categorically denied relationship with the assessee and any payment outstanding to him as on 31.3. 05. But then, in cross examination, one of the truck owner Ramkishan when confronted with the documentary evidence regarding the truck owned by him being engaged by the respondent-assessee for the transportation of his goods, he accepted that the goods were delivered to his truck. Similar was the position with regard to other truck owner put to cross examination. Obviously, the 6 statement of various witnesses recorded by AO at the back of the respondent-assessee cannot be used against him. The statement of the truck owners who appeared for cross examination before AO are not found to be creditworthy by the appellate authorities. If the statement of these witnesses are excluded from the consideration , there is no material on record which could justify doubting of the entries by AO. In considered opinion of this court, the addition made by AO drawing inference that the outstanding liabilities of the respondent-assessee against the freight payable to the truck owners are not genuine, solely on the basis of statements of a few truck owners recorded as aforesaid, is absolutely unjustified. In any case, the concurrent findings recorded by the appellate authority as aforesaid remain the findings of fact which cannot be said to be capricious or perverse and therefore, no substantial question of law arises in this appeal for consideration of this court.

10.

In the result, the appeal fails, it is hereby dismissed. (SANGEET LODHA),J. (ARUN MISHRA),C.J. Aditya/- All corrections made in the judgment/order have been incorporated in the judgment/order being emailed. Aditya Joshi, PS

More judgments on Section 131

All 4,706 judgments and leading authorities on Section 131 →

Recent GST High Court judgments

Search GST case law →