KHYBER CEMENTS PRIVATE LTD. vs. COMMISSIONER OF INCOME TAX AND ORS.

ITA/4/2010HC J&KJKHC01004974201026 April 20178 pages

AI SummaryRemanded

What did the High Court hold?

The High Court, while not deciding the substantive issue of law, observed that if sales made to the individuals who provided credit advances in the previous year were accepted by the department in the subsequent year, this warranted reconsideration by the department. The Court noted that the ITAT had granted liberty to the appellant to approach the authorities. The Court directed the appellant to produce before the jurisdictional Assessing Officer the revised return submitted in 2001 and the acceptance of sales to the individuals for both cull birds and litter. The department was instructed to verify and scrutinize these documents and take appropriate steps for processing the appellant's claim in accordance with the law. The Court clarified that the appellant could only produce records already furnished to the Assessing Officer, including subsequent year's returns and the 2001 revised return, if it was submitted within the limitation period and was still pending. The appeal was disposed of with these observations and directions, leaving the question of law open for future proceedings. No costs were awarded.

What were the facts?

The assessee, M/s. Raghava Ratna Poultry Farm, filed an appeal before the High Court of Telangana at Hyderabad challenging an order of the Income Tax Appellate Tribunal (ITAT), 'A' Bench, Hyderabad, dated April 20, 2006, for Assessment Year 1998-99. The dispute concerns credit advances of Rs. 5 lakhs received by the appellant during the financial year 1997-98 (Assessment Year 1998-99) from five individuals, each contributing Rs. 1 lakh. The assessee contended that sales against these advances occurred in the subsequent financial year 1998-99 (Assessment Year 1999-2000) and were accepted by the department. The assessee argued that disallowing the advances would lead to double taxation, as the department had accepted the subsequent sales to these same individuals. The department's reluctance was attributed to doubts about the identity, creditworthiness, and genuineness of the transaction.

What were the issues?

1. Whether the ITAT erred in not considering the acceptance of sales made to the same individuals in the subsequent assessment year as evidence of their genuineness and creditworthiness for the credit advances received in the assessment year 1998-99, thereby leading to a potential double taxation? Assessee's Contention: The assessee argued that since the department accepted the sales of goods made to the five individuals in the subsequent year (Assessment Year 1999-2000), it should not have doubted their identity, creditworthiness, and genuineness concerning the credit advances received in the previous year (Assessment Year 1998-99). The assessee claimed to have provided documentary proof and submitted revised data on January 29, 2001, which was not processed by the department. They relied on the principle that acceptance of subsequent transactions with the same parties validates prior transactions. Revenue's Contention: The revenue, through the learned Senior Standing Counsel, submitted that if the appellant had furnished the details to the department, they would have scrutinized them and passed appropriate orders. This implies that the department's stance was based on the information (or lack thereof) provided during the assessment.

Which sections of the Income-tax Act were involved?

260-4

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY,THE TENTH DAY OF DECEMBER TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRIJUSTICE P.SAM KOSHY THE HONOURABLE SRIJUSTICE SUDDALA CHALAPATHI RAO INCOME TAX TRIBU EAL NO: 4 OF 2010 Income Tax Tribunal Appeal Under Section 260-4 of the Income Tax Act, 196l against the order of the [ncome Tax Appellate Tribunal, *A' Bench Hyderabad dated 20-04-2006 in ITA No.508 Hyd/2003 for Assessment Year 1998-99 Between: M/s. Raghava Ratna Poultry Farm, 7th Floor, Raghava Ratna Towers Abids, Hyderabad ...APPELLANT Assistant Commissioner of lncome Tax, Circle - 3(4) Hyderabad. ...RESPONDENT Counsel for the Appellant: SRI PRUDHVIRAJ MATTAPALLY, REPRESENTING SRI. K. RAJIREDDY Counsel for the Respondent: Ms. BOKARO SAPNA REDDY The Court made the following ORDER:

IN THE HIGH COURT FOR THE STATE OF TELAI\IGANA AT HYDERABAD THE HONOURABLE SRI JUSTICE P.SAM KOSHY THE HONOURABLE SRI JUSTICE SUDDALA CHALAPATHI RAO N I 10.12.2025 Between: tWs Raghava Ratna Poultry Farm, 7th Floor,Raghava Ratna Towers, Abids, Hyderabad. .Appellant Assistant Co.mmissioner of [ncome Tax, Circle-3(4), Hyderabad. .Respondent JUDGMENT: (per Hon'bte Sri.lustice P.Sam Koshy) Heard Mr. Prudhviraj Mattapally, learned counsel representing Mr. K.Raji Redd-r-, learned counsel for the appellant, and Ms. B.Swapna, [eamed Senior Standing Counsel for the Income Tax Department for the respondent. Perused the record. 2. The instant appeal is one which has been filed by the assessee assailing the order passed by the [ncome Tax Appellate , \

Tribunal 'A' Bench, Hyderabad in I.T.A.No.508/flyd/03 for the assessment year 1998-99. 3. The point of issue involved in this appeal is pertaining to the credit advance received by the appellant for the assessment year 1998-99 in respect of the financial year lg97-g8. The credit advance was of Rs.5 lakhs of one lakh each from 5 different individuals whose names are reflected in paragraph 3 of the order of the ITAT. For ready reference, the details are reproduced hereunder: Sl.No Name Amount

ShriMd. Shaffil Rs.1.00.OO0/-

Shri Md. Zakki Rs.1,00,0@/- 3. ShriJangaiah Rs.1,00,000/- 4. Shri Jaqannath Rs.1.00.000/- 5. Shri Basha Rs.1.00.000/- 4. According to the appellant, against the said credit advances, the sale of goods occurred in the subsequent year i.e., for the financial year 1998-99 of the assessment yeat 1999-2000. This, according to the appellant, was accepted by the department and he has been subjected to tax against the said sale. He fuither contends that the department not accepting the credit advances received by the appellant for the assessment year 1998-99 teads to payment of double tax and that the department's only reluctance in afepting \

the same was on the identity, creditworthiness and genuineness of the transaction. He further submits that the appellant in fact had produced documentary proof in respect of the advances that it has received against the aforesaid 5 individuals which was not accepted by the department, who insisted upon the persons who has paid the advance to be produced before the authorities so far as establishing their identity is concerned. At this juncture, the learned counsel for the appellant submits that in fact immediately after the assessment order was passed, the appellant has submitted his revised data on 29.01.2001 which till date has not been processed by the department. He further contends that as regards the sale made to the 5 individuals from whom the credit advance has been received has been duly accepted by the department for the subsequent year sale made for the year 1998-99 and which has been reflected in the retums for the assessment year 1999-2000. According to the appellant, if the department is itself accepting the sale made to these 5 individuals for the subsequent year, they could not have doubted the genuineness and creditworthiness of these 5 persons in respect of the credit advances received for the prevlous year.

Perusal of the record would show that in faci in paragraph 6 of the impugned order itself the Tribunal had reserved the liberty to the appellant for approaching the authorities by making nec€ssary claim in accordance with law. We do not have any material to know whether the appellant has availed this liberty or not. Nonetheless, what strikes the mind of this Bench is the fact that if against the credit advances received by the appellant during the assessment year 1998-99 and against the same ifthe sale ofgoods for the subsequent year has been accepted upon their filing the retums to the department, it needs to be re-considered by the department to ascertain as to how if the genuineness and creditworthiness of these persons who have made the credit advances for the previous years have been doubted, how is their sale made to these individuals in the subsequent year, has been accepted. 6. Learned Senior Standing Counsel for the Department submits that if at all if the appellant would had fumished these details to the department, they would had definitely scrutinized the same and appropriate orders would had been passed.

Be that as it may, considering the contention of the appellant that against the credit advances made for the assessment year 1998-99 in respect of the credit advance of Rs.5 lakhs received from 5 individuals at Rs.I lakh each whose details have been refened to in the preceding paragraph against the sale ofcull birds, in addition, there was also Rs.50,000/- credit advance received against the sale of litter from Mallaiah, Rami Reddy and Gopal amounting to Rs.15,000/-, Rs.15,000/- and Rs.20,000/- respectively, thc sale of which has also been accepted by the department for the subsequent year. 8. In the given circumstances, let the appellant produce before the jurisdictional Assessing Officer in respect of the revised retum that the appellant had submitted in 2001 and also the acceptance of the sale of goods to the individuals whose names have been referred to in the earlier paragraph so far as the sale of cull birds and liuer are concerned. Let the same be verified and duly scrutinized by the department and appropriate steps be taken for verification and further process of the claim of the appellant in accordance with law. We make it clear that the appellant would be permitted to produce only those records which it has already

furnished to the jurisdictional Assessing Officer like the subsequent year's returns which reflects the details of the same made to these individuals and also the revised returns that it has furnished in the year 2001. tf the revised return has been submitted within the limitation and if it is still pending consideration with the department, let it be processed. g. With the aforesaid observation and direction and the liberty granted to the appellant, the appeal stands disposed of at this juncture. The question of law stands open to be decided in an appropriate proceedings subsequently as the matter stands left open to be decided by the department as of now. There shall be no order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed. SD'. R.KARTHIKEYAN JOINT REGISTRAR OFFICER //TRUE COPY" T!, 1. The Income Tax Appellate Tribunal, "A" Bench, Hyderabad 2. One CC to SRl. K. RAJI REDDY, Advocate [OPUC] 3. One CC to SRl. BOKARO SAPNA REDDY, Advocate IOPUC] t,a 4. Two CD Copies ry kul/PSL

,,/ f HIGH COURT DATED:1 0 11212025 JUDGMENT lTTA.No.4 of 2010 DISPOSTNG OF THE ITTA WITHOUT COSTS 'iric 3iii ll- () 1 6 JAN 202[ 2. * * I !:

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