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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, ITO, Ward 2 (1), Muzaffarnagar (hereinafter referred to as the ‘Revenue’) by filing the present appeal sought to set aside the impugned order dated 31.07.2012 passed by the Commissioner of Income-tax (Appeals), Muzaffarnagar qua the assessment year 2009-10 on the grounds inter alia that :-
“On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of Rs.4,17,50,140/- made by the Assessing Officer on account of cash credits under section 68 of the I.T. Act, 1961 by ignoring the fact that the said amount was received from 6 parties and out of them 4 parties have denied any dealing with the assessee.”
Briefly stated the facts necessary for adjudication of the issues at hand are : Assessee being an individual tax payee was deriving income from iron and steel and has filed return declaring income of Rs.2,24,860/-. Assessing Officer (AO) noticed during the scrutiny proceedings from the perusal of the bank account of the assessee maintained with AMMCO Bank Ltd. (C.A. No.11743) that the assessee has received total payment of Rs.4,17,50,140/- in a single day through numerous pay orders each amounting to Rs.49,000/-, which is detailed as under :-
Sl. Date Name of the parties stated to be giving Credit No. payment (in Rs.) 1 20.01.2009 Steel Grace India (P) Ltd., Delhi 11,76,000 2 22.01.2009 Steel Grace India (P) Ltd., Delhi 11,76,000 3 23.01.2009 Steel Grace India (P) Ltd., Delhi 11,76,000 4 23.01.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 5 02.02.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 12,25,000 6 03.02.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 12,25,000 7 04.02.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 12,25,000 8 05.02.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 12,25,000 9 06.02.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 12,25,000 10 07.02.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 12,25,000 11 10.02.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 12 11.02.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 13 12.02.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 14 13.02.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 15 14.02.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 16 16.02.2009 Steel Grace India (P) Ltd., Delhi 12,25,000 17 25.02.2009 Steel Grace India (P) Ltd., Delhi 24,50,000 18 26.02.2009 Steel Grace India (P) Ltd., Delhi 24,50,000 19 13.03.2009 Saraswati Met Stone India Pvt. Ltd., Delhi 15,19,000 20 18.03.2009 Aggarwal Enterprises, Bhatinda 49,00,000 21 19.03.2009 Aggarwal Enterprises, Bhatinda 36,75,000 22 20.03.2009 Steel Grace India (P) Ltd., Delhi 12,09,141 23 26.03.2009 Chimal Lal Bhushan Kumar, Bhatinda 10,78,000 Jackson Builder (P) Ltd 10,78,000 Ronak Tubewell & Machinery Store, Bijore 2,45,000 Sam India Buildwell (P) Ltd., Delhi 36,75,000 24 28.03.2009 Ronak Tubewell & Machinery Store, Bijore 1,15,315
AO in order to verify the nature of aforesaid payments issued notice dated 13.12.2011 under section 133 (6) of the Income-tax Act, 1961 (for short ‘the Act’) to six parties, namely, (i) M/s. Steel Grace India (P) Ltd., Delhi; (ii) M/s. Jackson Builder (P) Ltd., Delhi; (iii) M/s. Saraswati Met Stone India Pvt. Ltd., Delhi; (iv) M/s. Sam India Buildwell (P) Ltd., Delhi; (v) M/s.
Chimal Lal Bhushan Kumar, Bhatinda; and (vi) M/s. Aggarwal Enterprises, Bhatinda, to furnish account of the assessee i.e. M/s.
International Sales Corporation, Muzaffarnagar as per their respective books of account. AO in order to make a discreet enquiry deputed Income-tax Inspector to collect the requisite documents from the aforesaid parties stationed at Delhi. Consequently, M/s. Steel Grace India (P) Ltd., Delhi and M/s.
Jackson Builder (P) Ltd., Delhi intimated that they have never entered into any transaction with the assessee during the period 01.04.2008 to 31.03.2010. Similarly, M/s. Saraswati Metstone India Pvt. Ltd. also intimated through email that no transaction of any type took place between them and the assessee during the period 01.04.2008 to 31.03.2010. Similarly, Sam India Buildwell (P) Ltd. also intimated that they have no dealing with the assessee party during the FY 2008-09. AO tried to collect the detail from AMMCO Bank Ltd. by way of issuance of notice u/s 133 (6) of the Act but they have expressed their inability to provide copy of pay orders vide which huge amount was credited in the accounts of the assessee. AO also noticed that the assessee shown to have received payment of Rs.24,50,000/- received from M/s. Steel Grace India (P) Ltd. but as per copy of account maintained with AMMCO Bank Ltd. pay orders to the tune of Rs.11,76,000/- was credited on 20.01.2009 showing difference of Rs.12,74,000/- which remained unexplained. AO also noticed that all the pay orders having almost similar handwriting of 2/3 persons and none of them were having address of Delhi. AO also received copy of bank statement from six parties viz. (i) M/s. Barnala Steels Inds. Ltd., Muzaffarnagar; (ii) M/s. S.M. Steels (India) Pvt. Ltd., Muzaffarnagar; (iii) Indotech Engineers, Ghaziabad; (iv) Shree Ram Steels, Muzaffarnagar; (v)
Sharda Trading Co., Muzaffarnagar; and (vi) M/s. Akriti Enterprises, Bulandshahr. Statements of aforesaid six parties show that they have made payment to each other. Assessee vide reply dated 26.12.2011 also stated that M/s. S.M. Steels (India) Pvt. Ltd. is a debtor at sometime and creditor on the other times of the assessee’s proprietorship firm. AO reached the conclusion that the payment received from pay orders are not business receipts as claimed by the assessee and further proceeded to reject the books of account u/s 145 (3) of the Act. AO proceeded to hold that the amount of Rs.4,17,50,124/- credited in the books of account of the assessee claimed to have been received from six different parties is not proved as four parties have categorically denied to have any dealing with the assessee and the remaining two parties who claimed to have made payment through pay orders have also failed to prove any dealing with the assessee and thereby made an addition of Rs.4,17,50,140/-.
Assessee carried the matter by way of an appeal before the ld. CIT (A) who has deleted the addition by allowing the appeal.
Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Ld. DR for the Revenue challenging the impugned order passed by the ld. CIT (A) contended inter alia that the amount of Rs.4,17,50,140/- credited in the current account of the assessee by way of pay orders from different parties is nothing but sham transaction on account of some bogus purchases out of which most of the payments went to M/s. Barnala Steels Indus. Ltd.; that the assessee has received the entire payments by way of pay orders having names and addresses of other persons than those of the concerned parties of Delhi; that even during the remand report, the assessee has failed to appear before the AO to produce requisite ledger, journal, stock registration, bills, besides copy of form ‘C’ obtained with regard to ex-UP Sales which shows that no sales have been effected rather paper work has been completed and that the ld. CIT (A) has erred by deleting the addition by shifting the entire burden on the AO whereas ld. CIT (A) was having co- terminus power with that of the AO to conduct the enquiry and relied upon the decision of Hon’ble Delhi High Court in case of CIT vs. Jansampark Advertising and Marketing P. Ltd. (2015) 375 ITR 373 (Delhi).
However, on the other hand, in order to repel the arguments addressed by the ld. DR for the Revenue, ld. AR for the assessee contended inter alia that the assessee has duly shown the sale and purchases and the AO has never doubted the purchases, as such, there is no question of bogus purchases; that the assessee has purchased all the purchase bills, VAT returns filed with the VAT authorities, balance sheet, audited accounts, etc. which have been produced before the AO; that the assessee has also produced the bills containing all the details qua sales made outside UP and that the bills produced contain the CST numbers of the parties and GR numbers are also there and the amounts have been offered to show in the income; that the AO has also not doubted the GP and NP and as such, the purchases of Rs.4.71 crores cannot be bogus; that the AO has proceeded on the basis of doubts and suspicion; that mere denial by certain parties that they have no transaction, does not mean that sales are bogus; and relied upon the decision of Hon’ble Gujarat High Court in CIT vs. President Industries (2002) 258 ITR 654 (Gujarat). Ld. AR for the assessee also relied upon the impugned order passed by the ld. CIT (A). 8. Undisputedly, entire payment of Rs.4,17,50,140/- has been received by the assessee within a period of 24 days i.e. 20.01.2009 to 28.03.2009 by way of pay orders. It is also not in dispute that the assessee has received payment in one day from a single person through various pay orders each amounting to Rs.49,000/-. It is also not in dispute that the assessee issued notice u/s 133 (6) of the Act to six parties out of which four parties have denied to have any business transaction with the assessee and the other two parties claimed to have made payment through pay orders have also failed to prove any dealing with the assessee. It is also not in dispute that the AO has also not issued summons to the four parties who denied to have any transaction with the assessee to appear before him.
In the backdrop of the aforesaid undisputed facts, we are of the considered view that when four of the parties, namely, (i) M/s.
Steel Grace India (P) Ltd., Delhi; (ii) M/s. Jackson Builder (P) Ltd., Delhi; (iii) M/s. Saraswati Met Stone India Pvt. Ltd., Delhi; and (iv) M/s. Sam India Buildwell (P) Ltd., Delhi from whom huge payments by way of pay orders are shown to have been received by the assessee in current account no.11743 maintained with AMMCO Bank Ltd., have categorically denied to have any business transaction with the assessee, the bills, vouchers, GR, their bank statements, their VAT returns, etc. could not have been relied upon by the ld. CIT (A) without conducting proper enquiry.
Furthermore, when we examine this fact in the light of the fact that neither during assessment proceedings nor during remand proceedings assessee has failed to prove the books of account for AYs 2008-09 & 2009-10 along with ledger, journal, stock register, bills besides copy of form ‘C’ obtained with regard to ex-UP sales, the entire story put-forth by the assessee becomes doubtful.
Furthermore, information received by the AO from AMMCO Bank Ltd. in compliance to notice u/s 133 (6) also proves that all the pay orders are filled up in the handwriting of two or three persons but none of them were having Delhi address which shows that the amount received by the assessee represents cash credit. Furthermore, when this fact is examined in the light of the proved fact that four parties have categorically denied to have any business transaction with the assessee and dealing with remaining two parties have also not been proved, the case of the assessee is merely based upon smart paper work which cannot be believed.
The ld. CIT (A) who is having co-terminus power with that of the AO should have conducted a discreet enquiry. Even, AO has not issued the summons to the six parties compelling them to produce all books of account and other documents to know the veracity of plethora of documents brought on record by the assessee.
When we examine the entire issue in the totality of the facts and circumstances of the case, it shows that it is not only the case of bogus purchases but, in case, assessee has failed to prove any transaction with the six parties from whom he alleged to have payments of crores of rupees, it would be a case of perjury also.
No doubt, perusal of the documents shows that the case of the assessee based upon documents is in order but ld. CI (A) without bringing the truth on record has not tried to uncover the facts suppressed by the assessee in this case.
It is very surprising that four parties from whom huge payments have been received by the assessee categorically claimed that they have no business transaction whatsoever with the assessee but, at the same time, numerous documents like bills of the parties having CST number, GR number, VAT Returns, etc. have been brought on record by the assessee which makes the entire case of the assessee highly doubtful. In these circumstances, it is the duty of the assessee to prove the identity and creditworthiness of the six parties to further prove the genuineness of the transactions. So, in this case, half-baked enquiry has been conducted by the AO as well as ld. CIT (A) and facts and circumstances of the case require that detailed enquiry on the basis of plethora of documents brought on record by the assessee is required to be conducted to bring the truth on record. In these circumstances, impugned order passed by the ld. CIT (A) is not sustainable in the eyes of law.
Moreover, startling facts have come on record from the account books of the assessee that most of the payments have ultimately went to M/s. Barnala Steel Industries Ltd., Muzaffarnagar, which is nothing but round tripping of the money and all these facts need to be thoroughly enquired into.
Reliance in this regard is placed upon the decision rendered by Hon’ble Delhi High Court in CIT vs. Jansampark Advertising and Marketing P. Ltd. (supra) wherein Hon’ble High Court while deciding the identical issue has held as under :-
“Held, allowing the appeal, that the Assessing Officer might have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But the Commissioner (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of the Tribunal, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements revealed a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 issued by the Assessing Officer, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a “further inquiry” in exercise of the power under Section 250(4). This approach not having been adopted, the order of the Tribunal, and consequently that of Commissioner (Appeals), could not be approved or upheld. [matter remanded to the Commissioner (Appeals).”
In view of what has been discussed above, we are of the considered view that the impugned order passed by the ld. CIT (A) deleting the addition made by the AO is required to be set aside, hence set aside and case is remanded back to the AO to decide afresh after providing adequate opportunity of being heard to the assessee. Case law relied upon by the assessee is not applicable to the facts and circumstances of the case. Consequently, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in open court on this 26th day of July, 2019.