RAKESH KUMAR BHARGAVA,DELHI vs. ITO, WARD- 36(2), NEW DELHI

O R D E R The aforesaid appeal has been filed by the Assessee against the impugned order dated 17.11.2017, passed by the Commissioner of Income Tax (Appeals)-XII, New Delhi for the quantum of assessment passed u/s.143(3)/254 of the IT Act, for the Assessment Year 2006-07. In the grounds of appeal

, the assessee has raised the following grounds of appeal:-

1. That the Hon’ble CIT (A) XII has ignored the fact that the appellant’s creditors have twice confirmed and verified their claim before the Ld. A.O.: (a) Firstly in Nov./Dec. 2008 (9 numbers) confirmation submitted by Assessee. (b) Secondly in May/June 2011 (9 Numbers) confirmation directly submitted by Individual creditors to the Ld. A.O.

(c) That the Ld. A.O. in his verification remand report dt. 01.11.2017 has stated: “The Confirmation from the above 9 sundry Creditors were received in the office in the months of June 2011 via speed post, which are duly placed in file. In the confirmation, the creditors have confirmed the amount due from M/s. Mapytron Systems.”

That during the re-opened assessment proceedings the Ld. (d) A.O. Mrs. Sunita Gupta issued notice dt. 08.02.2016 to appear on 14.06.2016. However during this four months period the Ld. A.O. got transferred and the Ld. A.O. Mr. Ganesh Kumar the new A.O. issued fresh notice on 23.05.2016 and summoned the appellant on 06.06.2016 at 3.30 AM. The Assessee attended on 06.06.2016 and was made to sign the note sheet and was informed that a new list of requirement will be sent to him. That the Ld. A.O. did not sent any letter. However the (e) Assessee did visited department on following dates, but was always turned back having no regards to his age of 68 years and his medical conditions: Date of visit of Assessee Response from ITO’s office 14.06.2016 Ld. A.O. not presents. Staff told No Notice has been sent. 21.06.2016 Told Ld. A.O. gone on Training. 06.07.2016 Ld. A.O. not presents. Staff told No Notice has been sent. 12.07.2016 Neither Ld. A.O. nor Staff present. (f) That the Ld. A.O. has passed the ex-party Order stating that two Show cause notices dt. 08.07.2016 and 16.08.2016 were served on Assessee, which were never received by Assessee, however the Ld. A.O. intentions here are doubtful because he has send these two Notices on Old Address. Whereas, he himself had made earlier communication with Assessee at his current address and sent all notices from last many years to his current address. This intentional step taken by the Ld. A.O. creates suspense whether these Notices were ever sent or not, as the Assessee was visiting the Ld. A.O.’s office frequently and has provided his E-mail ID, Mobile number also beside his current address.

5. That the order dated 17.11.2017 as passed by the Ld. Commissioner of Income Tax (Appeals) XII is contrary to the law and facts.

6. That the order dated 17.11.2017 is not maintainable and the same is liable to be set aside and thus, the assessment order dated 31.08.2016 as passed by the Ld. Assessing Officer is not maintainable and the same is liable to be dismissed.

2. This is the second round of proceedings in pursuance of direction by the Tribunal to decide the issue afresh which relates to addition on account of sundry creditors aggregating to Rs.9,14,750/-. The assessee had filed confirmation from all the nine parties/ sundry creditors and same was rejected by the Assessing Officer on the ground that letters sent to them were received back unserved. The relevant observation of the Tribunal in this regard is as under:- “11. Keeping in view the undisputed fact that the assessee has placed before Assessing Officer the confirmations made by his nine sundry creditors as required u/s.133(6) of the Act, documents relied upon by the parties and submissions made before the Bench, we are of the considered view that Ld. CIT(A) has erred in passing the impugned order dated 29.08.2014 in affirming the addition of Rs.9,14,750/- made by the A.O. vide order dated 16.12.2008 for the following reasons:- i) that both, the A.O. as well as Ld. CIT(A) being judicial authorities, were under obligation to adhere to the rule of natural justice by providing opportunity of being heard to the assessee to produce nine sundry creditors whose confirmations have been duly placed on record during assessment/remand proceedings; ii) that when the assessee has discharged its onus u/s.68 of the Act by providing confirmation letter from the sundry creditors, the onus stands shifted to the A.O. to controvert the same by fringing cogent evidence on record, that the said parties are not existing and their creditworthiness and genuineness is highly doubtful. The A O has rather summarily dismissed the confirmation letters on the sole ground that the same are stereotyped and has never given findings that the confirmation filed by the assessee in respect of the nine sundry creditors are fake one and of non existing entities; iii) that no doubt Inspector, income tax deputed by the A.O. reported that M/s. R.K. Enterprises, Natraj Sanitary and Verma Engineering works are non-existing, but the assessee has never been provided opportunity to produce them, or to fill their latest addresses but outrightly, ignored the confirmations and business transactions submitted by the assessee; iv) that notices sent to nine parties detailed at page 20 of the impugned order are shown to have been received back unserved but thereafter, no opportunity has been provided to the assessee to provide their latest address or to produce the parties before the A.O. nor any effort has been made to serve them through substitute service; v) that confirmation filed by assessee pertaining to nine parties/sundry creditors detailed at page 20 of the impugned order ought not to have been rejected merely on the ground that the letters sent to them by the A.O. have been received back unserved except with thorough probe; vi) that it is abundantly clear from the facts on record that A.O. has failed to verify confirmations filed by the assessee rather rejected the same on the basis of conjectures and surmises.

4. Ld. CIT(A) has taken note of the fact that Assessing Officer has Deputed Inspector of Income Tax for inquiry in cases of some of the sundry creditors which were found to be non existing at the address given. Further notices issued u/s. 133(6) was also not complied with. The observation of the ld. CIT (A) in this regard reads as under:

“6.12 I have carefully considered all the surrounding facts pertaining to this case and find that the Hon’ble ITAT in their order dated 17.09.2015 observed that the Ld. Assessing Officer as well as CIT(A) being judicial authorities were under obligation to adhere to the rule of natural justice by providing opportunity of being heard to the Assessee to produce 9 sundry creditors whose confirmations were duly placed on record during assessment/remand proceedings. Now I find that the Assessee has been given ample opportunity to produce the sundry creditors whose confirmations were placed on record. But the Assessee failed to produce these creditors on the ground that those have become 16 to 19 years old and none of them are found at the given addresses. Again in para 11(iii) of the order, the Hon’ble ITAT observed that though Inspector deputed by the Assessing Officer reported M/s RK Engineers, M/s Natraj Sanitary and M/s Verma Engineering Works were non-existing, the Assessee was never given opportunity to produce them or to file their latest addresses. Now admittedly, the Assessee has been given the opportunity to produce the sundry creditors shown by him and also to produce their latest addresses. As stated above, the Assessee has failed to produce the sundry creditors as well as their latest addresses. In para 11 (iv) of the order, the Hon’ble ITAT observed that no opportunity has been provided to the Assessee to produce the parties before Assessing Officer nor has any effort been made to serve the notices through substitute modes. As mentioned above, the Appellant has himself failed to locate his parties on the given addresses. Therefore, the department could not make any exercise to serve the notices through any other mode. 6.13 Besides the above, I have gone through all the documents produced by the Assessee and find that the payments claimed to have been made to the sundry creditors was by way of cash. Had there been the payments through banking channel, some verification could have been made by the Assessing Officer to ascertain the facts. But in the event of cash payments no such verification is possible. The creditors may be old in 2017 but when the original assessment proceedings were going on, the Assessee had adequate opportunity to produce them before the Assessing Officer and in that situation the plea of old creditors could not be applicable. The Hon’ble ITAT has directed to make thorough inquiry into the genuineness of the creditors and not to reject the confirmations filed by the Assessee. Here a very pertinent question arises, if 9 out of 11 creditors confirmed their balances by sending the letters to the Assessing Officer, they could also be produced before the Assessing Officer by the Assessee because the implied inference is that the parties were available at their given addresses when they replied notices of the Assessing Officer. The disappearance of all the parties from the given addresses raises the doubt as to the genuineness of explanation offered by the Appellant. I find that the Assessing Officer, during the remand proceedings, afforded one more opportunity to the Assessee either to produce the creditors or to furnish their new addresses. But the Assessee has out rightly failed to furnish any such information. In so far as the cases of M/s JK Tubes and M/s SLB Export Ltd. are concerned, they themselves denied any transaction with the Assessee. In view of the above facts and in the circumstances, the sundry creditors claimed by the Assessee cannot be treated genuine. Hence, I confirm the addition made by the Assessing Officer and dismiss the grounds taken by the Appellant in this regard.”