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Income Tax Appellate Tribunal, ‘B’ BENCH, BENGALURU
Before: SHRI N.V.VASUDEVAN & SHRI INTURI RAMA RAO
O R D E R Per INTURI RAMA RAO, AM: These are appeals filed by the assessee directed against different orders of the learned Commissioner of Income- tax(Appeals),Mysore dated, 05/12/2013 for assessment years 2008-09 and 2010-11. Since common issues are involved in both the appeals, we proceed to dispose of the same by this common order.
(Assessment year 2008-09): 2. Briefly, the facts of the case are as under: The assessee is a partnership firm duly registered under the Partnership Act. It carries on business of execution of civil construction works under the name and style ‘Presidency Builders & Developers’. The return of income for the assessment year 2008-09 was filed on 30/09/2008 which was revised on 10/10/2008 at total income of Rs.17,53,050/-. Subsequently, survey operations under the & 827/Bang/2014 Page 2 of 8 provisions of section 133A of the Income-tax Act, 1961 ['the Act'] were carried on in the business premises of the assessee. During the course of survey proceedings, certain incriminating documents were stated to be found. Consequent to this information, the assessee-company had agreed to declare additional income and accordingly filed return of income on 10/01/2011 declaring total income of Rs.45,58,620/-. Since this return of income was filed beyond prescribed time, the Assessing Officer (AO) initiated re- assessment proceedings u/s 147 and accordingly issued notice dated 03/08/2011 u/s 148 of the Act calling upon the assessee- company to file return of income. In response to said notice, the assessee-company submitted that the return of income filed on 10/01/2011 be treated as return filed in response to notice u/s 148 of the Act. Subsequently, AO initiated assessment proceedings and completed the assessment vide order dated 28/02/2013 u/s 143(3) r.w.s. 147 of the Act at total income of Rs.1,66,23,625/-. While doing so, AO made addition of Rs.18 lakhs on account of unsecured loans by holding that the assessee-company had failed to furnish the confirmation letters from sundry creditors establishing the identity and genuineness and credit worthiness of the creditor. AO also made addition of unsecured creditors of Rs.22,94,147/- on account of unconfirmed sundry creditors. AO also brought to tax difference in the rate of flats sold in the same year of Rs.79,70,858/- (difference between maximum rate charged per sq.ft. and the rate shown per sq.ft.)
Being aggrieved, an appeal was filed before the ld.CIT(A) contending inter alia that the AO ought to have made addition of Rs.18 lakhs on account of unconfirmed loan creditors. Further, the assessee had filed confirmation letters in respect of one Mr.Shafi Muscat to the extent of Rs.6 lakhs. The ld.CIT(A), however, rejected this confirmation letter by holding that identity of the sundry creditor is not established. Further confirmation letter filed was not admitted by the ld.CIT(A) as no reasons as to why this evidence should not be filed before the AO. In respect of sundry & 827/Bang/2014 Page 3 of 8 creditors also, the ld.CIT(A) citing same reason confirmed the addition. As regards addition on account of understatement of sale consideration from flat sold, in the absence of plausible explanation for receipt of lower consideration as compared to consideration received in respect of other flats.
Being aggrieved, the assessee is before us in the present appeal raising the following grounds of appeal:
5. Ground Nos.1 and 6 are general in nature and do not require any adjudication. Ground No.2 challenges addition of Rs.18 lakhs on account of unsecured loan creditors as confirmed by the ld.CIT(A). Learned counsel for assessee submitted that confirmation letter from one Mr.Shafi Muscat has been filed before & 827/Bang/2014 Page 4 of 8 the ld.CIT(A) for the first time. He also took us through the same placed at pages 116 & 117 of the paper book. He submitted that the ld.CIT(A) ought to have admitted the additional evidence filed before him. As regards loan creditors of Rs.11 lakhs, he had no explanation as to why confirmation letters could not be filed. On the other hand, learned Departmental Representative placed reliance on the orders of the lower authorities.
We heard rival submissions and perused material on record. The issue in these grounds of appeal relates to is addition u/s 68 in respect of loan creditors of Rs.18 lakhs. Admittedly, the assessee had failed to discharge onus of establishing the genuineness, identity and credit worthiness of the loan creditors before AO. It is only before the ld.CIT(A) that the assessee had filed confirmation letter from one Mr.Shafi Muscat for Rs.6 lakhs and Mr.Shoiba Ameeruddin to the extent of Rs. 1 lakh. In respect of balance sundry creditors, no confirmation letters have been filed even before us. Even in respect of confirmation letters placed at pages 116 & 117 of the paper book, perusal of the same does not disclose the identity as well as credit worthiness and genuineness of the transaction. Nor this was brought on record in accordance with provisions of law. The assessee had not brought this material on record by filing application under rule 46A before the ld.CIT(A) . Evidence which is not brought on record can neither be admitted nor considered by the appellate authorities. No case was made out before CIT(A) as to why the confirmation letters could not be filed before AO. Thus, the ld.CIT(A) was justified in not admitting the additional evidence. Therefore, we confirm the addition of Rs.18 lakhs.
Next ground of appeal
challenges addition of Rs.22,94,147/- on account of unsecured sundry creditors. The AO had noticed that the assessee had shown sundry creditors to the extent of Rs.2,69,29,297/- had called upon the assessee to produce confirmation letters from the respective sundry creditors. & 827/Bang/2014 Page 5 of 8. However, the assessee could not produce confirmation letters to the extent of Rs.22,94,147/- and therefore, AO made addition. On appeal before the ld.CIT(A), confirmation letters to the extent of Rs.10 lakhs were filed before the ld.CIT(A). The ld.CIT(A) held that confirmation letters filed do not establish the identity, credit worthiness and genuineness of the credits, the necessary ingredients required to be satisfied. Regarding argument that subsequently sundry creditors were repaid, the ld.CIT(A) held that no credence could be given since the repayments were done in cash, accordingly dismissed the ground.
Being aggrieved, the assessee is in appeal before us. Learned counsel for assessee vehemently contended that sundry creditors represents opening balance and also filed ledger extracts at pages 128 to 135 and further argued that sundry creditors are on account of transactions of purchases made during the course of business and the purchases came to be accepted by the assessing authority. On the other hand, learned DR placed reliance on the orders of the lower authorities.
We heard rival submissions and perused material on record. The addition was made by the AO disbelieving the sundry creditors. Admittedly, the assessee could not discharge its onus of satisfying three ingredients required to prove sundry creditors and therefore, AO made addition. It is only before the ld.CIT(A), assessee could file confirmation letter to the extent of Rs.10 lakhs. According to the ld.CIT(A) the confirmation letter does not establish three essential ingredients to prove sundry creditors.
Before us, assessee took a plea that some of the sundry credits represent opening balance and therefore, no addition could be made during the year under consideration. This ground was not raised before the ld.CIT(A). Even before us, no application for admission of additional ground of appeal was raised. This additional ground cannot be accepted as it requires verification of & 827/Bang/2014 Page 6 of 8 facts. Therefore, even before us, assessee could not discharge the onus lying upon it to prove identity, genuineness and credit worthiness of the creditors. Therefore, we confirm the addition. This ground of appeal is dismissed.
10. Ground No.4 challenges addition on account of alleged suppression of sales. AO, during the course of assessment proceedings noticed that the assessee had sold apartments in two projects viz., Presidency Sunflower and Presidency Jasmine. In respect of project Sunflower the assessee had charged maximum rate of Rs.2000 per sq.ft. in respect of flat No.604 whereas in respect of other flats, the rate charged varies from Rs.1276 per sq.ft. to Rs.1317 per sq.ft. and the difference amount was brought to tax as assessee had failed to offer explanation as to why the assessee undercharged from other flat owners. Even before the ld.CIT(A), no plausible explanation was offered and the same came to be confirmed by the ld.CIT(A). Before us, learned counsel for assessee contended that addition cannot be sustained in absence of positive evidence disclosing suppression of sales. AO was not correct in making addition simply on the basis that flat No.604 was sold at higher price. He placed reliance on the following case-laws. i. DCIT vs. M/s.Nariman Land Developers P. Ltd., in & 3748/Mum/2009 dt.20/05/2011
ii. M/s. Aum Shiv Enterprises vs. ACIT in Mum/2010 dt. 14/08/2013 Even before the ld.CIT(A), no evidence/explanation was filed and the ld.CIT(A) confirmed addition. Admittedly, no explanation as to why lesser sale consideration was accepted compared to sale consideration received in respect of 604. It is in the exclusive knowledge of the assessee as to why lower price was accepted by him and the assessee has failed to discharge its onus by filing evidence/explanation in accepting lower consideration. Accordingly, we have no option to confirm the addition. & 827/Bang/2014 Page 7 of 8 11. Law does not impose any burden on the authorities to prove by positive evidence that the accounts are unreliable or that income assessed is the correct figure. Fact necessary to prove the claim would be within the knowledge of the assessee and it is the duty of the assessee alone to prove that what is claimed is true and correct. (Ganga Ram Balmokand vs. CIT (5 ITR 464), Lal Mohan Krishna Lal Paul vs. CIT (12 ITR 441)(Cal.) and section 106 of the Evidence Act). The relevant observation of the Hon’ble High Court of Calcutta in the case of Lal Mohan Krishna Lal Paul (supra) is as follows: “The question as framed for the opinion of this Court is whether there is anything in law which casts the burden of proof on the Income-tax Officer or the appellate authority to prove by positive evidence that they are items assessable to tax. This question was dealt with by a Bench of the Lahore High Court in a case (Ganga Ram Balmokand v. Commissioner of Income-tax, Punjab) reported in 1937, 5 Income-tax Reports, 464 at page 475 : "I am not, however, prepared to hold," says Mr. Justice Din Mohammad, "that any burden is imposed on the Income-tax authorities to prove by 'positive evidence' that the accounts are unreliable or that the figure at which they assess is the correct figure. In the first place, the question of unreliability of accounts is a question of fact and primarily falls for the determination of the Income-tax authorities alone................Secondly, the Income- tax Officer cannot be fixed with the knowledge of the state of the assessee's accounts and cannot consequently be expected to lead evidence to prove the assessee's transactions for the accounting year. Under Section 106 of the Evidence Act, the onus of proving a fact always lies on the person within whose knowledge especially that fact is and it cannot be denied that it is the assessee who is the person contemplated by this section."
We have also been referred in the course argument to Section 114 of the Evidence Act which provides in illustration (g) that the Court may presume that evidence which could be, and is not, produced would, if produced, be unfavourable to the person who withholds it. The Income-tax Officer may similarly presume that if there is evidence which might have been produced, in support of the assessee's case and that evidence has not been produced, the reason is that it would not assist the assessee's contention.”
& 827/Bang/2014 Page 8 of 8 In view of the above enunciated principle of law, AO was justified in drawing adverse inference and making the addition, especially in the light of the fact that no time gap between the dates of entering into the agreements sale and the wide variation of consideration. In the circumstances, we uphold the action of the lower authorities in bringing to tax the difference amount.