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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri S.S.Godara & Dr. A.L. Saini
None आवेदक क� ओर से/By Assessee Shri Sankar Halder, JCIT-SR-DR राज�व क� ओर से/By Revenue 13-03-2019 सुनवाई क� तार�ख/Date of Hearing 08-05-2019 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- The Revenue and assessee have filed their instant cross-appeal for assessment year 2007-08 arise against the Commissioner of Income Tax (Appeals), Asansol’s common order all dated 03.06.2014 passed in case No. 153/C.I.T(A)/Asl/Wd-3(1)/Asl/2009-10, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Case(s) called twice. None appears at the assessee’s behest. It is accordingly proceeded ex parte.
& 1620/Kol/2014 A.Y.2007-08 ITO Wd-3(1), Asl Vs. M/s Tirupat Sponge & Steel Page 2 2. We come to Revenue’s appeal first raising sole substantive ground seeking to challenge correctness of the CIT(A)’s order deleting undisclosed liability addition of ₹83,59,885/-. The assessment findings making the impugned addition read as under:- “1. On comparison of production vis-à-vis electricity consumption, it is found that production is not declared to the extent of maximum productivity level while electric consumption showing a steady rate. An analysis of per consumption with productivity suggests that with the use of that power the productivity would be much higher. As power actually consumed therefore no question of cessation of production arise. The ratio of production should be reflected reasonably with reference to the electric consumption. Contention of the assessee of minimum guarantee of bill amount is not acceptable as bills were raised by DVC on the basis of actual consumption of power as reflected in the monthly bill. For example, electric bill raised for the month of August, 2006 for an amount of Rs.31,66,369. The details of electric bills are given below- Bill for the month Supply Total KVAH Gross Bill Production of hours Amount (in Non Alloy Rs) Steel Ingot as per assessee’s book (in ton) March, 2006 724.42 5,59,800 20,27,795 Nil April “ 720 9,18,300 28,87,322 306.00 May “ 744 8,64,600 27,12,110 341.350 June “ 707.92 8,06,300 25,70,646 284.330 July “ 730.62 9,29,000 28,45,270 302.410 August “ 728.05 10,87,600 31,66,369 274.940 September “ 703.809, 80,300 29,64,452 246.070 October “ 737.10 727.900 24,14,772 246.670 November “ 21,77,721 126.550 December “ 6,43,365 Nil January, 2007 19,87,011 Nil 12th Upto 2,78,100 Nil February, 2008 Total Bills 2128.32 tons amount excluding bill of March, ’06 2,46,47,138 & other charges/minimum guarantee agreement charge From the above table, following discrepancies are found- On the basis of above discrepancies, assessee was asked to show cause as to why not the production and sale would not be determined by estimating & 1620/Kol/2014 A.Y.2007-08 ITO Wd-3(1), Asl Vs. M/s Tirupat Sponge & Steel Page 3 logically with reference to the similar cases. In response, Shri Majoj Saraf (partner) stated in his compliance in this way “we deny the additional liability as shown by DVC, Electricity which we have consumed has been paid in full. DVC has raised bills even of those period during which our factory was closed.” However, gross bill raised by DVC as per the contract with the assessee. Therefore the difference of bills raised and bills paid is treated a liability of the assessee which is not reflected in the books of the assessee. Therefore, Rs.83,59,885 is treated a undisclosed liability of the assessee. Hence, rs.83,59,885 is included in the income of the assessee.”
Mr. Choudhury vehemently contends during the course of hearing that the Assessing Officer had rightly made the impugned undisclosed liability addition during the course of assessment. His case is that M/s Demador Vally Corporation had raised the impugned actual power consumption bill not disclosed at the assessee’s behest in its books of account. We find no merit in Revenue’s instant argument as it has come on record as per CIT(A)’s findings under challenge that the assessee had nowhere claimed the impugned liability as an expenditure in its books of account. We make it clear that it is not a case of any undisclosed income component but a case herein the Revenue’s emphasize is on an alleged liability head which has not been recognized as such at the taxpayer’s behest as business expenditure. We therefore find no reason to interfere with the CIT(A)’s conclusion deleting the impugned addition on this count. Coupled with this, we further notice that assessee had sent its necessary intimation to “M/s DVC” regarding the impugned liability as not payable. All these clinging facts have gone unrebutted during the course of hearing. We therefore decline Revenue’s instant sole substantive ground as well as main appeal ITA 1544/Kol/2014.
Next comes the assessee’s cross-appeal ITA 1620/Kol/2015 seeking to delete to reverse both the lower authorities action adding advance from the customers as well as sundry creditors amount of ₹3,303,632.96 and ₹39,53,307; respectively. The CIT(A)’s detailed discussion qua this two issues confirming the Assessing Officer’s action reads as under:- “8. Ground 3 is against addition of Rs. 3,303,632.96 treated as income under section 68 which is recorded in books of accounts of assessee as 'Advance from Customers'. & 1620/Kol/2014 A.Y.2007-08 ITO Wd-3(1), Asl Vs. M/s Tirupat Sponge & Steel Page 4 It was in the basis of outcome of enquiry made by Assessing Officer. The findings are recorded in tabular form below: Purported Amount(Rs) Finding is assessment order creditor M/s Lalanjee 21,00,000 Initial notice under section 133(6) returned by postal Authorities. Second notice under section 133(6) on basis of Address given by assessee also returned by postal authorities Mortex India 3,07,757.96 Returned by postal authorities Narain & Co. 6,29,729 Confirmed closing balance of Rs.33,854 only Veenita Rolling Mill 3,00,000 No response to notice under section 133(6) 9. In the course of enquiry under section 250(4), the assessee submitted the manner of receipt of funds. All were found to be received by account payee cheques and was credited to account of assessee in Syndicate Bank, Raniganj. The bank instrument by which the sums were received was also traced but further enquiry met a block as banks were not able to furnish further information. Simultaneously the Assessing Officer conducted enquiry on the proof assessee has furnished viz proof of repayment to establish authenticity of the credits produced by assessee in form of copy of pay-in-slips issued by banks. 10. The outcome of the enquiry made by Assessing Officer is startling. The claim before Assessing Officer made by assessee is a. Repayment to M/s Lalanjee was made on 22.09.0-9 by demand draft ~. b. Account with M/s Mortex India was settled by way of sale for Rs. 2,039,535 and by way of payment of Rs. 3,07,758 by way of demand draft c. Account with M/s Narain & Co was settled by way of sale for Rs. 1,180,271 and by way of payment of Rs. 6,2939 by way of demand draft d. Account of M/s Veenita Rolling Mill settled by way of sale made to M/s Tijya steel, sister concern of purported creditor. The enquiry made by Assessing Officer revealed that all demand drafts were made not in name of the purported creditor, but in name of PARAMESWARI DEVI SARAF or RAMESWARI DEVI SARAF, immediate relatives of partner of the assessee. 11. The creditors can be compartmentalised in three ways. M/s Lalanjee and M/s Mortex India are ones which never responded to letter issued by Assessing Officer and the proof of repayment submitted by appellant was found to be unauthentic and fabricated. M/s Narain & Co is one that has responded but there is a mismatch of figures. M/s Veenita Rolling Mill is one where creditor is claimed to be settled through book adjustment. 12. The findings in paragraph 11 clearly establish that the credit balance in respect against M/s Lalanjee and M/s Mortex India is not correct. Therefore the two additions stands sustained. 13. In respect of M/s Narain & Co, from whom reply was received, during remand proceedings, explanation has been offered before Assessing Officer. The difference between confirmed balance and balance as per books of accounts of appellant boiled down to whether the purchase as per books of accounts of M/s Narain & Co, where a sum of Rs. 5,95,875 is debited on 19.10.2006 vide bill no 62 is true or not. The appellant denies the sale and states that the balance in their books of accounts viz Rs. 6,29,729 was repaid by demand draft dated 27.01.2009 issued through Indian Overseas Bank, Raniganj. However, the finding of Assessing Officer that the said demand draft .vas not purchased in name of M/s Narain & Co but in name of & 1620/Kol/2014 A.Y.2007-08 ITO Wd-3(1), Asl Vs. M/s Tirupat Sponge & Steel Page 5 PARAMESWARI DEVI SARAF relative of assessee. The fact indubitably establishes absolute lack of authenticity with regard to the explanation offered by the appellant regarding the closing balance. In view of this I uphold the addition made by Assessing Officer to the extent made in assessment order figuring against M/s Narain & Co. 14. In respect of M/s Veenita Roiling Mill the initial letter issued by Assessing Officer under section 133(6) was not responded. The explanation offered by the appellant is that sale was made to M/s Tijya Steel and by book adjustment the balance was cleared. No direct evidence on turnover with M/s Tijya Steel or any confirmation from M/s Veenita Rolling Mill was produced. Even in books of accounts of appellant for FY 2008-09, the year in which the sale is claimed it is seen that Mls Tijya Steel has opening balance of Rs. 6,22,647 and closed by multiple cash receipts of Rs. 20,000 and below and credit entry against M/s Veenita Roiling Mill of Rs. 3,00,000. In absence of any documentary evidence regarding the claimed transactions and the fact that the notice under section 133(6) issued by Assessing Officer was not answered to, I uphold the addition made by Assessing Officer. 15. The explanation offered by the appellant for purchasing demand draft in names of relatives is that PARAMESWARI DEVI SARAF and RAMESHWARI DEVI SARAF in turn encashed the demand draft and paid the amount in cash to the purported creditors. This explanation merely remains as an explanation with no documentary evidence and stands unsubstantiated. The fact that demand draft was purchased by fabricating records i.e by having a different name in pay-in-slip and producing the same before Assessing Officer and CIT(Appeals) aimed at diverting attention to hard facts goes against the assessee. Hence the new explanation offered by the appellant is not accepted. The decision in paragraphs 12,13 and 14 disposes of ground 3. It is dismissed. 16. Ground 4 is against addition of Rs. 3,953,307 being sums treated by Assessing Officer as bogus sundry creditors. The Assessing Officer made a finding that persons 1 to 6 has not responded to notice under section 133(6) issued by Assessing Officer and - has confirmed that there is no outstanding balance in their books as on 31.3.2007. ------------------------------------------------------------------------------ Sl.No. Purported creditor Sum(Rs) ------------------------------------------------------------------------------ 1.
Arvind Industreis 1,37,000 2. Concast Bengal Steel Industries Ltd 6,34,416 3. B.P. Spring & Engg. Co. Pvt. Ltd. 1,15,166 4. Kalika Steel Traders 1,52,152 5. Pacheria Casting Gas 4,09,846.53 6. Scrap India 17,87,479 7. Sobha Ispat Co 7,17,228 ----------------------------------------------------------------------------------- 17. The explanation offered by the appellant is that the entire sum is repaid by cash drafts between 21.11.2006 and 31.03.2009. In support evidence in form of pay in slip copy regarding purchase of demand draft was produced. The Assessing Officer was asked to enquire into the matter and report. In his reply, made after due enquiry with concerned bank, it was stated that all demand drafts were purchased not in name of the purported creditor but in the name of PARAMESWARI DEVI SARAF relative of assessee in respect of persons in serial numbers 1 to 6 of table in paragraph 16. Further as against claim of payment by cash draft below Rs. 50,000 demand drafts were actually raised in sums above Rs. 50,000. In view of the fact that notice under & 1620/Kol/2014 A.Y.2007-08 ITO Wd-3(1), Asl Vs. M/s Tirupat Sponge & Steel Page 6 section 133(6) was never responded by the purported creditors and the fact that whatever explanation offered by the appellant Assessing Officer was found the untrue and fabricated, I uphold the addition made by the Assessing Officer.
18. In respect of mismatch in closing balance of M/s Sobha Ispat the explanation offered by the appellant before me is that M/s Sobha Ispat Ltd. wrongly represented its case. No draft below Rs. 50,000 was ever issued it it. Payment was made by bank Draft of Rs. 7,17,228 at a time. Bank Draft slip and its ledger copy are enclosed herewith ....” However the Assessing Officer on enquiry found that the demand draft purchased from Indian Overseas Bank on 19.11.2008 for Rs.7,17,228 is not in name of the purported credited but in name of PARAMESWARI DEVI SARAF relative of assessee. Therefore whatever explanation offered by the appellant is found to be incorrect with absolute certainty. Hence I uphold the decision of the Assessing Officer in this regard.
19. The explanation offered by the appellant for purchasing demand draft in names of relatives is that PARAMESWARI DEVI SARAF in turn encashed the demand draft and paid the amount in cash to the purported creditors. This explanation merely remains as an explanation with no documentary evidence and stands unsubstantiated. The fact that demand draft was purchased by fabricating records i.e by having a different name in pay-in-slip and producing the same before .Assessing Officer and CIT(Appeals) aimed at diverting attention to hard facts goes against the assessee. Hence the new explanation offered by the appellant is not accepted. The decision in paragraphs 17 and 18 disposes of ground 4 of appeal. It is dismissed.
21. By producing fabricated evidences being forged copy of bank counterfoil concerning purchase of demand draft, aimed at evading tax, the assessee has committed grave offences warranting necessary action on part of Assessing Officer to initiate appropriate proceedings under the Income Tax Act 1961 and other prevailing laws. The Assessing Officer is directed to examine and initiate appropriate action.
5. We have given our thoughtful consideration to assessee’s pleadings and Revenue’s arguments against and in support of impugned twin addition(s). We find no merit in assessee’s instant two substantive grounds. It had failed to prove the clinching fact to have made the repayments in issue through Smt. Parameswari Devi Saraf (supra) in respect of the corresponding advances customers and sundry creditors along with the relevant nexus before the parties in issue. We make it clear that this is not the assessee’s case that either the Assessing Officer or the CIT(A) had not afforded it adequate opportunity of hearing to produce all the relevant details during the course of assessment and in lower appellate proceedings. We conclude in these peculiar facts that both the lower authorities have rightly declined assessee’s explanation in preparing the relevant demand draft in the name of ITA No. 1554 & 1620/Kol/2014 A.Y.2007-08 ITO Wd-3(1), Asl Vs. M/s Tirupat Sponge & Steel Page 7 Smt. Parameswari Devi Saraf (supra). We accordingly express our agreement with both the impugned addition(s) in entirety. The assessee’s appeal also fails.