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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SH. H.S.SIDHU & SH.ANADEE NATH MISSHRA
PER ANADEE NATH MISSHRA, ACCOUNTANT MEMBER (A). The present appeal has been filed by the assessee against the order dated 12.02.2016 of CIT(A)-27, New Delhi pertaining to A.Y. 2012-
Grounds of appeal are as under:-
1. “That on the facts and in the circumstances of case and in law, the Ld CIT-A erred in sustaining addition u/s 68 amounting to Rs.15,38,64,403/- on account of alleged unexplained credit where Ld AO made addition on mere basis of hearsay and gossip and merely based on conjectures and without meaningful and law bound enquiry.
2. That on the facts and in the circumstances of case and in law the Ld CIT-A erred in sustaining addition u/s 68 amounting to Rs Page 2 of 12 15,38,64,403/ on account of alleged unexplained credit where Ld AO made addition ignoring assessee's self explanatory replies on records.
3. That on the facts and in the circumstances of case and in law, the Ld CIT-A erred in sustaining addition u/s 68 amounting to Rs.15,38,64,403/- on account of alleged unexplained credit where Ld AO made addition without making possible enquiry from: 3.1. Available income tax records and co-ordinate officer of said creditor; 3.2. Available bank records of said creditor; 3.3. Available ROC records of said creditor 4. That on the facts and in the circumstances of case and in law, the Ld CIT-A erred in sustaining addition u/s 68 amounting to Rs I5,38,64,403 on account of alleged unexplained credit without appreciating detailed reply filed during assessment & appellate proceedings.
5. That on the facts and in the circumstances of case and in law, the Ld CIT-A erred in sustaining addition u/s 68 amounting to Rs 15,38,64,403 on account of alleged unexplained credit without appreciating that there was violation of principles of natural justice at the end of Ld AO.
6. That on the facts and in the circumstances of case and in law, the Ld CIT-A erred in not applying some token rate of profit to credits appearing in books as only ultimate beneficiary can be taxed u/s 68 for full credit.” (B). The assessee filed e-return on 04.12.2012 showing a loss of Rs.75,641/-. Assessment order was passed on 25.02.2015 wherein addition of Rs.15,38,64,403/- was made on account of unexplained sundry creditors and the income was assessed at Rs.15,37,88,762/- (rounded off to Rs.15,37,88,760/-). The relevant portion of the assessment order is reproduced hereunder:-
Page 3 of 12 “In this case e-return was filed on 04.12.2012. The case was selected for scrutiny and notice u/s 143(2) dated 26.08.2013 was issued fixing for 30.12.2013 but no compliance was made. On 03.12.2013 notice u/s 142(i) cum questionnaire was issued fixing for 17.12.2013 which too remained un-complied with. Again on 20.10.2014 notice u/s 142(l) cum questionnaire fixing for 30.10.2014 was issued. In compliance Ms. Nupur Garg Bansal C.A. appeared filed application for adjournment and case was adjourned for 13.11.2014. In reply the assessee company has stated as under:-
1. 1. Unsecured loans-No unsecured loan taken during the year.
2. Sales & purchases-No sales & purchases during the year.
3. Month-wise, party-wise details of services rendered or goods sold & purchases-There are no sales & purchases made by company during the year under consideration. Hence, this paint is not applicable.
4. Addition in fixed assets-As there are no fixed assets with the company during the year, this point is not applicable.
5. Exempt income-There is no income during the year which is claimed as exempt.
6. Deductions-No deductions claimed by company during the year under consideration.
7. AIR information-No AIR transactions taken place during the year under consideration.
2. During the course of assessment proceedings the assessee was required to give the details of sundry creditors reflected in the balance sheet. In reply the assesses has given details of sundry creditors amounting to Rs.15,37,15,000/- relating to eight parties. In order to verify the genuineness summons were issued to M/s IKF Green fuel Ltd. and M/s Urja Global Ltd. The summons remained un-complied and the ITI has reported that these companies were not found at given address. Letters u/s 133(6) were issued which were invariably returned by postal authority with the remarks office closed, address moved etc. However, few companies have filed confirmatory letters with bank statements. A perusal of bank statements submitted by the creditor companies shows that before Page 4 of 12 issuing the check to the assessee company and identical amount has been deposited. Accordingly the assessee was vide questionnaire dated 14.01.2015 was confronted of the fact as "Narration of each entry exceeding Rs.10,00,000/- appearing in bank statements with source and nature of such transactions in the light that it is seen adjust before issuance of cheque similar amount has been credited in the case of M/s BCA Capfin and M/s Adhunik India Ltd." On this issue the assessee never submitted its reply.
3. In view of the facts narrated above it is established that the creditors shown by the assessee company are either a non existing company or company's undisclosed income has been channelized under the disguise of these companies. Therefore, it is my considered opinion that sundry creditors reflected in the balance sheet which amounts to Rs.15,38.64,403/- is nothing but undisclosed income of the company which will be added to the income of the company as unexplained credits.” (B.1).The assessee filed appeal before Ld.CIT(A). Vide order dated 12.02.2016, the Ld.CIT(A) dismissed the assessee’s appeal. The relevant portion of the order of Ld.CIT(A) is reproduced below:-
“I have carefully considered the written submission and the cases relied upon by the A.R. of the appellant and have gone through the assessment order. It is seen that during the course of assessment proceedings, the Assessing Officer required the assessee to give the details of sundry creditors reflected in the balance sheet. The assessee gave details of sundry creditors amounting to Rs. 15,37,15,000/- relating to eight parties. The Assessing Officer issued summons to verify the genuineness to M/s IKF Green Fuel Ltd. and M/s Urja Global Ltd. The summons remained un-complied with and the inspector of his office reported that the said companies were not found at given address. Letters u/s 133(6) were issued which were invariably returned by postal authority with the remarks office closed, address moved etc. However, few companies have filed confirmatory letters with bank statements, A perusal of bank statements submitted by the creditor companies shows that before issuing the check to the assessee company identical
Page 5 of 12 amounts were deposited. Accordingly the Assessing Officer vide questionnaire dated 14.01.2015 confronted the assessee, and required to file "Narration of each entry exceeding Rs.10,00,000/- appearing in bank statements with source and nature of such transactions in the light that it is seen adjusted before issuance of cheque and similar amount was credited in the case of M/s BCA Capfin and M/s Adhunik India Ltd." On this issue the assessee never submitted its reply. 3.1. In view of the facts narrated in the order and as above, it is established that the creditors shown by the assessee company are either a non existing company or company's undisclosed income was channelized under the guise of these companies. Accordingly, the Assessing Officer found that sundry creditors refitted in the balance sheet which amounted to. Rs.15,38,64,403/- was undisclosed income of the company which were added to the income of the company as unexplained credits. 3.2. In view of all these facts, the submissions of the appellant and the legal position, I have no reason to disagree with the stand taken by the Assessing Officer in the order of assessment. Accordingly, all the grounds raised in appeal are dismissed.” (C). This appeal has been filed by the assessee in ITAT against the aforesaid order dated 12.02.2016 of the Ld.CIT(A). At the time of hearing before us, the Ld. Counsel for the assessee contended that the AO did not provide natural justice to the assessee before finalizing best judgement assessment u/s 144 of the I.T.Act, 1961. To support this contention, he pleaded that reasonable opportunity was not provided by the AO and further, he highlighted that the AO did not issue show cause notice prescribed under proviso to section 144(1) of the I.T.Act.
He also brought CBDT Instruction 20/2015 dated 29.12.2015 to our
Page 6 of 12 attention and contended that procedure communicated vide paragraph 4 of this instruction was not followed by the AO. The Ld. Counsel further contended that the assessee had filed detailed Paper Book containing 90 pages before the Ld.CIT(A). However, the Ld.CIT(A) did not consider the Paper Book filed by the assessee and passed a non- speaking order, by merely considering the assessment order and without taking any cognizance of the submissions and evidences filed by the assessee before Ld.CIT(A). The Ld.CIT. (DR) appearing for Revenue strongly supported the orders of the AO and the Ld.CIT(A). He contended that there was no violation of natural justice by the AO at the assessment stage. To support this contention, he drew our attention to facts stated by the AO in para 2 of the assessment order.
In this paragraph of the assessment order, the AO has given details of summons issued to M/s IKF Green Fuel Ltd. And M/s Urja Global Ltd. which remained uncomplied. The AO has also informed that Income Tax Inspectors (“ITI”) had reported that these companies were not found at the given address. The AO has also stated that letters u/s 133(6) were issued which were returned by postal authorities with the remarks “office closed”, “address moved” etc. Some companies did file confirmatory letters with bank statements but the AO noted on perusal of the bank statements submitted by creditor companies that before
Page 7 of 12 issuing cheque to the assessee company, an identical amount has been deposited in the bank account. The assessee was confronted with this fact by the AO and the assessee was asked by AO vide questionnaire dated 14.01.2015 to furnish “Narration of each entry exceeding Rs.10,00,000/- appearing in bank statements with source and nature of such transactions in the light that it is seen adjust before issuance of cheque similar amount has been credited in the case of M/s BCA Capfin and M/s. Adhunik India Ltd.” The Ld.CIT DR contended that the AO completed the assessment on 25.02.2015 after providing reasonable opportunity to the assessee since issue of questionnaire dated 14.01.2015 and took an adverse view against the assessee because the assessee never submitted its reply despite reasonable opportunity. However, Ld.CIT (DR) admitted that the Ld.CIT(A) passed a non-speaking order without taking the submissions and evidences filed by the assessee before Ld.CIT(A) into cognizance and by merely relying on the assessment order.
(D). We have heard both sides patiently. We have also considered the materials on record carefully. We find that the assessment order was passed on 25.02.2015 which is much before CBDT Instruction 20/2015 dated 29.12.2015. Therefore, the reliance by the assessee on CBDT
Page 8 of 12 instruction issued after completion of assessment proceedings, on procedure to be followed in assessment, lacks force and conviction. On procedural matters CBDT Instructions cannot be said to have retrospective application. Further, we notice that the AO had issued notices u/s 142(1) of I.T.Act dated 03.12.2013, 20.10.2014 and 14.01.2015. In particular vide questionnaire dated 14.01.2015 forming part of notice dated 14.01.2015 u/s 142(1) of the I.T.Act, the assessee was specifically asked, vide serial No.11 of the questionnaire, to furnish “Narration of each entry exceeding Rs.10,00,000/- appearing in Bank statements with source and nature of such transactions in the light that it is seen adjust before issuance of cheque similar amount has been credited in the case of M/s BCA Capfin and M/s Adhunik India Ltd.” Under second proviso to section 144(1) of the I.T.Act, the AO has statutory mandate, if a notice u/s 142(1) of I.T.Act is issued by the AO before completion of assessment, to complete best judgement assessment u/s 144 of the I.T.Act without giving show cause notice referred to in first proviso to section 144(1) of the I.T.Act. In the instant case, therefore, even if the AO has not served a show cause notice under first proviso of section 144(1) of the I.T.Act, the best judgement assessment completed by the AO u/s 144 of the I.T.Act is not inconsistent with provisions under section 144 of the Page 9 of 12 I.T.Act because indisputably, the AO had issued notice u/s 142(1) of I.T.Act, dated 14.01.2015. We have also noticed that the assessment order has been passed on 25.02.2015 after providing the assessee reasonable opportunity to comply with notice dated 14.01.2015 u/s 142(1) of the I.T.Act whereby the assessee was asked to furnish narration of each entry exceeding Rs.10 Lacs appearing in bank statement with source and nature of such transactions. We have also noticed that the AO had issued summons, had carried out field inquiry through ITI and had also carried out inquiry u/s 133(6) of the I.T.Act.
It is not the case of the assessee either before the Ld.CIT(A) or before us in ITAT that during the assessment proceedings the AO had refused to admit evidence which ought to have been admitted; or that the assessee was prevented by sufficient cause from producing the evidence with the assessee was called upon by the AO to produce; or that the assessee was prevented by sufficient cause from producing any relevant evidence before the AO; or that the AO made the assessment order without giving sufficient opportunity to the assessee to adduce relevant evidence. The grievance of the assessee comes from the fact that a show cause notice was not issued to the assessee before completing assessment u/s 144 of the I.T.Act. We have already held that the best judgement assessment completed by the AO u/s 144 of the I.T.Act is not Page 10 of 12 inconsistent with provisions under section 144 of the I.T.Act; since under second proviso to section 144(1) of the I.T.Act, the AO has statutory mandate , if a notice u/s 142(1) of the Act is issued by the AO before completion of assessment, to complete best judgement assessment u/s 144 of the I.T.Act without giving show cause notice referred to in first proviso to section 144(1) of the I.T.Act. We have also already held that the reliance by the assessee on CBDT instruction issued after completion of assessment proceedings, on procedural matters, lacks force and conviction. In these facts and circumstances, we reject the contentions made on behalf of the assessee by Ld. Counsel for the assessee that there was any violation of natural justice at the assessment stage or that reasonable opportunity was not provided by the AO.
(D.1). However, there is no dispute over the fact that the Ld.CIT(A) has passed appellate order dated 12.02.2016 without taking the submissions and evidences filed by the assessee before the Ld.CIT(A) into cognizance. The order of the Ld.CIT(A) is a non-speaking order as far as the submissions and evidences filed by the assessee before the Ld.CIT(A) is concerned. In her order, Ld.CIT(A) has not given any findings about the submissions and evidences filed by the assessee
Page 11 of 12 before Ld.CIT(A). The order of the Ld.CIT(A) is also silent on whether the evidences filed by the assessee during appellate proceedings before Ld.CIT(A) were partly or entirely in the nature of additional evidences and if so, the reason why the Ld.CIT(A) did not admit the additional evidences. Therefore, we do not have the benefit of a speaking order of Ld.CIT(A) on the aspects related to submissions and evidences filed by the assessee before the Ld.CIT(A). In the fitness of things, therefore, we set aside the order of Ld.CIT(A) and restore the entire matter to the file of Ld.CIT(A) with the direction to the Ld.CIT(A) to pass a denovo order which should be a speaking order taking into cognizance, the submissions and evidences filed by the assessee during appellate proceedings.
(H). In the result, the appeal of the assessee is partly allowed.
The decision to restore the matter to the file of the Ld.CIT(A) was pronounced in the open court on the date of hearing itself after conclusion of the hearing. This written order is pronounced in the open court on 19th April 2017.