M/S GUPTA METAL SHEET (P) LTD.,,DELHI vs. DCIT, FARIDABAD

Date of hearing 18.01.2016 Date of pronouncement 04.03.2016 ORDER PER O.P. KANT, A.M.:

This appeal of the assessee is directed against the order dated 07.01.2013 of ld. Commissioner of Income Tax (Central), Gurgaon, raising sole ground of appeal

, which is as under: “That on the facts as well as in Law the Ld. CIT(A) Central Gurgaon was not justified in confirming the addition of Rs. 38,55,577/- u/s 68 of the Income Tax Act, 1961.”

2. The facts in brief are that the premises of the assessee company were subjected to search and seizure action under Section 132 of the Act on 30.07.2009 along with other connected assessee’s of the group. The assessee filed return of income declaring income of Rs. 10,98,47,908/- for the year under 30.12.2010. The case was selected for scrutiny and notice under Section 143(2) of the Income-tax Act, 1961 (for short “the Act”) was issued. The Assessing Officer observed that the assessee company was engaged in manufacturing and trading of metal sheets in the previous year relevant to the assessment year. The Assessing Officer also observed that during the course of search and seizure action, the Director of the assessee company Sh. Radhey Shyam Gupta admitted undisclosed income in respect of the company of Rs. 7 crores related to the year under consideration and Rs. 3.5 crores related to the assessment year 2009-10. The Assessing Officer made addition in the assessment order corresponding to the undisclosed transactions, evidences of which were found and seized in the course of search action. In addition to the above, the Assessing Officer also observed that during the search action at the residential premises of one of the Directors Sh. Radhe Shyam Gupta, some loose cheques of M/s. Shivalik Enterprises (HUF), duly signed, were found and seized. The ld. Assessing Officer was of the opinion that M/s. Shivalik Enterprises(HUF) who was appearing as creditors in the books of account of the assessee, had not supplied the goods to the assessee and it has provided only accommodation entries to the assessee. In the books of account of the assessee, a credit balance of Rs. 38,55,557/- was appearing in the name of M/s. Shivalik Enterprises(HUF). The assessee explained that the said party left some signed blank cheques with the Director of the assessee company which was to be given to their representatives on their instructions and representative along with a person of the company used to go to the bank to withdraw the money from their account and for utilization in Rewadi i.e. the factory place of the assessee or elsewhere and those cheques were kept with the Directors of the assessee company for safety purposes. The above submission of the assessee was not accepted by the Assessing Officer. In the absence of any documentary evidence provided by the assessee such as name of the representative of the creditors, the representative confirmation etc., the explanation given by the assessee that the representative along with the person of the company used to go to bank to withdraw the money from their accounts and utilized in Rewadi or elsewhere, was also found illogical by the Assessing Officer. The ld AO also noticed that as the creditor was located at ‘Yamunanagar’ , how he felt the need of opening bank account in ‘Rewari’ which was almost 500 kilometers away from ‘Yamunanagar’ was not explained by the assessee. The Assessing Officer also observed that from the bank statement of the creditors that cash was withdrawn immediately after the cheque was deposited in the bank. On the basis of all the circumstantial evidences, the Assessing Officer observed that it was a pre- planned decision of the assessee in collusion with the creditors to keep the signed cheques so that the assessee can immediately withdraw the money from the bank account, after deposit of cheque in the account of the creditor, which according to the AO was actually an accommodation entry. In view of the above facts, the Assessing Officer held that the credit of Rs. 38,55,557/- was unexplained and he added the same under Section 68 of the Act. Aggrieved, the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) observed that the assessee failed to comply with three ingredients of Section 68 and the assessee failed to discharge the onus casted upon him under the provisions of Section 68 and, therefore, he confirmed the addition made by the Assessing Officer.

Aggrieved, the assessee is before us.

Shivalik Enterprises (HUF) was a regular supplier of the raw material and the outstanding balance of the creditors was duly recorded in the books of the assessee and the said party kept blank cheques with the Directors of the assessee to be given to their representative so that he may not be required to carry cash from one place to another. The learned AR made first proposition that the purchases in reference were made not in the assessment year under consideration and hence no addition could be made in the year under consideration. The ld. Authorized Representative relying on page one of the paper book submitted that in the assessment year 2009-10, the assessee purchased copper scrap of Rs. 1,12,65,189/- from M/s. Shivalik Enterprises (HUF) and in assessment year 2010-11, there was an outstanding of Rs. 38,35,557/- on 27.04.2009 ( referred page 11 of the paper book) , which has been added by the Assessing Officer and after that an aggregate purchase of Rs. 3,35,69,237/- were made from Shivalik Enterprises (HUF) in that year( referred page 11-13 of the paper book) . Thus, accordingly to the ld. Authorized Representative, the credit amount of Rs. 38,55,557/- as on 27.04.2009 was an amount carried forward from 01.04.2009

2009-10 and, therefore, no addition could be made in assessment year 2010-11. second proposition submitted by ld. Authorized Representative that the Assessing Officer has accepted the purchases from M/s. Shivalik Enterprises (HUF) except for the outstanding amount of Rs. 38,55,557/- and thus, the remaining purchases of Rs. 2,97,13,600/- was accepted. Therefore, it cannot be accepted that the purchases were not genuine. He further submitted that it is well settled law that the transaction cannot be rejected in part and therefore after having accepted the purchases from M/s. Shivalik Enterprises (HUF), the Assessing Officer was not justified in holding part purchases from very same party as bogus. The ld. Authorized Representation further proposed that Section 68 was not applicable to the purchases. In support of his proposition, he relied on judgement of Hon’ble Allahabad High Court in the case of CIT Vs Pancham Dass Jain 156 Taxman 507. In fourth proposition, as regard to the ingredients of Section 68, ld. Authorized Representative submitted that the party existed as the identity of party was not doubted by the Assessing Officer and the transactions were also genuine as the same were got verified by the Inspector of the Office of the Assessing Officer and the creditworthiness also cannot be doubted as for the invoices were tax paid and material purchased was accounted for in the excise records.

,submitted that this issue was not raised before the ld. CIT(A) and, therefore, this cannot be raised before the Tribunal at this juncture for first time. He further requested to issue direction to the Assessing Officer under Section 150 of the Act to reopen the proceedings for assessment year 2009-10 and reassess the case de-novo. As regard to the second proposition, ld CIT(DR) submitted that the facts and circumstances proved that M/s. Shivalik Enterprises (HUF) was mere an accommodation entry provider and other purchases from the said have not been held as non genuine, then the matter may be restored to the Assessing Officer for disallowing other purchases from the said parity. As regards to the case of CIT Vs Panchamdas (supra) relied upon by the ld AR, the Ld CIT DR submitted that facts of the said case were different from the facts of the assessee.

As regard to the proposition of fulfilling of ingredients of Section 68, ld. CIT(DR) submitted that the lower authorities have already brought on record the evidence that the genuineness and creditworthiness of the transaction were not established in the case of the assessee.

of the assessee were not provided. As regards to genuiness of the transaction, , the same was in doubt from the observation of the AO that cash used to be withdrawn after deposit of cheque by the assessee. We find that no documents have been submitted by the assessee in support of the creditworthiness of the creditor. Thus according to us the assessee has failed to discharge its Burdon of proof for requirement of section 68 of the Act regarding the creditor. In view of the facts and circumstances, we are of the opinion that in the interest of justice, the assessee should be provided one more opportunity to discharge its burden of proof in respect of the creditor. Accordingly, we restore the matter to the file of the Assessing Officer for deciding the issue afresh in accordance to law.

Needless to mention that the assessee shall be provided sufficient opportunity of being heard. As regards to the third proposition of the ld AR that the provision of section 68 of the Act are not applicable over the purchases, in view of the judgement of the CIT Vs Panchamdas Jain (supra) , is concerned , we find that the fact in the case of CIT Vs Panchamdas Jain (supra) purchases were not held bogus by the AO and thus the Hon’ble Court held that in absence of holding the purchases as bogus , the was not correct in holding the purchases on credit as unexplained u/s 68 of the Act. But, whether purchases have been doubted in the case of the assessee or not is not clear from the facts before us and , thus we hold that as we have already restored the matter to the file of the Assessing Officer , the AO is directed to examine whether the purchases in the case have been found bogus or not and thereafter, he is directed to take action in view of the CIT Vs Panchamdas Jain (supra) accordingly. As regards , the second proposition of the ld AR that part of the purchases from the creditor are only held as unexplained, we hold that the issue of examination whether the purchases in dispute are explained or not has been restored to the file of the AO for determination afresh, the proposition is thus rendered infructuous and not require our adjudication. As regards to the first proposition that the purchases in dispute pertained to earlier assessment year is concerned, we find that the issue has already been restored to the file of the Assessing officer for examination afresh, we direct the Assessing Officer to examine the issue as in which year the purchases in question were credited and take action accordingly in relevant year, in terms of the provisions of Section 150(1) of the Act. Accordingly, the ground of the appeal is allowed for statistical purpose.