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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]
ORDER Per Shri Mahavir Singh, JM:
This appeal by revenue is arising out of order of CIT(A)-1, Kolkata in Appeal No.326/CIT(A)-I/C-3/08-09 dated 29.03.2012. Assessment was framed by Addl. CIT, Range-3, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2006-07 vide his order dated 31.12.2008.
The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of unexplained credit u/s. 68 of the Act. For this, revenue has raised following four grounds: “1. That the Ld. CIT(A) erred in deleting the addition of Rs.21,87,82,482/- made u/s. 68 as 'unexplained credit' without appreciation the fact that the assessee company failed to reconcile the differences appeared on account of transactions made with M/s. Ram Swarup Industrial Corporation.
2. That the Ld. CIT(A) erred in deleting the addition of Rs.21,87,82,482/- without controvert the findings of the A.O. that the assessee company failed to reconcile the difference by producing supporting evidences.
3. That the Ld. CIT(A) erred while delivering the judgment without appreciating the cannons of judgment that the onus to prove the transactions was on assessee company.
4. That the Ld. CIT(A) erred in deleting the addition of Rs.21.87 Crore without allowing the opportunity to the A.O to verify the contents of the paper book filed by the assessee during the appellate stage.”
Briefly stated facts are that during the course of assessment proceedings, on going through the details of sundry creditors, the AO noticed that there is substantial difference in the Balance Sheet as shown by the assessee and as seen from ledger account submitted by the creditor M/s. Ram Swarup Industrial Corporation (hereinafter RSIC). In response to notice u/s. 133(6) of the Act, the creditor RSIC showing the credit balance at Rs.22,96,80,435/- as on 31.03.2006 as against the amount to be shown as payable by the assessee as on 31.03.2006 at Rs.1,08,97,953/-, thereby difference of Rs.21,87,82,482/- was added u/s. 68 of the Act by the AO. Aggrieved, assessee preferred appeal before CIT(A), who deleted the addition by observing as under:
“Regarding Ground No. 4 relating to addition of Rs.21,87,82,482/- under the head unexplained credit u/s 68 of the I.T. Act, it is noticed that A.O. issued notice u/s 133(6) to one of the creditors of the assessee M/s Ram Swarup Industrial Corporation which is a unit of M/s Ram Swarup Industries Ltd. The assessee had maintained two accounts of this party in its books of accounts. As per assessee's books of accounts credit balance as on 31.03.2006 was Rs.22,96,80,435/- in respect of M/s Ram Swarup Industrial Corporation and as per the accounts submitted by M/s Ram Swarup Industrial Corporation, the amount payable by the assessee to the party as on 31.03.2006 was Rs.1,08,97,953/-. The assessee was asked to reconcile the above difference and the reconciliation was submitted by the assessee on 24.12.2008. The assessee disputed the accounts submitted by M/s Ram Swarup Industrial Corporation in its reconciliation before the Assessing Officer and the statement of Shri Navin Gupta, Chief Finance Officer of M/s Ram Swarup Industrial Corporation was recorded by the Assessing Officer on 31.12.2008 and the addition of Rs.21,87,82,482/- on account of difference in the balance was made by the Assessing Officer u/s 68 of the I. T. Act, 1961 by an order dt.31.12.2008. The main dispute is regarding the payments of Rs.14 crore on 31.03.2006 through Allahabad Bank and Karur Vysya Bank which according to the contention of the assessee was wrongly shown by M/s Ram Swarup Industrial Corporation and there is dispute regarding bills wrongly debited by M/s Ram Swarup Industrial Corporation for which it is contended by the assessee that material was not received by them to the extent of Rs.7,87,82,482/-. During the appellate proceedings, the reconciliation submitted by assessee appears at page 65 of the Paper Book. The ledger account in the books of the assessee appears at page 66 to 87 of the Paper Book. The statement of Shri Navin Gupta appears at page 119 to 121 of the paper book and in the paper book assessee has also furnished copy of bank account in Bank of India maintained by the assessee. The assessee has also furnished the copy of account in the books of M/s Ram Swarup Industrial Corporation which was obtained by assessee in the inspection of the assessment records before filing of appeal. The assessee also furnished the copy of affidavit filed before the assessing Officer regarding denial of payment of Rs.14 crore made by the appellant company to M/s Ram Swarup Industrial Corporation and denial of transaction of Rs.7,87,82,482/-. The assessee has also produced annual balance sheet and Profit & Loss a/c along with Audit Report in the paper book. After careful consideration of the written submission, assessment order, remand report and counter comments of the assessee, it is noticed that the transaction of Rs.14 crore as on 31.03.2006 was reversed by M/s Ram Swarup Industrial Corporation in the months July and October, 2006 (page 158 of the paper book which is nothing but part of the ledger alc of the assessee in the books of M/s Ram Swarup Industrial Corporation, whose certified copy was given to the assessee before filing of the appeal). The assessee company had produced the copy of the bank account maintained by it in the Bank of India. The counter party i.e. M/s Ram Swarup Industrial Corporation never produced its bank accounts to substantiate the transaction of Rs.14 crores on 31.03.2006 before the Assessing Officer. The assessee was maintaining its bank accounts with Bank of India and during the course assessment proceedings and remand proceedings the Assessing Officer 3 M/s. AHW Steels Ltd. AY 2006-07 did not find any evidence for existence of any other Bank account in the name of Assessee Company. The audited books of accounts maintained by the assessee were not rejected by the Assessing Officer during assessment proceedings and the purchases and sales were considered to be genuine by the Assessing Officer. The reversal of the transaction of Rs.14 crore was a unilateral act by the counter party. The assessee wasnot given any opportunity by the Assessing Officer to cross examine Shri Navin Gupta, CFO of M/s Ram Swarup Industrial Corporation which is evident from the order sheet notings which are part of the Paper Book furnished by the assessee. The reversal of Rs.14 crore was also admitted by Shri Navin Gupta in answer to question No.4 of the statement recorded on 31.12.2008. Keeping in view these facts and circumstances, the additions of Rs.14 crore cannot be made in the hands of the assessee u/s 68 of the I.T. Act, 1961. Regarding the balance addition of Rs.7,87,82,482/-, the A/R of the assessee referred to copy of account furnished by M/s Ram Swarup Industrial Corporation and particularly the Page No.180 and Page No.239 of the paper book where amount of Rs.9,37,42,597/- was reconciled by M/s Ram Swarup Industrial Corporation by passing a internal entry in their books of accounts from debtor a/c to creditor a/c of the appellant. Similarly, at page 163 and 224 internal transfer entries had been made by M/s Ram Swarup Industrial Corporation in its own books of accounts for an amount of Rs.2,70,99,341/-. At Page No. 160 being Industrial Corporation books there was an reflection of closing balance as on 31.03.2005 for an amount of Rs.2,88,60,143/- while in the books of the appellant there was no closing balance in the account of M/s. Ram Swarup Industrial Corporation which forms page 66 of the paper book. The balance amount of Rs.1,54,78,255/- relating to supply of material (kindly refer to the details in page 4 of the assessment order) by M/s. Ram Swarup Industrial Corporation to the appellant which was not admitted by the appellant even at the assessment stage, no evidence in form of road challans and accepted bills was produced before the Assessing Officer. Keeping in view the above facts and circumstances, the addition of difference amount of rs.7,87,82,482/- was made by the Assessing Officer on the basis of conjectures and surmises and without any evidence. Therefore, the ground no. 4 is allowed.”
Aggrieved, now revenue is in appeal before the Tribunal.
We have heard rival submissions and gone through facts and circumstances of the case. During the scrutiny assessment proceedings, the reconciliation statement along with the relevant documents in support were filed by the assessee-company and an affidavit was also filed claiming that the balance as reflected in the books of account of the assessee vis-à-vis the books of account of RSIC as reflected in their books, were as per entries in the regular books of account and the reconciliation statement was in confirmatory with the books of accounts of assessee. We find from the facts of the case that as per the books of RSIC showed a closing credit balance of Rs.1,08,97,953/- as on 31.03.2006 in the name of the assessee. Further RSIC in their ledger for the subsequent year i.e. for 31.03.2007 have shown the same amount as opening balance under the party ledger as Debtors. The closing credit balance as reflected by the assessee in their books is Rs.22,96,80,435/-. It is this difference between the closing balance as reflected by RSIC and as per the books of assessee has been added back by the A.O.
4 M/s. AHW Steels Ltd. AY 2006-07 5. The assessee filed reconciliation statement and the first entry as payment shown by RSIC is of Rs.14,00,00,000/-. In the affidavit filed by the assessee (Paper Book page 113 & 114), it was clearly mentioned that no such payment has been made by the assessee to RSIC. From ledger account of RSIC for subsequent year, the said amount of Rs.14,00,00,000/- have been reversed by them on 01.07.2006 and 01.10.2006 (Paper Book page 158). The next amount in the reconciliation statement is Rs.9,37,42,597/- for which it has been stated that RSIC has transferred this sum to the credit account from their Debtor A/c of assessee to the Creditor A/c of assessee in their books. (page 180 of assessee paper book) The party being the Debtor A/c of assessee in RSIC books of account. The credit Ledger A/c of assessee in the books of RSIC have been filed by them during the scrutiny proceedings where this contra-entry is reflected (assessee paper book page 221 to page 239). As Regards the next entry of Rs.2,70,99,341/-, the same treatment has been done by RSIC in their books i.e. they have transferred from the Debtor A/c to Creditor A/c of assessee in their books. Page 163 of assessee’s Paper Book, wherin the Debtor A/c of assessee in RSIC, where, as on 31st August 2005, the said entry has been reflected as "AHW Steel Limited CRS". The Creditor A/c ledger as referred to herein above, which also confirm the same. ( Page 224 of assessee’s paper book). The next amount of Rs.2,88,574/- and Rs.2,93,150/- is with regard to two sale bills as issued by RSIC as per detail mentioned in the reconciliation statement, but were not entered by them in their ledger of assessee. The bills are in Paper Book at pages 90 & 91. The assessee had shown it as their purchase and booked it in their books of account. The next amount is with regard to the amount excess debited by assessee in their books in the Ledger A/c of RSIC for a sum of Rs.27,91,751/-. In this regard, Paper Book page 86 being the credit Ledger A/c of RSIC in the books of assessee, and Paper Book page 180 being the Debit A/c of assessee in RSIC. Two sale bills on 28th March 2006 of Rs.28,60,000/- each was wrongly entered by assessee in their Ledger as Rs.2,86,000/- and Rs.28,60,000/- which was subsequently rectified by the parties in the next year. As regard to the entries where RSIC has shown as sales by them totaling to Rs.1,54,78,255/- and the assessee has categorically denied that they have not received any such materials under the bill nos. and the quantity and amount as mentioned in the reconciliation as alleged by the party.
5 M/s. AHW Steels Ltd. AY 2006-07 6. We further find from the reconciliation filed by the assessee and the explanation that no opportunity of cross-examination was provided to the assessee despite the fact that it was only on the statement of the Chief Finance Controller, the AO relied upon his statement and made addition of Rs.2l.88 crores. The AO nowhere asked RSIC to produce the bills and the evidence of delivery of the material i.e. Road Challan and accepted Challan copy by assessee of the materials as alleged to have been sold by them. No enquiry whatsoever was made by the AO and it was simply on the statement of Sri Navin Gupta, the CFO of RSIC was relied on by him and addition made. Similarly, another amount of Rs.6,50,000/- transferred from the credit account of assessee and the books of RSIC to Debtor A/c of assessee in the books of RSIC. Paper Book page 166 being the Debtor A/c in the books of RSIC, where, on 30th September 2005, the entry has been made, and page 224, being the credit a/c of assessee in RSIC, where the corresponding entry has been made. The next amount of Rs.2,88,60,143/- is with regard to the sale bill, as reflected as on 31st March 2005, in the Debtor A/c of assessee, in the books of RSIC as sale bill. But, once again, no such purchases have been made by assessee and no verification with regard to the sale bill of RSIC and/or Road Challan and/or Delivery Evidence was verified by the AO. From the Ledger A/c which is at page 160 of assessee’s paper book, RSIC is showing the sum as 31st March 2005. This amount in any case is of the earlier year and not of the year under consideration. From the Ledger A/c in the books of assessee of RSIC which is at page 66, there is no opening balance and the first entry of purchase was made on 27th April 2005. The last entry is with regard to the purchase bill wrongly entered by assessee in the account of Ram Swarup Bars & Roes instead of RSIC amounting to Rs.4,36,436/-. The copy of the bill has been filed at Page 88 being the bill issued by RSIC.
From the above reconciliations and the explanations, We find that reconciliation is supported by evidence which are on record, and there is no difference in the balance in the books of account of assessee and that of RSIC. Even the CIT(A) has remanded the matter to AO, who vide his remand report explained the issue as under:- “The additions u/s 68 of the Act was made as the difference in the figures of creditors as per A/cs. of the assessee-co. were grossly deferred from what received in the reply vide notice u/s 133(6) of the Act Wherein it was found that the Sundry Creditor viz. Ramswarup Industrial Corporation showing Rs.l,08,97,953/- as on 31.03.2006 against the assessee's figure of credit balance of Rs.22,96,80,435/-.
6 M/s. AHW Steels Ltd. AY 2006-07 The assessee was asked to explain/reconcile the substantial difference in the balance shown by the assessee in its books and as shown by the party in the replies received vide notice u/s 133(6) of the Act. The assessee, however produce its reconciliation with M/s Ramswarup Industrial Corporation for the year under consideration i.e. F.Y. 05-06. Further, the assessee-co, submitted as affidavit on 30.12.08 contending that the alleged payment of Rs.14 crores on 31.03.2006 has credited by the M/s Ramswarup Industrial Corporation in their books was never made by the assessee-co. Further, the assessee-co. also contended that the transactions amounting to Rs.1,59,14,691/- on various dates, amounting to Rs.2,88,60,143/- has wrongly debited to the assessee's accounts. The crux of the mater under consideration is that the Ld. AO has the opportunity to cross verify the reconciliation as submitted by the assessee-co. and for that the CFO of M/s. Ramswarup Industrial Corporation, Sri Naveen Gupta, was produced by the assessee-co. himself before the A.O. The statements of Naveen Gupta, CFO were recorded wherein he deferred that differed to what the assessee has stated its affidavit, ibid. Sri Gupta, stated that the cheques were actually received by them on 31.03.2006 and that is why the amounts were credited. He has stated that the cheques were received but cheques No. has been mentioned in the ledger a/c. due to the error of the Data Entry Operators which is in direct contradiction to what the assessee has stated in its submission that the cheques were never issued to the party. Sri Gupta has stated in reply to question no.14 that he does not agree with the reconciliation of M/s. AHW Steels Ltd. He further stated that the statement of a/c M/s. Ramswarup Industrial Corporation was pm the basis of actual transaction that were carried out. In such circumstances, where assessee reconciliation is not based on concrete evidences and further it was submitted by the party that the transaction were actually made i.e. M/s Ramswarup Industrial Corporation. The reconciliation of the assessee-co. does not stand proved. Thus the AO correctly made the addition. Further, taking into account the facts and circumstances of the case, supra, the reconciliation of the assessee-co. is not acceptable. The copy of the statement of Sri Naveen Gupta, CFO of M/s. Ramswarup Industrial Corporation which in itself is an evidence may be produced to you, if required. In view of the above the remand report may kindly be treated as submitted.”
We find from the facts of the case that the AO relying on the submissions taken u/s 133(1) of one Sri Navin Gupta of RSIC, had added the difference of Rs.21.88 crores to the income of the assessee by invoking the provision of section 68 of the Act. We fuether find that though full details and documents and ledger copy of RSIC for the year ended 31st March 2006 and also of 31st March 2007 was put on record. The statement was recorded by the AO on the last date of passing of the assessment order on 31st December and made his conclusion based on the submission of Sri Navin Gupta but no opportunity whatsoever was provided to the assessee for cross-examination by the AO.
7 M/s. AHW Steels Ltd. AY 2006-07 The assessee has explained before us in entirety the reconsilation and also explained the discrepancies. The assessee referring to page 65 explained the entries as reflected in the reconciliation statement. As per the books of RSIC, the balance as on 31st March, 2006 in their books showed a closing credit balance of Rs.1,08,97,953/-. RSIC in their ledger for the subsequent year i.e. for 31st March, 2007 ending have shown the same amount as opening balance under the party ledger as Debtors. This can be seen from page 158 of assessee’s Paper Book. The closing credit balance as reflected by assessee in their books is Rs.22,96,80,435/-. (It is this difference between the closing balance as reflected by RSIC and as per the books of assessee has been added back by the AO). In the reconciliation statement, the first entry as payment shown by RSIC is of Rs.14,00,00,000/-. In the affidavit filed by assessee which is at assessee’s Paper Book pages 113 & 114, it was clearly mentioned that, no such payment has been made by assessee to RSIC which they have alleged. From the ledger account of RSIC for the subsequent year, the said amount of Rs.14,00,00,000/- have been reversed by them on Ist July 2006 and Ist October, 2006. This fact is verified from assessee’s Paper Book page 158.
Further, next amount in the reconciliation statement is Rs.9,37,42,597.69 for which it has been stated that RSIC has transferred this sum to the credit account from their Debtor A/c of assessee to the Creditor A/c of assessee in their books. This is verified from assessee’s paper book page 180 being Debtor A/c of assessee in RSIC books (where on 31st March 2006 they have internally transferred from the Debtor A/c to the Creditor A/c the said sum). The credit Ledger A/c of assessee in the books of RSIC have been filed by them during the scrutiny proceedings where this contra-entry is reflected, is being filed in continuous in assessee’s Paper Book page 221 to page 239. The next entry of Rs.2,70,99,341/-, the same treatment has been done by RSIC in their books i.e. they have transferred from the Debtor A/c to Creditor A/c of assessee in their books. This is verified from assessee’s Paper Book page 163 being the Debtor A/c of assessee in RSIC, where, on 31st August 2005, the said entry has been reflected as "AHW Steel Limited CRS". The Creditor A/c ledger as referred to herein above also confirm the same. Next amount of Rs.2,88,574/- and Rs.2,93,150/- is with regard to two sale bills as issued by RSIC as per detail mentioned in the reconciliation statement, but 8 M/s. AHW Steels Ltd. AY 2006-07 were not entered by them in their ledger of assessee. The bills are at assessee’s Paper Book page 90 & 91. The assessee had shown it as their purchase and had recorded it in their books of account accordingly. Next amount is with regard to the amount of excess debited by assessee in their books in the Ledger A/c of RSIC for a sum of Rs.27,91,751/- . Ld. Counsel for the assessee referred to assessee’s Paper Book page 86 being the credit Ledger A/c of RSIC in the books of assessee, and assessee’s Paper Book page 180 being the Debit A/c of assessee in RSIC. Two sale bills on 28th March 2006 of Rs.28,60,000/- each was wrongly entered by assessee in their Ledger as Rs.2,86,000/- and Rs.28,60,000/- which was subsequently rectified by the parties in the next year.
With regard to the entries where RSIC has shown as sales by them totaling to Rs.1,54,78,255/- and the assessee has categorically denied that they have not received any such materials under the bill nos. and the quantity and amount as mentioned in the reconciliation as alleged by the party. We find that no opportunity of cross-examination was provided to the assessee. It was only on the statement of the Chief Finance Controller, the AO relied upon his statement and made addition of Rs.2l.88 crores. Ld. Counsel for the assessee referred to Short Notes on Grounds of Appeal. According to him, the AO should have asked RSIC to produce the bills and the evidence of delivery of the material i.e. Road Challan and accepted Challan copy by assessee of the materials. No enquiry whatsoever was made by the AO. It was simply on the statement of Sri Navin Gupta, the CFO of RSIC was relied upon by him and addition was made. Next amount of Rs.2,88,60,143/- is with regard to the sale bill, as reflected as on 31st March 2005, in the Debtor A/c of assessee, in the books of RSIC as sale bill. But, once again, no such purchases have been made by assessee and no verification with regard to the sale bill of RSIC and/or Road Challan and/or Delivery Evidence was verified by the AO. From the Ledger A/c which is at assessee’s Paper Book at page 160, RSIC is showing the sum as on 31st March 2005. This amount in any case is of the earlier year and not of the year under consideration. From the Ledger A/c in the books of assessee of RSIC which is at assessee’s Paper Book page 66, there is no opening balance and the first entry of purchase was made on 27th April 2005. Next amount of Rs.8,088/- is with regard to the purchase bill less credited by assessee in their books. Reference was made to Paper Book page 180, where, on 16th March 2006, the entry in the RSIC in the debit ledger 9 M/s. AHW Steels Ltd. AY 2006-07 account of assessee, amount shown as Rs.2,08,388/- , whereas assessee in their books have made an entry of Rs.2,00,300/- that's the difference amount comes to Rs.8,088/-. The last entry is with regard to the purchase bill wrongly entered by assessee in the account of Ram Swarup Bars & Roes instead of RSIC amounting to Rs.4,36,436/-. The copy of the bill has been filed at assessee’s Paper Book at Page 88 being the bill issued by RSIC. From these reconciliations and the explanations and also the explanations and clarifications submitted in the Short Notes on Grounds of Appeal
, we find that the reconciliation is supported by evidence which are on record, and there is no difference in the balance in the books of account of assessee that of RSIC, and hence, the difference of the addition as made by the AO of Rs.21.88 crores is rightly deleted by CIT(A) and hence we confirm the same.
9. In the result, the appeal of revenue is dismissed.