Appell v. Sh. Kulwinder Singh

ITA No. 72 of 2017Date of decision: 12.07.2017. The Pr. Commissioner of Income Tax II, Amritsar ..... Appell Vs. Sh. Kulwinder Singh 66, Green Plaza Market, Court Road, Amritsar.| ..-- Responden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’ BLE MR. JUSTICE AMIT RAWAL Present: Mr. Denesh Goyal, Senior Standing Counsel for the appellant.Ajay Kumar Mittal,J. 1]The appellant-revenue has filed the instant appeal under Section260A of the Income Tax Act, 1961 (in short, “the Act”) against the orderdated 23.6.2016, Annexure A.3, passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.149(Asr)/2016, claiming following substantial questions of law for theassessment year 2009-10:-| (1)“Whether on the facts and circumstances of the case and|in law, Hon’ble ITAT has erred in allowing relief to the|assessee while not appreciating the fact that the|provisions of Section 68 of the Income Tax Act, 1961|were rightly attracted in this case since the assessee failedto prove identity, capacity, creditworthiness and_genuineness of the creditors?in law, Hon’ble ITAT has erred in allowing relief to the|assessee while not appreciating the fact that the|provisions of Section 68 of the Income Tax Act, 1961|were rightly attracted in this case since the assessee failedto prove identity, capacity, creditworthiness and_genuineness of the creditors? (11)Whether on the facts and circumstances of the case and|in law, Hon’ble ITAT was right in not following its own|decision in the case of Shiv Rice & General Mills in ITA|in law, Hon’ble ITAT was right in not following its own|decision in the case of Shiv Rice & General Mills in ITA| No.468(ASR)/2001 dated 13.01.2006, which squarely|covers the case of the revenue and also goes to the root ofthe matter? (111)Whether on the facts and circumstances of the case, the|order of the Appellate Tribunal is contrary to the|evidence and material on the record of the case and|therefore, perverse?order of the Appellate Tribunal is contrary to the|evidence and material on the record of the case and|therefore, perverse? (iv)Whether on the facts and circumstances of the case, theorder of the Appellate Tribunal is suffering from non-application of mind and is reasonable and arbitrary?order of the Appellate Tribunal is suffering from non-application of mind and is reasonable and arbitrary? | |A few facts necessary for adjudication of the controversyinvolved, as narrated in appeal, may be noticed. The assessee-respondent is a(Government Contractor in the business of road construction. A returndeclaring income of<55,81,540/-was filed by him. The case was selectedfor scrutiny and the assessment was made under Section 143(3) of the Act.During the course of assessment proceedings, on examination of books ofaccount vis-a-vis balance sheet filed by the assessee, it was seen that he hadShown a number of sundry creditors against registration number of thevehicles. When enquired, it was submitted by the assessee that he hadpurchased crusher through these vehicles on credit during the month ofFebruary and March, 2009. The amount shown against each vehicle numbersin the balance sheet was on account of Freight, Octroi and carriage as on31.03.2009. The assessee was asked to furnish copies of account of all theabove creditors mentioned in the balance sheet by way of vehicle numbers.He was also asked to produce the goods carrier owners in respect of whompayment exceeding250,000/-was outstanding as on 31.03.2009. Summonsunder Section 131 of the Act were issued randomly on 21.11.2011 to findout the genuineness of creditors in respect of outstanding payments as on31.03.2009, which were reflected against registration numbers of vehicles. All the summons were received back un-served with the remarks that “no'such person available at this address’, “address is incomplete’. The assesseewas asked to furnish ledger account of the aforesaid creditors, which wereproduced by him. It was found that credit entries in respect of all thevehicles had been made on account of freight, octroi and carriage. Theseentries had been made in the last days of March, 2009. A few entriespertained to the months of January and February, 2009. According to theappellant-revenue, the assessee had not been able to satisfactorily explain theaforesaid creditors shown against Registration Number of the vehicles. TheAssessing Officer passed an order dated 21.12.2011 under Section 143(3) ofthe Act making an addition of<83,18,322/-on account of freight, octroi andcarriage. Aggrieved by the order, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated99.12.2015, Annexure A.2, the CIT(A) dismissed the appeal and confirmedthe addition made by the Assessing Officer. Not satisfiedwith the order, theassessee filed appeal before the Tribunal. Vide order dated 23.06.2016,Annexure A.3, the Tribunal allowed the appeal holding that the provisions ofSection 68 of the Act could be invoked in case some amount was received|by an assessee. In the present case, the concerned transactions were only ofsupply of material and, therefore, provisions of Section 68 of the Act werenot applicable. It was further held that trade creditors in the earlier yearsstood accepted in scrutiny assessments. Thus, the genuineness of theexpenses under consideration could not be doubted. Hence the instant appealby the appellant-revenue. onWe have heard learned counsel for the appellant-revenue.4 A perusal of the order passed by the Tribunal shows that theassessee had shown numerous sundry creditors along with details in his balance sheet. The assessee being a road Contractor received material for theconstruction of the road. The amounts in question represented purchasesmade on credits. According to Section 68 of the Act, where any sum isfound credited in the books of account of an assessee maintained for anyprevious year and the asseessee offers no explanation about the nature andsource of the same or the explanation offered by him is not satisfactory inthe opinion of the Assessing Officer, the sum so credited may be charged toincome tax as the income of the assessee of that previous year. It has beencategorically recorded by the Tribunal that the provisions of Section 68 ofthe Act were clearly not attracted to the amount representing purchases madeon credits. Further the trade creditors in the earlier years i.e. assessmentyears 2007-08 and 2008-09 stood accepted in scrutiny assessments. Thus,the genuineness of expenses under consideration could not be doubted. Therelevant findings recorded by the Tribunal in this regard read thus:- “Having heard the rival contentions in the light of the materialavailable on record, it is seen that in para-3 of the assessmentorder, the AO observed that the assessee had shown numeroussundry creditors along with details, as was available from theexamination of the assessee’s hooks of account vis-a-vis hisbalance sheet. The assessee is a road contractor. He receivedmaterial for the construction of the road. The amounts inquestion represented purchases made on credits. The provisionsof Section 68 of the Act are clearly not attracted to amountrepresenting purchases made on credits, as is also held in ‘CITVs. Pancham Dass Jain’, 205 CTR 444 (All). The assesseeraised this issue by way of written submissions (APB 37 to 160,relevant portion at para-5, on page 43) dated 10.05.2014 filedbefore the CIT(A). The Id. CIT(A) has, however, not addressedthis grievance at all and merely upheld the addition made underSection 68 of the Act. On behalf of the assessee, a comparativechart of net profit rate of the assessee for the assessment yearsavailable on record, it is seen that in para-3 of the assessmentorder, the AO observed that the assessee had shown numeroussundry creditors along with details, as was available from theexamination of the assessee’s hooks of account vis-a-vis hisbalance sheet. The assessee is a road contractor. He receivedmaterial for the construction of the road. The amounts inquestion represented purchases made on credits. The provisionsof Section 68 of the Act are clearly not attracted to amountrepresenting purchases made on credits, as is also held in ‘CITVs. Pancham Dass Jain’, 205 CTR 444 (All). The assesseeraised this issue by way of written submissions (APB 37 to 160,relevant portion at para-5, on page 43) dated 10.05.2014 filedbefore the CIT(A). The Id. CIT(A) has, however, not addressedthis grievance at all and merely upheld the addition made underSection 68 of the Act. On behalf of the assessee, a comparativechart of net profit rate of the assessee for the assessment years 2005-06 to 2011-2012 has been filed before us. [In the earlieryears also, no such addition was made. For the assessment year2007-08, under scrutiny assessment, the assessment was madeat 8%. The position remained much the same for the assessmentyear 2008-09. The year under consideration is assessment year2009-10. The material supplied to the assesseee by theconcerned department is part of the assessee’s turnover. The netprotit rate of the assessee for the year under consideration wasin line with the preceding assessment year. Further, the tradecreditors in the earlier years, i.e. assessment years 2007-08 and2008-09 stand accepted in scrutiny assessments. Thus, thegenuineness of the expenses under consideration cannot bedoubted. Moreover, the genuineness of the expenditure was notat all called into question. It was only that no-verificationthereof raised doubts of the incurrence thereof. Then, even ifthe credits concerning the purchases and transportation of thematerial are not to be accepted, as discussed, still, theprovisions of Section 68 of the Act cannot be invoked to makethe addition.” 5 5 Learned counsel for the appellant-revenue has not been able toShow that the findings recorded by the Tribunal are illegal or perverse orbased on misreading of any material on record, warranting interference bythis Court. Thus, no substantial question of law arises. Consequently, theappeal stands dismissed. (Ajay Kumar Mittal)Judge(Amit Rawal)JudgeYes.Yes July 12, 2017|Whether speaking/reasoned Whether reportable Judge