Basir Ahmed Sisodiya v. The Income Tax Officer

[2020] 4 S.C.R. 581 BASIR AHMED SISODIYA THE INCOME TAX OFFICER (Civil Appeal No. 6110 of 2009) APRIL 24, 2020 [A.M. KHANWILKAR AND DINESH MAHESHWARI, JJ.] Income Tax Act, 1961 – ss.68, 143, 144, 145, 271 – AssessingOfficer, inter alia, relying on the Balance Sheet and the books ofaccount, added the credits amounting to Rs.2,26,000/- in declaredincome of the appellant-assessee – Appellant filed appeal – Partlyallowed by Commissioner of Income Tax (Appeals) – CIT(A) upheldthe assessment order by Order dtd. 09.01.2003 – ITAT partly allowedthe appellant’s appeal however, the order regarding credits ofRs. 2,26,000/- was upheld – High Court dismissed the appeal byOrder dated 21.08.2008 – Held: At the time of assessment, theappellant failed to produce any explanation or evidence in supportof entries regarding purchases of marbles from unregistered dealersto the extent of Rs. 2,26,000/- – Thus, the said transactions wereassumed as bogus entries (standing to the credit of named dealerswho were non-existent creditors of the assessee) – However, it hasnow come on record that in the penalty proceedings, the appellantproduced affidavits of 13 unregistered dealers out of whom 12 wereexamined by the Officer, who recorded their statements and did notfind any infirmity including about their credentials – Dealers stoodby the assertion made by appellant about the purchases on creditfrom them; and which explanation has been accepted by theappellate authority in the order dtd 13.01.2011 – Appellate authorityby Order dtd. 13.01.2011, had not only accepted the explanationoffered by the appellant but also recorded a clear finding of factthat there was no concealment of income or furnishing of anyinaccurate particulars of income by the appellant – Addition ofRs.2,26,000/- by the officer u/s.68 towards cash credit amount shownagainst the names of concerned unregistered dealers for theassessment year 1998-99 is set aside – Rest of the assessment Orderdtd. 30.11.2000 as modified by the CIT(A) by Order dtd. 09.01.2003remains undisturbed. 581 582SUPREME COURT REPORTS AAllowing the appeal, the Court Held: 1.1 In I.A.No. 57442/2011 permission has beensought to bring on record subsequent events. By this application,the appellant/assessee has placed on record an order passed bythe CIT(A) dated 13.1.2011, which considered the challenge toBthe order passed by the Income Tax Officer u/s. 271(1)(c) dated17.11.2006 qua the appellant for the self-same assessment year1998-1999. The Income-Tax Officer had passed the said orderas a consequence of the conclusion reached in the assessmentorder which had by then become final upto the stage of ITATvide order dated 27.4.2006- to the effect that the stated purchasesCby the appellant from unregistered dealers were bogus entrieseffected by the appellant. Resultantly, the penalty proceedingsu/s. 271 were initiated by the Officer. That order, however, hasnow been set aside by the appellate authority [CIT(A)] in theappeal preferred by the appellant, vide order datedD13.1.2011.[Para 10][589-E-H][590-A-C] 581 1.2 The appellant/assessee despite being given sufficientopportunity, failed to prove the correctness and genuineness ofhis claim in respect of purchases of marbles from unregistereddealers to the extent of Rs. 2,26,000/- (Rupees two lakhs twenty-Esix thousand only). Resultantly, the said transactions wereassumed as bogus entries (standing to the credit of named dealerswho were non-existent creditors of the assessee). However, ithas now come on record that the appellant/assessee in penaltyproceedings offered explanation and caused to produce affidavitsand record statements of the concerned unregistered dealersFand establish their credentials. That explanation has beenaccepted by the CIT(A) vide Order dated 13.1.2011. In paragraph17 of the said decision reproduced hitherto, it has been notedthat the Officer recorded statements of 12 unregistered dealersout of 13 and their identity was also duly established. AfterGanalyzing the evidence so produced by the appellant/assessee,the appellate authority [(CIT(A)] noted that the Officer had neitherdoubted the identity of those dealers nor any adverse commentswere offered in reference to their version regarding sale of marbleslabs by them to the appellant/assessee in the financial yearrelevant to assessment year 1998-1999 and receipt of paymentsH after two to three years. Further, there was no denial of purchaseof marbles worth Rs. 4,78,900/- (Rupees four lakhs seventy-eightthousand nine hundred only) by the assessee and sale thereofworth Rs. 3,57,463/-(Rupees three lakhs fifty seven thousandfour hundred sixty three only) with closing stock ofRs.2,92,490/- (Rupees two lakhs ninety two thousand four hundredninety only), as disclosed in the trading account for the year endedon 31.3.1998. The appellate authority thus found that withoutpurchases of marbles, there could be no sale and disclosure ofclosing stock in the trading account. The materials on recordwould clearly suggest that the concerned unregistered dealershad sold marble slabs on credit to the appellant/assessee, asclaimed. The appellate authority concluded that there was neitherany concealment of income nor furnishing of inaccurate particularsof income by the assessee. These observations are made by thecompetent forum (appellate authority) in penalty proceedingsu/s. 271 of the 1961 Act in favour of the assessee. However, whatneeds to be noted is that the stated penalty proceedings werethe outcome of the assessment order in question concerningassessment year 1998-1999. Indeed, at the time of assessment,the appellant/assessee had failed to produce any explanation orevidence in support of the entries regarding purchases made fromunregistered dealers. In the penalty proceedings, however, theappellant/ assessee produced affidavits of 13 unregistered dealersout of whom 12 were examined by the Officer. The Officerrecorded their statements and did not find any infirmity thereinincluding about their credentials. The dealers stood by theassertion made by the appellant about the purchases on creditfrom them; and which explanation has been accepted by theappellate authority in paragraphs 17 and 19 of the order dated13.1.2011. The appellate authority vide Order dated 13.1.2011,had not only accepted the explanation offered by the appellantbut also recorded a clear finding of fact that there was noconcealment of income or furnishing of any inaccurate particularsof income by the appellant for the assessment year 1998-1999.The addition of Rs.2,26,000/- by the officer u/s 68 of the 1961Act, towards cash credit amount shown against the names ofconcerned unregistered dealers for the assessment year 1998-1999 is set aside. The rest of the assessment Order dated A30.11.2000 as modified by the CIT(A) vide Order dated 9.1.2003,shall remain undisturbed. [Paras 13, 14, 15-17][599-E-H;600-A-H; 601-A-D] 583 Maddi Sudarsanam Oil Mills Co. v. Commissioner ofIncome-Tax, Hyderabad and Andhra (1959) 37 ITRB369 (AP) ; Commissioner of Income Tax v. AggarwalEngg. Co. (Jal.) (2006) 206 CTR (P&H) 648 ;Commissioner of Income Tax v. G.K. Contractors (2009)19 DTR (Raj) 305 – referred to. Case Law Reference CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6110 of D2009. From the Judgment and Order dated 21.08.2008 of the High Courtof Judicature for Rajasthan at Jodhpur in Income Tax Appeal No. 69 of2006. Dr. Manish Singhvi, K. Radhakrishna, Sr. Advs., Sandeep KumarEJha, P. V. Yogeswaran, Arpit Parkash, H.Raghavendra Rao, Jitin Singhal,Ms. Anil Katiyar, Advs. for the appearing parties. The Judgment of the Court was delivered by A. M. KHANWILKAR, J. 1. This appeal takes exception to the final judgment and orderdated 21.8.2008 passed by the High Court of Judicature of Rajasthan atJodhpur (for short, “the High Court”) in Income Tax Appeal No. 69 of2006, whereby the appellant’s appeal was dismissed and the order ofIncome Tax Appellate Tribunal, Jodhpur Bench (for short, ‘the ITAT’)Gcame to be upheld. 2. In short, the appellant/assessee was served with a notice underSection 143(2) of the Income Tax Act, 1961 (for short, ‘1961 Act’) bythe Assessing Officer (for short, ‘Officer’) for the assessment year1998-1999, pursuant to which an assessment order was passed on30.11.2000. This appeal involves limited challenge to certain additionH BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER[A. M. KHANWILKAR, J.] made under the heads - “Trading Account” and “Credits” in theassessment order. The Officer, inter alia, while relying on the BalanceSheet and the books of account, took note of the credits amounting toRs.2,26,000/- (Rupees two lakhs twenty-six thousand only). The Officertreated that amount as “Cash credits” under Section 68 of the 1961 Actand added the same in declared income of the assessee (for short, ‘secondaddition’). The Officer then proceeded to compute the income of theassessee for the concerned assessment year. The relevant part of thecomputation is mentioned below: - “Credits: On examining the balance-sheet and accounts books ofassessee, it is apparent that the assessee has shown credit amountof Rs.2,26,000/- in the names of the following 15 persons: Accordingly, sufficient time and opportunity was grantedto prove the veracity of credits of Rs. 2,26,000/- as shown byassessee. However false/wrong particulars or explanation weresubmitted with respect to credits shown by assessee. In thismanner, the credits of Rs.2,26,000/- shown in the name of 15persons, is not correct and any correct proof/evidence has notbeen produced by assessee with respect to income of creditorsand source of income. Besides this, the credits of Rs.2,26,000/-as shown in the name of 15 persons is held as unexplained underSection 68 and added in declared income of assessee. Accordingly, the computation of income of assessee forassessment year 1998-99 is as follows: AAssessment was made. Necessary forms were issued. Noticebe issued separately for imposition of penalty under Section272(1)(c).” 3. Aggrieved, the appellant/assessee preferred an appeal beforethe Commissioner of Income Tax (Appeals), Jodhpur (for short,B‘CIT(A)’). The appeal was partly allowed vide order dated 9.1.2003.However, as regards the Trading Account and Credits in question, the CIT(A) upheld the assessment order. 4. The appellant/assessee then preferred further appeal to theITAT. Having noted the issues and objections raised by the DepartmentCand the appellant/assessee, the ITAT partly allowed the appeal vide orderdated 4.11.2004. However, the order relating to the second addition (underconsideration in the present civil appeal) regarding credits of Rs.2,26,000/- (Rupees two lakhs twenty-six thousand only) came to be upheld. 2009. 585 7200/- 10000/- 18000/- 348700/- ए. 586 5. The appellant/assessee then filed an appeal before the HighDCourt under Section 260A of the 1961 Act. The appeal was admitted on27.4.2006 on the following substantial question of law: - ‘‘Whether claim to purchase of goods by the assessee could bedealt with under Section 68 of the Income Tax as a cash credit,by placing burden upon the assessee to explain that the purchaseEprice does not represent his income from the disclosed sources?’’ The principal argument of the appellant/assessee was that oncethe books of account have been rejected and an assessment order hasbeen passed, the same books of account cannot be then relied upon bythe Officer to impose consequent addition(s). F6. The High Court dismissed the appeal vide impugned judgmentand order dated 21.8.2008, as being devoid of merits. The High Courtopined that the amount shown as credits was nothing but bogus entriesand was justly added to the income of the appellant/assessee. The Courtalso noted other reasons to dismiss the appeal. Relevant part of thejudgment is reproduced hereunder: -G “In our view, none of the submissions advanced by the learnedcounsel for the appellant has force. Learned counsel hasproceeded on the basic assumption, about the factum of purchaseof goods, having accepted by the authorities below, while thecategoric finding of the Assessing Officer, which has not been disturbed in appeal is, that regarding this purchase fromunregistered dealer assessee was called upon during the courseof assessment proceedings to prove the correctness andgenuineness of his claim, but he completely failed, and therefore,the purchase cannot be accepted. In our view, this finding,rather is clear and categoric, that no purchase was affectedby the assessee, and amount was shown in a bogus manner,shown to be standing to credit of alleged purchasers, whocould not be shown, to be either existent, or to be thecreditors of the assessee, much less for the considerationalleged by the assessee. It is clear from the assessmentorders and the finding affirmed in the appeals, thatopportunity was given to the assessee to substantiate thegenuineness of the alleged transactions, but the assesseefailed, and efforts made by the Revenue, to investigate thecorrectness of the alleged transaction also could not yieldany results, in favour of the assessee. Thus it is clear, that the amounts shown to be standing tothe credit of the persons, which had been added to the income ofthe assessee, was clearly a bogus entry, in the sense that it wasonly purportedly shown to be the amount standing to the credit ofthe fifteen persons, purportedly on account of assessee havingpurchased goods no credit from them, while since no goods werepurchased, the amount did represent income of the assessee fromundisclosed sources, which the assessee had only brought on record(books of accounts), by showing to be the amount belonging tothe purported sellers, and as the liability of the assessee. That being the position, the contention about impermissibilityof making addition under this head, in view of addition of Rs.10,000/- having been made in trading account, cannot be accepted, asbooks of accounts has been rejected for the purpose ofassessing the gross profit, as the gross profit shown in thebooks has not been accepted, on the ground, that theassessee had not maintained day to day stock registers,nor has produced or maintained other necessary vouchers,but then, if those books of accounts did disclose certainother assets, which are wrongly shown to be liabilities, andfor acquisition of which the assessee did not show the 586 587