Iapl/562/2009 Of Commissioner Of Income Tax v. M/S National Chemical Products

Case :- INCOME TAX APPEAL No. - 562 of 2009 Appellant :- Commissioner Of Income TaxRespondent :- M/S National Chemical ProductsCounsel for Appellant :- S.S.C. I.T.,Praveen KumarCounsel for Respondent :- Rajesh Gupta,R.S.Agrawal,Rahul Agarwal Hon'ble Bharati Sapru,J.Hon'ble Neeraj Tiwari,J. Heard Shri Praveen Kumar, learned counsel for the appellantand Shri Rahul Agrawal, learned counsel for the respondent. This appeal under Section 260-A of the Income Tax,1961(hereinafter referred to as the 'Act') has been filed by thedepartment against the order of the Income Tax AppellateTribunal dated 14.08.2009 for the assessment year 2000-01.The questions of law sought to be answered are as under: "(1) Whether the Hon'ble ITAT, Agra Bench, Agra was legally correct in the findings oflearned CIT (A) and ignoring the evidence of introduction of un-accounted money amountingto Rs.1,17,79,084/- by the assessee in its bank by way of encashment of bank drafts purchasedby one of the employees of its sister concern in cash in the name of alleged three purchasers? (II) Whether the Hon'ble ITAT was justified in deleting the addition of Rs.1,17,79,08/-underprovisions of Section 69 on account of encashment of drafts when factum of sale to allegedpurchasers is not proved?" The assessee firm being a dealer of Tata Chemicals Ltd. engaged in trading of Soda Ash has filed return of income atRs.34,27,312/- and assessment was completed by the AO ontotal income of Rs.1,52,06,400/- by making an addition of Rs.1,17,79,084/- under section 69 of the IT Act, 1961. During the course of assessment proceedings, it is noticed bythe AO that pay orders worth Rs.1,17,79,084/- were depositedin the bank account of the assessee firm in OBC, Firozabad onvarious dates. On enquiry, it was found that these pay orderswere purchased itself by the employee of the assessee firm incash in the name of three firms namely M/s Three Stars PaperMills Ltd., Dadri, M/s B.J. Duplex Board Ltd., Kundali andM/s Shree Ram Chandra Straw Products Ltd., Moradabadfrom the OBC, Firozabad and were deposited in the Current Account No.650 of the assessee firm with OBC, Firozabad.The handwriting expert has reported that the handwriting andsignatures of the pay in slips through which these pay orderswere deposited in the bank account of the assessee are madeby one Sh. B.P. Singh, the employee of the assessee's sisterconcern M/s Ashoka Chemicals. The Version of the assessee that the amount of pay orders, ascredited in assessee's firm account, was the payment made bythe above three firms against the sales of goods of Soda Ashmade to them and the assessee also filed copy of 3B and FormNo.2C under the Trade Tax Act issued by the above threefirms and held that the assessee failed to prove the delivery ofthe goods and remittance of the money from these firms andaccordingly added an amount of Rs.1,17,79,084/- to theincome of the assessee under section 69 of the IT Act asunexplained investment after rejecting the books of account. Aggrieved with the order of the AO, the assessee preferred anappeal before the learned CIT (Appeals)-II, Agra. In appealthe learned CIT (A)-II Agra has deleted the entire additionmade by the AO holding that the AO was not justified andcorrect to conclude that the sales to alleged three parties to theextent of Rs.1,17,79,084/- was bogus and these parties hadgiven only book entry to the assessee and also that the receiptof this amount in the account of said three parties through payorders purchased in cash was actually undisclosed money ofthe assessee firm. Aggrieved with the order of the AO, the assessee preferred anappeal before the learned CIT (Appeals)-II, Agra. In appealthe learned CIT (A)-II Agra has deleted the entire additionmade by the AO holding that the AO was not justified andcorrect to conclude that the sales to alleged three parties to theextent of Rs.1,17,79,084/- was bogus and these parties hadgiven only book entry to the assessee and also that the receiptof this amount in the account of said three parties through payorders purchased in cash was actually undisclosed money ofthe assessee firm. Against the order of the CIT (A)-II, Agra the Revenuepreferred an appeal before the Hon'ble ITAT, Agra Bench,Agra. The Hon'ble ITAT following the findings of Tribunalorder dated 27.04.2007 in assessee's own case for the AY2001-2002 that the authorities below were not justified intreating the sales made by assessee to the three parties werebogus and assessee deposited his own money in the bankaccount by way of pay orders has confirmed the order of theCIT (A) vide its impugned order dated 14.08.2009. Ultimately, the admitted fact in this case is that the books ofaccount of the assessee had not been rejected, nor it was everrecorded that the sales made by the assessee to the threeparties were bogus. Other than this, a coordinate Bench of theTribunal in the assessee's own case for the assessment year2001-02 had also upheld the deletion of the amount which wassought to be added by the Assessing Officer for a sum ofRs.1,17,79,084/-. There are concurrent orders of the CIT (Appeals) as well asthe Tribunal which have discussed the order of the AssessingOfficer and while doing so the Tribunal as well as theCIT(Appeals) have noted particularly that the transactionswere made by the assessee at normal selling rates and wereproperly backed by sales tax forms issued by the parties andhad been found recorded in the accounts as well as the stockrecords. Such being the case, it could not be said to be presumed to acolourable device or arrangement to avoid tax liability. Meresuspicion cannot be the basis of making an addition. It is triteto say the suspicion however, so strong cannot replaceevidence. Therefore, in view of the fact that the books of account werenever rejected by any authority, the deletion was rightlygranted. The question nos.1 and 2 both are answered in favourof the assessee and against the department. The appeal is accordingly dismissed. Order Date :- 22.2.2018pks