Ita/170/2013 Of Commissioner Of Income Tax I v. M/S International Engg Corporation

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.170 of 2013Date of decision: 11.8.2015 Commissioner of Income Tax-I, Amritsar .....- Appel M/s The International Engg. Corporation (R) ....mesponden CORAM: HON BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MR. JUSTICEK RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?3. Whether the judgment should be reported 1n the Digest? Present: Mr. Dinesh Goyal, Advocate for the appellant-revenue. Mr. Pankaj Jain, Sr. Advocate with Mr. Divya Suri, AdvocateMr. Deepanshu Jain, Advocate and Mr. Madhur Sharma, Advocatefor the respondent. Ajay Kumar Mittal,J, 1.The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act’) against the order dated15.2.2013, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.433(ASR)/2012, for the assessment year 2007-08, claiming following substantialquestions of law:- 1) Whether the Hon'ble ITAT, Amritsar Bench 1s justified indeleting the addition made under Section 41(1) of theIncome Tax Act, 1961 when the assessee failed to produceany explanation/documentary evidence during the course ofassessment proceedings and as well as before Ist appellateauthority?deleting the addition made under Section 41(1) of theIncome Tax Act, 1961 when the assessee failed to produceany explanation/documentary evidence during the course ofassessment proceedings and as well as before Ist appellateauthority? 11)Whether on the facts and circumstances of the case, theHon'ble ITAT Amritsar Bench is right in law in deleting theaddition of =a26,30,038/- made by Assessing Officer onaccount of unexplained cash credit/unsecured loans andconfirmed by learned CIT(A) Amritsar as the assessee failedto discharge its onus to establish the genuineness of capacityand creditworthiness of these unexplained = cacredits/unsecured loans”Hon'ble ITAT Amritsar Bench is right in law in deleting theaddition of =a26,30,038/- made by Assessing Officer onaccount of unexplained cash credit/unsecured loans andconfirmed by learned CIT(A) Amritsar as the assessee failedto discharge its onus to establish the genuineness of capacityand creditworthiness of these unexplained = cacredits/unsecured loans” 111)Whether in the facts and circumstances of the case, thefinding of Hon'ble ITAT under para No.10 of the judgment,to the effect that the amount of|<a14,74,763/- pertained topreceding year, aS per copies of accounts, 1s perverse beingcontrary to material on record because it 1s the admitted factthat the assessee has not submitted confirmation of copies ofaccounts, books of accounts, for which his books of accountshave already been rejected under section 145(3) of the Act?finding of Hon'ble ITAT under para No.10 of the judgment,to the effect that the amount of|<a14,74,763/- pertained topreceding year, aS per copies of accounts, 1s perverse beingcontrary to material on record because it 1s the admitted factthat the assessee has not submitted confirmation of copies ofaccounts, books of accounts, for which his books of accountshave already been rejected under section 145(3) of the Act? iv)Whether in the facts and circumstances of the case, thefinding of Hon'ble ITAT under para No.11 of the judgment tothe effect that the amount of Ly26,30,038/- 1s outstanding forthe last many years as per the acknowledgment of return andPAN of concerned persons and proved their identity, capacityand creditworthiness, 1s perverse being contrary to materialon record because it 1s the admitted fact on record that theassessee has not submitted confirmation of copies offinding of Hon'ble ITAT under para No.11 of the judgment tothe effect that the amount of Ly26,30,038/- 1s outstanding forthe last many years as per the acknowledgment of return andPAN of concerned persons and proved their identity, capacityand creditworthiness, 1s perverse being contrary to materialon record because it 1s the admitted fact on record that theassessee has not submitted confirmation of copies of accounts, books of accounts, for which his books of accountshave already been rejected under section 145(3) of the Actand no explanation was offered by the assessee for proposedaddition to be made under section 41(1) of the IT Act 1961? ) -A few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed. The assessee firm 1sengaged in the business of manufacturing of textile machinery. It filed itsreturn of income on 29.10.2007 at.=a44,000/- tor the assessment year 2007-08 and the same was processed under Section 143(1) of the Act.Subsequently, the case was selected for scrutiny as per CBDT's instructionsand guidelines. The Assessing Officer completed the assessment underSection 143(3) of the Act on 16.12.2009, Annexure A.! and while rejectingthe books of account of the assessee under Section 145(3) of the Act madeadditions of |14,74,763/- representing fictitious and cessation of labilityandan26,30,038/- representing unsecured cash credits/unsecured loans|respectively. Not satisfied with the order, the assessee filed appeal beforethe Commissioner of Income Tax (Appeals) [in short, the CIT(A)]. Videorder dated 17.10.2012, Annexure A.2, the CIT(A) dismissed the appealconfirming the additions made by the Assessing Officer holding that theassessee could not file any evidence at the appellate stage. The assesseewent in appeal before the Tribunal. Vide order dated 15.2.2013, AnnexureA.3, the Tribunal partly allowed the appeal holding that the assessee havingproved the identity, capacity and credit worthiness of the said persons,deleted the additions oTL14,74,763/- andLT26,30,038/-. Hence the instantappeal by the revenue. 3]We have heard learned counsel for the parties. ITA No.170 of 2013 4Learned counsel tor the revenue submitted that the Tribunalerred in deleting the additions ofzy14,74,763/- andTL26,30,038/-. 4S.On the other hand, learned counsel for the respondentsupported the impugned order dated 15.2.2013, Annexure A.3 passed by theTribunal. 6.It has been categorically recorded by the Tribunal that theassessee had submitted the copies of accounts and complete postaladdresses of all the parties on record which had not been held to be false orfraudulent by the Assessing Officer and therefore, the assessment had to bemade on that basis. The relevant findings recorded by the Tribunal in itsorder dated 15.2.2013, Annexure A.3 read thus:- 3]We have heard learned counsel for the parties. ITA No.170 of 2013 4Learned counsel tor the revenue submitted that the Tribunalerred in deleting the additions ofzy14,74,763/- andTL26,30,038/-. 4S.On the other hand, learned counsel for the respondentsupported the impugned order dated 15.2.2013, Annexure A.3 passed by theTribunal. 6.It has been categorically recorded by the Tribunal that theassessee had submitted the copies of accounts and complete postaladdresses of all the parties on record which had not been held to be false orfraudulent by the Assessing Officer and therefore, the assessment had to bemade on that basis. The relevant findings recorded by the Tribunal in itsorder dated 15.2.2013, Annexure A.3 read thus:- “10. We have heard the rival contentions and perused the factsof the case. There 1s no dispute to the fact that the assessee hasnot submitted confirmation of copies of accounts, books ofaccount and therefore, the arguments made by the learned DRand the findings of both the authorities below to that extent arenot disputed but at the same time, there 1s also no dispute thatthe assessee has submitted copies of accounts in the case ofsundry creditors amounting to “a14,74,763/- where thebalances shown are outstanding as per last year 1.e. which hasbeen brought forwarded from the preceding year exceptprovision of interest in the respective years and in theimpugned year which has not been disallowed by the AO. Thehability pertains to the preceding year, as 1s evident frompages 6 to 21 where copies of accounts of all sundry creditorsare placed on record and were available before both theauthorities below. The said balances are outstanding in thefollowing years as well is a matter of record and there 1s nodispute to the said fact. The assessee has not obtained anybenefit out of such liability which is not ceased to be lability and the assessee has not written back such liability unilaterallyin 1ts books of account. Therefore, such liability cannot be asubject matter of section 41(1) of the Act. It is also a matter ofrecord in the order of the AO where the assessee had madesome payments during the assessment years 2008-09 and2009-10, which the AO at page 2 has mentioned in his order.Inspite of such facts on record, the matter did not find favourto the AO and confirmation made by the learned CIT(A) in asummary manner is not justified. The assessee is assessed toincome tax regularly, 1s on record and sundry creditors areoutstanding as per last year for which assessment record wasavailable with the AO which was argued by the learnedcounsel and was not rebutted by the learned DR 1in this respectEven if confirmation copies of accounts and books of accountare not produced, the copies of audited accounts for theimpugned year and the assessment record of preceding yearwas available with the AQ. The AQO cannot make theassessment on conjectures, surmises or on the basis ofsuspicion. The AO has not given any findings that the saidcopies of account as false or fraudulent. Therefore, theassessment has to be made on the basis of such copies ofaccount when they are not proved talse or fraudulent.Notwithstanding the fact, the rejection of books of account,the matter disclosed by the assessee, other material has to becollected by the AO which should have formed the basis ofcomputation of income. In the present case, the assesseehaving submitted the copies of accounts and complete postaladdresses of all the parties 1s a matter of record and the AO hasnot collected any adverse material. The learned counsel for theassessee, Mr. P.N.Arora has invited our attention that bymistake at PB-2, the assessee had written confirmed copy ofaccount which was explained to the AO and which 1s part ofthe assessment order at page 2 on the hearing dated16.12.2009, which infact were copies of account. 11. As regards the addition of<a26,30,038/-, all the balancesare outstanding for the last many years as appearing from PB22 to 33 and 97 to 99 and also all the persons 1.e. Smt.UyalKaur, Smt.Manyjit Kaur and Smt.Rayam Kaur are assessed ttax as per copy of acknowledgment of income tax return at PB-75, 76 and 77 alongwith PAN 1s placed on record. The AOafter applying his mind has made the addition of family loansof|a26,30,038/- which has been confirmed by the learned CIT(A). The arrangements made by the learned DR has nosubstance in the matter in this regard. The assessee havingproved the identity, capacity and creditworthiness of saidpersons and therefore cannot be subject matter of addition.Thus, both the additions of=a14,74,763/- and =a26,30,038/-have wrongly been confirmed by the learned CIT(A) and thesame are directed to be deleted.’ The findings recorded by the Tribunal have not been shown to be erroneousor perverse by the learned counsel for the appellant. No substantial questionof law arises. Consequently, finding no merit in the appeal, the same is|hereby dismissed. (Ajay Kumar Mittal)vudge August 11, 2015 (Ramendra Jain)Judge ‘gs!