M/S Shree Krishana Kripa Feeds, Panipat v. Commissioner Of Income Tax, Karnal

ITA-126-2018 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-126-2018 (O&M) Date of Decision: 1.11.2018 M/s Shree Krishana Kripa Feeds, Panipat Versus ....Appellant. Commissioner of Income Tax, Karnal ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. B.M. Monga, Advocate and Mr. Rohit Kaura, Advocate for the appellant. *** AJAY KUMAR MITTAL, J. CM-12060-CII-2018 This is an application under Order 41 Rule 27 of the Code ofCivil Procedure for placing on record additional evidence. By way of present application, the appellant seeks to produceaffidavits (Annexure A-4 Colly); copy of accounts of M/s Vishal Tradersand M/s Haryana Trading Company (Annexure A-5) and copy of deathcertificate (Annexure A-6). We find that the legal requirements foradducing additional evidence are not satisfied as it could not be explainedby learned counsel for the appellant-assessee as to what prevented theappellant from producing the said material even after exercise of duediligence before the authorities below. Moreover, it is an attempt on thepart of the assessee to keep the entire matter pending and have de novo trial ITA-126-2018 -2- even after having lost before the Assessing Officer, CIT(A) and theTribunal. Accordingly, the application for additional evidence is declined.ITA-126-2018 1.This appeal has been filed by the assessee under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated8.8.2017 (Annexure A-3) passed by the Income Tax Appellate Tribunal,Delhi Bench 'SMC', New Delhi (hereinafter referred to as “the Tribunal”) inITA No. 5818/DEL/2016, for the assessment year 2012-13, claiming thefollowing substantial questions of law:- a)Whether the impugned order passed by ld. IncomeTax Appellate Tribunal is bad in law beingperverse for lack of fact finding enquiry providedunder the statute, devoid of proper appreciation offacts, circumstances and well settled and thusdeserves to be set aside in the interest of justice?b)Whether the Income Tax Appellate Tribunal isjustified in confirming addition of ` 7,20,000/- onaccount of unsecured loan without appreciating thefact that out of the alleged three loans two arerepayment of debt towards the appellant firm,which is a result of non-appreciation of properfacts and thus deserves to be set aside beingperverse? c)Whether the Income Tax Appellate Tribunal isjustified in confirming addition of ` 21,46,261/- onaccount of unverified purchases without directing -3- proper enquiry of bank transactions therebyallowing tax on the basis of conjectures andsurmises which order is bad in law and deserves tobe set aside? d)Whether the ITAT is justified in confirmingaddition of ` 21,46,261/- on entire purchaseswhich would lead to a case of taxing the entiresales without allowing the deduction of thecorresponding purchase and is against the wellsettled law? c)Whether the Income Tax Appellate Tribunal isjustified in confirming addition of ` 21,46,261/- onaccount of unverified purchases without directing -3- proper enquiry of bank transactions therebyallowing tax on the basis of conjectures andsurmises which order is bad in law and deserves tobe set aside? d)Whether the ITAT is justified in confirmingaddition of ` 21,46,261/- on entire purchaseswhich would lead to a case of taxing the entiresales without allowing the deduction of thecorresponding purchase and is against the wellsettled law? 2.A few facts necessary for adjudication of the instant appeal asnarrated therein may be noticed. The assessee filed its return of income on20.9.2012 for the assessment year 2012-13 declaring income at ` 7,98,820/-.During the assessing proceedings, the assessee was asked to explain certainunsecured loans of ` 6,20,000/- (wrongly written as ` 7,20,000/-) receivedfrom three persons. The Assessing Officer treated the said loan asundisclosed income of the assessee and made the addition of ` 6,20,000/-.Since the appellant could not produce the record as sought, an addition of` 21,46,261/- was made by the Assessing Officer. Accordingly, vide orderdated 24.3.2015 (Annexure A-1), the Assessing Officer framed theassessment under Section 143(3) of the Act at ` 36,65,080/-. Feelingaggrieved by the order, Annexure A-1, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. TheCIT(A) vide order dated 8.9.2016 (Annexure A-2) upheld the assessmentframed by the Assessing Officer and dismissed the appeal. Still dissatisfied,the assessee filed an appeal before the Tribunal. The Tribunal vide order ITA-126-2018 dated 8.8.2017 (Annexure A-3) affirmed the orders, Annexures A-1 and A-2, and dismissed the appeal. Hence, the present appeal by the assessee. 3.After hearing learned counsel for the parties, we do not findany merit in the appeal. 4.Question (a) is general in nature and, therefore, do not call forany specific adjudication. 5.Now coming to question (b), it may be noticed that the assesseehad accepted unsecured loans from Kanta Chugh of ` 1.50 lakhs on20.12.2011, Krishna Wanti Chugh of ` 2.50 lakhs and Renu Chugh of` 2.20 lakhs on 8.2.2012 and the cash deposit had been made in the bankaccounts of the said parties on the same day when the cheques were issuedto the assessee. Since the assessee had failed to explain and establish thecreditworthiness of the parties from whom the loans had been taken, theAssessing Officer made the addition of ` 6,20,000/- treating the unsecuredloan as undisclosed income of the assessee. 6.The CIT(A) upheld the said addition of ` 6,20,000/- made bythe Assessing Officer by observing as under:-“2.4. After going through the facts and submissions, it isobserved that that the AO has made the addition byhighlighting that with regard to the three parties, KantaChugh, Krishna Wanti Chugh and Renu Chugh, therewere cash deposits in the bank account of these partiesimmediately preceding the cheque issued to the appellanttowards unsecured loans. The AO has highlighted thatthe credit worthiness of the parties had not beenestablished by the assessee. 2.5.On page 3 of the assessment order the AO haspointed out that the poor cash balance in the saving bankaccounts of the three parties raises doubt about the creditworthiness of three parties 2.6.Another important aspect detected by the AOhighlights that the cash amount deposited in the savingbank accounts was deposited by one person, namely,Mukesh. Such an action appears to be suspicious andnon genuine. The AO has therefore rightly raised hisdoubts that the genuineness and credit worthiness ofthese unsecured loans have not been established by theassessee and the initial onus had therefore not beendischarged by the assessee. 2.5.On page 3 of the assessment order the AO haspointed out that the poor cash balance in the saving bankaccounts of the three parties raises doubt about the creditworthiness of three parties 2.6.Another important aspect detected by the AOhighlights that the cash amount deposited in the savingbank accounts was deposited by one person, namely,Mukesh. Such an action appears to be suspicious andnon genuine. The AO has therefore rightly raised hisdoubts that the genuineness and credit worthiness ofthese unsecured loans have not been established by theassessee and the initial onus had therefore not beendischarged by the assessee. 2.7.On the other hand the AR of the appellant has onlyemphasized that Income Tax Return, PAN and otherdetails have been filed by the assessee before the AO andtherefore the credit worthiness of the parties has beenestablished. However, the AR has not provided thedetails of returned income of the parties and theexplanation for deposit of cash by one personimmediately before cheques were issued to the appellant.Establishing the credit worthiness and genuine wouldimply that the parties would be having sufficient surplussaving and funds backed by capital assets to provide loanto the appellant. Merely by providing the Income TaxReturn and PAN number is not enough to establish the -6- credit worthiness and genuineness of the unsecuredloans. Accordingly, this addition made by the AO isupheld and the ground of the appellant is dismissed.” 7.The Tribunal while upholding the said addition of ` 6,20,000/-made by the Assessing Officer and affirmed by the CIT(A) had held asunder:- “6.1 After perusing the aforesaid finding of the ld. CIT(A), with regard to addition of ` 6,20,000/- on account ofunsecured loan is concerned, I find that AO has made theaddition by highlighting that with regard to the threeparties, Kanta Chugh. Krishna Wanti Chugh and RenuChuqh; there were cash deposits in the back account ofthese parties immediately preceding the cheque issue tothe assessee towards unsecured loans. The AO hashighlighted that the credit worthiness of the parties hadnot been established by the assessee. I further find that onof the assessment order the AO has pointed out that thepoor cash balance in the saving bank account of the threeparties raises doubt about the credit worthiness of theseparties. Another important aspect detected by the AOhighlights that the cash amount deposited in the savingbank accounts was deposited by one person namelyMukesh. Such an action appears to be suspicious and nongenuine. In my considered opinion, the AO has thereforerightly raised his doubts that the genuineness and creditworthiness of these unsecured loans have not been established by the assessee and the initial onus hadtherefore not been discharged by the assessee. On theother hand the assessee has only emphasized that IncomeTax Return, PAN and other details have been filed by theassessee before the AO and therefore the creditworthiness of the parties has been established. However,the AR has not provided the details of returned income ofthe parties and the explanation for deposit of cash by oneperson immediately before cheques were issued to theappellant. Establishing the credit worthiness and genuinewould imply that the parties would be having sufficientsurplus savings and funds backed by capital assets toprovide loan to the assessee. Merely by providing theIncome Tax Return and PAN number is not enough toestablish the creditworthiness and genuineness of theunsecured loans. Accordingly, this addition made by theAO was rightly upheld by the Ld. CIT(A), which doesnot need any interference on my part, hence, I uphold theorder of the Ld. CIT(A) on the issue in dispute anddismiss the issue in dispute raised by the assessee.” The findings of fact recorded by the Assessing Officer, CIT(A) and theTribunal were not shown to be perverse based on non-appreciation ofmaterial on record or based on misreading of any evidence on record. Thus,question (b) cannot be held to be a substantial question of law. 8.Adverting to questions (c) and (d) relating to addition of` 21,46,261/- on account of bogus purchases, the Assessing Officer while ITA-126-2018 -8- treating the purchases as bogus made addition of ` 21,46,261/- to theincome of the assessee by holding that the purchases from M/s HaryanaTrading Company and M/s Vishal Trader were enquired and summons wereissued to them. As per the report dated 17.3.2015 of the Inspector, therewas no concern existing in the name of M/s Haryana Trading Company atthe given address and a certificate to this effect was also obtained from theHaryana Vaypar Mandal. The assessee was also confronted with the saiddetails vide letter dated 18.3.2015. Similarly, M/s Vishal Traders was alsonot existing at the given address. In the bills of the said parties, there wereno sales tax number/TIN number or CIN number. The assessee had failed toexplain the said discrepancies. 9.The CIT(A) while affirming the addition of ` 21,46,261/- madeby the Assessing Officer had recorded as under:- “3.4. After going through the facts and submissions it isobserved that the AO has conducted detailed enquiriesregarding the details of purchases from M/s HaryanaTrading Company and M/s Vishal Traders and had cometo logically conclude that these purchases from theparties could not be established. The bills of the partiesdid not have Sales Tax No., TIN No. or CIN No.Further, on physical verification of the addresses theseparties were not found to be existing, which was alsosupported by certificate from local authority.3.5.The AR of the appellant has submitted that thesepurchases were part of the sale reflected in the Sales TaxReturn. However, on going through the Sales Taxobserved that the AO has conducted detailed enquiriesregarding the details of purchases from M/s HaryanaTrading Company and M/s Vishal Traders and had cometo logically conclude that these purchases from theparties could not be established. The bills of the partiesdid not have Sales Tax No., TIN No. or CIN No.Further, on physical verification of the addresses theseparties were not found to be existing, which was alsosupported by certificate from local authority.3.5.The AR of the appellant has submitted that thesepurchases were part of the sale reflected in the Sales TaxReturn. However, on going through the Sales Tax Return there is no evidence to show that these purchaseshad been included in the details in the Sales Tax Return.It is pertinent to note that such Modus Operandi is usedby some business persons to book bogus purchases forsuppressing the profits of business. In the present casethe argument of the AR that these purchases were thebasis of the sales made, it is not established by facts andevidences. The value of goods as per the VAT return forthe year ending 31.03.2012 has been shown at` 53,53,28,987/-. Accordingly, it appears that thesepurchases from M/s Haryana Trading Company and M/sVishal Traders have been used for suppressing the profitsof the business. 3.6.Even though the books of accounts have not beenrejected, since the AO has clearly established that thepurchases were bogus, there is no justification foraccepting the contentions of the AR that only parts of thepurchase should be disallowed. 3.7.In view of the above observations this additionmade by the AO is upheld and the ground is dismissed.” 10.The Tribunal while affirming the addition of ` 21,46,261/- hadnoticed as under:-“With regard to addition of Rs.21,46,261/- relating tounverified purchases is concerned, I find that AO hasconducted detailed enquiries regarding the details ofpurchases from M/s Haryana Trading Company and M/s 3.6.Even though the books of accounts have not beenrejected, since the AO has clearly established that thepurchases were bogus, there is no justification foraccepting the contentions of the AR that only parts of thepurchase should be disallowed. 3.7.In view of the above observations this additionmade by the AO is upheld and the ground is dismissed.” 10.The Tribunal while affirming the addition of ` 21,46,261/- hadnoticed as under:-“With regard to addition of Rs.21,46,261/- relating tounverified purchases is concerned, I find that AO hasconducted detailed enquiries regarding the details ofpurchases from M/s Haryana Trading Company and M/s Vishal Traders and had come to logically conclude thatthese purchases from the parties could not be established.The bills of the parties did not have Sales Tax No., TINNo. or CIN No. Further, on physical verification of theaddresses these parties were not found to be existing,which was also supported by certificate from localauthority. I further find that the AR of the assessee hassubmitted that these purchases were part of the salereflected in the sale tax return. However, on goingthrough the sale tax return there is no evidence to showthat these purchases had been included in the details inthe sale tax return. It is worthwhile to note that suchmodus operandi is used by some business persons tobook bogus purchases for suppressing the profits ofbusiness. In the present case the argument of the AR thatthese purchases were the basis of the sales made, is notestablished by facts and evidences. The value of goods asper the VAT return for the year ending 31.3.2012 hasbeen shown at ` 53,53,28,987/-. Accordingly, it appearsthat these purchases from M/s Haryana TradingCompany and M/s Vishal Traders have been used forsuppressing the profits of the business. Even though thebooks of account have not been rejected, since the AOhas clearly established that the purchases were bogus,there is no justification for accepting the contentions ofthe AR that only part of the purchase should be ITA-126-2018-11- disallowed. In view of the above observations thisaddition made by the AO was rightly upheld by the Ld.CIT(A), which does not need any interference on mypart, hence, I uphold the order of the Ld. CIT(A) on theissue in dispute and dismiss the issue in dispute raised bythe Revenue.” 11.In view of the findings recorded above, questions (c) and (d)would not arise. 12.As noticed above, no illegality or perversity could be pointedout by learned counsel for the assessee in the concurrent findings of factrecorded by the Assessing Officer, the CIT(A) and the Tribunal which maywarrant interference by this Court. No question of law, much less,substantial question of law arise in the appeal. 13.Accordingly, there is no merit in the appeal and the same standsdismissed. (AJAY KUMAR MITTAL) JUDGE November 1, 2018(MANJARI NEHRU KAUL)gbsJUDGE Whether Speaking/ReasonedYesWhether ReportableYes