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TMI Blog2010 (4) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not made known about the non-appearance of the parties. T AO was duty bound to give opportunity to the assessee before drawing an inference against the assessee. The case of the assessee is duly covered by the decision of Nathu Ram Premchand s case[ 1962 (8) TMI 81 - ALLAHABAD HIGH COURT] . - AM has not distinguished the facts of the case with the decision of the Allahabad High Court in the case of Nathu Ram Premchand (supra) while confirming the addition made by the Assessing Officer. Once the AO has not given opportunity to the assessee for the 3 creditors for which the assessee asked to issue summons, the inference cannot be drawn against the assessee. The summons were duly served. Under these facts, the assessee has discharged his onus what can be expected from. The CIT(A) has rightly deleted the addition and the learned JM was correct in law in holding that the issue is squarely covered by the decision of the jurisdictional High Court. Question No. 1 is answered in favour of the assessee. Unrecorded investments for purchase of goods - JM confirmed the action of the CIT(A) in deleting addition while the learned AM confirmed the addition - HELD THAT:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es provided by the assessee. There were total 8 squared-up creditors to whom summons were issued out of which Shri Govardhan Das Johri, Shri Om Prakash Agarwal, Shri Nirmal Singhal, Smt. Prabha Rani and Shri Tipumal Hira Lal confirmed the credits and also furnished requisite necessary evidence in respect of their creditworthiness. The Assessing Officer accepted them as creditworthy and genuine creditors. In respect of three credi-tors, who did not turn up in response to summons issued to them by the Assessing Officer, he took adverse inference and treated them as unexplained. These creditors are : 1. Agarwal Co., Janakganj, Lashkar, Gwaliors ₹ 50,000 2. Goverdhan Das Gulab Chand, Daulatganj, Lashkar, Gwalior ₹ 1,00,000 3. Shri Satish Agarwal, Janakganj, Lashkar, Gwalior ₹ 50,000 ₹ 2,00,000 The Assessing Officer treated them as unexplained and added the sum of ₹ 2,00,000 under section 68 of the Act in the assessee s hands. This addition was, however, deleted by the learned CIT(A) on the premise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous defects like that the assessee did not produce the purchase bills/sale bills specifically for the last days of the month of March, 2003, valuation of the closing stock was found law, no Moong Dal and Tuerr Dal account in addition to non-availability of complete vouchers, with regard to freight and cartage expenses amounting to ₹ 5,65,436. He also noticed that minor defects were also found with regard to the books of account of Mahalaxmi Food Products, Morena amounting to ₹ 129, Gwalior Dal Oil Industries amounting to ₹ 63 and also with regard to M/s. Mayur Trading Co., Morena amounting to ₹ 459. He noticed major discrepancies regarding unrecorded purchases of ₹ 85,205 on 15-3-2005 through a draft, which was totally denied by the assessee. In view of the above reasons, the Assessing Officer did not find the book result shown by the assessee to be verifiable and, therefore, he rejected them under section 145(3) of the Act. The Assessing Officer referred to a case of manufacturer of Dal, namely Laxmi Dal Mill, Industrial Area, Morena, who has shown GP rate of 8.89 per cent in the year ending March, 2003 on sales of ₹ 8,19,57,596 and other that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year as compared to the last year. There is small decline in the GP rate that can be attributed to huge sales made in this year. Therefore, the small difference in GP rate can be ignored. It is a fact that the assessee is a trader in Dal, whereas the cases referred by the learned Assessing Officer are that of manufacturers and obviously, they are not comparable. This fact has been accepted by the Assessing Officer himself, but still he has applied higher gross profit without any basis simply by making reference to them. The learned Assessing Officer has not pointed out any specific suppression of sales or profits in this case. Insofar as the defects pointed by him are concerned, he has made separate additions qua them, which if considered, have a bearing upon the trading results directly. The turnover of this year is ₹ 2,47,13,148. The learned Assessing Officer has estimated the sales at ₹ 2,50,00,000 as against declared sales at ₹ 2,47,13,148, which again is based on surmises and conjectures. Therefore, keeping in view the entirety of facts and circumstances of the case, we are convinced that the turnover declared by the assessee along with the GP rate of 3.31 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000. In an extreme case, this disallowance can be restricted to 1/10th of the total expenses leading to disallowance of ₹ 1,735 approximately. To that extent, this disallowance is sustained and the ground No. 2 of the cross-objection is partly allowed and the ground taken by the Revenue stands dismissed. 9. Ground No. 4 of the Revenue s appeal is in relation to deletion of ₹ 18,000 added by the Assessing Officer under section 40A(2)(b) of the Act. The assessee has paid rent to Smt. Saroj Agarwal, who is mother of the assessee, for a godown measuring 600 sq. ft. at the rate of 7,500 per month, which comes to ₹ 90,000 per annum. This rent was treated by the learned Assessing Officer as excessive without any reasons simply because the payee is assessee s mother. He restricted this payment to ₹ 6,000 per month and made the impugned addition of ₹ 18,000, which has been deleted. 10. After hearing both the sides, we do not find any merit in the ground raised by the Revenue. It comes out of the assessment order itself that the rent was paid against the godown taken on rent by the assessee for business purposes from his mother and the godown is situated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the market and created interference in the duties of the authorities in carrying on the survey operation. For scuttling the administrative duties of the Department, a case under section 353 of the Indian Penal Code was got registered in the Jayendraganj Police Station, Gwalior. On the basis of the survey proceedings, the Assessing Officer issued notice to the assessee under section 148 after recording reasons. During the hearing of this case, a copy of reasons recorded by the Assessing Officer on 7-6-2004 was provided to us. Because the assessee did not file the return of income, despite having taxable income, notice for assessment year 2002-03, the year under consideration, was issued to the assessee. Under section 147 of the Act, the Assessing Officer has ample powers to issue notice under section 148 in case the income has escaped assessment. On the basis of survey proceedings, during which certain evidences were collected and the statement of the assessee was recorded, it was found that the assessee had taxable income, but did not file return of income. In these circumstances, the Assessing Officer can issue notice under section 148 of the Act. In the operative part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The assessee failed to, despite availing sufficient opportunities during the course of the assessment proceedings which continued over a span of fifteen months (from December, 2004 to March, 2006), furnish the primary details in respect of these credits, stated to be loans received by it and since paid. The assessee was finally show caused in the matter by the Assessing Officer vide notice dated 17-3-2006; the assessment getting time-barred on 31-3-2006. The assessee furnished the details on 17-3-2006, while requiring the Assessing Officer to issue summons to the creditors, if he so deems necessary, being unable to produce them as desired by him since long; the Assessing Officer stating the assessee to have availed several opportunities for the purpose. In response to the summons issued, thus, to all the creditors, five filed their confirmations as well as evidences of their creditworthiness. However, there was no response from the balance three impugned locally based creditors, as under, either by way of attendance (In case of filing of their confirmations along with any other evidence in respect of creditworthiness etc. 2.2 The primary onus cast on the assessee by section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnishing) can it state or prove its case, with the Assessing Officer clearly observing that no confirmation or any other evidence stands furnished in support and, consequently, dislodge his finding, and on which rests the Revenue s case. The learned CIT(A), in appeal, rather than giving a finding on this matter, which, as aforesaid, is the only issue arising, holds, without specifying the details and the basis on which it could be said that these were furnished, the assessee to have furnished the requisite details, so that there is a discharge of the primary onus cast on it. This is again surprising, firstly, for the reason that the relevant details remain unspecified (even at the first appellate stage) and, secondly, as it is only after examining these details can a decision as to their adequacy in satisfaction of the said onus could be arrived at. The said details, on the basis of which, thus, relief stands allowed by him, are conspicuous by their absence. The least that the learned CIT(A) could have or ought to have done in the matter, is to call upon the assessee to substantiate its claim and satisfy himself on that score, making it a part of his order, and the basis of his fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand furnished. In fact, this finding gets supported by the fact that the necessary details even in respect of the other five credits, which stood accepted, stood submitted only on 17-3-2006. The assessee s case, is, thus, wholly unsubstantiated and without merit. 5.3 The assessee has placed reliance on the decisions in the following : (i) Smt. Leela s case ( supra); (ii) Shrawan Kumar Soni s case (supra); (iii) Nathu Ram Premchand s case (supra); (iv) U.M. Shah s case ( supra). In support of its argument that non-attendance of the creditors could not be decisive of the matter, so that where unable to do so, no adverse inference could be drawn. There is no disputing the proposition in law, and the reliance on the said decisions, in view of the facts and circumstances of the case as detailed hereinabove, is clearly misplaced. The Assessing Officer has observed that neither any attendance was made nor any primary documents furnished. As such, the fact of non-attendance by the creditors in response to the summons thereto, is only a corroborative and supporting fact and not the only basis on which the Revenue makes its case, which, to repeat, is clearly the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, is to the contrary, with the assessee availing several opportunities and expressing its inability (to produce the creditors) also only at the fag end of the proceedings (which were on for a considerable while), whereat no meaningful verification (for which necessary procedures have to be followed) could be made. The Assessing Officer s remark, of which much is made out, and forms the basis of the assessee s case, and on which it stands allowed relief by the learned CIT(A), is only in this context and nothing more, and the assessee s attempt, as also stated earlier, in casting its case, as one of non-verification (though in the facts of its case, it may itself be responsible for the same, is another matter, and in which I do not consider it necessary to dwell; suffice it to say that it is not a case of non-verification), even as he has not even submitted any reason for the delayed submis- sion of whatever stands submitted, particularly considering that the creditors are locally based, is unfortunate. The ratio of the decision in the case of Orissa Corporation (P.) Ltd. (supra), as also other case law, based thereon, is clearly not applicable in the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant previous year. The assessee, even as he explained the other apparent differences in the two sets of accounts, despite opportunity, could not satisfactorily explain the said difference and, on its part, denied the transaction; rather, shifting the onus on the Revenue to show that the bank draft towards payment of the said purchase stood made by it. 8.2 The question that, thus, arises is whether a mere denial, without anything more, by the assessee, would be sufficient for the purpose, i.e., towards the discharge of the onus that lies on it in the facts and circumstances of its case, so that the same stands shifted to the Revenue and who, admittedly, has no other material or evidence in its possession against the assessee ? 8.3 In this regard, it needs to be borne in mind that the copy of the assessee s account under reference stands secured from the trader concerned itself, a credible source. It reveals regular purchases by the assessee from the said party, paid for through the banking channel, so that the said party assumes the status of a regular supplier to the assessee. All the other transactions as reflected in the said account stand also confirmed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase, i.e., bought the goods purchased, and which the Revenue claims to be the assessee, and who denies the same. This is particularly so as the fact of the relevant payment being effected during the year is undisputed. And which brings us back to the principal issue under reference, i.e., who could, under the facts and circumstances of the case, be inferred to have made the impugned purchase, or whether, the assessee has effectively rebutted the material, the credibility of which evidence stands confirmed (with all the entries/transactions as reflected therein having been confirmed by the assessee) and, thus, not in doubt, so that the Revenue s inference of it having made the impugned purchase and, consequently, paid therefor, is infirm. 8.5 Under the circumstances, I consider the assessee s response or rebuttal, as, in fact, falling woefully short, particularly considering that it had in its possession all the relevant material to establish its claim (or disprove the Revenues charge), including access to the said party, a regular trade partner, on account of error in whose accounts, or so it wants us to believe, an adverse inference is sought to be drawn by the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of assessment proceedings, vide letter dated 17-3-2002, required the assessee to furnish the details of the creditors, bills/vouchers of expenses, details of bank account, quantitative details of inventory of closing stock. The assessee in reply thereto produced the books of account which were test checked along with the details of the, creditors and squared-up creditors. The assessee could not produce the creditors but made request to the Assessing Officer to issue summons to the creditors. The Assessing Officer issued summons on the addresses provided by the assessee. There were total 8 squared-up creditors to whom the summons were issued, out of which, 5 creditors confirmed the credits and furnished the requisite evidence for their creditworthiness. In respect of the other 3 creditors, neither anyone appeared, nor any confirmation was filed. These creditors are : (1) Agarwal Co., Janakganj, Lashkar, Gwalior ₹ 50,000 (2) Goverdhan Das Gulab Chand, Daulatganj, Lashkar, Gwalior. ₹ 1,00,000 (3) Shri Satish Agarwal, Janakganj, Lashkar, Gwalior ₹ 50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had provided complete details in regard to the creditors. Even the addresses of the creditors to whom summons were issued were also provided and, therefore, the adverse inference cannot be drawn against the assessee. The assessee has duly discharged his onus as laid down under section 68 of the IT Act, 1961. 6. Learned Authorised Representative before us relied on the order of the learned JM. He contended that there were in all 8 squared-up creditors. The assessee has submitted the addresses and the particulars of all the 8 creditors and requested the Assessing Officer to issue summons to these creditors, out of which, 5 creditors confirmed the credits and, therefore, the Assessing Officer accepted them as genuine. Only 3 creditors did not comply with the summons even though the summons were duly served. The loans were received through cheques and repaid through cheques. Their PAN is on record. The Assessing Officer, due to non-compliance of the summons by these 3 creditors, has taken the adverse inference against the assessee. Even no opportunity, prior to the addition that the summons has not been complied with, was given to the assessee and the impugned addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be drawn against the assessee. The summons were duly served. Under these facts, the assessee has discharged his onus what can be expected from. The CIT(A) has rightly deleted the addition and the learned JM was correct in law in holding that the issue is squarely covered by the decision of the jurisdictional High Court. I, therefore, agree with the decision of the learned JM confirming the order of the CIT(A) deleting the addition of ₹ 2,00,000 on account of cash credit. Thus, question No. 1 is answered in favour of the assessee. 9. The second issue relates to the deletion of the addition of ₹ 85,205 on account of unrecorded investments for the purchase of goods, made by the CIT(A). 10. The Revenue has come in appeal. Learned JM confirmed the action of the CIT(A) while the learned AM confirmed the addition. 11. The facts relating to this issue are that the assessee, according to Assessing Officer, had purchased goods worth ₹ 85,205 from M/s. Narain Food Products, Morena through bank draft dated 15-3-2002, which was not found recorded in the books of account of the assessee. The assessee, when confronted, stated that he has not conducted any such transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons relating to ₹ 85,205 which the assessee has denied, M/s. Narain Food Products has not mentioned any bill number but has shown the draft, bank etc. In my opinion, no addition can be made merely on the basis of the evidence procured by the third party unless and until that party is put to the assessee for cross-examination, specially when the assessee has categorically denied the transaction. Statement relied on by the Revenue itself does not disclose the bill number through which transaction is entered into. It only contains through drafts etc., only. Therefore, this evidence, in my view, cannot be a valid evidence to make the addition. Once the assessee had denied the transaction, the Assessing Officer was bound to adduce the evidences for the rebuttal of assessee. The Assessing Officer has not done so. Therefore, under the facts of the case, I agree with the learned JM deleting the addition. 15. Thus, question No. 2 is decided in favour of the assessee. 16. The matter will now go before the regular Bench for deciding the appeal in accordance with the majority opinion. P.K. Bansal, Accountant Member. - In this case the difference arose between the Members of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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