9911796707
TMI Blog2020 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the Revenue also stated at BAR that the assessment years for A.Y. 2006-07 to 2007-08 have already been reopened and respective additions have already been made in those years. The said fact has also been confirmed by the assessee at BAR. Since both the parties have agreed that additions have already been made in the respective assessment years i.e. 2006-07 and 2007- 08, therefore, there is no cause left before the ld.DR to challenge this finding recorded by the ld.CIT(A) in this assessment year as the order passed by ld.CIT(A) has already been complied with and now there is no loss to the Revenue. DR has failed to substantiate its argument as to how and in what manner the order passed by the ld.CIT(A) on this ground is not sustainable in Law or what impropriety has been committed by the ld.CIT(A). No new facts or circumstances have been brought before us in order to controvert or rebut the findings recorded by ld.CIT(A). Therefore, we find no reasons to interfere or deviate from the lawful findings so recorded by ld.CIT(A), thus we upheld the same and dismiss this ground of appeal of Revenue Unexplained repayment of unsecured loans - sources and nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER Assessee by: Shri P.M. Jagasheth CA Revenue by: Shri O.P. Singh CIT-DR And Smt. Anupama Singla Sr.DR ORDER PER SANDEEP GOSAIN, JM: 1. This appeal by the Revenue is directed against the order of Ld.Commissioner of Income Tax(Appeals)-I, Surat dated 05.09.2013 for the assessment year 2009-10. 2. Grounds raised by the Revenue read as under: 1) On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) has erred in deleting the addition of ₹ 4,96,27,261/- in respect of unverifiable creditors and in giving directions that the amount should be added in A.Yr.2006-07 and 2007-08 despite the facts that the assessee could not prove the genuineness of the same in the course of assessment proceedings as well as in the remand proceedings. The Ld.CIT(A) has failed to appreciate that in its Return of Income the alleged debtor M/s. Pamis Tex.Pvt. Ltd. has not shown the assessee as its creditor for A.Yr.2009-10. The Ld.CIT(A) has failed to appreciate that despite numerous opportunities the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of his claim. 7. On the other hand, the ld.Authorised Representative(AR) relied upon the order passed by the ld.CIT(A). 8. We have heard the Counsels of both the parties, we have perused the material placed on record and orders passed by the Revenue Authorities. Before we decide the merits of this ground, it is necessary to evaluate order passed by the ld.CIT(A) on this ground and the same is contained in para no.10. However, the operative portion is contained in para no.10.3 to 10.8 as below: 10.3 As regards the first ground of appeal related to the addition of ₹ 4,96, 27,261/- the opening credit balance in the name of M/s Pamis Tex Pvt Ltd was ₹ 5,19,24,340/-which reduced to ₹ 4, 96, 27, 261 on 31.03.2009 as per ledger account of the said concern filed by the appellant. This repayment of ₹ 22,97,079/- made during the year consists of a payment of ₹ 2, 40,000 from the bank account of the appellant with Memon Co - op Bank Ltd, while the remaining payment of ₹ 20,57,079/- has been made by way of J. V entries. The appellant claimed that the J V entries are pertaining to sale parties whose crossed cheques wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s background, when the return of M/s. Pamis Tex P Ltd for assessment year 2007-08 is examined, the value of Sundry Debtors exceeding six months is only ₹ 22,70,128/-. Apparently, the appellant was not a debtor in the books of M/s. Pamis Jex-Pud even on 31.03.2007. This leaves us with possibilities. Either the claim of purchases by appellant from M/s Pamis Tex P Ltd in assessment year 2006-07 and assessment year 2007-08 In any situation income chargeable to tax of assessment year 2006-07 and assessment year 2007-08 has escaped assessment to the extent of several Crores. The corresponding addition is also required to be made in assessment year 2006-07 and assessment year 2007- 08. Considering the large quantum of amount, it is reasonable to believe that unaccounted payment has been made over a period of two years in case the purchases are genuine. 10.7 The assessment order in this case was passed on 29.12.2011 and on that date limitation to issue notice u/s 148 for assessment year 2006-07 was available to the assessing officer. Therefore, the assessing officer is directed u/s 150(1) of the Income Tax Act to issue notice u/s 148 for assessment year 2006- 07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orwarded by the Addl. CIT Range-5, Surat. Both these reports are reproduced herein under for reference. [a] No.SRT/Wd-5(l)/Remand Report/AS/2012-13 Date: 30.08.2012 2. In this case, return of income for A.Y.2009-10 was filed by the assessee on 08.09.2009, declaring total loss of ₹ 1,12,240/-. The assessee is engaged in manufacturing of crimped Yarn. The assessment was made u/s.143(3) of the I T Act on 29.12.2011 after giving sufficient opportunities of being heard to the assessee. The assessment was framed after carefully scrutinizing the submissions and evaluating the facts of the case. In the assessment, the following additions were made to the total income. Sr. No. Nature of addition Amount of Addition Reason for addition 1. Unverifiabie creditor 4,96,27,261/ Confirmation by the creditor was not submitted. The assessee did not provide the address and PAN of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the above details were produced before 3 days of the time barring date i.e. 31.12.2011, the AO was not in position to verify the genuineness of the creditor whether it was genuine or not. He was also not in position to call for confirmation directly from the office of the creditor shown at Mumbai and factory address shown at silvasa in very short time of 2/3 days. As the details produced could not be verified during the assessment proceedings for want of very short time, the entire credit balance of ₹ 4,96,27,261/- in the name of Pamis Tex. Pvt. Ltd. was added to the total income of the assessee as unverifiable creditor. During the appellate proceedings, the assessee has submitted the audit report (M/s. Alfa Synthetics) and copy of accounts of the M/s. Pamis Tex. Pvt. Ltd. before your honour who in turn sent the same to this office for verification under Rule 46A of the I.T. Rules, 1962. 5. Accordingly, before preparing the remand report, I have gone through the conditions laid down in Rule 46A of I.T. Rule 1962. Rule 46A of the IT Rules provides that the assessee/appellant shall not be entitled to produce befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f opportunities of being heard and give evidences of credit balance, but the assessee deliberately delayed the assessment proceedings by not furnishing the necessary details in time. The details were submitted just before three days of the limitation date and that too incomplete. Thus the assessee's plea that the details were not verified and the addition made on this ground was unwarranted is rejected. Thus, none of the conditions laid down in Rule 46A is fulfilled and therefore the additional evidences produced before your honour are required to be rejected. However, without prejudice to above findings, I have carried out inquiry work as per your honour's direction u/s. 250(4) of the I T Act and the report of the same is as under. Accordingly, ledger of M/s. Pamis Tex. Pvt. Ltd. in the books of assessee, purchase bills, audit report of the assessee etc. are verified. Also verified the audit report and return of income of M/s. Pamis Tex. Pvt. Ltd. and para-wise report is made as hereunder: - 8. On verification of the audit report of M/s. Alfa Synthetics for A.Y. 2009- 10, it is seen that there were total creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s worthwhile to mention here that during the year, assessee had made payment of ₹ 22,97,079/- and the entire payment was made through J.V. entries. In other words, during the year, the assessee received several cheque payments from different parties and these cheques were not deposited, in its bank account but the said cheques were directly endorsed to M/s. Pamis Tex. Pvt. Ltd., so in bank statement of M/s. Alfa Synthetics, the name of M/s. Pamis Tex. Pvt. Ltd. does not reflect. For further verification, the return of income for A.Y. 2008-09 of M/s. Pamis Tex. Pvt. Ltd. has also been called for from the ITO, Ward 4(3)-l, Mumbai where it is assessed. On verification of the return of income of M/s. Pamis Tex. Pvt. Ltd. for A.Y. 2008-09, it is seen that there are total debtors are of ₹ 2,11,32,426/- whereas Alfa Synthetics is showing total creditor of ₹ 5,25,92,189/- as closing balance as on 31.03.2008 in its books. More importantly it is to be stated that M/s Alfa Synthetics is not a debtor in the books of M/s. Pamis Tex. Pvt. Ltd. To sum up, closing balance of creditor as on 31.03.2008 in the books of M/s. Alfa Synthetics was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.32.496/- The AO, during the assessment proceedings, observed that the assessee had made repayment of unsecured loan of ₹ 28,32,496/- and therefore the assessee was asked to furnish evidences of the sources of fund from where the repayment was made. However, despite giving numbers of opportunities the assessee did, not furnish any evidence of sources of fund from where he had made payment. The AO had therefore, added the entire amount as unexplained payment. During the remand report proceedings, the assessee was again asked to produce names, address, PANs, contra accounts, ledger of the depositor for A.Y. 2009-10, but at this occasion also, he has failed to produce any of the above details to substantiate his claim of repayment of unsecured loans. 3. Addition on a/c of advances to supplier of ₹ 1,39,31,025/- The AO, during the assessment proceedings, observed that there was advances to supplier of ₹ 1,39,31,025/-in the balance sheet for A.Y. 2009-10. For the sanctity of the same, the AO had asked for the names and addresses of the suppliers to whom advances were given. However, in spite of having give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gures of creditors in the books of Alfa Synthetics debtors in the books of M/s. Pamis Tex Pvt. Ltd. Therefore, the AO had come to the conclusion that the assessee firm has shown bogus outstanding balance in the name of M/s. Pamis Tex Pvt. Ltd. Thus, treated the creditor of ₹ 4,96,27,261/- in the name of M/s. Pamis Tex Pvt. Ltd. as bogus one had added the same to the total income. Thus, it is crystal clear that the AO had already during the assessment proceedings itself proved the creditor of ₹ 4,96,27,261/- was bogus one. In the remand report proceedings also, the assessee neither produced contra account from the books of M/s. Pamis Tex Pvt. Ltd. nor produced the creditor itself personally. 4. In the para No. 10, I have reported that the ledger of M/s Pamis Tex Pvt Ltd from the books of Alfa Synthetics for A Y 2009-10 sent by your honour has been verified. I would like to add that this was only an analysis of the document submitted before you and sent to the undersigned. The genuineness of the said documents however was not established by the assessee, because nothing was produced from the books of M/s Pamis Tex Pvt Ltd. Nobody attended from M/s.Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant evidences from the books of M/s. Pamis Tex Pvt. Ltd or independently verifiable evidence. To sum up I will again re-iterate that after verification of the documents and looking to the facts and circumstances of the case, Alfa Synthetics is not a debtor in the books of M/s. Pamis Tex Pvt. Ltd. and M/s. Pamis Tex Pvt. Ltd. is not a creditor in the books, of Alfa Synthetics and therefore the creditor as claimed by assessee is not genuine. 10. The comments of the assessee in respect of remand reports has also been sought by the ld.CIT(A) it is contained in para 8.2 and the same is reproduced below: 8.2 Copies of remand reports were given to the appellant.. The appellant's comments dated 15.10.2012 in respect of the remand reports are reproduced herein under :- With reference to the subject matter noted above, we for and on behalf of our aforesaid client, make the following humble submissions for the kind consideration of your Honour as per the information, explanation and instructions, given to us. FACTS OF THE CASE 2. The case of the assessee was selected fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d copies were also submitted to this office. The ITD module is an internal document of the department and the same was not produced before us for but the fact that even the A Y 2009-10 module of the creditor does not have the name of the assessee in its list of debtors goes a long way in proving that the creditor may have not shown the sales to the assessee in his books of accounts or that the creditor may have squared up his accounts in the preceding previous year i.e. A Y 2009-10 or preceding years. For a moment if this probability of this possibility is accepted then also the addition as termed in the current year cannot be made as the issue related to preceding previous year and not to the year under appeal. As per contention of the AO if the amount of debtors is not in the opening books of the creditor the issue does not relate to the year in concern and hence addition cannot be made at least in the year in concern. It is further submitted that original bills were produced before the Ld. AO. Copies of the bills were submitted to the file of the AO. Copies of such bill are reproduced before your office. A mere reading of the bills show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Thereafter, again another remand report for the third time was received by ld.CIT(A) which is contained in para 9.1 and the same is reproduced below. The ld.CIT(A) further sought comments of the assessee to in respect of third remand report which is contained in para 9.2 and is reproduced below: 9.2 The appellant s comments in respect of the same were received on 01.08.2013. the same are reproduced herein under:- 2. The case of the assessee was selected for scrutiny. Notices were served on time. The AR of the assessee attended the hearing before the learned AO and submitted the requisite details. In course of the assessment proceedings, the AO examined that the assessee had shown a trade creditor of ₹ 5, 44, 65,103 in the name of M/s Pamix text Pvt Ltd . The AO requested confirmation of the same along with other details. The assessee submitted that as the creditor had done out of India, the contra of the same from 3rd party was not available from his end. The assessee also submitted copies of all purchase bills from the same party. The purchases pertained to preceding previous year. Further to this the assessee also subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot pass the test of legality, in anyway affect the real taxable income of assessee. What can be tax is the real income. It would be outside the tax net to tax an alleged bogus debtor of an alleged bogus liability unless it was any given point of time income of the assessee for the year in concern (copy of ledger attached) II. Reply to query no. 2 of remand report regarding purpose of loan of ₹ 60, 83,406/-. The assessee had submitted that secured loan of ₹ 60,83,406/- is a cash credit loan from Memom Co-op Bank Ltd. The loan is an old cash credit loan taken for the purpose of business. III. Reply to query no. 3 of remand report regarding addition of repayment of unsecured loan of ₹ 28, 32, 496/- The assessee had repaid an unsecured loan to the tune of ₹ 28, 32, 496/- The liability of ₹ 28, 32, 496/- is not a liability as on 31. 3. 2009. Repayment is done by account payee cheque and hence, the question of disallowance of non - existent liability does not arise. IV. Reply to query no. 4 of remand report regarding address of firm and partner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther we have submitted the ledger copy of five parties to whom we have sold goods and the payment so received from the five debtors was directly paid to M/s Pamix Tex P Ltd We have also mentioned the reason why the assessee had made payment to M/s Pamix Tex P LTd that the assessee firm was using full cash credit facilities of the bank and any deposit of such cross cheque received from debtors in the bank a/c of the assessee would amount to the bank reducing his excess overdraft and would also amount to delay of two days clearing time as during such period there always remains pressure from M/s Pamix Tex P Ltd to pay all dues immediately. VI Reply to query no. 7 of the remand report regarding requirement of section 41(1) Sec. 41(1) applies where a trading liability was allowed as a deduction in earlier year in computing business income and the assessee has obtained benefit in respect of such trading liability in later year by way of remission or cessation of the liability. In this regard, we would like to submit that the assessee had purchased goods from M/s Pamix Tex P Ltd in A Y 2006-07 and made whole payment of outstand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety has been committed by the ld.CIT(A). No new facts or circumstances have been brought before us in order to controvert or rebut the findings recorded by ld.CIT(A). Therefore, we find no reasons to interfere or deviate from the lawful findings so recorded by ld.CIT(A), thus we upheld the same and dismiss this ground of appeal. 14. Ground No.2: This ground raised by the Revenue challenging that the ld.CIT(A) has erred in deleting the addition of ₹ 28,32,496/- regarding unexplained repayment towards unsecured loans despite the fact that the sources and nature of the amount of repayment of the same were not proved despite repeated opportunities. 15. During the course of assessment proceedings the ld.Authorised Representative(AR) of the assessee asked to explain the source of repayment of unsecured loan of ₹ 28,32,496/- which was shown in preceding year but paid during the year under consideration. It was held by the ld.AO that the assessee firm or ld.AR of the assessee has not filed any explanation. And it was further held by the ld.AO that since neither the assessee nor the ld.AR could file any explanation or reply, therefore, it is clear that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been brought before in order to controvert or repaid the factual findings so recorded by the ld.CIT(A). In the light of above, we do not find any infirmity in the order of ld.CIT(A), accordingly same is upheld, consequently Ground No.2 of appeal of the Revenue is dismissed. 18. Ground No.3: This ground raised by the Revenue challenging that the ld.CIT(A) has erred in deleting the addition of ₹ 1,39,31,025/- in respect of unexplained advances to suppliers despite the fact the nature and genuineness of the transaction was not proved by the assessee either during the course of assessment proceedings or during the remand proceedings. 19. During the assessment proceedings the ld.AO held that the assessee has made repayment of unsecured loan which was outstanding in previous year, but not explained the source of repayment, therefore it is clear that the said amount was paid by the assessee firm from its undisclosed source or from conceal income for that reason penalty proceeding u/s.271(1)(c) of the IT Act was initiated separately. The ld.AO further stated that on verification of balance sheet it is found that the assessee has shown an amount of ₹ 1,39,31,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the appellant. 22. After having gone through the order passed by the Revenue Authorities and having heard the Counsels at length, we find that the additions were made by the AO on the ground that during the course of assessment proceedings, the assessee could not furnish the list of suppliers to whom the firm had paid advances, thus, additions were made. Although, during the appellate proceedings the ld.CIT(A) has sought Remand Reports from the AO and after appreciating said factual findings had rightly concluded that in comments filed dated 01.08.2013 the assessee has mentioned that the above amount is not advanced to the supplier, but in fact debtors of the assessee and the audited report has wrongly mentioned it as advance to suppliers. Therefore, in such circumstances it was rightly concluded by the ld.CIT(A) the if AO doubted the source of these payments, the addition should have been made of the corresponding liability, which has been used to finance this advance. In any case, an item on the asset side of the balance sheet can be added in the hands of the assessee unless the corresponding liability to finance the asset has been brought found to be consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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