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TMI Blog2012 (10) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... SIONER OF INCOME-TAX, WEST BENGAL [ 1958 (11) TMI 3 - SUPREME COURT] was referred where it was held that amount credited in business books can normally be presumed as business receipts. The expression books with respect to s.68 is concerned, the Hon ble Punjab Haryana High Court in the case of SMT. SHANTA DEVI VERSUS COMMISSIONER OF INCOME-TAX [ 1987 (10) TMI 26 - PUNJAB AND HARYANA HIGH COURT] , held that such books denotes books of assessee himself and not of other parties. Addition made by the AO u/s 68 of the Act by considering the sale proceeds as cash credits cannot be sustained. Decision in favour of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 3. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in manufacturing of refined Soyabean oil and DOC from soyabean seeds. The turnover of the assessee during the year, under consideration, was ₹ 149.58 crores on which a GP of 11.59% was shown. Before coming to any conclusion, we are reproducing hereunder the relevant portion from the impugned order :- " In the grounds of appeal bearing from no. 1 to 10, the appellant has challenged the additions made u/s 68 of the Act as unexplained cash credits at ₹ 6,47,03,548/- being sale proceeds realised by the appellant from four debtors after deducting an amount equal to 11.59% towards gross profit on such sales. 2. The facts of the case are that the appellant company is engaged in manufacturing of soya oil and de-oiled cake from soya seed in its solvent extraction plant located at Dewas since 1994. The case was selected for the scrutiny. Assessee has shown sales of soyabeen refined edible oil to one Mis A.K. Impex, New Delhi and three other parties M/s Praveen Trading Company, Sarangpur, M/s Maa Jpagwati Traders, Agar (Malwa) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /DD/pay order/cheque/RTGS from buyers against orders in advance. Following details were submitted before the AO in support of sales effected to such parties against which amounts were received - i) Copies of accounts of buyers in the books of the appellant; ii) Copies of all sales invoices issued by the appellant to said buyer. iii) Copies of the cash receipts issued to the parties. iv) Copies of bank slips relating to cheques received. v) Copies of bank statements of the appellant. vi) Stock register maintained by the appellant. vii) Letter from brokers confirming transactions. viii) Brokerage bills issued by the brokers of said buyers. ix) Weighment slips issued at the time of dispatches. x) Description regarding Truck/Tankers No, DO No. etc. 05. Submissions in detail were made by the appellant from time to time, the Assessing Authority did not accept the genuineness of sales effected to four parties out of six parties (one from Delhi & three dealers of MP). Enquiries were made by the Assessing Authority based on which the inference was drawn that such parties were non-exist. He, therefore, concluded that the appellant (selling dealer) introduced cash in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortation of goods to M/s. A.K. Impex. g) On enquiry from the bank, amounts were received through RTGS on behalf of MIs. A.K Impex which were remitted by other parties. Such parties were not dealers in edible oil. Notices issued U/S 133(6) of the Act to some of the parties, who remitted the amount on behalf of MIs. A.K. Impex, were returned un-served. On enquiry thorough Investigation Wing, New Delhi, it was reported that such firms did not exist at the addresses given. h) The broker MIs. Rajesh Kumar Arun Kumar, Gwalior confirmed the dealings between MIs. A.K. Impex and the appellant through him and he also provided Mobile number of MIs. A.K Impex. i) Mobile No. was provided by the broker and the Inspecter of Range-i, Gwalior talked to M/s. A.K. Impex on phone. The debtor also confirmed the address but on verification by Investigation Wing , Delhi, such address was again found incorrect. j) The appellant remitted excess payment received over and above the sales at ₹ 31,5281- by A/c payee cheque to Mis. A.K. Impex, which was credited in its bank account in Punjab National Bank, New Delhi. Address in the bank account was the same as was supplied by the debtor. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with written submissions of the appellant for comments, who objected for admission of any new evidence. Copy of the comments received were given to the appellant. Regarding admissibility of evidences, the appellant claimed that no new evidence were furnished and supporting documents which already forms part of record or originals of which were produced during the course of assessment were submitted at the appellate stage. 02) In written submissions dated 02/09/2011, additions made by the A.O. have been challenged by the appellant on merits as well as on legal grounds which are reproduced here under:- "Regarding Sales to A.I(. Impex, Delhi & 3 buyers of M.P. 2.1 It is well known fact that parties are carrying on trading activities outside the books either by maintaining various bank accounts or by changing their addresses quite often. Such traders not only avoid payment of Income tax on the earnings but also VAT, Central Sales tax or Entry tax. They are not purchasing the goods directly from manufacturer. Such business is carried on through brokers who are also hiding the fact for their vested interest because they are getting commission from the appellant on sales effected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'made the payment in cash against sales effected to them. Reliance is also placed on following judgments :_. Plestar Electronic vs. A CST (1978) 41 STC 409 (SC) State of Madras vs. Radio & Electricals Ltd. (1996) 18 STC 222 (SC) Dy. CSTvs. Bharat Refineries (1978) 41 STC 409 (Kerala - DB) State of A.P. vs. Askin Fabs (1999) 112 STC 550 (AP-DB) State of Orissa vs .Bharat Petroleum (2001) 122 STC 559 (Orissa _ DB) Agfa-Gavert India Ltd. vs. State of Tamil Nadu (2001) 123 STC 108 (Madras-DB) 2.4 Bonofides of the appellant:- Genuineness of sales to M/s. A.K. Impex was proved from following documents (copies of which were not allowed to be submitted by the A.O):- a) Sale, effected were properly recorded and VAT was deposited on entire sales @ 4% and CST payable on such sales was deposited @ 2%; b) b) Quantitative records of purchase & consumption of soya seed, production of crude oil, refined oil & cake, sales of manufactured goods & stock was maintained on day to day basis; c) Remittances are supported by covering letters from the buyer as and when they were received; d) MTRs proving the dispatch of goods to M/s. A.K. Impex are available. e) Letters issued by the bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce were made by them and copies of such letters were also produced before the A 0 in support of the claim that such parties had remitted the amount on behalf of Mis. A.K Impex. However, these letters were not taken on record by the A 0 for the reasons best known to him. Copies of such letters and certificate from transporter who deliver the goods to Mis. A.K. Impex are annexed for kind perusal in support of submissions made above with a request to kindly consider the same because they support the existence of the buyer. 2.6 Sales to buvers in MP:- It is submitted that the intention of three parties of MP also appears as melafide because:- a) in spite of having huge purchases effected by them, they were not registered dealers under MP VAT Act: b) Entire purchases were effected by them in cash which is in contravention of provisions of sec. 40A(3) of the Act. c)TIN informed to the appellant were found to be incorrect; d)The appellant is under no obligation to effect sales only to regd. dealers under MP. VAT Act and such sales can be effected to any person or to consumer. e) Details of sales effected to these dealers were submitted along with copies of inyoi-es and cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alized because the restriction placed for payment U/S 40A(3) of the Act applies to buyer and not the seller. There being no restriction under the Act to accept cash against sales, the appellant Company cannot be penalized. The AO relied upon certain judgments for the purpose of making addition u/s 68 of the Act which are not relevant at all because they related to amount received as share application money or share capital from the shareholders. The question for kind consideration is whether advances received in Cash against sale can be treated as un-explained cash-credit? Similar issue has been decided by Hon'ble Tribunal in following cases:- 1) Heera Steel Ltd Vs. ITO (2005) 4 ITJ 437 (Nagpur Bench) Held that "Both the lower authorities failed to appreciate the case of the assessee that these were trade advances and not cash credits and against such advances, the assessee has supplied the material in due time as per details available on record. In view of the above, there is no justification for the revenue authorities to treat these cash advances as unexplained cash credits under section 68 - Addition deleted. " Other judgments relied upon by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act. Many dealers (20) remitted the .amount by DD and RTGS which was not doubted upon by the AO except the remittances made by Mis. A.K. Impex, Delhi. Break-up of sales realization from the dealers is as under :- a) Remittances in cash ₹ 6,36,31,328/- b) By pay orders ₹ 7,43,14,326/- c) Remittances through DD/RTGS ₹ 13,83,04,831/- d) Remittances by Cheques ₹ 30, 49, 07, 455/- e) Remittances by D/D ₹ 3,56,11,450/- j) Remittancesthrough NBOT ₹ 5,95,70,137/- Total Rs. 67,63,39,527/- Copies of accounts of various parties to whom sales were effected over ₹ 15 lacs are enclosed indicating complete details such as invoice no., date of invoice, amount of invoice and mode of payment etc. It is therefore, submitted that the transaction of sales effected by the appellant were genuine and its receipt by cheque, cash or RTGS was normal feature in this line of trade. As submitted earlier, the dealers may be involved in the trading activities outside the books of accounts for which the appellant cannot be held responsible. Transactions of cash deposit was in the nature of counter sale only and the delivery was given on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they were in fact produced before A O in original at the time of assessment. On receipt of assessment order, it was found that the fact stated at page 14 (para 6.4) by the AD was not correct hence such correspondence from M/s. A.K. Impex, Delhi were submitted at appellate stage. Similarly, at para 6.6 of page 14 of the order, claim of the assessee that sales were made over the counter was disbelieved hence cash receipts were filed at appellate stage. Except filing of photo copies of the documents produced earlier (but not taken on record) no new evidence was submitted at the appellate stage. Such evidences were neither obtained subsequent to the assessment order passed by the AD nor they are in the nature of additional evidence but it became necessary to be produced to rebut the observations made in the assessment order. According to the appellant, they are not in the form of additional evidence yet at the instance of the then Commissioner of Income tax (Appeals), request was made under Rule 46A of the Act vide letter dated 17.10.2011 so that it can be examined by the AO. 2) Opportunity to the appellant :- As regards, comments made in para 3 to 5 of the letter, we submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party could not be traced after two years, the appellant cannot be held responsible to locate the party, as expected by AO. 4) The appellant made allegation in its letter dated 02.09.2011 with regard to melafide intention of the buyers but in para 9 of the letter, the AD has treated the same as assertions on the part of the assessee. The manner in which the trade is being carried out in various commodities in the Country was explained by the appellant just to appraise of the correctness of facts. Instead of appreciating' the fact, the AD has casted additional duty on the appellant to help the department to identify such buyers with whom the appellant had dealt in. If such duty is casted upon the seller, all retail stores and specially that of bullion and jewellery will not issue any sale invoice because identity of the buyers, who purchase such commodity against cash payment cannot be proved by the seller. 4) The decisions of Hon'ble ITAT, Indore Bench, Indore have been quoted in support of the claim that sales effected by an assessee cannot be treated as cash credits U/S 68 of the Act because sale consideration was duly entered in the books of accounts. 5) As regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The additions made have also been challenged on the ground that the amount received form part of sale proceeds credited in the profit & loss account hence it amounted to Double Taxation of same income which is not permissible under the law. The submissions made vide letter dated 02/09/2011, in this connection are reproduced hereunder :- "We further submit that additions made also deserves to be quashed on the ground that it resulted into double taxation. On one hand, net sales (after deducting gross profit) credited in the books and appearing on credit side of profit and loss account has been assessed to tax and on the other hand same amount has been assessed U/S 68 of the Act. As submitted above, sale proceeds cannot be treated as cash credit by. any stretch of imagination. Such receipts were adjusted against the sale of goods credited to profit and loss account and it amounted to double taxation of the same amount which is unwarranted and unauthorized by law as held in following judgments: i) Namra Mahila Evam Bal Kalyan Samiti Vs. ACIT (2010) 15 ITJ 581 (Indore Bench) : In this case donations were received by a society who was granted registration U/S 12AA of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from a source which has already been taxed". 05) Specific querry was raised during the course of appellate proceedings regarding mode of transportation of goods sold to M/s.A.K. Impex, Delhi and three traders of Shajapur (MP) which was suspected by the A.D. and to furnish documentary evidence there against. The appellant explained the same vide submission dated 16/02/2012 as under:- "As evident from copies of sale invoices already placed on record, sales of oil was effected to MIs. A.K. Impex, Delhi in oil tankers whereas sales to local parties of Shajapur Distt. were effected in oil drums, hence they were transported by Trucks. Such tanker/Trucks were arranged by the buyers only and the company did not make any payment of freight to the transporters. Tanker/Truck number by which goods were transported have been invariably mentioned on all sale invoices, as a regular system followed while dispatching the goods along-with entries recorded at the factory gate. M/s. A.K. Impex, Delhi arranged the oil tankers through its transporter viz. M/s. H. G. Oil Carriers, 79, Transport Center, Rohtak Road, New Delhi. A list containing complete details of sales with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t traceable, the assessee could not be penalized. In the sale documents the assessee has made available all necessary details i. e. the total weight sold as well as the rate per kilogram. Undisputedly, the assessee has maintained completed books of accounts alongwith day to day and kilogram to kilogram stock register and also submitted stock tally sheet alongwith the audited accounts ..........The assessee can not be put to prove a negative. It was for the department to substantiate and prove the allegation being leveled by it. This, however, has not been done. Even in the remand report, the AO has stated that the sales were duly verified and found to be genuine. Since the purchases has been held to be genuine, the corresponding sales cannot, by any stretch of imagination be termed as hawala transactions. " 2) ITO vs. Super Chemicals Distributors (2005) 1 SOT 102 (Del.) Held - "It was incumbent upon the assessing officer to found out actual location and present were about of the firm "A" and to verify the fact, and that simply because inspector was unable to locate firm 'A' , the A. O. could not jump to conclusion that this was a bogus creditors and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was infact carried out. In the body of the assessment order it was stated that proof was transportation was not submitted therefore it became necessary to submit the certificate of the transporter before your honour. Neither any querry was raised to submit such certificate nor any opportunity was given to prove the transportation of goods. Therefore the question of non submission of the certificate at the time of assessment stage did not arise. It is Claimed that such certificate is not additional evidence but it is a supporting document to prove the sales effected to Mis A. K. Impex, Delhi. The appellant is therefore not required to explain the circumstances as to exceptions provided under clauses (a), (b), (c) or (d) to rule 46A (1) of the Rules. 2) The appellant had clearly stated at the time of assessment proceedings that the buyer namely Ms A.K. Impex arranged the tankers at its own because the delivery of oil was given at factory. Had the assessing officer doubted upon the tanker numbers mentioned on the sale invoices, the appellant would have submitted the certificate at that stage itself Such tanker were arranged by the buyers only and the company did not make any payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties fall. Similarly A. K. Impex was also not found existed at the given address after making enquiries. All these parties were not found in existence at the addresses supplied by the assessee. According to the AO, based on the enquiries made, the appellant failed to establish the identity of the buyers to whom such sales were effected. The assessee did not discharge the burden casted upon him to prove the nature and source of any sum credited in the books of accounts as to whether such receipts were on account of sale consideration or otherwise. 6.3 For this purpose the, A.O. relied upon the observations in the case of CIT vs. Sophia Finance Ltd 2005 ITR Delhi by distinguishing the same from the observations made in CIT V s. Lovely Exports Pvt Ltd 216 CTR 195 and CIT V s. Steller Investment Ltd 251 ITR 263 (SC). Relying upon the ratio of judgment in the case of CIT Vs. Madhavnagar Cotton Mills Ltd 104 ITR 493 (Born) he rejected the books of accounts U/S 145 of the Act and assessed additional income as cash credit U/S 68 of the Act by accepting sales disclosed as per books of account in following manner :- a) Sales effected to M/s. A.K. Impex, Delhi ₹ 5,16,04,0001-. b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of MP through brokers to whom brokerage was paid after deduction of tax at source. Such brokers also confirmed sales effected to these parties. For making payment of brokerage also, maintenance of individual party ledger is necessary. 6.18 During the appellate proceedings the appellant submitted that the company had effected sales of oil in tankers to 79 dealers of M.P. and outside state. A statement was filed by the appellant which shows that total turnover to such dealers was 67.63 Crores. Out of these the sales were effected to 73 dealers of M.P. and 6 dealers outside M.P., who remitted the amount in cash as well as pay orders DD, RTGS and by cheques. Like the above four parties, the deliveries were also given at site to all these dealers. Out of those 73 dealers of M.P. 33 dealers remitted the amount in cash. The A.O. has doubted the genuineness of the sales made to above four parties only, in respect of which he has made the enquiry and not found existed at the given address. Transaction of cash deposit was in the nature of counter sale only and the delivery was given on the same day whereas, DD/RTGS were received in advance directly or through brokers against supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied the material in due time as per details available on record. In view of the above, there is no justification for the revenue authrorities to treat these cash advances as unexplained cash credit u/s 68". Again the reliance is placed on the decision of Hon'ble M.P. High Court in the case of Addl. CIT vs. Ghai Lime Stone Co. (1983) 144 ITR 140(MP).It is evident from these judicial rulings that trade advances or cash received against which goods is supplied subsequently is not a cash credit as contemplated by section 68. 6.23 Reliance is further placed on the decision of the ITAT, Mumbai Bench in the case of ITO vs. Surana Traders, (2005)93 TTJ 875: (2005)92 ITD 212, the relevant observation of the Mumbai Bench were as under :- "So merely because for the reasons that the purchaser parties were not traceable, the assessee could not be penalized. In the sales documents, the assessee has made available all necessary details, i.e. the total weight sold as well as the rate per kilogram. Undisputedly, the assessee has maintained complete books of accounts alongwith day to day and kilogram to kilogram stock register. These were produced before the A 0 by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. It has furnished the copy of the bank account of the buyer, TIN of Sales tax department, Delhi, confirmation of broker, various correspondences received while remitting the DD/R TGS, detailed copy of account as appearing in its books, sale invoices & confirmation certificate of transporter with tankers numbers who delivered the oil to Mis. A.P. Impex against payment of freight. The statement of the bank account of Mis. A.K. Impex, Delhi reflects encashment of the cheque of ₹ 31,528/remitted by the appellant. 6.5 The appellant's contention that Mis. A.K. Impex, Delhi was also carrying on the business with ulterior motives should be considered in its real prospective. On perusal of details of amounts received from M/s. A.K. Impex, Delhi and sales effected to it, the fact remains that such sales were effected immediately within a period of 3 to 5 days and the amounts were adjusted against sale proceeds only. The buyer being a new party, introduced during the year by the broker, insistence for remitting money before dispatching of goods by the appellant cannot be adversely viewed just to invoke provisions of section 68 of the Act. It can be applied were such credits : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranged the tankers at its own because the delivery of oil was given at factory. In the case of appellant tankers were arranged by the Buyers only and it did not make any payment of freight to the transporter. Dispatch of the goods through tankers mentioning the tankers number were recorded in sale invoices alongwith the entries recorded at the factory gate. It was certified by the transporter also that the freight was paid by Mis A.K. Impex, Delhi only. 6.9 As far as admission of additional evidence is concerned, the assessee had made a request for admitting additional evidences. It is observed that most of the evidences w.r.t. the effecting of sales to the parties, whose sales were treated as cash credit u/s 68, were furnished by the appellant before the A.O. Appellant has furnished a certificate of the transporter during the appellate proceedings which is only supporting in nature. Besides, the appellant has furnished copies of Sale Invoices, MTR, Stock Register, Broker details and Tanker No. etc., which were before the A.O. during the assessment proceedings. However, the remand reports under Rule 46A and u/s 250(4) were also called for from the A.O. and duly considered. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the party was not traceable at the time of framing the assessment. When sales made to the party is to be treated as cash credit then A.a. has to give effect to the purchases accordingly by way of increasing the closing stock, which has not been done. The broker Mis Rajendrakumar Arunkumar, Gwalior who arranged the transaction with the said party has also confirmed in his statement before Addl, CIT, Range-I, Gwalior uls 131 that he had done the deal of Mis A.K. Impex with the appellant. It is also observed that the appellant has recorded these sales in its regular books of account. Taxing these sales again tantamount to double taxation. 6.13 Appellant had supplied the goods to the parties after receiving advance payments, which were credited in the core banking account through cheques/DDlPayorderslR TGS and after verification of receipt of payments, the appellant had delivered the refined oil to the party through the tanker arranged by him. The appellant is making necessary entries in its regular books of accounts and in the stock register. Appellant has furnished the evidences in support of its contentions and established the genuineness of the transaction and nature and sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically observed by the learned first appellate authority that the assessee was maintaining complete quantitative records relating to purchase, production and sale which were properly accounted for. So far as cancellation of TIN by the Commercial Tax Authority is concerned, it was neither informed by the authorities to the assessee nor by the purchaser himself, therefore, at the later stage, the assessee cannot be punished for the deeds of somebody. Likewise, C-forms were issued and given to the assessee. The sale of such magnitude is normally possible through brokers and even otherwise so far as doing the business is concerned, it is up to the assessee. It is pertinent to mention here that evidence is furnished during first appellate stage by the assessee was forwarded to the Assessing Officer along with the written submissions and the copies of the comments of the Assessing Officer were given to the assessee, therefore, it cannot be said that the Assessing Officer was not provided any opportunity. Only after calling remand report the CIT(A) has decided the issue on merits. Under these circumstances there is no merit in the ground taken by Revenue with regard to violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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