9911796707
TMI Blog2005 (12) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... e next effective issue raised in this appeal i.e., in ITA No. 485 (ASR)/2000 is that the ld. CIT(A) was not justified in sustaining an addition of Rs. 20,02,136. The same ground is taken by the assessee in ITA No. 242(ASR)/2003 which arise from the set aside assessment completed by the Assessing Officer and order of CIT(A) dated 31-3-2003. Corresponding to this is the ground of appeal of the Revenue in ITA No. 294(ASR)/2003. Where grievance projected is that CIT(A) was not justified in reducing the addition from Rs. 82,28,347 made on the basis of peak credits to Rs. 20,02,136 being net credit balance outstanding at the end of the year. The facts of the case are that the assessee was engaged in the business of manufacturing of steel casting and steel ingots. The assessee filed the return of income declaring therein loss of Rs. 55,92,582. The Assessing Officer referred to the assessment order for the assessment year 1993-94 where it was noted that the entire sales of pig iron had been made to M/s. M.K. Sales, 639, Industrial Area, Ludhiana. It was observed that the partnership firm of M/s. M.K. Sales comprised of two partners, namely, Sh. Ajit Paul Singh, Director of the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M.K. Sales to the assessee is also not proved in the absence of production of relevant copy of bank account though specifically asked. (iv) That the genuineness of the entity known as M/s. M.K Sales to remain in dark when it has not been filing its sales-tax returns regularly with the Sales Tax authorities. (v) That the story of shifting of business of M/s. M.K. Sales to Kanpur is only a concocted story with a view to avoid any verification by the department of otherwise ingenuine sales made by the assessee-company to M/s. M.K. Sales." Thus, the Assessing Officer concluded that amount of Rs. 20,02,136 represented income by way of premium charged on sales made to parties and sales were routed through M/s. M.K. Sales only with an intention to give a colour of genuineness. Thus, the Assessing Officer added the entire amount of Rs. 20,02,136. It may further be mentioned that for the assessment year 1993-94, the assessee had shown similar transactions of sales and the balance amount p outstanding in the name of M/s. M.K. Sales was Rs. 34,39,338 against which neither the goods were supplied nor amount had been returned. The Assessing Officer, therefore, made an addition of Rs. 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered that similar additions were made in assessment year 1993-94 and that the same have become final as assessee-firm had availed of K.V.S.S. 1998 for assessment year 1993-94. The mere fact that sum of Rs. 20,02,136 has been surrendered as income of the assessee for the assessment year 1997-98 shows that the inference drawn by the Assessing Officer that this amount should be treated as income of the assessee has on the right footing. Only question remains is whether this amount should be treated as income of assessment year 1994-95 or whether it should be treated as income of assessment year 1997-98 when it was surrendered by the assessee. There is no dispute that there were no further transactions in the account of M/s. M.K. Sales after financial year 1993-94 and the amount of Rs. 20,02,136 represents the credit received in the account of M/s. M.K. Sales during the assessment year 1994-95. However, while completing the fresh assessment, it should be examined by the Assessment Officer whether only Rs. 20,02,136 was taxable in this year or whether the peak credits should be brought to tax in assessment year 1994-95." The assessee is aggrieved with the order of the CIT (A). He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter, the assessee did not make any sales to M/s. M.K. Sales and credit balance of Rs. 20,02,136 standing at the end of the accounting year relevant to the assessment year under consideration was also not paid. This amount was written off in the books of account in the accounting year relevant to the assessment year 1997-98 and accounted for as income of the assessee for that year. He submitted that since the sales made to M/s. M.K. Sales were duly supported by bills and it is not the case of the Revenue that the assessee had not carried on its manufacturing activity, the Assessing Officer ought to have not considered the credit balance in the accounts of M/s. M.K. Sales as premium on sales. He submitted that M/s. M.K. Sales was registered with the Sales-tax Department and if any action was to be taken, the same should have been taken against M/s. M.K. Sales. The ld. counsel further submitted that the onus was on the Revenue to prove that the assessee had made sales to M/s. M.K Sales on premium. He relied on the judgment of Supreme Court in the case of CIT v. Daulatram Rawatmull [1973] 87 ITR 349 and CIT v. Durga Parsad More [1971] 82 ITR 540 (SC). He further submitted that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) deserves to be deleted. 7. The ld. DR, Sh.P.S. Sachdev, on the other hand, heavily relied on the orders of the authorities below. He submitted that for the assessment year 1994-95, the ld. CIT(A) vide his order dated 4-9-2000 has already upheld the addition of Rs. 20,02,136. However, while setting aside the assessment order, the ld. CIT(A) had given directions to examine whether the addition could be made on the basis of peak credits and whether it should be made for the assessment year 1994-95 or 1997-98 i.e., when amount was written off in the books of account of the assessee. He further submitted that it is not the case of the Revenue that the assessee had not manufactured steel ingots and sold the same. Revenue's case is that sales were not made to M/s. M.K. Sales, rather these were made to outside parties on premium and were shown in the name of M/s. M.K. Sales. He submitted that this is clear from the fact that no evidence whatsoever has been produced about the dispatch of goods to M/s. M.K. Sales, how the goods were transported, Octroi and Sales tax etc. paid thereon. He further submitted that the Assessing Officer has recorded a clear-cut finding on page 5 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not been able to produce any evidence in the form of transportation of goods to M/s. M.K. Sales, Octroi and Sales-tax etc. paid on such sales. The facts placed on record also show that M/s. M.K. Sales had not filed any Sales-tax return. It is also a fact that the cash amounts were deposited in the Bank A/c. of M/s. M.K. Sales and from there cheques were issued to the assessee as advance for purchase of pig iron. It is also a fact that the amount of Rs. 20,02,136 remained outstanding at the end of the accounting year under reference and neither any sales were made nor the amount was refunded to the party. During the course of hearing of the appeal, the assessee was specifically asked to produce any correspondence or evidence where M/s. M.K. Sales had ever demanded refund of Rs. 20,02,136 from the assessee. The Ld. Counsel was fair enough to concede that no such evidence is available. Even for the assessment year 1993-94, the credit balance at the end of accounting period stood at Rs. 34,39,390 out of the same, amount of Rs. 10 lakhs each was transferred to the deposit account of M/s. M.K. Sales and Sh. Ajit Pal Singh and the amounts remained in the books of account. These were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Sales because thereafter management changed hands. Despite repeated opportunities allowed, the assessee has not been able to produce any documentary evidence in the form of transportation of goods to M/s. M.K. Sales, Octroi and Sales Tax paid etc. thereon to show that it had made genuine sales to M/s. M.K. Sales. Thus, apart from sale bills issued in the name of M/s. M.K. Sales, there is no documentary evidence whatsoever to lend support that assessee had made genuine sales to M/s. M.K. Sales. It is also a fact that the cash was deposited and the Bank a/c. of M.K. Sales from where cheques were issued to the assessee in advance. Further, the amounts of Rs. 34,39,390 and Rs. 20,02,136 were due to M/s. M.K Sales on 31-3-1993 and 31-3-1994 respectively. The assessee neither supplied any goods nor M/s. M.K. Sales ever demanded the refund of the aforesaid amounts. These were huge amounts. No prudent person would leave such substantial amounts with the assessee without even asking for the same. Coupled with this is the fact that such credit balance of Rs. 34,39,390 had been surrendered by the assessee for the assessment year 1993-94 under the voluntary disclosure scheme. Thus, these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 and 31-3-2003, in ITA No. 485(ASR)/2000 and ITA No. 242 (ASR)/2003 and reduce the addition to Rs. 5,62,748. Accordingly, the respective grounds of both the appeals are partly allowed. 11. This leaves us with a ground of appeal of the Revenue where the grievance is that the CIT(A) was not justified in sustaining an addition of Rs. 20,02,136 as against made by the Assessing Officer at Rs. 82,28,347 on the basis of peak credits. As already discussed, we do not find merit in making the addition on the basis of peak credits. It is not the case of the Revenue that the assessee had not at all done any manufacturing of steel ingots and steel casting. The Revenue has accepted that the assessee had manufactured these items and sold the same to outside parties and M/s. M.K. Sales was used only as a conduit for routing these transactions. Thus, the sale proceeds introduced in the books are to be reduced from the credits which have already been accounted for as part of sales. The Assessing Officer has not made any addition on the ground that the assessee had not at all made any sales even to outside parties and had introduced its undisclosed income in the garb of sales through M/s. M.K. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor was produced and none of them was assessed. The assessee failed to furnish GIR/PAN as to whether they were assessed and, therefore, the assessee failed to explain the source and nature of these credits. 13. Being aggrieved, the assessee filed an appeal before the CIT(A). It was submitted that there was opening balance of Rs. 2 lakhs in the account of M/s. Amar Finance Company, which was reduced to Rs. 1,60,000 at the end of the accounting year under reference. The ld. CIT(A) noted that as regards fresh credit of Rs. 5 lakhs in the name of Sh. Ajit Pal Singh, addition of Rs. 10 lakhs was made in the assessment year 1993-94 and the same had become final. Therefore, source of Rs. 5 lakhs introduced in the assessment year 1994-95 was not explained and, therefore, addition was rightly made. As regards M/s. R.K. Joshi Co. and Sh. Manjit Singh, the ld. CIT(A) observed that the assessee failed to furnish any confirmation and other details explaining the source and nature of these credits. Therefore, he also upheld the addition in respect of credits standing in their names. However, as regards M/s. Amar Finance Company, the ld. CIT(A) observed that this was a balance brought forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. We have heard both the parties and carefully considered the rival contentions with reference to facts, evidence and material on record. It is settled law that in case of cash credits, the onus is on the assessee to establish the identity of the creditors, credit-worthiness of the creditors and genuineness of the transactions. Reliance in this regard is placed on the judgment of Calcutta High Court in the case of Shankar Industries and the judgment of Kerala High Court in the case of K. Sreedharan. In the case of CIT v. Vir Bhan Sons [2005] 273 ITR 206 the facts before the Punjab Haryana High Court were that the assessee had received the amounts from certain parties and during the course of assessment proceedings, the assessee had furnished the PAN and also stated that the amounts in question have been received by A/c. Payee cheques. However, the parties were not produced before the Assessing Officer for cross-examination. On appeals, both the CIT(A) and the ITAT had deleted the additions on the ground that the amounts had been received by A/c. Payee cheques and the PAN of the parties were also given. The Assessing Officer ought to have verified the Income-tax records of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed. He has also not been produced before the Assessing Officer. However, the assessee had made a request to summon Sh. Ajit Pal Singh at assessee's expense. But the Assessing Officer failed to make any further enquiry and also failed to issue summon to him. Therefore, we are of the considered opinion that addition of Rs. 5 lakhs is not called for. We rely upon the judgment of Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78. Therefore, we do not find any justification in sustaining the addition of Rs. 5 lakhs. The order of the CIT(A) is set aside and the addition of Rs. 5 lakhs is deleted. 18. As regards the contention of the assessee that benefit of addition of Rs. 34,39,390 made for the assessment year 1993-94 should be allowed by telescoping the addition against the impugned credits, we find no merit in the same. We find that the entire amount of Rs. 34,39,390 remained in the books of account. In fact, the amount of Rs. 10 lakhs each was credited in the deposit A/c. of M/s. M.K. Sales and Sh. Ajit Pal Singh and this amount remained with the assessee itself. The remaining amount of Rs. 14.39 lakhs also remained in the books. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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