2020 (10) TMI 1048 - AT - Income Tax

ITAT partially allows Revenue's appeal, remands issues to AO for fresh adjudication. Cross objection dismissed.

The ITAT partly allowed the appeal of the Revenue, setting aside certain issues for fresh adjudication by the AO. The ITAT dismissed the cross objection ... Bogus sundry creditors - search and seizure operation u/s. 132 - assessee was unable to submit any details or explanation of sundry creditors during the assessment proceeding to prove the identity and credit worthiness of the creditors and was also failed to prove the genuineness of the transactions - No supporting bills and vouchers were produced before A.O. regarding the sundry creditors - CIT-A deleted the addition - HELD THAT:- Assessee that the sundry creditors were authorized representative of the assessee and acting on behalf of the assessee for procuring paddy. Affidavit filed by the assessee in which they categorically undertakes that he is doing only custom-milling for M/s Orissa State Civil Supplies Corporation Ltd.(OSCSC Ltd.) besides working also as agent of MARKFED, NAFED, NCMSL, PACS and FCI. Assessee is not purchasing paddy directly. He is doing custom milling only. In these circumstances, there should be no creditors for purchase of paddy. Further on perusal of the paper book page No.57 & 58, which is a copy of letter of authorization in which the assessee has pointed out to offer persons for purchase of paddy as authorized representative Creditors are mentioned by the assessee in his reports, who have filed undertaking in which they have categorically stated that they are authorized representative but received paddy from the paddy purchase centre and for milling from joint custody and maintenance and to deliver the resultant CMR in the RRC/FCI on behalf of the assessee. On perusal of the ledger copy of the creditors shown by the assessee the narration is with regard to labour charges, loading, unloading, banking and netting expenses and freight inward and outward expenses. Assessee has provided details of the creditors, which should have been examined by both the authorities below but they did not do so for proving the genuineness of the creditors. As per our considered opinion, the assessee discharged his liability as cast upon him and now the duty shifted on the revenue authorities for the verification of the genuineness of the creditors, which are lack in this case. In the second round of proceedings before the Assessing Officer, he could have exercised his powers for presence of the creditors and verification of the genuineness of the transactions done with the creditors but did not do so. Decided in favour of the assessee. Addition regarding capital introduction from undisclosed sources - addition on account of income of the assessee form bus plying - HELD THAT:- CIT(A) which is remand report of the assessing officer in which he has categorically stated that the computation of income was produced before the Assessing Officer but the assessee has not shown any income from business of bus plying and trading and the source of capital introduced could not be explained whereas the assessee has stated that the books of accounts were produced before the Assessing Officer and the capital introduction has been shown properly - we send these issues to the file of AO for verification of copy of income tax return filed with the income tax department for the purpose of verification of the income shown from business of buses plying. Whether the income from bus plying has been shown in the return of income and has paid due taxes thereon? - The assessee is directed to produce the copy of income tax return for the verification of income offered under buses plying. Accordingly, we restore the grounds to the file of Assessing Officer for fresh adjudication. Sale suppression of rice bran - HELD THAT:- There are differences observed by the assessee in regard to the addition made by the Assessing Officer, therefore, it would be better to send this issue to the Assessing Officer for calculating the current year’s transactions. AO is directed to calculate the actual current year’s sale of bran in cash to the above two parties and which has not been recorded in the books of accounts of the assessee. The assessee is directed to cooperate with the department for early disposal of the appeal and avoid to take unnecessary adjournments. Accordingly, we restore these issues to the file of CIT(A) for fresh adjudication. Stock difference during the course of survey operation - inventory of stock was taken by the survey party in present of the Manager Sri Deepak Sharma with the help of the staff members of the assessee concern and no satisfactory and convincing reply was given by Shri Sharma - submitted by the ld. DR that the assessee was the owner of such bran/broken rice which was being sold to outside parties out of books of account - HELD THAT:- The revenue authorities have counted physically to bags as kept lying in the row. The assessee has also alleged that the stock/inventory has been counted by the search team only on the basis of eye estimation but not actual weighment of stock of paddy/rice/bran/husk etc. Therefore, considering the totality of facts and circumstances of the case, we allow 20%(twenty percent) relief to the assessee on the total addition made due to there may be difference between eye-estimation for stock taking and actual weighment of the stocks found and the rates applied by the revenue authorities and uphold 80%(eighty percent) of the addition made by the AO in this regard. Accordingly, we are not in agreement with the observations made by the CIT(A) deleting the additions made by the AO. Issues Involved:1. Deletion of addition of Rs. 7,72,400/- as bogus sundry creditors.2. Deletion of addition of Rs. 5,97,186/- as unexplained capital introduction from undisclosed sources.3. Deletion of addition of Rs. 83,62,872/- on account of sale suppression of rice bran.4. Deletion of addition of Rs. 1,28,72,786/- on account of shortage of stock of paddy and bran and Rs. 13,47,352/- on account of excess of rice and broken rice.5. Deletion of addition of Rs. 2,40,000/- on account of income from bus plying.Detailed Analysis:1. Deletion of Addition of Rs. 7,72,400/- as Bogus Sundry Creditors:The CIT(A) deleted the addition of Rs. 7,72,400/- made by the AO on account of sundry creditors. The CIT(A) observed that the creditors were regular suppliers of paddy and authorized representatives for paddy collection. The CIT(A) noted that no evidence of bogus purchases was found during the search. The AO had failed to call for further details during the remand proceedings. The CIT(A) held the creditors as genuine and ordered the deletion of the addition.2. Deletion of Addition of Rs. 5,97,186/- as Unexplained Capital Introduction from Undisclosed Sources:The CIT(A) deleted the addition of Rs. 5,97,186/- made by the AO on account of unexplained capital introduction. The CIT(A) found that the introduction of capital was from the appellant to the proprietary concern and it had been demonstrated by the appellant. The AO in the remand report had not considered the submissions of the appellant. The CIT(A) ordered the deletion of the addition.3. Deletion of Addition of Rs. 83,62,872/- on Account of Sale Suppression of Rice Bran:The CIT(A) deleted the addition of Rs. 83,62,872/- made by the AO on account of sale suppression of rice bran. The CIT(A) noted that the impounded document MFP-30, which was alleged to contain ledger accounts of Maharaja Food Products in the books of Shri Shyam Products, was neither reliable nor valid. The CIT(A) observed that the payment received by the appellant in cheque as appearing in the impounded material had come from BMRC and not from Shri Shyam Products. The CIT(A) held that the alleged ledger account in MFP-30 was not reliable and ordered the deletion of the addition.4. Deletion of Addition of Rs. 1,28,72,786/- on Account of Shortage of Stock of Paddy and Bran and Rs. 13,47,352/- on Account of Excess of Rice and Broken Rice:The CIT(A) deleted the addition of Rs. 1,28,72,786/- on account of shortage of stock of paddy and bran and Rs. 13,47,352/- on account of excess of rice and broken rice. The CIT(A) found that the appellant was only a custom milling agent of agencies of Government of Orissa and the stock was under the lock and key of the principals. The CIT(A) noted that the stock registers were inspected by government officials and no discrepancies were found. The CIT(A) ordered the deletion of the additions.5. Deletion of Addition of Rs. 2,40,000/- on Account of Income from Bus Plying:The CIT(A) deleted the addition of Rs. 2,40,000/- made by the AO on account of income from bus plying. The CIT(A) noted that no incriminating material regarding bus plying activities was found during the search. The appellant had given details of gross income, depreciation, and net income from bus plying activities. The CIT(A) held that the appellant had correctly offered income from bus plying activities and ordered the deletion of the addition.Conclusion:The ITAT partly allowed the appeal of the Revenue, setting aside certain issues to the AO for fresh adjudication, and dismissed the cross objection filed by the assessee supporting the order of CIT(A).