TaxTMI 
TaxTMI 
2012 (7) TMI 34
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce under rule 46A can be accepted. 2. Because, the learned Commissioner of Income-tax (Appeals) erred in law as well as on facts while confirming the additions of Rs.1,53,43,292/- made by the learned AO on the ground that since the notices sent to the 7 creditors either came back with a remark 'left' or where delivered no balance confirmation has been received from them. The learned CIT(A) has also erred in not accepting the confirmation filed before him from the parties which contain the same addresses as provided to the learned AO during the course of assessment. 3. Because, the learned CIT(A) has failed to appreciate the following fact mentioned by the learned AO in his order at para 2 at page 3: "We had sent request to these parties to provide us with their statement of account to reconcile the balances. We are providing herewith the copy of the invoices and bank statement in support of the transactions entered into with these parties during the year under consideration." 4. Because, the learned Commissioner of Income-tax (Appeals) erred in law as well as on facts while disallowing the expenditure amounting to Rs.4,72,452/-. 5. The app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowance of extra depreciation on computer peripherals/accessories ignoring that as per the IT Rules 60% depreciation is allowable only on computer and computer software and not on computer peripherals and accessories. 2. In the facts and circumstances of the case, The learned CIT(A) has erred in law and on facts in directing to allow depreciation of Rs.10,94,274/- on capital stores ignoring that once the individual asset is not put to use, which is pre-requisite for availing depreciation u/s 32 of the I.T. Act, the same becomes ineligible/disqualified for block of asses on which depreciation is allowed as per Rule 5 and Appendix IA of the I.T. Rules but shall continue to remain part of the block of assets for all other purposes except for the purpose of claiming depreciation unless put to use. Reliance is also placed on the decisions in Liquidators of Pursa Ltd. vs. CIT (1954) 25 ITR 265(SC); CIT vs. Suhrid Geigy Ltd. (1982) 133 ITR 884(Guj.)/CIT vs. Jiwaji Rao Sugar Co. Ltd. (1969) 71 ITR 319(MP)(App.) 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and therefore, made an addition of Rs.16,36,599/- in respect of unreconciled accoutns, by observing as under: "The assessee in this connection has furnished copy of bills reflecting transaction with the concerned parties. It is acceptable that there was some transaction with these parties. The issue is whether the credit balance shown by the assessee in respect of the above said parties are genuine or not. These bills, vouchers do not prove the genuineness of outstanding balances against these parties. Despite of repeated opportunity the assessee failed to provide necessary details in its support and even failed to reconcile the balances. It is well settled by the apex court in the case of Roshan Di Hatti v. CIT (1997) 107 ITR 938 (SC) that onus of proving the source of a sum or money found to have been credited by an assessee is on him. If the assessee fails to discharge its onus or explain unsatisfactorily the nature of the outstanding balance or the assessee fails to rebut the same, the same must be treated as income of the assessee of the previous year. After considering all the aforementioned facts Rs.16,36,599/- [Rs.95,119 + 174595 + + 479892 + 596993 bein....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he information was supplied vide the letter dated 25-01-2006 the response from Power Max (India) (P) Ltd. the response was received on 25- 01-2006. Similarly, Eastern Carriers had supplied the information on 28-02-2006 and M/s Rathi Filters and Industries Pvt. Ltd. had filed the letter vide dated 04-03-2006. In M/s PPL Fedback Packaging Ltd. and M/s Goel roadways who furnished information vide letter dated 25-02-2006 and 17-03- 2006 respectively. In response to the letter by ld. AO the assessee has responded on 10-08-2009, wherein they have filed a statement of reconciliation of difference viz. a viz. RK. Logistics (India) and Power Max (India) Pvt. Ltd. As far as M/s Eastern Carriers are concerned, it was submitted that the books of accounts were misplaced. However, they were enclosing the statements showing payment made to the party during the concerned period and the same mentioned by the party. Reconciliation statement was filed with regard to M/s Rathi Filters and M/s PPL Feedback Packaging Ltd. As far as M/s Goel roadways is concerned, a statement was filed filing a statement explaining a difference of 9,91,91,223/-. 7. On receipt of the reconciliation statement, an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... deserves to fail in ground of appeal no. 2." 3.5. The addition on account of non-reply of notices u/s 133(6), CIT(A) upheld the same by following observations: "18. Ground of appeal no. 4 pertains to disallowance of Rs.1,53,43,292/-. From the impugned order, it is observed that M/s Allied Steel Traders and M/s Chemi Tech India Ltd. were untraceable. The remarks of the postal departments on the undelivered envelope was 'left'. The assessee did not furnish any confirmation from the parties. They even failed to provide the new address of the parties. Similarly, in the case of Prakash Machinery Co., Disco Carbon and Ribbon Manufacturing Co., UP Bombay Road Service, Pace Carrier and Janta Roadlines no response has been received with regard to the queries raised by the ld. AO. As such, the ld. AO after relying on certain case laws has proceeded to make an addition of Rs.1,53,43,292/-. 19. The assessee has taken the stand that non-filing of the transaction confirmation by itself cannot be reason enough for disallowance. The onus was on the AO to prove that the transactions entered with the parties were not genuine. Reliance was placed on the decision of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tores Rs. 5,00,000/- iii. Leave encashment Rs. 4,34,150/- 4.1. Before CIT(A) assessee relied on following judgments: CIT v. HCL Comnet Systems and Services Ltd. (2007) 292 ITR 299 (Del.); CIT v. Eicher Ltd. (2006) 287 ITR 170 (Del.) CIT v. Echjay Forgings Pvt. Ltd. (2001) 251 ITR 15 (Mum.) JCIT v. Usha Martin Industries Ltd. 104 ITD 249 (Kol.) Bharat Earth Movers vs. CIT 245 ITR 428 4.2. As far as provision for obsolete/non moving stores, it was contended that the same cannot be considered as unascertained liability as they diminish the value of the asset. 4.3. CIT(A) after hearing the assessee, allowed the claim of the assessee in respect of doubtful debts, relying on Hon'ble Supreme Court judgment in the case of CIT vs. HCL Comnet Systems and Services Ltd. (2008) 13 DTR (SC) 105 . 4.4. In respect of obsolete/non-moving stores, it was held that they amount to diminution in the value of the asset which was mentioned in the audited balance-sheet and by placing reliance on Hon'ble Supreme Court judgment in the case of Bhart Earth Movers vs. CIT 245 ITR 428 and Metal Box Co. of India vs. Their Workman (1969) 73 ITR 53. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve at a specific figure just to mach the balances. In the absence of signature no cognizance is being taken of the photocopies filed by the AR. A photocopy of ledger account of Prime Wovens Limited has been furnished which is unsigned. A mere photocopy of a ledger account without bearing signature of the concerned person is no confirmation. Confirmation signed by Accounts Manager on behalf of Store Sacks India Private Limited confirming balance of Rs.5,41,662/- is accepted. There is email from chemitech to Debjeet Bhatacharya confirming balance of Rs.602275.71 as on 31.03.2005. However, there is no reference of the assessee company in the communication relied upon by the AR. No cognizance of such document can be taken. A joint reconciliation between assessee company and India Oil Corporation for the period 1.08.2006 to 31.03.2007 is irrelevant and has no bearing on the subject matter. To sum up it is evident that out of all the documents filed by the AR only one confirmation in respect of credit balance of Rs.5.41.662/- in respect of M/s Store Sacks India Private Limited is acceptable and no other credit balance has been confirmed. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these additions before CIT(A). In this year also additional evidence was filed by the assessee in respect of reconciliation of accounts and balance confirmation in respect of unreplied creditors. Additional evidence was duly forwarded for comments/remand report, which was submitted by the AO. In the remand report the AO objected to admission of additional evidence, besides submitted its comments on the nature of evidence. The copy of remand report was provided to assessee. In rejoinder assessee contended that the specific compliance in this behalf was asked by AO at the fag end of the assessment proceedings, which were to be obtained from third parties. Due to delayed response from the purchasers, assessee could not obtain it prior to the framing of the assessment and further contended as under: It was further added that bills and relevant records were produced before Assessing Officer for establishing genuineness of the transactions during the year. During assessment proceedings, the assessee had provided the Assessing Officer with the copies of letters to' all the creditors having outstanding balances of Rs.5,00,000/- or more at the year end i.e. 31.3.2005 for their bal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Officer is that confirmation letters filed by the assessee for some of the parties are unsigned and the assessee has just reconciled the copies of accounts without any supporting evidence. The appellant has not replied to this specific objection and has only given general arguments. From a perusal of the documentary evidences filed by the appellant, the following position emerges: i) For BVG India Ltd. the appellant has filed one copy of reconciliation statement along with the copy of balance confirmation. However, this in fact, is a letter sent by the appellant company to BVG India Ltd. and the reconciliation is signed by the authorized signatory of the assessee company. Hence, these documents are in no way the confirmation given by BVG India Ltd. ii) For Chemitech India, Allied Engineering Works, IMC Limited, Eastern Tar Pvt. Ltd., Reliance Industries Ltd. and Premier Steels, the printouts of 'e-maikls' are given which are unsigned and unauthenticated. Wherever reconciliations are filed they are not supported by evidence. Hence, this does not meet the specific query/requirement of the Assessing Officer. iii) For Kumar and Company, the appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is definitely required to prima facie prove the identity of the trade creditors as well as the genuineness of the transaction. In the present case, the Assessing Officer has raised specific queries with regard to the outstanding credit balances. Despite sufficient opportunity being provided, the appellant has failed to prove the genuineness of the outstanding balances. In view of the facts of the present appeal, I find that for the outstanding balances which remain unverified/unconfirmed, the Assessing Officer is justified in treating the amount of liability as income of the assessee and the same is, therefore, upheld." 5.3. Aggrieved on this ground, both the assessee as well as the revenue are in appeal before us. A.Y. 2007-08: 6. Brief facts relating to assessee's appeal for A.Y. 2007-08 are that in this year the assessment order was passed on 24-12-2009, vide order-sheet entry dated 24-11-2009 the AO asked the assessee to explain the difference and credit balances in respect of which it was claimed by the AO that notices had been returned unserved. It has been observed by AO that along with its reply dated 4-12-2009 the assessee enclose....
X X X X Extracts X X X X
X X X X Extracts X X X X
....confirmations being filed. The Assessing Officer had sent notices u/s 133(6) to 22 concerns out of which 16 concerns did not respond and hence, the Assessing Officer added the outstanding balances u/s 68 of the Act. However, the Assessing Officer has not pointed out any discrepancy in the confirmations filed by the appellant. In such circumstances, the disallowance of outstanding balances merely on the ground that the parties did not respond to notice u/s 133(6) is not justified. The Assessing Officer has not given the details with regard to confirmations filed by the appellant. As per the submissions of the appellant, confirmation of 10 parties were filed during the assessment proceedings. With regard to remaining parties, no further evidence is filed to substantiate the outstanding balances. Thus the appellant has not been able to discharge the onus of proving the outstanding credit balances in certain cases and addition to that extent is upheld. In the case of Uplaksh Metal Industries vs. CIT 177 Taxman 298, it has been held by Hon'ble Pubjab and Haryana High Court that in case assessee claims liability of payment to trade creditors shown in the balance sheet, it is de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e parties to provide us with their statement of accounts to reconcile the balances. We are hereby enclosing the copy of some of the invoices and payment advice in support of transactions entered into with these parties during the year under consideration." 7.1. The information in possession of the assessee was duly submitted before AO; further information for reconciliation of accounts was not available with the assessee as late as on 24-3-2006. It is pertinent to note that assessment order has been passed on 27-3-2006 as the same was time barring. The fact remains that the assessee was yet to receive the information from third parties and the assessment was framed to avoid time barring. In these circumstances, the additional evidence furnished by the assessee before CIT(A) ought to have been admitted as the assessee was prevented by sufficient cause which was duly communicated to AO on 24-3-2006 i.e. 3 days before framing the assessment. There is neither rejection nor mention of assessee's request about time by the AO. 7.2. Vide written submissions dated 10-9-2008, the assessee made an application for admission of additional evidence, pleading that sufficient o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e information required was to be obtained from third parties, spread all over India. The assessee could only utilize his good relations to send the information. It had no power to compel them or insist immediate compliance. The parties which could not submit the necessary details in short time were added in ad hoc manner by the AO on this basis only. The successor of the CIT(A) though mentioned in his order about the remand report furnished by AO and the rejoinder report of the assessee and recording that the time given to the assessee was short, still refused to admit the additional evidence. It is ironical that in the same circumstances for A.Y. 2005-06, the CIT(A) admitted similar type of additional evidence. It is pleaded that there was no justification on the part of CIT(A) to refuse the admission of additional evidence in A.Y. 2003-04. The same may be admitted and since all the creditors are by and large the same for A.Y. 2005- 06 and 2007-08, the matter may be decided on merits. A.Y. 2005-06: 7.6. It is contended that in A.Y. 2005-06 the AO adopted a peculiar feature by adding all the sundry creditors minus the creditors added in A.Y. 2003-04. This action....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... - 2,091,361 12. Janta Road Lines 2,868,105 - 2,868,105 13. Eastern Tar Pvt. Ltd. 3,491,102 - 3,491,102 14. Continental Carbon Co. 4,961,629 - 4,961,629 15. U.P. Bombay Road Services 4,703,918 4,703,918 - 16. Reliance Industries Ltd. 107,430,240 - 107,430,240 17. Premier Steels 569,275 - 569,275 18. Disco Carbon and Ribon Manufg. Co. 2,770,562 2,770,562 19. Ramson Associates Pvt. Ltd. 9,915,894 9,915,894 150,888,468 9,514,551 141,373,917 7.8. Coming to A.Y. 2007-08, learned counsel contends that in this year there is no issue of additional evidence as all the relevant material was before the AO. Assessee filed a proper paper book, containing all the information and requisite confirmations before CIT(A). In this case, though the entire material was on record, the CIT(A) could not find any factual discrepancy therein. However, following the order for A.Y. 2005-06, part of the additions have been confirmed. Learned CIT(A) has failed to take into consideration that the assessee has discharged its burden by filing nec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1,569,495 7.10. Ld. counsel in fine contends as under: (i) All these parties are the supplier of raw-material to assessee, the credit balances being on account of purchase of goods they cannot be added u/s 68. The CIT(A)'s reliance on Hon'ble Punjab and Haryana High Court judgment in the case of Uplaksh Metal Industries vs. CIT (2009) 177 Taxman 298 is not applicable to assessee's case. In that case, identity, genuineness of supplier was in doubt. In this case identity of the supplier and genuineness of purchasers is established and is accepted by the AO, by upholding the books of account and following record: (a) stock register; (b) consumption based on such purchases have been accepted; (c) utilization has not been disturbed; (d) sales have been accepted (e) The assessee's purchases with the suppliers have been accepted in one or other subsequent year. Consequently it cannot be held that assessee has failed to discharge prima facie onus for proving the purchases as genuine. AO unfortunately adopted contradictory standard on one hand, all the purchases are accepted and allowed as expenditure in P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance is placed on following case laws: (a) CIT vs. Pancham Dass Jain (2006) 205 CTR (All.) 444 (b) YFC Projects (P) Ltd. vs. DCIT (Del) 134 TTJ 167 (c) ACIT vs. Han Singar Gutkha (P) Ltd. (2008) 9 DTR 604(Trib.) (d) JCIT vs. Mathura Dass Ashok Kumar (2006) 101 TTJ (All) 810. (e) CIT vs. Smt. P.K. Noorjehan (1999) 237 ITR 570. 7.13. Apropos difference in balances of assessee and supplier, the same cannot be added u/s 68 as the existence of assessee, supplier and purchases are admitted. The difference in accounts may be due to various reasons including discount, goods returns; quality, differences, rebates and so many other business exigencies. Such differences cannot lead to addition u/s 68/69C. At the most, if the differences remain unresolved for number of years, the AO may proceed to 41(1), but not u/s 68 or 69C. Suppliers existence and transactions having been accepted, the difference thus cannot be added as income. The assessee furnished reconciliation, if the same were wrong, it was the burden of AO to demonstrate that it was not proper. If AO fails to discharge his onus, it will be inappropriate to punish assessee fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alf. We find merit in the argument of the learned counsel for the assessee that for 133(6) compliance it had no control over third parties. In our view, once the AO issued summons u/s 133(6), as held by Hon'ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (supra), it is his duty to ensure that the proess of issue of summons is brought to a logical conclusion by enforcing summons. The enforcement can be achieved in many ways including taking action on uncomplied summoned persons, by appointing commission on the income-tax authorities having jurisdiction over them and getting the verification from their returns or accounts. In these cases neither AO nor CIT(A) adopted this course as laid down by law. 10.1. Further, on same facts and circumstances, CIT(A) partly admitted the additional evidence in subsequent year i.e. A.Y. 2005-06. In our view if the specific queries are raised at the end of assessment proceedings and the summons are not served or replied, in that case assessee deserves an opportunity to be heard in appeal. If a proper application for admission of additional evidence is filed along with reasons, the same shall be admitted. In view thereof,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see. It means that the assessee failed in establishing the genuineness of the so called trade creditors appearing in its books of account . We are further of the opinion that since in the instant case of the assessee, the point under consideration before us is regarding the genuineness of the liability amounting to Rs.1,75,26,586/- shown by the assessee in its balance-sheet as trade creditors, so it wa not relevant for us to consider as to whether the purchases made by the assessee were genuine or not or to whether the assessee has inflated those purchases or not. It is also not material to consider whether the GRs from sales-tax department were verified or not, so, the CIT(A) on considering these points was not justified in deleting the impugned addition without discussing as to whether the liability of trade creditors shown by the assessee in the absence of furnishing complete addresses of trade creditors/consignors and the payment vouchers was genuine or not." 10.4. The case is not applicable to assessee's case inasmuch as the identity of the supplier and assessees trading results have been accepted by the department in one year or the other. In view thereof, we hold t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar. Assessee orally explained that it was the amount payable on account of consultancy services to Continental Carbon Co. USA. That being international company, they have a procedure for issuing the debit note. Assessee duly explained that when these bills were received by the assessee, the liability crystallized. It has not been disputed that the services were rendered and there is no adverse finding about the bills or the liability having been communicated to the assessee earlier. It is further evident from the record that part of the bill was April 2002 and the balance was in March 2003. The assessee received the bills in March 2003 and by general entry entered the liability. Since the consultancy report was completed in March 2003, therefore, it is properly recorded. It is evident that the consultancy bills were raised by way of two bills i.e. April 2002 and March 2003. There is no dispute about the rendering of service and the last bill drawn by Continental Carbon Co. USA being March 2003. The liability has crystallized in this year and cannot be called as relating to earlier year and is allowable expenditure. In view thereof, we delete the addition. 13. Only other g....