TaxTMI 
TaxTMI 
TaxTMI 
2012 (10) TMI 1254
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....made by certain parties which were neither traceable at the given addresses nor were having valid TAN numbers. It was also pleaded that the impugned order is against the ratio laid down by the Tribunal in the case of M/s Agrawal Coal Corporation Limited. A plea was also raised that all the ingredients of section 68 were not fulfilled by the assessee. It was emphatically contended that M/s A.K. Intex and other parties were not traceable at the given addresses in spite of detailed inquiries made by the Assessing Officer to whom substantial sales were claimed to be effected by the assessee. The genuineness of sales along with the identity of the buyers was argued to be in dispute. 2.1 On the other hand, the learned counsel for the assessee defended the impugned order by submitting that regular books of accounts are maintained by the assessee and the same were produced for verification. It was also claimed that such books are supported by purchase/sale invoices along with stock register of raw material, consumption, production of finished goods, audit report. It was submitted that the total turnover of refined oil was Rs. 67.63 crores on which VAT and Central Sales Tax was deposited. ....
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.... order the assessee has preferred this appeal. 3. During the course of appellate proceedings the appellant had filed its written submissions on 02/09/2011, which is reproduced as below: "01) 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. Regular books of accounts have been maintained which are quantitative and supported by purchase and sale invoices, vouchers, tax audit report U/S 44AB of Income tax Act and Annual report under Companies Act. 02) Sales of D-oiled cake is effected outside India whereas sales of refined oil is effected within MP as well as outside MP. Past history of the appellant proves beyond doubt that accounts of the company have been accepted by the Department all along. The owners of the company are known for their loyalty and honesty. During the year total turnover was Rs. 149.58 crores whreas sales of soya refined oil was Rs. 67. 63 crores liable to VAT and Central Sales tax. 03 Common practice prevailing in the State regarding sales of soya oil by Solvent Extraction Plants is as under :- a) Sale are being made through brokers and rarely as dire....
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....81,306/- + Rs. 24,93,601/-) = (-)Rs. 84,74,907/- d) Net sales after deducting above gross profit treated as cash credit U/S 68 of IT Act Rs. 6,47,03,548/-. Addition so made U/S 68 of the Act is challenged before your honour on merits as well as on legal grounds as under:- ON MERITS:- 01) Genuineness of Sale versus Identity of buver: 1.1 The Assessing Authority doubted upon the identity of the debtor viz. Mis. A.K. Impex, Delhi who had purchased the goods from the appellant due to following reasons :- a) Notice issued U/S 133(6) of the Act at the address of Mis. A.K. Impex, Delhi was returned un-served with the remarks uno such form at this address". The debtor Mis. A.K. Impex, was not available at the address given by appel/ant or the debtor himself or otherwise and the same was found incorrect as per departmental enquiry. b) PAN given by Mis. A.K Impex, belongs to Shri Ashok Kumar of Delhi who did not file the return of income. Summon U/S 131 could not be served upon Mr. Ashok Kumar because the address of Mr. Ashok Kumar as per PAN was not correct address. c) Commercial tax authority at New Delhi informed that though Mis. A.K. Impex was duly registered vide TIN....
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....e nature and source of any sum credited in the books of accounts, whether it is on account of sale consideration or otherwise, was not discharged. For this purpose he 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 Vs. Lovely Exports Pvt Ltd 216 CTR 195 and CIT Vs. Steller Investment Ltd 251 ITR 263 (SC). 1.2 Sales were also effected to three dealers of MP who were also found to be non-exist at the addresses given by them. The Commercial tax department, MP. reported that aforesaid parties are not registered under MP VAT Act. The broker, however, confirmed that commission was received from the appellant against sales to such parties but did not provide the address of the parties or their where-abouts. One DD & two pay orders of Rs. 80, 000/- each were credited in the account of M/s. Praveen Trading Company (one buyer) which were issued from UP. Rest of the payments from three parties were received by the appellant in cash. 1.3 According to A.D., the appellant did not establish the nexus between the credits appearing in the accounts of Mis. A.K. Impex against sale proceeds shown in ....
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....n presumed against the appellant Company so as to treat the sales as non-genuine. 2.2 It appears that the buyer Mis. A.K. Impex had melafide intention since beginning to avoid the payment of due taxes as evident from the enquiries made by the AD:- a) Wrong address was given by the buyer; b) 'C' form books obtained in an unauthorized manner; c) Address on the PAN was different than the business address; d) In bank account, address was the same and such bank account was operated also but probably not disclosed in the books; e) Remittances were made directly as well as through other parties who were also probably involved in such transactions and their address were also found to be incorrect. Normal trade practice adopted by such dealers such as incorrect address, cancellation of TIN and amount received from third parties on behalf of Mis. A.K. Impex was ignored by AD. The material fact regarding advance receipt of money immediately before sale proves the genuineness of sale beyond doubt. 2.3 Furnishing of False or fake 'c' form:- It is settled law that the selling dealer cannot be penalized even if it is proved that the 'C' forms issued by the ....
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....the Supreme Court (72 ITR 194) nor the Bombay High Court in 104 ITR 493 have held that in case the amounts are received as advance towards sale proceeds, the assessee has to prove the source of amount deposited by buyer. 2.5 Burden discharged bv appellant :_ On one hand, the A.O recognized the fact that bank account of M/s. A.K Impex, in Punjab National Bank was having same address as reported by the appellant. He also considered that such account was being operated by Mis. A.K. Impex as Hawala account yet the burden has been shifted on the appellant to prove the genuineness of sales. The fact that the amount was adjusted against sale invoice issued to the party immediately on dispatch of goods, the burden on the part of the appellant regarding credit entry in the books of accounts stands discharged. The nexus of such credit entry was nothing else than the sales effected to the party. It may not be in the shape of "counter sale" like sale effected by a jeweller in his shop, but the nexus of receipt was proved beyond doubt from the entries in the books of accounts. Such amounts were received in advance by Cheque/RTGS, credit entries were made in the account of Mis. A.K. Impex an....
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....depositing cash with the cashier after weighment of goods at factory premises of the appellant. " 03) Validity of Applicability of section 68 of the Act As submitted above, the nexus of sale proceeds and the amount received in advance from all the parties was proved beyond doubt as evident from the books of accounts. The Assessing Authority stated that the nexus was not proved without giving any justification I thereof In case, the amounts are remitted by the buy~r through any other parties, it cannot be denied by the seller because such amounts were credited directly in the bank account of the appellant. The parties who remitted the amount were unknown to the appellant but such amounts were remitted on behalf of M/s. A.K. Impex along with covering letters or even by informing through broker, hence credit was given to that account in the books and thereafter sale invoice was issued on dispatch of goods. How it can be concluded that there was no nexus of sale proceeds and the remittance received without proving the same otherwise ? If such sale proceeds are permitted to tax u/s 688 of the Act all transactions where advances are received against sale, will be taxed and will resul....
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..../S 68 of the Act considering the amount sale proceeds of refined oil to four parties as unexplained credits. As submitted earlier refined oil is being purchased by many dealers by obtaining its delivery at factory site and sale proceeds are being deposited in advance through RTGSIDDslPay orders. Some dealers are also depositing the amount in cash against which delivery was given on same day. In support of aforesaid normal practice adopted by the buyer and to substantiate the claim of the appellant regarding normal trade practice we request your honour to consider certain details and documentary evidences and in case they are considered as additional evidence, the same may please beforwarded to the Assessing Authority:- 1) The Company effected sales of oil in tankers to 79 dealers of MP and outside State. Total turnover to such dealers was Rs. 67. 63 crores as per statement annexed giving complete names, addresses, TIN, amount of sales effected and mode of realization. On perusal of the statement, it is evident that sales were effected to 73 dealers of MP and 6 dealers outside MP, who remitted the amount in cash as well by Pay orders, DD, RTGS and by cheques. Nature of sales trans....
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....inst sales U/S 68 of the Act is based on presumptions and surmises and the same deserves to be quashed. " 3.3 Remand report under rule 46A of the IT Rules was called from the AO on the basis of the written submissions and the evidences furnished by the appellant vide letter dated 24/01/2012. The AO submitted his report on 09/02/2012 requesting not to admit additional evidence and reiterated the same facts as were mentioned in the assessment order. The appellant in its rejoinder dated 16/02/2012 submitted as under : "Re : Additional evidence under Rule 46A of Income tax Rules and comments of AD Appeal pertaining to A. 1': 2008-09 ------------------------------------------------------------------------- With reference to comments made by the Asstt. Commissioner of Income tax - 1(1), Ujjain regarding admission of additional evidence besides comments on submissions made before your honour during appellate proceedings, we submit the following for kind consideration :- 1) Additional Evidence :- At the outset, we submit that all documents were furnished before AO during the course of assessment proceedings so as to prove that sales effected to Mis. A.K. Impex, Delhi and th....
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....me tax (A) so that the normal practice prevailing in oil trade can be viewed. Such details supports to the claim of the appellant that certain parties are carrying on the business outside the books (in cash) in contravention to the provisions of section 40A(3) of the Act with the ulterior motives for which the appellant (the seller) cannot be penalized. 3.4 As regards discharging of burden as to credits appearing against sale proceeds only, the appellant further submitted vide letter date 16/02/2012 as under:- 3) Onus upon the assessee U/S 68 of the Act Admittedly, section 68 of the Act the obligation is casted upon the assessee to explain the credits in the books. At the outset, Section 68 is not applicable to the appellant's case because no credits were appearing in the books of the assessee at any given point of time in the accounts of three buyers of MP which can be termed as cash credits. As evident from the books, amount was deposited by them on the same day on which sales were effected. Not a single day any credit was lying in the books of the assessee of such parties hence by any stretch of imagination payments received from three parties can not be covered within....
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....Rs. 0.46 Crores 3.04 crore Add : Sale proceeds treated as cash Credits Rs. 7.00 crore Total Rs. 10.04 crore Thus, on one hand cost of sales has been added and on the other hand sale proceeds have been taxed without allowing any deduction towards cost of goods which resulted into double taxation. Judgments cited in relation to double taxation on page 11 and 12 of the submissions made earlier are, therefore, relevant for kind consideration. We also submit that principal laid down in the judgment of Apex Court (291 ITR 278) squarely applies to the case of the assessee though it was decided against the assessee. It was held that the Assessing Officer should form the opinion objectively with reference to materials on record whereas in the instant case, the AO made the addition solely on the ground that the buyer could not be traced. Had it been a case of credits appearing at the close of the year in the account of the buyer by way of advance against sale and if the buyer who could not be traced, the addition would have been justified but there being no credits in the Balance sheet of the assessee and entire collection forms part of the sales appearing to the credit of profit an....
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....y that the department can not seek to maintain the assessment of the same income in both sets of years. Consequent on our decision that it was rightly includible in the assessment year 1961-62, it is necessary that the department should take immediate steps to exclude the income from purview of the assessment for 1957-58 to 1960-61. We are quite sure that the department will take necessary administrative action to see that the double taxation is not maintained by giving the assessee appropriate relief in regard to the earlier years." iii) Similarly double taxation on same amount has been dis-approved In following cases also :- a) Laxmipat Singhania vs. CIT (1969) 72 ITR 291 (SC) b) Jotiprasad Agrawal & Others vs. ITO (1959) 37ITR 107 (All) c) CIT MPvs. Mrs. BannoE. Cowasji (1984) 147ITR 744 (MP) The Apex Court in the case of CIT Vs. P. Mohankala (2007) 291 ITR 278 (SC) had laid down the principal regarding the expression appearing in section 68 of the Act i. e. "the assessee offers no explanation means where the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the As....
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....hicle was duly registered as pick-up van by which oil drums were transported by the buyer. b) In case of M/s. Maa Bhagwati Traders, registration certificates of all Trucks (Eleven) downloaded from the website of Transport Department of MP. by which goods were transported in oil drums by the buyer are enclosed along with complete details of sales effected to said party. c) In case of M/s Pravin Trading Company, registration certificates of all Trucks (Seventeen) downloaded from the website of Transport Department of MP. by which goods were transported by the buyers in oil drums are enclosed along with complete details of sales effected to said party. Such certificates of the vehicle registration support the fact that the Truck numbers stated on the sale invoices are genuine and goods sold to these parties against payment were in fact transported to them. " 5.1 The assessee had further relied on certain case laws in which the courts have held that the advances and receipts against sale of the goods, cannot be assessed to tax U/S 68 of the IT Act. The written submission of the appellant dated 20103/2012 is reproduced as under:- "In continuation to submissions made earlier re....
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....ore than a week's time in case of A.K Impex, Delhi. " 5.2 Further remand report was called for from the AO U/S 250(4) vide letter dated 15/03/2012 for making necessary enquiries and comments on the evidences submitted by the assessee in respect of the transportation of goods to these buyers and quantitative stock tally maintained by the assessee, as in the remand report submitted by the AO vide letter dated 09/02/2012 there were no comments on these facts and also on the additional evidence in the nature of certificate dated 23/08/2011 from the transporter M/s H.G. Oil Carrier, New Delhi confirming loading and delivery of the oil to M/s A.K. Impex. This was submitted by the appellant during the course of appellate proceedings. A.O. again in his remand report dated 26/03/2012 requested to confirm the additions made by the then assessing officer without admitting any additional evidence. The appellant in its rejoinder dated 27/03/2012 submitted as under: "This has a reference to the remand report submitted by the Asstt. Commissioner of Income Tax 1(1), Ujjain vide his letter dtd. 26.03.2012 copy of which was given to the appellant for its comment. In this connection we submit....
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....reight was paid by Mls.A.K. Impex only. In view of above facts the submitted the remand report submitted by the A. O. is contrary to the facts and evidence submitted in support of transportation of goods to MIs A.K. Impex, Delhi may kindly be admitted. " 6. After taking into consideration the AO's findings and the remand reports called during the course of appellate proceedings from the AO, appellant's oral and written submission made in the course of hearing as well as the facts of the case, decisions on various grounds are made here under :- 6.1 Ground no. I to Ground No. 10:- The appellant has challenged the additions made by the AO U/S 68 of the Act as unexplained cash credits at Rs. 6,47,03,548/- being sale proceeds realized by the appellant from four sale parties after deducting an amount equal to 11.59% towards gross profit on such sales. 6.2 The AO suspected :the amount received against sales effected to M/s. A.K. Impex, Delhi in the form of ChequelDD/RTGS and the amounts from three parties of Shajapur Distt. (MP) namely Mis Praveen Trading Co., Mis Mohan Traders and Mis Maa Bhagwati Traders in cash on same day when the sales were effected. The AO has made t....
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....address supplied by the appellant. 6.15 The amounts were received in cash! DDs from these three buyers of M.P. The appellant has made the delivery of the goods on the same day and sale invoice was issued. Cash receipts and sale invoices issued to such parties on the same day quoting cross numbers prove the fact that such receipts were nothing else than the sale proceeds credited to the profit & loss account of the appellant. None of the amounts from these three parties were received as advance for a single day. The AO over-looked these important factors and sales to such parties have been disbelieved. 6.16 As demonstrated by the appellant by filing copies of cash receipts, sale invoices as well proof of dispatch of goods on the same day and entries in the stock register regarding sale, such sales were in the nature of counter sales only to all the three parties. Claim of counter sales has been negatived by the AO only on the ground that "in case of counter sales the business man does not maintain ledger accounts of clients to whom the goods are sold. The sales are shown entirely in cash and in the books the individual ledger accounts of the clients are not maintained, while in ....
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....redited to profit & loss account) and on the other hand amounts received from above parties has also been added u/s. 68 of the Act. 6.21 This view has been held by the Hon 'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 72ITR194 (SC) that "It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed". The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of CIT vs Durga Prasad More (1969) 72ITR807 (SC) in which it was held "If the amount represented the income of the assessee of the previous year, it was liable to be included in the total income and an enquiry whether for the purpose of bringing the amount to tax it was from a business activity or from some other source was not relevant". 6.22 Reliance is further placed on the decision of Hon 'ble Rajasthan High Court in the case of Smt. Harshila Chordia vs ITO (2008) 298 ITR 349 in which it was held that "Addition u/s 68 could not be made in respect of....
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....resaid discussions, the additions made by the A.O. u/s. 68 of the Act at Rs, 6,47,03,548/- by considering the sale proceeds as cash credits, cannot be sustained and the same is deleted in full. 8. In the result the appeal is allowed." 4. If the observations made in the assessment order, conclusion drawn in the impugned order, assertion made by the learned respective counsel and also in the absence of any positive material brought on record by the Revenue in support of its claim are kept in juxtaposition, we find that the learned CIT(A) has exhaustively dealt with the issue by following various decisions from various judicial forums right from the Hon'ble Apex Court, Hon'ble High Courts and the Tribunal. The main ground for rejecting the claim of the assessee is with respect of M/s A.K. Impex, Delhi. There is a finding in the impugned order that necessary evidence with the help of various documents regarding existence of the buyers like copy of bank account of the buyer, TIN of sales tax department, confirmation of broker, correspondence regarding receipt/remittance of DD/RTGS, detailed copy of account appearing in its books, sale invoices and confirmation certificate of the tran....
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....the appellant, for such an act of the buyer, the appellant (selling dealer) cannot be penalized in any manner. 6.7 The assessee is maintaining the quantitative stock details. It has also furnished the details of DDs, R TGS, cheques etc. received from Mis A.K. Impex, Delhi, which were credited in the accounts of the assessee. It has filed the copy of the accounts of the broker M/s Rajendra Kumar Arun Kumar, Gwalior through whom it had affected the sales to Mis A.K. Impex, Delhi. The appellant also filed the certificate from the transporter M/s H.G. Oil Carriers, 79, Transport Centre, Rohtak Road, New Delhi. It was certified by the transporter that it had loaded the Soya Refined Oil from the works of Mis Dewas Soya Limited, 96-97, Industrial Area, 3 A.B. Road, Dewas during the year 2007-08. The details of tanker nos. weight-of the oil and dates of dispatch were also provided. Perusal of the sale invoices shows that the assessee has maintained complete details of tankers, brokers and also who arranged the tankers by clearly mentioning in the sale invoices. 6.8 A.O. in his order has mentioned that appellant has not furnished any proof of transportation as it is not having lorry re....
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....cording to the AO, 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 is incorrect. On perusal of day to day commodity wise quantitative records maintained by the appellant and its verification from sale invoices issued to above parties, it is evident that such receipts were against sale proceeds only. 6.12 The A.O has rejected the books of accounts uls 145 on account of non existence of the parties after 2 ½ years, who purchases from. the appellant and payments made by him has been treated as cash credit uls 68 of the IT Act'61. The appellant is maintaining the quantitative stock records and the records show that the sales were effected to the party and goods were actually loaded and delivered on the tankers arranged by the buyer party. This fact is evident from the sales bills on which details of tankers nos., broker name and the person who has arranged the transport have been mentioned. The A.O. has not made any enquiry from the transporter, who transported the goods for the buyer party. The A.O. has also....
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....e, we hold that the CIT(A) has rightly come to the conclusion that the addition made by the Assessing Officer u/s 68 of the Act by considering the sale proceeds as cash credits cannot be sustained. Likewise, the learned CIT(A) very elaborately dealt with the issue with regard to other parties like M/s Pravin Trading Co., M/s Mohan Traders and Maa Bhagwati Traders, etc. wherein the goods were delivered on the same day and sale invoices were issued quoting crossnumbers evidencing that such receipts were sale proceeds credited to the profit and loss account of the assessee. The entries were made in the stock register regarding sales which were in the nature of counter sales to these parties and such counter sales were doubted by the Assessing Officer without bringing any evidence on record. Uncontrovertibly, the brokers to whom brokerage was paid after deduction of TDS have also confirmed sale effected to these parties while recording their statement before the department. There is a further finding in the impugned order that the assessee effected sales of oil in tankers 279 dealers showing turnover to the tune of Rs. 67.63 crores out of which 6 dealers were out of the State of Madhya....