TaxTMI 
TaxTMI 
2004 (9) TMI 309
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....tter dt. 25th March, 1994. (iii) The learned CIT(A) erred in confirming the addition of Rs. 51,13,835 as unexplained expenditure under s. 69C on account of payments of customs duty and clearing charges by the buyers of goods on high seas from the appellant. 2. Before we go to the facts and merits of the issues raised in this appeal, it may be mentioned that with regard to all the three issues reflected in the grounds of appeal, there has been a chequered history. The original assessment for the asst. yr. 1988-89 was made by the AO under s. 143(3) of the IT Act on 25th March, 1991. In this assessment, additions/disallowances agitated in the grounds of appeal were made by the AO. The assessee went in appeal and the CIT(A)-VII, Mumbai, vide his order dt. 26th Dec., 1991, set aside all the three issues and restored the same back to the AO for fresh consideration in the light of the directions given in the appellate order. Pursuant to the setting aside of the assessment order, fresh assessment order was passed by the AO on 30th March, 1994. In this assessment, the additions/disallowances were again repeated without any variation. Aggrieved, the assessee again filed an appeal and o....
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....und of appeal, this issue was restored back by the CIT(A) to the AO vide order dt. 26th Dec., 1991. This issue was restored back to the AO for fresh consideration on the ground that for the asst. yr. 1987-88 also, there was a cash credit of Rs. 7 lakhs in the name of the same party and for that year as well, the issue was restored back to the AO by the CIT(A) vide order dt. 15th March, 1991. Fresh assessment was made by the AO on 26th Dec., 1991. In this assessment, at p. 2, the AO has made general observation that the assessee filed letters dt. 7th Oct., 1993, and 10th March, 1994, and no new evidence was submitted to substantiate the claims. The AO, therefore, proceeded to complete the assessment on the basis of material already available on record. With regard to the impugned addition of Rs. 12.50 lakhs, the AO has mentioned that the assessee was not able to substantiate the creditworthiness of the lender and, therefore, he repeated the addition. The learned CIT(A), vide his order dt. 20th Nov., 1997 has considered together the total addition of Rs. 20.50 lakhs made under s. 68 in respect of the following creditors: (i) M/s FEL &nb....
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....s again added and the same has been confirmed by the CIT(A). 4. The learned counsel appearing for the assessee submitted before us that the assessee has completely discharged its onus by establishing the identity of the cash creditor and also by providing income-tax GIR number and by filing confirmation from the cash creditor. The learned counsel invited our attention to pp. 22 to 24 of paper book-I, which contain the confirmation from the cash creditor, letter dt. 17th Sept., 1991, addressed by the assessee-company to the Branch Manager, Central Bank of India, requesting him to obtain a certificate from the Punjab National Bank confirming clearance of cheques issued by the cash creditor to the assessee and letter dt. 10th Sept., 1991, addressed by the Central Bank of India to the Manager, Punjab National Bank, Fort, Mumbai, requesting him to certify the transactions. However, no reply from the Punjab National Bank is available on record. In any case, the learned counsel argued that the assessee completely discharged its onus and the addition is not justified. It is also submitted that in the subsequent asst. yr. 1989-90, the assessee had transactions of 'high seas' sales with M....
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.... CR ------------------------------------------------ 27-4-1987 -- 50,000 2,50,000 CR ------------------------------------------------ 15-6-1987 1,50,000 -- 1,00,000 CR ------------------------------------------------ 17-6-1987 1,00,000 -- 0 -- ------------------------------------------------ It is pointed out that credit balance of Rs. 7 lakhs is brought forward on 1st Aug., 1986, and this amount is squared up on 10th Feb., 1987. Thereafter, there are payments by the assessee amounting to Rs. 10 lakhs with the result that as on 2nd March, 1987, there is a debit balance of Rs. 10 lakhs. From 1st April, 1987 to 27th April, 1987, on different dates, the assessee received total sum of Rs. 12.50 lakhs and, therefore, as on 27th April, 1987, there is a credit balance of Rs. 2.50 lakhs. The assessee made payment of Rs. 2.50 lakhs and the account is squared up at the end of the year. I....
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....thiness of the said party. In this connection, it may not be out of place to mention here that after lapse of more than 10 years since the first assessment was completed, it has become more difficult now to file any further evidence. In our opinion, whatever best the assessee could have gathered in its favour have been produced which were not found satisfactory by the Revenue authorities. The case law cited by the assessee in its favour are not identical with this case, therefore, the same cannot be relied upon. On the other hand, in number of decisions it was specifically decided that the assessee should be in possession of sufficient and adequate material to prove the genuineness of loan taken. In case of any doubt or suspicion, the AO has absolute right to make the addition. In the latest decision in the case of R.E. Mittal vs. CIT (2001) 165 CTR (AP) 366 : (2000) 246 ITR 283 (AP), it was specifically observed that since the assessee has failed to discharge its onus to prove the identity and genuineness of the transactions, in the absence of relevant material on record, only adverse inference can be drawn. Under the totality of circumstances, we are of the opinion that the asses....
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....e assessment order: "In this regard assessee has submitted confirmation signed by Shri Niranjan Gandhi, partner. Apart from that assessee could not produce any other documentary evidence like bank statement, books of account, etc. to substantiate the genuineness of transactions and creditworthiness of the loan creditors. In the event, loan from Polyweave amounting to Rs. 7.5 lakhs is added to cash credits in the hands of the assessee-company under s. 68 of the IT Act." This addition has been confirmed by the CIT(A). 7. The learned counsel for the assessee contended that the AO failed to carry out the mandatory directions of the learned CIT(A) and he made no enquiries from the income-tax assessment record of the cash creditor and also from the banks. It is contended that the assessee has completely discharged his onus by filing confirmation from the cash creditor. All the transactions are through account payee cheques and the assessee made available the income-tax GIR number to the AO. It is submitted that in these circumstances, no addition can be made under s. 68. Reliance is placed by the learned counsel on the following cases: (i) CIT vs. Orissa Credit Corporation (P....
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....harged hundis and gave particulars of those creditors who were assessee's and whose general index numbers were with the Department. Since the respondent, after making attempts, could not produce the parties, the ITO, on its request, issued summons under s. 131 of the IT Act to the creditors, which however were returned unserved with the remark 'left'. The Tribunal further found that the creditors, while being assessed, had admitted that they had allowed their names to be lent without giving loans and also gave a list of assessees, but the respondent's name did not figure in it. The ITO treated the sum of Rs. 1.50,000 as unexplained income and added it to the respondent's income and the IAC also imposed a penalty of Rs. 50,000 under s. 271(1)(c). But, the Tribunal held that because the respondent could not produce the parties, it did not follow automatically that an adverse inference should be drawn that the amount represented undisclosed income of the respondent and that the Revenue was not justified in drawing the adverse inference and adding the amounts of the cash credits to the income of the respondent and also deleted the imposition of penalty. Both the Tribunal and the High C....
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....he addition is not justified. Accordingly, the addition of Rs. 7.5 lakhs is deleted. 9. The last issue pertains to addition of Rs. 51,13,835 under s. 69C of the IT Act. The relevant facts are that during the previous year, the assessee made high seas sales to 56 parties. The AO made enquiries as a result of which confirmations were received from 39 parties, but no confirmations were filed by 17 parties. The total sales to these 17 parties amounted to Rs. 32,88,125. In the original assessment, the AO treated that these sales were not genuine. However, he further assumed that the assessee paid customs duty on the import of goods, claimed to have been sold. He estimated such customs duty at Rs. 48,66,425. Since this assumed expenditure was not debited in the books of account, the AO added the same amount under s. 69C. It may be fruitful to reproduce below the relevant discussion given in the original assessment order from paras 5.2 and 5.3 as under: "From the facts as stated above, it is clear that in respect of the abovementioned nine parties, even the clearing agent's bill and the transporter's bill do not tally with regard to the name of the vessel through which the goods wer....
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.... powder @ 148 per cent. The assessee's unaccounted sales to the abovementioned bogus parties comes to Rs. 32,88,125. Therefore, customs duty is worked out on this sum @ 148 per cent, which comes to Rs. 48,66.425. Therefore, I hold that the amount of customs duty paid of Rs. 48,66.425 represents unaccounted expenditure of the assessee and accordingly, it is taxed under s. 69C of the IT Act, 1961." The AO further estimated transportation charges at Rs. 1,66,700 and clearing charges at Rs. 80,715 which were also added under s. 69C. Thus, the total addition under s. 69C amounted to Rs. 51,13,835. Vide appellate order dt. 20th Nov., 1997, this issue was restored back to the AO with the following directions contained at p. 4.1 of the appellate order: "Besides above, the Authorised Representative has also drawn my attention to pp. 40 to 42 of the paper book. It has been vehemently contended by the Authorised Representative that the customs duty, etc" were paid by the purchaser but are identified by the appellant. In this regard, confirmations of the payments have been also available from the clearing agents. This aspect of the issue has not been examined by the AO at all and, theref....
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...... 30th March, 2000, from the clearing agent, M/s Express Cargo Movers. In all these documents, it is confirmed that customs duty and all other expenditures were directly paid by the parties to whom high seas sales were made by the assessee. 11. The learned counsel submitted that in the light of the overwhelming evidence filed by the assessee, the deeming provisions of s. 69C cannot be invoked. In the alternative, it is contended that if the addition is made under s. 69C in respect of business expenditure, matching deduction has to be allowed under s. 37(1) of the IT Act. It is also submitted that the proviso to s. 69C is applicable w.e.f. asst. yr. 1999-2000 and subsequent assessment years and the proviso is not retrospective as held by the Tribunal, Mumbai Bench, in the case of D.G.P. Windsor (I) Ltd. vs. Dy. CIT (2002) 74 TTJ (Mumbai) 291 : (2003) 84 ITD 641 (Mumbai). 12. The learned Departmental Representative supported the orders of the Revenue authorities and he has also submitted that s. 69C has been wrongly invoked by the AO and the addition should actually be sustained under s. 69 of the IT Act. 13. We have given a careful consideration to the rival submissions vi....