Marwar Hotels Ltd.,, Ahmedabad v. The ACIT.,(OSD)-I,Range-4,, Ahmedabad

CO 143/AHD/2010 | 1998-1999
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 14320523 RSA 2010
Assessee PAN AAACM8009N
Bench Ahmedabad
Appeal Number CO 143/AHD/2010
Duration Of Justice 1 month(s)
Appellant Marwar Hotels Ltd.,, Ahmedabad
Respondent The ACIT.,(OSD)-I,Range-4,, Ahmedabad
Appeal Type Cross Objection
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-07-2010
Assessment Year 1998-1999
Appeal Filed On 08-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.955/AHD/2010 A.Y.: 1998-99 THE A. C. I. T. (OSD)-1 RANGE- 4 AHMEDABAD NAVJIVAN TRUST BUILDING OFF ASHRAM ROAD AHMEDABAD VS MARWAR HOTELS LTD. AIRPORT CROSS ROAD HANSOL AHMEDABAD PA NO. AAACM 8009 N (APPELLANT) (RESPONDENT) C. O. NO. 143/AHD/2010 (IN ITA NO.955/AHD/2010 -A.Y.: 1998-99) MARWAR HOTELS LTD. AIRPORT CROSS ROAD HANSOL AHMEDABAD VS THE A. C. I. T. (OSD)-1 RANGE-4 AHMEDABAD NAVJIVAN TRUST BUILDING OFF ASHRAM ROAD AHMEDABAD PA NO. AADCS 0877 R (CROSS OBJECTOR ) (RESPONDENT) DEPARTMENT BY SHRI K. M. MAHESH DR ASSESSEE BY SHRI P. M. MEHTA AR O R D E R PER BHAVNESH SAINI: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VIII AHMEDABAD DATED 27-11-2009 FOR ASSESSM ENT YEAR 1998-99. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A LIMITED COMPANY ENGAGED IN RUNNING OF HOTELS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT PERIOD DECLARING TOTAL INCO ME AT RS.82 809/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT D ETERMINING TOTAL ITA NO.955/AHD/2010 AND CO NO.143/AHD/2010 ACIT (OSD)-1 R-4 AHMEDABAD VS MARWAR HOTELS LTD. AHMEDABAD 2 INCOME AT RS.1 08 16 564/-. THE ASSESSEE PREFERRED APPEAL AGAINST THE SAID ASSESSMENT BEFORE THE LEARNED CIT(A)-II AHMED ABAD WHO VIDE HIS ORDER DATED 21-03-2003 DELETED THE ADDITION OF RS.9 3 88 422/- MADE ON ACCOUNT OF NON GENUINE OR UNEXPLAINED LIABILITY. TH E DEPARTMENT FILED APPEAL AGAINST THE DECISION OF THE LEARNED CIT(A) B EFORE THE ITAT AHMEDABAD BENCH AND THE TRIBUNAL VIDE ITS ORDER DAT ED 21-09-2007 IN ITA NO.2517/AHD/2003 RESTORED THE MATTER TO THE FIL E OF THE AO TO BE DECIDED AFRESH. AS PER DIRECTION OF THE TRIBUNAL T HE AO INITIATED THE ASSESSMENT PROCEEDINGS AND TREATED THE LIABILITIES IN THE CASE OF M.A. PRESTRESSED JODHPUR AMOUNTING TO RS.2 31 940/- AND PIYUSH WIRE NETTING INDUSTRIES AMOUNTING TO RS.4 50 450/- AS UN EXPLAINED AND ADDED THE SAME IN THE INCOME OF THE ASSESSEE FOR THE RELE VANT PERIOD. IT IS SEEN THAT DURING THE ASSESSMENT PROCEEDINGS INITIATED BY THE AO AS PER DIRECTION OF THE TRIBUNAL CARRIED OUT VERIFICATION OF THE LIABILITIES PERTAINING TO M/S. M. A. PRESTRESSED WORKS AND M/S. PIYUSH WIR E NETTING INDUSTRIES. THE NOTICES ISSUED BY THE AO U/S 133(6) OF THE IT A CT WERE RETURNED BACK UN-SERVED. ACCORDINGLY THE AO ASKED THE ASSESSEE T O JUSTIFY ITS CLAIM WITH REGARD TO THESE PARTIES IN RESPONSE TO WHICH THE AS SESSEE EXPLAINED THAT IN RESPECT OF THESE TWO PARTIES TO WHOM NOTICES WERE ISSUED BY THE AO THE GOODS WERE RETURNED BACK AND DEBIT NOTES WERE ISSUE D. COPIES OF THE DEBIT NOTES WERE ATTACHED AT PAGE 66 TO 71 OF ITS REPLY D ATED 30-08-2008 AND THUS THESE ACCOUNTS WERE SQUARED UP IN FY 1998-99 I .E. AY 1999-2000 AND IF THE AO WAS NOT SATISFIED WITH THIS EXPLANATI ON OF THE ASSESSEE HE COULD HAVE SUMMONED THESE PARTIES AND ASSESSEE COUL D HAVE GIVEN OPPORTUNITY TO CROSS EXAMINE THEM. THE AO HOWEVER DID NOT FIND THE SUBMISSIONS OF THE ASSESSEE SATISFACTORY AND OBSERV ED THAT THE ASSESSEE HAD FAILED TO RECONCILE THE DIFFERENCE IN AMOUNTS O UTSTANDING AS PER ITS BOOKS OF ACCOUNT AND ACCORDINGLY TREATED BOTH THE L IABILITIES AMOUNTING TO RS.6 82 390/- AS NON-GENUINE. ITA NO.955/AHD/2010 AND CO NO.143/AHD/2010 ACIT (OSD)-1 R-4 AHMEDABAD VS MARWAR HOTELS LTD. AHMEDABAD 3 4. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A) AND THE SAME SUBMISSIONS WERE REITERATED AND IT WAS EXPLAIN ED THAT THE ASSESSEE HAD SHOWN CURRENT LIABILITY VIDE SCHEDULE 9 TO THE BALANCE SHEET AS ON 31-03-1998 IN A SUM OF RS.1 15 39 733/-. THE AO MAD E ADDITIONS IN RESPECT OF TWO PARTIES. IT WAS EXPLAINED THAT THE A SSESSEE COMPANY IS IN THE BUSINESS OF RUNNING HOTELS. DURING THE YEAR THE ASSESSEE HAS UNDERTAKEN THE PROJECT FOR HOTEL AT STATE HIGHWAY JODHPUR. THE CONSTRUCTION OF THE HOTEL WAS AWARDED THROUGH CONTR ACT TO M/S. NAGARJUN CONSTRUCTION CO. LTD. THE MATERIAL PURCHASED AND SU PERVISION ETC. WAS BORNE BY THE ASSESSEE. THE ASSESSEE HAD SHOWN DISPU TED LIABILITY IN RESPECT OF BOTH THE PARTIES IN A SUM OF RS.2 31 940 /- AND RS.4 31 940/- RESPECTIVELY. IT WAS EXPLAINED THAT WHEN WORK OF CO NSTRUCTION WAS IN PROGRESS AND MATERIAL WAS SUPPLIED BY THE AFORESAID PARTIES PROPER ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT BY DEBITING WORK IN PROGRESS OF CONSTRUCTION WORK. HOWEVER ON VERIFICATION OF THE MATERIAL BY THE ASSESSEES ENGINEER IT WAS FOUND THAT THE MATERIAL SUPPLIED BY THE PARTIES WAS OF INFERIOR QUALITY AND WAS NOT UP TO THE MARK AND OF REQUIRED STANDARD. THEREFORE THE SAME WERE RETURNED TO THE PARTIES AND DEBIT NOTE WAS ISSUED ON 31-03-1999 IN A SUM OF RS.2 31 940/- AND RS.4 50 450/- RESPECTIVELY. COPIES OF THE DEBIT NOTES WERE FILED BEFORE THE AO AS WELL AS ALL PROPER ENTRIES WERE MADE IN THE BOOKS OF ACCOUN T. IT WAS THEREFORE SUBMITTED THAT THERE WAS NO JUSTIFICATION TO DISALL OW THE ABOVE AMOUNTS. IT WAS FURTHER SUBMITTED THAT TOTAL PURCHASES WERE MAD E FROM THESE PARTIES WERE OF MORE AMOUNT THAN THE AMOUNT WHICH REMAINED OUTSTANDING AT THE CLOSE OF THE FINANCIAL YEAR. COPY OF THE ACCOUNTS O F BOTH THE PARTIES ARE INCORPORATED IN PARA 6.3 OF THE IMPUGNED ORDER TO S HOW THAT AFTER MAKING PAYMENT BY ACCOUNT PAYEE CHEQUES THE AMOUNTS IN QUE STION ARE THE CLOSING BALANCE OF THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT SINCE THE DEBIT NOTE WAS RAISED AT THE END OF THE A CCOUNTING YEAR THEREFORE ENTRIES WERE MADE IN THE NEXT FINANCIAL YEAR AGAINS T THE PARTIES. IT WAS ITA NO.955/AHD/2010 AND CO NO.143/AHD/2010 ACIT (OSD)-1 R-4 AHMEDABAD VS MARWAR HOTELS LTD. AHMEDABAD 4 THEREFORE SUBMITTED THAT THE AMOUNT WAS SQUARED UP IN THE SUBSEQUENT YEAR. THEREFORE ADDITION SHOULD BE DELETED. 5. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND MATERIAL ON RECORD DELETED THE ENTIRE ADDITION. HIS FINDINGS IN PARA 6.5 ARE REPRODUCED AS UNDER: 6.5 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION OF THE LD. A. R. CAREFULLY. IT IS SE EN THAT THE APPELLANT HAD DISCLOSED PURCHASES TO THE TUNE O F RS.4 12 505/- FROM M/S. M. A. PRESTRESSED WORKS AND RS.5 83 897 FROM M/S. PIYUSH WIRE NETTING INDUSTRIE S. IT IS FURTHER SEEN THAT PAYMENTS AMOUNTING TO RS.1 62 565/- AND RS.2 33 447/- WERE MADE TO M/S. M . A. PRESTRESSED WORKS AND M/S. PIYUSH WIRE NETTING RESPECTIVELY BY THE APPELLANT DURING THE RELEVANT P ERIOD THROUGH A/C PAYEE CHEQUES. THEREFORE UNDER THESE CIRCUMSTANCES I DONT FIND ANY VALID BASE FOR THE A .O. TO TREAT THESE PARTIES AS NON GENUINE. IT IS ALSO TO B E NOTED THAT THE IMPUGNED AMOUNT OF PURCHASES WERE MADE BY THE APPELLANT TOWARDS CAPITAL ASSETS OUT OF WHICH T HE GOODS PURCHASES DURING THE MONTH OF MARCH 1998 WERE RETURNED TO THESE PARTIES AND A DEBIT NOTE WAS SEN T BY THE APPELLANT TO THIS EFFECT. THE A. O. WITHOUT APPRECIATING THE FACTUAL POSITION IN THIS REGARD TR EATED THE CREDIT APPEARING IN THE NAMES OF THESE PARTIES AS NON GENUINE. IN THE GIVEN SET OF CIRCUMSTANCES AS DISCUSSED ABOVE THE A.OS ACTION CANNOT BE HELD JUSTIFIED. IN VIEW OF THIS THE ADDITION MADE BY TH E A. O. IS HEREBY DELETED. 6. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND REFERRED TO THE EARLIER ASSESSMENT ORDER DATED 27-03-2001 COPY OF W HICH IS FILED AT PB- 42 IN WHICH THE AO HAS SPECIFICALLY NOTED THAT ON M AKING ENQUIRIES FROM BOTH THE PARTIES THE PARTIES HAVE REPLIED THAT THE RE WAS NO BALANCE OUTSTANDING AGAINST THE PARTY IN CASE OF M. A. PRES TRESSED WORK AND THERE WAS NOMINAL BALANCE OF RS.2 615/- IN THE CASE OF PIYUSH WIRE NETTING INDUSTRIES. THE LEARNED DR SUBMITTED THAT T HE PARTIES WERE NOT CONSIDERED GENUINE BY THE AO AND THAT ALL THE COPIE S OF THE BILLS ETC. NOW ITA NO.955/AHD/2010 AND CO NO.143/AHD/2010 ACIT (OSD)-1 R-4 AHMEDABAD VS MARWAR HOTELS LTD. AHMEDABAD 5 FILED IN THE PAPER BOOK WERE NOT PRODUCED BEFORE TH E AO FOR VERIFICATION. HE HAS SUBMITTED THAT RETURN OF THE GOODS AND THEIR RESPECTIVE DEBIT NOTES WERE NOT PRODUCED BEFORE THE AO AND THAT COND UCT OF THE PARTIES IN NOT RESPONDING TO THE LETTER OF THE AO ALSO CREATED DOUBT THAT THE PARTIES WERE NOT GENUINE AND NO GENUINE PURCHASE WAS MADE. THEREFORE THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE AD DITION. 7. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS BEFORE THE AUTHORITIES BELOW AND RE FERRED TO THE COPIES OF ACCOUNT BILLS AND DEBIT NOTES WHICH WERE FILED BEF ORE THE AUTHORITIES BELOW COPIES OF THE SAME ARE FILED IN PAPER BOOK P AGES 18 TO 30. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T THE ASSESSEE SPECIFICALLY PLEADED BEFORE THE AO IN THE SET ASIDE PROCEEDINGS THAT IN CASE THE AO IS NOT SATISFIED WITH THE EXPLANATION O F THE ASSESSEE THEN BOTH THE ABOVE PARTIES MAY BE CALLED BY ISSUE OF SU MMONS OR COMMISSION AND THE ASSESSEE MAY BE GIVEN OPPORTUNIT Y TO CROSS EXAMINE BOTH THESE PARTIES. HOWEVER THE AO HAS NOT SUMMONE D THE PARTIES FOR EXAMINATION AND CROSS EXAMINATION HAS NOT BEEN ALLO WED TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE THE REFORE SUBMITTED THAT THE LEARNED CIT(A) CORRECTLY DELETED THE ADDITION. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTE RFERE WITH THE ORDER OF THE LEARNED CIT(A). THE LEARNED CIT(A) HAS NOTED DE TAILS OF THE TRANSACTIONS CONDUCTED BY THE ASSESSEE WITH BOTH TH E ABOVE PARTIES IN WHICH IT WAS CLEARLY NOTED THAT THE ASSESSEE HAS MA DE PURCHASES FROM BOTH THE PARTIES IN MORE THAN THE AMOUNTS WHICH WER E DUE UPON THEM. THUS THE PART OF THE TRANSACTION HAS BEEN ACCEPTED BY THE AO OF MAKING THE PAYMENT IN RESPECT OF BOTH THE PARTIES. THEREFO RE THERE WAS NO REASON TO TREAT THE ABOVE PARTIES AS NON GENUINE. F URTHER THE ASSESSEE HAS EXPLAINED THAT SINCE AT THE END OF THE FINANCIA L YEAR SOME OF THE ITA NO.955/AHD/2010 AND CO NO.143/AHD/2010 ACIT (OSD)-1 R-4 AHMEDABAD VS MARWAR HOTELS LTD. AHMEDABAD 6 GOODS SUPPLIED BY BOTH THE PARTIES WERE OF INFERIOR QUALITY AND NOT OF REQUIRED STANDARD THEREFORE PART OF THE GOODS WER E RETURNED TO THEM BY ISSUING DEBIT NOTES. THE DEBIT NOTES WERE ENTERED I N THE BOOKS OF ACCOUNT AND PROPER ENTRIES WERE MADE ON THE NEXT FINANCIAL YEAR. THE ENTRIES CONTAINED IN THE BOOKS OF ACCOUNT IN THE ASSESSMENT YEAR IN QUESTION AND SUBSEQUENT YEAR HAVE NOT BEEN DISPUTED. COPIES OF ALL THE DETAILS DEBIT NOTES ETC. ARE FILED IN THE PAPER BOOK IN SUP PORT OF THE CONTENTION. IT IS THEREFORE CLEAR THAT THE GOODS WERE RETURNE D TO THE AFORESAID PARTIES. THEREFORE THERE WAS SOME OUTSTANDING BALA NCE AGAINST THE PARTIES ON THE CLOSE OF THE FINANCIAL YEAR IN QUEST ION. ACCORDING TO THE AO THE PARTIES HAVE NOT RESPONDED TO THE NOTICE U/S 133(6) OF THE IT ACT. THE ASSESSEE ON THE OTHER HAND REQUESTED THE AO TO SUMMON BOTH THE PARTIES FOR EXAMINATION AND CROSS EXAMINATION IN CA SE THE AO IS NOT SATISFIED WITH THE DOCUMENTARY EVIDENCES FILED BEFO RE HIM BY THE ASSESSEE. THE AO HOWEVER CHOSE NOT TO ENFORCE ATTE NDANCE OF THE AFORESAID PARTIES BY ISSUING SUMMONS/COMMISSION. TH EREFORE THE AO SUBSEQUENTLY CANNOT TREAT THE OUTSTANDING AMOUNT AS NON GENUINE. THE AO SHOULD HAVE SUMMONED BOTH THE PARTIES AND SHOULD HAVE EXAMINED ON OATH TO VERIFY THE DIFFERENCE IN THE ACCOUNTS BY ISSUE OF THE DEBIT NOTES. THE AO HOWEVER DID NOT SUMMON THE PARTIES A ND DID NOT ALLOW THE ASSESSEE TO CROSS EXAMINE THESE PARTIES ABOUT T HE DIFFERENCE IN THE ACCOUNTS. HONBLE M. P. HIGH COURT IN THE CASE OF C IT VS RAMESH CHANDRA SUKLA 10 ITJ 286 (MAIT 71/2003) HELD AS UND ER: IT IS NOW WELL SETTLED THAT WHERE THE ASSESSEE REQ UESTS THE ASSESSING OFFICER TO ISSUE SUMMONS TO ENFORCE ATTENDANCE OF THE CREDITORS TO ESTABLISH THE GENUINENESS AND CAPACITY OF THE CREDITORS IT IS DU TY OF THE ASSESSING OFFICER TO ENFORCE ATTENDANCE OF THE CREDITORS BY ISSUING SUMMONS. IF THE ASSESSING OFFI CER DOES NOT CHOSE TO ISSUE SUMMONS AND EXAMINE THE CREDITORS HE CANNOT SUBSEQUENTLY TREAT THE LOANS STANDING IN THE NAME OF SUCH CREDITORS AS NON GENUI NE NOR ADD THE AMOUNT THEREOF TO THE ASSESSEES INCOME . ITA NO.955/AHD/2010 AND CO NO.143/AHD/2010 ACIT (OSD)-1 R-4 AHMEDABAD VS MARWAR HOTELS LTD. AHMEDABAD 7 9. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE MATERIAL ON RECORD AND IN VIEW OF THE FACT THAT THE AO DID NOT EXAMINE THE PARTIES ON OATH ON THE REQUEST OF THE A SSESSEE WOULD PROVE THAT THE LEARNED CIT(A) ON PROPER APPRECIATION OF T HE FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE ADDITION. AS A RESULT WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCOR DINGLY DISMISSED. 10. AS A RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. C. O. NO.143/AHD/2010 (BY ASSESSEE) 11. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PR ESS THE CROSS OBJECTION WHICH IS FILED ONLY IN SUPPORT OF THE ORD ER OF THE LEARNED CIT(A). THE SAME IS DISMISSED AS WITHDRAWN. 12. IN THE RESULT REVENUES APPEAL AS WELL AS ASSE SSEES CROSS OBJECTION BOTH IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9-07-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 9-07-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD