ITO, Bulandshahr v. Sunil Kumar & Sons (HUF), Bulandshahr

ITA 3385/DEL/2010 | 2005-2006
Pronouncement Date: 23-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 338520114 RSA 2010
Assessee PAN AALHS3880H
Bench Delhi
Appeal Number ITA 3385/DEL/2010
Duration Of Justice 1 year(s) 5 month(s) 14 day(s)
Appellant ITO, Bulandshahr
Respondent Sunil Kumar & Sons (HUF), Bulandshahr
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 23-12-2011
Date Of Final Hearing 07-12-2011
Next Hearing Date 07-12-2011
Assessment Year 2005-2006
Appeal Filed On 09-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BEN CH BEFORE SHRI RAJPAL YADAV JM & SHRI A.N. PAHUJA A M ITA NO.3385/D/2010 ASSESSMENT YEAR:2005-06 INCOME TAX OFFICER WARD-4 BULANDSHAHR V/S SUNIL KUMAR & SONS (HUF) D.M. COLONY ROAD DISTRICT BULANDSHAHR [PAN:AALHS 3880 H] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI R.K. GUPTA AR REVENUE BY SMT.S. MOHANTY DR DATE OF HEARING 09-12-2011 DATE OF PRONOUNCEMENT 23-12-2011 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 09.07.2010 BY THE REVENUE AGA INST AN ORDER DATED 19.04.2010 OF THE LD. CIT(A) MEERUT RAISES THE FOLLOWING GROUNDS:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN NOT CONSIDERING THE MERITS OF T HE CASE AND IN DELETING THE ADDITION OF ` ` 10 00 000/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS WITHOUT APPRECIATING THAT THE ASSESSEE COULD NOT PRODUCE THE DEPOSITORS AND THE SUMMONS ISSUED BY THE ASSESSING OFFICER REMAINED UN - COMPLIED WITH RESULTING THE IDENTITY CREDITWORTHIN ESS AND GENUINENESS OF THE TRANSACTION OF THE CREDITORS REM AINED UNEXPLAINED. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN DELETING OF THE ` `6.50 LACS ADDED BY ASSESSING OFFICER UNDER SECTION 69 OF THE ACT AS UN PROVED CASH DEPOSITS IN THE BANK ACCOUNT OF THE KARTA OF H UF IN HIS INDIVIDUAL CAPACITY WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE COULD NOT ESTABLISH THE SOURCE OF DEPOSITS OF THESE CASH AMOUNTS. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN REDUCING THE GROSS PROFIT FROM ` `1 44 222/- TO ` `50 000/- WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE I.T.A. NO.3385/DEL./2010 2 ASSESSING OFFICER AND WITHOUT ASSIGNING REASONS FOR ALLOWING SUCH RELIEF. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. RESTOR ED. 2. ADVERTING FIRST TO GROUND NOS.1 & 2 IN THE APP EAL FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF ` 2 48 330/- FILED ON 31.10.2005 BY THE ASSESSEE AFTER BEING PROCESSED O N 21.03.2006 U/S 143(1) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO A S THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 10.10.2006. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT COMPLY WITH ANY OF THE NOTICE DATED 26 TH FEBRUARY 2007 9 TH JULY 2007 9 TH AUGUST 2007 05.11.2007 13.11.2007 AND 7 TH DECEMBER 2007 ISSUED U/S 142(1) OF THE ACT AND INSTEAD WENT ON SEEKING ADJOURNMENT ON ONE PRETEXT OR THE OTHER RIGHT SINCE 28.12.2006 AS DETAILED IN THE ASSESSMENT ORDER. SI NCE THE BALANCE SHEET OF THE ASSESSEE REVEALED INTRODUCTION OF CAPITAL OF ` `20 LACS BESIDES UNSECURED LOAN OF ` ` 10 LACS FROM 9 PERSONS THE ASSESSING OFFICER[AO I N SHORT] ASKED THE ASSESSEE TO FURNISH EVIDENCE OF CREDITWORTHINESS OF THE UNS ECURED CREDITORS IN RESPECT OF THE UNSECURED LOANS RECEIVED DURING THE YEAR BESIDE S EVIDENCE IN RESPECT OF SOURCE OF CAPITAL INTRODUCED DURING THE YEAR UNDER CONSIDERATION. THOUGH THE ASSESSEE FILED CONFIRMATIONS OF THE UNSECURED CREDI TORS THEIR CREDITWORTHINESS AND GENUINENESS WAS NOT ESTABLISHED DESPITE DIRECTI ONS VIDE ORDER SHEET ENTRY DATED 24 TH SEPTEMBER 2007 AND 15 TH OCTOBER 2007 AND SUBSEQUENT NOTICES U/S 142 (1) OF THE ACT ISSUED ON 5.11.2007 13.11.2007 AND 7.12.2007 FOR PRODUCTION OF ALL THE NINE PERSONS. EVEN SUMMONS ISSUED ON 26 TH FEBRUARY 2007 TO THE NEW UNSECURED CREDITORS WERE NOT COMPLIED WITH. IN THE SE CIRCUMSTANCES ESPECIALLY WHEN THE ASSESSEE FILED TO ESTABLISH CREDITWORTHINE SS OF ANY OF THE CREDITORS THE AO ADDED AN AMOUNT OF ` ` 10 LACS U/S 68 OF THE ACT. 2.1 AS REGARDS FRESH CAPITAL OF ` `20 LACS THE ASSESSEE EXPLAINED THAT THE AMOUNT WAS WITHDRAWN FROM HIS TWO BANK ACCOUNTS BY THE KARTA IN HIS I.T.A. NO.3385/DEL./2010 3 INDIVIDUAL CAPACITY. HOWEVER THE ASSESSEE DID NOT EXPLAIN THE SOURCE OF CASH DEPOSITED IN BANK ACCOUNT NO.41517 FOR AN AMOUNT OF ` `10 000/- ON 8.1.2005 ` ` 85 000/- ON 17.01.2005 ` 60 000/- ON 19.01.2007 ` `10 000 ON. 22.01.2005 ` `3 LACS ON 28.3.2005 AND ` `2 LACS ON. 29.3.2005 WHILE KARTA OF HUF DID NOT AP PEAR BEFORE THE AO DESPITE SPECIFIC DIRECTIONS ON 8 TH SEPTEMBER 2007 AND 24 TH SEPTEMBER 2007 NOR DID HE COMPLY WITH SUMMONS ISSU ED ON 13.11.2007.ACCORDINGLY THE AO ADDED AN AMOUNT OF ` ` 6 50 000/- IN TERMS OF PROVISIONS OF SEC. 69 OF THE ACT. 3. ON APPEAL THE LD. CIT(A) DELETED THE AFORESAID TWO ADDITIONS IN THE FOLLOWING TERMS:- 6 I HAVE CAREFULLY GONE THROUGH THE FINDINGS RECOR DED BY THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE AR. O N THE FACTS OF THE CASE THE ISSUES ARE DECIDED AS UNDER:- 6.1 GROUND NO.1-ADDITION OF RS.`10 LACS U/S 68 OF T HE INCOME-TAX ACT 1961 I) THE AO REQUIRED THE APPELLANT TO FURNISH DOCUMEN TARY EVIDENCES REGARDING SOURCE AND FRESH LOANS OF `RS.1 0 LACS RAISED DURING THE YEAR FROM 9 DIFFERENT PARTIE S. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EVIDEN CES FILED BY THE APPELLANT IN THE FORM OF CONFIRMATIONS COPIES OF RETURNS AND COMPUTATIONS OF INCOME OF THE DEPOSI TORS HOLDING THAT EVIDENCES REGARDING CREDITWORTHINESS O F THE PERSONS IN THE FORM OF THEIR BANK ACCOUNTS WERE NOT FURNISHED. THE APPELLANT WAS REQUIRED TO PRODUCE T HE PERSONS PERSONALLY BY THE ASSESSING OFFICER FOR THE IR EXAMINATION WHO WERE NOT PRODUCED BY THE APPELLANT . THE ASSESSING OFFICER ISSUED SUMMONS TO THE LOAN DEPOSITORS FOR THEIR PERSONAL ATTENDANCE BUT THE DEPOSITORS INSTEAD OF PERSONALLY ATTENDING FILED CONFIRMATIONS AND REPLIED IN DAK AS ALSO ACCEPTED B Y THE ASSESSING OFFICER IN THE ORDER UNDER APPEAL. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE EXPLANAT ION OFFERED FOR THE LOANS WERE NOT FOUND SATISFACTORY A ND THEREFORE HE ADDED THE AMOUNT U/S 68 OF THE INCOME -TAX ACT 1961 AS ACCORDING TO HIM CREDITWORTHINESS OF T HE LOAN DEPOSITORS WERE NOT PROVED. II) THE AR SUBMITTED THAT HAVING FILED CONFIRMATION INCOME TAX COMPUTATIONS ACKNOWLEDGEMENTS OF INCOME TAX RETURNS OF ALL THE 9 DEPOSITORS ALONG WITH THEIR CO MPLETE I.T.A. NO.3385/DEL./2010 4 ADDRESSES THE APPELLANT HAS DISCHARGED THE ONUS AS LAY UPON IT. IT IS FURTHER SUBMITTED THAT ALL THE TRAN SACTIONS WERE THROUGH BANKING CHANNEL AND ALL THE LOAN DEPOS ITORS HAVE RESPONDED TO THE SUMMONS ISSUED BY THE ASSESSING OFFICER AND THEREFORE THE ADDITION U/S 68 WAS TOTALLY UNLAWFUL. IT IS FURTHER CLAIMED THAT HAVIN G ISSUED SUMMONS WHICH WERE DULY SERVED THE ASSESSING OFFI CER WAS DUTY BOUND TO ENFORCE THE ATTENDANCE OF SUMMONE ES AND HAVING NOT DONE SO HIS ACTION TO MAKE ADDITION IN THE HANDS OF THE APPELLANT IS TOTALLY UNLAWFUL. RELIAN CE WAS PLACED ON THE JUDGMENT OF CIT VS. U.M. SHAH REPORTE D IN 90 ITR 396 MUMBAI. THE AR ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- A) CIT VS. ORISSA CORPORATION (P) LTD. 159 ITR 78 ( S.C.) B) DCIT VS. ROHINI BUILDERS 256 ITR 360 (GUJ.) C) NEMI CHAND KOTHARI VS. CIT 264 ITR 254 (OUA) III) HAVING GONE THROUGH THE ABOVE FINDINGS AND SUB MISSIONS OF THE AR I AM OF THE CONSIDERED VIEW THAT THE APP ELLANT HAS DISCHARGED THE ONUS WHICH LAY UPON IT TO PROVE THE UNSECURED LOANS TAKEN BY THE APPELLANT BY PRODUCING CONFIRMATIONS PAN NUMBERS RETURN FILING PROOFS AN D THE COMPLETE ADDRESSES. THE CORRECTNESS OF THE ADDRESS ES OF THE LOAN CREDITORS IS NOT CHALLENGED AND THEREF ORE THE IDENTITY GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE DEPOSITORS STOOD PROVED AND THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. 6.2 GROUND NO.3- REGARDING ADDITION OF `RS.6 50 000 : I) THE ASSESSING OFFICER HAS ADDED THE SUM OF `RS.6 50 000/- U/S 69 IN THE HANDS OF THE APPELLANT HOLDING THAT THE DEPOSIT OF THAT AMOUNT IN CASH IN THE BANK ACCOUNT OF SHRI SUNIL KUMAR THE KARTA OF THE APPELLANT HUF OPERATED BY HIM IN HIS INDIVIDUAL CA PACITY DURING THE YEAR WAS NOT EXPLAINED AND THEREFORE T HE SAID AMOUNT WAS ADDED IN THE HANDS OF THE ASSESSEE U/S 69 OF THE INCOME-TAX ACT 1961. HE HAS MADE A FURT HER FINDING THAT THE KARTA OF THE HUF HAS BEEN DIRECTED FOR HIS PERSONAL ATTENDANCE BUT HE HAS FAILED TO PRODUCE HI MSELF BEFORE THE ASSESSING OFFICER. II) THE AR SUBMITTED THAT THE KARTA OF THE APPELLAN T IS ASSESSED TO INCOME TAX IN HIS INDIVIDUAL CAPACITY FILING RETURNS OF INCOME DECLARING TOTAL INCOME INCLUDING AGRICULTURAL INCOME AT RS.`11 LACS OR SO AND THERE FORE HE I.T.A. NO.3385/DEL./2010 5 WAS A MAN OF MEANS. HE FURTHER SUBMITTED THAT THE CASH WAS DEPOSITED BY THE KARTA OUT OF HIS OWN RESOURCES IN HIS INDIVIDUAL BANK ACCOUNTS AND UNDER ANY CIRCUMSTANCES THE SAID CASH DEPOSITS IN THE BANK ACCOUNT OF THE KARTA IN HIS INDIVIDUAL CAPACITY CAN NOT BE ASSESSED AS UNDISCLOSED INVESTMENT OF THE APPELLANT HUF U/S 69. HE FURTHER SUBMITTED THAT IDENTITY CREDITWORTHINESS AND THE GENUINENESS OF LOAN WHICH HAS BEEN ACCEPTED THROUGH BANKING CHANNEL IS NOT AT ALL IN DOUBT AND THEREFORE THE AMOUNT OF LOAN TAKEN BY T HE APPELLANT FROM ITS KARTA CAN ALSO NOT TO BE ASSESSE D U/S 68 IN ITS HANDS. HE THEREFORE SUBMITTED THAT IN ANY CASE THE ADDITION OF RS. `6 50 000 DESERVES TO BE DELETE D. III) I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE AR AND I AM OF THE VIEW THAT NO ADDITION IN THE HANDS OF THE APPELLANT HUF IS LEGAL LY CALLED FOR U/S 69 AS THE CASH DEPOSIT IN INDIVIDUAL BANK ACCOUNT OF KARTA CANNOT BE TREATED AS UNEXPLAINED INVESTMENT OF THE APPELLANT UNLESS IT IS BROUGHT ON RECORD THAT THE CASH DEPOSITED IN THE SAID BANK ACCOUNT WE NT OUT OF THE CASH FLOW OF THE APPELLANT. THERE BEING NO SUCH FINDING ON RECORD ADDITION U/S 69 OF THE INCOME-TAX ACT 1961 CANNOT BE UPHELD. OTHERWISE ALSO HAVING PROVE D THE IDENTITY OF THE DEPOSITOR WHO IS THE KARTA OF THE APPELLANT HUF AND WHO IS ASSESSED TO TAX DECLARING HANDSOME AMOUNT OF TAXABLE INCOME IN HIS HANDS AND IN VIEW OF THE FACT THAT THE AMOUNT HAS BEEN RECEIVED THROUGH PROPER BANKING CHANNEL NO ADDITION CAN BE MADE AND UPHELD IN THE HANDS OF THE APPELLANT EVEN U/S 68. I THEREFORE DELETE THE ADDITION OF RS.`6 50 000/-. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE RELYI NG UPON THE DECISION IN CIT VS. KORLAY TRADING CO. LTD. 232 ITR 820 (CAL.)CONTENDE D THAT SINCE THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY AND CREDITWORTHINE SS OF THE CREDITORS NOR PRODUCED THESE CREDITORS FOR CROSS-EXAMINATION THE AO WAS J USTIFIED IN MAKING THE ADDITION. MOREOVER THE KARTA OF THE HUF DID NOT A PPEAR BEFORE THE AO DESPITE SUMMONS ISSUED BY THE AO. THEREFORE THE LEARNED CI T(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF ` `6.5 LACS THE LD. DR ARGUED..ON THE OTHER HAND L D. AR CONTENDED THAT CONFIRMATION OF THE 9 UNSECURED CRED ITORS WERE FILED BEFORE THE AO. EVEN IN RESPONSE TO SUMMONS ISSUED U/S 131 OF THE ACT THESE 9 PERSONS I.T.A. NO.3385/DEL./2010 6 CONFIRMED THE TRANSACTIONS THEREBY ESTABLISHING TH EIR IDENTITY AND CREDITWORTHINESS. WHILE RELYING UPON THE DECISION O F HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. PREM KUMAR 161 TAXMAN 150 (ALLD.) AND DECISION DATED 21.9.2011 OF THE HONBLE CALCUTTA HIGH COURT IN CI T VS. DATAWARE PRIVATE LTD. IN ITA NO.263 OF 2011 THE LD. AR ARGUED THAT THE AO OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR ESPECIALLY WHEN THE CREDITOR HIMSELF IS AN INCOME-TAX ASSESSEE . AS REGARDS ADDITION OF ` 6 50 000/- THE LD. AR SUBMITTED THAT KARTA OF HUF IS BEING SEPARATELY ASSESSED TO TAX AND NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED ENTRIES IN THE INDIVIDUAL BANK ACCOUNT OF THE KARTA OF THE HUF .TO A QUERY BY THE BENCH THE LD. AR DID NOT REPLY AS TO WHY THE AFORESAID CREDITORS AND KARTA OF THE HUF WERE NOT PRODUCED BEFORE THE AO D ESPITE REPEATED REQUESTS AND SUMMONS ISSUED BY THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS RELIED UPON BY BOTH THE PARTIES. INDISPUTABLY THE AMOUNT OF ` 10 LACS WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FROM THE 9 UNSECURED CREDI TORS WHILE AN AMOUNT OF ` `20 LACS WAS RECEIVED BY WAY OF LOAN FROM KARTA OF THE HUF IN HIS INDIVIDUAL CAPACITY. DESPITE ISSUING VARIOUS NOTICES ISSUED U/S 142(1) OF THE ACT ASKING THE ASSESSEE TO PRODUCE THE AFORESAID NINE CREDITOR S THE ASSESSEE MERELY FILED CONFIRMATION OF THESE PARTIES AND DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF CREDITWORTHINESS OF THE AFORESAID PERSONS. EVEN WHE N THE AO REPEATEDLY ASKED THE ASSESSEE TO PRODUCE THESE PERSONS THE ASSESSE E DID NOT COMPLY. SUMMONS ISSUED U/S 131 OF THE ACT ON 26.11.2007 ALSO WENT U NRESPONDED. AS A RESULT CREDITS OF ` 10 LACS WERE ADDED BY THE AO. ON APPEAL THE LD. C IT(A) DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE DISCHARGE D THE ONUS WHICH LAY UPON IT TO PROVE THE UNSECURED LOANS TAKEN BY THE ASSESSEE BY PRODUCING CONFIRMATIONS PAN NUMBERS RETURN FILING PROOFS AND THE COMPLETE ADDRESSES. ACCORDING TO THE LD. CIT(A) THIS ESTABLISHED THE IDENTITY GENUINE NESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE DEPOSITORS. THE LD. CIT(A) DID NOT ELABORATE BY ANALYZING I.T.A. NO.3385/DEL./2010 7 FACTS OF EACH OF THE CREDITOR NOR REFERRED TO ANY MATERIAL AS TO HOW CREDITWORTHINESS OF THESE CREDITORS AND GENUINENESS OF THE TRANSACTIONS IS ESTABLISHED WHEN NEITHER SOURCES OF THEIR INCOME OR COPIES OF THEIR BANK ACCOUNTS WERE SUBMITTED BEFORE THE AO AND NOR EVEN THESE CREDITORS WERE PRODUCED BEFORE THE AO DESPITE REPEATED REQUESTS AN D ISSUANCE OF SUMMONS. THIS APPROACH OF THE LD. CIT(A) IS NOT IN ACCORDANC E WITH LAW. IT IS WELL ESTABLISHED THAT ONUS IS ON THE ASSESSEE TO ESTAB LISH IDENTITY AND CREDITWORTHINESS OF THE CREDITORS APART FROM GENUIN ENESS OF THE TRANSACTIONS. MERELY ESTABLISHING THE IDENTITY OF THE CREDITOR IS NOT ENOUGH AS HELD IN SHANKAR INDUSTRIES VS. CIT (1978) 114 ITR 689 (CAL);C. KANT & CO. VS. CIT (1980) 126 ITR 63 (CAL);PRAKASH TEXTILE AGENCY VS. CIT (1980) 121 ITR 890 (CAL); ORIENTAL WIRE INDUSTRIES PVT. LTD. VS. CIT (1981) 131 ITR 68 5 (CAL);CIT VS UNITED COMMERCIAL & INDUSTRIAL CO. PVT. LTD. (1991) 187 IT R 596 599 (CAL.); AND CIT VS. KORLAY TRADING CO. LTD. (CAL.) 232 ITR 820.EVEN ME RE FILING OF CONFIRMATORY LETTERS DOES NOT DISCHARGE THE ONUS THAT LIES ON TH E ASSESSEE AS HELD IN BHARATI PVT. LTD. VS. CIT (1978 111 ITR 951 (CAL);CIT VS. W .J. WALKAR & CO. (1979) 117 ITR 690 694 (CAL)AND CIT VS. UNITED COMMERCIAL & I NDUSTRIAL CO. (P) LTD. (1991) 187 ITR 596 599 (CAL).MOREOVER MERE FURNISHING OF THE PARTICULARS OR PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN I T MAKE A NON-GENUINE TRANSACTION GENUINE AS CONCLUDED IN CIT VS. PRECISI ON FINANCE CO. PVT. LTD. (1994) 208 ITR 465 470 471 (CAL); NIZAM WOOL AGEN CY VS.CIT (1992) 193 ITR 318 320 (ALL)AND CIT VS. UNITED COMMERCIAL & INDUS TRIAL CO. (P) LTD. 187 ITR 596 (CAL.). IN THE LIGHT OF VIEW TAKEN IN THESE DEC ISIONS AND CONSIDERING THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE BEFORE US A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) WITHOUT EVEN ANALYZING AS TO HOW THE CREDITWORTHINESS OF EACH OF THE NINE CREDITOR OR GENUINENESS OF THE TRANSACTIONS WITH THEM IS ESTAB LISHED PARTICULARLY WHEN DESPITE SUFFICIENT OPPORTUNITY ALLOWED BY THE AO NONE OF THE CREDITOR WAS PRODUCED BEFORE THE AO. THE IMPUGNED ORDER ON THE I SSUE INVOLVED IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE NAMELY THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY M UST PASS REASONED ORDER WHICH I.T.A. NO.3385/DEL./2010 8 SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MA TERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. HONBLE DELHI HIGH COURT IN THEIR DECISION IN VODAFONE ESSAR LTD. VS. DRP 196 TAXMAN423(DELHI) HE LD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS IT IS OBLIGATORY ON IT S PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL O F THE MATTER AND FURTHER THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER I S CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. THE REQUIREMENT OF RECORDING OF REA SONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CO NCEPT OF FAIR PROCEDURE. THE REQUIREMENT OF RECORDING OF REASONS BY THE QUASI-JU DICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RUL E OF LAW. IT INTRODUCES CLARITY CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MA Y REITERATE THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS . STATE OF PUNJAB (1995)1SCC 760(SC)]. AS IS APPARENT THE IMPUGNED ORDER OF THE LD. CIT(A) SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKING ORDER. IN VIEW OF THE FOREGOING WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE LD. CIT(A) FOR DECIDING THE IS SUES RAISED IN THE GROUND NO. 1 AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR A FORESAID OBSERVATIONS AND VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THOSE RE FERRED TO ABOVE AND OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNITY TO B OTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL THE LEARNED CIT(A ) SHALL PASS A SPEAKING ORDER BRINGING OUT CLEARLY AS TO HOW CREDITWORTHINESS OF EACH OF THE NINE CREDITOR AND GENUINENESS OF THE TRANSACTIONS WITH THEM IS ESTAB LISHED. WITH THESE OBSERVATIONS GROUND NO. 1 IN THE APPEAL IS DISPO SED OF. 6. AS REGARDS ADDITION OF ` 6.50 LACS INDISPUTABLY THE ADDITION WAS MADE ON TH E BASIS OF ENTRIES IN THE INDIVIDUAL BANK ACCOUNT OF KARTA OF THE ASSESSEE HUF. THE LD. CIT(A) DELETED THE ADDITION ON THE GROUND THAT DEPOSIT IN INDIVIDUAL BANK ACCOUNT OF KARTA CANNOT BE TREATED AS UNEXPLAINED I NVESTMENT OF THE ASSESSEE I.T.A. NO.3385/DEL./2010 9 UNLESS IT WAS BROUGHT ON RECORD THAT THE CASH DEPOS ITED IN THE SAID BANK ACCOUNT WENT OUT OF THE CASH FLOW OF THE ASSESSEE AND IN TH IS CASE NO SUCH FINDING WAS RECORDED BY THE AO. IN THE LIGHT OF THESE UNDISPUTE D FINDINGS OF THE LD. CIT(A) ESPECIALLY WHEN THE THE LD. DR DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER AND KARTA IS STATED TO BE ASSESSED SEPARATELY IN HIS INDIVIDUAL CAPACITY WE ARE NOT INCLINED TO INTERFERE. THEREFORE GROUND NO.2 IN THE APPEAL IS DISMISSED. . 7.. AS REGARDS GROUND NO.3 IN THE APPEAL RELATING TO THE ADDITION OF ` 50 000/- WE FIND THAT THE ASSESSEE DID NOT PRODUCE RELEVANT BOOKS OF ACCOUNT BEFORE THE AO DESPITE QUESTIONNAIRE DATED 6 TH DECEMBER 2006 ORDER SHEET ENTRY 18.9.2007 AND NOTICE DATED 5 TH NOVEMBER 2007 & 13TH NOVEMBER 2007 ISSUED U/S 142 (1) OF THE ACT. EVEN IN RESPONSE TO A DETA ILED SHOWCAUSE NOTICE DATED 7 TH DECEMBER 2007 ALONG WITH NOTICE U/S 142(1) OF THE ACT THE ASSESSEE DID NOT REPLY . ACCORDINGLY THE AO REJECTED THE BOOK RESU LTS AND ADDED AN AMOUNT OF ` 1 42 222/- BY ESTIMATING THE GP @5% OF THE SALES RE FLECTED BY THE ASSESSEE AS AGAINST THE GP OF 4.3% SHOWN BY THE ASSESSEE IN TH E LIGHT OF TRADING RESULTS IN THE CASE OF M/S SIYANA DAIRY REFLECTING GP@5.21% 8. ON APPEAL THE ASSESSEE CONTENDED THAT IN THE IMMEDIATE PRECEDING YEAR THEY HAD REFLECTED GP @2.3% AS AGAI NST 4.3% IN THE YEAR UNDER CONSIDERATION. THE AO INSTEAD OF RELYING UPON THEI R BETTER TRADING RESULTS RELIED UPON THE RESULTS IN THE CASE OF M/S SIYANA DAIRY REFLECTING GP@5.21% AND ADDED THE AMOUNT WITHOUT EVEN CONFRONTING THE PRO FIT AND LOSS ACCOUNT OR OTHER DETAILS OF M/S SIYANA DAIRY. IN THE LIGHT OF THESE SUBMISSIONS THE LEARNED CIT(A) REDUCED ADDITION IN THE FOLLOWING TERMS:- I HAVE GONE THROUGH THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE AR AND AM OF THE VIEW THAT AS TH E BOOKS OF ACCOUNTS BILLS AND VOUCHERS FOR EXPENSES WERE NOT PRODUCED FOR SCRUTINY BY THE ASSESSING OFFICER THE ASSESSING OF FICER WAS RIGHT IN REJECTING THE GP RATE DECLARED BY THE APPELLANT. H OWEVER IN VIEW OF THE FACT THAT THE PROFIT & LOSS ACCOUNT AND THE OTHER RELEVANT FIGURES OF THE COMPARABLE CASE SELECTED BY THE ASSE SSING OFFICER I.T.A. NO.3385/DEL./2010 10 WERE NOT PROVIDED TO THE APPELLANT AND ALSO IN VIEW OF THE FACT THAT THE APPELLANT HAS DECLARED BETTER GP RATE THE SAME DECLARED IN THE IMMEDIATELY PRECEDING YEAR I HOLD THAT A LUMP SUM ADDITION OF RS.`50 000/- SHALL MEET THE ENDS OF JUSTICE. THE A SSESSEE SHALL GET A RELIEF OF `RS.92 222/- ON THIS ISSUE. 9. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE RELYIN G UPON THE FINDINGS IN THE ASSESSMENT ORDER CONTENDED THAT THE LD. CIT(A) EVEN THOUGH UPHELD THE REJECTION OF BOOK RESULTS WAS NOT JUSTIFIED IN REDUCING THE ADDITION MADE ON THE BASIS OF A COMPARABLE CASE. ON THE OTHER HAND THE LD. AR ON B EHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LEARNED CI T(A) WHILE POINTING OUT THAT THEIR TURNOVER WAS ` `1.46 CRORES AS AGAINST ` 76 LACS SHOWN BY SIYANA DAIRY. THUS THE SAID CASE WAS NOT COMPARABLE. TO A QUERY BY THE BENCH THE LD. AR ADMITTED THAT THEY HAVE NOT CHALLENGED THE FINDINGS OF THE LD. CIT(A) IN FURTHER APPEAL. 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY THE ASSESSEE ACCEPTED THE FIND INGS OF LEARNED CIT(A) UPHOLDING THE REJECTION OF BOOK RESULTS THE ASSESS EE HAVING FAILED TO PRODUCE RELEVANT BOOKS OF ACCOUNT AND OTHER VOUCHERS BEFORE THE AO. THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE PRODUCED BOOKS OF ACCOUNT BILLS AND VOUCHERS EVEN BEFORE THE LD. CIT(A). IN THESE CIRCUMSTANCES THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO REJECTING THE BOOK RESULTS HAVING RECO URSE TO PROVISIONS OF SECTION 145 OF THE ACT. ONCE THE ASSESSEE FAILED TO FURNISH THE RELEVANT DETAILS AND SUBSTANTIATE THE BOOK RESULTS FOR THE RELEVANT PER IOD UNDER CONSIDERATION IT WAS OPEN TO THE AO AND THE LD. CIT(A) TO REJECT THE BOO K RESULTS AND ESTIMATE THE PROFIT. IT IS NOT A CASE WHERE BOOKS OF ACCOUNT ARE SHOWN TO HAVE BEEN PROPERLY MAINTAINED AND THE AO SUBSTITUTED HIS OWN ESTIMATE IGNORING THE BOOKS OF ACCOUNT WITHOUT GIVING ANY REASONS. THE LD. CIT(A ) CONSIDERING THE FACT THAT TRADING RESULTS OF M/S SIYANA DAIRY WERE NOT CONFRO NTED TO THE ASSESSE REDUCED THE ESTIMATED ADDITION TO ` 50 000/-. NO DOUBT THE AO/CIT(A) SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT I.T.A. NO.3385/DEL./2010 11 AND SHOULD NOT ACT TOTALLY ARBITRARILY BUT THERE I S NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS AND DETAILS.[ KACHWALA GEMS VS JCIT 288 ITR 10 (2007)(SC) ].CONS IDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE ESPECIALLY WHE N THE ASSESSEE DID NOT SUBSTANTIATE THE BOOK RESULTS WITH COGENT EVIDENCE BEFORE THE AO OR THE LD. CIT(A) NOR EXPLAINED REASONS FOR DECLINE IN PROFI TS AND NO MATERIAL HAS BEEN PLACED BEFORE US BY THE LD. DR SO AS TO ENABLE US T O TAKE A DIFFERENT VIEW IN THE MATTER WE DO NOT FIND ANY INFIRMITY IN THE FINDING S OF THE LEARNED CIT(A) WHILE UPHOLDING REJECTION OF BOOK RESULTS AND SUSTAINING THE ADDITION TO THE EXTENT OF ` 50 000/- . THEREFORE GROUND NO 3 IN THE APPEAL IS ALSO DISMISSED. 11. GROUND NO. 4 IN THE APPEAL BEING GENERAL IN NATURE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROUND DOES NOT REQUIRE ANY SEPARATE ADJUDICATION AND IS THEREFORE DISMISSED. 12. IN THE RESULT APPEAL IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (RAJPAL YADAV) (A.N. PAHUJ A) JUDICIAL MEMBER ACCOUNTANT MEMBER NS COPY OF THE ORDER FORWARDED TO :- 1. M/S SUNIL KUMAR & SONS (HUF) D.M. COLONY ROAD DISTRICT BULANDSHAHR. 2. INCOME TAX OFFICER WARD-4 BULANDSHAHR. 3. CIT (APPEALS) MEERUT. 4. THE CIT CONCERNED. 5. THE DR ITAT G BENCH NEW DELHI 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI