MCM Oil Pvt. Ltd, New Delhi v. ITO, New Delhi

ITA 4722/DEL/2009 | 2001-2002
Pronouncement Date: 14-05-2010 | Result: Allowed

Appeal Details

RSA Number 472220114 RSA 2009
Assessee PAN AADCM0875H
Bench Delhi
Appeal Number ITA 4722/DEL/2009
Duration Of Justice 5 month(s)
Appellant MCM Oil Pvt. Ltd, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 14-05-2010
Date Of Final Hearing 10-05-2010
Next Hearing Date 10-05-2010
Assessment Year 2001-2002
Appeal Filed On 14-12-2009
Judgment Text
ITA NO. 4722/DEL/2009 A.Y. 2001-02 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 4722/DEL/2009 A.Y. : 2001-02 M/S MCM OILS MILLS PVT. LTD. VS. ITO WARD 6 (1) 349 NAYA BANS NEW DELHI DELHI 110 006 (PAN: AADCM0875H) [APPELLANT] (RESPO NDENT) ASSESSEE BY : SH. V.K. TULSIYAN FCA DEPARTMENT BY : SHRI G.S. SAHOTA SR. D.R. PER SHAMIM YAHYA: AM THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.9.200 9 PERTAINING TO THE ASSESSMENT YEAR 2001-02. 2. THE FIRST ISSUE RAISED IS THAT LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ADDITION U/S 68 ON ACCOUNT OF UNSECURED LOANS. ITA NO. 4722/DEL/2009 A.Y. 2001-02 2 3. IN THIS CASE DURING THE COURSE OF ASSESSMENT ASS ESSING OFFICER OBSERVED THAT ASSESSEE HAS TAKEN THE FOLLOWING UNSECURED LOA NS DURING THE RELEVANT PREVIOUS YEAR. NAME BALANCE AS ON 31.3.2000 BALANCE AS ON 31.3.2001 FRESH LOAN ACCEPTED DURING THE YEAR SH. MUNNA LAL GOYAL RS. 237150/- RS. 314150/- RS. 77000/- SH. OM PRAKASH GARG RS. 19000/- RS. 34000/- RS. 15000/- SMT. SARIKA GUPTA RS. 18500/- RS. 95500/- RS. 7700 0/- SH. P.C. HOTA - RS. 150000/- RS. 150000/ - 3.1 ASSESSEE FILED COPY OF ACCOUNTS OF SHRI MUNNA LAL GOYAL SMT. SARIKA GUPTA AND SHRI PC HOTA DURING THE ASSESSMENT PROCEEDINGS. FROM THE PERUSAL OF THE INCOME RETURN OF SHRI MUNNA LAL GOYAL ASSESSING OF FICER OBSERVED THAT HE HAS NO INCOME OTHER THAN SALARY AS A DIRECTOR OF THE AS SESSEE COMPANY TOTALING TO RS. 48000/- FOR THE ASSESSMENT YEAR 2003-04 AND A SMALL INCOME FROM OTHER SOURCES. THE ASSESSEE WAS ALSO ASKED TO PRODUCE S HRI MUNNA LAL GOYAL ALONGWITH HIS PASS BOOK AND COPY OF INCOME TAX RETU RNS. . ASSESSING OFFICER PROCEEDED TO HOLD THAT SHRI MUNNA LAL GOYAL DID NOT HAVE MEANS TO LEND THIS MONEY AND HE ADDED THE SAME U/S 68 OF THE IT ACT. 3.2 AS REGARDS SMT. SARIKA GUPTA IN WHOSE NAME AMOU NT OF RS. 77 000/- HAVE BEEN SHOWN TO HAVE BEEN RECEIVED ASSESSING OFFICER REFERRED TO THE COPY OF ITA NO. 4722/DEL/2009 A.Y. 2001-02 3 ACKNOWLEDGEMENT OF THE INCOME TAX RETURNS FOR ASSES SMENT YEAR 2001-02 SUBMITTED BEFORE HIM WHICH SHOWED FOLLOWING PARTICU LARS:- INCOME FROM SALARY : RS. 47000/- BUSINESS PROFIT : RS. 22264/- INCOME FROM OTHER SOURCES : RS. 2473/- GROSS TOTAL INCOME : RS. 71737/- 3.3 ASSESSEE WAS ASKED TO PRODUCE THE SAID PERSON A LONGWITH THE PASS BOOKS BUT THE SAME WAS NOT DONE. ASSESSEE FILED THE BA LANCE SHEET AS ON 31.3.2001 WHICH SHOWED A LOAN OF RS. 95 500/- TO THE ASSES SEE COMPANY. BUT ASSESSING OFFICER OBSERVED THAT IT WAS NOT CLEAR IF THE BALA NCE SHEET WAS FILED WITH THE RETURN OF INCOME. EVEN OTHERWISE ASSESSING OFFICER HELD THAT THIS CANNOT BE CONCLUSIVE EVIDENCE OF THE CREDITWORTHINESS OF THE ASSESSEE. ASSESSING OFFICER PROCEEDED TO ADD THE SAME UNDER SECTION 68 OF THE I T ACT. ASSESSING OFFICER MADE FURTHER ADDITION OF RS. 1 50 000/- RECEIVED FR OM SHRI PC HOTA THE PROPRIETOR OF PC HOTA & COMPANY ROURKELA. ASSESSING OFFICER HAD ASKED THE ASSESSEE TO PRODUCE THE PERSON ALONGWITH COPY OF PASS BOOKS AN D INCOME TAX RETURNS. AS THE ASSESSEE DID NOT SUPPLY THIS ASSESSING OFFICER TH E IMPUGNED ADDITION. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) ASSESSEE SUBMITTED THAT THE IDENTITY OF THESE PERSONS HAVE NOT BEEN D OUBTED AS THEY ARE REGULAR INCOME TAX ASSESSEE FROM MORE THAN ONE DECADE. TH EY HAVE CONFIRMED THEIR AMOUNTS BY FILING THEIR CONFIRMATIONS ALONGWITH THE COPY OF BALANCE SHEET. ITA NO. 4722/DEL/2009 A.Y. 2001-02 4 HOWEVER LD. COMMISSIONER OF INCOME TAX (APPEALS) D ID NOT ACCEPT THIS. HE UPHOLD THE ASSESSING OFFICER S ACTION IN CONFIRMI NG THESE ADDITIONS. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIALS PRODUCED BEFORE US AND PRECEDENTS RELIED UPON. LD. COUNSE L OF THE ASSESSEE CONTENDED THAT IDENTITY OF THESE PERSONS IN PROVED. THEY H AVE CONFIRMED THE INVESTMENTS THEIR BALANCE-SHEET AND INCOME TAX RETURNS HAVE BE EN FILED. INABILITY OF THE ASSESSEE TO PRODUCE THESE PERSONS AND SUBMIT THEIR PASS BOOK CANNOT BE TREATED AS A GROUND FOR TREATING THEIR AMOUNT RECEIVED AS U NEXPLAINED CASH CREDIT U/S 68 OF THE IT ACT. LD. COUNSEL FURTHER PLEADED THAT IT IS ALSO NOT THE CASE THAT ASSESSING OFFICER HAS ISSUED ANY SUMMONS AND THESE PERSONS HAVE NOT COMPLIED WITH THE SUMMONS. 6.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND SUBMITTED THE CREDITWORTHINESS OF THESE PERSONS HAVE NOT AT ALL B EEN PROVED. THEY HAVE VERY MEAGER INCOME. HENCE HE PLEADED THAT THE ADDITIONS BE CONFIRMED. 6.2 WE HAVE CAREFULLY CONSIDERED THE ISSUE. WE HAV E HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. HERE WE CAN GAINFULLY REF ER TO THE LATEST APEX COURT EXPOSITION IN THE CASE OF C.I.T. VS. P. MOHANAKALA 291 ITR 278 (SC) ON THE SCOPE OF PROVISION OF SECTION 68 AS UNDER:- A BARE READING OF SECTION 68 OF THE INCOME TAX A CT 1961 SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOK S MAINTAINED BY THE ASSESSEE; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR; AND (III) EITHER (A) THE ASSESSEE OFFERS NO E XPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS FOUND IN THE BOO KS OR (B) THE ITA NO. 4722/DEL/2009 A.Y. 2001-02 5 EXPLANATION OFFERED BY THE ASSESSEE IN THE OPINIO N OF THE ASSESSING OFFICER IS NOT SATISFACTORY. IT IS ONLY THEN THAT THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION THE ASESSEE OFFERS NO EXPLANA TION MEANS THE ASSESSEE OFFERS NO PROPER REASONABLE AND ACCEPTAB LE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINT AINED BY THE ASSESSEE. THE OPINION OF THE ASSESSING OFFICER FO R NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFAC TORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON THE RECORD. THE OPINIO N OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH R EFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSES SEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDITED IN TH E BOOKS IS NOT SATISFACTORY THERE IS PRIMA FACIE EVIDENCE AGAINS T THE ASSESSEE VIZ. THE RECEIPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME AND IF HE FAILS TO REBUT IT IT CAN BE HELD AGAINST THE AS SESSEE THAT IT WAS A RECEIPT OF AN INCOME NATURE. THE BURDEN IS ON THE ASSESSEE TO TAKE THE PLEA THAT EVEN IF THE EXPLANATION IS NOT ACCEPTABLE THE MATERIAL AND ATT ENDING CIRCUMSTANCES AVAILABLE ON RECORD DO NOT JUSTIFY THE SUM FOUND CR EDITED IN THE BOOKS BEING TREATED AS A RECEIPT OF INCOME NATURE. 6.3 WE FIND THAT THE INCOME TAX RETURN FOR CONCERNE D ASSESSMENT YEAR IN THE CASE OF SHRI MUNNA LAL GOYAL WAS NOT PRODUCED. IN T HE INCOME TAX RETURN COPY OF A.Y. 2003-04 HE HAD ONLY RECEIVED DIRECTOR SALARY OF RS. 48000/-. SHRI GOYAL IS ALSO A DIRECTOR OF THE COMPANY. STILL THE COMPANY FAILED TO PRODUCE HIM. THE INCOME TAX RETURN OF SMT. SARITA GUPTA ALSO SHOWED INCOME LESSER THAN WHAT IS CLAIMED TO HAVE BEEN GIVEN A LOAN. NO INCOME DETA IL OF SHRI P.C. HOTA WAS ITA NO. 4722/DEL/2009 A.Y. 2001-02 6 PRODUCED. HENCE WE ARE OF THE OPINION THAT ASSESS EE HAS NOT FULLY DISCHARGED ITS ONUS OF PROVING THE CREDITWORTHINESS OF THE CREDITO RS. 6.4 THE ASSESSING OFFICER ON THE GROUND OF LACK OF CREDITWORTHY AND ON THE GROUND THAT ASSESSEE HAS FAILED TO PRODUCE THESE PE RSONS AND FILED THEIR PASS BOOKS HAS MADE THE ADDITIONS. THOUGH THE MATERI AL SUPPLIED BY THE ASSESSEE DO NOT FULLY ESTABLISH THE CREDITWORTHINESS OF THESE P ARTIES WE FIND THAT ON THE FACTS OF THE CASE IT WAS INCUMBENT UPON THE ASSESSING OF FICER TO ISSUE THE SUMMONS TO THESE PERSONS AND MAKE FURTHER ENQUIRY. AS IT ALSO CANNOT BE DEDUCED THAT THESE PERSONS ARE PERSONS OF NO MEANS AT ALL. 6.5 IN THIS REGARD WE DRAW SUPPORT FROM THE APEX COURT DECISION IN THE CASE OF KAPURCHAND SHRIMAL VS. CIT 131 ITR 451 WHEREIN IT WAS HELD THAT THE APPELLATE AUTHORITY HAS JURISDICTION AS WELL AS THE DUTY TO CO RRECT THE ERRORS IN THE PROCEEDINGS UNDER APPEAL. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT WE REMIT THIS ISSUE TO THE FILES OF THE ASSESSING OFFICER TO CONSIDER THE ISSUE AFRESH AND MAKE THE NECESSARY ENQUIRIES. 7. THE NEXT ISSUE RAISED READS AS UNDER:- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) WAS JUSTIFIED BY UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT MERELY ON ACCOUNT OF NON- MAINTENANCE OF STOCK REGISTER RESULTING IN UPHOLDIN G OF ADDITION OF RS. 4 16 736/- ON ACCOUNT OF LOW GP RATE WHILE IGNO RING THE MATERIAL ON RECORD LIKE AUDITED BALANCE SHEETS QUANTITATIVE D ETAILS BOOKS OF ACCOUNT ETC. ITA NO. 4722/DEL/2009 A.Y. 2001-02 7 8. ON THIS ISSUE THE ASSESSING OFFICER OBSERVED TH AT ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF EDIBLE OIL. ASSESSEE PRODUCED T HE BANK BOOK CASH BOOK LEDGER AND JOURNAL BUT THE STOCK REGISTER WAS NOT P RODUCED. ASSESSING OFFICER OBSERVED THAT IN THE ABSENCE OF THE STOCK REGISTER IT WAS NOT POSSIBLE TO VERIFY IF THE QUANTITY AND VALUE OF CONSUMPTION OF RAW MATER IAL AND THE SALE OF FINAL PRODUCT AS DECLARED IN ITS PROFIT AND LOSS ACCOUNT IS CORRECT. HE OBSERVED THAT IT WAS NOT POSSIBLE TO VERIFY IF THE TOTAL STOCK PRODU CE HAS BEEN DECLARED IN SALES AND CLOSING STOCK. HE HELD THAT ASSESSEE WAS MANUFA CTURING A LIMITED NUMBER OF ITEMS AND MAINTENANCE OF STOCK REGISTER IS PERFECTL Y POSSIBLE. ASSESSEE HAD NOT STATED ANY REASON FOR NOT MAINTAINING THE STOCK REG ISTER. THEREFORE ASSESSING OFFICER HELD THAT FOR THE PURPOSE OF VERIFICATION OF TRADING RESULTS HE WAS INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I NCOME TAX ACT 1961. THEREAFTER ASSESSING OFFICER REFERRED TO THE GP RATE AND HEL D AS UNDER:- ASSESSMENT YEAR GP RATE 2000-01 4.80% 1999-2000 2.89% 1998-99 4.16% THE AVERAGE G.P. RATE OF THE THREE PRECEDING YEARS THUS COMES TO 3.95%. AS AGAINST THIS THE ASSESSEE HAS DECLARED G.P. RATE OF 3.09%. TAKING INTO ACCOUNT THE INCREASE IN TURNOVER OF THE ASSES SEE FROM THE PRECEDING YEAR ITS G.P. RATE IS ESTIMATED AT 3.5%. THUS THE ASSESSEE HAS UNDER DECLARED ITS GROSS PROFIT BY 0.41% OF ITS SALES WHI CH COMES TO RS. 416736/-. ITA NO. 4722/DEL/2009 A.Y. 2001-02 8 THEREFORE ADDITION OF RS. 416736/- IS HEREBY MADE FOR UNDER DECLARATION OF GROSS PROFIT. 9. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOM E TAX (APPEALS) CONFIRMED THE ADDITION. 10. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 11. LD. COUNSEL OF THE ASSESSEE CONTENDED THAT ASSE SSING OFFICER HAS NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. MERELY BECAUSE STOCK BOOK WAS NOT MAINTAINED HE PROCEEDED TO REJEC T THE ACCOUNTS AND MAKE ESTIMATE OF THE INCOME. HE CLAIMED THAT THIS ACTION OF THE ASSESSING OFFICER WAS NOT JUSTIFIED. FOR THIS PURPOSE HE ALSO REFERRED T O THE DECISION OF THE ITAT JODHPUR BENCH IN THE CASE OF HARIDAS PARIKH VS. IN COME TAX OFFICER 29 SOT 13. 12. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 13 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSEE HAS SUBMITTED ALL THE NECESSARY BOOKS OF ACCOUNTS EXCEPT THE STOCK REGISTER. THIS IS ALSO AN ADMITTED FACT THAT IN T HE BOOKS OF ACCOUNTS PRODUCED ASSESSING OFFICER HAS NOT FOUND ANY DEFICIENCY. THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE FOR THE CURRENT ASSESSMENT YEAR IS 3.0 9% WHILE THE AVERAGE FOR THE PRECEDING THREE YEARS WAS 3.95% WHICH INCLUDED 2.89 % FOR THE ASSESSMENT YEAR ITA NO. 4722/DEL/2009 A.Y. 2001-02 9 1999-2000. HENCE IT CANNOT BE SAID THAT THERE WAS A BNORMAL VARIANCE IN THE GROSS PROFIT SHOWN FOR CURRENT YEAR. UNDER SUCH CIRCUMSTA NCES IN OUR CONSIDERED OPINION THE FACTS OF THE CASE DID NOT WARRANT REJECT ION OF BOOKS AND ADDITION ON ACCOUNT OF ESTIMATED GROSS PROFIT RATE. 13.1 IN THIS REGARD WE PLACE RELIANCE UPON THE HON BLE PUNJAB HIGH COURT IN THE CASE OF PANDIT BROS. VS. C.I.T. IN 26 ITR 159. I N THIS CASE IT WAS HELD THAT THERE WAS NO DEFINITE FINDING BY THE INCOME TAX OFFICER T HAT THE CASE FELL WITHIN THE PROVISO TO SECTION 13. EVEN IF SUCH FINDING WERE TO BE IMPLIED FROM HIS ORDER IT COULD NOT BE SAID THAT THERE WAS MATERIAL BEFORE HI M WHICH WOULD ENABLE HIM TO COME TO SUCH A FINDING. THE FACT THAT THE PROFITS APPEARED TO HIM TO BE INSUFFICIENT AND THE FACT THAT NO STOCK REGISTER WA S MAINTAINED BY THE ASSESSEE WERE NOT MATERIALS UPON WHICH SUCH A FINDING COULD BE GIVEN BUT THEY WERE CIRCUMSTANCES WHICH MIGHT PROVOKE AN ENQUIRY. THE I NCOME TAX OFFICER MUST DISCOVER EVIDENCE OR MATERIAL ALIUNDE BEFORE HE COU LD GIVE SUCH A FINDING. IN INCREASING THE TAXABLE INCOME THE INCOME TAX OFFIC ER DID NOT ADOPT ANY METHOD OR BASIS AND HE WAS NOT ACTING ACCORDING TO THE PRO VISIONS OF THE STATUTE. 13.2 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION ON THIS ACCOUNT. ITA NO. 4722/DEL/2009 A.Y. 2001-02 10 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14/5/2010. SD/- SD/- [R.P. TOLANI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 14/5/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES