M/S. SWAROOP GROUP OF INDUSTRIAES P. LTD, MUMBAI v. ACIT CEN CIR. 41, MUMBAI

ITA 7063/MUM/2008 | 2005-2006
Pronouncement Date: 15-12-2010 | Result: Allowed

Appeal Details

RSA Number 706319914 RSA 2008
Assessee PAN AAJCS2778K
Bench Mumbai
Appeal Number ITA 7063/MUM/2008
Duration Of Justice 2 year(s) 3 day(s)
Appellant M/S. SWAROOP GROUP OF INDUSTRIAES P. LTD, MUMBAI
Respondent ACIT CEN CIR. 41, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 15-12-2010
Date Of Final Hearing 11-08-2010
Next Hearing Date 11-08-2010
Assessment Year 2005-2006
Appeal Filed On 12-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI P. M. JAGTAP A.M I.T.A. NO.7063/MUMBAI/2008 ASSESSMENT YEAR: 2005-06 M/S. SWAROOP GROUP OF INDUSTRIES PVT. LTD. C -153 CITY MALL ANDHERI LINK ROAD ANDHERI (W) MUMBAI-400 053 PAN NO: AAJCS2778K ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-41 MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI SHARAD PATEL RESPONDENT BY : SHRI SANJEEV DUTT ORDER PER P.M. JAGTAP (AM) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF LEARNED CIT(APPEALS)-III MUMBAI DATED 27.10.2008 A ND IN THE SOLITARY GROUND RAISED THEREIN THE ASSESSEE HAS CHALLENGED THE ADD ITIONS OF RS.15 83 00 000/- AND RS.2 47 25 000/- MADE BY THE AO AND CONFIRMED B Y THE LEARNED CIT (APPEALS) ON THE BASIS OF PROVISIONAL BALANCE SHEET SUBMITTED TO THE BANK. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY W HICH IS INCORPORATED FOR CARRYING ON THE MAIN BUSINESS OF M ANUFACTURING ELECTRO FORGED GRATINGS. THE RETURN OF INCOME FOR THE YEAR UNDER C ONSIDERATION WAS FILED BY IT ON 31.03.2006 DECLARING TOTAL INCOME AT NIL. THE AS SESSEE HAD SUBMITTED A PROPOSAL FOR AVAILING EXPORT CREDIT OF RS.25 CRORES FROM M/S. LORD KRISHRA BANK 2 LTD. ALONG WITH THE SAID PROPOSAL STATEMENT OF ACC OUNTS AND DOCUMENTS WERE FILED BY THE ASSESSEE INCLUDING A PROVISIONAL BALAN CE SHEET AND PROFIT AND LOSS ACCOUNT. FROM THE COPIES OF THE SAID DOCUMENTS OBTA INED DIRECTLY FROM THE BANK THE ASSESSING OFFICER NOTICED THAT PROFIT OF RS.15.88 CRORES WAS SHOWN BY THE ASSESSEE FOR THE YEAR ENDED ON 31.03.2005. IN T HE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HOWEVER HAD SHOWN TOTAL INCOME AT NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSEE WAS CALLED UPON BY THE AO TO EXPLAIN THE SAID DIFFERENCE. IN REPLY A LETTER DATED 20.10.2007 WAS FILED BY THE ASSESSEE MAKING THE FOLLOWING SUBMISSI ONS:- WITH REFERENCE TO YOUR LETTER NO.ACIT/CC-41/PROFI TS AND GAINS OF BUSINESS OR PROFESSION/2007-08 DATED 14-12-2007 WE ARE INSTRUCTED TO SUBMIT THAT PAPERS SUBMITTED TO LORD KRISHNA BANK LTD. BY OUR CLIENT DURING FEB 05 WERE FOR THE PURPO SE OF OBTAINING A FINANCIAL ASSISTANCE OF RS.25 CRORES AND KEEPING THIS IN VIEW WRONG FINANCIAL STATEMENT WERE SUBMITTED BY THE COM PANY. KINDLY NOTE THAT THE COMPANY WAS INCORPORATED ON 17-09-200 4 WITH THE OBJECT OF TAKING OVER THE BUSINESS OF PROPRIETARY C ONCERN OF ITS PROMOTER CALLED SWARUP GROUP OF INDUSTRIES (A COPY OF THE MEMORANDUM OF ASSOCIATION IS ENCLOSED). IT OPENED A BANK ACCOUNT ON 6-10-04 WITH STANDARD CHARTERED BANK AND ANOTHER ON 30-03-2005 WITH VIJAYA BANK. IT RECEIVED CAPITAL IN FUSION AS ON 30-102004. COPIES OF THE BANK STATEMENTS IN FULL AR E ENCLOSED FOR YOUR PERUSAL. BOOKS OF ACCOUNTS ARE PRODUCED IN PER SON FOR YOUR VERIFICATION. YOU WILL KINDLY OBSERVE THAT THERE AR E NO CHEQUES ISSUED FOR ANY PURCHASE AND NO CHEQUES RECEIVED FOR ANY SALES. THE STATEMENT SUBMITTED BY YOU TO US SHOWS PROJECTE D BALANCE SHEET AS ON 31-03-2005 AND THEN SUBSEQUENT OPERATIN G YEARS. UNFORTUNATELY THE PROVISIONAL PROFIT AND LOSS ACCO UNT FOR THE PERIOD FROM 01-04-2004 TO 31-03-2005 IS ABSOLUTELY IMAGINARY. NO SALES TOOK PLACE NO PURCHASES TOOK PLACE. THERE WE RE NO EMPLOYEES IN THE COMPANY. NO SALES TAX REGISTRATION AND NO SALES TAX WERE PAID. THERE WAS NO LOAN TAKEN. 3 COMING TO THE PROVISIONAL BALANCE SHEET AS ON 31-12 -2004; THE EXPORT BUSINESS OF SHRI GURU SWARUP SRIVASTAVA THE MAIN PROMOTER THAT WAS TO BE TAKEN OVER BY THE COMPANY W AS NEVER TAKEN OVER. ALL THE FIGURES MENTIONED IN THE PROVIS IONAL BALANCE SHEET AND PROFIT AND LOSS ACCOUNT UPTO 31-12-2004 W ERE IMAGINARY. THEREFORE PROVISIONAL BALANCE SHEET AND PROFIT AND LOSS ACCOUNT UPTO 31-03-2005 IS ALSO IMAGINARY. THE FOLLOWING POINTS WILL MAKE IT VERY CLEAR. IN TH E PROVISIONAL BALANCE SHEET A LOAN HAS BEEN SHOWN AS RECEIVED FR OM NAFED AT RS.98.73 CRORES. NO SUCH LOAN WAS RECEIVED OR GIVEN BY NAFED TO THE COMPANY. THIS LOAN WAS GIVEN TO M/S. SWARUP GRO UP OF INDUSTRIES AND MR. GURUSWARUP SRIVASTAVA WAS CONTEM PLATING THE TRANSFER OF HIS EXPORT BUSINESS INTO THIS COMPANY. AS STATE ABOVE AS THIS TRANSFER NEVER TOOK PLACE AL THE PAPERS SU BMITTED TO LORD KRISHNA BANK HAVE NO MEANING AND MAY PLEASE BE IGNO RED. YOU WILL ALSO KINDLY OBSERVE THAT THE PROJECTED BALANCE AS ON 31-03- 2005 SHOWS A PAYMENT OF RS.505 LAKHS AS INCOME TAX. YOU CAN VERIFY THIS POINT FROM YOUR OWN RECORDS. THE COMPAN Y NEVER PAID ONE RUPEE AS TAX. IT IS THEREFORE REQUESTED THAT THE PAPERS RECEIVED BY YOU FROM LORD KRISHNA BANK SHOULD BE IGNORED FOR THE PURPOSE OF A SSESSMENT. AN AFFIDAVIT OF MR. GURU SWARUP SRIVASTAVA TO THE A BOVE EFFECT WILL BE SUBMITTED BY 24-12-2007 AS MR. GURUSWARUP SRIVAS TAVA IS NOT IN TOWN. WITHOUT PREJUDICE TO THE ABOVE IN CASE YOU STILL W ANT TO RELY ON THE ABOVE PROJECTED BALANCE SHEET OF 31-03-2005. PLEASE NOTE THAT THE COMPANY NEVER PURCHASED ANY PROPERTY AT KALBADEVI O R AT ANDHERI. IN FACT GURU SWARUP SRIVASTAVA (INDIVIDUAL ) DOES OWN AN OFFICE PREMISES IN ANDHERI. EVEN GURU SWARUP SRIVASTAVA DOES NOT OWN ANY PROPER TY IN KALBADEVI BUT HE DID BID FOR A PROPERTY IN KALBADEV I WHICH HE NEVER GOT AND NEVER PURCHASED. ALL THE MOVABLE ASSETS LIKE AIR CONDITIONER BUILDI NG INTERIOR ELECTRIC INSTALLATIONS EPBS COMPUTERS AND FURNITU RE ARE INSTALLED IN THE OFFICE PREMISES AT ANDHERI OWNED BY GURU SWA RUP SRIVASTAVA AND SHOWN IN HIS BALANCE SHEET OF 31-03- 2005 A COPY OF THAT BALANCE SHEET IS ENCLOSED. 4 THE BUSINESS OF IRON ORE HAS ALSO BEEN DONE BY GURU SWARUP SRIVASTAVA (INDIVIDUAL). THE COMPANY DID NOT TAKE A NY LOAN FROM ANY BANK AMOUNTING TO RS.25 CRORES IT NEVER TOOK A NY LOAN. SIMILARLY THE COMPANY DOES NOT OWE ANY AMOUNT TO N AFED. AS SUBMITTED ABOVE THE COMPANY NEVER PAID ANY TAX. ALT HOUGH THE SAID BALANCE SHEET REFLECTS A PAYMENT OF RS.5.04 CR ORES. FROM THE ABOVE IT IS QUITE CLEAR THAT THE COMPANY N EITHER OWNED ANY IMMOVABLE PROPERTY OR ANY ASSET NOR IT HAD ANY LIABILITY. THE CORRECT AUDITED BALANCE SHEET OF THE COMPANY HAS BE EN FILED WITH THE RETURN OF INCOME. THE BALANCE SHEET HAS ONLY TW O ASSETS VIZ. LOAN DUE FROM A DIRECTOR AND CASH IN BANK BALANCE I N CURRENT ACCOUNT. IT HAS NO LIABILITY EXCEPT THE PAID UP CAP ITAL. 3. THE STAND TAKEN BY THE ASSESSEE THUS WAS THAT T HE BALANCE SHEET AND PROFIT AND LOSS ACCOUNTS SUBMITTED TO M/S. LORD KRI SHNA BANK LTD. WAS IMAGINARY AND THE FIGURES REFLECTED THEREIN WERE JU ST THE PROJECTIONS GIVEN TO AVAIL THE EXPORT CREDIT OF RS.25 CRORES FROM THE BA NK. THE STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HI M THE SUBMISSION OF THE ASSESSEE THAT NEITHER ANY SALES NOR ANY PURCHASES H AD ACTUALLY TAKEN PLACE WAS WITHOUT ANY BASIS. HE ALSO HELD THAT THE CLAIM OF T HE ASSESSEE OF NON PAYMENT OF INCOME TAX OF RS.505 LAKHS CONTRARY TO THE FIGURES REFLECTED IN THE PROVISIONAL BALANCE SHEET WAS NOT SUFFICIENT TO PROVE THAT ASSE SSEE HAD NOT EARNED PROFIT OF RS.15.88 CRORES AS SHOWN IN THE PROFIT AND LOSS ACC OUNT. THE AO ALSO DECLINED TO TAKE COGNISANCE OF AN AFFIDAVIT FILED BY SHRI GU RU SWARUP SRIVASTAVA DIRECTOR OF THE ASSESSEE COMPANY ON THE GROUND THAT IT HAD NOT BEEN NOTARIZED. HE ALSO NOTED THAT THE PROVISIONAL BALANCE SHEET AN D PROFIT AND LOSS ACCOUNT SUBMITTED BY THE ASSESSEE COMPANY TO THE BANK WAS S IGNED BY ONE OF ITS DIRECTORS. IN HIS STATEMENT RECORDED U/S.131 BY THE AO SHRI GURU SWARUP SRIVASTAVA DIRECTOR OF THE ASSESSEE COMPANY STATED THAT THE FIGURES REFLECTED IN THE PROVISIONAL BALANCE SHEET WERE ACTUALLY PROJECT ED FIGURES GIVEN TO EXPRESS THE FUTURE PLANS OF THE ASSESSEE COMPANY INORDER TO AVAIL THE EXPORT CREDIT OF 5 RS.25 CRORES. HE ALSO MADE AN ATTEMPT TO EXPLAIN TH AT THE ASSETS APPEARING IN THE SAID BALANCE SHEET WERE NOT REALLY BELONGING TO THE ASSESSEE COMPANY. ALL THESE ARGUMENTS RAISED ON BEHALF OF THE ASSESSEE COMPANY HOWEVER WERE NOT FOUND TO BE TENABLE BY THE AO. ACCORDING TO HIM WHEN A DIRE CTOR OF THE ASSESSEE COMPANY HAD SIGNED THE FINANCIAL STATEMENTS SUBMITT ED TO THE BANK THE FULL RESPONSIBILITY ABOUT THE AUTHENTICITY OF THE FIGURE S REFLECTED THEREIN WAS LAY ON HIM AND HE COULD NOT CHANGE THE STAND BEFORE THE T AX AUTHORITIES THAT THE SAID FIGURES ARE ONLY PROJECTED FIGURES BASED ON IMAGINA TION. ACCORDINGLY RELYING ON THE FINANCIAL STATEMENTS SUBMITTED BY THE ASSESS EE COMPANY TO THE BANK THE ASSESSING OFFICER TREATED THE PROFIT SHOWN THEREIN AS INCOME OF THE ASSESSEE COMPANY AND SUCH PROFIT AMOUNTING TO RS.15.88 CRORE S WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMP LETED U/S.143(3) VIDE AN ORDER DATED 28.12.2007. IN THE FINANCIAL STATEMENTS SUBMITTED TO THE BANK THE ASSESSEE HAD SHOWN PAYMENT OF RS.2 47 25 000/- ON A CCOUNT OF SALES TAX. THE ASSESSEE HOWEVER COULD NOT PRODUCE THE PROOF OF T HE SAID PAYMENT STATING THAT THERE WAS NEITHER ANY LIABILITY ON ACCOUNT OF SUCH SALES TAX NOR ANY ACTUAL PAYMENT THEREOF. THIS STAND OF THE ASSESSEE COMPANY WAS ALSO FOUND TO NOT ACCEPTABLE BY THE AO AND RELYING ON THE FINANCIAL S TATEMENTS SUBMITTED BY THE ASSESSEE COMPANY TO THE BANK WHICH WAS SIGNED BY ON E OF ITS DIRECTORS HE ADDED A FURTHER SUM OF RS.2 47 25 000/- TO THE TOTA L INCOME OF THE ASSESSEE U/S.43B IN THE ABSENCE OF ANY PROOF OF PAYMENT OF S ALES TAX. THE TOTAL INCOME OF THE ASSESSEE THUS WAS COMPUTED BY THE AO FOR THE YEAR UNDER CONSIDERATION AT RS.18 35 25 000/- AS AGAINST THE INCOME OF RS.NI L RETURNED BY THE ASSESSEE. 4. AGAINST THE ORDER PASSED BY THE AO U/S.143(3) AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(AP PEALS) CHALLENGING BOTH THE ADDITIONS OF RS.15 83 00 000/- AND RS.2 45 25 000/- MADE BY THE AO THEREIN RELYING ON THE FINANCIAL STATEMENTS SUBMITTED TO TH E BANK. DURING THE COURSE OF APPEAL PROCEEDINGS THE FOLLOWING SUBMISSIONS WERE MADE ON BEHALF OF THE 6 ASSESSEE COMPANY IN SUPPORT OF ITS CONTENTION THAT BOTH THE SAID ADDITIONS MADE BY THE AO WERE NOT SUSTAINABLE :- IN COURSE OF HEARING FIXED ON 05.08.2008 YOUR HON OUR HAVE ASKED US TO SUBMIT THE WRITTEN SUBMISSION. IN RESPO NSE TO THAT WE HAVE BEEN INSTRUCTED BY OUR CLIENT TO SUBMIT AS UND ER : OUR CLIENT FILED AN IMAGINARY SET OF ACCOUNTS WITH PROVISIONAL BALANCE SHEET PROVISIONAL PROFIT AND LOSS ACCOUNT PROVISIONAL CASH FLOW WITH THE BANK IN ORDER TO OBTAIN A LOAN O F RS.25 CRORES. IT IS COMMON KNOWLEDGE THAT BUSINESSMAN VERY OFTEN GIV E INFLATED FIGURES TO THEIR BANKERS FOR OBTAINING LOANS. IN ORDER TO RUN A BUSINESS A PERSON HAS TO HAVE SOM E STAFF SOME REGISTRATION IN SOME GOVERNMENT OFFICES LIKE SALES TAX DEPARTMENT EXCISE DEPARTMENT PROVIDENT FUND DEPARTMENT ETC. IF THE PERSON IS DOING EXPORT HE HAS TO HAVE IEC NO. FROM THE DG FT & RBI. THE ASSESSEE COMPANY DID NOT HAVE ANY REGISTRATION WITH ANY GOVERNMENT BODY OR ANY PRIVATE BODY NOT DID IT HAVE ANY EXPORT REGISTRATION. INCOME-TAX ACT TAXES REAL INCOME. IT DOES NOT TAX I MAGINARY INCOME. MOREOVER ALL THE PAPERS SUBMITTED BY THE A SSESSEE COMPANY SHOWED PROJECTED FIGURES. PROJECTED FIGUR ES DO NOT HAVE TO BE DEFENDED. THESE CAN BE WRONG BY MILLIONS . NOWHERE HAS THE COMPANY FILED ANY STATEMENT SHOWING ACTUAL SALES ACTUAL PURCHASES OR ACTUAL PROFIT AND LOSS ACCOUNT. YOU AR E REQUESTED TO IGNORE THE PAPERS FILED BY OUR CLIENTS WITH BANKER AS IMAGINARY AND NOT REAL. WITHOUT PREJUDICE TO THE ABOVE KINDLY GO THROUGH T HE ALLEGED PROFIT AND LOSS ACCOUNT. IT SHOWS INCOME-TAX PAYMEN T OF RS.501 LAKHS WHEN OUR CLIENT HAS NOT MADE ANY PAYMENT. IT ALSO SHOWS SALES-TAX PAYMENT OF RS.247 LAKHS WHICH ALSO OUR CL IENT HAS NOT MADE. THESE TOW FACTS CAN BE GET VERIFIED BY YOUR O WN DEPARTMENT AND SALES TAX DEPARTMENT. IT ALSO SHOWS REMUNERATI ON TO EMPLOYEES (RS.127.56 LAKHS). OUR CLIENT DID NOT HAV E ANY EMPLOYEE DURING THE YEAR UNDER CONSIDERATION. KINDLY NOTE T HAT NO PERSON WAS EMPLOYED BY OUR CLIENT AT ALL. IN FACT THE BUSI NESS WAS NEVER STARTED. 7 PLEASE NOTE THAT THE BALANCE SHEET FILED WITH THE R ETURN OF INCOME IS AUDITED. THE AUDITORS HAVE CERTIFIED THAT THERE WAS NO BUSINESS IN THE YEAR 2004-05 (KINDLY SEEN PARA (I) OF ANNEXURE TO AUDITORS REPORT DATED 03.09.2005 (COPY OF ALL CONNECTED PAPE RS ENCLOSED). THE IMAGINARY PROFIT & LOSS ACCOUNT ALSO SHOWS INTE REST PAID AT RS.606 LAKHS. OUR CLIENT DID NOT BORROW ANY MONEY A ND DID NOT PAY ANY INTEREST. KINDLY ALSO SEE THAT THE IMAGINARY BALANCE SHEET SH OWS A LOAN FROM NAFED AT RS.9873.23 LAKHS. OUR CLIENT DENIES H AVING TAKEN ANY LOAN FORM NAFED. NAFED IS A BIG CORPORATION AND OF GOVERNMENT OF INDIAN. PLEASE VERIFY FROM NAFED WHET HER NAFED HAS GIVEN ANY LOAN TO OUR CLIENT. IT HAS BEEN SUBMITTED TO THE ASSESSING OFFICER AND IS NOW AGAIN SUBMITTED TO YOU THAT COMPANY NEVER GOT ANY LOAN FR OM NAFED. AT LEAST YOU CAN VERIFY THIS FACT IF THE COMPANY DID RECEIVE THE LOAN THAN OUR CLIENT WILL ACCEPT THE ASSESSMENT. COMING TO THE IMAGINARY BALANCE SHEETS IT SHOWS TH AT OUR CLIENT OWNED COMMERCIAL PROPERTY AT KALBADEVI MUMBAI. OUR CLIENT DENIES OWNING ANY PROPERTY ANYWHERE IN THE WORLD. O UR CLIENT DENIES OWNING ANY AIR CONDITIONER COMPUTERS AND OT HER MOVABLE ASSETS. WE HAVE CONCLUSIVELY PROVED THAT ALL FIGURES IN THE IMAGINARY BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FILED BY OUR CLIENT WITH ITS BANKERS ARE NON EXISTENT AND INCORRECT. YOU CAN ACCUSE OUR CLIENT OF WASTING BANKERS TIME AND CAUSING WASTAGE OF DEPARTMENTS TIME BUT YOU CANNOT TAX OUR CLIENT WIT HOUT ANY EVIDENCE WITH YOU EXCEPT THIS IMAGINARY BALANCE SHE ET AND PROFIT AND LOSS ACCOUNT. IF NOTHING IS PROVED BY THE DEPARTMENT IT CANNOT IM POSE A TAX ON THE ASSESSEE FOR THE MERE FAULT THAT THE ASSESSEE F OOLISHLY SUBMITTED TO A BANK IMAGINARY FIGURES OF SALES PURCHASES ST AFF SALARY SALES- TAX PAID INCOME-TAX PAID PROPERTIES PURCHASED LO AN. AS THE ASSESSEE HAS DENIED ON AN AFFIDAVIT DOING OF ANY BUSINESS AND HAS EXPLAINED WHY THESE IMAGINARY FIGURES WERE MADE AND FILED WITH THE BANK. THE DEPARTMENT SHOULD BE ABLE TO PROVE BY 8 CORROBORATING EVIDENCES ONE FACT OR FIGURES IN THE PROJECTED FIGURES TO BE CORRECT. THE SUPREME COURT IN THE CASE OF K.P. VERGHESE VS. ITO [131 ITR 597 (SC) HELD THAT IF THE DEPARTMENT WANTS TO TAX A N AMOUNT IT HAS TO PROVE BY SOME EVIDENCE THAT THE SAID AMOUNT WAS RECEIVED OR EARNED BY THE ASSESSEE. ALL OUR SUBMISSION MADE TO THE ASSESSING OFFICER WE RE MADE VIDE LETTERS DATED 09.10.2007 20.1.2007 22.12.2007 28 .12.2007 AND AN AFFIDAVIT OF SHRI GURU SWARUP SRIVASTAVA FILED W ITH ASSESSING OFFICER ON 22.12.2007 ARE ENCLOSED. IN THE LIGHT OF THE FACTS OF THE CASES IT IS APPAR ENT THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF IMAGI NARY BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ARE BAD IN LAW AN D IS LIABLE TO BE DELETED. THEREFORE WE REQUEST YOUR HONOUR TO DELET E THE ADDITION OF RS.18 35 25 000/- 5. THE LEARNED CIT (APPEALS) DID NOT FIND ANY MERI T IN THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE H IM AND PROCEEDED TO CONFIRM BOTH THE ADDITIONS OF RS.15 83 00 000/- AND RS.2 45 25 000/- MADE BY THE AO FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5 OF HIS IMPUGNED ORDER. I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMISSI ONS. THERE IS NO DISPUTE THAT THE BALANCE SHEET AND PROFIT & LOSS AC COUNT SUBMITTED TO THE LORD KRISHNA BANK WERE SIGNED BY ONE OF THE DIRECTORS. THERE IS NO EVIDENCE TO SHOW THAT THE FIGURES CONTA INED IN STATEMENTS FILED WITH THE BANK WERE FOUND TO BE IMA GINARY BY THE BANK OR ANY SUCH STAND WAS TAKEN BY THE APPELLANT B EFORE THE BANK. IN MY OPINION ANY STATEMENT OR DOCUMENT SUBMITTED TO THE BANK CANNOT BE TAKEN LIGHTLY PARTICULARLY WHEN IT IS DUL Y SIGNED BY THE DIRECTOR AND HAS BEEN SUBMITTED FOR THE PURPOSE OF OBTAINING CREDIT TO THE TUNE OF RS.25 CRORES. SINCE THE BALANCE SHEE T AND PROFIT AND LOSS ACCOUNT STOOD SIGNED BY THE DIRECTOR HIMSELF THE APPELLANT COMPANY WAS BOUND WITH THE CORRECTNESS THEREOF AND THE FIGURES WERE IMAGINARY OR FICTITIOUS CANNOT BE ACCEPTED UNL ESS THERE IS SOME CONCLUSIVE EVIDENCE TO DISPROVE THE CORRECTNES S OF THE ABOVE DOCUMENTS. THERE IS NO EVIDENCE WHATSOEVER ON RECOR D WITH THE 9 BANK TO THE EFFECT THAT AFORESAID DETAILS AND FIGUR ES FILED BY THE APPELLANT WERE IMAGINARY AND WERE NOT INTENDED TO B E ACTED UPON BY THE BANK. THE DEFENCE TAKEN BY THE APPELLANT THA T THE DOCUMENT CONTAINED IMAGINARY FIGURES OF SALES PURCHASES TA XES PAID AND PROPERTY PURCHASED ETC. IS ONLY SELF SERVING AS IT CAME FORM THE VERY SAME PERSON WHO HAS DULY SIGNED THE PROJECTED BALANCE SHEET AND PROFIT & LOSS ACCOUNT. THE AFORESAID BALANCE SH EET AND PROFIT & LOSS ACCOUNT WERE SIGNED ON 21.03.2005 AND THUS ONLY PRIOR TO A PERIOD OF 10 DAYS FROM THE END OF THE RELEVANT FI NANCIAL YEAR. THEREFORE THERE WAS NOT MUCH SCOPE FOR VARIATION I N FIGURES PROJECTED AND ACTUAL AS ON 31.03.2005. THE CONTENTI ON THAT IT WAS THE DUTY OF THE DEPARTMENT TO BRING ON RECORD FACTU AL EVIDENCE IN SUPPORT OF PROVISIONAL DOCUMENTS BEFORE RELYING ON THE SAME IS NOT CONVINCING PARTICULARLY WHEN ALL THE STATEMENTS/DOC UMENTS FURNISHED TO THE BANK STOOD DULY SIGNED AND OWNED U P BY THE DIRECTOR. IN THE CIRCUMSTANCES VARIOUS EXPLANATION S PUT FORTH BEFORE THE AO AND BEFORE ME DO NOT LOOK CONVINCING. THE APPELLANT IS BOUND BY THE STATEMENTS/ DOCUMENTS SUBMITTED TO THE BANK AND DULY SIGNED BY THE DIRECTOR. SINCE IN THE PROFIT & LOSS ACCOUNT PROFIT WAS SHOWN AT RS.15 83 00 000/- THE AO WAS F ULLY JUSTIFIED TO INCLUDE IT INTO THE INCOME OF THE APPELLANT. WITH R EGARD TO THE FURTHER ADDITION OF RS.2 47 25 000/- U/S.43-B OF TH E IT ACT SINCE THE APPELLANT HAD FAILED TO FURNISH THE EVIDENCE OF THE PAYMENT OF SALES-TAX AMOUNTING TO RS.2 47 25 000/- THE ACTION OF THE AO IN DISALLOWING THE SAME U/S.43-B IS CONSIDERED JUSTIFI ED. THEREFORE THE ADDITIONS MADE AT RS.15 83 00 000/- AND RS.2 47 25 000/- ARE HEREBY CONFIRMED. THIS GROUND OF APPEAL IS DISMISSE D. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPEALS ) THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH THE ADDITIONS DISPUTED BY THE ASSESSEE IN THE PRESENT A PPEAL HAVE BEEN MADE BY THE AO AND CONFIRMED BY THE CIT(APPEALS) MAINLY ON THE BASIS OF FIGURES REFLECTED IN THE PROVISIONAL BALANCE SHEET AND PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE WITH THE BANK FOR AVAILING EXPORT CREDIT OF RS.25 C RORES. HE SUBMITTED THAT THE SAID FIGURES WERE ONLY PROJECTED FIGURES BASED ON I MAGINATION GIVEN INORDER TO 10 OBTAIN THE BANK FINANCE. HE CONTENTED THAT SUBMISSI ONS TO THIS EFFECT WAS MADE ON BEHALF OF THE ASSESSEE COMPANY BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT (APPEALS) POINTING OUT THAT THE SAID FIGURES WE RE NOT THE REAL ONE. HE CONTENTED THAT THE PROFIT REFLECTED IN THE SAID FIN ANCIAL STATEMENTS AS WELL AS THE PAYMENT OF SALES TAX SHOWN THEREIN HOWEVER WERE A DDED BY AO TO THE TOTAL INCOME OF THE ASSESSEE AND CONFIRMED BY THE LEARNED CIT (APPEALS) WITHOUT BRINGING ANYTHING ON RECORD TO CORROBORATE THE FIGU RES REFLECTED IN THE SAID FINANCIAL STATEMENTS WHICH WERE STATED BY THE ASSES SEE TIME AND AGAIN AS NOT THE REAL ONE. HE SUBMITTED THAT IN THE CASE OF SHRI GUR U SWARUP SRIVASTAVA BELONGING TO THE SAME GROUP ADDITIONS WERE SIMILAR LY MADE ON THE BASIS OF FINANCIAL STATEMENTS SUBMITTED TO THE BANK AND THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS ALREADY DELETED THE SAID ADDITIONS VID E ITS ORDER DATED 09.06.2009 PASSED IN ITA NO.551 -553/M/2009. HE ALSO PLACED ON RECORD A COPY OF THE SAID ORDER AND INVITED OUR ATTENTION TO THE OBSERVATIONS MADE BY THE TRIBUNAL IN PARAGRAPH NO.12 WHILE DELETING THE ADDITIONS SIMILA RLY MADE IN THE CASE OF SHRI GURU SWARUP SRIVASTAVA. 8. THE LEARNED DR ON THE OTHER HAND STRONGLY REL IED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES C ASE THAT BOTH THE ADDITIONS MADE TO THE TOTAL INCOME OF THE ASSESSEE ON THE BAS IS OF THE FINANCIAL STATEMENTS SUBMITTED TO THE BANK ARE FULLY JUSTIFIED. HE ALSO RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF COIMBATORE SPINNING & WEAVING COMPANY LTD. VS. CIT 95 ITR 375 IN SUPPORT OF THE R EVENUES CASE ON THIS ISSUE. HE CONTENTED THAT MERELY BECAUSE THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT SUBMITTED BY THE ASSESSEE TO THE BANK WAS S TATED TO BE PROVISIONAL ONE IT CANNOT BE SAID THAT THE FIGURES REFLECTED THEREI N WERE ALL IMAGINARY FIGURES. 9. IN THE REJOINDER THE LEARNED COUNSEL OF THE A SSESSEE SUBMITTED THAT THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF COIMBATORE 11 SPINNING & WEAVING COMPANY LTD. VS. CIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ALSO SUBMITTED THAT T HE PROVISIONAL FIGURES ARE ALWAYS SUBJECT TO CORRECTION. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT BO TH THE IMPUGNED ADDITIONS HAVE BEEN MADE BY THE AO AND CONFIRMED BY THE LEARN ED CIT (APPEALS) RELYING MAINLY ON THE PROFIT & LOSS ACCOUNT AND BALANCE SHE ET SUBMITTED BY THE ASSESSEE TO THE BANK FOR AVAILING EXPORT CREDIT FACILITY. AL THOUGH THE ASSESSEE TOOK A STAND BEFORE THE AO AS WELL AS BEFORE THE LEARNED C IT(APPEALS) THAT THE FIGURES REFLECTED IN THE SAID BALANCE SHEET AND PROFIT & LO SS ACCOUNT WERE ONLY IMAGINARY FIGURES AND NOT REAL ONE BOTH THESE AUTH ORITIES DID NOT ACCEPT THE SAID STANDS OF THE ASSESSEE AND PROCEEDED TO MAKE THE AD DITIONS RELYING ON THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT SUBMITTED B Y THE ASSESSEE TO THE BANK ON THE GROUND THAT THE SAID FINANCIAL STATEMENTS WE RE DULY VERIFIED AND SIGNED ON BEHALF OF THE ASSESSEE COMPANY. THE LEARNED COU NSEL FOR THE ASSESSEE HAS CONTENTED BEFORE US THAT THE ADDITIONS MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT (APPEALS) MAINLY ON THE BASIS OF THE SA ID BALANCE SHEET AND PROFIT & LOSS ACCOUNT ARE NOT SUSTAINABLE IN THE ABSENCE O F ANY EVIDENCE BROUGHT ON RECORD TO CORROBORATE THE SAME. IN SUPPORT OF THIS CONTENTIONS HE HAS RELIED ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI GURU SWARUP SRIVASTAVA (SUPRA). A PERUSAL OF THE ORDER P ASSED BY THE TRIBUNAL IN THE SAID CASE HOWEVER SHOWS THAT THE MAIN ADDITION MA DE IN THE SAID CASE WAS U/S.68 AND SINCE THE SAID ADDITION WAS MADE BY TREA TING THE OPENING BALANCE IN THE CAPITAL ACCOUNT OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT THE TRIBUNAL HELD THAT THE OPENING BALANCE REPRESENTING CASH CREDITS OF THE EARLIER YEARS COULD NOT BE ADDED IN THE YEAR UNDER CONSIDERATION. MOREOVER THE ISSUE RELATING TO BOTH THE ADDITIONS INVOLVED IN THE PRESENT CASE IS PUREL Y A FACTUAL ISSUE AND THE SAME HAS TO BE CONSIDERED AND DECIDED KEEPING IN VIEW TH E RELEVANT FACTS INVOLVED IN 12 THE PRESENT CASE. IN THIS REGARD WE HAVE PERUSED T HE COPIES OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET SUBMITTED BY THE ASSESSEE TO THE BANK WHICH ARE PLACED AT PAGE NO. 10 & 11 OF THE ASSESSEES PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE SAME ARE CLEARLY REFERRED TO AS PRO VISIONAL BALANCE SHEET AS ON 31.03.2005 AND PROVISIONAL PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2005. AS RIGHTLY OBSERVED BY THE LEARNED CIT (APPEALS) IN THIS CONTEXT THE SAID FINANCIAL STATEMENTS WERE PREPARED AND FUR NISHED BY THE ASSESSEE TO THE BANK ON 21.03.2005 AND IT THEREFORE CANNOT BE SAI D THAT THE FIGURES REFLECTED THEREIN WERE MAINLY PROJECTED FIGURES GIVEN TO AVAI L THE BANK FINANCE. NO DOUBT THE FIGURES GIVEN IN THE PROVISIONAL PROFIT & LOSS ACCOUNT AND BALANCE SHEET ARE ALWAYS SUBJECT TO CORRECTIONS. HOWEVER IT IS FOR T HE ASSESSEE WHO HAS SIGNED AND VERIFIED THE SAID PROVISIONAL FIGURES TO EXPLAI N AND RECONCILE THEM WITH THE FINAL FIGURES. IN THE PRESENT CASE THE ASSESSEES CLAIM AS PER THE FINANCIAL STATEMENTS FILED ALONG WITH THE RETURN OF INCOME IS THAT THERE WAS NOT EVEN COMMENCEMENT OF BUSINESS DURING THE YEAR UNDER CONS IDERATION. IN THE PROVISIONAL BALANCE SHEET AND PROFIT & LOSS ACCOUNT SUBMITTED TO THE BANK THE ASSESSEE HOWEVER HAD DISCLOSED A TURNOVER OF RS.1 59 CRORES RESULTING INTO A PROFIT OF RS.15.88 CRORES. IF THE EXPLANATION OF TH E ASSESSEE IN THIS REGARD IS THAT THE ENTIRE PROVISIONAL BALANCE SHEET AND PROFIT & L OSS ACCOUNT SUBMITTED BY IT TO THE BANK WERE FABRICATED ONE AND NONE OF THE FIGURE S REFLECTED THEREIN WAS A REAL ONE THE AUTHORITIES BELOW CANNOT STILL RELY ON THE PROVISIONAL BALANCE SHEET AND PROFIT & LOSS ACCOUNT MERELY BECAUSE THE SAID STATE MENTS WERE VERIFIED AND SIGNED ON BEHALF OF THE ASSESSEE COMPANY. IN OUR OP INION THE EXPLANATION OF THE ASSESSEE NEEDS TO BE VERIFIED BY MAKING VERIFICATIO N AND CROSS VERIFICATION OF ALL THE RELEVANT ASPECTS INCLUDING AN ENQUIRY WHICH CAN BE DIRECTLY MADE WITH THE CONCERNED BANK TO FIND OUT WHETHER THE ASSESSEE HAD FILED ANY OTHER DOCUMENTS IN SUPPORT OF THE FIGURES GIVEN IN THE PROVISIONAL BALANCE SHEET AND PROFIT & LOSS ACCOUNT. IT MAY ALSO BE RELEVANT TO FIND OUT WHETHE R ANY INDEPENDENT ENQUIRY WAS MADE BY THE BANK TO ASCERTAIN THE CORRECTNESS O F FIGURES GIVEN BY THE 13 ASSESSEE IN THE PROVISIONAL BALANCE SHEET AND PROFI T & LOSS ACCOUNT SUBMITTED ALONG WITH LOAN PROPOSAL. WE THEREFORE FIND IT FAR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE IMPUGNED ORDER OF THE L EARNED CIT (APPEALS) ON THE ISSUE INVOLVED IN THIS APPEAL AND RESTORE THE MATTE R BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER MA KING NECESSARY EXAMINATION/VERIFICATION AND AFTER GIVING THE ASSES SEE SUFFICIENT OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THIS 15 TH DAY OF DECEMBER 2010. SD/- SD/- ( D. MANMOHAN ) ( P.M. JAGTAP ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 15/12/2010 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR I - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI