M/s Spectrum Marketing, Bangalore v. ITO, Bangalore

ITA 948/BANG/2009 | 2005-2006
Pronouncement Date: 17-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 94821114 RSA 2009
Bench Bangalore
Appeal Number ITA 948/BANG/2009
Duration Of Justice 11 month(s) 18 day(s)
Appellant M/s Spectrum Marketing, Bangalore
Respondent ITO, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 17-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 17-09-2010
Date Of Final Hearing 25-08-2010
Next Hearing Date 25-08-2010
Assessment Year 2005-2006
Appeal Filed On 29-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.948/BANG/2009 ASSESSMENT YEAR : 2005-06 M/S. SPECTRUM MARKETING NO.803 17 TH CROSS 9 TH MAIN III BLOCK JAYANAGAR BANGALORE 560 011. : APPELLANT VS. THE INCOME TAX OFFICER WARD 4(1) BANGALORE. : RESPONDENT APPELLANT BY : SHRI S. PARTHASARATHI ADVOCATE RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADDL. C IT(DR) O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT (A) II BANGALORE IN ITA NO: 395/W 4(1)/CIT(A)-II /07-08 DATED: 27.7.2009 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE FIRM (THE ASSESSEE IN SHORT) HAD IN FACT RAISED THIRTEEN GROUNDS IN AN ILLUSTRATIVE AND NARRATIVE M ANNER. GROUND NOS.1 AND 13 BEING GENERAL AND NO SPECIFIC ISSUES RAISED THE Y HAVE BECOME NON- CONSEQUENTIAL. GROUND NO.12 RAISED BY THE ASSESSEE CANNOT BE ITA NO.948/BANG/2009 PAGE 2 OF 12 MAINTAINED AS CHARGING OF INTEREST U/S 234A 234B A ND 234C OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE AND THUS TH IS GROUND IS DISMISSED AS SUCH. IN THE REMAINING GROUNDS THE CRUX OF THE ISSUE IS CONFINED TO A LONE GROUND THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 12 80 824/- U/S 68 OF THE ACT - THAT THE CIT (A) HAD FAILED TO AFFORD AN OPPORTUN ITY BEFORE CONFIRMING THE ADDITION U/S 68 OF THE ACT WHICH WAS ORIGINALLY ADDED U/S 41(1) OF THE ACT BY THE AO. 3. BRIEFLY STATED THE ASSESSEE WAS A DISTRIBUTOR O F ELECTRICAL AND ELECTRONIC GOODS. DURING THE COURSE OF VERIFICATIO N OF ACCOUNT THE AO NOTICED THE DIFFERENCE IN THE CREDIT BALANCES COMPA RED WITH THE CORRESPONDING DEBIT BALANCE IN THE PARTIES ACCOUNTS TO THE EXTENT OF RS.12 80 874/-. AFTER CONSIDERATION OF THE ASSESSE ES CONTENTIONS AND ALSO THE REASONS SET-OUT EXTENSIVELY IN THE IMPUGNED ASS ESSMENT ORDER THE AO WAS OF THE VIEW THAT THE PROVISIONS OF S.41(1) OF T HE ACT CLEARLY APPLICABLE TO THE FACTS OF THE CASE SINCE THERE WAS A CESSATION O F THE LIABILITY TO THE EXTENT OF THE DIFFERENCE IN THE ACCOUNT AND ACCORDINGLY BROUGHT TO TAX THE SUM OF RS.12.80 LAKHS U/S 41(1) OF THE ACT CITING THE FIN DINGS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF K.G.SUBRAMANYA V. CIT REP ORTED IN (1992) 195 ITR 199 (KAR). 4. THIS WAS FORCEFULLY OBJECTED TO BY THE ASSESSEE BEFORE THE LD. CIT (A). AFTER CONSIDERING THE VARIOUS CONTENTIONS PUT -FORTH BY THE ASSESSEE AND ALSO EXAMINING THE ENTRIES IN THE LEDGER ACCOUN T OF THE ASSESSEE AND ALSO TAKING CUE FROM THE RULING OF THE HONBLE HIGH COURT OF KERALA IN THE ITA NO.948/BANG/2009 PAGE 3 OF 12 CASE OF CIT V. SMT. ANNAMKUTY JOSE REPORTED IN 174 TAXMANN 328 (KER) THE CIT (A) HAD OBSERVED THUS 4.7. IN VIEW OF THE RATIO OF THE DECISION OF THE HONBLE HIGH COURT OF KERALA THE ONUS TO PROVE SUNDRY CREDIT LIES ON THE APPELLANT. HENCE THE APPELLANTS EXPLANATION IS FOUND UNSATIS FACTORY AND AS SUCH THERE IS NO REASON TO INTERFERE WITH THE FINDI NGS OF THE AO. THE AO HOWEVER MADE ADDITION ON REMISSION/CESSATION O F LIABILITY U/S 41(1) OF THE ACT. I DIFFER WITH THE VIEW OF THE AO THAT SINCE THE APPELLANT CREDITED IN THEIR BOOKS OF ACCOUNT A SUM OF RS.12 80 824/- EXPLAINED UNSATISFACTORILY IT IS APPROPRIATE TO CO NSIDER IT AS DEEMED INCOME U/S 68 OF THE ACT. I THEREFORE CONFIRM TH E ADDITION U/S 68 OF THE ACT AND NOT U/S 41(1) OF THE I.T. ACT. 5. AGGRIEVED WITH THE STAND OF THE CIT(A) ON THE IS SUE THE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL. THE FORCEFUL CONTENTIONS OF THE ASSESSEE ARE FOR T HE SAKE OF CLARITY AND PROPER UNDERSTANDING OF THE FACTS SUMMARIZED THUS (I) THE CIT(A) GROSSLY ERRED IN CONFIRMING THE ADDITION U/S 68 OF THE ACT WHICH WAS ORIGINALLY ADDED U/S 41(1) OF THE ACT CITING THE HONBLE KERALA HIGH COURTS FINDING CITED SUPRA AND ALSO WITHOUT AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE; - THE CIT (A) HAD HELD THAT THE ONUS TO PROVE SUNDRY CREDITORS LIES ON THE ASSESSEE QUOTING THE KERALA HIGH COURT S RULING WHEREAS HE HAD FAILED TO APPRECIATE THE RECONCILIAT ION PROVIDED BY THE ASSESSEE BY WHICH IT HAD DISCHARGED ITS ONUS CAST ON IT. CORRESPONDING TO ERROR IN CREDITORS A CCOUNT OF GE CORRESPONDING ERRORS IN DEBTORS WERE ALSO MENTIO NED IN THE RECONCILIATION. THERE WAS ALSO A GLARING ERROR WITH REGARD TO BRIGADE ENTERPRISES WHICH FINDS A PLACE I N THE IMPUGNED ORDER OF THE CIT (A); (II) THE CIT (A ) ERRED IN APPLYING THE PROVISIONS OF S. 68 OF THE ACT AND SINCE THE ASSESSEE HAD OFFERED EXPLANATION REGA RDING THE CREDITS AND ALSO FURNISHED COMPLETE RECONCILIATION OF THE DISPUTED CREDIT BALANCE PERTAINING TO GE PVT. LTD. THE APPLICABILITY OF THE SAID PROVISIONS LEGALLY ARE NO T SUSTAINABLE; (III) THE LETTER OF THE ASSESSEE DT.24.12.2007 WHEREIN TH E RECONCILIATION DETAILS OF DISPUTED AMOUNT WERE FURN ISHED AND THE ITA NO.948/BANG/2009 PAGE 4 OF 12 SAME WAS FILED IN THE AOS OFFICE ON 24.12.2007. H OWEVER THE IMPUGNED ORDER OF THE AO DATED 20.12.2007 WAS SERVE D ON THE ASSESSEE ONLY ON 26.12.2007 AND THE ASSESSEES RECO NCILIATION LETTER WAS NOT FINDING A PLACE IN THE SAID ORDER. - IT WAS THE ALLEGATION OF THE CIT (A) THAT THE COPY OF THE LETTER DT.24.12.07 WAS NOT FURNISHED FOR HIS PERUSAL HOW EVER THE SAME WAS VERY MUCH IN THE PAPER BOOK FURNISHED IN M ID DECEMBER 2008 [PAGE 9/10 OF THE PAPER BOOK]; - EVEN IF THE RECONCILIATION WAS NOT CONSIDERED BY TH E AO WHILE CONCLUDING THE ORIGINAL ASSESSMENT HE SHOULD HAVE CONSIDERED THE SAME DURING THE REMAND REPORT PROCEE DINGS AND REFRAINED FROM RECOMMENDING FOR THE ALLEGED ADD ITION AND CONSEQUENTLY THE CIT (A) SHOULD HAVE ALSO REF RAINED FROM ACCEPTING THE AOS STAND IN STEAD WENT AHEA D TO SUSTAIN THE ADDITION; - THE MISTAKES CREPT IN THE ACCOUNTS WERE ONLY IN THE PARTYS ACCOUNTS WHICH ANYHOW DID NOT AFFECT THE REVENUE AC COUNTS AND SUCH MISTAKES HAVE SINCE BEEN RECTIFIED SUBSEQU ENTLY AND THE ULTIMATE PROFIT DID NOT VARY AND THUS THE CIT(A) OUGHT TO HAVE REFRAINED FROM CONFIRMING THE STAND O F THE AO OF COURSE U/S 68 OF THE ACT - THE ADDITION CONFIRMED U/S 68 OF THE ACT WAS ARBITR ARY AND UNREASONABLE AND LIABLE TO BE REDUCED SUBSTANTIALLY ; - RELIES ON THE CASE LAWS: (A) CIT V. MULTI SYSTEMS SECURITIES PVT. LTD. (20 08) 306 ITR 298 (DEL) (B) CIT V. PANCHAMDAS (2006) 156 TAXMAN 507 (ALL) (C) ANNAMARIA TRAVELS AND TOURS PVT. LTD. V. DCIT (2005) 95 TTJ 71 (DEL) (D) MANOJ AGARWAL V. DCIT ( 2008) 113 ITR 397 (DEL) (SB) 5.1. DURING THE COURSE OF HEARING THE LD. AR SUBMI TTED AN APPLICATION UNDER RULE 29 OF APPELLATE TRIBUNAL RULES 1963 IN WHICH IT WAS PRAYED THAT IN BRIEF THE LETTER DT.24.12.2007 WAS THE PART OF THE PAPER BOOK AT PAGES 5 & 6 FILED BEFORE THE AO ON 24.12.2007 A CO PY OF WHICH WAS ALSO FURNISHED BEFORE THE CIT(A). THE SAID LETTER WAS NOT CONSIDERED BY THE AO AS THE ASSESSMENT IN QUESTION WAS PURPORT ED TO HAVE CONCLUDED BY 20.12.07 ITSELF; AND THE AO HAD NO OCC ASION TO CONSIDER ITA NO.948/BANG/2009 PAGE 5 OF 12 THE CONTENTIONS OF THE ASSESSEE PUT-FORTH IN THE SA ID LETTER. THE ASSESSEE WAS UNDER BONA-FIDE BELIEF TAT THE AO WOUL D WAIT FOR THE RECONCILIATION SOUGHT FOR IN RESPECT OF THE ACCOUNT S OF GE LIGHTINGS PVT. LTD. IN THE ABSENCE OF THE ACCOUNTANT WHO WAS ORIGINALLY MAINTAINING THE ACCOUNTS AND ALSO THE UNTIMELY DEMI SE OF THE RESIDENT PARTNER WHO WAS WELL VERSED WITH THE TRANS ACTION AND AFTER DUE NOTICE OF CERTAIN DEFECTS IN THE ACCOUNTS A SU ITABLE REPLY WAS FURNISHED ON 24.12.2007. HOWEVER NEITHER THE AO N OR THE CIT(A) HAD TAKEN COGNIZANCE OF THE SAID LETTER IN STEAD THE CIT(A) HAD OBSERVED THAT THE SAID LETTER WAS NOT FURNISHED BEF ORE HIM AND THUS RECONCILIATION OF THE ACCOUNTS FURNISHED HAD NOT TA KEN NOTE OF. THE RECONCILIATION OF ACCOUNTS MADE BY THE SUCCESSOR AU DITOR WHICH WAS FURNISHED BEFORE THIS BENCH ON 28.7.2010 WAS NOT AV AILABLE WITH THE AUTHORITIES BELOW. IT WAS THEREFORE PLEADED THAT THE RECONCILIATION OF ACCOUNTS FURNISHED BE ADMITTED UNDER RULE 29 OF A.T. RULES 1963 AND RENDER JUSTICE. 5.2. ON THE OTHER HAND THE LD. D RS FORCEFUL URGE WAS THAT THE DIFFERENCE IN CREDITS PERSISTED EVEN WHEN THE ISSUE WAS BEFORE THE FIRST APPELLATE AUTHORITY AND THE ASSESSEE WAS UNABLE TO RECONCILE THE ACCOUNTS WHICH CULMINATED IN CONFIRMING THE ADDITION BY THE CIT (A). IT WAS THEREFORE PLEADED THAT THE STAND OF THE AUTHORITIE S BELOW BE SUSTAINED. 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS C AREFULLY PERUSED THE RELEVANT RECORDS AND THE PAPER BOOK CONTAINING 1 25 PAGES WHICH CONSISTS AMONG OTHERS ASSESSEES CORRESPONDENCES WITH THE AO BALANCE CONFIRMATION LETTER OF GE INDIA LTD COPY OF LEDGER ACCOUNT RECONCILIATION STATEMENT OF BALANCES BETWEEN THE ASSESSEE AND GE I NDIA LTD. ETC. FURNISHED BY THE LD. A R DURING THE COURSE OF HEARI NG. 6.1. AT THE OUTSET WE WOULD LIKE TO POINT OUT THAT THE APPLICATION SUBMITTED UNDER RULE 29 OF A.T. RULES BY THE ASSESS EES A R DURING THE COURSE OF HEARING WAS DULY CONSIDERED BY THIS BENCH . AFTER HEARING THE ITA NO.948/BANG/2009 PAGE 6 OF 12 RIVAL PARTIES THE ASSESSEES APPLICATION WAS ADMIT TED AND THE REGISTRY WAS DIRECTED TO PLACE THE SAME ON RECORD. 6.2. THE STAND OF THE AO IN ADDING RS.12 80 874/- U NDER THE PROVISIONS OF S.41(1) OF THE ACT WAS SOLELY ON THE GROUND THAT THE ASSESSEES SUBMISSION DID NOT MEET THE SPECIFIC QUERY - THE DI FFERENCES IN CREDIT BALANCES REQUIRE TO BE RECONCILED. 6.3. THE LD. CIT (A) HAD CONFIRMED THE ADDITION IN TOTO WITH THE OBSERVATIONS THAT [AT THE COST OF REPETITION] 4.7.THE APPELLANTS EXPLANATION IS FOUND UNSA TISFACTORY AND AS SUCH THERE IS NO REASON TO INTERFERE WITH TH E FINDINGS OF THE AO. THE AO HOWEVER MADE ADDITION ON REMISSION/CE SSATION OF LIABILITY U/S 41(1) OF THE ACT. I DIFFER WITH THE VIEW OF THE AO THAT SINCE THE APPELLANT CREDITED IN THEIR BOOKS OF ACCO UNT A SUM OF RS.12 80 824/- EXPLAINED UNSATISFACTORILY IT IS AP PROPRIATE TO CONSIDER IT AS DEEMED INCOME U/S 68 OF THE ACT. I THEREFOR E CONFIRM THE ADDITION U/S 68 OF THE ACT AND NOT U/S 41(1) OF THE I.T. ACT. 6.4. HOWEVER THE ASSESSEE IN ITS APPLICATION UNDER RULE 29 CITED SUPRA PLEADED THAT IT HAD IN FACT RECONCILED THE ACCOUN TS WHICH WAS FURNISHED BEFORE THE AO VIDE ITS LETTER DT: 24.12.2007 BUT THE ASSESSMENT WAS CONCLUDED BY THE AO ON 20-12-2007 ITSELF AND THUS IN THE ABSENCE OF RECONCILIATION OF ACCOUNTS THE AO HAD PERHAPS ADDE D THE IMPUGNED ADDITION UNDER S.41 (1) OF THE ACT. THE LD. CIT (A ) THOUGH WAS IN AGREEMENT WITH THE IMPUGNED ADDITION BUT TOOK A D IVERGENT VIEW THAT SINCE THE ASSESSEES EXPLANATION WAS UNSATISFACTORY HE C ONFIRMED THE ADDITION U/S 68 OF THE ACT. 6.5. LET US HAVE A QUICK GLANCE AT THE PROVISIONS O F S.68 OF THE ACT. ITA NO.948/BANG/2009 PAGE 7 OF 12 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFER NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 6.5.1. ON A DECISIVE READING OF THE ABOVE PROVISIO NS WE FIND THAT IF THE ASSESSEE HAD OFFERED NO EXPLANATION OR THE EXPL ANATION SO OFFERED IS NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY THE SUM SO CREDITED MAY BE CHARGED TO TAX U/S 68 OF THE ACT. HOWEVER IN THE PRESENT CASE THE ASSESSEE WAS SPEC IFICALLY REQUIRED TO RECONCILE THE DIFFERENCE IN THE CREDIT BALANCES AND THE ASSESSEE WAS PERHAPS IN THE PROCESS OF CLARIFYING THE DIFFERENC E IN THE CREDIT BALANCES THROUGH ITS LETTER DT.24.12.2007 THE AO HAD HASTEN ED IN CONCLUDING THE ASSESSMENT ON 20.12.2007 AND THUS THE RECONCILIAT ION OF DIFFERENCE IN THE CREDIT BALANCES IN THE ACCOUNT WAS NOT BEFORE THE A O WHEN HE CONCLUDED THE ASSESSMENT BY APPLYING THE PROVISIONS OF S.41(1 ) OF THE ACT. WHEN THE ISSUE WAS BEFORE THE CIT (A) ACCORDING TO THE ASSE SSEE [APPLICATION UNDER RULE 29 OF I.T.RULES 1963] EVEN THOUGH IT PURPORTE D TO HAVE FURNISHED THE REQUIRED PARTICULARS DURING THE COURSE OF APPELLATE HEARING IN THE SHAPE OF A PAPER BOOK THE CIT (A) RECORDED IN HIS IMPUGNED OR DER [PARA 4.1.] THAT COPY OF THE SAID LETTER IS ALSO NOT FILED AT THE TI ME OF APPEAL HEARING. THIS MUST HAVE BEEN THE REASON FOR THE CIT(A) TO DRAW ST RENGTH FROM THE FINDING OF THE HONBLE HIGH COURT OF KERALA CITED SUPRA AND TO OBSERVE THAT THE ASSESSEES EXPLANATION WAS FOUND UNSATISFACTORY AND AS SUCH THERE WAS NO REASON TO INTERFERE WITH THE FINDINGS OF THE AO. ITA NO.948/BANG/2009 PAGE 8 OF 12 6.5.2. THE CASE LAWS ON WHICH THE ASSESSEE PLACED STRONG RELIANCE ARE PERUSED AS UNDER: (I) CIT V. PANCHAM DASS JAIN 156 TAXMANN 507 (ALL ): THE ISSUE IN BRIEF WAS THAT IN AS MUCH AS THE ASS ESSEE WAS NOT ABLE TO GIVE ACCORDING TO THE ITO SATISFACTORY EXPLANATIO N WITH REGARD TO THE NATURE AND SOURCE OF THE DEPOSITS AND ACCORDINGLY MADE THE IMPUGNED ADDITION. THE CIT (A) WHO AFTER PERUSING BOOKS OF A CCOUNT WHEREIN THE RELEVANT ENTRIES SHOWING THE PURCHASES OF THE GOODS AND THE SALE THEREOF APPEARED. THE CIT (A) ACCEPTED THE ASSESSEE'S CONTE NTION THAT THE CREDITS APPEARING IN THE NAME OF THE AFORESAID TWO PERSONS DID NOT REPRESENT DEPOSIT OF CASH BY THEM WITH THE ASSESSEE AND THAT THEY REPRESENTED THE VALUE OF THE GOODS SUPPLIED BY THEM TO THE ASSESSEE AND THAT THEREFORE THE ADDITION IN QUESTION UNDER S. 68 OF THE ACT WAS NOT WARRANTED. THE TRIBUNAL AFTER CONSIDERING THE ASSESSEE'S PLEA THA T THE ADDITIONS IN QUESTION COULD NOT BE MADE IN TERMS OF S. 68 OF THE ACT BECAUSE THE ALLEGED DEPOSITS WERE NOT CASH CREDITS AS PRESUMED BY THE I TO. THE REVENUE SUBMITTED BEFORE THE HONBLE COURT THAT AS THE ASSE SSEE WAS UNABLE TO PRODUCE THE ALLEGED CREDITORS THE PROVISIONS OF S. 68 OF THE ACT WAS SQUARELY ATTRACTED IN THE PRESENT CASE AND THE ASSE SSING AUTHORITY HAS RIGHTLY ADDED THE TWO AMOUNTS AT THE HANDS OF THE A SSESSEE. AFTER CONSIDERING THE RIVAL SUBMISSIONS THE HONBLE COUR T WAS PLEASED TO OBSERVE THAT - 4. THE SUBMISSION IS MISCONCEIVED. THE TRIBUNAL HA S RECORDED A CATEGORICAL FINDING OF FACT BASED ON APPRECIATION O F MATERIALS AND EVIDENCE ON RECORD THAT THE AO HAD ACCEPTED THE PURCHASES S ALES AS ALSO THE TRADING RESULT DISCLOSED BY THE RESPONDENT-ASSESSEE. IT HAD RECORDED A FINDING THAT THE AFORESAID TWO AMOUNTS REPRESENTED THE PURCHASES MADE BY THE ASSESSEE ON CREDIT AND THEREFORE THE PROVISIONS OF S. 68 O F THE ACT COULD NOT BE ATTRACTED IN THE PRESENT CASE. WE FULLY AGREE WITH THE VIEW TAKEN BY THE TRIBUNAL ON THIS ISSUE INASMUCH AS ON THE BASIS O F THE FINDINGS RECORDED BY IT THAT THESE TWO AMOUNTS REPRESENTED PURCHASES MAD E BY THE RESPONDENT- ASSESSEE ON CREDIT AND THE PURCHASES AND SALES HAVI NG BEEN ACCEPTED BY THE DEPARTMENT THE QUESTION OF ADDITION OF THE AFORESA ID TWO AMOUNTS UNDER S. 68 OF THE ACT DID NOT ARISE INASMUCH AS THE PROVISI ONS OF S. 68 OF THE ACT WOULD NOT BE ATTRACTED ON THE PURCHASES MADE ON CRE DIT. ITA NO.948/BANG/2009 PAGE 9 OF 12 WE HAVE DULY PERUSED THE FINDING AND OF THE FIRM V IEW THAT RATIO LAID DOWN BY THE HONBLE COURT IS DIRECTLY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THAT THE CIT (A) WAS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF S.68 OF THE ACT. (II) ANNAMARIA TRAVELS AND TOURS PVT. LTD. V. DCIT (2005) 95 TTJ 71 (DELHI BENCH) THE HON'BLE BENCH AFTER CONSIDERING THE DETAILS FU RNISHED WITH REGARD TO PROVISIONS MADE FOR PAYMENT OF AUDIT FEE OF RS.25 3 86/- WHICH HAS BEEN TURNED DOWN BY THE AO AND ADDED THE SAME U/S 68 OF THE ACT HAD OBSERVED THUS AS REGARDS THE ADDITION OF RS. 25 386 THIS REPRESE NTS A PROVISION MADE FOR PAYMENT OF AUDIT FEE ACCOUNTING CHARGES AND SERVIC E TAX PAYABLE. ALL THE DETAILS WERE FILED BEFORE THE AO WHO HAS NOT STATED ANYTHING TO DOUBT THEM BUT HAS ADDED IT UNDER S. 68 OF THE ACT ONLY BECAUS E THERE IS NO CONFIRMATION. THE CIT (A) HAS REJECTED THE ASSESSEES PLEA ON THE GROUND THAT IT IS AN AFTERTHOUGHT. WE ARE UNABLE TO SUBSCRIBE TO THIS VI EW. THESE ARE BILLS SUBMITTED BY THE ASSESSEES AUDITOR WHICH HAVE BEEN PAID SUBSEQUENTLY; EVEN THE SERVICE TAX HAS BEEN PAID SUBSEQUENTLY. WE DO NOT SEE HOW S. 68 CAN BE INVOKED TO THESE BILLS PAYMENTS. ACCORDINGLY WE DELETE THE ADDITION. CONSIDERING THE FINDINGS OF THE HONBLE HIGH COURT OF ALLAHABAD AS WELL AS THE HONBLE TRIBUNAL DELHI [ SPECIAL BENCH] WE ARE OF THE FIRM VIEW THAT THE CIT(A) WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF S.68 OF THE ACT. 6.5.3. MOREOVER IN THE PRESENT CASE THE AO HAD R ECORDED IN HIS IMPUGNED ORDER THAT 7..NEITHER THE DIFFERENCES IN THE CREDIT BALANCE S ARE RECONCILED NOR ANY EXPLANATION FOR THE DIFFEREN CE IS OFFERED THE ASSESSEE IN ITS SUBMISSION UNDER RULE 29 OF A.T. R ULES BEFORE THIS BENCH ASSERTED THAT THE RECONCILIATION OF ACCOUNTS WAS SU BMITTED BEFORE THE AO VIDE ITS LETTER DT. 24.12.2007. IT WAS FURTHER AF FIRMED THAT A COPY OF THE SAME WAS ALSO FURNISHED BEFORE THE FIRST APPELLATE AUTHORITY. HOWEVER THE LD. CIT (A) HAD OBSERVED IN HIS IMPUGNED ORDER THAT ITA NO.948/BANG/2009 PAGE 10 OF 12 4.1. THE APPELLANT FURTHER CLAIMED THAT HE FILED A LETTER WITH EXPLANATION FOR RECONCILIATION VIDE LETTER DATED: 24.12.2007. IT IS OBSERVED THAT THIS LETTER WAS FILED AFTER PASSING THE ASSESSMENT ORDER . THE AO THEREFORE HAD NO OCCASION TO CONSIDER THE LETTER. COPY OF THE SA ID LETTER IS ALSO NOT FILED AT THE TIME OF APPEAL HEARING. HENCE I AM NOT IN A POSITION TO CONSIDER THE LETTER . 6.5.4. TAKING INTO ACCOUNT THE SEQUENCE OF EVENTS AS NARRATED IN THE FORE-GOING PARAGRAPHS THE FOLLOWING CRUCIAL POINTS ARE TO BE TAKEN COGNIZANCE OF WHILE DECIDING THE ISSUE: (I) THE ASSESSEE HAD IN ITS LETTER DATED 24.12.2007 FUR NISHED THE RECONCILIATION OF ACCOUNTS PERTAINING TO G.E. LIGHT INGS (P) LTD BEFORE THE AO WHICH HAS BEEN DULY ACKNOWLEDGED BY T HE O/O THE ADDL. CIT R-4 BANGALORE ON 24.12.2007 [P 5 OF PB AR]; - THE ASSESSMENT ORDER IN QUESTION APPEARS TO HAVE BE EN PASSED BY THE AO BY 20.12.2007 AND AS SUCH THERE WAS NO O CCASION FOR THE AO TO CONSIDER THE ASSESSEES EXPLANATION A ND ALSO THE PURPORTED RECONCILIATION OF ACCOUNTS; (II) THE ASSESSEE IN ITS APPLICATION UNDER RULE 29 ASSER TED THAT A COPY OF THE LETTER ADDRESSED TO THE AO DT.24.12.2007 WAS SUBMITTED BEFORE THE CIT(A) AMONG OTHERS IN MID DECEMBER 2 008 IN THE SHAPE OF A PAPER BOOK. - THIS VERY FACT HAS BEEN DISOWNED BY THE CIT (A) IN HIS IMPUGNED ORDER [ VIDE PARA 4.1]; (III) GE INDIA INDUSTRIAL PVT. LTD. IN ITS LETTER DATED 6 .8.2007 HAD CONFIRMED THE BALANCE FOR THE F.Y. 2004.05 WAS AT RS.47 08 752.01 [SOURCE: PAGE 15 OF PB AR]; - THIS CONFIRMATION LETTER APPEARS TO HAVE BEEN PRODU CED NEITHER BEFORE THE AO NOR BEFORE THE FIRST APPELLATE AUTHOR ITY; (IV) AS CONTENDED BY THE ASSESSEE THE APPLICATION OF TH E PROVISIONS OF S.68 OF THE ACT WAS VERY REMOTE IN THE INSTANCE CAS E SINCE AN ADDITION COULD BE MADE UNDER THIS SECTION ONLY WHEN THE ASSESSEE OFFERS NO EXPLANATION WITH REGARD TO THE CREDITS TH AT TOO BEFORE THE ASSESSING OFFICER OR THE EXPLANATION SO OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTO RY; ITA NO.948/BANG/2009 PAGE 11 OF 12 (V) WHEN THE FIRST APPELLATE AUTHORITY RESORTED TO INVO KE THE PROVISIONS OF S.68 OF THE ACT UNILATERALLY THE ASS ESSEE OUGHT TO HAVE BEEN AFFORDED AN OPPORTUNITY OF BEING HEARD. THIS HAS PRECISELY BEEN GIVEN A GO-BY BY THE CIT (A); (VI) THE AO WAS DEPRIVED OF AN OCCASION TO CONSIDER THE RECONCILIATION OF THE ACCOUNTS AS WELL AS THE CONFI RMATION LETTER OF THE PARTY CONCERNED AS THESE CRUCIAL PARTICULARS WE RE NOT BEFORE HIM WHILE CONCLUDING THE ASSESSMENT. 6.5.5. IN AN OVERALL CONSIDERATION OF THE FACT S AND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRA PHS AND ALSO IN THE INTERESTS OF NATURAL JUSTICE WE ARE OF THE CONSIDE RED VIEW THAT THE ENTIRE MATTER SHOULD BE REMITTED BACK ON THE FILE OF THE A O WITH A SPECIFIC DIRECTION TO LOOK INTO THE RECONCILIATION OF ACCOUNTS CONFIR MATION LETTER OF THE PARTY CONCERNED AND TO TAKE APPROPRIATE ACTION UNDER THE RELEVANT PROVISIONS OF THE ACT OF COURSE AFTER AFFORDING A REASONABLE OP PORTUNITY TO THE ASSESSEE OF BEING HEARD. IN THE MEANWHILE THE ASSESSEE TH ROUGH ITS A.R IS ADVISED TO FURNISH ALL THE RELEVANT REQUIRED PARTICULARS AT ITS POSSESSION BEFORE THE AO WHICH WOULD FACILITATE HIM TO DECIDE THE ISSUE I N AN EXPEDITIOUS MANNER. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF SEPTEMBER 2010. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 17 TH SEPTEMBER 2010. DS/- ITA NO.948/BANG/2009 PAGE 12 OF 12 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE. -