Shri Om Prakash Singh Vs ACIT (ITAT Agra)
When we test the explanation of the assessee in the light of evidences available on records and the precedents governing the issue, we find that identity of the Company who has advanced money to the assessee is proved beyond doubt. There can be hardly any dispute regarding the identity of the company which is body corporate and filing its Income Tax Return which was downloaded by the Assessing officer on his own from the system. The genuineness of the transaction is proved from the amount received from the party was duly reflected in the audited accounts of the assessee. Assessee during the course of assessment proceedings has furnished confirmation duly signed by the Director of the Company who has made the advance to the assessee. Even in enquiry undertaken under section 133(6) of the Act, it is not denied by the creditor. The assessee had produced the agreement with the party and its confirmation. Even if the agreement is excluded for the purpose of consideration, as pleaded by the revenue, the fact remains that amount was received and confirmed by the creditor. Thus, no material is brought on records on either of the two occasions by the learned Assessing officer and also by the first appellate authority to impeach the genuineness of the transaction except referring to the terms which are based on unilaterally drawn presumptions without confronting the assessee and therefore, has to be excluded for the purpose of consideration of merits of the addition. Next and last issue required to be established by the assessee was the creditworthiness of the company. The assessee had produced the audited balance sheet of the company (APB 26 -31), whichshowed that the company had shareholder’s fund of Rs. 41.29 lacs, secured loans from Oriental Bank of Commerce of Rs. 72.48 lacs, unsecured loans of Rs. 999.03 lacs and thus had total liabilities to the tune of Rs. 11.14 Crores. On assets site, it had fixed assets of Rs. 20.67 lacs, fixed deposits of Rs. 3.20 Crore, loans and advances of Rs. 5.84 Crore besides other assets. Schedule ‘F’ to the balance sheet showed advance for land Rs. 5.50 Crore (Previous year Rs. Nil) besides other advances. Thus, not only the company was creditworthy, its balance sheet disclosed advances for land amounting to Rs. 5.50 Crore extended during the year under consideration itself. Thus, on the circumspection of the evidence, Ld. CIT (A) has grossly erred in taking adverse view wherein she has altogether ignored to look into the creditworthiness of the company and the fact that its balance sheet disclosed advances of Rs. 5.50 crore towards land. If the authorities below entertained any doubt and required clarification with regard to any of the affair of the creditor in that eventuality summons under section 131(1) could have been issued which despite request made by the assessee was not issued.Failure to issue summons under section 131(1) on the request of the assessee in order to enable him to discharge his prima facie onus is fatal to the proceedings. Without such request, there is no duty cast on the Assessing Officer to issue summons under section 131, unless the Assessing Officer on its own deems it proper to do so. But as soon a request is made, it becomes incumbent on the Assessing Officer to issue such summons in order to enable the assessee to avail of such opportunity. After such issuance of summons, if those were not responded to or returned without service, the Assessing Officer is free to take his own decision as he may deem fit and proper. Such action of the authorities below is in direct conflict with the principles of law laid down by the Hon’ble Allahabad High Court in the case of “Munnalal Murli Dhar Vs CIT”, (1971) 79 ITR 540 (All.) and“Additional CIT Vs Radhey Shyam Jagdish Prasad”, (1979) 117 ITR 186 (Allahabad) wherein the Hon’ble Allahabad held that failure to issue summons for attendance or witnesses vitiated the assessment.
The assessee has thus discharged his onus in the matter. None of the evidence furnished by the assessee has been found to be non-genuine and the evidence has been discarded on the basis of conjectures and hypothesis only. There was nothing in the matter to apply the test of preponderance and probabilities, as was applied by Hon’ble Supreme Court in the cases of ‘Sumati Dayal & other’ cases referred by learned Ld. CIT (A). Nothing prevented the authorities to go beyond the transaction and look into the affairs. The assessee in fact made request both at assessment stage as well as appellate stage for examination of the party, but his request was not acceded to without assigning any reason, much less for valid and convincing reason. The assessee could not be punished merely for the reason that advance was received in cash whereas he could do so under the law, prevailing at that time and therefore, the transaction was fully in accordance with the law. The transaction was duly disclosed in the Audited Balance Sheet. In the totality of facts and in the circumstances of the case we are of the view that assessee has sufficiently discharged the burden which lay upon it in terms of section 68 of the Act and no evidence has been brought on records to prove that the amount of Rs. 3,00,00,000/- represents undisclosed money of the assessee. Therefore, we are not inclined to agree with the observation of the ld. CIT(A). Accordingly, the addition of Rs.3,00,00,000/- is hereby deleted and the grounds of appeal no. 5 to 7 are allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal, by the assesse, is directed against the order dated 30.06.2016 passed by the learned CIT(A)-I, Agra in the matter of assessment passed under section 144 of the Income Tax Act, 1961 for Assessment Year 2011-12 by the Dy. CIT, Circle-3, Mathura. The assessee has taken following grounds:
1. BECAUSE, the authorities below while framing the assessment under section 144 of the Act and sustaining the addition made therein was highly unjustified in discarding the past history of the ‘appellant’.
2. BECAUSE, while doing so the Ld ‘CIT(A)’ erred in law in overlooking and thereby not considering the binding decisions of the Hon ’ble Allahabad High Court and Hon ’ble ITA T, Agra Bench.
3. BECAUSE, while confirming the addition the Ld. CIT(A) was highly unjustified in holding that if books are not maintained presumptive rate of 8% should have been applied by the AO ignoring the fact on records that appellant has maintained Books of Accounts which are audited and as such case do not fall under the provisions of section 44AD of the Act.
4. BECAUSE, application of profit @ 8% is without any basis, evidence and is highly excessive and unreal in the light of facts of the case.
5. BECAUSE, upon overall consideration of the facts and in the circumstances of the case authorities below were highly unjustified in treating the ‘Advance against Property’ amounting to Rs.3,00,00,000/- as ‘Unexplained Cash Credits’ without examining the Creditor, looking to its Books of Accounts and without any justifiable reason . The addition had been made and sustained purely on the consideration of suspicion and unfounded presumptions.
6. BECAUSE, alternatively, in any view of the matter no addition under section 68 can be validly made after rejecting the books of account as the credits pertains to same set of books which had been held unreliable by the learned ‘AO’ while framing assessment.
7. BECAUSE, alternatively, in any view of the matter, entire addition of 3,00,00,000/- cannot have been validly made as the same is liable to be telescoped to the extent of addition made against extra profit as sustained.
8. BECAUSE, the ‘appellant’ denies levy of interest under section 234B of the Act as the Income of the assessee is subjected to TDS.
9. BECAUSE, while making the assessment the authorities below made various observations/ conclusions which are contrary to facts available on While making the addition submission made and evidences filed have been rejected arbitrarily.
10. BECAUSE, the order appealed against is arbitrary, illegal, contrary to the facts, material on record, law and principles of natural justice.
The ‘appellant’ reserves his right to add, delete, modify, alter or substitute any or all the grounds of appeal.
2. Vide Grounds No. 1 to 4 assessee has challenged the action of the authorities below in making trading addition by application of N.P rate @8% on contract receipts ignoring the past history of the assessee which as per judicial opinion is a material consideration for estimation of income while proceeding under section 144 of the Act.
3. The assessee is a civil contractor doing civil construction work. Return of Income was filed electronically on 28.09.2011 showing income of Rs. 29,32,732/-. Case was selected for scrutiny under ‘CASS’, which got culminated into Assessment order dated 28.03.2014 passed under section 144 of the I.T. Act making trading addition of Rs. 1,42,88,131/- which was reduced to Rs. 1,14,80,575/- by Ld. CIT(A) and Rs. 3,00,00,000/-in respect of advance received from M/s Easyway Solutions (P) Ltd.
4. On appeal, the Ld. CIT (A), confirmed the action of the learned Assessing officer on principals, reduced the N.P rate from 12% to 8% placing reliance upon ITAT, Agra Bench order in the case of Mahesh Chand, Contractor Vs ITO in ITA No. 359/Agra/2011, after observing on page-5 of the appellate order that “Once books of accounts are rejected then the learned Assessing officer has to estimate the income, but the estimation has to be done in a proper manner and on some basis.”
5. Shri. Anurag Sinha, Advocate, Ld. Counsel of the assessee filed a Synopsis together with Paper Books in two sets. The Ld. A.R submitted that where books of accounts are rejected and profit is to be estimated, it is the past history which is the most relevant criteria and such a view has been approved in following cases by the Jurisdictional High Court: –
a) ACIT vs. D. M. Brothers(2010) 44 DTR 0013 (All) (APB-57 -62)
b) CIT vs. Target Construction Co. Ltd.(2015) 55 294 (All)(APB-63-65)
c) Pragati Engineering Corporation vs. ITO (Order dated 04.2013 passed by Hon’ble Allahabad High Court in ITA No. 1 1/2012)(APB 66-70).
6. He submitted that similar view has been followed by this Bench of the Tribunal in the case of:-
a) ACIT vs. Jagdish Prasad Bansal (2012) 34 CCH 0446 (Agra) (APB 99 -102)
b) Sri Devendra Kumar vs. ACIT (Order dated 31 .08.2017 in ITA No. 495/Agra/2015)(APB 108 -119)
c) Infra Developers Vs ITO, Order dated 30.03.2017 in ITA No. 52/Agra/2013(APB 120 -133)
7. The Ld. A.R thus submitted that in light of settled judicial position, learned CIT (Appeals) has erred in estimation of net profit disregarding past history and further placed reliance to the orders passed by the Agra Bench in the cases of M/s Sri Siddheshwar Engineers India (P) Ltd 886 Takia Azad Gaan, Etawah Vs. ACIT- 5, Firozabad and Smt. ArchanaDutta, Mathura Vs ACIT, Circle-3, Mathura in ITA No. 330/Agra/2016. Copies of which were filed during the course of hearing.
8. The Ld. CIT, D.R Shri. Sunil Bajpayeestrongly disputed the arguments raised by the Ld. A.R, supported the order of the Ld. CIT(A), placed reliance upon the order passed by the ITAT Agra Bench in the case of Mahesh Chand Contractor (supra) and also submitted that estimate is a question of fact and not question of law. Therefore, reliance placed by the assessee to the case laws is fully misplaced.
9. We have heard both the sides, perused the material on records and the judgments relied upon. We agree with the argument of the learned Sr. D.R that estimation is a pure question of fact. It is also a fact on record that books of account are rejected by invoking provisions of Section 145(3) of the Act, pointing out discrepancies regarding details of sundry creditors, incomplete balance sheet, and no detail of sundry The assessee has not objected to the rejection of the books of account. Therefore, in absence of any challenge by the assessee the rejection of accounts is final. Thus, after rejection of accounts keeping in mind the judicial guideline available on issue, that after rejection of accounts, the income of the assessee is to be estimated on some reasonable basis for which comparable case and history of the assessee can be taken as a guide. The comparative position of trading results as appearing in the impugned order is reproduced as under:
