1 ITA No 2399/Ahd/2009
. A.Y. 2006-07
IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, AHMEDABAD
(BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No. 2399/AHD/2009
(Assessment Year:2006-07)
M/s Natural Bio Organic Product Vs. Income Tax Officer (OSD),
B/2, Golden Plaza, Ankur Char Range 9, Surat
Rasta, A.K. Road, Surat.
(Appellant) (Respondent)
PAN: AAFFN5752M
Appellant by : Shri M.J. Shah
Respondent by : Shri P.L. Kureel, Sr. D.R.
( )/ORDER
Date of hearing : 08-10-2013
Date of Pronouncement : 18 -10-2013
PER SHRI ANIL CHATURVEDI,A.M.
1. This appeal is filed by the Assessee against the order of CIT(A)-V, Surat
dated 29.05.2009 for A.Y. 2006-07.
2. The facts as culled out from the order of lower authorities are as under.
3. Assessee is a firm engaged in the business of manufacturing and sale of
Bio Organic Fertilizer. It filed its return of income for A.Y. 06-07 on
04.10.2006 declaring total income of Nil after claiming deduction of Rs.
2 ITA No 2399/Ahd/2009
. A.Y. 2006-07
28,42,041/- under Section 80JJA of the Act. The case was selected for
scrutiny and thereafter the assessment was framed u/s. 143(3) vide order
dated 31.12.2008 and the total income was assessed at Rs. 61,76,377/-.
Aggrieved by the order of A.O., Assessee carried the matter before
CIT(A). CIT(A) vide order dated 29.09.2009 dismissed the appeal of the
Assessee. Aggrieved by the order of CIT(A), the Assessee is now in
appeal before us and has raised the following grounds:-
1.1 The CIT(A) erred in upholding the addition of Rs. 33,34,336/- on account of
unexplained cash credit under section 68 of the I.T. Act, 1961.
1.2 The CIT(A) ought to have appreciated the overall facts and circumstances of the
case and should have deleted the addition of Rs. 33,34,336/- made on account of
unexplained cash credit under section 68 of the I.T. Act, 1961.
2.1 The CIT(A) further erred in not appreciating the facts and legal submissions and
in the process erred in confirming the addition of Rs. 28,42,041/- on the pretext of
rejection of deduction claimed under section 80JJA of the I.T. Act, 1961.
Ground no. 1.1 and 1.2 are in connection with addition made u/s. 68
and interconnected and both the grounds are considered together.
4. During the course of assessment proceedings, A.O. noticed that Assessee
has shown receipt of unsecured loan of Rs. 33,34,336/- which was
claimed to have received from OM Textiles and Elegant Diamond
Company. To verify the genuineness of transaction and the
creditworthiness of the persons, notice under section 133(6) was issued to
the parties and they were also asked to confirm the transaction by
producing the copy of contra account, bank statement, return of income,
proof of identity etc.
3 ITA No 2399/Ahd/2009
. A.Y. 2006-07
5. In the case of OM Textiles, A.O. noticed that the bank account furnished
pertained to period 1.04.2006 to 23.05.2006 and the same was not
covered under the period of scrutiny. He also observed that in the
statement that there were some entries of cash amounting to Rs. one lac
but as the bank account for the period was not provided of the persons
who had advanced the money to the Assessee, A.O. was of the view that
the genuineness of the transaction and creditworthiness of the person
advancing the fund left unproved. With respect to Elegant Diamond
Company, A.O. noted that the information called from Elegant Diamond
Company was not received from Elegant Diamond Company till the date
of finalization of assessment order but however the Assessee had
submitted the copy of confirmation statement, acknowledgement of
return of income, copy of bank account which it had claimed to have
been received directly from Elegant Diamond Company. The submission
of the Assessee was not found acceptable by the A.O. for the reason that
(i) none of the documents were original and were merely photo copies
bearing no date of issue/preparation. (ii) The signature on the copy of
confirmation of account and on the copy of acknowledgement of return
of income of Shri Rikhab Chand Jain did not tally. (iii) The
acknowledgement of the return of income did not establish any relation
between Shri Rikhab Chand Jain and Elegant Diamond Company, in
whose name the notices were issued. (iv) The return of income of Elegant
Diamond Company was filed at Gandhidham despite the fact that the
address given by the Assessee was of Mumbai. (v) The income shown in
the return of income was only Rs. 1,30,028/- which according to A.O.
creates a doubt about the capacity to loan Rs. 30 lacs. (vi) The bank
statement of Elegant Diamond Company did not carry the name and the
4 ITA No 2399/Ahd/2009
. A.Y. 2006-07
branch of the bank in which the account was maintained. In view of
these facts, the A.O. considered that the Assessee has failed to prove the
genuineness of transaction. He accordingly considered the amount
received from both the parties as unexplained cash credit under section
68 and made an addition of Rs. 33,34,336/-. Aggrieved by the order of
A.O., Assessee carried the matter before CIT(A), CIT(A) upheld the
order of A.O. by holding as under:-
"I have gone through the assessment order and also through the submissions made
and judgments relied upon by the appellant. The appellant's main contention is that
when the payments are routed through banks the genuineness of transaction is
proved. In this regard the appellant enclosed the bank statement of M/s Elegant
Diamond Co. along with the copy of the acknowledgement of the return filed by the
said party. The bank statement so attached does not bear the name and address of
the person to whom that bank account belong. Further the confirmation filed by the
appellant of the said party bears the signature which differs from the signature of the
said party on the return filed by him. The appellant did not file any supporting
document like affidavit from the said party affirming that the signature on the
confirmation and on the return of income are of the same person. Merely the
transactions are routed from bank is not sufficient compliance. The circumstantial
evidence too play very important role. Here the documents attached in support of
appellant's claim are against his claim, therefore, I hold that the addition made by the
AO as unexplained cash credits is correct. As regard loan received from M/s Om
Textiles the appellant has filed confirmation and acknowledgement of return and the
bank statement of year not relevant to the year under consideration. In this regard, I
disagree with the appellant's contention that there is no scope for doubting the same
just because subject depositor has by mistake provided the bank statement for
subsequent period. The appellant in his support did not produce the bank statement of
the period under consideration even before me. Without verifying the entries in
appellant's bank account with that of the depositor I am not is position to accept the
appellant's submissions. Therefore, addition as unexplained cash credit from M/s OM
Textile made by the AO stands confirmed. Therefore, the appeal of the appellant
against the addition of Rs.33,34,336/- of unsecured loans treated as unexplained cash
credits u/s 68 of the Act is rejected."
6. Aggrieved by the order of CIT(A), the Assessee is now in appeal before
us. Before us, with respect to Elegant Diamond Company it was
submitted that it was a proprietory concern of Shri Jain. Assessee placed
on paper book, the copy of confirmation from Elegant Diamond
5 ITA No 2399/Ahd/2009
. A.Y. 2006-07
Company which contained in PAN number and Address. He also placed
at page 73 of the paper book, the confirmation of balance as on
31.03.2006 and pointed to the fact that it contains the telephone number
of Elegant Diamond Company and further submitted that the Assessee
has also deducted TDS. He also placed on record, the copy of return of
income of Shri Jain for A.Y. 06-07 at page 74of the paper book and the
copy of his bank account showing the payment of Rs. 30 lacs by cheque.
With respect to OM Textile, he placed on record the copy of the ledger
account at page 79 of the paper book. He also placed on record at page
80, the copy of return of income of Shri Jaysukhbhai Lathia. He
therefore submitted that the Assessee has discharged the initial onus cast
upon the Assessee and therefore no addition was called for. The ld. D.R.
on the other hand submitted the Assessee has not proved the genuineness
of the transaction and he pointed to the finding of CIT(A) and thus
supported the order of A.O. and CIT(A).
7. We have heard the rival submissions and perused the material on record.
It is an undisputed fact that Assessee has received loan from two parties
namely Elegant Diamond Company and OM Textile. With respect to
Elegant Diamond Company, Assessee has placed on record the copy of
confirmation of accounts which contains the Telephone number of the
creditor. The ld. A.R. has also placed on record the copy of return of
income and the bank book of Elegant Diamond. We also find that during
the course of assessment proceedings, the Assessee has furnished these
materials but no enquiry was made by the A.O. He has simply rejected
the submissions of the Assessee for the reasons listed in his order. We
are of the view that in the present case, with respect to Elegant Diamond
6 ITA No 2399/Ahd/2009
. A.Y. 2006-07
Company, the Assessee has duly discharged the initial onus cast upon it
and thus no addition is required on that count.
8. With respect to OM Textile, we find that Assessee has filed copy of the
return of income and has also filed the copy of his pass book. However,
no copy of the confirmation has been filed before us. Considering the
totality of the facts, we are of the view that in the interest of justice and
fair play one more opportunity be granted to the Assessee to substantiate
its stand before the A.O. We therefore remit the matter with respect to
OM Textiles to the file of A.O. and direct him to verify the submissions
made by the Assessee and thereafter decide the issue in accordance with
law and after giving a reasonable opportunity of hearing to the Assessee.
Thus this ground of Assessee is partly allowed.
Ground no. 2 is with respect to rejection of claim of deduction of Rs.
28,42,041/- under Section 80JJA.
9. A.O. noticed that Assessee had claimed deduction of Rs. 28,42,041 under
80JJA. The Assessee was asked to submit documentary evidence to
confirm that it has fulfilled the condition laid down in the section for
claiming the deduction. A.O. also noticed that most of the bills/ invoices
for sale of Vermin Compost was issued in the name of Shri Narsibhai
Savalia. A.O. issued letter u/s. 133(6) to the party for confirmation of
transaction but the letter was returned unserved. Thereafter A.O. issued
commission under Section 131(1)(d) to ITO, Amreli assigning inquiry for
confirmation of transaction with Shri Narsibhai Savalia. A.O. noted that
ITO, Amreli vide letter dated 22.12.2008 has reported that Shri Narsibhai
7 ITA No 2399/Ahd/2009
. A.Y. 2006-07
Savalia had in his statement which was recorded on oath had shown his
ignorance about any transaction with the Assessee firm. The Assessee
was thereafter asked to explain the mismatch in the information, but no
satisfactory explanation was given by the Assessee. Thus in the absence
of satisfactory explanation, Assessee disallowed the claim of deduction
under 80JJA. Aggrieved by the order of A.O., Assessee carried the matter
before CIT(A). CIT(A) after considering the submissions of the Assessee
upheld the order of A.O. by holding as under:-
"I have gone through the assessment order and also through the submissions made
and judgments relied upon by the appellant. Except from the argument of the
appellant that the general project information consists of the date of commencement
of business as 2005 I disagree with all the other arguments of the appellant. But
merely the date of commencement of business in the said report does not prove that
the business was actually commenced in the year 2005. From the documents
submitted before me it could be seen that the appellant's claim that statement given by
Shri Narsibhai is not correct, is absolutely not acceptable. The signatures on the
statement recorded and that on the delivery challans produced by the appellant do
not match. Further the test reports of M/s Pollucon Laboratories Pvt. Ltd submitted
by the appellant appears to be fabricated as there is printing as well as signature
difference in all the four test reports. The condition for claiming deduction under
section 80JJA is, "a deduction of an amount equal to the whole of such profits and
gain for a period of five consecutive assessment years beginning with the assessment
year relevant to the previous year in which such business commences". In the
appellant's case from the documents submitted before me it is not proved that the
business has actually been commenced during the year under consideration.
Therefore, I do not find any reason to interfere with the decision of the AO and hence
confirm the addition of Rs. 28,42,041/- made by the AO by disallowing the deduction
u/s. 80JJA.
10. Aggrieved by the order of CIT(A), the Assessee is now in appeal before
us. Before us, at the outset, the ld. A.R. submitted that the statement of
Shri Narsibhai Savalia was recorded at the back of the Assessee and the
Assessee was not granted any opportunity to cross-examine him. He
further submitted that the Assessee be granted an opportunity to cross-
examine. Shri Narsibhai Savalia and therefore the matter may be remitted
8 ITA No 2399/Ahd/2009
. A.Y. 2006-07
to the file of A.O. with necessary directions. The ld. D.R. on the other
hand supported the order of A.O.
11. We have heard the rival submissions and perused the material on record.
We find commission under Section 131(1)(d) of the Act was issued to
ITO, Amreli who was assigned to make enquiry with Shri Narsibhai
Savalia about the transaction of alleged sale by with the Assessee. A.O.
in his order has noted that ITO, Amreli vide order dated 22.12.2008 has
reported about ignorance of any transaction by Shri Narsibhai Savalia
with the Assessee firm. The A.O. has relied on the aforesaid statement to
deny deduction. A.O. has also noted that the majority of sales by the
Assessee was to Shri Narsibhai Savalia. We further find that Assessee
was not granted an opportunity to cross-examine Shri Narsibhai Savalia.
12. In the case of CIT vs. Eastern Commercial Enterprises (1994) 210 ITR
103 (Cal) Hon. Calcutta High Court has held as under:-
"As a matter of fact, the right to cross examine a witness adverse to the Assessee
is an indespensible right and the opportunity of such cross examination is one of
the corner stones of natural justice. It has further held that it is trite law that
cross examination is the sine qua non of due process of taking evidence and no
adverse inference can be drawn against a party unless the party is put on notice
of the case made out against him. He must be supplied the contacts of all such
evidence, both oral and documentary, so that he can prepare to meet the case
against him. This necessarily also postulates that he should cross examine the
witness hostile to him."
13. In view of the aforesaid facts, and to meet the ends of justice, we are of
the view that the Assessee be granted an opportunity to cross-examine
Shri Narsibhai Savalia. We therefore remit the matter to the file of A.O.
and direct him to allow the opportunity to cross-examine of Shri
Narsibhai Savalia to the Assessee and after considering the submissions
9 ITA No 2399/Ahd/2009
. A.Y. 2006-07
of Assessee decide the issue in accordance with law and after giving
reasonable opportunity of hearing to the Assessee. Thus this ground of
Assessee is allowed for statistical purposes.
14. In the result, the appeal of the Assessee is partly allowed for statistical
purposes.
Order pronounced in Open Court on 18 -10 - 2013.
Sd/- Sd/-
(G.C.GUPTA) (ANIL CHATURVEDI)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad. TRUE COPY
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals)
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad
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