Kailash Chand Methi, Sawai Madhopur vs Department Of Income Tax

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 532/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2005-06

The I.T.O. cuke Shri Kailash Chand Methi, Ward 2, Sawai Madhopur Vs. Prop- M/s Rewadmal Kailash Chand, Nai Mandi, Gangapur City, Sawai Madhopur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACKPM 6965 C vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Mrs. Neena Jeph. fu/kZkfjrh dh vksj ls@ Assessee by : Shri Siddarth Ranka

lquokbZ dh rkjh[k@ Date of Hearing : 19/11/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 16/01/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the department against the order dated

28/03/2012 passed by the learned CIT(A)- Kota for A.Y. 2005-06. The

sole ground of appeal is against deleting the addition of Rs. 34,74,538/-

on account of unexplained cash creditors without going into the

examination of the creditworthiness of creditors and genuineness of

transactions.

2 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

2. In this case, the ITAT, Jaipur 'B' Bench in ITA No. 590/JP/2009

order dated 20/1/2008 had set aside the issue by giving the following

directions:

"There is no dispute to the fact the farmers/creditors examined are genuine persons and goods have been sold by them to the assessee. As regards the quantum and the affidavits the assessee should be given an opportunity of being heard and the cross examination of the said farmers/creditors. In the circumstances and facts of the case and in the interest of justice the matter is restored to the file of the A.O. to examine the issue denovo but by providing opportunity of being heard to the assessee. The A.O. is directed to act accordingly."

The learned Assessing Officer as per direction of this Bench had issued

notice to the assessee and also asked to produce 14 farmers for

verification. The appellant sought various adjournments on various

grounds. The details of opportunity being allowed by the Assessing

Officer have been mentioned on page Nos. 2 and 3 of assessment

order. On 17/09/2010, the assessee produced four farmers for

verification. The statement of four farmers namely Shri Babu Lal Meena,

Shri Ramji Lal Meena, Shri Ramswaroop Meena and Shri Dharmsingh

Meena were recorded U/s 131 of the Income Tax Act, 1961 (in short

the Act). The eminent portion of the statement has been reproduced by

the Assessing Officer on page Nos. 3 to 9 of the assessment order. It 3 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

had been confirmed by the farmers before the assessee that they have

given statement before the Inspector. The learned Assessing Officer

concluded that 24 persons cannot produce non-judicial stamp paper on

same day and also cannot be notarized on subsequent date. Shri Babu

Lal Meena, village- Seva had identified 14 creditors but he could not

express his identity on purchase of stamp on 15/2/2007. He further

held that these four farmers produced by the appellant were

confidential person of the appellant. The learned Assessing Officer cross

verified in the statement of Shri Babu Lal Meena with reference to Shri

Rewarmal Kailashchand where he had also not admitted exact sale

made to in the financial year 2004-05. He further assumed that

remaining farmers were not produced because of they were against the

appellant. He also relied on the findings given by the learned CIT(A),

Kota on difference in the signatures on various papers of the farmers.

He also noticed various discrepancies in the submissions made by the

assessee and finally added back the outstanding creditors at Rs.

34,74,538/- in the income of the assessee.

3. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the learned CIT(A), who had allowed

the appeal by observing as under:-

4 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

"I have gone through the A.O's report, assessee's submission, case records and the following observations/conclusions are worth mentioning:-

i) Non-production of 8 persons cannot be taken against assessee as despite my directions, no summons U/s 131 were issued by the A.O.

ii) I have gone through the statements recorded by A.O. and their cross examination by assessee. It was seen that all of them agreed that they have sold crops to the assessee on credit.

iii) Due to lapse of time, it was quite natural that these persons could not give exact details.

iv) The statement recorded by Inspector cannot be relied on as Inspector has no power to record statement under Income Tax Act. Secondly, the statements were in the hand writing of one person and signatures of farmer creditors were obtained on these statements.

v) All of them agreed that the signature on the affidavit were theirs and there is no evidence on record to suggest otherwise.

In view of the above discussion, I am of the view that no adverse inference can be drawn from the statements recorded by the A.O.. The A.O. is therefore directed to delete addition of Rs. 34,91,538/-

4. Now the Revenue is in appeal before us. The learned Sr. D.R.

supported the order of the Assessing Officer and argued that even in 5 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

second round of assessment, the appellant could not produce all the

farmers for verification before the Assessing Officer, therefore, he was

justified to add back outstanding creditors in the income of the

assessee.

5. At the outset, the learned A.R. for the assessee submitted the list

of outstanding creditors. Further he argued that in the set-aside

proceedings the learned Assessing Officer directed the assessee

respondent to bring the 14 cash-creditors whose statements were

earlier recorded by the Inspector. With much difficulty the assessee was

able to bring 4 out of 14 creditors/farmers for recording of statements.

In the statements recorded all 4 accepted that they had sold their crop

to the assessee and that they had left the sale consideration with the

assessee and have collected the consideration after a period of 1-2

months. However, the learned Assessing Officer disbelieved the version

of the farmers/creditors and again repeated the additions. Not a single

word has been spelt in the assessment order in the set-aside

proceedings with regards to genuineness or creditworthiness of the

farmers/creditors. In the first appeal proceedings before the learned

CIT (A), the learned CIT (A) gave instructions to the learned Assessing

Officer u/s 250(4) to issue fresh summons u/s. 131, take statements

and provide opportunity of cross examination to the assessee. He 6 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

instructed the learned Assessing Officer to choose any 20% of the 115

creditors on random sampling basis as is deemed convenient by the

learned Assessing Officer. The learned Assessing Officer did not issue

summons but instructed the assessee respondent to bring the

farmers/creditors as selected by him. On the basis of instructions issued

by the learned CIT (A), 20% of 115 creditors /farmers came to 23. He

also furnished details of land holding. Thus, he argued that the learned

Assessing Officer has simply stated that the agriculturists appeared to

be tutored. He submitted that at one side, learned Assessing Officer

refuses to issue summons u/s. 131 directly to the farmers/creditors to

be verified and simply instructs the assessee to bring the

farmers/creditors and puts the onus upon the assessee and at the same

time doubts the statement being given by the farmers/creditors. This is

highly arbitrary and improper. In the set aside proceedings out of 23

farmers selected for verification, 11 farmers/creditors were examined by

learned Assessing Officer and were also cross examined by assessee

respondent. One had died, one had brain hemorrhage, one had

paralysis, four couldn't come due to harvest season and four were

already examined in the set-aside proceedings. All the farmers who

came-up have accepted that they are having long term dealing with the

assessee respondent and that they used to collect their sale 7 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

consideration after 1-2 months. Not even a single farmer has denied

that no amount was due to be receivable from assessee in the financial

year 2004-2005. The assessee has already submitted the details of the

farmers / creditors thus their identity stood proved. Hon'ble ITAT has

itself held that the farmers / creditors are genuine persons and have

sold goods to the assessee. Thus their genuineness also stands proved.

Since they have been regularly selling agricultural produce to the

assessee respondent for the past more than 5-7 years and they also

have other sources of income their credit-worthiness also stands

proved. Thus the identity, genuineness and creditworthiness have been

proved by the assessee. He further relied upon on the following case

laws:-

(i) Anis Ahmed and sons Vs. CIT(A) (2008) 297 ITR 441 (SC).

(ii) CIT Vs. Kamdhenu Vyapar Co. Ltd. (2003) 263 ITR 692.

(iii) Madan Lal Vs. ITO (2006) 99 TTJ 538 (Jodh).

Therefore, he prayed to confirm the order of the learned CIT(A).

6. We have heard the rival contentions of both the parties and

perused the material on record. The Ward Inspector in original

proceeding had recorded the statement of 14 farmers. In set aside

proceedings, the assessee was able to bring four farmers out of 14

creditors/farmers for recording the statement. As the substantial time 8 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

has elapsed and there is no power with the assessee to force them to

appear before the Assessing Officer for verification but the statement of

4 farmers showed that they had accepted to sell their crops to the

assessee and they had left the sale consideration with the assessee and

had collected the consideration after a period of 1 to 2 months. The

farmers are illiterate persons and do not understand the income tax

legal proceedings. The appellant had furnished the detailed list before

the Assessing Officer with amount and some affidavits during the

assessment proceedings. In remand report proceedings, the learned

Assessing Officer had not doubted the genuineness and

creditworthiness of the farmers. The learned Assessing Officer should

have issued the 131 summons to all the farmers for appearance before

him. In set aside proceedings, out of 23 farmers selected for

verification. 11 farmers were examined by the learned Assessing Officer

and were also cross examined by the assessee/respondent. One had

died, one had brain hemorrhage, one had paralysis, four couldn't come

due to harvest season and four were already examined in the set-aside

proceedings. All the farmers who came-up had accepted that they are

having long term dealing with the assessee/respondent and that they

used to collect their sale consideration after 1-2 months, which is

general practice in the line of farming and selling in the mandis. The 9 ITA 532/JP/2012_ ITO Vs Kailash Chand Methi

appellant also furnished the details of land holdings of all the farmers,

which shows that they belonged to farming community. The case laws

relied upon by the assessee are squarely applicable on the case of the

assessee, therefore, we uphold the order of the learned CIT(A).

7. In the result, the revenue's appeal is dismissed.

Order pronounced in the open court on 16/01/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated 16th January, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the Order forwarded to:

1. vihykFkhZ@The Appellant- The ITO, Ward2, Sawai Madhopur.

2. izR;FkhZ@ The Respondent- Shri Kailash Chand Methi, Gangapur City

3. vk;dj vk;qDr¼vihy½@The CIT(A), Kota

4. vk;dj vk;qDr@ CIT, Jaipur

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 532/JP/2012).

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar