Siva Electronics (India) Pvt. Ltd. , New ... vs Assessee

Siva Electronics (India) Pvt. Ltd., vs. Income-tax Officer, 15-A-30, WEA, Karol Bagh, Circle-8(4), New Delhi. New Delhi. (PAN: AABCS5444E) (PAN: AABCS5444E) (Appellant) (Respondent)

Appellant by: Shri Ajay Wadhawa, CA Respondent by: Shri BRR Kumar, Sr. DR

Date of hearing : 30.12.2014 Date of pronouncement: 17.03.2015

ORDER

PER I.C. SUDHIR: JUDICIAL MEMBER In appeals preferred by the assessee for the assessment years 2006-07

and 2007-08, the common grievance against the First Appellate Order is that

the Learned CIT(Appeals) did not afford the adequate opportunity of being

heard to the assessee despite direction of the ITAT vide its order dated 2

29.04.2010 in ITA No. 3645/Del/2009 in assessment year 2006-07 and

similar was the action of the Learned CIT(Appeals) for the assessment year

2007-08.

2. In support of the above common grievance, the Learned AR submitted

that during the appellate proceedings for the assessment year 2006-07, there

was genuine difficulty in representing the case of the assessee on the dates

fixed for hearing before the Learned CIT(Appeals) and without appreciating

the difficulty, the Learned CIT(Appeals) refused the requested adjournment

on the given date. Even on the date when the Learned CIT(Appeals) opted to

proceed ex parte, the representative of the assessee waited long for his turn

of hearing before the Learned CIT(Appeals) and since the representative of

the assessee had to attend the other first appellate authority, hence, he could

not wait any longer. The Learned CIT(Appeals) instead of adjourning the

matter, proceeded ex parte and has repeated the additions made in the first

round of first appeal. The Learned AR submitted that after learning that the

Learned CIT(Appeals) was reluctant to give any adjournment and that he

was determined to pass an order against the assessee because of some

unfortunate past incidence, the assessee a 87 years old person had moved

application before the Chief Commissioner of Income-tax-III, Central

Revenue Building, New Delhi on 21.2.2011 for transfer of the appeals to 3

some other first appellate authority to protect the interest of justice. The

Learned AR drew our attention to that letter, a copy thereof has been made

available in the paper book filed by the assessee at page No. 3 and 4 of the

paper book along with an affidavit. He also referred page nos. 7 to 10 of the

paper book which are copies of application for adjournment moved before

the Learned CIT(Appeals) specifying sufficient reasons for the same. The

Learned AR submitted further that the assessee has got good case and if the

first appeal would have been heard and decided considering the materials

available on record, the additions in question would have been deleted.

Similar approach was adopted by the First Appellate Authority during the

assessment year 2007-08 as when the hearing was finally fixed on

09.08.2010, the Learned AR waited long for his turn out of the office of the

Learned CIT(Appeals) and thereafter had to leave to attend other hearing.

The order was passed ex parte on 18.08.2010.

3. The other common grievance of the assessee in all the three appeals is

the addition made under sec. 68 of the Act on account of unexplained cash

credits which as per the assessee are actually the sales made in cash and thus

would not have been added under sec. 68 of the Act keeping in view of the

nature of the business of assessee. The Learned AR that in response to the 4

query raised by the Assessing Officer in this regard the assessee had

submitted as to why cash deposits in bank account be not treated as

unexplained cash credits under sec. 68 of the Act. In support, the assessee

had filed details of cash sales with name and address of parties, details of

expenses above Rs.50,000 and books of account produced along with cash

sales bills.

4. Besides above, in the assessment year 2006-07, the Learned

CIT(Appeals) has upheld the addition of Rs.1,16,077 on account of

disallowance made towards commission, Rs.1,97,963 incurred on

advertisement and publicity. Again in the assessment year 2008-09, the

Learned CIT(Appeals) has upheld addition of Rs.1,00,000 made on account

of the disallowance of the claimed donation.

5. The Learned DR on the other hand submitted that more than sufficient

opportunities were granted by the Learned CIT(Appeals) for the assessment

year 2006-07 while deciding the first appeal in compliance of the orders of

the ITAT. The assessee, however, on one pretext or the other did not bother

to present its case before the Learned CIT(Appeals) in a proper manner.

Thus, the Learned CIT(Appeals) was having no option but to decide the

first appeal on the basis of material available on record. Similar was the

position in the appeal for the assessment year 2007-08.

5

6. Having gone through the orders of the authorities below as well as

material available on record, we find that in the assessment year 2006-07,

the matter was remanded back by the ITAT to the first appellate authority on

the basis that notice for last hearing i.e. 07.08.2009 issued by the first

appellate authority was not received by the assessee which resulted in

passing of ex parte order in the first appeal. The Learned CIT(Appeals) in

compliance has decided the first appeal ex parte since despite opportunities

afforded to the assessee, the assessee was taking adjournments on one

pretext or the other . The submission of the Learned AR for seeking the

adjournment before the Learned CIT(Appeals) is that the assessee due to

some past unfortunate incidence had sought the transfer of the first appeal

from any other First Appellate Authority vide letter dated 21.02.2011 to the

learned Chief Commissioner of Income-tax-III, New Delhi. A copy of this

letter has been made available at page Nos. 1 and 2 of the paper book.

Before this date, the assessee had also moved applications before the

Learned CIT(Appeals) for adjournment due to some sufficient reasons.

Lastly on 04.08.2011 which was fixed for final hearing, assessee had sought

adjournment giving the reference of letter dated 21.02.2011 seeking transfer

of the appeal to some other first appellate authority, which was rejected by 6

the Learned CIT(Appeals) and order was passed on 05.08.2011. Copies of

these letters have been made available at page No. 7 to 10 of the paper book.

The Learned CIT(Appeals) has thus adopted the First Appellate Order on the

issues which was passed in the first round on 11.08.2009. This First

Appellate Order was the subject matter of appeal preferred by the assessee

before the ITAT, which was set aside and remanded back to the file of the

Learned CIT(Appeals) for fresh consideration.

7. There is no dispute that the Learned CIT(Appeals) has afforded

sufficient opportunity to the assessee to present its case and file evidence in

support to justify the claims but at the same time, the assessee has also

shown some reasons for seeking adjournments.

8. So far as additions sustained by the Learned CIT(Appeals) in the

assessment year 2006-07 are concerned, the reason mentioned by the

Learned CIT(Appeals) was that despite opportunity the assessee did not file

evidence in support of request for deletion of the addition of Rs.60,60,577

u/s. 68 on account of unexplained cash credit, disallowance of Rs.1,16,077

made on account of payment of commission, Rs.1,97,967 on account of

advertisement and publicity expenses.

7

9. Opposing the addition of Rs.60,60,577 made on account of

unexplained credit, the contention of the Learned AR remained that the

provisions of sec. 68 of the Act are not applicable since the payment in

question mostly in cash were made against the sales made by the assessee

and details of 206 parties who had made purchases from the assessee were

submitted to the Assessing Officer vide letter dated 04.09.2008. Neither the

Assessing Officer nor the Learned CIT(Appeals) has examined the said

parties before making and upholding the addition. He submitted further that

in the assessment years 2009-10 and 2010-11 in the assessments framed

under sec. 143(3) of the Act, no such addition under sec. 68 has been made.

In support he filed copies of those assessment orders for the assessment

years 2009-10 and 2010-11. He submitted further that an identical issue has

been raised in the appeals preferred by the assessee for the assessment years

2007-08 and 2008-09. He referred the decision of Hon'ble Supreme Court in

the case of CIT vs. Excel Industries Ltd. (2013) - 358 ITR 295 (S.C) holding

that once the Revenue in other assessment years accepted the orders of the

ITAT in favour of the assessee and did not pursue the matter any further,

that being so, the Revenue cannot be allowed to flip-flop on the issue and it

ought let the matter rest rather than spend the taxpayers money in personal

litigation for the sake of it.

8

10. Similar arguments had been adopted by the Learned AR on an

identical issue raised in the appeals for the assessment years 2007-08 and

2008-09. He reiterated that provisions under sec. 68 of the Act are not

applicable on the sales made by the assessee to the parties and thus he is not

expected to keep records of those parties for future reference. The Learned

AR submitted that the goods sold are excisable and referred page No. 22 to

101 of the paper book for the assessment year 2007-08 wherein copies of

letter dated 18.8.2009 along with sales-tax registration and assessment order

for local and central sales-tax filed before the Assessing Officer and letter

dated 27.8.2009 along with cash sales bills filed before the Assessing Officer

have been made available. He also referred page Nos. 102 to 119 of the

paper book, which are copies of letter dated 31.8.2009, 04.11.2009,

12.11.2009 filed before the Assessing Officer along with details of central

excise duties paid, details of recasting closing stock and closing stock of

semi-finished goods in the process at different stages. He also referred page

No. 120A of the paper book which is reply dated 28.06.2010 of the assessee

to the interim remand report of the Assessing Officer dated 02.06.2010

furnished before the Learned CIT(Appeals). At page Nos. 126 & 127 of the

paper book has been placed the copy of the said remand report dated 9

02.06.2010. The Learned AR referred further the page Nos. 128 to 149 of

the paper book i.e. copies of letter dated 22.04.2010 and 26.05.2010 to the

Assessing Officer furnishing details of parties, complete bank statement and

copy of accounts from 01.04.2006 to 31.07.2007. Again in the assessment

year 2008-09, details of cash sales with name and address of the parties were

furnished before the Assessing Officer, copies whereof have been made

available at page Nos. 3 to 137 of the paper book for the assessment year

2008-09. The Learned AR also placed reliance on the decision of Hon'ble

Bombay High Court in the case of R.B. Jessram Fateh Chand vs. CIT

(1970) -75 ITR 33 (Bom.), holding that none-showing of addresses of

purchasers in the case of cash transactions cannot be a ground for rejection

of books of account of a seller-assessee.

11. Learned DR on the other hand placed reliance on the orders of the

authorities below, discussed above.

12. In the assessment year 2006-07, we find that the Assessing Officer has

mentioned at page No.2 para 2 of the assessment order that the assessee vide

letter dated 04.09.2008 had furnished a list of 206 parties. He has mentioned

further that notices under sec. 133(6) were sent to all these parties, however,

none of them making cash purchases from the assessee company confirmed 10

the assessee's submission. He has accordingly made the addition of

Rs.60,60,577 under sec. 68 of the Act on account of unexplained cash

credits. The Learned CIT(Appeals) upheld the addition simply following his

earlier order dated 11.8.2009 on the basis that despite opportunities the

assessee did not file any documents or evidence in support of its claim.

13. In the assessment year 2007-08, the Assessing Officer has made

additions of Rs.57,05,000 under sec. 68 of the Act on account of

unexplained cash credits on the basis that copies of relevant bills against the

claimed sales were not filed to substantiate the claim of these cash deposits

being received on account of cash sales. The Learned CIT(Appeals) has

recorded the contention of the assessee that all the cash sales have been

properly recorded in the stock register of the assessee and excise duty and

sales tax have been duly charged reflected from the invoices filed in the

paper book, all cash sales have been duly evidenced by proper gate passes

and other documents, the amount deposited represents the sales proceeds and

there is no credit entry within the meaning of sec.68 of the Act etc. The

Learned CIT(Appeals) called for remand report from the Assessing Officer.

The Assessing Officer responded with the report that notices under sec.

133(6) were duly sent to five parties for the purpose of obtaining 11

information about the transaction with the assessee. However, all the five

envelopes containing the notices were returned undelivered with the postal

general remarks that no such firm at the address given or premises found

locked despite repeated visits or firm has stopped operation. Therefore,

nothing can be definitely said regarding the genuineness of the transaction of

sales claimed by the assessee. The Assessing Officer has reported further

that in a very strange manner, replies to the notices under sec. 133(6) have

been received from the same entity to whom the notices were sent and

whose envelopes were returned back unserved. During the remand

proceedings, the assessee had filed before the Assessing Officer the stock

register, details of parties to whom cash sales were made, bank statement

and had produced the books of account on 22.4.2010 as mentioned by the

Learned CIT(Appeals). The Learned CIT(Appeals) called for the reply of the

assessee on the said remand report and being not satisfied with the same, has

upheld the addition.

14. In the assessment year 2008-09, the Assessing Officer has made

addition of Rs.67,23,904 under sec. 68 of the Act on account of unexplained

cash credits in this regard following the assessment orders for the assessment

years 2007-08 and 2006-07. He has mentioned that the claimed amount was 12

received from 236 parties and not even one party confirmed the transaction

with the assessee company. The Learned CIT(Appeals) has upheld the

addition without appreciating that books of account maintained in the

regular course of business have got evidentiary value and the evidence filed

in support cannot be ignored only because the parties to whom the claimed

sales were made were not found on the given address by the postal

authorities or reply filed by some of them were not appeared to be reliable.

15. In view of above discussion, we find that in all the assessment years

on the issue, the stand of the assessee remained that the cash deposits were

made out of the sales made by it to the parties and details of parties were

also furnished before the Assessing Officer hence provisions of sec. 68 of

the Act are not applicable. In the assessment year 2007-08, the Assessing

Officer also issued notices to five parties during the remand proceedings and

noted that the notices were returned undelivered with the postal general

remarks that no such firm at the address given or premises found locked

despite repeated visits or firm has stopped operations. The Assessing Officer

accordingly opined that nothing can be definitely said regarding genuineness

of the transaction of sales claimed by the assessee. In the assessment year

2006-07, the Assessing Officer has simply mentioned that the notices issued 13

to 206 parties were remained unresponded. In the assessment year 2008-09,

the Assessing Officer has noted that none of 236 parties from whom amount

was stated to have been received, has confirmed the transaction and in the

assessment years 2006-07 and 2007-08, the Assessing Officer and the

Learned CIT(Appeals) have upheld the action of the Assessing Officer. The

submissions of the assessee on the other hand remained that the claimed

sales have been properly recorded in the stock register of the assessee and

excise duty and sales tax have been duly charged, hence provisions under

sec. 68 of the Act are not applicable. In view of the cited decision of the

Hon'ble Bombay High Court in the case of R.N. Jessram Fateh Chand vs.

CIT (supra), we fully concur with the contention of the Learned AR that

non-showing of addresses of purchasers in the case of cash transactions

cannot be a ground for rejection of books of account of a seller assessee. The

case of the present assessee before us is however on better footing as in the

present case the assessee has not only maintained the details of the

purchasers but has also maintained the stock register and excise duty as well

as sales tax have also been paid. Considering all these facts in totality and to

meet the end of justice the matter is set aside to the file of the Assessing

Officer to examine the correctness of the above submissions and if he finds

that besides maintaining the details of the purchasers, the assessee has also 14

maintained the stock register and the cash sales transactions were also

subjected to the payment of excise duty and sales tax or even otherwise there

are sufficient material on record to establish the claim of the sales

transaction, the Assessing Officer will allow the claim of the assessee that

the transactions in question were sales and delete the addition made under

sec. 68 of the Act wrongly treating them as unexplained cash credit. It is

needless to mention over here that while deciding the issue, the Assessing

Officer will afford proper opportunity of being heard to the assessee. The

related grounds are thus allowed for statistical purposes.

16. In the assessment year 2006-07, the Assessing Officer has made

further disallowance of Rs.1,16,077 on account of commission paid and

Rs.1,97,967 on account of advertisement and publicity only on the basis that

these were higher in compassion to the last year and no evidence in support

was furnished. The Learned CIT(Appeals) has upheld the same. Likewise in

the assessment year 2008-09, claim of Rs.1,00,000 donation made to the

trust has also been denied, about which the contention of the Learned AR

remained that the trust is holding certificate under sec. 80G(5)(vi) of the

Income-tax Act, 1961. Since we have set aside the main issue regarding the

validity of addition made under sec. 68 of the Act raised in the assessment 15

years under consideration, the above additions questioned in the appeals for

the assessment years 2006-07 and 2008-09 are also set aside to the file of the

Assessing Officer to decide the same afresh after affording opportunity of

being heard to the assessee. These grounds are accordingly allowed for

statistical purposes.

17. In result, all the appeals are allowed for statistical purposes.

Decision pronounced in the open court on 17.03.2015

Sd/- Sd/- ( B.C. MEENA ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 17 /03/2015 Mohan Lal Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT(Appeals) 5) DR:ITAT ASSISTANT REGISTRAR

Date Draft dictated on Computer directly 12.03.2015 Draft placed before author 17.03.2015 Draft proposed & placed before the second member Draft discussed/approved by Second Member. Approved Draft comes to the Sr.PS/PS 19.03.2015 Kept for pronouncement on 17.03.2015 File sent to the Bench Clerk 20.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.