Matter restored to AO for assessee to discharge its burden of proof u/s 68 (of Income Tax Act, 1961)

1. The assessee company were subjected to search and seizure action under Section 132 (of Income Tax Act, 1961) along with other connected assessee's of the group. The assessee filed return of income declaring income of Rs. 10,98,47,908. The case was selected for scrutiny and notice under Section 143(2) (of Income Tax Act, 1961) was issued. The Assessing Officer observed that the assessee company was engaged in manufacturing and trading of metal sheets in the previous year relevant to the assessment year. The Assessing Officer also observed that during the course of search and seizure action, the Director of the assessee company Sh. Radhey Shyam Gupta admitted undisclosed income in respect of the company of Rs. 7 crores related to the year under consideration and Rs. 3.5 crores related to the assessment year 2009-10. The Assessing Officer made addition in the assessment order corresponding to the undisclosed transactions, evidences of which were found and seized in the course of search action. In addition to the above, the Assessing Officer also observed that during the search action at the residential premises of one of the Directors Sh. Radhe Shyam Gupta, some loose cheques of M/s. Shivalik Enterprises (HUF), duly signed, were found and seized. The ld. Assessing Officer was of the opinion that M/s. Shivalik Enterprises(HUF) who was appearing as creditors in the books of account of the assessee, had not supplied the goods to the assessee and it has provided only accommodation entries to the assessee. In the books of account of the assessee, a credit balance of Rs. 38,55,557/- was appearing in the name of M/s. Shivalik Enterprises(HUF). The assessee explained that the said party left some signed blank cheques with the Director of the assessee company which was to be given to their representatives on their instructions and representative along with a person of the company used to go to the bank to withdraw the money from their account and for utilization in Rewadi i.e. the factory place of the assessee or elsewhere and those cheques were kept with the Directors of the assessee company for safety purposes. The above submission of the assessee was not accepted by the Assessing Officer. In the absence of any documentary evidence provided by the assessee such as name of the representative of the creditors, the representative confirmation etc., the explanation given by the assessee that the representative along with the person of the company used to go to bank to withdraw the money from their accounts and utilized in Rewadi or elsewhere, was also found illogical by the Assessing Officer. The the need of opening bank account in 'Rewari' which was almost 500 kilometers away from 'Yamunanagar' was not explained by the assessee. The Assessing Officer also observed that from the bank statement of the creditors that cash was withdrawn immediately after the cheque was deposited in the bank. On the basis of all the circumstantial evidences, the Assessing Officer observed that it was a pre- planned decision of the assessee in collusion with the creditors to keep the signed cheques so that the assessee can immediately withdraw the money from the bank account, after deposit of cheque in the account of the creditor, which according to the AO was actually an accommodation entry. The Assessing Officer held that the credit of Rs. 38,55,557/- was unexplained and he added the same under Section 68 (of Income Tax Act, 1961).

2. CIT(A) held that the assessee failed to comply with three ingredients of Section 68 (of Income Tax Act, 1961) and the assessee failed to discharge the onus casted upon him under the provisions of Section 68 (of Income Tax Act, 1961) and, confirmed the addition.

3. On appeal, the ITAT held as under:

"We find from the order of the ld CIT(A) that as regards to the identity, even permanent account number (PAN) or was balance sheet etc of the assessee were not provided. As regards to genuiness of the transaction, , the same was in doubt from the observation of the AO that cash used to be withdrawn after deposit of cheque by the assessee. We find that no documents have been submitted by the assessee in support of the creditworthiness of the creditor. Thus according to us the assessee has failed to discharge its Burdon of proof for requirement of section 68 (of Income Tax Act, 1961) regarding the creditor. In view of the facts and circumstances, we are of the opinion that in the interest of justice, the assessee should be provided one more opportunity to discharge its burden of proof in respect of the creditor. Accordingly, we restore the matter to the file of the Assessing Officer for deciding the issue afresh in accordance to law. Needless to mention that the assessee shall be provided sufficient opportunity of being heard. As regards to the third proposition of the ld AR that the provision of section 68 (of Income Tax Act, 1961) are not applicable over the purchases, in view of the judgement of the CIT Vs Panchamdas Jain (supra) , is concerned , we find that the fact in the case of CIT Vs Panchamdas Jain (supra) purchases were not held bogus by the AO and thus the Hon'ble Court held that in absence of holding the purchases as bogus , the was not correct in holding the purchases on credit as unexplained u/s 68 (of Income Tax Act, 1961). But, whether purchases have been doubted in the case of the assessee or not is not clear from the facts before us and , thus we hold that as we have already restored the matter to the file of the Assessing Officer, the AO is directed to examine whether the purchases in the case have been found bogus or not and thereafter, he is directed to take action in view of the judgement of the CIT Vs Panchamdas Jain (supra) accordingly. As regards , the second proposition of the ld AR that part of the purchases from the creditor are only held as unexplained, we hold that the issue of examination whether the purchases in dispute are explained or not has been restored to the file of the AO for determination afresh, the proposition is thus rendered infructuous and not require our adjudication. As regards to the first proposition that the purchases in dispute pertained to earlier assessment year is concerned, we find that the issue has already been restored to the file of the Assessing officer for examination afresh, we direct the Assessing Officer to examine the issue as in which year the purchases in question were credited and take action accordingly in relevant year, in terms of the provisions of Section 150(1) (of Income Tax Act, 1961). Accordingly, the ground of the appeal is allowed for statistical purpose.”

Case Reference - M/s. Gupta Metal Sheet (P) Ltd, Vs. DCIT, Circle-II, Faridabad.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: 'C': NEW DELHI

BEFORE SH. I.C. SUDHIR, JUDICIAL MEMBER AND

SH. O.P. KANT, ACCOUNTANT MEMBER

ITA No. 1926/Del/2013

(Assessment Year: 2010-11)