CIT vs Jagdish B. Agarwal

H.N. Devani, J.—In this appeal u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act), Appellant-Revenue has proposed the following three questions:

(A) Whether the Tribunal is right in law and on facts in confirming the order passed by the Commissioner (Appeals) in deleting the addition of Rs. 10,73,822 made on account of estimation of GP though the Assessee had failed to furnish books of accounts and vouchers of expenses before the assessing officer and the Commissioner (Appeals) ?

(B) Whether the Tribunal is right in law and on facts in confirming the order passed by the Commissioner (Appeals) in deleting the addition of Rs. 41,72,462 made on account of unexplained cash credits though the creditworthiness of credors was not established ?

(C) Whether the Tribunal is right in law and on facts in confirming the order passed by the Commissioner (Appeals) in deleting the addition of Rs. 3,84,282 made on account of disallowance of interest?

The assessment year is 2003-04 and the relevant accounting period is the financial year 2002-03. The Assessee is engaged in the business of petroleum products and transportation. Vide order dated 20-3-2006, the assessing officer framed assessment u/s 144 read with Section 143(3) of the Act making addition of Rs. 10,73,822 on account of estimation of GP and Rs. 41,72,462 on account of unexplained cash credits and disallowing interest of Rs. 3,84,282 The Assessee carried the matter in appeal before Commissioner (Appeals) and succeeded. Revenue preferred appeal before Tribunal but failed.

Learned senior standing counsel for the Appellant has assailed the impugned order of the Tribunal and has placed reliance upon the findings recorded by the assessing officer as well as the grounds stated in the memorandum of appeal.

Proposed question No. 1 relates to addition of Rs. 10,73,822 on account of estimation of GP. The assessing officer invoked the provisions of Section 145 of the Act and estimated the GP @ 3 per cent on the gross sales of Rs. 9,41,94,937 against the GP @ 1.86 per cent shown by the Assessee and the difference of 1.14 per cent of gross sales of Rs, 9,41,94,937 which amounted to Rs. 10,73,822 came to be added.

As can be seen from the order made by Commissioner (Appeals), Commissioner (Appeals) upon appreciation of evidence on record found that the rate of commission was 2.685 to 3.990 for a litre of diesel which was fixed and regulated by the Government agencies; the purchase and sale of petrol and diesel was controlled at fixed prices, hence, the Assessee could get profit only out of the fixed commission. According to Commissioner (Appeals) there could not be any estimation of higher net profit without any other adverse finding about the conduct of the business. As the assessing officer had not given any adverse finding about suppression of income, the estimation of 3 per cent was not justified.

The Tribunal in the impugned order has recorded concurrent findings of fact to the effect that the Assessee was engaged in retail sale of petrol and diesel and as the sale price and purchase price was fixed by the Government, the commission on such sale was also fixed, there was no question of making any estimation on the higher side. The Tribunal further noted that the books maintained by the Assessee did not reveal any glaring irregularity hence, the estimation of higher GP was not called for. That considering the nature of the Assessees business, the same did not give any scope for such estimation.

Thus, both Tribunal as well as Commissioner (Appeals) have concurrently round that the rate of commission on diesel was fixed and regulated by Government agencies and was not linked to sale price, as such the Assessee was getting only fixed commission. In the circumstances, in absence of any other adverse finding as regards conduct of the business, the question of estimation of the net profit would not arise. The order of the Tribunal in relation to the ground in question, therefore, does not give rise to any question of law.

In relation to proposed question Nos. 2 and 3, the assessing officer found that during the year under consideration, the Assessee had obtained unsecured loans of Rs. 41,72,462 in respect of which the Assessee had neither furnished confirmations from the concerned persons, nor any evidence to prove the identity and creditworthiness of the persons concerned. He accordingly held the unsecured loans to be unexplained cash credits and taxed the same in the hands of the Assessee u/s 68 of the Act. The Assessee had also claimed interest expenses of Rs. 3,84,282 on the aforesaid unsecured loans which also came to be disallowed and were added back to the total income of the Assessee.

A perusal of the order made by Commissioner (Appeals) indicates that before Commissioner (Appeals) on behalf of the Assessee it had been submitted that to explain the unexplained credits, the Assessee had submitted all the details of the parties; the names and addresses of all the parties were furnished; all the persons were assessed to tax and had PANs and the transactions were made through banking channel. Commissioner (Appeals) has recorded that the assessment order had been made on 20-3-2006 and the Assessee had furnished the required information on different dates and that all information was made available by 27-3-2006. All the creditors are assessed to tax and that for want of confirmations the additions were made. During the proceedings before Commissioner (Appeals), the assessing officer was asked to confirm the statement of the Assessee that the confirmations were available in the file. In response to which the assessing officer submitted that out of 31 persons 27 had submitted confirmations. The assessing officer had agreed that confirmations were received along with PANs and copies of returns of income filed by some of the depositors were available before the assessment order was passed. Commissioner (Appeals) upon appreciation of the evidence on record was of the view that the assessing officer was primarily concerned with the confirmation regarding credits; that in the audit report that was available before the assessing officer, the full postal addresses, PAN and amounts advanced were available; what the assessing officer wanted was confirmation; that the Assessee had furnished confirmations subsequently. Commissioner (Appeals) found that the Assessee had discharged the primary onus of submitting confirmations in 27 cases before the assessing officer and in the remaining four cases before him, and as such did not consider the credits as undisclosed. It was further noted that out of the said credits, in respect of 14 credits, the opening balances were carried forward from the preceding year and there were no new credits in the year under consideration. According to Commissioner (Appeals), if the assessing officer wanted to disbelieve the credits, he himself had to make further investigation, which was not done. No material had been gathered to disapprove the Assessees explanation. Therefore, there was no adequate material to invoke the provisions of Section 144 and resort to addition u/s 68 and accordingly deleted the addition of Rs. 41,72,462 as unexplained cash credits as well as the addition of interest of Rs. 3,84,422.

The Tribunal in the impugned order has after appreciating the evidence on record, concurred with the findings of fact recorded by the Commissioner (Appeals) and has found that the Assessee had discharged the primary onus u/s 68 of the Act by proving the identity of the depositors and also genuineness of the transactions and capacity of the depositors by filing relevant details.

Thus, both Tribunal as well as Commissioner (Appeals) have recorded concurrent findings of fact which clearly show that the Assessee had discharged the onus u/s 68 of the Act and had proved the identity of the creditors, genuineness of the transactions, as well as capacity of the creditors by furnishing relevant material. In the light of the concurrent findings of fact recorded by the Tribunal it is not possible to state that the conclusion arrived at by the Tribunal is in any manner unreasonable or perverse. On behalf of revenue, nothing is pointed to show that the Tribunal has taken into consideration any irrelevant material or that any relevant material has been ignored.

In the circumstances, there being no infirmity in the impugned order of the Tribunal, the same does not give rise to any question of law, much less a substantial question of law, so as to warrant interference. The appeal is, accordingly, dismissed.