Home › Income-Tax Act › Basir Ahmed Sisodiya v. ITO (2020) 424 ITR 1/188 DTR 20/314 CTR 1/116 taxman.com 375/ 271 Taxman 247 (SC)

Basir Ahmed Sisodiya v. ITO (2020) 424 ITR 1/188 DTR 20/314 CTR 1/116 taxman.com 375/ 271 Taxman 247 (SC)

S.144: Best Judgment Assessment – Bogus purchases – Unregistered dealers –Addition of alleged bogus purchase creditors after rejection of books of account – assessee brought on record, where CIT(A) in penalty appeal proceedings affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer, accepted the explanation of assesssee that said creditors are genuine and accordingly deleted the penalty under section 271(1)(c) of the Act. That The dealers stood by the assertion made by the assessee about the purchases on credit from them-Held Factual basis on addition was made in quantum proceedings stands dispelled by the affidavits and statements of the concerned unregistered dealers in penalty proceedings- Addition cannot be justified, much less, sustained (Other contentions raised by assesse not adjudicated)- Addition is held to be not justified . [ S.68 , 271(1) (c ) ]

Facts

The case of assessee was selected for scrutiny proceedings vide notice issued under section 143(2) of the Act by ‘AO’ for assessment year 1998-1999. In assessment order passed by ‘AO’ one of the addition contested before the apex court, was pertaining to unexplained cash credits under section 68 of the Act of   Rs. 226,000 which pertained to purchase of marbles from unregistered dealers.  This addition made in the assessment order passed by ‘AO’ was sustained successively and concurrently by CIT(A), ITAT  and high court under section 68    of the Act, where they confirmed the ‘AO’  view that said creditors are bogus and  are not genuine creditors. Although assessee raised a jurisdictional question that after books are rejected to estimate the profit, very same books cannot be relied      to invoke section 68 of the Act qua stated purchase creditors, the same was rejected by High court. It viewed these credits were nothing but  bogus entries and same are rightly added to the income of  the  assessee. In  its  appeal before the apex court assessee raised that jurisdictional contention again which is noted extensively in the order of apex court. However said jurisdictional contention on possible applicability of section 68 where books are rejected is not adjudicated      in the order of apex court. Before apex court one interlocutory application was filed by assessee pointing to the CIT(A) order in penalty appeal proceedings under section 271(1)(c) of the Act vis-a-vis very same addition of alleged unexplained credits (which is contested on merits before apex court).In this order of CIT(A) deleting the penalty under section 271(1)(c) on very same additions under section 68 of the Act. The reason whichweighed with CIT(A) leading to deletion of

 

 

penalty under section 271(1)(c) was assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the officer. In the examination in their statements no infirmity was found.. The dealers stood by the assertion made by  the assessee about the purchases on credit from them; and which explanation has been accepted by the CIT(A) in paragraphs 17 and 19 of the penalty appeal order dated 13.1.2011.

 

Issue

Can addition made under section 68 of the Act in quantum assessment proceedings be sustained in wake of subsequent CIT(A) order deleting the penalty under section 271(1)(c) of the Act, on very same additions, after holding that assessee has proved genuineness of its purchase creditors (on basis of affidavits filed and their positive statements recorded) and which acceptance of genuineness    of said purchase creditors in said penalty proceedings under section 271(1)(c) of  the Act has attained finality?

 

Views

The court noted that “… it has now come on record that the appellant/assessee in penalty proceedings offered explanation and caused to produce affidavits and record statements of the concerned unregistered dealers and establish their credentials. That explanation has been accepted by the CIT(A) vide order dated 13.1.2011.”

 

Held

Allowing assessee’s appeal the court held that, the factual basis on  which  the Officer formed his opinion in the assessment order dated 30.11.2000 (for assessment year 1998-1999), in regard to addition of Rs.2,26,000, stands dispelled by the affidavits and statements of the concerned unregistered dealers in penalty proceedings. It was further noted that, this evidence fully supports the claim of   the appellant/assessee. It observed that, “The appellate authority vide order dated 13.1.2011, had not only accepted the explanation offered by the appellant/assessee but also recorded a clear finding of fact that there was no concealment of income     or furnishing of any inaccurate particulars of income by the appellant/assessee for the assessment year 19981999. That now being the indisputable position, it must necessarily follow that the addition of amount of Rs.2,26,000 cannot be justified, much less, maintained.” Finally it was concluded by the court that, “…accordingly, this appeal ought to succeed on this count alone and it would be unnecessary for     us to dilate on other questions/contentions urged by the parties as referred to in the earlier part of this judgment. 17. Accordingly, this appeal is allowed. The addition    of Rs.2,26,000/(Rupees two lakhs twenty-six thousand only) by the Officer under Section 68 of the 1961 Act, towards cash credit amount shown against the names     of concerned unregistered dealers for the assessment year 19981999, is hereby set aside.” (AY. 1998-99) (CA No. 6110 of 2009 dt. 24-04-2020)

Editorial : This decision is a peculiar decision where positive adjudication on facts in penalty proceedings has helped the assessee in deletion of the addition      in quantum order.

“What is true of the individual will be tomorrow true of the whole nation if individuals will but refuse to lose heart and hope.”

– Mahatma Gandhi