Commissioner of Income-tax, Circle-II v. M/s. Ankit Garments Manufacturing Co
[Citation -2014-LL-1126-37]

Citation 2014-LL-1126-37
Appellant Name Commissioner of Income-tax, Circle-II
Respondent Name M/s. Ankit Garments Manufacturing Co.
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 26/11/2014
Judgment View Judgment
Keyword Tags search and seizure • limitation period • fresh assessment • original return • issue of notice • erroneous and prejudicial to interest of revenue
Bot Summary: Findings recorded in the said order are primarily factual and it has been observed that the assessee had submitted copies of accounts duly confirmed by all trade creditors and debtors, whose balances were in excess of Rs.1 lac at the closing date of the year under consideration. Copy of accounts of the assessee existing in this Circle have been verified from their respective assessment records and of the assessees existing elsewhere are being sent to their respective AOs for necessary verification at their end. During the course of the assessment, the assessee was required to produce copies of accounts duly confirmed by the concerned parties in respect of fresh loans/deposits as also in respect of debtors and creditors whose balances were in excess of Rs. 1 lac. The Commissioner of Income Tax issued notice under Section 263 of the Act on the ground that the assessment order was erroneous and prejudicial to the interest of the Revenue as the Assessing Officer had passed the assessment order despite noticing the fact that the assessee had not submitted confirmed copies of accounts in all cases. Thereafter, the Commissioner of Income Tax, set aside the assessment for fresh assessment as per law after affording opportunity to the assessee and upon making proper inquires and verifications. Provisions of Section 68 of the Income Tax Act, 1961 clearly lays down that where any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof, or the explanation offered is unsatisfactory, the sum so credited will be added to the income of the assessee. In the impugned order, the Tribunal has accepted that ITA 511/2013 Page 5 of 9 the assessee s contention that they had furnished confirmations of all the creditors and debtors having a balance of Rs.1 lac and above.


IN HIGH COURT OF DELHI AT NEW DELHI Date of decision: 26th November, 2014 ITA 511/2013 COMMISSIONER OF INCOME TAX CIRCLE II..Appellant Through Ms. Suruchi Aggarwal, Sr. Standing Counsel. versus M/S ANKIT GARMENTS MANUFACTURING CO. Respondent Through Mr. Ved Jain and Mr. Pranjal Srivastava, Advocates. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO SANJIV KHANNA, J. (ORAL) present appeal by Revenue under Section 260A of Income Tax Act, 1961 (Act, for short) relates to assessment year 2008-09 and impugns findings recorded by Income Tax Appellate Tribunal (Tribunal, for short) in their order dated 26th March, 2013. Findings recorded in said order are primarily factual and it has been observed that assessee had submitted copies of accounts duly confirmed by all trade creditors and debtors, whose balances were in excess of Rs.1 lac at closing date of year under consideration. Tribunal accordingly set aside and quashed order under ITA 511/2013 Page 1 of 9 Section 263 of Act passed by Commissioner of Income Tax. 2. respondent-assessee is partnership firm engaged in business of readymade garments. Search and seizure proceedings were carried out under Section 132 of Act on 16th October, 2007 in case of Shri Dwarka Das Agarwal Group and search had also taken place in business and residential premises of respondent-assessee. Subsequently, notice under Section 142(1) of Act was issued and respondent-assessee filed return on 2nd April, 2009, declaring same income as was declared in its original return i.e. Rs.2,94,87,060/-. 3. assessment records produced before us reveal that possibly no effective proceedings were held till 26th October, 2009. Order sheet for said period is not available. Effectuate steps were taken for first time by issue of notice dated 7th October, 2009, by Assessing Officer under Section 142(1) of Act, enclosing therewith questionnaire going into nine closely typed pages asking for information on 24 questions/points. Some of questions were also having sub questions. Voluminous data, confirmations and details were asked. One such direction was to furnish copies of accounts ITA 511/2013 Page 2 of 9 duly confirmed by all trade debtors and creditors, whose balances at end of year, were in excess of Rs.1 lac. turnover of assessee as declared in return of income for year in question was Rs.16,01,30,230/-. assessee attended proceedings, filed replies and other details. Hearings were held on 23rd November, 2009, 11th December, 2009, 15th December, 2009 and 29th December, 2009. Order sheets for proceedings held on 26th October, 2009 and thereafter till 23rd November, 2009 are not on record. However, assessment records are bulky and show that numerous papers, confirmations, particulars, explanations etc. were furnished. Confirmations submitted by respondent-assessee are more than 100 in number. debtors and creditors, it was stated, were located all over India and assessee had written and asked them for confirmations to be submitted to department. 4. As noticed above, last hearing before Assessing Officer was held on 29th December, 2009. On said date, assessee had furnished several confirmations and documents. 5. In assessment order passed on 31st December, 2009, two additions of Rs.11,94,982/- and Rs.3,64,696/-, on account of discrepancies, were made. 6. Assessing Officer, it is claimed by revenue, had ITA 511/2013 Page 3 of 9 recorded following office note:- "Office Note 1. All documents/materials seized/impound during course of search/survey operation conducted on 16.10.2007 in Dwarka Das Agarwal Group of cases have been examined and nothing adverse pertaining to this assessee in previous year under consideration; was noticed as result thereof. 2. Copy of accounts of assessee existing in this Circle have been verified from their respective assessment records and of assessees existing elsewhere are being sent to their respective AOs for necessary verification at their end. 3. During course of assessment, assessee was required to produce copies of accounts duly confirmed by concerned parties in respect of fresh loans/deposits as also in respect of debtors and creditors whose balances were in excess of Rs. 1 lac. Since all of such confirmed copies of accounts have not been filed so far and since assessment in this case is getting barred by time today, assessment in this case is completed subject to condition that same shall be reopened in case any discrepancy is noticed subsequently in aforesaid accounts." 7. Commissioner of Income Tax issued notice under Section 263 of Act on ground that assessment order was erroneous and prejudicial to interest of Revenue as Assessing Officer had passed assessment order despite noticing fact that assessee had not submitted confirmed copies of accounts in all cases (See paragraph 3 of above office note). ITA 511/2013 Page 4 of 9 8. Thereafter, Commissioner of Income Tax, set aside assessment for fresh assessment as per law after affording opportunity to assessee and upon making proper inquires and verifications. reasoning of Commissioner of Income Tax in his order under Section 263 of Act dated 27 th March, 2012 reads:- It was observed that assessment has been completed by Assessing Officer without obtaining complete reply to questionnaire annexed to notice u/s 142(1) dated 07/10/2009. In above questionnaire, assessee was inter alia asked to furnish copy of account, duly confirmed, of parties from whom loans/deposits were given or taken and also in respect of debtors and creditors having balance above Rs.1 Lakh. above information was not fully furnished by assessee inspite of specific request. Provisions of Section 68 of Income Tax Act, 1961 clearly lays down that where any sum is found credited in books of assessee and assessee offers no explanation about nature and source thereof, or explanation offered is unsatisfactory, sum so credited will be added to income of assessee. Since, assessee had failed to furnish confirmed copy of accounts till fag end of proceedings, inspite of specific request made by Assessing Officer in questionnaire annexed to notice u/s 142(1), provisions of section 68 were attracted. 9. Commissioner of Income Tax had documented stand of assessee that they had furnished confirmations from all trade creditors and debtors having balance of Rs.1 lac and above. In impugned order, Tribunal has accepted that ITA 511/2013 Page 5 of 9 assessee s contention that they had furnished confirmations of all creditors and debtors having balance of Rs.1 lac and above. said finding was recorded by tribunal after examining assessment records, which were produced on directions before Tribunal. In this factual background, it has been held that Commissioner of Income Tax could not have exercised power under Section 263 of Act. Thus order of Tribunal is that Commissioner of Income Tax had proceeded on wrong facts and assumptions. 10. It is noticeable that in grounds of appeal filed before us, names and details of single creditor or debtor having balance of Rs.1 lac or more from whom confirmation had not been furnished has not been indicated or stated. order passed by Commissioner of Income Tax under Section 263 also does not give names and details of any creditor or debtor who had not furnished or given confirmation. Thus, finding of Tribunal cannot be held to be perverse. 11. Learned senior standing counsel for Revenue had submitted that confirmations were filed on last day and, therefore, they were not verified. Thus, Commissioner of Income Tax was justified in holding that assessment order was erroneous and prejudicial to interest of Revenue. ITA 511/2013 Page 6 of 9 said contention must fail for number of reasons. Firstly, with regard to confirmations already submitted, note No.2 of office note is relevant. It records that copy of accounts of confirming parties had been verified from their respective assessment records with said Assessing Officer. In respect of confirming assessees assessed under another charge, details had been sent to respective Assessing Officer for verification at their end. It is not allegation of Revenue that on verification any of conformation given by creditors or debtors was found to be wrong or incorrect. Secondly, this is not ground or reason why Commissioner of Income Tax had invoked his power under Section 263 of Act and passed said order. power and order under said section is predicated that confirmations from all debtors and creditors were not furnished. order does not proceed or hold that Assessing Officer had failed to carry out required verification of confirmations furnished and, therefore, assessment order was erroneous and prejudicial to interest of Revenue. By accepting arguments of Revenue, we would be creating new case, which was not basis of notice and order under Section 263 of Act. ITA 511/2013 Page 7 of 9 12. It is unfortunate that in present case, Assessing Officer waited till end and took up assessment proceedings only three months before end of limitation period. detailed questionnaire was only issued in October, 2009 and first effective hearing was fixed on 26th October, 2009. Surprisingly, even order sheets between 26th October, 2009 till 23rd November, 2009 are not on record and have not been shown. reading of questionnaire going into 9 pages would indicate that enormous and magnitudes of details/information were asked for. This would have required time for compilation, affirmation and clarification. queries were answered by several letters on record. For confirmations, assessee had to write letters to creditors and debtors all over India and wait for their response. Tribunal has noted that assessee had submitted bill, invoices, vouchers etc. to Assessing Officer. 13. Normally, scrutiny assessment order under Section 143(3) of Act should be presumed and hypothesised as made after due verification and ascertainment of facts. Principle of finality has sound and salutatory basis, but can be disturbed as per statute and within confines of provision applicable. Therefore, it has to be ensured administratively that ITA 511/2013 Page 8 of 9 Assessing Officer act and proceed promptly, keeping in mind limitation period and also factum that assessee may require time to furnish details, confirmations etc. 14. In view of finding of Tribunal that assessee had furnished confirmations from all debtors and creditors, with balances in excess of Rs.1 lac; finding of fact that we do not see any reason to disturb, present appeal by Revenue has to be dismissed. We order accordingly. In facts of present case, there will be no order as to costs. SANJIV KHANNA, J. V. KAMESWAR RAO, J. NOVEMBER 26, 2014 NA ITA 511/2013 Page 9 of 9 Commissioner of Income-tax, Circle-II v. M/s. Ankit Garments Manufacturing Co
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