Bhavnesh Saini, JM-This appeal by the assessee has been directed against the order of Ld. CIT(A)-2, Ludhiana dated 10.2.2016 for assessment year 2011-12 on the following grounds:-
i) That the Learned Commissioner of Income tax (Appeals-ll) Ludhiana has erred in confirming the addition of 4,37,47,870/- under section 68 of the Income Tax Act 1961 as deemed income on account of profit earned on purchase/sale of commodities already shown as Business Income and not assessing the Deemed Income U/S 68 under head "Income from Other Sources" ignoring the instructions of Income Tax Deptt. on filing of ITR6 and legal as well as factual position of the case and without considering the various judgments on the same issue.
ii) That it is prayed that the order of the Learned Commissioner of Income Tax (Appeal) Ludhiana, may kindly be set aside and benefit of set off losses and depreciation may kindly be allowed against the addition so made u/s 68 of the IT Act 1961."
2. We have heard the Ld. Representatives of both the parties and perused the material on record. Briefly stated, the facts of the case are that assessee is a company engaged in forgings of auto parts, hardware and railway parts, scaffolding items etc, trading of cloth etc. and trading in commodities. The Assessing officer noted that assessee in response to the questionnaire attended the assessment proceedings from time to time and furnished information as called for. The books of account along with relevant documents were also produced which were examined and test checked. The assessee disclosed 'nil' income. Schedule-10 of the Audit report shows "other income" of Rs. 6,21,63,739/- which includes Rs. 4,37,47,870/- as commodity income. During the course of assessment proceedings, details regarding the genuineness of the said commodity income were called for. The Assessing officer noted that assessee has not been able to prove the bona fide of the said transactions and, therefore, alleged income from commodities is without any evidence. A show cause notice was issued to the assessee as to why the income received from trading of commodities may not be treated as income u/s 68 of the Income-tax Act, 1961.
3. The assessee filed a reply before the Assessing officer and submitted that for the purpose of charging of income tax, any income earned by the assessee should fall in any one of the heads of the income. The profit earned by the assessee company on account of purchase / sale of commodities falls under the head 'business income' as shown in the computation of the taxable income. The order of the ITAT Chennai Bench in the case of Shri P. Subramanian Vs. ITO following the decision of the Hon'ble Supreme Court in the case of CIT Vs. D.P. Sandhu Bros, Chembur was relied upon. The Assessing officer however, do not accept the contention of the assessee and noted that in the present case, the nature and source of income from trading of commodities remain unexplained and the entire transaction is sham as the assessee has not been able to give a credible evidence to prove source of Rs. 4.37 crores. The Assessing officer also referred to the decision of the Hon'ble Punjab & Haryana High Court in the caseof Dulari Digital Photo Services vs CIT, Ludhiana dated 10.12.2013 in which it was held 'the expression income from other sources' would come into play only when income is relatable to a known source. Where, the income is not relatable to any known or any bona fide source; it would necessarily be brought to tax or considered as income of the assessee u/s 68 of the I.T. Act. The Assessing officer, therefore, noted that the income from commodities sales / purchase as shown by the assessee is not relatable to any known or bona fide sources; therefore, the same was brought to tax u/s 68 of the Act. The Assessing officer made addition of Rs. 4,37,47,870/- u/s 68 of the Act.
4. The said addition was challenged before the Ld. CIT(A) and written submissions of the assessee are reproduced in the impugned order in which assessee reiterated the same submissions as were made before the Assessing officer and also explained that complete details and evidences alongwith confirmed copies of account from book of Ludhiana Comfin Services, contract note and bank accounts of Ludhiana Comfin Services Ludhiana were produced before the Assessing officer, therefore, there is no question of not producing of any credible evidence. PAN number of Rakesh Kumar Prop. of M/s Ludhiana Comfin Services was also produced and since he has shifted to foreign country and he is not cooperating with the assessee in furnishing information, therefore, summons can be issued against him. Ultimately, as per remand report of the Assessing officer, Shri Rakesh Kumar was not traceable and was not produced before the Assessing officer in the remand proceedings. The Ld. CIT(A) therefore, confirmed the order of the Assessing officer holding that above amount to be unaccounted money of the assessee since the assessee failed to produce proprietor of M/s Ludhiana Comfin Services before the Assessing officer. The Ld. CIT(A) also relied upon his order in the case of Sh Jawahar Lal Prop. M/s Sahi Ram Jawahar Lal, in which on identical facts, the issue was decided against the assessee. The Ld. CIT(A) accordingly dismissed the appeal of the assessee .
5. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB-34 to show that other income earned by the assessee includes income from commodities purchase / sales of the impugned amount. He has also submitted that in preceding assessment year in 2010-11 also, the assessee had similar income from commodities purchase / sales, details of same are filed in the paper book, which is copy of the audit report, balance sheet and profit and loss account for preceding assessment year 2010-11 along with copy of account of Rupica Commodities Service in the books of the assessee and copy of the other business income in preceding assessment year. He has submitted that in preceding assessment year 2010-11, the Assessing officer passed order u/s 143(3) dated 28.12.2012 and similar source of income have been accepted by the Assessing officer. Therefore, Assessing officer should not take a different view in subsequent assessment year under appeal. The Rule of consistency applies to the Income tax proceedings. He has submitted that books of account have not been rejected. Copies of the bills of the broker showing profit along with details of contract note have been filed before the authorities below at the time of assessment proceedings, the appellate proceedings and remand proceedings to show that assessee filed the documentary evidence before the authorities below, proves genuine source of income. He has submitted that once on account of sale / purchase of commodities, Department has accepted the same source of income as business income of the assessee, therefore, it could not be treated as income from other sources u/s 68 of the I.T. Act. He has relied on the decision of the Hon'ble Supreme Court in the case CIT Vs. D.P. Sahdu Bros. Chembur P. Ltd (2005) 273 ITR (SC) 1, in which it was held as under:-
"Section 56 provides for the chargeability of income of every kind which has not to be excluded from the total income under the Act, only if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. Therefore, if the income is included under any one of the heads, it cannot be brought to tax under the residuary provisions of section 56."
6. He has referred to PB-11 which is remand report filed by the Assessing officer in which no adverse interference have been drawn against the assessee on filing the documentary evidence. He has submitted that since Rakesh Kumar, Proprietor of M/s Ludhiana Comfin Services Ludhiana have gone abroad, he could not be produced at the remand proceedings. He has submitted that CIT(A) relied upon his order in the case of Sh Jawahar Lal Prop. M/s Sahi Ram Jawahar Lal, (supra) which have been set aside by the ITAT Chandigarh Bench in the matter of Jawahar Lal Vs. ITO in ITA No. 75/Chd/2012 dated 29.5.2014 and in the matter of Jawahar Lal Vs. ITO in ITA No. 785/Chd/2015 (assessment year 2011-12) dated 19.7.2016, therefore, order of CIT(A) is liable to be set aside. He has submitted that section 115 BBE have been inserted in to the Income Tax w.e.f. 1.4.2013 to say that addition u/s 68 would be on account of deemed income and flat rate of tax would be charged, therefore, it would not apply to the assessment year under appeal i.e. 2011-12. The Ld. Counsel for the assessee, therefore, submitted that addition is liable to be deleted. He has stated that ground No.2 is consequential in nature.
7. On the other hand, Ld. DR relied upon the orders of the authorities below and referred to the assessee's reply before Ld. CIT(A) (Pages 11 to 14) in which assessee's submissions was that unabsorbed depreciation and current year depreciation may kindly be adjusted against the income assessed u/s 68 of the I.T. Act. He had submitted that in the case of Jawahar Lal (supra), party was produced and transaction was not doubted by the Assessing officer, therefore, this order would not support the case of the assessee.
8. We have considered the rival submissions. The assessee is a company and is engaged in trading of commodities. Ld. Counsel for the assessee referred to various replies filed before the authorities below at different stages, copies of which are filed in the paper book to show that assessee has filed documentary evidences before the authorities below in support of genuineness of the transaction of sale and purchase of commodities. The assessee filed confirmed copies of accounts from books of account of M/s Ludhiana Comfin Services along with photocopies of contract notes and bank account vide which assessee company received the difference of purchase / sales of commodities, profits during the financial year relevant to assessment year under appeal. The assessee also filed copies of bank statements of M/s Ludhiana Comfin Services, Ludhiana which show that amount of profits earned by the assessee company on account of difference of purchase / sales of various commodities during financial year under appeal. The assessee also filed complete chart alongwith ledger account of sundry debtor as desired by the Assessing officer. The assessee has also explained at the remand proceedings that as per information received by the assessee company, Shri Rakesh Kumar, Proprietor of M/s Ludhiana Comfin Services has since shifted to foreign country and the present address is not available with the assessee company, therefore, he could not be produced at the remand proceedings. Copies of the remand report is field at page 11 of the paper book in which on the documentary evidence no adverse inference has been drawn by the Assessing officer. The assessee also submitted before Assessing officer in the remand proceedings that Shri Rakesh Kumar, Proprietor to M/s Ludhiana Comfin Services is Member of K & A Securities (P) Ltd with I.D. and PAN number. Thus, the assessee produced sufficient evidence before the authorities below to prove that assessee has genuinely entered into sale and purchase of commodities so as to earn profit.
9. The Assessing officer specifically noted in the assessment order that detailed questionnaire have been issued and assessee furnished information as called for. The Assessing officer also examined the books of account and relevant documents at assessment stage. Therefore, assessee filed the relevant and requisite documentary evidence before the authorities below to prove that assessee genuinely entered into the transaction of sale and purchase of commodities. The assessee has known source of income from sale / purchase of commodities. The assessee has filed copies of the audited accounts in the paper book and in Schedule 10 of 'other income' as mentioned which include Rs. 4,37,47,870/- as income from commodities purchase / sale. In the preceding assessment year 2010-11, the assessee has shown Rs. 84,14,930/- on account of income form commodities purchase and sales. The assessee also filed audited accounts of the preceding assessment year 2010-11 along with computation of income and acknowledgment of return of income. The assessee also filed copy of the assessment order u/s 143(3) for assessment year 2010-11 dated 28.12.2012 in which the similar nature of source of income from commodities purchase / sales have not been disputed by the Assessing officer and income from the same source have been accepted by the Assessing officer as income from business. Since the same source of income have been accepted in preceding assessment year, therefore, nature of same business income could not be treated differently in assessment year under appeal.
10. It may also be noted here that Assessing officer except called for information from the assessee did not ask the assessee to produce Shri Rakesh Kumar, Proprietor of M/s Ludhiana Comfin Services for examination at assessment stage. No further enquiry or investigation has been carried out at the assessment stage. Therefore, if Sh. Rakesh Kumar shifted abroad at later stage and was not produced at remand proceedings, no adverse view should be taken against the assessee. The Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Vikas Chemi Gum India (2005) 276 ITR 32 (P&H) held that addition of income from particular source deleted in assessment year 1986-87, order not challenged - Department not entitled to challenge addition from same course in assessment year 1988-89 under appeal. It was further held: -
"That since the appellant did not challenge the order passed by the Tribunal in relation to the assessment year 1986-87 by which it confirmed the order of the Commissioner (Appeals) deleting the addition made by the Assessing Officer on account of value of "bardana" used for storing "churi and korma", it could not challenge a similar order passed in relation to the assessment year 1988-89."
11. The Hon'ble Delhi High Court in the case of CIT v Escorts Ltd. in (2011) 338 ITR 435 (Delhi) held that when transactions of purchase and sale of units for many years considered to be genuine in prior and subsequent assessment year - Revision proceeding on ground that transactions pertaining to relevant assessment year were speculative not permissible. It was further held as under:-
"Where a fundamental aspect of a transaction is found to have permeated through different assessment years and this fundamental aspect has stood uncontested then the Revenue cannot be allowed to change its view taken in earlier assessment years unless it is able to demonstrate a change in circumstances in the subsequent assessment year.
Held, that the Commissioner's order did not contain a finding to the effect that the stand taken by the assessee that the units purchased from the Unit Trust of India had actually been physically delivered along with executed transfer deed was false. Without such a finding the allegation that the transactions were speculative could not be sustained. The fundamental nature of the transactions was examined year after year more importantly in the assessment year 1986-87 it was specifically considered by the Commissioner (Appeals) and it remained the same. Given the fact that the assessee had been engaged in these transactions in the preceding assessment years, the Commissioner could have had no occasion to have recourse to the revisional powers under section 263 of the Act on the fundamental aspects of the transactions in issue on which a view had been taken and not shown to have been challenged."
12. Considering the above discussion, evidences and material on record, it is clear that assessee has declared business income on account of purchase / sale of commodities in earlier years which have been accepted by the Revenue Department. The rule of consistency do applies to the Income tax proceedings. Therefore, on the same source of income, Revenue should not doubt the transaction carried out by the assessee on account of commodities purchase and sales in assessment year under appeal. The assessee has known source of these transactions as business income, therefore, the same cannot be brought to tax under the head 'income from other sources' or 'deemed income' as is held by Hon'ble Supreme Court in the case of CIT Vs. D.P. Sandhu Bros, Chembur (supra). Therefore, section 68 would not apply to the facts and circumstances of the case. It may also noted here that Ld. CIT(A) followed his order in the case of Sh Jawahar Lal Prop. M/s Sahi Ram Jawahar Lal, (supra) in which Ld. CIT(A) decided the identical issue against the assessee for the purpose of dismissing the appeal of the assessee. The Ld. Counsel for the assessee rightly contended that order of the CIT(A) in the case of Jawahar Lal (supra) have been set aside by the ITAT Chandigarh Bench vide orders dated 29.5.2014 I dated 19.7.2016 (supra). Therefore, said decision would not support the case of the Revenue. It, therefore, appears that Assessing officer without making proper enquiries and without any basis considered the transaction of sale and purchase of commodities as sham transaction. The authorities below were not justified in holding that no credible evidence has been filed on record to prove genuineness of the transactions in the matter. The authorities below are also not justified in holding that no known or boanfide source of the transaction have been proved. Considering the totality of facts and circumstances and the fact that the nature of the income and source on the identical transaction have been accepted by the Department in preceding assessment year, authorities below were not justified in holding the income of the assessee from unexplained sources u/s 68 of the I.T. Act. We accordingly set aside the orders of the authorities below and delete the addition of Rs. 4,37,47,870/- u/s 68 of the I.T. Act. The appeal of the assessee on ground No.1 is accordingly allowed.
13. In view of the above findings, since ground No.2 is consequential, therefore, the same need not be adjudicated.
14. In the result, the appeal of the assessee is allowed.