The ITO, Ward-8(2),, Ahmedabad v. Suvarna Shilpi Jewellers Pvt.Ltd.,, Ahmedabad

ITA 1840/AHD/2009 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 184020514 RSA 2009
Assessee PAN AAJCS1075K
Bench Ahmedabad
Appeal Number ITA 1840/AHD/2009
Duration Of Justice 1 year(s) 7 month(s) 19 day(s)
Appellant The ITO, Ward-8(2),, Ahmedabad
Respondent Suvarna Shilpi Jewellers Pvt.Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 19-01-2011
Next Hearing Date 19-01-2011
Assessment Year 2006-2007
Appeal Filed On 02-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI BHAVNESH SAINI JUDICIAL MEMBER AND N.S. SAINI ACCOUNTANT MEMBER) ITA NO.1840/AHD/2009 [ASSTT. YEAR : 2006-2007] DICTATED ON: 19-01-2011 ITO WARD-8(2) AHMEDABAD. VS. SURVARNA SHILPI JEWELLERS P. LTD. 107 ASHISH COMPLEX SWASTIK 4 ROAD C.G. ROAD NAVRANGPURA AHMEDABAD. PAN : AAJCS 1075 K (APPELLANT) (RESPONDENT) REVENUE BY : MS.ANURAG SHARMA ASSESSEE BY : SHRI P.M. PATEL O R D E R PER BHAVNESH SAINI JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX(APPEALS)-XIV AHMEDABAD DATED 16.03.2009 FOR THE ASSESSMENT YEAR 2006-2007 CHALLENGING DELETION OF ADDITION OF UNEXPLAINED CASH CREDIT OF RS.15 00 000/- 2. BRIEFLY STATED FACTS IN ISSUE ARE THAT THE AO MA DE ADDITION OF RS.15 LAKHS ON ACCOUNT OF UNEXPLAINED CASH CREDIT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS R ECEIVED RS.15 LAKHS FROM SMT. HARSHIKA R. PATEL WHICH WAS SHOWN AS UNSECURE D LOAN AND THE ASSESSEE WAS ASKED TO PROVE GENUINENESS OF TRANSACTION IDEN TITY AND CREDIT WORTHINESS OF THE DEPOSITORS. THE ASSESSEE REPLIED THAT SMT. HAR SHIKA R. PATEL WAS NOT ASSESSED TO INCOME-TAX AND THE AMOUNT WAS RECEIVED BY HER FROM HER HUSBAND. HOWEVER THE AO DID NOT ACCEPT THE SAME BY OBSERVIN G THAT SHE HAS NO PAN AND HENCE HER IDENTITY WAS NOT PROVED AND THERE WER E NO OTHER DOCUMENTS I.E. PASSPORT DRIVING LICENCE ETC. WHICH COULD PROVE TH E IDENTITY OF THE DEPOSITORS. AS REGARDS CREDIT-WORTHINESS OF THE DEPOSITORS IT WAS NOTED BY THE AO THAT SMT. HARSHIKA R. PATEL WAS NOT ASSESSED TO TAX AND WHEN SHE HAS GIVEN AN AMOUNT OF RS.15 LAKHS THERE WOULD NOT HAVE BEEN AN Y REASON IN NOT FILING THE RETURN OF INCOME. FURTHER NO EXPLANATION HAS BEEN FILED IN RESPECT OF CREDITS IN HER BANK ACCOUNT AND HENCE THE AO HELD THAT THE ONU S LIES ON THE ASSESSEE TO ITA NO.1840/AHD/2009 -2- PROVE THE SAME AND THE ADDITION OF RS.15 LAKHS WAS ACCORDINGLY MADE AS UNEXPLAINED CASH CREDIT. 3. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A) AND IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS REC EIVED CERTAIN LOANS FROM ITS DIRECTORS AND THEIR FAMILY MEMBERS. SHRI RAJNIKANT K. PATEL HUSBAND OF SMT. HARSHIKA R. PATEL WAS A DIRECTOR. SHRI RAJNIKANT P ATEL WAS REGULARLY ASSESSED TO TAX SINCE 1995-96 AND THE ASSESSEE HAD TAKEN A DEPO SIT OF RS.35 LAKHS FROM SHRI RAJNIKANT K. PATEL AND HIS WIFE AND THAT SINCE SMT. HARSHIKA PATEL HAD NO TAXABLE INCOME SHE WAS NOT OBLIGED TO FILE THE RET URN AND OBTAIN PAN. SHRI RAJNIKANT PATEL MAINTAINED TWO BANK ACCOUNTS WITH S TATE BANK OF TRAVANCORE ONE WAS IN HIS PERSONAL NAME WITH ACCOUNT NUMBER SB 2379 AND THE OTHER WITH ACCOUNT NO.SB 3264 WAS JOINT ACCOUNT OF BOTH HUSBAN D AND WIFE AND ALL THE ENTRIES APPEARING IN JOINT ACCOUNTS WERE ENTERED IN THE BOOKS OF SHRI RAJNIKANT PATEL AND NO SEPARATE BOOKS OF ACCOUNT FOR HIS WIFE WAS MAINTAINED. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT SHRI RAJNKAN T PATEL ISSUED FOUR CHEQUES OF RS.5 LAKHS EACH FROM HIS ACCOUNT NO.SB 2379 AND THREE CHEQUES OF RS.5 LAKHS EACH FROM THEIR JOINT ACCOUNT NO.SB 3264 WHI CH WERE DULY ENTERED IN HIS BOOKS AND WHICH WERE ALSO REFLECTED IN THE BALANCE SHEET OF SHRI RAJNKANT PATEL WHEREIN ON ASSET ASIDE RS.34 LAKHS HAS BEEN SHOWN A S LOANS AND ADVANCES TO SURVARNA SHILP JEWELLERS PVT LTD. AS RS.1 LAKH WAS RETURNED TO HIM ON 11-8- 2005. IN THE BOOKS OF SURVARNA SHILIP JEWELLERS T WO SEPARATE ACCOUNTS WERE OPENED ONE IN THE NAME OF SHRI RAJNIKANT PATEL AND SECOND IN THE NAME OF WIFE SMT. HARSHIKA PATEL AND RS.20 LAKHS AND RS.15 LAKHS WERE CREDITED IN THE NAMES OF SHRI RAJNIKANT AS WELL AS SMT. HARSHIKA R ESPECTIVELY. THE ASSESSEE ALSO SUBMITTED THAT ALL NECESSARY DETAILS WERE ALRE ADY FURNISHED IN RESPECT OF THESE TRANSACTIONS BEFORE THE AO INCLUDING THE CONF IRMATION LETTER BY SMT. HARSHIKA R. PATEL. FURTHER THE ASSESSEE SUBMITTED THAT THE AO DID NOT ASK THE PASSPORT OR DRIVING LICENCE ETC. OF SMT. HARSHIKA P ATEL AND IT WAS NOT NECESSARY THAT IDENTITY OF A PERSON COULD ONLY PROVED BY PASS PORT OR DRIVING LICENCE. SMT. HARSHIKA R. PATEL FURTHER FURNISHED COPY OF HER JOI NT BANK ACCOUNT WITH HER ITA NO.1840/AHD/2009 -3- HUSBAND WITH STATE BANK OF TRANVANCORE WHEREIN HER ADDRESS WAS MENTIONED. FURTHER THE ASSESSEE SUBMITTED THAT THERE WAS NO L AW THAT EACH AND EVERY CITIZEN MUST HAVE A PAN AND THERE WAS ONLY ONE MIST AKE ON THE PART OF THE ASSESSEE-COMPANY I.E. OPENING TWO SEPARATE ACCOUNT S IN THE NAMES OF BOTH HUSBAND AND WIFE INSTEAD OF OPENING AN ACCOUNT IN THE NAME OF SHRI RAJNIKANT K. PATEL. FURTHER THE ASSESSEE SUBMITTED THAT A PETITION WAS FILED U/S.144A BEFORE THE JT.CIT AND ON THE DATE OF HEARING ALL D OCUMENTS MENTIONED ABOVE WERE PRODUCED AND THE FACTS OF THE CASE WERE DULY E XPLAINED TO HIM HOWEVER HE DID NOT PASS AN ORDER FOR THE REASONS BEST KNOWN TO HIM. IT WAS FURTHER SUBMITTED THAT SINCE SMT. HARSHIKA R. PATEL HAS NO SOURCE OF INCOME OF HER OWN THE QUESTION OF EARNING INTEREST DID NOT ARISE AT ALL. BEFORE THE CIT(A) THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ROHINI BUILDERS 256 ITR 360 IN SUPPORT OF HIS CONTENTION AND PLEADED THAT THE ADDITION MADE IN RESPECT OF TH IS CASH CREDIT BE DELETED. IT WAS FURTHER STATED THAT SINCE THE ASSESSEE STARTED ITS BUSINESS ONLY IN JUNE 2005 THE QUESTION OF GENERATING UNACCOUNTED MONEY DID NO T ARISE AT ALL AND IN CASE THE AO WAS NOT SATISFIED WITH THE EXPLANATION OFFER ED BY SMT. HARSHIKA PATEL HE WOULD HAVE MADE THE ADDITION IN HER CASE BY INIT IATING PROCEEDINGS UNDER THE ACT. 4. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE AND THE MATERIAL ON RECORD DELETED THE ADDITION. HIS FIND INGS IN PARA 2.3 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS AS ADVANCED BY THE AR. FROM THE DETAILS FURNISHED IT IS SEEN THAT IN RESPONSE TO THE NOTICE ISSUED BY THE A.O. SMT. HARS HIKA R. PATEL HAS FURNISHED ALL EVIDENCES IN RESPECT OF THIS TRANSACT ION I.E. COPIES OF JOINT BANK ACCOUNT . COPY OF ACCOUNT FROM THE BOOKS OF TH E COMPANY COPIES OF ACCOUNT OF SUVARNA SHILPI JEWELLERS PVT. LTD. FROM THE BOOKS OF RAJNIKANT PATEL COPIES OF BOTH S.B. ACCOUNTS MAINTAINED WITH STATE BANK OF TRAVANCORE CONFIRMATION ETC. AND ALSO EXPLAINED TH E DETAILS OF TRANSACTIONS. SINCE SMT. HARSHIKA PATEL WAS NOT HAV ING ANY TAXABLE INCOME SHE DID NOT POSSESS A PAN. IT IS ALSO SEEN THAT IN THIS CASE ALL SEVEN CHEQUES WERE ISSUED FROM TWO SEPARATE ACCOUNT S MAINTAINED BY ITA NO.1840/AHD/2009 -4- SHRI RAJNIKKANT K. PATEL WHICH WERE SHOWN IN THEBA LANCE SHEET AS LOANS AND ADVANCES TO THE APPELLANT AND TWO SEPARATE AMOU NTS WERE REFLECTED IN BOOKS OF ACCOUNTS OF THE APPELLANT ONE IN THE N AME OF SHRI RAJNIKANT K. PATEL AND THE OTHER IN THE NAME OF SMT. HARSHIKA R PATEL HIS WIFE. SINCE THE APPELLANT HAS BEEN ABLE TO PROVE THE IDEN TITY OF THE DEPOSITOR AND THE CREDIT WORTHINESS OF THE DEPOSITOR BY PRODU CING VARIOUS DOCUMENTS AND THE TRANSACTIONS WERE DULY EXPLAINED BEFORE THE A.O. AND ESPECIALLY WHEN THE CREDIT HAS COME FROM HUSBAND RA JNIKANT PATEL WHO IS ASSESSED TO TAX I AM OF THE VIEW THAT THE ADDIT ION MADE IN RESPECT OF CASH CREDIT ON THE GROUND THAT NO PAN WAS FURNISHED CANNOT BE SUSTAINED. I THEREFORE DIRECT THE AO TO DELETE T HE ADDITION OF RS.15 00 000/- AS UNEXPLAINED CASH CREDIT. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE IDENTITY AND CREDIT-WO RTHINESS OF THE CREDITOR AND THAT THE CREDITOR WAS NOT ASSESSED TO TAX THEREFOR E THE LEARNED CIT(A) SHOULD NOT HAVE DELETED THE ADDITION. HE HAS RELIED UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISIO N FINANCE PVT. LTD. 208 ITR 465. ON THE OTHER HAND LEARNED COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITY AND REF ERRED TO THE DOCUMENTS FILED IN THE PAPER BOOKS AND ALSO SUBMITTED THAT TH E CREDITOR NOT ONLY CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE BUT ALSO FILED V ARIOUS DOCUMENTS BANK ACCOUNT AND ALSO SUPPORTED THE EXPLANATIONS OF THE ASSESSEE THROUGH REPLY FILED UNDER SECTION 133(6) OF THE ACT. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE WITH THE ORDER OF THE LEARNED CIT(A). THE CREDITOR HAS CONFIRMED THE DEPOSIT WITH THE ASSESSEE-COMPANY. C OPY OF WHICH IS FILED IN THE PAPER BOOK IN WHICH IT IS EXPLAINED THAT THE HU SBAND OF THE CREDITOR MAINTAINED BOOKS OF ACCOUNTS IN WHICH HE INCLUDED T HE ENTIRE TRANSACTIONS OF THE DEPOSITS BY HER AND BY HER HUSBAND. COPY OF TH E BALANCE SHEET AND BANK ACCOUNT WERE ALSO FILED WHICH SUPPORT THE FINDINGS OF THE LEARNED CIT(A). IT IS ALSO EXPLAINED IN THE CONFIRMATION THAT THE CREDITO R HAS RECEIVED THE AMOUNTS BY TRANSFER FROM HER HUSBAND ON VARIOUS DATES AND ALSO CREDIT BALANCE WAS TRANSFERRED OUT OF TERM DEPOSITS. IT WAS ALSO EXPL AINED THAT THE AMOUNTS WERE ITA NO.1840/AHD/2009 -5- RECEIVED BY HER FROM HUSBAND AGAINST WHICH THE CRED ITOR HAS ISSUED THE CHEQUES TO THE ASSESSEE-COMPANY. THE ABOVE FACTS HAVE BEEN SUPPORTED BY THE DETAILS OF HER HUSBAND COPY OF HIS PROFIT & LOSS ACCOUNT A ND THE BALANCE SHEET TO SHOW THAT THE ABOVE DEPOSITS BY THE ASSESSEE AND HER HUS BAND HAVE BEEN TAKEN CARE IN THE BALANCE SHEET OF HER HUSBAND AND ALL THE TRANSA CTIONS ARE DULY RECORDED IN THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE AND HER HUSBAND ALSO CONFIRMED THE TRANSACTION WITH THE ASSESSEE-COMPANY IN REPLY TO THE NOTICE ISSUED UNDER SECTION 133(6) OF THE IT ACT. COPY OF WHICH IS ALS O FILED ON RECORD. THE ASSESSEE ALSO FILED STATEMENT OF FACT BEFORE THE LE ARNED CIT(A) COPY OF WHICH IS FILED IN THE APPEAL PAPERS IN WHICH IT IS EXPLAI NED THAT THE ASSESSEE-COMPANY WAS REGISTERED AND FORMED ON 30-5-2005 AND WAS ENGA GED IN THE BUSINESS OF TRADING OF JEWELLERY. FOR SMOOTH ESTABLISHMENT OF THE BUSINESS THE ASSESSEE- COMPANY OBTAINED UNSECURED LOANS FROM ITS SHAREHOLD ERS AFTER INCORPORATION OF WHICH RS.15 LAKHS HAVE BEEN RECEIVED FROM ONE OF TH E SHARE HOLDERS MRS. HARSHIKA R. PATEL ON 7-6-2005 I.E. THE CREDITOR. T HE AMOUNT OF RS.15 LAKHS HAVE BEEN SHOWN IN THE BANK ACCOUNT OF THE CREDITOR S AND HER HUSBAND JOINTLY HELD BY THEM. THE ABOVE FACTS WOULD ALSO STRENGTHE N THE FINDINGS OF THE LEARNED CIT(A) THAT IT IS AFTER THE COMMENCEMENT OF THE BUSINESS BY THE ASSESSEE-COMPANY THE AMOUNTS WERE TAKEN AS LOAN FR OM THE SHAREHOLDERS FOR SMOOTH BUSINESS OF THE ASSESSEE-COMPANY. HONBLE SUPREME COURT IN THE CASE OF CIT VS. BHARAT ENGINEERING & CONSTRUCTION CO. 8 3 ITR 187 HELD AS UNDER: THE ASSESSEE AN ENGINEERING-CONSTRUCTION COMPANY COMMENCED ITS BUSINESS IN MAY 1943. IN ITS ACCOUNTS THERE WERE S EVERAL CASH CREDIT ENTRIES IN THE FIRST YEAR OF ITS BUSINESS TOTALLING RS. 2 50 000. THOUGH THE EXPLANATION REGARDING THE CASH CREDIT ENTRIES WAS F OUND TO BE FALSE THE APPELLATE TRIBUNAL HELD THAT THESE CASH CREDITS COU LD NOT REPRESENT THE INCOME OR PROFITS OF THE ASSESSEE AS THEY WERE ALL MADE VERY SOON AFTER THE COMPANY COMMENCED ITS ACTIVITIES: HELD THAT THE INFERENCE DRAWN FROM THE FACTS PROVED WAS A QUESTION OF FACT AND THE TRIBUNAL'S FINDING ON THAT QUESTION WA S FINAL. A CONSTRUCTION COMPANY TOOK TIME TO EARN PROFITS AND IT COULD NOT HAVE EARNED A HUGE PROFIT WITHIN A FEW DAYS AFTER THE COMMENCEMENT OF ITS BUSINESS. HENCE IT WAS REASONABLE TO ASSUME THAT THE CASH CREDIT EN TRIES REPRESENTED ITA NO.1840/AHD/2009 -6- CAPITAL RECEIPTS THOUGH FOR ONE REASON OR ANOTHER T HE ASSESSEE HAD NOT COME OUT WITH THE TRUE STORY AS REGARDS THE SOURCE OF THE RECEIPTS. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISION IT IS CLEAR THAT THE ASSESSEE HAS PROVED NOT ONLY THE IDE NTITY OF THE CREDITORS BUT ALSO PROVED CREDIT-WORTHINESS OF THE CREDITOR. IT APPEA RS FROM THE FINDING OF THE AO THAT SINCE THE CREDITOR WAS NOT ASSESSED TO TAX TH EREFORE THE AO DID NOT TAKE INTO CONSIDERATION IDENTITY AND CREDIT-WORTHINESS O F THE CREDITOR. OTHERWISE NO REASONS HAVE BEEN MENTIONED AND NO MATERIAL OR EVID ENCE ARE DISCUSSED IN THE ASSESSMENT ORDER TO MAKE THE ADDITION AGAINST THE A SSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE EVIDEN CE ON RECORD WE ARE OF THE VIEW THAT THE LEARNED CIT(A) ON APPRECIATION OF THE FACTS MATERIAL AND EVIDENCE ON RECORD RIGHTLY DELETED THE ADDITION. WE THEREFORE DO NOT FIND ANY INFIRMITY IN HIS ORDER. WE CONFIRM HIS FINDING AND DISMISS THE APPEAL OF THE REVENUE. 8. IN RESULT THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 ST JANUARY 2011 SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 21-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD