The ACIT, Circle-2,, Surat v. Shri Pareshbhai Chandrakant Jariwala, Surat

ITA 2425/AHD/2008 | 2005-2006
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 242520514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 2425/AHD/2008
Duration Of Justice 2 year(s) 8 month(s) 28 day(s)
Appellant The ACIT, Circle-2,, Surat
Respondent Shri Pareshbhai Chandrakant Jariwala, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-03-2011
Date Of Final Hearing 08-02-2011
Next Hearing Date 08-02-2011
Assessment Year 2005-2006
Appeal Filed On 27-06-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH JM AND D.C.AGRAWAL AM ASSTT. CIT CIRCLE-2 SURAT. VS. SHRI PARESHBHAI CHANDRAKANT JARIWALA PROP. OF M/S GOLDEN FALCON INDIA 116 EMPIRE ESTATE BLDG. UDHNA DARWAJA SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. MADHUSUDAN SR.DR RESPONDENT BY:- SHRI S. N. SOPARKAR SR.ADVOCATE O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF UNEXPLAINED CASH CREDIT AMOUNTING TO RS.64 81 500/- U/S 68 OF THE ACT. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF INTEREST ON CASH CREDIT OF RS.7 81 665/- (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF DIWALI EXPENSES OF RS.25 000/-. ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 2 (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF OFFICE EXPENSES OF RS.26 585/-. 2. THE FIRST ISSUE IN DISPUTE IS REGARDING ADDITION OF RS.64 81 500/- BEING THE SUM ADDED U/S 68. DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE AO FOUND THAT THERE WAS UNSECURED LOANS IN THE NAMES OF 43 PERSONS AMOUNTING TO RS.64 81 500/-. THE DETAILS OF THE NAM ES AND AMOUNT STANDING AGAINST THEM ARE GIVEN BY THE AO IN PARA 3 OF HIS ORDER. AT THE DIRECTION OF THE AO THE ASSESSEE FURNISHED CONFIRMA TORY LETTERS COPIES OF BANK STATEMENTS OF THE CREDITORS COPIES OF ACKNOWL EDGEMENTS OF THE RETURNS OF INCOME FILED BY THEM ALONG WITH THEIR CO MPUTATION OF INCOME BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. FROM THE EXAMINATION OF BANK ACCOUNT OF SOME OF THE CREDITORS AO NOTED THAT CASH WAS DEPOSITED IN THE BANK ACCOUNT OF THE CREDITORS AND SUBSEQUENTLY CHEQ UES WERE ISSUED BY THEM TO THE ASSESSEE. HE ALSO NOTED THAT CAPITAL AC COUNTS OF THE CREDITORS DID NOT REFLECT ADEQUATE WITHDRAWALS. THEY HAD SHOW N VERY NOMINAL PROFITS AND THE ACCOUNTING DATA GIVEN BY THEM WAS M ORE OR LESS WAS SIMILAR TO EACH OTHER. THE AO RAISED SERIOUS DOUBT OVER THE GENUINENESS OF THE CASH CREDITS AND ASKED THE ASSESSEE TO PRODU CE THE CREDITORS IN WHOSE ACCOUNT CASH WAS DEPOSITED PRIOR TO ISSUE OF CHEQUES. SIMILAR QUERIES WERE RAISED IN RESPECT OF INTEREST CREDITED BY THE ASSESSEE ON THESE UNSECURED LOANS. ACCORDING TO THE AO ASSESSEE FAILE D TO MAKE COMPLIANCE ON THE APPOINTED DATE. IN RESPONSE TO SH OW CAUSE NOTICE IT WAS EXPLAINED TO THE AO THAT CASH DEPOSITED BY THE CREDITORS IN THEIR ACCOUNTS WAS OUT OF THEIR OWN INCOME AS THEY HAD BU SINESS ACTIVITIES. THE AO FINALLY DISBELIEVED THE FILING OF DOCUMENTS BY T HE ASSESSEE. ACCORDING TO HIM THE CREDITWORTHINESS OF THE CREDIT ORS WAS NOT ESTABLISHED. HE POINTED OUT RELEVANT DETAILS PERTAI NING TO 13 ALLEGED CREDITORS IN PARA 6 PAGE 6 OF HIS ORDER. ACCORDING TO THE AO RETURNS HAVE ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 3 BEEN FILED BY THE CREDITORS JUST FOR THE SAKE OF FO RMALITIES. THEIR BUSINESS INCOME WAS INSIGNIFICANT AND THEIR HOUSEHOLD WITHDR AWALS WERE INSUFFICIENT. THEY DID NOT HAVE CAPACITY TO GIVE LO AN TO THE ASSESSEE. ON THIS BASIS THE AO PROCEEDED TO TREAT THE SUM OF RS. 64 81 500/- AS UNEXPLAINED CASH CREDIT. 3. BEFORE LD. CIT(A) THE ASSESSEE EMPHASIZED THE PO INT THAT DETAILS OF PAN COPIES OF CONFIRMATION LETTERS COPIES OF ACKN OWLEDGMENTS OF RETURNS FILED COPIES OF COMPUTATION OF INCOME PRO FIT AND LOSS ACCOUNT CAPITAL ACCOUNT AND BALANCE SHEETS WERE FILED BEFOR E THE AO. THUS IDENTITY OF CREDITORS AND THEIR CREDITWORTHINESS IS PROVED AND ONCE MONEY IS TRANSFERRED THROUGH BANKING CHANNELS IT SHOULD B E TREATED AS GENUINE. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS:- CIT VS. ORISSA CORPORATION (P) LTD. (1986) 52 CTR ( SC) 138 ORIENT TRADING CO. LTD. VS. CIT (1963) 49 ITR 723 ( BOM) ROHINI BUILDERS VS. DCIT IN TAX APPEAL NO.65 OF 200 1 (2003) 182 CTR (GUJ) 373. THE LD. CIT(A) FOUND THAT THE AO MADE THE ADDITION FOR TWO MAIN REASONS FIRSTLY ASSESSEE WAS NOT ABLE TO PRODUCE THE CREDI TORS BEFORE THE AO AND SECONDLY THE CREDITWORTHINESS OF 13 OUT OF 43 CREDI TORS WAS DOUBTFUL. ACCORDING TO THE LD. CIT(A) FAILURE OF THE ASSESSEE DID NOT PRESENT OR PRECLUDE THE AO FROM EXERCISING HIS POWERS VESTED I N HER UNDER THE IT ACT TO ENSURE THE PRESENCE OF ALL THE CREDITORS BEF ORE HER. NOT ONLY SUMMONS COULD BE ISSUED TO THE ALLEGED LENDERS SPO T ENQUIRIES COULD ALSO BE DONE AT THE GIVEN ADDRESSES. SINCE THEY WERE ASS ESSEES ENQUIRIES COULD BE DONE WITH THE CONCERNED AO AND THEIR IT RECORDS COULD BE CHECKED. ACCORDING TO HIM ONCE ASSESSEE HAS FURNISHED ALL TH E NECESSARY DETAILS AND DOCUMENTS HE HAS DISCHARGED THE INITIAL BURDEN WHICH LAY ON HIM UNDER SECTION 68. THE ONUS NOW SHIFTED TO THE AO TO DISPROVE THE ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 4 ASSESSEES CLAIM EXPLANATION AND EVIDENCES. ONCE A O FAILED TO DISCHARGE THE ONUS LYING ON HIM HE COULD NOT MAKE THE ADDITIO N. THE LD. CIT(A) ALSO NOTED THAT ALL THE LOANS HAVE BEEN REPAID IN S UBSEQUENT YEARS. THE ASSESSEE CLAIMED THAT IT HAD SOUGHT TO FILE THE DET AILS OF REPAYMENT BEFORE THE AO BUT SUCH EVIDENCES WERE NOT ADMITTED. HOLDIN G THAT ASSESSEE HAS DISCHARGED THE INITIAL ONUS THE LD. CIT(A) DELETED THE ADDITION. 4. AGAINST THIS THE LD. DR SUBMITTED THAT IT IS TH E DUTY OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT MADE BY THE AO WHEN HE ASKED THE ASSESSEE TO PRODUCE THE CREDITORS. ONCE ASSESSEE FA ILS TO COMPLY WITH THE AOS REQUIREMENTS IT CANNOT BE SAID THAT ASSESSEE H AS DISCHARGED THE ONUS. HE REFERRED TO THE AUTHORITIES CITED BY THE A O IN HIS ORDER. 5. ON THE OTHER HAND THE LD. AR SUBMITTED THAT ONC E INITIAL BURDEN IS DISCHARGED BY THE ASSESSEE NO FURTHER ONUS IS LAY ON HIM. ONCE THE ASSESSEE REPAID THE MONEY TO THE CREDITORS HE HAS N O CONTROL OVER THE CREDITORS AND HE COULD NOT PERSUADE THEM TO APPEAR BEFORE THE AO. THE AO OUGHT TO HAVE EXERCISED HIS POWERS UNDER THE IT ACT AND ENFORCE THE ATTENDANCE OF THE CREDITORS OR CARRIED OUT ENQUIRI ES IN SOME OTHER WAY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE REASONS ARE THAT FIRSTLY T HE ASSESSEE HAS GIVEN COMPLETE DETAILS OF THE CREDITORS INCLUDING THEIR P ANS CONFIRMATION LETTERS COPIES OF ACKNOWLEDGEMENTS OF THE RETURNS FILED BY THEM COPIES OF PROFIT AND LOSS ACCOUNTS AND BALANCE SHEETS OF T HE CREDITORS AND DETAILS OF REPAYMENT OF LOANS TO THEM. THESE DOCUMENTS AND EVIDENCES HAVE NOT BEEN FOUND TO BE WRONG. FURTHER ASSESSEE HAS REASON ABLE CAUSE FOR NOT BRINGING THE CREDITORS BEFORE THE AO. ONCE HE HAS R EPAID THE MONEY TO THE CREDITORS ALONG WITH INTEREST IT IS NOT EXPECTED OF HIM TO KEEP TRACK OF THE ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 5 CREDITORS AND ENSURE THEIR ATTENDANCE BEFORE THE AO . THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT IT IS FOR THE AO UNDER THESE CIRCUMSTANCES TO CARRY OUT SPOT ENQUIRIES AND EXERCISE HIS POWERS GIVEN UN DER THE IT ACT TO VERIFY THE SUBMISSIONS MADE BY THE ASSESSEE. MERE O UTRIGHT REJECTION OF THE EVIDENCE WITHOUT POINTING OUT DEFECTS THEREIN W ILL NOT BE PROPER. IN OUR CONSIDERED VIEW THERE IS ALWAYS A DEMARCATING L INE AS TO WHAT EXTENT ONE PARTY IS REQUIRED TO DISCHARGE ONUS WHICH LAY O N HIM. SUCH ONUS DOES NOT HAVE ANY UNENDING LIMIT. ONCE THE ASSESSEE PROD UCED THE BASIC RECORDS OF THE CREDITORS WHICH SHOW THE IDENTITY OF THE CREDITORS CAPITAL ACCOUNTS OF THE CREDITORS AND BANK ACCOUNTS THROUGH WHICH MONEY WAS TRANSFERRED THROUGH CHEQUES TO THE ASSESSEE AND EVI DENCE THAT ALL OF THEM ARE INCOME-TAX ASSESSEES THEN IT CANNOT BE SAID THA T ASSESSEE HAS STILL TO DISCHARGE THE ONUS. THE ONLY GROUND ON WHICH THE AO MADE THE ADDITION WAS THAT ASSESSEE FAILED TO PRODUCE THE CREDITORS. AS OBSERVED ABOVE BY US THERE IS A REASONABLE CAUSE FOR THE ASSESSEE FOR NO T BEING ABLE TO DO SO. THIRD MEMBER IN KALYAN MEMORIAL AND CHARITABLE TRUS T VS. ACIT (2009) 121 ITD 525(AGRA) HAS HELD THAT WHEN PARTICULARS RE GARDING INCOME-TAX ASSESSMENT AND BANK ACCOUNT HAD BEEN FILED IN RESPE CT OF THE CREDITORS INITIAL BURDEN ON THE ASSESSEE U/S 68 IS HELD DISCH ARGED AND SHIFTS TO THE REVENUE TO SHOW THAT WHAT WAS STATED OR EXPLAINED B Y THE ASSESSEE WAS NOT SATISFACTORY. SIMILAR VIEW WAS TAKEN BY HON. DE LHI HIGH COURT IN CIT VS. DIAMOND PRODUCTS LTD. (2009) 177 TAXMAN 331 (DE L). IN VIEW OF ABOVE WE HOLD THAT ONCE ASSESSEE HAS DISCHARGED TH E PRIMARY ONUS AND ADDITION U/S 68 CANNOT BE MADE UNLESS EXPLANATION A ND EVIDENCE FURNISHED BY THE ASSESSEE ARE FOUND TO BE UNTRUE. AS A RESULT THIS GROUND OF REVENUE IS REJECTED. ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 6 7. THE NEXT GROUND RELATES TO ADDITION IN RESPECT O F INTEREST ON SUCH CREDITS. AFTER ALLOWING THE CREDITS AS GENUINE THE LD. CIT(A) ALSO ALLOWED THE INTEREST THEREON. 8. WE HAVE HEARD THE PARTIES. FOR THE REASONS DISCU SSED BY US WHILE CONFIRMING THE ORDER OF LD. CIT(A) ON QUANTUM ADDIT ION WE HOLD THAT THERE IS NO CASE FOR INTERFERENCE IN HIS ORDER IN R ESPECT OF DELETION OF INTEREST ON SUCH LOANS. ACCORDINGLY THIS GROUND OF REVENUE IS ALSO REJECTED. 9. OTHER TWO GROUNDS RELATE TO DIWALI EXPENSES AND OFFICE EXPENSES DELETED BY THE LD. CIT(A). THE ASSESSEE HAD CLAIMED SALES PROMOTION EXPENSES OF RS.84500/- WHICH INCLUDED OF RS.25 000/ - PERTAINING TO DIWALI EXPENSES. THE BILL DATED 1.3.2005 WAS RAISED BY M/S C. STATIONERS SURAT. SINCE DIWALI FESTIVAL FALLS IN THE MONTH OF OCTOBER/NOVEMBER AND THE BILL WAS RAISED IN THE MONTH OF MARCH THE AO R EJECTED THE CLAIM HOLDING THE EXPLANATION NOT SATISFACTORY. THE LD. C IT(A) ALLOWED THE CLAIM BY HOLDING THAT ASSESSEE HAD MADE PURCHASES I N THE MONTH OF OCTOBER BUT THE BILL WAS RAISED IN THE MONTH OF MAR CH. THE COPY OF THE RELEVANT BILL WAS SUBMITTED BEFORE THE LD. CIT(A). STAMP AFFIXED ON THE BILLS SHOWS THAT PAYMENT WAS MADE IN THE MONTH OF O CTOBER 2004 THROUGH CHEQUE. THE AO DID NOT VERIFY WHETHER THE P AYMENT WAS ACTUALLY DEBITED IN THE BANK ACCOUNT IN THE MONTH OF OCTOBER . SINCE THIS VERIFICATION IS DONE BY LD. CIT(A) WE DECLINE TO IN TERFERE. 10. THE OTHER ITEM RELATES TO DISALLOWANCE OF 25% O UT OF OFFICE EXPENSES. THE TOTAL CLAIM WAS RS.1 06 340/-. THE AO DISALLOWED BY ESTIMATE. THE LD. CIT(A) ALLOWED THE CLAIM BY HOLDI NG THAT THESE EXPENSES COMPRISES OF ITEMS OF PETTY NATURE SUCH AS TEA COFFEE AND MINOR MAINTENANCE FOR WHICH PROPER BILLS WERE ISSUED AND VOUCHERS KEPT BY THE ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 7 ASSESSEE. THEY WERE CONSIDERED NECESSARY FOR DAY TO DAY RUNNING OF THE OFFICE. ACCORDINGLY HE ALLOWED THE CLAIM. 11. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A) AS NO CONTRARY MATERIAL WAS PRO DUCED BEFORE US. ACCORDINGLY THIS GROUND OF REVENUE IS ALSO REJECTE D. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25/3/11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 25/3/11. MAHATA/- ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DCA) (BS) AM JM ITA NO.2425/AHD/2008 ASST. YEAR 2005-06 8 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 15/3/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 16/3/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..