The ITO, Ward-2(3),, Surat v. Shri Rajkumar Bagri(HUF),, Surat

ITA 3125/AHD/2009 | 2006-2007
Pronouncement Date: 25-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 312520514 RSA 2009
Assessee PAN AAKHR0218P
Bench Ahmedabad
Appeal Number ITA 3125/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 2 day(s)
Appellant The ITO, Ward-2(3),, Surat
Respondent Shri Rajkumar Bagri(HUF),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 25-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 25-07-2011
Date Of Final Hearing 19-07-2011
Next Hearing Date 19-07-2011
Assessment Year 2006-2007
Appeal Filed On 23-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER DATE OF HEARING : 19/07/2011 DRAFTED ON: 20/07/2011 ITA NO.3125/AHD/2009 ASSESSMENT YEAR : 2006-07 THE ITO WARD-2(3) SURAT VS. SHRI RAJKUMAR BAGRI (HUF) PROP.OF VIDHATA FASHION 1006 SHIV SHAKTI MARKET RING ROAD SURAT PAN/GIR NO. : AAKHR 0218 P ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.K.MENNA SR.D.R. RESPONDENT BY: SHRI RAMESH KUMAR MALPANI A.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II SURAT DATED 26/08/2009 PASSED FOR ASSESSMENT YEAR 2006-07 ON T HE FOLLOWING GROUNDS:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. OF RS.19 45 000/- ON ACCOUNT OF UNSECURED LOANS. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE MA DE BY THE A.O. OF RS.63 767/- OUT OF VARIOUS EXPENSES OF RS.2 494/-. [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 2 - 2. GROUND NO.1 :- THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T.ACT DATED 17/12/2008 WERE THAT THE ASSESSEE-HUF IS IN THE BUS INESS OF PROCESSING OF GREY CLOTH. IT WAS NOTICED BY THE ASSESSING OFF ICER THAT THE ASSESSEE HAS RAISED LOANS OF RS.19 45 000/- FROM 14 DIFFEREN T PARTIES. THE ASSESSING OFFICER HAS MADE THE LIST OF THOSE PARTIE S AND AS PER THE SAID LIST HE HAS NOTED THAT SOME OF THEM WERE STATED TO BE IN RETAIL BUSINESS OF DRESS MATERIAL STITCHING ON JOB-WORK BASIS SILK C LOTH BUSINESS OR RENT ETC. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THOSE DEPOSITORS HAVE DEPOSITED CASH AMOUNT IN THE BANK AND THEN ISSUED C HEQUE IN FAVOUR OF THE ASSESSEE. IT HAS ALSO BEEN OBSERVED BY THE ASS ESSING OFFICER THAT THE BALANCES IN THEIR RESPECTIVE BANK ACCOUNTS HAD NEVE R EXCEEDED RS.1 000/- AT ANY POINT OF TIME. IN OTHER WORDS THE ASSESSIN G OFFICER HAS DOUBTED THE CREDITWORTHINESS OF THOSE DEPOSITORS. CERTAIN ENQUIRY LETTERS WERE ISSUED BUT AS PER ASSESSING OFFICER THOSE REMAINED UNATTENDED. FROM THE SIDE OF THE ASSESSEE CONFIRMATION LETTERS WERE PLA CED ON RECORD. IT WAS ALSO INFORMED THAT THE DEPOSITORS WERE INCOME-TAX B EARERS AND IN SUPPORT INCOME-TAX ACKNOWLEDGEMENT FOR FILING OF RETURNS AN D THEIR RESPECTIVE BALANCE-SHEETS WERE FILED. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINCED AND HELD THAT MERE FILING OF IT ACKNOWLED GEMENT BANK ACCOUNT AND CONFIRMATION HAVE NOT PROVED THE CREDIT WORTHINESS OF THOSE DEPOSITORS. HE HAS ALSO GIVEN FINDING THAT NO DEPO SITOR WAS PRODUCED FOR VERIFICATION. HE HAS HELD THAT THE ASSESSEE WAS RE PEATEDLY REQUESTED TO PRODUCE THE DEPOSITORS TO PROVE THEIR CREDITWORTHIN ESS AND SINCE THOSE DEPOSITORS COULD NOT BE PRODUCED THEREFORE THE DE POSITS REMAINED UNEXPLAINED. AN ADDITION OF RS.19 45 000/- WAS RES ULTANTLY MADE WHICH ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 3 - WAS CHALLENGED BEFORE THE LEARNED CIT(APPEALS). TH E LEARNED CIT(APPEALS) IN A CRYPTIC MANNER ALLOWED THE GROUN D AS FOLLOWS:- 6.1. ONE OF THE GROUNDS TAKEN BY THE AO IS THAT A T LEAST 8-9 CREDITORS OUT OF THE 14 WERE THE ASSESSEES FAMILY MEMBERS OR CLOSELY RELATED. THIS FACT ACTUALLY SUPPORTS THE C ASE OF THE ASSESSEE. IT MEANS THAT ALL SUCH DEPOSITORS WERE C LEARLY IDENTIFIABLE AND SINCE THE LOANS WERE TAKEN FROM TH EM THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE DOUBTE D. THE MAIN CONTENTION OF THE AO WAS THAT NONE OF THE DEPOSIT ORS HAD THE REQUISITE CREDITWORTHINESS. THE POINT REMAINS THAT ALL THE DEPOSITORS WERE ASSESSED T TAX AND THAT TOO IN SURA T. COPIES OF THEIR INCOME-TAX RETURNS ALONG WITH THEIR BALANCE S HEETS APART FROM CONFIRMATION LETTERS SHOWING THEIR NAMES AND A DDRESSES WERE MADE AVAILABLE TO THE AO. THE AO COULD HAVE EASILY VERIFIED THE INCOME-TAX RECORDS OR COULD HAVE ISSUE D SUMMONS NONE OF WHICH HE TOOK THE TROUBLE TO DO. IT HAS BE EN CLAIMED THAT THE LOANS HAD BEEN SHOWN IN THEIR RESPECTIVE BALANC E SHEETS BY THE DEPOSITORS AND THAT THEY HAD SUFFICIENT ACCUMULATE D CAPITAL. 6.2. GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CASE AND SINCE NO INQUIRY OR VERIFICATION WAS CONDUCTED BY THE AO SIMPLY BECAUSE THE AMOUNTS WERE DEPOSITED IN CASH IN THE R ESPECTIVE BANK ACCOUNTS OF THE CREDITORS PRIOR TO GIVING THE LOANS BY ACCOUNT PAYEE CHEQUES THEY COULD NOT BE HELD TO BE BOGUS O R REPRESENTING UNEXPLAINED CASH CREDITS. THE AO IS THEREFORE DIRE CTED TO DELETE THE ADDITION OF THE SUM OF RS.19 45 000. 3. NOW THE REVENUE IS FURTHER IN APPEAL BEFORE US. 4. FROM THE SIDE OF THE REVENUE LEARNED DEPARTMENT AL REPRESENTATIVE MR. S.K.MEENA APPEARED AND VEHEMENT LY PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. HE HAS DRAW N OUR ATTENTION ON THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSE SSEE WAS ASKED ON ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 4 - NUMBER OF OCCASIONS TO PRODUCE THOSE DEPOSITORS BUT NO ONE CAME FORWARD FOR CROSS-EXAMINATION HENCE THE ASSESSING OFFICER HAD NO OPTION BUT TO DISALLOW THE CLAIM. LEARNED DEPARTME NTAL REPRESENTATIVE HAS ARGUED THAT THE ASSESSEE HAS NOT DISCHARGED HIS BURDEN TO ESTABLISH THE GENUINENESS OF THE TRANSACTION AND FOR THIS LEGAL P ROPOSITION HE HAS PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF ACIT VS. JEEVANLAL SHAH 205 ITR 244 (SC). HE HAS ALSO C ITED THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. UNITED COMMERCIAL AND INDUSTRIAL CO (P)LTD. REPORTED AT (1991) 187 IT R 596 (CAL.) FOR THE LEGAL PROPOSITION THAT THE ASSESSEE MUST PROVE IDEN TITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. 5. FROM THE SIDE OF THE RESPONDENT-ASSESSEE LEARNE D AUTHORISED REPRESENTATIVE MR.RAMESH KUMAR MALPANI APPEARED AND SUPPORTED THE ORDER OF THE LEARNED CIT(APPEALS) PRIMARILY ON THE GROUND THAT THE INCOME-TAX RETURN WERE VERY MUCH BEFORE THE ASSESSI NG OFFICER AND THE ASSESSING OFFICER COULD HAVE EASILY VERIFIED THE RE CORDS OF THOSE DEPOSITORS. THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROVING THE IDENTITY OF THOSE PERSONS WITH THEIR RESPECTIVE SOU RCE OF INCOME BUT THE ASSESSING OFFICER HAD NOT MADE ANY ATTEMPT TO VERIF Y THE CREDITWORTHINESS OF THOSE PERSONS. HE HAS ARGUED T HAT ONCE THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS THEN THE LEARNED C IT(APPEALS) WAS RIGHT IN DELETING THE ADDITION. HE HAS ALSO SUBMIT TED THAT THE ASSESSEE MUST NOT BE FORCED TO PRODUCE THE WITNESS IN RESPEC T OF ISSUE OF GENUINENESS OF CASH CREDITS AND IN SUPPORT HE HAS P LACED RELIANCE ON THE DECISION OF HON'BLE MADHYA PRADESH HIGH COURT IN TH E CASE OF CIT VS. ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 5 - BARJATIYA CHILDREN TRUST REPORTED AT (1997)225 ITR 640 (M.P.). HE HAS ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE SUP REME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION P.LTD. REPORTED AT (1 986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC). 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE MA Y LIKE TO CLARIFY THAT NO COMPILATION OR PAPER-BOOK WAS FILED BEFORE US FR OM EITHER SIDE. THEREFORE WE HAVE TO RELY UPON THE ORDERS OF THE A UTHORITIES BELOW. AS FAR AS THE FILING OF CONFIRMATION LETTERS AND ESTAB LISHING THE IDENTITY OF THE DEPOSITORS WAS CONCERNED THE ASSESSING OFFICER HAS NOT RAISED ANY OBJECTION OR EVEN NOT DOUBTED THE EXISTENCE OF THOS E DEPOSITORS. FACTS OF THE CASE HAVE ALSO CONFIRMED THAT THE ASSESSEE HAS FURNISHED THE PROOF OF FILING OF RETURNS AND THEIR RESPECTIVE BALANCE-SHEE TS BEFORE THE ASSESSING OFFICER. BUT THE MOOT QUESTION BEFORE US IS THAT W HETHER THAT INFORMATION WAS SUFFICE TO SAY THAT THE REQUIREMENT OF SECTION 68 OF IT ACT 1961 WERE COMPLIED WITH. THE PROVISIONS OF SECTION 68 H AVE BEEN DISCUSSED AT LENGTH IN NUMBER OF DECISIONS BY SEVERAL COURTS. I T WAS HELD BY THE HONBLE COURTS THAT THE PRIMARY ONUS IS ON THE ASSE SSEE TO PROVE THE GENUINENESS OF CASH CREDITORS. RATHER IN ONE OF T HE DECISIONS PRONOUNCED BY THE HON'BLE CALCUTTA HIGH COURT IN TH E CASE OF CIT VS. PRECISION FINANCE P.LTD. 208 ITR 465 (CAL.) THAT ME RE PAYMENT BY CHEQUE DO NOT MAKE THE TRANSACTION AS GENUINE. IN BRIEF THE HON'BLE CALCUTTA HIGH COURT HAS HELD THAT THE ASSESSEE MUST PROVE IDENTITY OF CREDITORS AS ALSO THEIR CREDITWORTHINESS. THOUGH THE TRANSACTION IN THAT CASE WAS ALSO THROUGH BANK BUT THAT FACT MERELY WA S NOT CONCLUSIVE. AS ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 6 - PER THE COURT THERE WAS NO MATERIAL TO ESTABLISH T HE CREDITWORTHINESS OF THOSE CREDITORS THEREFORE THE AMOUNT WAS HELD AS ASSESSABLE IN THE HANDS OF THE ASSESSEE. AS FAR AS THE ASSESSING OFFICER W AS CONCERNED IN THE PRESENT APPEAL HE HAS ASKED THE ASSESSEE TO PRODUC E THOSE DEPOSITORS BUT THAT EFFORT REMAINED IN VAIN. THE FIRST APPELLATE AUTHORITY HAS ALTOGETHER IGNORED THAT FACT. THE FIRST APPELLATE AUTHORITY H AS ALSO IGNORED THE FACT THAT THE ASSESSING OFFICER WAS SCEPTICAL ABOUT CASH TRANSACTION AS REFLECTED IN THEIR RESPECTIVE BANK ACCOUNTS. THE L EARNED CIT(APPEALS) WAS ALSO NOT CONCERNED WHETHER ALL THOSE PERSONS WE RE HAVING SUFFICIENT FUNDS TO GRANT LOANS TO THE ASSESSEE. THERE WAS NO DISCUSSION BY LEARNED CIT(APPEALS) ABOUT THEIR FINANCIAL POSITION. THOUG H THE ASSESSEE HAS FILED THE BALANCE-SHEETS OF THOSE CREDITORS BUT WHA T WAS THEIR FINANCIAL STATUS REFLECTED IN THOSE BALANCE-SHEETS HAVE NOT B EEN SEEN OR DISCUSSED BY THE LEARNED CIT(APPEALS). AS FAR AS THE DECISIO N OF HON'BLE M.P. HIGH COURT IS CONCERNED AS CITED BY THE LD.AR IN THE CASE OF BARJATIYA CHILDREN TRUST (SUPRA) THE HON'BLE COURT HAS REJEC TED THE APPLICATION OF THE REVENUE WHICH WAS MOVED U/S.256(1) OF THE I.T.A CT ON THE GROUND THAT THE FINDING OF THE TRIBUNAL WAS A FINDING OF FACT AND THAT FACTUAL FINDING DID NOT MANIFEST ANY ILLEGALITY. THE HON'B LE COURT HAS SIMPLY REPRODUCED THE PARAGRAPH OF THE TRIBUNAL AND THEN H ELD THAT ANY INTERFERENCE IN THOSE FACTUAL FINDINGS WAS UNWARRAN TED. IN OUR OPINION NO LAW WAS LAID DOWN THAT IN CASE OF FURNISHING OF CONFIRMATION LETTER AND PROOF OF FILING OF RETURN THE ASSESSING OFFICER IS DEBARRED TO ENQUIRED ABOUT THE CREDITWORTHINESS OF THE DEPOSITORS. IN RESPECT OF THE CREDITWORTHINESS OF THE LETTERS THE HON'BLE CALCUT TA HIGH COURT IN THE CASE OF CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO.( P) LTD. (187 ITR ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 7 - 596) HAS TAKEN A VIEW THAT THE PRIMARY ONUS LAY ON THE ASSESSEE EVEN TO PROVE THE CREDITWORTHINESS OF THOSE PARTIES IN ADDI TION TO PROVE THE IDENTITY AND THE GENUINENESS OF THE TRANSACTION. IN OUR CONSIDERED OPINION WHEN ALL THREE INGREDIENTS ARE COMPLIED WI TH AND PROVED BY THE ASSESSEE THEN THEREAFTER THE ONUS SHIFTS ON THE RE VENUE DEPARTMENT. AS FAR AS THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS REPORTED AT (2002) 256 ITR 360 (GUJ) IS CONCERNED CITED BY THE LD.AR THE ASSESSING OFFICER HAS CONDU CTED CERTAIN ENQUIRIES TO ASCERTAIN THE GENUINENESS FROM ALL THOSE PERSON S FROM WHOM LOANS WERE TAKEN. THE CAPACITY OF THE CREDITORS WAS ALSO ESTABLISHED BUT THE LOAN AMOUNT WAS ADDED ON THE GROUND THAT THOSE CRED ITORS WERE NOT ABLE TO PROVE THE SOURCE OF CREDITS IN THEIR BOOKS OF AC COUNTS. BECAUSE OF THAT REASON THE HON'BLE COURT HAS SAID THAT THE ASSESSE E COULD PROVE THE CREDIT IN ITS BOOKS OF ACCOUNT BUT NOT THE SOURCE OF THE S OURCE. AS AGAINST THAT IN THE PRESENT APPEAL THE ASSESSEE HAS NOT EVEN SA TISFIED THE ASSESSING OFFICER ABOUT THE SOURCE OF THE DEPOSITS BY NOT PRO DUCING THOSE DEPOSITORS. UNDER THESE CIRCUMSTANCES WHEN THE PR OVISIONS OF SECTION 68 OF THE I.T.ACT REQUIRED AN ASSESSEE TO COMPLY WI TH ALL THE THREE INGREDIENTS I.E. IDENTITY GENUINENESS AND CREDIT WORTHINESS OF THE DEPOSITORS THEN THE PRIMARY ONUS WAS ON THE ASSESS EE TO COMPLY WITH THESE CONDITIONS AND ALSO TO SATISFY THE ASSESSING OFFICER. THE LEARNED CIT(APPEALS) HAS ONLY LOOKED INTO THE FIRST TWO ASP ECTS BUT IGNORED THE THIRD ASPECT WHICH IS ALSO ONE OF THE INGREDIENTS OF SECTION 68 OF THE I.T.ACT. WE THEREFORE DEEM IT PROPER TO RESTORE THE ISSUE BACK TO THE STAGE OF THE ASSESSING OFFICER TO MAKE NECESSARY EN QUIRIES IN RESPECT OF THOSE DEPOSITORS AND FOUND THEIR CREDITWORTHINESS B EFORE MAKING SUCH AN ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 8 - ADDITION. WITH THESE OBSERVATIONS WE HEREBY ALLO W THIS GROUND OF THE REVENUE BUT FOR STATISTICAL PURPOSES. 7. GROUND NO.2 IS IN RESPECT OF AN ESTIMATED DISA LLOWANCE OF 35% OF THE TOTAL EXPENSES WAS MADE BY THE ASSESSING OFFICE R. THE EXPENDITURE WERE IN THE NATURE OF PACKING EXPENSES TRAVELLING EXPENSES TELEPHONE AND MOBILE EXPENSES ETC. WHEN IT WAS CHALLENGED B EFORE THE LEARNED CIT(APPEALS) PART RELIEF WAS GRANTED AND THE ADDIT ION IN RESPECT OF TELEPHONE AND MOBILE EXPENSES WERE SUSTAINED AND RE ST WERE DELETED. IN THE ABSENCE OF ANY SPECIFIC REASON BEING DEMONSTRAT ED FROM THE SIDE OF THE REVENUE DEPARTMENT EXCEPT TO ESTIMATE THE DISA LLOWANCE WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF LEARNED CIT(APPEALS) HENCE CONFIRMED THE SAME. THIS GROUND OF THE REVENUE IS THEREFORE DISMISSED. 8. IN THE RESULT REVENUES APPEAL IS PARTLY ALLOWE D BUT FOR STATISTICAL PURPOSES. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 25 TH JULY 2011. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 25 / 07 /2011 T.C. NAIR SR. PS ITA NO.3125/AHD /2009 ITO VS. SHRI RAJKUMAR BAGRI (HUF) ASST.YEAR - 2006-07 - 9 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II SURAT 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD 1. DATE OF DICTATION..19/07/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/07/2011 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 D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S25.7.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25.7.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER