M/S. RAJPAL MOTORS LTD., v. THE A C I T 4 (1),

ITA 324/IND/2008 | 2005-2006
Pronouncement Date: 05-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 32422714 RSA 2008
Assessee PAN AAACR7955G
Bench Indore
Appeal Number ITA 324/IND/2008
Duration Of Justice 1 year(s) 9 month(s) 24 day(s)
Appellant M/S. RAJPAL MOTORS LTD.,
Respondent THE A C I T 4 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 05-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 05-05-2010
Date Of Final Hearing 27-04-2010
Next Hearing Date 27-04-2010
Assessment Year 2005-2006
Appeal Filed On 11-07-2008
Judgment Text
PAGE 1 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : AAACR7955G I.T.A.NO. 324/IND/2008 A.Y. : 2005-06 RAJPAL MOTORS PVT.LTD. ACIT 7/2 MURAI MOHALLA VS 4(1) INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ABHISHEK PARWAL C.A. RESPONDENT BY : SMT.APARNA KARAN SR.DR DATE OF HEARING : 27-04-2010 O R D E R PER V.K. GUPTA A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II INDORE DATED 17.03.2008 FOR THE ASSESS MENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO.1 READS AS UNDER :- THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT BY CONF IRMING ADDITIONS U/S 68 ON ACCOUNT OF UNSECURED LOANS AMOU NTING TO RS. 1 80 000/-. PAGE 2 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. 1.1 THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT THAT TH E ASSESSEE HAD NOT DISCHARGED HIS ONUS OF ESTABLISHIN G THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF T HE CREDITORS. 1.2 THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT BY NOT APPRECIATING THAT JUST A CHANGE IN THE SOURCE OF MO NEY IN THE BOOKS OF LOAN PARTIES DOES NOT RENDER THE TRANSACTION SHAM AND COOKED UP. 1.3 THE LD. CIT(A) HAS GROSSLY ERRED BY NOT CONSIDERING THAT THE CIRCUMSTANCES & SITUATIONS BEHIND THE SOUR CE OF LOANS WHETHER OBTAINED THROUGH LOAN OR AS A GIFT REMAIN THE SAME. 4. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE L D. CIT(A) IN CONFIRMING THE ADDITION OF RS. 1.80 LAKHS MADE BY T HE ASSESSING OFFICER U/S 68. 5. THE FACTS IN BRIEF ARE THAT THE A.O. FOUND THAT T HE ASSESSEE HAD TAKEN UNSECURED LOAN TO RS. 2 82 000/- FROM THREE P ERSONS NAMELY SHRI MAHENDRA KUMAR RAJPAL ( RS. 1 LAKH) NEETA RAJPAL ( RS. 70000/- ) AND SUMIT RAJPAL ( RS.1 12 000/-). THE A.O. ASKED THE A SSESSEE TO EXPLAIN THE GENUINENESS OF SUCH LOANS. THE ASSESSEE FILED CONFI RMATORY LETTERS. HOWEVER THE A.O. HELD THAT MERELY BECAUSE THE PAYM ENT HAD BEEN PAGE 3 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. RECEIVED THROUGH ACCOUNT PAYEE CHEQUES IT COULD NO T BE SAID THAT THE NATURE AND SOURCE OF SUCH AMOUNT STOOD EXPLAINED. T HE LD. A.O. FURTHER HELD THAT SUCH DEPOSITORS DID NOT HAVE RESOURCES TO GIVE SUCH LOAN AND THEY WERE EVEN NOT AWARE ABOUT THE CORRECT FACT. AC CORDINGLY THE A.O. HELD THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIM ARY ONUS CAST UPON THE ASSESSEE AND THEREFORE THERE WAS NO NECESSITY TO ISSUE SUMMONS U/S 131. THE A.O. ACCORDINGLY ADDED THE IMPUGNED SUM AS UN EXPLAINED CASH CREDIT. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE MADE DE TAILED SUBMISSIONS AND ALSO PLACED RELIANCE ON THE DECISION OF THE HON 'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRI ES AS REPORTED IN 246 ITR 160 FOR THE PROPOSITION THAT WHERE THE ASS ESSEE ESTABLISHED THE IDENTITY OF A PERSON THEN THERE WAS NO REASON TO M AKE ANY ADDITION U/S 68. THE LD. CIT(A) FOUND THAT UNSECURED LOAN WAS FR OM MAHENDRA RAJ PAL AND THE SOURCE OF SUCH LOAN WAS A LOAN RECEIVED BY HIM FROM OTHER PARTY AND IF THE A.O. WAS HAVING DOUBTS REGARDING C REDITWORTHINESS OF SUCH CREDITOR THEN THE A.O. SHOULD HAVE ADDED RS. 1.50 LAKHS AND NOT RS. 1 LAKH. HENCE HE DELETED THE ADDITION IN RESPE CT OF SUCH LOAN. AS REGARD TO OTHER TWO CREDITORS NAMELY SMT. NEETA R AJ PAL AND SHRI SUMIT RAJ PAL THE LD. CIT(A) FOUND THAT SUCH PERSONS WER E NOT HAVING THE CAPACITY TO ADVANCE SUCH LOAN AND THEY HAD GIVEN SU CH LOAN TO THE PAGE 4 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. ASSESSEE FROM GIFTS WHICH WERE RECEIVED WITHOUT AN Y OCCASION AND THE ASSESSEE HAD ALSO NOT MADE ANY ATTEMPTS TO ESTABLIS H THAT SUCH GIFTS RECEIVED BY SUCH CREDITORS WERE GENUINE. THE LD. CI T(A) ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT VS. P.MOHAN KALA AS REPORTED IN 291 ITR 278 TO HOLD TH AT GIFTS FROM STRANGERS COULD NOT BE ACCEPTED AS GENUINE. THE LD. CIT(A) THEREAFTER ALSO DREW SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE VS. CIT AS REPORTED IN 8 2 ITR 540. THUS THE LD. CIT(A) HELD THAT TO AVOID ADDITION U/S 68 IT W AS INCUMBENT UPON THE ASSESSEE TO DISCHARGE ALL THE THREE INGREDIENTS ON ITS OWN OTHERWISE THE PROVISIONS OF SECTION 68 COULD BE INVOKED BY THE A .O. FOR MAKING ADDITION OF SUCH CASH CREDITS. THE LD. CIT(A) ALSO HELD THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF METACHEM INDUSTRIES (SUPRA) WAS NOT APPLICABLE FOR THE REASO N THAT QUESTION BEFORE THE HON'BLE HIGH COURT WAS DIFFERENT I.E. WHETHER T HE AMOUNT CREDITED IN THE CAPITAL ACCOUNT OF THREE PARTNERS WAS FOUND TO BE SATISFACTORILY EXPLAINED AND THE PERSON MAKING THE DEPOSIT HAD BEE N PRODUCED THEN NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE WHO HAD TAKEN THE LOAN/DEPOSIT FROM SUCH PERSONS. THE LD. CIT(A) FURT HER HELD THAT IN THE CASE OF PERSONS HAVING NO MEANS THIS DECISION OF T HE HON'BLE JURISDICTIONAL HIGH COURT COULD NOT BE APPLIED. THE LD. CIT(A) FURTHER PAGE 5 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. HELD THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS AS PER THE REQUIREMENT OF SECTION 68 OF THE ACT. HENCE ADDITION CAN BE MA DE IN THE HANDS OF THE ASSESSEE. THE LD. CIT(A) HOWEVER REDUCED THE QUAN TUM OF ADDITION IN THE CASE OF LOAN FROM SUMIT RAJ PAL TO RS. 1 10 000 /- BEING THE ACTUAL AMOUNT OF LOAN RECEIVED BY THE ASSESSEE. STILL AGGR IEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE FACTS REITERATED THE SUBMISSION SAME BEFORE THE LD. CIT(A) AND ALSO CONTENDED THAT EVEN THE LD. CIT(A) HAD HELD THAT ONCE THE PARTNER FROM WHOM THE LOAN HAD BEEN RECEIVED BY THE FIRM HAD ACCEPTED THE FACT OF ADVANCEMENT OF SUCH LOAN THEN NO ADDITION WAS TO BE MADE AND IF THIS P OSITION WAS APPLIED TO THE FACTS OF THE PRESENT CASE HENCE IN THE BACKGR OUND OF CONFIRMATION GIVEN BY SUCH PERSONS AND THEIR IDENTITY BEING PROV ED BY THE ASSESSEE THEN THE RATIO OF THE DECISION OF THE HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF METACHEM INDUSTRIES WAS SQUARELY APPLIC ABLE. THE LEARNED COUNSEL FURTHER CONTENDED THAT THE ASSESSEE WAS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE I.E. IT WAS REQUIRED TO EXPLAIN TH E NATURE OF SUMS FOUND CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND NOT IN THE BOOKS OF THE PARTIES FROM WHOM THE ASSESSEE HAD TAK EN THE LOAN. THE LEARNED COUNSEL FURTHER PLACED RELIANCE ON THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS AS REPORTED IN 216 PAGE 6 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. CTR 195 AND CONTENDED THAT IN CASE THE DEPARTMENT WAS NOT SATISFIED WITH THE EXPLANATIONS OF THE ASSESSEE THEN THE DE PARTMENT COULD REOPEN THE CASES OF SUCH PERSONS AND SHOULD HAVE PROCEEDED IN THOSE CASES AS PER LAW AND THEREFORE SUMS SO RECEIVED COULD NOT BE R EGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. AFTER THESE LEGAL PLEADINGS THE LEARNED COUNSEL SUBMITTED THAT MERELY BECAUSE IN CASE OF THESE TWO PERSONS THE SOURCE OF LOAN GIVEN TO ASSESSEE WAS GIFT AND NOT LOAN. HENCE THERE WAS NO JUSTIFIED REASON NOT TO ACCEPT THE CLAIMS OF THE ASSESSEE WH ICH WERE ACCEPTED IN THE CASE OF LAND RECEIVED FROM SHRI MAHENDRA RAJPAL . THE LEARNED COUNSEL FURTHER EMPHASIZED ON THE FACT THAT THE REV ENUE AUTHORITIES DID NOT ASK THE ASSESSEE TO GIVE FURTHER DETAILS AS TO THE THIRD PARTIES SOURCE IDENTITY AND CREDITWORTHINESS. HENCE THE ASSESSEE WAS DENIED EVEN AN OPPORTUNITY TO EXPLAIN AND THEREFORE THE VIEW OF THE REVENUE AUTHORITIES THAT THE ASSESSEE FAILED TO GIVE SATISFACTORY EXPLA NATION WAS FACTUALLY INCORRECT. IT WAS ALSO POINTED OUT THAT CAPITAL ACC OUNT AND BALANCE SHEET OF PARTIES FROM WHOM LOANS WERE TAKEN HAD BEEN GIVEN A ND IN BOTH THE CASES THE FUNDS WERE RECEIVED BY THE CREDITORS ON THE SAME DAY OR ONE OR TWO DAYS BEFORE THE DATE OF LOAN GIVEN BY THEM TO T HE ASSESSEE. THE SR. DR ON THE OTHER HAND PLACED STRONG RELIAN CE ON THE ORDER OF THE LD. CIT(A). PAGE 7 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE ASSESSEE HAS RECEIVED UNSEC URED LOANS FROM THREE PERSONS. ONE OF SUCH PERSONS HAS GIVEN LOAN T O THE ASSESSEE AFTER OBTAINING LOAN FROM ANOTHER INDEPENDENT PARTIES AND TWO OTHER PERSONS HAVE GIVEN LOAN TO THE ASSESSEE AFTER RECEIVING GIF TS FROM TWO OTHER PARTIES. THE SUCH GIFTS/LOANS HAVE BEEN RECEIVED BY THEM EITHER ON THE SAME DATE OR TWO THREE DAYS PRIOR TO THE TRANSACTIO N OF LOAN WITH THE ASSESSEE. IN THE CASE OF LOANS GIVEN AFTER TAKING L OAN THE LD. CIT(A) HAS ACCEPTED THE SAME AS GENUINE WHEREAS IN THE CASE O F TWO OTHER DEPOSITORS SUCH LAND HAS NOT BEEN ACCEPTED AS GENU INE. THE OTHER FACT IS THAT SUCH CREDITS ARE RELATED PARTIES. IN THESE CIR CUMSTANCES WE ARE UNABLE TO UNDERSTAND AS TO HOW THE LOAN TRANSACTION OUT OF LOAN IS GENUINE WHEREAS THE LOAN OUT OF GIFTS IS NOT GENUINE WHEN THE OTHER FACTS REMAIN THE SAME. WE FURTHER FIND THAT THE LD. CIT(A) HAS D ISTINGUISHED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF METACHEM INDUSTRIES(SUPRA). HOWEVER AS PER THE RATIO OF THI S DECISION ONCE THE ASSESSEE HAS FILED CONFIRMATORY LETTERS BALANCE SH EET AND OTHER DETAILS OF SUCH PERSONS THEN WITHOUT GIVING AN OPPORTUNITY OF FURTHER EXPLANATION TO THE ASSESSEE THE ADDITION IN OUR OPINION CANNOT BE MADE/SUSTAINED. WE FURTHER FIND THAT THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT IN PAGE 8 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. THE CASE OF LOVELY EXPORTS (SUPRA) IS ALSO APPLICAB LE. IT IS ALSO PERTINENT TO NOTE THAT THE QUANTUM OF LOAN IS NOT SO MUCH AS SO AS TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE. IT IS ALSO TO BE NO TED THAT THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT IT WAS THE UNDISCLOSED INCOME OF THE ASSESSEE WHICH WAS BROUGHT IN THE BO OKS OF THE ASSESSEE IN THIS MANNER. IN THIS VIEW OF THE MATTER WE HOLD TH AT NO ADDITION IS WARRANTED IN THE PRESENT CASE. THUS THIS GROUND OF THE ASSESSEE STANDS ALLOWED. 9. IN GROUND NOS. 2 & 3 THE ISSUE IS REGARDING DIS ALLOWANCE OUT OF DEPRECIATION ON VEHICLES AND OUT OF TELEPHONE EXPEN SES ON ACCOUNT OF NON-BUSINESS PURPOSES USE ARE INVOLVED. THE LEARNED COUNSEL TRIED TO SUBMIT THAT IT WAS A CASE OF THE COMPANY HENCE NO SUCH DISALLOWANCE WAS WARRANTED. HOWEVER WE FIND THAT THE DISALLOWAN CE HAS BEEN MADE BY THE REVENUE AUTHORITIES ON ACCOUNT OF SUCH EXPENSES BEING INCURRED FOR NON-BUSINESS PURPOSES AND U/S 38(2) HENCE IN PRIN CIPLE WE CONFIRM BOTH THE DISALLOWANCE. AS FAR AS THE RATE OF DISALLOWANC E OF 20 % OUT OF DEPRECIATION IS CONCERNED IN OUR OPINION IS ON HI GHER SIDE. HENCE WE REDUCE THE SAME TO 10 %. THUS GROUND NO.2 IS PARTL Y ALLOWED AND GROUND NO.3 IS DISMISSED. PAGE 9 OF 9 - 327/IND/2008 RAJPAL MOTORS PVT.LTD. INDORE. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 5 TH MAY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5 TH MAY 2010. CPU* 30.4.4.5