The ITO, Ward-1(3),, Surat v. Kalipar Credit & Mercantile Pvt.lTD.,, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON'BLE SH RI A.N. PAHUJA A.M.) I.T.A. NO. 421/AHD./2008 ASSESSMENT YEAR : 2004-2005 INCOME TAX OFFICER WARD-1(3) SURAT -VS.- KAILP AR CREDIT & MERCANTILE PVT. LTD. SURAT (PAN : AABCK 0027 B) (APPELLANT) (RES PONDENT) APPELLANT BY : SMT. NEETA SHAH SR. D.R. RESPONDENT BY : SHRI R.K. MALPANI O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 01.11.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-1 SURAT DELETI NG THE ADDITION OF RS.10 00 000/- MADE ON ACCOUNT OF UNSECURED LOANS UNDER SECTION 68 OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCING. FOR THE ASSESSMENT YEAR U NDER APPEAL IT FILED THE RETURN OF INCOME ON 17.12.2004 DECLARING TOTAL INCOME OF RS. NIL. THE A SSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) WHEREIN HE MADE THE ADDITION O F RS.10 21 000/- UNDER SECTION 68 OF THE INCOME TAX ACT 1961. THE ASSESSEE HAD TAKEN SHORT- TERM LOANS FROM THE FOLLOWING THREE PERSONS :- I) UDAY OVERSEAS PVT. LTD. KOLKATA RS.10 00 000/- II) SHREE RAMLAL RS. 10 000/- III) SHREE SHYAMLAL RS. 11 000/- RS.10 21 000/- ON APPEAL IN THE IMPUGNED ORDER THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ADDITION OF RS.10 000/- AND RS.11 000 /- IN RESPECT OF SHREE RAMLAL AND SHREE SHYAMLAL RESPECTIVELY. HOWEVER HE DELETED THE ADDI TION OF RS.10 00 000/- MADE UNDER SECTION 68 IN RESPECT OF SHORT-TERM LOAN TAKEN FROM M/S. UD AY OVERSEAS PVT. LTD. KOLKATA. THE 2 ITA NO. 421/AHD/2008 REASONING GIVEN BY THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) FOR DELETING THE SAID ADDITION CONTAINED IN PARA 3.3 OF THE IMPUGNED ORDE R WHICH READS AS UNDER :- 3.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE A.O. IN RESPECT OF UDAY OVERSEAS PVT. LTD. THE APPELLANT HAS FILED CONFIRMATION BEARING PAN. THE L OAN WAS TAKEN BY CHEQUE ON 29.04.03 AND HAS BEEN REPAID BY CHEQUE BE TWEEN 17.6.05 AND 11.10.03. THESE TRANSACTIONS ARE REFLECTED IN T HE BANK ACCOUNT. THE APPELLANT HAS FILED THE INTIMATION U/S. 143(1) OF U DAY OVERSEAS PVT. LTD. ISSUED BY WARD 6(4) OF INCOME TAX DEPARTMENT KOLKATA. THE A.O. HAS BROUGHT NO MATERIAL ON RECORD TO PROVE THAT THE LOAN WAS IN FACT BOGUS. THE APPELLANT HAS ESTABLISHED CREDITWORTHINE SS BY FILING INTIMATION U/S. 143(1) AND THE BALANCE-SHEET SHOWS THAT THE SOURCE OF FUNDS OF THE LENDER COMPANY ARE QUITE HIGH. HENCE THE ADDITION OF RS.10 LACS MADE BY THE A.O. IS DELETED. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) DELETING THE ADDITION OF RS.10 00 000/- THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US ON BEHALF OF R EVENUE SMT.NEETA SHAH SR. D.R. APPEARED AND CONTENDED THAT WHILE DELETING THE ADDI TION OF RS.10 00 000/- MADE UNDER SECTION 68 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER OBSERVED THAT THE ASSESSEE-COMPANY HAS GIVEN CONFIRMATION BEARING PAN AND THE AMOUNT OF LOANS WAS TAKEN BY CHEQUE AND HAS BEEN REPAID BY CHEQUE. THESE TRANSAC TIONS ARE REFLECTED IN THE BANK ACCOUNT. THE LD. D.R. POINTED OUT THAT IN THE IMPUGNED ORDER TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS NOT APPRECIATED THE FACT DISCUSSED BY THE ASSESSING OFFICER IN CONNECTION WITH THE TRANSACTION CLAIMED IN THE NAME OF UDAY OVERSEA S PVT. LTD. WHILE VERIFYING THE BANK ACCOUNT STATEMENT OF M/S. UDAY OVERSEAS PVT. LTD. THE ASSESSING OFFICER NOTICED THAT A CHEQUE OF RS.10 00 000/- WAS GIVEN BY IT TO THE ASSESSEE-C OMPANY ON 29.04.2003. THIS TRANSACTION IS PRECEDED BY A CREDIT ENTRY OF SIMILAR AMOUNT ON 26. 04.2003. THE BALANCE IN THE SAID ACCOUNT IMMEDIATELY BEFORE AND AFTER THE TRANSACTION WAS OF RS.11 171/- ONLY. THE ASSESSEE HAS CLAIMED TO HAVE REPAID THE MONEY TO UDAY OVERSEAS PVT. LTD. AS UNDER :- RS.2 15 000/- ON 17.06.2003 RS.5 00 000/- ON 26.09.2003 RS.2 85 000/- ON 11.10.2003 3 ITA NO. 421/AHD/2008 3.1. THE LD. D.R. FURTHER POINTED OUT THAT ON VERIF ICATION OF THE BANK STATEMENT OF UDAY OVERSEAS PVT. LTD. IT WAS NOTICED THAT THE ABOVE A MOUNTS HAVE BEEN CREDITED IN ITS BANK ACCOUNT. HOWEVER ON THE SAME DATE SIMILAR AMOUNTS OF CASH WITHDRAWAL WAS REFLECTED THEREIN. THE BALANCE IN THIS ACCOUNT IMMEDIATELY BEFORE AND AFTE R THESE TRANSACTIONS IS VERY MEAGER. 3.2. CONTINUING HER SUBMISSION THE LD. D.R. POINTE D OUT THAT ON VERIFICATION OF CASH BOOK OF THE ASSESSEE THE ASSESSING OFFICER NOTICED THAT ON VARIOUS DATES THROUGH THE YEAR THERE ARE HUGE CASH WITHDRAWALS FROM THE BANK ACCOUNT BY WAY OF SE LF CHEQUES. FURTHER AFTER A PERIOD OF TIME THE CASH BALANCES APPEARING IN THE BOOKS OF ACCOUNT HAVE BEEN DEPOSITED BACK INTO THE BANK ACCOUNT OF THE ASSESSEE. THE CASH BOOK OF THE ASSES SEE SHOWS HUGE CASH BALANCES FOR A CONSIDERABLE PERIOD OF TIME. THESE CASH BALANCES HA VE NEVER BEEN UTILIZED FOR ANY OFFICIAL EXPENSES OF THE ASSESSEE HOWEVER THE AMOUNTS ARE AGAIN DEPOSITED BACK IN THE BANK ACCOUNTS AFTER A CERTAIN PERIOD. THE PREPONDERANCE OF THESE EVIDENCES CLEARLY REVEALS THE MODUS OPERANDI OF THE ASSESSEE IN OBTAINING ACCOMMODATING ENTRIES OF CASH CREDITS. THE ONLY PURPOSE OF KEEPING HUGE CASH BALANCES IN THE BOOKS OF ACCOUNTS IS NONE ELSE THAN SETTLING THE ACCOMMODATING ENTRIES OF CASH CREDITS. THEREFORE THE ASSESSING OFFICER C LEARLY PROVED THAT THE ASSESSEE WAS INVOLVED IN ACTIVITY OF ISSUING ACCOMMODATING ENTRIES. ON THIS BASIS SHE CONTENDED THAT THE ASSESSING OFFICER RIGHTLY MADE THE ADDITION AND THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN DELETING THE SAME. 4. ON THE OTHER HAND SHRI R.K. MALPANI APPEARING O N BEHALF OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS ). HE POINTED OUT THAT THE LOAN WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE AND IT WAS AL SO REPAID THROUGH ACCOUNT PAYEE CHEQUE. THE WHOLE ADDITION OF RS.10 00 000/- WAS MADE BY TH E ASSESSING OFFICER UNDER SECTION 68 OF THE ACT ON DOUBTS AND SUSPICION AND THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE SAME. THEREFO RE THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 5. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE MAIN REASON GIVEN BY THE ASSESSING OFFIC ER FOR MAKING THE ADDITION OF RS.10 00 000/- UNDER SECTION 68 CAN BE SUMMARIZED A S UNDER :- (I) FROM THE COPY OF BALANCE-SHEET OF UDAY OVERSEA S PVT. LTD. IT CANNOT BE ASCERTAINED THAT LOAN OF RS.10 LACS WAS GIVEN BY THE SAID COMPANY TO THE 4 ITA NO. 421/AHD/2008 ASSESSEE. THE SCHEDULE CONTAINING SUCH DETAILS IS N OT FURNISHED BY THE ASSESSEE. (II) ON VERIFICATION OF THE BANK ACCOUNT STATEMENT OF UDAY OVERSEAS PVT. LTD. IT IS SEEN THAT THE CHEQUE OF RS.10 LACS WAS GIVEN BY IT TO THE ASSESSEE COMPANY ON 29.4.03. THIS TRANSACTION IS PRECEDED BY A CREDIT ENTRY OF SIMILAR AMOUNT ON 26.4.03. THE BALANCE IN THE SAID ACCOUNT IMMEDIATELY BEFORE AND AFTER THE TRANSACTION WAS RS.11 171/- ON LY. THEREFORE IT IS SEEN THAT THERE ARE HARDLY ANY TRANSACTIONS IN THE BANK ACCOUNT. (III) THE ASSESSEE HAS CLAIMED TO HAVE REPAID THE M ONEY TO UDAY OVERSEAS PVT. LTD. AS UNDER :- RS.2 15 000/- ON 17.06.03 RS.5 00 000/- ON 26.09.03 RS.2 85 000/- ON 11.10.03 ON VERIFICATION OF THE BANK STATEMENT OF UDAY OVERS EAS PVT. LTD. IT IS SEEN THAT THE ABOVE AMOUNT HAS BEEN CREDITED IN ITS BANK ACCOUNT BUT ON THE SAME DATE SIMILAR AMOUNTS OF CASH WITHDRAWAL IS REF LECTED THEREIN AND AGAIN THE BALANCE IN THIS ACCOUNT BECOMES MEAGER. (IV) ON VERIFICATION OF THE CASH BOOK OF THE ASSESS EE IT IS SEEN THAT ON VARIOUS DATES THROUGHOUT THE YEAR THERE ARE HUGE CA SH WITHDRAWALS FROM THE BANK ACCOUNT BY WAY OF CHEQUE. FURTHER AFTER A PERIOD OF TIME THE CASH BALANCES APPEARING IN THE BOOKS OF ACCOUNT HAVE BEE N DEPOSITED BACK INTO THE BANK ACCOUNT OF THE ASSESSEE. THE CASH BOOK OF THE ASSESSEE SHOWS HUGE CASH BALANCES FOR A CONSIDERABLE PERIOD OF TIME. TH ESE CASH BALANCES HAVE NEVER BEEN UTILIZED FOR ANY OFFICIAL EXPENSES OF TH E ASSESSEE HOWEVER THE AMOUNTS ARE AGAIN DEPOSITED BACK IN THE BANK ACCOUN TS AFTER A CERTAIN PERIOD. THE PREPONDERANCE OF THESE EVIDENCES CLEARL Y REVEALS THE MODUS OPERANDI OF THE ASSESSEE IN OBTAINING ACCOMMODATING ENTRIES OF CASH CREDITS. THE ONLY PURPOSE OF KEEPING HUGE CASH BALA NCES IN THE BOOKS OF ACCOUNTS IS NONE OTHER THAN GETTING HUGE CASH BALAN CES IN THE BOOKS OF ACCOUNTS IS NONE ELSE THAN SETTLING THE ACCOMMODATI NG ENTRIES. THEREFORE ACCORDING TO THE A.O. ON THE BASIS OF THE EVIDENCE FURNISHED BY THE ASSESSEE AS WELL AS ENQUIRIES MADE IN THIS REGARD T HE IDENTITY AND THE GENUINENESS OF SUCH CREDIT CANNOT BE ASCERTAINED. T HE CREDITWORTHINESS OF THESE PARTIES ALSO COULD NOT BE ESTABLISHED BECAUSE THERE IS NOTHING IN THE BANK STATEMENT BEFORE OR AFTER THE TRANSACTIONS. 6. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON APPRECIATION OF ENTIRE FACTS NOTICED THAT THE AMOUNT WAS RECEIVED BY ACCOUNT PAY EE CHEQUES. THESE WERE REPAID BY ACCOUNT PAYEE CHEQUES. THE LOANS WERE TAKEN IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AND THE SAME WERE PAID IN THE SAID FINANCIAL YEAR. THE MERE FACT THAT PRIOR TO ISSUE OF 5 ITA NO. 421/AHD/2008 CHEQUE THERE IS SOME CASH DEPOSIT IN OUR OPINION THIS ALONE IS NO GROUND TO MAKE THE ADDITION UNDER SECTION 68 OF THE INCOME TAX ACT 1961. WE FO UND CONSIDERABLE FORCE IN SUBMISSIONS MADE BY THE LD. COUNSEL OF THE ASSESSEE THAT THE AD DITION OF RS.10 00 000/- WAS MADE ON DOUBT AND SUSPICION AND THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) HAS GIVEN COGENT REASON FOR DELETING THE SAME. WE THEREFORE INCLINE TO UP HOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 14.05.201 0 SD/- SD/- (A.N. PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 / 05 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.