ITO WD 3(2), MUMBAI v. KISHORKUMAR G. JAIN, MUMBAI

ITA 492/MUM/2009 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 49219914 RSA 2009
Assessee PAN AAZPJ6248E
Bench Mumbai
Appeal Number ITA 492/MUM/2009
Duration Of Justice 2 year(s) 6 month(s)
Appellant ITO WD 3(2), MUMBAI
Respondent KISHORKUMAR G. JAIN, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 22-07-2011
Date Of Final Hearing 18-07-2011
Next Hearing Date 18-07-2011
Assessment Year 2005-2006
Appeal Filed On 22-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.492/MUM/2009(A.Y. 2005-06) INCOME TAX OFFICER ITO 3(2) 2 ND FLOOR RANI MANSION MURBAD ROAD KALYAN. (APPELLANT) VS. KISHORE KUMAR G. JAIN 1 ST FLOOR PORWAL BHAVAN NEAR VAISHYA MANDIR KASAR HAT KALYAN 421 301. PAN:AAZPJ 6248E (RESPONDENT) APPELLANT BY : SHRI N.B.K.MENON RESPONDENT BY : SHRI SUBODH L. RATNAPARKHI ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 15/10/2008 OF CIT(A) 1 THANE RELATING TO ASSESSMENT YEAR 2005-06. GROUND NO.1 & 2 RAISED BY THE REVENUE READ AS FOLLOWS: 1. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E CREDIT ENTRIES WERE NOT MADE IN THE F.Y RELEVANT TO A.Y 2005-06 AND THERE BY DEL ETING THE ADDITION OF RS. 13 56 000/- MADE BY THE ASSESSING OFFICER U/S. 68 O F THE I.T. ACT. 2. THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING T HE RULES LAID DOWN BY HONBLE APEX COURT IN THE CASE OF CIT VS. MOHAN KALE 292 I TR 278. 2. THE ASSESSEE IS AN INDIVIDUAL AND A TRADER IN GO LD AND ALSO TRADES IN MCX EXCHANGE. ON VERIFICATION OF THE CAPITAL ACCOUNT I N THE BALANCE SHEET THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD SHOWN GIFTS R ECEIVED TO THE TUNE OF RS.13 56 000. THE ASSESSING OFFICER FURTHER NOTICED THAT LOANS AV AILED BY THE ASSESSEE IN THE PAST WHICH WERE SHOWN AS OUTSTANDING LOANS IN THE EARLIE R YEARS WERE TREATED AS GIFTS BY THE ITA NO.492/MUM/2009(A.Y. 2005-06) 2 CREDITORS TO THE ASSESSEE DURING THE PREVIOUS YEAR. IT IS NOT IN DISPUTE THAT THE CREDITORS HAD FIELD CONFIRMATION OF GIFTS GIFT DEED ETC. BE FORE THE ASSESSING OFFICER. THE DETAILS OF THE LOAN CREDITS WHICH LATER BECOME GIFTS ARE AS FO LLOWS: S.NO. NAME OF THE PERSON OPENING BALANCE AS ON 1.4.04 ADDITIONAL AMOUNT RECEIVED DURING F.Y. 04-05 LOAN REPAID BY CHEQUE LOAN CONVERTED TO GIFT CLOSING BLANCE AS ON 31.3.05 LOAN CONFIRMATION LOAN DETAILS & GIFT DEED AT PG. NO. OF PAPER BOOK. 1. NARENDRA JAIN (PAN AASPJ9969M) 5 00 000 9 00 000 3 00 000 3 00 000 8 00 000 3 2 TO 36 2. VIKRAM G. JAIN (PAN ABCPJ9543J) 1 50 000 -- -- 1 50 000 -- 37 TO 41 3. RAMILA K. JAIN (PAN ADZPJ7913M) 1 41 000 -- -- 1 41 000 -- 42 TO 47 4. FANSIBEN G. JAIN (PAN AAZPJ6249F) 4 65 000 2 00 000 -- 4 65 000 2 00 000 48 TO 52 5. ASHOK JAIN (PAN ADZPJ9106G) 2 00 000 -- -- 2 00 000 -- 53 TO 57 6. SANTOSHIBEN JAIN (PAN ACOPJ 8502E) 1 00 000 -- -- 1 00 000 -- 58 TO 62 GRAND TOTAL 15 56 000 11 00 000 3 00 000 13 56 00 0 10 00 000 THE ASSESSING OFFICER ISSUED SUMMONS TO THE DONORS TO APPEAR BEFORE HIM AND PRODUCE EVIDENCE TO PROVE THAT CAPACITY TO GIVE LOANS AS W ELL AS GIFT BESIDES IDENTITY AND GENUINENESS OF THE TRANSACTION. NONE OF THE CREDIT ORS/DONORS APPEARED IN RESPONSE TO THE SUMMONS. THE ASSESSEE SUBMITTED BEFORE THE ASS ESSING OFFICER THAT THE DONORS WERE ALL RELATIVES AND RELATED BY BLOOD AS DEFINED IN THE ACT. THE ASSESSEE SUBMITTED THAT INITIALLY THESE AMOUNTS WERE GIVEN AS LOANS BY CROSSED ACCOUNT PAYEE CHEQUES. THE ASSESSEE SUBMITTED THAT AS PER THE TRADITIONAL MARVARI SYSTEM THE RELATIVES INITIALLY GIVE MONIES AS LOANS TO ENABLE THE ASSESSEE TO STAR T AND CARRY ON BUSINESS AND THE SAME REMAINS AS A LOANS TILL SUCH TIME THE PERSONS PROVES HIMSELF AS CAPABLE OF SURVIVING IN BUSINESS. THEREAFTER THE LOANS ARE TR EATED AS GIFTS. THE ASSESSING OFFICER HOWEVER WAS NOT SATISFIED WITH THIS EXPLANATION AND HE HELD THAT THE ASSESSEE HAS FAILED TO PROVE IDENTITY CAPACITY AND GENUINENESS OF THE TRANSACTION OF THE LOANS AND SUBSEQUENT CONVERSION INTO GIFTS. ITA NO.492/MUM/2009(A.Y. 2005-06) 3 3. ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED TH E ADDITION MADE BY THE ASSESSING OFFICER. THE CIT(A) NOTICED THAT OUTSTANDING LOANS WHICH WERE LATER CONVERTED INTO GIFTS APPEARED AS OPENING BALANCE AS ON 1/4/2004. THESE WERE LOANS AVAILED BY THE ASSESSEE IN THE PAST AND THESE LOANS WERE ACCEPTED AS GENUINE IN THE PAST BY THE DEPARTMENT. IN THESE CIRCUMSTANCES THE CIT(A) WAS OF THE VIEW THAT THERE WAS ONLY A MERE CHANGE OF HEAD OF ACCOUNT IN WHICH THE AMOUNT WAS SHOWN NAMELY WHAT WAS SHOWN AS A LOAN IS NOW SHOWN AS A GIFT. THE CIT(A) RELIED ON THE DECISION OF THE ITAT D BENCH MUMBAI IN ITA NO.1659/M/06 IN THE CASE OF LATE SHRI HAJI SULAIMAN ARBEE( THROUGH SHRI ANWAR HUSSAIN MEMON VS. ITO WARD 1(4) THANE) WHEREIN ON IDENTICAL FACTS THE TRIBUNAL HELD AS FOLLOWS: WE HAVE PERUSED THE RECORDS CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING THE LEGAL VALIDITY OF ADDITION MADE BY THE AO ON ACCOUNT OF OUTSTANDING LIABILITY COMING FROM EARLIER YEARS CON VERTED BY THE LENDER WHO HAPPENED TO BE THE NEPHEW OF THE ASSESSEE INTO GIFT DURING THE YEAR. THERE IS NO DISPUTE THAT THE SAME AMOUNT HAS BEEN OUTSTANDING I N THE BOOKS OF THE ASSESSEE FOR THE LAST SEVERAL YEARS AND THERE IS THEREFORE N O CREDIT OF THE AMOUNT DURING THE YEAR. THE ADDITION U/S. 68 CAN BE MADE ONLY IN CAS E AN AMOUNT IS CREDITED DURING THE YEAR. IN THIS CASE AMOUNT IS COMING FRO M EARLIER YEAR. THE ASESSING OFFICER IN ASSESSMENT ORDER HAS ALSO GIVEN A FINDIN G THAT IT WAS ASSESSEES OWN MONEY SHOWN AS LIABILITY AND CIT(A) AT PAGE 6 OF TH E ORDER HAS CONCLUDED THAT THE NEPHEW HAD CONVERTED HIS ERSTWHILE LOAN INTO GIFTS AFTER TEN YEARS IN LIEU OF HIS EXPENSES IN INDIA BORNE BY THE ASSESSEE. THUS IT IS AN ADMITTED FACT THAT THE AMOUNT IS BEING CARRIED FORWARD AS LOAN FROM THE EA RLIER YEARS AND THERE IS NO CREDIT IN THE BOOKS OF THE ASSESSEE DURING THE YEAR . THEREFORE EVEN IF THE CLAIM OF GIFT IS NOT TREATED AS GENUINE THE AMOUNT CANNOT BE ADDED IN THE CURRENT YEAR AS THERE IS NO CREDIT IN THAT YEAR AS THE SAME AMOUNT IS BEING CARRIED FORWARD FROM EARLIER YEARS. IN VIEW OF THIS POSITION WE AGREE WITH THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE THAT THE ADDITION MADE F OR THE RELEVANT YEAR IS LEGALLY NOT IN ORDER. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION MADE. 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRED GROUND NO.1 & 2 BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE SUBMISSIONS OF THE LD. D.R WH O RELIED ON THE ORDER OF THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSE E RELIED ON THE ORDER OF THE CIT(A). ITA NO.492/MUM/2009(A.Y. 2005-06) 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THE DECISION OF THE ITAT RELIED UPON BY THE CIT(A) AND THE CASE OF THE ASSESSEE IS ON IDENTICAL ON FACTS. IN VIEW OF THE FACT THAT THE LOANS HAVE BEEN ACCEPTED IN THE PAST BY THE REVENUE THE IDENTITY CAPACITY AND GENUINENESS OF THE TRANSACTI ON OF LOAN ALREADY STAND ACCEPTED. THE FACTUM OF THE LOAN CREDITORS HAVING MADE THE GI FT OF THE AMOUNTS OUTSTANDING AND PAYABLE TO THEM BY THE ASSESSEE HAS NOT BEEN DISPUT ED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ONLY WANTED THE ASSESSEE TO ESTAB LISH THE CAPACITY OF THE DONORS TO MAKE THE GIFT AND THEIR IDENTITY. AS ALREADY STATE D THE LOANS HAVING ALREADY BEEN ACCEPTED IN THE PAST THE ASSESSING OFFICER CANNOT INSIST ON THE ABOVE TO PROOF IN THIS ASSESSMENT YEAR. IN CIT VS. USHA STUD AGRICULTURA L FARMS LTD. AND CIT VS. PARAMESHWAR VORA 301 ITR 384(DEL) AND 301 ITR 404 (RAJ) IT HAS BEEN HELD THAT OPENING BALANCES OF EARLIER YEAR CANNOT BE SUBJECT MATTER OF INVESTIGATION UNDER SECTION 68. WE ARE THEREFORE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THIS ISSUE IS PROPER AND CALLS FOR NO INTERFERENCE. GROUND NO.1 &2 ARE ACCORDINGLY DISMISSED. 7. GROUND NO.3 RAISED BY THE ASSESSEE READS AS FOLL OWS: 3. THE LEARNED CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.15 00 000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT IN THE FORM OF UNSECURED LOANS WHEN THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY GENU INENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS. 8. THE AO HAD MADE AN ADDITION OF RS. 15 00 000/- A CCOUNT OF UNEXPLAINED CASH CREDIT IN THE FORM OF UNSECURED LOANS. THE AO HAD OBSERVED THAT THE LOANS WERE RECEIVED BY THE APPELLANT FROM SHRI NARENDRA JAIN ( RS. 13 LACS) AND FROM FENSIBAI JAIN (RS. 2 LACS). THE CIT(A) ON EXAMINATION OF THE FAC TS OF THE CASE AND ON GOING THROUGH THE AUDITED ACCOUNTS OF THE TWO PROPRIETARY CONCERN VIZ M/S. NEHA JEWELLERS AND M/S. NEHA INVESTMENT OF THE APPELLANT FOUND THAT THE TO TAL UNSECURED LOANS RECEIVED WERE AS UNDER: SHRI NARENDRA JAIN RS. 14 00 000 SMT. FENSIBAI JAIN RS. 02 00 000 ITA NO.492/MUM/2009(A.Y. 2005-06) 5 OUT OF THESE THE AO HAS MADE ADDITION OF ONLY RS.1 5 00 000/-. HE WAS OF THE VIEW THAT THE AO HAS NOT GIVEN ANY VALID REASONS FOR MAKING T HE ADDITION. THE CIT(A) FOUND THAT THE UNSECURED LOANS WERE RECEIVED BY THE ASSESSEE T HROUGH CHEQUES AND THE CHEQUES HAVE BEEN DULY DEPOSITED IN THE BANK ACCOUNT OF THE LOAN CREDITORS. BOTH THE LOAN CREDITORS SHRI NARENDRA JAIN AND SMT. FENSIBAI WER E IT ASSESSEES AND HAVE BEEN FILING THEIR IT RETURNS REGULARLY WITH ITO W-3(3) KALYAN AND ITO W-3(2) KALYAN RESPECTIVELY. THE CIT(A) THEREFORE HELD THAT THE ASSESSEE HAS EST ABLISHED THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS. SINCE THE LOANS HAVE BEEN RECEIVED THROUGH BANKING CHANNELS THE GENUINENESS OF THE TRANSACTIO NS WAS ALSO ESTABLISHED. THE CIT(A) THEREFORE DELETED THE ADDITION OF RS.15 00 0 00/- MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE IT ACT 1961. 9. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS RAISED GROUND NO.3 BEFORE THE TRIBUNAL. BEFORE US LD. D.R RELIED ON THE ORDE R OF THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT THE ORDER OF CIT(A) ON THIS ISSUE HAS TO BE UPHELD. AT PAGE 32 OF THE ASSESSEES PAPER BOOK WE FIND THAT THE ASSESSEE HAS GIVEN CONFIRMATION OF LOANS BY NARENDRA JAIN FOR RS. 14 LACS. THE ASSESSMENT PART ICULARS OF SHRI NARENDRA JAIN HAS BEEN GIVEN IN THIS CONFIRMATION. SIMILARLY FANSIBE N G. JAIN HAD FIELD A CONFIRMATION COPY OF WHICH IS AT PAGE 48 OF THE ASSESSEES PAPER BOOK. HE HAS GIVEN A LOAN OF RS. 2 LACS DURING THE PREVIOUS YEAR. HE HAS GIVEN PARTIC ULARS OF THE ASSESSMENT IN THE CONFIRMATION. THUS THE ASSESSEE HAS DISCHARGED HIS PRIMARY ONUS UNDER SECTION 68 OF THE ACT. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE CASH CREDITS WERE NOT PROPERLY EXPLAINED. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION PVT . LTD. 159 ITR 78(SC) THAT WHERE THE REVENUE APART FROM ISSUING NOTICE UNDER SECTION 131 TO THE CREDITORS DID NOT PURSUE THE MATTER FURTHER NOR EXAMINED THE CREDITWORTHINESS OF THE CREDITORS THE ASSESSEE COULD NOT DO ANYTHING FURTHER AND IT WOULD BE JUSTIFIED I N CONCLUDING THAT THE ASSESSEE HAD DISCHARGED HIS BURDEN UNDER SECTION 68 OF THE ACT. IT HAS FURTHER BEEN HELD THAT MERE ITA NO.492/MUM/2009(A.Y. 2005-06) 6 REJECTION OF EXPLANATION OF THE ASSESSEE WILL NOT A UTOMATICALLY RESULT IN THE CHARACTER OF A PARTICULAR RECEIPT AS INCOME. IN VIEW OF THE ABO VE WE ARE OF THE VIEW THAT THE CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AND GROUND NO.3 RAISED BY THE REVENUE IS ALSO DISMISSED. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 22 ND DAY OF JULY 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 22 ND JULY.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RA BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.492/MUM/2009(A.Y. 2005-06) 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18/7/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 19/7/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER