M/s. Shree Sainath Photochem, Navsari V. The Income tax Officer,Ward-4, Navsari

CO 63/AHD/2011

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0630 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Unexplained cash credit
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.) C.O.NO. 63/AHD/2011 (IN I.T. A. NO.369/AHD/2011) (ASSESSMENT Y EAR: 2007-08) M/S. SHREE SAINATH PHOTOCHEM SURVEY NO. 454/P, N.H. NO. 8, NR. HOTEL ALMASS, AT, ALIPORE, DIST. NAVSARI V/S THE I.T.O., WARD-4, NAVSARI (APPELLANT) (RESPONDENT) PAN: AAJFS9455Q APPELLANT BY : SHRI RAJESH UPADHYAY, A.R. RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 01-06-201 5 DATE OF PRONOUNCEMENT : 05 -06-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER. 1. THIS C.O FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), VALSAD, GUJARAT DATED 18.11.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHOTOGRAPHIC CHEMICALS. ASSESSEE F ILED ITS RETURN OF C.O NO 63/A HD/2011 . A.Y. 2007-0 8 2 INCOME FOR A.Y. 07-08 ON 25.10.2007 DECLARING TOTAL INCOME AT RS. 2,31,190/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 04 .12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 19,06,870/-. AGGRIEVE D BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 18.11 2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED B Y THE AFORESAID ORDER OF CIT(A), REVENUE AND ASSESSEE PREFERRED APPEAL BEFOR E TRIBUNAL. THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O READS AS UNDER:- 1. LD. A.O HAS ERRED IN LAW AND ON FACTS TO ADD AN AMO UNT OF RS. 5,69,000/- U/S. 68 OF I.T. ACT, 1961. 2. LD. A..O HAS ERRED IN LAW AND ON FACTS TO DISALLOW INTEREST OF RS. 8,153/- PAID TO SHRI BHUPENDRA A. DESAI ON AMOUNT BORROWED FROM HIM AND USED IN BUSINESS. 4. BEFORE US, LD. A.R. SUBMITTED THAT AGAINST THE ORDE R OF LD. CIT(A), REVENUE HAD ALSO PREFERRED APPEAL BEFORE TRIBUNAL AND THE S AME WAS DISMISSED BY TRIBUNAL IN ITA NO. 369/A/2011 ORDER DATED 14.11.20 14 BUT HOWEVER THE GROUNDS RAISED BY THE REVENUE ARE INDEPENDENT OF TH E GROUNDS RAISED BY THE ASSESSEE IN C.O. 5. THE LD. A.R. SUBMITTED THAT THE GROUNDS RAISED IN T HE PRESENT C.O ARE INTERCONNECTED. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD ACCEPTED CASH LOANS FROM VARIOUS PARTIES AGGREGATIN G TO RS. 5,69,000/-, (THE PARTIES ARE LISTED AT PAGE 4 OF THE ASSESSMENT ORDE R) WHICH INCLUDED THE AMOUNT RECEIVED OF RS. 3 LACS FROM BHUPENDRA DESAI . A.O HAS NOTED THAT SHRI BHUPENDRA DESAI WAS NOT ABLE TO EXPLAIN THE SO URCE OF CASH DEPOSITED IN HIS BANK ACCOUNT FROM WHICH HE HAS GIVEN THE UNSECU RED LOAN TO THE C.O NO 63/A HD/2011 . A.Y. 2007-0 8 3 ASSESSEE. WITH RESPECT TO THE OTHER PARTIES, HE NOT ICED THAT IN SOME OF THE CASES, THE DEPOSITORS HAD DENIED TO HAVE KNOWN THE ASSESSEE AND IN SOME CASES, THE DEPOSITORS WERE NOT PRESENT AT THE ADDRE SSES. HE THEREFORE CONCLUDED THAT ASSESSEE HAD FAILED TO DISCHARGE IN ALL THE CASES, THE ONUS CAST UPON IT U/S. 68 OF THE ACT BY ESTABLISHING THE IDEN TITY OF THE DEPOSITOR, THE GENUINENESS OF TRANSACTION AND THE CREDITWORTHINESS OF THE DEPOSITORS. HE ACCORDINGLY CONSIDERED THE AGGREGATE AMOUNT OF RS. 5,69,000/- RECEIVED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT. THE INTER EST EXPENSE OF RS. 8,153/- WHICH WAS GIVEN TO BHUPENDRA DESAI ON THE UNSECURED LOAN WAS ALSO ACCORDINGLY DISALLOWED AND ADDED TO THE INCOME. AG GRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 6.GROUND NO.-2 :- THIS GROUND RELATES TO THE ADDITION OF RS.5,69,0 00/- MADE BY THE AO U/S 68 OF I.T. ACT,1961. THE AO MADE ELABORATE INQU IRY AND COME TO THE CONCLUSIONS THAT THE CASH CREDITS APPEARING IN THE BOOKS OF A/C. TO THE EXTENT OF RS.5,69,000/- DOES NOT SATISFY THE REQUIREMENTS AS ENVISAGED IN THE PROVIS IONS U/S. 68 OF THE ACT. THE FINDING OF THE AO IS FOUND IN PAGES 4-7 OF THE ASSESSMENT ORDE R. ON THE OTHER HAND, THE ID. AR SUBMITTED GENERAL DEFENCE RAISING SOME LEGAL ISSUES SUCH AS CROSS EXAMINATION WAS NOT GIVEN ETC. FACTUALLY, THE AO MADE INDEPENDENT ENQUI RY AFTER- THE APPELLANT SUBMITTED CONFIRMATIONS FROM SOME OF THE CREDITORS. THE DETAI LS OF THE FINDING OF THE INDEPENDENT ENQUIRY WAS IN THE ASSESSMENT ORDER. AFTER COMPLETI NG THE INDEPENDENT ENQUIRY THE AO HAS CONFRONTED WITH THE APPELLANT BY ISSUING SHOW C AUSE NOTICE FOR PROPOSED ADDITIONS IN THIS COUNT. THE APPELLANT REPLIED TO THE AO THAT TH E APPELLANT DISCHARGED THE ONUS BY PROVIDING THE CONFIRMATION LETTERS. THE APPELLANT D ID NOT CONTEST THE RESULT OF THE ENQUIRY MADE BY THE AO NOR ASKED FOR ANY CROSS EXAMINATION OF THE CREDITORS. FINALLY, THE AO FOUND THAT THE APPELLANT FAILED TO JUSTIFY THE REQU IREMENTS IN THE PROVISIONS U/S. 68 OF THE ACT FOR THOSE CASH CREDITS AND THEREFORE MADE THE A DDITIONS. 7. DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTA NCES OF THE CASE. THE AO HAS STRONGLY MADE OUT A CASE FOR MAKING SUCH ADD ITIONS. HE MADE INDEPENDENT C.O NO 63/A HD/2011 . A.Y. 2007-0 8 4 INQUIRY ON THE BASIS OF CONFIRMATIONS FILED BY THE APPELLANT AND CONFRONTED WITH THE APPELLANT THE FINDING OF THE ENQUIRY. THAT MEANS TH E AO AFFORDED AMPLE OPPORTUNITY TO THE APPELLANT TO DEFEND THE CASE SATISFACTORILY. ON THE OTHER HAND; THE DEFENCE OF THE ID. AR IS FEEBLE AND WEAK. CONSIDERING THE ENTIRE GAMUT OF FACTS AND LAWS, I AM INCLINED TO CONCUR THE FINDING OF THE AO AND DON'T THINK FIT TO INTERFERE IN THE FINDING OF THE AO. THUS THIS GROUND OF APPEAL IS DISMISSED. 8. GROUND NO.-3 :- THIS GROUND IS WITH REGARDS TO THE DISALLOWANCE OF INTEREST OF RS.8,153/- PAID ON BORROWED LOAN OF RS.3,00,000/- F ROM BHUPENDRA A. DESAI. THE AO DISALLOWED PAYMENT OF INTEREST OF RS.8,153/- FOR TH E REASON THAT HE HAS NOT ACCEPTED BORROWING OFRS.3,00,000/- MADE FROM BHUPENDRA A. 'D ESAI. THE APPELLANT SUBMITTED THAT WHEN BORROWING IS ACCEPTABLE AS GENUINE, PAYMENT OF INTEREST OF RS.8,153/- ON SUCH BORROWED AMOUNT SHOULD BE ALLOWED AS BUSINESS EXPEN DITURE. 8. 1 DECISION ; I HAVE CAREFULLY CONSIDERED THE FINDING OF THE AO A ND THE SUBMISSIONS MADE BY THE ID. AR. THE ISSUE OF UNSECURED LOAN HAS BEEN DISCUSSED IN THE PARA 7 OF THIS ORDER. IT WAS HELD THEREIN THAT THE LOAN/CASH CREDI TS ARE BOGUS AND ADDED TO THE INCOME OF THE APPELLANT BY INVOKING PROVISIONS U/S.68 OF THE ACT. WHEN THE PRINCIPAL AMOUNT WAS HELD WAS BOGUS, THE INTEREST CANNOT BE ALLOWED AS G ENUINE. THUS I CONFIRM THE ADDITION MADE BY THE AO IN THIS GROUND. ACCORDINGLY, THE APP EAL IN THIS GROUND IS DISMISSED. 7. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW BEFORE US. 8. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT WITH RESPECT TO L OAN FROM SHRI BHUPENDRA BHAI DESAI, THE DEPOSIT WAS ACCEPTED BY ACCOUNT PAY EE CHEQUE AND THE SAME WAS ALSO REPAID THROUGH CHEQUE ON 07.11.2009, THE A SSESSEE HAD ALSO DEDUCTED TDS ON THE INTEREST PAYMENT. HE FURTHER SU BMITTED THAT SHRI BHUPENDRA BHAI DESAI HAS CONFIRMED GIVING OF DEPOSI T IN THE STATEMENT MADE U/S. 131 BEFORE THE A.O. HE ALSO PLACED ON REC ORD THE COPY OF THE LEDGER ACCOUNT OF BHUPENDRA BHAI DESAI. WITH RESPEC T TO THE DEPOSITS C.O NO 63/A HD/2011 . A.Y. 2007-0 8 5 ACCEPTED FROM OTHER DEPOSITORS, HE SUBMITTED THAT A SSESSEE HAD FILED CONFIRMATIONS FROM THE DEPOSITORS ALONG WITH THEIR COMPLETE ADDRESS AND THE AMOUNT WAS RAISED TO MEET URGENT BUSINESS REQUIREME NTS FOR A SHORT PERIOD AND ALL THE DEPOSITORS WERE REPAID IN THE YEAR ITSE LF. HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE A.O BE DELETED. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, THE ADDITION OF RS. 5,69,000/- HA S BEEN MADE U/S. 68 OF THE ACT. OF THE TOTAL ADDITION, RS. 3 LACS PERTAINS TO DEPOSITS RECEIVED FROM SHRI BHUPENDRA BHAI DESAI. FROM THE COPY OF THE LEDGER A CCOUNT AND THE SUBMISSIONS MADE BY THE LD. A.R., IT IS SEEN THAT T HE DEPOSITS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES AND HAS ALSO BEEN REPAID B Y ACCOUNT PAYEE CHEQUES , THE INTEREST HAS BEEN PAID ACCOUNT TDS HA S ALSO BEEN DEDUCTED. IT IS ALSO THE SUBMISSION OF THE ASSESSEE THAT SHRI BH UPENDRA BHAI DESAI HAS CONFIRMED THE DEPOSITS GIVEN TO THE ASSESSEE IN THE STATEMENT MADE U/S. 131 OF THE ACT. WE FURTHER FIND THAT ASSESSEE HAS ALSO FURNISHED THE COPY OF THE BANK ACCOUNT OF BHUPENDRA BHAI DESAI WHICH SHOWS TH E AMOUNT GIVEN TO THE ASSESEE. WE FIND THAT A.O HAS MADE THE ADDITION FO R THE REASON THAT THE DEPOSITOR HAD NOT BEEN ABLE TO EXPLAIN THE SOURCE O F CASH DEPOSIT IN HIS BANK ACCOUNT. IN THE PRESENT CASE, WE ARE OF THE VIEW TH AT SINCE THE AMOUNT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES, THE ASSESSE E HAS GIVEN THE FULL ADDRESS AND BANK ACCOUNT NUMBER OF THE DEPOSITOR IT HAS DISCHARGED THE INITIAL BURDEN OF PROVING THE CREDIT. IT IS A SETTL ED LAW THAT ASSESSEE CAN BE ASKED TO PROVE THE SOURCE OF CREDITS IN ITS BOOKS O F ACCOUNTS BUT NOT THE SOURCE OF SOURCE AND FOR WHICH WE ALSO FIND SUPPORT BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS 256 C.O NO 63/A HD/2011 . A.Y. 2007-0 8 6 ITR 360 (GUJ) WHERE THE HONBLE GUJARAT HIGH COURT HAS HELD WHEN IDENTITY OF THE CREDITOR HAS BEEN PROVED, THE AMOUNT HAS BEE N RECEIVED BY ACCOUNT PAYEE CHEQUE, THE INITIAL BURDEN OF PROVING CREDITS IS DISCHARGED BY ASSESSEE AND SOURCE OF CREDIT NEED NOT BE PROVED BY ASSESSEE . BEFORE US, REVENUE HAS NOT BROUGHT ON RECORD ANY BINDING DECISION IN I TS SUPPORT. WITH RESPECT TO THE OTHER DEPOSITORS, WE FIND THAT ASSESSEE HAS RAISED SMALL DEPOSITS BELOW 20,000/- AND HAS FILED THE CONFIRMATIONS ALON G WITH THEIR COMPLETE ADDRESSES AND THE DEPOSITORS HAVE ALSO BEEN PAID DU RING THE YEAR UNDER REVIEW. CONSIDERING THE TOTALITY OF THE AFORESAID F ACTS, WE ARE OF THE VIEW THAT NO ADDITION WAS CALLED FOR IN THE OTHER CASES ALSO. WE THUS DIRECT ITS THE DELETION OF ADDITION MADE U/S. 68. SINCE THE ADDITI ON ITSELF HAS BEEN DELETED THE ADDITION ON ACCOUNT OF INTEREST ON THOSE DEPOSI TS ALSO DOES NOT SURVIVE. THUS THE GROUNDS RAISED BY ASSESSEE IN CO ARE ALLOW ED. 10. IN THE RESULT, THE C.O OF ASSESSEE IS ALLOWED. SD/- SD/- (SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD ORDER PRONOUNCED IN OPEN COURT ON 05 - 06 - 2015.