Mr. Kishore Jeram Bhai Khaniya, New Delhi V. ITO, New Delhi

CO 89/DEL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9560 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Assessee Lawyers: K P GARG
• Keywords: Source of fund
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. R. S. SYAL, AM AND SH. I. C. SUDHIR, JM ITA NO. 1220/DEL/2011 : ASS TT. YEAR : 2006-07 C. O. NO. 89/DEL/2011 : ASST T. YEAR : 2006-07 KISHORE JERAM BHAI KHANIYA, PROP. M/S POONAM ENTERPRISES, MP-83, PITAMPURA, DELHI-88 VS INCOME TAX OFFICER, WARD-25(1) NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 980/DEL/2011 : ASSTT. YEAR : 2006-07 INCOME TAX OFFICER, WARD-25(1) NEW DELHI VS KISHORE JERAM BHAI KHANIYA, PROP. M/S POONAM ENTERPRISES, MP-83, PITAMPURA, DELHI-88 (APPELLANT) (RESPONDENT) PAN NO. AAEPK9657M ASSESSEE BY : SHRI K. P. GARG, CA REVENUE BY : SHRI S. N. BHATIA, DR DATE OF HEARING : 12.5.2014 DATE OF PRONOUNCEMENT : 13.5.2014 ORDER PER R. S. SYAL, AM: THESE TWO CROSS APPEALS-ONE BY THE ASSESSEE AND OTH ER BY THE REVENUE ALONG WITH CROSS OBJECTION BY THE ASSESSEE ARISE OU T OF THE ORDER PASSED BY THE CIT(A) ON 20.12.2010 IN RELATION TO THE ASSESSM ENT YEAR 2006-07. 2. THE ASSESSEES APPEAL IS A RECALLED MATTER INASM UCH AS THE EARLIER EX- PARTE ORDER PASSED BY THE TRIBUNAL WAS SUBSEQUENTLY RECALLED VIDE ITS ORDER DATED 2.12.2011. ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 2 3. THE ONLY ISSUE RAISED IN THE ASSESSEES APPE AL IS AGAINST THE CONFIRMATION OF ADDITION OF RS. 22,06,672/-. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN M ETAL, SCRAP ETC. UNDER THE NAME AND STYLE OF M/S POONAM ENTERPRISES. SOME INFO RMATION WAS RECEIVED FROM THE DIRECTORATE OF REVENUE INTELLIGENCE, AHMAD ABAD THAT DURING THE COURSE OF INVESTIGATION INTO THE AFFAIRS OF GURUKRU PA METAL RECYCLING (IN WHICH THE ASSESSEE IS A PARTNER) , JAM NAGAR AND O THERS, A SUM OF RS. 54 LACS WAS SEIZED ON 5.10.2005 FROM THE PREMISES OF THE AS SESSEE. ON BEING CALLED UPON TO EXPLAIN THE SOURCE OF SUCH SEIZURE OF RS. 5 4 LACS, THE ASSESSEE GAVE THE DETAILS OF SEIZED CASH AS OF I) POONAM ENTERPRI SES - RS. 23.1 LACS ; II) RADHA BHANUSHALI (SISTER-IN-LAW OF THE ASSESSEE) - RS. 3.62 LACS ; AND III) PREMJI BHANUSHALI (BROTHER OF THE ASSESSEE) - RS. 2 7 LACS. IN ORDER TO SUBSTANTIATE HIS CLAIM ABOUT THE CASH OF RS. 23.1 L ACS RELATING TO HIS PROPRIETORSHIP CONCERN, THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS ALONG WITH SALES/PURCHASE VOUCHER. THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE REGISTERED A TOTAL TURNOVER OF RS. 10.29 CRORE. ON THE EXAMINATION OF THE SALES REGISTER, IT WAS NOTICED THAT FOUR CASH MEMOS WERE ISSUED BY THE ASSESSEE ON 28.9.2005 AND 29.9.2005 DETAILED AS UNDER:- SL. NO. BILL NO. & DATE NAME & ADDRESS OF THE PARTY AMOUNT 1. NO. 085, 28/9/05 AFROJ ALLAM, MURADABAD 5,52,448 2. NO. 86, 28/9/05 YUSUF KHAN, MURADABAD 5,24,784 3. NO. 87, 29/9/05 SALIM KHAN, ALIGARH 5,20,832 4. NO. 88, 29/9/05 MOHMAD RAFFIK, ALIGARH 6,08,608 ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 3 4. THE ASSESSING OFFICER OBSERVED ON THE PERUSAL OF THE DETAILS THAT EXCEPT FOR THESE FOUR CASH MEMOS DEPICTING CASH SAL ES TOTALING RS. 22,06,672/-, THERE WERE NO OTHER INSTANCES OF CASH SALES. THESE CASH MEMOS DID NOT CARRY ADDRESS OF THE PURCHASER WHEREAS THE OTHER BILLS DID CARRY PROPER ADDRESSES. IT WAS FURTHER OBSERVED THAT THESE CASH MEMOS WERE IN THE HANDWRITING OF A PERSON DIFFERENT FROM OTHER INVOIC ES. THE A.O FURTHER NOTICED THAT THESE CASH MEMOS DID NOT CARRY ANY DET AIL OF TRANSPORTER WHO CARRIED HEAVY ITEMS LIKE METAL. SINCE, THESE CASH M EMOS WERE ISSUED A FEW DAYS BEFORE THE SEARCH WAS CONDUCTED BY THE DRI ON 5.10.2005, THE A.O CALLED UPON THE ASSESSEE TO CLARIFY SUCH ABNORMALIT IES. THE ASSESSEE TENDERED HIS REPLY. NOT CONVINCED WITH THE SAME, THE ASSESSI NG OFFICER MADE ADDITION OF RS. 22,06,672/- U/S 68 OF THE ACT. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT THE SEARCH CARRIED OUT ON 5.10.2005 RESULTED INTO SEIZURE OF CASH AMOUNTING T O RS. 54 LACS, WHOSE SOURCE WAS EXPLAINED AS, INTER ALIA A SUM OF RS. 23 .1 LACS COMING FROM POONAM ENTERPRISES, NAMELY, THE ASSESSEES PROPRI ETORSHIP CONCERN. THE ASSESSEE PRODUCED HIS BOOKS OF ACCOUNTS TO SHOW THA T THIS MUCH CASH WAS AVAILABLE IN HIS BOOKS ON THE DATE OF SEARCH. APART FROM OTHER INVOICES, THE ASSESSEE ISSUED FOUR CASH MEMOS TOTALING RS. 22.06 LACS, AS TABULATED ABOVE, WHICH AMOUNT WAS INCLUDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE REPLIED TO THE A.OS OBJECTIONS BY STATING THAT USUALLY SALES WERE MADE THROUGH DEMAND DRAFT/CHEQUE AND ONLY IN A CASE OF CERTAIN NEW UNKN OWN PARTY, THE ASSESSEE WAS MAKING SALES EITHER AFTER COLLECTION OF CHEQUE OR ON RECEIPT OF CASH. THE ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 4 REASON FOR THE ABOVE FOUR CASH MEMOS AMOUNTING TO R S. 22.06 LACS WAS STATED TO BE FOR AS THESE PARTIES APPROACHING THE ASSESSEE AND COMING DIRECTLY TO GODOWN FOR COLLECTING THEIR GOODS AND DIRECTLY TRAN SPORTING THEM TO THEIR RESPECTIVE DESTINATIONS. THE ASSESSEE FURTHER SUBMI TTED THAT ALL THE GOODS WERE SOLD AFTER CHARGING DUE VAT, WHICH AMOUNT WAS DULY DEPOSITED IN THE GOVERNMENT ACCOUNT WITHIN THE SPECIFIED TIME. THE R EASON FOR SUCH CASH MEMOS IN THE HANDWRITING OF A DIFFERENT PERSON, WAS STATED TO BE THEIR ISSUANCE BY THE ASSESSEES BROTHER WHO WAS THERE AT THE TIME OF DELIVERY OF GOODS AT STOCKYARD. RELEVANT EXTRACT OF THE ASSESSE ES CASH BOOK FROM 7.6.2005 TO 4.10.2005 IS AVAILABLE ON PAGES 34 AND 35 OF THE PAPER BOOK, FROM WHICH IT IS CLEAR THAT THE CASH IN HAND OF THE ASSESSEE STOOD AT RS. 23.10 LACS AT THE CLOSE OF 4.10.2005. IT IS FURTHER RELEV ANT TO NOTE THAT THE ASSESSEE WAS MAINTAINING STOCK REGISTER IN RESPECT OF THE IT EMS DEALT WITH BY HIM. A COPY OF THE RELEVANT PARTS OF THE STOCK REGISTER IS AVAILABLE ON PAGES 44 TO 49 OF THE PAPER BOOK. THIS STOCK TALLY WAS ADMITTEDLY BEFORE THE ASSESSING OFFICER, WHO HAS NOT POINTED OUT ANY DEFICIENCY I N THEM. THERE IS NO LAW WHICH PROHIBITS A TRADER OR A MANUFACTURER IN MAKIN G CASH SALES. THE HONBLE BOMBAY HIGH COURT IN R.B.JESSARAM FATEHCHAND (SUGAR DEPTT) VS. CIT (1970) 75 ITR 33 (BOM) HAS HELD THAT SALES CAN BE IN CASH AND IT IS HARDLY NECESSARY FOR THE SELLER TO BOTHER ABOUT THE NAME AND ADDRESS OF THE PURCHASER. WE FIND THAT SO LONG AS THE AVAILABILI TY OF STOCK IS THERE AND THERE IS NOTHING ADVERSE AGAINST THE CASH MEMOS ISSUED BY THE ASSESSEE, SUCH CASH SALES CANNOT BE DOUBTED. HERE IT IS PERTINENT TO NO TE THAT THE VOLUME OF SUCH CASH SALES AT RS. 22.06 IS TO BE SEEN IN THE LIGHT OF THE ASSESSEES TOTAL TURNOVER OF RS. 10.29 CRORE. IT IS BUT NATURAL THA T IF A CUSTOMER MAKES CASH ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 5 PURCHASE AND LIFTS THE GOODS, THERE IS NO DUTY CAS T UPON THE SELLER TO INSIST FOR THE ADDRESS OF THE PURCHASER. IN THE LIGHT OF THE F ACT THAT THE STOCK RECORD WAS AVAILABLE WITH THE ASSESSEE, WHICH EVIDENCED THE MA KING OF SALE, WE FAIL TO APPRECIATE AS TO HOW ANY ADDITION CAN BE MADE BY TR EATING CASH SALES AS BOGUS. 6. THERE IS ANOTHER DIMENSION TO THIS ISSUE. THE AS SESSING OFFICER MADE ADDITION OF RS. 22.06 LACS U/S 68 OF THE ACT, WHICH CONTEMPLATES THE MAKING OF ADDITION WHERE ANY SUM FOUND CREDITED IN THE BOO KS OF THE ASSESSEE IS NOT PROVED TO THE SATISFACTION OF THE A.O. IT IS ONLY WHEN SUCH A SUM IS NOT PROVED THAT THE ASSESSING OFFICER PROCEEDS TO MAKE ADDITION U/S 68 OF THE ACT. WE ARE DEALING WITH A SITUATION IN WHICH THE A SSESSEE HAS HIMSELF OFFERED THE AMOUNT OF CASH SALES AS HIS INCOME BY DULY INCL UDING IT IN HIS TOTAL SALES. ONCE A PARTICULAR AMOUNT IS ALREADY OFFERED FOR TAX ATION, THE SAME CANNOT BE AGAIN CONSIDERED U/S 68 OF THE ACT. IN FACT, SUCH A DDITION HAS RESULTED INTO DOUBLE ADDITION. 7. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF T HE CONSIDERED OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THIS ADDITION. THE IMPUGNED ORDER IS OVERTURNED ON THIS ISSUE AND THE ADDITION IS DIRECTED TO BE DELETED. THIS GROUND IS ALLOWED. 8. FIRST GROUND OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION ON ACCOUNT OF CASH SEIZED AMOUNTING TO RS. 30.26 LA CS. THE ASSESSEE EXPLAINED THE SOURCE CASH SEIZED AMOUNTING TO RS. 54 LACS INTER ALIA INCLUDING A SUM OF RS. 3.62 LACS RECEIVED FROM RADH A BHANUSHALI AND RS. 27 ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 6 LACS RECEIVED FROM PREMJI BHANUSHALI. THE ASSESSIN G OFFICER MADE ADDITION OF RS. 30.62 LACS (RS. 3.26 LACS + RS. 27 LACS) BY RECORDING THAT NO CONFIRMATION WAS FURNISHED FROM THEM. THE LD. CIT(A ) DELETED THIS ADDITION BY HOLDING THAT BOTH THESE PERSONS, NAMELY, PREMJI BHANUSHALI AND RADHA BHANUSHALI DULY CONFIRMED THE CASH BELONGING TO THE M. THE LD. CIT(A) DIRECTED TO DELETE THIS ADDITION AND GAVE LIBERTY T O THE A.O TO EXAMINE THE SOURCE OF CASH IN THE HANDS OF SHRI PREMJI BHANUSHA LI AND RADHA BHANUSHALI, WHO HAD CONFIRMED THE POSSESSION AND OWNERSHIP IN C ASH IN QUESTION. THE REVENUE IS AGGRIEVED AGAINST SUCH ADDITION. 9. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEE CATEGOR ICALLY STATED BEFORE THE ASSESSING OFFICER THAT A SUM OF RS. 30.62 LACS BELO NGED TO PREMJI BHANUSHALI AND RADHA BHANUSHALI. THIS FACT WAS CONFIRMED BY T HESE TWO PERSONS AS WELL. WHEN THE ASSESSEES BROTHER AND HIS WIFE ADMI TTED THE POSSESSION OF CASH BELONGING TO THEM, THERE CAN BE NO REASON FOR MAKING ADDITION IN THE HANDS OF THE ASSESSEE IN RESPECT OF CASH WHEN THE F ACTS AND CIRCUMSTANCES AMPLY SHOW THAT THE CASH DID BELONG TO THEM. IT IS FOR THEM TO EXPLAIN THE SOURCE OF CASH AVAILABLE WITH THEM IN THEIR RESPECT IVE HANDS. IN OUR CONSIDERED OPINION, THE LD. CIT(A) RIGHTLY APPRECI ATED THE FACTS IN DIRECTING TO DELETE THE ADDITION BY ASKING THE A.O TO VERIFY THE SOURCE OF CASH IN THE HANDS OF THESE TWO PERSONS. THIS GROUND IS NOT ALLO WED. 10. THE LAST GROUND OF THE REVENUES APPEAL IS AGAI NST THE DELETION OF ADDITION OF RS. 19,00,674/- BEING THE AMOUNT CREDIT ED TO THE ASSESSEES CAPITAL ACCOUNT. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE INTRODUCED A SUM OF ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 7 RS. 19,00,674/- AS FRESH CAPITAL IN M/S POONAM ENTE RPRISES. THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF SUCH FRESH CAPITAL VID E QUESTIONNAIRE DATED 24.3.2008. NO REPLY WAS GIVEN. AGAIN WHEN THE ASSES SEE WAS ASKED TO EXPLAIN THE SOURCE OF SUCH INTRODUCTION OF FRESH CA PITAL VIDE ORDER SHEET ENTRY DATED 22.12.2004, THE ASSESSEE GAVE THE FOLLOWING E XPLANATION WHICH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER:- DURING THE YEAR CAPITAL ACCOUNT OF PROPRIETOR IN I NCREASED AS HE HAS RECEIVED PERSONAL ADVANCES AND INDUCTED TO THE BUSINESS WHICH IN THE NEXT YEAR GETTING SETTLED. 11. THE ASSESSING OFFICER HELD THAT THIS LIMITED RE PLY OF THE ASSESSEE DID NOT INDICATE ANY SOURCE OF FUNDS INTRODUCED AS CAPI TAL. HE, THEREFORE, MADE ADDITION FOR THE SAID SUM U/S 68 OF THE ACT. THE LD . CIT(A) GOT CONVINCED WITH THE ASSESSEES SUBMISSIONS AND DIRECTED TO DEL ETE THE ADDITION. THE REVENUE IS IN APPEAL AGAINST SUCH DELETION. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESS ING OFFICER SPECIFICALLY REQUISITIONED THE ASSESSEE TO EXPLAIN THE SOURCE OF FRESH CAPITAL AMOUNTING TO RS. 19.00 LACS AND ODD INTRODUCED IN HIS BOOKS OF A CCOUNTS. THE ASSESSEE GAVE ONLY SKETCHY REPLY WHICH HAS BEEN REPRODUCED A BOVE. IN OUR CONSIDERED OPINION, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELET ING THIS ADDITION BY RATHER STRANGELY MENTIONING THAT THIS ADDITION WAS MADE IN A SUMMARY MANNER. IT IS SEVERELY SIMPLY THAT WHEN A CERTAIN SUM IS CREDITED TO THE ASSESSEES CAPITAL ACCOUNT, THE ONUS IS ON HIM TO EXPLAIN THE SOURCE O F SUCH DEPOSIT TO THE SATISFACTION OF THE A.O. THE LD. AR HAS INVITED OUR ATTENTION TOWARDS THE CAPITAL ACCOUNT OF THE ASSESSEE IN WHICH THERE ARE CERTAIN DEBIT AND CREDIT ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 8 ENTRIES. THE LD. CIT(A) WAS SWAYED BY THE ASSESSSE ES SUBMISSIONS WITHOUT RECORDING ANY CATEGORICAL FINDING ON THE EXPLANATIO N OF THE SOURCE OF CREDIT ENTRIES, MORE SO WHEN THE ASSESSEE DID NOT ADDUCE A NY PROPER EXPLANATION BEFORE THE AO. WE, THEREFORE, OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF A.O FOR DECIDING IT AFRESH AFTER ALLOWING A REASONABLE OPPORTUNITY BEING HEARD TO THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE WILL BE AT LIBERTY TO LEAD ANY FRESH EVIDE NCE BEFORE THE ASSESSING OFFICER IN SUPPORT OF THE CREDIT ENTRIES IN HIS CAP ITAL ACCOUNT. 13. THE CROSS OBJECTION FILED BY THE ASSESSEE, WHIC H IS ONLY IN SUPPORT OF THE CIT(A)S ORDER AS BECOME INFRUCTUOUS IN VIEW OF OUR DECISION IN THE REVENUES APPEAL. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED , THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CRO SS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/5/2014. SD/- SD/- (I. C. SUDHIR) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 13/5 /2014 *SUBODH* ITA NO. 980, 1220 /DEL/2011 & CO NO. 89/DEL/2011 KISHORE JERAM BHAI KHANIYA 9 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 12.5.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 12.5.2014 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 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *