NITCO TILES, MUMBAI V. ITO 12(3)(2), MUMBAI

ITA 1038/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2626 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 16-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Opportunity of being heard
• Section: 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VP & SHRI R.K. PANDA, AM I.T.A. NO. 1038/MUM/09 (ASSESSMENT YEAR 2003-04) M/S. NITCO TILES 85/86, MAKER CHAMBERS-III NARIMAN POINT, MUMBAI-400 021 PAN: AACFN8174E VS. I.T.O. WARD 12(3)(2) MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI VIMAL PUNMIYA RESPONDENT BY: SHRI RAJARSHI DWIVEDY O R D E R DATE OF HEARING: 23.10.2009 DATE OF ORDER: 07.12.2009 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 26 TH DECEMBER, 2008 OF THE CIT(A)-XII, MUMBAI RELATING TO ASSESSMENT YEAR 2003-04. 2. IN GROUNDS OF APPEAL NO. 1 THE ASSESSEE HAS CHALLEN GED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.90,000 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAPITAL INTRODUCTION OF MRS. DOLLY TALWAR. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUYERS AND SELLERS, IMPORTERS AND EXPORTERS OF TILES, MOSAIC, MARBLES AND BUILDING MA TERIALS, ETC. HOWEVER, DURING THE YEAR IT WAS STATED THAT NO BUSINESS ACTI VITIES WERE CARRIED OUT. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS OBSERVED FROM THE BALANCE SHEET THAT ONE OF THE PAR TNER MRS. DOLLY TALWAR HAS INTRODUCED A SUM OF RS.90,000 TO HER CA PITAL ACCOUNT. THE DETAILS OF SOURCE OF INVESTMENT WERE CALLED FOR. T HE ASSESSEE FILED THE I.T.A. NO. 1038/MUM/09 M/S. NITCO TILES ================= 2 LEDGER COPY OF MRS. DOLLY TALWAR APPEARING IN THE F IRMS ACCOUNTS ACCORDING TO WHICH THE CREDIT SIDE SHOWS THAT THE A MOUNT HAS BEEN PAID TO M/S. PRATHEMESH DECORATORS WHICH WAS LATER ON SETTL ED. NOT BEING SATISFIED WITH THE GENERAL EXPLANATION GIVEN BY THE ASSESSEE AND AS THE ASSESSEE COULD NOT SATISFACTORILY PROVE THE SOURCE OF ADDITIONAL CAPITAL INTRODUCED DURING THE YEAR, THE ASSESSING OFFICER A DDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ADDITIO N HAS BEEN MADE WITHOUT QUOTING THE SECTION UNDER WHICH THE SH ELTER HAS BEEN TAKEN B Y THE DEPARTMENT WHICH IS MANDATORY. ACCORDINGL Y IT WAS SUBMITTED THAT THE ADDITION MADE IS OUT SIDE THE PURVIEW OF T HE ACT WHICH BECOMES IPSO FACTO NULL AND VOID AB INITIO . IT WAS SUBMITTED THAT FOR INTRODUCING A CAPITAL OR MAKING INVESTMENT A PERSON NEED NOT IN A LL CASES SHOULD HAVE HIGHER CURRENT INCOME. THE INVESTMENT COULD BE OF PAST SAVINGS, LOANS, GIFTS, ETC. SINCE THE IDENTITY OF THE PARTNER IS E STABLISHED, SHE BEING AN INCOME-TAX ASSESSEE, AND SINCE THE AMOUNT OF CAPITA L INTRODUCED BEING RS.90,000 IS A VERY SMALL AMOUNT, THEREFORE, THE SO URCE OF CAPITAL SHOULD NOT HAVE BEEN DOUBTED. VARIOUS DECISIONS WERE ALS O RELIED UPON. 4.1 HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT ALTHOUGH THE ASS ESSEE HAD ESTABLISHED THE IDENTITY OF THE PERSON BUT HER CREDITWORTHINESS HAS NOT BEEN PROVED. MERELY BY STATING THAT THE AMOUNT INTRODUCED IS ONL Y RS.90,000 AND THAT SHE IS A PERSON OF REPUTE AND STATING THAT THE PAYM ENT OF RS.90,000 MADE TO M/S. PRATHEMESH DECORATORS WAS SUBSEQUENTLY REC OVERED DOES NOT PROVE THE CREDITWORTHINESS OF THE PARTNER. HE FURT HER OBSERVED THAT NON MENTION OF SECTION, ETC., DOES NOT MAKE THE ADDITIO N VOID SINCE THE ADDITION HAS BEEN MADE ON ACCOUNT OF CAPITAL INTROD UCED AND THE SAME HAS TO BE TAKEN AS BEING MADE ON ACCOUNT OF UNEXPLA INED CASH CREDIT U/S. 68 OF THE ACT BEING INTRODUCTION OF CAPITAL. HE AC CORDINGLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. I.T.A. NO. 1038/MUM/09 M/S. NITCO TILES ================= 3 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO P AGE 1 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE N OTE ON ADDITION OF RS.90,000 IN THE BOOKS OF NITCO TILES WHICH IS AS U NDER: NOTE ON ADDITION OF RS.90,000 IN THE BOOKS OF NITCO TILES: 1. NITCO TILES PAID RS.30000/- TO PRATHMESH DECORATORS VIDE CHEQUE NO. 151299 DT. 18/09/2000 AND DEBITED TO THE CURRENT ACCOUNT OF PARTNER LOVRAJ TALWAR (HUF). 2. NITCO TILES PAID RS.30000/- TO PRATHMESH DECORATORS VIDE CHEQUE NO.301001 DT. 19/10/2000 AND DEBITED TO THE CURRENT ACCOUNT OF PARTNER LOVRAJ TALWAR (HUF). 3. NITCO TILES PAID RS.30000/- TO PRATHMESH DECORATORS VIDE CHEQUE NO. 301009 DT. 19/10/2000 AND DEBITED T O THE CURRENT ACCOUNT OF PARTNER LOVRAJ TALWAR (HUF). FOR ABOVE TRANSACTION LEDGER COPIES OF CURRENT A/C. OF LOVRAJ TALWAR (HUF) IS ENCLOSED. SINCE PRATHMESH DECORATORS WAS DOING WORK ON TWO- THREE SITES AT A TIME WHICH WAS BELONGING TO DOLLY TALWAR, LOVRAJ TALWAR AND HANSOM FINANCE TRADING. PAYMENTS WERE MADE TO PRATHMESH DECORATORS ON ACCOUNT AND AT TH E TIME OF PAYMENT IT WAS NOT TRACEABLE THAT THE AMOUNT WHI CH IS BEING PAID RELATES TO WHICH PARTY. FURTHER LOVRAJ TALWAR TRANSFERRED ABOVE PAYMENT TO DOLLY TALWAR IN HIS BOOKS. AFTER COMPLETION OF WORK AT SITE IT GOT CLEARED THA T ULTIMATELY WORK WAS DONE FOR HANSOM FINANCE TRADING COMPANY H ENCE CURRENT ACCOUNT OF MRS. DOLLY TALWAR WAS REVERSED B Y RS.90000 AND PRATHMESH DECORATOR ACCOUNT WAS DEBITE D IN THE BOOKS OF NITCO TILES. ACCORDINGLY HANSOMN FINA NCE PAID RS.90000 TO NITCO TILES ON 25/03/2009 AND ACCOUNT O F PRATHMESH SETTLED. HE ACCORDINGLY SUBMITTED THAT THE ADDITION SHOULD B E DELETED. I.T.A. NO. 1038/MUM/09 M/S. NITCO TILES ================= 4 7. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE OR DER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS NOT DISC HARGED THE ONUS CAST ON IT BY PROVING THE CREDITWORTHINESS OF THE PARTNE R IN INTRODUCING RS.90000. THEREFORE, THE ORDER OF THE CIT(A) SHOUL D BE UPHELD. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE ONLY DIS PUTE IN THE IMPUGNED APPEAL IS REGARDING THE INTRODUCTION OF RS.90,000 B Y ONE OF THE PARTNER MRS. DOLLY TALWAR WHICH HAS BEEN TREATED BY THE ASS ESSING OFFICER AS UNEXPLAINED CASH CREDIT AND UPHELD BY THE CIT(A). FROM THE NOTE ON ADDITION OF RS.90,000 IN THE BOOKS OF NITCO TILES F ILED BY THE ASSESSEE IN THE PAPER BOOK PAGE 1, WE FIND ALTHOUGH NITCO TILES HAS PAID RS.90000 TO M/S. PRATHMESH DECORATORS AND DEBITED THE SAME T O THE CURRENT ACCOUNT OF PARTNER LOVERAJ TALWAR HUF, M/S. LAVERAJ TALWAR HUF TRANSFERRED THE ABOVE PAYMENT TO MRS. DOLLY TALWAR S ACCOUNT IN THEIR BOOKS OF ACCOUNT. IT IS THE SUBMISSION OF THE LEAR NED COUNSEL FOR THE ASSESSEE THAT M/S. PRATHMESH DECORATORS WAS DOING W ORK ON DIFFERENT SITES WHICH WAS BELONGING TO MRS. DOLLY TALWAR AND TWO OTHERS. WE FIND FOR TRACING THE ACCOUNT IT TOOK MORE THAN 5 YEARS T O THE ASSESSEE. THE EXPLANATION GIVEN IN THE NOTE DOES NOT INSPIRE ANY CONFIDENCE. THE ASSESSEE HAS NOT COME OUT WITH CLEAR PICTURE REGARD ING THE SOURCE OF INTRODUCTION OF CAPITAL. IT IS THE SETTLED PROPOSI TION OF LAW THAT FOR ESTABLISHING ANY CASH CREDIT AS GENUINE, THE ONUS I S ALWAYS ON THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE C ASH CREDITOR AND GENUINENESS OF THE TRANSACTION. IN THE INSTANT CAS E ALTHOUGH THE IDENTITY OF THE PERSON IS PROVED BUT THE CREDITWORTHINESS IS NOT PROVED. THE SUBMISSION IN THE SHAPE OF THE NOTE DOES NOT PROVE BEYOND DOUBT THE CREDITWORTHINESS OF THE PARTNER. WE, THEREFORE, DO NOT FIND MUCH FORCE IN THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. ACCORDINGLY THE GROUND RAISED BY THE ASSESSEE IS DI SMISSED. I.T.A. NO. 1038/MUM/09 M/S. NITCO TILES ================= 5 9. IN GROUNDS OF APPEAL NO. 2 THE ASSESSEE HAS CHALLEN GED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF R.23,5 00 MADE BY THE ASSESSING OFFICER UNDER PROVISIONS OF SECTION 41(1) OF THE ACT. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.23,500 WHICH WAS APPEARI NG AS SUNDRY CREDITORS IN THE BALANCE SHEET OF THE ASSESSEE IN A BSENCE OF FURNISHING OF CONFIRMATIONS WITH REGARD TO SUNDRY CREDITORS OUTST ANDING FOR MORE THAN THREE YEARS. 11. IN APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADDITIO N MADE BY THE ASSESSING OFFICER IN ABSENCE OF ANY EVIDENCE TO PRO VE THAT THE OUTSTANDING AMOUNT SHOWN AGAINST THE SUNDRY CREDITORS IS ACTUAL LY A LIABILITY AND IT HAS NOT CEASED. IT IS THE SUBMISSION OF THE LEARNE D COUNSEL FOR THE ASSESSEE THAT THIS AMOUNT WAS APPEARING IN ITS BOOK S OF ACCOUNT SINCE A.Y. 1999-2000 AND HAS BEEN PAID IN SUBSEQUENT YEARS. T HE THEORY OF SUBSEQUENT PAYMENTS WAS NEITHER BEFORE THE ASSESSIN G OFFICER NOR BEFORE THE CIT(A) BUT STATED BEFORE THE TRIBUNAL FOR THE F IRST TIME. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE TO PROVE WITH EVIDENCE THAT THE OUTSTANDING LIABILITY TO SUNDRY C REDITORS HAS BEEN PAID SUBSEQUENTLY. IF IT IS FOUND THAT THE SAME HAS BEE N PAID SUBSEQUENTLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. 12. IN GROUNDS OF APPEAL NO. 3 THE ASSESSEE HAS CHALLEN GED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.41, 143 ON ACCOUNT OF EXPENSES PAYABLE BY INVOKING THE PROVISIONS OF SECT ION 41(1) OF THE INCOME-TAX ACT, 1961. 13. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.41,143 AS EXPENSES PAYA BLE BY INVOKING THE PROVISIONS OF SECTION 41(1) AS NO DETAILS WERE FILE D. THE CIT(A) CONFIRMED THE ADDITION ON THE GROUND THAT NECESSARY EVIDENCE FOR ITS CLAIM HAS NOT I.T.A. NO. 1038/MUM/09 M/S. NITCO TILES ================= 6 BEEN PRODUCED. HE, HOWEVER, OBSERVED THAT THE ASSE SSING OFFICER HAS WRONGLY APPLIED THE PROVISIONS OF SECTION 41(1) WHI LE DISALLOWING THE EXPENSES OF RS.41,143. THE ASSESSING OFFICER COULD HAVE DISALLOWED THE SAID EXPENSES WITHOUT INVOKING THE SAID PROVISIONS IF HE HAD FELT THAT THE CLAIM WAS NOT JUSTIFIED. 14. IN OUR OPINION, THE APPLICATION OF PROVISIONS OF SE CTION 41(1) INVOKED BY THE ASSESSING OFFICER HAS BEEN NEGATED B Y THE CIT(A), WHO, HOWEVER, CONFIRMED THE ADDITION ON THE GROUND THAT NECESSARY EVIDENCE FOR THE CLAIM HAS NOT BEEN PRODUCED. WE, THEREFORE , IN THE INTEREST OF JUSTICE DEEM IT PROPER TO RESTORE THE MATTER BACK T O THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO FILE NECESSARY DETAILS. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVIN G ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 15. GROUNDS OF APPEAL NO. 4 RELATES TO CHARGING OF INTE REST U/S. 234A, 234B AND 234C. AFTER HEARING BOTH THE SIDES, WE AR E OF THE CONSIDERED OPINION THAT CHARGING OF INTEREST UNDER THE ABOVE S ECTIONS IS MANDATORY AND CONSEQUENTIAL. THEREFORE, THIS GROUND IS DISMI SSED. 16. GROUNDS OF APPEAL NO. 5 RELATES TO INVOKING OF PROV ISIONS OF SECTION 271. THIS GROUND BY THE ASSESSEE IS PREMATURE IN N ATURE HENCE DISMISSED. 17. GROUNDS OF APPEAL NO. 6 BEING GENERAL IN NATURE IS DISMISSED. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 7 TH DECEMBER, 2009. SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 7 TH DECEMBER, 2009 I.T.A. NO. 1038/MUM/09 M/S. NITCO TILES ================= 7 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT (A)-XII, MUMBAI, (4) THE CIT-XII, MUMBAI, (5) THE DR, A BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO