New Shimla Agencies, Hyderabad V. Income Tax Officer, Ward-4(3), Hyderabad

ITA 104/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1254 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 27-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 11-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEEJU GUPTA
• Assessee Lawyers: B SHANTHI KUMAR
• Keywords: Unexplained cash credit; Reasonable cause
• Section: 40A(3); 143(3)

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 104 / HYD/201 8 ASSESSMENT YEAR: 20 14 - 15 NEW SHIMLA AGENCIES , HYDERABAD. PAN A A EFN 4808 P VS. INCOME - TAX OFFICER, WARD 4(3), HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: S HRI B. SHANTHI KUMAR REVENUE BY: SMT. NEEJU GUPTA DATE OF HEARING: 2 7 / 0 1 / 201 9 DATE OF PRONOUNCEMENT: 20 / 0 3 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 1 , HYDERABAD, DATED, 2 6 / 1 0/201 8 FOR AY 20 14 - 15 . 2. BRIEF FACTS OF THE CASE ARE , ASSESSEE FIRM, A WHOLESALE TRADER OF OIL AND VERMICELLI, FILED ITS RETURN OF INCOME FOR THE AY 2014 - 15 ON 29/09/2014 DECLARING TOTAL INCOME OF RS. 3,11,220/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES WERE ISSUED U/S 143(2) & 142(1). THE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 28/12/2016 BY DETERMINING TOTAL INCOME AT RS. 53,20,110/ - BY MAKING THE FOLLOWING DISALLOWANCES: 1. DISALLOWANCE OF RS. 25,42,262/ - U/S 40A(3). 2. DISALLOWANCE OF RS. 23,24,680/ - ON ACCOUNT OF HOME LO AN. 3. DISALLOWANCE OF RS. 1,41,964/ - U/S 40A(2)(B) ON ACCOUNT OF INTEREST PAID TO PARTNERS. I.T.A. NO. 104 /HYD/1 8 NEW SHIMLA AGENCIES, H YD. 2 3. ON APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE U/S 1,41,964/ - U/S 40A(2)(B) AND CONFIRMED THE OTHER ADDITIONS MENTIONED AT SL.NOS. 1 & 2. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(APPEALS) ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE U/S 40A(3) OF CASH PAYMENTS AMOUNTING TO RS.25,42,262/ - WIT HOUT APPRECIATING THE FACTS OF ASSESSEE'S CASE. 2. THE CIT(APPEALS) ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.23,24,680/ - TOWARDS UNEXPLAINED CREDIT. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. AS REGARDS THE ADDITION OF RS. 23,24,680/ - TOWARDS UNEXPLAINED CREDIT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD TAKEN UNSECURED LOANS FROM THE FOLLOWING: BANK OVERDRAFT RS. 26,19,906/ - TATA FINANCE RS. 23,24,680/ - RS. 49,44,586/ - ============ 5.1 WITH REGARD TO THE LOAN TAKEN FROM M/S.TATA FINANCE, THE ASSESSEE SUBMITTED THAT ONE OF THE PARTNERS SRI MOHD IBR AHIM WAS SANCTIONED LOAN OF RS.25, 00,000/ - FOR CONSTRUCTION OF HIS HOUSE, IN 2011 . THE ASSESSEE FURTHER SUBMITTED THAT SINCE THE CHEQUE WAS IN THE NAME OF THE FIRM, IT WAS SHOWN ON THE CREDIT SIDE OF THE BALANCE SHEET. THIS LOAN WAS WITHDRAWN AND IT WAS DULY DEBITED IN HIS CAPITAL ACCOUNT. THE ASSESSEE SUBMITTED THAT SINCE NO ASSET WAS CREATED OUT OF THIS LOAN BY THE FIRM AND THE LOAN WAS WITHDRAWN BY THE PARTNER. IT WAS DEBITED TO THE PARTNER'S ACCOUNT AND IS NOT REFLECTED AS AN ASSET IN THE BALANCE SHEET. I.T.A. NO. 104 /HYD/1 8 NEW SHIMLA AGENCIES, H YD. 3 5.2 IN VIEW OF THE ABOVE, THE AO CONCLUDED THAT SINCE NO ASSET WAS CREATED OUT OF THIS LOAN BY THE FIRM, THE SAID LOAN WAS ALSO NOT THE LIABILITY OF THE FIRM. HENCE IT SHOULD NOT BE SHOWN ON THE CREDIT SIDE OF THE BALANCE SHEET OF THE ASSESSEE. THE AO OBSERVED THAT T HE ASSESSEE'S SUBMISSION THAT THE SAID LOAN HAS ALSO INCLUDED THE F IRM NAME IN THE SANCTION LETTER IS NOT ACCEPTABLE. THE SAID LOAN IS HOME EQUITY LOAN WHICH IS NOT RELATED TO THE BUSINESS OF THE FIRM. IN LIGHT OF THE ABOVE, THE ASSESSING OFFICER TREATED RS.23,24,680 / - AS UNEXPLAINED CREDITS IN THE BOOKS OF THE FIRM. 5. 3 WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE ADDITION MADE BY THE AO. 5.4 BEFORE US, THE LD. AR, WITH REGARD TO UNEXPLAINED CREDIT IN THE BALANCE SHEET OF THE FIRM, SUBMITTED THAT THE LOAN WAS SANCTIONED BY TATA CAPITAL LTD. TO THE JOINT APPLICANTS NAMELY MR. MD. IBRAHIM (PARTNER) AND THE ASSESSEE. AS THE PARTNER IS NOT ELIGIBLE TO APPLY FOR LOAN, THE ASSESSEE WAS MADE MAIN APPLICANT AND THE LOAN WAS SANCTIONED AND C HEQUE WAS ISSUED IN THE NAME OF THE ASSESSEE. HE BROUGHT TO OUR NOTICE THE SANCTIONED LETTER AND BANK COPY OF THE ASSESSEE TO HIGHLIGHT THAT THE SAME WAS RECEIVED BY THE ASSESSEE. (REFER PAGE 25 - 28 OF THE PAPER BOOK). HE SUBMITTED THAT THIS LOAN WAS SANCTI ONED ON 3 RD AUGUST, 2011. SINCE THE LIABILITY WAS IN THE NAME OF THE FIRM AND THE AMOUNT WAS PAID TO THE PARTNER, THE PARTNER ACCOUNT WAS PROPERLY RECORDED. AS THE LIABILITY IS IN THE NAME OF THE FIRM, THE SAME WAS SHOWN AS THE LIABILITY SIDE OF THE BALANC E SHEET. 5.5 LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. I.T.A. NO. 104 /HYD/1 8 NEW SHIMLA AGENCIES, H YD. 4 5.6 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WITH REGARD TO UNEXPLAINED CREDIT IN THE BALANCE SHEET, WE NOTICE THAT ASSESSEE HAS RECEIVED THE CHEQUE FOR THE LOAN SANCTIONED BY THE BANK ON 04/08/2011 (AS PER THE BANK STATEMENT SUBMITTED BEFORE US). EVEN THOUGH THE LOAN WAS TAKEN FOR THE PURPOSE OF CONSTRUCTION OF HOME FOR THE PARTNER, THE ASSESSEE HAS RECEIVED THE TOTAL SANCTIONED AMOUNT AND ASSESSEE HAS PAID ONLY PORTION OF THE LOAN TO THE PARTNER DURING THE YEAR I.E. ABOUT RS. 10 LAKHS (AS PER THE PARTNERS CAPITAL ACCOUNT). THE BALANCE AMOUNT WAS UTILIZED IN THE BUSINESS. EVEN IN THE SUBSEQUENT YEAR, THE PARTNERS HAS DRAWINGS OF RS. 17,65,965/ - . THEREFORE, T HE ASSESSEE HAS CLEARLY EXPLAINED THE DETAILS OF CREDIT STANDING ON THE LIABILITY SIDE OF THE BALANCE SHEET. SINCE THE LOAN WAS RECEIVED BY THE FIRM AND THE REPAYMENT OF THE LOAN LIABILITY IS JOINTLY IN THE NAME OF FIRM AND THE PARTNER, THE PARTNER IS NOT DIFFERENT FR O M THE FIRM AND EACH PARTNER IS JOINTLY AND SEVERALLY LIABLE FOR THE LIABILITY OF THE FIRM, THE LIABILITY IN THE BALANCE SHEET IS SUFFICIENTLY EXPLAINED, WE DO NOT SEE ANY REASON NOT TO ACCEPT THE SUBMISSION OF LD. AR. FURTHER, THIS CREDIT WAS NOT MADE DURING THIS AY RATHER IT IS THE CREDIT BALANCE CARRIED FROM THE EARLIER YEARS. THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 6. WITH REGARD TO THE DISALLOWANCE U/S 40A(3) OF RS. 25,42,262/ - TOWARDS CASH PAYMENTS EXCEEDED RS. 20,000/ - , D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF PURCHASES AND OTHER EXPENDITURE ALONG WITH BILLS, VOU CHERS AND BOOKS OF ACCOUNT. ON VERIFICATION OF THE SAME, THE AO NOTICED THAT THE ASSESSEE FIRM HAD MADE CASH PAYMENTS TOWARDS THE EXPENDITURE I.T.A. NO. 104 /HYD/1 8 NEW SHIMLA AGENCIES, H YD. 5 INCLUDING PURCHASES, THE DETAILS OF WHICH WERE EXTRACTED BY THE AO IN HIS ORDER AT PAGE 2 & 3 OF HIS ORDER IN TABU LAR FORM. 6.1 THE ASSESSING OFFICER CONCLUDED THAT AS PER SECTION 40A(3), WHEN ANY EXPENDITURE IN RESPECT OF WHICH AGGREGATE PAYMENTS MADE TO ANY PERSON IN A DAY OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE/DEMAND DRAFT EXCEEDS RS.20, 000/ - , THE WHOLE O F SUCH EXPENDITURE IS TO BE DISALLOWED. ACCO RDINGLY , THE ASSESSING OFFICER ISSUED SHOW CAUSE LETTER TO THE ASSESSEE TO SUBMIT HIS OBJECTIONS OF DISALLOWING THE SAID EXPENDITURE. THE ASSESSEE COULD NOT FURNISH ANY REASONABLE CAUSE FOR MAKING SUCH PAYMENTS I N CASH. IN VIEW OF THIS, THE ASSESSING OFFICER MADE DISALLOWANCE U/S 4 OA(3) OF RS.25,42,262/ - AND ADDED BACK TO TOTAL INCOME AND THE SAME WAS CONFIRMED BY THE CIT(A) WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE HIM. 6.2 BEFORE US, LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAS MADE CASH PAYMENT FOR THE PURCHASES MADE AND THE PAYMENTS ARE RECORDED IN THE BOOKS ON PERIODICAL BASIS. THEREFORE, THE CONSOLIDATED PAYMENTS ARE ABOVE RS. 20,000/ - . 6.3 LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHO RITIES. 6.4 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT LD. CIT(A) HAS VERIFIED THE SUBMISSION OF THE ASSESSEE AT THE FIRST APPELLATE STAGE AND ASSESSEE HAS NOT SUBSTANTIATED WITH ANY MATERIAL PROOF THAT THE PAYMENTS ARE RECORDE D PERIODICALLY AND INDIVIDUAL PAYMENTS ARE BELOW RS. 20,000/ - . EVEN BEFORE US, LD. AR HAS NOT SUBMITTED ANY MATERIAL EVIDENCE TO PROVE THAT THE I.T.A. NO. 104 /HYD/1 8 NEW SHIMLA AGENCIES, H YD. 6 INDIVIDUAL PAYMENTS FOR PURCHASES ARE BELOW RS. 20,000/ - . THEREFORE, GROUND RAISED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH M ARCH , 201 9. KV COPY FORWARDED TO: 1. NEW SHIMLA AGENCIES, C/O B. SHANTHI KUMAR, ADVOCATE, 111, TARAMANDAL COMPLEX, 5 - 9 - 13, SAIFABAD, HYDERABAD. 2 . IT O , WARD 4(3), 7 TH FLOOR, INCOME - TAX TOWERS, AC GUARDS, H YDERABAD 500 004 3 . CIT (A) - 1 , HYDERABAD 4. PR. CIT 1 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE