The ITO, Ward-1(4), RAJKOT-GUJARAT V. M/s. Meet Developers, RAJKOT-GUJARAT

ITA 1096/RJT/2010

• Counselvise Citation: 109624914 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 1096 /RJ T/201 0 ASSESSMENT YEAR : 2007 - 08 ITO, WARD - 1(4), RAJKOT V. M/S. MEET DEVELOPERS, DEEP COMPLEX, KOTECHANAGAR MAIN RO AD, RAJKOT PAN : AADFM 3193 M DATE OF HEARING : 12 .0 8 .2013 DATE OF PRONOUNCEMENT : 13 . 0 8 .2013 REVENUE BY : SHRI AVINASH KUMAR, DR ASSESSEE BY : SHRI D M RINDANI, CA ORDER D. K. SRIVASTAVA : THE APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST T HE ORDER PASSED BY THE CIT(A) - I, RAJKOT ON 25 .0 5 .201 0, ON THE FOLLOWING GROUNDS: - 1) THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION TO RS.34,70,000/ - BEING ADVANCE RECEIVED U/S 68 OF THE I.T. ACT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3) IT IS, THEREFORE PRAYED THAT THE ORDER OF THE LD CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE E XTENTS. 2. THE ASSESSEE IS A FIRM. IT IS ENGAGED IN BUSINESS AS CIVIL CONTRACTOR AND BUILDER. IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 08.11.2007 DECLARING TOTAL INCOME AT RS.36,182/ - . THE RETURN WAS TAKEN UP FOR SCRUTINY DURING WHICH IT WAS FOUND BY THE ASSESSI NG OFFICER THAT THE ASSESSEE HAD RECORDED CASH CREDIT S A GGREGATING TO RS. 34,70,000/ - IN ITS BOOKS OF ACCOUNT IN THE NAME OF (1) NIRMAL ODEDERA RS.2,90,000/ - , (2) SANJAY MEHTA RS.3,00,000/ - , (3) HEMANT RANPURIAYA RS.3,80,000/ - , (4) JERAMBHAI N THUMAR RS.4,25,000/ - , (5) SHRI MULJIBHAI R KIYADA RS.4,50,000/ - , (6) HIRJIBHAI R KIYADA RS.4,50,000/ - , (7) KISHORBHAI I PANSURIYA RS.4,65,000/ - , (8) H.M. PANDYA RS.6,00,000/ - AND (9) DARSHAN BHAGDEV RS.1,10, 000/ - . THE ASSESSEE COULD NOT SATISFACTORIL Y EXPLAIN THE NATURE AND SOURCE OF THE AFORESAID CASH CREDITS W ITH THE RESULT THAT THE SAID SUM OF RS.35,70,000/ - STANDING IN THE NAME OF THE AFORESAID PERSONS WAS TREATED AS UNEXPLAINED AND RESULTANTLY BROUGHT TO TAX U/S 68 OF THE INCOME - TAX ACT. 2 1096 - RJT - 2010 - MEET DEVELOPERS 3. AGG RIEVED BY THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A). THE LD CIT( A) CALLED FOR THE REMAND REPORT PURSUANT TO WHICH REMAND REPORT DATED 22.04.2010 WAS SUBMITTED BY THE ASSESSING OFFICER BEFORE T HE LD CIT(A). THE SAID REMAND REPORT HAS BEEN REPRODUCED BY THE LD CIT(A) IN PARAGRAPH 8 OF HIS APPELLATE ORDER. AFTER CONSIDERING THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER AND THE S UBMISSIONS MADE BY THE ASSESSEE, THE LD CIT(A) DELETED THE IMPU GNED ADDITION WITH THE FOLLOWING OBSERVATIONS: - 10. I HAVE CAREFULLY CONSIDERED THE ISSUE . I FIND THAT IN RESPECT OF FOUR PERSONS IT IS PROVED AND ALSO ACCEPTED BY THE AO THAT THE AMOUNTS WERE FOR THE PURPOSE OF PURCHASE OF FLATS AND THE APPELLANT HAS AL SO FURNISHED THE SALE DEED FOR THOSE FLATS. THEREFORE, AMOUNT OF RS.2,90,000/ - , RS.3 LAKH, RS.3,80,000/ - AND RS.6 LAKHS TOTALING TO RS.15,70,000/ - IS FULLY EXPLAINED AND IS DELETED. IN RESPECT OF REMAINING CREDITS, IT IS NOTICED THAT ALL THE PERSONS HAD AP PEARED BEFORE THE AO AND THEY HAVE EXPLAINED THAT THEY HAD ONLY DEPOSITED THE AMOUNT FOR BOOKING OF FLAT AND THE SAID BOOKING WAS CANCELLED AND THE ENTIRE AMOUNT WAS RECEIVED BACK BY THEM BY CHEQUE. ALL THESE PERSONS ARE AGRICULTURISTS. IN HIS REMAND REPOR T THE AO HAS MENTIONED THAT THESE PERSONS DID NOT FURNISH BILLS FOR EARNING OF AGRICULTURAL INCOME AND HENCE THEIR SOURCES OF ADVANCING THE SAID AMOUNT IS NOT PROVED. IN RESPECT OF SHRI DARSHAN BHAGDEV THE AO HAS STATED THAT HE IS BASICALLY A HAND TO MOUTH PERSON. HOWEVER, IT IS NOTICED THAT THE SAID PERSON IS ASSESSED TO TAX AND IS FILING THE RETURN OF INCOME. AO HAS ALSO MENTIONED THAT NONE OF THESE PERSONS DID SPECIFY AS TO WHAT WAS THE ADDRESS OF THE PROPERTY BOOKED. IN THIS REGARD THE LD. AR HAS FILED COPY OF STATEMENT ALSO, WHICH CLEARLY SHOWS THAT THE AO NEVER ASKED THE ADDRESS OF THE PROPERTY BOOKED NOR DID HE ASK ANY DETAILS REGARDING BILLS FOR SALE OF AGRICULTURAL PRODUCE. IN SUCH CIRCUMSTANCES THE OBSERVATION OF THE AO IS PATENTLY INCORRECT BECAUS E THE WITNESS WILL GIVE ANSWER TO ONLY THAT QUESTION WHICH IS PUT TO HIM. THE AO NEVER ASKED SUCH QUESTION AND IT REMAINS A FACT THAT APPELLANT IS A BUILDER AND THE PERSONS CAME TO BOOK PROPERTY WITH HIM. IN RESPECT OF ALL THE OTHER 3 1096 - RJT - 2010 - MEET DEVELOPERS PERSONS, THEY HAVE CONF IRMED HAVING ADVANCED MONEY AND WHEN THE BOOKING WAS CANCELLED THE MONEY WAS RECEIVED BACK BY THEM BY CHEQUE. APPARENTLY THE PERSONS ARE APPEAR TO BE GENUINE. EVEN, THESE ADDITIONS ARE UNJUSTIFIED. TO SUM UP, ENTIRE ADDITION OF RS.34,17,000/ - U/S. 68 IS DE LETED. 4 . AGGRIEVED BY THE ORDER PASSED BY THE LD CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD . DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER. 5 . IN REPLY, THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD CIT(A). 6 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. WE HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER - BOOK FILED BY THE ASS ESSEE BEFORE US. THE IMPUGNED ADDITION HAS BEEN DELETED BY THE CIT(A) ON THE BASIS OF REMAND REPORT SUBMITTED BY THE AO. THE LD CIT(A) HAS REPRODUCED THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER IN THIS BEHALF IN HIS APPELLATE ORDER, WHICH READS AS UNDER: - 2.0 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD CREDITED ADVANCE FOR BOOKING OF FLATS IN THE NAMES OF 9 PERSONS MENTIONED IN PARA - 4.1 OF THE ASSESSMENT ORDER. THE AGGREGATE CREDIT BALANCE IN RESPECT OF THESE PERSONS WAS RS.34,70,000/ - . THE DOCUMENTS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE LACKING OF SUPPORTING EVIDENCES IN RESPECT OF CONFIRMATION LETTERS TO PROVE THE GENUINENESS OF THE CREDITS & CREDITWORTHINESS OF THE CREDITORS. IN ABSENCE OF THE VITAL INFORMATION, THE AGGREGATE CREDITS WERE CONSIDERED AS UNEXPLAINED CASH CREDITS AND TAXED U/S 68 OF THE I.T. ACT, 1961. 3.0 DURING THE COURSE OF APPEAL PROCEEDINGS, THE ASSESSEE HAS FURNISHED FURTHER DOCUMENTS IN THIS REGARDS. SUMMONS WERE IS SUED TO FOLLOWING FIVE PERSONS FOR VERIFICATION OF GENUINENESS OF THE TRANSACTIONS. 1 . SHRI KISHORBHAI L PANSURIYA RS.4,65,000/ - 2 . SHRI JAYRAMBHAI N. THUMAR RS. 4,25,000/ - 3 . SHRI MULJIBHAI R. KIYADA RS.4,50,000/ - 4 . SHRI HARJIBHAI R. KIYADA RS.4,50,000/ - 5 . SHRI DAR SHAN BAGDEV RS.1,10,000/ - 4 1096 - RJT - 2010 - MEET DEVELOPERS 3.1 IN RESPONSE, THE ABOVE PERSONS ATTENDED AND THEIR STATEMENTS WERE RECORDED WHEREIN IT WAS CLAIMED TO HAVE MADE ADVANCE FOR BOOKING OF HOUSE. IT IS IMPORTANT TO MENTION HERE THAT NEITHER OF THE PERSONS DID SPECIFY AS TO WHAT W AS THE ADDRESS OF THE PROPERTY BOOKED, WHAT WAS THE PURCHASE PRICE, WHAT WERE THE TERMS AND CONDITIONS OF PAYMENT ETC. THEY HAVE ALSO NEITHER PRODUCED ANY SATAKHAT NOR CANCELLATION DEED IN RESPECT OF THE SO CALLED BOOKING OF THE HOUSE. 3. 1 IN SO FAR AS P ERSONS MENTIONED AT SR. NO.1 TO 4 ARE CONCERNED, THEY CLAIMED THAT THE ADVANCES WERE GIVEN BY THEM TO THE ASSESSEE IN CASH AND THE SAME WERE RETURNED BACK BY THE ASSESSEE THROUGH THE BANKING CHANNEL. THESE PERSONS ARE AGRICULTURIST ARID FURNISHED PROOF FOR POSSESSING AGRICULTURE LAND . THEY ARE NOT ASSESSED TO TAX. HOWEVER, THEY HAVE NOT FURNISHED BILLS FOR EARNING OF AGRICULTURE INCOME AND BANK STATEMENTS FOR VERIFICATION OF ADVANCE RECEIVED BACK. IN THE CIRCUMSTANCES, CREDITWORTHINESS OF THESE PERSONS COUL D NOT BE VERIFIED. THEREFORE, THEIR SOURCE OF ADVANCING THE SAID AMOUNT IS NOT CONCLUSIVELY PROVED. HENCE THE AO WAS DULY JUSTIFIED IN MAKING THE SAID ADDITION UNDER APPEAL. IN VIEW OF THESE FACTS, IT IS PRAYED THAT THE ACTION OF THE AO MAY KINDLY BE UPHEL D. 3.2 AS REGARDS CREDIT APPEARING IN THE NAME OF SHRI DARSHAN BHAGDEV, HE IS ENGAGED IN THE RETAIL TRADING IN CLOTH AS STREET HAWKER, WHICH ESTABLISHED THAT HE IS A HAND TO MOUTH PERSON AND HAD NO CAPACITY TO ADVANCE THE SO CALLED BOOKING MONEY. HE IS ASSESSED TO TAX AND FURNISHED COPY OF IT ACKNOWLEDGEMENT. HE CLAIMED THAT HE HAS MADE THE ADVANCE FROM THE BANK ACCOUNT OF HIS SISTER AND EXPRESSED INABILITY TO PRODUCE BANK PASS BOOK OF HIS SISTER. THE DEPOSIT IS RETURNED BACK BY THE ASSESSEE THROUGH THE BANKING CHANNEL. THEREFORE, THE ADDITION WAS RIGHTLY MADE BY THE AO AND THE SAME MAY KINDLY BE UPHELD. 3.3 AS REGARDS ADVANCES APPEARING IN THE NAMES OF REMAINING 4 PERSONS, IT IS RESPECTFULLY SUBMITTED THAT THE FLATS/HOUSE ARE REGISTERED IN THEIR NAMES AND HAS FURNISHED COPIES OF SALE DEED. 5 1096 - RJT - 2010 - MEET DEVELOPERS 7 . IN ALL, T HE RE ARE 9 CASH CREDITORS. IN PARA 3.3. OF HIS REMAND REPORT, THE AO HAS ACCEPTED THAT THE AMOUNTS FROM FOUR PERSONS, NAMELY, (1) NIRMAL ODEDERA RS.2,90,000/ - , (2) SANJAY MEHTA RS.3,00,000/ - , (3) HEM ANT RANPURIAYA RS.3,80,000/ - AND H.M. PANDYA RS.6,00,000/ - WERE RECEIVED FOR PURCHASE OF FLATS ON THE BASIS OF COPIES OF SALE DEEDS FILED BEFORE HIM. 8 . AS REGARDS THE ADDITION ON ACCOUNT OF CASH CREDITS STANDING IN THE NAME OF REMAINING F IVE PERSONS , THE CASE OF THE AO WAS THAT THEY WERE NOT GENUINE FOR SIX PRINCIPAL REASONS: (I) THE TRANSACTIONS OF PURCHASE WERE NOT SUPPORTED BY ANY AGREEMENT, I.E., SATAKHAT, OR SALE DEED , AND HENCE IT COULD NOT BE SAID THAT THEY HAD GIVEN THE MONEY FOR BOOKING THE FLATS ; (II) NO EVIDENCE WAS FURNISHED TO SHOW THAT THE AFORESAID CASH CREDITORS WERE GENUINE BUYERS; (III) NO EVIDENCE WAS FURNISHED TO ESTABLISH THE CREDITWORTHINESS OF THE AFORESAID FIVE CASH CREDITORS; (V) ALL THE CREDITORS CLAIMED TO HAVE PAID THE MONE Y IN CASH, I.E., OUTSIDE BANKING CHANNELS; AND (VI) THE AFORESAID FIVE CREDITORS DID NOT PRODUCE THEIR BANK ACCOUNTS ALSO. THE POINTS RAISED BY THE AO GO TO THE ROOT OF THE MATTER. UNLESS THEY ARE APPROPRIATELY EXPLAINED, THE NATURE AND SOURCE OF CASH CRED ITS CANNOT BE SAID TO HAVE BEEN SATISFACTORILY EXPLAINED. 9 . IT IS ADMITTED THAT THE IMPUGNED SUMS WERE GIVEN BY THE CREDITORS IN CASH TO THE ASSESSEE - FIRM . THE FACT THAT THE IMPUGNED SUMS WERE REPAID BY CHEQUE DOES NOT IPSO - FACTO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF CASH CREDIT S RECORDED IN THE BOOKS OF THE ASSESSEE - FIRM . UNLESS THE IMPUGNED SUM IS FIRST SHOWN TO HAVE BEEN GENUINELY RECEIVED BY THE ASSESSEE FROM THE AFORESAID CREDITORS, THE QUESTION OF THEIR BEING REPAID BY THE ASSESSEE - FIRM T O THEM THROUGH BANKING CHANNEL S WOULD BE COMPLETELY IRRELEVANT AS SECTION 68 SEEKS TO CHARGE UNEXPLAINED AMOUNTS CREDITED IN THE BOOKS TO TAX AND NOT THEIR REPAYMENTS. 10 . IT IS WELL ESTABLISHED THAT THE BURDEN TO ESTABLISH THE IDENTITY AND CREDITWORTHINE SS OF THE CREDITORS AS ALSO GENUINENESS OF THE TRANSACTIONS IS S QUARELY ON THE ASSESSEE. THE POWERS OF THE CIT(A) ARE CO - TERMINUS WITH THE AO. HE CAN ALSO DO WHAT THE AO CAN DO. THE LD . CIT(A) HAS NOT RECORDED ANY FINDING TO SHOW AS TO HOW THE AFORESAID BU RDEN, PARTICULARLY THE CREDITWORTHINESS OF THE CREDITORS AND 6 1096 - RJT - 2010 - MEET DEVELOPERS GENUINENESS OF THE TRANSACTIONS , HAS BEEN DISCHARGED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE ORDER PASSED BY THE LD CIT(A) CANNOT BE SUSTAINED. IT IS THEREFORE SET ASIDE AND THE MATTER I S RESTORED TO HIS FILE. HE IS DIRECTED TO RECORD HIS FINDINGS WITH REGARD TO IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND ALSO GENUINENESS OF THE TRANSACTIONS. FOR THIS PURPOSE, HE WILL LOOK INTO THE RELEVANT RECORD TO FIND OUT AS TO WHEN THE FLATS W ERE BOOKED, DETAILS OF RECEIPTS ISSUED BY THE ASSESSEE - FIRM TO THE CREDITORS, COPIES OF BANK ACCOUNT OF THE CREDITORS, COPIES OF SATAKHAT EXECUTED BETWEEN THE ASSESSEE - FIRM AND THE AFORESAID CREDITORS, COPIES OF SALE DEED , ETC. IT IS ONLY AFTER THE EXAMINA TION OF THE RELEVANT DOCUMENTS THAT THE LD . CIT(A) WILL RECORD HIS FINDINGS. REASONABLE OPPORTUNITY OF HEARING SHALL BE GIVEN TO BOTH THE PARTIES. APPEAL FILED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 13 . 0 9 . 201 3 SD/ - SD/ - (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: 13 . 0 9 .2013 B T COPY OF ORDER FORWARDED TO: - 1 . APPELLANT ITO, WARD - 1(4), RAJKOT 2 . RESPONDENT - M/S. MEET DEVELOPERS, DEEP COMPLEX, KOTECH ANAGAR MAIN ROAD, RAJKOT 3 . CONCERNED CIT - I, RAJKOT 4 . CIT (A) - I, RAJKOT 5 . DR, ITAT, RAJKOT 6 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT