ITO-4(I), Lucknow V. M/S Guru Teg Bahadur Enterprises, Lucknow

ITA 112/LKW/2011

• Counselvise Citation: 11223714 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Assessee Lawyers: H P SINGH
• Keywords: Gift; Depreciation; Source of fund
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.112/LKW/2011 ASSESSMENT YEAR:2006 - 07 INCOME TAX OFFICER - IV(1), LUCKNOW. VS. M/S GURU TEG BAHADUR AUTO ENTERPRISES, 4, SENANI VIHAR, RAEBAREILLY ROAD, LUCKNOW. PAN:AAFFG3946A (APPELLANT) (RESPONDENT) C.O. NO.17/LKW/2011 (IN ITA NO.112/LKW/2011) ASSESSMENT YEAR:2006 - 07 M/S GURU TEG BAHADUR AUTO ENTERPRISES, 4, SENANI VIHAR, RAEBAREILLY ROAD, LUCKNOW. PAN:AAFFG3946A VS. INCOME TAX OFFICER - IV(1), LUCKNOW. (OBJECTOR) (RESPONDENT) REVENUE BY SHRI R. K. RAM, D.R. ASSESSEE BY SHRI H. P. SINGH, ADVOCATE DATE OF HEARING 26/06/2014 DATE OF PRONOUNCEMENT 1 7 /07/2014 O R D E R PER A. K. GARODIA, A.M. THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST THE ORDER OF CIT (A) - II, LUCKNOW DATED 14/12/2010 FOR ASSESSMENT YEAR 2006 - 2007. 2 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LEARNED CIT(A) - II, LUCKNOW HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.21,06,582/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINE D CAPITAL CONTRIBUTION BY SMT. SINDHUJA MISHRA, ONE OF THE PARTNERS. HE FAILED TO APPRECIATE THAT CAPITAL INTRODUCED IS UNACCOUNTED MONEY STATED TO BE RECEIVED FROM PERSONS WHO ARE MERELY NAME LENDERS. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS JU STIFIED TO INQUIRE INTO THE SOURCE OF THE SOURCE OF FUNDS. 2. ANY OTHER GROUND WHICH MAY BE TAKEN AT THE TIME OF HEARING. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: ( I ) GIRISH NARAIN VS COMMISSIONER OF INCOME - TAX [2005] 274 ITR 405 (ALL) ( II ) COMMISSIONER OF INCOME - TAX VS JAISWAL MOTOR FINANCE [1983] 141 ITR 706 (ALL) 4. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A) AND HE ALSO SUBMITTED THAT CO PY OF BANK PASSBOOK OF THE PARTNE SMT. SINDHUJA MISHRA IS AVAILABLE ON PAGE NO. 1 TO 4 OF THE PAPER BOOK. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ADDITION WAS DELETED BY CIT(A) BY FOLLOWING THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS JAISWAL MOTOR FINANCE (SUPRA). IT IS STATED BY CIT( A) IN PARA 4.6 OF HIS ORDER THAT ADDITION WAS NOT WARRANTED IN THE HANDS OF THE ASSESSEE FIRM AND THE CORRECT COURSE TO BE TAKEN BY THE ASSESSING OFFICER WAS TO CONSIDER THIS ISSUE IN THE HAND OF SMT. SINDHUJA MISHRA. WHEN WE EXAMINE THIS JUDGMENT OF HO N'BLE ALLAHABAD HIGH COURT FOLLOWED BY CIT(A), WE FIND THAT IN THAT CASE , THE AMOUNT WAS 3 CREDITED IN THE CAPITAL ACCOUNT OF THE PARTNER IN THE BOOKS OF THE FIRM IN FIRST YEAR OF ASSESSMENT OF THE FIRM AND IT WAS FOUND THAT WITHOUT THE DEPOSIT, THE PARTNER COULD NOT HAVE BECOME PARTNER AND UNDER THESE FACTS, IT WAS HELD BY HON'BLE HIGH COURT THAT THIS DEPOSIT CANNOT BE ASSESSED AS INCOME OF THE FIRM. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT THIS IS THE FIRST YEAR OF THE FIRM AND THE AMOU NT IN QUESTION WAS DEPOSITED BY THE PARTNER FOR THE PURPOSE OF BECOMING THE PARTNER AND THEREFORE, IN THE FACTS OF THE PRESENT CASE, THIS JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IS NOT APPLICABLE. 6. BEFORE US, RELIANCE WAS PLACED BY LEARNED D.R. OF THE REVENUE ON ANOTHER JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF JAGMOHAN RAM CHANDRA VS. CIT (SUPRA) . IN THAT CASE, THE AMOUNT BEING TWO CASH CRE DITS IN THE BOOKS OF THE FIRM IN THE NAME OF TWO PARTNERS WERE ADDED IN THE HANDS OF THE F IRM AS WELL AS IN THE HANDS OF THE CONCERNED PARTNERS AND STILL , IT WAS HELD BY HON'BLE ALLAHABAD HIGH COURT THAT THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ADDITION IN THE TOTAL INCOME OF THE ASSESSEE FIRM EVEN THOUGH SAID AMOUNT WAS ALSO ASSESSED IN THE HANDS OF THE TWO PARTNERS . HENCE, IN OUR CONSIDERED OPINION, THIS LATE R JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IS REQUIRED TO BE FOLLOWED IN THE FACTS OF THE PRESENT CASE IN PREFERENCE TO EARLIER JUDGMENT FOLLOWED BY CIT(A). STILL IT HAS TO BE SEEN AS TO WHETHER THE ASSESSEE FIRM WAS ABLE TO EXPLAIN THESE DEPOSITS MADE BY THE PARTNER SMT. SINDHUJA MISHRA OR NOT AND IF IT IS FOUND THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE SOURCE OF DEPOSIT IN THE BOOKS OF THE FIRM, THEN ONLY ADDITION U/S 68 CAN BE U PHELD. 7. NOW WE EXAMINE THE EXPLANATION OF THE ASSESSEE. WE FIND THAT AS PER THE CHART NOTED BY CIT(A) IN PARA 4.1 OF HIS ORDER , AGAINST THE AMOUNT INTRODUCED BY THE PARTNER SMT. SINDHUJA MISHRA OF RS.21,06,582/ - , THE SOURCES ARE NOTED TO THE EXTENT OF RS.22,45,582/ - . THIS INCLUDES CASH RECEIPT OF RS.8.32 LAC S CLAIMED TO HAVE BEEN RECEIVED BY SMT. SINDHUJA MISHRA FROM 4 MOTHER - IN - LAW. REGARDING THIS CLAIM OF GIFT, IT IS NOTED BY CIT(A) ON PAGE NO. 6 THAT SMT. LEELAWATI SENANI IS NOT INCOME - TAX ASSESSEE A ND SHE IS NEITHER HAVING ANY PAN AND NOR SHE COULD EXPLAIN THE SOURCE OF GIVING GIFT TO HER DAUGHTER - IN - LAW AND THEREFORE, IN OUR CONSIDERED OPINION, THE SOURCE OF MONEY IN THE HANDS OF SMT. SINDHUJA MISHRA TO THIS EXTENT IS NOT ACCEPTABLE BECAUSE NOTHING MORE IS PRODUCED BEFORE US TO WARRANT INTERFERENCE FROM OUR SIDE . APART FROM THIS, IT IS NOTED THAT THE BALANCE AMOUNT HAS BEEN RECEIVED BY SMT. SINDHUJA MISHRA BY WAY OF CHEQUE FROM VARIOUS OTHER FIRMS I.E. IIHT SYSTEMS LTD. AND SENANI COLONIZERS & BUIL DERS (P) LTD. A S PER BANK STATEMENT OF SMT. SINDHUJA MISHRA AVAILABLE ON PAGE NO. 1 TO 4 OF THE PAPER BOOK . I T IS ALSO SEEN THAT IT IS NOTED BY CIT(A) ON PAGE NO. 4 BELOW THIS CHART THAT DURING THE COURSE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FURNISH VARIOUS DETAILS BEING COPY OF ACCOUNT OF SMT. SINDHUJA MISHRA WITH IIHT SYSTEMS LTD. AND SENANI COLONIZERS & BUILDERS (P) LTD. THE ASSESSEE WAS ALSO ASKED TO FURNISH CASH FLOW STATEMENT TO SHOW DEPOSIT OF RS.1 LAC IN CASH IN HER BANK ACCOUNT BU T NO COMPLIANCE WAS MADE IN THIS REGARD. EVEN AS PER REMAND REPORT, IT IS REPORTED BY THE ASSESSING OFFICER THAT THE EVIDENCE FILED BY THE ASSESSEE ARE INSUFFICIENT TO PROVE THE GENUINENESS OF THE SOURCES . A CLEAR FINDING IS GIVEN BY CIT(A) IN PARA 4.5 OF HIS ORDER THAT THE SOURCE FOR THE CAPITAL CONTRIBUTION OF SMT. SINDHUJA MISHRA WITH THE ASSESSEE FIRM HAVE NOT BEEN FOUND SATISFACTORY AND SMT. SINDHUJA MISHRA FAILED TO PROVE IT. AFTER HAVING NOTED THIS, THE CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE B Y FOLLOWING THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS JAISWAL MOTOR FINANCE (SUPRA). WE HAVE ALREADY DISCUSSED THAT IN PREFERENCE TO THIS JUDGMENT, THE LATE R JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IS REQUIRED TO BE FOLLOWED IN THE FACTS OF THE PRESENT CASE . SINCE THE SOURCE OF FUND IN THE HANDS OF SMT. SINDHUJA MISHRA COULD NOT BE EXPLAINED, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF 5 CIT(A) IS NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE S AME AND RESTORE THAT OF THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. 9. NOW WE TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEAR NED CIT(A) WAS NOT CORRECT IN OBSERVING THAT THE MONEY RECEIVED FROM M/S IIHT SYSTEMS LTD. AND M/S SENANI COLONIZERS & BUILDERS PVT. LTD. DID NOT MATCH WITH ENTRIES AS FOUND REFLECTED WITH THE SOURCES OF CAPITAL CONTRIBUTION OF THE ASSESSEE. 2. THE LEARNE D CIT(A) WAS NOT JUSTIFIED IN UPHOLDING ADDITION OF RS.4,06,579/ - BY INCREASING GROSS PROFIT TO RS.35,00,000/ - FROM RS.30,93,421/ - DISCLOSED BY THE ASSESSEE. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN UPHOLDING DISALLOWANCE OF RS.3,19,696/ - @20% OF THE GR OSS EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT (EXCLUDING BANK INTEREST & DEPRECIATION). 4. ANY OTHER GROUND WHICH THE APPELLANT MAY TAKE DURING THE COURSE OF HEARING WITH THE KIND PERMISSION OF THE HON'BLE TRIBUNAL. 10. REGARDING THE CROSS OBJECTION FILED BY THE ASSESSEE, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT AT LEAST CHEQUE RECEIVED FROM THESE TWO COMPANIES I.E. M/S IIHT SYSTEMS LTD. AND M/S SENANI COLONIZERS & BUILDERS PVT. LTD. SHOULD BE ACCEPTED AS VALID EXPLANATION. REGARDING THE REMAINING GROUNDS, HE FAIRLY CONCEDED THAT REJECTION OF BOOKS HAS NOT BEEN CHALLENGED. 11. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) IN PARA 4.5 OF HIS ORDER THAT THE SOURCE FOR CAPITAL 6 CONTRIBUTION OF SMT. SINDHUJA MISHRA TO THE ASSESSEE FIRM HAVE NOT BEEN FOUND SATISFACTORY AND SMT. SINDHUJA MISHRA FAILED TO PROVE IT. IN THE SAME PARA, IT IS ALSO OBSERVED THAT THE DETAILS FILED BY ASSESSEE DURING THE APPELLATE PROCEEDINGS REGARDING MONEY RECEIVED FROM M/S IIHT SYSTEMS LTD. AND M/S SENANI COLONIZERS & BUILDERS PVT. LTD. DO NOT FIND MATCHING WITH THE ENTRIES AS FOUND REFLECTED WITH THE SO URCES OF CAPITAL CONTRIBUTION OF SMT. SINDHUJA MISHRA AND SMT. SINDHUJA MISHRA HAS ALSO NOT FURNISHED ANY DOCUMENTARY EVIDENCE IN RESPECT OF H ER DEPOSIT OF RS.1 LAC MADE IN HER BANK. THIS FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED A.R. OF THE ASSESSEE BY BRINGING ANY COGENT MATERIAL BEFORE US AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE RAISED BY THE ASSESSEE AS PER GROUND NO. 1 OF THE CROSS OBJECTION. SIMPLY BECAUSE THE RECEIPT IS STATED TO BE BY CHEQ UE , THE SOURCE CANNOT BE ACCEPTED PARTICULARLY WHEN IT IS FOUND BY LEARNED CIT (A) THAT THE DETAILS FILED BY ASSESSEE DURING THE APPELLATE PROCEEDINGS REGARDING MONEY RECEIVED FROM M/S IIHT SYSTEMS LTD. AND M/S SENANI COLONIZERS & BUILDERS PVT. LTD. DO NO T FIND MATCHING WITH THE ENTRIES AS FOUND REFLECTED WITH THE SOURCES OF CAPITAL CONTRIBUTION OF SMT. SINDHUJA MISHRA AND THIS FINDING OF LEARNED CIT (A) COULD NOT BE CONTROVERTED. WE HAVE ALREADY DECIDED THE ISSUE AGAINST THE ASSESSEE WHILE DECIDING THE AP PEAL OF THE REVENUE. HENCE GROUND NO. 1 OF C.O. IS REJECTED. 13. REGARDING GROUND NO. 2 & 3, WE FIND THAT THE ASSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT. WE ALSO FIND THAT IT IS NOTED BY CIT(A) IN PARA 5.1 THAT THE ASSESSEE HAS NOT PR ODUCED STOCK REGISTER ALONG WITH DETAILS OF CASH PURCHASES WITH NAME AND ADDRESS OF THE PARTY AND VOUCHERS EVEN THOUGH NUMBER OF OPPORTUNITIES WERE GIVEN BY THE A. O. IN THE ABSENCE OF STOCK REGISTER AND DETAILS OF CASH PURCHASES ETC. THIS SMALL ADDITION OF RS.4,06,579/ - IS NEITHER EXCESSIVE NOR UNREASONABLE. IN ADDITION TO THAT , THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 20% OF THE EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT ON THE BASIS THAT NO VOUCHERS HAVE BEEN 7 PRODUCED BY THE ASSESSEE IN RESPECT OF THESE EXPENSES. IN RESPECT OF THESE EXPENSES , NEITHER ANY EVIDENCE HAS BEEN PRODUCED BEFORE THE CIT(A) NOR BEFORE US. HENCE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). GROUND NO. 2 & 3 ARE REJECTED. 14. IN THE R ESULT, THE CROSS OBJECTION IS DISMISSED. 15. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE IS ALLOWED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 / 07/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR