The ITO, Ward-9(4), Surat V. M/s. Shreya Traders, Surat

ITA 1197/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6918 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-12-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI V K SINGH
• Assessee Lawyers: SHRI HEMANT JADIA
• Keywords: Unexplained expenditure; Income from undisclosed sources; Additional evidence
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFO RE SHRI SHAILENDRA KR. YADAV, J.M & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 1197 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2002 - 03) THE I.T.O., WARD - 9(4) SURAT V/S M/S. SHREYA TRADERS PLOT NO. 21, DHANAMAL MILL COMP. OPP. VAISHALI CINEMA, VARACHHA ROAD, SUR AT. (APPELLANT) (RESPONDENT) PAN: AAPFS9613L APPELLANT BY : SHRI SHRI V.K. SINGH, SR. D.R. RESPONDENT BY : SHRI SHRI HEMANT JADIA, A.R. ( )/ ORDER DATE OF HEARING : 09 - 12 - 2014 DATE OF PRONOUNCEMENT : 19 - 12 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - I, SURAT DATED 15.12.2010 FOR A.Y. 2002 - 03. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM WHO FILED ITS RETURN OF INCOME FOR A.Y. 02 - 03 ON 17.10.2002 SHOWING TOTAL INCOME OF RS. 9,896/ - . THE RETURN WAS INITIALLY PROCESSED U/S. 143(1) OF THE ACT. LATER ON THE CASE WAS REOPENED U/S. 147 OF THE ACT BY ISSUING NOTIC E U/S. 148 DATED 30.03.2009 AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) R.W.S. 147 AND THE TOTAL INCOME WAS DETERMINED AT RS. 15,06,480/ - . AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 15.12.2010 GR ANTED SUBSTANTIAL RELIEF TO THE ITA NO 1197/AHD/2011 . A.Y. 2002 - 03 2 ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADD ITION OF RS. 9,53,794/ - MADE ON A/C OF NEW CREDITORS AFTER ADMITTING ADDITIONAL EVIDENCES IN CONTRAVENTION OF RULE 46A DESPITE THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO FURNISH ANY EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS MADE WITH THE CREDITORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 22,950/ - MADE ON A/C OF UNEXPLAINED EXPENDITURE AFTER ADMITTING ADDITIONAL EVIDENCES IN CONTRAVENT ION OF RULE 46 A DESPITE THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO FURNISH ANY EVIDENCES IN SUPPORT OF THE EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 4,24,396/ - MADE ON A/C OF CAPITAL INTRODUCTION AFTER ADMITTING ADDITIONAL EVIDENCES IN, CONTRAVENTION OF RULE 46 A DESPITE THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO FURNISH ANY EVIDENCES. 4. ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 95,440/ - MADE ON A/C OF UNEXPLAINED CASH DEPOSITS AFTER ADMITTING ADDITIONAL EVIDENCES IN CONTRAVENTION OF RULE 46 A DESPITE THE FACT THAT DURING THE ASSESSMENT PROCE EDINGS THE ASSESSEE FAILED TO FURNISH ANY EVIDENCES REGARDING SOURCE OF CASH . 4. GROUND NO. 1 & 2 ARE INTERCONNECTED AND THEREFORE CONSIDERED TOGETHER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS SHOWN CREDITORS FOR GOODS AM OUNTING TO R S. 9,53,794/ - AND CREDITORS FOR EXPENSES FOR RS. 22,950/ - . ASSESSEE WAS ASKED TO FURNISH THE DETAILS IN RESPECT OF THE CREDITORS. A.O NOTED THAT ASSESSEE DID NOT FURNISH ANY CONFIRMATION OF THE PARTIES NOR FURNISHED ANY PROOF OF GENUINENESS ABO UT THE CREDITORS. A.O WAS THEREFORE OF THE VIEW THAT ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM AND HE THEREFORE CONSIDERED THE CREDITORS TO BE UNEXPLAINED AND ADDED THE SAME AS INCOME OF THE ASSESSEE . AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED TH E MATTER BEFORE CIT(A) WHO DELETED THE ADDITION MADE BY THE A.O BY HOLDING AS UNDER: - 6.2. THE SECOND AND THIRD GROUNDS OF APPEAL ARE REGARDING ADDITION OF RS. 9,53,794/ - AND RS. 22,950/ - ON ACCOUNT OF ALLEGED NEW CREDITORS OF GOODS AND EXPENSES RESPECTIV ELY. THE AMOUNT IS WORKED OUT ON THE BASIS OF AUDIT REPORT OF THE FIRM. SINCE THE PURCHASES FOR GOODS WERE ACCEPTED, THERE IS NO QUESTION OF MAKING ADDITION ON ACCOUNT OF CREDITORS. SINCE THERE IS NO QUA LIFICATION IN THE AUDIT REPORT REGARDI NG ANY PURCHASE , THE ADDITION OF RS. 9,53,794/ - AND RS. 22950/ - ON ACCOUNT OF CREDITORS OF GOODS AND EXPENSES ARE UNJUSTIFIED. ITA NO 1197/AHD/2011 . A.Y. 2002 - 03 3 6. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. D. R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT SINCE THE PURCHASE FOR GOODS WERE ACCEPTED THERE WAS NO QUESTION OF MAKING ADDITION ON ACCOUNT OF CREDITORS AND IN THE ABSENCE OF ANY QUALIFICATION IN THE AUDIT REPORT WITH REPECT TO PURCHASES , NO ADDITION COULD HAVE BEEN MADE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A) AND WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 3 IS WITH RESPECT TO DELETION OF ADDITION ON ACCOUNT OF CAPITAL INTRODUCTION. 9. A .O NOTICED THAT DURING THE YEAR UNDER CONSIDERATION , PARTNERS HAD INTRODUCED CAPITAL AMOUNTING TO RS. 4,24,396/ - . ASSESSEE WAS ASKED TO EXPLAIN AND JUSTIFY THE CAPITAL INTRODUCTION, A.O NOTED THAT IN THE ABSENCE OF EVIDEN CE AND SATISFACTORY EXPLANATION, T H E INTRODUCTION OF CAPITAL OF PARTNERS AMOUNTING TO RS. 4,24,396/ - WAS CONSIDERED AS INCOME FROM UNDISCLOSED SOURCES AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO DELETED THE ADDITION MADE BY THE A. O BY HOLDING AS UNDER: - 6.3. THE FOURTH GROUND OF APPEAL IS REGARDING INTRODUCTION OF CAPITAL IN THE ACCOUNTS OF PARTNER FOR RS. 4,23,496/ - . THE PARTNERS ARE ASSESSED TO TAX AND THEY ARE FAMILY MEMBERS OF THE MOHAN DHANJI PATEL. SECONDLY, THE CREDIT OF CAP ITAL ALSO INCLUDES INTEREST, SALARY AND PROFIT TO THE EXTENT OF RS. 1,32,554/ - + RS. 6,852/ - WHICH CANNOT BE TREATED AS INTRODUCTION OF CAPITAL. THE REST OF THE INTRODUCTION OF CAPITAL BEING RS. 2,84,990/ - CANNOT BE TAXED IN THE HANDS OF FIRM AS PER APEX C OURT JUDGMENT IN THE CASE OF LOVELY EXPORTS LTD. (319 ITR 6). FURTHER, THE A.O. HAS OBSERVED THAT THE INTRODUCTION OF CAPITAL IS FICTITIOUS AND BOGUS, THEN THIS AMOUNT DOES NOT REPRESENT REAL INCOME. HENCE, QUESTION OF ADDITION DOES NOT ARISE. THUS, THE AD DITION ON ACCOUNT OF INTRODUCTION OF CAPITAL OF RS. 4,23,496/ - IS HEREBY DELETED. 10. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. ITA NO 1197/AHD/2011 . A.Y. 2002 - 03 4 11. BEFORE US LD. D. R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSI ONS MADE BEFORE LOWER AUTHORITIES. HE THUS SUPPORTED THE ORDER OF CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE ADDITION HAS GIVEN A FINDING THAT THE PARTNERS ARE ASSESSED TO TAX AN D THE CREDIT OF CAPITAL INCLUDES INTEREST SALARY AND PROFIT TO THE EXTENT OF RS. 1,39,406/ - . WITH RESPECT TO THE REST OF INTRODUCTI ON OF CAPITAL OF RS. 2,84,990/ - H E HAS NOTED THAT THE SAME CANNOT BE TAXED IN THE HANDS OF FIRM IN VIEW OF THE DECISION OF HO N BLE APEX COURT IN THE CASE OF LOVELY EXPORTS LTD. 319 ITR 6. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 4 IS WITH RESPECT TO DELETION OF ADDITION OF RS. 95,440/ - ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS. 13. ON VERIFICATION OF THE BANK STATEMENT OF THE ASSESSEE MAINTAINED BY IT WITH V ARACHHA CO.OP. BANK LTD.. A.O NOTICED THAT ASSESSE E HAD MADE CASH DEPOSITS AND WITHDRAWALS DURING THE PERIOD AND THE BALANCE AT THE END WAS RS. 95,440/ - . ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF CASH. A.O NOTED THAT IN THE ABSENCE OF ANY JUSTIFICATION OR PROPER EXPLANATION AND IN THE ABSENCE OF PROOF O F THE GENUINENESS OF CASH DEPOSITS, THE BALANCE OF RS. 95,440/ - WAS CONSIDERED AS INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO DELETED THE ADDITION MADE BY THE A.O BY HOLDING AS UNDER: - 6.4. THE FIFTH GROUND OF APPEAL IS REGARDING UNEXPLAINED CASH DEPOSIT OF RS, 95,440/ - IN THE BANK ACCOUNT. AS THE BANK ACCOUNT IS PART OF AUDITED ACCOUNTS AND HENCE THERE IS NO QUESTION OF ASSUMING AS NON - GENUINE. FURTHER, THE CLOSING BALANCE OF THE BANK ACCOUNT CANNOT BE TREATED AS NON - GENUINE CASH CREDIT PARTICULARLY WHEN THE BANK ACCOUNT IS PART OF REGULAR ACCOUNTS. IN VIEW OF THE ABOVE, THE ADDITION OF RS. 95,440/ - IS HEREBY DELETED. ITA NO 1197/AHD/2011 . A.Y. 2002 - 03 5 14. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 15. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUPPORTED THE ORDER OF CIT(A). 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT THE BANK ACCOUNT WAS PA RT OF THE AUDITED ACCOUNTS OF THE ASSESSEE AND THEREFORE THERE WAS NO QUESTION OF CONSIDERING IT TO BE NON GENUINE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO R EASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 19 - 12 - 201 4 . SD/ - SD/ - (SHAILENDRA KR. YADAV ) ( ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CO NCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD