ITO, BUNDI V. SHRI TARA CHAND GARG, BUNDI

ITA 1199/JPR/2010

• Counselvise Citation: 119923114 RSA 2010
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MEENA
• Keywords: Unexplained cash credit; Salary income
• Section: 131; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 1199/ JP/2010 ASSESSMENT YEAR 2005-06 PAN: AJXPG 8461 B THE ITO VS. SHRI TARA CHAN GARG BUNDI M/S. SOHAN LAL TARA CHAND P.O. KAPREN, DISTT. BUNDI (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI K..C. MEENA ASSESSEE BY: SHRI VIJAY GOYAL DATE OF HEARING: 20-09-2011 DATE OF PRONOUNCEMENT: 31-10-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), AJMER DATED 12-07-2010 FOR THE ASSESSMENT YEAR 2005-06. 2.1 THE FIRST GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITORS OF RS. 13.04 LACS. 2.2 THE ASSESSEE DERIVES INCOME FROM SALARY, LIC CO MMISSION, CAPITAL GAIN AND OTHER SOURCES. DURING THE PREVIOUS YEAR RE LEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE RAISED LOANS WORTH RS. 21,54,914/-. THE AO HAS TREATED THE SUM OF RS. 13.23 LACS AS INC OME U/S 68 OF THE ACT ON ACCOUNT OF DEPOSITS BY FOLLOWING PERSONS. 2 S.N. NAME OF THE DEPONENT SVS AMOUNT ADVANCED DATE OF LOAN DATE OF AFFIDAVIT 1. SOHAN LAL GUPTA 2,30,000 20-07-04 18-09-07 2. OM PRAKASH S/P SHRI NAND LAL 1,00,000 04-02-05 05-08-07 3. RAMESH SINGH S/O SHRI MOHAN SINGH 1,00,000 04-02-05 30-07-07 4. NATHULAL SHARMA S/O SHRI GOVIND LAL SHARMA 1,00,000 05-02-05 31-07-07 5. YURAJ SINGH S/O SHRI SWARAJ SINGH 1,00,000 10-02-05 31-07-07 6. 7. BABULAL NAGAR S/O SHRI MOTILAL NAGAR BABU LAL S/O SHRI GOBRI LAL 2,00,000 2,00,000 15-02-05 24-02-05 29-07-07 8. 9. GOPAL LAL DUBEY S/O SHRI HAZARI LAL DUBEY JAGDISH PRASAD UPADHYAYS/O BADRILAL 2,00,000 19,000 25-02-05 05-02-05 07-08-07 03-08-07 10. SHIV NARAIN SHARMA S/OBADRI LAL UPADHYAY 19,000 - DO - - 11. VIDHYA SHANKAR SHARMA S/O SHRI BADRI LAL UPADHYAY 19,000 - DO - - 12. KAILASH CHAND S/O SHRI NAND LAL MEENA 19,000 08-02-05 - 13. TOLA RAM S/O SHRI HEMRAJ 19,000 08-02-05 - 14. MAHAVEER PRASAD KHANDELWAL S/O SHRI GORDHAN LAL 19,000 09-02-05 08-08-07 15. SURENDRA KUMAR JAIN S/O MAHAVEER PRASAD 19,000 -DO- 30-07-07 16. MAHAVEER PRASAD JAIN S/O SHRI CHANDALAL 19,000 10-02-05 18-08-07 17. RAMESH CHAND SHARMA S/O SHRI BIRDHILAL 19,000 10-02-05 25-08-07 18. GAJENDRA KR PATNI S/O SHRI SHANTI LAL 19,000 -DO- 17-08-07 3 19. SATYA NARAIN SHARMA S/O SHRI NAND KISHORE 19,000 15-02-05 24-08-07 20. SURESH KR. SHARMA S/O SHRI NAND KISHORE 19,000 16-02-05 14-08-07 21. VIJAY KISHOR DUBEY S/O SHRI RAJ KISHOR 19,000 16-02-05 04-08-07 22. YOGENDRA TRIVEDI S/O SHRI GOBRI LAL 19,000 22-02-05 23. PRAHLAD SEN S/O SHRI BAJRANGLAL 19,000 22-02-05 - 24. BABULAL JAIN S/O SHRI SHOBHAG MAL 19,000 26-02-05 - 2.3 THE AO NOTICED THAT THE ASSESSEE HAS FILED THE AFFIDAVITS OF THE CREDITORS AND THE STAMP PAPERS HAVE BEEN PURCHASED FROM THE SAME VENDOR AND THE STAMP PAPERS ARE SERIAL NUMBERED. THE CONTE NTS OF THE AFFIDAVITS ARE ALSO THE SAME. THE AFFIDAVITS ARE NOT ATTESTED BY NOTARY PUBLIC OR BY THE OATH COMMISSIONER. THE AO REQUIRED THE ASSESSEE TO PRODUCE CASH CREDITORS. THE AO EXAMINED SOME OF THE CREDITORS. SHRI BABU LAL NAGAR 2.4 HE IS AN AGRICULTURIST. HE STATED THAT HE IS EA RNING INCOME AROUND RS. 3.00 LACS. SHRI BABU LAL NAGAR STATED THAT HE H AS ADVANCED THE LOAN TO THE ASSESSEE FROM THE SALE PROCEEDS OF AGRICULTURAL PRODUCE AND FROM CASH AVAILABLE AT HOME. THE AO NOTICED THAT SHRI BABU LA L NAGAR HAS RAISED LOAN FOR THE AGRICULTURAL OPERATION AND THE CASH WA S DEPOSITED IN HIS BANK ACCOUNT BEFORE ISSUING CHEQUE. THE SALE PROCEEDS OF AGRICULTURAL PRODUCE RELATED TO FEB. 04 AND MAY 04 WHILE THE AMOUNT HAS BEEN ADVANCED ON 4 15 TH MAY, 05. HENCE, THE AMOUNT RECEIVED FROM THE SALE PROCEEDS WAS NOT AVAILABLE FOR THE DEPOSIT IN THE BANK ACCOUNT. THE CASH CREDIT WAS HELD AS NON-GENUINE SHRI GOPAL LAL DUBE 2.5 SHRI GOPAL LAL DUBE IS PENSIONER AND IS ALSO OW NING 10 BIGHA OIF AGRICULTURAL LAND. HE STATED THAT HIS INCOME IS AR OUND RS. 1.50 LACS TO RS. 1.75 LACS. THE AO NOTICED THAT THE CREDITOR WAS HAV ING BANK BALANCE OF ONLY RS. 754/- ON 25-02-05. A SUM OF RS. 2.00 LACS WAS DEPOSITED IN CASH AND THE CHEQUE WAS ISSUED IN THE NAME OF THE ASSESS EE. THE AO HELD THAT CREDIT WORTHINESS OF THE CREDITOR IS NOT ESTABLISHE D. 2.6 THE AO ALSO RECORDED THE STATEMENT OF SHRI RAME SH SINGH, SHRI JUGRAJ SINGH, SHRI BABULAL AND SHRI NATHULAL SHARMA . ACCORDING TO THE AO, THE STATEMENTS GIVEN BY THESE CREDITORS WERE NO T BELIEVEABLE. IN THE BANK ACCOUNT OF THE CREDITORS, THE CASH WAS DEPOSIT ED BEFORE CHEQUE WAS ISSUED, OTHERWISE OPENING BALANCE AND CLOSING BALAN CE ARE SMALL AMOUNTS. THEREFORE, THE AO HELD THAT CREDIT IN THE NAME OF T HESE FOUR PERSONS IS NOT GENUINE BECAUSE THE CREDIT WORTHINESS IS NOT ESTABL ISHED. 2.7 SHRI OM PRAKASH DID NOT ATTEND THE PROCEEDING F OR VERIFICATION. THE AO THEREFORE, CONCLUDED THAT HE IS NOTHING TO SAY I N SUPPORT OF THE AFFIDAVIT. IN RESPECT OF THE CREDITORS APPEARING AT SERIAL NUMBERS 11 TO 26, THE AO NOTICED THAT ALL THE CREDITORS CAME TO DEPOS IT THE SUM TO THE 5 ASSESSEE BETWEEN 5-02-07 TO 26-02-07. THE ASSESSEE HAS NOT PRODUCED THE CREDITORS BELOW RS. 20,000/-. THUS THE AO ADDED A S UM OF RS. 13.23 LACS. 2.8 THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO RS. 19,000/- AS AGAI NST RS. 13.23 LACS MADE BY THE AO AFTER OBSERVING AS UNDER:- 4.4 FROM THE PERUSAL OF ASSESSMENT ORDER, IT IS F OUND THAT IN THIS CASE AFFIDAVITS WERE FILED IN RESPECT OF ALL THE CASH CREDITORS. THE APPELLANT ALSO PRODUCED SHR I GOPAL LAL DUBEY, SHRI RAMESH SINGH, SHRI NATHULAL SHARMA, SHRI YURAJ SINGH AND SHRI BABULAL NAGAR BEFORE THE AO. IN THEIR STATEMENTS, ALL THESE PERSO NS CONFIRMED HAVING ADVANCED LOAN TO THE APPELLANT. AO HAS NOT POINTED OUT ANY MAJOR CONTRADICTIONS IN THE STATEMENTS. HOWEVER, HE REJECTED THEIR CLAIMS ON TH E GROUND THAT THEIR FINANCIAL POSITION IS NOT VERY SO UND. 4.5 IT HAS BEEN HELD BY VARIOUS JUDICIAL AUTHORITIE S THAT THE ASSESSEE CAN BE ASKED TO PROVE THE SOURCE OF CREDIT BUT NOT THE SOURCE OF THE SOURCE. THIS VIEW DERIVES SUPPORT FROM THE DECISION OF HONB'LE SUPREM E COURT IN THE OF CIT VS ORISSA CORPORATION (P) LD 1 59 ITR 78 (SC). HON'BLE JURISDICTIONAL HIGH COURT ALSO EXPRESSED THE SAME VIEW IN THE CASE OF KANHIYA LAL JANGID VS ACIT, 217 CTR 354. IN THIS CASE, HON'BLE JURISDICTIONAL HIGH COURT MADE THE FOLLOWING OBSERVATIONS:- 6 THE QUESTION NO. 1 RELATES TO DISALLOWANCE ON ACCOUNT OF CASH CREDITS FOUND IN THE BOOKS OF THE ASSESSEE. RS.16,000/- WAS ALLEGED TO HAVE BEEN BORROWED TO HAVE BEEN BY SHRI DEVENDRA SANKHLA AND RS. 16,000/- WAS ALLEGEDLY BORROWED FROM ONE RAMLAL . ASSESSEE HAS PRODUCED THE CONFIRMATION LETTERS FROM BOTH THE CREDITORS AND HAS ALSO PRODUCED SHRI DEVENDRA SANKHLA BEFORE THE AO. SHRI DEVENDRA SANKHLA ON BEING PRODUCED BEFORE THE AO AFFIRMED THAT HE HAD GIVEN IN ADVANCE A SUM OF RS.16,000/- T O THE ASSESSEE. HOWEVER, THE EXPLANATION OF THE ASSES SEE ABOUT THE RECEIPT OF RS. 16,000/- FROM SHRI DEVENDR A SANKHLA WAS REJECTED ON THE GROUND THAT ON INJURY F ROM SHRI DEVENDRA SANKHLA, THE CREDITOR COULD NOT SATISFACTORILY EXPLAIN SOURCE WHEREFROM WHETHER HE COULD HAVE ADVANCED RS. 16,000/- LOOKING TO HIS INCOME AND FAMILY EXPENDITURES. IN OTHER WORDS, THE CASH CREDIT IN THE NAME OF SHRI DEVENDRA SANKHLA COULD BE MADE. THIS FINDING HAS BEEN CONSISTENTLY AFFIRMED BY CIT(A) AS WELL AS BY TRIBUNAL. WE ARE OF THE OPINION THAT IN REJECTING THE EXPLANATION OF TH E ASSESSEE ON THE UNDISPUTED FACTS IS FOUNDED ON ERRONEOUS APPLICATION OF LAW IN THE MATTER. WHILE I T WAS THE ASSESSEE'S BURDEN TO FURNISH EXPLANATION RELATING TO SUCH CASH CREDITS, THE ASSESSEE'S BURDE N DOES NOT EXTEND BEYOND PROVING THE EXISTENCE OF THE CREDITOR AND FURTHER PROVING THAT SUCH CREDITOR OWN S TO HAVE ADVANCED THE AMOUNT CREDITED IN THE ACCOUNT OF 7 ASSESSEE TO HIM. HOWEVER, THE BURDEN DOES NOT GO BEYOND TO PUT THE ASSESSEE UNDER AN OBLIGATION TO FURTHER PROVE THAT WHEREFROM THE CREDITOR HAS GOT O R PROCURED THE MONEY TO BE DEPOSITED OR ADVANCED TO T HE ASSESSEE. THE FACT THAT EXPLANATION FURNISHED BY TH E CREDITOR ABOUT THE SOURCE FROM WHERE HE PROCURED TH E MONEY TO BE DEPOSITED OR ADVANCED TO THE ASSESSEE, IS NOT RELEVANT FOR THE PURPOSE OF REJECTING THE EXPLANATION FURNISHED BY THE ASSESSEE, AND MAKE ADDITIONS OF SUCH DEPOSITS AS INCOME OF THE ASSESSE E FROM UNDISCLOSED SOURCES BY INVOKING SECTION 68 OF THE INCOME TAX ACT UNLESS IT CAN BE SHOWN BY THE DEPARTMENT THAT THE SOURCE OF SUCH MONEY COMES FROM THE ASSESSEE HIMSELF OR SUCH SOURCE COULD BE TRACED TO THE ASSESSEE ITSELF. IN THE PRESENT CASE WHILE EXIS TENCE OF SHRI DEVENDRA SANKHLA, THE CREDITOR IS NOT IN DO UBT AND HE HAS ADMITTED TO HAVE ADVANCED THE LOAN TO TH E ASSESSEE. THE FACT THAT THE EXPLANATION FURNISHED B Y SHRI DEVENDRA SANKHLA ABOUT HIS SOURCE OF SUCH ADVANCEMENT HAS NOT BEEN ACCEPTED BY THE REVENUE AUTHORITY CANNOT LEAD TO ANY PRESUMPTION THAT THE SOURCE OF SUCH ADVANCEMENT BY SHRI DEVENDRA SANKHLA EMANATED FROM THE ASSESSEE. THEREFORE, ADDITION OF RS. 16,000/- IN THE INCOME OF ASSESSEE AS CASH CREDIT I N THE NAME OF SHRI DEVENDRA SANKHLA CANNOT BE SUSTAINED. SUCH ADDITION OF INCOME OF ASSESSEE HAS TO BE DELET ED FROM THE INCOME OF ASSESSEE . 8 4.6 WHEN THE PRESENT CASE IS EXAMINED IN VIEW OF THIS LEGAL POSITION, IT IS FOUND THAT THE APPELLANT DISCHARGED INITIAL BURDEN PLACED ON HIM REGARDING GENUINENESS OF THESE LOANS. THEREAFTER, BURDEN SHIF TED ON THE AO TO PROVE THAT SUBMISSION OF CASH CREDITOR S ARE INCORRECT. THIS BURDEN HAS NOT BEEN DISCHARGED BY THE AO. IN THE STATEMENTS, NO CONTRADICTIONS HAVE B EEN POINTED OUT BY AO WHICH PROVE THAT THE STATEMENT IS FALSE OR INCORRECT. IN THE CASE OF REMAINING CREDIT ORS, AFFIDAVITS WERE FILED. IF AO WAS NOT SATISFIED ABOU T GENUINENESS OF CONTENTS OF THESE AFFIDAVITS, HE COU LD HAVE ISSUED SUMMONS U/S 131 TO ENFORCE THEIR ATTENDANCE AND EXAMINE THEM ON OATH. IN THE ABSENCE OF ANY SUCH EXERCISE, AO IS NOT JUSTIFIED TO REJECT THE AFFIDAVITS. THE MERE FACT THAT ALL THE STAMP PAPER WERE PURCHASED ON THE SAME DAY AND ALL THE DEPONENTS WER E IDENTIFIED BY ONLY ONE ADVOCATE CANNOT BE THE BASIS FOR REJECTION OF AFFIDAVITS IN THE ABSENCE OF ANY INDEPENDENT EVIDENCE. AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT AFFIDAVITS ARE FAL SE. I THEREFORE, HOLD THAT THE AO IS NOT JUSTIFIED TO MAK E ADDITION OF RS. 13,04,000/-. THE ADDITION IS THEREF ORE, DIRECTED TO BE DELETED. 4.7 HOWEVER, IN THE CASE OF ONE SHRI BUNTI KAPREN, NEITHER ANY CONFIRMATION NOR ANY OTHER DOCUMENTARY EVIDENCE WAS FILED EITHER BEFORE AO OR THE UNDERSIGNED. IN SUCH A CASE, ADDITION OF RS. 19,000 /- ON ACCOUNT OF CASH CREDIT APPEARING IN HIS NAME IS 9 JUSTIFIED AND THE SAME IS CONFIRMED. THUS ADDITION U/S 68 IS RESTRICTED TO RS. 19,000/- AS AGAINST RS. 13,23,000/- MADE BY AO. GROUND NO. 1 OF THE APPEAL IS THUS PARTLY ALLOWED 2.9 WE HAVE HEARD BOTH THE PARTIES. THE STATEMENT O F SHRI BABULAL IS AVAILABLE AT PAGES 46 TO 53 OF THE PAPER BOOK FILED BY THE LD.AR OF THE ASSESSEE. SHRI BABULAL STATED THAT HE IS RAISING LO AN FROM THE BANK BECAUSE THE SALE PROCEEDS OF AGRICULTURAL PRODUCE ARE SOMET IMES NOT RECEIVED IN TIME. THE BANK LOANS SO RAISED HAVE BEEN REPAID. HE HAS EXPLAINED THE SOURCES IN RESPECT OF THE DEPOSIT OF CASH IN THE BA NK BEFORE ISSUING CHEQUE. HE ALSO STATED THAT HE GAVE THE LOAN TO THE ASSESSE E ON INTEREST. IT WAS FURTHER STATED THAT THE AMOUNT HAS BEEN RECEIVED BA CK IN JAN 2006 WITH INTEREST. THUS IT SHOWS THAT THE CREDITOR IS CAPAB LE OF GIVING LOAN AND HENCE EXPLAINED THE SOURCES. HENCE, THERE WAS NO CA SE OF MAKING CREDIT IN THE NAME OF SHRI BABULAL AS UNEXPLAINED. SHRI GOPAL LAL DUBE 2.10 THE STATEMENT OF SHRI GOPAL LAL DUBE IS AVAILA BLE AT PAGES 72 TO 77 OF THE PAPER BOOK. HE HAS STATED THAT HE SOLD THE A GRICULTURAL PRODUCE BEFORE MAKING DEPOSIT IN CASH IN THE BANK ACCOUNT. HE ALSO STATED THAT THE AMOUNT IS STILL TO BE RECEIVED BACK FROM THE ASSESS EE. THE PERUSAL OF THE STATEMENT SHOWS THAT THE CREDITOR HAS EXPLAINED THE SOURCE OF DEPOSITING 10 THE AMOUNT IN THE BANK ACCOUNT. HE HAD ADMITTED TO HAVE GIVEN THE LOAN TO THE ASSESSEE. THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING ADDITION. 2.11 THE STATEMENTS OF SHRI RAMESH SINGH, SHRI NAT HULAL SHARMA, SHRI JUGRAJ SINGH AND SHRI BABU LAL ARE AVAILABLE AT PAG ES 27 TO 70 OF THE PAPER BOOK. SHRI RAMESH SINGH STATED THAT HE HAS RE CEIVED BACK THE AMOUNT ALONGWITH INTEREST IN JAN 06. SHRI BABU LAL IN HIS STATEMENT ADMITTED TO HAVE RECEIVED INTEREST FROM THE ASSESSE E ALONGWITH PRINCIPAL IN JAN 2006. SIMILARLY, SHRI JUGRAJ SINGH ALSO ADMITTE D TO HAVE RECEIVED BACK THE AMOUNT ALONGWITH INTEREST IN JAN 06 AND THE CAS H CREDITS IN THE NAME OF ABOVE REFERRED FOURS PERSONS STANDS EXPLAINED. IN R ESPECT OF OTHER CREDITORS, THE AMOUNT DEPOSITED IS NOT SUBSTANTIAL. ALL THE CREDITORS HAVE GIVEN THE AFFIDAVITS IN WHICH THEY HAVE ADMITTED TO HAVE GIVEN THE DEPOSITS TO THE ASSESSEE. WE THEREFORE, FEEL THAT THE LD CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 13.05 LACS. 3.1 THE SECOND GRIEVANCE OF THE REVENUE IS THAT TH E LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF VARIOUS E XPENSES OF RS. 61,318/-.. 3.2 THE ASSESSEE HAS CLAIMED EXPENSES TO THE EXTENT OF RS. 61,318/-. THE ASSESSEE HAS NOT CONDUCTED ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION. THE AO THEREFORE, DISALLOWED THE EXP ENSES. 3.3 THE LD CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE AO. 11 3.4 AFTER HEARING BOTH THE PARTIES AND ON PERUSAL O F THE MATERIALS AVAILABLE ON RECORD, WE FEEL THAT THE EXPENSES CANN OT BE ALLOWED WHEN THERE HAS BEEN NO BUSINESS DURING THE YEAR. THE EXP ENDITURES ARE TO BE CLAMED AGAINST RESPECTIVE HEADS OF INCOME. IN CASE THERE HAS BEEN NO BUSINESS ACTIVITIES THEN THE EXPENSES RELATING TO E ARLIER YEAR CANNOT BE ALLOWED. WE THEREFORE, FEEL THAT THE LD CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 61,318/-. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31-10 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 31 /10/2011 *MISHRA COPY FORWARDED TO :- 1. THE ITO , BUNDI 2. SHRI TARA CHAND GARG, BUNDI 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1199/JP /10) A.R, ITAT, JAIPUR 12