Sh. Ramesh Chand Gupta, New Delhi V. ITO, Muzaffarnagar

ITA 1208/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6872 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 17-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 02-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL SENIOR
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Notional interest; Onus to prove
• Section: 40A(3); 234B; 32; 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-I : NEW DELHI) BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.1208/DEL./2015 (ASSESSMENT YEAR : 2010-11) SHRI RAMESH CHAND GUPTA, VS. ITO, WARD 1 (1), PROP. BOOKMAN INDIA, MUZAFFARNAGAR. 151/1A, SOUTH CIVIL LINES, MUZAFFARNAGAR. (PAN : AATPG8477C) (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA, ADVOCATE AND SHRI SOMIL AGGARWAL, ADVOCATE REVENUE BY : SHRI ROBIN RAWAL, SENIOR DR DATE OF HEARING : 17.02.2016 DATE OF PRONOUNCEMENT : 18.02.2016 O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (APPEALS) DATED 29.12.2014. 2. GROUNDS NO.1 & 2 RELATE TO THE ADDITION OF RS.2, 10,000/- UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) AND RS.13,000/- ON ACCOUNT OF NOTIONAL INTEREST. THESE ADDITIONS HAVE BEEN CONFIRMED BY THE CIT (A). 3. THE BRIEF FACTS OF THESE ADDITIONS ARE THAT THE AO NOTED THAT THE ASSESSEE HAS TAKEN LOAN FROM SHRI BRHM PRAKASH, MAM TA RAJVANSHI, ITA NO.1208/DEL./2015 2 PUSHPA GARG, RAJDULARI AND RENU GARG AS DETAILED HE REUNDER AND THESE PARTIES HAVE DEPOSITED IN CASH BEFORE ISSUING THE C HEQUE TO THE ASSESSEE:- NAME OF THE PARTY/ PERSONS DATE OF CASH DEPOSITED AMOUNT DATE OF ISSUE OF CHEQUE AMOUNT BRAHM PRAKASH 14.09.200 9 45,000 15.09.2009 50,000 MAMTA RAJVANSHI 13.04.2009 15,000 23.04.2009 35,000 21.04.2009 20,000 PUSHPA GARG 03.08.2009 10,000 03.08.2009 25,000 RAJDULARI 08.03.2010 60,000 25.03.2010 95,000 25.03.2010 35,000 RENU GARG 02.01.2010 25,000 06.01. 2010 1,50,000 TOTAL CASH DEPOSIT 2,10,000 THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF TH E ASSESSEE. HE, THEREFORE, ADDED THE SUM OF RS.21,0,000/- IN THE HA NDS OF THE ASSESSEE U/S 68 OF THE ACT. THE ADDITION WAS MADE OF THE AMOUNT WHICH HAS BEEN DEPOSITED IN CASH IN THE ACCOUNT OF THE RESPECTIVE PARTIES. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A) AND THE CIT (A) C ONFIRMED THE SAME. 4. I HEARD THE RIVAL SUBMISSION AND CAREFULLY CONSI DERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. I NO TED THAT IN THIS CASE, THE ASSESSEE HAS TAKEN LOAN OF RS.50,000/-, RS.35,000/- , RS.25,000/-, RS.95,000/- AND RS.1,50,000/- FROM BRAHM PRAKASH, M AMTA RAJVANSHI, PUSHPA GARG, RAJDULARI AND RENU GARG RESPECTIVELY T HROUGH CHEQUES. ALL THESE PARTIES HAVE CONFIRMED THE TRANSACTION WITH T HE ASSESSEE AND ALL THESE PARTIES ARE INCOME-TAX ASSESSEE. THE ASSESSEE HAS SUBMITTED CONFIRMATION, ACKNOWLEDGEMENT OF THEIR RETURN AND COPY OF BANK AC COUNT OF RESPECTIVE ITA NO.1208/DEL./2015 3 PARTIES TO PROVE THEIR IDENTITY, CREDITWORTHINESS A S WELL AS GENUINENESS OF THE TRANSACTION. SO FAR LOAN TAKEN FROM RAJDULARI IS CONCERNED, THE ASSESSEE HAS SUBMITTED THE COPY OF THE SALE DEED WHICH IS AV AILABLE AT PAGES 7 TO 19 OF THE PAPER BOOK AND THIS SALE DEED PROVES THAT RA JDULARI HAS SOLD PROPERTY TO SMT. SARLA DEVI THROUGH REGISTERED SALE DEED FOR A SUM OF RS.1,96,000/-. THE CONSIDERATION THEREOF HAS BEEN RECEIVED BY SMT. RAJDULARI IN CASH. THE SALE DEED HAS BEEN EXECUTED ON 08.03.2010 I.E. PRIOR TO THE DEPOSIT OF THE CASH BY RAJDULARI IN HER BANK ACCOUNT AMOUNTING TO RS.60,000/- AND RS.35,000/-. THE EVIDENCE SO PRODUCED ITSELF PROVE THE SOURCE OF THE AMOUNT DEPOSITED IN CASH BY RAJDULARI IN HER BANK A CCOUNT. ON THIS BASIS ITSELF, I DELETE THE ADDITION OF RS.95,000/- OUT OF THE SUM OF RS.2,10,000/-. IN THE REST OF THE GROUND, I NOTED THAT THIS TRIBUN AL, VIDE ITS ORDER DATED 29.07.2015 IN ITA NOS.475 & 2928/DEL/2008 ON THE SI MILAR QUESTION, DELETED THE ADDITION MADE U/S 68 BY HOLDING AS UNDE R :- 14.1. VARIOUS COURTS HAVE HELD THAT THE ASSESSEE CANNOT BE COMPELLED TO PROVE THE SOURCE OF SOURCE. SINCE T HE ASSESSEE FURNISHED CONFIRMATION, PAN AND INCOME TAX DETAILS, HE DISCHARGED THE BURDEN OF PROOF THAT LAY ON HIM U/S 68 AND THE ONUS SHIFTED TO THE REVENUE. AN ADDITION CANNOT BE MADE ON MERE SURMISES AND CONJECTURES BY SIMPLY REJECTING A LL THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE AS NOT SUFFICIENT OR NOT BELIEVABLE. BY APPLYING THE PROPOSITIONS LAID D OWN IN VARIOUS CASE LAWS REFERRED TO IN THE EARLIER GENERA TIONS, WE DELETE ALL THE ADDITIONS EXCEPT IN THE CASE OF MADH U GARG AS HE HAS NOT PROVIDED EITHER CONFIRMATION LETTER OR INCO ME TAX DETAILS. HENCE, ALL THE ADDITIONS MADE U/S 68 OUGHT THE ADDITION OF RS.20,000/- MADE BEING LOAN FROM MADHU GARG IS D ELETED. ITA NO.1208/DEL./2015 4 IN THIS CASE ALSO, I NOTED THAT THE AO MADE THE ADD ITION IN RESPECT OF EACH OF THE PARTY ON THE BASIS OF SOURCE OF SOURCE NOT B EING FOUND BY BRAHM PRAKASH, MAMTA RAJVANSHI, PUSHPA GARG AND RENU GARG TOTALING TO RS.1,15,000/- AFTER DELETING THE ADDITION OF RS.95, 000/-. ON THE BASIS OF THE AFORESAID OF THIS TRIBUNAL, THIS ADDITION IS BO UND TO BE DELETED. 5. I MAY FURTHER ADD THAT IT IS A CASE WHERE THE AD DITION HAS NOT BEEN MADE ON THE SUM CREDITED IN THE BOOKS OF THE ASSESS EE BUT OF A DIFFERENT AMOUNT THAT IS THE AMOUNT WHICH HAS BEEN DEPOSITED IN CASH BY THE RESPECTIVE LENDER IN THEIR RESPECTIVE BANK ACCOUNT. THIS DENOTES THAT THE AO MADE ADDITION AS HE IS NOT SATISFIED THE SOURCE OF SOURCES OF THESE RESPECTIVE PARTIES. SECTION 68 WHILE EMPOWERS THE AO TO MAKE THE ADDITION IN RESPECT OF SUM CREDITED IN THE BOOKS OF ACCOUNTS. THEREFORE, ON THIS BASIS ITSELF, THE ADDITION SO MADE DOES NOT HA VE ANY LEG TO STAND. I, THEREFORE, DELETE THE SAID ADDITION. 6. SO FAR AS THE AMOUNT OF RS.13,000/- IS CONCERNED THAT RELATE TO THE INTEREST PAID ON ESTIMATE BASIS. SINCE, I HAVE ALR EADY DELETED THE ADDITION OF RS.2,10,000/-, THEREFORE, THE INTEREST ADDED ON THE SAID AMOUNT CANNOT SURVIVE. I ACCORDINGLY DELETE THE SAME. THUS, GRO UNDS NO.1 & 2 STAND ALLOWED. 7. GROUND NO.3 RELATES TO THE DISALLOWANCE OF RS.1, 40,000/- UNDER THE VARIOUS HEADS MENTIONED IN THE ASSESSMENT ORDER. ITA NO.1208/DEL./2015 5 8. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING TH ROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, I NOTED THAT THE AO OBSE RVED THAT THE ASSESSEE HAS INCURRED A SUM OF RS.13,92,688/- UNDER DIFFEREN T HEADS AND CLAIMED THE SAME AS DEDUCTION AS EXPENSES INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO DISALLOWED 10% OF THE SAME I.E. RS.1,40,000/- FOR WANT OF VERIFIABILITY. THE CIT ( A) ALSO CONFIRMED THE SAME. I NOTED THAT THE AO HAS NOT DISPUTED THAT TH E EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSES OF THE BUSINESS OR EXPENS ES ARE OF PERSONAL NATURE OR ARE OF CAPITAL NATURE IS JUST DISALLOWED ON AD H OC BASIS @ 10% OF THESE EXPENSES. IN MY OPINION, THE DISALLOWANCE MADE BY THE AO IS WITHOUT ANY BASIS AND MATERIAL, ONCE THE EXPENDITURE HAS BEEN I NCURRED FOR THE PURPOSE OF BUSINESS AND QUALIFY THE INGREDIENTS AS STIPULAT ED UNDER SECTION 32 OF THE ACT. THE AO IS BOUND TO ALLOW THE SAME. I, THEREF ORE, SET ASIDE THE ORDER OF THE CIT (A) AND DELETE THE SAID DISALLOWANCE. 9. GROUND NO.4 RELATES TO THE DISALLOWANCE OF RS.34 ,400/- BEING THE EXPENSES DEBITED UNDER THE HEAD DISCOUNTS ON SHORT OF BOOKS AND SPECIMEN BOOKS. 10. THE AO NOTED THAT THE ASSESSEE HAS INCURRED EXP ENSES OF RS.42,666/- IN THE HEAD DISCOUNT ON SHORT OF BOOKS AND RS.94,93 8/- IN THE HEAD SPECIMEN BOOKS. CONSIDERING THE NATURE OF THESE EX PENSES, THE AO DISALLOWED 20% OF THESE EXPENSES AMOUNTING TO RS.34 ,400/-. ITA NO.1208/DEL./2015 6 11. AFTER HEARING THE RIVAL SUBMISSION AND GOING TH ROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, I NOTED THAT THE ASSESSE E IS A PUBLISHER AND IS ENGAGED IN THE BUSINESS OF SELLING OF THE BOOKS TO VARIOUS TRADERS. DISTRIBUTION OF SPECIMEN BOOKS ACTIVITIES ARE NECES SARY TO BE CARRIED ON BY THE ASSESSEE TO SELL ITS BOOKS. SOMETIMES, THE TRA DER HAS TO GIVE THE SPECIMEN BOOKS TO THE TEACHERS. IT IS NOT A CASE W HERE THE EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS. THE DISALLOWANCE MADE BY THE AO, IN MY OPINION, IS AD HOC ONE AS ALLOWING THE PART OF THE EXPENSES ITSELF PROVE THAT THE AO IS SATISFIED THAT THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO, IN MY OPINION, IS BOUND TO PINPOINT WHILE DISALLOWING THE EXPENDITURE ANY SPECIFIC EXPENDITURE WHICH DID NOT COMPLY WITH THE CONDITIONS AS STIPULATED U/S 37 OF THE ACT. I, THEREFORE, DELETE THE DISALLOWANCE OF RS.34,400/-. THUS, THIS GROUND IS ALLOWED. 12. THE FIFTH GROUND RELATE TO THE DISALLOWANCE OF RS.74,595/-. 13. I HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE. I NOTED THAT THE DISALLOWANCE HAS BEEN MADE U/S 40A(3) OF THE ACT WH EN THE AO FOUND THAT THE ASSESSEE HAS INCURRED A SUM OF RS.31,595/- ON V EHICLE REPAIR AND MAINTENANCE ON 22.04.2009 AND RS.43,000/- ON 14.10. 2009 IN CASH. THE LD. AR EVEN THOUGH VEHEMENTLY ARGUED BUT COULD NOT SATISFY ME UNDER WHICH SUB-RULE OF RULE 6DD, THE CLAIM OF THE ASSESS EE FALLS SO THAT THE ASSESSEE MAY COME OUT OF THE CLUTCHES OF THE PROVIS ION OF SECTION 40A(3). ITA NO.1208/DEL./2015 7 I, THEREFORE, CONFIRM THE ORDER OF THE CIT (A) ON T HIS ISSUE. THUS, THIS GROUND IS DISMISSED. 14. THE LAST GROUND, AS BOTH THE PARTIES AGREED, RE LATES TO THE CHALLENGING OF THE INTEREST U/S 234B AND 234C. IT IS CONSEQUEN TLY IN NATURE. I, THEREFORE, DIRECT THE AO TO RECOMPUTED THE INTEREST U/S 234B AND 234C AFTER GIVING EFFECT TO THIS ORDER. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF FEBRUARY, 2016. SD/- (P.K. BANSAL) ACCOUNTANT MEMBER DATED THE 18 TH DAY OF FEBRUARY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MUZAFFARNAGAR. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.