The ITO, Ward-2(2), RAJKOT-GUJARAT V. Vishal Colour Lab, RAJKOT-GUJARAT

ITA 1347/RJT/2010

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0146 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained cash credit; Depreciation; Principle of natural justice; Corroborative evidences
• Section: 143(3); 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO.1347/RJT/2010. / ASSESSMENT YEAR 2007-08 INCOME TAX OFFICER WARD 2(2), AAYAKAR BHAVAN, 3 RD FLOOR, RACE COURSE, RING ROAD, RAJKOT-360001 PAN:AADFV4872E ( * / APPELLANT) VS. VISHAL COLOUR LAB., 104-105, KUNJ COMMERCIAL COMPLEX, NEAR RAJ PETROL PLUMP CANAL ROAD, RAJKOT. +,* / RESPONDENT - / REVENUE BY SHRI. M.K.SINGH /- / ASSESSEE BY SHRI. J.C.RANPURA - / DATE OF HEARING 5.9.2012 - / DATE OF PRONOUNCEMENT 30.10.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 15.9.2010 OF CIT( A), RAJKOT RESTRICTION THE ADDITION MADE BY THE AO U/S 68 OF THE INCOME TAX ACT, 1968 TO THE TUNE OF RS.1,50,000/- AND THEREBY DELET ING THE ADDITION OF RS.35,57,306/- FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FIRM IS EN GAGED IN THE BUSINESS OF PHOTOGRAPHY STUDIO AND ALSO ENGAGED IN JOB WORK OF PHOTO ITA NO.1347/RJT/2010. 2 DEVELOPMENT AND TRADING IN RELATED MATERIALS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 31 .3.2008 DECLARING TOTAL INCOME AT RS.10,668/-. THE AO FRAMED ASSESSMENT FOR THE YEAR UNDER CONSIDERATION U/S 143(3) WHEREIN HE MADE ADDITIO N OF RS.37,07,306/-. ON APPEAL, BEFORE THE LD. CIT(A), T HE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IN THE ASSESSMENT ORDER, THE AO MA DE ADDITION OF RS.37,07,306/- U/S 68 ON OF THE ACT ON ACCOUNT OF ALLEGED UNEXPLAINED CREDIT IN THE ACCOUNT NO.211/1/680 OF VIJAY COMMERCIA L CO-OP.BANK, BANK ACCOUNT NO.1618 OF CITIZEN CO-OP.BANK, AMOUNTING T O RS.3,98,120/-, 26,16,000/-,3,97,386/-2,95,800/- RESPE CTIVELY. BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT VIDE LETTER DATED 23.12.2009, THE ASSESSEE HAS EXPLAINED THE SOURCE OF CA SH AND DETAILS OF DEPOSITS MADE IN THE RESPECTIVE BANK ACCOUNT. HE ALSO SUBMITTED COPY OF CASH BOOK FOR WHICH IT IS CLEAR THAT THE CASH WAS DEPOSITE D OUT OF INCOME RECEIVED DURING THE YEAR. IN THE ASSESSMENT ORD ER, THE AO HAS RECORDED THE SUBMISSIONS OF THE ASSESSEE DESPITE, HE TREATE D THE ENTIRE DEPOSITS IN THE BANK; IS OUT OF UNEXPLAINED SOURCES. AFT ER CONSIDERING THE VARIOUS SUBMISSIONS, IN THE IMPUGNED ORDER THE LD. CIT( A) ESTIMATED THE INCOME OF THE ASSESSEE AT RS.1,50,000/- AND ACCORDINGLY HE DELETED RS.35,57,306/- FOR THE DETAILED REASONS GIVEN IN PARA GRAPH 3.2.4 OF HIS IMPUGNED ORDER WHICH READ AS UNDER : .3.2.4 THE AO HIMSELF ACCEPTED IN HIS ASSESSMENT ORDER T HAT HE COULD NOT THOROUGHLY VERIFY THE BOOKS OF ACCOUNTS VIS-A-VIS SUPPORTING DOCUMENTS, AS THE ASSESSEE SUBMITTED TH EM ON THE VERGE OF FINALIZING THE ASSESSMENT ORDER. THIS ACTION OF THE A.O. IS NOT APPRECIATED. WHEN AN ASSESSEE HAS PRODU CED BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS, THE AO IS SUPPOSED TO VERIFY THEM BEFORE TAKING ANY ADVERSE V IEW ON A PARTICULAR ISSUE. THE HON'BLE GUJARAT HIGH COURT HA S HELD IN THE CASE OF CIT VS. SCIENTIFIC CHEMICALS (SUPRA) THAT W HEN AN ITA NO.1347/RJT/2010. 3 EXPLANATION TENDERED BY THE ASSESSEE IS IGNORED OR OMITTED FROM THE ZONE OF CONSIDERATION BEFORE THE ORDER IS MADE, IT WOULD DEFINITELY VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. FURTHER, THE HON'BLE KERALA HIGH COURT IN THE CASE OF K. S. KANNAN KUNHI (SUPRA) HELD THAT REJECTION OF AN EXPLANATION WITHOUT CONSIDERING ITS ACCEPTABILITY IN THE LIGHT OF THE F ACTS AND CIRCUMSTANCES OF THE CASE, OR REJECTION OF THE EXPL ANATION WITHOUT STATING ANY GROUNDS, THE FINDING WOULD NOT BE VALID. THE ASSESSING OFFICER DID NOT POINT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS, NOR DID HE REJECT THE BOOK RESULTS. THE A SSESSMENT IN QUESTION WAS FINALIZED ULS.L43(3) OF THE ACT. IN VI EW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE L EGAL POSITION, I AM SATISFIED THAT THE ASSESSEE HAS DISC HARGED ITS PRIMARY ONUS OF PROVING THE SOURCE OF THE ABOVE CRE DIT ENTRIES AND THEIR GENUINENESS. THEREFORE, THE VERY BASIS OF ADDITION STANDS EXPLAINED IN VIEW OF THE SUPPORTING EVIDENCE S IN THE FORM OF CASH BOOK AND RELEVANT COPIES OF ACCOUNT. U NDER THE INCOME TAX ACT, THE BASIS OF TAX IS THE INCOME AND THIS INCOME IS DETERMINED FROM ITS SOURCE. ONCE WHEN THE SOURCE STANDS EXPLAINED, THERE REMAINS NO BASIS OF TAX. HERE, IN THE CASE OF THE ASSESSEE, THE CASH BOOKS REFLECT THE CASH ON HA ND AND IT CAN BE WELL INFERRED THAT THE SOURCE OF CASH DEPOSI T IN BANK ACCOUNT IS THE SAME CASH LYING ON HAND. FURTHER, SE CTION 68 OF THE INCOME TAX ACT, 1961 IS THERE TO PREVENT ANY UNSCRUPULOUS FUND ENTERING IN THE BOOKS OF AN ASSESSEE, WHICH HA PPENS TO BE THE ASSESSEE'S OWN FUNDS BEING PLOUGHED BACK IN THE FORM OF LOANS, DEPOSITS, OR ADVANCES. ADDITI ON U/S 68 CAN BE MADE WHERE THE ASSESSEE PRIMA FACIE FAILS TO DISCHARGE THE ONUS. HERE, IN THIS CASE, THE APPELLANT HAD SUB MITTED, THEN AND NOW THAT, THE SOURCE OF DEPOSITS IN BANK IS THE APPELLANT'S OWN RECEIPTS, THE NET OF WHICH, AFTER CLAIMING VARI OUS EXPENSES LIKE INTEREST, DEPRECIATION ETC. THEREFORE, THE APP ELLANT HAVING DISCHARGED ITS ONUS, ADDITION CANNOT BE MADE U/S 68 OF THE INCOME TAX ACT. THEREFORE, I HOLD THAT THE A.O. WAS NOT RIGHT IN MAKING ADDITION OF THE ENTIRE DEPOSITS MADE IN THE BANK AS THE SAME REPRESENTS THE ASSESSEES GROSS RECEIPTS. HOWEVER, IN QUEST OF MAKING ADDITION OF THE ENTIRE RECEIPT, THE A .O. FAILED TO CHECK THE GENUINENESS OF THE EXPENSES AND. THE ALLOWABIL ITY OF THE SAME. THIS IS UNDERSTANDABLY SO BECAUSE, THE ASSESSEE HAD ATTENDED THE ASSESSMENT PROCEEDINGS AT ITS FAG END. THER EFORE, A FINGER OF SUSPICION DOES RISE UPON THE ASSESSEE ALSO. HENCE, IN THE INTEREST OF NATURAL JUSTICE, IT WOULD BE FAIR, IF THE INCOME OR THE ASSESSEE IS WORKED OUT ON ESTIMATE BASIS, THE ASSESSEE HA D SHOWN NET INCOME OF RS.L0,668/-. I ESTIMATE THE INCOME O F THE ASSESSEE AT RS.1,50,000/- , WHICH WOULD MEET THE ENDS OF JUSTICE. HENCE, THE ASSESSEE'S INCOME IS ESTIMATED AT RS.1,50,000/- . THEREFORE, THE ADDITION MADE BY THE A.O. OF RS.37,07,306/- U/S .68 OF THE ACT IS HEREBY ORDERED TO BE DELETED TO THE EXTENT OF RS.35,57,306/- (RS.3707306 - RS.150000). ASSESSEE GETS RELIEF ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO.1347/RJT/2010. 4 3. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, SHRI M K SING H, THE LD. DR APPEARED FOR THE REVENUE AND POINTED OUT THAT DESPI TE ENOUGH OPPORTUNITY ALLOWED TO THE ASSESSEE BEFORE THE AO, THE ASSESSEE COULD NOT PRODUCED THE DETAILS OF SOURCE AND BANK ACCOUNTS AND A T THE FAG END OF THE ASSESSMENT, THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS AND OTHER DETAILS AND HENCE THE AO HAS NO OTHER ALTERNATI VE BUT TO MADE ADDITION AS UNEXPLAINED SOURCE OF INCOME U/S 68 OF THE ACT. AS AGAINST THIS, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO FRAMED ASSESSMENT ON 30.12.2009, WHEREAS THE ASSESSEE FURNISHED THE DETAILS ON 23.12.2009 INCLUDING THEREWITH COMPLETE DETAILS VI Z TRADING ACCOUNT, PROFIT AND LOSS ACCOUNT, PARTICULAR OF CAPITAL ACCOUNT AND BALANCE SHEET, COP OF RETURN OF INCOME, BANK PASS BOOK AND VARIOUS O THER DETAILS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THESE DET AILS WERE IGNORED BY THE AO WHILE PASSING ASSESSMENT ORDER. THE LD.CIT(A) AFTER CONSIDERING AND VERIFYING ALL THE DETAILS, FOR THE DE TAILED REASONS GIVEN IN PARAGRAPHS 3.2 TO 3.2.3 CONCLUDED THAT THE ASSESSEE HAD SU FFICIENT CASH AS PER BOOKS OF ACCOUNT AND THAT TRANSACTIONS OF DEPOSIT ING THE CHEQUES WERE ALSO SUPPORTED BY DOCUMENTS WERE SATISFACTORY EXPL ANATION, THEREFORE, HE RESTRICTED THE ABOVE ADDITION TO RS.1,50 ,000/-. THE LD. COUNSEL FOR THE ASSESSEE ACCORDINGLY SUBMITTED THAT THE AD DITION CONFIRMED BY THE CIT(A) BE DELETED. AS AGAINST THIS T HE LD. DR POINTED OUT THAT THE ASSESSEE HAS SUBMITTED DETAILS AT THE FAG END OF THE ASSESSMENT PROCEEDINGS, AND HENCE THE AO COULD NOT GET TH E SUFFICIENT TIME TO VERIFY THE DOCUMENTS AND HENCE MATTER NEEDS VERIFICATION AT THE ITA NO.1347/RJT/2010. 5 END OF THE AO. THEREFORE, THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 5. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. BEFORE US THE ASSESSEE HAS FURNISHED COMPARATIVE DETAILS OF IMMEDIATELY PRECEDING YEAR AND ASSESSMENT UNDER APPEAL. THE NET PROFIT AS PER THE PROFIT AND LOSS A CCOUNT IN THE ASSESSMENT YEAR 2007-08 SHOWN AS RS.9,600/- AS AGAINST THE LOSS OF RS.(22,428) FOR THE ASSESSMENT YEAR 2006-07 DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSEE HAS FILED VARIOUS D ETAILS CALLED FOR BY THE AO VIDE LETTER DATED 23.12.2009 WHICH H AS BEEN FILED ON 24.12.2009 AT 1.00 PM. THE RECEIPT OF THIS LETTER H AS ALSO BEEN OBTAINED. THE AO FRAMED THE ASSESSEE U/S 143(3) BUT IN THIS ASSESSMEN T ORDER THE AO FAILED TO TAKE COGNIZANCE OF THE DETAILS FILED BY T HE ASSESSEE. BE THAT IT MAY, FROM THE PERUSAL OF THE SAME IT CAN BE SEEN T HAT CASH RECEIPT COMPRISE OF TRADING OF PHOTOGRAPHIC MATERIAL TO THE TUNE OF RS.5,08,134/-, JOB WORK RECEIPT RS.14,15,111/- AND DEVELOPMENT PROCESSIN G CHARGES RS.12,51,488/-. FROM THESE, THE ASSESSEE HAS MADE DEPOSI TS IN THE BANK ACCOUNT. THE ENTIRE INCOME OF THE ASSESSEE CANNOT BE THE INCOME OF THE ASSESSEE. AT THE SAME TIME, WE ARE OF THE VIEW THAT THE DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE NATURE OF EXPE NDITURE AS ESTIMATED BY THE LD. CIT(A) RS.1,50,000/- IS ON THE V ERY LOWER SIDE. WE, THEREFORE, ARE OF THE VIEW THAT IT WOULD MEET ENDS O F JUSTICE, IF THE DISALLOWANCE BE RESTRICTED TO RS.2,50,000/-, WE DIRECT TH E AO TO RE-WORK OUT THE INCOME OF THE ASSESSEE ACCORDINGLY. ITA NO.1347/RJT/2010. 6 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD SD ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 30.10.2012 /RAJKOT SRL - -- - +8 +8 +8 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-. 2. +,* / RESPONDENT- 3. ; / CONCERNED CIT. 4. ;- / CIT (A). 5. 8 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.