ACIT, Faridabad V. Sh Ram Avtar Goyal, Faridabad

ITA 1414/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0421 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-02-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: K C SINGHAL
• Keywords: Unexplained cash credit; Depreciation; Onus to prove
• Section: 37(1); 32; 131; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F DELHI) BEFORE SHRI A.D. JAIN AND SHRI K.D. RANJAN ITA NO. 1414(DEL)2010 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, SH. RAM AV TAR GOYAL, CIRCLE II, FARIDABAD. V. PROP. M/S. GOYAL INDUSTRIAL ENTERPRISES, ANAJ MANDI NEHRU GROUND, FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI H.K. LAL, SR. DR RESPONDENT BY: SHRI K.C . SINGHAL, ADVOCATE ORDER PER A.D. JAIN, J.M . THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 200 7-08, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDIT ION OF ` 62,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED UNSECURED LOAN ESPECIALLY WHEN THE ASSESSEE HAD FAILED TO DIS CHARGE HIS ONUS TO PROVE THE IDENTITY OF THE CREDITOR, HIS CREDITWORTH INESS AND GENUINENESS OF THE TRANSACTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN RESTRICTING THE DI SALLOWANCE AT ` 22,782/- AND ALLOWED RELIEF OF ` 11,237/- OUT OF ADDITION OF ` 34,019/- ITA 1414(DEL)10 2 MADE BY THE AO ON ACCOUNT OF TELEPHONE AND VEHICLE RUNNING AND MAINTENANCE EXPENSES IN RESPECT OF DEPRECIATION, IN SURANCE AND INTEREST THEREON DISREGARDING THE FACT THAT THESE E XPENSES WERE THE PART OF CONFIRMED DISALLOWANCES MADE BY THE LD. CIT (A) FOR NON- BUSINESS PURPOSES. 2. GROUND NO.1 STATES THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 62,00,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINE D UNSECURED LOAN, PARTICULARLY WHEN THE ASSESSEE HAD FAILED TO PROVE THE IDENTITY OF THE CREDITOR, HIS CREDIT-WORTHINESS AND THE GENUINENESS OF THE TRANSACTION. 3. THE BALANCE SHEET OF THE ASSESSEE SHOWED UNSECUR ED LOAN OF ` 1,07,78,273/-. THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED UNSECURED LOAN OF ` 62,00,000/- FROM SHRI KESHAV GOYAL. THE ASSESSEE , IN SUPPORT THEREOF, HAD FILED COPY OF INCOME TAX RETURN FOR AS SESSMENT YEAR 2007-08, COPY OF BANK STATEMENT AND CONFIRMATION OF SHRI KES HAV GOYAL. THE ASSESSEE CONTENDED THAT FROM THE BANK STATEMENT OF CENTRAL CO-OPERATIVE BANK LTD., FARIDABAD OF SHRI KESHAV GOYAL, THE DIFF ERENCE IN THE DATES OF THE CHEQUES ISSUED TO THE ASSESSEE STOOD EXPLAINED. T HE AO, HOWEVER, WAS NOT SATISFIED ABOUT THE CREDITWORTHINESS OF THE PARTIES HAVING BEEN PROVED. ON THE ASSESSEES FAILURE TO PRODUCE THE PARTY, THE AO ISSUED SUMMONS U/S 131 OF THE I.T. ACT. THERE WAS NO COMPLIANCE. THE AO OBSERVED THAT THE BANKING TRANSACTIONS WERE NOT GENUINE, SINCE THE UN SECURED LOAN OF ` ITA 1414(DEL)10 3 62,00,000/- DID NOT CARRY ANY INTEREST AND THERE WE RE CASH DEPOSITS IN THE BANK ACCOUNT OF THE CREDITOR MADE JUST BEFORE THE I SSUANCE OF THE CHEQUES IN FAVOUR OF THE ASSESSEE. HOLDING THAT THE ASSESSEE HAD NOT DISCHARGED HIS ONUS U/S 68 OF THE ACT, THE AO ADDED THE AMOUNT OF ` 62,00,000/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDIT IN THE BOOKS MAINTAINED BY THE ASSESSEE. 4. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION. 5. AGGRIEVED, THE DEPARTMENT HAS TAKEN GROUND NO.1 BEFORE US. 6. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS A RGUED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION EVEN IN F ACE OF THE FACT THAT THE ASSESSEE HAD MISERABLY FAILED TO DISCHARGE ITS ONUS TO PROVE THE IDENTITY OF HIS CREDITOR, HIS CREDITWORTHINESS AND THE GENUINEN ESS OF THE TRANSACTION. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN CONTENDE D THAT THE ASSESSEE HAD FILED BEFORE THE AO, A COPY OF THE ACKNOWLEDGEMENT OF THE INCOME TAX RETURN SHOWING THE NAMES AND ADDRESSES OF THE CREDI TOR, HIS PERMANENT ACCOUNT NUMBER AND THE INCOME TAX WARD WHERE HE WAS ASSESSED, A COPY OF BANK STATEMENTS, CONFIRMATION CERTIFICATE, AFFIDAVI T OF THE CREDITOR, THE LEDGER ACCOUNT OF THE CREDITOR IN THE BOOKS OF THE ASSESSE E FOR THE PERIOD FROM 1.4.2006 TO 31.3.2007 AND FOR THE PERIOD FROM 1.4.2 007 TO 31.3.2008, ITA 1414(DEL)10 4 DISCLOSING THE FACT THAT THE AMOUNT HAD BEEN RECEIV ED BY THE ASSESSEE AS WELL AS REPAID BY THE ASSESSEE THROUGH CHEQUES AND COPIE S OF CERTIFICATES FROM CENTRAL CO-OP.BANK, FARIDABAD, WITH WHOM, THE CREDI TOR MAINTAINED HIS ACCOUNT REGARDING THE PAYMENT IN QUESTION. IT HAS BEEN CONTENDED THAT THE LD. CIT(A) HAS DULY TAKEN NOTE OF ALL THESE EVIDENC ES AND IT IS ONLY THEREAFTER THAT THE LD. CIT(A) DELETED THE ADDITION. IT IS SU BMITTED THAT THE ASSESSEE HAD DULY DISCHARGED HIS ONUS U/S 68 OF THE I.T. ACT. RELIANCE HAS BEEN PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF ORISSA CORPORATION LTD., 159 ITR 78(SC). RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LOVELY EXPORTS P. LTD. 216 CTR 195(SC). 8. UNDISPUTEDLY, THE ASSESSEE HAD PRODUCED BEFORE T HE AO, ALL POSSIBLE DOCUMENTARY EVIDENCE IN DISCHARGE OF HIS ONUS U/S 6 8 OF THE ACT. THIS EVIDENCE INCLUDED COPY OF THE ACKNOWLEDGEMENT OF IN COME TAX RETURN, GIVING THE NAME AND ADDRESS OF THE CREDITOR, HIS PE RMANENT ACCOUNT NUMBER AND THE INCOME TAX WARD WHERE HE WAS ASSESSED, COPY OF BANK STATEMENT, CONFIRMATION CERTIFICATE; THE AFFIDAVIT OF THE CRED ITOR; LEDGER ACCOUNT OF THE CREDITOR IN THE BOOKS OF THE ASSESSEE FOR THE PERIO D FROM 1.4.2006 TO 31.3.2007 AND FOR THE PERIOD FROM 1.4.2007 TO 31.3. 2008, DISCLOSING THAT THE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE AS WELL AS THAT IT HAD BEEN REPAID ITA 1414(DEL)10 5 BY THE ASSESSEE THROUGH CHEQUES; AND COPY OF CERTIF ICATE FROM THE BANK WITH WHICH THE CREDITOR HAD MAINTAINED HIS ACCOUNT CONCE RNING THE PAYMENT IN QUESTION. THE AO, HOWEVER, MADE THE ADDITION SIMP LY FOR THE REASON THAT THERE WAS NO COMPLIANCE TO THE SUMMONS ISSUED TO TH E CREDITOR U/S 131 OF THE I.T. ACT. THE LD. CIT(A), WHILE DELETING THE ADDI TION, DULY TAKEN INTO CONSIDERATION ALL THE ABOVE EVIDENCES FILED BY THE ASSESSEE BEFORE THE AO. IT WAS RIGHTLY OBSERVED THAT THE BANKING TRANSACTIO NS WERE FULLY AUTHENTICATED DOCUMENTS AND THAT THE INFLOW OF THE MONEY IN THE C REDITORS ACCOUNT WAS ALSO TOTALLY RELIABLE AND NORMAL IN THE ORDINARY CO URSE OF BUSINESS. THE ASSESSEE WAS FOUND TO HAVE FULLY DISCHARGED HIS ONU S OF PROVING THE GENUINENESS OF THE CREDIT OF SHRI KESHAV GOYAL BY ESTABLISHING THE IDENTITY AND FINANCIAL CAPACITY OF THE CREDITOR AND THE GENU INENESS OF THE TRANSACTION. 9. THE AO WAS FOUND NOT TO HAVE BROUGHT ANY MATERIA L ON RECORD CONTRARY TO THE EVIDENCE PRODUCED BY THE ASSESSEE. 10. IN ORISSA CORPORATION LTD.(SUPRA), IT HAS BE EN HELD THAT WHERE THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE C REDITORS, IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WE RE INCOME TAX ASSESSES, THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE AND WHERE BESIDES ISSUING NOTICES U/S 131 OF THE ACT, THE REVENUE HAD NOT PURSUED THE MATTER ANY FURTHER BY EXAMINING THE SOURCE OF INCOME OF TH E CREDITORS TO FIND OUT ITA 1414(DEL)10 6 WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COU LD ADVANCE THE ALLEGED LOANS, THE ASSESSEE COULD NOT HAVE DONE ANYTHING FU RTHER AND IT WAS NOT, IN SUCH CIRCUMSTANCES, UNREASONABLE OR PERVERSE OR BAS ED ON NO EVIDENCE FOR THE TRIBUNAL TO CONCLUDE THAT THE ASSESSEE HAD DISC HARGED THE BURDEN. 11. IN LOVELY EXPORTS P. LTD. (SUPRA), IT HAS BEE N HELD THAT WHERE THE ASSESSEE HAS PROVIDED ALL THE NECESSARY DETAILS OF THE CREDITORS, EVEN IF SUCH CREDITORS ARE BOGUS, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. 12. IN VIEW OF THE ABOVE, FINDING NO ERROR IN THE O RDER OF THE LD. CIT(A), IN THIS REGARD, THE SAME IS HEREBY CONFIRMED. GROUND NO.1 IS, THEREFORE, REJECTED. 13. APROPOS GROUND NO.2, THE AO MADE DISALLOWANCE O F 1/5 TH OUT OF CAR AND TELEPHONE EXPENSES OF ` 1,70,097/-, ON THE BASIS OF THE PERSONAL NATURE OF THE EXPENSES TO THIS EXTENT BEING INCAPABLE OF BEIN G RULED OUT. THIS DISALLOWANCE CAME TO ` 34,019/-. THE LD. CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE WAS CALLED FOR ON ACCOUNT OF THE EXPENSES INCURRED ON DEPRECIATION, INSURANCE AN D INTEREST ON CAR LOAN, THESE EXPENSES BEING ALLOWABLE U/SS 32 AND 37(1) OF THE I.T. ACT. ACCORDINGLY, 1/5 TH DISALLOWANCE, AMOUNTING TO ` 11,614/-, OUT OF THE REMAINING AMOUNT OF ` 58,071/- WAS UPHELD. THE DISALLOWANCE OUT OF ITA 1414(DEL)10 7 TELEPHONE EXPENSES OF ` 55,839/- WAS SIMILARLY WORKED OUT AT ` 11,168/-. THE TOTAL DISALLOWANCE UPHELD WAS THUS OF ` 22,782/-. THE ASSESSEE WAS ALLOWED RELIEF OF ` 11,237/-. 14. THE DEPARTMENT CONTENDS THAT WHILE SO RESTRICTI NG THE DISALLOWANCE, THE LD. CIT(A) HAS ERRED IN DISREGARDING THE FACT T HAT THESE EXPENSES WERE PART OF CONFIRMED DISALLOWANCES MADE FOR NON BUSINE SS PURPOSES. 15. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE IMPUGNED ORDER IN THIS REGARD. 16. UNDISPUTEDLY, NO DISALLOWANCE COULD HAVE BEEN M ADE CONCERNING EXPENSES INCURRED ON DEPRECIATION, INSURANCE AND IN TEREST ON CAR LOAN. THESE AMOUNTS ARE ALLOWABLE UNDER SECTIONS 32 AND 3 7(1) OF THE ACT. THE LD. CIT(A) THUS RIGHTLY WORKED OUT THE AMOUNT OF ` 11,614/- BY EXCLUDING SUCH EXPENDITURE AND MAKING DISALLOWANCE OF 1/5 TH OUT OF THE REMAINING AMOUNT OF ` 58,071/-. LIKEWISE, THE LD. CIT(A) CORRECTLY WOR KED OUT ` 11,168/- AS DISALLOWANCE OUT OF TELEPHONE EXPENSES OF ` 55,839/-. IN BOTH THESE CASES, THE EXTENT OF DISALLOWANCE TO 1/5 TH , AS MADE BY THE AO REMAINED UNDISPUTED. 17. ACCORDINGLY, FINDING NO ERROR IN THE ORDER OF T HE LD. CIT(A) IN THIS REGARD ALSO, THE SAME IS HEREBY CONFIRMED. GROUN D NO.2 IS REJECTED. ITA 1414(DEL)10 8 18. IN THE RESULT, THE APPEAL FILED BY THE DEPARTM ENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2011 . SD/- SD/- (K.D. RANJAN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18.2.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR.