Shri Pradeep Sarf, V. The I T O 1 (1),

ITA 143/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1536 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: H P VERMA; ASHISH GOYAL S
• Keywords: Business expenditure
• Section: 131; 68

Judgement Text

PAGE 1 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ADOPS9908A I.T.A.NO. 143/IND/2009 A.Y. : 2005-06 SHRI PRADEEP SARAF, INCOME-TAX OFFICER, PROP. M/S. STERLING RUBBER PRODUCTS, VS 1(1), BHOPAL. 401, WINDSOR RETREAT, 50, MALVIYA NAGAR, BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI H.P. VERMA AND SHRI ASHISH GOYAL, ADVOCATES RESPONDENT BY : SMT. APARNA KARAN, SR. DR DATE OF HEARING : 4.6.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-I, BHOPAL , DATED 18.12.2008, FOR THE ASSESS MENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. PAGE 2 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. 3. IN GROUND NOS. 1, 3, 4, 5 AND 6, THE ASSESSEE IS AG GRIEVED BY THE DECISION OF THE LD.CIT(A) IN CONFIRMING THE ADDITIO N OF RS. 3.80 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME- TAX ACT,1961. 4. THE FACTS, IN BRIEF, ARE THAT THE AO FOUND THAT THE RE WERE NUMBER OF OUTSTANDING CREDITORS IN THE BALANCE SHEE T OF THE ASSESSEE, SOME OF WHICH WERE OLD AND SOME OF THE AMOUNTS HAD BEEN TAKEN IN THE YEAR UNDER CONSIDERATION. THE AO EXAMINED THE LEDGER AND BANK PASS BOOK OF SUCH PARTIES FILED BY THE ASSESSEE AND FOUND THAT T HERE WAS DEPOSIT OF CASH IN SUCH BANK ACCOUNT EITHER ON THE SAME DAY OR A DA Y BEFORE THE DATE OF CHEQUES ISSUED TO THE ASSESSEE, HENCE, HE FORMED AN OPINION THAT IT WAS ASSESSEES OWN MONEY, WHICH HAD BEEN BROUGHT IN THE BOOKS OF THE ASSESSEE IN THIS FIRM. THE AO ALSO HELD THAT THE GE NUINENESS OF THESE TRANSACTIONS WAS NOT ESTABLISHED. HENCE, THE AO MA DE AN ADDITION OF SUCH AMOUNTS U/S 68 OF THE ACT. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHEREIN THE ASSESS EE GAVE THE DETAILS OF ALL THE SIX DEPOSITORS AND ALSO CONTENDED THAT SOME OF THE PERSONS WERE ASSESSED TO TAX IN THEIR INDIVIDUAL CAPACITY. IT WA S ALSO SUBMITTED THAT THESE WERE NEAR RELATIVES AND TO AVOID THE IMPLICAT IONS OF PROVISIONS OF SECTION 269SS, THE AMOUNTS WERE TAKEN THROUGH CHEQU ES, THOUGH THESE PARTIES WERE HAVING CASH AND ALSO WILLING TO GIVE T HE AMOUNT IN CASH. IT WAS ALSO CONTENDED THAT THE AO DID NOT ISSUE SUMMON U/S 131 TO VERIFY PAGE 3 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. THE CLAIMS OF THE ASSESSEE. IT WAS ALSO PLEADED THA T THE AO DID NOT PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE F URTHER EVIDENCE TO SATISFY THE REQUIREMENTS OF LAW. THE LD.CIT(A), HOW EVER, HELD THAT THE FACT OF DEPOSIT OF CASH IN THE ACCOUNTS OF LENDERS, BEING NEAR RELATIVES, RAISED A STRONG PRESUMPTION AGAINST THE CREDITWORTH INESS OF SUCH LENDERS, WHO WHERE APPARENTLY NOT ASSESSED TO TAX AND YET IN WHOSE ACCOUNTS CASH AMOUNTS BEYOND THEIR CAPACITY WERE SUDDENLY DEPOSIT ED IN TEN DAYS WITH THE LOAN REQUIREMENTS OF THE APPELLANT. THE LD.CIT( A) ALSO HELD THAT MERE IDENTITY AND GENUINENESS OF THE TRANSACTION WAS NOT ENOUGH AS THE ASSESSEE WAS ALSO REQUIRED TO PROVE THE CREDITWORTH INESS OF SUCH LENDERS, WHICH HE FAILED TO DISCHARGE. HENCE, THE BURDEN COU LD NOT BE SHIFTED TO THE AO AS PLEADED BY THE ASSESSEE. ACCORDINGLY, THE LD.CIT(A) UPHELD THE ACTION OF AO. STILL AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE US. 5. THE LD.COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET , SUBMITTED THAT TO SUPPORT THE CONFIRMATION FILED BEFORE THE A O, THE ASSESSEE HAD FILED AFFIDAVITS OF SUCH LENDERS CONFIRMING THE CON TENTS OF SUCH CONFIRMATORY LETTERS, HENCE, THE SAME SHOULD BE ADM ITTED. THE BENCH OPINED THAT HOW THESE AFFIDAVITS WOULD BE RELEVANT, BECAUSE THE ISSUE WAS REGARDING CREDITWORTHINESS OF SUCH DEPOSITORS. ON T HIS POINT, THE LD. COUNSEL SUBMITTED THAT FOUR OF THE CREDITORS WERE A SSESSED IN THEIR INDIVIDUAL CAPACITY FROM WHOM THE MAJORITY OF SUMS HAD BEEN TAKEN AND PAGE 4 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. IN CASE OF TWO OTHER LENDERS, NAMELY, SMT. RENU SAR AF AND SMT. SEEMA SARAF, THEY WERE ALSO EDUCATED AND HAVING THEIR IND EPENDENT SOURCES OF EARNINGS. HENCE, MERELY BECAUSE THEY DEPOSITED THE CASH IN THEIR BANK ACCOUNT, SO THAT LOAN COULD BE GIVEN TO THE ASSESSE E THROUGH CHEQUE TO AVOID THE RIGORS OF PROVISIONS OF SECTION 269SS, TH E CREDITWORTHINESS COULD NOT BE DOUBTED. THE LD. COUNSEL FURTHER SUBMI TTED THAT IDENTITY AND GENUINENESS OF THE TRANSACTIONS EVEN AS PER THE FIN DINGS OF THE LD.CIT(A) WAS NOT IN DISPUTE THAT AND IF THAT BE SO, THEN AS PER THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ME TACHEM INDUSTRIES AS REPORTED IN 245 ITR 160, THE ADDITION COULD NOT BE MADE WITHOUT CONFIRMING THE FACTS FROM THE VERY SUCH LENDERS BY ISSUING NOTICES U/S 131. THE LD. COUNSEL FURTHER SUBMITTED THAT EVEN TH E PROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE, AS THE AO AFTER COLL ECTING THE BANK PASS BOOK FORMED AN OPINION AND MADE THE ADDITION WITHOU T ASKING THE ASSESSEE TO FURTHER CLARIFY THE ISSUE. HENCE, FOR T HIS REASON ALSO, THE ADDITION WAS NOT JUSTIFIED. AS REGARD TO THE AVAILA BILITY OF BALANCE SHEET AND OTHER DOCUMENTS, SO AS TO SHOW THE CREDITWORTHI NESS OF SUCH DEPOSITORS, THE LD. COUNSEL FAIRLY SUBMITTED THAT T HESE WERE NOT AVAILABLE NOR THESE WERE REQUIRED BY ANY OF THE AUTHORITIES E ARLIER AND ALSO HAVING REGARD TO SMALLNESS OF THE AMOUNT INVOLVED, THE SAM E COULD NOT BE OF MUCH RELEVANCE. PAGE 5 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. 6. THE LD. SENIOR D.R., ON THE OTHER HAND, BESIDES PL ACING RELIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES SUBMITTED THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS REGARDING PROVING OF CREDITWO RTHINESS OF SUCH LENDERS, HENCE, THE ADDITION WAS RIGHTLY MADE. ON A QUERY FROM THE BENCH REGARDING HOW THE LD.CIT(A) COULD REACH TO A CONCLU SION THAT THE PERSONS OF MEAGER MEANS WITHOUT HAVING TAX RECORDS OR BALAN CE SHEET, SHE STATED THAT IT WAS THE DUTY OF THE ASSESSEE TO PROVIDE THE SAME AND EVEN AT THIS STAGE, IT WAS NOT AVAILABLE. 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT FOLLOWING AMOUNTS HAVE BEEN TAKEN BY THE ASSESSEE AS UNSECURED LOANS IN THE YEAR UNDER CONSI DERATION :- CASH DEPOSIT AMOUNT (I) GENDALAL SARAF 9.6.04 RS.20,000/- 1.8.04 RS.10,000/- 4.11.04 RS.30,000/- 24.12.04 RS. 20,000/- (II) SANJAY SARAF 1.12.04 RS. 35,000/- 4.12.04 RS.30,000/- (III) SMT. KAMLESH DEVI 20.12.04 RS. 20,000/- (IV) SHRI MUKESH SARAF 11.08.04 RS.47,000/- PAGE 6 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. 12.8.04 RS. 49,000/- 9. ALL THE ABOVE FOUR PERSONS ARE ASSESSED TO TAX AND HAVE GIVEN CONFIRMATORY LETTERS, BANK PASS BOOK, HAS ALSO BEEN MADE AVAILABLE FOR VERIFICATION. ALL THE PERSONS ARE ALSO RELATED TO T HE ASSESSEE. IT IS FURTHER NOTED THAT THE AO HAS ASSUMED THAT IT WAS ASSESSEE S OWN MONEY BROUGHT IN THE BOOKS OF ACCOUNT IN THIS WAY, INSPITE OF THE FACT THAT LOANS FROM SUCH PERSONS/OTHER PERSONS IN EARLIER YEARS AS WELL HAVE NOT BEEN DOUBTED. WE ARE FURTHER OF THE VIEW THAT IT IS A CASE OF DOU BT OR PRESUMPTION AND IT IS A SETTLED POSITION IN LAW THAT THE SAME CANNOT B E A BASIS FOR MAKING AN ADDITION UNLESS SOME COGENT MATERIAL IS BROUGHT ON RECORD OR SOME CIRCUMSTANTIAL EVIDENCES EXIST TO DRAW AN INFERENCE AGAINST THE ASSESSEE. IN THE PRESENT CASE, THERE IS NO MATERIAL ON RECORD , NOR A PROPER OPPORTUNITY TO EXPLAIN HAS BEEN GIVEN TO THE ASSESS EE AS EVIDENT FROM THE ASSESSMENT ORDER. WE FURTHER FIND THAT WITHOUT BALA NCE SHEET/OTHER RECORDS OF SUCH LENDERS, THE LD.CIT(A) HAS GIVEN A FINDING THAT PERSONS WERE OF NO MEANS, HENCE, THE SAME, IN OUR VIEW, IS NOT CORRECT IN LAW. WE FURTHER FIND THAT THE DECISION OF THE HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF METACHEM INDUSTRIES (SUPRA) ALSO SUPPOR TS THE CLAIMS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE IMPUGNED ADDITION IS LIABLE TO BE DELETED. WE ORDER ACCORDINGLY. THUS, A LL THE RELEVANT GROUNDS OF THE ASSESSEE ARE ACCEPTED. PAGE 7 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. 10. IN GROUND NO.2, THE ISSUE INVOLVED IS REGARDING A D HOC DISALLOWANCE OF RS. 30,000/- OUT OF VARIOUS EXPENSE S FOR PERSONAL USE, BEING INCURRED FOR NON-BUSINESS PURPOSES. THE IMPUG NED DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT BRIN GING THE DETAILS OF HEADS OF EXPENSES UNDER WHICH SUCH FINDING HAD BEEN GIVEN. THE LD.CIT(A) HAS, HOWEVER, EXAMINED THE HEAD OF EXPENS ES AND HAS HELD THAT THOUGH THE AO DID NOT SPECIFICALLY POINT OUT THE IT EMS OF PARTIAL DISALLOWANCE, BUT THIS COULD NOT MEAN THAT SUCH TYP E OF EXPENSES WERE NOT THERE. ACCORDINGLY, THE LD.CIT(A) HAS CONFIRMED THE DISALLOWANCE OUT OF TELEPHONE EXPENSES, VEHICLE EXPENSES AND DEPRECIATI ON ON ACCOUNT OF PERSONAL USE/NON BUSINESS PURPOSES. AGGRIEVED BY TH IS, THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LD.COUNSEL FOR THE ASSESSEE NARRATED THE FACTS AND CONTENDED THAT ACTION OF THE REVENUE AUTHORITIES WAS ARBITRAR Y AND FULL OF AD HOCISM, HENCE, NO DISALLOWANCE WAS TO BE MADE. 12. THE LD. SENIOR D.R. ,ON THE OTHER HAND, STRONGLY DE FENDED THE ORDER OF THE LD.CIT(A). 13. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 14. IT IS NOTED THAT BOTH THE REVENUE AUTHORITIES HAVE NEITHER MENTIONED THE QUANTUM OF EXPENSES INCURRED BY THE A SSESSEE UNDER THE PAGE 8 OF 8 - I.T.A.NO.143/IND/2009 SHRI PRADEEP SARAF, BHOPAL. HEADS TELEPHONE EXPENSES, VEHICLE EXPENSES AND DEPR ECIATION CLAIM AS BUSINESS EXPENSES NOR ANY PERCENTAGE OF DISALLOWANC E HAS BEEN BROUGHT ON RECORD. IT HAS ALSO NOT BEEN SPECIFICALLY POINTE D OUT THAT ON WHAT BASIS, THE FACT OF PERSONAL USE WAS ARRIVED AT. THOUGH, WE AGREE THAT THERE COULD BE SOME PERSONAL USE, BUT THE MANNER IN WHICH THE I MPUGNED DISALLOWANCES HAVE BEEN MADE DOES NOT STAND TO REAS ON. HENCE, WE DELETE THE SAME. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH JUNE, 2010. CPU* 4156