ITO, Malerkotla V. M/s Surinder Kumar Nand Kishore, Dhuri

ITA 154/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57741 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: T N SINGLA
• Keywords: Unexplained cash credit; Principle of natural justice
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.154/CHD/2010 (ASSESSMENT YEAR : 2006-07) THE INCOME TAX OFFICER, VS. SURINDER KUMAR NAND K ISHORE, IV (4), SHOP NO.41/42, NEW ANAJ MANDI, MALERKOTLA. DHURI. PAN: AAEFS7416E (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.JAISHREE SHARMA, DR RESPONDENT BY : SHRI T.N.SINGLA DATE OF HEARING : 12.03.2012 DATE OF PRONOUNCEMENT : 22.03.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA D ATED 26.11.2009 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS U NDER: 1. THAT THE LD.CIT (A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.25,00,000/- MADE BY THE A.O. U/S 68 OF THE INCOME TAX ACT, 1961. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN REL ATION TO THE DELETION OF ADDITION OF RS.25 LACS MADE UNDER SECTION 68 OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED UNSECURED L OAN OF RS.25 LACS FROM SHRI GAURAV SINGH. DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE ASSESSEE FURNISHED PHOTOCOPIES OF THE RETURN OF INCOME FILED BY THE 2 CREDITOR SHRI GAURAV SINGH. THE ASSESSING OFFICER NOTED THAT IN THE SAID RETURN OF INCOME THERE WAS NO INDICATION OF THE TRA NSACTION WITH THE ASSESSEE. THE ASSESSEE WAS ASKED TO PRODUCE THE PE RSON AND IN THE ABSENCE OF ANY EXPLANATION OFFERED BY THE ASSESSEE, THE SAID SUM OF RS.25 LACS WAS TREATED AS UNEXPLAINED CASH CREDITS AND ADDITION WAS MADE UNDER SECTION 68 OF THE ACT. 5. IN APPEAL BEFORE THE CIT (APPEALS) IT WAS POINTE D OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT TEMPORARY LOAN O F RS.25 LACS WAS RECEIVED IN THE MONTH OF MARCH, 2006 WHICH WAS REPA ID IN THE MONTH OF APRIL, 2006. IT WAS FURTHER CLAIMED THAT SHRI GAUR AV SINGH WAS AN EXISTING ASSESSEE WITH PAN NUMBER WITH INCOME TAX O FFICER, RAJPURA. THE CONFIRMATION FROM THE SAID PARTY WAS CLAIMED TO HAVE BEEN FILED BEFORE THE ASSESSING OFFICER ALONGWITH THE COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT OF FILING OF RETURN OF I NCOME RELATING TO ASSESSMENT YEAR 2006-07. IT WAS ADMITTED BY THE LE ARNED A.R. FOR THE ASSESSEE THAT SHRI GAURAV SINGH WAS NOT FILING ANY BALANCE SHEET ALONGWITH RETURN OF INCOME AND THE AMOUNT WAS RECEI VED BY WAY OF DEMAND DRAFT. RELIANCE WAS PLACED ON VARIOUS JUDGM ENTS FOR THE PROPOSITION THAT THE ASSESSEE HAVING DISCHARGED ITS ONUS NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THE CIT (AP PEALS) OBSERVED THAT WHERE THE ASSESSEE HAS FURNISHED DETAILS OF GIR NUM BER OR PAN NUMBER OF THE CREDITOR AND FURTHER ONCE CREDITOR HAD CONFI RMED THE TRANSACTION, NO ADDITION WAS TO BE MADE UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. THE CIT (APPEALS) FURTHER OBSERVED THAT SHRI GAURAV SINGH WAS AN EXISTING ASSESSEE AND THE AMOUNT WAS RECEIVED THROU GH BANKING CHANNELS. AS THE CREDITOR HAD CONFIRMED GIVING OF THE SAID AM OUNT TO THE ASSESSEE, NO ADDITION WAS TO BE MADE UNDER SECTION 68 OF THE ACT. THE CIT (APPEALS) FURTHER HELD THAT FOR ARGUMENT SAKE, EVEN IF SOURCES OF THIS 3 CREDIT ARE FOUND TO BE NOT EXPLAINED IN THE HANDS O F THE CREDITOR, HE BEING AN EXISTING INCOME TAX ASSESSEE, IN VIEW OF T HE SETTLED LEGAL POSITION IN THIS REGARD, THIS AMOUNT IS TO BE CONSI DERED FOR ADDITION IN THE HANDS OF THAT CREDITOR ONLY. THIS AMOUNT HOWEV ER AS ALREADY STATED, COULD NOT BE ADDED IN THE HANDS OF THE RECIPIENT U/ S 68 OF THE ACT . 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS). THE LEARNED D.R. FOR THE REVENUE MADE REFERENCE TO THE OBSERVATION OF CIT (APPEALS) IN PARA 4 AND POINTED OUT THAT ADDITI ON HAD BEEN DELETED AS THE CREDITOR WAS HAVING A PAN NUMBER AND TRANSAC TION WAS THROUGH BANKING CHANNEL. IT WAS POINTED OUT BY THE LEARNED D.R. FOR THE REVENUE THAT THE AMOUNT WAS RECEIVED THROUGH DRAFT. RELIAN CE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN CIT VS. VEER BHAN & SONS [273 ITR 206 (P&H)] AND IN THE CAS E OF SARASWATI TRACTORS CORPORATION VS. CIT [335 ITR 468 (P&H)]. 7. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT IDENTITY OF THE CREDITOR WAS PROVED AND FURTHER THE AMOUNT WAS RECE IVED IN MARCH, 2006 AND WAS RETURNED IN APRIL, 2006. THE GENUINENESS O F THE TRANSACTION COULD NOT BE DOUBTED AND HENCE NO ADDITION UNDER SE CTION 68 OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE UNSECURED LOAN OF RS.25 LACS RECEIVED BY THE ASSESSEE. 9. THE HON'BLE SUPREME COURT IN SUMATI DAYAL VS. CI T [214 ITR 801 (SC)] HAD LAID DOWN THE FOLLOWING PROPOSITIONS: IT IS, NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPAR TMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A REC EIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE A CT LIES UPON THE ASSESSEE. BUT IN VIEW OF SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVI OUS YEAR, THE 4 SAME MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPIN ION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH CASE T HERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT THE SAME, THE SAID EVIDENC E BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT IS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANAT ION OF THE ASSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREA SONABLY. 10. IN THE FACTS OF THE PRESENT CASE BEFORE US THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD FURNISHED ON R ECORD EVIDENCE OF THE LOAN CREDITOR BEING ASSESSED TO TAX BY WAY OF A CONFIRMATION FILED FROM THE SAID PARTY. FURTHER THE COPY OF THE COMPU TATION OF INCOME AND ACKNOWLEDGEMENT OF FILING OF RETURN OF INCOME BY TH E SAID CREDITOR RELATING TO ASSESSMENT YEAR 2006-07 WAS FURNISHED O N RECORD. HOWEVER, NO BALANCE SHEET WAS FILED ALONGWITH THE RETURN OF INCOME AND FURTHER THERE WAS NO EVIDENCE FURNISHED ALONGWITH THE RETUR N OF INCOME REFLECTING THE ADVANCE MADE BY THE LOAN CREDITOR TO THE ASSESSEE. THE AMOUNT IN QUESTION WAS RECEIVED BY DEMAND DRAFT. T HE CIT (APPEALS) WAS OF THE VIEW THAT AS THE LOAN CREDITOR IS ASSESS ED TO TAX AND HAD CONFIRMED THE TRANSACTION NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. 11. THE ONUS IS UPON THE ASSESSEE UNDER SECTION 68 OF THE ACT TO PROVE THE IDENTITY OF THE CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE BEING ASSESSED TO TAX ES TABLISHES THE IDENTITY OF THE CREDITOR. HOWEVER MERELY BECAUSE THE PERMAN ENT ACCOUNT NUMBER OF THE LOAN CREDITOR HAS BEEN FURNISHED, DOES NOT E STABLISH THE CREDITWORTHINESS OF THE CREDITOR. THE ASSESSEE HAD RECEIVED THE SAID LOAN AMOUNT OF RS.25 LACS BY WAY OF DEMAND DRAFT AND NO EVIDENCE WHATSOEVER HAS BEEN FURNISHED ON RECORD TO PROVE TH E SOURCE OF THE SAID DEMAND DRAFT. THE LEARNED A.R. FOR THE ASSESSEE FA IRLY ADMITTED THAT THE BANK STATEMENT OF THE LOAN CREDITOR WAS NOT FILED B EFORE THE AUTHORITIES 5 BELOW. THE LOAN RECEIVED BY THE ASSESSEE IN THE MO NTH OF MARCH, 2006 WAS REPAID IN APRIL, 2006 AS CLAIMED BY THE LEARNED A.R. FOR THE ASSESSEE. HOWEVER, NO EVIDENCE IN THIS REGARD HAS BEEN FURNISHED ON RECORD. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUM STANCES WE FIND NO MERIT IN THE ORDER OF THE ASSESSING OFFICER IN DELE TING THE ADDITION MADE UNDER SECTION 68 OF THE ACT. 12. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY TH E HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. VEER BHAN & SONS (SUP RA) WHEREIN SIMILAR ISSUE OF THE ASSESSEE HAVING FURNISHED THE PERMANENT ACCOUNT NUMBER OF THE CREDITOR AND THE EVIDENCE OF RECEIPT OF PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUES WAS FILED AND THE HON'BLE PUN JAB & HARYANA HIGH COURT HELD AS UNDER: THE ASSESSMENT ORDER CLEARLY SHOWED THAT THE ASSES SEE DID NOT CARE TO RESPOND TO THE SHOW-CAUSE NOTICE ISSUED BY THE ASSE SSING OFFICER REQUIRING IT TO EXPLAIN, WHY IN THE ABSENCE OF PROD UCTION OF THE CREDITORS, THE AMOUNT STANDING TO ITS CREDIT BE NOT TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68. IT WAS NOT THE CASE OF THE ASSESSEE THAT THE CREDITORS WERE NOT RESPONDING TO ITS LETTERS OR REF USING TO ATTEND THE OFFICE. THE ASSESSEE DID NOT EVEN MAKE A REQUEST TO THE ASSESSING OFFICER TO MAKE THE NECESSARY VERIFICATION. THE ASSESSEE AP PEARED TO HAVE FURNISHED CERTAIN MATERIAL BEFORE THE COMMISSIONER (APPEALS) WHO HAD STRAIGHTAWAY ACCEPTED THE SAME. THE ORDER DID NOT S HOW THAT HE AFFORDED ANY OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE CORRECTNESS OF THE MATERIAL PRODUCED BEFORE HIM. FURTHER, HE HAD ALSO NOT RECORDED A FINDING THAT HE HAD HIMSELF MADE ANY VERIFICATION F ROM THE RECORDS OF THE CREDITORS. THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS BY FUR NISHING THE PERMANENT ACCOUNT NUMBERS AND COPIES OF ACCOUNT OF THE CREDIT ORS SHOWING RECEIPTS AND PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUES. THAT, HOWEVER, COULD NOT CONCLUSIVELY PROVE THE GENUINENESS OF THE CREDITORS . THE ASSESSING OFFICER WAS FULLY COMPETENT TO MAKE FURTHER VERIFIC ATION TO SATISFY HIMSELF THAT THE TRANSACTIONS WERE GENUINE. THE APPELLATE A UTHORITIES HAD FAILED TO APPRECIATE THAT THE ASSESSEE HAD TOTALLY FAILED TO RESPOND TO THE NOTICE OF THE ASSESSING OFFICER. FURTHER, EVEN IF THEY WER E OF THE VIEW THAT THE ASSESSING OFFICER SHOULD HAVE MADE CROSS-VERIFICATI ONS FROM THE RECORDS OF THE CREDITORS AVAILABLE WITH THEM, THEY OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO DO SO INSTEAD OF STRAIGHTAWAY ACCEPTING THE ASSESSEES VERSION WITHOUT AFFORDING ANY OPPORTUNIT Y TO THE ASSESSING OFFICER TO MAKE THE VERIFICATION. IN THE ALTERNATIV E, THE APPELLATE AUTHORITIES COULD HAVE THEMSELVES VERIFIED THE MATE RIAL PLACED BEFORE THEM WITH THE RECORDS OF THE CREDITORS. THAT HAD NO T BEEN DONE. 6 ACCORDINGLY, THE APPELLATE AUTHORITIES HAD NOT DEAL T WITH THE MATTER PROPERLY. IN THAT VIEW OF THE MATTER, THE FINDINGS OF THE ASS ESSING OFFICER AND THE TWO APPELLATE AUTHORITIES WERE SET ASIDE AND THAT M ATTER WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE ASSESSEE WOULD PLACE BEFORE HIM ALL THE MATERIAL FI LED BY IT BEFORE THE COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER WO ULD MAKE FURTHER VERIFICATIONS FROM THE RECORDS OF THE CREDITORS, IF NECESSARY. IN CASE, REQUIRED INFORMATION WAS NOT AVAILABLE IN THE RECOR DS OF THE ASSESSEE, THE ASSESSING OFFICER WOULD BE AT LIBERTY TO REQUIRE TH E ASSESSEE TO PRODUCE THE CREDITORS ALONG WITH THE RECORDS. 13. FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE P UNJAB & HARYANA HIGH COURT IN CIT VS. VEER BHAN & SONS (SUPRA) AND THE PRINCIPLES OF NATURAL JUSTICE WE DEEM IT FIT TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER, FOR THE ASSESSEE TO ESTABLISH TH E CREDITWORTHINESS OF THE LOAN CREDITOR. IN CASE THE CREDITWORTHINESS OF THE LOAN CREDITOR IS ESTABLISHED BY THE ASSESSEE, NO ADDITION IS WARRANT ED IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER SHALL AFFORD REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. REVERSING THE ORDER OF CI T (APPEALS), WE ALLOW THE GROUNDS OF APPEAL FILED BY THE REVENUE FOR STAT ISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF MARCH, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND MARCH, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7