The DCIT, Circle-1, Surat V. M/s. PNC Fashoins Pvt.Ltd., Surat

ITA 1596/AHD/2009

• Counselvise Citation: 159620514 RSA 2009
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 1596/ AHD/2009 (ASSESSMENT YEAR 2006-07) DCIT, CIRCLE 1, SURAT VS. M/S. PNC FASHIONS PVT. LTD., 3004, WORLD TRADE CENTRE, RING ROAD, SURAT PAN/GIR NO. : AACCP0994R (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RAJ MEHRA, SR. DR RESPONDENT BY: NONE DATE OF HEARING: 09.08.2011 DATE OF PRONOUNCEMENT: 26/08/2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT(A) I, SURAT, DATED 13.03.2009 FOR THE ASSESSMENT YEAR 200 6-07. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF THE NOTICE WHICH HAS BEEN DULY SERVED ON THE ASSESSEE AS PER T HE ACKNOWLEDGEMENT AVAILABLE ON RECORD AND HENCE, WE PROCEED TO DECIDE THE APPEAL OF THE REVENUE EX-PARTE QUA THE ASSESSEE. 3. THE GROUND NO.1 OF THE APPEAL READS AS UNDER: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN RESTR ICTING THE DISALLOWANCE OF RS.1,70,710 TO RS.85,400, WITHOUT A SSIGNING ANY REASONS FOR SUCH RESTRICTIONS. 4. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. IN PARA 3 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DEBIT ED EXPENSES OF RS.3,99,072/- UNDER THE HEAD OFFICE EXPENSES AND AN AMOUNT OF I.T.A.NO.1596 /AHD/2009 2 RS.1,16,213/- UNDER THE HEAD REPAIR & MAINTENANCE E XPENSES (OTHERS) AND AN AMOUNT OF RS.54,014/- UNDER THE HEAD MISCELLANEO US EXPENSES. THE A.O. ASKED THE ASSESSEE TO EXPLAIN THAT THESE EXPEN SES ARE INCURRED FULLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE ASSESSEE WAS ASKED TO PRODUCE VOUCHERS/BILLS FOR VERIFICATION. IT IS THE REAFTER, NOTICED BY THE A.O. THAT IT IS FOUND THAT MOST OF THE VOUCHERS/BIL LS ARE SELF MADE AND INCOMPLETE. THEREAFTER, THE A.O. MADE DISALLOWANCE TO THE EXTENT OF 30% OF THESE EXPENSES AND IN THIS MANNER, HE MADE DISAL LOWANCE OF RS.1,70,790/- OUT OF THESE EXPENSES ON ACCOUNT OF P ROPER VERIFICATION. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATER BEF ORE LD. CIT(A). IT WAS SUBMITTED BY THE ASSESSEE BEFORE LD. CIT(A) THA T MOST OF THE VOUCHERS ARE SUPPORTED BY BILLS AND PAID BY ACCOUNT S PAYEE CHEQUES. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE LD. C IT(A) THAT NO DISALLOWANCE SHOULD BE MADE CONSIDERING THE FACT TH AT AGAINST A TOTAL TURNOVER OF RS.4.49 CRORES, EXPENSES OF ONLY RS.1,7 0,710/- WERE NOT FOUND TO BE FULLY VOUCHED. LD. CIT(A) HELD THAT 50% OF T HE DISALLOWANCE MADE BY THE A.O. WILL BE JUSTIFIED AND HE DIRECTED THE A .O. TO RESTRICT THE DISALLOWANCE TO RS.85,400/- AS AGAINST RS.1,70,710/ - MADE BY THE A.O. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. IT IS SUBMITTED BY THE LD. D.R. THAT THIS CONTEN TION WAS NEVER RAISED BEFORE THE A.O. THAT THE VOUCHERS ARE SUPPORTED BY BILLS AND PAID BY A/C PAYEE CHEQUES AND HENCE THE ORDER OF THE CIT(A) SHO ULD BE REVERSED AND THAT THE A.O. SHOULD BE RESTORED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D. R. AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND T HAT IT IS NOT THE CASE OF THE A.O. THAT THE VOUCHERS WERE NOT PRODUCED BUT TH E CASE OF THE A.O. IS THIS THAT MOST OF THE VOUCHERS/BILLS ARE SELF MADE AND INCOMPLETE. ON THIS I.T.A.NO.1596 /AHD/2009 3 BASIS ALONE, THE A.O. MADE DISALLOWANCE OF 30% OF T HE EXPENSES, WHICH HAS BEEN RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF 15% BEING 50% OF THE DISALLOWANCE MADE BY THE A.O. LD. CIT(A) HAS N OTED THAT AS PER THE ASSESSEE, MOST OF THE VOUCHERS ARE SUPPORTED BY BIL LS AND ARE PAID BY A/C PAYEE CHEQUES. CONSIDERING ALL THE FACTS IN ITS E NTIRETY, AND IN VIEW OF THE SMALLNESS OF THE AMOUNT, WE DO NOT FIND ANY MER IT TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE BECAUSE THE DISAL LOWANCE MADE BY THE A.O. ALSO WAS ON ESTIMATE BASIS AND THE SAME WAS RE DUCED BY LD. CIT(A) BY SUBSTITUTING HIS OWN ESTIMATE IN PLACE OF THE ES TIMATE OF THE A.O. LD. D.R. COULD NOT SATISFY US THAT THE DISALLOWANCE CON FIRMED BY THE LD. CIT(A) IS NOT SUFFICIENT IN THE FACTS OF THE PRESEN T CASE AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.1 OF THE REVENUE STANDS REJECTED. 7. GROUND NO.2 OF THE REVENUE IS AS UNDER: (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED DELETING THE ADDITIONS MADE BY THE AO OF RS.10,70,000 ON ACCOUNT OF UNEXPLAINED CASH-CREDIT TOGETHER WITH INTEREST CLAIMED, WITHOUT APPRECIATIN G THE FACT THAT MERE SUBMISSION OF CONFIRMATORY LETTERS OF THE CRED ITORS, THEIR PAN AND BANK ACCOUNTS CANNOT ITSELF PROVE THE CREDITWOR THINESS OF THE CREDITORS. 8. THE FACTS OF THE CASE ARE THAT IT IS NOTED BY TH E A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS TAKEN UNSECU RED LOANS OF RS.30 LACS FORM SIX DIFFERENT PERSONS. THE A.O. HAS FURT HER NOTED THAT IN THE BANK ACCOUNTS OF THE LENDERS, THERE WERE CASH DEPOS ITS TO THE EXTENT OF PART AMOUNT OF LOAN GIVEN BY THE RESPECTIVE PERSONS . THE A.O. NOTED THAT IN ONE CASE, THERE WAS CASH DEPOSIT OF RS.3 LACS WH EREAS HE HAS GIVEN LOAN OF RS.5 LACS. IN THE 2 ND CASE, THE A.O. NOTED THAT THERE WAS CASH DEPOSIT O F RS.2.5 LACS WHEREAS LOAN GIVEN BY HIM IS OF RS.5 LA CS. IN THE 3 RD ACCOUNT, CASH DEPOSIT WAS NOTED AT RS.3.50 LASS WHEREAS LOAN GIVEN BY HIM IS RS.5 LACS. IN THE 4 TH AND 6 TH ACCOUNTS, THE AMOUNT OF CASH DEPOSITED WAS NOTED I.T.A.NO.1596 /AHD/2009 4 AT RS.50,000/- EACH ONLY AND IN THE 5 TH ACCOUNT AMOUNT DEPOSITED IN CASH IS NOTED TO BE RS.70,000/- WHEREAS EACH OF THEM HAD GIVEN LOAN OF RS.5 LACS TO THE ASSESSEE. THE A.O. MADE ADDITION OF RS .10.70 LACS BEING THE AMOUNT DEPOSITED IN CASH IN THE BANK ACCOUNTS OF TH ESE LENDERS AND HE ACCEPTED THE BALANCE AMOUNT OF LOAN OBTAINED BY THE ASSESSEE FROM THESE VERY PERSONS. BEING AGGRIEVED, ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE CIT(A) WHO HAS DELETED THE ADDITION ON THIS BASIS THAT THERE IS NO DISPUTE ABOUT THE IDENTITY AND GENUINENESS OF TRANS ACTION BECAUSE THE SAME HAS BEEN ACCEPTED BY THE A.O. ALSO . REGARDING THE CREDITWORTHINESS OF THE LENDERS, IT IS NOTED BY THE LD. CIT(A) THAT ASSESSEE HAS DISCHARGED ITS ONUS BY FILING COPIES OF CONFIRMATION BEARING N AME, ADDRESSES, PAN, COPY OF ACKNOWLEDGEMENTS OF RETURN OF INCOME FILED, BALANCE SHEET, BANK STATEMENTS ETC AND HENCE, THE ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF ROSHNI BUILDERS AS REPORTED IN 256 ITR 360 WHEREIN, IT WAS HELD THAT THE A.O. CANNOT ASK THE SOURCE OF THE SOU RCE AND IF THE CASH DEPOSITED BY THE CREDITORS IN THEIR BANK ACCOUNTS I S FOUND UNEXPLAINED, THE ADDITION SHOULD BE MADE IN THE HANDS OF THE DEP OSITORS AND NOT IN THE HANDS OF THE ASSESSEE BORROWER. HE DELETED THE EN TIRE ADDITION AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 9. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D .R. AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND T HAT FROM THESE VERY SIX PERSONS, THE ASSESSEE HAS RECEIVED UNSECURED LOAN O F RS.30 LACS AND THE A.O. HAS ACCEPTED THE PART LOAN AND TO THE EXTENT O F RS.10.70 LACS FOR WHICH THERE WAS CASH DEPOSITS IN THE BANK ACCOUNTS OF THE LENDERS, ADDITION WAS MADE BY THE A.O. IN THE FACTS OF THE PRESENT CASE, WE FEEL THAT MAKING OF SUCH ADDITION IS NOT JUSTIFIED. REG ARDING THE SOURCE OF I.T.A.NO.1596 /AHD/2009 5 CASH DEPOSITED ALSO, IT WAS EXPLAINED BY THE ASSESS EE BEFORE THE A.O. THAT THESE PERSON WERE DEALING IN DIAMOND AND ONE OF THE M SMT. LATABEN N PAREKH, WHO HAS DEPOSITED CASH OF RS.50,000/- IN HE R BANK ACCOUNT, WAS STATED TO BE IN RETAIL SALE OF SAREES AND DRESS MAT ERIAL AND WAS FILING HER RETURN OF INCOME U/S 44AF. ALL THESE PERSONS ARE F ILING THEIR RETURN OF INCOME AND THEY HAVE GIVEN THEIR PAN AND DETAILS OF THEIR A.O. BY WAY OF PROVIDING ACKNOWLEDGEMENT OF RETURN OF INCOME FI LED BY THEM. UNDER THESE FACTS, WE FEEL THAT THE ADDITION MADE BY THE A.O. IS NOT JUSTIFIED BECAUSE THE IDENTITY OF THE CREDITORS AND GENUINENE SS OF TRANSACTION IS NOT IN DOUBT AND FOR CREDITWORTHINESS, WHEN THE FULL DE TAILS OF THE LENDERS IS AVAILABLE INCLUDING THEIR PAN, DETAILS OF THE A.O., BAN K ETC, EVEN IF IT IS FOUND THAT THEY ARE NOT IN A POSITION TO EXPLAIN TH E SOURCE OF CASH DEPOSITED BY THEM IN THEIR BANK ACCOUNTS, ADDITION CAN BE MADE IN THE HANDS OF THOSE CREDITORS AS PER THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF ROHINI BUILDERS (SUPRA) BUT NO ADDITION IS JUSTIFIED IN THE HANDS OF THE BORROWER UNDER THESE FACTS. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. GROUND NO.2 OF THE REVENUE IS ALSO REJECTED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 26 AUG., 2011. SD/- SD/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 26/08/2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE I.T.A.NO.1596 /AHD/2009 6 /TRUE COPY/ 1. DATE OF DICTATION. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER.. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..