Rajendra Kumar Saha, Baripada V. ITO, Baripada

ITA 161/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3885 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: D K SHETH
• Keywords: Unexplained cash credit; Business income; Depreciation; Accommodation entries; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 RAJENDRA KUMAR SAHA, WARDNO.6, BADABAZAR, BARIPADA. VS. ITO, WARD - 1, PALABANI, BARIPADA. PAN/GIR NO. AIVPS 8616 B (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI D.K.SHETH, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 05 /04 / 2017 DATE OF PRONOUNCEMENT : 07 /04 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 1, BHUBANESWAR , DATED 23.1.2015 , FOR THE ASSESSMENT YEAR 2008 - 09 . 2. GROUND NOS.1,5 & 6 OF THE APPEAL ARE GENERAL IN NATURE AND HENCE, REQUIRE NO SEPARATE ADJUDICATION BY BE, 3. IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.31,302/ - AND DISALLOWANCE OF EXPENDITURE UNDER THE HEAD OIL & FUEL AND REPAIR AND MAINTENANCE. 2 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 4. AT THE TIM E OF HEARING, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE DID NOT PRESS GROUND TAKEN FOR DISALLOWANCE OF DEPRECIATION OF RS.31,302/ - AND HENCE, THE SAME IS DISMISSED FOR WANT OF PROSECUTION. 4.1 WITH REGARD TO DISALLOWANCE OF RS.2 LAKHS UNDER THE HEAD OI L & FUEL AND REPAIR AND MAINTENANCE ACCOUNT, THE UNDISPUTED FACTS ARE THAT THE ASSESSING OFFICER FOUND THAT THE TURNOVER OF TH E ASSESSEE HAS DECREASED FROM RS .3,40,64,079/ - TO RS.1,05,14,440/ - I.E. BY 65%. HE OBSERVED THAT THE EXPENSES HAVE INCREASED SUB STANTIALLY IN RESPECT OF OIL & FUEL AND REPAIR & MAINTENANCE BY 353% AND 239% RESPECTIVELY. THE ASSESSING OFFICER OBSERVED THAT THE LEDGER ACCOUNTS CONTAIN ONLY DATES AND AMOUNTS WITHOUT ANY NARRATION REGARDING THE NATURE AND PURPOSE OF CASH PAYMENTS. NO REFERENCE IN THE LEDGER HAS BEEN G IVEN WITH CASH BOOK ENTRY OR TO THE BILLS & VOUCHERS. THE ASSESSEE COULD PRODUCE ONLY FEW BILLS AND VOUCHERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE, HE HELD THAT THE ASSESSEE FAILED TO ESTABLISH THE CORRECTNESS AND GENUINENESS OF TRANSACTION IN RESPECT OF OIL AND FUEL AND REPAIR & MAINTENANCE AND, THEREFORE, DISALLOWED RS.1 LAKH EACH UNDER THE HEADS OIL & FUEL AND REPAIR & MAINTENANCE AGGREGATING TO RS.2 LAKHS ON ESTIMATE BASIS. 5. ON APPEAL, THE CIT( A) HELD THAT NO CREDIBLE EXPLANATION COULD BE SUBMITTED FOR SUBSTANTIAL INCREASE OF EXPENSES IN THE FACE OF DRASTIC FALL OF TURNOVER. THE ASSESSEE FAILED TO FURNISH BILLS AND VOUCHERS IN SUPPORT OF THE EXPENSES CLAIMED ON ACCOUNT OF OIL & FUEL AND REPAIR & MAINTENANCE 3 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 AND MOST OF THE EXPENSES WERE MADE IN CASH. THEREFORE, HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 6. BEFORE ME, THE ONLY ARGUMENT OF THE LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS THAT THE DISALLOWANCE OF RS.1 LAKH EACH UNDER TH E HEAD OIL AND FUEL AND REPAIR & MAINTENANCE WAS EXCESSIVE. 7. LD DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, FULLY JUSTIFIED THE ORDERS OF LOWER AUTHORITIES . 8. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS ON RECORD, I FIND THAT LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS NOT DISPUTED DURING THE COURSE OF HEARING THAT THE BILLS AND VOUCHERS FOR OIL & FUEL AND REPAIR & MAINTENANCE COULD NOT BE PRODUCED BEFORE THE ASSESSING OF FICER AS WELL AS THE CIT(A) . H E ALSO COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT HOW THE DISALLOWANCE OF RS.1 LAKH EACH UNDER THE HEAD OIL & FUEL AND REPAIR & MAINTENANCE WAS EXCESSIVE. HENCE, I FIND NO GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS CONFIRMED AND GR OUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN GROUND NO.4 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.40,588/ - UNDER THE HEAD UNDISCLOSED ASSETS IN BALANCE SHEET. 10. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER OBSERVED THAT THE BALANCE SHEET DOES NOT REFLECT PROPERLY THE ADVANCE TAX 4 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 AND TDS THEREBY THE ASSETS HAVE BEEN UNDERSTATED BY AN AMOUNT OF RS .40,588/ - . IN ABSENCE OF ANY EXPLANATION, THE ASSESSING OFFICER ADDED RS.40,588/ - AS INCOME FROM OTHER SOURCES. 11. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT NO EXPLANATION WAS GIVEN AGAINST THE FINDINGS OF THE ASSESSING OFFICER. 12. BEFORE ME, IT WAS SUBMITTED BY LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT RS.40,588/ - REPRESENTS THE AMOUNT OF ADVANCE TAX AND TDS. IT IS NOT ANY ASSET AS HELD BY THE ASSESSING OFFICER AND THE CIT(A). IT WAS HIS SUBMISSION THA T THE PAYMENT OF ADVANCE TAX AND TDS WAS REFLECTED IN THE CAPITAL ACCOUNT OF THE ASSESSEE. ON BEING ASKED BY THE BENCH TO PRODUCE THE BALANCE SHEET AND CAPITAL ACCOUNT OF THE ASSESSEE, LD A.R. OF THE ASSESSEE EXPRESSED HIS INABILITY TO DO SO. 13. IN VIEW OF THE FACT THAT LD A.R. FAILED TO PRODUCE COPY OF BALANCE SHEET AND CAPITAL ACCOUNT WHEN ASKED BY THE BENCH, THE EXPLANATION OF THE LD A.R. OF THE ASSESSEE THAT PAYMENT OF ADVANCE TAX AND TDS OF RS.30,588/ - WAS REFLECTED IN THE CAPITAL ACCOUNT OF THE ASSE SSEE IS UN - SUBSTANTIATED AND SUCH UNSUBSTANTIATED CLAIM CANNOT BE ACCEPTED. HENCE, I FIND NO GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 5 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 14. IN GROUND NO.4 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF R.12,75,000/ - UNDER THE HEAD UNEXPLAINED CASH CREDIT. 15. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AN D MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED UNSECURED LOAN OF RS.12,75,000/ - FROM FOLLOWING PERSONS: NAME OF CREDITOR PAN DATE OF CREDIT AMOUNT(RS.) USHA AGARWAIA ABRPA7488A 20.7.2007 3,00,000 RAJENDRA KUMAR AQRAWAL AAUPA3319G 1.8.2007 1,00,000 GULAB CHAND KHETAN AFZPK0204J 11.4.2007 2,00,000 BRIJ MOHAN MAUKA ACZPM7266B - DO - 2,00,000 MIHIR KUMAR PATI ADJPP8065G 23.4.2007 2,25,000 DILIP KUMAR PATI ABFPP3680P 27.4.2007 2,50,000 TOTAL 12,775,000 16. THE ASSESSEE WAS ASKED TO FURNISH EVIDENCE TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF CREDITORS AND GENUINENESS OF TRANSACTION IN RESPECT OF EACH CASH CREDIT. IN RESPONSE TO SAME, THE ASSESSEE FURNISHED LOAN CONFIRMATIONS , COPY OF INCOME TAX RETURNS AND COPY OF BANK ACCOUNT OF THE LOAN CREDITORS AND EXPLAINED THAT ALL THE TRANSACTIONS WERE THROUGH CHEQUE. THE ASSESSING OFFICER OBSERVED THAT IN ALL THE CASES OF THE LOAN CREDITORS, THERE WAS A COMMON PATTERN T HAT THEY HAVE FILED THEIR RETURNS SHOWING NOMINAL BUSINESS INCOME ON ESTIMATED BASIS. BANK ACCOUNTS MAINTAINED BY THEM SHOW NOMINAL BALANCE WITH FEW TRANSACTIONS THROUGHOUT THE YEAR. AN AMOUNT EQUAL TO LOAN SOUGHT TO BE GIVEN TO THE ASSESSEE HAS BEEN 6 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 DEP OSITED SUDDENLY IN THE ACCOUNT AND WITHDRAWN SOON AFTER BY CHEQUE PAYABLE TO THE ASSESSEE OR HIS PROPRIETARY CONCERN. THEREFORE, HE HELD THAT ALL THE CASH CREDITS WERE ACCOMMODATION ENTRIES ONLY, INTENDED TO GIVE IT A COLOUR OF GENUINE LOAN TRANSACTIONS A ND MADE ADDITION OF RS.12,75,000/ - TO THE INCOME OF THE ASSESSEE. 17. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY OF THE CREDITORS, CREDITWORTHINESS OF THE CREDITORS AND G ENUINENESS OF THE TRANSACTIONS. 18. BEFORE ME, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED THAT THE ASSESSEE IN CASE OF CASH CREDIT WAS REQUIRED TO PROVE THE THREE INGREDIENTS SUCH AS IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CRE DITWORTHINESS OF THE CREDITORS. HE ARGUED AND SUBMITTED THAT THE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER HAS ADMITTED TO THE FACT THAT THE ASSESSEE FILED BEFORE HIM THE LOAN CONFIRMATIONS, COPY OF INCOME TAX RETURNS, COPY OF BANK ACCOUNT OF THE LOAN CREDITORS AND EXPLAINED THAT ALL THE TRANSACTIONS WERE THROUGH CHEQUE. THUS, THE ASSESSEE DISCHARGED ITS BURDEN AND IT WAS THEREAFTER FOR THE ASSESSING OFFICER TO SHOW BY BRINGING MATERIAL ON RECORD THAT CASH CREDITORS WERE NOT GENUINE OR THAT THE CASH CREDITORS DID NOT HAVE CREDITWORTHINESS TO ADVANCE THE MONEY TO THE ASSESSEE. HE ARGUED THAT NO SUCH MATERIAL HA S BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICE AS WELL AS THE CIT(A) AND, THEREFORE, THE ADDITION MADE CANNOT BE SUSTAINED IN LAW. 7 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 19. ON THE OTHER HAND, LD DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES. HE SUBMITTED THAT MERELY BECAUSE THE LOAN TRANSACTION WAS SOUGHT TO BE RELIED UPON BY THE ASSESSE E, AS THAT TRANSACTION WAS MADE BY CHEQUE, BY ITSELF WILL NOT PROVE THE GENUINENESS OF THE TRANSACTION . HE FURTHER PRODUCED COPIES OF INCOME TAX RETURNS OF THE LOAN CREDITO RS TO SUBSTANTIATE HIS CLAIM THAT THEY DID NOT HAVE CAPACITY TO ADVANCE THE MONEY AS LOAN TO THE ASSESSEE. 20. I FIND THAT THE ASSESSE IN SUPPORT OF RECEIPT OF CASH CREDIT OF RS.12,75,000/ - FILED BEFORE THE ASSESSING OFFICER LOAN CONFIRMATIONS, COPY OF IN COME TAX RETURNS AND COPY OF BANK ACCOUNT OF THE LOAN CREDITORS AND EXPLAINED THAT ALL THE TRANSACTIONS WERE THROUGH CHEQUE. THEREFORE, I FIND THAT THE ASSESSEE HAS DISCHARGED HIS INITIAL BURDEN, WHICH ESTABLISH THE IDENTITY OF THE LOAN CREDI T ORS BEYOND AN Y SHADOW OF DOUBT. THEREAFTER, THE DEPARTMENT COULD NOT BRING ANY POSITIVE MATERIAL ON RECORD TO SHOW THAT EITHER THE LOAN CREDITORS HAVE NOT ACTUALLY ADVANCED THE MONEY IN QUESTION OR THEY COULD NOT HAVE ADVANCED THE SAME. THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS DRAWN AN ADVERSE INFERENCE REGARDING CREDITWORTHINESS OF THE LOAN CREDITORS MERELY ON THE BASIS OF SUSPICION ALONE. IT WAS NOT THE CAS E OF THE ASSESSE THAT THE LOAN CREDITORS HAD ADVANCED THE MONEY OUT OF THE I NCOME OF THE YEAR ALONE AND NO POSITIVE MATERIAL HAS BEEN BROUGHT ON RECO RD TO SHOW THAT LOAN CREDITORS COULD NOT HAVE ANY OTHER SOURCE LIKE HIS CAPITAL I.E. SAVING OF EARLIER YEARS OR RECEIPT FROM ANY OTHER PERSON FRO M WHICH THE LOAN CREDITORS COULD NOT H AVE ADVANCED THE LOAN. T HE OTHER OBSERVATION OF THE ASSESSING OFFICER WHILE MAKING THE ADDITION U/S.68 OF 8 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 THE ACT IS THAT THE LOAN CREDITORS HAVE DEPOSITED THE AMOUNT IN CASH BEFORE ISSUING CHEQUE TO THE ASSESSEE. IN MY CONSIDERED VIEW, WHERE A BORROWING OR A CREDIT IS SHOWN TO HAVE COME FROM THE PERSON OTHER THAN THE ASSESSEE, THERE IS NO FURTHER RESPONSIBILITY FOR THE ASSESSEE TO SHOW THAT IT HAS COME FROM THE ACCOUNTED SOURCE OF THE LENDER. MY VIEW FINDS SUPPORT FROM THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES, 245 ITR 160 (MP) . FURTHER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ROHINI BUILDERS, 256 ITR 360 (GUJ) HELD THAT MERE IDENTIFICATION OF THE SOU RCE OF THE CREDITORS EVEN WITHOUT EVIDEN CE AS T O THE NATURE OF INCOME COULD JUSTIFIY ACCEPTANCE, WHERE THE ASSESSEE HAS GIVEN GIR NO/PAN NO. OF THE CREDITORS AND ALSO SHOWS THAT THE AMOUNTS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES. THE HONBLE HIGH COURT IN THIS CASE ENDORSED THE FINDINGS OF THE TRIBUNA L THAT IT IS NOT NECESSARY THAT THERE SHOULD BE AN EXPLANATION AS TO THE SOURCE OF THE MONEY ON TH E PART OF THE CREDITORS IN EVERY CASE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHIV DHOOTI PEARLS & INVESTMENT IN ITA NO.429/2003 ORDER DATED 21. 12.2015, HAS HELD THAT WHERE THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE LENDER, THERE WAS NO REQUIREMENT IN LAW FOR THE ASSESSEE TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE SUB - CREDITOR. HENCE, IN MY CONSIDERED OPINION, THE ADDITION OF RS.12,75,000/ - MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NOT SUSTAINABLE IN LAW. THEREFORE, I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE ADDITION OF RS.12,75,000/ - AND AL LOW THIS GROUND OF APPEAL OF THE ASSESSEE. 9 ITA NO. 161/CTK/2015 ASSESSMENT YEAR : 2008 - 09 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 07 /04 /2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 07 /04 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : RAJENDRA KUMAR SAHA, WARDNO.6, BADABAZAR, BARIPADA. 2. THE RESPONDENT. ITO, WARD - 1, PALABANI, BARIPADA 3. THE CIT(A) - 1, BHUBANESWAR. 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//