Snehal Pharma Chem, Baroda V. The ITO, Ward -2(4), Baroda

ITA 1626/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9158 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-07-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 16-06-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Keywords: Depreciation; Source of fund; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1626/AHD/2005 ASSESSMENT YEAR:2001-02 DATE OF HEARING:30.7.09 DRAFTED:30.7.09 SNEHAL PHARMACHEM NOW KNOWN AS SPC LIFE SCIENCES PVT. LTD., 284/1, 2 & 3, GIDC, OPP. LUCKY RESTAURANT, MAKARPURA, BARODA PAN NO.AAFFS3545R V/S. INCOME TAX OFFICER, WARD-2(4) BARODA (APPELLANT) .. (RESPONDENT) ITA NO.2102/AHD/2006 ASSESSMENT YEAR:2001-02 SNEHAL PHARMACHEM NOW KNOWN AS SPC LIFE SCIENCES PVT. LTD., 284/1, 2 & 3, GIDC, OPP. LUCKY RESTAURANT, MAKARPURA, BARODA PAN NO.AAFFS3545R V/S. INCOME TAX OFFICER, WARD-2(4) BARODA (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI M.J. SHAH, AR RESPONDENT BY:- SHRI SANJEEV KASHYAP, SR. DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- ITA NO.1626/AHD/05 & 2102/AHD/06 A.Y. 2001-02 M/S. SPC LIFE SCIENCES P. LTD. V. ITO WD-2(4) BARODA PAGE 2 THESE TWO APPEALS BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VI & II, BARODA IN APPEALS NO.CAB/VI- 198/2004-05 & CAN/II-22/06-07 BY DIFFERENT DATES 14 -03-2005 AND 24-07-2006. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD-2(4), BARODA U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VI DE HIS ORDER DATED 31-03-2004 FOR THE ASSESSMENT YEAR 2001-02. FIRST WE WILL TAKE UP ASSESSEES APPEAL IN ITA NO.1 626/AHD/2005. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER U/S.68 OF THE ACT ON ACCOUNT OF CASH CREDIT AMOUNTING RS.1 LAKH EACH IN THE NAME OF SHRI CHARURBHUJ MANDANKA AND SMT. ANJANABEN C MANDANKA. 3. THE BRIEF FACTS LEADING TO THIS ISSUE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS RECEIVED NEW DEPOSITS FROM DIFFERENT PARTIES AND THE AO IN THE C ASE OF SHRI CHARURBHUJ MANDANKA MADE ADDITION BY STATING THE FOLLOWING:- THOUGH THE ASSESSEE HAS FURNISHED CONFIRMATION FRO M THE ABOVE PARTY ALONG WITH AFFIDAVIT SHOWING THAT THE AMOUNT OF DEPOSIT I S OUT OF AGRICULTURAL INCOME AND THE DEPOSIT IS MADE TO THE ASSESSEE WITHOUT CHA RGING INTEREST, THE INTENTION OF MAKING DIFFERENT DRAFT AS MENTIONED AB OVE IN ONE DAY CANNOT BE UNDERSTOOD. IT IS STATED BY SHRI CHATURBHUJ MANDANK A IN HIS AFFIDAVIT, THAT THE FIRST DRAFT OF RS.3,00,000/- WAS PURCHASED FROM HIS PAST SAVING FROM AGRICULTURAL INCOME AND KEPT IN THE FORM OF CASH TI LL THE PURCHASE OF DRAFT CANNOT BE BELIEVED. SIMILARLY THREE DRAFT PURCHASE D ON 16.02.2001 OF RS.1,00,000/- EACH ALSO FROM AGRICULTURAL INCOME IS CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE FIRM, AS THE ASSESSEE HAS NO T SATISFACTORY EXPLANATION EXCEPT FILING THE CONFIRMATION ALONG WITH AFFIDAVIT . ACCORDINGLY A SUM OF RS.6 LAKHS WAS ADDED TO THE RE TURN OF INCOME OF THE ASSESSEE. 4. AS REGARDS TO THE DEPOSIT OF RS.1 LAKH IN THE NA ME OF SMT. ANJANABEN C MANDANKA, THE ASSESSING OFFICER STATED THAT THE ASS ESSEE HAS NOT PROVED THE SOURCE OF INCOME AND GENUINENESS OF THE TRANSACTION EXCEPT MERE CONFIRMATION. THE AO MADE ADDITION BY GIVING FOLLOWING FINDING IN PARA-4.2 :- ITA NO.1626/AHD/05 & 2102/AHD/06 A.Y. 2001-02 M/S. SPC LIFE SCIENCES P. LTD. V. ITO WD-2(4) BARODA PAGE 3 4.2 AS REGARDS, THE DEPOSIT OF RS.1,00,000/- BY AN JANABEN C MANDANKA ON 16.02.2001 BY DD NO.34643, THE ASSESSEE HAS NOT PRO VED THE SOURCES OF INCOME, GENUINENESS OF THE TRANSACTION EXCEPT BY FI LING MERE CONFIRMATION. NO AFFIDAVIT IN THIS CASE WAS FILED BY THE ASSESSEE FIRM. IT IS STATED BY THE ASSESSEE THAT IN THE CASE OF ANJANBEN IS HOLDING PA NO.AGYPP 7144A AND COPY OF THE SAME IS FILED. ON VERIFICATION OF COPY OF PA NO. CARD, IT IS NOTICED THAT THE SAME IS ISSUED FROM BARODA AND IT IS STATE D BY THE ASSESSEE THAT SHE IS NOT ASSESSED TO TAX. IN THE CIRCUMSTANCES, THIS DEPOSIT OF RS.1,00,000/- IS ALSO FOUND TO BE NOT GENUINE AND CONSIDERED AS UNDI SCLOSED INCOME OF THE ASSESSEE FIRM. ACCORDINGLY, AO MADE ADDITION OF RS.1 LAKH. AGGRIE VED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER EXACTLY ON IDENTICAL FACTS. AGGRIEVED, THE ASSESSEE PREFERR ED SECOND APPEAL BEFORE US. 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE, SHRI M.J . SHAH STATED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION WITHOUT ANY BASIS AND ALSO STATED THAT THE ASSESSEE HAS FURNISHED THE CONFIRMATION FROM THESE TWO CASH CREDITORS ALONG WITH SOURCE OF THEIR INCOME AND GENUINENESS OF TRANSACTI ON BY WAY OF FILING OF AFFIDAVIT. HE FURTHER ARGUED THAT THE DEPOSITOR HAS FIELD AN A FFIDAVIT STATING THAT THEY ARE AGRICULTURISTS AND THE CREDITWORTHINESS OF THE DEPO SITORS HAVE BEEN PROVED. LD. COUNSEL ALSO TAKEN US THE ASSESSEES PAPER BOOK AT PAGE NO.3-6 REFERRED WHEREIN THE ACKNOWLEDGEMENT OF RETURN ALONG WITH COMPUTATIO N AND BALANCE-SHEET OF THE CREDITOR, SHRI CHATRABHUJ C MADANKA IS ENCLOSED. HE SPECIFICALLY REFERRED THE BALANCE-SHEET AS ON 31-03-2001 OF CHATRABHUJ C PATE L, WHO IS PROPRIETOR OF M/S. VIJAY CONSTRUCTION CO., BY WHICH HE TRIED TO PROVE THE LOAN OF SHRI CHATRABHUJ MANDANKA BY STATING THAT THE ASSESSEE ADVANCED A SU M OF RS.6 LAKHS AND THIS IS REFLECTED IN THE BALANCE-SHEET. SIMILAR ARE THE FA CTS IN THE CASE OF SMT.ANJANNABEN C PATEL FROM WHO THE ASSESSEE HAS TAKEN LOAN OF RS. 1 LAKH. IN THE ASSESSEES PAPER BOOK AT PAGE-17 TO 20 THE ACKNOWLEDGEMENT OF RETURN AND COMPUTATION OF B ALANCE- SHEET IS ENCLOSED. HEREBY THE LD. COUNSEL STATED TH AT THIS PROOFS OF LOAN IS GENUINE AND EXPLAINED. ON QUERY FROM THE BENCH, LD. DEPART MENTAL REPRESENTATIVE FAIRLY STATED THAT THIS DOCUMENT ARE NOT SUBMITTED BEFORE THE LOWER AUTHORITIES AND THESE NEED RE-VERIFICATION. ON THIS, LD. COUNSEL FAIRLY STATED THAT THIS ISSUE CAN BE REMITTED BACK TO THE FILE OF ASSESSING OFFICER FOR FURTHER V ERIFICATION AND THE ISSUE CAN BE EXAMINED AFRESH IN THE LIGHT OF THESE DOCUMENTS. ITA NO.1626/AHD/05 & 2102/AHD/06 A.Y. 2001-02 M/S. SPC LIFE SCIENCES P. LTD. V. ITO WD-2(4) BARODA PAGE 4 6. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT NONE OF THE LOWER AUTHORITIES HAS EXAMINED THE RETURNS AND BALANCE-SHEET OF THESE CREDITORS, A S THESE ARE FILED BEFORE US FOR THE FIRST TIME, AS ADMITTED BY BOTH THE SIDES. ACCORDI NGLY, WE HAVE NO ALTERNATIVE EXCEPT TO SET ASIDE THIS ISSUE BEFORE THE AO IN VIEW OF TH ESE DOCUMENTS AND THE ASSESSEE IS DIRECTED TO PRODUCE THE SAME BEFORE THE ASSESSING O FFICER, SO THAT HE CAN GO THROUGH THESE DOCUMENTS ON THESE CASH CREDITS AND D ECIDE ACCORDINGLY. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. 7. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWANCE 1/5 OF THE FOLLOWING EXPENSES:- (A) TELEPHONE EXPENSES (B) TRAVELING EXPENSES VEHICLE EXPENSES AND (D) DEPRECIATION AS PERSONAL EXPENSES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED TH E CASE RECORDS INCLUDING THE ASSESSMENT ORDER, ORDER OF CIT(A) AND ASSESSEES PA PER BOOK CONTAINING PAGES 1 TO 30. WE FIND THAT THE ASSESSING OFFICER HAS DISALLO WED ONLY ON THE ELEMENT OF PERSONAL EXPENSE IN THESE EXPENSES AND ACCORDINGLY DISALLOWED 1/5. THERE IS NO FINDING IN THE ASSESSMENT ORDER THAT THE ASSESSEE C OULD NOT PRODUCE THE BILLS & VOUCHERS. HOWEVER, EVEN BEFORE US THE ASSESSEE STA TED THAT A REASONABLE DISALLOWANCE CAN BE MADE. ACCORDINGLY, WE FEEL THAT 1/10 OF THESE EXPENSES SHOULD BE DISALLOWED. ACCORDINGLY, AO IS DIRECTED TO RE-C OMPUTE THE INCOME AFTER DISALLOWANCE 1/10 AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. NOW COMING TO ASSESSEES APPEAL IN ITA NO.2102/AHD/ 2006. 9. AT THE OUTSET, IT IS SEEN THAT THE PENALTY LEVIE D U/S.271(1) OF THE ACT IS ON ACCOUNT OF ADDITION MADE BY THE ASSESSING OFFICER O N TWO CASH CREDITS, AS SET ASIDE BY US AS ABOVE TO THE FILE OF THE ASSESSING OFFICER IN ASSESSEES APPEAL IN ITA ITA NO.1626/AHD/05 & 2102/AHD/06 A.Y. 2001-02 M/S. SPC LIFE SCIENCES P. LTD. V. ITO WD-2(4) BARODA PAGE 5 NO.1626/AHD/2005. AS THE QUANTUM ADDITION HAS BEEN SET ASIDE TO THE FILE OF THE AO THIS PENALTY CAN BE SURVIVED. HOWEVER, THE AO IS A T LIBERTY TO INITIATE THE PENALTY PROCEEDINGS DURING THE SET ASIDE ASSESSMENT, IN CAS E, HE COMES TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME PRIMA FACIE AS THE CASE MAY B E AND THIS APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. 10. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.1626/AHD/2005 IS PARTLY ALLOWED AND ASSESSEES APPEAL IN ITA NO.2102/AHD/2006 IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04/09/2009 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 04/09/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VI, II, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD