M/s. V.K. Aggarwal & Co., Dehradun V. ACIT, Dehradun

ITA 1717/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2110 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 07-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 28-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SOHATA
• Assessee Lawyers: ROMAL JAIN
• Keywords: Unexplained cash credit; Peak credit
• Section: 68

Judgement Text

ITA NO. 1717/DEL/09 A.Y. 2004-05 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH H: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 1717/DEL/2009 A.Y. : 2004-05 M/S V.K. AGGARWAL & CO., VS. COMMISSIONER OF INCOME TAX 66, RAJPUR ROAD, (APPEALS), RANGE-1, SUBHASH R OAD, DEHRADUN-248001- (UTTRAKHAND) DEHRADUN (PAN : AAACV5681K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ROMAL JAIN, CA DEPARTMENT BY : SH. G.S. SOHATA, SR. DR O R D E R PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDERS OF THE LD. CIT(A) DATED 27.02.2009 AND PERTAINS TO ASS ESSMENT YEAR 2004-05. 2. THE ISSUE RAISED IS THAT THE ADDITION OF RS. 43 ,63,190/- UNDER SECTION 68 PERTAINING TO UNEXPLAINED CASH CREDIT IS TO BE DELETED OR REDUCED. 3. THE ASSESSEE IN THIS CASE IS A FIRM AND DEALS IN THE BUSINESS OF CIVIL CONSTRUCTION. DURING THE COURSE OF SCRUTINY THE AO OBSERVED THAT THE SCRUTINY OF BOOKS OF ACCOUNTS REVEALED THA T FOR CASH IN HAND MAINTAINED BY THE ASSESSEE IN DELHI BRANCH, TH E CREDIT BALANCE EXCEEDED THE DEBIT BALANCE ON CERTAIN DATE S. CREDIT ITA NO. 1717/DEL/09 A.Y. 2004-05 2 BALANCE ON 11.11.03 WAS RS. 2,45,05,422/- AND DEBIT BALANCE RS. 2,08,18,920/-. THE AO ASKED THE APPELLANT WHY THE DIFFERENCE BETWEEN THE TWO NOT BE TAKEN AS CASH CREDIT AND ADD ED BACK TOGETHER WITH SIMILAR OTHER SUMS TO THE TOTAL INCOM E OF THE YEAR. THE APPELLANT EXPLAINED TO THE AO THAT DUE TO BUSIN ESS EXIGENCIES ONE OF THE PARTNERS SHRI MUKUL AGARWAL HAD WITHDRAW N CASH AMOUNTING TO RS. 51,00,000/- FROM OBC, CURRENT ACCO UNT HARDWAR THROUGH SELF CHEQUES AND THE SAME WAS DULY REFLECTE D IN THE MUKUL AGARWAL IMPREST ACCOUNT. THE APPELLANT ALS O EXPLAINED THAT THE ACCOUNTANT HAD PASSED AN ERRONEOUS ENTRY A ND HAD DEBITED THE MUKUL AGRAWAL IMPREST ACCOUNT BY RS. 51 ,00,000/-. IT WAS ALSO EXPLAINED THAT LABOUR PAYMENTS OF THE SU BSEQUENT PERIOD WERE CREDITED TO MUKUL AGARWAL IMPREST ACCOUNT ERRO NEOUSLY RATHER THAN TO CASH ACCOUNT. 3.1 THE AO DID NOT ACCEPT THIS SUBMISSION AND HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE CAREFULLY ALONGWITH THE BOOKS OF ACCOUNT IN THE CAS E AND IT IS FOUND THAT THE ASSESSEE SO FAR IS MAINTAINING SEPARATE CASH BOOK FOR DELHI OFFICE AND DEHRADUN HE AD OFFICE. ALSO THE IMPREST ACCOUNTS ARE MAINTAINED SEPARATELY. A CASH BOOK IS A PRIMARY BOOK OF ORIG INAL ENTRY. ALL RECEIPT AND PAYMENTS OF MONEY ARE RECOR DED IN THIS. BUSINESS TRANSACTIONS ULTIMATELY RESOLVE THEMSELVES IN TERMS OF CASH VALUE. THEREFORE, EVE RY TRANSACTION MANIFESTS ITSELF IN THE CASH BOOK IN SO ME FORM OR THE OTHER. A LEDGER IS ALSO A PRINCIPA L BOOK OF ITA NO. 1717/DEL/09 A.Y. 2004-05 3 ACCOUNT. EVERY TRANSACTION AFTER BEING RECORDED IN THE BOOK OF ORIGINAL ENTRY FINDS PLACE IN THIS BOOK WHE RE IT IS PROPERLY ARRANGED, CLASSIFIED AND CONDENSED AND SHO WN UNDER THE APPROPRIATE ACCOUNTING HEAD. HENCE, FOR BOOKS OF ACCOUNTS IN ANY CASE THE IMPORTANCE OF MAINTENANCE OF THE ABOVE CANNOT BE UNDERESTIMATED. THE CLAIM OF THE ASESSEE OF TREATING THE MUKUL AGAR WAL IMPREST ACCOUNT AND THE CASH IN HAND BOOK ACCOUNT BEING THE SAME IS NOT ACCEPTABLE AS THE ASSESSEE HI MSELF HAS MAINTAINED TWO SEPARATE LEDGERS I.E. ACCOUNTS F OR THEM. IT IS INTERESTING TO NOTE FURTHER THAT THE ACCOUNTS SUBMITTED ALONGWITH THE RETURN OF INCOME ARE AUDITE D BY A CERTIFIED CHARTERED ACCOUNTANT. AUDIT IS A PROCE DURE WHEREIN THE VERACITY OF THE STATEMENTS TO BE SUBMIT TED IS ALSO CHECKED. IT IS ALSO SUPPOSED TO TAKE CARE O F ACTS OF OMISSIONS AND COMMISSIONS DONE AT THE ACCOUNTANT LE VEL. AS THE ASSESSEE HAS SUBMITTED THE BOOKS OF ACCOUNTS WITH THE RETURN OF INCOME WHICH IS SAID TO BE AUDI TED AS PER THE FORM 3CB SUBMITTED ALOGNWITH THE RETURN OF INCOME, THE PLEA OF THE ASSESSEE AT THIS STAGE TO I GNORE A FAULT IN THE PRIMARY BOOK OF ACCOUNTS IS NOT ACCEPT ABLE. AT THE TIME OF THE COMPLIANCE TO NOTICE U/S 132(2) THE ASSESSEE WAS GIVEN OPPORTUNITY TO PRODUCE ANYTHING FURTHER IN SUPPORT OF ITS CLAIM. HAD THE ERROR BE EN GENUINE THE ASSESSEE SHOULD HAVE EXPLAINED THE SAM E AT THE FIRST OPPORTUNITY GIVEN. FOR THE DIFFERENCES I N THE ITA NO. 1717/DEL/09 A.Y. 2004-05 4 BALANCES APPEARING IN THE CASH IN HAND BOOK THE PE AK CREDIT HAS BEEN ESTIMATED AS PER ANNEXURE-I OF THE ASSESSMENT ORDER. THE EXPLANATION OFFERED BY THE ASSESSEE AFTER CONFRONTATION WITH RESPECT TO THE SH ORTAGE OF CASH IN THE BOOKS MAINTAINED FOR THE DELHI OFFIC E, SEEMS LIKE AN AFTERTHOUGHT, TO COVER UP THE UNACCO UNTED CASH CIRCULATED IN THE BUSINESS. THERE IS A PREPONDERANCE OF PROBABILITY THAT FOR THE DURATION FOR THE SHORTFALL OF CASH IN THE CASH IN HAND BOOK, THE AS SESSEE HAD UTILIZED ITS OWN UNACCOUNTED CASH BALANCE FOR PAYMENTS SHOWN. THE PLEA TAKEN BY THE ASSESSEE TH AT THE SHORTFALL IN THE CASH IN HAND BOOK MAINTAINED B Y THE DELHI OFFICE IS TO BE COVERED BY THE MUKUL AGARWAL IMPREST ACCOUNT IS NOT ACCEPTABLE AS IT IS OBSERVE D THAT IN THE BOOKS I.E. MUKUL AGARWAL IMPREST ACCOUNT ON 13.12.2003, PAYMENTS HAVE BEEN MADE TO VARIOUS PIEC E WORKERS. AT THE END OF 13 TH DAY OF DECEMBER, 2003, THE STATUS OF MUKUL AGARWAL IMPRESET ACCOUNT IS RS. 12,11,248/-. AND AT THE SAME TIME THE CASH IN HAND A/C IS STILL SHORT BY RS. 24,61,271.69. HENCE THIS PRO VES THAT THE CASH CREDIT IN THE BOOKS OF THE ASSESSEE IS COV ERED BY UNEXPLAINED SOURCES, WHICH IS THE UNACCOUNTED INCOM E OF THE ASSESSEE FOR THE YEAR. HENCE, IN VIEW OF TH E ABOVE AN AMOUNT OF RS. 43,63,189.64, WHICH IS THE PEAK CR EDIT OCCURRING ON 20.01.2004 AS WORKED OUT IN THE ANNEXU RE-I ITA NO. 1717/DEL/09 A.Y. 2004-05 5 ATTACHED, IS HEREBY TAXED U/S 68 OF THE IT ACT, 196 1 AS CASH CREDIT IN THE BOOKS OF ACCOUNTS. 3.2 UPON ASSESSEES APPEAL THE LD. CIT(A) SUSTAINED THE ADDITION HOLDING AS UNDER:- THE ABOVE WRITTEN SUBMISSIONS OF THE APPELLANT HO WEVER, DO NOT EXPLAIN PROPERLY THE REASONS FOR SHORT CASH IN THE CASH IN HAND BOOK. THE LD. AO HAS CORRECTLY REACHED THE CONCLUSION THAT AN UNACCOUNTED AMOUNT OF CASH CIRCU LATING IN THE BUSINESS OF THE APPELLANT AND ALSO REACHED THE CORRECT CONCLUSION THAT THE APPELLANT WAS UTILIZING SOME OT HER UNACCOUNTED CASH BALANCE DURING THE DURATION OF SHO RTFALL OF CASH. THE CONTENTION OF THE APPELLANT THAT THE SHO RTFALL IN THE CASH IN THE HAND BOOK MAINTAINED BY THE DELHI OFFIC E WAS TO BE MADE UP BY THE MUKUL AGARWAL IMPREST ACCOUNT I S NOT BELIEVABLE FOR THE SIMPLE REASON THAT PAYMENT WERE BEING MADE FROM THAT ACCOUNT TO VARIOUS WORKERS AND ON 13.12.0 3 THERE WAS ONLY RS. 12,11,248/- IN THE MUKUL AGARWAL IMPRE ST ACCOUNT. THIS SHOWS THAT THERE WAS NO CONNECTION B ETWEEN THE CASH IN HAND BOOK WHEREIN A SHORTFALL HAD BEEN NOTICED AND THE MUKUL AGARWAL IMPREST ACCOUNT. THE AI HA S, THEREFORE, RIGHTLY MADE THE ADDITION BY WORKING OUT THE PEAK CREDIT AS ON 20.01.04 AS CASH CREDIT IN THE BOOKS O F ACCOUNT. THERE ARE, HOWEVER, APPARENT ERRORS IN WORKING OUT THE NEGATIVE CASH ON DIFFERENT DATES. THE PEAK OF TH E MAXIMUM NEGATIVE CASH NEEDS TO BE WORKED OUT BY MERGING TH E NEGATIVE BALANCES IN ALL THE THREE CASH BOOKS. THIS WOULD G IVE THE ITA NO. 1717/DEL/09 A.Y. 2004-05 6 CORRECT AMOUNT OF SHORTFALL AND THE SAME SHALL BE A DDED AS TAXABLE INCOME. IT IS BUT NATURAL THAT THE AMOUNT S O WORKED OUT AND ADDED BY THE AO, WOULD BE HIGHER. THE GROU ND OF APPEAL IS THEREFORE, REJECTED. SIMILAR TO THE ABOVE CASH BOOK MAINTAINED BY THE ASSESSEE FOR DEHRADUN OFFICE ALSO REVEALED SHORTAGE S OF CASH OR EXCESS CASH CREDIT IN THE BOOKS AND THE SAME WAS ALSO NOT EXPLAINED. THE AO ACCORDINGLY MADE AN ADDITION OF PEAK CREDIT OF RS. 5,05,126/- IN RESPECT OF DEHRADUN OFF ICE. THE EXPLANATION FURNISHED BY THE APPELLANT IN THE AFORE MENTIONED WRITTEN SUBMISSIONS IS NOT ACCEPTABLE AS THE SHORT CASH HAS NOT BEEN EXPLAINED. THE ADDITION MADE IS, THEREFOR E, SUSTAINED BUT THE SAME IS AMENABLE TO RECTIFICATION OF THE AMOUNT ADDED BY THE AO AFTER MERGE OF THE CASH BOOK S AS DIRECTED AT THE PRECEDING PARA. THE GROUND IS ACCO RDINGLY REJECTED. 4. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 5. LD. COUNSEL OF THE ASSESSEE REITERATED THAT THE IMPUGNED SHORTAGE WAS ACTUALLY RESULT OF WRONG ACCOUNTING ON THE PART OF THE ACCOUNTANT OF THE FIRM. HE CLAIMED THAT SHRI MUKU L AGARWAL, PARTNER WAS ALSO ACTING AS CASHIER. ACTUALLY THE FOLLOWING THREE CHEQUES WHICH SHOULD HAVE BEEN TAKEN INTO CASH IN H AND WERE INFACT DEBITED TO THE ACCOUNT OF SHRI MUKUL AGARWAL , PARTNER. DATE CHEQUE NO. AMOUNT 15/10/2003 588936 6,00,000/ - 17/10/2003 541626 15,00,000/ - ITA NO. 1717/DEL/09 A.Y. 2004-05 7 18/10/2003 541629 30,00,000/ - TOTAL 51,00,000/- THIS WAS THE ACTUALLY REASON FOR CASH SHORTAGES. HE CLAIMED THAT AMOUNT LYING WITH SHRI MUKUL AGARWAL WERE INFA CT IMPREST ACCOUNT AND IF THE BALANCE IN MUKUL AGARWAL IMPRES T ACCOUNT IS ADDED TO THE CASH AT DELHI, THERE WILL BE NO DIFFER ENCE. IN THIS REGARD, THE LD. COUNSEL RELIED UPON THE DECISION OF THE COCHIN TRIBUNAL IN THE CASE OF CIT VS. KERALA TRANSPORT CO . (1994) 50 TTJ 189 WHEREIN IT IS HELD THAT WHERE THERE IS NO INFLOW OF CASH INTO THE FIRM, FROM THE VERY NATURE OF THE ENTRIES PASSED IN THE JOURNAL, NO ADDITION UNDER SECTION 68 CAN BE SUSTAINED . 5.1 LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS O F AUTHORITIES BELOW. HE CONTENDED THAT IT IS A CLEAR CASE AGAINS T THE ASSESSEE. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT AO HAS OBSERVED THE SHORTA GES/ NEGATIVE BALANCE IN THE CASH BOOKS OF THE ASSESSEE. CASH BO OK IS A PRIMARY BOOK OF ACCOUNT. EVEN THE SAME HAD BEEN FINALIZED , ACCOUNTS DULY PREPARED AND AUDITED AND INCOME TAX RETURNS HAS ALS O BEEN FILED. NOW THE ASSESSEE IS TAKING THE PLEA THAT THERE ARE ERRORS TO THE EXTENT OF RS. 51 LACS. THIS IS AN ABSOLUTELY UNACCE PTABLE PROPOSITION. AS A MATTER OF FACT ANY ERROR IN THE BALANCING OF CASH BOOK REFLECTS UPON THE CORRECTNESS OF THE ACCOUNTS PREPARED. UNDER THE CIRCUMSTANCES, WHEN THERE ARE SO HUGE DISCREPAN CIES IN CASH ITA NO. 1717/DEL/09 A.Y. 2004-05 8 BALANCE, THE WHOLE MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE COMES UNDER THE BIG QUESTION MARK. THE A SSESSEE HAD TRIED TO EXPLAIN THAT THREE CHEQUES WERE DRAWN ON D IFFERENT DATES WHICH WERE DEBITED TO THE ACCOUNT OF MUKUL AGGARWAL , PARTNER WHICH ACTUALLY SHOULD HAVE BEEN TAKEN INTO CASH IN HAND. AO HAS NOTED THAT EVEN IF THIS FAR FETCHED PROPOSITION IS ACCEPTED, THEN AT THE END OF 13 TH DAY OF DECEMBER, 2003, THE STATUS OF MUKUL AGGARWAL IMPREST ACCOUNT WAS RS. 12,11,248/- AND A T THE SAME TIME CASH IN HAND WAS STILL SHORT BY RS. 2461271.69 . WHEN THERE IS OVERALL SHORTAGE IN THE BALANCING IN CASH BOOK, HO W THE ACCOUNTS HAVE BEEN TALLIED AND FINAL ACCOUNTS PREPARED IS IT SELF AN ACCOUNTING WONDER. MOREOVER, WE CANNOT ACCEPT THE PROPOSITION THAT THE MUKUL AGARWAL IMPRESET ACCOUNT WAS A PART OF THE MAIN CAS H BOOK WHICH HAD NEGATIVE BALANCING ON DIFFERENT DATES. BY NO S TRETCH OF IMAGINATION THERE CAN BE CASH SHORTAGES IN ONE OF T HE MAIN CASH BOOKS WHICH COULD BE ATTRIBUTED TO ACCOUNTING MISTA KES, EVEN AFTER THE ACCOUNTS HAVE BEEN FINALIZED AND AUDITED. UN DER SUCH CIRCUMSTANCES, THE VERACITY OF BOOKS OF ACCOUNTS OF THE ASSESSEE IS ABYSMALLY LOW. THE NEGATIVE CASH BALANCE CERTAINL Y INDICATE THAT ITA NO. 1717/DEL/09 A.Y. 2004-05 9 EXPENSES HAVE BEEN INCURRED OUT OF UNACCOUNTED RE CEIPTS. HENCE, THERE IS NO INFIRMITY IN AOS DRAWING INFERENCE THA T ASSESSEE HAS UTILIZED ITS UNACCOUNTED CASH BALANCE FOR MAKING TH E PAYMENTS. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND ANY INFIRM ITY IN THE ORDERS OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD T HE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2009. SD/- SD/- [R.P. TOLANI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11/12/2009 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCH