M/s Safari Fine Clothing Pvt. Ltd., Gandhidham. V. Asstt. Commr. of Income Tax, Gandhidham Circle, , Gandhidham

ITA 182/RJT/2018

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5048 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-07-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH KUMAR PANDEY
• Keywords: Unexplained cash credit; Unexplained investment; Corroborative evidences; Revised return
• Section: 68; 143(3); 143(2); 264; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND DINESH MOHAN SINHA, JUDICIAL MEMBER आयकरअपीलसं./ITA No.182/RJT/2018 ( नधा रणवष / Assessment Year: (2009-10) (Physical Hea ring) M/s Safari Fine Clothing Pvt. Ltd., Kalpesh S. Doshi & Co., Chartered Accountant, 411, Cosmo Complex, Mahila College Circle, Rajkot - 360001 Vs. The ACIT, Gandhidham Circle, Gandhidham थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAJCS0565Q (Assessee) (Respondent) Assesseeby : Shri Kalpesh Doshi, AR Respondent by : Shri Ashish Kumar Pandey, Sr. DR Date of Hearing : 23/07/2024 Date of Pronouncement : 12/08/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2009-10, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short ‘Ld. CIT(A)’] vide order dated 16.02.2018, which in turn arises out of an assessment order passed by the Assessing Officer (in short ‘assessing officer’) u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), dated 20.12.2011. 2. The grounds of appeal raised by the assessee are as follows: “1. That the learned CIT(A) has wrongly confirmed the addition of Rs.1,13,00,000/- on account of unexplained cash credit u/s 68 of the I.T. Act 1961. Page | 2 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. 2. That the learned CIT(A) has wrongly confirmed the addition of Rs.73,54,821/- on account of difference in the accounts with M/s Star Shine Pvt. Ltd. 3. That the learned CIT(A) has wrongly confirmed interest u/s 234A, 234B, 234C and 234D of the IT Act, 1961. 4. That, the findings of the learned assessing officer and CIT(A) are not justified and are bad-in-law. The assessee craves to add, alter, amend or delete any of the above grounds of appeal.” 3. Ground No.1 raised by the assessee, relates to addition of Rs.1,13,00,000/-, on account of unexplained cash credit u/s 68 of the Act. 4. Succinct facts qua ground no.1 are thatthe assessee filed original return of income on 30.09.2009, and thereafter it has filed revised return of income on 24.03.2010, declaring total loss at Rs.2,02,54,264/-. The case was selected for scrutiny manually and notice u/s 143(2) dated 17.09.2010, was issued and served upon the assessee on 24.09.2011. The assessee attended the proceedings and submitted the details/explanations as called for.The assessee is a Private Limited Company, deriving income from Import/Export/Trading of used garments. The books of account are audited and the return is accompanied by Tax audit Report u/s 44AB of the Act. During the year,the assessee company has shown unsecured loans of Rs.2,11,81,000/- from Shri Kuldeep Singh Grewal, one of the director of Saffire Fine Clothing Ltd. Shree Kuldip Singh Grewal is Resident and citizen of Canada and has not filed any return of income in India. The amounts have been received from different person in India who has been claimed as relatives (Indian Residents) and corresponding credit entry has been made in capital account of Mr. Kuldip Singh Grewal. The assessee- company had received deposits from Indian Residents and not from Shree Kuldip Singh Grewal Canada based, director of the assessee. In such circumstances,the A.O. noticed that submitting the documents to prove identity, creditworthiness and genuineness of alleged unsecured loan from Page | 3 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. Shree Kuldip Singh Grewal will not discharge the onus of the assessee. The assessee has to show and establish the identity, creditworthiness and genuineness of deposits in the hand of the Indian depositors. To this extent the assessing officer's ruling that alleged Affidavit from Shree Kuldip Singh Grewal, is not sufficient, at all, to absolve the assessee from its onus cast upon itself by Section 68. The assessing officer, during the assessment proceedings, has requested the assessee to submit independent evidences in respect of so-called relatives who have advanced money to the assessee, even if the same was rooted through capital account of the director. In response, the assessee submitted details and evidences, however, the assessing officer has rejected the same and made the addition to the tune of Rs.1,08,00,000/-. The assessing officer, also made addition in respect of loan accepted by the assessee -company, through cheque at Rs.5,00,000/-. This way, the assessing officer made total addition to the tune of Rs.1,13,00,000/- (Rs.1,08,00,000 + Rs.5,00,000). 5. Aggrieved by the order of the assessing officer, the assessee, carried the matter in appeal before Ld. CIT(A), who has confirmed the addition made by the assessing officer. The ld CIT(A) noted that assessee has failed in discharging this onus. The assessee should have provided identity, address and other relevant details in order to enable the assessing officer to verify and examine the alleged source of the source. It should be noted that the assessing officer has accepted the assessee's claim in respect of the amount of loan which has been directly remitted by the Non-resident director from his foreign sources/accounts. However, the assessee has failed to prove the Identity, creditworthiness and genuineness of the remitter/depositors in respect of Rs.1,08,00,000/-.The ld. CIT(A) has also confirmed the addition made by the assessing officer, in respect of loan accepted by the assessee -company, through cheque at Rs.5,00,000/-. Page | 4 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. Hence, the CIT(A) confirmed the addition to the tune of Rs.1,13,00,000/- (Rs.1,08,00,000 + Rs.5,00,000). 6. Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before us. 7. Shri Kalpesh Doshi, the Learned Counsel for the assessee, argued that assessee has furnished various details to prove the genuineness of cash credit, such as, (i)Confirmation of account by the depositor, (ii)HDFC Bank Account of depositor Bank Details of Scotia Bank to prove the fund transfer from non-resident director, (iii) Affidavit of the director stating the amount of deposits and the source of such fund, (iv) Affidavit of Shri Sukhwinder Singh to confirm that he has extended loan to Mr. Kuldip Singh Grewal to the tune of Rs.1,03, 00,000/-, out of amount received from the sale of land by the said person and the copy of agreement to sell the land, (v) Copy of bank statement of Shri Sukhwinder Singh from which the amount loan has been transferred to depositor account. (vi) Copy of affidavit of Shri Sandeep Singh, the relative of Mr. Kuldip Singh Grewal, who has extended loan of Rs. 3,50,000/-, out of his personal agriculture income and from the personal borrowings. Thus, ld Counsel contended that assessee has proved the source of deposits received from Mr. Kuldip Singh Grewal, the director of the company, and has also proved the source of the source, therefore the addition made by the assessing officer may be deleted. 8. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue has primarily reiterated the stand taken by the assessing officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. Page | 5 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. 9. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record.Wenote thatassessee is an individual engaged in the business of import and export of used garments. The assessee has maintained regular books of accounts along with all the supporting evidences.The books of account of the assessee are duly audited by the qualified Chartered Accountant and the auditor has also not found any defects in the books of accounts. During the year under consideration, the assessee- company has received deposits from one of the directors, Mr. Kuldeep Singh Grewal of Rs.2,11,81,000/-. The copy of ledger account of the director is placed on paper book Page Nos. 49 to 50.The assessee-company has submitted various details to prove the genuineness of deposits. The deposits were received in the accounts of the director and were duly credited in the accounts of director.During the course of assessment proceedings, the assessee has submitted copy of accounts, contra accounts and source of such amount by the director and detailed affidavit of the director. We find that assessee has furnished, the following documents and evidences before the lower authorities, Viz: (i)Confirmation of account by the depositor, (ii)HDFC Bank Account of depositor Bank Details of Scotia Bank to prove the fund transfer from non-resident director, (iii) Affidavit of the director stating the amount of deposits and the source of such fund, (iv) Affidavit of Shri Sukhwinder Singh to confirm that he has extended loan to Mr. Kuldip Singh Grewal to the tune of Rs.1,03,00,000/-, out of amount received from the sale of land by the said person and the copy of agreement to sell the land, (v) Copy of bank statement of Shri Sukhwinder Singh from which the amount loan has been transferred to depositor account. (vi) Copy of affidavit of Shri Sandeep Singh, the Page | 6 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. relative of Mr. Kuldip Singh Grewal, who has extended loan of Rs. 3,50,000/-, out of his personal agriculture income and from the personal borrowings. (vii) PAN Number and address of these persons were also filed before the lower authorities. We find that by submitting these documents and evidences, the assessee has proved the source of the amount. Therefore, we find thatassessee has discharged the initial burden of cash credit, and once the initial burden is proved by the assessee then the onus is shifted on the department. 10. As we have noted in above para that the assessee has proved the identity of depositor, genuineness of deposits and the creditworthiness of the depositor, therefore the burden on the assessee has been duly discharged.We find that Hon’ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523, has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word "may" in section 68. Relevant observations at pages 369 and 370 of this report are reproduced hereunder: "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the Page | 7 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. alleged creditors will not be sufficient to draw and adverse inference against the assessee. In the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69.” 11. We find that the assessment year, involved in the assessee`s case under consideration, is the assessment year 2009-10, where the assessee need not to prove ‘source of the source’, however, we note that the assessee has proved the source in a satisfactory manner, as noted by us above. Therefore, we note that assessee has discharged his initial onus, and once that onus is discharged, it is for the Revenue to prove that the credit found in the books of accounts of the assessee is the undisclosed income of the assessee. Our view is fortified by the judgement of the Hon`ble Gauhati High Court; in the case of, Nemi Chand Kothari Vs. CIT & ANR. (2003) 264 ITR 254 (Gau), wherein it was held that the burden of the assessee to prove the genuineness of the transactions as well as creditworthiness of the creditor is confined to the transactions which have taken place between the assessee and the creditors, and it is not the burden of the assessee to show the source of his creditor or to prove the creditworthiness of the source of the sub-creditors. 12. We note that assessing officer has also made another addition of Rs.5,00,000/- on account of unexplained cash credit for the loan taken from M/s. Deepika Roadlines during the year. We find that such loan was taken by the assessee, by an account payee cheque, through proper banking channel, and necessary interest have been accrued. Name and address and PAN number of the party from whom the loan was taken, have been submitted by the assessee, before the assessing officer, during the assessment proceedings. We note that Hon`ble Jurisdictional High Court of Gujarat in the case of CIT V/s. Ranchod JivabhaiNakhava, Tax Page | 8 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. Appeal no.50 of 2011, held that once the assessee has established that he has taken money by the way of accounts payee cheques from the lenders who all are Income Tax assessee, whose PAN have been disclosed, the initial burden u/s 68 of the Act was discharged. Therefore, based on these facts and circumstances, we delete the additionofRs.1,13,00,000/- (Rs.1,08,00,000 + Rs.5,00,000). 13. Now, we shall take ground No.2 raised by the assessee, which relates to addition of Rs.73,54,821/-, on account of difference in the accounts with M/s Star Shine Pvt. Ltd. 14. Succinct facts quaground No. 2 are that during the assessment proceedings, the assessing officer noted, on perusal of the account ofM/s Star Shine Pvt. Ltd, in the books of the assessee, that the assessee has shown a credit balance of Rs.1,14,75,089/-, while on the other hand, Star Shine Pvt Ltd, has shown a debit balance of Rs.41,20,268/- only. The assessing officer, asked the assessee, to explain the above difference. The assessee, in order to explain, the above difference, clarified as follows: "M/s. Vision Impex has send some containers to the SFCPL in FY.2008-09 from abroad, but SFCPL denied to take the delivery of the same due to poor quality of material and M/s Vision Impex direct the same to M/s Star Shine Pvt. Ltd., and the same was cleared through high seas sale transaction. SFCPL has not booked this transaction in his books as the goods not reached to SFCPL. But M/s. Star Shine gave the credit of the same in the ledger of SFCPL which was actually payable to M/s Vision Impex. The same become the difference in the ledger of both party. After considering the fact, assessee reconciles the accounts with M/s Star Shine Pvt Ltd by giving journal entry effect in the books." 15. However, the assessing officer rejected the contention of the assessee, and held that assessee has not explained the difference in a satisfactory manner, therefore, the assessing officer made the addition of Rs.73,54,821/-. 16. On appeal, the Ld. CIT(A), has confirmed the addition made by the assessing officer. The ld CIT(A) has just reiterated the facts narrated by Page | 9 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. the assessing officer, and confirmed the action of the assessing officer.Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before us. The ld Counsel for the assessee, argued before us, that the party has wrongly credited assessee's ledger account in its book with a sum which was not payable to the assessee but to another party M/s. Vision Impex. According to assessee this wrong entry has occurred because assessee has entered into a purchase agreement with M/s Vision Impex, who subsequently dispatched the goods but whose delivery was refused by the assessee and which was subsequently delivered to M/s. Star Shines Pvt Ltd, through high seas sale transaction. The ld Counsel, therefore stated that assessee has explained the transaction with documentary evidences, hence no addition should have been made by the assessing officer. 17. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the Revenue, argued that if assessee's version of wrongly debiting the account of M/s Star Shines Pvt Ltd, is accepted then there should have been a simultaneous purchase entry from M/s Vision Impex in assessee's books which is not the case here, therefore, the explanation given by the assessee should not be accepted. This way, ld. DR for the Revenue, reiterated the findings of the ld CIT(A) and prays the Bench that addition made by the assessing officer may be upheld. 18. We have heard both the parties. We find that in respect of the addition of Rs.73,54,821/-, which pertains to being a difference between the ledger account of a sundry debtors in assessee's book and contra ledger account of the assessee in the books of accounts of the debtor. The assessee has not disputed the fact that in his books the ledger account of M/s Star Shines Pvt Ltd, was showing credit balance of Rs.1,14,75,089/- whereas the books of M/s Star Shine Pvt Ltd, was showing only Rs.41,20,268/-, as Page | 10 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. debit balance in the ledger account of the assessee. It was explainedby the assessee, before the assessing officer that the party has wrongly credited assessee's ledger account in its book with a sum which was not payable to the assessee but to another party M/s Vision Impex. According to assessee, this wrong entry has occurred because assessee has entered into a purchase agreement with M/s Vision Impex who subsequently dispatched the good but whose delivery was refused by the assessee and which was subsequently delivered to M/s Star Shines Pvt Ltd, through high seas sale transaction. We find that assessee has maintained regular books of accounts along with all the supporting evidences.During the year under consideration, the assessee has shown credit balance of Rs.1,14,75,089/- in the account of M/s. Star Shine Pvt. Ltd., whereas M/s. Star Shine Pvt. Ltd., has shown debit balance of Rs.41,20,268/- in their books of accounts. We find that said difference in the two accounts, was due to the fact that M/s Vision Impex has sent some containers to the assessee- firm in the Financial Year(F.Y.) 2008-09, from abroad. However, the assessee had denied the taking over of the delivery of such goods due to poor quality of material.Therefore, M/s. Vision Impex diverted the said goods to M/s Star Shine Pvt Ltd, and the same were cleared through high seas sale transaction. The high sea sale agreement, invoices etc. were submitted by the assessee before the lower authorities, vide paper book page Nos. 71 to 75. The copies of High Seas Sale Agreements done between the parties and sample vouchers supporting those sales were submitted by the assessee, vide paper book page Nos. 71 to 86.The assessee has not recorded any transactions in its books of account, as the assessee has not purchased such goods from M/s Vision Impex, the said good was transferred to M/s Star Shine on high sea sale and therefore the said party has credited such transactions in the name of assessee, however, the said party was required to credit the said purchases Page | 11 ITA No.182/RJT/2018 M/s Safari Fine Clothing Pvt. Ltd. from M/s Vision Impex. The details of the bills which are issued on high sea sales by M/s Vision Impex to M/s Star Shine Clothing Pvt. Ltd,were submitted by the assessee, before the lower authorities.The copy of confirmation of the accounts obtained from M/s Star Shine Pvt Ltd was also submitted by the assessee, vide paper book Page No.65 to 70. Based on the factual position, narrated above, we are of the view that no addition should be made in the hands of the assessee, as the assessee has explained the transaction with document evidences, as noted by us above, hence, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. Hence this ground of the assessee is allowed. 19. In the result, ground No.2 raised by the assessee is allowed. 20. The Ground No.3, raised by the assessee, relates to charging of interest under sections 234A, 234B, 234C and 234D of the Act, which is premature in nature, hence does not require adjudication. 21. In the combined result, the appeal of the assessee is allowed. Order is pronounced in the open court on 12/08/2024 Sd/- Sd/- (DINESH MOHAN SINHA) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot दनांक/ Date: 12/08/2024 True Copy Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot