Deen Dayal Sugar Cottage Industries, V. ITO,

ITA 19/LKW/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9148 (ITAT-LUCKNOW)
• Duration Of Justice: 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: SAMEER SAXENA
• Keywords: Gift; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, LUCKNOW. BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.19(LKW.)/2011 A.Y. : 2006-07 DEEN DAYAL SUGAR COTTAGE VS. THE ITO-I, INDUSTRIES, SHAHJAHANPUR. VILL. CHAK KANHAU, DISTT. SHAHJAHANPUR. PAN AAEFD 5267 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMEER SAXENA, ADVOCATE RESPONDENT BY : SHRI P.K.BAJAJ, SR.D.R. O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A), BAREILLY DATED 14.09.2010 RELATING TO ASSE SSMENT YEAR 2006-07. 2. THE REGISTRY HAS POINTED OUT THAT THE APPEAL IS BARRED BY LIMITATION BY TWO DAYS. THE ASSESSEE MOVED AN APPLICATION FOR CO NDONATION OF DELAY STATING THEREIN AS UNDER : MAY IT PLEASE YOUR HONOUR THE APPELLANT HUMBLY SUBMITS THAT THE FORM NO 36 AL ONG WITH GROUND OF APPEAL AND CHALLAN ALONG WITH OTHER RELEV ANT DOCUMENTS FOR FILING OF APPEAL WAS SENT ON 12.01.2011 AS AGAI NST THE RECEIPT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) BAREI LLY ON 18.11.2011. 1) THAT THE APPEAL IN FORM NO. 36 ALONG WITH ALL RE LEVANT DOCUMENTS WAS SENT BY SPEED POST ON 12.01.2011 WHIC H WAS WELL IN TIME BEFORE I.E. 18.01.2011. 2 IT IS HUMBLY SUBMITTED THAT DELAY MAY KINDLY BE CON DONED AND RECEIPT OF APPEAL TIME BARRED MAY KINDLY BE CONDONE D. PRAYER IN VIEW OF THE AFORESAID FACTS AND THE CIRCUMSTANCE S OF THE CASE, IT IS PRAYED THAT THE AFORESAID APPEAL MAY KINDLY BE COND ONED AND BE HEARD ON MERITS. YOUR'S FAITHFULLY SD. SAMEER SAXENA (COUNSEL FOR THE ASESSEE) 3. I FIND SUBSTANCE IN THE AFORESAID EXPLANATION GI VEN BY THE ASSESSEE IN THE APPLICATION FOR CONDONATION OF DELAY. ACCORDIN GLY, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED. 4. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS: 1. BECAUSE THE LEARNED C.I.T.(A) BAREILLY ERRED IN NOT ENTERTAINING THE EVIDENCE OF STATEMENT OF PURCHASE AND SALE OF S HARE FOR THE AY 2004-05 OF RS.78,855/. SIMILARLY THE CASH GIFTS RECEIVED SURRENDERED DUE TO LACK OF PROPER EVIDENCE FOR THE AY 200405 OF RS.5,000/ WHEN THE SAME IS REFLECTED IN HER RET URN OF INCOME FOR THE A. Y. 200405 AND ON THE MORE WHEN ORDER U/ S 143(1)(A) FOR AY 2004-05 IS GIVEN BY THE DEPARTMENT. 2. BECAUSE THE LEARNED C.I.T (A) BAREILLY ERRED IN NOT ENTERTAINING THE CASH GIFTS RECEIVED SURRENDERED FOR THE AY 2005 -06 OF RS.80,000 /. DUE TO LACK OF PROPER EVIDENCE. HE DID NOT APPRECIATE THAT HAD SMT RANJANA GUPTA THE EVIDENCE TO PROVE GIFT RECEIVED BY ANY POSITIVE EVIDENCE WHY HAD SHE SURRENDERED THE SAID AMOUNT AND SHOWED IT AS HER INCOME FOR THE YEAR. 3. BECAUSE THE LEARNED C.I.T.(A) BAREILLY ERRED IN NOT TAKING INTO ACCOUNT THE DOCUMENTARY EVIDENCE OF LIC PLACED ON R ECORD TO 3 JUSTIFY THE MATURITY OF L1C POLICY FOR RS.86,695/-. 4. BECAUSE THE LEARNED C.I.T. (A) BAREILLY ERRED IN NOT ACCEPTING THE SUBMISSION :- ' THE AMOUNT WAS DEPOSITED IN CAS H ON 24.05.05 OF RS.2 LACS & ADVANCED TO A THIRD PARTY W HICH WAS RETURNED AFTER 4 MONTHS BY DRAFT AND THE SAME AMOUN T WAS AGAIN FORWARDED TO THE SAID FIRM BY A/C PAYEE CHEQU E ON 24.10.05. 5. BECAUSE THE ORDER OF THE LEARNED CIT (A) BAREILL Y TAKES THE SUPPORT OF THE HON'BLE ALLAHABAD HIGH COURT TO DISA LLOW & ADD THE AMOUNT IN THE HANDS OF THE ASSESSEE FIRM DO NOT FIT THE SCORE AS CAPACITY OF THE DEPOSITOR IS VERY WELL PROVED. 6. BECAUSE THE ASSESSMENT ORDER ON FACTS & LAW WA S NOT LEGALLY SUSTAINABLE. 7. BECAUSE THE ASSESSEE MAY KINDLY BE PERMITTED TO RAISE ANY FRESH GROUND/GROUNDS AT THE TIME OF THE HEARING OF APPEAL . 8. BECAUSE THE LEARNED CIT(A) MADE NO COMMENT ON T HE DISALLOWANCE OF CAR AND TELEPHONE EXPENSE AND KITC HEN AND CRUSHER EXPENSE. 5. GROUNDS NO.1 TO 5 ARE CORRELATED AND RELATE TO T HE SUSTENANCE OF ADDITION OF RS.2 LACS MADE BY THE AO ON ACCOUNT OF UNSECURED LOAN RECEIVED BY THE ASSESSEE. 6. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE FILED THE RETURN OF INCOME ON 27.10.2006 DECLARING TOTAL INCOME OF RS. 40,930. THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TA X ACT,1961 ON 9.1.2007. LATER ON, THE CASE WAS SELECTED FOR SCRU TINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAD SHOWN A FRESH UNSECURED LOAN FROM ONE SMT.RANJANA GUPTA. HE REQUI RED THE ASSESSEE TO 4 SUBSTANTIATE THE GENUINENESS OF THE LOAN. IN RESPO NSE TO THAT, THE ASSESSEE SUBMITTED AS UNDER : 'THAT THE ASSESSEE IS ENCLOSING THE COPY OF UNSECUR ED LOAN ACCOUNT GIVING THEIR NAMES AND ADDRESSES AS WELL AS FOR YOU R KIND PERUSAL. THAT THE THREE PERSONS ARE FAMILY MEMBERS NAMELY NE HA GUPTA, PRATIK GUPTA AND SHISHUPAL AND REST ARE FRIENDS AND ARE AGRICULTURIST, THESE ARE OLD LOANS EXCEPT FOR A NEW LOAN DURING TH E YEARS OF SMT. RANJANA GUPTA WHO IS ALSO AN ASSESSEE FOR THE LAST SEVERAL YEARS, THE SAID AMOUNT OF RS.2 LACS IS OUT OF HER LIC POLICY MATURITY R/D ACCOUNT. 6.1 THE AO FURTHER ASKED THE ASSESSEE TO FURNISH EVIDENCE IN RESPECT OF THE ABOVE UNSECURED LOAN BY OBSERVING AS UNDER: IN THE BALANCE SHEET FRESH UNSECURED LOAN OF RS. 2 LACS SHOWN TO HAVE TAKEN FROM SMT. RANJANA GUPTA. AS IT IS STA TED BY YOU THAT SHE IS WIFE OF PARTNER SHRI RAVINDRA KUMAR AND THE SOUR CE OF LOAN AMOUNT IN HER HAND IS STATED FROM LIP MATURITY RECEIPT AND FROM R.D. ACCOUNT, PLEASE FURNISH THE EVIDENCE. THE DATE WAS FIXED FOR HEARING ON 20-11-2008. 6.2 IN RESPONSE TO THAT, THE ASSESSEE SUBMITTED AS UNDER : ' THE EVIDENCE IN THE CASE OF SMT. RANJANA GUPTA OF RS.2 LACS, BANK ACCOUNT, PAN CARD AND SHARE SALE/PURCHASE EVIDENCE IS ENCLOSED HEREWITH.' 6.3 THE ASSESSEE FURTHER SUBMITTED AS UNDER : '2) THAT THE RANJANA GUPTA DEPOSITED RS.2 LACS DUR ING THE YEAR UNDER CONSIDERATION: SHARES/SALE PURCHASE SPECULATION 78,855 CASH SURRENDERED 5,000 (AS SHOWN IN RETURN FOR A.Y.2004-05) 5 LIP POLICY MATURITY 86,695 (CERTIFICATE OF LIP LOAN OF RS.58,600 IS ENCLOSED) R/D POST OFFICE CASH GIFTS RECD. RS.80,000 BELOW TAXABLE LIMIT 135 000.RETUIRN NOT FILED.(FY 1.4.05 TO 31.3.06 A.Y.2006-07) THE AMOUNT WAS DEPOSITED IN CASH ON 24.5.05 OF RS.2 00000/- AND ADVANCED TO A THIRD PARTY WHICH WAS RETURNED AFTER 4 MONTHS BY DRAFT AND THE SAME AMOUNT WAS AGAIN FORWARDED TO THE SAID FIRM BY A/C PAYEE CHEQUE ON 24.10.05.' 6.4 THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION BY OBSERVING AS UNDER : 1- AS THE ASSESSEE HAS MENTIONED ABOVE THAT RS.78 ,855/- HAS BEEN RECEIVED FROM THE SALE & PURCHASE OF SHARES BY SPEC ULATION PROFIT. HOWEVER, A PERUSAL OF ACCOUNT LEDGER OF SMT . RANJANA GUPTA IN THE BOOKS OF SHARE TRADING CONCERN M/S NAR AIN HARI ASSOCIATES, BAREILLY SHOWS THAT ALL THE PURCHASE AN D SALE PERTAINS TO THE F.Y. 2003-2004 (A Y. 2004-2005) COP Y ENCLOSED AS ANNEXURE A, A 1, A2, A3. HENCE THERE IS NO RELEV ANCY OF THE ABOVE MENTIONED SALE PURCHASE OF THE A Y. 2004-2005 WITH THE ASSESSMENT YEAR 2006-2007. 2- THE ASSESSEE SURRENDERED A CASH AT RS.5000/- IN THE HANDS OF SMT. RANJANA GUPTA. 3- THE ASSESSEE HAS CLAIMED THAT SMT. RANJANA GUPT A HAD RECEIVED RS.86,695/- ON MATURITY OF INSURANCE POLIC Y OF L1C, FOR WHICH NO EVIDENCE IS FURNISHED. HOWEVER, A COPY OF LOAN STATEMENT FROM L1C FOR RS.58,600/- IS ENCLOSED WHIC H HAS NO RELEVANCY WITH THE ABOVE. 4- THE ASSESSEE HAS MENTIONED THAT SMT. RANJANA GU PTA HAS RECEIVED RS.35,507/- FROM RD ACCOUNT OF POST OFFICE , FOR WHICH 6 NO EVIDENCE IS PRODUCED. 5- ASSESSEE HAS MENTIONED THAT SMT. RANJANA GUPTA HAS RECEIVED RS.80,000/- IN CASH AS GIFT, FOR WHICH NO EVIDENCE PRODUCED. THE ABOVE AMOUNTS TOTALING TO RS.2,86,057/- FOR WHI CH THE ASSESSEE HAS CLAIMED THAT SMT. RANJANA GUPTA HAS NO T FILED RETURN FOR AY. 2006-2007 BEING BELOW TAXABLE LIMIT. HOWEVER, A S STATED BY THE ASSESSEE EXCLUDING THE PRINCIPAL AMOUNT OF R.D. AND AMOUNT RECEIVED FROM L1C THE INCOME OF SMT. RANJANA GUPTA IS STILL TAXABLE. THE ABOVE SUBMISSION OF THE ASSESSEE GROSSLY DENIAB LE, FOR WHICH NO SPECIFIC EVIDENCE IS PRODUCED BY THE ASSE SSEE. I, THEREFORE, ADD AN AMOUNT OF RS.2,00,000 AS BOGUS LIABILITY FOU ND IN THE BOOKS AS CREATED BY THE ASSESSEE AGAINST WHICH ACTUAL ASSETS ARE LYING IN THE BALANCE SHEET AT RS.2,00,000. ADD: RS.2,00,000 7. THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM ARE REPRODUCED VERBATIM AS UNDER : 'THE A.O. MADE ADDITION OF RS.2,00,000/- AS UNEXPLA INED DEPOSIT FOR THE ADDITIONS MADE UNDER UNSECURED LOANS A/C DURING THE YEAR UNDER CONSIDERATION IN THE NAME OF SMT. RANJANA GUPTA, WH ICH WAS PAID BY ACCOUNT PAYEE CHEQUE. THAT THE A.O DID NOT APPRECIA TE THE FACT THAT SMT. RANJANA GUPTA WAS ASSESSEE FOR THE LAST, SO MA NY YEARS, AND ONLY AS HER INCOME WAS MUCH BELOW TAXABLE LIMITS, S HE WAS NOT FILING HER RETURN OF INCOME. THE AMOUNT OF RS.2,00,000 WAS PROVEN BEFORE THE A.O. AS PER WRITTEN SUBMISSION MADE BEFORE HIM WHICH WAS NOT ACCEPTED BY HIM. THAT THE A.O. DID NOT ACCEPT THE R ETURN FILED BY HER IN A. Y. 2004-05 OF RS.78,855 + RS.5,000, NEITHER H E TOOK INTO CONSIDERATION THE GIFTS SHE SURRENDERED OF RS.80, 000 IN THE NEXT YEAR. THAT THE AO ERRED IN ADDING BACK THE ENTIRE AMOUNT OF RS.2 LACS IN THE HAND OF THE ASSESSEE INSTEAD OF ASKING THE DEPO SITOR SMT.RANJANA GUPTA, WITHOUT GIVING ANY REASON AS TO WHY THE ADDI TION ARE MADE, NEGATING THE INCOME SHE PROVED BY POSITIVE EVIDENCE . 8. THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REPRODUCED THE OBSERVATIONS OF THE AO WHICH WERE MA DE IN THE ASSESSMENT 7 ORDER AND OBSERVED THAT THE ASSESSEE HAD AN OPPORTU NITY TO REBUT THE FINDINGS OF THE AO BY FURNISHING REQUIRED EVIDENCE REGARDIN G SOURCE OF CASH DEPOSITS OF THE CASH CREDITOR I.E. SMT.RANJANA GUPTA, WHO IS COINCIDENTALLY THE WIFE OF ONE OF THE PARTNERS OF THE ASSESSEE-FIRM. HE FU RTHER OBSERVED THAT THE AO MADE A VERY VITAL OBSERVATION THAT SMT.RANJANA GUP TA CREDITED RS.2 LACS IN CASH IN HER BANK ACCOUNT AND LENDED THE SAME TO A T HIRD PARTY AND AFTER THE PERIOD OF FOUR MONTHS SHE RECEIVED THE SAME AMOUNT THROUGH DRAFT FROM THE SAID PARTY AND GAVE LOAN OF IT TO THE ASSESSEE FIRM, THESE FACTS LEAD TO A FACTUAL CONCLUSION THAT THE SOURCE OF THE SUM CRED ITED IN THE BOOKS OF THE ASSESSEE, WAS NOT EXPLAINED BY HIM. HE ACCORDINGL Y CONFIRMED THE ACTION OF THE AO. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF BANARSI PRASAD VS. CIT (2008 ) 304 ITR 239(ALL.). 9. NOW, THE ASSESSEE IS IN APPEAL. 10. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE EXPLAINED THE SOURCES OF THE DEPOSITOR, BUT NO COGN IZANCE HAS BEEN GIVEN BY THE AO AS WELL AS BY THE LD.CIT(A) AND THAT THE LD. CIT(A) ARBITRARILY CONFIRMED THE ACTION OF THE AO. 11. IN HIS RIVAL SUBMISSIONS, THE LD.D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 12. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND THE MATERIAL ON RECORD, IT APPEARS THAT THE LD.CIT(A) MAINLY REL IED ON THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER. HOWEVER, HE DID NO T APPRECIATE THE 8 EXPLANATION OF THE ASSESSEE IN RIGHT PERSPECTIVE. EVEN HE MENTIONED THAT SMT.RANJANA GUPTA CREDITED RS.2 LACS IN CASH IN HER BANK ACCOUNT AND LENDED THE SAME TO A THIRD PARTY AND AFTER THE PERI OD OF FOUR MONTHS SHE RECEIVED THE SAME AMOUNT THROUGH DRAFT FROM THE SAI D PARTY AND GAVE LOAN OF IT TO THE ASSESSEE FIRM, WHICH CLEARLY ESTABLISHED THAT THE DEPOSITOR WAS HAVING THE BALANCE IN HER BANK ACCOUNT BEFORE GIVIN G LOAN TO THE ASSESSEE AND THAT BALANCE WAS OUT OF THE EARLIER LOAN GIVEN TO SOME THIRD PARTY. THE LD.CIT(A) HAD NOT DISCUSSED THE CIRCUMSTANCES IN WH ICH THE LOAN WAS GIVEN TO THE EARLIER PARTY AND WHAT WERE THE SOURCES AT T HE TIME OF GIVING THAT LOAN. IT IS ALSO NOTICED THAT THE LD.CIT(A) HAD NOT GIVEN HIS INDEPENDENT FINDINGS REGARDING THE EXPLANATION OF THE ASSESSEE RELATING TO THE SOURCES OF THE DEPOSITOR FROM LIFE INSURANCE POLICY, R.D. ACCOUNT OF POST OFFICE AND CASH GIFTS ETC. IT IS FURTHER NOTICED THAT THE LD.CIT(A ) HAD MENTIONED IN THE IMPUGNED ORDER THAT HIS VIEW WAS SUPPORTED BY THE J UDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF BANARSI PRASAD (SUPRA), HOWEVER, HE HAS NOT MENTIONED THE FACTS OF THE SAID CASE VIS-A-VIS FACTS OF THE ASSESSEES CASE. I, THEREFORE, THINK IT APPROPRIATE TO REMAND THIS ISSUE BACK TO THE FILE OF THE LD.CIT(A) TO BE ADJUDICATED AFRESH IN ACCORDANC E WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. GROUNDS NO.6 AND 7 ARE GENERAL IN NATURE, SO DO NOT REQUIRE ANY COMMENTS ON MY PART, WHILE IN GROUND NO.8, THE ASSE SSEE HAS STATED THAT THE LD.CIT(A) HAD NOT ADJUDICATED THE ISSUES RELATING T O DISALLOWANCE OF CAR AND TELEPHONE EXPENSES AND KITCHEN AND CRUSHER EXPENSE S. IT IS NOTICED THAT THE ASSESSEE HAS RAISED GROUND NO. H) BEFORE THE LD.C IT(A),WHICH WAS RELATED TO THE DISALLOWANCE OUT OF AFORESAID EXPENSES, BUT IN THE IMPUGNED ORDER NO 9 DISCUSSION HAS BEEN MADE BY THE LD.CIT(A). THEREFO RE, THE ISSUE AGITATED IN GROUND NO.8 IS ALSO RESTORED TO THE LD.CIT(A) TO BE ADJUDICATED IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 .2.2011. SD. (N.K.SAINI) ACCOUNTANT MEMBER FEBRUARY 3RD, 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.