M/s. Jalaram Enterprises, Baroda V. The Income tax Officer,Ward-2(3), Baroda

ITA 195/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76863 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 03-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-01-2011
• Court: TRIBUNAL
• Department Lawyers: RAJNISH K VOHRA
• Keywords: Unexplained cash credit; Additional evidence
• Section: 68

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD 0 00 0 0 00 0 , , , , !'# !$ !'# !$ !'# !$ !'# !$0 00 0! !! !0 00 0 %$ %$ %$ %$, , , , &' ( &' ( &' ( &' ( & & & & BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO. 195/AHD/2011 ASSESSMENT YEAR 2005-06 M/S JALARAM ENTERPRISES 37-40, SATYAM SHOPPING CENTRE, OPP. ZENITH TIN LTD., RAMAKAKA ROAD, CHHANI ROAD, BARODA. PAN: AADFJ2645R VS INCOME TAX OFFICER WARD-2(3), BARODA. )*/ APPELLANT ,-)* / RESPONDENT REVENUE BY : SHRI RAJNISH K. VOHRA, SR. DR ASSESSEE(S) BY : SHRI MUKUND BAKSHI, AR $'. / 0'/ // / DATE OF HEARING : 03/06/2014 123 / 0' / DATE OF PRONOUNCEMENT : 20/06/2014 &4 &4 &4 &4/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, BARODA DAT ED 01.09.2010. 2. GROUND NO. 1 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE DISALLOWANCE OF DISCOUNT ON SALES AT THE RATE OF 20% OF THE TOTAL D ISCOUNT DEBITED IN THE BOOKS OF ACCOUNT BY REJECTING THE ADDITIONAL EVIDEN CE FILED BY THE ASSESSEE. ITA NO. 195/AHD/2011 M/S JALARAM ENTERPRISES, BARODA FOR A.Y. 2005-06 - 2 - 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED A SUM OF RS 19,94,957/- UNDER THE HEAD DISCOUNT ALLOWED ON SALES. IN ABSENCE OF ANY DOCUMENTARY EVIDENCE TO PROVE THE SAME, THE ASSESSING OFFICER HELD THAT IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THE DISCOUNT HAD BEEN PASSED ON T O THE CUSTOMERS OR NOT AND THEREFORE, MADE DISALLOWANCE AT THE RATE OF 40% OF THE TOTAL DISCOUNT OF RS 19,94,957/- AND THEREBY MADE A DISALLOWANCE OF R S 7,97,980/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) OBSERVED THAT THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE IN THE FORM OF DETAILS OF THE NAMES AND ADDRESSES OF PERSONS TO WHOM THE DISCOUNT WERE ALLOWED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE SAME ON THE GROUND THAT NO EXPLANATION WAS OFFERED BY THE A SSESSEE AS TO WHY THESE EVIDENCES WERE NOT FILED BEFORE THE ASSESSING OFFIC ER. FURTHER, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO 20% OF THE TOTAL DISCOUNT OF RS 19,94,957/- AND THEREB Y CONFIRMED THE DISALLOWANCE OF RS 3,98,991/- AND DELETED THE BALAN CE DISALLOWANCE OF RS 3,98,989/-. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THE ASSESSING OFFICER DISALLOWED RS 7,97,980/- BEING 40 % OF RS 19,94,957/- WHICH WAS CLAIMED BY THE ASSESSEE UNDER THE HEAD D ISCOUNT ON THE GROUND THAT NO DOCUMENTARY EVIDENCE IN SUPPORT OF DISCOUNT COULD BE FILED BY THE ASSESSEE. 6. ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE DETAILS OF DISCOUNT FILED BY THE ASSESSEE WERE NOT ADMITTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) BEING FRESH EV IDENCE AND THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO RS 3,98,991/-. ITA NO. 195/AHD/2011 M/S JALARAM ENTERPRISES, BARODA FOR A.Y. 2005-06 - 3 - 7. BEING AGGRIEVED BY THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE AUTHORIZED REPRESENTATIVE CONTENDED BEFORE US THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NEVER ASKED THE ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE AND NO PRO PER OPPORTUNITY OF FILING THE SAME WAS ALLOWED TO THE ASSESSEE. 9. WE FIND FROM THE ASSESSMENT ORDER THAT THE ASSE SSING OFFICER HAS STATED THAT THE ASSESSEE WAS ASKED TO EXPLAIN T HE NATURE OF DISCOUNT AND THEREAFTER THE ASSESSING OFFICER DISALLOWED A P ART OF THE DISCOUNT FOR WANT OF DOCUMENTARY EVIDENCE. THE DEPARTMENTAL REP RESENTATIVE COULD NOT PRODUCE ANY MATERIAL BEFORE US TO SHOW THAT THE ASS ESSEE WAS ALLOWED REASONABLE OPPORTUNITY OF PRODUCING THE DESIRED DOC UMENTS. IN THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, IT SHALL BE FAIR AND IN THE INTEREST OF JUSTICE THAT THE ASSESSEE IS ALLOWED TO FURNISH THE DETAILS OF DISCOUNT BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFI CER IS ALLOWED TO READJUDICATE THE ISSUE AFTER PROPER VERIFICATION OF THE SAME. WE, THEREFORE, SET ASIDE THE ORDERS OF LOWER AUTHORITIES ON THE IS SUE AND REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUD ICATION AFRESH IN THE LIGHT OF OBSERVATIONS MADE ABOVE AFTER ALLOWING REASONABLE O PPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 10. GROUND NO. 2 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE DISALLOWANCE OF RS 11,801/- ON ACCOUNT OF BANK CHARGES ON THE GROUND T HAT THEY WERE INCURRED IN CONNECTION WITH PERSONAL LOAN. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER ITA NO. 195/AHD/2011 M/S JALARAM ENTERPRISES, BARODA FOR A.Y. 2005-06 - 4 - DISALLOWED RS 11,801/- OUT OF THE BANK CHARGES ON T HE GROUND THAT THE SAME RELATED TO PERSONAL LOAN TAKEN BY THE ASSESSEE. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING THAT BANK CHARGES FO R PERSONAL LOAN ARE PERSONAL EXPENSES EVEN WHEN THE LOAN IS TRANSFERRED TO BUSINESS AS IT IS INCOME PRIOR TO TRANSFER OF THE SAME TO THE BUSINES S. 12. BEFORE US, THE AUTHORIZED REPRESENTATIVE SUBMI TTED THAT IT IS NOT IN DISPUTE THAT THE PERSONAL LOAN TAKEN BY THE ASSE SSEE WAS USED IN ITS BUSINESS. THE LOWER AUTHORITIES DISALLOWED THE BAN K CHARGES ONLY ON THE BASIS OF NOMENCLATURE OF THE LOAN AND IGNORING THE ACTUAL PURPOSE AND UTILIZATION OF THE LOAN. 13. THE DEPARTMENTAL REPRESENTATIVE COULD NOT CONT ROVERT THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. 14. IN OUR CONSIDERED OPINION, WHEN THE LOAN IS TA KEN AND UTILIZED FOR BUSINESS PURPOSE, BANK CHARGES OF THE SAID LOAN CAN NOT BE DISALLOWED EVEN WHEN SUCH LOAN IS STATED AS PERSONAL LOAN BY THE BA NK. WE, THEREFORE, DELETE THE DISALLOWANCE OF RS 11,081/- AND ALLOW TH IS GROUND OF APPEAL OF THE ASSESSEE. 15. GROUND NO. 3 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE ADDITION OF RS 3,00,000/- TOWARDS UNSECURED LOAN U/S. 68 OF THE AC T BY REJECTING ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE HAS RECEIVED LOANS OF RS 1,00,000/- AND RS 2,00,000/- FROM RITABEN AND VINOD PATEL RESPECTIVEL Y. THE ASSESSEE WAS ASKED TO FILE CONFIRMATION LETTERS TO PROVE THE CRE DITWORTHINESS AND ITA NO. 195/AHD/2011 M/S JALARAM ENTERPRISES, BARODA FOR A.Y. 2005-06 - 5 - GENUINENESS AND SOURCE OF CREDIT BY PRODUCING SUBST ANTIAL EVIDENCES. THE ASSESSEE FAILED TO FILE ANY EVIDENCE WITH REGARD TO GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. THEREFORE, THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS 3,00,000/- BY TREATING THE SAME AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME TAX ACT. 17. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) OBSERVED THAT EVIDENCES AS REQUIRED BY THE ASSESSING OFFICER WERE NOT FILED BEFORE HIM. FRESH EVIDENCES HAVE BEEN FILED IN THE FORM O F PAN AND BANK ACCOUNT COPIES OF THE CREDITORS BUT THERE IS NO EXPLANATION AS TO WHAT WERE THE EXCEPTIONAL CIRCUMSTANCES WHICH PREVENTED THE ASSES SEE FROM FILING THESE EVIDENCES BEFORE THE ASSESSING OFFICER. MERELY STA TING THAT THESE WERE NOT AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS WAS NOT SUFFICIENT. THEREFORE, HE DECLINED TO ADMIT THE EVIDENCES AND C ONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECO RD, WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVED LOANS OF RS 1,00,000/- FROM RITABEN AND RS 2,00,000/- FROM VINOD PATEL DURING THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE COULD NOT FILE CONFIRMATION LETT ERS TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE SOURCE OF C REDIT, THE ASSESSING OFFICER TREATED THE SUM OF RS 3,00,000/- AS UNEXPLA INED CASH CREDIT U/S. 68 OF THE INCOME TAX ACT AND ADDED THE SAME TO THE INC OME OF THE ASSESSEE. 19. ON APPEAL BEFORE THE COMMISSIONER OF INCOME TA X (APPEALS), THE ASSESSEE FILED EVIDENCES SUCH AS PAN AND BANK A CCOUNT COPIES OF THE CREDITORS WHICH WERE NOT ACCEPTED BY THE COMMISSION ER OF INCOME TAX (APPEALS) ON THE GROUND THAT NO EXCEPTIONAL CIRCUMS TANCES WERE EXPLAINED BY THE ASSESSEE WHICH PREVENTED IT FROM FILING THES E EVIDENCES BEFORE THE ITA NO. 195/AHD/2011 M/S JALARAM ENTERPRISES, BARODA FOR A.Y. 2005-06 - 6 - ASSESSING OFFICER AND THEREFORE, THE COMMISSIONER O F INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 20. WE FIND THAT WHEN THE ASSESSEE FILED ADDITIONA L EVIDENCES TO PROVE THE CASH CREDITS IN ITS BOOKS OF ACCOUNT BEFO RE THE COMMISSIONER OF INCOME TAX (APPEALS), THEN THE COMMISSIONER OF INCO ME TAX (APPEALS), IN THE INTEREST OF JUSTICE AND ALSO FOR RENDERING SUBS TANTIAL JUSTICE, SHOULD HAVE ADMITTED THE SAME AND AFTER VERIFICATION DECIDED TH E ISSUE OF ALLOWANCE OR DISALLOWANCE OF THE CASH CREDITS IN THE HANDS OF TH E ASSESSEE. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES IN TH E INTEREST OF SUBSTANTIAL JUSTICE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO READJUDICATE THE ISSUE AFRESH AS PER LAW AFTER ALLO WING REASONABLE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FILE EVIDENCES BEFORE THE ASSESSING OFFICER AS A ND WHEN CALLED UPON TO DO SO. THUS, THIS GROUND OF APPEAL IS ALLOWED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED IN THE MANNER INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 20 TH OF JUNE, 2014 AT AHMEDABAD. SD/- SD/- (G.C. GUPTA) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 30/ 20/06/2014 GHANSHYAM MAURYA, SR. P.S.