ITO, Roorkee V. Brij pal Singh, Roorkee

ITA 1964/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97148 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDER MAINI
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 1964 /DEL/201 3 ASSESSMENT YEAR: 2009 - 10 INCOME TAX OFFICER, VS. BRIJ PAL SINGH, VILL - KHEDI WARD - 1, ROORKEE KALAN, LASKAR, ROORKEE (PAN: BXMPS5464G ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAVINDER MAINI, DR RESPONDENT BY : SH. P.C. YADAV, ADV. DATE OF HEARING: 09.07.2015 DATE OF PRONOUNCEMENT: 02.09.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS IS AN APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2009 - 10 AGAINST THE ORDER OF CIT(A) DATED, 28.11.2011. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS. 14,79,5 45/ - AS UNEXPLAINED INVESTMENT IN PURCHASE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAD NOT RECORDED PURCHASES IN HIS BOOKS, WHICH REMAINS UNEXPLAINED PURCHASES. II. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS IN ALLOWING THE RELIEF OF RS. 3,58,000/ - WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE COULD NOT PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION OF UNSECURED CASH LOAN. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND OF AO BE RESTORED. 2. THE BRIEF FACTS OF THE CASE AR E THAT THE RESPONDENT ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF RUNNING OF C OUNTRY MADE LIQUOR SHOP. FOR THE 2 ASSESSMENT YEAR UNDER CONSIDERATION, THE RETURN OF INCOME WAS FILED, DISCLOSING TOTAL INCOME OF RS. 1,65,900/ - . AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER AFTER MAKING SEVERAL DISALLOWANCES AT RS. 53,22,900/ - . BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE THE CIT(A), WHO VIDE IMPUGNED ORDER DATED 28.11.2011 PARTLY ALLOWED THE APPEAL. NOW, THE REVENUE IS BEFORE US WITH THE PRESENT APPEAL CHALLENGING THE DELETION OF ADDITION OF RS. 14,79,545/ - ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENTS AND RS. 3,58,000/ - UNDER SECTION 68 OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LEARNED CIT(A) DELETED THE ADDITION OF RS. 14,79,545/ - ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENTS VIDE PARA 2.1 OF HIS ORDER , WHICH READS AS UNDER: 2. UNEXPLAINED INVESTMENT (RS. 14,79, 545/ - ) THE ASSESSEE HAD PURCHASED LIQUOR FROM THE MANUFACTURER, INDIA GLYCOL LTD. THE AO CALLED FOR INFORMATION FROM THAT COMPANY REGARDING THE ASSESSEE S TRANSACTIONS. SHE OBSERVED THAT AN AMOUNT OF RS. 14,79,545/ - HAD BEEN PAID BY THE ASSESSEE TO IT A ND THE SAME WAS NOT RECORDED IN THE PURCHASE LEDGER OR THE CASH BOOK. SHE ADDED THE SAME AS THE ASSESSEE S UNEXPLAINED INVESTMENT U/S 69 OF THE I.T. ACT. THE ASSESSEE S SUBMISSION IN APPEAL ON THIS POINT IS SUMMARIZED BELOW: HE HAD PURCHASED GOODS WORTH R S. 14,63 ,048/ - ONLY. THIS SUM WAS DULY RECORDED IN HIS BOOKS OF ACCOUNT AND WAS ALSO VERIFIABLE FROM THE INFORMATION FURNISHED BY THE COMPANY. THE COMPANY HAD WRONGLY DEBITED CERTAIN SUMS TO THE ASSESSEE S ACCOUNT. THOSE WRONG ENTRIES WERE REVERSED FROM TI ME TO TIME. THERE WERE ACTUALLY NO PURCHASES NOR PAYMENTS. THE AO CALCULATED THE SUM TOTAL OF THESE WRONG ENTRIES AND HELD IT AS ASSESSEE S UNEXPLAINED INVESTMENT BUT SHE IGNORED THE DEBITS IN THE ASSESSEE S ACCOUNT. THE PURCHASES OF RS. 14,63,048/ - WERE A LSO INDEPENDENTLY VERIFIABLE FROM THE TCS CERTIFICATE ISSUED BY THE COMPANY. IF THE COMPANY WAS COLLECTING TAX AT SOURCE ON THE PURCHASE MADE BY THE ASSESSEE, IT WOULD HAVE 3 CERTAINLY DONE THE SAME IN RESPECT OF THE SUM IN QUESTION IF IT REPRESENTED PAYMENT S FOR PURCHASE. 2.1 THE SUBMISSION HAS BEEN CONSIDERED . PERUSAL OF THE STATEMENT OF TRANSACTIONS OF THE ASSESSEE IN THE BOOKS OF INDIA GLYCOL LTD. SHOWS THAT THE INVOICES RAISED BY IT FOR THE GOODS WERE CATEGORIZED AS TRANSACTION TYPE 33 WHILE THE PAYMENTS MADE BY THE ASSESSEE FOR THE SAME WERE CATEGORIZED AS TRANSACTION TYPE RV. APART FROM THIS, THERE IS A THIRD CATEGORY OF TRANSACTIONS, MARKET AS TYPE AB. IT IS NOTICED THAT THESE TRANSACTIONS ARE IN PAIRS OF POSITIVE AND NEGATIVE AMOUNTS WHICH ARE GENERALLY EQUAL. THE DOCUMENT NUMBER IS THE SAME FOR ONE SET O F POSITIVE AND NEGATIVE ENTRIES. THE AO MADE THE ADDITION WITHOUT CONFRONTING THE ASSESSEE WITH HER OBSERVATION AND ASKING HIM TO EXPLAIN THE SAME. THE ASSESEE HAS FURNISHED A PLAUSIBLE EXPLANATION. PRIMA FACIE, IT APPEARS THAT THESE ENTRIES REPRESENTED NE ITHER PURCHASES NOR PAYMENTS. THE PURCHASE MADE BY THE ASSESSEE ARE ALSO INDEPENDENTLY VERIFIABLE FROM THE TCS CERTIFICATES ISSUED BY THE COMPANY. IN VIEW OF THIS, IT IS HELD THAT, EVEN THOUGH THE SIGNIFICANCE OF THE MUTUALLY CANCELLING ENTRIES IS NOT CLEA R, THE AO S CONCLUSION THAT THEY REPRESENTED THE ASSESSEE S UNEXPLAINED INVESTMENT IN PURCHASE IS BASELESS. ADDITION BASED ON PURE GUESS WORK CANNOT BE SUSTAINED. IT IS DELETED. 4. THE ADDITION OF RS. 3,58,000/ - MADE UNDER SECTION 68 OF THE ACT WAS DELETED BY THE CIT(A) VIDE PARA 5.2 OF HIS ORDER, WHICH READS AS UNDER: 5. UNEXPLAINED CASH CREDIT - II (RS. 3,58,000/ - ) THE AO NOTED THAT THE ASSESSEE HAD INTRODUCED A SUM OF RS. 3,58,000/ - BY WAY OF UNSECURED LOANS RECEIVED IN CASH FROM 19 PERSONS, EACH LOAN BEING FOR LESS THAN RS. 20,000/ - . THESE AMOUNTS WERE CLAIMED TO HAVE BEEN TAKEN IN CASH AND SQUARED UP DURING THE PREVIOUS YEAR ITSELF. SHE REQUIRED THE ASSESSEE TO PRODUCE ALL THESE PERSONS BUT HE FAILED TO DO SO. HE FURNISHED CONFIRMATION LETTERS F ROM THESE PERSONS. SHE NOTED THAT THESE LETTERS WERE IN THE SAME FORMAT AND HAD BEEN PREPARED IN THE MONTH OF NOVEMBER, 2011. SHE REJECTED THE ASSESSEE S EXPLANATION AND TREATED THE SUM AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT. 5.1 THE ASSESSEE S SUBMISSION IN APPEAL IS SUMMARIZED BELOW: HE HAD FURNISHED COMPLETED DETAILS OF THE LENDERS INCLUDING THE NAMES AND ADDRESSES ALONG WITH CONFIRMATION LETTERS FROM THEM. HE, BEING AN AGRICULTURIST HIMSELF, HAD TAKEN UNSECURED LOANS OF SMALL SUMS FROM HIS FRIENDS AND FAMILY 4 MEMBERS WHO WERE ALSO AGRICULTURISTS. THEY DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNT OR EVEN BANK ACCOUNTS. THE FACT THAT THE CONFIRMATION LETTERS WERE MADE IN NOVEMBER, 2011 SHOULD HAVE NO ADVERSE IMPLICATION BECAUSE THEY WERE MADE WHE N THE AO DEMANDED THE SAME. 5.2 THE SUBMISSION HAS BEEN CONSIDERED. AS NOTED ABOVE, IT IS PLAUSIBLE THAT THE ASSESSEE WOULD HAVE MOBILIZED RESOURCES FROM OUTSIDE FROM HIS BUSINESS. THE PERSONS FROM WHOM THE LOANS ARE SAID TO HAVE BEEN RECEIVED ARE SAID TO BE AGRICULTURISTS. HENCE, SIMPLY BECAUSE EACH LOAN WAS BELOW RS. 20,000/ - , IT SHOULD NOT BE TREATED AS UNEXPLAINED. THE ASSESSEE FURNISHED COMPLETE DETAILS OF THESE PERSONS ALONG WITH THEIR CONFIRMATION LETTERS. IF THE AO WAS NOT SATISFIED WITH THE EVID ENCE, SHE WAS FREE TO CONDUCT INQUIRY WITH THESE PERSONS OR EVEN TO SUMMON THEM AND RECORD THEIR STATEMENTS. THE ASSESSEE SHOULD NOT BE EXPECTED TO PRODUCE THE PERSONS WITH WHOM HE HAS DONE TRANSACTIONS. OF COURSE, IF AFTER THE PRELIMINARY INQUIRY, THE EVI DENCE IS FOUND TO BE UNRELIABLE, THE ASSESSEE COULD HAVE BEEN ASKED TO PRODUCE THEM. SINCE THE AO FAILED TO CARRY OUT EVEN THE PRELIMINARY INQUIRY WITH THE PERSONS, HER CONCLUSION TO TREAT THE CASH CREDITS AS UNEXPLAINED WAS BASED ON SUSPICION AND DOES NOT MEET THE REQUIREMENT OF LAW. THE ADDITION IS DELETED. 5. WE DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 2 N D S E P T E M B E R , 2015. S D / - S D / - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 N D S E P T E M B E R , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI