Gold Park Jewellery, Trivandrum V. Dy CIT, Trivandrum

ITA 203/COCH/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0895 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 25-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2009
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: SHRIS RAJEEV ADV
• Keywords: Unexplained cash credit
• Section: 143(3); 131; 69; 68

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.A. NO. 203/COCH/2009 ASSESSMENT YEAR : 2004-05 M/S. GOLD PARK JEWELLERY, M.M. PLAZA, NAGAROOR ROAD, KALLAMBALAM, TRIVANDRUM. [PAN : AADFG 7657C] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRIS.RAJEEV, ADV.-AR REVENUE BY SHRI T.J.VINCENT, DR O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE ASSESSEE CONTESTS THE ORDER B Y THE COMMISSIONER OF INCOME TAX (APPEALS)-I, TRIVANDRUM (CIT(A) FOR SHORT) DA TED 26.12.2008, DISMISSING THE ASSESSEES APPEAL QUA ITS ASSESSMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR ASSESSMENT YEAR (A.Y.) 2004-05 DA TED 30.12.2006. 2. THE APPEAL RAISES TWO ISSUES, EACH OF WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST ISSUE (RAISED PER GROUNDS 2 THRO 4 THE FIRST BEI NG GENERAL AS WELL AS THE ADDITIONAL GROUND) RELATES TO THE CONFIRMATION OF ADDITION OF ` 10,84,500/- U/S. 68 OF THE ACT. THE ASSESSEE, A FIRM IN THE JEWELLERY TRADE, WAS DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER THE ACT, OBSERVED TO HAVE CREDITS AGGREGATING TO 21,84,500/- IN THE CURRENT ACCOUNT OF ITS MANAGING PARTNER, SHRI R. MURARILAL, I.E., I N ITS BOOKS OF ACCOUNTS FOR THE RELEVANT PREVIOUS YEAR. THE DETAILS CALLED FOR REVEALED THE CREDITS TO BE IN CASH RECEIVED FROM EIGHT (8) PARTIES, FOUR (4) OF WHOM WERE SUMMONED U/S. 13 1 OF THE ACT, AND THEIR STATEMENTS RECORDED. THE SAME WERE ACCEPTED SUBJECT TO ACTION U/S. 271D, BEING IN VIOLATION OF SECTION 269SS OF THE ACT, WHICH THOUGH IS NOT OF RE LEVANCE OR THE SUBJECT MATTER OF CONCERN IN THE INSTANT APPEAL. AS REGARDS THE OTHE R FOUR CREDITS, THE DETAILS OF WHICH ARE I.T.A. NO.203/COCH./2009 2 AS UNDER, ONLY CONFIRMATORY LETTERS WERE FILED IN R ESPECT OF THE FIRST TWO, WHILE BANK STATEMENTS WERE ALSO FILED FOR THE LATTER TWO:- (AMOUNT IN ` ) I) SHRI RAJENDRAN NAIR K.S. 2,03,000/- II) SHRI ABDUL HAKEEM 5,00,000/- III) SHRI K.BASHEER 90,000/- IV) SMT. THANKAM M. 2,71,500/- TOTAL 10,64,500/- ======== AS NO OTHER DETAILS OR EVIDENCES STOOD FILED IN SU PPORT OF THE SAID CASH CREDITS (FOR ` 10.645 LAKHS), THE ASSESSING OFFICER (AO) CONSIDERE D THE SAME AS UNPROVED. THE SAME STOOD CONFIRMED IN FIRST APPEAL ON THE LD. CIT(A) F INDING THAT THE ASSESSEE HAD BEEN ALLOWED SUFFICIENT OPPORTUNITY BY THE AO TO ESTABLI SH THE IDENTITY, CAPACITY AND THE GENUINENESS OF THE IMPUGNED CREDITS, INCLUDING ANOT HER FOR ` 20,000/-. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 4. BEFORE US, LIKE SUBMISSIONS STOOD RAISED. THE L D. AR SUBMITTED THAT THE REVENUE HAS FAILED TO CONSIDER THAT THE IMPUGNED CREDITS AR E IN THE PARTNERS CURRENT ACCOUNT, SO THAT IT REPRESENTS A LIABILITY (OF THE ASSESSEE-FIR M) TO THE CONCERNED PARTNER AND NOT TO THE PERSON WHO HAVE LENT MONEY THERE-TO. THE PARTNER, I N ORDER TO AUGMENT THE RESOURCES OF THE FIRM, AS FOR BUILDING-UP ITS STOCK POSITION, SE CURED LOANS FROM HIS FRIENDS AND RELATIVES, SO THAT THE GENUINENESS OF THE CREDIT(S) COULD NOT BE DOUBTED. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW, STATING THAT THE ASSESSEE HAS IN THE FACTS AND CIRCUMSTANCES OF THE CASE FAILED TO D ISCHARGE THE ONUS ON IT, I.E., IN TERMS OF SECTION 68 OF THE ACT. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. 5.1 THE FIRST THING THAT WE OBSERVE IS THAT THOUG H THE ADDITION ON THIS COUNT IS FOR ` 10,84,500/-, THE TOTAL OF THE IMPUGNED CREDITS WORK S TO ` 1 0,64,500/- ONLY. WHILE THE ASSESSMENT ORDER IS SILENT ON THIS, THE LD. CIT(A), THOUGH OBSERVES THIS FACT, TO WHICH HER I.T.A. NO.203/COCH./2009 3 ATTENTION WAS DRAWN BY THE ASSESSEE PER THE STATEME NT OF FACTS, EXPLAINS IT AWAY BY MENTIONING OF IT AS FOR ANOTHER CREDIT FOR ` 20,000/- ( REFER PAGE 3 OF THE IMPUGNED ORDER ). WE ARE UNABLE TO UNDERSTAND, AS, HOW COULD THIS BE? IF THERE IS ANOTHER CREDIT FOR 20,000/-, DOES IT FORM PART OF 21,84,500/-, WHICH IS THE AGGR EGATE AMOUNT OF CREDIT ALLOWED TO THE ACCOUNT OF THE CONCERNED PARTNER DURING THE YEAR, O R IS IT OUTSIDE IT. THERE ALSO DOES NOT APPEAR TO BE ANY TYPOGRAPHICAL OR CASTING MISTAKE, I.E., IN ADDING UP THE GROSS AMOUNT. THE ADDITION MADE AND SUSTAINED IS IN RESPECT OF FO UR PARTIES, THE TOTAL AMOUNT ASCRIBED TO WHOM IS AT ` 10,64,500/- INSTEAD OF ` 10,84,500/-, WHICH THUS APPEARS TO BE A MISTAKE. UNLESS THE AMOUNT IS IDENTIFIED, AND SPECIFIED IN R ELATION TO A PARTICULAR CREDIT/S, HOW COULD THERE BE ANY EXPLANATION OR THE QUESTION OF I T BEING CONSIDERED AS AN UNEXPLAINED CREDIT/S. UNDER THE CIRCUMSTANCES; THE ASSESSEE HAV ING NOT RAISED ANY SPECIFIC PLEA IN THIS REGARD BEFORE US, WE CONSIDER IT PROPER THAT THE MA TTER IS RESTORED BACK TO THE FILE OF THE LD. CIT(A) FOR APPROPRIATE FINDINGS; THE SAME NEVERTHEL ESS FORMING PART OF THE IMPUGNED CREDIT UNDER CHALLENGE BEFORE US, AND WHO SHALL ISS UE THE SAME AFTER HEARING THE ASSESSEE. 5.2 WITH REGARD TO THE ASSESSEES CASE ON MERIT S, ITS CONTENTION OF THE IMPUGNED CREDITS IN ITS BOOKS BEING IN THE NAME OF A PARTNER (INSTEA D OF THE PERSONS FROM WHOM THE AMOUNT/S STOOD SOURCED BY HIM) IS OF LITTLE CONSEQU ENCE, AS THE PARTNER HAS EXPLAINED THE SAME ONLY WITH REFERENCE TO BORROWINGS FROM HIS FRI ENDS AND RELATIVES, SO THAT HE IS ADMITTEDLY ONLY A CHANNEL, AND THE FUNDS DO NOT BEL ONG TO HIM. THE SOURCE, IN THE CONTEXT OF A CREDIT U/S. 68, COULD ONLY IMPLY THE ACTUAL AS AGAINST OSTENSIBLE SOURCE. WHEN THE SOURCE (PARTNER) IS ITSELF BEING EXPLAINED WITH REF ERENCE TO ANOTHER SOURCE (LENDERS), IT CANNOT BE SAID THAT THE SOURCE IS EXPLAINED, I.E. , UNTIL AND UNLESS THE ACTUAL OR THE PRIMARY SOURCE IS AUTHENTICALLY ESTABLISHED. THERE IS EVEN OTHERWISE NO BAR ON THE POWERS OF THE ASSESSING AUTHORITY, WHICH ARE PLENARY IN TH E MATTER OF ASSESSMENT; HIS MANDATE BEING TO EXAMINE THE FACTS TO ARRIVE AT THE TRUTH O F THE MATTER. IT WOULD RATHER BE SELF- DEFEATING, IF NOT SELF-CONTRADICTORY, IF THE SATISF ACTION OF THE AO U/S. 68 IS TO BE READ OR CONSIDERED AS WITH REFERENCE TO AN ADMITTEDLY OSTEN SIBLE SOURCE IN CONTRADISTINCTION TO THE ACTUAL SOURCE (REFER: CIT VS. BIJU PATNAIK (1986) 160 ITR 674 (SC)). THE PARTNERS ACCOUNT ONLY OPERATES TO ROUTE THE FUNDS; HE, AS IT APPEARS, HAVING USED HIS GOOD OFFICES TO PROCURE THE FUNDS FROM HIS WELL-WISHERS FOR THE BEN EFIT OF THE FIRM, SO THAT THE SOURCE OF I.T.A. NO.203/COCH./2009 4 THE CREDITS COULD ONLY BE WITH REFERENCE TO THEM. F IRMS GENERALLY ADOPT THIS ROUTE/PLOY TO PROP UP THE CAPITAL OF THE FIRM SO AS TO PRESENT A BETTER FINANCIAL PICTURE (THAN ACTUALLY IS) AND/OR SOURCE HIGHER CREDIT RATING AND, CONSEQUENTL Y, CREDIT FROM THE FINANCIAL INSTITUTIONS. S. 68 IS APPLICABLE TO OWN CAPITAL AS WELL AS LOANS ; THE PURVIEW OF THE SECTION ITSELF BEING THE SATISFACTORY EXPLANATION AS TO THE NATURE AND S OURCE OF A CREDIT, THE SAME CANNOT BE EXCLUDED ON THE GROUND OF IT BEING OF A PARTICULAR NATURE, I.E., CAPITAL, AND NOT A LOAN. 5.3 EXAMINING THE ASSESSEES CASE FURTHER, WHO IS U NDER OBLIGATION TO EXPLAIN ANY CREDIT APPEARING IN HIS BOOKS OF ACCOUNTS, NOTHING, APART FROM A CONFIRMATORY LETTER THAT IS, STANDS FILED IN RESPECT OF FIRST TWO CREDITORS, AGGREGATING TO ` 7.03 LAKHS. THE SAME CANNOT, BY ANY MEANS, BE CONSIDERED AS ESTABLISHING THE CREDITS AND IN DISCHARGE OF THE ONUS CAST ON THE ASSESSEE TO PROVE THE CREDIT ON TH E PARAMETERS OF IDENTITY AND CREDITWORTHINESS (OF THE CREDITOR) AND THE GENUINEN ESS (OF THE TRANSACTION), PARTICULARLY CONSIDERING THE FACT THAT THE CREDITS ARE IN CASH. IN THE FACTS AND CIRCUMSTANCES, THUS, EVEN THE IDENTITY CANNOT BE SAID TO HAVE BEEN ESTABLISHE D. THE ASSESSEE SAYS THAT THESE PERSONS, AS ALSO THE TWO OTHERS, COULD NOT BE CONTACTED DESP ITE BEST EFFORTS. WHY? THE QUESTION BEGS FOR AN ANSWER, WHILE WE FIND NO PROPER EXPLANA TION IN THE MATTER. THE CREDITORS ARE ADMITTEDLY ONLY THE PARTNERS CLOSE FRIENDS, WHO HA VE, AS EXPLAINED, COME TO HIS HELP IN EXTENDING THEIR FUNDS TO HIM ON INTEREST-FREE BASIS . SURELY, THEY WOULD BE ONLY KEEN TO CLARIFY THE FACTS, WHICH WOULD ALSO BE IN THEIR OWN INTEREST INASMUCH AS IT WOULD ESTABLISH THEIR OWNERSHIP OF THE FUNDS, I.E., ON RECORD. THE ASSESSEE STATES THAT THEY ARE NRIS, RESIDING ABROAD. WHAT IS THE EVIDENCE TO SHOW THAT THEY ARE ACTUALLY RESIDING ABROAD, AND WHICH WOULD, RATHER, LEAD TO TWO INCIDENTAL QUESTIO NS, I.E., OF THEIR STATUS AS ASSESSES OR OTHERWISE UNDER THE ACT, AND OF TRANSMISSION OF FUN DS, I.E., HOW WERE THE FUNDS THEN TRANSMITTED? 5.4 IN CASE OF THE LATTER TWO CREDITORS, I.E., SHRI K.BASHEER AND SMT. M. THANKAM, FOR THE TOTAL CREDIT OF ` 3,61,500/-, THE ASSESSEE HAS SUBMITTED COPIES OF TH EIR BANK ACCOUNT. THIS, FIRSTLY, INVALIDATES ITS CLAIM THAT BEING NRI S, THEY HAVE NO LOCAL BANK ACCOUNT, WHICH, IF TRUE, WOULD AGAIN BE SURPRISING INASMUCH AS NRIS GENERALLY HAVE BANK ACCOUNTS IN INDIA, IF NOT FOR INVESTMENTS, FOR TRANSMISSION OF FUNDS TO INDIA. ALSO, IT NEEDS TO BE I.T.A. NO.203/COCH./2009 5 BORNE IN MIND THAT THE CREDITORS ARE WELL-TO-DO PEO PLE, WITH FUNDS AT THEIR DISPOSAL, AS IT IS ONLY IN THAT CASE THAT THEY COULD HAVE FINANCIALLY ASSISTED THE ASSESSEE WITH INTEREST-FREE (FRIENDLY) LOANS. AGAIN, IF THE CREDITORS CAME FOR WARD TO HELP THEIR FRIEND, THE MANAGING PARTNER, THEY WOULD ALSO BE REMITTING FUNDS TO THEI R FAMILIES IN INDIA. NO OTHER DETAILS OR SUPPORTING DOCUMENTS, APART FROM THE BANK ACCOUNT S TATEMENT, STANDS FILED. THE TRANSMISSION OF FUNDS BEING IN CASH, IT IS ONLY THE IDENTITY (OF THE CREDITOR) THAT GETS ESTABLISHED THROUGH THE SAID BANK ACCOUNTS. IT IS O NLY WHERE THE TRANSFER OF FUNDS IS THROUGH CHEQUE DRAWN IN THE NAME OF THE MANAGING PA RTNER, THAT THE CREDIT CAN BE SOURCED TO THE ACCOUNT HOLDER. AS SUCH, BOTH THE CREDITWOR THINESS AND THE GENUINENESS CANNOT BE SAID TO BE PROVED. SO, HOWEVER, WE CONSIDER THAT S OME FURTHER FINDINGS ARE NECESSARY TO STRIKE A FINAL NOTE OF SATISFACTION OR DIS-SATISFAC TION, AS THE CASE MAY BE. THIS IS AS THE ASSESSEE HAS SUBMITTED THE BANK ACCOUNTS OF THESE T WO CREDITORS, FURTHER CLAIMING TO HAVE PAID THE PARTNER PER CHEQUE/S. ARE THE TWO BANK ACCOUNTS OF RESIDENTS OR OF NON-RE SIDENTS (NRE OR NRO ACCOUNTS)? IS THE TRANSFER BY CHEQUE OR CASH? WHY COULD NOT THE CREDITORS, WHO HAVE ISSUED CHEQUES (ON A LOCAL BANK ACCOUNT) TO THE ASSESSEE, BE PRESENTED BEFORE THE AO? ARE THEY ASSESSES, HAVING EXPLAINED THEIR STATED SO URCE TO THE REVENUE? TRUE, THE OBLIGATION RESTS SOLELY ON THE ASSESSEE, AND NO FURTHER BURDEN LIES ON THE AO, I.E., ONCE THE EXPLANATION (INCLUDING MATER IAL ADDUCED IN SUPPORT) DOES NOT LEND ITSELF TO HIS SATISFACTION. HOWEVER, THE EXPLANATIO N AND THE RESULTANT SATISFACTION (OR DIS- SATISFACTION), HAS TO BE IN RELATION TO THE OBTAINI NG FACTS AND CIRCUMSTANCES, AND WHICH WE FIND AS NOT FULLY DETERMINED. 5.5 UNDER THE CIRCUMSTANCES, WE, WHILE CONFIRMI NG THE ADDITION IN RESPECT OF THE CREDITS FOR ` 7,03,000 STATED AS RECEIVED FROM THE FIRST TWO PERS ONS (REFER PARA 2 ABOVE), CONSIDER IT FIT AND PROPER TO REMIT THE MATTER WITH REGARD TO THE CREDITS AGGREGATING TO ` 3,61,500/-, STATED TO BE SOURCED BY THE PARTNER FRO M OTHER (LATTER) TWO PERSONS, TO THE FILE OF THE LD. CIT(A) , WHO SHALL, EITHER ON HIS OWN OR THROUGH THE AO, RECORD PROPER FINDINGS OF FACT IN RELATION THERETO, GIVING HIS REASONS, AN D AFTER ALLOWING REASONABLE OPPORTUNITY TO THE ASSESSEE TO STATE ITS CASE IN THE MATTER. WE DE CIDE ACCORDINGLY. I.T.A. NO.203/COCH./2009 6 5.6 BEFORE PARTING WITH THE ORDER ON THIS ISSUE , WE WISH TO CLARIFY ONE ASPECT OF THE MATTER, AND THAT IS THAT WHILE THE AO HAS STATED OF MAKING THE ADDITION U/S. 69, WE HAVE CONSIDERED IT AS ONE U/S. 68 OF THE ACT. WE CONSIDE R THE SAME AS OF LITTLE CONSEQUENCE. THIS IS FOR THE REASON THAT THE SAME IS QUA CASH CREDITS AND, FURTHER, ON ACCOUNT TO THE AO BEING NOT SATISFIED WITH THE ASSESSEES EXPLANATION TOWARD THE SAME, SO THAT THE ONUS CAST ON THE ASSESSEE TO PROVE THE SAME ON THE PARAMETERS OF IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE CREDIT/S, IS NOT PROVED. THAT IS , THE REASONS LEADING TO THE IMPUGNED ADDITION ARE CLEAR AND NOT DIFFERENT ( REFER PARAS 2, 5 OF THE ASSESSMENT ORDER ). IN FACT, EVEN THE LD. CIT(A) HAS REFERRED TO THE SAME AS BEI NG U/SS. 68 AND 69 OF THE ACT. ALSO, THE FACT THAT THE ACTION INITIATED U/S. 271D BY THE AO QUA THE CREDITS FOR ` 11 LACS, EXPLANATION/S IN RESPECT OF WHICH STOOD ACCEPTED BY HIM, SO THAT NO ADDITION U/S. 68/69 WAS MADE, THOUGH FOUND TO HAVE BEEN ACCEPTED IN VIO LATION OF S. 269 SS, IS IN AGREEMENT AND CONSISTENCE WITH THE FACT OF IT BEING ONLY IN R ELATION TO ACCEPTANCE OF MONIES BY THE ASSESSEE, OR CREDITS APPEARING IN ITS BOOKS OF ACCO UNT IN THE NAME OF THE PARTNER. THE DECISION REFERRED TO (CIT VS. IDHAYAM PUBLICATIONS LTD., 285 ITR 221 (MAD.)) IN THIS REGARD, BEING QUA A PENALTY U/S. 271D ON ACCEPTANCE OF LOAN BY A COM PANY FROM ITS DIRECTOR, HAS NO BEARING ON THE INSTANT CASE. 6. THE SECOND ISSUE, PER THE ASSESSEES FIFTH GR OUND OF APPEAL, IS IN RELATION TO A DISALLOWANCE OF ` 2 LAKHS. THE AO HAS EFFECTED THE DISALLOWANCE FOR T HE REASON THAT SOME ITEMS OF EXPENDITURE CLAIMED ARE NOT PROPERLY SUPPO RTED BY VOUCHERS. THE SAME FOUND CONFIRMATION BY THE FIRST APPELLATE AUTHORITY FOR T HE SAME REASON. NO SPECIFIC ARGUMENTS WERE RAISED BY THE ASSESSEE-APPELLANT BEFORE US IN THIS REGARD, THOUGH CLAIMS THE SAID IMPUGNED DISALLOWANCE TO BE EXCESSIVE AND UNWARRANT ED. 7. THE IRREGULARITIES ARE ADMITTED, ALBEIT, AGAIN, ADMITTEDLY, MINOR. THE DECISION QUA THE APPROPRIATENESS OR OTHERWISE OF THE DISALLOWANC E MADE, WHICH IS WHAT WE ARE IN EFFECT CALLED UPON TO ADJUDICATE, CAN NOT BE WITHOUT, INTER ALIA , A KNOWLEDGE OF THE QUANTUM OF THE EXPENDITURE TO WHICH THE IRREGULARITY AFORESAID EXTENDS. THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SILENT IN THE MATTER, AND TO THIS EXTENT CAN BE SAID TO REFLECT ARBITRARINESS. UNDER THE CIRCUMSTANCES, WE CONSIDE R IT FIT AND PROPER TO REMIT THE MATTER I.T.A. NO.203/COCH./2009 7 BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE IS SUE RAISED, I.E., QUA THE EXTENT OF DISALLOWANCE, PER A SPEAKING ORDER. WE DECIDE ACCOR DINGLY. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. SD/- S D/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 21ST JANUARY, 2011 GJ COPY TO: 1. M/S. GOLD PARK JEWELLERY, KALLAMBALAM, TC-27/142 1, VANCHIYOOR (PO), TRIVANDRUM. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1(2), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REG ISTRAR) I.T.A. NO.203/COCH./2009 8