Subash Kumar Jain, Koraput V. ITO, Jeypore

ITA 204/CTK/2012

• Counselvise Citation: 20422114 RSA 2012
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-03-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SETH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO S.204 AND 205/CTK/2012 / ASSESSMENT YEAR S 2007 - 08 AND 2008 - 09 SRI SUBASH KUMAR JAIN, PROP. M/S.SUBASH AGENCIES, JEYPORE, DIST. KORAPUT PAN: ABLPJ 6771 B - - - VERSUS - INCOM E - TAX OFFICER, WARD 1, JEYPORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SETH, AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DATE OF HEARING: 13.09.20 12 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. APPEALS FOR THE AYS 2007 - 08 AND 2008 - 09 HAVE BEEN FILED BY THE ASSESSEE RAISING COMMON GROUNDS WITH RESPECT TO DISALLOW ANCE OF EXPENDITURE AND ADDITION ON ACCOUNT OF UNCONFIRMED LOAN CREDITORS U/S.68. 2. THE REGISTRY INFORMS THAT FOR THE ASSESSMENT YEAR 2008 - 09, THE ASSESSEE HAS PREFERRED TO PAY THE TRIBUNAL FEES ON THE REVISED INCOME AFTER APPEAL EFFECT THEREFORE BECOMES LESS THAN THE TAX DEMAND WHICH THE ASSESSEE HAS CHOSEN NOT TO PAY THE REMAINING FEES INSOFAR AS THE SHORTFALL IS OF 4,808. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITTED THAT THE T AX DEMAND BEING LESS THAN 4,808 THE ASSESSEE HAS INSTRUCTED HIM TO LET THE APPEAL REMAIN DEFECTIVE TO THE EXTENT THAT APPROPRIATE FULL FEES IS NOT BEING PAID MAY BE DI SPOSED OF ACCORDINGLY. THEREFORE, THE TRIBUNAL FEES HAVING NOT BEEN PAID IN FULL, WE DISMISS THE I.T.A.NOS.204 AND 205/CTK/2012 2 APPEAL BEING ITA NO.205/CTK/2012 FOR THE ASSESSMENT YEAR 2008 - 09 AS UN - ADMITTED. 3. ADVERTING TO ITA NO.204/CTK/2012 FILED FOR THE ASSESSMENT YEAR 2007 - 08, WHE N THE MAJOR ADDIT IO N BEING THE ADDITION U/S.68 HAS BEEN CONSIDERED BY THE LEARNED CIT(A) WAS ON THE BASIS OF THE ASSESSING OFFICER FINDING THAT THE ASSESSEE HAS NOT BEEN ABLE TO SATISFY THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS, THE AMOUNT OF LOAN CREDITORS AND THE AMOUNT OF INTEREST PAID TO THEM WAS BOUND TO BE DISALLOWED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A WHOLESALER AND DISTRIBUTOR OF GOODS OF CONSUMABLE ITEMS , TEA , TOOTHPASTE, BISCUITS A ND CONFECTIONARY ARTICLES FILED RETURN FOR THE ASSESSMENT YEAR 2007 - 08 DECLARING INCOME OF 1,01,413, WHICH WAS SUBJECTED TO SCRUTINY ON THE BASIS OF AUDITED FINANCIAL STATEMENTS SUBMITTED ALONG WITH THE RETURN. DISALLOWING INTERALIA AS THE EXPENDITURE CLAIMED ON FREIGHT FOR THE PURCHASES, REPAIRS AND MAINTENANCE OF PETTY NATURE ALONG WITH THE C LAIM OF HOLDING SMT.NEELAM JAIN AND SRI VIKASH JAIN WHO ARE INCOME - TAX ASSESSEES IN THEIR OWN RIGHT WITH THE SAME ASSESSING OFFICER HAVING VERIFIED THE RETURNS ON OTHER INCOME WHICH LED THEM TO GIVE LOAN TO THE ASSESSEE WAS SUBJECTED TO DISREGARD AS UNEXPL AINED CASH CREDITS U/S.68 BY THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOAN OF 2,08,950 EACH FROM THE SAID LOAN CREDITORS WERE RETURNED BY THE LOAN CREDITORS IN THEIR RESPECTIVE RETURNS OF INCOME AS PER THE DOCUMENTARY EVIDENCE FURNISHED BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE THE TRIBUNAL . THE LEARNED CIT(A) CONFIRMED THE DI SALLOWANCE INSPITE OF BRINGING ON RECORD THE FACT THAT THE LOAN CREDITORS HAD APPEARED IN PERSON COULD NOT HAVE EXPLAINED THE NATURE OF INCOME THEY HAVE HAD INSOFAR AS HE APPLIED THE I.T.A.NOS.204 AND 205/CTK/2012 3 TEST OF HUMAN PROBABILITY AS ENUNCIATED BY HONBLE SUPREME COURT IN THE C ASE OF SUMATI DAYAL (214 ITR 801) THAT THE ALLEGED CREDITORS ARE ASSESSEES WIFE AND SON, THEREFORE, THE RESPONSIBILITY TO PROVE THE CREDITWORTHINESS OF THE TRANSACTION WAS ON THE ASSESSEE ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO HOLD THEM AS AMOUNTS FIT FOR ADDITION U/S.68. FOR THIS PURPOSE HE RELIED ON THE DECISION OF HONBLE GAUHATI HIGH COURT I N THE CASE OF NEMI CHAND KOTHARI V. CIT (264 ITR 254) WHO HAVE ESTABLISHED THE FACT THAT THE FAILURE OF THE CREDITOR TO SHOW CREDITWORTHINESS OF HIS SUB - CREDITORS COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE, WHICH THE LEARNED CIT(A) HAS DONE OTHERWISE. THE WIFE AND THE SON ARE INCOME - TAX PAYEES ESTABLISHED THEIR CREDITWORTHINESS. THE AMOU NTS HAVE BEEN RECEIVED BY CHEQUES ESTABLISHED THE GENUINENESS. THE IDENTITY WAS ESTABLISHED BY THE ASSESSING OFFICER WHEN THE LOAN CREDITORS APPEARED BEFORE HIM. AT NO POINT OF TIME EITHER OF THE AUTHORITIES HAVE HELD THEM AS NON - GENUINE INSOFAR AS THE LEA RNED CIT(A) BROUGHT IN THE SOCIAL ANGLE THE LOAN CREDITORS ARE THE ASSESSEES WIFE AND SON. THEY ARE INDIVIDUALS IN THEIR OWN RIGHT, SINCE THEY ARE INCOME - TAX ASSESSEES HAVING PAN GIVEN BY THE DEPARTMENT. THEREFORE, NEGATING THE CLAIM BY THE AUTHORITIES BE LOW IS ILLEGAL, UNJUSTIFIED AND CONTRARY TO THE PROVISIONS OF THE I.T.ACT AND THE CITED CASE LAWS. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT OF INTEREST PAID THESE LOAN CREDITS HAS BEEN SUBJECTED TO DEDUCTION OF TAX U/S.194A TH EREFORE CANNOT BE DISALLOWED U/S.40(A)(IA) AS WELL. 4.2. WITH RESPECT TO THE FREIGHT EXPENSES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED 10% WHICH HAS BEEN SU S TAINED BY THE LEARNED CIT(A) AT 5% MAY KNDLY BE CONSID ERED AS DEEMED FIT BY THE TRIBUNAL. I.T.A.NOS.204 AND 205/CTK/2012 4 4.3. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED FOR THE DISALLOWANCE BEING 10% OF THE EXPENSES ON ACCOUNT OF BANK COMMISSION, TELEPHONE EXPENSES AND RMC FEES. 4.4. WITH RESPECT TO THE REPAIRS AND MAIN TENANCE OF SCOOTER, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) HAS CONFIRMED THE TOTAL DISALLOWANCE ON THE GROUND THAT THE ASSESSEE OWNS A MOTOR CYCLE AS WELL AS A SCOOTER BUT HAS CLAIMED THE EXPENDITURE ON SCOOTER WHICH WAS HI S PERSONAL ASSET. THE INCURRING OF EXPENDITURE ON PETROL IN EITHER THE MOTOR CYCLE OR SCOOTER IS NOT DISPUTED. BECAUSE THE SCOOTER IS HIS PERSONAL ASSET AND THE ASSESSEE BEING AN INDIVIDUAL PART DISALLOWANCE MAY KINDLY BE DELETED FOR THE PURPOSE OF HOLDING IT AS FOR PERSONAL USE. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ASSESSING OFFICER HAD MADE CATEGORICAL FINDING TO BRING TO TAX EXPENDITURE DISALLOWABLE WHICH HAS BEEN RIGHTLY CONFIRMED BY THE LEARNED CIT(A) I NSOFAR AS FOR THE ASSESSMENT YEAR 2008 - 09 THE LOAN CREDITORS SUSTAINED BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2007 - 08 HAS BEEN RECTIFIED BY GIVING APPEAL EFFECT WHICH ORDER U/S.251 HAS BEEN PLACED ON RECORD RIGHTLY CLINCHES THE ISSUE THAT THE APPE AL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09 WAS DEFECTIVE TO THE EXTENT THAT PART TRIBUNAL FEES HAS NOT BEEN PAID. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RE CORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WITH RESPECT TO THE MAJOR ADDITION BEING ADDITION U/S.68 WE ARE INCLINED TO HOLD THAT THE ASSESSEE HAS DISCHARGED THE ONUS WHICH LAY UPON HIM INSOFAR AS THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS REMAINS ESTABLISHED BY THE ASSESSEE WHICH THE ASSESSING OFFICER VERIFIED BY SUMMONING THE LOAN CREDITORS I.T.A.NOS.204 AND 205/CTK/2012 5 U/S.131. THE LEARNED CIT(A) THEREFORE, MISDIRECTED HIMSELF TO IMPORT HUMAN PROBABILITY AS ENUNCIATED BY THE HONBLE SUPREME COURT IN THE CA SE OF SUMATI DAYAL (SUPRA) IT BECOMES A MATTER OF DOUBT AND BIAS IN TH;E MIND OF THE LEARNED CIT(A) WHEN CERTAIN LOANS ARE EFFECTIVE TO BE DISCHARGED WHEN THE ASSESSEE COULD NOT GO BEYOND WHAT HAS ALREADY BEEN ESTABLISHED. FOR THIS PROPOSITION, THE LEARNE D COUNSEL FOR THE ASSESSEE RIGHTLY RELIED N THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF NEMI CHAND KOTHARI (SUPRA) WHICH HAS HELD THAT AFTER THE DISCHARGE OF THE ONUS WHICH LAY UPON AN ASSESSEE, THE BURDEN IS SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. INSTEAD OF PROVING THE CONTRARY, THE LEARNED CIT(A) HAS CONFIRMED THAT THE CREDITORS ESTABLISHED THEMSELVES AS WIFE AND SON OF THE ASSESSEE CANNOT BE TAKEN RECOURSE TO HUMAN PROBABILITY FOR CITING THE CASE LAW OF SUMATI DAYAL (SUPRA) . INCOME TAX IS TAX ON INCOME WHICH INCOME CANNOT BE DENIED BY HOLDING A DOUBT THAT THE INCOME WAS BELONGING TO THE ASSESSEE BUT WAS PARTICIPATED WITH BY A WIFE AND SON. THE LEARNED COUNSEL FOR THE ASSESSEE RIGHTLY STATED THAT THEY ARE INDIVIDUALS IN THEIR OWN RIGHT AND THEY CANNOT BE DEPRIVED OF HAVING EARNING THEIR OWN INCOME ON WHICH THEY HAVE PAID TAXES. THEREFORE, AS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT TAX AT SOURCE HAS ALSO BEEN DEDUCTED ON THE AMOUNT OF INTEREST PAID AMOUNTING TO 8,9 50 THEREFORE ENTITLED THE ASSESSEE TO CLAIM INTEREST AS EXPENDITURE U/S.40(A)(IA) AS WELL. WE, THEREFORE, DIRECT DELETION OF THE ADDITION OF 4,17,900 (BEING LOAN RECEIVED OF 2,08,950 EACH FROM SMT. NEELAM JAIN AND SRI VIKASH JAIN) ADDED IN THE HANDS OF T HE ASSESSEE WHEN THE AMOUNT OF INTEREST CREDITED TO THEIR ACCOUNT HAVING BEEN SUBJECTED TO DEDUCTION OF TAX AT SOURCE U/S.40(A)(IA) IS ALSO CONSEQUENTIALLY ALLOWED. 6.1. HOWEVER WITH RESPECT TO SUSTENANCE OF 5% OF THE ADDITION OF 13,078 ON ACCOUNT OF DISA LLOWANCE OF FREIGHT EXPENSES, AS NO FURTHER MATERIAL HAS I.T.A.NOS.204 AND 205/CTK/2012 6 BEEN BROUGHT ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN THIS REGARD IS CONFIRMED. 6.2. AS REGARDS THE DISALLOWANCE OF 10% OF VARIOUS EXPENSES ON AC COUNT OF BANK COMMISSION, TELEPHONE EXPENSES AND RMC FEES , AS ALREADY OBSERVED IN PARA 4.3 OF THIS ORDER, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS ISSUE AND IN VIEW OF THE SAME, WE CONFIRM THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS IS SUE. 6.3. LASTLY, AS REGARDING THE DISALLOWANCE OF EXPENSES ON REPAIR AND MAINTENANCE OF SCOOTER, WE ARE INCLINED TO FIND JUSTIFICATION IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT A PERSON WHO CAN RIDE A MOTOR CYCLE CANNOT RIDE THE SCOOT ER SIMULTANEOUSLY. THE CLAIM OF EXPENDITURE ON MOTOR CYCLE HAS NOT BEEN CLAIMED IN THE BUSINESS. THE SCOOTER IS A PERSONAL ASSET. THEREFORE AS MOTOR CYCLE AND SCOOTER BOTH RUN ON PETROL, THE EXPENDITURE OF 14,283 SHOULD BE PARTLY ALLOWED TO THE EXTENT THAT I T HAS NOT BEEN ESTABLISHED THAT IT WAS ONLY THE SCOOTER WHICH COULD RUN ON PETROL. IN THIS VIEW OF THE MATTER, WE DIRECT TO ALLOW 50% OF THE EXPENDITURE CLAIMED ON SCOOTER AS FOR BUSINESS OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2007 - 08 STANDS PARTLY ALLOWED. 8. TO SUM UP ITA NO.204/CTK/2012 FOR THE ASSESSMENT YEAR 2007 - 08 IS PARTLY ALLOWED AND ITA NO.205/CTK/2012 FOR THE ASSESSMENT YEAR 2008 - 09 IS DISMISSED AS UN - ADMITTED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28.09.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NOS.204 AND 205/CTK/2012 7 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI SUBASH KUMAR JAIN, PROP. M/S.SUBASH AGENCIES, JEYPORE, DIST. KORAPUT 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 1, JEYPORE. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 27.09.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.09.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... A 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..