MOHAMMED SHAMIM BADGUJAR, MUMBAI V. A.C.I.T. CIRCLE 19(2), MUMBAI

ITA 2066/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100693 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-05-2015
• Assessment Year: 1990-1991
• Appeal Filed On: 14-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BIRLA
• Assessee Lawyers: ASHOK L SHARMA
• Keywords: Business income; Additional evidence; Onus to prove
• Section: 131; 69; 68

Judgement Text

1 I.T.A.2066/UM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL! MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER & SHI SAN JAY GARG JUDICIAL MEMBER I.T.A.2066/MUM/2015 (A Y 1990-91) MOHAMMAD SHAMIM BADGUJAR V ACIT CIRCLE 19(2) MUMBAI C-1, KHIRA NAGAR, S.V. ROAD MUMBAI SANTACRUZ, MUMBI-400 0 54 PAN : AAEPB8218Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK L SHARMA RESPONDENT BY : SHRI PAWANKUMAR BIRLA, DR DATE OF HEARING : 27/05/20215 DATE OF PRONOUNCEMENT: 21 /08/2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER 1. THIS APPEAL IS PREFERRED BY ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] DATED31-12-2010 RELEVA NT FOR ASSESSMENT YEAR 1990-91. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN IND IVIDUAL CARRYING ON THE BUSINESS AS PROPRIETOR OF M/S SONI & ASSOCIATES. DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ACCEPTED CERTAIN LO ANS, WHICH REMAINED UNPROVED, AND THEREFORE AN ADDITION OF RS 240000/- U/S 68 OF THE INCOME TAX ACT WAS MADE. FURTHER ADDITION U/S 69 OF THE ACT OF RS 2,50,000/- WAS ALSO MADE ON ACCOUNT OF AMOUNTS RECEIVED FROM TWO P ARTIES. THE ASSESSING 2 I.T.A.2066/UM/2015 OFFICER ALSO ESTIMATED THE PROFITS FROM THE BUSINE SS OF REAL ESTATE @ 7 % OF RS 81,67,354/- AT RS5,71,714 AND ADDED THE SAME INT O THE INOME OF THE ASSESSEE. 3. IN THE FIRST ROUND OF APPEAL ALSO, THE ASSESSEE UN SUCCESSFULLY CONTESTED ALL THESE ISSUES BEFORE THE CIT (A), AND BEFORE THIS TR IBUNAL (ITAT). BEFORE ITAT IN FIRST ROUND OF APPEAL , THE ASSESSEE SUBMITTED S OME ADDITIONAL EVIDENCE, WHICH WERE NOT ADMITTED. ON APPEAL AGAINST THE SAID ORDER, THE HONBLE HIGH COURT SET ASIDE THE MATTER BACK TO THE FILE OF AO. 4. IN THE SECOND ROUND OF APPEAL ALSO, AO MADE SAME AD DITIONS WHICH WERE ALSO CONFIRMED BY THE LD CIT (A) AND THEREFORE ASS ESSEE IS IN APPEAL BEFORE US. 5. FIRST GROUND OF APPEAL IS AGAINST THE ADDITION OF R S. 2,40,000/- U/S 68 OF THE ACT. THE FACTS OF THE ADDITION ARE THAT ASSESSEE HA D OBTAINED LOANS FROM 8 PERSONS AMOUNTING TO RS 2,40,000/-. AT THE TIME OF VERIFICATION OF CASH CREDITS THE ASSESSEE SUBMITTED CONFIRMATION OF ALL THE LENDERS HOWEVER, AO WAS NOT SATISFIED ABOUT THE CREDIT WORTHINESS OF TH E CREDITORS. THEREFORE, AO MADE THE ADDITION U/S 68 OF RS 2,40,000/- AS UNEXPL AINED CASH CREDITORS. CIT (A) CONFIRMED THE ADDITION ON THE GROUND THAT THERE WAS FAILURE ON THE PART OF ASSESSEE TO PROVE THE CREDIT WORTHINESS OF THE LENDERS. 6. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE A MOUNT BORROWED FROM THE EIGHT LENDERS WERE SMALL AMOUNTS IN NATURE IN T HE RANGE OF RS 20,000/- TO RS. 50,000/-. FURTHER, DURING THE COURSE OF ASSE SSMENT LOAN CONFIRMATION OF ALL THE PARTIES WERE SUBMITTED WHICH ARE AT PAGE S NO 135 TO 166 OF THE 3 I.T.A.2066/UM/2015 PAPER BOOK. HE HAS FURTHER SUBMITTED THAT ALL THE L OANS WERE RECEIVED BY CHEQUE AND REPAID BY CHEQUE. TO SOME OF THE CREDITO RS INTEREST HAS ALSO BEEN PAID BY CHEQUE. ALL THE CONFIRMATIONS ALSO SHO WED PAN / GIR NUMBERS OF THE LENDERS. HE THEREFORE HAS SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE BURDEN TO PROVE THE GENUINENESS OF TRANSACTIONS . IN SUPPORT OF HIS CONTENTIONS, HE HAS RELIED UPON THE ORDER OF HONOUR ABLE SUPREME COURT IN THE CASE OF 159 ITR 78 (SC). 7. LD. DR HAS RELIED UPON THE FINDINGS OF THE LOWER AU THORITIES AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THE CASH CREDITS AS MANDATED U/S 68 OF THE ACT, AND THEREFORE, THE A DDITION NEEDS TO BE CONFIRMED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS ORDERS ARISING IN THIS APPEAL OF VARIOUS AUTHORITIES. DURING THE YEAR, THE ASSESSEE HAS OBTAINED LOAN FROM EIGHT PARTIES AMOUNTING IN ALL TO RS 2, 40,000/-. THESE LOANS ARE IN THE RANGE OF RS 20,000/- TO RS 50,000/-. FOR THE LOANS OBTAINED, ASSESSEE HAD FILED CONFIRMATIONS STATING THEIR NAMES, ADDRES SES AND GIR/ PAN NUMBERS. THE CONFIRMATIONS ALSO SHOWED THAT THE AMO UNTS HAD BEEN PAID BY CHEQUE BY THE LENDERS TO THE ASSESSEE AND THE ASSES SEE HAD ALSO REPAID THE LOANS THROUGH CHEQUES. IN SUPPORTS OF THESE, THE AS SESSEE HAD SUBMITTED THE BANK STATEMENTS ALSO. FURTHER TO SOME OF THE LE NDERS ASSESSEE HAD PAID INTEREST. SURPRISINGLY THIS INTEREST EXPENDITURE CL AIMED BY THE ASSESSEE HAS BEEN ALLOWED BY AO. IN THIS CASE AFTER SUBMISSION O F THE CONFIRMATIONS OF THE LENDERS STATING ALL THE NECESSARY FACTS, AO HAS NOT DONE ANY INQUIRY INCLUDING ISSUE OF SUMMONS U/S 131 OF THE ACT. THER EFORE, THERE ARE NO 4 I.T.A.2066/UM/2015 EFFORTS MADE BY AO TO VERIFY THE GENUINENESS AND CR EDIT WORTHINESS OF THOSE CREDITORS DESPITE CONFIRMATIONS FILED BY ASSESSEE. THEREFORE, AS HELD BY HONOURABLE SUPREME COURT IN CASE OF CIT V ORISSA CO RPORATION LIMITED 159 ITR 78 (SC) THAT IN A CASE WHERE THE ASSESSEE HAD G IVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS; IT WAS IN THE K NOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE THE INCOME TAX ASSESSE S; THEIR INDEX NUMBER WAS IN THE FILE OF THE REVENUE; THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE OF THE ASSESSEE, DID NO T PURSUE THE MATTER FURTHER; THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CRE DIT-WORTHY OR WERE SUCH PERSONS WHO COULD ADVANCE THE ALLEGED LOANS; IN THO SE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER; IN THE PREM ISES, IF THE TRIBUNAL CONCLUDED THAT THE ASSESSEE HAD DISCHARGED THE BURD EN THAT LIED ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WA S UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. 9. EVEN IN THE PRESENT CASE NO SUMMONS WERE ISSUED TO THE CREDITORS U/S 131 OF THE ACT. THE ASSESSEE HAS DISCHARGED THE ONUS TO PROVE THE GENUINENESS OF TRANSACTIONS, HENCE, NO ADDITION U/S 68 CAN BE M ADE IN THE HANDS OF THE ASSESSEE. HENCE, ADDITION U/S 68 OF RS 2,40,000/- IN RESPECT OF 8 LENDERS IS DELETED. THE GROUND NO 1 OF APPEAL IS ALLOWED. 10. GROUND NO 2 OF APPEAL IS AGAINST THE ADDITION OF RS . 2,50,000/- U/S 69 OF THE ACT, AS ALLEGEDLY, THE ASSESSEE COULD NOT PRO VE THE SOURCES OF THE CASH CREDIT. DURING THE YEAR, ASSESSEE HAD TAKEN A LOAN OF RS 2, 50,000/- FROM M/S SAHEEN BUILDERS AND SUBMITTED THE CONFIRMATION OF THE LOAN AND ALSO THE 5 I.T.A.2066/UM/2015 BANK ACCOUNT OF M/S SAHEEN BUILDERS FROM CANARA BAN K. M//S SAHEEN BUILDERS WAS ALSO ASSESSED TO TAX. THE MAIN REASON O F THE ADDITION WAS THAT ON THE DATE OF GIVING CHEQUE OF RS 2,00,000/- TO TH E ASSESSEE, THE BALANCE IN THE BANK ACCOUNT OF M/S SAHEEN BUILDERS WAS ONLY RS 3,087/- AND RS 2,50,000/- WAS DEPOSITED ON THE SAME DAY. AO MADE T HE ADDITION AS ASSESSEE COULD NOT SUBMIT SOURCE OF RS 2,50,000/- W HICH WAS DEPOSITED IN THE BANK ACCOUNT OF SAHEEN BUILDERS. FURTHER, A SSESSEE HAD TAKEN A LOAN OF RS 3,50,000/- FROM ONE MR. MOHAMMAD IQBAL BADGUJ AR BY CHEQUE ON 10.7.1989 FROM CANARA BANK. THE LENDER DEPOSITED CA SH ON 14.6.1989 AND THEREAFTER A CHEQUE WAS ISSUED IN THE NAME OF THE A SSESSEE ON 10.7.1989. OUT OF THE SAID LOAN AMOUNT ,A SUM OF RS 50,000/- W AS ADDED IN THE HANDS OF ASSESSEE U/S 69 OF THE ACT ACCEPTING THE BALANCE AM OUNT OF RS 3,00,000/-. 11. BEFORE US LD.AR SUBMITTED THAT THE ASSESSEE HAS FIL ED THE CONFIRMATION OF THE LOAN FROM THE PARTIES ALONG WITH COPIES OF THE BANK ACCOUNTS OF THE LENDERS WHERE FROM CHEQUES WERE ISSUED. THE CONFIRM ATION LETTERS SHOWED THE COMPLETE DETAILS OF THE LENDERS STATING THEIR N AMES, ADDRESSS, GIR NO. ETC. TTHE SOURCES OF THE FUNDS OF THE LENDERS WERE ALSO EXPLAINED BY DRAWING ATTENTION TO THE PASSBOOKS. THEREFORE, IT WAS SUBMI TTED THAT ADDITION MADE BY AO WAS INCORRECT AND THEREFORE SHOULD BE DELETED . 12. LD. DR SUBMITTED THAT CONCURRENTLY ADDITION HAS BEE N CONFIRMED AS THE ASSESSEE COULD NOT PRODUCE THE SOURCES OF FUNDS OF THESE PARTIES AND THEREFORE ADDITION IS RIGHTLY MADE BY AO. HE RELIED UP ON THE ORDERS OF LOWER AUTHORITIES IN THIS RESPECT. 6 I.T.A.2066/UM/2015 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION ON THE ISSUE. IN BOTH THE CASES ASSESSEE HAS SUBMITTED THE CONFIRMATION OF BOTH PAR TIES STATING THEIR NAMES, ADDRESSS, AND GIR NO. ASSESSEE ALSO SUBMITTED THE PASSBOOKS OF THE PARTIES, WHICH ALSO EXPLAINS THE SOURCES OF THE LOA NS GIVEN. BOTH THE PARTIES WERE ALSO REPAID BY THE ACCOUNT PAYEE CHEQUES. THER EFORE AS HELD IN GROUND NO ONE, WITH RESPECT TO THIS ADDITION ALSO AO HAS M ADE NO EFFORTS TO VERIFY THE CORRECTNESS OF CONFIRMATION SUBMITTED BY THE AS SESSEE EVEN IN SECOND ROUND OF LITIGATION. IN THESE BOTH LOANS,ASSESSEE H AS DISCHARGED ITS PRIMARY ONUS BY SUBMITTING THE COMPLETE CONFIRMATION INCLUD ING GIR NUMBER OF THE LENDERS. IN CASE OF MOHAMMAD IQBAL BADGUJAR ,ASSESSEE HAS SHOWN IN THE PASSBOOK THAT THE LENDER HAS DEPOSITED AN AMOUNT FO R RS 50,000/- IN CASH, WHICH THE LENDER HAD WITHDRAWN FEW DAYS BEFORE THE TRANSACTION. IN BOTH THE CASES ASSESSEE HAS DISCHARGED ITS ONUS BY SUBMI TTING THE CONFIRMATION AND SUBMITTED THAT DEPOSITORS ARE ON THE FILE OF DE PARTMENT. HOWEVER, THE AO HAD NOT MADE ANY INQUIRY BEFORE MAKING THE ABOVE STATED ADDITION. THEREFORE IN THE LIGHT OF THE DECISION OF THE HONOU RABLE SUPREME COURT IN CASE OF CIT V ORISSA CORPORATION LIMITED 159 ITR 78 (SC) (SUPRA) NO ADDITION U/S 69 CAN BE MADE IN THE HANDS OF THE ASSESSEE. HE NCE, ADDITION U/S 69 OF RS 2,50,000/- IN RESPECT OF THE ABOVE TWO DEPOSIT S IS DELETED. THE GROUND NO 2 OF APPEAL IS ALLOWED. 14. THIRD GROUND OF APPEAL IS AGAINST ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE @ 7 % OF RS 81,67,354/-. THE MAIN PLEA OF THE ASSESSEE IS THAT AS IT IS FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUN TING FOR ITS PROJECT. AO WAS OF THE VIEW THAT ASSESSEE HAD DEBITED ALL T HE EXPENSES EXCEPT THE 7 I.T.A.2066/UM/2015 COST OF THE LAND WHICH WAS PAID CUMULATIVELY OF R S 38,93,787/- WHICH WAS NOT PART OF THE TOTAL COST AMOUNTING TO RS 42,73,5 67/-. AO TOOK THE TOTAL COST OF RS 81,67,354/- AND ESTIMATED 7 % THEREOF. T HE ASSESSEE IS IN APPEAL AGAINST THE INCLUSION OF LAND COST IN THE TOTAL COS T IN THIS YEAR. 15. BEFORE US, LD AR OF THE ASSESSEE HAS SUBMITTED THAT PAYMENTS FOR THE LAND HAVE BEEN SPREAD OVER FROM AY 1989-90 TO AY 1990-91 . A CHART TO THIS EFFECT WAS ALSO FILED ALONG WITH THE PROOF OF PAYMENTS FOR SUCH LAND IN THE FORM OF AGREEMENTS FOR PURCHASES OF LAND. THE LD. DR HOWEVER, HAS SUBMITTED THAT AO HAS RIGHT LY TAKEN THE COST OF LAND AND IT SHOULD HAVE BEEN INCLUDED IN THE COST O F THE PROJECT IN THIS YEAR AND THEREFORE DEFENDED THE ADDITION MADE BY AO WHIC H HAVE BEEN CONFIRMED BY CIT (A). 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE RIVAL PARTIES. ASSESSEE HAS A BUSINESS OF CONSTRUCTION OF FLATS AND SHOPS. ONE BUILDING UNDER THE NAME ANISA IS CONSTRUCTED BY THE ASSESSEE WHILE T WO BUILDINGS ARE CONSTRUCTED AT BORIVALI. ASSESSEE HAS SHOWN PROFIT ON ESTIMATE BASIS IN THE CONSTRUCTION BUSINESS OF THE ASSESSEE. THE AMOUNT R ECEIVED FROM THE BUYERS HAS BEEN SHOWN AS ADVANCES AND THE TOTAL COST OF CO NSTRUCTION HAS BEEN SHOWN AS WORK IN PROGRESS. ASSESSEE HAS BEEN FOLLOW ING THE PERCENTAGE COMPLETION METHOD IN CONSTRUCTION BUSINESS AND THER EFORE SHOWING 7 % OF THE TOTAL COST INCURRED DURING THE YEAR. THE CONTEN TION OF THE LD. AR HAS BEEN THAT A SUM OF RS 11 LAKHS ADDED TOWARDS THE COST OF THE PROJECT WHICH WAS PROVISION MADE FOR OUTSTANDING AMOUNT P AYABLE FOR LAND IN AY 1990-91 SHOULD BE EXCLUDED . THIS WAS ALSO THE SUBMI SSION OF ASSESSEE IN THE 8 I.T.A.2066/UM/2015 FIRST ROUND OF APPEAL. THE TRIBUNAL CONFIRMED THE A DDITION IN THE FIRST ROUND OF APPEAL ONLY BECAUSE ASSESSEE DID NOT PRODU CE ANY EVIDENCE IN SUPPORT OF HIS CONTENTION. NOW IN THE SECOND ROUND , ASSESSEE HAS STATED THAT THE LAND COST HAS BEEN DEBITED IN THE TOTAL CO ST IN THE LAST YEAR ONLY. ASSESSEE, AS PER CHART HAD PAID RS 16,93,787/- IN A Y 1989-90 AND RS 11,00,000/- IN THIS YEAR AND FURTHER RS 11,00,000/- HAVE BEEN PAID IN SUBSEQUENT YEARS. ASSESSEE IS AGGRIEVED BY THE INCL USION OF RS 11,00,000/- PAID IN SUBSEQUENT YEAR INCLUDED IN THE TOTAL EXPEND ITURE. HOWEVER, IN SUBSEQUENT YEARS A Y 1991-92 AND 1992-93, THE ASSES SEE HAS TAKEN FULL COST OF THE LAND AND SHOWN THE PROFITS THEREON. IN THIS CASE, AO TOOK THE TOTAL COST OF RS 81,67,354/- AND ESTIMATED 7 % THEREOF, W HEREAS THE AMOUNT OF RS. 11 LAKH WAS REQUIRED TO BE REDUCED FROM THE TO TAL COST OF RS 81,67,354/- ON ACCOUNT OF PROVISION FOR LAND COST , WHICH WAS PAID BY THE ASSESSE IN SUBSEQUENT YEARS. THEREFORE AO IS DIREC TED TO TAKE TOTAL COST OF RS. 70,67,354/- (RS 81,67,354/- (-) RS. 11,00,000/ -) FOR THE YEAR AND ESTIMATE 7 % THEREOF AS THE PROFIT OF THE YEAR WH ICH COMES TO RS. 4,94,714/- INSTEAD OF RS. 5,71,714/- ESTIMATED BY A O. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE ON COURT ON THIS 21 ST DAY OF AUGUST, 2015. SD/- SD/- (G.S.PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 21 ST DAY OF AUGUST, 2015 9 I.T.A.2066/UM/2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT, CITY-19 4. THE CIT(A)-30 5. GUARD FILE 6. THE DR, B BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES