The ITO, Ward-9(3), Surat V. Shri Paragbhai Karamshibhai Patel, Surat

ITA 2084/AHD/2008

• Counselvise Citation: 208420514 RSA 2008
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-08-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 30-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Gift; Source of fund
• Section: 68

Judgement Text

ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH,A HMEDABAD. (BEFORE SHRI D K. TYAGI AND SHRI R.C. S HARMA) I.T.A. NO. 2084/AHD/2008 (ASSESSMENT YEAR 1999 -2000) INCOME TAX OFFICER, WARD 9(3), ROOM NO.420, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) VS. SHRI PARAGBHAI KARAMSHIBHAI DOBARIA, 108, RAMESHWAR IND. ESTATE, VASTADEVDI ROAD, SURAT. (RESPONDENT) PAN: AETPD 3521 N APPELLANT BY : SHRI S. K. MEENA, SR.D.R. RESPONDENT BY : SHRI M. K. PATEL. DATE OF HEARING : 4-8-2011 DATE OF PRONOUNCEMENT : ( (( ( )/ )/)/ )/ ORDER PER: SHRI R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. C.I.T.(APPEALS)-V, SURAT DATED 17-2008 FOR THE ASSE SSMENT YEAR 1999-00. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS HA VE BEEN PERUSED. FACTS IN BRIEF ARE THAT IN COURSE OF SURVEY U/S. 13 3A OF THE I.T. ACT, AT THE PREMISES OF SHRI PANKAJ DANAWALA, A CHARTERED ACCOU NTANT CERTAIN ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 2 DOCUMENTS WERE FOUND IN A FILE MARKED AS FILE NO.A- 373. THE FILE WAS IN THE NAME OF THE ASSESSEE. THE FILE INDICATED THAT DURIN G THE YEAR RELEVANT TO THE A.Y. 1999-2000 I.E. F.Y. 1998-99, SHOWED AN OPENING CAPITAL OF RS.14,29,688. THE A.O. NOTED THAT IN COURSE OF THE SURVEY SHRI DANAWALA HAD ADMITTED CREATING BOGUS CAPITAL IN THE NAMES OF HIS CLIENTS. THIS HE DID BY MANIPULATING THE OPENING CAPITAL BALANCE AND ALS O BY SHOWING BOGUS GIFTS AND INTEREST ON LOANS ETC. SINCE, THE ENTIRE CAPITA L CREATED SHOWING FICTITIOUS SOURCES OF INCOME AS WELL AS FICTITIOUS ASSETS, THE ENTIRE CAPITAL CREATED IN THE NAME OF THE ASSESSEE SHOULD BE REQUIRED TO BE TAXED SUBSTANTIALLY IN THE HANDS OF SHRI JAGDISH HAPANI AND PROTECTIVELY IN TH E HANDS OF THE ASSESSEE. HE THEREFORE, ADDED THE OPENING CAPITAL OF RS./14,2 9,688, AS THE INCOME OF THE ASSESSEE FOR THE YEAR. 3. VIDE IMPUGNED ORDER, THE LD. C.I.T.(A) DELETED THE ADDITION AFTER GIVING FOLLOWING OBSERVATION:- SECOND GROUND RELATES TO THE ADDITION OF RS.15,47 ,803 ON PROTECTIVE BASIS IS IN FACT AN ADDITION OF RS.14,29 ,688.THE AO HAD MISTYPED THE SAME AS RS.15,47,803 ON PAGE-8 OF HIS ORDER AND THE SAME FIGURE WAS MADE GROUND OF APPEAL BEFORE ME. HE NCE THE APPEAL IS FOR RS.14,29,688. THE PAPERS IMPOUNDED FROM THE PREMISES OF SHRI DANAWALA INDICATED AN OPENING CAPITAL OF RS.14,29,6 88 FOR THE YEAR IN CONCERN. ACCORDING TO THE AO, THIS AMOUNT OF RS.14, 29,688 REPRESENTED THE UNEXPLAINED NEWLY INTRODUCED CAPITA L. MOST IMPORTANTLY, THE CAPITAL SO CREATED BY SHRI DANAWAL A WAS ONLY IN THE FORM OF ROUGH ACCOUNTS AND HAD NOT BEEN ENTERED INT O THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS NOT FILED ANY RETURN FOR THE YEAR IN CONCERN. THE AO, HOWEVER, TREATED S UCH ENTRIES AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION, UNDER THE PROVISIONS OF SECTION 68 O F THE I. T. ACT. ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 3 THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME. TH E ASSETS SIDE OF THE BALANCE SHEET OF THE ASSESSEE DOES NOT SEEM TO INCLUDE ANY GENUINE ASSET OF THE ASSESSEE. THE MONEY SO INTRODU CED IN BOOKS HAS NOT BEEN INTRODUCED IN THE BOOKS OF ACCOUNTS OR BAN K ACCOUNT UNDER THE GRAB OF OPENING BALANCE. IT HAS BEEN ALSO ASCER TAINED THAT NO MONIES OUT OF SUCH OPENING BALANCE WERE WHOLLY OR P ARTIALLY ADVANCED AS INTEREST BEARING LOANS TO ANY ONE. NOR HAS ANY P ARTY UTILIZED SUCH FUNDS FOR ANY BUSINESS OR PERSONAL PURPOSES. IN THI S CASE ONLY THE CA OF THE APPELLANT HAS UNILATERALLY FABRICATED FIGURE S OF OPENING BALANCE ON AN UNSIGNED ALLEGED BALANCE SHEET PERHAPS TO BE READY TO GIVE ENTRIES AS AN WHEN THE OPPORTUNITY ARISES IN THE MA RKET. BUT IN REALITY IT COULD ONLY BE A PREPARATORY STEP WITHOUT ANY ACT UAL ENTRY GIVEN OR INCOME DERIVED THEREFROM. SHRI PANKAJ DANAWALA VIDE HIS STATEMENT DATED 11-3-2005 AS REPRODUCED ON PAGE NO. 8 TO 10 O F THE ASSESSMENT ORDER HAS GIVEN A DETAILED MODUS OPERANDI WHEREIN T HE ACTUAL UTILIZATION OF CAPITAL BUILD UP HAS BEEN CONFESSED IN CERTAIN CASES. IN THE APPELLANTS CASE IT IS NOT SO. THE CIRCUMSTANCE S AND FACTS IN APPELLANTS CASE RENDERED THE DIFFERENTIAL AMOUNT O NLY A FICTIONAL CHARACTER AND LYING IN FICTITIOUS NAMES. THERE IS N O REAL FUND WHICH IS AVAILABLE WITH THE APPELLANT EITHER IN HIS BOOKS OR BANK ACCOUNTS OR STOOD EXPENDED INVESTED OR LOANED OUT ANYWHERE. HOW CAN POSSIBLY ANY IMAGINARY FIGURE, GATHERED FROM ANYWHERE BE TAX ED AS APPELLANTS INCOME. SIMILARLY ALL THE SO CALLED ASSETS SHOWN AG AINST SUCH BOGUS CAPITAL WILL ACQUIRE SIMILAR FICTITIOUS CHARACTER. APEX COURT HAS HELD IN 43 ITR 387 (SC) LALJI HARIDAS THAT IN CASES WHERE I T APPEARS TO THE INCOME TAX AUTHORITIES THAT CERTAIN INCOME HAS BEEN RECEIVED DURING THE RELEVANT YEAR BUT IT IS NOT CLEAR WHO HAS RECEI VED THAT INCOME AND, PRIMA FACIE, IT APPEARS THAT THE INCOME MAY HAVE BE EN RECEIVED EITHER BY A OR BY B OR BY BOTH TOGETHER, IT WOULD BE OPEN TO THE INCOME TAX AUTHORITIES TO DETERMINE THE QUESTION WHO IS RESPON SIBLE TO PAY TAX BY TAKING ASSESSMENT PROCEEDING BOTH AGAINST A AND B. THEREFORE THE PRESUPPOSITION AND BASIC REQUIREMENT IS THE ACTUAL RECEIPT OF INCOME. IN THE INSTANT CASE NOTHING HAD BEEN RECEIVED. ONLY THE FIGURE STANDS CREATED IN A CLANDESTINE MANNER. SECONDLY IT IS NOT ONLY THE RIGHT, BUT THE DUTY OF THE AO TO CONSIDER WHETHER OR NOT THE B OOKS DISCLOSED THE TRUE STATE OF ACCOUNTS AND THE CORRECT INCOME CAN B E DEDUCTED THEREFROM. THE TERM BOOKS OF ACCOUNT WOULD MEAN T HOSE BOOKS OF ACCOUNT WHOSE MAIN OBJECT IS TO PROVIDE CREDIBLE DA TA AND INFORMATION TO FILE THE TAX RETURNS. THE CREDIBLE ACCOUNTING RE CORD PROVIDES THE ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 4 BEST FOUNDATION FOR FILING RETURN OF BOTH DIRECT AN D INDIRECT TAXES. IT CANNOT BE UNDERSTOOD TO MEAN COMPILATION OR COLLECT ION OF SHEETS WITH THE APPELLANTS CA. THE LEGISLATIVE INTENT IS TO AD MIT ONLY THOSE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ON HIS OWN BE HALF WHICH BY THEIR VERY NATURE AND CIRCUMSTANCES ARE MAINTAINED FOR THE PURPOSE OF DRAWING THE SOURCE OF INCOME. FOR THE CONDITIONS U/ S. 68 TO BE SATISFIED, AND FOR ANY ADDITION TO BE MADE AS UNEXP LAINED CASH CREDIT, THE CREDIT SHOULD HAVE BEEN MADE IN THE ASSESSEES BOOKS OF ACCOUNT KEPT IN THE REGULAR COURSE OF BUSINESS. SINCE, THE C.A. HAD ADMITTED TO HAVE CREATED THE ACCOUNTS HIMSELF, AND THE COMPLICI TY OF THE ASSESSEE IN SUCH CREATION WAS NOT ESTABLISHED, THE CREDIT EN TRIES IN SUCH ACCOUNTS IN LOOSE SHEETS OF PAPER, COULD NOT BE TRE ATED AS ENTRIES IN THE ASSESSEES OWN BOOKS OF ACCOUNT KEPT IN THE REGULAR COURSE OF BUSINESS. IN THE INSTANT CASE INCOME HAS NOT BEEN EARNED IN R EALITY AND THEREFORE NO TAXABILITY CAN BE FASTENED TO THE APPE LLANT FOR UNEARNED INCOME. APPARENTLY THERE IS A SPECIFIC FINDING BY T HE AO THAT THE SOURCE OF THE OPENING CAPITAL AS PER THE ABOVE, REM AINS UNVERIFIABLE AND IT LEADS TO DRAW THE CONCLUSION ON THE BASIS OF SOUND FOOTING THAT PERHAPS THE SAME IS NON-GENUINE AND FICTITIOUS AND PERHAPS THE INCOME EARNED BY JAGDISH HAPANI AS MENTIONED IN PARA 3.1 O N PAGE-3. THEREFORE, THE CAPITAL SO FORMED REMAINS FICTIONAL AS NO CONCLUSION EVIDENCE ARE ON RECORD AND THE UTILIZATION ALONE WO ULD PRESUPPOSE INTRODUCTION OF ACTUAL AND UNACCOUNTED CASH FUNDS. THEREFORE AFTER THIS CLEAR FINDING, EVEN IF ONE HAS CLAIMED ANY LOA NS, EXPENDITURE OR ACQUISITION OF ANY ASSETS, WHOSE SOURCE IS THIS FIC TITIOUS, ENHANCED AND BOGUS CAPITAL FORMATION IN THE APPELLANTS HANDS TH E SAME CANNOT BE ALLOWED TO GO EXPLAINED OR ACCOUNTED FOR AND WILL H AVE TO BE TAXED IN SUCH BENEFICIARYS HANDS, IF ANY. THEREFORE HOLDING OF OPENING BALANCE BEING TAXABLE INCOME OF THE YEAR UNDER CONS IDERATION IN CASE OF THE APPELLANT IS FUTILE. HENCE HAVING APPLIED MY MIND TO ISSUE, IT IS HELD T HE AO WAS NOT JUSTIFIED IN RELYING UPON THE FICTITIOUS ENTRIE S IN LOOSE SHEETS OF PAPER FOUND FROM THE PREMISES OF THE C.A. SHRI PANK AJ DANAWALA, WHO HAD ADMITTED TO HAVE CREATED SUCH ACCOUNTS HIMS ELF. FURTHER, THESE ENTRIES WERE NEITHER SUPPORTED BY ANY INDEPEN DENT CORROBORATIVE ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 5 EVIDENCE SO AS TO ESTABLISH THEIR GENUINENESS NOR W AS SUCH CAPITAL UTILIZED BY ANY ONE, WARRANTING ANY ADDITION OF THE SUM OF RS.14,29,688 UNDER THE PROVISIONS OF SECTION 68 OF THE I. T. ACT STANDS DELETED. 4. AGAINST THE ABOVE ORDER REVENUE IS IN FURTHER AP PEAL BEFORE US. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HAVE PERU SED THE MATERIAL PLACED ON RECORD FROM WHERE WE FOUND THAT ADDITION WAS MAD E BY THE A.O. BY RELYING UPON FICTITIOUS ENTRIES FOUND IN THE LOOSE SHEETS OF PAPERS LYING AT THE PREMISES OF C.A. SHRI PANKAJ DANAWALA. THESE ENTRIE S WERE NOT SUPPORTED BY ANY INDEPENDENT AND CORROBORATIVE EVIDENCE SO AS TO ESTABLISH THEIR GENUINENESS NOR ASSESSEE HAS UTILIZED SUCH CAPITAL WARRANTING AN ADDITION IN HIS HANDS. IT IS NOT CASE OF AO THAT DOCUMENTS WER E IN THE HANDWRITING OF ASSESSEE OR SIGNED BY ASSESSEE OR THAT IT WAS FOUND IN THE POSSESSION OF ASSESSEE. NOR IT IS THE CASE OF AO THAT SO CALLED F ICTITIOUS CAPITAL OR ASSETS WERE UTILIZED BY ASSESSEE ANY WHERE. THE DETAILED F INDING RECORDED BY THE CIT (A) ON PAGES 5 TO 8 AS NARRATED HEREINABOVE HAV E NOT BEEN CONTROVERTED BY THE DEPARTMENT, ACCORDINGLY NO INTERFERENCE IS W ARRANTED IN THE FINDINGS RECORDED BY THE CIT (A) RESULTING INTO DELETION OF ADDITION OF RS.14.29 LAKHS. 5. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO THE DELETION OF ADDITION OF RS.8,551/- BEING UNEXPLAINED GIFT. THE CIT (A) D ELETED THE SAME BY OBSERVING THAT GIFT AS SHOWN IN THE CAPITAL ACCOUNT WHICH WAS NEVER FILED BEFORE THE I.T. DEPARTMENT HAS NO LEGAL SANCTITY. W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A) IN SO FAR AS ASSE SSEE HAS NEVER CLAIMED ANY SUCH GIFT. ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 6 6. GROUND NO.3 RAISED BY THE REVENUE ARE MISCONCEIV ED, AS NO RELIEF HAS BEEN GIVEN BY THE CIT (A) BY DELETING THE ADDITION OF RS.49,810/- REGARDING THE RETURNED INCOME OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 8 - 2011. SD/- SD/- (D K. TYAGI) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. DATED: 26 -08 - 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)V, SURAT 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA.NO.2084AHD/2008. . ASSESSMENT YEAR 1999- 00. 7 1.DATE OF DICTATION 8 - 8 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 8 / 8 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 25 - 8 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 26 - 08 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 26 - 8 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26 - 8 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..