Shri Zafarulla I.Malek, Anand V. THE Dy.CIT.,Kheda Range, Nadiad

ITA 2120/AHD/2009

• Counselvise Citation: 212020514 RSA 2009
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: A L THAKKAR
• Keywords: Unexplained cash credit; Income from undisclosed sources; Loose papers; Bad and doubtful debts
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER I.T.A. NO.2120/AHD/2009 A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009 A.Y. 2005-06 SHRI ZAFARULLA I. MALEK SEVALIA KIRAN PATEL & CO., SHREE RAM NIVAS, OPP. BANK OF BARODA STATION ROAD, DT. ANAND PAN-ACNPH0803E (ASSESSEE) VS. THE DY. C.I.T., KHEDA RANGE, NADIAD (DEPARTMENT) DEPARTMENT BY : SHRI RAHUL KUMAR, SR. D.R. ASSESSEE BY : SHRI A.L. THAKKAR, A.R. DATE OF HEARING : 22.08.2012 DATE OF PRONOUNCEMENT : 21.09.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORD ER OF LD. CIT(A)- IV, BARODA DATED 11.05.2009. I.T.A. NO.2120/AHD/2009 2. ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 2 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.20,00 ,000/- ON ACCOUNT OF UNEXPLAINED CASH U/S 69A OF THE I.T. ACT , 1961. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE ON ACCO UNT OF BAD DEBT IN PART OF RS.5,65,349/- 3. FIRST GROUND RELATES TO ADDITION OF RS.20/- LACS U/S 69A OF THE ACT AS UNEXPLAINED CASH CREDIT. 4. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF SURVEY U/S 133A AT THE BUSINESS PREMISES OF M/S NEELAM TRANSPORT AN D OTHER PROPRIETARY CONCERNS OF THE ASSESSEE ON 01.04.2005 ADDITIONAL I NCOME OF RS.50/- LACS WAS DISCLOSED IN THE HANDS OF NEELAM TRANSPORT BY THE A SSESSEE. THE ADDITIONAL INCOME DISCLOSED WAS ON ACCOUNT OF CASH OF RS.20/- LACS WHICH HE WAS GOING TO DEPOSIT WITH SOME SHROFF AT UMRETH IN RESPECT OF WHIH A POLICE COMPLAINT HAD BEEN FILED AND WHICH THE ASSESSEE HAD ADMITTED TO BE UNACCOUNTED SUM. BESIDES THESE, ASSESSEE ALSO ADMITTED ADDITIONAL IN COME OF RS.30/- LACS ON THE BASIS OF LOOSE PAPERS/DOCUMENTS FOUND AT THE TI ME OF SURVEY. IN THE RETURN OF INCOME FILED SUBSEQUENTLY ASSESSEE INCORP ORATED UNDISCLOSED INCOME OF RS.30/- LACS ONLY IN THE PROFIT AND LOSS ACCOUNT . IN RESPECT OF CASH OF RS.20/- LACS IT WAS CONTENDED BY THE ASSESSEE THAT THE SUM HAD BEEN WITHDRAWN BY M/S NEELAM CONSTRUCTION FROM BANK OF B ARODA THROUGH CHEQUE NO.904205 DATED 25.3.2005. THE TOTAL WITHDRAWAL FR OM THE BANK WAS CLAIMED TO BE RS.24/- LACS OUT OF WHICH AMOUNT OF RS.20/- L ACS WAS TRANSFERRED TO NEELAM TRANSPORT CO. THE A.O. DID NOT ACCEPT ASSES SEES CONTENTION REGARDING THE CASH BEING FROM ACCOUNTED SOURCES ON THE GROUND THAT AT THE I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 3 TIME OF SURVEY CASH BOOK OF ANY OF THE CONCERNS HAD NOT BEEN WRITTEN AND THE PLEA REGARDING THIS CASH BEING FROM BANK ACCOUNT OF NEELAM CONSTRUCTION HAD NOT BEEN TAKEN AT THE TIME OF SURVEY. BESIDES, IN THE BOOKS OF ACCOUNT IMPOUNDED THERE WAS NO ACCOUNT OF SHROFF AT UMRETH VIZ. SHRI KIRTIKUMAR CHAMPAKLAL GABHAWALA. AS PER THE A.O., HAD SUCH TR ANSACTION BEEN ACCOUNTED FOR, NO PRUDENT PERSON WOULD GO AND DEPOS IT CASH OF RS.20/- LACS WITH A SHROFF. THE NATURE OF TRANSACTION ITSELF WA S UNACCOUNTED ONE AND IT WAS NOT POSSIBLE THAT IN SUCH A TRANSACTION, ACCOUN TED MONEY WOULD BE UTILIZED. BESIDES, THE ASSESSEE IN HIS STATEMENT R ECORDED AT THE TIME OF SURVEY HAD ADMITTED IN ANSWER TO TWO SEPARATE QUEST IONS THAT THE CASH OF RS.20/- LACS WERE UNACCOUNTED. ACCORDINGLY, THE A. O. ADDED THE ADDITIONAL INCOME IN THE FORM OF CASH FOUND OF RS.20/- LACS TO THE TOTAL INCOME OF THE ASSESSEE U/S 69A OF THE ACT. 5. BEFORE LD. CIT(A) ASSESSEES SUBMISSION WAS THAT DURING THE COURSE OF SURVEY TWO STATEMENTS U/S 133A WERE RECORDED BOT H ON 1 ST APRIL, 2012. IN THE SECOND STATEMENT RECORDED, ASSESSEE HAD SUBMITT ED THAT THE CASH WAS WITHDRAWN ON 25.03.2005 FROM BANK OF BARODA. FURTH ER, AS PER ASSESSEE THE A.O. ERRED IN CONCLUDING THAT THE ASSESSEE HAS NO A CCOUNT WITH SHROFF AT UMRETH. THE ASSESSEE FILED COPY OF ACCOUNT OF SHRO FF AND SUBMITTED THAT TOTAL BORROWING DURING THE YEAR WAS RS.82,83,279/-. AS P ER ASSESSEE, CONCLUSION OF THE A.O. THAT THE NATURE OF TRANSACTION WAS UNAC COUNTED WAS ILL-FOUNDED. WHEN THE TRANSACTION OF BORROWING FROM THE SHROFF W AS ACCOUNTED, HOW THE PAYMENT TO HIM COULD BE UNACCOUNTED. THE SHROFF HA D CHARGED INTEREST AND TDS HAD ALSO BEEN MADE BY HIM. THEREFORE, ACCORDIN G TO THE ASSESSEE, I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 4 OBSERVATION OF THE A.O. THAT THE EXPLANATION REGARD ING CASH ROBBED BEING OUT OF WITHDRAWAL FROM THE BANK WAS AN AFTERTHOUGHT, WA S NOT PROPER SINCE BANK ENTRIES COULD NOT BE MADE AFTERWARDS. AS PER ASSES SEE, THE A.O. DID NOT DOUBT WITHDRAWAL OF MONEY FROM THE BANK. ASSESSEE SUBMITTED THAT POLICE COMPLAINT HAS BEEN MADE BEFORE THE DATE OF SURVEY. THE FACT THAT HE HAD ACCEPTED THE ROBBED CASH TO BE UNACCOUNTED MONEY DU RING THE COURSE OF SURVEY CANNOT BE MADE SOLE CRITERIA FOR ADDITION. THERE CAN BE NUMEROUS REASONS FOR ACCEPTANCE IN THE STATEMENT, THE ACCOUN TANT AND ALSO THE CHARTERED ACOUNTANT WERE NOT ALLOWED DURING THE COU RSE OF SURVEY. ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF PUPLLAN GODE RUBBER PRODUCE COMPANY LTD. VS. STATE OF KERAL A, 91 ITR 18(SC) IN WHICH IT WAS HELD THAT IT IS OPEN TO THE ASSESSEE W HO MADE ADMISSION TO SHOW THAT SUCH ADMISSION WAS INCORRECT. THE ASSESSEE AL SO SUBMITTED THAT OUT OF AMOUNT OF RS.20/- LACS LOOTED RS.19/- LACS WAS RECO VERED AND THE SAME WAS SHOWN IN THE BALANCE SHEET AS RECEIVED FROM DAKOR C OURT AND THE BALANCE OF RS.1/- LAC WAS DEBITED TO PROFIT AND LOSS ACCOUNT A S CASH LOSS ON THEFT WHICH WAS DULY ALLOWED BY THE A.O. 6. AFTER TAKING INTO CONSIDERATION THESE SUBMISSION S OF THE ASSESSEE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AND ASSESSE ES APPEAL WAS DISMISSED. 7. BEFORE US, LD. COUNSEL OF THE ASSESSEE REITERATI NG THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A), FURTHER SUBMITTED THAT ASSESSEE WAS FREE TO SHOW THAT ADMISSION MADE BY HIM AT THE TIME OF SURVEY THAT ROBBED AMOUNT OF RS. 20 LACS WAS OUT OF UNACCOUNTED MONEY WAS INCORRECT. FOR MAKING THIS SUBMISSION HE PLACED RELIANCE ON TH E DECISIONS OF HONBLE I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 5 HIGH COURT OF CHATTISGARH IN THE CASE OF ITO VS. VI JAY KUMAR KESAR 327 ITR 497, HONBLE HIGH COURT OF MADRAS IN THE CASE OF M. NARAYANAN & BROS. VS. ACIT 339 ITR 192 AND ITAT, AHMEDABAD DECISION IN TH E CASE OF ANAND AUTORIDE LTD. VS. JCIT, 99 TTJ (AHD) 1250. LD. D. R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUS INESS PREMISES OF ASSESSEE ON 01.04.2005 DURING WHICH ADDITIONAL INCO ME OF RS.50/- LACS WAS DISCLOSED BY THE ASSESSEE WHICH INCLUDED A SUM OF R S.20/- LACS ROBBED FROM THE EMPLOYEE OF THE ASSESSEE ON 31.3.2005 WHEN HE W AS GOING TO DEPOSIT THIS AMOUNT TO THE ACCOUNT OF SOME SHROFF AT UMRETH. TH E ASSESSEES EXPLANATION THAT CASH OF RS.20/- LACS ROBBED FROM HIS EMPLOYEE WAS OUT OF WITHDRAWAL OF RS.24/- LACS FROM BANK ACCOUNT OF M/S NEELAM CONSTR UCTION ON 25.3.2005 WAS NOT ACCEPTED BY THE A.O. ON THE GROUND THAT WHEN HI S STATEMENT WAS RECORDED DURING THE SURVEY PROCEEDINGS, HE ADMITTED THAT THI S AMOUNT WAS OUT OF HIS UNACCOUNTED INCOME. THE OTHER GROUND FOR NOT ACCEP TING THE ASSESSEES EXPLANATION WAS THAT IN THE BOOKS OF ACCOUNT IMPOUN DED AT THE TIME OF SURVEY THERE WAS NO ACCOUNT OF SHROFF AT UMRETH. A SSESSEE HOWEVER, DURING THE APPELLATE PROCEEDINGS WAS ABLE TO SHOW THAT SHR OFF WAS ASSESSEES CREDITOR AND THE TOTAL BORROWINGS DURING THE YEAR W AS RS.82,83,279/- AND THE ASSESSEES EMPLOYEE WAS GOING TO DEPOSIT THE SUM OF RS.20/- LACS IN THE ACCOUNT OF SHROFF AT UMRETH. THIS SUBMISSION OF TH E ASSESSEE WAS NOT ACCEPTABLE TO THE LD. CIT(A) AS HE WAS ALSO OF THE VIEW THAT ALL THESE EXPLANATION ARE AFTERTHOUGHT AS AT THE TIME OF SURV EY THE ASSESSEE HAD I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 6 ACCEPTED THAT THE AMOUNT ROBBED ON 31.3.2005 WAS OU T OF ASSESSEES UNACCOUNTED INCOME AND THE ASSESSEE COULD NOT ESTAB LISH THAT THIS AMOUNT WAS OUT OF AN AMOUNT OF RS.24/- LACS WITHDRAWN ON 2 5.3.2005. WE ARE INCLINED TO AGREE WITH THIS VIEW OF LD. CIT(A) ON A CCOUNT OF TWO REASONS: (1) IF ASSESSEE WAS TO PAY ANY SUM TO MR. SHROFF, HE COULD HAVE PAID THE SAME THROUGH CHEQUE AS BOTH THE PARTIES WERE HAVING THEI R BANK ACCOUNTS AND THERE WAS NO NEED TO WITHDRAW ANY SUM IN CASH AND THEN DE POSIT THE SAME TO THE ACCOUNT OF MR. SHROFF. (2) IF THE CONTENTION OF TH E ASSESSEE IS ACCEPTED THAT THIS AMOUNT OF RS.20/- LACS WAS OUT OF RS.24/- LACS WITHDRAWN FROM THE BANK ON 25.3.2005, THE REMAINING AMOUNT OF RS.4/- LACS O R PART OF IT SHOULD HAVE BEEN FOUND AT THE TIME OF SURVEY ON 01.04.2005 WHIC H WAS NOT FOUND AS NO CASH WAS FOUND DURING THE SURVEY. WE FURTHER FIND THAT THE CASE LAWS RELIED BY THE ASSESSEE ARE DISTINGUISHABLE IN FACT. IN TH OSE CASES THE AMOUNT DISCLOSED AT THE TIME OF SURVEY WAS NOT SHOWN IN TH E RETURN FILED BY THE ASSESSEE ON THE BASIS OF CONCRETE EVIDENCE TO SHOW THAT ASSESSEE WAS WRONG IN DISCLOSING THE SAME AT THE TIME OF SURVEY. IN T HE INSTANT CASE THE ASSESSEE HAS FAILED TO GIVE ANY COGENT EVIDENCE IN SUPPORT O F HIS CONTENTION THAT A SUM OF RS.20/- LACS ROBBED ON 31.3.2005 WAS ACTUALLY OU T OF MONEY WITHDRAWN FROM THE BANK ON 25.3.2005. THEREFORE, THE RATIO A S LAID DOWN IN THOSE CASE LAWS IS NOT APPLICABLE TO THE FACTS OF THIS CASE. 9. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN TH E ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF ASSESSEE IS DISMISSED. 10. GROUND NO.2 OF THE ASSESSEES APPEAL AND THE ON LY GROUND TAKEN BY THE REVENUE IN THEIR APPEAL RELATE TO ADDITION OF R S.12,80,356/- ON ACCOUNT OF I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 7 BAD DEBT. THE ADDITION OF RS.12,80,356/- HAS BEEN MADE BY THE A.O. ON THE GROUND THAT ASSESSEE HAS FAILED TO PROVE THAT THESE DEBTS HAVE ACTUALLY BECAME BAD. LD. CIT(A) HAS RESTRICTED THIS ADDITIO N TO RS.5,65,349/-. THE ASSESSEE IS IN APPEAL AGAINST THE SUSTAINED ADDITIO N WHILE REVENUE HAS FILED THE APPEAL AGAINST THE RELIEF TO THE ASSESSEE. THE ISSUE IS NOW COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT REPORTED IN 323 ITR 397 WHEREIN IT HAS BEEN HELD THAT ONLY REQUIREMENT FOR CLAIMING DEDUCTION OF BAD DEBTS IS THAT ASSESSEE SHOULD HAVE WRITTEN OFF THAT AMOUNT IN HIS BOOKS OF ACCOUNT AND IN EARLIER YEARS THE SAME AMOUNT HAS BEEN OFFERED BY HIM FOR TAX PURPOSES AND THERE IS NO REQUIREMENT TO SHOW THAT DEBTS HAVE ACTUALLY BECOME BAD. SINCE IN THE INSTANT CASE THE RE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAS WRITTEN OFF THE ENTIRE AMOUN T OF RS.12,80,350/- IN HIS BOOKS OF ACCOUNT AND IT IS ALSO NOT THE CASE OF THE REVENUE THAT THIS AMOUNT WAS NOT EARLIER OFFERED FOR TAXATION, THE ADDITION MADE ON THIS GROUND IS NOT SUSTAINABLE. THUS, GROUND NO.2 OF ASSESSEE IS ALLO WED AND THE ONLY GROUND OF REVENUE IS DISMISSED. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21.09.2012 SD/- SD/- (T.R. MEENA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT I.T.A. NO.2120/AHD/2009, A.Y. 2005-06 WITH I.T.A. NO.2321/AHD/2009, A.Y. 2005-06 8 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD