The DCIT, Central Circle-1(1), Ahmedabad V. Smt. Kanaklata Umangkumar Thakkar, Ahmedabad

ITA 2142/AHD/2009

• Counselvise Citation: 214220514 RSA 2009
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Depreciation
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2142/AHD/2009 ASSESSMENT YEAR :2005-2006 & C.O. NO.181/AHD/2009 ASSESSMENT YEAR :2005-2006 DCIT, CENTRAL CIRCLE 1(1), ROOM NO.303, 3 RD FLOOR, AAYKAR BHAVAN ASHRAM ROAD, AHMADABAD. SMT. KANAKLATABEN UMANGKUMAR THAKKAR PROP. OF HOTEL KANTH PALANCE, NR. PALDI CHAR RASTA, PALDI, AHMEDABAD V/S . V/S. SMT. KANAKLATABEN UMANGKUMAR THAKKAR PROP. OF HOTEL KANTH PALACE, NR. PALDI CHAR RASTA, PALDI, AHMEDABAD DCIT, CENTRAL CIRCLE 1(1), ROOM NO.303, 3 RD FLOOR, AAYKAR BHAVAN ASHRAM ROAD, AHMADABAD. PAN NO. AA LPT4206G (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI RAHUL KUMAR SR.D.R. /BY ASSESSEE SHRI S.N. SOPARKAR, A.R. /DATE OF HEARING 24.08.2012 /DATE OF PRONOUNCEMENT 12.10.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE AND C.O. OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF CIT(A )-III, AHMEDABAD, ORDER DATED 30.03.2009 FOR ASSESSMENT YEAR 2005-2006. TH E REVENUES APPEAL AND ASSESSEES C.O. WERE HEARD TOGETHER AND ARE BEI NG DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 2 & C.O. NO.181/AHD/2009 ITA NO. 2142/AHD/2009 2. THE EFFECTIVE GROUNDS OF REVENUES APPEAL ARE AS UNDER: I) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.34,35,000/- MADE ON ACCOUNT OF UNEXP LAINED CASH CREDIT IN THE CAPITAL ACCOUNT, WITHOUT CONSIDERING THE FAC TS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROC EEDINGS AS WELL AS REMAND PROCEEDINGS. II) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION AS IN GROUND NO.1 IN VIOLATION OF RULE 46A OF I.T. RULES, 1962 AND RELYING UPON THE SUBMISSION OF THE ASSESSEE DAT ED 11.12.2006 WHICH WAS NEVER FILED BEFORE THE ASSESSING OFFICER. III) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES AT RS.3,39,940/- MADE ON ACCOUNT OF DIVERSION OF BORROWED FUNDS FOR NON BUSINESS PURPOS ES, WITHOUT CONSIDERING THE FACTUAL POSITION AS WELL AS VARIOUS JUDICIAL PRONOUNCEMENTS RELIED BY THE ASSESSING OFFICER IN F AVOUR OF THE REVENUE. 3. GROUND NOS. 1 & 2 ARE DIRECTED AGAINST THE DELET ION OF ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITOR OF RS.34,35,00 0/- AND VIOLATION OF RULE 46A OF THE IT ACT. THE FACTUAL MATRIX OF THE CASE I S THAT THE ASSESSEE HAS TAKEN LOAN FROM SEEMA CHATWANI RS. 10 LACS AND FROM NEHA RESIDENCY RS.18 LACS FOR WHICH THE APPELLANT HAD NOT PRODUCED ANY DOCUMENTARY EVIDENCES I.E. THE COPY OF BANK PASSBOOK, PA NUMBER , FULL NAME AND ADDRESS OF THE DEPOSITORS, THEIR BUSINESS ACTIVITIES AND EV IDENCES DEMONSTRATING THEIR CREDITWORTHINESS. EVEN MORE THAN REASONABLE OPPORT UNITY HAS BEEN GIVEN. SIMILARLY, THE ASSESSEES CAPITAL ACCOUNT HAS SHOWN ADDITIONAL CAPITAL OF RS.17.5 LACS IN CASH ON 19.04.2002 TO 11.06.2004 AN D FURTHER CAPITAL OF ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 3 & C.O. NO.181/AHD/2009 RS.5,50,000/- WAS INTRODUCED IN CASH FROM 10.07.04 TO 15.09.04. THE LD. A.O. ANALYZED THE CASH FUND AVAILABLE WITH THE APPELLANT AND HE HAD FUND AVAILABLE OF RS.16.65 LACS. THE DIFFERENCE OF RS.85,000/- HA S NOT BEEN FOUND EXPLAINED TO THE A.O. SIMILARLY, THE ASSESSEE HAS INTRODUCED THE FOLLOWING AMOUNTS IN CASH AS UNDER: DATE AMOUNT 10.7.2004 RS.1,00,000 21.8.2004 RS.1,50,000 26.8.2004 RS.1,00,000 1.9.2004 RS.1,00,000 15.9.2004 RS.1,00,000 TOTAL RS.5,50,000 THE LD. A.O. DID NOT FIND ANY CORRESPONDING CASH WI THDRAWAL FROM THE BANK ACCOUNT OF THE APPELLANT. THE LD. A.O. FINALLY HEL D THAT FOR THESE CASH CREDITORS AS WELL AS CAPITAL INTRODUCED IN CASH, THE APPELLAN T HAD NOT PROVED IDENTITY OF THE PAYER, GENUINENESS OF THE TRANSACTION AND CREDI TWORTHINESS OF THE PAYER. HE ALSO RELIED ON FOLLOWING DECISIONS: (I) CIT VS. R.S.TATHOD [212 ITR 390 (RAJ.)], ROSHAN D. HATTI VS. CIT [107 ITR 938], KALEKHAN MOHAMMAD HANIF VS. CIT [50 ITR 1 (S.C.)] BURDEN OF PROVE. (II) SHANKAR INDUSTRIES VS. CIT [HO ITR 689 (CAL)], CIT VS. BAISHNAB CHARAN MOHANTRY [212 ITR 199 (ORI.)] HOW TO PROVE. (III) CIT VS. PRECISION FINANCE (P) LTD. [208 ITR 465 (CA L.)] MERE FURNISHING OF PARTICULARS NOT ALLOWED. (IV) NANAKCHAND LAXMANDAS VS. CIT [140 ITR 151 (ALLD.)] NOT DISCHARGED ONUS. ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 4 & C.O. NO.181/AHD/2009 (V) DEVI PRASAD VISHWANATH PRASAD (ALLD.) 50 ITR 641, C IT VS. M. GANAPATHI MUDALIAR (SC) 53 ITR 623, CIT VS. DEVI PR ASAD VISHWANATH PRASAD (SC) 72 ITR 194, CIT VS. DURGA PRASAD MORE (S.C.) 7 2 ITR 807, CIT VS. MADHAVNAGAR COTTON MILLS LTD. (BOM.) 104 ITR 493 INCOME OF THE ASSESSEE. (VI) KALE KHAN MOHMMAD HANIF (S.C.) 50 ITR 1 AND CIT VS. DEVI PRASAD VISHWANATH PRASAD (S.C.) 72 ITR 194 UNDISLCOSED SOURCES ALONG WITH ESTIMATED ADDITIONAL PROFIT FROM BUSINESS AFTER REJ ECTION OF ACCOUNTS. (VII) CIT VS. BANARSI LAL DHAWAN 109 ITR 360 (MAD.) ALTERNATIVE PLEA THAT THESE FUNDS ARE FROM ESTIMATED ADDITIONS. (VIII) CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) (FB) , CIT VS. PRATIK FINANCE & INVT. CO. LTD. 215 ITR 272(DELHI) TRUE NATURE AND SOURCE OF CASH CREDITOR. (IX) SUMATI DAYAL VS. CIT 214 ITR 801 (S.C.). GENUINENESS. FINALLY, THE A.O. MADE ADDITION OF RS.34,35,000/- U /S.68 OF THE IT ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND RELIED UPON THE LETTER DATED 11.12.2006 OF THE APPELLANT AND A.O. W AS DIRECTED TO GIVE REMAND REPORT ON THE BASIS OF EVIDENCE FURNISHED WITH THIS LETTER. THE REMAND REPORT RECEIVED BY THE CIT(A) BUT THE LD. A.O. WAS NOT SAT ISFIED WITH THE EVIDENCE FURNISHED BY THE APPELLANT AND HE HAD POINTED OUT V ARIOUS DISCREPANCIES IN HIS REMAND REPORT. THE CIT(A) SUMMARIZED THE REASONS F OR ADDITION AND ARGUMENTS GIVEN BY THE APPELLANT ON PAGE NOS.5 TO 8 . AFTER CONSIDERING THE ASSESSEES REPLY, THE LD. CIT(A) HAS DELETED THE AD DITION IN PARAGRAPH NO.8.2, WHICH IS REPRODUCED AS UNDER: ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 5 & C.O. NO.181/AHD/2009 8.2 THE ADDITION OF RS.34.35 LAKHS U/S.68 OF THE A CT MADE BY THE A.O. IS ON THE GROUND THAT THE INCOME TAX DETAILS/PAN OF THE CREDITOR SEEMABEN WAS NOT ON RECORD. THESE HAVE BEEN FILED AND HER PAN FURNISHED. THE BANK DETAILS/CONFIRMATION/COPY OF A CCOUNT, ADDRESS HAD BEEN FURNISHED ALREADY AND SO ITS ADDITION, WITHOUT BRINGING ON RECORD ANY CONTRARY EVIDENCE, IS NOT SUSTAINABLE. SIMILAR LY, THE ADDITION OF RS.18 LAKH AND OF RS.6.35 LAKH IS BASED ON THE SPEC ULATION ABOUT THE AVAILABILITY OF CASH IN CAPITAL ACCOUNT OF M/S. NET RA RESIDENCY AND WITH HOTEL KANT PALACE. THE A.O. HAS EXAMINED AND VERIF IED THE BOOKS OF ACCOUNT AND THE COPIES OF ACCOUNT FURNISHED AND HAS NOT POINTED OUT TO ANY SPECIFIC DEFECT(S). THE STATED DEFICIENT OF RS .16.35 LAKH, AS PER A.O., AROSE AS THE A.O. DID NOT CONSIDER THE WITHDR AWALS OF THE APPELLANT FROM HER OTHER PROPRIETARY CONCERN(S)/PAR TNERSHIP FIRMS NAMELY, NETRA RESIDENCY AND PERSONAL BOOKS OF ACCOU NT. THESE DETAILS/COPY OF ACCOUNT WAS FURNISHED ON PAGES 15-1 8 OF THE PAPER BOOK FILED/BEFORE ME AND ON WHICH REMAND REPORT WAS ALSO OBTAINED. IN THE EVENT, THE ADDITIONS MADE U/S.68 WERE NOT JUSTIFIED AND ARE DELETED. THE RELATED GROUND OF APPEAL IS ALLOWED. 5. NOW THE REVENUE IS BEFORE US. LD. SR.D.R. CONTE NDED THAT THE APPELLANT HAD NOT FURNISHED CONFIRMATION WITH PAN A ND SOURCE OF INCOME OF THE CASH CREDITORS BEFORE THE A.O. DURING THE COURS E OF ASSESSMENT PROCEEDING. HE RELIED UPON THE ORDER OF THE A.O. A ND PRAYED TO CONFIRM THE ORDER OF THE A.O. AT THE OUTSET, SHRI S.N.SOPARKAR , SR. ADVOCATE, CONTENDED THAT THERE WERE SEPARATE PROCEEDINGS FOR A.Y.1999-2 000 TO 04-05 U/S.153A IN CASE OF APPELLANT, SHE HAD FILED VARIOUS EXPLANATIO NS BEFORE THE A.O. WHICH CAN BE VERIFIED FROM THE ASSESSMENT ORDER THAT THE CONFIRMATION FOR SAME CASH CREDITOR HAD BEEN SUBMITTED BY THE ASSESSEE BEFORE THE A.O. (PAGE NO.6 OF THE ASSESSMENT ORDER). LEARNED COUNSEL FOR THE ASS ESSEE FILED THE PAPER ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 6 & C.O. NO.181/AHD/2009 BOOK AND ALSO RELIED ON CIT-III, VS. JAY ENTERPRISE [2012] 22 TAXMANN.COM 163 (GUJ.) & CIT VS. RANCHHOD JIVABHAI NAKHAVA, [ 2 012] 208 TAXMANN 35 (GUJ.) AND ARGUED THAT THE APPELLANT HAD DISCHARGED HER B URDEN U/S. 68 OF THE IT ACT. THEREAFTER, ALSO THE EVIDENCE FURNISHED TO THE A.O. AND REMAND REPORT ALSO HAS BEEN CALLED FOR FROM THE LD. A.O. AND AFTE R CONSIDERING THE REPLY OF THE ASSESSEE AND REMAND REPORT, THE LD. CIT(A) HAD ALLO WED THE APPEAL IN FAVOUR OF THE APPELLANT. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE CIT(A). 6. WE HAVE GONE THROUGH THE ORDER OF THE AUTHORITIE S BELOW AND PAPER BOOK SUBMITTED BY THE ASSESSEE. THE APPELLANT HAD FILED CONFIRMATION REPORT BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PRO CEEDING AS EVIDENT FROM THE REMAND REPORT. THE CIT(A) ALSO GIVEN FRESH OPP ORTUNITY TO THE A.O. WHICH HAS BEEN AVAILED BY THE A.O. THE APPELLANT HAD DIS CHARGED HER BURDEN OF PROVE BY FILING THE CONFIRMATION, PAN NO., COPY OF RETURN AND EXPLANATION OF SOURCE OF CASH CREDITORS. THUS, WE HOLD THE ORDER OF THE CIT(A) AND DISMISS THE REVENUES APPEAL ON THIS GROUND. 7. THE LD. A.O. STATED THAT THE APPELLANT HAD ADVAN CED LOAN AND DEPOSITED TO THE EXTENT OF RS.28,32,833/- ON WHICH NO INTERES T WAS CHARGED. ON THE OTHER HAND, DURING THE YEAR, THE APPELLANT HAD BORR OWED INTEREST BEARING FUND OF RS. 89,99,567/- AND PAID INTEREST OF RS.7,12,724 /-. HE FURTHER CONCLUDED THAT BY BORROWING INTEREST BEARING LOAN, THE APPELL ANT HAD REDUCED THE INCOME TO THAT EXTENT. THE APPELLANT HAD NOT ESTABLISHED NEXUS BETWEEN INTEREST FREE FUND WITH INTEREST FREE ADVANCES. HE RELIED FOLLOW ING DECISIONS: ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 7 & C.O. NO.181/AHD/2009 (I) CIT V. MOTOR GENERAL FINANCE LTD. [2002] 254 IT R 449, (II) CIT V. H.R. SUGAR FACTORY P. LTD. [1991] 187 ITR 363, (III) K. SOMASU NDARAM AND BROTHERS V. CIT [1999] 238 ITR 939, (IV) CIT V. I. BABY AND CO. [20 02] 254 ITR 248 & (V) CIT VS. AVISHEK INDUSTRIES LTD. 286 ITR 1, AND HE DISALLOWED THE INTEREST OF RS.3,39,940/-. 8. THE APPELLANT CARRIED THE MATTER BEFORE THE CIT( A), WHO HAS DELETED THE ADDITION AND OBSERVED AS UNDER: 9. IN RESPECT OF THE DISALLOWANCE OF INTEREST IT I S SEEN THAT THE SECURED LOANS FROM BANKS WERE UTILIZED TOWARDS BUSI NESS ACQUISITIONS. IT IS EXPLAINED THAT THESE ADVANCES WERE THEREFORE, OUT OF APPELLANTS OWN INTEREST FREE BORROWINGS/FUNDS. IT IS ALSO SEE N THAT THE LOANS WERE NOT ADVANCED DURING THE ENTIRE PREVIOUS YEAR. TO T HAT EXTENT, THE CONTENTIONS OF THE APPELLANT ARE ACCEPTABLE. THE I NTEREST DEBITED TO P&L ACCOUNT WAS PAID ENTIRELY IN RESPECT OF BANK LO ANS UTILIZED FOR BUSINESS. HENCE ITS DISALLOWANCE WAS NOT SUSTAINAB LE IN VIEW OF THE JUDICIAL DECISIONS REPORTED IN 73 TTJ 62 (AHD). TH E DISALLOWANCE IS DELETED AND RELATED GROUND OF APPEAL IS ALLOWED. 9. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. CONT ENDED THAT THE APPELLANT HAD NOT ADVANCED LOAN IN BUSINESS EXPEDIE NCY AND RELIED UPON THE S.A. BUILDERS CASE AS HELD BY THE LD. CIT(A). FROM THE SIDE OF THE ASSESSEE, LD. COUNSEL RELIED UPON THE ORDER OF THE CIT(A) AND ALSO DRAWN OUR ATTENTION AT PAGE NO.1 OF PAPER BOOK AND CLAIMED THAT THE ASSESS EE HAS INTEREST FREE FUND IN FORM OF CAPITAL RS.29 LACS AND INTEREST FREE FUN D OF RS.75 LACS. THEREFORE, INTEREST FREE ADVANCES WERE GIVEN FOR BUSINESS PURP OSES. THUS, HE REQUESTED TO CONFIRM THE ORDER OF THE CIT(A). ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 8 & C.O. NO.181/AHD/2009 10. WE HAVE PERUSED THE ORDER OF THE AUTHORITIES BE LOW AND GONE THROUGH THE PAPER BOOK. THE LD. D.R. HAD NOT CONTROVERTED THE FINDINGS GIVEN BY THE CIT(A) AS THE LOANS WERE ADVANCED FOR BUSINESS ACQU ISITION, ADVANCES WERE GIVEN FROM OWN INTEREST FREE BORROWINGS/FUND AND DU RING THE YEAR NO LOAN WAS ADVANCED BY THE APPELLANT. THE INTERESTS WERE PAID ON BANK LOAN, WHICH WAS UTILIZED FOR BUSINESS PURPOSES. THUS, WE ARE OF TH E CONSIDERED VIEW THAT NO INTERFERENCE IN THE ORDER OF THE CIT(A) IS WARRANTE D. THE REVENUES APPEAL ON THIS GROUND IS DISMISSED. C.O. NO.181/AHD/2009 11. THE ASSESSEE FILED C.O. AGAINST THE CONFIRMATIO N OF DISALLOWANCES OF RS.85,046/- BEING EXCESS DEPRECIATION CLAIMED BY TH E APPELLANT ON ELECTRICAL INSTALLATION AND FITTING IN THE HOTEL BUILDING @ 25 % INSTEAD OF 15% ALLOWABLE AS PER IT RULES. AS PER APPELLANT, THIS WAS THE DEPRE CIATION ON TELEPHONE, AIR CONDITIONER, TELEVISION AND WATER HEATER. THESE FA CTS HAD NOT BEEN MADE OUT BY THE LD. A.O. IN ASSESSMENT ORDER. FURTHER D ISALLOWANCE OF RS. 12,550/- WAS ALSO MADE FROM THE TELEPHONE EXPENSES OF RS.62, 752/- WHICH WAS CLAIMED BY THE LD. COUNSEL IS HIGHER SIDE. THE CRO SS OBJECTION IS AGAINST CONFIRMING THE DISALLOWANCE OF RS.59,300/- BEING 25 % OUT OF VEHICLE EXPENSES AND THE DEPRECIATION OF RS.2,37,402/- WHICH IS ALSO APPEARS TO BE HIGHER SIDE. THEREFORE, C.O. FROM SERIAL NOS. 1 TO 3 ARE REQUIRE D TO BE RE-ADJUDICATED BY THE A.O. ACCORDINGLY, THESE THREE GROUNDS ARE SET ASIDE TO THE A.O. FOR DE NOVO. GROUND NO.4 IS NOT PRESSED BY THE APPELLANT. THEREFORE, THE SAME IS DISMISSED. ITA NO. 2142/AHD/2009 A.Y. 05-06 PAGE 9 & C.O. NO.181/AHD/2009 7. IN THE COMBINED RESULT, THE REVENUES APPEAL IS DISMISSED & ASSESSESS C.O. IS PARTLY ALLOWED FOR STATISTICAL P URPOSE.. THIS ORDER PRONOUNCED IN OPEN COURT ON 12.10.2012 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * < STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 27.09.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 03.10.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 12.10.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 12.10.2012