The ACIT, Circle-12, Ahmedabad V. Shri Kalpeshkumar H.Desai, Ahmedabad

ITA 2175/AHD/2010

• Counselvise Citation: 217520514 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained cash credit; Source of fund; Additional evidence; Corroborative evidences
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2175/AHD/2010 ASSESSMENT YEAR :2007-08 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-12, 1 ST FLOOR, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD V/S . SHRI KALPESHKUMAR H. DESAI 25, JAY YAMUNA SOCIETY, MANINAGAR (EAST), AHMEDABAD PAN NO. A BBPD6805A (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI T. SANKAR, SR. D.R. /BY RESPONDENT SHRI J. P. SHAH, A.R. /DATE OF HEARING 27.06.2013 /DATE OF PRONOUNCEMENT 08.08.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-XX, AHMEDABAD, DATED 25.03 .2010 FOR A.Y. 2007- 08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LD. CIT(A)-XX, AHMADABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.42,70,000/- MADE BY THE AO U/S. 68 OF THE I.T. ACT ON ACCOUNT OF UNEXPLAINED CASH CREDITS , WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE A.O. 1.2. IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW A ND ON FACTS IN NOT APPRECIATING THAT THE ONUS WHICH LAY UPON THE ASSES SEE OF ESTABLISHING THE IDENTITY OF THE DEPOSITORS, CREDIT WORTHINESS OF THE ITA NO. 2175/AHD/10 A.Y. 07-08 PAGE 2 DEPOSITORS AND THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE DISCHARGED BY THE ASSESSEE BEFORE THE AO. 1.3 IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN ADMITTING ADDITIONAL EVIDENCES IN VIOLATION OF THE PROVISIONS OF RULE 46A OF THE I.T. RULES. 2. THE LD. CIT(A)-XX, AHMADABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS.4,91,382/- MADE BY T HE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE A.O. 2.1 IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE FAILED TO ESTABLISH THAT INTEREST FREE ADVANCES WERE GIVEN BY HIM BECAUSE OF ANY COMMERCIA L EXPEDIENCY AS REQUIRED KEEPING IN VIEW THE RATIO OF THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. 288 ITR 1 (SC). 2. THE A.O. OBSERVED THAT ASSESSEE ENGAGED IN THE B USINESS OF DAIRY PRODUCTS AND SHARE TRADING. HE GAVE NUMBER OF NOTI CES TO SCRUTINIZE THE CASE U/S. 143(3) OF THE IT ACT. NO CONFIRMATION HAS BEE N FILED IN CASE OF FOLLOWING CASH CREDITORS: SR. NO. NAME OF DEPOSITORS AMOUNT IN RS. 1. DHARMENDRA H DESAI 350000 2. KALPESH H DESIA 100000 3. RAMILABEN H DESAI 700000 4. ROOPAL D DESAI 450000 5. HIMAL K PARIKH HUF 1000000 6. H C DESAI 685000 7. KSHAMA M PATEL 300000 8. PAULMI H PARIKH 1000000 TOTAL 4270000 THE ASSESSEE ALSO PAID INTEREST @ 12% ON THESE CASH CREDITORS AT RS.4,91,382/- AND ALSO MADE INVESTMENT IN ASSETS BY APPLYING THESE CASH CREDITORS. IN ABSENCE OF ANY CONFIRMATION FROM THE ASSESSEE, THE APPELLANT ITA NO. 2175/AHD/10 A.Y. 07-08 PAGE 3 HAD NOT PROVED THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF THE TRANSACTIONS. HE RELIED UPON VA RIOUS CASE LAWS AND AFTER CONSIDERING THE LEGAL POSITION ON SECTION 68, HE MA DE ADDITION OF RS. 42,70,000/- AND ALSO DISALLOWED THE INTEREST U/S. 3 6(1)(III), WHICH WAS NOT INCURRED FOR THE BUSINESS PURPOSES AT RS.4,91,382/- . FURTHER OBSERVATION ALSO GIVEN U/S. 69 OF THE IT ACT. THE LD. A.O. MADE ADD ITION U/S. 69C AT RS.42,70,000/- AND NO SEPARATE ADDITION U/S.68 HAD BEEN MADE AND INTEREST DISALLOWED U/S. 36(1)(III) OF THE IT ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER: FOR ADDITION U/S. 68 3.1 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF TH E ASSESSING OFFICER, THE CASE LAW RELIED ON BY HIM AND PERUSED THE SUBMISSIONS OF THE LD. A.R. WITH DETAILS COMPLIED IN TWO PAPER BOOKS ONE DATED 24/2/2010 AND ANOTHER ONE DATED 20/03/2010 ALSO CON TAINING SEVERAL DETAILS, BALANCE SHEET, JUDGMENT AND DOCUME NTS AS ALSO SUPPORTING EVIDENCES. I AM INCLINED TO ACCEPT THE VERSION OF A.R. THAT ALL NECESSARY MATERIALS WERE ALREADY FILED BEF ORE THE A.O. BY THE A.R. THROUGH LETTER DT.11/05/2009. IT IS FOUND THAT ALL PAYMENTS ARE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES, ADDRE SSES ARE GIVEN, PAN NUMBERS ARE GIVEN AND CONFIRMATIONS ARE ALSO GIVEN. THIS MATERIAL HAS BEEN HELD BOTH BY GUJARAT HIGH CO URT IN ROHINI BUILDERS CASE & SUPREME COURT IN ORISSA INDUSTRIAL CORPORATION'S CASE AS SUFFICIENT FOR ACCEPTING THE GENUINENESS OF THE CASH CREDIT. IF A.O. HAS ANY DISSATISFACTION, HE COULD HAVE PROC EEDED FURTHER IN ACCORDANCE WITH THE PROVISIONS OF LAW, WHICH HE DID NOT DO. THE EVIDENCES FILED AND EXPLANATION OFFERED REVEALS THA T HE HAS NO GENUINE REASON TO TREAT THE BORROWING AS UNEXPLAINE D CASH CREDIT. ITA NO. 2175/AHD/10 A.Y. 07-08 PAGE 4 3.2 THE A.R. HAS ALSO IN HIS CHART REPRODUCED HERE IN ABOVE FURNISHED FURTHER SUPPORTING EVIDENCES LIKE 'AFFIDA VITS, CROSS CONFIRMATIONS, CROSS REFERENCES, TO BANK OF CREDITO RS, B/S. OF CREDITORS, I.T. RETURNS ETC., WHICH FURTHER SUPPORT IN FULL THE GENUINENESS OF THE CREDITS. ALL THE SUPPORTING EVIDENCES REFERRED TO IN COLUMNA R CHART BY THE APPELLANT ARE FILED ON RECORD & THEY SAT ISFACTORILY PROVE THE CREDITS. ON PERUSAL OF THE EVIDENCES FOR EACH OF THE CREDITORS IT IS CLEAR THAT THE APPELLANT HAS BORROWED MONEY FOR THE PURPOSE OF HIS BUSINESS THROUGH ACCOUNT PAYEE CHEQUES WHICH H AVE BEEN FOUND DEPOSITED IN HIS BANK ACCOUNT. ALL THE REQUIREMENTS AS MENTIONED IN THE CASE OF RO HINI BUILDERS (GUJARAT HIGH COURT) BEING; 1. PERMANENT A/C. NUMBER. 2. FULL POSTAL ADDRESS 3. COPY OF LEDGER ACCOUNT 4. DEPOSITORS CONFIRMATION. 5. AFFIDAVITS OF THE CREDITORS. 6. COPY OF INCOME TAX RETURN IN MAJORITY OF THE CAS ES AND 7. CROSS CONFIRMATION OF BANK STATEMENT OF THE CRE DITORS ALSO IN MAJORITY OF THE CASES ETC. FOR A GENUINE CASH CREDI T ARE FILED AND SUBMITTED BY THE APPELLANT WHICH SUFFICIENTLY PROVE THAT EACH ONE OF THE CREDITORS HAS BROUGHT IN THIS MONEY, FOR THE BE NEFIT OF THE APPELLANT TO CARRY ON BUSINESS IN PARTNERSHIP FOR R EAL ESTATE AND ALSO TO SET UP BUSINESS FOR MULTI SPECIALITY DIAGNO STIC CENTRE AND THEY ARE GENUINE DEPOSITS. IT. IS SEEN THAT ALL THE CREDITORS ARE ASSESSED TO TAX AND AMOUNTS IN QUESTION HAVE BEEN R ECEIVED THROUGH BANKING CHANNELS ONLY. THEY HAVE THEIR DIF FERENT SOURCES OF INCOME. THE ASSESSING OFFICER HAS NOT POINTED OUT IN CASE OF ANY CREDITOR AS TO HOW THE IDENTITY, GENUINENESS OF TRA NSACTION AND CREDITWORTHINESS IS NOT PROVED. HE HAS MADE ADDITI ON ONLY ON THE BASIS OF GENERAL REMARK THAT THE ASSESSEE HAS NOT P ROVED THE SOURCE AND NATURE OF RECEIPTS. THIS GENERAL REMARK HAS NO MEANING WHEN ALL THE DETAILS ARE FILED AND ALL REQUIREMENTS OF A LL THE THREE INGREDIENTS ARE FULFILLED. UNDER THE AFORESAID FAC TS AND CIRCUMSTANCES, THE APPELLANT HAS PROVED NOT ONLY TH E IDENTITY OF THE ITA NO. 2175/AHD/10 A.Y. 07-08 PAGE 5 CREDITORS AND GENUINENESS OF TRANSACTIONS BUT ALSO THE CREDITWORTHINESS OF ALL THE CREDITORS. THUS, THE A PPELLANT HAS FULLY DISCHARGED THE BURDEN CASTS UPON HIM TO PROVE THE G ENUINENESS OF THE CASH CREDITS. IN VIEW OF THE ABOVE DISCUSSION I HOLD THAT THE ADD ITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. THE ADDITION O F RS.42,70,000/- MADE U/S.68 OF THE ACT, IS, THEREFORE DIRECTED TO B E DELETED. FOR U/S. ADDITION 69C 3.5 SINCE I HAVE FOUND THAT ALL CREDITS ARE RECEIVE D THROUGH ACCOUNT PAYEE CHEQUES AND FINDS PLACE IN THE BANK P ASS BOOK OF THE APPELLANT AND CORRESPONDINGLY IN HIS BOOKS OF A CCOUNTS WHICH ARE AUDITED, PROVISIONS OF SECTION 69 ALSO CANNOT B E APPLIED. THUS ALTERNATIVE ADDITION SOUGHT TO BE MADE BY THE ASSES SING OFFICER U/S.69C OF THE IT ACT IS DELETED. FOR INTEREST DISALLOWANCE 4.1 AFTER CONSIDERING THE FULL FACTS AND THAT SINCE THE CASH CREDITS ARE HELD BY ME AS EXPLAINED, I AM INCLINED TO HOLD THAT THE INTEREST EXPENDITURE OF RS.4,91,382/- IS THUS INCURRED U/S.3 6(1)(III) AND IS ALLOWABLE AND THE DISALLOWANCE AND ADDITION MADE BY THE ASSESSING OFFICER IS REQUIRED TO BE DELETED. THE APPELLANT HAS ALSO IN HIS 2 LETTERS DATED 11/5/ 2009 AND 25/11/2009 FILED BEFORE A.O. ALONGWITH DETAILS THER ETO HAS FILED NECESSARY DATA TO EXPLAIN THE CLAIM OF THE APPELLAN T REGARDING BORROWINGS MADE AND THE PAYMENT OF INTEREST INCURRE D THEREON. 4.2 IN VIEW OF THE FACT THAT I HAVE HELD THE BORROW INGS AS GENUINE, AND EXPLAINED THE PAYMENT OF INTEREST THEREON IS CO NSIDERED AS FOR THE PURPOSE OF BUSINESS AND MADE OUT OF COMMERCIAL CONSIDERATIONS. I THEREFORE DELETE THE DISALLOWANC E OF INTEREST AND ALLOW THE CLAIM OF INTEREST AS MADE BY THE APPELLAN T. ITA NO. 2175/AHD/10 A.Y. 07-08 PAGE 6 THE GROUND OF APPEAL, THUS, STANDS ALLOWED. 4. NOW, THE REVENUE IS BEFORE US. LD. SR. D.R. CON TENDED THAT LD. CIT(A) HAD ACCEPTED WHATEVER EVIDENCE SUBMITTED BY THE APP ELLANT DURING COURSE OF APPELLATE PROCEEDING. HE HAS DRAWN OUR ATTENTION O N TWO LETTERS DATED 15.05.2009 AND 25.11.2009 ON WHICH ALL THE ADDITION S HAVE BEEN DELETED BY THE LD. CIT(A). HE FURTHER ARGUED THAT PAPER BOOKS SUBMITTED BY THE APPELLANT DID NOT ENCLOSE ANY CONFIRMATION BEFORE THE A.O. A S THE LD. A.O. HAD ENDORSED THE LETTER DATED 11.05.2009 WHICH EMPHASIZED THAT O NLY REPLY HAD BEEN FILED WITHOUT ANY CONFIRMATION OF THE CASH CREDITORS. IT HAD BEEN FURTHER CLARIFIED BY THE LD. A.O. THAT MOST OF THE DETAILS CALLED FOR HA D NOT BEEN FILED BY THE ASSESSEE AND IN SPITE OF REPEATED OPPORTUNITIES GRA NTED TO THE ASSESSEE AS MENTIONED IN THE ASSESSMENT ORDER. THE LD. CIT(A) HAD NOT GIVEN ANY OPPORTUNITY OR SOUGHT ANY REMAND REPORT FROM THE A. O. AND WITHOUT AFFORDING ANY OPPORTUNITY TO THE A.O. HE HAD ALLOWED THE APPE AL. THUS, HE REQUESTED TO SET ASIDE THE ORDER OF THE CIT(A). AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT FILED PAPER BOOK AND ARGUED THAT ALL THE CONFIRMATI ONS HAVE BEEN SUBMITTED ALONG WITH REPLY VIDE LETTER DATED 11.05. 2009. HE ALSO CLAIMED THAT ALL THE CASH CREDITORS WERE RECEIVED THROUGH BANKING CHANNE L. FURTHER LETTER WAS ALSO FURNISHED ALONG WITH EVIDENCE VIDE LETTER DATED 25. 11.2009. THE SAME EVIDENCES HAVE BEEN FILED BEFORE THE LD. CIT(A). O N THE BASIS OF THIS EVIDENCE, HE HAD ALLOWED THE APPEAL IN FAVOUR OF TH E ASSESSEE. LD. COUNSEL HAS DRAWN OUR ATTENTION ON LETTERS DATED 24.02.2010 AND 20.03.2010 AND ALSO AUDIT REPORT. HE HAS DRAWN OUR ATTENTION IN EXHIBI T 3 OF AUDIT REPORT WHICH ITA NO. 2175/AHD/10 A.Y. 07-08 PAGE 7 SHOWS THAT IN AUDIT REPORT ITSELF, THE AUDITOR HAD MENTIONED PAN NO. IN MOST OF CASES. THEREFORE, HE HAD DISCHARGED HIS PRIMARY ON US AND SHIFTED THE BURDEN ON REVENUE. THUS, HE REQUESTED TO CONFIRM THE ORDE R OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT FROM THE COPY OF LETTERS DAT ED 11.05.2009 AND 25.11.2009 THAT THE APPELLANT HAD NOT FURNISHED ANY CONFIRMATI ON BEFORE THE A.O. FURTHER, IF ANY, LOAN IS RECEIVED FROM THE BANKING CHANNEL, IN ABSENCE OF CONFIRMATION, THE CREDITWORTHINESS OF THE DEPOSITORS CANNOT BE AS CERTAINED. THE LD. COUNSEL FROM BOTH THE SIDES FAIRLY ACCEPTED THAT THE MATTER MAY BE SET ASIDE TO THE CIT(A) FOR DE NOVO. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A). LD. CIT(A) IS DIRECTED TO GIVE OPPORTUNITY TO THE A.O. AND PASS NECESSARY ORDER AS PER LAW. 6. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 08.08.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (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. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ':