The Income-tax Officer, Jammu V. Sh. Arjun Singh, UDHAMPUR

ITA 227/ASR/2012

• Counselvise Citation: 22720914 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 PAN: AZEPS1753M INCOME TAX OFFICER, VS. SH. ARJUN SINGH, WARD-1(1), UDHAMPUR PROP. M/S SANSAR PALACE, RAILWAY ROAD, JAKHANI, UDHAMPUR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARSEM LAL, DR RESPONDENT BY: SH. P.N. ARORA, ADV. DATE OF HEARING: 24.09.2014 DATE OF PRONOUNCEMENT: 30.09.2014 ORDER PER A.D. JAIN, J.M. 1. THIS IS DEPARTMENTS APPEAL AGAINST THE ORDER DAT ED 22.03.2012 FOR THE ASSESSMENT YEAR 2007-08 PASSED BY LEARNED C IT(A), JAMMU. 2. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS O F APPEAL: I. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN APPLYING THE RATIO OF JUDGMENT OF HONBLE SUPREM E COURT OF INDIA IN THE CASE OF M/S SARGAM CINEMA WHEN NO BOOKS OF A CCOUNT HAS BEEN MAINTAINED BY THE ASSESSEE BEING NO ACCOUNT CASE. II. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN APPLYING THE RATIO OF JUDGMENT OF HONBLE SUPREM E COURT OF INDIA IN THE CASE OF M/S SARGAM CINEMA, WHEN NO BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFIC ER BEING NO ACCOUNT CASE. 2 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 III. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPREC IATING THE FACTS THAT THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSAC TIONS REMAINED UN- ESTABLISHED IN RESPECT OF UNSECURED LOANS OF RS. 5, 00,000/-. IV. ON THE FACTS AND CIRCUMSTANCED WHETHER THE LEARNED CIT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPREC IATING THE FACT THAT AS PER THE SETTLED LAW ON THE ISSUE OF UNSECURED LO ANS, IT IS THE PRIMARY ONUS OF THE ASSESSEE TO ESTABLISH ALL THE THREE COM PONENTS IN CASE OF LOANS I.E. IDENTITY, CREDITWORTHINESS & GENUINENESS . IF THE ASSESSEE FAILS TO ESTABLISH ANY ONE OF THREE, THE CASH CREDI T CANNOT BE ACCEPTED AS EXPLAINED. 3. APROPOS GROUND NOS. 1 AND 2, THE FACTS ARE THAT THE ASSESSEE DURING THE YEAR HAS CONSTRUCTED A BANQUET HALL AND HAS SHOWN COST OF CONSTRUCTION, AS PER BALANCE-SHEET, AT RS. 37,50,00 0/-. THE SOURCE OF INVESTMENT IN THE CONSTRUCTION WAS STATED TO HAVE B EEN MADE OUT OF THE COMPENSATION RECEIVED FROM THE GOVERNMENT ON THE CO MPULSORY ACQUISITION OF AGRICULTURAL LAND FOR THE CONSTRUCTI ON OF NH-IA BY PASS, AND RAILWAY ROAD, UDHAMPUR, ACCUMULATIONS OUT OF TH E BUSINESS PROFITS OF THE PRECEDING YEARS AND UNSECURED LOAN OF RS. 6 LAKHS TAKEN FROM THE RELATIVES. THIS CASE WAS PICKED UP BY THE ADDITIONA L COMMISSIONER OF INCOME TAX, RANGE-II, JAMMU, FOR DIRECTION U/S 144A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AN D THE CASE WAS EXAMINED AND INVESTIGATED AS PER HIS DIRECTION. THE CASE WAS REFERRED UNDER SECTION 142A OF THE ACT, TO THE VALUATION OFF ICER, AMRITSAR, VIDE 3 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 OFFICER LET NO. 1067, DATED 15.09.2009 FOR DETERMIN ING THE COST OF INVESTMENT MADE IN THE CONSTRUCTION OF THE BANQUET HALL. 4. THE ASSESSING OFFICER ADDED THE AMOUNT OF RS. 37 ,89,327/- BEING THE DIFFERENCE BETWEEN THE COST SHOWN BY THE ASSESSEE (RS. 75,39,327/-) AND THE VALUE GIVEN BY THE VALUATION O FFICER (RS. 37,50,000/-). 5. THE LEARNED CIT(A) DELETED THE ADDITION FOLLOWIN G THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S SA RGAM CINEMA , 328 ITR 513 (SC) AS FOLLOWED BY THE ITAT, AMRITSAR BENC H IN THE CASE OF M/S FATTU DHINGA RICE MILLS, PASSED ON 16.06.2011 IN ITA NO. 380(ASR)/2010. 6. THE LEARNED DR HAS CONTENDED THAT IN THE FACTS A ND CIRCUMSTANCES, THE LEARNED CIT(A) WAS NOT RIGHT IN APPLYING THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF M/S SARGAM CINEMA (SUPRA), WHEN NO BOOKS OF ACCOUNT HAD BEEN MAINTAINED BY THE ASSESSEE, OR EVEN PRODUCED BEFORE THE ASSESSING OFF ICER, IT BEING A NO ACCOUNT CASE. 7. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 4 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 8. THE DEPARTMENTS FIRST OBJECTION REGARDING THIS BEING A NO ACCOUNT CASE IS NOT SUSTAINABLE. THE ASSESSING OFF ICER HIMSELF DID NOT TREAT IT AS A NO ACCOUNT CASE. IN THIS REGARD, IN PARA 2 OF THE ASSESSMENT ORDER, IT HAS BEEN OBSERVED AS FOLLOWS: THE ASSESSEE HAS STATED THAT THIS IS A NO ACCOUNT CASE. THE ASSESSEE WAS REQUESTED TO EXPLAIN AS TO HOW HE HAS PREPARED THE BALANCE-SHEET AND THE PROFIT AND LOSS ACCOUNT IN RESPECT OF THE B ANQUET BALL RECEIPTS. HE STATED THAT THESE WERE PREPARED ON THE BASIS OF A DIARY MAINTAINED FOR THIS PURPOSE. HE COULD NOT GIVE ANY SATISFACTOR Y EXPLANATION. THE ASSESSEE HAS ALSO FURNISHED A PHOTO COPY OF THE BOO KING REGISTER MARKET AS ANNEXURE H IN WHICH THE ENTIRE RECEIPTS HAVE BEEN RECORDED. HE HAS ALSO FURNISHED DETAILS OF THE EXPE NSES CLAIMED ON ACCOUNT OF SALARY, GENERATOR POL, TRAVELLING, SANIT ATION AND CLEANING, GENERATOR RUNNING AND MAINTENANCE, TENTAGE AND WAIT ER ETC. THEREFORE, IT CANNOT BE TREATED AS A NO ACCOUNT CA SE. 9. APROPOS THE DEPARTMENTS OBJECTION THAT NO BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER, AS AVAI LABLE FROM PARA 2 OF THE ASSESSMENT ORDER, REPRODUCED ABOVE, THE ASSESSE E MAINTAINED A DIARY, WHICH WAS THE VERY BASIS FOR PREPARATION OF ASSESS EES BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT IN RESPECT OF THE BANQUET H ALL RECEIPTS. THE ASSESSEE FILED A COPY OF THE BOOKING REGISTER IN WH ICH THE ENTIRE RECEIPTS STOOD RECORDED. THE ASSESSEE ALSO FURNISHED DETAILS OF EXPENSES CLAIMED ON ACCOUNT OF SALARY, GENERATOR POL, TRAVELING, SAN ITATION AND CLEANING, GENERATOR RUNNING AND MAINTENANCE, TENTAGE AND WAIT ER, ETC. ALL THESE DOCUMENTS WERE DULY FURNISHED BEFORE THE ASSESSING OFFICER BY THE 5 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 ASSESSEE. IT WAS ON THIS BASIS ALONE THAT THE ASSES SING OFFICER REFUSED TO TREAT THE CASE AS A NO ACCOUNT CASE, THOUGH THE A SSESSEE HAD HIMSELF REQUESTED IT TO BE TREATED AS SUCH. THEN, SECTION 4 4AA(3) OF THE ACT READS AS FOLLOWS: 44AA- (3) THE BOARD MAY, HAVING REGARD TO THE NATURE OF THE BUSINESS OR PROFESSION CARRIED ON BY ANY CLASS OF PERSON, PR ESCRIBE, BY RULES, THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS (INCLUDING INV ENTORIES, WHEREVER NECESSARY) TO BE KEPT AND MAINTAINED UNDER SUB-SECT ION (1) OR SUB- SECTION (2), THE PARTICULARS TO BE CONTAINED THEREI N AND THE FORM AND THE MANNER IN WHICH AND THE PLACE AT WHICH THEY SHALL B E KEPT AND MAINTAINED. 10. RULE 6F OF THE INCOME TAX RULES, 1962 PROVIDES F OR BOOKS OF ACCOUNT AND OTHER DOCUMENTS TO BE KEPT AND MAINTAIN ED UNDER SECTION 44AA(3) OF THE ACT. THE RELEVANT PORTION OF THIS RU LE READS AS FOLLOWS: 6F (1) EVERY PERSON CARRYING ON LEGAL, MEDICAL, ENGI NEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOU NTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR AUTHORIZED RE PRESENTATIVE OR FILM ARTIST SHALL KEEP AND MAINTAIN THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS SPECIFIED IN SUB-RULE (2) (2) THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS REFER RED TO IN SUB-RULE (1) SHALL BE THE FOLLOWING, NAMELY:- (I) A CASH BOOK; (II) A JOURNAL, IF THE ACCOUNTS ARE MAINTAINED ACC ORDING TO THE MERCANTILE SYSTEM OF ACCOUNTING; (III) A LEDGER; (IV) CARBON COPIES OF BILLS, WHETHER MACHINE NUMBE RED OR OTHERWISE SERIALLY NUMBERED, WHEREVER SUCH BILLS ARE ISSUED B Y THE PERSON, AND CARBON COPIES OF COUNTERFOILS OF MACHIN E NUMBERED OR OTHERWISE SERIALLY NUMBERED RECEIPTS ISSUED BY H IM: 6 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 (V) ORIGINAL BILLS WHEREVER ISSUED TO THE PERSON A ND RECEIPTS IN RESPECT OF EXPENDITURE INCURRED BY THE PERSON OR, W HETHER SUCH BILLS AND RECEIPTS ARE NOT ISSUED AND THE EXPENDITU RE INCURRED DOES NOT EXCEED FIFTY RUPEES, PAYMENT VOUCHERS PREP ARED AND SIGNED BY THE PERSON; 11. FURTHER, EXPLANATION (B) TO RULE 6F (2) OF THE I NCOME TAX RULES, 1962 STATES THAT CASH BOOK MEANS A RECORD OF ALL CASH RECEIPTS AND PAYMENTS, KEPT AND MAINTAINED FROM DAY-TO-DAY A ND GIVING THE CASH BALANCE IN HAND AT THE END OF EACH DAY OR AT THE EN D OF A SPECIFIED PERIOD NOT EXCEEDING A MONTH . 12. IT HAS NOT BEEN SHOWN BEFORE US BY THE DEPARTMEN T AS TO HOW THE RECORD MAINTAINED BY THE ASSESSEE, AS PRODUCED BY H IM BEFORE THE ASSESSING OFFICER AND NOTED BY THE ASSESSING OFFICE R HIMSELF IN THE ASSESSMENT ORDER, DOES NOT FALL WITHIN RULE 6F (2) AND EXPLANATION (B) THEREOF. 13. THESE BOOKS OF ACCOUNT WERE NOT REJECTED BY THE ASSESSING OFFICER, RATHER HE CONSCIOUSLY TOOK THEM AS SUCH AN D SUBSEQUENTLY REJECTED THE ASSESSEES CONTENTION OF IT BEING TREA TED AS A NO ACCOUNT CASE. 14. COMING TO THE APPLICABILITY OF M/S SARGAM CINEM A (SUPRA) BY THE LEARNED CIT(A), THE DEPARTMENT HAS NOT BEEN ABL E TO COME OUT OF THE 7 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 RATIO CONTAINED THEREIN, I.E., WHERE BOOKS OF ACCOU NT ARE NOT REJECTED, NO REFERENCE CAN BE MADE TO THE VALUATION CELL. THE LE ARNED CIT(A) HAS DULY CONSIDERED THE POSITION OF LAW BY FOLLOWING M /S SARGAM CINEMA (SUPRA). ACCORDINGLY, WHEN NO REFERENCE COULD ITSEL F HAVE BEEN MADE TO THE VALUATION OFFICER, IN THE ABSENCE OF REJECTION OF BOOKS OF ACCOUNT, THE ADDITION MADE BY THE ASSESSING OFFICER WAS ENTIRELY UNCALLED FOR AND WAS RIGHTLY DELETED BY THE LEARNED CIT(A). THEREFORE, G ROUND NOS. 1 AND 2 RAISED BY THE DEPARTMENT ARE REJECTED. 15. REGARDING GROUND NOS. 3 AND 4, THE ASSESSING OFF ICER MADE THE ADDITION OF RS. 5,00,000/-, OBSERVING THAT THE LOAN S WERE NOT IN CASH; THAT THOUGH ALL THE FOUR CREDITORS HAD GIVEN THEIR STATE MENTS BEFORE THE ASSESSING OFFICER, ADMITTING TO HAVE ADVANCED THE M ONEY TO THE ASSESSEE FOR CONSTRUCTION OF A BANQUET HALL, THEY COULD NOT JUSTIFY THE AVAILABILITY OF FUNDS WITH THEM AS THEY, ACCORDING TO THE ASSESS ING OFFICER, WERE NOT MEN OF MEANS. THE LEARNED CIT(A) DELETED THE ADDITI ON, OBSERVING THAT THE IDENTITY, SOURCE AND CONFIRMATIONS IN WRITING AND ORAL DEPOSITIONS OF THE CREDITORS HAD NOT BEEN DISPUTED BY THE ASSESSIN G OFFICER, AND THAT, THEREFORE, THE ONUS CAST ON HIM HAD NOT BEEN DISCHA RGED BY THE ASSESSING OFFICER AND THAT IT HAD NOT SHIFTED ON TO THE ASSES SEE. THE LEARNED CIT(A) 8 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 FOLLOWED THE CASES M/S ARAVALI TRADING CO., 220 C TR 622 (RAJ.) AND M/S FIRST POINT FINANCE LTD., 286 ITR 477 (RAJ.). 16. THE LEARNED DR HAS CONTENDED THAT THE LEARNED CI T(A) HAS NOT APPRECIATED THE FACT THAT THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS REMAINED UN-ESTABLISHED IN RESPECT OF THE UNSECURED LOAN OF RS. 5,00,000/- AND IT IS THE PRIMARY ONUS OF THE AS SESSEE TO ESTABLISH ALL THE THREE COMPONENTS IN CASE OF LOANS, I.E., IDENTI TY, CREDITWORTHINESS & GENUINENESS. HE FURTHER CONTENDED THAT IF THE ASSES SEE FAILS TO ESTABLISH ANY ONE OF THE THREE COMPONENTS, THE CASH CREDIT CA NNOT BE ACCEPTED AS EXPLAINED. 17. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 18. IT REMAINS UNDISPUTED THAT THE ASSESSING OFFICER NEVER CHALLENGED EITHER THE IDENTITY, OR THE SOURCE, OR T HE CONFIRMATIONS GIVEN IN WRITING, OR EVEN THE ORAL STATEMENTS OF THE CREDITO RS OF THE ASSESSEE. THE ASSESSING OFFICER MADE THE ADDITIONS BY OBSERVING M ERELY THAT SINCE THE CREDITORS COULD NOT JUSTIFY THE AVAILABILITY OF FUN DS WITH THEM, THEY BEING MEN OF NO MEANS, THE ADDITION WAS CALLED FOR. 19. IN M/S ARAVALI TRADING CO. (SUPRA), IT HAS BEE N OBSERVED, INTER ALIA, THAT MERELY BECAUSE THE DEPOSITORS EXPLANATI ON ABOUT THE SOURCES OF 9 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 MONEY WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER, IT CANNOT BE PRESUMED THAT THE DEPOSIT MADE BY THE CREDITORS WAS MONEY BELONGING TO ASSESSEE ITSELF; THAT IF THE CREDITORS EXPLANATION ABOUT THE SOURCE OF DEPOSITS IS NOT FOUND TO BE ACCEPTABLE, THE INVESTM ENT OWNED BY SUCH PERSONS MAY BE SUBJECTED TO PROCEEDINGS FOR INCLUSI ON OF THE AMOUNTS AS THEIR INCOME FROM UNDISCLOSED SOURCES, OR IF THEY A RE FOUND BENAMI, THE REAL OWNER CAN BE BROUGHT TO TAX; AND THAT IN THE A BSENCE OF ANYTHING TO ESTABLISH THAT THE SOURCES OF THE CREDITORS DEPOSI TS FLOWED FROM THE ASSESSEE, THE CASH CREDITS CANNOT BE TREATED AS UNE XPLAINED INCOME OF THE ASSESSEE. 20. IN M/S FIRST POINT FINANCE LTD. (SUPRA), THE T RIBUNALS FINDING THAT THE INVESTORS WERE GENUINELY EXISTING PERSONS AND THEY HAD FILED CONFIRMATIONS IN RESPECT OF INVESTMENTS MADE BY THE M AND THEIR STATEMENTS HAD ALSO BEEN RECORDED, WAS CONFIRMED TO HOLD THAT THE AMOUNT DEPOSITED COULD NOT BE TREATED AS UNEXPLAINE D CASH CREDITS. 21. BEFORE US, THE DEPARTMENT HAS NOT CITED ANY DECI SION OPPOSED M/S ARAVALI TRADING CO. (SUPRA) AND M/S FIRST PO INT FINANCE LTD. (SUPRA). THE FACTS IN THE PRESENT CASE, AS CORRECTL Y NOTED BY THE LEARNED CIT(A), ARE IN PARI MATERIA WITH THESE CASES INASMUCH AS, IT WAS NOWHERE ESTABLISHED THAT THE FLOW OF THE AMOUNTS UNDER CONS IDERATION ORIGINATED 10 I.T.A. NO. 227(ASR)/2012 ASSESSMENT YEAR: 2007-08 FROM THE ASSESSEE. THEREFORE, THE LEARNED CIT(A) CO RRECTLY HELD THAT NO ADDITION COULD HAVE BEEN MADE IN THE HANDS OF THE A SSESSEE. 22. IN VIEW OF THE ABOVE DISCUSSION, FINDING NO ERRO R THEREIN, THE ORDER OF THE LEARNED CIT(A) QUA GROUNDS NOS. 3 AND 4 BEFORE US IS CONFIRMED AND GROUND NOS. 3 AND 4 ARE REJECTED. 23. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2014 SD/- SD/- (B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH SEPTEMBER, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. ARJUN SINGH, PROP. M/S SANSAR PA LACE, RAILWAY ROAD, JAKHANI, UDHAMPUR. 2. INCOME TAX OFFICER, UDHAMPUR 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.