Yadunandan Cotton Pvt.Ltd., Mahuva V. The ACIT.,Circle-1, Bhavnagar

ITA 230/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76720 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 31-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Unexplained cash credit; Source of fund; Bogus loan
• Section: 143(3); 133A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 230/AHD/2011 (ASSESSMENT YE AR: 2007-08) YADUNANDAN COTTON PVT. LTD. OPP. GANESH TEMPLE, TALAJA ROAD, MAHUVA V/S ACIT, CIRCLE-1, BHAVNAGAR (APPELLANT) (RESPONDENT) PAN: AAACY 2262R APPELLANT BY : M/S. URVASHI SHODHAN RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 31-03-2014 DATE OF PRONOUNCEMENT : 16 -05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-XX, AHMEDABAD DATED 29.10.2010 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN TH E BUSINESS OF MANUFACTURING AND PROCESSING OF COTTON, COTTON SEED S ETC. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 31.10.2007 DECLA RING TOTAL INCOME OF RS. 12,02,640/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 31.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 72,04,43 0/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CI T(A). CIT(A) VIDE ORDER ITA NO 230/ AHD/2011 . A.Y. 2007- 08 2 DATED 29.10.2009 GRANTED PARTIAL RELIEF TO THE ASSE SSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFO RE US AND HAS RAISED THE FOLLOWING GROUNDS:- 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- XX, AHMEDABAD [CIT(A)] ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING ADDITION OF RS 8,40,783/- MADE ON ACCOUNT OF ALLEGED UNACCOUNTED SALES. THE ADDITION MAY KINDLY BE DELETED. 2.1 THE LEARNED CIT(A) ERRED IN REFUSING TO ESTIMAT E PROFIT ON SUCH ALLEGED UNACCOUNTED SALES FOR THE PURPOSE OF MAKING ADDITION. 3 THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING ADDITION OF RS.18,15,000/- MADE U/S. 68 OF THE ACT IN RESPECT OF UNSECURED LOANS TAKEN F ROM THE FOLLOWING PARTIES. THE ADDITION MAY KINDLY BE DELETED: SR. PARTICULARS AMOUNTRS. 1 A. R. PANCHOLI 17,00,000/- 2 DOSHI KANTILAI JAYANTILAL HUF 50,000/- 3 N. B. MEHTA 65,000/- TOTAL 18,15,000/- 4 THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING ADDITION OF RS. 8,25,000/-MADE U/S. 68 OF THE ACT IN RESPECT OF UNSECURED LOANS TAKEN F ROM THE FOLLOWING PARTIES. THE ADDITION MAY KINDLY BE DELETED: SR. PARTICULARS AMOUNTRS. 1 DOSHI BALWANTRAI JENTILAL 1,00,000/- 2 DOSHI DHIRAJLAL VIRCHANDRA 90,000/- 3 JAYESHKUMAR I. THAKKER 1,00,000/- 4 SMT. KAJALBEN CHETANBHAI DOSHI 1,85,000/- 5 SHRI RAMESHKUMAR GIRJASHANKER 50.000/- 6 SHRI RAM FOODS 3.00.000- TOTAL 8,25,000/- 5 THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING ADDITION OF RS.70,000/-MADE U/S. 68 OF THE ACT IN RESPECT OF UNSECURED LOAN TAKEN FROM SHAH LILAVATIBEN SHANTILAL. THE ADDITION MAY KINDLY BE DELETED: GROUND NO. 2 & 2.1 ARE INTERCONNECTED AND THEREFORE CONSIDERED TOGETHER. 4. IN THIS CASE, SURVEY ACTION UNDER SECTION 133A O F THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 02.02.2007 . DURING THE COURSE OF ITA NO 230/ AHD/2011 . A.Y. 2007- 08 3 SURVEY, BOOKS OF ACCOUNTS AND DOCUMENTS WERE IMPOU NDED AND STATEMENT OF SHRI JADAVBHAI KALSARIA, DIRECTOR OF ASSESSEE, WAS RECORDED WHEREIN HE MADE DISCLOSURE OF RS. 11,31,176/- ON ACCOUNT OF EX CESS STOCK AND RS. 21 LACS ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN THUS MAKING AGGREGATE DISCLOSURE OF RS. 32,31,176. HOWEVER LATER IN THE RETURN OF INCOME FILED BY THE ASSESSEE, IT DISCLOSED ADDITIONAL INCOME OF RS. 3,8 0,000/- ONLY OVER AND ABOVE ITS REGULAR INCOME OF RS. 8,60,883/-. TO JUS TIFY THE ADDITIONAL INCOME OF RS. 3.80 LACS ASSESSEE FILED A STOCK STATEMENT WORK ING OUT EXCESS STOCK OF 41,450 KG IN COTTON SEED AS AGAINST WHICH A.O NOTE D THAT ASSESSEE IN THE WORKING HAD CLAIMED SALE OF 17,28,244 KG OF FINISHE D COTTON WHEREAS FROM THE SALES REGISTER IMPOUNDED DURING THE COURSE OF SURVE Y, IT WAS FOUND THAT ASSESSEE HAD RECORDED SALES OF 17,11,512 KG OF FIN ISHED COTTON. HE THEREFORE CONCLUDED THAT THE DIFFERENCE IN STOCK OF FINISHED GOODS AT 16,732 KG (17,28,244 17,11,512) WAS SOLD AND NOT RECORDE D IN THE BOOKS OF ACCOUNTS AND CONSIDERING THE RATE AT RS. 50.25 PER KG. (BEING THE RATE AS PER THE SALES MEMO BOOK) DETERMINED THE VALUE OF UNACCO UNTED SALE AT RS. 8,40,783/- AND ADDED IT TO THE INCOME. AGGRIEVED B Y THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) C ONFIRMED THE ADDITION MADE BY THE A.O BY HOLDING AS UNDER:- 4.3 I HAVE GONE THROUGH THE ORDERS OF THE AO THE SUBMIS SIONS OF THE AR CAREFULLY. THE AR CLAIMED THAT THE AO HAS NOT EXAMINED THE CONTENTION OF THE APPELLANT THAT THE MATTER HAD BEEN BROUGHT TO THE NOTICE OF THE AUTHORIZED OFFICER DURING THE COU RSE OF SURVEY AND THAT THE SALES WERE IN FACT MADE TO M/S SHREEEJI SALES OF 167.35 MT. IT IS SEEN THAT THE CONTENTION OF THE AR OF THE APPELLANT IS NOT BORNE OUT FROM THE RECORDS. THERE IS NO MENTION OF SALES MADE TO M/S SHREEJI SALES IN THE STATEMENT RECORDED DURING SURVEY. IT IS ALSO SEEN T HAT THE AO VERIFIED THE STOCK STATEMENT FILED BY THE APPELLANT WITH THE REGISTERS IMPOUNDED DURING T HE SURVEY AND ARRIVED AT THE SHORTAGE OF FINISHED COTTON. THE PHOTOCOPY OF THE STOCK REGISTER PRODUCED ALSO S HOWS THAT ENTRY OF SALES MADE TO M/S SHREEJI SALES STATED TO HAVE BEEN MADE ON 6/01/2007 HAS BEE N ENTERED AFTER ALL THE SALES HAVE BEEN RECORDED UPTO 31/03/2007 AND TOTALS HAVE BEEN DRAWN . IT IS ALSO SEEN THAT THE SALE HAS BEEN AT 16735KGS. IN THE BILL FILED ALONG WITH THE SUBMISSI ONS MADE DURING APPELLATE PROCEEDINGS WHERE AS THE ENTRY IN THE REGISTER IS 16732KGS. THE ABOVE CLEARLY INDICATES THAT THE SALES SHOWN TO M/S SHREEJI SALES ARE NOT GENUINE AND THE ENTRY HAS BEEN INSERTED AS AN AFTERTHOUGHT ONLY TO EXPLAIN THE SHORTAGE OF STOCK. IN VIEW OF THE ABOVE THE CONTENTION OF THE AR HAS NO MERITS. THE ALTERNATE CONTENTION OF THE AR ALSO HAS NO MERI TS BECAUSE IN THIS CASE THE PURCHASES HAVE ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNTS. IT IS NOT A CASE OF BOTH PURCHASES AND SALES BEING OUTSIDE BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE THE AO WAS JUSTIFIED IN MAKING ADDITION OF THE ENTIRE SALE VALUE OF THE SHORTAGE OF STOCK. THE ADDITION OF RS.8,40,783/- MADE BY THE AO IS HEN CE CONFIRMED. ITA NO 230/ AHD/2011 . A.Y. 2007- 08 4 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S NOW IN APPEAL BEFORE US . BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A). IT WAS FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE ON THE BASIS STATEMENT RECORDED DURING THE COURSE OF SURVEY AND IT SETTLED LAW THAT THE STATEMENT DURING THE COURSE OF SURVEY DOES NOT HAVE ANY EVIDENTIARY VALUE. RELIANCE WAS ALSO PLACED ON THE DECISION OF TRIBUNA L IN THE CASE OF ACIT VS. BRUJBHUMI COTTON INDUSTRIES ITA NO. 2210/AHD/2008 D ECISION IN THE CASE OF PAUL MATHEWS & SONS VS. CIT 263 ITR 101 (KERALA), I N THE CASE OF CIT VS. S. KADIRKHAN & SONS 300 ITR 157 (MADRAS) AND CIT VS. DHINGRA METAL WORKS 328 ITR 384 (DELHI). 6. THE LD. D.R. ON THE OTHER HAND POINTED TO THE FI NDINGS OF A.O AND CIT(A) AND THUS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, IT WAS SUBMITTED THAT THE SALES MADE TO SHREEJI TRADERS WHICH WAS ALREADY DESPATCHED THROUGH MEENAKSHI ROADWAYS HAD N OT BEEN TAKEN INTO ACCOUNT FOR WANT OF CONFIRMATION FROM THE PURCHASER . ACCORDING TO LD. A.R., IF THE GOODS DESPATCHED TO SHREEJI TRADERS IS CONSIDER ED, THE STOCK GETS FULLY RECONCILED. WE FIND THAT CIT(A) WHILE CONFIRMING T HE ADDITION HAS GIVEN A FINDING THAT THE SUBMISSION OF SALE TO SHREEJI TRAD ERS WAS NOT BORNE OUT FROM THE RECORDS AND THERE WAS NO MENTION OF SALES MADE TO SHREEJI IN THE STATEMENT RECORDED DURING THE SURVEY. CIT(A) AFTER EXAMINING THE PHOTO COPY OF THE STOCK REGISTER HAS GIVEN A FINDING THAT THE SALES STATED TO HAVE BEEN MADE TO SHREEJI SALES HAS BEEN ENTERED AFTER ALL TH E SALES HAVE BEEN RECORDED UP TO 31.03.2007 AND THE TOTALS WERE DRAWN AND FURTHER THE SALES AS PER BILLS WAS STATED TO BE 16735 KG WHEREAS THE ENT RY IN THE REGISTER WAS OF 16732 KG. HE HAS THEREFORE HELD THAT THE SALES SHOW N TO M/S. SHREEJI SALES ARE NOT GENUINE AND THE ENTRY HAS BEEN INSERTED AS AN AFTERTHOUGHT ONLY TO EXPLAIN THE SHORTAGE OF STOCK. BEFORE US, THE LD. A .R. COULD NOT CONTROVERT THE ITA NO 230/ AHD/2011 . A.Y. 2007- 08 5 FINDINGS OF CIT(A) BY BRINGING ANY TANGIBLE MATERIA L ON RECORD. FURTHER THERE IS NO MATERIAL ON RECORD TO SUPPORT THE CONTENTION OF THE ASSESSEE THAT THE MATERIAL SENT TO SHREEJI TRADERS WAS NOT TAKEN INTO ACCOUNT FOR WANT OF CONFIRMATION FROM THE PURCHASER. IN VIEW OF THE AF ORESAID FACTS, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE A.O WAS JUSTIFIE D. HOWEVER IT IS ALSO A SETTLED LAW THAT THE ENTIRE AMOUNT OF SALES CANNOT BE CONSIDERED AS INCOME BUT ONLY THE PROFIT ELEMENT OF THE SALE CAN BE ADDE D AS INCOME. BEFORE US, IN THE ABSENCE OF DETAILS ABOUT THE GROSS PROFIT RATE OR THE NET PROFIT RATIO OF THE ASSESSEE, WE ARE OF THE VIEW THAT CONSIDERING THE T OTALITY OF FACTS, ENDS OF JUSTICE WOULD BE MET IF ADDITION IS RESTRICTED TO L UMP SUM AMOUNT OF RS. 1.50 LAC. THUS THIS GROUND OF ASSESSEE IS PARTLY ALLOWED . GROUND NOS. 3, 4 & 5 ARE IN CONNECTION WITH CONFIRM ING THE ADDITION MADE UNDER SECTION 68 OF THE ACT. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON VERIFICATION OF FORM 3CD. A.O. NOTICED THAT ASSESSEE HAD ACCEPTED DEPOSI TS/LOANS AMOUNTING TO RS. 59.05 LACS AND AFTER REDUCING THE SQUARED UP LO ANS, FRESH UNSECURED LOANS AMOUNTING TO RS. 29,75,681/- WERE OUTSTANDING FROM THE PARTIES LISTED ON PAGE 4 OF THE ASSESSMENT ORDER. OUT OF THE 13 PA RTIES FROM WHOM THE ASSESSEE RECEIVED FRESH UNSECURED LOANS, SUMMONS UN DER SECTION 131 OF THE ACT WERE ISSUED TO 7 PARTIES AND 8 SUMMONS WERE ISS UED TO THE PARTIES WHOSE ACCOUNTS WERE SQUARED UP DURING THE YEAR. ASS ESSEE HAD CLAIMED TO HAVE RECEIVED UNSECURED LOAN OF RS. 17 LAC FROM MR. A.R. PANCHOLI. MR. PANCHOLI IN THE STATEMENT RECORDED ON OATH CLAIMED TO HAVE GIVEN THE LOAN THROUGH 2 CHEQUES AND THE SOURCE OF DEPOSIT WAS STA TED TO BE THE SALE PROCEEDS OF ANCESTRAL AGRICULTURAL LAND BY HIM AND HIS BROTHERS. HE ALSO SUBMITTED THE XEROX COPY OF THE BANK ACCOUNT. ON VE RIFICATION OF THE BANK STATEMENT A.O. NOTICED THAT THE ACCOUNT WAS OPENED ON 1.12.2006 WHEREAS MR. PANCHOLI HAS STATED TO HAVE RECEIVED HIS1/4 TH SHARE OF SALE PROCEEDS AMOUNTING TO RS. 22,18,996/- ON 23.11.2005 IN CASH. A.O ALSO NOTICED THAT ITA NO 230/ AHD/2011 . A.Y. 2007- 08 6 BEFORE ISSUING THE CHEQUES AMOUNTING TO RS. 17 LACS , MATCHING CASH AMOUNT OF RS. 17 LACS WAS DEPOSITED ON SIX DAYS STARTING F ROM 2.12.2006 TO 26.12.2006. HE THEREFORE CONCLUDED THAT THERE WAS N O NEXUS BETWEEN THE AMOUNT RECEIVED ON SALE OF LAND AND THE AMOUNT DEPO SITED IN THE BANK ACCOUNT AS THE AMOUNT WAS DEPOSITED IN BANK AFTER 1 YEAR FROM THE SALE OF LAND. A.O WAS FURTHER THE VIEW THAT NO VILLAGER CAN FEEL SAFE TO KEEP SUCH A HUGE AMOUNT OF CASH AT HIS RESIDENCE. FROM THE STA TEMENT OF SHRI PANCHOLI WHICH IS REPRODUCED AT PAGE 5 AND 6 OF THE ASSESSME NT ORDER, A.O CONCLUDED THAT SHRI PANCHOLI HAS NOT BEEN ABLE TO E XPLAIN THE SOURCE OF DEPOSIT OF RS. 17LACS IN HIS BANK ACCOUNT AND HE TH EREFORE CONCLUDED THAT THE MONEY BELONGING TO THE ASSESSEE WAS DEPOSITED BY TH E ASSESSEE TO FACILITATE SHRI PANCHOLI TO ADVANCE LOAN TO HIM. HE ACCORDING LY CONSIDERED RS. 17 LACS AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND A DDED TO THE INCOME. 9. IN CASE OF RECEIPT OF UNSECURED LOAN OF RS. 50, 000/- FROM SHRI KANTILAL JAYANTILAL DOSHI HUF, AND RS. 65,000-/- FROM SHRI N .B. MEHTA, IN THE ABSENCE OF COMPLIANCE TO THE SUMMONS. A.O CONCLUDED THAT SINCE THE ASSESSEE COULD NOT PROVE THE IDENTITY AND CREDITWOR THINESS OF THE DEPOSITORS, THE DEPOSIT TAKEN BY THE ASSESSEE, FROM THE DEPOSIT OR CANNOT BE TREATED AS GENUINE AND HE ACCORDINGLY TREATED THE AMOUNT OF RS . 50,000/- AND RS. 65,000/- RECEIVED AS CASH CREDIT U/S. 68 OF THE ACT . 10. IN THE CASE OF DOSHI BALWANTRAI JENTILAL (RS. 1 ,00,000/-), DOSHI DHIRAJLAL VIRCHANDRA (RS. 90,000/-) AND SHRI RAMESH KUMAR GIR AJASHANKER (RS.50,000/-). A.O HAD ISSUED SUMMONS U./S. 131 OF THE ACT. IN THE ABSENCE OF COMPLIANCE OF SUMMONS, OR ANY WRITTEN REPLY FROM THE LENDERS, A.O CONCLUDED THAT THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS REMAINED UNPROVED AND THEREFORE THE DEPOSITS WERE TREATED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. ITA NO 230/ AHD/2011 . A.Y. 2007- 08 7 11. IN THE CASE OF JAYESHKUMAR THAKKAR (RS. 1,00,00 0/-), ASSESSEE FILED CONFIRMATION AND COPY OF PAN CARD BUT DID NOT FILE COPY OF BANK STATEMENT FOR RELEVANT PERIOD. A.O WAS OF THE VIEW THAT IN THE A BSENCE OF BANK STATEMENT, CREDITWORTHINESS OF DEPOSITOR REMAINED UNPROVED AND THEREFORE THE DEPOSIT WAS TREATED AS UEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 12. FROM SMT. KAJALBEN CHETANBHAI DOSHI, ASSESSEE HAS CLAIMED TO HAVE RECEIVED RS. 1,85,000/- WHICH WAS ALSO STATED TO HA VE BEEN REPAID DURING THE YEAR ITSELF. BEFORE A.O THE CONFIRMATION OF DEPOSI T WAS FILED BUT SINCE THE COPY OF THE PAN CARD AND BANK STATEMENT OF RELEVANT PERIOD WAS NOT FILED, A.O. CONCLUDED THAT THE IDENTITY AND CREDITWORTHINE SS OF THE DEPOSITOR HAS NOT BEEN PROVED AND THEREFORE THE DEPOSIT OF RS. 1,85,0 00/- FROM SMT. KAJALBEN DOSHI WAS CONSIDERED AS UNEXPLAINED CASH CREDIT U/S . 68 OF THE ACT. 13. FROM SHRI RAM FOODS, ASSESSEE HAD CLAIMED TO HA VE RECEIVED DEPOSIT OF RS. 3 LAC DURING THE YEAR AND ALSO CLAIMED TO HAVE REPA ID DURING THE YEAR ITSELF. IN RESPONSE TO SUMMONS U/S. 131, ASSESSEE FILED UNSIGN ED CONFIRMATION OF DEPOSITOR AND ACKNOWLEDGEMENT OF FBT RETURN. A.O NO TED THAT DESPITE ASKING THE DEPOSITOR TO BE THE COPY OF PAN CARD TAX RETURN , ITR AND BANK STATEMENT FOR THE RELEVANT PERIOD, THE SAME WAS NOT FILED AND THEREFORE THE A.O CONCLUDED THAT THE CREDITWORTHINESS OF THE DEPOSITO R HAS NOT BEEN PROVED AND THEREFORE THE DEPOSIT OF RS. 3 LAC WAS TREATED AS U NEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 14. ASSESSEE HAS STATED TO HAVE RECEIVED RS. 70,000 /- FROM SHAH LILAVATI SHANTILAL. A.O NOTED THAT SINCE THE COPY OF THE LE DGER ACCOUNT AND THE PAN NUMBER OF THE LENDER WAS FILED, IT DID NOT PROVE TH E CREDITWORTHINESS OF THE DEPOSITOR AND THE GENUINENESS OF TRANSACTION. HE A CCORDINGLY CONSIDERED IT TO BE UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. ITA NO 230/ AHD/2011 . A.Y. 2007- 08 8 15. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIE D THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE CONFIRMED THE ACTION OF A.O. BY HOLDING AS UNDER:- 5.3 I HAVE GONE THROUGH THE ORDERS OF THE AO AND THE SUBM ISSIONS OF THE AR CAREFULLY.; IT IS SEEN THAT THE AO HAS MADE THE ADDITION OF RS, 17,00,000/- HOL DING THAT LOAN FROM SHRI A R PANCHOLI IS NOT GENUINE. IT IS SEEN THAT THE SOURCE OF FUNDS FOR HAVING ADVANCED THE LOAN TO THE APPELLANT OF RS. 17,00,000/- IS STATED TO BE SALE PROCEEDS OF AGRICU LTURAL LANDS BY SHRI A R PANCHOLI. IT IS ALSO SEEN THAT THE LANDS IN QUESTION BELONGED TO THE SHRI A R PANC HOLI AND HIS THREE BROTHERS JOINTLY. THE LAND WAS SOLD ON 23/11/2005 FOR A TOTAL CONSIDERATION OF RS. 88,75,985/-. THE ENTIRE MONEY WAS RECEIVED BY SHRI MANSUKHBHAI THE BROTHER OF SHRI A R PANCHOLI BY DRA FT. IN HIS STATEMENT ON OATH SHRI A R PANCHOLI HAS STATED THAT HIS SHARE OF THE MONEY WAS GIVEN TO HIM BY SHRI MANSUKH BHAI IMMEDIATELY. IT IS SEEN THAT SHRI PANCHOLI WAS UNABLE TO EXPLAIN WHY HE KEPT THE ENTIRE MONEY WITH HIM IN CASH FOR OVER ONE YEAR AND DEPOSITED THE SAME AFTER OPENING A BANK ACCOUNT IN INSTALLMENTS OVER A PERIOD OF THREE WEEKS ONLY TO GIVE LOANS TO THE APPELLANT. HE WAS ALSO UNABLE TO EXPLAIN WHAT HAPPENED TO THE REMAINING MONEY WHICH HE HAD RECEIVED FROM HIS BROTHER AS HIS SHARE . DURING THE COURSE OF APPELLATE PROCEEDINGS THE AR O F THE APPELLANT WAS ASKED TO PRODUCE THE COPY OF THE BANK ACCOUNT OF SHRI MANSUKHBHAI TO PROVE THAT SHRI PANCHOLI HAD INDEED RECEIVED HIS SHARE OF THE SALE PROCEEDS OF THE AGRICULTURAL LANDS. VIDE, ORDE R SHEET ENTRY DATED 29/10/2010 THE AR OF THE APPELLANT STATED THAT THE COPY OF ACCOUNT OF SHRI M ANSHUKHBHAI CANNOT BE FILED. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE LOAN FRO M SHRI A R PANCHOLI IS NOT GENUINE. HIS CAPACITY T O HAVE THE LOAN IS NOT PROVED BECAUSE THE PRIMARY FAC T THAT HE HAD INDEED RECEIVED HIS SHARE OF THE SALE PROCEEDS OF AGRICULTURAL LANDS HAS NOT BEEN ESTABLI SHED . 5.3 FURTHER IT IS SEEN THAT IN THE STATEMENT OF SHR I JADAVBHAI G KALSARIA., DIRECTOR OF THE APPELLANT COMPANY, RECORDED DURING THE COURSE OF SURVEY, SHRI KALSARIA HAS ADMITTED THE FACT THAT THE APPELLANT HAD SHOWN BOGUS LOANS WHICH WERE OFFERED FOR TAXATI ON. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE LOAN SHOW N FROM SHRI A R PANCHOLI IS NOT GENUINE. THE AO WAS HENCE JUSTIFIED IN MAKING AN ADDITION OF RS. 17,00, 000/- ON THIS COUNT. IN RESPECT OF THE LOANS RECEIVED FROM KANTILAL JAYA NTILAL HUF OF RS. 50,000/- AND SHRI NB MEHTA OF RS. 65,000/- IT IS SEEN THAT THE AO HAS MADE THE AD DITION HOLDING THAT THERE WAS NO COMPLIANCE TO THE SUMMONS ISSUED AND HENCE THE IDENTITY AND CREDITWOR THINESS OF THE PERSONS WAS NOT PROVED. IT IS SEEN THAT IN THE ASSESSMENT ORDER ITSELF THE AO HAS MENT IONED THE PAN OF BOTH THESE PERSONS. IT IS ALSO SEE N THAT THE AR HAS STATED THAT THE CONFIRMATION FROM T HE PERSONS AS WELL AS A COPY OF THEIR RETURN OF INCOME WAS FILED BEFORE THE AO. IN VIEW OF THE ABOV E IT IS CLEAR THAT THE IDENTITY OF THE CREDITORS WA S CLEARLY ESTABLISHED SINCE THEIR PAN AND COPY OF RET URN WAS FILED WITH THE AO. IT IS SEEN HOWEVER THAT THEIR BANK STATEMENT WAS NOT FILED DURING THE COURS E OF ASSESSMENT PROCEEDINGS. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS THE SAME ARE NOT FI LED DESPITE THE FACT THAT VIDE ORDER SHEET ENTRY DA TED 26/872010 THE AR OF THE APPELLANT WAS SPECIFICALLY ASKED TO DO SO. THUS IT IS APPARENT THAT THE CREDITWORTHINESS OF THESE CREDITORS IS NOT PROVED. THE AO WAS HENCE JUSTIFIED IN TREATING THE LOANS FR OM THESE PERSONS AS BOGUS. THE ADDITION OF RS. 50,000/- AND RS. 65,000/- IN R ESPECT OF LOANS FROM KANTILAL JAYANTILAL HUF AND SHRI N.B. MEHTA RESPECTIVELY IS HENCE CONFIRMED. 6.3 I HAVE GONE THROUGH THE ORDERS OF THE AO AND SU BMISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT IN RESPECT OF THE FOLLOWING PERSONS MADE THE ADDITION HOLDING THAT THE IDENTITY AND CREDITWORTHINESS COUL D NOT BE PROVED HENCE HE HAS TREATED THE LOAN FROM TH ESE PERSONS AS UNEXPLAINED AND PROCEEDED TO MAKE THE ADDITION UNDER SECTION 68: 1 DOSHI BALWANTRAI JENTILAL 1,00,000/- 2 DOSHI DHIRAJLALVIRCHANDRA 90,000/- ITA NO 230/ AHD/2011 . A.Y. 2007- 08 9 3 SHRI RAMESH KUMAR GIRIJASHANKAR 50,000/ - IT IS ALSO SEEN THAT THE AR HAS STATED THAT THE CON FIRMATION FROM THE PERSONS AS WELL AS A COPY OF THE IR RETURN OF INCOME WAS FILED BEFORE THE AO. THE ABOVE CONTENTION OF THE AR DOES NOT HAVE A CORRECT IN VIEW OF THE FACT THAT THE AO HAS MENTIONED THAT NO DETAILS WERE FILED BEFORE HIM. IT IS ALSO SEEN THAT COPY OF THEIR BANK ACCOUNTS WAS NOT FILED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS THE SAME ARE NO T FILED DESPITE THE FACT THAT VIDE ORDER SHEET ENTR Y DATED 26/8/2010 THE AR OF THE APPELLANT WAS SPECIFI CALLY ASKED TO DO SO. THUS IT IS APPARENT THAT THE CREDITWORTHINESS OF THESE CREDITORS IS NOT PROVED. THE AO WAS HENCE JUSTIFIED IN TREATING THE LOANS FR OM THESE PERSONS AS BOGUS. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE AO IS CONFIRMED. IT IS SEEN THAT INVESTMENT OF THE FOLLOWING PERSONS THE AO ISSUED SUMMONS IN RESPONSE TO WHICH CONFIRMATION OF THE LOANS WERE FILED. THE AO HOWEVE R HAD THAT SINCE COPIES OF BANK ACCOUNTS AND INCOME TAX RETURNS WERE NOT FILED HENCE THE CREDITW ORTHINESS OF THE CREDITOR WAS NOT PROVED. HE HENCE PROCEEDED TO MAKE THE ADDITIONS UNDER SECTION 68 WO RDING OF THE LOANS WERE NOT EXPLAINED. 1 JAYESHKUMAR L THAKKAR 1, 00,000/- 2 SMT. KAJALBEN CHETANBHAI DOSHI 1,85,000/- 3 SHRI RAM FOODS 3,00,000/- IT IS SEEN HOWEVER THAT COPY OF THE BANK ACCOUNTS W AS NOT FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. EVEN DURING THE COURSE OF APPELLATE PR OCEEDINGS THE SAME ARE NOT FILED DESPITE THE FACT THAT VIDE ORDER SHEET ENTRY DATED 26/8/2010 THE AR OF THE APPELLANT WAS SPECIFICALLY ASKED TO DO SO. THUS IT IS APPARENT THAT THE CREDITWORTHINESS OF TH ESE CREDITORS IS NOT PROVED. THE AO WAS HENCE JUSTIFIED IN TREATING THE LOANS FROM THESE PERSONS AS BOGUS. IN VIEW OF THE ABOVE THE AO WAS JUSTIFIED IN TREATING THE LOANS FROM THESE PERSONS AS BOGUS. AS FAR AS LOAN FROM SHAH LILAVATIBEN SHANTILAL IS C ONCERNED IT IS SEEN THAT OTHER THAN THE ADDRESS AN D PAN NO OTHER DETAILS WAS FILED DURING ASSESSMENT PROCEEDINGS. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS THE SAME ARE NOT FILED DESPITE THE FACT THAT VIDE ORDER SHEET ENTRY DATED 26/8/2010 THE AR OF THE APPELLANT WAS SPECIFICALLY ASKED TO DO SO. T HUS IT IS APPARENT THAT THE CREDITWORTHINESS OF THE SE CREDITORS IS NOT PROVED. THE AO WAS HENCE JUSTIFIED IN TREATING THE LOANS FROM THIS PERSON AS BOGUS. THE ADDITION MADE OF RS. 70 , 000/- IS HENCE CONFIRMED. 16. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. BEFORE US. LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A). IT WAS FURTHER SUBMITTED THAT THE LOAN FROM MR. PAN CHOLI WAS TAKEN BY ACCOUNT PAYEE CHEQUE SHE ALSO POINTED TO THE COPY OF THE E NGLISH TRANSLATION OF THE STATEMENT OF SHRI PANCHOLI, WHICH WAS PLACED AT PAG E 159 TO 162 OF THE PAPER BOOK AND POINTED OUT THAT THE AMOUNT WAS RECEIVED F ROM THE SALE PROCEEDS OF THE LAND. WITH RESPECT TO THE OTHER DEPOSITORS, SHE POINTED OUT THAT THE ITA NO 230/ AHD/2011 . A.Y. 2007- 08 10 DEPOSITORS ARE ASSESSED TO TAX, THE RECEIPTS ARE TH ROUGH BANKING CHANNELS AND THEREFORE THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING THE IDENTITY AND CREDITWORTHINESS. SHE FURTHER PLACED RELIANCE D ECISION IN THE CASE OF PRAHALADBHAI AAJIVANBHAI PATEL ITA NO. 23/47/AHD/20 12 AND THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. R ANCHOD JEEVABHAI NAKHAVA (2012) 21 TAXMAN. COM. 159 (GUJ). ON THE OT HER HAND LD. D.R. TOOK US THROUGH THE FINDINGS OF CIT(A) AND A.O AND SUBMI TTED THAT THE CREDITWORTHINESS HAS NOT BEEN PROVED BY THE ASSESSE E AND THEREFORE THE A.O WAS FULLY JUSTIFIED IN MAKING THE ADDITIONS. HE FUR THER PLACED RELIANCE ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF BLESS ING CONSTRUCTION COMPANY. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WITH RESPECT TO THE ADDITION WITH RESPECT TO DEPOSI T FROM SHRI PANCHOLI IT IS STATED THAT HE HAS GIVEN LOAN OF RS. 17 LACS THROUG H TWO CHEQUES TO THE ASSESSEE. IN THE STATEMENT RECORDED ON OATH WITH R ESPECT TO SOURCE OF MONEY, SHRI PANCHOLI HAS STATED TO HAVE RECEIVED HI S SHARE OF RS. 22,18,966/- ON 23.11.2005 IN CASH WHICH WAS LENT TO ASSESSEE. HOWEVER A.O HAS NOTED THAT BEFORE ISSUING TWO CHEQUES ON 29.12. 2006 I.E. ALMOST 1 YEAR AFTER THE RECEIPT OF SALE PROCEEDS, MATCHING CASH A GGREGATING TO RS. 17 LACS WAS DEPOSITED ON 6 DAYS FROM 02.12.2006 TO 26.12.20 06 AND THEREFORE IT HAD NO NEXUS BETWEEN THE AMOUNT RECEIVED OF HIS SHARE O N SALE OF LAND IN 2005 AND THE DEPOSIT BY CASH IN BANK WHICH WAS MORE THAN 1 YEAR AFTER THE SALE OF LAND. BEFORE US, THE LD. A.R. HAS STATED THAT SHRI PANCHOLI IS ASSESSED TO TAX AND HAS FILED HIS RETURN OF INCOME. FROM THE COPY O F THE RETURN OF INCOME PLACED AT PAGE 43 OF THE PAPER BOOK, IT IS SEEN THA T THE COPY OF ACKNOWLEDGEMENT IS FOR FILING OF RETURN OF INCOME F OR A.Y.07-08 BUT HOWEVER NO PROOF OF FILING OF RETURN OF THE YEAR IN WHICH T HE SHRI PANCHOLI HAD STATED TO HAVE RECEIVED HIS SHARE OF SALE OF AGRICULTURAL LAN D (A.Y 06-07) HAS BEEN PLACED ON RECORD. FROM THE COPY OF HIS STATEMENT PL ACED AT PAGE 166 OF THE PAPER BOOK, IT IS SEEN THAT IN RESPONSE TO QUESTION NO. 7 SHRI PANCHOLI HAD STATED TO HAVE SAID THAT THE LAND WAS SOLD ON 23.11 .2005 AND THE ITA NO 230/ AHD/2011 . A.Y. 2007- 08 11 CONSIDERATION WAS RECEIVED IMMEDIATELY BUT IN RESPO NSE TO QUESTION NO. 8 HE HAS STATED THAT THE MONEY WAS DEPOSITED IN BANKS AS AND WHEN IT WAS RECEIVED. THE AFORESAID SUBMISSION OF SHRI PANCHOL I TO THE TWO QUESTIONS ARE IN CONTRADICTION TO THE FINDING OF A.O THAT THE MAT CHING AMOUNTS WERE DEPOSITED IN THE BANK ACCOUNT OF SHRI PANCHOLI BETW EEN 2 ND DECEMBER 2006 AND 26 TH DECEMBER 2006. SHRI PANCHOLI IN RESPONSE TO QUESTI ON NO. 14 HAS STATED THAT HE HAS NOT RECEIVED INTEREST ON THE AMO UNT ADVANCED WHEREAS IN RESPONSE TO QUESTION NO. 12, HE HAS STATED TO HAVE RECEIVED 12% INTEREST PER ANNUM FROM THE ASSESSEE. THUS BOTH THESE ANSWERS A RE IN CONTRADICTION TO EACH OTHER. A.O HAS FURTHER NOTED THAT SHRI JADAVBH AI KALSARIA, DIRECTOR OF THE ASSESSEE, IN THE STATEMENT RECORDED THROUGH SURVEY HAD ADMITTED THAT ASSESSEE HAD SHOWN BOGUS LOANS WHICH WERE OFFERED F OR TAXATION. CONSIDERING THE AFORESAID FACTS, WE ARE OF THE VIEW THAT A.O WAS FULLY JUSTIFIED IN MAKING THE ADDITION OF RS. 17 LACS WITH RESPECT TO AMOUNT RECEIVED FROM SHRI PANCHOLI. 18. IN THE CASE OF JAYESH KUMAR THAKKAR, ASSESSEE HAD F ILED COPY OF CONFIRMATION AND PAN CARD BUT DID NOT FILE THE COPY OF BANK STATEMENT. THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT ON RECEIPT OF THE COPY OF CONFIRMATION AND PAN CARD, A.O HAD MADE ANY FURTHER INQUIRIES AN D THEN FOUND THE AMOUNT TO BE BOGUS. BY MERELY NON FILING THE BANK STATEMENT AND IN THE ABSENCE OF ANY OTHER MATERIAL ON RECORD IT CANNOT B E SAID THAT INITIAL BURDEN WAS NOT DISCHARGED BY ASSESSEE. IN SUCH CIRCUMSTANC ES WE ARE OF THE VIEW THAT NO ADDITION CAN BE MADE AND THUS DIRECT THE DE LETION WITH RESPECT TO AMOUNT RECEIVED FROM SHRI JAYESH THAKKAR. 19. IN THE CASE OF DOSHI KANTILAL JAYANTILAL, (HUF) N.B . MEHTA, DOSHI BALWANTRAI JAYANTILAL, THE ASSESSEES ARE ASSESSED TO TAX AND H AVE FILED THE COPY OF ITS RETURN OF INCOME AND THUS THE ASSESSEE HAD DISCHARG ED THE INITIAL ONUS CAST UPON. THERE IS NOTHING ON RECORD TO DEMONSTRATE TH AT ON THE BASIS OF DETAILS FILED, A.O HAD MADE FURTHER INQUIRIES AND FOUND THE AMOUNT TO BE BOGUS. IN ITA NO 230/ AHD/2011 . A.Y. 2007- 08 12 SUCH CIRCUMSTANCES MERELY THAT THE DEPOSITORS DID N OT COMPLY WITH THE SUMMONS ISSUED BY A.O, WE ARE OF THE VIEW THAT NO A DDITION CAN BE MADE FROM THESE PARTIES AND THEREFORE DIRECT ITS DELETIO N. 20. IN THE CASE OF DOSHI DHIRAJLAL, KALAJBEN DOSHI, RAM ESH KUMAR GIRJASHANKER, SHRI RAM FOODS AND LILAVATI SHAH, ASSESSEE HAD FILE D THEIR PAN NOS, THE DEPOSITS WERE RETURNED SUBSEQUENTLY AND INTEREST WA S ALSO PAID. THESE PARTIES ARE ALSO ASSESSED TO TAX. THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT ON THE BASIS OF PAN NUMBER, ENQUIRIES WERE MAD E BY A.O AND THEREAFTER THE DEPOSITS WERE FOUND TO BE BOGUS. IN SUCH CIRCU MSTANCES WE ARE OF THE VIEW THAT NO ADDITION CAN BE MADE WITH RESPECT TO T HE AMOUNTS RECEIVED FROM THESE PARTIES AND THUS DIRECT ITS DELETION. THUS TH IS GROUND OF ASSESSEE IS PARTLY ALLOWED. 21. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 05 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD