A.C.I.T., Circ;e-4(1), Agra V. Smt. Kusum Lata Agarwal, Agra

ITA 235/AGR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0368 (ITAT-AGRA)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K SEHGAL
• Keywords: Principle of natural justice
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.235/AGR/2012 ASSESSMENT YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME-TAX, VS. SMT. KUSUM LATA AGARWAL, CIRCLE 4(1), AGRA. B-73, NEW AGRA, AGRA. (PAN : AAXPA 0912 E). ITA NO.280/AGR/2012 ASSESSMENT YEAR: 2008-09 SMT. KUSUM LATA AGARWAL, VS. D.C.I.T 4(1), AGRA. B-73, NEW AGRA, AGRA. (PAN : AAXPA 0912 E). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI WASEEM ARSHAD, SR. D.R. ASSESSEE BY : SHRI A.K. SEHGAL, ADVOCATE DATE OF HEARING : 20.02.2013 DATE OF PRONOUNCEMENT : 28.02.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FILED BY THE REVENUE AND AS SESSEE AGAINST THE ORDER DATED 16.02.2012 PASSED BY THE LD. CIT(A)-II, AGRA FOR THE ASSESSMENT YEAR 2008- 09. 2 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . 2. FIRST WE TAKE UP REVENUES APPEAL, ITA NO.235/AG R/2012. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER :- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE DISALLOWANCE OF RS.3,60,109./- MADE BY THE A.O. OUT OF EXPENSES CLAIMED BY THE ASSESSEE FOR HANDLING AND TRANSPORTA TION CHARGES WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMS TANCES OF THE CASE ESPECIALLY THAT NO RAKE WAS RECEIVED/GOT UNLOADED B ETWEEN 13.02.2008 TO 17.03.2008 BY THE ASSESSEE. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING DISALLOWANCE OF RS.6,86,887/- MADE BY THE AO OUT OF EXPENSES CLAIMED BY THE ASSESSEE, WITHOUT PROPERLY APPRECIAT ING THE FACTS & CIRCUMSTANCES OF THE CASE ESPECIALLY THAT EXPENSES TO THE TUNE OF RS.6,86,887/- (1,01,553+2,49,300+47,570+9,360+2,79, 104) HAVE NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS P URPOSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF HANDLING AND TRANSPORT ACTIVITIES. THE ASSESSEE HA S DECLARED INCOME OF RS.5,00,925/-. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE WORKS AS C & F AGENT FOR MANGALAM CEMENT L IMITED. HE FURTHER NOTED THAT FROM 17.03.2008 TO 31.03.2008 THE ASSESSEE HAS MADE PAYMENT OF RS.15,85,184/- TOWARDS LABOUR PAYMENT WHEREAS THE L AST RAKE WAS UNLOADED ON 17.03.2008. AFTER CONSIDERING THE ASSESSEES SUBMI SSION, THE A.O. NOTICED THAT LOADING AND UNLOADING AND FREIGHT CHARGES HAS BEEN CLAIMED IN WHICH NO RAKING WAS RECEIVED EITHER FROM THE CEMENT FACTORY OR FROM THE CONCERN OF FERTILIZER. THE A.O. MADE ADDITION OF RS.3,60,109/- BEING UNLOADING EXPENSES CLAIMED BETWEEN 13.02.2008 TO 17.03.2008. THE CIT(A) ACCEPTED THE ASSESSEES EXPLANATION AND 3 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . DELETED THE ADDITION OBSERVING THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE EXPENDITURE HAS TO BE ALLOWED AS AND WHEN THE LIABILITY FOR THE SAME CRYSTALLIZES IRRESPECTIVE OF THE PAYMENT. 4. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE CASE OF THE A.O. IS THAT THE ASSESSEE HAS CLAIM ED EXPENSES ON ACCOUNT OF LOADING, UNLOADING AND FREIGHT CHARGES FOR THE PERI OD IN WHICH NO RAKING WAS RECEIVED. THE EXPLANATION OF THE ASSESSEE BEFORE T HE A.O. WAS THAT THE ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING. THE ACTU AL POSITION IS THAT ON 31.03.2008 THE ASSESSEE TRANSFERRED THE WHOLE YEAR S EXPENDITURES OF SERVICE TAX, STORAGE CHARGES AND H&T PAYABLE, TO FREIGHT & TRANS PORTATION ACCOUNT. COPIES OF RELEVANT ACCOUNT OF PAYMENT TOWARDS LABOUR FOR L AST FORTNIGHT I.E. 17.03.2008 TO 31.03.2008 WAS FURNISHED BEFORE THE A.O. THE A.O. HAS SELECTED CERTAIN DATES FROM THE BOOKS OF ACCOUNTS, THE DATES ON WHICH THE EXPENSES DEBITED. WITHOUT CONSIDERING THE ASSESSEES EXPLANATION AND THE FACT THAT THE ASSESSEE HAS CLAIMED EXPENSES ON ITS ACCRUAL WHICH IS NOT NECESSARY TO CORRELATE WITH THE RAKE-WISE EXPENSES. IN THIS REGARD, WE WOULD LIKE TO REFER A JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. DHANARAJGIRJI NARASING IRJI, 91 ITR 544 (SC) WHEREIN IT HAS BEEN HELD THAT IT IS NOT OPEN TO THE DEPARTMEN T TO PRESCRIBE WHAT EXPENDITURE AN ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR THAT 4 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . EXPENDITURE. EVERY BUSINESSMAN KNOWS HIS INTEREST BEST. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAIPUR ELECTRO (P.) LTD. V. CIT, 134 CTR (RAJ.) 237 WHEREIN IT HAS BEEN HELD THAT THE DOCTRINE THAT TH E BUSINESSMAN IS THE BEST JUDGE OF BUSINESS EXPEDIENCY DOES NOT AFFECT THE RIGHT, ANY DUTY, OF THE ASSESSING AUTHORITIES TO KNOW WHETHER IT WAS INCURRED FOR BUSINESS PURPOS ES AND NOT FOR OTHER EXTRANEOUS CONSIDERATIONS. 5. IN THE LIGHT OF THE ABOVE JUDGMENT, IF WE CONSID ER THE ISSUE FROM THE POINT OF VIEW OF THE ASSESSEE UNDER THE CIRCUMSTANCES WHEN T HE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT AND EXPENDITURE HAS BEEN ACCOUNTED FOR, ON THE BASIS OF ITS ACCRUAL AND IT IS NOT THE CASE OF THE A.O. THAT THE EXPENDITURES WERE NOT INCURRED, THERE IS NOTHING WRONG IN SYSTEM OF ACCOUNTING FOLL OWED BY THE ASSESSEE. IT IS NOT THE CASE OF THE A.O. THAT OTHER EXPENDITURE CLAIMED ON OTHER DATES HAVE BEEN TALLIED WITH THE RAKES RECEIVED AND EXPENDITURE CLAIMED. T HE MAINTENANCE OF REGULAR BOOKS OF ACCOUNTS SHOWS THAT THE EXPENDITURE INCURR ED FOR THE PURPOSE OF BUSINESS HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT WHI CH IS NOT NECESSARY THAT DURING THAT PERIOD SOME RAKES WERE RECEIVED. THE EXPENDIT URE MAY BE PERTAINING TO THE RAKES RECEIVED IN EARLIER PART OF THE YEAR AND EXPE NDITURE HAS BEEN ACCRUED SUBSEQUENTLY. THE A.O. MADE ADDITION WITHOUT MAKIN G COMPLETE ENQUIRY IN THIS REGARD. UNDER THE CIRCUMSTANCES, THE EXPENDITURE R ECORDED IN THE BOOKS OF ACCOUNT 5 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . INCURRED FOR THE PURPOSE OF BUSINESS ARE ALLOWABLE EXPENSES AND WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. ORDER OF T HE CIT(A) IS CONFIRMED ON THE ISSUE. 6. THE SECOND GROUND OF REVENUES APPEAL PERTAINS T O DELETION OF ADDITION OF RS.6,86,887/-. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT A RAKE WITH A LOAD OF 2526 M.T. WAS GOT UNLOADED BY THE AS SESSEE ON 17.03.2008. HOWEVER, AGAINST THE SERVICES PROVIDED FOR HANDLING THIS RAKE THE ASSESSEE HAS CLAIMED EXPENSES W.E.F. 18.03.2008 TO 31.03.2008. THE A.O. DID NOT ACCEPT THE ASSESSEES EXPLANATION AND MADE THE ADDITION OF RS. 6,86,887/-. THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT AND GIVEN FINDING THAT THE EXPENDITURE WAS NOT EXPENDED WHOLLY AND EX CLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. 7. THE CIT(A) DELETED THE SAID ADDITION ON THE SAME REASON WHICH WAS GIVEN FOR DELETING THE ADDITION OF RS.3,60,109/-. 8. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. IN THE LIGHT OF THE DETAILED DISCUSSION MADE WHILE DEC IDING GROUND NO.1 IN PARAGRAPH NO.4 OF THIS ORDER, WE FIND THAT THE CIT(A) HAS COR RECTLY DELETED THE ADDITION AS THE 6 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . A.O. HAS REJECTED THE BOOKS OF ACCOUNT MERELY ON TH E BASIS OF SO-CALLED DISCREPANCIES POINTED OUT BY HIM THAT THE RAKE WAS UNLOADED ON 17.03.2008 WHEREAS THE EXPENSES HAS BEEN ACCOUNTED FOR IN THE PERIOD FROM 17.03.2008 TO 31.03.2008. IN THE LIGHT OF THE ABOVE DISCUSSION, WE CONFIRM THE ORDER OF CIT(A) WHERE HE HAS RIGHTLY DELETED THE ADDITION OF RS.6,8 6,887/-. THUS, REVENUES APPEAL IS DISMISSED. 9. NOW WE TAKE UP ITA NO.280/AGR/2012 FILED BY THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE IN HER APPEAL ARE AS UNDER : - 1. BECAUSE THE AUTHORITIES BELOW HAVE BEEN ARBITRA RY AND UNJUST IN MAKING THE ADDITION U/S.68 OF RS.22,00,000/-. THE SAME BEING ILLEGAL, WRONG AND UNJUSTIFIED IS LIABLE TO BE DELETED. 2. BECAUSE THE AUTHORITIES BELOW HAVE COMPLETELY IG NORED THE FACT THAT THE UNSECURED LOANS OF EKTA AGARWAL, NAVNEET A GARWAL, GIRISH CHAND AND RAM SEWAK ARE GENUINE AND THE ASSESSEE HA S PROVED THE SAME BEYOND ANY DOUBT. THE ACTION OF AUTHORITIES B ELOW IN TREATING THE SAME AS NON GENUINE IS NOT LEGAL AND THE ADDITI ON MADE ON THIS SCORE IS LIABLE TO BE DELETED. 3. BECAUSE THE AUTHORITIES BELOW HAVE BEEN ARBITRAR Y AND UNJUST IN MAKING THE DISALLOWANCE OF 60,267/- (BEING THE AMOU NT OF INTEREST PAID TO LENDERS). THE SAME IS LIABLE TO BE DELETED . 10. GROUNDS NO.1 & 2 OF ASSESSEES APPEAL PERTAIN T O ADDITION OF RS.22,00,000/- MADE BY THE A.O. UNDER SECTION 68 OF THE ACT. DURI NG THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAS TAKEN LOAN O F RS.22,00,000/- FROM FOUR 7 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . CREDITORS I.E. EKTA AGARWAL, NAVNEET AGARWAL, GIRIS H CHAND & RAM SEWAK. EKTA AND NAVNEET RS.6,00,000/- EACH AND GIRISH CHAND RAM SEWAK RS.5,00,000/- EACH. THE A.O. MADE THE ADDITION RECORDING THE FACT THAT JUST BEFORE GIVING THE LOAN TO THE ASSESSEE THERE WERE CASH DEPOSITS IN THE ACCOUN T OF THE CREDITORS. THE A.O. WAS OF THE VIEW THAT THE ASSESSEE HAS INTRODUCED HER OW N MONEY IN THE GARB OF LOAN IN THE NAME OF THESE CREDITORS. 11. THE CIT(A) CONFIRMED THE ORDER OF THE A.O. OBSE RVING THAT THE A.O. HAS MADE OUT A STRONG CASE THAT THE CREDITOR HAD NO CRE DITWORTHINESS AS BEFORE GIVING THE LOANS TO THE ASSESSEE THE CREDITORS HAD VERY ME AGER FUNDS IN THEIR RESPECTIVE BANK ACCOUNTS. THE CREDITORS WERE NOT FINANCIALLY SOUND. 12. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE NOTICE THAT THE A.O. AND CIT(A) BOTH HAVE DECIDE D THE ISSUE ON INCORRECT FACTS. ALL THE CREDITOR ARE ASSESSED TO TAX. THEIR COPIES OF ACKNOWLEDGEMENT, BALANCE SHEET AND LOAN CONFIRMATION CERTIFICATE, COPIES OF BANK ACCOUNT AND OTHER DOCUMENTS WERE FILED BEFORE THE A.O. IT WAS EXPLAI NED BEFORE THE A.O. THAT SHRI NAVNEET AGARWAL WITHDRAWN LOAN FROM M/S. S.R. FERTI LIZERS ON 19.03.2008 OF RS.6,00,000/- AND GIVEN TO THE ASSESSEE ON THE SAME DATE AS NAVNEET AGARWAL AND THE ASSESSEE BOTH HAVE ACCOUNTS IN THE SAME BRANCH OF THE BANK. SIMILARLY, EKTA 8 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . AGARWAL HAS ALSO TRANSFERRED RS.6,00,000/- ON 19.03 .2008 FROM ANOTHER PERSON AND GIVEN LOAN TO THE ASSESSEE ON 19.03.2008. COPIES O F BANK ACCOUNT WERE FILED BEFORE THE A.O. IN RESPECT OF GIRISH CHAND. IT WAS EXPLAINED BY THE ASSESSEE THAT THE LOAN WAS TAKEN FROM GIRISH CHAND OUT OF HIS CAP ITAL, HOWEVER, MONEY WAS DEPOSITED BY TRANSFER OF RS.3,75,000/- ON 13.11.200 7 AND RS.1.25,000/- ON 14.11.2007 FROM ANOTHER PERSON. IN CASE OF RAM SEW AK, THE LOAN WAS TAKEN FROM RAM SEWAK OUT OF HIS CAPITAL IN HIS BANK ACCOUNT. HOWEVER, OLD BALANCE WAS RS.78,880/-. MONEY WAS TRANSFERRED BY TRANSFER OF RS.24,000/- ON 10.10.2007 AND RS.4,50,000/- ON 05.11.2007 FROM ANOTHER PERSON. T HIS FACT HAS BEEN DEMONSTRATED BY THE LD. AUTHORISED REPRESENTATIVE WHILE REFERRIN G COPIES OF BANK ACCOUNT FILED IN THE PAPER BOOK. THE ASSESSEE HAS ALSO REQUESTED VIDE LETTER DATED 17.08.2010 TO THE A.O. THAT IN CASE OF ANY DOUBT REGARDING GENUIN ENESS OF THE LOAN, THEY CAN VERY WELL SUMMON UNDER SECTION 131 OF THE ACT TO PROVE T HEIR LOAN. THE A.O. THOUGH REFERRED THIS LETTER IN HIS ORDER, HE REPRODUCED TH E CONTENTS OF THE LETTER PARTLY. IN RESPECT OF CASH CREDIT UNDER SECTION 68 OF THE ACT, THE ONUS IS ON THE ASSESSEE TO ESTABLISH IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTION. IN THE CASE UNDER CONSIDERATION, WE FIND THAT THE ASSESSEE HAS DISCHARGED THE BURDEN REGARDING IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTION BY FILING VARIOUS SUPPORTING DOCUMENTS IN THE FORM OF COPIES OF BANK ACCOUNT, COPIES OF RETURN OF INCOME, BALANCE SHEET, CONFIRMATION AND OTHERS. EV EN THE SOURCES OF CREDITORS 9 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . HAVE ALSO BEEN EXPLAINED BY THE ASSESSEE. THE A.O. AND CIT(A) BOTH HAVE DECIDED THE ISSUE ON INCORRECT FACTS. WHEN THE ASSESSEE MA DE REQUEST FOR SUMMONING THE CREDITORS, THE A.O. FAILED TO ISSUE SUMMONS. THE H ONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMC SHARE BROKERS LIMITED, 288 ITR 345 (DELHI) WHILE CONFIRMING THE ORDER OF I.T.A.T. HELD THAT INSPITE OF REQUEST OF THE ASSESSEE TO CROSS-EXAMINE MANOJ AGARWAL ON THE BASIS OF WHOSE S TATEMENT PROCEEDINGS HAD BEEN LAUNCHED AND FROM WHOSE POSSESSION THE DOCUMEN TS WERE RECOVERED, THE REQUEST WAS NOT ACCEDED TO BY THE A.O. THE TRIBUNA L FOUND THAT THIS WAS COMPLETE VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. SIMILAR LY, HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. RAMESH CHAND SHUKLA, 10 TTJ 286 (M. P.) WHERE IT HAS BEEN HELD THAT IF THE A.O. FAILED TO ISSUE SUMMON ON THE REQU EST OF THE ASSESSEE, HE CANNOT SUBSEQUENTLY TREAT THE LOAN AS NON-GENUINE. IN THE LIGHT OF ABOVE DISCUSSION AND AS NOTED ABOVE THAT THE ASSESSEE HAS DISCHARGED HER BU RDEN REGARDING SECTION 68 OF THE ACT BY FURNISHING VARIOUS EVIDENCES IN ESTABLISHING IDENTITY, CREDITWORTHINESS AN GENUINENESS OF THE LOANS TAKEN, WE DELETE THE ADDIT ION OF RS.22,00,000/- MADE BY THE A.O. UNDER SECTION 68 OF THE ACT AND SUSTAINED BY THE CIT(A). THE ORDER OF THE A.O. AND CIT(A) BOTH ARE SET ASIDE. 13. THE THIRD GROUND OF ASSESSEES APPEAL IS IN RES PECT OF DISALLOWANCE OF RS.60,267/- BEING THE AMOUNT OF INTEREST PAID TO CA SH CREDITORS. SINCE WE DELETED 10 ITA NOS.235 & 280/AGR/2012 A.Y. 2008-09 . THE ADDITION OF CASH CREDITORS AND THIS GROUND BEIN G CONSEQUENTIAL TO THAT, IN THE LIGHT OF THE FACT, ADDITION OF RS.60,267/- IS ALSO DELETED. THUS, APPEAL OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY