Prasant Arun sangai, Nashik V. ACIT,Cir.-2, Nashik

ITA 236/PUN/2011

• Counselvise Citation: 23624514 RSA 2011
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 03-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Unexplained cash credit; Depreciation
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.236/PN/2011 (ASSTT. YEAR : 2002-03) PRASHANT ARUN SANGAI ... APPELLANT 1 ST FLOOR SWASTIK CHAMBERS, PATHARDI PHATA, CIDCO NASHIK -09 PAN ACCPS1596F V. THE ACIT, CIRCLE - 2, RESPONDENT NASHIK APPELLANT BY : SMT. DEEPA KHARE RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 30/7/12 DATE OF PRONOUNCEMENT : 31-7-12 ORDER PER R.S. PADVEKAR, JM IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNE D ORDER OF THE LD CIT(A) II, NASHIK DATED 27.12.2010 FOR THE A.Y. 2002-03 . THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-II, NASHIK IS NOT JUSTIFIED IN CONFIRMING THE ADDITION ON ACCOUNT OF UNSECURED LOANS U/S. 68 INCLUDING INTEREST THEREON TOTALING TO RS. 3,11,245/- 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-II, NASHIK IS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 84,610/- ON ACCOUNT OF PERS ONAL ELEMENT IN VEHICLE EXPENSES, DEPRECIATION ON VEHICLE & TELEPHONE EXPENS ES. 2. THE FIRST ISSUE IS IN RESPECT OF THE ADDITION OF RS. 3,11,2 45/- U/S. 68 OF THE ACT. THE ASSESSEE IS IN THE WHOLESALE TRADING IN TH E SCRAP, H.R./C.R. SHEETS, MS ANGELS, CHANNALS ETC. IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAS SHOWN LOANS FROM SHRI. MADHUKARRAO FUKATE(H UF) WHICH WAS TAKEN ON 14.1.2002 BY TWO SEPARATE CHEQUES OF RS. 1,00, 000/- EACH AND ALSO LOAN FROM SMT. USHA ASHOK LOKHADE AT RS. 1,00,000/- ON THE SAME ITA . NO.236/PN/2011 PRASHANT ARUN SANGAI A.Y. 2002-03 PAGE OF 5 2 DATE. THE ASSESSEE FILED THE CONFIRMATION LETTERS AND AFFIDAV IT FROM THE LOAN CREDITORS. THE AO HAS OBSERVED THAT THE LOAN CREDITOR S ARE NOT ASSESSED TO TAX AS NO PAN NOS. ARE FURNISHED. THE A.O. HELD THAT BOT H THE LOAN CREDITORS WERE NOT GENUINE. HE ACCORDINGLY BROUGHT TO T AX THE SAID LOAN AMOUNTS AS UNEXPLAINED CASH CREDIT. IN ADDITION, THE A.O DISALLOWED THE INTEREST OF RS. 11,245/- WHICH WAS CLAIMED BY THE ASSESSE E ON LOAN ACCOUNTS OF SHRI. MADHUKARRAO FUKATE (HUF) AND SMT. LOKHA DE. THE A.O. THEREFORE MADE THE TOTAL ADDITION OF RS. 3,11,045. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD CI T(A). THE LD CIT(A) CONFIRMED THE ADDITION MADE BY THE A.O. BY GIVING THE FOLLOWING REASONS : 6. I HAVE CAREFULLY GONE THROUGH THE MATERIAL ON RECOR D AND SUBMISSION OF THE APPELLANT. IT IS WELL SETTLED THAT IN VIEW OF SEC 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOK S OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO IN COME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR, IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THERE O F IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. THIS VI EW HAS BEEN HELD BY THE HONBLE S C IN THE CASE OF (VIJAY KUMAR TALWAR VS CIT) DEC 2010. IT HAS BEEN HELD BY COURTS IN A NUMBER OF CASES THAT BURDEN IS ON ASSESSEE TO PROVE SOURCE OF RECEIPT. ONUS IS ON ASS ESSEE TO DISCHARGE THAT CASH CREDITOR IS A MAN OF MEANS. THERE SHOULD B E IDENTIFICATION OF THE CREDITOR AND HE SHOULD BE A PERSON OF MEANS. APA RT FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSE SSEE MUST PRIMAFACIE ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF THE CREDITOR WITH REGARD TO THE T RANSACTIONS THAT HAVE TAKEN PLACE BETWEEN HIM AND THE CREDITOR. THE VE RY FACT THAT ALL THE TRANSACTIONS WERE ENTERED INTO BETWEEN THE PARTIE S THROUGH ACCOUNT PAYEE CHEQUES WILL NOT BE SUFFICE TO PROVE THE GENU INENESS OF THE TRANSACTION. SIMILARLY MERE MENTION OF THE INCOME TAX FILE NUMBER OF THE CREDITOR WILL NOT SUFFICE. 7. COURTS HAVE ALSO HELD THAT MERE CONFIRMATION AND T HE FACT THAT THE TRANSACTION WAS MADE THROUGH BANK ACCOUNT DO NO T ESTABLISH THEIR GENUINENESS. IN CASE OF CASH CREDIT ONUS LIES ON TH E ASSESSEE WITH REGARD TO CREDITWORTHINESS OF THE CREDITOR, GENUINENES S OF THE ENTRY, IDENTITY OF THE CREDITOR, THE SOURCE OF MONEY ETC. SIN CE THE APPELLANT ITA . NO.236/PN/2011 PRASHANT ARUN SANGAI A.Y. 2002-03 PAGE OF 5 3 HAS FAILED TO DISCHARGE HIS ONUS IN RESPECT OF CREDI TS OF RS. 2,00,000/- FROM MADHUKARRAO FUGTE (HUF) AND RS. 1,00,000/- FROM SM T. USHA ASHOK LOKHANDE, I AM OF THE CONSIDERED OPINION THAT THE AOS ACTION IN ADDING THE CREDITS AND INTEREST OF RS.11,245/- (RS.7,495 T O SHRI. MADHUKARRAO FUGATE (HUF) AND RS. 3,750/- TO SMT. LOKHAND E) THEREON U/S 68 OF THE I T ACT TREATING THE SAME AS UNEXPLAI NED CASH CREDITS IN THE BOOKS OF APPELLANT WAS JUSTIFIED. THE APPELLANTS GROUND NO. 1 THEREFORE, STANDS REJECTED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD COUNSEL ARGUED THAT AS PER AFFIDAVIT FILED BY THE LOAN CREDITOR NAMELY MADHUKARRAO FUKATE, RS. 1,00,000/- WAS T AKEN IN HIS INDIVIDUAL CAPACITY AND RS. 1,00,000/- WAS TAKEN FROM MAD HUKARRAO FUKATE (HUF), BUT, THE A.O ERRED IN ADDING THE AMOUNT IN TH E HANDS OF MADHUKARRAO FUKATE (HUF) ONLY. SHE FURTHER SUBMITTED TH AT THE LOAN CREDITOR SHRI MADHUKARRAO FUKATE WAS WORKING IN MAHARA SHTRA STATE ELECTRICITY BOARD (MSEB) AS A JUNIOR ENGINEER AND HAS NOW RETIRED. OUT OF HIS SAVING, HE HAS GIVEN THE AMOUNT TO THE ASSESSEE. SH E SUBMITS THAT BEING A RETIRED PERSON, HE IS NOT ASSESSABLE TO TAX. IN RESPECT OF ANOTHER LOAN CREDITOR, THE LD COUNSEL SUBMITTED THAT THE SAID LOAN CREDITOR HAS ALSO FILED THE AFFIDAVIT AND THE IDENTITY, GENUINENESS AND CREDIBILITY OF BOTH THE LOAN CREDITORS ARE ESTABLISHED. THE LD COUNSEL PRAYED FO R DELETING THE ADDITION. PER CONTRA, THE LD D.R. SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 5. WE FIND THAT SO FAR AS SHRI MADHUKARRAO FUKATE, LOA N CREDITOR IS CONCERNED, HE HAS FILED CONFIRMATION LETTER IN THE FORM OF AFFIDA VIT. NOWHERE, IT IS CONTROVERTED BY BOTH THE AUTHORITIES BELO W THAT HE WAS WORKING IN THE MSEB AND HAS NOW RETIRED. WE FIND THAT B EING A RETIRED PERSON AND HAVING NO OTHER SOURCE OF INCOME, THE SAID LO AN CREDITOR IS NOT ASSESSABLE TO TAX. SO FAR AS SEC. 68 IS CONCERNED, PRIMA FACIE, THE BURDEN IS ON THE ASSESSEE TO PROVE 1) IDENTITY OF THE LOAN CREDITOR 2) THE GENUINE NESS OF THE TRANSACTION AND 3) THE CAPACITY TO GIVE THE LOAN TO THE ASSESSEE. IN THE PRESENT CASE, SO FAR AS SHRI MADHUKARRAO FUKATE IS CON CERNED, IN OUR ITA . NO.236/PN/2011 PRASHANT ARUN SANGAI A.Y. 2002-03 PAGE OF 5 4 OPINION, AS PER THE EVIDENCE ON RECORD, THE IDENTITY OF THE LOAN CREDITOR, GENUINENESS AND THE CAPACITY HAS BEEN ESTABLISHED. WE A CCORDINGLY DELETE THE ADDITION OF RS. 2,00,000/- PLUS THE ADDITION IN RESPECT O F THE INTEREST ON THE SAID AMOUNT. 6. SO FAR AS THE ANOTHER LOAN CREDITOR IS CONCERNED I.E. SM T. LATA FUGTE, THOUGH THE IDENTITY IS PROVED BUT CAPACITY OF THE SAID LOA N CREDITOR IS DOUBTED. NOTHING HAS BEEN PRODUCED BEFORE US THAT THE SAID CREDITOR HAS THE CAPACITY TO GIVE THE LOAN TO THE ASSESSEE. WE ACCO RDINGLY CONFIRM THE ADDITION OF RS. 1,00,000/- + INTEREST ON THE SAID AMOUNT D ISALLOWED BY THE A.O. ACCORDINGLY, GROUND NO. 1 IS PARTLY ALLOWED. 7. SO FAR AS GROUND NO. 2 IS CONCERNED, THERE IS ADHOC DIS ALLOWANCE OF RS.84,610/- OUT OF VEHICLE EXPENSES, VEHICLE DEPRECIATION AND TELEPHONE EXPENSES. THE ARGUMENT OF THE LD COUNSEL IS THAT THE SAID DISALLOWANCE IS ON THE HIGHER SIDE. IN OUR OPINION ALSO, THE DISALLOWANCE AT 20% IS VERY MUCH AT THE HIGHER SIDE. WE, ACCORDINGLY, RESTRICT THE DIS ALLOWANCE TO 10% OF TOTAL EXPENDITURE OF RS. 4,23,058/-. THE A.O IS DIRECTED T O WORK OUT THE DISALLOWANCE ACCORDINGLY AT 10%. ACCORDINGLY, GROUND NO. 2 IS PARTLY ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31ST JULY 2012. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 31ST JULY, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT ITA . NO.236/PN/2011 PRASHANT ARUN SANGAI A.Y. 2002-03 PAGE OF 5 5 3. THE CIT II, NASHIK 4. THE CIT(A)-II, NASHIK 5. THE D.R. A BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE