J.K. Kashyap, V. DCIT, Circle-20(2),

ITA 2364/DEL/2004

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5501 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-03-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 14-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Assessee Lawyers: S KRISHNA
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO. 2364/DEL/2004 ASSESSMENT YEAR : 1998-99 SHRI J.K. KASHYAP, 132, MUNIRKA ENCLAVE, NEW DELHI VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 20(2), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. KRISHNA , ADVOCATE RESPONDENT BY : SHRI G.S. SAHOTA, SR. DR O R D E R PER: C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 12.03.2004 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) BY THE AO FOR THE A.Y. 19 98-99. 2. IN THIS APPEAL, THE ASSESSEE HAS DISPUTED THE CI T(A)S ORDER IN CONFIRMING FOLLOWING TWO ADDITIONS:- (I) RS. 3,43,410/- ON ACCOUNT OF VALUATION OF STOCK . (II) RS. 17 LACS ON ACCOUNT OF ALLEGED UNEXPLAINED CREDIT U/S. 68 OF THE ACT. 3. IN THIS CASE, THE ASSESSEE FILED HIS RETURN OF I NCOME DECLARING LOSS OF RS. 28,51,550/-. THE AO COMPLETED THE ASSESSMENT B Y DETERMINING THE LOSS ITA NO. 2394/DEL/2004 PAGE 2 OF 6 AT RS. 8,08,440/-. THE LOSS SHOWN BY THE ASSESSEE HAS BEEN REDUCED BY MAKING CERTAIN ADDITIONS INCLUDING THE AFORESAID TW O ADDITIONS OF RS. 3,43,410 AND RS. 17 LACS RESPECTIVELY. 4. WITH REGARD TO THE ADDITION OF RS. 3,43,410/- ON ACCOUNT OF VALUATION OF STOCK OF SHARES, THE AO HAS TAKEN A VIEW THAT TH E STOCK OF SHARE IS TO BE VALUED AT MARKET PRICE OR COST, WHICHEVER IS LOWER, BUT THE ASSESSEE HAD INFLATED ITS OPENING STOCK AND CLOSING STOCK BY ADO PTING COST PRICE INSTEAD OF MARKET PRICE, RESULTING IN EXCESS VALUATION. THE A O WAS OF THE VIEW THAT THIS HAS RESULTED IN INCREASE OF LOSS CLAIMED DURIN G THE YEAR. THE CIT(A) HAS ALSO UPHELD THE AOS ACTION FOR SIMILAR REASONS. 5. WITH REGARD TO THE ADDITION OF RS. 3,43,410/-, T HE CIT(A) DISCUSSED THE FACTS AS UNDER:- 6. I HAVE CONSIDERED THE SUBMISSIONS MADE. THE APPELLANT STARTED DEALING IN SHARES ONLY FROM T HE LAST YEAR I.E. TO SAY, THAT, THE CLOSING STOCK OF LAST Y EAR HAS BECOME OPENING STOCK OF THIS YEAR. THE VALUATION O F THIS VERY STOCK HAS BEEN INTERFERED WITH. THEREFORE, TO SAY THAT THE VALUATION HAS BEEN IN CONFORMITY WITH THE EARLIER YEARS AND SHOULD BE ACCEPTED AS SUCH HAS NO FORCE. 6. AFTER HEARING BOTH THE PARTIES AND CONSIDERING T HE REASONS GIVEN BY THE AO, IT IS AN ADMITTED POSITION THAT THE ASSESSE E HAS VALUED ITS OPENING STOCK AS WELL AS CLOSING STOCK AT COST PRICE. THE AO IS OF THE VIEW THAT VALUE OF STOCK IS TO BE MADE AT MARKET PRICE. THE AO FUR THER OBSERVED THAT BY ADOPTING THE COST PRICE INSTEAD OF MARKET PRICE, TH ERE HAS RESULTED AN EXCESS ITA NO. 2394/DEL/2004 PAGE 3 OF 6 VALUATION. WE HAVE EXAMINED THE PARTICULARS ABOUT THE RATE AT WHICH THE ASSESSEE VALUED THE CLOSING STOCK AND THE MARKET RA TE. THE MARKET RATES ADOPTED BY THE AO ARE LOWER THAN THE COST PRICE ADO PTED BY THE ASSESSEE. THE AO HAS ALSO ACCEPTED THE POSITION THAT THE VALU ATION SHOWN BY THE ASSESSEE IS IN EXCESS OF THE VALUATION, IF DONE ON THE BASIS OF MARKET PRICE. IN OTHER WORDS, THE AO HAS ACCEPTED THAT THE VALUAT ION MADE BY THE ASSESSEE IS ON HIGHER SIDE. HOWEVER, AT THE SAME TIME, THE AO HAS STATED THAT THIS HAS RESULTED IN INCREASE OF LOSS CLAIMED DURING THE YEA R, WHICH IN OUR CONSIDERED OPINION, IS MISCONCEIVED AND NOT CORRECT, AS WHEN V ALUATION IS SHOWN AT EXCESS AMOUNT, THE GROSS PROFIT WOULD INCREASE ACCO RDINGLY, AND THEREBY LOSS WOULD NOT BE INCREASE BUT WOULD BE REDUCED. THEREF ORE, IT IS NOT THE CASE WHERE THE LOSS CLAIMED BY THE ASSESSEE HAS BEEN INC REASED BY ADOPTING THE COST PRICE. THE PRICE ADOPTED BY THE AO IS LOWER T HAN THE PRICE SHOWN BY THE ASSESSEE, AND, THEREFORE, QUESTION OF INCREASIN G LOSS DOES NOT ARISE. EVEN OTHERWISE, THE ASSESSEE HAS BEEN FOLLOWING REGULARL Y THE SYSTEM OF VALUING THE STOCK AT COST PRICE. THEREFORE, THE ADDITION M ADE BY THE AO OF RS. 3,43,410/- IS UNWARRANTED AND IT IS ACCORDINGLY DEL ETED. 7. THE ADDITION OF RS. 17 LACS HAS BEEN MADE BY THE AO BY OBSERVING AND DISCUSSING THE ISSUE AS UNDER:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RAISED AN UNSECURED LOAN OF RS. 17,00,000/- ON CASH FROM PRAVEEN NAYYAR. VIDE QUESTIONNAIRE DT. 27/11/ 2000 THE ASSESSEE WAS REQUESTED TO FILE COMPLETE DETAILS OF THIS ITA NO. 2394/DEL/2004 PAGE 4 OF 6 LOAN GIVING CONFIRMATION OF PARTY, IT PARTICULARS, ADDRESS ETC. THE ASSESSEE INFORMED THAT IT HAD SOME TIMES IN 1993 PAID AN AMOUNT OF RS. 20 LAKHS TO ONE DR. P.K. GUHA OF LONDON FOR PURCHASE OF PROPERTY NO. 13, GOL F LINKS, NEW DELHI. OUT OF THIS, RS. 17 LAKHS WAS PA ID BY SHRI PRAVEEN NAYYAR AND 3 LAKHS BY THE ASSESSEE. T HE DEAL COULD NOT BE MATERIALIZE OWING TO COURT DISPUT ES. IN FEB., 1998 DR. GUHA RETURNED THE ASSESSEE RS. 20 LA KHS. THUS, THE ASSESSEE TRANSFERRED TO HIS ACCOUNT RS. 1 7 LAKHS WAS SHOWN AS PAYABLE TO SHRI PRAVEEN NAYYAR IN THE BALANCE SHEET. THE ASSESSEE PLACED RELIANCE ON THE AGREEMENT DATED 9/11/1993 AND HIS BANK STATEMENT WI TH BANK OF AMERICA WERE RS. 20 LAKHS WERE CREDITED. T HE ASSESSEE, HOWEVER, HAS FAILED TO FILE ANY CONFIRMAT ION OR THESE CASH CREDITS U/S. 68 FROM SHRI PRAVEEN NAYYAR . NO INFORMATION WAS GIVEN REGARDING ASSTT. PARTICULARS, ADDRESS ETC OF SHRI PRAVEEN NAYYAR. THUS, AS IDENT ITY OF SHRI PRAVEEN NAYYAR COULD NOT BE ESTABLISHED BY THE ASSESSEE. THE GENUINENESS OF THIS TRANSACTION REMA INS UNVERIFIED. UNDER THESE CIRCUMSTANCES, I AM LEFT W ITH THE ONLY ALTERNATIVE OF ADDING BACK THE AMOUNT OF RS. 1 7 LAKHS AS UNEXPLAINED CASH CREDIT U/S. 68 TO THE TOT AL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION. 8. ON AN APPEAL THE CIT(A), CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 10. I HAVE CONSIDERED THE SUBMISSIONS MADE. THE FACTS ARE QUITE SIMPLE. THE AO NOTICED AN UNSE CURED LOAN OF RS. 17 LAKHS IN THE NAME OF SHRI PRAVEEN NA YYAR. THE AO ASKED FOR THE CONFIRMATION IN ORDER TO ESTAB LISH THE GENUINENESS OF THE UNSECURED LOAN. THIS CONFIR MATION WAS NEVER FILED. EVEN ADDRESS OF SHRI PRAVEEN NAYY AR WAS NOT GIVEN. NO INCOME-TAX DETAILS ETC. WERE FUR NISHED IN RESPECT OF SHRI PRAVEEN NAYYAR. THIS HAS LED TO THE ADDITION. IN DEFENCE, THE LD. COUNSEL STATED THAT THE AO WAS NOT JUSTIFIED IN ASKING FOR CONFIRMATION OF SHR I PRAVEEN NAYYAR, THAT, HE SHOULD CALLED FOR THE CONFIRMATION FROM THE SOURCE OF THIS AMOUNT WHO WAS DR. P.K. GUHA. I DO NOT AGREE. FIRSTLY BECAUSE THE SO URCE OF RS. 17 LAKHS IS IN FACT SHRI PRAVEEN NAYYAR. EVEN IN THE BOOKS OF ACCOUNTS OF THE APPLICANT MONEY HAD BEEN ITA NO. 2394/DEL/2004 PAGE 5 OF 6 ENTERED PAYABLE TO SHRI PRAVEEN NAYYAR. THE APPELL ANT HIMSELF HAS SHOWN THE MONEY PAYABLE ONLY TO SHRI PRAVEEN NAYYAR. DR. GUHA IS ONLY EXPLANATION ON PA PER. THE EXPLANATION WHICH APPEARS TO HAVE BEEN INTRODUC ED HAS NO VALIDITY IN LAW. THE GUHAS NAME IS NOWHERE IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE SIMPLE ISSUE WAS TO PROVE THE GENUINENESS, CAPACITY AND CREDITWORTHINESS OF SHRI PRAVEEN NAYYAR IN SHOW NAM E THE MONEY STANDS IN THE BOOKS OF THE APPELLANT. TH E APPELLANT FAILED TO THROW ANY LIGHT ON THE PERSON O F SHRI PRAVEEN NAYYAR. SINCE THE ONUS WHICH IS CAST UPON THE APPELLANT TO PROVE THE ENTRIES APPEARING IN THE BOO KS OF THE APPELLANT HAS NOT BEEN DISCHARGED, THE AO IS JU STIFIED IN REJECTING THE EXPLANATION AND MAKING THE ADDITIO N, WHICH IS CONFIRMED. 9. COMING TO THE ADDITION OF RS. 17 LACS, WE FIND T HAT THE ASSESSEE HAD RECEIVED RS. 20 LACS AS REFUND OF ADVANCE AMOUNT PA ID EARLIER TO DR. P.K. GUHA OF LONDON FOR PURCHASE OF PROPERTY, WHICH AGRE EMENT WAS, HOWEVER, NOT MATERIALIZED. THE ASSESSEE HAS FURNISHED A BAN K CERTIFICATE BEFORE THE AO SHOWING AND ESTABLISHING THAT HE HAD RECEIVED SU M OF RS. 20 LACS FROM DR. P.K. GUHA AND MRS. INA GUHA BY WAY OF TRANSFER THROUGH BANKING CHANNELS. HAVING RECEIVED THE SUM OF RS. 20 LACS F ROM DR. P.K. GUHA AND HIS WIFE MRS. INA GUHA, THE ASSESSEE TRANSFERRED TH E SUM OF RS. 17 LACS IN THE NAME OF ONE SHRI PRAVEEN NAYYAR FOR THE REASON THAT THE SAID AMOUNT WAS IN TURN PAYABLE BY THE ASSESSEE TO MR. PRAVEEN NAYYAR AS THE SUM OF RS. 17 LACS WAS THE CONTRIBUTION MADE BY SHRI PRAVEEN NAYYAR TO WARDS ADVANCE AMOUNT PAID FOR PURCHASE OF PROPERTY. NO SUCH AMOUNT OF R S. 17 LACS HAS ACTUALLY BEEN RECEIVED BY THE ASSESSEE FROM MR. PRAVEEN NAYY AR DURING THE CURRENT ITA NO. 2394/DEL/2004 PAGE 6 OF 6 YEAR, BUT THE AMOUNT HAS BEEN RECEIVED FROM MR. P.K . GUHA AND MRS. INA GUHA, WHICH HAS BEEN CREDITED IN THE BOOKS OF ACCOU NTS IN THE NAME OF SHRI PRAVEEN NAYYAR. THE FACT THAT THE ASSESSEE HAS REC EIVED THE SUM OF RS. 20 LACS FROM MR. P.K. GUHA AND MRS. INA GUHA, IS FULLY ESTABLISHED AND PROVED FROM THE BANK STATEMENT INDICATING THAT THE AMOUNT HAS BEEN RECEIVED FROM DR. P.K. GUHA AND MRS. INA GUHA. THE CAPITAL GAIN ARISING TO THE ASSESSEE AS A RESULT OF COMPENSATION RECEIVED FOR CANCELING THE AGREEMENT TO PURCHASE THE PROPERTY HAS ALSO BEEN ASSESSED IN ASSESSEES H AND IN A.Y. 1996-97. IN THIS VIEW OF THE MATTER, THE ADDITION OF RS. 17 LAC S MADE BY THE AO AND FURTHER CONFIRMED BY THE CIT(A), STAND DELETED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 11. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 19 TH MARCH, 2010. SD/- ( K.D. RANJAN) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 19 TH MARCH, 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR