The ITO, Ward-8(4), Ahmedabad V. Umiya Flexifoam Pvt.Ltd., Ahmedabad

ITA 2379/AHD/2008

• Counselvise Citation: 237920514 RSA 2008
• Duration Of Justice: 5 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL SRDR
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Unexplained cash credit; Opportunity of being heard
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NO. 2379/AHD/2008 ASSESSMENT YEAR :2005-06 I.T.O., WARD-8(4), AHMEDABAD. V/S . UMIYA FLEXIFORAM PVT. LTD. 40A, PANCHRATNA INDUSTRIAL ESTATE, CAHNGODAR, AHMEDABAD. PAN NO. AAACV6575F (APPELLANT) .. (RESPONDENT) *+ , - & BY APPELLANT SHRI P. L. KUREEL, SR. D.R. ./*+ , - & /BY RESPONDENT SHRI MEHUL K. PATEL, A.R. 0 , 1%' /DATE OF HEARING 18.09.2013 234 , 1%' /DATE OF PRONOUNCEMENT 13.11.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE CIT(A)-XIV, AHMEDABAD, ORDER DATED 11.04.2008 FOR A.Y. 2005-06. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE ADDITION OF RS.26,40 ,000/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND RS.3,77,709/- ON ACCOUN T OF INTEREST EXPENSES. 2. THE A.O. OBSERVED THAT ASSESSEE HAS SHOWN UNSECU RED LOAN TO THE TUNE OF RS.46,56,854/- AS COMPARED TO UNSECURED LOA N OF RS.10,81,995/- HAD BEEN INTRODUCED DURING THE YEAR. THE ASSESSEE WAS GIVEN REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE TO EXPLAIN THE GENUINENESS OF THIS ITA NO. 2379/AHD/2008 A.Y. 05-06 PAGE 2 LOAN ALONGWITH CREDITWORTHINESS OF THE LOAN. THE A SSESSEE HAD TAKEN LOAN FROM 47 PERSONS AT RS.26,40,400/-. THE AMOUNT OF R S.3,77,709/- WAS CLAIMED INTEREST AGAINST THIS UNSECURED LOANS. THE ASSESSE E FILED CONFIRMATION BEFORE THE A.O. IN ALL THE CASE BUT MODE OF PAYMENT WAS NO T PRESCRIBED IN THE CONFIRMATION. MOREOVER, ALL THE CONFIRMATIONS ARE IN THE SAME STEREO FORMAT. THE LOAN HAS BEEN ADVANCES TO THE ASSESSEE COMPANY BY THE FARMERS WHO ARE MOSTLY FROM THE SAME VILLAGE I.E. VILLAGE: SARL A/JASPURA, TAL: MULI, DIST. SURENDRANAGAR. ENQUIRIES WERE CONDUCTED THOUGH THE WARD INSPECTOR. THE WARD INSPECTOR HAD CONTACTED SOME OF THE PARTIES O F THE VILLAGE SARLA, TAL: MULI, DIST: SURENDRANAGAR WHO COULD BE TRACED AND G ATHERED THE DETAILS. THE WARD INSPECTOR WAS ABLE TO CONTRACT ONLY 11 PERSONS OUT OF TOTAL 47 PERSONS. IT WAS FOUND THAT LOAN WAS ACCEPTED IN CASH GIVEN B Y THE FARMERS TO THE ASSESSEE IN CASH. ON VERIFICATION OF THE ASSESSEE S BANK ACCOUNT MAINTAINED WITH BANK OF INDIA REVEALED THAT AMOUNT OF LOAN FRO M EACH PARTY HAD BEEN CREDITED IN THE BANK ACCOUNT THROUGH CLEARING. ACC ORDINGLY, A LETTER WAS WRITTEN BY THE A.O. ON 29.11.2007 TO THE MANAGER, B ANK OF INDIA, MAIN BRANCH, LALDARWAJA, AHMEDABAD TO GIVE THE DETAILS F ROM WHOSE ACCOUNT THE AFORESAID CHEQUES HAVE BEEN CLEARED ALONG WITH THE COPY OF INSTRUMENTS. THE BANK HAD SUPPLIED THE COPY OF PAYING-IN-SLIP PREPAR ED BY THE ASSESSEE FOR THE DEPOSIT OF THE SAID AMOUNT. IT WAS CERTIFIED BY TH E CHIEF MANAGER, BANK OF INDIA THAT THE DEPOSITS HAD BEEN MADE THROUGH THE D EMAND DRAFT DRAWN ON SBS, AHMADABAD. THEREAFTER, ENQUIRIES WERE MADE FR OM SBS, SARLA BRANCH, DIST: SURENDRANAGAR TO KNOW FROM WHOSE ACCOUNT THES E DRAFTS WERE ISSUED. ITA NO. 2379/AHD/2008 A.Y. 05-06 PAGE 3 THE MANAGER, SBS, SARLA BRANCH VIDE HIS LETTER DATE D 08.12.2007 HAD DENIED TO HAVE ISSUED ANY DEMAND DRAFTS AT THE REQUEST OF PARTIES, WHO HAD GIVEN LOAN TO THE ASSESSEE COMPANY. THE A.O. GAVE SHOW C AUSE NOTICE TO THE ASSESSEE ON THESE FACTS. AFTER CONSIDERING THE ASS ESSEES REPLY, THE LD. A.O. HELD AS UNDER: 1 THAT DURING THE YEAR THE ASSESSEE COMPANY ACCEPT ED THE UNSECURED LOAN FROM CERTAIN PARTIES AND DURING THE COURSE OF HEARING THEIR CONFIRMATIONS WERE FILED ALONG WITH T HE NAME, ADDRESSES AND COPY OF EVIDENCE OF BEING FARMERS DUL Y VERIFIED. 2 THAT HOWEVER IN COMPLIANCE OF YOUR ABOVE NOTICE WE ARE AGAIN SUBMITTING THE ELABORATIVE CONFIRMATIONS OF D EPOSITORS ALONG WITH THEIR COPY OF ACCOUNT IN THE COMPANY'S B OOKS OF ACCOUNT, ALONG WITH COPY OF EVIDENCE FOR BEING AGRI CULTURIST. 3 THAT THE CONFIRMATION IS CONSISTING OF THEIR NAM E, ADDRESS, AMOUNT THEY DEPOSIT AND MODE OF PAYMENT BY WHICH TH EY DEPOSITED AND RATE OF INTEREST ON WHICH THEY GOT TH E INTEREST. WE REQUEST YOUR GOOD SELF TO KINDLY ACCEPT THEM AND TREAT THEM AS FILED AS CLARIFICATION OF THEIR EARLIER CON FIRMATION. 4 THAT IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES SINCE THE CONDITIONS OF SECTION 68 OF I.T. ACT. THAT IS IDENT ITY OF THE PARTY IS PROVED, THE GENUINENESS OF TRANSACTIONS IS PROVE D AND MODE OF PAYMENT IS EXPLAINED, HENCE THE UNSECURED L OAN ACCEPTED DURING THE YEAR MAY PLEASE BE ACCEPTED. 5 IT IS FURTHER CLARIFIED THAT CERTAIN PARTIES AT V ILLAGE SARLA IN SURENDRANAGAR DISTRICT WHERE THE INSPECTOR OF THE D EPARTMENT VISITED AND ASKED THE MODE OF PAYMENT THEY STATED A S CASH, BUT INFECT OUT OF THE SAME CASH THE DRAFT WAS PREPA RED FROM SURENDRANAGAR DISTRICT IN THEIR RESPECTIVE NAME. TH AT INFECT ITA NO. 2379/AHD/2008 A.Y. 05-06 PAGE 4 THEY WERE UNDER IMPRESSION THAT DRAFT PREPARED FROM CASH IS A CASH MODE AND THERE ARE TWO MODES ONLY CASH OR CHEQ UE ONLY. SINCE THE DRAFT WAS PREPARED FROM CASH HENCE THEY SAID CASH. THAT THEIR FRESH CONFIRMATIONS ENCLOSED HERE WITH IS SELF EXPLANATORY. 6. THAT IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCE S AND IN LIGHT OF ENCLOSED CONFIRMATION THE UNSECURED LOAN MAY PLE ASE BE TREATED AS GENUINE AND ACCEPTED. THE A.O. FINALLY HAD HELD THAT THE ASSESSEE HAD REC EIVED DEPOSIT IN CASH FROM ALL THE PARTIES WHICH HAD BEEN PROVED THROUGH ENQUI RIES CONDUCTED BY HIM. THE NEXUS OF CASH RECEIVED FROM DIFFERENT PARTIES A ND THE CASH PAID FOR DEMAND DRAFTS HAD NOT BEEN ESTABLISHED WHICH IMPLIE D THAT THE ASSESSEE HAS ROUTED ITS OWN UNACCOUNTED MONEY IN ITS BOOKS OF AC COUNTS IN THE FORM OF UNSECURED LOAN ALLEGED TO HAVE BEEN RECEIVED FROM V ARIOUS FARMERS. THUS, HE MADE ADDITION OF RS.26,40,400/- U/S. 68 OF THE I T ACT AS UNEXPLAINED CASH CREDITORS AND ON WHICH INTEREST OF RS.3,77,709/- WA S DISALLOWED. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. I AM INCLINED TO AGREE WITH THE VIEW S OF THE APPELLANT. THE APPELLANT HAS FILED ALL THE CONFIRMATIONS AND T HE EVIDENCES REGARDING THE CAPACITY OF THE CREDITORS TO ADVANCE THE LOAN TO THE APPELLANT AND THE PERSONS CONCERNED HAVE ALSO CONFI RMED THAT THEY HAVE GIVEN THE LOANS. HOWEVER, AS THEY WERE FARMERS , THEY GAVE THE LOANS IN CASH AND TO COMPLY WITH THE PROVISIONS OF SEC. 69SS OF THE I.T. ACT, THE APPELLANT GOT THE DRAFTS PREPARED AND CREDITED IN ITS BOOKS, BUT THIS CANNOT MAKE THE LOANS AS BOGUS AND NOT GENUINE. ITA NO. 2379/AHD/2008 A.Y. 05-06 PAGE 5 WHEN THE PERSONS CONFIRMED OF HAVING GIVEN LOANS TO THE APPELLANT AND THEIR CREDIT WORTHINESS HAS NOT BEEN DOUBTED BY THE AO, I AM OF THE OPINION THAT THERE WAS NO JUSTIFICATION IN MAKI NG AN ADDITION ON THIS COUNT. BY RELYING ON THE DECISION OF HON. A'BA D TRIBUNAL IN THE CASE OF CLARIES LIFE SCIENES LTD., 298 ITR 403 AND THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRAG ATI CO-OPE. BANK LTD., CIT VS. ORISSA CORPORATION PVT. LTD., AND ROH INI BUILDERS, 256 ITR 360, I HOLD THAT THE ADVANCES GIVEN BY THE 47 P ERSONS ARE GENUINE AND THE ADDITION MADE IN THIS RESPECT WAS N OT JUSTIFIED. SINCE THE LOAN TAKEN IS TREATED AS GENUINE, THE DIS ALLOWANCE OF INTEREST THEREON IS ALSO DIRECTED TO BE DELETED. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY RELIED UPON THE ORDER OF THE A.O. TOTAL LOAN WAS TAKEN BY THE ASS ESSEE AT RS.26.4 LACS FROM 47 PERSONS AND EACH AMOUNT BELOW RS. 50,000/- TAKEN FROM AGRICULTURISTS. THIS LOAN WAS IN CASH BUT DEMAND DRAFTS PREPARED BY THE ASSESSEE. THE EVIDENCE FILED BY THE ASSESSEE SHOWED THAT THIS LOA N AMOUNT SHOWN BY THE ASSESSEE IN THE NAME OF AGRICULTURIST BUT MONEY BEL ONGED TO ASSESSEE. THE REVENUE ALSO FILED PAPER BOOK BEFORE US AND DREW OU T ATTENTION ON EVIDENCE COLLECTED BY THE DEPARTMENT AT THE TIME OF ASSESSME NT THAT CASH WAS DEPOSITED AND DEMAND DRAFTS WERE PREPARED FROM STAT E BANK OF SAURASHTRA, SARLA. THE DEMAND DRAFT FORMS WERE FILLED BY ONE P ERSON IN ONE HANDWRITING ON DIFFERENT DATES IN F.Y. 2004-05. THE DEMAND DRA FT CHARGE ALSO RECOVERED FROM THE PERSONS WHO ASKED TO PREPARE THE DEMAND DR AFT IN FAVOUR OF ASSESSEE IN ALL THE CASES. HE FURTHER DREW OUR ATT ENTION ON PAGE NO.16 OF PAPER BOOK FILED BY THE REVENUE SHOWS THAT STATE BA NK OF SAURASHTRA, SARLA BRANCH HAD NOT ISSUED ANY DEMAND DRAFT VIDE ITS LET TER DATED 08.02.2007 TO ITA NO. 2379/AHD/2008 A.Y. 05-06 PAGE 6 THE A.O. HE FURTHER ARGUED THAT EVEN WRITING ON DE MAND DRAFT FORM AS WELL AS DEPOSIT OF DEMAND DRAFTS IN THE ASSESSEES BANK ACC OUNT IS SIMILAR. IT PRIMA FACIE PROVED THAT ASSESSEE HAS ROUTED ITS OWN CASH IN THE GUISE OF LOAN. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAD GIVEN NAME AND ADDRESS OF THE DEPOSITOR IN CONFIRMA TION ALONGWITH PROOF OF THEIR LAND HOLDING AND THEIR CAPACITY TO ADVANCE TH E FUND. THESE PERSONS ALSO HAD CONFIRMED THE LOAN GIVEN TO THE ASSESSEE BEFORE THE INCOME TAX INSPECTOR DURING THE INQUIRY CONDUCTED BY THE DEPAR TMENT. THE LD. A.O. WAS NOT RIGHT IN MAKING ADDITION ON THE GROUND THAT THE RE IS NO NEXUS BETWEEN LOAN TAKEN IN CASH AND GOT IT DEMAND DRAFT PREPARED. IT WAS FURTHER ARGUED THAT ORIGINALLY LOAN WAS IN CASH BUT TO AVOID ANY VIOLAT ION OF SECTION 269SS, THE DEMAND DRAFTS WERE GOT PREPARED AND ASSESSEE HAS RE CEIVED THIS LOAN IN FORM OF DEMAND DRAFTS. THE LD. COUNSEL RELIED UPON THE DECISION OF RAJKOT BENCH IN CASE OF ITO VS. GOPALBHAI L. PATEL IN ITA NO. 777 ( FUT.)/2002, 2007 AND 2008(RJT.)/2002, FOR A.Y. 1994-95, 1995-96 AND 1996 -97, WHERE IDENTICAL ISSUE IN GROUND NO.2 HAD BEEN DECIDED AGAINST THE R EVENUE. THUS, HE PRAYED TO UPHOLD THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS FACT THAT THE ASSESSEE GOT PREPARED DEMAND DRAFT AFTER DEPOSITING THE CASH IN THE NAME OF VARIOUS FARMERS AND HAD BEE N SHOWN AS LOAN. THE LD. COUNSEL FOR THE ASSESSEE WAS ASKED TO CLARIFY BY US THAT LOAN HAS BEEN REPAID OR NOT. HE SHOWED IGNORANCE ABOUT THE REPAY MENT BEFORE US. EVEN HE COULD NOT ABLE TO GIVE ANY EVIDENCE WHETHER TDS ON INTEREST PAYMENT HAD ITA NO. 2379/AHD/2008 A.Y. 05-06 PAGE 7 BEEN DEDUCTED OR NOT. THE LD. CIT(A) ALSO HAD NOT ANALYZED EACH CASH CREDITOR IN THE LIGHT OF GENUINENESS OF THE LOAN AN D CREDITWORTHINESS OF THE CASH CREDITOR. THE MODUS OPERANDI ADOPTED BY THE A SSESSEE IN TAKING LOAN SHOWS THAT ALL THE LOANS WERE TAKEN IN CASH AND GOT PREPARED DEMAND DRAFTS IN THE NAME OF ASSESSEE FIRM IN A PARTICULAR DAY IN ON E HANDWRITING. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS CASE TO THE A.O. TO EXAMINE THE EVIDENCE FURNISHED BY THE ASSESSEE BEFORE US FOR CL AIMING OF LOAN AS GENUINE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE T O THE A.O. FOR READJUDICATION. NEED NOT TO MENTION HERE THAT THE A.O. WILL PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSEE BEFORE TAKING ANY DECISION. 6. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 13.11.2013 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # , )