Late Sri. K.B. Khaleel, Hassan V. ITO, Hassan

ITA 239/BANG/2011

• Counselvise Citation: 23921114 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-02-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Keywords: Unexplained cash credit; Gift; Source of fund
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.239 & 240/BANG/2011 ASSESSMENT YEARS : 2004-05 & 2005-06 LATE SHRI K.B. KHALEEL, L/R OF SMT. FAHIMIDA KHATOON, PROP. MUBARAK RICE MILL, HARANGI OFFICE ROAD, KONANUR, ARAKULGUD TALUK, HASSAN DISTRICT. PAN: AAHPF 9664L VS. THE INCOME TAX OFFICER, WARD II, HASSAN. APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 25.02.2015 DATE OF PRONOUNCEMENT : 05.03.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE APPEALS ARE BY THE ASSESSEE AGAINST THE COM MON ORDER DATED 15.12.2010 OF THE CIT(APPEALS), MYSORE RELATI NG TO ASSESSMENT YEARS 2004-05 & 2005-06. ITA NOS. 239 & 240/BANG/2011 PAGE 2 OF 9 2. IN THESE APPEALS THE ISSUES THAT ARISE FOR CONSI DERATION ARE REGARDING THE ACTION OF THE AO IN TREATING GIFT/LOANS RECEIVE D BY THE ASSESSEE AS UNEXPLAINED. THE GIFTS/LOANS RECEIVED BY THE ASSES SEE WERE AS FOLLOWS:- AY 2004-05 (1) GIFT RECEIVED FROM MR. TAHIR ALI RS. ONE LAKH. (2) LOAN RECEIVED FROM SHIVANNA SIDDAPUR RS. ONE LAKH . (3) LOAN RECEIVED FROM IRSHAD ALI KHAN- RS.1.45 LAKHS. ALL THE ABOVE SUMS WERE ADDED AS UNEXPLAINED CASH C REDITS U/S. 68 OF THE ACT BY THE AO, WHICH WAS CONFIRMED BY THE CIT(APPEA LS). AY 2005-06 3. LOAN TAKEN BY THE ASSESSEE FROM ZAFRULLAH KHAN O F RS.1 LAKH WAS TREATED AS UNEXPLAINED CASH CREDIT U/S. 68 BY THE A O AND CONFIRMED BY THE CIT(APPEALS). 4. ORIGINALLY THESE APPEALS WERE HEARD BY THE TRIBU NAL AND BY AN ORDER DATED 15.6.2012, THE ADDITIONS MADE BY THE REVENUE AUTHORITIES AS ABOVE WERE CONFIRMED BY THE TRIBUNAL. THE ASSESSEE PREFE RRED APPEALS BEFORE THE HONBLE HIGH COURT OF KARNATAKA. THE HONBLE H IGH COURT BY ITS JUDGMENT DATED 28.1.2014 IN ITA NO.366 & 367 OF 201 2, REMANDED THE MATTER IN RESPECT OF MERITS OF ADDITION OF ABOVE CA SH CREDITS TO THE FILE OF TRIBUNAL. IT IS IN THESE CIRCUMSTANCES THAT THESE APPEALS WERE LISTED FOR HEARING AND WERE HEARD. ITA NOS. 239 & 240/BANG/2011 PAGE 3 OF 9 5. THE ASSESSEE WAS AN AGRICULTURIST AND WAS RUNNIN G A RICE MILL. THE ASSESSEE CONSTRUCTED A COMMERCIAL COMPLEX AT KORAMA NGALA, NEAR KSRTC BUS STAND. A SUM OF RS.33,50,000 WAS SPENT A S INVESTMENT IN THE CONSTRUCTION. IN THE COURSE OF EXPLAINING THE SOUR CE OF MAKING THE AFORESAID INVESTMENT IN THE CONSTRUCTION, THE GIFT AS WELL AS LOANS WERE SHOWN AS SOURCE OF FUNDS FROM WHICH THE INVESTMENTS WERE MADE BY THE ASSESSEE IN THE CONSTRUCTION. IT IS IN THIS BACKGR OUND THAT THE GENUINENESS OF THE GIFT AS WELL AS LOANS WERE EXAMINED BY THE A O. 6. WE HAVE HEARD THE LD. COUNSEL FOR THE ASSESSEE A ND THE LD. DR. AY 2004-05 7. GIFT RECEIVED FROM ONE MR. TAHIR ALI RS. ONE L AKH : THE FACTS AS IT TRANSPIRES ARE THAT MR. TAHIR ALI GAVE A SUM OF RS. 1 LAKH AS GIFT IN FAVOUR OF THE ASSESSEE BY A DEMAND DRAFT DRAWN ON CANARA BANK , DATED 7.7.2003. THE AO FOUND THAT ON 7.7.2003, TAHIR ALI HAD DEPOSI TED A SUM OF RS.1 LAKH BY CASH IN THE BANK ACCOUNT. TAHIR ALI WAS EXAMINE D BY THE AO AND HE COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE THE SOURCE OF CASH OF RS. 1 LAKH DEPOSITED IN THE BANK ACCOUNT. THE AO ALSO FO UND FROM THE BANK ACCOUNT OF TAHIR ALI WITH CANARA BANK THAT FOR THE PERIOD FROM 30.10.02 TO 6.7.03, THERE WAS DEPOSIT OF RS.66,951 AND THE BALA NCE AVAILABLE IN HIS ACCOUNT AS ON 6.7.03 WAS RS.795. IT ALSO TRANSPIRE D THAT TAHIR ALI HAD AVAILED A BANK LOAN OF RS.1 LAKH ON 10.9.03 FOR BUS INESS PURPOSE AND ON 10.3.04 FOR INSTALLATION OF SOLAR NETS IN HIS HOUSE . IT IS IN THESE ITA NOS. 239 & 240/BANG/2011 PAGE 4 OF 9 CIRCUMSTANCES THAT THE AO HELD THAT THE CREDITWORTH INESS OF MR. TAHIR ALI WAS NOT ESTABLISHED. THE TRIBUNAL UPHELD THE CONCL USIONS OF THE AO. 8. LOAN RECEIVED FROM SHIVANNA SIDDAPUR RS. ONE L AKH: THE LOAN IN QUESTION WAS GIVEN BY CASH ON 3.11.03. THE SWORN S TATEMENT WAS RECORDED UNDER SECTION 131 OF THE I T ACT FROM SHRI SHIVANNA ON 26.7.2006. IN ANSWER TO QUESTION NO.10, SHRI SHIVANNA HAD STAT ED THAT HE HAD GIVEN A LOAN OF RS.1 LAKH TO IRSHAD ALI KHAN, S/O. K.B. KHA LEEL BY CASH ON 3.11.2003. IN ANSWER TO Q.NO.11, SHRI SHIVANNA HAD STATED THAT THE SAID SUM OF RS.1 LAKH WAS WITHDRAWAL OUT OF HIS PF ACCOU NT AND THE WITHDRAWAL WAS FOR THE PURPOSE OF PERFORMING HIS DAUGHTERS MA RRIAGE. IT WAS FURTHER STATED THAT THE LOAN GIVEN WAS INTEREST FREE AND NO PRO-NOTES/DOCUMENT WAS EXECUTED EVIDENCING GIVING OF THE SAID LOAN. THE A LLEGED LOAN TRANSACTION HAD TAKEN PLACE IN NOVEMBER, 2003. SHRI SHIVANNAS DAUGHTERS MARRIAGE WAS CONDUCTED IN THE MONTH OF NOVEMBER, 2003. SHRI SHIVANNA HAD TAKEN A LOAN FROM HIS PF ACCOUNT TO THE EXTENT OF RS.2.5 LAKHS. IN THE SWORN STATEMENT RECODED BY THE ASSESSING OFFICER, IN ANSW ER TO THE QUESTION NO.9, SHRI SHIVANNA HAD STATED THAT FOR HIS DAUGHTE RS MARRIAGE, HE HAD INCURRED APPROXIMATELY AN EXPENDITURE OF RS.3.5 LAK HS. THE CONCLUSION OF THE REVENUE AUTHORITIES WAS THAT WHEN SHRI SHIVANNA S DAUGHTERS MARRIAGE WAS CONDUCTED IN THE MONTH OF NOVEMBER, 2003, IT IS HIGHLY IMPROBABLE THAT THE CASH WITHDRAWN ON 3.11.2003 (NOTED AS SELF IN THE CHEQUE) IS FOR GIVING LOAN TO THE ASSESSEE. ITA NOS. 239 & 240/BANG/2011 PAGE 5 OF 9 9. LOAN RECEIVED FROM IRSHAD ALI KHAN- RS.1.45 LAKH S: THE LOAN IN QUESTION HAD BEEN GIVEN BY IRSHAD ALI KHAN BY CHEQU E DATED 29.6.03. ON EXAMINATION OF HIS BANK ACCOUNT, IT TRANSPIRED THAT A SUM OF RS.1,45,000 HAD BEEN DEPOSITED IN THE FORM OF CASH BY HIM IN HI S BANK ACCOUNT. THE CREDITOR COULD NOT EXPLAIN THE SOURCE OF CASH SO DE POSITED, WHICH ULTIMATELY WAS USED FOR PAYMENT OF CHEQUE OF RS.1.45 LAKHS. I T IS IN THESE CIRCUMSTANCES THAT THE LOAN WAS TREATED AS UNEXPLAI NED. AY 2005-06 10. LOAN OF RS. 1 LAKH TAKEN BY THE ASSESSEE FROM Z AFRULLAH KHAN : AS REGARDS THIS LOAN, THE CREDITOR HAPPENS TO BE THE S ON-IN-LAW OF THE ASSESSEE. HE EXPLAINED THAT THE SUM OF RS.1 LAKH W AS PAID OUT OF LOAN RECEIVED FROM HIS BROTHER-IN-LAW, MR. ZAKIR HUSSAIN (SON OF THE ASSESSEE). THE ASSESSEE HAD A BANK ACCOUNT WITH CANARA BANK, M ANDI MHALLA, MYSORE. ON PERUSAL OF THIS ACCOUNT, THE AO FOUND T HAT ON 31.12.04, A SUM OF RS.2 LAKHS WAS DEPOSITED IN HIS BANK ACCOUNT AND THE NEXT DAY I.E., ON 1.1.05, THE SAME WAS WITHDRAWN BY ISSUING A CHEQUE OF RS.1 LAKH TO ZAKIR HUSSAIN AND A DD FOR RS.1 LAKH IN FAVOUR OF SMT. FA HIMIDA KHATOON. ZAKIR HUSSAIN IS THE SON OF THE ASSESSEE AND IS NOT THE S AME ZAKIR HUSSAIN FROM WHOM ZAFRULLAH KHAN CLAIMED TO HAVE AVAILED OF LOAN WHICH WAS USED FOR GIVING LOAN OF 1 LAKH TO THE ASSESSEE. ZAKIR HUSSA IN (SON OF ASSESSEE) HAD UTILIZED THE SAID SUM OF RS. 1 LAKH FOR HIS BUS INESS. THIS FACT WAS CONFIRMED BY HIM WHEN HIS STATEMENT WAS RECORDED ON 17.7.06. ITA NOS. 239 & 240/BANG/2011 PAGE 6 OF 9 11. THE ABOVE CIRCUMSTANCES, ACCORDING TO THE AO, C LEARLY PROVED THAT THE PLEA OF ZAFRULLAH KHAN REGARDING SOURCE OF FUND S OUT OF WHICH LOAN WAS GIVEN TO ASSESSEE WAS FALSE. THIS FINDING OF THE A O WAS ALSO CONFIRMED BY THE TRIBUNAL. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT IN ALL THE CASES, THE DONOR/CREDITORS HAD CONFIRMED THE FACT T HAT THEY HAD GIVEN THE GIFT/LOANS TO THE ASSESSEE. ACCORDING TO HIM, THE ASSESSEE CANNOT BE CALLED UPON TO EXPLAIN THE SOURCE OUT OF WHICH GIFT /LOANS WERE GIVEN BY DONOR/CREDITORS. ACCORDING TO HIM, ASKING THE ASSE SSEE TO EXPLAIN THE SOURCE OF THE DONOR/CREDITORS WOULD BE ASKING THE A SSESSEE TO EXPLAIN THE SOURCE OF SOURCE. ACCORDING TO HIM, THE LAW IS WEL L SETTLED THAT ASSESSEE CANNOT BE CALLED UPON TO EXPLAIN THE SOURCE OF SOUR CE. IN THIS REGARD, RELIANCE WAS PLACED BY HIM ON THE DECISION OF HONB LE SUPREME COURT IN DAULAT RAM RAWATMULL, 87 ITR 349 (SC) . HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN KANHAIYALAL JANGID V. ACIT, 217 CTR 345 (RAJ) , WHEREIN IT WAS HELD THAT ONCE THE ASSESSEE FILES CONFIRMATION FROM THE CREDITOR AND PRODUCES T HE CREDITOR BEFORE THE AO, AND WHERE THE CREDITOR CONFIRMS GIVING OF LOAN TO THE ASSESSEE; NO ADDITION U/S. 68 COULD BE MADE IN THE HANDS OF ASSE SSEE ON THE GROUND THAT CREDITOR COULD NOT SATISFACTORILY EXPLAIN THE SOURC E OF LOAN. THE HONBLE RAJASTHAN HIGH COURT HELD THAT BURDEN ON THE ASSESS EE DOES NOT EXTEND TO PROVE THE SOURCE OF CREDITOR FORM WHERE HE MADE THE ADVANCE TO THE ASSESSEE. ITA NOS. 239 & 240/BANG/2011 PAGE 7 OF 9 13. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE CREDITWORTHINESS OF THE DONOR/CREDITORS HAD NOT BEEN PROVED BY THE A SSESSEE AND IN SUCH CIRCUMSTANCES, THE ADDITION MADE WAS JUSTIFIED. AC CORDING TO HIM, IN THE PRESENT CASE, THE AO HAS NOT CALLED UPON THE ASSESS EE TO PROVE THE SOURCE OF SOURCE, BUT ONLY WANTED THE ASSESSEE TO PRIMA FA CIE SHOW THE CREDITWORTHINESS OF THE CREDITOR. ACCORDING TO HIM , U/S. 68 OF THE ACT, THE ONUS IS ON THE ASSESSEE TO ESTABLISH THE IDENTITY A ND CREDITWORTHINESS OF THE CREDITOR AND ALSO THE GENUINENESS OF THE TRANSACTIO N. IT WAS SUBMITTED BY HIM THAT THE ADDITIONS MADE WERE JUSTIFIED AND DID NOT CALL FOR ANY REVIEW. HE PLACED RELIANCE ON THE DECISION IN THE CASE OF K.C.N. CHANDRASHEKAR V. ACIT, 66 TTJ 355 (BANG) , WHEREIN THE BANGALORE TRIBUNAL AFTER MAKING A REFERENCE TO THE DECISION OF THE HONBLE C ALCUTTA HIGH COURT IN SHANKAR INDUSTRIES V. CIT, 114 ITR 689 (CAL) AND THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN BEDI & CO. P. LTD. V. CIT, 144 ITR 352 (KAR) , HELD THAT CAPACITY OF THE CREDITOR HAS TO BE ESTA BLISHED BY THE ASSESSEE. 14. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F CHENNAI BENCH OF THE TRIBUNAL IN M/S. LALITA JEWELLERY MART V. ACIT, ITA NO.1871/MDS/2010 , A.Y. 2007-08, ORDER DATED 15.4.2013 , WHEREIN THE CHENNAI BENCH HELD THAT THE MERE FACT THAT TRANSACT IONS WERE EFFECTED THROUGH BANKING CHANNELS IS NOT SUFFICIENT TO UPHOL D THE GENUINENESS OF THE CREDIT. ITA NOS. 239 & 240/BANG/2011 PAGE 8 OF 9 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE MATERIAL ON RECORD THAT DONOR AS WELL AS CREDITORS COULD NOT SHOW PRIMA FACIE THE SOURCE OF FUNDS OUT OF WHI CH GIFT/LOANS WERE GIVEN. ADDED TO THIS IS THE CIRCUMSTANCE THAT ON THE DATE WHEN THE GIFT/LOANS WERE GIVEN, THERE WERE CASH DEPOSITS MADE IN THE BANK AC COUNTS. IT IS IN THESE CIRCUMSTANCES THAT THE DONOR/CREDITORS WERE CALLED UPON TO SHOW THEIR CAPACITY TO GIVE GIFT/LOANS. WE ARE SATISFIED THAT THE EXPLANATION GIVEN WITH REGARD TO CAPACITY OF THE DONOR/CREDITORS IS UNSATI SFACTORY. 16. IN THE CASE OF SHIVANNA SIDDAPUR, WHO GAVE RS. 1 LAKH AS LOAN AND EXPLAINED THAT THE SAME WAS WITHDRAWAL FROM GPF ACC OUNT, IT TRANSPIRED THAT HE WAS TO PERFORM THE MARRIAGE OF DAUGHTER AT THE TIME OF WITHDRAWAL FROM PF ACCOUNT. THIS CIRCUMSTANCE WAS CONSIDERED B Y THE REVENUE AUTHORITIES AS INDICATING THAT WITHDRAWAL FROM PF A CCOUNT WOULD NOT HAVE BEEN USED FOR GIVING LOAN TO THE ASSESSEE. IN OUR OPINION, THIS CONCLUSION ARRIVED AT BY THE REVENUE AUTHORITIES IS CORRECT AN D CALLS FOR NO INTERFERENCE. 17. WITH REGARD TO THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS BEEN CALLED UPON TO EXPLAIN THE SO URCE OF SOURCE, WE ARE OF THE VIEW THAT THE SAID STAND TAKEN BY THE LD. CO UNSEL FOR THE ASSESSEE IS UNSUSTAINABLE. AS ALREADY STATED, THE CAPACITY OF THE CREDITOR ALONE WAS QUESTIONED BY THE REVENUE AUTHORITIES. THIS CANNOT BE EQUATED AS CALLING UPON THE ASSESSEE TO FURNISH SOURCE OF SOURCE. THE CAPACITY OF THE CREDITORS HAS NOT BEEN PRIMA FACIE ESTABLISHED BY T HE ASSESSEE. IT IS ONLY ITA NOS. 239 & 240/BANG/2011 PAGE 9 OF 9 WHEN CREDIBLE EVIDENCE IS LET IN REGARDING CAPACITY OF THE CREDITOR THAT THIS ARGUMENT OF CALLING UPON THE ASSESSEE TO EXPLAIN SO URCE OF SOURCE CAN BE ADVANCED. IN THIS REGARD, THE LAW LAID DOWN BY THE HONBLE CALCUTTA HIGH COURT IN SHANKAR INDUSTRIES (SUPRA) CLEARLY EXPLAINS THE LEGAL POSITION. WE THEREFORE DO NOT FIND ANY MERIT IN THE APPEAL BY TH E ASSESSEE AND DISMISS THE SAME. 18. IN THE RESULT, THE APPEALS BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF MARCH , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 5 TH MARCH, 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.