Barnunei Roller Flour Mills Pvt. Ltd., Bhubaneswar V. ACIT, Bhubaneswar

ITA 242/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3862 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 12-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Keywords: Unexplained cash credit; Gift; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 BARUNEI ROLLER FLOUR MILLS P.LD., B - 30, RUCHIKA MARKET, BARAMUNDA, BHUBANESWAR. VS. ACIT, CIRCLE 1(1), BHUBANESWAR. PAN/GIR NO. (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 12 /04 / 2017 DATE OF PRONOUNCEMENT : 12 /04 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, BHUBANESWAR , DATED 27.2.2015 , FOR THE ASSESSMENT YEAR 2007 - 08 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) ERRED BY NOT CONSIDERING THE FUNDS ADVANCED AND MATERIAL SUPPLIED BY MAA BUILT MART AND CHANDRAKANT SAHOO AS UNSECURED LOAN FOR RS.6,26,910/ - ALTHOUGH THE SAME WERE FROM GENUINE AND EXPLAINED SOURCES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) ERRED BY NOT CONSIDERING THE FUNDS ADVANCED BY SANATAN SAHOO AS UNSECURED LOAN FOR 2 ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 RS.2,03,090/ - ALTHOUGH THE SAME WAS FRO M GENUINE AND EXPLAINED SOURCES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) ERRED BY NOT APPRECIATING THE REMAND REPORT OF INSPECTOR OF I.T. AND CONFIRMING THE ADDITIONS OF RS.1 ,11,500/ - AS UNSECURED L OAN FROM SIX NUMBER OF PARTIES ALTHOUGH IN THE REMAND REPORT NO ADVERSE REMARK WAS POINTED OUT IN RESPECT OF THESE PARTIES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) ERRED BY NOT ACCEPTING UNSECURED LOA N OF RS,13,75,500/ - IN RESPECT OF 68 PARTIES ALTHOUGH CONFIRMATIONS HAVE BEEN PRODUCED BY THE APPELLANT AND INSPECTOR OF I.T. (THE AUTHORITY PREPARING THE REMAND REPORT) HAS NOT TAKEN ANY SERIOUS ATTEMPT TO VERIFY THEM. 2. THE HEARIN G OF THE APPEAL WAS LAST FIXED ON 21.3 .2017 ON WHICH DATE, THE A.R. OF THE ASSESSEE REQUESTED FOR ADJOURNMENT OF THE HEARING, WHICH WAS GRANTED AND BOTH PARTIES WERE INFORMED ABOUT THE NEXT DATE OF HEARING I.E. 12.4.2017. HOWEVER, WHEN THE CASE WAS CALLED FOR HEARING, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE AND NEITHER ANY ADJOURNMENT APPLICATION WAS FILED. IT IS OBSERVED FROM THE RECORD THAT THE APPEAL WAS ADJOURNED AT THE REQUEST OF LD AUTHORISED REPR ESENTATIVE OF THE ASSESSEE ON 20.10.2016, 23 .11.2016, 2 0 .1 2.2016, 6 . 1.2017 AND 19.1.2017 . AS SUFFICIENT ADJOURNMENTS WERE GRANTED TO THE ASSESSEE, I REJECT THE ADJOURNMENT PETITION AND THE APPEAL WAS HEARD EXPARTE QUA THE ASSESSEE AND DISPOSED OF CONSIDERING THE SUBMISSION OF LD DEPARTMENTAL REPRESENTATIVE AND MATERIALS AVAILABLE ON RECORD. 3. I HAVE HEARD LD DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND FROM THE BALANCE SHEET THAT 3 ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 THE ASSESSE E HAS SHOWN INTEREST FREE UNSECURED LOAN AMOUNTING TO RS.23,67,000/ - AS ON 31.3.2007 FROM 88 PARTIES. 4. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVIDE COMPLETE DETAILS OF THE LOAN CREDITORS FOR RS.23,67,000/ - WHO HAVE GIVEN INTEREST FREE UNSECURED LOANS TO THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT MOST OF THE RECEIPTS WERE IN CASH AND BELOW RS.19,000/ - IN EACH OF THE CASE. THE ASSESSEE FILED CONFIRMATIONS FROM THE PARTIES. THEREAFTER, THE INSPECTOR WAS DIRECTED TO MAKE ENQUIRES, WH O REPORTED THAT OUT OF 88 PARTIES, ONLY 20 PARTIES WERE TRACEABLE IN THE GIVEN ADDRESS AND OUT OF SAME, ONLY 6 PERSONS CONFIRMED THE TRANSACTIONS . THE INSPECTOR ALSO REPORTED THAT THE PERSONS DID NOT HAVE CAPACITY TO LEND THE MONEY. IN VIEW OF ABOVE, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE CREDITORS FOR EXAMINATION. HOWEVER, THE CREDITORS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER CONSIDERED THAT THE IDENTITY OF THE CREDITORS, GENU INENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE LENDERS HAVE NOT BEEN ESTABLISHED . THEREFORE, THE ASSESSING OFFICER ADDED RS.23,67,000/ - AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 5 . BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSION ALONG WITH SOME ADDITIONAL EVIDENCE, WHEREIN, IT WAS CLAIMED THAT OUT OF RECEIPT OF RS.23,67,000/ - , INTEREST FREE LOAN OF RS.8,80,000/ - WAS IN THE FORM OF DD AND MATERIALS. THE DEMAND DRAFTS FOR RS.53,800/ - , RS.2 LAKHS WERE PAID DIRETLY TO HAVELS BY M/S. MAA BU ILD MART ON BEHALF OF THE ASSESSEE. THE 4 ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 DEMAND DRAFT OF RS.2,03,090/ - WAS PAID TO CESCO DIRECTLY BY SANATAN SAHOO ON BEHALF OF THE ASSESSEE AND DEMAND DRAFT FOR RS.50,000/ - WAS PAID DIRECTLY TO HAVELS BY PRASANNA KUMAR SAHOO ON BEHALF OF THE ASSESSEE. TH E MATERIALS WORTH RS.3,73,110/ - WAS RECEIVED FROM MAA BUILD MART. THE CIT(A) ACCORDINGLY CALLED FOR A REMAND REPORT FROM THE A SSESSING OFFICER, WHICH WAS RECEIVED BY THE CIT(A). 6 . THE CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER AN D ALSO THE SUBMISSION OF THE ASSESSEE CONFIRMED ADDITION OF RS.23,67,000/ - BY OBSERVING AS UNDER: I HAVE CONSIDERED THE MATTER. IN RESPECT OF INTEREST FREE LOAN OF RS.23,67,000/ - , THE IDENTITY OF THE CREDITORS EXCEPT FOR RS.8,80,000/ - HAVE NOT BEEN ESTABLISHED. THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS HAVE NOT BEEN ESTABLISHED FOR THE ENTIRE AMOUNT OF RS.23,67,000/ - AS POINTED OUT BY THE A O IN THE REMAND REPORT. SUBSTANTIAL CASH DEPOSITS HAVE BEEN MADE IN THE ACCOUNT OF MAA BUILD MART BEFORE ISSUE OF DRAFTS AND THE SUNDRY DEBTOR AS PER THE BALANCE SHEET IS LESS THAN THE LOAN GIVEN TO THE APPELLANT. IT IS ALSO UNUSUAL AND NOT BELIEVABLE THAT INTEREST FREE LOANS HAVE BEEN GIVEN TO THE APPELLANT WITHOUT ANY VALID REASON WHICH DEFIES NORMAL HUMAN BEHAVIOUR. THE PROVISIONS OF SECTION 68 OF THE ACT REQUIRES AN ASSESSEE TO PROVE THE CREDITS APPEARING IN HIS BOOKS OF ACCOUNT, AS TO THE NATURE AND SOURCE OF SUCH AMOUNTS, SO THAT IF THE EXPLANATION FURNISHED IS NOT SATISFACTORY, THE AO CAN TREAT IT AS THE ASSESSEE'S INCOME. THE ASSESSEE IS REQU IRED TO PROVE THREE IMPORTANT CONDITIONS, NAMELY, (I) THE IDENTITY OF THE CREDITOR, (II) CAPACITY OF THE CREDITOR TO ADVANCE THE MONEY, AND (III) THE GENUINENESS OF TRANSACTION. WHAT EVIDENCE WOULD BE SUFFICIENT TO ESTABLISH THE SAID CONDITIONS WHAT MATERIAL WOULD BE RELEVANT IN A PARTICULAR CASE, WOULD DEPEND ON THE FACTS EACH CASE. AS PER THE DECISION IN THE CASE OF RAM LAI AGRAWAL V. CIT (ALL) (2006) 280 ITR 0547, THAT U/S.68 OF THE INCOME - TAX ACT, 1961, IF ANY AMOUNT IS FOUND CREDITED THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE BURDEN LIES UPON THE ASSESSEE TO PROVE NATURE AND SOURCE. WHILE PROVING THE SAM E THE ASSESSEE HAS TO PROVE THE IDENTITY THE PERSON, GENUINENESS 5 ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PERSON , WHO HAS GIVEN THE MONEY. HELD; THAT IN THE PRESENT CASE THOUGH THE IDENTITY OF THE PERSON, WH HAD GIVEN THE MONEY HAD BEEN ESTABLISHED THE APPELLANT HAD FAILED TO PROV E THE CREDITWORTHINESS OF THOSE PERSONS MAKING THE PAYMENT OF SUCH AMOUNT C THE APPELLANT. ALL THE AUTHORITIES FOUND THAT BOTH THE PERSONS, WHO WEN ALLEGED TO HAVE MADE THE PAYMENT, HAD NO SOURCE AND CAPACITY TO MAKE SUCH PAYMENTS. LEARNED COUNSEL FOR THE APPEL LANT WAS NOT ABLE TO MAKE OUT ANY CASE TO THE CONTRARY. THE ASSESSMENT OF THE AMOUNTS UNDER SECTION 68 WAS VALID.' THE DELHI HIGH COURT IN THE CASE OF CIT V. OASIS HOSPITALITIES PVT LTD, 333 IT) 119(DELHI)/(2011) 19 8 TAXMAN 247 (DELHI), HAD TO CONSIDER WHETHER THE ADDITION MADE BY THE AO U/S.68 ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY WAS JUSTIFIED. AFTER A COMPREHENSIVE REVIEW OF ALL THE IMPORTANT CASES ON S. 68, THE FOLLOWING PRINCIPLES WERE LAID DOWN: (I) S. 68 PROVIDES THAT IF THE ASSESSEE IS NOT ABLE TO GIVE SATISFACTORY EXPLANATION AS TO THE 'NATURE AND SOURCE' OF A SUM FOUND CREDITED IN HIS BOOKS, THE SUM MAY.BE TREATED AS THE 'UNDISCLOSED INCOME' OF THE ASSESSEE THE INITIAL B URDEN IS ON THE ASSESSEE TO EXPLAIN THE 'NATURE AND SOURCE' OF THE CREDIT AND TO DO SO, THE ASSESSEE IS REQUIRED TO PROVE (A) IDENTITY OF THE SHAREHOLDER; (B) GENUINENESS OF TRANSACTION; AND (C) CR EDIT WORTHINESS OF SHAREHOLDERS. IN THE CASE OF CIT V. N.R. PORTFOLIO PVT. LTD, 263 CTR 456(DELHI)/ (2013) 29 TAXMANN.COM 291 (DELHI) THE HON'BLE DELHI HIGH COURT HELD THAT DESPITE PAN & BANK DETAILS, ADDITION OF SHARE ALLOTMENT MONEY VAIID U/S.68 IF APP LICANTS DO NOT RESPOND TO SUMMONS. IN THIS CASE BOTH THE CIT(A) AND TRIBUNAL RELIED ON LOVELY EXPORTS 216 CTR 195 (DEL) & DIVINE LEASING 299 ITR 268 (SC) HELD THAT AS THE ASSESSEE HAD FURNISHED THE PAN, BANK DETAILS AND OTHER PARTICULARS OF THE SHARE APPLI CANTS, IT HAD DISCHARGED THE ONUS OF PROVING THE IDENTITY AND CREDIT - WORTHINESS OF THE INVESTORS AND THAT THE TRANSACTIONS WERE NOT BOGUS. HOWEVER THE HIGH COURT, REVERSING THE CIT(A) & TRIBUNAL HAS HELD AS UNDER; 'THOUGH IN PREVIOUS DECISIONS (LOVELY EXP ORTS) IT WAS HELD THAT THE ASSESSEE CANNOT BE FAULTED IF THE SHARE APPLICANTS DO NOT RESPOND TO SUMMONS AND THAT THE REVENUE AUTHORITIES HAVE THE WHEREWITHAL TO COMPEL ANYONE TO ATTEND LEGAL PROCEEDINGS, THIS IS MERELY ONE ASPECT. AN ASSESSEE'S DUTY TO EST ABLISH THE SOURCE OF THE FUNDS DOES NOT CEASE BY MERELY FURNISHING THE NAMES, 6 ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 ADDRESSES AND PAN PARTICULARS, OR RELYING ON ENTRIES IN THE REGISTRAR OF COMPANIES WEBSITE. THE COMPANY IS USUALLY A PRIVATE ONE AND THE SHARE APPLICANTS ARE KNOWN TO IT SINCE TH E SHARES ARE ISSUED ON PRIVATE PLACEMENT BASIS. IF THE ASSESSEE HAS ACCESS TO THE SHARE APPLICANT'S PAN OR BANK ACCOUNT STATEMENT, THE RELATIONSHIP IS CLOSER THAN ARM'S LENGTH. ITS REQUEST TO SUCH CONCERNS TO PARTICIPATE IN INCOME TAX PROCEEDINGS, WOULD, F ROM A PRAGMATIC PERSPECTIVE, BE QUITE STRONG. ALSO, THE CONCEPT OF 'SHIFTING ONUS' DOES NOT MEAN THAT ONCE CERTAIN FACTS ARE PROVIDED, THE ASSESSEE'S DUTIES ARE OVER. IF ON VERIFICATION, THE AO CANNOT CONTACT THE SHARE APPLICANTS, OR THE INFORMATION BECOME S UNVERIFIABLE, THE ONUS SHIFTS BACK TO THE ASSESSEE. AT THAT STAGE, IF IT FALTERS, THE CONSEQUENCE MAY WELL BE AN ADDITION U/S 68 (A. GOVINDARAJULU MUDALIAR 34 ITR 807 FOLLOWED).' IN CIT V. R. S. SIBAL (2004) 269 ITR 429, 432, THE DELHI HIGH COURT HELD AS FOLLOWS: 'THERE IS NO QUARREL WITH THE PROPOSITION THAT A MERE IDENTIFICATION OF THE DONOR AND SHOWING THE MOVEMENT OF THE GIFT AMOUNT THROUGH BANKING CHANNELS IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE GIFT AND SINCE THE CLAIM OF A GIFT IS MADE BY THE ASSESSEE THE ONUS LIES ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF THE DONOR BUT HIS CAPACITY TO MAKE SUCH A GIFT.' THE APPELLANT HAS FAILED .TO ESTABLISH THE EXISTENCE OF THE CREDITORS EXCEPT FOR RS.8,80,000/ - , GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF CREDITORS. MOST OF SUCH LOANS ARE BELOW RS.20,000/ - TO ESCAPE THE RIGOROUS OF SECTION 271D. THERE IS NO DOUBT THAT THE LOANS ARE UNEXPLAINED CASH CREDITS. IN VIEW OF THE SAM E THE ADDITION OF RS.23,67,000/ - MADE BY THE AO U/S.68 IS CONFIRMED. 7 . I AM FULLY SATISFIED WITH THE CONCLUSION ARRIVED AT BY THE CIT(A) QUOTED ABOVE. AND DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF LD CIT(A). HENCE, I CONFIRM THE ORDER OF THE LD CIT(A) IN CONFIRMING THE ADDITION OF RS.23,67,000/ - MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT AND DISMISS GROUNDS OF APPEAL OF THE ASSESSEE. 7 ITA NO. 242/CTK/2015 ASSESSMENT YEAR : 2007 - 08 8 . IN THE RESULT, THE APPEAL F ILED BY THE ASSESSEE IS DISMISS ED. ORDER PRO NOUNCED IN THE OPEN COURT ON 12 /04 /2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 12 /04 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : BARUNEI ROLLER FLOUR MILLS P.LD., B - 30, RUCHIKA MARKET, BARAMUNDA, BHUBANESWAR 2. THE RESPONDENT. ACIT, CIRCLE 1(1), BHUBANESWAR 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//