Jai Parakash, V. ITO, Ward-24(4),

ITA 2528/DEL/2004

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0041 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2001-2002
• Appeal Filed On: 26-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAM CHANDRAN
• Keywords: Gift
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 2528/DEL/04 ASSTT. YR: 2001-02 SHRI JAI PARKASH, VS. INCOME TAX OFFICER, PROP. M/S ROMA ENTERPRISES, WARD 24(4), NEW DELHI . L-73, MAHIPAL PUR, NEW DELHI-110037. PAN/ GIR NO. ACNPP1303J ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI K. SAMPATH ADV. RESPONDENT BY : SHRI K. RAVI RAM CHANDRAN SR. DR O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL, PREFERRED AGAINST THE ORDER OF THE CIT(A) DATED 31-3-2004 RELATING TO THE ASSESSMENT YEAR 200 1-02. 2. VARIOUS ISSUES ARE TAKEN, WHICH IN EFFECT RAISE ONLY ONE GROUND OF APPEAL CHALLENGING THE ADDITION OF RS. 9,85,600/- U /S 68, ON ACCOUNT OF LOANS TAKEN FROM FOLLOWING PARTIES: I) SH. AZAD SINGH TRAVELS RS. 5,10,000/- II) MAHESH ENTERPRISES RS. 25,600/- III) S.B. ENTERPRISES RS. 1,50,000/- IV) DEEPIKA ENTERPRISES RS. 3,00,000/- RS. 9,85,600/- 2.1. THESE CREDIT ENTRIES WERE APPEARING IN THE BOO KS OF ACCOUNT SINCE PRECEDING ASSESSMENT YEAR 2000-01, ALTHOUGH THEY HA VE BEEN ACCEPTED IN A.Y. 2000-01. ITA 2528/DEL/04 JAI PRAKASH VS. ITO 2 3. BRIEF FACTS ARE THAT THE ASSESSEE MAINTAINED REG ULAR BOOKS OF ACCOUNT. ABOVE ENTRIES WERE CREDITED IN A.Y. 2000-01 AND ACC ORDINGLY WERE SHOWN AS CREDITS IN THAT YEAR. DURING THE YEAR IN QUESTION, NO FRESH CREDITS WERE TAKEN FROM THESE PARTIES. ONLY TRANSFER ENTRY WAS MADE DE BITING THEIR ACCOUNTS AND CREDITING ASSESSEES CAPITAL ACCOUNT. IT WAS CLAIME D BY THE ASSESSEE THAT THESE PARTIES HAVE GIVEN UP THEIR RIGHTS IN THE AMOUNT OU T OF NATURAL LOVE AND AFFECTION TO ASSESSEE AND THE SAME AMOUNTED TO GIFT S. THUS, IN THIS YEAR THERE WAS NO FRESH CREDIT ENTRY AND THE NATURE OF TRANSFE R ENTRY WAS EXPLAINED TO AO. AO CALLED THESE PARTIES BEFORE HIM, WHO CONFIR MED HAVING GIVEN THESE LOANS TO ASSESSEE, HOWEVER, DENIED HAVING GIVEN ANY GIFT. THE RELEVANT OBSERVATIONS OF AO ARE AS UNDER: DURING THE RECORDING OF STATEMENTS ALL THE PARTIES CATEGORICALLY DENIED OF HAVING GIFT4D SUCH LOAN TO THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION. THEY FURTHER STATED IN TH EIR STATEMENTS THAT THEY NEVER GIFTED THE LOAN TO THE ASSESSEE AND THE LOANS GIVEN TO THE ASSESSEE WAS STILL RECOVERABLE FROM TH E ASSESSEE. ALL THESE PARTIES ALSO STATED THAT IN THEIR BALANCE SHEET OF F.Y. 2001-02 RELEVANT TO AY 2002-03, THE LOAN HAS BEEN S HOWN AS RECOVERABLE FROM SH. JAI PRAKASH. FROM THE ABOVE, I T WAS EVIDENT THAT THE SOURCE OF CAPITAL ADDITION IN THE ACCOUNT OF THE ASSESSEE REMAINED UNEXPLAINED. IN LIGHT OF THE STATEMENTS OF SH. AZAD SINGH PROP. M/S AZAD SINGH TRAVELS, SH. MOHINDER SINGH PROP. M/S MA HESH ENTERPRISES AND SH. RAJ SINGH PROP. M/S. S. B. ENTE RPRISES RECORDED DURING THE ASSESSMENT PROCEEDINGS IT IS EV IDENT THAT NO GIFT WAS GIVEN TO THE ASSESSEE BY THE ABOVE LOAN CR EDITORS. HENCE THE SOURCE OF ADDITION IN CAPITAL ACCOUNT AT RS. 9,85,600/- REMAINED UNEXPLAINED, THEREFORE THE SAME IS BEING T REATED THE UNEXPLAINED DEPOSITS OF THE ASSESSEE AND BEING ADDE D IN THE INCOME OF THE ASSESSEE U/S 68 OF THE INCOME-TAX ACT AS UNEXPLAINED CASH DEPOSITS/ CREDITS OF THE ASSESSEE. ITA 2528/DEL/04 JAI PRAKASH VS. ITO 3 3.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A), WHO CONFIRMED THE ADDITION BY FOLLOWING OBSERVATIONS: 16. I HAVE CONSIDERED THE SUBMISSIONS MADE VERY CA REFULLY. THE ADDITION IN THE CAPITAL ACCOUNT HAS BEEN SHOWN BY THE APPELLANT. IT IS FOR THE APPELLANT TO EXPLAIN THE S OURCES OF THE CREDITS. THE APPELLANT HAS FAILED TO PROVE THIS ONU S WHICH LIES UPON HIM. THE APPELLANT EXPLAINED THE ADDITIONS BY WAY OF SAYING THAT THE CREDITORS HAD SURRENDERED THEIR LOA NS TO THE APPELLANT. IT WAS IN THIS CONTEXT THAT THE LD. ASSE SSING OFFICER ISSUED THE SUMMONS TO THESE PARTIES. ALL THOSE PART IES WHO APPEARED REFUSED IN HAVING SURRENDERED THE LOANS AS GIFTS TO THE APPELLANT. DURING THE COURSE OF HEARING OF APPEAL, THE LD. COUNSEL ADMITTED THAT EVEN IF THOSE PARTIES WERE SU MMONED AGAIN FOR CROSS VERIFICATION, THE OVERWHELMING EVID ENCE ALREADY AVAILABLE ON RECORD AGAINST THE APPELLANT, NO USEFU L PURPOSE WOULD BE SERVED. IT IS SO ALSO BECAUSE OF THE FACT THAT THOSE CREDITORS HAVE SHOWN, IN THEIR RESPECTIVE BALANCE S HEETS, THE AMOUNTS OF LOAN PAYABLE TO THEM BY THE APPELLANT. I N THE LIGHT OF THIS, THERE IS NO CASE THAT THE PRINCIPLE OF NATURA L JUSTICE HAS BEEN VIOLATED. AS A MATTER OF FACT, IT IS THE APPEL LANT WHO HAS TO EXPLAIN THE ADDITION IN HIS CAPITAL ACCOUNT. SINE H E HAS FAILED TO DO SO. THE ADDITION MADE IS LAWFUL. THE SAME IS CON FIRMED. AGGRIEVED, ASSESSEE IS BEFORE US. 4. LEARNED COUNSEL FOR THE ASSESSEE RAISED VARIOUS ARGUMENTS, WHICH, IN EFFECT, TAKE FOLLOWING: (I) IT HAS BEEN ADMITTED BY LOWER AUTHORITIES THAT THES E CREDITS WERE RECEIVED IN A.Y. 2000-01. ALL THE PARTIES APPEARED AND HAVE BEEN HELD TO BE GENUINE BY THE LOWER AUTHORITIES. (II) THESE PARTIES HAVE TESTIFIED THAT IN THIS YEAR AS W ELL AS IN SUBSEQUENT YEAR THESE AMOUNTS APPEARED AS OUTSTANDI NG AGAINST ASSESSEE. THE SOURCES OF DEPOSIT HAVE BEEN DULY EXP LAINED AND VERIFIED BY AO AND FOUND TO BE CORRECT. ITA 2528/DEL/04 JAI PRAKASH VS. ITO 4 (III) AT THE MOST, THE TRANSFER ENTRY MADE BY THE ASSESSE E UNILATERALLY TREATING THESE AMOUNTS TO BE CAPITAL, CAN BE CALLED IN QUESTION. (IV) THERE IS NOTHING IN LAW AGAINST THE ASSESSEE AND IN ANY CASE ADDITION U/S 68 CANNOT BE MADE BY ANY STRETCH OF IM AGINATION IN SO FAR AS THE ASSESSEE HAS DULY EXPLAINED THE CASH CRE DITS WHICH ARE TAKEN IN PRECEDING YEAR AND NOT IN THIS YEAR. A UNI LATERAL WRITE OFF OF ENTRY LEADS TO NO TAXABLE CONSEQUENCE. THESE AR E NOT THE TRADING LIABILITIES AND IN ANY CASE THE CREDITORS CLAIMED B EFORE AO THAT THE LIABILITIES WERE STILL OUTSTANDING AGAINST THE ASSE SSEE. 4.1. IT IS, THEREFORE, PLEADED THAT ADDITION U/S 68 CANNOT BE MADE AND THERE IS NO OTHER PROVISION IN LAW IN WHICH A MISTAKEN TR ANSFER ENTRY IN THE CAPITAL ACCOUNT CAN BE BROUGHT TO TAX. 5. LEARNED DR IS HEARD, WHO SUPPORTS THE ORDER OF L OWER AUTHORITIES. 6. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE GONE T HROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. LOWER AUTHORITIES HAV E NOT DISPUTED THE FACT THAT THESE ENTRIES WERE RECEIVED BY ASSESSEE IN PR ECEDING ASSESSMENT YEAR . ALL THE CREDITORS APPEARED BEFORE AO AND CONFIRMED HAVING GIVEN THE LOANS TO ASSESSEE WHICH IS DULY RECORDED BY THE AO. THE C REDITORS ONLY DISPUTED THE UNILATERAL TRANSFER ENTRY MADE BY ASSESSEE IN H IS BOOKS OF ACCOUNT TREATING THE AMOUNTS AS GIFTS. BY THIS TRANSFER ENT RY, NEITHER ANY FRESH AMOUNT WAS RECEIVED BY ASSESSEE NOR THE SAME CAN BE ADDED U/S 68 BEING ONLY A UNILATERAL TRANSFER ENTRY. IN OUR VIEW, THE CASH CR EDITS CANNOT BE ADDED IN ASSESSEES CASE, BECAUSE (I) THEY PERTAIN TO PRECEDING ASSESSMENT YEAR 2000-01; ITA 2528/DEL/04 JAI PRAKASH VS. ITO 5 (II) THE CREDITORS HAVE APPEARED AND ACCEPTED THAT THEY WERE GIVEN AS LOANS TO ASSESSEE. AO HAS DULY ACCEPTED THEIR VERS ION. GENUINENESS OF THOSE TRANSACTIONS, IDENTITY OF LEND ERS AND CAPACITY HAVE NOT BEEN CALLED IN QUESTION BY THE LOWER AUTHO RITIES. (III) UNILATERAL TRANSFER ENTRIES PASSED BY ASSESSEE IN HIS BOOKS OF ACCOUNT, TRANSFERRING THESE CREDIT BALANCES TO HIS CAPITAL ACCOUNTS, CANNOT BE HELD TO BE LIABLE TO INCOME TAX. 6.1. IN VIEW THEREOF, WE SEE NO JUSTIFICATION IN MA KING AND SUSTAINING THE IMPUGNED ADDITIONS U/S 68, WHICH ARE DELETED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25-3-2011. SD/- SD/- ( K.D. RANJAN ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25-3-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR