The ACIT, Circle-5, Baroda V. M/s. Kanaiyalal & Co., Baroda

ITA 2553/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80398 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI , ACCOUNTANT MEMBER ITA NO . 2553 /AHD/20 1 0 A. Y. 2007 - 08 ACIT, CIRCLE - 5, BARODA. VS M/S. KANAIYALAL & CO. PRASANNA HOUSE - 1, ASSOC IATED SOCIETY, AKOTA, BARODA. PAN: AADFK 9427E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V.K. SINGH , SR. D.R. , ASSESSEE(S) BY : SHRI S.N. SOPARKAR WITH MS. URVASHI SODHAN , AR / DATE OF HEARING : 04 / 0 9 /201 4 / DATE OF PRONOUNCEMENT: 1 / 10 /201 4 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN A PPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF TH E LD. CIT (APPEALS) - V , BARODA AND THE GROUND S RAISED ARE AS UNDER: 1 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION U/S.68 OF RS.77,67,664/ - ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND DISALLOWANCE OF RS.92,772/ - ON ACCOUNT OF INTEREST ON SUCH CASH CREDIT, IN RESPECT OF UNSECURED LOAN SHOWN TO HAVE RECEIVED BY THE ASSESSEE FROM TWO PARTIES VIZ. M/S. S.P. PATEL &. SONS AND SWASTIK PACKAGING PVT. LTD. 1 (II). THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IN THE CASE OF CASH CREDIT THE ONUS SQUARELY ON THE ASSESSEE TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS TRANSACTION. IN THIS CASE, EVEN IF THERE IS A RUNNING ACCOUNT OF THE ABOVE TWO PARTIES WITH THE ASSESSEE THAT DOES NOT CHANGE THE CHARACTE R OF TRANSACTION. IN THE STATEMENT RECORDED, THEY CATEGORICALLY DENIED TO HAVE ADVANCED ANY LOAN TO THE ASSESSEE. THUS, THE ASSESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITORS AND EVEN THE GENUINENESS OF THE TRANSACTIO N WAS DOUBTFUL IN VIEW OF THE STATEMENT RECORDED IN THE CASE OF ABOVE TWO PARTIES. ITA NO.2553/AHD/2010 ACIT, CIRCLE - 5, BARODA VS. M/S. KANAIYALAL & CO. FOR A.Y. 2007 - 08 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 115WE(3) DATED 24.12.2009 WERE THAT THE ASSESSEE HAS DECLARED AN INCOME OF RS. 6,32,180/ - , HOWEVER , THE ASSESSMENT WAS FRAMED BY MAKING AN ADDITION U/S.68 OF IT ACT OF RS.77,67,664/ - AND THE CORRESPONDING DISALLOWANCE OF INTEREST OF RS.92,772/ - . IT WAS NOTED BY THE AO THAT CERTAIN UNSECURED LOANS WERE SHOWN IN THE B ALANCE S HEET. HE H AS ISSUED NOTICE AND RECORDED THE STATEMENT U/S.131 OF IT ACT IN RESPECT OF TWO PARTIES, NAMELY, NARENDRA B. PATEL, PARTNER OF SP PATEL & SONS AND ANOTHER PARTY, NAMELY, RAVENDRA J. PATEL PROPRIETOR OF SWASTIK PACKAGING CO. THE STATEMENT RECORDED WAS DISCU SSED BY THE AO IN THE TABULAR FORM ON PAGE 3 OF THE ASSESSMENT ORDER. HE HAS NOTED THAT SRI NARENDRA B. PATEL, PARTNER OF SP PATEL & SONS HAS INFORMED THAT THE BUSINESS IS TRADING IN TOBACCO. THE AO HAS NOTED THAT THE SAID PARTY HAD DENIED OF GIV ING ANY LO AN TO THE ASSESSEE I N RESPECT OF OTHER PARTY, NAMELY, RAVENDRA J. PATEL , PROPRIETOR OF SWASTIK PACKAGING CO. , STATED TO BE IN THE BUSINESS WAS OF MANUFACTURING OF CORRUGATE BOXES . H E HAS ALSO DENIED OF GIVING ANY LOAN TO THE ASSESSEE. ON THE OTHER HAND, TH E ASSESSEE HAS STATED BEFORE THE AO THAT THOSE PARTIES HAVE TOTALLY MISUNDERSTOOD THE TRANSACTION AND THE ASSESSEE HAD IN FACT TAKEN THE UNSECURED LOAN FROM THOSE PARTIES , INTEREST WAS PAID AND TDS WAS DEDUCTED . B OOKS OF ACCOUNT S HAVE DULY BEEN A UDITED U/S .44AB. THEY HAVE DULY DISCLOSED THE LOAN ADVANCE IN THEIR RESPECTIVE BALANCE SHEETS. HOWEVER, THE AO HAS NOT CONSIDERED THOSE EVIDENCES AND BY PLACING RELIANCE ON THE STATEMENT GIVEN BY THOSE PARTIES IMPUGNED ADDITION WAS MADE AS PER THE FOLLOWING DETAILS. SR.NO. NAME OF THE PARTY AMOUNT OF LOAN RECEIVED IN A.Y.2007 - AMOUNT OF INTEREST DEBITED IN THE BOOKS OF ITA NO.2553/AHD/2010 ACIT, CIRCLE - 5, BARODA VS. M/S. KANAIYALAL & CO. FOR A.Y. 2007 - 08 - 3 - 08 BY THE ASSESSEE. THE ASSESSEE. 1. SWASTIK PACKAGING CO. RS.33,57,490/ - RS.48,437/ - 2. S.P. PATEL & SONS RS.44,10,172/ - RS.44,335/ - 3. TOTAL RS. 77,67,664/ - RS.92,772/ - 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY , AGAIN THOSE EVIDENCES WERE PLACED BEFORE LEARNED CIT(A) WHO HAS ALLOWED THE ASSESSEE S GROUND AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, T HE SUBMISSIONS OF THE APPELLANT, THE ASSESSMENT ORDER AND THE REMAND REPOT. AN EXAMINATION OF THE CREDITORS ACCOUNT CONFIRMS THE APPELLANT S ARGUMENT THAT THERE ARE NUMBER OF CREDIT AND DEBIT TRANSACTIONS IN THESE ACCOUNTS AND THEY ARE SIMILAR TO CURRENT A CCOUNT. THE APPELLANT BEING A SHROFF, THE FUNDS ARE RAISED OR ADVANCED PERIODICALLY AND THAT THERE COULD BE GENUINE MISUNDERSTANDING IN A LOAN/CURRENT ACCOUNT REPAYMENT TRANSACTION. BOTH THE CREDITORS ARE ASSESSED TO TAX AND THEIR ACCOUNTS ARE AUDITED AND THE OVER RELIANCE ON THE ASSERTION IN THE STATEMENTS THAT NO LOANS WERE ADVANCED TO THE APPELLANT BY THE AO WITHOUT SCRUTINIZING ALL THE OTHER ATTENDANT FACTS COULD NOT BE GROUND ALONG FOR CASH CREDIT ADDITIONS AND INTEREST. THE ADDITION OF RS.77,67,664/ - ON ACCOUNT OF CASH CREDIT AND DISALLOWANCE OF INTEREST ON SUCH CASH CREDIT OF RS.92,772/ - ARE DIRECTED TO BE DELETED. 4. FROM THE SIDE OF THE REVENUE, LEARNED SR. DR, MR. V.K. SINGH APPEARED AND AT THE OUTSET PLEADED THAT THE FINDINGS OF LEARNED CIT(A) WE RE CRYPTIC IN NATURE. THERE WAS NO DISCUSSION ABOUT THE FINDINGS GIVEN IN THE ASSESSMENT ORDER. HE HAS ALSO PLEADED THAT NO CROSS - EXAMINATION WAS REQUIRED SINCE THE ASSESSEE WAS GRANTED OPPORTUNITY AFTER THE RECORDING OF THE STATEMENT ; RATHER THE ASSESSEE HAS NEVER DEMANDED FOR ANY CROSS EXAMINATION BEFORE THE AO. HE HAS THEREFORE REQUESTED TO REVERSE THE FINDING OF LEARNED CIT(A) AND UPHOLD THE ACTION OF THE AO. 5. FROM THE SIDE OF THE RESPONDENT - ASSESSEE, LEARNED AR, MR. S.N. SOPARKAR AND MS. URVASHI SOD HAN APPEARED AND PLACED RELIANCE ON SEVERAL EVIDENCES AS PER THE COMPILATION, IN SHORT LISTED BELOW: ITA NO.2553/AHD/2010 ACIT, CIRCLE - 5, BARODA VS. M/S. KANAIYALAL & CO. FOR A.Y. 2007 - 08 - 4 - 1. COPY OF RETURN OF M/S. S.P. PATEL & SONS FOR A.Y. 2007 - 08. 2. TDS CERTIFICATE ISSUED BY ASSESSEE TO SP PATEL. 3. ANNUAL ACCOUNTS OF SP PATEL TO DEMON STRATE THE LOAN ADVANCED TO THE ASSESSEE. 4. COPY OF RETURN OF SWASTIK PACKAGING CO. 5. TDS CERTIFICATE ISSUED BY THE ASSESSEE TO SWASTIK PACKAGING CO. 6. ANNUAL ACCOUNTS OF SWASTIK PACKAGING CO. DEMONSTRATE THE LOAN REFLECTED IN THE BOOKS OF ACCOUNTS. 7. LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF SWASTIK PACKAGING CO. 8. LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF SP PATEL. 9. AFFIDAVIT OF MR. NARENDRA B. PATEL 10. AFFIDAVIT OF MR. RAVENDRA J. PATEL. 6. HEARD BOTH THE SIDES AT SOME LENGTH. ORDERS OF THE AUTHORITIES BELOW ARE PERUSED IN THE LIGHT OF THE COMPILATION FILED. AS FAR AS THE COMPLIANCE FROM THE SIDE OF THE ASSESSEE PERTAINING TO THE PROVISIONS OF SECTION 68 IS CONCERNED , IT IS EVIDENT FROM THE ORDER OF THE AO THAT THE PARTIES WHO HAVE ADV ANCED THE LOAN HAVE COME FORWARD AND APPEARED BEFORE THE AO. THE ASSESSEE HAS ALSO FURNISHED CERTAIN EVIDENCES SUCH AS TDS DEDUCTED AND THE RESPECTIVE STATEMENT OF ACCOUNTS. IT WAS ALSO INFORMED THAT THE SAID TWO PARTIES WERE MAINTAINING THEIR BOOKS OF ACC OUNT AND THOSE BOOKS OF ACCOUNTS HAVE BEEN AUDITED U/S. 44AB OF IT ACT. MEANING THEREBY, THOSE PARTIES WERE ASSESSED TO TAX. THE AO HAS MAINLY TAKEN THE DECISION AGAINST THE ASSESSEE DUE TO THE STATEMENT RECORDED U/S.131 OF THOSE TWO PARTIES. HOWEVER, LATE R ON THROUGH THE AFFIDAVIT S RESPECTIVELY FURNISHED BY BOTH THE PARTIES , IT WAS STATED ON OATH THAT A MISTAKE WAS COMMITTED THROUGH AN OVERSI GHT . IN THE AFFIDAVIT, IT WAS STATED THAT IT WAS ASKED WHETHER I HAVE TAKEN ANY LOAN AND THEREFORE MISTAKENLY STATED THAT NO LOAN WAS TAKEN. IN THE AFFIDAVIT, IT WAS STATED THAT IN THE SAID YEAR THERE WERE CERTAIN DEBITS AND CREDITS AND AT THE END I HAD TO RECOVER THE AMOUNT FROM M/S. KANHAIYALAL & CO. IT WAS ALSO AFFIRMED IN THE SAID AFFIDAVIT THAT IN RESPECT OF THE SA ID FINANCIAL ITA NO.2553/AHD/2010 ACIT, CIRCLE - 5, BARODA VS. M/S. KANAIYALAL & CO. FOR A.Y. 2007 - 08 - 5 - TRANSACTION AN INTEREST @ 18% PER ANNUM WAS EARNED ON WHICH TDS HAD ALSO BEEN DEDUCTED . 6.1 WE HAVE EXAMINED A REMAND REPORT FURNISHED BY THE AO DATED 21.05.2010 THROUGH WHICH IT WAS ACKNOWLEDGED THAT THERE WAS TRANSACTION WITH THE SAID PARTY AND THOSE PARTIES HAVE FURNISHED THEIR STATEMENTS OF ACCOUNTS AS WELL AS THE DETAILS OF THE BOOKS OF ACCOUNTS. IT WAS NOT DENIED BY THE REVENUE DEPARTMENT THAT THOSE PARTIES WERE SUBJECT ED TO TAX RESPECTIVELY BY THE REVENUE DEPARTMENT. 6.2 THE STATEMENT WHICH WAS RECORDED BY THE AO U/S.131 WAS ALLEGED TO HAVE NOT BEEN CONFRONTED TO THE ASSESSEE BEFORE THE FINALIZATION OF THE ASSESSMENT. RATHER, LEARNED AR HAS ARGUED THAT THE COPY OF THE SAID STATEMENT WAS NOT GIVEN TO THE ASSESSEE. RELIANCE IS PLACED ON T HE FOLLOWING DECISIONS: 1. CIT VS. BAGATI CO - OPERATIVE BANK (GUJ.) 2. MURLIDHAR LAHERIMAL VS. CIT, 278 ITR 170 AND 280 ITR 512 (GUJ.) 6.3 IN SUCH A SITUATION WHEN THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS AS PRESCRIBED U/S.68 OF IT ACT BY FURNISHING THE IDENTITY OF THOSE PERSONS ; THEIR STATEMENTS OF ACCOUNTS AS WELL AS THEIR AFFIDAVITS AND THAT THOSE PARTIES WERE INDEPENDENTLY ASSESSED TO TAX THEN WE HEREBY HOLD THAT THE IDENTITY, CREDITWORTHINESS AND THE CAPACITY TO ADVANCE SUCH LOAN WAS ESTABLISHED . WE HOLD THAT ON THE BASIS OF ALL THOSE EVIDENCES THE EXISTENCE OF THE LOAN WAS APPARENT THEN THE STRICT ONUS IS ON THE AO TO DEMONSTRATE THAT WHATEVER RECORDED IN THE ACCOUNTS WAS NOT REAL. WE, THEREFORE, HEREBY HOLD AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE ASSESSEE HAD DISCHARGED THE ONUS BUT NOT THE AO. C ONSIDERING ALL THESE ASPECTS LEARNED CIT(A) HAS RIGHTLY DELETED THE ITA NO.2553/AHD/2010 ACIT, CIRCLE - 5, BARODA VS. M/S. KANAIYALAL & CO. FOR A.Y. 2007 - 08 - 6 - ADDITION. RESULTANTLY, WE FIND NO FORCE IN THE GROUNDS RAISED BY REVENUE HENCE DISMISSED. 7 . IN THE RESULT, REVENUE S APPEAL IS DISMISSED. SD/ - SD/ - ( N.S. SAINI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 1 / 10 / 20 1 4 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD