ITO, Agra V. Shri Hari Mohan Garg C/o, Agra

ITA 267/AGR/2009

• Counselvise Citation: 26720314 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Keywords: Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO. 267/AGRA/2009 ASSTT. YEAR : 2006-07 INCOME-TAX OFFICER, VS. SHRI HARI MOHAN GARG, 1(3), AGRA. C/O NARENDRA ROAD LINES (P) LTD., SHAHDARA, FIROZABAD ROAD, AGRA. (PAN : ABCPB 4331 R) (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI A.K. SHARMA, JR. DR FOR RESPONDENT : SHRI AMIT GOYAL, ADVOCATE. DATE OF HEARING : 16.08.2011 DATE OF PRONOUNCEMENT : 17.08.2011 ORDER PER BENCH: THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDE R OF CIT(A)-I, AGRA, PASSED ON 23.03.2009, ON 19.06.2009 AND IT PERTAINS TO ASSESS MENT YEAR 2006-07. THE REVENUE HAS TAKEN UP ONLY ONE GROUND IN APPEAL FILED ORIGINALLY ON 19.06 .2009. IN THE COURSE OF HEARING BEFORE US, REVISED GROUNDS WERE FILED. THE ONLY DIFFERENCE IS THAT EACH ADDITION HAS BEEN MENTIONED SEPARATELY IN THE REVISED GROUNDS, THEREFORE, THE A SSESSEE HAD NO OBJECTION FOR DECIDING THE APPEAL ON THE BASIS OF REVISED GROUNDS. 2. GROUND NO. 1 IS AGAINST DELETING THE ADDITION OF RS.2,00,000/- MADE BY THE ASSESSING OFFICER IN RESPECT OF SAFE ACCOUNT. BRIEFLY, THE FACTS ARE THAT THE CASH AVAILABLE WITH THE ASSESSEE AS PER BOOKS WAS BROKEN UP INTO TWO PARTS, I.E., CASH IN HAND AND CASH IN SAFE ACCOUNT. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT T HERE IS NO REASON FOR THE ASSESSEE TO KEEP THIS AMOUNT AS A SORT OF RESERVE FUND WHEN IT HAS BEEN C ONTINUOUSLY DOING THE WORK OF TRANSPORT 2 BUSINESS AND IT MUST BE KNOWN THAT SOME AMOUNT HAS TO BE KEPT AS CASH IN HAND FOR CONTINGENCY PURPOSES. ON THE OTHER HAND, THE LD. CIT(A) EXAMINE D THE CASH FLOW STATEMENT AND FOUND THAT THE CASH BALANCE ON THE LAST DATE OF PREVIOUS YEAR AMOU NTED TO RS.2,69,120/-. OUT OF THIS, AN AMOUNT OF RS.2,00,000/- WAS SHOWN UNDER THE HEAD SAFE ACC OUNT AND RS.69,120/- AS CASH IN HAND. THEREFORE, IT WAS CONCLUDED THAT THERE IS NO DISCRE PANCY IN CASH ACCOUNT AND MERE TRANSFER OF A SUM OF RS.2,00,000/- TO THE SAFE ACCOUNT DOES NOT LEAD TO ANY ADVERSE INFERENCE UNDER THE ACT. ACCORDINGLY, SHE DELETED THE ADDITION MADE BY THE A SSESSING OFFICER. 2.1 BEFORE US, THE LEARNED DR REITERATED THE FINDIN G OF THE ASSESSING OFFICER THAT THE ASSESSEE COULD NOT PROVE THE NECESSITY OF KEEPING THE AMOUNT AS A KIND OF RESERVE FUND SHOWN IN THE BALANCE SHEET AS SAFE ACCOUNT. ON THE OTHER HAND, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT PLACING CERTAIN AMOUNT UNDER THIS OR THAT HEAD HAS NO IMPLICATION IN SO FAR AS TAXATION IS CONCERNED. 2.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS MADE BEFORE US. WE HAVE CONSIDERED THE CASH FLOW STATEMENT PLACED ON PAGE N O. 10 OF THE PAPER BOOK, WHICH SHOWS CASH BALANCE OF RS.2,69,120/-. NO ERROR OR DISCREPANCY H AS BEEN POINTED OUT IN RESPECT OF THIS CASH BALANCE. WE HAVE ALSO PERUSED THE BALANCE SHEET AS ON 31.03.2006, WHICH SHOWS AMOUNT UNDER THE HEAD SAFE ACCOUNT, I.E., RS.2,00,000/- AND CA SH IN HAND TO RS.69,120/-. THIS FACT SHOWS THAT THERE IS NO DISCREPANCY IN THE AMOUNT WHEN CONSIDER ED AS A WHOLE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT PLACING A PART OF THE AMOUNT U NDER THE HEAD SAFE ACCOUNT HAS NO IMPLICATION, IN SO FAR AS TAXATION IS CONCERNED. TH EREFORE, THE GROUND IS DISMISSED. 3 3. GROUND NO. 2 IS AGAINST DELETING THE AMOUNT OF R S.98,466/- IN RESPECT OF INTEREST INCOME. THE FACTS OF THE CASE ARE THAT THE ASSESSEE BORROWE D CERTAIN MONIES AND LENT THE SAME TO NARENDRA ROAD LINES (P) LTD., A COMPANY, IN WHICH HE IS A DI RECTOR. THE RATE OF INTEREST PAID AND CHARGED IN RESPECT OF THE BORROWINGS AND THE LENDING WAS TH E SAME, THUS, RESULTING IN NO PROFIT NO LOSS IN THESE TRANSACTIONS. THE ASSESSING OFFICER HELD THAT THE PURPOSE OF ADVANCING MONEY AS STATED BY THE ASSESSEE, I.E., TO MAKE AVAILABLE MONEY TO THE COMPANY FOR ITS BUSINESS, DOES NOT STAND TO REASON, AS THE SAME PURPOSE COULD HAVE BEEN SERVED BY INCREASING CAPITAL ETC. IN VIEW THEREOF, HE ADDED THE AMOUNT OF INTEREST PAID BY THE ASSESSEE T O THE CREDITOR, TO THE TOTAL INCOME. THE LEARNED CIT(A) EXAMINED THE FACTS, INTER ALIA, IN RESPECT O F PERSONS FROM WHOM MONIES WERE BORROWED AND TO WHOM THE INTEREST WAS PAID. FINALLY, IT WAS CONCLUDED THAT THE ASSESSEE, IN FACT, INCURRED EXPENDITURE OF RS.98,466/-, WHICH IS DEDUCTIBLE IN COMPUTING THE INCOME UNDER THE RESIDUARY HEAD. 3.1 BEFORE US, LEARNED DR REITERATED THAT THE EXPLA NATION FURNISHED BY THE ASSESSEE REGARDING THE PURPOSE OF TRANSACTION OF LENDING MONEY TO THE COMPANY WAS NOT SATISFACTORILY EXPLAINED AT THE TIME OF ASSESSMENT. ON THE OTHER HAND, THE CASE OF THE LD. COUNSEL IS THAT THERE IS NO DISPUTE ABOUT THE BORROWING OF MONEY AND PAYMENT OF INTERES T TO THE LENDERS. THE INTEREST PAID TO THEM HAS BEEN RECOVERED FROM THE COMPANY. THESE TRANSACT IONS WERE UNDERTAKEN, AS THE COMPANY HAS BEEN PROHIBITED FROM BORROWING THE FUNDS FROM OUTSI DERS AND, THEREFORE, MONEY WAS PROVIDED BY THE DIRECTORS AFTER BORROWING THE SAME FROM OTHERS. THERE IS NO DISPUTE ABOUT THE GENUINENESS OF THE CREDITS OR THE ACTUAL PAYMENT OF INTEREST. WHEN CONFRONTED WITH THE FACT THAT THE TRANSACTIONS ARE BETWEEN THE RELATED PARTIES AND NO PROFIT HAS B EEN EARNED BY THE ASSESSEE IN THESE TRANSACTIONS ALTHOUGH HE HAS TAKEN RISK, NO EXPLANATION COULD BE TENDERED EXCEPT THAT THE TRANSACTIONS HAVE BEEN UNDERTAKEN FOR THE PURPOSE OF BUSINESS OF THE COMPANY. 4 3.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS MADE BEFORE US. IN SO FAR AS THE GENUINENESS OF THE CREDITS AND INTEREST PAID AR E CONCERNED, THE FACTS HAVE BEEN MENTIONED ON PAGE NOS. 3 & 4 OF THE IMPUGNED ORDER IN TERMS OF T HE NAMES OF THE CREDITORS AND THE INTEREST PAID. THESE FACTS HAVE NOT BEEN DISPUTED BY THE LD. DR. THE TRANSACTIONS LED TO NIL INCOME AS FAR AS THE ASSESSEE IS CONCERNED. SINCE THE INTEREST HA S ACTUALLY BEEN PAID, WE ARE OF THE VIEW THAT THERE IS NO QUESTION OF DISALLOWANCE OF THE PAYMENT . IN OTHER WORDS, LD. CIT(A) RIGHTLY CAME TO THE CONCLUSION THAT THE INTEREST PAID WILL HAVE TO BE SET OFF AGAINST THE INTEREST RECEIVED. COMING TO THE QUERY RAISED BY US, THE TRANSACTIONS ARE BET WEEN THE RELATED PARTIES, I.E., THE ASSESSEE AND THE COMPANY, IN WHICH THE ASSESSEE HAS RECEIVED INT EREST. IN THESE BILATERAL TRANSACTIONS, THE ASSESSEE HAS NOT EXPENDED ANY MONEY AND, THEREFORE, THE PROVISION CONTAINED IN SECTION 40A(2) IS NOT APPLICABLE. THUS, WE HOLD THAT THE LD. CIT(A ) RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THUS, THIS GROUND IS ALSO DISMIS SED. 4. GROUND NO. 3 IS AGAINST DELETING THE ADDITION OF RS.7,88,996/- MADE IN RESPECT OF CREDITS, IN RESPECT OF WHICH SATISFACTORY EXPLANATION WAS NO T ALLEGEDLY FURNISHED BEFORE THE ASSESSING OFFICER. IN THIS CONNECTION, THE ASSESSING OFFICER HAS MADE A MENTION OF FIVE CREDITS ON PAGE 3 OF THE ASSESSMENT ORDER. ADMITTEDLY, THREE LOANS OF RS .2,92,737/-, RS.95,200/- AND RS.2,86,059/- FROM DINESH KUMAR SHARMA, SIYA RAM AGARWAL AND MAHE NDRA PRASAD BHARGAVA ARE OLD. HOWEVER, TWO NEW LOANS OF RS.33,000/- AND RS.80,000 /- HAVE BEEN RAISED FROM VINAY KUMAR AND ROHIT MOHAN GARG RESPECTIVELY IN THIS YEAR. THE ASSESSING OFFICER HAS ADDED ALL THE AMOUNTS, AGGREGATING TO RS.7,86,996/-, WITHOUT FURN ISHING ANY APPROPRIATE REASON. HOWEVER, THE LD. CIT(A) HAS CONSIDERED EACH LOAN INDIVIDUALLY. A S MENTIONED EARLIER, THE LOANS FROM SHRI DINESH KUMAR SHARMA, SIYA RAM AGARWAL AND MAHENDRA PRASAD BHARGAVE ARE OLD. THEREFORE, IT 5 HAS BEEN HELD THAT THESE AMOUNTS COULD NOT HAVE BEE N ADDED TO THE INCOME OF THIS YEAR. COMING TO THE LOAN OF RS.33,000/- FROM VINAY KUMAR, THE ON LY OBSERVATION MADE BY THE ASSESSING OFFICER WAS THAT INTEREST HAD NOT BEEN PAID. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE AMOUNT WAS PAID BY WAY OF A CHEQUE, WHICH HAS BEEN DEBITED TO THE BANK ACCOUNT OF THE CREDITOR. HE HAD A BALANCE OF RS.34,115/- AT THE TIME OF DEBI T OF THE CHEQUE TO HIS ACCOUNT. SINCE GENUINENESS HAD NOT BEEN DOUBTED AND THE ONLY REASO N MENTIONED WAS REGARDING NON-PAYMENT OF INTEREST, THE LD. CIT(A) HELD THAT THE SOURCE OF CR EDIT STANDS EXPLAINED. IN THE CASE OF ROHIT MOHAN GARG, THE ONLY OBSERVATION MADE BY THE ASSESS ING OFFICER WAS THAT THE CONFIRMATION WAS NOT SIGNED BY THE CREDITOR. HOWEVER, BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE CREDITOR WAS NOT AVAILABLE WHEN THE ASSESSEE WAS REQUIRED TO FUR NISH THE CONFIRMATION. THE CREDITOR IS ASSESSED TO TAX AND AN AMOUNT OF RS.80,000/- WAS DEPOSITED I N HIS BANK ACCOUNT PRIOR TO FURNISHING OF LOAN ON 27.02.2006. THIS LOAN IS REFLECTED IN HIS BALANC E SHEET. AFTER CONSIDERING THE FACTS, THE LD. CIT(A) CAME TO THE CONCLUSION THAT IN ANY CASE, AVA ILABILITY OF THE FUNDS HAD NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE IDENTITY AND CREDITWO RTHINESS HAVE ALSO NOT BEEN DOUBTED. THE AMOUNT HAS BEEN CONSIDERED AS INCOME SIMPLY BECAUSE THE CREDITOR DID NOT SIGN THE CONFIRMATION LETTER. THE CREDITOR IS THE SON OF ASSESSEE. IN THE SE CIRCUMSTANCES, IT HAS BEEN HELD THAT THE CREDIT STANDS EXPLAINED WITHIN THE MEANING OF SECTION 68. 4.1 BEFORE US, THE LD. DR RELIED ON THE ORDER OF TH E ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL TOOK US THROUGH THE ORDER OF THE LD. CIT(A) . ONE OF THE FINDINGS IS THAT THREE LOANS ARE OLD. IN RESPECT OF OTHER TWO LOANS, IT HAS BEEN HEL D THAT THE ASSESSEE HAS DISCHARGED HIS BURDEN AND THEREAFTER, THE ASSESSING OFFICER HAS NOT BROUG HT ON RECORD ANY CONTRARY OR ADVERSE EVIDENCE. 6 4.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. WE HAVE PERUSED THE COPIES OF THE ACCOUNT OF THE CREDITORS PLACED IN THE PAPER BOOK ALONGWITH OTHER EVIDENCES BETWEEN PAGE NOS. 33 TO 46 OF THE PAPER B OOK. IT IS SEEN THAT FIRST THREE LOANS ARE OLD LOANS AND EQUIVALENT AMOUNTS HAVE BEEN BROUGHT FORW ARD FROM 31.03.2006. THEREFORE, NONE OF THESE LOANS CAN BE ADDED TO THE INCOME OF THIS YEAR , AS NO CREDIT HAS BEEN MADE IN THE BOOKS OF THIS YEAR. COMING TO THE LOAN FROM VINAY KUMAR, THE SAME HAS BEEN TAKEN BY WAY OF CHEQUE AND HE HAD SUFFICIENT AMOUNT IN HIS ACCOUNT TO COVER TH E LOAN OF RS.33,000/-. MERELY, NON-PAYMENT OF INTEREST CANNOT CONVERT A GENUINE LOAN INTO NON-GEN UINE LOAN. THUS, WE ARE OF THE VIEW THAT THE LD. CIT(A) RIGHTLY DELETED THIS AMOUNT ALSO FROM TH E ASSESSMENT. IN SO FAR AS LOAN FROM ROHIT MOHAN GARG IS CONCERNED, THE LENDER IS THE SON OF T HE ASSESSEE. HE DEPOSITED AN EQUIVALENT AMOUNT IN CASH IN HIS BANK ACCOUNT AND ADVANCED LOA N TO THE ASSESSEE. THESE FACTS STAND CORROBORATED FROM HIS ASSESSMENT RECORD. THE ONLY P OINT OF SUSPICION, WHICH SURVIVES, IS THAT THERE WAS CASH DEPOSIT OF AN IDENTICAL AMOUNT PRIOR TO ADVANCING OF LOAN. WE ARE OF THE VIEW THAT THIS FACT BY ITSELF DOES NOT LEAD TO THE CONCLUSION THAT THE CREDIT IS NON-GENUINE, FOR THE REASON THA T THE SON IS ALSO ASSESSED TO TAX AND IF HE IS NOT IN A POSITION TO EXPLAIN THE SOURCE OF DEPOSIT IN HIS BANK ACCOUNT, THE PROPER COURSE WOULD BE TO SCRUTIN IZE HIS CASE AND TAKE ACTION AS PER LAW. THUS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS RIGHT IN DELETING THIS AMOUNT ALSO FROM THE TOTAL INCOME. IN THE RESULT, GROUND NO. 3 IS DISMISSED. 5. GROUND NO. 4 IS AGAINST DELETING THE ADDITION OF RS.1,80,000/- MADE IN RESPECT OF LOW HOUSEHOLD WITHDRAWALS. THE FACTS NOTED BY THE ASSES SING OFFICER ARE THAT WITHDRAWALS FOR HOUSEHOLD EXPENSES WERE SHOWN AT RS.60,000/-. THE A SSESSEE HAS INCURRED EXPENDITURE OF RS.5,75,274/- ON THE EDUCATION OF CHILDREN. LOOKING TO THE INCOME OF THE ASSESSEE AND SUBSTANTIAL EXPENDITURE INCURRED ON EDUCATION OF CHILDREN, HE W AS OF THE VIEW THAT THE WITHDRAWALS ARE NOT 7 SUFFICIENT TO MEET HOUSEHOLD EXPENSES. HE ESTIMATED THE EXPENSES AT RS.20,000/- PER MONTH, LEADING TO ADDITION OF RS.1,80,000/-. THE LEARNED C IT(A) DELETED THIS ADDITION BY OBSERVING THAT (I) WITHDRAWALS, AGGREGATING TO RS.72,000/- HAVE BEEN MADE BY THE SON AND WIFE OF THE ASSESSEE FOR HOUSEHOLD EXPENSES, AND (II) THE ADDITION IS NO T BASED ON ANY MATERIAL OR EVIDENCE ON RECORD. THUS, THE ADDITION HAS BEEN DELETED. 5.1 THE CASE OF THE LD. DR BEFORE US IS THAT THE WI THDRAWALS ARE TOO LOW LOOKING TO OTHER EXPENSES OF THE ASSESSEE AND HIS INCOME. ON THE OTH ER HAND, THE CASE OF THE LD. COUNSEL IS THAT NO EVIDENCE EXISTS ON RECORD TO SHOW THAT ANY EXPENDIT URE IN EXCESS OF ONE SHOWN BY ASSESSEE WAS INCURRED BY HIM. 5.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. WE ARE OF THE VIEW THAT THE EDUCATION EXPENSE OF THE CHILDREN AT RS.5,75,274/- DO INDICATE THAT HOUSEHOLD EXPENSES OF RS.60,000/- FOR THE WHOLE YEAR DO NOT R EFLECT THE REAL POSITION. IN ANY CASE, THE ASSESSING OFFICER HAS NOT TAKEN INTO ACCOUNT WITHDR AWALS OF RS.72,000/- MADE BY THE SON AND THE WIFE OF THE ASSESSEE. THEREFORE, THE DEDUCTION OF T HIS AMOUNT WILL HAVE TO BE GIVEN TO THE ASSESSEE, LEAVING A BALANCE OF RS.1,08,000/- LOOKIN G TO OVER ALL CIRCUMSTANCES, I.E., THE EXPENDITURE ON EDUCATION AND THE INCOME, WE ARE OF THE VIEW THAT ADDITION OF RS.1,00,000/- WILL BE JUST AND PROPER. ACCORDINGLY, GROUND NO. 4 IS PA RTLY ALLOWED. 6. GROUND NO.5 IS AGAINST THE DELETION OF A SUM OF RS.50,000/-, ADDED BY THE ASSESSING OFFICER IN RESPECT OF AGRICULTURAL INCOME. THE FIND ING OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAD BEEN SHOWING AGRICULTURAL INCOME IN PAST, BEING RS.32,115/- IN A.Y. 2004-05 AND RS. 49,000/- IN ASSESSMENT YEAR 2004-05. NO SUCH INCOME WAS SHOWN IN THIS YEAR. HE ESTIMATED THE 8 INCOME AT RS.50,000/- BUT TAXED IT UNDER THE RESIDU ARY HEAD. THE FINDING OF THE LD. CIT(A) IS THAT THERE IS NO MATERIAL OR EVIDENCE TO SUBSTANTIATE TH E ESTIMATION OF AGRICULTURAL INCOME OF RS.50,000/-. IT IS ALSO NOT UNDERSTANDABLE AS TO HO W THE ESTIMATED AGRICULTURAL INCOME OF RS.50,000/- COULD BE TAXED UNDER THE RESIDUARY HEAD . 6.1 BEFORE US, THE LD. DR RELIED ON THE FINDINGS OF THE ASSESSING OFFICER, BUT HE WAS NOT ABLE TO EXPLAIN AS TO HOW AGRICULTURAL INCOME WAS TAXABL E UNDER THE RESIDUARY HEAD. ON THE OTHER HAND, LD. COUNSEL ASSERTED THAT INCOMES HAD BEEN DE CLARED IN PAST ON ACTUALS AND IN THIS YEAR, THERE WAS NO INCOME. THUS, THERE IS NO QUESTION OF SHOWING ANY AGRICULTURAL INCOME. 6.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. WE ARE OF THE VIEW THAT EVEN IF THE ASSESSING OFFICER HAD SOME RE ASON TO ESTIMATE THE AGRICULTURAL INCOME, THERE IS NO REASON, WHATSOEVER, TO TAX THIS INCOME UNDER THE RESIDUARY HEAD. THEREFORE, IN VIEW OF POSITIVE ASSERTION BY THE ASSESSEES COUNSEL THAT T HERE WAS NO AGRICULTURAL INCOME IN THIS YEAR, WE HAVE NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A) IN THIS MATTER. ACCORDINGLY, GROUND NO. 5 IS ALSO DISMISSED. 7. IN RESULT, THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (H.S. SIDHU) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH AUGUST, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : BY ORDER APPELLANT/RESPONDENT/CIT(A)/CIT/DR/GUARD FILE ASSISTANT REGISTRAR TRUE COPY 9 DOD : 16.08 DOT : 17.08 DOP : 17.08