Jyoti Saraf, Kolkata V. Income Tax Officer, Ward-35(2), Kolkata, Kolkata

ITA 2677/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78388 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 28-11-2013
• Court: TRIBUNAL
• Department Lawyers: M L SARDAR
• Keywords: Principle of natural justice
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.2677/KOL/2013 ASSESSMENT YEAR : 2007-08 ( APPELLANT ) (RESPONDENT) JYOTI SARAF . , -VS- I.T.O., WARD-35(2), KOLKATA KOLKATA (PAN: APLPK 3302 F) FOR THE APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE FOR THE RESPONDENT SHRI M.L.SARDAR, JCIT, SR.DR DATE OF HEARING : 15.07.2014 DATE OF PRONOUNCEMENT : 15. 07.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LD. C.I.T.(A)- XX, KOLKATA AND PERTAIN TO ASSESSMENT YEARS 2007-08.. 2. GROUNDS OF APPEAL RAISED IN THIS APPEAL READ AS UNDER :- 1. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT(A) HAS ERRED IN LAW CONFIRMING THE ADDITION OF RS.21,45,000/- MA DE BY LD.ASSESSING OFFICER ON THE GROUND OF CREDITWORTHINESS & GENUINENESS OF THE LOA N CREDITORS, WHEN ALL THE LOAN CREDITORS ARE INCOME TAX ASSESSEE HOLDING VALID PER MANENT ACCOUNT NUMBER. 2. THAT THE LEARNED CIT(A) SHOULD HAVE ACCEPTED THE AFFIDAVITS MADE BY THE LOAN CREDITORS WHEREIN THEY HAVE DULY ACCEPTED THE LOAN GIVEN & ALSO SUBMITTED COPY OF THE INCOME TAX RETURN ALONG WITH THE BALANCE SHEET WHER E THE LOAN GIVEN TO YOUR APPELLANT IS DULY REFLECTED ON THE ASSETS SIDE OF THE BALANCE SHEET. 3. THAT LD. CIT(A) HAS ERRED IN TREATING INCOME/EAR NING OF THE LOAN CREDITORS DURING THAT PARTICULAR YEAR AS A ONLY CRITERIA FOR CAPACI TY TO LOAN GIVEN WHEREASZ THE LOAN HAD BEEN GIVEN FROM OUT OF OLD SAVINGS. 4. THAT THE LD. CIT(A) SHOULD NOT ADD ED THE LOANS IN YOUR APPELLANT HANDS WHEN THE LOAN CREDITORS ARE REGULAR INCOME TAX ASSESSEE AND IF THEY FALL TO PROVE THE SOURCE OF LOAN THEN THE SAID LOAN SHOULD BE ADDED IN THEIR HA NDS. ITA.NO.2677/KOL/2013 JYOTI SARAF A. YR.2007-08 2 5. THAT LD CIT(A) SHOULD NOT HAD DISBELIEVED THE BA LANCE SHEET OF THE LOAN CREDITORS FILED ALONG WITH I.T.RETURN WHERE SOURCES OF CASH D EPOSIT FOR THE LOANS WERE FULLY EXPLAINED. 6. THAT LEARNED CIT(A) SHOULD NOT HAVE ADDED THE LO AN TAKEN WHEN THE LOAN CREDITORS HAD PROVED :- A) THEIR IDENTITY B) GENUINENESS OF TRANSACTION I.E. THROUGH BANK C) SOURCES OF FUND AVAILABLE TO THEM AS SHOWN IN TH E BALANCE SHEET FILED BY THEM ALONG WITH THEIR INCOME TAX RETURN 7. THAT THE ASSESSMENT MADE BY THE LEARNED CIT(A) I S BASED ON ASSUMPTION, PRESUMPTION AND SURMISES AND AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 8. THAT APPELLANT RESERVES HER RIGHT TO ADDUCE ADDI TIONAL GROUND/GROUNDS IF ANY AT THE TIME OF HEARING. 3. IN THIS CASE THE AO FOUND THAT THERE WAS CASH CR EDITS OF A SUM OF RS.21,45,000/- IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE PRE VIOUS YEAR 2006-07 RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE CLAIMED THAT THE SAID CREDITS WERE LOAN FROM DIFFERENT PARTIES. THE AO OBSERVED THAT THE ASSESSE E CLAIMED TO HAVE TAKEN LOAN FROM THE FOLLOWING PERSONS :- SL.NO. NAMES OF THE LOAN CREDITORS LOAN AMOUNT (RS.) 1. MR.AJIT SINGH 2,00,000 2. MRS. ANITA GOEL 1,00,000 3. MR.CHIRAG JHUNJHUNWALA 95,000 4. MS.ISHA JHUNJHUNWALA 1,50,000 5. MR.MANOJ KUMAR MANDHOLIA 2,00,000 6. MRS.MINA DEVI MALL 1,25,000 7. MRS.RADHIKA SHARMA 1,00,000 8. MRS.RAJINDER KAUR 3,00,000 9. MR.RAMESWAR PRASAD SARAF, HUF 75,000 10. MRS.RASMONI PODDAR 1,00,000 11. MRS.SEEMA DEVI AGARWAL 1,00,000 12. MRS.SHANKAR SHAW 1,00,000 13. MR.SUMIT KUMAR KEDIA 1,00,000 14. MR.SUNIL SHARMA 1,00,000 15. MRS.UMA DEVI JHAWAR 1,00,000 16. MR.VIJAY RAJAK 2,00,000 TOTAL 21,45,000 IN THIS REGARD THE ASSESSEE ALSO SUBMITTED CONFIRMA TION OF THE LOANS AND ALSO SUBMITTED DETAIL OF PAN NO., INCOME TAX RETURNS, BALANCE SHEE T OF THE LOAN CREDITORS. HOWEVER, THE AO WAS NOT SATISFIED WITH THE SUBMISSION OF THE ASSESSEE. AO DOUBTED THE ITA.NO.2677/KOL/2013 JYOTI SARAF A. YR.2007-08 3 CREDITWORTHINESS OF THE LOAN CREDITORS. THE ENTIRE SUM OF RS.21,45,000/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 4. ASSESSEE WAS IN APPEAL BEFORE LD. CIT(A). THE L D. CIT(A) CONFIRMED THE ACTION OF AO HOLDING AS UNDER :- FROM THE ABOVE FACTS, IT IS CLEAR THAT THERE WAS N O CREDITWORTHINESS OF THE LOAN CREDITORS. THE LOANS WERE MOSTLY GIVEN OUT OF CASH DEPOSITED I N THEIR BANK ACCOUNTS. HOWEVER, NO SOURCE OF CASH DEPOSITS WAS EXPLAINED. FURTHER, FRO M THE DETAILS OF RETURN OF INCOME SHOWN BY THE LOAN CREDITORS, IT IS CLEAR THAT THEY DO NOT HAVE SUFFICIENT EARNING/INCOME TO GIVE SUCH HUGE LOANS. IN THE CASE OF SRI AJIT SINGH , NO RETURN OF INCOME WAS FILED. HIS OWN CAPITAL WAS SHOWN AT RS.7,105/- ONLY. IN VIEW O F THE FACTS AND CIRCUMSTANCES OF THE CASE, AS DISCUSSED ABOVE, IT IS CLEAR THAT CREDITWO RTHINESS AND GENUINENESS OF THE LOAN CREDITORS COULD NOT BE PROVED. ONUS WAS ON THE APPE LLANT TO PROVE THE SAME. IN ABSENCE OF PROVING THE TRANSACTION AS GENUINE, THE A.O. WAS JUSTIFIED TO TREAT SUCH LOANS AS INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES WH ICH WAS TAXED U/S 68 OF THE I.T.ACT, 1961. THE COLOURABLE DEVICE ADOPTED BY THE APPELLAN T TO REDUCE HER TAX LIABILITY BY WAY OF NOT SHOWING THE CORRECT INCOME OR UNDISCLOSED IN COME IN THE RETURN OF INCOME IS NOT ACCEPTABLE IN THE EYES OF THE LAW. UNDER THESE FACT S AND CIRCUMSTANCES OF THE CASE, THE GROUND RAISED BY THE APPELLANT IS DISMISSED. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL B EFORE US. 5. THE LD. COUNSEL OF THE ASSESEE SUBMITTED THAT TH E ASSESSEE HAS SUBMITTED ALL THE RELEVANT DETAILS OF THE LOAN CREDITORS. THEIR CONFI RMATION HAS ALSO BEEN GIVEN, THEIR PAN NOS. AND COPY OF THE INCOME TAX RETURNS FILED A LONG WITH THE BALANCE SHEET HAS ALSO BEEN SUBMITTED. HENCE HE SUBMITTED THAT THE AS SESSEE HAS DULY DISCHARGED HER ONUS. HE FURTHER CLAIMED THAT THE LD. CIT(A) HAS ER RED IN TREATING THE INCOME OR EARNING OF THE LOAN CREDITORS DURING THAT PARTICULA R YEAR AS THE ONLY CRITERIA FOR CAPACITY FOR LOAN GIVEN, WHEREAS THE LOAN HAD BEEN GIVEN FROM OUT OF OLD SAVINGS. THE LD. COUNSEL OF THE ASSESSEE FURTHER PLACED RELIANCE UPON THE DECISION OF THE JURISDICTAIONAL HIGH COURT IN THE CASE OF CIT VS M/ S.DATAWARE PRIVATE LIMITED IN ITAT NO.263 OF 2011, G.A.NO.2856 OF 2011 VIDE ORDER DATED 21.09.2011. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. UPON CAREFUL CONSIDERATION WE NOTE THAT THE ASSE SSE HAS SUBMITTED ALL THE REQUIRED RELEVANT DETAILS. THE ASSESSEE HAS ALSO SU BMITTED CONFIRMATION OF THE LOAN CREDITORS, COPIES OF THEIR INCOME TAX RETURNS AND T HEIR BALANCE SHEETS. WE AGREE WITH ITA.NO.2677/KOL/2013 JYOTI SARAF A. YR.2007-08 4 THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT INCOME OF THAT PARTICULAR YEAR CANNOT BE THE ONLY CRITERIA FOR THE CAPACITY OF THE LOAN GIVEN. A PERUSAL OF THE LOAN AMOUNTS REVEAL THAT THE LOAN AMOUNTS WERE NOT LARGE AMOUNTS AND HENCE IT CANNOT BE PRESUMED THAT PERSON FILING RETURN SHOWING A SMALLE R INCOME CANNOT HAVE ANY SAVING. FURTHERMORE, WE FIND THAT THE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS M/S.DATAWARE PRIVATE LIMITED (SUPRA) HAS EXPOUNDED AS UNDER :- IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSI NG OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS AC COUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AF TER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITORS IS ASSES SED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER O F THE CREDITOR AS TO THE GENUINENESS OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUC H COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RET URN SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OF FICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDIT OR AND THE GENUINENESS OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL-ACCEPTED PRINCIPLE WHICH AR E REQUIRED TO BE FOLLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY BO TH THE AUTHORITIES. THE APPEAL IS THUS DEVOID OF ANY SUBSTANCE AN D IS SUMMARILY DISMISSED. 6.1. THUS WE FIND THAT WHEN THE DETAILS OF THE LOAN CREDITORS, PAN NOS. AND THEIR INCOME TAX RETURNS WERE AVAILABLE TO THE AO THE RAT IO OF THE ABOVE JUDGMENT MANDATES THAT THE ADDITION CANNOT BE MADE WITHOUT MAKING ANY ENQUIRY FROM THE AO OF THE LOAN CREDITORS. FURTHERMORE, THE ASSESSEE HAS SUBMITTED ALL THE NECESSARY DETAILS. THE LOAN AMOUNTS ARE INDIVIDUALLY NOT LARGE AMOUNTS. UNDER T HESE CIRCUMSTANCES IT CANNOT BE PRESUMED THAT THE LOAN CREDITORS DID NOT HAVE THE C APACITY TO MAKE THAT LOAN. IN THESE CIRCUMSTANCES RESPECTFULLY FOLLOWING THE DECISION C ITED ABOVE WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FA VOUR OF THE ASSESSEE. ITA.NO.2677/KOL/2013 JYOTI SARAF A. YR.2007-08 5 7. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.07.2014. SD/- SD/- [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 15.07.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. JYOTI SARAF, 1, OLD COURT HOUSE STREET, TOBACCO HOU SE, 5 TH FLOOR, ROOM NO.519, KOLKATA-700001. 2 I.T.O., WARD-35(2), KOLKATA. 3 . CIT(A)-XX, KOLKATA 4. CIT KOLKATA 5 CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES