Nirmal Kumar Jain, Delhi V. DCIT, New Delhi

ITA 2730/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2169 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 10-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 04-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: AMIT GOEL CAS
• Keywords: Unexplained cash credit
• Section: 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : F NEW DELHI) BEFORE SHRI C.L. SETHI, J UDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNTANT MEMBER I.T.A. NO.2730/DEL./2009 (ASSESSMENT YEAR : 2004-05) NIRMAL KUMAR JAIN, VS. DCIT, CIRCLE 39(1), 10, NEW COLONY, MODEL BASTI, NEW DELHI. DELHI-10006 (PAN AAIPJ3626P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, & SHRI AMIT GOEL, CAS REVENUE BY : SHRI H.K. LAL, SR.DR ORDER PER A.K.GARODIA, AM THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF CIT(A)-XXVIII, NEW DELHI DATED 12.3.209 FOR ASSESSMENT YEAR 2004-05. THE GR OUNDS RAISED BY THE ASSESSEE READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN L AW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF ISSUING NOTICE U/S 1 48 OF I.T. ACT. THE NOTICE U/S 148 ISSUED BY AO WAS ILLEGAL, VOID AND W ITHOUT JURISDICTION AND CIT(A) SHOULD HAVE HELD SO. THE ASSESSMENT ORDER M ADE BY AO WAS LIABLE TO BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF MAKING ADDITION OF S UM OF RS.1937660/-. 2. BEFORE TAKING UP THE TECHNICAL ISSUE REGARDING V ALIDITY OF REASSESSMENT PROCEEDING, WE FIRST DECIDE THE ISSUE ON MERIT I.E. GROUND NO.2. BRIEF FACTS ARE THAT DURING THIS YEAR, THE ASSESSEE HAD PURCHASED SHARE S WORTH RS.19,37,660/- FROM ONE SHRI MANOJ BHATIA DUE TO NON-PROVIDING OF BILLS, CONTACT NOTES ETC., THE PAYMENT TO HIM WAS HELD UP, BUT THE ASSESSEE DULY ACKNOWLEDGED THE LI ABILITY AND THE SAME WAS DISCLOSED IN THE BALANCE SHEET AS ON 31.3.2004 & 31.3.2005. SUB SEQUENTLY, THE PARTY WAS NOT TRACEABLE AND IT WAS HEARD FORM MARKET THAT HIS LIA BILITY WAS MUCH HIGHER THAN HIS I.T.A. NO.2730/DEL./2009 (A.Y. : 2004-05) 2 RECEIVABLES, AND, THEREFORE, HE WAS NOT TRACEABLE. THE ASSESSEE ON ITS PART ACKNOWLEDGED THE LIABILITY UP TO 31.3.2005 AND AFTER THAT FOR TH E REASON THAT THE PARTY WAS NOT TRACEABLE AND SECONDLY FOR NON-FULFILLMENT OF OBLIGATION OF P ROVIDING THE NECESSARY BILLS AND DOCUMENTS, THIS AMOUNT OF RS.1937660/- WAS FORFEITE D AND OFFERED TO TAX IN AY 2006-07. IT WAS SUBMITTED BEFORE THE CIT(A) THAT ALL THESE F ACTS WERE EXPLAINED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT IN RESPEC T OF THIS, THE AO HAS MADE AN ADDITION IN THE PRESENT YEAR, ALTHOUGH THE LIABILITY IN QUES TION WAS WRITTEN BACK BY THE ASSESSEE IN AY 2006-07 AND OFFERED TO TAX IN THAT YEAR. BUT, I N THAT YEAR, THE AO HAS COMPLETED THE ASSESSMENT ON PROTECTIVE BASIS AND SUBSTANTIVE ADDI TION WAS MADE IN THE PRESENT YEAR. THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE THE CIT(A), BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT IS SUBMITTED BY THE LD.AR OF THE ASSESSEE THA T INCOME WAS DULY OFFERED TO TAX IN AY 2006-07 AND THE AO HAS ASSESSED THE SAME IN T HAT YEAR ON PROTECTIVE BASIS AND MADE SUBSTANTIVE ADDITION IN THE PRESENT YEAR. IT IS THE SUBMISSION OF THE ASSESSEE THAT SUBSTANTIVE ADDITION SHOULD BE MADE IN AY 2006-07 AND THE ADDITION MADE IN THE PRESENT YEAR IS TO BE DELETED BECAUSE IN THE PRESENT YEAR A ND IN THE NEXT YEAR I.E. AY 205-06, THE ASSESSEE HAS DULY ACKNOWLEDGED THE LIABILITY IN THE BALANCE SHEET AND THE LIABILITY WAS WRITTEN BACK IN AY 2006-07. LD.DR OF THE REVENUE S UPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT ADDITION WAS MADE BY THE AO IN THE PRESENT Y EAR ON THE BASIS OF THIS ALLEGATION THAT THERE WAS NO OUTSTAND ING LIABILITY AND THE PAYMENT WAS MADE BY THE ASSESSEE OUT OF ITS UNDISCLOSED SOURCES AND HENCE THE ADDITION HAS BEEN MADE IN THE PRESENT YEAR BY HOLDING THAT THE LIABILITY SHOWN IN THE PRESENT YEAR IS UNEXPLAINED CASH CREDIT. IT IS ADMITTED POSITION THAT SHRI MANOJ BH ATIA IS NOT TRACEABLE, BUT THIS FACTOR ALONE CANNOT BE DECISIVE TO HOLD THAT THERE WAS NO EXISTE NCE OF MANOJ BHATIA. THE OTHER ALLEGATION OF THE AO IS THAT WITHOUT RECEIVING THE PAYMENT HOW THE SELLER CAN DELIVER THE SHARES TO THE BUYERS. THIS ALSO APPEARS QUITE SURP RISING, BUT AGAIN THIS ALONE CANNOT BE A BASIS TO HOLD THAT SELLER MANOJ BHATIA IS NOT IN EX ISTENCE. THE ASSESSEE HIMSELF HAS WRITTEN BACK THE LIABILITY IN AY 2006-07 AND OFFERE D THE SAME FOR TAXATION IN THAT YEAR I.T.A. NO.2730/DEL./2009 (A.Y. : 2004-05) 3 AND CONSIDERING ALL THE FACTS IN THE PRESENT CASE, WE FEEL THAT THE ADDITION MADE BY THE AO IN THE PRESENT YEAR CANNOT BE SUSTAINED AND THE INC OME HAS TO BE ASSESSED IN THE AY 2006-07 AS DECLARED BY THE ASSESSEE BECAUSE WE FEEL THAT THIS IS VERY COMMON IN SHARE MARKET THAT WHEN A SHARE BROKER OR A PERSON DEALING IN SHARES INCURS HUGE LIABILITY ON ACCOUNT OF LOSS ETC., IN MANY A CASES, SUCH PERSON DISAPPEARS FORM THE MARKET. AS A RESULT, MANY A PERSONS LOOSES THEIR MONEY WHO HAS T O RECEIVE MONEY FROM SUCH PERSON, BUT SOME OTHER PERSONS TAKE ADVANTAGE OF THIS SITUA TION. THE PERSONS, WHO HAVE SOME LIABILITY TO PAY TO THESE PERSONS, THEY ARE NOT REQ UIRED TO PAY SUCH LIABILITY BECAUSE SUCH PERSON WHO IS HIDING FORM THE MARKET CANNOT CLAIM T HE MONEY FROM SUCH PERSONS. THIS TYPE OF SITUATION IS NOT UNKNOWN IN SHARE MARKET. IN SUCH A SITUATION, IT CANNOT BE HELD THAT THE LIABILITY SHOWN BY THE ASSESSEE IS BOGUS A ND HE HAS MADE PAYMENT OUT OF HIS UNDISCLOSED INCOME. IN SUCH CASES, ADDITION IS TO BE MADE WHEN THE LIABILITY CEASES TO EXIST AND SUCH ADDITION IS TO BE MADE U/S 41(1) OF I.T. ACT AND NOT U/S 68 OF THE ACT. IN THE PRESENT CASE, LIABILITY HAS CEASED TO EXIST IN AY 2006-07 AS PER EXPLANATION 1 TO SECTION 41(1) ON WRITING BACK OF THE LIABILITY BY T HE ASSESSEE. HENCE, WE HOLD THAT NO ADDITION CAN BE MADE IN THE PRESENT YEAR BECAUSE TH E AMOUNT IN QUESTION HAS BEEN OFFERED BY THE ASSESSEE FOR TAX IN AY 2006-07 AND THE SAME WAS ASSESSED BY THE AO IN THAT YEAR ON PROTECTIVE BASIS. WE HOLD THAT THIS AMOUNT HAS TO BE ASSESSED IN THAT AY 2006-07 ON SUBSTANTIVE BASIS AND NO ADDITION CAN BE MADE IN TH E PRESENT YEAR. WE ORDER ACCORDINGLY. 5. SINCE, WE HAVE DECIDED THE ISSUE OF MERIT IN FAV OUR OF THE ASSESSEE, THE TECHNICAL ISSUE REGARDING VARIABILITY OF REOPENING IS NOT REQ UIRED TO BE DECIDED BECAUSE IT HAS BECOME OF ACADEMIC INTEREST ONLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 17.12.2009. SD/- SD/- (C.L. SETHI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: DEC. 17, 2009. *SKB* I.T.A. NO.2730/DEL./2009 (A.Y. : 2004-05) 4 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-XXVIII, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. ASSISTANT REGISTRAR/ITAT