Sh. Dharmender Singh, Noida V. ITO, Noida

ITA 2764/DEL/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1819 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 14-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR ANJULA JAIN
• Keywords: Unexplained cash credit

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 2 : NEW DELHI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER ITA NO. 2764 /DEL/ 2014 (ASSESSMENT YEAR: 2005 - 06 ) DHARMENDER SINGH, A - 31, SECTOR - 33, NOIDA, PAN:ATZPS9958B VS. ITO, WARD - 1, NOIDA ( ASSESSEE ) (RESPONDENT) ASSESSEE BY : SH. MOHIT AGGARWAL, ADV. : SH. ALOK MATHUR, ADV RESPONDENT BY : DR. ANJULA JAIN, SR. DR DATE OF HEARING 14.12.2015 DATE OF PRONOUNCEMENT 21 . 12 .2015 O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 07.03.2014 OF THE LD CIT(A) , NOIDA FOR THE ASSESSMENT YEAR 2005 - 06. THE ASSESSEE HAS RAISED VARIOUS GROUNDS, HOWEVER THE FOLLOWING ISSUES AROSE FOR CONSIDERATION AND ADJUDICATION: I . WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,41,740/ - ON ACCOUNT OF SHORT OF CAH. II. WHETHER IN THE FACTS AND CIRCUMSTANCES OF T HE CASE THE LD CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3 LAC ON ACCOUNT LOAN TAKEN FROM MR. SUBHASH CHAND. 2. THE ASSESSEE RUNS A CABLE NETWORK IN NOIDA. THE ASSESSEE FILED ITS RETURN OF INCOME ON 03.01.2006 DECLARING INCOME OF RS.1,11,864/ - . DU RING THE COURSE OF ASSESSMENT THE AO NOTED THAT THERE WAS A NEGATIVE CASH BALANCE OF RS.1,41,740/ - AS ON 31.03.2005. THE AO ASKED THE ASSESSEE TO EXPLAIN THE NEGATIVE CASH BALANCE AS WORKED OUT. THE AO HAS RECORDED THAT THE ASSESSEE DID NOT FURNISH ANY EXP LANATION FOR THE EXPENDITURE MADE BY HIM TO THE EXTENT OF RS.1,41,740/ - WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, ACCORDINGLY, THE AO MADE AN ADDITION OF RS.1,41,740/ - BEING UNEXPLAINED. PAGE NO. 2 3. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LEAR NED COMMISSIONER OF INCOME - TAX (APPEALS), BUT COULD NOT SUCCEED . THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS CONFIRMED THE ADDITION MADE BY THE AO ON THE GROUNDS THAT THE ASSESSEE HAS NOT REBUT TED THE VARIOUS FIGURES CASH RECEIVED AND CASH PAYMENT, ON THAT BASIS THE AO ESTABLISHED THAT THERE WAS NEGATIVE CASH BALANCE IN THE BOOKS OF ACCOUNT. 4. BEFORE THE TRIBUNAL THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS GROSS RECEIPT OF RS. 8 , 10,000/ - AND A MARGIN IN THIS TYPE OF BUSINESS IS ONLY ABOUT 15% AS A MAJOR EXPENDITURE IS INCURRED TO MAIN CHANNEL PARTNER AND SALARY OF STAFF. HE HAS FURTHER CONTENDED THAT THE AO HAS NOT DISALLOWED ANY EXPENDITURE AS HE FOUND NO EXPENDITURE TO BE EXCESS IVE OR WHICH REMAIN UN - VOUCHED. THE AO FAILED TO TAKE NOTE OF THE FACT THAT THE ASSESSEE IS MAINTAINING SOME IMPREST ACCOUNT S IN HIS BOOKS OF ACCOUNT WHICH ARE ABSOLUTELY OF THE SAME NATURE AS CASH IN HAND AND THEREFORE THERE WAS NO REASON TO DEDUCE THAT T HERE WAS SHORTAGE OF CASH IN HAND. THE LD AR HAS SUBMITTED THAT THE ASSESSEE IS GIVING THE CASH TO ITS EMPLOYEES FOR MAINTAIN ING THE CABLE NETWORK AND CARRYING OUT THE EXPENSES DURING THE MAINTENANCE WORK. THEREFORE , THE ASSESSEE IS HAVING THIS IMPREST ACCOUNT AND WITHOUT CONSIDERING THE AMOUNT WITH THE EMPLOYEES OF THE ASSESSEE , THE SAID ADDITION IS NOT WARRANTED. THUS THE LD AR SUBMITTED THAT THERE WAS ADEQUATE CASH IN HAND AND IMPREST AND THEREFORE ADDITION MAY BE DELETED. ON THE OTHER HAND TH E LD DR HAS SUBMITTED THAT THE AO WORKED OUT THE VARIOUS DETAILS FROM THE ACCOUNT OF THE ASSESSEE AND FOUND THAT THERE IS NEGATIVE BALANCE AS ON 31.03.2005 FOR WHICH THE ASSESSEE HAS NOT FURNISH ED ANY EXPLANATION AS TO HOW THERE WAS NEGATIVE CASH BALANCE. EVEN BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THE ASSESSEE HAS NOT FURNISHED ANY RECORD OR MATERIAL TO EXPLAIN THE SAID AMOUNT OF NEGATIVE CASH BALANCE. THEREFORE THE ASSESSEE HAS FAILED EVEN EXPLAIN THE DISCREPANCY FOUND BY THE AO. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5 . HAVING CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIALS ON RECORD, IT IS FOUND THAT THE AO HAS VERIFIED THE CASH FLOW OF THE ASSESSEE AND AFTER TALLYING THE VARIOUS FIGURES OF EXPENSES AND R ECEIPTS WORKED OUT THAT THERE IS NEGATIVE CASH BALANCE OF RS.1 , 41 , 740/ - . THE ASSESSEE HAS NOT DISPUTED THE WORK ING OF THE AO IN BRINGING OUT THIS NEGATIVE CASH BALANCE , EVEN THE ASSESSEE HAS NOT PAGE NO. 3 GIVEN A SPECIFIC ITEMS OF EXPENSES WHICH IS ACTUALLY INCURRE D AND COULD NOT BE RECORDED IN THE BOOKS OF ACCOUNT OR CASH WAS TAKEN FROM THE BUSINESS AND COULD NOT BE RECORDED IN THE BOOKS OF ACCOUNT. FURTHER EVEN BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THE ASSESSEE HAS MADE A GENERAL STATEMENT THAT T HE ASSESSEE IS MAINTAINING SOME IMPREST ACCOUNT S AND GIVING CASH TO ITS EMPLOYEES WITHOUT GIVING ANY SPECIFIC DETAILS OF HOW MUCH AMOUNT THE ASSESSEE HAS GIVEN TO THE EMPLOYEES AND WHY THE SAME WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE IN THE ABSENCE OF ANY CONVINCING EXPLANATION AS WELL AS ANY SPECIFIC FACT BROUGHT ON RECORD NO FAULT HAS FOUND IN THE ACTION OF THE AO IN MAKING THE ADDITION ON THIS ACCOUNT. THE ENTIRE SUBMISSION OF THE ASSESSEE IS GENERAL IN NATURE WITHOUT ANY EVIDENCE OR MATERIAL TO SUBSTANTIATE ITS CLAIM . THEREFORE, THE ASSESSEE HAS NO MERIT TO SUBSTANTIATE AGAINST THIS ADDITION OF RS.141740/ - , AND THE SAME IS CONFIRMED. 6 . GROUND NO.2 IS REGARDING ADDITION OF LOAN TAKEN FROM MR. SUBHASH CHAND . DURING THE A SSESSMENT PROCEEDING THE AO FOUND THAT THE ASSESSEE HAS UNSECURED LOAN FROM THE THREE PERSONS AS UNDER: - 1. M/S. GAGAN MOULDING (P) LTD. RS.54,000/ - 2. M/S. SHIVAM & CO. RS.2,40,000/ - 3. SH. SUBASH CHAND RS.3,00,000/ - 7 . THE AO ASKED THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE LENDERS AND ESTABLISH THE GENUINENESS OF THE TRANSACTION . THE ASSESSEE FURNISHED A COPY OF CONFIRMATION SHOWING DATE AND MODE OF PAYMENT REGARDING LOAN TAKEN FROM M/S GAGAN MOULDING (P) LTD. AND M/S. SHIVAM & CO. THE AO GOT CONDUCTED AN ENQUIRY THROUGH THE INCOME TAX INSPECTOR. ON THE BASIS OF THE INFORMATION FROM TH E ENQUIRY CONDUCTED BY THE INSPECTOR , THE AO FOUND THAT SH.SUBASH CHAND WAS EMPLOYED AS SUPERVISOR IN NOIDA AUTHORITY ON CONTRACT BASIS AND EARNING A SALARY OF RS.3500/ - PER MONTH. THUS THE A O WAS OF THE VIEW THAT A PERSON WHO IS EARNING A SALARY OF RS.350 0/ - PER MONTH CANNOT GIVE AN AMOUNT RS.3 LAC TO THE ASSESSEE. IT WAS ALSO CLAIMED THAT SH. SUBASH CHANDS FATHER RECEIVED A COMPENSATION OF RS.10 LAC IN THE YEAR 1995. FURTHER , THE AO NOTED THAT THE LENDER COULD NOT PRODUCE ANY RECEIPT REGARDING THE COMPEN SATION HAVING BEEN RECEIVED BY HIS FATHER AND ALSO FAILED TO GIVE ANY EXPLANATION AS TO WHY THE COMPENSATION RECEIVED WAY BACK IN PAGE NO. 4 THE YEAR 1995 WAS STILL KEPT IN CASH TILL MARCH 2005. THUS THE AO TREATED RS.3 LAC AS UNEXPLAINED AND THE SAME ADDED TO THE IN COME OF THE ASSESSEE. 8 . THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS, BUT COULD NOT SUCCEED. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DID NOT FIND ANY ERROR IN THE FINDING OF THE AO AND THE SAME W AS CONFIRMED. 9. BEFORE THE TRIBUNAL THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE LOAN CREDITOR HAS BEEN EXAMINED BY THE AO AS HIS STATEMENT WAS RECORDED AND THEREFORE WHEN HE HAS GIVEN CONFIRMATION ABOUT THE LOAN TRANSACTION THEN THE SAME CANNOT BE T REATED AS EXPLAINED CREDIT. THE LOAN CREDITOR SPECIFICALLY UN EXPLAINED THAT IN THE YEAR 1995 HIS FATHER RECEIVED RS. 10 LAC AS COMPENSATION AND THEREFORE HE WAS HAVING A SOURCE OF LOAN GIVEN TO THE ASSESSEE. ONCE THE LOAN CREDITOR ACCEPTED THE TRANSACTION AND EXPLAINING THE SOURCE THEN THE ASSESSEE HAS DISCHARGED ITS ONUS FOR PROVING THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITOR. HE HAS FURTHER SUBMITTED THAT THE LOAN HAS BEEN REPAID BY THE ASSESSEE DURING THE ASSESSMENT YEAR 2012 - 13 AND THEREFORE THE LOAN CANNOT BE TREATED AS UNEXPLAINED CREDIT. ON THE OTHER HAND THE LD DR SUBMITTED THAT THE LOAN CREDITOR IS NOT A TAX ASSESSEE AS NO PAN WAS GIVEN. THEREFORE THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE LOAN CREDITOR. THE LD D R SUBMI TTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS, IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AND ACCORDINGLY THE AO IS JUSTIFIED IN MAKING THE ADDITION. 10 . RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL IS CONSIDERED. THE ASSESSEE HAS SHOWN LO AN FROM 3 PERSONS AS DETAILS GIVEN INFORESEEN PARA. OUT OF 3 LOAN TRANSACTIONS THE AO ACCEPTED 2 LOAN TRANSACTIONS AS HE WAS SATISFYING WITH THE GENUINENESS AND CREDITWORTHINESS THOSE TWO PARTIES, HOWEVER ONLY IN RESPECT OF THE LOAN OF RS.3 LAC FROM SH. SU BASH CHAND AO CONDUCTED AN ENQUIRY THROUGH THE INSPECT OR. STATEMENT OF THE LOAN CREDITOR WAS RECORDED IN WHICH THE LOAN CREDITOR CONFIRM ED THE TRANSACTION. THOUGH HE HAS EXPLAINED THAT HE IS DOING A SERVICE AND EARNING A SALARY OF RS.3500 PER MONTH, HOWEV ER HE HAS ALSO EXPLAINED THAT HIS FATHER RECEIVED A COMPENSATION OF RS.10 LAC IN THE YEAR 1995 AND THEREFORE HE WAS HAVING A SOURCE OF THIS LOAN. THIS FACT IS EXPLAINED BY THE LOAN CREDITOR , AND THE COMPENSATION ITSELF IS A FACT WHICH CAN BE VERIFIE D EVEN FROM THE OTHER RECORD AND INFORMATION FROM THE CONCERNED AUTHORITIES. THE AO HAS REJECTED THE CONFIRMATION PAGE NO. 5 OF THE LOAN CREDIT OR ON THE GROUND THAT THE AMOUNT RECEIVED IN THE YEAR BACK 1995 CANNOT KEEP IN CASH TILL 2005. THUS THE AO S REASONING IS BAS ED ONLY ON CONJECTURES AND SURMISES AND NOT ON THE DEFINITE FINDING OF THE FACT WHETHER THE LOAN CREDITOR WAS ACTUALLY HAVING THE SOURCE OR NOT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS CLAIMED THAT THE LOAN OF RS.3 LAC WAS REPAID IN THE ASSESSMENT YE AR 2012 - 13. THEREFORE IN VIEW OF THE FACT THAT THE ASSESSEE HAS REPAID THIS AMOUNT THE ISSUE IS REQUIRED TO BE RE CONSIDER BY VERIFYING THIS FACT WHETHER THE ASSESSEE HAS REPAID THE SAID AMOUNT AND THE REPAYMENT HAS BEEN ACCEPTED BY THE AO OR NOT. ACCORDIN GLY, FOR LIMITED PURPOSE OF VERIFICATION OF THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE HAS REPAID THIS LOAN , THE AO IS DIRECTED TO CONDUCT THE NECESSARY VERIFICATION AND IF THE ASSESSEE HAS ALREADY PAID THE LOAN AMOUNT THEN THE ADDITION MADE BY THE AO IS REQUIRED TO BE DELETED. 11 . IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 . 12 .201 5 . - SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER DATED : / 12 / 2015 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI