Shri Hiteshkumar Kanubhai Patel, Nadiad V. The Income tax Officer,Ward-1, Nadiad

ITA 2787/AHD/2009

• Counselvise Citation: 278720514 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Additional evidence; Corroborative evidences

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. K. GARODIA, AM. ITA NO.2787/AHD/2009 ASST. YEAR:2003-04 SHRI HITESHKUMAR KANUBHAI PATEL, KRISHNAKUNJ, OPP. SOMNATH SOCIETY, CIVIL HOSPITAL ROAD, NADIAD. VS. INCOME-TAX OFFICER, WARD-1, NADIAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI MUKUND BAKSHI, AR RESPONDENT BY:- SHRI VINOD TANWANI, SR.DR DATE OF HEARING :12/12/2011 DATE OF PRONOUNCEMENT : 30.12.11 O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 24.07.2009. THE ASSESSEE HAS RAISED FO LLOWING GROUND IN HIS APPEAL :- (1) THE LD. CIT(A)-IV, BARODA HAS ERRED IN FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE LD. AO IN MAKING ADDIT ION OF RS.5,00,000/- ON ACCOUNT OF UNEXPLAINED CREDITS IN THE CAPITAL ACCOUNT OF SHRI HITESHKUMAR K. PATEL WITHOUT CONSID ERING THE SUBMISSION OF THE APPELLANT AND MATERIAL AVAILABLE ON RECORD AND ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 2 THEREFORE, THE ADDITION BEING BAD IN LAW AND IN FAC TS IS PRAYED TO BE DELETED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF TRADING OF OIL/MANUFACTURING OF COSMETI C ITEMS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED O N 14.11.2003 DECLARING TOTAL INCOME OF RS.1,55,030/- AND AGRICUL TURAL INCOME OF RS.2,36,544/-. DURING THE ASSESSMENT PROCEEDINGS ON PERUSAL OF THE CAPITAL ACCOUNT OF THE ASSESSEE THE AO FOUND THAT T HERE WAS A CREDIT OF RS.5 LACS WITH NARRATION CASH RECEPT. IN RESPONSE TO AOS QUERY ABOUT THE SOURCE OF THE CREDIT OF RS.5 LACS ASSESSEES CO NTENTION WAS THAT OUT OF RS.5 LACS, RS.3,50,000/- WAS BORROWINGS FROM FRIEND S AND RELATIVES WHO WERE FARMERS AND REST OF RS.1,50,000/- WAS SURPLUS OUT OF ASSESSEES AGRICULTURAL INCOME OF RS.2,41,340/- FOR ASST. YEAR 2002-03 DISCLOSED IN THE RETURN OF INCOME. THE AO, HOWEVER, WAS OF THE V IEW THAT ASSESSEES CLAIM THAT RS.3,50,000/- WAS RECEIVED BY WAY OF BOR ROWINGS FROM FRIENDS AND RELATIVES WAS A SELF-SERVING STATEMENT NOT SUBS TANTIATED BY ANY SUPPORTING CORROBORATIVE EVIDENCES AND EVEN NAMES O F THE PARTIES, THEIR IDENTITY, INFORMATION AS TO WHAT AMOUNT WAS RECEIVE D FROM WHOM WAS NOT FURNISHED. THE AO FURTHER OBSERVED THAT IF THE ASSE SSEE HAD BORROWED RS.3,50,000/- FROM FRIENDS AND RELATIVES NAMES OF S UCH PERSONS WOULD APPEAR IN THE BALANCE SHEET ON THE LIABILITY SIDE U NDER THE HEAD UNSECURED LOANS AND SUCH UNSECURED LOAN WOULD NOT BECOME CAP ITAL OF THE ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 3 PROPRIETOR. ACCORDING TO THE AO UNDER THE PRINCIPLE S OF ACCOUNTANCY PROPRIETARY OWNED CAPITAL IS ALTOGETHER A DIFFERENT ASPECT FROM THE BORROWED CAPITAL I.E. SECURED AND UN-SECURED LOANS AND SUCH ITEMS WERE REQUIRED TO BE CONSIDERED AND ACCOUNTED FOR SEPARAT ELY UNDER DIFFERENT HEADS. THE AO FURTHER NOTED THAT AS PER BALANCE SHE ET ON 31.3.2003 ASSESSEES CAPITAL STOOD AT RS.17,55,484/- WHICH IN CLUDED CREDIT OF RS.5 LACS ON 5.4.2002 AND RS.50,000/- ON 1.1.2003 WHEREA S UNSECURED LOANS FROM 10 PARTIES WHOSE NAMES APPEARED IN THE BALANCE SHEET TOTALING TO RS.8,79,096/- WERE SHOWN IN THE BALANCE SHEET. THE AO, THEREFORE, HELD THAT ASSESSEES CLAIM THAT RS.3,50,000/- OUT OF BOR ROWINGS FROM FRIENDS AND RELATIVES WAS WITHOUT ANY SUBSTANCE OR MERIT. T HE AO ALSO DID NOT ACCEPT ASSESSEES CONTENTION THAT RS.1,50,000/- WAS OUT OF SURPLUS OF ASSESSEES AGRICULTURAL INCOME FOR FY 2001-02. SUCH SURPLUS HAS ALREADY BEEN GIVEN APPROPRIATE TREATMENT IN THE ACCOUNTS FO R RELEVANT ACCOUNTING YEAR. MOREOVER, IF AT ALL THERE WAS ANY SURPLUS OF AGRICULTURAL INCOME OF FY 2001-02 THE ASSESSEE WHO WAS A BUSINESS MAN WOUL D HAVE DEPOSITED SUCH SURPLUS OR OTHERWISE INVESTED IT IN THE FORM O F CASH TILL 5.4.2002. THE AO, THEREFORE, MADE THE ADDITION OF RS.5 LACS (RS.3 ,50,000/- + RS.1,50,000/-). BEING AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). 3. BEFORE THE FIRST APPELLATE AUTHORITY ASSESSEE SU BMITTED THAT RS.3,50,000/- WAS BORROWED FROM FRIENDS AND RELATIV ES, WHO WERE ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 4 FARMERS, WHEREAS AMOUNT OF RS.1,50,000/- WAS INVEST ED OUT OF AGRICULTURAL INCOME OF THE ASSESSEE FOR FY 2001-02. IT WAS SUBMITTED THAT ASSESSEE HAD COLLECTED CONFIRMATIONS IN RESPECT OF AMOUNTS BORROWED FROM FRIENDS AND RELATIVES ALONG WITH DOCUMENTARY E VIDENCE LIKE EXTRACT OF 7/12, 8-A, COPY OF INVOICES IN RESPECT OF SALE O F AGRICULTURAL PRODUCE ETC. AND HAD SUBMITTED THESE TO THE COUNSEL WHO DID NOT SUBMIT THE SAME TO THE AO. ASSESSEE SUBMITTED BREAK UP OF RS.3,50,0 00/- AS BORROWED FROM SIX PERSONS NAMELY SHRI JAYANTIBHAI C. PATEL, VILLAGE-NAR, TAL. PETLAD (RS.80,000/-), SHRI VINUBHAI M. PATEL, VILLA GE SOKHDA, TAL. VADODARA (RS.70,000/-), SHRI JAYANTIBHAI M. PATEL, VILLAGE SOKHDA, TAL. VADODARA (RS.60,000/-) SHRI ARVINDBHAI M. PATEL, VI LLAGE SOKHDA, TAL. VADODARA (RS.20,000/-), SHRI VINUBHAI S. PATEL, VIL LAGE NAR, TAL. PETLAD (RS.30,000/- AND SHRI HARSHADBHAI C. PATEL, VILLAGE NAR, TAL. PETLAD (RS.90,000/-)ALONG WITH CONFIRMATION LETTERS DATED 20.3.2006, EXTRACTS OF 8-A AND 7/12, INVOICES ETC. WITH A REQUEST TO ADMIT THE ADDITIONAL EVIDENCE, SINCE THESE DOCUMENTS WERE NOT SUBMITTED BY THE COUNSEL BEFORE THE AO THOUGH READY AT THAT TIME. REGARDING NON-APPEARANCE OF THESE AMOUNTS AS LIABILITY IN THE BALANCE SHEET, IT WAS SUBMITTED THAT THE SAID AMOUNTS WERE BORROWED BY THE APPELLANT IN HIS INDIVIDUAL CAPACITY, WHICH WAS CONFIRMED BY THE PARTIES GIVING THE AMOUN T. REGARDING AMOUNT OF RS.1,50,000/- AND AOS OBSERVATION THAT T HE SURPLUS OF AGRICULTURAL INCOME WAS ALREADY GIVEN APPROPRIATE T REATMENT IN THE ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 5 ACCOUNTS FOR THE RELEVANT ACCOUNTING YEAR, IT WAS S UBMITTED THAT THE ASSESSEE WAS NOT ACCOUNTING FOR THE AGRICULTURAL IN COME IN THE BOOKS OF ACCOUNTS MAINTAINED IN RESPECT OF THE PROPRIETORSHI P CONCERN AND THIS FACT COULD BE VERIFIED FROM THE COPY OF PROFIT AND LOSS ACCOUNT AND THE COMPUTATION OF TOTAL INCOME FILED FOR ASST. YEAR 20 02-03 AND 2003-04. ASSESSEE ALSO FILED COPY OF INCOME TAX RETURN FILED FOR ASST. YEAR 2002- 03, IN WHICH NET AGRICULTURAL INCOME OF RS.2,41,740 /- WAS DULY SHOWN. REGARDING ADDITION OF RS.50,000/- ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AO AND SUBMITTED THAT THE AGRICULTU RAL INCOME ACCOUNT WAS SEPARATELY MAINTAINED BY THE ASSESSEE FOR ASST. YEAR 2002-03, WHICH WAS PLACED AT PAGES 61 AND 52 OF THE PAPER BOOK. 3.1 COPY OF ASSESSEES SUBMISSIONS WAS FORWARDED TO THE AO FOR COMMENTS. THE AO IN HIS REPORT DATED 6.6.2009 SUBMI TTED THAT ASSESSEE PRODUCED FOUR PARTIES, VIZ. SHRI JAYANTIBHAI C. PAT EL, SHRI ARVINDBHAI M. PATEL, SHRI VINODBHAI S. PATEL AND SHRI HARSHADBHAI C. PATEL, WHO CLAIMED TO HAVE GIVEN THE SAID SUMS TO THE ASSESSEE DURING APRIL, 2002 FOR THE PURPOSE OF HIS BUSINESS FROM OF INTEREST OUT OF THEIR AGRICULTURAL INCOME, IN SUPPORT OF WHICH THEY PRODUCED FORM 7/12 , 8-A WITH COPIES OF INVOICES FOR SALE OF AGRICULTURAL PRODUCE. IT WAS R EPORTED FURTHER BY THE AO THAT EXCEPT FOR SHRI JAYANTIBHAI C. PATEL, WHO W AS A NEIGHBOUR, OTHER THREE PERSONS WERE RELATED TO THE ASSESSEE. REGARDI NG SHRI VINUBHAI M. ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 6 PATEL, ASSESSEE SUBMITTED BEFORE THE AO THAT HE EXP IRED ON 21.3.2005 AND COPY OF DEATH CERTIFICATE WAS FILED. IN RESPECT OF SHRI JAYANTIBHAI M. PATEL, FATHER-IN-LAW OF THE ASSESSEE SETTLED IN USA , CONFIRMATION CLAIMED TO BE RECEIVED ON FAX WAS FILED BEFORE THE AO. REGA RDING ASSESSEES CLAIM THAT RS.1,50,000/- WAS INTRODUCED ON 5.4.2002 OUT OF AGRICULTURAL INCOME FOR ASST. YEAR 2001-02, THE AO FOUND THE CLA IM TO BE DIFFICULT TO BELIEVE, SINCE ANY SURPLUS AGRICULTURAL INCOME MIGH T HAVE BEEN PUT TO BUSINESS AND AT THE RELEVANT TIME ITSELF WITHOUT KE EPING THE MONEY IDLE AT HOME. COPY OF AOS REPORT WAS SUPPLIED TO THE ASSES SEE ALSO, ON WHICH NO FURTHER WRITTEN SUBMISSIONS WERE MADE. 4. THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF TH E CASE, THE CONTENTIONS OF AO AND THE SUBMISSIONS OF THE ASSESS EE CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER :- 3.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE ASSESSMENT ORDER, APPELLANTS SUBMISSIONS AND AOS REMAND REPO RT. AS OBSERVED BY THE AO IN THE ASSESSMENT ORDER, WHILE LOANS AMOUNTI NG TO RS.8,79,096/- WERE SHOWN IN THE BALANCE SHEET WITH NAMES OF THE P ARTIES, RS.3,50,000/- WAS CREDITED TO APPELLANTS CAPITAL ACCOUNT DIRECTL Y AND NO DETAILS REGARDING THE SIX PARTIES FROM WHOM LOANS WERE NOW CLAIMED TO BE RECEIVED WERE PROVIDED IN THE BALANCE SHEET FILED W ITH INCOME-TAX RETURN. APPELLANTS SUBMISSION AT THE APPELLANT STAGE THAT THESE AMOUNTS TOTALING TO RS.3,50,000/- WERE BORROWED IN INDIVIDUAL CAPACI TY, IS NOT CONVINCING. THE PARTIES FROM WHOM LOANS ARE CLAIMED TO BE RECEI VED HAVE SUBMITTED THE LOANS TO BE GIVEN FOR APPELLANTS BUSINESS AND THUS APPELLANTS CONTENTION THAT LOANS WERE PERSONAL LOANS BORROWED IN INDIVIDUAL CAPACITY IS NEGATED. THERE APPEARS TO BE NO VALID E XPLANATION FOR NON- APPEARANCE OF THE LOANS IN THE BALANCE SHEET. IN LE TTER DATED 20.2.2006 FILED DURING THE ASSESSMENT PROCEEDINGS ALSO, NAMES OF THE PARTIES FROM WHOM LOANS OF RS.3,50,000/- ARE CLAIMED, WERE NOT M ENTIONED, WHICH ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 7 SHOWS THAT BY 20.2.2006, APPELLANT COULD NOT PROVID E NAMES OF THE PARTIES. FURTHER, IN THE LETTER, APPELLANT HAD MENT IONED THE SAID BORROWINGS ARE RECEIVED BELOW THE SPECIFIED LIMIT. APPELLANTS COUNSEL ON BEING SPECIFICALLY ASKED AS TO WHAT WAS MEANT BY THE LOANS BEING BELOW SPECIFIED LIMIT, COULD NOT THROUGH ANY LIGHT IN THE MATTER. IT APPEARS THAT THE APPELLANT WAS REFERRING TO THE LIMIT OF RS .20,000/- U/S 269SS FOR CASH LOANS. THUS, WHILE AT THE TIME OF ASSESSMENT P ROCEEDINGS, WITHOUT PROVIDING DETAILS OF LOANS, TO ESCAPE PROVISIONS OF SECTION 269SS, IT WAS SUBMITTED THAT EACH OF THE LOAN WAS BELOW RS.20,000 /-, NOW THE LOANS ARE CLAIMED TO BE FROM SIX PARTIES, ALL EXCEEDING RS.20 ,000/-. IN VIEW OF THIS, THE SIX PARTIES, WHO HAVE NOW CLAIMED TO HAVE GIVEN THE LOANS, APPEAR TO BE ACCOMMODATING THE APPELLANT ONLY WITHOUT ANY GEN UINE TRANSACTION HAVING TAKEN PLACE. MOREOVER, EVEN THOUGH FOUR PART IES HAVE CONFIRMED TO HAVE ADVANCED THE LOANS, IT IS HIGHLY UNLIKELY F OR FARMERS, WHO ARE NOT ASSESSED TO TAX TO ADVANCE AMOUNTS OF THE ORDER OF RS.90,000/-, RS.80,000/- TO ANY ONE FOR HIS BUSINESS WITHOUT EVE N CHARGING INTEREST. CONFIRMATIONS BY THESE PERSONS ARE SELF SERVING STA TEMENTS WHICH CANNOT BE ACCEPTED. ON THE TOTALITY OF FACTS, I AM OF THE VIEW THAT THE EXPLANATION REGARDING SOURCE OF RS.3,50,000/- IS NOT CONVINCING . ADDITION OF RS.3,50,000/- IS CONFIRMED. 3.2.1 REGARDING THE CLAIM THAT RS.1,50,000/- WAS OUT OF AGRICULTURAL INCOME FOR FY 2001-02, THE SAME IS NOT ACCEPTABLE S INCE APPELLANTS OPENING CAPITAL AS ON 1.4.2002 WOULD AUTOMATICALLY INCLUDE SURPLUS AGRICULTURAL INCOME FOR FY 2001-02 AND THE SAME WOU LD NOT BE AVAILABLE IN CASH SEPARATELY. ADDITION OF RS.1,50,000/- IS CO NFIRMED. AGGRIEVED BY THIS ORDER OF THE LD. CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ACTION OF THE AO WITHOUT PROP ER APPRECIATION OF FACTS OF THE CASE. ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 8 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF LOWER AUTHORITIES AND SUBMITTED THAT THERE IS NO INFIRMIT Y IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE AO AFTER DUE CONSIDERATION OF THE FACTS OF THE CASE, ASSESSEES SUBMISSIONS AND ALSO KEEPING IN VIEW THE REMAND REPORT OF THE AO. 7. HEARD BOTH THE PARTIES AND PERUSED THE RECORD AN D WE FIND THAT THE AO HAS MADE THIS ADDITION AS IN SUPPORT OF HIS CLAI M THAT RS,3,50,000/- WAS RECEIVED BY THE ASSESSEE FROM HIS FRIENDS AND R ELATIVES WHO WERE AGRICULTURISTS AND HAD GIVEN THIS AMOUNT TO THE ASS ESSEE OUT OF THEIR AGRICULTURAL INCOME, NO DOCUMENTARY EVIDENCE WHATSO EVER WAS FURNISHED. BEFORE LD. CIT(A) THE ASSESSEE HAS FILED THE CONFIR MATIONS FROM ALL THE CREDITORS EXCEPT ONE MR.VINUBHAI M. PATEL WHO EXPIR ED ON 21.3.2005. IN SUPPORT OF CLAIM OF THESE CREDITORS THAT THESE AMOU NTS WERE GIVENOUT OF THEIR AGRICULTURAL INCOME EVIDENCE IN THE FORM OF F ORM 7/12 AND 8-A WITH COPIES OF INVOICES FOR SALE OF AGRICULTURAL PRODUCE WERE FILED. DESPITE THESE EVIDENCES BEFORE HIM, THE LD. CIT(A) HAS CHOS EN TO CONFIRM THE ACTION OF THE AO WHICH ACCORDING TO US WAS NOT PROP ER BECAUSE THE SAME HAS NOT BEEN DONE BY HIM BY BRINGING ANY MATERIAL T O THE CONTRARY ON RECORD. THEREFORE, TAKING A LENIENT VIEW IN THE MAT TER AND KEEPING IN MIND THE SMALLNESS OF THE AMOUNT INVOLVED, WE ARE NOT IN CLINED TO AGREE WITH ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 9 THE LOWER AUTHORITIES THAT NAMES OF THE PERSONS WER E USED BY THE ASSESSEE FOR INTRODUCING ITS OWN UNEXPLAINED INCOME. AS REGARDS THE CLAIM OF THE ASSESSEE OF RS.1,50,000 /- THAT IT WAS OUT OF AGRICULTURAL INCOME FOR ASST. YEAR 2002-03, WE F IND THAT DURING THE ASST. YEAR 2002-03 ASSESSEE HAD SHOWN AN INCOME FRO M AGRICULTURE AT RS.2,41,740/- WHICH WAS ACCEPTED BY THE REVENUE. SO THE POSSIBILITY THAT THIS SUM WAS INTRODUCED BY THE ASSESSEE OUT OF ITS SURPLUS CASH OUT OF AGRICULTURAL INCOME CANNOT BE RULED OUT AND, THEREF ORE, THE ADDITION OF THIS AMOUNT IS HEREBY DELETED. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30.12.11. SD/- SD/ - (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.2787/AHD/2009 ASST. YEAR 2003-04 10 1.DATE OF DICTATION 12/12/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 20/12/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..