RAJSHREE CREATIONS, MUMBAI V. ACIT 15(3), MUMBAI

ITA 2810/MUM/2012

• Counselvise Citation: 281019914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Source of fund; Onus to prove
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO.2810/MUM/2012 ( / ASSESSMENT YEAR : 2007-08) M/S RAJSHREE CREATIONS, 102, KARMA SANDESH 2, OFF HINGWALA LANE, GHATKOPAR (E), MUMBAI-400077 / VS. ASSISTANT COMMISSIONER OF INCOME TAX, 15(3), 1 ST FLOOR, MATRU MANDIR, GRANT ROAD, OPP.BHATIA HOSPITAL, MUMBAI. ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ % ./PAN/GIR NO. : ABAFS7819J !' & / APPELLANT BY : SHRI REEPAL G TRALSHAWALA #$!' ' & /RESPONDENT BY : SHRI D URGA DUTT ( ) ' *+ / DATE OF HEARING : 17.6.2014 ,- ' *+ /DATE OF PRONOUNCEMENT : 25.6.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 21-02-2012 PASSED BY LD CIT(A)-26, MUMBAI AND IT RELATES TO TH E ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF RS.9,61,750/- MADE U/S 68 OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE DISCUSSED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, BUIL DERS AND DEVELOPERS. THE ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD COMMENCED DEVELOPMENT OF THE PROJECT I N BUILDING NOS. 101, 105, 108- 110 AT TILAK NAGAR. SINCE THE ASSESSEE WAS FOLLOWI NG PERCENTAGE COMPLETION METHOD FOR OFFERING INCOME, IT DID NOT OFFER ANY INCOME DURING THE INSTANT YEAR, SINCE THE PROJECTS I.T.A. NO.2810/MUM/2012 2 WERE AT NASCCENT STAGE. THE ASSESSING OFFICER CONSI DERED THE ABOVE SAID FACTUAL ASPECTS SUBMITTED BY THE ASSESSEE. HE FURTHER NOTICED THAT THE ASSESSEE HAD CAPITALISED THE EXPENSES IN THE IMMEDIATELY PRECEDING YEAR TO THE T UNE OF RS.30,95,405/- AND THE THEN AO HAD DISALLOWED EXPENSES TO THE TUNE OF RS.6,03,4 39/- AND ALLOWED THE BALANCE AMOUNT OF RS.24,91,966/- TO BE CAPITALISED. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CAPITALISED A SUM OF RS.42,66,006/-. THE AO EXAMINED THE CLAIM OF EXPENSES AND DISALLOWED A SUM OF RS.1,09,569/- AND ALLOWED THE BALANCE AMOUNT OF RS.41,56,497/- TO BE CAPITALISED. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) GRANTED PARTIAL RELIEF IN RESPECT OF DISALLOWANCE RELATING TO ADVERTISEMENT EXPENSES. 3.1 THE AO EXAMINED THE LOAN CREDITS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ON EXAMINATION OF BANK ACCOUNT OF C REDITORS, THE AO NOTICED THAT THEY HAD DEPOSITED CASH IN THEIR RESPECTIVE BANK ACCOUNT S BEFORE ISSUING CHEQUE TO THE ASSESSEE. THE DETAILS OF THE SAME ARE TABULATED AS UNDER:- SR. NO. NAME OF LENDER BANK A/C DETAILS AMOUNT OF CASH DEPOSITED AMOUNT OF LOAN GIVEN BY WAY OF CHEQUE. 01. DEVENDRA M JAIN (HUF) 3,00,000 3,00,000 02. GANGABEN POPATLAL GADA 53,400 2,50,000 03. LAHERI KANT T JOSHI (HUF) 24,700 1,75,000 04. MINAXI H GALA 49,950 2,50,000 05. MONICA C PRASAD 19,300 3,75,000 06. MORAJI GOSAR SHAH (HUF) 1,28,200 1,50,000 07. DINA BIMA PATIL 1,50,100 1,50,000 08. RACHITA MANISH SHAH 50,000 1,00,000 09. URMILA DAMJ I DEDHIA 10,000 1,50,000 10. BHARAT L CHHEDA 16,000 3,50,000 11. RITESH PRATAP SHAH 45,500 4,50,000 12. MANSUKH K JETHWA (HUF) 14,800 3,50,000 13. ARVIND L NANDU (HUF) 99,800 1,00,000 TOTAL AMOUNT OF CASH DEPOSITED 9,61,750 THE AO ASKED THE ASSESSEE TO EXPLAIN THE DETAILS OF CASH DEPOSITS MADE BY THE LENDERS. THE ASSESSEE FURNISHED THE DETAILS VIZ., NAME, ADDR ESS, IT RETURN COPIES, PASS BOOK COPIES OF ALL THE CREDITORS AND SUBMITTED THAT THE ABOVE SAID LOANS HAVE BEEN GENUINELY BORROWED AND FURTHER SUBMITTED THAT IT CANNOT ASK F OR SOURCE OF THE SOURCES FROM THEM. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING O FFICER MAY SUMMON THESE CREDITORS IN ORDER TO CLARIFY THE SOURCES OF CASH DEPOSITS MA DE BY THEM. HOWEVER, THE AO TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS PLACED UPON HIM U/S 68 OF I.T.A. NO.2810/MUM/2012 3 THE ACT AND ACCORDINGLY ASSESSED THE AMOUNT OF RS.9 ,61,750/- REFERRED ABOVE AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. 4. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND REPORT, THE AO MA INLY EXPRESSED TWO KIND OF VIEWS IN RESPECT OF ALL THE CREDITORS, VIZ., (A) THE SOURCE OF CHEQUE DEPOSITS WAS NOT EXPLAINED AND (B) INCOME DECLARED IS LOW. THE AO FINALLY S UMMED UP THAT THE CREDIT WORTHINESS OF THE CREDITORS HAS NOT BEEN ESTABLISHED; THE PART IES ARE OF LOW MEANS; THE SOURCES OF CASH DEPOSITS HAVE NOT BEEN EXPLAINED; THE SOURCES OF CHEQUE DEPOSITS JUST PRIOR TO ISSUING CHEQUE TO THE ASSESSEE HAS NOT BEEN EXPLAIN ED. ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION OF ITAT DELHI IN THE CASE OF DCIT V S. SMT. PHOOLWATI DEVI (2009)(314 ITR (AT) 1) AND THE DECISION OF THE HONBLE APEX CO URT IN THE CASE OF SUMATI DAYAL VS. CIT (214 ITR 201), THE AO EXPRESSED THE VIEW THAT T HE ASSESSEE HAS MANAGE THE DOCUMENTS AND HENCE THESE LOANS CANNOT BE HELD TO B E GENUINE. 4.1 THE LD CIT(A) WAS CONVINCED WITH THE EXPLANATI ONS GIVEN BY THE AO IN THE REMAND REPORT AND ACCORDINGLY ENDORSED HIS VIEW. IT IS PE RTINENT TO NOTE THAT THE LD CIT(A) DID NOT EXAMINE THE DOCUMENTS, EXPLANATIONS ETC. RELATI NG TO EACH CREDITOR, BUT INSTEAD PREFERRED TO MAKE GENERALISED OBSERVATIONS AND ACCO RDINGLY CONFIRMED THE ADDITION OF RS.9,61,750/- MADE BY THE AO. AGGRIEVED, THE ASSES SEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. IT IS PERTINENT TO NOTE THAT THE AO HAS NOT DOUBTED ABOUT THE GENUINENESS OF THE ENTIRE AMOUNT RECEIVED FROM EACH OF THE CREDITOR, BUT FOCU SED ONLY ON THE CASH DEPOSITS, WHICH WERE FOUND TO HAVE BEEN DEPOSITED IN THE BANK ACCOU NT OF THE CREDITORS BEFORE ISSUING CHEQUE TO THE ASSESSEE. ACCORDINGLY, THE AO HAS AL SO ASSESSED ONLY PART OF THE LOAN AMOUNTS IN MOST CASES. THERE IS NO DISPUTE BETWEE N THE PARTIES THAT THE PRIMARY BURDEN TO PROVE THE CASH CREDITS IS PLACED UPON THE ASSESSEE. THE ASSESSEE IS REQUIRED TO PROVE THREE MAIN INGREDIENTS TO DISCHARGE THE PR IMARY BURDEN OF PROOF, VIZ., THE IDENTITY OF THE CREDITOR, THE GENUINENESS OF THE TR ANSACTIONS AND THE CREDIT WORTHINESS OF THE CREDITOR. ONCE THE ASSESSEE DISCHARGES THIS PR IMARY ONUS PLACED UPON HIM, THEN THE ONUS TO DISPROVE THE SAID CLAIM SHIFTS TO THE ASSES SING OFFICER. WITH THESE SETTLED LEGAL PROPOSITIONS, WE SHALL EXAMINE EACH OF THE CREDITOR S. 5.1 WE HAVE ALREADY NOTICED THAT THE AO HAS DIS BELIEVED ONLY A PORTION OF LOAN AMOUNTS VIZ., THE AMOUNT RELATED TO THE CASH DEPOSI TS FOUND IN THE BANK ACCOUNT OF THE CREDITORS. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS I.T.A. NO.2810/MUM/2012 4 FURNISHED CONFIRMATION LETTERS OBTAINED FROM ALL TH E CREDITORS ALONG WITH THEIR NAME, ADDRESS AND THE COPIES OF INCOME TAX RETURNS AND CO PIES OF BANK ACCOUNTS. IT IS ALSO NOT IN DISPUTE THAT THE ENTIRE AMOUNT OF LOANS WERE REC EIVED THROUGH BANKING CHANNELS. HENCE, IT IS SEEN THAT THE TAX AUTHORITIES ARE SATI SFIED WITH THE IDENTITY OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS. THE TAX A UTHORITIES WERE NOT CONVINCED WITH THE CREDIT WORTHINESS OF THE CREDITORS AND HENCE HA VE EXPRESSED THE VIEW THAT ALL THE TRANSACTIONS ARE STAGE MANAGED. 5.2 HOWEVER, IN THE FOLLOWING CASES, WE NOTICE TH AT THE CASH DEPOSITS FORM ONLY A FRACTION OF THE LOAN AMOUNT TAKEN BY THE ASSESSEE:- NAME OF LENDER LOAN AMOUNT CASH DEPOSIT (A) GANGABEN POPATLAL GADA (B) LAHERIKANT T JOSHI (HUF) (C) MINAXI H GALA (D) MONIKA C PRASAD (E) URMILA DAMJI DEDHIA (F) BHARAT L CHHEDA (G) RITESH PRATAP SHAH (H) MANSUKH K JETHWA (HUF) 2,50,000 1,75,000 2,50,000 3,75,000 1,50,000 3,50,000 4,50,000 3,50,000 53,400 24,700 49,950 19,300 10,000 16,000 45,500 14,800 WHEN THE ASSESSING OFFICER IS ACCEPTING THE MAJOR P ORTION OF THE CASH CREDIT AS GENUINE, IN OUR VIEW, HE IS NOT JUSTIFIED IN DOUBTING THE GE NUINENESS OF THE PART OF THE LOAN ONLY FOR THE REASON THAT THE RESPECTIVE CREDITORS HAVE D EPOSITED CASH IN THEIR RESPECTIVE BANK ACCOUNTS BEFORE ISSUING THE CHEQUES TO THE ASSESSEE . IN OUR VIEW, THE CREDIT WORTHINESS OF THE LENDER HAS TO BE EXAMINED IN A HOLISTIC MANN ER. EVEN OTHERWISE, WE HAVE ALREADY NOTICED THAT THE ASSESSEE HAS FURNISHED COPIES OF I NCOME TAX RETURNS AND BANK ACCOUNTS PERTAINING TO THE ABOVE SAID CREDITORS. ACCORDINGL Y, WE ARE OF THE VIEW THAT THE ASSESEE HAS DISCHARGED THE PRIMARY ONUS PLACED UPON HIM IN RESPECT OF THE ABOVE CREDITORS AND THE AO HAS FAILED TO DISPROVE THE CLAIM MADE BY THE ASSESSEE. ALTERNTIVELY, THE AO WAS NOT JUSTIFIED IN MAKING ADDITIONS IN RESPECT OF FRA CTION OF THE LOAN AMOUNT, WHEN HE IS ACCEPTING THE MAJOR PORTION OF THE LOAN AS GENUINE. HENCE, WE ARE NOT IN AGREEMENT WITH THE VIEW EXPRESSED BY LD CIT(A) IN RESPECT OF THE ABOVE SAID CREDITORS. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CI T(A) IN RESPECT OF THE ABOVE SAID CREDITORS AND DIRECT THE AO TO DELETE THE ADDITION PERTAINING TO THEM. 5.3 IN RESPECT OF REMAINING CREDITORS, IT IS NOT ICED THAT THE ASSESSEE HAS FURNISHED COPIES OF THEIR RESPECTIVE INCOME TAX RETURNS AND C OPIES OF BANK ACCOUNT. WE NOTICE I.T.A. NO.2810/MUM/2012 5 THAT THE LOAN GIVEN TO THE ASSESSEE HAS BEEN DULY R EFLECTED IN THE INCOME TAX RETURNS OF ALL THE CREDITORS. THE INCOME TAX RETURNS SHOW THE IR SOURCES OF INCOME AND ALSO THE SOURCES TO LEND MONEY TO THE ASSESSEE HEREIN. ACCO RDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS PLACED UPO N HIM IN RESPECT OF THE REMAINING CREDITORS ALSO AND THE AO HAS FAILED TO DISPROVE TH E CLAIM MADE BY THE ASSESSEE IN RESPECT OF THEM. ACCORDINGLY, WE SET ASIDE THE ORD ER OF LD CIT(A) IN RESPECT OF THE REMAINING CREDITORS ALSO AND DIRECT THE AO TO DELET E THE ADDITION RELATING TO THEM. 6. THE LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTE D THAT THE ASSESSEE FIRM IS IN ITS GESTATION PERIOD AND HENCE IT DID NOT GENERATE/DECL ARE ANY INCOME DURING THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE ADDITION PRESCRIBED U/S 68 OF THE ACT CAN BE EFFECTIVELY APPLIED ONLY TO THE INCOME GENER ATING CONCERNS. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIF IED IN MAKING ADDITIONS U/S 68 OF THE ACT, WHEN THE ASSESSEE FIRM DID NOT GENERATE ANY IN COME. THE LD A.R ALSO SUBMITTED THAT THE ASSESSING OFFICER DID NOT DISALLOW THE INT EREST CLAIMED ON THE ABOVE SAID CREDITORS. ACCORDINGLY HE SUBMITTED THAT THE ASSES SING OFFICER, HAVING ACCEPTED THE INTEREST CLAIM AS GENUINE, COULD NOT HAVE DOUBTED T HE GENUINENESS OF THE LOAN AMOUNT AND ASSESSED THE SAME U/S 68 OF THE ACT. THOUGH WE FIND FORCE IN THE ABOVE SAID CONTENTIONS, YET WE DO NOT FIND IT NECESSARY TO ADD RESS THEM, SINCE WE HAVE DELETED THE ADDITION ON MERITS. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25TH JUNE, 2014. ,- ( ./ 0 1 25TH JUNE, 2014 - ' ) 2 SD SD ( /SANJAY GARG) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER . ( ) MUMBAI: 25TH JUNE,2014. . . ./ SRL , SR. PS I.T.A. NO.2810/MUM/2012 6 ! '#$%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ( 4* ( ) / THE CIT(A)- CONCERNED 4. ( 4* / CIT CONCERNED 5. 5 #* 6 , + 6 , . ( ) / DR, ITAT, MUMBAI CONCERNED 6. 7) / GUARD FILE. 8 ( / BY ORDER, TRUE COPY 9 (ASSTT. REGISTRAR) + 6 , . ( ) /ITAT, MUMBAI