SHRI PRAKASH GHORPDE, DURG V. INCOME TAX OFFICER, WARD 2(2), BHILAI

ITA 288/RPR/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1080 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 21-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 143(3); 142(1); 143(1); 143(2)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 288/RPR/2017 Ǔनधा[रण वष[ / Assessment Year : 2012-13 Shri Prakash Ghorpade, New Sarafa Line, Jawahar Chowk, Durg (CG) PAN : AGVPG1792N .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer, Ward-2(2), Bhilai ......Ĥ×यथȸ / Respondent Assessee by : None Revenue by : Shri G.N Singh, DR स ु नवाई कȧ तारȣख / Date of Hearing : 24.05.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 26.05.2022 2 ITA No. 288/RPR/2017 A.Y.2012-13 आदेश / ORDER PER RATHOD KAMLESH JAYANTBHAI, AM: This appeal is filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeal)- II, Raipur (CG) [ Here in after referred as Ld. CIT(A) ] for the assessment year 2012-13 dated 27.09.2017. 2. The hearing of the appeal was concluded through audio-visual medium on account of Government guidelines on account of prevalent situation of Covid-19 Pandemic, on behalf of the assessee none appeared but have considered the written submission and appeal is decided on merits as per the material placed on record. 3. The appellant has taken following grounds in this appeal; 1. That the learned A.O erred in making an addition amounting to Rs 350000 treating it as unexplained amount. On the facts and circumstance of the case, Addition is bad in law and unfair. 2. That the learned A.O erred in making disallowances amounting to Rs 30886 of shop expenses claimed. On the facts and circumstance of the case, Addition is bad in law and unfair. 3. That the learned A.O erred in making addition of Rs 54000 on account of Low withdrawal for household expenses without any basis. 4. That the appellant reserves right to amend/raise on any other point at the time of hearing of appeal. 3 ITA No. 288/RPR/2017 A.Y.2012-13 4. The fact as culled out from the records is that the assessee derived income by way of jewellery business. Return of Income for the assessment year 2012-13 declaring total income at Rs.6,69,430/- apart from agriculture income of Rs. 65,000/-, was filed electronically on 26.09.2012. A paper return along with a copy of Audit Report in Form No. 3CB & 3 CD and audited statement of accounts has been obtained. The case was selected for scrutiny through CASS. Accordingly, a notice under section 143(2) u/s 143(1) of the Income-tax Act, 1961 [herein after referred to as "the Act"] dated 08.08.2013 issued and served upon the assessee on 13.08.2013. On change of incumbent, notice u/s 143(2) dated 01.08.2014 issued to the assessee. Later on, Notice U/s 142(1) along with query letter dated 15.09.2014 issued to the assessee. Further, on change on incumbent, Notice u/s 143(2) dated 26.12.2014 issued to the assessee and another Notice u/s 142(1) dated 11.02.2015 issued to the assessee fixing the case for hearing on 18.02.2015. In response to the notices, Shri S.L. Jain, Advocate, for the assessee attended the proceedings from time to time and explained the return. Requisite compliances/written submissions have been made, which are placed on the records after perusal and verification. Books of accounts and other documents produced for examinations which have been examined on test check basis. The assessment was completed u/s. 143(3) making certain addition to the retuned income of the assessee. 4 ITA No. 288/RPR/2017 A.Y.2012-13 5. On appeal before the ld. CIT(A) the assessee got part relief and for the additions sustained the assessee carried this appeal before the bench. The assessee has mainly taken three grounds out of those three grounds one addition is already considered in favour of the assessee by the CIT(A) and therefore, ground no. 2 raised before us is infructuous and thus, effectively two addition challenged by the assessee in this appeal one is of addition of Rs. 3,50,000 as unexplained credit and Rs. 54,000 added as low house hold withdrawal. 6. The relevant finding of the ld. CIT(A) on both the issue is extracted here in below for the sake of understanding the issue and basis of the findings given by the ld. CIT(A). Issue No.1 The second grounds of appeal relates to addition of Rs. 54,000/- on account of low house hold expenses. On perusal of the capital account of the appellant the AO noticed that Rs. 66,000/- was shown on account of household withdrawals which according to the AO was low considering the status of the appellant, family size and prevailing market conditions. Accordingly, the AO made a reasonable estimate of Rs. 1,20,000/- per annum (i.e, Rs. 10,000/- per month) as reasonable for house hold expenses and added Rs. 54,000/- (Rs. 66,000/- + Rs. 54,000/-) on account of low house hold withdrawals. During the appeal proceedings I find that there is no specific submissions in this regard and moreover I agree with the AO 5 ITA No. 288/RPR/2017 A.Y.2012-13 that the amount of withdrawals shown by the appellant during the year is low considering the size of family and his status. Accordingly, the addition of Rs. 54,000/- made by the AO is confirmed and this ground of appeal is dismissed. Issue No. 2 The fifth ground of appeal relates to addition of Rs. 3,50,000/- on account of unsecured loans. The appellant had taken loan from Shri Madanlal Kothari which was shown as unsecured loans by the appellant. The following observations of the AO are reproduced: “On perusal of the copy of ITRV and computation of income of Shri Madanlal Kothari it was noticed that during the current year his source of income was by way of salary and interest income. Copy of balance sheet was also furnished in which sufficient funds have been reflected but in view of the fact that balance sheet is not forming an integral part of return of income. Hence the balance sheet of any person can be prepared at a later date. Moreover copy of bank statement reveals that during the current year only meagre amount of balance was at his credit. Only in the month of March 2012 an amount of Rs. 3,50,000/- was credited to his account which has been transformed in the form of unsecured loan in the hands of the assessee. With these facts it is clear that the lender, Shri Madanlal Kothari has no creditworthiness. The assessee has contended that as per balance sheet the lender has sufficient funds in his hands and also stated that due to non credit of another cheque presented in the bank timely, the cheque issued to the assessee has been rejected by the bank with the comments 'insufficient funds' But in view of the fact that 6 ITA No. 288/RPR/2017 A.Y.2012-13 balance sheet of the lender has been prepared at a later date, the contention of the assessee is not acceptable since without having sufficient funds in his account the lender has given loan Rs. 3,50,000/- to the assessee. Further, it was also noticed on perusal of bank statement the lender that during the entire period of the current year a meagre amount has been shown balance in the account of the lender. It is evident from the above that Shri Madanlal Kothari has no creditworthiness for giving loan amounting to Rs. 3,50,000/ to the assessee. Since the creditworthiness has not been proved in this case the loan amount of Rs. 3,50,000/- is treated as unexplained amount of the assessee and the same is added to the total income of the assessee. 9. During the course of appeal proceedings it was submitted by the appellant as under: That Shri Madan Lal Kothari given a cheque on 12.3.2012 for Rs. 3,50,000/- to the assessee that cheque was presented to the bank for clearing it could not be honoured by the bank, matter was reported by assessee to Shri Madan Lal Kothari he told that the cheque of Rs. 3,33,500/- presented by him is returned by the bank it is likely to be cleared and requested the assessee to represent the cheque assessee represented the cheque to the bank and it was cleared. The confirmation letter filed previously is clearly showing credit on 12.3.2013 debit on 13.3.2012 again credit on 15.3.2012 you will find the same cheque no 237113 mentioned in the confirmation letter. Reason was truly mentioned in the confirmation it doesn't mean that there was no fund with the assessee facts is that the creditor issued cheque he was under bonafide belief that the cheque which the creditor received might have cleared. In support of the above assessee obtained letter from the creditor Shri Madanlal Kothari which is enclosed with this letter. 7 ITA No. 288/RPR/2017 A.Y.2012-13 I have considered the grounds of appeal and gone through the order of the AO and seen the submissions made by the ld. Counsel. I have seen the bank statement of Shri Madanlal Kothari, his income tax returns and the computation of total income for the AY 2011-12, AY 2010-11, A Y 2009-10 and AY 2008-09. From these documents it clear that the lender Shri Madanlal Kothari has only income from salaries and income from other sources. The AO has rightly held that the lender has no credit worthiness for advancing Rs. 3,50,000/- as loan to the appellant. In the return of income and computation of total income of Shri Kothari I find that the total income declared by him for AY 2011-12 is Rs. 1,59,970/-, for AY 2010-11 is Rs. 1,58,810/-, AY 2009-10 is Rs.1,48,235/- and for AY 2008-09 is Rs. 1,09,890/-. Moreover I find that the AO has rightly pointed out that there are insufficient funds in the bank account of the lender. Under these facts and circumstances the lender has no creditworthiness which is an important criteria laid down by the hon'ble courts for justifying the payments and receipts of loans, accordingly the addition of Rs. 3,50,000/- made by the AO is confirmed and this ground of appeal is dismissed. 7. During the course of hearing, none appeared but the assessee has filed the paper book and the submission of the assessee on both these issues are extracted here in below: Submission of assessee on Ground no. 1 LOAN OF 3,50000/- TREATED AS UNEXPLAINED AMOUNT ADDED TO THE INCOME OF ASSESSEE The appellant taken a loan from MADAN LAL KOTHARI of Durg. the amount was given by MADAN LAL KOTHARI through chq. Copy of confirmation letter, I.T. RETURN also filed during the course of proceeding along with the photocopy of pass book of 8 ITA No. 288/RPR/2017 A.Y.2012-13 the creditor MADAN LAL KOTHARI. NO CASH WAS DEPOSITED in the BANK BY MADAN LAL KOTHARI FOR MAKING LOAN TO APPELLANT.it becomes clear from the pass book, written submission also given to A.O. along with the letter of MADAN LAL KOTHARI on the fact and circumstances of the case the addition cannot be said legal. Assessee had submitted all the details before the A.O., but after having all information addition made is not lawful. A.O. has not mentioned in the order how he feels it the amount is unexplained and added it to the total income of the assessee, the addition cannot be said lawful we rely on the following If the A.O. was not satisfied with the documents submitted along with explanation filed A.O. should have to give an opportunity to the assessee, without doing so the addition can not be said proper We rely on the following C.I.T V/S DAYACHAND JAIN VAIDYA (1975)98 ITR 280 ALL In our case it is clear that the person who advanced loan to appellant had fund with the bank and also received chq from other party to whom ( creditor) had given loan the cheque was return due to technical reason by the bank again it was presented and credited in the account. Facts will be very clear from the bank pass book ( MADAN LAL KOTHARI) I do not understand why the addition made by the A.O. by mentioning the unexplained amount of the assessee On the fact and going through the documents you will come to know that baseless addition made A.O. which may kindly be deleted Submission of the assessee on Ground no. 3 9 ITA No. 288/RPR/2017 A.Y.2012-13 Rs 54000/- added on account of house hold expenses: Assessee withdrawal Rs 66000/- for house hold expenses his family consists wife two children 5 yrs school going and 2 yrs he is residing with his brother having common mess, A.O. mentioned that looking to social status he determined the expenditure of the assessee, the basis of determining the house hold expense is not proper .Department have np power to decide the amount of house hold expenditure, before passing an order no question was raised by the A.O. which is beyond the law. Before making an addition A.O should have to ask in this respect, he have to mentioned the reason why the more fund required for house hold expenses Assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it, GARGIDIN JWAWLA PRASAD V/S CIT (1974/96 ITR 97 ALL) We also rely on PARWATI BEN SUKHADIYA V/S INCOME TAX DEPARTMENT ITAT AHD. ( copy of judgment enclosed) Going through the above hon courts judgment it is very clear that the addition made is not justified beyond the law Which may be deleted. 8. Per contra the Ld. DR supported the orders of the lower authority and the conviction of Ld. CIT(A) on sustaining the two additions and also stated in respective cash credit introduce by the assessee the cheque received is written with remark insufficient fund and CIT(A) observation that the lender has not capacity to advance a money which is beyond the income of the lender of the money to the assessee and therefore, he heavily relied upon the finding of the CIT(A). As regards 10 ITA No. 288/RPR/2017 A.Y.2012-13 the household addition he relied on the detailed finding of the AO supported by the ld. CIT(A) finding. 9. We have considered the rival contentions advanced before us as regards the ground no. 1 it is beyond doubt that the assessee has already discharged his onus by submitting the ITR, Bank pass book and confirmation. Merely at the first instance the cheque was bounce on account of technical reason and the same cheque again presented and clear did not mean that the loan obtained by the assessee remain unexplained. The requirement as per provisions of the act to prove the identity, genuineness and capacity of the lender is proved by placing on record the ITR, Pass book and confirmation merely the cheque was bounced at first instance the addition cannot be made as unexplained credit in the hands of the assessee and looking the material placed by the assessee on record, we direct that the addition of Rs. 3,50,000 made by the AO and sustained by the CIT(A) is required to be deleted and thus ground no. 1 raised by the assessee is allowed. 10. The assessee has raised ground no. 2 for an addition of Rs. 30,886/- since the said addition is already deleted by the ld. CIT(A) on merits this ground raised before us becomes infructuous and the same is not required to be adjudicated. 11. The third ground is in relation to the addition of low withdrawal for household withdrawal in this regard we have persuaded the findings of 11 ITA No. 288/RPR/2017 A.Y.2012-13 the AO, CIT(A) and arguments of the ld. DR since, the addition made is without issue of any show cause notice or an opportunity to the assessee to deal with the estimate the arbitrarily addition without hearing the assessee is against the principles of natural justice and is not sustainable. Even on merits we have persuaded the submission of the assessee and find from the records that the assessee is also having agricultural income his children are two small and assessee leaves with his brother having common mess the addition made without affording an opportunity in respect of low household withdrawal will not survive and thus the addition of Rs. 54,000/- made by the assessing officer and sustained by the CIT(A) is deleted. Thus, ground no. 3 raised by the assessee is allowed. 12. In the result, the appeal of the assessee is allowed. Order Pronounced in the open court on 26 th May 2022. Sd/- Sd/- RAVISH SOOD RATHOD KAMLESH JAYANTBHAI JUDICIAL MEMBER ACCOUNTANT MEMBER रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 26 th May, 2022 Ganesh Kumar, PS, Jaipur आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 12 ITA No. 288/RPR/2017 A.Y.2012-13 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 13 ITA No. 288/RPR/2017 A.Y.2012-13 2 Draft placed before author 25.05.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member 25.05.2022 JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order