The ITO, Ward-2(3), Surat V. M/s. G.P. Tex, Surat

ITA 2894/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6134 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSHI
• Keywords: Unexplained cash credit; Corroborative evidences; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BE NCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON BLE SHRI A. MOHAN ALANKAMONY,A.M.) I.T.A. NOS. 2893 & 2894/AHD./2009 : ASSESSMENT YEAR : 2005-2006 I.T.O., WARD-2(3), SURAT VS- M/S. G.P.TEX, SURAT (PAN: AABFC 7191B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.S.SOURYAWANS HI, SR.D.R. RESPONDENT BY : SHRI HARDIK VORA O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE TWO APPEALS FILED BY THE REVENUE ARE AGAINST ORDER OF LD. CIT(A)-II , SURAT BOTH DATED 31-07-2009 FOR THE ASSESSMENT YEAR 2005- 06. THESE APPEALS WERE HEARD ON THE SAME DATE AND WERE ARGUED BY THE COMMON REPRESENTAT IVE, THEREFORE, DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. VARIOUS GROUNDS RAISED BY THE REVENUE IN ITA NO. 2893/AHD./2009 ARE AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN- A) DELETING THE ADDITION MADE BY THE AO OF RS.15,90,3 10 ON ACCOUNT OF UNEXPLAINED CREDITS IN THE CAPITAL ACCOUNTS OF PART NERS. B) DELETING THE ADDITION MADE BY THE AO OF RS.87,280 ON ACCOUNT OF UNEXPLAINED CASH CREDIT IN THE ACCOUNTS OF VARIOUS 7 PERSONS. C) RESTRICTING THE DISALLOWANCE MADE BY THE AO OF RS. 82,124 TO RS.400 ON ACCOUNT OF DISALLOWANCE OF 20% EXPENSES CLAIMED OF RS.4,10,622 UNDER THE HEAD VARIOUS EXPENSES. 3. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN GROUND NO.1 ARE THAT IN THE ASSESSMENT ORDER, THE AO MADE ADDITION OF RS.15,90, 310/- ON ACCOUNT OF UNEXPLAINED CREDITS IN THE CAPITAL ACCOUNT OF PARTNERS ON THE F OLLOWING GROUNDS: ITA NOS.2893 & 2894-AHD-09 2 1) DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAS INTRODUCED CREDITS OF RS.15,90,310 IN THE CAPITAL ACCOUNTS OF PARTNERS. 2) ON BEING SPECIFICALLY AND REPEATEDLY REQUESTED FOR FURNISHING OF PROOF WITH REGARD TO THE SOURCES OF ACQUISITION OF CAPITAL INT RODUCED BY THE PARTNERS WITH SUPPORTING EVIDENCES THEREOF, COPIES OF THEIR BANK ACCOUNTS, THEIR BALANCE SHEET AND PROOF I.T. RETURNS FILED BY THEM THE ASSESSEE A HS NOT FURNISHED ANY SUCH EVIDENCES. 3) SINCE THE CREDITS MADE IN THE ACCOUNTS OF PARTN ERS OF RS.15,90,310/- IS NOT VERIFIABLE, THE SO CALLED CREDITS IS TREATED AS ING ENUINE AS WELL AS UNEXPLAINED CREDITS AND ADDED TO THE TOTAL INCOME OF THE ASSESS EE FIRM U/S.68 OF THE ACT. 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 7, WHICH READS AS UN DER: 7. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. I HAVE ALSO EXAMINED THE ASSESSMENT RECORDS AND I FIND THAT THE ARS CLAIM I S CORRECT. THE DOCUMENTARY EVIDENCES MENTIONED ABOVE ARE AVAILABLE ON RECORD. THIS MEANS THAT THE AO HAD DELIVERATELY NOT CONSIDERED SUCH EVIDENCES AND HAD NOT EVEN MADE ANY MENTION OF THE SAME. PRIMA FACIE THEREFORE, THE SOURCE OF SUCH CAPITAL WAS FULLY ESTABLISHED NOT ONLY IN THE HANDS OF THE ASSESSEE FIRM WHICH WA S VERY OBVIOUS BUT ALSO IN THE HANDS OF THE PARTNERS THEMSELVES. IN ANY CASE, THE FACT REMAINS THAT IF ANY PART OF THE CAPITAL INTRODUCED BY THE PARTNERS IS NOT EXPLA INED SATISFACTORILY IN COURSE OF THE ASST. PROCEEDINGS OF THE FIRM, THE FIRM CANNOT BE HELD RESPONSIBLE, NOR CAN SUCH CAPITAL BE TREATED AS UNEXPLAINED INCOME OF TH E FIRM. THIS VIEW HAS BEEN CONFIRMED BY THE COURTS AND TRIBUNALS IN SEVERAL CA SES, SOME OF WHICH HAVE BEEN RELIED UPON BY THE AR (SUPRA). THE AO IS THEREFORE DIRECTED TO DELETE THE ADDITION OF RS.15,90,310/-. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE REVENUE, SHRI G.S.SOURYAWANSHI, SR.D.R. APPEARED AND POINTED OUT THAT THE DECISION OF THE LD. CIT(A), DELETING THE ADDITION OF RS.15,90,310/-, IS NOT ACC EPTABLE ON ACCOUNT OF FOLLOWING REASONS: (A) THE LD. CIT(A) HAS NOT APPRECIATED THAT THE AS SESSEE HAS MERELY MADE A SUBMISSION BEFORE HIM THAT THEY HAVE FURNISHED THE REQUISITE DETAILS WITH REGARD TO ITA NOS.2893 & 2894-AHD-09 3 THE SOURCES OF ACQUISITION OF CREDITS INTRODUCED BY THE PARTNERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO WHICH WERE NOT CONSIDERED BY THE AO AND HAD MADE THE ADDITION WITHOUT MAKING VERIFICA TION THEREOF. BUT IN FACT THE ASSESSEE HAD NOT FURNISHED ANY SUCH DETAILS AT ALL DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (B) THE LD. CIT(A) HAS ALSO NOT APPRECIATED THAT T HE ASSESSEE WAS SPECIFICALLY AND REPEATEDLY REQUESTED NOT ONLY TO FURNISH THE EV IDENCES WITH REGARD TO THE SOURCES OF ACQUISITION OF CAPITAL INTRODUCED BY THE PARTNER BUT TO PRODUCE THEM PERSONALLY FOR THEIR CROSS EXAMINATIONS WITH REGARD TO THE SOURCES OF ACQUISITION OF CAPITAL INTRODUCED BY THEM BUT THE ASSESSEE HAD NEI THER PRODUCED THEM PERSONALLY NOR HAD FURNISHED ANY CONFIRMATORY LETTERS OR SUPPO RTING EVIDENCES WHICH MAY PROVE THE SOURCES OF ACQUISITION OF CAPITAL INTRODU CED IN THE ACCOUNTS OF PARTNERS, AND THEREBY THE AO HAD NO OTHER OPTION BUT TO HOLD SUCH CREDITS AS INGENUINE AS HAS BEEN HELD BY HIM IN THE ORDER OF ASSESSMENT. 7. ON THE OTHER HAND, SHRI HARDIK VORA, APPEARING O N BEHALF OF THE ASSESSEE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). T HE COUNSEL OF THE ASSESSEE DREW OUR ATTENTION TO PARA 3 AT PAGE 4 OF THE ASSESSMENT ORD ER, WHICH READS AS UNDER: 3. UNEXPLAINED CAPITAL/CASH CREDIT U/S. 68 OF THE ACT: - A. DURING THE YEAR UNDER CONSIDERATION THE P ARTNERS OF THE ASSESSEE FIRM HAVE INTRODUCED CAPITAL AS UNDER:- 1. SMT. D.N. VASANWALA RS. 50,0 00 2. SHRI K.G. CHOKSI RS.10,65,310 3. SMT. NITABEN M. CHOKSI RS. 4,75.000 RS.15,90,310 THE ASSESSEE FIRM COULD NOT SUBSTANTIATE THE CAPITA L INTRODUCED BY THE PARTNERS IN ANY WAY BY ADDUCING THE BANK STATEMENT, BALANCE SHEET, I.T. RETURN OF THE PARTNERS TO PROVE THE SOURCE OF THE C APITAL INTRODUCED. HENCE, TOTALLY FAILED TO SUBSTANTIATE THE SAME. 7.1 THE LD. COUNSEL POINTED OUT THAT CONFIRMATIONS WERE DULY FURNISHED. THE LD. CIT(A) CALLED THE ASSESSMENT RECORDS AND VERIFIED T HE SAME AND DELETED THE ADDITION OF RS.13,90,310/-. THE COUNSEL OF THE ASSESSEE ALSO RE LIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT DECIDED ON 06.07.2005 IN THE CAS E OF CIT-VS- PANKAJ DYESTUFF ITA NOS.2893 & 2894-AHD-09 4 INDUSTRIES IN I.T. REFERENCE NO.241 OF 1993, WHEREI N IT WAS HELD THAT ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOU NTS ARE THEIR OWN, THE ITO IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTORY. HE ACCORDING LY POINTED OUT THAT THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 7.2 IN REJOINDER, THE LD. D.R. POINTED OUT THAT LOO KING TO THE FACTS RECORDED BY THE AO IN THE ASSESSMENT ORDER THAT THE ASSESSEE COULD NOT ADDUCE THE BALANCE-SHEET, COPY OF INCOME-TAX RETURN, BANK STATEMENT, ETC. IN SUPPORT OF THE CLAIM THAT PARTNERS INTRODUCED RS.15,90,310/- , THE LD. CIT(A) OUGHT TO HAVE CALLE D THE REMAND REPORT FROM THE AO. NO REMAND REPORT WAS CALLED. THEREFORE, THE MATTER BE REMANDED TO THE FILE OF THE AO. 8. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN PARA 3 OF THE ASSESSMENT ORDER, THE AO HAS MENTIONED THAT PARTNERS OF THE ASSESSEE FIRM HA VE INTRODUCED CAPITAL AS UNDER: 1. SMT. D.N. VASANWALA RS. 50,000 2. SHRI K.G. CHOKSI RS.10,65,310 3. SMT. NITABEN M. CHOKSI RS. 4,75.000 RS.15,90,310 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-V S- PANKAJ DYESTUFF INDUSTRIES ( SUPRA ), RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE, HE LD THAT ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS A RE THEIR OWN, THE ITO IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTORY. AS PER SECTI ON 68 OF THE I.T. ACT, THE ONUS IS ON THE ASSESSEE TO FILE CONFIRMATIONS AND TO PROVE THE GEN UINENESS OF THE TRANSACTION THAT ALLEGED AMOUNT OF RS.15,90,310/- IS RECEIVED FROM THE PARTN ERS. ONCE THIS IS PROVED, AS PER THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF PANKAJ DYESTUFF INDUSTRIES ( SUPRA ), RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE, TH E AO MAY PROCEED AGAINST THE PARTNERS AND IF REQUIRED, ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTORY. THEREFORE, THE AMOUNTS INTRODUCED BY THE PARTNERS IN THE CAPITAL ACCOUNTS CANNOT BE TREATED AS UNEXPLAINED UNDER SECTION 68 O F THE I.T. ACT, 1961. BE THAT IT MAY BE, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE A LLEGED AMOUNT OF RS.15,90,310/- IS ITA NOS.2893 & 2894-AHD-09 5 RECEIVED FROM THE PARTNERS, I.E. WHETHER IT IS RECE IVED IN CASH OR THROUGH ACCOUNT PAYEE CHEQUE. FOR THIS LIMITED PURPOSE, WE RESTORE THIS I SSUE TO THE FILE OF LD. CIT(A) BECAUSE IN THE STATEMENT OF FACTS, FURNISHED BY THE REVENUE, A LONG WITH THE MEMORANDUM OF APPEAL, IT IS MENTIONED THAT THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS BEFORE THE AO AS CLAIMED BEFORE THE LD. CIT(A). WE, THEREFORE, REMAN D THIS ISSUE TO THE FILE OF THE LD. CIT(A) WITH THE DIRECTION THAT THE AO WILL PRODUCE THE ASSESSMENT RECORDS POINTING OUT THAT NO SUCH DETAILS ARE AVAILABLE. THE LD. CIT(A), AFTER CONSIDERING THE OBJECTIONS OF THE AO, RE-ADJUDICATE THIS ISSUE AFRESH, IN ACCORDANCE WITH LAW. 9. GROUND NO.2 IS AGAINST DELETING THE ADDITION OF RS.87,280/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT IN THE ACCOUNTS OF VARIOUS 7 PERSONS. 10. WE HAVE HEARD BOTH THE SIDES. THE LD. CIT(A) DE LETED THIS ADDITION ON THE GROUND THAT THIS REPRESENTS BALANCE OF SUNDRY CREDITORS BR OUGHT FORWARD FROM EARLIER YEARS. THEREFORE, THERE WAS NO CASE FOR AO EITHER TO TREAT THIS AS UNEXPLAINED CREDIT FOR EVEN ADDING THE SAME UNDER SECTION 68 OF THE I.T. ACT IN THE YEAR UNDER CONSIDERATION. AS AGAINST THIS, THE LD. D.R. POINTED OUT THAT THE VIE W TAKEN BY THE LD. CIT(A) IS NOT ACCEPTABLE, IN VIEW OF THE FOLLOWING REASONS: (A) THE LD. CIT(A) HAS NOT APPRECIATED THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, ON BEING SPECIFICALLY AND REPEATEDLY R EQUESTED FOR THE ASSESSEE HAD NEITHER FURNISHED ANY COPY OF ACCOUNT, CONFIRMATORY LETTER IN RESPECT OF CREDIT BALANCES OF RS.87,280 IN THE NAMES OF VARIOUS 7 PER SONS NOR HAD FURNISHED THEIR PRESENT POSTAL ADDRESSES THROUGH WHICH INDEPENDENT INQUIRIES COULD HAVE BEEN MADE TO VERIFY THE GENUINENESS OF THE TRANSACTION I N RESPECT OF THE SAID CREDITS. T (B) THE LD. CIT(A) HAS NOT APPRECIATED THAT DURING THE COURSE OF APPEAL PROCEEDINGS TOO, THE ASSESSEE HAS MERELY CLAIMED TH AT SUCH CREDITS REPRESENTS THE OUTSTANDING CREDITS FOR THE PURCHASE OF GOODS CARRI ED FORWARD FROM EARLIER YEAR BUT HAS NOT APPEARED TO HAVE FURNISHED ANY SUPPORTING E VIDENCES TO SUBSTANTIATE ITS CLAIM AND IF FURNISHED, THE LD.CIT(A) HAS NOT ALLOW ED AN OPPORTUNITY TO THE AO TO VERIFY THE SAME AS ENVISAGED UNDER RULE 46A OF THE I.T. RULES 1962. ITA NOS.2893 & 2894-AHD-09 6 10.1 FROM THE REASONS RECORDED BY THE AO IN THE ASS ESSMENT ORDER, WE ARE CONVINCED THAT THE LD. CIT(A) HAS NOT ALLOWED OPPORTUNITY TO THE AO TO VERIFY THAT OUTSTANDING CREDIT OF EARLIER YEARS ARE BROUGHT FORWARD. WE, TH EREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT THE ASSESSEE SHOULD FURNISH THE COPIES OF ACCOUNTS, CONFIRMATION LETTER IN RESPECT OF CREDITS OF RS.87,280/- IN THE NAMES OF SEVEN PERSONS. THE AO M AY VERIFY THE SAME AND READJUDICATE THE ADDITION OF 87,280/- AFRESH, IN AC CORDANCE WITH LAW. RESULTANTLY, FOR STATISTICAL PURPOSES, THIS ISSUE IS TREATED AS ALLO WED. 11. THE LAST GROUND IS AGAINST RESTRICTING THE DISA LLOWANCE MADE BY THE AO OF RS.82,124/- TO RS.400/- ON ACCOUNT OF DISALLOWANCE OF 20% EXPENSES OF RS.4,10,622/- UNDER THE HEAD VARIOUS EXPENSES. 12. WE HAVE HEARD BOTH THE SIDES. IN THE ASSESSMENT ORDER, THE AO DISALLOWED RS.82,124/- BEING 20% OF EXPENSES CLAIMED AMOUNTING TO RS.4,10,622/- UNDER THE HEAD VARIOUS EXPENSES. THE LD. CIT(A) CONFIRMED THE ADDI TION OF RS.400/- DELETING THE REMAINING ADDITION ON THE GROUND THAT THESE EXPENSE S WERE INCURRED IN CASH ON DAY TO DAY BASIS AND PERSONS TO WHOM SUCH PAYMENTS WERE MADE D O NOT USUALLY HAVE THEIR BANK ACCOUNTS. THE ONLY GRIEVANCE OF THE REVENUE BEFORE US IS THAT FOR WANT OF FULL CHECK/ VERIFICATION, DISALLOWANCE OF 20% WAS MADE. THE DIS ALLOWANCE OF 20% WAS FAIR AND REASONABLE. THEREFORE, THE SAME BE RESTORED. IN OUR CONSIDERED OPINION, NO CASE HAS BEEN MADE BY THE REVENUE FOR MAKING AD HOC DISALLOWANCE OF 20% OF EXPENSES. THE LD. CIT(A), AFTER VERIFYING THE DISALLOWANCE OF EXPENSE S, CONFIRMED THE ADDITION TO THE EXTENT OF RS.400/- AND DELETED THE BALANCE ADDITION OF RS.81,724/-. HENCE, THE VIEW TAKEN BY THE LD. CIT(A) IS FAIR AND REASONABLE. WE, THERE FORE, DECLINE TO INTERFERE. THIS GROUND OF THE APPEAL OF THE REVENUE IS REJECTED. RESULTANT LY, FOR STATISTICAL PURPOSES, THIS APPEAL OF THE REVENUE, IS TREATED AS PARTLY ALLOWED. 13. NOW WE TAKE UP THE APPEAL IN ITA NO.2894/AHD/2009. THIS APPEAL IS AGAINST THE ORDER DATED 31/07/2009 OF THE LD. CIT(A)-II, SURAT CANCELLING THE PENALTY OF RS.6,13,873/- LEVIED BY THE AO. ITA NOS.2893 & 2894-AHD-09 7 14. WE HAVE HEARD BOTH THE SIDES. THE MAJOR TWO ADD ITIONS, ON WHICH THE PENALTY UNDER SECTION 271(1)(C) ARE LEVIED, HAVE BEEN REMAN DED TO THE FILE OF THE LD. CIT(A), VIDE OUR ORDER IN ITA NO.2893/AHD/2009 ( SUPRA ). WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) CANCELLING THE PENALTY OF RS. 6,13,873/- WIT H THE DIRECTION THAT THE LD. CIT(A) WILL RE-DECIDE THIS APPEAL, AFTER DECIDING TWO ISSU ES IN ITA NO.2893/AHD/2009, REMANDED TO THE AO, VIDE OUR ORDER ( SUPRA ). RESULTANTLY, FOR STATISTICAL PURPOSES, THIS APPEAL OF THE REVENUE IS TREATED AS ALLOWED. 15. IN THE RESULT, FOR STATISTICAL PURPOSE, THE APP EAL FILED BY THE REVENUE IN ITA NO.2893/AHD/2009 IS TREATED AS PARTLY ALLOWED WHERE AS THE APPEAL OF THE REVENUE IN ITA NO.2894/AHD/2009 IS TREATED AS ALLOWED FOR STATISTI CAL PURPOSE THE ORDER PRONOUNCED IN THE COURT ON 08.07.2011 SD/- SD/- (A. MOHAN ALANKAMONY) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08/07/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.