SHRI CHHAGANBHAI MAVJIBHAI PATEL, Ahmedabad V. THE DY.CIT., CENT.CIR.1(2), Ahmedabad

ITA 2913/AHD/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57109 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-01-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 26-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: U S BHATI
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.2913/AHD/2006 (ASSESSMENT YEAR:-2002-03) CHHAGANBHAI MAVJIBHAI PATEL, PROP. OF M/S SIDDHI MANUFACTURING COMPANY, NEAR KIRTI DUGDHALAYA, INDIA COLONY, BAPUNAGAR, AHMEDABAD V/S THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11, AHMEDABAD PAN: ACRPP 9116 B [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI U S BHATI, AR REVENUE BY:- SHRI VINOD TANWANI, SR. DR DATE OF HEARING:- 16-01-2012 DATE OF PRONOUNCEMENT:- O R D E R PER D K TYAGI (JM) :- THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 20-10-2005 PASSED BY THE LEARNED CIT(A) -XVII, AHMEDABAD FOR ASSESSMENT YEAR 2002-03. THE FOLLOWIN G TWO EFFECTIVE GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: - 1.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE MAD E BY THE LEARNED AO REGARDING CLAIM OF LABOUR EXPENSES AMOUN TING TO RS.8,17,463/- ON THE GROUND OF BEING EXCESSIVE, UNR EASONABLE AND HAVING NOT INCURRED FOR THE PURPOSE OF BUSINESS . 2 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.1,50, 000/- U/S 68 F THE INCOME TAX ACT, 1961 MADE BY THE LEARNED AO. 2 AS REGARDS GROUND NO.1 IN THE ASSESSEES APPEAL, THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FR OM JOB WORK OF POLISHING AND CUTTING OF ROUGH DIAMONDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THE OUTST ANDING LIABILITY OF RS.8,17,463/- ON ACCOUNT OF LABOUR WOR K. THE AO HAS NOTED THE FOLLOWING FACTS:- DURING THE COURSE OF ASSESSEMENT PROCEEDINGS, SHRI DHARMESHBHAI. ACCOUNTANT AND SHII S.M.VITHLANI, C.A. ATTENDED AND THEY WERE ASKED TO FURNISH DETAILS OF UNPAID LIABILITY IN RESPECT O F LABOUR WORK AS PER AUDITOR'S REPORT WHICH IS OUTSTANDING AT RS.8,17,46 3/-. THEY WERE THEREFORE ASKED TO FURNISH DETAILS OF LABOUR WORK A ND WHEN OUTSTANDING LIABILITY AT RS.8,17,463/- AND WHEN IT WAS PAID. IN RESPONSE TO SAID NOTICE THEY HAVE REPLIED THAT DURING THE YEAR THE A SSESSEE HAS RECEIVED TOTAL INCOME FROM LABOUR WORK AMOUNTING RS.86,59,55 0/- OUT OF THIS, THE LABOUR PAYABLE / PAID DEBITED IN THE PROFIT & L OSS ACCOUNT AMOUNTING TO RE.69,71,775/- AND THE ACTUAL PAYMENT IS, MADE AT RS.61,54,312/-. THE REMAINING AMOUNT OF RS.8,17,463 /- IS STATED TO BE PAID IN THE NEXT YEAR AS UNDER: RE. 50000/- PAID ON 15TH JUNO 2002 RS. 30000/- PAID ON 17TH JUNE 2002 RS.2,50,000/- PAID ON 4TFL JUNO 2002 RS.1,50,000/- PAID ON 19LH SEP 2002 RS.1,50,000/- PAID ON 24TH SEP 200 RS. 80,000/- PAID ON 27TH SEP 2002 RS.1,07,463/- PAID ON 4LH OCT 2002 THEY HAVE FURNISHED COPY OF ACCOUNTS, WHEREIN THE A FORESAID ENTRIES OF THE1 PAYMENTS ARE APPEARING IN THE ACCOUNT BESIDES, THEY HAVE FURNISHED ZEROX COPIES OF PAGES OF REGISTER WHEREIN THE NAMES OF THE LABOURERS AND PAYMENTS ARE MENTIONED BUT, ON SCRUTI NY OF THE SAME, IT IS OBSERVED THAT THE HEADING ON THE TOP OF THE PAPE R, IS WRITTEN AS 3 AUGUST 2001 AND SPECIFIC DATE OF THE PAYMENT AS MEN TIONED IN THE COLUMN OF REGISTER, BUT NO SUCH ORIGINAL REGISTER I S PRODUCED FOR VERIFICATION. IN ABSENCE OF PROPER EVIDENCE OF PAYM ENTS SAME CANNOT BE CONSIDERED AS AMOUNT PAID SUBSEQUENTLY. NO REASO NS FOR SUCH HIGHER RATE OF LABOUR IS MENTIONED OR EXPLAINED. NO LABOUR WILL KEEP THEIR LABOUR PENDING FOR SUCH A LONG PERIOD THAT LA BOUR BILL RAISED IN THE MONTH OF AUGUST, PAID IN SUBSEQUENTLY IN THE NE XT YEAR AFTER CO LONG PERIOD. NO RECEIPT OF PAYMENT IS PRODUCED AND OLD REGISTER IS USED AS EVIDENCE. THEREFORE LOOKING TO THE MODUS OP ERAND! THE AMOUNT OUTSTANDING IS NOTHING BUT SAME HAS BEEN CON SIDERED AS ARTIFICIAL AND FORFEITED AND IT IS CONSIDERED THAT THE ASSESSEE HAS DEBITED TO THIS EXTENT AS EXCESSIVE EXPENDITURE. MOREOVER T HE ASSESSEE HAS FAILED TO MAINTAIN PROPER RECORD OF LEBOUR EXPENSES AND PAYMENT THEREOF THEY COULD NET PRODUCE PROPER EVIDENCE OF P AYMENTS SUBSEQUENT TO THE END OF RESPECTIVE F.Y. SUCH KIND OF LIABILITY WAS DISALLOWED IN A.Y.2000-2001 AND LD. C.L.T (A) HAS C ONFIRMED SAID ADDITION. THEREFORE CLAIM OF LABOUR EXPENSES IS TRE ATED AS EXCESSIVE, UNREASONABLE AND TO THE EXTENT OF LIABILITY WHICH I S NOT INCURRED FOR BUSINESS PURPOSE AND THEREFORE SAME IS DISALLOWED. HENCE ADDITION OF RS.8,17,463/- IS MADE TO THE TOTAL INCOME. (ADDITIO N OF RS.8,17,463/- ) 3 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FI LED AN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A ) CONFIRMED THE ACTION OF THE AO. 4 THE ASSESSEE IS NOW IN APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LEARNED CIT(A). THE LEARNED COUNSEL OF THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES AND FURTHER SUBMITTED THAT THE ASSESSEE WILL PRODUCE TH E ORIGINAL REGISTER BEFORE THE AO TO SHOW THAT AMOUNT OF RS.8, 17,463/- WAS PAID BY THE ASSESSEE IN NEXT YEAR. 5 THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND THE LEARNED CIT(A). 4 6 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORD. WE FIND THAT THE ASSESSEE DID NOT PRODUCE THE ORIGINAL REGISTER IN SUPPORT OF ITS CLAIM THAT AMOUNT OF RS.8,17,463/- W AS PAID IN NEXT YEAR, THEREFORE THE AO MADE THIS ADDITION WHIC H WAS CONFIRMED BY HE LEARNED CIT(A). SINCE THE LEARNED C OUNSEL OF THE ASSESSEE HAS GIVE UNDERTAKING THAT THE ASSESSEE WIL L PRODUCE THE ORIGINAL REGISTER BEFORE THE AO, WE DEEM IT PROPER THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH AD JUDICATION AFTER VERIFYING THE PAYMENT FROM THE ORIGINAL DOCUMENT. W E ORDER ACCORDINGLY. 7 THE SECOND GROUND OF APPEAL IS REGARDING ADDITION OF RS.1,50,000/- MADE U/S 68 OF THE IT ACT ON ACCOUNT OF UNEXPLAINED CREDIT. THE FACTS OF THE CASE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS DEPOSITED RS.1,50,000/- ON 29 -10-2001 AND IMMEDIATELY WITHDRAWN THE SAME BY CHEQUE AND DEPOSI TED IN THE REGULAR ACCOUNT OF THE ASSESSEE. THE ASSESSEE WAS A SKED TO EXPLAIN THE SOURCE OF DEPOSIT FOR AY 2002-03 AT RS. 1,50,000/- DEPOSITED IN HIS HUF CAPACITY. AFTER CONSIDERING T HE EXPLANATION OF THE ASSESSEE, THE AO HELD THAT THE RELEVANT NEXU S IS NOT ESTABLISHED, THEREFORE, THE SOURCE OF DEPOSIT OF RS .1,50,000/- CANNOT BE CONSIDERED AS GENUINE AND AMOUNT OF RS.1, 50,000/- WAS CONSIDERED AS UNEXPLAINED AMOUNT CREDITED IN THE NA ME OF HUF. THE AO ACCORDINGLY MADE AN ADDITION OF RS.1,50,000/ - TO THE TOTAL INCOME OF THE ASSESSEE. 5 8 THE LEARNED CIT(A) CONFIRMED THE ADDITION WITH TH E FOLLOWING OBSERVATIONS:- THE SECOND GROUND OF APPEAL IS REGARDING ADDITION OF RS.1,50,000/- MADE U/S 68 OF THE IT ACT ON ACCOUNT OF UNEXPLAINED CREDIT. IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT THE PAYMENT W AS RECEIVED BY CHEQUE AND THE CREDITOR WAS ASSESSED TO TAX ON SPEC IFIC INCOME. THE XEROX COPY OF BANK ACCOUNT AND CONFIRMATION WERE FI LED. IN VIEW OF THE EVIDENCE PRODUCED, THE ASSESSING OFFICER WAS NO T JUSTIFIED IN TREATING THE SAME AS NON-GENUINE LOAN. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS 256 ITR 360 (GUJ). 6 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E LEARNED COUNSEL AND THE FACTS OF THE CASE. THE APPELLANT HA S TAKEN LOAN FROM SHRI CHHAGANBHAI MAVJIBHAI PATEL, HUF AMOUNTING TO RS.1,50,000/- VIDE CHEQUE DATED 29.10.2001. ON SCRUTINY OF THE BA NK ACCOUNT OF THE SAID F, IT WAS OBSERVED THAT HE HAD DEPOSITED RS.1, 50,000/- ON 29.10.2001 AND ISSUED THE CHEQUE TO THE APPELLANT. THE APPELLANT TRIED TO EXPLAIN THE DEPOSITS STATING THAT THE HUF RECEIV ED RS.70,000/- FROM ENCASHMENT OF NSC AND REMAINING AMOUNT WAS DEPOSITE D FROM ITS SAVINGS. HOWEVER, THE ASSESSING OFFICER NOTICED THA T THE ENCASHMENT OF NSC WAS RECEIVED ON 30.03.2000 AND THE CREDIT EN TRY IN THE BANK ACCOUNT WAS DATED 29.10.2001. THERE IS NO NEXUS BE TWEEN THE ENCASHMENT OF THE NSC AND THE CASH DEPOSITS IN THE BANK AND THERE IS NO PROOF ANY SAVINGS BY THE HUF WHICH WERE STATED T O BE DEPOSITED ON 29.10.2001 BY THE HUF IN THE BANK ACCOUNT. THUS, TH E APPELLANT COULD NOT PROVE THE SOURCE OF CREDIT AND THE CREDITWORTHI NESS OF THE DEPOSITOR. THE ASSESSING OFFICER HAS RIGHTLY TREATE D THE LOAN AS UNEXPLAINED AND CORRECTLY MADE THE 'ADDITION U/S 68 OF THE I.T. ACT ON ACCOUNT OF UNEXPLAINED CREDIT. THE FINDING OF THE A SSESSING OFFICER IS HEREBY CONFIRMED. 9 THE LEARNED COUNSEL OF THE ASSESSEE REITERATED TH E SUBMISSIONS AS MADE BEFORE THE LEARNED CIT(A) AND A LSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF CIT VS. SMT. P K NOORJAHAN (1999) 237 ITR 570 (SC) AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF DCIT 6 VS. ROHINI BUILDERS (2002) 256 ITR 360 (GUJ). HE FU RTHER SUBMITTED THAT THE INCOME REPRESENTED BY INTANGIBLE ASSETS MADE IN THE ASSESSMENT OF THE ASSESSEE FOR THE AYS 2000- 01 AND 2002- 03 MAY BE CONSIDERED AS AVAILABLE FOR INTRODUCTION IN THE NAME OF THE HUF OF ASSESSEE. FOR MAKING THIS SUBMISSION, HE PLACED RELIANCE ON THE DECISION OF THE HONBLE RAJASTHAN H IGH COURT IN THE CASE OF CIT VS. TYARYAMAL BALCHAND (1987) 165 I TR 453 (RAJ). 10 THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND THE LEARNED CIT(A) AND FURTHER SUBMITTED THAT THE RATIO AS LAID DOWN IN THE CASE OF CIT VS. TYARYAMA L BALCHAND (1987) 165 ITR 453 (RAJ) IS NOT APPLICABLE IN THIS CASE AS IN THAT CASE THE ADDITION MADE DURING THE YEAR WAS FOUND SU FFICIENT TO COVER UP ANY UNEXPLAINED INCOME OF THE SAME YEAR. 11 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE HAVE ALSO GONE THROUGH THE DECISIONS AS REFERRED TO BY THE LEARNED COUNSEL OF THE ASSESSEE. WE FIND NO MERIT IN THE AR GUMENTS ADVANCED BY THE LEARNED COUNSEL OF THE ASSESSEE THA T THE INCOME REPRESENTED BY THE ADDITIONS MADE FOR THE AYS 2000- 01 AND 2002-03 MAY BE CONSIDERED AS AVAILABLE FOR INTRODUC TION IN THE NAME OF THE HUF OF ASSESSEE, PLACING RELIANCE ON TH E DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF TYA RYAMAL BALCHAND (SUPRA). AS THE FACTS OF THAT CASE ARE DIS TINGUISHABLE FROM THE FACTS OF THIS CASE. IN THAT CASE, THE HON BLE RAJASTHAN HIGH COURT HAS HELD THAT THE ADDITIONS MADE DURING THE YEAR BE CONSIDERED SUFFICIENT TO COVER UP ANY UNEXPLAINED I NCOME OF THE 7 SAME YEAR. THE SAME IS NOT THE CASE HERE. HERE, THE ASSESSEE WANTS US TO HOLD THAT THE INCOME GENERATED OUT OF A DDITIONS MADE IN THE EARLIER YEARS SHOULD BE CONSIDERED AVAILABLE FOR UNEXPLAINED INCOME OF CURRENT YEAR. THEREFORE, THE RATION AS LAID DOWN IN THE CASE OF TYARYAMAL BALCHAND (SUPRA) (198 7) 165 ITR 453 (RAJ) IS NOT APPLICABLE TO THE FACTS OF THIS CA SE. 12 NOW, COMING TO THE MERITS OF THE CASE, WE FIND T HAT THE ASSESSEE HAS TAKEN LOAN OF RS.1,50,000/- VIDE CHEQU E DATED 29- 10-2001 FROM SHRI CHHAGANBHAI MAVJIBHAI PATEL HUF . ON SCRUTINY OF THE BANK ACCOUNT OF THE HUF, THE AO FOU ND THAT A CASH OF RS.1,50,000/- WAS DEPOSITED ON 29-10-2001 A ND THEN CHEQUE WAS ISSUED TO THE ASSESSEE BY THE HUF. THE A SSESSEES EXPLANATION WAS THAT THE HUF RECEIVED RS.70,000/- F ROM ENCASHMENT OF NSC AND REMAINING AMOUNT WAS DEPOSITE D FROM ITS SAVINGS. THIS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE LOWER AUTHORITIES ON THE GROUND THAT ENCASHMENT OF NSC WA S RECEIVED BY THE HUF ON 30-03-2000 AND THE CREDIT ENTRY IN BA NK ACCOUNT WAS DATED 29-10-2001. THERE WAS NO NEXUS BETWEEN TH E ENCASHMENT OF NSC AND THE CASH DEPOSIT IN THE BANK AND ALSO THERE WAS NO PROOF OF ANY SAVINGS BY THE HUF WHICH WERE STATED TO BE DEPOSITED ON 29-10-2001 BY THE HUF IN ITS BAN K ACCOUNT. HOWEVER, TAKING A LENIENT VIEW OF THE MATTER, WE FE EL THAT RS.70,000/- WHICH WAS ENCASHMENT OF THE NSC WAS AVA ILABLE TO THE HUF FOR MAKING DEPOSIT IN ITS BANK BEFORE GIVIN G CHEQUE TO THE ASSESSEE AS NOTHING HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES THAT THIS AMOUNT OF RS.70,000/- WAS INV ESTED BY THE HUF SOME WHERE ELSE. AS FAR AS THE REMAINING AMOUNT OF 8 RS.80,000/- IS CONCERNED, SINCE THE HUF HAS FAILED TO EXPLAIN THE SOURCE OF THIS DEPOSIT, THE ADDITION OF RS.1,50,000 /- IS RESTRICTED TO RS.80,000/-. THIS GROUND OF APPEAL IS PARTLY ALL OWED. 12 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 03-02-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 03-02-2012 COPY OF THE ORDER FORWARDED TO: 1. CHHAGANBHAI MAVJIBHAI PATEL, PROP. OF M/S SIDDHI MANUFACTURING COMPANY, NEAR KIRTI DUGDHALAYA, INDIA COLONY, BAPUNAGAR, AHMEDABAD 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11 , AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XVII, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD