The ITO, 3(1), Bhopal V. Smt. Varsha Devi Chandani, Bhopal

ITA 299/IND/2012

• Counselvise Citation: 29922714 RSA 2012
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 143(3); 142(1); 12; 11; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 330/IND/2012 A.Y. 2005-06 SMT. VARSHA DEVI CHANDNANI (PROP. M/S VARSHA ENTERPRISES) BHOPAL PAN ACWPC 1420C :: APPELLANT VS INCOME TAX OFFICER 3(1), BHOPAL :: RESPONDENT ITA NO. 299/IND/2012 A.Y. 2005-06 INCOME TAX OFFICER 3(1), BHOPAL :: APPELLANT VS SMT. VARSHA DEVI CHANDNANI (PROP. M/S VARSHA ENTERPRISES) BHOPAL :: RESPONDENT 2 ASSESSEE BY SHRI HITESH CHIMNANI DEPARTMENT BY SHRI R.A. VERMA DATE OF HEARING 9.8.2012 DATE OF PRONOUNCEMENT 11.9.2012 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS A PPEALS AGAINST THE IMPUGNED ORDER DATED 27 TH FEBRUARY, 2012. THE GROUND RAISED BY THE ASSESSEE IS THAT THE LEARNED F IRST APPELLATE AUTHORITY ERRED IN MAINTAINING THE ADDITION OF RS. 23,99,200/- OUT OF THE ADDITION OF RS.67,28,996/- MADE U/S 68 ON AC COUNT OF UNEXPLAINED CASH CREDIT FROM THE FAMILY MEMBERS/REL ATIVES DESPITE VOLUMINOUS EVIDENCES FILED BY THE ASSESSEE WHEREAS THE REVENUE IS AGGRIEVED BY THE DELETION OF ADDITION OF RS. 40,29, 796/- OUT OF THE AFORESAID TOTAL ADDITION ON THE PLEA THAT THE LEARN ED CIT(A) DID NOT APPRECIATE THE FACTS MENTIONED IN ASSESSMENT ORDER ON ACCOUNT OF UNSECURED LOANS. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI HITESH CHIMNANI, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI R.A. VERMA, LEARNED SENIOR DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT UNSECURED LOANS WERE TAKEN FROM TH E FAMILY MEMBERS FOR WHICH CONFIRMATION WAS FILED BY THE ASS ESSEE. IT WAS ALSO POINTED OUT THAT THE LEARNED CIT(A) SOUGHT REM AND REPORT FROM 3 THE LEARNED ASSESSING OFFICER AND ULTIMATELY PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. IT WAS EXPLAINED THAT MRS. JAMNA DEVI IS THE MOTHER-IN-LAW WHEREAS SHRI K.S. CHANDNANI IS TH E HUSBAND OF THE ASSESSEE. THE CREDITORS FROM SERIAL NO. 2 TO 8 (MENTIONED IN THE CHART AT PAGE 5) ARE RELATIVES OF THE ASSESSEE WHER EAS THE CREDITORS MENTIONED AT S. NOS. 11 AND 12 ARE OUTSIDERS BUT IN THE SAME LINE OF BUSINESS. IN RESPECT OF 15 SUNDRY CREDITORS FRO M WHOM THE TOTAL AMOUNT OF RS. 2,90,200/- WAS TAKEN WERE ALSO CLAIM ED TO BE OUTSIDERS. OUR ATTENTION WAS INVITED TO PAGES 104 TO 118 TOWARDS CONFIRMATION. RELIANCE WAS PLACED UPON THE DECISIO NS IN 245 ITR 160 (MP), 141 TTJ 288 (AGRA) (TM) 256 ITR 360 (GUJ) AND 137 ITD 120 (CHD.). 3. ON THE OTHER HAND, THE LEARNED SENIOR DR, SHRI R .A. VERMA DEFENDED THE ASSESSMENT ORDER BY ASSERTING THAT CAS H WAS DEPOSITED ON THE SAME DAY AND CHEQUE WAS ISSUED OUT OF THE SAME DEPOSIT. IT WAS PLEADED THAT ALL THE CREDITORS ARE CONNECTED WITH EACH OTHER, THEREFORE, BURDEN IS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF SUCH CREDITS. A PLEA WAS ALSO RAISE D THAT THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN METACHEM INDUSTRIES (SUPRA) IS NOT APPLICABLE TO THE FACTS O F THE CASE. THE 4 CRUX OF ARGUMENTS IS THAT THE CREDIT WORTHINESS WAS NOT PROVED AND A FACADE WAS CREATED BY THE ASSESSEE AS IN EVERY AC COUNT CASH WAS DEPOSITED AND CHEQUES WERE ISSUED THEREFROM, CONSEQ UENTLY, SURROUNDING CIRCUMSTANCES HAVE TO BE LOOKED INTO AN D THE SOURCE OF CASH DEPOSITED BY SUCH CREDITORS IS ALSO NOT KNO WN. IT WAS ASSERTED BY THE LD. SR. DR THAT THE CREDITORS, WHO WERE NOT EVEN FILING INCOME-TAX RETURNS, SUDDENLY BECAME SO RICH THAT THEY LENT LACS OF RUPEES TO THE ASSESSEE. THE CRUX OF ARGUMEN TS IS THAT THE SOURCE OF CASH WAS EVEN NOT KNOWN AND IN THE ABSENC E OF DOCUMENTARY EVIDENCE, NOT FILED BEFORE THE LD. ASSE SSING OFFICER, HE COULD NOT EXAMINE THE SOURCE OF CASH. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE OBTAINED A CONTRACT OF TENDU PATTA, DURING THE YEAR FOR WHICH THE ASSESSEE WAS TO MAKE PAYMENT IN ADVANCE O F THE CONTRACT MONEY BEFORE THE AWARD OF THE CONTRACT. T HE ASSESSEE SHOWED HUGE UNSECURED LOANS. THE ASSESSEE DECLARED TOTAL INCOME OF RS.1,12,620/-, IN HER RETURN, FILED ON 29.10.200 5. THE CASE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTICES U/S 143(2 ) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE SERVED UPON THE A SSESSEE. IN RESPONSE TO THE SAID NOTICES, THE ASSESSEE ATTENDED ASSESSMENT 5 PROCEEDINGS, PRODUCED BOOKS OF ACCOUNTS, BILLS AND VOUCHERS ALONG WITH WRITTEN SUBMISSIONS. THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 15.12.2009 WHEREIN THE TOTAL INCO ME WAS ASSESSED AT RS.71,04,231/-. THE DETAILS OF AMOUNTS ADDED AS UNSECURED LOANS ARE SUMMARISED AS UNDER :- SL. NO. NAME OF THE CREDITOR AMOUNT ADDED (IN RS.) RELATION WITH THE ASSESSEE DEPARTMENTS APPEAL ASSESSEES APPEAL 1 SMT. JAMNADEVI CHANDNANI 4,38,000 CLOSE RELATIVE 2 BHARTIDEVI CHANDNANI 4,66,000 -DO- 3 LATADEVI CHANDNANI 3,00,000 -DO- 4 ANAND CHANDNANI 3,50,000 -DO- 5 GOURI CHANDNANI 80,000 -DO- 6 INDU CHANDNANI 2,75,000 -DO- 7 POONAM CHANDNANI 2,50,000 -DO- 8 VEENA CHANDNANI 2,50,000 -DO- 9 15 SUNDRY CREDITORS 2,90,200 NOT RELATED YES 10 K.S. CHANDNANI 26,95,069 HUSBAND YES 11 LALARAM PROPRIETOR SAPNA TRADERS 6,34,500 OUTSIDER YES 12 KACHRUMAL PROPRIETOR SHIVAM TRADERS 7,00,227 OUTSIDER YES TOTAL ADDITION 67,28,996 RELIEF BY CIT(A) 40,29,796 IF THE AFORESAID TABLE IS ANALYSED, WE FIND THAT TH E CREDITORS MENTIONED FROM SL. NO. 1 TO 8 WERE CLAIMED TO BE FA MILY MEMBERS 6 WHEREAS SHRI K.S. CHANDNANI (SL.NO. 10) IS THE HUSB AND OF THE ASSESSEE. THE AMOUNT OF RS.2,90,200/- RECEIVED FR OM 15 SUNDRY CREDITORS (SL.NO. 9) AND THE CREDITORS MENTIONED AT SERIAL NOS. 11 AND 12 ARE OUTSIDERS. THE LEARNED CIT(A) GRANTED R ELIEF OF RS.40,29,796/- AGAINST WHICH THE REVENUE IS IN APPE AL AND THE ASSESSEE IS IN APPEAL FOR THE ADDITION OF RS. 23,99 ,200/-, RETAINED BY THE LEARNED CIT(A). THE CRUX OF ARGUMENTS ON BE HALF OF THE ASSESSEE IS THAT PANS WITH RESPECT TO CREDITORS MEN TIONED FROM SR. NO. 1 TO 8 AND 10 TO 12 WERE FURNISHED BEFORE THE A SSESSING OFFICER AND THE LOANS WERE THROUGH CHEQUE EXCEPT THE 15 CRE DITORS FROM WHOM CASH WAS TAKEN. PLEA WAS ALSO RAISED THAT CONF IRMATIONS FROM ALL THE PERSONS WERE FILED. IT WAS EXPLAINED THAT S TATEMENTS OF SUCH CREDITORS WERE RECORDED. THERE IS AN UNDISPUTED FAC T THAT EXCEPT THE AMOUNT OF RS.2,90,200/- (FROM 15 SUNDRY CREDITORS) CASH WAS DEPOSITED IN ALL THE ACCOUNTS AND THE CHEQUES WERE ISSUED THEREFROM. THE REVENUE HAS DISPUTED THE GENUINENES S AND CREDIT WORTHINESS OF SUCH CREDITORS. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER CERTAIN UNDISPUTED FACTS ARRIVED AT BY THE LEARNED ASSESSING OFFICER :- I) ALL OF THE LADIES FROM WHOM LOANS HAVE BEEN SHOW N WERE NOT FILING THEIR INCOMETAX RETURN BEFORE LENDING MO NEY TO THE ASSESSEE. 7 II) ALL OF THE LADIES HAVE OPERATED THE BANK ACCOUN T FOR THE PURPOSE OF LENDING LOANS TO THE ASSESSEE. III) IN EVERY CASE, IT HAS BEEN FOUND THAT CASH HAS BEEN DEPOSITED IMMEDIATELY BEFORE ISSUING CHEQUES. IV) ALL OF THE LADIES HAVE MENTIONED THEIR SOURCE O F INCOME EITHER STITCHING, COOKING & BAKING CLASSES, TUITION BUT NONE COULD GIVE ANY EVIDENCE WHATSOEVER TO PROVE THE GENUINENESS OF THE BUSINESS CLAIMED BY THEM IN THE RETURNS FILED LATERON. V) ALL THE PERSONS FROM WHOM LOANS HAVE BEEN SHOWN ARE CONNECTED WITH THE ASSESSEE IN ONE WAY OR THE OTHER . VI) MOST OF THE MONEY HAVE BEEN ROUTED THROUGH THE BANK ACCOUNT OPENED IN A LOCAL COOPERATIVE BANK I.E. MAH ANAGAR NAGARIK SAHAKARI BANK MARYADIT, BAIRAGARH. 4.1 WE FIND THAT THE ASSESSING OFFICER HAS DEALT WI TH EACH CREDITOR INDEPENDENTLY. IN THE CASE OF SMT. JAMNADEVI FROM WHOM THE LOAN AMOUNT OF RS.4,38,000/- WAS TAKEN, THE ASSESSING OF FICER EXAMINED THE CLAIM OF THE ASSESSEE WITH RESPECT TO HER AND FOUND THAT SHE OPENED HER BANK ACCOUNT ON 19.2.2005, DEPO SITED CASH OF RS.2,28,500/- ON 22.2.2005 AND ISSUED A CHEQUE OF T HE SAME AMOUNT ON THE SAME DAY. SHE ALSO DEPOSITED RS.1,10 ,000/- IN CASH ON 24.2.2005 AND ISSUED THE CHEQUE OF THE SAME AMOUNT ON THE SAME DAY ITSELF. FURTHER, AMOUNT OF RS.1 LAC W AS DEPOSITED IN CASH ON 25.2.2005 AND ISSUED THE CHEQUE OF THE SAME AMOUNT ON THE SAME DAY. THERE IS A FURTHER UNCONTROVERTED FIN DING THAT THERE IS NO OTHER TRANSACTION IN HER BANK ACCOUNT EXCEPT AFOREMENTIONED. SO FAR AS THE CLAIM OF FILING OF RETURN IS CONCERNE D, SMT. JAMNADEVI FILED HER FIRST EVER RETURN ON 29.3.2006 AND THE PA N WAS ALLOTTED TO 8 HER ON 19.4.2005. WE FIND THAT THE TOTAL AMOUNT OF RS.4,38,000/- WAS DEPOSITED IN CASH AS MENTIONED ABOVE AND ISSUED CHEQUE THEREFROM. IN VIEW OF THESE FACTS, IT IS A CLEAR CU T CASE OF CHANNELIZING THE CASH IN THE GARB OF CHEQUE. THEREF ORE, THE CREDIT WORTHINESS AND GENUINENESS OF THE LENDER, SMT. JAMN ADEVI IS NOT ESTABLISHED. IF ALL THESE FACTS ARE ANALYSED WITH RESPECT TO SECTION 68 OF THE ACT, ONUS IS ON THE ASSESSEE TO PROVE THE CREDIT WORTHINESS, GENUINENESS OF THE TRANSACTION AND IDEN TITY OF THE LENDER. IN THE PRESENT APPEAL, CERTAINLY IDENTITY IS NOT IN DISPUTE BUT THE CREDIT WORTHINESS AND GENUINENESS ARE CLEAR LY UNDER DISPUTE ESPECIALLY WHEN THE LEARNED CIT(A) WHILE CO MING TO A PARTICULAR CONCLUSION HAS NOT MET WITH THE OBJECTIO NS RAISED BY THE LEARNED ASSESSING OFFICER AND SEEMS TO BE GUIDED BY THE PRINCIPLE OF SHARE APPLICATION MONEY, WHICH IS NOT APPLICABLE IN THE CASE OF LOANS. 4.2 THERE IS A DIFFERENCE BETWEEN LOANS AND SHARE A PPLICATION MONEY DEALT U/S 68 OF THE ACT. IN CASE OF A PRIVAT E PLACEMENT, THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BAL ANCE MUST BE MAINTAINED WHILE WALKING ON THE TIGHT ROPE OF SECTI ONS 68 AND 69 OF THE ACT. IF THE ASSESSING OFFICER HARBOURS DOUBT O N THE LEGITIMACY OF ANY SUBSCRIPTION/LOAN/CREDIT, HE IS EMPOWERED RA THER DUTY 9 BOUND TO CARRY OUT INVESTIGATION. HOWEVER, THE ASSE SSEE, PRIMA FACIE, IS TO PROVE (A) IDENTITY OF THE CREDITOR/SUB SCRIBER (B) GENUINENESS OF THE TRANSACTION AND (C) CREDIT WORTH INESS OF THE CREDITOR. OUR VIEW IS SUPPORTED BY THE DECISION IN THE CASE OF DIVINE LEASING & FINANCE LIMITED; 158 TAXMAN 440. IN THE C ASES OF LOANS TAKEN FROM CREDITORS WHOSE CREDIT WORTHINESS AND GE NUINENESS OF THE TRANSACTION IS UNDER CLOUDS, THE ASSESSING OFFI CER IS EXPECTED TO INVESTIGATE THE MATTER. THOUGH THE LEARNED ASS ESSING OFFICER HAS DEALT WITH EACH AND EVERY CREDITOR IN GREAT DET AIL AND ADDUCED UNCONTROVERTED FINDING EVIDENCING THAT SUCH CREDITO RS ARE NOT MEN OF MEANS AND CASH WAS DEPOSITED IN THE RESPECTIVE A CCOUNTS AND THE CHEQUES WERE ISSUED THEREFROM. THE LEARNED CIT (A) GRANTED PART RELIEF TO THE ASSESSEE WITHOUT CONTROVERTING T HE FACTS MENTIONED IN THE ASSESSMENT ORDER. 4.3 DURING HEARING BEFORE US, THE LEARNED COUNSEL F OR THE ASSESSEE POINTED OUT THAT THE RELEVANT EVIDENCES LIKE AFFIDA VITS OF THE CREDITORS, COPY OF INCOME TAX RETURN, PAN CARD, BAN K STATEMENT, WERE FILED BEFORE THE ASSESSING OFFICER. HOWEVER, WE FIND THAT THESE ADDITIONAL EVIDENCES WERE FILED BEFORE THE LEARNED CIT(A) ON 22.4.2008 AND NOT BEFORE THE ASSESSING OFFICER, THE REFORE, THE ASSESSING OFFICER COULD NOT GET THE OPPORTUNITY TO ANALYSE THESE 10 DOCUMENTS FROM THE REVENUE POINT OF VIEW DURING THE ASSESSMENT PROCEEDINGS AND TO INVESTIGATE THE MATTER IN THE LI GHT OF THESE DOCUMENTS QUA THE SOURCE OF CASH DEPOSITED BY THE C REDITORS AND CHEQUES WERE ISSUED THEREFROM. THE FOLLOWING CASES ALONG WITH OTHERS NEEDS APPRECIATION AT THE LEVEL OF THE ASSES SING OFFICER AGAIN :- I) A. GOVINDARAJULU MUDALIAR VS. CIT; 34 ITR 807 (SC) II) SUMATI DAYAL VS. CIT; 214 ITR 801 (SC) III) KAMAL MOTORS VS. CIT; 131 TAXMAN 155 (RAJ) IV) NEMICHAND KOTHARI VS.CIT; 136 TAXMANN 213 (GAU) V) CIT VS. R.S. RATHORE; 212 ITR 390 (RAJ) VI) CIT VS. KORLAY TRADING COM.LTD; 232 ITR 820 (CAL) VII) CIT VS. METACHEM IND.; 245 ITR 160 (MP) THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACTS AN D THE CIRCUMSTANCES NARRATED BEFORE US AND ALSO THE PRINC IPLE OF NATURAL JUSTICE THAT NO PREJUDICE IS CAUSED TO EITHER SIDE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND REMAND THE APPEALS TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICATION. T HE ASSESSEE IN HER OWN INTEREST IS EXPECTED TO ESTABLISH THE GENU INENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE CREDITORS FOR WHICH OPPORTUNITY OF BEING HEARD BE PROVIDED TO THE ASSES SEE WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUBSTANTIAT E HER CASE. FINALLY, BOTH THE APPEALS OF ASSESSEE AS WELL AS O F THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. 11 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2012. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 11 TH SEPTEMBER, 2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-