The ACIT, Gandhidham Circle, GANDHIDHAM V. Shri Surendrakumar Fulchand Jain, GANDHIDHAM

ITA 30/RJT/2010

• Counselvise Citation: 3024914 RSA 2010
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 13-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MEHUL J RANPURA DR
• Keywords: Unexplained cash credit; Depreciation; Income from undisclosed sources; Principle of natural justice; Additional evidence; Corroborative evidences
• Section: 142(1); 69; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVAST AVA, AM ITA NO.30/RJT/2010 / ASSESSMENT YEAR 2005-06 ASSTT. COMMR. OF INCOME TAX GANDHIDHAM CIRCLE, GANDHIDHAM. ( /APPELLANT) VS. SHRI SURENDRAKUMAR FULCHAND JAIN PLOT NO.108, SECTOR NO.4, GANDHIDHAM-KUTCH. PAN : ABRPJ8704C /RESPONDENT ! ' #$ / ASSESSEE BY SHRI ALOK KUMAR, DR % ! ' #$ / REVENUE BY SHRI MEHUL J. RANPURA, DR # & ' ! ( /DATE OF HEARING 22.10.2013 ) ! ( / DATE OF PRONOUNCEMENT 25.10.2013 / ORDER .. , / T. K. SHARMA, J. M.: THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 03.11.2009 OF LD CIT (A)-II, RAJKOT FOR THE ASSESSMENT YEAR 2005-06. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE IS AN INDI VIDUAL DOING BUSINESS OF TRADING IN SALT. FOR THE ASSESSMENT YEAR UNDER APPEAL HE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.473140/- ON 22. 11.2003. DURING THE COURSE OF ASSESSMENT PROCEEDING AO ASKED THE ASSESSEE TO F URNISH CERTAIN INFORMATION WHICH WERE NOT MADE AVAILABLE. AO THEREAFTER ISSUE D A FINAL NOTICE U/S 142(1) ON 02.03.2007, FIXING THE DATE OF HEARING ON 12.04. 2007 ASKING THIS ASSESSEE TO FURNISH THE FOLLOWING DETAILS ALONG WITH SUPPORTING EVIDENCES FAILING WHICH AN EX- PARTY ORDER U/S 144 OF THE ACT WILL BE PASSED. (1). CAPITAL INTRODUCED BY YOU DURING THE YEAR WILL BE CONSIDERED UNEXPLAINED CREDIT AND WILL BE ADDED BACK TO THE TOTAL INCOME. (2). NET PROFIT WILL BE TAKEN ON GROSS RECEIPTS AT 5 %. (3). ALL UNSECURED LOAN RECEIVED DURING THE YEAR (W HETHER SQUARED UP OR NOT) WILL BE TREATED BOGUS CREDIT AND WILL BE ADDED TO T HE TOTAL INCOME. (4). DEPRECIATION CLAIMED ON THE FIXED ASSETS PURCH ASED DURING THE YEAR WILL BE WITHDRAWN. (5). AGRICULTURE INCOME WILL BE TREATED YOUR INCOME FROM UNDISCLOSED SOURCE. ITA NO.30/RJT/2010 2 3. SINCE BEFORE AO NO COMPLIANCE WAS MADE, HE FRAM ED THE ASSESSMENT U/S 44 WHEREIN HE MADE FOLLOWING ADDITIONS. (I) NET PROFIT @ 5% OF GROSS RECEIPTS (ADDED) RS. 509987/- (II) BOGUS DEPOSITS (ADDED) RS.2174115/- (III) DEPRECIATION ON FURNITURE & MOBILE (DISALLOWE D) RS. 2138/- (IV) INCOME FROM OTHER SOURCES (ADDED) (AGRICULTURE INCOME) RS.107560/-. 4. ON APPEAL BEFORE LD.CIT(A) ASSESSEE FURNISHED VA RIOUS DETAILS AND DOCUMENTS WHICH WERE NOT PRODUCED BEFORE THE ASSESS ING OFFICER. THE LD.CIT(A) FORWARDED THE SAME TO AO FOR HIS COMMENTS/VERIFICAT IONS BUT NO REMAND REPORT WAS SUBMITTED BEFORE LD.CIT(A) DESPITE REMINDER GIV EN BY LD.CIT(A). THEREAFTER, IN THE IMPUGNED ORDER HE DELETED ALL TH E DELETION MADE BY AO FOR THE DETAILED REASON GIVEN IN PARA-3 C(B), PARA-4 AND 5 WHICH READS AS UNDER. 3(CB) IT IS FOUND THAT THE APPELLANT RETURNED A NET PROFIT OF 2.17% WHICH WAS HIKED TO 5% BY THE AO. NO BASIS WAS FOLLOWED BY AO. HE DID NOT COMPARE THE PREVIOUS RESULTS OF T HE APPELLANT. HE DID NOT BRING THE RESULTS OF COMPARABLE CASES ON THE FILE. HE ADOPTED 5% ONLY ON THE BASIS THAT THE APPELLANT FAI LED TO APPEAR BEFORE HIM. I OPINE THAT THIS IS NOT THE STRONG GR OUND FOR REJECTING THE BOOKS OF ACCOUNTS, BEFORE ESTIMATING THE NET PROFIT AT CERTAIN PERCENTAGE. IT IS TRUE THAT THE AO WAS NOT IN A POSITION TO PIN POINT ANY SPECIFIC GLARING DEFECTS IN THE BO OKS OF ACCOUNTS, AS BOOKS WERE NOT PRODUCED BEFORE HIM, BUT THIS MIS TAKE COMMITTED BY AO COULD HAVE BEEN EASILY SOLVED, HAD THE AO AVAILED THE OPPORTUNITY GIVEN U/S 250(4) OF THE ACT . THESE CIRCUMSTANCES ONLY FAVOR THE APPELLANT. THE AOS R EJECTION OF BOOKS IS NOT VALID AND HIS ESTIMATION OF NET PROFIT AT 5% IS NOT ENDORSED. THE ADDITION MADE ON THIS COUNT IS DELET ED. 4.0 ADDITION U/S 68. (A) THE AO MADE ADDITION ON ACCOUNT OF UNSECURED LO ANS IN RESPECT OF THE FOLLOWING PARTIES. SR.NO. NAME OF THE PARTY AMOUNT (RS.) 1 SHRI NARENDRA JAIN 3,95,000/- 2 SHRI RAVINDRA JAIN 1,75,000/- 3 MRS.SARITA JAIN 11,00,000/- 4 SUMEET JAIN 1,04,115/- 5 SURENDRA AIN(HUF) 2,00,000/- 6 SWATI JAIN 2,00,000/- (AA) THE ALLEGED THAT THE ABOVE STATED UNSECURED LO ANS, AS PER SCHEDULE-K OF THE AUDIT REPORT, COULD NOT BE VE RIFIED, AND THEREFORE, HE TREATED THE SAME AS UNEXPLAINED. IT WAS APPELLANTS CONTENTION THAT HE WAS PREVENTED BY A R EASONABLE CAUSE IN NOT SUBMITTING THE INFORMATION CALLED FOR BY AO. IT WAS STATED THAT DUE TO SEVERE INJURY TO THE APPELLANTS MOTHER, WHO WAS IN BIHAR, AND HER SUBSEQUENT SERIOUS OPERATION, THE APPELLANT WENT TO BIHAR AND WHEN HE CAME BACK, HIS WIFE GAVE HIM MANY LETTERS WHICH WERE RECEIVED IN HIS ABSENCE . ON GOING THROUGH THE SAME, HE FOUND THAT SUCH PAPERS INCLUDE D IN THE ASSESSMENT ORDER. ITA NO.30/RJT/2010 3 (AB) APART FROM THE ABOVE, THE APPELLANT STATED THA T HAD THE AO VERIFIED THE PAST RECORDS OF THE APPELLANT, SUCH AS AUDITED FINANCIAL STATEMENTS, AND THE CASE RECORDS OF THE A BOVE STATED CREDITORS, WHERE PANS AND ADDRESSES WERE GIVEN, THE AO COULD NOT HAVE MADE THIS HIGH PITCHED ASSESSMENT. FURTHE R, IN THE PRECEDING YEAR, F.Y.2004-05, THE APPELLANT TOOK LOA NS FROM NARENDRA JAIN AND RAVINDRA JAIN WHICH WERE REPAID W ITHIN THAT YEAR. BOTH WERE ASSESSED TO INCOME-TAX AND THEIR P ANS WERE ALSO GIVEN IN SCHEDULE ANNEXED TO P&L ACCOUNT. FUR THER, THE OTHER CREDITORS WERE THE FAMILY MEMBERS OF THE APPE LLANT, AND WERE ASSESSED TO TAX WITH ITO, GANDHIDHAM. THEIR A DDRESSES WERE ALSO GIVEN IN THE SCHEDULE ATTACHED TO THE AUD ITED ACCOUNTS. THUS, THE APPELLANT CONTENDED THAT ALL T HE BASIC THREE INGREDIENTS TO PROVE THE CASH CREDIT WERE SATISFIED . (B) WHEN THE AR APPEARED BEFORE ME, APART FROM THE ABOVE CONTENTIONS, HE DREW SUPPORT FROM THE FOLLOWING DEC ISIONS PRAGATI COOPERATIVE BANK-278 ITR 160 (GUJ.) APPELLANT CANNOT BE ASKED TO EXPLAIN THE SOURCE OF SOURCE OF DEPOSIT. THE CASE OF METACHEM INDUSTRIES 245 ITR 160 (M.P) ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN IN VESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR INDIVIDUAL, T HEN THE RESPONSIBILITY OF THE ASSESSEE FIRM IS OVER. THE A SSESSEE FIRM CANNOT ASK THAT PERSON WHO MAKES INVESTMENT WHETHER THE MONEY INVESTED HAS BEEN PROPERLY TAXED OR NOT. THE ASSESSEE IS ONLY TO EXPLAIN THAT THIS INVESTMENT HAS BEEN MA DE BY THE PARTICULAR INDIVIDUAL AND IT IS RESPONSIBILITY OF T HAT INDIVIDUAL TO ACCOUNT FOR THE INVESTMENT MADE BY HIM. IF THAT PE RSON OWNS THAT ENTRY, THEN, THE BURDEN OF THE ASSESSEE FIRM I S DISCHARGED. THOUGH IT IS OPEN FOR THE ASSESSING OFFICER TO TAKE THE APPROPRIATE ACTION UNDER SECTION 69 AGAINST THE PER SON WHO HAS NOT BEEN ABLE TO EXPLAIN THE INVESTMENT. - ACIT VS GOVIND RAM AGARWAL 76 ITD 120 (CAL.-TRIB. ) (T.M.) WHEN THE ASSESSEE HAS DISCHARGED HIS PRIMARY ONUS BY FILING RELEVANT EVIDENCE AS CONFIRMATION CERTIFICATE FROM ALL PARTIES CONCERNED, THEREFORE, ADDITION MADE BY THE ASSESSIN G OFFICER WAS NOT JUSTIFIED AND COULD NOT BE SUSTAINED. (C) THIS ISSUE WAS CONSIDERED CAREFULLY. THE AOS CONTENTION WAS THAT ASTHE APPELLANT DID NOT FURNISH ANY DETAILS RE GARDING THESE CREDITORS, DESPITE OPPORTUNITIES GIVEN, HE OPINED T HAT THE APPELLANT FAILED TO ESTABLISH GENUINENESS OF THE DE POSITS AND HE PROCEEDED TO ASSUME THAT THE ALLEGED DEPOSITS WERE NOTHING BUT APPELLANTS OWN UNACCOUNTED FUNDS, WHICH WERE INTRO DUCED INTO THE BOOKS AS UNSECURED LOANS. AS ALREADY STATED, A S THE ORDER WAS PASSED U/S 144, WHEN THE APPELLANT FAILED, THO UGH HE HAD HIS OWN REASONS FOR NOT APPEARING BEFORE AO, TO MEE T THE PRINCIPLES OF NATURAL JUSTICE, ANOTHER OPPORTUNITY WAS GIVEN TO THE APPELLANT, AND THE AO WAS ALSO DIRECTED BY MY REMAN D ORDER (SUPRA), TO VERIFY THE DETAILS AND GIVE COMMENTS. THE OPPORTUNITY WAS NOT UTILIZED BY THE AO. (CA) IN THE PAPER-BOOK BETWEEN PAGES 8 TO 56, I FIN D THAT THE APPELLANT ENCLOSED AUDITED FINAL ACCOUNTS OF THE AP PELLANT FOR THE F.Y.S ENDED 31-3-2005, & 31-3-2004. THE PERUSAL OF THAT ACCOUNTS REVEALED THAT THE APPELLANT TOOK LOANS FRO M NARENDRA JAIN AND RAVINDRA JAIN, WHICH WERE SUBSEQUENTLY PAI D. THE SCHEDULE ANNEXED TO THE P & L ACCOUNT CONTAINED PAN S OF THESE TWO PERSONS. REGARDING THE OTHER CREDITORS, THE APPELLANT FURNISHED THE COPIES OF THE COMPUTATION OF THEIR IN COMES AND ITA NO.30/RJT/2010 4 THEIR ACKNOWLEDGEMENTS FOR HAVING FILED THE RETURNS IN PAGES 57 TO 75 OF THE PAPER-BOOK. THUS, IT IS VERY CLEAR TH AT THE APPELLANT DISCHARGED ITS INTIAL BURDEN OF FURNISHING ALL THE REQUIRED PARTICULARS TO MEET THE BASIC FACTORS, SUCH AS IDEN TITY, CREDITWORTHINESS OF CREDITOR, AND GENUINENESS OF TH E TRANSACTION. IF AT ALL THE AO SUSPECTED THE BASIC REQUISITES WER E NOT RELIABLE, HE COULD HAVE ENGAGED SOME SORT OF EFFECTIVE ENQUIR IES, WHEN THE MATTER WAS REMITTED BACK TO HIM BY ME U/S 250(4 ) OF THE ACT. WITH THIS DISCUSSION, I DELETE THE ADDITION MADE BY AO ON THIS COUNT. 5.0 INCOME FROM OTHER SOURCES (AGRICULTURE INCOME): (A) THE AO MADE ADDITION OF RS.107560/- ON ACCOUNT OF AGRICULTURE INCOME TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCES. THE APPELLANT CONTENDED THAT THE AO FAILED TO NOTIC E THE FACTS AVAILABLE IN SCHEDULE B OF THE AUDITED ACCOUNTS OF A.Y.2004-05, WHERE THE VALUE OF THE AGRICULTURAL LAND WAS SHOWN AT RS.114400/-. THE SAME AMOUNT WAS ALSO SHOWN IN SCHE DULE I OF THE AUDITED ACCOUNTS OF THIS ASSESSMENT YEAR. I T WAS FURTHER SAID THAT THE QUANTUM OF AGRICULTURE INCOME WAS SHO WN AT RS.103500/- IN EARLIER ASSESSMENT YEAR, WHEREAS THI S YEAR, SUCH INCOME WAS SHOWN AT RS.107560/-. THERE WAS NO WIDE VARIATION IN THE AMOUNT OF AGRICULTURE INCOME RETUR NED BETWEEN THESE TWO ASSESSMENT YEARS. (B) THE ISSUE WAS ANALYZED. THE AO TREATED THE AGR ICULTURE INCOME AS INCOME FROM OTHER SOURCES ON THE BASIS THAT THE APPELLANT DID NOT FURNISH ANY PARTICULARS. NO INQUIRY WAS ALSO CA RRIED OUT IN THE REMAND PROCEEDINGS U/S 250(4). I FIND THAT THE APP ELLANT HAS BEEN RETURNING CONSISTENTLY REASONABLE INCOME FROM AGRICULTURAL ACTIVITIES. THE APPELLANTS CLAIM OF SUCH INCOME W AS NOT REJECTED BY THE DEPARTMENT IN ANY OF THE EARLIER YE ARS. LAST YEAR, THE AGRICULTURE INCOME WAS SHOWN AT RS.1.03 L AKH, AND THIS YEAR, IT WAS RS.1.07 LAKH. NO ABNORMAL DEVIAT ION COULD BE FOUND. PRIMA FACIE, THERE IS NO CASE FOR UPHOLDING THE ACTION TAKEN BY AO IN THE ABSENCE OF ANY VERIFICATIONS DON E BY HIM. THE ADDITION IS DELETED. AGGRIEVED WITH THE ORDER OF THE LD.CIT(A) REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS : 1). THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,14,847/- MADE ON ACCOUNT OF ESTIMATION OF N ET PROFIT @ 5% ON THE GROSS RECEIPTS. 2). THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.21,74,115/- MADE ON ACCOUNT OF NON-GENUINE DE POSITS. 3). THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETI NG THE ADDITION OF RS.1,07,560/- MADE ON ACCOUNT OF INCOME FROM OTHER SOURCES. 5. AT THE TIME OF HEARING BEFORE US ON BEHALF OF RE VENUE SHRI ALOK KUMAR, DR APPEARED AND CONTENDED THAT BEFORE THE AO ASSESS EE NEITHER FURNISHED THE DETAILS NOR BOOKS OF ACCOUNTS DESPITE AMPLE OPPORTU NITY ALLOWED. THEREFORE, LD.CIT(A) IS NOT JUSTIFIED IN ADMITTING THE ADDITI ONAL EVIDENCES. HE SUBMITTED THAT UNDER RULE-2 OF RULE-46A OF THE INCOME TAX RUL E 1962, THE COMMISSIONER (APPEALS) IS REQUIRED TO RECORD THE REASONS FOR ADM ISSION OF ADDITIONAL EVIDENCES. THESE REASONS ARE NOT RECORDED. THE LD . DR FURTHER SUBMITTED THAT ITA NO.30/RJT/2010 5 IT WAS THE DUTY OF LD.CIT(A) TO VERIFY THE EVIDENC ES WHEREAS IN THIS CASE IT APPEARS THAT HE HAS NOT DONE. THEREFORE, IN THE IN TEREST OF JUSTICE THE ORDER OF LD.CIT(A) BE SET ASIDE AND MATTER BE REMANDED TO TH E FILE OF AO WITH THE DIRECTIONS THAT ASSESSEE SHOULD PRODUCED ALL THE BO OKS AND ACCOUNTS WITH DETAILS/EVIDENCES WHICH WERE CALLED BY AO VIDE NOTI CE U/S 142(1) DATED 02.03.2007. 6. ON THE OTHER HAND SHRI MEHUL RANPURA, C.A. APPEA RED ON BEHALF OF THE ASSESSEE AND VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A). HE POINTED OUT THAT DESPITE OF VARIOUS OPPORTUNITY GIVEN TO AO U/S 250(4), HE HAS NOT EXAMINE THE BOOKS OF ACCOUNTS AND DETAILS/EVIDENCES. THERE FORE, VIEW TAKEN BY THE LD.CIT(A) BE UPHELD AS THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S 44AB OF THE IT ACT 1961. 7. HAVING HEARD BOTH SIDES WE HAVE CAREFULLY GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT DE SPITE AMPLE OPPORTUNITIES ALLOWED NEITHER THE BOOKS OF ACCOUNTS NOR DETAILS AND EVIDE NCES WERE FURNISHED BEFORE THE AO. EVEN LD.CIT(A) HAS NOT VERIFIED THE VARIOUS DOCUMENTS/EVIDENCES FURNISHED BEFORE ME. THERE IS NO WHISPER IN THE IM PUGNED ORDER THAT LD.CIT(A) HAS EXAMINED THE BOOKS OF ACCOUNTS. IN THESE CIRCUM STANCES WE SET ASIDE THE IMPUGNED ORDER OF THE LD.CIT(A) AND DIRECT THE AO T O RE-ADJUDICATE THE VARIOUS ADDITIONS/DISALLOWANCES WHICH ARE DISPUTED BY REVEN UE IN THIS APPEAL AFRESH AFTER EXAMINING THE BOOKS OF ACCOUNTS. THE ASSESSE E IS ALSO DIRECTED TO FURNISH ALL THE DETAILS/EVIDENCES AND BOOKS OF ACCOUNTS WHI CH THE ASSESSEE FAILED TO PRODUCE BEFORE AO FOR VERIFICATIONS AT THE TIME OF ORIGINAL ASSESSMENT. 8. IN THE RESULT, FOR STATISTICAL PURPOSE THE APPEA L OF THE REVENUE IS TREATED AS ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE D ATE MENTIONED HEREINABOVE. SD/- SD/- ( D. K. SRIVASTAVA) (T. K. SHARMA) $( #*% / ACCOUNTANT MEMBER #*% /JUDICIAL MEMBER *$+ ,*-/ ORDER DATE 25.10.2013 /RAJKOT PUJARA. ITA NO.30/RJT/2010 6 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT- A.C.I.T., GANDHIDHAM CIRCLE, GANDHIDH AM. 2. / RESPONDENT-SHRI SURENDRA KUMAR FULCHAND JAIN, GA NDHIDHAM. 3 . #-1- & 2 / CONCERNED CIT-I, RAJKOT 4. & 2 - / CIT (A)-II, RAJKOT 5. 678 , , / DR, ITAT, RAJKOT 6. 8: ;< / GUARD FILE. *$+ #$ / BY ORDER , TRUE COPY PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT