The ACIT, Circle-5, Surat V. M/s. Royal Filaments, Surat

ITA 302/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50577 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 30-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Unexplained investment; Additional evidence; Bogus loan
• Section: 142(1); 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND A. K. GARODIA, A. M. ASSTT. CIT, CIR-5, SURAT. M/S ROYAL FILAMENTS, 572, TRILOK INDUSTRIAL ESTATE OLPAD, SAYAN ROAD, SURAT. APPELLANT VS. RESPONDENT APPELLANT BY :- SHRI MAHESH KUMAR, SR.DR RESPONDENT BY:- SHRI M. K. PATEL, AR O R D E R DATE OF HEARING 18.8.2011. DATE OF PRONOUNCEMENT -30.8.2011. PER D.K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 28.11.2008 WHEREIN FOLLOWING GROUNDS H AVE BEEN RAISED :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN DELETING THE ADD ITION OF RS.6,00,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLA INED BOGUS LOAN SHOWN BY THE ASSESSEE IN ITS BALANCE SHE ET. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN DELETING THE ADD ITION OF RS.54,049/- MADE BY THE AO ON ACCOUNT OF INTEREST D ISALLOWED ON LOAN. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN RESTRICTING THE ADDITION OF ITA NO.302/AHD/2009 ASST. YEAR 2005-06 ITA NO.302/AHD/2009 ASST. YEAR 2005-06 2 RS.17,035/- TO RS.4435/- MADE BY THE A.O. ON ACCOUN T OF CONVEYANCE AND PETROL EXPENSES. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF YARN AND CHIPS AND KNITTED CLOTH. THE RETURN OF INCOME DECLARING T OTAL INCOME OF RS.10,38,109/- WAS FILED ON 29.10.2005 ALONG WITH A UDITED REPORT IN FORM NO.3CB AND 3CD AND WITH AUDITED TRADING AND PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. THE CASE WAS SELECTED FOR SCRUTI NY AND THE NOTICES U/S 143(2) & 142(1) WERE ISSUED ACCORDINGLY. THE ASSESS MENT WAS FINALIZED DETERMINING TOTAL INCOME AT RS.17,12,194/- U/S 143( 3) OF THE I.T. ACT ON 28.12.2007. 3. THE FIRST GROUND RELATES TO ADDITION OF RS.6 LAC S U/S 68 OF THE IT ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO OBSERVED THAT THERE WERE TWO CASH CREDITORS SHRI HIMATLAL MEHTA AND SHRI DHARMENDRA MEHTA EACH HAVING A DEPOSIT OF RS.3 LACS WITH THE A SSESSEE. WHEN REQUIRED TO FILE EVIDENCE OF GENUINENESS OF UNSECUR ED LOANS, THE ASSESSEE FILED COPY OF RETURN OF INCOME AND HAND WRITTEN CON FIRMATION OF THE DEPOSITORS. HOWEVER, COPY OF BANK STATEMENT, BALANC E SHEET ETC. WERE NOT FILED AND THE ASSESSEE ALSO COULD NOT PRODUCE THE D EPOSITORS ON THE GROUND THAT DUE TO DIWALI FESTIVAL, MAJORITY OF PARTIES WE NT TO THEIR NATIVE PLACE AND SO COULD NOT BE PRODUCED. THE AO FURTHER OBSERV ED THAT SHRI DHARMENDRA MEHTA, WHO HAD ADVANCED THE LOAN OF RS.3 LACS HAD AN INCOME OF RS.94,249/- ONLY DURING THE YEAR WHILE TH E OTHER DEPOSITOR SHRI HIMATLAL HAD AN INCOME OF RS.81,586/- ONLY AND THER EFORE THEIR CREDITWORTHINESS WAS NOT PROVED. THE AO THEREFORE T REATED THE TWO DEPOSITS AS UNEXPLAINED CASH CREDITS. ITA NO.302/AHD/2009 ASST. YEAR 2005-06 3 4. IN APPEAL BEFORE THE LD. CIT(A) THE LD. AR FOR T HE ASSESSEE SUBMITTED THAT BOTH THE PERSONS WERE EXISTING ASSES SEES AND AND AFFIDAVITS TO CONFIRM THE TRANSACTION WERE ALSO FILED. COPIES OF THEIR BALANCE SHEET AND COPIES OF ACCOUNT WERE FURNISHED BEFORE THE LD. CIT(A). IT WAS SUBMITTED THAT NO ADDITIONAL EVIDENCE WAS FILED DUR ING THE APPELLATE PROCEEDINGS. HOWEVER, A REMAND REPORT WAS CALLED FO R ON THE SUBMISSIONS OF THE ASSESSEE AND THE AO VIDE REPORT DATED 19.06. 2008 STATED THAT CERTAIN DOCUMENTS WERE FILED BY THE AR BEFORE HER B UT THE DEPOSITORS WERE NOT PRODUCED FOR VERIFICATION. IN THIS REGARD WHEN CONFRONTED WITH THE AOS REPORT, THE ASSESSEE FURNISHED THE COPY OF THE REPLY OF THE DEPOSITORS WHEREIN IT WAS STATED THAT THE RESPONSE TO SUMMON, THEY ATTENDED THE OFFICE BUT THE AO WAS AWAY FROM THE OF FICE FOR THE WHOLE DAY AND THAT AN AFFIDAVIT, INCOME-TAX RECORDS, COPY OF BANK PASS BOOK ETC. WERE FILED IN RESPONSE TO THE SUMMONS ALONG WITH WR ITTEN SUBMISSIONS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND AOS CONTENTION THE LD. CIT(A) DELETED THE ADDITION WITH THE FOLLOW ING OBSERVATIONS :- I HAVE GONE THROUGH THE COMPLETE DETAILS AND FIND THAT BOTH SHRI DHARMENDRA MEHTA AND SHRI HIMATLAL WERE EXISTING AS SESSEES AND THEIR BANK STATEMENT, BALANCE SHEET AND CAPITAL ACC OUNT WERE FILED BEFORE THE AO. THE CAPITAL ACCOUNT CLEARLY INDICATE S THE DEPOSITS MADE WITH THE APPELLANT. MERELY BECAUSE THE TWO DEP OSITORS WERE NOT PRODUCED BEFORE THE AO FOR PHYSICAL VERIFICATIO N DUE TO HER ABSENCE FROM THE OFFICE ON THE DAY WHEN THEY WERE S UMMONED, CANNOT BE A GROUND FOR HOLDING THAT THE CASH CREDIT S WERE NON- GENUINE. SINCE THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF TRANSACTIONS HAS BEEN ESTABLISHE D, THERE IS NO JUSTIFICATION IN TREATING THE SAID AMOUNT AS UNEXPL AINED INVESTMENT U/S 68 OF THE IT ACT AND ADDITION ON THIS ACCOUNT I S DIRECTED TO BE DELETED. AGAINST THIS ORDER OF THE LD. CIT(A), THE REVENUE I S IN APPEAL BEFORE US. ITA NO.302/AHD/2009 ASST. YEAR 2005-06 4 5. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THA T THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO AND HIS ORDER MAY BE UPHELD. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF AO AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION SINCE THE DEPOSITORS WERE NOT PRODUCED BEFORE THE A O. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD. IN OUR CONSIDERED VIEW THERE IS NO REASON TO INTERF ERE IN THE ORDER OF LD. CIT(A) AS HE HAS GIVEN FINDING OF FACTS THAT BOTH T HE CREDITORS WERE EXISTING ASSESSEES AND THEIR BANK STATEMENT, BALANC E SHEET AND CAPITAL ACCOUNT WERE FILED BEFORE THE AO. THE CAPITAL ACCOU NT CLEARLY INDICATES THE DEPOSITS MADE WITH THE APPELLANT. MERELY BECAUS E THE TWO DEPOSITORS WERE NOT PRODUCED BEFORE THE AO FOR PHYSICAL VERIFI CATION DUE TO HER ABSENCE FROM THE OFFICE ON THE DAY WHEN THEY WERE S UMMONED, CANNOT BE A GROUND FOR HOLDING THAT THE CASH CREDITS WERE NON -GENUINE. SINCE THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF TRANSACTIONS HAS BEEN ESTABLISHED, THERE IS NO JUST IFICATION IN TREATING THE SAID AMOUNT AS UNEXPLAINED INVESTMENT U/S 68 OF THE IT ACT. ACCORDINGLY WE UPHOLD THE ORDER OF LD. CIT(A) ON THIS ISSUE. TH IS GROUND OF REVENUE IS DISMISSED. 8. THE NEXT GROUND OF THE APPEAL RELATES TO DELETIO N OF ADDITION OF RS.54,049/- MADE BY AO. 9. IN APPEAL THE LD. CIT(A) HAS DELETED THIS ADDITI ON BY OBSERVING AS UNDER :- THE NEXT GROUND OF APPEAL IS REGARDING DISALLOWANC E OF INTEREST PAYMENT TO THE ABOVE MENTIONED TWO DEPOSITORS. SINC E I HAVE ITA NO.302/AHD/2009 ASST. YEAR 2005-06 5 ALREADY HELD THAT THE CASH CREDITS WERE GENUINE, TH ERE IS NO REASON TO DISALLOW THE PAYMENT OF INTEREST TO THESE TWO PE RSONS AND THE ADDITION IS DIRECTED TO BE DELETED. 10. BEFORE US THE LD. AR SUPPORTED THE ORDER OF LD. CIT(A) WHEREAS THE LD. DR RELIED ON THE ORDER OF AO. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD. SINCE WE HAVE CONFIRMED THE ORDER OF LD. CIT(A) ON THE FIRST ISSUE, WE AGREE WITH THE FINDING OF LD. CIT(A) THAT THE CASH CREDITS WERE GENUINE, THERE IS NO REASON TO DISALLOW THE PAYMENT OF INTER EST TO THOSE TWO PERSONS. THEREFORE, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE ON ACCOUNT OF INTEREST PAID. WE UPHOLD HIS ORDER ON TH IS ISSUE. THIS GROUND OF REVENUE IS ALSO DISMISSED. 12. THE LAST GROUND OF THE APPEAL IS REGARDING REST RICTION OF ADDITION OF RS.17,035/- TO RS.4,435/- MADE BY AO ON ACCOUNT OF CONVEYANCE AND PETROL EXPENSES. 13. IN APPEAL THE LD. CIT(A) HAS DECIDED THIS ISSUE WITH THE FOLLOWING OBSERVATION :- THE NEXT GROUND OF APPEAL IS REGARDING DISALLOWANC E OF RS.17,035/- BEING 10% OF CONVEYANCE AND PETROL EXPE NSES, MOBILE EXPENSES AND OFFICE EXPENSES. I DO NOT FIND ANY JUS TIFICATION IN DISALLOWANCE OUT OF OFFICE EXPENSES. HOWEVER, DISAL LOWANCE OF 1/10 TH OF PETROL AND MOBILE EXPENSES FOR REASONS OF PERSO NAL AND NON-BUSINESS USE IS IN ORDER AND IS CONFIRMED. THE APPELLANT GETS A RELIEF OF RS.4,435/- UNDER THIS HEAD. 14. BEFORE US THE LD. AR SUPPORTED THE ORDER OF LD. CIT(A) WHEREAS THE LD. DR RELIED ON THE ORDER OF AO. ITA NO.302/AHD/2009 ASST. YEAR 2005-06 6 15. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED OPINION THE LD. CIT(A) HAS RIGHTL Y OBSERVED THAT THERE IS NO JUSTIFICATION IN DISALLOWANCE OUT OF OFFICE EXPE NSES. HOWEVER, DISALLOWANCE OF 1/10 TH OF PETROL AND MOBILE EXPENSES HAVE BEEN RESTRICTED FOR REASONS OF PERSONAL AND NON-BUSINESS USE. WE FI ND NO INFIRMITY IN THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. THIS GROU ND IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30.8.2011. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 30.8.2011. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.302/AHD/2009 ASST. YEAR 2005-06 7 1.DATE OF DICTATION 23/8/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER /8/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..