The ITO, Ward-1, Navsari V. Shri Biren Prakashbhai Shroff, Navsari

ITA 3137/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6488 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S A BOHRA
• Assessee Lawyers: U S BHATI
• Keywords: Source of fund
• Section: 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI M.K. SHRAWAT, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WARD- 1, NAVSARI. VS. SHRI BIREN PRAKASHBHAI SHROFF, PROP. OF BIREN ENTERPRISE, SONIWAD, BILLIMORA, NAVSARI. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. A. BOHRA, SR.DR RESPONDENT BY:- SHRI U. S. BHATI, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS :- (1) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTI NG TO DELETE THE ADDITION OF RS.50,90,000/- MADE ON ACCOUNT OF U NEXPLAINED CAPITAL INTRODUCTION. 2. THUS THERE IS ONLY ONE EFFECTIVE GROUND WHICH IS ABOUT INTRODUCTION OF CAPITAL IN THE BOOKS BY THE ASSESSEE WHICH HAS B EEN TREATED AS UNEXPLAINED. 4. THE FACTS RELATING TO THE ISSUE ARE THAT ASSESSE E IS DEALING IN THE BUSINESS OF RESALE OF INDUSTRIAL OIL AND GREASE. DU RING THE COURSE OF ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 2 ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE H AS INTRODUCED FRESH CAPITAL OF RS.50,90,000/- FROM ITS SISTER CONCERN R UN BY HIS FATHER AND MOTHER. THE DETAILS OF INTRODUCTION OF CAPITAL BY T HE ASSESSEE ARE AS UNDER:- SL. NO. NAME OF DEPOSITOR DATE AMOUNT (IN RS.) 1 M/S ROLLA CHEMICALS PROP. SHRI PRAKASH H. SHROFF PAN:ABKPS 9052 M 25.01.05 27.01.05 28.01.05 31.01.05 29,600 1,60,000 4,80,000 4,00,000 10,69,600 2 M/S HIMSON PROP. M/S PRAKASH H. SHROFF HUF PAN :AACHP 4314A 20.01.05 22.01.05 01.02.05 3,00,000 1,80,000 5,40,000 10,20,000 3 M/S K.P. ENTERPRISE PROP. MRS. KISHORIBEN P. SHROFF PAN:ADIPS 9362A 19.01.05 22.01.05 24.01.05 25.01.05 29.01.05 29.01.05 01.02.05 5,00,000 3,70,000 6,50,000 2,70,000 49,000 3,31,000 5,40,000 27,10,400 4 M/S BIREN ENTERPRISE PROP. SHRI BIREN P. SHROFF PAN: ABKPS 9051 J 27.01.05 2,90,000 TOTAL 50,90,000 5. THE AO EXAMINED THE ACCOUNTS AND GAVE FOLLOWING FINDING ABOUT THE INTRODUCTION OF CAPITAL :- I. THE INTRODUCTION OF CAPITAL THE SUBJECT MATTER IS INTRODUCED BY THE APPELLANT FROM ITS SISTER CONCERNS RUN BY HIS P ARENTS, I.E. FAMILY CONCERNS. ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 3 II. THE ENTIRE TRANSACTION OF INTRODUCTION OF CAPITAL I S ROUTED AROUND THE BANK ACCOUNTS OF THE APPELLANT AND HIS SISTER C ONCERNS, BELONGS TO THE FAMILY OF THE APPELLANT. III. THE INTRODUCTION OF CAPITAL UNDER DISPUTE IS MERELY A BOOK ENTRY ROUTED THROUGH BANK ACCOUNT. IV. THE DEPOSITORS ARE NONE OTHER THAN THE PARENTS OF T HE APPELLANT AND THE FAMILY CONCERNS OF THE APPELLANT. V. THE AMOUNT UNDER DISPUTE IS ROUTED AMONGST THE PERS ONS CONCERNS ARE ASSESSED TO TAX SEPARATELY AT INCOME-T AX OFFICE, NAVSARI. VI. FINALLY, THE AO ACCEPTED, CONFIRMED AND ACKNOWLEDGE D THE VERY VITAL FACT THAT THE AMOUNT UNDER DISPUTE/CONSI DERATION IS RECEIVED BY ACCOUNT PAYEE CHEQUES AND THE SOURCES O F THE FUND OF CONCERNS ARE ALSO DIFFERENT. 6. ON THE ABOVE BASIS, THE AO TREATED THE SUM OF RS .50,90,000/- AS UNEXPLAINED AND ADDED THE SAME U/S 68. HE ALSO REFE RRED TO VARIOUS DECISIONS WHICH HAVE LAID DOWN THE PROPOSITION THAT ONUS IS ON THE ASSESSEE TO PROVE THE CREDITORS CAPACITY AND GENUI NENESS OF THE TRANSACTIONS. HE REFERRED TO THE FOLLOWING JUDGMENT S AS UNDER :- I) THE BURDEN IS ON THE ASSESSEE TO EXPLAIN SATISFA CTORILY WITH REGARD TO THE AMOUNTS WHICH HAVE BEEN CREDITED IN THE BOOKS OF AC COUNTS BY THE ASSESSEE. THE SOURCE AND THE NATURE OF THE RECEIPT HAS TO BE PROVED BY THE ASSESSEE AND IF HE FAILS TO PROVE SATISFACTORILY THE SOURCE AND THE NATURE OF AMOUNTS RECEIVED THE ASSESSING AUTHORITY IS ENTITLED TO DRAW AN INFE RENCE THAT THE RECEIPT IS ASSESSABLE INCOME OF THE ASSESSEE. CIT VS. R.S. RAT HOD 212 ITR 390 (RAJ), ROSHAN DI HATTI VS. CIT 50 ITR 1 (SC). II) IT IS FOR THE ASSESSEE TO PROVE THE IDENTITY OF CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF TRANSACTION; MERE FURNISHING OF THE PARTICULARS IS NOT ENOUGH; MORE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTION GENUINE. CIT VS. PRE CISION FINANCE (P) LTD. 208 ITR 465 (CAL). III) SCOPE OF SEC.68 : WHEN SOURCES OF DEPOSITORS N OT SATISFACTORILY EXPLAINED, DEPOSIT TO BE ADDED BY EVEN IF RECEIVED BY CHEQUE, ALSO HELD THAT BURDEN IS ON ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 4 THE ASSESSEE TO EXPLAIN THE DEPOSIT SATISFACTORILY, MERE FURNISHING OF PARTICULARS NOT ENOUGH, PAYMENT BY CHEQUE NOT CONCL USIVE. ITO VS. DIZA HOLIDINGS (P) LTD. 255 ITR 573 (KERA). IV) BURDEN ON THE ASSESSEE TO PROVE IDENTITY, CAPAC ITY AND GENUINENESS EVEN IF CONFIRMATIONS ARE FILED AND CREDITORS ARE ASSESSED TO TAX. R.B. MITTAL VS. CIT 246 ITR 283 (AP). 7. IN THE LIGHT OF ABOVE, HE MADE THE ADDITION. THE LD. CIT(A) DELETED THE ADDITION BY HOLDING THAT MONEY HAS BEEN ROUTED THROUGH BANKING CHANNELS. THE CREDITORS ARE FAMILY MEMBERS OF THE A SSESSEE. THE MONEY IS REFLECTED IN THEIR ACCOUNTS. THEY ARE ALL TAX PAYER S AND THERE IS NOTHING TO HOLD THAT ONUS LYING ON THE ASSESSEE IS NOT DISCHAR GED. IN THIS REGARD, THE LD. CIT(A) OBSERVED AS UNDER :- I HAVE CONSIDERED THE OBSERVATION OF THE AO AND CO NTENTIONS RAISED BY THE AR OF THE APPELLANT. I FOUND FORCE IN THE ARGUMENTS ADVANCED BY THE AR OF THE APPELLANT, WHO HAS RIGHTLY RAISED THE ISSUES THAT THE APPELLANT HA S ROTATED THE FUNDS WITHIN THEIR GROUND OF FAMILY CONCERNS WITH A SOLE OBJECTIVE OF AVAILING MAXIMUM BANK FINANCE, FOR THE BUSINESS ENTITY OF THE APPELLANT ONE OF TH E GROUP CONCERNS OF THE APPELLANT. HE HAS ALSO RAISED AN ISSUE THAT THE ENTIRE FUNDS W ERE LYING WITH THE FAMILY CONCERNS, WHO ARE ASSESSED TO TAX AT NAVSARI, WHERE THE AO IS POSTED. THE AR OF THE APPELLANT HAS RIGHTLY PLEADED THAT THE MOVEMENT OF FUNDS HAVE TAKEN PLACE WITHIN THE FAMILY MEMBERS/GROUP CONCERNS WHO ARE DULY ASSESSED TO TAX AND THEREBY JUSTIFYING THAT THE ADDITIONS BEING THE INTRODUCTION OF CAPITAL, REPRES ENTS THE SOURCE OF FUNDS WHICH IS DULY ASSESSED TO TAX AND THEREBY THE IDENTITY AND C REDITWORTHINESS OF THE DEPOSITORS ALONG WITH THE GENUINENESS OF THE TRANSACTIONS DULY ESTABLISHED. THE FUNDS WERE ROTATED THROUGH THE BANK ACCOUNTS AND BY A/C PAYEE CHEQUES. THE AR OF THE APPELLANT IS JUSTIFIED IN CLAIMING THAT THE APPELLANT HAS DUL Y DISCHARGED THE ONUS CASTE U/S 68 OF THE ACT, AS THE APPELLANT HAS PROVED THE IDENTITY A ND CREDITWORTHINESS OF THE DEPOSITORS ALONG WITH GENUINENESS OF THE TRANSACTIO NS, AS THE APPELLANT HAS FURNISHED THE CONFIRMATION LETTERS, COMPUTATION OF INCOME, AC KNOWLEDGEMENT OF RETURN OF INCOME, FINANCIAL STATEMENTS ALONG WITH THE COPY OF BANK A/CS WHEREBY THE FUNDS HAVE BEEN ROTATED. THE AO IS NOT JUSTIFIED IN INVOKING P ROVISIONS OF SECTION 68 OF THE ACT HAVING ACCEPTED THE DETAILS FURNISHED BY THE APPELL ANT, WHICH IS NOT DISPUTED BY HIM. HE IS ALSO NOT JUSTIFIED IN DRAWING A CONCLUSION TH AT THE ASSESSED FUNDS OF THE DEPOSITORS OF THE APPELLANT ROTATED THROUGH THE BAN K A/CS BY A/C PAYEE CHEQUES GETS CONVERTED INTO BOGUS TRANSACTIONS WITHOUT FUNDING A NY MATERIAL EVIDENCE ON RECORD. THE ADDITION IS THEREFORE DELETED. ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 5 8. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE LD. DR SUPPORTED THE ORDER OF AO WHEREA S THE LD. AR SUPPORTED THE ORDER OF LD. CIT(A). WE NOTICE FROM T HE ORDER OF LD. CIT(A) THAT ALL THE PERSONS, WHO HAD DEPOSITED THE MONEY A RE FAMILY MEMBERS AND THEY ARE ASSESSED TO TAX, THE DETAILS OF WHICH ARE AS UNDER :- SR. NO. NAME OF THE FAMILY MEMBERS RELATIONSHIP WITH APPELLANT BUSINESS FIRM P,A, NO./ASSESSED AT 01 SHRI PRAKASH SHROFF FATHER M/S ROLLA CHEMICALS ABKPS9052M WARD- 3. NAVSARI 02 SHRI PRAKASH SHIOFF-HUF - M/S HEM SONS AACHP4314 A WARD-3, NAVSARI 03 SMT. KISHORIBCN SHROFF MOTHER M/S K.P. ENTERPRISE ADIPS9362A WARD-2, NAVSARI 04 SHRI BIRCN SHROFF APPELLANT M/S BIREN ENTERPRISE ABK.PS9051 J WARD- 1, NAVSARI 05 SHRI BIRCN SHROFF- HUF - - AAFHB3296L WARD- 1, NAVSARI 06 SHRI ANKIT SHROFF BROTHER - ABKPS9053L \VARD-I, NAVSARI 07 KUMARI DIMPI SHROFF SISTER - AHHPS3489H WARD- 1, NAVSARI 9. THE LD. CIT(A) HAS ALSO MENTIONED HOW THE MONEY MOVED FROM VARIOUS CONCERNS TO THE ASSESSEE. HE PROVIDED FOLLO WING TABLE:- PARTICULARS ANKIT P.SHROFF BIREN P SHROFF HUF DIMPI P SHROFF HEM SONS KP ENTERPRISE ROLLA CHEMICALS SUCHETA P GHAEL TOTAL (RS) (RS) (RS) (RS) (RS) (RS) (RS) (RS) OPENING BALANCE AS ON ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 6 1.4.04 ADD: RECEIVED BY APPELLANT DURING THE YEAR INTEREST EXPENSES 612412 0 73489 216839 987000 35889 110363 0 13244 1864370 2126000 144483 145616 805000 58670 1430387 2023000 96787 123271 2113 18610 4503258 5943116 441122 LESS: REPAID BY APPELLANT DURING YEAR TDS DEDUCTED ON INT. 685901 5000 7496 1239728 900000 3661 123607 0 1351 4134853 3486800 14737 1009286 2941400 5984 3550174 29480000 9872 143994 123271 1898 10887543 10404471 44999 12496 903661 1351 3501537 2947384 2957872 125169 10449470 CLOSING BALANCE AS ON 31.3.2005 673405 336067 122256 633316 -1938098 595302 18825 438073 10. THE LD. AR ACCORDINGLY SUBMITTED THAT- I) THE IDENTITY OF THE DEPOSITOR IS PROVED/ESTABLIS HED. II) THE DEPOSITORS HAVING SUFFICIENT BALANCE TO JUS TIFY THE DEPOSITS AS IT IS EVIDENT FROM THE BANK ACCOUNTS PRODUCED BY THE A PPELLANT AND ACKNOWLEDGED BY THE AO. III) THE DEPOSITORS ARE IN EXISTENCE AS WELL AS THE Y ARE TAXPAYERS AND ASSESSED WITH THE INCOME-TAX OFFICE, NAVSARI, WHERE THE AO IS DEPUTED. IV) SINCE THE DEPOSITS WERE ROTATED THROUGH BANK AN D PAYEES A/C CHEQUE FROM THE BUSINESS ENTITIES OF THE FAMILY CON CERNS OF THE APPELLANT THROUGH THE PERSONAL ACCOUNT OF THE APPEL LANT DULY DISCLOSED AND EXPLAINED BY THE APPELLANT FURNISHING BANK ACCOUNT THE SOURCE OF SOURCE IS ALSO STOOD EXPLAINED AND JU STIFIED. ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 7 11. ONCE THE IDENTITIES OF THE DEPOSITORS ARE PROVE D AS THEY ARE CLOSELY RELATED TO THE ASSESSEE, THEY HAVE SUFFICIENT FUND IN THE BANK ACCOUNT TO TRANSFER FUNDS TO THE ASSESSEE AND SUCH FUNDS HAVE MOVED THROUGH BANKING CHANNELS BY ACCOUNT PAYEE CHEQUES AND THERE IS NO MATERIAL TO HOLD THAT MONEY HAS NOT COME FROM THEM OR IT WAS AS SESSEES OWN MONEY ROUTED THROUGH HIS RELATIONS. ONCE ONUS LYING ON TH E ASSESSEE IS DISCHARGED AND THERE ARE NO CONTRARY FACTS THE QUES TION OF ADDITION DOES NOT ARISE. FOLLOWING JUDGMENTS SUPPORT OUR CONTENTI ONS :- ITO VS. NIRMAL SINGH SURI (INDORE TRIBUNAL) ITO VS. JANAK U. BHATT (2006) 101 TTJ 337 (MUM) ACIT VS. S.A.T. ASSOCIATES (2005) 98 TTJ 1036 (NAG PUR) ACIT VS. DR. ARVIND MATHUR (2005) 95 TTJ 975 DCIT VS. GVS INV.(P) LTD. (2005) 92 TTJ 706 (DEL) IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF LD. C IT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 27/5/11. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 27.5.11. MAHATA/- ITA NO.3137/AHD/2008 ASST. YEAR 2005-06 8 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 1.DATE OF DICTATION 12/05/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 25/05/2011 MEMBER.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..