Deepak Garg, New Delhi V. ITO, New Delhi

ITA 3175/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5391 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DLEHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 3175/DEL/2017 ASSESSMENT YEAR: 2012-13 DEEPAK GARG, A-3/23, VS. INCOME-TAX OFFICER, PASHCHIM VIHAR, NEW DELHI. WARD 41(3), NEW DELHI. PAN : AABCN 6808R (APPELLANT) (RESPONDENT) APPELLANT BY : SH. LALIT MOHAN, C.A. RESPONDENT BY: MS. ASHIMA NEB. SR. DR DATE OF HEARING: 18.12.2019 DATE OF ORDER : 19.02.2020 ORDER PER K. NARASIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 24/03/2017 IN APPEAL N O. 26/15-16 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-14, NEW DELHI (LD. CIT(A)), FOR ASSESSMENT YEAR 2012-13, SHRI DEEPAK GARG (THE ASSESSEE) PREFERRED THIS APPEAL. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADI NG IN BULLIONS AND ALL TYPES OF GOLD AND DIAMOND JEWELLERY UNDER THE N AME AND STYLE OF M/S. SAI JEWELS. FOR THE ASSESSMENT YEAR 2012-13, ASSES SEE HAD FILED ITS RETURN OF INCOME ON 13.06.2012 DECLARING TOTAL INCOME OF R S.4,87,370/-. ASSESSMENT U/S. 143(3) WAS, HOWEVER, COMPLETE AT AN INCOME OF 2 RS.64,53,540/- MAKING CERTAIN ADDITIONS INCLUDING A DDITION OF RS.45 LACS ON ACCOUNT OF SUNDRY CREDITORS. 3. AGGRIEVED BY SUCH ADDITION, THE ASSESSEE PREFERR ED APPEAL BEFORE THE LD. CIT(A) AND BY WAY OF THE IMPUGNED ORDER, LD . CIT(A) DELETED OTHER ADDITIONS BUT CONFIRMED THE ADDITION OF RS.40 LACS OUT OF RS.45 LACS ADDED BY THE ASSESSING OFFICER U/S. 28 READ WITH SECTION 41 OF THE INCOME-TAX ACT (THE ACT). 4. THE ASSESSEE IS, THEREFORE, BEFORE US IN THIS AP PEAL CONTENDING THAT THE AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT THAT NEITHER SECTION 28 OF THE ACT NOR SECTION 41 OF THE INCOME-TAX ACT, 19 61 (THE ACT) IS APPLICABLE TO THE FACTS OF THE CASE, INASMUCH AS TH E GOLD INTRODUCED BY THE ASSESSEE INTO THE BUSINESS BELONGED TO HIS FATH ER ON WHOSE DEATH IT WAS INHERITED BY MOTHER, BROTHERS AND SISTER OF THE ASSESSEE. 5. LEARNED AR SUBMITTED THAT BOTH THE AUTHORITIES B ELOW PROCEEDED ON THE BASIS OF GOLD WORTH RS.45 LACS INTRODUCED IN TO THE BUSINESS OF THE ASSESSEE THOUGH ORIGINALLY BELONGED TO HIS FATHER, BUT SUBSEQUENTLY ON DEATH OF FATHER OF ASSESSEE, SUCH A LIABILITY CEASE D TO EXIST AND THEREFORE, IN VIEW OF THE NON-PLAYABILITY OF SUCH A DEBT, IT A SSUMES THE CHARACTER OF INCOME U/S. 28 READ WITH SECTION 41 OF THE ACT. THE LD. AR, HOWEVER, SUBMITTED THAT FATHER OF ASSESSEE DIED INTESTATE, T HE ESTATE OF FATHER DEVOLVES UPON ON CLASS-I HEIRS AND THEREFORE, IT IS INCORRECT TO CONCLUDE THAT THE LIABILITY OF THE ASSESSEE CEASED TO EXIST ON DEATH OF FATHER. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD SHOWN THE G OLD OF HIS FATHER TO HAVE BEEN PURCHASED BY THE ASSESSEE AND SUCH PURCHA SES WERE ACCEPTED BY THE ASSESSING OFFICER AND THEREFORE, IT WOULD BE FUTILE TO CONTEND THAT IT IS A CASE OF INTRODUCTION OF UNEXPLAINED AND UNA CCOUNTED MONEY INTO 3 THE CAPITAL. ACCORDING TO LD. AR, THE FACTS OF THIS CASE ARE SIMILAR TO THE FACTS OF THE CASE IN CIT VS. SUGAULI SUGAR WORKS P. LTD., 236 ITR 518. LASTLY, HE CONTENDED THAT IN VIEW OF THE DECISION OF HONBL E APEX COURT IN THE CASE OF CIT VS. MAHINDRA & MAHINDRA LTD., 404 ITR 1 (SC), SECTION 28 OF THE ACT HAS NO APPLICATION SINCE THE ALLEGED BENEFI T OF THE ASSESSEE IS NOT IN THE NATURE OF CASH OR MONEY AND SECTION 41(1) HA S ALSO NO APPLICATION SINCE THERE WAS NO CESSATION OF ANY TRADING LIABILI TY. 6. PER CONTRA, IT IS THE SUBMISSION ON BEHALF OF TH E REVENUE THAT THE ASSESSEE DID NOT PRODUCE ANY PURCHASE VOUCHER BEFOR E THE ASSESSING OFFICER TO SUBSTANTIATE HIS CLAIM AND FURTHER THAT THERE WAS NO REBUTTAL OF THE OBSERVATION OF THE ASSESSING OFFICER THAT THE R ATES ON WHICH THE ASSESSEE HAD SHOWN TO HAVE PURCHASED THE GOLD FROM HIS FATHER ON 01.03.2012, 03.03.2012 AND 17.03.2012 ALSO VARY AS THE RATE ON WHICH THE GOLD IS CLAIMED TO HAVE PURCHASED DOES NOT TALL Y WITH THE GOLD RATE ON THOSE DATES. SHE FURTHER SUBMITTED THAT THE ASSESSE E HAS BEEN CHANGING HIS VERSION FROM TIME TO TIME, INASMUCH AS INITIALL Y HE HAD SHOWN AS A CREDITOR TO HIMSELF WHICH WAS DISBELIEVED BY ASSESS ING OFFICER. 7. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF SUBMISSIONS MADE ON EITHER SIDE. IT COULD BE SEEN FROM THE RECORD, A S PLEADED BY THE ASSESSEE BOTH BEFORE THE ASSESSING OFFICER AND CIT( A), THE CASE OF THE ASSESSEE HAS BEEN THAT HIS FATHER DIED INTESTATE ON 15.05.1993 LEAVING BEHIND FIVE LEGAL HEIRS AND SOME GOLD BARS; THAT TH E ASSESSEE COMMENCED HIS BUSINESS IN THE LATTER HALF OF FINANCIAL YEAR 2 010-11 RELEVANT TO ASSESSMENT YEAR 2011-12; WITH A VIEW TO UTILIZE THE GOLD BARS AND ORNAMENTS LEFT BEHIND BY HIS FATHER, THE ASSESSEE P ASSED A GENERAL ENTRY ON 04.02.2012 ADMITTING THE PURCHASE AMOUNT BY RS. 5 LACS AND CREDITING 4 IT TO SEPARATELY OPENED LEDGER ACCOUNT IN THE NAME OF HIS FATHER; THAT DURING THE FINANCIAL YEAR 2011-12, THE ASSESSEE PUR CHASED GOLD ORNAMENTS ETC. WORTH RS.40 LACS BY CREDITING A CORR ESPONDING AMOUNT OF RS.40 LACS TO LEDGER ACCOUNT OPENED IN HIS OWN NAME UNDER THE LEGAL ADVICE SINCE THE GOLD DID NOT BELONG TO HIM EXCLUSI VELY BUT EQUALLY BELONG TO OTHER LEGAL HEIRS OF HIS FATHER. 8. IN SO FAR AS THE BOOKS OF ACCOUNT OF THE ASSESSE E ARE CONCERNED, THE ASSESSING OFFICER EXAMINED THE BOOKS OF ACCOUNT AND ACCEPTED THE TRADING RESULTS BY STATING THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN BULLIONS AND ALL TYPES OF GOLD AND DIAMON D JEWELLERY UNDER THE NAME AND STYLE OF M/S. SAI JEWELS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED GROSS TURNOVER AT RS.71,34 ,82,470/- AND GROSS PROFIT OF RS.22,04,057/- YIELDING G.P. RATE OF 0.22 %. AFTER DEBITING EXPENSES IN P&L ACCOUNT, THE NET PROFIT OF RS.4,93,8 28/- HAS BEEN DECLARED. THE DETAILS FURNISHED WITH RESPECT TO TRA DING RESULTS SUPPORTED WITH BILLS AND VOUCHES WERE EXAMINED AND PLACED ON R ECORD. 9. THE ENTIRE QUESTION IN THIS MATTER REVOLVES AROU ND WHETHER THE LIABILITY OF THE ASSESSEE TOWARDS THE GOLD OF HIS F ATHER INTRODUCED INTO THE BUSINESS OF ASSESSEE CEASED TO EXIST OR NOT. ACCORD ING TO ASSESSEE, HE ALONE IS NOT ENTITLED TO INHERIT THE ENTIRE ESTATE OF HIS DECEASE FATHER, BUT ALONG WITH HIM, FOUR OTHER LEGAL HEIRS ARE THERE UP ON WHOM THE ESTATE OF HIS DECEASED FATHER DEVOLVES. ON THIS ASPECT, THE A SSESSEE PRODUCED BEFORE THE CIT(A) AFFIDAVITS OF OTHER LEGAL HEIRS A ND WE HAVE GONE THROUGH SUCH AFFIDAVIT TO BE FOUND FROM PAGE 47 TO 56 OF TH E PAPER BOOK, WHEREIN, WIFE AND CHILDREN OF LATE DHARAM CHAND GARG (FATHER OF ASSESSEE) STATED IN UNEQUIVOCAL TERMS THAT THE DECEASED LEFT BEHIND FIVE LEGAL HEIRS AND 5 THE DECEASED OWNED A DEBT OF RS.45 LACS FROM M/S. S AI JEWELS ON ACCOUNT OF SALE OF GOODS TO THEM. THIS PARTICULAR ASPECT IS NOT IN DISPUTE. FURTHER, THE ASSESSING OFFICER ACCEPTED THE PURCHASE OF GOLD AND APPROVED THE TRADING RESULTS. HAVING ACCEPTED THE TRADING RESULT S, IT IS NOT OPEN FOR THE ASSESSING OFFICER TO SAY THAT THE ASSESSEE INTRODUC ED UNEXPLAINED AND UNACCOUNTED MONEY INTO THE CAPITAL. 10. IN THIS SET OF CIRCUMSTANCES, THE ONLY QUESTION THAT ARISES FOR OUR CONSIDERATION IS WHETHER REALLY THERE WAS ANY CESSA TION OF LIABILITY OF ASSESSEE IN RESPECT OF HIS FATHERS GOLD THAT WAS P URCHASED DURING THE YEAR. AS RIGHTLY CONTENDED BY THE LD. AR, INASMUCH AS THE OTHER LEGAL HEIRS ARE AVAILABLE AND THE DEBT IS ACKNOWLEDGED IN THE B OOKS OF ACCOUNT OF THE ASSESSEE, IT CANNOT BE SAID THAT THE LIABILITY CEAS ED TO EXIST. AS A MATTER OF FACT, IT CANNOT BE SAID THAT SUCH A LIABILITY CEASE D TO EXIST ON THE DEATH OF ASSESSEES FATHER BECAUSE THE FATHER OF ASSESSEE DI ED WAY BACK IN THE YEAR 1993 AND THE INTRODUCTION OF GOLD OF FATHER IN TO THE BUSINESS OF ASSESSEE TOOK PLACE IN THE ASSESSMENT YEARS 2011-12 AND 2012-13 ONLY. 11. IN MAHINDRA & MAHINDRA LTD. (SUPRA), HONBLE SU PREME COURT CLEARLY HELD THAT UNLESS THE BENEFIT ACCRUED TO THE ASSESSEE IS IN NATURE OF CASH OR MONEY, SECTION 28 HAS NO APPLICATION AND IN THE ABSENCE OF CESSATION OF LIABILITY, SECTION 41(1) HAS NO APPLIC ATION. WHAT ALL THAT HAPPENED IN THIS MATTER IS THAT THE ASSESSEE INTROD UCED THE GOLD LEFT BEHIND BY HIS FATHER INTO HIS BUSINESS AND HAD SHOW N THE TRADE LIABILITY IN HIS OWN NAME IN THE NAME OF OTHER FAMILY AS A WHOLE OR INDIVIDUAL LEGAL HEIR. WE, THEREFORE, ARE OF THE CONSIDERED OPINION THAT SUCH AN ACT CANNOT BE TERMED EITHER AS INTRODUCTION OF UNACCOUN TED OR UNEXPLAINED MONEY INTO THE CAPITAL OR THAT THE TRADE LIABILITY CEASED TO EXIST. FOR THESE 6 REASONS, WE FIND IT DIFFICULT TO SUSTAIN THE ADDITI ON MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 12. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19/02/2019 AKS