M/s Hilal Mixing Plant, Srinagar V. The Dy. Commissioner of Income-tax, Srinagar

ITA 320/ASR/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5709 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: M A MIR COST ACCOUNTANT
• Keywords: Unexplained cash credit; Source of fund; Onus to prove
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 320/(ASR)/2014 AS SESSMENT YEAR: 2010-11 HILAL MIXING PLANT UAKHOO, KAKAPORA, PULWAMA [PAN: AAEFH 9795B] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, SRINAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. M. A. MIR (COST ACCO UNTANT) RESPONDENT BY: SH. RAJEEV GUBGOTRA (D.R.) DATE OF HEARING: 06.03.2018 DATE OF PRONOUNCEMENT: 22.03.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU ('CIT(A)', FOR SHORT ) DATED 10.02.2014, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASS ESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 26.02.2013 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. AT THE OUTSET, IT WAS FOUND THAT THE FILING OF T HE APPEAL IS DELAYED BY A PERIOD OF 22 DAYS. THE ASSESSEE HAS FURNISHED AN AFFIDAVIT DATED 10.02.2018, DULY NOTARIZED, BY ONE, MOHAMMAD ISMAIL WANI, PARTNER OF THE ASSESSEE-FIRM, EXPLAINING THE REASONS FOR THE DELAY (COPY ON RECOR D). WE, ON PURSUING THE SAME, ITA NO. 320 (ASR)/2014 (AY 2010-11) HILAL MIXING PLANT V. DY.CIT 2 FIND THE DELAY AS REASONABLY EXPLAINED AND, ACCORDI NGLY, THE DELAY WAS CONDONED, AND HEARING IN THE MATTER PROCEEDED WITH. 3. THE APPEAL, IN EFFECT, RAISES TWO ISSUES PER ITS THREE GROUNDS. THE FIRST TWO REPRESENT THE TWO LIMBS OF THE SAME ASPECT OF THE A SSESSMENT, I.E., UNEXPLAINED CREDITS IN THE SUM OF RS.38.85 LACS. THE THIRD GROU ND, CONCERNING A DISALLOWANCE FOR RS.1,14,692 U/S. 40A(3), WAS NOT PRESSED DURING HEARING, STATING SO PER THE WRITTEN SUBMISSIONS ON RECORD, WITH MR. MIR, THE LD . AR FOR THE ASSESSEE, ALSO CONFIRMING THE SAME DURING HEARING ON BEING SPECIFI CALLY QUESTIONED IN THE MATTER BY THE BENCH. GROUND NO. 3 IS ACCORDINGLY DISMISSED AS NOT PRESSED. 4. AS REGARDS THE FIRST TWO GROUNDS, THE ASSESSEE, A GOVERNMENT CONTRACTOR, WAS OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDING S TO HAVE DEPOSITED RS.38.85 LACS IN CASH IN ITS BANK ACCOUNT (WITH J & K BANK, KAKAPORA, PULWAMA) ON DIFFERENT DATES DURING THE YEAR, DETAILED AT PARA 3 (PG. 3) OF THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT OF THE SAME RS.16.60 LA CS WERE FROM SIX INDIVIDUALS TO WHOM AMOUNTS HAD BEEN ADVANCED AS LOANS IN A PRECED ING YEAR, FURNISHING THEIR NAMES AND THE AMOUNTS RECEIVED, ALONG WITH STATEMEN TS FROM THEM CONFIRMING SO. NOTICES U/S. 133(6) TO THESE PARTIES, CALLING FOR T HE REQUISITE INFORMATION BY 13.02.2013, REMAINED UN-RESPONDED, AND NEITHER DID ANY ONE APPEAR ON 15.02.2013, THE DATE OF HEARING. THE ASSESSEE ON BE ING QUESTIONED IN THIS RESPECT, DID NOT FURNISH ANY FURTHER EXPLANATION (REFER PAGE S 6, 7 OF THE ASSESSMENT ORDER). THE ASSESSEES EXPLANATION WAS NOT FOUND SATISFACTO RY IN-AS-MUCH AS THE DATES IN THE CASH-BOOK DID NOT AGREE WITH THE DATES OF THE C ASH DEPOSITS IN THE BANK ACCOUNT. NONE OF THE PERSONS WHOSE PAN WAS MENTIONED IN THE CONFIRMATIONS WERE ON VERIFICATION FOUND TO HAVE FILED THE RETURN OF INCO ME FOR THE RELEVANT YEAR (AY 2010-11). IN FACT, PAN OF ONE OF THEM WAS FOUND TO BE INCORRECT IN-AS-MUCH AS IT WAS OF A DIFFERENT PERSON. THE ASSESSEE HAD NOT FUR NISHED ANY EXPLANATION FOR THE ITA NO. 320 (ASR)/2014 (AY 2010-11) HILAL MIXING PLANT V. DY.CIT 3 BALANCE RS.22.25 LACS (I.E., RS.38.85 LACS MINUS RS .16.60 LACS) DEPOSITED CASH IN ITS BANK ACCOUNT. THE SAME WAS ACCORDINGLY ADDED U /S. 68, AND CONFIRMED IN FIRST APPEAL FOR THE SAME REASONS. AGGRIEVED, THE ASSESSE E IS IN SECOND APPEAL. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE SHALL TAKE UP THE ADDITION OF RS.16.60 LACS FIRS T, EVEN AS WAS THE CASE DURING HEARING. THE ASSESSEES OBJECTION QUA NON-APPLICATION OF SECTION 68 IN-AS- MUCH AS THE CREDITS ARE FROM PERSONS TO WHOM LOANS HAD BEEN GIVEN, SO THAT IT IS ONLY THE RETURN OF A LOAN BY THEM, IS WITHOUT ANY M ERIT. SECTION 68 APPLIES TO ANY SUM FOUND CREDITED IN THE ASSESSEES BOOKS OF ACCOU NT. WHERE, HOWEVER, IT IS FROM A PERSON TO WHOM MONIES HAD BEEN LENT EARLIER BY TH E ASSESSEE, I.E., REPRESENTS REPAYMENT OF A LOAN/ADVANCE, AS CLAIMED, THE BURDEN OF PROOF ON THE ASSESSEE TO ESTABLISH THE NATURE AND THE SOURCE OF THE CREDIT W OULD STAND SUBSTANTIALLY IMPACTED IN-AS-MUCH AS THE SIGNIFICANCE OF THE CAPACITY AND GENUINENESS OF THE CREDIT STANDS DILUTED THE EARLIER LOAN/ADVANCE PROVIDING THE RAISON DETRE OF THE REPAYMENT. IT IS, AFTER ALL, WHERE SO PROVED, THE RECEIPT BY A PE RSON OF THE MONIES EXTENDED BY HIM EARLIER. THE MATTER THOUGH REMAINS LARGELY IN T HE REALM OF FACTUAL DETERMINATION. THE MONEY MAY HAVE BEEN ADVANCED TO A PERSON WITH NO KNOWN SOURCE OF INCOME, I.E., BY WAY OF FINANCIAL HELP (A S TO MEET A FINANCIAL EMERGENCY OR NEED, VIZ. TO BUILD A HOUSE, SO THAT THE AMOUNT STANDS DEPLOYED IN AN ILLIQUID ASSET), WHICH COULD BE YEARS AGO. THE CLAIM OF RECE IPT BACK FROM SUCH A PERSON WOULD REQUIRE A CLOSER EXAMINATION TO VERIFY IF IT IS INDEED SO. THAT THE RECEIPT IN THE PRESENT CASE IS IN CASH IS FURTHER CONFOUNDING, CONSIDERING THAT THE PAYER AND THE PAYEE ARE LOCATED AT A DISTANCE, AND CASH IS BO TH A RISKY AND COSTLY MANNER OF TRANSMISSION OF FUNDS. FURTHER, EVEN AS OBSERVED BY THE BENCH DURING HEARING, THE IDENTITY OF THE PERSON TO WHOM THE LOAN WAS GIVEN, AND FOR WHOM IT STANDS RECEIVED BACK, THOUGH WOULD HAVE TO BE ESTABLISHED WITHOUT A NY IOTA OF DOUBT. THIS IS ITA NO. 320 (ASR)/2014 (AY 2010-11) HILAL MIXING PLANT V. DY.CIT 4 PARTICULARLY SO WHERE, AS IN THE PRESENT CASE, NONE OF THE CREDITORS ARE ASSESSEES UNDER THE ACT, WITH THE PAN OF ONE OF THEM BEING IN CORRECT. ALSO, WHAT ASSUMES RELEVANCE IN THIS REGARD IS THE EVIDENCE ESTABLISHI NG THAT THE LOAN WAS IN FACT GIVEN BY THE ASSESSEE TO A PARTICULAR PERSON, AND IT IS H E WHO HAS RETURNED THE SAME. THOUGH THE ASSESSEES BOOKS OF ACCOUNT ARE TO BE EX TENDED PRIMACY IN THIS REGARD, THE LEDGER ACCOUNTS OF THE DIFFERENT LOANEES HAVE N OT BEEN FURNISHED. THE CONSOLIDATED ACCOUNT (OF ALL THE LOANS AND ADVANCES ), AT PAGE 5 OF THE ASSESSMENT ORDER, DOES NOT BEAR THE IDENTITY OF THE PERSON/S T O WHOM LOAN/S WAS EXTENDED, FROM WHOM THE SUM/S HAVE BEEN RECEIVED DURING THE RELEVA NT YEAR. THEN, AGAIN, HOW WAS THE AMOUNT/S GIVEN, AND FOR WHAT PURPOSE, AS TH E SAME COULD NOT PRESUMABLY BE WITHOUT PURPOSE AND, RATHER, WOULD BE FOR A BUSI NESS PURPOSE ONLY? NONE OF THESE FACTS - DEEMED RELEVANT, ARE ON RECORD. HOW C OULD IT BE UNDER THE CIRCUMSTANCE SAID, AS CONTENDED, THAT THE CREDITS A RE PROVED AS THE SAME REPRESENT A RECEIPT BACK OF FUNDS - WHICH FACTS ITSELF REQUIRES BEING ESTABLISHED? THE PRIMARY BURDEN IN THIS REGARD IS ON THE ASSESSEE. HOWEVER, WE MAY CLARIFY THAT WHERE THE ASSESSEE SATISFIES THAT MONEY HAD BEEN PAID TO A PA RTICULAR PERSON IN AN EARLIER YEAR, AND IT IS HE WHO HAS PAID BACK THE SAME, INCLUDING AS TO THE MANNER OF TRANSMISSION OF FUNDS, THE INITIAL ONUS ON THE ASSESSEE GETS DIS CHARGED. THE CREDIT/S UNDER SUCH CIRCUMSTANCES IS LIABLE TO REGARDED AS REASONABLY E XPLAINED UNLESS THE REVENUE BRINGS ANY ADVERSE OR CONTRARY MATERIAL ON RECORD. THE MATTER, ACCORDINGLY, TO AFFORD AN OPPORTUNITY TO THE ASSESSEE TO STATE AND PRESENT ITS CASE; WE HAVING DELINEATED THE SCOPE OF THE ONUS AS WELL AS THE PAR AMETERS ON WHICH THE ESSENTIALLY FACTUAL MATTER NEEDS TO BE EXAMINED AND DETERMINED, IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER (AO). AS REGARDS THE BALANCE SUM (OF RS.22.25 LACS), THE ASSESSEES CASE IS THAT THE NON-SPELLING OUT OF THE NATURE AND SOURCE OF THE CA SH DEPOSITS IN ITS BANK ACCOUNT - AS REQUIRED U/S. 69A OF THE ACT, IS THAT THE SAME I S THE CASH (IN HAND) AS PER ITS CASH ITA NO. 320 (ASR)/2014 (AY 2010-11) HILAL MIXING PLANT V. DY.CIT 5 BOOK. AND TOWARD WHICH THE LD. AR WOULD DURING HEAR ING TAKE US THROUGH THE CASH-BOOK ON RECORD (PB PGS. 4-32). TRUE, WHERE THE SOURCE OF THE DEPOSITS IS THE CASH WITH THE ASSESSEE, AS PER ITS CASH-BOOK, THE SAME STANDS EXPLAINED, DISCHARGING THE INITIAL ONUS ON THE ASSESSEE. AT TH E SAME TIME THOUGH, THE REVENUE IS FULLY WITHIN ITS RIGHTS TO EXAMINE THE SOURCE O F THE CASH AVAILABLE WITH THE ASSESSEE. IS IT BY WAY OF CASH WITHDRAWALS FROM THE BANK (EITHER THE SAME OR ANOTHER) ITSELF - AN UNLIKELY SITUATION AS AN ASSES SEE WOULD NOT WITHDRAW FUNDS FROM THE BANK ONLY TO DEPOSIT IT BACK; OR SALES - WHICH ARE THUS A REVENUE RECEIPT; OR CASH RECEIPT/S FROM OTHER PERSON/S, IN WHICH CASE IT IS THIS PERSON/S WHO IS THE ACTUAL (REAL) SOURCE OF FUNDS THE CASH-IN-HAND BEING O NLY AN OSTENSIBLE (ILLUSORY) SOURCE, ETC. THE MATTER, I.E., THE EXPLANATION AS T O THE NATURE AND SOURCE OF THE CASH DEPOSITS IN THE ASSESSEES BANK ACCOUNT, IS A PRIMA RILY FACTUAL MATTER, WHICH WE AGAIN FIND AS FACTUALLY INDETERMINATE. THIS ASPECT OF THE ADDITION IS THUS ALSO SET ASIDE TO THE AO FOR FRESH DETERMINATION, BY ISSUING DEFINITE FINDINGS OF FACT, AND ADJUDICATION IN ACCORDANCE WITH THE LAW. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 22, 201 8 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 22.03.2018 GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: M/S. HILAL MIXING PLANT UAK HOO, KAKAPORA, PULWAMA (2) THE RESPONDENT: DY. CIT, CIRCLE-3, SRINAGAR (3) THE CIT(APPEALS), JAMMU (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T ITA NO. 320 (ASR)/2014 (AY 2010-11) HILAL MIXING PLANT V. DY.CIT 6 TRUE COPY BY ORDER