MULLA ASSOCIATES, BUILDERS & DEVELOPERS, MUMBAI V. ITO 19(3)3, MUMBAI

ITA 3422/MUM/2012

• Counselvise Citation: 342219914 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BIRLA
• Assessee Lawyers: N R AGARWAL
• Keywords: Unexplained cash credit; Depreciation; Source of fund; Onus to prove
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.3422/M/2012 ASSESSMENT YEAR: 2005-06 M / S. MULLA ASSOCIATES, BUILDERS & DEVELOPERS, 102, SAQUIB, 111, TURNER ROAD, BANDRA (W), MUMBAI 400 050 PAN: AAHFM 6082H VS. ITO - 19(3)3, 3 RD FLOOR, PIRAMAL CHAMBERS, MUMBAI ( APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.R. AGARWAL, A.R. REVENUE BY : SHRI PAVAN KUMAR BIRLA, D.R. DATE OF HEARING : 19.05.2015 DATE OF PRONOUNCEMENT : 29.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)] DATED 26.03.2012. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: GROUND NO. 1 THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE LEARNED AO FOR RS 7,50,000/- U/S 68. GROUND NO. 2 THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE A DDITION MADE BY THE LEARNED AO RS. 13497/-@ 20% OF FOLLOWING EXPENSES RS. 67489/- WHICH ARE OUT OF CONVEYANCE EXPENSES RS 25,959/-, SUNDRY EXPENSES RS 6,941/-, STAFF WELFARE EXPENSES RS 26,071/-, AND BUSINESS DEVELOPM ENT EXPENSES RS 8,518/- FOR INVOLVEMENT OF PERSONAL EXPENSES. GROUND NO. 3 THE LEARNED CIT ( APPEALS) ERRED IN CONFIRMING TH E ADDITION MADE BY THE LEARNED AO RS. 7365/- OUT OF MOTOR CAR EXPENSES RS 16,582/- & DEPRECIATION ON MOTOR CAR RS 20,198/- @ 20% FOR INVOLVEMENT OF PERSONAL EXPENSES. ITA NO.3422/M/2012 M/S. MULLA ASSOCIATES, BUILDERS & DEVELOPERS 2 ADDITIONAL GROUND NO. 4 THE LEARNED CIT (APPEALS) ERRED IN NOT DISPOSING OF ADDITIONAL GROUNDS OF APPEAL FOR ADDIT ION OF RS. 1500001- U/S 4 1(1). GROUNDS NO.1 3. THE ASSESSEE DURING THE YEAR HAD SHOWN ADVANCES RECEIVED FOR FLATS OF RS.1,28,45,477/-, OUT OF WHICH A SUM OF RS. 7.5 LAK HS WAS SHOWN AS RECEIVED FROM J.H. ENTERPRISES. AO ASKED THE ASSESSEE TO FI LE CONFIRMATION. THE ASSESSEE FILED THE CONFIRMATION OF THE PARTY BUT WI THOUT PAN. THE ASSESSEE EXPLAINED THAT THE PARTY HAD REFUSED TO GIVE PAN WI TH THE INTENTION THAT THE ASSESSEE SHOULD PAY BACK THE ADVANCE TO HIM. THE AS SESSEE, HOWEVER, LATER ON FILED THE PAN AND BANK STATEMENT OF THE PARTY. THE AO HOWEVER OBSERVED THAT THE SIGNATURES DIFFERED WITH EARLIER CONFIRMATION A ND THAT THE ADDRESS WAS ALSO DIFFERENT. HE FURTHER OBSERVED THAT THE ASSESSEE HA D FAILED TO PRODUCE THE PARTY BEFORE HIM. HE ALSO OBSERVED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE IDENTITY OF THE CREDITOR. THE AO THEREFORE HELD THA T THE TRANSACTION OF ADVANCE RECEIVED FROM JH ENTERPRISES COULD NOT BE SAID TO B E NOT GENUINE. HE ACCORDINGLY ADDED THE ABOVE AMOUNT RECEIVED FROM JH ENTERPRISES INTO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U /S 68 OF THE ACT. 4. IN FIRST APPEAL, THE LD. CIT(A) CALLED REMAND R EPORT FROM THE AO IN RESPECT OF THE ABOVE STATED ADDITION. IN THE REMAND PROCEEDINGS BEFORE THE AO, THE PROPRIETOR OF JH ENTERPRISES NAMELY SHRI JAFAR ALI KHAN APPEARED BEFORE THE AO IN RESPONSE TO THE SUMMONS ISSUED TO HIM U/S 131 OF THE ACT. THE SAID SHRI JAFAR ALI KHAN, IN HIS STATEMENT RECORDED BEFO RE THE AO, CONFIRMED THE PAYMENT OF THE SAID ADVANCE TO THE ASSESSEE BY CHEQ UE FOR BOOKING OF THE FLAT. HE ALSO FILED THE COPY OF HIS RETURN OF INCOME FOR AY 2006-07, COPY OF THE BANK STATEMENT AND THE COPY OF THE BALANCE SHEET FO R THE FINANCIAL YEAR UNDER CONSIDERATION. THE AO OBSERVED FROM THE BANK STATEM ENT THAT JH ENTERPRISES HAD ADVANCED THE SUM OF RS.7.5 LAKHS TO THE ASSESSE E BY CHEQUE IN JUNE 2004. SHRI JAFAR ALI KHAN HAD ALSO EXPLAINED HIS SOURCE O F MONEY AS LOAN TAKEN OF ITA NO.3422/M/2012 M/S. MULLA ASSOCIATES, BUILDERS & DEVELOPERS 3 RS.11 LAKHS FROM HIS BUSINESS ASSOCIATE SHRI. MANGE SH PATIL. HE FURTHER OBSERVED THAT THE ADDITIONS WERE JUSTIFIED AS 3 RD PARTY VERIFICATION WAS NOT POSSIBLE. RELYING UPON THE REMAND REPORT, THE LD. CIT(A) CONF IRMED THE ADDITION. 5. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSEE HAS FULLY DISCHARGED ITS BURDEN OF PROOF REGARDING THE GENUINENESS OF THE TRANSACTION. ON THE OTHER HAND THE LD. DR HAS RELI ED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT IS AN ADMITTED FACT ON THE FILE THA T THE ASSESSEE HAS PRODUCED THE CONFIRMATIONS FROM THE PAYER, COPY OF THE BANK ACCO UNT STATEMENT OF THE JH ENTERPRISES AND EVEN THE PAN OF THE PARTY HAS ALSO BEEN VERIFIED BY THE AO. THE PAYER/CREDITOR HAS EXPLAINED THE SOURCE OF HIS FUNDS. FURTHER THE CREDITOR HAS APPEARED IN PERSON BEFORE THE AO AND IN HIS STA TEMENT TAKEN ON OATH HAS CONFIRMED THE TRANSACTION. THE ASSESSEE HAS NOT ONL Y ESTABLISHED THE IDENTITY OF THE CREDITOR, BUT ALSO, THE SOURCE OF FUNDS AND GEN UINENESS OF THE TRANSACTION. HENCE, IN OUR VIEW, THE ASSESSEE HAS FULLY DISCHARG ED HIS BURDEN OF PROVING THE SOURCE OF ADVANCE RECEIVED. THE AO HAS MADE A G ENERAL OBSERVATION THAT THE THIRD PARTY VERIFICATION WAS NOT POSSIBLE. HOWE VER, EVEN THERE IS NO EVIDENCE ON THE FILE THAT THE TRANSACTION OF LOAN B Y SHRI JAFAR ALI KHAN FROM HIS BUSINESS ASSOCIATE WAS NOT GENUINE. MOREOVER, THE A SSESSEE IS NOT SUPPOSED TO PROVE THE SOURCE OF THE SOURCE. ONCE, THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN OF GENUINENESS OF THE TRANSACTION/SOURCE, TH E BURDEN SHIFTS UPON THE AO TO PROVE IT OTHERWISE. UNDER SUCH CIRCUMSTANCES, TH ERE IS NO JUSTIFICATION ON THE PART OF LOWER AUTHORITIES IN MAKING/SUSTAINING THE ABOVE ADDITION, THE SAME IS ACCORDINGLY, ORDERED TO BE DELETED. ITA NO.3422/M/2012 M/S. MULLA ASSOCIATES, BUILDERS & DEVELOPERS 4 GROUNDS NO. 2 &3 7. THE ABOVE GROUNDS ARE RELATED TO ADDITIONS ON AC COUNT OF CERTAIN PERCENTAGE OF DISALLOWANCE OF EXPENDITURE MADE ON A DHOC BASIS. THE LD. AR OF THE ASSESSEE HAS NOT ADVANCED ANY SU BMISSIONS/ ARGUMENTS IN RELATION TO GROUNDS NO. 2&3 OF THE APPEAL. WE HAVE GONE THROUGH THE ORDER OF THE CIT(A) IN RELATION TO THE ISSUES RAISED IN THE ABOVE STATED GROUNDS AND HAVE NOT FOUND ANY INFIRMITY IN THE SAME. THE FINDING OF THE LD. CIT(A) IN RELATION TO GROUNDS NO.2 & 3 ARE THEREFORE, UPHELD. GROUND NO. 4 8. THE ASSESSEE BEFORE THE LD. CIT(A) HAD TAKEN ADD ITIONAL GROUND OF APPEAL IN RELATION TO ADDITIONS MADE BY THE AO OF R S.150000/- U/S 41 ON ACCOUNT OF CESSATION OF LIABILITY. THE ASSESSEE HAS CLAIMED THAT THE LOANS WERE NOT ON ACCOUNT OF BUSINESS LIABILITY AND THAT THE P ROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE TO THE ABOVE CASE OF THE ASSESSEE. T HE LD. CIT(A) HAS NOT DECIDED THE ABOVE GROUND RAISED BY THE ASSESSEE BE FORE HIM. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO CONSIDER AND DECIDE THE SAME ON MERITS. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.07.2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.07.2015. * KISHORE, SR. P.S. ITA NO.3422/M/2012 M/S. MULLA ASSOCIATES, BUILDERS & DEVELOPERS 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.