The ACIT, Circle-6, Surat V. M/s. Patel Babubhai Kantilal & Co., Surat

ITA 3445/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6622 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-10-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 10.5.2011 DRAFTED ON: 10 .5.2011 ITA NO.3445/AHD/2008 ASSESSMENT YEAR : 2004-05 THE ASST.CIT CIRCLE-6 SURAT VS. M/S.PATEL BABUBHAI KANTILAL & CO. 5/663, HARIPURA BHAVANIWAD, SURAT PAN/GIR NO. : AAEFP 7192 E ( APPELLANT ) .. ( RESPONDENT ) AND CO NO.317/AHD/2008 FOR A.Y.2004-05 M/S.PATEL BABUBHAI VS. THE ASST. CIT KANTILAL & CO. SURAT WARD-6, SURAT [CROSS OBJECTOR] [RESPON DENT] REVENUE BY : SHRI S.A. BOHRA, SR. D.R. ASSESSEE BY: SHRI P.M. MEHTA O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THE REVENUE IS IN APPEAL AND THE RESPONDENT-ASSESS EE IS IN CROSS OBJECTION ARISING FROM THE ORDER OF THE LEARNED CIT (APPEALS)-II, AHMEDABAD DATED 02/05/2008. THE SUBSTANTIVE GROUND IS GROUND NO.1; REPRODUCED BELOW:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-II, AHMEDABAD HAS ERRED IN DELETING THE ADDITION OF RS.15 LACS MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DATED 23/ 11/2006 WERE THAT THE ASSESSEE-FIRM IS IN THE BUSINESS OF ANGADIA I.E. WORKING AS A COURIER AGENT. IT WAS OBSERVED BY THE ASSESSING OFFICER T HAT FROM 12 PARTIES THE ITA NO.3445/AHD/2008 (BY REVENUE) & CO NO.317/AHD/2008 (BY ASSESSEE) ASST.CIT VS. M/S.PATEL BABUBHAI KANTIAL & CO. ASST.YEAR 2004-05 - 2 - ASSESSEE HAS ACCEPTED LOAN OF RS.15 LACS. LIST OF THE PERSONS AS MENTIONED IN THE ASSESSMENT ORDER AS FOLLOWS:- SR. NO. NAME LOAN OR DEPOSIT TAKEN OR ACCEPTED (RS.) 1. PARESH A.SHAH 1,00,000 2. NEHA CORPORATION 1,00,000 3. MITESH ENTERPRISE 1,00,000 4. POOJA ENTERPRISE 1,00,000 5. SHRADDHA JEMS 1,00,000 6. R.G. CORPORATION 1,00,000 7. AMISH DIAMOND 1,50,000 8. AMIT C.SHAH 1,50,000 9. JENISH H. TRIVEDI 1,00,000 10. KALPESH DIAMOND 2,00,000 11. NAIMESH M.PATEL 1,00,000 12. PATEL EXPORTS 2,00,000 2.1. THE ASSESSING OFFICER HAS ADMITTED THE FACT TH AT THE ASSESSEE HAD FURNISHED THE CONFIRMATION LETTERS OF ALL THE DEPOS ITORS. TO KNOW THE GENUINENESS OF THE TRANSACTION, NOTICES U/S.133(6) WERE ISSUED. OUT OF THE NOTICES ISSUED TO THE SAID DEPOSITORS, SEVEN OF THE M WERE RETURNED UNSERVED WITH THE REMARKS LEFT. IT WAS ALSO NOT ED BY THE ASSESSING OFFICER THAT THE PAYMENTS WERE MADE THROUGH CHEQUE OR DEMAND DRAFT, HOWEVER, AS PER THE BANK ACCOUNTS FILED, IT WAS FO UND THAT THERE WERE CASH DEPOSIT IMMEDIATELY BEFORE THE ISSUE OF CHEQUE . THE ASSESSING OFFICER HAS ALSO MENTIONED THAT THE DEPOSITORS HAVE VERY SMALL INCOME WHICH WAS JUST ABOVE THE TAXABLE LIMIT. IN HIS OP INION, THE IMPUGNED TRANSACTION WAS NOT GENUINE. IN COMPLIANCE OF SHO W-CAUSE, THE ASSESSEE HAS FURNISHED A DETAILED EXPLANATION ANNEXED WITH T HE COPY OF RETURN ITA NO.3445/AHD/2008 (BY REVENUE) & CO NO.317/AHD/2008 (BY ASSESSEE) ASST.CIT VS. M/S.PATEL BABUBHAI KANTIAL & CO. ASST.YEAR 2004-05 - 3 - FILED, COPY OF BALANCE-SHEET OF RESPECTIVE PERSONS FILED ALONGWITH RESPECTIVE BANK ACCOUNTS. A CHART IN THIS REGARD IS ALSO PLACED ON RECORD. THROUGH THIS CHART, AS APPEARING ON PAGE NO.4 OF TH E ASSESSMENT ORDER, IT WAS EVIDENT THAT ALL OF THEM WERE DIAMOND LABOURERS . THEIR RETURNED INCOME WAS IN THE RANGE OF RS.51,000/- TO 53,000/- AND THEIR CAPITAL WAS IN THE RANGE OF RS.80,000/- TO RS.1,30,000/-. ON T HE BASIS OF THOSE FIGURES, THE ASSESSING OFFICER HAS HELD THAT NONE O F THE DEPOSITORS WERE CREDITWORTHY TO ADVANCE THE LOANS WHICH WAS RANGING FROM RS.1 LAC TO RS.2 LACS. THE ASSESSEE HAS STATED THAT IN VIEW O F THEIR CONFIRMATION LETTERS, A PROOF OF FILING OF INCOME-TAX RETURNS, B ANK PASSBOOKS IN SUPPORT OF THE MODE OF PAYMENT THROUGH CHEQUE AND THEIR RES PECTIVE BALANCE- SHEETS IT WAS PROVED THAT THE TRANSACTION WAS GENUI NE AND THE IDENTITY WAS KNOWN TO THE INCOME TAX DEPARTMENT AND THEIR CREDIT WORTHINESS WAS ALSO ESTABLISHED BECAUSE THEY WERE EARNING LABOUR C HARGES OR JOB-WORK TO EARN THE INCOME. THE ASSESSING OFFICER WAS NOT CO NVINCED AND APPLYING THE RATIO LAID DOWN IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED AT [1995]214 ITR 801 (SC) HELD THAT THE CASH CREDIT TO THE EXTENT OF RS.15 LACS WAS NOT ESTABLISHED AND TAXED IN THE HANDS OF THE ASSESSEE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY. THE LEARNED CIT(APPEALS) HAS FOLLOWED THE DECISION OF DY.CIT VS . ROHINI BUILDERS REPORTED AT [2002]256 ITR 360 (GUJ.) AND DECIDED TH E ISSUE IN ASSESSEES FAVOUR AS FOLLOWS:- 2.1. I HAVE CONSIDERED THE ABOVE SUBMISSION AND TH E ASSESSMENT ORDER. IT IS SEEN THAT THE APPELLANT HAS FILED CON FIRMATIONS OF THE ACCOUNTS FROM THE RESPECTIVE DEPOSITORS. THE DEPOS ITORS HAVE GIVEN THEIR RESPECTIVE P.A.NO., COPIES OF THEIR BAN K STATEMENTS, ITA NO.3445/AHD/2008 (BY REVENUE) & CO NO.317/AHD/2008 (BY ASSESSEE) ASST.CIT VS. M/S.PATEL BABUBHAI KANTIAL & CO. ASST.YEAR 2004-05 - 4 - EXPLAINING SOURCES FROM WHICH THEY GAVE LOAN TO APP ELLANT. THEY HAVE ALSO FILED THEIR INCOME TAX RETURNS FROM YEAR TO YEAR. CONSIDERING ALL THESE FACTS & RESPECTFULLY FOLLOWIN G GUJARAT HIGH COURT DECISION IN THE CASE OF ROHINI BUILDERS, I HO LD THAT THE APPELLANT HAS DISCHARGED HIS DUTY & SATISFIED THE R EQUIREMENT BY PROVING THE GENUINENESS OF THE TRANSACTIONS, IDENTI TY OF THE DEPOSITORS AND THEIR CREDITWORTHINESS. ACCORDINGLY ADDITION OF RS.15,00,000/- MADE BY THE ASSESSING OFFICE IS NOT JUSTIFIED AND IS DELETED. 3. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AND ON DUE CONSIDERATION OF THE WRITTEN SUBMISSIONS OF THE ASS ESSEE, WE HAVE NOTICED THAT THE BASIC REASON FOR THE ASSESSING OFFICER FO R INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T.ACT WERE THAT T HE CREDITORS COULD NOT BE PRODUCED BY THE ASSESSEE AS ITS WITNESS BEFORE T HE ASSESSING OFFICER. THOUGH THE ASSESSING OFFICER HAS ISSUED THE NOTICE U/S.133(6) OF THE I.T.ACT, BUT THOSE NOTICES WERE RETURNED UNSERVED W ITH THE REMARKS LEFT. THE MAIN PLANK OF THE ARGUMENT OF THE REVENUE IS TH AT IF THOSE PERSONS WERE HAVING INCOME-TAX RETURNS AND ALSO HAVING BANK ACCOUNTS, THEN THEIR ADDRESSES AS ALSO THEIR IDENTITY SHOULD BE EASILY E STABLISHED BY THE ASSESSEE. MOREOVER, A TAXPAYER FILING A RETURN SHO ULD ALSO BE AVAILABLE AT THE ADDRESS INFORMED TO THE REVENUE DEPARTMENT AND IT WAS ALTOGETHER STRANGE THAT THOSE PARTIES WERE NOT FOUND PRESENT W HEN THE SUMMONS WERE ISSUED TO THEM. ONE MORE ASPECT WAS TOUCHED DURIN G THE COURSE OF HEARING AND ENQUIRED THAT WHETHER THE LOAN AMOUNTS IN QUESTION ARE STILL OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE OR THEY HAVE BEEN RETURNED BACK BY THE ASSESSEE. IN OUR OPINION, THI S FACT CAN BE ASCERTAINED BY THE ASSESSING OFFICER AFTER ENQUIRY. WE ARE ALS O OF THE VIEW THAT THE ITA NO.3445/AHD/2008 (BY REVENUE) & CO NO.317/AHD/2008 (BY ASSESSEE) ASST.CIT VS. M/S.PATEL BABUBHAI KANTIAL & CO. ASST.YEAR 2004-05 - 5 - ASSESSEE SHOULD MAKE ADEQUATE EFFORTS TO PRODUCE TH E WITNESSES TO ESTABLISH ITS CLAIM OF GENUINE LOANS. ALTHOUGH THE DOCUMENTARY EVIDENCES WERE PLACED BEFORE THE ASSESSING OFFICER AND THOSE DOCUMENTARY EVIDENCES WERE INDICATING THAT THE LOAN S HAVE BEEN TAKEN THROUGH A/C.PAYEE CHEQUES FROM THE PERSONS HAVIN G THEIR INCOME-TAX RECORD BUT BECAUSE OF THEIR NON-APPEARANCE, A DOUBT HAD ARISEN AND BECAUSE OF THAT REASON IT IS THE LEGAL OBLIGATION O F THE ASSESSEE TO REMOVE THE SAID DOUBT. WE, THEREFORE, REMAND THIS ISSUE B ACK TO THE STAGE OF THE ASSESSING OFFICER TO BE DECIDED AS PER THE OBSERVAT IONS MADE HEREINABOVE. THIS GROUND OF THE REVENUE MAY BE TRE ATED AS ALLOWED BUT FOR STATISTICAL PURPOSES ONLY. ASSESSEES CROSS OBJECTION NO.317/AHD/2008 FOR A.Y. 2004-05 (ARISING OUT OF ITA NO.3445/AHD/2008 A.Y. 2004-05 ) 4. THE ONLY CROSS OBJECTION IS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE OF RS.1, 20,551 MADE BY THE ASSESSING OFFICER FROM VARIOUS EXPENSES DEBI TED TO THE PROFIT AND LOSS ACCOUNT. 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I T WAS OBSERVED BY THE ASSESSING OFFICER THAT THERE WAS INCREASE IN RE SPECT OF CERTAIN EXPENSES; NAMELY TRANSPORT EXPENSES, TELEPHONE EXPE NSES, OFFICE EXPENSES, LODGING EXPENSES, ETC. THE ASSESSEE HAS FURNISHED THE REASONS OF INCREASE IN EXPENSE AS COMPARED TO THE PAST YEAR AND ALSO SUBMITTED THAT THE EXPENDITURE WERE DULY SUPPORTED BY THE VOU CHERS AND OTHER SUPPORTING EVIDENCE. HOWEVER, THE ASSESSING OFFICE R HAS HELD THAT THE ITA NO.3445/AHD/2008 (BY REVENUE) & CO NO.317/AHD/2008 (BY ASSESSEE) ASST.CIT VS. M/S.PATEL BABUBHAI KANTIAL & CO. ASST.YEAR 2004-05 - 6 - INCREASED EXPENDITURE WAS NOT ACCEPTABLE AND 10% OF THE TOTAL WAS DISALLOWED. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED. 5. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT ONCE THE ASSESSEE IS IN A POSITION TO SUBSTANT IATE ITS CLAIM OF EXPENSE BY VOUCHERS AND OTHER RELEVANT EXPENSES, THEN MEREL Y ON THE GROUND THAT IN COMPARISON TO THE LAST YEAR, THE EXPENDITURE HA D GONE UP, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN AN ADHOC DIS ALLOWANCE. THIS VIEW IS BUTTRESSED BY THE DECISION OF HON'BLE GUJARAT HI GH COURT IN THE CASE OF SAYAJI IRON & ENGG.CO. VS. CIT REPORTED AT [2002] 253 ITR 749(GUJ.) AND FOLLOWING THE RATIO LAID DOWN THEREIN, THIS CRO SS OBJECTION IS HEREBY ALLOWED. 6. IN THE RESULT, REVENUES APPEAL IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES ONLY AND ASSESSEES CROSS OBJE CTION IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13 TH MAY, 2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 13/ 05 /2011 T.C. NAIR, SR. PS ITA NO.3445/AHD/2008 (BY REVENUE) & CO NO.317/AHD/2008 (BY ASSESSEE) ASST.CIT VS. M/S.PATEL BABUBHAI KANTIAL & CO. ASST.YEAR 2004-05 - 7 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..10.5.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.5.2011 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 D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S13.05.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.05.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER