Shri Laxmichand V.Vaghela, Baroda V. The ACIT., Circle-1(2), Baroda

ITA 3447/AHD/2007

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2355 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-01-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 09-08-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMIT KAUR
• Keywords: Unexplained cash credit; Gift; Principle of natural justice; Initiation of penalty proceedings
• Section: 147; 68; 27

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM SHRI LAXMICHAND VAGHELA, C/O HONEST ENTERPRISES LTD., 118, MEGHDOOT APARTMENT, NEAR APSARA CINEMA, PRATAPNAGAR ROAD, BARODA. VS. ASSTT. CIT, CIR.2(1), BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. URVASHI SHODHAN, AR RESPONDENT BY:- SMT. SUMIT KAUR, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF AO IN REOPENING THE ASSESSMENT PROCEEDING S U/S 147 OF THE IT ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF REOPENING IS WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACT. THE PRESENT PROCEEDINGS, THEREFORE, ARE REQUIRED TO BE QUASHED. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF AO IN ADDING RS.4,10,000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. (3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF AO IN ADDING 50% OF THE TELEPHONE EXPENDI TURE AMOUNTING TO RS.17,238/- BORNE BY THE COMPANY IN WH ICH ITA NO.3447/AHD/2007 ASST. YEAR 2002-03 ITA NO.3447/AHD/2007 ASST. YEAR2002-03 2 APPELLANT IS A DIRECTOR, AS PERQUISITE IN THE HANDS OF THE APPELLANT. (4) ALTERNATIVELY AND WITHOUT PREJUDICE, BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT GRANTING BENEFIT OF TELESCOPING. (5) BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS SUBMI SSIONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS AND NOT PROPERLY APPRECI ATING VARIOUS FACTS AND LAW IN ITS PROPER PERSPECTIVE AND FURTHER ERRED IN PASSING ORDERS IN GROSS VIOLATION OF THE PRINCIP LES OF NATURAL JUSTICE. (6) LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THE LEVY OF INTEREST U/S 234A/B/C OF THE ACT. (7) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPH OLDING THE ACTION OF AO IN INITIATING PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CON TEMPLATED UNDER THE ACT. 2. THE LD. AR FOR THE ASSESSEE DID NOT PRESS GROUND NO.1 AND HENCE THE SAME IS TREATED AS CANCELLED. 3. GROUND NO.3 RELATES TO CONFIRMING ADDITION OF TE LEPHONE EXPENSES OF 50% AMOUNTING TO RS.17,238/-.THE AO FOUND THAT T HE COMPANY HAS PROVIDED TELEPHONE FACILITIES TO THE DIRECTOR BEING THE ASSESSEE AT HIS RESIDENCE AND THE COMPANY HAD INCURRED TELEPHONE EX PENSES TO THE EXTENT OF RS.34,477/-. THE AO HELD THAT PART OF THE EXPEND ITURE IS PERQUISITE IN THE HANDS OF THE DIRECTOR. ACCORDINGLY HE DISALLOWE D RS.17,238/- AND WAS ADDED AS INCOME OF THE ASSESSEE. THE LD. CIT(A) CON FIRMED THE ADDITION ON THE GROUND THAT ASSESSEE FAILED TO FURNISH A CER TIFICATE BEFORE THE AO FROM THE COMPANY THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY. ITA NO.3447/AHD/2007 ASST. YEAR2002-03 3 4. WE HAVE HEARD THE PARTIES. WE DECLINE TO INTERFE RE. THE ASSESSEE DID NOT EXPLAIN WHETHER ENTIRE EXPENDITURE ON TELEP HONE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND IT DID NOT BENEFIT THE ASSESSEE PERSONALLY. ACCORDINGLY THE ADDITION S O MADE AS PERQUISITE IS CONFIRMED. 5. GROUND NO.2 RELATES TO ADDITION OF RS.4,10,000/- BEING UNEXPLAINED CASH CREDIT IN THE FORM OF GIFTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAS OBTAINED GIFTS FROM FOLLOWING PERSONS :- I) GIFT OF RS.1,60,000/- FROM ANJANA SOLANKI IN THREE INSTALMENTS OF RS.50,000/-, RS.95,000/- AND RS.15,000/- II) GIFT OF RS.1,50,000/- FROM SHRI SANJAY BHAVSAR. III) GIFT OF RS.1,00,000/- FROM SHRI AMRISH BHAVSAR. GIFT FROM ANJANA SOLANKI - THE AO REQUIRED THE ASSESSEE TO FURNISH THE ADDRESS, PAN, COPY OF INCOME-TAX RETURN, CONFIRMATI ON LETTER AND COPY OF BANK ACCOUNT OF ANJANA SOLANKI FROM WHICH GIFT IS C LAIMED TO HAVE FLOWN. IN ADDITION RELATION OF ANJANA SOLANI WITH T HE ASSESSEE, THE OCCASION AND CIRCUMSTANCES UNDER WHICH THE GIFT WAS GIVEN WERE ALSO NOT EXPLAINED. IT WAS, HOWEVER, EXPLAINED THAT GIFT WAS GIVEN BY ANJANA SOLANKI, WHO IS A FRIEND OF ASSESSEE, VIDE CHEQUE N OS.742633, 742634 & 742635 DATED 4/10/2001, 6/10/2001 & 15/10/2001 RESP ECTIVELY DRAWN ON STATE BENK OF INDIA, MAKARPURA, BARODA. HOWEVER, PA N, COPY OF RETURN, BANK STATEMENT OF ANJANA SOLANKI ETC. WERE NOT SUBM ITTED AND IT WAS NOT EXPLAINED UNDER WHAT CIRCUMSTANCES THE GIFT WAS GIV EN. THE AO THEREAFTER ALSO CARRIED OUT ENQUIRIES FROM THE BANK WHICH DID NOT REVEAL THE TRANSFER OF MONEY FROM THE ACCOUNT OF ANJANA SO LANKI TO THE ASSESSEE. ITA NO.3447/AHD/2007 ASST. YEAR2002-03 4 ON BEING CONFRONTED IT WAS EXPLAINED THAT CHEQUES W ERE ACTUALLY ISSUED FROM BARODA PEOPLES CO-OP.BANK LTD. FROM THE ACCOUN T OF M/S VAGHELA METALS (P) LTD. AND NOT FROM STATE BANK OF INDIA. H OWEVER, NO SUBMISSIONS WERE MADE REGARDING OCCASIONS AND CIRCU MSTANCES. THE AO ACCORDINGLY HELD THAT GIFTS WERE NOT PROVED GENUINE AND CREDITWORTHINESS OF THE DONOR IS NOT PROVED. GIFT FROM SANJAY BHAVSAR THE AO REQUIRED THE ASSESSEE TO FURNISH SIMILAR DETAILS ABOUT DONOR. IT WAS EXPLAINED THAT SHRI SANJAY BHAVSAR IS A FRIEND OF THE ASSESSEE AND GIFT WAS MADE VIDE CHEQU E NO.944618 DATED 29.1.2002 ON INDIAN OVERSEAS BANK, MANDVI, BARODA. BUT PAN, COPY OF RETURN, BANK STATEMENT OF SANJAT BHAVSAR WERE NOT S UBMITTED. ON THE BASIS OF NAME AND ADDRESS OF THE DONOR THE AO CARRIED OUT ENQUIRY FROM INDIAN OVERSEAS BANK, MANDVI, BARODA AND OBTAINED A COPY O F THE BANK STATEMENT. THE BANK STATEMENT INDICATED THAT CASH O F RS.1,50,000/- WAS DEPOSITED IN THE SAME ACCOUNT AND THEREAFTER CHEQUE OF RS.1,50,000/- WAS ISSUED. THE AO ALSO FOUND THAT SANJAY BHAVSAR DID N OT HAVE ANY PAN, HE WAS NOT FILING ANY RETURN AND, THEREFORE, IDENTITY AND CREDITWORTHINESS OF THE DONOR WAS NOT ESTABLISHED. HE THUS HELD THAT GI FT IS NOT PROVED. GIFT FROM AMRISH BHAVSAR THE AO REQUIRED THE ASSESSEE SAME DETAILS IN RELATION TO THIS DONOR ALSO. IT WAS EXPLAINED TH AT SHRI AMRISH BHAVSAR IS A FRIEND OF THE ASSESSEE AND GIFT WAS MADE BY CHEQU E NO.8033835 DATED 30/1/2002 OF INDIAN OVERSEAS BANK, MANDVI, BARODA B UT OTHER DETAILS WERE NOT SUBMITTED AND IT WAS ALSO NOT EXPLAINED UN DER WHAT CIRCUMSTANCES GIFT WAS GIVEN. THE AO IN THE MEANTIM E OBTAINED THE BANK STATEMENT WHICH INDICATED THAT A CASH OF RS.1,00,00 0/- WAS DEPOSITED ON 30.1.2002 BEFORE ISSUING OF CHEQUE. FURTHER THE ASS ESSEE FAILED TO FURNISH ITA NO.3447/AHD/2007 ASST. YEAR2002-03 5 OTHER DETAILS LIKE PAN, COPY OF THE RETURN ETC. IN RESPECT OF THE DONOR. HE ACCORDINGLY TREATED THIS GIFT ALSO AS NON-GENUINE. 6. THE LD. CIT(A) CONFIRMED ALL THE THREE ADDITIONS IN RESPECT OF THE GIFTS BY HOLDING THAT ASSESSEE HAD FAILED TO FURNIS H PAN, COPY OF RETURN AND FAILED TO PROVE THE CREDITWORTHINESS OF THE DON OR. FURTHER IN RESPECT OF OTHER TWO DONORS CASH WAS DEPOSITED PRIOR TO ISSUE OF CHEQUES AND, THEREFORE, GIFTS WERE RIGHTLY HELD AS NON-GENUINE. 7. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED TH AT SHRI ANJANA SOLANKI HAD IN FACT BALANCE LYING WITH VAGHELA META ILS (P) LTDS. WHICH HAS AN ACCOUNT WITH BARODA PEOPLES CO-OP. BANK LTD . THE CHEQUES WERE ISSUED BY VAGHELA METALS (P) LTD. TO THE ASSESSEE A ND ACCORDINGLY BANK ACCOUNT OF VAGHELA METALS (P) LTD. IN BARODA PEOPLE S CO-OP. BANK LTD. WAS DEBITED AND CHEQUE WAS DEPOSITED IN THE ACCOUNT OF THE ASSESSEE. THE LD. AO AND THE LD. CIT(A) HAVE IGNORED THESE FACTS AND PROCEEDED TO CONFIRM THE ADDITION. HE ALSO SUBMITTED THAT ALL TH E THREE PARTIES HAVE GIVEN CONFIRMATIONS AND THEY ARE READY TO APPEAR BE FORE THE AO. UNDER THESE CIRCUMSTANCES IT WILL NOT BE PROPER TO HOLD T HAT THE GIFTS ARE BOGUS. 8. AGAINST THIS, THE LD. DR RELIED ON THE ORDER OF LD. CIT(A). 9. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN RESPECT OF ANJANA SOLANKI THE FACT THAT MONEY WAS WITHDRAWN FROM BARODA PEOPLES CO-OP. BANK LTD. FROM THE ACCOU NT OF VAGHELA METALS (P) LTD. AND CREDITED INTO THE ACCOUNT OF TH E ASSESSEE HAS NOT BEEN VERIFIED AND HAS BEEN RATHER IGNORED, SECONDLY, OTH ER TWO DONORS HAVE NOT BEEN QUESTIONED AS TO FROM WHERE THEY HAVE BROUGHT THE CASH BEFORE THE ISSUE OF CHEQUES. FURTHER, WE ARE OF THE VIEW THAT NO CONCLUSION CAN BE ITA NO.3447/AHD/2007 ASST. YEAR2002-03 6 DRAWN WITHOUT CROSS-EXAMINING THE DONORS AS TO THE SOURCE OF CASH DEPOSITED BY THEM. THE ISSUE REGARDING OCCASION AND CIRCUMSTANCES CAN BEST BE EXPLAINED BY THE DONORS AS TO WHAT PROMPTED THEM TO GIVE THE GIFTS. WE ACCORDINGLY RESTORE THE MATTER TO THE AO. BEFORE HI M THE ASSESSEE WILL PRODUCE THE DONORS FOR EXAMINATION BY THE AO AT AO S OWN CONVENIENT DATE. LET THE AO EXAMINE THE CREDITWORTHINESS OF TH E DONORS, SOURCE OF DEPOSIT OF CASH, CIRCUMSTANCES UNDER WHICH GIFTS WE RE MADE, THE STRENGTH OF RELATIONSHIP BETWEEN THE DONORS AND THE ASSESSEE WHICH PROMPTED THEM TO GIVE GIFTS, FINANCIAL STATUS OF THE DONORS, SO A S TO SUPPORT THE CLAIM OF GENUINENESS, PRE AND POST GIFT RELATIONSHIP BETWEEN THE DONORS AND THE DONEE ETC. THE AO WILL BE CONSIDER ALL THESE ASPECT S BEFORE COMING TO THE CONCLUSION WHETHER GIFTS ARE GENUINE OR NOT. THIS G ROUND OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 10. GROUND NO.4 IS REGARDING THE EFFECT OF TELESCOP ING. SINCE THE ISSUE OF GIFT HAS BEEN RESTORED TO THE FILE OF AO THERE I S NO QUESTION OF GIVING ANY TELESCOPING EFFECT. THIS GROUND IS REJECTED. 11. GROUND NO.5 IS GENERAL IN NATURE AND HENCE IT I S REJECTED. 12. GROUND NO.6 IS REGARDING CHARGING OF INTEREST U NDER SECTION 234A/B/C WHICH IS CONSEQUENTIAL IN NATURE AND WILL DEPEND UPON FINALLY ASSESSED INCOME. 13. GROUND NO.7 IS REGARDING INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). SINCE IT IS PRE-MATURE, IT IS RE JECTED. ITA NO.3447/AHD/2007 ASST. YEAR2002-03 7 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 13.1.11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEM BER AHMEDABAD, DATED : 13.1.11. MAHATA/- 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 11/1/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 12/1/ 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..