ASST CIT 21(3), MUMBAI V. RAM TEXTILES, MUMBAI

ITA 3478/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7964 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KUMARDR
• Keywords: Unexplained cash credit; Gift; Wrong claim
• Section: 133(6); 68; 69

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.3478/MUM/2015 ASSESSMENT YEAR: 2010-11 ACIT - 21(3), 02 ND FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI / VS. M/S RAM TEXTILES, 221, KEWAL INDUSTRIAL ESTATE, S.B. MARG, LOWER PAREL(W) MUMBAI-400013 ( ' / REVENUE) ( #$ % /ASSESSEE) P.A. NO. AAKFR4679N #$ % / ASSESSEE BY SHRI SHASHANK DUNDU ' / REVENUE BY SHRI PURUSHOTTAM KUMAR-DR * '+ , % - / DATE OF HEARING : 21/03/2017 , % - / DATE OF ORDER: 22/03/2017 M/S RAM TEXTILES ITA NO.3478/MUM/2015 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 10/03/2015 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, DELETING THE ADDITION OF RS.55,50,000/- MAD E ON ACCOUNT OF UNSECURED LOANS TAKEN BY THE ASSESSEE DU RING THE YEAR ADDED AS UNEXPLAINED CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. DURING HEARING, SHRI PURUSHOTTAM KUMAR, LD. DR, DEFENDED THE ADDITION MADE BY THE ASSESSING OFF ICER BY CONTENDING THAT THE FIRST APPELLATE AUTHORITY DELET ED THE ADDITION WITHOUT APPRECIATING THE FACT THAT ONUS WA S UPON THE ASSESSEE TO PROVE THE GENUINENESS OF TRANSACTIO N AND EVEN AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE, T HE ONUS WAS NOT DISCHARGED. IT WAS CONTENDED THAT THE ADDIT ION WAS DELETED IN A MECHANICAL MANNER, WHEN THERE WAS EVID ENCE THAT THERE WERE SUSPICIOUS DEPOSITS, MADE BY THE AS SESSEE AND THE SAME WERE NOT EXPLAINED. IT WAS ALSO CONTE NDED THAT THE PARTIES WERE NOT PRODUCED BY THE ASSESSEE. RELIANCE WAS PLACED UPON THE DECISION IN CIT VS P. MOHANKALA (2007) 291 ITR 278 (SC), CIT VS DURGA PRA SAD MORE 82 ITR 540 (SC), KAMAL MOTORS VS CIT (2003) 13 1 TAXMAN 155 (RAJ.), FOCUS EXPORT PVT. LTD. (2014) 51 TAXMAN 46 (DEL.), CIT VS UNITED COMMERCIAL AND INDUSTRIAL COMPANY PVT. LTD. 187 ITR 596 (CAL.), ETC. M/S RAM TEXTILES ITA NO.3478/MUM/2015 3 2.1. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESS EE, SHRI SHASHANK DUNDU, STRONGLY DEFENDED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) BY CONTENDI NG THAT ONUS CAST UPON THE ASSESSEE WAS DULY DISCHARGE D, CONFIRMATION WERE FILED FROM THE CONCERNED PARTIES, FOR WHICH OUR ATTENTION WAS INVITED TO PAGE-294 OF THE PAPER BOOK. IT WAS EXPLAINED THAT TWO PARTIES PERSONALLY APPEARED BEFORE THE ASSESSING OFFICER, FOR THE THIR D PARTY, THE HUSBAND APPEARED AND FOR THE REMAINING ONE, THE AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE ASSES SING OFFICER ALONG WITH CONFIRMATION. IT WAS CONTENDED THAT THE LOANS WERE REPAID BY THE ASSESSEE. RELIANCE WAS PL ACED UPON THE DECISION IN ORIENT TRADING CO. LTD VS. COMMISSIONER OF INCOME TAX 49 ITR 723 (BOM.) AND COMMISSIONER OF INCOME TAX VS. CHANDELA TRADING CO. P. LTD. 372 ITR 232 (CAL.). 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM, WAS ENGA GED IN THE BUSINESS OF MANUFACTURING AND DEALING IN TEXTIL ES AND OTHER MERCHANDISES, CONSISTING OF TWO PARTNERS. DU RING THE RELEVANT PERIOD, THE ASSESSEE BORROWED LOANS FOR IT S BUSINESS ACTIVITIES. THE ASSESSING OFFICER ISSUED S UMMONS U/S 133(6) OF THE ACT TO FOUR PARTIES. OUT OF THESE PARTIES, TWO PARTIES I.E. ALKA JAIN AND MS. LALITA JAIN RESP ONDED TO THE NOTICES AND IN ONE CASE, THE HUSBAND OF THE PAR TY PERSONALLY APPEARED BEFORE THE ASSESSING OFFICER AN D THE M/S RAM TEXTILES ITA NO.3478/MUM/2015 4 LAST ONE WAS REPRESENTED BY HIS AUTHORIZED REPRESEN TATIVE TO EXPLAIN THE SOURCE OF THE LOANS. MISS. PRIYANKA DEORA AND HER MOTHER SMT. MEENA DEORA ALSO APPEARED AND EXPLAINED THE SOURCE FROM WHICH LOAN WERE GIVEN TO THE ASSESSEE. TOTALITY OF FACTS, CLEARLY INDICATES THAT THE CONCERNED PARTIES ACCEPTED TO HAVE PROVIDED LOAN TO THE ASSESSEE. THE CASE OF THE ASSESSEE IS FURTHER FORTI FIED BY THE FACT THAT THE SUMMONS ISSUED U/S 133(6) OF THE ACT TO ALL THE PARTIES WERE DULY RECEIVED AND COMPLIED WITH, M EANING THEREBY, ALL THE PARTIES/LOAN CREDITORS ARE EXISTIN G ONE AND CONFIRMED TO HAVE PROVIDED LOAN TO THE ASSESSEE. IT IS NOT THE CASE THAT BOGUS CLAIM WAS MADE BY THE ASSESSEE AND THE PARTIES ARE NON-EXISTENCE. GENUINENESS OF LOAN IS NOT IN DOUBT AND FURTHER THE LOAN WAS REPAID TO ALL THE PA RTIES. IN SUCH A SITUATION, NOW QUESTION ARISES WHETHER ADDIT ION U/S 68 WAS RIGHTLY MADE BY THE ASSESSING OFFICER. THE O BVIOUS REPLY IS NO BECAUSE THE ONUS CAST UPON THE ASSES SEE, AS PROVIDED U/S 68 OF THE ACT, HAS BEEN DULY DISCHARGE D BY THE ASSESSEE AS IDENTITY OF THE PARTIES/LOAN CREDIT ORS, GENUINENESS OF THE TRANSACTIONS AND SOURCE OF LOAN AMOUNT HAS BEEN DULY EXPLAINED. 2.3. AS PER THE PROVISIONS OF SECTION 68 OF THE AC T, THE ASSESSEE IS EXPECTED TO OFFER AN EXPLANATION WITH R ESPECT TO THE NATURE AND SOURCE OF CASH CREDITS TO THE SATISF ACTION OF THE ASSESSING OFFICER. FOR READY REFERENCE SECTION 68 OF THE ACT IS REPRODUCED HEREUNDER:- M/S RAM TEXTILES ITA NO.3478/MUM/2015 5 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE T HEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINI ON OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION M ONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEV ER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESS EE- COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNL ESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSIN G OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM RE FERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE (23FB)OF S ECTION 10. 2.4. AS PER SECTION 68 OF THE ACT, ONUS IS UPON TH E ASSESSEE TO DISCHARGE THE BURDEN SO CAST UPON. FIRS T BURDEN IS UPON THE ASSESSEE TO SATISFACTORILY EXPLA IN THE CREDIT ENTRY CONTAINED IN HIS BOOKS OF ACCOUNTS. TH E BURDEN HAS TO BE DISCHARGED WITH POSITIVE MATERIAL (OCEANIC PRODUCTS EXPORTING COMPANY VS CIT 241 ITR 497 (KERALA.). THE LEGISLATURE HAD LAID DOWN THAT IN TH E ABSENCE OF SATISFACTORY EXPLANATION, THE UNEXPLAINED CASH C REDIT MAY BE CHARGED U/S 68 OF THE ACT. OUR VIEW IS FORTI FIED BY THE RATIO LAID DOWN IN HONBLE APEX COURT IN P. MOH ANKALA M/S RAM TEXTILES ITA NO.3478/MUM/2015 6 (2007)(291 ITR 278)(SC). A CLOSE READING OF SECTION 68 AND 69 OF THE ACT MAKES IT CLEAR THAT IN THE CASE OF SE CTION 68, THERE SHOULD BE CREDIT ENTRY IN THE BOOKS OF ACCOUN T WHEREAS IN THE CASE OF 69 THERE MAY NOT BE AN ENTRY IN SUCH BOOKS OF ACCOUNT. THE LAW IS WELL SETTLED, THE ONUS OF PROVING THE SOURCE OF A SUM, FOUND TO BE RECEIVED/TRANSACTED BY THE ASSESSEE, IS ON HIM AND WHERE IT IS NOT SATISFACTORILY EXPLAINED, IT IS OPEN TO TH E REVENUE TO HOLD THAT IT IS INCOME OF THE ASSESSEE AND NO FU RTHER BURDEN LIES ON THE REVENUE TO SHOW THAT INCOME IS F ROM ANY OTHER PARTICULAR SOURCE. WHERE THE ASSESSEE FAI LED TO PROVE SATISFACTORILY THE SOURCE AND NATURE OF SUCH CREDIT, THE REVENUE IS FREE TO MAKE THE ADDITION. THE PRIN CIPLE LAID DOWN IN GANPATI MUDALIAR (1964) 53 ITR 623/A. GOVIN DA RAJULU MUDALIAR (34 ITR 807)(SC) AND ALSO CIT VS DU RGA PRASAD MORE (72 ITR 807)(SC) ARE THE LANDMARK DECIS IONS. THE RATIO LAID DOWN THEREIN ARE THAT IF THE EXPLANA TION OF THE ASSESSEE IS UNSATISFACTORY, THE AMOUNT CAN BE T REATED AS INCOME OF THE ASSESSEE. THE RATIO LAID DOWN IN DAULAT RAM RAWATMAL 87 ITR 349 (SC) FURTHER SUPPORTS THE C ASE OF THE ASSESSEE. IN THE CASE OF A CASH ENTRY, IT I S NECESSARY FOR THE ASSESSEE TO PROVE NOT ONLY THE IDENTITY OF THE CREDITOR BUT ALSO THE CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS. THE ONUS LIES ON THE ASSESSEE, UNDER THE FACTS AVAILABLE ON RECORD. A HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDE NCE ACT AND SECTION 68 OF THE INCOME TAX ACT WILL BE THAT A PART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE M/S RAM TEXTILES ITA NO.3478/MUM/2015 7 MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION A S WELL AS THE CREDITWORTHINESS OF THE CREDITORS. IN CIT V S KORLAY TRADING COMPANY LTD. 232 ITR 820 (CAL.), IT WAS HEL D THAT MERE MENTION OF FILE NUMBER OF CREDITOR WILL NOT SU FFICE AND EACH ENTRY HAS TO BE EXPLAINED SEPARATELY BY THE AS SESSEE (CIT VS R.S. RATHAORE) 212 ITR 390 (RAJ.). THE HON BLE GUWAHATI HIGH COURT IN NEMI CHANDRA KOTHARI VS CIT (264 ITR 254)(GAU) HELD THAT TRANSACTION BY CHEQUES MAY NOT BE ALWAYS SACROSANCT. IN THE PRESENT APPEAL, THE ASSE SSEE DULY FULFILLED THE CONDITIONS ENSHRINED U/S 68 OF T HE ACT AND PRODUCED NECESSARY EVIDENCE FOR ITS CLAIM. 2.5. THE RATIO LAID DOWN IN ACIT VS RAJEEV TANDON 294 ITR (AT) 219 (DEL.), WHICH WAS CONFIRMED BY HON BLE HIGH COURT , IN 294 ITR 488, SUPPORTS THE CASE OF T HE REVENUE. IDENTICAL RATIO WAS LAID DOWN IN CIT VS A NIL KUMAR 392 ITR 552 (DEL.), WHEREIN IT WAS HELD THAT MERE IDENTIFICATION OF THE DONOR AND MOVEMENT OF GIFT TH ROUGH BANKING CHANNEL IS NOT SUFFICIENT TO PROVE THE GENU INENESS OF GIFT. KEEPING IN VIEW, THE TOTALITY OF FACTS, AT TENDANT CIRCUMSTANCES, HUMAN PROBABILITIES, AND IN THE PRES ENCE OF PLAUSIBLE EXPLANATION BY THE ASSESSEE, RELEVANT MAT ERIAL, AND FULFILLMENT OF INGREDIENTS ENSHRINED IN SECTION 68 OF THE ACT, WE FIND THAT ONUS CAST UPON THE ASSESSEE WAS D ULY DISCHARGED, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), RESULTING INTO DISMISSAL OF APPEAL, FILED BY THE REVENUE. M/S RAM TEXTILES ITA NO.3478/MUM/2015 8 FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 21/03/2017. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER * + MUMBAI; / DATED : 22/03/2017 F{X~{T? P.S / 0' !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. 1234 / THE APPELLANT 2. 534 / THE RESPONDENT. 3. 6 6 * 7% ( 12 ) / THE CIT, MUMBAI. 4. 6 6 * 7% / CIT(A)- , MUMBAI 5. 8'9% , 6 12-1 : , * / DR, ITAT, MUMBAI 6. #; / GUARD FILE. ! / BY ORDER, 582%% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , * / ITAT, MUMBAI,