LAXMI FINANCIER, MUMBAI V. ITO 19(1)(1), MUMBAI

ITA 3482/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8625 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KARTHIK S IYER
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.3482/MUM/2012(A.Y.2005-06) M/S.LAXMI FINANCIER, RAMSINGH PATANGWALA CHAWL, TEACHERS COLONY, WESTERN EXPRESS HIGHWAY, KHAR(E), MUMBAI 400 051. PAN: AABFL 7067R (APPELLANT) VS. THE INCOME TAX OFFICER 19(1)(1), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI KARTHIK S.IYER RESPONDENT BY : SHRI MANOJ KUMAR DATE OF HEARING : 11/1 0/2012 DATE OF PRONOUNCEMENT : 19/10/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A-30, MUMBAI DATED 29/02/2012 FOR ASSESSMENT YEAR 2005-06. GROUNDS OF APPEAL READ AS UNDER: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED C.I.T. (APPEALS): - A) ERRED IN NOT TAKING INTO CONSIDERATION THE TANGI BLE EVIDENCES FILED BY THE ASSESSEE IN FORM OF 129 LOAN CONFIRMATION ALONG WIT H PAN CARD COPY CONTAINING THEIR COMPLETE RESIDENTIAL ADDRESS, FUL L NAME, FATHERS NAME, PHOTO PROVING THEIR IDENTITY GENUINENESS. B) ERRED IN FAILING TO EXAMINE PERSONALLY ATLEAST O N TEST CHECK BASIS, THE LOAN PARTIES IN PERSON TO CLEAR THE DOUBTS ARISING IN HI S MIND. C) ERRED IN BLINDLY RELYING ON THE REMAND REPORT OF THE LEARNED ASSESSING OFFICER, WHICH WAS CLEARLY PREMEDITATED, BIASED, PR EJUDICED, LACKING APPLICATION OF MIND. D) ERRED IN REJECTING THE TANGIBLE EVIDENCE OF 129 LOAN CONFIRMATIONS ON THE PREMISE THAT SINCE ALL CONFIRMATIONS ARE BELOW RS. 20000/- CASTING SHADOW OF ITA NO.3482/MUM/2012(A.Y.2005-06) 2 DOUBT ON THE TRANSACTION. THE C.I.T. (APPEALS) CAN NOT PASS AN ORDER BASED ON ASSUMPTIONS, PRESUMPTIONS AND DOUBTS. E) ERRED IN IGNORING THE SUPPORTING CASE LAWS FILED BY THE ASSESSEE SUBSTANTIATING THE CASE. F) THE C.I.T. (APPEALS) OUGHT TO HAVE ALLOWED THE D ISALLOWED AMOUNT OF RS.25 11187/- SINCE THE ASSESSEE HAD DISCHARGED THE PRIMA RY ONUS CAST ON THE ASSESSEE BY PRODUCING LOAN CONFIRMATIONS ALONG WITH PAN CARD COPIES PROVING THEIR IDENTITY AND GENUINENESS. G) THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, DEM AND OR VARY ANY OR ABOVE GROUNDS OF APPEAL. 2. THE IMPUGNED ASSESSMENT ORDER IS DATED 29/12/2 008. IT HAS BEEN OBSERVED BY THE AO IN PARA-3 OF THE ASSESSMENT ORDE R THAT ASSESSEE DID NOT APPEAR IN RESPONSE TO VARIOUS NOTICES ISSUED BY HIM AND IN THIS MANNER A.O HAS PROCEEDED TO COMPLETE THE ASSESSMENT UNDER SECT ION 144 OF THE INCOME TAX ACT,1961 (THE ACT). 2.1 FROM THE BALANCE SHEET THE AO NOTICED THAT THER E WAS INCREASE IN THE UNSECURED LOANS AMOUNTING TO RS.25,11,187/-. IN AB SENCE OF FURNISHING OF BOOKS OF ACCOUNT AND OTHER DETAILS HE ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. THE ADDITION WAS CONTESTED IN AN APPEAL FILED BEFORE LD. CIT(A). 2.2 DURING THE COURSE OF APPEAL THE ASSESSEE FILED 129 LOAN CONFIRMATIONS FROM THE LENDERS WHICH COULD NOT BE FILED BEFORE AO . THEREFORE, THOSE CONFIRMATIONS WERE FORWARDED TO AO FOR VERIFICATION . THE AO SUBMITTED HIS REMAND REPORT VIDE LETTER DATED 24/1/2012. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUIRED THE ASSESSEE TO FILE CERTIFIED COPY OF ACKNOWLEDGEMENT OF RETURN, COMPUTATION OF INCOME, C APITAL ACCOUNT AND BALANCE SHEETS OF THE PERSONS FROM WHOM THE ASSESSE E HAS RECEIVED LOANS AND ALSO THEIR BANK STATEMENTS SHOWING LOAN TRANSACTION S OF ASSESSMENT YEAR 2005-06. SIMILARLY OTHER DETAILS WERE REQUIRED TO BE FILED. IT IS ALSO MENTIONED IN THE REMAND REPORT THAT ASSESSEE HAS F ILED CERTAIN INFORMATION ON 25/10/2011 WHICH WAS INCOMPLETE. HOWEVER, ON GO ING THROUGH DETAILS ITA NO.3482/MUM/2012(A.Y.2005-06) 3 FILED BY THE ASSESSEE, THE AO NOTICED THAT LOAN CON FIRMATIONS OF ALMOST ALL THE CREDITORS WERE BELOW RS.20,000/- I.E. RS.19,500/-. HE ALSO NOTICED THAT THERE WERE 10 PARTIES OF WHOM CREDITS WERE MORE THAN RS.2 0,000/- AND ASSESSEE DID NOT FILE ANY CONFIRMATION WITH REGARD TO THOSE AND IN ABSENCE OF THE CAPITAL ACCOUNT, COPY OF CREDITORS RETURN, BALANC E SHEET, BANK ACCOUNT ETC. THE AO OBSERVED THAT ASSESSEE HAS REMAINED UNABLE TO PROVE THE SAME. ON THIS REMAND REPORT FILED BY THE AO LD. CIT(A) HAS RETURNED A FINDING THAT IN ABSENCE OF THE DETAILS CALLED BY THE AO WHICH WERE NOT SUBMITTED BEFORE HIM, THE ASSESSEE REMAINED UNABLE TO PROVE THE GENUINENE SS OF THE CREDITS. THE PAN GIVEN BY THE ASSESSEE IN RESPECT OF THESE CREDI TORS CANNOT PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE LOAN TRANSA CTION. LD. CIT(A) ALSO OBSERVED THAT IN RESPECT OF 10 PARTIES THE ASSESSEE COULD NOT SUBMIT ANY CONFIRMATION. LD. CIT(A) HAS ALSO REJECTED THE CON TENTION OF THE ASSESSEE THAT THE DEPOSITS BELONG TO SMALL TIME RETAILERS, FRUIT SELLERS, VEGETABLE VENDORS, RICKSHAW OPERATORS OUT OF THEIR SAVINGS, WHO PARK T HEIR FUNDS WITH THE ASSESSEE TO GAIN INTEREST @12% PER ANNUM AND THEY P REFERRED TO DEPOSIT THEIR FUNDS WITH THE ASSESSEE BECAUSE OF THE FLEXIBILITY AVAILABLE TO WITHDRAW THE MONEY WHENEVER REQUIRED. FROM THESE SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) HAS OBSERVED THAT THOUGH IDENTITY OF LENDERS HAVE BEEN PROVED BUT CREDITWORTHINESS OF THE LENDERS HAVE NOT BEEN PROVE D, WHICH IS ALSO AN ESSENTIAL FACTOR TO FULFILL THE REQUIREMENT OF SECT ION 68 OF THE ACT. HE OBSERVED THAT IF LENDERS ARE HAVING PAN THEY COULD HAVE SUBM ITTED COPY OF ACKNOWLEDGEMENT OF THEIR RETURNS ALSO. IN THIS MAN NER LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE. THE ASSESSEE IS AGGRIE VED, HENCE, IN APPEAL . 3. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT ASSESSEE HAS SUBMITTED ALL THE CONFIRMATIONS INCLUDING PAN OF AL L THE 129 CREDITORS. HE SUBMITTED THAT 10 PARTIES WHO HAVE BEEN REFERRED BY THE AO IN HIS REMAND REPORT AND BY LD.CIT(A) IN HIS ORDER ARE OLD CREDIT ORS, THEREFORE, NO ADDITION COULD BE MADE IN RESPECT OF THOSE CREDITORS. HE S UBMITTED THAT THE AO COULD ITA NO.3482/MUM/2012(A.Y.2005-06) 4 HAVE VERIFIED THE CREDITWORTHINESS OF THE LENDERS FROM THE PAN GIVEN TO HIM. THE AMOUNTS WERE VERY SMALL. IN VIEW OF THE AVAILA BILITY OF PAN AND CONFIRMATIONS THE AO COULD HAVE EXAMINED THE CREDIT ORS ON TEST CHECK BASIS. HE SUBMITTED THAT ASSESSEE IS ABLE TO PRODUCE THOSE CREDITORS AND THE CONTENTION OF THE ASSESSEE HAVE ARBITRARILY BEEN R EJECTED BY THE AO AND LD. CIT(A). HE SUBMITTED THAT IT WOULD BE APPROPRIATE IF THE MATTER IS RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO EXAMINE THE CREDITORS ON TEST CHECK BASIS TO VERIFY THE GENUINENESS OF THE CREDITORS. HE SUBMITTED THAT OTHER WISE ALSO NO ADDITION CAN BE MADE WHERE PAN IS GIVEN TO THE DEPARTMENT. THEREFORE, HE SUBMITTED THAT ADDITION HAS WRONGLY B EEN SUSTAINED BY LD. CIT(A) AND HIS ORDER COULD BE SET ASIDE. 4. ON THE OTHER HAND LD. D.R SUBMITTED THAT ASSESS EE COULD NOT PROVE ALL THE THREE INGREDIENTS TO PROVE THE GENUINENESS OF T HE CREDIT. HE SUBMITTED THAT THOUGH IDENTITY HAS BEEN ESTABLISHED BY THE AS SESSEE BUT THE GENUINENESS OF TRANSACTIONS WELL AS CREDITWORTHINE SS OF THE CREDITORS HAVE NOT BEEN PROVED. HE, THEREFORE, SUBMITTED THAT LD. CIT (A) HAS RIGHTLY SUSTAINED THE ADDITION AND HIS ORDER SHOULD BE UPHELD. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE CASE OF AO IS THAT ASSESSEE HAS NOT FURNISHED C OPY OF ACKNOWLEDGMENT OF RETURNS, CAPITAL ACCOUNT, BAL ANCE SHEETS ETC. OF THE CREDITORS. HOWEVER, THE FACT REMAIN THAT ASSESSEE HAS SUBMITTE D PAN OF ALL THE CREDITORS AND IS ALSO READY TO PRODUCE THE CREDITORS ON TEST CHECK B ASIS. THE REASON FOR MAKING SMALL DEPOSIT WHICH ARE LESS THAN RS.20,000/- IS THAT CREDITORS ARE PERSONS OF LOWER MEANS WHO DEPOSITS THEIR FUNDS WITH THE ASSESSEE. KEEPING IN VIEW THE FACT THAT ASSESSEE HAS SUBMITTED PAN OF ALL CREDITORS ALONGWI TH CONFIRMATIONS, WE ARE OF THE OPINION THAT IT WILL BE APPROPRIATE IF THE MATTER IS RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO EXAMINE SOME OF THE CREDITORS ON TEST CHECK BASIS TO VERIFY THE CLAIM OF THE ASSESSEE REGARDING GENUINENESS OF THE CREDITORS AND THEIR CREDITWORTHINESS. LD. AR HAS SUBMITTED TH AT THE ASSESSEE IS IN A POSITION TO ITA NO.3482/MUM/2012(A.Y.2005-06) 5 PRODUCE THEM. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO RE-ADJUDICATE THE SAME AFTER GIVING TH E ASSESSEE A REASONABLE OPPORTUNITY OF HEARING AFTER EXAMINING SOME OF TH E CREDITORS AS MENTIONED ABOVE. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, FOR STATISTICAL PURPOSES APPEAL F ILED BY THE ASSESSEE IS CONSIDERED AS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THE 19 TH DAY OF OCT., 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19 TH OCT., 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R A BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.