M/s. Akshar Gems, Surat V. The ACIT.,Circle-9, Surat

ITA 3500/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8637 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: ASHWIN PAREKH
• Keywords: Gross profit estimation; Unexplained cash credit; Rejection of books of accounts; Income from undisclosed sources; Opportunity of being heard; Source of fund; Additional evidence; Corroborative evidences; Onus to prove
• Section: 131; 69; 27; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING:04/03/2010 DRAFTED ON: 04/03/2 010 ITA NO.3500/AHD/2008 ASSESSMENT YEAR : 2005-2006 M/S. AKSHAR GEMS 505, DIAMOND PARK BUILDING, RAMPURA, SURAT. VS. ADDL. CIT, RANG-7/SRT, AAYKAR BHAVAN, MAJURA GATE, SURAT. PAN/GIR NO. : AAGFA 2419P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI ASHWIN PAREKH A.R. RESPONDENT BY: SHRI C.K.MISHRA SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT, DAT ED 29.08.2008. 2. GROUND NO.1 AND 2 OF THE APPEAL READS AS UNDER:- 1. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND O N FACTS IN CONFIRMING REJECTION OF BOOKS OF ACCOUNTS WITHOUT A NY DEFECTS, THEREIN AND WITHOUT APPRECIATING FACTS OF DEBTORS REALIZED AND CREDITORS PAID IN SUBSEQUENT YEAR. 2. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D ON FACTS IN CONFIRMING GROSS PROFIT ADDITION OF RS. 14,61,303/- WITHOUT APPRECIATING CIRCUMSTANCES OF LOSS IN ONE TRANSACTIONS. THE ADDI TION OF RS. 14,61,30S/- BE DELETED. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS DECIDED THE ISSUE AS UNDER:- THE FIRST AND SECOND GROUNDS OF APPEAL ARE REGARDI NG REJECTION OF BOOKS RESULTS AND ADDITION OF RS.14,61,303/- FOR LO W GP. THE AO CALLED FOR DETAILS OF PURCHASE AND SALES OF POLISHED DIAMO NDS AND FOUND THAT ALL THE PURCHASES WERE LOCAL WHILE SELLS WERE EXPOR TS. HE OBSERVED THAT POLISHED DIAMONDS WEIGHING 36 CARATS WAS PURCH ASED FROM M/S. ITA NO .3500 /AHD/2008 - 2 - JIGAR DIAMONDS ON 10.04.2004 @ RS.88.500 PER CARAT WHICH WAS EXPORTED TO M/S. PRECIOUS GEMS ON 13.04.2004 @ RS.6 8148 PER CARAT. HOWEVER, NO PAYMENT TO M/S. JIGAR DIAMONDS WAS MADE TILL 31.03.2005. THEREFORE, THE AO ISSUED SUMMONS U/S 13 1 OF THE ACT TO M/S. JIGAR DIAMONDS WHICH REMAINED UNSERVED AND THE APPELLANT ALSO DID NOT PRODUCE THE PARTY EVEN THOUGH SPECIFICALLY A SKED BY THE AO VIDE LETTER DTD. 22.10.2007. THE AO ALSO ISSUED SUMM ONS TO M/S. DEV CORPORATION. DILIP CHOSKI RUSSEL DIAMONDS VATSAL CO RPORATION AND DEVESH CHOKSI TO VERIFY THE GENUINENESS OF CLAIM OF P URCHASES BUT NONE OF THE SUMMONS WERE COMPLIED WITH NOR ANY REPL Y WAS FURNISHED BY THE APPELLANT. THE AO FURTHER OBSERVED THAT ALTHOUGH PURCHASES WERE MADE BETWEEN APRIL. 2004 AND OCTOBER . 2004. NONE OF SIX THE PANICS WERE PAID EVEN A SINGLE RUPEE TILL THE END OF THE FINANCIAL YEAR. HE THEREFORE, HELD THAT THE BOOKS O F ACCOUNTS WERE NOT RELIABLE AND REJECTED THE SAME BY INVOKING THE PROVIS IONS OF SECTION 145(3) OF THE IT ACT. AFTER REJECTING THE BOOK RESULTS THE AO OBSERVED THA T AS PER APPELLANT'S OWN ADMISSION THE OPENING STOCK OF THE YEAR WAS ALSO THE CLOSING STOCK WHICH MEANT THAT PURCHASES MADE DURIN G THE YEAR ONLY WERE SOLD. THE APPELLANT HAD SOLD HUGE LOSSES IN ON E TRANSACTION OF EXPORT SALES IN THE MONTH OF APRIL ALTHOUGH THERE W AS NO DECREASE IN THE RATE OF POLISHED DIAMONDS AS PER THE INTERNATIO NAL DIAMOND EXPORT JOURNAL OF THAT PERIOD. HE WAS OF THE VIEW TH AT THE APPELLANT HAD INFLATED HIS EXPENSES AND HAD TAKEN AN ENTRY FR OM M/S. JIGAR DIAMONDS WHICH REMAINED OUTSTANDING AT THE END OF T HE YEAR AND THAT IS WHY THE SAID PARTY DID DOT APPEAR FOR VERIFI CATION. IN RESPECT OF TWO OTHER TRANSACTIONS, THE APPELLANT HAD SHOWN PRO FIT MARGIN OF 23% AND 16.41%, THE AVERAGE OF WHICH WORKED OUT AT 19.70 %. THE AO THEREFORE ESTIMATED THE PURCHASE PRICE FROM M/S.JIG AR DIAMONDS AT RS.19.90,101/- AND AFTER RECASTING THE TRADING ACCO UNT ESTIMATED GP AT RS.21,22,0987- AGAINST WHICH THE APPELLANT HAD S HOWN GP AT RS.6.60.795/-. THE AO MADE AN ADDITION OF THE DIFFE RENCE. BEFORE ME THE ID. AR SUBMITTED THAT THE APPELLANT H AD MAINTAINED THE BOOKS OF ACCOUNTS AND THERE WERE NO DEFECTS IN ANY OF THE ITEMS OF EXPENDITURE OR RECEIPTS EITHER IN THE PAST OR IN THE PRESENT ASSESSMENT YEAR. THE BOOKS COULD NOT BE REJ ECTED ON THE BASIS OF LOSS IN ONE TRANSACTION, A NUMBER OF CASE LAWS WERE RELIED UPON BY THE APPELLANT IN SUPPORT OF HIS CLAIM. REGA RDING ADDITION FOR LOW GP, IT WAS SUBMITTED THAT THE .APPELLANT EARNED PROFIT IN TWO TRANSACTIONS IN AUGUST & SEPT.. 2004 AND THE LOSS W AS ONLY IN ONE CASE IN TRANSACTION FOR APRIL. 2004. THE APPELLANT ON AC COUNT OF AN ERRONEOUS DECISION MADE A PURCHASE FOR WHICH EXPORT MARKET AT HIGHER PRICE WAS NOT AVAILABLE AND HAD TO SALE THE D IAMONDS AT THE AVAILABLE PRICE. THE AO DID NOT HAVE ANY EVIDENCE THAT THE APPELLANT HAD SUPPRESSED SALES CONSIDERATION OR INFLATED COST OF PURCHASES SINCE ITA NO .3500 /AHD/2008 - 3 - ALL THE TRANSACTIONS WERE THROUGH BANKING CHANNELS. THE NET PROFIT WAS 6.07% AND THE CBDT VIDE CIRCULAR NO.2/2008. DATE D 22.02.2008 ACCEPTED THE TRADING RESULTS WHEN THE NET PROFIT SH OWN WAS 6%. I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUGH T HE DETAILS. I DO NOT FIND ANY MERITS IN THE APPELLANT'S SUBMISSION I N THIS REGARD. THE TRANSACTION WITH JIGAR DIAMONDS IS EXTREMELY DOUBTF UL SINCE THE APPELLANT WAS NEITHER ABLE TO PRODUCE THE PARTY FOR VERIFICATION AND HAS ALSO NOT MADE ANY PAYMENT TO THE SAID PARTY. SU CH PARTY WAS ALSO NOT AVAILABLE. THE PURCHASE FROM THE SAID PARTY WAS MADE AT THE RATE OF RS.88.500/- PER CARAT ON 10.04.2004 AND THE SAME WAS EXPORTED AT THE RATE OF RS.68.148/- PER CARAT WITHIN FOUR DAYS OF THE PURCHASE. THIS MEANS THAT THE ARGUMENT OF THE APPELLANT THAT THERE WAS AN ERROR OF JUDGMENT IN PURCHASING THE SAID DIAMONDS I S NOT ACCEPTABLE BECAUSE THE APPELLANT BEING IN DIAMOND BUSINESS SIN CE LONG WOULD NOT COMMIT AN ERROR OF JUDGMENT AND EVEN OTHER WISE WOULD WAIT FOR SOME TIME IN SELLING THE SAME WHEN THE MARKET CONDI TIONS WERE MORE FAVORABLE. SINCE THE PRICE AT WHICH THE APPELLANT HA S CLAIMED TO HAVE PURCHASED DIAMONDS FROM M/S. JIGAR DIAMONDS IS NOT VERIFIABLE AND SINCE THE MARGIN IN RESPECT OF OTHER TWO TRANSACTIO NS WERE 16% AND 23%, THE BOOK RESULTS WERE RIGHTLY REJECTED BY THE AO AND ADDITION ON ACCOUNT OF GP HAS RIGHTLY BEEN MADE. THE SAME IS HE REBY CONFIRMED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. I N THE INSTANT CASE, THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLA IMED TO HAVE PURCHASED 36 CARATS OF DIAMONDS @ 88,500/- PER CARAT TOTALLING T O RS.32,00,400/- FROM M/S. JIGAR DIAMOND AND EXPORTED THE SAME FOUR DAYS THEREAFTER @ RS.68,198/- PER CARAT TOTALLING TO RS.24,78,332/-. THUS, THE ASSESSEE HA S CLAIMED TO HAVE SUFFERED LOSS OF RS.7,22,068/- ON THE TRANSACTION. THE LEARNED ASSES SING OFFICER OBSERVED THAT ON OTHER EXPORT TRANSACTIONS, THE ASSESSEE HAS EARNED AVERAGE PROFIT @ 19.70%. THE LEARNED ASSESSING OFFICER ALSO OBSERVED THAT THE ASS ESSEE HAS NOT MADE ANY PAYMENT TO AFORESAID M/S.JIGAR DIAMOND DURING THE Y EAR AND HAS ALSO NOT PRODUCED THE SAID CREDITOR FOR HIS EXAMINATION. TH E LEARNED ASSESSING OFFICER THEREAFTER REJECTED THE BOOKS OF ACCOUNT OF THE ASS ESSEE AND ESTIMATED THE PURCHASE OF THE 36 CARAT OF DIAMOND AT RS.19,90,101 /- AND APPLYING THE AVERAGE RATE OF PROFIT OF 19.70% AND THEREBY, MAKING TRADIN G ADDITION OF RS.14,61,303/-. THE AFORESAID ADDITION WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME ITA NO .3500 /AHD/2008 - 4 - TAX(APPEALS). WE FIND THAT MERELY BECAUSE ASSESSEE HAS SUFFERED A LOSS ON ONE TRANSACTION CANNOT BE A GROUND FOR REJECTION OF BOO KS OF ACCOUNT OF THE ASSESSEE. FURTHER, THE FACT THAT THE ASSESSEE COULD NOT PRODU CE THE CREDITOR BEFORE THE LEARNED ASSESSING OFFICER FOR EXAMINATION ALSO CANN OT BE READ AGAINST THE ASSESSEE AS AMPLE POWER HAS BEEN GIVEN UNDER THE ACT TO THE L EARNED ASSESSING OFFICER BY WHICH THE LEARNED ASSESSING OFFICER COULD HAVE ENSUR ED PRESENCE OF THE SAID CREDITOR BEFORE HIM IF HE REALLY SO DESIRED. WE FIN D THAT REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT ANY SUMMON UNDER SE CTION 131 WAS ISSUED BY THE LEARNED ASSESSING OFFICER TO THE SAID CREDITOR. IN RESPECT OF NON-PAYMENT TO THE SAID CREDITOR, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE FILED DETAILS OF PAYMENT TO M/S. JIGAR DIAMOND AND SUBMITTED THAT THE PAYMENT WAS MADE SUBSEQUENTLY BY CHEQUES. THOUGH THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE PLACED BEFORE US COPY OF BANK STATEMENT W HICH SHOWS PAYMENT MADE TO OTHER CREDITORS BUT THE SAID BANK STATEMENT DOES NO T CONFIRM THE DETAILS OF PAYMENTS TO M/S.JIGAR DIAMOND AS FILED BY THE ASSES SEE. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE CH EQUES ISSUED TO M/S.JIGAR DIAMOND WERE CLEARED SUBSEQUENTLY AND BANK STATEMEN T OF THAT PERIOD ALSO CAN BE PRODUCED. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSID ERED OPINION, IT SHALL BE JUST AND FAIR TO RESTORE THE ISSUE BACK TO THE FILE OF T HE LEARNED ASSESSING OFFICER FOR VERIFICATION OF SUBSEQUENT PAYMENT TO M/S.JIGAR DIAM OND FROM THE BANK ACCOUNT OF THE ASSESSEE. WE FIND THAT REVENUE HAS BROUGHT NO MA TERIAL ON RECORD AFTER MAKING INQUIRIES TO SHOW THAT THE PURCHASE CLAIMED FOR M/S .JIGAR DIAMOND WAS NOT GENUINE. IT IS AN ESTABLISHED POSITION OF LAW THAT THE ONUS TO PROVE LIES UPON THE PERSON WHO ALLEGES A TRANSACTION AS BOGUS AND REVENU E HAS FAILED TO DISCHARGE THIS BURDEN BY BRINGING ON RECORD COGENT MATERIAL. THE L EARNED ASSESSING OFFICER HAS TREATED THE PURCHASE TRANSACTION BOGUS MERELY ON SU RMISES AND CONJECTURES WHICH CANNOT BE SUSTAINED. WE THEREFORE, SET ASIDE THE O RDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICATION AS STATED ABOVE AND THEREAFTER, TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE HEREINABOVE. NEEDLESS TO MENTION TH AT THE LEARNED ASSESSING ITA NO .3500 /AHD/2008 - 5 - OFFICER SHALL ALLOW REASONABLE AND PROPER OPPORTUNI TY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE AFRESH. THE ASSESSEE IS A LSO DIRECTED TO FILE THE RELEVANT DETAILS AND BANK STATEMENT FOR VERIFICATION OF THE L EARNED ASSESSING OFFICER WHEN CALLED UPON TO DO SO. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO.3 OF THE APPEAL READS AS UNDER:- 3. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LAW A ND ON FACTS IN CONFIRMING THE ADDITION OF RS.57,24,000/- FOR NEW C APITAL INTRODUCED IN CASH BY PARTNERS OUT OF SALE PROCEEDS OF THEIR AGRICULTU RE LAND. THE ADDITION OF RS. 57,24,000/- U/S. 68 OF THE ACT BE DELETED. 6. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS DECIDED THE ISSUE AS UNDER:- 3. THE NEXT GROUND OF APPEAL IS REGARDING ADDITION OF RS.57,24.000/- FOR NEW CAPITAL INTRODUCED U/ S 68 OF THE IT ACT. THE AO OBSERVED THAT ONE OF THE PARTNERS OF THE FIRM SMT RI TABEN PATEL DEPOSITED CASH OF RS,14,24,000/- BY SIX DIFFERENT I NSTALLMENTS IN THE MONTHS OF MAY & JUNE, 2004. NO DETAILS OF SOURCE OF SUCH FUNDS WAS FILED. SIMILARLY IN THE CASE OF THE OTHER PARTNERS SMT. NIRMALABEN PATEL. CASH OF RS.12 LACS WAS DEPOSITED IN THE MONTHS OF A PRIL & MAY. IN THE CASE OF SMT HINABEN PATEL, RS.11 LACS IN CASH WAS D EPOSITED WHILE DAYARAMBHAI PATEL DEPOSITED RS.20 LACS IN CASH DURI NG THE SAME MONTHS. NO DETAIL OF THE SOURCES OF SUCH CASH INTRO DUCTION WAS FILED. THE AO THEREFORE WAS OF THE VIEW THAT THE ENTIRE AMO UNT OF RS.57.24.000/- WAS UNEXPLAINED CASH CREDITS U/S 68 OF THE IT ACT AND MADE AN ADDITION ON THIS ACCOUNT. BEFORE ME, THE ID. AR SUBMITTED THAT SOURCE OF ALL THESE PARTNER'S CAPITAL INTRODUCED IN THE FIRM WAS THEIR INDIVIDUAL ACCOUNTS AND GENUINENESS OF TRANSACTIONS AND CREDITWORTHINES S OF PARTNERS WAS ESTABLISHED. THESE WERE THE FUNDS RECEIVED BY THE P ARTNERS FROM SALE OF THEIR AGRICULTURAL LANDS IN SUPPORT OF WHICH THE ID. AR FILED COPIES OF SELL AGREEMENT. IN ORDER TO VERIFY THE GENUINENESS O F THIS CLAIM, THE AO WAS REQUIRED TO EXAMINE THE DETAILS AND COMMENT ON THE GENUINENESS OF THE CLAIM. THE AO SUBMITTED HIS REPORT DATED 29. 07.2008. THE RELEVANT EXTRACT OF WHICH IS AS UNDER :- 'AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED AN APP EAL BEFORE YOUR HONOUR BY TAKING THIS ISSUE AS ONE OF THE GROUNDS O F APPEAL SLATING THAT THE ASSESSING OFFICER HAS ERRED IN MAKING AN ADDITI ON OF RS.57,24,000/- FOR NEW CAPITAL INTRODUCED IN CASH BY PARTNERS OUT OF SALE PROCEEDS OF ITA NO .3500 /AHD/2008 - 6 - THEIR AGRICULTURAL LAND. IN THIS REGARD, AS PER THE DIRECTIONS CONTAINED IN YOUR HONOUR'S LETTER REFERRED TO ABOVE, THE ASSESSE E HAS BEEN GIVEN AN OPPORTUNITY OF BEING HEARD VIDE THIS OFFICE LETTER DATED 27.06.2008 TO ATTEND BEFORE THE UNDERSIGNED AND FURNISH THE DETAI LS, EVIDENCES IN SUPPORT OF ITS CONTENTIONS. IN RESPONSE, THE A. R. OF THE ASSESSEE ATTENDED UND PRODUCED AGRICULTURAL LAND RECORDS, AG REEMENT FOR SALE OF AGRICULTURAL LAND. ETC. A PERUSAL OF THE SATAKHAT R EVEALS THAT THESE PARTNERS HAVE MADE AN AGREEMENT FOR SALE OF AGRICUL TURAL LAND IN THEIR NAME AND RECEIVED THE ABOVE AMOUNT AS SALE CONSIDER ATION. HOWEVER, NO FINAL SALE AGREEMENT HAS BEEN REGISTERED. AS PER THE TERMS AND CONDITIONS 'THE SATAKHAT, THE SALE DEED HAS TO BE E XECUTED -WITHIN ONE YEAR FROM THE DATE OF SATAKHAT OR OTHERWISE, THE AM OUNT IS REQUIRED TO BE RETURNED TO THE PERSONS MENTIONED IN THE SATAKHA T. IN THIS I REGARD, THE ASSESSEE WAS ASKED TO FURNISH THE DOCUMENTS TO SUBSTANTIATE THESE CLAIMS. IN RESPONSE, IT WAS SUBMITTED THAT THE SATA KHAT WAS CANCELLED AND NO SALE DEED WAS EXECUTED AS THE BUYERS FAILED TO RESALE THE LAND DUE TO RECESSION AND THE PARTNERS HAVE REPAID THE M ONEY BY CASH AND FURNISHED ACKNOWLEDGEMENT OF AMOUNT PAID. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER HAD GIVEN AMPLE OPPORTUNITIES TO THE ASSESSEE TO FURNISH THE EVIDENCES/DETAILS TO PROVE THE TRANSACT IONS. EVEN, THE SUMMONS U/S.131 OF THE ACT ISSUED TO THE SAID PARTI ES WERE ALSO NOT COMPLIED. THERE WAS NOTHING AGAINST OR PREVENTED TH E ASSESSEE IN FURNISHING THE DETAILS BEFORE THE ASSESSING OFFICER . THEREFORE, IT IS CRYSTAL CLEAR THAT THIS IS AN AFTERTHOUGHT AND IT I S TRYING TO COVER UP THE CASH CREDITS INTRODUCED IN (HE BOOKS USING COLORFUL DEVICE BY TAKING THE SHELTER OF SATAKHATS MADE FOR SALE OF AGRICULTURAL LAND. IT IS. THEREFORE, PRAYED THAT THE ACCEPTANCE OF ADDITIONAL EVIDENCE D URING THE COURSE APPELLATE PRODUCEEDINGS WILL ADVERSELY AFFECT THE R EVENUE. IN THIS REGARD, IT IS PERTINENT TO MENTION HERE THA T NO SUCH DETAILS WERE EVER FILED BY THE ASSESSEE BEFORE THE ASSESSING OFF ICER DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS P ROVIDED ENOUGH OPPORTUNITY TO THE ASSESSEE TO FURNISH DETAILS/EVID ENCES BUT THE ASSESSEE HAS NOT EVEN MENTIONED THE SALE OF AGRICUL TURAL LAND OR OWNERSHIP OF AGRICULTURAL LAND BY THESE PARTNERS DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. IF THE PARTNERS WERE HAVING SUCH STRONG EVIDENCES IN THEIR FAVOUR IN THE FIRST INSTANCE, TH EY SHOULD HAVE PRODUCED THEM BEFORE THE A. O. OR AT LEAST RAISED T HIS POINT DURING THE COURSE OF ASSESSMENT PROCEEDINGS SO AS TO PROVE THE GENUINENESS OF THE DEPOSITS. FURTHER, IT IS SURPRISING TO NOTE THA T THE AMOUNT HAS BEEN INTRODUCED BY CASH EVEN THOUGH THE AMOUNT WAS DERIV ED FROM SALE OF AGRICULTURAL LAND HELD IN THEIR NAME AND ALL THE PA RTNERS WERE HAVING BANK ACCOUNTS. FURTHER, IT IS STATED BY THE A. R. T HAT THE BUYERS PURCHASED THE LAND ONLY WITH A VIEW TO RESULT AND E ARN PROFIT IN A HIGHLY FLUCTUATING MARKET AND DUE TO RECESSION CYCLE IN TH E MARKET, THEY COULD ITA NO .3500 /AHD/2008 - 7 - NOT RESALE THE PROPERTY. HENCE, THE INTENTION THE B UYERS WERE CRYSTAL CLEAR I.E. TO EARN MORE PROFIT AND. THEREFORE, IT I S HARD TO BELIEVE THAT THE BUYERS WHO WERE HAVING ONLY PROFIT MOTIVE IN TH EIR MIND, HAVE KEPT SUCH A HUGE AMOUNT IDLE WITH THE ABOVE MENTIONED PA RTNERS ALMOST FOR ONE YEAR. A PERUSAL OF THE SATAKHATS PRODUCED BY TH E ASSESSEE REVEALS THAT IT IS A SIMPLE WRITTEN AGREEMENT. A BETW EEN THE BUYER AND SELLER MADE ON RS. 50/- STAMP PAPER. FURTHER, A PERUSAL OF THE RECEIPTS PRODUCED IN SUPPORT OF RETURN OF MONEY TO THE BUYER S SHOWS THAT IT HAS WRITTEN ON NO PLAIN WHITE PAPERS AND THE SO CALLED RECEIVER HAS PUT HIS SIGNATURE ON A REVENUE STAMP IN THE SECOND PAGE OF THE RECEIPT. IT IS QUITE SURPRISING AND HARD TO BELIEVE THAT TRANSACTI ONS WHICH INVOLVED SUCH A HUGE SUMS HAVE MADE IN VERY CASUAL WAY. THE FIRST PAGES OF THE RECEIPTS ARE NOT CARRYING ANY SIGNATURE OR IDEN TIFICATION AND, THEREFORE, IF REQUIRED, THE CONTENTS IN IT CAN BE C HANGED ANY POINT OF TIME. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE EVIDENTIARY VALUE OF THE SATAKHAT AND RECEIPTS ARE NOT BEYOND DOUBT. T HE ASSESSEE COULD NOT FURNISH ANY OTHER CORROBORATIVE EVIDENCES TO PR OVE THE SOURCES OF FUNDS BROUGHT BY THE PARTNERS OF THE FIRM. DURING T HE COURSE OF HEARING BEFORE THE UNDERSIGNED, THE ASSESSEE WAS ASKED TO F URNISH PARTICULARS OF THE PERSONS MENTIONED IN THE SATAKHAT IN FAVOUR OF WHOM IT IS MADE FOR SALE OF LAND ALONG WITH COPIES OF AUDITED PROFI T & LOSS ACCOUNT AND BALANCE SHEET FOR ASST. YEAR 2005-06 AND 2006-07. A T THIS STAGE ALSO, THE ASSESSEE DID NOT CARE TO FURNISH THESE DETAILS/ DOCUMENTS TO PROVE THE GENUINENESS OF THE CASH CREDITS. ALL THESE FACT S LEAD TO A CONCLUSION THAT THE SALE OF AGRICULTURAL LAND, RECEIPT OF MONE Y FROM BUYERS AND CANCELLATION OF SATAKHAT AND RETURN OF MONEY ARE CO NCOCTED AND COOKED UP STORY AND AN AFTER THOUGHT TO SWINDLE THE REVENUE AND, THEREFORE, THE TRANSACTIONS OF CASH DEPOSITS IN PAR TNERS CAPITAL ACCOUNT IN THE BOOKS OF THE ASSESSEE-FIRM ARE NOT FOUND GEN UINE AND ACCORDINGLY. THE ADDITION MADE UNDER SEC.68 OF THE I. I. ACT IS REQUIRED TO BE CONFIRMED AS UNACCOUNTED INCOME OF THE ASSESS EE FIRM INTRODUCED IN THE GUISE OF CASH CREDITS IN THE NAME OF PARTNERS IN THEIR CAPITAL ACCOUNT. ' A COPY OF THE REMAND REPORT WAS GIVEN TO THE APPELLA NT ON 3.07.2008 FOR HIS CONTRA COMMENTS. THE ID. AR VIDE HIS LETTER DATED 06.08.2008 SUBMITTED THAT THE AO HAD ACCEPTED THAT THE APPELLA NT PRODUCED AGRICULTURAL LAND RECORDS, AGREEMENT FOR SALE OF AG RICULTURAL LAND AND ACKNOWLEDGEMENT OF AMOUNT REPAID TO THE BUYERS ON C ANCELLATION OF 'SATAKHAT'. IT WAS STATED THAT THE AO ACCEPTED THAT THESE WERE STRONG EVIDENCES FOR SOURCE OF FUNDS GENERATED FROM SALE OF AGRICULTURAL LAND. HOWEVER, IF THE AO HAD ANY DOUBT REGARDING GENUINENE SS OF TRANSACTIONS, HE COULD HAVE VERIFIED THE SAME BY ISSU ING SUMMONS TO THE PARTNERS, BUYERS OF LAND AND BY MAKING NECESSAR Y INQUIRIES FROM SUGAR FACTORIES WHERE FROM THE BUYERS OBTAINED CASH FOR GIVING MONEY TO THE PARTNERS OF THE APPELLANT FIRM. ITA NO .3500 /AHD/2008 - 8 - I HAVE CONSIDERED THE SUBMISSIONS AND HAVE GONE THROU GH THE DETAILS. IT IS SEEN THAT THE AO PROVIDED ENOUGH OPPORTUNITY T O THE APPELLANT TO FURNISH DETAILS AND EVIDENCES TO SUPPORT ITS CLAIM. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT DID NOT EVEN ME NTIONED THE OWNERSHIP OF AGRICULTURAL LAND OR SALE THEREOF. THE AMOUNT HAS BEEN INTRODUCED BY CASH EVEN THOUGH IT WAS CLAIMED TO HAV E BEEN DERIVED FROM AGRICULTURAL LAND AND ALL THE PARTNERS HAD BAN K'S ACCOUNT. IT IS ALSO SEEN THAT THE APPELLANT'S CLAIM THAT THE BUYERS PUR CHASED THE LAND FOR RESELLING THE SAME TO EARN PROFIT AND IT IS DIFFICU LT TO BELIEVE THAT THE BUYERS WOULD HAVE KEPT SUCH A HUGE AMOUNT WITH THE P ARTNERS FOR ALMOST ONE YEAR. I HAVE ALSO FIND THAT THE RECEIPT P RODUCED BY THE APPELLANT IN SUPPORT OF RETURN OF MONEY IS ON PLAIN WHITE PAPER AND IT WOULD BE DIFFICULT TO BELIEVE THAT TRANSACTIONS INVOL VING SUCH A HUGE AMOUNT WERE MADE IN A CASUAL BILL. THEREFORE, THE E VIDENTIARY VALUE OF 'SATAKHATS AND RECEIPTS' IS DOUBTFUL. EVEN AT THE RE MAND STAGE, THE APPELLANT DID NOT FURNISH ANY PARTICULARS OF PERSON S TO WHOM THE SO CALLED SALE OF LAND WAS MADE AND THEREFORE I AM OF THE CONSIDERED VIEW THAT THE ENTIRE STORY IS A COOKED UP STORY AND AN AFTERTHOUGHT ONLY. IT IS ALSO IMPORTANT TO NOTE THAT THE PARTNER S WHO INTRODUCED SUCH CAPITAL IN THE FIRM DID NOT APPEAR BEFORE THE AO TO CONFIRM THE CREDITS APPEARING IN THEIR NAMES IN THE BOOKS OF AC COUNTS. THEREFORE, I AM OF THE VIEW THAT THE ENTIRE AMOUNT INTRODUCED AS THE SO CALLED CAPITAL OF THE PARTNERS IN THE BOOKS HAS NOT BEEN S ATISFACTORILY EXPLAINED AND THE AO'S ACTION IN TREATING THE SAID AMOUNT AS UNEXPLAINED CASH CREDITS IS IN ORDER AND THE ADDITI ON IS HEREBY CONFIRMED. THE NEXT THREE GROUNDS OF APPEAL ARE REGARDING AO'S ACTION IN INITIATING PENALTIES U/S 271E AND 27 ID OF THE IT A CT. THE INITIATION IS NOT APPELLABLE AND BEING PREMATURE IS HEREBY DISMIS SED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. T HE UNDISPUTED FACTS ARE THAT FOUR PARTIES INTRODUCE FURTHER CAPITAL OF RS.57,24, 000/- IN THE ASSESSEE FIRM DURING THE YEAR UNDER CONSIDERATION AS BELOW:- 1. MRS. RITABEN NITINBHAI PATEL RS.14,24,000/- 2. MRS.NIRMALABEN D. PATEL RS.12,00,000/- 3. MRS. HINABEN B. PATEL RS.11,00,000/- 4. DAYARAMBHAI K. PATEL RS. 20,00,000/- TOTAL RS.57,24,000/- ITA NO .3500 /AHD/2008 - 9 - 8. THE LEARNED ASSESSING OFFICER OBSERVED THAT ASSES SEE FIRM COULD NOT FILE THE DETAILS OF SOURCE OF ABOVE CASH INTRODUCED THEREFORE , THE LEARNED ASSESSING OFFICER ADDED THE ENTIRE AMOUNT OF RS.57,24,000/- TO THE IN COME OF THE ASSESSEE FIRM BY INVOKING PROVISIONS OF SECTION 68 OF THE ACT. ON APP EAL, LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ABOVE ADDITION. WE FIND THAT SECTION 68 READS AS UNDER:- CASH CREDITS. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND ASSESSEE OFFE RS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING OFFICE R], SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. A READING OF THE AFORESAID PROVISION SHOWS THAT THE ASSESSEE IS OBLIGED TO FURNISH MATERIAL IN RESPECT OF NATURE AND SOURCE OF THE AMO UNT CREDITED IN HIS BOOKS OF ACCOUNT. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT AMOUNT OF RS.57,24,000/- WAS CREDITED IN THE BOOKS OF ACCOUNT OF ASSESSEE FIRM. THE ASSESSEE FIRM EXPLAINED THE NATURE OF THE SAME AS FURTHER CAPITAL INTRODUCED BY THE PARTNERS. FURTHER IN RESPECT OF SOURCE OF THE SAME, THE ASSESSEE FIRM EXPLAINED SOURCE AS RS.14,24,000/- FROM MRS.RITABEN NITINBHAI PATEL, RS.12,00,000/- FROM MR S.NIRMALABEN D. PATEL, RS.11,00,000/- FROM MRS. HINABEN B. PATEL AND RS. 2 0,00,000/- FROM DAYARAMBHAI K. PATEL. IN SUPPORT OF ABOVE EXPLANATION, THE ASSES SEE FIRM FILED CONFIRMATION OF ALL THE AFORESAID FOUR PARTNERS BEFORE THE LEARNED ASSE SSING OFFICER A COPY OF WHICH IS ALSO PLACED AT PAGE NO.105, 109, 114 AND 116 OF THE PAPER BOOK. FROM PERUSAL OF THE SAID CONFIRMATION OF ACCOUNTS, WE FIND THAT THE SAME CONTAINS ADDRESSES OF THE AFORESAID FOUR PERSONS AND ALSO THERE PERMANENT ACC OUNT NUMBERS. THUS, IN OUR CONSIDERED OPINION, THE INITIAL ONUS WHICH WAS ON T HE ASSESSEE WAS DULY DISCHARGED BY IT. AFTER THIS, THE LEARNED ASSESSING OFFICER HA S MADE THE ADDITION ONLY BY DOUBTING THE SOURCE OF SOURCE I.E. NOT THE SOURCE O F THE FIRM BUT THE SOURCE FROM WHERE THE AFORESAID FOUR PERSONS RECEIVED THE AMOUNT . IT IS WELL SETTLED POSITION OF LAW THAT ADDITION CAN BE MADE WHEN THE ASSESSEE COU LD NOT SATISFACTORILY EXPLAIN ITS ITA NO .3500 /AHD/2008 - 10 - SOURCE AND NOT BECAUSE OF INABILITY OF THE ASSESSEE TO EXPLAIN SOURCE OF SOURCE. IN OUR CONSIDERED OPINION, IF THE REVENUE HAD A DOUBT R EGARDING SOURCE OF MONEY IN THE HANDS OF PARTNERS THEN AT BEST THE AMOUNT CAN B E ADDED AS INCOME IN THE HANDS OF THE PARTNERS UNDER SECTION 69 OF THE ACT, BUT NOT AS INCOME OF THE ASSESSEE FIRM BY INVOKING THE PROVISIONS OF SECTION 6 8 OF THE ACT. WE THEREFORE DELETE THE ADDITION OF RS.57,24,000/- AND ALLOW TH E GROUND OF APPEAL OF THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE ALLOWED IN THE MANNER INDICATED HEREINABOVE. ORDER, SIGNED DATED AND PRONOUNCED IN THE COURT 12 /03/2010. SD/- SD/- (BHAVNSH SAINI) (N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 12/03/2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS) 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD