Kuldeep Kumar Gupta, Baraut V. ITO, Baraut

ITA 3566/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3632 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business expenditure
• Section: 37(1); 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER ITA NO.-3566/DEL/2013 ( ASSESSMENT YEAR: 2008-09) KULDEEP KUMAR GUPTA 1/184, NAYA BAZAR, BARAUT ACYPG5278L VS ITO WARD BARAUT ASSESSEE BY SH. K. SAMPATH, ADV. REVENUE BY SH. AMIT JAIN, SR. DR ORDER PER SHRI K.N. CHARY, J.M. AGGRIEVED BY THE ORDER DATED 13/03/2013 IN APPEAL NO. 695/284/2010-11/NOIDA RELEVANT TO THE ASSESSMENT Y EAR 2008- 09 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS), NOIDA, U.P. (HEREINAFTER FOR SHORT REFERRED TO AS T HE LD. CIT(A)), ASSESSEE PREFERRED THIS APPEAL ON THE FOLLOWING GRO UNDS: 1. THAT THE INCOME AS RETURNED BY THE ASSESSEE OUGHT TO HAVE BEEN ACCEPTED AND MADE THE BASIS OF ASSESSMENT. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AD ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN SUSTAINING THE A DDITION OF RS. DATE OF HEARING 14.11.2017 DATE OF PRONOUNCEMENT 16.11.2017 2 ITA NO. 3566/DEL/2013 1,00,000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT WHICH OUGHT NOT TO HAVE BEEN SUSTAINED BY THE LD. C OMMISSIONER OF INCOME TAX (APPEAL). 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HA D ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN SUSTAINING THE A DDITION OF RS. 2,23,279/- AS INTEREST PAID ON UNSECURED LOANS AND TREATED IT AS INCOME OF THE ASSESSEE WHICH OUGHT NOT TO HAVE BEEN TREATED IT AS INCOME OF THE ASSESSEE. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HA D ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN SUSTAINING THE A DDITION OF RS. 1,82,505/- BEING UNEXPLAINED ENTRIES IN BANK A/C, A DDITION WHICH OUGHT NOT TO HAVE BEEN SUSTAINED BY THE LD. COMMISS IONER OF INCOME TAX (APPEAL). 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HA D ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN SUSTAINING THE A DDITION OF RS. 7,831/- BEING 10% OF BUSINESS EXPENDITURE U/S 37(1) OF INCOME TAX ACT, ADDITION WHICH OUGHT NOT TO HAVE BEEN SUSTAINE D BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS DERIVING INCOME BY TRADING OF ASIAN PAINTS. FOR THE AY 2008 -09 THE ASSESSEE FILED THE RETURN OF INCOME ON 29.09.2008 D ECLARING A NET INCOME OF RS. 1,18,102/- AND DURING SCRUTINY AO MAD E ADDITION ON FOUR COUNTS, NAMELY RS. 1,00,000/- AND RS. 1,82, 505/- DISALLOWANCE U/S 68, RS. 2,23,279/- DISALLOWANCE U/ S 40(A)(IA) AND RS. 7,831/- DISALLOWANCE U/S 37(1). APPEAL PREF ERRED TO THE LD. CIT (A) WAS DISMISSED BY WAY OF THE IMPUGNED OR DER. HENCE, 3 ITA NO. 3566/DEL/2013 THE ASSESSEE IS BEFORE US IN THIS APPEAL. GROUND N O. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDIC ATION. 3. IN SO FAR AS GROUND NOS. 2 & 4 ARE CONCERNED, AO OBSERVED THAT THERE WAS A CASH CREDIT OF RS. 2 LACS ON 28.09 .2007 IN THE FEDERAL BANK A/C OF THE ASSESSEE. ASSESSEE EXPLAIN ED THAT THE CASH CREDIT WAS ACTUALLY THE AMOUNT WITHDRAWN FROM HIS CAPITAL ACCOUNT. AO ACCEPTED THE SAID EXPLANATION OF THE A SSESSEE IN PART TO THE EXTENT OF RS. 1 LAKH ONLY. WHEN CALLED UPON TO EXPLAIN THE CASH CREDIT OF THE BALANCE OF RS. 1 LAKH ASSESSEE S UBMITTED THAT THE SAID AMOUNT WAS RECEIVED AS LOAN FROM FIVE PERS ONS AND PRODUCED THEIR AFFIDAVITS. ON EXAMINATION THE AO F OUND THAT THE ALLEGED LENDERS WERE PETTY WORKERS AND TWO OF THEM WERE THE EMPLOYEES OF THE ASSESSEE. THEIR EARNINGS ARE BETW EEN RS. 1,500/- AND RS. 5,000/- PER MONTH AND HENCE, THE AO FOUND THAT THEIR LENDING THE AMOUNT WAS DOUBTFUL. IN RESPECT OF SUM OF RS. 1,82,505/- APPEARING IN THE BANK ACCOUNT, ASSESSEE STATED THAT A SUM OF RS. 38,085/- WAS THE MATURITY AMOUNT OF PIGM Y SAVING ACCOUNT OPENED ON THE NAME OF HIS DAUGHTER AND RS. 27,500/- WAS THE COMPENSATION FROM INSURANCE COMPANY. AO DI D NOT 4 ITA NO. 3566/DEL/2013 ACCEPT THIS EXPLANATION OF THE ASSESSEE AND HOLDING THAT THERE WAS NO EVIDENCE EXPLAINING THE OTHER CASH CREDIT AMOUNT S ALSO, AND PLACING RELIANCE ON THE DECISION REPORTED IN GUMANI RAM SIRI RAM VS. CIT (1975) 98 ITR 337 (P&H). AO MADE THE ADDIT ION OF THE ENTIRE AMOUNT. LD. CIT (A) AGREED WITH THE AO AND SUSTAINED THE ADDITIONS MADE. 4. IT IS THE ARGUMENT OF THE LD. AR THAT BOTH THE P ARTIES BELOW RECORDED THAT THE ASSESSEE PRODUCED THE AFFIDAVITS OF THE LENDERS OF RS. 1 LAKH BUT ONLY ON SUSPICION AS TO THEIR FINANC IAL CAPACITY THE ADDITION WAS MADE WITHOUT POINTING OUT ANY SPECIFIC DISCREPANCY. ACCORDING TO THE LD. AR, SHOULD THERE BE ANY DOUBT, AO SHOULD HAVE EXAMINED THE MATTER A LITTLE DEEPER AND DISCAR DED THE EVIDENCE FURNISHED BY THE ASSESSEE BY RECORDING REA SONS, BUT WITHOUT ASSIGNING ANY COGENT REASONS THE AO DISBELI EVED THE AFFIDAVITS OF THE PARTIES. ACCORDING TO HIM THERE IS NOTHING ON RECORD TO DISCARD THE SWORN STATEMENT OF THE LENDER S. LD. DR SUBMITS THAT THE AO RECORDED A FINDING THAT THE FIN ANCIAL CONDITION OF THE LENDERS IS QUITE WEAK SINCE THEIR EARNING WE RE ONLY RS. 1,500/- TO RS. 4,500/- PER MONTH. FOR THIS THE REP LY OF THE LD. AR 5 ITA NO. 3566/DEL/2013 IS THAT THE SALARY OF THE EMPLOYEES NEED NOT BE THE ONLY SOURCE OF INCOME AND THE LENDER OF THE ASSESSEE WERE HAVING A GRICULTURAL INCOME AND THIS ASPECT WAS NOT CONSIDERED BY THE AO . ON A CAREFUL CONSIDERATION OF THE MATTER, WE ARE OF THE OPINION THAT WHEN IT APPEARS TO THE AO THAT THE FINANCIAL CAPACI TY OF THE LENDERS WAS WEAK WITH THEIR EARNING CAPACITY OF RS. 1,500/- TO RS. 4,500/- PER MONTH, THE AO SHOULD HAVE EXAMINED THE ISSUE BY QUESTIONING THEM TO KNOW THE SOURCE OF THE AMOUNTS FOR EXTENDING THE LOAN TO THE ASSESSEE, INSTEAD OF REJECTING THE SWORN STATEMENTS WITHOUT SCRUTINY. NO REASONS ARE ASSIGNED BY THE A O FOR DISCARDING THE SWORN STATEMENTS AND IT IS NOT KNOWN WHERE FROM THE AO GATHERED THE INFORMATION RELATING TO THE FIN ANCIAL CAPACITY OF THESE PERSONS. FOR THIS REASON, WE FIND THAT RS . 1 LAKH IS NOT SUCH A BIG AMOUNT AS COULD NOT BE CONTRIBUTED BY FI VE PERSONS AND IN THE ABSENCE OF ANY MATERIAL THE AO SHOULD HAVE A CCEPTED THE CONTENTION OF THE ASSESSEE. 5. NOW COMING TO THE ADDITION OF RS. 1,82,505/-, AS SESSEE EXPLAINED ONLY TWO AMOUNTS I.E. RS. 38,085/- AND RS . 27,500/- AS THE AMOUNTS RELATING TO PIGMY SAVINGS OF THE DAUGHT ER OF THE 6 ITA NO. 3566/DEL/2013 ASSESSEE AND THE OTHER AMOUNT AS COMPENSATION FROM INSURANCE COMPANY. IN SO FAR AS THE COMPENSATION FROM INSURA NCE COMPANY IS CONCERNED THE ASSESSEE COULD HAVE PRODUC ED THE RELEVANT DOCUMENTS. HOWEVER, WE CANNOT EXPECT ANY SUCH EVIDENCE IN RESPECT OF RS. 38,085/- AND THE PIGMY S AVINGS OF THE DAUGHTER OF THE ASSESSEE CANNOT BE TERMED AS INCOME OF THE DAUGHTER SO AS TO CLUB SUCH INCOME WITH THE INCOME OF THE ASSESSEE. SUCH SAVINGS OF THE DAUGHTER COULD OBVIO USLY BE OUT OF THE AMOUNTS PROVIDED BY THE ASSESSEE. WE, THEREFOR E, FIND IT JUST AND REASONABLE TO ACCEPT THE EXPLANATION OF THE ASS ESSEE IN RESPECT OF RS. 38,085/- AND REJECT THE CONTENTION O F THE ASSESSEE IN RESPECT OF THE BALANCE AMOUNT. WE, THEREFORE, D IRECT THE AO TO DELETE RS. 1 LAKH AND RS. 38,085/- AND WE CONFIRM T HE REST OF THE ADDITION. GROUNDS NO. 2 & 4 ARE ANSWERED ACCORDING LY. 6. NOW COMING TO THE GROUND NO. 3 WHICH IS IN RESPE CT OF THE ADDITION RELATING TO THE INTEREST PAID ON UNSECURED LOANS, AO STATED THAT SINCE THE PURPOSE OF OBTAINING LOAN WAS FOR BUSINESS, AND THE ASSESSEE WAS CLAIMING THE DEDUCTION OF INTE REST ON SUCH LOANS, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX OF S UCH INTEREST 7 ITA NO. 3566/DEL/2013 PAYMENTS, THEREFORE, FOR NON DEDUCTION OF TDS THE I NTEREST AMOUNT OF RS. 2,23,279/- ON UNSECURED LOANS WAS DISALLOWED . LD. CIT (A) RECORDS A FINDING ON THIS ASPECT THAT THE PROVISION S OF SECTION 40(A)(IA) ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE SINCE THE TOTAL SALES/GROSS RECEIPTS/TURNOVER FROM THE BUSINE SS/PROFESSION CARRIED OUT BY THE ASSESSEE, EXCEEDS THE MONETARY L IMIT SPECIFIED U/S 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PREC EDING THE FINANCIAL YEAR UNDER CONSIDERATION, AND THE ASSESSE E FAILED TO COME OUT WITH ANY LOGICAL OR MEANINGFUL EXPLANATION TO EXPLAIN REASONS FOR NON-COMPLIANCE OF PROVISION OF SECTION 40(A)(IA) OF THE ACT. LD. AR BROUGHT TO OUR NOTICE THAT THE ORDER O F THE LD. CIT (A) SHOWS THE SUBMISSION OF THE ASSESSEE BEFORE HIM TO THE EFFECT THAT THE PERSONS TO WHOM THE INTEREST WAS PAID BY THE AS SESSEE HAD PAID THE ADVANCE TAX AND SELF ASSESSMENT TAX OVER A ND ABOVE THE TAX PAYABLE, THEREBY NOT CAUSING ANY LOSS TO THE RE VENUE AND THE REVENUE IS PERMITTED TO LEVY INTEREST U/S 201(1A) E VEN IN A CASE WHERE THE PERSON LIABLE TO TAX HAS PAID TAX ON DUE DATE, AS SUCH, IF THE INTEREST EXPENSES IS DISALLOWED IT WOULD CAUSE UNDUE BENEFIT TO THE REVENUE. THERE WAS A CLEAR ASSERTION BY THE AS SESSEE BEFORE THE LD. CIT (A) THAT SINCE THE DEDUCTEE-ASSESSEE HA D PAID DUE 8 ITA NO. 3566/DEL/2013 TAXES IN TIME ON THE INTEREST INCOME RECEIVED FROM THE ASSESSEE AND DULY SHOWN IN THEIR RESPECTIVE RETURN, THE PAYM ENT OF INTEREST CANNOT BE TREATED AS INCOME OF THE ASSESSEE AND HEN CE, ADDITION MADE ON THIS ASPECT CANNOT BE SUSTAINED. IN SPITE OF THIS CLEAR SUBMISSION, LD. CIT (A) FAILED TO DEAL WITH THIS AS PECT IN HIS ORDER WHILE DEALING WITH GROUND NO. 3. IN ALL FAIRNESS L D. CIT (A) SHOULD HAVE REJECTED THIS CONTENTION OF THE ASSESSEE ONLY AFTER CONSIDERING THE SAME AND BY ASSIGNING THE COGENT REASONS. THOU GH THE LD. CIT (A) RECORDED A FINDING THAT THE SUBMISSIONS OF THE ASSESSEE WERE CONSIDERED AND THOSE WERE FOUND TO BE OUT OF C ONTEXT AND DEVOID OF MERITS, WE ARE UNABLE TO AGREE WITH HIM. IT IS NOT KNOWN HOW THE CONTENTIONS RAISED BY THE ASSESSEE BY REFER RING TO THE PROVISIONS U/S 201(1A) OF THE ACT AND THE PAYMENT O F THE ADVANCE TAX BY THE RECIPIENTS OF THE INTEREST AMOUNT ARE IR RELEVANT. WE, THEREFORE, DO NOT FIND REASONING GIVEN BY THE LD. C IT (A) AS SATISFACTORY AND FIND IT DIFFICULT TO SUSTAIN THE S AME. WE CONSIDER THAT IT IS A FIT CASE TO RESTORE THE GROUND TO THE FILE OF THE AO FOR VERIFICATION OF THE FACTS PLEADED BY THE ASSESSEE A ND TO GIVE A FRESH FINDING. WE, THEREFORE, REMAND THIS GROUND TO THE FILE OF THE AO TO VERIFY WHETHER THE RECIPIENTS OF THE INTEREST AMOUN T HAVE PAID THE 9 ITA NO. 3566/DEL/2013 ADVANCE TAX AND SELF ASSESSMENT TAX IN RESPECT OF T HIS PARTICULAR INTEREST AMOUNT BY GIVING AN OPPORTUNITY TO THE ASS ESSEE OF BEING HEARD. GROUND NO. 3 IS ANSWERED ACCORDINGLY. 7. NOW COMING TO GROUND NO. 4, THIS IS IN RESPECT O F DISALLOWANCE OF RS. 7,831/- TOWARDS 10% OF THE TOTA L EXPENSES ON THE GROUND THAT THE SAME IS ATTRIBUTABLE TO THE PER SONAL USE OF TELEPHONE AND TRAVELLING EXPENSE. IN SO FAR AS TEL EPHONE IS CONCERNED, WE AGREE WITH THE AUTHORITIES BELOW BUT IN SO FAR AS TRAVELLING AND SHOP EXPENSES ARE CONCERNED, WE DO N OT FIND IT JUSTIFIABLE TO MAKE ANY DISALLOWANCE WITHOUT POINTI NG OUT ANY DISCREPANCY IN RESPECT OF THOSE TWO EXPENSES. WE, THEREFORE, SUSTAIN THE DISALLOWANCE U/S 37 OF THE ACT TO A TUN E OF RS. 1,536/- AND DELETE THE REST OF THE SAME. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16.11.2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA C HARY) PRESIDENT JUDICIAL ME MBER DATED: 16.11.2017 *KAVITA ARORA 10 ITA NO. 3566/DEL/2013 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI