A.C.I.T.-3, Mathura V. Sh. Narayan Das Agrawal, Mathura

ITA 382/AGR/2011

• Counselvise Citation: 38220314 RSA 2011
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOHAIL AKHTAR
• Keywords: Capital asset
• Section: 40A(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 382/AGRA/2011 ASSTT. YEAR : 2007-08 A.C.I.T. 3, VS. SHRI NARAYAN DAS AGARWAL, MATHURA. 200/1, YUGAL NIWAS, RAMANRETI, VRINDAVAN, MATHURA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SOHAIL AKHTAR, JR. D.R. RESPONDENT BY : WRITTEN SUBMISSIONS DATE OF HEARING : 26.04.2012 DATE OF PRONOUNCEMENT OF ORDER : 27.04.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-I, AGRA DATED 31.03.2011 FOR THE ASSESSMENT YEAR 2007- 08. 2. WE HAVE HEARD THE LD. DR AND PERUSED THE FINDING S OF THE LD. AUTHORITIES BELOW. HOWEVER, NONE APPEARED ON BEHALF O THE ASSES SEE DESPITE SERVICE OF NOTICE. THE ASSESSEE IS, THEREFORE, PROCEEDED EXPARTE. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS, WHICH IS TAKEN INTO CONSIDERATION. ITA NO. 382/AGRA/2011 2 3. ON GROUND NO. 1, THE REVENUE CHALLENGED THE ORDE R OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.2,69,800/- MADE BY THE AO U/S. 40A(3) OF THE IT ACT. BRIEFLY, THE FACTS ON THIS ISSUE ARE THAT THE AO FO UND THAT THE ASSESSEE HAS PURCHASED LANDS IN SIX TRANSACTIONS FOR THE BUSINES S AND FOR TWO TRANSACTIONS, CASH PAYMENTS HAVE BEEN MADE FOR PURCHASE OF LANDS AT VI LLAGE SUNRAKH BANGAR AND LAND AT MAUZA JAINT FOR RS.11,80,000/- AND RS. 1,69 ,000/- TOTALING TO RS.13,49,000/-. THE AO HAS NOTED THAT ALL THE PAYME NTS WERE MADE FOR PURCHASE OF LAND AS STOCK IN TRADE. THEREFORE, 20% WAS DISALLOW ED U/S. 40A(3) OF THE IT ACT. IT WAS EXPLAINED BY THE ASSESSEE THAT THE ABOVE PROVIS ION IS NOT APPLICABLE TO THE FACTS OF THE CASE BECAUSE GENUINE PURCHASES HAVE BEEN MAD E OF LANDS WHICH COULD BE VERIFIED FROM THE OFFICE OF THE SUB-REGISTRAR. IT W AS ALSO EXPLAINED THAT THE ASSESSEE PURCHASED AGRICULTURAL LANDS AS CAPITAL IN VESTMENT, WHICH WERE LATER ON CONVERTED INTO STOCK IN TRADE. IN RESPECT OF THE SA ME, THE ASSESSEE PRODUCED COPY OF LEDGER ACCOUNT AND OTHER EVIDENCES TO SHOW THAT IN THE BOOKS OF ACCOUNT THESE TWO TRANSACTIONS OF PURCHASE OF LANDS HAVE BEEN SHOWN A S CAPITAL INVESTMENT. THE LD. CIT(A) ON EXAMINATION OF THE DETAILS FOUND THAT THE ASSESSEE HAS PURCHASED THESE LANDS AS CAPITAL ASSETS AND LATER ON IT WAS CONVERT ED INTO STOCK IN TRADE. THEREFORE, THE PROVISIONS OF SECTION 40A(3) WOULD NOT APPLY FO R MAKING PAYMENTS FOR INVESTMENTS. THE AO WAS DIRECTED TO VERIFY THE DETA ILS AND THE AO AS PER DIRECTIONS OF THE LD. CIT(A) VERIFIED THE FACTS AND REPORTED THAT THE ASSESSEE ITA NO. 382/AGRA/2011 3 PURCHASED AGRICULTURAL LANDS ON ACCOUNT OF AGRICULT URAL LAND INVESTMENT ACCOUNT AND LATER ON, THE ASSESSEE TRANSFERRED THESE LANDS INTO THE STOCK IN TRADE ACCOUNT ON 12.10.2009, I.E., SUBSEQUENT TO THE ASSESSMENT YEAR UNDER APPEAL. THE LD. CIT(A) WAS, THEREFORE, SATISFIED WITH THE EXPLANATION OF T HE ASSESSEE THAT THE ASSESSEE PURCHASED THE LANDS AS INVESTMENT INTO THE CAPITAL ASSET. THEREFORE, THE PROVISIONS OF SECTION 40A(3) WOULD NOT APPLY. IT WAS ALSO FOUN D THAT LANDS WERE CONVERTED FROM INVESTMENT ACCOUNT TO THE STOCK IN TRADE ACCOU NT LATER ON. THEREFORE, THE ADDITION WAS DELETED. 4. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. D R, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETIN G THE ADDITION. THE LD. DR RELIED UPON THE ORDER OF THE AO AND HAS NOT POINTED OUT AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE AO HIMSELF REPORTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE PURCHASED THE AGRICULTURAL LAND ON ACCOUNT OF AGRIC ULTURAL LAND INVESTMENT ACCOUNT, WHICH WERE LATER ON TRANSFERRED TO STOCK IN TRADE A CCOUNT ON 12.10.2009. THEREFORE, IN THE ASSESSMENT YEAR UNDER APPEAL, I.E., 2007-08, THE AGRICULTURAL LANDS WERE PURCHASED ON ACCOUNT OF INVESTMENT. SECTION 40A(3) OF THE IT ACT FALLS IN CHAPTER IV OF THE INCOME-TAX ACT FOR COMPUTATION OF BUSINES S INCOME. THE LD. CIT(A), ON PROPER APPRECIATION OF THE FACTS AND REPORT OF THE AO, RIGHTLY HELD THAT THE ITA NO. 382/AGRA/2011 4 PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN THIS CASE. ACCORDINGLY, GROUND NO.1 OF APPEAL OF THE REVENUE IS DISMISSED. 5. ON GROUND NO. 2, THE REVENUE CHALLENGED THE ORDE R OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.20,00,000/- MADE BY THE AO U/S. 68 OF THE IT ACT. THE ASSESSEE RECEIVED LOAN OF RS.20,00,000/- FROM SHRI RAM GOPAL ON TWO DATES IN A SUM OF RS.8,00,000/- AND RS.12,00,000/- THROUGH CHE QUES. THE ASSESSEE FILED CONFIRMATION LETTER BEFORE THE AO GIVING THE PAN OF THE DEPOSITOR AND ALSO FILED COPY OF BANK CERTIFICATE WHEREIN IT WAS CONFIRMED T HAT THE LOAN CHEQUES HAVE BEEN DEBITED TO THE ASSESSEE. THE AO WAS, HOWEVER, NOT S ATISFIED WITH THE SOURCE OF INCOME OF THE CREDITOR AND HELD THAT THE CREDITWORT HINESS OF THE CREDITOR HAS NOT BEEN PROVED AND ACCORDINGLY, MADE ADDITION. 6. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT THE CREDITOR IS ASSESSED TO TAX AND FILED CONFIRMATION LETTER GIVING PAN ALSO CONFIRMIN G THE TRANSACTION OF GIVING LOAN THROUGH CHEQUES WHICH IS SUPPORTED BY BANK STATEMEN T OF THE CREDITOR. IT WAS ALSO EXPLAINED THAT IN THE BANK CERTIFICATE, IT WAS PROV ED THAT NO CASH HAS BEEN DEPOSITED FOR ISSUING THE CHEQUES AND IF THE AO WAS NOT SATIS FIED WITH THE CREDITWORTHINESS OF THE CREDITOR, HE SHOULD HAVE SUMMONED THE CREDITOR U/S. 131 OF THE IT ACT ON THE REQUEST OF THE ASSESSEE. HOWEVER, THE AO HAS NOT SU MMONED THE CREDITOR ON THE ITA NO. 382/AGRA/2011 5 REQUEST OF THE ASSESSEE. THEREFORE, THE ADDITION SH OULD BE DELETED. THE LD. CIT(A) ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT SUFFI CIENT EVIDENCE HAVE BEEN FILED TO PROVE IDENTITY OF THE CREDITOR, HIS CREDITWORTHINES S AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE LD. CIT(A) ALSO FOUN D FROM THE BANK CERTIFICATE THAT RS.21,65,000/- HAVE BEEN CREDITED IN THE ACCOUNT OF THE CREDITOR BEING CLEARING PROCEEDS OF CHEQUES. THE LD. CIT(A) ALSO FOUND ON V ERIFICATION FROM THE COMPUTER CENTRE OF THE INCOME-TAX DEPARTMENT THAT THE PAN OF THE CREDITOR IS CORRECT AND THE CREDITOR IS ASSESSED TO TAX WITH ITO 4(3), AGRA. TH E LD. CIT(A) ALSO NOTED THAT ON EXAMINING THE BANK CERTIFICATE AND THE DETAILS, THE CREDITWORTHINESS OF THE CREDITOR IS PROVED AND IN CASE THE AO WAS HAVING ANY DOUBT O N THE CREDITWORTHINESS OF SHRI RAM GOPAL, HE COULD HAVE SUMMONED THE CREDITOR U/S. 131 OF THE IT ACT ON THE REQUEST OF THE ASSESSEE. HOWEVER, THE AO DID NOT IS SUE SUMMON ON THE REQUEST OF THE ASSESSEE. THE LD. CIT(A) ALSO FOUND THAT NO EVI DENCE HAS BEEN BROUGHT ON RECORD THAT THE AMOUNTS OF CHEQUES WERE GIVEN BACK TO THE CREDITOR OR THE SAME DID NOT BELONG TO HIM. THE LD. CIT(A), THEREFORE, HELD THAT INITIAL ONUS UPON THE ASSESSEE IS DISCHARGED TO PROVE THE CONDITION OF SE CTION 68 OF THE ACT. THE LD. CIT(A) IN SUPPORT OF HIS FINDINGS RELIED UPON THE D ECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS, 256 ITR 360 AND THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JOHARI MAL GOYAL, 147 TAXMAN 448 (ALLD.). THE LD. CIT(A) CONSIDERING THE FACTS, EVIDENCE ON RECORD AND ITA NO. 382/AGRA/2011 6 ABOVE JUDGMENTS, HELD THAT THE CREDITOR HAS CONFIRM ED GIVING OF LOAN TO THE ASSESSEE AND WAS ASSESSED TO TAX AND THERE WAS SUFF ICIENT AMOUNT AVAILABLE IN THE ACCOUNT OF THE CREDITOR AS PER BANK CERTIFICATE TO GIVE LOAN TO THE ASSESSEE. THE ADDITION WAS ACCORDINGLY DELETED. 7. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT NO SOURCE OF INCOME WAS FILED BEFORE THE AO. THEREFORE, CREDITWO RTHINESS OF THE CREDITOR IS NOT PROVED AND THE ORDER OF THE AO MAY BE RESTORED. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR , THE FACTS OF THE CASE AND THE WRITTEN SUBMISSION OF THE ASSESSEE AND DO NOT F IND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE AD DITION. THE ASSESSEE IN THE WRITTEN SUBMISSION FILED COPY OF REPLY FILED BEFORE THE AO IN WHICH THE ASSESSEE SPECIFICALLY PLEADED THAT IN CASE THE AO IS NOT SAT ISFIED WITH THE DOCUMENTS PRODUCED WITH REGARD TO SHRI RAM GOPAL, THE CREDITO R, HE MAY BE SUMMONED U/S. 131 OF THE IT ACT ON THE COST OF THE ASSESSEE. THE HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. RAMESH CHAND SHUKLA, MAIT NO. 71 OF 2003 DECIDED ON 01.04.2005 (10 ITJ-286) HELD THAT IT IS NOW WELL SETTLED THAT WHERE ASSESSEE REQUESTS THE AO TO ISSUE SUMMONS TO ENFORCE ATTENDA NCE OF THE CREDITORS TO ESTABLISH THE GENUINENESS AND CAPACITY OF THE CREDI TORS, IT IS DUTY OF THE AO TO ITA NO. 382/AGRA/2011 7 ENFORCE ATTENDANCE OF THE CREDITORS BY ISSUING SUMM ONS. IF THE AO DOES NOT CHOOSE TO ISSUE SUMMONS AND EXAMINE THE CREDITORS, HE CANN OT SUBSEQUENTLY TREAT THE LOANS STANDING IN THE NAME OF SUCH CREDITORS AS NON -GENUINE NOR ADD THE AMOUNT THEREOF TO THE ASSESSEES INCOME . IN THE PRESENT CASE, IT IS UNDISPUTED FACT THAT T HE ASSESSEE FILED CONFIRMATION OF THE CREDITOR BEFORE THE AO GIVING PAN OF THE CREDITOR ALSO CONFIRMING THEREIN THAT THE LOANS WER E GIVING TO THE ASSESSEE THROUGH CHEQUES. THE LD. CIT(A) ON VERIFICATION OF THE PAN OF THE CREDITOR, FOUND THE SAME TO BE CORRECT AND GENUINE AND THE CREDITOR WAS ASSE SSED TO TAX WITH THE INCOME-TAX DEPARTMENT AT AGRA. THE CONFIRMATION WAS SUPPORTED BY THE BANK CERTIFICATE OF THE CREDITOR WHICH IS ALSO REPRODUCED IN THE IMPUGNED O RDER IN WHICH THE BANK HAS CONFIRMED OF DEBITING THE CHEQUES IN THE NAME OF TH E ASSESSEE WHICH WERE ISSUED FROM THE ACCOUNT OF THE CREDITOR AND THERE WAS SUFF ICIENT BANK BALANCE AVAILABLE IN THE ACCOUNT OF THE CREDITOR ON CLEARING OF THE CHEQ UES PROCEEDS. THE ASSESSEE ALSO MADE A REQUEST TO THE AO THAT IN CASE HE IS NOT SAT ISFIED WITH THESE DOCUMENTS, CREDITOR MAY BE SUMMONED U/S. 131 OF THE IT ACT FOR EXAMINATION, BUT THE AO DID NOT ISSUE ANY SUMMON TO THE CREDITOR. THEREFORE, TH E DECISION IN THE CASE OF RAMESH CHAND SHUKLA (SUPRA) CLEARLY SUPPORTS THE FI NDINGS OF THE LD. CIT(A). THE SAME VIEW IS TAKEN BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ADDL. CIT VS. RADHEY SHYAM JAGDISH PRASAD, 117 ITR 186. CONSIDER ING THE TOTALITY OF FACTS AND CIRCUMSTANCES NOTED ABOVE, WE ARE OF THE VIEW THAT THE LD. CIT(A) ON PROPER ITA NO. 382/AGRA/2011 8 APPRECIATION OF FACTS AND EVIDENCE ON RECORD, RIGHT LY DELETED THE ADDITION. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. 9. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY