ITO 25(2)(1), MUMBAI V. KIRAN R. MEHTA, MUMBAI

ITA 3884/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71421 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-03-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Keywords: Unexplained cash credit; Bonafide belief; Onus to prove
• Section: 69C; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.3884/MUM/2010 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER 25(2)(1) C-11, BLDG., ROOM NO.107 P.K. BHAVAN, BKC BANDRA(E) MUMBAI-51. VS. MR. KIRAN R. MEHTA 5 TH FLOOR, PLOT NO.82 KAILASH APAT.NO.3 S.V. ROAD, BORIVALI(W) MUMBAI-92. (APPELLANT) (RESPONDENT) P.A. NUMBER : AACPM 7558 H ASSESSEE BY : SHRI MANDAR VAIDYA REVENUE BY : SHRI S.K. MADHUK DATE OF HEARING : 21/08/2013 DATE OF PRONOUNCEMENT : 18/10/2013 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDERS OF THE CIT(A) DATED 19/03/2010 RELEVANT TO T HE ASSESSMENT YEAR 2007-08. ITA NO.3884/M/10 A.Y.07-08 2 2. THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S. S.K. ENTERPRISES ENGAGED IN THE BUSINESS OF PROVIDING LO ANS AND HAVING INCOME FROM ASSORTMENT CHARGES. FOR THE RELEVANT AS SESSMENT YEAR, THE ASSESSEE FILED HIS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.1,20,772/- WHICH WAS ACCEPTED U/S.143(1). SUBSEQ UENTLY, THE A.O. SELECTED THE CASE FOR SCRUTINY AND COMPLETED THE AS SESSMENT U/S.143(3) AND AFTER MAKING CERTAIN ADDITIONS DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.41,55,270/- . THE CIT(A) IN APPEAL S UBJECT TO CERTAIN DIRECTIONS DELETED THE ADDITIONS SO MADE BY THE AO. THE REVENUE IS THUS IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON MADE U/S. 68 OF THE ACT AMOUNTING TO RS.31,00,000/- ON ACCOUN T OF LOANS ACCEPTED DURING THE YEAR, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE PRI MARY ONUS CAST ON HIM AND HAS NOT PROVED THE CREDITWORTHINESS OF THE LOAN CREDITORS. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST PAID OF RS.3,60,000/- MADE U/S. 69C OF THE ACT ON ACCOUNT OF INTEREST PAID, WITHOUT APPREC IATING THAT THE ASSESSEE HAS NOT PROVIDED ANY DETAILS REGARDING SUCH INTEREST PAYMENTS. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.5,74,000/- MADE U/S. 68 OF THE ACT ON ACCOUNT OF CASH DEPOSITS IN THE BANK ACCOUNT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE SO URCE OF THESE DEPOSITS DURING THE ASSESSMENT PROCEEDINGS. 3. THE ISSUES, INVOLVED IN THIS APPEAL ARE DISCUSSE D SEPARATELY AS BELOW: GROUND NO. (I): UNSECURED LOANS - RS.31,00,000/- ITA NO.3884/M/10 A.Y.07-08 3 3.1 THE A.O. NOTICED THAT THE ASSESSEE RECEIVED NEW LOANS OF RS.31,00,000/- DURING THIS YEAR. THE ASSESSEE FILED CONFIRMATION FROM M/S. R. KANTILAL & CO. FOR A LOAN RS.16,00,000/- AN D FROM DIVYA TEJ CORPORATION FOR RS.15,00,000/-.THE A.O. HELD THAT M ERE FILING OF CONFIRMATION LETTERS WOULD NOT DISCHARGE THE BURDEN OF PROOF AND THE ASSESSEE DID NOT FILE DOCUMENTARY EVIDENCES IN THE FORM OF PAN OF LOAN CREDITORS, COPY OF RETURN OF INCOME AND BANK STATEM ENT REFLECTING THE TRANSACTIONS .THE AO WAS OF THE OPINION THAT THE AS SESSEE DID NOT PROVIDE THE COMPLETE DETAILS AND, THEREFORE, ADDED RS.31,00,000/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CRED IT U/S.68 OF THE I.T. ACT. 3.2 THE LD. CIT(A) IN APPEAL OBSERVED THAT THE ASSE SSEE HAD FILED THE CONFIRMATION LETTERS FROM THE CREDITORS BEFORE THE AO. IN WHICH THE ADDRESSES OF THE PARTIES WERE CLEARLY INDICATED. TH OUGH THE PAN OF THE CREDITORS WERE NOT MENTIONED IN THE CONFIRMATION LE TTERS, YET, IT WAS EVIDENT THAT THE LOANS WERE RECEIVED THROUGH BANKIN G CHANNEL. THE RESPECTIVE ENTRIES WERE MADE IN THE BANK ACCOUNTS O F THE ASSESSEE AND THE SAME WAS FORMING PART OF THE REGULAR BOOKS OF A CCOUNTS MAINTAINED BY THE ASSESSEE. IT WAS FURTHER OBSERVED BY HIM THA T THAT THE SAID LOANS HAD BEEN REPAID BY THE ASSESSEE THROUGH ACCOUNT PAY EE CHEQUES AS EVIDENCED FROM THE BANK ACCOUNT OF THE ASSESSEE WIT H N/S. INDIAN OVERSEAS BANK. HE THUS CONCLUDED THAT FROM THE DOCU MENTS, IT WAS EVIDENT THAT THE ASSESSEE RECEIVED AND REPAID THE L OAN FROM THE CREDITORS THROUGH BANKING CHANNEL AND MERELY BECAUSE PAN WAS NOT QUOTED IN THE CONFIRMATION, COULD NOT BE THE GROUND FOR MAKING TH E ADDITION ESPECIALLY WHEN THE AO HAD NEVER ASKED THE ASSESSEE TO FURNISH THE SAME. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THE CON FIRMATIONS WERE ACCEPTED BY THE A.O. EVEN THE AO WITHOUT CONDUCTING THE NECESSARY INQUIRIES, COULD NOT HAVE HELD THAT THE CREDITORS W ERE NOT GENUINE. THE LD. CIT(A) THUS DELETED THE ADDITION OF RS.31.00 LA CS MADE BY THE AO. ITA NO.3884/M/10 A.Y.07-08 4 HOWEVER HE FURTHER DIRECTED THAT THE A.O. WOULD BE FREE TO EXAMINE THE SOURCE IN THE HANDS OF THE CREDITORS AND IF LATER O N IT IS FOUND THAT THE ASSESSEE HAD NOT SUBMITTED TRUE AND CORRECT PARTICU LARS, NECESSARY ACTION MAY BE TAKEN IN ACCORDANCE WITH LAW. IN CA SE THE CREDITORS ARE NOT ASSESSED TO INCOME TAX OR THE LOAN GIVEN TO THE ASSESSEE ARE NOT REFLECTED IN THE INCOME TAX STATEMENT FILED BY THEM , THE A.O. SHALL BE FREE TO PROCEED AGAINST THEM. 3.3 THE LD. DR, BEFORE US, HAS SUBMITTED THAT THE C REDIT WORTHINESS OF THE CREDITORS WAS NOT PROVED BY THE ASSESSEE AND EV EN PAN NUMBERS OF THE CREDITORS WERE NOT FURNISHED BY HIM BEFORE THE AO, HENCE THE ADDITIONS UNDER THIS HEAD WERE RIGHTLY MADE BY THE AO. ON THE OTHER HAND THE LD. AR HAS RELIED UPON THE FINDINGS OF THE CIT(A). 3.4 WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. REPRESENTATIVES OF THE PARTIES. WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CIT(A) THAT THE AO COULD NOT HAVE MADE THE ABOV E MENTIONED ADDITIONS WITHOUT MAKING PROPER INQUIRIES TO SATISF Y HIMSELF REGARDING THE GENUINENESS OF THE CREDITORS ETC. THE AO FIRSTL Y SHOULD HAVE ASKED THE ASSESSEE TO FURNISH THE REQUIRED DETAILS SUCH A S PAN NUMBER ETC. OF THE CREDITORS AND SECONDLY HE HIMSELF COULD HAVE SU MMONED THE RECORDS AND IN CASE OF NEED THE CREDITORS BY ISSUING SUMMON S UNDER SECTION 131 OF THE INCOME TAX ACT. ADMITTEDLY NO SUCH COURSE WA S ADOPTED BY THE AO. HENCE IN OUR VIEW THE LD. CIT(A) HAS RIGHTLY RE STORED THE ISSUE TO THE FILE OF THE AO WITH LIBERTY TO THE AO TO MAKE NECES SARY INQUIRIES ABOUT THE CREDITWORTHINESS ETC. OF THE CREDITORS BY MAKIN G RESORT TO THE PROVISIONS OF THE I.T. ACT IN THIS RESPECT, IN ACCO RDANCE WITH LAW AND DECIDE THE ISSUE ACCORDINGLY. 4. GROUND NO.(II): INTEREST PAYMENT - RS. 3,60,000/- ITA NO.3884/M/10 A.Y.07-08 5 4.1 THE AO NOTICED THAT THE ASSESSEE CLAIMED INTERE ST PAYMENT OF RS. 3,60,000/-, BUT AS HE TREATED THE RECEIPT OF LOANS AS NOT GENUINE, HE DISALLOWED INTEREST OF RS. 3,60,000/- AS UNEXPLAINE D EXPENDITURE U/S.69C OF THE I.T. ACT. 4.2 THE LD. CIT(A) HOWEVER OBSERVED THAT THE INTE REST PAYMENT WAS NOT ON THE LOAN TAKEN DURING THE YEAR, BUT ON THE L OANS TAKEN IN THE EARLIER YEARS AS THERE WAS NO CLAIM OF INTEREST FOR THE CREDITS MADE DURING THE CURRENT YEAR AS PER THE CONFIRMATION LETTERS F ILED BY THE CREDITORS. THE AO WRONGLY OBSERVED THAT THE INTEREST OF RS. 3, 60,000/- WAS AGAINST LOAN OF RS.31,00,000/-, WHICH HE DISALLOWED IN THE ASSESSMENT ORDER AND CONSEQUENTLY THE INTEREST WAS ALSO DISALLOWED. HE T HEREFORE DELETED THE ADDITIONS MADE UNDER THIS HEAD. 4.3 BEFORE US, THE LD. DR HAS SUBMITTED THAT THE A O HAD RIGHTLY MADE THE ADDITIONS UNDER THIS HEAD AS THE ASSESSEE HAD F AILED TO SUBMIT THE NECESSARY DETAILS REGARDING SUCH INTEREST PAYMENT. ON THE OTHER HAND THE LD.AR HAS RELIED UPON THE FINDINGS OF THE CIT(A ). WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE P ARTIES. IN OUR VIEW THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE ASSESSEE H AD SUBMITTED THE NECESSARY DETAILS TO THE AO REGARDING THE INTEREST PAYMENT WHICH IN FACT WAS RELATING TO THE LOANS TAKEN IN THE PAST AND NOT DURING THE RELEVANT YEAR AND FURTHER THAT THE AO WRONGLY RELATED THE SA ME TO THE LOANS TAKEN DURING THE YEAR UNDER CONSIDERATION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE ALSO, HENCE, THE SAME ARE UPHELD . 5. GROUND NO.(III): CASH DEPOSIT-RS.5,74,500/- ITA NO.3884/M/10 A.Y.07-08 6 5.1 THE A.O. NOTICED THAT THE ASSESSEE DEPOSITED RS .5,74,500/- DURING THE YEAR IN CASH IN HIS BANK ACCOUNT MAINTAINED WIT H M/S. JAIN SAHAKARI BANK LTD. A.O. REQUIRED THE ASSESSEE TO E XPLAIN THE SOURCE OF DEPOSIT. THE ASSESSEE SUBMITTED THAT THE CASH IN QU ESTION WAS DEPOSITED IN PARTS ON DIFFERENT DATES AND FURNISHED THE DAT E & ITEM WISE CASH ACCOUNT TO THE AO. HE FURTHER EXPLAINED THAT THE SOURCE OF SUCH DEPOSIT WAS OUT OF THE OPENING CASH BALANCES OF RS.517000/ - AVAILABLE AS ON 1/4/06 & WITHDRAWALS FROM THE BANK ON VARIOUS DATES . HOWEVER, THE A.O. HELD THAT THE CASH ACCOUNT FILED BY THE ASSESS EE HAD NO AUTHENTICITY. HE FURTHER OBSERVED THAT EVEN THOUGH IT WAS TRUE THAT THE ASSESSEE WAS HAVING OPENING CASH BALANCE OF RS. 5,1 7,000/-, HOWEVER IT WAS NOT CLEAR AS TO HOW HE DEPOSITED THE SAME IN TH E LAST MONTHS OF YEAR. HE, THEREFORE, ADDED RS. 5,74,500/- TREATING IT AS UNEXPLAINED CASH CREDIT. 5.2 IN APPEAL THE LD. CIT(A) OBSERVED FROM THE BAL ANCE SHEET (AS ON 31.3.2006) THAT THE CASH IN HAND WAS SHOWN AT RS.5, 17,000/- MERELY BECAUSE THE ASSESSEE KEPT THE CASH IN HAND FOR LONG TIME, NO ADDITION COULD BE MADE UNLESS THE A.O. WOULD HAVE PROVED TH AT THE ASSESSEE DID NOT HAVE ADEQUATE SOURCE. HE HELD THAT THE ASSESSEE HAD SATISFACTORY EXPLAINED THE SOURCE OF CASH DEPOSITS IN THE BANK A CCOUNT WITH REFERENCE TO THE CASH BOOK AND AS SUCH DELETED THE ADDITION S O MADE BY THE AO UNDER THIS HEAD. 5.3 BEFORE US, THE LD. DR HAS RELIED UPON THE OBSER VATIONS OF THE AO WHILE THE LD. AR HAS RELIED UPON THE FINDINGS OF TH E CIT(A) ON THE ISSUE UNDER CONSIDERATION. AS OBSERVED ABOVE, THE BANK AC COUNT OF THE ASSESEE WAS FORMING THE PART OF THE REGULAR BOOKS OF THE A CCOUNT MAINTAINED BY THE ASSESSEE. THE CASH DEPOSITS WERE SUFFICIENTLY E XPLAINED AND ALSO TALLIED WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HENCE IN OUR VIEW THE ITA NO.3884/M/10 A.Y.07-08 7 CIT(A) RIGHTLY DELETED THE ADDITIONS UNDER THIS HEA D. THE FINDINGS OF THE CIT(A) ON THIS ISSUE ARE THEREFORE UPHELD. 6. GROUND NOS. (IV) AND (V) ARE GENERAL IN NATURE A ND NEED NOT ANY ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2013. SD/- SD/- (SANJAY ARORA ) ACCOUNTANT MEMBER (SANJAY GARG ) JUDICIAL MEMBER MUMBAI, DATED: 18/10/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.