ACIT, New Delhi V. Sh. Pramod Jain, Delhi

ITA 3916/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58810 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI S.V. MAHROTRA, ACCOUNTANT MEMBER ITA NO. 3916/DEL/2010 ASSESSMENT YEAR: 2007-2008 ACIT, CIRCLE-39(1), ROOM NO. 212, C.R. BLDG., NEW DELHI. VS. PRAMOD JAIN, PROP. M/S MAHAVIR TRADERS, 5834-356, BASTI HARPHOOL SINGH, SADAR BAZAR, DELHI. AAFPJ6259H (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. RENUKA JAIN GUPTA, SR. DR RESPONDENT BY : VED JAIN, CA O R D E R PER S.V. MAHROTRA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER OF LD. CIT(A) DATED 30.03.2010 FOR THE A.Y. 2 007-2008. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF NARROW WOVEN FABRIC, COTTON NIWAR AND OTHER BAG MATERIAL. HE HAD FILED HIS RET URN OF INCOME DECLARING TOTAL INCOME AT RS. 7,82,290/-. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 43,14,586/-, INTER-ALIA MAKING FOLLOW ING ADDITIONS: - DISALLOWANCE OF INTEREST EXPENSES RS. 3,31,170/ - UNEXPLAINED LOAN BALANCES RS. 27,40,760/- UNEXPLAINED SOURCE OF SMT. PREM DEVI LOAN RS. 3,7 5,000/- ITA NO. 3916/D/2010 2 3. LD. CIT(A) WHILE PARTLY ALLOWING THE ASSESSEES APPEAL DELETED THE AFOREMENTIONED DISALLOWANCES. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US. THE FIRST GROUND RAISED BY THE D EPARTMENT READS AS UNDER: - 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 27,40,760/- M ADE ON ACCOUNT OF UNEXPLAINED LOANS BY ACCEPTING THE ADDITIONAL EVIDE NCE IN VIEW OF PROVISION OF RULE 46A OF THE INCOME TAX RULES. 4. BRIEF FACTS APROPOS THIS ISSUE ARE THAT THE AO R EQUIRED THE ASSESSEE TO FURNISH THE FOLLOWING DETAILS IN REGARD TO UNSEC URED LOANS: - THE CONFIRMATION ALONG WITH COMPLETE ADDRESS AND PAN OF UNSECURED LOANS AND SQUARED UP ACCOUNT AND SECURED LOAN ALSO, IF ANY. FOLLOWING, EVIDENCE AS TO GENUINENESS AND CREDIT WO RTHINESS OF THE PERSONS WHO HAVE ADVANCED LOANS DURING THE YEAR BE ALSO GIVEN: - (I) GIVE NAME, ADDRESS, PAN, WARD NO./CIRCLE NO. OF PER SONS GIVING LOAN WITH COPY OF ACKNOWLEDGEMENT RECEIPT OF LATEST RETURN FILED AND AMOUNT OF LOAN GIVEN. (II) CONFIRMATION OF ABOVE PERSONS GIVING DETAILS OF DAT E, AMOUNT, CHEQUES NO., NAME OF BANK/BRANCH FROM WHERE CHEQUE ISSUED. (III) COPY OF STATEMENT OF INCOME, BALANCE SHEET, COPY OF RELEVANT ANNEXURE IN WHICH LOANS/ADVANCES MADE TO THE ASSESS EE ARE SHOWN. (IV) COPY OF BANK STATEMENT OF THE RELEVANT MONTH IN WHI CH LOAN WAS ADVANCED. (V) DETAILED NARRATION OF THE RELEVANT BANK ENTRY REGAR DING SOURCE OF LOAN GIVEN. 5. THE ASSESSEE FILED CONFIRMATION IN RESPECT OF FO LLOWING SIX PERSONS: - THE ASSESSEE IN HIS REPLY DATED 17.09.2009 COULD ONLY FILE FOLLOWING CONFIRMATIONS: - 1. SUKMAL CHAND JAIN & SONS (HUF) RS. 6,93,060/ - 2. PRADEEP JAIN & SONS (HUF) RS. 6,92,938/- 3. PARMOD JAIN & SONS (HUF) RS. 6,95,387/- 4. RAJESH JAIN RS. 3,55,492/- 5. MADHU JAIN RS. 5,21,569/- 6. PREM DEVI RS. 7,76,642 /- TOTAL RS. 37,15,088/- ITA NO. 3916/D/2010 3 6. THEREFORE, THE AO MADE AN ADDITION OF RS. 27,40, 760/- OUT OF THE TOTAL UNSECURED LOAN AMOUNTING TO RS. 64,55,848/- IN RESP ECT OF THOSE LENDERS WHO DID NOT FILE THE CONFIRMATION. BEFORE THE LD. CIT(A) IT WAS PRIMARILY DEMONSTRATED THAT IN SOME ACCOUNTS THE INCREASE IN THE BALANCE WAS ON ACCOUNT OF INTEREST BEING CREDITED TO THEIR RESPECT IVE ACCOUNTS AND IN SOME OTHER CASES ONLY THE OPENING BALANCES WERE THERE. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL. 7. LD. DR SUBMITTED THAT ASSESSEE WAS GIVEN SUFFICI ENT OPPORTUNITY TO SUBSTANTIATE THE UNSECURED LOAN TAKEN BY HIM. HE R EFERRED TO PARA 4.3 OF CIT(APPEALS) ORDER AND POINTED OUT THAT THE LD. CIT (A) ACCEPTED THE ASSESSEES CONTENTION REGARDING CREDIT IN THE RESPE CTIVE ACCOUNTS RELATING TO INTEREST ACCRUED WHICH WAS NOT BEFORE THE AO. 8. LD. COUNSEL SUBMITTED THAT THE DEPARTMENTS GROU ND IS REGARDING ACCEPTANCE OF ADDITIONAL EVIDENCE IN VIOLATION TO R ULE 46A. HE SUBMITTED THAT NO PAPER WAS FILED BEFORE THE LD. CIT(A). THE REFORE, THIS GROUND DESERVES TO BE REJECTED ON THIS PRELIMINARY ISSUE O NLY. HE REFERRED TO PAGE 4 OF THE PAPER BOOK, WHEREIN THE LIST OF UNSECURED LOANS AS ON 31.03.2006 AND 31.03.2007 IS CONTAINED TO DEMONSTRATE THAT UNS ECURED LOANS WERE OLD AND IN FOLLOWING ACCOUNTS ONLY INTEREST HAD BEEN CR EDITED: - NAME OP. BAL. CL. BAL. AMOUNT REMARK PRADEEP JAIN & SONS (HUF) 6,25,530 6,92,938 67,408 INTEREST PRAMOD JAIN & SONS 6,25,485 6,95,387 69,902 INTEREST 2500/- RECEIVED MADHU JAIN 4,70,832 5,21,569 50,737 INTEREST SUKMAL CHAND JAIN & SONS 6,25,641 6,93,060 67,419 INTEREST RAJESH JAIN 3,02,856 3,35,492 32,636 INTEREST ITA NO. 3916/D/2010 4 9. FURTHER IN FOLLOWING ACCOUNTS THERE IS NO VARIAT ION IN THE OPENING AND CLOSING BALANCE: - MAHAVIR TRADERS SCHEDULE - A LIST OF UNSECURED LOANS AS ON 31 ST MARCH, 2007 31.03.2007 31.03.2006 S.NO. PARTICULARS AMOUNT (RS.) AMOUNT (RS.) 1. AMPLE FINVEST P. LTD. 40,360.00 40,360.00 2. ATUL JAIN 860,000.00 860,000.00 3. BABU LAL MAHENDER KUMAR 224,000.00 224,000.00 4. BURIENT EATHEM P. LTD. 453,000.00 453,000.00 5. CALRIUM TIE UP P. LTD. 448,000.00 448,000.00 6. DARSHAN LAL JAIN 54,000.00 54,000.00 7. LAKSHMI JAIN 75,000.00 75,000.00 8. RITA JAIN 25,000.00 25,000.00 9. SURENDER LAL JAIN 50,400.00 50,400.00 10. UNITOUCH FIN. & INVEST. CO. LTD. 336,000.00 336,000.00 11. UTTAM CHAND JAIN 175,000.00 175,000.00 10. FROM THE ABOVE, IT IS EVIDENT THAT NO LOAN WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION FROM THE AFOREMENTIONED PA RTIES. THEREFORE, THERE WAS NO QUESTION OF MAKING ANY ADDITION ON THI S COUNT IN THE CURRENT ASSESSMENT YEAR. ALL THESE DETAILS ARE PART OF FINA NCIAL STATEMENTS OF ASSESSEE WHICH WERE BEFORE THE AO ALSO. THEREFORE, THERE WAS NO QUESTION OF ANY ADDITIONAL EVIDENCE BEING FILED BEF ORE THE LD. CIT(A). WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F LD. CIT(A). 11. GROUND NO. 2 READS AS UNDER: - 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE ADDITION OF RS. 3,75,000/- MADE ON ACCOUNT OF UNEXPLAINED SOURC E OF LOAN FROM SMT. PREM DEVI BY ACCEPTING THE ADDITIONAL EVIDENCE IN VIEW O F PROVISION OF RULE 46A OF THE INCOME-TAX. ITA NO. 3916/D/2010 5 12. BRIEF FACTS APROPOS THIS ISSUE ARE THAT THERE W AS AN UNSECURED LOAN OF RS. 7,76,642/- FROM SMT. PREM DEVI OUT OF WHICH THE OPENING BALANCE WAS RS. 3,91,106/-. THE BALANCE AMOUNT OF RS. 3,75,000 /- WAS ADVANCED BY HER DURING THE YEAR OUT OF AN ADVANCE AGAINST PROPE RTY RECEIVED BY HER. THE AO REQUIRED THE ASSESSEE TO FILE EVIDENCE OF PR OPERTY SOLD BY SMT. PREM DEVI BUT THE ASSESSEE FAILED TO DO SO. A COPY OF RELEVANT PAGES OF BANK ACCOUNT OF SMT. PREM DEVI AND COPY OF HER ACKN OWLEDGEMENT OF ITR WAS ALSO NOT FILED. THEREFORE, THE AO MADE AN ADDI TION OF RS. 3,75,000/- AS UNEXPLAINED AMOUNT. 13. BEFORE LD. CIT(A), IT WAS SUBMITTED THAT AN AMO UNT OF RS. 3,75,000/- WAS ADVANCED IN RESPECT OF A TRANSACTION OF A PROPE RTY TO THE ASSESSEE BY MRS. KAUPALYA DEVI WHO WAS DIRECTED BY SMT. PREM DE VI TO DEPOSIT THE SAID AMOUNT WITH THE ASSESSEE. IT WAS FURTHER POIN TED OUT THAT ASSESSEE HAD ESTABLISHED THE SOURCE OF HIS RECEIPTS BY PROVI DING CONFIRMATION FROM PREM DEVI AND, THEREFORE, HE HAD DISCHARGED HIS ONU S. LD. CIT(A) DELETED THE ADDITION. 14. LD. DR SUBMITTED THAT AO ACCEPTED THE CREDIBILI TY OF PREM DEVI WITHOUT PROPER EVIDENCE. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IT IS NOT DISPUTE D THAT SMT. PREM DEVI WAS ASSESSED TO TAX. SHE HAD CONFIRMED GIVING LOAN OF RS. 3,75,000/- TO ASSESSEE. THE SOURCE OF THIS LOAN COULD BE EXAMINE D IN THE ASSESSMENT OF PREM DEVI BY REFERRING THE MATTER TO THE AO HAVING JURISDICTION OVER PREM DEVI. BUT ONCE THE LENDER HAD CONFIRMED THE LOAN T O THE ASSESSEE AND THE CREDIBILITY OF LENDER WAS NOT IN DOUBT THEN MERELY ON ACCOUNT OF NON- FURNISHING OF DETAILS RELATING TO TRANSACTIONS PERT AINING TO LENDER AND THIRD ITA NO. 3916/D/2010 6 PARTIES, THE ADDITION WAS NOT JUSTIFIED. LD. CIT(A ) HAS RIGHTLY OBSERVED THAT ASSESSEE HAD DULY DISCHARGED ITS ONUS. 16. WE ACCORDINGLY CONFIRM THE ORDER OF LD. CIT(A) ON THIS COUNT. IN THE RESULT, THIS GROUND IS DISMISSED. 17. GROUND NO. 3 READS AS UNDER: - 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3,31,170/- RE GARDING DISALLOWANCES OF INTEREST DEBITED TO P&L ACCOUNT WHICH RELATES TO LO AN EXTENDED FOR NON- BUSINESS PURPOSES. 18. THE AO NOTICED THAT ASSESSEE ON ONE HAND WAS CL AIMING INTEREST EXPENSES OF RS. 3,31,170/- ON UNSECURED LOANS OF RS . 37.15 LACS AND ON THE OTHER HAND, ADVANCED INTEREST FREE LOANS TO HIS RELATIVES AND FRIENDS FOR NON-BUSINESS PURPOSES. THE ASSESSEE POINTED OUT TH AT LOAN WAS GIVEN OUT OF SURPLUS FROM CAPITAL ACCOUNT OF RS. 34.38 LACS A ND OUT OF NON-INTEREST BEARING SURPLUS GENERATED IN THE BUSINESS. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION OBSERVING THAT INTEREST FREE LOANS ADVANCED AMOUNT TO RS. 59,22,914/- WHICH IS MUCH MORE THAN THE SURP LUS IN HIS CAPITAL ACCOUNT AND SURPLUS GENERATED IN BUSINESS DURING TH E YEAR. LD. CIT(A) DELETED THE ADDITION, INTER-ALIA, OBSERVING THAT TH E MATERIAL ON RECORD DOES NOT WARRANT THE CONCLUSION THAT THE INTEREST FREE L OANS HAD BEEN GIVEN OUT OF INTEREST BEARING FUNDS. 19. LD. DR RELIED ON THE ORDER OF AO. 20. LD. COUNSEL SUBMITTED THAT ASSESSEES CAPITAL W AS 38.14 LACS AND IT HAD TAKEN UNSECURED LOANS OF RS. 64.55 LACS. HE PO INTED OUT THAT OUT OF THESE UNSECURED LOANS INTEREST BEARING LOANS WERE T O THE EXTENT OF RS. 30 LACS AND THE BALANCE 34.55 LACS WAS NON-INTEREST BE ARING. THUS, THE ITA NO. 3916/D/2010 7 ASSESSEE HAD 73 LAKHS INTEREST FREE FUNDS OUT OF WH ICH IT HAD ADVANCED 59 LAKHS AND, THEREFORE, THE ENTIRE INTEREST FREE LOAN S WERE COVERED BY INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. 21. WE HAVE THE FACTS AS SUBMITTED BY LD. COUNSEL A RE CLEARLY DISCERNIBLE FROM THE FINANCIAL STATEMENTS OF ASSESSEE. SINCE, ENTIRE NON-INTEREST BEARING ADVANCES WERE COVERED BY NON-INTEREST BEARI NG FUNDS AVAILABLE WITH THE ASSESSEE, THE DISALLOWANCE WAS WHOLLY UNWA RRANTED. IN THE RESULT, THIS GROUND IS DISMISSED. 22. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.02.2012 SD/- SD/- ( U.B.S. BEDI ) JUDICIAL MEMBER ( S.V. MAHROTRA ) ACCOUNTANT MEMBER DATED: 29.2.12 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR