Gabani Polyster Pvt.Ltd., Surat V. The Income tax Officer, Ward-1(2), Surat

ITA 3924/AHD/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2119 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH , , , , , , , , ! ! ! ! ' ' ' ' BEFORE S/SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AN D T.R. MEENA, ACCOUNTANT MEMBER) ITA NO.4505/AHD/2007 [ASSTT.YEAR : 2004-2005] AND ITA.NO. 3924/AHD/2008 [ASSTT.YEAR : 2005-2006] GABANI POLYESTER PVT. LTD. 11-A, BAMBAWADI PATEL INDUSTRIAL ESTATE KATARGAM, SURAT. # /VS. ITO, WARD-1(2) SURAT. ( (( (%& %& %& %& / APPELLANT) ( (( ('(%& '(%& '(%& '(%& / RESPONDENT) ) * / REVENUE BY : SHRI D.K. SINGH, SR. DR # , ) * / ASSESSEE BY : SHRI J.P. SHAH #- ) .!/ DATE OF HEARING : 11 TH APRIL, 2013 /01 ) .!/ DATE OF PRONOUNCEMENT : 24 TH MAY, 2013 2 / O R D E R PER MUKUL KR. SHRAWAT, JUDIIAL MEMBER : THESE TWO APPEALS BY THE ASSESSEE ARE ARISING FROM THE OR DER OF THE CIT(A)-I, SURAT DATED 1.1.2007 AND 17.10.2008 FOR THE ASSESSM ENT YEARS 2004- 2005 AND 2005-2006. BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. ITA NO.4505/AHD/2007 AND ITA.NO. 3924/AHD/2008 -2- 2. THE GROUND NO.1 FOR BOTH THE YEARS ARE ALMOST ID ENTICAL AS FAR AS THE LEGAL ISSUE IS CONCERNED, THEREFORE REPRODUCED BELOW: ASSTT.YEAR 2004-2005 ADDITION U/S.68 OF THE ACT: (1) THE LD.CIT(A) ERRED IN CONFIRMING ADDITION OF RS.25,14,100/- IN RESPECT OF LOAN AND SHARE APPLICA TION MONEY FROM THE FOLLOWING PARTIES: I) VIMAL GABANI 4,90,000 LOAN II) -DO- 12,74,100 SHARE APPLICATION III) DHARMENDRA LAXMANBHAI 2,20,000 LOAN IV) MANOJBHAI BABUBHAI PATEL 1,50,000 V) SMT. SHARDABEN SANDHANI 8,70,000 ASSTT.YEAR 2005-2006 (I) UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN NOT DELETING RS.6,07,000/- IN RESPECT OF L OAN FROM SHRI VIMAL GABANI. (2) THE APPELLANT SUBMITS THAT THE LD.CIT(A) WAS NO T JUSTIFIED IN IGNORING EVIDENCE OF LENDER, HIS CONFIRMATION AN D CAPACITY TO PAY AND HE WRONGLY RELIED ON STATEMENT OF SHRI PANKAJ DANAWALA, COPY OF WHICH WAS NOT GIVEN T O THE APPELLANT. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN NOT DELETING RS.48,000/- IN RESPECT OF LOA N FROM SHRI DHARMENDRA L. PATEL. 3. THE FACTS OF THE CASE HAVE REVEALED THAT THE ASS ESSEE HAD SHOWN UNSECURED LOANS FROM CERTAIN PERSONS. FOR THE A.Y. 2004-2005, THE AO HAD MADE ADDITION OF RS.25,14,100/- IN RESPECT O F THE FOLLOWING PARTIES: ITA NO.4505/AHD/2007 AND ITA.NO. 3924/AHD/2008 -3- NAME NATURE AMOUNT IN RS. REASON FOR TREATING UNEXPLAINED. VIMAL GABANI LOAN 4,90,000 CASH DEPOSITED IN BANK ACCOUNT AND ON THE SAME DAY TRANSFER CHEQUES ARE RECEIVED. VIMAL GABANI SHARE APPLICATION 12,74,100 CASH IS DIRECTLY DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. DHARMENDRA LAXMANBHAI LOAN 2,20,000 CASH DEPOSITED IN BANK ACCOUNT AND ON THE SAME DAY TRANSFER CHEQUES ARE RECEIVED. MANOJBHAI BABUBHAI PATEL LOAN 1,50,000 CASH DEPOSIT ED IN BANK ACCOUNT AND ON THE SAME DAY TRANSFER CHEQUES ARE RECEIVED. SMT. SHARDABEN SANGANI LOAN 8,70,000 IDENTITY OF TH E PERSON IS NOT PROVED. CASH DEPOSITED IN BANK ACCOUNT AND ON THE SAME DAY TRANSFER CHEQUES ARE RECEIVED. TOTAL 25,14,100 LIKEWISE FOR ASSESSMENT YEAR 2005-2006, THE AO HAD MADE ADDITION OF RS.7,33,300/- UNDER SECTION 68 IN RESPECT OF THE FOLLOWING THREE PARTIES: NAME OF THE DEPOSITOR AMOUNT (RS.) 1. SHRI VIMALBHAI M. GABANI 6,07,000 2. SHRI DHARMENDRA L. PATEL 48,000 3. SMT.SAHRDABEN G. SANGHANI 78,300 TOTAL 7,33,300 4. THE MAIN REASON WHICH WAS GIVEN BY THE AO WAS TH AT THERE WAS AN INQUIRY IN THE CASE OF SHRI PANKAJ DANAWALA, CHA RTERED ITA NO.4505/AHD/2007 AND ITA.NO. 3924/AHD/2008 -4- ACCOUNTANT, AND CONSEQUENCE THEREUPON, IT WAS NOTIC ED THAT THE BOGUS CAPITAL WAS CREATED BY THE SAID CHARTERED ACCOUNTAN T. THE ASSESSEE BEING THE ULTIMATE BENEFICIARY, THEREFORE THE BOGUS CAPITAL CREATED IN THE NAMES OF THESE PARTIES WAS TREATED AS UNEXPLAIN ED CASH CREDIT UNDER SECTION 68 OF THE IT ACT IN THE HANDS OF THE ASSESSEE. ON THE OTHER HAND, THE ASSESSEES VEHEMENT CONTENTION IS T HAT THESE PARTIES HAVE FILED THEIR INCOME-TAX RETURNS, AND THE AMOUNT WAS TRANSFERRED FROM THEIR RESPECTIVE BANK ACCOUNTS. ON THE BASIS OF THESE EVIDENCES, IT IS ARGUED BEFORE US THAT, IT WAS WRONG ON THE PA RT OF THE AO TO HOLD THAT THE IMPUGNED AMOUNT WAS UNACCOUNTED MONEY OF T HE ASSESSEE. AS FAR AS THE LEARNED CIT(A) IS CONCERNED, IT WAS H ELD THAT THE A FRAUD WAS PERPETRATED BY THIS GROUP OF ASSESSEE-COMPANY, IN CONNIVANCE WITH THE CA, SHRI PANKAJ DANAWALA WHO HAD CREATED F ICTITIOUS PAPER ENTRIES. IT WAS NOTED BY THE LEARNED CIT(A) THAT T HE CLOSING BALANCE IN CAPITAL ACCOUNT OF THESE PARTIES WAS INFLATED AND B Y SHOWING HIGHER OPENING BALANCE, THE LOANS AND ADVANCES WERE GIVEN OUT OF THE SAID CAPITAL ACCOUNT. ACCORDING TO THE LEARNED CIT(A) E VEN THE SOURCES OF THESE INCOME WERE NOT VERIFIABLE. HE HAS CONCLUDED THAT LOANS AND SHARE CAPITAL IN THE GABANI GROUP WAS NOTHING BUT T HE UNACCOUNTED CASH OF THE GROUP, WHICH WAS RIGHTLY TAXED IN THE H ANDS OF THE ASSESSEE. NOW BEFORE US, A DECISION OF THE ITAT C BENCH, AHMEDABAD HAS BEEN CITED WHEREIN IN THE GROUP CASES (FOR IDENTIFICATION OF NAME OF THE APPELLANT AT SR.NO.1 BEING ALPESHKUMAR J. MANGUKIA VS. ITO, IN ITA NO.1419/AHD/2009), ALMO ST ON IDENTICAL ISSUE, VIDE ORDER DATED 17.02.2012, CERTAIN ADDITIO NS WHICH HAVE BEEN MADE ON ACCOUNT OF THE REVENUES ACTION ON SHRI PAN KAJ DANAWALA, WAS TAKEN BUT THE MATTER WAS RESTORED TO THE FILE O F THE AO IN THE FOLLOWING MANNER: ITA NO.4505/AHD/2007 AND ITA.NO. 3924/AHD/2008 -5- 5. MOREOVER, MOST OF THE ADDITIONS IN RESPECT OF DIFFERENT ITEMS ARE MADE ONLY ON THE BASIS OF PAPER ENTRIES RECORDED AN D FOUND FROM THE PREMISE OF SHRI PANKAJ DANAWALA, CHARTERED ACCOUNTA NT OF SURAT. THERE IS NO FINDING BY ANY OF THE AUTHORITIES BELOW AS TO WHETHER THE ASSESSEE HAS, IN FACT, UTILIZED / TAKEN ADVANTAGE OF SUCH PA PER ENTRIES IN LATER YEARS WHICH IS VERY MATERIAL TO DECIDE THE TAXABILITY OR OTHERWISE OF THE ADDITIONS IN QUESTION. 6. IN SOME OF THE MATTERS, IT IS NOTICED THAT THE ADDITIONS MADE PERTAIN TO THE OPENING CAPITAL BALANCE WHILE IT IS NOT CLEA R AS TO WHAT HAS BEEN DONE ABOUT THE BALANCE IN THE PRECEDING PREVIOUS YE ARS. 7. ........ 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN VIEW OF THE ABOVE-MENTIONED LEGAL AS WELL AS FACTUAL CONTENTIONS OF BOTH THE SIDES WE FIND IT APPROPRIATE TO SET ASI DE ALL THE APPEALS OF THE ASSESSEE AS WELL AS OF THE REVENUE INCLUDING THE AP PEAL FILED IN THE CASE OF PENALTY MENTIONED HEREINABOVE TO THE FILE OF ASSESS ING OFFICER, WHO WILL PASS A SPEAKING ORDER AND AFTER GIVING AMPLE OPPORT UNITY TO THE ASSESSEES CONCERNED ON ALL THE ISSUES, WITH SPECIFIC REFERENC E TO KEEPING IN CONSIDERATION THE SUBSTANTIVE ASSESSMENT IN THE HAN DS OF DIFFERENT ASSESSEES AND UTILIZATION OF THE CAPITAL IN THE HAN DS OF THE ULTIMATE BENEFICIARIES. THE AO IS DIRECTED TO DECIDE ALL THE MATTERS DE NOVO AS DIRECTED ABOVE BUT BY PROVIDING REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. THUS, ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 5. PARTIES APPEARED BEFORE US HAVE ALSO SUGGESTED T HAT IN NUMBER OF OTHER CASES, WHICH WERE AFFECTED BY THE ACTION T AKEN AGAINST THE SAID CA HAVE BEEN STOOD RESTORED BACK TO THE FILE O F THE AO, THEREFORE ON THE SAME LINES, THESE APPEALS CAN ALSO BE SENT B ACK TO THE FILE OF THE AO SO THAT INVESTIGATION IN RESPECT OF THE CREDITOR S CAN BE THOROUGHLY MADE. ON HEARING THE PLEADING OF BOTH THE SIDES, A S ALSO RESPECTFULLY FOLLOWING THE DECISION OF THE RESPECTIVE CO-ORDINAT E BENCH, WE HEREBY DEEM IT PROPER THAT IN RESPECT OF THE CASH CREDITS, THE AO IS FREE TO EXAMINE THEIR CREDIT-WORTHINESS AND ALSO GENUINENES S OF THE TRANSACTION, AS DEEM FIT, AS PER THE LAW. RESULTAN TLY, THIS GROUND OF THE ITA NO.4505/AHD/2007 AND ITA.NO. 3924/AHD/2008 -6- ASSESSEE, FOR BOTH THE YEARS, MAY BE TREATED AS ALL OWED, BUT FOR STATISTICAL PURPOSE ONLY. 6. FOR ASSTT.YEAR 2004-2005, ANOTHER GROUND HAS ALS O BEEN RAISED BY THE ASSESSEE IN RESPECT OF SUPPRESSION OF SALES, REPRODUCED BELOW: THE LD.CIT(A) ERRED IN CONFIRMING ADDITION OF RS.1 1,659/- AS SUPPRESSION OF SALE IN RESPECT OF DISCREPANCY OF 98 .47 KGS. OF FINISHED GOODS WHEN THAT DISCREPANCY WAS EXPLAINED. 7. ON VERIFICATION OF CONSUMPTION AND PRODUCTION RE CORDS, IT WAS NOTED THAT THE SALES OF FINISHED GOODS, AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS 2,98,124.050 KGS WHEREAS, AS PER T HE EXCISE RECORDS, THE SALES OF THE FINISHED GOODS WERE SHOWN AT RS.2, 98,222.520 KGS. THUS, THERE WAS A DIFFERENCE OF 98.470 KGS. WHICH W AS NOT EXPLAINED BY THE ASSESSEE. BY APPLYING THE SALE RATE OF RS.1 18.46 PER KG., THE AO HAD WORKED OUT THE VALUE OF THE UNDISCLOSED FINI SHED GOODS AT RS.11,665/- WHICH WAS TAXED IN THE HANDS OF THE ASS ESSEE. THIS ADDITION WAS CONFIRMED BY THE LEARNED CIT(A) IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION. EVEN BEFORE US, THE LEAR NED AR HAS NOT CONTESTED THIS GROUND THEREFORE, THE SAME IS HEREBY REJECTED. 8. IN THE RESULT, THE APPEAL FOR A.Y.2004-2005 IS P ARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL FOR A.Y.2005-200 6 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( /T.R. MEENA) ! ! ! ! /ACCOUNTANT MEMBER ( /MUKUL KR. SHRAWAT) /JUDICIAL MEMBER C OPY OF THE ORDER FORWARDED TO: