ITO, Ludhiana V. Saanyam Mitttal, Ludhiana

ITA 434/CHANDI/2003

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90249 (ITAT-CHANDIGARH)
• Duration Of Justice: 12 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 03-07-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Unexplained cash credit
• Section: 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 434/CHD/2003 (ASSESSMENT YEAR: 1998-99) THE INCOME TAX OFFICER, VS. SH.SANYAM MITTAL WARD 1(9), JYOTI KNITTING MACHINE, LUDHIANA. LUDHIANA. PAN/GIR NO. 241-S (APPELLANT) (RESPONDENT) APPELLANT BY : DR.AMARVEER SINGH, DR RESPONDENT BY : S/SHRI SUDHIR SEHGAL & ASHOK GOYAL DATE OF HEARING : 29.06.2015 DATE OF PRONOUNCEMENT : 09.7.2015 O R D E R PER H.L.KARWA, VP : THIS APPEAL FILED BY THE REVENUE IS DIR ECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA DATED 28.3.2003 RELATING TO A SSESSMENT YEAR 1998-99. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER : : 2 1. THE LD. CIT(A)-I, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, HAS ERRED IN DELETING THE ADDITION OF RS.3,80,000/- CONCLUDING THAT THE SALE OF DIAMONDS WERE NOT SHAM, AND HAD ACTUALLY BEEN TAKEN PLACE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONS IDERATION WAS FILED ON 31.10.1998 DECLARING AN INCOME OF RS.1 ,77,550/-. THE ASSESSEE HAS SUBMITTED ITS CAPITAL ACCOUNT ALON GWITH THE RETURN OF INCOME. AS PER THAT, RS.6,35,000/- WERE CREDITED AS FRESH CAPITAL DURING THE YEAR. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SUBMIT THE DETAILS OF SOUR CE OF THIS AMOUNT ALONGWITH DOCUMENTARY EVIDENCE. IN RESPONS E, THE ASSESSEE SUBMITTED THAT THE SOURCE OF THIS AMOUNT I S SALE PROCEEDS OF GOLD AND DIAMOND DECLARED IN VDIS. TH E ASSESSEE ALSO SUBMITTED COMPLETE DETAILS OF THESE TRANSACTIONS. THE ASSESSEE HAD DECLARED GOLD AND DIAMOND JEWELLERY FOR ASSESSMENT YEAR 1986-87 FOR RS.2,59,5 70/-. THIS CONSISTED OF GOLD JEWELLERY VALUED AT RS.1,53, 380/- AND DIAMONDS AT RS.1,06,000/-. THE GOLD ORNAMENTS WER E SOLD ON 14.1.1998 FOR RS.2,39,753/-. THE DIAMONDS WERE SO LD ON 4.2.1998 FOR RS.3,80,000/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE ORIGINAL SALE VOUCHERS IN RESPECT OF THE ABOVE TRANSACTIONS. THE ASSESSEE PRODUCED T HE ORIGINAL SALE VOUCHERS AND COPIES OF DECLARATION FILED IN RE SPECT OF VDIS. ON PERUSAL OF THE ABOVE DOCUMENTS, THE AS SESSING OFFICER HAS NOTICED THE FOLLOWING FACTS : I) THE ALLEGED SALE VOUCHER GIVE BY M/S PAWAN JEWELLERS PROP. M/S CENTURY DIAMONDS WAS NOT 3 SIGNED BY ANYBODY. II) IN HIS DECLARATION, THE ASSESSEE HAS DECLARED TWO TYPES OF DIAMONDS. THE FIRST TYPE CONSISTED OF DIAMOND WEIGHING 26 CARAT, THE VALUE OF WHICH WAS RS.56,000/- GIVING THE RATE PER CARAT AT RS.2150/- APPROXIMATELY. THE SECOND TYPE CONSISTED OF DIAMOND WEIGHING 12 CARAT, THE VALUE OF WHICH WAS SHOWN AT RS.50,000/- GIVING THE RATE PER CARAT OF RS.2170/- APPROXIMATELY. III) AS AGAINST THIS THE ASSESSEE HAD CLAIMED LO HAVE SOLD ALL THE 38 CARAT OF DIAMONDS AT A UNIFORM RATE OF RS. 10,000/- PER CARAT. IV) THE ASSESSEE HAS CLAIMED TO HAVE SOLD THE DIAMONDS TO M/S PAWAN JEWELLERS PROP. M/S CENTURY DIAMONDS. THIS PARTY, AS PER THE SALE BILL, HAD ITS PREMISES AT TWO PLACES IN THE CITY. HOWEVER, DURING FIELD ENQUIRIES, THE PARTY WAS NOT TRACEABLE AT ANY OF THE TWO PREMISES. V) THE ASSESSEE HAS STATED TO HAVE SOLD THE DIAMONDS TO M/S PAWAN JEWELLERS PROP. M/S CENTURY DIAMONDS. HOWEVER, THE AMOUNT OF RS.3,80,000/- HAS BEEN RECEIVED BY THE ASSESSEE FROM M/S CENTURY DIAMONDS LTD., WHICH HAS BEEN PAID BY THE COMPANY OUT OF ITS BANK ACCOUNT NO.73/97 WITH FEDERAL BANK, GHUMAR MANDI, LUDHIANA. 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ALLEGED TRANSACTION OF SALE OF DIAMONDS FOR RS.3,80 ,000/- IS NOT A GENUINE TRANSACTION. HE FURTHER OBSERVED TH AT THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY OF TH E ALLEGED PURCHASER OF THE DIAMONDS. THE ASSESSEE ALSO FAIL ED TO LINK THE ACTUAL ALLEGED PURCHASER AND THE PARTY WHO HAD ISSUED THE 4 CHEQUE TO HIM. THE ASSESSING OFFICER FURTHER OBSE RVED THAT NON-APPEARANCE OF SIGNATURE OF ANY PERSON ON THE SA LE BILL IS NOT JUST AN OVERSIGHT AND COUPLED WITH THE FACT THA T NO SUCH PARTY EXISTED IN THE CITY, SUGGEST THAT THE TRANSAC TION IS NOT REAL. THE ASSESSING OFFICER ALSO TOOK THE VIEW TH AT BY NO STRETCH OF IMAGINATION, THE DIAMONDS OF TWO TYPES H AVING 100% DIFFERENCE BETWEEN THEIR VALUES PER CARAT, CAN BE SOLD AT THE SAME RATE. THE ASSESSING OFFICER CONCLUDED THA T THE ALLEGED TRANSACTION OF SALE IS TOTALLY BOGUS AND NO SALE OF DIAMONDS HAS ACTUALLY TAKEN PLACE. HE ACCORDINGLY, HELD THAT THE AMOUNT OF RS.3,80,000/- CONSTITUTED AN UNEXPLAI NED CREDIT IN THE HANDS OF THE ASSESSEE AND IS LIABLE T O BE DEEMED TO BE HIS INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ACCORDINGLY, THE AMOUNT OF R S.3,80,000/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LEARNED CIT (APPEALS) DELETED TH E ADDITION, OBSERVING AS UNDER : 2.1 I HAVE ANALYSED THE ENTIRE ISSUE IN DETAIL, AND I FIND FORCE INTEREST HE CONTENTIONS OF THE LEARNED COUNSEL FOR T HE FOLLOWING REASONS : (I) A VALID DECLARATION HAD BEEN MADE UNDER THE VDIS 1997 SCHEME AND THE SAID DECLARATION WAS DULY ACCEPTED B Y THE WORTHY COMMISSIONER OF INCOME-TAX, LUDHIANA, VIDE IS SUE OF A CERTIFICATE UNDER SECTION 68(2) OF THE VDIS ACT. (II) THESE DIAMONDS WERE SOLD TO A THIRD PARTY, M/S PAWAN JEWELLERS PROP. CENTURY DIAMONDS LTD., WHO ISSUED CHEQUES IN RESPECT OF THESE SALE TRANSACTIONS. AT N O STAGE COULD IT BE PROVED THAT EITHER M/S PAWAN JEWELLERS PRO P. M/S CENTURY DIAMONDS DID NOT BUY THESE DIAMONDS OR THAT THE 5 CHEQUES WERE ISSUED ONLY AFTER DEPOSITING OF CASH IN THEIR BANK ACCOUNTS. (III) NO TANGIBLE EVIDENCE OR ANY CONCRETE FACTS HAVE BEEN BROUGHT ON RECORD, THE ASSESSING OFFICER TO DISPROVE THE APPELLANT'S VERSION. ALTHOUGH THE EFFORTS OF THE ASSESSING OFFICER IN OBTAINING DATA FROM THE GEMS AN D JEWLLERY EXPORT PROMOTION COUNCIL ARE LAUDABLE, BUT A LIABILITY CANNOT BE SIMPLY FASTENED ON THE AP PELLANT MERELY ON THE BASIS OF SUCH FACTS AND FIGURES BECAUS E PROPER INVESTIGATIONS HAVE TO BE TAKEN TO THEIR LOG IC CONCLUSION BY POINTING OUT SPECIFIC INSTA NCES AND TRANSACTIONS WHICH WERE SHAM OR NON-EXISTENT. AS PO INTED OUT BY THE LEARNED COUNSEL IF MAURICE GREEN OR CARL LEW IS RUN THE 100 METER IN LESS THAN 10 SECONDS, IT DOES NOT MEAN THAT EACH AND EVERY INDIVIDUAL IS EXPECTED TO DO THE SAME. AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS. DAULAT RAM RAWAT MULL 87-ITR-349, 'THERE SHOULD BE SOME DIRECT NEXUS BETWEEN THE CONCLUSION OF THE FACT ARRIVED AT BY THE AUTHORITY CONCERNED AND THE PRIMARY FACTS UPON WHICH THAT CONCLUSION IS BASED THE USE OF EXTRANE OUS AND IRRELEVANT MATERIAL IN ARRIVING AT THAT CONCLUSI ON WOULD VITIATE THE CONCLUSION OF FACT BECAUSE IT IS DIFFICULT TO PREDICATE AS TO WHAT EXTENT THE EXTRANEOUS AND IRRELEVANT MATERIAL HAS INFLUENCED THE AUTHORITY IN ARRIVE AT THE CONCLUSION OF THE FA CT.' (IV) ASSESSING OFFICER HAS NOT BEEN ABLE TO CONTROVERT THE APPELLANT'S STAND THAT THE DIAMONDS HAD BEEN SO LD ON A LUMP-SUM BASIS AT A UNIFORM RATE, AND THAT THE PAYMENTS IN RESPECT OF THESE TRANSACTIONS HAD BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES FROM A BANK ACCOU NT BEARING NO. 73/97 WITH FEDERAL BANK, GHUMAR MANDI, LUDHIANA. (IV) THE BULWARK OF THE ASSESSING OFFICER'S ARGUMENT IN DIS- BELIEVING THE APPELLANT'S ARGUMENT WAS THAT THE SALE 6 VOUCHER HAD NOT BEEN SIGNED. THIS TO MY MIND IS NOT R EASON ENOUGH TO DISBELIEVE THE APPELLANT'S CASE, ESPECIALLY AS THE EXISTENCE OF THE DIAMONDS WAS NOT IN DOUBT, IN VIEW OF THE VDIS CERTIFICATE HAVING BEEN ISSUED BY THE CIT, LUD H.IANA, AND SECONDLY, BECAUSE OF THE REASON THAT ALL THE PAYM ENTS HAD BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES FROM A B ANK ACCOUNT, THE NOMENCLATURE WHEREOF WAS VERY MUCH KNOW N TO THE DEPARTMENT. A CONFIRMATION FROM THAT PARTY H AD ALSO BEEN FILED TO THE EFFECT THAT THE REFERENCE WA S TO THE SAME BILL INDEED. PHOTO COPIES OF THE INVOICE A ND CHEQUES HAD BEEN FURNISHED BY THE APPELLANT ALSO. AS HELD IN CIT VS. AS HELD BY THE HON' BLE SUPREME COURT IN THE CASE OF CIT VS. K.S. KANNAN KUNHI 1973 CTR (SC) 27 87 ITR 395 (SC); STEELEKHA BANERJEE ORS. VS. CIT (1963 ) 49 ITR 112 (SC) AND ROSHAN DI HATTI VS. CIT 1977 107-ITR - 938 (SC), WHERE THE ASSESSEE HAS DISCHARGED THE INITI AL ONUS CAST ON HIM BY ADDUCING PRIMA FACIE REASONABLE EVIDENCE, BEFORE REJECTING THE SAME, THE REVENUE SHOU LD POINT OUT AN INHERENT FLAW IN THE EXPLANATION. (V) THE SO-CALLED FIELD ENQUIRES MADE BY THE ASSESSING OF FICER WERE NEVER CONFRONTED TO THE APPELLANT. IN THE ABSE NCE OF SUCH CROSS EXAMINATION, THE EVIDENTIARY VALUE OF THE ENQUIRIES BECOMES A LITTLE DOUBTFUL. (VI) THE ASSESSING OFFICER'S CONCLUSION THAT T HE SALES TRANSACTIONS WERE SHAM AND THE AMOUNT OF RS. 3,80,000/- CONSTITUTED UNEXPLAINED CREDIT IN THE APPELLANT'S HANDS UNDER SECTION 68 DOES NOT SOUND LOG ICAL IN VIEW OF THE EXISTENCE OF THE JEWELS AND DIAMONDS DUL Y EVIDENCED BY THE ISSUE OF THE CERTIFICATE ISSUED BY THE CIT LUDHIANA UNDER SECTIN 68(2) OF THE VDIS ACT, AND TH E CONSEQUENT SALE OF THESE ITEMS TO MIS PAWAN JEWLLER S PROP. MIS CENTURY DIAMONDS, WHO ISSUED ACCOUNT PAYE E CHEQUES IN RESPECT OF THESE TRANSACTIONS, AS WELL A S A CONFIRMATION LETTER TO THIS EFFECT. 2.1 ALL THE FACTORS AS-ENUMERATED ABOVE GO TO STREN GTHEN THE CASE OF THE APPELLANT THAT THE SALE OF DIAMONDS WERE NOT 7 SHAM, AND HAD ACTUALLY TAKE PLACE. IN THE ABOVE SCE NARIO, THE HYPOTHESIS OF THE ASSESSING OFFICER THAT NO SALES H AD TAKEN PLACE, IS INCAPABLE OF BEING SUSTAINED. I, THEREFOR E, DIRECT THE ASSESSING OFFICER TO DELETE THIS ADDITION. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. WHILE PERUSING THE CAPITAL ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT RS.6,35,000/- WERE CREDITED AS FRESH C APITAL DURING THE YEAR. AS REGARDS THE SOURCE OF THIS AM OUNT, THE ASSESSEE CLAIMED THAT THIS AMOUNT REPRESENTED SALE PROCEEDS OF GOLD AND DIAMOND DECLARED IN VDIS. IN THIS REG ARD, THE LEARNED CIT (APPEALS) HAS OBSERVED THAT A VALID DEC LARATION HAS BEEN MADE UNDER THE VDIS, 1997 SCHEME AND THE S AID DECLARATION WAS DULY ACCEPTED BY THE COMMISSIONER O F INCOME TAX, LUDHIANA VIDE ISSUE OF A CERTIFICATE UNDER SEC TION 68(2) OF THE VDIS,1997. THE ASSESSEE SOLD DIAMONDS FOR RS.3,80,000/- TO M/S PAWAN JEWELLERS PROP. CENTURY DIAMONDS LTD., WHO ISSUED ACCOUNT PAYEE CHEQUE NO.9 83422 CREDITED ON 9.2.1998 DRAWN ON FEDERAL BANK LTD., LU DHIANA BRANCH DULY CREDITED IN ASSESSEES ACCOUNT NO.8311 OF CENTRAL BANK OF INDIA SARABHA NAGAR BRANCH, LUDHIANA. THE RE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE STAND OF THE ASSESSEE. IN OTHER WORDS, NO CONCRETE EVIDENCE HA S BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO DISAP PROVE ASSESSEES VERSION. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE SALE VOUCHER HAS NOT BEEN SIGNED AND SECONDLY, SINCE BOTH THE DIAMONDS WERE OF DIFFE RENT CARATS, HOW THEY COULD BE SOLD AT UNIFORM RATE. IN THIS 8 REGARD, THE CONTENTION OF THE ASSESSEE IS THAT THE SIGNATURE ON THE BILL DOES NOT MATTER, AND WHAT IS IMPORTANT IS THAT THE PAYMENT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES FROM THE PARTYS ACCOUNT AND IT HAS BEEN ACCEPTED BY THE ASS ESSING OFFICER THAT THE M/S CENTURY DIAMONDS HAS A BANK AC COUNT BEARING NO.73/97 WITH FEDERAL BANK, GHUMAR MANDI, LUDHIANA AND HE HAS NOT DOUBTED THIS FACT THAT THE PAYMENT HAS BEEN RECEIVED FROM THAT BANK ACCOUNT ONLY. FURTHERMORE, THE ASSESSEE FILED A CONFIRMATION FROM THE ABOVE PARTY BEFORE THE AUTHORITIES BELOW. AS REGARDS TH E SELLING OF THE DIAMONDS COSTING TO RS.56,000/-, RS.50,000/- HA VING PER CARAT VALUE AT RS.2150/- AND RS.2170/- RESPECTIVELY IN 1987 IS CONCERNED, THE ASSESSEE SUBMITTED THAT ALL THE D IAMONDS WERE SOLD ON LUMPSUM BASIS AT A UNIFORM RATE IN ONE LOT, SHOULD NOT BE A POINT TO DOUBT FOR MAKING THE ADDIT ION OF ALLEGED UNEXPLAINED CREDIT. AS REGARDS THE FIELD ENQUIRIES CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, IT IS STATED THAT WHAT WERE THOSE ENQUIRIES HAVE NOT BEEN COMMUNICATED TO THE ASSESSEE, AND, THEREFORE, THE O BJECTION OF THE ASSESSING OFFICER CARRY NO WEIGHT IN MAKING THE ADDITION OF RS.3,80,000/- AS THIS AMOUNT WAS RECEIVED AGAINS T THE SALE OF DIAMONDS ONLY. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THERE WAS NO JUS TIFICATION IN MAKING THE ADDITION OF RS.3,80,000/- IN THE HAND S OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. THERE IS NO MATERIAL ON RECORD TO COME TO THIS CONCLUSION THAT THE SALE TRA NSACTIONS WERE SHAM AND THE AMOUNT OF RS.3,80,000/- CONSTITUT ED UNEXPLAINED CREDIT IN ASSESSEES HANDS. IN THE IN STANT CASE, 9 THE EXISTENCE OF THE DIAMONDS CANNOT DOUBTED IN VIEW OF THE VDIS CERTIFICATE HAVING BEEN ISSUED BY THE COMMISSI ONER OF INCOME TAX, LUDHIANA. THIS FACT ALSO CANNOT BE DE NIED THAT THE DIAMONDS WERE SOLD TO M/S PAWAN JEWELLERS PROP. M/S CENTURY DIAMONDS LTD., WHO ISSUED ACCOUNT PAYEE CHE QUES IN RESPECT OF THESE TRANSACTIONS. SUBSEQUENTLY, THE SAID PARTY ALSO SUBMITTED A CONFIRMATION LETTER TO THIS EFFECT . IN VIEW OF THE ABOVE, I UPHOLD THE ORDER OF THE LEARNED CIT (A PPEALS) AND DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE BEING DEVOID OF ANY MERIT. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF JULY, 2015. SD/- (H.L.KARWA) VICE PRESIDENT DATED : 9 TH JULY, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH