Shri Umesh Krishnani, Prop. of M/s. Swami Enterprise, Surat V. The Income tax Officer,Ward-2(3), Surat

ITA 439/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1755 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-12-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 31-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Keywords: Unexplained cash credit; Depreciation
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER) ITA NO.439/AHD/2007 [ASSTT.YEAR: 2003-2004] SHRI UMESH KRISHNANI (PROP. OF M/S.SWAMI ENTERPRISES) 2002, JASH TEXTILE MARKET, RING ROAD, SURAT. VS. ITO, WARD-2(3) SURAT. ASSESSEE BY : SHRI S.N.SOPARKAR WITH MS.URVASHI SHODHAN REVENUE BY : SMT. NEETA SHAH DATE OF ORDER RESERVED : 14-12-2009 O R D E R PER DR.O.K. NARAYANAN, VICE-PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2003-2004. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE CI T(A)-II, SURAT DATED 7-12-2006. THE APPEAL ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,97,346/- AGAINST THE BROKERAGE EXPENSES CLAIMED BY THE ASSES SEE. THE VERY SAME ISSUE WAS CONSIDERED BY THE ITAT, AHMEDABAD, D BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-20 02 IN THEIR ORDER DATED 7-8-2009 PASSED IN ITA NO.3288 & 3360/AHD/200 4. AFTER PAGE - 2 ITA NO.439/AHD/2007 -2- CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , THE TRIBUNAL HAS ACCEPTED THE GENUINENESS OF THE CLAIM AND HAS DIREC TED THE ASSESSING AUTHORITY TO ALLOW THE ENTIRE AMOUNT THEREBY DELETI NG THE DISALLOWANCE. AS A FINDING OF FACT HAS ALREADY BEE N ARRIVED AT BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSM ENT YEAR ON THE BASIS OF MATERIALS AVAILABLE ON RECORD, WE FIND THA T THE EARLIER DECISION OF THE TRIBUNAL HAS TO BE FOLLOWED IN THE IMPUGNED ASSESSMENT YEAR AS WELL. ACCORDINGLY, FOLLOWING TH E ORDER OF THE TRIBUNAL FOR A.Y.2003-2004, WE AGREE WITH THE CONTE NTION OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND DELE TE THE DISALLOWANCE OF BROKERAGE OF RS.1,97,346/-. THIS I SSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 3. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT T HE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,25,000/- M ADE BY THE ASSESSING AUTHORITY UNDER SECTION 68 OF THE ACT IN RESPECT OF DEPOSITS RECEIVED FROM VARIOUS PERSONS. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE HAS EXPLAINED THAT ALL THE SIX PERSONS INVOLVED IN THE TRANSACTIONS HAVE FILED CONFIRMATION LETTERS, THAT THE TRANSACTIONS WERE MADE THROUGH BANKS, THAT THE PERSONS ARE ASSES SED TO INCOME- TAX AND SOURCES HAVE BEEN EXPLAINED AND IN SUCH CIR CUMSTANCES, THE GENUINENESS OF THE CASH CREDITS STANDS PROVED AND T HEREFORE, THE CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. 4. THE LEARNED ADDL. COMMISSIONER OF INCOME-TAX APP EARING FOR THE REVENUE ARGUED ON THE OTHER HAND THAT EVEN THOU GH THE ASSESSEE PAGE - 3 ITA NO.439/AHD/2007 -3- HAS SATISFIED ALL THE TECHNICAL REQUIREMENTS OF EXP LAINING THE NATURE OF THE CASH CREDITS, THE ASSESSEE WAS NOT SUCCESSFU L IN EXPLAINING THE RESOURCES AVAILABLE IN THE HANDS OF THE CREDITORS S O AS TO GIVE THAT MUCH AMOUNTS TO THE ASSESSEE AS DEPOSITS/ADVANCES. THEREFORE, SHE SUBMITTED THAT LOWER AUTHORITIES WERE JUST AND PROP ER IN ADDING THE AMOUNT OF RS.7,25,000/- AS UNEXPLAINED CASH CREDITS . 5. WE CONSIDERED THE MATTER IN DETAIL. THE FACTS O F THIS ISSUE HAVE BEEN CONSIDERED BY THE LOWER AUTHORITIES AND A RGUED BY THE PARTIES BEFORE US IN THE LIGHT OF PLETHORA OF CASE LAWS. ONE OF THE CREDITORS INVOLVED IN THE CASE IS MRS.SUNITA KRISHN ANI. HER CASE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE F OR A.Y.2001- 2002 BY ITAT, AHMEDABAD D BENCH. MRS.SUNITA KRIS HNANI FURNISHED HER P.A. NUMBER, CONFIRMATION OF ADVANCIN G MONEY, COMPUTATION OF HER INCOME TO ESTABLISH THE RESOURCE FULNESS AND BALANCE SHEET ETC. IN SPITE OF ALL THESE TECHNICAL DETAILS, THE TRIBUNAL HAS HELD FOR THE SAID ASSESSMENT YEAR 2001-2002 THA T THE CREDIT STATED TO HAVE BEEN GIVEN BY MRS.SUNITA KRISHNANI WAS NOT EXPLAINED. THE ADDITION WAS ACCORDINGLY UPHELD BY THE TRIBUNAL. M RS.SUNITA KRISHNANI APPEARED IN THE IMPUGNED ASSESSMENT AS WE LL, AGAINST A CREDIT OF RS.75,000/-. AS HER CASE HAS ALREADY BEE N EXAMINED AND CONFIRMED BY THE TRIBUNAL, WE ARE OF THE VIEW THAT THE AMOUNT OF CREDIT STANDING IN THE NAME OF MRS.SUNITA KRISHNANI NEEDS TO BE CONFIRMED AS ADDITION WITHOUT MUCH DISCUSSION AND D ETAILS. REGARDING THE REMAINING FIVE CREDITORS AS WELL, THE ASSESSEE HAS FURNISHED PA NO., CONFIRMATION LETTERS, COMPUTATION OF INCOME, PAGE - 4 ITA NO.439/AHD/2007 -4- ACKNOWLEDGEMENT ETC. IT IS TO BE SEEN THAT IN THE CASE OF MRS.SUNITA KRISHNANI ALSO ALL THESE DETAILS WERE AVAILABLE WIT H THE TRIBUNAL FOR THE ASSESSMENT YEAR 2001-2002. BUT IN SPITE OF THA T THE TRIBUNAL HAS HELD THAT THE CREDIT-WORTHINESS OF MRS.SUNITA KRISH NANI WAS NOT SATISFACTORILY EXPLAINED AND ACCORDINGLY UPHELD THE ADDITION. THEREFORE, THE POINT EMERGES OUT OF THE SITUATION I S THAT IT IS NOT SUFFICIENT TO SATISFY THE TECHNICAL REQUIREMENTS OF EXPLAINING CASH CREDITS, SUCH AS, IDENTITY OF PERSON, MODE OF TRANS ACTION, PAN, STATEMENT OF ACCOUNTS ETC. THE CRUCIAL QUESTION TO BE CONSIDERED IS WHETHER THE CREDITOR IS IN A POSITION TO RAISE THAT MUCH FUND NECESSARY FOR ADVANCING TO THE ASSESSEE. THE SOUL AND SUBSTANCE OF THE ISSUE IS WHETHER THE CREDITOR HAS RESOURCEFULNE SS TO MAKE ADVANCE OF CERTAIN AMOUNTS TO THE ASSESSEE. WHILE EXPLAINING THE SOURCES AVAILABLE IN THE HANDS, THESE CREDITORS USU ALLY EXPLAIN THAT THEY RECEIVED AMOUNT FROM VOCATIONS LIKE, TUITION, GARDENING, TAILORING AND SO MANY SUCH FANCY ITEMS. IT IS TRUE THAT A HOUSE-WIFE MAY BE EARNING INCOME OUT OF TUITION. IT MAY BE TR UE THAT A HOUSE- WIFE MAY BE EARNING INCOME BY DESIGNING OR GARDENIN G ETC. ALL THESE POSSIBILITIES HAVE TO BE EXAMINED IN THE LIGH T OF THE FACTS AND CIRCUMSTANCES OF THE CASE SURROUNDING EACH AND EVER Y INDIVIDUAL CASE. IN THE PRESENT CASE ALSO, THE CREDITORS HAVE EXPLAINED THE NATURE OF ACTIVITIES CARRIED ON BY THEM TO GENERATE INCOME. BUT WE ARE OF THE VIEW THAT ALL THESE ACTIVITIES EXPLAINED BY THE CREDITORS ARE FANCIFUL EXPLANATIONS JUST TO HELP OUT THE ASSESSEE . WHEN WE EXAMINED THE SURROUNDING CIRCUMSTANCES OF THE CREDI TORS, MAINLY RELATIVES OF THE ASSESSEE, WHO ARE COMING FROM BUSI NESS FAMILIES, IT PAGE - 5 ITA NO.439/AHD/2007 -5- IS TO BE SEEN THAT THE EXPLANATIONS REGARDING THE A CTIVITIES FURNISHED BY THE CREDITORS ARE NOT CONVINCING. EXCEPT FROM M AKING A GENERAL STATEMENT THAT THEY EARN INCOME FROM SUCH AND SUCH ACTIVITIES, NO DETAILS WERE FURNISHED BEFORE THE ASSESSING AUTHORI TY. THE BALANCE SHEET AND STATEMENT OF ACCOUNTS PRODUCED IN SUPPORT OF THOSE CREDITS DO NOT SPEAK ANYTHING ABOUT THE RECORDS OF ORIGINAL ENTRIES MAINTAINED BY THE THOSE CREDITORS WHAT IS THE RAT E OF INCOME THEY ARE RECEIVING, WHAT IS FREQUENCY OF THE RECEIPTS AN D HOW REGULARLY THEY INDULGE IN SUCH ACTIVITIES AND ALL SUCH SIMILA R PERTINENT QUESTIONS, REMAIN UNANSWERED. THEREFORE, ONLY FOR THE REASON THAT THE CREDITORS HAVE SATISFIED THE TECHNICALITIES OF EXPLAINING THE CREDITS, THE RULE OF PITH AND SUBSTANCE IS NOT SATI SFIED. A MATTER HAS TO BE ACCEPTED AS A TRUTH IN ACTUAL LIFE WHEN IT SA TISFIES THE QUERIES OF HUMAN REASONING OF NORMAL PRUDENCE. THE EXPLANATIO NS MUST BE ACCEPTABLE IN A NORMAL SENSE. ONE SHOULD NOT BE LE AD TO ACCEPT THE EXPLANATIONS ON THE COMPULSIONS OF TECHNICALITIES. ON AN OVERALL VIEW OF THE SITUATION AND IN THE LIGHT OF THE DECIS ION OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS IN THE CASE OF MRS .SUNITA KRISHNANI, WE FIND THAT THE ASSESSEE HAS FAILED TO CONVINCE TH E LOWER AUTHORITIES REGARDING THE RESOURCEFULNESS AVAILABLE IN THE HAND S OF THE CREDITORS. THEREFORE, WE FIND THAT THE LOWER AUTHORITIES ARE J USTIFIED IN ADDING THE CREDITS AS UNEXPLAINED UNDER SECTION 68 OF THE INCOME TAX ACT. ACCORDINGLY, WE CONFIRM THE ADDITION OF RS.7,25,000 /-. 6. THE THIRD GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.1,32,543/- PAGE - 6 ITA NO.439/AHD/2007 -6- PERTAINING TO CASH CREDITS ADDED UNDER SECTION 68. AS THE CASH CREDIT ADDITION OF RS.7,25,000/- IS CONFIRMED, AS M ENTIONED IN THE ABOVE PARAGRAPHS, THIS ADDITION IS CONSEQUENTIAL AN D LIABLE TO BE CONFIRMED. 7. THE FOURTH GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,63,500 /- AGAINST INTEREST EXPENSES IN RESPECT OF CASH CREDITS RELATI NG TO THE ASSESSMENT YEAR 2001-2002. CERTAIN CASH CREDITS RELATING TO T HE ASSESSMENT YEAR 2001-2002 HAVE BEEN ACCEPTED BY THE TRIBUNAL AS GEN UINE. THEREFORE, THE ASSESSEES CLAIM FOR DEDUCTION OF EX PENDITURE PERTAINING TO THE SAID CREDITS ACCEPTED BY THE TRIB UNAL HAS TO BE ALLOWED. THE AO HAS TO ALLOW INTEREST EXPENDITURE PERTAINING TO THOSE CREDITS FOUND AS GENUINE BY THE TRIBUNAL AND TO DISALLOW THE SAME IN RESPECT OF THE CREDITS NOT ACCEPTED BY THE TRIBUNAL. THE ASSESSING AUTHORITY IS DIRECTED TO REEXAMINE THE IS SUE TO WORK OUT THE PROPORTIONATE DEDUCTION AVAILABLE TO THE ASSESSEE U NDER THIS HEAD. THIS MATTER IS REMITTED BACK TO THE ASSESSING AUTHO RITY. 8. FIFTH GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,06,971/- AS EXCESS PAYMENT OF INTEREST. THE DIFFERENTIAL RATE INVOLVED IN THE PRESENT CASE IS 2%. THE EXCESSIVENESS OF THE RATE AT 2% IS IN COMPARISO N WITH THE BANK RATE. ONE CANNOT INSIST THAT THE ASSESSEE SHOULD O BTAIN LOANS FROM PRIVATE PARTIES ALWAYS AT THE BANK RATE. THESE ARE MATTERS OF PREVAILING MONEY MARKET CONDITIONS AND CREDITWORTHI NESS OF THE PAGE - 7 ITA NO.439/AHD/2007 -7- PARTIES INVOLVED. IN THE PRESENT CASE, THE INTERES T HAS NOT BEEN PAID TO THE PARTIES COVERED BY SECTION 40A(2)(B). THE P AYEES ARE OUTSIDERS. IN THESE CIRCUMSTANCES, THE DIFFERENTIA L RATE OF 2% DOES NOT MAKE OUT A CASE AGAINST THE ASSESSEE. ACCORDIN GLY, WE DELETE THE DISALLOWANCE AT RS.1,06,971/-. 9. THE SIXTH AND LAST GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF 20% OF EXPENSES LIKE VEHICLE AND PETROL EXPENSES, TELEPHONE EXPENSE S AND DEPRECIATION ON SCOOTER AND PAGER. THE AMOUNTS INV OLVED ARE OF RS.13,610/-, RS.12,451/- AND RS.4,875/- RESPECTIVEL Y. WE ARE NOT INCLINED TO INTERFERE IN THE ABOVE DISALLOWANCES. THIS GROUND IS ACCORDINGLY DISMISSED. 10. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THIS 16 TH DAY OF DECEMBER, 2009. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 16-12-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER /DR, ITAT, AHMEDABAD