The ITO, Ward-9(3), Surat V. Shri Nevil Ramjibhai Bhingradia, Surat

ITA 45/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94538 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Tax effect; Reason to believe
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER INCOME TAX OFFICER, WARD 9(3), ROOM NO. 420, 4 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) VS SHRI NEVIL RAMJIBHAI BH INGRADIA, B - 2, CHITRAKUT SOCIETY, HI RA BAUG, VARACHHA ROAD, SURAT - 395006 (RESPONDENT) SHRI NEVIL RAMJIBHAI BH INGRADIA, B - 2, CHITRAKUT SOCIETY, HI RA BAUG, VARACHHA ROAD, SURAT - 395006 (CROSS OBJECTOR ) VS INCOME TAX OFFICER, WARD 9(3), ROOM NO. 420, 4 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT (RESPONDENT) REVENUE BY : S H RI RAJ DEEP SINGH , SR. D . R. ASSESSEE BY: S H RI RAJESH M. UPADHYAY , A.R. DAT E OF HEARING : 09 - 10 - 2 015 DATE OF PRONOUNCEMENT : 14 - 10 - 2 015 I T A NO S . 45 & 46 / A HD/20 12 A SSESSM ENT YEAR 200 5 - 06 & 2006 - 07 C.O. NO S . 47 & 48 /AHD/20 12 (IN ITA NO S . 45 & 46 /AHD/20 12) ASSESSMENT YEAR 200 5 - 06 & 2006 - 07 I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 2 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THESE TWO REVENUE S APPEALS WITH ASSESSEE S CROSS OBJECTIONS THEREIN RELATING TO ASSESSMENT YEARS 2005 - 06 A ND 2006 - 0 7 ARISE FROM SEPARATE ORDER S OF THE CIT(A) - V, SURAT BOTH DATED 28 - 09 - 201, IN APPEAL NO. CAS - V/355 & 356/20 10 - 11 RESPECTIVELY , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . WE PROCEED ASSESSMENT Y EAR WISE FOR THE SAKE OF CONVENIENCE AND BREVITY. THE REVENUE S FORMER APPEAL ITA 45/AHD/2012 IN AY 2005 - 06 CHALLENGES THE LOWER APPELLATE ORDER DELETING ADDITION OF RS. 4,96,700/ - MADE BY THE ASSESSING OFFICER IN REASSESSMENT FRAMED 28 - 12 - 2010. THIS SUM AROSE ON ACCOUNT OF ASSESSEE S CAPITAL INVESTMENT IN ITS PARTNERSHIP FIRM M/S FARMSONS FIBERS . THE ASSESSEE S CROSS OBJECTION ITA 47/AHD/2012 RAISE LEGAL PLEAS OF SECTION 143(2) NOTICE AND VALIDITY OF REOPENING. 3 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE CASE FILE. THE REVENUE STRONGLY ARGUES IN FAVOUR OF THE IMPUGNED CAPITAL INVESTMENT ADDITION. THE ASSESSEE SUBMITS THAT TOTAL DEMAND AMOUNT INVOLVED IN THIS APPEAL IS RS. 2,53,576/ - AS STATED IN THE LOWER APPELLATE ORDER. IT PLACES ON RECORD BOARD S CIRCULAR/INSTRUCTION NO. 3/2011 DATED 09 - 02 - 2011 SPECIFYING PECUNIARY LIMIT FOR INSTITUTING APPEALS IN THE TRIBUNAL TO BE RS. 3 LACS. THIS APPEAL HAS BEEN INSTITUTED ON 06 - 01 - 2011 I.E. MUCH AFTER THE CIRCULAR. WE ACCORDINGLY I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 3 ACCEPT ASS ESSEE S CO NTENTION AND DISMISS THE REVENUE S APPEAL TO BE HAVING LOW TAX EFFECT. ASSESSEE S CROSS OBJECTION (SUPRA) HAVE ACCORDINGLY BEEN RENDERED INFRU CTUOUS. THE REVENUE S APPEAL ITA 45/AHD/2012 FAILS AND ASSESSEE S CROSS OBJECTION HAS BEEN RENDERED INFRUCTUOUS . 4 . NOW WE COME TO ASSESSMENT YEAR 2006 - 07 INVOLVING REVENUE S APPEAL ITA 46/AHD/2012 AND CROSS OBJECTION 48/AHD/2012. THE REVENUE S SOLE SUBSTANTIVE GROUND SEEKS RESTORATION OF ADDITION OF RS. 25,71,934/ - AS CAPITAL INVESTMENT IN PARTNERSHIP M/S FARMSO N S FIBERS DELETED IN THE LOWER APPELLATE PROCEEDINGS. THE ASSESSEE S PLEADING IN CROSS OBJECTION RAISED LEGAL GROUNDS OF REOPENING AND SECTION 143(2) NOTICE. THE CASE FILE REVEALS THAT THE ASSESSING OFFICER NOTICED ASSESSEE S CAPITAL INVESTMENT IN THE AB OVE STATED PARTNERSHIP FIRM. THE ASSESSEE DOES NOT SEEM TO HAVE FILED ALL OF HIS EVIDENCE TO EXPLAIN SOURCE THEREOF. TH E ASSESSING OFFICER ACCORDINGLY MADE THE IMPUGNED ADDITION IN ORDER DATED 28 - 12 - 2010. 5 . THE ASSESSEE PREFERRED APPEAL. HE FILED AD DITIONAL EVIDENCE . THE CIT(A) SOUGHT FOR REMAND REPORT. THE ASSESSING OFFICER OBJECTED TO THE SAME. THE CIT(A) THEREAFTER GRANTED ANOTHER OPPOR TUNI TY . THE ASSESSING OFFICER DOES NOT SEEM TO HAVE FILED ANY REPLY. THE CIT(A) HAS ACCEPTED ASSESSEE S SUB MISSION AS UNDER: - I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 4 4. IT IS REVEALED FROM THE AO'S ORDER THAT NO EXPLANATION OR EVIDENCE WAS BEFORE THE HIM TO DECIDE GENUINENESS OF CAPITAL CONTRIBUTION MADE BY THE APPELLANT IN THE FIRM, M/S FARMSONS FIBERS. THE APPELLANT HAS FILED EVIDENCES AND ALSO EXPLANATIONS IN SUPPORT OF HIS CLAIM AND MADE REQUEST TO ADMIT THE SAME UNDER RULE 46A OF INCOME - TAX RULES. THEREFORE, IN THE INTEREST OF JUSTICE, APPELLANT'S SUBMISSION AND ALL EVIDENCES ARE FORWARDED TO THE AO AND REMAND REPORT, WAS CALLED ON APPELLANT'S SUBMISSION/EVIDENCES. THE AO HAS SENT HIS REPORT THROUGH JT. CIT, RANGE - 9, SURAT. FROM THE ASSESSMENT ORDER, APPELLANT'S SUBMISSION AND REMAND REPORT OF THE AO FOLLOWING FACTS ARE EMERGES. THE APPELLANT IS ONE OF THE PARTNERS IN THE FIRM, M/S. FARMSONS FIBERS. WHIJE MAKING THE ASSESSMENT IN THE CASE OF FIRM BY ITO WARD - 9(L), SURAT HAS FOUND THAT THE APPELLANT HAS MADE CAPITAL INVESTMENT OF RS, 4,96,700/ - IN THE FIRM DURING A.Y.2005 - 06, WHICH WAS NOT PROPERLY EXPLAINED BY THE FIRM AND HENCE ADDITION WAS MA DE IN THE HANDS OF THE FIRM. THE SAID ADDITION WAS DELETED BY HON'BLE ITAT, AHMEDABAD. THEREAFTER, HE PASSED INFORMATION TO THE ASSESSING OFFICER OF THE APPELLANT FOR THE VERIFICATION OF SUCH CAPITAL INVESTMENT. THE AO OF THE APPELLANT, AFTER RECORDING REA SONS, RE - OPEN ASSESSMENT FOR A.Y.2005 - 06. THE APPELLANT HAS REQUESTED THE AO TO CONSIDER HIS RETURN FILED U/S 139, AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT AND ALSO REQUESTED TO ISSUE A COPY OF REASONS RECORDED FOR REOPENING OF ASSE SSMENT IN THE APPELLANT'S CASE FOR THE YEAR UNDER APPEAL. THOUGH SEPARATE REASONS WERE NOT SUPPLIED, THE AO HAS STATED SUCH REASONS ARE IN HIS SHOW CAUSE NOTICE DATED 15/12/2010, SERVICE OF WHICH IS ACCEPTED BY THE AR. THE AO PROVIDED OPPORTUNITY TO PROVE APPELLANT'S INVESTMENT IN THE FIRM, M/S FARMSONS FIBERS BY ISSUE OF A NOTICE U/S 142(1) AND A SHOW CAUSE NOTICE, THOUGH, HE HAS NOT ISSUED A NOTICE U/S 143(2) OF THE ACT. THE APPELLANT HAS COMPLIED ALL NOTICES BUT HAS NOT FILED EVIDENCES IN SUPPORT OF SOUR CES OF CAPITAL INVESTMENT IN THE FIRM AND SO THE ADDITION OF RS. 4,96,700/ - BEING UNEXPLAINED CASH WAS MADE IN THE ASSESSMENT. HE HAS ALSO INITIATED PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 5 SUBMISSION OF THE APPELLANT: 5. DURING THE APPELLANT PROCE EDINGS BEFORE ME THE LEARNED A.R. HAS FILED A CHART IN RESPECT OF CAPITAL INVESTMENT MADE IN THE FIRM AND ALSO CORRESPONDING SOURCES OF SUCH INVESTMENT. HE HAS ALSO FILED CONFIRMATION, BALANCE SHEET AS ON 31 - 03 - 2006, COPY OF INCOME TAX RETURN, COMPUTATION, INCOME PROOF ETC. IN RESPECT OF THE DEPOSITORS. ON THE BASIS OF THESE EVIDENCES HE ARGUED THAT FOR THE PURPOSE OF MAKING CAPITAL INVESTMENT IN THE FIRM, THE APPELLANT HAS BORROWED MONEY FROM FOLLOWING FRIEND AND RELATIVES: (A)RS.2,64,312/ - FROM FARMSONS FABRICS P. LTD. THE SAID COMPANY HAS GIVEN LOANS BY 3 CHEQUES. RS. 1,30,000/ - ON 23.07.2004, RS. 64,312/ - ON 14.10.2004 AND RS. 70,000/ - ON 09.03.2005. THE COMPANY HAS FILED CONFIRMATION IN WHICH TWO ENTRIES ARE APPEARING. RS. 64,312/ - IS APPEARING IN THE APPELLANT'S BALANCE SHEET AS ON 31 - 03 - 2004. ALL THE THREE AMOUNTS ARE APPEARING IN THE APPELLANT'S BANK ACCOUNT, WHICH IN TURN DEPOSITED IN FIRM TOWARDS CAPITAL. THE COMPANY IS SSESSED TO TAX UNDER PAN AAACF3416G. IT HAS CONFIRMED HIS LOAN TO THE APPELLANT . (B)RS.95,700/ - FROM M/S SWASTIK SYNTHETICS OF PLOT NO. 6509/4, ROAD NO. 65B, GIDC, SACHIN, DIST.; SURAT BEING CAPITAL WITHDRAWALS FROM THE FIRM. THE APPELLANT IS ONE OF THE PARTNERS IN THE SAID FIRM. THE FIRM IS ASSESSED UNDER PAN AARFS9602B. THE SUM WI THDRAWN IS ALSO APPEARING IN APPELLANT'S BANK ACCOUNT WHICH IN TURN GIVEN TO THE BANK. (C)RS. 1,40,000 / - ARE DEPOSITED IN THE FIRM BY PROCURING SMALL LOANS FROM SEVEN VILLAGERS WHO ENGAGED IN AGRICULTURAL ACTIVITIES AND ALSO SUBMITTED CONFIRMATIONS, IDENT ITY PROOF, PROOF OF THEIR AGRICULTURE LAND HOLDINGS. ALL SUCH LOANS HAVE STATED TO BE REPAID IN F. Y. 2006 - 07. HE HAS FILED COPY OF BANK STATEMENTS OF THE APPELLANT. IT IS FURTHER ARGUED BY THE LEARNED A.R. THAT THE APPELLANT IS I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 6 MAINTAINING REGULAR BOOKS OF ACCOUNT IN WHICH ALL ENTRIES ARE MADE ON ACCOUNT OF CAPITAL INVESTMENT MADE BY HIM IN THE FIRM. HE HAS ALSO BROUGHT TO MY NOTICE A BALANCE SHEET AS ON 31 - 03 - 2005 IN WHICH, ON ASSET SIDE AN AMOUNT OF RS. 6,08,67.90 IS APPEARING AS INVESTMENT MADE IN THE FIRM M/S. FARMSON FIBERS. HE HAS ALSO BRING TO MY NOTICE A COPY OF CAPITAL ACCOUNT APPEARING IN THE BOOKS OF ACCOUNT OF THE FIRM IN WHICH CLOSING BALANCE HAS BEEN SHOWN AT RS. 6,08,067.90. REMAND REPORT: 6. THE CASE WAS REMANDED TO THE A.O. VIDE LETTER D TD. 18.07.2011 WITH REMINDER LETTER DTD. 11.08.20011. THE A.O. OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCES VIDE LETTER DTD. 23.08.2011 RECEIVED ON 09.09.2011. BUT THE OBJECTION WAS OVERRULED IN THE INTEREST OF NATURAL JUSTICE AND THE A.O. WAS AGAIN D IRECTED TO SUBMIT HIS REMAND REPORT WITHIN 7 DAYS FROM THE RECEIPT OF THE LETTER VIDE LETTER DTD. 09.09.2011. BUT THE A.O. DID NOT SUBMIT THE SAME TILL DATE, HENCE, THE ISSUES ARE BEING DECIDED ON THE BASIS OF MATERIALS AVAILABLE ON THE RECORD. DECISION: 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER, AO'S LETTER RECEIVED ON 09.09.2011 AS WELL AS SUBMISSION OF THE APPELLANT. THE SUBM ISSION OF THE APPELLANT IS SELF EXPLANATORY AND DOES NOT REQUIRE MUCH ELABORATION. I FIND MERIT IN SUBMISSION OF THE APPELLANT 'S AR THAT THE DETAILS AND EVIDENCES PRODUCED BY HIM FOR ENTIRE CAPITAL INVESTMENT OF RS, 25,71,934/ - MADE BY THE APPELLANT IN M/S. FARMSONS FIBERS ARE SUPPORTED BY SUFFICIENT EVIDENCES. IN THE ASSESSMENT ORDER, THE A.O. HAS ONLY STATED THAT THE APPELLANT HAS NOT PROVED CREDIT WORTHINESS AND SOURCE OF INVESTMENT DURING THE ASSESSMENT PROCEEDINGS. HE HAS ALSO NOT STATED THAT WHICH OF THE INVESTMENT ENTRY IS - NOT EXPLAINED BY THE APPELLANT. HE HAS ALSO NOT SPOKEN A SINGLE WORD REGARDING NON ACCEPTANCE OF INVE STMENT ENTRY MADE IN APPELLANT'S BOOKS AS WELL AS IN HIS BANK ACCOUNT. ON THE OTHER HAND, THE APPELLANT I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 7 HAS PROVED GENUINENESS OF ALL CREDITS APPEARING IN HIS BOOKS IN F.Y. 2005 - 06 AND BALANCE SHEET AS ON 31 - 03 - 2006. INVESTMENT MADE IN THE FIRM, M/S FARMSO NS FIBERS IS ALSO DULY RECORDED BY THE APPELLANT IN HIS BOOKS OF ACCOUNT. FURTHER, ALL CREDITS ARE DULY EXPLAINED ON THE BASIS OF EVIDENCES AND DEPOSITORS ARE ASSESSED TO TAX AND THEY HAD SUBMITTED PAN AND OTHER EVIDENCES A PART FROM CONFIRMATIONS. THE APP ELLANT HAS DISCHARGED HIS BURDEN. AND THEREAFTER, IF THE AO HAD REASON TO BELIEVE FOR NON ACCEPTANCE OF APPELLANT'S EXPLANATIONS, HE WOULD HAVE MADE OUT HIS CASE BY BRINGING CONTRARY EVIDENCES ON RECORD. IN THIS CASE, IN - SPITE OF SUFFICIENT OPPORTUNITY FOR SENDING REMAND REPORT, THE AO HAS FAILED TO BRING ANY EVIDENCE ON RECORD TO STRENGTHEN HIS CASE ON MERITS. IN ABSENCE OF ANYTHING CONTRARY ON RECORD, EXPLANATION OF THE APPELLANT IS REQUIRED TO BE ACCEPTED. THEREFORE, I DO NOT HAVE ANY OPTION, EXCEPT, TO ALLOW APPELLANT'S CLAIM, ON THE BASIS OF EVIDENCES FILED BEFORE ME. ACCORDINGLY, THE ADDITION MADE IS HEREBY DELETED AND THE APPEAL IS ALLOWED. 6 . WE HAVE HEARD RIVAL CONTENTIONS. RECORDS PERUSED. IT IS EVIDENT THAT THE LOWER APPELLATE AUTHORITY GRANT ED DUE OPPORTUNITY TO THE ASSESSING OFFICER BEFORE ADMITTING/ACCEPTING ASSESSEE S CONTENTIONS BASED ON ADDITIONAL EVIDENCE. THE REVENUE S PLEADINGS NOWHERE STATE ANY VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IT TRANSPIRES ON MERITS THAT THE ASSESSEE HA D ALREADY EXPLAINED SOURCE OF ITS CAPITAL INVESTMENT BY WAY OF CONFIRMATIONS, IT RECORDS, MODE OF PAYMENT AND BALANCE SHEET OF THE FOUR PARTIES AS WELL AS WITHDRAWALS FROM HIS SAVING BANK ACCOUNTS FORMING PART OF THE ABOVE EXTRACTED PORTION. THAT BEING TH E CASE AND IN ABSENCE OF EVIDENCE TO THE CONTRARY, WE HOLD THAT THE CIT(A) HAS RIGHTLY DELETED IMPUGNED ADDITION OF UNEXPLAINED CASH CREDIT AMOUNTING TO RS. 25,71,934/ - IN QUESTION. THE REVENUE S SOLE SUBSTANTIVE GROUND AND ITS APPEAL ITA I .T.A NO S . 45 - 46 /AHD/20 12 & CO 47 - 48/AHD/2012 A.Y. 2005 - 06 & 06 - 07 PAGE NO ITO VS. SHRI NEV IL RAMJIBHAI BHINGRADIA 8 46/AHD/2012 ACCO RDINGLY FAIL. THESE FINDINGS ON MERITS RENDER ASSESSEE S LEGAL PLEAS (SUPRA) IN CROSS OBJECTION AS INFRUCTUOUS. 7 . THESE TWO REVENUE S APPEALS ARE DISMISSED. ASSESSEE S CROSS OBJECTIONS STAND DISMISSED AFTER HAVING BECOME INFRUCTUOUS . ORD ER PR ONOUNCED IN THE OPEN C OURT ON 14 - 10 - 2015 SD/ - SD/ - ( MANISH BORAD ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 14 /10 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,