Abdul hafiz, Udhampur V. D.C.I.T, CIRCLE-2, JAMMU

ITA 465/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5712 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 11-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: P N ARORA
• Keywords: Onus to prove
• Section: 143(3); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 465/(ASR)/2017 AS SESSMENT YEAR: 2013-14 ABDUL HAFIZ, NEAR POST OFFICE JAKHNI, UDHAMPUR (J & K) [PAN: AARPH 6698A] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA, ADV. RESPONDENT BY: SH. RAJEEV GUBGOTRA (D.R.) DATE OF HEARING: 14.03.2018 DATE OF PRONOUNCEMENT: 19.03.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU ('CIT(A)' FOR SHORT) DATED 27.04.2017, DISMISSING THE ASSESSEES APPEAL CONTESTING HIS ASSESSMENT U/S . 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 06.01.2016 FOR A SSESSMENT YEAR (AY) 2013-14. 2. THE INSTANT APPEAL CONCERNS AN ADDITION OF RS. 9 LACS BROUGHT TO TAX U/S. 68 OF THE ACT. THE ASSESSEE, A GOVERNMENT CONTRACTOR, OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO HAVE RECEIVED RS. 9 LACS BY BANK TRANSFER ON 14.05.2012 FROM ONE, ZAITOON BEGUM, WAS ASKED TO EXPLAIN THE S AME. THE ASSESSEE FURNISHED A LEDGER ACCOUNT WHICH DID NOT EXHIBIT THE SAID RECEI PT, FURTHER EXPLAINING ZAITOON ITA NO.465/(ASR)/2017(AY 2013-14) ABDUL HAFIZ V. DY. CIT 2 BEGUM TO BE HIS WIFE, WHO HAD WORKED AS MATE FOR A SHORT SPELL IN DODA AREA - THE LEDGER ACCOUNT REFLECTING A CREDIT OF RS.2.15 L ACS TO HER ACCOUNT BY WAY OF LABOUR CHARGES, AND WHICH WAS PAID BY THE ASSESSEE DURING THE YEAR. THE ASSESSEE, ADMITTEDLY IN RECEIPT OF RS. 9 LACS FROM THE SAID P ERSON, HAD NOT CREDITED THE SAID SUM IN HIS BOOKS OF ACCOUNT, SO THAT THE RECEIPT WA S UNEXPLAINED AS TO ITS NATURE AND SOURCE. THE AO, ACCORDINGLY, BROUGHT THE SAME T O TAX U/S. 68. THE SAME STOOD CONFIRMED IN FIRST APPEAL FOR PRINCIPALLY THE SAME REASON; THE ASSESSEE NOT EFFECTING ANY IMPROVEMENT IN HIS CASE BEFORE HIM. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES FIRST OBJECTION THAT SECTION 68 WOUL D NOT APPLY WHERE, AS OBSERVED BY THE ASSESSING OFFICER (AO), THE IMPUGNE D SUM HAD NOT BEEN FOUND CREDITED IN HIS BOOKS OF ACCOUNT, IS RENDERED OF NO CONSEQUENCE AS, BY OWN ADMISSION, THE IMPUGNED SUM STANDS CREDITED IN THE ASSESSEES BOOKS OF ACCOUNT (PB PG. 29). IN FACT, AS EXPLAINED BY THE LD. COUNS EL, SH. P. N. ARORA, ADVOCATE, THE ASSESSEE HAS MAINTAINED TWO ACCOUNTS OF THE CREDITO R, AND THE ACCOUNT REPRODUCED BY THE AO (AT PG. 2 OF HIS ORDER) IS THE OTHER ACCO UNT, I.E., FOR LABOUR CHARGES (PB PG. 27), WHILE THE CASH CREDITS - RECEIVED DURING T HE YEAR AT RS.12.95 LACS, STAND CREDITED TO ANOTHER ACCOUNT (PB PG. 29). THOUGH THE CASH CREDIT ACCOUNT IS ALSO CERTIFIED TO HAVE BEEN FURNISHED BEFORE THE AO AND, IN FACT, BEFORE THE LD. CIT(A) AS WELL, WE ARE UNABLE TO COMPREHEND AS TO HOW, WHE RE SO, COULD BOTH OF THEM OVERLOOK THE SAME, WITH, RATHER, THE AO OBSERVING T HAT THE IMPUGNED SUM DOES NOT FIND REFLECTION EVEN IN THE ASSESSEES FINAL ACCOUN TS. THEN, AGAIN, THE ASSESSEE WOULD HAVE, IN THAT CASE, SPECIFICALLY DRAWN THE AT TENTION OF THE LD. CIT(A) TO THIS ACCOUNT WHICH, AS APPARENT, HE HAS NOT. THE CONTROV ERSY RAISED HOWEVER IS WITHOUT ANY SUBSTANCE IN LAW, AS THE IMPUGNED SUM STANDS AD MITTEDLY RECEIVED BY THE ASSESSEE, DULY CREDITED TO HIS BANK ACCOUNT, SO THA T EVEN IF NOT CREDITED IN HIS BOOKS ITA NO.465/(ASR)/2017(AY 2013-14) ABDUL HAFIZ V. DY. CIT 3 OF ACCOUNT - WHICH IN FACT HE HAS SHOWN TO, THE ASS ESSEE IS YET OBLIGED U/S. 69/69A TO FURNISH A SATISFACTORY EXPLANATION AS TO THE NAT URE AND THE SOURCE OF DEPOSIT IN HIS BANK ACCOUNT. REFERENCE IN THIS CONTEXT MAY BE MADE TO THE DECISION IN CIT V. JAUHARIMAL GOEL [2005] 147 TAXMAN 448 (ALL). ON BALANCE, SECTION 6 8 IS CLEARLY APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE. THE NEXT QUESTION IS IF THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROOF CAST ON HIM U/S. 68. THE NATURE AND SOURCE OF A CREDIT, AS IS WELL-SETTLED, IS TO BE DISCHARGED ON THE ANVIL OF THE PARAMETERS OF THE ID ENTITY AND CAPACITY OF THE CREDITOR, AND THE GENUINENESS OF THE CREDIT TRANSAC TION/S. THE BANK ACCOUNT OF THE CREDITOR (PB PG. 9), COUPLED WITH THE CONFIRMATION (BEARING HER ADDRESS AND PAN, AT PB PG. 8), CLEARLY ESTABLISH THE IDENTITY OF THE CREDITOR. THE GENUINENESS OF THE CREDIT TRANSACTION ALSO CANNOT, AT LEAST PRIMA FACIE , BE DOUBTED AS - EVEN IF ON INTEREST-FREE BASIS, THE LOAN/ADVANCE IS EXTENDED T O THE ASSESSEE BY HIS SPOUSE. THAT LEAVES US WITH THE THIRD ASPECT OF THE MATTER, I.E. , THE CREDITORS CREDITWORTHINESS. WE OBSERVE NO REFERENCE TO THIS ASPECT IN THE ASSES SEES EXPLANATION BEFORE EITHER AUTHORITY. THERE IS, CORRESPONDINGLY, NO FINDING BY THE REVENUE IN THE MATTER. THOUGH THE LD. AR WOULD DRAW OUR ATTENTION TO THE C REDITORS TAX RETURNS FOR AY 2012-13 (PB PG. 31) AND AY 2013-14 (PB PG. 32), THE Y HARDLY INSPIRE CONFIDENCE. APART FROM FACT THAT THERE IS - AS AFORE-NOTED, NO REFERENCE THERETO EITHER IN THE ASSESSEES SUBMISSIONS BEFORE THE REVENUE AUTHORITI ES (OR EVEN BEFORE US) NOR, PERHAPS CONSEQUENTLY, ANY FINDING BY THEM QUA IT, THE SAME CANNOT BE REGARDED AS ENABLING A POSITIVE SATISFACTION AS TO THE CREDITOR S CAPACITY. THE RETURN FOR AY 2012-13 IS FOR A PALTRY SUM OF RS.0.83 LACS, FILED, AS IT APPEARS, TO CLAIM A TAX REFUND. AS REGARDS THE RETURN FOR AY 2013-14, THE S AME, THOUGH AT A HIGHER FIGURE (OF RS.1.74 LACS), CANNOT BE SAID TO LEAD TO GENERA TION OF CAPITAL AND, THUS, TO EXHIBIT HER FINANCIAL CAPACITY (TO THE REQUIRED EXT ENT). IT ALSO DOES NOT SHOW AS TO WHEN THE RELEVANT INCOME WAS AVAILABLE TO THE CREDI TOR IN-AS-MUCH AS THE FUNDS ITA NO.465/(ASR)/2017(AY 2013-14) ABDUL HAFIZ V. DY. CIT 4 UNDER REFERENCE WERE ADVANCED TO THE ASSESSEE IN MI D MAY, 2012, I.E., BARELY 1 MONTHS INTO THE YEAR, WHEREAT PRESUMABLY ONLY A FRA CTION OF THE TOTAL INCOME FOR THE YEAR (F.Y. 2012-13) WOULD HAVE MATERIALIZED. TH E CREDITOR HAD, AT THE TIME OF THE IMPUGNED CREDIT, IN FACT ALREADY EXTENDED RS.3. 95 LACS TO THE ASSESSEE DURING THE RELEVANT YEAR ITSELF. THOUGH IT IS ONLY THE CRE DIT OF RS. 9 LACS THAT IS UNDER EXAMINATION, THE CREDITORS WHO IS ALSO MAINTAINI NG BOOKS OF ACCOUNT, CAPACITY HAS TO BE SHOWN WITH REFERENCE TO THE ENTIRE SUM. A CREDIT MAY NOT NECESSARILY ARISE FROM THE CREDITORS CURRENT YEAR INCOME, AND MAY WELL BE FROM HIS CAPITAL, HEREINBEFORE EMPLOYED IN SOME OTHER ASSET/S, SINCE REALIZED. AT THE SAME TIME, IT MAY BE THAT A CREDITOR MAY BE MERELY A CONDUIT FOR FUNDS, THE SOURCE OF WHICH IS THUS LOCATED IN ANOTHER PERSON/S, SO THAT THE CREDI TOR IS ONLY AN OSTENSIBLY SOURCE, AND DOES NOT HAVE THE CAPACITY TO LEND OR ASSUME (F INANCIAL) RISK. WE HAVE ALREADY STATED THAT THE IDENTITY IS PROVED, AND THERE IS NO THING ON RECORD TO DOUBT THE GENUINENESS OF THE TRANSACTION. THE MATTER, THEREFO RE, FOR EXAMINATION OF THE CAPACITY SHALL HAVE TO NECESSARILY TRAVEL BACK TO T HE FILE OF THE AO. TO THE EXTENT THE ASPECT OF CAPACITY IS LINKED TO GENUINENESS, WH ICH MAY HAVE SOME OVERLAP, OUR FINDING AS TO GENUINENESS MAY BE REGARDED AS RESERV ED. THE PRIMARY BURDEN TOWARD ESTABLISHING THE CREDIT WOULD BE ON THE ASSESSEE. T HE AO SHALL DECIDE ISSUING DEFINITE FINDING/S OF FACT, BASED ON THE MATERIAL O N RECORD. BEFORE PARTING, WE MAY ALSO ADDRESS AN ARGUMENT RAI SED BY THE LD. AR DURING HEARING, I.E., THAT THE ADDITION IS NOT SUST AINABLE IN LAW AS THE ASSESSEES BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO DURING ASSESSMENT. THE ASSESSEES BOOKS OF ACCOUNT REFLECT A CREDIT AND, P LACING RELIANCE THEREON, IS REQUIRED BY THE ASSESSING AUTHORITY TO PROVE THE GE NUINENESS THEREOF - NOTHING MORE AND NOTHING LESS. THE SAME IS AS PER THE MANDATE OF LAW (S.68), WHICH THEREBY MAKES A DEPARTURE FROM THE NORMAL RULE THAT THE APP ARENT IS REAL UNLESS SHOWN OTHERWISE, AND THE BURDEN TO SHOW SO (OTHERWISE) IS ON THE PERSON WHO SO CLAIMS/ ITA NO.465/(ASR)/2017(AY 2013-14) ABDUL HAFIZ V. DY. CIT 5 ALLEGES. AS EXPLAINED BY THE APEX COURT TIME AND AG AIN, IT IS ON ACCOUNT OF THE CREDIT APPEARING IN THE ASSESSEES BOOKS OF ACCOUNT , SO THAT HE IS THE BENEFICIARY OF THE SUM CREDITED, THAT THE LAW DEEMS IT TO BE THE A SSESSEES INCOME UNLESS HE SATISFACTORILY EXPLAINS THE SAME (CREDIT) AS TO ITS NATURE AND SOURCE. REFERENCE IN THIS CONTEXT MAY ALSO BE MADE TO THE DECISION IN CIT V. S. KAMARAJA PANDIAN [1984] 150 ITR 703 (MAD), WHEREIN IT STANDS EXPLAIN ED THAT IN SPITE OF THE ENTRIES TO THAT EFFECT IN HIS ACCOUNTS, AN ASSESSEE, IN VIE W OF SECTION 68, WILL HAVE TO ESTABLISH THE IDENTITY OF THE CREDITOR; THE CAPACIT Y OF THE CREDITOR TO ADVANCE; AND THE GENUINENESS OF THE TRANSACTION/S, AND WHERE THE ASSESSEE DOES NOT OFFER ANY EXPLANATION ABOUT THE NATURE AND SOURCE OF THE CASH CREDITS OR THE EXPLANATION OFFERED IS NOT SATISFACTORY, THE SAME MAY BE CHARGE D TO TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. WHERE AND HOW, THEN , ONE MAY ASK, DOES THE QUESTION OR THE NEED FOR THE AO TO REGARD THE ASSES SEES BOOKS OF ACCOUNT AS NOT RELIABLE ARISE FOR INVOKING THE PROVISIONS OF SECTI ON 68 OR, FOR THAT MATTER, SECTIONS 69, 69A, ET. AL, WHICH ARE ESSENTIALLY RULES OF EVI DENCE. THE OTHER PROVISIONS, VIZ. SECTION 69, 69A, ETC. CAN IN FACT BE INVOKED ONLY W HERE THE REVENUE DISCHARGES THE PRIMARY ONUS ON IT TO SHOW THE ASSESSEE TO BE OWNER OF THE RELEVANT ASSET. AS EXPLAINED IN CHUHARMAL V. CIT [1988] 172 ITR 250 (SC), THE SAME SEEK TO PROVIDE STATUTORY RECOGNITION TO THE PRINCIPLES OF COMMON L AW JURISPRUDENCE AS ENSHRINED IN THE EVIDENCE ACT. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 19, 201 8 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:19.03.2018. ITA NO.465/(ASR)/2017(AY 2013-14) ABDUL HAFIZ V. DY. CIT 6 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: ABDUL HAFIZ NEAR POST OFFICE JAKHNI, UDHAMPUR (J&K) (2) THE RESPONDENT: DY.CIT, CIRCLE 2, JAMMU (3) THE CIT(APPEALS), JAMMU. (4) THE CIT CONCERNED. (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER