The ITO, Ward-1(3), RAJKOT-GUJARAT V. M/s. Vinayson Metals Pvt. Ltd., RAJKOT-GUJARAT

ITA 488/RJT/2012

• Counselvise Citation: 48824914 RSA 2012
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE DR REI
• Assessee Lawyers: SUMIT C SHINGALA CA I
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Source of fund; Additional evidence; Third party statement
• Section: 68

Judgement Text

I , IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. 9 . . R L . . L L BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 488/RJT/2012 R R / ASSESSMENT YEAR 200 6 - 0 7 . THE INCOME - TAX OFFICER, WARD - 1 ( 3 ), RAJKOT. ( . / APPELLANT) M/S. VINAYRAJ METALS PVT. LTD., 310, SHILPAN PLAZA,SWAMINARAYAN CHOWK, KRUSHNANAGAR MAIN ROAD, B/H.P.D.MAL A V IYA COLLEGE, NR. GONDAL ROAD, RAJKOT - 360 004. PAN : AA BCC8311K N. / RESPONDENT I / REVENUE BY SHRI VILAS V. SHINDE, DR REI / ASSESSEE BY SHRI SUMIT C. SHINGALA , CA I / DATE OF HEARING 2 1 - 0 8 - 2013 I / DATE OF PRONOUNCEMENT 13 - 09 - 2013 / ORDER 9 . . , R L / T. K. SHARMA, J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 27 - 06 - 2012 OF LD. CIT (A), GANDHINAGAR, AHMEDABAD FOR THE ASSESSMENT YEAR 200 6 - 07. 2 . T HE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN BUSINE SS OF MANUFACTURING OF ALL TYPE OF METAL, CASTING AND SHEET METAL PARTS. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 30 - 12 - 2006 DECLARING T OTAL INCOME OF RS. 2 4,520/ - ALONG WITH AUDIT REPORT, PROFIT & LOSS ACCOUNT, BALANCE SHEET, CAPITAL ACCOUNT, ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE - COMPANY HAS TAKEN LOAN/ DEPOSIT AMOUNTING TO RS.5 5 ,54 ,000/ - FROM 9 CREDITORS/PERSONS WH ICH ARE LISTED IN PARA - 4 OF THE ASSESSMENT ORDER.. AO FURTHER OBSERVED THAT IN RESPECT OF 6 CREDITORS, ASSESSEE - COMPANY HAS FURNISHED CONTRA CONFIRMATION, PAN, COPY OF RETURN OF INCOME, ETC. BUT IN RESPECT OF FOLLOWING THREE PERSONS NAMELY; (1) RAMNIKBHAI T. LADANI RS.5,00,000/ - (2) BALVANT J. KALOLA RS.2,00,000/ - (3) KISHOR M. BHALODIA RS.3,00,000/ - ITA 488 - 2012 2 ONLY CONFIRMATION AND COPY OF BANK PASSBOOK OF DEPOSITORS ARE FILED. NONE OF THESE THREE PERSONS ARE ASSESSED TO TAX. THE AO VIDE LETTER DATED 30 - 10 - 2008 C ATEGORICALLY ASKED THE ASSESSEE TO PRODUCE (1) SHRI BALVANT B. KALOLA, (II) SHRI KISHOR MADHABHAI BHALODIA AND (III) SHRI RAMNIKBHAI D. LADANI AND TO PROVIDE THE PROOF OF CREDITWORTHINESS AND CAPACITY TO LEND MONEY. TO THIS, NOTHING IS HEARD FROM THE ASSE SSEE - COMPANY. THEREAFTER, ON VERIFICATION OF PASSBOOK PROVIDED BY THE ASSESSEE OF THE ABOVE THREE NAMED DEPOSITORS, AO NOTICED THAT NONE OF THEM HAVING CAPACITY TO LEND THE MONEY. THEY HAVE DEPOSITED MONEY IN CASH IN THEIR RESPECTIVE BANK ACCOUNT BEFORE IS SUING CHEQUE OR DRAFTS. NONE OF THEM IS ASSESSED TO TAX. SHRI RAMNIKBHAI T. LADANI IS A RETIRED PERSON. HE IS NOT HAVING HIS INDEPENDENT SOURCE OF INCOME. SHRI KISHORBHAI M. BHALODIA IS NOT HAVING ANY SOURCE OF INCOME. HE IS NOT FILING THE RETURN OF INCO ME. HE IS NOT HAVING PAN, ETC. SHRI BALVANT J. KALOLA IS NOT ASSESSED TO TAX. HE IS HAVING ONLY PAN. HE IS RUNNING A HAIR CUTTING SALOON. ON THE BASIS OF ABOVE, AO CONCLUDED THAT NONE OF THE ABOVE THREE PERSONS ARE HAVING CAPACITY, CREDITWORTHINESS TO LEN D THE MONEY. THE ASSESSEE HAS NOT PRODUCED THE ABOVE THREE PERSONS FOR VERIFICATION . THIS PROVES THAT ASSESSEE HAS ROUTED ITS OWN MONEY THROUGH THESE DEPOSITORS. CONSIDERING THESE CONSPICUOUS FACTS, AO MADE ADDITION OF RS.10,00,000/ - U/S.68 OF THE I.T. ACT BEING UNEXPLAINED CASH CREDIT. 3. ON APPEAL BEFORE LD. CIT (A), ASSESSEE CLAIMED THAT THEY HAVE ESTABLISHED THE IDENTITY OF THE CREDITORS AND PRODUCED THEIR BANK ACCOUNTS FROM WHICH THE CREDITS WERE GIVEN BY CHEQUES AND ALSO PRODUCED THE CONFIRMATIONS. IT WAS ALSO CLAIMED THAT THEY ARE NOT ABLE TO GET THE CO - OPERATION OF THE CREDITORS IN THE MATTER OF PRODUCING THEM BEFORE THE AO AND HAVE INSISTED THAT THE AO SHOULD FORCE THE CREDITORS ATTENDANCE BY ISSUING NOTICE U/S.131 OF THE I.T. ACT. IN VIEW OF THIS , LD. CIT (A) REMANDED THE MATTER TO THE AO WITH FOLLOWING EFFECTIVE DIRECTIONS: - THE APPELLANT IS CLAIMING THAT RS.10 LAC WERE LOANS TAKEN FROM 3 DIFFERENT PARTIES BY CHEQUES THROUGH BANK ACCOUNTS. CONFIRMATIONS HAVE BEEN FILED AND BANK ACCOUNTS OF ALL T HE CREDITORS WERE SUBMITTED BEFORE THE AO, ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE APPELLANT IS CLAIMING THAT THE CREDITORS ARE NOT CO - OPERATING IN TERMS OF ATTENDANCE BEFORE THE INCOME - TAX AUTHORITIES. ITA 488 - 2012 3 IN THESE CIRCUMSTANCES, AS PER DECIDE D LAW IT IS THE ONUS OF THE REVENUE THAT IF IT FEELS NECESSARY, IT SHOULD EXAMINE THE MATTER BY FORCING THE CREDITORS TO COMPLY U/S.131. THE APPELLANT SHOULD C0 - OPERATE WITH THE AO IN GIVING THE ADDRESSES OF THE CLAIMED CREDITORS AND OTHER DETAILS AS REQUI RED BY THE AO AS THE PRIMARY ONUS U/S.68 LIES WITH THE ASSESSEE ONLY. 4. MEANWHILE, AS ADDITIONAL EVIDENCE, THE APPELLANT HAS FILED AN AFFIDAVIT OF ONE OF THE CREDITORS VIZ. SHRI RAMNIKLAL T. LADANI PURPORTING TO GIVE DETAILS OF THE INVESTMENTS MADE EARLI ER BY HIM AND THE SOURCES, AND ALSO GIVING DETAILS OF HIS PAYING CAPACITY. YOU ARE ALSO DIRECTED TO GO THROUGH THE SUBMISSIONS AND THE AFFIDAVIT AND EXAMINE THE TRUTHFULNESS OF IT. YOU MAY CONDUCT INQUIRIES FROM THE POST OFFICE WHERE KVPS WERE CLAIMED TO B E GOT ISSUED. I HAVE ADMITTED THE ADDITIONAL EVIDENCES UNDER RULE 46A IN THE INTEREST OF NATURAL JUSTICE, BECAUSE TO PROVE PAYING CAPACITY, GENUINENESS ETC., U/S.68, THE EVIDENCES MAY HAVE TO BE COLLECTED FROM THIRD PARTIES AND MAY TAKE TIME FOR REASONS BE YOND THE CONTROL OF THE APPELLANT. 4. THE AO SENT HIS REMAND REPORT (DTD.13/3/2012) TO THE LD. CIT (A) SAYING THAT NOTICE U/S.131 HAS BEEN ISSUED FOR ATTENDANT ON 12/3/2012. HE COMMENDED THAT NOTICE ISSUED TO SHRI RAMNIKBHAI T. LADANI HAS COME BACK UNSE RVED AND THE OTHER TWO HAVE NOT ATTENDED ON THAT DATE. HE SOUGHT FURTHER TIME TO CONDUCT INQUIRIES FROM THIRD PARTIES. 5. MEANWHILE, THE ASSESSEE SUBMITTED AFFIDAVITS BEFORE THE AO IN WHICH THE CREDITORS GAVE REASONS FOR NON - COMPLIANCE WITH 131 NOTICES, S TATED THAT THEY CAME TO THE AOS OFFICE ON 3/4/2012 AND FOUND THAT AO WAS ON LEAVE AND MADE ASSERTIONS OF GIVING OF LOAN ABOUT SOURCES AND THEIR OCCUPATION ETC. THE AFFIDAVIT OF SHRI RAMNIKBHAI T. LADANI WAS ALSO SUBMITTED WHICH WAS BEFORE THE EXECUTIVE MA GISTRATE WHEREIN HIS PRESENT RESIDENTIAL ADDRESS AND CONFIRMATION OF FACTS STATED BY WAY OF HIS EARLIER AFFIDAVIT DATED 25/3/2012. AO SUBMITTED A FINAL REPORT VIDE LETTER DATED 7/6/2012 WHEREIN HE RAISED THE FOLLOWING THREE CONTENTIONS: - I) NO PROOF OF T HE SOURCES HAS BEEN GIVEN EVEN IN THE AFFIDAVITS. II) THE AFFIDAVITS HAVE GOT NO EVIDENTIARY VALUE UNDER INDIAN EVIDENCE ACT. III) THE CREDITORS WERE NOT PRODUCED EVEN AFTER SEVERAL OPPORTUNITIES. 6. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, THE L D. CIT (A) DELETED THE ADDITION OF RS.10,00,000/ - MADE U/S.68 OF THE I.T. ACT FOR THE DETAILED REASON GIVEN IN PARA - 5 .4 , WHICH READS AS UNDER: - 5.4 I HAVE GONE THROUGH ALL THE FACTS OF THE CASE. I FIND THAT EVEN IN THE REGULAR ASSESSMENT PROCEEDINGS THE A PPELLANT HAD ESTABLISHED THE IDENTITY OF THE CREDITORS AND PRODUCED THEIR BANK ACCOUNTS FROM WHICH THE CREDITS WERE GIVEN BY CHEQUES AND HAVE ALSO PRODUCED THE CONFIRMATIONS. THE ITA 488 - 2012 4 SOURCES OF INCOME WERE ALSO NARRATED IN THE AFFIDAVITS SUBMITTED BEFORE THE A O. THE AO SHOULD HAVE ENFORCED THE ATTENDANCE OF THE CREDITORS ONCE THE AFFIDAVITS WERE SUBMITTED AND THERE WAS NO DOUBT ABOUT THE IDENTITY AND ADDRESS. IN THE CASE OF ROHINI BUILDERS 256 ITR 360, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT ONCE TH E ASSESSEE HAD DISCHARGED INITIAL ONUS BY PROVING IDENTITY OF ALL CREDITORS BY GIVING THEIR COMPLETE ADDRESSES AND HAD ALSO PROVED CAPACITY OF CREDITORS BY SHOWING THAT AMOUNTS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES DRAWN FROM BANK ACCOUNTS OF CREDITORS; T HE ASSESSEE WAS NOT EXPECTED TO PROVE GENUINENESS OF CASH DEPOSITED IN BANK ACCOUNTS OF CREDITORS, BECAUSE UNDER LAW, ASSESSEE CAN BE ASKED TO PROVE SOURCE OF CREDITS IN ITS BOOKS OF ACCOUNT BUT NOT SOURCE OF SOURCE. IT IS ALSO HELD THAT MERELY BECAUSE SUM MONS ISSUED TO SOME OF CREDITORS COULD NOT BE SERVED OR THEY FAILED TO APPEAR BEFORE ASSESSING OFFICER, COULD NOT BE GROUND TO TREAT THESE CREDITS AS NON - GENUINE. I ALSO OBSERVE THAT IN THE CASE BALVANT J. KALOLA THE AMOUNT HAS GRADUALLY GROWN IN THE BANK ACCOUNT, THERE WAS A BALANCE OF OVER RS.82,000/ - AS EARLY AS IN FEBRUARY, 2005. THE CREDITOR HAS EARNED SUBSTANTIAL INTEREST AND THERE WERE TRANSACTIONS AND DEPOSITS BY CHEQUES. SHRI KISHOR M. BHALODIA HAS BEEN PROVED TO BE MAN OF SOURCE HAVING LAND WITH 2 00 MANGO TREES AND ADMEASURING OVER 3 HECTARES (APPROXIMATELY 10 BIGHAS) IN THE NAME OF HIS FATHER WHOSE DEMISE TOOK PLACE IN 2004. THE MAIN AMOUNT WAS THERE AS EARLY AS IN FEBRUARY, 2004. SIMILARLY, THERE WAS OVER RS.5 LAC IN THE BANK ACCOUNT OF RAMNIK D. LADANI IN FEBRUARY,2004, MUCH EARLIER TO THE DATE WHEN THE AMOUNT WAS ADVANCE TO THE ASSESSEE. HE HAD IN HIS AFFIDAVIT GIVEN DETAILS OF HIS EARLIER INVESTMENTS IN LAND AND KVPS. HE GAVE DETAILS BANK ACCOUNTS AND POST OFFICE OF CONTINUOUS INVESTMENTS BUT C OULD NOT GIVE THE EVIDENCES. I HAD SPECIFICALLY ASKED THE AO TO COLLECT INFORMATION FROM THE POST OFFICE ETC. SO THAT THE CLAIM COULD BE PROVED OR DISPROVED, BUT NO EFFORT HAS BEEN MADE BY THE AO EVEN AFTER 4 MONTHS. IN THE TOTALITY OF FACTS AND CIRCUMSTAN CES THE ASSESSEE IS HELD TO HAVE DISCHARGED HIS ONUS AND EXPLAINED THE CREDIT AS REQUIRED U/S.68 OF THE ACT BY PRODUCING SUFFICIENT EVIDENCES. THE GROUNDS OF APPEAL ARE ALLOWED AND ADDITION U/S.68 IS DIRECTED TO BE DELETED. AGGRIEVED WITH THE ORDER OF LD. CIT (A) DELETING THE ADDITION OF RS.10,00,000/ - , THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: - 1 . ON APPEAL FILED BY THE ASSESSEE COMPANY, THE LD. CIT (A), GANDHINAGAR HAS DELETED THE ADDITION OF RS.10,00,000/ - , MADE BY THE AO U/ S.68 OF THE IT ACT, BY RELYING UPON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF ROHINI BUILDERS 256 ITR 360. 2 . ON THE FACTS OF THE CASE, LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER AS THE ASSESSEE COMPANY COULD NOT PROVE TH E GENUINENESS OF THE TRANSACTIONS, CREDITWORTHINESS OF THE DEPOSITORS AND EVEN THE IDENTITY OF THE DEPOSITORS. 3 . IT IS, THEREFORE, PRAYED THAT THE ORDER OR LD. CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. AT THE TIME OF HEARI NG BEFORE US, ON BEHALF OF REVENUE , SHRI VILAS V. SHINDE, DR APPEARED AND POINTED OUT THAT AO VIDE LETTER DATED 30 - 10 - 2008 HAD CATEGORICALLY ASKED THE ASSESSEE TO PRODUCE ALL THE THREE CREDITORS AND TO FURNISH PROOF OF CREDITWORTHINESS AND CAPACITY TO LAN D THE MONEY. TO THIS, NOTHING WAS ITA 488 - 2012 5 HEARD FROM THE SIDE OF THE ASSESSEE. HE FURTHER POINTED OUT THAT POWERS OF LD. CIT (A) ARE CO - TERMIN US WITH THAT OF AO AS HELD BY HONBLE SUPREME COURT IN THE CASE OF CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225 (SC). AS PER THIS JUDGMENT, FIRST APPELLATE AUTHORITY HAS PLENARY POWERS IN DISPOSING OF AN APPEAL. HE CAN DO WHAT AO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IN CASE THE LD. CIT (A) WAS OF THE VIEW THAT AO FAILED TO ENFORCE THE ATTENDANCE OF THE CREDITORS, THE LD. CIT (A) HIMSELF HAS ISSUED NOTICE U/S.131 TO ALL THE THREE CREDITORS, AND CONDUCT THE INQUIRY AS PROVIDED U/S.68 OF THE I.T. ACT, 1961. AS AGAINST THIS, COUNSEL OF THE ASSESSEE POINTED OUT THAT NOW HE CAN PRODUCE ALL THE THREE CREDITORS IF ONE MORE OPPORTUNITY IS ALLOWED TO THE ASSESSEE. HE ALSO ASSURED THAT HE WILL FURNISH NECESSARY EVIDENCE INDICATING THE CAPACITY OF THE CREDITORS TO ADVANCE THE LOAN AMOUNT TO THE ASSESSEE. 8. RIVAL SUBMISSIONS WERE CONSIDERED. UNDER SECTION 68 OF THE I.T. ACT, 1961, AO HAS TO CONDUCT THE INQUIRY AND IT IS THE DUTY OF THE ASSESSEE TO CO - O P ERATE. THE POWERS OF LD. CIT (A) ARE ALSO CO - TERMINUS WITH THAT OF AO. THE LD. CIT (A) OUGHT TO HAVE GOT THE ASSESSEE TO PRODUCE THE CREDITORS AS THE ASSESSEE FAILED T O PRODUCE THEM BEFORE THE AO. BE THAT IT MAY BE, NOW THE ASSESSEE HAS AGREED TO PRODUCE THE CREDITORS, WE SET ASIDE THE ORDER OF LD. CIT (A) ON THIS ISSUE AND DIRECT THE ASSESSEE TO PRODUCE THE CREDITORS BEFORE THE AO. THE AO WILL EXAMINE ALL THE THREE CR EDITORS AND RE - ADJUDICATE THE ADDITION OF RS.10,00,000/ - AFRESH IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. BEFORE PARTING WITH, WE MAY ORDER THAT IN CASE THE ASSESSEE FAIL TO PRODUCE THE CREDITORS BEFORE THE AO, THE AO IS AT LIBERTY TO MAKE THE ADDITION U/S.68 OF THE I.T. ACT, 1961. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED. 11. THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( . . . D. K. SRIVASTAVA ) ( . . R / T. K. SHARMA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ITA 488 - 2012 6 / ORDER DATE 13 - 0 9 - 2013. /RAJKOT NVA/ - 3 RJO /O / COPY OF ORDER FORWARDED TO: - 1 . . / APPELLANT - THE INCOME - TAX OFFICER, WARD - 1 ( 3 ), RAJKOT. 2 . N. /RESPONDENT - M/S. VINAYRAJ METALS PVT. LTD., 310, SHILPAN PLAZA, SWAMINARAYAN CHOWK, KRUSHNANAGAR MAIN ROAD, B/H.P.D.MAL A VIYA COLLEGE, NR. GONDAL RO AD, RAJKOT - 360 004. 3 . I / CONCERNED CIT - 4 . GOND L RO - / CIT (A) , GANDHINAGAR. 5 . NI , I , / DR, ITAT, RAJKOT 6 . R / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT