ITO 21(3)(3), MUMBAI V. KAJORIMAL G. MEHTA, MUMBAI

ITA 4970/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3843 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARAS S SAVLA; DR K SHIVARAM
• Keywords: Unexplained cash credit
• Section: 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI . . , . , ! '#$ ' BEFORE SHRI H.L. KARWA, PRESIDENT AND D. KARUNAKARA RAO, AM ' ./I.T.A. NO.4970/M/2010 ( %& ' / ASSESSMENT YEAR :2007-2008) ITO-21(3)(3), C-11 BLDG, 5 TH FLOOR, PRATYAKSH KAR BHAVAN, BKC, BANDRA (E), MUMBAI 400 051. & / VS. SHRI KAJORIMAL G. MEHTA, 4, ANUPAMA BLD., BAIL BAZAR, KALE MARG, OLD KURLA, MAMANI, MUMBAI 400 072. $( ! ' ./PAN : AELPM 8737 P ( () /APPELLANT) .. ( *+() / RESPONDENT) () , - ' / APPELLANT BY : SHRI MANOJ KUMAR, DR *+() , - ' / RESPONDENT BY : DR. K. SHIVARAM & MR. PARAS S. SAVLA ' & , .! /DATE OF HEARING : 9.5.2013 /0' , .! /DATE OF PRONOUNCEMENT :16.5.2013 #1 #1 #1 #1 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 15.6.2011 IS AG AINST THE ORDER OF CIT (A)32, MUMBAI DATED 17.03.2010 FOR THE ASSESSMENT Y EAR 2007-2008. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS. 90 LACS AND RS. 80 LA CS TREATED BY THE A.O. AS UNEXPLAINED CASH CREDIT BEING LOAN TAKEN BY ASSESSE E FROM M/S SHREEJI CORPORATION, PROP. ANIL R CHORDIA HUF AND M/S. SUMATI ENTERPRISES PROP. YASHWANT L JAIN HUF RESPECTIVELY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE INTEREST AMOUNT OF RS. 1,33,150/- AND RS. 1.36,110/ - PAID ON LOANS FROM M/S SHREEJI CORPORATION AND M/S SUMATI E NTERPRISES RESPECTIVELY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN STATING THAT THE A.O. DID NOT ISSUE SHOW CAUSE NOTI CE TO THE ASSESSEE CONVEYING HIS DOUBTS IN RESPECT OF LOANS. 2 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS AN INDIVIDUAL, CARRYING ON BUSINESS IN THE NAME & STYLE OF PROPRIE TARY CONCERN M/S. PRAMANIK METAL CORP. IT IS A PROPRIETORSHIP CONCERN AND IT IS ENGA GED IN RUNNING THE BUSINESS OF WHOLESALERS AND EXTRACTORS IN FERROUS & NON-FERROUS METAL. ASSESSEE FILED RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 4,34,790/- . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT QUANTIFYING THE ASSESSED INCOME A T RS. 1,77,04,040/-. IN THE ASSESSMENT, AO MADE ADDITION OF TWO CASH CREDITS AMOUNTING TO RS. 1.7 C RS , INVOLVING TWO PARTIES IE M/S. SHREEJI CORPORATION ( RS. 90 LACS) AND M/S. SUMATI ENTERPRISES (RS. 80,00,000/-). THE RELATABLE INTER EST OF RS. 2,69,250/- ACCRUED ON THE SAID CASH CREDITS WAS ALSO DISALLOWED. DURING THE ASSESSMENT PROCEEDINGS, IN CONNECTION WITH THE CASH CREDITS INVOLVING M/S. SHR EEJI CORPORATION, AO NOTICED THAT THE DETAILS OF PAN ARE NOT IN CONFORMITY WITH THE B OOKS OF ACCOUNT. IN THE OPINION OF THE AO, THE SOURCE OF RS. 90 LACS IN THE HANDS OF M /S. SHREEJI CORPORATION WAS ALSO NOT EXPLAINED. REGARDING THE OTHER CREDIT INVOLVIN G M/S. SUMATI ENTERPRISES, AO DOUBTED THE SOURCES OF FUNDS. CONSEQUENT TO HIS FIN DING THAT THE SAID LOANS ARE NOT GENUINE, AO DISALLOWED THE INTEREST CLAIM ALSO. AG GRIEVED WITH THE SAME ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORIT Y. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, ASSESSEE SUBMITTED THAT IT IS A PROPRIETARY CONCERN NAMED CO NCERN M/S. PRAMANIK METAL CORP RUNNING THE BUSINESS OF WHOLESALERS AND EXTRACTORS IN FERROUS & NON-FERROUS METALS. REGARDING THE PAN DISCREPANCY, APPEARING IN CONFIRM ATION LETTER INVOLVING THE CASH CREDIT BY M/S. SHREEJI CORPORATION VIS--VIS PAN AP PEARING ON THE RETURN OF INCOME, ASSESSEE EXPLAINED THAT THE DISCREPANCY OCCURRED IN VIEW OF THE ERROR IN PROVIDING PAN DETAILS OF SHRI ANIL RIKABHCHAND CHORADIA, INDIVIDUAL , INSTEAD OF GIVING ANIL RIKABHCHAND CHORADIA, HUF . IF THE SAME IS CONSIDERED, THERE IS NO DISCREPANCY AND THEREFORE, THE ADDITION INVOLVING SREEJI CORPORATIO N IS UNWARRANTED. SIMILARLY, REGARDING THE DISCREPANCY IN THE MATTERS OF JURISDI CTION INVOLVING M/S. SUMATI ENTERPRISES, THE ASSESSEE MENTIONED THAT THOUGH THE RETURN OF INCOME WAS OF M/S. SUMATI ENTERPRISES IN RAJASTHAN, THE PAN WAS ISSUED IN MUMBAI JURISDICTION. THE SAME IS PROPER AND THERE IS NOTHING UNUSUAL ABOUT T HE SAME. THEREFORE, THERE IS NO DISCREPANCY. ON OTHER ASPECTS REGARDING IDENTITY, CREDITWORTHINESS AND GENUINENESS 3 OF TRANSACTIONS ASSESSEE GAVE WRITTEN SUBMISSIONS W HICH ARE NARRATED IN PARA 4.4 OF THE IMPUGNED ORDER. AFTER EXAMINING THE SAME, CIT (A) GRANTED RELIEF IN RESPECT OF BOTH THE CASH CREDITS INVOLVING M/S. SHREEJI CORPOR ATION AND M/S. SUMATI ENTERPRISES. CONSEQUENTLY, INTEREST PORTION DISALLOWED BY THE AO WAS ALSO RESTORED. PARA 4.5 TO 4.7 OF THE IMPUGNED ORDER ARE RELEVANT IN THIS REGA RD. AGGRIEVED WITH THE SAME, REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNA L WITH THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED O N THE ORDER OF THE AO AND MENTIONED THAT THE CIT (A) ERRED IN DELETING THE SA ID ADDITIONS DESPITE THE DISCREPANCY IN THE NOTICES WITH REFERENCE TO THE PA N AND JURISDICTIONS. 6. ON THE OTHER HAND, DR SHIVRAM, LD COUNSEL FOR TH E ASSESSEE MENTIONED THAT THE CONFUSION WITH REFERENCE TO PAN APPEARING ON TH E CONFIRMATION LETTERS GATHERED BY THE ASSESSING OFFICER FROM THE CREDITORS DIRECTL Y RELATES TO THE MISTAKEN SUPPLY OF THE PAN NOS. REFERRING TO THE VARIOUS PAGES IN THE PAPER BOOK, LD COUNSEL DEMONSTRATED THAT SHRI ANIL RIKABHCHAND CHORADIA HA S TWO PANS, ONE IN THE CAPACITY OF INDIVIDUAL AND OTHER IN THE CAPACITY OF KARTA OF ANIL RIKABHCHAND CHORADIA, HUF. THE IMPUGNED LOANS ARE GIVEN BY THE CREDITORS IN THE HUF CAPACITY BUT THE PAN ERRONEOUSLY MENTIONED RELATES TO THE IN DIVIDUAL. LD COUNSEL FURTHER MENTIONED THAT THE LOANS AMOUNTING TO RS. 1.7 CRS, IN QUESTION, ARE SUBSEQUENTLY REPAID. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTE NTION TO THE PAPER BOOK IN RESPECT OF THE REPAYMENT OF THE LOANS INVOLVING THR OUGH BANKING CHANNELS. CIT (A) APPRECIATED THESE FACTS AS PER THE DISCUSSION GIVEN IN PARA 4.5, 4.6 AND 4.7 OF THE IMPUGNED ORDER, BEFORE GRANTING RELIEF TO THE ASSES SEE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AND THE PAPERS FILED BEFORE US. WE SHA LL TAKE UP EACH OF THE CASH CREDIT FOR ADJUDICATION IN THE FOLLOWING PARAGRAPHS. REGARDING THE CASH CREDIT OF RS 90 LAKHS INVOLVING M/S SREEJI CORPORATION: BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT T HE PAN OF M/S SHREEJI CORPORATION IS AAFHA6145K AS EVIDENT FROM T HE ACKNOWLEDGMENT OF THE RETURN OF INCOME. PAN: ABMPC1644D IS THE PAN OF THE KARTA OF THE SHRI ANIL 4 RIKABHCHAND CHORADIA, HUF. THEREFORE, THE DOUBT REG ARDING IDENTITY OF THE CREDITOR IN THE MIND OF THE AO IS CLEARLY MISPLACED. THE SAM E HAS BEEN SORTED OUT AS EVIDENT FROM THE CONTENTS OF PARA 4.5 OF THE IMPUGNED ORDER . 4.5. I HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS VERY APPARENT FROM THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE LD. AR OF THE APPELLANT ALONG WITH DOCUMENTARY EVIDENCE FILED BY HIM THAT THE ONLY REA SON WHICH LED THE LD. AO TO MAKE THE ADDITION IS THAT THE PAN OF THE TWO LENDERS DID NOT MATCH WITH THE DESCRIPTION IN THE CONFIRMATION LETTER. FURTHER, THE LENDERS HAD L OW INCOME AND CAPITAL IN COMPARISON OF HUGE SUNDRY CREDITORS WHICH FURTHER CREATED DOUB T IN THE MIND OF THE AO. HOWEVER, IT IS FAIRLY WELL EXPLAINED BY THE LD. AR OF THE AP PELLANT THAT IN CASE OF M/S SHREJI CORPORATION, THE PAN IS AAFHA6145K AND THE SAME IS APPEARING IN THE ACKNOWLEDGMENT OF THE RETURN OF INCOME. PAN ABMPC164 4D IS THE PAN OF THE KARTA OF THE HUF IN HIS INDIVIDUAL CAPACITY. THEREFORE, THE DOUBT REGARDING IDENTITY OF THE CREDITOR IN THE MIND OF THE AO IS CLEARLY MISPLACED . IT IS FURTHER, SEEN THAT THE LD. AO HAS NOT VERIFIED THE BALANCE SHEET AND P&L A/C OF T HE CREDITOR. UNDER THE HEAD LOAN AND ADVANCES, M/S. PRAMANIK METAL CORPORATION STAND S AS A CREDITOR TO THE EXTENT OF RS. 91,32,817 IN THE BOOKS OF MS/. SHREEJI CORPN. UN TIL AND UNLESS THE AO OF THE M/S. SHREEJI CORPORATION GIVES THE FINDING THAT THEIR CR EDITORS ARE NOT GENUINE, THE LD. AO OF THE APPELLANT HAD NO OPTION BUT TO ACCEPT SUCH LOAN AS GENUINE. 8. THEREFORE, IT IS THE CASE OF MISTAKEN SUPPLY OF THE PAN OF HUF IN PLACE OF SRI RIKABHCHAND CHORDIA, INDIVIDUAL. ON APPRECIATING THE FACTUAL MATRIX OF THE ISSUE, THE CIT(A) GRANTED RELIEF. WE HAVE ALSO CONSIDERED THE FACT THAT THE SAID AMOUNT OF RS 90 APPEARS IN THE BOOKS OF ACCOUNTS OF THE THE ASSE SSEE AS WELL AS THE SREEJI CORPORATION. IT IS ALSO AN UNDISPUTED FACT THAT THE IMPUGNED CASH CREDIT HAS BEEN REPAID BY THE ASSESSEE LATER IN TIME. FURTHER, IT I S A SETTLED ISSUE THAT THE ASSESSEE IS PREVENTED FROM EXAMINING THE ISSUE OF SOURCE OF THE SOURCE OF RS 90 LAKHS IN THE ASSESSEES CASE. CONSIDERING THE ABOVE STATED FACT S AS WELL AS THE SPEAKING ORDER OF THE CIT (A), IN OUR OPINION, THE DECISION OF THE CI T (A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, RELEVANT GROUNDS OF THE REVENUES APPEAL ARE DISMISSED. 9. REGARDING THE CASH CREDIT OF RS 80 LAKHS: SIMILARLY, THE DISCREPANCY WITH REFERENCE TO THE PAN AND THE JURISDICTION OF M/S. S UMATI ENTERPRISES, THE CIT (A) HAS DISCUSSED THE SAME IN PARA 4.6 AND 4.7 OF THE IMPUG NED ORDER AND THE SAME ARE REPRODUCED HERE UNDER: 4.6. EXACTLY SIMILAR SITUATION OBTAINS IN THE CASE OF THE OTHER CREDITOR NAMELY M/S. SUMATI ENTERPRISES. THE LOAN CREDITORS PAN IS AAAH Y3767N AND THE SAME IS APPEARING IN ACKNOWLEDGEMENT OF THE RETURN OF HIS I NCOME. THE LOAN CREDITOR IS PRESENTLY ASSESSED WITH ITO WD(1) BEAWAR, RAJASTHAN . EARLIER, HE WAS ASSESSED WITH 25(2)(2) MUMBAI, AS IT IS APPARENT FROM THE COPY OF ACKNOWLEDGMENT OF RETURN OF THE HUF FOR AY 2003-04. IN RESPECT OF THIS LOAN ALSO, T HE LD. AO HAS NOT GIVEN ANY SHOW 5 CAUSE NOTICE TO THE APPELLANT RAISING HIS DOUBT IN RESPECT OF THESE LOANS AND HAS MERELY GONE BY HIS GUT FEELING IN RESPECT OF LAW IN COME AND LOW CAPITAL AS AGAINST HIGH CREDITORS TO CONCLUDE THAT THE LOAN IS NOT GEN UINE. IT IS VERY APPARENT FROM, THE BALANCE SHEET OF THE CREDITOR THAT M/S. PRAMANIK MET AL CORPORATION STANDS AS THEIR DEBTOR TO THE EXTENT OF RS. 81,35,770/- AS ON 31.03 .2007. THERE IS NOTHING ON RECORD TO DOUBT THE CREDITWORTHINESS OR GENUINENESS OF THE LOAN. 4.7. IN VIEW OF THE FACTS NARRATED ABOVE THE LD. AO IS DIRECTED TO TREAT THE LOAN OF RS. 90 LAKHS TAKEN FROM M/S. SHREEJI CORPORATION AN D RS. 80 LAKHS TAKEN FROM M/S. SUMATI ENTERPRISES ARE GENUINE. ACCORDINGLY, THESE ADDITIONS ARE DIRECTED TO BE DELETED. GROUND NO.2 IS ALLOWED. 10. THE PAN OF THE LOAN CREDITOR IS AAAHY3767N AND THE SAME IS EVIDENT FROM THE FACE OF ACKNOWLEDGEMENT OF THE RETURN OF HIS IN COME. THE LOAN CREDITOR IS PRESENTLY ASSESSED WITH ITO WD(1) BEAWAR, RAJASTHAN . EARLIER, HE WAS ASSESSED WITH 25(2)(2) MUMBAI, AS IT IS APPARENT FROM THE COPY OF ACKNOWLEDGMENT OF RETURN OF THE HUF FOR AY 2003-04. AO MERELY SUSPECT THE LOAN TRANSACTION AND OTHERWISE, AO HAS NO EVIDENCE AGAINST THE ASSESSEE TO CONCLUDE TH AT THE LOAN IS NOT GENUINE. FURTHER, WE HAVE ALSO CONSIDERED THE FACT THAT THE SAID AMOUNT OF RS 80 APPEARS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS WELL AS TH E SUMATI CORPORATION. IT IS ALSO AN UNDISPUTED FACT THAT THE IMPUGNED CASH CREDIT HA S BEEN REPAID BY THE ASSESSEE LATER IN TIME. FURTHER, IT IS A SETTLED ISSUE THAT THE ASSESSEE IS PREVENTED FROM EXAMINING THE ISSUE OF SOURCE OF THE SOURCE OF RS 8 0 LAKHS IN THE ASSESSEES CASE. CONSIDERING THE ABOVE STATED FACTS AS WELL AS THE S PEAKING ORDER OF THE CIT (A), IN OUR OPINION, THE DECISION OF THE CIT (A) ON THIS IS SUE DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, RELEVANT GROUNDS OF THE REVENUES APPEAL ARE DISMISSED. 11. REGARDING THE ISSUE RELATING TO THE CLAIMS OF P AYMENT OF INTEREST ON THE SAID CASH CREDITS AMOUNTING TO RS 1.7 CRORES IE THE LOAN OF RS. 90 LACS TAKEN FROM M/S. SHREEJI CORPORATION AND RS. 80 LACS FROM M/S. SUMAT I ENTERPRISES, WE FIND THE SAID ISSUE IS MERELY CONSEQUENTIAL IN NATURE. SINCE THE ADDITION OF CASH CREDITS ARE DELETED, EX CONSEQUENTI, THE ASSESSEE IS ENTITLED T O THE CLAIM OF INTEREST PAID TO THE LOAN CREDITORS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) AND WE CONFIRM THE SAME. ACCORDINGLY, GROUNDS RAISED BY T HE REVENUE ON THIS ISSUE ARE DISMISSED . 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . 6 ORDER PRONOUNCED IN THE OPEN COURT ON 16/5/2013. . #1 , /0' ! 2#&3 16/5/2013 0 , 4 SD/- SD/- (H.L. KARWA) (D. KARUNAKARA RAO ) / PRESIDENT ! '#$ / ACCOUNTANT MEMBAI MUMBAI; 2#& DATED 16/5/2013. . %& . ' ./ OKK , SR. PS #1 #1 #1 #1 , ,, , *%.56 *%.56 *%.56 *%.56 76'. 76'. 76'. 76'. / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 *%.%& , , / DR, ITAT, MUMBAI 6. 4 : / GUARD FILE. '+6. *%. //TRUE COPY// #1& ' #1& ' #1& ' #1& ' / BY ORDER, ; ;; ; / '< '< '< '< = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI