ITO, Muzaffarnagar V. M/s. Naveen Kumar Mittal (HUF), Muzaffarnagar

ITA 4985/DEL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4742 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Assessee Lawyers: MUKESH LALL
• Keywords: Unexplained cash credit; Unexplained expenditure; Business expenditure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.4985/DEL/2010 4985/DEL/2010 4985/DEL/2010 4985/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2005 2005 2005 2005- -- -06 0606 06 INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -1(2), 1(2), 1(2), 1(2), MUZAFFARNAGAR. MUZAFFARNAGAR. MUZAFFARNAGAR. MUZAFFARNAGAR. VS. VS. VS. VS. M/ M/M/ M/S NAVEEN KUMAR MITTAL (HUF), S NAVEEN KUMAR MITTAL (HUF), S NAVEEN KUMAR MITTAL (HUF), S NAVEEN KUMAR MITTAL (HUF), 183, PATEL NAGAR, 183, PATEL NAGAR, 183, PATEL NAGAR, 183, PATEL NAGAR, NEW MANDI, NEW MANDI, NEW MANDI, NEW MANDI, MUZAFFARNAGAR. MUZAFFARNAGAR. MUZAFFARNAGAR. MUZAFFARNAGAR. PAN : PAN : PAN : PAN : AACHN8365H. AACHN8365H. AACHN8365H. AACHN8365H. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMEER SHARMA, SR.DR. RESPONDENT BY : SHRI MUKESH LALL, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF LEARNED CIT(A), MUZAFFARNAGAR DATED 20 TH AUGUST, 2010 FOR THE AY 2005- 06. 2. GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: - THAT THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON THE FACT BY DELETING THE ADDITION OF RS.2,85,000/- MADE BY THE AO ON ACCOUNT OF CASH SHORTA GE BY RELYING UPON THE SECOND SET OF BOOKS OF ACCOUNT WIT HOUT GIVING ANY LOGIC FOR MAINTAINING TWO SETS OF BOOKS OF ACCOUNT. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL PLACED BEFORE US. THE ASSESSEE IS DERIVING INCOME FROM RUNNING OF COACHING CLASSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TWO SE TS OF BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFI CER, ONE IN ITA-4985/DEL/2010 2 THE FORENOON AND, THE OTHER IN THE AFTERNOON. THER E WERE DIFFERENCES IN BOTH THE SETS OF ACCOUNTS. ON THE SCRUTINY OF ONE C ASH BOOK, THE ASSESSING OFFICER FOUND THE CASH DEPOSITS IN THE NAME OF 1 5 PERSONS AMOUNTING TO ` 2,85,000/-. THE ASSESSING OFFICER TREATED THE SAME TO BE UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. LEARNED CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDING:- THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE A.O. HAS MADE ADDITION OF RS.2,85,000/- MAINLY ON THE BASIS OF DISCARDED BOOKS OF ACCOUNT. I HAVE ALSO PERUSED THE REMAND REPORT OF T HE A.O. AND IT IS NOTICED THAT THE A.O. HAS NOT COMMENTED ON THE MAIN BASIS OF THE ADDITION I.E. NO SHORTAGE OF CASH O CCURRED IN THE CORRECT BOOKS OF ACCOUNTS ON ANY DATE. DURING APPELLATE PROCEEDINGS THE LD.A.R. PRODUCED TWO SEPARA TE CASH SHORTAGE STATEMENTS WITH NARRATIONS EXPLAINING TH E CASH STORAGE OCCURRING IN THE DISCARDED CASH BOOK, THE A.O. WAS ALSO PRESENT AT TIME OF HEARING WHO WAS DIRECTED TO CHECK THE CASH SHORTAGE CHARTS EARLIER FILED BY THE APPELLANT AND SUBMIT A REPORT. THE A.O. AFTER CHECK ING THE RECORDS REPORTED THAT CASH SHORTAGE, IN FACT, OCCURR ED IN THE DISCARDED BOOKS OF ACCOUNTS AND NOT IN THE CORR ECT BOOKS. I HAVE VERIFIED THE ENTRIES FROM THE BOOKS AN D FOUND THAT THE CASH SHORTAGE DID OCCUR IN THE WRONG SE T OF BOOKS OF ACCOUNTS WHILE THE CORRECT BOOKS OF ACCOUNTS SHOWED NO CASH SHORTAGE. THUS IT IS APPARENT THAT THE WRONG NARRATION OF CASH AS AGAINST CHEQUE/DRAFT DISTURB ED THE CASH FLOW POSITION AND REDUCED THE CASH BALANCES TO NIL ON VARIOUS DATES. AS TO THE APPLICABILITY OF SECTION 68 OF THE I.T.ACT, 1961 IT WAS SUBMITTED THAT THE ADDITION COULD NOT BE MADE U/S 68 WHEN THE ASSESSEE NEITHER RECEIVED ANY CASH FROM VARIOUS PERSONS NOR REPAID CASH TO SUCH PERSONS AS WRONGLY RECORDED IN THE BOOKS OF ACCOUNTS HIMSELF DISCARDED BY HIM AND WAS NOT FORM THE BASIS OF RETURN. I FIND THAT THE CLAIM OF THE APPELLANT IS CORRECT. THE ACCOUNTANT SHRI RA NJEET SINGH ALSO ATTENDED BEFORE ME AND ACCEPTED THE ACCOUNTING BLUNDER COMMITTED BY HIS JUNIOR. IN FAC T THE WHOLE EXERCISE COULD HAVE BEEN AVOIDED HAD THE PAYEE S ACCOUNT CHEQUES BEEN PROPERLY RECORDED BY THE ITA-4985/DEL/2010 3 ACCOUNTANT IN THE BOOKS OF ACCOUNTS. AT THE ASSESSMENT STAGE ALSO, IF THE BOOKS CLAIMED CORRECT BY THE ASSESSEE COULD BE EXAMINED PROPERLY IN THE RIGHT PERSPECTIVE , THE FUTILE EXERCISE COULD HAVE BEEN SAVED. I ALSO FIND TH AT THE A.O. HAS NOT BEEN ABLE TO LAY HANDS ON ANY PROBABLE REASON FOR THE USAGE OF SUCH ALLEGED RECEIPT OF LOANS AGGREGATING TO RS.2,85,000/-. THE APPELLANTS CLAIM HAS FORCE. IN VIEW OF ABOVE FACTS, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED IN HOLDING THAT THE IMPUGNED SUM OF RS.2,85,000/- WAS UNACCOUNTED MONEY OF THE APPELLANT ROUTED IN THE BOOKS OF ACCOUNT AND THEREBY MAKING ADDITION OF RS.2,85,000/-. ADDITION OF RS.2,85,000/- IS DIRECTED TO BE DELETED. 4. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AN D PERUSAL OF THE MATERIAL PLACED BEFORE US, WE DO NOT FIND ANY JU STIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A). WHEN T HERE WERE TWO SETS OF BOOKS OF ACCOUNT, OBVIOUSLY ONE SET IS THE CORRECT BOOK S AND THE OTHER ONE IS ROUGH OR DISCARDED. LEARNED CIT(A) HAS RECORD ED THE FINDING THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER WAS PRESENT AND THE ASSESSING OFFICER, AFTER CHEC KING THE RECORDS, REPORTED THAT THE CASH SHORTAGE WHICH WAS MA DE UP BY CASH CREDIT IN THE NAMES OF 15 PERSONS OCCURRED IN THE DISCA RDED BOOKS OF ACCOUNT AND NOT IN THE CORRECT BOOKS. IN THE CORREC T BOOKS OF ACCOUNT, THERE WAS NO CASH SHORTAGE AND THUS, THERE WAS NO CASH CREDIT IN THE NAMES OF 15 INDIVIDUALS. LEARNED CIT(A) ALSO STATED TH AT THE ACCOUNTANT ALSO APPEARED BEFORE HIM AND ACCEPTED THA T IN ONE SET OF BOOKS OF ACCOUNT, ACCOUNTING BLUNDERS WERE COMMITTED BY HIS JUNIOR AND, THEREFORE, ACCOUNT BOOKS WERE CORRECTED BY HIM. IN VIEW OF THE ABOVE FACTUAL FINDING RECORDED BY THE LEARNED CIT(A ), WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH HIS ORDER. THE SAME IS SUSTAINED AND GROUND NO.1 OF THE REVENUES APPEAL IS REJECTED. 5. GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDER: - ITA-4985/DEL/2010 4 THAT THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON THE FACT BY DELETING THE ADDITION OF RS.8,92,684/- MADE BY THE AO UNDER SECTION 69A BY REL YING UPON THE SECOND SET OF BOOKS OF ACCOUNT WITHOUT GIVING ANY LOGIC FOR MAINTAINING TWO SETS OF BOOKS OF ACCOUNT. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL PLACED BEFORE US. THE ASSESSING OFFICER MADE THE ADDITION OF ` 8,92,684/- WHICH WAS THE TRANSACTION RECORDED IN THE STUDENTS PE RSONAL EXPENSES ACCOUNT. ON APPEAL, LEARNED CIT(A) DELETED THE ADD ITION WITH THE FOLLOWING FINDING:- THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT HAVE CAREFULLY CONSIDERED. ALL THE RECEIP TS AND PAYMENTS ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE GENUINENESS OF THE RED JINDAL DIARY AND THE ENTRIES MA DE THEREIN HAS NOT BEEN DOUBTED BY THE A.O. THIS LEADS T O THE PRESUMPTION THAT ITS ENTRIES ARE TRUE AND CORRECT. OU T OF THE GROSS RECEIPTS OF RS.8,92,684/- PAYMENT OF RS.4,83,475/- WAS MADE TO THE HOUSE OWNERS FOR PREMISES TAKEN ON LEASE, THROUGH ACCOUNT PAYEES CHEQUES. THE BALANCE PAYMENT OF RS.4,09,209/- WAS MADE TO THE STUDENTS IN CASH FOR DISBURSEMENT OF THEIR EXPENDITURE. MY VIEW ALSO GETS STRENGTH FROM THE FACT THAT THE APPELLA NT WAS ABLE TO EXPLAIN THE ENTRIES RELATING TO STUDENTS PERSONAL EXPENSES A/C AGGREGATING TO RS.8,92,684/- IN H IS EXAMINATION ON OATH BEFORE THE A.O. ON THE BASIS OF B OOKS CLAIMED CORRECT BY HIM. AFTER PERUSAL OF THE BOOKS OF ACCOUNT, I AGREE WITH T HE LD.A.R. THAT ALL THE RECEIPTS AS WELL AS THE DISBURSEMEN TS OF SUCH RECEIPTS WERE DULY RECORDED IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE AND THEREFORE THERE WAS NO LEGAL WARRANT TO INVOKE THE PROVISIONS OF SECTION 69-A OF THE INCOME TAX ACT, 1961 AS THERE WERE NO UNRECORDED OR UNACCOUNTED TRANSACTIONS. THE RENT PAYMENT OF RS.1,00,000/- MADE BY THE ASSESSEE ON BEHALF OF THE STUDENTS TO M/S PANCHKULA ADVERTISERS ON 31.07.2004 THROUGH PAYEES CHEQUE, IS AL SO RECORDED IN THE LEDGER UNDER THE RENT A/C. THUS TH E REASONS GIVEN BY THE A.O. FOR MAKING THE ADDITION HAS NO BASIS OR FORCE AT ALL. ACCORDINGLY, THE ADDITION OF ITA-4985/DEL/2010 5 RS.8,92,684/- IS UNSUSTAINABLE AND IS DIRECTED TO BE DELETED. 7. THUS, THE LEARNED CIT(A) HAS RECORDED THE FINDING THAT SINCE IN THE COACHING CLASSES THERE WERE OUTSIDE STUDENTS, THEY KE PT THE MONEY DEPOSITED WITH THE ASSESSEE WHICH WAS CREDITED IN THE STUD ENTS PERSONS EXPENSES ACCOUNT AND, OUT OF SUCH RECEIPT, AMOU NT WAS SPENT ON THE PERSONAL EXPENSES OF THE STUDENTS WHICH INCLUDED RENT AND PAYMENT FOR OTHER EXPENDITURE. OUT OF ` 8,92,684/-, THE SUM OF ` 4,83,475/- WAS PAID BY CHEQUE ON ACCOUNT OF RENT. T HE REMAINING SUM OF ` 4,09,209/- WAS INCURRED FOR OTHER EXPENSES. IN VIEW O F THE ABOVE FACTUAL FINDING RECORDED BY THE LEARNED CIT(A ), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) IN DEL ETING THE ADDITION OF ` 8,92,684/-. THE SAME IS SUSTAINED. 8. GROUND NO.3 OF THE REVENUES APPEAL READS AS UNDER :- THAT THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON THE FACT BY DELETING THE ADDITION OF RS.1,92,590/- MADE BY THE AO ON ACCOUNT OF RENT PAID OUT OF BOOKS RELYING UPON THE ORAL MUTUAL AGREEMENT WITH THE BUILDING OWNERS AND BY IGNORING THE COPIES OF RENT AGREEMENTS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 9. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE PAID LESS RENT THAN THE RENT PAYABLE AS PER THE RENT AGREEMENT. TH EREFORE, THE ASSESSING OFFICER TREATED THE SUM OF ` 1,92,590/- AS UNEXPLAINED EXPENDITURE UNDER SECTION 69A OF THE ACT. LEARNED CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDING:- THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT HAVE CAREFULLY CONSIDERED. DURING THE YEA R UNDER CONSIDERATION RENT FOR 3 BUILDINGS WAS PAID BY THE ASSESSEE, NECESSARY DETAILS INCLUDING COPIES OF RENT ITA-4985/DEL/2010 6 AGREEMENTS AND RENT A/C WERE FILED BEFORE THE A.O. IN THE STATEMENT, ON OATH ALSO SUCH DETAILS WERE NARRATED BY T HE APPELLANT. IT WAS EXPLAINED THAT DUE TO DECLINE IN THE BUSINESS ONE BUILDING WAS VACATED ALTOGETHER WHILE ANOTHER BUILDING REMAINED VACANT FOR 2.5 MONTHS AS TH E ASSESSEE FOUND HIMSELF UNABLE TO PAY THE INCREASED RENT AND AFTER NEGOTIATIONS THE BUILDING WAS RE-OCCUPIED A T A LOWER RENT. ONE OF THE BUILDINGS WAS ORIGINALLY TAKE N FOR 11 MONTHS ONLY. IT WAS FURTHER CLAIMED THAT RENT OF ALL THE 3 BUILDINGS WAS GOT REDUCED AFTER MUTUAL NEGOTIATIONS WI TH THE OWNERS. THE APPELLANT FILED WRITTEN SUBMISSIONS ALONGWITH RENT CERTIFICATES FROM THE OWNERS OF THE B UILDINGS WHICH WERE SENT TO THE A.O. FOR HIS COMMENTS. IN HIS REMAND REPORT THE A.O. HAS RELIED UPON THE ASSESSMENT ORDER, I DO NOT FIND ANY IMPROPRIETY IN THE PAYMENT OF RENT AT THE REDUCED RATES ON THE BASIS OF ORAL MUTUAL AGREEMENTS. THE BUILDING OWNERS HAVE ALSO CERTIFIED T HE PAYMENT OF RENT AS CLAIMED BY THE ASSESSEE. FROM THE RECORD IT IS CLEAR THAT ALL THE PAYMENT IS THROUGH PA YEES ACCOUNT CHEQUES ONLY. EVEN IF THE ORIGINALLY AGREED INCREASED RENT HAD BEEN PAID, IT WOULD BE ALLOWABLE AS A VALID BUSINESS EXPENDITURE. BY PAYMENT OF LESSER AMOUNT THE ASSESSEE HAS ONLY REDUCED HIS LIABILITY. THUS THE A.O . WAS NOT JUSTIFIED IN TREATING THE IMPUGNED SUM OF RS.1,92,590/- AS UNEXPLAINED MONEY NOT RECORDED IN TH E BOOKS OF ACCOUNTS AND MAKING ADDITION OF RS.1,92,590/- U/S 69A OF THE ACT. THUS THE ADDITION OF RS.1,92,590/- I S DIRECTED TO BE DELETED. 10. FROM THE ABOVE, IT IS EVIDENT THAT BEFORE THE LE ARNED CIT(A), THE ASSESSEE EXPLAINED THAT THE RENT OF ALL THE THREE BUILD INGS WAS REDUCED AFTER MUTUAL NEGOTIATIONS WITH THE OWNERS. THE APPEL LANT HAS FILED THE WRITTEN CERTIFICATE FROM THE OWNERS OF THE BUILDING WHICH WAS DULY SENT TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE BUILDING OWNERS HAVE DULY CERTIFIED THE PAYMENT OF RENT AS DEBITED BY TH E ASSESSEE IN ITS BOOKS OF ACCOUNT. THUS, IF AS PER MUTUAL AGREEMENT TH E RENT IS REDUCED, THE ADDITION UNDER SECTION 69A CANNOT BE M ADE MERELY ON THE BASIS OF PRESUMPTION. THE PRE-REQUISITE CONDITION OF SECTION 69A IS THAT THERE SHOULD BE EVIDENCE OF INCURRING OF THE EX PENDITURE. IN THIS CASE, IT IS THE CLAIM OF THE ASSESSEE THAT IT INCURRED LE SS EXPENDITURE ITA-4985/DEL/2010 7 AND WHICH IS DULY SUPPORTED BY THE ASSESSEE WITH THE CE RTIFICATE OF THE OWNER OF THE BUILDING. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A). THE SAME IS SUSTAINED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST, 2013. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE P VICE P VICE P VICE PRESIDENT RESIDENT RESIDENT RESIDENT DATED : 27.08.2013 VK. COPY FORWARDED TO: - 1. APPELLANT : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -1(2), MUZAFFARNAGAR. 1(2), MUZAFFARNAGAR. 1(2), MUZAFFARNAGAR. 1(2), MUZAFFARNAGAR. 2. RESPONDENT : M/S NAVEEN KUMAR MITTAL (HUF), M/S NAVEEN KUMAR MITTAL (HUF), M/S NAVEEN KUMAR MITTAL (HUF), M/S NAVEEN KUMAR MITTAL (HUF), 183, PATEL NAGAR, 183, PATEL NAGAR, 183, PATEL NAGAR, 183, PATEL NAGAR, NEW MANDI, MUZAFFARNAGAR. NEW MANDI, MUZAFFARNAGAR. NEW MANDI, MUZAFFARNAGAR. NEW MANDI, MUZAFFARNAGAR. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR